Colorado State Dept. of Health v. Geriatrics, Inc.

• Decision Date: 22 April 1985
• Docket Number: No. 82SC187,82SC187
• Parties: Medicare & Medicaid Guide P 34,583 COLORADO STATE DEPARTMENT OF HEALTH and Anthony D. Robbins, Director of the Colorado State Department of Health, and Colorado State Department of Social Services and Armando Atencio, Director of the Colorado State Department of Social Services, La Plata County Department of Social Services and Mark Tandenberg, Director of the La Plata County Department of Social Services, and James E. Dotson, Hearings Examiner, State Department of Administration, Petitioners, v. GERIATRICS, INC., d/b/a Eventide of Durango, a Nevada corporation authorized to do business in Colorado, Respondent.
• Court: Colorado Supreme Court

Page 952

699 P.2d 952

Medicare & Medicaid Guide P 34,583

COLORADO STATE DEPARTMENT OF HEALTH and Anthony D. Robbins Director of the Colorado State Department of Health, and Colorado State Department of Social Services and Armando Atencio, Director of the Colorado State Department of Social Services, La Plata County Department of Social Services and Mark Tandenberg, Director of the La Plata County Department of Social Services, and James E. Dotson, Hearings Examiner State Department of Administration, Petitioners, v. GERIATRICS, INC., d/b/a Eventide of Durango, a Nevada corporation authorized to do business in Colorado Respondent.

No. 82SC187.

Supreme Court of Colorado,

En Banc.

April 22, 1985.

Rehearing Denied May 20, 1985.

J.D. MacFarlane, Atty. Gen., Richard F. Hennessey, Deputy Atty. Gen., Mary J. Mullarkey, Solicitor Gen., Gregory C Smith, Asst. Atty. Gen., Denver, for petitioners.

Miles & McManus, Frederick Miles, Denver, for respondent.

NEIGHBORS, Justice:

We granted certiorari to review the Colorado Court of Appeals' decision in Geriatrics, Inc. v. Colorado State Department of Health, 650 P.2d 1288 (Colo.App.1982). In that case, the court of appeals examined the action taken by the Colorado State Department of Health terminating the operating license and Medicaid certification of Geriatrics' nursing care facility, Eventide of Durango, and the decision of the Colorado State Department of Social Services revoking the facility's Medicaid participation agreement. The three issues upon which we granted certiorari review are whether the department of social services could lawfully base its revocation of the facility's Medicaid participation agreement on regulations not properly published in accordance with statutory requirements; whether the department of health's licensing standards violated Geriatrics' due process rights; and, whether the court of appeals properly allowed Geriatrics additional time within which to comply with those regulations. We affirm in part and reverse in part.

I.

Geriatrics, Inc. owns and operates a nursing home named Eventide of Durango (Eventide). Eventide was licensed by the department of health to operate as a "skilled nursing facility" with a capacity of 118 beds, ¹ pursuant to section 25-3-101, 11 C.R.S. (1984 Supp.). See also § 25-1-107(1)(1)(I), 11 C.R.S. (1984 Supp.) (department of health has power and duty to license, and to establish and enforce standards for nursing care facilities); 6 C.C.R. 1011-1 (1984) (standards for issuance of operating license). Both "skilled nursing care facilities," as defined in 42 U.S.C. § 1395x(j) (1982), and "intermediate health care facilities," as defined in 42 U.S.C. § 1396d(c) (1982), are eligible for participation in the federal Medicaid program.

Nursing care facilities at the time this dispute arose were certified for Medicaid participation by the Colorado Department of Health pursuant to an agreement with the United States Secretary of Health, Education and Welfare. Under this agreement, the department of health inspected the facility to determine the extent of its compliance with federal participation regulations. See 42 U.S.C. § 1395aa(a) (1982) (use of state agencies to determine compliance). In the case of skilled nursing care facilities, these regulations are presently specified in "conditions of participation," which are further divided and subdivided into "standards" and "elements" or "factors." 42 C.F.R. §§ 405.1101-.1137 (1984). Intermediate health care facilities must also comply with federal regulations. 42 C.F.R. §§ 442.250-.346 (1984).

