SUBJECT: Georgia Department of Community Health

DECISION

The Georgia Department of Community Health (Georgia) appealed a decision by the Centers for Medicare & Medicaid Services (CMS) disallowing $2,515,808 in federal financial participation (FFP) that Georgia claimed under the Medicaid program at title XIX of the Social Security Act (the Act). ⁽¹⁾ Georgia claimed FFP for certain enhanced payments to two hospitals, located in Hamilton County, Tennessee and owned by the county hospital authority, that provided Medicaid services to Georgia residents. CMS reduced Georgia's claims for FFP to reflect funds that the Tennessee county hospital authority transferred to Georgia during fiscal year (FY) 2002, on the grounds that these funds were impermissible donations that under section 1903(w) of the Act must be deducted from the total amount of Medicaid expenditures claimed for FFP, and that they did not fall within a statutory exception in section 1903(w) permitting states to receive transfers of state and local tax funds from government-owned Medicaid providers.

This case is before a three-member panel, which sustains the disallowance by a two-member majority. The decision of the two-member majority is below, and the dissenting opinion follows.

Summary

The Medicaid program is a partnership between the federal government and individual states in which the federal government and individual states share in the cost of each state's program pursuant to formulae established in the Medicaid statute and regulations. Each state's Medicaid program is designed to serve the particular health care needs of needy residents of that state pursuant to a mandatory state plan proposed by the state and approved by the Secretary of the Department of Health and Human Services. The Medicaid statute permits each state to look to state and local governmental sources as a funding source for the state or non-federal share of Medicaid costs. In 1991 Congress restricted a state's ability to receive conditional donations of funds from Medicaid providers as a funding source for the non-federal share when the donations are tied to the amount of reimbursement the providers receive. Congress, however, provided an express exception that left intact a state's ability to receive state and local tax funds from "units of government within a State," even when those units were providers of Medicaid services and the fund transfers might otherwise be considered restricted conditional donations. Georgia did not dispute that its enhanced Medicaid payments to the two county-owned Tennessee hospitals were conditioned on the receipt of funds from the Tennessee county hospital authority. Georgia argued, however, that the exception applied because the Tennessee county hospital authority is a unit of government "within a State."

We find that CMS properly applied the statutory language and that the transfers of funds from Tennessee governmental units to Georgia were not protected by the statutory exception. The purpose of the law was to prohibit states from receiving conditional donations from Medicaid providers, while protecting existing funding practices by which a state could spread the cost of its Medicaid program among its various state and local governmental units. We conclude therefore that "units of government within a State" includes both a "unit of local government," defined by the statute as a governmental unit "in the State," as well as other units of government within that same state that might not be considered "local." There is no evidence in the history of the relevant statutory provisions that state funding practices had ever included, or that the exception was meant to apply to, funds from governmental units from outside a state.

Georgia's arguments to the contrary rest solely on Congress's use of the article "a" rather than "the" in the applicable statutory provision. Georgia's arguments do not take into account significant aspects of the statute and its history and purpose, and violate basic principles of statutory construction. Moreover, Georgia advanced no evidence whatsoever showing that Congress contemplated the use of out-of-state fund sources as part of a state's non-federal share when it enacted the relevant statute. If Congress had intended the result proposed by Georgia, it presumably would have used more explicit language to authorize the transfer of donated funds between states. Georgia's reading of the statute is thus not reasonable, and Georgia was not entitled to rely on that reading in receiving the conditional transfers from Tennessee sources. The funds that Georgia received from Tennessee public sources in effect eliminated Georgia's non-federal share contribution for Medicaid payments for services to Georgia residents, thus undermining the expectancy in the federal-state partnership that both partners will share in the program costs.

Factual background

Georgia's Medicaid state plan permits Georgia to make enhanced or supplemental Medicaid payments, above the Medicaid reimbursement rates established in the plan, to facilities which, "based on their status as government owned or operated, need sufficient funds for their commitments to meet the healthcare needs of all members of their communities." Georgia State Medicaid Plan, Georgia Exhibits (Exs.) 4, 5.

The supplemental payments are based on the difference between the Medicaid rates, and the higher amounts that could be paid for the same services under reimbursement principles applicable to the Medicare program at title XVIII of the Act. (Similar payments above Medicaid reimbursement rates for inpatient hospital services are authorized under the Disproportionate Share Hospital (DSH) program for hospitals that serve a disproportionate number of low-income patients with special needs. Sections 1902(a)(13)(A), 1923 of the Act.) The supplemental payments based on Medicare payment principles are subject to the "upper payment limits" (UPLs) established for the Medicaid program by regulations at 42 C.F.R. � 447.272, and Georgia in its brief referred to the supplemental payments as UPL payments, made under its UPL program. Georgia Brief (Br.) at 2, 4. For each type of health care facility (i.e., hospitals, nursing facilities and intermediate care facilities) the UPL is the aggregate amount that can be reasonably estimated would have been paid to that group of facilities for those services under Medicare payment principles. 42 C.F.R. � 447.272; see New Hampshire Dept. of Health and Human Services, DAB No. 1862 (2003); Oklahoma Dept. of Human Services, DAB No. 1575 (1996). ⁽²⁾ Georgia's supplemental payments are also limited by the amount of funds available to Georgia with which to make the payments.

Georgia reported that it used funds transferred to it from the Tennessee county hospital authority to fund Georgia's non-federal share of the supplemental payments to the two Tennessee hospitals, in which Georgia claimed FFP. Georgia Br. at 4. The section of Georgia's state Medicaid plan providing for the supplemental payments specified that a facility's status as government owned or operated (and thus its eligibility to receive supplemental payments) "will be based on its ability to make direct or indirect intergovernmental transfer payments to the State." ⁽³⁾ Georgia Exs. 4, 5. Information that Georgia submitted indicates that Georgia calculated estimated supplemental payments for approximately 100 hospitals for services provided to Medicaid patients during calendar year 2000. Georgia Ex. 3.

The disallowance concerns supplemental Medicaid payments that Georgia made to the Hospital Authority of Hamilton County, Tennessee, on behalf of two Tennessee hospitals owned by the Hospital Authority, Erlanger Medical Center and T. C. Thompson Children's Hospital, and funds that the Hospital Authority transferred to Georgia as a condition of the receipt of the supplemental Medicaid payments. The two Tennessee hospitals are located near the Georgia state line and provide hospital services to Georgia residents. The Hospital Authority of Hamilton County entered into Medicaid provider agreements with Georgia that permitted the two hospitals to participate in Georgia's Medicaid program and to receive payments from Georgia for Medicaid services. Georgia Exs. 1, 2. As noted above, Georgia's state Medicaid plan describes facilities eligible to receive enhanced Medicaid reimbursement as those that are able to transfer funds to Georgia. Georgia Exs. 4, 5. CMS determined that Georgia received $4,264,081 from the Hospital Authority and disallowed $2,515,808 in FFP that Georgia claimed for supplemental Medicaid payments to the Hospital Authority on behalf of the two hospitals. Georgia reported that the funds received from the Hospital Authority, which "represented Georgia's share of the UPL [supplemental] payments to the Authority," were used to draw down federal Medicaid matching funds, and that Georgia in turn paid enhanced reimbursement, which included federal funds, back to the Hospital Authority on behalf of the two facilities. Georgia Br. at 3, 4.

Legal background

Title XIX of the Act established Medicaid, a cooperative federal-state program providing for joint federal and state funding of medical assistance for certain needy persons. Under section 1903(a) of the Act (42 U.S.C. � 1396b(a)), a state with an approved Medicaid state plan may receive FFP for expenditures for services that qualify as medical assistance under the Act. "Medical assistance" is defined in section 1905(a) to include payment for specified health care items or services, including hospital services, provided to eligible individuals. The rate of FFP that a state receives in its expenditures for medical assistance is called the federal medical assistance percentage (FMAP), and generally ranges from 50 percent to 83 percent of the cost of medical assistance, depending the state's per capita income and other factors. 42 C.F.R. � 433.10 (2001). The non-federal share that states must provide in order to receive FFP is sometimes referred to as the state share. 42 C.F.R. � 433.51 (1992).

The disallowance is based on section 1903(w) of the Act, which requires that the total expenditures for medical assistance in which a state claims FFP must be reduced by the amount of revenues that the state receives from health care providers in the form of certain types of taxes and donations. The affected taxes and donations, called health care-related taxes and provider-related donations, include those received from Medicaid providers that are related to the amount of Medicaid reimbursement that the state pays to those providers, in which the state claims FFP. Section 1903(w) of the Act was enacted as part of the Medicaid Voluntary Contribution and Provider-Specific Tax Amendments of 1991, Public Law No. 102-234, 105 Stat. 1793 (Dec. 12, 1991). It provides exceptions for taxes of general applicability (non-health care related taxes), permissible "broad-based" health care related taxes, and bona-fide donations that are not related to the amount of Medicaid reimbursement that the providers receive. Section 1903(w)(1)(A) of the Act.

The practical result of the requirements of section 1903(w) is illustrated by an example involving a state with a 60% FMAP claiming FFP in a single expenditure of $100, but which also received a $40 provider-related donation. Ordinarily, in the absence of the donation, the provider would receive $100: $40 from the state and $60 from CMS that the state claimed as FFP (60% of $100). However, section 1903(w) of the Act requires that the $100 expenditure be reduced by the $40 received as a provider-related donation, yielding a net expenditure of $60, for which the state may receive only $36 in FFP (60% of $60).

