Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: New Jersey
Department DATE: June 16, 1993 of
Human
Services Docket No. A-93-15 Decision
No.
1419
DECISION
The New Jersey Department of Human Services (New Jersey or State)
appealed
a determination by the Health Care Financing Administration
(HCFA)
disallowing $6,088,315.85 claimed by the State under the Medicaid
program for
the quarter ending December 31, 1991. The disallowance was
taken
pursuant to section 1903(g)(1) of the Social Security Act (Act),
which
provides for the reduction of a state's federal medical assistance
percentage
(FMAP) of amounts claimed for certain long-stay services for
a calendar
quarter unless the state makes a satisfactory showing that,
during the
quarter, it had an effective medical review program.
Based on a validation survey of New Jersey's annual medical review for
the
quarter in issue, HCFA found that the State had failed to review the
care
provided to individual recipients in two mental hospitals.
HCFA
contended that New Jersey did not have an effective program of
annual
review because the State had relied on the facilities to
identify
recipients due for review. New Jersey maintained that the
program for
annual review which it had followed was effective. The
State asserted
that it did not rely on facilities to identify recipients for
review.
Rather, the facility-generated information was used to
double-check
information which the State produced. Thus, the State
contended, its
failure to review these individuals could be excused by the
"good faith
and due diligence" exception to the annual review
requirement. See
section 1903(g)(4)(B) of the Act. New Jersey
also asserted that the
amount of the disallowance was incorrect because HCFA
had included
disproportionate share hospital payments in its
calculations. New
Jersey asserted that, in the event the disallowances
at both facilities
were sustained, the maximum amount disallowed should be
$146,612.
We find that New Jersey had a reasonable system for identifying
recipients
due for review. The State's failure to identify two patients
was not
due to a flaw in its system or to a failure to implement its
system.
Therefore, we reverse the entire disallowance. 1/
Statutory and Regulatory Background
Section 1903(g)(1) of the Act requires that a state make a
quarterly
showing that it has an effective program of annual medical
review
including on-site inspection of the care of each Medicaid
recipient
residing in an inpatient mental hospital. The annual
review
requirements applicable to inpatient mental hospitals are in
section
1902(a)(26) of the Act.
The regulations implementing this provision and section 1903(g)(1)
are
found at 42 C.F.R. Part 456. In particular, section 456.652
provides:
(a) In order to avoid a reduction in FFP [federal
financial
participation], theMedicaid agency must make a
satisfactory
showing to the Administrator, in each quarter, that it has
met
the following requirements for each recipient:
* * *
(4) A regular program of reviews, including
medical
evaluations, and annual on-site reviews of the care of
each
recipient. . . .
(b) Annual on-site review requirements.
(1) An agency meets the quarterly on-site review
requirements
of paragraph (a)(4) of this section for a quarter if
it
completes on-site reviews of each recipient in every facility
in
the State, . . . by the end of the quarter in which a review
is
required under paragraph (b)(2) of this section.
Analysis
In New Jersey, the annual reviews required by section 1903(g)(1) of
the
Act are conducted by Periodic Medical Review (PMR) teams. For
the
quarter ending December 31, 1991, PMR teams failed to identify
and
review one patient at Ancora Psychiatric Center (Ancora) and one
patient
at Bergen Pines County Hospital (Bergen Pines).
Relying on the rationale in Pennsylvania Dept. of Public Welfare v.
U.S.
Dept. of Health and Human Services, 928 F.2d 1378 (3rd Cir. 1991),
New
Jersey argued that the "good faith and due diligence" exception to
the
annual review requirement (section 1903(g)(4)(B) of the Act) excused
the
deficient reviews at these facilities. 2/
We need not reach the issue of whether the "good faith and due
diligence"
exception to the annual review requirement applies in this
case. The
Board has long held that, while a state bears the ultimate
responsibility for
identifying patients subject to the annual review
requirement, a state may
not be held responsible for reviewing the care
provided to patients not
reasonably identifiable as Medicaid recipients
at the start of a facility
review. See New York State Dept. of Social
Services, DAB No. 1368
(1992); Virginia Dept. of Medical Assistance
Services, DAB No. 1108 (1989);
Texas Dept. of Human Services, DAB No.
