SUBJECT: Green Oaks Hospital,

Petitioner,

Centers for Medicare & Medicaid Services

DECISION

I find that Petitioner, Green Oaks Hospital's, Medicare provider agreement was not effective until the date of the State survey on March 17, 2000. Therefore, I deny Petitioner's motion for summary judgment and grant the Centers for Medicare & Medicaid Services' (CMS, formerly know as the Health Care Financing Administration) motion for summary judgment.

I. Background

Petitioner timely requested a hearing. The case was assigned to me from Administrative Law Judge Jill S. Clifton. Prior to the case's transfer to me, Judge Clifton determined, and the parties agreed, that the issues raised in this appeal were suitable for disposition on motions for summary judgment, and she directed the parties to submit their motions and supporting briefs and exhibits according to a schedule set out in her Order of November 28, 2000.

Petitioner filed its Motion for Summary Judgment and its Memorandum of Points and Authorities on December 15, 2000. The Memorandum contained an addendum of seven exhibits, Petitioner's Exhibits (P. Exs.) 1-7, which I here admit into the record of these proceedings. CMS responded on March 27, 2001, in its pleading entitled, "Respondent's Response to Petitioner's Motion for Summary Judgment and Motion for Summary Judgment for Respondent Thereon." This pleading included two attached exhibits, CMS Exs. 1-2, which I here admit into the record. Green Oaks replied to CMS's pleading on April 17, 2001 with its "Reply to HCFA's [CMS's] Response to Green Oaks Hospital's Motion for Summary Judgment and Motion for Summary Judgment for HCFA [CMS] Thereon." This pleading also contained, as an attachment designated Appendix A, copies of pages 4-7 of its December 15, 2000 pleading. Because of the potential for confusion in referring to the pleadings by their very lengthy titles, I shall hereafter refer to Petitioner's December 15, 2000 pleading as Petitioner's Motion, and to CMS's March 27, 2001 pleading as CMS's Motion. I shall describe Petitioner's April 17, 2001 pleading as Petitioner's Reply.

No material facts remain in dispute, and the case is indeed suitable for disposition on what amounts to the parties' cross-motions for summary judgment now before me. I shall set out the controlling material facts in detail presently. The legal question raised by those settled facts, and the question dispositive of this appeal, is this: does the "Special Rule" set out in 42 C.F.R. § 489.13(d)(2) allow Petitioner, a free-standing psychiatric hospital, to claim the date of its accreditation as the effective date of its Medicare provider agreement, or do the terms of 42 C.F.R. § 489.13(d)(1)(i) require that such a facility's Medicare provider agreement is not effective until it is both accredited and the subject of a satisfactory State survey?

From on or about December 1, 1996 until late in 1999, Petitioner was operated as a subprovider psychiatric facility under the Medicare certification of Medical City Dallas Hospital, a Medicare-certified, general acute-care hospital located in Dallas, Texas. Petitioner had operated independently as a psychiatric hospital for slightly over 12 years prior to its consolidation with Medical City Dallas. On November 1, 1999, Petitioner applied to participate again in the Medicare program as a free-standing psychiatric hospital.

While it had operated as a subprovider of Medical City Dallas, Petitioner had been accredited by the Joint Committee on Accreditation of Healthcare Organizations (JCAHO). If a hospital is accredited by JCAHO, it is, in most cases, deemed to meet standards for participation in the Medicare program, and, accordingly, Petitioner made timely application for JCAHO accreditation. The JCAHO accreditation process was soon completed, and JCAHO awarded certification to Petitioner, effective January 1, 2000.

In its most basic terms, it is Petitioner's position here that its eligibility as a Medicare provider should be established as of that date, and that it should be entitled to payment for services provided to Medicare patients beginning on January 1, 2000.

