CASE | DECISION | JUDGE | FOOTNOTES

Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
IN THE CASE OF  


SUBJECT:

Triad Eye Medical Clinic and Cataract Institute, P.C.,

Petitioner,

DATE: December 6, 2001
                                          
             - v -

 

Centers for Medicare & Medicaid Services

 

Docket No.C-00-161
Decision No. CR844
DECISION
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DECISION

I grant the Centers for Medicare & Medicaid Services' (CMS(1)) motion for summary adjudication of the issues and I deny Petitioner's motion (Appellants Brief and Response to Respondents Motion for Summary Adjudication and Request for Partial Summary Adjudication). I sustain CMS' determination not to certify Petitioner to participate in Medicare between October 13 and December 1, 1998. I base my decision on the documentary evidence, the applicable law and regulations, and the arguments of the parties.

The essence of the dispute in this case is whether ambulatory surgical centers (ASCs) may participate in Medicare using the provider agreement number of another ASC (as discussed below, Petitioner, a corporation, operated more than one ASC). The dispute centers on an apparent ambiguity in the regulations at 42 C.F.R § 416.2, where ASCs are defined, in part, as "distinct entities." As explained fully below, I find that the phrase "distinct entities" does not mean or say that an ASC may have multiple sites or facilities under one provider agreement.

I. Introduction and Background

Petitioner requested a hearing by letter dated December 8, 1999 (request). Petitioner is a corporation that operates ASCs. It owns a facility in Tulsa Oklahoma (Triad Tulsa) and another in Muskogee, Oklahoma (Triad Muskogee). Triad Tulsa has had a Medicare provider number since 1987. On October 13, 1998, Triad Muskogee was issued an operating license by the Oklahoma State Department of Health (OSDH). On December 1, 1998, Triad Muskogee was certified by CMS to participate in Medicare.

Petitioner's position, as stated in the request, is that it should be reimbursed by Medicare for services rendered between October 13 and December 1, 1998. Petitioner's appeal is from the reconsidered determination of CMS that Petitioner had not yet been certified prior to December 1, 1998. That reconsidered determination was contained in two letters from CMS to Petitioner, dated October 8 and October 25, 1999, respectively.

CMS filed Respondent's Motion for Summary Adjudication of the Issues (CMS Br.) on April 26, 2000. Petitioner filed Appellants Brief and Response to Respondent's Motion for Summary Adjudication and Request for Partial Summary Adjudication (P. Br.) on May 10, 2000. CMS filed Respondent's Reply Memorandum in Support of its Motion for Summary Disposition (CMS Reply) on June 19, 2000. By letter dated July 17, 2000, Petitioner sought to clarify a procedural and evidentiary issue: the status of a letter dated June 26, 1998, which I address in detail below.

CMS requests in its motion that the determination that Triad Muskogee was qualified to participate in Medicare on December 1, 1998 - and not before - be upheld. The partial summary adjudication that Petitioner seeks is that CMS should reimburse Petitioner for services it provided between October 13 and December 1, 1998. Petitioner's response affirmatively seeks several findings, and asks that I schedule an in-person hearing. Petitioner argues that I should find that an ASC may receive payment for services from Medicare under the provider agreement of an ASC that is already participating in Medicare: in this case, an ASC that is a corporate parent (Triad Tulsa) of a subsidiary or satellite ASC (Triad Muskogee).

Petitioner also seeks a finding that the State Operations Manual (SOM)(2) § 2024, which pertains to hospitals, should apply by analogy to the facts in this case. Once the application of the SOM is established, Petitioner requests that an evidentiary hearing be held to address whether Triad Tulsa and Triad Muskogee complied with the requirements of SOM § 2024, which, Petitioner argues, would qualify Triad Muskogee to participate under a single provider number (Triad Tulsa's provider number) between October 13 and December 1, 1998.

Petitioner also argues that CMS engaged in retroactive rulemaking because CMS' policy regarding ASCs sharing provider numbers was not enunciated prior to Triad Muskogee's commencement of ASC services. Finally, Petitioner argues that CMS and OSDH misled Petitioner to its detriment by encouraging it to proceed with providing ASC services to patients prior to Petitioner's certification on December 1, 1998.

