GAB Decision 518
Docket No. 83-156
February 29, 1984
Michigan Department of Social Services;
Ford, Cecilia Sparks; Settle, Norval Garrett, Donald
The Michigan Department of Social Services (State) appealed a
decision by the Health Care Financing Administration (Agency)
disallowing $183,608.38 in federal financial participation claimed by
the State under Title XIX of the Social Security Act for the quarter
ending September 30, 1982. The disallowance was based on the Agency's
determination that the State had violated the utilization control
requirements of section 1903(g) of the Act in six Intermediate Care
Facilities (ICFs), two of which were also licensed as Skilled Nursing
Facilities (SNFs). The Agency disallowed $166,891.45 for ICF violations
and $16,806.93 for SNF violations.
The parties have agreed that questions remain concerning the accuracy
of the penalty calculation and have initiated negotiations aimed at
resolving this issue. Therefore, after consulting the parties, we
severed the calculation issue from this appeal. If the parties are
unable to resolve this question, they may resubmit that issue for our
review.
This decision addresses all the remaining substantive issues raised
by the State, as well as a jurisdictional challenge posed by the Agency.
Our decision is based upon briefs and appeal files submitted by the
parties. The State filed an initial brief in this matter, but chose not
to submit a reply brief. The State had initially requested an
evidentiary hearing, but subsequently withdrew its request. For the
reasons discussed below, we sustain the disallowance.
Jurisdiction
The Agency argued that the State's failure to specifically set out
its position in the notice of appeal precluded us from resolving the
issues ultimately raised by the State. The Agency noted that in the
notice of appeal the State merely indicated that it had met the intent
of the regulations concerning the operation of an effective program of
utilization control. The Agency cited the Board's requirement that a
notice of appeal contain a "brief statement of why the (final Agency)
decision is wrong" (45 CFR 16.7(a)). The Agency argued that this
requirement was a jurisdictional prerequisite which the State had failed
to meet. The Agency (2) argued that past Board decisions had repeatedly
held that the utilization control regulations require strict compliance.
Since the State had not alleged that it had strictly complied with the
regulations, the Agency concluded that the State had not in effect
alleged that the Agency's decision was wrong. (Agency Brief, pp. 9-10)
The Agency further indicated that the State's failure to set out a more
specific basis for appeal would impair the Board's ability to determine
if it had jurisdiction.
We believe that the State has met the jurisdictional prerequisites
for pursuing the appeal. The State filed a notice, appealing the
disallowance in question, which stated that it had met the "intent"
of
utilization control regulations. Thus, as is required by 45 CFR 16.7(
a), the State put the Board on notice of its intention to appeal the
disallowance and briefly explained, for purposes of the preliminary
notice of appeal, why the Agency's decision was wrong. This was
sufficient to enable the Board to determine that it had subject matter
jurisdiction over the appeal. The Agency, however, appears to be
arguing that a notice of appeal should contain a fully developed legal
position.
The Agency pointed to two Board decisions /1/ and 45 CFR Part 16,
Appendix A, G. for the proposition that the Agency's opinion on the
Board's jurisdiction over an issue is binding on the Board unless the
Board determines it to be "clearly erroneous." The Agency's reliance
on
those decisions and the Board's regulations is misplaced. The decisions
and regulatory guidelines speak to the subject matter of the Board's
review. Here, there is no question that the utilization control program
falls within our jurisdiction. (45 CFR Part 16, Appendix A, B(a)(1))
Since, we conclude that the State's notice of appeal comported with
the guidelines of 45 CFR 16.7(a), we now turn our attention to the
substantive issues raised by the State.
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 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 the federal medical assistance percentage (FMAP) is
requested with respect to amounts paid for such services for patients
who have received care for 60 days in (3) an ICF (or SNF) or the FMAP
will be reduced 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 certifies at the time of admission . . . (and recertifies,
where such services are furnished over a period of time, in such cases,
at least every 60 days . . .) that such services are . . . required to
be given on an inpatient basis because the individual needs such
services; and
(B) in each such case, services were furnished under a plan
established and periodically reviewed and evaluated by a physician . .
. .
The implementing regulation for the certification and recertification
of need for intermediate care patients is found at 42 CFR 456.360
(1981). The regulation provides:
(a)(1) a physician must certify for each applicant or recipient that
ICF services are or were needed. (2) The certification must be made at
the time of admission or, if an individual applies for assistance while
in an ICF, before the Medicaid agency authorizes payment.
