GAB Decision 204
August 7, 1981 New York State Department of Social Services; Docket No.
79-49-NY-HC Settle, Norval; Teitz, Alexander Ford, Cecilia
The New York State Department of Social Services (State) appealed a
disallowance by the Director, Medicaid Bureau, Health Care Financing
Administration (HCFA, Agency), of $596,200 in Federal financial
participation (FFP) claimed under Title XIX of the Social Security Act
(Medicaid) for the period April 1, 1975 to December 31, 1976 for
reimbursement at 75 percent for the cost of skilled professional medical
personnel and supporting staff. The Agency contends that FFP was only
available at the 50 percent rate, so that the State's claim was
overstated by the disallowed amount. Such costs are eligible for 75
percent FFP if attributable to administration of the Medicaid program
where skilled professional medical expertise is necessary. The issue is
whether the disallowance should be upheld because the State cannot
document its claim for 75 percent FFP.
The record on which this decision is based includes the State's
application for review, the Agency's response, an Order to Show Cause
issued by the Board, the Grantee's response to the Order, and
documentation provided by the Agency in accordance with a request made
in Grantee's response to the Order. The Agency was not required to
respond to the Order and did not do so.
We conclude that the Agency's determination should be upheld for
reasons set forth below.
Applicable Statute, Regulations, and Policies
Section 1903 of the Social Security Act (1976), 42 U.S.C. Sec.
1396b, provides in pertinent part:
(a) From the sums appropriated therefor, the Secretary (except as
otherwise provided in this section) shall pay to each State which has a
plan approved under this title . . .
. . . .
(2) an amount equal to 75 per centum of so much of the sums expended
during each quarter (as found necessary by the Secretary for the proper
and efficient administration of the State plan) as are attributable to
compensation or training of skilled (2) professional medical personnel,
and staff directly supporting such personnel of the State agency or any
other public agency; plus
. . . .
(6) an amount equal to 50 per centum of the remainder of the amounts
expended during such quarter as found necessary by the Secretary for the
proper and efficient administration of the State plan.
45 C.F.R. Sec. 250.120 /1/ implements Section 1903 and provides, in
part, that FFP is available at 75 percent for salary and other
compensation, travel, and training costs of skilled professional medical
personnel and support staff involved in the State and local
administration of the medical assistance program. Skilled professional
medical personnel include physicians, dentists, and other health
practitioners. The 75 percent rate is available only for the amount of
time such persons actually devote to the administration of the program.
Otherwise, FFP is available only at the 50 percent rate.
The Medical Assistance Manual (Action Transmittal, SRS-AT-75-50, July
3, 1975) /2/ provides in section 2-41-20 B. 1. a. that:
The function of a "skilled professional medical" position whether
at
the State or local level, is the principal basis for determining
eligibility for increased Federal matching. . . .
Support positions derive their eligibility for increased Federal
matching from their direct association with and supervision by skilled
professional medical personnel. . .
The Medical Assistance Manual explains in section 2-41-20 B. 2. a.
that it is important to look behind the job title and organizational
placements of a position and instead look at the functions included in
the job. In order to claim matching at the 75 percent rate, the skilled
professional medical personnel must be performing functions at a
professional level of (3) responsibility requiring medical subject area
expertise. The Manual points out that staff functions unrelated to the
specialized field of medical care management are eligible for 50 percent
matching and, as an example, states that a physician in charge of an
accounting operation would be eligible only at 50 percent FFP.
Section 2-41-20 B. 2. b. describes the kind of documentation to
substantiate a claim. That section provides in part:
Because the position's function is the primary determinant of its
professional medical status, the State's official position descriptions
will provide the basic substantiation for claims for 75 percent
matching. . . .
Section 2-41-20 C. 5. provides as follows:
Audit Staff -- 50 or 75 percent FFP
Personnel engaged in routine claims review, such as auditing whether
the codes correctly coincide with billed charges, are matched at 50
percent. Matching at 75 percent would apply to those skilled
professional medical personnel (and directly supporting staff) whose
function involved the necessity for and adequacy of the medical care and
services provided, as in utilization review.
