Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: Kansas Department of Social and Rehabilitation Services
DATE: May 3, 1993
Docket No. A-92-172
Decision No. 1408
DECISION
The Kansas Department of Social and Rehabilitation Services
(Kansas,
State) appealed a decision by the Health Care Financing
Administration
(HCFA) disallowing $346,482 in federal financial participation
(FFP)
claimed by Kansas under title XIX (Medicaid) of the Social Security
Act
(Act) for the period November 1, 1983 through August 11, 1988.
HCFA
determined that Kansas paid a skilled nursing facility (SNF)
for
intermediate care services provided to Medicaid recipients during
this
period when the facility was certified by the Kansas Department
of
Health and Environment as a SNF and not as an intermediate care
facility
(ICF).
For the reasons discussed below, we sustain the disallowance.
Factual Background
HCFA performed an institutional reimbursement review which focused
on
long-term care facilities certified by Kansas as only SNFs.
Kansas
Exhibit (ex.) A. The purpose of the review was to determine if
there
were payments made for services rendered to recipients who required
only
intermediate care. HCFA discovered that Golden Plains Health
Care
Center (Golden Plains), which was certified as only a SNF, received
FFP
for intermediate care services provided to Medicaid patients
from
November 1, 1983 through August 11, 1988. HCFA disallowed FFP for
these
payments on the ground that they were not made in accordance with
the
state plan. .Golden Plains was licensed by the Kansas Department
of
Health and Environment, the state survey agency, to operate as a SNF
in
1983. Prior to that time, it was dually certified as a
Medicaid
provider for SNF and ICF care. During the approximately
five-year
period in dispute, Kansas urged Golden Plains to apply for
certification
as a dually certified facility, but Golden Plains
refused. Kansas brief
(br.) at 3; Kansas ex. D at 2. Kansas
nevertheless determined to
reimburse Golden Plains the ICF rate (which was
less than the SNF rate)
for some recipients in this facility who needed ICF
services rather than
moving the recipients from the facility.
Applicable law
In order to be eligible for FFP under the Act, state claims for the
costs
of medical services must be in accordance with an approved
Medicaid state
plan. Section 1903(a) of the Act. The state plan must
include
provisions for the state survey agency to conduct an annual
facility survey
to certify that a facility meets particular standards
spelled out in the
regulations. Applicable regulations at 42 C.F.R. .
442.12 provided that
a state Medicaid agency could not make Medicaid
payments to a facility for
SNF or ICF services unless the state survey
agency had certified the facility
under Part 442 to provide those
services. 1/ Section 447.253(b) of 42
C.F.R. provided that the state
plan must specify the methods and standards
used by the state to set
payment rates. 2/ Section 447.252(a)(2) also
required that the Medicaid
agency pay for long term care services using rates
"determined in
accordance with methods and standards developed by the
agency." 3/
"Intermediate care facility services, other than in an institution
for
tuberculosis or mental diseases" were defined at 42 C.F.R. . 440.150
as
services provided in a facility that--
(1) Fully meets the requirements for a State license to
provide,
on a regular basis, health-related services to individuals
who
do not require hospital or skilled nursing facility care,
but
whose mental or physical condition requires services that--
(i) Are above the level of room and board; and
(ii) Can be made available only through
institutional
facilities;
(2) Has been certified to meet the requirements of Subpart C
of
Part 442 of this subchapter as evidenced by a valid
agreement
between the Medicaid agency and the facility for
providing
intermediate care facility services and making payments
for
services under the plan; and
(3) Meets the conditions of Subpart E of Part 442 of
this
subchapter.
"Skilled nursing facility services" were defined at 42 C.F.R.
.
440.40(a)(1) as services that were --
(i) Needed on a daily basis and required to be provided on
an
inpatient basis under .. 409.31-409.35 of this chapter.
(ii) Provided by (A) a facility or distinct part of a
facility
that is certified to meet the requirements for
participation
under Subpart C of Part 442 of this subchapter, as
evidenced by
a valid agreement between the Medicaid agency and the
facility
for providing skilled nursing facility services and
making
payments for services under the plan; or (B) if specified in
the
State plan, a swing-bed hospital that has an approval from
HCFA
to furnish skilled nursing facility services in the
Medicare
program; and
(iii) Ordered by and provided under the direction of
a
physician.
Regulations at 42 C.F.R. . 442.254 specified standards for SNFs
providing
ICF services. These standards required the SNF to meet
certain
additional ICF standards. Among these additional or
different
standards are requirements for: a resident services director
(.
442.304); agreements with outside resources for institutional
services
(. 442.317); rehabilitative services (. 442.343); social services
(.
442.344); and an activities program (. 442.345).
Analysis
Kansas argued that HCFA erred in concluding that the payments made
to
Golden Plains were unallowable because they did not comply with
the
state plan. In addition, Kansas stated that its licensing standards
for
SNFs were equivalent to federal ICF standards, and it argued that
there
was no showing that patients at Golden Plains did not receive
proper
care. Kansas also contended that the provisions of OBRA 87,
which
eliminated the distinction between ICFs and SNFs, could be
given
retroactive application to permit these payments. Kansas
additionally
maintained that its failure to adhere strictly to the
regulations
should not be penalized because its action was in the nature
of
"harmless error."
