DAB Decision 66
October 10, 1979 Ohio Department of Public Welfare; Docket No.
78-50-OH-KC; Decision No. 66 Hiller, Manuel B.; Malone, Thomas Mason,
Malcolm S.
(The following summary is prepared on the responsibility of the
Executive Secretary of the Board as a convenience to the interested
public. It is not an official part of the decision and has not been
reviewed by the panel. Similar official summaries of earlier cases
appear in 45 CFR Part 16, Appendix.)
SUMMARY
The Ohio Department of Public Welfare appealed from the determination of
the Administrator of the Health Care financing Administration imposing a
penalty disallowance under Section 1903(g) of the Social Security Act
for failure of the State to comply with a requirement of Title XIX of
the Act (Medicaid) for annual inspections of all nursing homes. Although
the State failed to complete all inspections due in the first quarter of
1978 by the end of the quarter, it inspected the missed facilities in
the next quarter.
The Board found that extraordinary hazardous snow conditions were a
substantial cause of the missed inspections, and that the penalty should
have been waived under the terms of Section 1903(g)(4)(B) directing the
Secretary to find a State's quarterly slowing of compliance with the
annual inspection requirement satisfactory if the showing demonstrated
that the State had inspected not less than 98 percent of all facilities
and every facility with 200 or more beds and exercised good faith and
due diligence in attempting to conduct the remaining inspections or if
the State would have made such a showing but for failings of a technical
nature. Specifically, the Board found that although the State had not
met the "98 percent plus all 200 bed or more" standard, the technical
failings clause constituted an independent exception which was
applicable, relying in part on HCFA's action transmittal to the States
explaining Section 1903(g)(4)(B). Regulations implementing that section
were not in effect during the period in question, and the Board noted
that its conclusions of law would not necessarily be the same where a
regulation had been issued.
Geoffrey E. Webster, Legal Counsel, Ohio Department of Public Welfare,
for the Ohio Department of Public Welfare. Margaret Jane Porter,
Attorney, HEW Office of General Counsel, Health Care Financing and Human
Services Division, for the Health Care Financing Administration.
DECISION
This case involves a requirement of Title XIX of the Social Security Act
(Medicaid) for annual inspections of all participating nursing hones. In
broadest terms, the issue presented is whether or not the State's
failure to complete in the first quarter of 1978 the inspections due in
that quarter is excused by a winter of extraordinary hazardous snow
conditions so severe as to result in a declaration of emergency by the
President. We conclude that under the circumstances of this case, the
delay in inspections was a failure of a technical nature only which is
excused under the terms of the statute. Accordingly, the penalty
disallowance imposed in this case by the Administrator of the health
Care Financing Administration (HCFA) is set aside. This is the final
administrative decision in this matter. (45 CFR 16.91(b)).
Note on the conduct of counsel for the State.
Although on the substantive issue our decision favors the State, we note
with concern the obstructive character of the representation the State
has received in this case. Counsel appeared determined to preclude alike
a substantive decision in the State's favor (Transcript, pp. 10-15,
86-87) and a cooperative clarification with opposing counsel of
substantive issues that might well have resulted in a quicker decision
supporting the State's position and better lone-term federal-state
relations. (Transcript, pp. 47-48, 103-106, 109-118; Respondent's
Submission in Response to the Panel's Ruling on Further Procedures to be
Followed in the Disposition of This Case, dated 7/2/ 79, pp. 2-3.)
Instead, counsel appeared to seek by choice confrontations on procedural
excursions created by himself, in which he repeatedly violated the
board's rules of which he was fully aware, and filed with the board
certifications which were misleading and appeared in context calculated
to mislead. (Letter from board's Executive Secretary to parties, dated
7/25/79; letter from Board's Executive secretary to counsel for the
State, dated 8/1/79; letter from Board's Executive Secretary to
parties, dated 8/15/79.) his conduct in this and other respects was
obstructive and distracted from the expeditious consideration of the
substance of an appeal which the board finds meritorious in spite of
counsel's cantankerous conduct.
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We do not generally comment publicly on behavior of counsel except
favorably. We are moved to comment in this case because of our concern
that this extraordinary behavior not be repeated or initiated by others,
and that neither the State, nor opposing counsel nor the Board suffer
from it in the future.
Procedural history.
