Oregon Department of Human Resources, DAB No. 1056 (1989)

DEPARTMENTAL APPEALS BOARD

Department of Health and Human Services

Subject: Oregon Department of DATE: June 1, 1989 Human
Resources Docket No. 88-238 Decision No. 1056

DECISION

The Oregon Department of Human Resources (Oregon/State) appealed a
determination by the Health Care Financing Administration (HCFA/Agency)
disallowing $46,474.89 in federal funds claimed by the State under the
Medicaid program of the Social Security Act (Act) for the calendar
quarter ending March 31, 1988. 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 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."

Based on a validation survey, HCFA alleged that Oregon failed to conduct
a satisfactory annual review at the Bishop Morris Convalescent Center
(Bishop Morris), a dually certified facility providing both intermediate
care (ICF) and skilled nursing services. Specifically, HCFA asserted
that Oregon omitted one Medicaid recipient from the ICF review at Bishop
Morris. Oregon did not deny that it failed to review the recipient
cited by HCFA. Rather, the State's argument for reversal of the
disallowance was based on an earlier decision by the Board which found
that Oregon had a satisfactory system for identifying recipients due for
review. See Oregon Dept. of Human Resources, DAB No. 895 (1987). The
State asserted that, since it followed a reasonable system for
identifying Medicaid recipients and could not identify this individual,
it was not responsible for including this patient in the review.
Therefore, the Bishop Morris annual review should be found satisfactory.
In the alternative, Oregon argued that if the Board found that this
patient should have been included in this review, the State's failure to
review this recipient could be excused under the "good faith and due
diligence" exception to the annual review requirement.

Based on our previous consideration of Oregon's system for recipient
identification and the facts of this case, which support a finding that
Oregon did all that could reasonably be expected of it in attempting to
identify this recipient, we find that the State was not required to
review this individual. Accordingly, we reverse the disallowance.

Applicable Law

In pertinent part, section 1902(a)(31) of the Act requires that a state
plan provide:

(B) with respect to each . . . intermediate care facility
within the State, for periodic onsite inspections of the care
being provided to each person receiving medical assistance, by
one or more independent professional review teams . . . .

The regulations implementing this provision and section 1903(g)(1) are
found at 42 C.F.R. Part 456. 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, . . . by the end of the quarter in
which a review is required . . . .

Oregon's System For Identifying Medicaid Recipients

The adequacy of Oregon's system for identifying Medicaid recipients due
for annual review was the subject of an earlier decision by this Board
in Oregon, DAB No. 895. At that time, Oregon's recipient identification
process consisted of four steps. Oregon's Client Care Monitoring Unit
(CCMU) would first obtain a copy of the facility's most current billing
document, known as a turn around document (TAD). The TAD was updated to
the end of the month preceding the review. Second, on the first day of
an inspection the CCMU would request a list from the facility of all
Medicaid-eligible patients who had entered the facility after the past
month's TAD update or had recently applied or been accepted for
Medicaid. Third, the CCMU would contact the local social services
agency responsible for processing Medicaid applications for the facility
and request information on any recent applicants. Finally, on the last
day of a review, the team would ask the facility for a list of any
potentially Medicaid-eligible individuals whom the facility had become
aware of during the course of the review. The CCMU would routinely
review potential, as well as actual, Medicaid recipients. In analyzing
Oregon's system we noted that there was very little guidance available
to states to assist them in identifying Medicaid recipients prior to an
annual review. In spite of that limited direction, we found that Oregon
had made "exhaustive attempts to develop comprehensive patient review
lists" and that it maintained a reasonable system for identifying
Medicaid recipients. Id. at 4-6.

Oregon noted that in March 1987, in response to the disallowance at
issue in Oregon, DAB No. 895, it added an additional step to the
recipient identification process. At the end of a review, the CCMU
would show the facility's Administrator or Director of Nursing the list
of patients reviewed and ask if they were aware of any other Medicaid
applicants or patients in the facility. The team would then obtain a
signed statement from that individual stating that all known Medicaid
recipients or applicants had been identified. Oregon Exhibit (Ex.) B;
Oregon Brief (Br.), pp. 1-5.

