SUBJECT:

Mariner Health Home Care of Metro West,

Petitioner,

Centers for Medicare & Medicaid Services

DECISION

I decide that Centers for Medicare & Medicaid Services (CMS or HCFA) correctly determined to certify Mariner Health Home Care of Metro West (Petitioner) to participate in the Medicare program, effective October 8, 1998. ⁽¹⁾ On that date, Petitioner met all the federal requirements for participation, including those imposed following the moratorium on certification of home health agencies, which went into effective on September 15, 1997.

I. APPLICABLE LAW AND REGULATIONS

The regulations require that an entity, such as a home health agency, must apply to CMS to be certified to participate in Medicare. 42 C.F.R. § 489.10(a). In order to be certified, an applicant must first be surveyed to ascertain whether the applicant meets all of the federal requirements, which, for a home health agency, means meeting all conditions of participation. 42 C.F.R. §§ 488.10; 489.10(d); Part 484. CMS has delegated to the individual State survey agencies the authority to conduct surveys on CMS's behalf. After the requisite surveys have been completed, the state survey agency forwards a recommendation to CMS concerning the applicant's compliance with the federal requirements. 42 C.F.R. § 488.11. CMS will accept an applicant's participation agreement to be effective on the date that a survey of that applicant is completed, provided that the applicant meets all of the pertinent federal requirements on that date. 42 C.F.R. § 489.13.

If an applicant for participation fails to satisfy all federal requirements as of the date of completion of the survey, then CMS will not certify that applicant to participate in Medicare until CMS is satisfied that the applicant meets the federal requirements. 42 C.F.R. § 489.13.

The conditions of participation which must be met by a home health agency are set forth in the statute at sections 1861(o) and 1891(a) of the Social Security Act (Act) and implemented in the regulations at 42 C.F.R. Part 484.

II. BACKGROUND

I set forth below the essentially undisputed facts of the case. By agreement the parties have submitted joint exhibits which have been marked as Petitioner's Exhibits (P. Exs.) 1-86. I admit into evidence P. Exs. 1-86.

On July 30, 1997, the State of Florida Agency for Health Care Administration (State agency) notified Petitioner it had received Petitioner's application for Medicare certification for its home health care agency. The State agency advised Petitioner it should request a Medicare survey within 20 days and its request must state Petitioner is fully operational, aware of and in compliance with all applicable federal regulations and has provided services to a minimum of two skilled nursing patients. The State agency's letter also advised Petitioner that it could take six months to complete the certification process and emphasized that services rendered to program beneficiaries prior to the effective date of provider participation are not reimbursable. P. Ex. 43.

Petitioner was surveyed by the State agency on September 10, 1997, and was found to be in compliance with all conditions of participation for home health agencies.

Due to the passage of the Balanced Budget Act of 1997, the President of the United States (President) issued a moratorium on certifying home health agencies pending promulgation of new regulations for home health agencies that would be in accord with the new statutory requirements. The moratorium went into effect on September 15, 1997, five days after Petitioner's successful State agency survey. An exception to the moratorium was made for home health agencies for which CMS determined had successfully completed an initial survey.

On November 19, 1997, the State agency advised Petitioner that the forms it had submitted with its application for Medicare participation contained an incorrect address; that is, the address was neither the home health agency's address nor Petitioner's corporate address. Petitioner was asked to resubmit the corrected forms so the full package could be sent to CMS. The State agency told Petitioner,"[s]ince the survey was completed prior to the moratorium HCFA will be able to follow through and assign the agency a provider number." P. Ex. 47.

Petitioner did not submit the corrected application forms to the State agency until December 12, 1997. The State agency approved the resubmitted forms on December 19, 1997 with a notation that sending the forms back to Petitioner had,"caused another months delay." P. Ex. 48. At some time shortly after December 19, 1997, the State agency transmitted Petitioner's application to CMS.

