Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: Missouri Department
DATE: September 6, 1990
of Social Services Docket No. 90-28
Decision No. 1193
DECISION
I. Introduction
The Missouri Department of Social Services (State) appealed a
disallowance by the Health Care Financing Administration (HCFA) of
$86,208 in federal funding claimed for Medicaid services under Title XIX
of the Social Security Act (Act). The disallowance was for the federal
share of a portion of the rate paid for long-term care to two nursing
homes: Mt. Vernon Park Care Center West (Mt. Vernon) and Cosada Villa of
Missouri (Cosada Villa). The disallowance period for Mt. Vernon was
April 1, 1984 through June 30, 1989. The disallowance period for Cosada
Villa was January 1, 1985 through June 30, 1989.
HCFA determined that Missouri had violated its state plan by granting
Mt. Vernon and Cosada Villa negotiated trend factor increases to
compensate them for inflation during their first year of operation. 1/
The State responded that the trend factor increases did not violate the
state plan and were consistent with its practice in administering the
state plan.
We conclude that the state plan authorized trend factors for newly
constructed nursing homes during their first year of operation and
therefore we reverse the disallowance. Nevertheless, we agree with HCFA
that there would be a violation of the state plan if the State's
practice of granting trend factors resulted in double inflation
allowances. Therefore, HCFA is not precluded from requiring further
information from the State and from reviewing the rates for these
providers further to determine whether they actually received a double
inflation allowance.
II. Analysis
In order to qualify for federal funding, a state's claim for the cost of
medical services must be in accordance with an approved Medicaid state
plan. 2/ Section 1903 of the Act. Missouri interprets its Medicaid
state plan as authorizing trend factors for newly constructed nursing
homes during their first year of operation. Missouri represented that,
since it consistently used trend factors to compensate providers for
inflation, providers omitted the cost of inflation from their proposed
budgets. App. Ex. B., p. 28; App. Reply Brief, p. 7. HCFA argued that
such trend factors violated Missouri's state plan and compensated a
newly constructed provider twice for the cost of inflation. HCFA
assumed that, since first year rates were set from proposed budgets,
those budgets and rates would have included the effects of inflation.
Disallowance Letter, p. 3. There is no indication in the record that
HCFA actually reviewed the providers' budgets to determine whether they
included inflation increases or actually reviewed the State's assessment
of these budgets to determine whether the initial rates set by the State
included inflation increases. Id.; App. Ex. B.
Missouri's interpretation of its state plan was reviewed in Missouri
Dept. of Social Services, DAB No. 1189 (1990). In that case, the Board
upheld Missouri's interpretation and overturned HCFA's disallowance of
trend factor increases to a newly constructed nursing home during its
first year of operation.
In Missouri, the Board deferred to the State's interpretation of its
plan for the following reasons:
o Missouri's interpretation was reasonable in light of both the
language and the organization of the plan.
o Missouri's interpretation was supported by its contemporaneous
administrative practice.
o There was no evidence that Missouri's interpretation and
practice resulted in providers' receiving a double inflationary
factor for this period.
o Missouri's interpretation was consistent with the purpose of its
prospective reimbursement methodology.
For the reasons set forth in Missouri (pages 5-11), which we incorporate
here, we reverse this disallowance on the grounds that the plan
permitted trend factors for newly constructed providers in their first
year of operation.
However, we note that in Missouri the record contained evidence which
supported the State's position that its actual practice in administering
the plan did not result in double compensation for inflation. 3/ Since
the purpose of the plan is to establish rates which are "reasonable and
adequate to assure an efficient and economically operated facility . . .
." (13 CSR 40- 81.081(1)), such double compensation would violate the
plan by exceeding what would be required to assure an economically
operated facility. Because there is no evidence in this record as to
the circumstances of these providers, our decision does not preclude
HCFA from further examining whether Missouri's practice resulted in
these providers being compensated twice for inflation.
III. Conclusion
For the reasons set forth above, we conclude that the state plan
authorized trend factors for newly constructed providers during their
first year of operation and therefore we reverse the disallowance.
However, HCFA is not precluded from requiring additional information
from the State and from reviewing the rates for these providers further
to determine whether they actually received a double inflation
allowance.
Judith A. Ballard
Norval D. (John) Settle
Donald F. Garrett Presiding Board Member
1. The Missouri Dept. of Social Services granted Mt. Vernon, a
newly constructed facility, an initial per-diem rate of $46.20,
effective January 16, 1984. App. Ex. B, p. 24. On July 1, 1984, the
State increased Mt. Vernon's rate by a negotiated trend factor. Id.
The Missouri Dept. of Social Services granted Cosada Villa, a newly
constructed facility, an initial per-diem rate of $42.57 effective
August 6, 1984. Id., p. 17. On January 1, 1985 and July 1, 1985, the
State increased Cosada Villa's rate by negotiated trend factors. Id.
Since the providers' subsequent rates were based on their initial rates
as increased by trend factors, HCFA's disallowance of those trend
factors causes the rate paid by the State to be incorrect during the
initial year and subsequent years.
2. Missouri's provisions for setting Medicaid long- term care rates
are contained in Attachment 4.19-D of its state plan. The attachment is
a copy of the Missouri Medicaid long-term care rate regulations which
are set forth in Title 13 of the Missouri Code of State Regulations.
The plan and regulations have been amended a number of times. In this
decision and in Missouri Dept. of Social Services, DAB No. 1189 (1990),
we have relied on the 1983 version.
3. Specifically, the record in Missouri established that the
per-diem rate at issue, even when increased by trend factors, was
significantly below the provider's allowable cost; that the increased
rate was significantly below the applicable class ceiling; and that the
rate was based on an eight month, rather than a twelve month, budget.
These factors were relevant to our finding that there was no evidence
that Missouri's practice had resulted in the provider's receiving double
compensation for