Background

Patient V.B. was determined eligible for Medicaid on March 1, 1988.
Bishop Morris was reviewed from March 8-15, 1988. On the first day of
the review the CCMU obtained a copy of the facility's TAD which had been
updated by the facility through the end of February. The CCMU then
followed the various steps designed by the State to update the
information available by means of the computer system and the facility's
routine end of the month update. The facility's bookkeeper updated the
TAD through the first day of the review, but was unaware of V.B.'s
Medicaid application because the county had not yet sent the facility
notice that she had applied. The CCMU team leader contacted the county
social services employee responsible for managing Medicaid recipients at
Bishop Morris to inquire about Medicaid recipients or applicants who
might not have been included on the updated TAD. The county employee
did not give the team leader V.B.'s name. V.B. had been pre-authorized
for Medicaid in mid-January. However, due to questions about her
financial eligibility, V.B. was not determined Medicaid eligible until
March 1. The county employee later indicated that while she was aware
of V.B.'s pending application when the team leader requested the update,
she mistakenly assumed that V.B. was already on the TAD and consequently
did not give the team leader the patient's name. Oregon Ex. E. At the
end of the review the team leader had the bookkeeper update the TAD and
received a statement from the facility's Director of Nursing Services,
who was also its Acting Administrator, that the TAD included all
Medicaid recipients and applicants in the facility. Oregon Br., pp.
6-9; Oregon Ex. C.

The State noted that since V.B.'s eligibility information was entered
into the State's Medicaid Management Information System (MMIS) in early
March, the eligibility information could not have appeared on the
February TAD. The State indicated that, even though the eligibility
information was entered into the MMIS prior to the start of the review,
the earliest the MMIS information could have been routinely available to
the CCMU was approximately March 18th, when the next TAD was printed.
The CCMU received the March TAD from Bishop Morris in mid-April, noted
V.B.'s status and reviewed her on May 6th. Oregon Br., p. 10.

Argument

The State asserted that, since it had improved upon a system of
recipient identification which the Board had already found reasonable
and had followed that system, it was not required to review patient V.B.
The State argued that it had done all it could have reasonably been
expected to do to identify this recipient. Oregon contended that, in
spite of its best efforts, information on this recipient was simply
unavailable in time for this review. As further testimony to the
efficiency of its process, Oregon noted that the routine production of
the March TAD revealed that V.B. had not been reviewed, thus allowing
the State to promptly correct this oversight. Oregon Br., pp. 11-17.

HCFA maintained that the untimely review could be blamed on the State's
inefficiency in checking the records necessary to properly identify all
recipients due for review. HCFA noted that Bishop Morris housed two
patients with identical last names (V.B. and L.B.). HCFA speculated
that the failure to review V.B. was attributable to the State
erroneously assuming "that the two individuals were one and the same . .
. ." HCFA Br., pp. 6-7. HCFA based its position on the affidavit of
the county employee, responsible for Medicaid patients at Bishop Morris,
who HCFA contended, "unequivocally admits that she mistakenly thought
... [V.B.'s] name was on the TAD . . . ." Id. at 6. HCFA asserted that
this individual was a State employee. Consequently, HCFA argued, Oregon
should be held responsible for the actions of all its employees, in
failing to identify this individual, not just the facility review team.
Id.

In reply, Oregon argued that HCFA's position was not supported by the
record. Oregon noted that there is no basis for HCFA's assertion that
the State thought recipients V.B. and L.B. were the same. Further,
Oregon argued that the individual responsible for Medicaid recipients at
Bishop Morris was a county employee, not a State employee. Oregon Reply
Br., pp. 1-3.

HCFA's Supplemental Appeal File

After receipt of Oregon's reply brief, HCFA requested that the Board
allow it to submit additional supporting documentation. Counsel for
HCFA indicated that he was not aware of this documentation at the time
he submitted his initial brief. Oregon objected to HCFA's request on
the grounds that HCFA should not be allowed to reopen the record on the
basis of its oversight. In the interest of more complete development of
the record, the Board allowed HCFA to submit additional documentation
and a brief explanation of how this material supported its initial
arguments. HCFA was specifically instructed not to advance new
arguments. Oregon was given an opportunity to respond to the Agency's
submission. See Board Ruling (April 13, 1989).

