DEPARTMENTAL APPEALS BOARD
Department of Health and Human Services
SUBJECT: North Carolina Dept. DATE: August 14, 1989 of
Human Resources Docket
No. 89-2 Decision No. 1085
DECISION
The North Carolina Department of Human Resources (North Carolina/State)
appealed a determination by the Health Care Financing Administration
(HCFA/Agency) disallowing $90,642.04 in federal funds claimed by the
State under the Medicaid program of the Social Security Act (Act) for
the quarter ending September 30, 1988. The disallowance was taken
pursuant to section 1903(g)(1) of the Act, which provides for the
reduction of a state's federal medical assistance percentage of the
amounts claimed for a calendar quarter for long-stay services where the
state fails to show 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." HCFA found that North Carolina
did not conduct a timely annual review at Britthaven of Raleigh, a
dually-certified facility.
North Carolina conceded that the review of Britthaven of Raleigh was
untimely in that it occurred two weeks after the close of the quarter in
which it was due. However, North Carolina asserted that since the
untimely review was due to an isolated breakdown in its system for
identifying facilities due for annual review, it could be excused under
either of the statutory exceptions to the annual review requirement.
Generally, HCFA attributed the untimely review to poor administration by
the State. HCFA asserted that the State's failure to provide any
acceptable reasons for its untimely review of Britthaven of Raleigh
mandated that the disallowance be sustained. Based on the following
analysis, we find that the technical failings exception applies to
excuse this untimely review. Consequently, we reverse the disallowance.
Applicable Law
In pertinent part, section 1902(a)(31) of the Act requires that a
Medicaid state plan provide:
(B) with respect to each skilled nursing or 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 regulations implementing this provision and section 1903(g)(1) are
found at 42 C.F.R. Part 456. In particular, section 456.652 provides
that:
(b) Annual on-site review requirements.
(1) An agency meets the quarterly on-site reviewrequirements
of paragraph (a)(4) of this section for a quarter if it
completes on-site reviews of each recipient in every facility in
the State . . . by the end of the quarter in which a review is
required under paragraph (b)(2) of this section.
(2) An on-site review is required in a facility bythe end of
a quarter if the facility entered theMedicaid program during the
same calendar quarter 1 year earlier or has not been reviewed
since the same calendar quarter 1 year earlier . . . .
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 had 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 had 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.
The statutory exceptions are implemented by 42 C.F.R. 456.653 which
provides in pertinent part:
The Administrator will find an agency's showing satisfactory,
even if it failed to meet the annual review requirements of
section 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 could 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.
Background
North Carolina's Division of Facility Services (DFS) is responsible for
identifying the facilities due for annual review in a quarter and
forwarding a list of those facilities to the State's Division of Medical
Assistance (DMA) 45 days prior to the start of the quarter. DMA is
responsible for verifying the accuracy of DFS's facility lists,
providing DFS with a patient census for each facility due for review,
and, ultimately, checking the accuracy of DFS's reviews. Britthaven of
Raleigh was identified under this system as being due for review during
the July-September quarter of 1988. North Carolina Brief (Br.), p. 2
(unnumbered); North Carolina Exhibit (Ex.) 11.
In mid-1987 the State devised a "joint protocol" program whereby
the
State agencies responsible for licensure, certification, and medical
review could schedule a joint visit to a facility to carry out their
specific functions. The State originally planned to implement the joint
protocol on July 1, 1988 and had conducted training on the protocol
procedure for the involved State agencies in late May and early June
1988. However, HCFA expressed some concerns which delayed the official
implementation of the protocol. Thus, as of late July 1988 the protocol
had not been officially implemented. Nevertheless, during the quarter,
DFS encouraged its staff to conduct as many joint visits as possible.
North Carolina indicated that, normally, the review schedule for an
entire quarter is drawn up at one time. However, during this quarter,
the State's attempts to follow its joint protocol resulted in reviews
being scheduled one month at a time. DFS submitted the August review
schedule on July 12, 1988. Britthaven of Raleigh was not originally
scheduled for review in August. North Carolina Br., pp. 2-3.
On July 19, a HCFA in-service training program involving review team
participants, which had been cancelled in June, was rescheduled to
August. This program necessitated the rescheduling of three other
planned joint visits and involved negotiations between participating
protocol agencies for acceptable review dates. Initially, Britthaven of
Outer Banks (Outer Banks) was scheduled for review August 29-31.
However, the review at Outer Banks was moved forward to August 16-18 and
Britthaven of Raleigh was inserted into the August 29-31 slot. The
earlier review date for Outer Banks was not acceptable to one of the
agencies participating in the protocol. Consequently, Britthaven of
Raleigh was moved to the August 16-18 slot while Outer Banks reverted to
its original review date at the end of August. Other scheduling
problems arose. In an attempt to accommodate a facility whose
previously scheduled review had been affected by the in-service
training, the State inserted Britthaven of Edenton into the August 16-18
slot previously occupied by Britthaven of Raleigh.
