GAB Decision 660
June 19, 1985
Virginia Department of Health;
Settle, Norval D. (John); Teitz, Alexander G. Ballard, Judith A.
Docket No. 84-214
The Virginia Department of Health (State) appealed a determination by
the Health Care Financing Administration (HCFA) disallowing $292,732.28
in federal financial participation (FFP) claimed by the State under
Title XIX of the Social Security Act. Based on a validation survey of
intermediate care facilities (ICFs) in the State, HCFA determined that
the State had not validly shown that, in the quarter ending December 13,
1983, the State had an effective program for the control of utilization
of long-stay services in ICFs. Specifically, HCFA found that, in five
out of ten ICFs surveyed, patient records revealed violations of
physician recertification or plan of care requirements under section
1903(g) (1) of the Act. The State conceded that it did not have an
effective utilization control program in one of the facilities. The
State also conceded that physician recertification and plan of care
requirements were not met in the other four facilities, but argued that
it had an effective utilization control program in those four facilities
because it had discovered the deficiencies using a system for annual
facility reviews approved by HCFA. In addition, the State said that
HCFA had improperly computed the disallowance as though the State had
185 ICFs when in fact the State had 187. Finally, the State argued that
the enactment of the Deficit Reduction Act of 1984 (DEFRA) precludes the
imposition of the disallowance because DEFRA amended section 1903(g) (1)
so that a state's utilization control showing no longer has to include
evidence that recertification and plan of care requirements are met. We
have already concluded that the DEFRA amendments do not preclude this
disallowance. Effect of DEFRA Amendments on Section 1903(g)
Disallowances, Decision 655, June 7, 1985. (This decision addressed
arguments made by Virginia, as well as arguments made by seven other
States on this question.) We further conclude here that the fact that
HCFA approved the State's system for annual reviews does not require
HCFA to find the State's showing satisfactory. HCFA agreed to recompute
the disallowance if it can verify the State's figure concerning the
number of ICFs. Accordingly, we uphold the disallowance in the amount
as recomputed(2) by HCFA. If the State disputes HCFA's recalculation,
the State may return to the Board solely on the computation issue.
Relevant statutory and regulatory provisions
Under Title XIX of the Social Security Act, states which have an
approved Medicaid state plan receive FFP in expenditures for medical
services to needy individuals. Services which qualify as "medical
assistance" under section 1905(a) of the Act, including ICF services,
are reimbursed generally at the "Federal medical assistance percentage"
(FMAP) rate. Section 1903(a) (1); 1905(b). However, section 1903(g)
(1) of the Act, as in effect during the time period in question here,
provided that, with respect to amounts paid for certain "long-stay
services," the FMAP "shall be decreased . . . unless the State . .
.
makes a showing satisfactory to the Secretary that there is in operation
in the State an effective program of control over utilization of such
services . . . ." Section 1903(g) (1) further provided:
. . . such a showing must include evidence that--
(A) in each case for which payment is made under the State plan, a
physician certifies at the time of admission . . . (and . . .
recertifies, . . . at least every 60 days . . . ) that such services are
or were required . . . ; and
(B) in each such case, such services were furnished under a plan . .
. ;
(C) such State has in effect a continuous program of review of
utilization pursuant to section 1902(a)(30) . . . ; and
(D) such State has an effective program of medical review . . .
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.
See also 42 CFR 456.652.
The Secretary was then to review the validity of the states' showings,
sometimes performing on-site surveys of institutions. Section 1903(g)(
2); see also 1903(g)(6)(B). In the case of a state's unsatisfactory or
invalid showing, a reduction was to be taken based on the formula set
out at section 1903(g)(5).(3)
The statutory requirements for certifications, recertifications, and
plans of care under section 1903(g)(1)(A) and (B) are implemented by
HCFA regulations at 42 CFR 456.360 and 456.380. The statutory
requirements for a medical review program in ICFs under section 1903(
g)(1)(D) (which incorporates by reference section 1902(a)(31)) are
implemented at 42 CFR Part 456, Subpart I. These latter provisions
require a review team to perform an on-site review in each facility at
least annually (this is sometimes referred to as the "inspection of
care" requirement). For the quarter in question here, the State had to
certify as part of its utilization control showing that it met the
physician recertification and plan of care requirements, as well as the
requirements for annual on-site reviews of the care of each recipient.