The moratorium was lifted on January 13, 1998, at which time new surety bond and capitalization requirements for home health agencies were imposed. 63 Fed. Reg. 292, et. seq. (1998); 42 C.F.R. §§ 489.28, 489.61. In January 1998, the State agency published a memo with the new CMS regulations for home health agencies. The memo reminded home health agencies that Medicare participation would require, inter alia, a $50,000 surety bond, specified capitalization requirements and specified financial statements including a copy of the most current bank statement(s) from the home health agency's savings, checking, or other accounts which contain the operational funds, accompanied by an attestation from the bank officer or other financial officer that the funds are immediately available to the home health agency. This memo also stated:

When the documents are returned . . . . we then forward them to your fiscal intermediary [FI] . . . . [who] has 30 days to review . . . . [and if the FI] needs to request further information . . . . they again have 30 days to process the additional information.

* * * *

Once the FI verifies the application and gives us approval . . . . (1) [f]or an initial Medicare application, we will send you instructions for scheduling a certification survey.

Under a new paragraph, but still under enumeration (1) above, the memo stated the following:

Your agency must be providing skilled care to a minimum of 10 patients before the survey is conducted. At least 7 of the 10 patients should be receiving skilled care from your agency at the time of the initial survey.

Again, the State agency advised that the application process could take up to six months to process after receipt of an acceptable application. P. Ex. 50.

CMS issued a transmittal notice to all state agencies on January 15, 1998. In that notice, CMS advised the state agencies about the new requirements for surety bonds and capitalization requirements. CMS also advised the state agencies that, "[a]n HHA [home health agency] must have provided care to a minimum of 10 patients before an initial survey is conducted. At least 7 of the 10 required patients should be receiving care from the HHA at the time of the initial Medicare survey." P. Ex. 39, at 2.

On March 4, 1998, the State agency wrote to Petitioner and advised that CMS had returned Petitioner's application package to the State agency and had asked that Petitioner resubmit the initial application with the new requirements for a surety bond and proof of capitalization. The State agency also told Petitioner in this letter that,"unfortunately, HCFA has also decided that your agency will have to be resurveyed due to the new requirement that you must be serving 10 skilled patients when the survey is conducted." P. Ex. 51. Petitioner had not been serving 10 skilled patients at the time of its initial survey on September 10, 1997. P. Ex. 83.

On June 12, 1998, Petitioner's counsel protested to CMS. Petitioner did not object to the new requirements to provide a surety bond and proof of capitalization but, rather, objected that it would have to start over with a new survey. Petitioner argued that CMS's requirement for a new survey appeared to be based on the "10 patient rule" and the "10 patient rule" was substantively and procedurally invalid because it should have been subject to notice and comment rule-making and was arbitrary and capricious. P. Ex. 59.

CMS responded to Petitioner's protest letter on September 8, 1998, but did not focus on Petitioner's main point, that is, that Petitioner should not have to go through another survey due to the "10 patient rule" in order to be certified. CMS's associate regional administrator told Petitioner that because of the moratorium, the new requirements apply to all home health agencies becoming Medicare providers on or after January 1, 1998, even if the application process began before January 1. CMS restated that the "new certification requirements for home health agencies include meeting initial capitalization requirements, completing the provider enrollment process . . . . and meeting HCFA's minimum patient requirements (i.e., at least 10 patients receiving skilled care, 7 of whom must be receiving care at the time of the survey) . . . . [t]he effective date of the provider agreement will be the date all requirements are found to be met." P. Ex. 61.

Once again on November 5, 1998, Petitioner's counsel wrote to CMS and protested that it should not have been required to be resurveyed. "Upon lifting of the moratorium in January 1998, HCFA announced a process for compliance with new requirements, duly imposed on existing HHAs. We submit that, under the process allowed for then existing HHAs, Mariner complied with those new rules, such as surety bonding. Thus, for those new rules which were duly issued by HCFA, Mariner is in full compliance." Petitioner asserted that, "HCFA's application of the 10 patient rule, retroactively, to impose on [Petitioner] the duty to undergo yet another state survey is legally indefensible." P. Ex. 62.

