GAB Decision 326
June 30, 1982 California Department of Health Services; Docket No.
81-7-CA-HC Settle, Norval; Teitz, Alexander Ford, Cecilia
The California Department of Health Services appealed a disallowance
by the Health Care Financing Administration (respondent) for the quarter
ended March 31, 1980, in the amount of $212,743.84. The disallowance
was taken under section 1903(g) of the Social Security Act, 42 U.S.C.
1396b(g), and was based on the respondent's determination that the
utilization control requirements of sections 1903(g)(1)(A) and (B) had
been violated for 88 patients in eight skilled nursing facilities
(SNFs). The respondent reduced the amount of the disallowance to
$148,463.21 to reflect only the cost of long-term care services.
The issues in this appeal have been modified as the appeal developed;
some issues have been eliminated completely. Because there were
potentially many factual disputes concerning the 88 patients, the
parties reached an agreement with the Board in which the Board agreed to
decide the legal issues presented to it by the parties with regard to
what utilization control standards the appellant must meet. The parties
agreed that they would then apply that decision to the facts and resolve
between themselves the amount of the disallowance, if any, which should
be taken. If the parties cannot resolve the factual disputes
themselves, the appellant may initiate a new appeal requesting that the
Board do so. In keeping with the parties' agreement, this decision
constitutes the Board's resolution of the legal issues placed before it.
We cannot sustain the respondent's basis for the disallowance with
regard to alleged violations of the certification and recertification
requirements, section 1903(g)(1)(A). The basis for this conclusion is
discussed below. With regard to the alleged violations of the plan of
care requirement, section 1903(g)(1)(B), this decision sets forth the
standards to which the appellant should be held. To the extent that the
appellant can show, in future discussions with the respondent, that it
has met these standards, the disallowance is reversed. The (2)
disallowance is sustained for any remaining violations in keeping with
the statutory formula set forth at section 1903(g)(5). /1/
Background
Section 1903(g)
Section 1903(g) of the Act requires that the responsible state agency
show to the Secretary's satisfaction that there is an "effective
program" of utilization control of long-term inpatient services in
certain types of facilities. The state must meet specific requirements
set out in sections 1903(g)(1)(A) through (D) or the federal medical
assistance percentage (FMAP) must be decreased, for the quarter in which
the violations were found, by an amount determined according to the
formula set out in section 1903(g)(5). The requirements involved in
this appeal are those of sections 1903(g)(1)(A) and (B). Section
1903(g)(1)(A) requires, for each patient paid for by federal funds,
certification at the time of admission, or if later, at the time the
individual applies for medical assistance under the State plan, and
recertification by a physician "at least every 60 days," that the
specific level of long-term care provided was necessary. Section 1903(
g)(1)(B) requires that for each patient, a plan of care be "established
and periodically reviewed and evaluated by a physician."
The certification and recertification requirements for SNFs are
implemented by 42 CFR 456.260 (1979), and the plan of care requirements
are implemented by 42 CFR 456.280 (1979), both recodified effective
September 29, 1978. In addition, the respondent instructed the states
about the certification and recertification requirements in Action
Transmittal SRS-AT-75-122, dated November 13, 1975.
Section 1903(g)(1)(C) requires that a State have in effect a
continuous program of utilization review pursuant to section 1902(a)(
30), which in turn requires that the state plan provide methods and
procedures relating to the utilization of, and the payment for, care and
services available under the plan (including but not limited to
utilization (3) review plans as provided for in section 1903(i)(4)) as
may be necessary to safeguard against unnecessary utilization of such
care and services.
Section 1903(i)(4)
Section 1903(i)(4) provides that payment shall not be made to a state
for care or services by a hospital or SNF unless the hospital or SNF has
in effect a utilization review plan which meets the requirements imposed
by section 1861(k) for purposes of Title XVIII of the Act. The
provision allows the Secretary to waive the requirements of section
1903(i)(4) if the State agency demonstrates to his satisfaction that it
has in operation utilization review procedures which are superior in
their effectiveness to the procedures required under section 1861(k).
Utilization review and utilization control
The parties agreed that the meaning and use of the terms utilization
review and utilization control are important in understanding the
context of the issue with regard to compliance with section 1903(g)(1)(
A). Utilization control is a program which attempts to assure that
costly institutional services are appropriately utilized and that
patients in long-term care facilities need the particular level of care
they are receiving. Section 1903(g) addresses this goal. Both parties
agreed that, technically, utilization review refers only to the peer
review system, usually performed on a sample basis by a facility-based
committee, which checks physician assurances (certifications and
recertifications) about utilization control. Both sections 1861(k) and
1903(g)(1)(C) address utilization review. Thus, utilization review is
one aspect of utilization control, and under the system set forth in the
Act, the procedures for utilization review are not the same as those for
physician certifications and rcertifications, which are another aspect
of utilization control. /2/ We will address later in this decision
whether the appellant's superior system of utilization review, which
substitutes state review for peer review of the physician certification
and recertification system, is broader than the statutory utilization
review system, and thus may include other aspects of utilization
control.
