GAB Decision 602
December 12, 1984
Colorado Department of Social Services;
Ford, Cecilia; Garrett, Donald Ballard, Judith
Docket No. 83-217
The Colorado Department of Social Services (State) appealed a
disallowance of $367,975 made by the Health Care Financing
Administration (Agency) related to Medicaid reimbursement of payments
made to six public hospitals. The payments were claimed on Quarterly
Statements of Expenditures for the quarters ended June 30, 1981,
September 30, 1981, or December 30, 1981.
The primary issue raised in this appeal was decided in the State's
favor in Joint Consideration - Timely Filing of Claims, Decision 576,
October 5, 1984. The sole remaining issue is whether the State's claims
were timely filed under section 306 of Public Law 96-272.
Based on a preliminary review of the record, it appeared to the Board
that the claims fell within exceptions to the section 306 filing
deadlines for an adjustment to prior year costs or court-ordered
retroactive payments and, therefore, were timely filed. The Board
issued an order, dated October 19, 1984, directing the Agency to show
cause why the disallowance should not be reversed based on the analysis
set out in the order. The Agency subsequently notified the Board that
it did not intend to respond substantively to the order. (Letter dated
November 26, 1984 from Jay A. Swope)
Accordingly, for the reasons stated in the order, which is attached
to this decision and made part of it, we conclude that the disallowance
should be reversed.
(2) The Health Care Financing Administration disallowed $367,975 in
federal financial participation claimed by the Colorado Department of
Social Services on Quarterly Statements of Expenditure for the quarters
ending June 30, 1981, September 30, 1981, and December 30, 1981 for
payments made to six public hospitals.
The primary basis for the disallowance here was that the State's
claims were not timely filed under certain appropriations act provisions
which the Agency interpreted as permanently barring payment for any
pre-fiscal year 1979 expenditures not filed within a one-year time
limit. In Joint Consideration-Timely Filing of Claims, Decision No.
576, October 5, 1984, the Board held that the appropriations act
provisions relied on by the Agency did not permanently extinguish claims
for pre-fiscal year 1979 expenditures.
Given the Board's holding in Decision No. 576, the question of
whether a claim has been timely filed is governed by section 306 of
Public Law 96-272. Under section 306(b), claims for pre-fiscal year
1980 expenditures must be filed by May 15, 1981.
Section 306 provides, however, that the time limits should not be
applied so as to deny payment with respect to any expenditure involving
"adjustment to prior year costs" or "court-ordered retroactive
payments."
HHS regulations define the exception for an adjustment to prior year
costs as follows:
Adjustment to prior year costs means an adjustment in the amount of a
particular cost item that was previously claimed under an interim rate
concept and (3) for which it is later determined that the cost is
greater or less than that originally claimed.
45 CFR 95.4 (1981).
In the same regulation, a court-ordered retroactive payment is
defined as:
either a retroactive payment the State makes to an assistance
recipient or an individual, under a Federal or State court order or a
retroactive payment we make to a State under a Federal court order.
Although we may accept these claims as timely, this provision does not
mean that we necessarily agree to be bound by a State or Federal
decision when we were not a party to the action.
The relevant preamble explained that the "adjustment to prior year
costs" exception was "limited to claims for services or medical
assistance based on interim rates that subsequently are determined to be
higher or lower than originally claimed." 46 Fed. Reg. 3528, January 15,
1981. The preamble also noted: "It has been our experience that in
these areas subsequent adjustments are unforeseen and unavoidable." Id.
In this case, a preliminary review of the record indicates that the
disputed claims fall within the Agency's definitions of an adjustment to
prior year costs or court-ordered retroactive payments. The
disallowance letter itself breaks the total disallowance into two parts
and characterizes the claims as follows:
the payments represented $296,963 for adjustments to prior year costs
(regular hospital cost settlements based on audits) and $71,012 in court
ordered payments based on a Federal court decree.
Thus, based on our preliminary analysis, it appears that the
exceptions apply and that the claim should be considered to be timely
filed under section 306(b).
We note that this case raises the additional question of when the
expenditures were incurred. Various states have disputed the Agency
position that an expenditure related to a public provider of Medicaid
services is incurred when the provider agency incurs the costs, rather
than when the State agency adjusts the reimbursement rate as a result of
a cost settlement. However, in view of our preliminary analysis (4)
that the costs in question here fall within the exceptions for
"adjustment to prior year costs," and "court-ordered retroactive
payments," it does not appear at this time that it will be necessary for
the Board to reach the issue of when the expenditures were incurred.
Accordingly, the Agency is directed to show cause, in writing, why
the Board should not proceed to decision in this case, reversing the
disallowance on the basis of Decision No. 576 and the further conclusion
that the costs in question here fall within the exceptions for an
"adjustment to prior year costs" and "court-ordered retroactive
payments" and, therefore, the State's claim was timely filed under
section 306 of Public Law 96-272 and the HHS implementing regulations.
If the Agency determines that the Board's preliminary analysis is
correct, the Agency may wish to simply notify the Board and the State
that it is withdrawing the disallowance on that basis. Otherwise, the
Agency's response to this order should be filed within 30 days of the
date the Agency receives this order. The Agency representative may wish
to note that the Board is issuing similar orders in the Board cases
identified on the attached list. The Agency may, if it wishes, submit a
coordinated response.
The State is not required to respond to this order. If the Agency's
response to this order raises any new issue, the State will be given an
opportunity to reply if fairness requires.
MARCH 19, 1985