Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: Georgia Department of Medical Assistance
DATE: March 6, 1992
Docket No. 91-112
Decision No. 1312
DECISION
The Georgia Department of Medical Assistance (Georgia) appealed a
decision
by the Health Care Financing Administration (HCFA) disallowing
$1,740,798 in
federal financial participation (FFP) claimed by Georgia
for the period July
1, 1988 through June 30, 1990. Georgia claimed
federal funding under
Medicaid, Title XIX of the Social Security Act
(Act), at an enhanced rate of
FFP available for a program of training
and competency evaluation for nurse
aides. Specifically, HCFA
disallowed Georgia's claims for the salaries
of nurse aides hired to
replace nurse aides who were undergoing training and
evaluation.
The basic issue here is whether HCFA was reasonable in interpreting
the
law to authorize payment of the higher rate only for direct costs
of
training and evaluation (books, instructor salaries, etc.).
While
salaries of the trainees themselves apparently were reimbursed at
the
enhanced rate, HCFA took the position that salaries for the
replacement
aides did not qualify for this higher rate of
reimbursement. Moreover,
HCFA noted that Georgia had not amended its
Medicaid State Plan (State
Plan) to include the replacement aides' salaries
in its per diem rate
for services provided at the facilities involved.
Thus, HCFA found
there was no basis for reimbursing the cost of salaries
through the per
diem rate. Consequently, HCFA disallowed all salary
costs claimed for
the replacement aides.
The record in this case consists of the parties' written arguments
and
documentary evidence. 1/ Based on our analysis of the record,
we
sustain the disallowance in its entirety.
Background
The Omnibus Budget Reconciliation Act (OBRA) of 1987 (Pub. L.
100-203)
added extensive nursing home reforms to Medicaid. A number of
those
provisions related to nurse aide competency. As relevant here,
OBRA '87
amended the following provisions of the Act:
o Section 1919(b)(5) required nursing facilities, as of
January
1, 1990, to use only aides who had completed training
and
competency evaluation.
o Section 1919(f)(2)(A) required HCFA to establish standards
by
September 1, 1988, for approval of training and
competency
evaluation programs.
o Section 1919(e) required states' Medicaid plans, by
January
1, 1989 2/, to specify training and competency
evaluation
programs that the State approved and which met HCFA
requirements
under section 1919(f)(2)(A); and by January 1, 1990, to
provide
for periodic review and reapproval of such programs.
The
provision, at section 1919(e)(1), specified that a HCFA
failure
to establish section 1919(f)(2) standards "shall not relieve
any
State of its responsibility under this paragraph."
o Section 1902(a)(13) required a Medicaid State Plan
to
provide:
(A) for payment . . . of . . . nursing facility
services
. . . provided under the plan through the use of
rates
(determined in accordance with methods and
standards
developed by the State which, in the case of
nursing
facilities, take into account the costs . . .
of
complying with [.1919(b)(5)]) . . . which the
State
finds, and makes assurances satisfactory to
the
Secretary, are reasonable and adequate to meet the
costs
which must be incurred by efficiently and
economically
operated facilities in order to provide care
and
services in conformity with applicable State and
Federal
laws, regulations, and quality and safety standards .
.
. .
OBRA '87 also amended section 1903(a)(2)(A) of the Act to provide
states
with reimbursement for 50% of necessary costs of training and
evaluation
programs. Section 4211(d)(2) of OBRA '87 provided for
enhanced funding
for such programs in fiscal years 1988 and 1989. In
March 1989, HCFA
revised section 2514 of the State Medicaid Manual (HCFA
Transmittal 61)
in order to implement the requirements of section
1919(e)(1)(A) as
enacted by OBRA '87. Section 2514 provided, in part,
--
FFP for State Costs Section 1903(a)(2)(B) of the Act,
as
amended by OBRA 87, and .4211(d)(2) of OBRA 87 provide
that
State administrative expenditures incurred for nurse
aide
training programs are reimbursed at a 50-percent rate
with
enhanced funding during fiscal years 1988 and 1989.
* * *
Administrative costs do not include the actual cost of
the
training and competency evaluation programs (except
for
competency evaluation in facility-based programs).
