GAB Decision 154
March 18, 1981 New Jersey Department of Human Services; Docket Nos.
78-106-NJ-HC (partial), 80-3-NJ-HC, (ME-NJ 7602), 80-12-NJ-HC, (ME-NJ
7601, ME-NJ 7801) Garrett, Donald; Teitz, Alexander Settle, Norval
These are cases that are being considered jointly because they
involve some common issues in the Medicaid program. This decision
disposes of all issues in 80-3-NJ-HC and 80-12-NJ-HC and the remainder
of the issues in 78-106-NJ-HC (See also, Decisions Nos. 107, 137, and
148 which disposed of the other issues in 78-106-NJ-HC).
PROCEDURAL HISTORY
78-106-NJ-HC
The New Jersey Department of Human Services (State), by letter dated
August 28, 1978, filed a request for reconsideration of the July 27,
1978 disallowances of Federal financial participation (FFP) by the
Acting Assistant Director for Financial Management of the Health Care
Financing Administration (HCFA, Agency). The State was advised in a
letter dated October 27, 1978 that its appeal would be reviewed pursuant
to 45 CFR Part 16 as amended. After being granted several extensions of
time, the Agency filed a response to the appeal on May 24, 1979.
The costs disallowed are for Medical Assistance payments, and Medical
Assistance State and Local Administration and Training, incurred during
the quarter ended March 31, 1977. Under the category "Medical
Assistance payments", the following costs were disallowed: (1) payments
for skilled nursing and intermediate care facility services ($109,975);
(2) payment for "special hospital expenditures" at Mount Carmel Guild
($874); (3) payments for medical care and services for residents in
psychiatric hospitals and schools for the retarded ($81,244); and (4)
payments for drugs -- Vineland School ($33,895). Under the category"
Medical Assistance State and Local Administration and Training", the
following costs were disallowed: (1) payments for salaries and fringe
benefits $37,314); (2) salaries and fringe benefits claimed at 75%
federal matching ($10,008); and (3) payments for inspection of nursing
homes ($69,494).
The State advised the Board in its request for reconsideration that
it was not contesting the disallowances for payments to Mount Carmel
Guild ($874) and payments for inspection of nursing homes ($69,494).
The total disallowances appealed therefore are $225,114 in Medical
Assistance payments and $47,322 in Medical Assistance State and Local
Administration, a total of $272,436.
The skilled nursing and intermediate care facility services were
provided in the following facilities:
Irvington Nursing Home $31,381 Bayview Nursing
Home 26 n1Springview Nursing Home
3,353 n2Alps Manor Nursing Home 1,235 n3Woodbine
State School 68,076 n4Emerson Convalescent Center
759 n3McFarland Nursing Home 5,145
80-3-NJ-HC
On December 31, 1979, the Administrator of HCFA upheld a disallowance
of $580,394 made by the Regional Commissioner of SRS (predecessor of
HCFA), Region II. The disallowance was for FFP for payments for
services rendered from October 1975 through December 1976 by the
following facilities:
Irvington Nursing Home $532,926 Bayview Nursing
Home 446,661 n3Frank Langdon King Memorial
Nursing Home 807
The State submitted an application for review on January 31, 1980 and
requested that the appeal proceed under 45 CFR Part 16. After being
granted an extension of time, the Agency filed its response to the
appeal on April 7, 1980.
80-12-NJ-HC
On January 10, 1980, the Administrator of HCFS upheld a disallowance
of $3,857,618 made by the Regional Commissioner of SRS, Region II. The
disallowance was for FFP in payments for outpatient services
expenditures for inmates of public institutions and the mentally
retarded in public mental hospitals ($3,285,497), for the Vineland State
School for the mentally retarded drug program ($306,770), and for
salaries of State Medicaid staff in public institutions ($265,351).
The Board received the State's application for review on February 22,
1980; the application requested that the appeal proceed under 45 CFR
Part 16. After being granted an extension of time, the Agency filed its
response to the appeal on June 18, 1980.
On December 15, 1980, the Board issued an Order to Show Cause and an
Order to Develop the Record which analyzed the issues in all three
cases. The Agency responded on January 12, 1981 and February 11, 1981.
