Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: Iowa Department of
DATE: July 30, 1990
Human Services Docket No. 90-15
Audit No. CIN A-07-89-00165
Decision No. 1179
DECISION
The Iowa Department of Human Services (State) appealed a determination
by the Health Care Financing Administration (HCFA) disallowing $279,975
in federal financial participation (FFP) claimed under title XIX
(Medicaid) of the Social Security Act (Act) for the period October 1,
1986 through September 30, 1987. The costs were claimed for
intermediate care facility (ICF) services provided in a county-owned
facility, known as Broadlawns West, which HCFA determined was an
institution for mental diseases (IMD). Medicaid funding is not
available for ICF services provided to individuals under age 65 who are
in an IMD. Section 1905(a) of the Act.
As discussed in detail below, we conclude that Broadlawns West was an
IMD. The evidence clearly shows that Broadlawns West was established as
a facility specializing in the care of mentally diseased patients, and
that more than 50% of the patients in the facility during the year under
review were institutionalized for treatment of a mental disease and in
fact received such treatment. Thus, the State should have known that
Broadlawns West had the overall character of an IMD. Accordingly, we
sustain the disallowance.
Statutory and Regulatory Background
Title XIX of the Act provides grants to states for medical assistance to
eligible low-income persons. In defining "medical assistance," the
language following section 1905(a)(21) specifically excludes payments
for services to "any individual who has not attained 65 years of age and
who is a patient in an institution for mental diseases" (except
inpatient psychiatric hospital services for individuals under age 21).
1/ Under section 1905(a)(15), however, FFP is available for medical
assistance provided in an ICF which is not an IMD to individuals "who
because of their physical or mental condition" require institutional
care. Thus, an ICF can appropriately care for some mentally diseased
patients without becoming an IMD.
The regulations implementing the exclusion for IMD patients define an
IMD as --
an institution that is primarily engaged in providing diagnosis,
treatment or care of persons with mental diseases, including
medical attention, nursing care and related services. Whether an
institution is an institution for mental diseases is determined by
its overall character as that of a facility established and
maintained primarily for the care and treatment of individuals with
mental diseases, whether or not it is licensed as such . . . .
42 C.F.R. 435.1009.
Section 4390 of the State Medicaid Manual, issued to state Medicaid
agencies in December 1982 and revised in September 1986, sets forth
guidelines for determining if a facility is an IMD within the meaning of
the regulation. 2/ Some of the guidelines concern patient population
and require that patients be classified as either mentally diseased or
physically diseased. Instructions in section 4390 for applying the
guidelines state that patients with a diagnosis listed as a mental
disorder in the International Classification of Diseases (ICD) should be
classified as mentally diseased if the institutionalization resulted
from that diagnosis. Section 4390 also excludes from consideration as
mental diseases (despite their listing in the ICD) mental retardation,
certain diagnoses related to the general category of "senility," and
under certain circumstances organic brain syndrome and alcoholism (which
is defined to include other chemical dependencies).
Section 4390 also explains that --
no single guideline will necessarily be determinative in any given
case. A final determination of a facility's status rests on
whether an evaluation of the information pertaining to the various
guidelines establishes that its overall character is that of a
facility established and/or maintained primarily for the care and
treatment of individuals with mental diseases.
This approach is consistent with the Board's holding in a prior decision
that HCFA's failure to publish the guidelines as a regulation was not
critical since the guidelines were simply used to gather evidence to
determine whether the regulatory definition of an IMD applied. See
Minnesota Dept. of Human Services, DAB No. 831 (1987).
In this case, the guidelines must also be read in light of the decision
of the Eighth Circuit in Minnesota v. Heckler, 718 F.2d 852 (8th Cir.
1983), which held that the Board's interpretation of the regulation
defining an IMD and "extensive reliance on diagnoses-based criteria for
the purpose of revealing the overall character of an IMD, were
inconsistent with the provision and purposes of the Social Security
Act." 718 F.2d at 862. The Eighth Circuit further stated that --
. . . the characterization of an IMD must fundamentally center on
the type of care or nature of services required, not on the mere
presence in a facility of patients who have, or at one time did
have, diagnoses of a mental disease.
