GAB Decision 177
May 27, 1981 South Carolina Department of Social Services; Docket No.
79-78-SC-HC Garrett, Donald; Teitz, Alexander Ford, Cecilia
The South Carolina Department of Social Services (State) appealed
from a penalty disallowance of $255,831 made by the Health Care
Financing Administration (Agency) pursuant to Section 1903(g) of the
Social Security Act (the Act) for the quarter ending June 30, 1978. The
penalty disallowance was made after an Agency validation survey, as
required by Section 1903(g)(2) of the Act, in which the Agency
determined that the State violated Section 1903(g)(1)(D), requiring
annual medical reviews in certain facilities. We conclude that the
disallowance should be reversed because the State has met the technical
failings exception of Section 1903(g)(4)(B).
The record in this appeal consists of the State's application for
review, the Agency's response to the appeal, a supplemental memorandum
filed by the Agency informing the Board of a Comptroller General's
Opinion concerning this Section of the Act, /1/ and the parties'
responses to the Board's Order to Show Cause, dated March 6, 1981. We
have determined that there are no material facts in dispute which a
hearing would help resolve, and that a conference or hearing would not
assist the development of the issues.
Pertinent Statutes and Regulations
Section 1903(g) of the Act requires that the State agency responsible
for the administration of the State's Medicaid plan under Title XIX of
the Act show to the satisfaction of the Secretary that there is an
"effective program of control over utilization of" long-term inpatient
services in certain facilities, including "hospitals for mental
diseases." This showing must be made for each quarter that the federal
medical assistance percentage (FMAP) is requested with respect to
amounts paid for such services for patients who have received care for
90 days in "hospitals for mental diseases," or the FMAP will be
decreased according to the formula set out in Section 1903(g)(5). The
satisfactory showing must include evidence that the State has an
effective program of medical review (MR) of the care of patients in
mental hospitals (Section 1903(g)(1)(D)). Independent professional
review teams must review and evaluate the professional management of
each case "at least annually," including the care provided to the
patient, the adequacy of available services, the necessity and
desirability of the patient's continued placement in the hospital, and
the feasibility of meeting the patient's health care needs through
alternative services. The teams' findings and recommendations are to be
put in full reports. (Sections 1903(g)(1)(D) and 1902(a)(26)).
The implementing regulations in effect during the quarter in question
were 42 CFR 450.18(a)(4) and 450.20(b), which required that the medical
reviews of the care of patients in mental hospitals meet the
requirements of Sec. 450.23. 42 CFR 450.23(a)(3)(iii) stated that a
State plan must provide for methods and procedures assuring that a
medical review is made in each "institution for mental diseases . . .
not less often than annually." /2/ Section 450.23(a)(3)(v) required that
the review include personal contact with and observation of each patient
under 21 receiving assistance under the plan in such an institution and
that review for patients 65 years or older include review of their
medical records, or personal contact if the records are unavailable or
inadequate. 42 CFR 450.23(a)(4)(i) provided that the medical review
report must include observations, conclusions, and recommendations on
the adequacy and quality of all patient services in the institution and
specific findings for individual patients.
Section 1903(g)(4)(B), discussed later in this decision, provides an
exception to the requirement of Section 1903(g)(1)(D).
Statement of the Facts
The hospital involved here, one of two mental hospitals in the State,
entered the Medicaid program on July 1, 1968 (State Response to Order to
Show Cause, April 22, 1981). Annual medical reviews of the hospital
were conducted in July 1976 and June 1977 (Letter from Virgil L. Conrad,
State Commissioner to Agency Regional Medicaid Director, August 30,
1978). Medical reviews conducted at the hospital in April, May, and
June, 1978 did not include one of the hospital's fifteen buildings. On
August 29, 1978, soon after the State discovered this omission, it
conducted a review of that building (State Response to Order to Show
Cause, April 22, 1981). Federal reviewers conducted a validation survey
at the State Agency during August 1978 to determine whether timely
medical reviews had been performed for all patients for the facilities
in which reviews were required for the quarter ending June 30, 1978.