This appeal centers on the language of section 1903(w)(6), which contains an exception to the restrictions on provider-related donations and permits states to use certain state and local tax funds as the state's non-federal share without having to reduce claims for FFP. Section 1903(w)(6) in relevant part provides:

(A) Notwithstanding the provisions of this subsection, the Secretary may not restrict States' use of funds where such funds are derived from State or local taxes . . . transferred from or certified by units of government within a State as the non-Federal share of expenditures under this title, regardless of whether the unit of government is also a health care provider . . . unless the transferred funds are derived by the unit of government from donations or taxes that would not otherwise be recognized as the non-Federal share under this section.

(B) For purposes of this subsection, funds the use of which the Secretary may not restrict under subparagraph (A) shall not be considered to be a provider-related donation or a health care related tax.

Emphasis added.

CMS took the disallowance on the grounds that the Tennessee county funds were provider-related donations that, under section 1903(w)(1)(A) of the Act, had to be subtracted from the total amount of expenditures for medical assistance in which Georgia claimed FFP. Georgia did not dispute CMS's determination that the transferred monies did not qualify as permissible "bona fide provider-related donations" - those that have no relationship to Medicaid payments made to the provider - because they were directly correlated to the hospitals' receipt of the supplemental Medicaid payments. See section 1903(w)(2)(B) of the Act.

Instead, Georgia argued that the funds fell within the ambit of section 1903(w)(6) of the Act, which forbids CMS from restricting a state's use of "funds . . . derived from State or local taxes . . . transferred from or certified by units of government within a State as the non-Federal share of expenditures under this title, regardless of whether the unit of government is also a health care provider . . ." Neither party disputed that this subsection, if applicable, would preclude CMS from reducing the expenditures in which Georgia claimed FFP by the amount of the transferred funds. CMS determined, however, that section 1903(w)(6) only applies to transfers from "units of government within a State," and not to the transfers here which were not received from governmental units within Georgia.

Georgia argued that "[t]he phrase 'within a State' necessarily implies that a transfer made to or from any of the fifty states within the United States is made within a State." Georgia Br. at 9. Thus, the issue is whether the exception permits Georgia to use funds transferred by a Tennessee county as part of Georgia's non-federal share of Medicaid expenditures.

As we discuss below, section 1903(w)(6) preserves the use of intergovernmental transfers (IGTs) as the state's non-federal share of Medicaid expenditures by recognizing fund transfers to the state Medicaid agency from "units of government within a state," i.e., from units of local government as that term is defined at 1903(w)(7)(G) ("with respect to a State, a city, county, special purpose district, or other governmental unit in the State") or from other units of government within that same state that are not local. We conclude that Georgia's reading of section 1903(w)(6) of the Act as permitting it to use funds from out-of-state governmental units as its non-federal share is not reasonable because it violates basic principles of statutory construction, and moreover is contrary to the context and history of that provision and the clear purpose for which it was enacted. That context and history demonstrate that prior to the passage of section 1903(w) in Public Law No. 102-234, it was a longstanding and common practice for a state to pay for its non-federal share of Medicaid expenditures with funds derived from state and local taxes and transferred to its state Medicaid agency from its local governments and other state governmental units. Sometimes these other state agencies and local governments provided Medicaid services to eligible recipients, and instead of transferring funds to the state Medicaid agency directly, they would report or certify expenses they incurred providing those services, and the state would then use those Medicaid expenses to satisfy the non-federal share requirement. One purpose of Public Law No. 102-234 was to permit states to continue this practice, while restricting a state's ability to receive funds from providers that did not derive from state and local taxes and which were tied to the amount of Medicaid reimbursement the providers received. In the history of that law, however, there is no indication that this practice ever encompassed funds transferred from governmental providers from outside a state which necessarily did not derive from a state's own state and local taxes.

In essence, section 1903(w)(1) of the Act recognizes that when a state receives impermissible provider taxes and donations, it realizes a reduction in the cost of its Medicaid program, and requires that the state share that cost savings with federal funding sources by lowering its claims for FFP. Section 1903(w)(6), by contrast, recognizes that states finance their Medicaid programs with permissible state and local taxes, and that a state does not experience any cost savings simply because those permissible state and local tax funds are transferred to the state Medicaid agency from other state agencies and local governments, even where the other state agencies and local governments are providers of Medicaid services. This latter rationale does not apply to funds from out-of-state governmental units provided in exchange for Medicaid reimbursement since such funds effectively reduce the state's net expenditures for medical assistance in which the state claims FFP.

1. The statutory language does not support Georgia.

Georgia's reading rests solely on the presence of the article "a" instead of "the" in the language permitting states to receive without consequence state or local tax funds "transferred from . . . units of government within a State" (emphasis added). Georgia argued that the transfers from the Tennessee county Hospital Authority on behalf of the two Tennessee hospitals were protected by the statute because the two hospitals are "within a State," and that the phrase "within a State" encompasses a transfer made to or from any of the fifty states within the United States. Georgia Br. at 9. Georgia argued that if Congress had intended to limit a state's ability to receive voluntary fund transfers from government-owned providers to only those providers located within its boundaries, then the disputed language would have read, "within the State." Citing Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), Georgia argued that no deference was due to CMS's position because the language of section 1903(w)(6) unambiguously permits states to receive donations on behalf of government-owned providers located in other states. Georgia Br. at 13-14. Georgia also noted that the statute at section 1903(w)(3)(B)(i) uses the phrase "in the State" in defining "broad-based health care related tax" as including a tax imposed at least with respect to all items or services in a class of health care items or services furnished by all non-federal, nonpublic providers "in the State," and argued that Congress could have used similar language if it had wanted to limit acceptable fund transfers in section 1903(w)(6)(A) to those made by providers located in the receiving state.

The specific wording of the statute does not support Georgia's reading, for the following reasons:

• Georgia's reading of the statute violates a basic principle of statutory construction, that statutes should be construed so as to avoid rendering superfluous any statutory language. George Costello, Congressional Research Service Report for Congress, Statutory Construction -- General Principles and Recent Trends at 10 (updated Aug. 3, 2001)(citations omitted). A law should be construed so as to give meaning to all its parts. Sutherland, Statutory Construction, 4^th ed., Vol. 2A, � 46.06, cited in Illinois Dept. of Children and Family Services, DAB No. 1335, at 13 (1992). Had Congress intended to permit states to receive funds from government-owned providers in other states, it could simply have omitted the words, "within a state" altogether, so that the disputed section would have read, "funds . . . derived from State or local taxes . . . transferred from or certified by units of government. . . regardless of whether the unit of government is also a health care provider . . ." Georgia's reading renders the words "within a State" superfluous. "An interpretation that needlessly renders some words superfluous is suspect." Crandon v. U.S., 494 U.S. 152, 171 (1990) (Scalia, J. dissenting).

  For the phrase "units of government within a State" to mean units of government "within any State" or "within any of the States" without being superfluous, its purpose would necessarily have been to exclude transfers from units of government located in foreign nations. However, the legislative history of Public Law No. 102-234, which we discuss further below, contains no indication that states had been receiving funds from government-owned providers located in foreign nations, or that Congress was concerned about such a practice and intended to outlaw it. Moreover, the statute's requirement that funds transferred by units of government be derived "from State or local taxes" is a further indication that Congress was not expressing concern over states receiving fund transfers from foreign nations. As CMS argued, the indefinite article "a" refers to an unspecified but single state, and the use of "a" to mean any and all states is, without further support from the context or legislative history, unwarranted. CMS Br. at 5-6, n.2, citing definition of "a" in American Heritage Dictionary of the English Language (New College ed. 1976).

• As CMS noted, another "fundamental principle of statutory construction" is that the meaning of a word cannot be determined in isolation, but must be drawn from the context in which it is used. Deal v. U.S., 508 U.S. 129, 132 (citations omitted). In determining the meaning of a statute, courts look not only to the particular statutory language, but to the design of the statute as a whole and to its object and policy. Crandon v. U.S., 494 U.S. at 158 (citations omitted). Similarly, in analyzing the meaning of clauses or sections of general acts, courts should appraise the purposes of Congress as a whole, and a few words of general connotation appearing in the text should not be given a wide meaning, contrary to a settled policy, unless a different purpose is plainly shown. U.S. v. American Trucking Ass'ns, Inc., 310 U.S. 534, 544 (1940). As we discuss more fully below, the clear purpose of Public Law No. 102-234 was to forbid states from receiving provider donations and taxes related to the providers' Medicaid reimbursement that reduced a state's net expenditures for medical assistance. The purpose of section 1903(w)(6) was to preserve the practice of states financing Medicaid programs with funds provided by units of government within a state other than the state Medicaid agency, or with the cost of medical assistance that they provided. These funds must derive from a state's own state and local tax structure and their use does not reduce the state's net expenditures for medical assistance. Here, the "object and policy" of the statute did not include permitting a state to receive funds from providers that did not derive from its own state and local taxes transferred from units of its state and local governments.
  
