Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: Missouri Department of Social Services
DATE: February 21, 1992
Docket No. 91-124
Decision No. 1304
DECISION
The Missouri Department of Social Services (Missouri) appealed a
decision
by the Health Care Financing Administration (HCFA) disallowing
$557,168 in
federal financial participation (FFP) claimed under Title
XIX (Medicaid) of
the Social Security Act (Act) for the period April 1,
1985 through June 30,
1990.
Based on a financial review, HCFA determined that time studies used
by
Missouri did not adequately document its claims for FFP at the
Federal
Medical Assistance Percentage (FMAP) rate in expenditures for
case
management services provided under its Home and Community Based
Services
waiver. 1/ HCFA contended that Missouri was required to
maintain
certain specific documentation about the services provided to
each
recipient to support its claim for reimbursement at the FMAP rate,
which
it did not do. HCFA found, however, that FFP was available for
these
expenditures at the 50% rate available generally for
Medicaid
administrative costs. Consequently, HCFA disallowed the
difference
between the FMAP reimbursement rate claimed by Missouri and the
50% rate
which, HCFA contended, applied.
As explained more fully below, we reverse HCFA's disallowance for
the
period April 1, 1985 through January 17, 1989. We find that during
this
period, Missouri's time studies provided documentation sufficient
to
satisfy then-existing HCFA requirements. HCFA cannot reasonably
decline
to reimburse Missouri at the FMAP rate based on the failure to
meet
specified documentation requirements, prior to the time Missouri
had
adequate notice of those requirements. For the period January 18,
1989
through June 30, 1990, we sustain the disallowance since we find
that
Missouri had adequate notice during this time period that it did
not
meet the documentation requirements applicable to case
management
services claimed at the FMAP rate. We remand the appeal to
HCFA for
recalculation of the disallowance amount. Should Missouri
disagree with
the recalculation, it may return to the Board but only for the
limited
purpose of appealing the recalculation.
Background
The Medicaid program provides federal funding to assist states
in
providing medically necessary services to certain low
income
individuals. HCFA advances funding to participating states on
a
quarterly basis equal to the federal share of estimated program
costs.
Within 30 days of the close of each fiscal quarter, states are
required
to submit to HCFA a report of actual costs incurred during that
quarter
(Form HCFA-64). HCFA examines the report to ensure the
allowability of
costs claimed and then adjusts future Medicaid payments as
necessary to
reflect any over- or underpayment which may have been made to
the state
in a prior quarter. See section 1903(d) of the Act; 42 C.F.R.
. 430.30.
Section 1915(c) of the Act authorizes states to provide Home and
Community
Based Services (HCBS) under a waiver of certain
otherwise-applicable Medicaid
requirements. These services are provided
to persons who would require
institutionalization but for the
availability of such services. See 42
C.F.R. . 441.300 et seq. Each
state electing to provide HCBS waiver
services must request a waiver and
have a written plan approved by
HCFA. 42 C.F.R. . 441.301. Case
management services may be
provided by states under the HCBS waiver
program if they are approved as part
of the waiver request. 42 C.F.R. .
440.180.
Effective October 1, 1983, Missouri had an approved HCBS waiver
which
included case management services. This waiver was
subsequently
extended through the periods at issue in this
disallowance. HCFA's
Financial Management Report of October 31, 1991,
on which the
disallowance is based, lists the amounts claimed for HCBS
case
management services as program costs at the FMAP rate for the
quarters
ending June 30, 1985 through June 30, 1990. 2/ HCFA Ex. 2, p.
8. HCFA
disallowed the amounts claimed in excess of the 50%
administrative rate
based on its determination that Missouri had not met the
documentation
requirements in the State Medicaid Manual, Part 2, section 2500
. A.18
(issued December 1988, effective January 18, 1989). HCFA Ex.
1.
By letter of September 3, 1985, HCFA had transmitted to Missouri
the
instructions for a new Schedule I to be attached to the
HCFA-64
beginning with the fourth quarter of FY 1985 (July 1, 1985 -
September
30, 1985). See Missouri Ex. A. Schedule I encompassed
expenditures
made under the HCBS waiver program. The instructions
relayed the
following directive from HCFA:
Where the State proposes to provide services under a
waiver
(e.g. case management) by individuals employed by a component
of
the State, the cost of these services must be claimed as
a
program cost on the Form HCFA-64.9 and/or HCFA-64.p [sic],
as
appropriate. (Case management not provided under a HCBS
waiver
but furnished by public employees is reportable as
an
administrative cost.)