They determined that a timely medical review was not performed in one
building (Notice of Disallowance, March 30, 1979, page 1).
Discussion
The issues in this appeal are whether the required medical review of
each patient was conducted in a timely manner and, if not, whether the
State may be excused under the exception provided in Section 1903(g)(
4)(B).
A. Timeliness of the Review
The State (Response to the Order to Show Cause April 22, 1981, pages
2-3) alleged that, under Action Transmittal HCFA-AT-77-106, a medical
review is timely if conducted by the end of the anniversary quarter of a
facility's entry into the Medicaid program. The State argued that
because the hospital entered the Medicaid program on July 1, 1968, the
1978 review was not due until the end of the anniversary quarter for the
facility's entry into the program ten years earlier, i.e., by September
30, 1978. The Agency argued that the review was due by the end of the
anniversary quarter of the last prior review of the facility, i.e., by
June 30, 1978.
The statutory and regulatory provisions require that reviews such as
these be made "annually." In order to understand the statement made
in
HCFA-AT-77-106, it is necessary to consider it in the context of the
development of the Agency's written policy. The Agency first set out
its interpretation of the "annual" requirement in May, 1976.
(A) complete inspection by an MR team must be made in each SNF and MH
within the first 12 months of a facility's certification as a Title XIX
provider and that each subsequent inspection by the team must be
completed within 12 months of the last prior inspection. (Action
Transmittal SRS-AT-76-79, May 14, 1976, addressed to State
Administrators and other interested agencies and organizations, pages
2-3.)
The Agency amplified its definition of "annual" in June, 1976.
(It) logically follows from our definition that an inspection in a
facility (by either an MR or an IPR team) which is completed more than
12 months after the last prior inspection in that facility is not in
accordance with Federal timeliness standards. (Action Transmittal
SRS-AT-76-88, June 3, 1976, addressed to State agencies administering
medical assistance programs)
SRS-AT-76-88 provided the following example:
Example 1: A facility becomes a certified Title XIX provider of SNF
services on July 1, 1976. The first inspection by an MR team must be
completed on or before June 30, 1977. If the first inspection is
completed on April 1, 1977, the next inspection must be completed on or
before March 31, 1978.
Note that the due date of the second review is keyed according to the
date of the previous review rather than the date of the facility's entry
into the Medicaid system.
The Agency added a "clarification" of the two previous Action
Transmittals December, 1976 (Action Transmittal SRS-AT-76-176, December
8, 1976, addressed to State agencies administering medical assistance
programs). This Transmittal stated that the determinant of the due date
should be the calendar month, rather than the particular day the review
occurred. Thus, in the example provided above (using the clarification
set forth in SRS-AT-76-176), the first inspection would be due by July
31, 1977. If the first inspection were completed on April 1, 1977, the
next inspection would need to be completed on or before April 30, 1978.
Finally, Action Transmittal HCFA-AT-77-106, November 11, 1977,
addressed to State agencies administering medical assistance programs,
summarized the provisions of P. L. 95-142, enacted October 25, 1977. It
stated, at page 3, that the enactment of P. L. 95-142 effected a change
in Agency policy. The requirement of a review no later than the end of
the anniversary month was relaxed so that "(under) 1903(g) as modified
by P.L. 95-142, effective with quarters beginning on or after January 1,
1977, a MR or IPR will be timely if it is conducted by the end of the
anniversary quarter of the facility's entry into the program or of the
last prior review." /3/ It is this statement that the State relies upon
for its position.