Discussion
Background
The Agency performed an audit for the period October 1971 through
March 31, 1975 to determine the accuracy and propriety of expenditures
claimed by the New York City Department of Social Services (NYCDSS) for
FFP. This audit report, Audit Control No. 02-60251, dated March 24,
1976, found that personnel costs for three departments, identified in
the follow-up audit as Central Office Clerks (JYA), Central Office
Dentists (KYA), and Medical Services Payment (DYA), were incorrectly
classified as policy planning/administration and consequently claimed at
75 percent FFP rather than 50 percent FFP. The auditors determined that
the major functions in these departments were "the receipt and review of
dental invoices and supporting documentation, the authorizing of certain
types of work to be performed and the processing of payments" and that
dentists employed in these departments were not involved in policy
making or administration but rather with auditing dental invoices prior
to payment. The auditors found that one of the factors contributing to
this improper classification was the fact that NYCDSS did not have a
system to determine properly the type of work performed by its various
departments. The auditors found the NYCDSS was (4) unable to correlate
accurately the functions performed by the dental payment units with the
specified claiming requirements set by the State, and noted that NYCDSS
prepared its administrative cost claims based on department names which
were, in most instances, insufficient to determine functions. (Audit
Report, pp. 6 & 7.)
In question here is the follow-up audit for April 1, 1975 to December
31, 1976. This audit report, Audit Control No. 02-80201, dated December
12, 1977, affirmed the conclusions in the first audit and determined
that NYCDSS's claim for FFP for these three departments was overstated
by $596,200. In disputing the conclusions reached in the follow-up
audit, the State asserted that "the group auditing dental invoices meet
the 75% FFP eligibility requirement" and noted that New York City had
agreed to prepare job descriptions for those positions which the State
hoped would help to resolve this question. (Letter of June 16, 1977,
Part of Exhibit 1 to the Agency's Memorandum In Support of Respondent's
Position.)
Before the disallowance in question here was made, the Agency
reviewed documents submitted by New York City to support the 75 percent
FFP claim. The results of this review are summarized in a memorandum
dated April 26, 1978. (Agency memorandum) (Exhibit 3 to the Agency's
Memorandum In Support of Respondent's Position.) The Agency concluded
that its review "seems to confirm the statement made in the original
audit that NYCDSS did not have an adequate system to properly determine
the type of work performed by the department's various units." (Agency
memorandum, p. 3.) The Agency noted that it received job descriptions
for 7 dentists out of the approximately 50 dentists listed on a 1972
roster and stated both that the duties listed on individual job
descriptions were so diverse as to apply to several units, and that the
documents themselves were prepared as part of a self-evaluation program.
The Agency memorandum states that some of the documents it reviewed were
unsigned, undated, altered, and not identified with any organization.
The Agency questioned the authenticity of what had been submitted,
concluding that the "material submitted is inconclusive and not valid
appropriate documentation." (Agency memorandum, p. 4.) The Agency also
noted that it had received no job descriptions for support personnel.
Parties' Positions
The State's argument is that the Agency disallowed expenditures for
salaries for dentists and supporting staff who performed administrative
services requiring the exercise of professional medical expertise. The
Agency contends that the State has not provided sufficient documentation
of the functions of the personnel in question to substantiate the claims
for FFP at the 75 percent rate. The Board finds that the question
involved here is not whether certain functions qualify for the 75
percent rate but whether the State can show that personnel costs for the
three NYCDSS departments are attributable to individuals performing
functions for which the 75 percent rate can be claimed.
(5) State's Obligation To Document Claimed Costs
In order to demonstrate that the personnel were performing functions
for which the 75 percent rate can be claimed, the State has an initial
burden to document these costs and show that the claim for reimbursement
is proper. The cost principles at 45 CFR Part 74, Appendix C, Part I,
Section C provide that in order to claim costs under a grant program,
the grantee must show that the costs are necessary and reasonable for
the administration of the grant program, are allocable to the program,
and are incurred for the benefit of the program. Grantees are required
to meet standards for financial management of the grant. These
standards, 45 CFR Sec. 74.61(b), (f), (g), require that the grantee make
and retain records of expenditures, and support these records with
source documentation. The Board has found that "(these) provisions
clearly place the burden of establishing allowability of costs on the
grantee." (Neighborhood Services Department, Decision No. 110, July 15,
1980, p. 3.) Furthermore, in administering the Medicaid program, a
state, and where applicable, local agencies, are required by 45 CFR Sec.
205.145 to maintain an accounting system and supporting fiscal records
to assure that claims for federal funds are in accordance with
applicable federal requirements. Accordingly, if an audit report makes
findings that certain costs or claims for expenditures are not proper,
the standards discussed above impose an obligation on the grantee to
show in response to the audit report that its claim is proper. The
Board also has found the requirement to document costs to be a
fundamental principle of grant management. (Head Start of New Hanover
County, Inc., Decision No. 65, September 26, 1979.) In the instant case,
in coming before the Board, the State does not lose this initial
obligation of documenting costs even though its claim for FFP in these
costs was paid by the Agency. The State must provide documentation
sufficient to show that its claim for 75 percent FFP for costs for
skilled professional medical personnel and support personnel was proper,
thus necessarily showing that the audit report findings were wrong.
