GAB Decision 536
Docket No. 83-255
May 16, 1984
Oregon Department of Human Resources;
Ballard, Judith; Garrett, Donald Settle, Norval
The Oregon Department of Human Resources appealed decisions by the
Health Care Financing Administration (HCFA) disallowing $1,921,325 in
federal financial participation (FFP) claimed by the State under Title
XIX (Medicaid) of the Social Security Act. The claims were for per diem
rates for inpatient psychiatric services rendered to individuals aged 22
to 64 in institutions for mental diseases (IMDs) during the period
October 1, 1979 through September 30, 1983. The claims were submitted
under 42 CFR 435.1008(b), which permits FFP in Medicaid services
provided to eligible individuals during the month the individual is
admitted to or discharged from on IMD. This regulation provides an
exception, based on administrative convenience, to a provision generally
excluding from the definition of reimbursable "medical assistance"
any
care or services to individuals aged 22 to 64 in IMDs.
The issues raised by this appeal are primarily those addressed by the
Board in Joint Consideration: IMD Admission/Discharge Issue, Decision
No. 436, May 31, 1983. /1/ There, the Board upheld HCFA's position that
the partial month eligibility regulation did not permit the States to
ignore limitations on covered services resulting from the IMD exclusion.
Thus, the Board concluded that there was no provision in the statute,
regulations, or state plans covering the category "inpatient psychiatric
services" when provided to individuals aged 22 to 64 in IMDs and the
states could not claim the full per diem rates for this category, even
during the months of admission and discharge. The Board also concluded
that HCFA did not (2) have a longstanding interpretation to the contrary
and was not precluded from disallowing the full per diem rates based on
any of the theories advanced, including equitable estoppel. However,
the States were permitted to show what parts of their per diem rates
were for services separately covered in the State plans.
Here, Oregon contended that its evidence showed that HCFA did have a
longstanding policy permitting FFP in the disallowed costs; that the
interpretation advanced in the disallowance was a new interpretation,
inconsistent with congressional intent and Agency usage; that Oregon
had relied to its detriment on Agency assurances that the costs were
allowable; and that HCFA should be precluded from taking the
disallowances based on the principles of usage and estoppel. /2/
For the reasons stated below, we conclude that nothing the State has
presented shows that our analysis in Decision No. 436 was incorrect.
Oregon has not established that HCFA had a policy permitting the State
to ignore the coverage limitations in its State plan during partial
months in IMDs, nor has the State shown that it reasonably relied on
Agency action in incurring the costs or in submitting its claims for per
diem rates for services in IMDs during partial months. Thus, we sustain
the disallowances, /3/ subject to reduction to the extent the State can
show what part of the per diem rates were for covered services.
(3) The issue here.
Before analyzing the evidence the State presented here, we note that
the critical issue is whether the partial month eligibility provision
permits the State to ignore the limitations on service coverage in IMDs.
The question arises in the context of the State's claim for the full per
diem rates because those rates include costs for services such as room
and board which are not covered under applicable statutory and
regulatory provisions except when part of the aggregate of services
provided by an institution which is a hospital, skilled nursing facility
(SNF), intermediate care facility (ICF), or inpatient psychiatric
facility. The Agency did not deny that the partial month eligibility
provision allowed FFP in services which are separately covered in a
state plan, such as dental services or eyeglass services. /4/ In
Decision No. 436, the Board concluded that the partial month eligibility
provision at 42 CFR 435.1008 could be read as providing FFP only in
services covered in a state plan. The Board concluded that the IMD
exclusion resulted in service descriptions being written so that there
was an absence of any provision covering hospital, SNF, ICF, or
inpatient psychiatric facility services in IMDs except for IMD services
provided to the aged or inpatient psychiatric facility services provided
to children. General descriptions of hospital, SNF, and ICF services
are limited by the phrase "other than in an IMD," and provisions
covering these services in IMDs under certain conditions are limited to
individuals aged 65 or over or under age 22. The State did not deny
that the same limits as those in the statute and regulations appear in
its State plan.
