SSR 73-35a: Sections 1861 (j) and 1866 (b) (2) (A), (B) and (C) (42 U.S.C. 1395ff).-Provider Participation Agreement-Failure to Maintain Performance Standards-Failure to Submit Cost Reports-Termination of Certification
20 CFR 405.614(a) (1), (2) and (3), 405.1120(b). 407.1124, 405.1125, 405.1134-405.1136
Where a provider, certified for participation as an extended care facility under title XVIII of Social Security Act, failed to correct certain deficiencies pertaining to records, personnel, licensing, supervision, food service, physical environment, and cost accounting reports after repeated inspections, held, termination of certification proper for non-compliance with conditions of participation, as required by Act and regulations. Further held, Secretary also authorized under statute and regulations to terminate provider participation solely on basis of failure to submit timely cost accounting reports.
The X Nursing Home filed a request to establish eligibility as an extended care facility under title XVIII of the Social Security Act. The application received favorable consideration and the facility was notified that it met the requirements to participate, the agreement becoming effective February 28, 1967.
Subsequently, certain deficiencies were noted pertaining to clinical records and transfer agreements. In October 1967 the facility was notified that evidence indicated it no longer qualified as a provider of services under the Medicare program. The following deficiencies were noted: two nurses on the staff were not currently licensed by the State; there was neither a Registered Nurse nor a Licensed Vocational Nurse who was a graduate of a State-approved school of practical nursing on duty and in charge of the nursing services at all times; and there were an insufficient number of nurses employed to meet the total needs of the patients.
In June 1969 the facility was notified of the determination that it no longer met the requirements for participation and that its agreement with the Secretary, Department of Health, Education, and Welfare was to terminate on July 16, 1969. Following a resurvey on July 11, 1969, the facility was advised on August 7 that serious deficiencies continued to exist and the termination was made effective as of August 11, 1969. Following an unsuccessful hearing before an administrative law judge, the X Nursing Home appealed for a further administrative review.
The general issue is whether the action terminating certification of the facility to participate as a provider of services under the Social Security program was proper.
The specific issues are whether a 24-hour nursing service as required by the Act and regulations was provided (Section 1861 ( j ) (6), and 20 CFR 405.1124) ; whether such other conditions were met relating to the health and safety of the patients or relating to the physical facilities as required by section 1861( j ) (10) of the Act, particularly the Conditions of Participation required by sections 405.1120 (b); 405.1125(a), (d), (h) and ( i ) ; 405.1134(b) and ( i ) ; 405.1135(a) and (c) ; and 405.1136(b) of Regulations No. 5 of the Social Security Administration; and whether there was a failure to provide such information as is required to determine whether payments are or were due under title XVIII and the amounts thereof, or a refusal by X Nursing Home to permit such examination of its fiscal and other records as necessary to verify such information, as required by section 1866(b) (2) (C) of the Act.
Upon review, the following specific findings of the administrative law judge were affirmed: inadequate 24-hour nursing services; non-compliance as to licensing of staff, nursing supervision, adequacy of nursing personnel, adequacy in quality of nursing care and in-service training; non-compliance with regulations relating to dietary department and physical environment to insure safety of patients; poor housekeeping and maintenance services; lack of a disaster plan; and failure to submit cost accounting or other reports until after termination of participation. This latter finding is worthy of further comment.
Section 1866 of the Act provides, in pertinent part:
(b) An agreement with the Secretary under the section may be terminated-
(2) by the Secretary at such time and upon such reasonable notice to the provider of services and the public as may be specified in Regulations, but only after the Secretary has determined . . . (C) that such provider of services has failed to provide such information as the Secretary finds necessary to determine whether payments are or were due under this title and the amounts thereof, or has refused to permit such examination of its fiscal and other records by or on behalf of the Secretary as may be necessary to verify such information.
Section 405.406 of Regulations No. 5 of the Social Security Administration provides, in part:
(b) Cost reports will be required from providers on an annual basis with reporting periods based on the provider's accounting year . . . .
Section 405.454 of Regulations No. 5 provided, in part:
(h) Cost Reporting Period.-For cost reporting purposes the program will request submission of annual reports covering a 12-month period of operations based upon the provider's accounting year . . . .
Section 405.614 of the pertinent Regulations provides, in part:
(a) Cause for Termination.-The Secretary may terminate an agreement if the Secretary determines that the provider of services:
(1) Is not complying substantially with the provisions of title XVIII and this Part 405, or with the provisions of the agreement entered into pursuant to 405.606 . . . .
The agreement between the Secretary and the facility reads, in part:
The agreement may be terminated by either party in accordance with the provisions of section 1866(b) (1) and (2) of the Social Security Act and regulations thereunder . . . .
The record in this case reveals that no cost reports were filed until after the agreement had been terminated. It appears from the reports finally submitted that the accounting year was a calendar year. Despite numerous requests for submission of the cost reports due for the years 1967 and 1968, none were submitted until on or about September 17, 1969.
It is noted that various administrative steps, short of termination, were taken by the intermediary on behalf of the Secretary because of X's failure to file the required cost reports. Initially, its interim rate of payment was reduced and certain other payments were suspended. A further reduction was made effective February 1, 1969. Finally, payments were held in escrow pending receipt of the required reports. Although administrative penalties may be imposed because of a provider's failure to submit the required reports, the statute and the regulations clearly provide that an agreement may be terminated by the Secretary solely upon the provider's failure to submit cost reports.
Accordingly, since the X Nursing Home was not in substantial compliance with the provisions of its agreement, and with the provisions of the law and regulations, and did not submit such information as necessary to determine whether payments were due, the Appeals Council held that termination of the agreement as a provider of extended care services was proper.