GAB Decision 273
March 31, 1982 North Carolina Department of Human Resources; Docket No.
81-116-NC-HC Garrett, Donald; Teitz, Alexander Ford, Cecilia
The North Carolina Department of Social Services (State) appealed
from a determination by the Health Care Financing Administration
(Agency) disallowing $217,461.15 pursuant to Section 1903(g) of the
Social Security Act (Act). The agency found that the requirements in
the Act for physician recertitification and updating of plans of care
were not met with respect to 45 patients in five intermediate care
facilities in the State during the quarter ending September 30, 1980.
The Agency subsequently stated that the amount of the disallowance
should be reduced to $173,632.03 because the original calculation
erroneously applied the Section 1903(g) penalty to all expenditures at
the applicable level of care rather than only to expenditures for
"long-stay services." (Letter dated November 25, 1981) The State then
asserted that the amount of the disallowance should be further reduced
since it had been calculated using the wrong number of facilities.
(Letter dated December 7, 1981) However, the Agency needs additional
time to verify the State's assertion. (Confirmation of Telephone
Conversation, dated March 31, 1982) We conclude that the disallowance in
an amount to be agreed upon by the parties should be upheld.
The Board issued an Order to Show Cause on November 2, 1981, which
discussed the arguments made by the State on appeal, concluding
preliminarily that they had no merit. The State has not submitted any
further substantive arguments concerning that conclusion. Therefore, we
sustain the disallowance based on the analysis as set forth above and in
the Board's Order to Show Cause, incorporating that Order into this
decision. If the parties are unable to reach an agreement, the Board
will consider an appeal on the amount involved at that time.
(2) ORDER TO SHOW CAUSE
The North Carolina Department of Human Resources (State) appealed
from a determination by the Administratory of the Health Care Financing
Administration (Agency) dated July 7, 1981 disallowing $217,461.15
pursuant to Section 1903(g) of the Social Security Act (Act) for the
quarter ending September 30, 1980. The disallowance was based on an
onsite survey conducted by the Agency as part of the validation
procedures under Section 1903(g)(2) of the Act in which the Agency found
that the requirements for physician recertification and updating of
plans of care in Section 1903(g)(1)(A) and (B) of the Act were not met
with respect to 45 patients in five intermediate care facilities (ICFs)
in the State. As discussed below, it tentatively appears that the
disallowance should be sustained. The purpose of this Order, which is
based on the application for review, with attachments, the Agency's
response to the appeal, and on the State's response to a request by the
Board for additional information, is to give the State an opportunity
for further briefing before the Board proceeds to decision. No response
is requested from the Agency at this time, although it will be afforded
an opportunity to respond if substantial new issues are raised by State.
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 types of facilities, for each quarter that federal
medical assistance is requested for such services, or the federal
medical assistance percentage (FMAP) must be decreased by an amount
determined pursuant to the formula set out in Section 1903(g)(5). The
State "must" show that --
(A) in each case for which payment is made under the State plan, a
physician certifies . . .(and recertifies, where such services are
furnished over a period of time, in such cases, at least (3) every 60
days, . . .) that such services are or were required to be given on an
inpatient basis because the individual needs or needed such services;
and
(B) in each such case, such services were furnished under a plan
established and periodically reviewed and evaluated by a physician.
(Sections 1903(g)(1)(A) and (B))
The Agency has implemented these statutory provisions for ICFs at 42
CFR 456.360 and 456.380. Section 456.360(c) requires that
recertification be made "at least every 60 days after certificatin."
Section 456.380(c) requires that an interdisciplinary team or health
professionals "review each plan of care at least every 90 days." The
State must make a satisfactory showing, in each quarter, that it has met
these requirements for each recipient in order to avoid a reduction in
federal financial participation. 42 CFR 456.652(a).
The penalty prescribed by Section 1903(g) takes the form of a
reduction of a state's federal medical assistance percentage which
results in a reduction of federal funds received by the State. Section
1903(g)(5) specifies that the percent amount of the reduction --
is equal to 33 1/3 percentum multiplied by a fraction, the
denominator of which is equal to the total number of patients receiving
that type of services in that quarter under the State plan in facilities
or institutions for which a showing was required to be made under this
subsection, and the numerator of which is equal to the number of such
patients receiving such type of services in that quarter in those
facilities or institutions for which a satisfactory and valid showing
was not made for that calendar quarter.
