GAB Decision 240
December 18, 1981 National Capital Medical Foundation, Inc.; Docket No.
81-104 Ford, Cecilia; Settle, Norval Teitz, Alexander
Introduction
The National Capital Medical Foundation, Inc. (NCMF) appealed the
Health Care Financing Administration's (Agency) decision to permit its
grant, No. 97-P-99593, to expire after an extension of the grant to
November 30, 1981. The decision provided that the grant would be
further extended, if necessary, to permit this Board to make a final
decision. The Agency based its decision on the number of points NCMF
was awarded on various criteria in an evaluation of NCMF's performance
conducted by the Agency. NCMF's score of 1083 on that evaluation was 22
points short of the 1105 which the Agency required.
In its appeal letter, dated July 17, 1981, NCMF requested a hearing
pursuant to Sec. 1152(d)(2) of the Social Security Act (Act). A hearing
before the Presiding Board Member was held on September 23, 24 and 25,
1981. /1/ This decision is based on the Record in this case, which
includes the written submissions of the parties and the evidence
presented at the hearing (as recorded in the transcript of the hearing).
/2/ Based on the analysis below, we conclude that the Agency's decision
should be reversed.
This decision is divided into two sections. The first provides
general background information on the Professional Standards Review
Organization (PSRO) program and the nationwide evaluation of PSROs which
led to this dispute. The second section sets out the positions of the
parties regarding (2) criterion II.B.2(c) and a discussion of the
Board's determination that NCMF should receive the 60 points available
for that criterion. /3/
Having determined that NCMF should have passed the evaluation based
on that criterion, the Board will not issue any findings on whether NCMF
should receive additional points for the other contested criteria. And,
although NCMF raised several substantive and procedural legal issues in
its appeal, NCMF said that it did not wish to pursue those issues if its
grant were reinstated based on a recalculation of its evaluation score.
(See Appeal Brief, p. 2.) Therefore, this decision will not address any
of those matters.
I. General Background
A. Information on the PSRO Program
The 1972 Amendments to the Social Security Act created the PSRO
program in order to involve local practicing physicians in the review
and evaluation of health care services covered under Medicare, Medicaid,
and the Maternal and Child Health programs. (Title XI, Part B, of the
Act.) The PSROs are physician-controlled organizations responsible in
specifically designated geographic areas for assuring that the health
care paid for under these programs is medically necessary and consistent
with professionally recognized standards of care. The PSROs also review
whether the health services are provided at the level of care which is
most economical, consistent with the patient's medical care needs. The
major focus of the PSRO program has been on review of inpatient hospital
services. While PSROs are also charged with review responsibilities in
other health care settings, budget restrictions have limited the PSROs'
ability to review outside the hospital setting.
PSROs are responsible for developing and operating a quality
assurance system based on peer review of the quality and efficiency of
services and continuing education. In hospitals, the peer review system
must include: concurrent review, which is review focusing on the
necessity (3) and appropriateness of inpatient hospital services
performed while the patient is in the hospital; medical care evaluation
studies, which are assessments, performed retrospectively, of the
quality or nature of the utilization of health care services and
assessments of the PSRO's impact where corrective action is taken; and
profile analysis, which is the analysis of patient care data to identify
and consider patterns of health care services. (See, e.g., PSRO Program
Manual, Chapter VII, p. 1, March 15, 1974.)
The Act, and regulations governing the program, provide that a PSRO
is "conditionally designated" for a period of time, and that there
will
be an agreement between the Secretary and the PSRO "fully designating"
the PSRO after it has satisfactorily performed PSRO functions during its
trial period as a conditional PSRO. After a maximum of six years, a
conditional PSRO must be fully designated or it can no longer
participate in the program. (Section 1154(b) and (c) of the Act.) A
fully designated PSRO may be terminated only after an opportunity for a
hearing, upon a finding by the Secretary that the PSRO "is not
substantially complying with or effectively carrying out the provisions
of such agreement." (Section 1152(d) of the Act.) NCMF is a fully
designated PSRO.
B. The Nationwide Evaluation PSROs
The Agency has stated that it implemented a nationwide evaluation of
the performance of PSROs in response to proposals by the President, in
February and March, 1981, to phase out the PSRO program within three
years, and to reduce funding for fiscal year 1981. In June, 1981,
Congress approved a rescission of $28,701,000 from the PSRO program.
(Pub. L. No. 97-12, Title I, Chapter VIII; 94 Stat. 3166.) The Agency
maintained that the legislative history of the rescission bill indicated
that the Agency was to accomplish the rescission by terminating
ineffective PSROs. (Agency Response, pp. 2-4.)
