New Jersey Department of Human Services, DAB No. 1090 (1989)

DEPARTMENTAL APPEALS BOARD

Department of Health and Human Services

SUBJECT: New Jersey Department DATE: August 24, 1989 of Human
Services Docket Nos. 88-189 89-55 Decision No. 1090

DECISION

The New Jersey Department of Human Services (State, New Jersey) appealed
determinations by the Health Care Financing Administration (HCFA,
Agency) disallowing a total of $1,252,677 in federal financial
participation (FFP) claimed under the Medicaid program (Title XIX) of
the Social Security Act (Act). The costs disallowed were claimed as
administrative expenditures for non-medical transportation supplied by
the Division of Youth and Family Services (DYFS). The basis for the
disallowances was that the costs were not claimed under an approved
State plan.

For the reasons discussed below, we find that the costs claimed for
transportation by DYFS could be included in a reasonable interpretation
of the State Medicaid plan, taking into consideration the consistent
practice of the State. We therefore reverse the disallowance.

Background

In New Jersey the Department of Human Services is the designated single
state agency for the Medicaid program. The Department of Human Services
consists of several divisions; during the period of the disallowances
these included the Division of Medical Assistance and Health Services
(DMAHS), the Division of Public Welfare (DPW), and the Division of Youth
and Family Services (DYFS). This latter division, DYFS, had previously
been a part of DPW, but became a separate division prior to the
disallowance period.

The Agency disallowed claims for administrative expenditures for
transportation furnished by DYFS because the State plan provided that
these costs were allowed under arrangement with DPW, and did not mention
DYFS.

The State contended that the State plan provision was ambiguous, and
could reasonably be interpreted to cover these transportation costs
furnished by DYFS, where there was an inter-agency agreement among DYFS,
DPW, and DMAHS pertaining to costs of transportation to medical
providers.

The State also argued that the section of the State plan on which HCFA
relied for its disallowances did not require that the State identify all
the State divisions which provided the transportation services.

Analysis

1. The Issue

Section 1903(a)(1) of the Act requires that expenditures be claimed
under an approved state Medicaid plan to be eligible for reimbursement
under Title XIX. During the period covered by the disallowances the
wording of the approved State plan covered the provision of non-medical
transportation services by arrangement with the Division of Public
Welfare.

The services were in fact provided by the State DYFS, which had a
written inter-agency agreement with DPW, and also DMAHS. DPW and DYFS,
as well as DMAHS, are divisions of the State Department of Human
Services, the designated single State Medicaid agency, but DYFS was
originally a component of DPW.

The issue in these appeals is whether, taking into account all the
circumstances, including consistent State practice, the words "under
arrangement with the Division of Public Welfare" in the State plan can
reasonably be read to include services provided by DYFS under its
inter-agency agreement with DPW and DMAHS.

2. Non-Medical Transportation

The use of the term "non-medical transportation" in connection with
transporting patients for medical services at first seems confusing.
The term does not appear in either the statute or regulation pertaining
to transportation under Title XIX. In fact, the parties were not
entirely clear on the use of the term. However, the term appears in the
State plan provision at issue, and also in the disallowances. We
therefore examine the statute and regulation to find out where the term
originated.

Section 1905 is the definition part of Title XIX of the Act. In
addition to the various types of medical services listed in the
definitions of "medical assistance" in section 1905(a), there is a
catch-all provision in subsection (a)(21):

any other medical care, and any other type of remedial care
recognized under State law, specifispecified by the Secretary;

Transportation is identified under "Any other medical care or remedial
care recognized under State law and specified by the Secretary" in the
regulations at 42 C.F.R. 440.170:

(a) Transportation. (1) "Transportation" includes expenses for
transportation and other related travel expenses determined to be
necessary by the agency to secure medical examinations and
treatment for a recipient.

(2) Transportation, as defined in this section, is furnished only
by a provider to whom a direct vendor payment can appropriately be
made by the agency. If other arrangements are made to assure
transportation under 431.53 of this subchapter, FFP is available as
an administrative cost.

