SUBJECT:

Counseling and Therapeutics Center, L.L.C.,

Petitioner,

Health Care Financing Administration

I. Background facts and governing law

A. Background facts

Petitioner is a corporation that is located in Baton Rouge, Louisiana. Petitioner applied to be certified to participate in Medicare as a CMHC. In a letter dated October 1, 1998, HCFA informed Petitioner that HCFA had determined that Petitioner did not meet the criteria for participation in Medicare as a CMHC. HCFA concluded that Petitioner was not providing services that a CMHC must provide in order to be eligible to participate in Medicare. By letter dated November 2, 1998, Petitioner requested HCFA to reconsider its determination. HCFA did so and concluded again that Petitioner failed to satisfy participation requirements. HCFA notified Petitioner of its reconsideration determination by letter dated March 11, 1999. Petitioner then requested a hearing and the case was assigned to me for a hearing and a decision.

Petitioner moved for summary disposition and HCFA cross-moved for summary disposition. Each party submitted proposed exhibits with its motion. Petitioner submitted 12 proposed exhibits (P. Ex. 1 - P. Ex. 12). HCFA submitted eight proposed exhibits (HCFA Ex. 1 - HCFA Ex. 8). I am receiving into evidence P. Ex. 1 - P. Ex. 12 and HCFA Ex. 1 - HCFA Ex. 8.

B. Governing law

A CMHC must be certified to participate in the Medicare program in order to be able to claim, and to receive reimbursement for, services that it provides to Medicare beneficiaries. If a CMHC is certified to participate in Medicare it will be eligible to be reimbursed for services known as "partial hospitalization services" that it provides to Medicare beneficiaries. See Social Security Act (Act), section 1861(ff)(3)(A).

The term "partial hospitalization services" is explained at section 1861(ff) of the Act. Partial hospitalization services consist of services that are prescribed by a physician and are 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 Act defines a CMHC to be an entity that is:

(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:

(A) services principally to individuals residing in a defined geographic area (hereafter . . . "service area")[;]

(B) outpatient services, including specialized outpatient services for children, the elderly, individuals with a serious mental illness, and residents of the . . . [community mental health centers'] service areas who have been discharged from inpatient treatment at a mental health facility[;]

(C) 24-hour-a-day emergency care services[;]

(D) day treatment or other partial hospitalization services, or psychosocial rehabilitation services[; and]

(E) 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 CMHCs in the State in which it is located.

42 C.F.R. § 410.2.

In order to be certified to participate in Medicare, a CMHC must be providing all of the services that are described in section 1913(c)(1) of the Public Health Service Act and at 42 C.F.R. § 410.2. HCFA Ex. 1 at 1 - 2. A CMHC will not satisfy participation requirements if it is providing some of the described services - such as partial hospitalization services - but not all of them. Id.

A CMHC may provide its services either directly or through an arrangement with an individual or entity. Services that are provided "directly" include those services that are provided by a CMHC's employees during the course of their duty hours. HCFA has explained what it means by services that a CMHC provides via an arrangement:

Under arrangements, as it applies to CMHCs, means that a CMHC may arrange for the services required by section . . . [1913(c)(1) of the Public Health Service Act] and partial hospitalization services to be provided 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.

HCFA Ex. 1 at 3 - 4. Supervision of arranged-for services requires a CMHC to apply many of the same quality controls to arranged-for services that it applies to services that are furnished directly. HCFA Ex. 2 at 1 - 2. HCFA has explained that, in an arranged for service, a CMHC must:

accept the patient for treatment in accordance with its admission policies, and maintain a complete and timely clinical record on the patient, which includes diagnoses, medical history, physician's orders, and progress notes relating to all services received and must maintain liaison with the attending physician regarding the progress of the patient and the need for revised orders.

Id. at 2.

II. Issue, findings of fact and conclusions of law

A. Issue

The issue in this case is whether Petitioner satisfied the requirements for participation of a CMHC in the Medicare program.

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. It is appropriate to decide this case based on the parties' written submissions.

Neither party to this case requested to present testimony in person. Both HCFA and Petitioner have moved to have this case decided based on written submissions. Therefore, I conclude that it is appropriate to decide the case based on the parties' written submissions.

2. Petitioner did not establish that it is providing all of the services that a CMHC must provide in order to satisfy Medicare participation requirements.

As I discuss above, at Part I.B., the Act and implementing regulations specify the services that a CMHC must provide in order to qualify to participate in the Medicare program. A CMHC must provide all, and not just some, of these services in order to qualify to participate. Moreover, it is not sufficient for a CMHC merely to demonstrate that it has the capacity or capability to provide the requisite services. In order to qualify to participate in Medicare, a CMHC must demonstrate that it actually is providing the requisite services. Psychstar of America, DAB CR645 at 6 (2000).