The State agency did the resurvey of Petitioner on October 8, 1998. On December 10, 1998, CMS advised Petitioner that it had met all requirements and was certified as a Medicare provider as of October 8, 1998, the date of its resurvey rather than September 10, 1997, the date of Petitioner's original survey. P. Ex. 63.

On February 9, 1999, CMS's regional administrator responded to Petitioner's November 5, 1998 letter. This time CMS focused on the fact that Petitioner's original application had not reached CMS until after January 1, 1998 and, therefore, the new requirements were applied, and another survey was necessary to establish compliance. P. Ex. 64. CMS seemed to miss the point that Petitioner was not complaining about the new requirements for a surety bond and proof of capitalization. Instead, Petitioner objected to what it claimed to be a retroactive application of the "10 patient rule." Petitioner argues that had CMS not issued the "10 patient rule," CMS would not have determined Petitioner must have another survey, and therefore, would have found Petitioner's participation effective date to be September 10, 1997, when Petitioner was last surveyed and found in compliance with all federal requirements.

Petitioner filed a request for hearing with the Departmental Appeals Board (DAB) seeking review of CMS's September 8, 1998 letter denying Petitioner's request for a certification date of September 10, 1997. This request for hearing was docketed as C-99-068. When Petitioner received CMS's letter dated December 10, 1998, with CMS's determination that Petitioner's correct certification date was October 8, 1998, Petitioner filed another request for hearing. This hearing request was docketed as C-99-234. Petitioner also sought review of CMS's reconsideration letter dated February 9, 1999, in which CMS reaffirmed October 8, 1998 as Petitioner's effective certification date. This case was docketed as C-99-285.

These docketed cases were assigned to several administrative law judges (ALJs) before being reassigned to me for hearing and decision. The cases were originally assigned to ALJ Jill Clifton. In her ruling of January 18, 2001, ALJ Clifton dismissed Docket number C-99-234 on the grounds that CMS's December 10, 1998 letter was not subject to appeal because it was superseded by CMS's reconsideration letter of February 9, 1999. As part of her ruling, ALJ Clifton also denied Petitioner's motion for remand of the remaining dockets and she reserved ruling on Petitioner's arguments regarding the "10 patient rule."

The parties indicated they intended to file dispositive motions in this case. On May 1, 2002, CMS filed a motion for summary affirmance (CMS Br.). On July 8, 2002, Petitioner filed a motion in support of an earlier effective date (P. Br.). On August 9, 2002, CMS filed a reply brief (CMS R. Br.).

Notwithstanding the various docket numbers and ALJ Clifton's interlocutory ruling, the essential issue in this matter has remained the same; that is, the proper certification date for Petitioner's participation contract with Medicare for its home health services. I have carefully reviewed the applicable law, the parties' briefs, and the exhibits in the record and have determined that CMS correctly determined the effective date of Petitioner's Medicare participation agreement to be October 8, 1998.

III. THE PARTIES' ARGUMENTS

A. Petitioner's Arguments

Petitioner's essential argument is that because Petitioner was surveyed on September 10, 1997 and was found to be in compliance with all conditions of participation then in effect for home health agencies, and because the regulations provide that CMS's approval for Medicare participation is retroactive to the date the survey is completed if the provider met all applicable federal requirements, the proper effective date for Petitioner's provider agreement should be September 10, 1997, not October 8, 1998. Petitioner makes the following arguments in support of its claim:

• Under the Medicare rules, the dates that CMS actually receives, reviews, and approves an application do not affect the deemed effective date of the participation agreement. P. Br. at 1.
  