1081 (1989); Texas Dept. of Human
Services, DAB No. 830 (1987); Idaho
Dept. of Health and Welfare, DAB No. 747
(1986). The evidence convinces
us these patients were not reasonably
identifiable and thus, the State
was not responsible for reviewing
them. Therefore, the reviews at
Ancora and Bergen Pines were not
deficient.
I. A.R. at Ancora
The Ancora review was conducted from November 25 through December
3,
1991. During that time the PMR team did not review patient A.R.
3/
Prior to the start of the review, New Jersey's Burlington
County
Medicaid District Office (Burlington MDO) gave the PMR team
an
Institutional Services Section (ISS) list dated November 19, 1991.
The
ISS list identified Medicaid eligibles at Ancora and included
A.R.
During the review, the PMR team requested and received from
Ancora's
business office a Quality Assurance/Utilization Review Active
Medicaid
List (Ancora's list) dated November 27th. Ancora's list was
requested
because of the frequency of arrivals and departures at the facility
and
the short review period. Ancora's list was used to cross check the
ISS
list in order to minimize the chance of missing a patient. New
Jersey
indicated that Ancora's list had been generally accurate in the
past.
New Jersey Brief (Br.) at 4-5.
Comparing the lists, the PMR team found that four patients identified
as
recipients on the ISS list were not on Ancora's list. The PMR
team
learned that two of the patients on the ISS list had been
discharged
from the facility on November 19th. Two others, including
A.R., were
still in the facility but their Supplemental Security
Income
(SSI)/Medicaid eligibility had been terminated. Ancora officials
told
the PMR team that they were unaware of the Medicaid status of
these
individuals as the result of the SSI terminations. 4/ Id. at
5.
The Burlington MDO contacted the State ISS office to clarify the status
of
these individuals. The ISS office confirmed that their SSI coverage
had
been terminated, but indicated that Medicaid applications had been
taken for
both of them. However, New Jersey asserted that the PMR team
was not
told that A.R. would continue to be eligible for Medicaid even
though his SSI
coverage had been terminated. Additionally, New Jersey
maintained that
there were no facts from which that conclusion could be
derived. Thus,
A.R. was not reviewed during the quarter ending December
31, 1991.
Following its validation survey, HCFA notified New Jersey
that A.R. should
have been reviewed. A PMR team promptly reviewed A.R.
Id. at 6, 12.
HCFA noted that A.R. had been determined eligible for Medicaid on
December
14, 1990, almost one year prior to this review. A.R.'s
eligibility was
retroactive to November 1990. HCFA asserted that the
PMR team
disregarded this information and instead relied on "faulty
facility documents
and oral misinformation from the facility." HCFA Br.
at 6-7; HCFA Ex.
R-6. HCFA also expressed amazement at the apparent
failure of State
officials to tell the PMR team that A.R.'s Medicaid
eligibility would
continue following his SSI termination (as HCFA
alleged was usually the
case). HCFA contended that the evidence
supported a conclusion that New
Jersey's system for recipient
identification was flawed as it relied on
facilities to identify
recipients. According to HCFA, this resulted
here in the PMR team
missing an individual otherwise readily identifiable as
a Medicaid
recipient. In sum, HCFA contended that New Jersey's
"practice of
relying upon out-of-date information from the facility's records
created
a situation in which an error was likely." Id. at 12-15.
HCFA has mischaracterized the State's arguments and misstated the
facts.
Contrary to HCFA's allegations, this was not a situation in which
a
state relied solely on a facility to identify recipients due for
review.
See, e.g., North Carolina Dept. of Human Resources, DAB No. 728
(1986).
