DEPARTMENTAL APPEALS BOARD
Department of Health and Human Services
SUBJECT: Pennsylvania Department
of Public Welfare
Docket Nos. 88-99 88-207
Decision No. 996
DATE: December 5, 1988
DECISION
The Pennsylvania Department of Public Welfare (State) appealed
two
determinations by the Health Care Financing Administration
(HCFA/Agency)
disallowing a total of $1,903,730 in federal financial
participation
(FFP) claimed by the State. The disallowance represented
the difference
between the 75 percent enhanced funding rate, the allowable
rate for
operational costs of Agency-approved mechanized information systems,
and
the 50 percent rate for the costs of functioning components of
the
State's Client Information System (CIS). HCFA disallowed the
claims
because expenditures are only eligible for the enhanced rate of
FFP
after a state's entire mechanized claims processing and
information
retrieval system has been approved by the Agency. In the
case at issue,
the Agency has not yet approved the State's system.
For the reasons discussed below, we uphold the Agency's disallowance.
Background
The State's CIS is an automated eligibility determination system
designed
to be used by various federally assisted programs including the
Medicaid
program. In April 1982, the State submitted to HCFA an advance
planning
document (APD) for the CIS, which was approved on June 21,
1983.
Agency's brief, p.1; State's appeal file, ex.3. It is undisputed
that
the APD contemplated that CIS would become operational in stages,
and that
both parties agreed that operational costs of the CIS project
would be
entitled to only 50 percent FFP until the CIS was fully
operational.
State's reply brief, p. 3. The State, however, claimed 75
percent FFP
for all operational costs of certain functioning components
of the CIS that
were being used by the State's previously completed and
approved Medical
Assistance Management Information System (MAMIS).
State's Position
The State argued that the Agency knew and understood that the CIS
project
would yield components which could and would serve as
enhancements of MAMIS
even before they served as components of the
completed CIS project.
State's brief, p.3. The State argued that while
the parties agreed that
the State would not seek 75 percent FFP for the
component parts of the CIS
until it was fully operational, the parties
did not agree that the State
would not seek 75 percent FFP for these
components that served as
enhancements to the MAMIS when and if they
became operational as part of the
MAMIS. Id. When the component parts
of the CIS became operational
and were utilized by the MAMIS, the State
claimed 75 percent FFP for the
components as part of the MAMIS, an
approved system. (The State did
not, however, claim the 75 percent
within the CIS, the system in which the
parts were created.)
Analysis
The issue in this appeal is whether the State should receive 75
percent
FFP for phases of its incomplete CIS which have been utilized by
the
State's MAMIS, and which the State now claims as expenditures
entitled
to the enhanced rate of FFP as part of MAMIS.
The applicable authority is not in dispute in this case.
Section
1903(a)(3) of the Social Security Act (Act) provides for enhanced
FFP
for mechanized claims processing and information retrieval
systems
approved by the Secretary. The regulation, basically, tracks
the Act.
Section 433.116(a) of 42 C.F.R. provides that:
FFP is available at 75 percent of expenditures for
operation of a
mechanized claims processing and
information retrieval system
approved by HCFA, from
the first day of the calendar quarter after
the date
the system met the conditions of initial approval,
as
established by HCFA. . . .
The State reasoned that (1) operational costs of the MAMIS are entitled
to
FFP at 75 percent, (2) components of the CIS are used in the MAMIS
and (3)
therefore, the State is entitled to FFP at 75 percent for costs
of operation
of the CIS components used in the MAMIS.
The primary flaw in the State's reasoning is in the third step,
which
disregards the distinct requirements for receiving 75 percent (or
other
enhanced) FFP. By law, enhanced FFP requires something
more. Because
it is something special, the requirements are special,
and include a
specific requirement for system approval before the funding
is
available. We said in Missouri Dept. of Social Services, DGAB No.
395
(1983):
[W]henever a State is claiming funding under the
various special
authorizations in the Act of funding
beyond the regular 50% rate,
the State has the
burden of showing how it meets the special
qualifications. p. 6.
