GAB Decision 732
March 21, 1986
Delaware Department of Health & Social Services;
Docket No. 85-33
Garrett, Donald F.; Settle, Norval D. Ford, Cecilia Sparks
The Delaware Department of Health and Social Services (Delaware)
appealed a decision by the Health Care Financing Administration (HCFA)
to disallow $201,824.62 in federal financial participation (FFP) claimed
by Delaware under the Medicaid program for the first three fiscal
quarters of 1984. HCFA based the disallowance on its determination that
Delaware had failed to maintain an effective program of utilization
control over long-term care services for Medicaid patients in two
intermediate care facilities (ICFs), including those for the mentally
retarded.
During the course of this appeal, HCFA reviewed documentation submitted
by
Delaware and withdrew the disallowance for the quarter ending
September 30,
1984. Additionally, HCFA has agreed that the disallowance
can be
recalculated based on exact recipient data. See 42 CFR 456.657.
HCFA
indicated that the parties need only agree on the precise figures
to be used
to begin the recalculation. Consequently, the amount of
federal funding in
dispute is lower than the amount HCFA initially
disallowed. Based on
our analysis of the record, we uphold the
disallowance.
Background
The statutory authority for the Medicaid program is found at Title XIX
of
the Social Security Act (Act). It provides that for each quarter
in
which a state claims federal funds under Medicaid, that state must
make
a "showing satisfactory to the Secretary" that it is operating
an
effective utilization control program for long-stay patients in
certain
facilities. See section 1903(g)(1). As noted above, HCFA
examined
documentation submitted by Delaware regarding HCFA's initial
findings as
to whether certain patients were not properly reviewed.
Based on that
subsequent examination, HCFA now contends that Delaware failed
to
include four patients in the annual on-site review of two ICFs
during
the first quarter of 1984, as required by 1903(g)(1)(D).
Consequently,
HCFA imposed the statutory(2) reduction in FFP for that
quarter, as well
as the following quarter for which it alleged that Delaware
remained out
of compliance by failing to complete the reviews. See
section
1903(g)(5), and 42 CFR 456.652(b)(3).
Generally, Delaware argued that the facts of this case do not warrant
a
finding that it had violated the statutory annual review
requirements.
Delaware contended that its medical review system was
essentially
satisfactory; that it had substantially complied with the
statutory
annual requirements; that its medical review program had been
operated
in good faith at all times; and that, given the larger purpose
of the
medical review program, its failure to review four patients in
two
facilities was essentially de minimis.
Applicable Law
Section 1903(g)(1)(D) /1/ of the Act requires the state agency
responsible
for the administration of a state's Medicaid plan to submit
a written,
quarterly showing demonstrating that --
it has an effective program of medical review of the care of
patients
in . . . intermediate care facilities pursuant to section 1902(a) .
. .
(31) whereby the professional management of each case is reviewed
and
evaluated at least annually by independent professional review teams.
A state's showing for each quarter must be "satisfactory" or FFP paid
to
the state for expenditures for long-stay services will be
decreased
according to the formula set out in section 1903(g)(5).(3)$%
Section
1902(a)(31) required, in pertinent part, that a State plan provide
--
. . . for periodic on-site inspections to be made in all . .
.
intermediate care facilities . . . within the State by one or
more
independent professional review teams . . . of (i) the care
being
provided in such intermediate care facilities to persons
receiving
assistance under the State plan, (ii) with respect to each of
the
patients receiving such care, the adequacy of the services available
.
. . .
Regulations implementing the statutory utilization control
requirements
are found at 42 CFR Part 456 (1978). In particular,
section 456.652
provides that --
(a) . . . (in) order to avoid a reduction in FFP, the Medicaid
Agency
must make a satisfactory showing to the Administrator, in each
quarter,
that it has met the following requirements for each recipient;
* * * *
(4) A regular program of reviews, including medical evaluations,
and
annual on-site reviews of the care of each recipient . . . .
(b) Annual on-site review requirements. (1) An agency
meets the
quarterly on-site review requirements of paragraph (a)(4) of
this
section for a quarter if it completes on-site reviews of each
recipient
in every facility in the State . . . by the end of the quarter in
which
a review is required under paragraph (b)(2) of this section.
The statutory exception at section 1903(g)(4)(B) /2/ states --
The Secretary shall find a showing . . . to be satisfactory
. . . if
the showing demonstrates that the State has conducted such an
onsite
inspection during(4) the 12-month period ending on the last date of
the
calendar quarter --
(i) in each of not less than 98 per centum of the number of
such
hospitals and facilities requiring such inspection, and
(ii) in every such hospital or facility which has 200 or more beds,
and that, with respect to such hospitals and facilities not
inspected
within such period, the State has exercised good faith and due
diligence
in attempting to conduct such inspection, or if the State
demonstrates
to the satisfaction of the Secretary that it would have made
such a
showing but for failings of a technical nature only.