  
• While courts in a variety of other situations have recognized a distinction between the indefinite article "a" (or "an") and the definite article "the," with the latter signaling a limitation in number not implied by the former, courts in such cases have also been guided by the overall context of the disputed language. E.g., Republican National Committee v. Taylor, 299 F.3d 887, 891-93 (D.C. Cir. 2002); Onink v. Cardelucci, 285 F.3d 1231, 1234-36 (9^th Cir. 2002); Kruman v. Christie's Int'l, 284 F.3d 384, 400-01 (2^nd Cir. 2002); Flandreau Santee Sioux Tribe v. U.S., 197 F.3d 949 (8^th Cir. 1999); Comm'r of Internal Revenue v. Kelley, 293 F.2d 904, 911-13 (5^th Cir. 1961). As one court stated, "a statutory provision must be construed in context and in harmony with the statutory purpose." Kelley, 293 F.2d at 912. As we discuss below, the overall context of the law supports CMS's position here. "A myopic focus on Congress' selection of a definite or indefinite article could occasion results that, at the very least, would be unexpected." National Ass'n of Casualty and Surety Agents v. Board of Governors of the Federal Reserve System, 862 F.2d 351, 353 (D.C. Cir. 1988). We agree with CMS that the meaning of the critical language should not turn on a single article to support a reading that is not consistent with the overall purpose of the statute.


2. Georgia's position is neither supported by the purpose, context and legislative history of the statutory language, nor consistent with the rationale for permitting a state's governmental entities to transfer state and local tax funds to its state Medicaid agency.

Public Law No. 102-234 was intended to prevent states from effectively reducing their net payments to providers by recouping some of the payments through provider-related taxes and donations, without correspondingly reducing their claims for FFP. Section 1903(w)(6)(A) of the Act, and a related section of Public Law No. 102-234, permitted states to continue financing their Medicaid programs with funds transferred to the state Medicaid agency from other state agencies and local governments (or by having those other state agencies and local governments certify to the state Medicaid agency the costs of Medicaid services they provided to eligible recipients), so long as those funds derived from state and local taxes. However, we could find no indication anywhere in the legislative history of Public Law No. 102-234 that states ever relied on fund transfers from Medicaid providers that were units of government of other states.

By permitting states to receive state and local tax funds from units of state and local government, the law recognizes that states rely on such taxes to fund their operations, and that their receipt of such tax funds from within their borders, whether appropriated directly from the state legislature or transferred from other units of government, does not lower a state's net expenditures for medical assistance. However, that rationale does not apply to funds transferred from providers in other states, because those transfers do not derive from a state's own tax structure. Such funds received from out-of-state providers are recoveries to the recipient state which, like impermissible provider taxes and donations, reduce its net expenditures for medical assistance.

a. The history, purpose and effect of Public Law No. 102-234 limit permissible provider funds to those derived from state and local taxes of the receiving state, from government-owned providers that are located in, and part of, the governmental structure of the receiving state.

The history of Public Law No. 102-234, the Medicaid Voluntary Contribution and Provider-Specific Tax Amendments of 1991, demonstrates that a principal reason Congress limited states' use of provider taxes and donations was that states were shifting an increasingly larger portion of their Medicaid expenses to the federal government. This cost shifting resulted in part because states were claiming FFP in amounts in which they did not have actual or net expenditures, because some of the funds that the states paid to providers as Medicaid reimbursement were being returned to the states in the form of provider taxes and donations. The enactment of Public Law No. 102-234 followed CMS's attempts, through a series of proposed and interim final rules, to limit this cost shifting by restricting states' abilities to receive provider-related donations and taxes. CMS was concerned that states' receipt of those funds unfairly increased the federal share of Medicaid payments, without corresponding increases in either Medicaid services or costs to the state. See, e.g., 56 Fed. Reg. 46,380 (Sept. 12, 1991); 55 Fed. Reg. 4626 (Feb. 9, 1990). CMS noted in the preamble to one of the interim final rules that--

The basis for this proposal was that a number of States had used provider donations and other voluntary payments and revenue from provider-specific taxes to fund part or all of the State share of Medicaid payments. We believed that, since the donation or other voluntary payment or tax or other mandatory payment revenue received from providers effectively reduced the expenditure made by the State for medical assistance costs and reduced the payment received by providers, the FFP should be based upon the "net expenditure" made by the State.

56 Fed. Reg. 46,382. CMS provided an example in which a state with a 75% FMAP pays a $100 hospital bill and receives a $25 donation from the hospital and $75 from CMS in federal Medicaid funds (75% of the $100 expenditure), thus reducing its net expenditure to zero, and increasing the FMAP to 100%. Id.

CMS's attempts to remedy this situation were initially rejected by Congress. In November 1991 the House of Representatives passed a bill extending an existing moratorium on CMS issuing new regulations on provider taxes and donations until September 30, 1992, and barred CMS from issuing any regulation changing the treatment of IGTs (funds that the state Medicaid agency received from other units of government) regardless of whether the public agency transferring the funds was a Medicaid provider. ⁽⁴⁾ H.R. 3595, 102^nd Cong. (1991), the Medicaid Moratorium Amendments of 1991.

Despite the House bill, Congress came to accept CMS's view that some states' use of provider taxes and donations had increased the federal government's share of Medicaid costs without an increase in services, and that some states were "gaming" the system to reap windfalls that they used for non-Medicaid expenses. See 137 Cong. Rec. S18652 (Nov. 27, 1991) (remarks of Sen. Kohl); H.R. Rep. No. 310, at 29-31 (Nov. 12, 1991), reprinted in 1991 U.S.C.C.A.N. 1413, 1438-40. Instead of the Medicaid Moratorium Amendments that the House had passed, Congress enacted the Medicaid Voluntary Contribution and Provider-Specific Tax Amendments of 1991, Public Law No. 102-234, which imposed many of the restrictions on the use of provider donations and taxes that CMS had originally attempted to effect by issuing interim final rules. Congress expressed the same concerns that had motivated CMS:

Although donation and tax programs vary from State to State, they all alter the Medicaid matching rate in basically the same way. These programs typically work as follows: (1) States "borrow" money from providers (usually hospitals) through donations or tax programs; (2) this money is then used as the State share of Medicaid and is matched, at least dollar for dollar, by Federal funds; (3) States frequently increase Medicaid payments to reimburse providers for the donations or taxes they paid; and (4) then States use the Federal matching funds to pay providers for the Medicaid services. In many States, providers are guaranteed to get back at least as much as they donated or paid in provider-specific taxes through enhanced Medicaid reimbursements.

H.R. Rep. No. 310, at 30 (Nov. 12, 1991), reprinted in 1991 U.S.C.C.A.N. 1413, 1439; see also 137 Cong. Rec. S18145-46 (Nov. 25, 1991) (statement of Sen. Durenberger); 137 Cong. Rec. H10520 (Nov. 19, 1991) (statement of Rep. Dannemeyer); 137 Cong. Rec. S18170-71 (Nov. 26, 1991) (statement of Sen. Grassley).

Notably, Public Law No. 102-234 permitted states to receive without consequence funds derived from state or local taxes (and not from the provider-specific taxes and donations barred by section 1903(w)), transferred from providers that are themselves units of government within a state. This exception reflected the states' protests that they had long relied on transfers of funds from their various units of state and local government, including those that were Medicaid providers, to fund the non-federal share of Medicaid expenditures. The legislative history of Public Law No. 102-234 reflects states' deep concern that CMS's interim final regulations limiting the use of provider taxes and donations would have curtailed states' abilities to fund their Medicaid programs with funds provided by other state and local government agencies (IGTs). ⁽⁵⁾ That history, including the transcripts of congressional hearings at which states voiced their strong objections to CMS's regulations, indicates that states had a longstanding practice of funding their Medicaid programs with funds transferred from other governmental entities. State Financing of Medicaid: Hearings before the Subcomm. on Health and the Environment of the House Comm. on Energy and Commerce, 102^nd Cong. (Sept. 30, Oct. 16, Nov. 25, 1991), CIS Ref. No. H361-54; HCFA Regulation Restricting Use of Medicaid Provider Donations and Taxes: Hearing before the Senate Comm. on Finance, 102^nd Cong. (Nov. 19, 1991), CIS Ref. No. S361-40; Medicaid/Medicare Financing and Implementation of Certain Programs: Hearing Before the Subcomm. on Health for Families and the Uninsured of the Senate Comm. on Finance, 102^nd Cong. (Jul. 26, 1991), CIS Ref. No. S361-18. However, that history contains absolutely no indication that states had been utilizing transfers of funds from units of government of other states, and no report or example of any such transfers. Nor has Georgia pointed to any instances of states funding their Medicaid programs with funds transferred from Medicaid providers owned by governmental units of other states.

Instead, the governmental entities that had been providing funds to the state Medicaid agency were typically other state agencies such as state departments of health and mental health, state developmental disabilities agencies and publicly-owned hospitals, and also local government entities including county and city governments, municipal and county hospitals (some supported in part by local and county sales and property taxes), county health department clinics and local school districts providing Medicaid services to poor children with handicaps and other special needs. These various governmental entities either transferred funds to the state Medicaid agency, or provided Medicaid services which were then certified as the state's Medicaid expenditures for which the state agency claimed FFP. The hearing reports indicate that states had been using such transfers since the inception of the Medicaid program. Moreover, states believed that financing their Medicaid programs with funds contributed by local government entities was expressly permitted by section 1902(a)(2) of the Act, which requires that the state fund at least 40% of the non-federal share of its Medicaid expenditures. States viewed this provision as thus authorizing local sources to contribute up to 60% of the non-federal share. ⁽⁶⁾ Id.

Consistent with these examples presented to Congress, CMS during the hearings clarified that it did not intend to disallow "longstanding intergovernmental transfers," and stated that some examples of what it considered to be permissible sources of IGTs would include county property taxes and other county taxes contributed to the state Medicaid program, and funds or certifications of expenditures by county maternal and child health agencies. State Financing of Medicaid: Hearings before the Subcomm. on Health and the Environment of the House Comm. on Energy and Commerce, 102^nd Cong. (Sept 30, Oct. 16, Nov. 25, 1991) at 275-76, 313, 422, CIS Ref. No. H361-54. Similarly, CMS submitted a statement to Congress acknowledging that the restrictions it imposed on the use of provider donations in its September 12, 1991 interim final rule created confusion as to whether states would be permitted to use IGTs, and assuring that CMS was not eliminating the use of "traditional intergovernmental transfers," meaning "public funds transferred between different levels of local government." H.R. Rep. No. 310, at 25-26 (Nov. 12, 1991), reprinted in 1991 U.S.C.C.A.N. 1413, 1436-37.