The parties submitted proposed stipulations of fact and proposed issues of law under cover of a letter dated April 12, 2000. This letter indicated the parties' desire to have this matter decided on the written record without an in-person hearing (although, as noted above, assuming I make certain findings in Petitioner's favor, Petitioner seeks an in-person hearing on some issues based on those findings). The parties stipulated that: the two facilities, Triad Tulsa and Triad Muskogee, are ASCs, and that both are owned by Petitioner, Triad, P.C. The parties also stipulated that Triad Tulsa has had a Medicare provider number since 1987, that on October 13, 1998, Triad Muskogee was issued an operating license by OSDH; and that, on December 1, 1998, Triad Muskogee was certified by CMS to participate in Medicare.

CMS submitted three proposed exhibits. These have been identified by CMS as Exs. A-C. I have redesignated these as CMS Exs. 1-3 to conform with Civil Remedies Division procedures. Petitioner submitted six attachments labeled as Attachments A-F, which I have marked as P. Exs. 1-6. Petitioner, in a letter to this tribunal dated July 17, 2000, objects to my consideration of CMS' proposed exhibit identified as CMS Ex. 1. As discussed fully below, I overrule Petitioner's objection. Neither party objected to any other submission. Accordingly, I admit CMS Exs. 1-3 and P. Exs. 1-6 into evidence.

A. Preliminary evidentiary matter: Petitioner's letter of clarification dated July 17, 2000.

Petitioner complains that CMS agreed not to include a letter dated June 26, 1998, from OSDH to Petitioner, in the parties' stipulations. Petitioner asserts that its "principals" do not remember receiving the letter, and that the address in the letter has an irregularity: the letter is addressed to a "Mr. Williams" instead of "Dr. Abel" (Triad's Administrator). Petitioner claims that more foundation is needed regarding the letter and OSDH's office mailing procedures to ascertain whether the letter was actually sent or received, otherwise, Petitioner asserts, I should not consider the letter in the decision.

CMS counters that the letter should be received into evidence because there is credible circumstantial evidence that the letter was received by Petitioner. CMS points out that without having received the letter Petitioner would not have known to submit the State licensing application, application fee, or the CMS Medicare forms - all of which it did submit. CMS Reply at 21.

The letter explains that OSDH is authorized to license ASCs and is under contract with CMS to survey and certify ASCs for Medicare. The letter from OSDH explains that CMS requires facilities to be operational, but that they must have an on-site survey to be certified. The letter warns that there is a backlog and budgetary process delays which could cause the commencement of the survey to be delayed.

I note that the address on the letter reads:

Mark L. Abel, D.O.

Triad Eye Medical Clinic and Cataract Institute

3131 Military Boulevard

Muskogee, Oklahoma 74403

Re: Ambulatory Surgical Center

The salutation line reads: "Dear Mr. Williams." I do not require more foundation to consider this letter. It seems doubtful that the irregularity that Petitioner has cited, the salutation line, caused Petitioner not to receive the letter. But, this is beside the point. Of the two potentially relevant facts that might be deduced from the letter, one is moot in light of my finding discussed below, and the other is not determinative of any issue.

The first fact that could be relevant, and could be deduced from the letter, is that the letter purports to explain that in addition to the requirement that a facility be operational, there is a backlog in processing applications which may cause a delay in certification by delaying the commencement of the survey. Thus, if Petitioner received the letter, its claim to have detrimentally relied on OSDH or CMS might be undermined. However, because of my finding, discussed below, that Petitioner's alleged detrimental reliance on OSDH and/or CMS is an equity matter, and, thus, beyond the scope of my review, this first fact concerning the letter is moot. The second fact which might be drawn from the letter is that the facility was allegedly instructed that an on-site survey is required. This fact is not determinative. While I find, as discussed below, that CMS did not engage in retroactive rulemaking, and that the regulations require an on-site survey (both findings which the instruction given in the letter potentially addresses), I arrived at those findings based on information in the law and the record of this case independent of any information in the letter. Moreover, the record and the law supports my finding whether the letter is construed to have informed Petitioner of the on-site survey requirement or not. Nonetheless, the letter may be considered as part of the context within which CMS provided Petitioner information concerning its policy on the certification of ASCs.

