Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: New York State Department of Social Services
DATE: April 2, 1992
Docket No. 90-255
Decision No. 1321
DECISION
The New York State Department of Social Services (State) appealed
the
determination of the Health Care Financing Administration
(HCFA)
disallowing federal financial participation (FFP) in the amount
of
$4,833,867 claimed by the State under title XIX (Medicaid) of the
Social
Security Act (Act). The disallowed costs represented payments
made by
the State between 1984 and 1990 to five independent laboratories
for
services provided to Medicaid recipients. 1/ The laboratories
were
certified by either New York City or New York State as Medicaid but
not
Medicare providers. The disallowance was based on HCFA's finding
that
the standards used by both New York City and New York State to
certify
the laboratories were not the same as the conditions for
participation
in Medicare. HCFA determined that the payments to the
laboratories were
thus unallowable under the Medicaid regulations at 42
C.F.R. .
440.30(c), which requires that laboratories meet the Medicare
conditions
to be eligible to participate in Medicaid. HCFA exhibit
(ex.) 1, at 1.
During Board proceedings, the amount of the disallowance was
reduced to
$1,653,541 FFP based on HCFA's determination that the
original
disallowance included federally non-participating amounts as well
as
amounts previously refunded by the State. HCFA ex. 4, at 1. 2/
On appeal, the State argued that New York State standards for
Medicaid
certification of independent laboratories met or exceeded the
Medicare
conditions of participation, and that payments to two of
the
laboratories (Idant Labs and NYS, DSAS), both of which were certified
by
New York State as Medicaid providers, were therefore reimbursable
under
title XIX. The State also argued that costs incurred for payments
to
two of the remaining three laboratories, which were certified by
New
York City, (New York Diagnostic and RHO Medical Lab), were
allowable
under section 1903(d)(2)(D) of the Act, which precludes HCFA
from
recovering the federal share of overpayments which a state is unable
to
recover because of the bankruptcy of the provider or which are
otherwise
uncollectable. The State did not argue that the payments to
the fifth
laboratory, Clinopath Labs, were allowable or could not properly
be
recovered by HCFA.
Since the disallowance with respect to Clinopath Labs is uncontested,
we
sustain that portion of the disallowance. In addition, as
discussed
later in detail, we remand the remainder of the disallowance to
HCFA for
further consideration. HCFA took the position in this appeal
that 42
C.F.R. 440.30(c) requires that a laboratory actually be certified as
a
Medicare provider, and that it was therefore unnecessary to consider
the
State's argument that the State standards under which Idant Labs
and
NYS, DSAS, were certified to participate in Medicaid met or exceeded
the
Medicare conditions of participation. However, we find that
section
440.30(c) requires only that a laboratory meet the Medicare
conditions
of participation. Accordingly, HCFA should determine on
remand whether
the State can meet its burden of showing that Idant Labs and
NYS, DSAS,
met the Medicare conditions. Furthermore, while we find that
the
payments made to New York Diagnostic and RHO Medical Lab were
possibly
uncollectable overpayments within the meaning of section
1903(d)(2)(D),
HCFA should address the question whether this provision
applies here if
the laboratories were not out of business within 60 days of
the date the
overpayments were discovered and the State did not attempt to
recover
the overpayments during that period.
The two pairs of laboratories still in dispute are discussed
separately
below.
I. Payments to Idant Labs and NYS, DSAS
Statutory and Regulatory Background
The Medicaid program established by title XIX of the Social Security
Act
(Act) makes federal matching funds available to states for payments
for
"medical assistance" to eligible individuals. Section
1903(a)(1). The
term "medical assistance" includes "other laboratory
and X-ray
services." Section 1905(a)(3).
Section 1902(a)(9)(C) of the Act requires that a state's title XIX
plan
provide:
that any laboratory services paid for under such plan must
be
provided by a laboratory which meets the applicable
requirements
of . . . paragraphs . . . (15) of section 1861(s) . . .
.
