West Virginia Department of Human Services, DAB No. 686 (1985)

GAB Decision 686

August 21, 1985

West Virginia Department of Human Services;
Garrett, Donald F.; Settle, Norval D. (John) Teitz, Alexander G.
Docket No. 85-43

DECISION

The West Virginia Department of Human Services (State) appealed a
determination by the Health Care Financing Administration (Agency)
disallowing $400,442.60 claimed for intermediate care facility (ICF) and
skilled nursing facility (SNF) services under title XIX of the Social
Security Act (Act) for the quarters ended March 31, 1984, June 30, 1984
and September 30, 1984. The disallowance was taken pursuant to section
1903(g)(1) of the Act, which provides for the reduction of a state's
federal medical assistance percentage of amounts claimed for any
calendar quarter unless the state shows that during that quarter there
was in operation an effective program of control over the utilization of
the institutional services provided pursuant to title XIX. Based on a
validation survey, the Agency found specifically that the State failed
to include in its annual reviews of two ICFs and four dually certified
SNF/ICFs all Medicaid patients residing in those facilities as required
by section 1903(g)(1)(D). The Agency also found that in each of the two
ICFs which were reviewed, services were provided to a patient who was
certified as needing SNF rather than ICF services, in contravention of
the requirement at section 1903(g)(1)(A) for certification and
recertification that in each case the individual needs the services
provided.

As discussed below, we conclude that the Agency properly determined that
the State failed to comply with the annual review requirement in section
1903(g)(1)(D). In view of this conclusion, we need not reach the
question whether the certification and recertification requirement in
section 1903(g)(1)(A) was met for the quarters ended March 31, 1984 and
June 30, 1984 since the amount of the disallowance for the two
facilities involved is the same regardless of the number of violations.
In addition, we find that the disallowance for these two facilities for
the quarter ended September 30, 1984, which was based solely on section
1903(g)(1)(A), was invalid under provisions of the Deficit Reduction Act
of 1984 eliminating the certification and recertification requirement
from section 1903(g). Accordingly, we uphold the disallowance in part
and reverse it in part.(2)

Statement of Facts

The validation survey was conducted in ten randomly selected facilities.
The State had conducted an annual review in each facility some time
during the quarters ended September 30, 1983, December 31, 1983, or
March 31, 1984. Based on the survey, the Agency determined that when
the State conducted its annual reviews, it failed to review a total of
37 Medicaid patients residing in six facilities. All of the patients in
question had been determined to be eligible for Medicaid before the date
on which their respective facilities were reviewed. In addition, a
determination had been made that each patient was financially eligible
for Medicaid benefits for care in the facility. /1/ At the time the
reviews were conducted information regarding the latter eligibility
determination had not been entered into the State's computerized record
keeping system. The State's review team used a listing of patients
generated by the computer to determine which patients to review. Thus,
the patients in question were not reviewed because the review team was
unaware of their status.


Although the reviews which the Agency found deficient occurred in the
last two quarters of calendar year 1983 and the first quarter of 1984,
the Agency imposed a disallowance only for the first quarter of 1984.
It also imposed a disallowance for the quarters ended June 30, 1984 and
September 30, 1984 on the ground that the State again failed to review
some of the six facilities. (Letter from Director, Bureau of Quality
Control, Health Care Financing Administration, to Commissioner, West
Virginia Department of Human Services, dated December 28, 1984, p. 2 and
Enclosure 3)

Applicable Law

Section 1903(g)(1)(D) requires a showing that a state has, in any
calendar quarter for which the state submits a request for payment for
long-stay SNF or ICF services:

an effective program of medical review of the care of patients . . .
pursuant to section . . . 1902(a)(26) and(3)

(31) whereby the professional management of each case is reviewed and
evaluated at least annually by independent professional review teams.

Section 1902(a)(26) requires in pertinent part that a State plan
provide:

for periodic on-site inspections to be made in all . . . skilled
nursing facilities . . . within the State by one or more medical review
teams (composed . . . of physicians or registered nurses and other
appropriate health and social service personnel) of (i) the care being
provided in such nursing facilities . . . to persons receiving
assistance under the State plan, (ii) with respect to each of the
patients receiving such care, the adequacy of the services available. .
. .

Section 1902(a)(31) contains comparable language pertaining to ICFs.
Implementing regulations are found at 42 CFR Part 456 (1978). In
particular, section 456.652 provides that:

(a) . . . (i)n order to avoid a reduction in FFP, the Medicaid Agency
must make a satisfactory showing to the Administrator, in each quarter,
that it has met the following requirements for each recipient;

* * * *

(4) A regular program of reviews, including medical evaluations, and
annual on-site reviews of the care of each recipient. . . .