The State also responded on February 11, 1981.
SKILLED NURSING AND INTERMEDIATE CARE FACILITIES (78-106-NJ-HC,
80-3-NJ-HC)
Irvington and Bayview
The chronologies of events leading to the disallowances were
described in detail in the appendix to the Board's December 15, 1980
Order to Show Cause and are incorporated by reference herein. In brief,
the issue common to both facilities is whether a day-to-day provider
agreement is valid if it has not been preceded by certification.
Regulations and Discussion
The Medicaid regulations have been recodified several times in recent
years, but have not changed substantively since March 1975, the
beginning of the periods in question. For convenience, citations will
be to 45 CFR Part 249 (1975), "Services and Payment in Medicaid
Assistance Programs." FFP in payments to a facility providing skilled
nursing and intermediate care services is available only if the facility
is certified as having met all the requirements for participation in the
Medicaid program as evidenced by an agreement (provider agreement)
between the single state agency and the facility. (Sec.
249.10(b)(4)(i)(C) for skilled nursing services, Sec. 249.10(b)(
15)(i)(E) for intermediate care services.) The execution of the provider
agreement is contingent upon certification of the facility by an agency
designated as responsible for licensing health institutions in the state
(state survey agency). Sec. 249.33(a)(6). The survey agency is required
to certify that the facility is in compliance with each condition of
participation. Sec. 249.33(a)(4)(i). In order for the State to obtain
FFP the execution of the provider agreement must be in accordance with
the federal regulations. Sec. 249.33(a)(6). Ordinarily, a provider
agreement between the state agency and a facility is a sufficient basis
to claim FFP. The provider agreement may be determined invalid if the
Secretary establishes that any of the five provisions listed in Sec.
249.10(b)(4)(i)(C)(1)-(5) for a skilled nursing facility or in Sec.
249.10(b)(15)(vi)(A)-(E) for an intermediate care facility were violated
in the certification of the facility. A facility which does not qualify
under Sec. 249.33 is not recognized as a skilled nursing facility or an
intermediate care facility for purposes of payment under the Medicaid
program. Sec. 249.33(a)(10).
The State has argued that an understanding, expressed in an April 1,
1975 letter from the Director of the Regional Office of Long Term Care
(OLTC), existed between the Agency and the single State agency that
permitted the issuance of a day-to-day provider agreement under
extenuating circumstances. That letter, apparently a review of
discussions on several matters between the Agency and the State, details
how in circumstances where a two-month extension of a provider agreement
(permitted under Sec. 249.33(a)(6)) has been insufficient to complete
the certification process, a day-to-day provider agreement may be issued
if the reason for the delay is well-documented and appropriate action is
in progress; once a new provider agreement is issued, it would be
retroactive to the expiration date of the two month administrative
extension. The State has claimed that on the basis of this letter, the
State issued a day-to-day provider agreement to Irvington as the
November 21, 1975 letter from Irvington indicated that the deficiencies
had been corrected or were in the process of being corrected and to
Bayview by letter dated December 16, 1975 "for record purposes." The
Agency is now estopped, the State has argued, from issuing
disallowances.
As was discussed in Decision No. 148, in which the Alps Manor factual
situation is similar, we do not believe it is necessary to examine the
theory of whether estoppel can be asserted against the federal
government to dispose of this argument by the State. The April 1, 1975
letter states that a day-to-day provider agreement may be executed only
after the two month administrative extension proves insufficient to
allow certification action. There is nothing in the records to indicate
that two month extensions were ever recommended by the State survey
agency or granted by the single State agency. Indeed the Certification
and Transmittal Form (C&T) signed November 25, 1975 by the survey agency
for Bayview states that "lack of correction of the deficiencies. .
.could affect the health and safety of patients in this facility", and
the C&T signed November 3, 1975 by the survey agency for Irvington
states that "conditions are not met and the plan of correction is not
acceptable for these areas." As the procedure set forth in the OLTC
Director's letter for the issuance of a day-to-day provider agreement
was never followed by the State, the State cannot now assert reliance
upon that letter as a defense against the disallowances.
