Washington State Department of Health and Social Services, DAB No. 803 (1986)

DEPARTMENTAL GRANT APPEALS BOARD

Department of Health and Human Services

SUBJECT: Washington State Department of
Health and Social Services

Docket No. 86-87
Decision No. 803

DATE: November 4, 1986

DECISION

The Washington State Department of Health and Social Services
(Washington/State) appealed a determination by the Health Care Financing
Administration (HCFA/Agency) disallowing $226,807.79 in federal funding
claimed by the State under Title XIX (Medicaid) of the Social Security
Act (Act) for the quarters ending June 30, September 30 and December 31,
1985. Based on a validation survey, HCFA concluded that the State did
not have an effective program of utilization control of long term stay
services as required by section 1903(g)(l) of the Act. Specifically,
HCFA found that Washington failed to conduct valid annual medical
reviews in intermediate care and skilled nursing facilities within the
state during those three quarters.

Based on documentation submitted by Washington during the course of this
appeal, HCFA reduced the scope of the disallowance so that this decision
concerns violations at one skilled nursing facility for the quarter
ending September 30, 1985. The amount of federal funding disallowed has
been reduced to $20,524.65. See HCFA Letter, October 8, 1986.
Washington conceded that the annual review in this one facility was not
completed in a timely manner, but argued that no penalty should be
assessed as this was a de minimis violation of the annual review
requirement.

For the reasons discussed below, we uphold this disallowance in the
revised amount of $20,524.65.

Facts

The remaining facility for which HCFA alleged a deficiency is the Ocean
View Convalescent Center. HCFA found that Washington had failed to
conduct annual medical reviews for two patients at this facility by the
close of the quarter ending September 30, 1985. Washington conceded
that it had not reviewed one Ocean View.- 2 -

patient in a timely fashion. 1/ However, Washington argued that
"imposition of a penalty for an entire facility based on . . . the
failure to review even one patient is unreasonable. Failure to review a
single patient cannot mean the State failed to have an effective program
for utilization control." Washington Reply Brief, p. 3, n.l. Washington
recognized that the Board has taken a contrary position on this issue,
but nevertheless asked the Board to address the issue in its decision.

Applicable Law

The statutory authority for the Medicaid program is found at Title XIX
of the Act. It provides that for each quarter in which a state claims
federal funds under Medicaid, that 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)(l). Specifically, section 1903(g)(l)
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 . . . skilled nursing facilities pursuant to paragraphs . . .
(31) of section 1902(a) whereby the professional management of each
case is reviewed and evaluated at least annually by independent
professional review teams. (Emphasis added)

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).


1/ Throughout these proceedings HCFA has cited two patients at this
facility as not having been timely reviewed. See Washington's Notice of
Appeal, Enclosure 1, and HCFA's Letter, October 8, 1986. However,
Washington made its argument in terms of only one patient and did not
discuss the second patient cited by HCFA. See Washington's Reply Brief,
p. 3. Washington's documentation, however, has shown untimely review
for two patients at Ocean View. See Washington's Notice of Appeal,
Enclosure 2, and Washington's Reply Brief, Ex. A. Given our finding
herein rejecting Washington's contention that a single violation is an
insufficient basis for a disallowance, this inconsistency does not
affect our holding.

- 3 -

Regulations implementing the statutory utilization control requirements
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, he 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 . . . by the end
of the quarter in which a review is required under paragraph
(b)(2) of this section. 2/

Analysis

The Board has recently addressed the issue of de minimis violations of
the annual medical review requirement in Delaware Department of Health
and Social Services, Decision No. 732, March 21, 1986, and Pennsylvania
Department of Public Welfare, Decision No. 746, April 28, 1986. In both
Delaware and Pennsylvania, HCFA asserted that the language in section
1903(g)(l) and 42 CFR 456.652(b), which calls for a review of each
patient in every facility in the state, clearly demonstrated that HCFA
had no discretion to waive the imposition of a penalty for even a single
violation of the annual review requirement. Therefore, HCFA contended,
a state is required to review every recipient in every facility due for

2/ Section 1903(g)(4)(B) of the Act (implemented by 42 CFR 456.653)
provides two exceptions to the annual review requirements where a state
meets certain threshold criteria and can show that it exercised good
faith and due diligence in its effort to complete the reviews or that
failings of a technical nature prevented timely completion of the
reviews. Washington did not argue that either exception applied to
these facts.

- 4 -

review. Further, HCFA reasoned that since Congress had not written a de
minimis exception into the statute, the Agency could not be expected to
apply one. Consequently, HCFA concluded, it was obliged to hold that
failure to review any patient is tantamount to failure to review the
facility.

In Delaware and Pennsylvania, the Board concluded that the Agency's
interpretation is supportable under the terms of the statute and
consistent with the implementing regulations, which the Board is bound
to apply. Although section 1903(g)(l) requires a showing that "there is
in operation in the State an effective program of control over
utilization of" long-stay services, the statute specifies that such a
program must include conducting annual medical reviews of the care of
each Medicaid patient. See sections 1903(g)(l) and 1902(a)(26) and
(31). The statute provides certain limited exceptions to the
requirement for the annual review of each patient, but contains no
indication that the Secretary has discretion, where those exceptions do
not apply, to find that the State has made a valid showing if the State
did not review patients who reasonably should have been identified as
Medicaid eligibles in the facility. Here, Washington did not even argue
that it was not reasonably able to identify and review the omitted
patients.

The regulation at 42 CFR 456.652(b) states a general requirement for an
on-site medical review in every facility for each Medicaid recipient.
Here, there is no dispute that a review did not include one or more
Medicaid recipients who were in the facility and who ought to have been
included in the on-site review. We agree with HCFA's general premise
that where such recipients are omitted from the medical review performed
at the facility, such a facility is legally on a par with a facility
which was entirely unreviewed. See generally Delaware, supra at 6-9;
Pennsylvania, supra at 6-9.

Washington has presented no arguments which would cause us to reconsider
our previous decisions on this issue. Consequently, we uphold this
disallowance..

- 5 -

Conclusion

Based on the analysis above, we uphold the disallowance in the revised
amount of $20,524.65.


________________________________ Norval D. (John) Settle

________________________________ Alexander G. Teitz

________________________________ Judith A. Ballard Presiding
Board