GAB Decision 566
Docket No. 83-165
August 22, 1984
Indiana Social Services Fiscal Office;
Garrett, Donand; Settle, Norval Ballard, Judith
The Indiana Social Services Fiscal Office appealed a determination by
the Office of Human Development Services (OHDS) disallowing State claims
for federal financial participation (FFP) under Title XX of the Social
Security Act for social services provided to residents of various
institutions. Based on an audit report, OHDS determined that the State
had claimed FFP in costs which violated section 2002(a)(11) of the Act
and the implementing regulations, which prohibit use of Title XX funds
for services to residents of prisons or intermediate care facilities,
unless certain conditions are met.The State appealed disallowances
totaling $2,217,658, relating to claims in the following general
categories: Reception and Diagnostic Center services for adult
offenders, $632,888; Intake and Evaluation Unit services for juvenile
offenders, $308,960; Day Activity Programs for the developmentally
disabled, $1,199,149; and Diagnostic and Evaluation services for the
developmentally disabled, $76,661. Subsequent to a hearing held by the
Board in this case, OHDS withdrew the $308,960 disallowance for Intake
and Evaluation Unit services.
For the reasons discussed below, we conclude that 1) the Reception
and Diagnostic Center is a prison and, therefore, the costs of services
provided by the staff of that facility are not allowable; and 2) the
Day Activity Program and Diagnostic and Evaluation services (except for
certain counseling and therapy services provided as part of the Day
Activity Programs) met the conditions for funding for services to
residents of intermediate care facilities, including the reguatory
condition that the services not be activities intrinsic to the purpose
of the facilities. Accordingly, we upheld the disallowance in part, and
reverse in part. With respect to the $30,293 for counseling and therapy
services, we remand to OHDS to reexamine the services in light of our
analysis.
I. Reception and Diagnostic Center costs.
Section 2002(a)(11) of the Act prohibits use of Title XX funds for
services provided to prison inmates by prison staff.
(2) OHDS disallowed $632,888 in FFP claimed for costs of services
labeled "Diagnostic Service for Offenders" and provided by a State
institution called the Reception nd Diagnostic Center (RDC), based on
audit findings that the RDC was a prison and that the services were
provided by the staff of the RDC. OHDS regulations define the term
"prison" for purposes of section 2002(a)(11) as follows:
"Prison" means any State or local correctional institution or
facility for the confinement of individuals charged with or convicted of
criminal offenses. The term does not include separate juvenile
correctional facilities nor community-based residential service
facilities, such as half-way houses.
45 CFR 1396.44(c)(1) (1980). /1/
The State did not deny that the services in question were provided by
RDC staff but said that the State had "interpreted this regulation to
mean that a prison is an institution that has as its sole and primary
purpose the confinement of individuals convicted of criminal offenses."
State's appeal file, Tab B-1, p. 2 (emphasis in original). The State
argued that this interpretation was developed "because it provided an
operational definition that was logically consistent with the understood
intent of the regulation and federal statute." Id. The State argued
that the RDC was established for the sole purpose of diagnosing
individuals charged with or convicted of criminal offenses and
classifying these individuals for proper placement within the State's
penal system. The State also argued that OHDS was involved in the
development of the State's provisions in its Title XX Comprehensive
Annual Services Plan (CASP) that related to these services and, thus,
should be estopped from disallowing the costs now.
These issues were previously addressed by this Board in Indiana
Office of Social Services, Decision No. 283, April 28, 1982. /2/ There,
the Board that the RDC had (3) the characteristics of a prison
nincluding that the RDC was a maximum security facility and that time
spent in the RDC counted toward an inmate's prison term), and that there
was no basis in the regulation for the State's alleged distinction
between facilities which confine criminals because that is their sole
purpose and those that do so only incidentally to some other purpose.
Moreover, the Board found that the parties' discussions related to
including these services in the CASP focused on how the State could
comply with the regulations at 42 CFR 1396.44 and that it was OHDS'
understanding that the State intended to have the services provided by
outside contractors, rather than RDC staff. Thus, contrary to the
State's assertion that it had interpreted the regulation as not applying
to the RDC, the clear implication was that the State knew it applied.
In this case, the State did not submit any new evidence or
information which would alter our conclusion in Decision No. 283 that
the RDC is a prison and that the State did not rely on agency action in
incurring the costs. Accordingly, for the reasons stated above and in
Decision No. 283, we uphold the disallowance of $632,888 in costs of
services provided by the RDC.