* * *
(b)(2) Recertification must be made at least--
(ii) Every 60 days after certification in an ICF . . . .
The Agency also issued Action Transmittal AT-80-68 (October 1, 1980)
to State Medicaid Administrators to clarify what "constitutes a valid
certification and recertification for purposes of satisfying statutory
and regulatory requirements." /2/
(4) Finally, services for intermediate care patients must be provided
in accordance with a written plan of care established prior to admission
to a facility or authorization for payment. (2 CFR 456.380( a)) The
plan of care must be reviewed at least every 90 days. (42 CFR
456.380(c))
Background
Section 1903(g)(2) of the Act requires the Secretary to conduct
timely onsite surveys of private and public institutions in which
recipients of medical assistance may receive care and services. Agency
reviewers surveyed ten ICFs in Michigan to certify that the requirements
of sections 1903(g)(1)(A) and (B) were met for the quarter ending
September 30, 1982. The Agency found 69 individual violations at six
facilities at both the intermediate and skilled levels of care. Each
facility had at least three documented recertification violations for
which the Agency provided documentation from the facilities' records.
The individual violations generally touched upon the three basic areas
of utilization control, i.e., certifications, recertifications, and
plans of care. However, the most predominant violation concerned
untimely and invalid recertifications. Of the 69 patients cited, 65 had
recertification violations, either alone or in concert with another type
of violation. Four patients in two facilities had plan of care
violations only.
Inclusion of SNFs in the Disallowance
In the routine course of the Agency's review of the State's ICF
utilization control program, the State provided Agency surveyors with
lists of patients at the facilities scheduled for review. The
surveyors' examination of these patients' records not only revealed that
some of the patients were certified for skilled care, but that they had
utilization control violations as well. The State protested the
inclusion of skilled care patients in the disallowance based on what it
parceived to be an established limit on the scope of the Agency's
review. The State argued that the Agency action was contrary to
applicable law, and appeared to be "aimed solely at arbitrarily
increasing the moneys sought . . . from the State." (State Brief, p. 6)
In support of its position the State cited Medicaid Action Transmittal
AT-82-27 (State Exhibit 1) which explained how the Agency surveyors
would review ICFs (including ICFs for the mentally retarded (ICF/MR)).
Under section 1903(g)(1) states are required to make a quarterly
showing for each level of care and the Secretary must take reductions
for unsatisfactory showings. The Secretary conducts the mandated review
of facilities by means of an on-site survey. (Section 1903(g)( 2))
Here, the information upon which the survey was based revealed the (5)
existence of skilled care patients with utilization control violations.
Since a reduction is required by statute for each level of care for
which the requirements have not been met, the Agency clearly is
authorized to recognize violations at the SNF level. See, Ohio
Department of Public Welfare, Decision No. 191, June 24, 1981; Virginia
Department of Health, Decision, No. 208, August 28, 1981; Idaho
Department of Health and Welfare, Decision No. 250, January 28, 1982;
Kansas State Department of Social and Rehabilitation Services, Decision
No. 312, June 21, 1982; also, Opinion of the Comptroller General, 58
Comp. Gen. 286, March 4, 1980.
Further, we reject the specific State argument that the disallowance
for SNFs was invalid because it was not taken in accordance with a
separate SNF on-site survey. In Colorado Department of Social Services,
Decision No. 218, September 20, 1981 /3/ we found:
"that the validation procedures, whether sample on-site surveys or
any other method, are not a condition precedent to imposition of a
penalty, and that the Secretary has considerable discretion with regard
to how and whether to perform a validation."
Therefore, for the reasons discussed above, we conclude that the
inclusion of SNFs in the disallowance was proper.
Recertifications Every Two Calendar Months
The Agency specifically cited two facilities (Ingleside and
Provincial House of Gaylord) for recertification violations based upon
those facilities' practice of recertifying patients every two calendar
months, rather than at 60 day intervals, as required by section 1903(
g)(1)(A).
The State pointed out that the 60 day formula requires a constant
recalculation of the impending deadline. The State argued that a two
calendar month deadline is more easily remembered and, therefore, more
easily enforced than the 60 day deadline set out in the statute. The
State noted that the intent of the recertification requirement is to
encourage periodic review of the appropriateness of a patient's level of
care. The State contended that this standard was just as well served
whether the recertification took place on the 59th or 61st day.
