Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: Pennsylvania Department of Public Welfare
DATE: May 26, 1993
Docket No. 91-131
Decision No. 1414
DECISION
This case is on remand from the United States District Court for
the
Middle District of Pennsylvania in accordance with a decision by
the
United States Court of Appeals for the Third Circuit.
Pennsylvania
Dept. of Public Welfare v. U.S. Dept. of Health and Human
Services, 928
F.2d 1378 (3rd Cir. 1991). The Third Circuit's (the
court's) decision
followed appeals by the Pennsylvania Department of Public
Welfare
(Pennsylvania) from three administrative decisions by this Board.
1/
This case concerns disallowances exceeding $500,000 taken by the
Health
Care Financing Administration (HCFA) of amounts claimed by
Pennsylvania
under title XIX (Medicaid) of the Social Security Act (Act).
The question presented on remand is whether for certain quarters in
1984
and 1985 Pennsylvania qualified for the statutory exceptions to
the
requirement for reducing Medicaid payments for any quarter for which
a
state failed to make a satisfactory and valid showing that it had
an
effective program for conducting annual medical reviews of the
care
provided to Medicaid recipients in long-term care facilities.
Section
1903(g) of the Act. Specifically, the Board is to decide
whether
Pennsylvania qualified for the technical failings exception for
the
quarters ending March 31, June 30, and September 30, 1984 and for
the
"good faith and due diligence" exception for the quarters
ending
September 30 and December 31, 1985. 2/
Summary of Findings
Below, we find that:
o The "good faith and due diligence" exception to the
annual
review requirement applies to excuse Pennsylvania's failure
to
conduct satisfactory annual reviews at two intermediate
care
facilities (ICFs), Valley Manor and Camp Hill Nursing Homes,
for
the quarters ending September 30 and December 31, 1985. 3/
o The technical failings exception to the annual
review
requirement does not apply to excuse Pennsylvania's failure
to
conduct satisfactory annual reviews at two skilled
nursing
facilities (SNFs), Valley Crest Home and Lock Haven
Hospital,
for the quarters ending March 31, June 30, and September
30,
1984. Additionally, the technical failings exception does
not
apply to excuse Pennsylvania's failure to conduct a
satisfactory
annual review at an intermediate care facility for the
mentally
retarded (ICF/MR), Ramsbottom Center, for the quarter
ending
March 31, 1984.
o The technical failings exception does apply to excuse
the
deficient review at the Ramsbottom Center for the quarter
ending
June 30, 1984.
Background
I. The Statute
Section 1902(a)(31) of the Act required periodic on-site inspection
of
each Medicaid recipient in an ICF, including ICFs/MR.
Section
1902(a)(26) contained a similar requirement for SNFs. Our
references to
the annual review requirements will generally apply to all
long-term
care facilities.
During the period in issue, section 1903(g)(1) of the Act required a
state
to make a quarterly showing demonstrating that it had an effective
program of
medical review of the care provided to Medicaid recipients in
long-term care
facilities whereby the professional management of each
case is reviewed and
evaluated at least annually. 4/ If the Secretary
determined that a
state's quarterly showing was unsatisfactory or
invalid, the state's funding
for long-stay services was reduced in
accordance with the formula at section
1903(g)(5).
Section 1903(g)(4)(B) set out circumstances in which the Secretary
"shall
find" a state's showing satisfactory, in spite of a state's
failure to
conduct all required reviews. Specifically --
[t]he Secretary shall find a showing of a State with respect
to
a calendar quarter under [section 1903(g)] paragraph (1), to
be
satisfactory . . . if the showing demonstrates that the
State
has conducted such an onsite inspection during the
12-month
period ending the last day 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.
II. The Regulation
The annual review requirements were implemented by regulations at
42
C.F.R. Part 456, Subparts I and J. The exceptions were implemented
by
42 C.F.R. . 456.653. In pertinent part, that regulation provided
--
The [HCFA] 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 that 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 by the close of the quarter
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.
Analysis
I. "GOOD FAITH AND DUE DILIGENCE"
A. The Court's Decision
The court determined that HCFA's regulation implementing the "good
faith
and due diligence" exception was "based on an
impermissible
interpretation" of section 1903(g)(4)(B). Consequently,
the court was
concerned that the Board's conclusion, that the "good faith and
due
diligence" exception did not apply, was tainted by an incorrect
legal
standard. 928 F.2d at 1391.
The court found that proper application of the "good faith and
due
diligence" exception required --
consideration not only of the state's "good faith" but also
its
"due diligence." The latter term includes an assessment of
the
reasonableness of the state's actions. A state that has
adopted
an unreliable method for reviewing Medicaid recipients or
that
failed to apply a valid method reasonably would not
have
exercised "due diligence," despite its sincere, "good
faith"
efforts. We conclude that the Secretary's inclusion of
the
"beyond its control" condition into "good faith and
due
diligence" is not supported by the statute.
