GAB Decision 231
November 30, 1981 Joint Consieration: "Institutions for Mental
Diseases"; Docket Nos. 79-52-MN-HC, 79-89-MN-HC, 80-44-IL-HC,
80-150-CT-HC, 80-184-CA-HC Ford, Cecilia; Garrett, Donald Settle,
Norval
The Board jointly considered five appeals by four different States
(Minnesota, Illinois, Connecticut, and California), raising common
issues of law and some common issues of fact. Each appeal was from a
determination by the Health Care Financing Administration (Agency),
disallowing Federal financial participation (FFP) claimed by a State
under Title XIX (Medicaid) of the Social Security Act for services
provided in a private facility certified by that State as a skilled
nursing facility (SNF) or intermediate care facility (ICF). The Agency
determined that the facilities were "institutions for mental diseases"
and, therefore, FFP was not available under Medicaid for services
provided by the facilities to individuals under age 65.
Our decision is based on the States' applications for review; the
Agency's responses to the separate appeals; pre-hearing briefing
submitted by the State of Connecticut; the transcript of a hearing held
before the full Panel on April 22 and 23, 1981, involving all four
States; exhibits submitted at the hearing; the Agency's consolidated
brief, filed after the hearing; and the States' reply briefs. Although
no party objected to joint consideration and, in fact, each State chose
to reply on oral presentations by other States on various issues, each
State was given a full opportunity to present its individual case.
Because of the complexity of the issues raised, and the number of
parties and facilities involved, we have first briefly summarized our
decision (Section I). We then present a more detailed analysis of the
parties' arguments, divided into three major sections: issues related
to the relevant statutory provisions and their legislative history
(Section II); issues related to pertinent regulations (Section III);
and issues related to certain Agency "criteria" for applying the
regulations (Section IV). Finally, we discuss the factual issues raised
by specific States (Section V). (2) I. Summary of Decision
Under Title XIX of the Social Security Act (Act), FFP is not
available for certain services provided to any person under 65 who is a
patient in an "instiution for mental diseases" (IMD). The Act does
not
define this term. Agency regulations provide that an IMD is an
institution "primarily engaged in providing diagnosis, treatment or care
of persons with mental diseases," and that whether a particular facility
is an IMD 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." The Agency used unpublished
supplementary criteria in applying the regulation.
Briefly, the Agency determined that high percentages of the patients
in the SNFs and ICFs had mental diseases; that most of the facilities
held themselves out as caring for the mentally ill; that some of the
facilities had special programs designed specifically for the mentally
ill; and that each facility had other characteristics of an IMD under
the regulations.
The States did not challenge the validity of the Agency regulations.
Rather, the States argued based on their reading of the Act and its
history, and on their reading of the regulations, that the IMD exclusion
should be interpreted to cover only the traditional mental hospital or
its equivalent, not the SNFs and ICFs here. The States challenged the
use of the Agency's supplementary critieria, arguing that the criteria
were not properly published and, in any event, are flawed and were
erroneously applied. In particular, the States attacked the Agency
approach of counting patients with mental disorders in the facilities.
Our determinations, discussed in detail below, are as follows:
The Agency's regulations reflect a reasonable interpretation of the
Act and its legislative history, and were clear enough to put the States
on notice that facilities such as these SNFs and ICFs are IMDs.
There is persuasive evidence, by any reasonable standard, to show
that the "overall character" of the facilities in question was that
of
institutions established and maintained primarily for the care and
treatment of persons with mental diseases.
Lack of publication of the criteria does not provide a basis for
reversing the disallowances here, since these facilities were IMDs under
any reasonable reading of the regulations. (3) Although some of the
Agency's findings developed through using the criteria carry less weight
or represent some inconsistency in applying the criteria, these defects
do not invalidate the Agency's findings as a whole.
Based on these findings and conclusions, we have upheld the
disallowances.
In doing so, we are mindful that the dispute is, in large part, a
consequence of the absence of explicit Congressional guidance in the
face of changing circumstances in the care of the mentally ill. Neither
side is supported definitively by the Act or its legislative history,
and there are contervailing policy considerations involved: The
disincentive that these disallowances might provide for the principle of
deinstitutionalization of the mentally ill, and the concern of the
Agency that States might inappropriately move patients out of mental
hospitals into SNFs or ICFs to maximize FFP. But whether or not the law
or the regulatons should be changed are policy questions beyond the
authority of this Board. Our decision essentially is that the Agency's
rules, reflecting a reasonable interpretation of the statute, were
fairly applied here and that there is substantial evidence in the record
to support the conclusion that these facilities were IMDs.
II. The Statute and Legislative History
The major issue raised by the States is whether the statutory
language, read in light of the legislative history of the IMD exclusion,
compels a reading of the statute and regulations under which the
exclusion applies only to institutions which are similar to, or the
functional equivalent of, mental hospitals. Stated differently, the
issue is whether the Agency application of the statute and regulations
to the private, free-standing SNFs and ICFs here is consistent with
legislative intent. For the reasons discussed below, we conclude that
the Agency interpretation is supported by the language of the statute
and that the legislative history does not compel a different reading.
Our discussion of this issue is divided into three parts: the
history of development of the IMD exclusion and relevant provisions from
Title XIX; a statement of the parties' arguments on this issue; and our
analysis of the arguments.
A. Development of the Statutory Exclusion
The Social Security Act Amendments of 1950, Pub. L. 81-734, contained
the original IMD exclusion. Those amendments defined "old age
assistance," under Title I of the Act, to include payments to residents
of most public medical institutions but to exclude "payments to or care
(4) in behalf of . . . any individual (a) who is a patient in an
institution for tuberculosis or mental diseases, or (b) who has been
diagnosed as having tuberculosis or psychosis and is a patient in a
medical institution as a result thereof." Section 6 of the Act. /1/
When "medical assistance" for the aged was added in 1960, Pub. L.
86-778, that term was similarly defined to exclude payments with respect
to long-term" care or services for . . . any individual who is a patient
in an institution for . . . mental diseases . . . ." Section 6(b).
The Social Security Act Amendments of 1965, Pub. L. 89-97, removed
prohibitions on funding for the mentally ill in a general hospital and
provided for the first time for medical assistance on behalf of
individuals 65 years of age or older who were patients in IMDs. To
receive Federal funding for such assistance, however, States had to have
programs which met certain standards. Conditions included "the
development of alternate plans of care . . . for recipients 65 years of
age or older who would otherwise need care in such institutions" and
"assurance of immediate readmittance to institutions where needed for
individuals under alternate plans of care." If a State plan included
such assistance to patients in public institutions for mental diseases,
the State had to show that it was making "satisfactory progress toward
developing and implementing a comprehensive mental health program,
including provision for utilization of community mental health centers,
nursing homes, and other alternatives to care in public (IMDs)." /2/
(5) The House Report on the 1965 Amendements referred to "payments to,
or for, patients in mental hospitals . . . ." H.R. Rep. No. 213, 98th
Cong., 1st Sess. 19 (1965). The exclusion was explained (at 126) as
relating to patients in public or private mental hospitals since
"long-term care in such hospitals had generally been accepted as
responsibility of the States." The term "hospital" was used in
the
report to explain removal of the exclusion and "nursing homes" were
referred to as an alternative to care in such hospitals. /3/
In Title XIX of the Act, also enacted in 1965, the exclusion appears
in the general definition of "medical assistance" for which FFP is
available, as well as in conjunction with various levels of services.
Section 1905(a) currently defines "medical assistance" as --
payment of part or all of the cost of the following care and
services. . .
(1) inpatient hospital services (other than services in an
institution for tuberculosis or mental diseases);
(4)(A) skilled nursing facility services (other than services in an
institution for tuberculosis or mental diseases). . .;
(14) inpatient hospital services, skilled nursing facility services,
and intermediate care facility services for individuals 65 years of age
or over in an institution for tuberculosis or mental diseases;
(15) intermediate care facility services (other than such services in
an institution for tuberculosis or mental diseases). . . ; Except as
otherwise provided in paragraph (16), such term does not include --
(A) any such payments with respect to care or services for any
individual who is an inmate of a public institution (except as a
paatient in a medical institution); or (6) (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 any institution for tuberculosis or
mental diseases.
For purposes of Title XIX, the term "intermediate care facility"
is
defined as --
As institution which (1) is licensed under State law to provide, on a
regular basis, health-related care and services to individuals who do
not require the degree of care and tratment which a hospital or skilled
nursing facility is designed to provide, but who because of their mental
or physical condition require care and services (above the level of room
and board) which can be made available to them only through
institutional facilities . . . . Section 1905(c). /4/
The provisions for coverage of ICF services were added by the Social
Security Act Amendments of 1972. These Amendments also added paragraph
(16) to Section 1905(a), including as "medical assistance" under certain
conditions "inpatient pyschiatric hospital services for individuals
under 21 . . . ." The conditions for coverage included that the
institution in which the services were provided be "accredited as a
psychiatric hospital by the Joint Commission on Accreditation of
Hospitals" and that the services involve "active treatment" which
could
reasonably be expected to improve the patient's condition. Section
1905(h)(1). /5/
(7) B. The Parties' Arguments on Legislative Intent
The States' position is that "Congress intended the term 'institution
for mental diseases' to apply to mental hospitals, which were the
facilities traditionally used by states to care for the mentally ill."
Brief of the State of Connecticut (CT Br.), p. 3. /6/ Under the States'
interpretation SNF or ICF services would be exlcuded only if provided in
a State mental hospital or the functional equivalent.
The Agency position is that SNF or ICF services are excluded if they
are provided in any institution which meets the regulatory definition.
Such and institution could be a private facility and it need not be part
of or on the grounds of a mental hospital; the basic requirement is
that the institution's overall character must be that of a facility
estalished and maintained primarily for individuals with mental
diseases.
For their position, the States rely primarily on the references to
"mental hospitals" in the legislative history cited above and on several
court opinions which refer to the exclusion. The States cite to
language inthe Supreme Court case of Schweiker v. Wilson, 450 U.S. 221
(1980), /7/ and to similar statements in two other cases, /8/ in (8)
support of their view that "it was the large state-finance mental
hospitals, which provided primarily custodial care, that Congress meant
to exclude," not SNFs and ICFs. CT Br., pp. 19-20. The States argue
that SNFs and ICFs were developed as alternatives to care in traditional
institutions, as shown by the statutory provisions and legislative
history associated with the 1965 Amendments. Since use of nursing homes
was encouraged by Congress as part of the process of
"deinstutionalization," the States contend, these SNFs and ICFs cannot
themselves be the type of institutions which Congress refused to fund.
The Agency responds that "although the statute does not specifically
state that a SNF or an ICF can be an IMD, such an interpretation is the
only resonable one . . . ." Consolidated Response of the Health Care
Financing Administration to the States' Applications for Review (Cons.
Br.), p. 31. The Agency relies primarily on the language of the Act,
particularly Section 1905(a). The scheme of that section, as a whole,
the Agency argues, supports the position that hospitals do not occupy
some special status. Cons, Br., p. 36. Since that section lists
hospital services separately from SNF and ICF services, and excludes
each type of service in an IMD, the section must be read so that an SNF
or ICF can be an IMD, the Agency contends.
Citing Section 1905(a)(14), the Agency argues:
Acceptance of the States' argument that an IMD can only be a
hospital, in effect, make superflous the term "hospital" in this
provision since it presumably was the same as, and was already included,
within the term IMD. If this was the intent, the provision would have
stated simply "all services, including SNF and ICF services provided in
an IMD." It was not so drafted and as a result the terms hospital, SNF,
and ICF services must be interpreted consistently to permit any of these
institutions to be IMDs.
Cons. Br., p. 33.
The States counter that the term "hospital" in the legislative
history was not intended to refer merely to a level of care (acute
care), like the term "hospital" in the Act itself. Rather, the States
argue, Congress used the term in the legistlative history to refer to "a
'total institution' setting, that is, a place where all the patient's
needs were met by the facility." CA Reply Br., pp. 6-7; see also CT
Br., p. 20, n.2. Since this kind of institution might offer different
levels of care, the States argue, Congress needed to refer to all three
levels to effect a complete exclusion of all services provided by the
institution. See, e.g., CRBr., p. 20, n. 1; CT Reply Br., p. 4. The
($9) States argue that, since section 1905(a) referes to services in an
IMD, the section can reasonably be read to mean merely that no level of
services can be provided to persons under 65 in a mental hospital. CA
Reply Br., p. 8.
The Agency responds that the States' interpretation is not logical
because, under it, an institution could never be an IMD, "even if the
institution provided solely psychiatric services at a SNF level of care
to 100% of its patients . . . ." Cons. Br., p. 37.
An additional State argument, related solely to ICFs, is based
primilary on the statutory definition of an ICF at Section 1905(c).
This section refers to ICFs providing "care and services to indivduals
who . . . because of their mental or physical condition require care and
services. . . ." (Emphasis added.) The States argue, "It would be
wholly
inconsistent with this explicit statutory language to remove Mediciad
coverage for an ICF simply because some percentage of the residents have
been placed there because of a mental condition." CT Reply Br., p. 18.