The State maintained a spreadsheet for the quarter to record scheduled
reviews. The August 16-17 date was recorded for Britthaven of Raleigh
on this spreadsheet (and was not changed); the review was checked off as
scheduled, so, apparently, this meant that when the September reviews
were scheduled, Britthaven of Raleigh was omitted. North Carolina Ex.
4. The State caught this error and reviewed Britthaven of Raleigh on
October 14, reporting the error in its quarterly showing. North
Carolina Br., pp. 3-4; North Carolina Ex. 9; HCFA Br., p. 8.
The issue we must address is whether the failure to timely review
Britthaven of Raleigh can be excused under either statutory exception.
Analysis
Britthaven of Raleigh had 120 Medicaid beds. North Carolina Ex. 4, p.
4. North Carolina asserted that it completed reviews in 98% of all
facilities requiring review by the end of the quarter (September 30)
including all facilities with 200 or more Medicaid beds. The State
argued that it had exercised good faith and due diligence in attempting
to review the facility and would have succeeded but for failings of a
technical nature. Consequently, the State contended, its failure to
review Britthaven of Raleigh could be excused under either the "good
faith and due diligence" or the technical failings exception to the
annual review requirement. North Carolina Br., p. 5.
HCFA framed the issue as follows --
There is no question here that . . . the State had undertaken
annual reviews of 98 percent of facilities requiring such
reviews and reviews of all facilities over 200 beds within 30
days after the . . . quarter; it completed a 100 percent review
within that time period. The question presented is whether the
State has furnished "acceptable reasons" . . . for failing to
fully undertake 98 percent of such reviews . . . when it failed
to review Britthaven/Raleigh during such quarter.
HCFA Br., p. 8 (emphasis added).
HCFA then proceeded to explain its position that neither exception
applies in this case.
At the outset, we note that HCFA's approach evidences a misunderstanding
of how the exceptions apply which we must address prior to considering
the substantive issues.
We have found that the 98% requirement pertains to the completion of
reviews in 98% of the combined total of all facilities where such a
review was required by section 1903(g)(1) during the 12-month period
ending with the close of the quarter in question. See HCFA Action
Transmittal AT-77-106 (November 11, 1977) p. 5.; 43 Fed. Reg. 50925,
November 1, 1978 and 44 Fed. Reg. 56336-56337, October 1, 1979. Thus,
for example, if a state had a total of 100 ICFs, SNFs, and mental
hospitals due for review during the annual period October 1, 1987
through September 30, 1988 it would meet the 98%/200 bed standard for
the September 1988 quarter if it completed reviews in 98 facilities
(including all those with 200 or more certified Medicaid beds). See
Pennsylvania Dept. Public Welfare, DAB No. 746 (1986), p. 10;
Commonwealth of Pennsylvania Dept. of Public Welfare v. U.S. Dept. of
Health and Human Services, C.A. No. 86-1608 (M.D. PA., September 8,
1988). If, as HCFA suggested, North Carolina had failed to "undertake
98 percent of such reviews, . . . during such quarter," there would be
no need to address the question of whether an exception applies.
Our review of North Carolina's Exhibit 4 shows that there were
approximately 90 facilities due for review in the June to September 1988
quarter alone. Given the number of facilities due for review in that
quarter alone and the fact that only one is at issue here, we can safely
conclude that North Carolina met the 98% requirement (a fact which HCFA
did not directly dispute). Thus, the issue which we discuss below is
whether the State failed to review Britthaven of Raleigh due to
technical reasons.
North Carolina contended that the facts here are similar to those in
Massachusetts Commission for the Blind, DAB No. 1001 (1988). There, a
transcription error caused one facility, previously identified as due
for review, to be omitted from the final list of facilities due for
review. Consequently, the facility was not timely reviewed.
Massachusetts discovered its error and ultimately reviewed the facility
10 days after the close of the quarter. Before the Board, the
Commission admitted the untimely review but claimed that it could be
excused under the technical failings exception.
In DAB No. 1001, we found that the technical failings exception would
apply to excuse the untimely review. Recalling our past analysis of
this issue, we noted that there is little guidance on what constitutes a
technical failing. Based on the legislative history of the exceptions,
however, the Board concluded that Congress intended that a state should
aim for 100% compliance. Therefore, the Board has found that an
unexplained failure to attempt a review or a review deficient for no
apparent reason would not qualify as a technical failing. While the
Board agreed with the general principle underlying HCFA's position that
poor administration or bad record keeping should not be considered a
technical failing, the Board also made it clear that not every failure
on the part of a state can be considered poor administration or bad
record keeping. This would render the regulation meaningless since a
technical failing is defined as "circumstances within the State's
control." In Utah Dept. of Health, DAB No. 843 (1987), the Board stated
that the concepts of poor administration and bad record keeping connote
a systemic problem resulting in failings on a regular basis (or at least
more than a singular occurrence) in a state's system of reviews. See
Massachusetts Commission for the Blind, pp. 8-9; see also Wisconsin
Dept. of Health and Social Services, DAB No. 1062 (1989).
