New York State Department of Social Services, DAB No. 744 (1986)

GAB Decision 744

April 21, 1986

New York State Department of Social Services; 
Docket No. 85-35
Ballard, Judith A.; Garrett, Donald F.  Settle, Norval D.

The New York State Department of Social Services (State) appealed a
determination by the Health Care Financing Administration (Agency)
disallowing $334,648.32 claimed by the State for inpatient hospital
services in two institutions for mental diseases (IMDs) under Title XIX
(Medicaid) of the Social Security Act for quarters ended March 31, 1984
and June 30, 1984.  The disallowance was taken pursuant to section
1903(g)(1)(D) 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 it had
an effective program of medical review of the care of patients "whereby
the professional management of each case is reviewed and evaluated at
least annually by independent professional review teams." /1/ Based on a
validation survey, the Agency determined that the State failed to
include one patient in each of two IMDs.  As discussed below, we
conclude that neither patient was required to be included in the review,
and accordingly reverse the disallowance.


We issued an Order to Develop the Record in this case as well as four
others which set out preliminary analyses and questions on three general
issues concerning the medical review requirement and the statutory
exceptions in section 1903(g)(4).(2)

The Order also contained specific questions pertinent to this appeal.
The Agency submitted one consolidated response to the Order on the
cross-cutting issues;  in addition, the Agency attorney in this case
submitted a supplemental response to the general issues as well as a
response to the case-specific questions.  The State responded to both
parts of the Order.

In this Decision, we discuss the cross-cutting issues only to the extent
they are relevant to the New York facts.

Applicable Law and Brief Overview of New York Process

Section 1903(g)(1) of the Act requires the state agency responsible for
the administration of a state's Medicaid plan to submit a written,
quarterly showing demonstrating that --

   (it) has an effective program of medical review of the care of
patients in mental hospitals, skilled nursing facilities, and
intermediate care facilities 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.

A state's showing for each quarter must be "satisfactory" or FFP paid to
the state for expenditures for long-stay services will be decreased
according to the formula set out in section 1903(g)(5).

Section 1902(a)(31) requires in pertinent part that a state plan
provide:

   (B) for periodic inspections to be made in all . . . mental
institutions . . . within the State by one or more medical review teams
. . . of (i) the care being provided in . . . (mental institutions . .
.) 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. . . .

Regulations implementing the statutory utilization control requirements
are found at 42 CFR Part 456 (1982).  In particular, section 456.652
provides that:

   (a) . . . (in) 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;

   * * * *(3)

   (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 . . . by the end of the quarter in which
a review is required under paragraph (b)(2) of this section.

The statute at section 1903(g)(4) (B) /2/ provides exceptions to the
requirement for "reviews of each recipient in every facility in the
State" in certain circumstances where a state had reviewed 98% of all
facilities and 100% of all facilities with 200 or more certified
Medicaid beds requiring review.  The parties argued about whether the
exceptions applied in this case.  We do not reach that issue because
both facilities had more than 200 certified Medicaid beds.  Had we found
a violation in either facility, the exceptions still would not apply
since they are not applicable to facilities with more than 200 certified
Medicaid beds.


In New York, the annual reviews of psychiatric hospitals were conducted
by Utilization Review Associates, under contract with the New York State
Office of Mental Health (OMH).  Approximately six weeks before the
scheduled review date, OMH prepared a list identifying current Medicaid
recipients who were inpatients at the hospital to be reviewed.  This
identification of patients was based on several automated data bases
maintained centrally at OMH.  The list was then sent to the hospital.
"Shortly before the review date," the hospital updated the list and then
submitted it to the review team.  (State's Brief, p. 3) The fact that
the facilities here are psychiatric hospitals is significant because
such hospitals are IMDs.  FFP may be available under Medicaid for
inpatient psychiatric hospital services to individuals under age 21 (or
in certain circumstances, under age 22).  Otherwise, inpatient services
are covered only if provided other than in an IMD or to an individual
age 65 or over.  In addition, any individual aged 22 to 64 in an IMD is
rendered ineligible for Medicaid by reason of this institutional status.
See, generally, section 1905( a) of the Act;  42 CFR 435.1008. (4)

Marcy Psychiatric Center

In August 1984, federal reviewers found that one patient, C.V., /3/ in
Marcy Psychiatric Center had not been included in an annual patient
review for the quarter ended March 31, 1984.  The Agency subsequently
issued a disallowance for that quarter as well as the successive quarter
based on the finding that a review for this patient had still not been
completed.


The review at Marcy took place from September 6, 1983 through September
13, 1983 and covered 557 patients.  C.V. was in the facility on
September 6, but did not become 65 years old until September 11, 1983.
Her name did not appear on OMH's list of current recipients or on the
hospital's updated list.