II. Day Activity Programs and Diagnostic and Evaluation Services.
Indiana's Comprehensive Annual Services Plan (CASP) for Title XX
services covered Day Activity Programs, a general heading for services
provided to the developmentally disabled in the following subcategories:
Sheltered Workshop, Work Activity, Adult Day Activity, Adult Daily
Living Skills, Counseling - Casework - Individual, Counseling - Casework
- Group, Transportawtion, Therapy - Individual, and Therapy - Group.
The CASP also covered Diagnostic and Evaluation Services for the
developmentally disabled, to determine which of the Day Activity
Programs were most appropriate for each individual. OHDS disallowed
$1,199,149 in FFP claimed for Day Activity Programs and an additional
$76,661 for Diagnostic and Evaluation Services, provided to residents of
intermediate care facilities (ICFs), during the period July 1, 1979
through April 30, 1981. OHDS determined that these services were
activities intrinsic to the purposes of the facilities and therefore
unallowable under 45 CFR 1396.44(b)(2).
In essence, OHDS' position was that the services were "intrinsic
activities" because the ICFs were responsible for the services under
Medicaid certification requirements. In reaching this conclusion, OHDS
relied on its interpretation of the Medicaid requirements and on
statements made in two OHDS memoranda, which responded to "Policy
Interpretation Questions" asked by regional officials and were issued to
state agencies as PIQ 76-22 and PIQ 80-5. At the hearing, OHDS also
said that the services were unallowable because they were provided
outside the ICFs in community facilities.
(4) Below, we discuss the relevant statutory and regulatory
provisions. We then explain why we conclude that OHDS applied the
requirements here in an overbroad manner which is not justified by the
statute and its underlying purposes, nor by the plain wording of the
regulations and other policy issuances. The State here appropriately
used Title XX funds to pay for habilitative services which promote
deinstitution-alization of the residents, and which the ICFs were not
required to provide and could not have been reimbursed for under
Medicaid. We also discuss why we think that the record is insufficient
to determine whether the counseling and therapy services include
unallowable services and, therefore, that OHDS may further examine these
services in light of our decision.
A. What the statute and regulations provide.
Effective October 1, 1975, Title XX authorized FFP in expenditures
incurred under state programs for social services, to low income
individuals and families, directed at the goals specified in the Act.
These goals included the goal of "providing services to individuals in
institutions." Section 2002(a)(1)(E) of the Act. However, section
2002(a)(11) provided:
No payment may be made under this section with respect to any
expenditure for the provision of any services to any individual living
in any hospital, skilled nursing facility, or intermediate care facility
(including any such hospital or facility for mental diseases or for the
mentally retarded), . . . except --
(A) any expenditure for the provision of a service that (i) is
provided by other than the hospital, facility, . . . in which the
individual is living, and (ii) is provided under the State's (Title XX)
program . . ., to individuals who are not living in a hospital, skilled
nursing facility, intermediate care facility . . . .
The legislative history of this section indicates that Congress was
primarily concerned that the states not use Title XX funding to
refinance existing state programs. The relevant Ways and Means
Committee Report states:
The prohibition in the bill against funding for services provided by
hospitals, skilled nursing facilities, intermediate care facilities, and
prisons, is designed to avoid refinancing programs in such institutions.
Again, however, the issue is complex: in order to improve the lives of
institutional residents, and particularly to prepare them to leave the
institutions, in-reach services by outside organizations appear
warranted, and are provided for in the bill. A continued concern for
refinancing, however, requires (5) that States only fund in-reach
services provided to other eligible individuals.
H.R. REP. No. 1490, 93d Cong., 1st Sess. 8 (1974); see, also, S.
REP. No. 1356, 93d Cong., 1st Sess. (1974).
Program regulations restate and expand upon the two statutory
conditions for reimbursable services: that the services be provided by
other than the staff of the facility and that the services also be
provided to community residents. 45 CFR 1396.44(a). The regulations
further state that FFP is not available for services that are either:
"Inherent responsibilities of a facility such as food, clothing,
shelter, general maintenance and administration . . ." (section
1396.44(b)(1)), or "Activities that are intrinsic to the purpose of such
facility, as determined by facility charter, State law or standards,
relevant licensing or certification requirements, or Federal or State
court decisions" (section 1396.44(b)(2)). /3/
The "intrinsic activities" requirement was explained in the preamble
to the original version of the regulations:
The Department believes that Congress intended social services to
supplement and provide for innovative programs to assist in the
deinstitutionalization of individuals, not to finance or refinance those
functions which are the essential purpose of the institution's
existence; . . .