(4) Statement of the Issues
Section 1903(g)(1)(A)
The appellant has maintained throughout this appeal that a waiver
granted by the respondent under section 1903(i)(4) of the Act, which
allowed the appellant to use its superior utilization review system in
place of that specified at section 1861(k) (and section 1903(g)(1)(C))
of the Act, has a direct bearing on the appellant's actions in complying
with section 1903(g). The issue was originally phrased, in part, in
terms of the scope of the 1903(i)(4) waiver, that is, whether it also
waived compliance with section 1903(g).The appellant has agreed,
however, that the respondent granted a waiver only for the utilization
review requirement of sections 1861(k) and 1903(g)(1)(C) of the Act.
The appellant's position is that it has complied with the requirements
of section 1903(g)(1)(A) by using its superior utilization review system
described in the request for a waiver under section 1903( i)(4), and
that the appellant reasonably believed that it could comply through the
use of this system because the respondent never indicated otherwise,
even though the respondent was thoroughly familiar with the system and
must have understood that the appellant used it for utilization control
as well as utilization review.
Therefore, one issue presented in this decision is whether the
respondent's actions in connection with granting th waiver under section
1903(i)(4), and the respondent's approval of a state plan which
incorporated the waivered system, gave the appellant a reasonable basis
to believe that it could comply with section 1903(g)(1)(A) in a manner
different from that prescribed in the respondent's guideline,
SRS-AT-75-122, November 13, 1975.
Section 1903(g)(1)(B)
The issues under this provision concern the specific standards which
the appellant must have met to comply with the provision.
1) Establishment of a plan of care
There is one issue under the requirement for establishment of an
initial plan of care: when must the plan of care be established to be
timely under 42 CFR 456.280(a) (1979).
2) Review of a plan of care
The respondent has admitted that the appellant was not provided with
written notice, for the quarter involved in this appeal, that a
physician would be required to date his signature when reviewing plans
of care. On the other hand, the respondent has argued that it must (5)
have some concrete evidence of the date upon which a physician
established or reviewed a plan of care. In view of these factors, the
issue is how may the appellant show compliance with the implementing
regulation 42 CFR 456.280(c), which requires review of plans of care
every 60 days.
Facts
Federal reviewers conducted a survey of ten out of approximately 1131
SNFs in the State during June 1980. That survey provided the basis for
the respondent's determination that the appellant had violated section
1903(g) for 88 patients in eight SNFs.
The appellant asserted that its system of utilization control is
described in the utilization review plan submitted in connection with
its request for a waiver under section 1903(i)(4). The general outlines
of the system are also in Title 22 of the California Administrative Code
(CAC), section 51335. Generally, the system as is follows. A Treatment
Authorization Request (TAR) must be submitted to the Medi-Cal /3/
consultant, who is a physician, for each initial admission to an SNF.
The Medi-Cal consultant affirms the certification of the attending
physician, which is submitted as part of the TAR, that SNF services are
necessary, and the TAR is submitted to the fiscal intermediary for
payment of the services. The same process must be followed whenever the
previous authorization expires because the fiscal intermediary will not
pay claims for long-term care unless such claims are accompanied by a
valid TAR or covered by a still valid previous TAR. Most TARs are valid
for a period of two months, except those for patients who are considered
prolonged care patients, that is, it is not anticipated that their
condition will change in the immediate future. The TARs for such
patients are usually valid for one year. In connection with the
polonged care patients, every two months the attending physician
completes a short form certifying that the patient needs the level of
care, and this form is submitted with the facility's bill.
Attending physicians complete a written certification prior to or at
the time of admission and this certification is included as part of the
TAR submitted to the Medi-Cal consultant.Such TARs are valid for the
balance of the month in which the patient is admitted and for the next
full month. Some time before the expiration of that TAR, the attending
physician signs a recertification which is valid for the next two
calendar months; this recertification is submitted as part of the next
TAR. Thereafter, the attending physician signs a recertification (6)
prior to the expiration of each two calendar month period, and that
recertification is submitted with the next TAR.
In order for a TAR to be timely submitted and approved by the
Medi-Cal consultant, the attending physician must certify in advance
that the patient will need the specific level of care he is receiving.
