Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: New York State Department of Social Services
DATE: March 17, 1992
Docket No. 91-48
Decision No. 1313
DECISION
The New York State Department of Social Services (State) appealed
a
determination by the Health Care Financing Administration
(HCFA)
disallowing $17,762,539 in federal financial participation (FFP)
claimed
under Title XIX of the Social Security Act (Act). New York
claimed
these funds for inpatient services furnished from October 1,
1986
through September 30, 1989 by New York Hospital-Cornell Medical
Center
in White Plains, New York and by St. Vincent's Hospital and
Medical
Center in Harrison, New York. HCFA found that the hospitals
were
"institutions for mental diseases" (IMDs) and, therefore, that FFP
was
not available under the Act for services provided by the hospitals
to
individuals between the ages of 22 and 65.
Although each facility was certified as a "psychiatric hospital" by
HCFA
and the State acknowledged that psychiatric hospitals are IMDs,
the
State argued that in fact these facilities were psychiatric units
of
general acute care hospitals located in New York City and therefore
were
not free-standing IMDs. The State contended that each facility
was
licensed by the State as a psychiatric unit of a general acute
care
hospital, and that the requirements of HCFA's State Operations
Manual
for certification of multiple components as a single hospital were
met.
We conclude that this disallowance should be upheld in full. Based
on
the record, we find that the administrators of the facilities, as
well
as the State, consistently treated the facilities (both before
and
during the disallowance period) as free-standing psychiatric
hospitals.
This treatment has great weight in determining the overall
character of
the facilities, but, in any event, the State did not establish
that this
treatment is inconsistent either with the State licensure or with
the
State Operations Manual. Thus, HCFA correctly concluded that
the
facilities were IMDs.
Below, we discuss the legal and factual background of the case and
then
analyze the State's arguments.
Legal Background
A. Exclusion of Medicaid reimbursement for
services provided in an
IMD
Title XIX of the Act establishes a cooperative federal-state program
known
as "Medicaid" to enable states to furnish "medical assistance" to
eligible
individuals. Section 1901 of the Act. The definition of
"medical
assistance" codified at section 1905(a) specifically excludes
payments for
services to "any individual who has not attained 65 years
of age and who is a
patient in an institution for mental diseases."
Language following section
1905(a)(24)(B). Moreover, inpatient hospital
services are covered by
Medicaid only if not provided in an IMD.
Section 1905(a)(1). The IMD
exclusion reflects Congress' conclusion
that the federal government ought not
to assume responsibility through
the Medicaid program for the long-term care
of institutionalized
patients, who have traditionally been wards of the
states. S. Rep. No.
404, 89th Cong., 1st Sess., pt. 1, at 144-47
(1965). However, sections
1905(a)(14) and 1905(a)(16) provide for
exceptions to the exclusion. If
states meet certain conditions, they
may cover IMD services for
individuals 65 years of age or over and inpatient
psychiatric hospital
services for individuals under age 21. 1/
Therefore, a State is not
entitled to FFP in inpatient hospital services
provided in an IMD to
Medicaid patients between the ages of 22 and 65.
New York regulations
reflect the IMD exclusion. N.Y. Comp. Codes R.
& Regs. tit. 14, .
505.4(d)(2).
Throughout the disallowance period, HCFA regulations implementing the
IMD
exclusion have defined an IMD as an institution whose "overall
character [is]
that of a facility established and maintained primarily
for the care and
treatment of individuals with mental diseases, whether
or not it is licensed
as such." 42 C.F.R. . 435.1009 (emphasis added).
2/ In 1988, a
parallel definition was added to the Act. Section
1905(i) defines
"institution for mental disease" as "a hospital, nursing
facility, or other
institution of more than 16 beds, that is primarily
engaged in providing
diagnosis, treatment, or care of persons with
mental diseases . . . ."
Additionally, HCFA has issued guidelines to
states for determining whether a
facility is an IMD, most recently in
the State Medicaid Manual, section 4390,
issued in September 1986.
In Connecticut Dept. of Income Maintenance v. Heckler, 471 U.S.
