Basic Care Facilities

Survey Results

Memorandum

To:              North Dakota LTC and Basic Care Adminstrators

From:         Darleen Bartz, PhD, Chief Health Resources Section

Date:          August 5, 2016

Subject:     Response to Questions Related to Bed Transitions

Recently, we have had questions raised with the North Dakota Department of Health related to: 1) if LTC beds had been placed in a bed layaway (for 24 months) or bed hold (for 48 months) and were due to expire, could the beds be relicensed by the facility and other licensed beds in the facility be placed into bed layaway or bed hold resulting in a new 24 month (bed layaway) or 48 month period (bed hold)? and, 2) can a facility transfer (sell) basic care beds to another facility, and then the facility that sold the beds request and be approved for new additional basic care beds from the NDDoH and OHS to replace those beds? We have visited with the department's attorney on these questions. His response was that both of these scenarios would be considered a shell game and would not be allowable.

The department's attorney referred us to a memorandum he had written in response to a similar situation in 2007. The response to these questions is based on our recent conversation with the department's attorney and the information from the previous research he had completed on this issue. This information is updated and summarized below.

The statutory moratorium on expansion of long-term and basic care bed capacity requires the beds become licensed within forty-eight months of transfer. In addition, the statutory language allows a facility to delicense up to twenty-five percent of its bed capacity for a period of twenty-four months. Delicensed bed capacity not sold or relicensed at the conclusion of the twenty-four-month period ceases to exist. If the bed capacity is transferred to another facility within the twenty-four month period, the receiving entity must license the transferred bed capacity within the forty-eight month period originally established at the time of initial delicensure. 1

The facility in the original 2007 scenario was planning to build a second facility. Their proposal was to purchase beds that were close to their expiration date, but which would expire before the new facility was constructed. In order to obtain the full (or new) 48 month period before licensure, the facility proposed to transfer bed capacity from its current facility

1 See N.D.C.C. § 23-16-01.1(2) and (5) ("Transferred bed capacity must become licensed by an entity within forty-eight months of transfer.a), see also N.D.C.C. § 23-16-01.1(6) and (7) for a twenty-four month timeframe for facilities to delicense and relicense or transfer bed capacity and N.D.C.C. §§23-09.3-01.1 for similar provisions concerning basic care facilities

period before licensure, the facility proposed to transfer bed capacity from its current facility to the new facility and replace these beds at their existing facility with the beds they were planning to purchase which were close to their expiration date. These beds transferred from their existing facility to the new facility presumably would gain the full forty-eight months to become licensed at the new facility. Thus, the entire project would be completed in a series of transactions which would individually comply with the law, but taken together these transactions were "an attempt to evade the forty-eight month limitation contained in the moratorium."

This same analysis applies to the two transactions described in the first paragraph of this memo. The department's attorney also has indicated if a facility had delicensed beds that were close to the twenty-four month expiration date and decided to relicense those beds, only to delicense other beds in the facility, this too would be considered an attempt by the facility to evade the intent set forth in statute.

The department's attorney indicated the second scenario identified in the first paragraph of this memo related to the selling of basic care beds, followed by a request for new/additional basic care beds from the Department of Health and Department of Human Services calls into question the need for the basic care beds when the facility that sold beds is the same facility requesting the new/additional basic care beds. The department's attorney recommended that such a request not be approved.

Summary of Legal Analysis

When interpreting the bed capacity moratorium, we need to be sure any interpretation is consistent with other statutory uses of bed capacity.2 The original use for licensed bed capacity is to measure the maximum number of patients that may be admitted to a facility for licensing fee purposes.3 Therefore, when discussing a facility's licensed bed capacity, each individual bed is not counted separately, but rather the sum total of beds is the relevant consideration. This is because a facility does not receive a license for each bed, but rather the facility itself is licensed, and the licensing fee is detennined by the total number of beds. Therefore, a transaction that subtracts one bed and adds another bed doesn't actually have an effect on the facility's state license.4 Also, this meaning for bed capacity implies that a bed is to be licensed at a facility whether or not it is presently occupied by a resident.

Further, the moratorium's background5 and purpose6 needs to be considered. The moratorium is the sole surviving remnant of the former certificate of need program.7

2 All statutes relating to the same topic are to be construed together. State v. Novak. 338 N.W.2d 637, 640 (N.D. 1983), Litten v. City of Fargo, 294 N.W.2d 628. 633 (N.D. 1980), Hospital Services, Inc. v.
Brackey. 283 N.W.2d 174. 1TT (N.D. 1979).
3 N.D.C.C. § 23-16-03 sets fees for facilities based on the number of beds in the facility.
4 But it may have an effect on Federal certification. That. however. is a moot issue given the state licensing issue.
5 In construing a statute. consideration must be given to the background for the enactment as ascertained from the whole act. Sheets v. Graco. Inc.. 292 N.W.2d 63. 66 (N.D. 1980).
6 Remedial statutes must be interpreted to address the mischief that the statute was enacted to correct. Northern X-Rav Co. Inc., v. State by and through Hanson, 542 N.W.2d 733, 736 (N.D.1996), Hebron