I find persuasive CMS' argument that Petitioner would presumably not have known to make the relevant submissions to CMS had it not received the letter; and I note that Petitioner has not disputed this assertion, either in its brief or the July 17, 2000 letter of clarification. Furthermore, the joint stipulations in this case have not been offered as a complete catalogue of facts and or exhibits - only those the parties agreed were not in dispute. Therefore, I do not find it a significant factor that the letter is beyond the scope of the parties' stipulations. Finally, Petitioner fails to explain why it waited to address its concerns about the letter until after the briefs had been submitted; although, it acknowledges that CMS raised precisely this question in CMS' Reply brief. Thus, I may deem the objection as untimely filed. For all of these reasons, I admit the letter as CMS Ex. 1 over Petitioner's objection.

II. Issues

1. Whether summary disposition is appropriate in this case.

2. Whether CMS correctly determined the date of certification as December 1, 1998.

III. Governing Law

Section 1832(a)(2)(F)(i) of the Social Security (Act) provides for Medicare Part B coverage for services furnished at ASCs.

42 C.F.R.. Part 416 sets forth the regulations for ASCs. An ASC is defined as "any distinct entity that operates exclusively for the purpose of providing surgical services to patients not requiring hospitalization, has an agreement with HCFA to participate in Medicare as an ASC, and meets the conditions set forth in subparts B and C of this part." 42 C.F.R. § 416.2.

IV. Discussion

The findings of fact, and conclusions of law (italicized), below, are followed by analysis and discussion.

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 the parties' arguments to decide whether there are disputed issues of material fact. The parties submitted proposed stipulations of fact dated April 12, 2000. I accept the stipulations, and find that there are no disputed material facts in this case.(3) Essentially, the parties are relying on the same facts, they are making legal arguments based on those facts, and their characterization of the import of those facts. Therefore, I find that there are no disputed issues of material fact, and summary disposition is appropriate in this case.

2. CMS correctly determined the date of certification as December 1, 1998.

Petitioner has made three main affirmative arguments, essentially reducible to the following: (1) the applicable law and regulations concerning the certification of ASCs in Medicare allow subsidiary or satellite facilities to share provider numbers with parent corporate entities;(4) (2) CMS engaged in retroactive rulemaking; and (3) the assertion of what appears to be an argument based on equity principles that Petitioner relied on information from OSDH and CMS to its detriment.

Petitioner argues that it did not need a separate Medicare provider number for its Muskogee facility, and therefore, it should be reimbursed for ASC services provided between October 13 and December 1, 1998 - the date of certification. Petitioner's main contention is that Part 416 does not require a branch or satellite facility to have a separate provider agreement with CMS, but allows them to be included under a parent's provider number. As discussed fully below, I agree with CMS that the requirements for participation in Medicare by an ASC, set forth in the regulations at Part 416, do not contemplate having a branch or subsidiary or satellite ASC facility participating in Medicare under an existing provider agreement and/or provider agreement number of a participating ASC. This is true regardless of the status of the participating ASC as a parent of a subsidiary, branch, or satellite. Therefore, CMS was correct in ascertaining that the first date of Triad Muskogee's participation in Medicare is December 1, 1998.

Also discussed fully below, I do not agree that the record in this case establishes that CMS engaged in retroactive rulemaking. Additionally, Petitioner has made a claim based on equitable principles that Petitioner detrimentally relied on OSDH and CMS in commencing ASC services on October 13, 1998, and therefore, it should be reimbursed for services rendered starting on that date. P. Br. at 2 ("Because Triad acted in reliance upon a representation of CMS, CMS should reimburse Triad for the subject services."). As discussed below, this argument is beyond the scope of my authority to review.

a. The regulations do not allow subsidiary or satellite ASCs to participate in Medicare using the provider numbers of a parent company.

An ASC is defined as "any distinct entity that operates exclusively for the purpose of providing surgical services to patients not requiring hospitalization, has an agreement with HCFA to participate in Medicare as an ASC, and meets the conditions set forth in subparts B and C of this part." 42 C.F.R. § 416.2 (emphasis added). The parties dispute whether "distinct entity" means an individual ASC, or a corporation that operates more than one ASC.

The regulations do not explicitly prohibit ASCs from having multiple facilities. Also, the word "entity" is commonly understood to include, in a corporate context, a parent and subsidiaries, or branches, or satellite facilities. Or, "entity" could describe a single facility, or individual ASC. Because an "entity" is merely something that exists as a discrete unit, "entity" can describe both an individual facility and a corporate "entity" that operates numerous facilities. It is this ambiguity that Petitioner attempts to exploit. However, reading the regulations as a whole, including one of the requirements for certification (that an on-site survey be conducted) I conclude that the phrase "distinct entity," in the regulations means a single ASC facility, not a corporate entity that operates multiple ASCs.