See Missouri Ex. D, p. 2. HCFA's instructions for Schedule I
appeared
in the State Medicaid Manual as section 2500.6, which was issued
in
November, 1985.
Missouri reported its actual expenditures for both HCBS waiver
case
management services and for case management claimed as
administration
based on time studies throughout the period at issue in
the
disallowance. Throughout the disallowance period, Missouri had
cost
allocation plans (CAPs) approved by HCFA which permitted allocation
of
case management costs based on time studies. 3/
Effective April 1, 1986 and in response to a request from HCFA,
Missouri
revised its time study to calculate its expenditures for these
services
using three time study codes: services to recipients eligible
for such
services under the HCBS waiver (MW); services to recipients
eligible
under the Medicaid program but not under the waiver (MD); and
services
to recipients eligible under both (MM). Missouri then claimed
all of
its MW and half of its MM costs as program costs at the FMAP rate;
it
claimed all of its MD and the other half of its MM costs
as
administrative costs at the 50% rate. 4/
HCFA issued a draft report of a review of Missouri's Forms HCFA-64 for
the
period October 1, 1987 through September 30, 1988. During that
period,
the State had claimed $888,534 ($526,633 FFP) for case
management services
under the HCBS waiver program. In its draft report,
HCFA found that the
$526,633 FFP was not supported by adequate
documentation and requested a
return of all federal funding. However,
based on the State's reply,
HCFA determined that the services were
necessary for the efficient
administration of the Medicaid program so
that Missouri's claims were
allowable at the 50% rate available for
administrative costs.
In its final review report issued October 31, 1990, HCFA expanded the
time
period encompassed by the review so that it covered the period
April 1, 1985
through June 30, 1990, but allowed for reimbursement of
Missouri's case
management services at the administrative cost rate
throughout the entire
period. During these 17 quarters, Missouri had
claimed $5,510,823
($3,312,579 FFP) at the higher FMAP rate. At the 50%
administrative
cost rate, Missouri would have been entitled to only
$2,755,411 FFP.
HCFA requested the return of the difference of $557,168
and Missouri brought
this appeal.
Analysis
A. Missouri's time studies were
sufficient support for its
claims at the FMAP rate for the period April
1, 1985 through
January 17, 1989.
Missouri used the time studies 5/ performed according to its
approved
CAPs, which measured actual services provided, to determine the
amounts
it claimed for both program costs, under the HCBS waiver program,
and
administrative costs, for other case management programs. 6/
HCFA argued that accounting methods such as time studies and
other
statistical sampling methods constitute unacceptable estimates.
7/ HCFA
did not argue that the time studies were not sufficient to
ensure that
Missouri was claiming only for case management services
properly
provided under the terms of the HCBS waiver to eligible
individuals.
See generally HCFA pp. 6-8. The State argued that time
studies were
utilized in the past and that there was no notification by HCFA
that
additional documentation was required under the policy requiring
the
reporting of HCBS waiver case management services as program costs.
See
generally Missouri pp. 3-5.
1. Sources of law, regulation, and policy
Section 1903(a)(1) of the Act provides the basic standard
for
reimbursement for expenditures for medical assistance under Medicaid:
[T]he Secretary . . . shall pay to each State which has a
plan
approved under this title, for each quarter . . . an
amount
equal to the Federal medical assistance percentage [FMAP] . .
.
of the total amount expended during such quarter as
medical
assistance under the State plan . . . .
HCFA cited to 45 C.F.R. Part 201, which applied to state Medicaid
agencies
prior to October, 1988. Section 201.5(a)(3) provided that
state
agencies must submit a quarterly statement of Medicaid
expenditures (Form
HCFA-64), which is an accounting statement of the
disposition of federal
funds granted for past periods. HCFA also cited
to 45 C.F.R. . 74.61,
applicable to state Medicaid agencies at all
periods relevant to this
disallowance, which provides that state
grantees must provide accounting
records which adequately identify the
source and application of funds for
grant-supported activities.
In March, 1984, HCFA issued Transmittal No. 21 containing revisions to
the
instructions for Form HCFA-64. HCFA Ex. 4. Transmittal No.
