DEPARTMENTAL GRANT APPEALS BOARD
Department of Health and Human Services
SUBJECT: Michigan Department of Social Services
Docket No. 88-8
Decision No. 971
DATE: July 28, 1988
DECISION
The Michigan Department of Social Services (Michigan) appealed
a
determination by the Health Care Financing Administration
(HCFA)
disallowing $7,258,000 in federal financial participation (FFP)
claimed
under Title XIX (Medicaid) of the Social Security Act (Act).
The
disallowance was based on a HCFA review of State records which
indicated
that Michigan had not credited the federal government with its
share of
excess or improper payments to hospitals, to long-term care
providers,
and to certain providers identified through the Surveillance
Utilization
Review System.
For the reasons stated below, we uphold the disallowance in part
and
reverse it in part, subject to the conditions discussed below.
I. HCFA may require a state to adjust for the federal share
of
overpayments regardless of whether the state has recovered from
the
provider.
Title XIX of the Act authorizes federal grants to aid in financing
state
programs which provide medical assistance and related services to
needy
individuals, in accordance with a state plan. The Secretary of
Health
and Human Services is required to pay a percentage of the "total
amount
expended as medical assistance under the State plan" and
associated
administrative costs. Section 1903(a) of the Act.
"Medical assistance"
is defined in section 1905(a) of the Act generally as
payment for
covered services provided to individuals who meet specified
eligibility
requirements. Other provisions require states to establish
methods and
standards setting provider reimbursement rates, and to follow
those
methods and standards. See, e.g., sections 1902(a)(13)(A) and
(a)(30)
of the Act; 42 C.F.R. 447.252(a)(2) and 447.253(b)(1982).
The Secretary is authorized to make quarterly advances of the
federal
share of estimated Medicaid expenditures in amounts:
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 1903(d)(2).
In numerous cases involving excess or improper payments by states
to
Medicaid providers, this Board has held that, under section
1903(d)(2),
HCFA may require adjustment of the grant award for the federal
share of
firmly established overpayments, even if a state has not yet
recovered
these amounts from the providers. The Board reasoned that
excess or
improper payments are not "medical assistance" within the meaning
of
sections 1903(a)(1) and 1905(a) of the Act. The Board recognized
that a
state plan may permit a state to pay an interim rate (essentially
an
estimate of a provider's per diem costs) but found that any excess
over
the final rate, determined in accordance with the reimbursement
methods
set out in the state plan, was not "medical assistance" in which
the
federal government had agreed to participate.
The Board found no basis for concluding that adjustment of the grant
award
should be limited to the federal share of those improper or excess
payments
which a state has already recouped from a provider. The
Board
considered arguments, such as those repeated by Michigan in its
appeal
here, that the term "overpayment" in section 1903(d)(2) is not
clearly
defined and is limited in the context of the Act by section
1903(d)(3)
to include only amounts which the State has already
recouped. Section
1903(d)(3) of the Act states:
The pro rata share to which the United States is
equitably entitled
. . . of the net amount recovered
during any quarter by the State .
. . with respect
to medical assistance furnished under the State
plan
shall be considered an overpayment to be adjusted under
this
subsection.
In prior Board cases, the Board found that section 1903(d)(3) applies
only
to those amounts which would be allowable as "medical assistance
furnished
under the State plan." This would include recoveries from
third
parties, such as relatives or insurers, of amounts properly paid
as medical
assistance. The Board concluded that the section does not
preclude
treatment as overpayments of amounts unallowable as
medical
assistance. See, e.g., Arkansas Dept. of Human Services,
DGAB No. 717
(1986); New York Dept. of Social Services, DGAB No. 311
(1982).
The Board's prior holdings on overpayments issues have 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); and
Missouri
Department of Social Services v. Bowen, 804 F.2d 1035 (8th Cir.
1986).
Michigan presented no new arguments concerning the interpretation of
the
statutory language. After considering Michigan's arguments on
related
issues discussed below, we reject Michigan's contention that the
Board
misinterpreted the scope of section 1903(d)(2) and we reaffirm
the
Board's prior holdings. Thus, we conclude that, in general, HCFA
may
require Michigan to adjust for the federal share of excess or
improper
payments to providers, and need not wait until Michigan recovers
the
overpayments from the providers.
a. The federal-state cooperative
relationship does not compel a
different result.
Michigan argued that placing the full burden of unrecoverable
Medicaid
overpayments on the State is inconsistent with the nature of the
program
as a federal-state partnership, as discussed in the case of Harris
v.