Relevant Documents
The documents in the record which pertain to the personnel costs in
question are a letter dated June 24, 1977 from an official of the Office
of Budget and Fiscal Affairs for the City of New York, Human Resources
Administration to an employee of the New York State Department of Social
Services (June letter) and job descriptions for 32 dentists. /3/
(6) The June letter was attached to the State's response to the Order
to Show Cause. We have no information to indicate that the Agency had
ever previously received a copy of this letter or that it was used by
the parties in their discussions concerning the auditors' findings.
The June letter briefly details "the duties performed by the per diem
dentists on distribution point KYA 2, which the HEW audit considered to
be wholly 50% FFP and we (New York City) consider to be wholly 75% FFP."
The letter states that these dentists were employed in four sections of
the Bureau of Medical Services: Prior Authorizations, Quality Assurance
Review ("formerly called Payments"), Evaluation, and Nursing Homes.
The
letter lists the dentists employed in each section as well as
identifying the names and special duties of three dentists not in these
four sections. The June letter refers to a State audit report, "'Audit
of the Bureau of Medical Assistance-skilled Professional Personnel
Claimed for 75% Federal Reimbursement, New York City Department of
Social Services' dated October 17, 1975." According to the June letter,
the State concluded in its Audit that personnel costs for the Quality
Assurance Review and Nursing Homes sections were appropriately
reimbursed at 50 percent and personnel costs for the Prior
Authorizations and Evaluation Sections were appropriately reimbursed at
75 percent. The work of the dentists in the Prior Authorizations
section is described as:
(Processing) requests by dentists when the services to be performed
require prior authorization. . . . . . . (Dentists) in this section make
field trips to DSS Health clinics . . . to verify the need for (dental)
work.
The letter states that dentists in the Evaluation section "evaluate
the quality of the dental work received by recipients." The June letter
does not reference the time period in question here or append any
organization charts or materials for these KYA sections which were in
effect in the City during this time.
As requested by the State in its response to the Order to Show Cause,
the Agency produced the documents currently in its files that pertain to
the State's claim. The Board received documents entitled "Job
Description" for 32 dentists. The documents contain no form number or
other information identifying them as official State or New York City
records. They are undated and unsigned. The documents show the
organizational unit where the individual dentist works and give the
supervisor's name. The daily work load is given by listing the percent
of time spent for various duties, such as 65 percent for "Clinical
Review of patients for Prior Approval," the first and most significant
duty listed for those dentists in the organization identified in the job
descriptions as "Prior Approval reviews." (Presumably the same section
identified as Prior Authorizations in the June letter). The job
descriptions appear to be (7) a standard form giving the same duties for
each section with the individual dentists' names merely inserted in the
first line. The Board has job descriptions for 29 of the 31 dentists
listed in the June 24, 1977 letter as well as for three individuals not
listed in the June letter. Examination of the job descriptions shows
that they are consistent with but do not add to the information about
the KYA sections supplied in the June letter.
Documents' Failure To Support State's Claim
The State asks that the disallowance be reversed in total. /4/
However, the State's arguments are based on only some of the duties
described in the June letter, prior approval for dental work and the
"processing of payment" characterized by the State as "a rendum
(sic)
sample review of the quality of care provided." (State Response to Order
to Show Cause, pp. 4 & 5.) The State has provided no documents or
discussion of the personnel employed in two of the three departments,
JYA and DYA, for which total personnel costs were claimed at 75 percent
FFP. In addition, the record contains no information concerning support
personnel in the three departments. There is then no information
whatsoever before the Board to support a finding that the State was
entitled to 75 percent reimbursement for DYA and JYA. In addition, the
State's own audit report finding 50 percent reimbursement appropriate
for the Quality Assurance Review and Nursing Homes sections of KYA, as
cited in the June letter, is unrefuted by other evidence. There is no
support then for a conclusion that 75 percent reimbursement is available
for personnel in these two sections. From the June letter we conclude
that the State and the City agree that costs for personnel employed in
the Prior Authorizations and Evaluation sections should be reimbursed at
75 percent. Nevertheless, as explained below, we cannot conclude from
the record before us that the State has shown that any personnel
identified in the June letter were in fact performing duties subject to
75 percent FFP.
The Action Transmittal specifically cites to official position
descriptions as "basic substantiation" for 75 percent FFP. The Agency
memorandum discusses several position descriptions which were prepared
as part of a self-evaluation, some of which listed duties so diverse the
Agency could not determine where the individual dentist was employed.