21,
which was incorporated into section 2500 of the State Medicaid
Manual,
informed grantees that the amounts shown on HCFA-64 must
represent
actual expenditures and that estimates were not acceptable.
Id.
Likewise, in April, 1986, HCFA issued Transmittal No. 40, which
stated
slightly more specifically that Form HCFA-64 claims must contain
only
actual expenditures supported by documentation. It also stated
that
claims developed through sampling or estimates are not allowable.
HCFA
Ex. 3. This transmittal was also incorporated into section 2500 of
the
State Medicaid Manual. The prohibition on estimates in the
quarterly
reporting of actual program costs later was incorporated into
the
codified regulations. See 42 C.F.R. . 430.30(c)(2) (effective
October,
1988). HCFA cited these sources in support of its argument
that
Missouri had notice that time studies were insufficient to
support
claims for reimbursement of HCBS waiver case management services
as
program costs. 8/ Id.
None of these sources stated specifically that additional
documentation
would be required when states claimed case management services
under the
HCBS waiver as program costs. Each stated the basic
requirement that
states must report actual expenditures and not estimates on
the
quarterly HCFA-64. This was a long-standing requirement of the
Medicaid
program and was well-known to state Medicaid grantees. .At the
same
time, HCFA was well aware that many states used time studies to
document
their allocation of administrative expenses to Medicaid. See,
e.g.,
Missouri Exs. B and F. The case management services at issue in
the
disallowance were being provided by public employees who
customarily
would be using time studies to measure their services and who
normally
would be involved in providing services under multiple federal
programs.
The circumstances here are distinguishable since medical
assistance
services are typically rendered by outside providers and not by
public
employees. Moreover, it is obvious that states would have to
engage in
a major restructuring of their documentation methods for these
programs
if time studies were not permitted for case management services
under
the waiver. In the absence of explicit directions to restructure
its
documentation system, Missouri reasonably relied on its approved
time
study. We find that none of the sources cited by HCFA
provided
sufficiently clear instructions to states as to what documentation
would
be required to claim HCBS waiver case management services as
program
costs.
2. The Board's decision in New York
State
Department of Social Services
Both parties agreed that estimates are not acceptable for
determining
actual Medicaid expenditures, whether the expenditures are for
program
costs or administrative costs. The disagreement is over whether
the
expenditures for case management services as determined by the
time
studies used by Missouri were prohibited estimates.
A February, 1990 decision of the Board, cited by both parties in
their
briefs, addressed the issue of what constitutes an
unacceptable
estimate. New York State Dept. of Social Services, DAB No.
1134 (1990).
DAB No. 1134 involved a statistically valid sample of a universe
of
actual expenditures, some of which qualified for federal funding.
The
Board found that the sample in question was not an estimate
as
contemplated by the Act and subsequent regulations.
HCFA attempted to distinguish this case, alleging that DAB No. 1134
did
not address requirements that a state report actual expenditures
after
the close of each quarter. We believe that HCFA misread the case
and
that Missouri correctly cited the case in support of its position.
Like
the statistical sampling method which was found to be adequate
for
measuring costs in New York, time studies, if otherwise valid,
are
methods accepted as reasonable for allocating actual expenditures
among
benefitting programs. Thus, we find that Missouri's valid time
studies
used to determine the amount of its actual expenditures for
waivered
case management services are not estimates that are per se
prohibited by
Medicaid regulations and policies in reporting expenditures on
Form
HCFA-64. The fact that Missouri's expenditures were not also
supported
by the more detailed recipient-specific data required by HCFA for
later
time periods does not mean that the reported expenditures were
not
actual. We note that the requirements relied on by HCFA also
applied to
Missouri's expenditures for administrative costs. Time
studies used in
accordance with an approved CAP, like those at issue here,
distribute
actual expenditures among particular objectives in a manner which
is
fully acceptable to meet requirements not to claim based on estimates.
3. Summary of analysis for period
of April 1, 1985
through January 17, 1989
We conclude that the State's method for claiming case management
services
provided by Missouri state employees under the HCBS waiver for
the period
April 1, 1985 through January 17, 1989 complied with
then-existing
documentation requirements. HCFA's reliance for this time
period on the
general documentation requirements for federal grants
derived from 45 C.F.R.
