Virginia Department of Health, DAB No. 682 (1985)

GAB Decision 682

August 15, 1985

Virginia Department of Health,
Ballard, Judith A.; Teitz, Alexander G. Settle, Norval D. (John)
Docket No. 85-36

DECISION

The Virginia Department of Health (State) appealed a determination by
the Health Care Financing Administration (Agency) disallowing
$315,526.84 claimed by the State under Title XIX (Medicaid) of the
Social Security Act (Act) for services rendered in one mental health
facility (MH), four intermediate care facilities (ICFs), and two dually
certified ICF and skilled nursing facilities (SNFs) for the quarter
ended March 31, 1984. The disallowance represented a reduction in
federal financial participation (FFP) for the State's alleged failure to
show it had an effective program for controlling utilization of
institutional long-term care services under section 1903(g) of the Act.
Specifically, the disallowance was taken pursuant to section 1903(g)(
1)(D) of the Act. Based on a validation survey, the Agency determined
that the State failed to include in its annual medical review certain
patients in the facilities noted above. As discussed below, we uphold
the disallowance. This decision is based on written submissions and a
tape of a telephone conference call.

Applicable Law

For each quarter in which a state claims federal funds under Medicaid, a
state must make a "showing satisfactory to the Secretary" that it is
operating an effective utilization control program for long-stay
patients in certain facilities. See section 1903(g)(1). Here the
Agency found that Virginia failed to conduct mandatory on-site annual
reviews of the medical care provided to 141 Medicaid patients as
required by section 1903(g)(1)(D). That section provides for the
reduction of a state's federal medical assistance percentage (FMAP) with
respect to amounts claimed for long-stay services for any calendar
quarter unless the state shows that during that quarter it had an
effective program of medical review of the care of patients "whereby the
professional management of(2) each case is reviewed and evaluated at
least annually by independent professional review teams." /1/


Section 1903(g)(4)(B) and its implementing regulation, 42 CFR 456.653,
provide that a state's showing of annual on-site inspections in MHs,
ICFs, and SNFs will be satisfactory, even if the state can not show that
it has conducted such on-site inspections in all facilities, if certain
conditions are met. If the state cannot show that it inspected all
facilities, it must demonstrate in one of the following two ways, that
it had acceptable reasons for failing to do so:

1) If the state reviewed at least 98% of all facilities requiring
review and all facilities with 200 or more certified beds and showed
good faith and due diligence in attempting to review the others, the
requirement is met. 2) If the state does not review at least 98% of all
facilities and all facilities with 200 or more certified beds but can
show that it failed to do so for technical reasons and meets the 98%/
200 bed standard within the following 30 days, the requirement is met.

Section 1903(g)(5) of the Act and the regulation at 42 CFR 456.657
explain how to calculate the reduction in FMAP when a violation is
found. Each provides for a fraction comprised of the number of
recipients who received services in facilities that did not meet the
requirements (numerator) over the total number of recipients who
received services in facilities for the level of care for which a
showing is required (denominator). The result is then multiplied by one
third, which is in turn multiplied by the FMAP. The FMAP product is
then multiplied by the Agency payments for long-stay services furnished
during the quarter at that level of care to reach the final disallowance
amount. Further, the regulation provides --

If the number of recipients in individual facilities is not
available, the fraction . . . will be estimated, for each level of care,
by dividing the number of facilities in which the requirements were not
met by the total number of facilities . . .(3)

Statement of Facts

The State's validation survey for the calendar quarter ending March 31,
1984 was conducted by the Agency during the month of August 1984 to
verify that medical and independent professional reviews were performed
as reported for each participating long-term care facility. The State
had submitted its showing for the quarter ending March 31, 1984, listing
timely review dates and indicating that at least 98 percent of all
facilities requiring a review by the end of the quarter and all
facilities with 200 or more certified Medicaid beds requiring a review
by the end of the quarter had been reviewed. However, the Agency's
survey revealed that 11 SNF patients in two dually certified facilities,
two MH patients in one MH facility, and 128 ICF patients in four ICFs
were not reviewed. /2/ In accordance with section 1903(g)(5) of the Act
and 42 CFR 456.657, the Agency reduced the State's FFP for SNF, MH, and
ICF services.


The State's Arguments

In its notice of appeal, the State argued that the Agency's
interpretation that the medical care provided to 100% of the patients
had to be reviewed and evaluated on-site at least annually is
unreasonable and arbitrary. Further, the State argued that the intent
of ensuring quality of care to Medicaid recipients does not require a
complete 100% review. The State also questioned the penalty
calculations, but it did not submit an alternative figure or
information.