928 F.2d at 1387.
Given the district court's finding that Pennsylvania had made a
sincere
effort to inspect every patient and did not deliberately miss
any
patient or type of facility, the court found that Pennsylvania met
the
"good faith" aspect of the exception. Thus, the only remaining
issue
was whether the "due diligence" aspect had been satisfied. The
court
noted that while due diligence did not require perfection, it
did
require that a state establish a reliable system of review.
However,
the court was concerned that the error of law reflected in
the
regulation had affected the Board's analysis. Having clarified
the
standard, the court determined that Pennsylvania should be given
an
opportunity to show that it had exercised due diligence. 928 F.2d
at
1387-1388.
B. The Court's Decision Applied
Pennsylvania did not dispute that the patients now at issue were
Medicaid
recipients residing in the facilities who were reasonably
identifiable and
ought to have been reviewed. See DAB No. 840, at 7.
On remand the issues presented are 1) whether Pennsylvania had a
reliable
system for identifying Medicaid patients due for annual review
and 2) whether
it reasonably applied its system in connection with the
reviews at issue.
The court directed that Pennsylvania "be given the opportunity to
produce
evidence that it had a reasonable system in place which was
designed to
accomplish the statutory goal of total inspection without
consideration of
whether the failure to inspect the two patients missed
was due to
circumstances beyond its control." 928 F.2d at 1388.
1. Pennsylvania's System Was Reasonable.
At a hearing before the Board on remand, Pennsylvania provided
evidence
about its process whereby individuals, generally eligible for
Medicaid,
were determined eligible for Medicaid institutional benefits and
about
its system for identifying those Medicaid recipients as due for
review.
Pennsylvania residents applied for Medicaid benefits through their
local
County Assistance Offices (CAOs). Pennsylvania noted that 70
percent of
these applicants were not in nursing homes when they
applied.
Application for Medicaid at this time facilitated an
individual's
application for admission to a nursing home since it provided a
facility
with information about the source of reimbursement for services.
5/
When an individual was found eligible for Medicaid, the CAO generated
a
Medicaid Identification (MA-ID) card and a form known as a PA-162.
The
PA-162 notified the individual that he or she was eligible for
certain
Medicaid benefits. Tr. at 41-46. Eligibility for
long-term
institutional care benefits was a separate process which,
when
successful, generated another PA-162. If an individual was in a
nursing
home at the time of application for long-term care benefits,
the
facility would receive the PA-162. Tr. at 66-71. Pennsylvania
noted
that a redetermination of Medicaid eligibility was conducted every
six
months following the initial eligibility determination. Tr. at
42.
Once determined Medicaid eligible for long-term care benefits,
individuals
commonly would apply to several facilities at once, often
spending time on
waiting lists for admission. After admission, the
facility had up to
six months to bill Pennsylvania for services
provided. However,
Pennsylvania noted that since it was in a facility's
best interest to receive
prompt payment, a six-month delay in billing
for a new patient would be
extreme. As a rule, a facility usually
billed within two months.
Tr. at 43-46. The facility submitted an
invoice to Pennsylvania, known
as a 309-C, and a resource computation
worksheet, known as a MA-313.
The MA-313 contained information from the
facility and the CAO which enabled
Pennsylvania to determine what part,
if any, of the cost of services the
patient was liable to pay. Tr. at
49. Each invoice received by
Pennsylvania was reflected in a monthly
Remittance Advice returned to the
facility. The Remittance Advice was
the payment history for the
services to individuals billed to Medicaid
by the facility. 6/ Tr. at
60-61. A Remittance Advice included "the
last current total billing for
the month." Tr. at 46. Generally, each
Remittance Advice would
include the billings and payments for services
provided for the month ending
four to six weeks earlier. Id.
In Pennsylvania, annual medical reviews are conducted by Inspection
of
Care (IOC) teams. Prior to conducting a review, Pennsylvania sent
each
facility a letter explaining the review requirements and requesting
that
specific documentation be made available at the start of the
review.
Tr. 48; Pennsylvania Tab 1 in Board Docket No. 86-121 (DAB No.
840).
HCFA did not require a state to review pending Medicaid patients
(here,
patients whose Medicaid applications for institutional services
were
pending decisions). Tr. at 111, 157. However, Pennsylvania
asked
facilities to notify the IOC teams of patients whose
Medicaid
applications were pending so the teams could track their status
during
the review. If, during the course of a review, the IOC team
learned
that a patient had been enrolled in Medicaid for institutional
services,
the team would routinely review that individual. Id. at 48,
57-59. As
part of the pre-review entrance conference, the facility was
to provide
the IOC team with the recipients' MA-ID cards, the PA-162
forms
(containing the notice of nursing home eligibility and the patient
pay
amount), and all the facility's latest recipient billing
information
including the resource computation worksheet, the MA-313.
The IOC teams
were to double check this information against the facility's
latest
Remittance Advice. Id. at 48-51.
At the time in issue, there was little guidance available to states
to
assist them in establishing systems for recipient identification
capable
of meeting the section 1903(g) requirement for the annual review
and
evaluation of "each case." In November 1972, HCFA's predecessor
agency
had issued a Medical Assistance Manual known as MSA-PRG-25.
