GAB Decision 312
June 21, 1982 Kansas State Department of Social and Rehabilitation
Services; Docket No. 81-118-KS-HC Settle, Norval; Teitz, Alexander
Ford, Cecilia
The Kansas State Department of Social and Rehabilitation Services
(State) appealed the disallowance by the Health Care Financing
Administration (HCFA, Agency) of $63,098.69 in federal financial
participation (FFP) claimed under Title XIX (Medicaid) of the Social
Security Act (Act). The disallowance was based on an on-site survey
conducted by the Agency as part of the validation procedures under
section 1903(g)(2) of the Act. The Agency found that the requirements
for physician certification and recertification in sections 1903(g)(1)(
A) and (B) of the Act were not met with respect to a number of patients
in seven intermediate care facilities (ICFs) in Kansas for the quarter
ended September 30, 1980. The disallowance was a reduction, based on a
formula set forth at section 1903(g)(5) of the Act, in the State's
federal medical assistance percentage (FMAP). The Agency subsequently
determined that the disallowance was erroneoulsy calculated and reduced
the disallownce to $56,071.83. For the reasons discussed below, we
sustain the disallowance in the reduced amount.
Pertinent Statutes and Regulations
Section 1903(g) of the Act requires that the State agency responsible
for the administration of the State's Medicaid plan under Title XIX of
the Act show to the satisfaction of the Secretary that the State has an
"effective program of control over utilization of" long-term inpatient
services in certain facilities, including ICFs. This showing must be
made for each quarter that FMAP is requested with respect to amounts
paid for such services for patients who have received care for 60 days
in ICFs, or the FMAP will be decreased according to the formula set out
in section 1903(g)(5). Specifically, sections 1903(g)(1)(A) and (B)
provide that the State "must" show that --
(A) in each case for which payment is made under the State plan, a
physician certified . . . (and recertifies, where such services are
furnished over a period of time, in such cases, at least every 60 days,
. . .) that such services are or were required to be given on an
inpatient basis because the individual needs or needed such services;
and (2)$T(B) in each such case, such services were furnished under a
plan established and periodically reviewed and evaluated by a physician.
This statutory requirement is implemented for ICFs at 42 CFR 456.360,
effective September 29, 1978. Section 456.360(c) requires that
recertification be made "at least every 60 days after certification."
The Agency also issued an "action transmittal," SRS-AT-75-122, dated
November 13, 1975, to State Medicaid administrators to clarify "what is
required in order for States to be considered in adherence with the
statute and regulation." The action transmittal defined recertification
as "the process by which a physician attests to an individual's need for
continued placement at a specific level of care. This recertification
must be provided at least every 60 days." (emphasis in original) It also
identified several conditions "which must be met in order for the
recertification to be considered valid": i.e., that it be in writing,
signed by a physician using his/her signature or initials, and dated at
the time it is signed or initialed. Several types of documents are
given as examples of acceptable recertifications: a statement signed
and dated by a physician that the patient needs a particular level of
care; signed and dated physician orders or progress notes which
indicate the need for continued care; or a medical evaluation signed and
dated by a physician (provided in each case that the date of the
signature meets the Agency's requirements for a timely recertification,
and the signature is identifiable as that of a physician).
Statement of the Case (3)$TThe Agency found violations of the
applicable statute and regulations in seven of the ten ICFs surveyed.
Specifically, it found that 56 residents in the seven facilities did not
have valid physician recertifications within the quarter.
In its appeal the State agreed that the disallowance was "based
totally on the 60-day physician recertification requirement." (State's
letter of July 27, 1981, p. 1) The State argued, however:
The 60-day physician recertification is not cost effective, it
complicates the care of these residents, it wastes valuable physician's
time and it is costly paperwork. The requirement that these residents
be recertified by a physician in 60 days is totally unrealistic. (Id.)
The State supplied its own calculation of the recertification time
for the residents cited in the disallowance letter. The State's
calculations showed that 32 of the residents were over the 60-day
physician recertification requirement by a matter of 1-7 days and 24
were under the 60-day requirement. According to the records submitted
by the State with its appeal, each facility surveyed but one, the
Hodgeman County Hospital with only one resident cited by the Agency as a
violation, had at least several patients who were not recertified during
a 60-day period. The State argued:
It is felt that if these intermediate care facilities had made no
effort to comply with this regulation, HCFA would have cause for this
disallowance. Since these homes made every effort to comply and were
within 1-7 days, . . . it is arbitrary and capricious (for the Agency)
to disallow $63,098.69 . . . . (Id. p. 3)
The Agency responded that it has no discretion to waive the reduction
once there is a finding that a violation has occurred, even if there is
only one violation of the 60-day recertification requirement at a
facility. The Agency argued that the Act requires a reduction to be
imposed unless the State can show evidence of a valid recertification
for each patient for whom payment is made under the State plan. In
support of its position the Agency referred to the language of section
1903(g)(1)(A) of the Act, to several prior Board decisions, and to a
decision by the U.S. Comptroller General, 59 Comp. Gen. 286 (March 4,
1980).
