Connecticut Department of Social Services, DAB No. 3234 (2026)

DECISION

The Connecticut Department of Social Services (Connecticut DSS) appeals a determination by the Centers for Medicare & Medicaid Services (CMS) to disallow $21,627,547 in federal financial participation (FFP) for certain disproportionate share hospital (DSH) expenditures for federal fiscal years (FYs) 2008 through 2012.  We uphold the disallowance.

Legal Background

I.    Medicaid administration and funding

This case concerns funding for Medicaid, which CMS administers for the Department of Health and Human Services (HHS) under Title XIX of the Social Security Act (Act) and its implementing regulations in the Code of Federal Regulations (C.F.R.).  See Act §§ 1900, 1903; 42 C.F.R. Subchapter C.1  Title XIX authorizes federal grants to states for medical assistance to eligible low-income persons.  42 C.F.R. § 430.0.  The federal government and participating states jointly finance the program.  Id.  A state may use certain types of local government funding to contribute to the non-federal share of Medicaid expenditures.  Act §§ 1902(a)(2), 1903(w)(7)(G) (defining “unit of local government”); 42 C.F.R. §§ 433.50, 433.51.  “Certified public expenditures” (CPEs) are funds “certified by the contributing public agency as representing expenditures eligible for FFP.”  42 C.F.R. § 433.51(b). 

Each participating state operates its Medicaid program subject to federal requirements and the state plan.  Act §§ 1902, 1903(a); 42 C.F.R. §§ 430.10-430.25.  The state plan is a comprehensive written statement of the nature and scope of the state’s Medicaid program.  Act § 1902(a).  CMS must review and approve or disapprove each state plan.  Act § 1902(b); 42 C.F.R. §§ 430.10-430.16.  It must contain “all information necessary

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for CMS to determine whether the plan can be approved to serve as a basis for” FFP in the state program.  42 C.F.R. § 430.10.  A state must submit a state plan amendment (SPA) promptly for CMS approval whenever necessary to reflect changes in federal law or material changes in the state’s law, organization, policy, or Medicaid program operations.  Id. § 430.12(c).

Administration of Medicaid funding relies on states’ reporting to CMS.  See 42 C.F.R. § 430.30(a)(2).  Once CMS has approved a state plan, CMS awards the state quarterly grants to cover the federal share of Medicaid expenditures.  Id. § 430.30(a)(1).  For each calendar quarter, the state receives federal funds based on its estimated program needs.  Mo. Dep’t of Soc. Servs., DAB No. 2892, at 2 (2018) (citing 42 C.F.R. § 430.30(b), (d)).  After each quarter, the state submits a “Form CMS-64 (Quarterly Medicaid Statement of Expenditures for the Medical Assistance Program)” (QSE form), which gives the state’s “accounting of actual recorded expenditures.”  42 C.F.R. § 430.30(c)(2).  States use the QSE form to report expenditures for the most recent calendar quarter and adjustments to amounts reported for prior quarters.  Mo. Dep’t of Soc. Servs., DAB No. 3156, at 3 (2024); N.J. Dep’t of Hum. Res., DAB No. 2039, at 3 (2006). 

State reporting is time-limited.  Generally, “any claim by a State for payment with respect to” a Medicaid expenditure during a calendar quarter “shall be filed . . . within the two-year period which begins on the first day of the calendar quarter immediately following such calendar quarter,” or else “payment shall not be made.”  Act § 1132(a).  In other words, CMS generally will pay FFP for an expenditure “only if the State files a claim with [CMS] for that expenditure within 2 years after the calendar quarter in which the State agency made the expenditure.”  45 C.F.R. § 95.7.  Limited, specific exceptions exist.  Act § 1132(a); 45 C.F.R. § 95.19(a)-(b).  A CMS publication, the State Medicaid Manual, communicates federal policies and procedures to state Medicaid agencies on matters including claim filing, Mo., DAB No. 3156, at 2-3, including this instruction in section 2560.4G.1.a on when an “expenditure” occurs for reporting purposes:

a. Expenditures for services are made in the quarter in which any State agency made a payment to the service provider (45 CFR 95.13(b)[)]:

(1) Public Facility or Provider. – the expenditure is made when it is paid or recorded, whichever is earlier, by any State agency.  Public providers are those that are owned or operated by a State, county, city or other local government agency or instrumentality.