Thus, to prevail here the State must establish that the claims for
per diem rates are allowable in spite of the fact that the State plan
did not specifically cover inpatient services to individuals aged 22-64
in IMDs; that is, that the State could properly ignore the coverage
limits in its State plan because they were overridden by the partial
month eligibility provision. (4) This context is important because the
State confuses the Agency policy to permit FFP in covered services
during partial months (a policy embodied in 42 CFR 435.1008(b), to which
the Agency adhered) with a purported policy to permit FFP in the per
diem rates claimed here in spite of the fact that the category of
services represented by the rates is not specifically covered in the
State plan.
We found in Decision No. 436 that the Agency documents on which the
States said they relied (including an August 1980 memorandum discussed
below) did not show that the Agency had an established policy permitting
the States to ignore during partial months the coverage limits in their
State plans. As we conclude below, nothing Oregon has presented shows
that such a policy, in fact, had been adopted by the Agency or that the
State otherwise reasonably relied on Agency action.
With this context in mind, we first discuss what the State said
happened prior to and during the claim periods involved here, what the
evidence shows, and, finally, why we do not think the State's legal
arguments provide a basis for overturning the disallowances.
The circumstances under which the State began claiming.
Provisions permitting states to consider an individual eligible for
the full month even if the individual was in fact eligible for only part
of the month have been in effect since the inception of the Medicaid
program. The specific provision in question here, 42 CFR 435.1008(b),
resulted from a recodification in 1978.
The State first began claiming for per diem rates for individuals
aged 22 to 64 for partial months in IMDs on its expenditure report for
the first quarter of the federal fiscal year (FY) 1980 (that is, the
last quarter of calendar year 1979). The State asserted that it did so
"only after obtaining assurance from HCFA-Region X staff that FFP was
definitely available under HCFA interpretation of 42 CFR 435.1008(b) and
Oregon's State Medicaid Plan thereunder." State's brief (appeal file,
Tab B), p. 1. In response, HCFA said that the only evidence of record
concerning Region X staff actions was two letters to the State advising
the State that the claims were not reimbursable. (HCFA submitted copies
of these letters, one dated October 19, 1981 and one dated November 19,
1981. We discuss these letters below.)
The State in its reply brief pointed out that HCFA had not directly
denied the State's assertion that it had received Region X assurances
and stated that the State was prepared to (5) support the assertion.
When the Board offered the State an opportunity to provide such support,
the State clarified that it had no documentary evidence to support the
assertion. The State said that the statement in the reply brief
"related to testimony we are prepared to present at a hearing, if such
is determined necessary by the Board." State's letter of April 4, 1984.
The Board then explained that, if the appellant did not wish to request
a hearing, the appellant could submit affidavits from the persons who
would testify. Confirmation of Telephone Conversations dated April 11,
1984. /5/
The State subsequently submitted an affidavit by the Assistant
Manager, Health Services Section of the Adult and Family Services
Division of the Oregon Department of Human Resources, dated April 11,
1984. The affidavit states that, during the course of verbal
communications in "early 1979" over an issue of availability of Medicaid
funding for medical care provided inmates of penal institutions during
the partial months of admission and release, the Assistant Manager was
told by a Region X Medicaid Eligibility Specialist, that --
Oregon was "missing" federal matching which is available in Medicaid
payments made on behalf of otherwise eligible individuals between the
ages of 21 and 65 during partial months of a stay in an institution for
mental disease. He further stated that other states were claiming and
receiving such FFP. I am personally aware that at least one other state
in Region X--namely Alaska, was contacted by HCFA Region X personnel and
provided with essentially the same assurance of availability of this
FFP.
Arbuckle Affidavit, p. 1, submitted with State's letter of April 11,
1984.
The affiant further states:
After further research, I discussed with (the) Region X Medicaid
Program Representative, my intent to begin claiming such FFP. He agreed
with my plan.
Arbuckle Affidavit, p. 2.
Even assuming these statements to be true, we do not think that they
provide a basis for overturning the disallowances here. The (6)
statement allegedly made by the Medicaid Eligibility Specialist that
federal matching is available in Medicaid payments on behalf of
otherwise eligible individuals between the ages of 21 and 65 during
partial months in an IMD is consistent with the policy expressed in the
regulation; the Agency permits FFP in such payments so long as they are
for services covered in the State's plan. As explained above, however,
the critical question is whether the State can consider inpatient
psychiatric services in IMDs to be covered services for individuals in
this age group in spite of the State plan limits on such services.