Paragraph (15) of section 1861(s) provides that diagnostic tests
performed
in an independent laboratory are not reimbursable services
under Medicare
unless the laboratory "meets such other conditions
relating to the health and
safety of individuals with respect to whom
such tests are performed as the
Secretary may find necessary." 3/
The Medicaid regulations at 42 C.F.R. . 440.30 (1987) state:
Other laboratory and X-ray services means professional
and
technical laboratory and radiological services--
* *
* (c) Furnished by a laboratory that
meets the Medicare conditions for
coverage of services for
independent laboratories. 4/
During the period covered by the disallowance, the Medicare conditions
for
coverage of services provided by independent laboratories were set
out at 42
C.F.R. Part 405, Subpart M (1977). 5/ The particular
conditions at
issue here are identified later in the decision.
Section 1902(a)(33)(B) of the Act provides that the state
agency
responsible for licensing health institutions must determine
whether
institutions and agencies meet the requirements for participation in
the
Medicaid program. It further provides that the Secretary "is
authorized
to validate State determinations and, on that basis, make
independent
and binding determinations concerning the extent to which
individual
institutions and agencies meet the requirements for
participation."
Factual Background and Parties' Arguments
The disallowance was based in part on the report of a financial
management
review by HCFA dated September 21, 1990 (HCFA ex. 2). HCFA
found that
"New York City Medicaid only laboratory certification
standards were not in
accordance with Medicare standards." HCFA ex. 2,
at 6. 6/ HCFA
found that five of the 49 laboratories which it reviewed
had received
Medicaid funds despite the fact that they did not meet the
Medicare
conditions of participation, as required by 42 C.F.R. .
440.30(c). 7/
The report identified a total of nearly $5.4 million in
Medicaid funds which
it stated was improperly paid to these
laboratories.
HCFA subsequently disallowed the overpayments identified in the
financial
management review report. 8/ In addition to noting that the
New York
City standards differed from the Medicare standards, the
disallowance letter
stated:
New York State certification procedures also showed
differences
with Federal requirements. For example, Medicare
laboratories
are required to have a technical supervisor; State
requirements
do not contain this category. In addition, Medicare
requires
laboratories to have an overall operating procedure manual
which
is reviewed and updated each year by the technical
supervisor.
State rules do not contain this provision. Even the
State's
recordkeeping system was not fully in accordance with
Medicare
criteria.
HCFA ex. 1, at 2. The disallowance letter does not indicate
who
reviewed the New York State standards for Medicaid certification,
which
were not discussed in the financial management review report.
HCFA subsequently agreed with the State that the amount
disallowed
included both federally non-participating expenditures and
overpayments
which had already been refunded by the State, and reduced
the
disallowance to $1,653,541. HCFA ex. 4, at 1.
On appeal, the State did not argue that the New York City standards
for
Medicaid certification of independent laboratories were the same as
the
Medicare conditions of participation. However, the State took
the
position that the New York State standards for Medicaid certification
of
independent laboratories were the same as the Medicare conditions.
9/
Accordingly, the State argued that the disallowance pertaining to
Idant
Labs and NYS, DSAS, the two laboratories which were certified by
New
York State as Medicaid providers, should be reversed. 10/
In support of its position, the State specifically addressed the
three
Medicare conditions of participation which HCFA cited in
its
disallowance letter as absent or differing from State standards:
the
requirement for a technical supervisor, the requirement for a
current
procedures manual, and recordkeeping requirements. With respect
to the
first requirement, the State asserted that the New York State
Department
of Health (DOH) regulations at 10 N.Y.C.R.R. . 58-1.3 and .
58-1.4
require that laboratory directors and supervisors be
technically
qualified to oversee the procedures being performed by
their
laboratories. The State argued that this satisfied the
requirement at
42 C.F.R. . 405.1313(a)(1) for a technical supervisor with
certain
qualifications "to supervise the technical performance of
the
[laboratory] staff . . . ." The State further argued that it was
not
necessary that a technical supervisor be specifically designated by
the
laboratory.
The State also asserted that, pursuant to 10 N.Y.C.R.R. .
58-1.10(g)
(which requires that technical procedures employed in a laboratory
be of
proven reliability and generally accepted by leading authorities
and/or
approved by DOH), DOH requires laboratories to maintain
up-to-date
procedures manuals. The State submitted copies of DOH
laboratory survey
checklists for the different specialties in which
laboratories could be
certified (e.g., endocrinology). State ex.
3. The checklists include
requirements that the laboratory maintain a
current standard operating
procedure manual and update the manual to reflect
the most recent
supervisory reviews. In addition, the checklists
provide that the
manuals must be checked for specific deficiencies. Id.
