GAB Decision 687
August 22, 1985
Vermont Agency of Human Services;
Ballard, Judith A.; Teitz, Alexander G. Garrett, Donald F.
Docket No. 85-34
DECISION
The Vermont Agency of Human Services (State) appealed a determination by
the Health Care Financing Administration (Agency) disallowing
$127,515.44 claimed for intermediate care facility (ICF) services under
Title XIX (Medicaid) of the Social Security Act (Act) for the quarters
ending March 31, 1984, June 30, 1984, and September 30, 1984. The
disallowance was taken pursuant to section 1903(g)(1)(D) of the Act,
which provides for reduction of a state's federal medical assistance
percentage for amounts claimed for any calendar quarter unless the state
shows that during that quarter it had in effect an effective program of
medical review of the care of patients "whereby the professional
management of each case is evaluated at least annually by independent
professional review teams." /1/ The Agency disallowed the funds based on
a federal review of State surveys of two ICFs. The disallowance letter
stated that the federal reviewers had found the State surveys of the
facilities to be deficient for the March quarter and, further, that the
State had failed to conduct a subsequent "follow-up" review at either
facility during the June quarter and again at one of the two for the
September quarter.
The issues in dispute are (1) whether the State had to include in its
survey of Beverly Manor Convalescent Center (Beverly Manor) one patient
who entered the facility after the State review had started; and (2)
whether a disallowance based on the failure to comply with the statutory
requirement at both Beverly Manor and another facility, Birchwood
Terrace Health Care (Birchwood Terrace), could be assessed more than
once a year.
The Board reverses the disallowance with respect to Beverly Manor and
upholds the disallowance with respect to Birchwood Terrace.(2)
Facts
In August 1984, federal reviewers found that two patients in Birchwood
Terrace and one patient at Beverly Manor had not been subject to annual
patient reviews for the quarter ending March 31, 1984. The Agency
subsequently issued a disallowance for the quarter ending March 31, 1984
based on that finding, and for the successive quarters ending June 30
and September 30, 1984 at Birchwood Terrace, and June 30, 1984 at
Beverly Manor, based on the further finding that satisfactory follow-up
reviews still had not been completed during those successive quarters at
the respective facilities. (State's Appeal File, Exhibit A, Enclosure
3)
The State did not dispute the disallowance assessed for the two patients
overlooked at Birchwood Terrace for the quarter ending March 31, 1984,
but did dispute the disallowance assessed for the one patient not
reviewed at Beverly Manor for the quarter. The State also disputed the
follow-up disallowances assessed for the successive quarters at both
facilities. /2/
The State presented a factual background, not disputed by the Agency,
explaining why the State review at Beverly Manor had omitted the patient
in question there. The State explained that the review team arrived at
Beverly Manor at 9:30 AM on the morning of August 24, 1983. The team
had in its possession the names of all Medicaid recipients who were in
the facility according to the records of the Vermont Department of
Health and the records of Vermont's Medicaid Fiscal Intermediary. Upon
arrival, the team contacted Beverly Manor's billing clerk to determine
if any of the patients who the team's information indicated were in the
facility in fact were no longer in the facility, or if any new patients
had come in to the facility since the State's records were compiled.
(State's Appeal Brief, p. 2; Appeal File, Exhibit B) The patient in
question was not in the facility on the morning of August 24, 1983 when
the review team arrived. Rather, he was transferred to Beverly Manor
from another facility later that day, arriving between 1: 00 PM and 2:30
PM. (State's Appeal Brief, p. 3, Appeal File, Exhibit B) The review
team left Beverly Manor on August 26, never having been informed of the
presence of the patient in question. The Department of Health received
notice of the patient's transfer to Beverly some time thereafter.(3)
Was the State required to include in its review of Beverly Manor a
patient admitted after the review team began its review?
The State argued that the patient in question at Beverly Manor was not
required to be reviewed because he was not in the facility at the time
the review team entered the facility and because the team had no notice
of his arrival prior to its departure. In support of this position the
State cited 42 CFR 456.652(b)(2), which states that "(i)f there is no
Medicaid recipient in the facility on the day a review is scheduled, the
review is not required until the next quarter. . . ." (underlining
added) The State argued that it was reasonable to interpret this
provision to mean that the "key" date was the first day of the review
and the State was only required to review people on the facility's rolls
as of the time the review team checked with the billing clerk on the
first day of the review. The State also asserted that neither the
statute nor the regulations nor any other communication from the Agency
gave notice that the State's practice of reviewing only those
individuals present in the facility at the time inspection began was
incorrect.
The Agency did not dispute that the patient in question was not present
in the facility when the State team checked with the facility's billing
clerk on the first day of the review. The Agency argued that the State
was obliged to review the patient in question since he was admitted to
the facility before the team's inspection was over on August 26th. The
Agency asserted that the review team, upon arrival on August 24, should
have asked the facility's billing office to inform the team of any
admissions during the course of its inspection. The Agency further
asserted that, if the State had conducted a complete review within 30
days of learning that a patient admitted during the inspection had not
been reviewed, the State may have avoided a disallowance, as provided
for in 42 CFR 456.653. The Agency apparently presented this argument to
show that the regulations contained their own safeguard against the
problem of such an oversight of a patient as at issue here.
Discussion
We agree with the State that it was not required to include the
individual in question in the review conducted at Beverly Manor since
the individual was not admitted to the facility until after the State
team had started its inspection on the morning of August(4) 24th. The
Board has held that Section 456.652(b)(2), cited by the State here,
clearly supports the view that the relevant date for purposes of
determining which patients should be reviewed is the first day of a
review. (South Dakota Department of Social Services, Decision No. 650,
May 28, 1985, p. 5) A logical extension of that holding is that the
significant time during that first day is when the review team checks
with facility authorities to get a "census" of those patients present
in
the facility on that first day when the review commences.