Id., at 863.
Analysis of Basis for Disallowance
HCFA's determination that Broadlawns West was an IMD was based on an
audit report issued by the Office of Inspector General, Office of Audit.
3/ The audit included a review of patient records which was performed
by two board-certified psychiatrists. We discuss below each of the
factors listed by HCFA for its finding that Broadlawns West had the
overall character of an IMD.
1. Broadlawns was established to provide care for patients with
mental diseases.
In support of this conclusion, the auditors cited the 1980 application
for a certificate of need. The application appears to have been
submitted by a representative of Polk County, which planned to purchase
and remodel an existing facility in order to --
establish an Intermediate Care Facility in the city of Des Moines
to care for the mentally ill who have been professionally assessed
through the Sands Center and other like agencies/institutions.
Such care shall be for the physical, social and mental needs of our
patients in an atmosphere of dignity, security, companionship and
privacy. This purpose/project is a part of a written plan
developed by the Polk County Health Services task force on mental
health. The major objective of the program is to provide ICF care
with appropriate special programming designed to serve adults with
chronic psychiatric disabilities.
State's ex. 1, p. 7. The auditors also noted language in the
application, under "Admissions Criteria," that "this population
will
exhibit certain psycho-social behaviors that lend itself to a
psychiatric diagnosis." Id. 4/
The State conceded that Broadlawns West "was established to meet a gap
in available ICF services in Polk County, Iowa for a facility with
expertise in treating persons with mental illness and other behavior
disorders." State's brief dated 4/5/90, p. 7. It argued, however, that
a facility with this expertise was not necessarily an IMD. 5/ The State
cited in support of its position the final, revised "Resume of Resident
Care Program and Supportive Services" submitted by Broadlawns West to
the Iowa Department of Social Services in March 1981, which stated that
a "Major Objective" was "[t]o provide ICF care with appropriate
special
programming for adults who have permanent physical and/or chronic
psychiatric disabilities," and further, that "[r]esidents may/will
have
a diagnosis of mental illness." State's ex. 6, p. 2.
We conclude that the auditors correctly found that Broadlawns West was
established to provide care and treatment for mentally diseased
patients. The application for the certificate of need expressly stated
that the purpose of the facility would be to provide care and
specialized programming for the mentally ill. Moreover, the decision of
the Iowa State Health Facilities Council to award Broadlawns West a
certificate of need was clearly based on this representation. Noting
that "[t]here are no ICF's for the mentally ill in this area," the
decision further stated:
The identified target population includes: 23 Polk County
residents, average age 67, for whom the goal will be maintenance,
rather than rehabilitation, currently housed at Clarinda [a mental
institution, and] 26 Clarinda patients in active treatment who were
transferred there from ICF's. In addition, transfer is expected
for an estimated 50 patients in Polk County ICF's, whose primary
diagnosis is mental illness.
HCFA's ex. 1, p. 3. While the facility's "Resume" was modified shortly
thereafter to indicate that patients without a diagnosis of mental
illness were also eligible for admission, this does not mean that
Broadlawns West was not intended primarily to serve mentally diseased
patients.
The State also argued that "[e]ven if Broadlawns West may have at one
time been an institution for mental diseases (although the State does
not concede this), it overcame that classification by transferring out
persons who had been placed solely for mental illness as part of an
attempt to more precisely comply with Federal law." State's brief dated
4/5/90, p. 2. The State did not provide any evidence that such a
transfer occurred, however. Moreover, as discussed later, the record
shows that between 54 and 65% of the patients at Broadlawns West in any
month during the period audited had a primary diagnosis of mental
disease for which they received care and treatment. Thus, even if some
mentally diseased patients were transferred out of Broadlawns West,
their numbers were not sufficiently diminished to change the character
of the facility.
2. Psychotropic and antipsychotic drugs were prescribed for most
residents.
The auditors found that of 87 patients, 80 received psychotropic drugs
and 78 also received antipsychotic drugs during their stay at Broadlawns
West. State's ex. 1, p. 7. The State conceded that a majority of the
patients in Broadlawns West were receiving psychotropic or antipsychotic
drugs. However, the State noted that many patients who were not
classified as mentally diseased in the audit report were receiving
psychotropic medications, so that the use of such medications alone had
no probative value.
