DEPARTMENTAL GRANT APPEALS BOARD
Department of Health and Human Services
SUBJECT: Georgia Department of Medical Assistance
Docket No. 88-17
Decision No. 974
DATE: August 4, 1988
DECISION
The Georgia Department of Medical Assistance (Georgia/State) appealed
a
determination by the Health Care Financing Administration
(HCFA/Agency)
disallowing $128,879.58 in federal funds claimed by the State
under the
Medicaid program of the Social Security Act (Act) for the
quarters
ending March 31 and June 30, 1987. The disallowance was taken
pursuant
to section 1903(g)(1) of the Act, which provides for reduction of
a
state's federal medical assistance percentage of amounts claimed for
a
calendar quarter for long-stay services unless the state shows
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 initially alleged that Georgia failed to conduct satisfactory
annual
reviews at three long-term care facilities--Atlanta Care
Convalescent Center
(Atlanta Care), an intermediate care facility (ICF),
where the State failed
to review one patient; Brown's Nursing Home
(Brown's Home), a
dually-certified facility operating as both an ICF and
a skilled nursing
facility (SNF), where the State failed to review one
SNF patient; and
Hospitality Care Center of Clayton County (Hospitality
Care), a dually
certified facility, where the State failed to review one
SNF patient.
Upon consideration of documentation submitted by the State
during this
appeal, HCFA withdrew its finding of a violation at
Hospitality Care.
Accordingly, the disallowance has been reduced to
$104,887.73. HCFA
Reply Memorandum (June 27, 1988); HCFA Exhibits
(Exs.) 17 and 18.
Georgia asserted a variety of defenses against the disallowance which
we
discuss below. Based on the following analysis, we sustain
the
disallowance. As explained in section 4 of our analysis, Georgia
will
have an opportunity to present exact recipient data in an effort
to
reduce the amount of the disallowance.
Applicable Law
Generally, section 1903(g)(1) of the Act requires that a state make
a
satisfactory showing that it has an effective program of medical
review
of the care of patients in SNFs and ICFs. Section 1902(a)(31)
requires
that a 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, . . . .
The quarterly showing requirements are implemented by regulation at
42
C.F.R. Part 456.
The Act contains certain limited exceptions to the section
1903(g)(1)
annual review requirement. Specifically, section
1903(g)(4)(B)
provides--
The Secretary shall find a showing of a State, . . .
under
paragraph (1), to be satisfactory . . . 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.
The statutory exceptions are implemented by regulation at 42
C.F.R.
456.653(a) and (b). Failure to make a satisfactory showing will
result
in the reduction of a state's federal medical assistance
percentage
under a formula set out at section 1903(g)(5) and 42 C.F.R.
456.657. We
will refer to other regulations as needed in our
analysis.
Background
Atlanta Care is a 103 bed ICF which was reviewed on January 27, 1987.
The
patient at issue was not included on the census of Medicaid
recipients
provided to the State review team by the facility.
Consequently, the review
team was unaware of the need to review this
patient. Georgia Brief
(Br.), p. 5; Georgia Ex. 3, p. 4.
Brown's Home is a 63 bed dually-certified facility which was reviewed
on
March 23, 1987. One SNF patient was not reviewed at this time
because
she was listed on the facility's census as a private pay
patient.
Georgia indicated that this patient had been listed as private
pay
because her Medicaid eligibility had been "in question for some
time."
However, she had in fact been found Medicaid eligible February 3,
1987
(retroactive to December 1, 1986). Georgia Br., pp. 4-5; Georgia
Ex. 3,
p. 4.
The facts are uncontested. HCFA assessed a disallowance for the
quarter
ending March 31, 1987, concluding that Georgia had failed to
conduct
satisfactory annual reviews at these facilities. HCFA based
the
disallowance for the June 30 quarter on 42 C.F.R. 456.652(b)(3),
which
provides that when a facility is not reviewed in a quarter in which
a
review is due, the facility continues to require a review in
each
subsequent quarter until a review is performed.
Analysis
Below we consider separately each aspect of the State's argument
for
reversal of the disallowance.
1. The Statutory Review Requirement and the Exceptions
Georgia argued that HCFA's strict interpretation of the annual
review
requirements as well as the manner in which the exceptions are
applied
is arbitrary and capricious. Georgia pointed out that its review
missed
only two patients at two facilities and thus could not be
considered
systemically flawed. Further, the State noted that it had
satisfied the
98%/200 bed standard of section 1903(g)(4)(B). Therefore,
it argued,
its failure to complete the reviews could be excused under the
statutory
exceptions. Georgia Br., pp. 8-11.