MSA-PRG-25
provided no specific requirements regarding how states were to
identify
patients due for review. Generally, Part 5, Chapter VI,
section
5-60-20, provided that states may obtain a current list of patients
for
whom payments are being made from the state component responsible
for
accounting for such payments. The Manual suggested that
principal
sources of pre-review patient information were files relating
to
authorization of payment and records of past reviews at the
facility.
MSA-PRG-25 at 62. HCFA noted, however, that MSA-PRG-25 was
superseded
by the State Medicaid Manual "in the late 1970s and early 1980s
and was
not in effect during the 1984-1985 reviews in this case."
HCFA
Submission (March 3, 1993) at 1.
HCFA did not, however, cite to the text of any authority which
set
specific requirements for state systems for identifying patients due
for
review which replaced MSA-PRG-25 and which was in effect during 1985.
7/
HCFA issued Action Transmittal 79-61 (HCFA-AT-79-61) on July 2,
1979.
The subject addressed in HCFA-AT-79-61 was the format of
quarterly
showings. It did not, however, address the question of
identifying
recipients due for review. 8/
HCFA nonetheless argued throughout these appeals that the
disallowances
should be sustained because Pennsylvania had an inherently
unreliable
system which relied exclusively on the facilities to identify
recipients
due for review. A HCFA official testified that, in general,
the
validity of a state's system was assessed by examining whether the
state
used all the resources available to it to identify recipients due
for
review, rather than simply relying on the facility to perform
that
function. Tr. at 92.
At the hearing, Pennsylvania addressed the Board's concern, expressed
in
DAB No. 1014, that Pennsylvania had not explained why there was
no
back-up system which would enable the IOC team to enter a facility
with
a list of all Medicaid recipients residing there. By explaining
in
greater detail the instructions given to the IOC teams and
the
facilities, Pennsylvania clarified that what the IOC teams obtained
from
a facility was state-generated documentation pertaining to
Medicaid
recipients as well as the facility's own data.
Pennsylvania maintained that it could not have implemented a better
system
for recipient identification than the one in place during the
periods covered
by these disallowances. Tr. at 51-54. Pennsylvania
explained that
it did not have in place during this time period a
computer system capable of
generating a master list of recipients at a
facility. Tr. at 176-177.
9/ Therefore, it was not able to provide its
IOC teams prior to the day
they went on-site at a facility with a
comprehensive listing of patients
determined eligible for institutional
benefits and residing in that
facility. However, nothing in HCFA's
guidance required that
Pennsylvania produce such a list. Moreover,
contrary to HCFA's
assertion, Pennsylvania's system did not rely
exclusively on the facilities
to identify recipients due for review.
Rather, much of the information to be
produced for an IOC team was
originally generated by Pennsylvania and was
merely retained by the
facilities. It is clear that if a facility
actually provided the
documentation required, the IOC teams would obtain
information which to
a reasonable degree of certainty would identify all
Medicaid recipients
present in the facility or for whom eligibility
determinations were
pending. Since Pennsylvania itself was the source
of much of the
documentation, there was not the same opportunity for error
that would
be present if the facility was the sole source of documentation
for
identifying its Medicaid patients. Therefore, the fact
that
Pennsylvania necessarily relied on the facilities as a source of
data
does not render its system inherently unreliable since under
the
corrected legal standard the state was required to implement a
system
that was reasonably, not perfectly, certain of identifying all
patients
due for review.
HCFA did not cite to or rely on any requirements for state
systems
applicable during this time period that would have required
Pennsylvania
to have a different system for patient identification.
Therefore, we
find that Pennsylvania's system for identifying recipients due
for
review was reasonable.
We next examine whether Pennsylvania followed its system for the
reviews
in question here.
2. Pennsylvania Followed Its System.
The unreviewed recipient at Valley Manor was in private pay status for
two
months prior to the September 1985 review, as the result of a
verbal
agreement between the facility and the patient's caseworker in the
CAO.
However, she had returned to Medicaid status by the time of the
review.
The recipient at Camp Hill was determined Medicaid
eligible
approximately a month prior to the review. However, at the
time of the
review, the facility inexplicably informed the IOC team that her
status
was "pending." See DAB No. 840, at 6.
Pennsylvania conceded that, in both these cases, the IOC teams failed
to
check the Remittance Advice for these individuals.
Pennsylvania
indicated that, during the period in issue, its IOC teams
received
written instructions regarding the type of documentation which
needed to
be reviewed. The Remittance Advice fell within that
documentation.
Apparently, however, there was some ambiguity in the
instructions. 10/
As a result, team members failed to check the Remittance
Advice. They
did, however, examine other available billing
documentation.
Pennsylvania asserted that the failure to follow its system in
this
respect was merely harmless error since the Remittance Advices
available
to the IOC teams at the time in question did not contain
information for
these recipients. Pennsylvania Submission (January 15,
1993) at 2-3 and
Attachments.
Here, while it is clear that the facilities did not provide
information
adequate to identify these patients as Medicaid recipients due
for
review, there is no basis for attributing the failure to identify
these
patients to any action or inaction taken by the IOC teams.