Section 431.53, entitled Assurance of transportation, reads as follows:

A State plan must--

(a) Specify that the Medicaid agency will assurenecessary
transportation for recipients to and from providers; and

(b) Describe the methods that will be used to meet this
requirement.

The use of the term non-medical transportation, therefore, applies to
transportation in connection with the furnishing of medical services,
just as much as the term medical transportation does. It applies to
transporting patients to a doctor, for instance. The distinction is
that when the method of transportation is by a separate provider who is
paid directly as a vendor, such as an ambulance service, for instance,
then this is called medical transportation. This is claimed as a
medical service and reimbursement is at the State's federal medical
assistance percentage rate. If the transportation is provided in any
other way, such as by a state employee driving the patient to a doctor,
or paying for the patient to go by taxi or on a bus, then that is
"non-medical" transportation. These costs are claimed as administrative
expenditures, and are reimbursed at the normal 50% rate.

The costs at issue here were all of the latter, or "non-medical"
transportation variety, and were claimed as administrative expenses.
Transcript (Tr.), pp. 71-72.

3. The State Plan provisions

The State Medicaid plan provisions at issue were not changed during the
period of the disallowances. The preprint plan under "Transportation"
has checked "Provided," and the space for "With limitations" is also
checked. The limitations are identified as follows:

Prior authorization by the local Medicaid office is required for
Invalid Coach except in emergency conditions.

Ambulance service is reimbursable if any other method of
transportation is medically contraindicated.

Expenses of non-medical transportation are allowed under
arrangement with the Division of Public Welfare.

Exhibit O, Attachment 3.1-A

The State argued that the language of the State Medicaid plan, providing
for non-medical transportation "under arrangement with the Division of
Public Welfare," was ambiguous because it did not specify with what
other State body or with whom an "arrangement" had to be made for the
transportation. The State further contended that the language was not
clear on its face since it did not specify what type of arrangement had
to be made with DPW.

The Agency contended that the language of the State plan was not
ambiguous, and therefore there was no need to go on to any further
steps, such as considering State practice. See Agency opening
statement, Tr., pp. 82-83.

The Agency witness, who testified immediately after this opening
statement, was nowhere near as positive. The federal Medicaid
representative for the State of New Jersey, whose job function involved
"overall review of the medical assistance plan" (Tr., p. 84), testified
as follows at the beginning of her cross-examination:

Q: Now in terms of arrangements, the state plan speaking of an
arrangement with the Division of Public Welfare, do you know what
that means?

A: No. It means there has been to (sic) some kind of an
agreement, an arrangement, I don't know specifically what the word
arrangement means.

Tr., pp. 93-94.

Later in the cross-examination, the following exchange occurred:

Q: When the state says that nonmedical transportation will be
allowed under arrangement with the Division of Public Welfare, does
that mean in your mind that only employees of the Division of
Public Welfare can do the transportation?

A: I certainly hope it doesn't mean that because it would be in
violation of the law.

Tr., p. 95.

The witness then testified as to the language in the State plan being
limiting language, and also as to the necessity of the state practice
complying with the plan. Eventually, she was asked again about the
language in the State plan about an arrangement:

Q: Okay. The phrase, "under arrangement with the Division of
Public Welfare", could that phrase not, couldn't that phrase
refer to an arrangement with the Division of Public Welfare,
whereby the county welfare and DYFS employees are the ones who
do the actual transportation work?

Her answer was substantially the same as before:

A: I don't really know. I don't know what it meant. I told
you, I don't know what it means. I would accept it at face
value.

Tr., p. 102.

Thus, HCFA's own witness undercut HCFA's position that the State plan
provision was clear on its face, and we reject that position here.

4. The Cost Allocation Plans

The State submitted numerous documents pertaining to its cost allocation
plans, and also offered considerable testimony on the same subject at
the hearing. The State admitted that claiming of costs under an
approved cost allocation plan (CAP) does not automatically make those
costs allowable under the program in which they are claimed. Tr., p.
35. However, the State argued that claiming under approved CAPs "was
relevant to the state's intent and consistent administrative practice."
Tr., p. 26.

