Department of Health and Human Services


OFFICE OF 

INSPECTOR GENERAL 

PREADMISSION SCREENING AND 


RESIDENT REVIEW FOR YOUNGER 


NURSING FACILITY RESIDENTS 


WITH SERIOUS MENTAL ILLNESS


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. 
Δ EXECUTIVE SUMMAR 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. 

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EXE CUTIVE S CUTIVE S U MMAR Y

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 

individual’s 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 individual’s 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. 

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EXE CUTIVE S U MMAR Y

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. 

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EXE CUTIVE S U MMAR 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. CMS’s 

comments did not warrant any revisions to the results of our review or 

to our recommendations. 

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Δ T ABLE OF CONTENTS 

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

INTR O D U C T I ON ........................................... 1

FINDI NGS ................................................ 11

Almost all sampled residents received a Level I screen ............. 11

Two-thirds of sampled residents received a Level II PASRR ......... 11

Eighty-five percent of Level II PASRRs contained service 

recommendations ........................................... 14

PASRR may not consider community placements. ................ 15

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

RECOM M E NDATI O NS ..................................... 21

 Agency Comments...................................... 22

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

A: Detailed Methodology ................................ 24

B: Level II PASRR Resident Review ....................... 27

C: Agency Comments. . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . .29 

ACKN O W LEDGMENTS .................................... 33
Δ INTRODU C TION 

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 

General’s 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. 

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Supreme Court’s 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 State’s 

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 President’s 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. 

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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 

applicant’s 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). 

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INTROD UCT ION 

Assessment of Individual Needs and Appropriate Placement. Federal 

regulations require evaluators to assess whether an individual’s 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 evaluator’s assessment.19 If an individual’s 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 individual’s 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 resident’s 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).

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INTROD UCT ION 

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. 

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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. 

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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 

Alzheimer’s 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 

files. The number of case files 

reviewed per State is outlined in 

Table 1: Number of Nursing Facility 

Case Files Reviewed in Each State 

Number of Case Table 1. State Files Reviewed 

We reviewed each resident’s 1 40

2 39 

3 

case file to determine the 

pe 42 rcentage of sampled residents 

who had any document 4 31 ation, 

5 34 herein referred to as evidence, of 

Total 186 a Level I screen and a Level II 

PASRR in their case files. We 

Source: OIG analysis of 186 case files, 2006. 

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 resident’s 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). 

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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 State’s 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 

 OE I-05-05-00 220 

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. 

PASRR FO R Y O U N G E R NURS I N G FA C I L I T Y RESID E NTS WITH S E R IOUS MENTA L I L L NESS 9 
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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 President’s 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 beneficiary’s 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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ΔF I NDING S 

 FINDINGS

Almost all sampled residents with serious 

mental illness received a Level I screen that met 

all Federal requirements 

Ninety percent of sampled residents 

received a Level I screen 

In our 5-State review, 90 percent 

(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 

mental illness had evidence of a Level II PASRR, 

but only 5 percent met all Federal requirements 

Sixty-seven percent of sampled 

residents had evidence of a Level II 

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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F I NDING S 

(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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F I NDING S 

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 State’s 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 evaluator’s basis for the conclusions regarding treatment and 

placement was present in less than half of case files. In addition, a 

summary of the beneficiary’s 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 evaluator’s name and professional 

title, and a statement of the individual’s rights. 

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F I NDING S 

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 evaluator’s 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 Individual’s rights 26% (32) 

Source: OIG review of 121 resident case files, 2006. 

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 

All Level II PASRRs that conclude 

that an applicant with serious 

mental illness needs nursing 

facility services must identify the 

specific mental health services 

that meet the individual’s 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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F I NDING S 

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 

may not always occur as part of the Level II 

PASRR process 

Federal regulations require that 

Level II PASRR evaluators assess 

whether the individual’s total 

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 State’s 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 State’s 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 State’s 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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F I NDING S 

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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F I NDING S 

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 

State 

2004 Level 

II for Ages 

22-64 

States’ Level II 

Evaluation Forms 

Include 

Consideration of 

Community 

Placement 

Nursing 

Facility Level 

of Care 

More 

Restrictive 

Than Nursing 

Facility 

Less 

Restrictive 

Than Nursing 

Facility 

Other, 

Cancelled, or 

Don’t 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 

Total 7,397 (6,278) 85% (307) 4% (155) 2% (657) 9% 

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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F I NDING S 

CMS conducts limited oversight; all five selected CMS has a role in assisting 

and guiding State oversight 

efforts. Pursuant to Federal 

regulation, State Medicaid 

agencies must “retain ultimate control and responsibility” over the 

PASRR process.50 

States monitor aspects of the PASRR process 

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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F I NDING S 

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 State’s 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 State’s 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 State’s Medicaid agency has future plans to recoup 

Medicaid funds for the days residents did not receive recommended 

services. 

The third selected State’s 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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F I NDING S 

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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Δ RECOMME NDA TIONS 

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 

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R E C O MMENDA T I O N S 

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 CMS’s 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 

State’s 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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R E C O MMENDA T I O N S 

CMS’s comments did not warrant any revisions to the results of our 

review or to our recommendations. For the full text of CMS’s comments, 

see Appendix C. 

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Δ APPENDIX ∼ A 

DETAILED METHODOLOGY 

State Selection 

Our purposive sample did not include the same States selected in the 

Office of Inspector General’s 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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APP E N D I X ~ A 

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 resident’s 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 State’s 

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 resident’s 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 resident’s social and medical history, and 

(8) basis for the evaluator’s 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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APP E N D I X ~A 

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 resident’s 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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Δ APPENDIX~B 

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 resident’s 

physical or mental condition. 

Each SMHA must establish a notification procedure for nursing 

facilities to promptly notify SMHA when a resident’s 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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APP E N D I X ~B 

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 resident’s 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 resident’s 

significant change. 

One selected State does not have a process for nursing facilities to 

report a resident’s 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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Δ APPENDIX ~C 

AGENCY COMMENTS 

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APPEND IX~ C 

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APP E N D I X ~ C 

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APP E N D I X ~C 

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Δ ACKNOWLEDGMENTS 

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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