11/ The State
also submitted the affidavit of the Technical Director of
the Clinical
Evaluation Unit of the Bureau of Laboratories, DOH, stating that
"[t]he
manual is reviewed as a standard part of the survey process."
Affidavit
of Carol Olsen dated 9/20/92, State ex. 3, at 3. The State
asserted
that DOH certification requirements thus parallel the requirement at
42
C.F.R. . 405.1316(a) that laboratories maintain a procedural
manual
which includes "all automated and manual methods for tests which
are
performed in or offered by the laboratory."
The State asserted, moreover, that 10 N.Y.C.R.R. . 58-1.11(c)
requires
that all patient records be maintained for two years.
According to the
State, this is the same as the requirement at 42 C.F.R. .
405.1316(g)
that "a suitable record of each test result is preserved by
the
laboratory for a period of at least 2 years after the date of
submittal
of the [laboratory] report . . . ." The State stated that
DOH
regulations do not require items such as worksheets, temperature
control
records, and specimens to be retained as long as two years,
but
contended that the Medicare conditions did not require the retention
of
these items.
In response, HCFA took the position that the statute and
regulations
require that a laboratory actually be surveyed for compliance
with the
Medicare conditions of participation and be certified as a
Medicare
provider in order to be eligible for Medicaid funds. (As part
of this
process, under section 1864(a) of the Act, HCFA would review
the
recommendation of a state survey agency -- in this case, the New
York
State Department of Health -- and determine whether to certify
a
facility as a Medicare provider.) HCFA argued that the Board thus
need
not determine whether the State standards for Medicaid
certification
were comparable to the Medicare conditions. In support of
its argument,
HCFA noted that there was "[n]o reference . . . in either the
statute or
regulations to compliance with state licensure requirements as
a
substitute for compliance with the Medicare conditions of coverage
in
order to qualify for Medicaid reimbursement." HCFA brief dated
1/30/92,
at 8. HCFA also asserted that if Congress had intended to
substitute
compliance with state or local laboratory licensure requirements
for
compliance with the Medicare conditions of coverage, the statute
would
so state. In addition, HCFA contended that it would not
make
"administrative good sense" to allow Medicaid funding based on
a
determination that state standards for Medicaid certification
were
equivalent to the Medicare conditions of participation "since it
would
be extremely burdensome to make such equivalence determinations."
HCFA
brief dated 1/30/92, at 9.
Discussion
We conclude that neither the language of the applicable regulations
nor
their history supports HCFA's position that an independent
laboratory
must be certified as a Medicare provider in order to be eligible
for
Medicaid funds. At issue here is the requirement at 42 C.F.R.
.
440.30(c) that laboratory services funded by Medicaid be "[f]urnished
by
a laboratory that meets the Medicare conditions for coverage of
services
for independent laboratories." 12/ There is no express
reference to
Medicare certification in this provision. Thus, there is
no basis for
reading this provision as requiring Medicare certification since
clearly
not every laboratory which meets the Medicare conditions
of
participation is certified as a Medicare provider.
The history of section 440.30(c) also supports the State's reading.
The
1977 version of the regulations defined the term "Other laboratory
and
X-ray services" as (among other things) services--
provided to a patient by a laboratory that is qualified
to
participate under title XVIII of the Social Security Act, or
is
determined currently to meet the requirements for
such
participation.
42 C.F.R. . 449.10(b)(3). This language makes clear that a
laboratory
which is not "qualified to participate" in Medicare, i.e., not
certified
as a Medicare provider, may nevertheless be eligible for Medicaid
funds
if it meets the requirements for participation in Medicare. While
the
regulations were subsequently recodified and rewritten, no
substantive
changes were intended. See 43 Fed. Reg. 45176
(Sept. 29, 1978), and
52 Fed. Reg. 47926, 47931 (Dec. 17, 1987). Thus,
although the
regulations no longer expressly provide that a laboratory may
either be
certified as a Medicare provider or meet the Medicare conditions
of
participation, the history suggests that this is still their meaning.