Appeal Ex. 11.
Effective May 12, 1989, HCFA also revised the State Medicaid Manual to
set
out guidelines for training and competency evaluation programs.
Subsequently, OBRA '89 (Pub. L. 101-239) amended section 1903(a)(2)(B)
to
provide for enhanced funding, up to 90%, for amounts expended for
nurse aide
training and competency evaluation programs (NATCEPs). As
amended, and
as applicable during the period in question here (July 1,
1988 -- July 1,
1990), section 1903(a)(2)(B) required HCFA to pay the
states:
. . . with respect to amounts expended for nursing
aide
training and competency evaluation programs,
and
competency evaluation programs, described in
section
1919(e)(1) (including the costs for nurse aides
to
complete such competency evaluation
programs),
regardless of whether the programs are provided in
or
outside nursing facilities or of the skill of
the
personnel involved in such programs, an amount equal
to
50 percent (or, for calendar quarters beginning on
or
after July 1, 1988, and before October 1, 1990,
the
lesser of 90 percent or the Federal medical
assistance
percentage plus 25 percentage points) of so much of
the
sums expended during such quarter (as found necessary
by
the Secretary for the proper and
efficient
administration of the State plan) as are attributable
to
such programs . . . .
Following OBRA '89, in May 1990 HCFA again revised section 2514 of
the
State Medicaid Manual (HCFA Transmittal 66). This revision was
intended
"to implement the requirements for NATCEPs as enacted by . . .
[OBRA
'87] and amended by OBRA 1989 . . . ." Appeal Ex. 8. HCFA
Transmittal
66 recognized that under section 1903(a)(2)(B) of the Act state
payments
for costs incurred by a nursing facility (NF) "in relation to
training
and competency evaluation of nurse aides, current and future, will
be
considered as State administrative expenses" and therefore would
be
eligible for an enhanced rate. Transmittal 66 stated with respect
to
these costs, however, that "NF costs for training and competency . .
.
must be identified separately from other NF costs incurred in
furnishing
services to Medicaid recipients."
In June 1990, the HCFA Regional Office for the region encompassing
Georgia
issued a Transmittal Notice to State Medicaid Agencies (Regional
Transmittal
Notice) clarifying nursing facility costs eligible for
enhanced funding under
section 1903(a)(2)(B) of the Act. Salaries of
nurse aides in training
or replacement aides for those in training or
testing status were
specifically identified as not eligible for enhanced
funding. 3/ States
were instructed to consider those expenses in their
approved Medicaid
rate-setting procedures since they would be reimbursed
as part of each
nursing facility's rate. See Appeal Ex. 7.
Analysis
Georgia indicated that, although OBRA '87 established nurse aide
training
requirements, its State Plan required nursing facilities to
provide 2.5
nursing hours per patient per day. Georgia noted that aides
could not
simultaneously be on duty and in training. Consequently,
replacement
aides were needed to maintain the nursing hours to patient
ratio.
Georgia reasoned that since the replacement aides were hired as
a direct
result of the OBRA training requirements, their salaries were
eligible for
enhanced FFP as "costs for nurse aides to complete such
competency evaluation
programs," within the meaning of section
1903(a)(2)(B) of the Act.
Generally, Georgia asserted that the disallowance was arbitrary
and
capricious and that HCFA was attempting to invoke a retroactive
rule
which ignored the administrative flexibility provided to states
under
section 1902(a)(13) of the Act (referred to as the Boren
Amendment).
The disallowance was not arbitrary or capricious.
Georgia maintained that HCFA had initially interpreted the
enhanced
funding provisions of OBRA '87 to exclude nurse aide training costs
on
the theory that only state administrative costs were entitled
to
enhanced funding. Georgia contended that HCFA recognized the error
in
its initial interpretation of the statute in HCFA Transmittal 66
(dated
May 1990), which, Georgia asserted, confirmed the availability
of
enhanced funding for the costs of nurse aide training. However,
Georgia
argued that Transmittal 66 did not specifically distinguish
between
those costs for which enhanced funding was available and those
which
were to be reimbursed through inclusion in the facilities' per
diem
rates. Georgia contended that HCFA had failed to detail the types
of
costs eligible for enhanced funding until it published the
Regional
Transmittal Notice (dated June 7, 1990). Georgia argued that
the
Regional Transmittal Notice was issued in response to its
funding
scheme. Moreover, Georgia maintained that the Regional
Transmittal
Notice was an attempt by HCFA to return to its "pre-OBRA '89
position"
that costs associated with training are not administrative
costs.
