DEPARTMENTAL APPEALS BOARD
Department of Health and Human Services
SUBJECT: Oregon Department of
DATE: March 15, 1990
Human Resources Docket No. 89-240
Decision No. 1137
DECISION
The Oregon Department of Human Resources (Oregon/State) appealed a
determination by the Health Care Financing Administration (HCFA)
disallowing $100,878.53 in federal funds claimed by the State under the
Medicaid program of the Social Security Act (Act) for the quarter ending
June 30, 1989. 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 based the disallowance on its finding that the State's showing for
the quarter ending June 30, 1989 was unsatisfactory. A quarterly
showing (QS) is a reporting instrument by which a state documents its
compliance with the annual review requirements. HCFA alleged that
Oregon's June QS indicated that the State failed to conduct timely
annual reviews at two intermediate care facilities (ICFs), Mountain View
Hospital (Mountain View) and Life Care Center of Coos Bay (Life Care).
HCFA noted that both facilities were due for annual review by the end of
the first (March) quarter of 1989, but were not reviewed until the
second (June) quarter. See Notice of Disallowance, Oregon Exhibit (Ex.)
1.
Oregon agreed that the facilities were not reviewed in the March
quarter. However, Oregon asserted that, since the facilities were
reviewed shortly after the end of the March quarter, there was no basis
for HCFA's decision to take a disallowance for the June quarter. Oregon
also argued that its failure to review the facilities in March, when the
reviews were due, should be excused as a "technical failing" under
section 1903(g)(4)(B) of the Act. 1/
The threshold question is whether the State's quarterly showing for the
June 1989 quarter was unsatisfactory. As we discuss below, we find that
the June quarterly showing was satisfactory on its face because it
showed that all reviews due in the June quarter had been completed.
Accordingly, we reverse this disallowance. HCFA did not assert that its
notice of disallowance issued for the June quarter could function as
adequate notice of a section 1903(g) reduction for the March quarter.
See section 1903(g)(3)(A)(iv) of the Act. Therefore, we do not address
the State's argument that its failure to review the facilities was
attributable to a "technical failing," nor HCFA's argument that the
State's March showing should have identified the facilities as
unreviewed. 2/
Background
Oregon readily conceded that annual reviews at Mountain View and Life
Care were due during the March 1989 quarter, but were not conducted
during that quarter. Oregon Brief (Br.), p. 5. Oregon asserted that it
noticed this problem while preparing its March QS and corrected the
error before actually submitting the showing. Oregon indicated that it
did not feel obligated to report these late reviews on the March QS
because it had completed the reviews by the time the QS was submitted,
and that "the application of the technical failings exception made
Oregon's review satisfactory." Id. at 10, 12-14; Oregon Exs. 8 and 9.
Consequently, Oregon's March 1989 QS listed both Mountain View and Life
Care among those facilities for which reviews had been completed in the
past year. The QS did, however, list the following completion dates for
an inspection of care (IOC) of the facilities: Mountain View
"02-05-88," and Life Care "03-04-88." See HCFA Ex.3.
On its face, the March QS raised a question regarding these facilities
since it showed that reviews were due by the end of March 1989, but did
not indicate that reviews had been performed by then. On May 15, 1989,
the Regional Office responsible for reviewing Oregon's quarterly showing
submitted the State's March QS to HCFA central office, along with a
Memorandum which noted that the QS did not contain current review dates
for Mountain View and Life Care. The Memorandum indicated that--
[i]t appears likely . . . that the most recent reviews of these
facilities were not recorded. We have requested that the State
forward IOC [inspection of care] reports for these two facilities
to our office.
HCFA Ex. 4, p. 2.
The State apparently did not forward IOC reports for these two
facilities, but Oregon's June QS reported that Mountain View had been
reviewed "04-06-89" and that Life Care had been reviewed "04-13-89."
Oregon Ex. 2, pp. 17 and 21. An August 14, 1989, Memorandum (August
Memorandum) from HCFA's Regional Office which accompanied Oregon's June
QS confirmed that the reviews had been performed in April 1989. See
HCFA Ex. 5, p. 2.
Analysis
The Act's reduction applies to a quarter for which a state failed to
make a satisfactory showing, not a different quarter.
Section 1902(a)(31)(B) of the Act requires that a Medicaid state plan
provide for an annual review, including an on-site review (an IOC), at
participating ICFs within a state. Section 1903(g)(1) of the Act
provides for a reduction in Medicaid funding for amounts claimed for
long-stay services in ICFs unless a state shows that it has an effective
program of medical reviews, including annual IOCs of ICFs.
Read as a whole, section 1903(g) makes it clear that the reduction
applies to any calendar quarter in which a state fails to make a
satisfactory and valid showing. In particular, section 1903(g)(5)
provides for calculating the reduction for a quarter "for which a
satisfactory and valid showing was not made." Moreover, under section
1903(g)(4)(B), a state need only show with respect to facilities "not
inspected within" the applicable 12-month period that it has acceptable
reasons for failing to review the facilities. This reading is also clear
from HCFA's own regulations implementing section 1903(g) of the Act, at
42 C.F.R. Part 456, Subpart J, and its State Medicaid Manual (Manual)
provisions at Part 9. For example, HCFA's regulations provide that a
state meets the annual on-site review requirement 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 . . . .
