GAB Decision 711
December 6, 1985
California Department of Health Services;
Ford, Sparks Cecilia; Teitz, Alexander G. Ballard, Judith A.
Docket No. 84-219
The California Department of Health Services (California) appealed a
decision by the Health Care Financing Administration (HCFA) disallowing
$244,748.49 in federal funds claimed by California under the Medicaid
program for the quarter ending December 31, 1983. /1/ HCFA determined
that, during this period, California did not have an effective program
of utilization control at certain facilities providing long-stay
services to Medicaid patients. HCFA surveyors found a variety of
certification, recertification, and plan of care violations during their
examination of 10 randomly selected intermediate care facilities (ICFs),
some of which were also licensed as skilled nursing facilities (SNFs).
Where a facility had violations at both levels of care, HCFA counted it
twice in calculating the number of facility violations. /2/
California conceded that HCFA's findings at some of these facilities
were
correct, and HCFA accepted California's documentation pertaining to
others.
Conseqently, this(2) appeal now involves only certification
and
recertification issues related to patients at the following
facilities:
Canyon Convalescent Hospital (ICF), Driftwood Manor (ICF), and
Live Oak
Manor (SNF).
California asserted that this appeal was another chapter in the
dispute
that led to our decision in California Department of Health
Services,
Decision No. 326, June 30, 1982 (Reconsidered, November 2,
1982).
Decision No. 326 resulted from HCFA's allegation of utilization
control
violations at eight SNFs. In that decision, we determined that
HCFA's
approval of California's Utilization Review Waiver System (U.R.
Waiver)
under section 1903(i)(4) of the Social Security Act (Act)
necessarily
involved an acknowledgment that, in certain technical
details,
California's utilization control system did not adhere to
HCFA's
interpretations. We found that HCFA had never indicated that
those
variations were unsatisfactory for purposes of section 1903(g),
and,
therefore, it was reasonable for California to believe its
system
complied with the statute. California also contended here that
HCFA
improperly based violations at the Driftwood Manor facility on the
fact
that the dates accompanying physicians' signatures on certifications
and
recertifications were typewritten. /3/
HCFA insisted that it had provided California with adequate notice
that
it was obliged to change its system or it would no longer be
considered
in compliance with utilization control requirements. HCFA
also
maintained that, even if we found for California regarding
the
violations at Live Oak Manor, the rationale of Decision No. 326 did
not
apply to the violations found at the two ICFs.
Upon examination of the record in the instant case and consideration
of
the parties' arguments we conclude that--
* HCFA did not provide notice sufficient to alert the State that
the
Agency was, as a matter of policy, overriding the Board's holding
in
Decision No. 326 as reconsidered and that immediate, and
ultimately(3)
radical, changes in its utilization control system were
necessary in
order to avoid a disallowance.
* Based on its knowledge of California's system in general
and
specifically the 1981 California Medi-Cal Utilization Review
Plan
(California Exhibit G), HCFA knew that California employed the
same
utilization control procedures for ICFs as well as SNFs, in spite of
the
fact that section 1903(i)(4) does not extend waiver coverage to ICFs.
* The findings for Canyon Convalescent Hospital and Live Oak
Manor
should be reversed.
* The parties should apply the reasoning set out in our analysis
to
the patients at Driftwood Manor.
* After application of our analysis to Driftwood Manor and a
final
determination regarding the number of facilities with
violations,
California should be allowed a reasonable time to submit actual
patient
data for those facilities in an effort to reduce the amount of
the
disallowance. See section 1903(g)(5) of the Act and 42 CFR
456.657.
This decision, as was Decision No. 326, is limited to the
particular
circumstances in California.
Background
I. The Statute and Regulation
The statutory authority for the Medicaid program is contained at Title
XIX
of the Social Security Act. To avoid a reduction in federal
funding
under Medicaid a state had to show that, for each quarter for which
it
claimed such funding, it was operating an effective program of
control
over the utilization of services provided to long-stay Medicaid
patients
at various facilities. Section 1903(g)(1). Such a
showing had to
include evidence that --
(A) in each case for which payment is made under the State plan,
a
physician certifies at the time of admission, or, if later, the time
the
individual applies for medical assistance under the State plan (and
the
physician, or physician assistant, or nurse pratitioner . .