The States also point to legislative history which states that ICF
coverage is for persons "who, in the absence of immediate care would
require placement in a skilled nursing home or mental hospital." CT
Reply Br. p. 19, citing 117 Cong. Rec. 44721 (1971). /9/ This shows, the
States argue, that Congress intended Medicaid to cover those individuals
in ICFs who otherwise would have been in a mental hospital.
The States argue, in addition, that applying the IMD exclusion to
SNFs and ICFs contravenes Congress' intent in other respects. The
States point out that the Agency approach can result in denial of
Medicaid coverage to all individuals under 65 in an IMD, regardless of
diagnosis. Such denial, the States contend, "seems consistent with
congressional intent only where mental hospitals are involved, since all
residents of such hospitals presumably are mentally ill." CT Br., p. 21.
The States also find the Agency interpretation to be inconsistent
with statutory and regulatory prohibitions against discrimination on the
basis of diagnosis. We discuss this question below in connection with
the Agency's counting of patients with diagnoses of mental disorders in
the facilities. (10) C. Discussion of the Legislative Issues
Both parties have recognized here that not all of the provisions of
the statute or the legislative history can be reconciled with either
party's position. As the States point out, "The statute is not easy to
parse." Tr., p. 29, and, as the Agency acknowledges, "With regard
to the
legislative history of the terms 'IMD' and 'institutions,' no clear
defintions are evident . . . ." Cons. Br., p. 37. We conclude below
however, that the Agency interpretation is supported by the language of
the statute itself and consistent with the legislative history.
The States acknowledge that a private mental hospital, if
traditionally used by a State for care of its mentally ill, could be an
IMD and could be providing SNF and ICF services. See, e.g., Tr., pp.
115 and 118. This result is compelled by the Statutory language,
especially viewed in light of its history and context. Although used
elsewhere in the statute, the modifier "public" is notably absent
from
the term "institution for mental deseases." /10d/d
The statute is less clear on the issue of whether the IMD exclusion
encompasses private SNFs and ICFs of the type under consideration here.
In using the term "instition for mental diseases" without definition,
however, Congress can reasonably be assumed to have given the Agency
leeway in determining what institutions would be excluded. Certainly,
the term is not specifically limited to "traditional facilities" or
to
"large, warehouselike facilities" or to accredited psychiatric
hospitals.
Further, the structure of Section 1905(a) supports the Agency
position. The exclusion appears in reference to each specific level of
care: hospital, SNF, and ICF. Although the States' explanation of this
is not as "totally illogical" as the Agency says it is, the Agency
interpretation that Congress meant to exclude each level of care,
regardless of whether a facility encompasses only one or all three
levels, makes more sense. (11) Moreover, we do not agree with the
States that the legislative history compels the conclusion that Congress
intended that the exclusion never apply to a private, free-standing SNF
or ICF. The question simply is not addressed.
Although the legislative history is replete with refences to "mental
hospitals," there are several factors which make these references less
meaningful in resolving the issue with which we are confronted.
As the States themselves point out, the term "hospital" is used
differently in the legislative history than in the statute.The record
indicates that, at the time the exclusion was originally enacted, a
so-called mental hospital was most likely providing only custodial care
and would not have qualified as an acute care hospital for Medicaid
purposes. Therefore, we do not think that reference to mental hospitals
as IMDs in the legislative history precludes a broader interpretation of
the statutory term IMD. /11/ This is particularly true in light of the
change in circumstances from the time when the exclusion was enacted to
the present. Congress may not have contemplated that the States would
use private SNFs or ICFs to fulfill the role that State mental hospitals
had traditionally fulfilled, but neither did it state that this could
not be so.
Moreover, given that the term "mental hospital" in the legislative
history is not defined, and means something different than an
institution meeting Medicaid hospital standards, even if we were to
substitute this term for the statutory one of "institution for mental
diseases" we would be left with an amorphous concept.The States have not
clearly delineated a difference between the "traditional mental
hospital," providing primarily custodial care, and these facilities
here.
The statutory language and legislative history on which the States
rely most heavily is related to the 1965 provisions permitting State
plans to cover IMD services for the aged. Considered in context,
however, the statements are not inconsistent with the Agency position.
Section 1902(a)(21) of the Act does refer to nursing homes as an
alternative form of care. This section deals, however, solely with
public IMDs and nursing homes as an alternative to care in public IMDs.
(12) In Section 1902(a)(20), which is not limited to public IMDs,
nursing homes are not specifically mentioned as an alternaive. /12/ The
States' reliance on the phrase "readmittance to institutions where
needed under alternate plans of care" in this section is also misplaced.
As shown by the legislative history, alternate plans can include care in
community mental health centers or the patients' own homes. From these
alternate plans, readmittance conceivably could include readmittance to
an institution which was a nursing home.
Further, the term "institution for mental diseases" for purposes of
coverage for the aged is narrowed in scope then the definition related
to the general exclusion. Under implementing regulations now at 42 CFR
Sec. 440.140, to be qualified to carry out the provisions of the Act
with respect to services to aged recipients, an "institution for mental
diseases" must meet general requirements for a psychiatric hospital
under Section 1861(f) of the Act. /13/ Given this interpretation,
references to mental hospitals as IMDs are less meaningful in the
context of services to the aged than if the references had been
associated with the general exclusion.
We also conclude that the Agency interpretation does not conflict
with the statutory provisions and legislative history related solely to
ICFs and relied upon by the States. That Medicaid covers some persons
placed in an ICF due to mental condition, where those persons might
otherwise have been placed in a mental hospital, does not necessarily
mean that it covers all such persons. Under the Agency interpretation,
a person with a mental condition is covered in an ICF so long as the
(13) ICF is not an IMD and, even if the ICF is an IMD, the person may be
covered if over age 65. /14/
Moreover, we are not persuaded that the Agency must adopt the
description of the exclusion set forth in the court cases cited by the
States. Those cases did not directly involve the issue presented here.
Schweiker, in particular, involved an issue of payment of Supplemental
Security Income benefits to inmates of public institutions who were not
receiving Medicaid benefits. Thus, the Court was only concerned with
the exclusion of patients in public IMDs and statements in the opinion
must be taken in that context. /15/
As a matter of policy, the States present an appealing argument that
classifying private SNFs and ICFs as IMDs may counteract Congressional
incentives to move patients out of the large State mental institutions.
The Agency has, however, based its interpretation on the policy
judgement that if private, free-standing SNFs or ICFs could never be
IMDs, the States might use these facilities as inappropriate substitutes
for State institutions rather than as appropriate alternatives.
The Agency interpretation, while not the only possible one, is
reasonable and is supported by the statute. Moreover, as we discuss in
the following section of our decision, the Agency interpretation that
SNFs and ICFs such as those involved here can be IMDs is embodied in
duly promulgated regulations. /16/
(14) III. The Regulations
The major issue concerning the Agency regulations is whether they
were sufficient to give the States notice that the facilities involved
should be classified as IMDs. The States contend that the regulations
should be read in light of the legislative history of the exclusion to
apply only to mental hospitals and are too vague as applied to the SNFs
and ICFs here. As discussed below, we conclude that the regulations
were clear enough to give the States notice that an SNF of ICF could be
an IMD and, in the context of the specific facts here, the regulations
were properly applied.
Our discussion of the regulations is divided into three parts: the
history and wording of relevant provisions; a statement of the parties'
arguments related to the regulations; and our analysis of the issues.
A. Relevant Regulatory Provisions
The Handbook of Public Assistance Administration, Supplement D,
Medical Assistance Programs (HPA), published in 1966, restated the
statutory provisions concerning IMDs and provided that FFP could not be
claimed in medical assistance for --
Any individual who has not attained 65 years of age and is a patient
in an institution for . . . mental diseases; i.e., an institution whose
overall character is that of a facility established and maintained
primarily for the care and treatment of individuals with . . . mental
diseases (whether or not it is licensed). HPA, D-4620.2.
HPA provisions were later incorporated into codified regulations.
Regulatory provisions at 45 CFR Sec. 249.10, added June 24, 1969, 34
Fed. Reg. 9784, dealt with the amount, duration, and scope of medical
assistance. They contained a general limitation on FFP "with respect to
. . . any individual who has not attained 65 years of age and who is a
patient in an institution for . . . mental diseases." Sec. 249.10(c).
"Inpatient hospital services" in which FFP was available were defined,
in part, as "for the care and treatment of inpatients . . . in an
institution maintained primarily for treatment and care of patients with
disorders other than . . . mental disease . . . ." Sec. 249.10(b)( 1).
Skilled nursing home services were defined, in part, as "furnished by a
skilled nursing home maintained primarily for the care and treatment of
inpatients with disorders other than . . . mental diseases . . . ." Sec.
249.10(b)(4)(i).
(15) Section 248.60, added to 45 CFR at 36 Fed. Reg. 3872, February
27, 1971, contained the provisions with respect to "institutional
status" and its effect on availability of FFP under Medicaid. The
section basically paralleled HPA Sec. D-4620.2 language on "overall
character" of an IMD. 45 CFR Sec. 248.60(a)(3)(ii). It also contained
the following definitions:
(1) "Institution" means an establishment which furnishes (in single
or multiple facilities) food and shelter to four or more persons
unrelated to the proprietor, and in addition, provides some treatment or
services which meet some need beyond the basic provision of food and
shelter.
(7) "Institution for mental diseases" means an institution which
is
primarily engaged in providing diagnosis, treatment or care of persons
with mental diseases, including medical attention, nursing care, and
related services.
45 CFR Sec. 248.60(b). /17/
Current provisions are similar but reflect the addition of ICF
services and of inpatient psychiatric facility services for individuals
under age 21 and also, the change to use the Medicare standards for
skilled nursing services. The key definition of an IMD, at 42 CFR Sec.
435.1009, incorporates several earlier provisions as follows:
"Institution for mental disorders" means 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.
An institution for the mentally retarded is not an institution for
mental diseases.
B. The Parties' Arguments on the Regulations
Basically, the States' position is that they had a reasonable
expectation of funding for these SNFs and ICFs here because they relied
on the legislative history of the exclusion and past practice of the
(16) Agency in applying the regulation only to "mental hospitals."
The
States further argue that, even if the regulations could apply to
private, free-standing SNFs or ICFs under some circumstances, the
regulations were improperly applied here. On the latter point, the
States focus on key words in the regulation, arguing either that the
terms are too vague or that they should be interpreted a particular way.
For their view that the regulations should be interpreted to refer
only to institutions with an "overall character" like a traditional
mental hospital, the States rely in part on the legislative history of
the exclusion.
They point out that the references to IMDs as mental hospitals in
relation to the 1965 Amendments were made only a year before the medical
assistance provisions of the HPA were issued. CT Br., p. 5, n. 2.
Further, the States argue, the use of the term "overall character"
in
the regulations is an indication that the emphasis would be on the
nature and type of institution rather than on the patients. The States
point to those institutions which the States recognize as IMDs, the
character of which is "unambiguous and a matter of public knowledge."
CA
Reply Br., p. 5. Focusing on the nature and purpose of the facilities,
the States argue, allows for accepting the published regulations as
valid since "(only) traditional state mental hospitals or their
functional equivalents are truly institutions established and maintained
for the purpose of diagnosis, treatment and care of persons with mental
diseases." CA Reply Br., p. 5.
The States argue that their interpretation of the exclusion was a
long-standing one, and that they acted on the basis of this
understanding without attempting in any way to disguise their programs.
CA Reply Br., p. 16. On the other hand, they argue, the Agency
interpretation is a new one. According to the States, there had been no
effort by the Agency to apply the regulatory definition of an IMD to
nursing homes until the issuance of a General Accounting Office report,
followed by field staff instructions in 1975. IL Reply Br., p. 2.
Thus, the States argue, applying the definition to the facilities here
amounts to a retroactive interpretation of the regulations.
This "retroactive" interpretation should be disfavored, the States
argue, because it leads to "a proposed wholesale recoupment of federal
funds," devastating to the States' budgets. CA Reply Br., p. 17. Given
this effect, the States contend, the Board should apply the rationale
set forth in the recent Supreme Court case of Pennhurst State School and
Hospital v. Halderman, 101 S. Ct. 1531 (1980). That (17) decision is
relevant, the States argue, because it points up the need to consider
the legitimate expectations of the States in grant programs. CA Reply
Br., p. 16; CT Reply Br., p. 15.
The Agency does not allege that the regulatory definition had been
applied to private, free-standing SNFs and ICFs prior to these
disallowances, but argues, "The States' contention that HCFA has in some
way changed its policy with regard to the definition of IMD is
completely unfounded." Cons. Br., p. 38. In support of this, the Agency
points to the HPA, which, it states, "makes clear that hospital, SNF,
and ICF services are all defined as services provided in those
institutions." Cons. Br., p. 38. In particular, the Agency cites to the
definition of a skilled nursing home for Medicaid purposes as one
maintained primarily for patients without mental disorders. Cons. Br.,
p. 38, citing HPA D-5141.14.b. From this, the Agency concludes that the
Statements have clearly known since 1966 that the Agency interpreted
IMDs to include nursing homes.
