Department of Health and Human Services

OFFICE OF 

INSPECTOR GENERAL 

P S
READMISSION  CREENING AND 

R R Y
ESIDENT  EVIEW FOR  OUNGER 

N F R
URSING  ACILITY  ESIDENTS 

W S M I
ITH  ERIOUS  ENTAL  LLNESS

Daniel R. Levinson

Inspector General 

January 2007

OEI-05-05-00220
 Office of Inspector General 

http://oig.hhs.gov 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, 
as amended, is to protect the integrity of the Department of Health and Human Services 
(HHS) programs, as well as the health and welfare of beneficiaries served by those 
programs.  This statutory mission is carried out through a nationwide network of audits, 
investigations, and inspections conducted by the following operating components: 
Office of Audit Services 
The Office of Audit Services (OAS) provides all auditing services for HHS, either by 
conducting audits with its own audit resources or by overseeing audit work done by others. 
Audits examine the performance of HHS programs and/or its grantees and contractors 
in carrying out their respective responsibilities and are intended to provide independent 
assessments of HHS programs and operations.  These assessments help to reduce waste, 
abuse, and mismanagement and promote economy and efficiency throughout HHS. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide 
HHS, Congress, and the public with timely, useful, and reliable information on 
significant issues.  Specifically, these evaluations focus on preventing fraud, waste, or 
abuse and promoting economy, efficiency, and effectiveness in departmental programs.  
To promote impact, the reports also present practical recommendations for improving 
program operations. 
Office of Investigations 
The Office of Investigations (OI) conducts criminal, civil, and administrative 
investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries 
and of unjust enrichment by providers.  The investigative efforts of OI lead to criminal 
convictions, administrative sanctions, or civil monetary penalties. 
Office of Counsel to the Inspector General 
The Office of Counsel to the Inspector General (OCIG) provides general legal services to 
OIG, rendering advice and opinions on HHS programs and operations and providing all 
legal support in OIG's internal operations. OCIG imposes program exclusions and civil 
monetary penalties on health care providers and litigates those actions within HHS. 
OCIG also represents OIG in the global settlement of cases arising under the Civil False 
Claims Act, develops and monitors corporate integrity agreements, develops compliance 
program guidances, renders advisory opinions on OIG sanctions to the health care 
community, and issues fraud alerts and other industry guidance.    E X E C U T I V E   S U M M A R Y  

OBJECTIVE 
1. 	 To examine the extent to which Preadmission Screening and 
Resident Review (PASRR) requirements were addressed for 
Medicaid nursing facility residents aged 22 to 64 with serious 
mental illness within selected States and selected nursing facilities. 
2. 	 To assess Federal and State oversight of the PASRR process. 
BACKGROUND 
The Omnibus Budget Reconciliation Act of 1987 (OBRA 87) mandated 
preadmission screening for individuals suspected of having mental 
illness and mental retardation or related conditions to ensure that: 
(1) nursing facilities admit only individuals needing nursing facility 
care, (2) these individuals needs for specialized services are determined, 
and (3) these individuals obtain the services identified through the 
preadmission screening.  The PASRR is the primary mechanism used to 
meet these objectives.  This report focuses exclusively on the PASRR as 
it relates to individuals with mental illness.  We concurrently conducted 
a separate review of the PASRR as it relates to individuals with mental 
retardation. 
All individuals who apply to or reside in Medicaid nursing facilities are 
required to receive a Level I screen to identify suspected serious mental 
illness. Those suspected of having serious mental illness must receive a 
Level II PASRR to confirm that they have serious mental illness, to 
determine whether they require nursing facility services, and to 
determine whether they require specialized services. 
The Centers for Medicare & Medicaid Services (CMS) and State 
Medicaid agencies are responsible for administering and overseeing the 
PASRR process.  The State Mental Health Authorities are responsible 
for determining the most appropriate placement and services for each 
nursing facility applicant. 
To assess the PASRR, we selected a purposive sample of five States.  We 
reviewed 186 case files of Medicaid nursing facility residents aged 22 to 
64 with serious mental illness from 4 purposively selected nursing 
facilities per State. We also interviewed State officials, nursing facility 
staff, and CMS staff, and reviewed States PASRR policy documents and 
forms. 
  OEI-05-05-00220  PASRR FOR YOUNGER NURSING FACILITY RESIDENTS WITH SERIOUS MENTAL ILLNESS  i  EEE XXX EEE CCC UUU TTT III VVV EEE     SSS UUU MMM MMM AAA RRR YYY

FINDINGS 
Almost all sampled residents with serious mental illness received a 
Level I screen that met all Federal requirements. We found that 
90 percent (168 of 186) of sampled residents had a Level I screen. 
Eighty-two percent (138 of 168) of Level I screens met both timing and 
content requirements. 
Two-thirds of sampled residents with serious mental illness had 
evidence of a Level II PASRR, but only 5 percent met all Federal 
requirements. Sixty-seven percent (124 of 186) of sampled resident 
case files contained evidence of a Level II PASRR. Five percent of these 
Level II PASRRs met both timing and content requirements. Most 
Level II PASRRs contained required information regarding placement 
and recommended mental health services. 
Eighty-five percent of sampled residents who received a Level II 
PASRR had mental health service recommendations. Thirty-three 
percent had all recommended services incorporated into their care 
plans. Of those sampled residents who received a Level II PASRR, 
85 percent (103 of 121) received one or more mental health 
recommendations. All Level II PASRRs are required to include mental 
health service recommendations necessary to meet the evaluated 
individuals needs. Thirty-three percent of residents who received 
mental health recommendations in their Level II PASRR had all of the 
recommended services incorporated into their care plans. 
Consideration of community-based settings may not always occur 
as part of the Level II PASRR process. Federal regulations require 
that Level II PASRR evaluators assess whether the individuals total 
needs can be met in an appropriate alternative placement to nursing 
facilities, including community-based settings, inpatient hospitals, and 
Institutions for Mental Diseases. However, only two out of five selected 
States Level II evaluation forms prompt evaluators to consider 
community-based placement. Additionally, respondents from all five 
States reported concern that individuals aged 22 to 64 with serious 
mental illness are inappropriately placed in nursing facilities. Finally, 
we found that 85 percent of 2004 Level II PASRRs for individuals with 
serious mental illness aged 22 to 64 in the five selected States resulted 
in nursing home placement. Two percent resulted in community-based 
placement. 
OEI-05-05-00220  PASRR FOR YOUNGER NURSING FACILITY RESIDENTS WITH SERIOUS MENTAL ILLNESS  ii  EE XX EE CC UU TT II VV EE    SS UU MM MM AA RR YY
CMS conducts limited oversight; all five selected States monitor 
aspects of the PASRR process. Most CMS regional offices report 
providing limited guidance and oversight to States regarding their 
PASRR process. To ensure that nursing facility residents receive 
Level I screens, all five selected State Medicaid agencies report that 
Medicaid payment to nursing facilities is linked to the completion of the 
Level I screen. While State Medicaid agencies must maintain ultimate 
control and responsibility over the PASRR process, only three of five 
selected States report that they systematically monitor the Level II 
PASRR process to ensure appropriate placement and treatment. 
Further, the nursing facility Survey and Certification process does not 
provide systematic oversight of the PASRR process. 
RECOMMENDATIONS 
The OBRA 87 mandated preadmission screening to ensure that 
individuals with mental illness are not inappropriately placed in 
Medicaid nursing facilities. The PASRR is the primary mechanism used 
to ensure that individuals aged 22 to 64 with serious mental illness are 
appropriately screened, thoroughly evaluated, and placed in nursing 
facilities when appropriate, and receive all necessary services. As such, 
it is essential that the PASRR process work effectively. 
We based our findings on a purposive sample and have not made a 
statistical projection. However, our findings indicate that there are 
deficiencies in the PASRR process that should be addressed to ensure 
that individuals with serious mental illness are appropriately placed 
and receive necessary services. 
We recommend that CMS hold State Medicaid agencies accountable for 
ensuring compliance with Federal requirements. Specifically, we 
recommend that: 
o	 every nursing facility applicant receive a Level I screen prior to 
nursing facility admission, 
o	 all individuals with a suspected serious mental illness receive a 
complete Level II PASRR prior to nursing facility admission and 
that all Level II PASRR documentation is shared with the 
admitting nursing facility, and 
o	 the admitting nursing facility incorporate all recommended services 
identified on the Level II PASRR into residents care plans and 
provide for or arrange all of these services. 
OEI-05-05-00220  PASRR FOR YOUNGER NURSING FACILITY RESIDENTS WITH SERIOUS MENTAL ILLNESS  iii  E X E C U T I V E   S U M M A R Y  
We also recommend that CMS hold States accountable for considering 
community placements during the Level II PASRR process by: 
o	 working with State Medicaid agencies to develop tools, such as 
protocol, forms, and guidance to evaluators, to ensure that 
community-based alternatives to nursing facility placement are 
considered; and 
o	 reviewing all States Level II PASRR evaluation forms to ensure 
that consideration of community placement is included. 
Finally, we recommend that CMS revise survey and certification 
requirements to ensure that State surveyors sample residents with 
serious mental illness, review PASRR documentation for timely 
completion, and review care plans for the incorporation of all Level II 
mental health service recommendations. 
AGENCY COMMENTS  
CMS concurred with all of our recommendations to ensure that States 
implement an effective and timely Level I and Level II process.  CMSs 
comments did not warrant any revisions to the results of our review or 
to our recommendations. 
  OEI-05-05-00220  PASRR FOR YOUNGER NURSING FACILITY RESIDENTS WITH SERIOUS MENTAL ILLNESS  iv    T A B L E   O F   C O N T E N T S  

EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i

I N T RO DUC T IO N  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1

F I N D IN G S  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11

Almost all sampled residents received a Level Iscreen. . . . . . . . . . . . .  11

Two-thirdsof sampled residents received a Level II PASRR. . . . . . . . .  11

Eighty-five percent of Level II PASRRs contained service 
recommendations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14

PASRR may notconsider community placements.  . . . . . . . . . . . . . . . .  15

CMS oversight limited;States monitor aspects  . . . . . . . . . . . . . . . . . . .  18

R E C O MMEN D A T ION S  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  21

  AgencyComments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  22

APPENDIXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  24

A:  DetailedMethodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  24

B:  Level IIPASRR Resident Review. . . . . . . . . . . . . . . . . . . . . . .  27

C: AgencyComments. . . . . .  . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . .29 

A C K NO WL E D G M E N T S  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  33
   I N T R O D U C T I O N  

OBJECTIVE 
1. 	 To examine the extent to which Preadmission Screening and 
Resident Review (PASRR) requirements were addressed for 
Medicaid nursing facility residents aged 22 to 64 with serious 
mental illness within selected States and selected nursing facilities. 
2. 	 To assess Federal and State oversight of the PASRR process. 
BACKGROUND 
The Omnibus Budget Reconciliation Act of 1987 (OBRA 87) mandated 
preadmission screening for individuals suspected of having mental 
illness and mental retardation or related conditions1 to ensure that: 
(1) nursing facilities admit only individuals needing nursing facility 
care, (2) these individuals needs for specialized services are determined, 
and (3) these individuals obtain the services identified through the 
preadmission screening.  The PASRR is the primary mechanism used to 
meet these objectives. 
States may have an incentive to place younger individuals with mental 
illness in nursing facilities so they can obtain matching Federal 
Medicaid funds.  Medicaid funds do not cover the cost of long term care 
for individuals aged 21 to 64 with serious mental illness in psychiatric 
facilities or Institutions for Mental Diseases (IMD).2  However, Medicaid 
will cover the cost of long term care for individuals with mental illness 
aged 21 to 64 residing in nursing facilities that are not primarily 
engaged in the care of persons with mental diseases.   
However, nursing facilities may be ill equipped to meet the needs of 
residents with mental illness. According to the 1999 U.S. Surgeon 
Generals Mental Health report, there are major barriers that prevent 
the delivery of appropriate care to these residents.3 In addition, placing 
individuals with mental illness in nursing facilities may violate the 
1 Related conditions are defined by 42 CFR  435.1009. 
2 An IMD is a hospital, nursing facility, or other institution of more than 16 beds that is 
primarily engaged in the care of persons with mental diseases.  Under sections 1905(a)(16) 
and 1905(28)(B) of the Social Security Act, inpatients of psychiatric facilities who are over 
21 and under 65 years of age are not covered by Medicaid.     
3 Department of Health and Human Services, Substance Abuse and Mental Health 
Services Administration, Center for Mental Health Services, National Institutes of Health, 
and National Institutes of Mental Health, Mental Health:  A Report of the Surgeon 
General, p. 374, 1999. 
  OEI-05-05-00220  PASRR FOR YOUNGER NURSING FACILITY RESIDENTS WITH SERIOUS MENTAL ILLNESS  1  II NN TT RR OO DD UU CC TT II OO NN
Supreme Courts 1999 decision in Olmstead v. L.C. (Olmstead). 
Olmstead held that States are required to provide community-based 
treatment for persons with mental disabilities when the States 
treatment professionals determine that such placement is appropriate, 
the affected persons do not oppose such treatment, and the placement 
can be reasonably accommodated, taking into account the resources 
available to the State and the needs of others with mental disabilities.4 
In response to Olmstead, the Secretary of the Department of Health and 
Human Services issued guidance to States in the form of a letter to 
State Medicaid Directors. The letter states that no one should have to 
live in an institution or a nursing facility if they can live in the 
community with the right support.5 In addition, the Presidents New 
Freedom Initiative, begun in 2001, aims to remove barriers to 
community living for persons with disabilities, including serious mental 
illness.6 
Preadmission Screening and Resident Review 
The Social Security Act specifies that a nursing facility may not admit 
an applicant who is mentally ill unless the State Mental Health 
Authority (SMHA) has determined prior to admission that the 
individual requires the level of services provided by a nursing facility 
and, if the individual requires that level of services, whether the 
individual requires specialized services for mental illness.7 As a 
condition of the Centers for Medicare & Medicaid Services (CMS) 
approval of a Medicaid State plan, the State must operate a 
preadmission screening program that complies with Federal 
regulations.8 The intent of the PASRR is to ensure that individuals 
aged 22 to 64 with serious mental illness are appropriately screened, 
thoroughly evaluated, and placed in nursing facilities when appropriate, 
and that they receive all necessary services. 
4 Olmstead v. L.C. 527 U.S. 581 (1999), 138 F.3d 893, affirmed in part, vacated in part, 
and remanded. 
5 Department of Health and Human Services, Centers for Medicare & Medicaid Services, 
State Medicaid Director Letter, January 14, 2000. 
6 Exec. Order No. 13217, 66 Fed. Reg. 33, 1555 (June 18, 2001). 
7 42 U.S.C.  1396r(b)(3)(F)(i). 
8 42 CFR  483.104. 
OEI-05-05-00220  PASRR FOR YOUNGER NURSING FACILITY RESIDENTS WITH SERIOUS MENTAL ILLNESS  2  I N T R O D U C T I O N  
Level I Screens. All individuals who apply to or reside in a 
Medicaid-certified nursing facility, regardless of payer, are required to 
receive a Level I PASRR screen to identify possible mental illness.9 
There are no Federal requirements regarding who or what type of entity 
must conduct Level I screens.  
Federal regulations require that the Level I screen indicate whether an 
individual has a suspected serious mental illness.10  For PASRR 
purposes, the Federal definition of serious mental illness is based on 
diagnosis, treatment history, and recent functional limitations.  
Specifically, the individual must have a major mental disorder resulting 
in functional limitations in major life activities within the past 3 to  
6 months, and must have received intensive psychiatric treatment 
within the past 2 years.11  States can either adopt the Federal definition 
of serious mental illness or use a broader definition, as long as it 
complies with the minimum Federal standard.  Individuals suspected of 
having mental illness must also receive a Level II PASRR.12 
Level II Evaluations and Determinations.  The Level II PASRR objectives 
are to confirm whether the applicant has mental illness, assess the 
applicants need for nursing facility services, and determine whether the 
applicant requires specialized services for the mental illness.13  The 
Level II PASRR must include a comprehensive psychiatric evaluation 
and a determination.14 
SMHA is ultimately responsible for the determination of whether an 
individual requires nursing facility services and specialized services.15 
SMHA may verbally convey Level II PASRR determinations to nursing 
facilities and individuals, but must subsequently confirm the 
determination in writing.16  Pursuant to regulation, SMHA must 
contract with an independent entity to conduct the Level II PASRR 
evaluation.17 
9 42 CFR  483.106 and 483.128(a). 