.
recertifies, where such services are furnished over a period of time,
in
such cases, at least every 60 days, and accompanied by such
supporting
material, appropriate to the case involved, as may be provided
in
regulations of the(4) Secretary), that such services are or
were
required to be given on an inpatient basis because the individual
needs
or needed such services; and
The statutory provisions for certifications and recertifications in
ICFs
were implemented by federal regulation at 42 CFR 456.360,
which
provides--
(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 . . . 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.
Certification and recertification requirements for SNFs were identical
to
those for ICFs. See 42 CFR 456.260. /4/
(5)
The State's utilization control showing also had to include evidence
that
patients had plans of care and that the State had programs of
utilization
review and medical review. /5/
Facts
The Waiver and Decision No. 326
The circumstances leading to this appeal can best be understood in
the
context of our analysis of California's utilization control system
and
its U.R. Waiver in Decision No. 326. Section 1903(i)(4) of the
Act
provides that payment shall not be made to a state for care or
services
by a hospital or SNF unless the hospital or SNF has in effect
a
utilization review plan which meets the requirements imposed by
section
1861(k) for purposes of Title XVIII of the Act. The provision
allows
the Secretary to waive the requirements of section 1903(i)(4) if
the
state agency makes a satisfactory showing that its utilization
review
procedures are superior in their effectiveness to the
procedures
required under section 1861(k).
Utilization review was a part of utilization control under
section
1903(g)(1)(C). In Decision 326 and its Reconsideration the
Board found
that California had one unseverable system for utilization review
and
utilization control.
The Calfornia program was described in Decision No. 326 as follows --
The appellant asserted that its system of utilization control
is
described in the utilization review plan submitted in connection
with
its request for a waiver under section 1903(i)(4). The general
outlines
of the system are also in Title 22 of the California Administrative
Code
(CAC), section 51335. Generally, the system is as follows. A
Treatment
Authorization Request (TAR) must be submitted to the Medi-Cal
/6/(6)
consultant, who is a physician, for each initial admission to an
SNF.
The Medi-Cal consultant affirms the certification of the
attending
physician, which is submitted as part of the TAR, that SNF services
are
necessary, and the TAR is submitted to the fiscal intermediary
for
payment of the services. The same process must be followed whenever
the
previous authorization expires because the fiscal intermediary will
not
pay claims for long-term care unless such claims are accompained by
a
valid TAR or covered by a still valid previous TAR. Most TARs are
valid
for a period of two months, except those for patients who are
considered
prolonged care patients, that is, it is not anticipated that
their
condition will change in the immediate future. The TARs for
such
patients are usually valid for one year. In connection with
the
prolonged care patients, every two months the attending
physician
completes a short form certifying that the patient needs the level
of
care, and this form is submitted with the facility's bill.
Attending physicians complete a written certification prior
to or at
the time of admission and this certification is included as part of
the
TAR submitted to the Medi-Cal consultant. Such TARs are valid for
the
balance of the month in which the patient is admitted and for the
next
full month. Some time before the expiration of that TAR, the
attending
physician signs a recertification which is valid for the next
two
calendar months; this recertification is submitted as part of the
next
TAR. Thereafter, the attending physician signs a recertification
prior
to the expiration of each two calendar month period, and
that
recertification is submitted with the next TAR.
In order for a TAR to be timely submitted and approved by
the
Medi-Cal consultant, the attending physician must certify in
advance
that the patient will need the specific level of care he is
receiving.
This recertification may occur anywhere from a few days to two or
three
weeks in advance of the date the two month certification period
actually
begins. The appellant has stated that this is necessary
because it
takes a few days for the TAR to be mailed and received by the
Medi-Cal
consultant and for processing of the forms. The
consultant's
authorization for payment takes retroactive effect only under
certain
conditions and for specifically stated causes (CAC, section
51003).
