SUBJECT:

Stanton Road Clinic,

Petitioner,

Health Care Financing Administration

I deny Petitioners' motions for summary disposition. Because Petitioners' challenges to the determination of the Health Care Financing Administration (HCFA) are legally incorrect or beyond my authority to address, I enter summary judgment for HCFA.

A. Background

This case involves three Petitioners' challenges to the effective date assigned by HCFA to their participation in the Medicare program as Federally Qualified Health Centers (FQHC). The three Petitioners herein contend that the effective date should have been November 23, 1998, when applications were first submitted on their behalf to request each Petitioner's participation as a FQHC.

An FQHC is a type of health services supplier under the Medicare laws. Section 1861(aa)(3) and (4) of the Social Security Act (Act); 42 C.F.R. § 488.1 (definition of "supplier"). Unlike the words "hospital" or "nursing home" which have significance outside of the Medicare program as well, "FQHC" is a classification unique to the Medicare program. An entity does not acquire the FQHC designation unless it has been approved for participation in the Medicare program as such. 42 C.F.R. § 405.2401(b). Consequently, when an entity applies to enter the program as an FQHC, it is seeking approval for both the FQHC designation as well as Medicare participation.⁽¹⁾ Generally speaking, the Medicare program reimburses an approved FQHC for services which are rendered to a medically under-served population, or which are provided from a location in a medically under-served area, as demonstrated by an application approved by the Public Health Service. See, e.g., 42 C.F.R. § 491.5(f).

The regulations provide that an entity seeking Medicare participation as an FQHC is entitled to a hearing in accordance with 42 C.F.R. Part 498 "when HCFA fails to enter into an agreement with the entity." 42 C.F.R. § 405.2430(d). I believe the hearing rights extend to the situation in this case, where HCFA has failed to enter into an agreement as early as the Petitioners thought was proper. Given the proceedings to date, I infer that the parties' interpretation of the hearing regulation is the same as mine.

The parties have submitted and briefed cross-motions for summary disposition in accordance with Chief Administrative Law Judge Marion Silva's "Order and Briefing Schedule" dated October 6, 2000 (October 6, 2000 Order). Chief Administrative Law Judge Marion Silva was the presiding official before the case was reassigned to me. In that order, Judge Silva summarized the outcome of her prehearing conference with the parties. Specifically, Judge Silva granted the three Petitioners' unopposed motion to consolidate their respective cases. Id. at 1. The parties agreed to brief the following issues, as described by Judge Silva:

Issue. Whether certification for the parent entity, Franklin Primary Health Care Center, Inc., encompasses and serves as blanket certification for any entities created subsequently, or in the alternative, whether HCFA erred in its designation of the effective date of enrollment of June 1999 as opposed to an earlier date connected with Petitioner's [sic] original enrollment application submission.

Id. at 2.

The order noted also the parties' agreement that no material facts were in controversy and that the case could be decided based on written submissions. Id. Consequently, the briefing schedule set by Judge Silva directed Petitioners to file a motion for summary judgment together with their evidence in support, allowed HCFA an opportunity to file its response, and provided Petitioners with the opportunity to file a brief in reply. Id. at 2 - 3. She granted the request of Petitioners to "go forward with a hearing" if the issues cannot be resolved by summary judgment. Id. at 2, n.1.⁽²⁾

The parties were specifically advised of their right under 42 C.F.R. § 498.50 to file objections to the October 6, 2000 Order within 10 days. Id. at 3. No objections were received from either party. Accordingly, the agreements of the parties, including the issues for adjudication as framed by Judge Silva, have become binding on the parties. 42 C.F.R. § 498.50(c).

In ruling on the parties cross-motions for summary judgment, I have especially considered the following documents filed pursuant to the October 6, 2000 Order:

- Petitioners' Motion for Summary Disposition; Petitioners' Brief in Support of Their Motion for Summary Disposition (P. Br.); Petitioners' Exhibits (P. Ex.) 1 to 3 and Exhibits A and B;

- HCFA's Memorandum in Opposition to Petitioners' Motion for Summary Disposition, or, in the alternative, Motion for Summary Judgment (HCFA Br.);

- Petitioners' Reply Brief in Support of Their Motion for Summary Disposition (P. Reply).

Additionally, I have reviewed the other filings of record, including the hearing request, dated November 8, 1999, with its attached copies of Petitioners' documents.

B. Discussion

According to the undisputed facts of record, each Petitioner herein was purchased by the Franklin Primary Health Care Center, (Inc.,) during 1998. (P. Br. at 2.)

