GAB Decision 523
Docket No. 83-237
March 21, 1984
Colorado Department of Social Services;
Ballard, Judith; Garrett, Donald Settle, John
The Colorado Department of Social Services (State) appealed a
disallowance of $1,036,850.46 taken by the Health Care Financing
Administration (Agency) for alleged violations of section 1903(g) of the
Social Security Act (the Act). Specifically, the Agency determined that
for the fourth quarter of 1982 and the first two quarters of 1983, the
utilization control requirements set out in regulations implementing
section 1903(g)(1)(D) were violated in thirty intermediate care
facilities for the mentally retarded (ICFs/MR). The Agency subsequently
agreed to a reduction in the amount of the disallowance because the
State submitted exact patient data. The State calculated the reduced
amount of the disallowance to be $343,414.58. The Agency did not
challenge the calculation. We conclude that the disallowance should be
upheld in the reduced amount.
This decision is based on the written record.
Statutory and Regulatory Background
Section 1903(g) of the Act requires that the state agency responsible
for the administration of a state's Medicaid plan under Title XIX of the
Act show to the satisfaction of the Secretary that the state has an
"effective program of control over utilization" of long-term inpatient
services in certain facilities, including ICFs/MR. 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)(1) provides that the showing must include
evidence that --
(D) such State has an effective program of medical review of the care
of patients in . . . intermediate care facilities pursuant to section
1902(a)(26) and (31) whereby the professional management of each case is
reviewed and evaluated at least annually by independent professional
review teams.
(2) Section 1902(a)(26) refers to inspections in skilled nursing
facilities (SNFs) and mental hospitals. Section 1902(a)(31) provides,
in part --
(B) for periodic on-site inspections to be made in all such
intermediate care facilities . . . within the State by one or more
independent professional review teams (composed of physicians or
registered nurses and other appropriate health and social service
personnel) . . . .
The Agency implemented these statutory provisions by regulations at
42 CFR Part 456, Subpart I, which addresses inspections of care in SNFs,
ICFs and institutions for mental diseases. /1/ Section 456.602
provides, in part, --
(a) A team, as described in this section and 456.603, must
periodically inspect the care and services provided to recipients in
each facility.
(b) Each team conducting periodic inspections must have at least one
member who is a physician or registered nurse and other appropriate
health and social service personnel.
* * *
The Issues
The Agency determined and the State admitted that, although a
registered nurse was listed as a member of the inspection team, the
nurse did not participate in the actual onsite reviews performed during
the fourth quarter of 1982. Instead, the nurse reviewed the team's
reports upon completion of the reviews. The State used qualified mental
retardation professionals and registered record administrators to
perform the reviews. The Agency took a disallowance for the fourth
quarter of 1982, which was the quarter in which the facilities involved
were required to be reviewed.
Under 42 CFR 456.652(b)(3), a facility continues to require a review
in each quarter subsequent to the one in which a facility is not
appropriately reviewed, until a valid review is performed. The State
relied on the same review data for the two quarters subsequent to the
one in which the reviews were performed. Thus, the Agency also took a
disallowance for the first two quarters of 1983.
(3) The State disputed the disallowance on two grounds. First, the
State asserted, that it had complied with the applicable utilization
control regulations. The State argued that the regulations do not
require that the nurse on the team go into each facility and complete
on-site examinations. State Brief, p. 4. Moreover, the State argued
that an interpretation of the statute which required the nurse to
complete on-site examinations in each facility was inappropriate in
light of the federal regulatory scheme for ICFs/MR.
Secondly, the State argued that the Agency is estopped from
collection a penalty for the quarter ending December 31, 1982 because
the Agency had informed the State by Medicaid Action Transmittal 81-9 in
February 1981 that the State would not be subject to a penalty for
failing to make a satisfactory showing under section 1903(g) within the
first year after the State resumed responsibility for utilization
control. According to the State, the State Medicaid agency assumed
responsibility for performing the inspections of care reginning January
1, 1982 and, therefore, the State argued, the State was not subject to a
penalty for any quarter in 1982.
Discussion
Participation by a Registered Nurse in On-Site Inspections
The State acknowledged that the regulations require a team to inspect
the facilities and require a nurse or physician to be a team member.
However, the State argued, these two requirements did not mean that
every team member must participate in the inspections. The State argued
that the regulations on their face did not require that a nurse actually
inspect the care and services provided in the facilities.
Moreover, the State argued that --
observations about services rendered for physical care of patients
are so basic and general as specified under 42 CFR 456.610(e), . . .
that any surveyors properly trained in assessment skills could make
those evaluations during the site visit. Those surveyors would then
note any medical problems about a patient and return from the survey to
consult the nurse team member, or physician as necessary, to reach a
final conclusion about medical care.
State Brief, p. 9.