• The date that CMS actually receives an application should not affect the regulations that apply to the application. ⁽²⁾
• CMS, as a government agency, is required to follow its own rules and 42 C.F.R. § 489.13 says that a provider's participation is retroactive to the completion date of a successful on-site survey. Nothing in the Balanced Budget Act of 1997 or the implementing regulations changed 42 C.F.R. § 489.13. The law in effect when CMS received the application should only affect how CMS reviewed the application, not the retroactivity of the effective date as stated in 42 C.F.R. § 489.13(b).
• Because Petitioner was surveyed on September 10, 1997, and found to be in compliance with all requirements on that date, Petitioner had a vested right under 42 C.F.R. § 489.13(b) to participate in Medicare as of that date. When the new regulations were applied to Petitioner, its vested interest was disturbed. P. Br. at 14.
• CMS, in a program issuance transmittal notice on January 15, 1998, announced an end to the moratorium and stated new requirements for State survey and certification, including a requirement that before an initial survey is conducted, the home health agency must have provided care to a minimum of 10 patients. Applying the "10 patient rule" to Petitioner adversely affected Petitioner's property interests.
• The "10 patient rule" is legislative and should have been subject to notice and comment rule-making, was arbitrary and capricious, and was a inappropriate retroactive application and was, thus, an invalid exercise of agency authority.

B. CMS's Arguments

CMS's essential argument is that when it determined Petitioner's application required a new on-site survey, CMS was merely applying to a pending application the laws in effect at the time CMS was called upon to decide the question of the prospective provider's eligibility. CMS's underlying arguments are as follows:

•Although the new requirements for certification of home health agencies became effective after Petitioner's first on-site survey, the new requirements were in effect at the time Petitioner's application was presented to CMS by the State agency in January of 1998.

•The on-site survey on September 10, 1997, like other surveys, was performed by the State agency. State agency findings are only recommendations to CMS. As recommendations, the State agency's findings confer no rights or interests in the prospective provider.

•When Petitioner's application for eligibility to participate in Medicare was presented to CMS for decision in January 1998, CMS properly applied the rules in effect at that time.

•The moratorium on enrolling new home health agencies which continued until January 15, 1998, had no relevance to Petitioner's application. The moratorium was not the basis for CMS to delay processing of Petitioner's application. CMS continued to process applications for home health agencies who had passed their initial surveys prior to the moratorium. Petitioner's application was not presented to CMS until after January 1, 1998, thus requiring CMS to consider whether Petitioner met the new requirements that were effective January 1, 1998.

•Prior to CMS's December 10, 1998 decision approving Petitioner's application, Petitioner had no vested interest in Medicare participation.

•Delays and errors attributable to either the State agency or CMS cannot be the basis for establishing a participation effective date earlier than the date CMS has actually determined eligibility.

•ALJs do not have jurisdiction to consider a challenge to regulations on the grounds they were not properly promulgated under the Administrative Procedures Act, 5 U.S.C. § 553.

Until its reply brief, CMS did not address specifically Petitioner's opposition to CMS's application of the "10 patient rule" to Petitioner, which, required Petitioner to have a new on-site survey. ⁽³⁾ CMS R. Br. at 5. CMS's arguments with respect to the "10 patient rule" are as follows:

•CMS issued the "10 patient rule" as a "policy" at the time the new regulations became effective. The new policy was to provide further guidance on what was meant by the requirement that a home health agency be operating and treating patients before it could obtain its initial survey. The "10 patient rule" qualifies as a valid interpretive rule exempt from the notice and rule-making requirements of the APA. Moreover, the "10 patient rule" was not retroactively applied because it was never used to invalidate CMS's determination of eligibility made before the policy was promulgated.

IV. CONCLUSIONS OF LAW

I set out conclusions of law below in separately numbered headings. I explain my analysis of the application of the law below each numbered heading. The facts in this case are not in dispute. The parties have agreed to all facts but one. The parties have not agreed to the date when CMS received, or should be deemed to have received, Petitioner's application from the State agency. I find, as I explain below in Section IV. B, that when CMS received Petitioner's application is not a relevant material fact.

A. Summary disposition is appropriate in this case.

Summary disposition is appropriate where there are no disputed issues of material fact and the only questions that must be decided involve the 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. Both parties in this case filed motions for summary affirmance. After a careful review of the briefs and exhibits in this case, I find that there is only one contested fact, and that is whether CMS received Petitioner's application prior to January 1, 1998. For purposes of this decision, I have assumed that CMS did receive the application some time between December 17, 1997 and January 1, 1998, as alleged by Petitioner. This is not a material fact because, as I explain below, even if CMS received Petitioner's application prior to January 1, 1998, my decision would not change. As there are no other disputed facts and the only questions involve the application of law to the facts, summary disposition is appropriate.