10 42 CFR  483.128(a). 

11 42 CFR  483.102(b)(1). 

12 42 CFR  483.128(a). 

13 Ibid. 

14 42 CFR  483.134(b)(4) and 483.130(a). 

15 42 CFR  483.106(e)(1)(i). 

16 42 CFR  483.112(c). 

17 42 CFR  483.106(d)(1) and (e)(3). 

  OEI-05-05-00220  PASRR FOR YOUNGER NURSING FACILITY RESIDENTS WITH SERIOUS MENTAL ILLNESS  3  I N T R O D U C T I O N  
Assessment of Individual Needs and Appropriate Placement.  Federal 
regulations require evaluators to assess whether an individuals total 
needs can be met in a community setting or only on an inpatient basis 
(e.g., nursing facilities, psychiatric hospital).18  Level II determination 
notices must include the placement options that are available given the 
results of the evaluators assessment.19 If an individuals needs can be 
met in the community, then nursing facility services are not needed. 
Determining Services for Nursing Facility Residents With Mental Illness. 
Level II PASRRs must identify whether specialized services are 
necessary. For individuals with mental illness, specialized services are 
the services specified by the State which, when combined with services 
provided by the nursing facility or other service providers, result in a 
continuous active treatment program.20  The State must provide or 
arrange for the provision of specialized services to all nursing facility 
residents whose mental illness was identified by the Level II PASRR.21 
When specialized services are not recommended, Level II PASRRs must 
identify any specific services of lesser intensity that are required to 
meet the individuals mental health needs.22  The nursing facility must 
provide mental health services of lesser intensity to all residents who 
need such services.23  Medicaid does not separately reimburse these 
services of lesser intensity; they are considered a condition of 
participation and must be paid by the nursing facility or under some 
other arrangement with the State. 
Level II Resident Reviews for Significant Changes in Condition.  In addition to 
initial Level II PASRRs, nursing facility residents may receive 
subsequent Level II PASRR resident reviews during their nursing 
facility stay. Federal law requires resident reviews when there is a 
significant change in a residents physical or mental condition.24 
18 42 CFR  483.132. 

19 42 CFR  483.130(l)(3). 

20 42 CFR  483.120(a)(1) and 483.136. 

21 42 CFR  483.120(b). 

22 42 CFR  483.128(i)(4). 

23 42 CFR  483.120(c). 

24 42 U.S.C.  1396r(b)(3)(C)(i)(II).

  OEI-05-05-00220  PASRR FOR YOUNGER NURSING FACILITY RESIDENTS WITH SERIOUS MENTAL ILLNESS  4  I N T R O D U C T I O N  
Federal and State Oversight of PASRR 
The State Medicaid agencies and CMS share responsibility for enforcing 
PASRR requirements. State Medicaid agencies must deny Medicaid 
payments for nursing facility services provided to individuals who do 
not have a PASRR determination requiring these services.25 
According to the fiscal year 2005 Medicaid Budget and Expenditure 
Report, based on Form CMS-64, CMS spent approximately $51.2 million 
nationally on the administration of the PASRR. These funds represent 
the Federal share of each States PASRR program expenditures paid to 
the State Medicaid agencies. 
CMS contracts with State Medicaid agencies to survey and certify 
nursing facilities to verify compliance with Federal requirements. Each 
nursing facility is subject to a standard, unannounced survey by a 
multidisciplinary team of professionals at least every 15 months.26 
Surveyors cite noncompliance with Federal regulations using deficiency 
tags. For these surveys, a sample of resident records is selected for 
review. If sampled nursing facility residents have mental illness, then 
surveyors must determine whether nursing facility services and 
specialized services were needed.27 
Previous Studies of PASRR 
In the last 5 years, two studies and a nursing facility investigation 
identified problems with States implementation of the PASRR. 
The 2001 Office of Inspector General (OIG) report, entitled Younger 
Nursing Facility Residents with Mental Illness (OEI-05-99-00700), 
found a lack of compliance with PASRR requirements and minimal 
State and Federal oversight of the PASRR.28 Specifically, OIG found 
that only 47 percent of sampled residents with serious mental illness 
had evidence of a Level I PASRR screen and only 41 percent of sampled 
residents had evidence of a Level II PASRR in their case files.29 
The report also found that, in 2001, four of five selected States relied on 
25 42 U.S.C.  1396r(e)(7)(D). 

26 42 U.S.C.  1396r(g)(2)(A)(iii). 