This recertification may occur anywhere from a few days to two or three
weeks in advance of the date the two month certification period actually
begins. The appellant has stated that this is necessary because it
takes a few days for the TAR to be mailed and received by the Medi-Cal
consultant and for processing of the forms. The consultant's
authorization for payment takes retroactive effect only under certain
conditions and for specifically stated causes (CAC, section 51003). /4/
A TAR received after the date of its proposed effectiveness will not be
retroactively approved except under those conditions. Therefore,
payment under a TAR, which is untimely received and which does not fall
within the very limited circumstances authorized for retroactive
approval, will be authorized only from the date of receipt by the
Medi-Cal consultant, and a lapse in payment could occur. Thus, if a
physician did not certify a patient until the actual beginning date of
the certification period, the TAR would be received too late to be
approved from the beginning date of the certification.
The California Administrative Code, section 51003, provides for bills
for service. This regulation provides that billing is performed on a
monthly basis and is done in the form prescribed by the Director. A (7)
detailed description of the billing process is contained in the Medi-Cal
months (pages 2-8, 2-10c). The authorization dates on the TAR, which
must be submitted with a bill, must cover the period billed.
The respondent determined that several types of violations existed
when it surveyed the ten SNFs. The respondent considered that, under
the interpretation outlined in SRS-AT-75-122, certifications and
recertifications are valid only for 60 days from the date of the
physician's signature. Under such an interpretation, the appellant's
system of advance certification failed to comply. The respondent's
reviewers counted 60 days from the date of the physician's signature and
found that the next signature might occur from 61 to 72 days after the
previous one. Furthermore, since the respondent did not accept the
validity of certifications and recertifications for more than 60 days,
it would not accept the purported validity of the certifications and
recertifications which covered a period of 61 or 62 days where the two
months certified contained more than 30 days each.
With regard to the plans of care, the reviewers determined that plans
of care which were not established in writing by the date of admission
were invalid. Furthermore, they determined that where the physician had
not dated his signature, the establishment of the plan of care or the
review of the plan of care was invalid.
Discussion
A. Section 1903(g)(1)(A)
Both parties stipulated that a waiver under section 1903(i)(4) was in
effect for the quarter in question. The waiver had been granted by the
respondent for every quarter since June 30, 1977. /5/ The document
which the appellant submitted as its utilization review plan in order to
obtain the waiver was prepared in 1975, and remained unchanged until the
fall of 1981. (Tr., Vol. I, April 27, 1982, pp. 52-53) It was entitled
"California Medi-Cal Utilization Review Plan." This document discussed
the entire TAR system, and stated in its introduction, (8) page (i), and
its summary, page 1, that it described a system of five interlocking
processes which achieve "utilization control." (Tr., Vol. I, April
27,
1982, p. 36; Exhibit B, Appellant's Submission, December 23, 1981) It
discussed pre-admission procedures, authorization for payment, the
review made by the fiscal intermediary, and the billing system. /6/ The
system described in the document was established in 1970, and thus
pre-dated Pub. L. 92-603, 86 Stat. 1379, (1972), which established the
requirements for utilization review and utilization control, including
sections 1903(g) and 1903(i) of the Act. The appellant testified that,
at the request of federal reviewers, language was added to the waiver
document which provided for recertifications, every sixty days, of
prolonged care patients. Since the appellant's system had previously
relied only on TARs, the appellant argued that the request for
incorporation of this additional step was an indication that the federal
reviewers felt that the system did not meet section 1903(g) without
these certifications. The further implication is that if it did not
meet the requirements in any other ways, the federal reviewers would
have added other requirements.
The respondent's Regional Office conducts quarterly discussions with
the appellant about the waiver, in which the respondent updates what it
requires the appellant to do in order to maintain the waiver. (Tr.,
Vol. I, April 27, 1982, pp. 30-34) The appellant and the Regional Office
go over the waiver document in detail and discuss its provisions. (Tr.,
Vol. 1, pp. 56-58) The Regional Office periodically checks the system by
conducting site reviews at hospitals and facilities and by reviewing the
actual conduct of the procedures. At the time the waiver was first
granted, the respondent had one division in the Regional Office which
was responsible for both utilization control and utilization review.
This is no longer true; a reorganization provided for two separate
divisions, the Division of Health Standards and Quality, which is
responsible for section 1903(i)( 4) waivers, and the Division of Quality
Control, which is responsible for section 1903(g). (Tr. Vol. 1, April
27, 1982, p. 104; Vol. 2, April 28, 1982, pp. 241, 239, 240, 242; 255)
The Division of Program Operations conducts the quarterly reviews of the
system. Furthermore, the respondent testified that its current Division
of Quality Control personnel did not familiarize themselves with the
entire waiver (9) document because they did not know it related to
utilization control. They did have, however, selected pages from the
document, which referred specifically to the certification and
recertification process. (Tr., Vol. 2, April 28, 1982, pp. 254, 269)
The appellant testified that, although the document describing this
system is not referred to by name in the state plan, the system
described is incorporated in the California Administrative Code (Title
22, sections 51323, 51335, 51003). These regulations require the state
to use its prior authorization system (TARs), certification and
recertification for prolonged care patients, and monthly billing in
accordance with instructions, including submission of an approved TAR
covering the same period of time as the services billed.