(footnote omitted) A TAR received after the date of its
proposed
effectiveness will not be retroactively approved except under
those
conditions. Therefore, payment under a TAR, which is untimely
received
and(7) which does not fall within the very limited
circumstances
authorized for retroactive approval, will be authorized only
from the
date of receipt by the Medi-Cal consultant, and a lapse in payment
could
occur. Thus, if a physician did not certify a patient until the
actual
beginning date of the certification period, the TAR would be
received
too late to be approved from the beginning date of the
certification.
The California Administrative Code, section 51003, provides for
bills
for service. This regulation provides that billing is performed
on a
monthly basis and is done in the form prescribed by the Director.
A
detailed description of the billing process is contained in the
Medi-Cal
Provider manual for long term care. This again refers to
calendar
months. . . The authorization dates on the TAR, which must be
submitted
with a bill, must cover the period billed.
Decision No. 326, pp. 5-7.
The primary way in which California's utilization control program
differs
from HCFA's instructions as contained in HCFA's action
transmittals (see note
4 above) is that certifications and
recertifications, submitted in accordance
with the TARs, are issued for
a period which begins after the day on which
the physician signs the
TAR. In addition, California's system applied
"60 days" as meaning "two
months" although HCFA said that the requirement
meant literally "60
days," no more and no less. /7/
In Decision No. 326, we determined--
. . . the relationship between the appellant and respondent
in
negotiating a waiver from 1977 forward, and the respondent's
consequent
knowledge of the interaction of utilization review and
utilization
control as the appellant's system implemented them, gave the
appellant a
reasonable basis to believe that its system was in compliance
with
section 1903(g)(1)(A). This conclusion removes the respondent's
basis
for a(8) disallowance based on violations of section
1903(g)(1)(A).
This conclusion in no way conflicts with other Board decisions
based on
compliance with SRS-AT-75-122 or AT-80-68. We simply conclude
that the
respondent's approval of the system, under section
1903(i)(4),
necessarily involved an acknowledgment that the appellant did not
adhere
to the requirements of SRS-AT-75-122 in certain technical
details. The
respondent never indicated that these variations were
unsatisfactory for
purposes of section 1903(g); therefore, it was
reasonable for the
appellant to believe its system was approved.
Id. at 11.
Contrary to what HCFA implied here, we did not rely on section 1903(i)(
4)
as a basis for Decision No. 326. We did not find that California
had
violated section 1903(g)(1)(A), nor that the section 1903(i)(4)
waiver
excused such a violation. Reconsideration of Decision No. 326,
p. 2.
Rather, we held that California was complying with section
1903(
g)(1)(A), including the requirement for recertification "at least
every
60 days."
Issues and Analysis
A. The SNF
The primary issue here is whether HCFA adequately notified California
that
it would be considered out of compliance with section 1903(g)(1) if
certain
aspects of its utilization control system were not changed to
conform to the
technical details of the action transmittals and HCFA's
literal application
of the 60-day requirement.
In light of our Decision No. 326 and its Reconsideration, HCFA could
not
reasonably expect to effect a change in California's program
without
providing explicit notice that, notwithstanding that decision,
the
State's system would no longer be considered approved.
Additionally, we
note that California's system had been in operation since
1970 and in
Decision No. 326 we emphasized that it was one unseverable
system, which
encompassed the certification and recertification requirements
currently
at issue. Given this context, the communications from HCFA
were unclear
and did not provide California with sufficient notice that
significant
and immediate changes in its system were necessary in order to
avoid a
disallowance.
Although it appears that some HCFA employees attempted to
inform
California employees that the recertification requirement could only
be
met by recertifications performed every 60(9) days and not
by
recertifications performed every two months where this was longer
than
60 days, we conclude that their statements were ineffective notice,
for
the following reasons:
* When the communications are viewed as a whole, they are ambiguous
about
whether the State was being asked to actually change its
recertification
system or merely being asked to conform the language of
the Waiver document
to the language of the statute and regulation.