B. That fact that Petitioner filed its application prior to January 1, 1998, does not require CMS to apply the substantive regulations in force prior to January 1, 1998.

At least one prior case is closely on point in its holding that the mere filing of an application with an agency does not entitle the applicant to the operation of the substantive regulations then in force at the time of the filing date. Pine Tree Medical Assoc. v. Secretary of Health and Human Serv., 127 F.3rd 118 (1^st Cir. 1997). The Court stated,". . . . the mere filing of an application is not the kind of completed transaction in which a party could fairly expect stability of the relevant laws as of the transaction date." Id. at 15. The essential question is whether CMS followed, and applied to an application, the rules and regulations in effect at the time it was considering the application. It is, in fact, incumbent on CMS, who is charged with protecting Medicare beneficiaries, to apply those rules and regulations that have been deemed by statute or regulation to be relevant, at the time it is considering a prospective provider's application.

C. The filing of an application does not afford the applicant any right or interest in Medicare participation prior to CMS's approval of the application.

A number of other cases have discussed whether an applicant has any particular right or vested interest in Medicare participation prior to the time that CMS has determined the applicant has met all federal requirements for participation. See, e.g., Options Center of St. Petersburg, DAB CR712 (2000). In a different context, but instructive nonetheless, an appellate panel of the DAB, in Big Bend Hospital Corp., DAB No. 1814 (2002), considered the effective date for Medicare participation for a hospital. In the Big Bend case, the hospital had applied for a provider agreement and was surveyed by the applicable State agency. After a revisit survey, the State agency recommended certification as of that date. Thereafter, CMS decided to conduct its own survey. The DAB affirmed on appeal the holding that CMS is not required by law to accept the results of a State agency survey and recommendation. Id. at 7. The DAB saw no basis in the statute, regulations, or State operations manual provisions that CMS was required to make a determination based on a particular State agency survey.

It does not follow that CMS may not take independent measures to verify compliance where the state survey recommendation does not include evidence satisfactory to CMS of a provider's compliance with participation requirements, since CMS retains the ultimate responsibility to accept only providers who have satisfactorily assured CMS of their substantial compliance.

Big Bend Hospital Corp., DAB No. 1814 (2002).

The DAB also pointed out that the regulations explicitly provide that the state agency makes recommendations on the basis of which CMS will determine whether a provider is eligible to participate. The DAB further stated, ". . . . it is clear that 'acceptance of a provider as a participant' requires an independent action by CMS." Id. at 10. I find, therefore, that Petitioner in this matter had no rights or interests in the Medicare program until CMS acted independently to approve Petitioner's application for provider status.

D. The regulation at 42 C.F.R. § 489.13 does not provide a substantive right to a provider with respect to CMS's consideration of its application.

42 C.F.R. section 489.13(b) provides that for those prospective providers who are subject to survey and certification by CMS or the State survey agency and about whom "all Federal requirements are met on the date of survey," a participation agreement is effective "on the date the survey . . . . is completed, if on that date the provider or supplier meets all applicable federal requirements as set forth in this chapter." For those situations where all federal requirements are not met on the date of the survey, 42 C.F.R. § 489.13 (c)(2) applies. This section provides that the effective date of the Medicare participation agreement is the earlier of the following:

(i) The date on which the provider or supplier meets all requirements;

(ii) The date on which a provider or supplier is found to meet all conditions of participation or coverage, but has lower level deficiencies, and CMS or the State survey agency receives an acceptable plan of correction for the lower level deficiencies, or an approvable waiver request, or, both.

Petitioner's situation is an anomaly. The regulations are silent as to a prospective provider that met federal requirements when it was first surveyed but did not meet federal requirements at the time CMS was considering its application. I must look at other statutory and regulatory sections to analyze how Petitioner's particular situation should be viewed.