At the time of the purchases, Franklin Primary Health Care Center had already been an FQHC receiving funds under Section 330 of the Public Health Service Act for many years. P. Br., 2. Additionally, Franklin Primary Health Care Center had been awarded continued accreditation by the Joint Commission on Accreditation of Healthcare Organizations (the Joint Commission or JCAHO) for its Ambulatory Health Care Program and Laboratory Accreditation Program. P. Ex. 1; P. Br. at 6. The Joint Commission issued these certifications to Franklin Primary Health Care Center on June 23, 1998, based on a survey conducted between May 4 through 6, 1998. P. Ex. 1. The certification of these two programs took effect on May 7, 1998. P. Ex. 1 at 1.

After being purchased by the Franklin Primary Health Care Center, each Petitioner was opened for business and began serving Medicare beneficiaries. Petitioner Loxley Family Medical Center was opened for business on May 1, 1998; Petitioner Dr. A. Thomas Family Medical Center was opened for business on July 1, 1998; and the Stanton Road Clinic was opened for business on September 1, 1998. P. Br. at 2.

Thereafter, applications were submitted to HCFA requesting that each of these three Petitioners be allowed to participate in the Medicare program as an FQHC. Three separate applications (one for each Petitioner) were sent in at the same time to HCFA. The first set of these applications was sent on November 23, 1998. P. Br. at 1. Various events occurred thereafter, including the substitution of new forms for outdated ones. HCFA did not approve the three Petitioners' participation in the Medicare program as FQHCs until June 22, 1999. HCFA Br. at 1, 2, and 8.⁽³⁾ Additionally, HCFA has denied reimbursement for services rendered by each of the three Petitioners prior to June 22, 1999. P. Br. at 2.

On the bases of these foregoing undisputed facts, Petitioners seek to have HCFA's June 22, 1999 "effective date of Medicare participation" set aside as a matter of law. They request summary judgment to deem the date of their applications, November 23, 1998, as the date on which their Medicare participation with an FQHC designation should have begun.

Ruling #1: ⁽⁴⁾ As a matter of law, none of the three Petitioners herein were entitled to the FQHC designation for Medicare participation solely because their purchaser, the Franklin Primary Health Care Center, had such a designation.

On the issue of"[w]hether certification for the parent entity, Franklin Primary Health Care Center, Inc., encompasses and serves as blanket certification for any entities created subsequently" (October 6, 2000 Order, at 2), Petitioners summarized their arguments as follows:

The clinic sites that are the subject of this action are not separate legal entities, but rather are legally a part of Franklin Primary Health Care Center, Inc. It is Franklin Primary Health Care Center that is the PHS Act Section 330 grantee, not the individual sites. Moreover, the three clinic sites and the services they offer are within Franklin's approved scope of grant project. In short, Franklin maintains that by virtue of its FQHC status alone, it is entitled under the federal Medicare statute to FQHC reasonable cost reimbursement for the services provided by these clinic sites. A certification process that is in essence, ministerial, and that can do no more than acknowledge and verify the legal entitlement of Franklin to FQHC reimbursement for services at these sites should not and cannot stand as a barrier to receipt of such reimbursements.

P. Br. at 2 - 3. I reject these arguments by Petitioners for being incorrect as a matter of law.

Even assuming that the applications of record were intended by Franklin Primary Health Care Center to have HCFA "acknowledge and verify the legal entitlement of Franklin to FQHC reimbursement for services" furnished at three newly acquired sites, the statute and the regulations precluded HCFA from deeming the three Petitioners to be FQHCs for Medicare participation by virtue of the fact that they were purchased and operated by an existing FQHC. An FQHC is defined at section 1861(aa)(4) of the Act. As relevant to the facts of this case and Petitioners' arguments, the regulations state in part:

Federally qualified health center (FQHC) means an entity that has entered into an agreement with HCFA to meet Medicare program requirements under § 405.2434 and -

(1) Is receiving a grant under section 329, 330, or 340 of the Public Service Act, or is receiving funding from such a grant under a contract with the recipient of such a grant and meets the requirements to receive a grant under section 329, 330, 340 of the Public Health Service Act [or]

(2) Based on the recommendation of the PHS [Public Health Service], is determined by HCFA to meet the requirements for receiving such a grant

42 C.F.R. § 405.2401(b)(emphasis added).

Therefore, to receive the FQHC designation, entities such as the Petitioners herein cannot rely solely on their having received funding from Franklin Primary Health Care Center's section 330 Public Health Service Act grant. Each Petitioner must still, on its own merits, meet the requirements to receive a grant under section 329, 330, or 340 of the Public Health Service Act and have "entered into an agreement with HCFA to meet Medicare program requirements under § 405.2434." 42 C.F.R. § 405.2401(b). Since no Public Health Service Act grant had actually been awarded to the three Petitioners, they needed for this process at least a recommendation from the Public Health Service, as well as HCFA's determination that they would meet the Public Health Service Act's requirements for receiving one of the specified grants. 42 C.F.R. § 404.2430(a)(1)(I); 42 C.F.R. § 405.2401(b).