Nothing in the affidavit states that this question was addressed, nor
even that the State made it clear that it intended to claim the full per
diem rates.
Like the documents we considered in Decision No. 436, the discussions
which the State official had with Agency staff fall short of showing
that the Agency had adopted an official policy position that a state
could claim FFP in the full per diem rates during partial months, under
existing state plan provisions.
Agency actions after the State began submitting its claims.
The State also said that it "notified" Region X about its claims
and
that its first actual claim for FFP in the costs was "specifically and
thoroughly reviewed by the HCFA-Region X Financial Analyst concerning
these costs." The State further said that the analyst found the costs
"allowable in accordance with HCFA policy." State's brief, p. 1.
The State's assertion that it had "notified" Region X of its claims
was based on the State's assertion that it had sent Region X a copy of a
State transmittal about claiming federal matching for services in
partial months. But this State transmittal, Executive Letter 79-62,
dated October 24, 1979 (Appeal file, Tab G), even if reviewed by the
HCFA regional officials, would not have informed them that the State
thought that it could claim the full per diem rates during partial
months. The Executive Letter merely informs State program personnel
that State hospitals could be reimbursed for "services" provided to
persons age 21 to 65 in IMDs during partial months. The focus of the
transmittal is on the question of individual eligibility, and there is
nothing in the transmittal directed to the question of what specific
services would be reimbursable. /6/
(7) Similarly, we do not think that review by a financial analyst is
a basis for precluding the Agency from a later disallowance. The Setate
relied on mere reimbursement of the claim as constituting approval and
submitted evidence intended to illustrate the thoroughness with which
the analyst generally reviewed questioned items in the State's claims.
The evidence submitted is a grant award document issued to the State in
the Medicaid program showing that a number of items on the State's claim
for the third quarter of 1980 were deferred. Appeal file, Tab O. Even
accepting this as evidence that the analyst thoroughly reviewed the
State's claims does not establish that the analyst knew that the claims
for partial months were for per diem rates, or that he considered the
question of whether the services were covered. As we have explained
elsewhere, the Agency's claiming process generally does not lend itself
to close examination of individual items included on the states'
expenditure reports. New York State Department of Social Services,
Decision No. 449, July 29, 1983, p. 26. Finally, the State did not show
why we should consider the Agency bound by any preliminary judgment of
allowability made at this level of review, even if it had been made with
full knowledge.
In short, the evidence is insufficient to show that as a result of
receiving the State's transmittal and reviewing the State's expenditure
report the Agency was aware of the specific nature of the costs the
State claimed and had determined that there were allowable.
The regional letters in 1981 and the central office letter in 1982.
In 1981, the State issued an Executive Letter, 81-82. By letter
dated October 19, 1981, the Chief of the Policy and Technical Assistance
Branch, HCFA Region X, notified the State that in the course of
reviewing recently released State policy material, the Region had
discovered a problem in that Executive Letter. The problem was
identified as follows:
The EL explains that Title XIX funds will be claimed on behalf of
individuals age 21 to 65, for inpatient psychiatric services, during
partial months of institutionalization. . . .
Title XIX funds are not available for such services to individuals
age 21 thru 64 years of age during either partial or full months of
institutionalization. The Bureau of Program Policy has been so advised
by HCFA General Counsel.
(8) We are advising you of this information promptly to avoid
erroneous claims for federal financial participation. . . .
HCFA brief, Tab A.
The State questioned this position, and the Region X response (from
the same official) dated November 19, 1981 stated that the State was
confusing two issues. HCFA brief, Tab B. The State had apparently
questioned the Agency position in light of 42 CFR 435.1008, a Regional
Medicaid Director's Memorandum (No. FY 77-28M) about partial month
eligibility in public institutions, and a May 1979 letter to the State
from a HCFA official. The Region's response was that --
None of the above documents addresses the issue discussed in our
October 19, 1981 letter. That letter does not dispute the eligibility
of individuals during partial months of institutionalization, but rather
deals with whether those individuals are or are not eligible for
specific services under the Medicaid program. Regardless of whether
they are provided during either a partial month or full month, inpatient
psychiatric services are not Medicaid reimbursable if provided to
individuals aged 21 to 65 years of age.