McRae, 448 U.S. 297 (1980). The Board has considered this argument
in
several cases and has concluded that, in light of the fact that
the
states have primary responsibility for administering the program
and
preventing or recouping improper payments in the first instance, it
is
indeed consistent with the partnership concept to place the burden
of
unrecoverable payments on states. New York State Dept. of
Social
Services, DGAB No. 311 (1982). As the First Circuit stated
in
Massachusetts v. Secretary, supra, in which it upheld the Board on
the
issue of which party should bear the loss when a provider has
declared
bankruptcy:
Since only Massachusetts [the appellant state] deals
directly with
the providers, and since the state is
empowered to perform on-site
audits of these
institutions, it is clearly the party best able to
minimize the risks resulting from dealing with insolvent
providers.
The fact that Massachusetts will in any
event bear a share of the
loss, and so already has
some incentive to minimize these risks,
diminishes
but does not destroy the force of this observation.
Placing an additional burden on the state will increase
its
incentive to take care, whereas the Secretary
remains powerless to
reduce the risks no matter what
the costs imposed on her.
Id. at 96.
For these reasons, we reject Michigan's argument that placing the
burden
of unrecoverable overpayments on states is inconsistent with
the
federal-state partnership.
b. The federal government did not
"agree" to participate in
excess or improper
payments which were proper when made.
Michigan also argued that, because many of the disputed amounts
were
proper payments under the approved State plan when made,
section
1903(d)(2) should not apply until there is a final determination
that
the amounts were overpayments and until the erroneous amounts
are
recovered. Michigan asserted that the federal government "has given
its
approval for the state to make these payments to the provider, but
now
does not want to participate in the consequences of that
approval."
Michigan's Brief, p. 12. Michigan argued, essentially, that
excess
payments, and the possibility of their loss, are
necessary
administrative costs of administering the state plan in which
the
federal government should share, particularly when the payments
were
proper when originally made to the provider.
The fact that the payments may have been proper at one time under
the
particular payment reimbursement system adopted by Michigan does
not
justify federal participation after Michigan itself has determined
that
the payments were excessive. As the Board held in New York Dept.
of
Social Services, DGAB No. 311 (1982), HCFA may disallow FFP in
payments
which exceed the rates ultimately determined to be proper under
the
state plan. Congress specifically provided for adjustment
for
overpayments, and did not make an exception for overpayments
unrecovered
by states (except as noted below).
Although the Board has recognized in prior cases that some excess
or
improper payments may be unavoidable in administering a
medical
assistance program, this does not provide a basis to require
federal
participation in these overpayments, for reasons similar to
those
discussed in reference to the nature of the federal-state
partnership.
Congress provided for federal participation only in amounts
expended for
designated purposes: for example, as medical assistance under
the state
plan (section 1903(a)(1) of the Act) and for the proper and
efficient
administration of the state plan, in amounts found by the Secretary
to
be necessary (section 1903(a)(7) of the Act). Congress did not
provide
for federal participation in all "out-of-pocket" costs which might
be
incurred by states, such as payments outside the scope of state
plans
and state reimbursement systems. See Massachusetts v. Secretary,
supra,
at 95. Since improper or excess payments do not further the
purposes of
Title XIX, HCFA reasonably determined that, in administering
medical
assistance programs, states bear the burden of minimizing such
payments
and recouping them in a timely manner.
c. The federal government is not
required to participate in
improper or excess
payments to bankrupt or insolvent providers.
The reasoning discussed above applies equally to improper or
excess
payments to both solvent and insolvent providers. Michigan
argued,
however, that the federal government should participate in
overpayments
to bankrupt providers since states are precluded from recovery
by
federal bankruptcy law and thus it is "logical" that the
federal
government be precluded from collecting a share of
the
federally-discharged debt. In this argument, Michigan erred in
two
basic assumptions. The first is that a connection can be drawn
between
the federal role in bankruptcy law and the federal interest in
the
Medicaid program. The federal involvement in bankruptcy is based on
the
federal interest in uniform laws among the states in this important
area
of commercial regulation, see Railway Labor Executives Association
v.
Gibbons, 455 U.S. 457, 471-72 (1982), not on a federal commitment
to
assume responsibility for adjudicated debts. Michigan's logic
also
neglects the federal and state governments' different roles in
the
Medicaid program; states administer the program and contract
directly
with providers. The federal government does not control
that
contractual relationship, and is not directly liable under it.