As the State noted, the facts of this case are similar to those in DAB
No. 1001. Britthaven of Raleigh was timely identified as being due for
review in the September 1988 quarter, through the State's routine
process for facility identification. Under the month-by-month
scheduling procedures the State was using at that time, the facility was
generally targeted for review in September. However, when the State was
faced with the prospect of rescheduling reviews already set for August,
the possibility arose that Britthaven of Raleigh could be reviewed that
month. In fact, the facility was twice scheduled for review in August,
but ultimately was bumped from both dates. The State's error was in not
changing the date on the spreadsheet to show that Britthaven of Raleigh
was no longer scheduled for August 16-18. Accordingly, Britthaven of
Raleigh was not included in the September review schedule. See North
Carolina Ex. 9.
HCFA admitted that, since North Carolina has abandoned the joint
protocol, the failure to review Britthaven of Raleigh occurred in
circumstances not likely to recur. HCFA Br., p. 15. HCFA attempted
nonetheless to distinguish this case from DAB No. 1001. There, HCFA
noted, the transcription error was part of an otherwise orderly
administrative process. HCFA contrasted the facts of that case with
what it described as confused circumstances here and argued that the
untimely review of Britthaven of Raleigh was attributable to the State's
poor, or chaotic administration. HCFA asserted that a good deal of the
confusion surrounding the review schedules for this quarter was due to
the State's efforts to implement the joint protocol, even though HCFA
had raised some misgivings about the plan. Further, HCFA questioned
North Carolina's priorities, noting that while the State was insistent
that Outer Banks be reviewed at the end of August, the facility was, in
fact, not actually due for review until the following quarter. HCFA
also challenged the State's assertion that the training session
interfered with the review process. Based on its view of the facts, HCFA
argued that the circumstances here clearly did not fall within the
technical failings exception, as interpreted by HCFA in a State Medical
Manual provision dated January 1988 (effective February 10, 1988). We
find that the failure to review Britthaven of Raleigh was attributable
to circumstances which may properly be classified as technical failings.
Admittedly, there was some confusion surrounding the review schedules
during this quarter. This confusion was not, however, attributable to
an administrative failure in the State's system for identifying and
reviewing facilities. Rather, it was caused by the convergence of
several factors: the disrupted attempt by the State to implement a
joint protocol (in an effort to increase efficiency); the need to
reschedule the in-service training; and the complicating factor that
three of the facilities for which rescheduling was necessary were
Britthaven facilities. The mere fact that the State unnecessarily
scheduled Outer Banks in August is not significant since the State still
had the whole month of September to review Britthaven of Raleigh and
presumably would have done so except for the fact that it was checked as
having been scheduled for August.
Moreover, HCFA's position that the State's administration of the review
process was poor loses sight of the following facts: the State had
identified and scheduled Britthaven of Raleigh for review in this
quarter; the error occurred in part because of the change in the State's
system for scheduling reviews; the State did utilize the spreadsheet
mechanism in an attempt to ensure that the month-to-month scheduling
still resulted in a review of all facilities due for review. Also, as
we have found significant in other cases, the State's system caught the
omission and the State acted promptly to correct the error. See, e.g.,
Oregon Dept. of Human Resources, DAB No. 1056 (1989). HCFA argued that
the State's proceeding with the joint protocol was "systemic
administration, poorly done." HCFA Br., p. 14. The facts simply do not
support this conclusion; rather, they indicate that the State reasonably
departed from its usual system to experiment with a new system which may
have been more cost-effective and less burdensome on the facilities.
Although, in hindsight, this was a factor in causing delayed review of
one facility, this does not mean that the State was not reasonable in
experimenting with the protocol. Moreover, although HCFA had apparently
raised some concerns about the joint protocol, this alone does not
render the State's decision to test the protocol evidence of poor
administration.
HCFA's position was also based on the misconception that since the
in-service training was rescheduled on July 19, 1988, it could have been
integrated into the original schedule for August reviews, and that the
in-service training was unrelated to inspection of care reviews. The
record shows, however, that the State originally set the August schedule
on July 15, before the in-service training was changed. Also, the
State explained in its reply brief what HCFA's in-service training
involved and that attendance by the inspection of care teams was
mandatory. North Carolina Reply Br., p. 3, n. 4; see also North
Carolina Ex. 3.
Since we find that the error here was not attributable to a systemic
problem evidencing poor administration, we also conclude that HCFA's
reliance on its interpretation in the State Medicaid Manual provision is
misplaced. Application of the exception here is not contrary to that
interpretation.
In view of our finding we do not need to address the State's arguments
relative to the application of the "good faith and due diligence"
exception.
Conclusion
Based on the foregoing analysis we find that the technical failings
exception applies to excuse the untimely review of Britthaven of
Raleigh. We reverse the entire disallowance of $90,642.04.
_____________________________ Donald F. Garrett
_____________________________ Norval D. (John) Settle
_____________________________ Judith A. Ballard
Presiding Board