GAB Decision 785
September 8, 1986
Washington, Department of Social And Health Services;
Docket No. 86-8;
Audit Control No. 10-50202
Ford, Cecilia S.; Settle, Norval D. Ballard, Judith A.
(1) The Washington Department of Social and Health Services (State)
appealed a decision by the Health Care Financing Administration (HCFA or
Agency) to disallow $1,080,380 in federal financial participation (FFP)
claimed under Title XIX (Medicaid) of the Social Security Act (Act) for
the period January 1, 1980 through December 31, 1981. The claims
disallowed were for intermediate care facility (ICF) services provided
by the Cherry Heights Villa Care Center (Cherry Heights) to patients
under 65 years of age. The disallowance was based on an audit report
finding that Cherry Heights was an institution for mental diseases
(IMD).
Section 1905(a) of the Act excludes from the definition of
"medical
assistance," for which Medicaid funding is available, services
to
individuals under age 65 who are patients in an IMD. Agency
regulations
define an IMD generally as having the "overall character" of
an
institution primarily for the care and treatment of persons with
mental
diseases. The IMD exclusion has been addressed in a number of
Board and
court decisions; the key holdings in those decisions are that
an ICF
may be an IMD and that evidence gathered by the Agency using
unpublished
"criteria" may support a disallowance if it shows that the
facility was
an IMD under the regulatory definition.
In this case, the Agency relied primarily on evidence related to
certain
"patient-counting" criteria. As we discuss below, application
of these
criteria requires particular care since an ICF can properly treat
some
patients with mental diseases without becoming an IMD. Here, we found
a
number of deficiencies in the process used by the Agency to
classify
patients, including instances where there was a failure to
follow
guidance the Agency itself has adopted or where the record simply
did
not support the Agency's findings. In addition, unlike other
cases
where we found substantial other evidence to support(2)
determinations
that the facilities in question had the requisite overall
character of
an IMD, here the supporting evidence was either flawed or
lacked
probative value. We find that the record does not support
a
determination that Cherry Heights was an IMD, and, accordingly,
we
reverse the disallowance.
Relevant Statutes and Regulations
Title XIX of the Social Security Act, as amended, provides grants
to
states for furnishing medical assistance to eligible low-income
persons.
Section 1905(a), in defining "medical assistance," specifically
excludes
payments for services and care to "any individual who has not
attained
65 years of age and who is a patient in an institution for . . .
mental
diseases." Section 1905(a) (18) (B). /1/ This exclusion has been
present
in the Medicaid program from the program's inception in 1965.
The
exclusion rests on a Congressional intent not to finance through
the
Medicaid program long-term custodial care for
institutionalized
individuals traditionally the responsibility of state and
local
governments. S. Rep. No. 404, 89th Cong. 1st Sess.
Pt. I, 144-47
(1965).
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 CFR 435.1009 (1978-1981).
To interpret these general statutory and regulatory standards, the
Agency
established "criteria" in a series of(3) transmittals to field
staff between
1975 and 1977, the "Field Staff Information and
Instruction Series"
(FSIIS). The Agency characterized these criteria as
interpretive rules
and stated that "(obviously) some . . . are more
probative as to whether a
facility, given its 'overall character,' is
'primarily' engaged in an IMD
type activity. . ." See Joint
Consideration: "Institutions for Mental
Diseases," Decision No. 231,
November 30, 1981, pp. 24-25. In December
1982, the Agency issued
section 4390 of the State Medicaid Manual, which
explained its
guidelines for determining if a facility is an IMD and
amplified the
criteria to be used. Section 4390 lists ten factors to be
used
cumulatively to determine the facility's overall character. Some
of
those factors concern the facility's status (e.g., licensure)
and
resources (e.g., locked wards). Several factors concern
patient
population. /2/
(4) The patient population factors require that patients be classified
as
mentally diseased or physically diseased. In section 4390 the
Agency
stated that patients with a diagnosis which was listed in the
latest
revision of the International Classification of Diseases
(ICD-9-CM)
would be classified as mentally diseased only if
the
institutionalization resulted from that diagnosis. /3/ The
Agency
excluded from consideration as a mental disease (despite their
listing
in the ICD-9-CM) certain diagnoses related to the general category
of
"senility," stating that "these diagnoses represent the
behavioral
expression of underlying neurological disorders."
To determine if a patient's institutionalization resulted from
the
diagnosis of mental disease, the Agency stated that patients with both
a
mental disability and a physical problem, either of which
would
independently require nursing home care, would not be classified
as
mentally diseased. Specifically, the Agency stated:
(Patients) with longstanding mental disability may develop
major
physical problems and vice versa. When it is clear that
institutional
care initially resulted from one or the other, the patient
should be
classified according to the initial disability. When no
clear-cut
distinction is possible, the patient should not be included in
the
mentally ill category.
(5) Prior Board Decisions and Judicial Precedent
Both the Board and the courts have devoted considerable scrutiny to
the
issues raised in determining if a facility is an IMD. The Board
issued
its most detailed analysis in Decision No. 231, involving appeals
from
four states. Each of these states appealed the decision. The
Board
also considered an appeal of an IMD determination in
Massachusetts
Department of Public Welfare, Decision No. 413, April 29, 1983,
and,
most recently, was asked to review certain issues related to IMD
status
involved in an Eighth Circuit Court case in Granville House,
Inc.,
Decision No. 529, April 9, 1984. Below, we summarize issues
relevant to
the instant case addressed in prior Board decisions and
judicial
precedent.