Part 74 and the prohibition on estimates is
misplaced. HCFA did not
cite any regulations which would indicate that
specific documentation
requirements existed for either HCBS waiver case
management services or other
FMAP claims which would have put Missouri
on notice that enumerated per-case
documentation was necessary. HCFA's
position was that the FMAP rate was
available throughout this period so
long as documentation requirements were
met. In the absence of more
specific documentation requirements of
which the State had actual
notice, the time studies were adequate support for
the State's
expenditures for waiver case management services. We find
that the
expenditures for case management services provided by Missouri
state
employees under the HCBS waiver are reimbursable at the FMAP rate
for
the period April 1, 1985 through January 17, 1989.
B. Missouri's time studies were clearly
insufficient to
meet documentation requirements for its claims at the
FMAP rate
applicable as of January 18, 1989.
In January, 1988, HCFA sent to state Medicaid agencies Transmittal No.
30
containing implementing regulations for targeted case
management
services. The transmittal on its face implemented only
optional
targeted case management provided for in a state plan in accordance
with
section 1915(g) of the Act. HCFA Ex. 5. The transmittal
listed certain
specific per-case documentation requirements which would be
required in
order to claim case management services at the FMAP rate.
However,
while the transmittal points out other authorities for case
management
services (including section 1915(c) HCBS waiver services), the
specific
documentation requirements are in a section dealing with state
plan
requirements for section 1915(g) and do not clearly apply to
case
management services authorized under other sections.
On June 13, 1988, HCFA sent a letter to Missouri which stated that
some
states were not complying with the January, 1988 transmittal.
Missouri
Ex. E. The letter, while mentioning that the January
transmittal had
provisions addressing both section 1915(g) and other case
management
services, did not specifically state that the documentation
requirements
of the January transmittal which were applicable to section
1915(g) were
now applicable to other case management services.
HCFA asserted that the January, 1988 Transmittal and June, 1988
letter
gave notice to Missouri that additional documentation was required
for
HCBS waiver case management services. However, we conclude that
neither
of these communications was sufficiently clear to put Missouri on
notice
of a requirement of specific per-case documentation for these
services.
However, beginning in December, 1988, such specific notice was given.
In
December, 1988, HCFA issued Transmittal No. 59 which, among other
changes,
added section 2500, . A.18 of the State Medicaid Manual. The
new
section reiterated that case management could be claimed as a
Medicaid
service only in four instances, one of which was under the HCBS
waiver
program. It then stated:
When claiming case management as a Medicaid service in
these
instances, fully document your claim as you would for any
other
Medicaid service. . . . When you make [arrangements other
than
through a prepaid health plan or capitation plan] to provide
the
service, you must provide the following minimum documentation:
Date of service, Name of
recipient,
Medicaid identification number, Name
of
provider agency and person providing
the
service, Nature, extent, or units
of
service, and The place of service.
Time studies, random moment sampling, cost allocation plans,
and
other methods which you use to support Medicaid
administrative
expenditures are not sufficient to support a claim for
a
Medicaid service.
This revision had an effective date of January 18, 1989. HCFA relied
on
this State Medicaid Manual section as the basis for its disallowance
of
claims at the FMAP level due to insufficient documentation. HCFA Ex.
2,
p. 6 and Ex. 1, p. 1.
Missouri's time studies were clearly insufficient to meet
the
documentation requirements for program costs set forth in the
December,
1988 State Medicaid Manual revision. We therefore find that
case
management services provided under the HCBS waiver by Missouri
state
employees beginning January 18, 1989 through the quarter ending June
30,
1990 should be reimbursed only at the administrative cost rate.
Had
Missouri complied with the more specific documentation
requirements
enumerated in the December, 1988 transmittal, reimbursement at
the FMAP
rate would have been available.
Conclusion
For the above reasons, we conclude that reimbursement for case
management
services provided by Missouri state employees under the HCBS
waiver is
allowable at the FMAP rate for the period April 1, 1985
through January 17,
1989. We further conclude that reimbursement for
HCBS waiver case
management services for January 18, 1989 through June
30, 1990 is allowable
only at the 50% rate for administrative costs.