524
(1985), the Supreme Court addressed the question of what type
of
facility can be considered an IMD. In that case, Connecticut
argued
that an IMD was limited to traditional state "mental
hospitals."
However, the Court upheld the Secretary's broad definition of IMD
under
which a private facility such as an intermediate care facility may be
an
IMD. Id. at 529-30. In discussing section 1905(a)(1) of the
Act, the
Court specifically noted that a hospital may be an IMD. Id. at
529,
536.
B. Certification of facilities to participate in Medicaid
To qualify for reimbursement under Medicaid, a provider of services
must
be inspected by the proper state survey agency. In the case
of
hospitals, the state survey agency must be the agency responsible
for
licensing such institutions under state law. Section 1902(a)(33)(B)
of
the Act. Generally the same survey agency performs the surveys for
both
Medicare and Medicaid. Section 1902(a)(9)(A) of the Act; 42 C.F.R.
.
431.610(e). If the facility is found to meet the standard for its
class
of providers, the survey agency certifies this to the single
state
agency (responsible for administering the Medicaid program). If
the
facility will participate only in Medicaid, the single state agency
may
then enter into a Medicaid provider agreement with the
certified
facility without seeking approval from HCFA. In contrast, if
a facility
is seeking certification for Medicare purposes, the survey
agency's
certification is forwarded to HCFA as a recommendation which HCFA
must
review and approve before the facility may be reimbursed under
either
Medicare or Medicaid.
To be certified as Medicaid providers, hospitals must meet the
standards
for Medicare participation. The Medicare regulations contain
separate
certification requirements for hospitals and psychiatric
hospitals. To
be certified as a psychiatric hospital, a facility must
meet enhanced
treatment and recordkeeping standards. 42 C.F.R. ..
482.60-482.62.
Additionally, a facility certified as a psychiatric hospital
is
reimbursed at a per diem rate calculated based on the
facility's
reasonable costs, whereas a general hospital is usually
reimbursed
prospectively on a per-case basis. 42 C.F.R. .. 412.23, .25.
3/
HCFA's State Operations Manual establishes the following criteria
for
certifying multiple components of a hospital as a single hospital:
A. Ownership.--All components included
are subject to the
control and direction of one common owner . . .
responsible for
the operational decisions of the entire hospital
enterprise.
B. Chief Medical Officer.--There is a
single Chief Medical
Officer who reports directly to the governing body
and who is
responsible for all medical staff activities of all
components.
C. Totally Integrated Medical Staff.--. .
.All medical
staff members have privileges at all components. . . .
All
medical staff committees are responsible for their
respective
areas of responsibility in all components of the hospital. .
. .
D. Chief Executive Officer.--There is a
single Chief
Executive Officer through whom all administrative
authority
flows and who exercises control and surveillance over
all
administrative activities of all components. . . .
State Operations Manual, section 2024.
C. Licensing of psychiatric facilities by New York State
New York licenses hospitals pursuant to Article 28 of its Public
Health
Law. The statute excludes from the definition of hospital--
an institution, sanitarium or other facility engaged
principally
in providing services for the prevention, diagnosis or
treatment
of mental disability and which is subject to the powers
of
visitation, examination and investigation of the department
of
mental hygiene except for those distinct parts of such
a
facility which provide hospital service.
N.Y. Pub. Health Law . 2801 (McKinney 1985). Section 2805 of the
Public
Health Law provides that no hospital shall be operated unless
it
possesses a valid operating certificate issued by the New York
State
Department of Health.
Article 31 of the New York Mental Hygiene Law governs the operation
of
facilities for the care and treatment of persons with
mental
disabilities. The New York State Office of Mental Health
issues
operating certificates to such facilities. N.Y. Mental Hyg. Law
. 31.02
(McKinney 1988); see also State Brief at 11. Section 31.02
provides, in
pertinent part:
. . . no provider of services shall engage in any of
the
following activities without an operating certificate issued
by
the commissioner pursuant to this article:
1. operation of a residential facility or
institution,
including a community residence, for the care, custody,
or
treatment of the mentally disabled; . . . .
2. operation of any part of a general hospital for the
purpose
of providing residential or non-residential services for
the
mentally disabled.