* In Decision No. 231, the Board upheld the Agency's determinations
that
certain facilities were IMDs, based upon an examination by the Board
of
the overall character of the facilities. The Board found that the
term
"institution for mental diseases" was not restricted to
large,
state-financed mental hospitals, but could include private
skilled
nursing facilities (SNFs) or intermediate care facilities (ICFs)
which
were primarily maintained for the care and treatment of patients
with
mental diseases. The United States Supreme Court upheld the
Board's
determination that an ICF could be an IMD. Connecticut v.
Heckler, U.S.
, 105 S. Ct. 2210 (1985).
* In Decision No. 231, the Board specifically upheld the
characterization
of facilities by the Agency based upon evidence related
to the FSIIS
criteria, including the percentages of patients
institutionalized because of
diagnoses of mental diseases under the
ICDA. The Board recognized the
substantial difficulties in the
classification of patients, and the possibly
disruptive effects of small
shifts in patient percentages for facilities
close to the 50 percent
mark. In the cases being considered, however,
the Board found that the
percentage of mentally diseased patients was only
one of several factors
upon which the Agency based its determinations of the
overall character
of each facility. The Board's decision on these
issues was upheld by
the court in California v. Bowen, Civ. No.
5-82-180-EJG (E.D. Ca. May
21, 1986); see, also, Illinois v. Heckler,
No. 82C-1349 (N.D. Ill. June
30, 1986).
* Decision No. 231 was reversed with respect to Minnesota facilities
by
the Eighth Circuit, in Minnesota v. Heckler, 718 F. 2d 852 (1983),
which
affirmed a district court ruling, and with respect to three
Illinois
facilities by the district court in Illinois v. Heckler, No.
(6)
82C-1349 (N.D. Ill. June 30, 1986) (the court upheld the
disallowance
with respect to six facilities). These courts found that
the Board had
relied too heavily on patient-counting factors, such as the
number and
percentages of mentally diseased patients, rather than on the
treatment
being given by, and the general nature of, the facilities.
* The Board examined the treatment issue in Decision No. 413 and
agreed
that patient diagnoses and related factors should not be the
sole
factors in determining that a facility is an IMD and that
treatment
should be considered. Decision No. 413, p. 14. But the
Board disagreed
with the contention that the IMD exclusion extended only to
psychiatric
hospitals or certified facilities providing active treatment for
mental
diseases of the type appropriate to acute care patients.
Decision No.
413, pp. 11-14. The Board noted that Congress had
apparently recognized
that many IMDs provide little active psychiatric
treatment. Decision
No. 413, p. 12.
* In Decision No. 529, which addressed the status of
alcholism-treatment
facilities in Minnesota, the Board concluded that,
because of the
complex nature of alcoholism and the various means of treating
it, the
Agency could not determine that a facility was an IMD based upon
the
mere presence of alcoholics "without more definitive rules or
guidelines
which enable HCFA and its constituents to better evaluate what
types of
alcoholism treatment are, and are not, conclusive of IMD status."
The
decision included a lengthy discussion of the dual nature of
alcoholism
as both a mental and physical affliction. The Eight Circuit
agreed with
the Board, requiring that the Agency develop such guidelines on
remand
(although disagreeing with Minnesota and the District Court that
this
had to be accomplished through notice and comment
rulemaking).
Granville House, Inc. v. Department of Health, Education
and Welfare,
722 F.2d 451 (8th Cir. 1985).
Case Background
Cherry Heights was certified as an ICF with 180 beds by the State
during
the period of January 1, 1980 through December 31, 1981. During
that
period, the State paid the facility approximately $2.6 million under
the
Medicaid program for providing services to Medicaid patients,
who
comprised 96 percent of the total patient population. The federal
share
of these payments was $1,080,380.
The Agency disallowed the State's claim for FFP because an audit
conducted
by the Office of the Inspector General had(7) found that the
facility was an
IMD during the period January 1, 1980 through December
31, 1981. The
audit was conducted in 1982 but the results were modified
in light of section
4390 of the State Medicaid Manual and Board Decision
No. 529. The audit
report was not issued in final form until mid-1985.
The audit report primarily presents findings based on classification
of
patients; the auditors found that 61 percent of the admissions to
the
facility (involving 58 percent of patients) were of patients with
mental
disease and that 62 percent of the patient days during the audit
period
were for patients with mental diseases. /4/ The audit report
also
contained findings regarding mental health services provided at
the
facility, the average age of the patient population, the hospitals
from
which the patients were admitted, and the opinions of the
facility's
staff.
The audit report included no evidence related to other Agency
criteria
factors, such as whether the facility was licensed as a
psychiatric
facility, advertised as such, had locked wards, or had any
agreement
with an established mental hospital to provide alternate
care. Neither
the proximity to a state mental institution nor the
findings of an
Independent Professional Review team were mentioned in the
report.
The State submitted a patient-by-patient challenge to the
classification
of approximately 98 of the 642 admissions examined by the
auditors, as
well as challenging the classification of 81 admissions of
patients who
had a(8) diagnosis of alcoholism. /5/ The State also
challenged
generally the process used in classifying patients, as well as
the
finding that the facility specialized in providing mental
health
services. In addition, the State raised a number of legal
issues. The
State challenged the use of the Agency's unpublished
criteria and
guidelines, relying on the Eighth Circuit's decision
Minnesota. The
State also argued that, under Decision 529, the Agency
must classify
patients with a diagnosis of alcoholism as physically ill.