* None of the communications advised the State specifically that
the
State's current system would no longer be considered satisfactory
and
even the one document that directly referred to the 60 days/two
months
distinction only "recommended" that the State advise its providers
about
the distinction.
* None of the communications go into any depth concerning the
differences
between California's system and the technical details of how
HCFA applied the
requirements elsewhere. In spite of the fact that
Decision No. 326
contained an extensive discussion of those differences,
the statements made
by HCFA employees show a lack of understanding of
those differences and of
the Board conclusion that California's system
had been approved as being in
compliance with the statutory and
regulatory requirements, including that
recertifications be performed
"at least every 60 days" (read by California as
meaning two months).
* In particular, none of the communications refer to the fact that,
under
California's system, the period of certification did not begin on
the date
the physician signed the document. Yet, this difference was
clearly an
issue in Decision No. 326 and is crucial in this case as
well.
* The HCFA report on the State's Waiver document contains
conflicting
statements. While noting some inconsistencies in the Waiver
language,
State instructions, and the understanding among State staff
about
recertification requirements, the report also found that the State had
a
method for assuring that certifications and recertifications were
done.
This finding is not qualified in any way.
* Also, since California's system for certifications and
recertifications
was integrally related to its U.R. system, approval of
the U.R. Waiver was
inconsistent with the notion that HCFA was requiring
changes in the rest of
(10) the State's utilization control system which
would then be incompatible
with its waivered U.R. system.
* California's formal response to HCFA's recommendations showed
that
California merely thought it should revise the language of the
Waiver
document and take steps to ensure that providers send in
the
certification documents with their monthly bills. While
California's
lack of understanding would not be relevant if HCFA had clearly
informed
the State that its existing system would no longer be considered
a
satisfactory utilization control system, we think that here the
State's
response gave rise to a duty on HCFA's part to clarify its statements
so
the State would know that HCFA intended to require immediate
and
substantial changes in the State's system, which HCFA had
previously
approved as being in compliance.
* Although HCFA alleged that changes California made in response to
the
U.R. Waiver Report showed that, in fact, California understood that
it
had to change its system, HCFA provided no evidence that such
changes
were made. On the other hand, California submitted a copy of its
billing
instructions, which continued to require recertifications every
two
months.
We do not here intend to imply that, to be adequate, notice to the
State
had to specifically refer to our decision and the possibility of
future
disallowances. We only hold that, under the particular
circumstances
here, what HCFA did say was inadequate to inform the State that
its
system would no longer be considered in compliance with the
federal
requirements.
B. The ICFs
HCFA argued that ICFs were not included in the scope of the
section
1903(i)(4), U.R. Waiver, and thus, the Waiver could not be applied
to
ICFs. California conceded that, theoretically, the Waiver did
not
encompass ICFs. However, California argued that as a practical
matter
it employed the SNF utilization control system for ICFs as
well.
Although they are clearly two distinct levels of care, there is
no
difference in certification and recertification requirements for
SNFs
and ICFs. While California conceded that there was no reference to
ICFs
in its 1983 Utilization Review Plan, it noted that its 1981
Plan
contained significant references to the ICF level of care.
California
Response to the Order to Develop the Record, p. 2. The 1981
plan notes
"authorization for prolonged care in ICFs follows the same
procedure for
SNFs. . . ." California Exhibit G, p. 38. California
noted that it
employs a single unseverable system for utilization control as
reflected
by its U.R. Waiver. California also(11) indicated that HCFA
recognized
the existence of this system in both its 1982 and 1983 reviews
of
California's system. California Exhibits I and B; Response to
Order,
pp. 4-5. California concluded by noting it has virtually
no
freestanding ICFs and very few ICF beds at all. Further,
California
noted that "most (if not all) of the audited facilities are joint
SNF/
ICF, with . . . 'swing beds,' . . . ." and, therefore, it would
be
impractical to expect the State to maintain two completely
different
billing and review systems for such an interrelated system.
Id. at 6.