Factual Background
In this section, we provide background necessary to understanding
the
history of the facilities at issue here (located in Westchester
County)
and their relationships with general hospitals located in New York
City.
The State argued that the Westchester facilities were psychiatric
units
of the New York hospitals.
A. The St. Vincent's Hospitals
In 1961, St. Vincent's Hospital of Westchester County, was
consolidated
with and into the St. Vincent's Hospital of the City of New
York. State
Exhibit (Ex.) 4. Later, the entity's name was changed
to St. Vincent's
Hospital and Medical Center of New York (St.
Vincent's). Id. The
Westchester County facility continued in
existence as St. Vincent's
Hospital and Medical Center of New York,
Westchester Branch. According
to an affidavit signed by J. Rock Tonkel,
President and Chief Executive
Officer of St. Vincent's, the New York City and
Westchester branches of
St. Vincent's operate under common ownership, with a
single Chief
Medical Officer, a single Chief Executive Officer, and an
integrated
medical staff. Id. There is a single Board of
Trustees, which is
responsible for the general management of the property and
affairs of
both branches. Id.
By application dated February 14, 1966, St. Vincent's Hospital and
Medical
Center of New York, Westchester Branch, located in Harrison, New
York (St.
Vincent's-Westchester), requested to be certified as eligible
to participate
in the Medicare program. HCFA Ex. 3. Item VII of the
application
form requests the "Type of Hospital." In item VII, a
typewritten X next
to the description "General-Short Term" appears to
have been stricken out; a
handwritten X is marked next to the
description "Psychiatric." The
application indicates that the hospital
is licensed by the New York State
Department of Mental Hygiene. The
hospital requests certification for
200 beds. The application was
signed by the hospital's administrator,
Sister Regina Helen. Id. The
state survey agency 4/ recommended
that St. Vincent's-Westchester be
certified as a psychiatric hospital and
HCFA's predecessor agency, the
Bureau of Health Insurance, approved
certification on June 22, 1966.
HCFA Ex. 4. The hospital executed a
provider agreement on June 21, 1966
and was assigned provider number
33-4007. HCFA Exs. 4, 5.
After 1966, and throughout the disallowance period,
St.
Vincent's-Westchester continued to describe itself as a
psychiatric
hospital when it completed the forms requesting continued
certification
in the Medicare and Medicaid programs. HCFA Exs. 6,
9. The state
survey agency continued to recommend recertification and
HCFA approved
the hospital's recertification. These recertifications
were for 103
beds, rather than the original 200. HCFA Exs. 7, 10.
The hospital was
surveyed for compliance with the two special conditions of
participation
for psychiatric hospitals. HCFA Ex. 8; State Ex. 1, App.
at 15.
Meanwhile, St. Vincent's Hospital and Medical Center of New York in
New
York City (St. Vincent's-NYC) first applied to be certified as
a
Medicare provider on February 18, 1966. In its application,
St.
Vincent's-NYC responded to item VII, "Type of Hospital" by
marking
"General-Short Term." The application states that the hospital
is
licensed by the New York State Department of Health. The
hospital
requested to be certified for 780 beds. The application also
identified
an additional 200 beds at the Westchester Branch, with a
parenthetical
note "filing separately." The application was signed by
Sister Anthony
Marie, who is identified as the hospital's
administrator. HCFA Ex. 12.
The state survey agency recommended that
St. Vincent's-NYC be certified
as a general hospital. HCFA Ex.
13. The Bureau of Health Insurance
approved certification on June 25,
1966. Id. The hospital executed a
provider agreement on May 26,
1966 and was assigned provider number
33-0290. HCFA Exs. 13, 14.
Thereafter and throughout the disallowance
period, the hospital periodically
requested, the state survey agency
recommended, and HCFA approved
recertification of St. Vincent's-NYC as a
general acute care hospital.
HCFA Exs. 15, 16.
In a request for certification dated March 4, 1991, St.
Vincent's
requested that the New York City and Westchester facilities be
certified
to participate in the Medicare program as a single provider.
HCFA Ex.