Section 1903(g)(4)(B) is implemented by 42 CFR 456.653 which provides
that
--
The Administrator will find an agency's showing satisfactory,
even if
it failed to meet the annual (medical) review requirements of
Sec.
456.652(a)(4), if --
(a) The agency demonstrates that --
(1) It completed reviews by the end of the quarter in at least
98
percent of all facilities requiring review by the end of the quarter;
(2) It completed reviews by the end of the quarter in all
facilities
with 200 or more certified Medicaid beds requiring review by the
end of
the quarter, and
(3) With respect to all unreviewed facilities, the agency
exercised
good faith an due diligence by attempting to review those
facilities and
would have succeeded but for events beyond its control which
it could
not have reasonably anticipated; or
(b) The agency demonstrates that it failed to meet the standard
in
paragraph (a)(1) and (2) of this section for technical reasons, but
met
the standard within 30 days after the close of the quarter.
Technical
reasons are circumstances within the agency's control.(5)
Issues concerning the medical review requirement and the
statutory
exception as raised in an Order to Develop the Record.
We issued an Order to Develop the Record (Order) /3/ which set
out
preliminary analyses and questions on three general issues concerning
--
(1) the meaning of the statutory exception stated in section
1903(g)(
4)(B) whereby a state's quarterly showing is
satisfactory
notwithstanding a state's failure to conduct a medical review in
one or
more facilities where a review was required,
(2) under what circumstances a state's showing will be found
satisfactory
under the statutory exception in section 1903(g)(4)(B), and
(3) whether the Agency may properly find a violation of the
section
1903(g) medical review requirement for a facility where there was
an
on-site inspection under section 1903(a)(31), but the state review
team
failed to review one or more Medicaid recipients and there
were
mitigating or unusual circumstances or reasons to find that the
state's
program substantially complied with the requirements.
The analyses in the Order derived from the Agency's analysis of the
effect
of the amendments to section 1903(g) in Public Law 95-142 and how
to
implement them set forth in an Action Transmittal, HCFA-AT-77-106,
November
11, 1977, and the preambles to the proposed and final
regulations at 43 Fed.
Reg. 50922, November 1, 1978 and 44 Fed. Reg.
56333, October 1, 1979.(6)
We will refer to the parties' responses to the Order to the extent
they
are relevant to the issues presented here.
Analysis
When performing the annual facility reviews due during the first
calendar
quarter of 1984, the State review teams failed to review three
Medicaid
recipients in one ICF and one Medicaid recipient in another
ICF. Both
ICFs had fewer than 200 certified Medicaid beds. Delaware
stated that
"(for) some unknown reason their names had been deleted
inadvertently from
the regional Medicaid list" used by the review team.
Subsequent to the
on-site reviews, the State learned that these patients
were Medicaid eligible
and had been Medicaid recipients for some time
when the reviews were
performed. State Brief, p. 9. Medical reviews
were finally
performed in mid-August of 1984 for the patients that were
missed. At
issue now is a 1903(g) reduction for the quarters ending
March 31, 1984 and
June 30, 1984.
A. Whether Delaware's failure to review three patients in two
ICFs
constitutes a de minimis violation of the annual review requirement
so
that we may conclude that Delaware has substantially complied with
the
statute.
Delaware maintained that it substantially complied with the 1903(g)(4)(
B)
exceptions and that HCFA was reducing Delaware's federal funding on
the basis
of obviously de minimis violations. Delaware contended that
the legislative
history of section 1903(g)(4)(B) clearly revealed
Congresional intent to
apply the annual review requirement (and
exceptions) in a reasonable
manner. Delaware argued further that the
legislative history clearly
focussed the annual review requirement on
facilities, rather than
recipients. Therefore, HCFA's recipient-based
approach, whereby failure
to review even a single patient is the
equivalent of not reviewing the entire
facility, is unreasonable. Thus,
Delaware reasoned, HCFA should ignore de
minimis violations and, under a
theory of liberal construction, resolve
doubts as to the validity of an
annual review in the state's favor.
Delaware contended that any medical
review system which in practice produces
results with such a small
margin of error, here missing only four recipients,
is inherently valid.
Further, Delaware argued that section 1903(g)(4)(B) gave the
Secretary
wide discretion regarding the imposition of a penalty stemming from
a
state's failure to meet the requirements of section 1903(g)(1)(D).
In
support of its position, Delaware cited an Opinion of the
Comptroller
General (59 Op. Comp. Gen. 286) which noted that "Congress had
provided
a 'standard of reasonableness in the bill' with respect to the
(7)
annual review requirements of Sec.1903(g)(1)(D)." Delaware
contended
that its attempts at compliance with section 1903(g)(1)(D), as well
as
the overall effectiveness of its Utilization Control program, should
be
judged in light of the Secretary's discretion and the standard
of
reasonableness inherent in the statute.