HCFA determined that Petitioner did not establish that it was providing several of the services that a CMHC is required by law to provide in order to qualify for Medicare reimbursement. These services consisted of the following:

• Specialized outpatient services for children and the elderly;

• 24-hour-a-day emergency care services; and

• Screening for patients being considered for admission to State mental health facilities to determine the appropriateness of such admissions.

HCFA Ex. 3 at 1 - 2. I have considered the evidence that the parties - and, in particular, Petitioner - submitted in order to decide whether, in fact, Petitioner was providing these services. I conclude that Petitioner has not shown that it was providing these services, either directly or under an acceptable arrangement.

a. Petitioner did not establish that it was providing required services directly.

In its initial determination, HCFA made specific findings about the absence of proof that Petitioner was providing all required services. At an onsite review of Petitioner's operation that was conducted on September 24, 1998, Petitioner's Director was asked by HCFA to provide evidence to show that Petitioner was providing specialized outpatient services for children and elderly individuals. Petitioner produced records to show that, in the period running from January to May, 1997, Petitioner provided counseling services to children. HCFA Ex. 3 at 3. However, Petitioner produced no records to show that it provided services after that date. Id. Petitioner produced no evidence to show that it was providing services for elderly individuals. Id.

Petitioner was also asked at the September 24, 1998 review to establish that it was providing 24-hour emergency service. HCFA Ex. 3 at 3. Petitioner produced no evidence to show that it was providing that service. Id. Finally, Petitioner was asked to establish that it was providing screening for patients being considered for admission to State mental health facilities to determine the appropriateness of such admissions. Id. at 4. Once again, Petitioner did not produce evidence to show that it was providing that service. Id.

On February 14, 2000, counsel for Petitioner and HCFA stipulated that Petitioner was not contending that it provided outpatient services for children or the elderly, 24-hour-a- day emergency service, or screening for patients for admission to State mental health facilities directly. Petitioner reiterated this stipulation in its motion for summary disposition. Petitioner's Initial Brief on Summary Disposition at 1 - 2.

b. Petitioner did not establish that it was providing required services through an acceptable arrangement with another individual or entity.

Petitioner relies on a clinical services management agreement between itself and CPHC Behavioral Health Management LLC (CPHC) as proof that it is offering all required services via an arrangement with another entity. P. Ex. 1. I have looked closely at this agreement. I conclude that it does not establish that Petitioner has an acceptable arrangement with another entity to provide all required services. I reach this conclusion for the following reasons.

(i). The management agreement does not require CPHC to provide all of the services that Petitioner must provide in order to qualify as a CMHC.

There is no language in the management agreement which either states directly or which suggests that CPHC will provide all of the services that a CMHC must provide in order to qualify to participate in Medicare but which Petitioner is not providing directly. In particular, the management agreement does not cover the provision of specialized outpatient services to children or elderly individuals nor does it assure that CPHC will provide 24-hour per day emergency services.

The specific wording of the management agreement obligates CPHC only to provide partial hospitalization services. The management agreement contains a schedule (Schedule B) which enumerates the services that CPHC will provide for Petitioner. P. Ex. 1 at 11 - 13. Schedule B states that CPHC will provide "all necessary partial hospitalization services . . . ." Id. at 12. It does not state that CPHC will provide specialized outpatient services for children and elderly individuals. See Id. Nor does it state that CPHC will provide 24-hour per day emergency services.

Furthermore, there is nothing in the management agreement from which I could infer reasonably that the parties intended that CPHC would provide the required specialized outpatient services or emergency services. The fact that the agreement expressly mentions partial hospitalization services and does not mention the other required services is strong grounds for me to infer that the agreement does not require CPHC to provide the other required services. Moreover, the statutory definition of "partial hospitalization services" plainly does not cover specialized outpatient services to children or the elderly nor does it encompass emergency services. Act, sections 1861(ff)(1); 1861(ff)(2)(A) - (I). In the absence of some special definition of the term "partial hospitalization services" in the management agreement, it is reasonable to assume that the parties to the agreement intended to give the term its statutory meaning.

(ii). Petitioner has not shown that CPHC actually is providing all required services.

Petitioner seems to be arguing in its motion for summary disposition that CPHC is in fact providing all required services even if the agreement between Petitioner and CPHC does not specifically refer to all of these services. Petitioner contends that P. Ex. 2 - P. Ex. 8 establish that these services are being provided.

HCFA objects to Petitioner's contention on the ground that Petitioner did not assert, either in its request for reconsideration, or in its hearing request, that it actually was providing all covered services via an arrangement with CPHC. Although I agree with HCFA that Petitioner is raising an issue that it did not raise previously, I have decided to hear and decide the issue. 42 C.F.R. § 498.56(a).

However, I do not find that Petitioner's exhibits offer persuasive evidence that Petitioner is providing all required services via an arrangement with CPHC. First, none of the exhibits suggest that either Petitioner or CPHC is offering specialized outpatient services for children. P. Ex. 2 - P. Ex. 8 are excerpts from patient treatment records. None of the patients whose records Petitioner supplied appear to be children. See Ids.

