DEPARTMENTAL GRANT APPEALS BOARD
Department of Health and Human Services
SUBJECT: Louisiana Department of Health
and Human Resources
Docket No. 87-201
Decision No. 979
DATE: August 25, 1988
DECISION
The Louisiana Department of Health and Human Resources (State) appealed
a determination by the Regional Administrator, Health Care Financing
Administration (Agency), disallowing $141,580 in federal financial
participation (FFP) claimed by the State under Title XIX of the Social
Security Act (Medicaid). The FFP claims were for payments made by the
State to a provider of transportation services, Arcadian Ambulance, for
the period October 1, 1985 through May 21, 1986.
Based on the record in this case, which includes the tape of a telephone
hearing, we find that the State claimed FFP in vendor payments for
ambulance transportation services which did not meet the requirements of
its state plan. Therefore, we uphold the Agency's disallowance because
the State has claimed FFP in expenditures for services which were not
covered under its state plan. See 42 C.F.R. 440.2(b). However, we find
that the disallowance amount must be recalculated consistent with a
general Department of Health and Human Services (Department or HHS)
policy concerning sample-based disallowances.
Applicable Authority
Section 1903(a)(1) of the Social Security Act authorizes payment of a
percentage of the total amount expended for medical assistance under an
approved Medicaid state plan. The Medicaid program regulation at 42
C.F.R. 431.53 requires that a state's Medicaid plan specify that the
state "will assure necessary transportation for recipients to and from
providers" of medical care. A state may meet this requirement by
providing coverage of transportation as an optional item of service
included in "medical assistance" when furnished by a provider to whom
the state makes a direct vendor payment. 42 C.F.R. 440.170(a). In the
present case, the State uses ambulance companies as providers of
transportation services.
The regulations provide that the state plan must describe the methods
that will be used to meet the transportation requirement. A state must
follow its approved state plan in order to receive FFP for the costs of
any claimed expenditures. See 42 C.F.R. 431.53(a) and (b) and 440.2(b).
The Louisiana state plan sets specific conditions relating to the
payment of vendor claims for emergency and non-emergency medical
transportation. We describe below the portions of the state plan which
pertain to this case. See State Ex. C.
Under its plan, the State makes a vendor payment for emergency medical
transportation service one way to the nearest appropriate hospital where
the emergency nature of the transportation is verified by a physician or
other designated medical professional. For Medicaid recipients who are
also beneficiaries of the supplemental insurance program under Part B of
Title XVIII of the Social Security Act (Medicare), a physician's
verification is required.
The state plan requires that non-emergency medical transportation by
ambulance be medically necessary, and it provides for a
pre-authorization process. The state plan envisions that at least two
days notice will be given the State prior to the needed transportation
service; however, the State attempts to arrange for transportation even
without the two-day notification. Prior to authorizing transportation
by ambulance, a State worker must have a physician's oral or written
certification that an ambulance is the medically necessary mode of
transportation. The State worker then issues to the transportation
provider an authorization form for the needed service. The only
exception to the state plan's non-emergency transportation
pre-authorization requirement relates to Medicare Part B beneficiaries.
Pre-authorization for ambulance transportation is not required by the
state plan for Medicare Part B beneficiaries for transportation to or
from a hospital or skilled nursing facility since this service is
covered by Medicare. After payment by Medicare, Medicaid pays the
coinsurance and/or deductible, which would otherwise be the
responsibility of the recipient.
Background
The Agency reviewed claims for ambulance services for both non-emergency
and emergency transportation to determine if such services were provided
in accordance with the approved state plan and, therefore, were eligible
for FFP. Payments to Arcadian Ambulance were chosen for review because
it submitted 64 percent of the ambulance transportation claims and
received 70 percent of the total payments made by the State during a
base period when no other transportation provider received more than 5
percent of the total amount paid. See "Review of Ambulance
Transportation Claims" at State Ex. G; Agency brief, p. 2. The Agency
reviewed a random sample of 299 claims submitted by Arcadian Ambulance
and determined that 62 of them were not paid in accordance with the
State's Medicaid plan requirements. The Agency found that the 62 claims
fell into various categories, based on the requirements of the state
plan. The Agency notified the State of its findings and listed these
disallowed claims by category in six attachments to its final review
report, designated Attachments A through F. In a telephone hearing on
June 2, 1988, the State conceded the validity of the disallowed claims
on Attachments B and F; thus, we affirm without discussion the Agency's
findings on those claims. Therefore, we discuss below only the claims
listed on the four remaining attachments, which were:
Attachment A - Non-emergency claims without prior
authorization and/or medical necessity determination for use of
ambulance. (37 claims)
Attachment C - Emergency certification not completed by M.D.