The certificate of need program existed to require review and approval for expansion of services in hospitals and related medical facilities, including skilled nursing facilities, because facilities were being constructed which greatly exceeded the needs of patients or persons in the area to be served, thereby imposing great medical costs on the public for services that were not needed.8

This legislative purpose has continued in the moratorium on expansion of long-term care bed capacity and the moratorium on expansion of basic care bed capacity. These laws have been amended to adapt their purpose to present needs in every legislative session since the certificate of need program was repealed.9 While the existing moratorium language must be interpreted on its own merits without regard to former terms, this history shows the Legislature has maintained a consistent public policy directing the reduction of state-wide licensed bed capacity, together with flexibility to transfer this capacity geographically with the ability to grant additional capacity where a shortage has been demonstrated.

The only way the proposed transactions can work is if they are independent from one another. If the transfers of beds from the existing facility are treated as completely unrelated to the beds being transferred to that facility, then both transactions would appear to be legally correct. However, doing so requires us to not see the forest because of the trees. The series of related transactions proposed are not independent from one another. The purpose of this series of related transactions is to take beds that are expiring and give them a new expiration date; or to sell beds and replace them with free beds requested from the state.

These related transactions, taken together as a single course of action, are plainly intended to evade the 24-month or 48-month time frame for licensure that has been mandated by the Legislature; or to gain revenue on existing beds by selling them and replacing them with free beds obtained from the state. It is well established law in North Dakota that a series of related transactions may be interpreted together.10 Evidence of a series of related transactions is admissible to demonstrate the intent behind one of the individual transactions.11 As found in a case involving securities fraud, the court noted the charge "arose out of the same series of events and is based upon the same acts and transactions, constituting a single act, carried out under a common scheme or plan."12

Public School Dist. No. 13 of Morton County v. United States Gypsum Co., 475 N.W.2d 120, 124 (N.D.1991) (quoting Berry v. Branner. 421 P. 2d 996, 998-999 (Or.1966).
7 See 1995 N.D. Sess. laws ch. 254.
8 See generally City of LaMoure v. State Health Council. 213 N.W.2d 869,873 (N.D. 1973).
9 See 1995 N.D. Sess. Laws ch. 254, 1997 N.D. Sess. Laws ch. 12, 1999 N.D. Sess. Laws ch. 236, 2001
N.D. Sess. Laws ch. 237 and ch. 431, 2003 N.D. Sess. Laws ch. 216, 2005 N.D. Sess. Laws ch. 241, 2007 N.D. Sess. Laws ch. 240, 2009 N.D. Sess. Laws 
h.218, 2011 N.D. Sess. Laws chs. 188, 189, 2013
N.D. Sess. Laws ch. 210, 2015 N.D. Sess. Laws ch. 190.
10 Jacobson v. Mutual Ben. Health & Acc. Assn., 296 N.W. 545, 559 (N.D. 1941).
11 Amann v. Frederick, 257 N.W.2d 456, 440 (N.D.1977). Of course, if the transactions are not related, then they should not be interpreted together. See generally Griffin v. Implement Dealers' Mut. Fire Ins. Co., 241 N.W. 75, 76-77 (N.O.1932) (distinguishing conducting a single transaction from generally doing business within a given county).
12 State v. Weisser, 161 N.W.2d 360, 363 (N.D. 1968).

Further, it is also well established law in North Dakota to look at the substance of a transaction as opposed to its form or format:

• Illegality is seldom guilty of the consummate folly of flaunting its defiance of law in the face of public sentiment - of furnishing itself the evidence of its violation of law. To escape the penalties of breaking the law, it will always put on the "suits and trappings” of honest transactions………. In Edwards v. Hoeffinghoff, 38 Fed. 639, Judge Sage says: "no matter what the form of the contract, no matter how many colorings of reality and genuine dealing are thrown about the transaction, if, piercing all these disguises, the court or jury see that all these forms are merely shams, and that there was in fact no actual dealing in the article itself, but that forms were adopted as merely a semblance to deceive and evade the law, it is the duty of the court and jury to tear away the disguise, treat the transaction as it is."13

It is equally a long standing position of the North Dakota Supreme Court to forbid a person from evading a statute through indirect means.14

When the proposed series of transactions is examined as a whole, it is apparent the sole purpose is to remove the expiration from the beds transferred and placed in bed hold, or delicensed and placed in bed layaway, and give those beds a new forty-eight month (bed hold) or new twenty-four months (for delicensed beds in layaway) timeframe for licensure; or to gain revenue on selling of beds and replacing with new/additional free beds requested from the state in an area of identified need. As stated previously, the second scenario also calls in to question the need for new/additional beds in the area if the facility that sold beds is the same facility requesting the new/additional basic care beds. None of these actions (adding and subtracting beds) would result in a significant actual change in bed capacity for the facility, but would result in a new expiration date, or increased revenue from selling beds and replacing with free beds obtained from the state. This demonstrates these transactions are not intended to cause any real licensing change at that facility and is nothing more than a strawman transaction designed to evade the law.15

13 Dows v. Glaspel. 60 N.W. 60, 62-3 (N.D. 1894).
¹⁴ Straw v. Jenks. 43 N.W. 941 (Dak. 1889), Ex Parte Corliss, 114 N.W. 962, 963 (N.D. 1907), Cain v.
Merchants Nat. Bank & Trust Co., 268 N.W. 719, 722 (N.D. 1936).
15 Roeders v. City of Washburn, 298 N.W.2d 799, 781 (N.D.1980), Rozan v. Rozan, 129 N.W.2d 694, 708 (N.D.1964).
 