The State asserted that the patients in ICFs/MR required primarily
treatment for retardation rather than medical treatment and that the
Agency had acknowledged this in its regulatory scheme for Medicaid
provider certifications and (4) utilization control. The State pointed
out that the Agency required different services to be provided in SNFs
than in ICFs and ICFs/MR, and that, in particular, the requirements for
the amount of nursing and physician services to be provided vary
according to the type of facility. Thus, the State argued, it is
inconsistent for the Agency to require the State to send a nurse on the
inspections when other team members made adequate observations which
could be confirmed later by a nurse reviewing the team's reports. The
State argued that the Agency's insistence that a nurse participate in
the on-site reviews of ICFs/MR was technical and that the interpretation
ignored the State's real ability to assess the care rendered in ICFs/MR
without a nurse being on-site.
We address first the State's argument that the statute and
regulations can be read on their face to permit persons who are required
to be members of the team not to actually inspect the facilities. We do
not agree that either the statute or the regulations can be read in this
manner. We have recently upheld the Agency's position on this question
by concluding that the statute and the regulations require that either a
nurse or a physician actually participate in inspections of ICFs/MR.
Louisiana Department of Health and Human Resources, Decision No. 515,
February 29, 1984.
The language of both sections 1902(a)(26) and (31) provides for
"on-site inspections to be made . . . by . . . teams (composed of
physicians or registered nurses and other appropriate health and social
service personnel)." Two points are obvious. Teams must include not
only health and social service personnel but also either a physician or
a nurse. These teams must make "on-site" inspections. It would be
disingenuous to argue that this language means that the type of persons
specifically required to be members of the team need not participate in
the on-site inspections.
Looking at the regulations which implement this statutory language,
we see that section 456.602 sets out a complete scheme for the
composition of teams and that scheme is entirely consistent with section
1902(a)(31). Section 456.602(a) first sets out that a team, "as
described in this section," must inspect the care and services provided.
Sections (b) through (h) then describe the team which must do the
inspections. Section (b) says that "each team conducting periodic
inspections" must have either a physician or nurse as a member of the
team. It does not distinguish between types of facilities. Sections
(c) through (f) then specify types of individuals who must be members of
the team in addition to the physician or nurse, and these sections
distinguish between types of facilities. For example, teams inspecting
institutions for mental diseases other than ICFs must have a member who
is a psychiatrist or physician knowledgeable about mental institutions.
Teams inspecting (5) ICFs/MR must have at least one member who knows the
problems and needs of mentally retarded individuals. 42 CFR 456.602(e).
Sections (a), (b) and (e) must be read together. Thus, contrary to the
State's argument, a team inspecting ICFs/MR cannot be composed solely of
health and social service personnel who know the problems and needs of
mentally retarded individuals, but must also include a physician or a
nurse.
Section 456.602(g) provides that if there is no physician on the
team, a physician must be available to provide consultation. As we
concluded in Louisiana, Decision No. 515, this provision implies that a
physician who does not participate in the on-site inspections but is
available for consultation is not a member of the team. Here, we are
faced with a similar situation. No physician or nurse participated in
the on-site inspections, but a nurse was available for consultation.
The necessary implication is that the nurse was not, in fact, a member
of the on-site inspection team. Moreover, section (g) does not say that
it is permissible to have a nurse available for consultation. That
section refers only to physicians, and nothing in section 456.602
permits a nurse to be available solely for consultation in any
circumstances.
Thus, we see nothing in either the statute or the regulations which
supports the State's interpretation.
We do agree with the State that the Agency's regulations in 42 CFR
Parts 405 (provider certification standards) and 442 (payment standards
for SNFs and ICFs) specify different services to be provided in SNFs
than in ICFs and ICFs/MR, and that the amount of nursing and physician
services to be provided varies also, with ICFs/MR being required to
provide the least amount of medical services. However, we do not think
that those differences necessarily lead to the conclusion that the
Agency is being inconsistent if it requires a medically-trained person
to participate in an inspection of an ICF/MR: Clearly some patients in
ICFs/MR have medical needs and these must be evaluated by someone who is
trained to do so. Moreover, as we concluded above, section 456.602( b)
is consistent with the statute in not distinguishing between types of
facilities with regard to the requirement for a medically-trained member
of the inspection team.
