South Carolina Health and Human Services Finance Commission, DAB No. 1212 (1990)

Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Appellate Division

SUBJECT: South Carolina Health and Human
Services Finance Commission
Docket No. 90-150
Decision No. 1212

DATE: December 6, 1990

DECISION

The South Carolina Health and Human Services Finance Commission (State)
appealed a determination by the Health Care Financing Administration
(HCFA) disallowing $74,873 in federal funds claimed by the State under
Title XIX of the Social Security Act (Act) for the quarter ending March
31, 1990.  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 for long-stay services for a quarter unless a
state shows that 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 determined that the State failed to make a satisfactory showing for
the quarter in question since it did not conduct an annual review for
Greenbrook Manor until the third month following the close of the
showing quarter.  The State argued that the failure to review Greenbrook
before the close of the showing quarter could be excused under an
exception to the annual review requirement (referred to as the technical
failings exception).

As explained further below, we reverse the disallowance.  We conclude
here that under the circumstances of this case, the State's failure
qualifies under the technical failings exception.


Applicable Authority

Section 1903(g) of the Act requires that a state make a quarterly
showing that it has an effective program of annual medical review
including on-site inspections of the care of each Medicaid recipient in
a long-term care facility. 1/  The annual review requirements applicable
to skilled nursing and intermediate care facilities are in section
1902(a)(31)(B) of the Act.  Section 1903(g)(4)(B) provides two
exceptions under which a state's quarterly showing is found
satisfactory, even though the state did not conduct all the required
reviews by the close of the quarter.  Specifically, a showing is
satisfactory --

 [I]f the showing demonstrates that the State has conducted such
 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.

Section 1903(g)(4)(B) of the Act (emphasis added).

The statutory exceptions are implemented by the regulation at 42 C.F.R.
456.653 titled, "Acceptable reasons for not meeting requirements for
annual on-site review."  This regulation states in part:

 The Administrator will find an agency's showing satisfactory,
 even if it failed to meet the annual review requirements . . .
 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.


Background

As part of an initiative to add some 300 Medicaid beds in South Carolina
for long-term patients without psychiatric diagnoses but being cared for
by the South Carolina Department of Mental Health, licensed nursing
homes in South Carolina were offered an opportunity to add Medicaid beds
without applying for another Certificate of Need.  Greenbrook Manor, a
licensed nursing home with no Medicaid certified beds, applied under
this initiative and received approval for 40 Medicaid beds on February
3, 1989.  However, when the Certification and Transmittal document was
issued on March 9, 1989, it was based on the originally issued
Certificate of Need which indicated that the facility was certified to
serve 44 Medicare patients.  This error was caught and a corrected
Certification and Transmittal document was issued on May 3, 1989 with
the written notation, "this amends C&T dated 03-09-89."  State Appeal
File, Exhibit (Ex.) A.  The amended document at line 11 indicates that
the period of certification began March 1, 1989 and further provided at
line 14 for 4 Medicare beds and 40 Medicaid beds.  This Certification
and Transmittal was attached to the State's Quarterly Showing for the
quarter ending March 31, 1990 which was submitted to HCFA on April 26,
1990.  State Appeal File, Ex. A.

The State's quarterly showing for the quarter ending March 31, 1990
listed Greenbrook Manor on page 10 of the "Facility Listing for
SNF/ICF."  There is no entry in the column headed "Reviews Completed In
Prior 12 Months."  The entry in the column headed "Certification Status
Change" reads "new facility-eff. 5/3/89, see attach."  State Appeal
File, Ex. A, p. 10.  Greenbrook Manor was not reviewed in this quarter;
instead it was reviewed in the third month following the close of the
quarter, on June 25, 1990.  HCFA Appeal File, Ex. F.

The State explained that the Certification and Transmittal was sent to
the Division of Inspection of Care (IOC) for use in cross checking the
scheduling of their inspections.  The State indicated that the IOC uses
the Certification and Transmittal to verify new facilities which must be
added to the quarterly roster of facilities due for inspection.  The IOC
also will look at licensing letters, monthly facility reports, and the
monthly printout of billings to cross check facility changes and
additions.

In the case of Greenbrook Manor, the State admitted errors occurred.
The State conjectured that the IOC did not realize the amending
Certification and Transmittal only corrected the bed breakdown in line
14 without any change to the other items in the document, and that the
IOC scheduler did not check the monthly printout of billings for
patients at Greenbrook.  State Brief (Br.), pp. 5-6.  South Carolina
argued that it failed to review Greenbrook before the close of the
showing quarter because of an isolated "convergence of two unconnected
errors."  It added:

 The errors are unlikely to recur and the breakdown did not
 result in multiple scheduling errors.  The occurrence of the
 double error was only a remote possibility, the occurrence of
 which could only have been avoided at great cost.