(2) Non-public Facility or Provider. – the expenditure is incurred when paid by any State agency.

State Medicaid Manual, CMS Pub. 45, § 2560.4G.1.a (available at https://www.cms.gov/regulations-and-guidance/guidance/manuals/paper-based-manuals-items/cms021927) (last visited May 27, 2026). 

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II.     DSH payments

DSHs are “hospitals which serve a disproportionate number of low-income patients with special needs.”  Act § 1902(a)(13)(A)(iv).  The Act requires each participating state to define in its state plan which hospitals are DSHs and to pay them increased amounts to offset the uncompensated costs of care.  Id. §§ 1902(a)(13)(A)(iv), 1923(a)(1).  “[E]ach State must submit to CMS the quarterly aggregate amount of its [DSH] payments made to each individual public and private provider or facility,” and states’ reports “must present a complete, accurate, and full disclosure of all of their DSH programs and expenditures.”  42 C.F.R. § 447.299(a), (b).  The federal government reimburses, through FFP, a share of the state’s allowable DSH payments.  Act § 1903(a).   

The Act imposes monetary limits (or “caps”) and auditing requirements on state DSH programs.  “In 1993, Congress added section 1923(g) to the Act to provide for ‘hospital-specific’ DSH limits.”  La. Dep’t of Health & Hosps., DAB No. 2350, at 2 (2010), aff’d, No. 11-76-BAJ-CN, 2013 WL 12109519 (M.D. La. Feb. 7, 2013), aff’d, 566 F. App’x 384 (5th Cir. 2014).  “In 2003, Congress enacted section 1923(j) of the Act,” which added a requirement for states “to submit annual, independent certified audits of their DSH programs.”  Id. at 3.  Effective January 19, 2009, CMS adopted a final rule that “sets forth the data elements necessary to comply with” section 1923(j).  Medicaid Program; [DSH] Payments, 73 Fed. Reg. 77,904, 77,904 (Dec. 19, 2008). 

III.    Deferrals and Disallowances

If CMS questions the allowability of a state’s claim for FFP and needs more information to resolve the question, CMS may defer payment within 60 days after receiving the QSE form that included the questioned claim.  42 C.F.R. § 430.40(a). 

CMS disallows claims it determines are not allowable.  42 C.F.R. § 430.42(a).  “Through the disallowance process, claims for a prior period are denied, or, if already paid, recouped.” Alaska Dep’t of Health & Soc. Servs., DAB No. 2103, at 31 (2007).  A state may timely request CMS’s reconsideration of a disallowance and may appeal to the Departmental Appeals Board (Board) either after or instead of reconsideration by CMS.  Act § 1116(e)(1)-(2)(A).

Case Background

I.    The SPAs and Connecticut DSS’s initial claim for FFP

Two state plan amendments, SPA 03-009 and SPA 11-012, are relevant.  On February 20, 2004, CMS approved SPA 03-009, which modified the state plan “to provide for additional [DSH] expenditures by Public Acute Care Hospitals” effective July 1, 2003.  State Ex. 2, at 2-3.  On May 8, 2012, CMS approved SPA 11-012, which superseded SPA

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03-009 effective July 1, 2011.  State Ex. 3, at 2.  Both SPAs stated that Connecticut DSS “determines the amount of” DSH payments from “information provided by the Office of Health Care Access (OHCA),” a state office, and that the “source data for calculating payments is based on data from OHCA.”  Ex. 2, at 4; Ex. 3, at 1.  SPA 11-012 added that Connecticut DSS would “test the calculated disproportionate share payments allocated to each hospital in each year to ensure that payments do not exceed federal limits established under the Omnibus Budget Reconciliation Act of 1993 or Section 1923 of the Social Security Act.”  Ex. 3, at 2. 

Both SPAs applied solely to John Dempsey Hospital, Connecticut’s “only publicly-operated acute care hospital,” which the University of Connecticut owns and operates.  Decl. of Michael J. Gilbert (1st Gilbert Decl.) at 1-2.2  According to Connecticut DSS, “the intent was to pay John Dempsey [Hospital] the maximum amount of DSH that could be made under the hospital-specific” DSH cap.  Id. at 2. 