The appellant's position is that it has a utilization review system
which replaces facility-based committees reviewing on a sample basis.
The appellant's utilization review system is also its entire utilization
control system, a system that consists of physician certifications and
recertifications submitted in accordance with the prior authorization
system (TARs) which is used to substantiate billing. This system checks
every patient rather than a sample and differs from those instructions
set forth by the respondent in SRS-AT-75-122, in that the certifications
and recertifications are issued for a period of two months rather than
60 days, and are issued for a period which begins days or weeks after
the day the physician actually signs te form. The appellant argued that
this system complied with section 1903(g)(1)(A) and 42 CFR 456.260. It
argued that the respondent was thoroughly familiar with the system and
how it had worked for ten years, because the division which granted the
1903(i)(4) waiver (and had initially been responsible for all of section
1903), worked with the system on a regular basis, and because the system
described in the document submitted for the waiver, in conjunction with
the regulations in the California Administrative Code, was also the
written plan required by SRS-AT-75-122. The appellant argued that it
reasonably believed that it was complying with the statute and
regulations and that it did not have to comply in every detail with
SRS-AT-75-122 because the respondent knew that it had a different
system, and, except for requesting additional recertifications for
prolonged care patients, never indicated dissatisfaction with the
system. /7/
(10) Furthermore, the appellant argued that because SRS-AT-75-122's
requirement that the appellant submit its written methods and procedures
for utilization control had been met through the California
Administrative Code and the waiver document, the appellant must use the
above-described system in order to comply with its own approved state
plan.
The respondent argued that its requirements for compliance with
section 1903(g)(1)(A) had not been met, that utilization review is only
one element of utilization control and that they are different,
completely separate requirements, and that it did not approve a
deviation from SRS-AT-75-122 when it granted a waiver under section
1903(i)(4).
At the time the waiver was originally granted, one federal division
was responsible for all of utilization review and utilization control.
Even though this subsequently changed, the respondent continued to
oversee the waivered "superior system" as well as the California program
in general. The respondent cannot claim that it did not know how the
appellant's system worked. It is clear that there was an unseverable
interaction between certification, authorization for payment, and the
billing process, which made it impossible for the appellant to meet
certain details of the federal requirements, as outlined in
SRS-AT-75-122, without implementing a duplicate procedure which would
have no purpose except fulfilling those details. The appellant has
testified that California's system is aministratively streamlined and
efficient. As far as this Board can tell, California's system is
clearly a "superior system," and the respondent has not contradicted
this.
The respondent testified that only three states have been granted
waivers under section 1903(i)(4) and that, consequently, it does not
have a great deal of experience about the effects of a waivered system.
(Tr. Vol. 2, April 28, 1982, p. 270) The appellant should not be forced
to shoulder the burden of the statutorily-required reduction in FMAP
because the respondent's administrative organizational changes may have
caused one office to be less informed that it should have been.
Some of the regulations incorporated in the state plan do not on
their face give notice that the appellant interpreted 60 days as two
months and as to when the certification and recertification periods
begin to run. The regulations read with each other, and with such
documents as the Provider Manual and the "California Medi-Cal
Utilization Review Plan," however, do provide a clear picture of the
appellant's practices. The respondent knew how the appellant's system
worked. They must, therefore, have known that the system met the
requirements of section 1903(g)(1)(A) in a slightly different fashion.
The appellant has provided evidence that there is a relationship between
utilization review and utilization control. Certainly we do not believe
that (11) Congress intended that there be an artificial separation
between utilization control and utilization review which would result in
duplicative and burdensome procedures. (See e.g. Sen. Rep. 92-1230,
September 26, 1972, where the discussion refers to review methods as
controls, p. 218.) It seems reasonable to conclude that utilization
control is a broad term which incorporates both the certification
process and the check on that process, utilization review. Where
utilization review procedures are intricately linked to the
certification process, there obviously is not a distinct separation of
the two. This conclusion is supported by the fact that the respondent
accepts utilization review committee minutes as acceptable
recertifications (AT-80-68, September 1980).
