DEPARTMENTAL GRANT APPEALS BOARD
Department of Health and Human Services
SUBJECT: Georgia Department of Medical Assistance
Docket No. 87-135
Decision No. 944
DATE: April 6, 1988
DECISION
The Georgia Department of Medical Assistance (Georgia or State) appealed
a
determination by the Health Care Financing Administration (HCFA or
Agency)
disallowing $1,379,889 in federal financial participation (FFP)
claimed for
the period July 1, 1984 through March 31, 1985. The amount
disallowed
represents the difference between the State's claims for
costs at the 75
percent rate available for operation of a mechanized
claims processing and
information retrieval system called a Medicaid
Management Information System
(MMIS), and the 50 percent rate available
generally for administrative
costs. The enhanced 75 percent rate for a
MMIS is available only for a
system which HCFA approves as operational
under standards in regulations and
HCFA's State Medicaid Manual. HCFA
disallowed Georgia's claim for enhanced
FFP for its MMIS for the three
quarters in question on the basis that
Georgia's system had not been
approved as operational until March 31, 1985.
Systems are eligible for
the enhanced FFP "retroactive to the first quarter
beginning after the
date. . . such systems became operational." Social
Security Act,
section 1903(r)(3)(A). Georgia argued that its MMIS became
operational,
and therefore eligible for 75 percent FFP, as of July 1,
1984.
At Georgia's request, we have already addressed the legal issue
whether
HCFA exceeded its statutory authority when it denied the State's
claim
for this period. In Georgia Dept. of Medical Assistance, DGAB No.
882
(1987), we found that HCFA was authorized to determine when a
system
became operational and therefore eligible for enhanced FFP. Now
we face
the factual question whether HCFA correctly found that Georgia's
MMIS
was not operational when Georgia said it was. For the reasons
stated
below, we find that HCFA reasonably determined that Georgia's MMIS
was
operational only as of March 31, 1985..Background
Georgia originally began operating a MMIS in March 1976, that
was
certified in August 1977. In March 1983, Georgia submitted an
Advanced
Planning Document to HCFA detailing the State's intention to replace
its
old system with a new MMIS system to be operated by a private
contractor
as the State's fiscal agent. HCFA approved the State's Request
For
Proposal for the MMIS fiscal agent contract in June 1983.
Meanwhile, Georgia's original MMIS system continued to operate and
receive
75 percent operational funding. In fact, HCFA notified the
State on
October 1, 1984 that its old system was reapproved through June
30,
1984. Appellant's Appeal File, Exhibit (Ex.) 8. 1/ In that
same
letter, HCFA acknowledged that effective July 1, 1984, the old
system
had been replaced with a new MMIS. With regard to the costs of
that new
system, HCFA stated that "until that new system is approved you
may
claim Federal financial participation (FFP) for its operation at
only
the 50 percent level." Id. HCFA indicated, however, that
should the
State choose after October 1, 1984 to reinstate the discontinued
system,
the FFP available for its operations, since already approved, would
be
at the full 75 percent rate. Id.
In November 1984, HCFA notified the State that upon review of the
State's
claim for expenditures for the quarter ended September 30, 1984,
HCFA had
determined that the State claimed all of its MMIS costs at the
75 percent
rate. HCFA notified the State that:
Since your
Department's new fiscal agent . . .
commenced
operations on June 30, 1984 your MMIS must be recertified
to
be
eligible for 75 percent FFP. . . .
Appellant's Appeal File, Ex. 10.
Similar letters for subsequent quarters were sent to the State by HCFA
in
March 1985, June 1985, and September 1985. Appellant's Appeal
File,
Exs. 11, 12, and 13. Since the Agency can only perform a
certification
review at the State's request, Georgia made a formal request
for
certification review of its new MMIS on May 3, 1985. Appellant's
Appeal
File, Ex. 14. It is uncontested that Georgia had timely
knowledge of
the standards of performance and other pertinent provisions of
the State
Medicaid Manual which were applicable to the certification review
for
enhanced FFP. Respondent's Appeal File, Ex. II.
On December 16, 1985, HCFA transmitted to the State the results of
its
certification review in accordance with the State's request for FFP
for
operation of its MMIS retroactive to June 30, 1984. HCFA
determined
that, during the period in question, three of the State's
subsystems
(the claims processing subsystem, the management and
administrative
reporting subsystem, and the surveillance and utilization
review
subsystem) did not meet the minimum federal requirements
for
certification. After identifying the specific problems with the
State's
system, HCFA stated that major errors had been corrected by the end
of
March 1985, and that "the Georgia MMIS is approved with an
operational
date of March 31, 1985." As a result, HCFA indicated that
the State
could claim FFP at the 75 percent operational rate for the
replacement
system effective April 1, 1985. However, HCFA further
indicated that
the approval was contingent upon certain continuing
shortcomings
identified in the report--some of which were residual parts of
the major
subsystem errors largely corrected earlier--being corrected within
a
reasonable time. Appellant's Appeal File, Ex. 15. 2/
On November 7, 1986, HCFA issued a final decision disallowing the
State's
claim for retroactive FFP pursuant to section 1903(r)(3)(A) of
the Social
Security Act at the 75 percent operational rate for the
period July 1, 1984
through March 31, 1985. HCFA indicated that the
State's MMIS was
conditionally determined to be operational and
certifiable beginning April 1,
1985 inasmuch as the certification
reviewers had determined that the State's
MMIS did not meet the
conditions for certification for the period July 1,
1984 through March
31, 1985. Accordingly, the Agency allowed the
State's claim for this
period only at the 50 percent administrative rate.
The State appealed this determination to the Board, but requested that
the
legal and factual issues be separated. The Board granted the
State's
request and determined the legal issue first. In Georgia Dept.
of Medical
Assistance, DGAB No. 882 (1987), the Board found that HCFA
acted within its
statutory authority in determining when the State's
MMIS became
operational.
The nature of this dispute
The Board determined in its earlier decision that HCFA had the
authority
to determine when the State's system became operational for
purposes of
enhanced FFP by applying the system requirement standards set
forth in
the State Medicaid Manual to the State's system from the time the
State
contended its system became operational. That is not in dispute
here.
The question here is whether Georgia has succeeded in showing that
HCFA
was wrong in its factual determination that Georgia did not meet
the
system requirements as of June 30, 1984. 3/
We note at the outset that Georgia effectively admitted that it has
not
fully met the requirements; it submitted that "its MMIS
system
substantially satisfied all standards established by the State
Medicaid
Manual, Part 11, Section 11260." 4/ Emphasis added.
Appellant's Brief,
p. 1. Essentially, Georgia argued that "substantial
compliance" with
the requirement standards ought to be sufficient.