(b) Annual on-site review requirements. (1) An agency meets the
quarterly on-site review requirements of paragraph (a)(4) of this
section for a quarter if it completes on-site reviews of each recipient
in every facility in the State, and in every State-owned facility
regardless of location, by the end of the quarter in which a review is
required under paragraph (b)(2) of this section.

(2) An on-site review is required in a facility by the end of a
quarter if the facility entered the Medicaid program during the same
calendar quarter 1 year earlier or has not been reviewed since the same
calendar quarter 1 year earlier. If there is no Medicaid recipient in
the facility on the day a review is scheduled, the review is not
required until the next quarter in which there is a Medicaid recipient
in the facility.(4)

(3) If a facility is not reviewed in the quarter in which it is
required to be reviewed under paragraph (b)(2) of this section, it will
continue to require a review in each subsequent quarter until the review
is performed.

* * * *

Other regulations are referred to as appropriate in the course of this
decision.

State's Arguments

The State argued on appeal that the patients in question were not
required to be reviewed since, at the time that their respective
facilities were reviewed, they were not Medicaid recipients within the
meaning of 42 CFR 456.652. The State asserted that a patient did not
become a Medicaid recipient until information regarding his financial
eligibility was entered into the State's computerized record keeping
system and payment of medical expenses was made by the State. (State's
reply brief dated June 7, 1985, p. 2; State's Response to Order to
Develop the Record, dated July 18, 1985, p. 2) The State also argued
that the statute and regulations required only that each Medicaid
patient receive an annual medical review and asserted that it complied
with this requirement since all of the patients in question either were
reviewed within one year of the end of the quarter in which they had
been determined eligible for Medicaid or else died or were discharged
from the facility within that time period. (State's brief dated April
15, 1985, pp. 7-9) /2/


Discussion

We find no basis for the State's position that the patients in question
here were not Medicaid recipients within the meaning of 42 CFR 456.652.
Section 400.203 of 42 CFR (1983) defines the term "recipient" for
purposes of the Medicaid program as "an individual who has been
determined eligible for Medicaid," but(5) provides that the definition
does not apply if "the context indicates otherwise." There is no
indication from the context in which the term "recipient" is used here
that in addition a Medicaid payment on behalf of the patient must have
actually been received by the facility in order for the patient to be
considered a recipient. The State admitted that the patients in
question had been determined to be financially eligible for Medicaid
prior to the time that the reviews were conducted. Thus, there was no
doubt at the time that the facilities were reviewed that Medicaid
payments would ultimately be received for all of the patients in
question. To require that the State have paid a bill for a patient's
care in order for the patient to be considered a recipient would exclude
from review a patient who was receiving services clearly reimbursable
under the Medicaid program on the basis of factors totally unrelated to
his eligibility. (The time of actual payment, which is in any event
made only for services already rendered, would be to a large extent
dependent upon when a bill was submitted by the facility which provided
the care.)

Moreover, the fact that the State had not yet updated its computerized
record keeping system to reflect the patients' financial eligibility for
Medicaid does not mean that the patients should not be considered
recipients. The State asserted that it would have been difficult, if
not impossible, for it to have identified patients who had been
determined eligible for Medicaid until the information was entered into
the computerized system. (State's Response to Order to Develop the
Record, dated July 18, 1985, p. 2) It is arguable that a patient has not
"been determined eligible for Medicaid" within the meaning of 42 CFR
400.203 and is thus not a recipient until the review team reasonably has
access to information regarding the determination. /3/ However, we are
not persuaded that the State's procedures for transmitting the
information to the review team were in fact reasonable. The fact that
37 patients who had been determined financially eligible for Medicaid
were not reviewed itself indicates that the State's procedures were
deficient. The State noted that determinations of financial eligibility
were made in the "area offices" of the Department of Human Services,
were relayed to medical staff in the Department and were thereafter
entered into the computerized record keeping system. The review team
used a computer listing of Medicaid eligibles to determine those
patients subject to its review. The record shows(6) that in many cases
several weeks, and in some cases one or two months, elapsed between the
time that the medical staff was advised by the area offices of these
determinations for the patients in question and the date that the review
of a particular facility commenced. (Id., p. 2 and revised Exhibit 5)
Thus, a substantial amount of time passed after the determination of
financial eligibility was actually made without the State's entering
information regarding that determination into its computerized system.
In our view, therefore, the State did not make determinations of
financial eligibility known to the review team in a reasonably prompt
and efficient manner. Thus, although the State may have been unable to
provide its review team with a current list of patients who had been
determined financially eligible for Medicaid, that does not on the facts
of this case excuse the State from reviewing all such patients.