From October 26, 2009 through July 10, 2013, the University of Connecticut Health Center’s Chief Financial Officer (CFO) issued memoranda to Connecticut DSS certifying John Dempsey Hospital’s CPEs for FYs 2008 through 2012.  State Exs. 4-8.  The CFO stated the certifications represented the hospital’s “actual uncompensated costs” for each FY, “based on the actual cost data for the same period as filed with and subject to review of the [OHCA].”  State Ex. 4, at 1; State Ex. 5, at 1; State Ex. 6, at 1; State Ex. 7, at 1; State Ex. 8, at 1.  Each certification included a table with an OHCA header and financial data for the pertinent FY.  State Ex. 4, at 2-6; State Ex. 5, at 2-6; State Ex. 6, at 2-6; State Ex. 7, at 2-6; State Ex. 8, at 2-6.  Based on these certifications and OHCA data, Connecticut DSS claimed DSH payments for FYs 2008 through 2012.  1st Gilbert Decl. at 2.

II.    The DSH audit and Connecticut DSS’s second claim for FFP

After “the federal DSH audit rules were finalized in 2008,” DSS retained an independent accounting firm to perform DSH audits.  1st Gilbert Decl. at 3.  Connecticut DSS submitted the five relevant audit reports to CMS between December 29, 2011 (for FY 2008), and January 11, 2016 (for FY 2012).  State Exs. 13-17. 

The audits for FYs 2008 through 2012 allegedly alerted Connecticut DSS that it “had repeatedly claimed DSH expenditures” for John Dempsey Hospital “that were less than its actual uncompensated costs” – specifically, $49,414,320 less for FYs 2008 through 2012.  1st Gilbert Decl. at 3.  Connecticut DSS determined that “OHCA would need to endorse” the use of the auditors’ calculations “because the plan stated that [Connecticut] DSS would base the payment on information provided by OHCA.”  Id. 

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Connecticut DSS asked OHCA “to confirm that it supported an additional claim for DSH related to John Dempsey Hospital based on the independent audits,” id., and on March 30, 2016, OHCA responded, State Ex. 10.  OHCA recognized “differences between the DSH Audit Methodology” and “the information and data which OHCA collects pursuant to” state law.  State Ex. 10, at 1.  OHCA concluded:

As the decision on the basis for and calculation of DSH payments clearly rests with DSS, and DSS is required to adhere to the State Medicaid Plan in which it is required to use the financial data collected by OHCA under DSS’ statutory determination and/or calculation of [John] Dempsey [Hospital] DSH payments, we think it would be reasonable for DSS to recognize both, the OHCA calculations, which DSS indicates had served as the basis for the original DSH claim for FY 2009 through 2011, and the Federal required DSH audit for these same years which clearly demonstrates that [John] Dempsey Hospital actually incurred a much higher level of uncompensated care costs.

Id. at 3.3

Connecticut DSS concluded it could “move forward with an additional claim” for John Dempsey Hospital’s expenditures and included that claim on its QSE form for the quarter ending March 31, 2016.  1st Gilbert Decl. at 3-4.  Connecticut DSS “later adjusted that claim downward” on the QSE form for the quarter ending March 31, 2018 “based on revised audit-based cost calculations.”  Id. at 4.

III.    CMS deferral and disallowance

On July 28, 2016, CMS deferred $24,707,161 in FFP for DSH expenditures incurred during FYs 2008 through 2012 that Connecticut DSS claimed on the QSE form for the quarter ending March 31, 2016.  CMS Ex. 1, at 1.  CMS explained those expenditures “were claimed beyond the two year timely filing period” and CMS could not “determine if the expenditures were claimed in accordance with [the] state plan methodology.”  Id.  CMS “attached a list of questions and requests for information related to these DSH claims” and required additional documentation.  Id. at 1, 3.  In response, Connecticut DSS provided documentation and told CMS that the claim in question fell within “the exception for adjustments to prior year costs set forth at 45 C.F.R. § 95.19(a),” and “also referred to Section § 95.19(b)” concerning audit exceptions.  State Ex. 11, at 2-3. 