We start from the proposition that we see nothing in the
statute,
applicable regulations, or the Manual provisions which authorizes
or
defines a standard of "substantial compliance," as opposed to
full
compliance with the minimum federal requirements. HCFA clearly
is
within the reasonable range of its discretion to demand full
compliance
with these minimum requirements. Nevertheless, we have examined
the
record in some detail to determine the extent of the State's
compliance
at the time in question with the standards for system
operations. While
the extent of the failures are unclear in places
overall there is ample
evidence to support the reasonableness of HCFA's
determination
(particularly given the context we described above, i.e., that
there is
no lesser standard applicable than full compliance).
Another contextual element important here is that the State's entire
claim
for FFP here was not denied; rather, HCFA denied only Georgia's
claim for FFP
in excess of the 50 percent rate generally available under
the Act.
This Board has repeatedly concluded that where a State is
claiming
reimbursement of costs at a rate higher than the 50 percent
rate generally
available for expenditures under section 1903(a)(7) of
the Act, the State has
the burden to show that the costs claimed are
entitled to the higher rate of
reimbursement. See, e.g., Missouri Dept.
of Social Services, DGAB No.
395 (1983).
The specific defects in the State's system
As stated, HCFA determined that three subsystems of Georgia's MMIS
were
deficient. Appellant's Appeal File, Ex. 15. HCFA determined
that those
subsystems did not meet the applicable standards of performance
during
the period in question as required by the State Medicaid
Manual,
including the General Systems Design (the "blueprint" for MMIS
design
incorporated as a condition for approval in the Manual), section
1903(r)
of the Act, and 42 C.F.R.433.113. We will discuss these
subsystem
defects in turn below. A. The claims processing subsystem
HCFA found that this subsystem did not meet the minimum requirements
due
to the fact that three programming errors existed which resulted
in
overpayments being made systemically. These errors involved:
(1)
duplicate payments; (2) a decimal shift which increased payments by
a
factor of 100; and (3) payment of interim bills which should not
have
been paid. In addition, HCFA found that another deficiency in
the
State's system was the absence of diagnosis and procedure code
editing
to assure that only necessary medical services were
reimbursed.
Appellant's Appeal File, Ex. 15.
1. Duplicate payments
The certification reviewers found that several computer programs were
in
error resulting in approximately $1.3 million in "duplicate
claims."
Respondent's Brief, p. 12; Appellant's Appeal File, Ex. 15.
One such
error was that the computer program that compares hospital claims
to
records of past payments was not locating all previous records
to
prevent duplicate payments. Also, separate and distinct
programming
errors caused malfunctions in the conversion of Georgia's old
MMIS
records to the format of its new replacement system. The errors
were
detected in August 1984. HCFA noted that the program logic changes
were
completed in February 1985 which corrected most of the ongoing
problems
and the criteria changes were completed in May 1985.
The State did not dispute that these errors existed for the three
quarters
in question. Appellant's Brief, pp. 5-7; Appellant's
Post-Hearing
Brief, pp. 13-14, 24-26. Rather, the State contended that:
(a) the
amount of duplicate claims identified by HCFA was minor in
relation to the
total claims processed during the fiscal year; (b) the
Agency's contention
that this error should have been discovered during
the performance of the
systems acceptance test prior to the system
becoming operational was
incorrect; and (c) HCFA's contention that the
State failed to exercise due
diligence in detecting the defect was
incorrect.
At the outset, we reiterate that Georgia cannot deny that, as a result
of
the duplicate payments, the MMIS did not meet specific requirements
of the
Manual and the General Systems Design applicable to claims
processing
subsystems. Specifically, the MMIS did not "ensure that
reimbursement
to providers. . . [was]. . . rendered. . . correctly for
inpatient and
outpatient hospital services," nor was the State's claims
processing
subsystem able to verify "that the claim [submitted by
providers] does not
duplicate or conflict with one adjudicated
previously. . . ." State Medicaid
Manual, section 11325; General Systems
Design, Part IV, paragraph i.
Moreover, the State does not deny that
these duplicate payments were still
being made as late as February 1985.
Appellant's Appeal File, Ex. 16;
Transcript (Tr.), p. 116. Thus, unless
there is a "substantial
compliance" exception to these standards--which
there is not--it is clear
that Georgia has not met the standards,
notwithstanding its arguments
identified above. Even so, we have gone
on to assess Georgia's
arguments, and we find that the record does not
support them.
In support of its de minimis argument, Georgia submitted that $1.3
million
duplicated claims was small in comparison to a year's worth of
claims (said
to be about $775 million). Appellant's Brief, p. 6;
Appellant's Post-Hearing
Brief, p. 25. Georgia was comparing errors
found in (at most) three quarters
to a total of all claims for a full
year. More important, there is
nothing in the record to show that HCFA
in its brief review had attempted to
identify all possible errors during
the period that was assessed; that was
not the purpose. Thus, the ratio
is not as extreme as Georgia would
have it appear. Eleven percent of
the claims presented to the system
(50,273 claims) were erroneous.
Appellant's Post-Hearing Brief, p. 25.
Furthermore, HCFA argued, as we
discuss further below on pages 21 and 22,
that the errors involved were
statistically sufficient to skew the inpatient
and outpatient reports
produced by the surveillance and utilization review
subsystem.
Respondent's Brief, p. 13. Finally, and in any event, we conclude
that
nothing precluded HCFA, in the reasonable exercise of its
discretion,
from refusing to tolerate a systemic problem in this
particular
subsystem which produced an admitted $1.3 million in duplicate
payments
over a relatively short period. Certainly, this result
appears
compelling when this error is viewed in combination with the
other
errors discussed below.
We now turn to Georgia's argument that HCFA was incorrect in its
position
that a sound "systems acceptance test," unlike Georgia's,
should have found
the duplicate payment errors (as well as other claims
processing errors
discussed below). It is important to note, contrary
to Georgia's
implication, that this was in the nature of an incidental
argument, and that
HCFA based neither the certification determination
nor the disallowance on
the lack or failure of a "systems acceptance
test." Appellant's Appeal
File, Exs. 15 and 21. HCFA first raised this
as an argument in an early
brief in this case. Respondent's Brief, p.
12. Georgia thus has
created something tantamount to a straw man issue
not directly bearing on the
bases of the HCFA determinations. Even so,
the record does not support
Georgia's contentions.
While the State presented testimony that a systems acceptance test
could
not practically have discovered these errors, the Agency's
witness
testified to the contrary: that, in his experience with over
30
certification reviews, errors such as these are usually detected.
Tr.,
pp. 58-60, 113-114, and 223- 225. We disagree with the
State's
assertion that the witness's opinion is without any factual basis
merely
because he did not examine how the underlying programs
occurred.
Appellant's Post-Hearing Brief, pp. 13-14. The Agency's
witness here
has had extensive experience in performing certification reviews
and has
seen the performance of other states. Tr., p. 204. We
think this alone
is sufficient to allow him to render a reasoned
opinion. We find his
testimony credible and, on balance,
persuasive.
