DEPARTMENTAL GRANT APPEALS BOARD
Department of Health and Human Services
SUBJECT: Michigan Department of Social Services
Docket No. 87-49
Decision No. 885
DATE: August 3, 1987
DECISION
The Michigan Department of Social Services (Michigan) appealed
a
determination by the Health Care Financing Administration
(HCFA)
disallowing $65,529.43 in federal funds claimed by Michigan under
Title
XIX (Medicaid) of the Social Security Act (Act) for the quarter
ended
December 31, 1986. The disallowance was taken pursuant to
section
1903(g)(1) of the Act, which provides for the reduction of a
state's
federal medical assistance percentage of amounts claimed for long
stay
services for a calendar quarter unless the state "makes a
showing
satisfactory to the Secretary" that during the quarter it had
"an
effective program of medical review of the care of patients . .
.
pursuant to paragraphs (26) and (31) of section 1902(a) whereby
the
professional management of each case is reviewed and evaluated at
least
annually by independent professional review teams."
Michigan failed to conduct annual reviews during the final quarter of
1986
for any of the patients at two facilities: Roubals Nursing Home,
an
intermediate care facility (ICF), and Pinecrest Medical Care Facility,
a
dually certified ICF and skilled nursing facility (SNF). In
its
quarterly showing under section 1903(g)(1), Michigan stated that
the
reviews had not been timely conducted because of "unavoidable
scheduling
conflicts and unpredictable winter weather." Michigan also
stated that
the reviews had been conducted within 30 days after the close of
the
quarter. Michigan claimed that HCFA should find its
showing
satisfactory because these circumstances were within the scope of
either
the "good faith and due diligence" or the "technical failings"
exception
to the requirement for annual reviews.
For the reasons discussed below, we find that Michigan
provided
insufficient information to establish that Michigan's circumstances
fit
any exception to the.requirement that a state conduct annual
reviews.
Therefore, we uphold the disallowance in the full amount of
$65,529.43.
Applicable Law
The general requirement for an effective program of annual reviews
in
section 1903(g)(1) is treated more specifically in sections
1902(a)(26)
and 1902(a)(31).
Section 1902(a)(31) discusses requirements for annual review programs
in
SNFs and ICFs, the two types of facilities involved in this
case.
Section 1902(a)(31) requires that a state plan must provide:
(B) with respect to each skilled nursing
or intermediate care
facility within the
State, for periodic onsite inspections of
the
care being provided to each person
receiving medical assistance,
by one or
more independent professional review teams . . .
Regulations implementing these statutory requirements are found at 42
CFR
Part 456. In particular, section 456.652 provides that:
(a) . . .
[i]n 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 Act contains two statutory
exceptions to full compliance with the annual
review requirements.
Section 1903(g)(4)(B) states:
The Secretary shall find a showing . . .
to be satisfactory . . .
if the showing
demonstrates that the State has conducted such
an
onsite inspection during 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. (Emphasis added.)
The statutory exceptions are 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 review requirements
of
section 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 and 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. 1/
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).
Discussion
Michigan asserted that it had made a satisfactory showing of an
effective
program for the annual review of patients, despite its failure
to conduct a
timely review of patients in two facilities. Michigan had
submitted, with its
quarterly showing, a memorandum noting the missed
facilities and listing two
reasons why the facilities had not been
reviewed during the quarter:
unavoidable scheduling conflicts and the
unpredictable winter weather in the
area of Michigan where the
facilities are located (the Upper
Peninsula). Appellant's Exhibit (App.
Ex.) 3. Michigan argued
that, since it completed reviews in at least 98
percent of all facilities
requiring review and all facilities with 200
or more Medicaid beds, these
reasons were sufficient to bring Michigan's
showing of compliance within the
"good faith and due diligence" or
"technical failings" exceptions to the
requirement for annual review of
each patient.
HCFA responded that Michigan had failed to establish that either
exception
applied. HCFA argued that Michigan's showing had not
contained the
information required to sustain a finding that either of
the exceptions
apply, but had contained only unsupported conclusory
assertions.
Moreover, HCFA presented some evidence intended to rebut
Michigan's assertion
that the failure to review the two facilities was
due to bad weather
conditions. Respondent's Exhibit (Resp. Ex.) 1.
Section 1903(g) and the implementing regulations unambiguously place
the
burden upon states to demonstrate that the requirements of
annual
reviews have been met. States must provide a showing
"satisfactory to
the Secretary" that the requirements have been met.
Section 1903(g)(1).
In order to qualify for an exception the showing must
"demonstrate" the
elements necessary for the exception. Section
1903(g)(4)(B).
Similarly, the regulations indicate that the states have the
burden of
providing a "satisfactory showing" of an effective program of
annual
review. 42 CFR 456.652(a). Specific requirements for the showing
are
listed at 42 CFR 456.654. Even if a state's showing is
facially
acceptable, a state may have to provide more information if
the
Secretary finds that the showing was not valid. Section 1903(g)(2);
42
CFR 456.655.
Michigan appears to have believed that an exception was automatic if
the
state reviewed all patients in facilities of 200 beds or more,
98
percent of all facilities and the missed facilities were reviewed
within
30 days after the close of the quarter. See App. Ex.
3. Such a
reading would render meaningless the other requirements in
section
1903(g)(4)(B) and in 42 CFR 456.653(a)(3) and 456.653(b) that
states
must show either "good faith and due diligence" or a
"technical
failing." 2/ Both the statute and the regulations clearly
indicate that
the exceptions are not automatic and require that a state
demonstrate
the key elements. The burden to support an exception is clearly
placed
on the states.
