SUBJECT:

Tenet HealthSystem Philadelphia, Inc.,

Petitioner,

Health Care Financing Administration

HCFA filed sixteen proposed exhibits (HCFA Exs. 1 - 16) in support of its motion for summary disposition. However, Petitioner opposed the admission into evidence of HCFA's Exhibit 7. Petitioner asserted that this Exhibit represented part, but not all, of a facsimile transmission from Petitioner's Fiscal Intermediary (Intermediary) to the Pennsylvania Department of Health (State Survey Agency). Petitioner argued that this Exhibit omitted a cover page and other attachments which demonstrated that the State Survey Agency did not perform HCFA-required surveys. Moreover, Petitioner alleged that the Exhibit "does not appear to be the complete transmission . . . but . . . reflects incomplete pages from two separate transmissions." Petitioner Brief (Br.) at 9, n.14.

HCFA cites this Exhibit at page 4 of its Brief and page 3 of its Reply Brief to show that the Intermediary recommended a particular course of action. Moreover, Petitioner Exhibits 5 and 10 are essentially copies of HCFA's Exhibit 7. Petitioner Exhibit 10 contains the facsimile cover page. HCFA appears to rely upon its Exhibit 7 solely to establish a time line, which Petitioner does not dispute. Given the limited use of this Exhibit by HCFA, the fact that Petitioner has also submitted copies of it and that I do not rely on it in reaching my decision, I overrule Petitioner's objection and hereby admit into evidence HCFA Exs. 1-16.

Petitioner filed seventeen proposed exhibits (P. Exs. 1-17) in opposition to the motion. HCFA has not opposed the admission into evidence of Petitioner's proposed exhibits. I hereby admit into evidence P. Exs. 1-17.

Background

On November 10, 1998, Petitioner executed a purchase agreement with Allegheny Health Education and Research Foundation (AHERF) under which Petitioner acquired a number of Philadelphia area health care facilities. The facilities transferred to Petitioner included acute care hospitals, skilled nursing facilities home health agencies and ESRD units within the hospitals. At issue here are the ESRD units in two hospitals purchased by Petitioner in the November 1998 transaction, Hahnemann University Hospital (Hahnemann) and St. Christopher's Hospital for Children ( St. Christopher's).

Both Hahnemann and St. Christopher's hospitals were Medicare-certified while under AHERF ownership and had Medicare provider agreements. In addition to its Medicare-certified hospitals, AHERF had a number of other Medicare provider agreements in effect for various non-acute hospital services at the time Petitioner acquired ownership. AHERF also had existing Medicare supplier approvals, including those covering items and services provided in Hahnemann's and St. Christopher's ESRD units. HCFA Ex. 2 at 1-3, 5-6.

Pursuant to 42 C.F.R. § 489.18, Petitioner had the option of assuming all of AHERF's existing Medicare provider agreements and supplier approvals. Assumption of these agreements and approvals would have continued an uninterrupted Medicare payment stream in spite of the transfer of ownership. However, on October 15, 1998, Petitioner informed HCFA that "it is in . . . [Petitioner's] best interest not to accept assignment of AHERF's existing provider agreements and to request new Medicare and Medicaid certification . . . ." HCFA Ex. 2 at 1. Petitioner's business decision relieved it of any claims HCFA may have had against AHERF and its affiliates and ensure that HCFA would not look to Petitioner for satisfaction of any of AHERF's outstanding liabilities. Id. at 3

The certification of Hahnemann and St. Christopher's Hospitals, under Petitioner's ownership was through the process of applying for initial certification of a provider into the Medicare program. The hospitals' unique status, as entities "deemed" to meet the Medicare requirements by virtue of their accreditation by the Joint Commission on Accreditation of Health Care Organizations (JCAHO), allowed them to be accredited effective November 11, 1998 because JCAHO had provided accreditation on that date. See 42 C.F.R. § 489.13(d)(2); HCFA Ex. 3 at 1. However, as a result of Petitioner's decision not to assume the preexisting Medicare agreements, all other provider agreements and supplier approvals, because they were not accredited services, were subject to the effective date regulations for new providers/suppliers set out at 42 C.F.R. § 489.13(b) or (c).

