GAB Decision 535
Docket Nos. 84-7, 84-8
May 9, 1984
Petition for Clarification of Decision No. 436;
Ballard, Judith; Garrett, Donald Settle, Norval
The dispute.
This dispute arose during the course of proceedings following our
decision in Joint Consideration: IMD Admission/Discharge Issue,
Decision No. 436, May 31, 1984. There, we upheld determinations by the
Health Care Financing Administration (HCFA) disallowing claims of five
States (New York, New Jersey, Delaware, Pennsylvania, and Ohio) for
federal financial participation (FFP) under Medicaid in per diem rates
for inpatient psychiatric services provided to individuals aged 22 to 64
in institutions for mental diseases (IMDs). Services to individuals in
this age group in IMDs are generally excluded from the definition of
"medical assistance" in which federal Medicaid funding is available.
Section 1905(a) of the Social Security Act. The States contended that,
because the services were provided during the month the individual
receiving the services was admitted to, or discharged from, the IMD, FFP
was available under 42 CFR 435.914(b) and 435.1008(b). These
regulations permit states to consider a person eligible for Medicaid for
a full month if that person is eligible during any part of the month, as
a matter of administrative convenience. We concluded that these
regulations authorize FFP during partial months in IMDs only for
services covered in a state's Medicaid plan, and that there were no
provisions in the State plans in question covering the category of
inpatient services in IMDs other than provisions specifically limited to
individuals aged 65 and over or under age 21. We further concluded
that, contrary to the States' assertions, HCFA did not have a
longstanding interpretation of the regulations permitting the States to
ignore these limits during partial months in IMDs. In upholding HCFA's
decision that the States could not claim the full per diem rates for
inpatient psychiatric services for individuals aged 22 to 64 in IMDs,
however, we noted that HCFA had acknowledged that FFP was available in
whatever part of the rates represented the allowable costs of services
separately covered in the State plans. Therefore, we said the
disallowances were subject to reduction to the extent that the States
could show what part of the rates represented covered services.
(2) After we had issued Decision No. 436, the States presented data
to HCFA to show what part of their claims were allowable, taking the
position that all services separately covered in the State plans were
allowable. In response, HCFA took the position that services "integral
to inpatient psychiatric services" were not allowable, even if covered
under the State plans. Four of the States appealed HCFA's decision on
this matter to the Board; two of the appeals are before us here: New
York's (Docket No. 84-8) and New Jersey's (Docket No. 84-7). /1/
For the reasons stated below, we conclude that HCFA cannot disallow
the States' costs claimed here simply because they are psychiatric
services "integral to inpatient psychiatric services." Services which
are covered in a state plan are allowable under the partial month
eligibility provisions, even if psychiatric in nature. We do not decide
here, however, whether the costs included by the States in their
submissions to HCFA are, in fact, covered in their State plans. HCFA
raised questions on this point but specifically said it had not decided
this issue, yet. If the parties cannot resolve this issue, the States
may return to the Board.
What we said in Decision No. 436.
We will not repeat here the lengthy analysis we provided in Decision
No. 436. However, since an understanding of what we held in that
decision is necessary to an understanding of our decision here, we
summarize below the relevant points from Decision No. 436.
The partial month eligibility provision directly applicable to IMDs
states that --
FFP is available in expenditures for services furnished to eligible
individuals during the month in which they (3) become . . . patients in
an institution for . . . mental diseases.
42 CFR 435.1008(b)
HCFA based some of its original disallowances on the position that
the term "services" in this provision had to be read to mean only
"non-institutional" services. We did not specifically adopt this
reading in Decision No. 436. Instead, we said that the crux of the HCFA
position, as explained during Board proceedings, was that, when the
regulation refers to "services," it can only mean services which are
covered in a state Medicaid plan. Decision No. 436, pp. 13-14; see also
Transcript of the hearing held in the cases leading to Decision No. 436
(Tr.), pp. 55-59.
We analyzed how the IMD exclusion affects the service definitions in
section 1905(a) of the Act. Provisions for covering inpatient hospital,
skilled nursing facility, and intermediate care facility services,
generally, contain the limit "other than in an IMD." Provisions for
covering inpatient services in IMDs contain as part of the service
descriptions the age of the individual receiving the services: age 65
or over or under age 21 (or, in certain circumstances, under age 22).
We concluded that there is no provision in the statute, regulations, or
State plans specifically covering inpatient services to individuals aged
22 to 64 in IMDs.