In its April 18 submission, HCFA noted that it appeared that the review
at Bishop Morris began on March 8 not March 3, as both parties had
originally indicated. HCFA also offered three more substantive
arguments concerning the State's responsibility for the incorrect
information provided in response to the review team's efforts to update
the TAD and the existence of a systemic flaw in the State's procedures
for identifying patients. These arguments, at the very least, redefined
its original arguments. In its supplemental reply brief, Oregon
conceded that the correct dates for the Bishop Morris review were March
8-15. However, Oregon objected to the Board's consideration of the
remaining three points raised by HCFA on the grounds that HCFA was
offering essentially new arguments in support of the disallowance.

There is merit to Oregon's objection. In general, the parties are
obligated to develop the facts and make their complete legal arguments
during the briefing process set out in 45 C.F.R. 16.8. In spite of what
was a limited opportunity to supplement its original appeal file, HCFA
offered essentially new arguments for the Board's consideration.
Obviously, HCFA's correction of the review dates helped ensure the
accuracy of the record. However, the remainder of HCFA's substantive
arguments were based on a memorandum from a HCFA Bureau of Quality
Control official to HCFA's counsel, written after receipt of Oregon's
reply brief. See Bureau of Quality Control Memorandum (April 11, 1989)
accompanying HCFA's April 18 Submission. Even considering HCFA's "new"
arguments, our opinion that the disallowance was incorrect would not
change. Accordingly, since the result here is unaffected, we do not
need to formally rule on Oregon's objection. We do note, however, that
the Board's process is flexible and the Board can permit additional
record development beyond 45 C.F.R. 16.8 when such action is warranted.

Analysis

The Board has previously found that the State's system for Medicaid
recipient identification is reasonable. Since the Board first made that
determination in Oregon, DAB No. 895, the State has added an additional
step to further ensure complete identification and review of Medicaid
recipients.

V.B. was determined eligible for Medicaid March 1. Her eligibility
information was promptly entered into Oregon's MMIS and would not have
been routinely available to the CCMU until after completion of the
Bishop Morris review. In a number of cases we have found that Medicaid
recipients determined eligible or arriving at a facility just prior to
the start of a review could not reasonably be identified and thus need
not be included in that review. See Texas Dept. of Human Services, DAB
No. 830 (1987) (Medicaid recipient transferred into an ICF 11 days prior
to the start of a review); Missouri Dept. of Social Services, DAB No.
801 (1986) (recipients eligible for Medicaid 2-3 weeks prior to the
start of a review, but eligibility information not processed in enough
time to inform review teams); and Idaho Dept. of Health and Welfare, DAB
No. 747 (1986) (recipient determined eligible two days prior to the
start of a review). Our analysis in Oregon, DAB No. 895, which we
incorporate by reference here, contains a more comprehensive discussion
of our holdings in those cases.

We view the holding in these cases as recognizing that the annual review
requirements must be applied reasonably in light of the inherent delays
in processing eligibility information even in the most modern state
systems. Further, we reiterate that states have been given little
explicit guidance regarding the identification of Medicaid recipients
due for review. Here, the patient was determined Medicaid eligible
seven calendar days (four working days) prior to the start of the
review. The State's system even goes so far as to track and review
Medicaid applicants, a step clearly not required by either the statute
or the implementing regulations. The State followed its system, but did
not include V.B. due to a county employee's oversight. The State's
system actually identified this recipient as unreviewed shortly after
completion of the full facility review and the State took immediate
action to correct the error.

The record shows that the CCMU followed Oregon's established process for
recipient identification in a step-by-step fashion. The facts of this
case are analogous to those presented in Oregon, DAB No. 895. On the
basis of the prior Oregon decision and other Board decisions cited
herein, we find that Oregon's CCMU could not have reasonably identified
V.B. so that Oregon's quarterly showing was, in fact, satisfactory. See
section 1903(g)(1) of the Act. Therefore, we do not need to address the
applicability of the "good faith and due diligence" exception to the
facts of this case.

Conclusion

Based on the preceding analysis, we reverse the entire disallowance of
$46,474.89.


_____________________________ Cecilia Sparks Ford

_____________________________ Donald F. Garrett


_____________________________ Norval D. (John) Settle Presiding
Board