DEPARTMENTAL APPEALS BOARD
Department of Health and Human Services
SUBJECT: Arkansas Department of Human Services
Docket No. 88-77
Decision No. 992
DATE: October 17, 1988
DECISION
The Arkansas Department of Human Services (Arkansas/State) appealed
a
determination by the Health Care Financing Administration
(HCFA/Agency)
disallowing $212,614 in federal funding claimed by the State
under the
Medicaid program of the Social Security Act (Act) for the
quarters
ending June 30, September 30, and December 31, 1987. The
disallowance
was taken pursuant to section 1903(g)(1) of the Act, which
provides for
reduction of a state's federal medical assistance percentage of
amounts
claimed for a calendar quarter for long-stay services unless the
state
shows that during the 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."
HCFA alleged that Arkansas' inspection of care reviews in two
intermediate
care facilities (ICFs), Crestpark Retirement Inn
(Crestpark) and Nashville
Nursing Home (Nashville), were deficient
because the State failed to review
one patient in each facility. The
disallowance at Crestpark involved
the June quarter, while the
disallowance at Nashville involved the June,
September, and December
quarters. Arkansas argued that its failure to
review one patient at
each facility was an insufficient basis for a
disallowance which, in any
event, could be excused under the statutory
exceptions to the annual
review requirement at section 1903(g)(4) of the
Act.
During the course of this appeal, HCFA reviewed documentation submitted
by
Arkansas and withdrew the disallowance at Nashville for the September
30 and
December 31 quarters. HCFA Brief (Br.), pp. 3-4. Thus,
this
disallowance now is based on HCFA's finding of invalid annual reviews
at
two ICFs for the quarter ending June 30, 1987. The amount remaining
in
dispute is $124,129.73. HCFA Br., p. 10.
For the reasons set out below, we reverse the disallowance for
Crestpark,
but uphold the disallowance pertaining to Nashville.
Statute and Regulations
Section 1903(g)(1) of the Act establishes the requirement that a
state
make a quarterly showing that it has an effective program of
annual
medical review of the care of each Medicaid recipient in a
long-term
care facility. Section 1902(a)(31)(B) of the Act requires
periodic
onsite inspections of the care being provided to "each person
receiving
medical assistance" in an ICF. Section 1903(g)(4)(B) of the
Act
provides two exceptions to the annual review requirement.
Specifically,
the Secretary shall find a state's showing satisfactory --
. . . if the showing demonstrates that the State has
conducted . .
. an onsite inspection during the
12-month period ending on the
last date of the
calendar quarter --
(i) in each of not less than 98
per centum of the number of such
hospitals and facilities requiring such inspection, and (ii)
in
every such hospital or facility which
has 200 or more beds,
and that, with respect to such hospitals and
facilities not
inspected within such period, the
State has exercised good faith
and due diligence in
attempting to conduct such inspection, or if
the
State demonstrates to the satisfaction of the Secretary that
it
would have made such a showing but for failings
of a technical
nature only.
The statutory provision is implemented by federal regulation at 42
C.F.R.
456.653, which provides that a state agency's showing will be
found
satisfactory if --
(a) The agency demonstrates that -- (1) It completed
reviews
by the end of the quarter in at least 98
percent of all facilities
requiring review by the
end of the quarter; (2) It completed
reviews by the
end of the quarter in all facilities with 200 or
more certified Medicaid beds requiring review by the end of
the
quarter; and (3) With respect to all unreviewed
facilities, the
agency exercised good faith and due
diligence by attempting to
review those facilities
and would have succeeded but for events
beyond its
control which it could not have reasonably
anticipated;
or
(b) The agency demonstrates that it
failed to meet the standard
in paragraph
(a)(1) and (2) of this section by the close of
the
quarter for technical reasons, but
met the standard within 30
days after
the close of the quarter. Technical reasons
are
circumstances within the agency's
control.
We refer to other statutory and regulatory sections as needed during
the
course of our analysis.
Background
In preparation for an annual review in Arkansas, the State review
team
generates a computer list of Medicaid recipients due for review at
a
facility. At the start of the review, the facility's
administrator
reviews and updates the list to ensure its accuracy.
Arkansas Br., p.
2. (unnumbered).
At Crestpark, patient B.K. was preparing to transfer to another ICF at
the
time the review took place. Arkansas alleged that the paperwork
for
this patient's transfer was complete by the start of the
review,
although the patient had not actually left the facility. Based
on the
completed paperwork, the Crestpark Administrator struck this
patient's
name from the list of recipients to be reviewed.
Consequently, this
patient was not reviewed although she remained in
Crestpark during the
review; she was ultimately transferred the day after the
review was
completed. Arkansas Br. p. 2; Arkansas Reply Br., pp.