We are not persuaded by the Agency's argument that the regulation
required the State team to review anyone admitted during the entire
course of the inspection. This position lacks specific support in the
regulations or in policy issuances. Moreover, as we stated in South
Dakota, supra:
The soundness of the result here is demonstrated by the fact that a
contrary interpretation could be difficult to implement. If any
patients who are determined eligible for Medicaid before a review team
leaves a facility must be reviewed, the team would have to extend its
review indefinitely since a "final" check might always reveal that
an
additional patient had been determined eligible for Medicaid. (p.6)
While the narrow holding in that case related to the date a patient was
determined to be eligible to receive Medicaid, the logic is applicable
here as well. If any patients who entered the facility before the
review team leaves must be reviewed, the team would have to extend its
review indefinitely since a final check might always reveal a new
patient. It is reasonable to set some time after which the team need
not be concerned with new admissions. Section 456.652(b)(2) in a
related context established that time as "on" the first day of the
review, and this can reasonably be interpreted as the time on that first
day when the review team checks with facility officials to ascertain
which patients are present in the facility on that first day. The State
had no notice of any contrary interpretation.
Finally, we note that the Agency's assertion that section 42 CFR 456.653
was a safeguard which could have prevented the disallowance is not
persuasive. Subsection (b) of that section provides that a technical
failure to conduct a satisfactory annual review may be forgiven if the
State complies within 30 days of the close of the quarter. Apparently
the Agency felt that since the State learned on August 27th that a
patient admitted on August 24 had not been reviewed, the State should
have corrected the oversight within 30 days of the close of the quarter.
However, this argument failed to consider that the State was not aware,
until well beyond 30 days(5) after the end of the quarter, that the
Agency considered the State's failure to review patients admitted after
a review had begun to be an error. /3/
Was the penalty imposed upon Birchwood Terrace for the quarters ending
June 30, 1984 and September 30, 1984 permissible under the applicable
statute and regulations?
The State did not contest its initial failure to complete an annual
review of all patients at Birchwood Terrace for the quarter ending March
31, 1984. Rather, the State contested the Agency's position that the
State was required to conduct reviews for the successive quarters ending
June 30 and September 30, 1984. The State argued that the regulation
under which the disallowances for the successive quarters were imposed
was inconsistent with the statute and, therefore, invalid. The State
asserted that, while section 1903(g)(1) of the Act imposed a requirement
of yearly reviews, section 42 CFR 456.652(b)(3) of the regulations
wrongly imposed a requirement of quarterly reviews. The Agency argued
that the regulation was consistent with the statute and that the Board
had upheld the application of the regulation in past decisions.
Discussion
We find the State's position to be without merit. In a previous
decision, the Board held that section 1903(g) of the Act clearly
established a system that "continues to penalize a state for successive
quarters until the state performs a review in a manner that complies
with the applicable statute and regulations." (Michigan Department of
Social Services, Decision No. 491, December 30, 1983, p. 6; see also
Vermont Agency of Human Services, Decision No. 599, December 10, 1984,
p. 5 n. 3) Section 456.652(b)(3) provides:
(3) If a facility is not reviewed in the quarter in which it is
required to be reviewed under paragraph (b) (2) of this section, it will
continue to require a review in each subsequent quarter until the review
is performed.
The regulation does not state a policy of quarterly reviews; it states
a policy that, if an adequate review has not been performed within the
quarter ending in which a quarterly review is due, the review continues
to be due. Thus, the regulation is not inconsistent with the statute.(
6)
Furthermore, in Vermont Agency of Human Services, supra, the State
presented the same argument as the State did here, that the regulation
changed the statutory requirement of annual reviews. There the Board
stated:
. . . the State's argument, if correct, would mean that even if a
state does not perform a review, or performs it inadequately, it need
not perform a review until another year elapses. This would negate the
purpose of the requirement, which is to ensure that all patients are
receiving adequate care at the level they need. Moreover, under section
1903(g), a state must make a satisfactory showing for each quarter.
This means that the Agency may check each quarter to see that all
patients have received an on-site review within the last year,
regardless of whether the review was performed during the quarter being
surveyed by the Agency.
The same logic applies here.
Conclusion
Based on the foregoing, we reverse the portion of the disallowance
attributable to Beverly Manor and uphold the portion of the disallowance
attributable to Birchwood Terrace. /4/
/1/ Amendments to section 1903(g)(1) as contained in section
2363 of the Deficit Reduction Act (DEFRA) of 1984, enacted July 18,
1984, Pub. L. 98-369, have eliminated all utilization control
requirements other than the medical review requirement as a basis for
reductions in federal financial participation. Section 2368 of DEFRA
amended the medical review requirement. These amendments do not affect
the result here. /2/ The State did not argue that its showing
was satisfactory because the requirements of the exception provided by
section 1903(g)(4)(B) and 42 CFR 456.653 were met here. However, in
view of the Board's reversal of the disallowance with respect to one of
the facilities involved, the parties are not precluded from considering
whether the State may now meet the conditions of the exception. /3/
Nothing in the record indicated that the State knew of the Agency's
interpretation prior to the State's receipt of the December 21, 1984
disallowance letter. /4/ The parties have notified the Board
that they have reached agreement on an adjustment in the disallowance to
account for patients sent by Vermont to out-of-state facilities. (See
Agency's letter of July 9, 1985 and State's letter of July 23, 1985).
The precise effect of that agreement on the amount of the disallowance
remains to be determined by the parties.
JANUARY 14, 1986