The evidence about the State's approved CAPs is relevant here, because
of the ambiguity of the State plan language taken by itself. We said in
South Dakota Dept. of Social Services, DAB No. 934 (1988), that if the
State plan provision is ambiguous, the Board will then go on to consider
other factors in determining whether a state has followed its approved
state plan.

If the provision is ambiguous, the Board will consider whether
the state's proposed interpretation gives reasonable effect to
the language of the plan as a whole. The Board will also
consider the intent of the provision. . . .

p. 4.

We then went on to explain when consistent administrative practice would
be significant:

Lacking any documentary, contemporaneous evidence of intent, the
Board may consider consistent administrative practice as
evidence of intent. The importance of administrative practice
is in part determining whether the state in fact was applying an
official interpretation of a plan provision or has advanced an
interpretation only as an after-the-fact attempt to justify
acting inconsistently with or simply ignoring its plan. Id.

The documents and testimony offered by the State were for the purpose of
showing what the intent of the State was, when it used the words "under
arrangement with Public Welfare" in its State plan, and also that its
administrative practice was at all times consistent with this intent.

The only witness for the State had been employed by the State Medicaid
agency since 1976, and served during much of that period as federal
fiscal coordinator. His primary function when he began his employment
with the State was to develop a cost allocation plan for DYFS to shift
the costs of transportation for medical services from Title XX, Social
Services, to Title XIX, Medicaid. The reason, as the witness stated,
was that there was a ceiling on the amount of reimbursement for social
services, while there was none under Title XIX.

The State was permitted to show what was in its CAP for transportation
to medical providers as evidence of its intent and practice, even though
the Agency admitted that New Jersey was operating under an approved CAP
(Tr., p. 33).

The witness testified that the CAP he prepared, based on a random moment
sample, was submitted on December 20, 1977, and was approved effective
July 1, 1977. Tr., pp. 36-37; see Exhibit B. The witness explained
that in this CAP the transportation costs were to be transferred to
DMAHS for claiming under Title XIX. Tr., p. 38; see Exhibit A,
Appendix 3, Schedule D-8. He also testified that he then worked on
revising the CAP of the Division of Medical Assistance to reflect the
charging of transportation costs to Title XIX by DYFS.

5. Claiming for non-medical transportation costs

The State's witness also testified that the State subsequently began
claiming for FFP for non-medical transportation under the approved CAP,
based on the random moment sample. He testified that there were claims
based on the approved CAP of DYFS "during the period beginning at least
September of 1981 going through the period of December 31, 1985." Tr.,
p. 45. The witness also produced from his files a document dated
September 30, 1977, headed "RMS FOR DYFS COST ALLOCATION," which had a
percentage identified as being for "MEDICAL TRANS-19." Hearing Exhibit
#3.

The same witness also testified that based on the random moment study,
as outlined in the CAP, claims were submitted for non-medical
transportation furnished by DYFS. This witness could not testify of his
own personal knowledge that the claims were in fact filed with HCFA on
the claiming form (HCFA-64), but there seems to be little doubt that
they were so filed. See Hearing Exhibits #4 through #7.

The significance of offering this testimony and these exhibits is to
meet the requirements outlined in South Dakota, supra, in considering
whether a state has followed its approved state plan. Administrative
practice is important in determining whether the state in fact "was
applying an official interpretation of a plan provision," or whether the
state had "advanced an interpretation only as an after-the-fact attempt
to justify acting inconsistently with or simply ignoring its plan."
Id., p. 4. It is obvious that going back to 1977 and 1978, many years
before the period covered by the disallowances here, the State intended
to claim non-medical transportation costs furnished through DYFS as
Title XIX costs under its approved CAP. It is not an explanation that
the State has interposed based on after-the-fact rationalization.

