SUBJECT:

New Millennium CMHC, Inc.,

Petitioner,

Health Care Financing Administration

I enter summary disposition sustaining the determination of the Health Care Financing Administration (HCFA) not to certify Petitioner, New Millennium CMHC, Inc., to participate in the Medicare program as a community mental health center (CMHC) providing partial hospitalization services. I do so because Petitioner has failed to show that it is providing screening services which comply with the requirements of federal law and Florida State law.

I. Background

Petitioner is a for profit corporation that is located in Hialeah, Florida. Petitioner applied to participate in the Medicare program as a CMHC providing partial hospitalization services. On August 28, 1998, HCFA notified Petitioner that it had determined that Petitioner did not meet applicable certification requirements. On November 3, 1998, Petitioner requested HCFA to reconsider its determination. On November 21, 1998, HCFA notified Petitioner that it had reviewed Petitioner's reconsideration request and had determined that its initial denial of the request was correct.

Petitioner requested a hearing and the case was assigned to me for a hearing and a decision. HCFA moved for summary disposition. Petitioner opposed the motion. HCFA submitted nine exhibits (HCFA Ex. 1 - HCFA Ex. 9) in support of its motion. Petitioner submitted seven exhibits (P. Ex. 1 - P. Ex. 7) in opposition to HCFA's motion. Petitioner submitted two additional exhibits, which it labeled as P. Ex. 1 and P. Ex. 2 as attachments to a reply brief that it submitted on April 25, 2000. I am renumbering these two exhibits as P. Ex. 8 and P. Ex 9. I am receiving into evidence HCFA Ex. 1 - HCFA Ex. 9 and P. Ex. 1 - P. Ex. 9.

II. Governing law

A. Federal law

"Partial hospitalization services" are services which are described at section 1861(ff) of the Social Security Act and which are 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. Act, sections 1861(ff)(1); 1861(ff)(2)(A) - (I).

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

(i) providing the services described in section 1916(c)(4) of the Public Health Service Act; and

(ii) meeting applicable licensing or certification requirements for community mental health centers in the State in which it is located.

Act, section 1861(ff)(3)(B)(i), (ii). Although the Act refers to section 1916 of the Public Health Service Act, the 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:

(i) outpatient services, including specialized outpatient services for children, the elderly, the seriously mentally ill, and residents of the . . . [community mental health center's] service area discharged from inpatient treatment at a mental health facility;

(ii) 24-hour-a-day emergency care services;

(iii) day treatment or other partial hospitalization services or psychosocial rehabilitation services; and

(iv) screening for patients being considered for admission to State mental health facilities to determine the appropriateness of such admission.

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

(1) Provides outpatient services, including specialized outpatient services for children, the elderly, individuals who are chronically mentally ill, and residents of its mental health service area who have been discharged from inpatient treatment at a mental health facility;

(2) Provides 24-hour-a-day emergency care services;

(3) Provides day treatment or other partial hospitalization services, or psychosocial rehabilitation services;

(4) Provides screening for patients being considered for admission to State mental health facilities to determine the appropriateness of such admission;

(5) Provides consultation and education services; and

(6) Meets applicable licensing or certification requirements for CMHC's in the State in which it is located.

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 community mental health services center 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:

under a written arrangement, agreement or contract with other agencies, organizations, or individuals who are not CMHC employees, and for which the CMHC maintains overall management responsibility. The written agreement includes at least the identification of the services to be provided and the manner in which the contracted services are coordinated, supervised, and evaluated by the CMHC . . . .

Id. at 3 (emphasis added).

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 State mental health facilities pursuant to section 1913(c)(1) of the Public Health Services Act. In a memorandum dated August 21, 1998, HCFA stated that "screening":

constitutes the performance of at least one of the steps in a process by which an individual is clinically evaluated, pursuant to State law, for the appropriateness of admis[s]ion to a State mental health facility by an entity that has both the appropriate clinical personnel and authorization under State law to perform all of the steps in the clinical evaluation process except those required to be performed by a 24 hour facility.

HCFA Ex. 3 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 those 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:

the process, as approved by the appropriate district office of the . . . [Florida Department of Children and Family Services], whereby a person who is being considered for placement in a state treatment facility is first evaluated for appropriateness of admission to the facility by a community-based public receiving facility or by a community mental health center or clinic if the public receiving facility is not a community mental health center or clinic.

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).

III. Issues, findings of fact and conclusions of law

A. Issues

This case is one of a series of cases that I have heard and decided recently involving the general issue of whether a CMHC meets certification requirements for participation in Medicare. Many of these cases involve CMHCs that are located in the State of Florida. My recent decisions which address the participation status of Florida CMHCs include the following: Charity Behavioural Services, Inc., DAB CR635 (1999); T.L.C. Mental Health Center, DAB CR636 (1999); Psychstar of America, DAB CR645 (2000).