The Agency states that, under the regulatory definition of an
institution, hospitals, SNFs, and ICFs can all be institutions. Since
the regulation sets no categories of institutions but looks to "overall
character," the Agency argues, the regulation "requires an individual
institution-by-institution determination, not a blanket prohibition as
the states propose." Cons. Br., p. 37.
The States further argue, however, that the terms "diagnosis" and
"treatment" in the regulatory definition provide a basis for
distinguishing the SNFs and ICFs here from recognized IMDs covered by
the definition. According to the States, an IMD performs a diagnostic
service "to determine if a person is mentally ill through competent
medically accepted, psychiatric techniques of diagnosis," and this is
distinguishable from what SNFs and ICFs do, which is "relying upon
historical diagnoses or diagnoses from some other institutional
setting." Tr., p. 86.
The States also argue that the term "treatment" in the regulation
must mean more than the mere "services" which are provided to anyone
in
an SNF or ICF. In the States' view, "treatment" as contemplated by
the
regulation means an attempt to cure, which "involves very active efforts
in treating the underlying pathology." Tr., p. 87. /18/
(18) The States recognize that SNFs and ICFs provide some services
provided by mental hospitals, such as food, shelter, and management of
daily problems. Yet, the States assert that this is not sufficient to
characterize these facilities as IMDs because "there is no psychiatric
component to any of those treatment modalities." tr., p. 88.
The State challenge the Agency interpretation as so overbroad that
under it any institution that provided some treatment or services to a
person who is mentally ill would become an IMD. This is inconsistent,
the States contend, with the Agency's own regulations which define
"institution" broadly, but use IMD as a clearly limited subset of
institutions. Tr., p. 85. See also, CA Reply Br., p. 6.
The agency counters that an institution may be an IMD if engaged in
providing diagnosis, treatment, or care, and therefore need not be
performing diagnosis. In response to the States' interpretation of the
term "treatment," the Agency points out that regulations at 42 CFR
Sec.
456.380 require that ICFs provide a plan of treatment. According to the
Agency, the regulatory definition of an IMD "mandates that facilities be
classified according to the overall character of the patient population,
not according to the services provided." Agency response to appeal,
Docket Nos. 79-52-MN-HC and 79-89-MN-HC.
Finally, the States point out that the term "mental diseases," not
defined in the regulation, is vague. In applying the regulation, the
Agency referred to a disease classification system known as the ICDA.
/19/ The States contend that the Agency definition, using mental
disorders under the ICDA, was overbroad since it included mental states
resulting from an underlying physical disease. CA Supplemental
Statement in Support of Application of Review (CA Supp. App.), pp.
44-45, see also, CT. Br., pp. 44-45. The States also allege that the
Agency confused use of the terms "mental impairment," "mental
disability," and "mental disease" and this led to inconsistent
application of definitions.
The Agency responds that --
Congress used the term "mental disease" in 1965 . . . to mean what
were commonly known as mental disorders at that time. The (ICDA) is a
reasonable guide to the universe of "mental diseases". Establishing
a
physical cause for "psychiatric symptoms" does not (19) change the
fact
that "psychiatric symptoms are what Congress meant when it said "mental
diseases."
Agency response to appeal, Docket No. 80-184-CA-HC, p. 26.
C. Discussion of the Regulatory Issues
Althogh there is some basis for distinguishing the issue in the
Pennhurst case from the issue presented here, /20/ we agree with the
States that the Pennhurst rationale is relevant. If the States are to
plan their Medicaid programs, they must know on what basis a facility
will be classified as an IMD, particularly if that classification can be
avoided by choices on patient placement. In examining whether the
regulations in question were sufficient to inform the States that they
could not expect funding for services in these particular facilities,
however, the issue of clarity must be examined in light of the specific
facts presented here.
The evidence discussed in section V below establishes that very high
percentages of patients in these institutions had disorders which were
identified as mental disorders under a generally accepted classification
system, that the facilities in most instances held themselves out as
caring for the mentally ill, that some of the services provided to the
patients could reasonably be considered "treatment," and that the
facilities had other characteristics supporting the conclusion that the
regulations apply. Thus, we are not dealing here with close calls
concerning the Agency's application of a questionable criterion; in
virtually all cases, the facilities involved had attributes which placed
them securely within any reasonable reading of the Agency's regulation.
The States' major argument is that the regulations must be viewed in
light of the legislative history of the exclusion and the States'
understanding of the exclusion. Since the States viewed the regulations
this way, the States claim, they had an expectation of funding for these
facilities and the disallowances result from an unfair retroactive
interpretation of the regulation. Even if we were (20) to concede that
the States interpreted the regulations in light of a certain
understanding of the exclusion, we would not necessarily be led to the
conclusion that the States' interpretation was reasonable, given the
plain language of the regulations.
The regulations state that an IMD is, first of all, an institution.
The term "institution" is defined for these purposes as "an
establishment that furnishes . . . some treatment or services to four or
more persons . . . ." This is a longstanding interpretation which is
inconsistent with the view that the exclusion applies only to large,
warhouselike facilities. We are not persuaded that this definition is
not significant merely because IMDs are a specific subset of all
institutions. There is nothing in the regulations to indicate that the
scope of the IMD "subset" is related to institutional size.
Moreover, an institution may encompass a single facility or multiple
facilities, and may be public or private. While the regulations do not
specifically state that a single, private facility is an IMD if
otherwise meeting the definition, it is a logical implication from the
definition taken in context. /21/
The states also argue that the regulations should be interpreted in
light of the statement in Schweiker that mental hospitals were treating
only the mentally ill. This view does not comport with the use of the
term "primarily" in the regulations. It is a clear implication from
the
use of that term that an IMD may also be providing care and treatment to
persons other than patients with mental diseases. Moreover, the early
definition of inpatient hospital services as services in an institution
primarily for persons with disorders other than mental diseases (with
the parallel definition of skilled nursing services) indicates that the
nature of the patient population is pertinent. While we agree with the
States that the term "overall character" reinforces a view that the
focus of the exclusion is on the nature of the institution itself, we
fail to see how one can totally separate the nature of the institution
from the patients it serves.
The States' attempt to distinguish the facilities here from
recognized IMDs on the basis that these facilities do not perform
diagnostic services and do not provide the same degree of treatment also
fails in (21) light of the plain language of the regulation. The term
"diagnosis" appears before the disjunctive "or." The regulation
cannot
reasonably be read to infer that only institutions performing diagnosis
are IMDs. /22/
With respect to the States' interpretatin of the meaning of the term
"treatment," we agree with the agency that this interpretation is
inconsistent with the States' own position that the regulation should be
read in light of the legislative history and the circumstances at the
time the exclusion was originally enacted. Congress has provided
incentives to upgrade the quality of treatment in mental institutions
and to ensure "active" psychiatric treatment for individuals for whom
Federal funding would be available. See, Sections 1902(a)(20) and
1905(h)(1)(b)(i) of the Act. There is a substantial question, however,
whether recognized IMDs were providing this kind of treatment at the
time the exclusion was enacted. We also note that the regulation speaks
of treatment of persons with mental diseases, not treatment for mental
diseases.
Contrary to other statutory and regulatory provisions which specify a
certain type of tretment, the regulatory definition of IMDs merely says
"treatment." The States have pointed to nothing that supports a
conclusion that the SNF and ICF services here did not constitute
"treatment" within the meaning of the regulation. /23/
The term in the regulation which is most readily subject to various
meanings is the term "mental diseases." Here, again, the States'
arguments have internal contradictions. While the States accuse the
(22) Agency of using an overbroad definition in light of current
knowledge of the causes of mental symptons, the State have not shown
that that definition was broader than those categories of persons
treated in mental hospitals at the time the exclusion was enacted.
The States would have us overturn the Agency determinations since the
Agency included patients with mental disorders where the States say the
primary diagnoses were physically-based diseases, and since the Agency
included patients whose diseases were probably misdiagnosed. The
regulations, however, merely say "persons with mental diseases." Thus,
to the extent that the Agency evaluated patients at all on the basis of
primary rather than secondary diagnosis, this as a narrowing of the
regulation from which the States benefited. Moreover, for the most
part, even excluding patients with physically-based mental disorders,
these facilities were serving primarily persons with mental diseases.
We agree with the States that the Agency sometimes may have confused
the use of various terms related tomental status. In clarifying proper
usage, however, California's expert states, "Impairment and diability
are terms describing the effects of disease on functioning, while
disease is a diagnostic concept." CA Supp. to App., Exhibit C, p. 53
(footnote omitted). Since the Agency findings are related to diagnosis,
we conclude that Agency misuse of terms, while unfortunate, did not
prejudice any State and is consistent with Congress' use of the term
"mental diseases."
Moreover, we agree with the Agency that its use of the ICDA was
reasonable. The States have not disputed that the ICDA is a generally
recognized classification system. While the States' testimony
establishes that the ICDA is subject to some difficulties in
application, it also establishes that any attempt to classify illness
presents such difficulties. To preclude the Agency from adopting any
classification system at all would render the exclusion totally
unenforceable.
Thus, we conclude that the regulations were sufficiently clear to
inform the States that these facilities were IMDs and funding would not
be available for services to patients in the facilities. Given that the
regulations are sufficiently clear to apply to these facilities, to the
extent that the States relied on the fact that the exclusion had not
been applied to this type of facility before, that reliance is
unreasonable. Moreover, the Agency should not be precluded from fully
enforcing a regulation merely because it has never been applied a
particular way in the past. The Agency must be able to repsond to
changing circumstances, by enforcing an existing regulation.(23) I.V.
The Criteria
Thus far, we have considered the States' arguments related to
Congressional intent and to the regulations themselves. In this
section, we consider the States' arguments concerning the Agency
criteria for applying the regulations, set out in instructions to field
staff. We conclude that these arguments also do not provide a basis for
overturning these disallowances.
Our discussion of the issues related to the criteria is divided into
five parts: the history of development of the criteria; the parties'
arguments on procedural issues related to the criteria; our analysis of
the procedural issues; the parties' arguments on substantive issues
related to the criteria; and our analysis of the substantive issues.
A. History and Statement of the Criteria
The Agency "criteria" for determining IMD status were set forth
in a
series of documents which were part of an Agency transmittal system
called the Field Staff Information and Instruction Series (FSIIS).
FSIIS FY-76-44, dated November 7, 1975, was addressed to the Regional
Commissioners of the Social and Rehabilitation Service (SRS), then
responsible for administering the Medicaid program, and informed them
that regional office findings and a General Accounting Office study had
indicated that FFP was being improperly claimed for Medicaid for
individuals between 21 and 65 in IMDs. This document cites the
regulatory definition of IMDs and states:
The character rather than the licensure status of the institution is
a paramount importance ... . An institution is characterized as
"primarily" one for mental diseases if it is licensed as such, if
it
advertises as such or if more than 50 percent of the patients are in
fact patients with mental disease. In some instances a facility may be
"primarily" concerned with such individuals because they concentrate
on
managing patients with behavior or functional disorders and are used
largely as an alternative care facility for mental hospitals, even if
less than 50 percent of the patients have actually been diagnosed as
having a mental disease. Mental diseases are those listed under the
heading of mental disorders in the (ICDA), except that mental
retardation is not included for this purpose.
The document requested information from the regions on the problem of
improper claiming for services in IMDs, stating that the focus should be
on SNFs and ICFs since "we assume, absent evidence to the contrary (24)
that improper claims related to age are not a problem for care in
psychaitric hospitals."
FSIIS FY 76-97, issued May 3, 1976, stated that responses to the
earlier instruction "have heightened our awareness of great discrepancy
in the understanding, interpretation, and implementation of policy" with
respect to IMDs. The document points to the regulations as a basis for
the conclusion that free-standing SNFs and ICFs may of themselves be
IMDs, expresses concern with improper claiming, and advises regions to
"assess or continue to assess the situation as it now exists in order to
assist the States where necessary in complying with applicable Federal
Regulations."
A third document, FSIIS FY-76-156, dated September 14, 1976,
addressed mental health under Title XIX in general and noted progress in
the efforts to assure observation of the prohibition on funding in IMDs.
This document referenced the earlier transmittals and stated:
Various methods in addition to those discussed in earlier issuances
have been suggested to help States identify suspect facilities,
including proximity to State institutions (for example, within a 25-mile
radius) and age distribution uncharacteristic of nursing home patients
(i.e. a preponderance of individuals under age 65). Also, included in
these methods would be a determination as to whether the basis of
Medicaid eligibility of patients under 65 in suspect facilities was due
to mental disability.
FSIIS FY-76-156 recommended use of review teams "to review patients
in those facilities where the determination (of IMD status) cannot be
made without applying the 50% criterion." It also set out a system for
classifying patients, according to physical problems and mental
disability, to determine whether the person's need for skilled nursing
or intermediate care resulted from a mental disability.
