Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: South Carolina Health and Human
Services Finance Commission
Docket No. 90-150
Decision No. 1212
DATE: December 6, 1990
DECISION
The South Carolina Health and Human Services Finance Commission
(State)
appealed a determination by the Health Care Financing
Administration
(HCFA) disallowing $74,873 in federal funds claimed by the
State under
Title XIX of the Social Security Act (Act) for the quarter ending
March
31, 1990. The disallowance was taken pursuant to section
1903(g)(1) of
the Act, which provides for the reduction of a state's federal
medical
assistance percentage for long-stay services for a quarter unless
a
state shows that 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 determined that the State failed to make a satisfactory showing
for
the quarter in question since it did not conduct an annual review
for
Greenbrook Manor until the third month following the close of
the
showing quarter. The State argued that the failure to review
Greenbrook
before the close of the showing quarter could be excused under
an
exception to the annual review requirement (referred to as the
technical
failings exception).
As explained further below, we reverse the disallowance. We
conclude
here that under the circumstances of this case, the State's
failure
qualifies under the technical failings exception.
Applicable Authority
Section 1903(g) of the Act requires that a state make a quarterly
showing
that it has an effective program of annual medical review
including on-site
inspections of the care of each Medicaid recipient in
a long-term care
facility. 1/ The annual review requirements applicable
to skilled
nursing and intermediate care facilities are in section
1902(a)(31)(B) of the
Act. Section 1903(g)(4)(B) provides two
exceptions under which a
state's quarterly showing is found
satisfactory, even though the state did
not conduct all the required
reviews by the close of the quarter.
Specifically, a showing is
satisfactory --
[I]f 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.
Section 1903(g)(4)(B) of the Act (emphasis added).
The statutory exceptions are implemented by the regulation at 42
C.F.R.
456.653 titled, "Acceptable reasons for not meeting requirements
for
annual on-site review." This regulation states in part:
The Administrator will find an agency's showing
satisfactory,
even if it failed to meet the annual review requirements
. . .
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.
Background
As part of an initiative to add some 300 Medicaid beds in South
Carolina
for long-term patients without psychiatric diagnoses but being cared
for
by the South Carolina Department of Mental Health, licensed
nursing
homes in South Carolina were offered an opportunity to add Medicaid
beds
without applying for another Certificate of Need. Greenbrook
Manor, a
licensed nursing home with no Medicaid certified beds, applied
under
this initiative and received approval for 40 Medicaid beds on
February
3, 1989. However, when the Certification and Transmittal
document was
issued on March 9, 1989, it was based on the originally
issued
Certificate of Need which indicated that the facility was certified
to
serve 44 Medicare patients. This error was caught and a
corrected
Certification and Transmittal document was issued on May 3, 1989
with
the written notation, "this amends C&T dated 03-09-89." State
Appeal
File, Exhibit (Ex.) A. The amended document at line 11 indicates
that
the period of certification began March 1, 1989 and further provided
at
line 14 for 4 Medicare beds and 40 Medicaid beds. This
Certification
and Transmittal was attached to the State's Quarterly Showing
for the
quarter ending March 31, 1990 which was submitted to HCFA on April
26,
1990. State Appeal File, Ex. A.
The State's quarterly showing for the quarter ending March 31, 1990
listed
Greenbrook Manor on page 10 of the "Facility Listing for
SNF/ICF."
There is no entry in the column headed "Reviews Completed In
Prior 12
Months." The entry in the column headed "Certification Status
Change"
reads "new facility-eff. 5/3/89, see attach." State Appeal
File, Ex. A,
p. 10. Greenbrook Manor was not reviewed in this quarter;
instead it
was reviewed in the third month following the close of the
quarter, on June
25, 1990. HCFA Appeal File, Ex. F.
The State explained that the Certification and Transmittal was sent to
the
Division of Inspection of Care (IOC) for use in cross checking the
scheduling
of their inspections. The State indicated that the IOC uses
the
Certification and Transmittal to verify new facilities which must be
added to
the quarterly roster of facilities due for inspection. The IOC
also
will look at licensing letters, monthly facility reports, and the
monthly
printout of billings to cross check facility changes and
additions.
In the case of Greenbrook Manor, the State admitted errors occurred.
The
State conjectured that the IOC did not realize the amending
Certification and
Transmittal only corrected the bed breakdown in line
14 without any change to
the other items in the document, and that the
IOC scheduler did not check the
monthly printout of billings for
patients at Greenbrook. State Brief
(Br.), pp. 5-6. South Carolina
argued that it failed to review
Greenbrook before the close of the
showing quarter because of an isolated
"convergence of two unconnected
errors." It added:
The errors are unlikely to recur and the breakdown did
not
result in multiple scheduling errors. The occurrence of
the
double error was only a remote possibility, the occurrence
of
which could only have been avoided at great cost.
