Colo. Dept. of Soc. Serv. v. Dept. of Health

• Citation: 558 F. Supp. 337
• Decision Date: 25 January 1983
• Docket Number: Civ. A. No. 82-M-281.
• Parties: COLORADO DEPARTMENT OF SOCIAL SERVICES, Petitioner, v. The DEPARTMENT OF HEALTH AND HUMAN SERVICES, et al., Respondents.
• Court: U.S. District Court — District of Colorado

558 F. Supp. 337

COLORADO DEPARTMENT OF SOCIAL SERVICES, Petitioner, v. The DEPARTMENT OF HEALTH AND HUMAN SERVICES, et al., Respondents.

Civ. A. No. 82-M-281.

United States District Court, D. Colorado.

January 25, 1983.

COPYRIGHT MATERIAL OMITTED

Kenneth S. Lieb, Asst. Atty. Gen., Human Resources Section, Denver, Colo., for petitioner.

Margaret Jane Porter, Washington, D.C., Janis E. Chapman, Asst. U.S. Atty., Denver, Colo., for respondents.

MEMORANDUM OPINION AND ORDER

MATSCH, District Judge.

The State of Colorado Department of Social Services (Colorado) brought this action to obtain judicial review of two decisions by the Board of Grant Appeals (the Board) of the United States Department of Health and Human Services (HHS). The Board upheld the disallowance by the Secretary of HHS (the Secretary) of certain federal funding of Colorado's state plan of medical assistance under the Medicaid Act. Two disallowances are involved: $2,881,309, for the period from January 1, 1978 through June 30, 1978; and $21,377, for a one-day infraction which occurred on January 27, 1978.

This court's jurisdiction is invoked under 28 U.S.C. §§ 1331 and 1361, and under 5 U.S.C. § 702. Section 702 does not confer subject matter jurisdiction on district courts; it simply provides for judicial review of final agency action where there is an independent basis for subject matter jurisdiction. Califano v. Sanders, 430 U.S. 99, 104-07, 97 S.Ct. 980, 983-985, 51 L.Ed.2d 192 (1977). In this case the defendants concede that judicial review under the Administrative Procedure Act, pursuant to the court's federal question jurisdiction under 28 U.S.C. § 1331, is proper.

The defendants filed a motion to affirm the Secretary's decisions on the record. The court has the administrative record for each of the Secretary's disallowance decisions, the defendants' motion has been briefed and argued fully, and the case is ready for final disposition.

The history of the disallowances at issue in this lawsuit, particularly the larger disallowance, is long and complicated, due to the complexity of the Medicaid statute, the relevant provisions of which were amended twice, each time with significant impact on Colorado.

Title XIX of the Social Security Act, commonly known as the Medicaid Act and codified at 42 U.S.C. §§ 1396-1396n, provides funding to enable each state to furnish "necessary medical services" for families with certain dependent children and for aged, blind, or disabled individuals "whose income and resources are insufficient to meet the costs" of those services. 42 U.S.C. § 1396. The payments are made to those states which have submitted, and had approved by the Secretary, state plans for medical assistance meeting all of the requirements set forth in 42 U.S.C. § 1396a(a). Colorado submitted and obtained approval of its plan and thereby became entitled to quarterly payments from appropriated federal funds as reimbursement for prescribed portions of the expenditures made for medical assistance to eligible recipients and certain administrative costs.

The formulae for computing federal payments to the states are established in 42 U.S.C. § 1396b. The sharp focus in this case is on § 1396b(g) and the amendments to it.^* That section requires a decrease in the federal medical assistance percentage of payments for inpatient care in hospitals, mental hospitals (MHs), skilled nursing facilities (SNFs), and intermediate care facilities (ICFs) after certain time periods, unless the state "makes a showing satisfactory to the Secretary that, with respect to each calendar quarter for which the State submits a request for payment ... there is in operation in the State an effective program of control over utilization of such services ..."

Section 1396b(g)(1) further sets out specific matters which must be included in such a showing. The following two requirements are particularly pertinent in this action:

(g)(1) ... Such a showing must include evidence that —

(A) in each case for which payment is made under the State plan, a physician certifies at the time of admission, or, if later, the time the individual applies for medical assistance under the State plan ... that such services are or were required to be given on an inpatient basis because the individual needs or needed such services; and

. . . . .

(D) such State has an effective program of medical review of the care of patients in mental hospitals, skilled nursing facilities, and intermediate care facilities pursuant to section 1902(a)(26) and (31) 42 U.S.C. §§ 1396a(a)(26), (31) whereby the professional management of each case is reviewed and evaluated at least annually by independent professional review teams.