27 The Centers for Medicare & Medicaid Services State Operations Manual,        

Appendix PP,  483.20(m).  
28 Office of Inspector General, Younger Nursing Facility Residents With Mental Illness:  
Preadmission Screening and Resident Review (PASRR) Implementation and Oversight 
(OEI-05-99-00700), 2001. 
29 Ibid. 
  OEI-05-05-00220  PASRR FOR YOUNGER NURSING FACILITY RESIDENTS WITH SERIOUS MENTAL ILLNESS  5  I N T R O D U C T I O N  
the State nursing facility survey agency to monitor the PASRR process.  
However, State surveyors who were interviewed reported that 
monitoring the PASRR process was not their responsibility.   
In the 2001 report, OIG recommended that CMS improve Federal 
monitoring and oversight of the PASRR, improve States ability to 
determine appropriate facility placement, and improve access to mental 
health treatment. In response to the 2001 OIG report, CMS created a 
PASRR training video for surveyors.  CMS also developed both a review 
tool for its regional office staff to assess States PASRR programs and a 
State self-assessment tool.  The review tools have been neither finalized 
nor distributed.  CMS PASRR staff reported that they provide   
PASRR-related guidance when States request technical assistance. No 
additional OIG recommendations have been addressed to date. 
A 2006 study conducted by the Substance Abuse and Mental Health 
Services Administration also raised serious concerns regarding States 
ability to meet the PASRR objectives.30 In addition, a 2003 Department 
of Justice investigation into one of the largest publicly operated nursing 
facilities found that the facility failed to comply with PASRR 
requirements.31 
Concurrent Office of Inspector General Evaluation 
Concurrent with this evaluation, OIG conducted an evaluation on 
Preadmission Screening and Resident Review for Younger Nursing 
Facility Residents With Mental Retardation (OEI-07-05-00230).  These 
studies were produced separately because in many States the mental 
health service delivery system is distinct from the mental retardation 
service delivery system. 
30 Department of Health and Human Services, Substance Abuse and Mental Health 
Services Administration, PASRR Screening for Mental Illness in Nursing Facility 
Applicants and Residents, 2006.   
31 Department of Justice, Investigation of Laguna Honda Hospital and Rehabilitation 
Center, 2003. 
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METHODOLOGY 
We focused this review on the PASRR process in a purposive sample of 
five States (California, Colorado, Georgia, Illinois, and New York). We 
purposively selected these States based on the high proportion of 
Medicaid nursing facility residents aged 22 to 64 with possible serious 
mental illness identified by the calendar year (CY) 2004 Minimum Data 
Set (MDS). In addition, we considered geographic location, States 
definition of specialized services, and availability of alternative 
placements. Below we provide a basic description of our methodology. 
See Appendix A for a more detailed description. 
In each of the five selected States, we collected data from six sources: 
(1) case file reviews of Medicaid nursing facility residents aged 22 to 
64 with serious mental illness; (2) structured interviews with agency 
officials from the selected States; (3) structured interviews with 
administrators and staff from selected nursing facilities; 
(4) structured interviews with CMS staff; (5) review of PASRR policy 
documents, Level I PASRR screens, and Level II PASRR evaluation 
forms from the selected States; and (6) review of data on the 
placement recommendations for all 2004 Level II PASRR evaluations. 
Case File Reviews of Nursing Facility Residents 
Within each selected State, we used CY 2004 MDS data to select 
4 nursing facilities with a high prevalence of residents aged 22 to 64 
with possible serious mental illness, for a total of 20 nursing facilities.32 
Within each of the nursing facilities, we randomly selected 10 current 
residents who met the following criteria: 33 
o	 Medicaid as the payer source; 
o	 aged between 22 and 64 as of the nursing facility site visit date; 
o	 diagnosis of mental illness which is likely to be correlated to the 
PASRR definition of serious mental illness as defined in Federal 
regulation (see Appendix A, Table 4 for specific International 
Classification of Diseases, 9th Revision); 
32 The MDS does not contain data that identify nursing facility residents with serious 
mental illness. However, the MDS allowed us to use proxy variables for serious mental 
illness, including history of mental illness, categories of mental illness, and history of 
residence in a psychiatric setting. In addition, the MDS provided necessary demographic 
information including age and Medicaid reimbursement. 
33 In 2 facilities, 11 case files were reviewed. 
OEI-05-05-00220  PASRR FOR YOUNGER NURSING FACILITY RESIDENTS WITH SERIOUS MENTAL ILLNESS 7  I N T R O D U C T I O N  
o	 admitted on or after January 31, 2001 (this allowed us to focus on 
the PASRR compliance after the 2001 OIG report Younger Nursing 
Facility Residents With Mental Illness:  Preadmission Screening 
and Resident Review Implementation and Oversight was 
published); and 
o	 do not have a diagnosis of mental retardation, dementia, or 
Alzheimers disease.   
If 10 or fewer residents met our criteria, we selected all the residents 
who met our criteria.  
We reviewed a total of 186 case 
 Table 1: Number of Nursing Facility 
files. The number of case files 
 Case Files Reviewed in Each State 
reviewed per State is outlined in 

Number of Case 
Table 1. 
State  Files Reviewed 
We reviewed each residents  1  40
case file to determine the  2  39 
percentage of sampled residents  3  42
who had any documentation,  4  31
5  34
herein referred to as evidence, of 
Total  1	 86
a Level I screen and a Level II 
Source:  OIG analysis of 186 case files, 2006. 
PASRR in their case files. We 
were unable to conduct separate analysis on Level II PASRR 
evaluations and determinations due to the impossibility of 
distinguishing between the evaluation and determination documents in 
two selected States.  Therefore, we refer to evidence of either a Level II 
evaluation or determination as a Level II PASRR throughout our 
findings. 
We asked nursing facility administrators to produce the PASRR 
documentation when it was not maintained in the residents file. 
Nursing facilities must retain a Level I screen and, when appropriate, a 
Level II PASRR.34  We also analyzed the PASRR documentation for 
compliance with regulations related to timing and content. 
We also examined the extent to which mental health service 
recommendations were included in Level II PASRRs.35  We then 
compared the mental health service recommendations to residents 
34 42 CFR  483.130(j) and 483.75(4)(iv). 
35 42 CFR  483.120(b) and (c). 
  OEI-05-05-00220  PASRR FOR YOUNGER NURSING FACILITY RESIDENTS WITH SERIOUS MENTAL ILLNESS  8  I N T R O D U C T I O N  
charts and other documentation as a measure of whether recommended 
services were provided. We allowed up to 6 months after the Level II 
PASRR for the nursing facility to incorporate the recommended service 
into the care plan. 
We conducted a separate analysis of Level II PASRR resident reviews. 
See Appendix B for our separate compliance analysis of Level II PASRR 
resident reviews. 
Structured Interviews and Documentation Review 
In each of the five selected States, we interviewed representatives from 
the State Medicaid agency, SMHA, the States long term care survey 
and certification agency, and one SMHA-contracted mental health 
evaluator responsible for conducting Level II PASRR evaluations. 
Additionally, we collected all five States PASRR policy documents, 
Level I screens, and Level II PASRR evaluation forms. 
At each of the 20 sampled nursing facilities, we interviewed the nursing 
facility administrator and other nursing facility staff responsible for the 
PASRR process and the provision of mental health services. 
We interviewed CMS PASRR and Survey and Certification Group staff 
from headquarters and CMS regional office PASRR contacts 
representing the five selected States.  We also collected documentation 
of CMS oversight activities, including draft guidance. 
Review of Level II PASRR Evaluations 
We sought to assess whether the five selected States considered 
placement types other than nursing facility placement as part of the 
Level II PASRR evaluation.36  To accomplish this, we reviewed Level II 
PASRR evaluation forms and placement recommendations. 
We reviewed 15 different Level II PASRR evaluation forms from the 
5 selected States to determine whether they met all Federal content 
requirements.37  To systematically review the placement 
recommendations made in Level II PASRR evaluations, we reviewed 
data on the total number of CY 2004 Level II PASRR evaluations in the 
36 42 CFR  483.132(a) and Olmstead v. L.C. (98-536) 527 U.S. 581 (1999), 138 F.3d 893, 
affirmed in part, vacated in part, and remanded. 
37 In CY 2004, three of the five selected States used one State-specific Level II PASRR 
evaluation form and one State modified its form midyear, for a total of two forms.  The fifth 
State used a variety of forms, depending on the contracted mental health evaluator.  For 
this State, we randomly selected 10 forms for review. 
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five selected States and the placement recommendations made in these 
evaluations. 
Scope 
Our review of the PASRR is limited to Medicaid beneficiaries aged 22 to 
64 with serious mental illness residing in Medicaid-certified nursing 
facilities in five selected States.38  We selected this population because 
there are financial incentives under Medicaid for States to place 
beneficiaries in nursing facilities, as opposed to IMDs.    
We purposively selected five States and four nursing facilities within 
each of these States.  As such, we do not project our results to the 
population of these five States, nursing facilities, or nursing facility 
residents.  In addition, we do not compare the results of this report to 
those found in the 2001 OIG report Younger Nursing Facility Residents 
With Mental Illness:  Preadmission Screening and Resident Review 
(PASRR) Implementation and Oversight (OEI-05-99-00700). 
As part of this review, we evaluated whether Level II PASRR service 
recommendations were incorporated into treatment plans. We did not 
verify whether these services were provided, nor conduct a medical 
review to determine the necessity of these services. 
Standards 
This study was conducted in accordance with Quality Standards for 
Inspections issued by the Presidents Council on Integrity and 
Efficiency and the Executive Council on Integrity and Efficiency. 
38 Section 1905(h)(1)(C) of the Social Security Act states that after a beneficiarys 21st 
birthday, Medicaid no longer covers inpatient psychiatric care, unless the beneficiary is 
under psychiatric care immediately preceding his or her 21st birthday.  If so, Medicaid will 
stop covering inpatient psychiatric services no later than his/her 22nd birthday.  
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  F I N D I N G S