In Decision No. 436, we discussed the States' view that, once a
person between the ages of 22 and 64 is in an IMD qualified to provide
services to persons in other age groups, it is solely age that renders
the person ineligible, and, therefore, the partial month provision
allows the States to disregard the person's age. We said that the HCFA
interpretation that the IMD exclusion went both to individual
eligibility and to covered services was supported by the statutory
scheme as a whole, as well as the provisions on covered services in
Agency regulations at 42 CFR Part 440. We said that the States' view
was not reasonable because the exceptions permitting FFP in IMD services
to the aged and to children were not framed solely in terms of age.
Congress provided for optional coverage of these services only if they
met certain conditions. We said that provisions setting conditions for
services which would be covered made it clear that Congress was
concerned, not only with the State's financial responsibility for care
in IMDs, but also with the nature of the services provided there. In
this context, we said:
Permitting FFP for partial months for individuals in the 22-64 age
group would frustrate Congressional intent because services on a partial
month basis could not be subject to the type of long-range planning and
periodic (4) review Congress contemplated for IMD services Medicaid
would cover.
Decision No. 436, p. 10.
We also addressed in Decision No. 436 the States' arguments that HCFA
had a longstanding interpretation of the partial month provisions that
was inconsistent with the disallowances. We concluded that there was no
such longstanding interpretation after examining the documents the
States said they relied on, including formal policy issuances, internal
Agency memoranda, and correspondence to the States from regional
officials. We also found that the record did not support the States'
position that the Agency should be precluded on equitable grounds from
taking the disallowances. Decision No. 436, pp. 16-34.
Accordingly, we upheld the disallowances, stating that the
disallowances were "subject to reduction to the extent that the States
can show the Agency what portion of the rates were for the costs of
services separately covered in the State plans." Decision No. 436, p.
36.
HCFA's position here.
Subsequent to the issuance of Decision No. 436, the States provided
documentation to HCFA to support their views of what part of the per
diem rates represented costs allowable under our decision. HCFA
informed New York and other States that it agreed that some of these
costs were allowable (for example, costs of dentistry, laboratory,
podiatry, and radiology services), but disagreed that all services
separately covered in the approved State plan and included in the IMD
per diem rate were allowable. HCFA said:
The (Grant Appeals Board) decided that inpatient psychiatric services
which are provided in the IMD are unallowable under the Medicaid statute
and regulations. Other medical services may be provided in the IMD for
the treatment of a patient's medical condition and are allowable during
the first and last partial month of institutionalization if otherwise
separately covered under your approved State plan.
Therefore, in determining what portions of the disaggregated IMD per
diem rate are allowable a distinction must be made between those
services which are integral to the inpatient psychiatric service and
those which are not.
Letter to New York from Acting Regional Administrator, HCFA, dated
December 15, 1983, Petition for Clarification of Decision No. 436,
Appendix II.
(5) HCFA identified some costs which it considered integral to
inpatient psychiatric services (for example, psychological and
psychiatric evaluation services), and some services which might be
allowable in part but which HCFA said required splitting into allowable
and unallowable parts (for example, physicians, nursing, and diagnostic
services) based on whether the services were psychiatric in nature. Id.
n2
The States challenged this determination as inconsistent with
Decision No. 436 and with the position that HCFA took in the proceedings
leading to that decision. In response, HCFA said that its determination
was consistent with the Board's decision because "it assures that no
federal payment will be made for a category of services which the Board
has already held may not be covered under Medicaid." HCFA brief, p. 3.
Citing the Board's statement about Congress' concern with the nature of
IMD services which could be covered under Medicaid (see quoted passage
above), HCFA viewed its task as providing "substance to the category of
IMD services which Medicaid may not cover." HCFA brief, pp. 6-7. HCFA
said that, since the Board did not directly address the question of what
elements of the per diem rate make up this prohibited category, HCFA
determined that "this category of 'inpatient psychiatric service'
consists of psychiatric treatment rendered to IMD patients between 21
and 64 in an institutional setting (even if the psychiatric services
could, in the abstract, be provided to individuals on an outpatient
basis)." HCFA brief, p. 4.
HCFA also argued that "HCFA's position before the Board -- that 42
CFR 435.1008(b) authorizes payment only for those services which fall
within the scope of medical assistance under the Medicaid statute and
regulations -- in no way conflicts with the determination that FFP for
psychiatric services in IMDs is not available." HCFA brief, p. 8. HCFA
referred to the statement of its position in its brief in the previous
case (pp. 9-10) that the regulation authorized FFP for "non-IMD
services" for which an individual aged 22 to 64 would be eligible except
for institutionalization in an IMD. HCFA also cited its statement that
the term "services" in the regulation "must refer . . . to those
Medicaid services which . . . are services which do fall within the
definition of medical assistance, and for which an IMD patient would be
otherwise eligible outside the institution." HCFA brief, p. 8, citing p.