The question to be resolved is whether C.V. is to be considered a
Medicaid recipient as of the first day of the on-site review.  In South
Dakota Department of Social Services, Decision No. 650, May 28, 1985,
the Board determined that a review need not include an individual who
had not been determined Medicaid eligible as of the first day that the
facility is reviewed.  The Agency also concluded from the decision that
"the review must include all persons in the facility determined to be
Medicaid eligible as of the first day of the review." (Agency's General
Response to Board's Order, p. 10)

The Agency's interpretation of our South Dakota decision is overbroad.
The Board there held that a patient who had not been determined eligible
for Medicaid on the first day of a review conducted in a facility was
not required to be included in the review.  The decision does not
necessarily stand for its converse and very general proposition that an
on-site medical review must include all persons in a facility determined
to be Medicaid eligible as of the first day of the review.  As we find
below, the statute and regulations do not require review of a patient
for whom the State completed the paperwork finding income and medical
eligibility prior to review but who had not actually met a condition
necessary to be found eligible for Medicaid in general, and inpatient
psychiatric services in particular, until after the review had begun.

In this case, the Agency focused on the definition in 42 CFR 400.203
which states that "unless the context indicates otherwise" a recipient
is an "individual who has been determined eligible for Medicaid." The
Agency presented evidence (5) to show that although C.V. turned 65
during the review, a Medicaid eligibility determination was actually
done some time during the month prior to the start of the review.  The
State presented evidence to show that it made the eligibility
determination for C.V. after the start of the review.

The parties presented contradictory evidence and information about the
eligibility determination process in general in New York and the process
followed for this patient in particular.  The Agency admitted that, if
the "determination" were completed after the start of the review, then
under our South Dakota decision, the disallowance would be improper.  We
need not find when the paperwork on eligibility was completed for C.V.,
however, because even if we were to find that the Agency was correct
that the paperwork "determination" was made prior to the review, we
would still find that there was no violation.

As mentioned above, the regulation references "annual on-site reviews of
the care of each recipient" and "on-site review of each recipient in
every facility." 42 CFR 456.652.  Recipient is defined, "unless the
context indicates otherwise" as an "individual who has been determined
eligible for Medicaid." 42 CFR 400.203.  Agency regulations do not
specify at what point a patient becomes "an individual who has been
determined eligible for Medicaid." We conclude that, in the context of
the medical review of an IMD, a state could reasonably read the
regulation as not applying to a patient who, at the time the review
begins, has not yet attained the qualifying age to receive Medicaid
inpatient psychiatric services, even if the patient meets income and
other eligibility requirements.  The State could have reasonably viewed
its action as merely anticipating that the individual would become
eligible, and not as a completed eligibility action.

The Agency argued, in effect, that the patient had been determined to be
currently eligible for Medicaid because the State's Medicaid program
provided for a full month of Medicaid payments for an individual who was
determined eligible any time during a particular month.  The Agency
contended that once the eligibility determination was made, the State
knew that Medicaid would cover the full month of services;  therefore,
the individual's care should be reviewed.

Under Medicaid regulations at 42 CFR 435.914, a state may make an
eligibility determination effective on the first day of the month in
which the individual becomes eligible.  Such determinations are
considered to be determinations of retroactive eligibility (see 42 CFR
435.1002(b)).  The fact that the State (6) may have anticipated that it
could make a retroactive determination does not necessarily mean that
the State is required to include as the subject of a review such a
person not yet meeting all conditions of eligibility.  In the absence of
specific guidance by the Agency requiring review of such patients, we
conclude that the State's system of identifying patients for review need
not include such patients in order to be found satisfactory. Thus, we
reverse the finding of a violation for Marcy Psychiatric Center.

Buffalo Psychiatric Center

In August 1984, federal reviewers found that one patient, T.S., in
Buffalo Psychiatric Center had not been included in an annual patient
review for the quarter ended March 31, 1984.  The Agency subsequently
issued a disallowance for that quarter as well as the successive quarter
based on the finding that a review for this patient had still not been
completed.

Although there is a dispute between the parties as to the exact date
that the State made a paper "eligibility determination" for patient T.
S., both parties agree that the determination was done before the first
day of the review of the Buffalo facility, some time during the month of
January 1984.  The State asserted, and the Agency did not deny, that the
list of those patients requiring review sent from the State to the
facility was dated December 20, 1983.  T.S.'s name was not on the list.
The facility ran its own listing of people age 65 and over on Thursday,
January 26, 1984.  On Friday, January 27, the facility prepared the 327
survey forms for the review which began on Monday, January 30.  T.S.
turned 65 years old on Saturday, January 28. T.S. was not reviewed
during the January 1984 review, but was subsequently reviewed on
December 14, 1984.