In its brief, the State developed its arguments. The State raised three
major points. First, the State argued that it made routine and frequent
reviews of the medical care provided its Medicaid patients in
participating facilities. The State explained that --

(a) nursing home which admits a medicaid recipient must provide the
Department with the details of that particular patient's care and needs
including the level of necessary care, on the so-called MAP-95 form.
The necessary information must be submitted within four months of the
patient's admission. An on-site review is then conducted at least ten
months after admission.

The State argued that many facilities are visited every two months to
assure a higher quality of care and greater facility compliance.
Therefore, the State concluded that it makes a good-faith and diligent
effort to conduct timely reviews of patients in nursing homes.(4)

Further, the State argued that it "substantially" conformed to federal
requirements. The State argued that, on the basis of its review, it was
able to make a decision about the general adequacy and utilization of
medical care in a facility. Moreover, the State reasoned that, if the
purpose underlying the federal regulations is to "generally safeguard
against unnecessary utilization of care and improve the quality of
patient care," the State fulfilled that purpose and should not be
penalized. State's brief, pp. 2-3.

Finally, the State argued that it has not previously been required to
demonstrate that each and every patient in a facility had been reviewed.
The State argued that its administrators must be in a position to do
long-term planning for inspections, and that arbitrary anniversary dates
for patient reviews simply cannot always be met.

Discussion

The factual basis for the disallowance in this case is undisputed; the
dispute here concerns interpretations of the statutory and regulatory
requirements. As stated above, the State made arguments about the
reasonableness of its actions and its attempts to comply with the
underlying purpose of the federal regulations. The Agency argued that
it is unnecessary to speculate on the underlying purpose of the Act and
regulations because the State itself admits that, with limited
exceptions, it has not complied with the statutory and regulatory
requirement of reviewing "each and every patient in each and every
facility at least annually." /3/ (Respondent's brief, pp. 4-5) Further,
the Agency noted that the State did not claim that it comes within one
of the exceptions.


(5)

While there is some latitude in the review requirement, the general rule
is that the State must review each recipient. Although the State
provided the Board with an explanation of its review process and argued
that it made a good-faith and diligent effort to conduct timely reviews
of patients in nursing homes, the State did not provide enough evidence
to show that it actually complied with the requirements of the statute
and regulation. The State did not argue that the unreviewed patients
here were not "recipients" within the meaning of the regulation.
Moreover, the State did not provide evidence to show that its reasons
for missing some of the patients were ones envisioned by the Agency and,
therefore, arguably acceptable. If the State's arguments were related
to the specific patients not reviewed, we might accept the State's
position. However, the Board cannot, without further evidence and
documentation, accept the State's arguments because they are too
insubstantial and conclusory to provide a basis for reversal in this
case.

It may be true that the Agency has not previously required the State to
demonstrate that it reviewed each and every patient, but that does not
change the effect of the specific requirements of the law applicable
here. Further, the State has alleged some reasons that, under certain
circumstances, might be acceptable. In its explanation of its
procedures, the State said that many of its facilities are visited
every(6) two months. In the present case, the State did not show, nor
even specifically allege, that any of the facilities that were included
in the disallowance had been reviewed two months earlier. If the State
had provided evidence to show that it had reviewed the facilities
included in the disallowance two months earlier, this action would have
raised the issue of whether reviews were due for the facilities. If the
State had provided such evidence, its failure to perform an adequate
review in the present quarter may have not been a fatal error. But, the
State presented no such evidence.

Further, the State did not allege that its efforts to comply with the
regulations qualified it for exceptional treatment under section 1903(
g)(4)(B). Specifically, in the conference call held in this case, the
State admitted that it did not meet either of the conditions listed in
section 1903(g)(4)(B) that allow for a satisfactory showing even when
the general requirement is not met. (See p. 2)

The State failed to show that it met the minimum requirement of
reviewing 98% of the participating facilities and every facility with
200 or more beds, or that it failed to do so because of a technical
reason and then came into compliance within 30 days. In fact, the State
specifically acknowledged that it did not meet the conditions of section
1903(g)(4)(B).