1-2.
At Nashville, the State merely attributed its failure to timely
review
patient M.R. to "human error." This recipient was ultimately
reviewed
in late September 1987. Arkansas Br., pp. 2-3; Arkansas Ex.
1.
Analysis
The State took the position that the circumstances of this case do
not
support a disallowance and that the violations were essentially
de
minimis. Further, Arkansas asserted that either of the
statutory
exceptions would apply to excuse these untimely reviews.
Below, we find
that the failure to review patient B.K. at Crestpark does not
render the
State's showing with respect to that facility invalid.
However, with
regard to Nashville, we reject Arkansas' de minimis argument
and find
that the statutory exceptions to the annual review requirement
cannot
excuse the State's unexplained failure to review patient M.R.
Crestpark
Based on an analysis of the applicable statutory and
regulatory
provisions, as well as HCFA guidance, this Board has held that a
state
may not aim for less than 100% review of each recipient in a
facility,
but that a state may not be held responsible for the review of a
patient
it could not have reasonably identified as a Medicaid recipient in
the
facility. See Idaho Dept. of Health and Welfare, DGAB No. 747
(1986).
There is no dispute that the State had initially identified patient
B.K.
as a recipient due for review. The issue is whether the State's
failure
to review this patient renders the State's showing invalid. The
record
indicates that the Crestpark Administrator had the completed
transfer
documents for this patient and believed that the patient had in
fact
been transferred to another facility. Consequently, the
Administrator
deleted this individual from the recipient list. Arkansas
Reply Br.,
pp. 1-2. The review team had followed their procedures in
developing
the list of patients and the Administrator updated that list
based on
information available to him. There was no evidence of any
circumstance
which would cause the review team to question the Administrator
on this
patient.
In this instance, we find that the failure to review patient B.K. did
not
result from a systemic flaw in the State's patient
identification
process. The conclusion of the review team that patient
B.K. had been
discharged was based on documented evidence arising in the
routine
context of the State's review process. Given the facts, we find
that
the State review team could have reasonably concluded that the
patient
had in fact been transferred. The review team followed their
patient
identification process from start to finish. There was no basis
on
which they could reasonably be expected to challenge the
Administrator's
action regarding this one individual, especially when viewed
in context
of their need to review the entire facility. See Oregon
Dept. of Human
Resources, DGAB No. 895 (1987) (no need to review recipients
transferred
into facility or found eligible just prior to start of review)
and
Missouri Dept. of Social Services, DGAB No. 801 (1986) (while
facility
may have had information on new recipients, State did not have
access to
it). While this Board has found that a state may not
reasonably rely
solely on a facility's list to identify those patients
determined
eligible for Medicaid, we do not think that states should be
required to
have elaborate systems for double checking whether an approved
transfer
has actually occurred on the date scheduled. The review of the
quality
of care a patient is receiving in a facility has little benefit for
that
patient if the patient is being moved to another facility.
Accordingly, we reverse HCFA's finding of a deficient review
at
Crestpark.
Nashville
The State conceded that patient M.R. in the Nashville facility
was
identified as a recipient requiring review prior to the close of
the
June 30 quarter. Further, unlike the circumstances at Crestpark,
there
is no intervening factor which the State pointed to as a reason for
not
reviewing this recipient. Arkansas merely attributed its failure
to
timely review patient M.R. at Nashville to "human error." Arkansas
Br.,
p. 2. Arkansas provided no specific information or evidence about
what
type of human error caused the missed review. In reality, the
State's
explanation is no explanation. The Board has said that an
unexplained
failure to review a recipient is insufficient to invoke the
statutory
exceptions to the annual review requirement. See Arkansas
Dept. of
Human Services, DGAB No. 923 (1987), at p. 4; Utah Dept. of Health,
DGAB
No. 843 (1987), at p. 6; and New Hampshire Dept. of Health and
Human
Services, DGAB No. 841 (1987), at p. 5. At the very least, the
statute
requires that some reason be given for a state's failure,
with
sufficient explanation to enable HCFA to evaluate whether the
exceptions
apply.
The above noted cases were based, at least in part, upon our decision
in
Delaware Dept. of Health and Social Services, DGAB No. 732
(1986),
rev'd, Delaware Div. of Health and Social Services v. U.S. Dept.
of
Health and Human Services, 665 F. Supp. 1104 (D. Del. 1987),
appeal
dismissed (as untimely filed), C.A. No. 87-3602 (3rd Cir. October
6,
1987). Arkansas relied upon the district court's reversal of
our
holding in DGAB No. 732 to argue that the Board's interpretation of
the
annual review requirement and accompanying exceptions was incorrect
and
that the district court's interpretation should prevail.