The Agency relied primarily on the Supreme Court's decision
in
Connecticut. On the whole, the Agency's response to the
State's
detailed analysis of patients and the difficulties with the
audit
process was very general, even after the Board asked questions
designed
to elicit more specific responses.
Below, we first discuss some general considerations from previous
Board
and court decisions which we think are relevant to our analysis
here.
We then discuss the subsidiary factors relied on by the Agency,
and,
finally, we address the patient-counting data and the review
process
used to classify the patients.
Discussion
I. The Agency's use of criteria to collect evidence was not a
ground
for reversal.
The auditors cited the FSIIS criteria in the audit report as indicators
of
the overall characteristics of IMDs. The State asserted that the
Agency
determination was improperly based on these criteria, which the
State
asserted were "invalid" and had been rejected on judicial review.
The State
cited Minnesota v. Heckler, 718 F.2d 852 (8th Cir. 1983),
stating that the
court had remanded the IMD determination and had
requested that the Agency
develop new IMD criteria.
(9) The State mischaracterized the Minnesota litigation. The Court
in
Minnesota stated that the Agency must consider treatment in
determining
whether the Minnesota facilities were IMDs. This did not
invalidate the
other criteria; they remain factors which may indicate
useful evidence
in the determination of IMD status. On remand in
Minnesota, the Agency
agreed to revise its audit of the facilities by
considering the
additional factors cited by the Court in addition to the
FSIIS standards
used in its initial determination.
We affirm our prior decisions and emphasize that the application of
the
criteria is permissible to collect evidence as long as the evidence
is
then weighed to ensure that the regulatory standard, relating
to
facility's overall character, is met.
As we discuss next, however, prior Board decisions and the
reviewing
courts have recognized that there are difficulties in applying
the
patient-counting criteria.
II. Patient counting data must be strictly scrutinized.
An analysis of the court decisions reviewing Decision No. 231
indicates
that the primary reason the Illinois and Minnesota courts found
the
evidence inadequate in those cases was the courts' perception that
the
Board had relied too heavily on diagnosis-based patient-counting
data.
Although we disagree with the courts' evaluation of the extent of
that
reliance in Decision No. 231, what is important is the
courts'
underlying concerns with the problems of patient classification
and
counting. The courts were concerned that discrimination
against
patients on the basis of diagnosis (which is prohibited) might
be
present to the extent that patients were classified based
upon
historical diagnosis which did not reflect the patients'
current
conditions (what the states referred to as "labeling" of patients).
The
courts' concern with treatment reflects the idea that, if there
is
evidence that a facility is treating a patient for mental illness, it
is
clear that the diagnosis of mental illness is not simply labeling
based
on historical diagnoses. If patients are classified based on
historical
diagnoses, the resulting evidence is not truly probative of
the
character of the facility; a historical diagnosis simply does
not
reflect the nature of the facility, unlike evidence of the
condition
which caused the patient to be placed in the facility.
Another reason for caution in applying patient-counting factors is that
an
ICF can properly treat a patient with a mental disease. See,
Illinois,
slip op. at 14. If a facility treats some patients with
mental diseases
and(10) develops appropriate services it is likely that
other patients with
mental diseases will be placed in the facility. We
have recognized in
our past decisions that when a facility was not
established as a facility
specializing in mental diseases, but begins
taking on more and more patients
with mental diseases, it is 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.
The patient-counting criteria rely on the classification of
patients
according to whether they are institutionalized primarily because of
a
mental disease or a physical disease. Such classifications involve
a
judgment requiring medical expertise. The Board has no
independent
medical expertise; nonetheless, the Board can review
appropriately the
reasonableness of the process used to make such
classifications and can
evaluate conflicting expert testimony.
In prior Board decisions, we gave little weight to alleged errors
in
patient classification since, even eliminating the errors, we
still
found either overwhelming percentages of the patients
properly
classified as mentally ill or other strong evidence that the
facility
had the overall character of an IMD. Moreover, we found in
each of
those cases that the review process used by the Agency was
reliable.
Here however, the other factors cited by the Agency were minimal
and the
evidence in the record does not fully support the major other
factor
(mental health services). Moreover, although we do not agree
with all
of the State's challenges to patient classification, it is clear
that
errors were made and that the review process in general was
less
reliable than in other cases we have examined.
III. The Agency focused primarily on patient-counting factors
Although the eight criteria contained in the FSIIS were listed in
the
introduction to the audit report, the Agency's conclusions were
based
primarily on the alleged high proportion of patients with diagnoses
of
mental diseases and other patient-counting factors. /6/
(11) The auditors mentioned factors other than patient counting in
only
one section of the report. The report referred to the
psycho-social
services provided to the mentally ill at the facility.
The Agency also
alleged that the facility employed a full-time psychologist
and five
full-time mental health specialists who provided "psychosocial"
services
to the residents, and that outside mental health consultants
visited
weekly.
Although the document describing services offered by the mental
health
department at Cherry Heights shows that the facility offered
some
programs for patients with problems such as chronic
psychiatric
histories or thought disorders, some of the programs are simply
directed
at helping patients to adjust to life in an institutional setting
and
would be appropriate for any ICF patient. The Agency made no
findings
relating the mental health programs to specific patients to show
that
they were receiving mental health services of a particular type.