As for the State's disagreement with the Agency's testimony that
these
errors should have been detected and corrected sooner, the record
shows
that the State was well aware of the errors in the subsystem as
of
February 1985 and the record further indicates that the State
MMIS
experienced problems as early as October 1984 which prevented the
system
from running smoothly. Respondent's Supplemental Record on
Appeal, Ex.
VI, "Medicaid computer problems still plaguing State," The
Atlanta
Journal, April 25, 1985. 5/ Another reasonable inference drawn
from the
record here is that if the State thought its system was
fully
operational as of June 30, 1984, it would have requested
certification
review at that time. Instead, the State here did not
request a
certification review until May 1985 even though the Agency
repeatedly
informed the State that it could not claim operational FFP at the
75
percent rate until its new system was certified, and, as a result,
the
State's claims for FFP at this rate were deferred for four
quarters.
Appellant's Appeal File, Exs. 10, 11, 12, 13 and 14.
Thus, the record in this case clearly supports the reasonableness
of
HCFA's determination that the claims processing subsystem did not
meet
applicable standards.
2. Decimal shift
The certification reviewers found that a programming error in the
on-line
"pend resolution" of hospital claims shifted the decimal point
on the revenue
amount fields two positions to the right; 30 hospital
outpatient claims were
overpaid by a total of $1,065,160. Appellant's
Appeal File, Ex.
15. This problem was corrected in October 1984.
Appellant's Brief, p.
3.
The State contended that this overpayment problem was minor in relation
to
the total claims paid correctly in the fiscal year; that the error
was
corrected within four months of its detection; and that the
Agency's
assertions that a "system acceptance test" would have detected
this
error and that the State was not diligent in correcting this error
were
without factual basis. Appellant's Brief, pp. 2-3;
Appellant's
Post-Hearing Brief, p. 22.
The record here shows that, notwithstanding the State's arguments,
the
Georgia MMIS as a result of the decimal shift made
substantial
overpayments. The Manual requires that the claims
processing subsystem
accomplish certain objectives. Among those
objectives is the
requirement that the system "verify that charges submitted
by providers
are reasonable and within acceptable limits." State
Medicaid Manual,
section 11325 A.6. The State does not deny that as a result
of the
overpayments here its subsystem was unable to meet this
objective.
Appellant's Brief, pp. 2-3; Appellant's Post-Hearing Brief, p.
22.
Moreover, the record shows that even prior to the State's request
for
certification review, the State was well aware of the problems with
its
MMIS system and the fact that the system was not running smoothly
and
paying erroneous claims. Respondent's Supplemental Record on
Appeal,
Ex. VI, "Medicaid computer problems still plaguing state," The
Atlanta
Journal, April 25, 1985.
The amount of the error, despite the State's claim to the contrary,
was
substantial--$1.6 million, which HCFA represented
(without
contradiction) as representing 8.5 percent of the total payments
made by
Georgia to hospitals for outpatient services during the four
month
period (the relevant comparison; Georgia used a ratio of the error
to
all dollars paid by the MMIS, a much different figure).
Respondent's
Post-Hearing Brief, p. 4; Appellant's Post-Hearing Brief, p.
22.
We have already rejected the State's allegations concerning the
"systems
acceptance test" above. Our findings and conclusions apply
equally
here.
The record is inconclusive concerning the diligence with which
Georgia
pursued this error. It is true that Georgia apparently solved
the
problem within four months (as opposed to the much longer period of
time
correction of other errors took); HCFA nonetheless argued that the
high
ratio of errors should have triggered much more rapid correction.
In
any event, it is clear that HCFA correctly determined that the
system
was not operational as of the June date Georgia said it was.
Thus, overall, the record amply supports HCFA's determination on
the
decimal shift error.
3. Interim bills
The certification reviewers found overpayment of 153 claims
involving
overpayment of $544,422 due to an absence of programming logic
to
prevent payment of interim bills as well as a programming error
that
erroneously identified some bills as interim. Appellant's Appeal
File,
Ex. 15. Under Georgia's State Plan, interim bills were not to be
paid.
The reviewers found that the cause of the overpayments was
logic
problems which were a result of a system edit that was not in place
to
prevent such payments. Corrective action to cure this problem was
not
completed before January 1985. Appellant's Appeal File, Ex.
16;
Respondent's Supplemental Appeal File, Ex. III.
The State essentially repeated arguments already discussed above.
The
State again argued that the scope of this error was minor in relation
to
all the claims that were processed and that the State
after
identification of the problem in October 1984 acted diligently
to
correct it. Appellant's Brief, pp. 4-5; Appellant's Post-Hearing
Brief,
p. 23. The corrections to both programs apparently were made in
January
1985. Appellant's Appeal File Ex. 16. The State again
repeated its
objection to the Agency's assertions that these errors could
have been
detected and that the State did not act diligently in correcting
the
errors. Appellant's Post-Hearing Brief, pp. 13-14.
One of the principal objectives of the claims processing subsystem of
the
MMIS is to "ensure that reimbursements to providers are rendered
promptly and
correctly." State Medicaid Manual, section 11325 A.7.
Clearly, as a
result of the improper payment of over a half-million
dollars in interim
bills by Georgia's claim processing subsystem for at
least a six-month
period, Georgia's claims processing subsystem did not
meet one of the
required objectives. As in other instances already
discussed, HCFA did
not abuse its discretion in treating the amount of
the overpayment as
substantial.
In this instance, one of the State's witnesses admitted that the type
of
error involved here should have been detected by a system
acceptance
test. Tr., pp. 54-56, and at 108. The Agency's
witness, speaking from
his experience with other state systems, indicated
that the State should
have discerned and corrected the problem in a shorter
period of time
rather than taking almost six months after the system was
supposedly
operational. Id., p. 222-223.
Thus, the Agency's assertions here were fully and reasonably supported.
4. Absence of diagnosis and procedure code editing
The certification reviewers also found that Georgia's system did
not
compare diagnoses with procedures rendered patients to ensure
that
patients receive only necessary medical services as required under
Title
XIX. Appellant's Appeal File, Ex. 15; Respondent's Brief, p.
14.
The State did not deny HCFA's charge, but contended that its MMIS had
the
programmatic capacity to implement a mechanized comparison of
procedures with
diagnoses if an acceptable data base for comparison is
ever
established. Appellant's Brief, pp. 7-8; Appellant's
Post-Hearing
Brief, pp. 16-17. The State argued that it had determined
that, with
few exceptions, no such data base existed to make it medically
practical
or prudent for Georgia to establish computer edits requiring such
a
comparison to determine whether the procedure is consistent with
the
diagnosis prior to payment of the claim. The State further argued
that
its policy judgment is supported by the General System Design,
Section
VI. Appellant's Post-Hearing Brief, pp. 17-18 and Appendix
C. The
State also argued that HCFA had certified the prior system
without these
edits, and that the absence of these edits did not prevent HCFA
from
certifying the State's new replacement system or prevent HCFA
from
passing the State's system in its last system performance review.