Enhanced funding is available only where it is specifically provided
for
either in statute or regulation, and only after any approval required
by
the appropriate federal agency has been granted. Just because
completed
and operational parts of the uncompleted CIS are being used in
the
operation of an approved system (MAMIS) does not make these parts of
the
CIS themselves approved for enhanced FFP. As we said in
Alabama
Medicaid Agency, DGAB No. 880 (1987):
The Secretary has the authority to demand more than
routine
processing and payment of claims when the
states are paid more than
the ordinary 50% FFP for
administrative costs. p. 15
The State has provided nothing to show how these components of the CIS,
in
and of themselves, have been specifically approved by the Agency
and
therefore qualify for the enhanced rate of FFP. The fact that HCFA
may
have been aware that, as CIS components became operational, they
would
be used as parts of MAMIS, is simply not equivalent to the
Agency's
express approval of enhanced funding for the whole
system.
Additionally, the State argued that "the parties certainly did
not
intend to simply leave the developed system lying fallow until
the
entire CIS project was complete." State's reply brief, p. 4.
This
statement is true, but it does not entitle the State to FFP at a
rate
greater than 50 percent. The critical factors which the State
overlooks
are that in the APD the parties intended to have phases of the
CIS
system that became operational used in the MAMIS system and that FFP
for
the operational costs of any or all of the CIS system would not
be
eligible for FFP at 75 percent until the entire system was completed
and
approved.
This is shown in the APD, which is "a written plan of action to
acquire
the proposed ADP services or equipment." 45 C.F.R.
95.605. Even the
identification by the State of excerpts from the APD
in its appeal file
shows that the State always knew that part of the CIS
would be
integrated with the State's MAMIS system. The Documents List
identifies
Document 2 as being "[e]xcerpts from the Advance Planning Document
for
the development and operation of CIS and its integration with
MAMIS".
(Emphasis added) It is not even necessary to examine the cited
pages
from the APD to determine that the State always knew that CIS would
be
used with MAMIS.
The APD also clearly provided that operating costs of the CIS
would
receive FFP at only 50 percent until the entire system had
been
completed and was approved. The State admits on the first page of
its
argument that "[t]here is no dispute in this matter that CIS has
not
been approved and certified by HCFA." Therefore parts of CIS which
are
complete and were integrated with MAMIS would similarly be entitled
to
only 50 percent FFP.
The State has never alleged that it requested approval of 75 percent
FFP
for the operational components of CIS utilized by the State's
MAMIS.
The State could have done so, conceivably, since the record shows
that
the original APD, which called for 50 percent FFP for operational
costs
of all CIS components until completion of the entire system, was
revised
and updated several times since 1983. In fact, certain
development
costs were later approved in an updated APD for FFP at 75 percent
and 90
percent. Agency Exhibit 2.
The Agency has undertaken an obligation to pay 75 percent for
operational
costs of the CIS (or any other such system) only after it is
completed.
Nor is the fact that the APDs for the CIS project, which
provided that
components of the CIS would be utilized by the MAMIS, were
approved by the
Agency a determinative factor in this case. The State
is receiving the
rate of FFP that HCFA agreed to pay it until the system
is completed.
The system is not completed, and so the State is
receiving the 50 percent FFP
it was supposed to receive until
completion. Indeed, common sense would
dictate that since the entire
CIS is not operational, if the operational
components of the CIS were to
be used at all, they would be used with some
other system.
In reviewing the applicable regulation itself, we find that the
regulation
envisioned enhanced funding for expenditures relating to the
same system that
the parts were created for, not just any system that is
able to utilize the
parts, and then only after the entire system has
been approved. The
regulation at 42 C.F.R. 433.116(a) states that "FFP
is available at 75
percent of expenditures for operation . . . from the
first day of the
calendar quarter after the date the system met the
conditions of initial
approval." (Emphasis added) To interpret the
regulation otherwise
would render it meaningless, allowing costs of
unapproved systems to
circumvent the HCFA approval process simply by
having a previously approved
system utilize components of the unapproved
system.
Conclusion
Based on the foregoing, we find that the State improperly claimed
75
percent FFP for the operational components of the incomplete
and
unapproved CIS. Therefore, we uphold the disallowance.
____________________________
Donald
F. Garrett
____________________________
Norval
D. (John) Settle
___________________________
Alexander
G. Teitz Presiding
Board