17. HCFA approved the request by letter dated June 24,
1991. HCFA Ex.
18. At the time of approval, HCFA also retired the
separate provider
number of St. Vincent's-Westchester. Id. By
letter dated September 4,
1991, Mr. Tonkel, St. Vincent's President,
requested that the
certification of the facilities as a single provider
commence as of
January 1, 1992. HCFA Ex. 19. In a letter dated
October 1, 1991, HCFA
replied that the separate provider number for St.
Vincent's-Westchester
would be reinstated, and that St. Vincent's would have
to reapply at the
time it wished to become certified as a single
provider. HCFA Ex. 20.
Throughout the disallowance period and currently, the New York
State
Department of Health issued separate licenses and operating
certificates
to St. Vincent's-Westchester and to St. Vincent's-NYC.
State Exs. 4, 6,
7. The licenses for both facilities were issued
pursuant to Article 28
of the Public Health Law. State Ex. 4. The
New York State Office of
Mental Health also separately licensed St.
Vincent's-Westchester and the
psychiatric beds at St. Vincent's-NYC.
State Exs. 4, 6. The Office of
Mental Health licenses were issued
pursuant to Article 31 of the Mental
Hygiene Law. State Ex. 6.
Prior to 1987, the Joint Commission on
Accreditation of Health Care
Organizations (JCAHO) separately surveyed
and accredited St.
Vincent's-Westchester and St. Vincent's-NYC. State
Ex. 1 at 8.
Since 1987, JCAHO has jointly surveyed the facilities.
State Ex. 4.
In addition to having separate licenses, operating certificates, and,
for
a portion of the disallowance period, separate accreditation, the
facilities
also have separate provider numbers for use in the State's
Medicaid
Management Information System (MMIS). State Ex. 7. Moreover,
St.
Vincent's-Westchester and the psychiatric unit at St. Vincent's-NYC
submit
separate cost reports to the Medicare and Medicaid programs and
are
reimbursed using different per diem rates. Id.
B. The New York Hospital-Cornell Medical Center Facilities
The New York Hospital-Cornell Medical Center (New York Hospital)
consists
of several components, including general hospital facilities, a
burn center,
and the Payne Whitney Clinic, all of which are located in
New York City, and
a psychiatric hospital facility located in
Westchester County. See HCFA
Ex. 35. In an affidavit, George A.
Vecchione, Executive Vice President,
Director, and Chief Operating
Officer of the New York Hospital, states that
the hospital's New York
City and Westchester Divisions operate as a single,
integrated medical
center. State Ex. 3. According to Mr.
Vecchione, the Westchester
facility has always been part of New York
Hospital. Id. He also states
that the various divisions have a common
owner, a single Chief Executive
Officer, a single Medical Director, and an
integrated medical staff.
Id.
The New York Hospital-Cornell Medical Center, Westchester
Division,
located in White Plains (New York Hospital-Westchester), requested
to be
certified as a Medicare provider by application dated March 17,
1966.
HCFA Ex. 21. In that application, the hospital indicated that it
was
licensed by the Department of Mental Hygiene and identified itself as
a
psychiatric hospital. The application requested certification for
350
beds. The application was signed by Francis J. Hamilton, M.D., who
was
identified as the hospital's medical director. The state survey
agency
recommended that the facility be certified as a psychiatric
hospital.
HCFA Ex. 22. The Bureau of Health Insurance approved
certification on
July 11, 1966. Id. The hospital executed a
provider agreement on June
20, 1966 and was assigned provider number
33-4006. HCFA Exs. 22, 23.
Periodically thereafter, and throughout the disallowance period,
the
hospital requested, the state survey agency recommended, and
HCFA
approved recertification of New York Hospital-Westchester as
a
psychiatric hospital. HCFA Exs. 24-27. The hospital was
surveyed for
compliance with the two special conditions of participation
for
psychiatric hospitals. State Ex. 1, App. at 15.
The New York Hospital-Cornell Medical Center, located in New York
City
(New York Hospital-NYC), requested certification as a Medicare
provider
by application dated February 22, 1966. HCFA Ex. 36. The
application
stated that the hospital was licensed by the Department of Health
and
indicates that it was a general short-term hospital. The
application
requested certification for 886 beds. The application was
signed by
Henry N. Pratt, M.D., who was identified as the hospital's
director.