Moreover, although section 4390 of the State Medicaid Manual refers to
"an
unusually large proportion" of the facility staff specializing in
mental
diseases as evidence that the facility is an IMD, the audit
report contained
no analysis of how Cherry Heights staff compared with
other ICFs of the same
size. The State, in its response to an order to
develop the record,
listed only 2.48 full-time equivalent mental health
workers. Even if we
accepted the audit report as establishing that
there were six full-time
equivalent mental health specialists, these
employees would still comprise
less than 10 percent of the staff, which
was primarily made up of nurses'
aides. Although the State admitted
that most other ICFs in Washington
had no formally trained mental health
workers, the State noted that there(12)
were no other ICFs of a
comparable size in the State. Cherry Heights
had almost twice as many
patients as the largest of the other 33 ICFs in the
State. Given the
absence of any evidence that the percentage of mental
health workers was
substantially higher than might be anticipated in any
large facility
with some mentally diseased patients, we find that the
presence of some
mental health workers on the staff does not establish that
the facility
was primarily engaged in treating mentally diseased patients.
/7/ This
is especially so since some of the mental health programs would
be
appropriate in any ICF.
The presence of mental health professionals on the staff or
as
consultants and the provision of programs directed at patients
with
mental diseases is also explained by the uncontested fact that
the
facility contained some proportion of patients with mental
diseases,
either as a primary or secondary diagnoses. The presence of
such
patients also explains an agreement between the facility and the
Seattle
University School of Nursing to provide nursing experience to
students,
which the auditors alleged was to provide psychiatric
nursing
experience. Agency's Ex. A.; State's Ex. 1, Audit Report, p.
12;
Affidavit of Ronald P. Benoy. /8/
The auditors also asserted that the facility was used as an
"alternative
facility" for the care and treatment of mentally ill patients
because of
overcrowding in other facilities for the mentally ill. Audit
Report,
States'(13) Ex. 1, p. 11. This assertion was based on the
auditors'
finding that 13 percent of the Medicaid patients at the facility
were
admitted directly from Western State Hospital, a State-owned
IMD.
Another 20 percent, approximately, were discharged from the
psychiatric
ward of Harborview Medical Center, a general purpose public
hospital.
/9/ The audit report did not state whether the patients admitted
from
Western State or Harborview were admitted primarily for care of a
mental
or physical disease. The audit report contained no evidence of
either
an explicit agreement to act as an alternative care facility or of
any
State policy to that effect. No evidence or analysis supported
the
auditors' assertion of overcrowding at other facilities.
The fact that individual patients were admitted to Cherry
Heights
immediately after receiving care for an acute psychiatric problem
from a
state hospital might have bearing on the reason for those
patients'
placement at Cherry Heights. The underlying purpose behind
the factor
cited by the auditors (i.e., whether the facility was being used
as an
alternate to a State mental institution), however, was to
determine
whether a state is attempting to avoid its traditional
responsibility
for IMD care by dumping patients out of state mental hospitals
into ICFs
or otherwise using an ICF as a de facto IMD. The evidence
here did not
establish that Washington was using Cherry Heights in this
manner.
In sum, the factors cited by the Agency, other than the
patient-counting
factors, could reasonably have been present in an ICF which
was not an
IMD at all. None of these factors distinguish the facility
from an ICF
which accepts some mental patients, or identify the facility
as
"primarily engaged" in the treatment of mental diseases. Having
found
little suport for the Agency's determination in the evidence
presented
on these factors, we must carefully scrutinize the auditors'
findings
dependent on patient-counting.
IV. The audit process resulted in a misapplication of
the
patient-counting criteria.
In this section we review the State's challenges to the application
of
patient-counting factors with respect to(14) patient
classification.
/10/ The classification of patients was performed in a number
of steps.
First, the auditors examined Medicaid patient medical records
and
recorded certain information on audit forms. The forms
contain
identifying information and sections to indicate diagnoses,
medications,
and behavioral characteristics. The auditors, who
apparently had no
medical training, then classified the patients. These forms
were
reviewed by a nurse who classified the patient on the basis of the
form
alone, without reference to the underlying medical records. Some
of the
forms were also reviewed by a staff physician in Region IX, although
the
audit report does not indicate the precise number. In addition to
this
process, Agency "medical personnel" (the audit report does not
specify
whether this was a doctor or a nurse) examined the medical records of
40
patients and concluded that the auditors had obtained complete
and
appropriate information on the forms.
The State submitted a patient-by-patient challenge to the
determinations
with respect to a total of approximately 98 admissions.
This included
approximately 42 admissions with a diagnosis of alcoholism or
related
symptoms classified as primarily due to mental diseases by the
Agency
(the State claimed to contest 47 admissions, but apparently included
at
least 3 duplicates and two admissions which the auditors had
changed
from a mental to a physical classification), and approximately 55
other
admissions classified as primarily due to mental diseases (the
State
claimed to contest 57 admissions, but at least 2 were duplicates).
/11/
(15) The State also raised procedural issues regarding the adequacy
of
the bases for the Agency's medical determinations, the
qualifications
and credibility of the medical personnel making the
determinations, and
the consistency of those determinations with the
principles set forth in
Agency regulations and policy documents.