Moreover, our conclusion that Medicare certification was not required
is
consistent with the Board's decision in Oklahoma Dept. of
Human
Services, DAB No. 799 (1986), in which the Board found that "the
literal
language" of a similar requirement relating to hospitals "does not
on
its face require that a hospital be certified as a Medicare
provider,
only that the facility meet the requirements for participation
in
Medicare." Oklahoma at 5. The Board also noted in Oklahoma
that where
HCFA approval under the Medicare program is required for
Medicaid
participation, HCFA has so specified, citing the requirement at
42
C.F.R. . 440.40(a)(1)(ii)(B) that skilled nursing facility services
must
be provided by a hospital "that has an approval from HCFA to
furnish
nursing facility services in the Medicare program. . . ." Thus,
the
absence of any reference to HCFA approval in the regulations
here
supports our conclusion. In contrast, the absence of any reference
to
state or local certification standards is not significant. Such
a
reference would not change the basic requirement that a laboratory
meet
the Medicare conditions of participation but would merely indicate
one
way of establishing that the laboratory meets these conditions. We
are
not persuaded that this level of detail is required in the
regulations.
Furthermore, we disagree with HCFA's suggestion that the State's
reading
of the regulations is unreasonable because it would be
administratively
burdensome to determine whether state or local certification
standards
met the Medicare conditions of participation. To the
contrary, it
appears that making a determination that state or local
standards for
Medicaid certification (or other state or local licensing
requirements)
were equivalent to the Medicare conditions would ease
HCFA's
administrative burden since HCFA would not have to determine
whether
individual laboratories certified by a state or local
licensing
authority met the Medicare conditions. Furthermore, it is a
state's
responsibility, as a claimant of federal funds, to document that
state
or local standards for Medicaid certification are the same as
the
Medicare conditions. Thus, HCFA is not required to conduct its
own
investigation into this matter but need only review the
documentation
provided by a state. In any event, since HCFA itself issued
section
440.30(c), it can hardly complain of any administrative burden
which
results from the fact that the regulations permit states to show
that
laboratories met the Medicare conditions if the laboratories
were
certified based on standards which were the same as the
Medicare
conditions.
Because HCFA argued that the disallowance should be sustained as a
matter
of law, HCFA's brief did not specifically address the
evidence
furnished by the State to establish that the State standards
for
Medicaid certification were the same as the Medicare
conditions.
Moreover, it does not appear that HCFA even considered the
State
standards in the course of its financial management review, since
the
review report mentions only the discrepancy between City
certification
standards and the Medicare conditions. Furthermore, we
cannot accept
the findings in HCFA's disallowance determination that the
State
certification standards are not the same as the Medicare
conditions
since this determination does not contain any explanation of
these
findings. Thus, we conclude that the matter should be remanded to
HCFA
to consider the evidence and argument presented by the State
concerning
the State standards as well as any additional evidence which HCFA
deems
relevant. HCFA should thereafter issue a new determination which
either
reaffirms or withdraws this portion of the disallowance. 13/
II. Payments to New York Diagnostic and RHO Medical Lab
Statutory and Regulatory Background
The Medicaid program uses a funding mechanism by which funds equal to
the
federal share of the estimated cost of the program are advanced to a
state on
a quarterly basis. Section 1903(d)(2)(A) of the Act authorizes
HCFA to
require adjustment of a quarterly grant award for the federal
share of
overpayments by a state. This section states:
The Secretary shall then pay to the State, in such
installments
as he may determine, the amounts so estimated, reduced
or
increased to the extent of any overpayment or underpayment
which
the Secretary determines was made under this section to
such
State for any prior quarter and with respect to which
adjustment
has not already been made under this subsection.
Section 9512 of the Consolidated Omnibus Reconciliation Act of
1985
(COBRA) added section 1903(d)(2)(D) to the Act. This section,
which
COBRA made applicable to overpayments identified for quarters
beginning
on or after October 1, 1985, states:
In any case where the State is unable to recover a debt
which
represents an overpayment (or any portion thereof) made to
a
person or other entity on account of such debt having
been
discharged in bankruptcy or otherwise being uncollectable,
no
adjustment shall be made in the Federal payment to such state
on
account of such overpayment (or portion thereof).
Regulations implementing section 1903(d)(2), as amended by COBRA,
appear
at 42 C.F.R. Part 433, Subpart F (1989). Section 433.312(c)(2)
of 42
C.F.R. provides that these regulations "apply to overpayments made
to
Medicaid providers that occur and are discovered in any quarter
that
begins on or after October 1, 1985." The specific regulations at
issue
are identified later in this decision.