Therefore, Georgia contended, the disallowance was arbitrary
and
capricious. Georgia Brief (Br.) at 7-8.
Georgia's argument is not persuasive. Georgia's reading of the
phrase,
"costs for nurse aides to complete such competency evaluation
programs,"
as including the costs of replacement salaries is not a
reasonable
interpretation of the Act, for the following reasons:
o The replacement aides were not in training; rather they
were
providing services in the NFs to recipients. The Act
provides
for reimbursement for NF services as "medical assistance" at
the
federal medical assistance percentage rate. Section
1903(a)(1)
of the Act. The reimbursement must be determined
according
methods set out in the state plan (here, according to the
per
diem rate established under the State plan).
Section
1902(a)(13) of the Act.
o FFP rates established in section 1903(a) of the Act are
rates
available for expenditures made by the states.
Traditionally,
facilities were required to provide in-service training
for
employees and the costs of this training were reimbursed
through
the facilities' reimbursement rates. See New York State
Dept.
of Social Services, DAB No. 1287 (1991). While
Congress
established an exception in section 1903(a)(2)(B),
permitting
some costs incurred by NFs to be treated as state
administrative
expenses, such an exception should be read narrowly.
o Georgia had a prospective rate-setting system. Georgia
had
provided assurances, under the Boren Amendment, that
its
prospective rate was sufficient to reimburse facilities for
the
costs which would be incurred by an efficiently and
economically
operated facility in providing services. Such costs
would
include nurse aides salaries. Reimbursing the
facilities
through the per diem rates for costs of nurse aides
providing
services to Medicaid recipients and then providing
additional
reimbursement for both the nurse aides in NATCEP and
the
replacement aides would clearly result in
duplicate
reimbursement. 4/
o The State's reading of the phrase "costs for nurse aides
to
complete such competency evaluation programs" is
clearly
over-broad because it could encompass any costs which bear
any
relationship to such programs, no matter how remote.
Further, section 1902(a)(13)(A) of the Act, as amended by OBRA
'87,
recognized that some costs to facilities of complying with the
training
requirements required by section 1919(b) of the Act were
properly
reimbursed through the facilities' rates (such as Georgia's per
diem
rates), and that state plans should be amended if necessary to
reflect
such costs.
Georgia argued that HCFA had first interpreted the enhanced
funding
provisions of OBRA '87 to exclude nurse aide training costs on
the
theory that only state administrative costs were entitled to
enhanced
funding. See HCFA Transmittal 61 (Appeal Ex. 11).
Georgia indicated
that when Congress clarified its intent in OBRA '89, HCFA
was forced to
recognize that nurse aide training costs were indeed eligible
for
enhanced FFP. See HCFA Transmittal 66 (Appeal Ex. 8). Georgia
faulted
HCFA for not distinguishing in that Transmittal between different
types
of costs attributable to nurse aide training and not specifying
the
types of costs which should be included in computation of per
diem
rates. Georgia Br. at 7.
While Transmittal 66 does not specifically refer to payments
for
replacement aides' salaries as not subject to enhanced FFP,
Georgia's
argument ignores the statement in Transmittal 66 that
requires
identifying NF costs for training and competency evaluation
separately
from other NF costs incurred in furnishing services to
Medicaid
recipients. Admittedly, HCFA amended its interpretation of
section
1903(a)(2)(B) to encompass payment by a state of some NF costs
as
necessary administrative expenditures. However, HCFA did not, in
any
manner, lead Georgia to believe that the salaries of replacement
aides
would be eligible for enhanced reimbursement. 5/
Georgia also asserted that the legislative history of OBRA
'89
supported its claim for enhanced FFP. Citing language in the
House
Budget Committee Report, Georgia contended that Congress was
concerned
that HCFA had ignored the OBRA '87 requirement that it
promulgate
regulations for nurse aide training programs. Georgia Br. at
15-16,
citing H.R. Rep. No. 247, 101st Cong., 1st Sess. 461, reprinted in
1989
U.S. Code Cong. & Admin. News 2182. Georgia intimated that
HCFA's
failure to promulgate regulations had contributed to Georgia's
incurring
the disallowance.