This case arises under Title XIX of the Social Security Act, which
authorizes payments to States to enable them to carry out medical
assistance plans. Section 1116(d) of the Act entitles a State to receive
upon request reconsideration of a disallowance of costs claimed under
that title. The reconsideration function is vested by the Secretary in
the Departmental Grant Appeals Board pursuant to 45 CFR 16.91(a).
The disallowance in this case was made following the Agency's
determination that the State had not met the basic requirement in
Section 1903(g) of the Act for an annual inspection of all nursing homes
or the conditions specified in Section 1903(g)(4)(B) under which the
Secretary must waive that basic requirement. The State was first given
notice of the disallowance, which was in substance a penalty and took
the form of a $255,753 reduction in the State's Federal medical
assistance percentage for expenditures under Title XIX in a subsequent
quarter, in a June 1, 1978, mailgram from the Administrator of HCFA.
The State filed an application for review by the Board dated June 22,
1978, which it supplemented after receiving a more detailed disallowance
letter. During the course of the proceedings before the Board, HCFA
changed the amount of the disallowance to $177,809 based on corrected
information provided by the State. (Memorandum in Support of
Respondent's Response to Petitioner's Request for Reconsideration and in
Response to the Board's Order to Show Cause and in Support of
Respondent's Motion for Decision on the Record Upholding the
Disallowance and Rejecting the Appeal, dated 9/27/79, hereinafter
referred to as HCFA's memorandum in response to Order to Show Cause, p.
27.)
This decision is rendered on the basis of written briefs in conjunction
with an informal conference pursuant to 45 CFR 16.8(b) (1). The parties
were given several opportunities to brief the issues in the case both
before and after the conference was held. A transcript of the
conference was made at the Board's expense and is a part of the record.
Legal issue.
The case turns on the interpretation of a statutory rule. No regulation
has as yet been issued although we were informed by HCFA that a
regulation was expected to issue (by May 31, 1979) that would possibly
resolve the case in favor of the State. (Respondent's Memorandum in
Response to the Notice of Informal Conference and in Support of
Respondent's List of Additional Issues for Consideration at the
Conference dated 3/20/79, hereinafter referred to
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as HCFA's pre-conference brief, pp. 3-4; Transcript, pp. 32-34, 40, 44;
Respondent's Proposal to the Board Concerning Further Procedures in this
Reconsideration, dated 4/2/79, p. 3.) Since that regulation has not
appeared, we proceed to decision without it and hold that the statute
itself is sufficiently clear to require the same result in favor of the
State.
Although no regulation has appeared, an Action Transmittal (AT-77-106,
November Il, 1977) was issued shortly before the quarter in question.
This transmittal gave the Agency's explanation of the statutory
provisions in question here. Both parties rely on this document as
supporting their present position in this dispute--the State with more
plausibility than the Agency as will be noted below.
We turn, then, to the statutory rule which we must construe.
The original medical review requirement.
Section 1903(g)(l)(D) of the Social Security Act provides for certain
penalty decreases in the Federal medical assistance percentage which
affects the State's reimbursement for Medicaid expenditures unless the
State makes a showing satisfactory to the Secretary for each quarter
that there is in operation in the State an effective program of control
over utilization of services. This showing must include evidence that
the State has 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.
The medical review requirement was for some time after its enactment
substantially or wholly unenforced by HE('). After an expression of
Congressional displeasure, HEW reversed its practice and went to the
opposite extreme of strict literal enforcement of the same provision.
(TR. REP. No. 393-- Part II, 95th Cong., 1st Sess. 34, 85 (1977); 5.
REP. NO. 453, 95th Cong., 1st Sess. 40, 41 (1977)). This overreaction
was required neither by Congressional intention nor by a sound
interpretation of the law.
It is not possible to state general rules of law with the absolute
precision that would justify a totally rigid enforcement. A general
statute must necessarily be read with at least a minimum element of
common sense that recognizes extraordinary circumstances and extreme
cases to which it does not apply. Where the reason for the rule stops,
an ancient legal maxim teaches us, the rule stops.
As Harlan, J. stated the matter in Amalgamated Assn. of St. E. R. & ii.
C. Emp. v. Lockridge, 403 U.S. 274 (1971), with respect to the
preemption doctrine, that doctrine "is, with any other purposefully
administered legal principle, not without exception." 403 U.S. 274, 297.
(Cf. 1 G. Sharswood, Blackstone's Commentaries 60 (1888) and discussion
of Blackstone's example in Transcript, pp. 65-60.)