We conclude that the relationship between the appellant and
respondent in negotiating a waiver from 1977 forward, and the
respondent's consequent knowledge of the interaction of utilization
review and utilization control as the appellant's system implemented
them, gave the appellant a reasonable basis to believe that its system
was in compliance with section 1903(g)(1)(A). This conclusion removes
the respondent's basis for a disallowance based on violations of section
1903(g)(1)(A). This conclusion in no way conflicts with other Board
decisions based on compliance with SRS-AT-75-122 or AT-80-68. We simply
conclude that the respondent's approval of the system, under section
1903(i)(4), necessarily involved an acknowledgment that the appellant
did not adhere to the requirements of SRS-AT-75-122 in certain technical
details. The respondent never indicated that these variations were
unsatisfactory for purposes of section 1903(g), therefore, it was
reasonable for the appellant to believe its system was approved.
B. Section 1903(g)(1)(B)
a) Establishment of a plan of care
The federal reviewers determined that plans of care which were not
established in writing by the date of the patients' admission to the
facility were invalid. The appellant argued that it had complied with
42 CFR 456.280(a)(1979), which stated:
Before admission to a SNF or before authorization for payment, the
attending physician must establish a written plan of care for each
applicant or recipient in a SNF.
The appellant pointed out that the physician statement submitted as
part of each TAR has been stated by the respondent to be an acceptable
plan of care, where it is completed in the usual fashion. Thus, the
appellant argued, plans of care are always established before
authorization for payment. Since authorization for payment occurs when
the (12) Medi-Cal consultant approves the TAR containing the plan of
care, there is no way this system can produce authorization for payment
without a plan of care. This is true even where a patient is a Medicare
patient when first admitted, but becomes eligible for Medicaid
thereafter. The appellant has testified that, within 20 days of a
Medicare patient's admission to an SNF, a TAR must be submitted, with a
valid certification and plan of care, and the Medi-Cal consultant must
act on the TAR thereafter.
The respondent appeared to argue that the authorization for payment
deadline contained in section 456.280(a) was inextricably linked to a
decision on eligibility for Medicaid, and that both must occur prior to
admission unless the patient applies for Medicaid after admission. The
appellant has stated that a decision about the eligibility of Medicare
patients for Medicaid is not always made prior to their admission.
Furthermore, authorization for payment of services is not always
coincidental with a decision that a patient is eligible for Medicaid,
since an authorization for payment is made on an ongoing basis every two
months. Therefore, we believe that the plain language of 42 CFR
456.280(a), "authorization for payment," must be applied. We conclude
that to the extent a valid plan of care was included in the initial TAR,
even though dated subsequent to the date of admission, it may be a
timely establishment of a plan of care under the appellant's system, /8/
because the approved TAR is the "authorization for payment" within
the
meaning of 42 CFR 456.280(a).
b) Review of a plan of care
The federal reviewers determined that undated physicians' signatures
could not establish reviews of plans of care under 42 CFR 456.280(c).
The respondent admitted, however, that it did not provide the appellant
with written notice, for the quarter involved here, that timely review
of a plan of care could be shown only by a dated physician signature.
We agree that the respondent must be able to verify that the plans of
care were reviewed as required by 42 CFR 456.280(c). The appellant
provided evidence at the hearing that the date of the physician's
signature can often be established by reading the physician's orders in
conjunction with the orders made prior and (13) subsequent to the review
in queston, and in conjunction with TARS and the signature of the nurse
implementing the orders. Therefore, we conclude that to the extent the
appellant can show through contemporaneous records that a plan of care
was timely reviewed, the appellant will be deemed in compliance with
section 1903(g)(1)(B) for the patients included in the disallowance for
the alleged violation of this section.
Conclusion
We conclude that the respondent's basis for a disallowance due to
violations of section 1903(g)(1)(A) cannot be sustained. The amount of
any disallowance sustained in this appeal must be determined after the
parties apply to the facts the standards for section 1903(g)(1)(B)
articulated above.
(14) Docket No. 82-141-CA-HC DATE: November 2, 1982
RULING ON PETITION FOR RECONSIDERATION OF DECISION NO. 326 AND
RECONSIDERED DECISION
The Health Care Financing Administration (Respondent) requested that
the Board reconsider Decision No. 326, issued June 30, 1982. The Board
has the power to reconsider a decision "where a party promptly alleges
a
clear error of fact or law." 45 CFR 16.13 (1981).
Decision No. 326 involved an appeal from the respondent's
determination that the appellant violated the utilization control
requirements of sections 1903(g)(1)(A) and (B) of the Social Security
Act (the Act). Only the portion of the decision relating to section
1903(g)(1)(A) is involved in this reconsideration. The appellant
maintained throughout the appeal that the respondent's waiving
utilization review requirements for the appellant under section 1903(
i)(4) of the Act had a direct bearing on the appellant's actions
regarding compliance with section 1903(g)(1)(A). The Board took the
existence of the waiver into account in its decision. In its petition
for reconsideration, at p. 1, the respondent stated:
... the Board held that the agency's action in granting a utilization
review waiver to the state of California under Section 1903(i)(4) of the
Social Security Act permitted the state to comply with the
certification/recertification "utilization control" requirement of
Section 1903(g)(1)(A) in a manner other than that prescribed in that
statute as interpreted by the agency, in Action Transmittal 75-122,
(November 13, 1975).