Additionally, Georgia pointed to the parenthetical phrase "(including
the
costs for nurse aides to complete such competency evaluation
programs),"
added to section 1903(a)(2)(B) of the Act by OBRA '89, as
further evidence of
Congressional intent that enhanced funding should be
available for
replacement aides. Georgia contended that this language
was a reaction
to HCFA's attempt, subsequent to OBRA '87, to narrow the
scope of the
enhanced funding by limiting it to administrative costs and
excluding the
cost of nurse aide training. Georgia argued that Congress
added this
clarifying language "to prevent HCFA's erroneous
interpretation."
Georgia Br. at 17-18.
The legislative history cited by Georgia cannot reasonably be read
as
supporting Georgia's contention that salaries for replacement aides
were
ever considered eligible for enhanced funding. Rather, it is clear
that
Georgia has taken the legislative history out of context.
The House Budget Committee noted that --
OBRA '87 required the Secretary to establish requirements
for
State nurse aide training and competency evaluation programs
and
State nurse aide competency evaluation programs by September
1,
1988. Pending the publication of regulations establishing
such
requirements, HCFA has issued a guidance document, effective
May
12, 1989 . . . which sets out the approval criteria for
the
States. This delay has resulted, in some instances, in
States
postponing either the development of . . . programs or
the
approval of . . . programs that are already in operation . . .
.
* * *
No Compliance actions before the date of the guidelines. --
In
light of the confusion that has resulted from HCFA's delay
in
publishing regulations relating to nurse aide training
and
competency evaluation programs and to nurse aide
competency
evaluation programs, the Committee bill prohibits the
Secretary
from taking any compliance action against any State that
has
made a good faith effort, prior to May 12, 1989 (the
effective
date of HCFA's interpretative guidelines) to comply with
these
OBRA '87 requirements. . . .
* * *
[T]he Committee emphasizes that the Secretary's past failure
to
implement OBRA '87 . . . provisions through regulation,
while,
regrettable, [sic] should not be construed to undermine
the
validity of the requirements specified in HCFA's May 12,
1989
interpretative guidelines. OBRA '87 did not mandate that
the
Secretary issue such regulations and explicitly did
not
predicate implementation of the nurse aide training
and
competency evaluation requirements upon the issue of
final
regulations.
H.R. Rep. No. 247, 101st Cong., 1st Sess. 461, reprinted in 1989 U.S.
Code
Cong. & Admin. News 2183-84.
It is clear from the legislative history that, to the extent OBRA
'87
"required" HCFA to issue regulations for nurse aide training,
the
regulations were to serve as guidelines for establishing
requirements
for state NATCEPs. Congress wanted states to get their
training
programs approved and into their state plans with a minimum
of
disruption of services provided by the facilities. This is evidenced
by
the language indicating that, due to HCFA's delay, no compliance
actions
would be taken against states that had failed to adopt these
programs
before May 12, 1989. Contrary to what Georgia argued, there is
no
evidence that Congress specifically envisioned regulations itemizing
the
type of costs eligible for enhanced funding or that the salaries
for
replacement aides would be eligible for such enhanced funding.
Congress
was concerned with the quality and content of the programs, not
the
administrative details. Thus, HCFA's failure to implement
regulations
in a timely fashion is of no consequence in this disallowance
action.
Georgia's reliance on the parenthetical phrase in section 1903(a)(2)(B)
of
the Act "(including the costs for nurse aides to complete such
competency
evaluation programs)" as further evidence of Congressional
intent that
enhanced funding should be available for the salaries of
replacement aides is
also not persuasive.
As HCFA noted, the legislative history of OBRA '89 does not
specifically
refer to why this parenthetical was added. However, the
most logical
explanation is that it was added to address Congress' concern
that nurse
aides not be charged for the costs of textbooks, course materials
or for
the competency evaluation itself. H.R. Rep. No. 247, 101st
Cong., 1st
Sess. 461, reprinted in 1989 U.S. Code Cong. & Admin. News
2186.