Id. The state survey agency recommended certification of the
New York
Hospital as a general hospital. HCFA Ex. 37. The Bureau
of Health
Insurance approved certification on May 27, 1966. The
hospital executed
a provider agreement on May 25, 1966 and was assigned
provider number
33-0101. HCFA Exs. 37, 38. Apparently, from 1966
until 1990, the
hospital periodically requested, the state survey agency
recommended,
and HCFA approved recertification as a general hospital.
By application dated June 1, 1990, New York Hospital requested that all
of
its components be certified to participate in the Medicare program as
a
single provider. HCFA Ex. 34. By letter dated February 5, 1991,
HCFA
approved the request, effective January 1, 1991. HCFA Ex.
35.
Accordingly, HCFA retired the separate provider numbers of New
York
Hospital-Westchester and the Payne Whitney Clinic and directed
the
hospital to use provider number 33-0101 for the 1462 beds located in
all
of the hospital's components. Id.
As is true of the St. Vincent's facilities, the New York State
Department
of Health and the Office of Mental Health issued separate
Article 28 and
Article 31 licenses and operating certificates to New
York
Hospital-Westchester and to New York Hospital-NYC. State Exs. 3,
6,
7. During the disallowance period, JCAHO surveyed New
York
Hospital-Westchester and New York Hospital-NYC on different dates
and
accredited the facilities for different periods. State Ex. 1 at
8.
Additionally, the New York Hospital facilities, like the St.
Vincent's
facilities, have separate MMIS provider numbers. State Ex.
7. New York
Hospital-Westchester and the psychiatric unit at New York
Hospital-NYC
submit separate cost reports to the Medicare and Medicaid
programs and
are reimbursed using different per diem rates. Id.
Analysis
The State conceded that if St. Vincent's-Westchester and New
York
Hospital-Westchester are considered to be free-standing
psychiatric
hospitals, they would be IMDs subject to the Medicaid exclusion
for
patients between the ages of 22 and 65. However, the State argued
that
the Westchester County facilities are not free-standing
psychiatric
hospitals, but instead are psychiatric units of their general
acute care
hospital affiliates in New York City. The State argued that
treating
the Westchester facilities as psychiatric units of general acute
care
hospitals is consistent with HCFA guidelines published in the
State
Operations Manual and with the State licensure status of the
facilities.
The State further argued that HCFA's focus on the separate
certification
of the Westchester facilities to participate in Medicare and
Medicaid as
psychiatric hospitals relies on form rather than substance.
For the reasons explained below, we conclude that, during the
disallowance
period, each of the Westchester facilities was a
psychiatric hospital and,
therefore, an IMD. We accord great weight to
the State's
contemporaneous certification of the Westchester facilities
as free-standing
psychiatric hospitals. That certification is
consistent with a
substantial number of factors indicating that the
Westchester facilities were
operated as psychiatric hospitals distinct
from the New York City
hospitals. Recognizing their status as IMDs
therefore accords with
substance and not mere form. Moreover, even if
the Westchester
facilities could have been certified as psychiatric
units of the New York
City hospitals during the disallowance period,
this was not required.
The State was in the best position to determine
the appropriate
classification of the facilities and did not question
their status as
separate psychiatric hospitals. The State licenses are
not inconsistent
with that status. In any event, the Act and the
federal regulations
make clear that facilities may be IMDs regardless of
their state licensure
status.
A. The State recommended that the Westchester facilities be
certified
as psychiatric hospitals.
According to the Medicare conditions of participation, a
psychiatric
hospital must be "primarily engaged in providing, by or under
the
supervision of a doctor of medicine or osteopathy, psychiatric
services
for the diagnosis and treatment of mentally ill persons." 42
C.F.R. .
482.60 (emphasis added). An entity which satisfies the
conditions of
participation for psychiatric hospitals would be an IMD
because, by
definition, its "overall character [would be] that of a
facility
established and maintained primarily for the care and treatment
of
individuals with mental diseases." 42 C.F.R. . 435.1009. The
State
admitted that the Westchester facilities provide only
psychiatric
services and that, considered separately from the related New
York City
institutions, the facilities would be IMDs.