The Agency's interpretation of the annual review requirement, as
expressed in its regulation implementing P.L. 95-142, was also
consistent with its policy as expressed in Action Transmittals 76-79 and
76-88. The regulation says:
An on-site review is required in a facility by the end of a quarter
if the facility entered the Medicaid program during the same calendar
quarter 1 year earlier or has not been reviewed since the same calendar
quarter 1 year earlier. (emphasis supplied) (42 CFR 456.652(b)(2))
The Action Transmittals 76-79 and 76-88 clearly established that once
a facility has been in the program for over a year and at least one
review has been conducted, the anniversary for the next review is
calculated based on the prior review rather than the date of entry into
the program. Action Transmittal 76-176 merely clarified that the
reviews were due within the anniversary month rather than on the
anniversary day. Action Transmittal 77-106 modified this policy only
with regard to the fact that reviews were due in the anniversary quarter
rather than the anniversary month (43 FR 50924, November 1, 1978).
Although the statement in 77-106 quoted above is susceptible of more
than one interpretation when read alone, the Board concludes that it was
not intended to be a statement of a new policy. A construction of the
policy statement in HCFA-AT-77-106 that would allow a State to use
either the facility's entry into the Medicaid program or the date of the
last prior review as the anniversary date for the next review would be
inconsistent, in the context of the Agency's expressed interpretation of
"annual" prior to HCFA-AT-77-106 and the subsequently promulgated
regulation. Furthermore, the Agency's interpretation implements the
underlying statutory policy that medical reviews be conducted regularly
in all facilities during a 12 month period (H. Rep. 95-673, at 102,
October 11, 1977). To construe the word "annual" as once each calendar
year, or to permit a choice of either the date of a facility's entry
into the program or the date of the last prior review as the basis for
calculating the next review date, would allow a State to establish an
irregular review pattern and would be a contravention of the basic
statutory policy. Thus, we conclude that a review would have had to be
completed by June 30, 1978 in order to be timely.
B. Adequacy of the Reviews
Although the State's application for review focused on the Agency's
statement in the notice of disallowance that adequate medical reviews
had not been done in one building of a fifteen-building facility, there
appears to be general agreement by the parties that the issue is not
whether a particular physical component of an institution has been
reviewed (Agency Response to Order to Show Cause, page 7; State
Response to Order to Show Cause, pages 1 and 2). The adequacy of a
medical review is determined by whether the regulatory requirements set
forth at 42 CFR 450.23 have been met. These include observation of and
reporting on the adequacy and quality of all services in the facility
(450.23(a)(3)(v)(A) through (F)), as well as specific findings about all
individual patients (Section 1903(g)(1)(D) and 42 CFR 450.23(a)(4)( i)
/4,/, although personal contact with patients 65 years or older is not
necessary unless their medical records do not contain adequate reports
of periodic assessment of the patients (450.23(a)(3)(v)). Thus, the
issue is whether the review met these requirements.
The record shows that there were 43 Medicaid patients residing in the
building which was not timely reviewed (Application for Review, April
25, 1979, page 2; State's Response to Order to Show Cause, April 22,
1981, Appendix A). All of these patients were 65 years or over. The
Board's Order to Show Cause, March 6, 1981, asked whether these patients
were reviewed, whether their records had been reviewed, and whether it
was possible for the review team to report on the adequacy and quality
of facility services to patients if the building was not reviewed. The
State responded that the building was "basically a housing unit with
treatment and even meals being provided in other buildings," and that,
therefore, it would be possible for the review team to report on the
adequacy and quality of facility services without physically inspecting
the building (State Response to Order to Show Cause, Appendix A). The
record does not reflect, however, any timely reports or specific
findings with regard to the 43 patients; in fact, the record shows that
the State admits that it did not complete medical reviews for the
patients in the building until August 29, 1978 (Letter to Regional
Medicaid Director from State Commissioner of Social Services, August 30,
1978; State's Response to Order to Show Cause, April 22, 1981, pages 3
and 4). Thus, we conclude that the State did not conduct adequate and
timely medical reviews as required by Section 1903(g)(1)(D) and 42 CFR
450.23 for the 43 patients residing in one building of the mental
hospital.