Affidavits
presented by Pennsylvania in the original proceedings indicate
that the
IOC teams were aware of their obligation to review each case and
made
reasonable efforts to meet that obligation. Board Docket No.
86-121
(DAB No. 840) Pennsylvania Exs. C and D. HCFA did not challenge
these
affidavits. Thus, we conclude that the IOC teams exercised
due
diligence in spite of failing to review one patient in each facility.
While the court held that a failure to follow a reasonable system
for
recipient identification would preclude the application of an
exception
(928 F.2d at 1387), we conclude that there is no evidence of
such
failure here. In essence, HCFA suggested that the
Pennsylvania's
implementation of its system must be perfect. That is a
standard higher
than reasonable and clearly not what the court
articulated. Given the
guidance available to Pennsylvania, the court's
analysis and the facts,
we see little more which could have reasonably been
expected of
Pennsylvania's IOC teams here.
We conclude that Pennsylvania's IOC teams exercised due diligence in
the
conduct of their reviews at Valley Manor and Camp Hill. Thus,
we
reverse the disallowances taken for those facilities for the
quarters
ending September 30 and December 31, 1985.
II. TECHNICAL FAILINGS
A. The Court's Decision
The court affirmed the Board's decision rejecting Pennsylvania's
claim
that the 1985 disallowances at Valley Manor and Camp Hill should
be
reversed because the technical failings exception applied. See DAB
No.
840. There, we determined that "a finding that the technical
failings
exception applies cannot be based on the number of violations
alone."
Id. at 7. We rejected the argument "that a few unexcused
individual
reviews missed in the overall annual review constitute
mere
�technicalities.�" Id. Additionally, we found that missed
reviews
resulting from poor administration or bad record keeping could not
be
considered a technical failing. Id. The court agreed with this
aspect
of our analysis and affirmed our conclusion that the technical
failings
exception did not excuse the missed reviews at Valley Manor and
Camp
Hill. 928 F.2d at 1391.
In DAB No. 746, we found Pennsylvania's quarterly showings for
certain
quarters in 1984 unsatisfactory because the patients at issue
were
Medicaid recipients residing in the facilities who were
reasonably
identifiable and ought to have been reviewed. However, the
court
disagreed with our further determination in that decision that
the
technical failings exception could not apply to excuse the
defective
reviews at Valley Crest Home, Lock Haven Hospital (for the
quarters
ending March 31, June 30, and September 30, 1984) and Ramsbottom
Center
(for the quarters ending March 31 and June 30, 1984). We found
that
this exception was unavailable to excuse the missed reviews at any
of
these facilities since Valley Crest, a facility with more than
200
certified Medicaid beds, had not been reviewed during any of
those
quarters. We concluded that for either statutory exception to
apply a
state must have reviewed 98 percent of all facilities requiring
review,
including all facilities with 200 or more certified Medicaid
beds.
The court found invalid HCFA's regulation requiring a state to satisfy
the
98%/200 bed standard as a precondition for meeting the technical
failings
exception. The court determined the correct reading of the
technical
failings exception to be --
The Secretary shall find a showing of a State with respect to
a
calendar quarter under [section 1903(g)] paragraph (1), to
be
satisfactory under such paragraph with respect to
the
requirement that the State conduct annual onsite inspections
in
mental hospitals, nursing facilities and intermediate
care
facilities 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.
928 F.2d at 1389.
Consequently, the court held that it could not sustain the
Board's
determination that the technical failings exception could not apply
to
the disallowances in the 1984 quarters due to Pennsylvania's failure
to
satisfy the 98%/200 bed standard. 928 F.2d at 1389-1390.
In attempting to discern more precisely what constituted a
technical
failing, the court recognized, as has the Board in many prior
decisions,
that the term "technical failings" is not defined by statute and
the
legislative history contains little clear guidance as to
what
constitutes a technical failing. The court noted that "technical"
was
ordinarily defined as immaterial or not substantial. The
court
interpreted the statute's legislative history as indicating that
a
review several weeks late might also be technical, favoring a
restricted
reading of the term "technical reasons" (i.e., reasons enabling a
state
to claim the technical failings exception) because the exceptions
were
not intended to diminish the intent of the law that all facilities
be
reviewed. 928 F.2d at 1390.
The court also noted it had been advised that, in practice, HCFA had
found
technical failings only in "extraordinary circumstances which the
state
(albeit perhaps with great difficulty) could have addressed by
using
alternative solutions." 928 F.2d at 1390. This statement
reflects
positions HCFA took before us, but does not accurately reflect
this Board's
prior decisions.