Id.,
at 19 and 20.
The State did not deny that regulations and the General Systems
Design
mandate the performance of a comparative analysis. The State's
reason
for the its failure to perform this function was that, as a matter
of
State policy, Georgia had determined that it was not medically
practical
or prudent to make this computerized comparative analysis.
The State
here contended that the fact that its system had the capability
to
perform this function is enough; it does not have to actually
perform
this function.
We do not agree. The General System Design and applicable
regulations
specifically require that the claims processing subsystem
"makes"
extensive checks as to the compatibility of procedures and
diagnoses.
Respondent's Supplemental Record on Appeal, Ex. VII; See also 42
C.F.R.
447.45(f)(ii). 6/ Even if the rule were not so specific, nothing
in the
record here suggests any valid reason to read the regulations and
Manual
to distinguish between the capability to do an important function
and
the doing of it. Thus, the fact that the system may have had
the
capability to perform this analysis is not enough; the
actual
comparative analysis must be performed. Thus, we conclude that
under
the standards, the State had a clear obligation to have a system
that
not only could, but actually did, perform diagnosis and procedure
code
editing. The State has effectively admitted that the system could
not
so perform.
However, in all fairness, we are compelled to point out that HCFA
never
rebutted Georgia's affirmative statements that HCFA condoned the
same
problems before and after the period in question. The record thus
is
incomplete on this issue, and raises unanswered questions whether
HCFA's
generosity arose from accident or, perhaps, an acquiescence to errors
in
a circumstance of borderline approvability. Whatever the case, we
need
not rely on HCFA's factual finding on edits in upholding
the
disallowance; the standards are clear and evidence elsewhere in
the
record is overwhelmingly persuasive that HCFA's overall
determination
that the system was not operational was reasonable.
5. Overall conclusion--claims processing subsystem errors
We conclude that there is nothing in the record to support the
State's
contention here that HCFA erred in determining that the State's
claims
processing subsystem was not in substantial compliance from June
30,
1984. The record shows that the State did not meet
specific
requirements mandated by the State Medicaid Manual and General
System
Design. Moreover, at least two errors, the interim bills and
the
duplicate payments, were still occurring during the first quarter
of
1985. 7/ The State also has not shown that the Agency's assertions
that
these errors were detectable and correctable sooner were
unreasonable.
Retroactive FFP is allowable only from the first day of the
quarter
after the Secretary determines a system was fully operational.
If the
errors were still occurring in the subsystem in January and February
of
1985, then the Secretary reasonably determined that the system
was
operational as of March 31, 1985, and thus, the State could only
begin
to claim 75 percent operational FFP from the quarter beginning April
1,
1985 for its MMIS.
B. Management and Administrative Reporting Subsystem
The certification reviewers found that this subsystem did not fully
meet
the minimum federal requirements for approval. Specifically,
the
following functions were not being performed either in whole or in
part:
o
Preparing budget allocations for various categories
of
services for the fiscal year. o Projecting the cost
of
program
services for future periods. o Comparing
current
cost with previous period cost to establish a frame
of
reference for analyzing current expenditures. o
Comparing
actual expenditures with budget to determine current
and
projected financial position. o Providing data
essential
to the development and formulation of program policies.
o
Reviewing errors in claims processing to determine
those
errors most frequently committed by providers and
claims
processing personnel in order to improve training and
forms.
o Developing third party payment profiles to
determine
where program cost reductions might be achieved.
o
Assisting auditors in reviewing provider cost
and
establishing a basis for cost settlement.
Appellant's Appeal File, Ex. 15.
1. Cost projections for the fiscal year were not provided for
budget
purposes.
The HCFA reviewers found that, as a result of deficiencies in
the
subsystem's budgeting capabilities, the first four functions
listed
above, which are requirements of the General Systems Design for
this
subsystem, were not met. Appellant's Appeal File, Ex. 15;
Respondent's
Supplemental Record on Appeal, Ex. X. While the State admitted
that the
budget data for this subsystem was not loaded into the system
until
November 12, 1984, it contended that its MMIS generally performed
the
functions required for a management and administrative
reporting
subsystem. Appellant's Brief, p. 10. The State contended that
it
prepared budget allocations for various categories of services for
the
fiscal year by using the State's primary budget report, the AI-0-
04.
Appellant's Brief, p. 16; Appellant's Post-Hearing Brief, pp.
27-30.
The State contended that this report is equivalent to the MR-0-01
and
the MR-0-03 reports required under the Manual and the General
Systems
Design to be included in the management and administrative
reporting
subsystem. Appellant's Brief, p. 9. The State further argued
that the
type of information contained on the MR-0-01 and the type of
comparison
made on that report is useless to Georgia because of Georgia's
budgeting
process. Appellant's Post-Hearing Brief, p. 28. The State
contended
that its use of its equivalent report was incorporated by reference
in
the State's Advanced Planning Document and the Request for
Proposal.
Id. Consequently, the State argued that to the extent the
State
Medicaid Manual requires HCFA approval of the AI-0-04 report as
the
conceptual equivalent to the MR-0-01, HCFA gave that approval when
it
approved first the Advance Planning Document and then the Request
for
Proposal. Id., at 29.
We agree with the Agency that the State has not shown that it has met
the
requirement that its management and administrative reporting
subsystem had
the necessary budgeting capabilities for the fiscal year
to allow it to
perform the first four functions indicated above. First,
the State
admitted that the requisite budget data was not placed into
the subsystem
until November 12, 1984. Consequently, no budget data was
available in
the subsystem on the date the State claims the system
became operational,
June 30, 1984. Appellant's Brief, p. 10,
Appellant's Appeal File, Ex.
16. Thus, even if the State had used the
MR-O-01 report, it would not
be able to perform its intended function as
the data necessary for operation
of the subsystem was not there.
Moreover, the State did not actually produce
the MR-O-01 report until
February 1985. Appellant's Appeal File, Ex.
16. The record also
indicates that the State was well aware that its
system was not
producing the requisite reports and that these reports would
be needed
in order to be certified. Respondent's Supplemental Record on
Appeal,
Ex. VI.
The Agency also produced evidence that, while the State argued that
it
used an equivalent report in lieu of the MR-O-01, it never informed
HCFA
of this nor did the State seek an equivalency determination from
HCFA
for this report either before the certification review, at the time
of
the review, or subsequent to the review. Tr. pp. 206-209. See
also
Respondent's Record on Appeal, Ex. II. There was testimony at
the
hearing that the State knew that the State Medicaid Manual requires
the
State to seek an equivalency determination and that it was HCFA's
policy
that, if a State wished to use a substitute report, it should seek
an
equivalency determination. Tr., pp. 154-156. We do not agree
with the
State here that in approving the State's Advanced Planning
Document,
HCFA approved the State's use of the AI-0-04 as the
functional
equivalent of the MR-0-01. The State did not specifically
reference
this particular report in the Advanced Planning Document.