In recognition of the states' concerns that CMS's interim rulemaking would restrict the ability of local governments and state agencies to transfer funds to the state Medicaid agency, Congress included section 5(b) of Public Law No. 102-234, "Regulations changing treatment of intergovernmental transfers." Section 5(b), which appears as a note to 42 U.S.C. � 1396b but not in the Act, forbids CMS from issuing any interim final regulation changing the treatment, prior to CMS's attempted interim rulemaking, of public funds as a source of the state share of financial participation under title XIX, except where the funds derive from the sort of impermissible provider-related donations or health care-related taxes that were prohibited by section 1903(w) of the Act. As we have seen above, there is no indication that the prior use of IGTs ever included a state's receipt of funds from governmental entities located in other states.

Thus, the legislative history of Public Law No. 102-234 shows no indication that Congress considered or addressed the issue of whether a state would be permitted to use such out-of-state transfers as part of its non-federal share of Medicaid expenditures, or any indication that states had ever relied on such out-of-state sources in financing their expenditures for medical assistance in which they claimed FFP. We therefore conclude that Congress's intent to preserve the status quo did not encompass the type of transactions at issue here.

b. Georgia's position is not consistent with the rationale for permitting a state's governmental entities to transfer state and local tax funds to its state Medicaid agency.

Permitting states to continue funding their Medicaid programs with funds provided to state Medicaid agencies by each state's various state and local governmental components, but not with funds received from out-of-state Medicaid providers, is consistent with the rationale that led Congress to restrict states' receipt of provider-specific or "health care related taxes," but not their receipt of taxes of general applicability (non-health care related taxes) or permissible "broad-based" health care related taxes. ⁽⁷⁾ Section 1903(w)(1)(A) of the Act. A state that receives funds derived from state and local taxes of general applicability, transferred to the state Medicaid agency from other units of that state's government or from its local governments, realizes no reduction in its net expenditures for medical assistance. Instead, it is simply acquiring funds that substantively are no different than the funds that states typically raise through taxes of general applicability.

The rationale for permitting states to finance their Medicaid programs with IGTs was explained in a statement from one witness, the governor of New York: "The same taxpayers that pay taxes to the City of New York to support Metropolitan Hospital, or to the County of Nassau to support Nassau County Medical Center pay taxes to the State of New York." State Financing of Medicaid: Hearings before the Subcomm. on Health and the Environment of the House Comm. on Energy and Commerce, 102^nd Cong. (Sept 30, Oct. 16, Nov. 25, 1991) at 248-49, CIS Ref. No. H361-54 (statement of Mario Cuomo, Governor, New York). That rationale does not apply to funds received from out-of-state units of government which reduce the receiving state's net expenditures for medical assistance. The cooperative nature of the required federal/state participation in Medicaid funding means that the state's non-federal share must come from a state's own state and local taxes.

Limiting federal funding to a state's actual or net expenditures for medical assistance is analogous to the requirements in various cost principles that a grantee's claim for federal funding be reduced by any "applicable credits," or "those receipts or reduction of expenditure-type transactions that offset or reduce expense items allocable to Federal awards as direct or indirect costs," which generally must be subtracted from claims for federal funding. Office of Management and Budget Circular A-87, Cost Principles for State, Local, and Indian Tribal Governments, Att. A, �� C.1.i, C.4; other OMB cost principles apply similar requirements to grants to other classes of grantees. Applicable credits, like the provider-specific taxes and donations limited by Public Law No. 102-234, involve "the receipt of monies (or reductions of expenditures) by a state related to its federally funded program which, if unaccounted for in the program, would result in a savings or gain to the state alone." Oregon Dept. of Human Resources, DAB No. 1298, at 10 (1992). If a state has receipts or reductions in expense items allocable to a federally-funded grant (such as its federal Medicaid funding) but fails to credit the grant for the receipts or reductions accordingly, then the state experiences savings which it does not pass on to the federal funding source as well. Id. The funds that a state recovers in the form of provider-specific taxes and donations that are related to the providers' receipt of payments for Medicaid services are effectively rebates or discounts in the costs of those services that states are required to share with federal funding sources. By requiring that provider-specific taxes and donations be deducted from the cost of medical assistance in which a state claims FFP, section 1903(w) ensures that the state's charges to federal funds for Medicaid expenditures will be limited to the state's actual costs.

On the other hand, the exception in section 1903(w)(6) permitting state Medicaid agencies to receive transfers of state and local tax funds is analogous to Board holdings recognizing that such taxes and other fees of general applicability that states typically use to fund their operations are not applicable credits that reduce a state's net expenditures in which the state claims FFP. In Oregon, CMS sought to treat as applicable credits funds that the state raised through a fee on all driver's licenses. In reversing the disallowance, the Board noted that "[t]he 'source' that Oregon has taken these funds from is nothing other than the State itself." Oregon at 13. The Board rejected CMS's argument that those fees were recoveries from "third parties" other than the state, noting that the funds were contributed by the residents of Oregon who received and renewed driver's licenses. Viewing those fees as third party recoveries and applicable credits, the Board held, would render meaningless a state's ability to raise revenues, as all monies received by a state from its populace through the power of taxation would potentially be "applicable credits." Oregon at 14-15.

Section 1903(w)(6) similarly recognizes that the funds that a state receives from government-owned providers that derive from state and local taxes of general applicability (or which are permissible broad-based health care related taxes) are in effect funds that a state raises through its general powers of taxation. They do not lose their character as state and local tax revenues simply because they have been channeled to the state Medicaid agency through other units of government that happen to be Medicaid providers.

This obvious rationale for permitting state Medicaid agencies to receive transfers of state and local tax funds, however, does not apply when the government-owned providers supplying the funds are units of other states' governments. Funds from out-of-state providers are not funds that the receiving state has raised through its own state and local taxes through its general powers of taxation and not the sort of funds with which states would typically finance their Medicaid programs. They are effectively recoveries or rebates that reduce the actual cost of the Medicaid services for which the state pays the out-of-state providers. Funds transferred from a governmental unit within a state can reasonably be viewed as part of that state's financial contribution toward its own Medicaid program, whereas funds from a governmental unit outside a state cannot reasonably be viewed as part of a state's share of Medicaid expenditures.

Like applicable credits, the Tennessee funds enabled Georgia to bypass its responsibility for the non-federal share for the supplemental payments to the Tennessee hospitals. Those payments for services provided to Georgia citizens would thus be funded entirely by the federal government and by a unit of Tennessee's government, much in the same way that Georgia would bypass its responsibility for the non-federal state share if it were able to receive conditional provider-related donations from private providers. There is no evidence that Congress in passing section 1903(w) intended that result.

c. Other aspects of the legislative history support CMS.

Other portions of the legislative record relating to Public Law No. 102-234, which CMS cited in its brief, cannot reasonably be read to describe transfers from governmental units of other states. A House conference report on H.R. 3595 notes that the provision that became section 1903(w)(6)--

[p]rohibits the Secretary from restricting States' use of funds derived from State or local taxes (including funds appropriated to State-owned teaching hospitals) transferred from or certified by local government units (including units that are providers) unless the transfers exceed the 40 [sic] percent limit on local government sharing in Medicaid or stem from otherwise prohibited donations or taxes.

H.R. Conf. Rep. No. 409, at 17 (Nov. 27, 1991), reprinted in 1991 U.S.C.C.A.N. 1441, 1443. Similarly, a December 1992 summary of the legislative and oversight activities of the House Committee on Energy and Commerce, in discussing the statute, also referred to the transferring entities as "local governments," and thus again incorporated the definition of "unit of local government" adopted in section 1903(w)(7)(G):

With respect to intergovernmental transfers, the legislation clarifies that transfers (whether directly or by certification) of public funds by local governments (or other state agencies) to the state Medicaid agency may be used by the states to fund the nonfederal share even though the unit of government is also a health care provider. As under current law, public funds from other than state sources may not exceed 60 percent of the nonfederal share of Medicaid spending. However, the Secretary is not prohibited from revising or repealing the regulation that currently authorizes the use of intergovernmental transfers so long as he issues a notice of proposed rulemaking before issuing a final regulation.

H.R. Rep. No. 1096, at 37, 102nd Cong., 2^nd Sess. 1992 (Dec. 31, 1992), 1992 WL 405925.

The references to local governments, local government units, and other state agencies as the transferring entities are consistent with the understanding that states had been funding their Medicaid programs with funds provided to the state Medicaid agency by other units of its state and local government, with no indication that states had been using funds provided from outside the state. Thus, the legislative record of Public Law No. 102-234 is consistent with limiting transfers from government-owned providers to funds derived from the state and local taxes of the receiving state, transferred from government-owned providers that are part of the receiving state's governmental structure.