We agreed generally with HCFA that a failure for reasons which
evidence
poor administration or bad record keeping could not qualify as
a
technical failing. However, since acceptable technical reasons
were,
under HCFA's regulations, related to matters within a state's
control,
the Board previously stated that not every failure by a state can
be
considered poor administration or bad record keeping because this
would
render the exception meaningless. The Board has concluded that
the
technical failings exception applied in many cases, including
the
following: Michigan Dept. of Social Services, DAB No. 1017
(1989)
(failure to review an entire facility excused due to the
singular
occurrence of the State's mistaken conclusion that the quarter
the
facility was due for review would change since there was a change in
the
type of services provided at the facility); Illinois Dept. of
Public
Aid, DAB No. 930 (1988) (review of one facility was deficient
because
the review team did not include a physician but the State caught
its
error and conducted a proper review within 30 days of the close of
the
review quarter); Arkansas Dept. of Human Services, DAB No. 923
(1987)
(one facility was not timely reviewed because the State expected
there
to be a court decision on whether it had properly terminated
facility
from Medicaid prior to the close of the review quarter); Utah Dept.
of
Health, DAB No. 843 (1987) (a key punch error caused a patient
present
in the facility to be deleted from the State's list rather than
a
discharged patient and the State's back-up system also failed to
pick-up
this patient since the patient was moved during the review to a part
of
the facility where the review had been completed); and New
Hampshire
Dept. of Health and Human Services, DAB No. 841 (1987) (one patient
in
an eight building facility was not reviewed until shortly after
the
review quarter when during the review the patient had been missed
when
moved from one building to another). Generally, we have reasoned
that
poor administration and bad record keeping which evidence a
systemic
problem which could result in failings on a regular basis in a
state's
system of review should not be considered merely technical because
they
evidence lack of an effective program. Arkansas at 4; Utah at
6.
The court did not examine the analytical approach in our line of
past
decisions regarding what constitutes a technical failing.
Moreover,
Pennsylvania did not argue that we should not follow those
decisions
here. In our view, the approach in past Board decisions is
consistent
with the analysis suggested by the court: i.e., an analysis
of whether
Pennsylvania satisfactorily demonstrated that it would have made
a
satisfactory and valid showing but for failings which are "immaterial
or
insubstantial," such as completing a review several weeks late. 11/
The
court apparently agreed that if the reasons for the failings evidence
a
systemic problem the failings are not immaterial or insubstantial.
B. The Court's Decision Applied
Pennsylvania did not here seek to overturn our finding in DAB No. 746
that
all of the patients at issue here were Medicaid recipients residing
in the
facilities who were reasonably identifiable and ought to have
been
reviewed. Thus, Pennsylvania's showing was invalid because
Pennsylvania
had not completed reviews of these facilities as required.
1. Valley Crest and Lock Haven
The disallowances at Valley Crest and Lock Haven were for the SNF level
of
care. The review at Valley Crest took place March 7-19, 1984.
The
IOC team at Valley Crest failed to review four patients. 12/ In
the
proceedings leading to DAB No. 746, Pennsylvania had asserted only
that
the facility failed to inform the review team of these
patients'
Medicaid status. DAB No. 746, at 11-13.
The review at Lock Haven took place on December 5, 1983. The IOC
team
at Lock Haven failed to review one patient. In the prior
proceedings,
Pennsylvania had indicated only that this recipient was not
reviewed
because the facility did not list him as a Medicaid patient.
Id. at
15-16.
In those earlier proceedings, Pennsylvania submitted affidavits from
the
leaders of the IOC teams which conducted the reviews at Valley Crest
and
Lock Haven. The affiants merely stated that the facilities had
not
informed them of the Medicaid status of the individuals in
issue.
Pennsylvania Appeal File Docket No. 85-40 (DAB No. 746) at A-9 and
A-10.
Pennsylvania also submitted documentation for the four patients
at
Valley Crest showing that they had been present in the facility
and
authorized for Medicaid payments at least since dates ranging
from
January 5 to February 18, 1984. Pennsylvania Supplemental Brief
in
Response to Order to Develop the Record Docket No. 85-40 (DAB No.
746)
Attachments A-D. Pennsylvania did not allege that it had
completed
reviews of the missed recipients within several weeks of the close
of
the quarter. Indeed, Pennsylvania submitted no evidence to show when
it
completed the reviews, so that it was reasonable to conclude that it
was
after HCFA's validation survey.
Since DAB No. 746 was issued in 1986, Pennsylvania has offered
no
additional evidence regarding its failure to review the patients
at
these two facilities. While not conceding that the technical
failings
exception did not apply to the disallowances at Valley Crest and
Lock
Haven, Pennsylvania noted that --
as a practical matter . . . it has no new information to
submit
on the SNF violations and the Board is unlikely to
reverse
itself on this issue.
Pennsylvania's Submission (January 15, 1993) at 1.
The Act requires annual review of each patient's care to assure
the
quality and appropriateness of that care. Here, HCFA's
validation
survey (which included only a relatively few SNFs) found five
SNF
patients who were not reviewed for three quarters and who,
presumably,
would have remained unreviewed at least until the next scheduled
annual
reviews, but for HCFA's survey. While the IOC team leaders
attested
that the facilities had failed to inform them about the
patients,
Pennsylvania presented no documentation for the Lock Haven
patient
concerning when that patient entered the facility, when the
patient
became Medicaid eligible, or whether the patient's name was on the
prior
month's Remittance Advice or facility invoice. For the four
patients at
Valley Crest, the documentation Pennsylvania submitted shows that
all of
the patients had been determined eligible for Medicaid long-term care
at
least a month prior to the end of the review on March 19,
1984.