The Order posed the question whether the Agency must find a violation
of
the medical review requirement where a review is performed in a
facility
but the review team fails to review one or more Medicaid
recipients
where there are mitigating or unusual circumstances or where a
state's
program substantially complies with the requirements. Our
question was
based on the statutory exception, the Agency's implementation of
the
medical review requirement as a facility-based requirement so that
the
states need not track the length of care for any particular patient,
and
the Agency's recognition that there may be recipients who have
received
care for an annual period who are not reviewed because they had
been
transferred or were absent from the facility at the time of the
review.
See 43 Fed. Reg. 50924.
The Agency pointed to language in section 1903(g)(1) and 42 CFR
456.652(b)
which, it claimed, clearly demonstrated that the Agency had
no discretion in
this area. Thus, argued the Agency, a state is
required to review every
patient in every facility due for review. HCFA
Response to the Order, pp.
6-7. The Agency noted that the regulations
interpreted the annual
review requirement in terms of the anniversary
review quarter by which time
all recipients in the facility must be
reviewed, rather than as 12-month
periods for each recipient. The Agency
cited the preamble to the final
regulations which provided that, "States
would not be required to track the
length of time each individual
recipient was in a facility, and the review
date would not relate to the
length of stay of any individual recipient in
that facility." 44 Fed.
Reg. 56335. The Agency maintained that this
interpretation did not
relieve a state from the requirement that each
recipient be reviewed
during an annual review. Further, since Congress
had not written a de
minimis exception into the statute, HCFA said it could
not be expected
to apply one. Therefore, HCFA concluded, failure to
review any patient
is tantamount to failure to review the facility.
The above cited Comptroller General Opinion, with specific reference
to
the certification, recertification, and plan of care requirements
and
the requirement for utilization review of each admission, (at
former
1903(g)(1)(A), (B), and (C)), concluded that HHS did "not have
authority
under the circumstances presented (violations of(8) 1903(g)( 1)(A)
and
(B)) to find that a State has satisfied the Medicaid utilization
control
provision." The Comptroller General discussed the "standard
of
reasonableness" set forth in section 1903(g)(4)(B) and reasoned
that
there was no indication that Congress intended to lessen
the
requirements in general, given the explicit statement of the
exception
for a state's showing for the medical review requirement.
The Board has previously held that total rather than
substantial
compliance with utilization control requirements is
necessary. Kansas
Department of Social Services, Decision No. 312, June
21, 1982. We have
also upheld as reasonable the Agency's interpretation
that it has no
discretion to waive the reduction of FFP once there is a
violation of
the section 1903(g)(1) requirements. Colorado Department
of Social
Services, Decision No. 169, April 30, 1981. In large part the
Agency
based this interpretation on the above discussed Comptroller
General
decision. Upon considering the parties arguments, we conclude
that
there is no reason to reverse our basic holdings for the medical
review
requirement. We have concluded that substantial compliance
and
mitigating circumstances cannot meaningfully be applied here.
The
Agency has clearly chosen not to approach the medical review
requirement
in this way. The Agency's interpretation is supportable
under the terms
of the statute and consistent with its own regulations, which
we are
bound to apply. Although the Agency has issued little
guidance
expressly on the medical review requirement, the Agency's
longstanding
strict application of the other utilization control requirements
is
well-known to the states. We cannot reasonably conclude that the
Agency
is obliged to implement the medical review requirement in a
radically
different or more liberal fashion than it implemented the
other
utilization control requirements.
Moreover, we are not persuaded by the State's argument that omitting
from
medical reviews three patients in one facility and one patient in
another is
de minimis. Although section 1903(g)(1) requires a showing
that "there
is in operation in the State an effective program of control
over utilization
of" long-term care services, the statute specifies that
such a program must
consist, inter alia, of conducting annual medical
reviews of the care of each
Medicaid patient. (Sections 1903(g)(1) (D)
and 1902(a)(26) and (31))
The statute provides certain limited
exceptions to the requirement for the
annual review of each patient
(discussed in part below), but contains no
indication that the Secretary
has discretion to find that the State has a
valid showing if the State
did not review patients who reasonably should have
been identified as
Medicaid eligibles in the facility and the exceptions did
not apply.
Here, Delaware presented no(9) evidence designed to show that it
was not
reasonably able to identify and review the omitted recipients.
For
"some unknown reasons," these recipients were simply
"inadvertently"
missed by the reviewers. State Brief, p. 9. /4/
The regulation at 42 CFR 456.652(b) states a general requirement for
an
on-site medical review in every facility for each Medicaid
recipient.
Furthermore, a state may not aim for anything less than completion
of
100% of the required reviews by the end of the showing quarter.
Order,
pp. 6-7. Here, we are faced with a situation where there is no
dispute
that reviews did not include one or more Medicaid recipients who were
in
the facility and who ought to have been included in the on-site
review.
We agree with HCFA that where such recipients are omitted from
the
medical review performed at the facility, such a facility is legally
on
a par with a facility which was entirely unreviewed.
B. Whether Delaware's showing is satisfactory under the
statutory
exceptions at section 1903(g)(4) (B).
Delaware reasoned that its good faith and due diligence are shown by
(1)
the conduct of reviews in all of its ICFs and patients since they
were
Medicaid eligible. Moreover, Delaware argued that missing these
four
patients in two facilities was "a classic case of a failing which
is
technical in nature only."
