GAB Decision 121
September 30, 1980
Docket Nos. 78-137-KY-HC, 79-22-KY-HC
Kentucky Department for Human Resources;
Przybylinski, Donald; Coster, Clarence Settle, Norval
The Commonwealth of Kentucky, Department for Human Resources (Grantee
or State) appealed under 45 CFR Part 16 the disallowances of Federal
financial participation (FFP), for the calendar quarters ending on
December 31, 1977 and March 31, 1978, made by officials of the Health
Care Financing Administration (HCFA or Agency). The disallowances were
based on determinations that the State had submitted claims for FFP for
certain expenditures at higher rates than allowed by the regulations.
Inasmuch as identical issues were involved and the parties did not
object, the two cases were considered together.
The decision is based on the State's November 2, 1978 and February 9,
1979 applications for review, the Agency's January 25, 1979 and June 8,
1979 responses, and the Agency's September 8, 1980 response to the
Board's July 1, 1980 Order to Develop the Record. The Order noted that
the Board might reach a decision based on the parties' responses. The
State did not file a response to the Order.
Background
Various percentages of FFP are established by law and regulation for
operation and administration of specific aspects of the Medicaid program
under Title XIX of the Social Security Act.
The amounts disallowed by HCFA represent reductions in FFP from the
100% and 75% rates claimed by the State to the 50% rate HCFA has found
to be allowable. The Agency's review of expenditure reports submitted
by the State for the quarters ending December 31, 1977 and March 31,
1978 resulted in separate disallowances of $22,332 and $42,165,
respectively. In both cases the disallowance letters call for a
reduction in the State's claim for FFP from a rate of 100% to 50% for
expenditures other than the compensation and training costs of personnel
of the State licensing agency who are responsible for inspection of long
term care facilities. Also, in both cases the disallowance letters call
for a reduction in the State's claim for FFP from a rate of 75% to 50%
for costs other than salary, other compensation, travel, and training of
skilled professional medical personnel and direct supporting staff of
the State agency administering the Medicaid program.
The relevant provision, quoted from 42 CFR 446.175, reads as follows:
42 CFR 446.175 Staffing and training costs
(a) "Availability of FFP." FFP is available in expenditures for
salary or other compensation, fringe benefits, travel, per diem, and
training, at rates determined on the basis of the individual's position,
as specified in paragraph (b) of this section.
(b) "Rates of FFP." (1) For skilled professional medical personnel
and supporting staff of the State agency or of other public agencies (as
defined in Sec. 446.151), the rates is 75 percent.
(2). . . .
(3). . . .
(4) For personnel of the State licensing agency who are responsible
for inspections of skilled nursing or intermediate care facilities, the
rate is 100 percent through September 30, 1980:
(i) If a work plan and budget plan relative to this personnel have
been approved by the Department's regional office, and
(ii) Only for those expenditures that are not attributable to the
overall cost of meeting the State licensing agency's responsibilities
under State law and regulations, but are necessary and proper for
carrying out the inspections required under Title XIX and the pertinent
regulations of this chapter.
The requirements for increased levels of FFP contained in 42 CFR
446.175 are the same as those of 42 CFR 450.120(a) and (d). The latter
was in effect during the quarter involved in 78-137-KY-HC and part of
the quarter involved in 79-22-KY-HC; the former was in effect during
the remainder of the quarter involved in 79-22-KY-HC. Currently, the
provisions of 42 CFR 446.175, with minor revisions not relevant here,
can be found at 42 CFR 432.50.
The State argues that 100% and 75% FFP is available under the
regulations for the claims disallowed. HCFA contends that 100% and 75%
FFP is not available under the regulations for the costs claimed but 50%
FFP is available. The State presents no documentation of its position.
HCFA does present documentation of its position.
Items Disallowed
The notifications of disallowance did not identify the items for
which the higher rates of FFP were disallowed. HCFA's responses to the
State's appeals and HCFA's response to the Board's Order to Develop the
Record stated that the items in question were expenditures for supplies,
communications, premises, contractual services, rental and maintenance
equipment, capitalized equipment and non-capitalized equipment.The
Agency filed supporting documentation, including copies of the State's
cost allocations workpapers and regional office workpapers. Under the
applicable regulation cited above, claims for expenditures for supplies,
communication, premises, contractual services, rental and maintenance
equipment, capitilized equipment and non-capitalized equipment are not
allowable for FFP at the 75% or 100% rates.
In its response to the Board's Order, HCFA states:
It is important to note that the Respondent has not characterized the
costs involved in any manner contrary to what the Applicant itself has
done. The Respondent further believes that its position is a very
straightforward one -- it has set forth what the law and the regulations
provided and its has based its disallowance amounts upon information
gleaned from the Applicant itself, without different categorization or
manipulation of those figures. (page 3)
HCFA's submissions support this contention. Moreover, HCFA has
offered to present additional documentation and witnesses if necessary.
The State has presented no evidence beyond its conclusory statements.
The documentation presented persuades the Board that the disallowances
can be supported and should be sustained.
Sufficiency of Notice to State
On April 10, 1979, the designated attorney for the Kentucky
Department of Human Resources stated in a telephone conversation with a
member of the Board's staff, that the State had found that HCFA's
notifications of disallowance did not provide sufficient information
regarding the expenditures for which FFP was being disallowed to permit
the State to prepare an adequate appeal. The designated attorney for
Kentucky further stated that State auditors were using HCFA's response
to the State's appeal as a source of information about the disallowances
so as to prepare a more complete statement of Kentucky's case.
The Board agrees that HCFA's notifications of disallowance in this
matter may not have sufficiently informed the State of the specific
items for which FFP was being disallowed. The Agency's response to the
State's appeal, however, provided specific information regarding the
items disallowed, thus curing any possible defect in the disallowance
letters. The Board's Order to Develop the Record set forth a summary of
the record as presented by the parties and was in part an opportunity
for the State to use the information contained in the Agency's response
to present a more complete appeal.
The Board, having received no response to its Order to Develop from
the State, inquired by telephone whether a response would be filed.
Kentucky's designated attorney stated that Kentucky would not file a
response because of changover in staff who were familiar with the
disallowance. Kentucky had been informed in the Order that the Board
might reach a decision based on responses to the Order. Nonetheless, the
State still presented no evidence in support of its position.
Conclusion
The documentation presented supports HCFA's position. The State has
presented no documentation in rebuttal. Accordingly, the Board upholds
HCFA's disallowance of $22,332 in FFP for the quarter ending December
31, 1977 and $42,165 in FFP for the quarter ending March 31, 1978.
OCTOBER 04, 1983