This provision was implemented at 42 CFR 456.657
Statement of the Case
The Agency found violations of the applicable statute and regulations
in five of the ICFs surveyed. Specifically, it found that the
requirement for recertification within 60 days was not met with respect
to 44 patients, and in addition, that the requirement for updating of
the plan of care within 90 days was not met with respect to 15 of those
44 patients. The Agency further found that the requirement for updating
of the plan of care only was not met with respect to a 45th patient.
The State submitted with its application for review documentation (4)
purporting to show, for each of the 45 patients, that either (1) there
was recertification and/or updating of the plan of care within the
required time period, or (2) medical records and onsite review supported
the need for continued ICF care. (Application for review, Attachments 6
- 10.) The principal thrust of the State's argument, which this
documentation is intended to support, is that the State's failure to
meet these specific requirements does not necessarily indicate that the
State did not have an effective program of utilization control within
the meaning of Secction 1903(g) of the Act.The State asserts that it
cannot force physicians to make recertifications within the required
time periods and therefore has developed other means of assuring that
patients are receiving the appropriate level of care. The State argues
that any violations are thus technical in nature and that the Act
permits technical violations to be excused. (Application for review,
pp. 2-5; Letter dated September 9, 1981, pp. 1-2.)
The State also argues that the Agency did not determine the amount of
the disallowance in accordance with the formula in Section 1903(g)( 5)
of the Act. It argues that the Act "provides a penalty formula based on
the ratio of the number of recipients whose records are determined not
to validate need for ICF level of care during a specified period to
total number of recipients receiving services during that period. The
formula adopted by HCFA penalized the State based on a ratio of the
number of facilities in which the requirements were not met to the total
number of facilities enrolled in the State's program." (Letter dated
September 9, 1981, p. 3.)
The State also asserts that it did not have an opportunity to
informally resolve matters before the issuance of the notification of
disallowance. (Application for review, p. 2.) In response to the
Board's inquiry, however, the State later stated that it had "suffered
no material prejudice...if the Grant Appeals Board has the authority
to...reverse the findings of and penalty assessed by (the Agency)."
(Letter dated September 9, 1981, p. 3.) Since the Board possesses such
authority (although it would not exercise it unless the facts and the
law warranted reversal), it does not appear necessary to pursue this
matter.
Discussion
In its request for the Agency's response to the appeal, the Board
instructed the Agency to examine the documentation provided by the State
regarding the 45 patients, and to state "with respect to each individual
whether the State has provided any basis for withdrawing the
disallowance, and if not, why not." (Letter dated August 11, 1981, p.
2.) The Agency did not comply with this instruction, maintaining only
that "(the) State is unable to refute the findings of HCFA . . . . "
(5)
(Letter dated September 10, 1981, p. 3.) It appears, however, that even
if the Agency had accepted the documentation as showing that there were
in fact no violations for some of the 45 patients, the amount of the
disallowance would not be affected. This appears to be the case because
the State concedes that, in each of the five facilities, there was at
least one patient (in most cases substantially more) for whom there was
no timely recertification or updated plan of care: (Application for
review, Attachements 6-10.) As discussed further below, the same result
is obtained under the formula in Section 1903( g)(5) regardless of the
number of patients in a particular facility with respect to whom
violations occur. Thus, it does not appear necessary to require the
Agency to examine the documentation in question. This Board reached the
same conclusion on similar facts in Virginia Department of Health,
Decision No. 208, August 28, 1981 (at p. 2).
As noted earlier in this Order, the State argues that the Agency
improperly based the disallowance on the ratio of the number of
facilities in which violations were found to the total number of
facilities participating in the State's Medicaid program during the
period in question, contending that the relevant data is the number of
patients ("recipients") with respect to whom violaions are found
compared to the number of patients served in all participating
facilities. It tentatively appears that the State is in error in two
respects. First, while it is true that Section 1903(g)(5) calls for
numbers of patients and not facilities, the regulation implementing
Section 1903(g)(5) allows the Agency to use facility data for
calculating the disallowance in the absence of exact data acceptable to
the Agency. Section 456.657(b) to Title 42 CFR provides that --
If any of the data required to compute the amount of the reduction in
FFP are unavailable, the Administrator will substitute an estimate. If
the State agency determines the exact data to the satisfaction of the
Administrator, the estimate may later be adjusted. If the number of
recipients in individual facilities is not available, the fraction
specified in paragraph (a)(1) of this section will be estimated, for
each level of care, by dividing the number of facilities in which the
requirements were not met by the total number of facilities for which a
showing is required under this subpart.