40 Fed. Reg. 27353, June 27, 1975.
In Florida Department of Health and Rehabilitative Services, Decision
No. 414, April 29, 1983, this Board addressed an argument by the State
of Florida that the "instrinsic activities" requirement conflicted
with
the statute because it was not one of the specific statutory conditions
for "in-reach" services. Based on OHDS' explanation of the purpose
of
the provision, we said:
The intrinsic activities requirement implements the statutory
conditions listed (in the statute) by ensuring that states will not
shift services which are intrinsically the responsibility of the
institutions (and therefore should have been provided by staff of the
(6) facility) to other outside entities solely for the purpose of
obtaining federal funds.
Decision No. 414, p. 22.
In Decision No. 414, we also said that, since the intrinsic
activities requirement is ambiguous and is not specifically listed as
one of the statutory conditions, it must be read in light of those
conditions. Finally, we found that the fact that Florida had not simply
used Title XX funds to refinance services in its institutions was
evidence that Florida's system for providing services was not a mere
"subterfuge" as OHDS had contended. Decision No. 414, p. 22.
B. Whether the services here met the statutory conditions and
underlying purpose.
OHDS did not allege here that the State failed to meet the conditions
explicitly set out in the statute. Indeed, the following facts are
undisputed here:
* The services in question were not provided by the ICF staffs. The
Day Activity Program services were provided by Community Agencies for
the Developmentally Disabled (CADDs), which are non-profit, local
organizations, under contract with the Indiana Department of Mental
Health (DMH). The Diagnostic and Evaluation services were provided
either by CADDs or by specialized teams under contract with DMH.
* The services were generally available to all developmentally
disabled individuals in the communities, not just to the ICF residents.
The State said that the services were directed at several of the
goals set out at section 2002(a)(1) of the Act, including the goals of
promoting self-sufficiency, reducing dependence, and preventing or
reducing inappropriate institutional care. The State presented
testimony by two State officials (one with the Indiana Social Services
Fiscal Office and one with DMH), who said that the services promoted
deinstitutionalization of the ICF residents. OHDS did not directly deny
these assertions, nor present any rebuttal testimony, but questioned
whether the services could be considered as part of a
deinstitutionalization process, given that the auditors had found that
some of the ICF residents had been receiving the services for up to 10
years but were still in the facilities. Both State witnesses testified,
however, that, even where the services were provided over a long period
of time, they could still be considered part of the
deinstitutionalization process since some developmentally disabled
individuals progress very slowly to the point of actually being able to
move into the community. Tr. pp. 73-74; 107-108. One witness also
pointed out that the ICF (7) environment was less restrictive than some
other forms of institutionalization and that these residents left the
ICFs for between four to eight hours a day to participate in the Day
Activity Programs with other community residents. Tr., pp. 107. We
found the State's witnesses to be generally knowledgeable about the
concept of deinstitutionalization and the State's services program.
Moreover, the State standards for the Day Activity Programs show they
covered a continuum of services for individuals functioning at various
developmental levels, from those needing basic skills, to others needing
pre-vocational skills, to those who could handle a sheltered workshop
environment producing useful goods. State's appeal file, Tab B-1.
Thus, we find that funding these services with Title XX money is
consistent with the statements in the legislative history of section
2002(a)(11) and in the preamble to the implementing regulations that
Congress intended generally to fund services which assisted in
deinstitutionalizing individuals.
Funding these services is also consistent with the further
Congressional intent not to merely refinance State programs. The State
presented testimony by State officials who administer the Medicaid
program in Indiana to show that the Medicaid reimbursement rate paid to
ICFs does not cover these types of services, and never has. See, e.g.,
Tr., P. 117. OHDS did not present any evidence to rebut this. This
auditors mentioned that the State was operating day activity programs
prior to the implementation of Title XX, but there is no evidence that
the State was doing so through ICFs, or even that ICF residents were
receiving the services prior to Title XX.
The State also presented additional evidence to show that Medicaid
would not cover these services when provided to residents of general
ICFs. The State presented testimony describing these services as
"habilitative" in nature rather than "rehabilitative." See,
e.g., Tr.
pp. 102-103. The State also submitted a letter by an Associate Regional
Administrator for the Health Care Financing Administration (HCFA), which
administers the federal Medicaid program, distinguishing these two types
of services as follows:
Habilitative services are essentially non-medical services that focus
on the development and maintenance of life skills that will enable the
individual to function to the best of his/her capacity. . . . On the
other hand, rehabilitative services are those medical items or services
designed to restore an individual's ability to function to the extent
his/her condition will permit.
State's reply brief, Att. A.