Pennsylvania submitted no documentation to show whether their names
were
on the prior month's Remittance Advice or facility
invoice.
Pennsylvania did not even attempt to explain here how the evidence
it
had previously submitted demonstrated that its failure to review
the
five patients was immaterial or insubstantial.
In our view, the evidence is unsatisfactory because it leaves open
the
possibility that the patient in Lock Haven had remained unreviewed
for
almost two years, and that, with regard to both facilities, the
IOC
teams had Remittance Advices or facility invoices containing
the
patients' names and simply failed to review them. The affidavits by
the
IOC team leaders refer only to "lists" provided by the facilities
which
did not contain the patients' names. They do not clearly indicate
that
the teams obtained and checked the documents Pennsylvania required
the
teams to check (i.e., the Remittance Advice and the facility
invoice).
Thus, Pennsylvania did not satisfactorily demonstrate that its
failings
here were immaterial or insubstantial.
We conclude that Pennsylvania did not satisfactorily demonstrate that
the
technical failings exception applies to excuse the deficient SNF
reviews at
the Valley Crest and Lock Haven facilities for the quarters
ending March 31,
June 30, and September 30, 1984. We uphold the
disallowances taken at
each facility for the three quarters in issue.
2. Ramsbottom
The disallowance at Ramsbottom was for the ICF level of care.
a. The March 31, 1984 quarter
The original due date for Ramsbottom's review was March 31, 1984,
which
marked the one-year anniversary of the quarter in which the
facility
entered the Medicaid program. The Director of Pennsylvania's
IOC teams
did not become aware of the need to review Ramsbottom until late
June
1984. He testified that the letter notifying him that Ramsbottom
was
due for review was apparently lost in the mail.
The IOC Director indicated that his office was "not mailed the
beginning
provider agreement . . . so . . . we didn't know that the facility
was
up for review till we got notified . . . in late June . . . ." Tr.
at
55-56. When asked why they did not receive the provider agreement
he
said: "We have no idea. The division that enrolls them felt
that they
. . . sent it to us. We have no record of it . . . ."
Id. at 56. When
asked specifically if the provider agreement was lost,
the Director
characterized that as a "fair statement." Id. The
Director admitted
that his division has since changed its procedure for
collecting
provider agreements (they are now collected by hand) in order to
avoid
this type of problem. Regardless of this procedural change,
however, he
indicated that, other than this instance, he had never
experienced this
type of problem relative to any other facility in spite of
the frequency
with which the agreements were transmitted by mail within
Pennsylvania.
Tr. at 77-80.
The object of the annual review process is to provide assurances
that
Medicaid funds are paying for an appropriate level of services
at
long-term care facilities and that recipients are receiving
quality
care. The fact that a state failing to meet the review
requirements
faces a significant reduction in federal funding underscores the
fact
that the review process is not merely a paper-pushing exercise.
Rather,
it imposes a significant and genuine duty upon a state to have
an
effective program for conducting the required annual reviews.
Here, the testimony shows only that an entire facility was missed but
does
not adequately explain why. The evidence does not
satisfactorily
demonstrate that the failure to review Ramsbottom for this
quarter was
immaterial or insubstantial. This was not the situation
envisioned in
the legislative history, and discussed by the court, where a
facility
was missed but the review was performed several weeks after it was
due.
In this case, the review ultimately occurred several months
later.
Pennsylvania conceded that Ramsbottom entered Pennsylvania's
Medicaid
program in the first quarter of calendar year 1983. Tr. at 56,
73-76.
However, Pennsylvania's IOC Division remained unaware of
its
participation in Medicaid until June 1984, well after the review
was
due. Thus, as a practical matter, the facility operated within
Medicaid
for a fifteen to eighteen month period with no on-site inspection
of
care.
Even if this was, as Pennsylvania claimed, a one-time occurrence,
that
fact alone would not warrant application of the exception; an
entire
facility was reviewed late and Pennsylvania had "no idea" why. A
state
may not aim for less than 100 percent review of all patients
and
facilities. Given the relative harm flowing from failure to review
an
entire facility compared to a few patients, it is incumbent
upon a
state to take greater precautions in identifying
facilities
participating in the Medicaid program and their due dates for
review
than it is required to take for individual recipients. Here,
there is
no evidence that Pennsylvania had a system for double-checking its
list
of facilities due for review in a quarter, which may have caught
this
error earlier, or even what system, if any, it previously had
for
receiving new provider agreements, filing them, and recording
their
anniversary dates. Pennsylvania did not even explain how it
ultimately
discovered that Ramsbottom was unreviewed.
Thus, we conclude that Pennsylvania did not satisfactorily
demonstrate
that its failure to identify Ramsbottom as a facility
participating in
the Medicaid program and due for review in the quarter
ending March 31,
1984 was a technical failing. We uphold the
disallowance taken at
Ramsbottom for the quarter ending March 31, 1984.
b. The June 30, 1984 quarter
Pennsylvania's efforts to schedule a review of Ramsbottom before the
end
of the June quarter were thwarted by personnel shortages (illness
among
some IOC team members and the need for one team member to testify in
a
hearing). See Pennsylvania Exhibit titled "Affidavit -
Ramsbottom
Center," Board Docket No. 85-40 (DAB No. 746). Given these
shortages
and the late date on which he learned that Ramsbottom needed
review, the
Director was unable to schedule a review for the June quarter
without
jeopardizing previously scheduled reviews at other facilities.