Congress, in section 1891(c) of the Act, delegated to the Secretary of Health and Human Services (Secretary) the duty and responsibility,"to assure that the conditions of participation and requirements specified in or pursuant to section 1861(o) and subsection (a) of this section and the enforcement of such conditions and requirements are adequate to protect the health and safety of individuals under the care of a home health agency and to promote the effective and efficient use of public moneys." ⁽⁴⁾

Based on statute, the Secretary has the duty and responsibility for the certification of home health agencies, and the fundamental bases the Secretary (and CMS) must consider are the health and safety of individuals under the care of a home health agency and the effective and efficient use of tax funds.

Given the Secretary's clear mandate to protect beneficiaries, I find CMS, once it had officially decided as policy that a home health agency must have at least 10 patients to perform an adequate initial on-site survey, was obligated to apply that policy to Petitioner's application. Regardless of the State agency recommendation to certify Petitioner after the State agency had surveyed Petitioner, CMS was free to decide that Petitioner's initial survey had been based on too few patients to adequately judge whether Petitioner met all federal requirements for participation at the time of the survey.

The federal requirements for home health agencies are set forth in the statute, regulations, and interpretive guidelines. 42 C.F.R. section 489.13 describes when a provider becomes a provider, not what it must do to meet federal requirements. In applying 42 C.F.R. section 489.13 in this case, CMS could have treated Petitioner's application as either an entirely new application under 42 C.F.R. § 489.13(b) or as an application of a provider that had deficiencies at the time of the initial survey under § 489.13(c). Unfortunately for Petitioner, in either case, a new survey was required. Because of the actual deficiency found by CMS, that is, a sample base too small for an adequate survey, the only way to cure the deficiency was to require a new survey.

That CMS might require a home health agency to have a greater number of patients prior to a survey should have not been a surprise to Petitioner. When the President announced the moratorium, as reported in a Commerce Clearing House (a commercial legal reporter) newsletter, the announcement included the information that the Department of Health and Human Services would have six months to develop anti-fraud regulations that would include the following provisions:

•requiring home health agencies to post a minimum surety bond of $50,000 before they can enroll or re-enroll in Medicare;

•requiring a minimum number of patients prior to seeking Medicare enrollment in order to ensure that an agency has adequate home health experience; and

•targeting home health agencies that are more likely to abuse Medicare.

P. Ex. 23.

This indicates the "10 patient rule" was not developed by CMS in secret. Prospective home health agencies, including Petitioner, were on notice that there would likely be some change in the requirements for an initial survey. The Secretary's press release of September 15, 1997, announced that,". . . . HCFA will require agencies to serve a minimum number of patients prior to seeking Medicare certification. Serving private-pay patients will demonstrate experience and expertise in the field before an agency is allowed to serve Medicare and Medicaid's vulnerable populations." P. Ex. 31.

A home health agency certainly has the right to a hearing on whether it met federal requirements for participation on a date prior to the effective date set by CMS. 42 C.F.R. § 498.3(b)(15). That review, however, would normally contemplate looking into whether a finding of deficiencies at the time of the survey was incorrect. In this situation, however, at the time CMS reviewed its application, Petitioner no longer met all federal requirements. At the time of the September 10, 1997 State agency survey, Petitioner did not have 10 patients to survey. CMS could, after determining that two patients for a survey were insufficient to resolve an applicant's fitness for participation, require another survey.

As discussed above, CMS has the authority to accept or not accept a State agency's recommendation. An ALJ can later review the facts regarding compliance and make an independent decision as to whether the applicant met all federal requirements or whether deficiencies found in the survey were erroneous, but I do not find that an ALJ can question CMS's authority to require an applicant to meet all currently stated federal requirements. ⁽⁵⁾ To say this in another way, a participation effective date "may be based on a State certification survey only if the provider demonstrated that it met the necessary requirements in a way that gave CMS satisfactory assurance of compliance." Big Bend at 21. Obviously, by the time Petitioner's application was before CMS, CMS had determined that two patients for a survey were too few to give CMS satisfactory assurance of compliance.