If the Westchester facilities were indeed psychiatric units of the
New
York City institutions, however, the overall character of the
combined
entities would not be that of IMDs. For example, the combined
New York
Hospital group is now certified for 1462 beds, of which 108 in New
York
City and 322 in Westchester are psychiatric beds. HCFA Ex. 35;
HCFA
Brief at 22. Similarly, if at some time in the future St.
Vincent's-NYC
and St. Vincent's-Westchester become certified as a single
provider, the
combined facility could be certified for a total of 891 beds,
with 100
psychiatric beds in New York City and 103 psychiatric beds
in
Westchester. HCFA Brief at 22.
The State asserted that the Westchester facilities are, and have been
at
all relevant times, psychiatric units of the New York City
hospitals.
The State pointed to section 2024 of the State Operations Manual
and
argued that the separate Westchester and New York City facilities of
St.
Vincent's and New York Hospital satisfy the criteria enumerated
for
certification as single hospitals. That is, according to the State,
St.
Vincent's-Westchester and St. Vincent's-NYC are controlled by a
common
owner, are directed by a single Chief Medical Officer and a single
Chief
Executive Officer, and are served by an integrated medical staff.
The
State argued that New York Hospital-Westchester and New
York
Hospital-NYC share the same attributes.
In support of its position, the State offered the affidavits of
George
Vecchione, the Chief Operating Officer of The New York
Hospital-Cornell
Medical Center, and J. Rock Tonkel, the Chief Executive
Officer of St.
Vincent's Hospital and Medical Center. Both affidavits
attest that,
throughout the disallowance period, the hospitals met the
criteria
enumerated in section 2024 of the State Operations Manual.
State Exs.
3, 4. However, the State did not produce any documentation
from the
disallowance period, such as organizational charts or
position
descriptions, that would corroborate the statements made in
the
affidavits. We note that the affidavits were plainly
prepared
specifically to address the issues in this litigation and therefore
must
be viewed cautiously because of their self-serving character.
However, even if the State Operations Manual criteria were in fact
met
throughout the disallowance period, this would not mean that
each
Westchester facility was required to be treated as part of a
larger
institution, rather than as a separate hospital sharing
some
administration and staff with another, commonly owned hospital.
Indeed,
section 2024 of the State Operations Manual, relied on by the
State,
recognizes that "a hospital may establish an additional facility
so
organizationally or geographically separate as to make it impossible
to
operate as a component of a single hospital." This
language
demonstrates that a related facility, such as the "branch" or
"division"
at issue in this case, could nevertheless be regarded as a
separate
institution under the federal regulations. 5/ In fact, the
State and
the hospitals themselves consistently treated the Westchester
facilities
as separate hospitals over a significant period of time.
Throughout the disallowance period, the State apparently concluded
that
the Westchester facilities were, in fact, sufficiently separate from
the
New York City hospitals, organizationally or geographically, or both,
to
be treated as free-standing psychiatric hospitals. There are a
number
of factors that would support such a determination. The
Westchester
facilities were accredited separately from the New York City
hospitals,
they executed separate provider agreements, filed separate cost
reports,
and received separate reimbursement rates. 6/ Moreover, in
addition to
recommending to HCFA that the Westchester facilities be
separately
certified as psychiatric hospitals, the State issued separate
licenses
and operating certificates to the Westchester and New York
City
facilities.
Not only the State, but the hospitals themselves apparently viewed
the
Westchester facilities as separate and distinct from the New York
City
facilities throughout the disallowance period. During that time,
the
Westchester facilities described themselves as psychiatric
hospitals
when requesting certification to participate in Medicare and
Medicaid.