In a memorandum to the Regional Attorney, Region IX, HEW, dated
September 16, 1977, the regional office requested a legal opinion on the
criteria set out in the FSIIS series, summarizing the criteria as
follows:
1. Licensed as mental institutions.
2. Advertises as mental institutions.
3. More than 50 percent of the patients have a disability in mental
functioning. (25) 4. Used by mental hospitals for alternative care.
5. Patients who may have entered mental hospital accepted direct from
community.
6. Proximity to State mental institutions (a 25 mile radius).
7. Age distribution uncharacteristic of nursing home patients.
8. Basis of Medicaid eligibility for patients under 65 due to mental
disability.
Attachment IV to Appendix D to CA Audit Report.
The October 28, 1977 response, prepared by an Assistant Regional
Attorney, expressed the opinion that the criteria were interpretative
rules which "constitute both clarification and more specific explanation
of existing law and regulations." Appendix E to CA Audit Report. The
Assistant Regional Attorney's memorandum, included with all but one of
the Agency audit or review reports used here, further states:
Obviously some of the above listed criteria are more probative as to
whether a facility, given its "overall character", is "primarily"
engaged in IMD type activity, e.g. the fact that a facility is used by
mental hospitals for alternative care (#4) is more probative than the
fact that a facility happens to be located within a 25 mile radius of a
state mental institution ... .
p. 8.
The memorandum warns that "every indication of any significance that
a given facility is primarily engaged in IMD activity should be
marshalled to fulfill the regulatory mandate that the determination be
on the basis of the facility's 'overall character' ... ." pp. 8-9.
The auditors and reviewers making the determinations disputed here
all used four or more of the criteria. Two additional factors,
considered by the reviewers in Connecticut were --
9. Hires staff specialized in the care of the mentally ill.
10. Independent professional reviews conducted by state teams report
a preponderance of mental illness in patients in facility.
CT Review Report.
(26) With respect to the criteria, the States raise a number of
procedural arguments. They also attack the criteria substantively,
particularly challenging the so-called "51% rule" (Criterion #3) as
inconsistent with the statute and regulations and with prohibitions on
discrimination on the basis of diagnosis. The States allege that the
criteria were inconsistently applied by the Agency and present serious
administrative difficulties.
B. The Parties' Arguments on Procedural Issues
The States first argue that they did not have timely notice of the
criteria and therefore cannot be adversely affected by the criteria
since the criteria were not published in the Federal Register. In
support, the State cite 5 U.S.C. Sec. 552(a)(1).
Whether the criteria are substantive rules or interpretative rules,
the States contend, they should have been published because they have
"general applicaility." This "general applicability" is
shown, in the
States' view, by the "fact that HCFA issued the criteria to all SRS
regional commissioners and has used them as a basis for disallowances
against four states ... ." CT Br., p. 33. The States cite the case of
Appalachian Power Co. v. Train, 566 F.2d 451, 455 (4th Cir. 1977), for
the proposition that information is required to the published under Sec.
552(a)(1) if it is "of such a nature that knowledge of it is needed to
keep outside interests informed of the agency's requirements in respect
to any subject within its competence."
The States also argue that, under the Department's own regulations,
/24/ the criteria should have been published in accordance with the
notice and comment rulemaking procedures of Section 4 of the
Administrative Procedure Act (APA), 5 U.S.C. Sec. 553. Since this
section applies only to substantive rules, the States allege that the
criteria were more than an interpretation clarifying or explaining
existing law, and, in this connection, point out that the label assigned
to a rule by an administrative agency is not determinative. CT Br., p.
35, citing Anderson v. Butz, 550 F. 2d 459, 463 (9th Cir. 1977);
Continental Oil Co. v. Burns, 317 F. Supp. 194, 197 (D. Del. 1970).
Further reason why the criteria should have been published, the
States argue, is that the criteria had a "substantial impact" on the
States. Using the test for "substantial impact" set forth in
Continental Oil (27) Co., supra, 317 F. Supp. at 1978 the States present
an analaysis to show that the crtieria are complex and pervasive;
represent significant changes from existing law; have retroactive
effect; and have engendered confusion and controversy. CT Br., pp.
36-37; see also, IL Application for Review, pp. 10-11; Tr., pp. 74-76.
Based on this analysis, the States conclude that the Agency's failure to
use notice and comment rulemaking to promulgate the criteria renders
them invalid.
Finally, the States attack the criteria as procedurally defective on
the grounds that use of the criteria without giving notice to the States
of the criteria themselves, of the Agency's intent to use them as an
enforcement tool, and of the meaning of the criteria violates principles
of due process and fundamental fairness.
The Agency does not dispute that the States may not have had notice
of all the criteria, Tr., pp. 18-19, but explains its position as
follows:
The criteria ... discussed in the FSIIS's were never intended to be
criteria as such. They were merely guidelines. ...they merely discuss
the central office's view of what factors might be helpful in locating,
identifying, possible IMD's and evaluating possible IMD's. They were
never intended to be the kind of criteria that you would assign a
numerical score to, and none of the criteria was ever considered
determinative with respect to the nature of the facility. Tr., pp.
15-16.
In support of this, the Agency points to inclusion, with the reports,
of the Regional Attorney's legal opinion on applying the criteria in
relationship to the regulation. Tr., p. 16.
According to the Agency, the criteria are interpretative rules,
constituting clarification of existing policy embodied in the duly
promulgated regulations; they were not required to be published because
they were not "for the guidance of the public." /25/
(28) The Agency further argues that the FSIIS "include obvious
factors for determining which institutions might be primarily engaged in
the treatment of persons with mental diseases.Cons. Br., p. 44. There
is nothing confusing, drastic, or retroactive about the criteria, the
Agency states, since they merely aid in the implementation of HCFA
policy that has been clear and consistent since 1966." Cons. Br., p.
44. See also, Tr., p. 16.
C. Discussion of Procedural Issues
In view of our conclusion above that the regulation itself was
sufficiently clear to give the States notice that these particular
facilities were IMDs, we conclude that the Agency's failure to publish
or otherwise give the States notice of the criteria would not provide a
basis for overturning these disallowances. The adverse effect, and
financial impact, of these disallowances is a result of the regulations
rather than the criteria since these facilities had the requisite
"overall character" under any reasonable reading of the regulation.
Thus, we cannot say that the Agencyhs actions prejudiced the States,
given the circumstances presented here.
The FSIIS series documents show that the Agency viewed the criteria
as indicators of whether a facility was an IMD under the applicable
regulations. The Agency used some or all of the criteria in making each
of the disallowance determiations here, but none of the criteria was
considered determinative. The cumulative evidence is that the
facilities met the regulatory definition.
We also note that many of the State' arguments with respect to the
need for notice or publication are premised on the view that the
criteria amounted to a change in existing law, since their understaning
was that only mental hospitals were IMDs. As stated above, the
regulations in context clearly imply that private, free-standing SNFs
and ICFs can be IMDs. Moreover, while it is unclear from the record at
what point the States had actual notice of the criteria themselves, it
appears likely from the record that the States were aware prior to (29)
the period of disallowance that the Agency interpreted the regulation as
applying to such SNFs and ICFs. /26/
D. Substantive Issues Related to the Criteria
The States also attack the criteria substantively, focusing primarily
on the Agency's counting of patients with mental disorders (Criterion
#3), but also making some general arguments. The parties' substantive
arguments are summarized below, followed by our analysis.
1. Substantive Arguments Related to the Counting of Patients
The States direct their substantive attack on the criteria mainly
against Criterion #3, referred to as the "51% Rule," arguing that
it is
arbitrary, invidious, and contrary to prohibitions against
discrimination on the basis of diagnosis. For support of their
proposition that the counting of patients is discriminatory, the States
cite Social Security Act provisions which forbid a State from
discriminating against any eligible individual with respect to the
amount, duration, and scope of medical assistance, Section 1903(a)(10),
and regulations which prohibit a State from denying a required service
to an otherwise eligible individual solely because of diagnosis, type of
illness, or condition. 42 CFR Sec. 440.230. The States also cite a
policy guide and other Department issuances which reflect a policy of
nondiscrimination on the basis of diagnosis. CT Br., pp. 25-26.
Moreover, the States argue, the Agency approach "encourages segregation
of individuals with mental diagnosis in certain facilities on the basis
of considerations other than their individual needs," and thus violates
Section 504 of the Rehabilitation Act of 1973, as amended. CT. Br., p.
289
In response, the Agency asserts,
The statute provides, quite simply, that no FFP is available for
services provided in an institution for mental diseases. (30)... once a
facility is determined to be an IMD, no federal financial participation
is available for services to any resident of the facility, whether or
not a resident is mentally ill. ... To paraphrase the Supreme Court's
holding in Schweiker v. Wilson, ...the distinction is not between the
mentally ill and a group composed of the nonmentally ill, but rather
between residents of IMDs and residents of other long-term care
facilities.
Cons. Br., p. 53.
Other problems which the States raise with respect to Criterion #3
include the arbitrariness of diagnostic labeling of patients, the
difficulties of categorizing patients with multiple disorders, the
problems inherent in using the ICDA, the unreliability of medical
records, and the administrative headaches potentially caused by changes
in patient population. The States presented testimony tjhat the fact
that a patient once carried a label of being mentally ill had nothing to
do with the current status of the patient, and, since the auditors did
not engage in a procedure to determine whether a patient still had an
acute, active illness, use of a previously-given diagnosis amounted to
"gross prejudice." Tr., p. 279; see also, Tr., p. 298. According to
the States, diagnosis is a judgmental process, which may depend in part
on the particular specialty of the doctor engaged in the process.
Determining reasons for placement in a particular facility is
particularly complex with respect to patients with multiple diagnoses,
the States point out, with supporting testimony. Tr., pp. 187-188.
The States attack the use of the ICDA as a basis for categorizing
patients by presenting testimony that SNFs and ICFs have no legal
restrictions in terms of using the ICDA and concluding from this that an
Agency reviewer might be confronted with diagnoses which do not fit the
ICDA categories. Tr. pp. 182-183. The States also argue that a "51%
Rule" is completely unworkable because patient population can shift and,
under the rule, admission of one additional patient with a mental
disorder could result in loss of Medicaid coverage for all patients in a
facility.
The Agency in rebuttal presented testimony by a psychaitrist who was
an the review team which examined the Connecticut facility involved
here. He stated that he carefully weighed judgment as to why a patient
with multiple diagnoses was placed in the Connecticut facility. He
further expressed the opinion:
I donhtt think non-medical or non-nursing auditors would be able to
have necessarily the same kind of credibility that I was able to have
concerning the medical records. (31) But if you assume that they are
accurate and of reasonable quality, they do give you, I think, an
accurate understanding of what is being treated.
Tr., p. 331.
The Agency also defends use of the ICDA as a reasonable guide to the
universe of "mental diseases," given that "complete agreement
cannot be
revealed with regard to systems of diagnosis... ." Cons. Br., p. 46.
The Agency points out that trained medical staff conducted or aided in
the review of patient records and claim forms here in order to establish
diagnosis. The Agency states that its evidence shows that the review
teams were if anything very cautious and conservative in their
applications of the categories." Cons. Br., p. 47, citing Tr., pp.
312-407.
In general, the Agency argues:
As stressed in the controlling regulation, it is the overall
character of the facility, and not merely the percentage of residents
with diagnoses of mental illness, that is determinative. Moreover, the
FSIISs specifically recognized the problems inherent in the arbitrary
application of a percentage standard, under which a facility's status
could change day-to-day. It made clear that the character of the
facility would be determined once, and that status would continue until
a special request to change it was filed: ... FSSIIS (sic) FY-76-156 at
3. Thus, the admission of one patient with mental illness would not
affect the character of a facility.
Cons. Br., p. 52.
2. General Substantive Issues Related to the Criteria
The States attack all the criteria on substantive grounds as
impermissibly vague and the Agency's use of the criteria as arbitrary
and capricous. In general, the States argue that the criteria "are
ill-defined, and they appear to be wholly inadequate indicators of
whether an institution meets the 'primarily engaged' or 'overall
character' standards of the published regulations." CT Br., p. 42; see
also, Tr., pp. 100-101. With respect to specific criteria, the States
challenge each of them as "meaningless," "incomprehensible, (32)
"misleading," or otherwise irrelevant to the question of whether a
facility is an IMD. /27/
The States also allege that the criteria were inconcsistently
applied. The States attribute this, in part, to what they say is a lack
of objectivity to the criteria. Applying the criteria presents serious
administrative difficulties, the States allege, because this method of
identifying IMDs "involves a number of highly judgmental elements (e.g.,
what is 'mental disease,' how to deal with multiple diagnoses, how to
categorize 'senility') which make it impossible for auditors to classify
the facility, which make any classification likely to be both subjective
and time-consuming, and which will inevitably lead to legitimate heated
disagreements with the findings." CA Reply Br., p. 13; see also, CT
Reply Br., pp. 8, 16.
In response, the Agency states:
The "criteria", while varying widely in relative importance, are
all
useful in identifying possible IMDs. As indicated in the review reports
that support the disallowances, none of them was ever deemed sufficient
in itself to classify an institution.
Cons. Br., p. 45-46.