E. I do not have the authority to decide whether the "10 patient rule" is an interpretive or legislative rule, or whether CMS's implementation of the "10 patient rule" violates the Administrative Procedures Act.

Petitioner has objected to CMS's requirement for a new survey because the "10 patient rule" was not subject to notice and comment rule-making. ⁽⁶⁾ Under a long line of cases, ALJs at the DAB, after consideration of the regulations setting forth the ALJ's jurisdiction, have found that ALJs do not have the authority to decide whether CMS's implementation of a rule violates the Administrative Procedures Act, 5 U.S.C. § 553; Vermillion Behavioral Health Center, DAB CR751 (2001), citing Lauderhill Community Mental Health Center, DAB CR652 (2000); Life Directions Mental Health PHP, DAB CR750 (2001). My authority is specified at 42 C.F.R. §§ 498.3 and 498.5. I may decide whether CMS applied the facts of a case correctly to applicable regulations or official interpretations of law. I may also decide whether CMS's interpretation of a regulation is correct. However, I lack the authority to decide whether CMS or the Secretary failed to publish a rule in violation of the APA. Lauderhill Community Mental Health Center, DAB CR652 (2000). ⁽⁷⁾

F. CMS did not apply the "10 patient rule" retroactively or selectively.

In Options Center of St. Petersburg, DAB CR712 (2000), the ALJ noted the axiom that law applied with retroactive effect, especially without explicit retroactive intent expressed in the text, is generally disfavored. The test of whether a rule is being applied retroactively is whether the rule impaired rights that the applicant possessed when it acted, or increased the applicant's liability for past conduct, or imposed new duties with respect to transactions already completed. As I explained above, Petitioner did not have a right or vested interest that was disturbed because its application was only a pending application at all times relevant to this case. Therefore, the "10 patient rule" was not applied retroactively.

Petitioner has also argued that other home health agencies who were impacted by the moratorium and who had satisfactory surveys were given provider agreements based on the provider's initial survey. Petitioner suggests that CMS disparately treated it. I carefully reviewed the home health agency applications to which Petitioner referred to determine how Petitioner's case might have differed or if the State agency had selectively discriminated against Petitioner. P. Exs. 53-58.

With respect to the Florida home health agencies referenced by Petitioner, all had surveys done prior to Petitioner's. All had been approved on December 22, 1997. P. Exs. 53-58. Thus, it appears CMS was attempting to consider these provider applicants according to when they had been surveyed. Moreover, it appears CMS was attempting to issue these agreements prior to the time the new regulations were to go into effect.

I also note that, although the State agency returned Petitioner's application on November 19, 1997 because it contained an incorrect address, Petitioner did not resubmit the corrected application until December 12, 1997, causing, in the words of a State agency employee, another month's delay. It is speculation, of course, but one wonders if Petitioner's first application had been correct, whether CMS would have included it in the group of agencies whose provider agreements were issued on December 22, 1997. Timing occasionally results in consequences. In Petitioner's case, it resulted in CMS requiring a new survey.

With respect to the examples Petitioner submitted involving State agencies other than Florida, I found no examples where the CMS decision was issued after January 1, 1998 for a survey done prior to January 1, 1998. P. Exs. 65-80. None of Petitioner's examples manifest selective application of the new home health agency regulations by CMS.

Although Petitioner fell off the list of the moratorium's grand fathered applicants at the end of 1997, it does not follow that CMS either retroactively or selectively applied the new requirements. Even if it were not Petitioner's own fault that its application reached CMS too late, and one found there was some unfairness in what happened to Petitioner, I do not have authority to redress that particular unfairness. Options Center of St. Petersburg, DAB CR712 (2000).