Factual Background and Parties' Arguments
The State did not dispute HCFA's finding that New York Diagnostic and
RHO
Medical Lab did not meet Medicare conditions of participation.
However, the
State took the position that HCFA was precluded by section
1903(d)(2)(D) from
recouping the federal share of the payments to these
laboratories. The
State asserted that both laboratories were out of
business and that, under
these circumstances, the overpayments to these
laboratories were
"uncollectable" within the meaning of this section.
In support of its
contention that the laboratories were out of business,
the State submitted
the affidavit of an employee of the New York State
Department of Social
Services, dated February 1991 (day illegible),
which stated that Departmental
staff had found that neither laboratory
was at its last known address or had
a forwarding address, that there
was no current telephone listing for either
laboratory, and that the
laboratories were no longer billing the Medicaid
program. State ex. 4.
14/
HCFA did not dispute that the two laboratories in question were out
of
business or that overpayments to providers who are out of business
are
"uncollectable" within the meaning of section 1903(d)(2)(D).
However,
HCFA took the position that this provision does not apply here
because
the laboratories did not meet the Medicare conditions of
participation
and payments to them were therefore made outside the scope of
the
State's Medicaid plan. Citing prior Board decisions, HCFA argued
that
section 1903(d)(2) only applies to overpayments of "medical
assistance"
under a state plan. Moreover, HCFA asserted generally that
there is
other authority to recover the federal share of erroneous payments
made
outside the scope of a state Medicaid plan, but that this authority
is
not subject to any exception for payments made to bankrupt providers
or
payments which were otherwise uncollectable. HCFA also argued
that
section 1903(d)(2)(D) is inapplicable here because the laboratories
were
never Medicaid providers and this section deals only with the
recoupment
of overpayments to providers.
The State responded that HCFA's position was contrary to Board
precedent
and that the Board had found that "amounts unallowable as
medical
assistance, such as erroneous payments, were still within the scope
of
`overpayments' under section 1903(d)(2) . . . ." State's brief
dated
9/23/91 at 8, quoting Missouri Dept. of Social Services, DAB No.
1018
(1989), at 3.
Discussion
We conclude that, contrary to HCFA's argument, section
1903(d)(2)(D)
applies to the types of payments in question here. HCFA's
argument that
the provisions of section 1903(d)(2) apply only to payments of
medical
assistance under a state plan is based on a complete misreading of
prior
Board decisions. What the Board has held is that section
1903(d)(3),
not section 1903(d)(2), applies only to medical assistance paid
under a
state plan. (Section 1903(d)(3) permits HCFA to recoup the
federal
share of medical assistance payments which have been recovered by
a
state.) Furthermore, the Board has held that section 1903(d)(3)
does
not preclude the treatment of amounts which are unallowable as
medical
assistance as overpayments under section 1903(d)(2). See e.g.,
Missouri
Dept. of Social Services, DAB No. 1018 (1989); California Dept.
of
Health Services, DAB No. 977 (1988) As noted in these decisions,
the
Board's analysis of this issue has been upheld in three decisions
by
United States Courts of Appeals: Massachusetts v. Secretary, 749
F.2d
89 (1st Cir. 1984), cert. denied, 472 U.S. 1017 (1985); Perales
v.
Heckler, 762 F.2d 226 (2d Cir. 1985); Missouri Department of
Social
Services v. Bowen, 804 F.2d 1035 (8th Cir 1986). It is clear
that if
section 1903(d)(2) authorizes HCFA to recover the federal share
of
amounts paid by a state which are unallowable as medical
assistance
expenditures, section 1903(d)(2)(D) precludes HCFA from recovering
the
federal share of such amounts which are "uncollectable" within
the
meaning of the subsection.
We conclude, moreover, that HCFA's argument that section
1903(d)(2)(D)
does not apply here because the laboratories were improperly
certified
by the City as Medicaid providers has no merit. HCFA did not
cite any
authority other than section 1903(d)(2) which authorizes HCFA to
recover
overpayments made to facilities which are improperly certified, and
the
Board has specifically relied on this section in upholding
HCFA's
disallowance of such overpayments. Nebraska Dept. of Public
Welfare,
DAB No. 184 (1981). Furthermore, section 1903(d)(2)(D) refers
only to a
payment to "a person or other entity" and the regulations
implementing
this section specifically make it applicable to an overpayment
to "any
individual or entity furnishing Medicaid services under a
provider
agreement with the Medicaid agency." 42 C.F.R. . 433.304 and
.