(10 claims)
Attachment D - Item 15 "hospital to hospital transfer" not
completed. (8 claims)
Attachment E - Prior authorization after date of service. (3
claims)
Discussion
As mentioned above, the applicable statute and regulations provide FFP
only for expenditures for services covered in a state plan. Further,
this Board has said that a state's burden to document expenditures and
make expenditures in accordance with its state plan is an affirmative
one, and the Board has no basis to forgive a state's failure based on a
"good faith effort" to administer the program as a whole. New Hampshire
Division of Human Resources, DGAB No. 583 (1984). The Act provides for
submission and approval of a state plan in order to provide a process
whereby the procedures a state proposes to use in administering its
Medicaid program can be reviewed by the Agency for conformity with
statutory and regulatory requirements. As we said in New Jersey Dept.
of Human Services, DGAB No. 396 (1983), at p. 11:
The methods specified in the plan were approved upon approval of
the plan itself; use of other methods would have required a plan
amendment.
Approval of the state plan meant approval of the procedures within the
plan, which we find the State was obligated to follow. We discuss
separately below the attachments and the State's failure to follow its
applicable state plan requirement in each instance.
Attachment A
On Attachment A, the Agency listed 37 non-emergency claims that it found
had no prior authorization and/or medical necessity determination for
the use of an ambulance. The Agency found that this was primarily the
result of the State's routinely using the Medicare Part B exception for
all Medicare Part B eligible beneficiaries. The Agency stated that,
while two or three of the claims were for recipients who were eligible
only for Medicaid, most, if not all, of the remaining claims were for
Medicare Part B beneficiaries where the claims had been previously
denied by Medicare. In general, these claims had been denied by
Medicare because they were not the type of ambulance service covered by
Medicare. (With a few exceptions not relevant here, Medicare covers
only ambulance transportation to or from a hospital or to or from a
skilled nursing facility). The Agency found that non-emergency
ambulance services were being routinely used for dialysis, X-rays, and
office visits, without a certification of medical necessity and/or the
State's prior authorization.
The State acknowledged that for Medicare Part B beneficiaries, at the
time these transportation services were provided, it did not require its
parish offices to authorize such services or to obtain a physician's
oral or written certification of medical necessity, even though the
state plan required this unless the exception applied. During this
period, the State required the vendors to submit all claims pertaining
to Medicare beneficiaries who were also Medicaid recipients to the
Medicare intermediary even when the service was not covered by Medicare.
(Claims for services to such dually eligible individuals are called
crossover claims.) The State argued that because at one time the
Medicare intermediary had required a doctor's statement to be attached
to all claims, its state plan pre-authorization and medical necessity
determination requirements were thereby met for crossover claims. The
State said that after a change in intermediaries occurred, the new
intermediary did not require doctors' statements to be attached to the
bills submitted by the transportation providers. The State took steps
to correct its procedures after the disallowance period. The State
submitted two exhibits to support its position. The State's exhibit M,
dated February 6, 1987, indicated that effective February 15, 1987, a
doctor's statement had to be attached to each claim. Further, the
State's exhibit U, dated August 10, 1987, documented a meeting with the
Agency and additional changes that the State had agreed to make.
However, the State admitted that between the time the intermediary
changed and the State took corrective action, it paid these claims, even
though there were no State pre-authorizations and/or certifications of
medical necessity as required by the state plan.
The State did not provide any argument or evidence for the disallowed
Medicaid-only claims. Further, the State did not deny that it had
misused the Medicare Part B exception process. Instead, the State
submitted certifications, which we discuss below, that it maintained met
the state plan's requirement. The State urged reversal of the
disallowance based on the after-the-fact certifications and its action
to correct the problem with crossover claims.
