Tennessee Department of Health and Environment, DAB No. 736 (1986)

GAB Decision 736

March 31, 1986 Tennessee Department of Health and Environment;  Docket
No. 85-46 Teitz, Alexander G.; Settle, Norval D.  Garrett, Donald F.

   The Tennessee Department of Health and Environment (State) appealed a
determination by the Health Care Financing Administration (Agency)
disallowing federal financial participation (FFP) claimed for services
provided in long-term care facilities under title XIX of the Social
Security Act (Act) for the quarters ending March 31, June 30, and
September 30, 1984.  The disallowance was taken pursuant to section
1903(g)(1)(D) of the Act, which provides for the reduction of a state's
federal medical assistance percentage of amounts claimed for a calendar
quarter 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."
/1/

Based on a validation survey, the Agency initially found that the State
had failed to include 18 patients in six facilities in its annual
medical reviews.  Originally, the disallowance included:

   1) two patients for the quarters ending March 31, June 30, and
September 30, 1984 in Bel-Aire Health Care (Bel-Aire);

   2) two patients for the quarter ending March 31, 1984 in East Villa
Nursing Home (East Villa);

   3) two patients for the quarter ending March 31, 1984 in Lauderdale
County Nursing Home (Lauderdale);

   4) one patient for the quarters ending March 31, June 30, and
September 30, 1984 in Royal Care of Jackson, Inc. (Royal Care);

   5) two patients for the quarters ending March 31, June 30, and
September 30, 1984 in Trevecca Health Care Center (Trevecca);  and

   6) nine patients for the quarters ending March 31, June 30, and
September 30, 1984 in Oakville Health Care Center (Oakville).

However, in response to the Board's Order to Develop the Record in this
case, the State clarified its position and explained that the State was
not appealing the Lauderdale disallowance.  Indeed, this position had
been implicit in the State's original notice of appeal.  (State's brief,
pp. 1 and 4) Further, the State also conceded the disallowance for the
March 31 and June 30, 1984 quarters for the patients in Trevecca and
Oakville.  Further, the State submitted evidence to show that the
patients in Trevecca and Oakville were reviewed by the end of the third
quarter (September 30, 1984).  The Agency accepted the State's evidence
and reduced the penalties for Trevecca and Oakville.  As a result, the
total disallowance was reduced by the Agency from $560,596.23 to
$525,579.48.  (Agency telephone conference, February 19, 1986)

Following the foregoing developments, only five patients in three
facilities (Royal Care, Bel-Aire, and East Villa) remained in dispute.
As discussed below, we conclude that none of the five patients were
required to be included in the medical reviews from which they were
omitted.  We, therefore, reverse the Agency's disallowance to the extent
that the State has conceded that reviews were not performed in the three
remaining facilities.  We leave it to the parties to recompute the
appropriate disallowance amount.  If the parties cannot reach an
agreement, the State may return to the Board on solely the computation
issue.(3)

Statutory and Regulatory Framework

Section 1903(g)(1)(D) of the Act requires the state agency responsible
for the adminstration 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 mental hospitals, skilled nursing facilities (SNFs), and
intermediate care facilities (ICFs) pursuant to section 1902(a)(26) and
(31) whereby the professional management of each case is reviewed and
evaluated at least annually by independent professional review teams.

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).

Section 1902(a)(26) requires in pertinent part that a State plan
provide:

(B) for periodic inspections to be made in all skilled nursing
facilities . . . within the State by one or more medical review teams .
. . of (i) the care being provided in such nursing facilities . . . to
persons receiving assistance under the State plan, (ii) with respect to
each of the patients receiving such care, the adequacy of the services
available . . . .

Section 1902(a)(31) contains similar language for ICFs.

Regulations implementing the statutory utilization control requirements
are found at 42 CFR Part 456 (1984).  In particular, section 456.652
provides that:

   (a) . . . (in) 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 (4) facility in the State . . . by the end of the quarter in
which a review is required under paragraph (b)(2) of this section.

   (2) An on-site review is required in a facility by the end of a
quarter if the facility entered the Medicaid program during the same
calendar quarter 1 year earlier or has not been reviewed since the same
calender quarter 1 year earlier.  If there is no Medicaid recipient in
the facility on the day a review is scheduled, the review is not
required until the next quarter in which there is a Medicaid recipient
in the facility.

   (3) If a facility is not reviewed in the quarter in which it is
required to be reviewed under paragraph (b)(2) of this section, it will
continue to require a review in each subsequent quarter until the review
is performed.

The Board has held that the foregoing provisions establish a general
requirement for an annual review of all Medicaid patients in a facility
regardless of the length of time a patient has been in the facility.
West Virginia Department of Human Services, Decision No. 686, August 21,
1985.

Discussion

During August 1984, the Agency conducted surveys of the State's
long-term care facilities in order to verify that the State had in
operation an effective program for controlling the utilization of
Medicaid services during the quarters ending March 31, June 30, and
September 30, 1984.  As noted above, five patients in three facilities
remain in dispute.  The Agency found that the State failed to review
patient C.B. in the Royal Care facility and patients N.M. and J.P. in
the Bel-Aire facility for all three quarters involved in this case. /2/
Further, the Agency found that the State failed to review patients M.D.
and M.F. in the East Villa facility for the quarter ending March 31,
1984.