Rather, the PMR team used facility-generated information to
double-check
the accuracy of the Medicaid recipient information contained on
the ISS
list. There is no evidence that the State simply disregarded
its own
information in favor of that produced by Ancora or that the
facility's
information was out-of-date or otherwise incorrect. 5/
Ancora's
information accurately identified the circumstances of the
four
individuals for which a question arose after comparison of the
State's
and facility's lists. Two individuals had transferred out of
the
facility and were clearly not subject to review while the need to
review
two others (including A.R.) was called into question because of
the
termination of their SSI/Medicaid coverage.
New Jersey's position is based on an interrelationship between A.R.'s
SSI
and Medicaid coverage in so far as his SSI termination necessitated
his
reapplication for Medicaid-only coverage. After being informed
of
A.R.'s situation by the facility, the PMR team checked with the
ISS
office to clarify his status. The PMR team was told that
A.R.'s
Medicaid application was pending. However, HCFA suggested that
A.R.'s
Medicaid application was merely a pro forma exercise and that
his
Medicaid eligibility would have routinely continued. Further,
HCFA
noted that A.R. had been found Medicaid eligible in November 1990
and
argued that the State was referring to the 1990 application as
pending.
HCFA Br. at 14-15. HCFA presented no evidence to support its
argument.
HCFA has done no more than intimate that there was not
another
application submitted after A.R.'s SSI coverage ended.
Moreover,
affidavits from a staff nurse on the Ancora PMR team and the
Director of
the Burlington MDO state that these individuals were consistently
told
by the ISS office that A.R. had a pending application for
Medicaid-only
coverage. New Jersey Exs. 2 and 3. We are not
persuaded by HCFA's
suggestion that this referred to A.R.'s 1990 application
since, based on
approval of that application, the State had identified A.R.
as a
recipient prior to the review.
Further, HCFA's contention that Medicaid coverage after SSI termination
is
"usually" continuous (HCFA Br. at 14) supports the State's position
since it,
in effect, admits that there are circumstances in which
coverage does not
continue. Moreover, the evidence in the record shows
that there was
another Medicaid application pending for A.R. based on
his termination from
SSI. Although A.R.'s Medicaid application was
ultimately approved and
his eligibility continued through the period in
issue, his Medicaid status at
the time of the Ancora review was pending.
HCFA policy does not require
states to review pending Medicaid
applicants. Pennsylvania Dept. of
Public Welfare, DAB No. 1414 (1993),
at 7.
We do not see a flaw in the State's system of recipient identification
or
in the PMR team's attempts to identify recipients due for review
at
Ancora. As a pending Medicaid applicant, A.R. was not subject to
review
in the quarter ending December 31, 1991.
II. L.C. at Bergen Pines
Bergen Pines was reviewed October 1-9, 1991. Specifically, the
review
occurred at Bergen Pines Building 12. See New Jersey Exs. 4 and
5.
Prior to the review, the PMR team checked a State-generated list
of
Medicaid eligible patients at the facility dated September 11,
1991.
This listing of Active Mental Recipients identified recipients by
name,
recipient number and admission date. 6/ Patient L.C.'s name did
not
appear on that list. From the facility, the PMR team obtained
Bergen
Pines' most recent CP-10 Statement of Claim Payment (CP-10). A
CP-10 is
a State-generated document which chronicles claims paid to a
facility
and contains each recipient's payment history. This CP-10 was
dated
September 11, 1991 and listed billings through August 1991. L.C.
was
not identified on the CP-10. Bergen Pines also provided a roster
of
Medicaid and private pay patients residing in Building 12 as
of
September 5, 1991. This roster was updated by the facility's
social
workers on October 1st and 9th, the first and last days of the
review.
These updates did not identify L.C. as a recipient. On the
final day of
the review the PMR team asked the social workers to identify
any
patients who became Medicaid eligible during the review. The
social
workers told the PMR team that there were no new eligibles in
the
facility. New Jersey Br. at 7-8; New Jersey Ex. 4.
Following its validation survey, HCFA informed New Jersey that it
had
failed to review L.C. A PMR team promptly reviewed L.C.
Attempting to reconstruct the circumstances that caused the PMR team
to
miss L.C., New Jersey indicated that L.C. was determined
Medicaid
eligible on September 10, 1991 retroactive to June 3, 1991.