The
states have the ability to ensure that the program contracts
with
responsible providers, and there is no inherent logic in the
federal
government sharing in risks that a particular provider will
become
insolvent (although Congress and HCFA are not precluded from choosing
to
do so).
Michigan also alleged that Congress had intended that the
federal
government should participate in overpayments to bankrupt or
insolvent
providers. Michigan cited section 9512 of COBRA, which added
section
1903(d)(2)(D) to the Act, and which provided that, for
overpayments
identified for quarters beginning on or after October 1, 1985,
states
would not be required to return the federal share of
unrecoverable
overpayments, including those to bankrupt providers or those
which are
"otherwise uncollectable." Although Michigan did not deny
that the
disputed amounts in this case had been paid for quarters prior to
1985,
Michigan argued that Congress, in passing this amendment, "merely
wished
to clarify past intent." Michigan's Brief, pp. 22-23.
Michigan's argument ignores the fact that Congress did not explicitly
make
the amendment retroactive. In the legislative history,
Congress
recognized that the prior practice was that states must refund
the
federal share of an overpayment immediately upon discovery but did
not
indicate that it wished to change this practice retroactively. S.
Rep.
No. 146, 99th Cong., 1st Sess., 314-15 (1985).
Thus, we conclude that HCFA may require states to adjust claims
for
federal funds to account for excess or improper payments, even when
a
state may be unable to recover the funds from providers.
II. HCFA may rely on state overpayment records absent some showing
why
those findings were not reliable.
Michigan argued that HCFA should not rely on state records for
this
disallowance since those records may not be final
determinations
concerning these overpayments. The Board has considered
the use of
state overpayment audits and other records in numerous prior
decisions.
See, e.g., Ohio Dept. of Public Welfare, DGAB No. 637
(1985). The Board
has held that HCFA may reasonably rely on state
records when the
following criteria have been met:
- HCFA provides sufficient detail
to identify the records from
which the disallowed
amounts are derived.
- The State is provided an opportunity to show that:
- adjustments have been made to the state findings;
- the records were not reliable for some reason;
- the State has already recovered the amount identified as
an
overpayment and has already adjusted its claims to account
for
the federal share; and
- the State never claimed FFP in the overpayment in the
first
place.
See Pennsylvania Dept. of Public Welfare, DGAB No. 765 (1986).
The Board developed this approach in the absence of any clear HCFA
policy
on when a state would be considered to have "identified" or
"found"
overpayments so that the state would be required to report the
overpayment
and credit the federal government with its share. See Ohio,
supra;
Pennsylvania, supra. The resolution of this issue does not
affect the
underlying obligation to account for overpayments; it affects
only the timing
of the accounting. The Board has said that, in
analyzing the issue, it
would consider the particular circumstances in
determining the adequacy of
the record to support a proposed
disallowance including factors such as the
nature of the overpayments
involved, the extent to which HCFA independently
determined that the
state claimed unallowable costs, the issues raised by the
state, and the
evidence the state provided in support of its positions.
In this case, Michigan has had an opportunity to present arguments
and
evidence about why HCFA should not rely on state records for
its
disallowance. We discuss these arguments below.
a. Amounts no longer disputed because of
repayment or revision of
State findings
Michigan alleged that of the $1,910,249 in outstanding overpayments
to
hospitals which the federal auditors had found in State records,
$12,414
had been collected from Grant Hospital, a closed but not
bankrupt
hospital. Michigan also alleged that revised audits had been
accepted
by it which documented that $548,279 had been incorrectly identified
as
an overpayment to the Wayne County General Hospital. HCFA agreed
to
reduce the disallowance by the federal share, amounting to $280,539,
to
account for these adjustments subject to receipt of
appropriate
documentation that the federal government had been credited with
its
share of the Grant Hospital repayment. HCFA's Brief, pp. 3-4.
Michigan
provided some of the requested documentation with its reply brief,
in
Exhibit T.
Michigan also alleged that $666,313 of the $1,581,031 in overpayments
to
providers identified through Michigan's Surveillance Utilization
Review
System (SURS) was no longer "unrecoverable." It is unclear
whether
Michigan meant that it had, in fact, recovered these overpayments
from
providers and credited the federal share appropriately.
Michigan
further stated that, of the remaining amount identified through
its
SURS, it is contesting only $788,918 in overpayments, or $394,488
of
disallowed FFP. Again it is unclear whether Michigan had
already
credited the federal government with a share of these
uncontested
amounts.