The Agency stated that, in order to identify ineffective PSROs, it
developed evaluation criteria to measure performance. It further
asserted:
(the) criteria were based on program and priorities in effect at
least two years prior to the evaluation, and in particular the criteria
used to convert PSROs from conditional to fully designated status,
policy issuances, and previous performance assessment protocols. The
major difference from the criteria previously used to assess PSROs was
the increased emphasis placed on cost effectiveness examined in Section
I and the PSRO's impact on the utilization and quality of health care
services examined in Section III.
(Agency Response, pp. 4-5.)
(4) The proposed criteria were sent to all PSROs for review and
comment on March 20, 1981. After considering and implementing some of
the suggestions, the Agency distributed the final version to all PSROs
on April 15, 1981. The criteria were not promulgated as a regulation
nor published in the Federal Register.
The final version of the criteria was also sent to the Agency's
Regional Offices to be completed for each PSRO. The Agency stated that
to insure uniformity and objectivity the "Regional Offices were
instructed that no consideration was to be given to factors not included
in the criteria." (Agency Response, p. 6.)
C. The Format of the Evaluation Criteria and the Scores Needed To
Pass
The evaluation was composed of criteria which measured three areas of
performance: Part I -- organization and program mangement; Part II --
performance of review: compliance and process; and Part III --
performance of review: impact/potential impact. Each criterion was
assigned a point value which the Agency awarded to a PSRO if it "met"
the criterion or, with some criteria, the points were awarded based on
the PSRO's level of performance, as described in the criteria. In order
to pass the evaluation, a PSRO needed a total score of 1105 (of the 2350
available points) and passing scores on two of the three parts.
Part I evaluated organization and management by examining the
following areas: commitment of the PSRO Board and committees;
administration and financial mangement; cost efficiency and relations
with the State. A PSRO needed 190 of the 300 available points to pass
this part. Part II examined performance of PSRO review based on
compliance with established review processes including the acute care
review process, special actions taken to address identified problems
such as the modification of a review system and adverse actions, medical
care evaluation studies, the adequacy of the PSRO's data system, and the
use of profiles. A PSRO needed 400 of the 850 available points to pass
this part. Part III evaluated PSROs on the basis of their impact and
potential impact on utilization objectives and the quality of health
care. A PSRO needed 515 of the 1200 available points to pass this part.
(See Agency Response, pp. 6-7.)
II. The Evaluation of NCMF
A. Summary of the Scores Awarded NCMF
The Agency awarded NCMF a base score of 1083 points, 22 short of the
1105 needed to pass the evaluation. NCMF passed Part I with 203 points
and Part II with 595 points. NCMF did not pass Part III, as its score
of 285 was 230 short of the 515 needed to pass that part.
(5) In addition, NCMF received 175 bonus points for performing
"Additional Review Activities" and documenting significant impact
in
those activities; and it received the maximum 100 bonus points
available for "Special Contributions for the Art of PSRO Review."
The
additional review activities included long term care review, review of
physician services, review of ancillary services, and review of home
health agency services. The special contributions were in the form of
"special studies or review activities which resulted in advances in the
state of art of quality assurance," specifically, for being "a leader
in
the ambulatory surgery area." (Evaluation Criteria, p. 42.) The bonus
points were not included in the PSRO's base score of 1083 for the
purpose of determining whether it passed the evaluation; they were (to
be) used only for the purpose of ranking PSROs nationwide.
B. Discussion of Criterion II.B.2(c)
Criterion II.B.2(c) was worth 60 points, and read as follows: /4/
PSRO has documentation of resolution of problem(s). Worked with
institution(s) and/or practitioner(s) thereby eliminating the need to
proceed with sanction recommendation.
NCMF's Position
NCMF submitted three examples in support of its claim that NCMF
resolved problems and worked with institutions and practitioners,
thereby eliminating the need to proceed with sanction recommendations.
The first involved activities relating to doctors who admitted
patients into hospitals to perform surgery that should have been done on
an out-patient basis. NCMF said that the medical community generally
agreed that there were "51 surgical procedures which should be done on
an ambulatory basis unless specific reasons for hospital admissions are
documented." (Appeal Brief, Appendix 13.) NCMF adopted a position
statement on ambulatory surgery and notified physicians practicing in
the District of Columbia of this policy. NCMF then monitored admissions
for these surgical procedures and sent letters to physicians who did not
conform to the policy. The letters informed the physicians that (6)
"continued inappropriate admissions will raise the need for
pre-admission certification of these procedures." (Id.) NCMF said of its
activities:
52 letters were sent to physicians concerning inpatient surgery which
should have been provided in an ambulatory setting rather than an
inpatient setting. Twenty six physicians received one warning letter,
covering a total of 36 procedures, 7 physicians received two warning
letters covering a total of 17 procedures and four physicians received
three warning letters covering a total of 28 procedures. As a result of
these letters, the physicians involved changed from use of inpatient to
ambulatory facilities.