The Agency argues that, in criticizing the Agency criteria but
failing to suggest reasonable alternatives, the States apepar to be
saying that it is impossible to define an IMD and this would render the
exclusion unenforceable. Tr., p. 20.
3. Discussion of the Counting of Patients
We agree with the States that there are difficulties with counting
patients according to diagnoses based on medical records and with use of
the ICDA. We also agree that it is not conclusive that a person is
mentally ill merely because at one time the person was diagnosed as
mentally ill. With a few exceptions discussed in Section V (33) below,
however, the States' arguments on these points are generalized and
speculative. The States have presented no evidence, that, in any of
these cases, the determiation that the facility was an IMD was based
solely on a finding that 51% of the patients had mental diseases.
As stated above, the Agency was reasonable in looking to patient
population as a factor in determining "overall character" of a facility.
Moreover, given the very difficulties in diagnosis and classification
which the States point to, some choice had to be made of how to
determine whether a resident was a person with a mental disease. The
Agency did include some patients whose psychiatric symptoms might have
been physically-based. On the whole, however, the Agency took a
conservative approach, employing a current, generally recognized
classification system. This approach benefited the States when viewed
in light of the common understanding of the term "mental diseases"
at
the time the exclusion was enacted.
The Agency witness was persuasive on the general reliability of
medical records and the ability of auditors to interpret them with
relative accuracy. For the Agency to take some risk of
misclassification was reasonable, where the patient population was not
the sole basis for determining "overall character." While the ideal
might be to engage in a lengthy diagnostic analysis to determine reasons
for patient placement, it is simply administratively infeasible. We
agree with the Agency witness, Tr., p. 331, that the degree of
credibility in the medical record needed to understand what is going on
is less than what would be demanded if someone were using it as a basis
for treatment. Moreover, the States' arguments with respect to
unreliability of records and possible misdiagnosis of patients ignore
the consideration that, not only the Agency, but the facilities and the
States were likely also dependent on historical diagnoses for their
decisions on the appropriateness of placement. Even though a diagnosis
of mental disease might be wrong, if it was a basis for placement of the
patient in a facility, it is an indication of the nature of the facility
as one engaged in care and treatment of mental diseases.
As stated above, we also think that the States benefited from the
Agency excluding patients who were placed in the facility due to a
physical problem even though they may have also been mentally ill. The
regulation covers facilities for care and treatment of "persons with
mental diseases," and this is not limited to persons with a primary
diagnosis of mental disease.
We share the States' concern with administrative difficulties which
might be caused by a shift from 49% to 51% population of mentally ill in
a facility. This concern is irrelevant here, however, given (34) the
high percentages of mentally ill in most of the facilities during the
disallowance periods and since other significant factors also evidence
"overall character" of the facilities as IMDs.
We also do not find the counting of patients here to be
discriminatory. As the Court in Schweiker, supra, found, the exclusion
is directed at a type of institution, not at the patients. The
resulting disallowances flow from classification of a facility as an
IMD, not from the counting of patients per se. This classification may
have unfortunate results on placement decisions made by the States, and
lead to mentally ill patients being segregated in IMDs or placed in
facilities farther from their homes so that the exclusion would be
avoided. However, any discrimination in this situation would be a
result of the exclusion and the State seeking to maximize funding, and
only tangentially the result of the Agency's counting of patients.
We also note that Medicaid provisions forbid denial of "medical
assistance" on the basis of diagnosis. The Agency is using diagnosis
here as a basis for determining whether services are, indeed, "medical
assistance" or are excluded from being "medical assistance" because
they
are provided in an IMD.
Our holding here does not imply that the Agency could never apply a
"51% Rule" arbitrarily. Given the facts of these cases, however, the
criterion itself does not provide a basis for reversal of the
disallowances.
4. Discussion of General Substantive Issues Related to the Criteria
With respect to the remaining criteria, we also find that they were
applied here in a reasonable manner.If the Agency had relied solely on
any one of them, we might view the issue differently. The Agency itself
recognized, however, that some of the criteria were more probative than
others and here used the criteria as a guide for accumulating evidence
that the regulatory definition was met.
While all of the criteria might not be as obvious as the Agency
alleges, neither are they as obscure as the States allege. In these
particular cases, the findings which result from the Agency's use of the
criteria do support the general conclusion that the facilities were
IMDs, or, at least, do not detract from that conclusion.
There was some inconsistency in application of the criteria to the
different States' facilities. For the most part, this merely reflected
the differences in the States' programs and did not prejudice any State
since the inconsistency in no case led to a legally incorrect
application of the regulation. Further, the inconsistency in some (35)
instances favored the States since the Agency may have applied the
criteria more conservatively than the regulations required.
Thus, given our conclusion that the regulations apply as a basis for
the disallowances here, we further conclude that the Agency's failure to
promulgate the criteria does not render these disallowances defective,
and that, substantively, use of the criteria as tools for the
application of the regulations was not arbitrary or discriminatory. We
also conclude that while the criteria in some instances may have been
inconsistently applied, these instances were not prejudicial and do not
invalidate the Agency's findings as a whole. As discussed below, the
Agency has presented persuasive evidence that each of these facilities
met the regulatory definition of an IMD.
V. Analysis of Factual Issues
In this section, we discuss the facts related to the disallowances
for each of the four States involved here, analyzing the issues each
State raised with respect to its particular case. The order of
discussion (Connecticut, Illinois, Minnesota, and California) is the
order in which the States presented their arguments at the joint
hearing. Each subsection is organized differently, depending on the
types of issues the particular State raised.
A. Connecticut
Docket No. 80-150-CT-HC involves a disallowance of FFP claimed by the
State of Connecticut for services provided by Middletown Haven Rest Home
(Middletown Haven), during the period January 1, 1977 through September
30, 1979. The disallowance was based on a report submitted by an Agency
regional office review team, /28/ which found that Middletown Haven was
an IMD.
For reasons discussed below, we conclude that Middletown Haven was an
IMD and uphold the Agency's disallowance.
1. The Reviewers' Findings in Connecticut
Both the Review Report itself and testimony at the hearing by the
psychiatrist member of the review team show that the determination (36)
that Connecticut's Middletown Haven ICF met the regulatory definition of
an IMD was based on careful consideration of a number of different
factors. The reviewers specifically recognized that the criteria were
factors to be cumulatively weighed, that they were not intended to be
all-inclusive, and that they did not carry equal weight. CT Review
Report pp. 5-6.
The reviewers found that, during the disallowance period, Middletown
Haven was certified as an ICF under the Medicaid program, but also had a
license from the State with an "authorization to care for persons with
certain psychiatric conditions" ("psychiatric rider"). CT Review
Report, p. 6, and Attachment. The reviewers reported:
The staff of the facility stated that not only is it identified in
the license but that they view the facility as a psychiatric facility.
Statements were made with regard to the patient population that it
consisted mostly of mentally ill patients, for the most part transferred
from ... a State mental institution. Also, the statement was made that
local hospitals have been advised of this specialty and will
specifically refer patients with mental impairments. ... Other
indications were given during the interview that supported the team's
conviction that the facility administration regards its license
seriously and viewed itself as a licensed facility for psychiatric
conditions.
CT Review Report, P. 6.
The other indications the reviewers relied on included that the
facility advertised itself to sources of referral as a facility
specializing in the care of persons with mental diseases. This finding
was based primarily on statements by the facility's administrator, but
was partially verified through other means. CT Review Report, p. 7.
The reviewers also found that Middletown Haven hired medical and
other staff which specialized in care of the mentally ill. The facility
had a contract with three psychiatrists, requiring each of them to be an
active staff member, to come in a least weekly for consultation on
patients, and to participate in in-service education programs for the
staff. CT Review Report, P. 12.
The factor which the reviewers thought indicated most clearly that
Middletown Haven was "primarily engaged" in treating the mentally
ill
was the determination that, of the 469 patients deemed to have been
patients in the facility from January 1977 to December 18, 1979, (37)
364 or 77% had a major mental illness which was a substantial part of
their need for ongoing IFF care. /29/ CT Review Report, pp. 7-8 and
Attachment F, p. 3.
This determination was based on a very careful review of the
available data, under the guidance of the psychiatrist on the team, who
performed an in-depth analysis of a test sample and a detailed review of
all cases where other team members had a question about how to classify
a patient. CT Review Report, P. 8. This psychiatrist testified at
length at the hearing on the rationale he applied to patients with
multiple dianoses. See, Tr., pp 312-328.
Additional review findings included that a large proportion of
Middletown Haven patients came from State mental institutions, that the
facility is within three miles of a State mental institution, and that
approximately two-thirds of the patients were between the ages of 21 and
65, which is uncharacteristic of nursing home patients in general. CT
Review Report, pp. 8-11. The reviewers also cited an Independent
Professional Review report, prepared by State teams, which commented on
the "high incidence of psychiatric patients" in the facility. CT Review
Report, p. 13.
2. Analysis of the Issues in Connecticut
Connecticut does not dispute the correctness of the reviewers'
findings with respect to the facility's specialization and staffing, but
does question their relevance. Connecticut contends that the
specialization at Middletown Haven can be explained because it makes
economic sense to have some concentration of individuals with a
particular condition, so that some specialized services can be
developed. CT Reply Br., p. 23. Given some concentration of patients
with mental problems, it was logical, Connecticut argues, for the
facility to seek staff with some relevant experience. Indeed,
Connecticut asserts, federal (38) regulations require a facility to have
a staff that meets the needs of its residents. CT Br., p. 51.
Connecticut also points out that the Medical Director of Middletown
Haven was a general practitioner, not a psychiatrist, CT Reply Br., p.
20, and that many long-term care facilities have some staff with
experience in caring for mentally disturbed residents. CT Br., p. 51.
The evidence shows, however, that the degree of specialization which
occurred at Middletown Haven was significant. The staff viewed
Middletown Haven as a psychiatric facility, primarily caring for the
mentaly ill. Whatever the facility's motiviation for concentrating on
the mentally ill, we find that the resulting situation strongly
indicated that the facility had the "overall character" of an IMD.
We
also do not think, based on the record, that Middletown Haven was a
typical general ICF in the services it offered. The Agency presented
convincing testimony by the review team psychiatrist that the level of
psychiatric treatment offered by Middletown Haven to its residents was
greater than one would normally expect in ICFs. Tr., p. 328.
Connecticut did attempt to factually rebut some of the reviewers'
other findings, primarily through the testimony of a Public Assistance
Consultant for the Connecticut Department of Income Maintenance. This
consultant testified that a "psychiatric rider" to a Connecticut nursing
home license merely means that the facility cares for at least one
mentally ill patient and has one staff person with psychiatric training.
The witness further testified as to the differences between Middletown
Haven and State mental hospitals, including that a State hospital
provides a greater intensity of treatment and cares for patients with
"acute mental disorders." Tr., pp. 138-140. Middletown Haven's
admission policy did not permit it to care for persons with acute mental
disorders. CT Review Report, Attachment E, pp. 1, 3.
The Connecticut witness also discussed the results of a review she
had performd, based on reports by Independent Professional Review (IPR)
teams in accordance with federal utilization control requirements. The
witness testified that she would not have concluded from her examination
of these reports that in December 1979 a majority of Middletown Haven's
patient population were persons with mental diseases. Tr., pp. 143-149;
see also, Affidavit, Exhibit D to CT Br. She also gave examples of
patients, with multiple diagnoses, whom she thought may have been
misclassified by the reviewers as mentally diseased.
While we accept Connecticut's evidence as to the meaning of the
"psychiatric rider" on Middletown Haven's license, and certainly would
not view the presence of such a rider as determinative of the character
of a facility, the fact that Middletown Haven had such a rider has some
(39) weight when viewed in the context of the other evidence here. We
also are persuaded that there were distinctions between Middletown Haven
and State mental hospitals during the disallowance period. Given the
regulatory definition of an IMD, however, the fact that Middletown Haven
was unlike a mental hospital in some respects is irrelevent to the issue
of whether it was an IMD.
On the whole, we find the Agency evidence more persuasive with
respect to the reasons for patient placement in Middletown Haven. The
testimony of Connecticut's witness on possible misclassification was
based on speculation from her review of the IPR reports, not on
first-hand knowledge of what the reviewers did.
Moreover, we find that, as between the two witnesses, the Agency
witness had more credibility. The Agency witness was highly qualified
in psychiatry, Tr., pp. 309-310, whereas Connecticut's witness was not,
Tr. pp. 144-145. Even if we agreed with Connecticut that some mistakes
may have been made with respect to classifiction of individual patients,
however, there would still remain overwhelming evidence that the
"overall character" of Middletown Haven was that of a facility
established and maintained for the care and treatment of persons with
mental diseases.
Accordingly, we uphold the disallowance of $1,634,655 claimed by the
State of Connecticut for payments to Middletwon Haven for quarters
ending March 31, 1977 through September 30,1979.
