DEPARTMENTAL GRANT APPEALS BOARD
Department of Health and Human Services
SUBJECT: Texas Department of Human Services
Docket No. 86-246
Decision No. 883
DATE: July 30, 1987
DECISION
The Texas Department of Human Services (Texas/State) appealed
a
determination by the Health Care Financing Administration
(HCFA/Agency)
disallowing $188,942.20 in federal funds claimed by the State
under the
Medicaid program of the Social Security Act (Act) for the
calendar
quarter ending September 30, 1986. The disallowance was taken
pursuant
to section 1903(g)(1) of the Act, which provides for reduction of
a
state's federal medical assistance percentage of amounts claimed for
a
calendar quarter for long-stay services unless the state shows
that
during the 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."
In the notice of disallowance, HCFA alleged that Texas failed to
conduct
annual reviews at a total of six intermediate care facilities
(ICFs),
including three intermediate care facilities for the mentally
retarded
(ICFs/MR). HCFA further asserted that Texas' quarterly showing
was
unsatisfactory because the State had not met the regulatory
requirements
governing the showing submission including a requirement to give
reasons
why any facilities were not timely reviewed. Texas did not
address
HCFA's assertions regarding its quarterly showing submission.
Texas
specifically "accepted" HCFA's findings with regard to three ICFs
but
contended that since its failure to review the three ICFs/MR could
be
excused under the technical failings exception to the annual
review
requirement, the disallowance should be reversed as to those
facilities.
Based on the analysis below, we find that the State's quarterly
showing
was deficient. Accordingly, we uphold the disallowance in its
entirety
subject to possible reduction as noted below if the State chooses
to
provide exact recipient data.
Background
A. Statute and Regulations
Section 1903(g)(1) of the Act requires the state agency responsible
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.
Section 1902(a)(31) requires in pertinent part that a state plan
provide
--
(B) 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 . . . .
The Act contains two exceptions to the annual review requirement.
Section
1903(g)(4)(B) provides --
The 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. 1/
The regulations implementing the statutory annual review requirement
are
found at 42 CFR 456.650 et seq. The regulation at 42 CFR
456.654
establishes the requirements for the content and submission of
a
quarterly showing. In pertinent part, 45 CFR 456.654(a)(1)
specifically
provides that a state agency's showing for a quarter must
include --
. . . a
certification of the reasons the annual
on-site
review requirements . . . were not met in any facilities;
Additionally, HCFA issued to states participating in the Medicaid
program
an action transmittal (HCFA Action Transmittal 79-61, July 2,
1979)
addressing quarterly showing requirements. Paragraph V of the
Action
Transmittal specifically directs states to attach to their
quarterly showings
a full explanation of the circumstances for any
missed facility review.
That same paragraph also provides --
If the State believes the "exception
clauses" of section
1903(g)(4)(B)
apply, 1) explain the attempts the State
made
to perform the reviews and 2)
attach a copy of the State's
original
review team schedule showing the planned dates
of
review. The statement should
include a full explanation of the
circumstances which caused the facility or facilities not to
be
reviewed on time.
pp. 9-10 (emphasis in original).
B. Case History
The original notice of disallowance alleged medical review violations
at
five facilities. Specifically, Texas had not conducted timely
annual
reviews at four facilities: Hudson House, 105 Cooper, 701 Spring
Meadows
Drive, and Coastal CC. Further, the State had not conducted any
review
at a fifth facility, Pleasant Hill Nursing Home. In the
disallowance,
the Agency specifically cited the provisions of Action
Transmittal 79-61
requiring a state to provide acceptable reasons for missed
reviews in
those instances where facilities were not reviewed. HCFA noted
that
Texas' quarterly showing did not indicate that there was a review of
the
Pleasant Hill facility, nor acceptable reasons for not reviewing any
of
the other facilities in question. Therefore, HCFA concluded that
the
State's quarterly showing was unsatisfactory, and
disallowed
$157,451.84, in federal funding.
In its brief in this proceeding, HCFA again referred to the
State's
quarterly showing and alleged that Texas had failed to conduct
timely
reviews at four additional facilities. HCFA again noted that
Texas had
not provided any reasons for failing to conduct reviews at
these
facilities in its quarterly showing, nor had the State claimed that
the
statutory exceptions applied to these facilities. HCFA Brief, pp.