Almost all sampled residents with serious  Ninety percent of sampled residents 
mental illness received a Level I screen that met  received a Level I screen 
In our 5-State review, 90 percent 
all Federal requirements   
(168 of 186) of sampled residents 
had a Level I screen in their case file. All individuals who apply to a 
Medicaid nursing facility are required to receive a Level I screen to 
identify suspected mental illness prior to nursing facility admission.39 
Eighty-two percent of Level I screens we reviewed met both timing and 
content requirements 
Overall, 82 percent (138 of 168) of Level I screens met both timing and 
content requirements.  Eighty-eight percent (148 of 168) of Level I 
screens were conducted prior to nursing facility admission, and 
therefore met the timing requirement.  The remaining 20 Level I 
screens were, on average, 225 days past the date of admission. 
Ninety-four percent (157 of 168) of Level I screens contained the 
required content to identify suspected mental illness. Content 
requirements for Level I screens are dictated by the definition of serious 
mental illness used by the State.  These screens must contain sufficient 
content to determine whether an applicant has a suspected serious 
mental illness. 
Two-thirds of sampled residents with serious  Sixty-seven percent of sampled 
mental illness had evidence of a Level II PASRR,  residents had evidence of a Level II 
but only 5 percent met all Federal requirements  PASRR 
Nursing facility applicants 
suspected of having mental 
illness, according to their Level I screen, must receive a Level II PASRR 
prior to admission to ensure appropriate placement and treatment.40 
Overall, we found that 67 percent (124 of 186) of sampled nursing 
facility residents had evidence of a Level II PASRR in their case files.   
In three of the selected States, evidence of a Level II PASRR should 
have been present for 100 percent of sampled residents.  In these 
3 States, we found evidence of a Level II PASRR for 64 percent   
39 42 CFR  483.102(a) and 483.128(a). 
40 42 CFR  483.128(a).   
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(72 of 112) of sampled residents.  These three States consider any 
individual with a mental illness diagnosis as having a serious mental 
illness for the purposes of the PASRR.  Thus, in these States, 
individuals with mental illness diagnoses trigger a referral for a Level II 
PASRR, and all of the sampled residents in the three States had a 
mental illness diagnosis. 
In the remaining 2 States, 37 of the 45 residents (82 percent) who met 
the criteria to necessitate a Level II PASRR had evidence in their case 
file that they received one.  These States use the more restrictive, 
Federal definition of serious mental illness.  In these States, only 
nursing facility applicants with a serious mental illness diagnosis, 
treatment history, and recent functional limitations are required to 
receive a Level II PASRR.41 
While only 5 percent of Level II PASRRs reviewed met timing and content 
requirements, most contained required information regarding placement 
and recommended services 
Like Level I screens, Level II PASRRs must be completed prior to 
nursing facility admission.42 Federal requirements delineate specific 
content for Level II PASRRs that must be used in determining 
appropriate placement and treatment for evaluated individuals.43 
Overall, only 5 percent (6 of 121) of the Level II PASRRs reviewed met 
both timing and content requirements.44 
Sixty percent of Level II PASRRs were conducted prior to nursing facility 
admission. Sixty percent (73 of 121) of all Level II PASRRs reviewed 
were conducted prior to nursing facility admission.  The 33 Level II 
PASRRs conducted after admission were, on average, 106 days late.45 
For sampled residents in 1 State, only 3 percent (1 of 32) of Level II 
41 Additionally, in these 2 States, we found 15 Level II PASRRs in case files in which 
either the Level I screen was missing or the Level I screen indicated that the Level II 
PASRR was not required. 
42 42 U.S.C.  1396r(b)(3)(F). 
43 42 CFR  483.132(a).   
44 We found that 67 percent (124 of 186) of sampled residents had evidence of Level II 
PASRRs. The 124 resident files with a Level II PASRR included 3 files categorized as 
terminated, which have separate content requirements in the Federal regulation.  See 
Appendix A for more information on these residents case files.  The timing and content 
analysis presented here was conducted on the 121 Level II PASRRs found in resident case 
files that were not categorized as terminated. 
45 There were 15 Level II PASRRs for which we were unable to determine the time of 
completion. 
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PASRRs reviewed were completed prior to admission.  The State 
Medicaid agency, SMHA officials, and nursing facility staff from 
sampled nursing facilities in this State indicated that Level II PASRR 
evaluators often take several months to conduct Level II PASRRs, and 
the States Medicaid agency authorizes 4-month stays for nursing 
facility residents without Level II PASRRs.    
Seven percent of Level II PASRRs met all content requirements. While only 
7 percent (9 of 121) of the Level II PASRRs we reviewed met all content 
requirements, most met requirements related to placement and 
recommended services. Over 90 percent of Level II PASRRs contained 
the required indications of placement option and need for nursing 
facility services. In addition, 85 percent (103 of 121) of Level II PASRRs 
contained mental health service recommendations and 72 percent (87 of 
121) indicated whether specialized services were necessary.  See Table 2 
for details on Level II PASRR compliance with specific content 
requirements. 
At the same time, most Level II PASRRs were missing information that 
could help nursing facilities provide appropriate mental health services.  
The evaluators basis for the conclusions regarding treatment and 
placement was present in less than half of case files.  In addition, a 
summary of the beneficiarys medical and social history was included in 
only 28 percent (34 of 121) of case files. 
Additionally, many of the Level II PASRRs we reviewed were missing 
technical information, including the evaluators name and professional 
title, and a statement of the individuals rights. 
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Table 2: Level II PASRR Content Compliance 
Required Level II PASRR Content  Level II PASRR Compliance 
Indicates placement option  94% (114) 
Indicates need for nursing facility 
services    93% (113) 
Provides mental health service 
recommendations    85% (103) 
Indicates need for specialized 
services  72% (87) 
Provides evaluators name and 
professional title  53% (64) 
Provides basis for Level II 
placement and service conclusions  46% (56) 
Provides summary of medical and 
social history   28% (34) 
Identifies Individuals rights  26% (32) 
Source:  OIG review of 121 resident case files, 2006. 
All Level II PASRRs that conclude 
Eighty-five percent of sampled residents who 
that an applicant with serious 
received a Level II PASRR had mental health 
mental illness needs nursing 
service recommendations.  Thirty-three percent 
facility services must identify the 
had all recommended services incorporated 
specific mental health services 
into their care plans  that meet the individuals needs.46 
Eighty-five percent of sampled 
residents who received a Level II PASRR had mental health service 
recommendations  
Of those sampled residents who received a Level II PASRR, 85 percent 
(103 of 121) received 1 or more mental heath service recommendations 
for a specialized service, a service of lesser intensity, or both.  The most 
frequently recommended services were medication management, case 
management, family therapy, and monitoring. 
46 42 CFR  483.128(i)(3)(4) and (5). 
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Thirty-three percent of sampled residents who received a Level II PASRR 
with mental health service recommendations had these services 
incorporated into their care plans 
Thirty-three percent (34 of 103) of sampled residents who received an 
initial Level II PASRR with mental health service recommendations 
had all recommended services incorporated into their care plans.   
Seventeen of twenty sampled nursing facilities reported that it is their 
policy to incorporate Level II PASRR mental health service 
recommendations into residents care plans.  The other three nursing 
facilities reported that they do not receive service recommendations for 
their residents.  However, four of the five Level II PASRRs we found in 
these nursing facilities had mental health service recommendations. 
Consideration of community-based settings  Federal regulations require that 
may not always occur as part of the Level II  Level II PASRR evaluators assess 
whether the individuals total 
PASRR process 
needs are such that they can be 
met in an appropriate alternative placement to nursing facilities, 