There is no dispute that the state plan requires certain specific
procedures for prior authorization by the State for use of Medicaid
funds for non-emergency medical transportation by ambulance. State Ex.
C, Item 18(a). The only exception to this procedure provided for in the
state plan is when the Medicaid recipient is also a Medicare Part B
beneficiary who requires ambulance transportation to or from a hospital
or skilled nursing facility.
The State admitted that it had relied on the transportation provider's
billing to the Medicare intermediary as satisfying the state plan
requirements for all of its non-emergency transportation for crossover
claims, even if the Medicare Part B exception provision did not apply.
We find that the State's practice was to pay a provider's claim although
the state plan's prior authorization process had not been followed.
In a belated attempt to document that these claims were allowable under
its state plan, the State provided medical transportation certification
forms. State Ex. A. The certifications were signed and dated,
purportedly by physicians, in 1987, approximately 1 1/2 years after the
services in question were provided. (The State submitted a few forms
that were undated and/or unsigned.) The forms do no more than restate
the State's unsubstantiated categorization of the claims as medically
necessary; they do not show that a determination of medical necessity
was made before the services were provided. The State did not submit
any contemporaneous documentation of prior authorization for these
non-emergency ambulance trips.
Based on the State's failure to comply with the prior authorization and
medical necessity requirements detailed in its state plan, we find that
FFP is not available in the State's payments for these claims. See 42
C.F.R. 440.2(b). Although the State argued that it took steps to
rectify its procedures, that does not cure the defect in these claims
since, in actuality, the State's corrective action was taken after the
period in question here. The non-contemporaneous documentation supplied
by the State does not show that the State complied with the
prior-authorization procedures specified in its state plan.
Attachment C
On Attachment C, the Agency listed ten emergency transportation claims
that it found had no physician's certification of the medical necessity
of the emergency transportation services, as required by the state plan
for Medicaid recipients who have Medicare Part B coverage.
The State did not dispute that the claim forms did not contain the
necessary certification. Rather, the State maintained that, with the
exception of one claim, it has submitted subsequent certification of the
emergency nature of the service. State brief, p. 6; State Ex. A. The
State appeared to argue that these certifications should be sufficient
under its state plan. The Agency rejected the State's after-the-fact
documentation, noting that the state plan requires verification of
emergency transportation before payment to the provider is made. The
Agency argued that to accept these certifications would "render
meaningless" the procedures established for such claims in the state
plan.
We agree. Not only are the certifications facially inadequate for the
purpose submitted here (as explained in the discussion of the claims on
Attachment A, some of the certifications are unsigned and undated), but
the state plan requires that verification of the emergency occur before
the vendor payment.
Attachment 3.1-A, Item 17(a), of the Louisiana State Plan provides, in
part:
(1) Emergency Medical Transportation
* * *
Vendor payment shall be made for Emergency Medical Transportation
as subject to the following conditions:
* * * *
(B) The medical necessity of the emergency medical transportation
service is verified by
(1) a physician (for Medicaid eligibles who have Medicare
Part B coverage, this verification is mandatory);
* * * *
On the face of the plan provision, the Agency appears reasonable in
arguing that the clear language requires verification before vendor
payment; in any event, the State never argued explicitly otherwise.
Essentially, the State merely presented documentation which it alleged
was after-the-fact verification. Assuming arguendo that the state plan
provision on its face did not resolve the issue, we still would not be
persuaded by the only two alternative arguments which we can infer from
the State's enigmatic presentation. One argument would be that the
words of the provision do not explicitly require contemporaneous
verification. Our response is that the common sense of the state plan
provision, as well as the State's own implementation of it, does. To
read the provision otherwise would mean that the plan provision
contemplates some process of ineligible payments accompanied by
recoupment. This would be an absurd reading. Indeed, the State's form
shows that this was not the State's own reading; the form contemplated
obtaining the verification prior to payment. The State did not argue
that it had, in fact, interpreted its plan differently. The second
argument we might infer from the State's presentation is that even if
the plan required pre-payment verification, there was an implied right
of after-the-fact "correction". Aside from suffering from the same
infirmities as the first argument, this would drive a giant loophole in
the plan provision that simply is not reasonable in the absence of
explicit supporting language. Again, and in short, the State has
offered nothing substantial in support of an alternative reading to the
plain meaning of the state plan provision in question -- that
verification must precede provider payment. Therefore, FFP is not
available in State payments for these claims.
