Decision No. CR649
Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division

SUBJECT:

The Recovery Place, Inc.,

Petitioner,

I enter summary disposition sustaining the determination of the Health Care Financing Administration (HCFA) to deny certification to Petitioner, The Recovery Place, Inc., to participate in the Medicare program as a community mental health center (CMHC) providing partial hospitalization services. I do so because Petitioner has not shown that it may provide screening for patients being considered for admission to State mental health facilities to determine the appropriateness of such admissions, consistent with the requirements of federal and applicable Florida State law.

I. Background

Petitioner is a corporation located in Bowling Green, Florida. Petitioner applied for certification to participate in the Medicare program as a CMHC which provides partial hospitalization services. On September 1, 1998, HCFA denied Petitioner's application. On September 17, 1998, Petitioner applied to HCFA for reconsideration. On December 8, 1998, HCFA informed Petitioner that it had concluded that its original determination was correct. Petitioner requested a hearing and the case was assigned to me for a hearing and a decision.

HCFA has moved for summary disposition. It asserts that there are no material facts in dispute in this case. Petitioner opposes the motion. Petitioner asserts that there are disputed issues of material fact and that, furthermore, HCFA's asserted interpretation and application of law is incorrect.

HCFA offered 18 proposed exhibits (HCFA Exs. 1 - 18) in support of its motion for summary disposition. Petitioner offered one proposed exhibit (P. Ex. 1) in opposition to HCFA's motion. Neither party objected to these exhibits. I hereby receive into evidence HCFA Exs. 1 - 18
and P. Ex. 1.

Governing Law

A. Federal law

"Partial hospitalization services" are services which are defined at section 1861(ff) of the Social Security Act (Act) and reimbursed by the Medicare program. "Partial hospitalization services" consist of services that are prescribed by a physician and provided pursuant to specified statutory criteria, and which include: individual and group therapy with physicians and psychologists; occupational therapy requiring the skills of a qualified occupational therapist; services of social workers, trained psychiatric nurses, and other staff trained to work with psychiatric patients; drugs and biologicals furnished for therapeutic purposes; individualized activity therapies; family counseling; patient training and education; diagnostic services; and such other services as the Secretary of this Department may determine to be reasonable and necessary. Sections 1861(ff)(1) and 1861(ff)(2)(A) - (I) of the Act.

The Medicare program will reimburse for partial hospitalization services that are provided by either a certified hospital or by a CMHC. See section 1861(ff)(3)(A) of the Act. A "community mental health center" is defined by the Act to mean an entity:

Section 1861(ff)(3)(B)(i), (ii) of the Act. Although the Act refers to section 1916 of the Public Health Service Act, that section was recodified as section 1913(c)(1) of the Public Health Service Act. Under this section, the services that a CMHC must provide include the following:

Additionally, the Secretary of this Department has issued a regulation which defines the term "community mental health center." There, a CMHC is defined as an entity that:

42 C.F.R. § 410.2.

HCFA has published policy guidelines which describe a CMHC's obligations under section 1913(c)(1) of the Public Health Services Act and the above-cited regulation. In a document that is entitled "All States Letter 76-95" (All States Letter), HCFA states that a CMHC must provide all of the services that are listed in the Public Health Service Act, either directly or under arrangements with others. HCFA Ex. 2. The term "under arrangements" is defined in the All States Letter to mean that a CMHC may arrange for those services described at section 1913(c)(1) of the Public Health Services Act and partial hospitalization services:

Id. at 3 (emphasis added). HCFA has explained its understanding of what is meant by overall management responsibility in its Medicare Intermediaries Manual (MIM). The MIM provides, at section 3007 that, in permitting a provider to furnish services under an arrangement with another entity, the provider may not serve merely as a billing mechanism for that entity. MIM, § 3007; HCFA Ex. 3 at 1 - 2. A provider's professional supervision over arranged-for services requires the provider to utilize many of the same quality controls that the provider would apply to services that are provided by its own employees. Id. These controls include: acceptance of the patient for admission in accord with the provider's own admission policies; and, maintaining a complete and timely clinical record of each patient, which includes diagnoses, the patient's medical history, any physician's orders and progress notes. Id. The provider must maintain liaison with the patient's attending physician regarding the progress of the patient and the need for revised patient orders. Id.

HCFA has elected to defer to the laws of the States in order to determine what constitutes adequate screening for patients being considered for admission to a State mental health facility pursuant to section 1913(c)(1)(iv) of the Public Health Services Act. In a memorandum dated August 21, 1998, HCFA stated that "screening":

HCFA Ex. 4 at 1 (emphasis in original).

B. Florida State law

Florida State law defines the entities that are authorized to perform the procedures which are necessary prerequisites to admission of individuals for treatment at a Florida State mental health facility. Under the Florida Mental Health Act (Florida State Act), F.S.A.

§ 394.451, et seq., only certain types of entities are authorized to perform the necessary procedures. Specifically, these entities are limited to entities which are authorized to

perform "transfer evaluations." F.S.A. § 394.461(2). A "transfer evaluation" is defined under Florida State law as being:

F.S.A. § 394.455(29).