In its decision in Virginia Department of Health, cited above, this
Board sustained a disallowance computed using facility data, citing this
regulation. The Board also noted in that decision that it had
previously held that the use of facility rather than patient data (6)
was reasonable even with respect to periods before the effective date of
the regulation. (See decision at p. 6 and decisions cited therein. See
also, Colorado Deparement of Social Services, Decision No. 218,
September 30, 1981, at p. 17.) In the instant case, the State was
informed in an attachment to the notification of disallowance that the
Department lacked specific data on the number of recipients in
individual facilities and that the State could supply exact recipient
data during the reconsideration process.(Section 1903(g) Penalty
Estimation Procedure, footnote.) The State has not yet done so.
Even if the State had supplied exact patient data, the State appears
to be incorrect in its assertion that the numerator of the fraction
properly consists of the number of patients with respect to whom
violations are found. Section 1903(g)(5) states that the numerator "is
equal to the number of such patients receiving such type of services ...
in those facilities or institutions for which a satisfactory and valid
showing was not made for that calendar quarter." Construing this
provision in Missouri Department of Social Services, Decision No. 214,
September 23, 1981, this Board stated that --
... the modifying clause "for which a satisfactory and valid showing
was not made for that calendar quarter" comes after the words
"facilities or institutions", not after "patients." Under
common rules
of grammatical construction, it would appear that the formula provides
that the numerator consist of the number of patients in those
insitutions in which violations were found. (Decision at p. 5.)
Accordingly, it appears that any recalculation of the penalty based
on exact patient data supplied by the State would have to consider the
total number of patients in the facilities in which violations were
found.
The argument made by the State that the violations in question are
minor ones which should be waived has been considered by this Board in
several other cases involving similar violations of Section 1903(g).
Tennessee Department of Public Health, Decision No. 167, April 30, 1981;
Colorado Department of Social Services, Decision No. 169, April 30,
1981; Ohio Department of Public Welfare, Decision No. 191, June 24,
1981; Georgia Department of Medical Assistance, Decision No. 207,
August 28, 1981; Virginia Department of Health, cited above; Colorado
Department of Social Services, Decision No. 218, September 30, 1981; and
Ohio Department of Public Welfare, Decision No. 219, September 30, 1981.
In each case, the Board has concluded that the Agency's position that
the Secretary lacks discretion to waive the (7) penalty for even minor
violations is a reasonable one, and has upheld the disallowance. As
more fully explained in the decisions cited above, the Board's
conclusion rests on the fact that the statutory and regulatory language
is clear, that the legislative history indicates that Congress did not
intend a waiver, that the Agency has consistently interpreted the
statute as not permitting a waiver, and that the Agency's interpretation
must be accorded some deference by the Board. The decisions also note
that an Opinion of the Comptroller General (#B-164031(3).154, March 4,
1980) supports the conclusion that the Agency has no discretion to waive
the penalty even for minor violations of Section 1903(g). The
Comptroller General's Opinion concludes that the Secretary has no
alternative but to consider a state's showing unsatisfactory or invalid
if the requirements of Section 1903(g) are not met in every case. None
of the arguments made by the State appear to warrant a different
conclusion in this case.
Order
(7) No material facts appear to be in dispute. It does not appear
likely that an evidentiary hearing will be required or that an informal
conference will be useful. It appears tentatively that this case should
be decided on written record and argument.
Accordingly, it is directed that, within 30 days of the receipt of
this Order, the State show cause in writing why the appeal in this case
should not be denied on the ground that there was at least one violation
of the requirements of Section 1903(g) in each of the five facilities in
question, that the penalty required for such violations was property
computed, and that the Secretary has no discretion to waive the penalty.
The State's response should also indentify the respects, if any, in
which the foregoing statement of the case and analysis of the issue are
inaccurate or incomplete. Its response may include in addition a
discussion of any others issues considered relevant.
OCTOBER 22, 1983