Tr. at
189-190. Ramsbottom was eventually reviewed on July 11,
1984.
A facility not timely reviewed by its anniversary quarter i.e.,
the
quarter in which it entered the Medicaid program, retains that
original
anniversary date as the basis for measuring when an annual review
is
due. Here, the annual review at Ramsbottom would be due in the
quarter
ending March 31, every year, regardless of when the previous review
was
actually conducted. However, HCFA's regulations specifically
provide
that a facility not timely reviewed remains due for review in
each
succeeding quarter until a satisfactory review is conducted. 42
C.F.R.
. 456.652(b)(3).
In directing that this case be remanded to us, the court expressed
an
opinion that the situation at Ramsbottom relative to the June
quarter
might constitute a technical failing, citing a Senate Report
which
envisioned technical noncompliance where unreviewed facilities
are
reviewed "several weeks after the deadline for completion of all
reviews
by a [s]tate." 928 F.2d at 1390.
HCFA asserted that the Ramsbottom review actually occurred well after
the
"several weeks" time frame envisioned in the legislative history.
HCFA
contended that the court had erroneously assumed that Ramsbottom's
annual
review was due by June 30, 1984. HCFA noted that the review
was
initially due by March 31, 1984. Thus, HCFA asserted that
even
considering the 30-day grace period provided by 42 C.F.R. .
456.653(b),
the July 11th review of Ramsbottom was approximately two and
one-half
months late, not 11 days as the court had believed. HCFA Br.
at 15. 13/
Essentially, HCFA argued that since the failure to review Ramsbottom
in
the March quarter could not be excused by the technical
failings
exception, the deficient review in the June quarter could not
be
forgiven by this exception either. We conclude that
HCFA's
interpretation of the exception is overly restrictive.
HCFA's argument is premised on its assertion that the Ramsbottom
review
was two and one-half months late. HCFA measured the due date for
the
review (and any possible exception) from the quarter in which the
review
was initially due, which ended March 31, 1984. As HCFA noted,
the
Senate Report cited by the court envisioned application of the
technical
failings exception to facilities reviewed only several weeks
late.
However, the Senate Report did not address a situation such as
presented
here where a facility had deficient reviews in different quarters
for
different reasons. Given that reviews continue to remain due
in
successive quarters until completed, it is logical that we examine
each
quarter on an individual basis. Here, in order to avoid a penalty
for
the June quarter, Pennsylvania had to complete a review at Ramsbottom
by
June 30, 1984 or demonstrate that the technical failings
exception
applied.
The review for the June quarter was only 11 days late. 14/ The
reason
Pennsylvania did not complete a review at Ramsbottom by June 30,
1984
was due to a variety of factors, including the late date at
which
Pennsylvania finally learned of the need to review, illness of an
IOC
team member, and the need for another team member to attend
an
administrative hearing which precluded rearranging schedules to make
up
this review without jeopardizing others. HCFA would have us
conclude
that these circumstances constitute poor administration.
However, as
discussed below, we find that Pennsylvania's reasons for the
missed
review in Ramsbottom for the June 1984 quarter were acceptable.
Pennsylvania never specified the June 1984 date on which it learned
that
Ramsbottom needed review. However, Pennsylvania did not contend
that,
ordinarily, there would not have been sufficient time remaining in
the
quarter to conduct the review. Rather, Pennsylvania's staffing
problems
frustrated the review. Those problems were not the type which
call to
mind a poor system for facility review. People get sick;
employees in
this line of work are called to court. If a state agency
did not plan
sufficiently to be able to compensate for absence due to illness
or a
court date over the course of regularly scheduled reviews, then its
lack
of planning could be considered poor administration reflecting
the
absence of an effective program. However, the simultaneous
occurrence
of these factors combined with the limited opportunity for a
timely
review (the remainder of the month of June) could not reasonably
have
been anticipated. Ultimately, the review was conducted within two
weeks
of the close of the quarter. Thus, as the court
suggested,
Pennsylvania's reasons for missing the Ramsbottom review in the
June
1984 quarter fit within the intent of the technical failings
exception.
Accordingly, we conclude that Pennsylvania satisfactorily
demonstrated
that the technical failing exception applies to excuse the
deficient
review at Ramsbottom for the quarter ending June 30, 1984. We
reverse
the disallowance taken for that quarter at Ramsbottom.
Conclusion
Based on the preceding analysis, we sustain the disallowances for the
SNF
level of care taken at the Valley Crest Home and Lock Haven Hospital
for the
quarters ending March 31, June 30 and September 30, 1984. We
sustain
the disallowance for the ICF level of care at the Ramsbottom
Center for the
quarter ending March 31, 1984.
