GAB Decision 650
May 28, 1985
South Dakota Department of Social Services;
Ballard, Judith A.; Ford, Cecilia Sparks Garrett, Donald F.
Docket No. 85-10.
The South Dakota Department of Social Services (State) appealed a
determination by the Health Care Financing Administration (Agency)
disallowing $36,567.03 claimed for intermediate care facility (ICF)
services under title XIX (Medicaid) of the Social Security Act (Act) for
the quarters ended March 31, 1984, June 30, 1984 and September 30, 1984.
The disallowance was taken pursuant to section 1903(g)(1)(D) of the Act,
which provides for the reduction of a state's federal medical assistance
percentage of amounts claimed for any calendar quarter unless the state
shows that during that quarter it had an effective program of medical
review of the care of patients "whereby the professional management of
each case is reviewed and evaluated at least annually by independent
professional review teams." /1/ Based on a validation survey, the Agency
determined that the State failed to include one Medicaid patient in its
annual review of a particular ICF. As discussed below, we conclude that
this patient was not required to be included in the review, and
accordingly, we reverse the disallowance.
Applicable Law The requirement in section 1903(g) (1) (D) for annual
reviews is amplified in section 1902(a) (31), which requires in
pertinent part that a State plan provide --
for periodic on-site inspections to be made in all . . .
intermediate care facilities . . . within the State by one or more
independent professional review teams (composed of physicians or
registered nurses and other appropriate health and social service
personnel) of (i) the care being provided in such intermediate care
facilities to persons receiving assistance under the State plan . . .
(ii) with respect to each of the patients receiving such care, the
adequacy of the services available. . . . Implementing regulations are
found at 42 CFR Part 456. In particular, section 456.652 provides that
--
(a) . . . (i)n order to avoid a reduction in FFP, the Medicaid agency
must make a satisfactory showing to the Administrator, in each quarter,
that it has met the following requirements for each recipient;
. . . .
(4) A regular program of reviews, including medical evaluations, and
annual on-site reviews of the care of each recipient, as specified in .
. . Subpart I of this part.
(b) Annual on-site review requirements. (1) An agency meets the
quarterly on-site review requirements of paragraph (a)(4) of this
section for a quarter if it completes on-site reviews of each recipient
in every facility in the State, and in every State-owned facility
regardless of location, by the end of the quarter in which a review is
required under paragraph (b)(2) of this section.
(2) An on-site review is required in a facility by the end of a
quarter if the facility entered the Medicaid program during the same
calendar quarter 1 year earlier or has not been reviewed since the same
calendar quarter 1 year earlier. If there is no Medicaid recipient in
the facility on the day a review is scheduled, the review is not
required until the next quarter in which there is a Medicaid recipient
in the facility.
(3) If a facility is not reviewed in the quarter in which it is
required to be reviewed under paragraph (b)(2) of this section, it will
continue to require a review in each subsequent quarter until the review
is performed.
. . . . Other regulations are referred to as appropriate in the
course of this decision. Statement of Facts The purpose of the
validation survey as stated by the Agency was (1) to verify that the
State completed a timely inspection of care review in each participating
facility for a 12-month period ending March 31, 1984; and (2) to verify
that all Medicaid patients were reviewed in 10 randomly selected
facilities that received a review in the quarters ending September 30
and December 31, 1983 and March 31, 1984 and that all review teams were
properly constituted. (State's appeal file, Exhibit 1, Survey
Instructions, p. 1) The Agency noted several deficiencies pursuant to
its validation survey, but after further information and documentation
were submitted by the State, the Agency found only one deficiency which
is the basis for the current disallowance. The deficiency in question
was the failure to include one patient in the annual inspection
conducted in a particular ICF. (State's appeal file, Exhibits 2 and 4)
The State's review of this ICF was conducted from December 5, 1983
through December 20, 1983, the latter being the date of the exit
conference conducted in the facility. The Agency did not question that
the facility was reviewed in a timely fashion. The Agency found,
however, that the review did not include one patient who was determined
eligible for Medicaid on December 8, 1983, during the course of the
review. The State's review team looked only at those patients who
appeared on a list of Medicaid eligibles which was prepared by the team
prior to its entry in the facility using a November 15, 1983 vendor list
and was updated on the date that the team entered the facility based on
a comparison with a list of Medicaid eligibles maintained by the ICF.
No further checks were made by the review team to ascertain whether any
patients were determined eligible for Medicaid before the team completed
its review. The State asserted, and the Agency did not dispute, that it
would have been difficult for the review team to have become aware of
this patient's change in status during the course of its review since
the medical case worker sent notice of the patient's eligibility to the
team's office on December 8, 1983 while the team was at the ICF.