CMS did not, and does not, regard the JCAHO accreditation process as the final step in Petitioner's qualification process. Although the exact date remains uncertain, it is clear that by mid-February, 2000, HCFA had determined that a compliance survey, conducted on its behalf and on its authority by the Texas Department of Health (TDH), would be required before Petitioner's application could be approved. Petitioner has asserted that it urged CMS and TDH to expedite the survey process because it was at the time already caring for over 100 Medicare patients and feared that any period of ineligibility would result in serious financial losses to the facility. TDH completed its survey on March 17, 2000, and found Petitioner in compliance with all Medicare requirements. On April 14, 2000, CMS announced that Petitioner was entitled to Medicare provider status effective with the successful survey completion, March 17, 2000.

II. Applicable law, findings of fact and conclusions of law, and discussion

I make findings of fact and conclusions of law (Findings) to support my decision in this case. I set forth those Findings in italics and discuss them below.

1. While Petitioner's accreditation by JCAHO satisfied the accreditation requirements of 42 C.F.R. § 489.13(d), Petitioner, a psychiatric hospital, is subject to the "additional staffing and medical records requirements" set out in 42 C.F.R. §§ 482.61 and 482.62.

2. The terms of 42 C.F.R. § 489.13(d)(1)(i) are satisfied only upon a provider's accreditation and its meeting all additional federal requirements for participation in the Medicare program and the effective date of a Medicare provider agreement under the terms of 42 C.F.R. § 489.13(d)(1)(i) is the date on which the provider has satisfied all of the terms of that subsection.

3. Petitioner's compliance with the "additional special staffing and medical records requirements" was established in a survey conducted on or about March 17, 2000.

4. 42 C.F.R. § 489.13(d)(2), referred to as the "Special Rule," does not permit a Medicare provider to establish an effective date for its agreement earlier than the effective date otherwise determined pursuant to 42 C.F.R. § 489.13(d)(1)(i).

5. CMS correctly determined that Petitioner's Medicare provider agreement became effective only upon the survey that established Petitioner's compliance with all additional federal requirements imposed on psychiatric hospitals.

This 10-week period of ineligibility is the practical manifestation of the legal question I have set out earlier, and my resolution of that legal question has the practical effect of denying not only Petitioner's Motion, but its right to receive payment for services it may have provided to Medicare patients between January 1, 2000 and March 16, 2000. According to Petitioner's estimate, the total "lost" reimbursement may be approximately $400,000. Regrettable though this loss may be, the particular standards demanded of a free-standing psychiatric hospital required that Petitioner not only receive JCAHO accreditation, but that it pass the TDH survey as well. CMS's determination of March 17, 2000 as the effective date of Petitioner's agreement awarded that status at the earliest date for which Petitioner was eligible, and was correct.

In general, a hospital or other provider of medical services can meet the requirements of participation in the Medicare program upon accreditation by a national accrediting organization. 42 C.F.R. § 489.13(d)(1). Neither of the parties to this appeal challenge the status of JCAHO as a national accrediting organization empowered to confer accredited status. But the same regulation that establishes JCAHO as an authorized accrediting organization in general adds an explicit caveat. 42 C.F.R. § 488.5(a) cautions that JCAHO accreditation is "deemed to meet all of the Medicare conditions for participation of hospitals, except--(emphasis added):

(2) The additional special staffing and medical records requirements that are considered necessary for the provision of active treatment in psychiatric hospitals (section 1861(f) of the Act) and implementing regulations . . . .

42 C.F.R. § 488.5(a)(2).

Petitioner is a psychiatric hospital, and its separation from Medical City Dallas means that it is a free-standing institution whose Medicare provider agreement must be assessed on its own terms. Petitioner concedes as much in its memorandum, and does not contest what the regulations plainly say: that, as operated at all relevant times, it was within the definition of a "psychiatric hospital" set out in 42 U.S.C. § 1395x(f) and 42 C.F.R. § 482.60, and was therefore subject to the "additional special staffing and medical records requirements" the details of which appear in 42 C.F.R. §§ 482.61 and 482.62.