After licensing and Medicaid certification of Eventide by the department of health, the department of social services entered into a Medicaid participation arrangement with Eventide, in the form of a "provider agreement." The provider agreement established Eventide's obligation to furnish services to Medicaid patients in accordance with the federal Medicaid standards, in exchange for the department of social services' agreement to reimburse the facility.

The record reveals the following chronology of pertinent events: On August 10, 1976, the department of health notified Eventide that its quarterly staffing report disclosed violations of federal and state regulations, commonly styled "deficiencies," which, if uncorrected, would result in proceedings to revoke Eventide's operating license and Medicaid certification. Later that month, an unannounced inspection of the facility by the department of health resulted in a finding that "serious deficiencies" existed and had gone uncorrected for some time. On November 8, 1976, another unannounced survey of Eventide was conducted and, although some improvement was noted, a number of deficiencies remained. An inspection conducted on February 16, 1977, resulted in notification to Eventide that, because of its "consistent inability" to comply with state and federal regulations, its Medicaid certification would be terminated and the application for renewal of its operating license would be denied. The department of social services subsequently notified Eventide that its Medicaid provider agreement would also be terminated.

Eventide requested a hearing and the issues concerning its operating license, Medicaid certification, and Medicaid provider agreement were consolidated and heard before a department of health hearing officer. The hearing officer issued an initial decision upholding the agencies' actions, to which Eventide excepted.

In its final decision, the department of health denied Eventide's application for a renewal of its license to operate, and refused to certify Eventide as a provider of skilled and intermediate care to Medicaid patients. The department of social services also issued a decision concluding that Eventide had deliberately and willfully breached its provider agreement and ordered that that agreement be terminated. The orders were stayed for 90 days to allow the attorney general to initiate and conclude proceedings placing Eventide in receivership. The department of health directed the attorney general to take these steps because, in the view of the department of health, the transfer of patients consequent to the decertification of Eventide would probably result in the deaths of some of the transferred patients. Since the evidence did not establish that the danger of continued operation of the facility by Geriatrics outweighed the danger of patient transfer, the department of health directed the attorney general to seek a receivership.

Geriatrics sought judicial review of both departments' final decisions. The Denver District Court reversed the department of health's order refusing to renew Eventide's operating license and its order terminating the facility's Medicaid certification, finding that the hearing officer had had no authority to preside over the hearing. ² The district court also set aside the decision of the department of social services terminating Eventide's Medicaid provider agreement, on the ground that the department of social services had based its action on regulations not properly published as required by statute. The district court further found that the department of health's licensing standards and Medicaid participation regulations granted such broad discretion to agency personnel without providing specific criteria that the provisions constituted a denial of Geriatrics' due process rights. Finally, the district court concluded that the actions of the departments of health and social services were not supported by substantial evidence in the record. The court based this finding on Eventide's showing that patient care at the facility was at all relevant times adequate. The court inferred that a facility's right to renewal of its operating license and Medicaid certification was ultimately dependent upon whether adequate patient care was being afforded rather than upon technical compliance with the licensing standards and participation regulations.

The court of appeals affirmed the district court's ruling that the department of social services could not base its cancellation of Eventide's provider agreement on regulations not properly published. However, the court of appeals also held that Eventide's failure to object to the appointment of the hearing officer acted as a waiver of that error, that the federal regulations upon which the department of health based its decertification and delicensure of Eventide were not so vague as to violate due process requirements, and that the record supported the department of health's decertification of Eventide despite the latter's showing of adequate patient care. Thus, the court of appeals reversed the district court's order to reinstate Eventide's operating license and Medicaid certification. However, because the record contained evidence of the dangers in transferring patients from one facility to another, the court of appeals ordered that Eventide be afforded a reasonable time of not less than 90 days within which to bring the facility into compliance with the department of health's standards for recertification.

II.

Geriatrics contends that the department of social services was precluded by statute from relying upon improperly published regulations to terminate the Medicaid provider agreement. We agree that the regulations were not published in accordance with the statutory requirements then in effect. ³

Section 24-4-103(10), 10 C.R.S. (1982), provides that "[n]o rule shall be relied upon or cited against any person unless, if adopted after May 1, 1959, it has been published and, whether adopted before or after said date, it has been made available to the public in accordance with this section." The statute in effect at the time relevant to this matter ⁴ established the following publication requirements:

All rules of any agency ... shall be filed, in duplicate, in the office of the secretary of state, and the office of the secretary of...