The State's position here is no more than a general reiteration
of
arguments previously considered and rejected by this Board. We
have
thoroughly considered the question of whether the statutory
annual
review requirements may be met where a state simply fails to review
a
small number of recipients in a facility who were required to
be
reviewed. See Delaware Dept. of Health and Social Services, DGAB
No.
732 (1986), rev'd, Delaware Div. of Health and Social Services v.
U.S.
Dept. of Health and Human Services, 665 F. Supp. 1104 (D. Del.
1987);
Pennsylvania Dept. of Public Welfare, DGAB No. 746 (1986);
and
Washington State Dept. of Social Services, DGAB No. 803 (1986).
The district court in Delaware found the Agency's (as well as
this
Board's) interpretation of the statutory review requirements
and
exceptions arbitrary and capricious. However, as we have observed
in
several subsequent decisions, the court's analysis was flawed in
a
number of respects. Notably, the court in Delaware failed to
consider
relevant statutory language which clearly required the states to
include
in the periodic inspection each Medicaid recipient in a
facility. See
Wyoming Dept. of Health and Social Services, DGAB No. 945
(1988); and
Nebraska Dept. of Social Services, DGAB No. 972 (1988). Of
course, a
state may only be held responsible for reviewing a patient it could
have
reasonably been expected to identify as a Medicaid recipient. See
Texas
Dept. of Human Services, DGAB No. 830 (1987); New Hampshire Dept.
of
Health and Human Services, DGAB No. 841 (1987); and Maine Dept. of
Human
Services, DGAB No. 857 (1987).
Here, there is a question as to the reasonableness of the State's
system
for identifying Medicaid recipients due for review. In both
instances
the State review teams relied entirely upon a facility-generated
census
of recipients due for review. The review teams would compare
the
facility's current census with that from the preceding inspection
of
care. Georgia Br. pp. 3-4; Georgia Ex. 8, p. 3. The State
apparently
provided no records to the teams which would have allowed them to
double
check recipient lists. While the State argued that its system
was
successful in reviewing all but a few patients, the statute
requires
that a review include each recipient. The circumstances here are
similar
to those in Pennsylvania Dept. of Public Welfare, DGAB No. 840
(1987),
where we upheld a disallowance based on the Commonwealth's failure
to
have a reasonable system of recipient identification.
In this instance, the recipient in Brown's was determined
Medicaid
eligible approximately seven weeks prior to the start of the
review. In
Atlanta Care, there is no explanation as to why the patient
was not
identified as a Medicaid recipient due for review. Although the
State
tried to dismiss the failure to review these patients as
mere
inadvertent facility error, the State bears the ultimate
responsibility
for the conduct of the review. North Carolina Dept. of
Human Resources,
DGAB No. 728 (1986). The reviews in question here were
deficient
because recipients who ought to have been reviewed were not.
Georgia offered a general argument that the statutory exceptions
should
apply to excuse its failure to conduct satisfactory reviews. As
we have
noted elsewhere, the concepts of "good faith and due diligence"
and
technical failings are mutually exclusive. The concept of "good
faith
and due diligence" is premised upon a state being unable to complete
an
annual review due to circumstances beyond its control. On the
other
hand, the technical failings exception is premised upon a
state's
inability to complete a review due to circumstances within its
control.
Thus, the same set of facts could not support both exceptions.
Wyoming,
at 12. In general, Georgia argued that the circumstances
surrounding
the reviews triggered the exceptions. However, the State
offered no
plausible explanation as to how the facts of this case could fit
either
of the statutory exceptions. Moreover, the circumstances put
forward by
the State evidence poor administration, which can not excuse a
failure
to review. See Pennsylvania, DGAB No. 746; Arkansas Dept. of
Human
Services, DGAB No. 923 (1987).
Thus, the State did not make a satisfactory showing under
section
1903(g)(1) of the Act and the facts do not support a finding that
the
failure to make a satisfactory showing may be excused by the
exceptions
at section 1903(g)(4)(b).
2. Georgia's Peer Review Organization Contracts
Georgia argued that the medical review requirements of 42 C.F.R. Part
456
were satisfied in this instance because the state contracted with a
Peer
Review Organization (PRO) to perform its reviews. Under 42
C.F.R.
456.2(b)(2) a state may be deemed to meet the medical
review
requirements where it has contracted with a PRO to review the
state's
Medicaid services in accordance with 42 C.F.R. 431.630.