B. Illinois
Docket No. 80-44-IL-HC involves a disallowance of FFP claimed by the
State of Illinois for services provided to persons under 65 years of age
in nine ICFs and SNFs during quarters ending December 1, 1976 through
September 30, 1978. The Agency concluded that the nine facilities were
IMDs based on a comprehensive review of eleven Illinois long-term care
facilities. The review was conducted by two Medicaid Program
Specialists from the Regional Medicaid staff. /30/
1. The Reviewers' Findings in Illinois
The reviewers examined medical review or independent professional
review documents as well as utilization review data prepared by the
Illinois Department of Public Aid and Public Health. These documents
were prepared by registered nurses employed by the State (40) and
contained the diagnoses and treatment for each Medicaid patient, as
recorded in the patient's actual medical records. Diagnoses in the ICDA
were used to classify persons with mental diseases. The reviewers also
examined advertisements, residents' handbooks, newspaper articles and
internal State memoranda concerning the facilities.
The number of Medicaid patients with mental diseases in each of the
facilities was found to represent at least 60% of the Medicaid
population. /31/ In all but two facilities, the number exceeded 85%.
Statements in reports prepared by the Illinois Departments of Public
Health and Public Aid confirmed for six of the facilities that resident
population was made up primarily of mental patients or that the type of
care was oriented towards mental patients. In the remaining three, the
reviewers pointed to statistics concerning the use of each facility as
alternative placement for mental hospitals or the number of former
mental hospital patients in the facility. The reviewers noted that in
five of the facilities, the average age of the patient population was
uncharacteristically low for nursing homes, e.g., 46 years. IL Review
Report.
2. Discussion of the Issues in Illinois
Illinois expended most of its effort in this case arguing general
legal issues. To the extent the presentation related peculiarly to
Illinois, it related primarily to State policy and to the
characteristics of all Illinois ICFs rather than to the specific
facilities found to be IMDs.
Illinois attacked the Agency criteria in general and the use of
patient diagnosis in particular, presenting testimony on the dangers of
patient labeling. Illinois also submitted evidence designed to show
that its facilities certified as ICFs are distinguishable from State
psychiatric hospitals. We have addressed these issues above.
With respect to the specific findings in Illinois, the State
presented evidence primarily on three points: the legal requirements
governing admission and discharge policies of Illinois ICFs; the nature
of follow-up responsibislity by the Illinois Department of Mental Health
for patients in the facilities; and the significance of placement of
(41) patients from State mental facilities into these ICFs. We do not
find that any of this evidence overcomes the Agency's findings as to the
overall character of the specific facilities as IMDs.
Illinois has established that State regulations governing admission
and discharge policies of ICFs expressly prohibit the admission or
retention of persons who require "mental treatment" as defined in
the
Illinois Mental Health Code. That definition, however, refers to a
person needing "menatl treatment" is "that person is afflicted
with a
mental illness and as a result of such mental illness is reasonably
expected . . . to intentionally or unintentionally physically injure
himself or other persons, or is unable to care for himself so as to
guard himself from physical injury or to provide for his own physical
needs." IL Hearing Exhibit 5.Thus, need for "mental treatment"
can
certainly not be equated in Illinois with being mentally ill. In
addition, the policies of the Illinois State Psychiatric Institute, a
recognized IMD, indicate that a person might be discharged from a
psychiatric hospital providing "mental treatment" into a long-term
care
facility "because of continuing illness, which has proved refractory to
all available therapies which the hospital has to offer." IL Hearing
Exhibit 2, p. 6.
Moreover, the admission policy of Grasmere Residential Home, Inc.,
one of the ICFs involved here, indicates that, while the Home did not
provide "mental treatment," it did consider itself as providing some
form of treatment to patients where therapeutically indicated. IL
Hearing Exhibit 3.
Illinois also presented testimony regarding the scope of the
jurisdiction of the Illinois Department of Mental Health and
Developmental Disabilities. According to the Director of the
Deparpment, who testified at the hearing, the Department has
jurisdiction only over the mentally ill in hospitals. Follow-up
responsibility for persons placed from hospitals into facilities such as
these ICFs does not include monitoring of individual patients, only
evaluation of the patients' status as affected by the facilities'
programs. Tr., p. 301. The Department merely acts as an advocate for
persons discharged from State Mental health facilities. Tr., p. 284.
Based on this, the State argued that the Agency should not have placed
any significance on the fact that the Department had follow-up
responsibility for a number of the patients placed in the ICFs here. IL
Reply Br.
Illinois' evidence on this point is convincing to show the scope of
the Department of Mental Health's jurisdiction and the nature of its
follow-up responsibility. We would also agree that the fact of
follow-up responsibility does not necessarily indicate continuing mental
illness. However, Illinois has not demonstrated that patients (42) for
whom the Department had that responsibility were considered cured and
were placed into these ICFs for purely physical illnesses. Indeed, the
Agency's evidence shows that most of the patients were ambulatory and
few had physical problems. Thus, while we do not consider the fact that
the Department had follow-up responsibility for a number of the patients
placed in the facilities here to have great weight, we nonetheless
consider it some support for the general finding that high percentages
of the patients were mentally ill.
The remainder of Illinois' evidence is intended primarily to show
that the placement of patients from State mental facilities into these
ICFs does not mean these facilities were used as alternatives to the
State facilities. In addition to pointing to Illinois regulations on
persons requiring "mental treatment," discussed above, Illinois presents
evidence to show: 1) persons placed on ICFs are placed there solely
because they need the care that an ICF normally provides, Tr., p.
283-287; 2) only a small percentage of persons discharged from State
facilities were placed in long-term care facilities during the
disallowance period, IL Hearing Exhibit 6; and 3) the Department of
Mental Health has placed persons in approximately 400 different
facilities during the disallowance period, Tr., p. 291.
The Agency has not rebutted these points, and Illinois' evidence does
indicate, at least, that the State was not arbitrarily "dumping"
patients from State mental hospitals into ICFs, using them as
inappropriate alternatives to mental hospital care. The real issue
here, however, is whether particular facilities were IMDs. As part of
its findings supporting the conclusion that the facilities had the
requisite overall character, the Agency found that the facilities had
relatively large numbers of patients placed into the facilities from
State mental hospitals.None of the State's evidence directly contradicts
the Agency's findings, which are based on State census reports. Indeed,
given that only small percentages of persons discharged from State
facilities were placed in long-term care and that over 400 facilities
received some patients, the relatively high number of placements into
these facilities has greater weight in showing that these facilities
were not typical ICFs than it would otherwise.
Thus, while we find Illinois' evidence sufficient to establish
certain facts, those facts are not directly relevant to the issues
before us and do not overcome the Agency's findings that high
percentages of the patients in the facilities had mental disorders and
that the State in some way recognized that the facilities were primarily
serving the mentally ill. Thus, we conclude that the facilities met the
regulatory definition and were IMDs.
(43) Accordingly, we sustain the disallowance of $4,261,162 in FFP
claimed for services provided in these facilities.
C. Minnesota
Docket Nos. 79-52-MN-HC and 79-89-MN-HC involve disallowances of FFP
claimed by the State of Minnesota for services provided to persons under
65 years of age in three ICFs during quarters ending September 30, 1977
through June 30, 1978. The Agency concluded tht thre three facilities
were IMDs based on a review conducted by the Region V Medicaid Bureau.
/32/ The Agency states that these facilities were selected for review
based on a list of facilities with a Minnesota "Rule 36" license for
residential facilities providing programs for five or more mentally ill
persons. The record indicates, however, that only two of the three
facilities had this type of license. MN Review Report, Attachment 8.
1. The Reviewers' Findings in Minnesota
Utilizing methods similar to that employed by the Illinois review
team, the reviewers examined Minnesota Department of Public Welfare
records that included judgments by the State's medical personnel as to
the primary reason for each Medicaid patient being in the facility.
Diagnoses of mental diseases were based on the ICDA. The reviewers also
considered correspondence from the facilities, statements by Minnesota
concerning the facilities, and other information.
The reviewers concluded that all three facilities were "primarily
engaged in providing treatment and care for persons with mental
diseases." The findings for individual facilities are described below.
Andrew Care Home
90.4% of the Medicaid patients in this facility were found to have
diagnoses of mental diseases. In a letter to the Agency concerning a
requested waiver of a handrail requirement, counsel for the home
characterized it as follows:
". . . the residents of Andrew Care Home are handicapped because of
mental health rather than physical disability . . . ."
(44) ". . . only 10% of the total resident population is over 65
years old . . . ."
"The majority of residents of the facility carry a diagnosis of
schizophrenia or paranoid schizophrenia or other neurological
disorders."
MN Review Report, Attachment 10.
In a subsequent letter, the same law firm referred to Andrew Care
Home as a "menrtal health residential facility." MN Review Report,
Attachment 11. According to State records cited by the reviewers, the
average age of Medicaid patients in the facility in November 1977 was
39.88 years. Andrew Care Home was licensed under Rule 36 from December
1, 1976 to January 1, 1978 and the review report quotes the following
statement, concerning the license, made in a memorandum of the Minnesota
Department of Public Welfare:
Rule 36 licensure is a direct admission, being a program license,
that the facility has a fairly primary intent to provide specific care
and treatment aimed at the mentally ill population.
Birchwood Care Home
86.4% of the Medicaid patients in this facility were found to have
diagnoses of mental diseases. The Minnesota Department of Public
Welfare in a letter dated December 27, 1977 stated that the average age
of Medicaid residents in November 1977 was 58 years. Birchwood Care
Home had a Rule 36 license for adult mentally ill persons from March 1,
1977 to March 1, 1978.
Hoikka House
The reviewers found tht 94.9% of the Medicaid patients in this
facility had diagnoses of mental diseases. The average age of Medicaid
patients in November 1977 was 48 years and a majority of patients came
to the house from State hospitals. A calling card of the Hoikka House
program director refers to the facility as providing "Care of the
Mentally Ill."
2. Discussion of the Issues in Minnesota
a. Availability of Psychiatric Treatment and Diagnostic Services on
the Premises
Minnesota argues that the Agency criteria failed to address a
critical element of the definition of an IMD by failing to consider the
availability of psychiatric treatment at the facilities. Minnesota (45)
presented affidavits from administraors of all three facilities, stating
that residents did not receive psychiatric or psychological services on
the premises of the facility. Any such services received by the
patients were furnished outside the facility. The administrators
characterize the services provided by the facilities as counseling in
"basic living skills" designed to increase patients' capacity to
function more independently and to deal with daily living needs.
As we discussed more fully in our section on the regulations, the
regulatory definition of an IMD requires that a facility provide
"treatment" for its patients, not a specific kind of treatment such
as
active psychiatric services. The Agency argues that, depending on the
individual's condition, counseling in living skills may be just as
significant in treating the individual as classic psychiatric therapy.
Further, Minnesota does not deny that psychiatric treatment received by
residents outside the facilities may complement the services received
within the facility and may be considered to be part of the residents'
comprehensive treatment program at the facility.
Minnesota also argues that the Agency's criteria are defective in
that they do not consider the availability of diagnostic services at the
facilities. We have previously addressed several aspects of this issue.
The regulations do not require that a facility must provide diagnostic
services for mental diseases in order to be classified as an IMD.
Moreover, Minnesota has not presented evidence that the facilities here
do not diagnose patients upon admission or at some subsequent time.
b. Recorded Diagnoses of Patients as an Indication of Type of
Facility
Minnesota also argues extensively that the recorded diagnoses of the
patients are not a reliable indicator of the type of facility since
misdiagnosis frequently occurs and old diagnoses are not updated.
Minnesota adds that the listing used for classifying mental diseases,
the ICDA, is indefinite and of limited usefulness. Minnesota ignores
the fact, however, that the diagnoses cited here were derived from the
State's own records and were used by health professionals in placing and
retaining the residents in the facilities under review. Regardless of
whether the diagnoses were correct, the facilities apparently depended
on them in providing patient treatment and care and in developing their
services and programs. Moreover, it would be unreasonable to require
the Agency to rediagnose each of the individuals in the facilities under
review merely so it could administer the IMD provisions. While
Minnesota criticizes the ICDA for lack of definiteness, it does not
propose any preferable alternative method of classification.
(46) Minnesota also argues tha the key specialist that assisted in
the Agency review lacked the background to assess the facilities and to
evaluate patient diagnosis. As we understand the review procedures,
however, the specialist depended largely on the State's own records.
Minnesota does not allege that the statistics cited were inaccurately
transcribed. Also, the Agency alleged that its reviewers were assisted
by medical personnel when necessary and the State has not disputed this.
c. Other Arguments
The State also raises a series of arguments concerning individual
criteria applied by the Agency. The Agency has never asserted that age
distribution, former place of treatment, or Rule 36 licensure, if taken
alone, would be a decisive indication of the facility's character. The
Agency may properly consider these criteria, in our view, if it also
considers more conclusive ones such as the facility's own
representations and the makeup of the patient population. We certainly
would not discount representations made by the facility's counsel
relating to another Medicaid program requirement simply because the
facility could "benefit" from the representation.
In conclusion, there is substantial evidence in the record that these
facilities met the regulatory definition for IMDs. A very large
percentage of the patient population in each of the facilities had
diagnoses of mental diseases, and other significant indicators support
the Agency's findings in each case. While Minnesota has raised legal
arguments concerning the weight to be given to findings, it has not
presented any evidence to persuade us that these findings were
incorrect.