42 U.S.C. §§ 1396b(g)(1)(A),(D).

The smaller disallowance resulted from a determination that Colorado failed to meet the physician certification requirement in § 1396b(g)(1)(A). The larger disallowance resulted from a determination that Colorado failed to meet the requirement of § 1396b(g)(1)(D) for independent professional review (IPR) and medical review (MR) during the first two calendar quarters of 1978.

The reviews requirement of § 1396b (g)(1)(D) must be considered in the context of other provisions of the Medicaid Act. Section 1396a(a)(26) and its implementing regulations at 42 C.F.R. Part 456, Subpart I (1981), outline the requirements of a program of medical review in SNFs and MHs; § 1396a(a)(31) and the same implementing regulations outline the requirements of a program of independent professional review in ICFs. While §§ 1396a (a)(26) and (31) require that state plans provide for "regular programs" of MR and IPR, including "periodic" on-site inspections of facilities, the showing mandated by § 1396b(g)(1)(D) requires that such inspections of MRs and IPRs must be performed "at least annually" in order to avoid the decrease in percentage payments.

Section 1396b provides for quarterly payments to the states under the Medicaid Act, and § 1396b(g) incorporates that format by requiring the state to show that it has an effective program of utilization control for each quarter for which it seeks federal funding. The state must submit its quarterly utilization control showings within thirty days after the end of the quarter with respect to which the showings are made. 42 U.S.C. § 1396b(g)(4)(A).

HHS, acting through the Health Care Financing Administration (HCFA), developed specific procedures for the states to follow when making their quarterly showings. Each quarter the state must submit certifications signed by the director of the state Medicaid agency, stipulating that for each level of care there were methods and procedures in effect to assure that utilization control requirements were met during that quarter. 42 C.F.R. § 456.654(a)(1) (1981). Additionally, the state must submit lists of all MHs, SNFs and ICFs participating in the state Medicaid program for that quarter, and must indicate for each facility the dates on which required reviews were completed and the name and degree of one professional member of the review team for each review completed. Id. §§ 456.654(a)(2), (5) and (7). Finally, the state must submit, in addition to the facility listings described above, lists of all MHs, SNFs and ICFs participating in the state Medicaid program for that quarter which did not receive an appropriate review during the annual period ending on the last day of the quarter in question. Id. § 456.654(a)(6).

The state's quarterly utilization control showings are reviewed by HCFA to determine whether they are satisfactory on their face. The Secretary shall find a state's showing "satisfactory" with respect to 42 U.S.C. § 1396b(g)(1)(D), if the showing demonstrates that the state has conducted the required onsite inspections during the 12-month period ending on the last day of the calendar quarter, by a medical review team visit to each SNF and MH that participated in the state's Medicaid program for the showing quarter, and by an independent professional review team visit to each participating ICF.¹ An unsatisfactory showing requires a reduction in the federal medical assistance percentage payment according to the formula set out in § 1396b(g)(5).

Section 1396b(g)(2) requires the Secretary, as part of his validation procedures, to conduct sample onsite surveys of institutions in which persons receive care under the state plan. In those surveys the Secretary should obtain information which supports the representations made in the state's showings. If HCFA is unable to validate the state's showing of utilization control for a particular calendar quarter, it must find the showing invalid and reduce payments by a computation made pursuant to § 1396b(g)(5).

The effective date of the statutory requirements for utilization control codified in 42 U.S.C. § 1396b(g) was July 1, 1973. Social Security Amendments of 1972, Pub. L.No. 92-603, § 207(b), 86 Stat. 1329 (1972). Apparently, these new requirements were not immediately enforced. By letter dated September 24, 1976, HHS informed Colorado that the Department was conducting a survey and could not validate the state's adherence to the MR requirements in SNFs during fiscal year 1975. In that letter HHS said:

The RO Regional Office reviewers were informed by the Colorado Department of Social Services that the MR reports were on file at the Colorado State Health Department. On-site validation visits were made to the Colorado State Health Department on July 26, 27, and 28, 1976. On these occasions, in response to a request by the RO staff for the MR reports, staff of the State Health Department produced form SSA-1569, entitled "Medicare/Medicaid Skilled Nursing Facility Survey Report." RO staff have also been informed that the "MR report" form for participating MHs is form SSA-1537-A, entitled "Psychiatric Hospital Survey Report."

Forms SSA-1569 and SSA-1537-A, developed and issued by the Social Security Administration, are facility-oriented

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