These cases do not involve identical questions of law and fact, but the issues raised by them are very closely related. As I discuss above, at Part II of this decision, qualification to participate in Medicare as a CMHC depends on application of both federal and State laws. In order to qualify for participation, a CMHC must meet both federal and applicable State requirements. What lies at the heart of this case is that Petitioner is a for-profit entity which seeks to operate under State laws which do not recognize for-profit entities as CMHCs.

The specific issues in this case are whether:

1. Petitioner established that it satisfied Medicare participation criteria for a CMHC providing partial hospitalization services.

2. I have authority to hear and decide Petitioner's arguments that HCFA's actions violate the notice and comment requirements of the Administrative Procedure Act, are arbitrary and capricious, or provide a basis for granting equitable relief to Petitioner.

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 separate 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. Summary disposition is appropriate either where: there are no disputed issues of material fact and the only questions that must be decided involve application of 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 its brief and exhibits 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. 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.

2. Petitioner does not satisfy participation criteria for a CMHC providing partial hospitalization services because it has not established that it provides 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 - and to satisfy 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:

1. It must meet applicable licensing or certification requirements in the State in which it is located. 42 C.F.R. § 410.2;

2. It must provide all of the services that are listed in section 1913(c)(1) of the Public Health Service Act. Act, section 1861(ff)(3)(B);

3. The services that it must provide must include screening for patients being considered for admission to State mental health facilities to determine the appropriateness of such admissions. Public Health Service Act, section 1913(c)(1); 42 C.F.R. § 410.2; and,

4. Screening may be done either directly by a CMHC or through an arrangement with another entity. HCFA Ex. 2.

HCFA asserts that Petitioner fails to meet these criteria because Petitioner may not offer screening directly consistent with the requirements of Florida State law nor has Petitioner shown that it has entered into an acceptable arrangement with a third party for the performance of screening.

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) of the Act and section 1913(c)(1) of the Public Health Service Act, Petitioner must be authorized to perform transfer evaluations pursuant to Florida State law. 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. Under federal law screening is the clinical evaluation of a patient to determine his or her suitability for hospitalization in a State mental health facility. 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).

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 a CMHC may perform a transfer evaluation only if it 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 publicly funded CMHC that is certified to perform transfer evaluations under Florida State law.

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. HCFA Ex. 2. 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. Id. at 3 - 4.

I have evaluated Petitioner's arguments that it has established satisfactory arrangements with others for performing screening. I find them to be unpersuasive. The evidence in this case does not show that Petitioner has a screening arrangement with another entity which complies with federal requirements.

Petitioner contends that it has established acceptable arrangements with another entity to perform screening. Petitioner asserts that it is able to satisfy the screening requirement by referring patients in need of screening to an entity described under Florida State law as a "receiving facility". Petitioner contends that it has an acceptable screening arrangement with a specific receiving facility, HealthSouth Larkin Hospital (Larkin Hospital). See P. Ex. 4; P. Ex. 9.

Petitioner argues that, under Florida State law, a receiving facility is permitted to perform transfer evaluations. Petitioner's brief at 3 - 4. From this Petitioner asserts that it may satisfy the screening requirement by transferring its patients to a receiving facility which will then perform the requisite screening. This argument is essentially the same argument that was made by the facility in the case of T.L.C. Mental Health Center, DAB CR636 (1999). I held there that a referral of a patient to a receiving facility does not satisfy the screening requirement where the referring entity does not exercise the supervisory authority that is required by HCFA. DAB CR636 at 8. I restate that holding here.

An arrangement that Petitioner may have with a receiving facility to perform screening will only pass muster under HCFA's criteria if the arrangement specifies the requisite supervision by Petitioner of the receiving facility's screening and if the receiving facility itself satisfies the relevant federal criteria for performing screening. The fact that a facility is designated as a receiving facility is not in and of itself sufficient to satisfy federal criteria. As Petitioner describes referral of a patient to a receiving facility, it generally is not screening through an arrangement with others as is required by HCFA, because Petitioner would not retain the necessary management control or supervisory authority over the screening process. The fact that the receiving facility may be authorized under Florida State law to perform a transfer evaluation begs the question of whether Petitioner is exercising the requisite supervision of the receiving facility's performance of its functions. It also begs the question of whether the receiving facility is complying with federal requirements.

