GAB Decision 482
Docket No. 83-20
November 30, 1983
Wisconsin Department of Health and Social Services;
Garrett, Donald; Settle, Norval Ford, Cecilia
The Wisconsin Department of Health and Social Services (appellant)
appealed a decision by the Health Care Financing Administration
(respondent), disallowing $112,640.59 pursuant to section 1903(g) of the
Social Security Act (Act). The disallowance was based on a June 1982
validation survey in which the respondent determined that the appellant
did not have an effective utilization control program in its
intermediate care facilities (ICFs) for the fiscal quarter ending March
31, 1982. The survey indicated that six of the ICFs reviewed by the
appellant contained both skilled and intermediate care patients. The
respondent determined that the State had not recertified that the
Medicaid recipients needing skilled care were receiving the appropriate
level of care and therefore failed to show that it had an effective
utilization control program. See, 42 CFR 456.652(a)(1), 456.654(a)(1)
(1981).
During the course of this appeal the respondent accepted
documentation offered by the appellant with regard to one facility,
thereby reducing the number of facilities in dispute to five. Based on
our analysis below, we uphold the disallowance for the five remaining
facilities. We direct the respondent to recalculate the disallowance
accordingly.
The record in this appeal consists of submissions made by both
parties as well as tape recordings of telephone conferences held on
September 28, 1983 and October 14, 1983.
Pertinent Statutes and Regulations
Section 1903(g) of the Act requires that the state agency responsible
for the administration of a state's Medicaid plan under Title XIX of the
Act show to the satisfaction of the Secretary that the state has an
effective program of control over utilization of long-tery inpatient
services in certain facilities, including ICFs. This showing must be
made for each quarter that the federal medical assistance percentage
(FMAP) is requested with respect to amounts paid for such services for
patients who have received care for 60 days in ICFs or the FMAP will dbe
decreased according to the formula (2) set out in section 1903(g)(5).
Specifically, section 1903(g)(1)(A) provides that the state must show
that --
(A) in each case for which payment is made under the State plan, a
physician certifies . . . (and recertifies, where such services are
furnished over a period of time, in such cases, at least every 60 days .
. .) that such services are or were required to be given on an inpatient
basis because the individual needs or . . . such services;
This statutory provision is implemented at 42 CFR 456.360. Section
456.360(b) provides, that for ICF patients, recertification "that ICF
services are needed" must be made "at least . . . (every) 60 days
after
certification . . . ." A state must make a satisfactory showing, in each
qauarter, that it has met this requirement for each recipient in an ICF
in order to avoid a reduction in federal financial participation. See,
42 CFR 452.652(a).
Statement of the Case
The issue presented in this appeal is whether the appellant has
satisfied the recertification requirement where patients evaluated as
needing skilled nursing care are retained in ICFs.
The appellant argued that it had an effective program of utiliation
control because the skilled care patients had State-created variances
which allowed them to remain in the ICFs in spite of their certification
for a higher level of care. (In four of the five facilities involved
here, each SNF patient had a State variance.) The appellant maintained
that the primary goal of the utilization control program is cost
efficiency and that therefore the appellant may properly retain a
patient recertified as needing skilled nursing care in an ICF because
that is a less costly alternative than moving the patient to a SNF. The
appellant correctly noted that in order to qualify for Medicaid funding
each participating state must establish a plan which meets the
requirements of section 1902(a) of the Act. /1/ In partial support of
its cost efficiency argument, the appellant cited section 1902(a)(30) of
the Act which requires that a state plan:
provide such methods and procedures relating to the utilization of,
and the payment for, care and services available under the plan
(including but not limited to (3) utilization review plans as provided
for in section 1903(i)(4) as may be necessary to safeguard against
unnecessary utilization of such care and services and to assure that
payments . . . are . . . consistent with efficiency, economy, and
quality of care. (Appellant's Brief, p. 3)
The appellant stated that "the very existence of an intermediate
level of care is attributable to a congressional desire to reduce costs
by allowing many Medicaid recipients to deside in a lower cost ICF,
rather than the higher cost SNF." (Appellant's Brief, pp. 4-5)
The appellant argued that cost efficiency was the "primary objective"
of Congress in 1967 when it amended the Act to provide "intermediate
care" as a new level of treatment for Medicaid recipients. The
appellant contended that the intermediate care level was created to
reduce the financial burden on both the state and federal governments
which had resulted from the large number of Medicaid recipients in SNFs.