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On September 17, 2018, CMS disallowed the previously deferred $24,707,161 in FFP that Connecticut DSS had claimed “beyond the two-year timely filing limit.”  State Ex. 11, at 1.  CMS stated that section 1132(a) of the Act provides a two-year window for filing FFP claims and Connecticut DSS relied on inapplicable exceptions.  Id.  CMS explained that the 45 C.F.R. § 95.19(a) exception applies only to a cost item “previously claimed under an interim rate concept,” and the Connecticut state plan did not “authorize an interim payment methodology.”  Id. at 2-3.  CMS further explained that the 45 C.F.R. § 95.19(b) exception “is limited to situations where the responsible federal agency has accepted the results of the audit” and proposed an adjustment to prior years’ claims based on those results, which had not occurred in this case.  Id. at 3.  CMS stated the criteria for both exceptions were unmet and “no other exceptions apply.”  State Ex. 11, at 4.

IV.    Reconsideration by CMS

Connecticut DSS sought reconsideration by CMS and raised the following four arguments.  Docket #1a, at 6-10 (Req. for Recons. of Disallowance Number CT/2017/001/MAP).  First, even if the claim was time-barred, the disallowed amount should be $21,627,547 (not $24,707,161) due to misreported hospital costs in FYs 2011 and 2012 and “revised calculations” provided to CMS.  Id. at 6.  Second, “the adjustments to the prior periods to conform to the DSH audits were based on an interim rate concept and meet the exception in 45 C.F.R. § 95.1[9](a).”4  Id. at 8.  Third, even if the disputed payment was not an adjustment to prior year costs, it was still timely per section 2560.4G.1.a[(1)] of the State Medicaid Manual.  Id. at 8-9.  Finally, Connecticut DSS was “entitled to a good cause waiver for the claimed amounts.”  Id. at 9.

On January 11, 2019, CMS revised the disallowed amount from $24,707,161 to $21,627,547 but otherwise denied reconsideration.  State Ex. 1, at 1-2.  CMS maintained the state plan “does not have an interim rate concept methodology defined” per “the comprehensive requirements” of section 1902(a) of the Act and 42 C.F.R. § 430.10.  Id. at 2.  CMS rejected Connecticut DSS’s argument based on the State Medicaid Manual, explaining that the disputed expenditures were “considered non-public expenditures,” which therefore “were incurred when paid, and not when paid or recorded.”  Id. at 2.  CMS determined that Connecticut DSS “did not formally submit” a good cause waiver request or provide “any new or additional information that would justify any further reduction” in the disallowance, so CMS affirmed it “for the reasons specified” in both the original disallowance letter and the denial of reconsideration.  Id. at 3-4.   

V.    Connecticut DSS’s appeal to the Board

Connecticut DSS timely appealed the disallowance to the Board and filed briefing and evidence, arguing that the disallowed claim complied with the two-year filing limit. 

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Notice of Appeal at 1; Br. of Appellant Connecticut DSS (State Br.); Reply Br. [of] Connecticut DSS (State Reply); State Exs. 1-17; 1st Gilbert Decl.; 2nd Gilbert Decl.  CMS filed responsive briefing and exhibits, seeking affirmance of the disallowance.  Br. of CMS, Sur-Reply of CMS; CMS Exs. 1-2. 

Standard of Review

“We review de novo an agency’s decision to disallow costs charged to federal awards.”  Tex. Health & Hum. Servs. Comm’n, DAB No. 3066, at 7 (2022), recons. denied, DAB Ruling No. 2024-1 (Oct. 27, 2023).  When reviewing a disallowance, the Board is “bound by all applicable laws and regulations.”  45 C.F.R. § 16.14. 

The Board follows established principles when interpreting a state plan.  We first consider the plan language itself, and if it is clear, it controls.  Md. Dep’t of Health, DAB No. 3153, at 16 (2024); Alaska, DAB No. 2103, at 16.  “If, however, the provision is ambiguous, the Board will consider whether the state’s proposed interpretation gives reasonable effect to the language of the plan as a whole.”  Alaska, DAB No. 2103, at 16.  We also consider whether contemporaneous documentation and consistent administrative practice support the state’s interpretation.  Md., DAB No. 3153, at 16-17; Va. Dep’t of Med. Assistance Servs., DAB No. 2727, at 12 (2016), aff’d, No. 16-2008, 2018 WL 4705792 (D.D.C. Sept. 30, 2018), aff’d, 967 F.3d 853 (D.C. Cir. 2020).  “A state’s interpretation cannot prevail unless it is reasonable in light of the purpose of the provision and program requirements, including governing federal law and regulations.”  Alaska, DAB No. 2103, at 16.