(8) The letter also specifically stated that habilitative services
are not covered in the Medicaid program except for residents of an
intermediate care facility for the mentally retarded (ICF/MR) or in
certain other circumstances not relevant here. Id.; see also State's
reply brief, Att. B. The State submitted the letter containing these
statements with its reply brief. Although a HCFA official was present
for part of the hearing in this case, OHDS did not present her as a
witness, nor otherwise rebut either the HCFA official's statement about
funding or the State's characterization of the services here as
habilitative.
Thus, we conclude that allowing FFP in the services here does not
contravene either the explicit statutory conditions or their underlying
purposes. /4/ In this context, we next turn to the question of whether
funding for these services is unavailable on the basis of the Agency
regulations.
C. Whether these services are intrinsic to the purposes of the ICFs
As noted above, OHDS regulations prohibit FFP in services which are
activities intrinsic to the purpose of a facility, as determined by
relevant certification requirements. The facilities in question here
were all certified under Title XIX of the Act (Medicaid) as ICFs. In
applying Medicaid requirements to determine that the State's Day
Activity Programs and Diagnostic and Evaluation services were
unallowable, OHDS interpreted the "intrinsic activities" requirement
to
mean that funding is prohibited for any service for which an ICF has
some responsibility, even if Medicaid reimbursement does not cover that
service. See, e.g., OHDS Response to Order to Develop the Record, p.
4. As we discuss below, this interpretation is not supported by the
wording of the "intrinsic activities" requirement or by the Agency's
previous interpretations of that requirement. Moreover, in (9) applying
the Medicaid regulations here, OHDS misread those regulations in several
respects.
1. OHDS' interpretation of the "intrinsic activities" requirement.
As we said in Decision No. 414, the focus of the "intrinsic
activities" requirement is on whether a state is using Title XX funds
for services which should have been provided by the staff of the
facility. The regulation refers to certification requirements only to
determine what are activities intrinsic to the purpose of the facility.
The very use of the word "intrinsic" suggests that activities which
are
only tangentially related to the purposes of an institution may be
fundable, particularly if they are not normally provided by the
institution itself. The dictionary defines "intrinsic" as "belonging
to
the essential nature or constitution of a thing." Webster's New
Collegiate Dictionary, 1977 ed.
Moreover, the Agecy's policy statements indicate that the
disallowance here goes beyond the terms of the regulation. The preamble
to the regulation, quoted above, refers to the "essential purpose of an
institution's existence." As we discuss below, the essential purpose of
a general ICF's existence is to provide medical or remedial services,
rather than "habilitative" services like the services here. The Program
Regulation Guide for Title XX, issued in draft form by OHDS in 1975 and
in final form in 1980, refers to the "essential nature" of an
institution and to state law and other policy materials as describing
the "primary purpose and activities" of institutions. It further states
that FFP is available for services which "supplement of augment" a
facility's services. This statement is also made in the PIQs discussed
below. We think that this implies that FFP may be available even in
some services which are similar to services the facility provides. When
questioned about whether this statement was consistent with the position
taken by OHDS here, OHDS replied: "To augment would mean to provide
services not otherwise required, for example, legal services,
supplemental recreational services (PIQ 76-22) or library services . . .
." OHDS response to Order to Develop the Record, p. 2. This goes beyond
the plain meaning of the word "augment," which is "to make (something
well or adequately developed) greater, more numerous, larger, or more
intense." Webster's New Collegiate Dictionary, 1977 ed. But, in any
event, as we discuss next, these services may accurately be described as
"not otherwise required."
2. Whether the ICFs were required to provide these services.
For its interpretation that the State's services were intrinsic to
the purposes of the ICFs, OHDS relied primarily (10) on the Medicaid
certification standards at 42 CFR 442.306 and 442.344. Section 442.306
provides:
The ICF must have written policies and procedures that it admits as
residents only those individuals whose needs can be met --
(a) By the ICF itself;
(b) By the ICF in cooperation with community resources; or
(c) By the ICF in cooperation with other providers of care affiliated
with or under contract to the ICF.
Essentially, OHDS' argument was that this meant the ICFs were
required to meet any identified needs of the residents, and since the
developmentally disabled individuals who received these services needed
them, this made the services intrinsic to the purpose of the facilities.