C. Exception to the Section 1903(g)(1)(D) Requirement, as provided
by Section 1903(g)(4)(B)
Section 1903(g)(4)(B) says:
The Secretary shall find a showing of a State with respect to a
calendar quarter under paragraph (1), to be satisfactory under such
paragraph with respect to the requirement that the State conduct annual
onsite inspections in mental hospitals, skilled nursing facilities, and
intermediate care facilities under paragraph (26) and (31) of section
1902(a), 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. /5/
There are only two mental hospitals in the State; if one hospital is
out of compliance because there was no medical review for some of its
patients, the State cannot meet the 98% requirement for that level of
care. /6/ Furthermore, since there were 792 Medicaid patients in the
facility (State's Response, to Order to Show Cause, April 22, 1981,
Appendix A), the hospital would be considered a facility with 200 or
more certified Medicaid beds and must be reviewed. Therefore, the State
would not meet either of the numerical requirements necessary to qualify
for the good faith and due diligence exception.
On the other hand, the State's action does fall within the "technical
failings" exception. Previous decisions of this Board have interpreted
the provision so that a State need not meet the 98%, 200-bed requirement
in order to be excused by a technical failing (Ohio Department of Public
Welfare, Decision No. 66, October 10, 1979, and Utah Department of
Health, Decision No. 168, April 30, 1981). The Agency's statement of
the exception, as expressed in the preamble to its final regulation, /7/
published at 44 FR 56336, October 1, 1979, also interpreted the
provision in this way, although the regulation and its explanation in
the preamble confined the statutory provision further by requiring that,
in order for a failure to meet the 98%, 200-bed standard within the
quarter to be excused, the 98%, 200-bed requirement must still be met
within 30 days after the close of the quarter.
The regulation was not effective during the quarter in question here.
/8/ We conclude that it would be possible for the State to make a
satisfactory showing if it were excused by a technical failing, even
though the reviews were made later than 30 days after the end of the
quarter.
Neither party has pointed to a precise definition of technical
failings. Action Transmittal HCFA-AT-77-106 cited the only pertinent
legislative history, which stated that technical noncompliance would
include instances where a State reviewed patients in most facilities on
time with the remaining facilities reviewed "several weeks after the
deadline for completion of all reviews" (S. Rep. 95-453, September 26,
1977, page 41). The Action Transmittal also said:
This provision thus gives the Secretary some limited discretion to
find satisfactory a showing that indicates that all facilities have been
reviewed since the beginning of the annual period ending on the last
date of the showing quarter, although some facilities were not reviewed
until after the end of the showing quarter. (page 9)
In this case the State performed reviews in the facility within the
anniversary quarter. As soon as the State discovered that the patients
in one building had not been reviewed, it reviewed them. This could be
viewed as a mere technical failing. Furthermore, the record shows that
the review process was hampered by the fact that the institution
transferred patients from building to building and closed and reopened
wards because of heat, thus confusing the reviewers (Letter to Regional
Medicaid Director from State Commissioner of Social Services, August 30,
1978, Exhibit 2 of State's Application for Review; Letter from the
State reviewer to the Department of Social Services, December 14, 1978,
Exhibit 7 of State's Application for Review). The Agency has not
refuted this evidence. We conclude that a failure to review one
building under such circumstances can be considered "technical."