Appellant's
Appeal File, Ex. 1. The Advanced Planning Document merely
contains the
general statement that the system would include an "Accounting
Interface
Subsystem," a separate system, which would produce a variety of
reports
for use by accounting personnel. Appellant's Post-Hearing
Brief, p. 28;
Appellant's Appeal File, Ex. 1. The Advanced Planning
Document also
stated that the State would include a management and
administrative
reporting subsystem which also produced reports. There is,
however, no
mention in this document that the State intended to use any
reports
developed in the accounting interface subsystem as the
functional
equivalent to the required management and administrative
subsystem
reports. Moreover, since a copy of the alternative report was
not
included in this document, the Agency was not able to examine
this
report to see if it was equivalent to the MR-0-01. As a matter of
fact,
the first time the State submitted this report for the Agency's
review
was with its post-hearing brief. Appellant's Post-Hearing
Brief,
Appendix E. Even though the State still has not requested a
functional
equivalency determination, the Agency examined the report for
its
content and utility and determined the report was not the
functional
equivalent to the MR-0-01 because it does not attempt to forecast
for
financial planning as required. 8/
Thus, the State has not met the requirement that its management
and
administrative subsystem "establish information reporting to
assist
management in fiscal planning and control" and that it used the
required
reports. State Medicaid Manual, section 11240.
2. Providing data essential to the development and formulation of
program
policies
HCFA found that the MR-0-02 report, in which Georgia reported total
units
of service rendered under the Medicaid program, included
prescriptions
counted not by the number of drug prescriptions, as
required, but by the
number of grams of a drug or number of pills within
a particular
prescription. Respondent's Brief, p. 18. HCFA argued that
the
prescription information was critical to program management, and
that
Georgia's information was inflated and useless. Respondent's
Brief, pp.
18-19; Respondent's Post-Hearing Brief, pp. 26-28. The State
did not deny
that the error existed, but argued that the error was not
substantial and
that the report was not needed for the State's Medicaid
program.
Appellant's Post-Hearing Brief, p. 31.
We agree with the Agency here that the errors involved in the MR-
0-02
could have had a significant effect on the utility of the report
because
it would make it impossible to make a management decision on whether
to
place a limit on drug usage by a recipient or to make a
management
decision to set fee schedules for providers. We find nothing
in the
record that impeaches the determination of HCFA, in the exercise of
its
program expertise, that prescription-specific reporting was important
as
a management tool. Reporting on the number of pills/grams, rather
than
the prescription per recipient for a particular kind of
medicine,
apparently created confusion and could substantially mislead
someone
reviewing drug usage by, e.g., inflating the apparent usage way
beyond
actual per-prescription usage, complicating decisions on limiting
drug
usage and costs. As a result, the error in this report prevented
this
subsystem from enabling the State to "assist management in
fiscal
planning and control" as well as providing data essential to
the
development of program policies as required by the State
Medicaid
Manual. Section 11340, see also General Systems Design, section VII.
9/
3. Reviewing errors in claims processing to determine those errors
most
frequently committed by claims processing personnel
The reviewers found that the MR-O-11 report showed percentages
that
exceeded 100 percent indicating a program error. Appellant's
Appeal
File, Ex. 15. Thus, the reviewers contended that the subsystem
function
of reviewing errors in claims processing to determine those errors
most
frequently committed by providers and claims processing personnel
was
not being met as required by this report.
The State disagreed with HCFA's finding. It argued that the
calculation
error did not invalidate the entire function of this
report.
Appellant's Brief, p. 14.
The State does not deny that this error occurred. However, the
Agency
here has not shown that this calculation error prevented the State
from
properly ranking the errors as required. Consequently, on the basis
of
the record before us, we cannot make a determination that these
errors
prevented the State from meeting the stated function. We do
note,
however, that errors did occur and were not corrected until
sometime
during the third quarter. Appellant's Appeal File, Ex. 16.
Thus, we cannot conclude that the State's errors here prevented it
from
meeting the required function. However, considering that
there were
other substantial defects in this subsystem, our finding here does
not
affect our overall conclusion that the Agency made a
reasonable
determination that this subsystem was not meeting the
requisite
standards for the quarters in question.
4. Developing third party profiles to determine where program
cost
reductions might be achieved
HCFA reviewers found that the MR-O-17 report did not include the
required
third party payor data. Appellant's Appeal File, Ex. 15.
The
General Systems Design specifically requires this report and
requires
that it analyze "each provider in terms of third party data with
respect
to total claims payment data and individual payment data."
Respondent's
Post-Hearing Brief, Appendix B, p. VII-131.
The State argued that the MR-O-17 report did include third party data
and
that this, coupled with a separate report (the MR-O-12) of some
summary third
party data, met HCFA's requirements. Appellant's Brief,
pp. 14-15. The
record, however, directly contradicts this. In a letter
of August 23,
1985, the State's Commissioner of the Department of
Medical Assistance wrote
to HCFA that as of July 1985, HCFA's charge
that no third party data was
shown in the majority of cases was
"consistent with our understanding."
Appellant's Appeal File, Ex. 16.
The State offered no evidence to prove that
the other report, the
MR-O-12, was an acceptable substitute for the required
MR-O-17 or that
it was sufficient to meet the General Systems Design
requirements.
Later in briefing, the State made a new argument: that when
HCFA
approved the State's Advanced Planning Document (APD), it approved
the
State's provision for a separate third party liability
recovery
subsystem distinct from the management and administrative
subsystem.
Appellant's Post-Hearing Brief, pp. 32-33. Consequently,
argued the
State, HCFA could not now find the latter system inadequate to
produce
third party data. We cannot agree, for three reasons. First,
the APD --
a very general document compared to the more specific and
detailed
General Systems Design -- in no way modifies the requirements of
the
latter, and, in fact, was written subject to applicable HCFA
guidelines.
Appellant's Appeal File, Ex. 1, pp. 9, 14. Second, the
APD's
description of the separate third party liability recovery
subsystem
contains nothing to inform the reader about whether it would
produce the
specific data, much less the specific report, required by the
General
Systems Design (and Georgia offered no evidence to show that it
did).
Third, there is no evidence that HCFA ever contemplated
such
substitution (and HCFA denies it). Thus, the record does not
support a
conclusion that HCFA did, or would ever have, contemplated that
the
separate system would meet the General Systems Design requirements.
The
same conclusions are applicable to the Request for Proposals and
the
subsequent contract with the Computer Company, which the State
alleged
incorporated its third party oversight structure. Appellant's
Appeal
File, Exs. 25 and 26.