Analysis

The parties’ evidentiary burdens are well established.  It is CMS’s “initial burden to provide sufficient detail about the basis for its disallowance determination to enable the grantee to respond.”  Mass. Exec. Off. of Health & Hum. Servs., DAB No. 2218, at 11 (2008), aff’d, 701 F. Supp. 2d 182 (D. Mass. 2010); accord Cal. Dep’t of Health Care Servs., DAB No. 3099, at 11 (2023). “If the federal agency carries this minimal burden, the grantee must establish the allowability of the expenditures in dispute.”  Mass., DAB No. 2218, at 11; accord Ariz. Health Care Cost Containment Sys., DAB No. 2824, at 2 (2017), aff’d, No. CV-17-04462, 2020 WL 805235 (D. Ariz. Feb. 18, 2020). 

The parties no longer dispute certain issues.  Connecticut DSS no longer raises the 45 C.F.R. § 95.19(b) “audit exception” to the two-year filing requirement or contends Connecticut DSS is entitled to a good cause waiver of that requirement.  Compare State Ex. 11, at 3 and State Ex. 1, at 3-4 (rebutting, in CMS’s initial and reconsidered decisions, Connecticut DSS’s audit exception and good cause waiver arguments) with State Br. at Table of Contents (listing no such arguments) and State Reply at 2 (same).  CMS no longer disputes John Dempsey Hospital’s status as a public facility.  Compare

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State Ex. 1, at 2 (assessing the hospital to be “a non-public facility for purposes of Section 2560.4G.1 of the State Medicaid Manual”) with Sur-Reply of CMS at 7 (referencing “services by a public hospital (like [John] Dempsey [Hospital]”). 

Regarding the issues still in dispute, we conclude that Connecticut DSS has not met its burden of establishing the allowability of the disallowed amounts.

I.     CMS sufficiently articulated the basis for the disallowance.

CMS’s September 17, 2018 disallowance notice and January 11, 2019 reconsidered determination satisfy the content requirements of 42 C.F.R. § 430.4 and meet CMS’s initial burden to articulate sufficiently the basis for the disallowance.  As required, both letters specified when Connecticut DSS made the disputed expenditures and claims for FFP and the amount that CMS previously deferred.  42 C.F.R. § 430.42(a)(1)-(3); State Ex. 1, at 1; State Ex. 11, at 1.  Both letters stated the amounts of FFP claimed, allowed, and disallowed, explained the computation of those amounts, and stated the factual findings supporting disallowance.  42 C.F.R. § 430.42(a)(4)-(5); State Ex. 1, at 1-4; State Ex. 11, at 1-4.  CMS summarized that the expenditures were incurred during FYs 2008 through 2012 but were claimed on the QSE form for the quarter ending March 31, 2016, thus the $21,627,547 disallowance represented the federal share of expenditures “claimed beyond the two-year timely filing limit.”  State Ex. 1, at 1.  Both letters contained “[p]ertinent citations to the law, regulations, guides and instructions supporting” disallowance, as the regulation requires.  42 C.F.R. § 430.42(a)(6); see State Ex. 1, at 1-4; State Ex. 11, at 1-4 (citing legal authorities including:  Act §§ 1132(a) and 1902(a); 42 C.F.R. §§ 430.40 and 455.304(b); 45 C.F.R. §§ 95.4, 95.7, 95.19(a)-(b), and 95.28; interpretive case law; and the State Medicaid Manual).  Connecticut DSS thus had sufficient information to respond to the disallowance.