Delaware noted that the facilities in question had less than 200
beds.
Accordingly, Delaware contended that its compliance had to be
assessed
in terms of section 1903(g)(4) (B) (i) which mandates reviews in
"not
less than 98 per centum of . . . facilities requiring such
inspection.
. . ." Delaware again disputed HCFA's interpretation of the
statute,
equating the failure to review a single recipient with a failure
to
review an entire facility. Delaware argued that HCFA's application
of
the statute is plainly unjustified by the statutory language
and
legislative history, which clearly emphasize a facility oriented
review.
Delaware then argued that HCFA's approach harmed states, such
as
Delaware, with a(10) small number of long-term care facilities, in
that
a failure to review four patients in two facilities may alone preclude
a
state from meeting the 98% standard established by the statute.
However,
under HCFA's approach, the fact that a state made a good faith
effort to
conduct 100% of the required facility reviews and review all
recipients in
those facilities, will be ignored simply because the state
inadvertently
missed four patients and in spite of the fact that the
State clearly reviewed
more than 98% of all patients due for review.
Delaware stated that the
corollary to this argument is that, under
HCFA's current application of the
statute, a larger state with more
facilities can conduct reviews which miss
far more recipients, yet their
medical review programs can be found in
compliance with the statute.
Additionally, Delaware argued that the language of 42 CFR
456.653(a)(3)
and (b), which does not appear in the statute, restricts the
coverage of
the statute. Delaware stated that it was not clear "that
the 30 day
rule . . . applies to the exception section as compliance . . . is
not
expressly conditioned on the 30 day limit." Delaware noted that
although
the legislative history of section 1903(g)(4)(B) mentioned that
a
showing made under the technical failings exception should be
completed
within a few weeks of the close of the quarter, neither
the
(House-Senate) Conference Agreement, nor the statute as enacted
mentions
this requirement. Thus, Delaware argued, it would be
"reasonable to
conclude that Congress intended that the discretion bestowed
on the
Secretary for technical failings not be limited in terms of
time."
Delaware Response to the Order, p. 4.
In order to address Delaware's arguments concerning the
statutory
exception, we first discuss the meaning of the 98%/200 bed standard
in
section 1903(g)(4)(B) and what a state must show to meet that
standard.
1. A general analysis of the statutory exception.
The Order noted that the statutory exception had been added because of
the
apparent requirement in section 1903(g)(1)(D) for the Secretary "to
find a
State's showing unsatisfactory if a single (facility's medical
review) was
omitted or late or did not completely fulfill the statutory
requirements."
Order, p. 3.
In the Order, we posed the following interpretation of the 98%/200
bed
standard --
Under section 456.653, the Secretary is to find a state's
showing
satisfactory if (1) the state met the 98%/200 bed standard by the
close
of the showing(11) quarter and exhibited good faith and due diligence
in
that its failure to complete 100% of the required reviews was beyond
its
control or reasonable anticipation or (2) the state meets the 98%/
200
bed standard within 30 days of the close of the quarter (possibly
even
meeting the 98%/200 bed standard before the close of the quarter)
and
there were circumstances within the state's control, i.e.,
technical
reasons, which prevented 100% of the required reviews from taking
place
during the quarter. /5/
HCFA responded to the Order's tentative analysis and --
(1) Agreed with the Order's interpretation of the 98%/200
bed
standard for the "good faith and due diligence" exception;
(2) Interpreted 42 CFR 456.653(b) as a "subpart" of the "good
faith
and due diligence" exception; and
(3) Presented a different version of the technical
failings
exception.
HCFA attempted to recast its regulation implementing the
statutory
exception. HCFA created a technical failings "subpart" to the
good
faith exception and predicated this exception on a state's having
first
met the good faith and due diligence standard and on having
technical
reasons for not meeting the 98%/200 bed standard by the close of
the
quarter, but meeting this standard within 30 days of the close of
the
quarter. HCFA read the "subpart as applying only where the state
failed
to conduct a timely 100% review(12) due to reasons beyond its
control
and made a good faith effort to do so." HCFA Response to Order, p.
4,
n.1. HCFA then presented a new version of the technical
failings
exception which required a state to complete 100% of the
required
reviews within 30 days of the close of the quarter. /6/
In its Response to the Order, HCFA argued that allowing a state
which
claims the technical failings exception, and thus failed to complete
the
reviews for reasons within its control, to meet the same standard as
a
state that failed, notwithstanding its good faith and due
diligence,
violated common sense.
HCFA may wish that it had implemented the exception differently,
but
cannot now take a position contrary to its own published regulation
as
explained in the preamble, without amending that regulation. A
state
seeking guidance on the exception reviewing the preamble to the
final
rule would find plain language stating --
. . . we have revised the final regulation to allow states,
under the
technical failings exception, to reach the 98 percent, 200-bed
standard
(rather than a (13) standard of 100%) within 30 days of the close of
the
quarter if there were circumstances (within their control) during
the
showing quarter which prevented the reviews from taking place.
