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CENTRAL SUFFOLK HOSP. v. SHALALA

January 19, 1994

CENTRAL SUFFOLK HOSPITAL, Plaintiff,
v.
DONNA SHALALA, SECRETARY OF THE UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, Defendant.



The opinion of the court was delivered by: LEONARD D. WEXLER

 WEXLER, District Judge

 Plaintiff Central Suffolk Hospital ("plaintiff" or "CSH") brings this action pursuant to 42 U.S.C. §§ 405(g) and 1395ff(b) to appeal the final determination of defendant Secretary of Health and Human Services (the "Secretary") denying CSH's application for certification as a skilled nursing facility ("SNF") provider under the Medicare program for its new 60-bed skilled nursing facility as of August 7, 1987, rather than March 11, 1988, the date determined by the Secretary. Presently before the Court are plaintiff's motion for summary judgment and the Secretary's cross-motion for judgment on the pleadings. For the reasons below, plaintiff's motion for summary judgment is denied, and the Secretary's cross-motion for judgment on the pleadings is granted.

 I. BACKGROUND

 The material facts in the record can be briefly summarized as follows. CSH is a hospital licensed by the State of New York, and is located in Riverhead, New York. In the mid-1980's, CSH built a new 60-bed skilled nursing facility ("CSH-SNF") at its existing facility.

 Since the 1960's, CSH has participated in the federally-established Medicare program, a federal health insurance program established by Congress pursuant to the federal Social Security Act, 42 U.S.C. § 1395 et seq. Under Medicare, individuals who satisfy certain qualifications are entitled to receive certain health benefits, including SNF services as defined in 42 U.S.C. § 1395-i(3). Providers which render such services to Medicare-eligible individuals are entitled to reimbursement for such services at rates established by HHS if such providers are certified as participants under Medicare by entering into a "provider agreement" with HHS.

 Pursuant to 42 U.S.C § 1395aa(a), HHS contracted with the New York State Department of Health ("DOH") for DOH to survey, on behalf of HHS, providers in New York seeking to participate under Medicare. As the state survey agency for HHS, DOH was required to determine whether the conditions for participation, as established under federal law, are satisfied by a provider and to make its recommendation to HHS's Health Care Financing Administration ("HCFA"), which was charged with the responsibility for determining whether to accept a provider as a participant and to offer such provider a provider agreement. *fn1"

 In 1987, prior to its opening, CSH-SNF applied for an operating license from New York State, and also sought to participate in the Medicare program. Inspectors from DOH surveyed CSH-SNF on July 10, 1987, and found that CSH-SNF was not in substantial compliance with state and federal regulations. A subsequent survey by DOH on July 29, 1987 revealed continuing noncompliance with state and federal regulations. However, upon a survey of CSH-SNF on August 6, 1987, DOH found CSH-SNF to be in substantial compliance with state and federal regulations.

 By letter of August 24, 1987, DOH advised CSH-SNF that it was issuing CSH-SNF a New York State operating certificate, and that CSH-SNF could proceed to open. The effective date of the operating certificate was August 7, 1987. The August 24 letter also advised that a "recommendation" was being made by DOH to HHS that CSH-SNF be issued a provider agreement under Medicare with an effective date of August 7, 1987. However, the letter explicitly warned: "Should you choose to admit Medicare . . . patients prior to official notification by [HHS], you do so at your own financial risk."

 Following the October 15, 1987 recommendation from DOH to HCFA, DOH completed another survey of CSH-SNF, during which time CSH-SNF was operational. This survey was completed on October 23, 1987. Based on this survey, DOH notified CSH-SNF, by letter dated November 19, 1987, that CSH-SNF was not in compliance with applicable state and federal regulations, and identified various deficiencies noted by DOH surveyors during that survey. See Tr. 702-36.

 Thereafter, by letter dated December 14, 1987, HCFA notified CSH-SNF that it had determined that CSH-SNF "is not eligible to participate as a provider of services in [Medicare]." In this respect, the December 14, 1987 letter states:

 
Our review of the documentation submitted by [DOH] in connection with your Medicare application has found that your facility is not in compliance with the ...

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