(Appeal Brief, p. 18.)
The second example involved developing a Memorandum of Understanding
with Greater Southeast Community Hospital. NCMF explained that it
negotiated with the Hospital; that the discussions culminated in a
telegram notifying the Hospital that its authority to conduct review
activities on behalf of NCMF would be withdrawn unless the agreement was
signed; and that the agreement was signed the next day. (Appeal Brief,
pp. 16, 19.)
The third example involved a physician who admitted patients into the
hospital for taste and smell dysfunction tests. NCMF maintained that,
after NCMF action, the hospital involved retroactively denied some of
the physician's admissions and established guidelines for pre-admission
certification. (Appeal Brief, pp. 16-17, 19, and Appendix 15.)
The Agency's Position
The Agency did not dispute that NCMF performed these activities (Tr.
I, p. 75), but maintained that "a PSRO cannot meet the standards of
criterion II.B.2(c) unless it has first issued a 'sanction
recommendation.'" /5/
(7) (Post-hearing Brief, p. 10.) The Agency stated that to meet this
criterion the PSRO had to have sent a "warning letter" which included
a
reference to possible fines or exclusion from the program. The Agency
said that this PSRO had "not issued any warning letters to hospitals
that could be classified as 'sanction recommendations' within the
meaning of the Act, regulations, PSRO manual, and case law." (Id.)
The Agency's project officer testified at the hearing that he marked
the criterion "not met" because:
(it) was the HCFA position that in order to be credited with a met on
that item (II.B.2(c)), there must have been an adequate warning letter
containing the language . . . as described in the prior criteria. So in
order to meet that (II.B.2(c)), you would have had to have a met on the
prior item (II.B.2(b)).
(Tr. II, p. 65.)
The Chief of the Operations Planning and Policy Branch of the
Agency's PSRO program also testified regarding the criterion. He said
the reason for including sanction-related criteria in the evaluation
was:
the view of HCFA that PSROs which had actually warned a provider or
practitioner that the sanction of exclusion or fine would occur were a
high priority for continuation . . . .
(Tr. II, p. 72.) He explained further:
(the) test here is the willingness of the PSRO to use all of the
authorities at its disposal. The view of HCFA is that some PSROs are
not willing to use all available means to accomplish the goals of the
program, and, therefore are ineffective or less likely to be effective.
(Tr. II, p. 73.)
Discussion of Whether NCMF Met Criterion II.B.2(c)
The Board is not persuaded that a criterion which required the PSRO
to "(work) with institution(s) and/or practioner(s) thereby eliminating
the need to proceed with sanction recommendations," can reasonably be
interpreted to require that the PSRO actually have issued a statutory
sanction recommendation.
The Act and the Program Manual state that the PSRO should attempt to
resolve problems in a voluntary manner before recommending sanctions.
(8) The Program Manual also states that:
(the) legislative history of Sec. 1160 indicates that the PSRO in its
operation is expected to use voluntary, educational methods, and/or
denial of payment as the initial and primary methods for correction of
behavior which is inconsistent with the obligations of persons under
this Title.
(Chaper XX, Sec. 2005.2, p. 5, October 21, 1977.)
In addition, the Chief of Program Operations Planning and Policy for
the Agency's PSRO program admitted that sanction is "neither the common
nor preferred method" of dealing with problems, and agreed that sanction
was a "method of last resort." (Tr. II, p. 73.)
The Board is also not persuaded that in order to receive points for
this criterion the PSRO had to issue a letter warning of the potential
sanctions available to the Secretary under the Act. Although the
regulations and Program Manual outline a procedure for dealing with
potential sanctions which include the use of a warning letter, criterion
II.B.2(c) did not say that such a process must be used to satisfy the
criterion. This criterion on its face makes no mention of that
requirement, and in addition, a different criterion -- II.B.2(b) --
deals specifically with whether a PSRO has issued warning letters.