Below, we discuss first the general issue of whether there was an
adequate
basis in the record for accurate patient-counting
determinations. Then,
we discuss challenges to the qualifications of
the patient classification
team. Finally, we discuss issues associated
with the application of
Agency guidelines, particularly with respect to
physically-based mental
diseases and alcoholism.
a. Was there an adequate basis for accurate patient classification?
The State alleged that certain of the forms, prepared by the auditors
and
used as the basis for the medical determination, did not provide
complete
information upon which an accurate determination could be
based. The
State indicated a number of forms which listed medications
appropriately
administered for physical diagnoses. On some forms,
however, no corresponding
physical diagnosis is listed. The State
argued that this contradiction
indicates that the information listed by
the auditors on the forms is
incomplete. See, e.g., State's Ex. 7, D.
F. (admission of 5/8/80).
/12/
The Agency responded that the medications cited by the State were
items
such as "vitamins, nutrients, aspirins, anti-acids, decongestants,
lice
control, itching control, etc." Agency's Brief, p. 16. Our review
of
the patient forms submitted by the State indicated, from a
layman's
perspective, that the Agency response was true in some instances,
but
not in others. In itself, we would not find much significance in
this,
since the number of patients involved is not large and there was
no
evidence presented that any missing information would have affected
the
classification of those patients. But the inaccuracy pointed out by
the
State, and the overly general response of the Agency (along with
other
factors, discussed below), diminished our view of the credibility of
the
Agency's review process.
(16) The State challenged the failure of the auditors to indicate on
the
forms whether a mental diagnosis was episodic, acute, chronic,
in
remission, or controlled. If a patient's mental disease was
under
control, then the diagnosis -- although still recorded in the
patient's
medical records -- would not necessarily be the reason for the
patient's
institutionalization. The diagnosis would merely be for
historical
purposes, or to indicate a continued maintenance program of
medication.
/13/
The Agency responded that mistakes in classifying patients
with
historical diagnoses of mental diseases were not important, since
the
mere fact that these patients had mental diagnoses should be
considered
as a broad indicator that the overall character of the facility
was an
IMD. If the Board were to accept this argument, we would
render
meaningless the Agency's policy in section 4390 of the state
Medicaid
Manual which states that the significant element is not the
diagonsis
itself, but whether "each patient's need for
institutionalization
results from a mental disease." This policy indicates
that the Agency
recognized that classification should not be based upon an
historical
diagnosis, but must be made with reference to the reasons
for
institutionalization at the time of admission. This makes sense
because
otherwise patients with historical or controlled mental diseases
would
face unwarranted discrimination. Thus we must reject the
Agency's
argument that historical diagnosis are important in themselves,
as
indicators of the overall character of the facility.
We acknowledge that historical diagnoses may be relevant to an
inquiry
concerning patient's current health status, and were properly
considered
by the Agency. But the failure of the aduitors to
distinguish between
historical and current diagnoses in the forms used by the
medical
evaluators created the possibility of mistaken classifications on
a
large scale.
The possibility of error is particularly strong when other indicators
of
the status and severity of a mental diagnosis, such as the
treatment
being given, are not indicated on the patient forms. The
State
challenged the failure of the auditors to list details of the types
of
treatment received by patients, which would indicate the severity of
the
mental disease and allow a medical professional to accurately
determine
the relative importance of a mental disease as a reason for
the
patient's institutionalization.
(17) The auditors did not list dosages of medication, frequencies
of
treatment with medication, or patient utilization of mental
health
services (apart from a few references to a senior citizens'
group
offered by the Mental Health Department of Cherry Heights). /13/
The
audit report does not list visits by either mental health or
other
medical professionals. The Agency defended its reliance on
diagnoses,
rather than treatment, by stating that it assumed that
treatment
appropriate to each diagnosis was provided.
We recognize that treatment can not be considered so critical a
factor
in determining whether a facility is an IMD as to permit states to
claim
federal participation in the costs of "warehousing" patients
in
facilities which do not provide appropriate treatment. That
was
precisely one of the evils Congress sought to avoid. See Decision
No.
413. As the Agency pointed out in its brief, the issue is not
whether
the patients were receiving the appropriate quality of care; we
must
assume that the patients were receiving treatment appropriate to
their
needs. If the patients' diagnoses and medical records indicated
that
patients should have been receiving treatment for mental diseases,
then
the overall character of the facility must be considered to be an
IMD,
whether or not the appropriate treatment was actually given.
But treatment is a critical factor in a situation in which the
diagnoses
can be considered as either mental or physical diagnoses, such
as
alsoholism, or in determining the primary reason for
the
institutionalization of patients with both physical and
mental
diagnoses. See Decision No. 529. Treatment is an indicator
of the
judgement of the attending physician of the nature and severity of
the
patient's alleged mental diagnoses, and of the overall character of
the
facility as to whether it is concerned primarily with the physical
or
mental aspects of the patients' health problems.
Because of these several irregularities brought forward by the State,
we
agree that the patient classifications necessary to support
the
patient-counting criteria as evidence of the overall character of
the
facility were flawed. We are not persuaded that the effects were
minor
by the Agency's assertion that the medical personnel examined
the
underlying medical records in 40 cases, and found that "the
information
collected by the auditors from the medical records provided an
adequate
basis for determining the(18) primary reason patients were at
the
facility." Agency's Response to Order, p. 4. Those 40 cases were
not a
random sample; they were the cases which were undecided after
an
intitial review by the medical personnel. We can not determine
whether
those cases were representative of the entire set of
cases.