On October 12, 1998, Petitioner completed Medicare/Federal Health Care Provider/Supplier Enrollment Applications (HCFA 855s) for the Hahnemann and St. Christopher's ESRD units. HCFA Exs. 4 and 5. Petitioner forwarded the completed HCFA 855s to the State Survey Agency on October 13, 1998. The State Survey Agency forwarded the completed HCFA 855s to Mutual of Omaha, Petitioner's Intermediary for review and recommendation. On October 30, 1998, the Intermediary recommended that Petitioner's enrollment applications be approved. Petitioner became owner of the facilities on November 10, 1998. HCFA Exs. 1 and 2.

The State Survey Agency conducted Medicare surveys of Hahnemann's ESRD unit on March 4, 1999 and St. Christopher's on March 5^th. The surveys uncovered deficiencies at both facilities. Both facilities timely submitted plans of correction. Hahnemann's plan was received by the State Survey Agency on March 18^th and St. Christopher's plan was received on March 22^nd. HCFA Exs. 8-13.

By letter dated April 22, 1999, Pennsylvania's Acting Secretary of Health asked HCFA if it would consider using the results of a November 3-6, 1998 State Licensure Survey at Hahnemann Hospital to satisfy the Medicare certification requirements for Hahnemann's ESRD unit. Part of that survey included a visit to the ESRD unit. No deficiencies were found at that time. The Acting Secretary recognized, however, that a licensure survey and a Medicare certification survey were different procedures. HCFA Ex. 14.

On June 21, 1999 HCFA notified the Hahnemann and St. Christopher's Hospitals that the Medicare effective dates for their ESRD units would be March 18 and 22, 1999, respectively. HCFA Ex. 15. Petitioner's request for a hearing followed.

The Law

Section 1881 of the Social Security Act establishes Medicare coverage for ESRDs. The implementing regulations are found at 42 C.F.R. Part 405, Subpart U. ESRD applicants are required to have onsite Medicare surveys so that HCFA may determine their compliance with the Subpart U requirements. 42 C.F.R. § § 488.6 and 488.10(d).

The regulations establishing the effective date for an ESRD's supplier approval provide:

42 C.F.R. § 489.13(b), (c).

JCAHO or American Osteopathic Association accredited hospitals are deemed by HCFA to meet all Medicare conditions except for certain requirements enumerated at 42 C.F.R. § 488.5(a). An accredited hospital may obtain an effective date based on 42 C.F.R.

§ 489.13(d). However, paragraph (d) applies only where an accredited provider or supplier, whose program had HCFA approval at the time of the accreditation survey and the accreditation decision, requests participation in the Medicare program. HCFA does not permit ESRD services to be deemed to meet Medicare conditions of participation by virtue of national accreditation. 42 C.F.R. §§ 488.6 and 488.10(d). Consequently, an applicant seeking approval as a supplier of ESRD services is required to have an onsite Medicare survey and the subsequent ESRD effective date determination must be made pursuant to 42 C.F.R. § 489.13(b) and (c).

I find that Petitioner has not rebutted HCFA's prima facie case for summary judgment. Below, I set out the findings of fact and conclusions of law (Findings) supporting my decision.

1. Petitioner executed the purchase of the ESRD units at Hahnemann and St. Christopher's on November 10, 1998, as part of a larger transaction. HCFA Exs. 1 and 2.

2. On October 15, 1998, Petitioner notified HCFA that it would not accept assignment of the existing Medicare provider numbers for the facilities purchased in the November 10, 1998 transaction including the ESRD units at Hahnemann and St. Christopher's. HCFA Ex. 2 at 1.

3. As a result of Petitioner's decision not to assume the preexisting Medicare agreements, all other provider agreements and supplier approvals, because they were not accredited services, were subject to the effective date regulations for new providers/suppliers set out at 42 C.F.R. § 489.13(b) or (c).

4. The State Survey Agency conducted Medicare surveys of Hahnemann's ESRD unit on March 4, 1999 and St. Christopher's on March 5^th. The surveys uncovered deficiencies at both facilities. Both facilities timely submitted plans of correction. Hahnemann's plan was received by the State Survey Agency on March 18^th and St. Christopher's plan was received on March 22^nd. HCFA Exs. 8-13.

5. By letter dated April 22, 1999, Pennsylvania's Acting Secretary of Health asked HCFA if it would consider using the results of a November 3-6, 1998 State Licensure Survey at Hahnemann Hospital to satisfy the Medicare certification requirements for Hahnemann's ESRD unit. Part of that survey included a visit to the ESRD unit. No deficiencies were found at that time. The Acting Secretary recognized, however, that a licensure survey and a Medicare certification survey were different procedures. HCFA Ex. 14.