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As noted by Douglas, J. dissenting in NLRB v. Seven-Up Bottling Company,
344 U.S. 344, (1953):
"There are exceptions to most general rules; and the Board (NLRB)
should be the guardian of the exceptions as well as the formula
itself." 344 U.S. 344, 353.
Although this comment is contained in a dissenting opinion, the majority
agreed with the dissenters on the importance of recognizing exceptions
where circumstances make application of a general rule to a particular
situation "oppressive and therefore not calculated to effectuate a
policy of the Act". 344 U.S. 344, 349.
As Judge Leventhal has emphasized in a thoughtful decision:
"The agency's discretion to proceed in difficult areas through
general rules is intimately linked to the existence of a safety
valve procedure for consideration of an application for exemption
based on special circumstances." WAIT Radio v. FCC 418 F.2d 1153,
1157 (D.C. Cir. 1969). Cf. Gulf Oil Corporation v. Hickel, 435
F.2d 440, 447 (D.C. Cir. 1970).
Cf. also National Broadcasting Company, v. United States, 319 U.S. 190,
207, 225 (1943); United States v. Storer Broadcasting Company, 351 U.
S. 192, 204-5 (1956). See also Davis, Discretionary Justice, pp. 25-26:
"Rules alone untempered by discretion, cannot cope with the
complexities of modern government and of modern justice."
Cf. Gardner, The Procedures by which Informal Action is Taken, 24 Ad.
L.R. 155, 159-160, 165 (1972) where he comments that "...no man is wise
enough to devise any rule, however narrow its scope and rich its obvious
appeal, which can uniformly be applied..."
Cf. also, Friendly, The Federal Administrative Agencies, p. 16: where
after noting:
"'(T)he tendency of the law', Holmes' told us eighty years ago,
'must always be to narrow the field or uncertainty,'"
he comments:
"Of course, neither Holmes nor others who have sought to follow
him ever supposed that complete certainty
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would be attainable; some critics have thus been beating not
merely a dead but a phantom horse."
In general, statutory directions, particularly those addressed to
administrative agencies, are intended to be construed reasonably in
light of their purpose; the authority of the agency to make (with
thoughtful care) common sense adjustments to extreme and oppressive
instances is normally to be assumed. HEW was not legally required to
behave catatonically, nor did the Congress intend that it should.
Faced with HEW's mechanical interpretation of its statute, Congress
amended the statute so as to make clear that HEW was not permitted to
reject State showings in cases in which performance, without being
perfect, meets tests that assure substantial compliance and reasonable
ground to excuse deficiencies. Some of the members of the Congress
clearly felt that HEW had been over-rigid in its reading of the statute.
(123 CONG. REC. (No. 148) at H 9823.) Others may have accepted as
presumptively correct representations by HEW that the statute required
the extreme application and objected to the result itself. (123 CONG.
REC. (No. 148) at H 9825 and H 9826; 123 CONG. REC. (No. 112) at S
10928.) Both groups agreed that the rule as construed needed to be
ameliorated.
The new exculpatory rule.
As amended by Pub. L. 95-142, the statute directs the Secretary to find
a State's showing "satisfactory"
"if the showing demonstrates that the State has conducted such
an onsite inspection (of SNF's and ICF's) during the 12-month
period ending on the last date of the calendar quarter (i) in each
of not less than 98 percentum of the number of such hospitals
and facilities requiring such inspection, and (ii) in every such
hospital or facility which has 200 or more beds and that, with
respect to such hospitals and facilities not inspected within
such period, the State has exercised good faith and due diligence
in attempting to conduct such inspection, or if the State
demonstrates to the satisfaction of the Secretary that it would
have made such a showing but for failings of a technical nature
only." (Section 1903(g)(4)(B).)
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This rule is also subject to a basic requirement of common sense
interpretation in the light of its purposes, but it would be permissible
to argue that since Congress has laid down so detailed a rule, it
expected stricter compliance than when it had furnished only a sweeping
general rule.
On the other hand, it is to be noted that the rule does not direct that
the Secretary may excuse less than perfect performance only when the new
statutory tests are met. Instead it directs that the Secretary must
excuse such performance when the tests are met. That leaves open the
possibility that there is a penumbra to the rule. The Secretary must
excuse if the tests are met and still may excuse in a sufficiently
extreme case of oppressive circumstances just outside the specific new
tests.
The difference between the Secretary "shall excuse... only when"
and the
Secretary "shall not refuse to excuse... when" is not accidental.
