GAB Decision 669
July 3, 1985
New Hampshire Department of Health and Welfare;
Ballard, Judith A.; Teitz, Alexander G. Garrett, Donald F.
Docket No. 84-213
DECISION
The New Hampshire Department of Health and Welfare (New Hampshire)
appealed a decision by the Health Care Financing Administration (HCFA)
disallowing $362,396.54 in federal funds claimed by New Hampshire under
the Medicaid program for the fiscal quarter ending December 31, 1983.
HCFA based the disallowance on its determination that New Hampshire did
not have an effective program of utilization control in operation at 10
intermediate care facilities (ICFs) during that quarter. New
Hampshire's primary position before the Board was that nearly 50 percent
of the individual violations cited by HCFA were de minimis in nature
and, given the purpose of the utilization control program and in view of
recent amendments to the requirements, these and the remaining
violations should be overlooked. In addition, New Hampshire argued that
the method for calculating the disallowance was improper and that HCFA
failed to provide proper notice of the disallowance.
For reasons discussed more fully below, we uphold the substantive bases
for the disallowance, but permit New Hampshire the opportunity to
provide HCFA with accurate patient data aimed at reducing the monetary
impact of the disallowance.
Background
I. The Statute and Regulations
The statutory authority for the Medicaid program is contained at Title
XIX of the Social Security Act. The statute provides that for each
quarter in which a state claims federal funding under the program, it
must make a showing satisfactory to the Secretary that it is operating
an effective program of utilization control over the services provided
to long-stay Medicaid patients at various medical facilities. Such a
showing must include evidence that --
(A) in each case for which payment is made . . . a physician
certifies at the time of admission, or, if later, the time the
individual applies for(2) medical assistance . . . (and the physician,
or a physician assistant or nurse practitioner . . . recertifies . . .
at least every 60 days . . . ), that such services are or were required
to be given on an inpatient basis because the individual needs or needed
such services; and
(B) in each such case, such services were furnished under a plan
established and periodically reviewed and evaluated by a physician; .
. . .
Section 1903(g)(1).
The statutory requirements pertaining to certification and
recertification are implemented for ICFs by federal regulations which
provide:
(a) Certification. (1) A physician must certify for each applicant
or recipient that ICF services are or were needed.
(2) The certification must be made at the time of admission or, if an
individual applies for assistance while in an ICF, before the Medicaid
agency authorizes payment.
(b) Recertification. (1) A physician, or physician assistant or
nurse practitioner . . . acting within the scope of practice as defined
by State law and under the supervision of a physician, must recertify
for each applicant or recipient that ICF services are needed.
(2) Recertification must be made at least --
* * *
(ii) Every 60 days after certification in an ICF other than a public
institution for the mentally retarded or persons with related
conditions. 42 CFR 456.360.
The implementing regulation relating to plan of care requirements
provides:
(a) Before admission to an ICF or before authorization for payment, a
physician must establish a written plan of care for each applicant or
recipient.
* * *
(c) The team must review each plan of care at least every 90 days.
42 CFR 456.380.
(3) II. The Facts
HCFA conducted onsite surveys at 10 ICFs in order to assess New
Hampshire's compliance with utilization control requirements during the
final quarter of 1983. The survey results revealed more than 100
alleged individual violations throughout the 10 facilities. The alleged
violations consisted of invalid certifications, untimely or invalid
recertifications, and untimely review of plans of care. New Hampshire
did not present specific evidence to refute HCFA's findings as to any
individual or facility. Rather, New Hampshire presented several legal
arguments aimed at reversing this disallowance.
Analysis
I. Applicability of the DEFRA Amendments
New Hampshire contended that, based on recent changes in utilization
control laws contained in amendments to the Deficit Reduction Act of
1984, Pub. L. 98-369 (DEFRA), there should be no reduction in its
Medicaid funding for this quarter. The changes relied on by New
Hampshire include the provision of a 10-day grace period in which
recertifications may be performed (providing the state shows good cause
for the delay) and the elimination of improper recertifications as a
basis for a percentage reduction in Medicaid funding. See DEFRA,
section 2363. New Hampshire maintained that these changes reflected
Congressional recognition that the former utilization standards were
inequitable, unduly burdensome, and counter-productive to the purposes
of the Medicaid program. New Hampshire indicated that here
approximately 48 percent of the recertifications challenged by HCFA
occured on the 61st day and that, overall, 55 percent of the cited
recertifications fell within the now effective 10 day grace period. New
Hampshire indicated that, since it does not have control over the
physicians working at the various ICFs, it should not suffer a reduction
in Medicaid funding for their failure to adhere to program requirements.