We conclude that administration of psychotropic and antipsychotic drugs
to most patients was indicative of Broadlawns West's status as an IMD.
HCFA stated, and the State did not dispute, that psychotropic drugs are
drugs which "affect the mental state," and that antipsychotic drugs,
a
subcategory of psychotropic drugs, "are used for the management of the
manifestations of psychotic disorders, e.g., schizophrenia." HCFA's
brief dated 6/28/90, p. 7, n. 2. Moreover, the Board has previously
held that the dispensing or administering of such medication can
constitute treatment for mental diseases. Massachusetts Dept. of Public
Welfare, DAB No. 413 (1983). That these drugs were also administered to
patients not classified by the auditors as mentally diseased does not
make their administration to patients classified as mentally diseased
any less meaningful since, as HCFA pointed out, a patient might have
required drug therapy for mental disease even if mental disease was not
the primary reason for institutionalization. Absent any showing by the
State that these drugs were instead prescribed as treatment for physical
disorders, we find that administration of these drugs constituted
treatment of mental diseases. See Minnesota Dept. of Human Services,
supra.
3. The majority of Broadlawns patients were receiving care
provided by psychiatrists.
The auditors found that 95% of all patients at Broadlawns West,
including all 54 patients identified as institutionalized for mental
disease, received care provided by a psychiatrist. The State asserted,
however, that the care provided by the psychiatrist -- the prescription
of psychotropic medication, and a bi-monthly review of patient charts
for the purpose of certifying or recertifying the patients as
Medicaid-eligible -- was "minimal," noting that the psychiatrist did
not sign or otherwise supervise the patients' treatment plans. State's
brief dated 4/5/90, pp. 8-9, 16-17.
We see no basis for discounting the care provided by the psychiatrist
since, as noted previously, the prescription of psychotropic or
antipsychotic drugs is one aspect of treatment for mental disease.
Moreover, although the auditors did not specifically make this finding,
the record clearly indicates that treatment for mental disease was also
provided by the facility's staff. An internal Department of Social
Services memorandum dated 2/7/83 stated that Broadlawns West --
serves a population of severely and chronically mentally
handicapped persons -- primarily those with severe and chronic
psychiatric disorders. It serves those persons who have received
maximum benefits from the [psychiatric] treatment programs at
Clarinda and/or the Sidney Sands Center but still cannot live in an
environment without considerable structuring, supervision and
attention to health care needs.
HCFA's ex. 6. This indicates that, while psychiatric therapy was not
required by the chronically mentally diseased patients served by
Broadlawns West, they nevertheless required care because of their mental
disease. The care provided by the Broadlawns West staff included --
a comprehensive token economy operated under the direction of a
full-time staff psychologist. Residents . . . are given points for
appropriate behaviors and fined for inappropriate behaviors.
Behavioral objectives have been established for each resident and
daily check sheets of compliance are kept by each shift. Quarterly
staffings are held to assess resident progress and redirect
programming efforts as necessary.
HCFA's ex. 4, p. 4 (report of Department of Social Services audit of
Broadlawns West). The behaviors addressed by the "token economy" were
"(1) personal hygiene, (2) personal management, (3) floor activities and
(4) social skills." State's ex. 10 (excerpt from Resume of Program and
Services). This treatment is consistent with the needs of the type of
mentally diseased patients described above.
The State cited auditors' notes (at State's ex. 8) which indicated that
the care provided at Broadlawns West was primarily nursing care in the
form of assistance with the activities of daily living (ADLs) rather
than psychiatric therapy. However, assistance with ADLs could well be
necessary in most cases to implement the token economy described above.
Thus, in this context, this type of nursing assistance constituted
treatment for mental diseases.
