Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: New York State Department of Social Services
DATE: November 20, 1991
Docket No. 91-138
Decision No. 1282
DECISION
The New York State Department of Social Services (State) appealed
a
determination by the Health Care Financing Administration
(HCFA)
disallowing $161,493 in federal financial participation (FFP)
claimed
for the quarter ended March 31, 1991. The disallowance
amount
represented the difference between the 75 percent enhanced funding
rate
available for administrative costs "attributable to the operation"
of
the State's Medicaid Management Information System (MMIS) under
Title
XIX of the Social Security Act (Act), and the 50 percent rate
generally
available for Medicaid administrative costs. HCFA determined
that the
State had claimed FFP at the enhanced rate for MMIS
overhead
expenditures not directly attributable to the MMIS cost
center. HCFA
based its determination on the State Medicaid Manual
provision limiting
enhanced FFP to "[o]nly the direct overhead costs
resulting from [MMIS]
operation." Revision 8 to Part 11 of the State
Medicaid Manual, section
11275.30.
The issues presented by this case were previously raised and addressed
in
New York State Dept. of Social Services, DAB No. 1023 (1989), and New
York
State Dept. of Social Services, DAB No. 1205 (1990). In DAB No.
1023,
the Board found that it was within HCFA's discretion to establish
a policy
that distinguishes between indirect costs that originate from
the State's
Medicaid agency, and would thereby qualify for the enhanced
funding rate, and
statewide and department-wide indirect costs that
originate from other
sources, which would thereby qualify only for the
normal 50 percent
rate. Further, the Board found in DAB No. 1023, that
the State had
notice of HCFA's policy and was therefore bound by it.
In DAB No. 1205, the Board found that New York's reliance on the
personnel
costs regulation at 42 C.F.R. 432.50 to support the
availability of 75
percent FFP for the disputed expenditures was
misplaced. The Board held
that the personnel costs included in the
disallowance were clearly incurred
for overhead-type activities which
HCFA had reasonably determined were too
remote from actual system
operation to qualify for enhanced FFP.
Further, the Board found that
the availability of enhanced FFP for costs for
personnel directly
engaged in MMIS operations does not establish the
availability of the
enhanced rate for any personnel whose costs are allocated
down to MMIS
operations.
Although the State disagreed with the Board's analyses in DAB Nos.
1023
and 1205, the State agreed that a summary decision is appropriate
in
this case. However, the State maintained that the disallowance
amount
was overstated by $1,013. HCFA also agreed to a summary decision
and
confirmed that the disallowance was overstated by the amount claimed
by
the State.
We therefore sustain the disallowance in the amount of $160,480 based
on
the analyses in DAB Nos. 1023 and 1205, which we incorporate here
in
full. We note, furthermore, that the Board concluded that HCFA
could
reasonably restrict enhanced reimbursement for remote overhead costs
in
New Jersey Dept. of Human Services, DAB No. 1071 (1989). In New
Jersey
v. U.S. Dept. of Health and Human Services, 748 F. Supp. 1120
(D.N.J.
1990), the court concluded that HCFA's policy was "valid" and upheld
DAB
No. 1071.
Donald F. Garrett
Norval D. (John) Settle
Cecilia Sparks Ford
Presiding
Board