New Hampshire concluded that, given the factual setting of these
violations and in light of the clear congressional intent embodied in
the DEFRA amendments, it would be inequitable to impose a penalty based
on requirements which Congress has deemed counter-productive to the
purposes of Medicaid. New Hampshire Brief, pp. 1-2; 6-8.
We conclude that the DEFRA amendments do not apply to the calendar
quarter covered by this disallowance. Further, we conclude that under
the applicable statutes and regulations, the Agency's findings of
violations are clearly supportable. Moreover even if HCFA had the
discretion to apply the grace period retroactively, and did so, that
would not avail New Hampshire here.
(4) New Hampshire was one of several states to have raised the DEFRA
amendments as a defense to HCFA's finding of utilization control
violations in jointly considered appeals recently before the Board. The
general applicability of the DEFRA amendments to the utilization control
program in New Hampshire and those other states was adjudicated in a
joint Board decision, Effect of DEFRA Amendments on Utilization Control
Disallowances, Decision No. 655, June 7, 1985.
In our analysis of the DEFRA amendments we concluded that:
. . . there is no clear indication in DEFRA or its legislative
history that Congress intended to retroactively alter the States'
obligations to make a satisfactory and valid utilization control showing
under the requirements in effect during any given quarter. Rather, the
wording of section 2363(c) of DEFRA indicates that Congress intended the
amendments to apply to quarters beginning on or after October 1, 1984
and implies that the pre-amendment provisions would continue to apply to
previous quarters.
Id. at 3.
Further, we found that:
Although Congress acted through the DEFRA amendments to provide a
more liberal schedule for recertifications (and a grace period for late
recertifications in some circumstances) and to change the requirements
to which the section 1903(g) reductions would apply, Congress reaffirmed
its intention that utilization control requirements be met. Nothing in
the amendments indicates that Congress thought that HCFA had
misinterpreted the previous requirements.
Id. at 4.
Thus, we determined that the DEFRA amendments were not to be applied
retroactively (that is, to showings made in quarters before October 1,
1984) in assessing a state's compliance with the utilization control
requirements. We note here specifically that the grace period applies
by its own terms only to the revised recertification schedule set out in
section 1903(g)(6) effective October 1, 1984. Since this disallowance
concerns solely the quarter ending December 31, 1983, there is simply no
statutory grace period in effect which might possibly validate the
challenged recertifications.
As HCFA noted in its brief, we have consistently ruled that, under the
statute and regulations applicable to the quarter in question here, HCFA
reasonably interpreted the statute to mean recertifications must occur
at least every 60 days. Our (5) position on this issue has been clearly
stated in numerous decisions. For example, in Decision No. 518 we
found:
The statute clearly requires a recertification "at least" every
60
days. The Board has addressed the validity of recertifications
occurring outside the 60 day limit on several occasions. In each
instance, the Agency has interpreted the "at least" language of the
statute so that there is no discretion to allow recertifications in any
other time frame . . . . (W)e have consistently found that the Agency's
position is reasonable and reflects the statutory intent. Additionally,
we have also supported the Agency conclusion that it does not have the
discretion to waive violations or reductions for even one violation.
(citations omitted) Michigan Department of Social Services, Decision No.
518, February 29, 1984, at p. 6. /1/
We do not think that the DEFRA amendments render HCFA's interpretation
of the previous provisions unreasonable, particularly in light of the
wording of the grace period provision which relates it only to the
revised recertification schedule.
Even if we were to determine that the grace period applied here, however
(which it does not), this would not alter our findings. HCFA found
recertifications occurring more than 10 days late in nine of ten
facilities. In the remaining facility, involving 22 recertifications on
the 61st day, New Hampshire did not allege that there was good cause for
the delay, so the grace period provision would not apply in any event.
As we noted earlier, New Hampshire has neither denied nor provided
evidence to contradict HCFA's finding that there were untimely
recertifications at each of the ICFs in question. Thus, since HCFA may
impose a penalty for even a single violation in a facility, we uphold
HCFA's findings relative to untimely recertifications with regard to all
10 ICFs. Given this determination, it would be unnecessary for us to
specifically address the other alleged violations pertaining to
certifications or plans of care. However, since New Hampshire did not
attempt to specifically contest any of these violations, in spite of its
burden to do so, we uphold the certification and plan of care violations
as well.