3-4;
HCFA Ex. E. During ensuing negotiations, Texas provided HCFA
with
documentation which caused HCFA to withdraw its findings with respect
to
three of the facilities cited in HCFA's brief. Texas conceded that
it
had not conducted a timely review at one of the facilities, Manda
Ann
Convalescent Home. The amount of federal funding now at issue
is
$188,942.20 for six facilities. Texas Reply Brief, pp. 1-3; Texas
Ex.
E. 2/
C. The State's Argument
After some discussion, the parties agreed that Texas met the
statutory
threshold for application of the technical failings
exception. That is,
the State had reviewed 98% of all facilities
requiring review for the 12
month period ending September 30, 1986 and all
facilities with 200 or
more beds. Texas Reply Brief, p. 3.
In its briefing Texas did not address HCFA's allegations that the
State's
quarterly showing was deficient. Rather, Texas' argument
focused on
whether the reasons it offered with respect to three of the
six unreviewed
facilities qualified as statutory exceptions.
Texas conceded that it had not conducted timely reviews at the Coastal
CC,
Pleasant Hill, and Manda Ann facilities. Texas Reply Brief, p.
2.
However, Texas argued that the technical failings exception should
apply
to excuse the failure to conduct reviews at Hudson House, 105
Cooper,
and 701 Spring Meadows Drive. The State indicated that near the
end of
the September 30, 1986 quarter, it was faced with an emergency
situation
at an ICF/MR with 1,026 beds. Texas contended that keeping
the
imperiled facility open required a diversion of specialized
personnel
who would have otherwise been available for facility reviews.
Texas
maintained that its ability to perform reviews during this quarter
had
already been hampered by a gubernatorial hiring freeze, imposed in
July,
which depleted its ICF/MR review staff. Texas insisted that
the
convergence of these two facts during the same quarter forced it
to
choose between allocating resources toward keeping the 1000-bed
facility
open or conducting annual reviews of the three six-bed
facilities.
Texas argued that in acting to keep the larger facility open it
pursued
the most prudent course of action. Texas Reply Brief, pp. 4-7.
3/
Analysis
As noted above, Texas has not addressed HCFA's assertion that the
State's
quarterly showing was deficient. We have previously held that
section
1903(g) requires that a showing must demonstrate either full
compliance with
the annual review requirements or compliance with the
exception provisions of
section 1903(g)(4)(B). 4/ Ohio Department of
Human Services, Decision
No. 824, January 14, 1987. In Ohio, we
determined that the statute
provides notice that a reduction will be
imposed if a state fails to meet the
requirements relating to a showing.
Ohio, supra at 4.
The regulation at 42 CFR 456.654 establishes reasonable requirements
for
the content of a quarterly showing. Particularly relevant here is 42
CFR
456.654(a)(1) which requires a certification that the state
has
completed on-site reviews of each recipient in every facility in
the
state by the end of the quarter in which a review was required.
When
the State fails to conduct a review in any such facility, the state
must
provide a certification of the reasons the review requirements were
not
met. As noted above, these requirements were further explained
in
Action Transmittal 79-61 which also informed the states that a claim
for
application of the statutory exceptions should be made in the
quarterly
showing.
Based on the clear guidance provided in the statute, regulations, and
the
Action Transmittal, we affirm our conclusion in Ohio. The quarterly
showing
submission must include at a minimum specific identification of
facilities
not reviewed in any quarter as well as the reasons for the
missed
review. If a state does not provide the appropriate
certification and
accompanying lists, the Secretary would not be able to
determine on the face
of the showing whether the state was in compliance
with the full requirements
or the exceptions. If the Secretary did not
perform a comprehensive
validation survey and the showing itself did not
fully identify the
deficiencies and the reasons for the deficiencies,
the Secretary would have
insufficient basis upon which to consider
whether a disallowance was
justified and may be unable to detect
instances where the statute would
require imposition of a disallowance.
Moreover, such a requirement furthers
an important program purpose in
that it obligates a state to give
contemporaneous reasons for any review
deficiency at the time the deficiency
occurred, not a justification
several months after-the-fact in response to
Agency inquiries.
