SUBJECT:

Big Bend Hospital Corporation, d/b/a Big Bend Medical Center,

Petitioner,

Centers for Medicare & Medicaid Services

DECISION

I sustain the determination of the Centers for Medicare & Medicaid Services (CMS) to certify Petitioner to participate in the Medicare program as a hospital effective February 3, 2000.

I. Procedural history

Petitioner filed a hearing request to challenge CMS's determination that it should be certified to participate in the Medicare program effective February 3, 2000. Petitioner contends that it should have been certified to participate effective October 27, 1999.

CMS moved for summary disposition, Petitioner opposed the motion, and CMS replied. CMS offered 13 proposed exhibits in support of its motion. The CMS exhibits are identified with the acronym "HCFA," which stands for the Health Care Financing Administration, the former name of CMS. HCFA Exs. 1 - 13. Also, CMS is referred to in the text of both parties' exhibits as "HCFA." Petitioner offered 11 exhibits in opposition to the motion. P. Exs. 1 - 11.

CMS did not object to the admission into evidence of any of Petitioner's proposed exhibits. Therefore, I receive into evidence P. Exs. 1 - 11. Petitioner objected to the admission of three of CMS's proposed exhibits. The exhibits Petitioner objected to are: HCFA Ex. 4, HCFA Ex. 6, and HCFA Ex. 8. I overrule Petitioner's objections, and I receive into evidence HCFA Exs. 1 - 13.

II. Undisputed facts

None of the facts that I discuss in this section are disputed.

Petitioner is a hospital in Alpine, Texas. In early October, 1999, Petitioner applied to participate in the Medicare program. The materials that Petitioner submitted in connection with its application included a form that Petitioner had submitted in September which is known as the Medicare/Federal Health Care Provider/Supplier Enrollment Applications or the "HCFA-855."

On October 7, 1999, the Texas Department of Health (Texas State survey agency) conducted an initial certification survey of Petitioner in order to determine whether Petitioner was complying with Medicare participation requirements for hospitals. The surveyors found that Petitioner was not complying with several conditions of participation. HCFA Ex. 1. Based on these findings, the Texas State survey agency recommended to CMS that Petitioner not be certified to participate in Medicare. In a notice that is dated October 19, 1999, CMS notified Petitioner that it had determined not to certify it to participate in Medicare. HCFA Ex. 2. Petitioner did not contest this determination.

Petitioner requested that it be surveyed again. The Texas State survey agency conducted a second survey of Petitioner from October 25 - October 27, 1999 (October 27, 1999 survey). The Texas State survey agency surveyors who conducted the October 27, 1999 survey found that Petitioner was complying with all participation requirements. Based on these findings, the Texas State survey agency advised CMS that Petitioner had attained compliance with all participation requirements. It recommended to CMS that CMS certify Petitioner to participate in Medicare. HCFA Ex. 3.

CMS did not accept this recommendation. It decided to conduct its own unannounced survey of Petitioner in order to determine whether Petitioner complied with participation requirements. On December 7, 1999, CMS sent surveyors into Petitioner's facility for the purpose of conducting a survey (December 7, 1999 survey). The surveyors concluded that Petitioner likely was not complying substantially with participation requirements. HCFA Ex. 4 at 2 - 4. However, the CMS surveyors did not complete the December 7, 1999 survey nor did they write a final survey report. Surveyor Dodjie Guioa told David Conejo, Petitioner's Chief Executive Officer, that it appeared likely that the team would conclude that Petitioner was not complying substantially with Medicare participation requirements. To forestall this finding, Mr. Conejo gave the surveyors a letter on December 7, 1999 which, in its entirety, stated:

This letter is a formal request to withdraw from the . . . [CMS] Validation Survey process. We will resubmit a request for an onsite survey at a later date.

HCFA Ex. 5. The surveyors then left Petitioner's facility.

On December 20, 1999, CMS responded to Mr. Conejo's December 7, 1999 letter. HCFA Ex. 6. The CMS letter began with the following statement:

This is to confirm your request to withdraw your application to participate in the Medicare program effective December 7, 1999.

Id. (Emphasis added). CMS also advised Petitioner that it could reapply at any time to participate in the Medicare program. Id.