We
believe that this change accurately reflects Congressional intent.
44 Fed. Reg. 56336.
In its promulgation of the final regulation, HCFA clearly rejected
the
interpretation it now espouses. Furthermore, the legislative
history
relied on by the Agency as support for requiring 100% of the reviews
to
be completed within 30 days of the showing quarter to meet the
technical
failings exception was repeated in the preamble to both the
proposed and
final rules. /7/ The Agency was aware of the legislative history
and
implemented the technical failings exception as consistent with
its
intent. HCFA is now ignoring the only published interpretation of
the
exception on record and relying instead on an interpretation which,
to
this point, HCFA itself had rejected. HCFA's position is
unreasonable.
Ordinarily, the Agency's reading of the applicable statutes
and
regulations would have great weight. The reading the Agency
advanced
here, however, has no contemporaneous support from the
action
transmittals and is directly contrary to the preambles to the
proposed
and final rules and must be rejected out of hand as incorrect.
In sum,
our reasons are as follows:
(1) The Order's statement of the meaning of the statutory
exception
derives from express language in the preamble to the final
regulation
explaining the "good faith and due diligence" and technical
failings
exceptions.
(2) There is no basis in the preambles to the proposed and
final
regulation for concluding that 42 CFR 456.653 implemented the
"good
faith and due diligence" exception and a subpart of that exception
--
only a part of section 1903(g)(4)(B) of the Act.(14)
(3) Although the Agency's proposed regulation implemented
the
technical failings exception to require completion of 100% of
the
required reviews within 30 days of the close of the quarter, the
Agency
rejected this interpretation in the final rule and in the
preamble
explained why this was not its interpretation of the technical
failings
exception.
(4) Whatever anomaly the Agency now sees in the apparently
more
lenient application of the technical failings exception, this
was
clearly intentional. (We noted at one point in the Order that
perhaps
this was in recognition of the difficulties inherent in reviewing
all
patients in all facilities; the Agency did not specifically comment
on
this possible rationale.)
In addition, we affirm what we tentatively found in the Order for
the
technical failings exception and conclude that requiring the 98%/200
bed
standard to be met by the end of the 30-day period allowed by
statute
for submission of showings is consistent with the legislative
guidance.
We do not agree with Delaware that the regulation at 42 CFR
456.653
fatally restricts the statute. Those parts of the regulation
cited by
Delaware provide guidance as to how the statute has been interpreted
by
the administrative agency charged with that responsibility. Review
of
the legislative history and the preambles shows that the
referenced
language was purposefully considered and included by the Agency in
the
final regulation. Section 456.653(a)(3) is consistent with the
Agency's
longstanding view of when it would not determine a
showing
unsatisfactory. With regard to section 456.653(b), the 30 day
reference
is administratively workable and obviously relates to the statutory
30
day time period to submit the quarterly showing and the reference
to
technical reasons as within the state's control represents
the
administering agency's judgment as to the meaning of that
exception.
Simply because the State would prefer that the Agency interpret
a
statutory provision differently, does not oblige the Agency to do so.
2. Whether a state must certify to the availability of the
statutory
exception in its quarterly showing.
HCFA raised this issue for the first time in its Response to the
Order.
There, the Agency indicated that, as a precondition to qualifying
for
either the "good faith and due diligence" or technical
failings
exceptions, a state must inform HCFA, at the time it submits
its
quarterly report, of (1) all facilities due for review by the end of
the
quarter that were not reviewed, and (2) the reasons why
the(15)
facilities were not reviewed. The Agency noted that the states
had been
made aware of this requirement through two action
transmittals,
HCFA-AT-79-61 (July 2, 1979), and HCFA-AT-77-106. HCFA
Response to the
Order, pp. 4-5. If we uphold the Agency on this
precondition, the
statutory exception would be unavailable here.
Delaware did not submit
evidence that it claimed the exception in its
quarterly showing, and, in
any event, this appears a practical impossibility
since Delaware was on
site performing reviews in each facility during the
first quarter of
1984 and only learned later that these patients had been
missed. Thus,
there is no evidence that Delaware knew when it submitted
its showings
that two reviews were deficient.
Section 1903(g)(4)(B) provides that a state's showing shall
be
satisfactory if the showing demonstrates that the state met the
98%/200
bed standard and the state met either the "good faith an due
diligence"
or technical failings exceptions for those facilities not
reviewed. The
implementing regulation at 42 CFR 456.654(a)(1) provides that a
state's
showing must include --
. . . a certification of the reasons the annual on-site
review
requirements . . . were not met in any facilities.
AT-77-106 provided on page 8 --
. . . States are to include with their showings . . . a list of
all
facilities which . . . did not receive an appropriate review during
the
12 month period ending on the last date of the showing quarter.
Additionally, AT-79-61 stated on page 11 --
. . . States must include . . . list of all facilities, . . .
that
were due for annual review by the close of the quarter, but did
not
receive it.