including community-based settings, inpatient hospitals, and IMDs.47 
Further, the Olmstead decision holds that services for persons with 
disabilities should be provided consistent with the States determination 
regarding the most appropriate setting.  This requirement means that 
States have a responsibility to place individuals with mental illness in 
community settings rather than institutions when deemed 
appropriate.48 
Only two out of five selected States Level II PASRR evaluation forms 
include the consideration of community placement 
Only two of the five selected States Level II PASRR evaluation forms 
prompt evaluators to consider the appropriateness of community-based 
settings for nursing facility applicants with mental illness.  Specifically, 
one States form prompts evaluators to assess whether the applicant 
could care for himself or herself and stay out of danger if placed in the 
community.  The other States form instructs evaluators to consider the 
level and availability of support that would be needed for the applicant 
47 42 CFR  483.132(a). 
48 Olmstead v. L.C. (98-536) 527 U.S. 581 (1999), 138 F.3d 893, affirmed in part, vacated 
in part, and remanded. 
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to remain in the community. In addition, Level II PASRR evaluators in 
only these States report routinely considering the appropriateness of 
community placements as part of the Level II PASRR. 
In the three other States, a prompt to consider community placement is 
not routinely included on the evaluation form and may occur only at the 
discretion of the Level II PASRR evaluator. In two States, the Level II 
evaluation forms do not prompt for the consideration of community 
placements at all. In one of these States, this is due to the fact that 
Level I screeners determine whether an individual should be placed in 
the community. Federal law requires this determination occur during 
the Level II PASRR process to ensure that qualified mental health 
evaluators are making placement decisions. 
The third State allows Level II PASRR evaluators to use a variety of 
Level II PASRR evaluation forms, most of which prompt the evaluator 
to consider available community options, but some of which do not. 
Further, the Level II PASRR evaluator we interviewed in this State 
reported that he does not consider community-based placements. 
Respondents from all five States reported concern about appropriate 
placement of individuals with serious mental illness aged 22 to 64 
Some respondents reported concern that individuals aged 22 to 64 with 
serious mental illness are inappropriately placed in nursing facilities. 
Three Level II PASRR evaluators, from three separate States, reported 
having this concern. In addition, 3 State surveyors, and staff in 9 of 
20 sampled nursing facilities reported that the PASRR is ineffective in 
ensuring the appropriate placement of individuals with mental illness 
in nursing facilities. 
Some respondents were also concerned that there are not adequate 
numbers of alternative community-based placements for younger 
individuals with serious mental illness, limiting Level II PASRR 
evaluators ability to recommend community-based placements. 
Level II evaluators from three States and three of five States Medicaid 
agencies and SMHAs reported having this concern. 
Two percent of 2004 Level II PASRRs for individuals aged 22 to 64 with 
serious mental illness recommended community-based placement 
Because our case file review focused exclusively on nursing facility 
residents, and not on all individuals evaluated under the PASRR, we 
also reviewed data on all Level II PASRRs conducted in CY 2004 for 
individuals with suspected mental illness aged 22 to 64 in the five 
selected States. 
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Eighty-five percent (6,278 of 7,397) of Level II PASRRs for individuals 
aged 22 to 64 resulted in nursing facility placement recommendations,  
4 percent (307 of 7,397) resulted in more restrictive inpatient placement 
recommendations, and 2 percent (155 of 7,397) resulted in less 
restrictive community placement recommendations.  See Table 3 for 
additional placement recommendation information. 
Table 3:  2004 PASRR Placement Recommendations for Individuals Aged 22 to 64 With a Serious 
Mental Illness 
States Level II 
Evaluation Forms 
Include  More  Less 
2004 Level  Consideration of  Nursing  Restrictive  Restrictive  Other, 
II for Ages  Community  Facility Level  Than Nursing  Than Nursing  Cancelled, or 
State  22-64  Placement  of Care  Facility  Facility  Dont Know 
1  2,375  Yes  95%  0%  5%  0% 
2  629  Yes  91%  2%  5%  2% 
3  625  No  85%  8%  0.5%  6.5% 
4  3,102  No  76%  6%  0%  18% 
5  666  No  87%  8%  0%  5% 
Overall 
7,397  (6,278) 85%  (307) 4%  (155) 2%  (657) 9% 
Total 
Source:  OIG analysis of five selected States 2004 Level II PASRR placement recommendations, 2006. 
While we did not determine a causal relationship, we found that the two 
selected States that prompt for the consideration of community 
placement on their Level II evaluation forms had higher levels of 
community placements. In the 2 selected States where Level II PASRR 
evaluation forms prompt for the consideration of community placement, 
5 percent (152 of 3,004) of Level II PASRRs recommended less 
restrictive placement than nursing facilities for individuals aged 22 to 
64 with mental illness.49  In contrast, in the 3 States with forms that do 
not prompt the Level II evaluator to consider community placements, 
less than 1 percent (3 of 4,393) of Level II PASRRs recommended a less 
restrictive setting.   
49 Since we did not conduct a clinical review of these Level II PASRRs, we do not know 
what placement type is most appropriate. 
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CMS conducts limited oversight; all five selected  CMS has a role in assisting 
States monitor aspects of the PASRR process  and guiding State oversight 
efforts.  Pursuant to Federal 
regulation, State Medicaid 
agencies must retain ultimate control and responsibility over the 
PASRR process.50 
CMS provides limited oversight and guidance to States  
Seven of ten CMS regional PASRR contacts report providing limited 
guidance and oversight to States regarding their PASRR process.  In the 
past 5 years, only two CMS regions report having conducted State 
PASRR reviews.  Further, only two CMS regions report having ever 
provided PASRR-related training to States or nursing facilities. 
Four of five selected States reported receiving limited Federal guidance.  
Three of these States reported concern that PASRR regulations lack 
clarity, creating confusion about how best to comply with Federal 
standards.  These three States reported unsuccessfully consulting with 
CMS to better understand Federal PASRR regulations. 
All five selected States link Medicaid payment to completion of the Level I 
screen 
To ensure that nursing facility residents receive Level I screens, all five 
selected State Medicaid agencies report that Medicaid payment to 
nursing facilities is linked to the completion of the Level I screen.  In 
these five States, nursing facilities will not be reimbursed for a 
Medicaid-eligible resident unless he or she received a Level I screen and 
the Medicaid agency has a copy of the document.   
Three of five selected States report that they systematically monitor Level II 
PASRRs 
Three of five selected State Medicaid agencies report that they maintain 
control over Level II PASRR outcomes by mandating that SMHAs 
review the Level II PASRRs conducted by the contracted mental health 
evaluator. These reviews seek to ensure that the Level II PASRRs 
contain appropriate placement decisions and recommended services. In 
two of these three States, the State Medicaid agencies mandate that 
SMHAs review all Level II PASRRs.  In the third selected State, SMHA 
is required to review 5 percent of all Level II PASRRs recommending 
50 42 CFR  483.106(e). 
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nursing facility placement, and all Level II PASRRs recommending 
inpatient hospitalization. 
Two State Medicaid agencies report that they do not have processes for 
systematically reviewing Level II PASRRs. In fact, in one State neither 
the Medicaid agency nor SMHA even receives the Level II PASRRs for 
review. In the other selected State, SMHA is required by the State 
Medicaid agency to review only Level II PASRRs with contested 
outcomes. None of the five selected States link Medicaid payment to the 
completion of the Level II PASRR. 
Three of five selected States report that they monitor the provision of 
Level II PASRR-recommended services 
Three selected States report that, in addition to the annual nursing 
facility survey, they directly monitor whether Level II PASRR mental 
health service recommendations are being delivered. Two of these three 
States conduct this oversight as well as requiring that SMHAs 
systematically review Level II PASRRs, as described above. 