On January 4, 2000, Mr. Conejo sent a memorandum to CMS. HCFA Ex. 7 at 2. He advised CMS that Petitioner would be prepared by January 12, 2000 to be surveyed by CMS "under its original HCFA-855 application." Id. Mr. Conejo sent an additional letter to CMS on January 20, 2000. HCFA Ex. 8. In that letter, he advised CMS that he was confirming his understanding "that our . . . survey notification of January 4, 2000 . . . satisfied all requirements to be surveyed under our original 855 application." Id. CMS's staff responded with a handwritten note in which they advised Petitioner that its previously approved HCFA-855 was valid until a survey team arrived at Petitioner's premises to conduct an initial Medicare survey. Id.

Petitioner was surveyed again on February 3, 2000 (February 3, 2000 survey). CMS determined to certify Petitioner effective that date based on the findings that were made at the February survey. HCFA Ex. 10.

III. Issues, findings of fact and conclusions of law

A. Issues

The issues in this case are whether:

1. There are disputed issues of material fact which require testimony to be given at an in-person hearing;

2. Petitioner may now assert that it met participation requirements prior to the February 3, 2000 survey; and

3. CMS is required by law to accept the results of the October 27, 1999 survey.

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, under a separate heading.

1. There are no disputed issues of material fact in this case which require testimony to be given at an in-person hearing.

CMS characterizes its motion for disposition in this case as a "motion for summary judgment." This is an inaccurate characterization by CMS of what it is asking for. Summary disposition is appropriate in a case where there are no disputed issues of material fact and where the only disputed issues involve questions of law or of application of law to undisputed facts. However, at the center of this case is a disputed fact issue, that being the question of whether Petitioner abandoned any right that it may have had to argue that it was in compliance with Medicare participation requirements as of the October 27, 1999 survey or on dates between October 27, 1999 and running through December 7, 1999.

However, the presence of a disputed fact issue in a case does not necessarily mean that an in-person hearing is required in order to decide that issue. An in-person hearing is necessary in any case where there is a disputed issue of fact and where there is evidence that is relevant to that issue in the form of testimony that must be presented in person. In this case, although there is a disputed issue of fact, neither CMS nor Petitioner have made a showing that there is testimony that is relevant to deciding that issue. It is appropriate in this case to decide it based on the parties' written submissions because there is no relevant testimony that I need to hear in person.

The facts that are relevant to deciding the issue of whether Petitioner abandoned its efforts to be certified to participate in Medicare on dates prior to December 7, 1999, including October 27, 1999, are stated in the letter that Mr. Conejo gave to the CMS surveyors on December 7, 1999 and in CMS's reply to that letter dated December 20, 1999. HCFA Ex. 5; HCFA Ex. 6. Mr. Conejo's December 7, 1999 letter contains Petitioner's declaration that it is withdrawing from the survey process. At Finding 2 of this decision, I find that the December 7, 1999 letter unambiguously announces Petitioner's intent to abandon its assertion that it met participation requirements as of December 7, 1999 or on prior dates, including October 27, 1999. CMS's December 20, 1999 response to Petitioner confirms CMS's understanding that it was Petitioner's intent not to continue to assert that it met certification requirements at a date that was earlier than the date of a new survey scheduled after December 7, 1999.

if the survey team returned at a later time and found the hospital in compliance with the Medicare conditions of participation, then the date of certification would be October 27, 1999, the concluding date of the . . . [October 27, 1999 survey] which found the hospital to be in compliance with all federal requirements for participation in the Medicare program.

Id. at 2. Mr. Conejo concludes by asserting that at no time did he intend to withdraw the application that Petitioner had submitted for participation in September 1999. Id. at 2.

Petitioner's intent as of December 7, 1999 is expressed in the unambiguous language of Mr. Conejo's letter of that date. Additional evidence, including in-person testimony, concerning Petitioner's intent is not only unnecessary, but its admission would be prejudicial to CMS.

Mr. Conejo's affidavit addresses the question of what he allegedly intended by his statements in the December 7, 1999 letter. It does not address the issue of what Petitioner - or Mr. Conejo speaking on Petitioner's behalf - actually said to CMS. Yet, what is relevant here is not what Petitioner intended to communicate, but what it actually told CMS. What Petitioner is seeking to do here is to offer parol evidence to interpret the statements contained in Mr. Conejo's December 7, 1999 letter. I find that to be inappropriate. The letter is clear on its face. The letter contains a straightforward and unambiguous statement of Petitioner's intent. Additional evidence is unnecessary to interpret the letter.

