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New Jersey v. Department of Health and Human Services

February 11, 1982



Author: Adams

Before: ADAMS, ROSENN, and SLOVITER, Circuit Judges

ADAMS, Circuit Judge

New Jersey petitions for review of a decision by the Grant Appeals Board of the Department of Health and Human Services (HHS) disallowing reimbursement to the State under the Medicaid program for medical services provided by a nursing home that, according to the Department, had been improperly certified. Because we conclude that the controlling legislation does not authorize direct review by a court of appeals of this type of determination by the Board, we dismiss New Jersey's petition for want of jurisdiction.


Under the Medicaid program (Title XIX of the Social Security Act, 42 U.S.C. § 1396), eligible individuals who receive medical assistance generally are not billed for any services rendered to them. Rather, the "provider" of such services seeks reimbursement of its expenses from the "single state agency"*fn1 responsible for administering the state's Medicaid arrangement and for distributing federal funds. In order to qualify for reimbursement, a provider institution, such as a nursing home, must enter into a "provider agreement" with the single state agency.*fn2 That agreement is contingent upon certification by a "state survey agency"*fn3 that the facility in question meets certain federal standards.*fn4

On October 21, 1975, the New Jersey Department of Health -- the State's Title XVIII and Title XIX survey agency*fn5 -- conducted a "licensure walk-through" of Springview Nursing Home, a new facility located in Freehold, New Jersey. Grant Appeals Board Decision No. 137 (Dec. 1, 1980), Appendix at 10a. Based on its inspection, New Jersey's single state agency (the Division of Medical Assistance and Health Services) executed a provider agreement with Springview covering the Medicaid program. Appendix at 54a. On October 23, 1975, the single state agency requested a statement from the survey agency "to the effect that [Springview] meets the standards for Medicaid participation." Record at 3-1. In response, the director of the survey agency issued the following hand-written note: "10/28/75. Now meets the Standards for Medicaid participation." Id.

In January 1976, Springview also sought to enter into a provider agreement with respect to the Medicare program. That agreement was not forthcoming, however, because a joint Title XVIII-Title XIX survey conducted on January 12 and 13 revealed operating deficiencies sufficient to render the institution ineligible for both Medicare and Medicaid funds. Record at 5-1 to 5-74. Only after Springview committed itself to and undertook a plan of correction did the facility receive approval, effective March 22, 1976, for Medicare participation. Grant Appeals Board Decision, supra, Appendix at 10a.

Citing the results of the January 1976 survey, HHS refused to honor New Jersey's subsequent request for reimbursement for Medicaid-related services provided at Springview during the October 1975 to March 1976 period. Record at 11-1 & 16-1. The State's claim, which totaled $221,824, was disallowed by the Administrator of HHS' Health Care Financing Administration on the ground that a provider agreement could issue only after a full-fledged Title XIX certification survey, such as that conducted in January 1976, as opposed to October 1975's mere "licensure walk-through." Record at 56-1 to 56-3.

New Jersey appealed the Administrator's determination to the HHS Grant Appeals Board, which affirmed the disallowance, albeit on a different ground. See Grant Appeals Board Decision, supra, Appendix at 9a-14a.The Board declined to decide whether the Department of Health's failure fully to survey Springview nullified the October 21, 1975, provider agreement. Rather, the Board held that, although there existed no explicit statutory or regulatory requirement that any particular form be completed in certifying a nursing home for Title XIX eligibility, a survey agency was obligated to "communicate certain information" to the single state agency before Medicaid funds could be made available with respect to that institution. Specifically, the Board stated that the survey agency must record "[t]he duration of the certification period, the type of facility involved, whether the facility is in compliance with program requirements, and the existence of [any] special conditions."*fn6 Applying this standard, the Board concluded that the "one-line note" penned by the director of New Jersey's survey authority did not constitute an "effective" certification of Springview. Grant Appeals Board Decision, supra, Appendix at 13a.

On appeal to this Court, New Jersey contends that: (1) because neither statute nor regulation mandates that a particular form be used or that specific information be provided when a state survey agency represents that a nursing home meets certification criteria, HHS "elevated form over substance" by refusing to accept the written memorandum involved here; (2) in this instance, the single state agency actually was aware of all the "information" that the Board deemed necessary for the agency to know in making a Title XIX eligibility determination; (3) because of "a severe shortage of nursing home beds available for New Jersey's Medicaid recipients," informal and expedited certification procedures were necessary; and (4) by imposing a "huge forfeiture" in a situation where there was no damage to Medicaid recipients themselves, HHS violated the principle of "cooperative federalism." Brief for Petitioner at 14-19.


New Jersey maintains that its petition is properly before this Court pursuant to 42 U.S.C. § 1316(a), which authorizes direct appellate review of a determination by the Secretary of HHS that a state's Medicaid plan is not in compliance with federal statutes and regulations. HHS insists, on the other hand, that the present controversy is more appropriately classified as a disallowance dispute, and therefore should be reviewed under 42 U.S.C. § 1316(d), which does not provide for initial consideration by a court of appeals.

A jurisdictional question similar to the one presented here was discussed and resolved in two recent decisions of this Court, both of which, in fact, involved these same litigants. See State of New Jersey v. Department of Health and Human Services, Nos. 80-2809 et al. (3d Cir. Dec. 23, 1981) (hereinafter referred to as New Jersey I); State of New Jersey v. Department of Health and Human Services, No. 80-2438 (3d Cir. Feb. 5, 1982) (hereinafter referred to as New Jersey II). In view of these decisions, we believe it unnecessary once again to identify the various differences between section 1316(a) and section 1316(d) procedures or to justify why "a court of appeals is obligated to look beyond the label the Secretary puts on his or her actions, and instead is required to conduct an independent evaluation of the underlying substance of the dispute," New Jersey I, slip op. at 18. Rather, we ...

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