3. The context of section 1903 supports the disallowance.

The disputed language of section 1903(w)(6) must be considered in the context of the rest of section 1903, and this context supports CMS's position, and not Georgia's. In section 1903(w), the use of the word "state" -- such as in the statute's definition of "provider-related donation" as any donation or other voluntary payment "to a State or unit of local government" -- is significant as it bears on the question of whether a state will be required to reduce the expenditures in which it claims FFP by the amount of any provider-related donations it has received. Section 1903(w)(2)(A) of the Act. Section 1903 in general specifies the amount of FFP that will be paid to each state with an approved state Medicaid plan, and the requirements that each state must meet in order to receive those payments. As used in section 1903, "state" refers to a state that is seeking FFP in its expenditures, under its state plan, for medical assistance, the administration of its state plan, and other activities specified in section 1903. In this context, the "state" described in the language of section 1903(w)(6) permitting transfers of state and local tax funds from units of government "within a state" can only be a state that is claiming FFP, limiting the transfers permitted by section 1903(w)(6) to those received from its own units of government.

Other references to units of government in section 1903(w) are generally to units of local government, which by context and definition are limited to those units of government that are located within one state, the state that is claiming FFP in its Medicaid expenditures under its state plan. The definition of "unit of local government" in section 1903(w)(7)(G) -- "with respect to a State, a city, county, special purpose district, or other governmental unit in the State" -- clarifies that units of local government are units with respect to and within that single state. This is consistent with the longstanding requirement of section 1902(a)(2) that funds used to pay the non-federal share of Medicaid expenditures by a state derive from state and local sources, with funds from state sources comprising at least 40% of that non-federal share. The regulations implementing the statute interpret the statute's references to "local sources" as meaning local governments. 42 C.F.R. � 433.50(a)(1) (1993); see also former � 433.33 (1979) (distinguishing between state and local funds).

As opposed to "unit of local government," the term "units of government" in section 1903(w)(6) is not separately defined and therefore a reasonable assumption, based on the framework established by section 1903(w)(7)(G) and by section 1903(w) generally, is that "units of government" would include units of local government and other units of government within a single state.

Likewise, the reference to "local taxes" in section 1903(w)(6) reasonably should be read to correspond to taxes imposed by "units of local government" defined in section 1903(w)(7).

If Congress had intended the result proposed by Georgia, Congress could have explicitly provided for states to be able to claim FFP using funds received from governmental units in other states, but no explicit language was in fact used. ⁽⁸⁾ If Congress had intended that result, then it could have clearly stated that intent with language such as "within any State" or "within any of the States." Use of the qualifying phrase "within a State" indicates no intent to broaden the range of government providers whose contributions could be utilized in claiming FFP to those outside a state's boundaries. As discussed above, the only limitation that makes sense in the context of section 1903 is the limitation of the exception in section 1903(w)(6) to states utilizing funds received from government-owned providers that are part of their own tax structure. The use of the undefined phrase "units of government within a State," instead of the phrase "unit of local government," which is defined at section 1903(w)(7), clarifies that, consistent with section 5(b) of Public Law No. 102-234, a state Medicaid agency could continue to receive IGTs from those units of state government that had traditionally helped supply its non-federal share of Medicaid funding, such as state departments of health and mental health, state developmental disabilities agencies and publicly-owned hospitals. These governmental components of a state might not typically be thought of as units of "local" government. While "state" is defined in the definitional subsection of 1903(w) as including the 50 states and the District of Columbia, there is no separate definition for "unit of state government," which arguably is not included in "unit of local government." Section 1903(w)(7)(D) of the Act.

Thus, because the phrase "unit of government" serves a dual purpose by encompassing units of both local and state government, we do not agree with the dissent that the use of "unit of government" in section 1903(w)(6) instead of "unit of local government" means that that term includes out-of-state governments or providers.

During congressional hearings leading to the passage of Public Law No. 102-234, states that reported relying on IGTs did not provide any examples of IGTs being provided from outside the state, and there is no evidence that states utilized or relied on such transfers from out of state. Given that there is no evidence that Congress considered whether states should be able to receive funds from providers owned by units of government of other states, there is no reason why Congress would view "units of government within a State" as referencing units of government in any state in the United States. As CMS argued, Congress' use of "units of government" would be an awkward and ambiguous way of referring to a unit of government anywhere in the United States. As discussed earlier, if Congress had intended that result, then it would presumably have used terms such as "within the United States" or "within the 50 States" or "within the States" or "within any State."

Georgia's reading of the words "within a State" takes those words in isolation and is not reasonable in light of the basic principles of statutory construction discussed above and the law's clear purpose of preserving the states' longstanding practice of financing their Medicaid programs with IGTs from their own governmental entities.

The Board has rejected a state's reading of grammatically disputed language (whether "indirect cost centers or pools" meant "indirect cost centers or indirect cost pools") where the Board found that the state's reading would frustrate the purpose of a regulation. Missouri Dept. of Social Services, DAB No. 468 (1983). Similarly, Georgia's position here would frustrate the statutory arrangement and intent that states not benefit by receiving conditional fund transfers from Medicaid providers that are tied to the amount of reimbursement the providers receive, unless the provider is part of the type of governmental unit that states had, prior to the passage of Public Law No. 102-234, looked to for some of the required non-federal share of expenditures for medical assistance.

Because Georgia's reading of section 1903(w)(6) is not reasonable, Board decisions holding that a state is entitled to rely on its own reasonable interpretation of a statute or regulation in the absence of notice of the federal agency's contrary interpretation are not applicable and do not support reversing the disallowance. See, e.g., Utah Dept. of Health, DAB No. 1307, at 13 (1992), citing Maine Medicaid Fraud Control Unit, DAB No. 1182, at 12 (1990); see also Maryland Dept. of Human Resources, DAB No. 1667, at 26 (1998), citing Community Action Agency of Franklin County, DAB No. 1581 (1996), and decisions cited therein.

4. The applicable regulation supports the disallowance.

Georgia argued that its use of the funds from Tennessee was permitted by CMS regulations listing acceptable sources of funds for the non-federal share of Medicaid expenditures. Georgia Reply Br. at 4. That regulation provides:

Public funds as the State share of financial participation.

(a) Public funds may be considered as the State's share in claiming FFP if they meet the conditions specified in paragraphs (b) and (c) of this section.
(b) The public funds are appropriated directly to the State or local Medicaid agency, or transferred from other public agencies (including Indian tribes) to the State or local agency and under its administrative control, or certified by the contributing public agency as representing expenditures eligible for FFP under this section.
(c) The public funds are not Federal funds, or are Federal funds authorized by Federal law to be used to match other Federal funds.

42 C.F.R. � 433.51, 57 Fed. Reg. 55,138 (Nov. 24, 1992).

Georgia argued that the regulation does not require that allowable IGTs must originate from a governmental unit in the receiving state. However, the language of the regulation must be considered in the context of the statute it implemented, as well as other provisions of the regulation, and the law that kept it in force following CMS's attempts to restrict states' use of IGTs.

The cited language previously appeared in substantively identical form at 42 C.F.R. � 433.45(a) (1985) and implements section 1902(a)(2) of the Act, which requires that funds used to pay the non-federal share of Medicaid expenditures by a state derive from state and local sources, with funds from state sources comprising at least 40% of that non-federal share. Tennessee Dept. of Health and Environment. Section 1902(a)(2) "requires states to share in the cost of medical assistance expenditures but permits both states and local governments to participate in the financing of the non-federal portion of the program." Tennessee at 15. In the context of section 1902(a)(2), the regulation's focus on transfers of public funds from public agencies to "the State or local Medicaid agency," (emphasis added) as opposed to a state in general, indicates that the regulation addresses transfers of public funds within a state, and not from sources outside a state. ⁽⁹⁾

The Board characterized the 1985 regulation as recognizing "that local governments or institutions might step in as alternate funding sources for a state." Tennessee at 15. Consistent with this view, the Board has held that the regulation permitted transfers of funds to a state Medicaid agency from the state's local public hospitals (Tennessee) and the state motor vehicle agency (Oregon). In this regard, the "public funds" addressed by the regulation are "public" in the sense that they derive from public sources within a state that uses them to finance its share of expenditures for medical assistance in which it receives FFP.

Expanding the concept of protected IGTs by reading the term "public funds" to include funds from out-of-state sources is not consistent with the history that led to the regulation's remaining unchanged in the later regulations implementing Public Law No. 102-234. It was CMS's attempts to revise section 433.45(a) through proposed and interim final rules that led Congress first to enact a series of moratoria on CMS's revisions, and then to pass Public Law No. 102-234, which at section (5)(b) forbade CMS from issuing any interim final regulation changing the treatment of IGTs specified in the regulation. As we discussed above, Congress acted in response to states' complaints that CMS's revisions to section 433.45(a) would end the practice of states financing their Medicaid programs with IGTs from other state agencies and local governments, some of which provided Medicaid services. However, also as discussed above, we find no indication from that history that states had been using funds from Medicaid providers owned by governmental components of other states. There is thus no basis to conclude that the prior treatment of IGTs in the former 42 C.F.R. � 433.45 that Congress preserved in section 5(b) encompassed funds from outside a state and its agencies and local governments. Thus, this disallowance does not represent an effort by CMS to restrict states' use of IGTs in violation of section 5(b) of Public Law No. 102-234, as the dissent argues. We are also not persuaded by the dissent's suggestion that the statement, in the preamble to section 433.51(b), that states will be able to continue to use funds derived from "any governmental source" other than impermissible provider taxes and donations as the state share of Medicaid expenditures was intended to encompass anything other than transfers among governmental units of a single state. 57 Fed. Reg. 55,119 (Nov. 24, 1992).