State employees involved in administering the Medicaid program in
Indiana testified that in applying the certification requirements they
did not interpret this requirement to mean that a facility had to meet
the total needs of the residents, but referred solely to the residents'
medical or remedial needs, and that this would not generally include
habilitative needs. /5/ Tr., pp. 124, 139. OHDS did not present any
evidence that this State application of the Medicaid requirement was
inconsistent with any federal interpretation issued during the time
period in question here. /6/
(11) An even more important point is that the Medicaid regulation
explicitly permits a facility to use community resources to meet a
resident's needs, which is what happened here. The whole point in
examining certification requirements is that they may be relevant to
determining what activities are intrinsic to the purpose of a facility.
We fail to see how this certification provision somehow transforms
services which were provided by community resources (and for which the
facilities would not have been reimbursed even if actually providing the
services themselves) into services intrinsic to the purpose of the
facility.
A similar analysis applies to section 442.344. That Medicaid
certification standard provides that an ICF must provide "social
services for each resident as needed," but permits this to be done
through arrangements with qualified outside resources.
OHDS acknowledged that an ICF resident's needs could be met through
outside resources under the certification standards, but argued that the
ICF's here were quired to provide the services themselves because 1)
they were certified as providing social services through their own
in-house staff and 2) they did not have contracts with the CADDs. OHDS'
first point was based on a finding in the audit report that the ICFs had
said in their applications for certification that they would provide
"social services" through in-house staff only. Audit Report, p. 19.
The State responded, however, that it did not view the informal
arrangements between the CADDs and the ICFs to be inconsistent with the
conditions under which the ICFs were certified. The State said that it
viewed the "social services" to be provided by the in-house staff
as
covering only a narrow range of medically-related social services and
not encompassing the kinds of services in question here. This view is
not unreasonable, considering the underlying purposes and scope of the
Medicaid program. See Oklahoma Department of Human Services, Decision
No. 367, December 17, 1982. Moreover, OHDS presented no support for its
position that the provision should be read more broadly to encompass the
kinds of social services involved here. /7/
(12) Further, even if the arrangements here were inconsistent with
the ICFs applications for certification, this does not necessarily mean
that the services involved were intrinsic to the purpose of the ICFs as
determined by certification standards. As noted above, the standards
permit provision of services by community resources such as these CADDs.
For its position that the ICFs should have had written contracts with
the CADDs, OHDS cited 42 CFR 442.317(a), which provides:
If the ICF does not employ a qualified professional to furnish a
required institutional service, it must have in effect a written
agreement with a qualified professional outside the ICF to furnish the
required service.
As discussed above, it is far from clear that these services should
be considered a "required institutional service." Moreover, under
the
ICF certification standards, there is some ambiguity as to whether
contracts are required when resident needs are to be met through
community resources. Section 442.306 refers to contracts in connection
with "providers of care" not affiliated with the ICF, but not with
respect to community resources providing services in cooperation with an
ICF. Finally, even if we read the provisions as applying here, the lack
of written contracts between the CADDs and the ICFs can be viewed as
violating certification standards without necessarily implying that the
lack of the contracts transforms the services into ones which are
intrinsic to the purposes of the ICFs.
Thus, we conclude that the major provisions relied on by OHDS were
applied in a manner which is simply not warranted by the plain language
of the provisions, nor by the context in which they are relevant here.
OHDS did express a concern for duplication of funding which at first
blush seems to have merit since the ICFs were receiving Medicaid per
diem rates for some of the residents (13) (although the record indicates
that some of them were not eligible for Medicaid), yet the residents
were receiving services at the CADD facilities for up to eight hours per
day. But this ignores the fact that Medicaid reimbursement is on a
cost-related basis and having the residents out of the ICFs for part of
the day would reduce the facilities' costs. Moreover, if the ICFs were
claiming Medicaid funding for services they did not provide (and there
is no showing that they were), this would not justify a disallowance
under Title XX for services which were provided by the CADDs. Moreover,
the Agency's argument was based in part on a reading of Medicaid
regulations as requiring that the residents remain in the facilities 24
hours a day. But 42 CFR 435.1009, in defining an ICF resident as an
individual "(u)nder care and supervision 24 hours a day" does not
necessarily preclude an individual from leaving the facility for part of
the day, and a State witness testified that the State would not
decertify a facility solely on this basis. Tr., pp. 143-144. /8/
With respect to the Diagnostic and Evaluation Services, OHDS pointed
to ICF standards for a resident's plan of care. The State acknowledged
that this would require some diagnosis and evaluation of each resident,
but said that its contracts with the CADDs and other services providers
required them to use whatever information was already available in a
recipient's files and to perform only those additional studies necessary
to place the recipient in the appropriate Day Activity Program. Tr. pp.
111-112. OHDS did not dispute this, and it seems reasonable in light of
the distinction, discussed above, between habilitative and medical
services.