433.318(a) (1989). HCFA did not argue that the laboratories in
question
did not have provider agreements but merely that the laboratories
were
not properly certified. Accordingly, we conclude that
section
1903(d)(2)(D) is not inapplicable on the ground that the laboratories
in
question were not properly certified as Medicaid providers.
While we do not agree that section 1903(d)(2)(D) is inapplicable on
the
basis argued by HCFA, the record here does not disclose whether HCFA
has
fully considered whether this section is applicable on the facts of
this
case. Section 1903(d)(2)(C) provides that a state shall have a
period
of 60 days from the date an overpayment is discovered in which
to
recover or attempt to recover the overpayment before an adjustment
in
the amount of its quarterly grant is made, "[e]xcept as
otherwise
provided in subparagraph (D)." When section 1903(d)(2)(C) and
section
1903(d)(2)(D) are read together, it appears that section
1903(d)(2)(D)
would not apply here if the State did not attempt to collect
the
overpayments within 60 days of the date the overpayments were
discovered
unless the laboratories went out of business before the end of
this
60-day period. HCFA in fact adopted this interpretation in
its
regulations implementing section 1903(d)(2)(D). See 42 C.F.R. .
433.318
(1989). We cannot determine from the record before us whether
the State
attempted to collect the overpayments to either New York Diagnostic
or
RHO Medical Lab within the 60-day period specified in
section
1903(d)(2)(C) or when these laboratories went out of business.
Accordingly, we conclude that the case should be remanded to HCFA
to
consider whether the factual prerequisites for application of
section
1903(d)(2)(D) were met in the case of either New York Diagnostic or
RHO
Medical Lab and to provide the State an opportunity to furnish
relevant
documentation. HCFA should thereafter issue a new
determination which
either reaffirms or withdraws this portion of the
disallowance.
Conclusion
For the foregoing reasons, we conclude that the disallowance relating
to
Clinopath Labs should be sustained. We further conclude that
the
remaining disallowance should be remanded to HCFA as specified
above.
If the State disagrees with a determination by HCFA to reaffirm
any
portion of the disallowance, it may institute a new appeal pursuant
to
45 C.F.R. Part 16.
_____________________________ Cecilia Sparks Ford
_____________________________ Norval D. (John) Settle
_____________________________ Donald F. Garrett Presiding
Board
Member
1. An independent laboratory is one which is independent both of
the
attending or consulting physician's office and of a hospital.
See
section 1861(e)(14) of the Social Security Act and 42 C.F.R.
.
405.1310(a) (1977).
2. As reduced by HCFA, the disallowance consisted of: $320,219
in
payments made to Idant Labs from 1984 to 1990; $4,489 in payments
made
to Clinopath Labs in 1984; $868,508 in payments made to New
York
Diagnostic from 1985 to 1986; $393,956 in payments made to NYS,
DSAS,
from 1984 to 1988; and $66,369 in payments made to RHO Medical Lab
in
1988. HCFA ex. 4, at 1, and State's brief dated 9/23/91, at 2.
3. Section 1902(a)(9)(C) also requires that a laboratory meet
the
requirements of section 1861(e)(9) and of paragraph (14) of
section
1861(s). Section 1861(e)(9) requires that a hospital meet "such
other
requirements as the Secretary finds necessary in the interest of
the
health and safety of individuals who are furnished services in
the
institution." Paragraph (14) requires that the laboratory be
licensed
pursuant to any "State or . . . local law which provides for
licensing
of establishments of this nature," or "be approved, by the agency .
. .
responsible for licensing . . ., as meeting the standards
established
for such licensing . . . ."
4. From 1984 (the beginning of the period covered by the
disallowance)
until 1987, paragraph (c) of section 440.30 read "[p]rovided by
a
laboratory that meets the requirements for participation in
Medicare."
As noted later in the decision, the wording change was not
significant.