Furthermore, the State's reliance on Irvington's own November 21,
1975 assertion that the deficiencies were corrected is an action without
basis in the regulations. Mere assertions by a facility that it has
corrected deficiencies cannot be accepted as evidence that certification
standards have been met without actual substantiation by the State
survey agency. The Medicaid regulations require that a certification be
based on on-site surveys, not unsupported assertions by a facility. In
the case of Irvington, the on-site survey did not occur until January 6,
1976, and deficiencies were found.
The facts set out above indicate that Irvington and Bayview were not
recertified. Their previous provider agreements expired, and since
there were no recertifications, there were no valid provider agreements
for the purposes of providing FFP after those expirations.
The State has argued that the amount of the disallowances is
significantly out of proportion to the deficiencies that may have
existed at both facilities. This argument was discussed and rejected in
Decision No. 148, pages 5-6.
MEDICAL CARE AND SERVICES FOR RESIDENTS IN PSYCHIATRIC HOSPITALS AND
SCHOOLS FOR THE RETARDED; DRUG PROGRAM-VINELAND STATE SCHOOL
(78-106-NJ-HC, 80-12-NJ-HC)
The issue is whether FFP is available in Medicaid claims for
outpatient services for inmates of public institutions for the mentally
retarded and public mental hospitals.
Section 1905(a) of the Social Security Act defines "medical
assistance" for purposes of Medicaid. At the end of the definition, the
section provides that "such term" does not include:
(17)(A) any such payments with respect to care or services for any
individual who is an inmate of a public institution (except as a patient
in a medical institution); or
(B) any such payments with respect to care or services for any
individual who has not attained 65 years of age and who is a patient in
an institution for tuberculosis or mental diseases. /5/
By amendment effective January 1, 1973, inpatient psychiatric
hospital services for individuals "under the age of 21" could also
be
covered. The age limit is further interpreted to include services to
some individuals until the age of 22. Section 1903(h)(1).
Regulations implementing this provision provide in 45 CFR 248.60(a)(
1975) as follows:
(a) Federal financial participation.
(1) Federal financial participation under Title XIX of the Social
Security Act is not available in medical assistance for any individual
who is an inmate of a public institution except as a patient in a
medical institution or as a resident of an intermediate care facility.
(2) Federal financial participation under Title XIX of the Social
Security Act is not available in medical assistance for any individual
who has not attained 65 years of age and who is a patient in an
institution for tuberculosis or mental diseases, except for an
individual under age 22 who is receiving inpatient psychiatric hospital
services pursuant to Section 249.10(b)(16) of this Chapter.
45 CFR 249.10(c)(1)(1975) provides:
(c) Limitations.
(1) Federal financial participation in expenditures for medical and
remedial care and services listed in paragraph (b) of this section is
not available with respect to any individual who is an inmate of a
public institution (except as a patient in a medical institution or as a
resident in an intermediate care facility), or any individual who is a
patient in an institution for tuberculosis or mental diseases.
Thus, it is clear that inmates of public institutions, under-65
patients in tuberculosis facilities, and patients between ages 22 and 65
in psychiatric facilities are generally excluded from receipt of medical
assistance benefits under Title XIX. The only exception to this
exclusion is that such an inmate may receive Title XIX benefits if he is
a "patient in a medical institution."
"Patient" is defined in the regulations as an individual in need
of
and receiving professional services directed by a licensed practitioner
toward maintenance or improvement or protection of health or alleviation
of illness or pain. Sec. 248.60(b)(8). "In an institution" is defined
in the regulations as referring to an individual who is admitted to
participate in the living arrangements and to receive treatment or
services provided there as appropriate to the individual's needs. Sec.
248.60(b)(2).
"Inmate of a public institution" is defined at Sec. 248.60(b)(4)
as a
person who is living in a public institution. However, an individual is
not an inmate if in a public, educational or vocational training
institution for purposes of securing education or vocational training or
when in a public institution for a temporary emergency period pending
other arrangements appropriate to his needs. "Medical institution"
is
defined at Sec. 248.60(b)(5) to include an institution which "is
organized to provide medical care. . . ." The regulations, however, fail
to offer a definition for the phrase "patient in a medical institution."