On its face, the contract between HCFA and Larkin Hospital fails to satisfy the criteria for performing screening through another entity. P. Ex. 4. The contract was executed on December 3, 1996. Id. at 1. It recites that it remains in effect for a period of one year. Id. at 2. The contract therefore expired on December 3, 1997, nearly one year prior to the date that HCFA determined that Petitioner was not complying with participation requirements. Petitioner has not offered any evidence that the contract has been renewed or that another contract currently is in effect between Petitioner and Larkin Hospital.

Furthermore, even if the contract remains in effect, Petitioner has not shown that it is actually supervising screening performed by Larkin Hospital in a way which satisfies participation requirements. The All States Letter requires that a CMHC which has screening performed via an arrangement with another entity must retain overall management responsibility for the performance of screening. HCFA Ex. 2 at 3 - 4. For a CMHC to satisfy this requirement, it must show not only that it has an agreement with another entity that recites that the CMHC retains management responsibility and is supervising screening, but that it is actually exercising management and supervisory authority over the entity that is doing the screening. The agreement between Petitioner and Larkin Hospital recites that Petitioner will supervise screening performed by Larkin Hospital. P. Ex. 4 at 2. But, Petitioner has offered no evidence to show how that contract actually was or is being administered. In particular, Petitioner offered no documentation of the degree of supervision or management authority it exercised or exercises pursuant to the agreement.

Petitioner argues that Larkin Hospital is, in fact, a receiving facility and is therefore authorized to perform screening arrangements. As proof for this assertion, Petitioner relies on P. Ex. 9. This exhibit contains a list which is subtitled "Designated Receiving Facilities." Id. at 3. Larkin Hospital is one of the names on the list. Id. However, even if Larkin Hospital is a receiving facility, that fact would not address the other reasons which I have stated for finding that the arrangement between Petitioner and Larkin Hospital does not demonstrate that Petitioner is actually performing screening in compliance with federal participation requirements. In particular, Petitioner has not shown how Larkin Hospital meets federal requirements for performing screening.

Finally, Petitioner has not shown that it actually is referring patients to Larkin Hospital to have screening performed. In Psychstar of America, DAB CR645 (2000) I held that the capacity to perform screening is not enough to satisfy the requirements which govern screening. In order to satisfy those requirements, a CMHC must show that it is actually performing screening, either directly or through an acceptable arrangement with another entity.

3. HCFA's application of the law is not on its face inconsistent with the law's requirements. Moreover, I do not have the authority to decide that HCFA's application of the law is ultra vires.

Petitioner argues that HCFA's August 21, 1998 memorandum, in which HCFA explained that restrictions in State law might preclude a CMHC from complying with the federal requirement that a CMHC be authorized under State law to perform mandated functions including screening, constitutes a departure by HCFA from its previous policy concerning certification of CMHCs to provide partial hospitalization services. Petitioner's brief at 7; see HCFA Ex. 3. Petitioner argues that, prior to August 21, 1998, HCFA did not require that a CMHC in Florida be authorized to perform transfer evaluations pursuant to Florida State law. It asserts that the policies embodied in the August 21, 1998 memorandum constitute a departure from that which HCFA stated previously in the All States Letter. See HCFA Ex. 2. Petitioner asserts that such an allegedly fundamental change in policy by HCFA, and any certification determination that HCFA makes pursuant to the allegedly changed policy is unlawful where HCFA has failed to follow the notice and comment requirements of the Administrative Procedure Act.

I do not find that this argument provides a basis for me to order that HCFA certify Petitioner to participate in Medicare. First, Petitioner has made no showing that HCFA's interpretation of the law as is stated in HCFA's August 21, 1998 memorandum is inconsistent with federal statutes or regulations published by the Secretary. Indeed, HCFA's policy statement is consistent with the requirements of the Act and implementing regulations. The Act requires that a CMHC meet applicable licensing or certification requirements in the State in which it is located. Act, section 1861(ff)(3)(B)(i), (ii). Regulations reiterate this requirement. 42 C.F.R. § 410.2.

Second, the August 21, 1998 memorandum does not express a policy which conflicts with the contents of the All States Letter. HCFA Ex. 2; HCFA Ex. 3. The All States letter contains explanations of what are meant by the terms "screening" and "under arrangements." HCFA Ex. 2 at 3 - 4. The August 21, 1998 memorandum further clarifies HCFA's policy by reiterating the Act's requirement that a CMHC must operate in conformance with State law. Nothing about this latter pronouncement is inconsistent with the contents of the All State letter. In reiterating the Act's requirement of compliance with the requirements of State law, the August 21, 1998 memorandum neither imposed a new requirement on CMHC's, nor did it alter existing policy. It merely stated the requirements of federal law. It is true that the All States letter does not discuss a CMHC's obligations to operate in compliance with the requirements of State law. Moreover, that omission is not a suggestion that a CMHC may operate in violation of the requirements of State law.