HCFA agreed to reduce the disallowance to the extent that
Michigan
provides documentation of the providers and amounts which Michigan
is
not contesting (presumably necessary only if Michigan alleges that
it
has already accounted for the federal share), documentation of the
basis
for Michigan reducing amounts identified as "unrecoverable," and
proof
that Michigan has returned the federal share of these uncontested
or
recovered amounts. HCFA's Brief, p. 5. Michigan provided some
of the
requested documentation with its reply brief, in Exhibit U, and
agreed
to provide supplemental documentation. Michigan's Reply Brief,
pp. 3-4.
Our decision in this case incorporates HCFA's agreement to reduce
the
disallowance by $280,539, subject to HCFA's review of documentation
that
Michigan credited the federal government with a share of the
Grant
Hospital collection, and HCFA's agreement to further reduce
the
disallowance in accordance with documentation to be submitted
by
Michigan, as discussed immediately above. Michigan must submit any
such
documentation within 30 days after receiving this decision (or
such
longer period as HCFA allows).
b. Judicial reversal of state
determinations of depreciation
recapture
Michigan alleged that $4,474,354 of the disallowance was attributable
to
alleged excess payments which represented recapture of
excess
depreciation payments under the state plan. Depreciation
recapture is
an adjustment to a prior allowance for depreciation costs, made
upon the
sale or transfer of a facility and based on a finding of the
amount
which the facility actually depreciated. Michigan stated that
the
Michigan court of appeals had held that, as of January 1, 1982 (the
date
the facility in dispute in a case before that court was sold), there
was
no state plan provision requiring providers to pay
depreciation
recapture. Michigan's Ex. L, Provincial House, Inc. &
Living Centers,
Inc. v. Michigan Department of Social Services, Docket No.
97573 (March
7, 1988). Michigan is appealing the state court ruling,
but argued that
it is presently precluded from collecting depreciation
recapture and
should not be required to refund the federal share.
Since FFP is available in "the total amount expended as medical
assistance
under the State plan" under section 1903(a)(1) of the Act,
Michigan argued
that there is no basis for HCFA to recoup FFP if the
state court ruling
remains in effect holding that the state Medicaid
plan did not provide for
depreciation recapture. As Michigan noted,
there is no federal
requirement that a state plan must provide for
depreciation recapture in the
Medicaid reimbursement rate system.
HCFA stated that, in light of the possibility that further action by
the
Michigan Supreme Court would affect this disallowance, HCFA would
not
object to a "stay of the disallowance" with respect to
amounts
attributable to depreciation recapture, until further action by
the
Michigan Supreme Court. HCFA requested a stay, rather than a
remand,
apparently on the basis that it would need to take no further action
if
the Michigan Supreme Court reverses the current judicial
determinations
in favor of the provider. HCFA nonetheless also
presented arguments
explaining why it believed the state court had erred in
interpreting the
state plan.
Since HCFA may be willing to accept the resolution of the
depreciation
recapture issues by the Michigan Supreme Court, it is
unnecessary for us
to resolve them at this time. We note that the state
plan provisions at
issue in the court case were not federally mandated and
were not so
clear that questions regarding their proper interpretation can
be
resolved based only on the evidence in the record before the Board.
The
Michigan court appears to have examined evidence, such as
testimony
concerning the intent of the drafters of the state plan provision,
which
is not in the record before the Board and which the Board has, in
the
past, recognized as relevant in interpreting ambiguous plan
provisions.
See, e.g., South Dakota Dept. of Social Services, DGAB No. 934
(1988).
Thus, in view of the State court ruling that the payments in question
are
not in excess of the amount permitted under the state plan, HCFA may
not
adjust at this time the federal share of amounts representing
depreciation
recapture within the scope of the court ruling. Our
decision requires,
however, that if that ruling is overturned on appeal,
Michigan must adjust
the federal share of the depreciation recapture
amounts on its next quarterly
statement of expenditures, regardless of
whether Michigan has recovered the
amounts from the providers. If the
lower court ruling is upheld, and
HCFA takes the position that the
applicable state plan provisions required
depreciation recapture, HCFA
may reinstate the disallowance determination by
issuing a written
statement of reasons why HCFA believes the court ruling
does not
preclude the disallowance.
In reaching this conclusion, we recognize that issues being
litigated
between a provider and a state may not be dispositive of whether
FFP is
available to the state. However, when the relevant issue
is
interpretation of a state plan provider reimbursement system
provision
which is not federally mandated, it makes sense and promotes
judicial
economy to await resolution of that issue by the state courts.