This
is shown by the fact that successive paragraphs of the statute show
distinct use of the different formulations and by the fact that the
legislative history of the statute shows that both approaches were
considered by the House. (H.R. REP. No. 393 -- Part II, 95th Cong., 1st
Sess. 37, 141 (1977); 123 Cong. Rec. Daily Ed. H 9954, September 23,
1977; H.R. REP. No. 383 Part II, 95th Cong., 1st Sess. 140 (1977).)
It is not necessary, however, to reach a final resolution of this
difficult issue since we are satisfied that the statute in any event
requires a decision in favor of the State under the "technical failings"
clause.
Exculpation for technical failings.
The State contends that its showing should be found satisfactory under
both the good faith and due diligence and the technical failings
exceptions in Section 1903(g)(4)(B) since it completed the inspections
as soon as possible under the circumstances. (Letters from Director,
Department of Public (Welfare, to Board's Executive Secretary, dated 6/
22/78 (pp. 1-2), 7/24/78 (Attachments C and E), and 9/26/78 (pp. 3-4);
Transcript, pp. 21-26, 83, 85-86, 90-91, 93; Brief of the State of Ohio
dated 8/6/78, pp. 6-7.) HCFA's position is that the basic requirement
for inspection of all facilities by the end of the quarter cannot be
waived pursuant to Section 1903(g)(4)(B) unless a State has inspected at
least 98 percent of all facilities plus all facilities with 200 or more
beds, regardless of the reason for the State's failure to make timely
inspections. (HCFA's memorandum in response to Order to Show Cause,
dated 9/27/78, pp. 11-12, 23; Transcipt, pp. 30, 33, 35-36, 40.) We do
not find either reading of the statute completely tenable, however.
Section 1903(g)(4)(B) contains a basic requirement--" (t)he Secretary
shall find a showing of a State... to be satisfactory"--followed by two
"if" clauses which are separated by the conjunction "or",
indicating
that they are alternatives.
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The first alternative is "if the showing demonstrates that the State
has" inspected not less than 98 percent of all facilities plus all
facilities with 200 or more beds and, with respect to those facilities
not inspected, has exercised good faith and due diligence in attempting
to conduct the inspections.
The second alternative is "if the State demonstrates to the satisfaction
of the Secretary that it would have made such a showing but for failings
of a technical nature only."
Thus, it appears that the exercise of good faith and due diligence in
attempting to inspect those facilities not inspected excuses the failure
to make a 100 percent inspection only if the State has met the "98
percent plus all 200 bed or more" standard, as HCFA contends. The
technical failings provision, however, appears to be entirely
independent of the "98 percent plus all 200 bed or more" standard,
as
the State argues. It is possible, therefore, that the State's failure to
complete its inspections by the end of the quarter is excused by the
technical failings provision even though it does not meet the "200 bed
or more" part of the "98 percent plus all 200 bed or more" standard.
The legislative history of Section 1903(g)(4)(B) supports this reading
of the technical failings provision. The House and Senate bills each
contained provisions for some sort of exception to the requirement in
Section 1903(g)(l)(D) for a reduction in payments to a State which had
not inspected all facilities. The House bill provided that "(t)he
Secretary shall find (a) showing of a State... to be satisfactory...
if" the showing demonstrates that the State has conducted an onsite
inspection during the 12-month period ending on the last date of the
calendar quarter (i) in each of not less than 98 percent of all
facilities requiring inspection and (ii) in every such facility which
has 200 or more beds, and that, with respect to facilities not
inspected, the State has exercised good faith and due diligence in
attempting to conduct such inspections. (The bill was also reported in
one instance with the language "(n)o showing of a State... may be found
satisfactory by the Secretary unless..." substituted for the command
that the Secretary shall find a showing satisfactory.)
The House report stated with respect to this provision:
"This section further clarifies the conditions a State must meet
to be deemed in full compliance with the onsite medical and
independent review requirements. It must demonstrate good faith
efforts to conduct onsite surveys in all mental hospitals, SNF's
and ICF's and actually conduct such surveys in all large
institutions and
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(98 percent of ?) all other institutions in the State. This
provision was included because HEW has announced penalties on
States which failed to review only two or three homes out of
hundreds of homes subject to review within the annual time limit.
In the light of the Secretary's position that HEW has no
discretion in determining that the requirements of the law have
been met, the Committee has provided a standard of reasonableness
in the bill." (H.R. REP. NO. 393--Part II, 95th Cong., 1st Sess.
85 (1977).)