This situation is different from the circumstances surrounding C.V.
because not only was T.S.'s paperwork done before the review, but he
also turned 65 years old before the review.  The State did not review a
patient in an IMD who turned 65 on the Saturday before a Monday review
(see prior section for discussion of the importance of the age
requirement), and the system identified all recipients as of two
business days before the review where one day was needed to prepare the
survey papers.  We cannot find, however, given the circumstances
surrounding this review, that the State did not have an effective
program of medical review.

Here, we find that the State's system was operating in a wholly
reasonable and satisfactory manner.  The language of the statute and
regulations is very general;  there is very little Agency guidance to
assist the State in knowing what sort of review system the Agency would
find acceptable, and(7) what guidance there is does not bolster the
Agency's position.  Chapter 5-6-20, Suggested Format, Content and
Methodology Reviews and Inspections, a subchapter of the Medical
Assistance Manual's chapter on Medical Review in Skilled Nursing Homes
and Mental Hospital n4, encourages the states to gather "advance
knowledge about patients and their problems (in order to) enhance
materially both the efficiency and the effectiveness of on-site medical
reviews." The Manual goes on to state:

   Information on the medical history, conditions, treatment regimen and
other needs and characteristics of medical assistance patients . .  .
should be assembled and studied by the team before conducting the
on-site review in the facility.  A current list of patients for whom
payments are being made to a particular facility may be obtained from
the unit in the State responsible for accounting for such payments. . .
.

   Manual, Part 5, p. 62.


The Manual contains a list of the "Suggested Sequence of Medical Review
Events" which states:

   1.  Review team prepares schedules for on-site reviews . . .

   2.  Three weeks or more prior to the date of the scheduled on-site
review visit, the review team assembles the medical evaluation and
related information and prior review reports on each patient.

   3.  Review team analyzes pre-review patient information, develops a
"feel" for the kinds of situations to be dealt with during review visit
to the provider facility concerned;  and, develops its overall strategy
and work load distributions for the upcoming review.  Pertinent notes
are made on each patient and of any matters to be cleared up or to which
special attention is to be paid during the forthcoming review.

   4. . . . a pre-printed review team check-off form for each patient
(provides):

   - patient, facility, and physician identification data and related
information.(8)$T- "Alert" notes made for any patient-status, patient
care, or facility factors made by members of the review team during
their pre-review analysis of patient information.

   5.  No more than 48 hours immediately preceding the exact date set
for the on-site review, the provider facility concerned may be notified.

   6.  Upon arrival at the provider facility, the review team meets with
the administrator and/or chief nurse for an introductory conference
during which the purposes of periodic medical review are explained and
the general format to be followed by the review team and its individual
members during the course of the visit is outlined.

   7.  Work of members of the review team then proceeds according to
plan.

   . . . .

From the Agency guidance and the State's description of what was done by
the facility to prepare for the review once it received the OMH list, it
is clear that there are some processing steps which must be taken by the
facility before the reviewers can do their job.  In the case of the
Buffalo facility, forms for over 300 patients had to be generated.  No
inference could have been drawn from the Agency guidance that a system
which updated an IMD list two business days before a review began to
include all people 65 or older was not a reasonable system.  We note
that even if the facility had updated the list on Friday, the last
business day preceding the review, T.S. would not have been on the list.
In other words, the State included everyone in its review that it could
reasonably identify as a recipient as of time the review began.
Although the facility could have anticipated that T.S.  would become
eligible over the weekend, we do not think that a failure to anticipate
renders a system inadequate and ineffective.  For the same reasons as
stated in the prior section, we also find that the fact the State may
have determined T.S. to be retroactively eligible for payments for the
entire month does not render the system ineffective.  In the context of
medical review, the requirement for a review of each recipient must be
read as meaning that the review must include each person the State could
reasonably identify as a patient who (9) met all eligibility
requirements and had been determined eligible.  The State, here, met
that standard.  We therefore, find no violation for Buffalo Psychiatric
Center. /5/


Conclusion

For the reasons stated above, we overturn the disallowance pertaining to
both IMDs.  /1/ Amendments to section 1903(g)(1) as contained in section
2363 of the Deficit Reduction Act (DEFRA) of 1984, enacted July 18,
1984, Pub. L. 98-369, have eliminated all utilization control
requirements other than the medical review requirement as a basis for
reductions in federal financial participation. Although section 2368 of
DEFRA also amended the medical review requirement, those changes have no
substantive effect on the issues here.         /2/ Public Law 95-142
added section 1903(g)(4) (B), among other amendments, to section 1903(
g).  See section 20 of the Medicare-Medicaid Anti-Fraud and Abuse
Amendments of 1977, Pub. L. 95-142, October 25, 1977.         /3/ The
patients are identified by their initials to protect their privacy.  /4/
        The Manual is MSA-PRG-25 and is dated November 13, 1982.  /5/
        Because we have found for the State on a very fact-specific
basis for both patients, we do not address other general State arguments
pertaining to the meaning of the statutory requirements and exceptions.