One States Medicaid agency expanded its annual nursing facility 
survey to include a review of mental health services and comprehensive 
assessments, including Level II PASRRs, for all residents with mental 
illness. The second States Medicaid agency conducts a monthly review 
of sampled nursing facility residents to assess whether they are 
receiving the services recommended in their Level II PASRR as 
required. This States Medicaid agency has future plans to recoup 
Medicaid funds for the days residents did not receive recommended 
services. 
The third selected States SMHA annually reviews a sample of nursing 
facility residents to assess whether Level II PASRR service 
recommendations were provided. 
The survey and certification process does not provide systematic oversight 
of the PASRR 
CMS contracts with States to survey nursing facilities, no less than 
every 15 months, to verify compliance with Federal nursing facility 
requirements.51 If surveyors identify noncompliance with Federal 
PASRR regulations, a deficiency tag, F285, should be cited. In CY 2004, 
F285 was cited 101 times in approximately 16,000 nursing facilities 
nationwide. 
51 42 U.S.C.  1396r(g)(2)(A)(iii)(I). 
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As part of the survey process, CMS directs State surveyors to review 
PASRR documents when residents with mental illness randomly fall 
into their survey sample.52 When a resident with mental illness was 
randomly included in an annual survey, four of the five selected State 
surveyors reported reviewing those files for evidence of Level I screens 
and Level II PASRRs and, if recommended, services were incorporated 
into the nursing facilities care plans.  However, according to CMS 
survey and certification staff we interviewed, surveyors are not required 
to include a resident with mental illness in their survey sample, even 
when there is a high prevalence of individuals with mental illness in a 
nursing facility. 
As part of their offsite survey preparation, surveyors are instructed to 
review the PASRR documentation for nursing facility residents with 
mental illness to consider purposefully including a resident with mental 
illness in their sample.53  However, surveyors can only review the 
PASRR documentation prior to the survey if the State makes these 
documents available.54  None of the officials we interviewed from the 
five selected State Medicaid agencies reported providing PASRR 
documents to surveyors prior to the survey and none of the five State 
surveyors we interviewed reported requesting or reviewing PASRR 
documents prior to a nursing facility survey.   
52 The Centers for Medicare & Medicaid Services State Operations Manual,        
Appendix PP,  483.20(m). 
53 The Centers for Medicare & Medicaid Services State Operations Manual,        
Appendix P, II.B.1 (Task 1)(B)(7). 
54 Ibid. 
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The PASRR process was created to ensure that individuals with mental 
illness are not inappropriately placed in Medicaid nursing facilities.  
The PASRR is the primary mechanism to ensure that individuals aged 
22 to 64 with serious mental illness are screened, evaluated, and placed 
in nursing facilities when appropriate, and receive identified needed 
services.  As such, it is essential that all State PASRR systems work 
effectively. 
This examination of the PASRR process found that not all residents 
with serious mental illness received a Level I screen and/or a Level II 
PASRR. Additionally, most Level II PASRRs did not comply with all 
Federal requirements.  We also found that while Level II PASRRs often 
included recommendations for mental health services, only one-third of 
case files had all services incorporated into residents care plans.  
Finally, the Level II PASRR process does not appear to be used as a tool 
to systematically consider alternative placements to nursing facilities.  
Two percent of all CY 2004 Level II PASRRs for individuals aged 22 to 
64 with serious mental illness in the five selected States resulted in 
community-based placement recommendation.  
We based our findings on a purposive sample and have not made any 
statistical projections. However, the findings from the sample identify 
deficiencies pertaining to the PASRR process that should be addressed 
to ensure that individuals with serious mental illness are appropriately 
placed and receive necessary mental health services.  We therefore 
recommend the following to CMS:  
Hold State Medicaid agencies accountable for ensuring compliance with 
Federal requirements.  Specifically, we recommend that: 
o	 every nursing facility applicant receives a Level I screen prior to 
nursing facility admission, 
o	 all individuals with suspected serious mental illness receive a 
complete Level II PASRR prior to nursing facility admission and 
that all Level II PASRR documentation is shared with the 
admitting nursing facility, and 
o	 the admitting nursing facility incorporate all recommended services 
identified on the Level II PASRR into residents care plans and 
provide for or arrange all of these services.  
To address the above recommendations, we have several specific 
suggestions for CMS to consider.  First, CMS could require that State 
Medicaid agencies provide data to CMS regarding the number of 
  OEI-05-05-00220  PASRR FOR YOUNGER NURSING FACILITY RESIDENTS WITH SERIOUS MENTAL ILLNESS  21  RR EE CC OO MM MM EE NN DD AA TT II OO NN SS  
completed Level I screens, the number of expected and completed 
Level II PASRRs, and nursing facility confirmation of receipts of the 
PASRR documentation. Alternatively, as part of CMSs current efforts 
to modify the MDS, CMS could consider adding a data element to 
indicate whether a Level I screen and Level II PASRR have been 
completed. Finally, we suggest that CMS distribute both its draft State 
self-assessment form and its draft regional office assessment form as 
tools to be used in the regular collection of information about each 
States PASRR processes. 
Hold States accountable for considering community placements during the 
Level II PASRR process by: 
o	 working with State Medicaid agencies to develop tools, such as 
protocols, forms, and guidance to evaluators, to ensure that 
community-based alternatives to nursing facility placement are 
considered; and 
o	 reviewing all States Level II PASRR evaluation forms to ensure 
that consideration of community placement is included. 
Revise survey and certification requirements to ensure that State surveyors: 
o	 sample residents with serious mental illness, 
o	 review all PASRR documentation for timely completion, and 
o	 review care plans for the incorporation of all Level II PASRR 
mental health service recommendations. 
AGENCY COMMENTS 
CMS concurred with all of our recommendations. CMS intends to 
remind States of their obligation to implement an effective and timely 
Level I and Level II process, clarifying for States all of the Level II 
elements required by Federal regulation. In addition, CMS intends to 
review State claims, if necessary, to ensure that States recoup Federal 
Financial Participation from nursing facilities for any days claimed 
prior to the completion of all PASRR documentation. CMS intends to 
review the forms and tools used by each State for the PASRR Level II 
evaluation and determination to assess whether they include 
consideration of community placement. To address our final 
recommendation regarding revising survey and certification 
requirements to ensure oversight of PASRR, CMS stated it will ensure 
that a resident requiring a Level II PASRR is included in the resident 
sample during a nursing facility survey. 
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CMSs comments did not warrant any revisions to the results of our 
review or to our recommendations.  For the full text of CMSs comments, 
see Appendix C. 
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DETAILED METHODOLOGY 
State Selection 
Our purposive sample did not include the same States selected in the 
Office of Inspector Generals 2001 report, with the exception of 
California.  We chose different States than those involved in the 
concurrent OIG evaluation Preadmission Screening and Resident 
Review for Younger Nursing Facility Residents With Mental 
Retardation (OEI-07-05-00230) to reduce the burden on any one State 
during its participation in this review. 
Case File Reviews 
Our criteria for sample inclusion in the case file review included the 
following diagnosis codes: 
Table 4: Selected Diagnosis Codes for Serious Mental Illness 
ICD-9 
(Diagnosis) 
Codes  Description of Mental Disorder Category 
Transient mental disorders due to conditions classified elsewhere; includes  
293 
transient organic mental disorders not associated with drugs or alcohol 
294 (some 
Persistent mental disorders due to conditions classified elsewhere; includes  
dementia 
organic psychotic brain syndromes (chronic) not elsewhere classified 
exceptions) 
295  Schizophrenic psychoses  