The respondent then alleged (1) that there is no authority under
section 1903(i)(4) of the Act which allows a state to comply with
section 1903(g)(2)(A) in a manner other than that prescribed by the
statute, and (2) that the Board erred in relying on the doctrine of
equitable estoppel since there must be a showing of affirmative
misconduct before the respondent can be estopped.
(15) We conclude that the respondent is simply mistaken on the first
ground cited, and, thus, has not met the standard for reconsideration on
that ground. The Board did not rely on section 1903(i)(4) of the Act as
a basis for its decision. The scope of the waiver, i.e., whether
compliance with section 1903(g)(1)(A) was also waived, originally
appeared to be an issue in the case; however, appellant ultimately
acknowledged that the respondent granted a waiver only for the
utilization review requirement of sections 1861(k) and 1903(g)(1)( C) of
the Act. (Decision 326 at p. 4) Consequently, the Board did not examine
whether the 1903(i)(4) waiver changed the appellant's obligations under
section 1903(g)(1)(A).
Nevertheless, the Board considered the existence of the waiver to be
evidence that the respondent knew that the appellant used a system of
utilization control which was different from the usual system described
in SRS-AT-75-122, because the plan submitted for the waiver also
described the appellant's utilization control system. Thus, the Board
concluded, at page 11, that --
... the respondent's approval of the system, under section 1903(i)(
4), necessarily involved an acknowledgment that the appellant did not
adhere to the requirements of SRS-AT-75-122 in certain technical
details.
The Board did not find that the appellant violated section 1903(g)(
1)(A), nor did it find that the section 1903(i)(4) waiver excused any
such violation.
The Board agrees to reconsider its decision on the second ground
since the respondent alleged that the Board erred as a matter of law in
reaching its decision, and we understand how the respondent may have
misconstrued the decision. As the Board noted in the introduction to
its decision, the issues were modified as the appeal developed. The
factual situation was one of first impression for the parties and the
Board, and the significance of particular elements was not always clear.
After careful consideration of all aspects of the appeal, we conclude
that reversal of Decision No. 326 is not warranted, although we do
restate our conclusion in this reconsideration since we believe that
some aspects of our decision would profit from further elaboration.
Although the Board did not explicitly mention the doctrine of
equitable estoppel, the respondent alleged that the language of the
decision indicated that the decision rested on this doctrine. The
respondent cited several statements made by the Board concerning two
basic points: (1) that the appellant "reasonably believed" (16) that
it
could comply with section 1903(g)(1)(A) through the use of its system;
and (2) that the respondent knew, or must have known, that the
appellant's system met the requirements of section 1903(g)(1)(A) in a
slightly different fashion than respondent usually required. (Decision
No. 326 at pp. 4, 9, 11) The remainder of the respondent's arguments
pertained to why the elements necessary to prevailing on a claim of
equitable estoppel, as set forth in the case law, were not present in
this appeal.
While some language in the Board's decision may appear to be related
to equitable estoppel, the appellant never asserted estoppel and the
Board did not reverse the disallowance on that basis. * Estoppel is an
equitable doctrine which precludes a party from establishing an
essential element of its claim because of certain actions or statements
on the part of that party toward the second party. In this instance, to
support its disallowance, the respondent had to show that it could take
the disallowance under a valid, applicable statute or policy; respondent
did not do this. Accordingly, there was no need for the Board to
consider equitable estoppel. The question here was not whether the
respondent could be estopped from taking the disallowance, but whether
the respondent actually had a basis for the disallowance.
Although the respondent's brief on reconsideration stated that
California's system failed to meet the requirements of section 1903(g)(
1)(A), we point out that the issue before the Board, as stated in its
decision at page 4, was:
... whether the respondent's actions in connection with granting the
waiver under section 1903(i)(4), and the respondent's approval of a
state plan which incorporated the waivered system, gave the appellant a
reasonable basis to believe that it could comply with section 1903(g)(
1)(A) in a manner different from that prescribed in the respondent's
guideline, SRS-AT-75-122, November 13, 1975.
The Board's discussion and analysis was limited to the violations of
SRS-AT-75-122, as can be seen by the following portions of the decision.
The Board's statement of the facts included the following, at page 7:
(17) The respondent considered that, under the interpretation (of
section 1903(g)(1)(A)) outlined in SRS-AT-75-122, certifications and
recertifications are valid only for 60 days from the date of the
physician's signature....