Georgia also argued that HCFA took "absolutely no exception" in
the
December 16, 1985 certification review findings to a failure to
produce
the necessary third party liability reports. Appellant's
Post-Hearing
Brief, p. 34. While it is true that the findings did not
list this
matter among the separate subject-specific headings, the findings
do
specify in an overview that Georgia's management and
administrative
reporting subsystem failed to develop necessary third party
payment
profiles. Appellant's Appeal File, Ex. 15, p. 3.
Thus, the record clearly supports HCFA's finding that Georgia's
system
failed to meet a specific requirement for production of
certain
information concerning third party liability. 10/
5. Overall conclusion--management and administration
subsystem
errors
Overall, the record, as discussed above, clearly shows that the
State's
system did not meet minimum requirements for the management
and
administrative reporting subsystem as set forth in the State
Medicaid
Manual and the General Systems Design for the three quarter period
in
question. State Medicaid Manual, section 11340, General Systems
Design,
section VII..C. Surveillance and Utilization Review Subsystem
(SURS)
The certification reviewers found that the first three quarterly cycles
of
this subsystem's reports, for the quarters ending September 30,
1984,
December 31, 1984, and March 31, 1985, contained a substantial amount
of
erroneous data. Appellant's Appeal File, Ex. 15. The reviewers
found
that this erroneous data prevented the subsystem from fully
achieving
the principal objectives for this subsystem as specified in the
State
Medicaid Manual. These objectives include:
o That the
subsystem be able to provide information
which
reveals and facilitates investigation of potential
defects
in
the level of care and quality of service provided
under
the
Medicaid program.
o That the
system be capable of developing
provider,
physician and patient profiles which are sufficient
to
provide
specific information as to the use of covered
types
of
services and items, including prescribed drugs.
State Medicaid Manual, section 11335 A.
The reviewers noted that the source of the erroneous data was in
almost
all instances in the front end processing of the claims.
Appellant's
Appeal File, Ex. 15. The reviewers cited some examples of
how this
erroneous data in the reports and line items, some of which we deal
with
specifically below, prevented the State's subsystem from meeting
the
principal objectives stated above. Id.
In response, Georgia essentially made the following arguments.
A
general argument was that the SURS errors, if they were errors,
arose
only because of erroneous input from other subsystems (for which
SURS
itself was not at fault) and that the SURS subsystem was
not
substantially different in make-up or operation from the old
system
(which HCFA had approved and whose information HCFA did not
fault).
Appellant's Brief, pp. 20-22; Appellant's Post-Hearing Brief, pp.
1-3.
Next, the State focused on the specific findings of error,
making
certain arguments as to each.
We deal first with the general argument. At heart, the problems
with
the SURS subsystem were an extrapolation of problems with the
claims
processing subsystem (discussed above), in that faulty data
produced
there produced even more bad data when run through SURS -- in
the
computer cliche, "garbage in, garbage out." In this sense, the
problems
with SURS need not be viewed as separate from those already
discussed;
its presentation as a separate matter has to do more with
organizing
ideas than explaining fact. Understanding the latter is important
to
understanding why we are not persuaded by the superficial attraction
of
Georgia's primary argument here. Georgia makes much of
the
circumstance, undisputed by HCFA, that the SURS subsystem was
not
substantially different from the subsystem which had preceded it,
and
fed on the same kind of data in the same kind of way -- thus, how
could
HCFA legitimately find fault with it? The answer is that SURS,
by
manipulating faulty data, produced erroneous or useless
information.
Thus, the SURS subsystem in context -- i.e., in the medium of
the new
MMIS -- failed. The reports required of the SURS system
were
inaccurate, and the system therefore substantially failed to develop
the
information required by the objectives quoted above. This
is
illustrated in discussion of particular errors below.
1. The subsystem did not identify duplicate payments for
drug
prescriptions.
The reviewers found that a report line item for "same day same
drug"
contained erroneous data from the claims processing subsystem caused
by
a duplication of paid claims. Appellant's Appeal File, Ex. 15.
As a
result, the SURS report was not able to provide information
which
revealed potential defects in level of care and services provided
under
the program. Moreover, the reviewers determined that the
erroneous data
prevented the system from developing provider, physician, and
patient
profiles necessary to help discover misutilization in the
program.
The State essentially argued that: (1) despite the erroneous data,
the
primary use of the line item to detect duplicate payments was
not
impaired; (2) contrary to the Agency's contentions, the function
to
establish a "profile" was not impaired; and (3) in any event, the
dollar
amount of total duplicates reported in this line item is
insignificant
in relation to the millions of dollars in total claims
processed by the
MMIS. Appellant's Brief, pp. 22-23; Appellant's
Post-Hearing Brief, pp.
4-7.
We find that the function of the line item "same day same drug"
was
impaired by the erroneous data. As the State admitted, the
primary
purpose of the line item in dispute here was to identify instances
where
the same or a different provider filled the same drug for the
same
recipient on the same day. Appellant's Brief, p. 23. There
is no basis
or evidence in the record to find that this line item was also
meant to
report, as the State argued conclusorily, duplicate payments
paid
because of errors in the claims processing subsystem.
Appellant's
Brief, p. 23. There are two very different things.
The intention here
was not to detect claims erroneously paid by the system;
the intention
here was to cull for examination those instances where the same
drug is
filled the same day to determine whether instances of fraud and
abuse
are involved.
We also find that the erroneous data in this line item prevented
creation
of an accurate profile of this aspect of the State's health
care
delivery. The inclusion of this erroneous data prevented the
subsystem
from being able to investigate and reveal misutilization of
the State's
Medicaid program "by individual participants" as required by
section
1903(r)(5)(A) of the Act and section 11335 of the Manual.
Finally, the fact
that the total amount of claims reported on this line
item is small in
relation to the total claims processed by the system is
not material here.
Since this line item is intended to detect a certain
discrete circumstance,
it is not expected that it should represent a
large portion of the total
amount of claims processed by the total
system. As the Agency
indicated, since the dollar amount reported on
this line item is usually
small, deviations in this number from one
reporting period to another, as was
found by the Agency in its review,
called into question the reliability of
the information. Tr., pp. 258
and 279.
Plainly and simply, the presence of this erroneous data in this line
item
distorted what the line item was to report. We conclude that this
then
was an impairment of the functions of this item. Thus, we find
that the
Agency's determination was not unreasonable.
