GAB Decision 658
June 7, 1985
Missouri Department of Social Services;
Ballard, Judith A.; Settle, Norval D. (John) Ford, Cecilia Sparks
Docket No. 85-26
The Missouri Department of Social Services (State) appealed a
disallowance of $103,410 taken by the Health Care Financing
Administration (Agency) under section 1903(g) of the Social Security Act
(the Act). The Agency based the disallowance on its determination that
the State failed to meet the statutory and regulatory medical review
program requirements for certain Medicaid patients in two intermediate
care facilities (ICFs) during the period April 1, 1984 through September
30, 1984. The Agency stated that the State had failed to review and
evaluate the medical care provided to each patient at least annually.
During the appeal, the State provided the Agency with documentation that
it met the requirements for the annual inspection of care of patients in
the facilities for the two quarters involved in this appeal. After
considering the documentation, the Agency concluded that the State met
the review requirements for (1) one of the facilities for both quarters,
and (2) the second facility for the second quarter. The Agency,
therefore, reduced the disallowance to $38,941.27. /1/
The State did not contest the Agency's determination with respect to the
second facility for the remaining quarter. As the parties stipulated,
the only issue presented is whether the calculation of the reduction in
reimbursement for ICF services for the quarter beginning April 1, 1984
should exclude the costs of services in intermediate care facilities for
the mentally retarded (ICFs/MR). For the reasons discussed below, we
sustain the disallowance in the reduced amount as calculated by the
Agency. Section 1903(g) of the Act requires that the state agency
responsible for the administration of a state's Medicaid (2) plan under
Title XIX of the Act show to the satisfaction of the Secretary that the
state has an effective program of medical review of long-term inpatient
services in certain facilities. This showing must be made for each
quarter, or the federal medical assistance percentage (FMAP) requested
for amounts paid by the state for long-term care services will be
decreased according to the formula set out in section 1903(g) (5).
Section 1903(g) (5) provides that a reduction in FMAP should be taken
with regard to the State's unsatisfactory or invalid showing with
respect to each "type of facility or institutional services." /2/
The State maintained that the Agency had incorrectly included ICF/MR
costs in the reduction calculation for ICFs. The State argued that when
ICFs/MR are excluded from the penalty calculation, the proper penalty
should be $25,172.54. The State argued that ICF/MR costs should not be
included because the type of services provided in an ICF/MR differs
significantly from the type of services provided in a general ICF. The
State cited regulations that provided different certification standards
for ICFs and ICFs/MR. The State pointed to 42 CFR 456.657 which states
that the reduction is computed "for each level of care specified in a
provider agreement." According to the State, since none of the provider
agreements for the ICFs which were the subject of this review provided
for ICF/MR services, ICFs/MR should not have been included. As further
evidence of its position, the State maintained that the Agency itself
made a distinction between the two types of facilities when it
specifically excluded ICFs/MR from its review. Finally, the State also
argued that 1903(g) (5), which describes the reduction calculation,
speaks of "type of services," which is nowhere defined. The regulations
refer only to levels of care. Since the certification standards are
different, and the Agency did not review any ICF/MR facilities, the
State argued that the regulations are inconsistent with the statute if
they "require the Agency to include in the penalty calculation a type of
services that was not the subject of the federal survey." State Reply
Brief, p. 3.(3) As explained below, we conclude that the applicable
statutory and regulatory provisions support the Agency's position that
ICFs include ICFs/MR for reduction calculation purposes. Section 1903(g)
(1) of the Act, which provides for the reduction, recognizes only four
categories of care: (1) inpatient hospitals, (2) skilled nursing
facilities, (3) intermediate care facilities, and (4) inpatient mental
hospitals. The utilization control regulations implementing the Act also
define level of care in the same way. 42 CFR 456.650(a) provides that
reimbursement for inpatient services at a level of care be reduced when
the State fails to make a satisfactory showing that it has an effective
program of utilization control for that level of care. Section 456.651
defines "level of care" as one of the following types of inpatient
services: hospital, mental hospital, skilled nursing facility,
intermediate care facility, or a facility providing psychiatric services
to individuals under 21 years of age. Since there is no separate
category for ICFs/ MR, the ICF level of care must include ICFs/MR.
Furthermore, the structure of 42 CFR Part 456, "Utilization Control,"
supports our conclusion since there are subparts for different types of
facilities but no separate subpart for ICFs/MR. In addition, Subpart F
of the Part relating to ICFs clearly encompasses ICFs/MR (see section
456.351 which refers back to section 440.150). The different standards
for ICFs and ICFs/MR cited by the State relate to certification of
facilities and do not indicate that ICFs and ICFs/MR should be
considered different levels of care for purposes of calculating the
1903(g) (5) reduction in FMAP, especially in light of the clear
intention of the Act and regulations. Also, for the purposes of section
456.657, which uses the phrase "level of care," there is no indication
that the Agency intended to make a distinction between ICFs and ICFs/MR
for reduction calculation purposes. Furthermore, it is significant that
different types of Medicaid services are defined in section 1905 of the
Act. By statute, "medical assistance" includes ICF services (section
1905(a) (15)); ICF services are, in turn, defined to include ICF/MR
services (section 1905(d)). ICF/MR services are not separately listed
under 1905(a) as "medical assistance" for which the FMAP is available.
Subpart A of 42 CFR Part 440, inter alia, interprets section 1905(a) and
(d) of (4) Section 440.150(c) reflects the statutory provisions by
including ICF/MR services within ICF services (section 440.150(c)).
Sections 1903(g) and 1905 do not differentiate ICF/MR services from ICF
services. We find no support in the statute for the State's argument
that the Agency was incorrectly applying the statute. Finally, the fact
that the Agency chose not to review any ICFs/MR during its review of the
State's quarterly showing does not alter the requirement that the
disallowance be calculated considering all facilities in the ICF level
of care, including all ICFs/MR. The Act does not place a requirement on
the Secretary to review all private and public institutions with
Medicaid recipients during each validation survey or to include ICFs/MR
in every ICF review. (see Section 1903(g) (2) of the Act). Conclusion
For the reasons discussed above we uphold the disallowance of
$38,941.27. /1/ The reduction was also based on long-stay ICF service
figures for 1984 provided by the State in its appeal brief, rather than
1983 figures originally used by HCFA. /2/ Section 2363 of the
Deficit Reduction Act of 1984, Pub. L. 98-369, July 18, 1984, amended
section 1903(g) to delete the paragraphs describing utilization control
requirements other than the medical review program requirement.
AUGUST 08, 1985