The documents submitted by California support its position that
the
rationale of Decision No. 326 applies to ICFs as well as SNFs. As
we
noted earlier, Decision No. 326 was based on our determination that
HCFA
approved California's system as complying with utilization
control
requirements. Since we found that HCFA had worked extensively
with
California during its development of the Waiver and monitored
the
program regularly after its implementation, HCFA can appropriately
be
charged with having approved California applying the same system to
both
its ICFs and SNFs. Therefore, in this instance HCFA acted
unreasonably
in basing an ICF disallowance on California's failure to adhere
to the
technical details of the action transmittals.
C. The Facilities
I. Live Oak Manor
The patient at this facility was admitted at the ICF level in
October
1983. On December 1, he was transferred to the SNF level.
The TAR for
SNF care was signed on December 15 and subsequently
approved. HCFA
argued that the SNF certification for this patient
should have been
performed at the time of his admission to the SNF, December
1.
Although the certification of this patient was effective for a
period
before the certifying document was actually signed, California
alleged,
and HCFA did not deny, that this method of certification was valid
under
California's approved system. Thus, we reverse the SNF violation
at
this facility.
II. Canyon Convalescent Hospital
The dispute at this facility concerns a patient with a period of 64
days
between the dates recertifications were signed by the physician.
HCFA
argued that this recertification violated the requirements set out
in
the action transmittals. California conceded that the
recertifying
signatures were more than 60 days apart, but contended that
the
recertifications complied with its system because there was no
gap
between the recertification periods.(12)
A review of the documentation submitted for this patient
(California
Exhibit D) supports California's argument regarding compliance
with the
State's system. Therefore, we reverse the finding of a
violation for
this facility.
III. Driftwood Manor
HCFA alleged 22 certification and recertification violations at
this
facility based on the failure of the certification or
recertification
documents to comply with the action transmittals.
Additionally, HCFA
noted that, in some instances, the dates accompanying the
physician's
signatures were typewritten. HCFA alleged that a typed date
on the
certification or recertification was "prima facie evidence that
the
certifications and recertifications were not signed on the
date
indicated. . . ." HCFA Brief p. 14. California argued that
the
certifications and recertifications in dispute were acceptable under
its
approved system. Further, California argued that in a
previous
decision, Minnesota Department of Human Services, Decision No.
615,
December 24, 1984, the Board had determined that a requirement
of
handwritten dates was unreasonable without prior notice.
The parties have not supplied documentation regarding the
specific
patients for whom HCFA alleged violations. California noted,
". . . if
the Board rules on these . . . legal issues, there will be no need
for
Board review of the actual documents for this facility. The
parties
should be able to reach agreement on how the Board's decision is to
be
applied." California Brief, p. 10. HCFA did not object to
this
suggestion.
Accordingly, the parties should apply our analysis above to the
individual
cases at Driftwood. Additionally, regarding the validity of
the
typewritten dates on certifications and recertifications, we found
in
Minnesota --
The statutory and regulatory provisions specify who must certify
or
recertify and when they must do so, but do not specify how this must
be
documented. Since the Secretary must be able to verify that
the
requirements are met, however, the Board has held that
action
transmittal provisions clarifying that a certification
or
recertification must be in writing and signed by the appropriate
person
were a logical extension of the statutory and regulatory
requirements.
Social Service Board of North Dakota, Decision No. 166, April
30, 1981.
We have also said that a requirement for dating may be viewed as
an
interpretation of what is a timely and verifiable certification.
Maine
Department of Human Services, Decision No. 516, February 29,
1984.
However, we do not think that, where there is other
persuasive(13)
evidence of timeliness, HCFA can reasonably apply AT-80-68 to
require a
finding of a violation simply because the physician has not
manually
dated the certification or recertification document, particularly
where,
once a violation is found, a disallowance must be taken.
Some of the examples of acceptable certifications and
recertifications
given in AT-80-68 refer to documents "signed and dated by a
physician,"
but other examples refer merely to "signed and dated" orders or
notes.
In general, AT-80-68 states: "The certification must be dated at
the
time it is signed by the physician." . . . Although the
illustrations
imply that HCFA expects the date to be entered by the
physician,
AT-80-68 does not explicitly state that a violation will be found
if the
physician has not dated the certification by hand or the date does
not
appear next to the signature.