Georgia replied that if HCFA's position were correct, then there was
no
reason for HCFA to have changed its 1989 position that nurse
aide
training was not entitled to enhanced funding. Georgia Reply Br.
at 2.
HCFA's change in position was due to the clarification by Congress
that
temporary enhanced FFP for state administrative costs was
available
regardless of whether the programs are conducted in or outside NFs
and
that the enhanced funding for start-up expenditures for nurse
aide
training and competency evaluation was an exception to the general
rule
that Medicaid funds are available only for expenditures attributable
to
Medicaid recipients. H.R. Rep. No. 247, 101st Cong., 1st Sess.
461,
reprinted in 1989 U.S. Code Cong. & Admin. News 2188-89.
In sum, there is simply no evidence in the statutory language cited
by
Georgia, nor in the legislative history, of Congressional intent
that
salaries for replacement aides were to be eligible for enhanced
funding.
For the reasons set out above, we find that the disallowance was
not
arbitrary or capricious.
The disallowance was not a retroactive rule.
Georgia argued that HCFA had timed the disallowance to preclude
Georgia
from receiving FFP for the salaries of replacement aides through the
per
diem rates. Therefore, Georgia contended that the disallowance
amounted
to a retroactive rule such as the one declared invalid in Bowen
v.
Georgetown University Hospital, 488 U.S. 204 (1988).
Additionally,
given the administrative flexibility granted states by the
Boren
Amendment, 6/ Georgia contended that it was "as free to interpret
the
statute as HCFA . . . ." Thus, Georgia asserted, as the agency
charged
with administering Medicaid, its interpretation of the statue
was
entitled to deference. Georgia Br. at 8-14.
Finally, Georgia argued that HCFA had waited until Georgia had acted
in
good faith and then interpreted a previously uninterpreted statute
to
penalize Georgia. Georgia asserted that HCFA's action here was
similar
to previous actions taken by HCFA against the State of New Jersey
and
invalidated by this Board in New Jersey Department of Human
Services,
DAB No. 648 (1985). Georgia Br. at 15-17.
Georgia's arguments are not persuasive. We disagree that the timing
of
the disallowance precluded Georgia's ability to amend its State Plan
to
receive any FFP for replacement aide salaries. In part, OBRA
'87
amended section 1902(a)(13)(A) of the Act to require that a state
plan's
reimbursement methods for nursing facilities take into account the
costs
of complying with the nurse aide training requirements established
by
section 1919(b)(5) of the Act. As noted earlier, HCFA's
subsequent
amendment to the State Medicaid Manual underscored the need for
per diem
rates as a tool for recovering costs associated with nurse
aide
training. See HCFA Transmittal 61 (Appeal Ex. 11). 7/
Furthermore, the Georgetown University Hospital decision is
inapplicable
here. In that case, the Supreme Court invalidated HCFA's
attempt to
retroactively reinstitute a Medicare cost limit rule which had
been
previously struck down in Federal District Court. The Court noted
that
retroactivity is not favored in the law and, thus, courts should
be
reluctant to find authority for retroactive rulemaking absent an
express
statutory grant. The Court concluded that there was no such
express
authority in Medicare for the retroactive regulations adopted by
HCFA.
488 U.S. 204 at 208, 213-215.
The rules at issue in Georgetown University Hospital were
legislative
rules. Here, HCFA has not engaged in retroactive
rule-making, but is
simply applying an interpretation of the Act on an issue
not
specifically addressed in regulations or policy
guidance. Admittedly,
HCFA has varied its policy on the
rate at which administrative costs
associated with nurse aide training would
be reimbursed. HCFA conceded
that it "initially treated all nurse aide
training costs as nurse
facility costs rather than state administrative costs
subject to
enhanced reimbursement . . . ." HCFA Br. at 6-7.
However, the rate at
which a cost may be reimbursed and the appropriate
components of a cost
are two different issues. Nothing in the Act, the
OBRA amendments or
HCFA's policy issuances could reasonably be interpreted to
suggest that
enhanced funding was available for the costs of replacement
aides'
salaries.