The regulation must also be considered in light of the specific statutory provision at section 1903(w)(6)(A) stating when CMS may not take action to limit a state's use of funds as the non-federal share of Medicaid expenditures. Section 1903(w)(6)(A) provides an exception to the prohibition in section 1903(w)(1) on states receiving funds from Medicaid providers that are related to the amount of reimbursement the providers receive. As we have seen, the exception in section 1903(w)(6)(A) was meant to apply where the funds are from the types of governmental entities from which states had traditionally received some of the required non-federal share of expenditures for medical assistance, which did not include providers in other states.

A regulatory preamble that the dissent cites is consistent with this limitation of IGTs to funds derived within a single state. The regulations addressed nationwide increases in DSH payments, some funded with IGTs, by narrowing the categories of providers for which aggregate upper payment limits (UPLs) could be calculated. The dissent argues that CMS's decision to limit DSH payments via this route, and not by restricting the use of IGTs through notice-and-comment rulemaking, suggests that CMS viewed permissible IGTs as including funds from outside a state.

If anything, however, the preamble to the UPL regulations that the dissent cites evinces an understanding that permissible IGTs were those that states had traditionally used for funding Medicaid expenditures, which were confined to those that arose within each state's own governmental structure. The preamble lists as examples of "non-State government owned or operated facilities" eligible to make IGTs "county or city owned and operated facilities, quasi-independent hospital districts, and hospitals that are owned by local governments but operated by private companies through contractual arrangements with those local governments . . ." 66 Fed. Reg. 3148, 3153-54 (Jan. 12, 2001). These examples are very similar to the non-state governmental entities that states cited during the congressional hearings leading to Public Law No. 102-234 as sources of IGTs they had relied on for Medicaid funding. See supra pp. 14-16. There is no indication that the list in the preamble encompassed government-owned facilities outside of a state's own governmental structure. Moreover, given that section 1903(w)(6) prevents CMS from limiting a state's use of funds derived from state and local taxes, even when transferred from government-owned providers, it is not clear that CMS could in any event have addressed the increases in DSH payments by restricting IGTs.

The preamble to the UPL regulations is also consistent with our analysis that "units of government within a State" in section 1903(w)(6) must be viewed in the context of section 1902(a)(2) permitting states to use local as well as state funds to fund their non-federal share of Medicaid expenses. The preamble states:

The statute also permits States some flexibility to use local government funds for the non-Federal share of Medicaid expenditures. Under section 1902(a)(2) of the Act, States may fund up to 60 percent of the non-Federal share of Medicaid expenditures with local government funds. Section 1903(w)(6) of the Act specifically limits the Secretary's ability to place restrictions on a State's use of certain funds transferred to it from a local unit of government subject to the requirements in section 1902(a)(2) of the Act. . . .

States and the Federal government share the responsibility of financing the Medicaid program. IGTs are a financing mechanism States can use to help fund their share of allowable program expenditures. Under the Medicaid statute, up to 60 percent of State funding may come from local public resources. States, counties, and cities have developed their own unique arrangements for sharing in Medicaid costs. IGTs have their own statutory basis and those provisions are not being interpreted or modified by this regulation.

66 Fed. Reg. 3148, 3164 (language from the first paragraph above also appears in the preamble to the proposed regulations, at 65 Fed. Reg. 60,151 (Oct. 10, 2000)). These statements clearly reflect an understanding that IGTs were a method for a state to allocate its Medicaid costs among its various state and local governmental components, with no indication that those components included governmental units of other states.

Thus, CMS's regulatory issuances are consistent with the disallowance.

5. Georgia did not reasonably rely on its reading of the statute.

Georgia argued that it is entitled to deference in its reasonable interpretation of the Medicaid statute. Georgia Reply Br. at 5. As discussed above, we conclude that Georgia's reading of section 1903(w)(6)(A) as permitting it to use these Tennessee funds as its state share was not reasonable. Moreover, even if we were to find that Georgia's reading had some merit (which we do not), the record does not support a finding that Georgia reasonably relied on that reading in requiring and accepting the transfers as a condition of making supplemental payments to the Tennessee hospitals.

In Alaska Dept. of Health and Social Services, DAB No. 1919 (2004), the Board explained how it will consider a state's claim that it reasonably relied on an alternative interpretation, or on a prior agency interpretation, of statutory language that is subject to more than one interpretation, where the agency has not informed a state of the interpretation that is the basis for a disallowance. To determine whether the "alternative interpretation is simply a position taken after the fact in litigation or one responsibly developed and relied upon by that party in its actions . . . the Board has considered factors such as historical claiming patterns, good-faith efforts to verify the interpretation with appropriate agency officials, the openness with which the interpretation was put forward, and the nature of contemporaneous statements and actions of the non-federal party." Id. at 15-16. While we here find that the statute in its overall context is not reasonably subject to more than one interpretation and that Georgia's reading is not reasonable (and here there is also no prior agency interpretation supporting the state, as in Alaska), we nevertheless note that application of the factors that the Board outlined in Alaska do not support a finding that Georgia reasonably relied on its reading of the statute. Georgia advanced no historical pattern of claiming FFP in Medicaid expenditures financed with conditional fund transfers from Medicaid providers owned by governmental entities of other states, or from any governmental entities of other states. Georgia's current reading of the statute is thus new and novel, given that the state share regulation as currently written has been in effect since 1985, and that Public Law No. 102-234 was passed in December 1991. As we have seen, that law was prompted by states' protests of what they perceived to be CMS's attempts to curtail their longstanding use of IGTs as a source of the non-federal share of Medicaid expenditures, yet none of the examples of IGTs that states offered in their testimony before Congress prior to the passage of the law included the receipt of funds from governmental entities of other states.

Next, there is no indication that Georgia attempted to verify its reading of the statute with CMS, as in Alaska. Georgia did not assert that it ever inquired of CMS whether states were permitted to receive IGTs from governmental entities in other states or had in fact ever done so, and there is no indication that Georgia informed CMS of an intent to finance its state share of some Medicaid expenditures with funds transferred from providers located in other states. Georgia also did not present its reading of the statute in an open manner. The state plan amendments permitting Georgia to make enhanced Medicaid payments make no reference to government-owned Medicaid providers in other states, and do not mention the receipt of IGTs from other states, or that Georgia would receive funds from out-of-state facilities in exchange for the enhanced payments. Georgia Exs. 4, 5. The "statement of participation" provider agreements that Georgia and the two Tennessee hospitals executed address only the provision of covered Medicaid services to eligible Medicaid recipients and make no reference to enhanced reimbursement or to the transfer of funds from the providers, or to the providers' status as government-owned or private facilities. Given that the legislative history of Public Law No. 102-234 contains no example of states receiving IGTs from outside their boundaries, CMS in reviewing Georgia's state plan amendments and its reference to IGTs had no reason to believe that Georgia would be receiving conditional fund transfers from governmental entities in other states that would replace Georgia's non-federal share of the enhanced payments. The cooperative federal/state nature of the Medicaid program does not, as Georgia argued, entitle it to develop and rely on a reading of the statute that is contrary to the clear purpose for which Congress preserved states' ability to use IGTs and that would result in Georgia receiving FFP in supplemental payments for which it had no net state expenditure.

There were moreover no contemporaneous statements from Georgia indicating that it had considered whether the law permitted it to receive funds from government-owned providers in other states that were related to the providers' Medicaid reimbursement. As noted above, Georgia did not inform CMS that it would be receiving funds from the two out-of-state facilities, or that receiving those funds was a condition for making enhanced payments. Although the two Tennessee hospitals are included among approximately 100 hospitals on a list that Georgia submitted in the appeal showing the calculation of upper payment limits for each facility, titled "DCH 12/31/01 Inpatient and Outpatient Annual UPL Rate Adjustment Estimate," Georgia did not argue that it provided this list to CMS and the list moreover contains no information about the location of the two facilities nor does it otherwise indicate that they are not Georgia hospitals, instead listing them simply as "Erlanger" and "T.C. Thompson." Georgia Ex. 3.

Application of these factors from Alaska supports finding that Georgia's position in the appeal was not a reasonable analysis of the applicable law that Georgia developed and relied upon prior to receiving the fund transfers from the Tennessee hospitals.

6. Georgia's other arguments do not provide a basis to reverse the disallowance.

Georgia made several other arguments. Below, we discuss why these arguments do not support reversing the disallowance.

Georgia argued that its approved state plan amendments permitted the Tennessee transfers. Georgia Exs. 4, 5. However, as noted above, the plan provisions make no reference to Georgia receiving funds from out-of-state providers. The portions of its state plan that Georgia submitted simply state that "State government-owned or operated facilities, non-State government-owned or operated facilities and Critical Access eligible hospitals" would be eligible for "rate payment adjustments," and that a facility's status as government owned or operated "will be based on its ability to make direct or indirect intergovernmental transfer payments to the State." Georgia Exs. 4, 5. Moreover, the plan provisions contain no direct statement or indication placing CMS on notice that Georgia expected to receive transfers from out-of-state hospitals and treat them as its state share.