Moreover, I take notice of 42 C.F.R. § 491.3(a)(3)(iii), which states in relevant part:

If clinic or center services are furnished at permanent units in more than one location, each unit is independently considered for approval as an FQHC. (Emphasis added.)

Under this regulation, there can be no inference drawn that the Petitioners' applications were superfluous ab initio because each was a part of an existing FQHC, the Franklin Primary Health Care Center.

Ruling #2: As a matter of law, none of the three Petitioners herein may be deemed to have acquired approval as an FQHC for Medicare participation on the basis of the Joint Commission's accreditation of Franklin Primary Health Care Center.

On the alternative issue of "whether HCFA erred in its designation of the effective date of enrollment of June 1999 as opposed to an earlier date connected with Petitioner's original enrollment application submission" (October 6, 2000 Order at 2), Petitioners' position is that 42 C.F.R. § 489.13(d) governs what HCFA should have done because Franklin Primary Health Care Center had received accreditation effective May 7, 1998 from the Joint Commission.

Petitioners relied upon the fact that the Joint Commission is a national accreditation organization with approval by HCFA under 42 C.F.R. § 489.13(d)(1). Petitioners implied that neither they nor Franklin Primary Health Care Center were subject to the "additional requirements" exception referenced in 42 C.F.R. § 489.13(d)(1) and (d)(1)(ii). P. Br. at 6. Therefore, Petitioners reasoned that HCFA should have applied the following rules in 42 C.F.R. § 489.13(d)(1)(ii) and (2) for Franklin Primary Health Care Center's benefit:

[(d)(1)](ii) Providers or suppliers not subject to additional requirements. For a provider or supplier that is not subject to additional requirements, the effective date is the date of the provider's or supplier's initial request for participation if on that date the provider or supplier met all Federal requirements.

 

(2) Special rule: Retroactive effective date. If a provider or supplier meets the requirements of paragraphs (d)(1) and (d)(1)(ii) of this section, the effective date may be retroactive for up to one year to encompass dates on which the provider or supplier furnished, to a Medicare beneficiary, covered services which it has not been paid.

P. Br. at 5 - 6. These arguments by Petitioners take liberties with the law and the facts.

In this case, there were applications filed on behalf of the three Petitioners herein, asking that each one be given a separate Medicare provider number by approving it an FQHC. Franklin Primary Health Care Center was not seeking designation as a FQHC or a Medicare participation agreement for itself. As I have already noted above, filing a separate application for each of the three Petitioners herein was required by 42 C.F.R. § 491.3(a)(3)(iii). Therefore, to consider the applications in this case to be Franklin Primary Health Care Center's applications would be as wrong as considering the application filed by a supplier's lawyer to be the lawyer's application instead of the supplier's application.

Petitioners have put forth no evidence concerning the sites which were surveyed by the Joint Commission from May 4 through 6, 1998, which resulted in its issuance of the May 7, 1998 certification to Franklin Primary Health Care Center for its Ambulatory Health Care Program and its Laboratory Accreditation Program, and the sites at issue here. See P. Ex. 1. Two of the Petitioners, Dr. A. Thomas Family Medical Center and Stanton Road Clinic, were not even open for business during May of 1998 while the Joint Commission was conducting its survey. P. Br. at 2. However, even if all three Petitioners had been surveyed and covered by the Joint Commission's May 7, 1998 accreditation certificate, the rules of 42 C.F.R. § 489.13(d)(1)(ii) and (2) would still be inapplicable to this case.

The very regulation relied upon by Petitioners contains the dispositive caveat that they have disregarded:

(2) Exceptions. (I) For an agreement with a Federally qualified health center (FQHC), the effective date is the date on which HCFA accepts a signed agreement which assures that the FQHC meets all federal requirements.