42 C.F.R. 456.652(b).
Finally, HCFA's consistent practice, as evidenced by numerous cases
before this Board, is that a reduction is not taken for the quarter in
which reviews are completed. Rather, the reduction is taken for any
quarter in which reviews were due but were not completed and were not
excused under the exceptions. The particular quarter is important
because the calculation of the reduction is based on data only from that
quarter.
HCFA pointed to nothing in the statute, regulations, or Manual which
would support a reading that a disallowance may be taken for a later
quarter based on a violation in an earlier quarter which does not
continue into the later quarter. Instead, HCFA responded to the State's
argument by continuing to press for a disallowance for the June quarter,
on the basis of an alleged pattern of deficiencies in the State's
quarterly showings. As discussed below, these alleged deficiencies do
not support the disallowance here.
The reasons advanced by HCFA do not justify taking the reduction for the
June quarter.
HCFA argued in effect that it could not have known that the State had in
fact failed to conduct timely reviews of the two facilities in the March
quarter. HCFA said the State's March QS was not the first instance in
which the State had failed to include IOC completion dates; HCFA
characterized this as a "consistent, incorrect practice" by the State.
HCFA indicated that it routinely addressed this situation by telephoning
the State to obtain the missing information. HCFA Br., pp. 8-9.
The record does support a conclusion that in several instances in the
past the State had failed to record facility reviews on its QS, even
though they had been timely performed. HCFA Ex. 6. We fail to see,
however, how this justifies HCFA ignoring the wording of the statute and
its own regulations concerning the quarter with respect to which a
reduction is to be taken. Moreover, HCFA knew at least by the time of
submission of the June QS that the State was not claiming to have
reviewed the facilities in the March quarter. See HCFA Ex. 4. Thus,
HCFA had plenty of time to give notice to the State of a reduction for
the March quarter. See section 1903(g)(3)(A)(iv) of the Act. 3/
HCFA also relied on the implementing regulation at 42 C.F.R.
456.652(b)(3), which provides that when a facility is unreviewed in a
quarter in which a review was due, it continues to require review in
subsequent quarters until a review is performed. See, e.g., Wisconsin
Dept. of Health and Social Services, DAB No. 1062 (1989); Kansas Dept.
of Social and Rehabilitation Services, DAB No. 993 (1988). That
regulation does not support the disallowance here, however, as the
facilities were reviewed in the June quarter. 4/
HCFA also tried to justify the disallowance for the June quarter based
on the fact that Oregon's June QS did not address the State's failure to
review the facilities or request an exception to the annual review
requirement. HCFA cited the Board's holding in Ohio Dept. of Human
Services, DAB No. 824 (1987). In that case, the Board held that, at a
minimum, a showing must identify unreviewed facilities and explain
missed reviews. Consequently, HCFA argued that the inadequacies in the
June QS provided a sufficient basis for the disallowance.
Under Ohio (as well as 42 C.F.R. 456.654 and the State Medicaid Manual
provisions at section 9111), it appears that the State's March QS was
deficient because it did not specifically identify Mountain View and
Life Care as facilities which were unreviewed during the March quarter,
even though the reviews were due, and did not explain the State's
reasons for considering this failing to be a "technical failing."
The
June QS was not deficient on this basis, however, since the facilities
had been reviewed in that quarter and were no longer "unreviewed
facilities."
HCFA further tried to justify the reduction on the basis that the June
QS "revealed" the State's failure. HCFA asserted that the August
Memorandum "verified" that Mountain View and Life Care "had not
received
a timely review." HCFA Br., p. 9. While the June QS and the August
Memorandum may have been HCFA's basis for verifying that these
facilities were not timely reviewed in March, they do not provide a
basis for finding the June showing unsatisfactory. To the contrary,
they verified that the facilities were reviewed in the June quarter.
In sum, even if Oregon's March QS did not identify Mountain View and
Life Care as unreviewed facilities, that fact would not be an adequate
basis for taking a disallowance for another quarter. The statute and
regulations provide for a disallowance only for a quarter in which a
state fails to conduct a required annual review. No matter what
shortcomings HCFA may have found in Oregon's March QS, the fact remains
that the facilities were reviewed in the June quarter. HCFA asserted no
adequate basis for finding the showing for the June quarter to be
unsatisfactory.
Conclusion
The statute and regulations provide for a disallowance only for the
quarter in which required reviews were not completed. The reviews of
Mountain View and Life Care were completed in the June quarter.
Consequently, we reverse the entire disallowance of $100,878.53.
_____________________________ Cecilia Sparks Ford
_____________________________ Donald F. Garrett
_____________________________ Judith A. Ballard
Presiding Board Member
1. Section 1903(g)(4)(B) of the Act establishes two limited exceptions
to the annual review requirement. They are known generally as the
technical failings and the "good faith/due diligence" exceptions.
The
exceptions are implemented by 42 C.F.R. 456.653.
2. Nothing in this decision precludes a reduction for the March
quarter.
3. This section provides that no reduction shall take effect "unless
notice of such reduction has been provided to the State no later than
the first day of the fourth calendar quarter with respect to which such
showing was made."
4. In its brief, HCFA contended, for the first time, that Oregon had
offered no evidence to support its position that the Mountain View and
Life Care reviews had been performed in the June quarter. HCFA Br., p.
9. In response, Oregon offered completed IOC reports for the two
facilities which support its assertion as to the dates upon which the
reviews were completed. See Oregon Exs. 8 and 9. We note, moreover,
that in the notice of disallowance, HCFA itself stated that the reviews
at issue were completed in the June quarter. See Oregon Ex. 1, p. 2.