The Agency argued that the action transmittals establish a
precondition
making the statutory exception unavailable to a state unless
established
on the face of the quarterly showing. While the action
transmittals
make it clear that, if a state knows that a facility has not
received an
appropriate review, the state must report this on its showing,
this does
not necessarily mean that a state is precluded from claiming
the
exception where HCFA determines, after-the-fact, that the review of
one
or more facilities was not an appropriate review or where a state
for
technical reasons unknowingly failed to perform any review at
all.(16)
Strict application of the precondition such as the Agency proposed
here,
without regard to the circumstances of a particular case, may work
a
substantial injustice upon a state in certain instances. For
example,
as happened here, if HCFA determined after a state's showing that
the
review for a particular facility did not meet the statutory/
regulatory
standards, the facility is treated as if no review had been
performed.
Thus, the time for a state's submission of a list of
unreviewed
facilities for which it wishes to claim an exception would have
passed
by the time the state was informed that a facility's review
was
deficient. The state having believed the review of the facility to
be
valid, did not list it as unreviewed and therefore cannot, under
the
HCFA policy advanced here, claim the good faith or technical
failings
exceptions to the annual review requirement.
Regardless of the fact that HCFA notified the states that it
expected
listings of unreviewed facilities and reasons for which the states
could
claim an exception, the action transmittals did not address
the
situation where a quarterly showing submitted in good faith is
later
determined invalid. The emphasis in section 1903(g)(4)(B) is on
the
showing demonstrating that a state met the 98%/200 bed standard.
This
makes the showing the basic source of evidence of reviews performed
by
the state. The action transmittals establish a ministerial
requirement
for completeness with regard to what the state must submit
quarterly,
i.e., if a state did not review a facility or performed a
deficient
review, the State should certify as to the reason why. The
effect of
imposing a precondition like the Agency advocated here is so
extreme,
that it is not an implicit requirement that may be applied
without
notice. Moreover, the Agency never supported its proposed
precondition
by offering a reason why the precondition should be
imposed. The
precondition would preclude a state showing from being
found unknowingly
to review one patient in a facility, but mandate the
showing be found
satisfactory if due to the same type of technical failing a
state had
knowingly omitted review of an entire facility and claimed the
exception
in its quarterly showing. Therefore, the practical effect of
the
application of the precondition as argued by the Agency here would be
to
deny the states access to the statutory exceptions. The
action
transmittals do not explicitly require this, and in any event we
think
the effect of the precondition is contrary to congressional intent
in
enacting the exception so that the Agency cannot reasonably apply
the
action transmittal requirement in this way.(17)
3. The meaning of the requirement to review 98% of the facilities
and
all facilities with 200 or more beds.
In the Order we asked the parties to comment on the meaning of
the
requirement to review 98% of the facilities and all facilities with
200
or more beds. After reviewing the parties responses, we are
convinced
that the following analysis is correct. The 98% requirement
pertains
not to the number of facilities in a particular level of care
under
review during a quarter, but to the completion of reviews in 98% of
the
combined total of all facilities where such a review was required
by
1903(g)(1) during the 12-month period ending with the close of
the
quarter in question. AT-77-106, p. 5; 43 Fed. Reg.
50925; 44 Fed.
Reg. 56336-56337. For example, assuming a state
had a total of 100
intermediate care facilities, skilled nursing facilities,
and mental
hospitals due for review during the annual period from March 31,
1984 --
March 31, 1985, the state would meet the 98%/200 bed standard for
its
showing submitted for the quarter ending March 31, 1985 if it
completed
reviews during the annual period in 98 facilities including all
those
with 200 or more certified Medicaid beds. /8/
4. Application of the statutory exceptions to the facts.
As we discussed above, the statutory exception specifically requires
that
a state review 98% of all facilities due for review and all 200
bed
facilities by the end of the showing quarter for the purposes of
the
"good faith and due diligence" exception and within 30 days of the
close
of the quarter for purposes of the technical failings exception.
There is no dispute here that the facilities where HCFA found
deficient
medical reviews had less than 200 beds. Therefore, in order
to take
advantage of the statutory exception, Delaware was required to
review
98% of all facilities due for review. Delaware indicated that
42
facilities were due for annual review during the twelve month
period
ending March 31, 1984. For the twelve month period ending June
30,
1984, 43 facilities were due for review. The Agency found
Delaware's
on-site medical reviews during the first quarter of 1984 deficient
in
two facilities. The deficiencies were not corrected until August
1984,
when the State reviewed the patients initially omitted. Thus,
Delaware
clearly failed to review 98% of all facilities for which a review
was
required by March 31, (18) 1984 -- the end of the showing quarter.
This
continued throughout the second quarter of 1984. /9/
Additionally, even if Delaware had met the 98%/200 bed standard
within
the required time, we would not find that either exception applied.