Furthermore, the very fact that the medical personnel went back to
the
underlying medical records indicates that the patient forms were
not
considered, at the time, an adequate basis for a determination in
a
close case. Yet, the Agency provided no evidence to support
its
determination in close cases other than the patient forms.
b. Were the patient determinations made by qualified medical personnel?
In challenging Agency medical determinations concerning
individual
patients, the State implicity challenged the credibility
and
qualifications of the Agency medical personnel who categorized
the
patients. The Agency offered little information concerning
the
qualifications of the medical personnel.
In section 4390, the Agency recommended that review teams have "at
least
one ohysician or other member who is familiar with the care of
mentally
ill individuals." The audit report states that the "medical
personnel"
made the determinations, and identified the medical personnel as
"one
physician and two nurses." State's Ex. 1, Audit Report, p. 2. /14/
Each
patient form was reviewed by a nurse and a determination was made in
a
space labeled "Nurse's Determination." State's Ex. 7. There is
no
indication that the physician reviewed all of the forms,
although
changes indicate that some of the forms were reviewed by the
physician.
The record does not indicate whether the Agency medical personnel
had
any experience in the area of mental health. The physician
was
identified as "a medical doctor currently employed with the
Public
Health Service, Region X," but the Agency did not allege that he
was
licensed to practice in any state, or that he had any experience
in
evaluating or treating mental patients. On the other hand, the
State's
challenges to the Agency medical determinations were based on a
review
by two nurses with experience in psychiatric(19) nursing and
nursing
home services, in consultation with three doctors with experience
with
psychiatric patients.
In Decision No. 231, we found that the classification of patients in
a
facility in Connecticut had a high degree of credibility because
the
classification had been conducted by a review team guided by
a
psychiatrist with significant experience in the area of mental
health.
While we also upheld IMD determinations based on evidence gathered
by
less qualified review teams, we agree with the State's implication
that,
with a less qualified review team, the patient classifications are
more
open to doubt.
c. Were the patient-counting determinations consistent with
Agency
policy?
The State alleged that the patient classification was inconsistent
with
Agency policy in several respects. We have already discussed
the
State's argument that the Agency failed to prevent classification on
the
basis of historical diagnoses or diagnoses which were not the
primary
reason for institutionalization. The State also pointed out
that the
auditors recorded on the forms, and used for patient evaluation,
entries
which were not diagnoses under the ICD-9-CM (which section 4390 of
the
State Medicaid Manual states will be used for patient
classification).
We do not believe that recording of these other symptoms or
diagnoses
was necessarily improper, to the extent the forms were not
evaluated
merely on a mechanical basis but were evaluated by medical
personnel who
presumably could distinguish between relevant and irrelevant
medical
information. We agree with the Agency's assertion that these
medical
personnel could exclude superfluous information in exercising
medical
judgment. We note, however, that classifications made without
ICD
diagnoses from the attending medical personnel must be made
cautiously
and conservatively. /15/
(20) A more difficult question was suggested by the State in
its
arguments related to alcoholism: whether the Agency
improperly
classified as mental diseases those diagnoses, such as organic
brain
syndrome and Wernicke-Korsakoef syndrome, which are diagnoses
resulting
from physical damage to the brain. In State Medicaid Manual
section
4390, the Agency stated that diagnoses related to senility were
excluded
from classification as mental diseases because they "represent
the
behavioral expression of underlying neurological disorders." The
State
alleged that this rationale covered some of the diagnoses cited by
the
State, and the Agency did not deny it. When we asked the Agency
to
explain the basis for distinguishing among physically-based
disorders,
the Agency response was wholly insufficient: the only
explanation the
Agency offered was that section 4390 had specifically
excluded
senility-related diagnoses, but had not mentioned others.
Agency's
Response to Board Order, pp. 8-9.
We do not determine, in this case, whether the Agency improperly failed
to
apply the rationale from section 4390 to other neurological
disorders;
no evidence in this record suggests that the Agency could
not reasonably
classify these physically-based diseases as mental
diseases, since they are
listed as mental diseases in the ICD-9-CM. We
simply find that the
Agency, at the very least, was bound to offer an
explanation of the
classification of these diagnoses and failed to do
so.
The State also challenged generally the classification of 81 patients
with
a diagnosis of alcoholism, stating that a determination that these
patients
were primarily institutionalized because of a mental disease
was inconsistent
with Agency policy. The State cited Board Decision No.
529 for the
proposition that the Agency could not base a determination
that a facility is
an IMD on the basis of the classification of
alcoholics as mentally ill
without developing rules or guidelines to
evaluate whether the facility
treats alcoholism as a mental or as a
physical disease. The State
pointed out that the audit report was
issued in draft prior to the Board's
decision, and treated alcoholism as
a per se mental disease. After the
Board decision, an Agency medical
official reevaluated all (21) patients with
a diagnosis of alcoholism.
State's Ex. 1, Audit Report, p. 21. The
State alleged that this
reevaluation was perfunctory, and had failed to
examine whether
alcoholism was being treated as a physical or a mental
disease by the
facilit, relying instead upon "secondary" diagnoses of mental
diseases.