(State's brief dated February 28, 1985, pp. 2-3) The record does not
show whether the facility itself would have been aware before the end of
the review that the individual in question had been determined to be
eligible for Medicaid. The next review of the facility was conducted in
December 1984 with an exit conference on December 14, 1984, and included
the individual in question. (Agency's brief dated April 17, 1985, p. 6)
Although the Agency found that the individual in question should have
been included in the December 1983 review of the ICF, it did not impose
a penalty disallowance for the quarter ended December 31, 1983. However,
it imposed a disallowance for the three subsequent quarters on the
ground that the State failed to correct in those quarters the deficiency
noted for the quarter ended December 31, 1983. (State's appeal file,
Exhibit 1, Survey Instructions, p. 1) Parties' Arguments On appeal, the
State argued that the individual in question was not required to be
reviewed because she was not a Medicaid recipient on December 5, 1983,
when the review team entered the facility. In support of its position,
the State relied on 42 CFR 456.652(b) (2), which provides that "(i)f
there is no Medicaid recipient in a facility on the day a review is
scheduled, the review is not required until the next quarter. . . ." The
State argued that, under this provision, it was not required to review a
patient who was determined to be eligible after the first day of a
review. (State's brief dated February 28, 1985, p. 5) The State also
asserted that the individual in question received an annual review in
compliance with the statute and regulations since she was included in
the review conducted in the facility in December 1984. (Id., pp. 5-6)
Finally, the State asserted that the Agency had never before questioned
the State's practice of reviewing only those patients who had been
determined eligible for Medicaid as of the first day of a scheduled
review, and argued that the Agency changed its interpretation of the
requirements in an arbitrary and capricious manner. (Id., p. 5) The
Agency argued that section 456.652(b) (2) was inapposite here because it
dealt with which facilities were required to have a review as opposed to
which recipients. (Agency's brief dated April 17, 1985, p. 8) The
Agency argued, moreover, that that regulation did not apply here because
there were some Medicaid recipients in the facility on the first day of
the review, while the regulation addresses the situation where there are
no recipients at that time. (Id., p. 10) The Agency took the position
that the applicable requirements were found instead at 42 CFR 456.606
and 456.608. Section 456.606 provides that --
(t)he team and the agency must determine, based on the quality of
care and services being provided in a facility and the condition of
recipients in the facility, at what intervals inspections will be made.
However, the team must inspect the care and services provided to each
recipient in the facility at least annually. Section 456.608 provides in
pertinent part:
(a) For recipients under age 21 in psychiatric facilities and
recipients in SNF's and ICF's, . . . the team's inspection must include
--
(1) Personal contact with and observation of each recipient; and
(2) Review of each recipient's medical record. The Agency asserted
that these regulations, as well as section 1903(g) (1)(D) of the Act,
"expressly provide that each case in an ICF must be reviewed annually."
(Agency's brief dated April 17, 1985, p. 8) The Agency also cited the
Board's statement in a prior decision that "in order to avoid the 1903(
g) disallowance here the State must show that the certification,
recertification, and plan of care requirements were met for each
patient, i.e., 'in each case.'" (New York State Department of Social
Services, Decision No. 531, April 23, 1984) (Agency's brief dated April
17, 1985, pp. 7-8) The Agency also contended that the practical
difficulty faced by the State in learning of new Medicaid recipients
during the course of a review should not excuse the State's
non-compliance here in view of the requirement in 42 CFR 456.605 that a
state have "a sufficient number of teams so located within the State
that on-site inspections can be made at appropriate intervals in each
facility caring for recipients." (Id., p. 11) Finally, the Agency
asserted that the Board should give deference to its interpretation of
the regulations. (Id., p. 11) It is important to note that the Agency
apparently objects only to instances where a patient determined eligible
during the course of the review of a facility, not after the review is
completed, remains unreviewed for several quarters. Thus, the issue
here is a narrow one. Discussion We agree with the State that it was not
required to include the individual in question in the December 1983
review conducted in the ICF since the individual had not been determined
to be eligible for Medicaid as of the first day of the review. Section
456.652(b)(2), cited by the State, clearly supports the view that the
relevant date for purposes of determining which patients should be
reviewed is the first day of a review. While the Agency is correct that
the regulation specifically addresses only the situation where there are
no recipients in a facility on the first day of a scheduled review, the
logical extension of this rule is that any patients determined Medicaid
eligible after the first day of a review need not be included in any
review conducted as scheduled. We are not persuaded by the Agency's
argument that section 456.652(b)(2) is inapposite because it deals with
which facilities as opposed to which recipients are required to be
reviewed. It is clear from the structure of the regulations that the
requirement in section 456.652(b)(2) for an annual review of a facility
is not independent of the requirement for an annual review of each
Medicaid patient's case since section 456.652( b)(1) refers to section
456.652(a)(4), requiring "annual on-site reviews of the care of each
recipient," and section 456.652(a) (4) in turn refers to Subpart I of
Part 465, which includes the regulations relied on by the Agency.