Moreover, if there was any unfairness in the way in which CMS evaluated Petitioner's application, I find it was not in requiring a new survey due to the "10 patient rule," but rather because the State agency took so long in scheduling another survey. More than six months elapsed between the time in March 1998 when CMS determined another survey would be required and October 1998 when the survey was completed. If in March 1998 or soon thereafter, Petitioner did have 10 patients for purposes of a survey, Petitioner may have been in a position to show it complied with all federal requirements. I cannot envision, however, how Petitioner could have factually shown its compliance without another survey. The survey in this situation seems the only way CMS could have assured itself that Petitioner was compliant with all federal requirements.

Although there has been some DAB disapproval of the broad scope of authority that CMS accords itself in dealing with pending applications (see Conclusion of Law E, above) the case law I reviewed holds that even when the State agency or CMS was found to have contributed to the delay in a certification process, an ALJ does not have the authority to give an effective date to a Medicare participation agreement prior to a successful survey during which the prospective provider was found in compliance with all applicable federal requirements. This is true even if the State survey agency or CMS was dilatory in completing the survey. Occupational Health Clinic, Inc., DAB CR874 (2002); Therapeutic Rehabilitation Centers, Inc. DAB CR531 (1998); Renal Services Group of ElCentro, DAB CR482 (1997); GranCare Home Health Service & Hospice, DAB CR464 (1997).

V. CONCLUSION

Anne E. Blair

Administrative Law Judge

1. The Health Care Financing Administration's or HCFA's name was changed to Centers for Medicare & Medicaid Services. I have used primarily the acronym of CMS in this decision. There are quotations or other appropriate instances when I also have used the acronym of HCFA.

2. As explained more fully below, I believe that neither the uncertainty about the date Petitioner's application was transmitted from the State agency to CMS nor the date when CMS actually received the application is a material factual issue in this case.

3. CMS also argues that Petitioner does not have standing to address the "10 patient rule" because Petitioner was not adversely affected by the rule. This is simply disingenuous. CMS claims it returned Petitioner's application to the State agency to address the new surety bond and capitalization requirements, but the exhibits show that CMS required a new on-site survey due to the "10 patient rule." It was the requirement for a new survey that prevented Petitioner from possibly meeting all federal requirements earlier, and using the September 10, 1997 survey date as the applicable effective date for participation.

4. Section 1861(o) of the Act contains the definition of a home health agency and lists the eight major requirements for home health agencies.

5. It appears the DAB has questioned whether CMS has defined too broadly the scope of its discretion in setting the effective date of a provider agreement. See, Harriet Cohn Center, DAB No. 1817 (2002). The DAB stated in Harriet Cohn Center at page 13, ". . . . the effective date provision for CMHCs - like the effective date provisions for other providers - is properly read as specifying how CMS will make an initial determination on an effective date rather than as specifying what that date will be irrespective of any findings on appeal." This case is distinguishable because no findings on appeal herein could have eliminated CMS's need to have Petitioner surveyed a second time.

6. I note that neither the new surety bond nor capitalization requirements, to which Petitioner did not object, were subject to invited public comment on the proposed rules. The Secretary found good cause that a notice-and-comment procedure was impracticable and unnecessary because the delay in promulgating these rules would have been contrary to the public interest. 63 Fed. Reg. 291 (1998) .

7. While my opinion on this issue is of little consequence, I will note that I believe that CMS's "10 patient rule" was an interpretive ruling and not a legislative ruling and, therefore, not subject to notice and comment rule-making requirements under the APA. federal courts have wrestled with the question of whether an agency rule is an interpretation not requiring comment and rule-making or a legislative action that does require comment and rule-making. The D.C. Circuit has concluded that, "[determining whether a given agency action] is interpretive or legislative is an extraordinarily case-specific endeavor." American Hosp. Assn. v. Bowen, 834 F.2d 1037 (D.C. Cir. 1987). One acceptable method for deciding is to consider how the agency views the rule. Another approach is to consider the rule's regulatory history - whether the rule amends an earlier legislative or interpretive rule. An interpretive rule changing an agency's interpretation of a statute is not magically transformed into a legislative rule. White v. Shalala, 7 F.3rd 296 (2d Cir. 1993). Under either of these approaches the "10 patient rule" is interpretive.