In summarizing the appellant's position, the Board stated, at page 9:
This system... differs from those instructions set forth by the
respondent in SRS-AT-122,.... The appellant argued that this system
complied with section 1903(g)(1)(A) and 42 CFR 456.260.... The appellant
argued that it reasonably believed that it was complying with the
statute and regulations and that it did not have to comply in every
detail with SRS-AT-75-122....
Finally, the Board's concluded, at page 11:
... the respondent's approval of the system, under section 1903(i)(
4), necessarily involved an acknowledgment that the appellant did not
adhere to the requirements of SRS-AT-75-122 in certain technical
details.
The Board has previously held that SRS-AT-75-122 is a reasonable
interpretation of section 1903(g)(1)(A) and that it is binding on the
states. Social Service Board of North Dakota, Decision No. 166, April
30, 1981; Kansas State Department of Social and Rehabilitation
Services, Decision No. 312, June 21, 1982. The Board affirms that
conclusion. However, we also point out that the Board has never said
that the respondent's interpretation, as stated in SRS-AT-75-122, is the
only reasonable interpretation of what constitutes compliance with
section 1903(g)(1)(A). We believe that the respondent could have
interpreted some aspects of the statute in another way. Decision No.
326 recognized that the appellant's utilization control system was
different from those systems which conform to SRS-AT-75-122. The facts
show that the system was accepted by the respondent as an alternative
method which also complied with the statute. Thus, even though the
respondent chose to interpret section 1903(g)(1)(A) in the manner
described by SRS-AT-75-122, it could find a statewide system, such as
appellant's, in compliance with section 1903(g)(1)(A), and at the same
time enforce SRS-AT-75-122 in other states where it had not accepted a
nonconforming system.
We did not find that, merely by approving the 1903(i)(4) waiver,
respondent accepted the system for purposes of section 1903(g)(1)(A).
The following are factors the Board considers important:
(18) * The usual methods of utilization control envisioned by the
respondent included certification and recertification of all individuals
by attending physicians, and sample checks on those certifications by
utilization review committees. The respondent recently stated
(AT-80-68, September, 1980) that it will also accept utilization review
minutes, signed by a physician, as a recertification. Thus, utilization
review methods are part of utilization control.
The 1903(i)(4) waiver allowed the appellant to vary its utilization
review procedure from the committee review provided for by regulation.
In California, the process was incomplete unless there was both an
attestation by the attending physician and a final authorization by a
"physician consultant," prior to payment under Medicaid. That signature
by the "physician consultant" constituted utilization review.
(Conference Transcript at pp. 123, 157, 246) Both physicians'
attestations were incorporated on one document known as a Treatment
Authorization Request (TAR). Thus, the appellant's recertification
process differed from SRS-AT-75-122. The entire process was one
unseverable method, since both signatures, which constituted the
certification or recertification, ** were prerequisites to Medicaid
payment. (Decision No. 326 at pp. 5-6 and 9-10) There is no way that
the appellant could both follow its own system and conform to
SRS-AT-75-122. (Decision No. 326 at p. 10)
* The appellant's plan has been in existence, essentially unchanged,
since 1970. (Decision No. 326 at p. 8) From the inception of the
federal program until 1979, the same federal office was responsible for
both utilization review and utilization control procedures. The
appellant provided that office with the document entitled, "California
Medi-Cal Utilization Review Plan," which described the utilization
review and control system. (Decision No. 326 at pp. 7-8) Over the
years, persons from that office conducted quarterly discussions (19)
about the utilization review system, discussing various aspects of the
plan with implementing personnel, and making spot checks through site
visits at hospitals and facilities. (Decision No. 326 at pp. 8-10) We
cannot find that the respondent did not understand, in ten years of
interaction with the appellant about utilization review and utilization
control, how the appellant's system functioned. Furthermore, the fact
that the entire plan description had been submitted to the respondent
when the appellant requested a waiver under section 1903(i)(4) is
evidence that the respondent knew how the system worked.
* When the appellant's plan was submitted to the respondent for
purposes of obtaining a waiver under section 1903(i)(4), the respondent
asked that the appellant institute an additional procedure which would
ensure recertifications every two months for prolonged care patients.
The utilization review process under section 1903(g)(1)(C) and the
1903(i)(4) waiver did not require such a procedure, and the requirement
had nothing to do with utilization review. The requirement could only
have pertained to utilization control under section 1903(g)(1)(A).
Accordingly, the logical conclusion is that the respondent understood
that California's procedures referred not only to utilization review but
also to the certification and recertification process required by
section 1903(g)(1)(A).
* The appellant testified that the description of the plan for
utilization review was submitted as the description of its utilization
control procedures, a step which is required by SRS-AT-75-122.
