SUBJECT:

Life Directions Mental Health PHP, Inc.,

Petitioner,

Health Care Financing Administration

I. Background

Petitioner is an organization located in Pembroke Park, Florida. Petitioner applied for certification to participate in the Medicare program as a CMHC which provided partial hospitalization services. By letter dated August 28, 1998, Petitioner was advised by HCFA that its application for Medicare certification had been denied due to Petitioner's failure to comply with the statutory requirements of section 1861(ff)(3)(B) of the Social Security Act (Act). Specifically, Petitioner did not provide screening for patients being considered for admission to state mental health facilities to determine the appropriateness of such an admission. HCFA Ex. 5. Additionally, HCFA noted that Petitioner was a for-profit corporation that did not contract with the Florida Department of Children and Families (DCF) for the provision of inpatient, outpatient, day treatment, or emergency services and, therefore, could not perform transfer evaluations in accordance with Florida law. On October 27, 1998, Petitioner submitted to HCFA a request for reconsideration of HCFA's initial determination. By letter dated December 21, 1998, HCFA informed Petitioner that the initial denial of its request for certification was a correct determination.

On February 19, 1999, Petitioner forwarded to the Civil Remedies Division (CRD) of the Departmental Appeals Board (DAB) a request for hearing before an administrative law judge. The matter was initially assigned to Administrative Law Judge Mimi Hwang Leahy for hearing and a decision. The case was subsequently reassigned to me on February 3, 2000.

HCFA filed a motion for summary disposition on October 1, 1999. HCFA submitted six exhibits (HCFA Exs. 1-6) in support of its motion. Petitioner opposed HCFA's motion and submitted its response brief on November 2, 1999. Attached to Petitioner's response were five exhibits (P. Exs. 1-5). HCFA filed a reply to Petitioner's response on November 16, 1999 and submitted two additional exhibits (HCFA Exs. 7 and 8). I am receiving into evidence HCFA Exs. 1-8 and P. Exs. 1-5.

II. Applicable Law

A. Federal law

"Partial hospitalization services" are services which are described at section 1861(ff) of the Act and which are reimbursed by the Medicare program. "Partial hospitalization services" consist of services that are prescribed by and provided under the supervision of a physician, 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) and 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, that particular provision 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 the Department of Health and Human Services (DHHS) 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; and

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

42 C.F.R. § 410.2 (2000).

HCFA has published policy guidelines which describe a CMHC's obligations under section 1913(c)(1) of the Public Health Service Act and the above-cited regulation. In a document entitled "All States Letter 76-95" (All States Letter), HCFA states that a CMHC 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 Service 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 provided by a 24-hour facility.

HCFA Ex. 3 at 1 (emphasis in original).

B. Florida law

Florida 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, Fla. Stat. Ann. § 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." Fla. Stat. Ann. § 394.461(2). A "transfer evaluation" is defined under Florida law as being:

the process, as approved by the appropriate district office of the . . . [Florida Department of Children and Families], 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.

Fla. Stat. Ann. § 394.455(29).

Under Florida 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.

Fla. Stat. Ann. § 394.455(6).

III. Issues, Findings of Fact and Conclusions of Law

A. Issues

This case is one in a series of cases that has been recently heard and decided by the Civil Remedies Division involving the general issue of whether a CMHC meets certification requirements for participation in the Medicare program. Many of these cases involve CMHCs that are located in the State of Florida. Recent decisions which address the participation status of Florida CMHCs include: New Millennium CMHC, Inc., DAB CR672 (2000); The Recovery Place, Inc., DAB CR649 (2000); Long Life Wellness Center, DAB CR657 (2000); Lauderhill Community Mental Health Center, DAB CR652 (2000); Charity Behavioral Services, Inc., DAB CR635 (1999); Psychstar of America, DAB CR645 (2000); and T.L.C. Mental Health Center, DAB CR636 (1999).

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 upon 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. HCFA's determination not to certify Petitioner for participation in the Medicare program as a CMHC providing partial hospitalization services was proper; and

2. I have authority to hear and decide Petitioner's additional affirmative arguments.

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 separately numbered 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 where either: 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 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 Services 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. 7 at 1-2.

HCFA asserts that Petitioner fails to meet these criteria because Petitioner may not offer screening directly consistent with the requirements of Florida law, nor has Petitioner demonstrated 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 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 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 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. Fla. Stat. Ann. § 394.455(29).

Petitioner cannot qualify to perform screening directly because it cannot qualify pursuant to Florida law to perform transfer evaluations. Florida law provides that a CMHC may perform a transfer evaluation only if it is a "not-for-profit," publicly-funded entity. Fla. Stat. Ann. § 394.455(6). Petitioner is a private, for-profit facility which has not contracted with the DCF to provide inpatient, outpatient, day treatment, or emergency services. See HCFA Ex. 5 at 3. Petitioner does not dispute HCFA's findings that it is a "for-profit," private entity which cannot perform transfer evaluations. See P. Hearing Request at 1.