Id. at 6-7.

The State argued that based on the analysis in prior Board decisions the
circumstances here could qualify as a "technical failing."  The State
alleged that the State reviewed 98 percent of all facilities, including
all facilities with 200 or more beds, before the close of the showing
quarter, notwithstanding the State's failure to review Greenbrook.

HCFA did not dispute the State's position that the circumstances
surrounding the State's failure to review Greenbrook qualified as a
"technical failing" or that the State met the 98 percent requirement
before the close of the showing quarter.  HCFA's primary argument on
appeal was that the applicable regulation required the State to review
100 percent of the facilities, including Greenbrook, within 30 days of
the close of the March 31, 1990 quarter.  HCFA also argued in a footnote
that the State's quarterly showings were facially deficient.


Analysis

This appeal raises the question whether a state must have reviewed 100
percent of its facilities within 30 days of the close of the showing
quarter to qualify for the technical failings exception or whether it
need only have reviewed 98 percent of its facilities (including
facilities with 200 or more beds).  We have previously considered this
issue in some depth in prior Board decisions.  See Delaware Dept. of
Health and Social Services, DAB No. 732 (1986), pp. 10-14, rev'd on
other grounds, Delaware Div. of Health and Social Services v. U.S. Dept.
of Health and Human Services, 665 F. Supp. 1104 (D. Del. 1987).  See
also Wisconsin Dept. of Health and Human Services, DAB No. 1062 (1989),
pp. 7-8.  We conclude here, as we concluded previously, that, based on
the applicable regulation, the State need only meet the 98 percent
requirement during the 30-day period following the close of the showing
quarter.

The regulation at 42 C.F.R. 456.653(b), quoted on page 3 above,
specifically requires a state to meet the standard in paragraphs (a)(1)
and (2) of the section within 30 days after the close of the showing
quarter.  The standard in the two referenced paragraphs is the 98
percent standard, not 100 percent compliance.  Thus, under the plain
meaning of section 456.653(b), the State need only meet the 98 percent
requirement (including all facilities with 200 or more beds) within 30
days of the close of the showing quarter.  Moreover, as we concluded in
Delaware, supra, the legislative history of section 456.653 provides
highly persuasive evidence that HCFA considered this very issue and
intended to require only the 98 percent standard within 30 days of the
showing quarter.  Thus, HCFA's current position is contrary to its
program regulations and cannot be sustained. 2/

HCFA also argued in a footnote that the disallowance should be upheld
because the State's quarterly showings for quarters ending March 31 and
June 30 were facially deficient because they did not explain why the
facility had not been reviewed or even indicate that Greenbrook had not
been reviewed.  In prior decisions concerning the sufficiency of
quarterly showings, we have concluded that it would be unreasonable to
hold a state responsible for a deficient quarterly showing where the
state was unaware of the review deficiency at the time it submitted the
showing and where the deficiency was not obvious from the face of the
showing itself.  See, e.g., Massachusetts Dept. of Public Welfare, DAB
No. 1174 (1990), p. 8.  Here, there is no basis in the record to
conclude that the State was aware of the error until after the March 31
showing had been mailed (see State Reply Br., p. 3), and that showing on
its face does not suggest a review failing with respect to Greenbrook.
Further, the June 30 showing states that Greenbrook had been reviewed on
June 26, and therefore is not deficient concerning the date of the
review.  Moreover, the State alleged, and HCFA did not dispute, that the
review failing for the March 31 quarter was already the subject of
discussion and that further comment on the matter in the June 30 showing
was inappropriate and unnecessary.


Conclusion

On the basis of the foregoing, we reverse the disallowance.

 

 _____________________________ Judith A. Ballard

 


 _____________________________ Norval D. (John) Settle

 


 _____________________________ Donald F. Garrett Presiding Board
 Member

1.   This provision of the Act was amended by Public Law 100-203, the
"Omnibus Budget Reconciliation Act of 1987."  The amendments struck out
"skilled nursing facilities and intermediate care facilities" and
substituted "and intermediate care facilities for the mentally
retarded".  However, these amendments apply no earlier than October 1,
1990 and only if the Secretary determines that the State has specified
the resident assessment instrument under section 1919(e)(5) and begun
conducting surveys under section 1919(g)(2) of the Act (1989).

2.   While the Board's decision in Michigan Dept. of Social Services,
DAB No. 1017 (1989), may have contained confusing dicta on this issue,
we clarified our position and reaffirmed our reliance on the Delaware
analysis in the subsequent Wisconsin decision,