GAB Decision 603
December 12, 1984
Pennsylvania Department of Public Welfare;
Ballard, Judith; Garrett, Donald Ford, Cecilia
Docket No. 83-621
The Pennsylvania Department of Public Welfare (State) appealed a
disallowance of $655,901 made by the Health Care Financing
Administration (Agency) pertaining to reimbursement of Medicaid costs
claimed on a Quarterly Statement of Expenditures for the quarter ended
March 31, 1982.
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 claim
was 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 claim fell within an exception to the section 306 filing
deadlines for an adjustment to prior year costs and, therefore, was
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 19, 1984 from James
S. Feight, Jr.)
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 $655,901 in
federal financial participation claimed by the Pennsylvania Department
of Public Welfare on its statement of expenditures for the quarter
ending March 31, 1982. The primary basis for the disallowance 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
"adjustments to prior year costs."
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 for which it is later determined that the cost is greater or
less than that originally claimed.
45 CFR 95.4 (1981).
(3) The relevant preamble explained that this 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 definition of an adjustment to
prior year costs. The State alleged that its claims involved
adjustments to prior year costs and the Agency did not deny that
allegation. Moreover, it appears that the Agency allowed FFP in similar
adjustments, related to costs recorded on State records between October
1, 1978 and March 31, 1980, which were not claimed until March 31, 1982.
Thus, based on our preliminary analysis, it appears that the
exception applies 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 records 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 that the costs
in question here fall within the exception for "adjustment to prior year
costs," 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 exception for an
"adjustment to prior year costs" 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 (4) 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 raises any new issues, the State will be given an opportunity
to reply, if fairness requires.
MARCH 19, 1985