The appellant offered the following piece of legislative history from
the amendments as further support for its position:
The committee bill would provide for a vendor payment in behalf of
persons . . . who are living in facilities which are more than boarding
houses but which are less than skilled nursing homse. The rate of
federal sharing for payments for care in those institutions would be at
the same rate as for medical assistance under Title XIX. Such homes
would have to meet safety and sanitation standards comparable to those
required for nursing homes in a given state.
This provision should result in a reduction in the cost of Title XIX
by allowing States to relocate substantial numbers of welfare recipients
who are now in skilled nursing homes in lower cost institutions. 113
Cong. Rec. 32599 (1967)
The appellant maintained that in addition to being cost efficient,
its variance process protected the best interests of Medicaid
recipients. The appellant pointed out that transfers from one facility
to another can have a devastating impact upon nursing home residents in
the form of "transfer trauma." The apellant argued that its variance
process negated the risk of transfer trauma while insuring that the
patient received adequate treatment.
The respondent argued that the appellant's sole reliance on the cost
savings aspect of the utilization control regulations was misplaced.
The respondent cited the legislative history of provisions authorizing
intermediate care, Pub.L. (4) 92-603. The House Report recalling the
purpose of the 1967 amendments to the Act, initially creating an
intermediate level of care, stated:
It (Intermediate Care) was not intended as a placement device whereby
States could reduce costs through wholesale and indiscriminate transfer
of patients from skilled nursing homes to intermediate care without
careful and independent medical review of each patient's health care
needs.
Your committee's amendment is designed to make it clear that
intermediate care coverage is for persons who require care in the entire
range from just above simple boarding home arrangements up to, but not
including, the skilled nursing home level.
Analysis
The Board has issued numerous decisions addressing certification and
recertification issues. However, the question presented here is one of
first impression. We are not concerned with whether a particular
certification or recertification is timely, or whether the language of a
particular certification or recertification constitutes a determination
of the appropriate level of care. Rather, the question is whether the
utilization control recertification requirement can be met by a
determination that an individual needs a higher level of care than the
facility involved is certified to provide.
We do not accept the appellant's argument that the recertification
requirements were met here because the primary purpose of the
utilization control program is cost efficiency.
The language of section 1903(g)(1)(A) provides that the purpose of
recertification is to ensure that the Medicaid patient is receiving
services which are needed. On its face, and under the appellant's
theory of utilization control, section 1903(g)(1)(A) could be
interpreted so that if patients need at least the level of care at which
they are placed, the fact that they are actually certified for a higher
level of care would not result in a violation. Under this
interpretation, a skilled care patient could be placed in an ICF because
the patient needs at least an intermediate level of care. The Agency
has interpreted the recertification requirement to be met only if there
is assurance that the patient is receiving appropriate care, i.e., the
level of care needed.
(5) The regulation governing the recertification of patients in ICFs,
42 CFR 456.360(b), merely requires:
(1) A physician . . . must recertify for each . . . recipient that
ICF services are needed.
However, the respondent issued an "Action Transmittal" SRS-AT-75-122
(November 13, 1975) to State Medicaid Administrators to clarify "what is
required in order for State to be considered in adherence with the
statute and regulation" regarding certification and recertification.
Action Transmittal 75-122 and its replacement, Action Transmittal 80-68
(October 1, 1980) defined recertification as "the process by which a
physician attests to an individual's need for continued placement at a
specific level of care . . . ." (Respondent's Exhibit 5, emphasis added)
We have recognized both these Action Transmittals as valid
interpretations of the theory and process of certification and
recertification. (See, California Department of Health, Decision No.
326, June 30, 1981; Kansas State Department of Social and
Rehabilitative Services, Decision No. 312, June 21, 1981; Hawaii
Department of Social Services and Housing, Decision No. 295, May 7,
1982; and cases cited therein). The respondent issued Action
Transmittal 80-68 to the appellant as part of its system of providing
information updates to states participating in Medicaid. The appellant
has not denied receiving the Action Transmittal. Therefore, we conclude
that the appellant had notice of the provisions of the Action
Transmittal.