Attachment D
The eight sample claims disallowed on Attachment D involved claims for
transportation from one hospital to another. In its appeal file, the
Agency submitted the State form used by providers for billing for
ambulance transportation services. Agency Ex. B. The Agency disallowed
these claims because Item number 15 of that form, "Hospital to Hospital
Transfer Due To", was not completed. In the Agency's view, since Item
15 had been left blank, the State had not documented that it met the
requirements of its state plan.
The State relied, once again, on after-the-fact certifications as to the
emergency nature of the transport. State Ex. A. The state plan,
however, provides that emergency medical transportation service is
provided one way to the nearest appropriate hospital. The state plan
also provides that:
The equipment, its personnel, and its capabilities to provide the
services necessary to support the required medical care designates
the hospital as appropriate. State Ex. C, Item 17(a).
Consequently, in order to support such an emergency transfer, the claim
must document that the initial hospital was inappropriate due to its
equipment, personnel or other inability to provide the required medical
care. There is no dispute that the claims submitted to the State did
not document compliance with that requirement of the state plan, since
the form did not contain the reason for the transfer. See Agency Ex. B.
The State's after-the-fact certifications are faulty as well. This
non-contemporaneous documentation does not state the reason for the
hospital transfers. Thus, the State's documentation is simply not
responsive to the basis for the Agency's disallowance. We therefore
affirm the Agency's finding that the claims on this attachment were not
paid in accordance with the state plan. Thus, FFP is not available in
State payments for these claims.
Attachment E
The last attachment at issue, Attachment E, listed three non-emergency
claims which the Agency disallowed because the authorization was
apparently made after the date of the service. The Agency used the date
of the parish office worker's signature on the provider claim forms as
the date of the authorization.
The State argued that the authorization for these non-emergency
transportation claims was given orally by the parish worker to the
provider prior to the service being provided. The State maintained that
the date listed on the claim form is the date that the State office
worker completed the form and had nothing to do with the authorization
process. State brief, p. 7; June 2, 1988 Telephone Hearing.
Even assuming that the state plan contemplates oral prior
authorizations, this does not alleviate the State's responsibility to
document that authorization. In past decisions, the Board has found
that a grantee has the burden of documenting the allowability of its
claim. See Indiana Dept. of Public Welfare, DGAB No. 772 (1986); 42
C.F.R 431.17 (1985). This burden does not diminish because of the type
of original authorization. In this case, the State presented nothing to
substantiate the alleged prior authorizations.
The State argued that its Title XIX procedures give the State worker up
to two days in which to provide the signed form to the service provider
so that sometimes the form is not given to the provider until after the
date of service. The fact that the worker has two days to give the form
to the provider, however, does not excuse the State's failure to
document that the authorization was, in fact, given prior to the
service being provided. Without evidence that the state plan
requirement of prior authorization was met, we must affirm the
disallowance of FFP in payments for these claims.
Other Issues
In addition to the arguments by the parties regarding the specific
attachments discussed above, additional issues arose during the
development of this case, which we now discuss.
In its initial brief, the State argued that the errors made by the State
were "technical errors" as opposed to "erroneous payments."
Thus,
asserted the State, these were "valid claims with most of the
deficiencies in documentation . . . corrected." State brief, p. 4. The
State cited the definitions at 42 C.F.R. 431.804(b) to support its
position.
We find that the regulation at 42 C.F.R. 431.804 is inapplicable. The
definitions there pertain to the Medicaid quality control system.
Specifically, section 431.804(a)(1) defines the purpose of this section:
This section establishes rules and procedures for disallowing
Federal financial participation (FFP) in erroneous medical
assistance payments due to eligibility and beneficiary liability
errors, as detected through the Medicaid quality control (MQC)
system required under section 431.800. (Emphasis added.)