New Jersey
notified the facility of L.C.'s Medicaid status by letter
dated
September 19, 1991. This letter was received by an individual at
the
facility shortly thereafter (although the exact date is unknown)
and
forwarded to the facility's Medicaid Billing Office near the end
of
September. Approximately October 1st, Bergen Pines' Billing Office
sent
a PA-3L Form to New Jersey's Bureau of Claims and Accounts. The
PA-3L
identifies the income available to a patient to offset the
State's
payment to the facility. A PA-3L must be filed prior to payment
to the
facility. New Jersey noted that Bergen Pines would not have been
paid
for L.C. until the CP-10 of November 1991, which was the earliest
L.C.'s
name would have appeared on that form. New Jersey surmised that
the
social workers at Building 12 were probably notified of L.C.'s
status
when her name appeared on the CP-10. New Jersey Br. at 7-9, 12;
New
Jersey Ex. 4.
HCFA alleged "flaws" in New Jersey's efforts to identify recipients
for
the review at Bergen Pines. HCFA asserted that the State's system
for
recipient identification was defective because L.C.'s name did
not
appear on the State-generated September 11th list of Medicaid
recipients
at Bergen Pines even though L.C. was determined eligible for
Medicaid on
September 10th. There is no merit in this argument.
HCFA ignores
earlier Board decisions recognizing that there is naturally some
lag
time between the date an individual is determined eligible for
Medicaid
and the date on which it is reasonable to expect that person's name
to
appear on a computer-generated master list of Medicaid recipients.
See,
e.g., South Carolina State Health and Human Services Finance
Commission,
DAB No. 814 (1986); Missouri Dept. of Social Services, DAB No.
801
(1986); Idaho. Clearly, it is unreasonable to expect such
information
to be available in a day or less, as HCFA's argument
implies. Moreover,
we have found reasonable a system for recipient
identification in which
a state produced a computer-generated master list of
recipients
approximately 30 days prior to the start of each facility review
and
then updated that list upon arrival at the facilities. See Texas,
DAB
No. 1081, and Texas, DAB No. 830. Here, the state generated its
initial
list of recipients approximately three weeks prior to the start of
the
review and sought to update that listing at the facility.
The State notified the facility of L.C.'s eligibility in a letter
dated
September 19th, approximately seven working days following
the
eligibility determination. The State was unable to specify the date
on
which the facility received the notification other than to say it
would
have been late in September. The State indicated that the
facility
submitted a PA-3L for L.C. to the State billing office on or
about
October 1st. The State indicated that it would not have expected
L.C.'s
name to appear on a CP-10 until approximately six weeks later.
HCFA
attacked the credibility of the State's argument by pointing out
that
the State had received Medicaid funding for this patient from June
3rd.
In this case, the date from which Medicaid reimbursement for L.C.
was
calculated is irrelevant. HCFA ignores the fact that L.C.'s
Medicaid
eligibility was retroactive to June 3rd. Thus, whenever the
facility
first billed for services provided to L.C. it would
receive
reimbursement for services provided back to the effective date
(June
3rd), not simply the eligibility determination date (September
10th).
However, the timing of the payment itself would depend on how
quickly
the facility reacted to the notice of eligibility determination.
Further, if the State mailed the notice of L.C.'s eligibility from
Trenton
as early as Thursday, September 19, 1991, it is not unreasonable
to assume
that the first business day on which it could possibly have
been received at
Bergen Pines (in Paramus) was Monday, September 23rd.
Thus, at best, the
notice arrived at the facility approximately one week
prior to the start of
the review. During that week the notice was
received by a Bergen Pines'
employee who forwarded it to the billing
office which initiated the process
which would enable the facility to
identify L.C. as a recipient. HCFA
seized upon these facts to argue
that the State's system was flawed because
Bergen Pines' employees did
not inform the PMR team of L.C.'s status although
facility officials,
arguably, knew of her eligibility one week prior to the
review.
