Pennsylvania Department of Public Welfare, DAB No. 840 (1987)

DEPARTMENTAL GRANT APPEALS BOARD

Department of Health and Human Services

SUBJECT: Pennsylvania Department of
Public Welfare

Docket No. 86-121
Decision No. 840

DATE: February 20, 1987

DECISION

The Pennsylvania Department of Public Welfare (Pennsylvania/ State)
appealed a determination by the Health Care Financing Administration
(HCFA/Agency) disallowing $300,812.33 in federal funds claimed by the
State under the Medicaid program of the Social Security Act (Act) for
the quarters ending September 30 and December 31, 1985. The Agency
based the disallowance on its finding that during these two quarters
Pennsylvania did not have an effective program of control over the
utilization of institutional long-term care services for patients
receiving medical assistance, as required by section 1903(g)(1) of the
Act. The Agency found that the State failed to conduct satisfactory
annual reviews at two intermediate care facilities (ICFs), Valley Manor
Nursing Home and Camp Hill Nursing Home. Specifi- cally, HCFA found
that the State failed to review a total of three Medicaid recipients
during the annual reviews at those facilities. Pennsylvania argued that
it was not required to review one of the recipients. Although
Pennsylvania admitted that the remaining two recipients should have been
reviewed, it argued that its failure to review those individuals could
be excused under the technical failings exception to the annual review
requirement.

Based on the following analysis, we conclude that although the State was
not required to review one of the two cited patients at Valley Manor,
its failure to review the remaining patients (one each at Valley Manor
and Camp Hill) did not fall within the statutory exception.
Accordingly, we sustain the disallowance.

Statutory and Regulatory Framework

Section 1903(g)(1) of the Act requires the state agency respon- sible
for the administration of a state's Medicaid plan to submit a written
quarterly showing demonstrating that --

[it] has an effective program of medical review of the care of
patients in . . . intermediate care facilities pursuant to
paragraphs . . . (31) of section 1902(a) whereby the professional
management of each case is reviewed and evaluated at least
annually by independent professional review teams.

A state's showing for each quarter must be "satisfactory" or FFP paid to
the state for expenditures for long-stay services will be decreased
according to the formula set out in section 1903(g)(5).

In pertinent part, section 1902(a)(31)(B) requires that a state plan
provide --

with respect to each . . . intermediate care facility within the
State, for periodic onsite inspections of the care being provided
to each person receiving medical assistance, by one or more
independent professional review teams . . . including with
respect to each such person (i) the adequacy of the services
available. . . .

Regulations implementing the statutory utilization control requirements
are found at 42 CFR Part 456 (1984). 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. . . . 1/

Section 1903(g)(4)(B) provides two exceptions to the annual review
requirement whereby --

[T]he Secretary shall find a showing . . . to be satisfactory . .
. if the showing demonstrates that the State has conducted such
an onsite inspection during the 12-month period ending on the
last date of the calendar quarter --

(i) in each of not less than 98 per centum of the number of
such hospitals and facilities requiring such inspection, and


(ii) in every such hospital or facility which has 200 or
more beds,

and that, with respect to such hospitals and facilities not
inspected within such period, the State has exercised good faith
and due diligence in attempting to conduct such inspection, or if
the State demonstrates to the satisfaction of the Secretary that
it would have made such a showing but for failings of a technical
nature only.

Section 1903(g)(4)(B) is implemented by 42 CFR 456.653, "Accept- able
reasons for not meeting requirements for annual on-site review," which
provides in pertinent part that --

The Administrator will find an agency's showing satisfactory,
even if it failed to meet the annual review requirements of
.456.652(a)(4), if --

(a) The agency demonstrates that --

(1) It completed reviews by the end of the quarter in at
least 98 percent of all facilities requiring review by the
end of the quarter;

(2) It completed reviews by the end of the quarter in all
facilities with 200 or more certified Medicaid beds
requiring review by the end of the quarter; and

(3) With respect to all unreviewed facilities, the agency
exercised good faith and due diligence by attempting to
review those facilities and would have succeeded but for
events beyond its control which it would not have reasonably
anticipated; or

(b) The agency demonstrates that it failed to meet the standard
in paragraph (a)(1) and (2) of this section for technical
reasons, but met the standard within 30 days after the close of
the quarter. Technical reasons are circumstances within the
agency's control.