The Agency invokes its regulation, 42 CFR 456.653(b), which provides
that where a state does not meet the 98%, 200-bed standard within the
quarter due to technical failings, its showings will be considered
satisfactory if it meets the standard "within 30 days after the close of
the quarter." This regulation did not become effective until December
31, 1979, however, and did not apply during the quarter for which the
reduction was made. The applicable Agency policy during the quarter
involved here was stated in HCFA-AT-77-106, which simply said, "For
example, the Secretary could find satisfactory a showing for the quarter
ending December 31, 1977 which showed that all facilities had been
reviewed since January 1, 1977, although some reviews had not been
completed until January 1978." This statement is, by its own words,
merely exemplary. It can hardly be taken as a statement of the maximum
amount of time allowable to complete a missed or unsuccessful review
under the exception. The NPRM containing Sec. 456.653 (43 FR 50925,
November 1, 1978) phrased the proposed policy in terms of future
application. Thus, there is no evidence that the 30-day limit was other
than a proposal of future policy until finally promulgated. There is no
basis for concluding that such a restriction would be effective prior to
final promulgation of the rule, particularly because the statutory
language does not mention a time limit by which the 98% standard must be
met. The preambles to both the NPRM and the Notice of a Final
Regulation (44 FR 56335, October 1, 1979) quote the legislative
history's phrase "several weeks." The word "several" is,
of course,
indefinite. Webster's Third New International Dictionary defines it as
"being more than two but fewer than many." This does not mean, of
course, that the State could meet the "technical failings" exception
by
completing a review any time it wished. Clearly it was bound to a
reasonable standard. In the absence of an effective regulation or other
definitive statement by the Agency of currently applicable policy, this
Board will look to Congressional intent and reason to determine the
standard.The State conducted a review within the quarter but was
technically unsuccessful in its attempt to complete the requirements.
Completion of a satisfactory review of the hospital as soon as the
discrepancy was discovered, within several weeks of the end of the
anniversary quarter, should be deemed a compliance with the statute, in
the absence of a promulgated regulation or other requirement binding on
the State during the period in question. Thus, we conclude that the
State has met the requirements of the technical failings exception, as
provided in Section 1903(g)(4)(B).
D. Calculation of the Penalty Section 1903(g)(5)
Although the State raised several issues pertaining to the Agency's
calculation of the penalty, we do not address these since we have
concluded that the disallowance should be reversed and, therefore, no
penalty should be imposed.
Conclusion
The State was required to complete an adequate and timely medical
review of all patients in the facility on or before June 30, 1978.We
conclude that the State did not conduct an adequate and timely review in
one of two mental hospitals in the State since it did not complete the
reviews by June 30, 1978. We also conclude that, although the State did
not meet the 98%, 200-bed requirement necessary to qualify for the
statute's good faith and due diligence exception, the State did meet the
technical failings exception by completing the required reviews in
August 1978. Therefore, we conclude that the disallowance should be
reversed. /1/ The Comptroller General's Opinion referred to the
question of whether the Secretary had the discretion to waive
the penalty for violations regarding only a few patients. This question
is not an issue in this decision. /2/ Section 1903(g) refers to
"(hospitals) for mental diseases" and "mental hospitals."
These terms
are used by the Agency as references to levels of care (SRS-AT-76-88,
June 3, 1976, page 1). While we do not decide here whether the term
"institution for mental diseases," as used by the Agency, can include
more than mental hospitals, it seems clear that the term does include
mental hospital level of care and, therefore, 42 CFR 450.23 applies to
the facility involved here. /3/ The Agency based this change on
the language in Section 1903(g)(4)(B), added by P.L. 95-142, which says,
" . . . 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 . . . ." /4/ Section 1903(g)(1)(D) refers
to review and evaluation of the "care" and "professional management
of
each case." /5/ The Agency published its final regulation
implementing this provision at 44 FR 56338, October 1, 1979. The
regulation became effective December 31, 1979 and is codified at 42 CFR
456.653. /6/ The Agency's policy generally is to survey one
level of care and take a penalty based only on that level of care. The
numerical standard in Section 1903(g)(4)(B) is also calculated on the
basis of only the level of care being surveyed (SRS-AT-76-88, June 3,
1976, page 1). /7/ 42 CFR 456.653 says: The Administrator will
find an agency's showing satisfactory, even if it failed to meet the
annual review requirements of Sec. 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 by the close of the
quarter 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. /8/ The Agency admits that the regulation
is not binding for purposes of this case (Agency's Response to Order to
Show Cause, April 24, 1981, page 11).
OCTOBER 04, 1983