Accordingly, we sustain the disallowance of $896,159 in FFP claimed
for these facilities during quarters ending September 30, 1977 through
June 30, 1978.
D. California
Docket No. 80-184-CA-HC involves a disallowance of FFP claimed by the
State of California for services provided to persons under 65 years of
age in five SNFs during the quarters ended March 31, 1975, through
September 30, 1977. Based on an HHS Audit Agency report, /33/ the
Agency determined that the five facilities were IMDs.
(47) In classifying the facilities as IMDs, the Agency primarily
relied on four factors: participation by the facilities in a special
State program for the mentally disordered; licensing status; program
and admisson factors, as well as some general arguments the State makes.
We conclude that the Agency has presented substantial evidence to show
that these California SNFs were IMDs.
1. The Special Disabilities Services Program
In September 1974, the State of California authorized funding for a
Special Disabilities Services (SDS) Program, through which a
supplemental payment could be made to participating SNFs and ICFs for
services to persons who were developmentally disabled. California
Administrative Code, Title 22, Division 5. In order for a facility to
be certified for the mentally disordered component of the SDS Program,
at least 30 of its patients had to be certified by the local mental
health director as having a primary or secondary diagnosis of a mental
disorder. CA Audit Report, p. 12. Parrticipation in the SDS Program
was used by Agency auditors as an initial screening device in choosing
the five facilities in question here.
California does not deny that each of the facilities participated in
the program, but attempted to show that it was irrelevant to IMD status.
Through testimony, California implied that the fact of participation
might be misleading since the SDS Program served the developmentally
disabled and substance abusers, as well as the mentally disordered.
Tr., pp. 258-262. As part of the administrative record on which it
based its decision (Agency Record), however, the Agency has submitted
materials which show that each of these facilities qualified for a
component of the program called "mentally disordered rehabilitation,"
and that some of the facilities had more eligible patients than the
required number. /34/ Agency Recod, Tab 16. The State has not
challenged the authenticity of these documents. These materials also
show that both the facilities and the State referred to the program as a
"special treatment" program. This undermines the State's position
that
the rehabilitation services provided should not be considered
"treatment" within the meaning of the IMD regulatory definition.
(48) b. Licensing Status
Another factor relied upon by the Agency auditors in determining IMD
status was that the facilities were licensed by the State as skilled
nursing facilities, "long-term mental." A California witness testified
that this license classification (referred to as an "L-facility")
was
developed for "wandering geriatrics," and some people therefore thought
that "L" referred to permission to have a locked door.Tr., pp. 225-226.
Yet, the relevant licenses clearly say "long-term mental," and indicate
for some facilities that the total bed capacity had that classification
and for others that at least half the capacity did. Agency Record, Tab
16.
2. Program and Admission Policies
For their conclusion that the facilities were established and
maintained primarily for the care and treatment of persons with mental
diseases, the auditors also relied heavily on the facilities' program
and admisson policies. Some of the most significant statements in these
materials, included in the Agency Record at Tab 16, are the following:
Facility A:
This facility was self-described as having cared for "over 1000
mentally disabled residents' during its 4 and 1/2 years of experience.
Its program was described as "a practical approach at teaching/
reteaching the skills of living required for the severely mentally
disordered." Patient profiles included "treatment" as the "functional
level" which "includes the majority of residents." The program
was
described as a standard one, varying only "according to the specific
patient's treatment plan." A Certification and Transmittal form for
Medicaid eligibility of the facility identified as the "certification
specialization and/or services" of the facility "mentally disordered/
rehabilitation."
Facility B:
Its own Program Philosophy described this facility as a "120 bed
facility comprised primarily of mentally ill patients." An Information
Booklet describing participation of the facility in the SDS Program
stated that the extra funding "is expended strictly on additional
psychiatric and recreational staff members . . . ." Under "Admissions
Policies" is the following: "Only patients in need of 24 hour skilled
nursing services for the management and observation of mental illness or
other (49) related behavioral disorders shall be admitted . . . .
Patients with only physical illnesses shall not be admitted."
Facility C:
The admission policy of this facility was described as an intent "to
admit patients who exhibited behavior compatible with the State's
Special Treatment Program." The philosophy of the facility was "to
care
for those individuals who have a mental disorder requiring long-term
care in a highly structured, secure environment," and the basic program
was described as "utilization of behavioral intervention and
rehabilitation techniques."
Facility D:
Facility materials referred to "residents of our long-term
psychiatric facilities." Program philosophy was described as "employment
of all the latest, medically approved psycho-social treatment
modalities." The facility also had "mentally disordered/ rehabilitation"
as a certification status.
Facility E:
The admission policy of this facility was to exclude "patients that
do not have a primary psychiatric diagnosis." The treatment program was
described as "planned for the chronically mentally ill, not the mentally
retarded."
sCalifornia attacked the reliability of this evidence through
testimony that it would be to a facility's financial advantage to
advertise as a facility specializing in the mentally ill so as to
qualify for the SDS Program. Tr., p. 223. We are not inclined on this
basis, however, to conclude that these facilities misrepresented
themselves, particularly since some of their statements were not purely
advertising but related to certification for State programs.
3. Patients' Diagnoses
The points on which California did present some persuasive evidence
mostly went to the issue of whether the auditors' findings were reliable
with respect to diagnoses of the patients.
(50) The auditors described their method for determining the
characteristics of the patient populations of the five SNFs as follows:
We randomly selected 210 Medicaid claims for each of the five SNFs,
or 1,050 sample items in total, for the periods the SNFs participated in
the (SDS) Program until September 30, 1977. We then made on-site visits
to the five SNFs and reviewed patients' medical records for the periods
covered by the paid claims. We obtained the patients' primary and
secondary diagnoses and noted if the patients were being treated for
physical illnesses or mental diseases. We categorized the patients'
diagnoses as mental diseased based on those listed under the heading of
Mental Disorders in the (ICDA).
Our review showed that 1,005, or 95.7 percent, of the claims were for
patients with mental diseases and 45, or 4.3 percent, of the claims were
for patients who had physical illnesses as their primary diagnoses.
CA Audit Report, pp. 15-16.
The auditors' charts show that the auditors included as primary
diagnoses of mental diseases the categories alcoholism, schizophrenia,
chronic/organic brain syndrome, senility, psychosis, and "other mental
diseases." CA Audit Report, pp. 16-17.
California attacks these findings on a number of different grounds,
challenging the reliability of the findings as a whole, the specific
inclusion of certain diagnoses as mental, and the use of medical
records.
California's position is most fully elaborated in a report prepared
by a clinical psychologist who is a Senior Mental Health Consultant for
the State (Consultant). /35/ In her report and testimony at the hearing,
this Consultant assessed the results of a study, performed at the
request of the State, designed to provide accurate (51) diagnostic
characterization of the patients in one of the five SNFs audited
(Diagnostic Study). /36/
The Consultant challenges the auditors' findings that 95.7% of the
sample claims were for patients with mental diseases and only 4.3% were
for patients with a primary diagnosis of physical illness. She states:
"These proportions strikingly differ from those which would be
anticipated on the basis of well-documented, methodologically sound
studies of the extent of primary physical diseases in patient
populations manifesting mental symptoms." Consultant's Report, p. 47.
For this proposition, the Consultant relies on the Diagnostic Study
mentioned above and on a "landmark study" which showed a 46% error
rate
of undiagnosed primary physical disorders in a group of 100 State
hospital psychiatric admissions. /37/
While California presents convincing evidence to the effect that
misdiagnosis of patients with mental sympotoms is prevalent, we are not
persuaded that we should therefore apply the 46% error rate to the
auditors' findings, as California suggests.
Even though the Agency may have been relying on diagnoses in
patients' records which were incorrect, to the extent that these
diagnoses were in the records, they are evidence as to the "overall
character" of the facilities. The facilities were admitting and
treating the patients using those diagnoses. The Agency cannot be
expected to perform for each patient the extensive diagnostic analysis
which California's own evidence shows is necessary to properly determine
wherther there is a physical cause of psychiatric symptoms. Moreover,
the "landmark study" on which Califronia partially bases its thesis
that
many of these SNF patients were misdiagnosed is a study of patients in a
State mental hospital. Therefore, misdiagnosis is hardly a basis for
distinguishing these SNFs from recognized IMDs.
Califronia's Consultant also presents a detailed anaylsis to show
that the auditors did not properly apply the ICDA in classifying
patients. The most cogent evidence of this which California presents
relates to the categories of senility, alcoholism, and chronic/organic
brain syndrome. The State presented expert (52) testimony by a
psychiatrist with the Calfornia Department of Mental Health
(Psychiatrist), who pointed out the difficulties associated with use of
the ICDA. He testified that "senility" is not a code in the mental
discorders chapter of the ICDA. Tr., p. 183; see also, Consultant's
Report, p. 50. California also questioned the aduitors' use of the term
"alcoholism." According to California's Consultant, there is a code
in
the ICDA for "alcoholism," meaning either episodic or habitual excessive
drinking, as well as a code in the mental disorders chapter for
"alcoholic psychoses," which come within the organic mental disorders.
Consultant's Report, p. 50. With respect to the category
"chronic/organic brain syndrome" (which the Psychiatrist describes
as a
constellation of symptoms which raises the suspicion that something has
gone wrong with the brian itself, Tr. p. 203), California states that
the ICDA guidelines require that patients with any organic mental
disorder also be coded for the causal or associated physical disease.
Consultant's Report, pp. 51-52; Tr. pp. 184, 190. Thus, California
conculdes that the auditors misused the ICDA.
The Agency did not present any evidence which would show that
senility should have been included as a mental disease, although
testimony by California's Psychiatrist suggests that this would not
always be inappropriate. Tr., p. 183. The Agency also did not fully
expalin its rationale for inclusion of alcoholism and chronic/organic
brain syndrome here. But see, CT Review Report, Attachment F.
The record shows that the State's underlying factual premises have
some validity. We do not agree with the State, however, as to the
conculsions to be drawn from those premises. Califronia acknowledges
that many persons whose diagnoses were senility, alcoholism, or organic
brain syndrome were in State mental hospitals in the early sixties. Tr.
pp. 116-117; see also, Tr. p. 193. Moreover, even if we were to
exclude patients with these primary diagnoses on the grounds that
including them was inconsistent with proper use of the ICDA, the
auditors' sample still provides a basis for concluding that over 50% of
the patients had mental diseases. Out of the 210 sample claims for each
facility, patients placed by the auditors in the categories of
schizophrenia, psychosis, and "other mental" total well over 50% of
the
claims. Excluding the "other mental" category as well would reduce
the
percentage of patients with primary mental disorders below 50% for one
of the facilities only (Facility B). CA Audit Report, p. 17.
We consider it most important, however, that any defects in the
auditors' findings here must be viewed in the context of other strong
evidence that the facilities had the requisite "overall character."
In
particular, the facilities' own program and admission policies discussed
above support the finding that the facilities were primarily engaged in
treating persons with mental diseases.
(53) 4. Other Arguments by California
The State also attempts to show the unreliability of medical records
for determining diagnosis and the need for exercise of medical judgment
where there is more than one diagnosis. As we have previously
mentioned, we think the Agency was reasonable in relying on medical
records under these circumstances. Also, while the auditors here
certainly do not have the credibility that the Connecticut review team
had, the Agency has stated without contradiction that the auditors were
advised by a physician-consultant whenever necessary and, in cases of
doubt, the audit team would confer with the medical staff of the
facility. Cons. Br., p. 9.
We also conclude that the State's remaining arguments do not have
merit. The State points out that private-pay patients were not included
in the auditors' sample, but has presented nothing to lead us to
conclude that the characteristics of these patients would be
significantly different from those of the Medicaid patients. This is
highly unlikely in view of the facilities' program and admission
policies. The State also argued at one point that the auditors
presupposed their result and did not do a random sample of all the
facilities participating in the SDS Program. The Agency responded that
the audit was performed in accordance with generally accepted
principles, that the auditors did not have a "preconceived purpose,"
and
that there was no need for a random sample of all participating SNFs
since the disallowance relates to only five of them. Agency Response,
Docket No. 80-184-CA-HC, pp. 27-28. California did not press its
arguments on these points during the later stages of the proceedings,
and we do not find them convincing.
5. Conclusion in California
California has shown that there might have been some defects in the
audit here, notably the inclusion of patients with senility. The
evidence as a whole, however, convincingly demonstrates that these five
facilities had the "overall character" of being IMDs.
Accordingly, we sustain the disallowance of $2,329,401 claimed by the
State of California for services provided by these facilities in the
quarters ending March 31, 1975 through September 30, 1977.