6. Arrangement with the Department of Public Welfare

The Agency has consistently taken the position in this appeal that there
was no evidence indicating that any arrangement existed between DPW and
DYFS. Counsel for the Agency stated this categorically in his opening
statement. Tr., p. 81. This statement is surprising since the State had
already submitted Exhibit Q into the record before the hearing. This
exhibit consisted of a State internal transmittal letter, dated August
19, 1977, and an attached agreement. The transmittal letter carried the
subject heading: Medical Transportation--Claim Shift From Title XX to
Title XIX. The attached agreement is entitled "Agreement of Cooperation
among Division of Medical Assistance and Health Services and Division of
Youth and Family Services and Division of Public Welfare."

In its post-hearing brief the Agency refused to accept this exhibit as
evidence of an arrangement between DYFS and the DPW for claiming of
non-medical transportation costs. The Agency argued that nothing in the
agreement "establishes any arrangement between DPW and DYFS other than
some report distribution." Id., p. 9. There is no requirement that
such an agreement spell out every detail. All the State plan speaks to
is some "arrangement with the Department of Public Welfare." Certainly,
Exhibit Q, taken together with the testimony of the State's witness
referred to above, and Hearing Exhibits #1 through #7, establishes that
there was in fact an arrangement between DYFS and DPW.

The Agency seems to go to extremes in attempting to disparage Exhibit Q.
Thus, in its post-hearing brief the Agency stated that "[t]here is no
mention in the cover letter of any agreement or arrangement between
divisions." Tr., p. 9. Yet the cover letter has the following sentence
in the first paragraph:

An inter-agency Agreement of Cooperation among the three (3)
Divisions, attached for your information, has been adopted to
delineate the roles and functions each State agency will discharge
under the Medical Transportation Services Program.

Thus, we conclude that DYFS did have an "arrangement" with DPW for
providing transportation.

7. There was no federal requirement for the disputed language in
the State plan.

The State also offered an alternative argument to the one discussed
above. This contention was that the language in question in the State
plan did not mean that expenses of non-medical transportation were
allowed only under arrangement with DPW. The State's argument was that
the language in the plan was a limitation on transportation provided by
county welfare agencies. For example, the first sentence in the State
plan provision requires prior authorization for the use of an invalid
coach by the "local Medicaid office," which is a county welfare agency.
The third sentence, the one referring to an arrangement with DPW, was
applicable to transportation costs of the local county welfare agencies,
since 45 C.F.R. 95.507 required that a cost allocation plan for services
provided by a "governmental agency outside the State agency" must be
supported by a written agreement. State brief, p. 12.

The State went on to argue that this limitation did not apply to
transportation costs of DYFS, which was a State agency and part of the
single State agency, rather than part of any local government.
Therefore, the DYFS expenses of transportation were not subject to the
limitations of any agreement with DPW.

The Agency did not give any satisfactory answer to this argument, but
contended that the State plan provisions were clear and the costs in
question were not claimed in accordance with them. The State's
corollary argument is that there was no requirement that the State
specify in its State Medicaid plan which agency of State government
would supply the non-medical transportation.

The regulation, 42 C.F.R. 431.53, has only two requirements for what
must be in the State Medicaid plan pertaining to transportation to
medical providers. First, the plan must specify that the Medicaid
agency "will assure" necessary transportation for recipients to and from
providers. 431.53(a). HCFA has not contended that the State plan did
not meet this requirement.

The second requirement, in 431.53(b), is that the plan "must describe
the methods that will be used to meet this requirement" [in (a)]. There
is no requirement in the regulation that the plan must identify each
branch of state government which will provide the transportation; the
single state agency is of course responsible for seeing that the
transportation is provided, and DYFS was part of the single state
agency.

The Agency's argument is that this identification of the specific
provider of transportation is required by the language of 42 C.F.R.
440.170. This section defines transportation as furnished only by a
provider to whom a direct vendor payment can be made, and then states
that "[I]f other arrangements are made to assure transportation under
431.53 of this subchapter, FFP is available as an administrative cost."
440.170(a)(2).

