SUBJECT:

Midtown Community Mental Health Clinic

Petitioner,

Health Care Financing Administration

I. Background and governing law

A. Background

Petitioner is a community mental health clinic (CMHC) providing partial hospitalization services for Medicare beneficiaries. On September 6, 1996, Petitioner applied to be certified to participate in the Medicare program. On August 5, 1997, the Health Care Financing Administration (HCFA) denied Petitioner's application. On August 8, 1997, Petitioner applied to HCFA for reconsideration of its determination. On October 3, 1997, HCFA notified Petitioner that Petitioner had been approved to participate in Medicare effective August 7, 1997.

Petitioner disagreed with the reconsidered determination insofar as it established an effective date of participation of August 7, 1997. Petitioner contended that it should have been certified to participate in Medicare effective September 6, 1996, the date of its initial application to participate in Medicare. Petitioner requested a hearing before an administrative law judge to contest the effective date of its participation in Medicare. The case was assigned to me for a hearing and a decision.

HCFA moved for summary disposition. Petitioner opposed the motion. I held a prehearing conference at which I identified issues that required additional briefing. The parties submitted supplemental briefs. HCFA submitted 10 proposed exhibits (HCFA Ex. 1 - HCFA Ex. 10) with its motion for summary disposition. Petitioner submitted 11 proposed exhibits (P. Ex. 1 - P. Ex. 11) in opposition to the motion and in support of its contention that it should have been certified to participate in Medicare effective September 6, 1996. I note that some of Petitioner's proposed exhibits duplicate some of HCFA's proposed exhibits. However, I am admitting into evidence all of the parties' proposed exhibits. I hereby admit into evidence HCFA Ex. 1 - HCFA Ex. 10 and P. Ex. 1 - P. Ex. 11.

B. Governing law

1. Federal law governing participation of CMHCs in Medicare

"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. #1. 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 issued additional guidance explaining the meaning of the term "under arrangements. The Medicare Intermediary Manual (MIM) explains, at section 3007, that it is not HCFA's intent that a provider providing services under arrangements with another entity not function merely as a billing agent for that entity:

Accordingly, for services provided under arrangements to be covered the provider must exercise professional responsibility over the arranged-for services.

HCFA Ex. 2 at 1 - 2.

2. Federal regulations governing the effective date of participation of a CMHC

In order to be certified to participate in Medicare, a CMHC must apply to participate in Medicare. The CMHC must be inspected by or on behalf of HCFA and HCFA must certify that the CMHC satisfies applicable participation requirements.

Prior to September 17, 1997, the regulation that governed the effective date of participation of a CMHC was 42 C.F.R. § 489.13(c)(2) (1995). That regulation provided that, for requests for Medicare participation received after June 30, 1992:

the agreement is effective on the date the CMHC meets all federal requirements, but not before the date HCFA receives the application [to participate in Medicare]

42 C.F.R. § 489.13(c)(2) (1995).

That regulation was changed effective September 17, 1997. On that date, the relevant regulation governing the effective date of participation of a CMHC was codified as 42 C.F.R. § 489.13(a)(2)(i). This regulation specifies that the effective date of a participation agreement with a CMHC:

is the date on which HCFA accepts a signed agreement which assures that the CMHC . . . meets all federal requirements.

42 C.F.R. § 489.13(a)(2)(i).

II. Issue, findings of fact and conclusions of law

A. Issue

The issue in this case is the date on which Petitioner's participation in the Medicare program became effective.

B. Findings of fact and conclusions of law

I make findings of fact and conclusions of law (Findings) to support my decision. 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 the parties' arguments to decide whether there are disputed issues of material fact. There are no disputed material facts in this case. Essentially, the parties are relying on the same facts and are making legal arguments based on those facts.

2. Petitioner did not satisfy federal participation requirements for providing services "under arrangement" prior to August 6, 1997.

As I discuss above, at Part I.B. of this decision, a CMHC will satisfy federal participation requirements for services that it provides "under arrangement" with another entity only if it retains and exercises overall management responsibility for such services. HCFA Ex. 1 at 3; HCFA Ex. 2 at 1 - 2. Petitioner did not establish that it satisfied federal participation requirements for providing services "under arrangement" until August 6, 1997. Prior to that date, the arranged-for services that Petitioner provided were being provided without Petitioner having the requisite management control and supervisory authority over those services.

On September 6, 1996, Petitioner entered into a contract with Dr. Vladimir Einisman to provide arranged-for services which included specified outpatient services and 24 hour per day emergency services. HCFA Ex. 8 at 1. The services which were provided by Dr. Einisman were among those services that a CMHC must provide as a prerequisite to participating in Medicare. However, under the terms of the September 6, 1996 agreement, those services were not being provided in a manner which satisfied federal participation requirements. The agreement between Petitioner and Dr. Einisman failed to provide for any management or supervision of Dr. Einisman's services by Petitioner. Id.

Nor did there exist collateral agreements between Petitioner and Dr. Einisman which gave Petitioner the requisite management authority over or supervision of Dr. Einisman's services. Dr. Einisman served as Petitioner's medical director. On September 4, 1994, he signed a contract with Petitioner which governed his services as Petitioner's medical director. HCFA Ex. 5. The contract appoints Dr. Einisman to serve as Petitioner's medical director. Id. at 1. It describes Dr. Einisman's duties as medical director. Id. at 1 - 2. However, the contract does not provide for any supervision of Dr. Einisman's performance of his duties. Id. at 1 - 5.