Were I to receive the December 7, 1999 letter into evidence at an in-person hearing, I would rule as inadmissible testimony by Mr. Conejo as to what he intended to say when he wrote the letter and gave it to CMS. I find that testimony to be irrelevant insofar as it attempts to alter the meaning of a document in evidence that is clear and unambiguous. I would also find Mr. Conejo's testimony to be prejudicial to CMS. CMS acted in reliance on what Mr. Conejo said to it. It is unfair for the author of the letter to attempt to change the meaning of the words of his statement after the fact by testifying as to what he intended to say.

Petitioner argues also that the state of its compliance with certification requirements as of October 27, 1999 is a disputed issue of material fact that cannot be decided at this time and which requires additional proceedings. I disagree with this contention. Petitioner's compliance with participation requirements as of October 27, 1999 arguably would be in dispute if Petitioner had a right to a hearing as to the issue of its compliance on that date. In that event I would not find it appropriate to decide this case based on the parties' written submissions. But, as I explain below at Finding 2, Petitioner does not have a right to a hearing as to the issue of its compliance with participation requirements as of October 27, 1999 because it abandoned its contention that it was in compliance as of that date.

2. On December 7, 1999 Petitioner abandoned its contention that it qualified to participate in Medicare as of the October 27, 1999 survey. It may not now assert that it met participation requirements prior to the February 3, 2000 survey.

On December 7, 1999 Petitioner abandoned its contention that it qualified to participate in Medicare as of the October 27, 1999 survey. That intent was conveyed by Mr. Conejo's letter to CMS of that date. Petitioner may not now assert that it met participation requirements prior to the February 3, 2000 survey.

Petitioner contends that its application to participate in Medicare, which it had filed in October, 1999, remained pending because it withdrew only from the survey and not from the application process. Under this rationale, according to Petitioner, it may continue to assert that it attained compliance effective October 27, 1999 and remained in compliance thereafter.

I disagree with Petitioner's characterization of events. It does not comport with what actually occurred on December 7, 1999. On that date Petitioner unequivocally abandoned its efforts to show that it met certification requirements as of December 7, 1999 or on dates prior thereto, including October 27, 1999.

On December 7, 1999, the CMS survey team was on the verge of concluding that Petitioner was not complying with Medicare participation requirements. Such a conclusion would have produced adverse consequences for Petitioner. It would have led to a formal determination by CMS that Petitioner was not complying with participation requirements. It would have increased the burden on Petitioner to show at some future date that it had corrected the deficiencies that the CMS surveyors were in the process of identifying on December 7, 1999. Had the surveyors completed the survey, they would have generated a written record of noncompliance, in the form of a survey report, that Petitioner would have to overcome as a prerequisite to certification. A formal finding of noncompliance effective December 7, 1999 might have delayed a new survey of Petitioner. Petitioner might not have been certified to participate in Medicare until after February 3, 2000, the date that CMS ultimately determined to be the date of certification.

Mr. Conejo and Petitioner were anxious to avoid these consequences. The intent of Mr. Conejo's December 7, 1999 letter is evident from the plain language of the document. And, it is also clear in light of the undisputed facts that establish that Mr. Conejo knew that the surveyors were about to find that Petitioner remained out of compliance with participation requirements. It is an unequivocal and "formal request" to withdraw from the survey and to abandon Petitioner's arguments that it was in compliance with participation requirements. HCFA Ex. 5.

Petitioner's request to withdraw from the validation survey process was not simply a request that the survey, that was ongoing on December 7, 1999, be ended. CMS's reason for conducting the December 7, 1999 survey was that it was not satisfied with the Texas State survey agency's findings from the October 27, 1999 survey. CMS was not prepared to accept the findings that were made from the October 27, 1999 survey unless it independently confirmed them. Consequently, the effect of Petitioner's request to withdraw from the survey process was to surrender any argument that Petitioner might have that it was complying with participation requirements as of October 27, 1999.