5. Effective September 10, 1990, HCFA issued a new Part 493 of
42
C.F.R. which consolidated all requirements for laboratories
under
Medicare, Medicaid, and the Clinical Laboratory Improvement Act.
55
Fed. Reg. 9538 (March 14, 1990).
6. Specifically, HCFA found that, unlike the Medicare standards,
the
City standards did not require a technical supervisor to be on
the
premises and did not require general supervisors to be on the
premises
whenever tests were performed. In addition, HCFA found that
there were
differences between the City and Medicare standards with respect
to the
definition of a laboratory test, personnel requirements,
recordkeeping
and quality control procedures.
7. HCFA found that there were no overpayments to the remaining
44
laboratories, which it stated had not received any Medicaid funds,
were
out of business, or were terminated or suspended from Medicaid.
HCFA
ex. 2, at 6.
8. The amount disallowed was less than the amount identified in
the
report because some Medicaid payments had previously been disallowed
by
HCFA. See HCFA ex. 2, at 7, note 1.
9. The State argued variously that the State standards "met
or
exceeded" the Medicare conditions and that the State standards
were
"equivalent to" the Medicare conditions. We understand the State
to
mean that the State standards were the same as the Medicare
conditions
even if they were not formulated in precisely the same way.
In any
event, it seems clear that a laboratory could not satisfy
the
requirement of section 440.30(c) that it meet the Medicare conditions
if
the state or local standards under which it was certified were
less
rigorous than the Medicare conditions.
10. Both Idant Labs and NYS, DSAS, were located in New York City.
HCFA
ex. 2, at 7. HCFA's financial management review report stated that
the
New York City Department of Health performed the certification
function
for laboratories in the City which applied for Medicaid
only
certification, while the New York State Department of Health
performed
this function for upstate laboratories (i.e., laboratories outside
of
New York City). Id. at 4; HCFA brief dated 1/30/92, at 3, n.
2.
However, the State asserted, and HCFA did not dispute, that the
two
laboratories in question here were certified as Medicaid providers
by
both the City and by the State. HCFA ex. 2, State's letter
dated
8/17/90.
11. The State indicated that it had provided both the
"current
revision" of the checklists and some earlier version. State
ex. 3,
Affidavit of Carol Olsen at 4. However, not all of the
checklists are
dated, and at least five different dates appear on portions of
the
checklists. Thus, it is not clear whether the checklist
requirements
relied on by the State were included in the checklists
throughout the
periods covered by the disallowance for either
laboratory. It is also
unclear which checklists were used for the
laboratories in question
since the record does not indicate the specialties
in which the
laboratories were certified.
12. While HCFA cited other statutory and regulatory provisions as
well,
none of them advance HCFA's position. Section 1861(s)(15)
merely
authorizes the Secretary of HHS to establish "such . . .
conditions
relating to the health and safety of individuals with respect to
whom .
. . [laboratory] tests are performed as . . . [he] may find
necessary,"
and does not itself impose any specific requirements.
Section
1861(e)(9) contains a similar provision which pertains to
hospitals.
Section 493.1 of 42 C.F.R. states that Part 493 "sets forth
the
conditions that laboratories must meet in order for their tests to
be
approved for coverage under the Medicare and Medicaid programs . . .
,"
but was not in effect during the time the payments were made to
Idant
Labs and NYS, DSAS.
13. In its brief, HCFA suggested that the State could not
justifiably
rely on how DOH interpreted and enforced the State
certification
standards to show that a laboratory certified by the State met
the
Medicare conditions. In fact, the State asserted that the
DOH
regulations themselves contained the same requirement for a
technical
supervisor and for recordkeeping as the Medicare conditions.
The State
relied on documents other than the DOH regulations only to show
that the
State had the same requirement for a procedures manual as the
Medicare
conditions. These documents consisted of the checklists used
by DOH in
surveying a laboratory to determine whether, and in what
specialties,
the laboratory should be certified. The issue here is what
requirements
the laboratories had been determined to meet, not necessarily
what form
these requirements take. Thus, in evaluating the State's
evidence, HCFA
should consider whether the State may have been justified in
relying on
these documents.
14. The State noted that section 1903(d)(2)(D) applies only
to
overpayments made on or after October 1, 1985, but asserted that all
of
the payments in question were made after this date. State's brief
dated
9/23/91, at 8. HCFA did not dispute this