CMS’s initial brief to the Board permissibly asserts an additional basis for the disallowance.  CMS contends that Connecticut DSS’s claims were not only untimely but also “were not made in accordance with Connecticut’s state plan” because they were “premised on a different definition of uncompensated care” than the approved state plan contained and “were not calculated using source data compiled by OHCA.”  Br. of CMS at 2.  CMS argues that Connecticut DSS may not “use a revised methodology” to calculate DSH uncompensated care costs “using the independent auditor’s data rather than OHCA’s data” because Connecticut DSS “is not permitted to ignore the methodology set out in its approved state plan.”  Id. at 18.  CMS presents evidence that it notified Connecticut DSS at the deferral stage that CMS questioned whether “the expenditures were claimed in accordance with [the] state plan methodology.”  CMS Ex. 1, at 1.  CMS also cites further statutory and regulatory authority in its briefing:  Act §§ 1902(a)(13)(A), 1903(a)(1), and 1923,5 as well as 42 C.F.R. § 430.10 and 73 Fed.

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Reg. at 77,906.  Br. of CMS at 14-16.  “[A] federal agency may revise the basis for a disallowance on appeal as long as the opposing party is given an adequate opportunity to respond to the change in position, as happened here.”  Mass., DAB No. 2218, at 10 n.9; see also Me. Dep’t of Health & Hum. Servs., DAB No. 2931, at 12-13 (2019) (“[I]t is well-established that an agency may amend the basis for its action during the administrative adjudication process, so long as the appellant has an opportunity to respond.”).  Connecticut DSS has had an opportunity to respond since the deferral stage concerning adherence to the state plan, and has addressed that issue in briefing before the Board.  See State Reply at 5-8.

II.    The disputed claim does not meet any exception to the statutory and regulatory two-year filing limit.

Under section 1132(a) of the Act and 45 C.F.R. §§ 95.7 and 95.19, a state claiming FFP for an expenditure must file the claim within two years after the calendar quarter when the State agency made the expenditure, unless a specified exception applies.  The exception at issue here is for adjustments to prior year costs.  Act § 1132(a) (excepting “adjustments to prior year costs”); 45 C.F.R. § 95.19(a) (excepting “[a]ny claim for an adjustment to prior year costs”).  “Adjustment to prior year costs means an adjustment in the amount of a particular cost item that was previously claimed under an interim rate concept and for which it is later determined that the cost is greater or less than that originally claimed.”  45 C.F.R. § 95.4.

Connecticut DSS argues that the disputed 2016 claim for supplemental FFP for John Dempsey Hospital was not untimely under section 1132 of the Act and 45 C.F.R. § 95.7 because the claim falls within the exception at 45 C.F.R. § 95.19(a).6  State Br. at 8-12; State Reply at 4.  Connecticut DSS admits its “state plan provision does not use the term ‘interim rate,’” but argues “it is clearly intended to authorize adjustments to cover all of a hospital’s uncompensated costs,” and “CMS has never required the use of the word ‘interim’” in this context.  State Br. at 9-10.  Connecticut DSS asserts that it reasonably could use the mandated DSH audits “as source data for an additional claim” and that the state’s interpretation is consistent with Board precedent, particularly Virginia Department of Medical Assistance Services, DAB No. 1838, at 3 (2002).  Id. at 11.

CMS correctly counters that Connecticut DSS submitted the claim too late and it does not fall within any statutory or regulatory exception to the two-year time limit.  Br. of CMS at 19-27.  CMS’s position is correct primarily because it is consistent with the plain language of the plan.  Connecticut DSS’s disputed claim does not fall within the narrow scope of 45 C.F.R. § 95.19(a) because the state plan did not set forth an interim rate concept.  “[T]he adjustment-to-prior-year-costs exception does not apply unless the state shows that a subsequent adjustment to an interim rate is consistent with and contemplated

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by its state plan and methodology,” and that is not the case here.  See Tex. Health & Human Servs. Comm’n, DAB No. 2404, at 12 (2011) (internal quotation marks and citation omitted).  “A claim for FFP under an ‘interim rate concept’ is one that is based on an interim or provisional payment rate,” and “the exception for an adjustment to prior year costs was intended to apply to claims generated by an established interim and final cost settlement process.”  Md. Dep’t of Health & Mental Hygiene, DAB No. 1909, at 4-5 (2004).  SPA 03-009 and SPA 11-012 establish no such process for estimating interim costs and settling them up years later.  State Ex. 2, at 4; State Ex. 3, at 1-2. 