Additionally,
section 42 C.F.R. 456.650(c)(2) provided that the 1903(g)
reduction does
not apply to services in facilities where a PRO contractor has
binding
review authority. Georgia stated that since it contracted with
a PRO
this disallowance should be reversed. Georgia Br., pp. 11-12.
As HCFA pointed out, the State's position is not supported by
the
record. Georgia's state plan clearly shows that it assumed
direct
responsibility for the reviews. HCFA Ex. 13. Georgia's
quarterly
showing further supports HCFA's position. Georgia Ex.
3. The
instructions for completing the quarterly showing require states
to show
the date for which they were relieved of inspection of
care
responsibility (in favor of a PRO). HCFA Exs. 9 and 14.
Georgia
provided no evidence that it had been so relieved. Further,
HCFA noted
that although Georgia contracted with the PRO for certain
purposes, its
PRO contract does not satisfy the regulatory requirements for
such a
transfer of function. HCFA Br., pp. 11-12.
Georgia did not respond to HCFA's argument. We find HCFA's analysis
on
this issue persuasive. We therefore conclude that this disallowance
is
not precluded by Georgia's PRO contract.
3. Georgia's Superior Waiver
Georgia argued that since 1976 it has been operating under a
superior
waiver program which relieved the State of meeting certain
regulatory
requirements dealing with utilization review committees. See
42 C.F.R.
456.505. Further, Georgia argued that the waiver proposal
approved by
HCFA sets out in "some detail" how Georgia would implement
its
utilization review. Georgia claimed, therefore, that the
Agency's
approval of its program, via the superior waiver, estopped HCFA
from
claiming that Georgia's program of medical review is
ineffective.
Georgia Br., p. 13.
Georgia's argument is without merit. The annual review requirements
at
issue are at subparts I and J of 42 C.F.R. Part 456. As HCFA
pointed
out, Georgia's superior waiver does not apply to those subparts;
the
waiver provision at 42 C.F.R. 456.505 applies to three
entirely
different subparts. As far as the requirements of subparts I
and J are
concerned, the waiver has no effect. Thus, Georgia's argument
regarding
the waiver and any related estoppel argument is simply
incorrect. But
see California Dept. of Health Services, DGAB No. 326
(1982), and its
Reconsideration (1982).
4. The Penalty Calculation
Based on the opinion of the court in Delaware, Georgia protested
that
HCFA's calculation of the reduction is unfair since an entire
facility
is considered unreviewed if a state fails to review one
patient.
Georgia Br. p. 15; Georgia Reply Br., pp. 4-5. We
disagree. The court
in Delaware did not specifically address the manner
in which HCFA
calculates disallowances under section 1903(g)(5) of the
Act. Upon
consideration of the Act, the regulations, and pertinent
legislative
history, we have found that the Agency's policy of taking a
disallowance
even where only one patient is unreviewed is not per se
unreasonable.
In fact, such an enforcement policy is clearly in accord with
the
statutory purpose. See Washington Dept. of Social and Health
Services,
DGAB No. 663 (1985); Virginia Dept. of Health, DGAB No. 682 (1985);
and
Pennsylvania, DGAB No. 746.
The State also raised questions regarding the data used by HCFA
in
calculating the disallowance. Georgia questioned where HCFA
has
obtained the recipient data used in the calculation and whether
the
reduction calculation formula properly reflected the provision
in
section 1903(g)(1) applying such a reduction to amounts paid for
ICF
services "beyond 60 days." Georgia Br., pp. 14-15; Georgia Reply
Br.
pp. 1-4. HCFA responded that the disallowance was calculated on
the
best data available at this time, as provided by 42 C.F.R.
456.657(b).
The parties have discussed the State's questions about the
formula both
independently and during conference calls with the Board.
HCFA has
noted also that should the substantive basis for the disallowance
be
sustained, it would not object to the State having a limited
opportunity
(30 days from the date of this decision) to provide exact
recipient data
aimed at reducing the amount of the disallowance. HCFA
Reply Memorandum
(June 27, 1988).
Accordingly, Georgia will have 30 days from the date it receives
this
decision to submit exact recipient data to HCFA unless the parties
agree
to extend the period for the State's submission. If the parties
are
unable to agree on the proper calculation, they may return to the
Board
on that limited issue.
Conclusion
Based on the foregoing analysis we sustain the revised disallowance
of
$104,887.73 subject to the State's opportunity to provide
exact
recipient data as discussed in section 4 of our analysis.
________________________________ Norval D. (John) Settle
________________________________ Alexander G. Teitz
________________________________ Cecilia Sparks Ford
Presiding
Board