The regulation's stated purpose clearly indicates that the definitions
cited by the State were intended to apply to the Medicaid quality
control system requirements. We are not dealing here with a quality
control sample of erroneous payments resulting from recipient
eligibility errors or beneficiary liability errors. Rather, the claims
involved in this case involve state plan requirements for payment of
vendor claims. The types of "errors" made by the State are neither
related to the recipient's eligibility nor do they logically relate to
any of the errors defined as technical in the regulation at 42 C.F.R.
431.804(b) ("technical errors means errors in eligibility conditions"
such as work incentive program requirements). The regulation, on its
face, simply does not apply here. We, therefore, reject the State's
argument.
Finally, the last issue raised in this appeal concerned the computation
of the disallowance amount. In the Review of Ambulance Transportation
Claims, State Ex. G, pp. 3-4, the Agency reviewers said:
We computed confidence limits of the mean error for the 90th
percent confidence level based on statistical sampling data. This
analysis showed that at the 90 percent confidence level, the
overpayment ranged from a lower limit of $186,753 ($119,167 FFP) to
an upper limit of $296,672 ($189,306 FFP). The Federal share was
computed using an FMAP of 63.81. The point estimate (which is the
mid-point between the upper and lower limit) was calculated at
$241,713 ($154,237 FFP).
Based on the reviewers' calculations, the Agency disallowed an amount
which was the point estimate. The State argued that the Agency should
have used the lower limit value rather than the point estimate.
The Agency maintained that the lower limit value would have favored the
State and, similarly, that the upper limit value would have favored the
Agency; therefore, the Agency chose the point estimate as a balance.
The Agency asserted that this method is reasonable, and that there is no
"wrong" figure anywhere between the lower and the upper limit. Agency's
June 23, 1988 submission, p. 1.
Absent any other consideration, we likely would agree with the Agency.
After all, assuming the sampling methodology is otherwise valid, using
the point estimate means the parties are equally sharing the risk that
the unknown true value is higher or lower. However, there is another
factor which we cannot ignore: there is a general, Department-wide
audit policy which, if applied to the facts here, would result in use of
the lower limit value (or other recalculation).
The Office of Inspector General (OIG) in HHS frequently performs audits
of HHS-funded programs, and often uses statistical sampling. Based on
our experience with many disputes involving sampling-based
disallowances, we take notice of the fact that OIG auditors have
considerable experience and substantial expertise in the application of
sampling methodology. In a memorandum to all Regional Audit Directors
dated April 22, 1980, the Acting Assistant Inspector General for
Auditing articulated standards for determining amounts of disallowances.
It is undisputed that these standards remain in effect. A simple
calculation shows that these standards would not allow the use of the
point estimate in the facts of this case.
The OIG standards do not appear to be specifically binding on the Agency
here, and we suppose the Agency could announce a policy in regulations
or guidelines which established and explained a different policy. But
in the absence of any such general official stance, it would appear
arbitrary for one part of the Department to ignore long-standing
standards of the part of the Department with the most experience and
expertise in the use of statistical sampling. Thus, while the OIG
standards may not provide the only answer to the question of what the
disallowance amount should be, the existence of the OIG standards
effectively placed a burden on the Agency to justify a deviation from
those standards. This in part involves a factual issue of how much
deviation there is; here, we note that the amounts of the sampled
claims ranged from $1.50 to over $200.00 and that the sampling error was
substantial (as noted, the sampling error may have been as much as 45
percent of the point estimate, or over four times as much as the OIG
standards would allow). In this context, the Agency's justification for
use of the point estimate -- which essentially was only that the point
estimate seemed more fair -- is too insubstantial to withstand a
challenge of arbitrariness.
Therefore, while we sustain the disallowance, we find that the Agency
has not in this case justified the use of the point estimate and,
accordingly, the disallowance amount should be reduced.
Conclusion
Based on the foregoing, we uphold the Agency's disallowance in
principle, subject to the reduction discussed at pages 11 to 13.
________________________________ Judith A. Ballard
________________________________ Norval D. (John) Settle
________________________________ Cecilia Sparks Ford Presiding
Board