Significantly, the parties agree that Connecticut DSS submitted a plan amendment articulating an interim rate concept in 2018, after filing the disputed claim in 2016.  Br. of CMS at 22-23 n.3; State Reply at 13.  CMS approved that 2018 plan amendment, SPA 18-0018-A (effective February 1, 2018), which set out a detailed three-step reconciliation process featuring an “[i]nitial DSH claim,” a recalculation producing “a prior period adjustment,” and a “[f]inal calculation” also producing “a prior period adjustment.”  CMS Ex. 2, at 5.  That approved SPA language illustrates the type of straightforward phrasing that can establish an “interim rate concept” for purposes of 45 C.F.R. § 19(a).  SPA 03-009 and SPA 11-012 lack any equivalent terms. 

We reject any suggestion that an “interim rate concept,” and thus the right to make prior period adjustments, already was implicit in SPAs 03-009 and 11-012.  See, e.g., State Br. at 11-12 (asserting state plan’s “intent” was “to make ‘additional payments’” and “reasonable” state interpretation thus permitted “further expenditure beyond . . . expenditures previously claimed”).  It is true that the SPAs reference “additional” DSH payments.  State Ex. 2, at 1, 3-4; State Ex. 3, at 1.  However, in context, the SPAs described those payments as being “[i]n addition to the disproportionate share payments set forth in other sections of the Medicaid State Plan,” not in addition to DSH payments already claimed for a facility for a prior FY.  State Ex. 2, at 3; State Ex. 3, at 1.  The SPAs also make no reference to initial or estimated claims or to subsequent reconciliation or recalculation of costs.  If the state wanted the ability to file successive claims for more federal funding for the same DSH for the same FY, then the state plan could and should have said so clearly, as it later did in SPA 18-0018-A.  That amendment detailed “the three times the limit for the initial DSH claim is calculated” during a reconciliation process consisting of an “[i]nitial DSH claim,” a susbsequent “[r]ecalculat[ion],” and a “[f]inal calculation using finalized Medicare cost report(s) and DSH audit results shown in the federally required independent audit report.”  See CMS Ex. 2, at 4-5.

We also reject Connecticut DSS’s related characterizations of its 2016 claim as a “final, additional claim up to actual costs” and its initial claim as “based on OHCA’s estimates of uncompensated costs.”  See State Reply at 7, 14; see also State Br. at 5, 16 (referring to OHCA’s “estimates”).  These characterizations are factually unsupported and legally inconsequential.  The annual CPE memoranda certified the hospital’s “actual uncompensated costs,” not as mere estimates but as “based on the actual cost data for the

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same period as filed with and subject to review of [OHCA].”  State Ex. 4, at 1; State Ex. 5, at 1; State Ex. 6, at 1; State Ex. 7, at 1; State Ex. 8, at 1.  In any event, under “the plain language of section 1132(a) and its corresponding regulations,” there is nothing “that could be interpreted as making the applicability of the two-year filing rule contingent on whether the FFP request is based on old (previously reported) or new (previously unreported) expenditures.”  Conn. Dep’t of Soc. Servs., DAB No. 1982, at 15 (2005).