HCFA brief, Tab B (emphasis in original).
The State said that, even though it admittedly had received these
letters from Region X stating that the claims were unallowable, those
letters were overridden by the policy "clarification" the State had
sought and received from the HCFA central office.
By letter dated December 8, 1981, the State did request assistance
from the Director, Bureau of Program Operations, HCFA, in resolving its
dispute with Region X regarding "the long-standing prohibition on the
provision of federal financial participation in payments made on behalf
of individuals receiving care as inmates of public institutions." HCFA
brief, Tab C. This letter referred to the partial month exception and
said that the State believed that regional officials were saying that
HCFA was planning to revise a Medical Assistance Manual provision
(Section 4-50-00, G.) for partial months. (For a discussion of this
provision, see Decision No. 436, p. 17.) The letter then stated:
Our primary concern is with the fact that your Region X Office
appears to be requesting that we (9) make a significant change in our
program which has been based on this long-standing concept contained in
the Social Security Act and its implementing regulations, while at the
same time telling us that you are planning no changes in either the
language of the Social Security Act or those implementing regulations.
* * *
Is the interpretation which we are receiving from your Region X
Office correct? If so, can you give us some indication as to when you
will be making a change in the language contained in 42 CFR 435.1008
(copy enclosed) and in the language of the Medical Assistance Manual as
already cited?
In this context, the HCFA response (dated January 28, 1982) primarily
addressed the question of whether HCFA intended to revise 42 CFR
435.1008(b). The response said that no final decision had been made on
whether FFP should be available during partial months for inmates of
public institutions or individuals in the 22 through 64 years of age
group in IMDs. It further indicated that the regulations were being
reviewed and that, if HCFA decided to modify the regulation, this would
be done through notice and comment rulemaking. /7/ After discussing
this issue, the letter makes the following statement:
We are also considering the possibility of retracting an August 1980
policy interpretation to our regional offices which allowed States to
claim FFP for inpatient psychiatric care and services for individuals in
the 22 through 64 years of age group during the partial month in
institutions for mental diseases or tuberculosis.
State's appeal file, Tab F.
The State tried to characterize its inquiry to HCFA as asking whether
there would be any change in HCFA policy on FFP in the costs claimed
here. The State said it was advised that "HCFA was examining this area
but that no final decision had been made." State's brief, p. 1. The
State also said:
(10) This letter confirmed beyond any doubt that what we had been
assured by HCFA-Region X staff as to HCFA policy concerning these costs
was, in fact, HCFA's policy for at least the past two and one-fourth
years. It also confirmed that someone or some group in HCFA Central
Office was considering changing that policy. It did not make clear what
the basis of change of that longstanding policy would be, but did state
that if the governing regulations were changed, Notice of Proposed
Rulemaking would be utilized with the states afforded an opportunity to
comment prior to implementation.
Id.
We think that the State's view of this letter is tainted by its
confusion between the issue of revision to the regulation to delete
partial month coverage (which would be a change in longstanding policy)
and the issue of availability of FFP under the regulation for a specific
category of services. Statements in the letter regarding the lack of a
final decision and possibility of rulemaking relate to the first issue,
not the latter.
The statement in the letter regarding the "August 1980 policy
interpretation" does arguably relate to the second, and only relevant
issue, since it mentions inpatient psychiatric care and services. Thus,
the key question here is the effect of that statement. We do not think
it stands either as an official statement of policy or as evidence of an
earlier policy to allow reimbursement of per diem rates during partial
months under the circumstances here.
The State's inquiry focused on the question of whether the Agency
intended to change its policy in the regulation (and Medical Assistance
Manual provision). Although the letter referred to the Region X
interpretation, it did not state specifically what that interpretation
was, nor ask what we believe is the relevant question: is FFP available
in the full per diem rates in spite of the state plan limits on
inpatient services in IMDs? The HCFA response does not purport to be an
official Agency interpretation of the statute and regulations on this
issue, but only a statement of the status of existing Agency policy.