The Senate bill, on the other hand, authorized the Secretary to waive
the penalty otherwise required to be imposed under Section 1903(g)(1)
"in any case in which the Secretary determines that the unsatisfactory
or invalid showing made by the State is of a technical nature only, or
is due to circumstances beyond the control of the State." In explanation
of this provision, the Senate Finance Committee report stated that the
bill authorizes waiver of the penalty
"if the State's noncompliance is technical or due to circumstances
beyond its control. The committee intends, however, that this
waiver authority is to be invoked only den reasonably appropriate
and not as a generalized routine exception. Circumstances
considered outside of a State's control are those which could not
reasonably be anticipated and provided for in advance. Technical
non-compliance for example, would include instances where a State
had reviewed patients in most facilities on time with the
remaining facilities also reviewed but not until several weeks
after the deadline for completion of all reviews by a State." (S.
REP. NO. 453, 95th Cong., 1st Sess. 40(1977)).
The provision enacted into law thus contains elements of both the House
and Senate bills. It contains the 98 percent plus all 200 bed or more,
good faith and due diligence provision of the House bill, and also the
technical noncompliance provision of the Senate bill. The conference
report stated with respect to the compromise:
"The conference agreement provides that (if a State makes) good
faith attempts to perform reviews of all institutions, and
actually reviews all large institutions and 98 percent of all
other institutions (or fails to meet this standard only for
technical reasons), it will be considered in full compliance with
the requirements of the law. The conferees stress
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that the intent of the law that all facilities be reviewed is not
changed by this provision. If a facility is not reviewed, there
will be a reduction in matching unless the Secretary finds there
was a good faith attempt to review the institution, and there is
no evidence that any institution, or kind or type of institution,
is deliberately not reviewed." (H.R. REP. NO. 673, 95th Cong., 1st
Sess. 48.)
The passage just quoted seems to indicate that the Congress intended
that the technical failings provision, conceived independently of the
"98 percent plus all 200 bed or more" standard, be treated as a separate
test, since it states that a State will be considered in full compliance
if it either meets the "98 percent plus all 200 bed or more" standard
or
fails to meet it "only for technical reasons."
The legislative history of Section 1903(g)(4)(B) is instructive not only
because it supports the reading of the technical failings provision as
independent of the "98 percent plus all 200 bed or more" standard
but
also because it indicates what Congress intended by the phrase "failings
of a technical nature only."
The Senate Finance Committee report previously quoted states that "(t)
echnical noncompliance for example, would include instances where a
State had reviewed patients in most facilities on time with the
remaining facilities also reviewed but not until several weeks after the
deadline for completion of all reviews by a State." This language is in
fact quoted in HCFA's AT-77-106 in a section on the "technical failings
exception." That section further states that the exception gives the
Secretary "some limited discretion" to find a showing satisfactory
"although some facilities were not reviewed until after the end of the
showing quarter," such as where some reviews required for the quarter
ending December 31, 1977 are not completed until January 1978
(AT-77-106, p. 9). In the instant case, as noted in greater detail
below, all but five of a total of 240 facilities scheduled for
inspection during the first quarter of 1978 were inspected within two
weeks of the end of the quarter, and those five facilities were
inspected before the end of the next quarter. This situation seems
within the ambit of the examples of technical noncompliance in the
Senate Finance Committee report and in HCFA's action transmittal.
Although HCFA claims that AT-77-106 supports its interpretation of the
technical failings provision, (HCFA's memorandum in response to the
Order to Show Cause, pp. 11-12; Transcript, pp. 35-36, 42), the action
transmittal does not in fact contain any clear statement linking the
technical failings provision to the "98 percent plus all 200 bed or
more" standard, and the State could reasonably have understood from the
action transmittal that it might be entitled to a waiver of the
statutory penalty even if it did not meet that standard.
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Factual issue.
Ohio had an effective program of medical review which operated
satisfactorily in the last quarter of 1977 and in the second quarter of
1978. The review program failed, however, to inspect, in the first
quarter of 1978, 17 skilled nursing facilities (SNF's) and intermediate
care facilities (lCF's) (21 counting twice four institutions with both
certifications), including two certified for 200 beds or over, out of a
total of approximately 1,100 SNF's and ICF's in the State, 240 of which
were scheduled for inspection in that quarter. (Letter from Director,
Department of Public Welfare, to Board's Executive Secretary, dated 7/
24/78; HCFA's memorandum in response to Order to Show Cause, dated 9/
27/78, pp. 27-28; Respondent's Submission in Response to the Panel's
Ruling on Further Procedures to be Followed in Disposition of This Case,
dated 7/2/79, enclosed letter from Chief, Division of Medical
Assistance, to Deputy Director, Medicaid Bureau, dated 5/9/79,
Attachments #1 and #2.)