(54) VI. General Conclusion
For the reasons stated above, we uphold the Agency disallowances in
all five appeals considered jointly here. /1/ The relevant House Report
states: "Your committee does not favor Federal participation in
assistance to persons residing in public or private institutions for
mental illness . . ., since the states have generally provided for
medical care of such cases." H.R.Rep. 1300, 81st, Cong., 1st Sess. 42
(1949). (Emphasis added.) /2/ These provisions were originally
proposed as amendments to Titles I (Old-Age Assistance and Medical
Assistance for the Aged) and XVI of the Act. Identical provisions were
incorporated into Title XIX at Sections 1902( a)(20) and (21). The
provisions were promoted on the Senate floor by Senator Carlson who
spoke of "great strides in the field of mental disease," stating that
he
was "convinced that the time has come that these diseases should no
longer be set apart from others . . . ." He also referred to the need
for greater flexibility in care of the aged than in other age groups,
since it is difficult to detemine whether an elderly person is mentally
ill or merely senile, and "it may be appropriate for him at one time to
be in a mental institution and at another to be in a nursing home, his
own home, or in some other arrangement." 110 Cong. Rec. 21349 (1964).
/3/ Similar language appears in the Senate Report. S. Rep. No. 404,
Part I, 89th Cong., 1st Sess. 144-47 (1965). See also, Statement of
Senator Ribicoff, 111 Cong. Rec. 15801 (1965). /4/ This section
further provides, "With respect to services furnished to individuals
under age 65, the term 'intermediate care facility' shall not include,
except as provided in subsection (d), and public institution or distinct
part thereof for mental diseases or defects." Subsection (d) provides
that, under certain conditions, ICF services may include services in "a
public institution (or distinct part thereof) for the mentally retarded
or persons with related conditions . . . ." /5/ A Finance
Committee amendment which would have also authorized funding of
demonstration projects to ddetermine the "potential benefits of
extending medicaid coverage to mentally ill persons between the ages of
21 and 65," S. Rep. No. 1230, 92d Cong., 2d Sess. 57 (1972), was dropped
in conference, H.R. Rep. No. 65, 92d Cong., 2d Sess. 65 (1972). /6/ See
also, Post-Hearing Reply Brief of State of California (CA Reply
Br.), p. 2 (relating the exclusion to "the traditional state mental
hospital or the functional equivalent thereof"). /7/ In that
case, the Court related the IMD exclusion to Congress' assumption that
the care of persons in public mental institutions was properly a
responsibility of the States, citing for this conclusion the legislative
history reference to "long-term care in such hospitals . . . ." 450
U.S. at 237, n. 19. The States also rely on the following statement in
the dissent in Schweiker: "The residual exclusion of large state
institutions for the mentally ill from federal financial assistance
rests on two related principles: States traditionally have assumed the
burdens of administering this form of care, and the federal government
has long distrusted the economic and therapeutic efficiency of large
mental institutions. See S. Rep. No. 404, 98th Cong., 1st Sess., 20
(1965), reprinted in 1965 U.S. Code Cong. & Admin. News 1943, 2084."
450
U.S. at 242. /8/ Legion v Richardson, 354 F. Supp. 456
(S.D.N.Y.), aff'd sub nom., Legion v Weinberger, 414 U.S. 1058 (1973),
and Kantrowitz v. Weinberger, 388 F. Supp. 1127, 1130 (D.D.C. 1974),
aff'd 530 F.2d 1034 (D.C.Cir), cert. denied, 429 U.S. 819 (1976).
/9/ The legislative history refers to intermediate care as "for persons
with health-related conditions who require care beyond residential care
or boarding home care, and who, in the absence of intermediate care
would require placement in a skilled nursing home or mental hospital."
Statement of Senator Bellmon, 117 Cong. Rec. 44720 (1971). /10/
In section 1905(a), following paragraph (17), the exclusion for a
patient in an IMD appears after a general exclusion for "an inmate of a
public institution (except as a patient in a medical institution)."
Also, in establishing conditions for States wishing to include coverage
of patients 65 or over in IMDs, the statute requires different State
plan provisions for such assistance "in institutions for mental
diseases," Section 1903(a)(20), and for such assistance "in public
institutions for mental diseases," Section 1902(a)(21). See also,, the
legislative history cited in footnote 1 above. /11/ Also, the
use of the phrase "in an institution for mental diseases" with respect
to the various levels of services in Section 1905(a) does not
necessarily imply that the services are provided by a facility that is
part of a larger institution. SNF services, for example, are provided
in an SNF and therefore would be in an institution whether the SNF is an
institution itself or a distinct part of a larger institution.
/12/ To a certain extent, the States' arguments based on these
provisions have the same flaw which the States identify with respect to
some Agency arguments on the Sections. See, CT Reply Br., p. 3, n. 1.
Both parties refer to the conditions for coverage as though those
conditions determined the scope of the exclusion. /13/ The States were
given a limited time period in which to bring their institutions up to
these standards, but in the meanwhile had to meet other standards,
including standards related to safety, to staffing requirements, and to
an active program of treatment. See, Handbook of Public Assistance
Administration (HPA), Supplement D, Medical Assistance Programs, Section
D-5141.14.d.(2) (1966); 34 Fed. Reg. 9784, June 24, 1969 (extending
deadline for compliance to July 1, 1970). /14/ We also do not
place any significance on the use of the term "public institution for
mental diseases or defects" in Section 1905(c) of the Act with reference
to ICFs. See footnote 4 above. That provision must be read in light of
the exception for ICF services in public institutions for the mentally
retarded in Section 1905(d), immediately following this language.
/15/ We also note that the statement which provides the strongest
support for the States' position is quoted from the dissent rather than
the majority opinion in Schweiker. /16/ We do not here adopt the
Agency's unqualified statement, expressed at the hearing, that the
exclusion is meant to continue the States' "traditional financial
responsibility for the mentally ill." Tr., p. 21. The exclusion is
directed at the States' responsibility for individuals in a certain type
of institution. The regulations, in using the term "overall character,"
reflect this emphasis. The Agency does not deny that Medicaid funding
is available for patients with mental diseases placed in a "general"
SNF
or ICF. Moreover, prohibitions on assistance to individuals with a
diagnosis of psychosis who were in general medical institutions were
deleted in 1965. /17/ Sections 249.10 and 248.60 were
redesignated, 42 Fed. Reg. 52827, September 30, 1977, and then
recodified, 43 Fed. Reg. 45176, September 28, 1978. /18/
California distinguishes nursing home services from "clinical treatment"
performed by recognized IMD's associating the term "clinical" with
treatment provided by psychiatrists and clinical psychologists. CA
Reply Br., p. 3., n. 2. The Director of the Illinois Department of
Mental Health referred to the distinguishing factor as "psychiatric
intervention." Tr., pp. 287, 299. /19/ "International
Classificatin of Diseases, Adapted for Use in the United States," Eighth
Revision, Public Health Services Publication Number 1693. /20/
In Pennhurst, the issue was whether a statutory statement of patients'
rights imposed an affirmative duty on States to expend their own funds
as a condition for receiving Federal funding. Here, we are dealing with
the scope of an exclusion of funding, where the States' interest in
clear notice must be weighed against the Federal government's interest
in not funding services Congress has refused to cover. /21/
Congress apparently considered ICFs and SNFs to be institutions. The
statutory definition of an ICF at Section 1905(c) refers to persons
requiring care which could be made available only through "institutional
facilities," and to "institutional services" deemed appropriate
in
certain sanatoriums. An SNF is defined at Section 1861(j) as "an
institution (or a distinct part of an institution) . . . ." /22/ While
the States have presented some evidence that SNFs and ICFs do not
perform a full range of diagnostic services, the record does not fully
support a conclusion that the facilities here did not engage in some
diagnostic functions. In fact, a statement by a psychiatrist from the
California Department of Mental Health who testified at the hearing was
to the effect that he would not expect an emphasis on diagnosis in a
SNF. Tr., p. 204. This implies that he would expect some diagnosis to
occur. /23/ The States' position that these nursing homes were
providing a level of services which does not constitute treatment of
patients also does not comport with numerous statutory and regulatory
uses of the terms. For example, Section 1905(c) of the Act describes
ICF services as those for persons who do not require the "degree of care
and treatment" provided by an SNF.Also, the original definition of
skilled nursing home services included reference to homes for "care and
treatment" of patients. HPA D-5141.4. /24/ On February 5, 1971,
the Department of Health Education, and Welfare (HEW, now HHS) adopted
notice and comment rulemaking for matters relating to "public property,
loans, grants, benefits or contract," otherwise exempted under the APA.
36 Fed. Reg. 2536. /25/ In support of this, the Agency cites the
Attorney General's Manual on the Administrative Procedure Act (1947) at
22 for the statement that "interpretations need be published only if
they are formulated and adopted by the agency for the guidance of the
public. The Act leaves each agency free to determine for itself the
desirability of formulating policy statements for the guidance of the
public." Cons. Br., p. 42; see also, Tr., p. 18. We note that the
version of 5. U.S. C. Sec. 552 (a)(1) quoted by the Agency appears to
be an earlier version, prior to the 1967 amendments, Pub. L. 90-23. The
Agency version contains the phrase "for the guidance of the public"
as a
description of covered interpretations, whereas the current version
places the phrase in the introductory language, requiring publication
"for the guidance of the public." In view of our conclusion below,
we do
not address the significance of this difference. /26/ The FSIIS
series documents indicate that the regional offices were to involve the
States in addressing the problem of whether SNFs and ICFs were IMDs.
There is also other evidence that some of the States knew of this
application of the regulation. See, e.g., Letter of October 4, 1971
from Associate Regional Commissioner, SRS, to Director CA Depatment of
Health Care Services (relating the IMD exclusion to services provided
"by nursing homes or in hospitals"), Agency Admin. Record, Tab 1;
Tr.,
p. 129 (Testimony of Connecticut Public Assistance Consultant that
"around 1976" her Department was aware of the position that ICFs and
SNFs could be IMDs); Letter of December 29, 1977, from Assistant
Commissioner, Minnesota Department of Public Welfare, Attachment 6 to MN
Audit Report. /27/ See, e.g., CA Application for Review, p. 9;
CT Br., p. 42; Tr., p. 93 (Criterion #1); CA Application for Review,
P. 9; CT Br., p. 43; Tr. p. 94 (Criterion #2); CA Application for
Review, p. 10; CT Br., p. 47 (Criterion #4); CA Application for Review,
p. 10; CT Br. p. 48 (Criterion #5); CA Application for Review, p. 10;
CT Br., p. 49; Tr., p. 98 (Criterion #6); CA Application for Review,
p. 10; CT Br., p. 49 (Criterion #7); CA Application for Review, p. 10;
CT Br., p. 50 (Criterion #8). /28/ "Review of Costs Claimed by the
Connecticut Department of Income Maintenance for Services
Provided to Title XIX Recipients Residing at Middletown Haven Rest Home,
Middletown, Connecticut, for the period January 1, 1977 through
September 30, 1979," FM Control No. 3-8001, May 1980 (CT Review
Report), submitted with Agency response to the appeal. /29/ The
77% here included patients with diagnoses of alcoholism or organic brain
syndrome where the record indicated that "the psychiatric causes,
complications or sequelae of these disorders were a significant part of
the patients ongoing need for ICF placement." CT Review Report,
Attachment F, p. 2. The psychiatrist from the review team stated that
the conclusion that a majority of the patients in the facility were
mentally ill would still be valid, even excluding these categories. He
further explained that the reason for including them was "their
appearance as major mental disorders in ICD-8, DSM II, and all major
textbooks of psychiatry, and the fact that the State of Connecticut
treats this class of mentally ill in its state mental hospitals... ."
Attachment F, p. 2. /30/ See "Report on Review of Institutions
for Mental Diseases under the Medicaid Program," March 5, 1979 (IL
Review Report). /31/ The Illinois, Minnesota, and California
reviews examined only records of Medicaid patients, and, therefore, the
percentages found were percentages of the total Medicaid population, not
the total patient population, for each facility. The States have
presented nothing, however, which would lead us to conclude that the
Medicaid population was not representative of the total population. The
assumption that it was appears to be reasonable. /32/ "Review on Review
of Federal Financial Participation under Medicaid in Payments
for Care in Institutions for Mental Diseases," November 8, 1978 (MN
Review Report). /33/ "Audit of Five Selected Skilled Nursing
Facilities that Participated in California's Special Disabilities
Services Program for the Mentally Disordered, February 1, 1975, through
September 30, 1977," ACN 00150-09 (CA Audit Report), Exhibit A to CA
Supp. to App. /34/ We do not think it significant that all the
patients were not eligible since the materials indicate that
ineligibility may relate to lack of rehabilitation potential rather than
to mental status. /35/ "Assessment of the Diagnostic Composition
of the Patient Population in a SNF Deemed by Federal Auditors To Be an
IMD: Further Analysis of Results and Implications for Interpreting the
Audit Approach and Findings," Exhibit C to CA Supp. to App.
(Consultant's Report). /36/ "Neurobehavioral Evaluation and
Diagnostic Study of 102 patients in an 'L' Facility", prepared by
Neurobehavioral Foundation, Exhibit B to CA Supp. to App. /37/
"Physical Illness Manifesting in Psychiatric Disease," Hall et al.,
reprinted in Consultant's Report.
OCTOBER 22, 1983