Tennessee Department of Health and Environment, DAB No. 736 (1986) GAB Decision 736 March 31, 1986 Tennessee Department of Health and Environment; Docket No. 85-46 Teitz, Alexander G.; Settle, Norval D. Garrett, Donald F. The Tennessee Department of Health and Environment (State) appealed a determination by the Health Care Financing Administration (Agency) disallowing federal financial participation (FFP) claimed for services provided in long-term care facilities under title XIX of the Social Security Act (Act) for the quarters ending March 31, June 30, and September 30, 1984. The disallowance was taken pursuant to section 1903(g)(1)(D) of the Act, which provides for the reduction of a state's federal medical assistance percentage of amounts claimed for a calendar quarter unless the state shows that during the quarter it had "an effective program of medical review of the care of patients . . . whereby the professional management of each case is reviewed and evaluated at least annually by independent professional review teams." /1/ Based on a validation survey, the Agency initially found that the State had failed to include 18 patients in six facilities in its annual medical reviews. Originally, the disallowance included: 1) two patients for the quarters ending March 31, June 30, and September 30, 1984 in Bel-Aire Health Care (Bel-Aire); 2) two patients for the quarter ending March 31, 1984 in East Villa Nursing Home (East Villa); 3) two patients for the quarter ending March 31, 1984 in Lauderdale County Nursing Home (Lauderdale); 4) one patient for the quarters ending March 31, June 30, and September 30, 1984 in Royal Care of Jackson, Inc. (Royal Care); 5) two patients for the quarters ending March 31, June 30, and September 30, 1984 in Trevecca Health Care Center (Trevecca); and 6) nine patients for the quarters ending March 31, June 30, and September 30, 1984 in Oakville Health Care Center (Oakville). However, in response to the Board's Order to Develop the Record in this case, the State clarified its position and explained that the State was not appealing the Lauderdale disallowance. Indeed, this position had been implicit in the State's original notice of appeal. (State's brief, pp. 1 and 4) Further, the State also conceded the disallowance for the March 31 and June 30, 1984 quarters for the patients in Trevecca and Oakville. Further, the State submitted evidence to show that the patients in Trevecca and Oakville were reviewed by the end of the third quarter (September 30, 1984). The Agency accepted the State's evidence and reduced the penalties for Trevecca and Oakville. As a result, the total disallowance was reduced by the Agency from $560,596.23 to $525,579.48. (Agency telephone conference, February 19, 1986) Following the foregoing developments, only five patients in three facilities (Royal Care, Bel-Aire, and East Villa) remained in dispute. As discussed below, we conclude that none of the five patients were required to be included in the medical reviews from which they were omitted. We, therefore, reverse the Agency's disallowance to the extent that the State has conceded that reviews were not performed in the three remaining facilities. We leave it to the parties to recompute the appropriate disallowance amount. If the parties cannot reach an agreement, the State may return to the Board on solely the computation issue.(3) Statutory and Regulatory Framework Section 1903(g)(1)(D) of the Act requires the state agency responsible for the adminstration of a state's Medicaid plan to submit a written quarterly showing demonstrating that -- (it) has an effective program of medical review of the care of patients in mental hospitals, skilled nursing facilities (SNFs), and intermediate care facilities (ICFs) pursuant to section 1902(a)(26) and (31) whereby the professional management of each case is reviewed and evaluated at least annually by independent professional review teams. A state's showing for each quarter must be "satisfactory" or FFP paid to the state for expenditures for long-stay services will be decreased according to the formula set out in section 1903(g)(5). Section 1902(a)(26) requires in pertinent part that a State plan provide: (B) for periodic inspections to be made in all skilled nursing facilities . . . within the State by one or more medical review teams . . . of (i) the care being provided in such nursing facilities . . . to persons receiving assistance under the State plan, (ii) with respect to each of the patients receiving such care, the adequacy of the services available . . . . Section 1902(a)(31) contains similar language for ICFs. Regulations implementing the statutory utilization control requirements are found at 42 CFR Part 456 (1984). In particular, section 456.652 provides that: (a) . . . (in) order to avoid a reduction in FFP, the Medicaid Agency must make a satisfactory showing to the Administrator, in each quarter, that it has met the following requirements for each recipient: * * * * (4) A regular program of reviews, including medical evaluations, and annual on-site reviews of the care of each recipient . . . . (b) Annual on-site review requirements. (1) An agency meets the quarterly on-site review requirements of paragraph (a)(4) of this section for a quarter if it completes on-site reviews of each recipient in every (4) facility in the State . . . by the end of the quarter in which a review is required under paragraph (b)(2) of this section. (2) An on-site review is required in a facility by the end of a quarter if the facility entered the Medicaid program during the same calendar quarter 1 year earlier or has not been reviewed since the same calender quarter 1 year earlier. If there is no Medicaid recipient in the facility on the day a review is scheduled, the review is not required until the next quarter in which there is a Medicaid recipient in the facility. (3) If a facility is not reviewed in the quarter in which it is required to be reviewed under paragraph (b)(2) of this section, it will continue to require a review in each subsequent quarter until the review is performed. The Board has held that the foregoing provisions establish a general requirement for an annual review of all Medicaid patients in a facility regardless of the length of time a patient has been in the facility. West Virginia Department of Human Services, Decision No. 686, August 21, 