GAB Decision 663
June 21, 1985
State of Washington Department of Social and Health Services;
Ballard, Judith A.; Teitz, Alexander G. Settle, Norval D. (John)
Docket No. 85-39
The Washington Department of Social and Health Services (State or
Washington) appealed a decision of the Health Care Financing
Administration (HCFA) which disallowed $334,400.39 claimed by Washington
for Medicaid services rendered in certain intermediate care facilities
and skilled nursing facilities during the period from January 1, 1984
through September 30, 1984. The disallowance represented a reduction in
federal financial participation (FFP) for the State's alleged failure to
show it had an effective program for controlling utilization of
institutional long-term care services under section 1903(g) of the
Social Security Act. Specifically, HCFA said the State failed to
perform the annual review required for each patient required by section
1903(g)(1)(D). Shortly after it appealed to the Board, Washington
submitted certain additional documentation to the Board and HCFA. The
Board briefly stayed the case and HCFA, after reviewing the submission,
recomputed and reduced the disallowance to $228,254.58. During
briefing, Washington submitted further documentation, and HCFA again
reduced the disallowance to the amount now in dispute, $207,714.58.
Based on our analysis of the record, and earlier Board decisions
discussed below, we uphold the disallowance in the reduced amount of
$207,714.58. With regard to the facilities and amounts remaining in
dispute, Washington argued mainly that it was in "substantial
compliance" with utilization control requirements and that the "number
of violations found in these facilities was de minimus." Appellant's
Brief, pp. 2, 4. Section 1903(g)(1) of the Act requires a reduction in
the amount paid to a State unless the State "makes a showing
satisfactory to the Secretary" that there is an effective program of
control over utilization of services in certain hospitals and nursing
homes. This showing "must include evidence that" the requirements
of
paragraphs (A) through (D) of section 1903(g)(1) are met. Paragraph (D)
requires that:(2) (D) such State has an effective program of medical
review of the care of patients in mental hospitals, skilled nursing
facilities, and intermediate care facilities pursuant to section
1902(a)(26) and (31) whereby the professional management of each case is
reviewed and evaluated at least annually by independent professional
review teams. *
Sections 1902(a) (26) and (31) require on-site inspections of the
adequacy of services "with respect to each of the patients" receiving
care. HCFA has implemented these provisions at 42 CFR 456.606. Part
456 also contains other requirements for utilization control. If a State
fails to meet the requirements of section 1903(g)(1), HCFA must impose a
reduction of federal funds according to a formula specified in section
1903(g)(5) of the Act. Washington did not dispute that it failed to
review the records of some individual patients in the facilities which
remain in question in relation to the reduced disallowance. The Board
has determined in a number of cases that states have the burden of
demonstrating compliance with the utilization control requirements of
section 1903(g), that section 1903(g) contains specific requirements
binding on HCFA, and that HCFA has reasonably determined that it must
impose a disallowance for a finding of even one violation in a facility.
Colorado Department of Social Services, Decision No. 169, April 30,
1981; Hawaii Department of Social Services and Housing, Decision No.
295, May 7, 1982; Kansas State Department of Social and Rehabilitation
Services, Decision No. 312, June 21, 1982; Oklahoma Department of
Institutions, Decision No. 318, June 28, 1982 (and reconsideration
denial, August 12, 1982); New York State Department of Social Services,
Decision No. 531, April 23, 1984; Vermont Agency of Human Services,
Decision No. 599, December 10, 1984. The Board has also frequently held
that the statute makes imposition of the reduction mandatory. See,
e.g., Tennessee Department of Public Health, Decision No. 167, April 30,
1981; Colorado Department of Social Services, supra; Ohio Department
of Public Welfare, Decision No. 191, June 24, 1981; (3) Georgia
Department of Medical Assistance, Decision No. 207, August 28, 1981;
Virginia Department of Health, Decision No. 208, August 28, 1981;
Colorado Department of Social Services, Decision No. 218, September 30,
1981; Ohio Department of Public Welfare, Decision No. 219, September
30, 1981; North Carolina Department of Human Resources, Decision No.
273, March 31, 1982; Arkansas Department of Human Services, Decision No.
278, April 13, 1982. Decision No. 169, supra, has been upheld by a
Federal District Court. Colorado Department of Social Services v.
Department of Health and Human Services, 558 F. Supp. 337 (D. Colo.
1983). These cases generally dealt with disallowances as they related
to violations of section 1903(g)(1)(A) (requiring periodic medical
certification that services are needed), but we see no basis for any
distinction between violations of that section and section
1903(g)(1)(D), the provision involved here. Certainly, the State
presented no argument that there is any distinction. We will not repeat
the analysis in the cited decisions here. The Board has repeatedly
concluded that HCFA lacks discretion to waive the reduction for even
minor variations. Statutory and regulatory language is clear,
legislative history indicates that Congress did not intend a
discretionary waiver, and respondent has consistently interpreted the
statute as not permitting a discretionary waiver. In short, except as
discussed in the next paragraph, the reduction must be applied unless
total compliance is demonstrated, and since Washington has presented
nothing whatsoever to challenge HCFA's determination that total
compliance was not demonstrated, we must uphold the disallowance of the
reduced amount. Washington also stated conclusorily in its notice of
appeal that it came within the ambit of an exception to the basic
requirement that on-site annual reviews be performed for each patient.
Section 1903(g)(4)(B) provides for such an exception where certain
conditions are met relating to the number and type of facilities
inspected, where the state can show "good faith and due diligence in
attempting to conduct such inspection" or "failings of a technical
nature." However, the State presented nothing on this issue in its
appeal brief. Thereafter, HCFA noted this omission in its brief, and
made an argument that Washington would not have qualified under the
exception in any event. HCFA Brief, pp. 6-7. Washington thereafter
specifically chose not to submit a reply brief. See Letter from
Washington's Assistant Attorney General dated June 10, 1985. Since
Washington has not developed this argument, even in the face of HCFA's
challenge to it, we have no alternative but to reject it. The State also
argued that it did not have sufficient notice that it could submit
certain documentation to rebut HCFA's findings. Appellant's Brief, pp.
2-4. However, the record shows that (4) Washington did finally submit
much or all of this documentation (as a supplemental submission with its
brief), and HCFA accepted it and reduced the disallowance the second
time. Appellant's Brief, Exhibit A; HCFA Brief, pp. 2, 12-13. HCFA
therefore characterized the issue as moot. Id., p. 2. It appears that
the notice issue is, indeed, moot; in any event, Washington did not
submit a response to this HCFA position in a reply brief. Conclusion
Based on the foregoing analysis, we uphold the disallowance in the
amount of $207,714.58. * The Deficit Reduction Act of 1984, Pub. L. No.
98-369, July 18, 1984, amended section 1903(g). The State did not argue
that these amendments affected the disallowance here, and our analysis
reveals that they did not.
AUGUST 08, 1985