42 C.F.R. § 489.12(a)(2)(I). The caveat is consistent with the fact that Part 489 of the regulations covers only certain types of providers and suppliers. See 42 C.F.R. § 489.2. An FQHC is not among the providers and suppliers covered by the Part 489 regulations. Id. Accordingly, general references to "providers" or "suppliers" found in 42 C.F.R. § 489.13, a regulation within Part 489, cannot be interpreted to mean FQHCs. With the exception of 42 C.F.R. § 491.3 (titled "Certification procedures"), the requirements an entity must meet to participate as an FQHC are contained instead in Part 491. 42 C.F.R. § 405.2434(a).

As correctly pointed out by HCFA, the regulations at 42 C.F.R. § 489.13(a)(2)(I) and 42 C.F.R. § 405.2434(a)(2)(b) make clear that the effective date of the Medicare agreement with an FQHC must be the date that HCFA accepts a signed agreement which assures that the FQHC meets all federal requirements. HCFA Br. at 3. The procedural steps are outlined in 42 C.F.R. § 405.2430. The process entails, at the very minimum, the filing of an application by an interested entity, a recommendation by the Public Health Service that the entity qualifies as an FQHC,⁽⁵⁾ that the FQHC assures HCFA that it meets the requirements specified in Part 491 of the regulations, and that HCFA sends the applicant a written disposition of its request. 42 C.F.R. § 405.2430(a)(1) and (2). If the disposition is favorable, HCFA must then issue two copies of the agreement to the applicant entity for signing; if the applicant signs and returns both copies, HCFA may then accept the agreement and return a copy to the applicant with notice of the effective date determined in accordance with 42 C.F.R. § 405.2434. 42 C.F.R. § 405.2430(a)(3) and (4).

The regulations do not permit HCFA to deviate from the specified procedures. Nor do the regulations permit HCFA to calculate an effective date for the Petitioners' participation as they have argued. HCFA's lack of discretion on assigning an effective date to FQHC applicants has been made clear in no less than three regulations: 42 C.F.R. § 489.12(a)(2)(I), 42 C.F.R. § 405.2434, and 42 C.F.R. § 405.2430(a)(4). The regulations specify, in addition, "[t]he requirements for provider-based or freestanding Federally qualified health centers are the same, 42 C.F.R. § 405.2430(c).

For all of the forgoing reasons, the Petitioners' challenges to the effective date assigned by HCFA are incorrect as a matter of law.

Ruling #3: I lack authority to grant Petitioners relief pursuant to their equity arguments and related rationale.

The three Petitioners have sought to show that HCFA's use of six months to process and approve their applications was excessive and unwarranted by the circumstances. They submitted, for example, the affidavit of Mr. Charles White, Chief Executive Officer for Franklin Primary Health Care, to summarize the problems and delays. P. Ex. 2. With the Petitioners' hearing requests, Mr. White had also submitted a typed summary of his contacts by telephone and correspondence with various employees and agents of HCFA in his attempt to have the application process concluded expeditiously during the six months between November 23, 1998 and June 22, 1999. Suffice it to say that the evidence put forth by Petitioners concerning the difficulties Mr. White encountered do not flatter HCFA or its agents and employees. Moreover, it seems especially unfortunate that a six-month processing period was used to approve the applications of entities which were caring for a medically under-served population in the meantime. According to Petitioners, Franklin Primary Health Care could have received Medicare reimbursement in the six digits had the Petitioners' FQHC applications been approved on the day they were first submitted, November 23, 1998. P. Ex. 3.

Nevertheless, I am unable to agree with Petitioners' conclusion that approval of their FQHC applications should have been granted on the day they were sent (November 23, 1998) because HCFA's work on those applications consisted of ministerial bureaucratic functions with minor technicalities which have been unjustifiably complicated by HCFA. See P. Br. at 8 - 9; P. Reply at 3, 4, and 5. The intended beneficiaries of the FQHC designation are the people of medically under-served communities or areas. They are vulnerable and deserve quality health care services. The regulations governing HCFA's approval or disapproval of FQHC applications serve to protect the interests of the medically under-served population. Given the importance of the process, HCFA is expected to give serious deliberation to the information it receives. Nothing required by these regulations became inapplicable because the three Petitioners herein were owned by Franklin Primary Health Care, a long-time FQHC.

I have no general or equitable jurisdiction to exercise. Therefore, even if I thought that HCFA's processing time could have been shorter in this case, I cannot order the effective date changed. Moreover, only HCFA has been given the authority to perform the tasks specified by the regulations discussed above. How long Petitioners or I would have taken to do those same tasks, or how much deliberation we would have committed to bringing each task to closure, are of no legal significance. Very clearly, only HCFA's acceptance of a signed agreement can be used as the effective date of an applicant's participation in the Medicare program as an FQHC. 42 C.F.R. § 405.2434(b)(1). I cannot order Medicare reimbursements to make Petitioners whole because they had provided services before being approved as FQHCs.