We note that we are not bound here by the opinion of the district court
in
Delaware. Rather, given Arkansas' reliance on the district
court's
opinion, we explain below why we think that the court's reasoning
is
flawed. Essentially, this is the same analysis we put forward
in
Nebraska Dept. of Social Services, DGAB No. 972 (1988).
DGAB No. 732
In DGAB No. 732, review teams failed to review four patients in
two
long-term care facilities. The state review teams were unaware
that
they had missed these recipients until HCFA issued the
disallowance.
Essentially, Delaware took the position that the patients had
slipped
through the cracks and that the violations were de minimis in
nature.
Delaware argued that it had substantially complied with the statute
and
that HCFA's facility-based approach, whereby the failure to review
even
a single patient was the equivalent of not reviewing the
entire
facility, was unreasonable. Delaware suggested that, under a
theory of
liberal construction, its violations should have been ignored since
any
system which in practice produced results with such a small margin
of
error was inherently valid. DGAB No. 732, p. 6.
Based on the statute and regulations, as well as HCFA's
longstanding
strict application of other, now eliminated, utilization
control
requirements, the Board determined that substantial compliance
and
mitigating circumstances could not be meaningfully applied to relieve
a
state of its statutory obligation to review each patient. Further,
we
were unpersuaded by Delaware's argument that the violations were
de
minimis and could be overlooked. Rather, we noted that
section
1903(g)(1) requires a showing that there is in operation an
effective
program of control over utilization of long-term care services
which
specifically includes conducting annual medical reviews of the care
of
each Medicaid patient. We concluded that although the statute
provided
certain limited exceptions to the annual review requirement, the
statute
contained no indication that the Secretary has discretion to find
a
showing valid if a state failed to review a patient who
reasonably
should have been identified as a Medicaid recipient in a facility
and if
the exceptions do not apply. Id. at 7-8.
The district court's treatment of DGAB No. 732
Reversing the Board's decision, the district court acknowledged
the
statutory requirement that each case be reviewed at least
annually.
Delaware, at 1120. However, the Court then focused on the
language of
the Act at section 1903(g)(4)(B) establishing the statutory
exceptions
to the annual review requirement. Section 1903(g)(4)(B)
provides that
if a state satisfies certain criteria a state's showing will be
found
satisfactory with respect to the requirement that it "conduct"
annual
onsite inspections. Based on the use of the word "conduct" in
the
statutory exception, the court concluded that "the review of each case
.
. . is merely a goal and not a requirement." Id. at 1122. The
court
concluded that the statute did not define "onsite inspection" such
that
every patient in every facility must be inspected. The Court
then
accepted Delaware's argument that the implementing regulations at
42
C.F.R. 456.653 improperly substituted the term "completed review"
for
the less restrictive term "conducted review." Ultimately, the
court
found that HCFA had acted in an arbitrary and capricious manner
in
attempting to hold Delaware to a more restrictive standard through
the
implementing regulation than was envisioned by the statute.
The district court's opinion is in error.
As we have noted elsewhere, the district court's analysis of the
statutory
exceptions overlooked the fact that section 1903(g)(1)
incorporated by
specific reference sections 1902(a)(31) and 1902(a)(26)
of the Act.
These sections expressly require that a state plan provide
for periodic
inspections of the care of "each person receiving medical
assistance."
(Emphasis added) See Washington State Dept. of Social and
Health
Services, DGAB No. 940 (1988); Wyoming Dept. of Health and Social
Services,
DGAB No. 945 (1988); Nebraska, supra.
The Agency's longstanding interpretation in its implementing
regulations
is that a review must include personal contact with and
observation of
each Medicaid recipient. See 39 Fed. Reg. 2235 (January
17, 1974). The
obvious purpose of this policy is to ensure that each
patient is at the
appropriate level of care and is receiving quality care in
the facility.
The court's analysis failed to examine the statutory purpose behind
the
annual review requirement. The court was adamant in its assertion
that
a state need only "conduct," not necessarily "complete," a review in
a
facility to satisfy the statute. Yet, section 1903(g)(4)(B)
provides
exceptions enabling a state to meet the requirement of
section
1903(g)(1) that "each case is reviewed annually." Further,
section
1903(g)(4)(B) mandates that reviews be "conducted" in accordance
with
sections 1902(a)(26) and (a)(31), which require that each patient
be
reviewed annually. These sections of the Act clearly demonstrate
that,
contrary to the Delaware court's conclusion, review of each patient in
a
facility is a requirement, not simply a "goal." Had Congress
intended
to lessen this basic requirement when it created the exceptions,
it
could have easily done so in a manner which left no doubt as to
its
intent.