By withdrawing, Petitioner avoided the recording of a formal finding of noncompliance. This benefitted Petitioner because it gave Petitioner a clean slate from which to argue that it was complying with participation requirements. CMS accepted Petitioner's request because it obviated the need for CMS to make findings of noncompliance and because it removed from dispute the period of time which began on October 27, 1999.

CMS plainly understood Mr. Conejo's December 7, 1999 letter as a request from Petitioner to abandon its contention that it was complying with participation requirements prior to and as of the December 7, 1999 survey. That is evident from CMS's December 20, 1999 response to Mr. Conejo's letter. HCFA Ex. 6. That letter told Petitioner unequivocally that CMS understood that Petitioner was withdrawing its application to participate. Although Petitioner could have replied to CMS's letter and clarified that it had not abandoned its contention that it was complying with participation requirements prior to and as of the December 7, 1999 survey, it did not do so. Petitioner did not indicate in any way that CMS's understanding of Mr. Conejo's December 7, 1999 letter was incorrect.

CMS's December 20, 1999 response to Mr. Conejo's December 7, 1999 letter is understandable. It would not have been in the interest of CMS, nor of program beneficiaries, for CMS to allow Petitioner to avoid the consequences of adverse survey findings without abandoning its contention that it qualified to participate as of December 7, 1999 or on earlier dates. The reason that CMS decided to conduct the December 7, 1999 survey was that it doubted the accuracy of the Texas State survey agency's October 27, 1999 survey findings. CMS was in the process, as of December 7, 1999, of developing evidence which its surveyors believed showed that these prior findings were inaccurate. Had CMS terminated the December 7, 1999 survey without receiving assurances from Petitioner that it was withdrawing its application to participate, then Petitioner would have been able to continue to assert that it had attained compliance as of October 27, 1999 in the absence of evidence that might confirm CMS's preliminary conclusion that Petitioner was not, in fact, complying with participation requirements.

Communications between Mr. Conejo and CMS that occurred after December 20, 1999 show that Mr. Conejo focused on obtaining a new certification survey from CMS and on the question of whether Petitioner would have to file a new HCFA-855 in order to complete the application process. CMS allowed Petitioner to reapply to participate without submitting a new HCFA-855 to CMS. However, nothing in these documents suggests that Petitioner intended to argue that it was, in fact, complying with participation requirements either as of October 27, 1999 or as of December 7, 1999.

CMS told Petitioner that it would not need to re-file its HCFA-855 in order to reapply to participate in Medicare. That makes sense in light of the fact that a completed HCFA-855 contains information about a facility's organization which, presumably, does not change from day to day. But, providing Petitioner with that courtesy does not suggest that CMS understood that Petitioner was continuing to assert that it had attained compliance with participation requirements as of October 27, 1999 or on any date up to and including December 7, 1999. Allowing Petitioner to request a new certification survey without filing a new HCFA-855 is entirely consistent with CMS's understanding, based on Petitioner's words and actions, that Petitioner had withdrawn its contention that it qualified to participate either as of December 7, 1999 or previously.

The communications between CMS and Petitioner that were made after December 20, 1999 are consistent with this analysis. The first communication to CMS that was made on behalf of Petitioner after December 20, 1999 was a memorandum from Mr. Conejo dated January 4, 2000. HCFA Ex. 7. In that memorandum Mr. Conejo states that Petitioner would be prepared for a survey "under its original HCFA-855 application . . ." Id. at 2. This is not a statement that Petitioner was asserting that it was in compliance with participation requirements as of December 7, 1999 or previously. All it conveys is Mr. Conejo's understanding that Petitioner would not have to re-file its HCFA-855 in order to request a new survey from CMS.

Nor do subsequent communications between CMS and Petitioner show Petitioner to be asserting that it had complied with participation requirements in the past. On January 20, 2000, Mr. Conejo sought reassurances from CMS that Petitioner would not have to re-file its HCFA-855. HCFA Ex. 8. CMS's response to Mr. Conejo appropriately focuses only on the question of whether Petitioner would have to re-file the HCFA-855. Id. Nothing in the communications between the parties suggests that either of them understood Petitioner to be saying that it continued to assert that it complied with participation requirements on dates prior to a new survey including December 7, 1999 or October 27, 1999. Id.