We believe that the Agency has properly interpreted the requirement.
Section 1905(c) of the Act defines an ICF as:
an institution which is licensed . . . to provide . . .
health-related care and services to individuals who do not require the
degree of care and reatment which a hospital or skilled nursing facility
is designed to provide . . . .
Thus, the Act clearly differentiates between skilled and intermediate
care based on a qualitative, rather than solely an economic,
distinction. This distinction is also supported by the federal
regulation at 42 CFR 440.40(a)(1) which defines SNF services as those
services that are --
(ii) Provided by a facility . . . that is certified to meet the
requirements for participation . . . as evidenced by a valid agreement
between the Medicaid agency and the facility for providing skilled
nursing services . . . .
(6) Additionally, the "General Provisions" section of the utilization
control regulation at 42 CFR 456.3 provides that:
The Medicaid agency must implement a statewide surveillance and
utilization control program that --
(a) Safeguards against unnecessary or inappropriate use of Medicaid
services and excess payment;
(b) Assesses the quality of those services . . . .
This is consistent not only with the legislative history cited by the
respondent, but also with the statutory language cited by the appellant
which refers to quality of care as one concern of the utilization
control program.
The recertifications here did not meet the Action Transmittal
requirement of being an attestation that the patients needed continued
placement at the ICF level of care. Instead, they indicated that the
patients needed skilled care. The appellant contended that its variance
process permitted skilled care patients to remain in the ICFs. Perhaps
this could be acceptable if there had been some recognition by the
respondent that the appellant's variance process assured that the
patients were receiving appropriate care, even though the facilities
were not actually certified to provide the level of care needed by the
patient. Here, however, there was no such recognition.
There are no provisions in the regulations or Action Transmittal
which specifically provide for a system of variances such as the
appellant has created. The respondent argued that the variance
procedure was not part of the appellant's State plan. The appellant has
never contended that its variance procedure was approved by the
Secretary. Rather, the appellant argued for the procedure's acceptance
under the cost efficiency theory discussed above.
We think that cost efficiency is a prominent concern underlying the
utilization control program. However, based on our reading of the
statute, its legislative history and the supporting regulations, we
believe that the respondent's interpretation of the statute is
consistent with another purpose of utilization control, i.e, to ensure
Medicaid patients are receiving the level of nursing care they need.
The respondent also alleged that the appellant had failed to document
that it had followed its own variance process and, (7) therefore, failed
to actually determine that patient care needs were met. The respondent
noted that the appellant had not submitted any variance documentation
for patients in the Rutledge facility. /2/ Additionally the respondent
alleged that there were defects in the variance documentation submitted
for patients in the four remaining ICFs (Rice Lake, Centuria, Hope and
St. Josephs). The appellant did not respond directly to these
allegations, but chose to rely on its submissions as support for its
position. Thus, there would appear to be some question as to whether
the variance documents demonstrate that the medical needs of the
variance patients were met. However, given our analysis above, we do
not need to reach this issue.
As the respondent noted, the statute in its complete context sets out
the elements which comprise an effective program of utilization control.
Such a showing must include evidence that "in each case for which
payment is made . . . ." appropriate personnel certify and recertify
"that such services are or were required to be given on an inpatient
basis because the individual needs or needed such services . . . ."
(Sec. 1903(g)(1)(A); Respondent's Brief, p. 9). Implicit in the
respondent's interpretation of the statutory certification/
recertification requirement is the idea that the individual will need
that level of services which the facility is certified to provide. In
addition, there has been no showing that the patients in question were
receiving the services they needed. Therefore, we think that a 1903(g)
disallowance is warranted.
(8) Conclusion
Based on our analysis above, we uphold this disallowance. However,
given the change in the number of facilities involved in the original
disallowance, the respondent must recalculate the amount of funds
disallowed. /1/ The appellant in fact cited the statute at 42 USC
1396a. The United States Code at 42 U.S.C. 1396 et seq.
codifies Title XIX of the Act. In the interest of consistency we will
cite to the provisions of Title XIX throughout this Decision.
/2/ The respondent admitted that although the Rutledge facility was
State-certified to provide skilled nursing care, it was not certified to
provide skilled nursing services under Medicaid. (Telephone conference,
October 14, 1983)
NOVEMBER 14, 1984