For the same reasons, I cannot give effect to Petitioners' remaining arguments that it was unfair, unconstitutional, and illegal for HCFA to have applied a set of regulations which were unique to FQHC applications. P. Reply at 4 - 5. According to Petitioners, the line drawing done by HCFA in following those regulations was also "arbitrary," "capricious," and "unnecessary" because all prospective suppliers and providers should be subject to the same rules. Id. Petitioners see no valid reason why they should have been denied the benefit of a retroactive effective date that was within HCFA's discretion to grant to hospitals, home health care agencies, or ambulatory surgical centers with certifications also from the Joint Commission. P. Reply at 4 (referring to 42 C.F.R. § 489.13(d)(2)).

In Ruling #2, I have already discussed the legal errors in Petitioners' use of regulations which, by their very words, are inapplicable to FQHC applications. HCFA cannot be faulted for having failed or refused to apply those inapplicable regulations in this case. The lines of distinction were created by the regulations themselves. I have concluded from my review of the law and facts of this case that HCFA has no discretion and must apply the regulations uniquely applicable to FQHC applications. In the administrative appeals and review process, Petitioners cannot be given relief because an agency has followed the very regulations it was obligated to follow.

Ruling #4: HCFA is entitled to summary affirmance of its "effective date" determination.

I noted in the "Background" section of this decision that Judge Silva had granted Petitioners' request that a hearing be convened if this case could not be resolved on summary judgment. Her ruling made explicit what must necessarily happen if there exist disputes of material facts which preclude entry of summary judgment in full. See, e.g., Fed. R. Civ. P. 56. Whether or not further proceedings would be necessary depends on whether summary judgment could be granted and dispose of all issues in the case. The ruling did not create an absolute right to an evidentiary hearing no matter the outcome of the cross-motions for summary judgment.

In this case, Petitioners have set forth only two grounds for challenging the effective date determination issued by HCFA. See October 6, 2000 Order at 2. I have found both to be invalid as a matter of law. Rulings #1 and #2. In their reply brief in further support of summary judgment, Petitioners present collateral arguments concerning the inequitable or unconstitutional results of HCFA's adherence to the set of regulations applicable to only FQHC applications. I have determined that I am without the authority to provide redress for the results asserted by Petitioners. Ruling #3.

None of the parties has requested or otherwise indicated a need for further proceedings. All of the disputes between the parties have arisen from their reliance on different regulations and laws. I have found no disputed issue of material fact in need of resolution, and the parties have identified none. Neither party has asked that I stay ruling on their cross-motions to enable them to gather more facts. Each motion and brief concluded with a request for summary judgment. Each summary judgment requested would resolve the entire case and end further proceedings.

Accordingly, I conclude that HCFA's determination of the effective date cannot be disturbed for any of the reasons set forth by Petitioners, and summary judgment should be granted in favor of HCFA at this time.

Conclusion

On the basis of the rulings issued above, I enter summary judgment for HCFA. The proceedings in this case are hereby terminated.

Mimi Hwang Leahy

Administrative Law Judge

1. I may use "FQHC application" to mean an application for Medicare participation as an FQHC.

2. I assume the parties and Judge Silva meant by "hearing" an in-person presentation of contested evidence in accordance with the section titled "Burdens of proof, of coming forward with evidence, and of persuasion" of the October 6, 2000 Order.

3. HCFA's brief consistently referred to June 22, 1999 as the effective date. Petitioner's brief referred to the effective date as June 23, 1999 (P. Br. at 2) as well as June 22, 1999 (Id. at 4 (citing affidavit at P. Ex. 2)). Since the parties agreed during the prehearing conference before Judge Silva that no issue of material fact exists, I am inclined to believe that the June 23 date reflects a typographical error. I do not find it necessary to resolve this discrepancy by examining the original documents in the parties' possession. The one day difference has no material bearing on the parties' arguments or my rulings.

4. I am using each ruling as a numbered conclusion of law, as required by 42 C.F.R. § 498.74(a). I will make no finding of fact since the parties have presented no factual dispute for resolution.

5. The Public Health Service also notifies HCFA if the entity meets the requirements of the Public Health Act. 42 C.F.R. § 405.2430(b)(2).