Under Florida State law, a "community mental health center or clinic" is a:

publicly-funded, not-for-profit center which contracts with . . .
[the Florida Department of Children and Families] for the provision
of inpatient, outpatient, day treatment, or emergency services.

F.S.A. § 394.455(6).

A. Issue

The issue in this case is whether HCFA properly determined not to certify Petitioner to participate in Medicare as a CMHC providing partial hospitalization services.

B. Findings of fact and conclusions of law

I make findings of fact and conclusions of law (Findings) to support my decision in this case. I set forth each Finding below as a separately numbered heading. I discuss each Finding in detail.

1. Summary disposition is appropriate in this case.

A threshold question in this case is whether summary disposition is appropriate. Petitioner argues that there are disputed issues of material fact which cannot be resolved without the taking of additional evidence.

Summary disposition is appropriate either where: there are no disputed issues of material fact and the only question that must be decided is application of the law to the undisputed facts; or, where the moving party must prevail as a matter of law even if all disputed facts are resolved in favor of the party against whom the motion is made. I have looked closely at Petitioner's arguments in order to decide whether there exist any genuinely disputed issues of material fact.

I am assuming the facts that Petitioner asserts in P. Ex. 1 to be true for purposes of deciding HCFA's motion for summary disposition. I conclude that summary disposition is appropriate in this case notwithstanding my decision to accept as true the facts alleged by Petitioner in P. Ex. 1. As I explain in detail in the Findings which follow, Petitioner has failed to make a showing that it qualifies to participate in Medicare as a CMHC providing partial hospitalization services even accepting as true the facts which Petitioner alleges.

2. Petitioner did not satisfy participation criteria for a CMHC providing partial
hospitalization services because it did not provide requisite screening services
for patients who are candidates for admission to State mental health facilities.

As I discuss above, at Part II.A. of this decision, in order to be certified to provide partial hospitalization services - indeed to fall within the statutory definition of a CMHC contained at section 1913(c)(1) of the Public Health Service Act - an entity must meet criteria which, among other things, include the following:

a. Petitioner cannot qualify under federal participation requirements
to perform screening directly because Petitioner cannot qualify under
Florida State law to perform transfer evaluations.

In order to be able to perform directly the screening services that are required under section 1861(ff)(3)(A) of the Act and section 1913(c)(1)(iv) of the Public Health Service Act, Petitioner must be authorized to perform transfer evaluations pursuant to Florida State law. Screening and transfer evaluations are essentially identical processes. HCFA has defined screening to constitute the clinical evaluation of a patient to determine his or her suitability for transfer to a State mental health facility. HCFA Ex. 4 at 1. Under Florida State law a transfer evaluation also is a clinical evaluation of a patient to determine his or her suitability for transfer to a State mental health facility. F.S.A.

§ 394.455(29). Federal law requires a CMHC to comply with applicable State requirements in order to participate in Medicare. 42 C.F.R. § 410.2. Florida's law governing a transfer evaluation by a CMHC is plainly applicable State law inasmuch as a transfer evaluation is a process that is identical to screening.

Petitioner cannot qualify to perform screening directly because it cannot qualify pursuant to Florida State law to perform transfer evaluations. Florida State law provides that the only type of entity which may perform a transfer evaluation is a not-for-profit publicly funded entity. F.S.A. § 394.455(6). Petitioner has not made any showing that it is a nonprofit entity that is certified to perform transfer evaluations under Florida State law.

Petitioner concedes that, in order to qualify to participate in Medicare, it must meet applicable State licensing and certification requirements. Petitioner Brief (Br.) at 11. Moreover, Petitioner admits that, under Florida State law, a for-profit entity may not lawfully perform transfer evaluations. Id. at 12. Petitioner seems to assert however, that under federal law screening is not the same thing as is a transfer evaluation under Florida State law. Id. Petitioner therefore appears to argue that its disqualification under Florida State law from performing transfer evaluations is irrelevant to deciding the question of whether it may be certified to perform screening directly.

Petitioner attempts to support its argument by asserting that, prior to November 1997, HCFA certified for-profit entities in Florida to participate in Medicare as CMHCs. Petitioner contends that HCFA's alleged prior interpretation of the law, in which HCFA allegedly certified for-profit entities as CMHCs, is dispositive of the question of whether Petitioner may perform screening directly.

I am not persuaded by Petitioner's argument. First, Petitioner has not offered anything to explain why HCFA's present interpretation of the law is unreasonable. And, on its face, the interpretation is reasonable. It is entirely reasonable for HCFA to conclude that a for-profit facility in Florida may not perform screening directly if that facility cannot, under Florida State law, lawfully perform a transfer evaluation. As I discuss above, a transfer evaluation under Florida State law essentially duplicates what federal law describes as screening. HCFA Ex. 4 at 1; F.S.A. § 394.455(29). Petitioner has offered nothing to show how screening differs from a transfer evaluation.