12 of its brief in the cases leading to Decision No. 436.
(6) HCFA further said that it had always maintained that "only
non-psychiatric medical services could be matched" under the regulation.
HCFA brief, p. 9. HCFA pointed to the examples it had given of services
reimbursable under the regulation and said that they were all
non-psychiatric in nature.
Discussion
Is reimbursement for psychiatric services during partial months
prohibited?
We conclude that HCFA cannot disallow costs of services provided
during partial months in IMDs solely because the services are
psychiatric. The relevant inquiry under the partial month regulation is
whether or not a service is covered in a state plan. HCFA's distinction
between covered services which are psychiatric and those which are not
is not supported by the regulations or the statute, or the rationale
underlying Decision No. 436.
HCFA's current analysis is premised on the view that there is a bar
to FFP in a specific category of services: inpatient psychiatric
services to individuals aged 22 to 64 in IMDs. The Agency relates this
to its earlier position expressed in some of the disallowance letters
that FFP was available only in non-institutional (or non-IMD) services.
That position was challenged by the States in the proceedings leading to
Decision No. 436, both on the ground that nothing in 42 CFR 435.1008(b)
distinguished services by whether they were institutional (or IMD)
services, and on the ground that the Act did not prohibit FFP
specifically in inpatient IMD services to individuals aged 22 to 64. In
Decision No. 436, we said that the Agency had clarified its position to
be that 42 CFR 435.1008(b) authorized FFP only in covered services
during partial months. Decision No. 436, p. 8; Tr., pp. 58-60. We
also noted that HCFA had acknowledged that there was no explicit
prohibition on covering IMD institutional services to individuals aged
22 to 64. Specifically, HCFA's representative said at the hearing:
It's not an answer to say that there is no provision of the Act which
excludes payment for services in IMDs from individuals between 22 and 64
because the point is that there is none that permits it. That's what
we're arguing. There is no statutory basis for such a claim because it
does not fall within any of the types of services which have been
enumerated by Congress . . . .
Tr., pp. 89-90.
Our decision was based precisely on this reasoning: that as a result
of the way the IMD exclusion is written into the service descriptions in
section 1905(a) of the Act, there is no provision in the regulations or
state plans covering the (7) category "inpatient psychiatric services"
when provided to individuals aged 22 to 64 in IMDs. In spite of this
development of the issue, stated clearly in the Board's decision, HCFA
has tried to characterize the decision as holding that HCFA lacks
authority to reimburse psychiatric services in IMDs because it is
prohibited from doing so.
There is a provision in the statute barring FFP in services to
individuals aged 22 to 64 in IMDs: the general IMD exclusion which
appears in paragraph (B) following section 1905(a)(18) of the Act. This
provision renders persons aged 22 to 64 in IMDs ineligible for all care
or services by reason of their institutional status. But the Agency has
provided an exception to this through the partial month eligibility
notwithstanding the statutory exclusion. See Decision No. 436, p. 11.
Nothing in the wording of either the general IMD exclusion or the
exception in the partial month elgibility regulation provides a basis
for distinguishing psychiatric and non-psychiatric services. As we have
said, however, the exception in the regulation can be read as extending
FFP during partial months only to services which are covered under a
state plan. Thus, the relevant inquiry is whether a service is covered
under a state plan.
Section 1905(a) of the Act and Agency regulations at 42 CFR Part 440
describe care and services which must or may be covered in a state's
Medicaid plan. Examining the service descriptions indicates that
services are characterized by the qualifications of the person or
facility providing the services, the needs or age of the person
receiving the services, or the setting in which the services are
provided. Some categories are packages of services which may include
various services which are also covered when provided separately.
The facility providing a package of services may be an institution if
it furnishes food, shelter, and some treatment or services to four or
more persons unrelated to the proprietor. 42 CFR 435.1009. A person
receiving "inpatient" services in an institution is receiving room,
board, and professional services in the institution on a continuous
24-hour-a-day basis. 42 CFR 435.1009. Room and board are not
separately listed as a covered service under the Act, but may be
reimbursed as part of the per diem rate for inpatient hospital, skilled
nursing facility (SNF), intermediate care (8) facility (ICF), or
inpatient psychiatric facility services. /3/ The basis in the statute,
regulations, and state plans for our finding that the full per diem
rates for inpatient psychiatric services could not be reimbursed as a
covered service was simply this:
* The general descriptions of services in hospitals, SNFs and ICFs
are each modified by the limitation "other than services in an
institution for . . . mental diseases." See sections 1905(a)(1), (4),
and (15) of the Act.