Although the parties generally agree that the statutory provisions and regulatory schemes just set out apply to Petitioner's operation, it is over their interaction as applied that the parties disagree, and the 10-week period of non-eligibility arises. That disagreement is in turn generated by the parties' differing interpretations of yet another regulation, 42 C.F.R. § 489.13(d)(1) and (d)(2). Set out in full, the regulation states:

(d) Accredited provider or supplier requests participation in the Medicare program--(1) General rule. If the provider or supplier is currently accredited by a national accrediting organization whose program had HCFA [CMS] approval at the time of accreditation survey and accreditation decision, and on the basis of accreditation HCFA [CMS] has deemed the provider or supplier to meet Federal requirements, the effective date depends on whether the provider or supplier is subject to requirements in addition to those included in the accrediting organization's approved program.

(i) Provider or supplier subject to additional requirements. If the provider or supplier is subject to additional requirements, the effective date of the agreement or approval is the date on which the provider or supplier meets all requirements, including the additional requirements.

(ii) Provider or supplier 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)(i) or (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 for which it has not been paid.

42 C.F.R. § 489.13(d).

Petitioner's interpretation of the regulation is summarized simply and clearly in its submission:

[t]he regulatory provision at issue in this case, the Special Rule, was adopted by HCFA to create an exception to the general rules governing the effective dates of provider agreements. Under such general rules, the effective date of the provider agreement for an accredited provider is either the date of the certification request, or if the provider is subject to additional federal requirements such as the Special Conditions, the date the provider meets all federal requirements . . . By the clear language of the regulation, the Special Rule (which appears above as Section (d)(2)) permits designation of a retroactive effective date of up to one year for either type of medical provider.

Petitioner's Motion at 10.

CMS's view of the regulatory scheme is quite different, and it is summarized at Page 11 of its motion:

[t]he general requirements can be deemed to be met by accreditation based on the accreditation survey, but the effective date is dependent on the additional requirements, and the survey date is the earliest date the additional requirements can be affirmed.

CMS Motion at 11.

I believe that this latter interpretation is the correct one, since it is supported both by explicit statements of intent when the regulation containing the "Special Rule" was promulgated and by the notion, urged vigorously by both sides in this dispute, that the instant regulatory scheme should be viewed and analyzed as a whole.

When the language of the "Special Rule" was promulgated, the discussion in the Federal Register included an explicit response to two commenters' concerns about the availability of retroactive approval for Medicaid providers who had been accredited. The authors of the regulation responded:

We consider the concerns to be justified. Accordingly, we have revised (the "Special Rule" regulation) to provide that an agreement or approval may be made retroactive for a provider or supplier that . . . has been deemed to meet all federal requirements on the basis of accreditation . . . .

62 Fed. Reg. 43,933 (Aug. 18, 1997). The plain meaning of this language needs no paraphrase, but, if it did, it could be fairly paraphrased thus: if all federal requirements can be satisfied by the fact of accreditation, then no more is required and the provider agreement may be given retroactive effect if accreditation is established. The inclusion of the language "all federal requirements" can have had no other purpose than to make clear that "all federal requirements" and accreditation mean exactly the same thing in this special context, and that this special context is an explicit condition for invocation of the "Special Rule." CMS correctly notes, moreover, that there is little in the history of the "Special Rule" language that would support its application outside the Medicaid program.

But the entire text of 42 C.F.R. § 489.13, not solely section 489.13(d)(2), addresses the method by which the effective dates of Medicare provider agreements must be calculated. Both parties agree that the regulation must be read so as to give all its parts effect, and they are, of course, correct. In re Surface Mining Regulations Litigation, 627 F.2d 1346 (D.C. Cir. 1980). In applying the terms of 42 C.F.R. § 489.13, I must keep in mind the other provisions that bear on the status and approval of a provider agreement, including the survey requirements outlined in section 489.10(d). And, in doing so, I am led to the conclusion that Petitioner's interpretation of the "Special Rule" would, if adopted, render entirely nugatory the whole body of 42 C.F.R. § 489.13(d)(i) and effectively expunge it as a qualifying provision to the so-called "General Rule" governing effective dates.