The Act provides enhanced funding for amounts expended for nurse
aide
training and competency evaluation programs (for less experienced or
new
aides) and competency evaluation programs (for experienced
aides).
Georgia's assertion that this provision can be interpreted to
cover
salaries of aides hired to replace the trainees is over-broad for
the
reasons stated above. The relationship, advanced by Georgia,
between
replacement salaries and "amounts expended for . . . training,"
is
simply too tangential to support a claim for enhanced funding. This
is
especially true given section 1902(a)(13) of the Act, which requires
a
state to cover costs of complying with the training requirements
through
the use of per diem rates.
Georgia's argument that its interpretation of the Act merits equal, if
not
greater, deference than HCFA's is invalid. Medicaid is a
national
health care plan. Congress has required the Secretary to
implement the
statutory requirements for Medicaid. Moreover, section
1903(a)(2)(B) of
the Act specifically limits enhanced funding to amounts
"found necessary
by the Secretary for the proper and efficient administration
of the
State plan." Georgia's position on deference would subject
Medicaid to
as many interpretations as there were states participating in
the
program. Such a result is clearly at odds with the purpose of
a
national health care program.
Georgia's reliance on the Boren Amendment is also misplaced. The
Boren
Amendment gave states greater flexibility in developing methods
of
provider reimbursement by minimizing the federal requirements placed
on
states so as not to burden them with unnecessary paperwork
requirements.
See Missouri Dept. of Social Services, DAB No. 1189 at 2
(1990). Here,
however, Georgia is seeking to make a substantive
determination that a
particular cost is eligible for enhanced federal
reimbursement outside
of the provider reimbursement system. Georgia's
action far exceeds the
grant of administrative flexibility provided to states
by the Boren
Amendment.
Additionally, in spite of Georgia's argument to the contrary, there is
no
similarity between the facts of this case and those in New Jersey.
In New
Jersey HCFA had initially issued an interpretation that all
costs, both
direct and indirect, which benefitted a state's Medicaid
Management
Information System were reimbursable at an enhanced rate.
After New Jersey
had expended its funds, HCFA sought to limit the types
of indirect costs
eligible for enhanced funding. As HCFA noted, the
Board reversed the
ensuing disallowance, finding that HCFA had not
provided adequate notice that
it was changing its policy and
distinguishing between types of indirect
costs. New Jersey at 6-7.
There is no basis for comparison between our
holding in New Jersey and
the facts of this case. As noted above, HCFA
has never indicated that
salaries for replacement aides would be eligible for
enhanced funding.
Rather, Georgia's argument is based entirely on its
strained
interpretation of the Act and relevant OBRA Amendments. HCFA
took no
action which threatened Georgia's ability to receive enhanced
federal
funding. The costs in issue were never eligible for such
funding.
Conclusion
Based on the preceding analysis, we sustain the entire disallowance
of
$1,740,798.
_________________________
Judith
A.
Ballard
_________________________
Donald
F.
Garrett
_________________________
Norval
D. (John)
Settle
Presiding
Board Member
1. The exhibits are sequentially numbered without reference to
which
party actually submitted the document. We will refer to them as
Appeal
Exhibit (Ex.) (number).
2. OBRA '87 originally set this deadline as September 1988, but
a
subsequent amendment in Pub. L. 100-360 changed the deadline to
January
1, 1989.
3. However, HCFA did not disallow the nurse aides' salaries for
the
periods that they were in training.
4. Moreover, reimbursing services costs through the per diem
rate
ensures that Medicaid pays only for costs of services provided
to
Medicaid recipients. If Georgia paid the facilities the entire
salaries
of the replacement aides, it would be funding services to
individuals
who were not Medicaid eligible.
5. HCFA's Regional Transmittal, which did specifically refer
to
replacement aides' salaries as not eligible for enhanced
reimbursement
was issued before Georgia actually submitted its claim for
FFP. It is
not clear from the record when Georgia made any payments to
NFs for such
costs.
6. See Pub. L. No. 96-499, .962 (1990).
7. Moreover, as noted above, the existing per diem rate would
have
taken account of costs for nurse aides actually providing services
in
the facilities, as the replacement aides