We have also examined the other Medicaid provisions which OHDS cited
(e.g., 42 CFR 447.15, 442.346, 442.339, 442.341, 442.342) and conclude
that the OHDS application of the requirements here is based on a
strained reading which is simply unwarranted under the circumstances
here and unsupported by any evidence that the requirements were intended
to have such an effect.
(14) 3. Whether the PIQs preclude FFP in the services.
OHDS also argued that the State knew that these services were
unallowable because PIQs 76-165 and 80-5 refer to "sheltered workshops"
and "day activity programs" and specify that FFP is available in such
services only when provided on a short-term basis as part of discharge
planning for a resident. The State said that it thought that these PIQs
did not apply to these types of programs where the services provided
were habilitative in nature, rather than rehabilitative. The State also
argued that PIQs are merely guidance documents setting out Agency
interpretations which are not binding on the State.
As OHDS pointed out, the Board has previously held that a State may
be bound by an Agency interpretation stated in a PIQ from the time the
State has actual notice of that interpretation. See, e.g., Montana
Department of Social and Rehabilitative Services, Decision No. 119,
September 30, 1980. /9/ These cases are based on the administrative law
concept that an interpretative rule may be applied against a party, even
if the rule was not published in the Federal Register, if the party had
actual, timely notice of the rule. See 5 U.S.C. 552(a)(1). In order
for the rationable of these cases to apply, the PIQs must, in fact, give
adequate notice to the State. We conclude that the PIQs here did not
give the State adequate notice that the services here would not be
allowable under Title XX:
* PIQ 76-165 answers in the affirmative a question about whether FFP
is available in day activities programs provided on a short-term basis
as part of discharge planning for an ICF resident.It does not say that
FFP is not available in such programs under any other circumstances,
only that FFP is not available if the day activity programs are "the
same services provided by or required to be provided by the facility to
the resident . . ." (15) (emphasis added). As we have discussed above,
the State reasonably determined that these were not required services,
nor services provided by the facility.n10
* PIQ 80-5 refers to "sheltered workshop, work activity centers, or
day activity programs" that are called "social and rehabilitative,"
and
states that the only time such services may be provided to residents of
ICFs is on a short-term, time-limited basis, generally for a maximum of
three months. Given the use of the term" rehabilitative," the PIQ
is
ambiguous regarding habilitative types of programs such as those here,
particularly when considered with previous policy statements about the
intrinsic activities requirement and its purpose.
* PIQ 80-5 contains a general discussion of the ICF Medicaid
requirements cited by OHDS here, but nothing in that discussion compels
the application of these requirements in the overinclusive manner OHDS
has applied them here.
As we have discussed above, the statutory conditions and underlying
purposes are met here. This is simply not a case where there is a need
to apply the intrinsic activities requirement to prevent a state from
refinancing state programs. The State here used the community agencies
to provide services which the ICFs were not required to provide
themselves, and could not have received reimbursement for. In light of
these factors, applying the PIQs to these services merely because the
terms used to describe them are the same as those used for some
rehabilitative programs (for which the ICFs could potentially be
reimbursed) is simply unwarranted.
D. Whether these services are "in-reach" services
At the hearing in this case, OHDS raised for the first time the
question whether these services were unallowable solely by the fact that
they were provided outside the facilities, (16) rather than in the
facilities. OHDS argued that the legislative history of the statute and
the preamble to the original regulation both refer to the services which
would be funded for ICF residents as "in-reach" services, and that
this
meant that services provided outside the institutions could not be
funded. OHDS presented testimony by a policy official from OHDS, who
was working in the federal office responsible for policy interpretations
and development of regulations at the time Title XX was passed. She
testified that although the services in question "met the test of the
regulations," they did not meet "the first basic crucial test which
is
that they should be in-reach services," because "the residents were
leaving the institution and going elsewhere." Tr., pp. 155-156.She said
that the task force which drafted the exception to the general
prohibition on funding services to institutional residents had in mind
services like a church group going into a hospital to provide
recreational programs. Tr., p. 152. She acknowledged that the
regulations did not specifically state that FFP was available only for
services provided in the facility, but said that this was so because it
seemed clear to everyone but a few states, where there were some
continuing questions. She further said that, in issuing the PIQs
stating that FFP would be available for day activity programs in some
circumstances, the Agency considered that it was providing a limited
exception to the "in-reach" concept.