(6) II. Calculation of the Reduction
New Hampshire also alleged that the disallowance was improperly
calculated. Citing the enclosures which accompanied the Notice of
Disallowance (New Hampshire Exhibit E), New Hampshire noted that HCFA
improperly inserted into the formula for calculating the funding
reduction a fraction comprised of the number of facilities for which
there was an unsatisfactory showing (numerator) over the total number of
facilities for the level of care for which a showing is required
(denominator). New Hampshire argued that the proper fraction, indeed
that required by both section 1903(g)(5) and 42 CFR 456.657, should have
been composed of the number of patients receiving services in facilities
that did not meet the program requirements over the total number of
recipients who received services in facilities for which a showing was
required. /2/ New Hampshire indicated that the calculation based on
patient data would result in a Medicaid funding reduction of $237,209
and argued that, at the minimum, the reduction should be recalculated
based on the use of patient data. New Hampshire Brief, pp. 3-5.
As HCFA noted, we have previously addressed the propriety of
substituting facility data for patient data in calculating a utilization
control reduction. In North Carolina Department of Human Resources,
Decision No. 273, March 31, 1982, at p. 4 we found:
First, while it is true that Section 1903(g)(5) calls for numbers of
patients and not facilities, the regulation implementing Section 1903(
g)(5) allows the Agency to use facility data for calculating the
disallowance in the absence of exact data acceptable to the Agency.
Section 456.657(b) of Title 42 CFR provides that --
If any of the data required to compute the amount of the reduction in
FFP are unavailable, the Administrator will substitute an estimate. If
the State agency determines the exact data to the satisfaction of the
Administrator, the estimate may later be adjusted. If the number of
recipients in individual facilities is not available, the fraction
specified in paragraph (a)(1) of this section will be estimated, for
each level of care, by dividing the number of facilities for which a
showing is required under this subpart. /3/
(7) Our discussion in North Carolina accurately reflects the
circumstances of this appeal. HCFA did not have the patient data
necessary to calculate the reduction so it used facility data instead.
New Hampshire has now amassed the more exact patient data and HCFA has
indicated it will recalculate the penalty based on that data, once the
Board rules on the underlying legal issues in the appeal. HCFA Brief,
p. 5.
Nevertheless, the manner in which the reduction was calculated does not
change the basic focus of this appeal, i.e., HCFA's determination that
New Hampshire did not have an effective program of utilization control
in operation during the final quarter of 1983. Further, since the
relevant statute and regulation clearly allow HCFA to use facility data
in calculating the reduction pending receipt of accurate patient data,
we find no merit in New Hampshire's argument that HCFA's use of facility
data mandates reversal of the disallowance.
III. Notice of the Disallowance
In its final argument, also related to the calculation of the funding
reduction, New Hampshire argued that, since the reduction in Medicaid
funds was based on incorrect data, New Hampshire had not received proper
notice of the disallowance. Here, New Hampshire relied upon section
1903(g)(3)(A)(iv) which provides that there can be no reduction in
federal medical assistance unless notice of the reduction has been
provided to the State no later than the first day of the fourth quarter
following the calendar quarter at issue. New Hampshire contended that
HCFA's improper calculation effectively denied it notice of the
reduction and that to hold otherwise would be contrary to the concept of
due process. New Hampshire Brief, pp. 5-6.
As we pointed out in Part II, the fact that the reduction may be
initially calculated based on facility instead of patient data is not
improper, given the circumstances, nor does it alter the fact that HCFA
found statutory violations in New Hampshire's utilization control
program. The Notice of Disallowance (September 20, 1984) provided New
Hampshire with a complete list of facilities and individuals involved in
this disallowance. New Hampshire has had ample opportunity, consistent
with Board procedures, to refute HCFA's findings. Further, any "defect"
in the reduction in funding by HCFA's use of facility data will be cured
upon HCFA's review of the patient data submitted by New Hampshire.
New Hampshire's argument here goes more to the end result of HCFA's
findings, i.e., the size of the reduction rather than to any
infringement upon its ability to present its case. Accordingly, we
conclude that HCFA's use of facility data did not compromise New
Hampshire's notice of the basis for this disallowance.
(8) Conclusion
For the reasons set out above, we uphold the finding of violations in
all 10 facilities. However, HCFA has agreed to review the patient data
submitted by New Hampshire and to adjust the reduction accordingly. If
the parties are unable to agree on the appropriate amount of the
reduction, they may return to the Board for resolution of that issue
only. /1/ A copy of this decision, as well as New York State Department
of Social Services, Decision No. 531, April 23, 1984, which also
provides a capsule history of some of the issues raised here, was
provided to New Hampshire with our Acknowledgment letter dated November
28, 1984. /2/ From this point on, HCFA's calculation will be
referred to as based on facility data and New Hampshire's as based on
patient data. /3/ See also Virginia Department of Health,
Decision No. 208, August 28, 1981 in which we sustained a disallowance
computed using facility data based on 42 CFR 456.657(b).
OCTOBER 04, 1985