Georgia argued that it is required by court precedent to reimburse out-of-state providers to the same extent as it is required to reimburse providers located in Georgia. Georgia cited West Virginia Univ. Hosps. Inc. v. Casey, 885 F.2d 11 (3d Cir. 1989), aff'd 499 U.S. 83 (1991), for the proposition that it may not reimburse out-of-state facilities at rates lower than those paid to in-state facilities. Georgia's argument and the cited case, however, address only the eligibility of out-of-state hospitals to receive the same supplemental payments that the state was making to in-state providers, and do not bear on the separate issue of whether Georgia must reduce its Medicaid expenditures in which it claims FFP by the amount of funds it received from the two Tennessee hospitals. The disallowance does not forbid Georgia from paying those facilities enhanced reimbursement under its state plan. ⁽¹⁰⁾ Georgia also has not shown that West Virginia Univ. Hosps. Inc. v. Casey is applicable here in any event. The decision was based on superseded requirements for state plan reimbursement methodologies that were removed when the Medicaid statute was amended in 1997. As the Third Circuit noted in rejecting a claim by out-of-state facilities for DSH payments equal to those paid to in-state facilities, when Congress replaced the provisions addressed in Casey, it "removed a party's ability to enforce any substantive right" with regard to a state's establishment of Medicaid reimbursement rates. Children's Seashore House v. Waldman, 197 F.3d 654, 659 (3^rd Cir. 1999). While the Third Circuit noted that Casey could still apply to a state whose reimbursement methodology was established pursuant to the earlier version of the statute, Georgia did not show that Casey would apply here. ⁽¹¹⁾

Finally, we reject Georgia's argument that public policy considerations support reversing the disallowance, ostensibly because the fund transfers enabled the two Tennessee hospitals to receive supplemental payments that recognized and rewarded them for services they provided to a disproportionate number of medically indigent Georgia residents. Georgia Br. at 15. Rather, public policy considerations mean that the cooperative federal/state nature of the Medicaid program should be preserved by requiring Georgia to repay federal funds claimed for supplemental payments in which it effectively had no net expenditure. Additionally, those transfers effectively reduced the amount of supplemental payments received by the two Tennessee hospitals by substituting the transferred funds for Georgia's state share.

The disallowance in any event does not bar Georgia from receiving FFP in payments, at enhanced or unenhanced rates specified in Georgia's state plan, for Medicaid services provided to Georgia residents by hospitals in Tennessee (or, for that matter, by private hospitals in Georgia). However, those payments may not be conditioned on transfers of funds from the hospitals that take the place of Georgia's required non-federal share, reducing its net expenditures and altering the applicable FMAP.

Conclusion

For the preceding reasons, we sustain the disallowance. We have fully considered the points relied on by the dissenting Board Member and have addressed them in our analysis as we determined necessary. Contrary to what the dissenting opinion suggests about CMS's credibility in taking this disallowance, there is no evidence in the record that CMS ever anticipated the possibility of donations coming from governmental units of another state, or that CMS had advance notice of Georgia's reading of the statutory language. We therefore respectfully disagree that there is any basis for characterizing this disallowance as retroactive. Georgia on the other hand had approximately 10 years after enactment of the statute to raise this issue to CMS before requiring fund transfers from out-of-state providers, but failed to do so. We also conclude that the dissenting opinion mischaracterizes the purpose of the statute in stating that section 1903(w)(6)(A) was directed at CMS. The primary purpose of the statute was to identify donations that may not be used by states to fund their state share of the program. The legislative history demonstrates that Congress wished to prohibit the use of donations that would allow a state to bypass its partnership funding responsibilities. That is precisely what is happening here. No governmental unit of Georgia is taking responsibility for the funding of these services provided by Tennessee hospitals to Georgia residents. The Tennessee hospitals are donating the Georgia share not because they have a governmental responsibility to Georgia residents but because the donation arrangement is the only means by which they could receive the federal share of the enhanced payments under the Georgia program. Finally, we respectfully submit based on numerous factors that have been highlighted in our decision that the plain meaning of the statute does not support Georgia's position. To put it simply, if Congress had in fact intended what Georgia suggests, it would much more likely have used plainer, clearer or more specific wording to accomplish that end, and the legislative history would likely have provided some evidence of that intent and purpose.

Had my view prevailed, I would have provided detailed analysis and citations in support of it. Instead, I have only briefly stated the key reasons why I respectfully disagree with the other Panel Members in this case.

The funds at issue here were "public funds" transferred from a "unit of government within a State" and the transfer was "intergovernmental," within the plain meaning of those terms.

The applicable regulation, first published in 1985, restricts use of "public funds" as the "non-federal" share of Medicaid expenditures in only two ways: the state has to have administrative control of public funds transferred to it, and funds derived from federal sources may be used only if authorized. Section 1903(w)(6)(A) of the Act was directed at CMS, which had deleted the 1985 regulatory provision as part of broad regulatory changes about treatment of provider taxes or donations, based on a "net expenditure" theory. Congress had first imposed a moratorium on the changes, expressing concern for how the changes would harm Medicaid recipients in states that had structured their programs in reliance on the regulation and that could not easily and quickly implement new funding mechanisms. In hearings on the moratorium, the CMS Administrator explained that the regulatory change to the "public funds" provision was intended only to prevent use of funds derived from provider taxes or donations that CMS viewed as part of "State schemes," not to restrict "intergovernmental transfers" of funds derived from other sources. Indeed, CMS then issued a clarifying rule (also subject to a moratorium), stating in the preamble that the rule "will in no way preclude States from increasing this [non-federal] share of Medicaid expenditure from other sources" (i.e., sources other than the provider taxes and donations CMS sought to restrict).

While some in Congress expressed concern about state tax and donation "schemes," the 1991 law clearly took a narrower approach to what taxes were impermissible than what CMS had tried to implement by regulation. With respect to intergovernmental transfers, Congress addressed the concern stated by the CMS Administrator by providing that transferred funds could not be derived by the "unit of government" from impermissible taxes or donations. Otherwise, the expressed intent of prohibiting the Secretary from restricting the use of funds from a "unit of government within a State" as "non-federal share" was to undo CMS's change to the regulations regarding public funds. An accompanying provision addressing "intergovernmental transfers" precluded any change, through an interim final rule, in the treatment of "public funds as a source of State share" (other than to implement the proviso). In other words, Congress wanted notice before any change and an opportunity to intervene again if it disagreed or wished to avoid or delay the consequences.

The Secretary's actions in implementing the 1991 provision met this intent by restoring the "public funds" provision to the regulations, with no substantive change other than the added proviso. The preamble referred to the provision as permitting transfer of funds from "any governmental source" (other than impermissible taxes or donations). Twice since then, the Secretary has, while regulating supplemental provider payments (the specific context here), specifically declined to restrict "intergovernmental transfers" and instead taken other steps to ensure that the resulting federal match is not applied to payments exceeding providers' reasonable costs. The Secretary did this by adjusting upper payment limits and by applying a separate aggregate limit to state payments made to "non-State government-owned or operated facilities (all government facilities that are neither owned nor operated by the State)." The preamble says that "a facility [is considered] to be subject to the new governmental UPL [upper payment limit] if it can make an IGT [intergovernmental transfer] payment to the State." The only other categories for purposes of the upper payment limits are "State-owned or operated" and "private" facilities. Indian tribal facilities are specifically excepted from the upper payment limits. There is no indication in the rule or its history that out-of-state government facilities were not considered to be "non-State government-owned or operated facilities" that could make intergovernmental transfers.

In this context, CMS approved Georgia's plan amendment providing for supplemental payments to any "non-State government-owned or operated" hospital making an "intergovernmental transfer." CMS gave no notice to Georgia that no federal funds would be available if the hospital was owned by an out-of-state governmental entity, so Georgia made payments based on the plain meaning of the relevant terms (and must continue making those payments unless it amends its plan or the transfers stop). Now CMS wants to retroactively disallow federal funds for those payments based on an implied restriction to intergovernmental transfers protected by section 1903(w)(6)(A) and on a narrow reading of the term "public funds" that CMS has never before advanced in the 20 years the regulations have used that term. ⁽¹²⁾

CMS acknowledges that the word "a" denotes a "single, unspecified" state, whereas use of the word "the" would have denoted a "particular specified" state, but CMS ignores the effect of the use of an "a" in section 1903(w)(6)(A) as indicating that Congress was not referring to a particular state. CMS argues that "a" plainly means the single state receiving the intergovernmental transfer, but does not deny that the Hospital Authority is a "unit of government," nor that it is "within a State," within the ordinary meanings of those terms. Moreover, the more limiting phrase "in the State" is used elsewhere in the 1991 law, such as in the definition of the term "unit of local government." Generally, different wording suggests a different intent, absent compelling evidence to the contrary. CMS says that the two phrases were intended to have the same effect, but points to nothing in the legislative history that directly supports its view, even though CMS was involved in negotiating the wording of the 1991 law.

CMS mistakenly focuses on one general purpose of the 1991 law -- to avoid state schemes to artificially inflate federal match -- and effectively ignores the very different purpose of the specific provision allegedly being interpreted and the related procedural requirement -- to undo and constrain CMS attempts to change non-federal share requirements on which states rely in structuring and financing their programs. In any event, CMS's position that the context and purpose justify treating the state's reading as unreasonable (rather than simply not the better reading) is inconsistent with basic principles of statutory construction, which look first to the plain meaning of the language Congress used. At most, the context and purpose raise a question about how the provision should be applied to the situation at hand. They do not establish that the statutory and regulatory provisions cannot reasonably be read to mean what they say.