Although the State did not complete all the required inspections by the
end of the first quarter, it proceeded with its inspections of the
missed facilities in the next quarter, inspecting all but five of the 17
facilities by the end of the first two weeks of April, and the last of
the first-quarter facilities on May 31. (Letter from Director,
Department of Public Welfare, to Board's Executive Secretary, dated 6/
22/78, enclosed letters from Director, Department of Public Welfare, to
Acting Director, Medicaid Bureau, dated 5/26/78 and 5/31/78.)
Ohio attributes this failure (corrected fully in the next quarter--
letter from Director, Department of Public Welfare, to Board's Executive
Secretary, dated 9/26/78; Transcript, p. 76) to severe snow storms.
HCFA initially conceded this explanation and indeed, almost throughout,
HCFA has cooperatively accepted representations of fact by the State.
(HCFA's Response to Order to Show Cause, pp. 25-28.) Somewhat belatedly,
however, HCFA asked for proof of the causal relationship. (HCFA's
pre-conference brief, pp. 4-5; Transcript, pp. 27-31.)
We are therefore required to consider whether in fact the failure to
perform perfectly was attributable to the weather and if so, whether
that excuses the State's delay.
The State submitted in support of its position a report by the Adjutant
General of Ohio, dated March 24, 1978, entitled "Blizzard '78," 'which
indicated that there were in fact three successive blizzards in the
State in January 1978: one in northeastern Ohio from January 9 through
January 14, one in southern Ohio from January 16 through January 24, and
a statewide blizzard from January 26 through February 5, which the
Adjutant General characterized as "the most severe blizzard in the
history of Ohio." In
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the two earlier blizzards, the Governor of Ohio declared several
counties in a state of emergency or disaster areas and National Guard
assistance was required for snow removal and road clearance. The new
storm on January 26 brought 12-14 inches of new snow, accompanied by
50-70 mph winds and a wind chill factor of minus 70 degrees. On January
26, the President declared a state of emergency under the Disaster
Relief Act of 1974 (Pub. L. 93-288), which entitled the Stat' to Federal
assistance "to supplement State and local efforts to save lives and
protect property, public health and safety," and federal troops were
dispatched. An estimated 31,000 miles of roads were cleared of snow.
("Blizzard '78," pp. 1-4, 6.) Documentation provided by the State
shows
that the State's inspection teams lost 308 working hours during the week
of January 9, 288 working hours the week of January 16, and 250 working
hours the week of January 23 due to weather conditions, as compared to
less than 100 hours during most weeks during the winter (Respondent's
Submission in Response to Panel's Ruling on Further Procedures, enclosed
letter from Chief, Division of Medical Assistance, Ohio Department of
Public Welfare, to Deputy Director Medicaid Bureau, HCFA, dated 5/9/79,
Attachment 114).
We find it inconceivable that under these weather conditions, the
State's original review schedule would not have been disrupted to such
an extent that the State could not reasonably have been expected to
complete its inspections in a timely fashion. Our conclusion that the
weather conditions were the cause of the delay, rather than either
careless or deliberate behavior on the part of the State, is reinforced
by the fact that the State completed in a timely fashion 100 percent of
required inspections both in the last quarter of 1977 and in the second
quarter of 1978. We do not believe that the technical failings exception
requires any greater degree of scrutiny since there is in fact no
express requirement in the statute that good cause be shown. While it
seems implicit that the State must show good cause even when its failure
to comply with the statute is merely technical, since otherwise the
basic requirement for completion of all inspections by the end of the
quarter would be rendered virtually meaningless, we consider that the
circumstances of this case are sufficiently unusual that this basic
requirement is not in fact rendered meaningless by excusing the State's
failure.
After HCFA raised the question whether the cause for the delay in
inspections was the extreme weather conditions, and prior to the
production of the documentation cited above, the Panel determined that
the issue might be most fairly and expeditiously resolved by the parties
themselves without the participation of the Panel, and advised the
parties accordingly, directing HCFA to file a report stating what
agreement, if any, was reached by the parties. (Ruling on Further
Procedures to be Followed in Disposition of Case dated 4/12/79, p. 3.)