The State also argued that the token economy used at Broadlawns West "is
typical of care provided to the mentally retarded, not to the mentally
ill." State's supplemental brief dated 5/11/90, p. 5. The record
clearly shows, however, that the majority of patients at Broadlawns West
needed this type of treatment because of their mental disease. Thus, it
is irrelevant that similar treatment may have been provided in
facilities for the mentally retarded or that it was also provided to
patients at Broadlawns West other than those who were classified as
mentally diseased. 6/
The State also pointed to Broadlawns West's revised "Resume of Resident
Care Program and Supportive Services" in support of its position that
Broadlawns West did not provide care for mental disease. That document
identified as the facility's "Major Objective" the provision of --
. . . ICF care with appropriate special programming for adults who
have permanent physical and or chronic psychiatric disabilities.
Residents may/will have a diagnosis of mental illness. However,
such diagnosis will not be the basis for care provided. Needs will
have to be chronic and not requiring an active psychiatric
treatment program to be admitted.
State's ex. 6, p. 2. However, we read this to mean simply that,
although the facility would not treat mentally diseased patients who
needed active psychiatric treatment, it would provide appropriate
treatment for patients who had a diagnosis of chronic mental disease not
requiring active psychiatric treatment. That Broadlawns West never
intended to provide active psychiatric treatment does not advance the
State's case, moreover, as the Board has consistently held that a
facility need not provide active psychiatric treatment or intervention
for mentally diseased patients in order to be an IMD. Massachusetts
Dept. of Public Welfare, supra; Colorado Dept. of Social Services, DAB
No. 985 (1988); cf. 42 C.F.R. 441.154. What is critical is whether the
facility primarily served patients who required treatment for a mental
disease, regardless of the level of treatment required or actually
provided. We conclude that Broadlawns West did so here.
4. More than 50 percent of all patients at Broadlawns had mental
diseases.
The State challenged the auditors' conclusion that 54 of 87 residents of
Broadlawns West during the year in question (62%) were primarily
admitted to and resided at Broadlawns West for care and treatment of
mental disease. The State specifically disputed the auditors'
classification of eight patients as mentally diseased. The State also
noted that there appeared to be 89, not 87, patients in the facility
during the course of the year, citing internal auditor review notes (at
State's exhibit 11) indicating that additional patients were identified
during the course of the audit, for a total of 89. Finally, the State
noted that, even using HCFA's figures, the percentage of mentally
diseased patients was lower than 62% in some months if the percentage
was computed on a monthly basis rather than for the entire review
period, since the mentally diseased patients had a shorter length of
stay than other patients.
We are not persuaded that there is any basis for the State's assertion
that eight of the patients were improperly classified as having been
institutionalized for mental diseases. While the Board has no
independent medical expertise, we can evaluate the process used to make
the patient classifications. The more reliable that process, the less
weight any alleged classification errors have. Washington Dept. of
Social and Health Services, DAB No. 785 (1986). Here, we find that the
process used to make the patient classifications was eminently reliable.
As noted earlier, the medical records for each patient were reviewed by
one of two board-certified psychiatrists whose extensive experience is
detailed in the record. See HCFA's appeal file, ex. 2. The
psychiatrists identified the primary and any secondary diagnosis for
each patient at three points in time: upon admission, at the beginning
of the period being reviewed (10/1/86), and upon discharge (or at the
time the review was conducted if the patient had not been discharged),
classifying a patient as mentally diseased only if this was the primary
diagnosis. 7/ The psychiatrists also identified the type of treatment
provided to the patient, and the frequency and duration of the treatment
(e.g., daily throughout the patient's entire stay). Any psychotropic
drugs administered, the dosage, and the period of time for which they
were administered were also specifically identified. 8/ In addition,
the psychiatrists provided a narrative description of the patient's care
and treatment supporting the conclusion that the patient was mentally
diseased. See State's ex. 5.
The State disputed the psychiatrists' classifications in eight cases
based on a review conducted "by and under the supervision of" a
registered nurse (RN) whom the State identified as the manager of the
alternate review section of the Iowa Foundation for Medical Care, the
State's peer review organization. According to the State, the RN had
"extensive experience in various types of medical and psychiatric
settings," including three years of experience in a psychiatric unit.
State's brief dated 4/5/90, pp. 15-16. Whatever her background,
however, the RN clearly was not as qualified as a board-certified
psychiatrist to make the kind of judgment required here.