Additionally, the State cited a report by the HHS Office of the
Inspector General (OIG) which (6) recommended elimination of periodic
level of care recertifications for ICFs and ICFs/MR, based upon the
OIG's conclusion that "periodic recertifications have little or no
effect on services received by residents and their elimination would not
affect patient care." (State Brief, pp. 11-12; State Exhibit 2)
The statute clearly requires a recertification "at least" every
60
days. The Board has addressed the validity of recertifications
occurring outside the 60-day limit on several occasions. In each
instance, the Agency has interpreted the "at least" language of the
statute so that there is no discretion to allow recertifications in any
other time frame. Based upon the statutory language and the Opinion of
the Comptroller General, supra, we have consistently found that the
Agency's position is reasonable and reflects the statutory intent.
Additionally, we have also supported the Agency conclusion that it does
not have the discretion to waive violations or reductions for even one
violation. E.g., Tennessee Department of Public Health, Decision No.
167, April 30, 1981; Colorado Department of Social Services, Decision
No. 169, April 30, 1981; Ohio, supra; Georgia Department of Medical
Assistance, Decision No. 207, August 28, 1981; Virginia, supra; Kansas,
supra; Georgia Department of Medical Assistance, Decision No. 508,
January 31, 1984. Finally, while the OIG report may raise legitimate
questions concerning the effect of periodic recertifications, the Agency
currently is mandated by statute to conduct timely on-site surveys to
confirm that the utilization control requirements, including the 60-day
recertification requirement, have been followed.
Accordingly, we find that the penalties resulting from recertifying
patients every two calendar months, where this time period exceeded 60
days, were proper.
Documentation and Notice of the Agency's Findings
The State contended that the Agency failed to provide timely notice
of certain violations in the preliminary findings that preceded Board
review, thereby denying the State the opportunity to show compliance
with the statutory requirements. The State also argued that the Agency
failed to properly document some of its findings. /4/ The State urged
(7) the Board to reverse that portion of the disallowance attributable
to findings revealed for the first time in the Notice of Disallowance,
or otherwise not adequately documented.
We cannot accept the argument that the State has not had an
opportunity to respond to all the alleged violations. Even if the State
first learned about some of the violations in the disallowance letter,
the Board's process provides ample opportunity to submit documentation
to refute the final Agency findings. The State did not attempt to
address these violations in its initial brief, nor did the State submit
a reply to the Agency's brief as permitted by Board regulations. We
addressed a similar set of circumstances in our Hawaii decision. There,
at page 5, we concluded that:
(the) fact that the State did not have an opportunity to respond to
every finding of a violation before the disallowance was taken does not
act to relieve the State of the burden of demonstrating its compliance
with the applicable requirements (during Board proceedings).
Additionally, we find no merit in the State's argument that it was
unaware of violations at Ingleside until the Notice of Disallowance. In
its preliminary findings, the Agency indicated that the Ingleside
facility, like Provincial House of Gaylord conducted recertifications
every two calendar months. The Agency specifically noted that this
method of recertification resulted in the violations at Provincial. The
Agency also indicated that this method of recertification was employed
at Ingleside and that the Administrator at Ingleside would correct it.
The Agency's preliminary statements relative to Ingleside clearly
indicated that violations existed at this facility. (State Exhibit 3)
Therefore, the State cannot realistically argue that it did not know
that the Agency was likely to find violations there.
Finally, we agree with the Agency that the State cannot shift the
burden of proof concerning patients with alleged violations simply
because the Agency did not retain underlying documentation from the
patients' records to establish the violations. The State alleged that
in order to verify the completeness of the survey findings and
supporting patient records developed by the Agency, "(it) would have to
contact each of the six facilities and obtain the original documents
from them, a task which has not been undertaken to date." (State Brief,
p. 13) The State also alleged that there were either no underlying
documents or insufficient documents in support of the survey findings
for four patients. However, the State has the ultimate burden to
demonstrate that it has an effective program of utilization control and
to persuade (8) the Board that the Agency has erred in its
determination. Missouri Department of Social Services, Decision No.
214, September 23, 1981. Here the record shows that the Agency
surveyors did examine the requisite documents and recorded the necessary
information on survey sheets, even though they may not have retained
copies of the original documentation in a limited number of cases. This
information, in each case, demonstrated utilization control violations.