The State also argued on appeal that the patients in question need not
have been included in the reviews which were the subject of the
validation survey since each patient in fact received a review within
one year of the end of the calendar quarter in which the patient was
determined eligible for Medicaid if the patient had not died or been
discharged from the facility within that time. /4/ The State argued that
this satisfied the statutory requirement for an annual review of each
patient's case.


We are not persuaded by the State's argument. Although the statute does
require an annual review of the care of each patient, the Agency
implemented that requirement by providing for an annual review in each
facility. Thus, section 456.652(b)(2) specifically requires "(a)n
on-site review . . . in a facility by the end of a quarter if the
facility entered the Medicaid program during the (7) same calendar
quarter 1 year earlier or has not been reviewed since the same calendar
quarter 1 year earlier." In issuing this regulation, the Agency stated
as follows:

We proposed in the NPRM that annual reviews would be considered
timely if they are performed by the end of the calendar quarter
corresponding to the quarter in which a facility entered the program or
the quarter in which the facility had been inspected the previous year.
Under this interpretation, States would not be required to track the
length of time each individual recipient was in a facility, and the
review date would not relate to the length of stay of any individual
recipient in that facility.

* * * *

All comments received supported . . . (this provision). However,
several States took exception to our proposal that where, on the day of
the scheduled review, no Medicaid patients are found in the facility,
the due date for an on-site inspection would be moved to the next
quarter. The States commented that this provision was overly
restrictive and that the due date should be moved forward one year,
since this would still mean no patient would be in the facility for more
than one year without being reviewed. However, this would be
inconsistent with the regulatory scheme in which the timing of reviews
is based on facilities and not on the length of time individuals were in
those facilities.

(44 Fed. Reg. 56333, 56335 (October 1, 1979))

Thus, the Agency clearly viewed the requirement for an annual review in
each participating facility as precluding states from demonstrating
compliance based on the length of time individual(8) patients had
resided in their respective facilities before a review was conducted.
/5/


In our view, moreover, the Agency reasonably interpreted the statute to
require annual reviews of facilities rather than the tracking of
individual patients. Since the latter system would require that a
review team visit a particular facility as many times within a year as
the number of Medicaid patients in the facility with different
anniversary dates, the Agency could reasonably have concluded that
annual reviews of facilities -- which would conserve state resources and
be easier for the federal government to validate -- were sufficient to
satisfy the statutory objective of an annual review of each patient's
case. Indeed, here the State does not argue that tracking of individual
patients should be substituted for reviews scheduled on the basis of the
facility's entry date into the Medicaid program and subsequent reviews.
Instead, its position is that it can show compliance with the annual
review requirement on a case-by-case basis for Medicaid patients not
included in the annual facility reviews. Under the(9) State's approach,
however, compliance may become dependent upon purely fortuitous events,
such as a patient's death or discharge from the facility, occurring up
to a year after a facility receives an annual review. Thus, we think
that the Agency reasonably determined that annual facility reviews were
to be the sole mechanism for complying with the requirement for an
annual review of each patient's case. /6/


Certification and Recertification Issue

For the quarters ended March 31, 1984 and June 30, 1984, the Agency
found a violation of the section 1903(g)(1)(A) certification and
recertification requirements for patients in two ICFs for which it also
found deficiencies in the reviews conducted pursuant to 1903(g)(1)(D).
A finding of additional violations for the same facility does not alter
the amount of the disallowance. (Georgia Department of Medical
Assistance, Decision No. 508, January 31, 1984, p. 5) Since we uphold
here the Agency's determination that the State did not comply with
section 1903(g)(1)(D) with respect to reviews conducted in these
facilities, we need not decide whether there were also violations of
section 1903(g)(1)(A) involving these facilities in the quarters noted.
The disallowance for the quarter ended September 30, 1984 for these two
facilities is based solely on the certification and recertification
issue. However, amendments to section 1903(g) in section 2363(c) of the
Deficit Reduction Act (DEFRA) of 1984, enacted July 18, 1984, Pub. L.
98-369, eliminated the certification and recertification requirements as
a basis for reductions in federal financial participation. In Effect of
DEFRA Amendments on Utilization Control Disallowances, Decision No. 655,
June 7, 1985, the Board concluded that no disallowance could be(10)
taken for the quarter beginning July 1, 1984 based on the failure to
meet these requirements. Accordingly, the disallowance in that quarter
for the two ICFs is improper.