The court inferred support for its position that reviews need only
be
conducted, not completed, from the fact that the term
"onsite
inspection" is not defined in the statute "such that every patient
in
every facility must be reviewed." Delaware, at 1122. However,
given
the statute's unequivocal requirement in section 1902(a)(26) and
(a)(31)
that each patient be reviewed during the inspection, separately
defining
the term would seem unnecessary.
The court's concern that the Agency's interpretation of the statute
not
"disentitle" Medicaid recipients seems misplaced here. Id.
at
1122-1123. Section 1903(g) reductions are taken when HCFA finds that
a
state is not meeting the statutory mandate to assure that
adequate
medical services are being provided to each Medicaid recipient
in
long-term care. The court's analysis leaves open the possibility
for
the federal government to find itself subsidizing inadequate health
care
for Medicaid recipients, thereby defeating the goal of the
Medicaid
program. Contrary to the court's assertion, the actual effect
of a
section 1903(g) reduction is neither to recover payment for a
specific
recipient nor to reduce a state's payment to the facility, but
rather
serves as a reduction of the federal medical assistance percentage
paid
to a state. Thus, the Act affects only the level of state
versus
federal participation in certain costs and provides a fiscal carrot
and
stick incentive which attempts to ensure that all recipients are
getting
the care to which they are entitled under the Act.
Under the court's theory, a state review team could enter a facility,
make
a half-hearted effort to review some patients, and assert, without
fear of
contradiction, that it had conducted an onsite inspection.
This
scenario underscores the correctness of the Board's conclusion that
the
concepts of substantial compliance or de minimis violations
are
analytically unsound in the context of the administration of
section
1903(g). These concepts simply provide no guidance as to where
the line
is drawn to distinguish a review which meets the statutory
requirements
from one which does not.
Thus, we have found no basis in the district court's opinion in
Delaware
to alter the Department's longstanding interpretation of the
medical
review requirement. See Nebraska, supra, at 5-9.
Arkansas offered several additional reasons why the district
court's
opinion should apply here. Below we analyze and reject those
arguments.
The State argued that since HCFA did not appeal the district
court's
opinion in Delaware, it must agree with the court's analysis.
Clearly,
if this were the case, HCFA would not have taken this
disallowance,
which, according to Arkansas, is contrary to the court's
holding. HCFA
did in fact attempt to appeal the district court's
decision, but that
appeal was filed one day late and was subsequently
dismissed. See p. 6
above.
The State argued that since the Board has had difficulty interpreting
this
statutory language, the only reasonable course of action would be
to
implement the district court's opinion in Delaware. Regardless
of
whatever interpretative difficulties the statute may present, we
could
not implement an interpretation which is so obviously incorrect.
While
Arkansas has cited the Board's "difficulty" with the statutory
language,
we have found no inconsistency in our past analysis. Rather,
we have
attempted to provide uniform application consistent with the facts
of
each case.
Clearly, the State's failure to "explain" the deficient review
at
Nashville precludes application of the exceptions to that
facility.
Moreover, in spite of Arkansas' assertion to the contrary,
both
exceptions cannot be applied to the same facts. As we have
noted
elsewhere, these exceptions by their nature are mutually
exclusive. The
"good faith/due diligence" exception is based upon
circumstances outside
a state's control which intervene to prevent a
review. On the other
hand, the technical failings exception is based
upon circumstances
within a state's control which prevent a review.
Consequently, while
either of the exceptions may apply to excuse an untimely
review, clearly
they both cannot apply to the same set of facts. See
Wyoming Dept. of
Health and Social Services, DGAB No. 945 (1988). Since
Arkansas offered
no explanation which could bring the failure to review the
patient at
Nashville within either exception, we need not determine whether
the
State could meet the prerequisite of reviewing 98% of all facilities
due
for review.
In view of the foregoing analysis, we conclude that HCFA's finding of
a
deficient review at Nashville was correct and that the
statutory
exceptions do not apply to excuse the deficiency.
Conclusion
Based on the above analysis we reverse the disallowance as it pertains
to
Crestpark, but we sustain the disallowance for Nashville. Arkansas
has
submitted exact recipient data aimed at reducing the amount of
the
disallowance. HCFA is currently evaluating that information.
The
parties should cooperate to establish the reduced amount of
the
disallowance. If the amount cannot be agreed upon, HCFA should
advise
Arkansas in writing of the amount of the revised disallowance as soon
as
reasonably possible. If Arkansas disagrees with this determination,
it
may return to the Board (on this issue only) within thirty (30)
days
after receiving the determination.
________________________________ Judith A. Ballard
________________________________ Cecilia Sparks Ford
________________________________ Alexander G. Teitz
Presiding
Board