The State submitted undisputed evidence showing that:  the review of
Royal Care occurred on December 2, 1983, and that patient C.B. was
hospitalized on that date;  the review of Bel-Aire occurred on October
14, 1983, and that patients (5) N.M. and J.P. were hospitalized on that
date;  and that the review of East Villa occurred on April 21, 1984, and
that patients M.D. and M.F. were hospitalized on that date.

Further, the State argued that the regulatory provisions implementing
the statutory medical review requirements, noted above, did not require
the State to review medical records of patients absent from a facility
during the required medical review.  The State argued that not only was
the Agency requiring more than the statute and regulations, but that the
Agency was not being consistent with its past actions and statutory and
regulatory interpretations. /3/

The Agency argued that its interpretation of the statute and regulations
requiring inspection teams to review the medical records of each
patient, whether or not the patient is physically present in the
long-term facility at the time of the review, is a long-standing one and
is entirely consistent with the Act and the regulations.  Moreover, the
Agency argued that "the Board has consistently held 100% compliance to
be mandatory;  once there is a finding of even one violation in a
facility, (the Agency) is 'required' to impose a disallowance."
(Agency's brief, p. 4) The Agency argued that it never approved the
State's policy of excluding hospitalized patients from the medical
review, and that the Agency is not estopped from enforcing the
requirement.

In past decisions, the Board has upheld as reasonable the Agency's
interpretation that it has no discretion to waive the reduction of FFP
once there is a violation of the section 1903(g)(1) requirements.  New
York State Department of Social Services, Decision No. 531, April 23,
1984, and decisions cited therein.  Additionally, the Board has upheld
reductions of FFP based on violations found for facilities where on-site
reviews were conducted but all Medicaid recipients were not reviewed.
See West Virginia Department of Human Services, Decision No.  686,
August 21, 1985;  and Virginia Department of Health, Decision No.  682,
August 15, 1985.  However, here there is an insufficient basis for the
Board to conclude that violations existed in the facilities at issue.(6)

The regulations require that the State conduct "on-site reviews of each
recipient in every facility in the State. . . ." 42 CFR 456.652(b)(1).
(Emphasis added).  If a patient is no longer "in" the facility on the
day when the review team comes to review him, no review is reasonably
required.  North Carolina Department of Human Resources, Decision No.
728, March 11, 1986.  The preamble to the proposed regulations
implementing section 1903(g) supports this view.  In discussing its
decision to require an annual review in each facility without regard to
the period of time that each patient in a facility had received care,
the Agency stated:

   We recognize that, under this interpretation, there may be some
recipients in a facility who are not reviewed, even though they have
received care for an annual period, because they either (had) been
transferred or were absent from the facility at the time of the onsite
review. . . .  We believe, however, that since most recipients do not
move in and out of long-term-care facilities, most individual recipients
are being reviewed at least annually under our present interpretation.

43 Fed. Reg. 50922, 50925 (November 1, 1978).  This discussion clearly
recognized that patients absent from the facility at the time of the
review need not be reviewed.

Nevertheless, the Agency argued that the State was required to review at
the very least the medical records of the patients not present in the
facilities, and that the Agency was unaware of the State's policy not to
review such records.  (Agency brief, p. 7, and affidavit, supra) We
disagree that the State must review the records alone where the patients
have been hospitalized.  The regulations require that an on-site review
of recipients in SNFs and ICFs (except in certain cases not relevant
here) include:

   (1) Personal contact with and observation of each recipient;  and

   (2) Review of each recipient's medical record.

42 CFR 456.608(a).  As we stated in North Carolina, since a review of
the medical records alone would not satisfy this requirement, we see no
basis for penalizing the State for failing to review the medical records
of patients with whom personal contact was not possible.

Accordingly, we conclude that, since none of the five patients in the
three facilities at issue were present(7) during the annual medical
reviews, they were not required to be reviewed.

Conclusion

For the foregoing reasons, we sustain that portion of the disallowance
conceded by the State pertaining to the Trevecca, Oakville and
Lauderdale facilities, and reverse that portion of the disallowance
pertaining to the Royal Care, Bel-Aire and East Villa facilities.  /1/
        Amendments to section 1903(g) as contained in section 2363( c)
of the Deficit Reduction Act (DEFRA) of 1984, enacted July 18, 1984,
Pub. L. 98-369, have eliminated all utilization control requirements
other than the medical review requirment as a basis for reductions in
FFP. The medical review requirement was substantively unchanged.  /2/
        The patients are identified by their initials to protect their
privacy.         /3/ Since we find that, based on the regulatory
language, the State did not have to review the five patients, we do not
reach the issue of whether the Agency's actions in this matter are
inconsistent with past actions and interpretations.

MARCH 28, 1987