Computation of Disallowance

Section 1903(g)(5) of the Act and the implementing regulation at 42 CFR
456.657 set out a formula for computing the disallowance for failure to
make a satisfactory showing under section 1903(g) of the Act. Part of
the computation involves dividing, for each level of care, the number of
recipients who received services in facilities that did not meet the
applicable requirements by the total number of recipients who received
services in facilities for which a showing was required. However,
section 456.657(b) provides that if the number of recipients in
individual facilities is not available, the Agency may divide the number
of facilities in which the requirements were not met by the total number
of facilities for which a showing is required. The Agency used facility
rather than patient data to compute the disallowance here since it
stated that it lacked accurate data on the total number of Medicaid ICF
patients in facilities in the State. (Agency's brief, dated May 20,
1985, p. 4) The State subsequently provided information regarding the
total number of Medicaid patients in each facility for which a violation
was found. (State's Response to Order to Develop the Record, dated July
18, 1985, p. 4, and revised Exhibit 5) However, this information is not
sufficient to permit the Agency to revise the disallowance using patient
data since the statute and regulation call for the total number of
Medicaid patients in all participating facilities, not just in those
facilities in which the applicable requirements were not met.
Nevertheless, we see no reason why the Agency should not recalculate the
amount of the disallowance if the State provides the necessary
information promptly following the issuance of this decision.

Conclusion

For the foregoing reasons, we conclude that patients who had been
determined to be financially eligible for Medicaid prior to annual
reviews conducted in their respective facilities pursuant to section
1903(g)(1)(D) of the Act were required to be included in those reviews.
We further conclude that the fact that the patients received care in the
facilities for less than a year following the determination of Medicaid
eligibility before they either were included in another review or died
or were discharged from the facility does not cure the deficiencies in
the annual reviews. Accordingly, we sustain the Agency's disallowance
except to the extent that it pertains to the two ICFs for the
quarter(11) ended September 30, 1984, where the sole basis for the
disallowance was a violation of certification and recertification
requirements which were deleted from the Act by the DEFRA amendments.
/1/ As used in this decision, a determination that an individual
is financially eligible for Medicaid means a determination pursuant to
42 CFR 435.725 that, after deducting the individual's income from the
cost of institutional care, some amount remains which must be paid by
the State for such care pursuant to title XIX. This determination
follows a determination that the individual is eligible for Medicaid as
a categorically or medically needy individual who meets the general
financial requirements. /2/ The State also argued that the date
on which a patient was initially certified by a physician as needing the
level of care provided by the facility determined when the review of
that patient must take place. (State's brief dated April 15, 1985, p.
10) However, the State did not follow up this argument by providing
information regarding the date on which the patients in question were
certified. /3/ The Agency did not argue in this case that a
patient could properly be considered a recipient absent a determination
of financial eligibility. /4/ The import of the State's
reference to the end of the calendar quarter is that some of the
patients in question actually resided in their respective facilities
more than one year after the date on which they were determined to be
either generally eligible or financially eligible for Medicaid before
they were reviewed or died or were discharged. (See State's brief dated
April 15, 1985, Exhibit 5) The State apparently had in mind that under
42 CFR 456.652, because of the timing of the reviews, a Medicaid patient
could remain in a facility for up to 15 months between reviews.
/5/ We note that the regulations do not appear to preclude states from
conducting reviews of facilities more frequently than annually.
Specifically, 42 CFR 456.606 provides that: The team and the agency must
determine, based on the quality of care and services being provided in a
facility and the condition of recipients in the facility, at what
intervals inspections will be made. However, the team must inspect the
care and services provided to each recipient in the facility at least
annually. This provision seems to contemplate reviews scheduled without
regard to the length of stay of individual patients and thus does not
provide any support for the State's position. Where more than one review
occurs in a year, however, it is arguable that deficiencies in one of
the reviews are not a basis for a disallowance as long as no more than
one year has elapsed since the last satisfactory review. The State
conducted two reviews in some of the facilities in question during 1983,
one of which preceded the review included in the validation survey.
(See Agency's submission dated July 15, 1983, p. 2) However, even
assuming that the prior review was satisfactory, there is no basis here
for reversing the disallowance since more than a year passed from the
time of the prior review until another satisfactory review was
performed. /6/ The situation presented here is clearly
distinguishable from the situation where a review is conducted in a
subsequent quarter which includes any patients improperly excluded from
the facility's annual review. In the latter situation, the deficiency
in the annual review is considered cured as of the subsequent quarter
and no further disallowance may be taken on the basis of the original
deficiency. (The Agency in fact took no disallowance here for subsequent
quarters in which a review was conducted covering those patients in
question who had not died or been discharged.) In this case, however,
the State argued that reviews in a subsequent quarter rendered the
disallowance for the quarter in which the deficient review was performed
and any intervening quarters improper.

JANUARY 14, 1986