Divisions of Health Facilities and Life Safety and Construction ND Department of Health

Policy and Procedure Manual

Effectivce:
Section:  Licensing
Subject:  Waiver Process for Basic Care Facilities

PURPOSE:

This policy applies to basic care facilities licensed by the Division of Health Facilities. Consistent with North Dakota Century Code (NDCC) 23-09.3-04 (1), “The department may waive all or a portion of a licensure standard if the department determines the lack of compliance does not adversely affect health or safety of residents.”

POLICY:

This policy and procedure provide a review process for waivers submitted to the State Department of Health by a basic care facility requesting the department to waive all or a portion of a licensure standard if the department determines the lack of compliance does not adversely affect the health or safety of residents.

This waiver process applies to licensure standards only.

PROCEDURE:

1. The basic care facility licensed by the Division of Health Facilities must submit the request for a waiver to all or a portion of a health care or service licensure standard to the Division of Health Facilities for review, or a request for a waiver to a construction standard to the Division of Life Safety and Construction for review.

2. The basic care facility seeking to request a waiver must fully complete and submit the Basic Care Facility Waiver Request Form to the Division of Health Facilities or the Division of Life Safety and Construction dependent upon the licensure standard requested to be waived. Only complete waiver requests will be reviewed. A separate waiver request form for each licensure standard requested to be waived is required.

3. The waiver request must include the following:

• Identify the licensure standard or portion of the licensure standard that is requested to be waived.
• Documentation from the Department of Human Services that verifies the waiver will not result in the facility being noncompliant with the home and community-based setting requirements.
• A description of actions taken by the facility to meet the licensure standard and why the waiver is being requested.
• A description of any unreasonable hardship (including financial and work force) caused by not granting the waiver to the basic care facility.
• Evidence to support why the requested waiver will not adversely affect the health and safety of the basic care residents.
• A description of how the waiver would benefit the basic care facility, residents, and community.
• A description regarding actions that will be taken by the facility to monitor and assure the health and safety of residents are not adversely affected if the request for a waiver is approved.
• Other information as requested by the State Department of Health.
• Signature of authorized representative and date.

4. The request for a waiver will be reviewed, research completed, and additional information gathered by the Division of Health Facilities and/or the Division of Life Safety & Construction as needed to complete the review within 45 days.

5.A meeting will be scheduled with the State Health Officer or designee of the State Department of Health to discuss the recommendations resulting from the review.

6. The State Health Officer or designee will make the final determination related to the approval or denial of the waiver within 60 days of when the complete waiver request was received. The final decision by the State Health Officer designee is not appealable. If denied, a letter will be sent from the State Health Officer or designee to the basic care facility stating the request has been denied, and the rationale.

• If approved, a letter will be sent from the State Health Officer or designee to the basic care facility indicating that the waiver request has been approved contingent upon the facility signing an agreement with the State Department of Health. The agreement will identify the basic care facility’s responsibility to monitor to ensure that the lack of compliance does not adversely impact health and safety, their understanding that the waiver will be monitored by the department onsite periodically to ensure that lack of compliance has not resulted in an adverse impact on health or safety, and that if an adverse impact on health or safety is identified, the waiver may be rescinded and the facility would be expected to meet the requirement waived.
• The State Department of Health reserves the right to limit the period the waiver is in effect.
• The State Department of Health reserves the right to withdraw or modify the waiver if it is determined information submitted by the basic care facility has been misrepresented or the basic care facility fails to comply with their responsibilities to monitor the impacts of the waiver.

7. Time frames identified above may vary dependent upon receipt of a complete waiver request from the basic care facility, the time it takes to complete additional research, and the availability of department staff to complete the steps outlined in this procedure. The basic care facility would be notified five days in advance if an extension on review of the waiver is needed.

8. The waiver request to all or a portion of a basic care licensure standard becomes effective on the date the agreement is signed by both the basic care facility authorized representative and the State Health Officer or designee.

9. All final decisions and agreements will be documented in writing and a copy placed in the facility file.

10. All basic care waiver requests and their disposition will be logged on the division waiver log.

11. A final decision on a waiver of all or a portion of a basic care licensure standard applies to that basic care facility only and should not be construed to apply to other basic care facilities.

Waiver Request Form

Senate Bill 2317