Id. at 6-7.
The State argued that based on the analysis in prior Board decisions
the
circumstances here could qualify as a "technical failing." The
State
alleged that the State reviewed 98 percent of all facilities,
including
all facilities with 200 or more beds, before the close of the
showing
quarter, notwithstanding the State's failure to review
Greenbrook.
HCFA did not dispute the State's position that the
circumstances
surrounding the State's failure to review Greenbrook qualified
as a
"technical failing" or that the State met the 98 percent
requirement
before the close of the showing quarter. HCFA's primary
argument on
appeal was that the applicable regulation required the State to
review
100 percent of the facilities, including Greenbrook, within 30 days
of
the close of the March 31, 1990 quarter. HCFA also argued in a
footnote
that the State's quarterly showings were facially deficient.
Analysis
This appeal raises the question whether a state must have reviewed
100
percent of its facilities within 30 days of the close of the
showing
quarter to qualify for the technical failings exception or whether
it
need only have reviewed 98 percent of its facilities
(including
facilities with 200 or more beds). We have previously
considered this
issue in some depth in prior Board decisions. See
Delaware Dept. of
Health and Social Services, DAB No. 732 (1986), pp. 10-14,
rev'd on
other grounds, Delaware Div. of Health and Social Services v. U.S.
Dept.
of Health and Human Services, 665 F. Supp. 1104 (D. Del. 1987).
See
also Wisconsin Dept. of Health and Human Services, DAB No. 1062
(1989),
pp. 7-8. We conclude here, as we concluded previously, that,
based on
the applicable regulation, the State need only meet the 98
percent
requirement during the 30-day period following the close of the
showing
quarter.
The regulation at 42 C.F.R. 456.653(b), quoted on page 3
above,
specifically requires a state to meet the standard in paragraphs
(a)(1)
and (2) of the section within 30 days after the close of the
showing
quarter. The standard in the two referenced paragraphs is the
98
percent standard, not 100 percent compliance. Thus, under the
plain
meaning of section 456.653(b), the State need only meet the 98
percent
requirement (including all facilities with 200 or more beds) within
30
days of the close of the showing quarter. Moreover, as we concluded
in
Delaware, supra, the legislative history of section 456.653
provides
highly persuasive evidence that HCFA considered this very issue
and
intended to require only the 98 percent standard within 30 days of
the
showing quarter. Thus, HCFA's current position is contrary to
its
program regulations and cannot be sustained. 2/
HCFA also argued in a footnote that the disallowance should be
upheld
because the State's quarterly showings for quarters ending March 31
and
June 30 were facially deficient because they did not explain why
the
facility had not been reviewed or even indicate that Greenbrook had
not
been reviewed. In prior decisions concerning the sufficiency
of
quarterly showings, we have concluded that it would be unreasonable
to
hold a state responsible for a deficient quarterly showing where
the
state was unaware of the review deficiency at the time it submitted
the
showing and where the deficiency was not obvious from the face of
the
showing itself. See, e.g., Massachusetts Dept. of Public Welfare,
DAB
No. 1174 (1990), p. 8. Here, there is no basis in the record
to
conclude that the State was aware of the error until after the March
31
showing had been mailed (see State Reply Br., p. 3), and that showing
on
its face does not suggest a review failing with respect to
Greenbrook.
Further, the June 30 showing states that Greenbrook had been
reviewed on
June 26, and therefore is not deficient concerning the date of
the
review. Moreover, the State alleged, and HCFA did not dispute, that
the
review failing for the March 31 quarter was already the subject
of
discussion and that further comment on the matter in the June 30
showing
was inappropriate and unnecessary.
Conclusion
On the basis of the foregoing, we reverse the disallowance.
_____________________________ Judith A. Ballard
_____________________________ Norval D. (John) Settle
_____________________________ Donald F. Garrett Presiding
Board
Member
1. This provision of the Act was amended by Public Law 100-203,
the
"Omnibus Budget Reconciliation Act of 1987." The amendments struck
out
"skilled nursing facilities and intermediate care facilities"
and
substituted "and intermediate care facilities for the
mentally
retarded". However, these amendments apply no earlier than
October 1,
1990 and only if the Secretary determines that the State has
specified
the resident assessment instrument under section 1919(e)(5) and
begun
conducting surveys under section 1919(g)(2) of the Act (1989).
2. While the Board's decision in Michigan Dept. of Social
Services,
DAB No. 1017 (1989), may have contained confusing dicta on this
issue,
we clarified our position and reaffirmed our reliance on the
Delaware
analysis in the subsequent Wisconsin decision,