Petitioner agrees that 42 C.F.R. § 416.2 requires an ASC to be a "distinct entity" and to have a provider agreement with CMS. P. Br. at 5. Petitioner argues, however, that "distinct entity" means only that an ASC must be distinct from other types of health care entities. Citing Fed. Reg. 32,290, et seq. (June 12, 1998) ("proposed changes for ambulatory surgical centers"), Petitioner explains that the rationale behind the distinction is to keep ASCs and other types of healthcare entities separate to avoid confusion over differences in reimbursement methodology. P. Br. at 8. Petitioner concludes that the "distinct entity" requirement is inapplicable to identical ASCs within the same business organization. Petitioner argues that Triad Tulsa and Triad Muskogee together are a "distinct entity," and are not distinguishable from each other for the purposes of the regulations at part 416.

Petitioner explains that "distinct entity" first appeared in a 1998 amendment to 42 C.F.R. § 416.2. This was a clarification of the 1982 version that an ASC may not be part of a business organization which has costs that are not "clearly distinguishable" from the ASC. Hearing Request at 2. So, according to Petitioner, the language "distinct entity" has nothing to do with two separate branches of an ASC business organization using the same provider agreement. Hearing Request at 2.

CMS counters that the language in the regulations calling for an ASC to be a "distinct entity" should not be construed to mean a corporate entity with multiple facilities. According to CMS each type of provider has different certification requirements which must be taken into account, including that the statute pertaining to ASCs, 42 U.S.C. § 1395k, and the implementing regulations at 42 C.F.R. Part 416, do not allow an ASC to obtain a Medicare agreement without: (1) CMS deeming compliance, or (2) certification after a survey as provided for in 42 C.F.R. §§ 416.25, 26. CMS seems to indicate that these requirements preclude reading "distinct entity" in the manor favored by Petitioner.

The regulations are not explicit about whether the operators of ASCs must acquire an additional provider number for any new locations or facilities in order to participate in Medicare. The U.S. Secretary of Health and Human Services (Secretary) has explained in the comments to proposed changes to the regulations that:

[t]he definition of an ASC that is currently found at § 416.2 became effective following publication on August 5, 1982 of the final rule (47 FR 34082) that implemented the ASC benefit initially. Since 1982, ASCs as a type of facility have evolved significantly. In 1982 there were approximately 40 ASCs in existence. By the end of 1997, the number of Medicare-approved ASCs exceeded 2400. We have found the 1982 definition of an ASC to be so broad and general that it is increasingly difficult for us to make a definitive determination whether a facility is an ASC for the purposes of Medicare approval. This is especially true in the health care delivery system of the late 1990s, which is in a state of dynamic and constant reformation. Therefore, we have revised the definition of an ASC in § 416.2 to be more specific in distinguishing ASCs from other categories of facilities.

Fed. Reg. 32,295 (June 12, 1998). While this indicates the relevant regulations have undergone changes to address an evolving healthcare setting, Petitioner's attempt to capitalize on a perceived ambiguity fails. What the regulations require is that when the operators of an existing ASC commence operating a separate facility, even one that is part of the same corporate 'entity' and subject to the existing corporation's management, it is required to secure a separate provider number in order for services at the separate facility to be reimbursable under Medicare.

The Secretary's comments to the proposed changes at Fed. Reg. 32,290, et seq. (June 12, 1998), are helpful to gain an understanding of how the term "distinct entity" is intended. The purpose of the term "distinct entity" is to clarify which operation, in a situation where different types of healthcare providers are operating in a shared environment, is billing for services provided under Medicare. For example, in the comments to the proposed changes, (see the block quote below) a hospital and an ASC may operate on the same campus. This physical proximity between two different types of health care providers could be confusing about which provider is billing federal programs for what services. Significantly, under the facts in the instant case, Triad Tulsa and Triad Muskogee are neither different types of health care providers nor proximate enough to cause confusion over billing methodologies. Thus, there would not appear to be a rationale for allowing them, or entities like them, to be "distinct entities."