6. On June 21, 1999, HCFA notified the Hahnemann and St. Christopher's Hospitals that the Medicare effective dates for their ESRD units would be March 18 and 22, 1999, respectively. HCFA Ex. 15.

7. No basis in law exists to grant Petitioner earlier certification dates for the Hahnemann and St. Christopher's ESRD units.

8. Estoppel does not lie against HCFA.

9. Petitioner did not rebut HCFA's prima facie case.

Petitioner's Position

Generally, Petitioner argued that:

Discussion

No basis in law exists to grant Petitioner earlier certification dates for the Hahnemann and St. Christopher's ESRD units.

In order to become an approved supplier of Medicare services, an ESRD facility must be surveyed on-site, so that HCFA may determine whether the ESRD facility is complying with the requirements found in 42 C.F.R. Part 405, Subpart U. The earliest date that a renal dialysis facility may be approved is the date of completion of an initial on-site facility survey, assuming no deficiencies or, if deficiencies are found, the date on which HCFA or the State survey agency receives an acceptable plan of correction. 42 C.F.R. § 489.13(b) and (c).

The uncontroverted facts of this case are that the Hahnemann and St. Christopher's ESRD units were surveyed on March 4 and 5, 1999, respectively. Deficiencies were found in each unit and acceptable plans of correction were received by the State Survey Agency on March 18^th and 22^nd respectively. Consequently, by law the earliest available certification dates for the facilities were March 18 and 22, 1999.

The program regulations do not permit HCFA or an administrative law judge to look behind the completion date of an on-site survey, or the date on which an acceptable plan of correction was received. Snowden at Fredricksburg and Mary Washington Hospital, DAB CR486 at 22-23 (1997); Renal Services Group of El Centro, DAB CR482 at 6-7 (1997). Under these circumstances, an administrative law judge does not have the authority to order an earlier effective certification date.

Petitioner argues that the various cases cited by HCFA presented factual circumstances so radically different from the instant case as to warrant a different outcome. According to Petitioner, these cases involve providers which were truly "new" Medicare applicants, not cases in which providers had continued a certified programs but whose new ownership had not accepted assignment of the bankrupt seller's Medicare provider numbers, nor providers which had had undergone full surveys within days or months prior to the closing of the sales transaction, nor did any of the cited cases involve a State Agency that did not process an application consistent with the application's clear language. Petitioner Br. at 13.

Contrary to Petitioner's protestations, regardless of the perceived factual differences in the cases cited by HCFA, the case law relied upon by HCFA is on point. The governing regulations are essentially unforgiving. While Petitioner may not perceive itself as a new applicant in the sense that it was a program novice, the fact remains that for economic reasons Petitioner placed itself on the same footing as a new applicant and was thus required to satisfy the regulatory guideline for certification. At the first survey after the change in ownership, both ESRD units had correctable deficiencies, but deficiencies which were impediments to certification nonetheless. Whatever the units' history in the context of prior surveys under previous ownership, the deficiencies found here, in the first survey after the transfer of ownership, warranted certification only after receipt of an acceptable plan of correction.

Estoppel does not lie against HCFA.

The common thread in Petitioner's arguments against summary judgment is that HCFA should be estopped from imposing the March 1999 certification dates. Petitioner relies upon several exhibits to support its claim.

Petitioner's Exhibit 3 is an October 16, 1998 from the Pennsylvania Associate Director Division of Acute and Ambulatory Care to the HCFA Acting Chief of Survey and Certification Branch I transmitting CHOW [change of ownership] packets for 8 AHERF Hospitals and two ESRD units for an impending change of ownership. The letter specifically stated: "These replace the packets previously submitted September 29, 1998 on behalf of the same buyer . . .[Petitioner]." Petitioner Ex. 3. Petitioner asserts that this letter should have put HCFA on notice that the State Agency was treating the situation at hand as changes of ownership rather than new enrollments. Petitioner Br. at 6. There are several flaws with this argument. First, other than the paraphrasing above, the State Agency Official's letter does not identify the ESRD units in issue. Second, it is an amendment to a September 29, 1998 submission. Third, there is no evidence that this submission was made in the context of Petitioner's record notice to HCFA that it would not assume the old Medicare provider numbers.