The question then becomes whether the letter is evidence that Agency
policy was to permit FFP in the full per diem rates. The State
correctly pointed out that the letter speaks of "retracting" a "policy
interpretation to our regional offices" which "allowed FFP for inpatient
psychiatric care and services." This statement, (11) however, does not
clearly resolve the question of whether FFP would be available for full
per diem rates under State plan provisions containing the limits we have
discussed above.
It is also noteworthy that the State does not depend directly on the
August 1980 memorandum. In Decision No. 436, we analyzed the effect of
the August 1980 memorandum, and several other related Agency memoranda.
Decision No. 436, pp. 18-21. We concluded that the memoranda were not
intended as an official interpretation of whether the IMD exclusion is a
matter of covered services as well as of eligibility of individuals. We
mentioned the following factors:
* The memoranda were internal Agency documents. Although the States
alleged generally that they became aware of the contents of the
memoranda, the States provided no evidence that these documents were
issued to the States in a manner which would suggest they were
authoritative statements of Agency policy. Moreover, the States did not
provide any specific evidence of when they obtained copies of the
documents (nor has Oregon presented such evidence here).
* The memoranda have to be read in light of the fact that a statement
in the August memorandum that states "may cover medical care, including
psychiatric care and services" is qualified by the phrase "as indicated
in the State plan." There is no specific finding by any Agency official
that any particular state plan did cover the services here.
* The issue addressed in the memoranda was primarily the effect of
the partial month provision on availability of FFP in general for
services to individuals aged 22 to 64 in IMDs. To the extent that the
memoranda could be read as implying that a state could disregard the age
limits in service coverage provisions, once an individual is in an IMD
qualified to provide inpatient services to the aged and children, the
memoranda are inconsistent with the statutory and regulatory schemes,
which treat the IMD exclusion as also going to covered services. (For a
discussion of how the statute and regulations support the Agency
position here, see pages 5-16 of Decision No. 436.)
We also noted that the memoranda were issued in a context which
suggested that the matter of FFP in per diem rates was an unsettled
question, within the Agency.
(12) These factors all support a conclusion here that the Agency did
not have an official established policy permitting FFP in the claims
here, given the absence of any state plan provision specifically
covering inpatient psychiatric services in IMDs to individuals aged 22
to 64. We cannot accept the reference in the HCFA letter to the August
1980 memorandum as evidence of such a policy without ignoring the
qualifications in the memorandum itself. To the extent the 1982 letter
suggests that there was a policy interpretation permitting FFP in
inpatient psychiatric services, the letter, at the very least, must be
read as incorporating the qualification in the 1980 memorandum "as
indicated in the State plan."
Like the States whose appeals we decided in Decision No. 436, Oregon
cannot point to either a state plan provision specifically covering
inpatient services in IMDs without any age limits, or an Agency policy
statement specifically stating that those age limits could be
disregarded during partial months. We simply cannot agree with the
State that the January 1982 letter constitutes evidence of such a policy
interpretation.
Subsequent events.
The final factual allegation which the State made regarding the
history of its claims was that the "first formal challenge" to the
State's claims was in a letter dated June 7, 1982, advising the State
that its claim for the quarter ended March 1982 would be deferred. Even
if we agreed with the State that the Regional letters the State received
in late 1981 were "overridden" by the central office letter of January
1982, we would not find that the first formal challenge to the claims
was the June deferral. The record shows that the State received, at
least by May 17, 1982, a Region X communication entitled "Regional Title
XIX State Agency Letter No. 82-02," dated April 16, 1982. State appeal
file, Tab H. This communication cofirmed discussions with each state in
the region regarding claims for FFP in inpatient psychiatric care and
services for partial months in IMDs and states that "HCFA has found that
such claims are legally unsupportable." Id.
The State has not provided any reason why we should not consider this
formal notice to the State that its claims were unallowable, removing
any doubt which might have existed prior to that time.
The State's equitable estoppel argument.