/16/ State's Brief, pp. 4-5.
The reevaluation process described by the Agency appears to
be
appropriate, but examination of the patient forms submitted by the
State
indicates that the reevaluation may indeed have been merely
perfunctory.
The audit report stated that alcoholism was considered as a
physical
disease in the reevaluation, and that patients were classified as
mental
only if the primary reason for institutionalization was found to be
a
different diagnosis of a mental disease. State's Ex. 1, Audit
Report,
p. 21. The Agency stated that the reevaluation was not made on
the
basis of a secondary diagnosis, but on a determination that
alcoholism
was a secondary diagnosis. When no determination was being
made on the
basis of a classification of alcholism as a mental disease,
Decision No.
529 was not applicable. Here, the Agency alleged that the
reevaluator
assumed the worst, classifying alcoholism per se as a
physical
diagnosis. While this process appears consistent with Agency
policy,
the results described below indicate that the process was not
diligently
followed.
As the State pointed out, a significant number of patient forms
for
admissions classified as primarily mental patient admissions show
a
diagnosis of alcoholism with no other mental diagnosis.
These
admissions should not have been classified as mental patient
admissions
without further Agency guidance and evidence of the type of
treatment.
See, e.g., State's Ex. 5, L.H. (admission of 6/30/80); H.P.
(admission
of 12/24/79). The incorrect classification of these
admissions leads us
to conclude that the reevaluation of the classification
of patients with
diagnoses of alcoholism was not carefully and accurately
performed.
Our finding that the Agency improperly classified admissions
involving
patients with a diagnoses of alcoholism is in addition to our
earlier
criticism of the determinations with(22) respect to the 42
individual
patients with a diagnosis of alcoholism challenged by the State on
other
grounds.
In summary, there are substantial questions here about whether the
patient
classifications were consistent with Agency policy. These
questions,
when considered with the other factors discussed above
concerning the process
used to classify patients, lead us to conclude
that the patient
classification data is unreliable.
IV. The cumulative evidence of the overall character of the facility
is
not sufficient to support a determination that the facility was an
IMD.
In prior Board decisions, the Board has upheld determinations that
a
facility was an IMD based upon a consideration of the
cumulative
evidence. The Board recognized that no single factor or set
of factors
were necessarily determinative, but that evidence of a range of
factors
could indicate an overall pattern and reveal the character of
the
facility.
Here, the Agency did not present a sufficient record which might
indicate,
taken as a whole, the character of the facility. The audit
report
relied primarily on only a few factors associated with the
characteristics of
the patient population. Other factors presented were
inconclusive and
incompletely developed. See discussion, pp. 10-13.
The patient
population factors were determined on the basis of
inadequate underlying
factual data, by personnel who may not have been
sufficiently knowledgeable
about mental diseases, and may, consequently,
have been determined
inconsistently with stated Agency policy. These
patient-counting
factors, which the Board has recognized as the most
problematic factors,
must, therefore, be viewed as inconclusive as well.
See discussion, pp.
13-22.
In addition, the Agency failed to adequately explain its basis for
certain
interpretations of Agency policy in applying the
patient-counting
factors.
On the whole, we did not find this evidence to be as credible
and
probative of overall character as the evidence we reviewed in
our
previous cases.
Conclusion
For the reasons stated above, we conclude that the record
provides
insufficient evidence to support a determination that the Cherry
Heights
Villa Care Center was an IMD during the audit period from January
1,
1980 through December 31,(23) 1981. Therefore, we reverse
the
disallowance imposed by the Agency in this case. /1/ Under
section
1905(a) (15) of the Act,
FFP is available for intermediate care
facility (ICF) services, other than
such services in an IMD. Section
1905(c) defines an ICF as an
institution licensed to provide
"health-related care and services to
individuals . . . who because of
their physical or mental condition" require
institutional care but not
at the level of hospital or skilled nursing
care. (Emphasis added.)
/2/ The factors listed in section 4390 are:
1. The facility is licensed
as a psychiatric facility for the care and
treatment of individuals with
mental diseases; 2. The facility
advertises or holds itself out as a
facility for the care and treatment of
individuals with mental diseases;
3. The facility is accredited as a
psychiatric facility by the JCAH;
4. The facility specializes in
providing psychiatric care and
treatment. This may be ascertained
through review of patients' records
and may also be indicated by the fact
that an unusually large proportion
of the staff has specialized psychiatric
training; 5. The facility is
under the jurisdiction of the
State's mental health authority; 6. More
than 50 percent of the
patients have mental diseases which require
inpatient treatment according to
the patients' medical records; 7. A
large proportion of the
patients in the facility has been transferred
from a State mental institution
for continuing treatment of their mental
disorders; 8.
Independent Professional Review teams report a
preponderance of mental
illness in the diagnoses of the patients in the
facility (42 CFR
456.1); 9. The average age in the facility is
significantly lower
than that of a typical nursing home; 10. Part or
all of the
facility consists of locked wards. As we discuss later in
this decision, the
audit findings here relate to the factors above
numbered 4, 6, 7 and 9.
There is no evidence related to the remaining
six
factors. /3/ An earlier version
of this classification
system was discussed in previous Board decisions and
referred to as the
ICDA. /4/
The statistics concerning patients and admissions were
somewhat confusing
because of multiple admissions of individual
patients. We found the
statistics on patient days to be more probative.