Moreover, read as a whole, the regulations, and comments to the proposed changes, do not support Petitioner's assertion that more than one ASC can be a "distinct entity" requiring only one provider number to participate in Medicare. The Secretary has stated:

though a facility may be called an ASC and may be located in a separate building or a site removed from the hospital campus Medicare does not consider the facility to be an ASC unless the facility has its own license and accreditation, governing board [and] . . .

. . . unless the site has been approved by Medicare as an ASC in accordance with the regulations

Fed. Reg. 32,295 (June 12, 1998).

The Secretary's comments show that the phrase "distinct entity" was intended to delineate the difference in different types of healthcare providers so that Medicare reimbursement for services could be more easily kept separate for each entity. While the intent to keep different types of healthcare providers separate may make it reasonable to infer that "distinct entity" was not intended to describe facilities providing identical services (e.g., two ASCs), I do not conclude from this, as Petitioner apparently does, that it is permissible for more that one ASC to share a single provider number. The regulations and comments clarify that ASC facilities are required by CMS to adhere to all requirements for certification, including that an on-site survey be performed. This leads me to conclude that the "distinct entity" language does not grant permission for more that one ASC to participate in Medicare under the provider number of one ASC simply because both ASCs are part of the same corporate entity.

i. SOM § 2024 is not applicable in this case.

Petitioner maintains that, although there is no Medicare law on point regarding multiple site ASCs, Medicare law provides that hospitals with multiple sites may, sometimes, operate under the same provider number. Request at 3 (citing SOM § 2024) (CMS Publication 7). Petitioner argues that the SOM section pertaining to the regulation of hospitals should be applied to ASCs in this case. Petitioner's rationale is that there is no regulatory instruction concerning when ASCs may participate in Medicare under the provider agreement of a parent. However, SOM § 2024 explains CMS's view of when hospital facilities may participate in Medicare under a scheme similar to the one Petitioner advocates regarding ASCs. See P. Br. at 10.

SOM § 2024 allows hospitals to include several physical locations under a single provider number when certain criteria are met. SOM § 2024 sets forth criteria to be met including: (1) a common owner must make decisions for all of the facilities; (2) a single chief medical officer must supervise the medical staff and report to a governing body; (3) there must be integration of the facilities' medical staff; (4) there must be a single chief executive officer; (5) all locations must meet the conditions of participation; and (6) State licensure laws must be met. Petitioner argues that these criteria should be applied in the instant case; and that a hearing should be held to allow Petitioner to show that Triad Muskogee would have met the criteria in SOM § 2024 between October and December 1998. Additionally, Petitioner would argue that the fifth criterion does not, under SOM § 2024, require verification by survey. Petitioner argues that recognition by CMS may be based on information gathered by the State agency. P. Br. at 11.

CMS counters that SOM § 2024 is not applicable by analogy to ASCs because SOM § 2024 applies to hospitals. CMS Reply at 19.

CMS is correct that, in the regulations, hospitals are treated as distinct from ASCs. I agree that provisions that are specific to hospitals are not applicable to ASCs in the absence of some affirmative indication in the statute or the regulations. The temptation to draw analogies between one type of health care entity and another might be more compelling in the absence of separate regulations governing each type. However, in this instance, separate regulations govern hospitals, ASCs, and other types of healthcare entities. SOM § 2024 is CMS's interpretation of how the regulations apply to certain activities of hospitals and Petitioner has provided no basis for extending "authority by analogy"in this case.

Moreover, even if I agreed that SOM § 2024 applied by analogy in this case, the facts, as stipulated, indicate that Petitioner did not meet the fifth requirement, stated above, that all locations must meet the conditions of participation, because, as discussed below, Muskogee Triad did not undergo an on-site survey before December 1, 1998, and an on-site survey is a requirement for certification. I find, therefore, that the SOM provisions cited by Petitioner do not apply in this case.

ii. Certification requires an on-site survey.

Logic dictates that the survey requirement found in the regulations must apply to each ASC facility. To hold otherwise would mean that if an ASC with a provider agreement, such as Triad Tulsa, went through the survey process of its facility, i.e., Tulsa, other free standing facilities could be opened and operated under its provider number foregoing any on-site survey. This would circumvent the purpose for having on-site surveys which is to verify that minimum standards are met by each facility as a condition of participation in Medicare.