Kansas has not shown that there was any state plan provision
authorizing
payment to a SNF for ICF care where the SNF was not certified for
ICF
care. Kansas Administrative Regulation 30-10-18 provides the
State's
methodology for setting reimbursement rates for SNFs and ICFs.
Kansas
never denied HCFA's assertion in the disallowance letter (Kansas ex.
D
at 5) that the key to the proper application of this regulation is
that
a facility must be certified for the level of care being
reimbursed.
Instead, Kansas maintained that it was forced by "an
impossibly
difficult circumstance" to adopt a course of action that it
believed
comported with the intent of Congress, HCFA, the principles of the
state
plan, the State's goals, and the welfare of the residents of
Golden
Plains. Kansas br. at 4. Thus, it decided to pay ICF rates
to Golden
Plains while continuing to urge the facility to seek ICF
certification.
As Kansas has offered no evidence that its state plan provided
an
exception to the regulation requiring that a facility be certified
for
the level of care being reimbursed, we conclude that Kansas has
not
shown that these payments were authorized by the state plan.
Although
Kansas maintained that these payments satisfied the principles of
the
state plan, we note that Kansas alleged that it continued to urge
the
facility to obtain ICF certification, which indicated at the least
that
Kansas was concerned that these payments did not comply with its
state
plan. Clearly, payments at an ICF level were contrary to the
applicable
federal regulations, which defined an ICF as a facility with a
valid
provider agreement. Merely paying the lower rate did not rectify
the
lack of certification since the Act differentiated between skilled
and
intermediate care not only on an economic basis, but on a
qualitative
basis as well. Michigan Dept. of Social Services, DAB No.
595 (1984) at
6.
Moreover, once Golden Plains refused to renew its ICF
certification,
Kansas lost any leverage it had to oblige Golden Plains to
obtain ICF
certification, by continuing to pay it for nearly five
years. While we
understand Kansas' reluctance to move the ICF patients
out of Golden
Plains, it is difficult to credit the state's characterization
of this
situation as impossibly difficult. Kansas offered no real
defense to
HCFA's determination, based on a survey of occupancy rates for
ICFs in
the area during 1983-88, that there were other certified ICFs in
the
area that were available to serve these patients during the
five-year
period. See disallowance letter (Kansas ex. D) at 5; HCFA ex.
1. 4/ In
any event, while Kansas' rationale might have supported
payment during a
30-day period for patients resident at the time Golden
Plains first lost
its ICF status while alternative placements were found, it
does not
provide authority for making unauthorized payments for five years.
5/
In addition, Kansas' contention that its SNF standards were equivalent
or
higher than federal ICF standards cannot overcome the Act's
requirement that
payments be made in accordance with an approved state
plan. Although it
argued that the provisions of its regulations tracked
federal regulations
concerning ICF qualifications (Kansas ex. E), there
are significant
differences between state and federal standards. For
example, the
federal standard requires that a physician examine an ICF
resident every 60
days, unless the physician decides this frequency is
unnecessary and records
the reasons for that decision (42 C.F.R. .
442.346), while Kansas requires
only annual physical examinations.
Kansas ex. E at . 38-39-88. In
addition, Kansas' requirement for a
resident's plan of care (id.)is not so
detailed as HCFA's (42 C.F.R. .
442.319), periodic review of social services
and activities services
efforts are not required (compare 42 C.F.R. .
442.344(d)(2) with .
28-30-94; 42 C.F.R. . 442.345(c)(3) with . 28-39-95),
and there are no
provisions for a residents' bill of rights. See 42
C.F.R. . 442.311.
Furthermore, even if Kansas' standards were as similar to
federal
requirements as Kansas claimed, Kansas has not shown that its
surveyors
used federal certification standards, forms, methods, and
procedures for
determining the provider's qualifications. See 42 C.F.R.
. 442.30(a)(1)
and (4). Kansas did not produce survey forms showing
that, for the
period in question, its surveyors checked this SNF for
compliance with
certain federal standards, such as the requirement for a
resident
services director, that were applicable only if a facility was to
be
certified as an ICF. There is simply no documentation in this
case
demonstrating that Golden Plains was in fact certifiable as an
ICF
during this period. Consequently, we cannot conclude that
simply
because Golden Plains was certified to provide SNF services, it was
also
qualified to provide ICF services. Minnesota Dept. of Public
Welfare,
DAB No. 575 (1984) (utilization review reduction upheld where
facility
was certified as an ICF for the years immediately before and after
the
relevant period). 6/
For the same reason, we cannot credit Kansas' assertion that, absent
a
HCFA allegation that the patients were receiving inadequate care,
we
must assume these patients were receiving the care that they
needed.