Pennsylvania's System for Identifying Individuals Eligible for Medicaid
Nursing Home Benefits

In Pennsylvania, applications for Medicaid nursing home benefits are
processed by County Assistance Offices (CAO) throughout the State. The
CAO staff double-checks the initial eligibility determinations made by
caseworkers and enters that information into the State's computer
system. The computer produces a Medical Assistance card for accepted
applicants and enters those names into the Medical Assistance
Eligibility File. This information, along with other necessary billing
information, is provided to the applicant's facility. The State's
computer system does not produce a master list of Medicaid recipients
for a particular facility. Thus, in order to identify patients to be
included in an annual review the State's Inspection of Care (IOC) team
relies exclusively on billing and eligibility information provided by
the facility at the beginning of the review.

Argument and Analysis

The Valley Manor and Camp Hill facilities each have less than 200
certified Medicaid beds. See Pennsylvania Exs. C and D. The parties
agreed that, for purposes of the statutory exceptions, by the close of
the September 30, 1985 quarter, Pennsylvania had reviewed 98% of all
facilities requiring review including all facilities with 200 or more
certified Medicaid beds. However, Pennsylvania admitted that it failed
to review three Medicaid recipients: Patients E.M. and H.D. in Valley
Manor Nursing Home and patient G.M.W. in Camp Hill Nursing Home. 2/

A. Patient E.M. (Valley Manor)

Pennsylvania contended that this patient was not subject to review as
she could not reasonably be identified as a Medicaid recipient by the
review team. Patient E.M. was determined Medicaid eligible on September
11, 1985. The eligibility information was entered into the State's
computer system on September 20, 1985. The State review of Valley Manor
occurred from September 16-19, 1985. Pennsylvania argued that the
relevant date for determining whether this patient should have been
reviewed was the date the information regarding her Medicaid eligibility
was entered into the computer system, September 20.

HCFA insisted that, by the definition of the term "recipient" at 42 CFR
400.203, this individual was a Medicaid recipient at the start of the
Valley Manor review and thus, subject to review. The regulation defines
a recipient, unless the context indicates otherwise, as "an individual
who has been determined eligible for Medicaid." Citing the quoted
language, HCFA concluded that the operative date for determining if this
patient should have been reviewed was the date on which she became
eligible for Medicaid, September 11, rather than the date her name was
entered into the computer system. HCFA contended that Pennsylvania's
argument was similar to one rejected by the Board in West Virginia
Department of Human Services, Decision No. 686, August 21, 1985.

We disagree with HCFA's position on this issue. As we discuss below, we
do not believe that our holding in West Virginia is controlling here.
In the context of the annual review require- ment, the issue is not
whether this patient was a "recipient" for other purposes under the
regulatory definition of that term. Rather, the issue is whether the
information regarding this patient's recipient status was reasonably
available to the facility and the IOC team conducting the review.

HCFA's reliance on our holding in West Virginia is misplaced. The West
Virginia decision involved a large number of patients determined
eligible for Medicaid benefits well before the review challenged by the
Agency. Based on the regulatory definition of the term "recipient," we
rejected West Virginia's argument that these individuals were not
"recipients" because the facilities had not actually received Medicaid
payments on their behalf. Moreover, the facts of that case demonstrated
that West Virginia's system for providing current listings of Medicaid
recipients to its IOC teams was inefficient and ineffective. West
Virginia, supra at 4-6.