Cf.
Washington Dept. of Social and Health Services, DGAB No. 693 (1985).
As this Board has previously recognized, a state's involvement
in
litigation with a provider may limit its ability to defend against
a
disallowance issued by HCFA. In California Dept. of Social
Services,
DGAB No. 159 (1981), the Board found that a state's involvement
in
litigation with a provider should be a factor in determining the
burden
on the state in contesting the federal disallowance. Here, we
find that
Michigan has provided sufficient evidence that the state records
which
HCFA reviewed do not provide a supportable basis for a disallowance
with
respect to alleged overpayments for depreciation which are within
the
scope of the court ruling. Our finding does not encompass
disputed
depreciation payments for periods subsequent to the period
considered in
the outstanding state court ruling.
c. Provider appeals pending at the administrative level
Michigan argued that a "substantial number of cases cited by both
the
audit and disallowance contain providers who are currently involved
in
legal proceedings which include administrative reviews,
judicial
reviews, court orders and repayment agreements." Michigan
said:
"Providers must be granted full due process (in whatever stage
of
proceedings) prior to HCFA's claim for FFP." Michigan's Brief, p.
25.
We considered above judicial review of depreciation issues; with
respect
to other court orders, HCFA, in the audit report, agreed to adjust
the
overpayment balance for any "errors, omissions and changes as a
result
of appeal conferences and hearing/court decisions. . ." upon receipt
of
basic documentation. Michigan Ex. C., p. 5. We also considered
above
adjustments due to repayment. Below, we address the effect of
pending
court cases and the special situation of court orders
establishing
public health receivers. Thus, in this section we address
only the
effect of administrative-level provider appeals.
Michigan did not cite to any statutory or regulatory authority
requiring
HCFA to wait until provider appeals are completed before adjusting
the
federal share of a provider overpayment. Michigan relied on
the
district court case, Arkansas v. Heckler, No. LR-C 83-467 (E.D.
Ark.,
Sept. 17, 1984) on remand, Arkansas Dept. of Human Services, DGAB
No.
717 (1986). In Arkansas, the district court found essentially that
it
was arbitrary to require Arkansas to repay the federal share of
the
alleged overpayments when the approved state plan established a
provider
appeal process and appeals by the providers were still pending.
We note first that the reasoning in Arkansas v. Heckler has been
rejected
in other court cases, such as Missouri Department of Social
Services v.
Bowen, 804 F.2d 1035 (8th Cir. 1986). The court in Arkansas
properly
noted that the central issue in the case was the timing of
repayments of
excess FFP, since there was no authority for FFP in
unallowable costs.
But the court's holding was based primarily on its
view that the Board had
not adequately explained why it found that HCFA
did not have to wait until
exhaustion of the provider appeal process
based on the fact that the
overpayments there had been independently
established by a federal audit of
the providers' records. See DGAB No.
717. In Missouri, the court
upheld a Board decision holding that the
mere fact that providers had
appealed state overpayment determinations
did not preclude HCFA from relying
on those determinations where the
state itself considered the determinations
sufficiently final so that it
could collect from the providers irrespective
of any appeal.
In this case, the facts require a different analysis from either
Arkansas
or Missouri. In its reply brief, Michigan provided evidence
that it is
precluded by state law from recovering disputed amounts from
a provider until
after administrative appeals are completed (except in
the event of a threat
to the health, safety, or welfare of recipients or
the general public).
Michigan Ex. R, R400.3407 Rule 7(1). Furthermore,
Michigan provided
evidence which indicates that all the disputed amounts
which are in
litigation are either contested depreciation recapture or
cost settlements
with providers who are also contesting depreciation
recapture.
Michigan's Ex. S. This exhibit does not clearly indicate,
however,
whether any of the cost settlement disputes are still at the
administrative
level.
Since 1) HCFA's position in this case assumed that the State could
collect
disputed overpayments pending appeal; 2) there may not be any
administrative
appeals pending for cost settlement disputes; 3) HCFA has
agreed to examine
further documentation related to other issues; and 4)
as discussed below,
HCFA has not had an opportunity to respond to the
State's explanation of why
it delayed processing these appeals, we
remand this issue for further
consideration by HCFA.
Specifically, HCFA should consider whether the Board's reasoning
in
Pennsylvania Dept. of Public Welfare, DGAB No. 765 (1986), would
apply.
