PASARR: what you should know about the new mental health requirements.

Will this new government regulation be a boon or a bane?

On January 29, 1993, the final rule of the Health Care Financing Administration (HCFA) on Preadmission Screening and Annual Resident Review (PASARR) went into effect. The purpose of the rule is to prevent placement of individuals with mental illness or mental retardation in a nursing facility (NF), unless they clearly need nursing facility levels of care. The promulgation of the final rule had been awaited since PASARR requirements were first imposed on nursing facilities by the Omnibus Budget Reconciliation Act of 1987 and revised by Omnibus Budget Reconciliation Act of 1990. Implementation of PASARR has been made a condition of approval for State Medicaid Plans. Thus, administrators' familiarity with the Final Rule is essential, since it affects their facilities' reimbursement of nursing homes and the types of services that they provide.

What is PASARR?

PASARR requires the states to implement preadmission screening and annual resident reviews for all persons seeking admittance to, or residing in, Medicaid-certified nursing facilities, regardless of whether they are Medicaid, Medicare, or private pay patients. The statutory provisions governing the PASARR procedures apply to both persons with mental illnesses and, in slightly different form, persons with mental retardation. However, the focus of this discussion is solely upon the population affected by mental illness.

A person is considered to have a serious mental illness under the Final Rule when he or she meets three criteria of diagnosis, level of impairment, and duration. For example, he or she must have a diagnosis of a major mental disorder (schizophrenia, mood, paranoid, panic or other somatoform disorder; personality disorder; or another mental disorder that may lead to a chronic disability--but excluding dementia, Alzheimer's, or a related disorder). In addition to the diagnosis, an individual must also have had a functional limitation on a continuing or intermittent basis in at least one major life activity within the last three to six months. Finally, the person must have received psychiatric treatment involving inpatient or partial hospitalization more than once in the past two years, or required supportive services at home or in residential treatment as a result of a significant disruption in a normal living situation. Interventions by housing authorities or police in response to a significant disruption in a normal living situation may qualify in meeting the treatment criterion.

Under the Final Rule, state mental health authorities must arrange independent screenings and evaluations for all individuals who apply as new admissions to Medicaid nursing facilities (NFs). PASARR programs also must provide an annual review of all residents with mental illness or mental retardation. The screening is done on two levels: Level I is used to determine whether an individual seeking NF care may have a serious mental illness; Level II determines whether an individual's physical and mental condition requires the level of service provided by a nursing facility and confirms the existence of a serious mental illness.

While evaluations are done outside of the state mental health authority, actual determinations are made by the state agency. States cannot contract with NFs to conduct the required screenings, but a state's PASARR system can use NF-developed resident assessment (RA) data. In addition, Medicaid RAs can be used to meet the requirements of the Level I annual resident reviews.

PASARR does not require a nursing facility to admit anyone, but it does prevent certain admissions. Persons not needing the level of care provided by nursing homes are to be denied admission or, with certain exceptions, to be transferred to more appropriate settings. Persons with mental illnesses who need NF-level services can be admitted to a nursing home if the placement is appropriate, even though they may need "specialized services" (as narrowly defined by the final rule) to treat a mental illness.

"Specialized Services" and Required Mental Health Services 

If specialized mental health services are needed, the state must either provide or arrange for them. They are essentially the same kind of intense psychiatric services delivered in an inpatient psychiatric setting, not the lower-intensity mental health services one might expect to find in a nursing facility. The distinguishing characteristic of "specialized services" is not the type of service provided, but its frequency and intensity. Because these services are a state--and not a nursing facility--responsibility, if a nursing facility provides "specialized services," those services are not Medicaid-reimbursable. Federal Financial Participation (FFP), however, is available for the other less intensive mental health services for persons needing nursing facility levels of care.

In fact, based on individual determinations, the PASARR rules require NFs to provide all psychiatric care below the "specialized services" level necessary to attain or maintain the "highest practicable physical, mental, and psychosocial well-being of each resident." These required services include "mental health" rehabilitation. An individual's PASARR report is supposed to identify which level of services are to be provided by the state as "specialized services" and which are to be provided by the NF as mental health services.

A state's PASARR evaluation report is expected to identify the mental health services provided by an admitting or retaining NF and the need for specialized services or for services of lesser intensity. The report is to be provided to the NF to use for its internal assessment and care planning.

An appeals process is available to individuals who are denied admission to NFs and to NFs who might want to challenge a PASARR decision.

Implications of PASARR

In a 1993 article in the American Journal of Public Health, Duke University's Barbara Burns and her colleagues reported that a significant neglect of the mental health needs of nursing home residents was found when the National Nursing Home Survey data was last collected in 1985.|1~ The clear intent of the final PASARR rule is to end such neglect.

Somewhat at odds with this Congressional intent, however, is the interplay between PASARR and the institutions for mental diseases (IMD) rule. If nursing facilities provide the required "lower intensity" mental health services to enough residents, they run the risk to their Medicaid reimbursement. Medicaid law contains a provision which denies Title XIX reimbursement for all (i.e., physical and mental health) Medicaid-covered services provided to otherwise eligible persons who are over twenty-one and under sixty-five years of age residing in "institutions for mental diseases (IMDs)." An IMD is defined as "a hospital, nursing facility, or other institution of more than sixteen beds, that is primarily engaged in providing diagnosis, treatment, or care of persons with mental diseases, including medical attention, nursing care, and related services." As a general rule, whenever a nursing facility has over half of its patients diagnosed with a mental illness, it can be categorized as an IMD and denied Medicaid reimbursement by the Health Care Financing Administration (HCFA). It can also be classified as an IMD for having the overall character of an IMD (based on an assessment of 10 criteria which are beyond the scope of this article to discuss).

HCFA doesn't see this as a serious problem, because it believes the PASARR process will effectively remove most individuals with serious mental illnesses from NFs to other treatment settings. However, the net effect of the Final Rule's narrow definitions of "mental illness" and "specialized services" will allow the vast majority of individuals with mental disorders to enter and reside in NFs and receive needed services, but with reimbursement for those services remaining questionable.

Another problematic area relates to possible state default on its treatment obligations under PASARR. What happens if a state fails to provide "specialized services" for a resident of a nursing facilities needing such intensive

treatment? Who is liable? Can Medicaid or Medicare FFP be withheld from a resident or a nursing facility due to a state's failure to perform its responsibilities under the law? Would a nursing facility be held accountable if its psychiatric rehabilitation were inadequate to compensate for a state's failure to provide "specialized services?"

Unfortunately, the law doesn't provide a specific remedy for state dereliction in this regard. Nonetheless, HCFA has said that nursing facilities are not accountable for providing "specialized services" and so they would not be penalized for a state's failures, nor would they be held to a "specialized services" standard in the event of a state default.

Will the PASARR process prove to be a boon or a bane? Will it achieve its objective of promoting more appropriate placements for persons with mental health treatment needs or will it merely compound the already frustrating snarl of paperwork and administrative regulations confronting nursing home administrators? Will it lead to more accurate assessments of mental health treatment needs or encourage "gaming the system" to maximize reimbursement? It is still too early to know, but it is clear that nursing home administrators and staff will be providing the answers to these questions as they help to implement the new PASARR process.

Reference

1. Burns BJ, Wagner HR, et al. Mental health service use by the elderly in nursing homes. American Journal of Public Health 1993; 83:331-7.

Jim Havel is Associate Director of the Mental Health Policy Resource Center, a policy information resource based in Washington, DC.