Based on the evidence in the record, we find that Texas failed to make
a
satisfactory quarterly showing under 42 CFR 456.654. Texas not
only
neglected to provide any explanation on its quarterly showing of why
it
failed to conduct timely reviews of six facilities, but, even in
these
proceedings, gave no reasons explaining why three of those
facilities
were not reviewed during the quarter. These three facilities
contained
approximately 250 Medicaid beds. In arguing for application
of the
technical failings exception, Texas noted that the three
facilities
which it was contesting contained a total of only 18 Medicaid
beds. HCFA
Ex. A. Thus, Texas attempted to frame its argument before
the Board in
terms of its having chosen the lesser of two evils, by
concentrating on
the 1000 bed ICF/MR. In fact, the State failed to
timely review more
than 250 patients.
We further note that, given the State's arguments and the dates used
on
the quarterly showing, it is fair to conclude that the State was
aware
of the fact that six facilities were either reviewed late or
completely
unreviewed. In circumstances such as these, the regulation
clearly
requires a certification of reasons if a state wishes to claim
a
statutory exception. Just as clearly, Texas ignored the
regulatory
guidelines. In view of this finding, we do not need to
consider whether
the technical failings exception would apply if the State's
showing had
indicated the reasons Texas ultimately gave for why three of
the
facilities were unreviewed.
Conclusion
Based on the above analysis, we uphold the disallowance of
$188,942.20.
HCFA indicated that the State may reduce the disallowance by
submitting
exact recipient data. See Texas Ex. E. The State
has not indicated if
it wishes to take advantage of this opportunity.
We merely note that
such an opportunity exists and the amount of federal
funds ultimately
disallowed could change based on submission of that
data.
________________________________ Donald F. Garrett
________________________________ Alexander G. Teitz
________________________________ Judith A. Ballard Presiding
Board
Member
1. In a recent opinion reversing our decision in
Delaware Department
of Health & Social Services, Decision No. 732, March
21, 1986, the U.S.
District Court for the District of Delaware held that the
Secretary's
regulatory interpretation of section 1903(g) to mean that a state
must
have "completed" reviews by examining the care provided to each
Medicaid
recipient in a facility was inconsistent with the use of the
word
"conducted" in section 1903(g)(4)(B). Delaware Division of Health
and
Social Services v. United States Dept. of Health and Human
Services,
Civil Action 86-233 CMW (D. Del., July 9, 1987). This issue is
not
raised in the instant case since Texas has acknowledged that it
failed
to conduct any timely onsite inspection in six facilities. We
note,
however, that the Secretary's construction of the statute is
derived
from the wording of the statute, contrary to what the court
thought.
Section 1903(g)(4)(B) refers to conducting "such an onsite
inspection."
This refers to the onsite inspection described in section
1902(a)(31)(B)
(incorporated by reference into section 1903(g)(1)).
That inspection
must examine "the care being provided to each person
receiving medical
assistance." (See, also, section 1903(g)(1), which
refers to "each
case.") Thus, if a state has not completed an onsite
inspection by
reviewing each Medicaid recipient, the state has not met the
statutory
requirement of conducting "such an onsite inspection."
2. Texas did not challenge HCFA's action in revising
the
disallowance, nor argue that it did not have a sufficient opportunity
to
respond to the new findings.
3. Texas did not allege that it met the "good faith
and due
diligence" exception. Even applying the Delaware court's
interpretation
of that exception to require only that a state had a
subjective good
faith intent, we would conclude that that exception does not
apply here
since the State did not provide timely explanations nor even claim
that
it had made any attempt to review three of the facilities.
4. Section 1903(g)(4)(B) provides that the Secretary
shall find a
showing satisfactory "if the showing demonstrates" that the
98
percent/200 bed, good faith and due diligence standard is met.
The
section then continues "or if the State demonstrates . . . that
it
would have made such a showing but for failings of a technical
nature
only." While this latter language is not as clear in requiring
that the
showing demonstrate compliance where the technical failings
exception is
invoked, the Agency's longstanding regulatory interpretation is
that a
state should at least provide as part of its showing an
identification
of missed facilities and a statement of