HCFA's report stated that the State had failed to respond to its request
for certain documents and information, and that HCFA was therefore
unable to stipulate that the delay in completing the inspections was due
to the blizzard. (Respondent's Submission in Response to the Panel's
Ruling on Further Procedures to be Followed in the Disposition of This
Case, dated 7/2/79, pp. 2-3.)
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HCFA identified in particular two matters that precluded it from
stipulating as to the cause of the delay. HCFA stated that the
information provided by the State did not support an assertion made by
the State at the conference that, after falling behind on the original
review schedule, it deliberately chose to inspect facilities with less
than 200 beds prior to the two facilities with over 200 beds but with
less patients than the smaller facilities (Transcript, pp. 19, 79,
97-98), and that the State failed to clarify this matter although
requested by HCFA to do so. (Respondent's Submission in Response to the
Panel's Ruling Ion Further Procedures, attached letter from Porter to
Webster, dated 6/5/79, pp. 1-2.) In view of our holding that the
technical failings provision is not tied to the "98 percent plus 200 bed
or more" standard, however, the order in which the missed facilities
were inspected is not of any significance.
HCFA stated, secondly, that it appeared that, contrary to the State's
contention that the blizzard had disrupted inspections on a large scale,
the State had in fact met its original review schedule for all but the
17 facilities which were reviewed after the end of the quarter.
(Respondent's Submission in Response to the Panel's Ruling on Further
Procedures, attached letter from Porter to Webster, dated 6/5/79, pp.
2-3.) The State clearly asserted with respect to each of the 17
facilities in question that the inspections were delayed beyond the end
of the quarter because weather conditions had caused delays throughout
the entire schedule. (Respondent's Submission in Response to the Panel's
Ruling on Further Procedures, enclosed letter from Chief, Division of
Medical Assistance, Department of Public Welfare, to Deputy Director,
Medicaid Bureau, HCFA, dated 5/9/79, pp. 1-2.) HCFA compared a list of
facilities and dates which the State represented as "(t)he original
review schedule for the period January 1 to March 31, 1978" with two
other lists supplied by the State showing the facilities reviewed from
January 26 to February 8, 1978, and the facilities reviewed from
February 9 to March 31, 1978 and found that the dates were the same. The
list identified by the State as the "original review schedule" is
clearly not the original, however, since the 17 missed facilities are
not included on it. HCFA stated that the State had failed to provide a
copy of the original review schedule which it had subsequently requested
in order to make a clear determination on this point.
It is possible that, even if the entire schedule was not thrown into
disarray, at least the 17 facilities which were missed were scheduled to
be reviewed during the blizzard. Again, however, the State's
documentation fails to show that this was the case. A list provided by
the State of the date each of the 17 facilities was "due for review"
and
the date each facility was actually reviewed shows that all but two of
the facilities were "due for review" after the date of the blizzard
which the State contends was responsible for the delays. (Respondent's
Submission in Response to the Panel's Ruling on Further
'(Page 13 - 66 - 10/10/79)'
Procedures, enclosed letter from Chief, Division of Medical Assistance,
Department of Welfare, to Deputy Director, Medicaid Bureau, HCFA, dated
5/9/79, Attachment Ill.) From a comparison of these dates with the
State's Quarterly Showing, however, it appears that the "due for review"
dates are merely the anniversary dates of each facility's previous
inspection, which, at least in the case of the other facilities, were
not necessarily the dates they were originally scheduled for review in
the first quarter of 1978. If the State had provided a copy of the
original review schedule as requested by HCFA, this matter might have
been clarified.
Rather than cooperate with HCFA, counsel for the State instead proceeded
on his own initiative to take a deposition, apparently on this issue. He
refused, however, to serve a copy of the transcript of the deposition on
HCFA, asserting that the Federal Rules of Civil Procedure required that
the opposing party pay for a copy if it wanted one, this despite the
fact that he had been specifically advised that the Federal Rules did
not apply in proceedings before the Board. Although he refused to serve
the deposition in accordance with 45 CFR 16.53, counsel for the State on
two occasions filed with the Board certificates of service which, in
context, appeared calculated to mislead the Board to believe that
service was properly made. This confrontation was entirely of counsel's
own making, since the Board's rules do not provide for the taking of a
deposition, and further, since the Panel had preliminarily indicated
that there was in the case no dispute of material fact the resolution of
which would be materially assisted by the taking of oral testimony. In
fact, it seems apparent that with less cost, less space, less time and
less confrontation, a short affidavit could have provided the same
information in view of the diffuseness of the deposition technique.