The regulations require a survey of an individual ASC. For the requirement to have a purpose, the definition of an ASC as a "distinct entity" must mean a facility that is an ASC, as opposed to a corporation that operates multiple ASC facilities. 42 C.F.R. Part 416 requires ASCs to (1) meet the definition of an ASC in section 416.2, and (2) have in effect an agreement obtained in accordance with 42 C.F.R. Part 416 subpart B. In order to obtain a Medicare agreement in accordance with subpart B, there are two allowable routes: (1) CMS deems an ASC compliant if it is accredited by a national accrediting body or licensed by the State in cases where CMS concludes the state provides reasonable assurances (neither party raises this course as an issue in this case); or (2) by an on-site survey conducted by an appropriate state survey agency to ascertain compliance with conditions for participation. 42 C.F.R. § 416.26(b)(1). Since section 416.25(b) requires that a provider agreement be obtained in accordance with section 416.26, in Oklahoma the OSDH would have to conduct a survey to determine whether an ASC was compliant with section 416, then CMS would have to accept the State's recommendation. I note that 416.26 uses the term "the facility" to describe the ASC to be surveyed. CMS has seized on this description as "entity specific." See CMS Reply at 13. I agree that this is support for the position that "entity" means "facility" for the purposes of the regulation of ASCs. This language further supports an interpretation that multiple facility corporations must have each individual ASC facility surveyed and accepted before being admitted to participate in Medicare.(5)

The requirement that individual facilities undergo on-site surveys is logically consistent with the purpose of on-site surveys: to ascertain compliance with conditions for participation. Under Petitioner's vision of the requirements for participation, a corporation that operated an ASC with a provider agreement with CMS could conceivably open innumerable remote facilities - I take administrative notice that Muskogee, for instance, is approximately 50 miles from Tulsa - and commence billing Medicare for services without those facilities having been subject to an initial on-site survey. The facts in this case prompt the questions: Under such a scheme, for what purpose would the survey requirement have been included in the regulations? How many facilities could participate under such a scheme? Would only one satellite be permissible, or an unlimited number? These questions illustrate the incompatibility with the regulations of Petitioner's assertion that the term "distinct entity" should be interpreted to allow multiple ASCs to participate in Medicare under the provider number of a parent which operates ASCs that have not undergone an on-site survey.

Furthermore, support for CMS' position is found in the contrast between the regulations pertaining to ASCs and the regulations pertaining to home health agencies (HHAs). As CMS explains in its reply brief, the regulations allow HHAs to have independent branches admitted to participate in Medicare without independent certification. In contrast, Part 416 contains no similar provisions for ASCs. I conclude that the Secretary did not intend to permit branch or satellites forgoing an on-site survey to participate in Medicare. If the Secretary had intended to permit branch or satellites forgoing an on-site survey, I presume he would have included language giving effect to that intent in the regulations.

Cumulatively, the facts, the regulations pertaining to ASCs, and the regulations pertaining to other health care entities show that Petitioner's interpretation contorts the regulations. Petitioner argues that the lack of express permission in the regulations should be read to mean that participation by branches or satellites is permissible. I agree with CMS that the regulations do not contemplate individual ASC facilities, regardless of their relationship with any corporation, circumventing the on-site survey requirement of the certification process.

CMS argues that the regulations at 42 C.F.R. § 416.2 require that a facility meet the definition of an ASC to participate in Medicare. The definition is contained in the regulations, and includes having an agreement with CMS to participate in Medicare. In order to have an agreement, CMS explains, according to 42 C.F.R. § 416.26 (b)(1), an ASC must have an on-site survey completed. CMS Br. at 4-5. Because in this case December 1, 1998, was the date that the State survey agency certified Triad Muskogee, I find that is the effective date of Triad Muskogee's participation in Medicare.

b. CMS did not engage in retroactive rulemaking.

Petitioner argues that CMS engaged in retroactive rulemaking because relevant CMS policy was not announced to Petitioner until the litigation in this case began. Furthermore, Petitioner claims, the policy as announced is ad hoc, unfair, and unlawful. P. Br. at 6.