In Idaho Department of Public Welfare, Decision No. 747, April 28, 1986,
we found that a state may not be held responsible for reviewing a
Medicaid recipient when notice of the patient's status was not
reasonably available to the IOC team at the beginning of their review.
In Idaho, the issue centered around Idaho's failure to review a patient
found eligible for Medicaid benefits two days prior to the start of an
IOC review. The patient in question in that case did not appear on
Idaho's computer-generated eligibility list until eight days after her
application for benefits was approved. Idaho argued that until the
patient's name appeared on the computer print-out, its IOC team had no
way of identi- fying the patient for review. We found that Idaho's
system for identifying Medicaid recipients was reasonable and, in the
context of that case, had operated efficiently. Further, we recognized
that there was very little Agency guidance available to states regarding
preparation of patient lists for annual reviews. We noted that while
the Medical Assistance Manual encouraged state review teams to obtain a
current list of Medicaid recipients from the facility prior to the
review, the Manual did not define the term "current." Moreover, the
Manual clearly indicated that basic preparation for the review should
begin more than two days prior to the review. Idaho, supra at 6-7.

The facts here are similar to those in Idaho. Patient E.M. was
determined eligible for Medicaid on Wednesday, September 11, and the
annual review of Valley Manor began on the following Monday, September
16. Thus, Pennsylvania officials had two working days to process this
information, enter it into the computer, and provide it to the facility.
Even if Pennsylvania's system had produced a master list of recipients
for the IOC team's use during review, the facts here lead to a
conclusion that the State likely could not have processed this
information in time for the annual review of Valley Manor.

We find the facts surrounding the patient E.M. to be controlled by our
holding in Idaho. This patient could not have reasonably been
identified in time for the annual review. Accordingly, we find that
Pennsylvania was not required to include this patient in the September
1985 annual review of Valley Manor.

B. Patients H.D. (Valley Manor) and G.M.W. (Camp Hill)

The State initially indicated that, although it had followed its usual
procedures for identifying Medicaid recipients in need of reviews, the
personnel at Valley Manor did not notify the IOC team of patient H.D.'s
Medicaid status. Pennsylvania Brief, p. 3; Pennsylvania Ex. C. In a
later submission, the State indicated that although this patient had
previously been a Medicaid recipient, she was in private pay status
during July and August of 1985 as a result of money she had received
which would enable her to pay for her care for those two months. The
decision to place this patient in private pay status to use up her
"excess assets" had been made "verbally between the business office of
Valley Manor and the caseworker . . . ." Pennsylvania Submission,
December 16, 1986; Pennsylvania Tab 3. However, although the patient
was again a Medicaid recipient in September 1985, the facility did not
advise the IOC team of that fact. Pennsylvania Submission, December 16,
1986.

Patient G.M.W. was determined eligible for Medicaid on November 19,
1985. The on-site review at Camp Hill occurred from December 23-31,
1985. The facility informed the reviewers that this patient's status
was "pending." Pennsylvania Brief, p. 4; Pennsylvania Ex. D. The State
indicated that its "guess is that the facility never received notice"
that the patient G.M.W. was Medicaid eligible even though notice was
sent to Camp Hill and the patient was eligible "a month before the
review." Pennsylvania Submission, December 16, 1986.

The State asserted that its failure to review both these recipients
could be excused under the technical failings exception to the annual
review requirement. The State specifically argued that the failure to
review patient H.D. at Valley Manor could be attributed to record
keeping errors by the facility.