It is unclear how much more could reasonably be expected of the State
in
this instance. The State identified the core of recipients due
for
review based on its computer listing of eligibility determinations
and
prior billings by the facility. L.C. had only recently been
found
eligible and, apparently, had no billing history prior to the
review.
In spite of the State-generated recipient identification information
in
its possession prior to the review, the PMR team sought further
updates
from the facility on three additional occasions during the course of
the
review. None of these updates resulted in the identification of
L.C. as
a recipient due for review.
The issue here is whether L.C. was reasonably identifiable as a
recipient
at the time of the review. The State chronicled a
comprehensive series
of steps it took to identify all recipients at this
facility. The
State's efforts to identify the recipients at Bergen
Pines were
reasonable. Thus, we find that the State was not responsible
for the
failure to review L.C. during the quarter ending December 31,
1991.
Conclusion
In our review of New Jersey's efforts to identify these individuals,
we
have considered the purpose of the statutory provision.
Specifically,
the Act requires that a state's FMAP be decreased unless the
state makes
a "satisfactory showing" that it has an "effective program of
medical
review of the care of patients in mental hospitals." Section
1903(g)(1)
of the Act. We have found that while a state must make
reasonable
efforts to identify Medicaid recipients, it should be able to rely
on
its existing computer-based information system if, overall, that
system
is effective. New York, at 5. As noted in New York, the
Act's
legislative history does not contemplate that a state be required to
go
through herculean efforts to look for every possible situation in
which
an error might occur. Rather, Congress intended that a state
should
show that it had a system that worked. Id. Here, the
State's failure
to review an individual patient in each of two facilities
does not,
contrary to HCFA's arguments, automatically mean that New
Jersey's
system of medical review is unsatisfactory. The Medicaid
eligibility
status of one of these patients was in question at the time of
the
review, and the facility had not completed the steps to put the
second
patient in payment status prior to the review. Consequently, we
find
that the State's showing was satisfactory.
Based on the preceding analysis, we reverse this disallowance in
its
entirety.
_________________________
Judith
A.
Ballard
_________________________
Donald
F.
Garrett
_________________________
M.
Terry Johnson
Presiding
Board
Member
1. Since we reverse the disallowance, we do not need
to address New
Jersey's argument regarding the calculation of the
disallowance.
2. See also Pennsylvania Dept. of Public Welfare, DAB
No. 1414
(1993). There, the Board applied the court's rationale to
particular
factual aspects of two earlier Board decisions which had been
involved
in Pennsylvania's appeal to the Third Circuit.
3. Patients are identified by their initials to
protect their
privacy.
4. The second individual whose SSI/Medicaid coverage
was terminated
was not reviewed. New Jersey indicated that no adverse
action was taken
by HCFA regarding this individual since Ancora did not seek
Medicaid
reimbursement for services to this individual in the fourth quarter
of
1991 or for any period thereafter. See New Jersey Br. at 6
(unnumbered
footnote) and New Jersey Exhibit (Ex.) 5.
5. As noted above, HCFA also suggested that the State
should not
prevail because its failure to review A.R. was not due "to
circumstances
beyond its control." The quoted language is taken from
HCFA's
regulation at 42 C.F.R. . 456.653(a)(3) implementing the "good faith
and
due diligence" exception to the Act's annual review requirement.
Since
New Jersey was not required to review this recipient, we need not
reach
the parties' arguments regarding the exception. However, we note
that,
more than two years ago, the federal Appeals Court for the Third
Circuit
(which includes New Jersey) specifically invalidated "the
circumstances
beyond a state's control" language in the regulation.
Pennsylvania
Dept. of Public Welfare v. U.S. Dept. of Health and Human
Services, 928
F.2d at 1384-1388; see also Pennsylvania Dept. of Public
Welfare, DAB
No. 1414 (1993).
6. The State did not specifically identify this as an
ISS list
similar to that used by the Ancora PMR team. However, both
lists were
produced by the State's Division of Medical Assistance and
Health
Services in Trenton. The lists contained similar
information. See New
Jersey Exs.