2. The subsystem did not provide for control over drug use.
HCFA reviewers found that there was no control over the number of
days'
supply for drugs. Appellant's Appeal File, Ex. 15. HCFA
noted that a
minimum days' supply cap and a maximum days' supply cap should
be
implemented whenever appropriate. Defining maximums and minimums
is
largely left to State discretion, except that HCFA expects states to
use
pharmacy consultants. HCFA's Post-Hearing Brief, p. 39. In
its initial
brief, the State argued that the State Medicaid Manual does not
require
"anywhere" that there be a control over the number of days' supply
for
drugs. Appellant's Brief, p. 23. The State in its post-hearing
brief
modified this argument somewhat to contend that nothing in the
State
Medicaid Manual or the General Systems Design required that
a
surveillance and utilization review subsystem perform those functions
or
contain those controls. Appellant's Post-Hearing Brief, p. 7.
The
State argued that, while the State Medicaid Manual contained
the
requirement that the MMIS system contain designated data element
files
which include "minimum units of a drug prescription eligible
for
payment" and "the maximum units of a drug prescription eligible for
a
particular drug," it does not specify that the surveillance
and
utilization review subsystem contain these data elements. Id.
The
State argued that its claims processing subsystem does in fact
contain
these data element files. Id., at 7 and 8. The State then
explained
that these data element files existed to permit use of a data
base
establishing maximum and minimum prescriptions for particular drugs
if
such a data base was ever developed and implemented by the State.
The
State argued that the decision on whether to establish the maximum
or
minimum is a policy matter left to the State.
First of all, we do not agree with the State that the State
Medicaid
Manual does not require this information at all. The
Manual
unambiguously states that, at a minimum, certain data elements must
be
included in the State's MMIS, specifically including the minimum
days'
supply and the maximum days' supply of drugs. State Medicaid
Manual,
section 11375.1, 92 and 93. This is not a matter of
substantial
performance discretion for the State; while, as the State said
HCFA
recognized, there may be some common-sense leeway to
accommodate
peculiarities regarding particular drugs, the general command
does not
permit Georgia to disregard the requirement altogether.
Appellant's
Post-Hearing Brief, p. 8; Tr., pp. 273-277. While the State
argued that
these data elements were included in its claims processing
subsystem, it
has not persuaded us that these elements should not also have
been
available for use by the surveillance and utilization review system
(as
this subsystem is meant to manipulate data from the other
subsystems).
We find persuasive HCFA's argument, not substantially rebutted,
that use
of this data in the SURS system is necessary to effectuate section
11335
A.2 of the State Medicaid Manual, which explicitly requires SURS
to
"investigate and reveal misutilization patterns established by
provider
and recipient participants in various categories of services"
under
Medicaid.
The State's arguments here overlook the obvious; the surveillance
and
utilization review subsystem is intended to detect fraud and abuse
by
means of computerized exception processing techniques. Without use
of
this data, this function is impaired. As HCFA pointed out, this
is
particularly serious here considering that the State's volume of
claims
for drugs is exceedingly large when compared with the total universe
of
claims under the Medicaid program. Respondent's Post-Hearing Brief,
p.
37. Considering the Manual requirements and that this
subsystem's
function of investigating and revealing misutilization of
Medicaid
services was impaired because of the absence of this information,
we
conclude that the Agency's determination here was reasonable.
3. Outpatient Hospital Reports
The reviewers found that, in a certain line item in these reports,
the
payments to hospitals for outpatient services frequently exceeded
100
percent of what was billed. 11/ The reviewers determined that the
cause
for these errors was identified by the State as the programming
error
that shifted the decimal point two places to the right in the
claims
processing subsystem (discussed above). Appellant's Appeal File,
Ex.
15.
The State did not deny that these errors existed. Appellant's
Brief,
pp. 24 and 25. It instead argued that the subsystem functioned
as
designed by accurately reporting the data presented to the
subsystem,
even if that data is incorrect. We have rejected this
argument already,
above, and will not repeat our conclusions here. The
State also
contended that while the Agency's witness took exception to the
report
because the errors affected the statistical validity of the report,
the
witness made no effort to determine the statistical significance of
the
error. Appellant's Post-Hearing Brief, pp. 10-12.
The State has not shown that the Agency's determination here
was
unreasonable: given the admitted erroneous data, the
percentages
reported by this part of SURS did not reflect what they were
intended to
reflect. Consequently, the decimal shift problem meant that
this part
of SURS did not accurately report the amount paid to the
providers.
While the State may be correct that sometimes the aggregate
percent
billed for inpatient services might exceed 100 percent, it has
not
demonstrated that this is more than further confusion compounding
the
error. Moreover, whether or not the claims involved here were small
or
large is not dispositive; the reviewers were never engaged in an
effort
to find all the errors, or even establish the scope of the
errors
statistically. The reviewers were merely noting obvious errors
which
they viewed as one item of evidence, among others, calling into
question
the usefulness of a reporting system. Were HCFA trying to
establish the
amount of the disallowance by direct reference to these errors,
we would
demand a statistically valid methodology to extrapolate from a
sample to
a universe, but that was not the purpose here. Finally, as we
stated
earlier, it is not the reviewers' job to determine the
statistical
validity of their reports as a result of the errors. It is
merely the
reviewers' job to detect that errors do exist.
We conclude then that the State had not shown that the
Agency's
determination here was unreasonable given the objectives of the
system
and given the admitted presence of errors.
4. Inpatient Hospital Reports - Discharge Codes
The reviewers found a large discrepancy between admissions
and
discharges. This was caused by an erroneous discharge code.
Appellant's
Appeal File, Ex. 15
The State admitted that the presence of erroneous status codes on
hospital
claims was detected by review of this report. Appellant's
Brief, pp. 24-25;
Appellant's Post-Hearing Brief, p. 12. The State also
indicated that
the erroneous data was presented to this subsystem from
the claims processing
subsystem. The State contended then that since the
reports accurately
reflected the data presented to the subsystem, the
subsystem was functioning
as it was designed to do.
We have already rejected this argument. The State here did
not
otherwise dispute the Agency's findings. Moreover, the State did
not
dispute the Agency's contention that as a result of this inaccurate
data
there was a total loss of much inpatient hospital data on these
reports
for March 1985. The fact that the subsystem manipulated the
erroneous
data as it was supposed to belies the fact that as a result of
this
erroneous data the subsystem was unable to detect problems as it
was
intended. Thus, we conclude the Agency's determination here
was
reasonable.
5. Overall conclusion--surveillance and utilization review
subsystem
errors
While it may be true that this subsystem was operating the same way as
it
did when it was previously certified, the fact that this subsystem
must
operate by blindly manipulating data from the claims processing
subsystem as
well as the other subsystems means that, if that data is
incorrect, it could
significantly affect the reports generated under
this system. That is
what happened here. Consequently, the subsystem
was unable to operate
as it was intended. As a result of the errors
discussed above, 12/ the
prime objective of this subsystem was made
ineffective because the reports
were no longer a reliable tool for
detecting fraud and abuse.