The case is remanded to HCFA
to determine the amount disallowed
consistent with this decision. If
Missouri disagrees with
HCFA's.recalculation, Missouri may return to the
Board for review of
this limited issue only. Any further appeal must be
filed within 30
days of receipt of HCFA's recalculation determination.
_______________________________ Judith A. Ballard
_______________________________ Donald F. Garrett
_______________________________ Cecilia Sparks
Ford
Presiding Board Member
1. Missouri's FMAP rate ranged between 59.18% and 61.40% for
the
quarters in the disallowance period.
2. Under Medicaid regulations, certain types of case
management
services related to the review of a patient's need
for
institutionalization are claimed as administrative expenses. See
State
Medicaid Manual, section 4302.2.F.3; Missouri Ex. E, p.
2-3.
Essentially, the effect of the waiver is to classify as program
services
certain case management functions which would otherwise
be
administrative. Both parties' briefs noted that Missouri claimed
HCBS
waiver case management services as administrative costs through
the
quarter ending December 31, 1985. Missouri p. 1; HCFA p. 5.
Neither
party explained how this was significant here; the federal
review
clearly found amounts claimed at the FMAP rate from April 1, 1985.
3. Medicaid regulations require that states have approved CAPs for
the
apportionment of administrative costs incurred in support of all
state
agency administered federal programs. See 42 C.F.R. . 433.34; 45
C.F.R.
Part 95.
4. Missouri stated that its CAP, including the original sampling
plan
to identify HCBS waiver expenditures, had been approved effective
July
1, 1984. HCFA Ex. 6, p. 11. The record does not show the
method by
which the State was selecting out HCBS waivered from other
case
management services prior to 1986 in order to claim them as
program
costs.
5. Missouri's administrative cost reimbursement had always been
based
on time studies in accordance with its approved CAP, and HCFA
had
knowledge of and had accepted these time studies for
determining
administrative costs for all periods relevant to this
disallowance. The
appeal record lacks a detailed explanation of the
particular time study
method(s) used. We note that HCFA did not
question the statistical
accuracy of the particular time study, but rather
questions the use of
such method(s) for measuring program costs while at the
same time
recognizing its accuracy in measuring administrative costs.
For
purposes of this decision, there is no basis to question whether
the
time study was carried out in a valid and accurate manner.
6. Missouri asserted that HCFA approved the State's CAPs for
the
periods in question and that such approved plans contained time
study
measuring provisions. Missouri argued that HCFA should not be
permitted
to disallow costs based on cost measuring methods that it has
previously
approved for the applicable period. Missouri pp. 4-5.
HCFA argued that
CAP provisions do not apply to case management services
claimed as
medical assistance services provided under Medicaid. HCFA
asserted that
the definition of state agency administration costs, i.e.,
those costs
which are encompassed under cost allocation plans, specifically
exclude
services provided directly to program recipients. HCFA p.
11.
While CAPS are generally used to allocate administrative costs, there
is
no basis to conclude that the approved CAP did not adequately
measure
Missouri's expenditures for case management services. Moreover,
since
these are the types of costs ordinarily measured through CAPs,
until
Missouri was explicitly instructed to the contrary, Missouri could
have
reasonably thought its approved CAP method was appropriately used.
7. HCFA further argued that the State's long-standing position
that
case management services are administrative in nature should preclude
it
from obtaining reimbursement at the FMAP rate. However, the
way
Missouri characterized these functions in its dealings with HCFA is
not
relevant. Here it is undisputed that so long as Missouri met
the
applicable documentation requirements, it was entitled to receive
the
FMAP rate for its expenditures for case management services under
the
waiver.
8. HCFA further argued that Missouri was on notice that it must
provide
additional documentation to receive reimbursement at the FMAP rate
based
on a general principle that grantees must provide adequate
documentation
in support of enhanced funding requests. While HCFA cited
no cases in
support of this theory, we assume that it is based on previous
Board
decisions holding that state Medicaid agencies must bear the burden
of
providing documentation sufficient to demonstrate that
administrative
costs qualify for enhanced funding under section 1903(a) of
the Act.
E.g., New Jersey Dept. of Human Services, DAB No. 845 (1987); New
Jersey
Dept. of Human Services, DAB No. 688 (1985). These decisions
involved
only at what rate administrative costs should be paid. We can
find
nothing in these cases which would support a conclusion that
Missouri
should have known that what it was doing here
was