Second, the exhibits do not establish that either Petitioner or CPHC is offering 24-hour per day emergency services. Petitioner contends that the provision of such services is established by P. Ex. 7 and P. Ex. 8. These exhibits, which are identical copies of the same treatment record, show that, on October 13, 1998, at 4:30 a.m., a patient presented to Concord Hospital for assessment and admission. The patient is described in the record as having suicidal ideation. An assessment was performed at Concord Hospital by Dr. Rama Kongar.

These exhibits establish, at most, that Petitioner or CPHC may have referred a patient to Concord Hospital. They say nothing about the services that Petitioner provided to the patient. They do not suggest that Petitioner or CPHC actually provided emergency services to the patient. Indeed, all of the services that are described in the exhibits were performed by Concord Hospital.

Third, the exhibits do not establish that either Petitioner or CPHC is providing specialized outpatient services for elderly individuals. Petitioner contends that the provision of such services is established by P. Ex. 2. This exhibit is a treatment record for an individual, born December 23, 1934, who was provided care at Petitioner's facility.

I agree that the individual whose record Petitioner supplied is an "elderly individual." The record documents that this individual received outpatient services from Petitioner. P. Ex. 2 at 3 - 7. Services appear to have included group therapy. Id. However, the record also documents that all of the services were provided to this individual during a period that ran from August 13, 1996 through August 15, 1997. Id. No outpatient services are documented as having been provided to this individual, or to any other elderly individual, after August 15, 1997.

The evidence that Petitioner offered to show that it is providing outpatient services to elderly individuals addresses services that were provided in the remote past and not the services that Petitioner was providing at the time that it applied for participation. The evidence that Petitioner offers to establish that it is providing outpatient care to elderly individuals shows only that Petitioner gave outpatient care to a single elderly patient during a period of time that is between one and two years previous to the onsite certification review that HCFA conducted of Petitioner to ascertain Petitioner's compliance with participation requirements. HCFA Ex. 3 at 1. As I discuss above, at Part I.B. of this decision and at the beginning of this Finding, a CMHC must be providing all required services in order to qualify for participation in Medicare. The fact that a CMHC may have provided a service at some point in the remote past does not establish that the CMHC is providing such service now.

(iii). The management agreement does not vest Petitioner with the management and supervisory authority that is required for services that are performed via an arrangement with another individual or entity.

As I discuss above, at Part I.B., HCFA has determined that an agreement between a CMHC and another individual or entity to provide services by an arrangement will not satisfy participation requirements - even if it assures that required services will be provided - if it does not vest in the CMHC the requisite degree of management and supervisory authority. The agreement between Petitioner and CPHC plainly does not give Petitioner the requisite management and supervisory authority.

A CMHC must manage closely and supervise any services that are provided via an arrangement. HCFA Ex. 2 at 1 - 2. Indeed, a CMHC must exercise the same degree of management and supervision over the services that are provided by arrangement as it would exercise if it performed the services directly. A primary object of certification to participate in Medicare is to assure beneficiaries that the certified provider is conforming with applicable standards which govern quality of care. That purpose would be defeated if a CMHC were able to delegate covered services to another entity without subjecting those services to the same degree of control as it exercises over services that it provides directly.

The management agreement between Petitioner and CPHC is deficient when it is measured against this standard. The agreement does not provide for close management or supervision of CPHC by Petitioner. To the contrary, it establishes CPHC as an independent contractor which provides services free from Petitioner's management or supervision.

The management agreement identifies CPHC as "the Manager." P. Ex. 1 at 1. It delegates to CPHC the authority to "establish, manage, and operate" a partial hospital psychiatric program. P. Ex. 1 at 1. It contains no provision which gives Petitioner the authority to manage and supervise these delegated services. See Id. at 1 - 9. Moreover, it expressly states that CPHC is to operate as an independent contractor. The independent contractor clause, on its face, exempts CPHC from close management control and supervision by Petitioner. The agreement states that:

It is expressly acknowledged by the parties hereto that . . . [CPHC] is an independent contractor, and nothing in this Agreement is intended, nor shall be construed, to create any employer/employee relationship or a joint venture relationship; provided that the services to be rendered thereunder by . . . [CPHC] shall be provided in a manner consistent with the standards governing such services and the provisions of this Agreement.

Id. at 5.

There is nothing in the management agreement to suggest that Petitioner and CPHC intended to give the term "independent contractor" a meaning other than its plain meaning. An independent contractor is, under common law, exempt from the close supervision and control that an employer has over its employee. Black's Law Dictionary 770 (6^th Ed. 1990), citing Restatement (Second) of Agency, § 2.

III. Conclusion

For the reasons stated, I sustain HCFA's determination to deny certification to Petitioner to participate in Medicare as a CMHC.

Steven T. Kessel

Administrative Law Judge