Id. at 5-6.
As we noted above, the parties have not supplied documentary
evidence
regarding the individual violations at this facility.
Therefore, we
cannot determine whether, in those cases where dates are
typewritten,
there is "other persuasive evidence of timeliness." Accordingly,
we
remand to the parties to apply our rationale in Minnesota, where it
is
appropriate, and otherwise to determine whether the documents
complied
with the requirement, as implemented in California's system.
Conclusion
Based on our analysis above, we reverse the disallowance taken at the
Live
Oak and Canyon Convalescent facilities and remand to the parties to
apply our
analysis above and our rationale in Minnesota to the alleged
violations at
Driftwood Manor. If the parties are unable to resolve the
issues raised
with respect to Driftwood Manor, they may return to the
Board for a
determination regarding that facility. When a final
determination has
been made regarding the number of facilities for which
violations exist,
California should be permitted to submit exact patient
data in order to
reduce the(14) amount of the disallowance. See section
1903(g) (5) of
the Act and 42 CFR 456.657. /1/ The Notice
of
Disallowance indicated at page
1 that the amount of federal
funds disallowed was $244,784.49. However,
elsewhere in the Notice of
Disallowance, and in the accompanying Enclosure 1,
the disallowance was
broken down as follows: $180,635.06 for ICF
violations and $64,113.43
for SNF violations. These figures total
$244,748.49. We assume the
higher figure was merely a typographical
error. /2/ We have
previously
found that, where a utilization control survey designed to
review one level
of care reveals violations at another level of care,
HCFA is justified in
citing a state for violations at the second level
of care as well. See,
e.g., Ohio Department of Public Welfare, Decision
No. 191, June 24, 1981;
Michigan Department of Social Services, Decision
No. 518, February 29, 1984;
New York State Department of Social
Services, Decision No. 531, April 23,
1984. /3/ In the
present
appeal California also contended that the disallowance is
inconsistent
with the utilization control amendments contained in the
Deficit
Reduction Act of 1984 (DEFRA), Pub. L. 98-369, section
2363.
California was one of several states to challenge alleged
utilization
control violations in light of the DEFRA amendments. We
addressed this
issue in a joint decision and concluded that the DEFRA
amendments do not
preclude this disallowance. Effect of DEFRA Amendments on
Section
1903(g) Disallowances, Decision No. 655, June 7,
1985. /4/ HCFA
issued Action
Transmittal SRS-AT-75-122 (November 13, 1975) and its
successor AT-80-68
(October 1, 1980) to clarify the certification and
recertification
requirements. We have addressed the impact of these
action transmittals in
numerous decisions. See, e.g., Social Service
Board of North Dakota,
Decision No. 166, April 30, 1981; Kansas State
Department of Social and
Rehabilitation Services, Decision No. 312, June
21, 1982; Washington
Department of Social and Health Services, Decision
No. 482, December 17,
1982; Georgia Department of Medical Assistance,
Decision No. 508,
January 31, 1984; Minnesota Department of Human
Services, Decision
No. 615, December 24,
1984. /5/ The key
substantive
changes imposed by the DEFRA amendments were those to
section 1903(g)(1) of
the Act which eliminated the Secretary's authority
to take reductions based
on violations of the certification,
recertification, plan of care and
utilization review requirements.
Accordingly, under the statute as amended by
DEFRA, a state's quarterly
showing need only include evidence that medical
review requirements are
met. Decision No. 655, pp.
7-8. /6/ The California
Medicaid
system is known as Medi-Cal. (Note 3 in
original) /7/ This view
is
not explicitly stated in either SRS-AT-75-122 or AT-80-68, but
AT-80-68
perhaps implies it by stating that a recertification "loses its
validity
after a 60-day period." A regional Medicaid letter, 80-22,
transmitted to
California by transmittal number 80-31, instructs HCFA
surveyors about how to
measure the 60 days and gives examples which
reflect a literal application of
the requirement.
MARCH 28, 1987