In past decisions we have analyzed the technical failings exception to
the annual review requirement. See Delaware Department of Health and
Social Services, Decision No. 732, March 21, 1986; and Pennsylvania
Department of Public Welfare, Decision No. 746, April 28, 1986.
Admittedly, there is little guidance about what is properly regarded as
a technical failing. 3/ While the language of the statutory and
regulatory history indicates that this exception will apply only when
the number of violations is relatively insignificant, a finding that the
technical failings exception applies cannot be based on the number of
violations alone. The regulation relates the concept of technical
failings to the reasons for which the reviews were missed. The heading
of 42 CFR 456.653 refers to "[a]cceptable reasons" and the provision on
the technical failings exception states a requirement for "technical
reasons." We have not found either an unexcused failure to attempt a
review or a review deficient for no apparent reason to be a technical
failing. We believe the term "technical failings," however imprecise,
is, nonetheless, a term of art. Thus, we do not believe, as some states
have argued, that a few unexcused individual reviews missed in the
overall annual review constitute mere "technicalities" and therefore
fall within the technical failings exception. Moreover, we generally
agree with the basic principle underlying HCFA's position that poor
administration or bad record keeping should not be considered a
technical failing.

Here, in both instances the State conceded that these individuals were
part of the universe of patients requiring review. While the State
initially could not explain how these patients were missed, the State's
later explanations in response to Board questions have done no more than
to confirm that these individ- uals should have been readily
identifiable. These explanations do not provide an acceptable reason
for missing these patients. The Medicaid recipient status of patient
H.D. at Valley Manor fluctuated during the summer preceding the review,
yet she was admittedly in recipient status at the time of the review.
See Pennsylvania Tab 3. The State provided no evidence that would

show that her status in the review month was unknown to the facility or
that somehow it was administratively infeasible for the facility to have
identified this patient for the IOC team. Regarding patient G.M.W. at
Camp Hill, there is no dispute regarding her Medicaid eligibility, the
State having apparently mailed notification of this patient's recipient
status to the facility approximately one month prior to the review.

While the facilities may share some of the blame for the failure to
review these patients, Pennsylvania chose to rely exclusively on the
facilities to identify patients needing review and must bear the
ultimate responsibility to conduct satisfactory annual reviews. See
North Carolina Department of Human Resources, Decision No. 728, March
18, 1986, p. 5. Simply stating that these recipients fell through the
cracks, as it were, is not a sufficient basis for us to find that
technical reasons exist qualifying for the technical failings
exceptions. 4/

Conclusion

Based on our analysis we conclude that patient E.M. in Valley Manor
could not have reasonably been identified as a Medicaid recipient prior
to the review. Thus, the IOC team was not required to include her in
the review of Valley Manor. However, since we have determined that
Pennsylvania's failure to review


patient H.D. at Valley Manor and patient G.M.W. at Camp Hill was not due
to technical reasons, we sustain the disallowance in the entire amount
of $300,812.33.


________________________________ Judith
A. Ballard


________________________________ Norval
D. (John) Settle


________________________________ Cecilia
Sparks Ford Presiding Board Member


1. The regulation at 42 CFR 456.652(b)(3) provides that a facility
which is not reviewed in the quarter during which a review is required
continues to require review in subsequent quarters until a valid review
is performed. Thus, this disallowance was taken for the last two
quarters of 1985.

2. In order to protect the privacy of the patients, we refer to them
by their initials.

3. From the legislative history we know only that the "technical
failings" exception would cover the situation where the state had
conducted reviews in most but not all facilities by the close of the
showing quarter, but completed the remaining reviews within "several
weeks." See 44 Fed. Reg. 56336, October 1, 1979.

4. The State also argued that the small number of missed reviews
bears testimony to its good faith and due diligence and the efficiency
of its system. However, as the State is aware, we have previously
concluded that the statute and regulations state a general requirement
for an annual medical review of each Medicaid patient in each facility.
See Delaware, supra; and Pennsylvania, supra. The nature of the
circumstances here indicates that there may be a flaw in Pennsylvania's
system of relying exclusively on information provided by the facilities,
so that, even though the Agency's survey (which generally would examine
only a small proportion of the State's facilities) uncovered only a few
violations, the likelihood is that more violations exist. Thus, the
failure to review these two patients may not be dismissed as a mere
technicality solely because of their statistical insignificance in the
universe of patients requiring review.