The Agency pointed out that the legislative history of the statutory
provision requiring periodic on-site inspections of care is consistent
with the Agency's interpretation. Agency Brief, pp. 5-6. Until 1977
the Agency regulation implementing section 1902(a)(26) required that at
least one physician be a member of a team inspecting SNFs, while the
Agency regulation implementing section 1902(a)(31) permitted either a
physician or a nurse to be a member of a team (6) inspecting ICFs. In
1977 Congress enacted Pub. L. 95-142 and provided that teams inspecting
SNFs need only have a physician or a nurse. The Senate Finance
Committee acknowledged that this change would make the requirement for
physicians or nurses as members of teams inspecting SNFs the same as
that for ICFs. S. REP. No. 453, 95th Cong., 1st Sess. 40 (1977). Thus,
the legislative history supports the Agency's regulation requiring
either a nurse or a physician on "each team" and its interpretation
that
even an inspection team for an ICF/MR must include at least a nurse. We
cannot agree with the State's argument that the legislative history and
the regulatory scheme for Medicaid are inconsistent with requiring a
nurse to participate in inspections of ICFs/MR.
Although the State asserts that non-medical personnel are capable of
making determinations of the medical needs of patients in ICFs/MR, we do
not think the truth of this assertion is self-evident; in fact, the
Agency disputes the truth of the assertion. The Agency's regulation at
section 456.609(a)(1) requires that the team determine whether the
services available in a facility are adequate to meet the health needs
of each recipient. This entails knowing about the health needs of each
recipient. In addition, section 456.610(a) provides that a team may
consider whether the medical evaluation and the plan of care are
complete and current. It seems reasonable to think that a nurse or a
physician are better qualified to make these determinations than social
service personnel. Even if the State's assertion were correct, however,
we think it is clear that Congress thought that a medically-trained
person, either a nurse or a physician, should participate in the on-site
inspections. The State's arguments about the policy underlying such a
requirement are more appropriately addressed to Congress.
Thus, we think the Agency has reasonably interpreted the statutory
language in requiring that either a nurse or a physician to participate
in inspections of ICFs/MR. The State admits that neither a nurse nor a
physician did visit the facilities in question. State Brief, pp. 9-10.
We conclude that the State violated the statute and regulations and we
uphold the basis for the disallowance appealed here.
The Effect of Medicaid Action Transmittal 81-9
The Agency issued Medicaid Action Transmittal 81-9 in February 1981
to state agencies administering medical assistance programs. State's
Appeal File, Exhibit D. The Action Transmittal (AT 81-9) addressed the
resumption of state agency responsibilities following defunding of
Professional Standards Review Organizations (PSROs), and (7) purported
to be a clarification of existing policy under 42 CFR 463.27. /2/ AT
81-9 explained that when a PSRO was defunded, the responsibilities for
meeting sections 1903(g)(1), 1902(a)(26), 1902(a)(31), and other
sections previously designated in section 463.27, would revert to the
state agencies.
The State pointed to language in the Action Transmittal which stated:
All substantive reassumption activities should be in place no later
than 90 days from the effective date of PARO defunding. . . . Your
agency is not subject to the penalty provisions of 42 CFR 56 Subpart J
for the failure to make a satisfactory showing that it has an effective
program of utilization control within the first year after reassuming
these responsibilities. If your agency is selected for utilization
control review during the reassumption period for activities previously
performed by a PSRO, then you should inform the HCFA regional office
that you are not subject to review of these activities.
The State pointed out that the PSRO operating in the State was
defunded as of September 30, 1981, and that the State agency reassumed
the review activities under sections 1903(g)(1), 1902(a)(26) and 1902(
a)(31) as of January 1, 1982. Therefore, the State asserted, it had
reassumed these activities within 90 days, as permitted by AT 81-9, and
resumption of responsibilities and activities were synonymous. Thus, the
State argued that it was not subject to a penalty for any failure to
meet the requirements during the quarter ending December 31, 1982.
The Agency's position was that the one year period of immunity began
to run immediately upon defunding of the PSRO and that the 90-day period
was subsumed in the one-year period. The Agency pointed to language in
AT 81-9 which it said clearly indicated when the responsibility and,
thus, the one-year period, began to run.
These responsibilities revert to the State agency when a PSRO is
defunded . . . .
and
(8) Indicated below is a listing of these activities and
responsibilities which revert to the State agency upon defunding of a
PSRO.
The Agency explained that the language pointed to by the State refers
to allowing 90 days to reassume substantive "activities," not
"responsibilities," and that the State's responsibility resumed
immediately upon the expiration of the contract with the PSRO, in this
case, as of October 1, 1981. The Agency noted that since the language
about not being subject to the penalty provisions refers to "within the
first year after reassuming these responsibilities," (emphasis supplied)
rather than "activities," the expiration of the year during which
the
State would not be subject to a penalty would have been September 30,
1982. According to the Agency, this meant that the Agency could take a
penalty for the quarter ending December 31, 1982.