The
only written policy interpretation of circumstances constituting
"good
faith and due diligence" is set out in AT-77-106. Simply stated,
this
exception could be applied in situations where reviews were missed
due
to circumstances beyond a state's control. Delaware refers to
its
failure to conduct the medical reviews as "inadvertent". There
is
nothing to show that this failure was related to circumstances
beyond
the State's control. The circumstances here, rather than
demonstrating
"good faith and due diligence", as alleged by Delaware, are
more
appropriately considered with the types of "disorderly record
keeping"
or staffing or scheduling problems which the Agency explicitly
stated
would not place a state within this exception.
As we note in the Order, there is little guidance about what is
properly
regarded as a technical failing. However, since a state may
not aim for
less than 100% compliance with the annual review requirement,
we
generally agree with the basic principle underlying HCFA's position
that
technical failings are based on circumstances within a state's
control,
but that poor administration or bad record keeping should not
be
considered a technical failing. HCFA Response to the Order, p.
6.
Similarly, we cannot condone an unexcused failure to attempt a review
or
a review deficient for no apparent reason as a technical failure.
We
believe the term "technical failings," however imprecise,
is,
nonetheless, a term of art. The term does not mean, as Delaware
argues,
that a few unexcused individual reviews missed in the overall
annual
review constitute mere "technicalities" which fall within the
technical
failings exception.
Finally, we note that even if an inadvertent failure to review a
recipient
could be deemed a technical failing, Delaware did not
demonstrate that it met
the 98%/200 bed standard within 30 days of the
close of either quarter for
which a disallowance was taken. (19)
D. Whether HCFA erred in its inclusion of one patient in the
group
cited for annual review violations.
Delaware argued that HCFA had incorrectly included a patient residing
in
the Jeanne Jugan Residence in the disallowance. Delaware noted
that
"due to breaks in the patient's coverage, . . . the patient's case
had
not been open for a full twelve months and . . . was not due for
an
annual review." (Delaware Brief, p. 20; Attachment D) However,
Delaware
has not argued, nor does the evidence demonstrate, that the patient
in
question was not a Medicaid recipient residing in the facility at
the
time of the annual review. HCFA maintained that the
applicable
regulation requires that an annual review must include all
Medicaid
patients in a facility at the time of the review. /10/ Further,
HCFA
noted that since there were other patient violations aside from the
one
challenged by Delaware here, the facility was still
appropriately
included in the disallowance. HCFA Brief, p. 4. Delaware
did not
specifically respond to this point.
As we have discussed earlier, the preamble to 42 CFR 456.652(b)
clearly
indicates that, "States are not required to track the length of
time
each individual recipient was in a facility, and the (facility's)
review
date would not relate to the length of stay of any individual
recipient
in that facility." See 44 Fed. Reg. 56335. The same preamble
reiterates
at a later point that "the regulatory scheme . . . is based
on
facilities, not the length of time individuals were in
those
facilities." Id.
Delaware's approach suggests that a patient must reside in a facility as
a
Medicaid patient for one year prior to being subject to review.
Thus,
an individual could avoid review for a period substantially in excess
of
one year, simply by virture of successive breaks in the
patient's
coverage. We do not find this approach supported by the
regulation or
the preamble. This individual was a Medicaid recipient in
this facility
prior to the start of the review and was present during the
review.
Thus, Delaware was clearly obliged to(20) review this
recipient. We
conclude that this patient was properly included as a
basis for the
disallowance. /11/
E. The constitutionality of section 1903(g)(5)
Delaware contended that the utilization control penalty provision
at
section 1903(g)(5) of the Act is arbitrary, unreasonable, and
irrational
in its application to smaller states. Delaware maintained
that the
disparate impact of the penalty calculation on smaller
states
constitutes a due process violation under the 5th Amendment of
the
United States Constitution. Delaware argued that two states with
the
same number of facilities reviewed and violations found, could
receive
penalties which would not reflect the difference in those states'
size
and resources.
The Agency characterized the Public Law 95-142 amendment to the
reduction
calculation as "substantially reducing this drastic penalty."
Prior to
amendment the statutory reduction equaled "one-third of the
total Federal
matching" for each level of care for the quarter for only
a single violation
for a patient at that level. The amended reduction
calculation provided
for a reduction "roughly equivalent to one-third of
the Federal matching
payment for long stays in the quarter by patients
receiving the same level of
care in the facility or facilities with
respect to which UC requirements were
not met (footnote omitted)."
(emphasis in original) AT-77-106, p. 10.
Public Law 95-142 provides evidence to support the proposition
that
Congress has considered section 1903(g)(5) and that that section of
the
Act accurately reflects the manner in which the statutory reduction
was
meant to apply. Additionally, Delaware has provided no evidence
that
Congress intended anything other than to apply this aspect of
the
statute to all states. Under 45 CFR 16.14 the Board is bound by
all
applicable laws and regulations. Therefore, we are required to
apply
section 1903(g)(5) in this case.