Nothing in the statute, regulations, or Agency policy issuances
states, or even implies, as an additional condition for funding that
services must be provided in the institution. By itself, the witness's
testimony is insufficient as a basis for the disallowance here. Even if
it were acceptable as evidence of Congressional intent, which it is not,
the testimony would simply not be persuasibe because it is contradicted
by weightier evidence. The legislative history from the committee
report cited above, says that the statute provides for funding of
"in-reach services by outside organizations," implying that the way
the
statute accomplishes this goal is by establishing the condition that the
services be provided by other than the staff of the facility. Indeed,
the Agency has in its policy statements in effect defined what Congress
meant by "in-reach" by stating that fundable services must "be
provided
on an in-reach basis, i.e., by other than the staff of the facility."
Program Regulation Guide, 1980, p. 3.D. 37; PIQ 80-5.
Moreover, the reading of the "in-reach" concept advanced by the
OHDS
witness ignores the fact that Congress clearly intended in Title XX to
fund services which prepared the residents to leave the institutions (so
long as no refinancing was occurring). It is reasonable to presume that
services provided in the community could as effectively promote the
statutory goals as services provided in the facility. To deny FFP
solely on the basis that the services (17) were provided outside of the
facility rather than in the facility, in the absence of a regulation
specifying this requirement, simply does not make sense in light of the
statutory purposes.
Thus, we conclude that the fact that these services were provided
outside the ICFs does not render them unallowable.
III. The counseling and therapy services.
The record is unclear as to whether the rationale we have stated
above applies equally to the counseling and therapy services as to the
other services the State claimed. The State's testimony that the
services were "habilitative" in nature seemed to apply to all the
services. The State had originally acknowledged, however, that the
counseling and therapy services could potentially be excepted from its
statement that its services were not required institutional services.
The State argued instead that its claim for these services was allowable
because the State's practice was to claim FFP in these services only
when provided to individuals not eligible for Medicaid. OHDS did not
deny that the claims were only for "non-Medicaid eligible" individuals,
but said that Medicaid certification requirements apply to all
individuals in a facility, not only those who are Medicaid eligible, so
this factor would not permit funding of services which were activities
intrinsic to the ICFs as determined by the certification requirements.
In its last submission, the State said that the counseling and
therapy services which were provided as part of its day activities
programs were not the type of services for which an ICF might receive
reimbursement under Medicaid because they were not medically prescribed
services. As an example of the type of services provided as part of the
Day Activity Programs, the State said that a client might receive job
counseling services from community agencies, including mock interviews
and how to complete applications. We would agree with the State that
this type of service would not generally be considered intrinsic to an
ICF, under applicable requirements. Indeed, the Program Regulation
Guide, in its draft form, described "psychological counseling services"
as services which could be funded under Title XX in some circumstances,
even when provided to residents of ICF/MRs (facilities which are
required to provide a broader range of services than general ICFs like
those here).
Unlike the other services involved here, however, there are several
factors which raised doubts in our minds about whether the State's
recent characterization of these services is correct: 1) the State's
description of the services provided in response to the audit report
indicates that the (18) category of therapy services was broad enough to
include some services which would be rehabilitative or otherwise medical
in nature; 2) the State itself originally acknowledged that some of
these services might be the same as those offered in a nursing home;
and 3) the fact that the State only charged Title XX for these services
when provided to individuals not eligible for Medicaid suggests that
reimbursement might have been available under Medicaid. See, State's
appeal file, Tab B-1, pp. 16-18, 20.
On the other hand, the record is insufficient as a basis for
upholding the disallowance. The audit report contains no findings on
the nature of the counseling and therapy services actually provided to
these ICF residents, but questioned them solely because they were part
of the Day Activity Programs. Moreover, as discussed above, the
position advanced by the Agency before us on the meaning of the OHDS and
Medicaid regulations is unsupportable.
Accordingly, we have determined to remand the $30,293 related to
counseling and therapy services to OHDS for further examination in light
of our analysis above.
Conclusion
For the reasons stated above, we uphold the disallowance of $632,888
in RDC costs, reverse the diallowance of $1,168,856 of the Day Activity
Program costs and $76,661 in Diagnostic and Evaluation services costs,
and remand the $30,29o in counseling and therapy costs to OHDS to
further examine the allowability of those services in accordance with
the analysis set forth above. If OHDS makes a further determination on
the counseling and therapy services adverse to the State, the State will
have 30 days after receiving that determination to return to the Board.