Furthermore, the Agency pointed to Transmittal No. 6, October 1982,
which was included as part of the State Medicaid Manual. This
publication stated that Action Transmittal 81-9 was made obsolete by
Transmittal No. 6. The Transmittal set out several new policies with an
effective date of October 1, 1982. One of these, listed as Section 2355
of the Manual, indicated that if a state did not choose to contract with
a PSRO for review, it must reassume medical and utilization review
responsibilities immediately. The Agency argued that Action Transmittal
81-9, even though later made obsolete, and Transmittal No. 6, were
consistent and that both indicated that the State was responsible for
utilization review immediately upon the end of the PSRO contract on
September 30, 1981.
The Agency did use both the terms "responsibilities" and "activities"
in AT 81-9. The sentence providing a state with 90 days to reassume
activities and the sentence indicating that states would not be subject
to a penalty for one year after reassuming responsibilities might be
ambiguous about when the year would begin, if read by themselves. But
AT 81-9 says in two places that the "responsibilities" revert to the
state agency when a PSRO is defunded. Moreover, the discussion
preceding the sentence setting a maximum of 90 days for reassuming
activities says:
If the period of time between the defunding of the PSRO and the
funding of a new or alternate PSRO will be relatively brief, it may be
possible to scaledown State agency resumption activities. . . . Should
full resumption of responsibilities for an extended period of time be
necessary, a reasonable timetable should be developed and submitted
within 30 days of the final PSRO defunding notice . . . .
(9) Thus, in context, the meaning of AT 81-9 is clear that the state
agency must reassume responsibility immediately upon defunding of the
PSRO, and that states would not be subject to penalty for one year after
resumption of "responsibilities." We think the discussion sets forth
the
understanding that even though the state agency has full responsibility,
it cannot necessarily be expected to begin performing all activities
immediately upon resuming those responsibilities. Therefore, the 90-day
period provided for resumption of "all substantive" activities would
reasonably be subsumed in the one year period of immunity. This
interpretations is reinforced by a reading of the regulation referred to
in AT 81-9 (section 463.27), which provided that a state was exempted
from utilization control requirements only to the extent that a PSRO had
responsibility for them. To read AT 81-9 as the State proposed would
mean that neither the State nor a PSRO would have responsibility during
the 90 day period after defunding. This would be inconsistent with the
statute which places responsibility for utilization control on the state
agency, and inconsistent with the Agency's regulations. Moreover, the
State has advanced no policy reason for a contrary interpretation.
We also agree with the Agency that the later Medicaid Transmittal No.
6, even though brief, is consistent with the Agency's interpretation of
AT 81-9, since it specifically indicated that a state must reassume
utilization review responsibilities immediately upon defunding of PSRO.
The State argued that, under the Administrative Procedure Act, the
Agency was required to give formal, advance notice through rulemaking
when it rescinded a policy impacting on providers of services. However,
the policy we are concerned with here is simply a suspension for a
limited period of time of a statutorily-imposed penalty. We conclude
that the Agency's interpretation of its own Action Transmittal is the
only reasonable interpretation of the document as a whole. AT 81-9 set
a limit on how long states would not be subject to a penalty and, once
that limit had expired, as here, a penalty could properly be imposed
without further notice.
We also note that, although the State argued that it relied upon AT
81-9 as a guarantee that it would not be subject to penalty through the
end of 1982, the State does not indicate how it relied. There is no
evidence in the record that the State complied with the utilization
control requirements in a particular way because of the Transmittal; in
fact, the evidence shows that the State did not change its actions with
regard to inspections beginning in 1983 when, even under its (10)
interpretation of AT 81-9 advanced here, it no longer was immune from
penalty. /3/
Conclusion
We conclude that the disallowance should be upheld on the basis of
the above analysis, in the reduced amount submitted by the State and
agreed to by the Agency. The disallowance is sustained in the amount of
$343,414.58. /1/ The Agency, has defined intermediate care facility to
include institutions for the mentally retarded. See 42 CFR 456.601.
/2/ Section 463.27, which was removed from the regulatory scheme
in 1981, provided that PSRO review activities satisfied the requirements
of sections 1903(g)(1), 1902(a)(26) and 1902(a)(31), among others.
/3/ The State argued that the Agency should be estopped from taking the
penalty for the quarter ending December 31, 1982 because the State
relied on its interpretation of AT 81-9. The Supreme Court has not yet
explicitly decided that the federal government may be estopped, but at
the very least the elements of estoppel must be proved, including a
showing of affirmative misconduct. INS v. Miranda, 103 S. Ct. 281
(1982); Schweiker v. Hansen, 450 U.S. 785 (1981). The Board has
discussed in detail these elements in many previous decisions. See,
e.g., Michigan Department of Social Services, Decision Nos. 290 and 370,
April 30, 1982 and December 28, 1982. Here, the State did not discuss
any of the elements of estoppel except reliance. Clearly the State has
not demonstrated that the elements of estoppel were present.
Furthermore, the only Agency action which formed the basis of the
State's argument about estoppel was AT 81-9.
NOVEMBER 14, 1984