We find that the technical failings exception applies to excuse
the
deficient review at the Ramsbottom Center for the quarter ending
June
30, 1984. Thus, we reverse the disallowance at the ICF level of
care
for that quarter.
We find that the "good faith and due diligence" exception applies
to
excuse the deficient reviews at the Valley Manor and Camp Hill
Nursing
Homes for the quarters ending September 30 and December 31,
1985.
Consequently, we reverse the disallowances for the ICF level of
care
taken at those facilities.
HCFA should recalculate the disallowances in accordance with
this
decision. If the parties cannot agree on the correct amount of
the
reduction, Pennsylvania may return
to the Board for resolution of that issue within 30 days of HCFA's
final
written decision on the reduction calculation.
_________________________
Judith
A.
Ballard
_________________________
Norval
D. (John)
Settle
_________________________
Cecilia
Sparks
Ford
Presiding
Board Member
1. Pennsylvania Dept. of Public Welfare, DAB No.
746, (1986); DAB
No. 840 (1987); DAB No. 1014 (1989).
2. The record in this case consists of the parties'
briefs and
evidentiary submissions and the transcript of a hearing held by
the
Board; the records in Pennsylvania's three earlier appeals
(identified
above); and the related orders and decisions of the district and
circuit
courts to date.
3. We discuss the 1985 quarters first, following the
same order as
the court.
4. A state was not required to track each individual
recipient.
Rather, HCFA implemented this requirement through annual
facility
reviews. A state met the annual review requirement by
reviewing each
reasonably identifiable recipient present during the annual
facility
review. See DAB No. 1014, at 2, n.1.
5. Pennsylvania indicated that the CAOs maintained a
client
information system (CIS). The CIS contained individuals'
eligibility
histories and was the source of the Medicaid Identification
cards.
However, the CIS had limited value in terms of facility review since
70
percent of the applicants are not in homes when they apply. Thus,
the
location of recipients by facility could not be retrieved from the
CIS
data base. Hearing Transcript (Tr.) at 42 and 188.
6. The Remittance Advice is a product of
Pennsylvania's medical
assistance management information system
(MAMIS). MAMIS is a certified
federal system in which Pennsylvania
maintains the billing and paid
claims histories of providers that bill
Medicaid. Tr. at 51.
7. Indeed, prior Board decisions specifically relied
on this
document as a statement of policy applicable to this time
period. See
Arkansas Dept. of Human Services, DAB No. 735 (1986) at 8;
North
Carolina Dept. of Human Resources, DAB No. 728 (1986) at
5-6.
Pennsylvania agreed that this transmittal was obsolete.
However,
Pennsylvania noted that "the transmittal is relevant to the extent
it
provides guidance which has not been altered by the Agency. Where
the
transmittal provides express guidance to the State it is unreasonable
to
expect that the State would alter its procedures in the absence
of
express instruction from the Agency." Pennsylvania Submission (March
9,
1993) at 1.
8. HCFA also stated that both these documents were
ultimately
superseded, effective February 10, 1988, by Part 9 of the State
Medicaid
Manual (January 1988). See HCFA Submission (March 3, 1993) at
1.
9. HCFA submitted an affidavit by the same
Pennsylvania official who
testified at the hearing, but which was originally
submitted by
Pennsylvania in another case. See HCFA Submission January
15, 1993
(originally Pennsylvania Ex. S-2, Docket No. 89-264). HCFA
alleged that
this affidavit was inconsistent with the official's testimony at
the
hearing. This affidavit addresses the computer system Pennsylvania
had
from 1985 through 1989 but does not specifically indicate
that
Pennsylvania had the software system necessary to generate a master
list
by facility. Thus, the affidavit does not directly contradict
the
hearing testimony. Moreover, HCFA did not question the official on
the
alleged inconsistency at the hearing.
10. Pennsylvania indicated that those instructions
had been purged
from its files and it thus could not submit copies for the
Board's
review. Pennsylvania Submission (January 15, 1993) at 2.
11. The plain wording of the statutory exception
requires that
Pennsylvania satisfactorily demonstrate that the failings were
of a
technical nature only, and thus places the burden on Pennsylvania
of
showing that the exception applies.
12. HCFA also had alleged a failure to review a fifth
Valley Crest
patient. We found that Pennsylvania was not required to
review this
recipient since he had been discharged to a hospital and was not
a
Valley Crest patient at the start of the review. Since we found
that
Pennsylvania was required to review the other four patients,
this
finding did not alter our overall conclusion that the Valley
Crest
review was deficient. See DAB No. 746, at 6, 10-11, 13.
13. HCFA apparently reasoned that under 42 C.F.R. .
456.653(b),
Pennsylvania had 30 days from the close of the quarter (until
April 30)
to conduct the Ramsbottom review in order to claim the
technical
failings exception. The July 11th review occurred
approximately two and
one-half months from April 30th.
14. While it is true that the review was completed
several months
after its original due date, the unreasonableness of HCFA's
argument is
underscored by the fact that Pennsylvania could have completed
the
review any time prior to June 30, 1984 (for example June 29th)
and
avoided a disallowance even though, as a practical matter, the
review
was still three months