* Coverage of hospital, SNF, and ICF services in an IMD is
specifically limited to individuals aged 65 or over and inpatient
psychiatric facility services are limited to individuals under age 21
(or, in certain circumstances, under age 22). See sections 1905(a)(14)
and (16) of the Act.
The crux of our holding in Decision No. 436 was that the limitations
in these service descriptions resulted in the absence of any provision
specifically covering inpatient services in IMDs to individuals aged 22
to 64.
Our discussion of Congress' concern with the nature of the inpatient
services provided in an IMD was in the context of whether it was
reasonable of HCFA to say that the States could not disregard during
partial months the age limits in provisions covering inpatient services
in IMDs. We upheld HCFA's view because the category of services in IMDs
which Congress said it would cover are not distinguished from
non-covered IMD services solely by the age of the person to whom they
are provided; Congress also placed conditions on coverage related to
the quality of the services. That this supports the disallowance of the
full per diem rates claimed by the States, however, does not mean that
it ineluctably leads to the conclusion that psychiatric services are not
allowable during partial months because they are "integral" to the
inpatient psychiatric service category in a way which other covered
services are not. It goes to the conditions under which a package of
services will be reimbursed and is not, as HCFA would have it, a
prohibition on coverage of any component "integral" to that package.
(9) With respect to services which are included in the per diem
rates, HCFA's position in the prior proceedings was that the costs could
be reimbursed to the extent that the States could identify services that
were covered under the State plans. See, e.g., Tr., pp. 60-61. HCFA
said here that the examples it gave of separately covered services were
all services which were non-psychiatric in nature. This is not so.
HCFA mentioned physicians' services -- without qualifying that example
as "non-psychiatrist's" services as it attempted here. Id. Physicians'
services are covered under the state plans, regardless of the setting in
which they are provided (see 42 CFR 440.50), just as the services HCFA
has agreed are allowable, such as dentists' services and eyeglass
services.
Besides the fact that the distinction between psychiatric and
non-psychiatric services which HCFA drew in its determination appears
nowhere in the statute or regulations, the distinction is not
supportable for several other reasons:
* As the States mentioned, Congress did not exclude funding of
psychiatric services when provided in settings other that IMDs. Covered
services are generally allowable regardless of whether they are provided
for a physical or mental disorder.
* HCFA stated that services provided in the IMD for the treatment of
a patient's "medical condition" were allowable during partial months
if
not unallowable inpatient psychiatric services and if otherwise
separately covered in a state plan. /4/ This fails to recognize that a
mental disease may have physiological as well as psychiatric symptoms.
If the patient is receiving inpatient psychiatric services because of
such a disease, treatment of both types of symptoms may be appropriate,
and the non-psychiatric component is no less integral to the treatment
than the psychiatric component. Moreover, the facility would generally
be required to meet all the health needs of its patients; if a patient
needs treatment for a physical condition the cost of that treatment
would generally be included as part of the inpatient service rate.
Services which HCFA has identified as allowable (for example, radiology
services) may also be related to or caused by the patient's disease (a
brain scan might be necessary to determine if the patient has a brain
tumor (10) which is causing psychiatric symptoms). Finally, HCFA said
it was distinguishing psychiatric and non-psychiatric services, but
identified as unallowable some services which are psychological rather
than psychiatric. Given these factors, we fail to see the logical basis
for HCFA's distinction, and we think it is unworkable. /5/
* There are provisions against discriminating against a patient on
the basis of diagnosis. Courts have examined the IMD exclusion in this
context and upheld it because the exclusion focuses on a type of
institution. See, e.g., Schweiker v. Wilson, 450 U.S. 221 (1980); Joint
Consideration: "Institutions for Mental Diseases," Decision No. 231,
November 30, 1981. Once the institutional status of an individual is
disregarded because of the partial month exception, to distinguish
allowability of services to treat the individual solely on the basis of
whether they are psychiatric or not comes dangerously close to such
discrimination.