In that case, the Board found that Pennsylvania state law
precluded
Pennsylvania from recovering alleged overpayments pending
provider
appeals, and that HCFA had failed to give notice to Pennsylvania of
a
change in its policy regarding the timing of accounting for
overpayments
to long-term care facilities. (HCFA previously accorded a
grace period
until after completion of administrative-level provider
appeals. See
note 5 above.)
We also note that the parties in Pennsylvania agreed that HCFA
could
impose a disallowance if a state had been remiss in
processing
administrative appeals in a timely fashion. In Pennsylvania,
HCFA
agreed to provide Pennsylvania an opportunity to explain why
appeals
might have been delayed. Michigan explained here that it had
not been
actively pursuing its claims against providers with
depreciation
recapture disputes because it was awaiting resolution of the
Provincial
House case, which it considered as a test case, in order to use
its
resources efficiently. Michigan's Reply Brief, p. 6. HCFA did
have an
opportunity to directly address this explanation (although HCFA
had
previously stated that the delays might limit Michigan's chances of
ever
recovering the disputed funds). HCFA's Response, pp.19-20.
It appears
from Exhibit S, however, that ultimate resolution of the
depreciation
recapture issue in favor of the providers may require Michigan
to pay
out a significant amount to adjust for underpayments to these
providers.
Since HCFA may accept Michigan's explanation, and is in any
event
precluded by our decision from adjusting now for depreciation
recapture
amounts, we remand this issue to HCFA for further
consideration.
d. Effect of pending court appeals
We find no authority, in either Arkansas or any of the Board
cases
examining timing issues, which would support Michigan's argument
that
HCFA may not generally rely on state-level findings after the
provider
appeal process has concluded at administrative levels and these
findings
have been affirmed. The mere fact that a provider has appealed
to court
does not render administrative findings unreliable (although, as
we
discussed earlier, judicial reversal of administrative findings may
do
so).
Michigan argued that it has no control over the time expended during
court
litigation. While we recognize that a state may not exert as
much
control over court proceedings as over its own administrative
processes,
we do not think this justifies a state retaining FFP in amounts it
has
found to be excessive or improper.
e. Public health receivers
Michigan alleged that $164,169 of the disallowance was not an
overpayment
to a provider, but represented "excess amounts paid for
medical care because
of a court appointed public health receiver."
Michigan's Brief, p. 26.
Michigan provided copies of court orders
appointing public health receivers,
named by Michigan pursuant to
Michigan state law, to administer two
facilities after the providers
failed to meet state standards.
Michigan conceded that the costs were
"beyond the limit of costs that would
have been reimbursable to the
provider had the facility not closed."
Michigan's Brief, p. 27.
Michigan argued, however, that "[t]he additional
expenditures were for
the actual medical care needed to move the patients to
another facility
in an orderly manner." Id.
The court orders appointing public health receivers do not provide a
basis
for considering the disputed payments to be appropriate
expenditures under
the state Medicaid program. The court orders are
related to the
traditional responsibilities of states in the area of
public health (which
Michigan apparently implemented in state laws
providing for public health
receivers), not to Michigan's
responsibilities as administrator of the
Medicaid program. Michigan's
Medicaid program is described in the state
plan, and there is no basis
to extend its coverage beyond that state plan to
require federal
participation in any health-related expenditure Michigan may
incur.
Although Michigan argued that the disputed payments were for medical
care,
Michigan provided no evidence that the medical services themselves
were
allowable under the state plan, or that the costs of the medical
services
were reimbursable to either the provider, the receiver, or
Michigan
itself. Michigan's own records indicate that the disputed
payments were
overpayments. Absent any evidence that the payments were
allowable
costs for covered services, we find that HCFA can reasonably
rely on
Michigan's own determination that these payments were not within
the scope of
reimbursement under the state plan.
Conclusion
For the reasons discussed above, we uphold the disallowance with
the
following exceptions: we find that the disallowance should be reduced
to
the extent that Michigan can provide documentation that the
alleged
overpayments were collected or withdrawn and the federal
government
credited with its share as appropriate; we remand the cost
settlement
amounts involved in provider appeals pending at the administrative
level
for further consideration by HCFA; and we find that HCFA may not
adjust
at this time the alleged overpayments for depreciation
recapture
directly within the scope of the Provincial House case, but
the
disallowance may be reinstated on the conditions noted
above.
Michigan's documentation must be submitted within 30 days after
Michigan
receives this decision (or such longer period as HCFA allows).
________________________________ Donald F. Garrett
________________________________ Alexander G. Teitz
________________________________ Judith A. Ballard
Presiding
Board