Conclusion
Based on the analysis above, we conclude that Delaware failed to
conduct
valid annual medical reviews at two ICFs during the first two
quarters
of 1984. Thus, we uphold (21)
HCFA's decision to take a disallowance for those quarters. The
amount
of federal funds ultimately disallowed will be based on
HCFA's
recalculation of the penalty based on exact recipient data. If
the
parties are unable to agree on the manner in which the
disallowance
should be calculated they may return to us for assistance on
that
limited question. /1/ Amendments to section 1903(g) made by
section
2363 of the Deficit
Reduction Act of 1984 (DEFRA) deleted the
provisions in 1903( g)(1)(A), (B),
and (C) requiring a state's showings
to include evidence for "each" case that
certification, recertification,
and plan of care requirements were met and
evidence of a "continuous
program" of utilization review under section
1902(a)(30). The DEFRA
Amendments also amended section 1902(a)(31) (the
changes made to that
section do not affect the issues presented here). DEFRA
was enacted July
18, 1984. /2/ Public Law 95-142 added section
1903(g)(4)(B), among
other
amendments, to section 1903(g). See section 20 of the
Medicare-Medicaid
Anti-Fraud and Abuse Amendments of 1977, Pub. L.
95-142, October 25,
1977. /3/ The Order was issued
in this case
as well as four other appeals -- Colorado Department of Social
Services,
Docket No. 85-31; New York State Department of Social
Services, Docket
No. 85-35; Pennsylvania Department of Public Welfare,
Docket No. 85-40;
and Arkansas Department of Human Services Docket No.
85-42; these
cases all raised substantially similar issues. The
Orders also
contained specific questions pertinent to the individual
appeals. The
Agency submitted a consolidated response to the Order on
the
cross-cutting issues. Additionally, orders raising similar types
of
questions and concerns were issued in Idaho Department of Health
and
Welfare, Docket No. 85-6; New Hampshire Department of Health
and
Welfare, Docket No. 85-38; and Tennessee Department of Health
and
Environment, Docket No.
85-46. /4/ We do not imply here
that the
retrospective identification by the Agency of one or more
patients
omitted from a medical review is necessarily always a proper basis
for a
finding that the State violated the on-site medical review
requirement.
We have found in other cases that the patients identified by the
Agency
did not have to be reviewed. See, e.g., North Carolina Department
of
Human Resources, Decision No. 728, March 18, 1986. /5/
Alternatively,
we inquired whether
42 CFR 456.653(b) should be read literally
to mean that a state need not meet
the 98%/200 standard by the close of
the quarter, so long as the state has
technical reasons for not doing
so; and that within 30 days of the
close of the quarter a state need
only meet the 98%/200 bed standard and does
not need to demonstrate
technical reasons for not reviewing 100% of the
patients. We reject this
interpretation even though it represents a literal
reading of the
regulation. We believe this interpretation is incorrect
because it
would implicitly permit a state to aim for less than total
compliance
with the basic requirement to complete 100% of the required
reviews by
the close of the showing quarter. Properly interpreted, the
regulation
implements the exception but can not be construed as altering the
basic
requirement. /6/ As we
stated in the Order, our analysis of the
meaning of the statutory exception
and the implementing regulation at 42
CFR 456.653 derived from AT-77-106 and
the preambles to the proposed and
final regulations. Although the
Agency response presented a contrary
view of the meaning of the exceptions,
the Agency did not analyze the
material relied on by the Board and explain
why the Board's conclusion
was incorrect. The preamble to the proposed rule
indicates that the
amendments to section 1903(g) were
-- //ot intended to
permit
agencies to aim for less than 100 percent performance of the
review
requirement. Rather, (Pub. L. 95-142) was intended to permit a
limited
exception to the 100 percent requirement in the specified situations.
43
Fed. Reg. 50925 We agree that the basic medical review
requirement
remains unchanged; the interpretation of the exception
stated in the
Order is premised on the overall objective of completion of
100% of the
required reviews by the close of the showing
quarter. /7/ The
preamble to
the proposed rule stated that while the legislative history
was silent as to
what constituted a technical failing, it specified that
the "exception would
cover instances in which a state had reviewed
patients in most facilities on
time, with the remaining facilities
reviewed within several weeks after the
end of the quarter. (95th Cong.,
1st Sess. Senate Committee on Finance,
S. Rept. No. 95-453, p. 41.)"
/8/ Delaware initially based its argument
concerning the 98%/200 bed
standard on a faulty interpretation of what this
requirement means. /9/
HCFA
indicated that "if the (sic) Delaware had failed to review
only 1 out of 45
facilities (97.778%) or 1 out of 49 (97.959%), the
Agency would round off the
percentage figures to 98%." HCFA Response to
the Order, pp.
13-14. /10/ But see South Dakota
Department of
Social Services, Decision No. 650, May 28, 1985, where we held
that an
Inspection of Care team is not responsible for reviewing a
patient
determined Medicaid eligible after the team entered the facility
to
begin the annual review.
/11/ Additionally as HCFA correctly
notes, even if we were to find that this
person did not have to be
included in this review, the existence of other
patient-violations in
the facility mandates that it be included in the
penalty calculation.