1985. Discussion During August 1984, the Agency conducted surveys of the State's long-term care facilities in order to verify that the State had in operation an effective program for controlling the utilization of Medicaid services during the quarters ending March 31, June 30, and September 30, 1984. As noted above, five patients in three facilities remain in dispute. The Agency found that the State failed to review patient C.B. in the Royal Care facility and patients N.M. and J.P. in the Bel-Aire facility for all three quarters involved in this case. /2/ Further, the Agency found that the State failed to review patients M.D. and M.F. in the East Villa facility for the quarter ending March 31, 1984. The State submitted undisputed evidence showing that: the review of Royal Care occurred on December 2, 1983, and that patient C.B. was hospitalized on that date; the review of Bel-Aire occurred on October 14, 1983, and that patients (5) N.M. and J.P. were hospitalized on that date; and that the review of East Villa occurred on April 21, 1984, and that patients M.D. and M.F. were hospitalized on that date. Further, the State argued that the regulatory provisions implementing the statutory medical review requirements, noted above, did not require the State to review medical records of patients absent from a facility during the required medical review. The State argued that not only was the Agency requiring more than the statute and regulations, but that the Agency was not being consistent with its past actions and statutory and regulatory interpretations. /3/ The Agency argued that its interpretation of the statute and regulations requiring inspection teams to review the medical records of each patient, whether or not the patient is physically present in the long-term facility at the time of the review, is a long-standing one and is entirely consistent with the Act and the regulations. Moreover, the Agency argued that "the Board has consistently held 100% compliance to be mandatory; once there is a finding of even one violation in a facility, (the Agency) is 'required' to impose a disallowance." (Agency's brief, p. 4) The Agency argued that it never approved the State's policy of excluding hospitalized patients from the medical review, and that the Agency is not estopped from enforcing the requirement. In past decisions, the Board has upheld as reasonable the Agency's interpretation that it has no discretion to waive the reduction of FFP once there is a violation of the section 1903(g)(1) requirements. New York State Department of Social Services, Decision No. 531, April 23, 1984, and decisions cited therein. Additionally, the Board has upheld reductions of FFP based on violations found for facilities where on-site reviews were conducted but all Medicaid recipients were not reviewed. See West Virginia Department of Human Services, Decision No. 686, August 21, 1985; and Virginia Department of Health, Decision No. 682, August 15, 1985. However, here there is an insufficient basis for the Board to conclude that violations existed in the facilities at issue.(6) The regulations require that the State conduct "on-site reviews of each recipient in every facility in the State. . . ." 42 CFR 456.652(b)(1). (Emphasis added). If a patient is no longer "in" the facility on the day when the review team comes to review him, no review is reasonably required. North Carolina Department of Human Resources, Decision No. 728, March 11, 1986. The preamble to the proposed regulations implementing section 1903(g) supports this view. In discussing its decision to require an annual review in each facility without regard to the period of time that each patient in a facility had received care, the Agency stated: We recognize that, under this interpretation, there may be some recipients in a facility who are not reviewed, even though they have received care for an annual period, because they either (had) been transferred or were absent from the facility at the time of the onsite review. . . . We believe, however, that since most recipients do not move in and out of long-term-care facilities, most individual recipients are being reviewed at least annually under our present interpretation. 43 Fed. Reg. 50922, 50925 (November 1, 1978). This discussion clearly recognized that patients absent from the facility at the time of the review need not be reviewed. Nevertheless, the Agency argued that the State was required to review at the very least the medical records of the patients not present in the facilities, and that the Agency was unaware of the State's policy not to review such records. (Agency brief, p. 7, and affidavit, supra) We disagree that the State must review the records alone where the patients have been hospitalized. The regulations require that an on-site review of recipients in SNFs and ICFs (except in certain cases not relevant here) include: (1) Personal contact with and observation of each recipient; and (2) Review of each recipient's medical record. 42 CFR 456.608(a). As we stated in North Carolina, since a review of the medical records alone would not satisfy this requirement, we see no basis for penalizing the State for failing to review the medical records of patients with whom personal contact was not possible. Accordingly, we conclude that, since none of the five patients in the three facilities at issue were present(7) during the annual medical reviews, they were not required to be reviewed. Conclusion For the foregoing reasons, we sustain that portion of the disallowance conceded by the State pertaining to the Trevecca, Oakville and Lauderdale facilities, and reverse that portion of the disallowance pertaining to the Royal Care, Bel-Aire and East Villa facilities. /1/ Amendments to section 1903(g) as contained in section 2363( c) of the Deficit Reduction Act (DEFRA) of 1984, enacted July 18, 1984, Pub. L. 98-369, have eliminated all utilization control requirements other than the medical review requirment as a basis for reductions in FFP. The medical review requirement was substantively unchanged. /2/ The patients are identified by their initials to protect their privacy. /3/ Since we find that, based on the regulatory language, the State did not have to review the five patients, we do not reach the issue of whether the Agency's actions in this matter are inconsistent with past actions and interpretations. MARCH 28, 1987