The consequence of the Westchester facilities' requesting
certification
as psychiatric hospitals was that, throughout the disallowance
period,
they were surveyed against the two special conditions of
participation
for psychiatric hospitals. Had the Westchester facilities
been
psychiatric units of general hospitals, they would not have
been
required to undergo those surveys. 7/
Both the State and the hospitals now argue that the characterization
of
the Westchester facilities as free-standing psychiatric hospitals
was
simply erroneous. However, it appears that this argument (and
indeed
this perception of the Westchester facilities) did not materialize
until
the audit by the Inspector General raised the question of whether
the
Westchester facilities were IMDs. For this reason, we conclude that
the
contemporaneous actions of the State in recommending certification
of
the facilities as psychiatric hospitals and the actions of
the
Westchester facilities in requesting certification as such
and
submitting to surveys for the special conditions of participation
are
entitled to greater weight than arguments made now in hindsight.
Moreover, even if the Westchester facilities could properly have
been
viewed as psychiatric units of the New York City hospitals
throughout
the period in question, HCFA could reasonably determine that the
State
should bear the consequence of classifying the facilities as
psychiatric
hospitals, since the State was in the best position to determine
the
appropriate classification of the hospitals and to
recommend
certification to HCFA on that basis. See Massachusetts Dept.
of Public
Welfare, DAB No. 262, at 13-14 (1982), aff'd 749 F.2d 89 (1st
Cir.
1984); New York State Dept. of Social Services, DAB No. 311, at
7
(1982). Further, the State had a duty under the regulations to
identify
IMDs and ensure that no FFP was claimed for excluded services in
IMDs.
Yet, while it repeatedly recommended that the Westchester facilities
be
certified as psychiatric hospitals, the State apparently
never
questioned their status for Medicaid purposes.
B. State licensure is not determinative as to
whether a facility is
an IMD.
The State attempted to counter the certification of the
Westchester
facilities as psychiatric hospitals by pointing to the
facilities'
licensure, which, according to the State, demonstrates that they
are, in
fact, psychiatric units of general hospitals. The State
explained that,
under its licensing scheme, general hospitals and psychiatric
hospitals
are licensed by different State agencies. According to the
State,
general hospitals are licensed by the New York State Department
of
Health pursuant to Article 28 of the Public Health Law,
while
psychiatric hospitals are licensed by the New York State Office
of
Mental Health pursuant to Article 31 of the Mental Hygiene
law.
According to the State, psychiatric units of general hospitals
are
co-licensed by the Department of Health and the Office of Mental
Health.
The Westchester facilities are licensed by both agencies, a fact
which
the State argued proves that the facilities are psychiatric units
of
general hospitals.
In essence, the State argued that any facility that possesses a
dual
Article 28/Article 31 license must be a psychiatric unit of a
general
hospital and thus cannot be an IMD for Medicaid reimbursement
purposes.
The State did not point to any official interpretation of its
licensure
law in support of this argument, however, and this is not the
only
reasonable interpretation. Section 2801 of the Public Health
Law
(quoted on page 5 above) excludes from the definition of "hospital"
any
facility which is principally engaged in providing services for
the
treatment of mental illness, "except for those distinct parts of such
a
facility which provide hospital service." Section 31.02 of the
Mental
Health Law (quoted on page 5 above) requires that any part of a
general
hospital which provides services to the mentally disabled obtain
an
operating certificate from the Office of Mental Health. This does
not
necessarily mean, however, that only psychiatric facilities bearing
some
relationship to a general hospital would be required to obtain both
an
Article 28 license and an Article 31 license. Each of the
Westchester
facilities provided hospital level services throughout the
facility.
Thus, it is arguable that each facility, as a whole, would fall
within
the exception in section 2801 and could be licensed as a
hospital
without regard to any relationship to a larger institution. 8/
Moreover, the State offered no evidence that the Westchester
facilities
received operating certificates "as a part of a general hospital"
under
subsection 2 of section 31.02 of the Mental Health Law, rather than
as
"institutions" under subsection 1. Nor did the State offer any
evidence
to show that the term "part of a general hospital" as used in
section
31.02 of the Mental Health Law is intended to have the same meaning
as
the term "psychiatric unit" as used in the federal regulations. 9/
It
may be that in New York any psychiatric facility related to a
general
hospital is regarded as "part of a general hospital" and thus subject
to
dual Article 28/31 licensure. The fact that certain facilities
are
related, however, does not establish that they should be treated as
a
single provider entity for purposes of Medicare and
Medicaid
reimbursement. As discussed above, the State Operations Manual
clearly
contemplates that related institutions which are geographically
or
administratively distinct might properly be treated as
separate
providers.