We do not read this regulatory provision to mean what the Agency says it
does. We read it to provide that FFP is available as an administrative
cost, rather than as a medical service cost, if arrangements are made by
the state to provide transportation to secure medical examinations and
treatment for a recipient by a method that is different from the direct
vendor payment method described in 440.170(a)(2). This is in accord
with the language in 431.53 that the Medicaid agency must assure
necessary transportation and "describe the methods" that will be used to
meet this requirement. 431.53(b).

The State plan preprint listed "transportation" under "Amount, Duration
and Scope of Medical and Remedial Care and Services Provided to the
Categorically Needy." See State plan effective October 1, 1986,
Attachment 3.1-A, page 8, in Exhibit O. Under paragraph 20, the only
boxes checked were "provided", and "with limitations." The description
provided on the Addendum to Attachment 3.1-A, had a similar heading:
"State Plan under Title XIX of the Social Security Act - Limitations on
Amount, Duration and Scope of Services Provided to the Categorically
Needy."

The State plan, under this heading, described three methods of meeting
the assurance for transportation in its State plan. The first reference
was for "Invalid Coach"; the second method was "ambulance service"; the
third was for "expenses of non-medical transportation." The plan stated
that these expenses (of non-medical transportation) "are allowed." The
words "under arrangement with the Division of Public Welfare" were not
required by regulation, nor were they suggested as being required by the
preprint. The words were not a limitation by the single State agency of
non-medical transportation. The language was that expenses of
non-medical transportation were allowed. There was no limitation on the
"amount, duration and scope" of non-medical transportation, as
distinguished from the specific limitations on the use of invalid coach
and ambulance.

The situation is in some ways similar to that of the Boren amendment
referred to in South Dakota, supra, and the cases following it (see
n.3), where we spoke of the flexibility allowed states in the provision
for the use of rates for long-term care facilities determined in
accordance with methods and standards developed by the State, where the
State made certain assurances to the Secretary about the rates.

Here the State is required to make assurances about furnishing
transportation, and describe the methods it will use to meet those
assurances. There is no requirement that the State provide a list of
every State or county agency which may in fact furnish the assured
transportation. The methods are by invalid coach, ambulance, and
non-medical transportation, i.e., by other than a vendor to whom a
direct payment can be made. The State met the regulatory requirements,
and, therefore, it does not matter who in fact supplied the assured
transportation.

8. The costs were otherwise allowable.

It is important to realize what is not involved in this disallowance.
In its original brief HCFA stated that it was not disputing the validity
of the State's medical assistance plan, the organization of its
Department of Human Services, or the accuracy of its random moment
sample. p. 6. In its post-hearing brief the Agency said, in addition,
that "[t]here is no argument . . . over the authority of the State to
authorize the reimbursement of expenses incurred for non-medical
transportation." p. 11.

The situation here is that the language used by the State in its plan
could reasonably be read, on its face, to encompass the provision of
non-medical transportation by DYFS. This is particularly so, where the
language in the plan, if it did not on its face allow transportation by
DYFS, was ambiguous enough so that the State reasonably construed it to
permit such transportation, under the language of an arrangement with
DPW, and this was the State's consistent practice.

In fact, the disallowance letter overstates the Agency's case, in saying
that "[t]he State plan only covers expenses for non-medical
transportation provided by the Division of Public Welfare . . . during
this time period." As we discussed above, the State plan actually
covered expenses for non-medical transportation provided "under
arrangement with the Division of Public Welfare." There might be more
plausibility for the Agency position if the State plan said what the
disallowance said it did. But where the plan said "under arrangement
with the Division of Public Welfare," the State should not suffer loss
of FFP for services otherwise allowable simply because DYFS actually
provided the services. It should make no difference who provided the
services, if there was a provision for the services in the State plan
and the costs were otherwise allowable. (See the discussion of the
State's alternative argument above.)

Conclusion

Taking into consideration all the facts of this particular case, we find
the State's construction of the provision in its State plan to provide
non-medical transportation in the manner in which it did to be a
reasonable interpretation, consistent with federal requirements. We
therefore reverse the disallowance.


_____________________________ Judith A. Ballard


_____________________________ Donald F. Garrett


_____________________________ Alexander G. Teitz Presiding Board