The State said that the Board should consider the principle of
estoppel in this case, but provided no analysis as to how that principle
applied here. In response, HCFA cited several cases (13) for the
proposition that the party alleging estoppel must meet a burden of
showing that the basic elements of a claim of estoppel are met, and
that, when the party against whom estoppel is alleged is the United
States, a showing of "affirmative misconduct" must be made. HCFA brief,
pp. 15-18, citing United States v. Georgia Pacific Corp., 421 F. 2d 92,
96 (9th Cir. 1970); Holland Livestock Ranch v. United States, 655 F.2d
1002, 1007 (9th Cir. 1981); and Schweiker v. Hansen, 450 U.S. 785
(1981); see also State of Oregon Department of Human Resources v.
Heckler, Civ. 83-1466 FR, D. Or., February 6, 1984. The State's reply
was to contest HCFA's view of the facts, and simply to state that the
Board should consider the principle of estoppel, notwithstanding HCFA's
arguments. Reply brief, p. 6.
We agree with HCFA, however, that the State has not shown that the
elements of estoppel are present in this case. As discussed above, the
State has not established that its view of the facts is correct. The
State has failed to show that the Agency assured the State in 1979 that
the specific services claimed here were allowable during partial
statements in continuing to submit its claims. The central office
letter in 1982 may have been somewhat misleading, but, in context, we
think the State could not reasonably rely on it and it certainly falls
far short of affirmative misconduct on the part of the Agency.
Moreover, the State has failed to show that it was harmed by Agency
action. The State conceded that it would have incurred the costs for
the per diem rates for inpatient psychiatric services to these
individuals regardless of Agency policy. State's appeal file, Tab A, p.
2. The State argued nonetheless that it had relied to its detriment on
Agency policy because, "with assurances of FFP in the subject costs, the
State funds which would have otherwise been utilized for these costs
were allocated by the State Legislature for other needs. Such State
funds have been spent." Id. The State did not provide any evidence to
support this assertion, but, even assuming it to be true, we would not
hold that it was a basis for precluding the Agency from taking these
disallowances. As we noted in Decision No. 436, this kind of harm is at
most an administrative or remote consequential effect, insufficient to
justify awarding millions of dollars to a state to cover costs which
would have been incurred in any event.
Thus, we conclude that the Agency should not be estopped from taking
these disallowances.
(14) The State's arguments based on congressional intent and "usage."
The State also argued that the disallowances here were inconsistent
with congressional intent and the principle of "usage." /8/ This
argument was based on the State's view that the position taken in the
disallowances represented a revision in the policy embodied in the
partial month eligibility regulation. The State relied on the
following:
* Prior to the enactment of Title XIX, FFP was provided under other
public assistance titles of the Social Security Act for partial months
in IMDs, and is still provided under those titles as applicable to the
territories. State's brief, p. 2; State's appeal file, Tab I.
* Provisions of the Handbook of Public Assistance Administration and
the Medical Assistance Manual have provided for partial month
eligibility in IMDs since the beginning of the Medicaid Program.
State's appeal file, Tabs J and K.
* Congress referred to partial month eligibility in the Conference
Report accompanying Public Law 89-97, which enacted Title XIX. State's
appeal file, Tab L. /9/
(15) The State said that careful reference to these provisions
indicate that HCFA is "clearly trying to invalidate longstanding Social
Security Act public assistance programs policy. . . ." State's brief, p.
5. According to the State, "HCFA's attempt to draw a fine distinction
between the fact of individual eligibility on the one hand and specific
services for which the individual would be eligible on the other hand
began to appear only in the communications issued in 1982 and 1983."
State's brief, pp. 2-3.
As we mentioned above, the difficulty with the State's position here
is that it confuses the longstanding policy to consider a person
eligible for a full month, in spite of institutionalization for part of
the month, with a policy to allow FFP in the full per diem rates for
inpatient psychiatric services. Neither the regulatory provisions nor
legislative history relied on by the State addresses the question of
what specific services are covered during partial months.
Moreover, contrary to the State's assertion, the communications in
1982 and 1983 were not the first indications of the Agency's
interpretation of the IMD exclusion to affect more than individual
eligibility for Medicaid. As we discussed in Decision No. 436, both the
statutory scheme and the Medicaid regulations treat the exclusion as a
matter of covered services as well as individual eligibility. Decision
No. 436, pp. 5-16. In light of this, we cannot find an Agency policy to
permit states to ignore the limits on covered services based on the
vague, informal statements relied on here and in the cases leading to
Decision No. 436. Nor does the mere payment of the State's claims
establish some sort of Agency practice which must be adhered to.