However, even if it were true that Article 28 licenses are only issued
to
general hospitals, and thus the Westchester facilities could only
have
received dual Article 28/31 licenses if the State regarded them as
part of a
general hospital, HCFA would not be precluded from concluding
that they
nevertheless were IMDs. The federal regulatory definition of
IMD makes
clear that a facility can be an IMD regardless of how it is
licensed.
In our view, the dual Article 28/31 licensure of the
Westchester
facilities by the New York Department of Health and the Office of
Mental
Health does not preclude a finding that the facilities were
sufficiently
distinct from the New York City hospitals to be regarded
as
free-standing psychiatric hospitals, and by extension as IMDs,
for
Medicaid reimbursement purposes. . Conclusion
For the foregoing reasons, we uphold this disallowance in full.
____________________________
Donald
F. Garrett
____________________________
Norval
D. (John) Settle
____________________________
Judith
A. Ballard Presiding
Board Member
1. Section 1905(h)(1)(C)(ii) of the Act extends coverage for
inpatient
psychiatric hospital services to patients until they reach age 22
under
certain circumstances. That section extends coverage: "in
the case of
an individual who was receiving such services in the period
immediately
preceding the date on which he attained age 21, [until] (I) the
date
such individual no longer requires such services, or (II) if
earlier,
the date such individual attains age 22."
2. All regulatory citations are to the 1989 Code of
Federal
Regulations. These regulations were in effect throughout
the
disallowance period.
3. Psychiatric units of general hospitals are also excluded from
the
prospective payment system and are reimbursed at a per diem rate.
In
the present case, the psychiatric beds located in New York City
were
reimbursed at a different per diem rate than the psychiatric
beds
located in Westchester. State Exhibit (Ex.) 7.
4. Prior to April 1987, the New York State Office of Health
Systems
Management was the state survey agency for Medicare and
Medicaid. After
April 1987, HCFA contracted with HCR of Rochester to
perform the survey
functions. However, HCR did not perform a
Medicare/Medicaid survey at
either St. Vincent's-Westchester or New York
Hospital-Westchester during
the disallowance period. State Ex. 1 at
7.
5. The federal regulations define "institution" as, "an
establishment
that furnishes (in single or multiple facilities) food,
shelter, and
some treatment or services to four or more persons unrelated to
the
proprietor." 42 C.F.R. . 435.1009. The Westchester facilities
would
meet this definition independent of their relationship with the New
York
hospitals.
6. In fact, one consequence of retroactively reclassifying
the
hospitals as single providers would seem to be to invalidate the
per
diem reimbursement rates for both the Westchester facilities and
the
psychiatric beds in the NYC hospitals, since those rates should
have
been calculated based on the combined costs of the Westchester and
NYC
facilities. The hospitals seem to have recognized this problem, as
they
did not request retroactive reclassification when they requested
that
the Westchester and NYC hospitals be certified as single
providers. See
HCFA Exs. 19, 35.
7. In a letter dated March 9, 1990, Frederic Raine, the
administrator
of New York Hospital-Westchester questioned, apparently for the
first
time, the propriety of conducting such a survey at the facility.
HCFA
Ex. 30. In a subsequent letter, dated March 19, 1990, Mr. Raine
stated
that the facility would cooperate should HCFA officials decide
to
proceed with the survey. HCFA. Ex. 33. However, Mr. Raine
further
stated that the facility's cooperation should not be viewed as
an
admission that the facility was a free-standing psychiatric
hospital.
Id.
8. The State produced no clear proof that other
free-standing
facilities providing hospital level psychiatric services were
not
required to obtain dual Article 28/31 licensure.
9. It is unclear whether the Westchester facilities would qualify
as
"psychiatric units" under the federal regulations. One of the
criteria
for identifying a "unit" is that the unit "[r]eport its costs in
the
hospital's cost report covering the same fiscal period and using
the
same method of apportionment as the hospital." 42 C.F.R.
.
412.25(a)(12). The Westchester facilities submitted separate
cost
reports from the New York City facilities. See State Exs.
3,