Contrary to what Kansas argued, it was the State's obligation
to
document the allowability of its claims for these services, not
HCFA's
obligation to show their unallowability by showing that the
patients
were harmed. Only if Kansas could produce provider
agreements
evidencing valid ICF certification surveys for Golden Plains for
this
period would the State be entitled to the presumption that
these
patients received ICF care. See 42 C.F.R. . 442.30. As it
stands,
there is no evidence whatsoever in the record as to what type of
care
these patients received; thus, the claims for costs of these
services
are not allowable. 7/
Kansas also contended that the provisions of OBRA 87 could be
given
retroactive application to authorize these payments. OBRA 87
abolished
the distinction between ICFs and SNFs in favor of a single
category
called "nursing facility," which would be paid at a higher rate
than
ICFs. However, that statute specifically provided that this change
was
to apply to nursing facility services furnished on or after October
1,
1990. Section 4214 of Pub. L. 100-203. The services in this
case were
provided during the period November 1, 1983 through August 11,
1988. As
noted above, the regulations and Kansas' state plan during
that period
conditioned payment of ICF rates upon ICF certification.
That the law,
and Kansas' state plan, was later changed does not excuse the
payment of
Medicaid funds to a facility that was not certified under
then-existing
law.
Finally, Kansas characterized its payment of Golden Plains under
the
circumstances in this case as "harmless error" that should not
be
penalized by a disallowance. We have already found above that
Kansas'
actions violated statutory and regulatory strictures; since this
Board
is bound by all applicable regulations, 45 C.F.R. . 16.14, we have
no
authority to overlook this violation. Moreover, we do not agree
that
this error was either accidental, as Kansas implies, or
harmless.
Kansas has admitted that it made a conscious decision to keep
ICF
patients in Golden Plains despite its lack of ICF
certification. In
addition, there is nothing in this record to
substantiate Kansas' claim
that "[t]he client received at least the type of
services to which the
client was entitled." Kansas br. at 10-11.
Kansas has offered no proof
that, without the safeguards embodied in federal
certification as an
ICF, Kansas got what it paid for. 8/ Thus, we
disagree with Kansas'
contention that its knowing failure to follow
applicable regulations was
harmless error. .Conclusion
Based on the above analysis, we affirm HCFA's disallowance of $346,482.
___________________________
Cecilia
Sparks Ford
___________________________Norval
D.
(John) Settle
___________________________ M.
Terry
Johnson Presiding Board Member
1. The terms "ICF" and "SNF" were deleted by
Congress in the Omnibus
Budget Reconciliation Act of 1987, Public Law No.
100-203 (OBRA 87),
effective October 1, 1990, and HCFA adopted new
regulations to effect
these changes. See 54 Fed. Reg. 5316 (February 2,
1989). Thus, all
citations to the Code of Federal Regulations are to
the 1983 version,
which remained substantially unchanged throughout the
disallowance
period.
2. This provision was moved to 42 C.F.R. . 447.252(b)
effective
December 19, 1983, and the word "comprehensively" was added to
modify
how the state plan must specify methods and standards. See 48
Fed. Reg.
56058.
3. This provision was also amended on December 19,
1983, and read
throughout the rest of the disallowance period, "The Medicaid
agency
must pay for . . . long term care services using rates determined
in
accordance with methods and standards specified in an approved
State
plan." 42 C.F.R. . 253(g) (1984-1988); 48 Fed. Reg. 56057.
4. Kansas characterized the patients involved as
"heavy care"
patients whose treatment needs had changed from skilled nursing
care to
intermediate nursing care and implied that such patients might
be
difficult to place. Kansas br. at 3. We find this unpersuasive
because
the State did not contend that it ever even contacted any of the
ICFs
identified by HCFA as having available beds to inquire whether
those
facilities would accept Golden Plains' ICF patients. Moreover,
"heavy
care" is not a meaningful term since this term is not defined
or
otherwise used to describe a type of Medicaid service.
5. The regulations at 42 C.F.R. . 442.15(c) provided
for
continuation of FFP for services provided by a facility for up to
30
days after its provider agreement expired or was terminated.
6. Kansas contended during oral argument that the Board
should not
follow the Minnesota case in deciding this appeal because the
amount of
money involved here is so much greater. While we are not
bound to treat
our prior decisions as precedents, we are bound by all
applicable
statutes and regulations (see 45 C.F.R. . 16.14), and we have
determined
that the explanation of applicable law in Minnesota is correct and
is
relevant here.
7. Kansas challenged HCFA's reliance in this
case on the statement
in Wisconsin Dept. of Social Services, DAB No.
525 (1984), that
appropriate care for Medicaid recipients does not mean care
at a higher
level. Kansas contended that the intent of the Medicaid
program was to
pay facilities at the proper level of reimbursement, even when
the
facility provided care which exceeded minimum requirements.
This
contention rests, however, on the presumption that the ICF patients
at
Golden Plains were receiving SNF-level care. As noted above, there
is
no evidence as to what type of care these patients were receiving.
8. Kansas stated that it paid for care for these ICF
patients "at
ICF rates." It did not dispute, however, a statement in
the
disallowance letter that Golden Plains filed cost reports as a
SNF.
Kansas ex. D at 1-2. Thus, it is unclear whether Kansas could
have
calculated a proper ICF rate for this