Second, the fact that HCFA may have in the past certified for-profit Florida entities to participate as CMHCs does not mean that it presently misinterpreting or misapplying the law. What HCFA may have done in the past provides no precedent for its present determinations. Arguably, HCFA may have applied the law incorrectly in the past.

b. Petitioner does not qualify under federal participation requirements
to provide screening through arrangements with others because it has
not shown that it has an arrangement with another entity which complies
with federal requirements.

In order to comply with federal participation criteria an arrangement between a CMHC and another entity must provide that the CMHC retains overall supervision over the screening process. All States Letter. It is not sufficient for the CMHC merely to refer a patient to another entity for screening. The CMHC must directly supervise the basic functions which the other entity performs that comprise screening. MIM § 3007; HCFA Ex. 3 at 1 - 2.

Petitioner does not comply with federal participation requirements which govern screening through an arrangement with others. The evidence in this case does not show that Petitioner has a screening arrangement with another entity which complies with federal requirements. Petitioner has a contract with University Behavioral Center in which University Behavioral Center agrees to service Petitioner's clients in emergency situations which require stabilization. HCFA Ex. 8 at 2. However, the agreement does not provide for the supervision that is required by federal participation requirements. Indeed, it is unclear from the face of the agreement whether the emergency services that University Behavioral Center is providing includes screening as is defined under federal law. Id.

Petitioner has not averred that it has an acceptable arrangement with others to perform screening. Instead, Petitioner argues that HCFA's statements of the requirements governing screening are "invalid exercises of delegated authority" by HCFA. Petitioner Br. at 4.

On close examination of Petitioner's arguments, it does not appear that Petitioner actually takes issue with HCFA's assertion that a CMHC must closely supervise screening services that are performed through an arrangement with another entity. Petitioner devotes its arguments to a different question: that being whether a CMHC must actually be referring patients to another entity to in order to be in compliance with the provisions which govern screening through an arrangement with another entity. Petitioner Br. at 4 - 9.

It is not necessary for me to resolve the question that Petitioner raises in its brief in order to decide this case. Whether Petitioner actually is referring patients for screening is irrelevant to my decision. That is because I find that Petitioner has not shown that it has an acceptable arrangement. Even if Petitioner were referring patients to some other entity for screening, the fact that Petitioner did so would be of no avail to Petitioner in the absence of proof that the arrangement to refer patients met HCFA's criteria.

Furthermore, I am not persuaded that HCFA's statement of the criteria governing the terms of a screening arrangement exceeds the scope of HCFA's authority. It is true that neither the Public Health Service Act nor regulations specifically provide how screening may be accomplished by a CMHC. Public Health Service Act, section 1913(c)(1); 42 C.F.R. § 410.2. Having said that, however, there is nothing in the All States Letter or MIM § 3007 that is inconsistent with the requirements of either the Public Health Services Act or with the regulation. As is pointed out in MIM § 3007:

In permitting providers to furnish services under arrangements, it was not intended that the
provider merely serve as a billing mechanism for the other party. Accordingly, for the
services provided under arrangements to be covered the provider must exercise
professional responsibility over the arranged-for service.

HCFA Ex. 3 at 1 - 2. Petitioner has not made any showing why this is an unreasonable application of the law.

3. Petitioner has not offered facts that are relevant to the issue
of whether Petitioner met certification criteria for screening services.

I have examined closely the documents which Petitioner provided as P. Ex. 1. The exhibit consists of the declaration of Thomas Sledd, Petitioner's vice president, along with excerpts from patient treatment records. In his declaration, Mr. Sledd discusses at some length the arrangements that Petitioner made with University Behavioral Center. Mr. Sledd avers that referrals from Petitioner to University Behavioral Center typically were for patient stabilization. He asserts that Petitioner and University Behavioral Center prepared and maintained separate clinical records relative to the services that they provided. However, University Behavioral Center consulted with Petitioner and obtained copies of the record of treatment provided by Petitioner.

Mr. Sledd avers further that Petitioner actually performed psychosocial evaluations. According to Mr. Sledd, such evaluations are the "same tools used in the state of Florida in determinations of the appropriateness of patients who are being considered for admission to state mental facilities." P. Ex. 1 at 22.

As I discuss above at Finding 1, I am assuming for purposes of this decision that Mr. Sledd's declaration and the accompanying records are entirely true. However, neither the declaration nor the records relate to the issue of whether Petitioner met certification criteria for screening services. The fact that Petitioner may have done screening which involved the same tools or methodology used by State-certified CMHCs does not establish that Petitioner met federal criteria for providing screening directly. As a matter of law Petitioner does not qualify to provide screening directly, no matter how closely its screening methodology may emulate that which is used by State-certified CMHCs, because Petitioner does not satisfy the requirement under Florida State law that it be a not-for-profit entity.

Petitioner has not shown how its relationship with University Behavioral Center satisfied federal criteria for screening arrangements with third parties. For example, Petitioner has not offered any evidence to show that it closely supervised the activities of University Behavioral Center. Mr. Sledd's declaration shows, at most, that Petitioner and University Behavioral Center cooperated with each other. Cooperation is not equivalent to supervision.

Steven T. Kessel
Administrative Law Judge