Moreover, in proposing to issue section 452.652, the Agency stated
specifically that a state would meet the independent professional review
requirements of section 1903(g) of the Act "if an on-site review of the
care of each recipient in the facility was conducted whenever the
facility had participated in the Medicaid program as a certified
provider for 12 consecutive months without a review." (Notice of
Proposed Rulemaking, 43 Fed. Reg. 50922, 50924 (November 1, 1978)) Thus,
the requirement for an annual on-site review in a facility stated by
section 456.652(b) (2) is the mechanism adopted by the Agency for
assuring that each patient in a facility receives the annual review
required by statute. Accordingly, the State was justified in relying on
section 456.652(b) (2) in determining which patients to include in the
December 1983 review of the facility. Since the individual in question
had not been determined eligible for Medicaid as of December 5, 1983,
the first day of the review, she was not required to be included in the
review under the terms of section 456.652(b) (2). The soundness of the
result here is demonstrated by the fact that a contrary interpretation
could be difficult to implement. If any patients who are determined
eligible for Medicaid before a review team leaves a facility must be
reviewed, the team could have to extend its review indefinitely since a
"final" check might always reveal that an additional patient had been
determined eligible for Medicaid. /2/
The authority cited by the Agency does not in our view support its
position. The fact that section 1903(g) (1) (D) of the Act and 42 CFR
456.606 and 456.608 require that "each patient" or "each recipient"
be
reviewed does not have any bearing on the question presented here
whether an individual is properly considered a patient or recipient if
he or she was not determined eligible for Medicaid as of the starting
date of a review. We find the Agency's reliance on Decision No. 531
misplaced for the same reason. The Board's statement there that the
1903(g) requirements at issue had to be met for "each patient" still
leaves unanswered the question at what point an individual is to be
considered a patient subject to those requirements. Thus, the Agency's
position is not based on any regulation or program rule. Indeed,
nothing the Agency points to addresses this specific issue. We do not
address the State's argument that the Agency arbitrarily changed its
interpretation of the applicable requirements since we find no valid
basis for the Agency's position. We also do not address the issue
whether the failure to include the patient in question in the December
1983 review fell within the exception for failings of a technical nature
stated in section 1903(g) (4) (B) of the Act since neither party raised
this issue and since we have concluded that the individual in question
was not a Medicaid patient who was required to be reviewed. Conclusion
For the reasons stated above, we conclude that an individual who has not
been determined eligible for Medicaid as of the first day that a
facility is reviewed is not a patient within the meaning of section
1903(g) (1) (D) and need not be included in the review. Since there was
no deficiency for the quarter ended December 31, 1983, the penalty
imposed on the basis of such a deficiency for the three successive
quarters was without a valid basis and is, accordingly, reversed. /1/
Amendments to section 1903(g) as contained in section 2363( c)
of the Deficit Reduction Act (DEFRA) of 1984, enacted July 18, 1984,
Pub. L. 98-369, have eliminated all utilization control requirements
other than the medical review requirement as a basis for reductions in
federal financial participation. /2/ We note, moreover, that the
Agency has permitted far longer intervals between reviews than the
period which elapsed between the date the patient in question here was
certified as Medicaid eligible and the first review of her case. As
discussed above, an annual review in a facility is sufficient under the
regulations to meet the statutory requirement for annual inspections of
the care provided to each recipient. In proposing this regulatory
scheme, the Agency specifically stated that this was the case regardless
of "the length of time individual recipients have received services in
a
facility." (43 Fed. Reg. 50922, 50924 (November 1, 1978)) Moreover, the
Agency stated in Action Transmittal HCFA-AT-77-106, dated November 11,
1977, that a review "will be timely if it is conducted by the end of the
anniversary quarter of the facility's entry into the program or of the
last prior review." (See South Carolina Department of Social Services,
Decision No. 177, May 27, 1981, p. 4) Under this policy, a Medicaid
patient could under certain circumstances remain unreviewed for up to 15
months without a state's incurring any penalty. Thus, the length of
time that the individual in question here remained unreviewed was less
than the time permitted between reviews of a facility.
JULY 18, 1985