The majority finds unconvincing the rationale Georgia advanced to explain why it thought Congress deliberately did not use the more limiting phrase "in the State" in section 1903(w)(6)(A). There are, however, other plausible reasons (consistent with the context and history) why the term "unit of government within a State" was used in that section. The term "public funds" used in the 1985 regulation extends beyond merely funds from a particular state government or local units within that state. For example, the regulation specifically includes funds from Indian tribes as "public funds," yet a tribal government might not be considered to be "in" every state serving Medicaid recipients belonging to the tribe (although it is "within a State"). ⁽¹³⁾

Absent any history directly addressing the issue at hand, moreover, there is no basis for ruling out the possibility that the drafters of the 1991 law (which included representatives of CMS, states, and counties) consciously intended to protect transfers from governmental units of other states, as the plain language implies, especially since state plans must by regulation "provide that the State will pay for services furnished in another State to the same extent it would pay for services within its boundaries." In my view, the wording in the UPL regulation and CMS's approval of state plan amendments like the one at issue here indicate that CMS was aware that some intergovernmental transfers might come from out-of-state government owners of public hospitals. Otherwise, payments under the plan to non-state public hospitals located within the state would be higher than payments to non-state public hospitals located outside of the state for the same service. Also, if a state made lower payments to out-of-state public hospitals and included those payments in calculating its total payments to "non-State government-owned or operated facilities" for purposes of applying the aggregate upper payment limit, the state could then pay in-state hospitals at rates exceeding reasonable costs, without exceeding the limit. Such excessive payments would give rise to a genuine concern about schemes to obtain federal match with no corresponding expenditure. On the other hand, allowing federal funding for payments made according to the plain language of Georgia's approved plan would mean the payment limit would work as intended and that reimbursement for public hospital services provided to a Medicaid recipient would not depend arbitrarily on whether the recipient needed to cross a state line in order to receive the service. ⁽¹⁴⁾

In any event, the issue here is not whether the Secretary could have reasonably implemented the 1991 law by interpreting it to protect intergovernmental transfers only from governmental units within the particular state receiving the transfer. The Secretary did not in fact implement the provision based on such an interpretation. Instead, the Secretary implemented the provision by restoring the regulation generally permitting use of "public funds" as "non-federal share," with no language excluding use of out-of-state public funds as part of that share.

CMS cannot credibly assert that the issue here is one of first impression, and that it did not previously anticipate that "public funds" might come from another state. State plans are required to address out-of-state services, and Medicaid program regulations recognize that it may be "general practice for recipients in a particular locality to use Medical resources in another State." The court case cited by the majority regarding disparate payments, the wording of the upper payment limits, and other circumstances over the last 20 years not detailed here, also indicate that the issue is not new. Yet, neither the CMS Administrator nor the Secretary has ever issued any guidance formally adopting the position advanced here.

Finally, this Department's longstanding grants policy is that any limit on non-federal share be clearly stated. Like the 1991 law, this policy recognizes that states need clear, advance guidance in this area because they have flexibility in how they structure and finance their programs. Retroactively applying unstated limits harms both states and program recipients.

In sum, Georgia's reliance on the plain meaning of the statute, regulations, preambles, and its approved plan amendment was reasonable. By holding otherwise, the majority avoids applying longstanding Board and court precedent, based on federal procedural law, that favors Georgia. More important, it ratifies an effort by CMS to restrict intergovernmental transfers through informal action, contrary to the directive in the 1991 law. Because the Board is also bound by applicable laws and regulations, I cannot in good conscience concur.

Cecilia Sparks Ford

Donald F. Garrett
Presiding Board Member

Dissent to Decision No. 1973

Judith A. Ballard

1. CMS was previously named the Health Care Financing Administration (HCFA). See 66 Fed. Reg. 35,437 (July 5, 2001). In this decision we use CMS, except where we quote materials that use the prior acronym.

2. Within each group of facilities, the regulation calls for separate aggregate upper payment limits to be calculated for state government-owned or operated facilities (facilities that are either owned or operated by the state), non-state government-owned or operated facilities (government facilities that are neither owned nor operated by the state, such as county-owned facilities), and privately-owned and operated facilities. Id.

3. There is no specific definition of intergovernmental transfers in the statute or regulations. The term was here used by the parties to refer to public funds that states may use to fund Medicaid expenditures in which they claim FFP.

4. On several earlier occasions Congress barred CMS from issuing any final regulation changing the treatment of voluntary contributions or provider-paid taxes prior to May 1, 1989, a date that Congress later extended to December 31, 1990 and then to December 31, 1991. Pub. L. No. 100-647, 102 Stat. 3342 (Nov. 10, 1988); Pub. L. No. 101-239, 103 Stat. 2106 (Dec. 19, 1989); Pub. L. No. 101-508, 104 Stat. 1388 (Nov. 5, 1990).

5. Although CMS stated that the interim final rule published in September 1991 did not prohibit IGTs, states were concerned that the rule would still prohibit their use of such transfers, because the rule prohibited fund transfers from Medicaid providers but did not appear to distinguish between private and government-owned providers. 56 Fed. Reg. 46,380, 46,383-84 (Sept. 12, 1991); see, e.g., 137 Cong. Rec. S18653 (Nov. 27, 1991) (letter from Sen. Cranston).

6. Section 1902(a)(2) also requires state plans to provide, effective July 1, 1969, for financial participation by the state equal to all of the non-federal share, or provide for "distribution of funds from Federal or State sources, for carrying out the State plan, on an equalization or other basis which will assure that the lack of adequate funds from local sources will not result in lowering the amount, duration, scope, or quality of care and services available under the plan." The Board has interpreted this provision as suggesting "that when some local governments or agencies are in a better position than others to assist in funding the state share for the program, any lack of uniformity in local funding is permissible as long as the state picks up the shortfall so that program services remain equal throughout the state." Tennessee Dept. of Health and Environment, DAB No. 1047, at 15, n.8 (1989).

7. A "tax of general applicability" for Medicaid purposes is a tax which applies to services other than health care services. New England Health Care Employees Union Dist. 1199 v. Mount Sinai Hosp., 846 F.Supp. 190, 198 n.11 (D.Conn. 1994), rev'd 65 F.3d 1024 (2^nd Cir. 1995). Section 1902(t) of the Act forbids CMS from denying or limiting payments to a state for Medicaid expenditures "attributable to taxes of general applicability imposed with respect to the provision of such items or services." CMS's State Medicaid Manual likewise permitted FFP for payments attributable to taxes of general applicability, which it characterized as taxes not restricted to medical providers of care or services and which are applied to all types of businesses. See Louisiana Dept. of Health and Hospitals, DAB No. 1109 (1989), aff'd, Louisiana Dep't of Health & Hospitals v. Sullivan, 760 F.Supp. 929 (D.D.C. 1991).

8. It would be reasonable to expect more explicit language from Congress permitting IGTs from out-of-state governmental units under the circumstances here, where there is no historical evidence that states had ever relied on transfers from other states to fund their Medicaid programs and there is absolutely no legislative history that Congress particularly wanted to promote or protect such a practice.

9. The reference in section 433.51 and the former 433.45(a) to "the State or local Medicaid agency" is consistent with the Medicaid statute and regulations, which require each state to designate a single state agency to administer or supervise the administration of its state Medicaid plan, but provide for local agencies to participate in administering the plan. See, e.g, section 1902(a)(4),(5) of the Act; 42 C.F.R. �� 431.10(b) (1979), 433.32 (1979), 433.51 (1993).

10. Georgia reported that the Tennessee hospitals furnished some $51.5 million worth of hospital services to thousands of Georgia residents during 2002 and portions of 2001. Georgia Br. at 4. This case does not concern the amount of reimbursement due the Tennessee hospitals, or Georgia's ability to receive FFP in its expenditures for Medicaid services provided by the two Tennessee hospitals to Georgia residents. Rather, the issue is whether Georgia can use Tennessee funds as its non-federal share.

11. Unlike the dissent, we do not see Waldman as indicating that CMS had likely encountered the issue of IGTs from out-of-state providers prior to this disallowance. If anything, Waldman and Casey support an inference that states resisted making supplemental payments to out-of-state facilities.

FOOTNOTES FOR DISSENT TO DECISION NO. 1973

12. Indeed, the initial theory on which the CMS Regional Administrator questioned use of the funds here was that the regulation required that the transferring entity had to be within Georgia's administrative control. The wording of the regulation (and its history), however, clearly indicate that it is the transferred funds that must be within Georgia's control. Only when Georgia pointed this out did CMS advance its theory that "within a State" in section 1903(w)(6)(A) plainly means within the State receiving the transfer.

13. The phrase "within a State" is not rendered superfluous by Georgia's reading, contrary to what the majority says. The longstanding treatment of "public funds" as a source of non-federal share that Congress intended to preserve precluded use of certain funds derived from federal grants. The phrase "within a State" may have been added for that reason, to clarify that not all intergovernmental transfers were unrestricted in their use as part of the non-federal share. Moreover, the phrase may have been added to indicate that the provision was not referring solely to units within the particular state, as other provisions did. Similarly, if Congress had intended the result CMS advocates here, it could have easily said "within the State" or "within the receiving State" but did not do so.

14. The compromise leading to the 1991 law also addressed federal concerns through payment limits -- states agreed to limits on supplemental payments to hospitals called "DSH payments" (and on limits on donations) in exchange for provisions making some provider taxes permissible and protecting intergovernmental transfers as a source of the non-federal share. By referring to the net expenditure (applicable credits) rationale, the majority resorts to an analytical approach that CMS had tried to implement, which would have made any tax or donation impermissible if at all related to provider reimbursement. Congress rejected this approach, and CMS ultimately agreed with the states on statutory language that takes a much narrower approach in defining impermissible provider-related taxes and donations. CMS does not allege here that the transferred funds were derived from such impermissible taxes or donations made to the Hospital Authority by the hospitals. Moreover, the supplemental payments from Georgia to the hospitals were defined to be within the upper payment limit, so there is no reason to believe they caused Medicaid reimbursement to exceed the hospitals' allowable actual costs of providing Medicaid services.