Petitioner ultimately assumed management responsibility for and supervisory control over the arranged-for services that were provided by Dr. Einisman. When Petitioner did so it satisfied federal participation requirements for arranged-for services. However, it did not assume that authority until August 6, 1997. On that date, Petitioner and Dr. Einisman agreed that Petitioner would provide management and supervision of those arranged-for services consistent with federal participation requirements which govern CMHCs. HCFA Ex. 8 at 3.

3. It is not relevant whether the pre-September 17, 1997 version of 42 C.F.R. § 489.13 governs HCFA's certification of Petitioner's participation in Medicare.

As I discuss above, at Part I.B.2. of this decision, the language of the regulation which governs the effective date of participation in Medicare of a CMHC changed on September 17, 1997. Prior to that date, 42 C.F.R. § 489.13(c)(2) provided that the effective date of participation of a CMHC was the date that the CMHC met all federal participation requirements, but, not prior to the date that the CMHC applied for participation. Beginning with September 17, 1997, the revised 42 C.F.R. § 489.13(a)(2)(i) provides that the effective date of participation of a CMHC will be the date on which HCFA accepts a participation agreement from the CMHC.

Arguably, the two versions of the regulations might operate to produce different consequences in cases involving identical facts. The pre-September 17, 1997 version of the regulation allows a CMHC to participate on the date that it demonstrates compliance with participation requirements. Under the pre-September 17, 1997 version, a CMHC might establish that it meets participation requirements either as of the date it applies for participation or on some date that is in between the date it applies to participate and the date on which HCFA evaluates Petitioner's application. Under that version, the effective date of participation would be the date on which Petitioner is in compliance with participation requirements even if HCFA completed its evaluation of the evidence which establishes compliance at a later date. The current version of the regulation appears to vest discretion in HCFA to decide the date on which a CMHC qualifies to participate. Under the current version, it appears that HCFA may determine to certify a CMHC to participate at a date which is as late as the date that HCFA completes its evaluation of a CMHC's application even if the evidence of compliance that is submitted to HCFA by the CMHC demonstrate compliance at an earlier date than the evaluation date.

Petitioner argues that its certification is governed by the pre-September 17, 1997 version of the regulation. It avers that the version which became effective on September 17, 1997 is inapplicable here inasmuch as Petitioner applied prior to September 17, 1997 both for certification and for reconsideration of HCFA's initial determination denying certification. Petitioner asserts that it would be an impermissible retroactive application of the September 17, 1997 regulation if that regulation were to govern Petitioner's application for participation.

Petitioner asserts that it attained compliance with participation requirements on September 6, 1996, the date of its agreement with Dr. Einisman to provide arranged-for services. It argues that, under the pre-September 17, 1997 version of 42 C.F.R. § 489.13, it should be certified to participate as of September 6, 1996 inasmuch as September 6, 1996 is the date that Petitioner met all federal participation requirements.

HCFA argues that the version of 42 C.F.R. § 489.13 which became effective on September 17, 1997 governs here. It asserts that the regulation is not being applied retroactively inasmuch as HCFA made its final determination to certify Petitioner on October 3, 1997, after the effective date of the regulation. Moreover, it asserts that the September 17, 1997 version governs, even if Petitioner might have established an earlier effective date of participation under the version of the regulation that was in effect prior to September 17, 1997.

Resolving the issue of which version of the regulation governs might be significant in a case where a CMHC establishes that it complied with all participation requirements on a date that precedes the date on which HCFA accepts the CMHC's application for participation. Here, however, the dispute as to which version of the regulation governs is academic. That is because Petitioner did not establish that it complied with all participation requirements until August 6, 1997.

Under either version of the regulation, Petitioner would not have been eligible to participate in Medicare prior to August 7, 1997. The pre-September 17, 1997 version of the regulation enabled Petitioner to participate as of the date it attained compliance with participation requirements. But, Petitioner did not execute the addendum to its agreement with Dr. Einisman governing services provided "under arrangement" until August 6, 1997. It was not in compliance with participation requirements at any time prior to August 7, 1997. Therefore, under the pre-September 17, 1997 version of the regulation, the date that Petitioner established that it was in compliance with participation requirements was, effectively, August 7, 1997. That is the date on which HCFA certified Petitioner to participate in Medicare. The current version of the regulation gives HCFA greater flexibility in determining the effective date of participation of a CMHC. However, even under the current regulation, the earliest date that a CMHC may be certified to participate is the date that it attains compliance with all federal participation requirements. In this case, that date was August 7, 1997, the date on which HCFA certified Petitioner to participate.

I note that the addendum to Petitioner's agreement with Dr. Einisman is dated August 6, 1997 and that HCFA certified Petitioner to participate effective August 7, 1997. I do not conclude that HCFA should have certified Petitioner to participate effective August 6, 1997. Evidently, HCFA assumed that Petitioner's supervision of Dr. Einisman would not begin until August 7, 1997, the day after the date of the addendum. That is not an unreasonable assumption for HCFA to have made.

Steven T. Kessel

Administrative Law Judge