There are 32 job descriptions in the record here, all of which list
identical duties for each section and are consistent with the
descriptions of these sections in the June letter. Accordingly, it does
not appear likely that the seven job descriptions referenced by the
Agency memorandum were part of the 32 job descriptions in the record
here. The 32 job descriptions before (8) the Board are unsigned and
undated. In addition, since we have concluded that these documents were
probably not the subject of the Agency memorandum, there is then no
information about why they were prepared, who prepared them, what time
period they apply to, or why the documents, which were in the Agency's
files, were provided to the Agency. The record here fails to show that
the 32 job descriptions are in fact "official." The June letter, from
the City to the State, was written after the Agency's findings in the
follow-up audit were given to the State. Although it describes the
functions of four KYA sections, there is no information concerning the
time period for which this letter is an accurate description. The
descriptions in the letter are conclusory and argue on the City's behalf
rather than provide direct evidence that certain functions were
performed which would support a claim for 75 percent FFP.
The auditors consistently faulted the City for its lack of an
adequate system to determine the work performed by its various
departments. The Agency memorandum repeated that finding and faulted
the job descriptions it reviewed because "the duties were so diversified
that they could have been working in several units and it would have
been difficult if not impossible to prorate their time." (Agency
memorandum, p. 3.) The rather disorganized state of the City's
departments, as reflected by the audit reports in general and the above
referenced findings in particular, is inconsistent with the clear
exposition of functions made in the June letter and the job descriptions
in the record here, where there are no overlapping functions between
dentists and sections and each dentist in a section performs the same
duties. This apparent inconsistency diminishes the weight we can give
to the City's description of the KYA sections, prepared in 1977, and the
undated, unsigned, and, apparently, unofficial job descriptions. The
documents in the record are unsupported by any other documents,
affidavits, city organization charts or materials, or information of any
kind from the time period in question which would support a finding that
the functions ascribed to the sections and individuals discussed in the
June letter were in fact performed and in fact their duties.
Accordingly, the Board concludes that the record is insufficient to
support a finding that personnel costs attributable to dentists and
support personnel employed in the Prior Authorizations section, the
Evaluation section, or elsewhere in KYA should be reimbursed at 75
percent.
Although the auditors recognized that "some of these functions (of
the three departments) may qualify for 75 percent FFP," (Follow-up Audit
Report, p. 7) there is no persuasive evidence before the Board to
support specific conclusions concerning the functions eligible for 75
percent FFP that were performed by dentists and direct support personnel
in the three NYCDSS departments in question here. The State's arguments
and supporting documentation are conclusory and provide no convincing
information about the functions of these three departments from April 1,
1975 to December 31, 1976.
(9) Additional Concerns
There is no dispute that Section 2-41-20 C. 5. of the Action
Transmittal provides for 75 percent reimbursement for "Audit Staff"
for
"skilled professional medical personnel and directly supporting staff
whose function involves assessing the necessity for and adequacy of the
medical care and services provided as in utilization review." The State
argues that this standard supports its claim for 75 percent
reimbursement. However, it is also clear from the Action Transmittal
that the "function of a . . . position . . . is the principal basis for
determining elgibility" for 75 percent FFP. (Section 2-41-20 B. 1. a.)
Since the State has failed to show the functions performed by the
dentists and their direct support staff employed in the three NYCDSS
departments in question, the arguments based on the reimbursement
standard for "Audit Staff" are simply not persuasive.
The disallowance is not based on the unavailability of 75 percent
reimbursement for specific functions but rather on the State's failure
to document that there were in fact individuals performing functions
eligible for 75 percent reimbursement in the three NYCDSS departments.
Consequently we see no need to require HCFA to relate the disallowance
to particular functions as the State requests.
In concluding that the State has not sufficiently documented its
claim for reimbursement at 75 percent, we rely neither on the State's
failure to formally contest the findings of the first audit concerning
similar costs for an earlier time period nor on the description of how
such costs are to be claimed set forth in State Bulletin 143b.
Conclusion
For the reasons stated above, we uphold the disallowance of $596,200.
/1/ This section of the Code of Federal Regulations has been
recodified at 42 C.F.R. Sec. 432.50 (1978). However, during the period
covered by this disallowance the above cited regulation was in effect,
and all references in this decision are to the earlier regulation. /2/
Although this Action Transmittal was published during the period
for which this disallowance was taken, both parties cited its provisions
to support their arguments. Accordingly, the Board will also refer to
the Action Transmittal in its discussion. /3/ In its response to
the Order to Show Cause the State admitted that it was unable to submit
additional documents for the Board's consideration. (State Response to
Order to Show Cause p. 8.) /4/ The State also asks in the
alternative that HCFA identify the functions reimbursable at 75 percent
and reverse the disallowance to that extent. (State Response to Order
to Show Cause, p. 9.)
OCTOBER 22, 1983