The Agency asserts that in order to ascertain the meaning of this
phrase, the definitions in Sec. 248.60 of "patient," "in an institution"
and "medical institution" must be synthesized. The resultant definition
is "an individual in need of and receiving professional medical services
from a licensed practitioner while admitted to participate in the living
arrangements and to receive treatment or services provided in an
institution organized to provide medical care." (Emphasis added.)
The State's arguments can be summarized under three topics:
(1) The Agency is required to provide advice and guidance to a state.
It failed to do so here either by remaining silent when it should have
spoken or by misleading the State to its detriment, resulting in
expenditures which were disallowed.
(2) The Agency has not met its burden of proof of establishing the
factual basis for its determination that FFP has been claimed for
ineligible inmates.
(3) The State disagrees with the Agency's reading of the Social
Security Act and the regulations that an inmate is eligible for medical
assistance as a patient only when "physically housed" in or admitted
to
a qualifying medical institution.
These arguments will be discussed in the order mentioned above.
(1) On February 22, 1971, the Commissioner of the New Jersey
Department of Institutions and Agencies requested clarification of the
Medicaid eligibility status for certain children and for needy disabled
persons between the ages of 18 and 65 who had been placed in or who
resided in State institutions (Record for Reconsideration, Item 1). In
a reply dated May 6, 1971, the Regional Commissioner, SRS, cited Section
1905(a) of the Social Security Act and stated that inmates in public
institutions could qualify for all medical care services set forth in
the New Jersey title XIX plan provided they lacked "inmate" status
or
were patients in a medical institution. The Regional Commissioner
stated that one could qualify as a patient for any period of time in
which he was physically housed in a distinct institution (or part
thereof) classified and accredited as a medical facility (Record for
Reconsideration, Item 3).
In February 1971, the State submitted to the Regional Commissioner
copies of the service agreement between the State's Division of Mental
Health and Hospitals and the State's Division of Medical Assistance and
Health Service. On August 25, 1971, Region II replied, taking only
minor objection to the agreement and no objection to subparagraph E.1.(
c), which indicated that the division of medical assistance and health
services would reimburse the institutions for outpatients. (Record for
Reconsideration, Item 4).
In 1974, after learning that the State's Title XIX program was
reimbursing for outpatient and other services, the Regional Office
advised the State that the "physically housed" requirement referred
to
by Mr. Smith in his 1971 letter was synonymous with inpatient status
(Record for Reconsideration, Item 5). The Regional Commissioner
notified the State in April 1975 that the Title XIX Medicaid claims for
outpatient services for inmates of public institutions for the mentally
retarded and public mental hospitals had been incorrectly claimed
(Record for Reconsideration, Item 12).
The State contends that the submission of the 1971 agreement between
two state agencies and the failure to comment on the provision evidences
approval of all of the provisions in the agreement. The record shows
that since 1971, the State was apprised of the federal requirements for
reimbursement for medical expenses of inmates of public institutions.
The State has not presented any convincing arguments why this agreement
between two State agencies should be made binding on HHS or that HHS was
put on notice that the State intended to seek FFP in the cost of
outpatient services.
(2) The Agency asserts that:
The State of New Jersey has quite accurately pointed out that many
habitual residents of public, non-medical institutions may fall within
the language of the exceptions and, thus, not be considered inmates
under the regulations. Nevertheless, the fact that such person are
habitual residents of public, non-medical institutions is sufficient to
justify the presumption by the Federal Government that those individuals
are, in fact, inmates in a public institution. Such presumption is
rebuttable on a sufficient showing by the State, either that an admitted
inmate was, for a demonstrated period of time, simultaneously housed as
an inpatient in an acknowledged medical institution or that the
individual housed in a public, non-medical institution is not within the
definition of "inmate" contained in the regulations (for whatever
reason). . . . It is appropriate that the State thus bear the burden of
proof: the State is in sole possession of any data which justifies
excluding an individual from inmate status. (Notification of
Disallowance, p.9, 80-12-NJ-HC.)