The Agency argued essentially that this criterion means more than it
says. But the criterion simply does not say the substantial things the
Agency would add to it by interpretation. The criterion does not
specify the methods that a PSRO must have used to resolve problems. It
would require an attenuated and unreasonable interpretation to say that
one must infer from the term "worked with" in the criterion that NCMF
could only receive points if it had issued written threats of statutory
sanctions before it "worked with" in an institution or practitioner.
Since the criterion is unambiguous on its face, we do not need to test
it with alternative interpretations.
The Act provides that sanctions can be taken against a practioner if
the practitioner violates his obligations under Sec. 1160 of the Act.
Section 1160(a)(2) specifically directs that practitioners not authorize
a patient to be admitted as an inpatient unless it is necessary for the
proper care of the patient. Two of the examples NCMF submitted fit into
that category. NCMF could have recommended sanctions against the
doctors who unnecessarily admitted patients for surgery or taste and
smell dysfunction tests, if they had continued that practice. The
Agency did not contest NCMF's claim that the surgical procedures or
tests at issue were inappropriate for inpatient care, or that NCMF
satisfactorily resolved the problems. (See e.g., Tr. 1, p. 75.)
(9) The Board therefore concludes that NCMF is entitled to points
under criterion II.B.2(c) because it showed that it worked with
institutions and practitioners and resolved problems which, if not
resolved, could have led to sanctions under the Act.
Conclusion
The Board concludes that NCMF should receive 60 additional points on
its evaluation for criterion II.B.2(c). This would raise NCMF's total
score to at least 1143 points, which is more than the 1105 points needed
to pass. It was not disputed that NCMF met the other requirement of the
evaluation, which was to receive passing scores on two of the three
parts. Based on the foregoing analysis, the Board concludes that the
decision permitting NCMF's grant to expire should be reversed. /1/ The
Greater Southeast Community Hospital petitioned the Board to
participate in this appeal as a party, or in the alternative, as an
amicus. The Board Chair ruled that the Hospital could participate as an
amicus, but by letter dated September 18, 1981, the Hospital wrote that
it had "decided not to submit a statement as amicus curiae." /2/
Below we refer to NCMF's submission of July 17, 1981 as Appeal Letter;
NCMF's brief dated August 25, 1981 as Appeal Brief; NCMF's brief dated
September 15, 1981 as Reply Brief; and the brief dated October 28, 1981
as NCMF Post-hearing Brief. We refer to the Agency's submission of
August 25, 1981 as Agency Response and the brief dated October 30, 1981
as Agency Post-hearing Brief. We refer to the transcript for September
23 as Tr. I.; September 24 s Tr. II.; and September 25 as Tr. III.
/3/ Because NCMF's evaluation score was only 22 points short of the 1105
required to pass, NCMF raised the issue of whether the Board would make
determinations regarding all the evaluation criteria which NCMF claims
were incorrectly scored. (Tr. I, pp. 16-24.) At the hearing, NCMF made
and than withdrew a request that the Board issue a decision on each
criterion in dispute. (Tr. I, p. 16, Tr. III, pp. 16-63.) The
presiding Board member said, at that time, that since the function of
the Board in this appeal is to determine whether to uphold or reverse
the Agency's decision to permit NCMF's grant to expire, if in examining
the criteria the Board found that its evaluation on any criterion would
give NCMF sufficient points to pass, the Board's decision could be
limited to that finding. (Tr. III, p. 62.) The parties did not object
to this approach. /4/ This criterion was part of a criteria
section on "Special Actions to Address Identified Problems -- Adverse
Actions," which included the following other sanction-related criteria
for which NCMF did not receive points: Criterion II.B.2(b) Warning
letter(s) to institution(s) and/or practitioner(s) issued on actions
which could lead to sanction recommendations. Criterion II.B.2d(d) PSRO
prepared recommendation(s) on sanction to Secretary and forwarded to
appropriate party. /5/ The Act provides that if, after giving
reasonable notice and opportunity for discussion, a PSRO finds that
practitioners and providers of health care are violating their
obligations as defined under Sec. 1160(a), the PSRO may recommend
sanctions to the Secretary of HHS. (Section 1160(a) requires
practitioners and providers to ensure that services to beneficiaries
under the Act are provided only when and to the extent medically
necessary, and that the services are of a quality which meets
professionally recognized standards.) The Secretary then decides whether
to impose sanctions. The sanctions which the Secretary may impose are
to exclude the practitioner from eligibility to be reimbursed for
services provided under the Act, either permanently or for a shorter
period of time, or to require the practitioner to pay a monetary
penalty. (See Secs. 1157 and 1160 of the Act.)
OCTOBER 22, 1983