State's counsel, by insisting improperly and deliberately on violating
the Board's rules, has made it inappropriate for us to consider the
deposition which, if the material had been properly submitted, might
perhaps have strengthened his case. Nevertheless, we find that the
evidence already in the record impels the inference the blizzard was a
substantial cause of the 17 missed inspections.
Other issues raised by the State.
The State at one point argued that it had in fact met the "98 percent
plus all, 200 bed or more" standard. It contended that the "200 bed
or
more part of the standard refers to actual patients and not bed
capacity, and that since the two uninspected facilities which had bed
capacities of over 200 had only 33 and 156 patients, respectively, it
did inspect all facilities with 200 or more beds. (Letter from Director,
Department of Public Welfare, to Board's Executive Secretary, dated
9/26/79, p. 2.)
'(Page 14 - 66 - 10/10/79)'
The State has failed to show, however, that there is any ambiguity in
the statute's use of the word "beds". The State bases its
interpretation on the fact that the formula in Section 1903(g) (5) for
computing the amount of the penalty for failure to complete the required
inspections calls for the number of patients and not beds. This tends,
however, to undermine rather than support the State's argument since it
appears that if Congress had intended a count of "patients" in Section
l903(g)(4)(B), it would have said so. Moreover, the State has shown no
reason why it is inconsistent to use beds as the criterion in one
section and patients as the criterion in another. Finally, it seems
that it would not make sense in practical terms to require the
inspection of all facilities with more than a certain number of patients
rather than beds since the number of patients in a facility fluctuates
whereas the number of beds remains relatively constant.
Another issue, raised by the State for the first time during the
informal conference, was whether the disallowance was invalid since
HCFA, in calculating the amount of the disallowance, had used the number
of facilities rather than the number of patients as required by Section
1905. (Transcript, pp. 6-8.) HCFA explained that this procedure was used
since States were not required to submit patient data to it on a routine
basis, and stated that if the State would supply the patient data, it
would be willing to recalculate the amount of the disallowance?
(Transcript, pp. 45-46, 49-50.) Thus, on the basis of facts which are
available and serve as reasonable estimators, HCFA makes a rough
disallowance which the State is free to correct by furnishing more
refined data if it is in its interest to do so. HCFA's procedure, which
avoids acquiring voluminous reports that may prove unnecessary, seems to
be a reasonable accommodation of the interests of all parties. The State
took the position, however, that the case should be dismissed without
prejudice to HCFA, which could issue a new notification of disallowance
once it had properly calculated the amount of the disallowance.
(Transcript, pp. 47-49, 52-53.) We declined to dismiss the case, but
requested the parties themselves to try to agree on the proper amount of
the disallowance (assuming that disallowance was required under the
statute). (Ruling on Further Procedures to be Followed in Disposition of
Case, dated 4/12/79, p. 3.) The parties did not reach any agreement on
this issue (HCFA's Summary Memorandum, dated 8/6/79, p. 7.); since we
have determined that the State's showing should have been found
satisfactory, however, the resolution of this issue is not required.
Precedential value of decision.
We note, finally, that HCFA stated that if the Panel did proceed to
decision before a final regulation was issued, and adopted an
interpretation of the statute different than that adopted in the final
regulation, HCFA would not consider itself bound by the Panel's ruling
in making further
'(Page 15 - 66 - 10/10/79)'
disallowances under the final regulation. (Respondent's Summary
Memorandum, dated 8/6/79, p. 5.) Our conclusions of law under the
present situation where no regulation interpreting the statute was in
effect of course would not necessarily be the same where a regulation
had been issued.
After this decision was in final form, we learned of the issuance of
amendments to 42 CFR Part 456, published at 44 FR 56333 (October 1,
1979) and effective December 31, 1979, dealing in part with the
exception clauses of Section 20, Pub. L. 95-142, amending Section 1903(
g) of the Act. Preliminary examination of this regulation indicates
that it is not retroactive in terms and thus does not directly affect
the issues in this case. We do not inquire into the consistency of this
opinion and the new regulation which is not applicable here. We leave
determination under that regulation for such time as a case may arise
before this Board under it, at which time the matter can be resolved.
CONCLUSION
We hold that the State's showing was satisfactory under the technical
failings provision of Section 1903(g) (4 (B) of the Social Security Act,
and accordingly, reverse the disallowance made by the Administrator of
HCFA. D11 May 15, 1992