GAB Decision 767
July 15, 1986
Texas Department of Human Services;
Docket No. 85-233
Settle, Norval D.; Teitz, Alexander G. Garrett, Donald F.
The Texas Department of Human Services (TDHS, State) appealed the
disallowance by the Health Care Financing Administration (HCFA, Agency)
of $769,826 in federal financial participation (FFP) claimed under Title
XIX (Medicaid) of the Social Security Act (Act). The disallowance was
based on a review of TDHS' Hospital-Based Eligibility Worker Program
(Program) for the period April 1, 1981 through June 30, 1985. HCFA
concluded that TDHS had improperly claimed FFP in an amount not reduced
by the reimbursements TDHS received from the hospitals participating in
the Program. /1/
HCFA stated that several hospitals had contracts with TDHS, under
which
the hospitals provided reimbursement for a portion of the costs
related
to the Program which had the purpose of reducing expenditures
associated
with the Program. HCFA found that these funds from the
hospitals
constituted applicable credits, barring TDHS, under the
prohibitions of
Office of Management and Budget Circular Number A-87
(formerly set out
at 45 CFR Part 74 as Appendix C and now incorporated by
reference at 45
CFR 74.171), from claiming FFP for an amount represented by
the
funds.(2)
HCFA had taken an identical disallowance for an earlier period which
TDHS
had appealed to the Board. In Texas Department of Human
Resources,
Decision No. 381, January 31, 1983, the Board upheld the
first
disallowance and found the funds to be applicable credits and
not
unconditional donations as claimed by the State, because
they
effectively reduced the State's expenditures for the Program. /2/
The
State appealed Decision No. 381 to federal district court which,
on
August 2, 1985, remanded the appeal to the Board for
further
consideration of HCFA's basis for the disallowance. Texas
Department of
Human Resources v. Heckler, Civil No. A-83-CA-159 (W.D.
Texas). The
Board assigned Docket No. 85-226 to the remand and gave the
parties
additional opportunities to present arguments and to respond to
Board
questions on the issues raised by the Court in its remand. The
parties
presented the Board with new arguments and evidence not offered in
the
earlier appeal. Among other things, the Board learned that HCFA
had
subsequently published a regulation, 42 CFR 433.45, in December
1985,
that apparently would now permit such funds as those received from
the
hospitals to be used as the state matching share of
Medicaid
expenditures.
While Decision No. 381 was on remand to the Board, this appeal
arose.
Both parties incorporated in this appeal the arguments, briefs,
and
exhibits submitted in Docket No. 85-226. /3/
(3)
The Board's Amended Decision
On June 18, 1986 the Board issued an amended decision to Decision
No.
381. In that amended decision, the Board reversed the
first
disallowance because it found that HCFA had never articulated, prior
to
November 1985, a policy on what sources of funds could be used as
the
state share of Medicaid expenditures and that, in view of all
the
circumstances raised there, the State reasonably concluded that
the
funds could be used as part of its share.
Because HCFA had asserted during the course of the appeal that, if
funds
are eligible to be included as part of the state share, the funds
are
not subject to the applicable credit provisions, the Board
concluded
that there was no sustainable basis for a disallowance.
Insomuch as the stated basis for the disallowance in this appeal
is
identical to that reviewed in the amended decision and the
parties'
arguments here were examined by the Board in the amended decision,
we
reverse the disallowance based on our reasoning in the amended
decision,
which we incorporate herein.
Conclusion
For the reasons stated above, we reverse the disallowance of
$769,826.
/1/ For the period April
1, 1981 through June 30, 1985 TDHS had
received reimbursements of $1,507,779
from hospitals participating in
the Program. HCFA's review also
determined that an additional $31,874
in reimbursments had been omitted from
the calculation of a previous
disallowance for the period January 1, 1977
through March 31, 1981.
Because the relevant rate of FFP at issue here was
50%, HCFA had
calculated that TDHS' claims for FFP should be reduced by
one-half of
the amounts received from the hospitals. Thus, $1,507,779 +
$31,874 =
$1,539,653 x 50% = $769,826 FFP
disallowed. /2/ The State
of
Texas has since changed the name of its department administering
welfare
programs to the Texas Department of Human
Services. /3/ TDHS
stated
that, while arguing that it believed that the issues in the
appeal were
substantially similar to those being considered in the
remand and that the
Board's decision on the remand of Decision No. 381
might be dispositive of
this appeal, other factors should be considered
by the Board specifically
concerning this appeal. TDHS claimed that
following the issuance of the
first disallowance (subsequently reviewed
in Decision No. 381) it modified,
beginning in 1982, its agreements with
the hospitals participating in the
Program. In some instances contracts
were revised to specify more
clearly that any funds paid to TDHS by the
hospitals were donations.
State Ex. A. In other instances, according
to TDHS, hospitals agreed to
pay 100% of the cost of the on-site
eligibility workers so that no claims for
federal matching claims were
submitted by TDHS. State Ex. B.
Concerning the latter option, TDHS
claimed that HCFA overstated the amount of
the disallowance by including
the funds derived from those hospitals in its
disallowance calculations,
although TDHS had never submitted claims to HCFA
for those services.
Because, as discussed below, our amended decision to
Decision No. 381
reversed the first disallowance and its reasoning is
applicable to the
facts of this case and causes us to reverse this
disallowance, we find
no need to pursue these additional factors advanced by
TDHS. . MARCH
28, 1987