We understand HCFA's concern that, if it reimburses for substantially
all of the per diem rates (except for costs associated with room and
board), the practical effect may be to reimburse for a group of services
which is covered as a group -- i.e., inpatient psychiatric services --
only when provided to the aged or children. But once having established
by regulation the States' entitlement to FFP in "services" provided
during partial months in FFP, HCFA cannot read in a limitation for which
there is no reasonable and logical basis. While HCFA, of course, may
amend the regulation (as it has in fact proposed to do, 48 Fed. Reg.
13446, (11) March 31, 1983), HCFA cannot refuse to give effect to the
regulation as written.
Are the services claimed separately covered in the State plans?
Under our reasoning set out above, the relevant inquiry in
determining allowability of the parts of the per diem rates for which
the States have presented cost data is whether they are for services
separately covered in the State plans. The States said that all of the
costs for which they presented data were for covered services. We said
in our Invitation to Brief that we would consider this an undisputed
fact unless HCFA specifically contested the allegation. In response,
HCFA said that it had not yet fully examined the costs on this basis and
would not do so until we had resolved the threshold issue presented
here.
Given the lack of a final HCFA position on the issue of what services
are separately covered in the State plans, we decline to reach that
issue here. We assume that the parties will cooperate to resolve this
issue as soon as possible. If there is a further dispute, the States
may return to the Board. The Board would also assist in facilitating
resolution of the issue if the parties wish.
In order to assist the parties in further consideration of this
issue, we note that HCFA in its brief did raise a question about whether
some of the conditions for the service categories claimed were met (for
example, New York claimed costs of services which are reimbursable when
a component of a group of services called "clinic treatment" services,
but the definition of this category of services says they are provided
on an outpatient basis). Nothing in our decision here or in Decision
No. 436 implies that the States could get FFP for a service if all of
the conditions for coverage were not met. Thus, if HCFA's allegation is
true (which we do not decide here), there might be a basis for
determining that some of the costs for which the States presented data
are unallowable. This issue should be resolved as expeditiously as
possible.
Conclusion
For the reasons stated above, we reverse HCFA's determination that
costs of services to individuals aged 22 to 64 during partial months in
IMDs are unallowable if they are psychiatric in nature, even if
separately covered in a state plan. (12) We do not decide here whether
the costs claimed by the States are, in fact, for services which are so
covered. /1/ New York submitted a brief with its Petition for
Clarification of Decision No. 436. The Board invited HCFA to submit a
brief in response to New York's and also gave other States with cases
involving the issue addressed in Decision No. 436 an opportunity to
state their views. New Jersey asked that its case be joined with New
York's and that request was granted. Pennsylvania and Delaware appealed
separately (Docket Nos. 84-12 and 84-29, respectively) and asked that
their cases be stayed pending a decision in the New York case. Ohio
submitted a brief in response to our invitation, but has not appealed
separately. When we refer to the "States" below, we mean New York
and
New Jersey, unless the context indicates otherwise. /2/ The HCFA
determination with respect to New Jersey's costs was similar,
but it is our understanding that there are some differences in the way
New York and New Jersey calculated what parts of their rates were
allowable. /3/ The term "inpatient" is most often used when
describing hospital services to distinguish services provided to someone
living in the hospital from services provided on an outpatient basis.
The term is also used to describe inpatient psychiatric facility
services or a person in an SNF (since an SNF is a medical institution).
A resident of an intermediate care facility is similarly receiving
professional services under the care and supervision of the facility 24
hours a day. /4/ HCFA seemed to be implying that a psychiatric
disorder would not be a "medical condition" but cited no basis for
this.
In a different case before the Board, HCFA indicated that psychiatric
treatment was medical treatment. Granville House, Inc., Decision No.
529, April 9, 1984, p. 28. /5/ In response to New York's argument that
the services claimed where not unique to institutional care, HCFA
pointed out that New York itself had said in its presentation breaking
down the per diem rates that services upon admission to an IMD were
characterized by their intensity. This intensity, HCFA argued,
distinguishes inpatient psychiatric care from outpatient psychiatric
care. New York responded that its reference to the intensive nature of
the services was in the context of comparing the services offered upon
admission to a facility (usually during a crisis in the patient's
illness) with services offered at a later point during the patient's
stay. There is nothing in the record here to indicate that "intensive"
psychiatric services may only be offered on an inpatient basis and,
therefore, are unallowable during partial months. As we mention below,
however, HCFA may examine the service categories under which the States
are claiming the costs here to determine whether the service
descriptions are met, including any limitations there may be on the
intensity of the treatment.
NOVEMBER 14, 1984