Petitioner claims that an October 8, 1999 letter from CMS contradicts the policy CMS now asserts, where it says "satellite or branch locations of ambulatory surgical centers are allowed." P. Br. at 6. A subsequent letter, dated October 25, 1999, corrected CMS's earlier letter, and said that satellites or branches are not permitted to be included under a participating ASC's provider agreement. Petitioner complains that it was one and one-half years after Triad Muskogee provided the surgical services at issue before CMS interpreted the regulations for the first time. Petitioner's position is that the letter dated October 25, 1999, constitutes impermissible retroactive rulemaking.

The October 8, 1999 letter does indicate that satellite or branch ASCs participating under the same Medicare provider agreement as an already participating ASC are permissible. However, as CMS explains, the two letters also indicate that ASCs must comply with all conditions of coverage. CMS argues that the reference to "all the conditions of coverage," as was made clear in the letters from CMS dated June 26, 1998, October 8 and October 25, 1999, must include verification by on-site survey. The October 25, 1999 letter enunciated what CMS contends is its longstanding policy: that satellites and branches may not share provider numbers with a parent ASC. Following from this, CMS maintains that even if the October 8, 1999 letter had not been corrected by the October 25, 1999 letter, the requirement that an on-site survey be conducted was articulated to Petitioner in all correspondence, and no such survey was done until December 1, 1998, which CMS argues is the correct effective date of certification for Triad Muskogee. CMS Reply at 15-16.

I find no indication that CMS has engaged in retroactive rulemaking. While there was an erroneous statement of the regulation contained in the letter from CMS to Petitioner after the October to December 1998 time period, this was not prejudicial to Petitioner, and an erroneous statement in a letter, subsequently corrected, does not constitute rulemaking. Furthermore, the regulations as they are now, and as they were between October and December of 1998, do not allow satellite or branch facilities to participate using the provider agreement of a parent or an ASC already participating in Medicare.

CMS has indicated that it has no affirmative obligation to set forth a policy disallowing multiple ASCs participating under the provider agreement of one ASC, be they branches or not, because the regulations at Part 416 set forth how individual ASCs must be certified. CMS Reply at 18. CMS also explains that it is not the case that CMS allowed Triad Muskogee to participate under Triad Tulsa's provider number and subsequently changed its position. As explained above, the regulations do not support a scheme such as the one advanced by Petitioner. This is made clear by the requirement that an individual ASC must be certified by an on-site survey, and the lack of any affirmative language in the regulations permitting the participation in Medicare of multiple ASCs using a single provider number.

The October 1999 letters from CMS were ultimately consistent with the regulations so that it was made clear that: (1) ASCs may not share provider numbers with satellites or branches; and (2) an on-site survey is required as part of the certification process. The letters are not new rules or interpretations; therefore, I find no evidence that CMS engaged in making new rules or regulations, applied them retroactively, or interpreted a rule or regulation in a new way, or for the first time, so as to create a retroactive effect.

c. Petitioner's equitable arguments are beyond the scope of my review.

To the extent that Petitioner appears to have made an argument based on its detrimental reliance on OSDH and CMS's guidelines, or an estoppel claim in this vein, it is beyond the scope of my review in this case. Petitioner argues that Triad Muskogee provided services between October and December of 1998 based on the representations of CMS through OSDH that a facility must be operational prior to its certification for participation in Medicare. Petitioner argues that this reliance justifies payment. P. Br. at 1-2.

My authority in cases involving CMS is limited to hearing and deciding those issues which 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 only to hear and decide cases involving specified initial determinations by CMS.

The regulations give me the authority to hear and decide whether CMS' determination that an entity fails to qualify as a provider was made correctly. 42 C.F.R. §§ 498.3(b)(1), 498.5(a)(2). In such a case, I may decide whether CMS correctly applied regulations to the facts of a case. I may also decide whether CMS' interpretation of a regulation is correct or incorrect. I do not have authority to hear claims of estoppel against CMS or the Secretary. It is well-established, for instance, that as an administrative law judge I lack the authority to hear and decide estoppel arguments involving alleged dilatory processing of applications for provider certification. GranCare Home Health Service & Hospice, DAB CR464 (1997); SRA, Inc. D/B/A St. Mary Parish Dialysis Center, DAB CR341 (1994). I infer from these cases that I do not have the authority to hear estoppel arguments. Petitioner has offered no argument here which would give me reason to revisit the holdings in these decisions.