At that point it became incumbent on the State to refute the Agency's
findings from documentation which the State admits was also accessible
to it. As we indicated above, the State had ample opportunities during
Board proceedings to do just that.
Moreover, we note that even if we refused to accept findings without
underlying documentation, there were several documented violations at
each of the three facilities in question. As noted above, a facility is
out of compliance with the utilization control regulations if only a
single violation exists at the facility. Additionally, once a single
confirmed violation exists, the penalty calculation remains the same
regardless of any additional violations. /5/
The Validity of the Agency Survey
The State maintained that, "althogh not expressly stated, it is clear
that neither the homes chosen for review nor the patients therein were
picked randomly . . . ." (State Brief, p. 17) The State indicated that
the Agency reviewed 25 patients per facility without regard to the
percentage of the facility's population which that numer represented.
The State argued that the Agency was obligated to show that its sampling
techniques were valid. The State intimated that a 10% sample size was
too small to provide an adequate basis for a disallowance, but that a
sample size of 27% might be acceptable. However, the State did not
specifically demonstrate why the Agency's techniques were invalid.
(9) Section 1903(g)(2) merely requires that the Secretary conduct
timely sample on-site "surveys" in order to determine whether the
states
have complied with utilization control requirements. The statute does
not require that the surveys follow any particular statistical sampling
methodology and clearly does not contemplate the use of statistical
extrapolation in computing the penalty for violations.
In response to the State's allegation regarding the survey
procedures, the Agency asserted that the selection of facility sites and
patients was, in fact, random. The Agency pointed out that the smallest
percentage of patient population represented by its review of 25
patients in any of the six facilities was 19.5% (Ingleside) while the
next smallest was 33%. (Agency Brief, p. 41) Additionally, the Agency
submitted an affidavit from one of its Program Analysts which attests to
the validity of the Agency review. (Agency Exhibit H) The State has not
challenged that affidavit. Further, we reiterate that under the
currently accepted interpretation of section 1903(g) a single individual
violation is sufficient to sustain a penalty at that facility. Thus,
there is no merit to the State's argument that a review of only 25
patients was insufficient to assess a facility's compliance with the
statute, especially given that the State must meet the requirements of
1903(g)(1)(A) and (B) in each case.
We have previously found that particular validation procedures,
whether on-site surveys or any other method, are not a condition
precedent to the imposition of a penalty, and that the Secretary has
considerable discretion with regard to how and whether to perform a
validation. Colorado, Decision No. 218, supra. Here, the State has not
demonstrated that the survey was conducted in a manner which prejudiced
it. Therefore, we reject the State's argument on this issue.
Conclusion
Based on our findings and analysis as set out above, we uphold the
substantive basis of this disallowance. As discussed on page 1, if the
parties are unable to resolve the penalty calculation issue through
negotiations, they may submit that issue for our review. /1/ City of
Dayton, Decision No. 325, June 30, 1982; Ohio Developmental
Disabilities Planning Council, Decision No. 330, June 30, 1982.
/2/ The Agency had previously issued Action Transmittal SRS-AT-75-122
(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 regulations." Action Transmittal 80-68 replaced Action
Transmittal SRS-AT-75-122. /3/ Aff'd, Colorado Department of
Social Services v. Department of Health and Human Services, 558 F. Supp.
337, (D. Colorado, 1983), (Appeal pending, 10th Cir. No. 83-1395)
/4/ The State contended that the Agency failed to supply supporting
documentation for a "few" of the alleged recertification violations
at
the United Memorial Hospital, Matheson Nursing Home, and Provincial
House of Gaylord. The State maintained that it could not address these
violations without the corresponding records. The State contended that
the Agency was the best source of this documentation. /5/ The
State also argued that "alleged errors which purport to render . . .
documents 'invalid' range from a failure to put in a day of the month in
a plan of care update which hardly seems critical to not circling ICF or
SNF on the recertification form." (State Brief, p. 14) The State,
however, failed to provide documentation of any sort to demonstrate that
the updates had been made within the requisite time frame or to
demonstrate the recertification related to the appropriate level of
care. Further, the State provided no legal argument as to why the Board
should not apply the plan of care and recertification requirements to
these patients. Accordingly, we must uphold the Agency's findings of
violation concerning these patients.
NOVEMBER 14, 1984