/1/ The Title XX regulations were originally codified at 45 CFR
Part 228. On August 25, 1980, they were redesignated as 45 CFR Part
1396, with no substantial change. Although the disallowance period here
is from July 1, 1979 to April 30, 1980, the parties cited to Part 1396,
so we have also used these citations, to avoid confusion. /2/ There is
some overlap in the time period covered by the disallowance in Decision
No. 283 and the period covered by the audit which gave rise to the
disallowance appealed here. OHDS said that it had deducted the amounts
previously disallowed from the audit figure, and the State did not
dispute this. /3/ The language regarding what determines the
purpose of a facility was not in the original version of the regulation,
but was added by an amendment on January 31, 1977. 42 Fed. Reg. 4242.
Neither the notice of proposed rulemaking nor the preamble to the final
rule explained the addition. /4/ The only policy concern clearly
expressed by OHDS did not relate to Title XX; OHDS apparently thought
that the developmentally disabled individuals receiving the services
should not have been placed in general ICFs as they were, but should
have been placed in ICF/MRs. However, there are Medicaid regulations
designed to prevent inappropriate placement, and there is no finding
here that these regulations were violated. The record here indicates
that each of these ICF residents had physical disabilities, as well as
deveopmental disabilities, and that it may have been impossible to place
them in ICF/MRs in their communities. See, e.g. Tab B-1, p. 21. While
the individuals may have been better off in ICF/MRs, we fail to see how
it aids these individuals to retroactively dely funding for Title XX
services they received. /5/ There was some ambiguity in one
State witness's testimony regarding whether habilitative services might
have to be provided to an ICF resident if a need for such services were
identified in the resident's plan of care required under 42 CFR 442.341.
There was no finding here that these habilitative services were
identified in the residents' plans of care. In any event, as we discuss
below, this would not mean that the facilities had to themselves provide
the habilitative services. /6/ OHDS did refer to a HCFA State
Medicaid Manual issuance which said that, even when the primary needs of
retarded persons in ICFs are physical, "developmental needs must still
be met by the facility in the context of the individual's overall
physical condition." HIM-45, Part 4. But this provision was not issued
until October 1982, after the period involved here, and, moreover, must
still be read in light of the regulation itself which permits an ICF to
meet certain resident needs through cooperation with community
resources. /7/ The precise range of social services encompassed
by this provision is unclear. PIQ 76-165, which we discuss below,
points out that certification standards for skilled nursing facilities
should be read as requiring only that those facilities provide or
arrange for "medical social services" (a term of art somewhat explained
in the PIQ). OHDS pointed out here that the ICF social services
provision at 42 CFR 442.344 is stated in broader terms than the
provision for skilled nursing facilities. But the previous wording of
the ICF standard referred to social services "designed to promote
preservation of the resident's physical and mental health." 45 CFR
249.12(b)(4)(1977) (recodified at section 442.344 on September 29, 1978,
43 Fed. Reg. 45233, with no substantial change intended). This is a
narrower interpretation than OHDS would have us adopt here. PIQ 76-165
also explicitly says that, if a skilled nursing facility opts to provide
medical social services by referral, Title XX funding is available.
/8/ The Agency first cited to the definition of "inpatient" at 42
CFR
435.1009, but our reading of that section is that it distinguishes
between "inpatients" in medical institutions such as hospitals and
"residents" of ICFs. We also note that this regulation is not a
certification requirement but relates to limitations on Medicaid funding
for institutionalized individuals. While it is a certification
requirement that an ICF provide "health services 24 hours a day" (42
CFR
442.338) we do not read this as requiring that an individual resident
constantly receive such services in the facility if this is unnecessary.
/9/ The State did not deny that it received copies of the PIQs, although
it pointed out that PIQ 80-5 was not issued until March 31, 1980. OHDS
argued that the State understood that PIQ 76-165 prohibited FFP in its
services because, in September 1978, the State had notified the CADDs
that funding for the Day Activity Programs might be in jeopardy. A
State witness explained that the State had thought at one point that
there might be some question about the programs (although this was not a
result of the PIQ), but that the State had ultimately determined, based
on continuing discussions with federal officials, that its programs were
permitted because they were habilitative rather than rehabilitative in
nature, and not reimbursable under Medicaid. Tr., pp. 75-83. OHDS
presented nothing to rebut this testimony. /10/ Nothing in the
PIQ, nor any other Agency issuance suggests that a service should be
considered "provided by" a facility merely because a facility arranges
to have a community resource provide the service. Indeed, PIQ 76-22,
which PIQ 76-125 was intended to clarify, suggests the contrary by
stating that FFP is not available for services "which are the intrinsic
responsibility of the facility and for which it receives payment," and
by distinguishing an SNF which is certified as "providing" medical
social services from an SNF which is certified as "meeting the social
services needs of its residents by referral to appropriate social
agencies."
JANUARY 08, 1985