The fact that the State may have missed only a few patients in its
review of some of the facilities does not justify noncompliance with the
utilization control requirements. The Board has determined in a number
of cases that states have the burden of demonstrating compliance with
the utilization control requirements of section 1903(g), that section
1903(g) contains specific requirements binding on the Agency, and that
the Agency has reasonably determined that it must impose a disallowance
for a finding of even one violation in a facility. See, State of
Washington Department of Social and Health Services, Decision No. 663,
June 21, 1985, and decisions cited therein. In Washington, as in this
case, the Board noted that, although the cases cited generally dealt
with disallowances as they related to violations of section 1903(
g)(1)(A) (requiring periodic medical certification that specific levels
of services are needed), there is no basis for any distinction between
violations of that section and section 1903(g)(1)(D), the provision
involved here. Moreover, the Board has previously decided cases where
it appeared that the Agency had failed to enforce every requirement or
where there had been only one minor deviation. The Board has held that
even when there is one minor deviation, the Secretary must impose a
penalty reduction and does not have any discretion to waive the
violation. Colorado Department of Social Services, Decision No. 169,
April 30, 1981. The Board's position has been upheld in court.
Colorado Department of Social Services v. Department of Health and Human
Services, et. al, 558 F. Supp. 337 (D. Colo. 1983). Aff'd, No. 83-1395
(10th Cir. 1984).(7)

Finally, the State questioned the computation of the disallowance and
argued that the penalty imposed is extraordinary. Although the State
did not specifically argue it, the State may have been referring to the
fact that the Agency used facility data to calculate the disallowance
instead of patient data. The Agency argued that it lacked accurate data
on the total number of Medicaid SNF, MH, and ICF patients in facilities
in Virginia and, since the State did not attempt to provide this
information, the Agency computed the disallowance in accordance with 42
CFR 456.657(a) which permits the use of facility data.

We have previously addressed the propriety of substituting facility data
for patient data in calculating a utilization control reduction. In
North Carolina Department of Human Resources, Decision No. 273, March
31, 1982, at page 4, we found:

First, while it is true that Section 1903(g)(5) calls for numbers of
patients and not facilities, the regulation implementing Section 1903(
g)(5) allows the Agency to use facility data for calculating the
disallowance in the absence of exact data acceptable to the Agency.
Section 456.657(b) of Title 42 CFR provides that --

If any of the data required to compute the amount of the reduction in
FFP are unavailable, the Administrator will substitute an estimate. If
the State agency determines the exact data to the satisfaction of the
Administrator, the estimate may later be adjusted. If the number of
recipients in individual facilities is not available, the fraction
specified in paragraph (a)(1) of this section will be estimated, for
each level of care, by dividing the number of facilities for which a
showing is required under this subpart. /4/


Our discussion in North Carolina accurately reflects the circumstances
of this appeal. The Agency did not have the patient data necessary to
calculate the reduction so it used facility data instead. In light of
the State's failure to provide any patient data on which to base the
disallowance, the Agency's formula is appropriate.(8)

Conclusion

Based on the foregoing, we uphold the Agency's disallowance of
$315,526.84. /1/ The Deficit Reduction Act of 1984, Pub. L. No. 98-369,
July 18, 1984, amended section 1903(g). The State did not argue
that these amendments affected the disallowance here, and our analysis
reveals that they did not. /2/ The Agency's enclosure 3 to its
brief lists each facility and patient by name and is undisputed.
/3/ Although we are upholding the Agency's disallowance, we do not agree
with this characterization of the statutory and regulatory requirement.
Nothing in the statute or the regulation requires that "each and every
patient in each and every facility" be reviewed. The statute refers
generally to patients receiving Medicaid inpatient services and states,
in part, only that: the professional management of each case is
reviewed and evaluated at least annually by independent professional
review teams. Agency regulations require as part of the review: (p)
ersonal contact with and observation of each recipient; and . . .
review of each recipient's medical record. But, every patient may not be
a "recipient." Moreover, the Agency, in the preamble to the regulations
and in Action Transmittal HCFA, AT-77-106 (MMB), issued on November 11,
1977, recognized that there are situations when every recipient may not
be reviewed. In discussing its facility-based approach to the annual
review requirement, the Agency stated in the preamble to the regulations
implementing section 1903(g) that: (w)e recognize that under this
interpretation there may be some recipients in a facility who are not
reviewed, even though they have received care for an annual period,
because they either been (sic) transferred or were absent from the
facility at the time of the on-site review. . . . We believe, that
since most recipients do not move in and out of long-term care
facilities, most individual recipients are being reviewed at least
annually under our present interpretation. Moreover, we believe that
those few cases in which recipients are not reviewed annually are not
numerous enough to justify the reporting and administrative requirements
that would be necessary to track reviews of each recipient. 43 Fed. Reg.
50924, November 1, 1978. /4/ See also Virginia Department of
Health, Decision No. 208, August 28, 1981 in which we sustained a
disallowance computed using facility data based on 42 CFR 456.657(b).

JANUARY 14, 1986