However, Petitioner argues that Florida law permits Petitioner to qualify under participation requirements. Petitioner contends that even though it is not capable of conducting transfer evaluations, under Fla. Stat. Ann. § 394.455(26), a for-profit CMHC may involuntarily commit an individual to a receiving facility where a transfer evaluation may be conducted to determine admission or non-admission to a state mental health facility. Thus, Petitioner argues it would be in compliance with the requirements of the law. P. Response at 4-5. Additionally, Petitioner infers in its response that it employs mental health professionals capable of executing a professional certificate authorizing the involuntary commitment of an individual to a receiving facility. Id. at 5.

In its reply, HCFA asserts that the August 21, 1998 memorandum, which interprets the screening requirements, is quite explicit as to the standards the facility must meet. The memorandum provides that:

. . . an entity must be authorized under state law to perform all of the steps in the process whereby individuals are clinically evaluated for the appropriateness of admission to a state mental health facility, except those steps required to by provided by a 24-hour facility.

HCFA Reply at 2-3 (citing HCFA Ex. 3 at 1).

HCFA also argues that, while Petitioner may employ professionals that can perform evaluations for involuntary transfer, this does not obviate the fact that Petitioner is not authorized under Florida law to perform transfer evaluations. Id. at 3-4.

I find HCFA's analysis on both issues to be convincing. Fla. Stat. Ann. § 394.455(29) is concise as to what constitutes a "transfer evaluation." Clearly, Petitioner does not meet this standard. Furthermore, Petitioner itself must be authorized to perform transfer evaluations. If Petitioner is not certified to perform such tasks, it is irrelevant whether every one of Petitioner's employees is certified or qualified to carry out such services. Petitioner's argument to the contrary is unconvincing.

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 at 3-4. It is not sufficient for the CMHC to merely 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.

I have evaluated Petitioner's arguments that it has established a satisfactory arrangement with another entity 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 asserts that it contracted with mental health professionals capable of executing a professional certificate under Florida law. Primarily, Petitioner contends that it had an arrangement with Fort Lauderdale Hospital (Fort Lauderdale) to provide screening and that the arrangement conformed with all applicable law. P. Response at 6-7; See P. Ex. 4.

HCFA's counter-argument propounds that Petitioner's agreement with Fort Lauderdale fails to satisfy the criteria for performing screening through another entity, and therefore the Fort Lauderdale agreement is not an arrangement authorized to perform all of the requisite steps in the process where individuals are clinically assessed for appropriateness of admission to a state mental health facility, as required by the August 21, 1998 memorandum. Petitioner, HCFA contends, is unable to demonstrate that it provides screening services "under arrangements." HCFA Reply at 6. I agree. The agreement cited by Petitioner does not address or describe the specific evaluations that are the subject of the regulations. I am not convinced that this agreement satisfies the requirement associated with the provision of the services "under arrangement" as provided by law. The terms of Petitioner's arrangement do not disclose the types of services to be provided by the hospital, and it clearly indicates that Petitioner's management and control over Fort Lauderdale is limited in nature. The agreement specifically stipulates that, among other things, integration of Petitioner's staff into the hospital facility would be on an "as needed" or "where appropriate" basis. P. Ex. 4 at 2.

I also concur with HCFA's argument that, because Petitioner is prohibited under Florida law from supervising, being responsible for, or otherwise controlling the manner in which Fort Lauderdale conducted a transfer evaluation, Petitioner could not exercise the supervision and control necessary to satisfy the criteria for the provision of services "under arrangements" discussed above.

3. I do not have the authority to hear and decide Petitioner's additional affirmative arguments.

Petitioner also asserts the following additional arguments:

• HCFA's interpretation of the screening requirement is procedurally invalid for failure to comply with the notice and comment rulemaking provision of the Administrative Procedure Act (APA);
  

• The August 21, 1998 memorandum constituted a "change" in agency policy, and is arbitrary and capricious in violation of the APA; and
  
  
• HCFA's past conduct in certification of CMHC's entitles Petitioner to equitable relief under theories of equitable estoppel and/or waiver.

I do not have authority to hear and decide these arguments. My authority in cases involving HCFA is limited to hearing and deciding those issues which the Secretary of the Department of Health and Human Services (the Secretary) has delegated authority for me to hear and decide. That authority is specified in 42 C.F.R. §§ 498.3 and 498.5. The regulations authorize me to hear and decide only cases involving specified initial determinations by HCFA.

The regulations give me the authority to hear and decide whether HCFA's determination that an entity fails to qualify as a provider was made correctly. 42 C.F.R. §§ 498.3(b)(1) and 498.5(a)(2). In such a case, I may decide whether HCFA applied correctly to the facts of a case applicable regulations and interpretations of the law. I may also decide whether HCFA's interpretation of a regulation is correct or incorrect. However, I lack the authority to decide whether HCFA or the Secretary published an interpretation of law in violation of the APA.

Nor do I have the authority to hear claims of estoppel against HCFA or the Secretary. It is well-established that I and other Administrative Law Judges on this Board lack the authority to hear and decide estoppel arguments involving alleged dilatory processing of applications for provider or supplier certification. GranCare Home Health Service & Hospice, DAB CR464 (1997); The Rivers HealthCare Resources, Inc., DAB CR446(1996); SRA, Inc. D/B/A St. Mary Parish Dialysis Center, DAB CR341 (1994). Petitioner in the instant matter has not offered any argument which would give me reason to revisit the holdings in these decisions.

Alfonso J. Montano

Administrative Law Judge