Discussion
The central issue in this appeal is the reasonableness of the
Agency's interpretation mandating 100% compliance with the 60-day
physician recertification requirement. The Board issued an Order to the
State, directing the State to show cause why the disallowance should not
be sustained on the basis of the reasoning contained in previous Board
decisions, discussed below, that found the Agency's interpretation to be
reasonable.
In its response to the Order, the State argued that the Agency's
interpretation of the requirement was not a reasonable one. The State
did not believe that it was the intent of Congress to require such
strict compliance. The State contended that all of the facilities
surveyed were in substantial compliance with the Act and that the
quality of care the patients received was not affected by some of the
recertifications being 1-7 days late. The State doubted that it was
Congressional intent to impose a financial sanction where the level of
care was not questioned and where there was substantial compliance with
the Act and regulations. (4)$TWe are not persuaded by the State's
arguments. In a series of decisions the Board has thoroughly examined
the recertification requirement and concluded that total, rather than
substantial, compliance is mandated if the reduction provided for in
section 1903(g)(5) is to be avoided. In Tennessee Department of Public
Health, Decision No. 167, April 30, 1981, the Board upheld the Agency's
interpretation of the Act, based on the legislative history and specific
amendments to section 1903(g), that it does not have the discretion to
waive the statutory reduction once there is a finding that a violation
has occurred. In support of the Agency's interpretation, the Board
referred to the Comptroller General's Opinion, supra. The Comptroller
General concluded that if the requirements of section 1903(g) are not
met in every case, the Secretary has no alternative but to consider the
State's showing unsatisfactory or invalid and impose the reduction
according to the statutory formula. The Comptroller General based this
conclusion on the legislative history of the Act and on the fact that
amendments to the Act described specific circumstances in which the
Secretary could waive the statutory provisions, leading the Comptroller
General to conclude that Congress did not intend to permit waivers under
any other circumstances.
The Board thus sustained the Agency's action in assessing a
disallowance when only one patient in a facility failed to meet the
certification requirements of section 1903(g)(1)(A) (Colorado Department
of Social Services, Decision No. 169, April 30, 1981) and when
recertifications were made 1-4 days after the 60-day limit (Georgia
Department of Health, Decision No. 207, August 28, 1981; Virginia
Department of Health, Decision No. 208, August 28, 1981). Under the
formula in section 1903(g)(5) for computing the reduction, the amount of
the disallowance remains the same regardless of the number of violations
in a particular facility as long as there is at least one violation.
See, e.g., Hawaii Department of Social Services and Housing, Decision
No. 295, May 7, 1982. Thus the State's position that it has
substantially complied with the requirements of section 1903(g)(1)(A) is
not adequate grounds for the Board to reverse the disallowance.
In its response to the Order, the State supplied the Board with
numerous documents pertaining to the questioned 56 patients. The Board
sent these documents to the Agency for analysis. Attached to the
documents pertaining to each facility was a summary by the State of the
relevant recertification dates for the patients at the facility. The
Agency examined the documents and concluded that, while the patient at
Hodgeman and several patients at another facility had, in fact, been
properly recertified, the documents revealed that other patients not
previously cited by the Agency in the disallowance letter had not been
(5) recertified within 60 days. The summary sheets provided by the
State also show this. Each of the facilities in question had at least
several patients who had not been recertified within 60 days. The
Agency must impose a disallowance according to the statutory formula set
forth at section 1903(g)(5) unless the State agency makes a satisfactory
showing that there are valid certifications/ recertifications "in each
case." Ohio Department of Public Welfare, Decision No. 191, June 24,
1981.
In this appeal the State has made what essentially amounts to a
policy argument, namely, that the Secretary's interpretation of the
60-day physician recertification requirement in section 1903(g)(1)(A) is
impractical. Regardless of whether we might agree with the State's
position on the value of a 60-day recertification period, the Agency's
interpretation that there must be 100% compliance with the
recertification requirement is reasonable in light of the statutory
language. The State, by the facilities' summary sheets is submitted,
has admitted that each facility had at least one patient who did not
meet the 60-day requirement. Therefore the disallowance must be
sustained.
Conclusion
For the reasons stated above, we sustain the disallowance in the
reduced amount of $57,071.83.
OCTOBER 22, 1983