3. CMS is not required by law to accept the results of the October 27, 1999 survey.

Petitioner contends that the survey that CMS undertook on December 7, 1999 was unlawful. According to Petitioner, any actions that it might have taken in response to that survey have no legal effect inasmuch as Petitioner was forced to take them in the face of an illegal survey. Under this theory, the issue of whether Petitioner withdrew its application to participate on December 7, 1999 is irrelevant because the only valid survey findings are those that were made by the Texas State survey agency after the October 27, 1999 survey.

The linchpin of Petitioner's argument is that the December 7, 1999 survey was unlawful because it was not specifically authorized by regulations or by the State Operations Manual (SOM). The SOM is a policy manual which CMS issues to provide guidance to State survey agency surveyors. Petitioner asserts that, if CMS wanted to conduct the kind of survey that it conducted on December 7, 1999, it should have first adopted rules governing such a survey pursuant to the notice and comment rulemaking requirements of the Administrative Procedure Act. Petitioner reasons that, without some express written authorization to conduct the December 7, 1999 survey, CMS had no choice but to accept the findings made at the October 27, 1999 survey. And, it contends that, even if CMS was not required to accept the findings that were made at the October 27, 1999 survey, its subsequent actions were illegal and of no lawful consequence.

Petitioner focuses on CMS's various characterizations of the December 7, 1999 survey as a "comparative" survey, a "monitoring" survey, or a "validation" survey. Petitioner contends that surveys of these types are described in the SOM as being something other than that which CMS performed on December 7, 1999. According to Petitioner, there is nothing in the SOM or in regulations to describe the type of survey that CMS actually performed. Petitioner reasons that if a survey like the December 7, 1999 survey is not described specifically in regulations or the SOM, then there must not be any authority for CMS to conduct such a survey.

I find these arguments not to be persuasive. CMS was under no compulsion to accept the recommendations that were made to it by the Texas State survey agency. CMS had the authority to conduct its own survey of Petitioner for the purpose of ascertaining whether Petitioner was complying with Medicare participation requirements. What CMS called the survey is irrelevant to establishing its authority to perform it. The fact that the survey is not described specifically by regulations or the SOM does not derogate from CMS's authority to conduct it.

It is clear from both the Social Security Act (Act) and implementing regulations that CMS is not required to accept a recommendation for certification from a State survey agency. The Act makes it plain that the Secretary of the United States Department of Health and Human Services (Secretary), or his delegate, has the sole authority to determine when to certify an applicant for provider status. The Act contains no language to suggest that CMS must defer to any entity in determining whether to enter into an agreement with a provider. The Act provides that:

The Secretary may refuse to enter into an agreement under this section . . . after the Secretary

(A) has determined that the provider fails to comply substantially with the provisions of the [provider] agreement, with the provisions of this title and regulations thereunder, or with a corrective action . . .

Act, section 1866(b)(2)(A). I take notice that the Secretary has delegated to CMS the authority to act on his behalf in deciding whether to enter into agreements with providers.

Regulations provide that CMS, acting as the Secretary's delegate, has the authority to accept or not accept a recommendation that is made to it by a State survey agency. The regulations provide that it is CMS (referred to in the regulations as HCFA) who determines whether a provider meets participation requirements. 42 C.F.R. § 489.11(a).

Finally, CMS has the authority to conduct a provider certification survey. It may do so even though it contracts with State survey agencies to perform surveys on its behalf. 42 C.F.R. § 489.13(a)(1)(i).

CMS acted under the authority of both the Act and implementing regulations when it decided not to accept the recommendation of the Texas State survey agency and to conduct its own survey of Petitioner. CMS had the authority to take these actions because CMS has the ultimate authority to accept or not accept a recommendation to certify a provider and because CMS has the authority to survey an applicant for provider participation.

It is irrelevant that the action that CMS took in conducting its own survey on December 7, 1999 may not fall into any specific survey category that is mentioned in the SOM. The SOM is an explanatory document and does not carry the force of law. The Act and implementing regulations provide the authority for CMS's actions. I have concluded that CMS was operating pursuant to the authority conferred by the Act and regulations when it determined to conduct its own survey of Petitioner. Moreover, Petitioner has not shown that there is a prohibition in the SOM against CMS conducting the survey that it conducted on December 7, 1999. Petitioner has shown, at most, that what CMS did on that date is not described in the SOM.

Steven T. Kessel

Administrative Law Judge