Moreover, it is not clear that the RN herself performed the reviews.
Worksheets on the patients appear to have been completed by at least
three different individuals, none of whom are identified. 9/ In
addition, a letter summarizing the findings is signed by someone other
than the RN in question.
It is also significant that, although the review performed for the State
identified seven individuals as improperly classified, the State did not
dispute the classification of one of these individuals. Compare State's
ex. 4, letter dated 3/30/90, pp. 3-4, and State's supplemental brief
dated 5/11/90, pp. 2-3. The fact that the State did not adopt the
review findings in their entirety indicates that even the State viewed
the findings as less than completely reliable.
Furthermore, in addition to six individuals identified by this review as
improperly classified, the State disputed the classification of two
other individuals, one of whom it stated suffered from substance abuse,
and the other whom it stated had a questionable psychiatric diagnosis
and was receiving care for physical problems. Assertions to this effect
in counsel's brief are clearly not a basis for reversing the
psychiatrists' findings, however.
Accordingly, we find that the auditors correctly classified all 54
patients as having been institutionalized for mental diseases. We
further find that the percentage of such patients was sufficiently high
as to be probative of IMD status. 10/ HCFA found that the 54 mentally
diseased patients constituted 62% of the patients in the facility during
the review period, and that 58% of the patient days during that period
were attributable to these patients. Even on a monthly basis, the
percentage of mentally diseased patients, using HCFA's figures, did not
fall below 54% in any month and was as high as 65% in one month.
Moreover, there is no basis for finding that the monthly figure should
be lower because there were 89 rather than 87 patients in the facility
over the course of the year, since this does not mean that the two
additional patients were present every month or that they should not
have been included in the count of mentally ill patients.
The Board has previously recognized "the difficulty in relying on
patient population statistics close to the 50% mark . . . ." Colorado,
supra, p. 14, citing Washington Dept. of Social and Health Services,
supra. However, the Washington decision makes clear that this
difficulty arises --
when a facility was not established as a facility specializing in
mental diseases, but begins taking on more and more patients with
mental diseases, [making] it . . . difficult to draw the line in
determining at what point the facility would attain the requisite
overall character of an IMD so clearly that the State should have
known that FFP would not be available for the services provided at
the facility.
Washington, supra, p. 10. As discussed earlier, however, Broadlawns
West was originally established as an IMD. Thus, as long as the
percentage of mentally diseased patients remained above 50%, it should
have been clear to the State that the facility was an IMD, especially in
view of the fact, discussed below, that the State monitored the status
of Broadlawns West from the time it was established until it withdrew
from the Medicaid program.
5. Patients were transferred to Broadlawns from other mental
health facilities.
The State disputed the auditors' finding that patients were transferred
to Broadlawns West from other mental health facilities. The State
questioned the auditors' reliance on the 1980 decision to grant
Broadlawns West a certificate of need, which stated that a transfer of
about 45 patients from the Clarinda Mental Health Institute was planned.
The State argued that it was not clear that this transfer ever took
place, noting that its own review showed that only seven of the 54
patients identified by the auditors as mentally diseased had been at
Clarinda within the ten years prior to their admission to Broadlawns
West (with an additional eleven patients having been at Clarinda at some
point in time which was not documented). 11/ The State also questioned
the probative value of the auditors' finding that 70 of 86 patients
transferred out of Broadlawns Medical Center, since only about half the
beds at that facility were psychiatric.
We agree with the State that the auditors did not establish that
patients were transferred to Broadlawns from other mental health
facilities. The audit report itself admits that the auditors "did not
attempt to identify specific numbers of mentally ill patients that were
transferred from Clarinda." State's ex. 1, p. 10. Moreover, the State's
review showed that the planned transfer of large numbers of patients
from Clarinda to Broadlawns West never materialized. 12/ In addition,
we see no basis for assuming that the patients who transferred out of
Broadlawns Medical Center were there as psychiatric patients, since, as
the State pointed out, only about half of its beds were psychiatric.
Accordingly, we find that this criteria was not met
12. We deem the review by the Iowa Foundation for Medical Care
reliable on this point since no medical expertise was required to
determine if a patient had been transferred from