To further clarify the elements necessary for a showing, HCFA
issued
Action Transmittal 79-61. Resp. Ex. 2. This action
transmittal
requires, with respect to facilities which did not receive a
timely
annual review:
If the State believes the "exception
clauses" of section
1903(g)(4)(B) apply,
[the state's showing must] 1) explain
the
attempts the State made to perform
the reviews and 2) attach a
copy of the
State's original team schedule showing the
planned
dates of review. The
statement should include a full
explanation
of the circumstances which
caused the facility or facilities not
to
be reviewed on time.
Resp. Ex. 2, p. 10 (emphasis in original).
In prior decisions, the Board has required that states provide
sufficient
information, such as the type described in the action
transmittal, to support
contentions that the exceptions apply. See,
e.g., Ohio Department of Human
Services, Decision No. 824, January 24,
1987, p. 6; District of Columbia
Department of Human Services, Decision
No. 833, February 5, 1987, p. 5.
In these decisions, the Board found
that a state must, at a minimum, provide
sufficient information for HCFA
to determine whether the exceptions would
apply. The Board relied on
the statutory burden placed on states to
"demonstrate" that the
requirements for the exception have been met.
See Ohio, p. 4. The
Board also relied on the regulation at 42 CFR
456.654(a)(1-5), which
specifies other requirements for a satisfactory
showing.
Michigan cited the action transmittal in its showing, and, thus, was
aware
of its requirements. Yet Michigan did not submit the type
of
information required by its provisions, but relied solely on
its
conclusory statements that its failure was attributable to
"unavoidable
scheduling conflicts" and "unpredictable weather." Michigan
raised no
new issues or arguments to cause us to reconsider our prior
decisions
concerning the requirement that states provide sufficient
information to
support contentions that the exceptions apply. Michigan
offered no
basis for the Board to conclude that the requirements of the
action
transmittal quoted above should not apply.
We find that the specific information requirements of the type
referenced
in the action transmittal are a reasonable interpretation of
the statutory
and regulatory requirements in the circumstances of this
case. These
information requirements are clearly relevant to an
exception based upon
scheduling problems and particular days of bad
weather conditions. In
order to investigate the merits of a claim
related to scheduling conflicts or
weather conditions, HCFA must be able
to consider information concerning the
dates reviews were originally
scheduled, the weather conditions on those
dates, and the unavailability
of review team members on those or any
alternative dates.
Michigan's showing did not provide the information required by the
action
transmittal. Although Michigan's showing invited HCFA to
telephone the
relevant state employee if further clarification on the
showing was needed,
HCFA's apparent failure to do so is not important
because Michigan had a full
and fair opportunity to present
clarification in the course of this
proceeding. Michigan did not
present any further information or
evidence to bolster its showing,
despite ample notice that this was the core
of HCFA's objection to the
showing. For example, HCFA challenged the
conclusory assertion that bad
weather conditions had prevented timely
reviews. HCFA even included
some evidence of mild weather during the
period. Resp. Ex. 1. A
reasonable response would have rebutted
that evidence by providing the
type of information required by the action
transmittal. But Michigan
did not provide any explanation or evidence
to rebut HCFA. Michigan
relied solely on legal arguments concerning the scope
and application of
the exceptions. Thus, we must infer that Michigan
was unable to present
any evidence which would support its factual
contentions concerning the
reasons for its failure to timely review patients
at two facilities
during the final quarter of 1986.
Although both parties presented arguments related to the scope and
nature
of the two exceptions, and argued over which exception would
apply, we
do not reach these issues. We conclude that Michigan
provided
insufficient information and evidence to allow either HCFA or
this Board to
find that either one of the exceptions might apply.
Conclusion
For the reasons described above, we uphold the disallowance in the
amount
of $65,529.43.
________________________________ Norval D. (John) Settle
________________________________ Charles E. Stratton
________________________________ Judith A. Ballard Presiding
Board
Member
1. The United States District Court for the
District of Delaware
recently held that this regulation misinterprets the
statute in sections
(a)(1) and (2) by substituting a requirement that reviews
be "completed"
for the statutory requirement that review be "conducted."
Delaware
Division of Health and Social Services v. United States Dept. of
Health
and Human Services, Civil Action 86-233 CMW (July 9, 1987),
reversing
Delaware Department of Health and Social Services, Decision No.
732,
March 21, 1986. The court found that Delaware could qualify for
the
exceptions because it had conducted reviews in all facilities,
even
though it had not timely completed those reviews, because it had
missed
four patients for various reasons. That holding is not relevant
to this
case, since both parties agreed that while Michigan fulfilled
the
requirements of sections (a)(1) and (a)(2) by reviewing 98 percent
of
its facilities and all facilities of 200 beds or larger, Michigan
failed
to either conduct or complete timely reviews of any patients at
two
facilities.
2. Although Congress might have intended "good faith"
to be
subjectively determined and readily accepted without any
elaborate
factual basis, "due diligence" refers to specific actions which
states
should have taken. These actions can be demonstrated by
objective
evidence. See Bell Telephone Laboratories, Inc. v. Hughes Aircraft
Co.,
564 F. 2d 654 (3d Cir. 1977); Beidler v. Caps, 36 F. 2d 122
(C.C.P.A.
1929); but see Delaware Division of Health and Social Services v.
United
States Dept. of Health and Human Services, supra,
pp.