Petitioner's Exhibit 5 is an October 30, 1998 letter sent, on what purports to be HCFA letterhead, to the State Survey Agency recommending acceptance of facilities for Medicare enrollment, including the ESRD units at Hahnemann and St. Christopher's. Petitioner again asserts that this is further proof that HCFA knew or should have known of the position in which Petitioner was placed. Regardless of the HCFA letterhead, the letter appears to be from Petitioner's Intermediary, Mutual of Omaha, as the author provides a Nebraska telephone number and the Intermediary's logo and Nebraska address appear at the bottom of the letterhead.

Petitioner's Exhibit 6 consists of Medicare/Medicaid Certification and Transmittal Forms for the ESRD units at Hahnemann and St. Christopher's. Petitioner noted that on or about December 1, 1998, unknown to Petitioner, the State Survey Agency sent these forms to HCFA. Petitioner noted that both forms reflected changes of ownership for the ESRDs rather than new enrollments. Additionally, neither form contained a survey date.

Again Petitioner asserted that HCFA's failure to catch these signals precluded HCFA from acting in a manner which would have mitigated the damages Petitioner alleges to have suffered, i.e., ultimately approximately 13 weeks of renal procedures for which it would not obtain Medicare reimbursement. Petitioner Br. at 7-8.

Petitioner generally recounts a variety of telephone conversations occurring in January 1999 in which it claims its representatives inquired about the absence of "Provider Tie-Ins" which are forms used by HCFA to notify the Fiscal Intermediary of enrollments. Petitioner then professed a lack of concern about these forms as it believed HCFA routinely took months to issue such forms. Petitioner Br. at 8, n.12. Petitioner also noted that even on February 17, 1999, when HCFA alerted the State Survey Agency to undertake Medicare certifications for outpatients at the ESRDs, HCFA failed to tell Petitioner that the ESRDs were not Medicare certified. Additionally, "three more weeks elapsed" before the surveys were performed. Petitioner Br. at 8-9; Petitioner Exs. 8 and 9.

As a matter of law, even if the fact alleged by Petitioner are true, I cannot grant the relief it has requested. It is well-settled that estoppel rarely, if ever, will lie against the Federal government. Office of Personnel Management v. Richmond, 496 U.S. 414 (1990); Schweiker v. Hansen, 450 U.S. 785 (1981). Moreover here, the chain of events posited by Petitioner do not even begin to rise to the level of affirmative misconduct required for estoppel. In fact, Petitioner's general characterization of the events between the date of purchase and the eventual certifications of the ESRD units is that HCFA knew or should have known of Petitioner's circumstances and its potential jeopardy. While it might be safe to assume that there existed a fair degree of confusion between various branches of HCFA and the State Survey Agency regarding the status of these ESRDs, Petitioner remained liable for compliance with the applicable program regulations. Those regulations required that, as a new applicant, Petitioner's ESRD units complete the certification process before they were eligible to receive Medicare reimbursement for services provided.

While there may a significant number of disputed facts here, the are no material facts in dispute. Petitioner purchased the Hahnemann and St. Christopher's ESRD units as part of a larger transaction. As part of that larger transaction, Petitioner made a business decision not to assume the various facilities' preexisting Medicare provider numbers and communicated that decision to HCFA. HCFA Ex. 2 at 1; Petitioner Ex. 2 at 1. In spite of this decision, Petitioner asserted before me that these ESRD units were not, by definition, new applicants to the Medicare program and impliedly argued that they should not be treated as such. Petitioner Br. at 14-15. However, in the same letter in which Petitioner communicated to HCFA its decision not to assume the preexisting provider numbers, it recognized that the ESRDs, as well as other providers, would "require a survey based on our election to terminate the old provider numbers." HCFA Ex. 2 at 2; Petitioner Ex. 2 at 2.

Petitioner did not rebut HCFA's prima facie case.

HCFA established that, under the circumstances, the ESRD units at Hahnemann and St. Christopher's were certified at the earliest possible dates allowed by law. Even if the facts as alleged by Petitioner are true, they are immaterial to the result here. The ESRD units at Hahnemann and St. Christopher's were properly certified. Consequently, I grant HCFA's motion for summary judgment, and affirm its decision establishing March 18 and 22, 1999, respectively, as certification dates for these two ESRDs.

Marc R. Hillson
Administrative Law Judge