An analysis based on patient
days might have been more convincing,
particularly if the analysis took into
account the changes in the
character of patient days over the course of the
audit period. This
analysis would, of course, be subject to the same
challenges of patient
classification. The chart included as Exhibit B to the
audit report,
State's Exhibit 1, alleged a trend at the facility of an
increasing
percentage of mental patient days. If the Agency had relied
only on the
later periods when the percentages of mental patient days were
higher,
then the case might have been stronger that the facility had become
an
IMD. /5/ Since the
auditors' findings relate to patient
admissions and some patients had
multiple admissions, there are some
difficulties in translating the figures
to percentages of patient
population; however, it is fair to say that
the State conceded that
about 40 percent of the patients were primarily
mentally ill and the
auditors found that about 30 percent of the patients
were primarily
physically
ill. /6/ During the course of
this proceeding, the
Agency submitted two affidavits from auditors stating
that the
facility's administrator stated to them, on or about March 11,
1982,
that the "primary purpose of the facility is to provide care
and
treatment of persons with mental diseases." We give considerably
less
weight to the offhand statements of facility staff, made subsequent
to
the audit period, then we gave to the contemporaneous written
admission
policies or advertisements of the facilities we examined in
previous
decisions, particularly absent further indication of the context of
such
statements. The audit report indicated a trend toward the
treatment of
patients with mental diseases at the facility; therefore,
statements
relevant to a later period may not be relevant to the entire
audit
period. Furthermore, there is no question that a majority of
the
patients may have had diagnosed mental diseases; the contested
issue is
whether these diagnoses were the primary reason for
their
institutionalization at the facility. See Affidavits of Ronald P.
Benoy
and Michael E. Coblentz; State's Ex. 1, Audit Report, p.
13.
/7/ In its response to the Board's Order to Develop the Record,
the
Agency stated that a comparative analysis of staffing and services
would
be burdensome, but that, given time, the Agency could generate a
report
with enough samples of various institutions to support its
position.
This statement did not even amount to an offer of proof, since it
was
merely hypothetical, and was not responsive since our question
clearly
and directly indicated that we found no evidence in the record
to
support the Agency's position. /8/ Although an affidavit submitted
by
an auditor stated that the
facility's Nursing Director said that
this was the purpose of the agreement,
the agreement itself does not
refer to psychiatric nursing experience.
The contemporaneous notation
made by the auditor at the bottom of a copy of
the agreement merely
stated that the Nursing Director said that the students'
experience
"involves working with psychiatric patients." Agency's Ex.
A. In any
case, given the acknowledged percentage of patients with
mental
diseases, we do not find this agreement to be very probative in
itself.
/9/ The audit report found that 23 percent of Medicaid
patient
admissions were for patients admitted directly from Harborview, but,
in
a random sample, the auditors found that 10 percent of these
admissions
were not from the psychiatric
ward. /10/ The Agency asserted
one
ground in support of its IMD determination which was based on
the
patient population but was not dependent on patient classification:
the
relatively young age of patients compared with patients in other
ICFs.
While this may be sufficient as an indicator to trigger an
Agency
investigation, it has no direct probative value with respect to
IMD
status. The relatively young age of patients could have a
reasonable
explanation other than that the facility is an IMD, such as a
preference
for placing younger people together no matter what the reason for
their
institutionalization.
/11/ In this case, the Agency's
determination was based largely on the
finding that during the audit
period, 58 percent of the patients were
admitted primarily because of
mental diseases. Unlike in other
facilities we have considered (where
much higher percentages of mentally
diseased patients were found), in
this facility a shift in the
characterization of only a small number of
patients would diminish the
significance of the patient population data
as an indicator of IMD
status. /12/ We refer to the
patients by
initials to protect
privacy. /13/ The patient forms
indicated
only whether the diagnosis were present at the time of admission,
not
whether the diagnosis were active or historical. /13/ Compare,
with
respect to dosages, the Massachusetts review described in Decision
No.
413 at page 14. /14/ The
patient forms contain spaces labeled
"Auditor's Evaluation." It is not clear
why this space was included if
the determinations were made by the medical
personnel. Apparently,
these spaces were for preliminary
evaluations. See Agency's Response to
Order, p.
3. /15/ Additionally, the State
alleged that the
Agency improperly classified as mentally diseased patients
with senile
dementia and related diseases or mental retardation, which had
been
explicitly excluded from the classification of mental diseases
by
section 4390 of the State Medicaid Manual. While we agree
that
classification of a patient as having a mental disease because of
senile
dementia or mental retardation would be improper, we found only
two
possible cases of this error in the audit forms submitted by the
State.
States' Ex. 7 A.K. (admission of 1/7/80) (senility); M.M.
(admissions
of 2/10/80 and 3/4/80) (mental retardation). It is not
clear to us that
these patients were necessarily classified improperly, since
other
indications of mental diseases on the patient forms might have been
a
basis for the classifications. In light of our other findings, we
did
not find it necessary to consider in any further depth the
sufficiency
of the evidence in support of these
classifications. /16/ In
the
draft audit report, 92 admissions with a primary diagnosis of
alcoholism
had been included in the mental category. In the
reevaluation, the
Agency changed only 11 admissions to the physical
category. The Agency
did not provide any patient forms from those 11
admissions, which might
have shown how those 11 admissions were
distinguishable from the other
81.