Conclusion
In reviewing the record before us, we weighed the evidence against
the
law. We determined in DGAB No. 882 that "operational" for purposes
of
enhanced 75 percent retroactive FFP does not mean when the system
first
begins to process and pay claims, however poorly; "operational"
means
when the Secretary determines that the State met the conditions
for
approval. In order to determine whether the State meets
these
conditions of approval, the Secretary performs a certification
review.
Based on the results of this review, the Secretary determines the
date
the system was operational. Here, the Secretary determined that,
based
on how the State's system was operating as measured against the
specific
minimum requirements the system must meet for approval, the
State's
system became operational as of March 31, 1985. This
operational date,
and with it the corresponding right of the State to claim
operational
FFP at the enhanced 75 percent rate from that date, was
contingent on
the State correcting certain defects in its system.
As we have discussed above, the State has not met its burden of
showing
that its system was operational as of the date it claimed.
13/
Substantial defects in major subsystems prevented the State from
meeting
the conditions for approval. The record here does not support
the
State's contentions that the Agency's findings of deficiencies
were
without a factual basis or were arbitrary and capricious. Rather,
the
record clearly shows that the Agency reasonably determined that
the
State's system was not certifiable as operational.
For the reasons indicated above and in our prior decision (DGAB No.
882),
we sustain the Agency's disallowance of $1,379,889.
________________________________ Donald
F.
Garrett
________________________________
Alexander
G. Teitz
________________________________ Norval
D.
(John) Settle Presiding Board Member
1. The record in DGAB No. 882 was incorporated into the appeal here.
2. In accordance with HCFA's instructions, the State
submitted a
corrective action plan for these residual errors to HCFA on March
11,
1986 (Ex. 16), and HCFA acknowledged receipt of the plan on May 1,
1986,
indicating that HCFA would require verification from the State after
the
completion of the scheduled changes that the corrections had been
made
to the system and that all outstanding issues had been
completely
resolved. Appellant's Appeal File, Ex. 17. On the basis of
such a
verification, HCFA notified the State on July 22, 1986 that
"the
contingencies for certification approval are satisfied and the
Georgia
MMIS is approved for enhanced funding effective April 1,
1985."
Appellant's Appeal File, Ex. 18.
3. As we discussed in DGAB No. 882, the State
Medicaid Manual
provides that a state can obtain 75 percent FFP for
operations of a MMIS
"retroactive to the first quarter beginning after the
date established
by the Secretary that the system became operational."
Emphasis added.
Consequently, in order to receive FFP retroactive to July 1,
1984, as
requested by the State, Georgia's MMIS must have been
fully
"operational" beginning July 1, 1984. See DGAB No. 882, pp. 2-4.
4. Section 11260 of the State Medicaid Manual
incorporates by
specific reference the performance standards for a MMIS
contained in
sections 11300, et seq., of the Manual, which also must be met
in order
to receive 75 percent FFP.
5. The State contended that in order to determine
whether the State
was dilatory in correcting the errors, the Agency's witness
should
possess information concerning the nature of the errors,
their
frequency, their pattern, the manner of their discovery and the
work
required to correct such errors. Appellant's Post-Hearing
Brief, p.
14. We do not agree that this is necessarily the job of
the
certification reviewer. Considering that the reviewer is
usually
performing the on-site review over a short period of time, it would
be
impossible for the reviewer to research these types of questions
and
still perform the review. Moreover, this kind of looking behind
the
system's errors by the reviewer should not be necessary,
considering
that when a State requests a review the system is supposed to be
fully
operational and meeting the minimum requirements. State
Medicaid
Manual, Section 11241.
6. While the State also argued that its policy
judgment that
mechanized comparisons are not medically prudent was supported
by the
General Systems Design, the provision the State cites is in a
1971
document dealing with the general design of the surveillance
and
utilization review subsystem. We are not convinced that this
provision
is applicable here to the claims processing subsystem, or that
the
policy considerations would be the same in 1985 (when further data
would
be available). Appellant's Post-Hearing Brief, Appendix C.
7. The record also indicates that the State itself was well aware
that
its system was not operational as of June 30, 1984. The State was
aware
as of April 25, 1985 that its system was making
overpayments.
Respondent's Supplemental Record on Appeal, Ex. VI.
8. The State also alleged that HCFA approved a
Request for Proposal
(RFP) eliciting bids to develop the MMIS system, and
that this RFP
incorporated by reference the design of the Accounting
Interface
Subsystem. It is unlikely that the RFP would be more
detailed, in and
of itself, than the APD; in any event, we have already found
this
subsystem to be insufficiently related to the required reporting.
The
State made the same arguments concerning the contract with the
Computer
Company (the State's MMIS contractor), and the argument is subject
to
the same weakness. The point is that neither the Accounting
Interface
System, nor the RFP or contract which subsequently may have
incorporated
that subsystem, contained anything approaching proof that HCFA
had
approved the AI-O-04 as the equivalent of the reports required under
the
separate subsystem in issue here.
9. The State contended that the Agency's witness
admitted on cross
examination that the report in question here provides no
information
with utility to the operation of the State's Medicaid
program.
Appellant's Post-Hearing Brief, p. 31. The State, however,
took this
statement out of context; while it may or may not be true that the
lump
sum total of all line items at the bottom of the report (which is
what
the witness was asked about) has no direct relevance, that does
mean
that the drug total listed in the particular line item, which is what
is
in issue here, is meaningless. Consequently, we do not think
this
argument is persuasive.
10. The Agency did not provide any argument to rebut
the State's
contention that it had certain reports which were equivalent to
the
MR-O-14 which allowed the State's subsystem to "assist auditors
in
reviewing provider cost and establishing a basis for cost
settlement"
(the last function listed on page 11). Considering that there
were
significant defects in the State's subsystem, the failure of the
Agency
to address this function does not change our determination that
the
Agency's decision here was reasonable.
11. HCFA's original findings here also questioned
payment of greater
than 100 percent of costs of inpatient services. In
its post-hearing
brief, HCFA said it was no longer relying on this
ground. P. 38.
Therefore, we have not dealt with the State's arguments
on this point.
See, e.g., Appellant's Post-Hearing Brief, pp. 10-11.
12. HCFA did not press another error, dealing with
anesthesiology,
apparently reflecting a misunderstanding about the State's
system. See,
e.g., Appellant's Post-Hearing Brief, p. 4.
13. At the hearing, the State presented testimony
meant to show that
HCFA was somehow treating Georgia differently than other
states. The
State contended that no other state had been denied
retroactive FFP back
to the date the state requested. The evidence
presented, however, does
not support the State's contention. In fact,
it turned out the specific
state Georgia alluded to had been denied
retroactive FFP back to the
date it first claimed its system became
operational, just as here.
Hearing Ex. XVII. Even if Georgia had been
able to prove another state
was dealt with more laxly, it likely would not be
dispositive, because
in the case before us -- which is the only case we are
dealing with --
the evidence clearly supports HCFA's
determination.