In particular, with regard to the Vineland School, the Agency asserts
that the School has only 125 certified skilled nursing facility beds
(which would qualify as a "medical institution" which is a distinct
part
of the public institution). Yet 1600 residents were having their drugs
reimbursed under Title XIX. No evidence has been produced by the State
to show that part of the disallowed amount was payment made for
residents while inpatients of the SNF. It appears that if the State
could have produced evidence of inpatient status at Vineland or
inpatient status in a section of any other facility that might be
involved in these appeals, the Agency would have considered those costs
eligible for FFP, provided the expenditures had not been previously
billed to Medicaid and payments made. The State has provided no such
evidence.
(3) The State argues that Section 1905(a) of the Social Security Act
was intended to preclude Medicaid payments for institutional custodial
care, but not necessarily for medical care. It argues that no
definitions preclude payments for "outpatient care rendered to an
'inmate' who is a 'patient,'" and that inmates need not be physically
housed at a medical institution in order for the State to receive FFP.
(Application for Review, p.9.) These conclusory statements do not appear
to correctly describe the law and regulations.
The State is correct that the Medicaid program does not necessarily
preclude payments for medical care; indeed, the purpose of Medicaid is
to permit federal matching for medical care and services provided to
eligible individuals, which might include outpatient services such as
dental, clinic, and home health services. The problem is that the
individuals for whom the State has requested reimbursement are inmates
of public institutions who do not qualify for Medicaid coverage and do
not fall within the exception for inmates who are "patients in a medical
institution." In the absence of a definition for the latter phrase, the
Agency's procedure of amalgamating three separate definitions
("patient," "in an institution," and "medical institution")
appears
reasonable. Therefore, only if a public psychiatric institution or
institution for the mentally retarded has distinct sections which are
separately certified as a hospital, SNF, or ICF may there be FFP for
Medicaid eligible patients physically housed in these sections. For
residents of the other non-medical parts of these public institutions
there can be no FFP.
SALARIES OF STATE STAFF IN PUBLIC INSTITUTIONS (78-106-NJ-HC,
80-12-NJ-HC)
The Agency argues that since the population of the public institution
is ineligible for Medicaid, personnel cannot be performing Medicaid
functions. The State merely argues that HCFA has made no demonstration
of a factual basis for the conclusion that staff at public institutions
perform no valid Medicaid function. However, as was noted in the
discussion above, the burden is placed on the State, which has access to
the records, to demonstrate the eligibility of recipients so that a
proportional amount of salaries could be claimed. No such evidence has
been provided.
SALARIES AND FRINGE BENEFITS CLAIMED AT 75% FEDERAL MATCHING
(78-106-NJ-HC, 80-12-NJ-HC)
The State, in its response to the Board's December 15, 1980 Orders,
stated that the appeal pertaining to this issue was "withdrawn
previously". It is not clear from its statement whether it meant that
the appeal pertaining to this particular amount disallowed was
withdrawn. The Board had noted in its Order that two other earlier
appeals involving this issue had been closed because the State had
accepted the Agency's determinations. We therefore find that the State
is here once again accepting the Agency's determination.
CONCLUSION
Based on the discussion above, we find the following:
(1) The appeals pertaining to Irvington Hursing Home and Bayview
Nursing Home are rejected;
(2) The appeals pertaining to outpatient services to inmates in
public institutions for the mentally retarded and public mental
hospitals are rejected;
(3) The appeal pertaining to salaries of State staff in public
institutions is rejected; and
(4) The appeal pertaining to salaries and fringe benefits claimed at
75% federal matching has been withdrawn by the State. /1/ This
disallowance was upheld in Decision No. 137, December 1, 1980.
/2/ This disallowance was upheld in Decision No. 148, February 2, 1981.
/3/ State withdrew appeal. See its Response to Board's December 15,
1980 Order. /4/ This disallowance was upheld in Decision No.
104, June 9, 1980. /3/ State withdrew appeal. See its Response
to Board's December 15, 1980 Order. /5/ The Surpeme Court has recently
noted that "(the) Medicaid limitation was based on Congress' assumption
that the care of persons in public mental institutions was properly a
responsibility of the States...." Schweiker v. Wilson, 49 U.S.L.W. 4207,
4211 n. 19 (U.S. March 4, 1981).
OCTOBER 04, 1983