Indeed, even where a formal deferral action is taken and claims are
subsequently paid, this does not preclude a later disallowance as a
result of an audit exception or financial management review. 45 CFR
201.15(c)(10).
The State said that its claims were based on the "clear" policy
in
the regulation, but has not explained why, if that policy was so clear
from the inception of the program in 1965, none of the states whose
claims we have examined began claiming for per diem rates until 1979.
The claiming of the per diem rates, and the payment of the claims,
appears to have been the departure from longstanding practice, rather
than the disallowances.
In short, we do not think the disallowances here contravene
congressional intent or longstanding Agency usage.
(16) Conclusion
For the reasons stated above, we uphold the disallowances, subject to
reduction to the extent the State can show what part of the per diem
rates was for services separately covered in the State plan. /1/ In
Decision No. 436, the Board decided appeals from five States.
Since Decision No. 436, the Board has issued decisions on appeals by
those same States from disallowances of claims for later quarters, and
in addition has upheld disallowances against two other States, raising
new factual issues. See Washington Department of Social and Health
Services, Decision No. 490, December 30, 1983, and Illinois Department
of Public Aid, Decision No. 517, February 29, 1984. /2/ The Agency
argued essentially that Board Decision No. 436 was controlling,
and that the legal principles enunciated there should be applied since
the State had not shown that that decision was arbitrary, capricious, or
otherwise not in accordance with law. The State vehemently disagreed
with this standard, relying in part on the State's view that, by
accepting Oregon's appeal, the Board had determined that Decision No.
436 was not controlling. We do not agree that mere acceptance of the
State's appeal constitutes a determination that our analysis in Decision
No. 436 would not apply here. We do agree with the State, however, that
the Board must consider the evidence presented here to determine whether
this case is distinguishable on the facts. Also, fairness requires that
we consider the arguments presented by the State about whether our legal
analysis in Decision No. 436 was correct. /3/ This case
originally involved an appeal of $1,510,074, covering the period October
1, 1979 through March 31, 1983. The Agency subsequently disallowed
claims of $193,725 for the quarter ended June 30, 1983, and $217,526 for
the quarter ended September 30, 1983. The parties agreed to include
those disallowances with this case. Confirmation of Telephone
Conversations, March 29, 1984. /4/ During negotiations with
several of the States following the issuance of Decision No. 436, the
Agency took the position that only the costs of non-psychiatric services
were allowable during partial months. The Board examined this question
in Decision No. 535, May 9, 1984, and concluded that the relevant
inquiry in determining what costs were allowable was whether the costs
were for covered services, and that the Agency's distinction between
psychiatric and non-psychiatric services was unsupportable. /5/
Ultimately, the State chose not to request a hearing and the Board
determined that the appeal did not raise an issue of material fact
requiring a hearing. /6/ We also note that this transmittal does not
state that it is based on an Agency policy interpretation, but
says that the State agency "has identified in the Federal regulations
two groups of persons" for whom federal matching can be claimed. Appeal
file, Tab G. /7/ In March 1983, HCFA did issue a notice of proposed
rulemaking to amend 42 CFR 435.1008 to delete coverage during partial
months in IMDs. 48 Fed. Reg. 13446, March 31, 1983. /8/ The
State invoked the "principle of usage" here without any analysis of
that
principle or why it should apply here. In response, HCFA presented an
analysis of case law on usage, stating why it was inapplicable. HCFA
brief, pp. 14-15. We do not find it necessary to provide such an
analysis here since we conclude that the State's argument is based on
erroneous premises. /9/ This report states: Medical assistance
provided under the bill may include payment for care and services
provided at any time within the month in which an individual becomes
eligible or ineligible for assistance, e.g., by attaining a specified
age. This avoids the administrative inconvenience of having to
segregate bills by the day of the month on which care or services were
provided and is consistent with the monthly pattern of benefits under
the other public assistance titles. In its reply brief, the State
underlined the phrase "care and services" in this report as though
that
indicated that Congress intended to pay the full per diem rates claimed
here. This implication is unwarranted.
NOVEMBER 14, 1984