Finally, I lack the authority to declare HCFA's official interpretation of law to be ultra vires due to HCFA's failure to publish it pursuant to the notice and comment requirements of the Administrative Procedure Act. Regulations give me the authority to decide whether HCFA's interpretations of law are consistent with the Act and regulations. 42 C.F.R. §§ 498.3(b)(1); 498.5(a)(2). But, these regulations do not give me the authority to declare an interpretation of law by HCFA to be ultra vires the requirements of the Act. See Ids.

4. I do not have the authority to order HCFA to certify Petitioner to participate in Medicare on the ground that HCFA's determination not to certify Petitioner is arbitrary and capricious.

Petitioner argues that I should declare HCFA's determination to deny Petitioner certification to be unlawful on the ground that the certification determination was arbitrary and capricious. Petitioner contends that, prior to August 21, 1998, HCFA made determinations to certify CMHCs to participate in Medicare which are inconsistent with the policy that HCFA announced in the August 21, 1998 memorandum. However, according to Petitioner, HCFA has not rescinded these pre-August 21, 1998 determinations even while it is enforcing the August 21, 1998 memorandum against entities which apply for certification after August 21, 1998. See Petitioner's brief at 8 - 9. Petitioner asserts that this allegedly disparate treatment of entities by HCFA establishes HCFA to be arbitrary and capricious in denying certification to Petitioner.

I do not have the authority to order HCFA to certify Petitioner to participate in Medicare on the ground that HCFA's determination not to certify Petitioner is arbitrary and capricious in light of its alleged failure to decertify other CMHCs. My authority is limited pursuant to 42 C.F.R. §§ 498.3 and 498.5 to hearing and deciding whether HCFA's determination in this case, given the undisputed facts, complies with applicable law.

The premise which underlies HCFA's August 21, 1998 memorandum is that, prior to that date, HCFA had misunderstood the implications of Florida State law and had been certifying incorrectly as CMHCs entities that did not comply with the requirements of Florida State law. HCFA Ex. 3. I am aware of nothing in the Act or in regulations which commands HCFA to continue to certify applicants to participate on the ground that it has certified similarly situated applicants in the past. And, there is nothing that I am aware of in either the Act or regulations which forces HCFA to adhere rigidly to an interpretation of a State law if in fact HCFA's understanding of how the law operates evolves over time. HCFA plainly has the responsibility to apply the law in a manner that is consistent with its understanding of the meaning of that law. HCFA may adapt its actions to comport with its evolving understanding of the meaning of a State law. And, HCFA is under no obligation to continue to apply a policy that it had applied previously if it determines that the requirements of a State's laws direct it to do otherwise.

5. I do not have the authority to hear and decide Petitioner's claim of estoppel.

Petitioner asserts that it incurred expenses based on its understanding from conversations with employees of HCFA occurring in late 1997 and early 1998 that Petitioner would be certified to participate in Medicare. See Petitioner's brief at 9 - 10. Petitioner asserts that it relied to its detriment on representations allegedly made to it by HCFA's employees. It contends that it suffered damages as a consequence of its reliance on these alleged statements. Presumably, Petitioner would have me award money damages to it premised on the injury caused by its reliance on the representations allegedly made by HCFA's employees.

For purposes of deciding Petitioner's argument, I am assuming to be true Petitioner's contentions about the representations that HCFA's employees are alleged to have made. I am also assuming to be true Petitioner's assertions that it relied on these representations to its detriment. Notwithstanding, I lack the authority to hear and decide Petitioner's claim to equitable relief based on estoppel.

On several previous occasions I have held that I lack the authority to decide claims of estoppel in cases involving the manner in which HCFA allegedly has processed applications for provider certification. T.L.C. Mental Health Center, DAB CR636 (1999); GranCare Home Health Service & Hospice, DAB CR464 (1997); The Rivers Health Care Resources, Inc., DAB CR446 (1996); SRA, Inc. D/B/A St. Mary Parish Dialysis Center, DAB CR341 (1994). As I explain above, at Finding 3 of this decision, my authority in a case involving HCFA is limited to hearing and deciding whether any of those determinations that are described in 42 C.F.R. §§ 498.3 and 498.5 was made correctly by HCFA. My authority to hear and decide a case involving HCFA does not extend to awarding money damages based on principles of estoppel. Petitioner has offered no argument here which would give me reason to revisit my previous decisions that I lack the authority to hear and decide estoppel arguments.

Steven T. Kessel
Administrative Law Judge