(Decision 326 at pp. 9-10) The respondent did not deny that assertion,
and, in fact, testified that the regional office may have had the entire
document, but that the central office had looked only at selected
portions of the description in conjunction with the review of the
appellant's utilization control procedures which led to the disallowance
appealed here. (Conference Transcript at pp. 229, 242, 249-255)
* The appellant testified that the California Administrative Code,
together with the billing manual and the description of this plan,
constituted the State plan with reference to utilization control and
utilization (20) review, and that reading them as a whole would have put
the respondent on notice about the appellant's practices. (Conference
Transcript at pp. 9, 10) The State plan was approved by the respondent.
In summary, the appellant's utilization control system was a complete
system which the Board concluded was clearly "superior," in some
respects, to the system required by the respondent under SRS-AT-75-122,
even though it differed from the respondent's methods in some ways.
(Decision No. 326 at p. 10) The appellant provided the respondent with
ample opportunity to know about and understand how the appellant's
system worked, and there was sufficient evidence that the respondent
did, in fact, know about the system. Thus, the respondent's actions
were effective to permit the appellant to comply with section
1903(g)(1)(A) in a manner which varied from the respondent's
administrative interpretation stated in SRS-AT-75-122, which was
otherwise binding on the states. The respondent has no basis for the
disallowance and the Board did not need to reach the issue of equitable
estoppel. /1/ This Board has held in past decisions that, under the
statutory formula, if there is at least one violation in a facility, the
amount of disallowance for that facility remains the same, regardless of
the total number of violations in the facility. Virginia Department of
Health, Decision No. 208, August 28, 1981; North Carolina Department of
Human Resources, Decision No. 273, March 31, 1982; Utah Department of
Health, Decision No. 304, May 28, 1982. /2/ Both parties agreed that
there is a technical distinction between utilization review and
utilization control. The appellant also pointed out that Congress did
not use the terms consistently when it discussed the provisions in the
legislative history. Congressional usage which blurred distinctions
between the two terms may indicate that any distinctions which may exist
are not always clear, and furthermore, may indicate that there is some
overlap between the two. /3/ The California Medicaid system is known as
Medi-Cal. /4/ The appellant stated (Conference, April 27, 1982,
Tr., Vol I, pp. 81-84) there is never a retroactive
authorization/admission problem in SNFs except for emergency admissions.
Most TARs which are retroactively approved occur because the patient was
admitted to the SNF from a hospital where the patient was a Medicare
patient. In Medicare-Medicaid crossover situations, the average patient
receives Medicare benefits for approximately 20 days after admission to
an SNF. Therefore, CAC section 51335(B)(3) provides that a TAR must be
received by the Medi-Cal consultant on or before the 20th day of SNF
care in order to be approved prior to the first day of Medicaid payment.
42 CFR 456.260(b) provides that "if an individual applies for assistance
while in an SNF," the certification must be made before the Medicaid
agency authorizes payment. Under the appellant's system, a TAR,
submitted within 20 days after a Medicare patient's admission, will
contain a certification, and will thus comply with the regulation
because the certification is made before the Medicaid agency authorizes
payment. /5/ The appellant requested a waiver on May 21, 1973;
the respondent did not develop procedures and criteria for granting
waivers until sometime after March 1975, but allowed states applying for
waivers to continue using existing procedures for which they were
seeking waivers, until such time as the criteria were effective.
(Exhibit A, Appellant's submission, December 23, 1981; Information
Memorandum AD-IM-75-12, October 22, 1974; Action Transmittal
SRS-AT-76-77, May 10, 1976) /6/ See the Chapter headings:
Chapter II, Utilization Controls Used in the California System; Chapter
III, Application of Utilization Controls; Chapter IV, Medical Review;
Chapter VII, Post-Service, Pre-payment Utilization Controls and
Post-Service, Post-payment Utilization Controls.(Exhibit B, Appellant's
Submission, December 23, 1981) /7/ During the conference held in
this appeal, the respondent's witness admitted that she was of the
opinion that there was a burden on the respondent to alert the appellant
to any procedures used by the appellant which the respondent was aware
of and which were unacceptable to the respondent. (Tr., Vol. 2, April
28, 1982, p. 268) /8/ During the conference held in this appeal,
the appellant raised the question of whether telephone establishment of
a plan of care with subsequent written confirmation of that fact may
constitute establishment of the plan of care by the date of the
telephone order. Under the system described by the appellant, and our
conclusion stated above, there is no need to consider the question. *
The respondent did not raise the subject of equitable estoppel until it
submitted its post-conference brief. ** Although the Board did not
specifically address this, it may be possible for the entire document
or, at least the signature of the "physician consultant," to be the
required recertification. If this were the case, the appellant's system
might conform to the respondent's interpretation of the statute.
SEPTEMBER 22, 1983