Episodic mood disorders; includes episodic affective disorders; 

296 
does not include 296.2: Major Depressive Disorder, single episode  
297  Delusional disorders; includes paranoid disorders 
Other nonorganic psychoses; includes psychotic conditions due to or provoked 
298 
by emotional stress or environmental factors 
299  Psychoses with origin specific to childhood 
300  Anxiety, dissociative, and somatoform disorders 
301  Personality disorders; includes character neurosis 
307.1  Special symptoms or syndromes not elsewhere classified:  Anorexia nervosa 
307.51  Special symptoms or syndromes not elsewhere classified:  Bulimia nervosa 
312  Disturbance of conduct not elsewhere classified 
Source:  International Classification of Diseases, 9th Revision, List of Three Digit Categories, FY 2005. 
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Analysis of Level I screen and Level II Preadmission Screening and 
Resident Reviews 
To assess whether Level I screens and Level II Preadmission Screening 
and Resident Reviews (PASRR) were in compliance with timing 
requirements, we determined whether the Level I screen and Level II 
PASRR were completed prior to or on the residents current nursing 
facility admission date. 
To assess whether Level I screens contained required content, we 
assessed whether they indicated that the individual had a suspected 
mental illness. Pursuant to Federal regulation (42 CFR  483.102(b)(1) 
and 42 CFR  483.102(b)(iii)(B)), a State may use the Federal definition 
of serious mental illness or a broader definition of serious mental 
illness. As such, each Level I screen was assessed using its States 
definition of serious mental illness. 
The Level II PASRR process comprises a mental health and physical 
evaluation, notice of completion of the evaluation, determination letter, 
and summary of findings. If we found any of these documents, we 
considered this evidence of a Level II PASRR. We reviewed the Level II 
PASRRs to determine whether they included all required components as 
detailed in Federal regulations (42 CFR  483.128(i) and 
42 CFR  483.130(l)). 
Specifically, we reviewed each residents Level II PASRR to see if it 
included: (1) recommended placement option, (2) need for nursing 
facility services, (3) need for specialized services, (4) rights of the 
individual, (5) name and professional title of the evaluator, 
(6) recommendations for services of lesser intensity and/or specialized 
services, (7) summary of the residents social and medical history, and 
(8) basis for the evaluators conclusions. If any required item was 
missing, we determined that the Level II PASRR was not in compliance 
with Federal requirements. 
We also reviewed all aspects of selected States Level II PASRR 
evaluation and determination form templates to determine whether 
they contained the categories needed to capture the required content. 
Level II PASRRs that the State Mental Health Authority (SMHA) 
determined did not need to be completed due to a regulatory exemption 
were categorized as terminated. In our case file review, we found three 
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terminated Level II PASRRs.55  Terminated Level II PASRRs have 
limited content requirements compared to completed Level II PASRRs.  
Terminated Level II PASRRs were assessed under these limited content 
requirements as described in Federal regulation (42 CFR  483.128(m)).  
All three terminated Level II PASRRs met all content requirements.  
We did not include the three terminated Level II PASRRs in our overall 
Level II PASRR compliance review. 
We also reviewed residents case files to determine the extent to which 
Level II PASRRs specialized mental health service recommendations 
were documented by the nursing facility as either provided or arranged 
by the State, and the extent to which recommended services of lesser 
intensity were incorporated into the residents care plan by the nursing 
facility as required.56 
55  The three Level II PASRRs were terminated because the evaluator determined that 
the individuals had dementia. 
56 42 CFR  483.128(i). 
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LEVEL II PASRR RESIDENT REVIEW 
The Omnibus Budget Reconciliation Act of 1987 required annual Level 
II PASRR resident reviews (readministration of the Level II PASRR) for 
nursing facility residents with serious mental illness. The 1996 
Nursing Home Facility Resident Act, Public Law 104-315, repealed the 
annual review requirement and instead required a Level II PASRR 
resident review when there is a significant change in a residents 
physical or mental condition.   
Each SMHA must establish a notification procedure for nursing 
facilities to promptly notify SMHA when a residents mental or physical 
status has significantly changed.57  SMHA is then required to conduct a 
Level II PASRR resident review or reassessment if this change has a 
bearing on the active treatment needs of the resident.58 
A Level II PASRR resident review enables SMHA to determine: 
(1) whether the nursing facility remains the most appropriate 
placement option, (2) any new services a resident may need, and 
(3) what services should be provided by the nursing facility or provided 
or arranged by the State. 
Five percent of case files had evidence of a Level II PASRR resident review 
We could not determine how many residents experienced a significant 
change warranting a Level II PASRR resident review.  In our case file 
review, 5 percent of sampled residents had evidence of a Level II 
PASRR resident review, for a total of nine Level II PASRR resident 
reviews. Without a Level II PASRR resident review, residents are 
limited to their initial Level II PASRR despite any potential change in 
their mental health status that might necessitate that they be placed in 
a more appropriate setting or receive needed mental health treatment. 
We found that while none of the nine Level II PASRR resident reviews 
met all content requirements, most included key information such as 
needed mental health services and recommended placement option. 
57 The Nursing Home Facility Resident Reform Act, Public Law No. 104-315  2 (1996).  
58 Ibid. 
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Four States have established a notification process for triggering Level II 
PASRR resident reviews, but only half of the selected nursing facilities 
follow notification protocol 
To ensure that nursing facility residents with serious mental illness 
who experience a significant change in physical or mental condition 
receive appropriate services in an appropriate placement, four of the 
five selected States have established a process for nursing facilities to 
report a residents significant change in status. This notification 
triggers a review by SMHA to determine whether a resident needs a 
Level II PASRR resident review to reassess his or her treatment and 
placement needs.  However, despite these established notification 
procedures, only 8 of 16 nursing facilities in these States reported that 
their procedure is to directly notify the State about a residents 
significant change. 
One selected State does not have a process for nursing facilities to 
report a residents significant change in status and none of the four 
nursing facilities in that State reported that there would ever be an 
instance in which a resident would receive another Level II PASRR. 
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AGENCY COMMENTS 

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This report was prepared under the direction of Ann Maxwell, Regional Inspector General for 
Evaluation and Inspections in the Chicago regional office.  Other principal Office of Evaluation 
and Inspections staff who contributed include: 
Emily Melnick, Team Leader 
Susan Otter, Team Leader 
Anne Bracken, Program Analyst 
Caryn Roseman, Program Analyst 
Sandy Khoury, Program Specialist 
Tricia Davis, Director, Medicare Branch 
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