42 CFR 456.654. HCFA later performed a validation survey and determined
that the physician recertifications or plans of care did not meet the
applicable requirements in five facilities. As noted above, the State
contested the HCFA determination only with respect to four of the five
facilities. The State's argument To support its position that HCFA must
find the State's utilization control program to be satisfactory, the
State first pointed to provisions in the Virginia State Plan for Medical
Assistance. This State Plan provides that nursing homes must demonstrate
that a physician has certified the need for nursing home care at least
every 60 days. It further provides that the State will withhold payment
beginning on the 61st day following the last physician certification,
and also assess a penalty of 1-1/2 percent of the disallowed payment
from the time the non-certified service was rendered until the time the
State receives a refund of the payment. Appeal file, Ex. 1, Att. 3.1-C
to State Plan. The State Plan also provides that each recipient's plan
of care should be reviewed every 60 days. Id. These requirements have
been communicated to the facilities through a Nursing Home Manual and
"Medicaid Memos" which emphasize the need for recertification and
plans
of care. Appeal file, Exs. 2, 3. The State then phrased the issue as
follows: "If one assumes that the VMAP (the State Medicaid agency)
regulations conform to federal recertification requirements, the next
question is how frequently VMAP must inspect providers to ensure
compliance." State's brief, p. 6. The State contended that the State had
been informed by letter dated July 22, 1976, from the Department of
Health and Human Services (HHS, then HEW) that the State's "annual
on-site visit satisfied federal requirements . . . for utilization
review." State's brief, p. 6. Since this approval(4) has never been
retracted, the State argued, the State could properly assume that annual
on-site visits were sufficient. The State provided documentation to show
that the State performed timely on-site visits in each of the four
facilities in dispute and, as a result of these reviews, had identified
each of the deficiencies found by HCFA and had acted to recover from the
facility amounts claimed for any patients who did not have a valid
recertification or plan of care. This shows, the State argued, that
Virginia effectively controlled the utilization of ICF care. Since the
reduction set out at section 1903(g)(5) applies only "in the case of a
State's unsatisfactory or invalid showing," the State concluded, that
section simply does not apply here. In response to HCFA's position that
it was required to impose a disallowance any time it found that a
patient had not been properly recertified, regardless of whether
Virginia had uncovered (or would uncover) the same deficiency, the State
argued that this "theory" would lead to absurd results. To avoid a
disallowance under this construction of the requirements, the State
argued, it would have to have a State employee at an ICF on a constant
basis to ensure that the facility complied or, alternatively, send out a
State survey team just ahead of any federal team to make sure that the
State "caught" the deficiencies first. The State alleged that "the
former approach would be impossibly expensive and effectively nullify
the prior HCFA approval of annual inspections," and the "latter would
reduce HCFA inspections to a meaningless exercise . . . ." State's reply
brief, pp. 3-4. Analysis The State's argument is unpersuasive because it
confuses the requirements for recertifications and plans of care under
sections 1903(g) (1)(A) and (B) with the wholly separate requirements
for annual on-site reviews (inspections of care) under section 1903(g)
(1) (D). The structure of section 1903(g) (1), and the implementing
regulations, makes it clear that these are wholly separate requirements
with different purposes. The 1976 letter to which the State referred
simply approves the State's definition of "annual" for purposes of
the
annual on-site reviews. Appeal file, Ex. 4. Nothing in this approval
letter, or in the regulations, indicates that annual on-site reviews
were sufficient by themselves to show a satisfactory utilization control
program. To the contrary, section 1903(g) (1) specifically provided
that the State's showing had to include evidence of proper physician
certifications and plans of care in addition to evidence that other
utilization control requirements, including the annual on-site reviews,
were met. The HCFA regulations set out the(5) requirements separately
also and specifically state that HCFA will not find a showing
satisfactory if the information obtained through the validation
procedures demonstrates that any one of the requirements was not met
during the quarter for which the showing is made. States have complained
to us previously that the physician recertification and plan of care
requirements are difficult to administer because a state does not have
direct control over the physicians. However, Congress clearly intended
that the states find some means to ensure that the requirements were
met. Moreover, other states have found less burdensome means of
administering this requirement than the alternatives suggested by the
State--for example, by requiring that the recertifications be submitted
to the State agency by the facility and refusing payment if they are
not. Indeed, the State here obviously sought to bring its providers into
compliance through the threat of a disallowance and penalty assessment
if the requirements were not met. Unfortunately for the State, this
threat was apparently unsuccessful in preventing the deficiencies found
by HCFA here. Although the State showed that it identified the
deficiencies when it did its annual on-site reviews, this is not a basis
for reversing the disallowance. Congress set a higher standard--the
State had to show that the recertification and plans of care
requirements were, in fact, met. In view of the State's failure to show
this, HCFA correctly determined that the State had not shown that it had
an effective utilization control program, and, therefore, the State's
funding should be reduced according to the formula in section 1903(g)
(5). As noted above, the State provided no evidence to show that HCFA's
findings were incorrect. The State's documentation simply showed when
the State had performed annual on-site reviews and discovered the
deficiencies. In some instances, the State had identified the
deficiency prior to HCFA's survey and demanded and received repayment
from the facility. In other instances, the State review was performed
after the HCFA survey, or the State had demanded repayment and the
facility had appealed the determination. Although the State did not
raise the issue here, other states have argued that, if they recovered
the Medicaid payment from a facility where a recertification deficiency
was found, there should be no section 1903(g) reduction. See Ohio
Department of Public Welfare, Decision No. 219, September 30, 1981. The
question arises because the recertification requirement applies "in each
case for which payment is made under the State plan . . . ." Section
1903(g) (1) (A). Since the State plan here does not permit payment for
services provided after the 61st day if no recertification has been
made,(6) one could take the position that any case in which a deficiency
was found is not one for which payment was made "under the State plan."
We do not adopt this position here because it would defeat application
of the section 1903( g) reduction altogether. If a state could avoid the
application of the requirement simply by recovering after the fact the
payment made to the facility for any patient who did not have a proper
recertification, no reduction could ever be taken. In view of this, we
think that the requirement has to be read as applying to each patient
for whom the State has made a Medicaid payment for services of a type
generally covered under the State plan and provided during the quarter
in question. Here, the State did make such payments, so the reduction
is appropriately applied. Conclusion For the reasons stated above, and
in Decision No. 655, we uphold the disallowance, which HCFA has agreed
to recompute as discussed above. If the State disputes HCFA's
recalculation, the State may return to the Board solely on the
recomputation issue.
AUGUST 08, 1985