V. Conclusion

Based on the foregoing, I sustain CMS's determination not to certify Petitioner to participate in the Medicare program as an ASC prior to December 1, 1998.

JUDGE
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Marion T. Silva

Chief Administrative Law Judge

 

FOOTNOTES
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1. 1 This agency was formerly named the Health Care Financing Administration.

2. 2 The SOM is a Department of Health and Human Services document that is commonly relied upon by State surveyors and cited in many Departmental Appeals Board matters. While the SOM is not legally binding on either facilities or CMS, it does provide, as it says, "guidance" regarding the "intent" of the requirements of participation. See Beverly Health and Rehabilitation of Williamsburg, DAB CR653 (2000).

3. 3 I note that Petitioner has objected to certain of CMS' arguments as beyond the scope of the parties agreed stipulations of fact. Petitioner argues that acceptance of factual assertions in CMS' brief will prejudice Petitioner. P. Br. at 3. However, Petitioner's objections are to assertions of law and CMS' characterization of the stipulated facts. Specifically, Petitioner objects to the following assertions by CMS:

(1) "In 1998 Triad sought to expand its service area by opening a separate facility in Muskogee." CMS Br. at 2. Triad characterizes the expansion in Muskogee as an effort to serve an existing service area better. P. Br. at 3.

(2) CMS' statement that "[t]he separate certification was requested because the Medicare program does not recognize satellite, or branch units, of ambulatory surgical centers." CMS Br. at 2. Petitioner indicates that this was not stipulated, and is an issue the parties agreed was to be determined. P. Br. at 4.

(3) References to OSDH's letter dated June 26, 1998, as referred to by CMS at CMS Br. at 2. P. Br. at 4; See Section I.A., above.

(4) CMS' assertion that Triad Muskogee sought separate Medicare certification, but now seeks qualification as a provider-based facility. Petitioner indicates that it is not seeking to have Triad Muskogee qualified as a provider-based facility. As noted below, Petitioner explains its position that a provider-based facility designation is appropriate where dissimilar facilities seek to use the same Medicare provider number. Accordingly, Petitioner indicates that there is no provider-based designation issue in this case. P. Br. at 5.

(5) CMS' statement that "[t]he Muskogee facility was not intended to be part of, or subordinate to the Tulsa facility." CMS Br. at 2. Petitioner says this was not part of the stipulations, and it maintains that exactly the opposite is what was intended. P. Br. at 5.

4. 4 To clarify and distinguish an issue raised by CMS, I note that CMS advances a counter argument that concerns PMI-A-96-7, a Program Memorandum to Intermediaries concerning provider-based designation issued in May, 1998 by CMS, which is not relevant in this case. CMS argues in its brief that provider-based designations are reserved for situations where more than one type of services activity, for instance where an ASC operates in the same physical space as a hospital, is taking place. CMS Br. at 5. Under 42 C.F.R. § 416.30(f)(2), ASCs cannot have provider-based designations unless CMS finds good cause. CMS says provider bases designation issues are an outgrowth of the Medicare reimbursement system and not intended to circumvent the certification requirements for Medicare participation. As stated in the Memorandum: "the main purpose of the provider-based designation is to accommodate the appropriate accounting and allocation of costs where there is more than one type of provider activity taking place within the same facility/organization, e.g., a hospital-based skilled nursing facility." CMS Br. at 4 (citing CMS Ex. 2: PMI A-98-15 (a reissue of PMI A-96-7)).

CMS contends that Triad Muskogee performs the same function and provides the same services as Triad Tulsa, only at a different physical location. Thus, Triad Muskogee is not a subordinate part of the Tulsa facility engaged in a different activity for costs and billing purposes. CMS Br. at 5. Petitioner correctly observes, however, that it has not asserted that Triad Muskogee is eligible for provider-based designation. Petitioner acknowledges that provider-based designations are applicable to facilities with different types of providers operating within the same location or facility and, in this case, Petitioner maintains that Triad Muskogee and Triad Tulsa are not dissimilar types of providers. P. Br. at 10. Therefore, I do not consider provider-based designation in this Decision.

5. 5 I note that absent a change in the regulations, the requirement for each facility to be surveyed and accepted would be necessary even if there were provisions in the regulations for satellite or branch facilities to bill for Medicare services under the provider number of a parent ASC.

CASE | DECISION | JUDGE | FOOTNOTES