The "General Rule" set out in 42 C.F.R. § 489.13(d)(1) is that the effective date "depends on whether the provider . . . is subject to requirements in addition to those included in the accrediting organization's approved program." The immediately-following subsections, (d)(1)(i) and (d)(1)(ii), attend to the two alternative and mutually-exclusive possibilities: providers subject to "requirements in addition" are addressed in subsection (d)(1)(i). I repeat here that Petitioner does not deny that it "is subject to requirements in addition" as that term is employed here, and I note that there is no assertion from Petitioner that the JCAHO accreditation amounted to either a de facto or de jure satisfaction of the "requirements in addition."

Given that the two categories of providers contemplated by the "General Rule" are defined as those subject to additional requirements beyond accreditation and those not subject to additional requirements, and given that Petitioner is a psychiatric hospital and therefore subject to additional requirements, it follows that the alternative crafted for "additional-requirements" providers in the "General Rule" governs Petitioner's situation. That alternative is explicit in linking the effective date of the agreement to "the date on which the provider . . . meets all requirements, including the additional requirements." One might argue that the regulation's terms were clear enough in demanding that "all requirements" be met, but the inclusion of the language "including the additional requirements" emphasizes the importance of the additional requirements in the starkest possible fashion. In this case, the additional requirement is compliance with the terms of 42 C.F.R. §§ 482.61 and 482.62, as demonstrated by a satisfactory survey, and the date of that survey is the earliest date on which an "additional-requirements" provider can claim an effective agreement. Any other reading of the "General Rule" would render it virtually meaningless, as such a reading would erase the regulatory distinction between those described in subsection (d)(1)(i) and those described in subsection (d)(1)(ii).

Put another way, the distinctions set out in 42 C.F.R. § 489.13 create two classes of potential providers. The first class is made up of providers whose agreements can be effective only after survey. The second class is made up of providers whose agreements may be based on accreditation, and that second class is divided in a straightforward way into two groups: first, providers for which accreditation is sufficient; and second, providers for which survey-established compliance with additional requirements is necessary. An accredited provider which is subject to additional requirements is within the ambit of subsection (d)(1)(i), and "meets the requirements of paragraphs (d)(1) and (d)(1)(i)" only when it has satisfied "the additional requirements."

Thus, the "Special Rule" relied on by Petitioner is simply unavailable to it, because any retroactivity the "Special Rule" might confer is premised on the provider's having fully complied with the demands of subsection (d)(1)(i). And, because the "Special Rule" cannot be relied on at all by Petitioner on these facts, there is little need to discuss the argument directed at CMS's failure to exercise its discretion and invoke the "Special Rule" in amelioration of Petitioner's situation. The operation of the "Special Rule" is not discretionary, and CMS cannot be faulted for failing to exercise discretion it did not enjoy.

Finally, Petitioner has raised challenges to broader aspects of the history of its relationship with CMS. Petitioner asserts that CMS's interpretation of the regulations amounts to "an attempt to promulgate a new regulation without following . . . the rule-making requirements of the APA (the Administrative Procedures Act, 5 U.S.C. § 522(a)(1) et seq.)." That argument may be pursued in another forum, but this one is not empowered to consider it and I must disregard it. Lauderhill Community Mental Health Center, DAB CR652 (2000); Beverly Health & Rehabilitation, Springhill, DAB No. 1696 (1999); Orchard Grove Extended Care Center, DAB CR541 (1998). Similar well-established precedent bars my consideration of Petitioner's claim that CMS's action "violates fundamental principles of fair procedures" and "produces an inequitable result." National Behavioral Center, DAB No. 1760 (2001).

III. Conclusion

Accordingly, I grant CMS's motion and deny Petitioner's. I affirm CMS's determination that the effective date of Petitioner's Medicare provider agreement, is March 17, 2000.

Richard J. Smith

Administrative Law Judge