Connecticut DSS’s position also is inconsistent with the legislative purpose of governing statutes.  The legislative intent of section 1132(a) of the Act “is to enable HHS to know the total amounts of its obligations for each fiscal year within a reasonable time after the end of the year.”  46 Fed. Reg. 3,527, 3,527 (Jan. 15, 1981); accord Conn., DAB No. 1982, at 15-16; see also Mont. Dep’t of Soc. & Rehab. Servs., DAB No. 1471, at 1 (1994) (“In enacting the two-year filing limitation, Congress’ intent was to facilitate federal budget planning for programs under the Act by controlling states’ ability to make delayed claims.”).  In keeping with section 1132’s purpose, the exceptions to the timely claims limit are to be narrowly construed, including 45 C.F.R. § 95.19(a)’s exception for adjustments to prior year costs.  Kan. Health Pol’y Auth., DAB No. 2216, at 4 (2008); see also N.J. Dep’t of Hum. Servs., DAB No. 2508, at 7 (2013) (“[T]he principle underlying the two-year filing limitation is to foster fiscal certainty with respect to the government’s budget processes, and the exceptions to that time limit must be construed and applied consistent with that principle.”); N.Y. State Dep’t of Soc. Servs., DAB No. 521, at 8 (1984) (stating that exceptions to the time limitation “were intended to cover only extreme situations”).  Connecticut DSS reads section 1132’s timely-filing requirements liberally and its exceptions broadly, and that reading would undermine the budgetary predictability and stability that Congress enacted the statute to promote.  Furthermore, Congress’s intent in imposing the annual per-hospital DSH cap in 1993 was also fiscally conservative – that is, “to restrict FFP in some DSH payments which Congress found to be excessive.”  See N.J. Dep’t of Hum. Servs., DAB No. 1652, at 12 (1998); see also La., DAB No. 2350, at 2, 16 (summarizing that Congress’s 1993 enactment of section 1923(g) of the Act, which created “‘hospital-specific’ DSH limits,” was “precisely because” states were making excessive claims for FFP).  Thus, Connecticut DSS’s position is contrary to the cost-constraining purpose of the hospital-specific cap as well.

Connecticut DSS relies on Virginia, DAB No. 1838, which concerned a state’s DSH payments to two public hospitals under a state plan providing that DSH payments were “not . . . subject to settlement except when necessary due to the limit” established by federal law.  Id. at 1, 11-12.  Virginia interpreted that language as encompassing “the hospital-specific cap” for DSHs and had a yearslong practice of making partial, “initial quarterly payments,” with subsequent “enhanced” payments once the hospitals had “demonstrated sufficient losses consistent with the hospital-specific cap.”  Id. at 12.  The Board deferred to Virginia’s interpretation as “a reasonable one” that the state had “consistently applied in practice.”  Id.  The Board explained that, “in referencing a

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subsequent ‘settlement,’” Virginia’s plan “recognize[d] that the complete DSH payment could not be correctly computed until a later time,” so it was “not unreasonable of Virginia to interpret the language to allow a delay in the payment of the enhanced component.”  Id. at 13.  “[N]othing in the record” contradicted Virginia’s assertions that it had “consistently interpreted its state plan and applied the DSH payment procedures” for years and CMS was “aware of this interpretation.”  Id.  On those facts, the Board reasoned that HHS was not “caught completely off guard” and rejected CMS’s assertion that the disallowed claims “must be viewed as untimely.”  Id. at 11, 14. 

This case differs from Virginia.  The hospital-specific DSH cap plays a role in both cases, but SPA 03-009 and SPA 11-012 contain no language corresponding to the Virginia plan provision for “settlement . . . when necessary due to the [federal] limit.”  State Exs. 2, 3.  It may have been the state’s “intent” under these SPAs to pay John Dempsey Hospital “the maximum amount of DSH” available under the hospital-specific cap.  See 1st Gilbert Decl. at 2.  However, the SPAs did not put CMS on notice that Connecticut DSS planned to carry out that intent by making initial claims for FFP based on OHCA data and then later supplemental claims based on audit results.  The record does not show that Connecticut DSS had a consistent administrative practice, known to CMS, of claiming supplemental FFP for John Dempsey Hospital based on audit results; instead, CMS deferred and disallowed the first such claim that Connecticut DSS ever filed.  These facts implicate Congress’s purpose in enacting the two-year filing limitation in section 1132 – which, again, was to help HHS “to plan its budget” by preventing delayed “claims for millions of dollars for expenditures in years long gone.”  N.J. Dep’t of Hum. Servs., DAB No. 1655, at 8 (1998).  This case concerns just such a claim. 

We thus conclude, consistent with long-standing Board precedent, that the timely-filing exception for an adjustment to prior year costs is available to a state only under strictly limited circumstances that are not present here.  A “key factor for the exception to apply is that a state must show that a subsequent adjustment to an interim rate is consistent with and contemplated by its state plan and methodology.”  W. Va. Dep’t of Health & Hum. Res., DAB No. 2365, at 8 (2011), aff’d, 899 F. Supp. 2d 477 (S.D. W. Va. 2012).  If a state has not “defined its interim rate concept in a state plan” and followed it, then an adjustment “is not an ‘adjustment to prior year costs’ within the narrow meaning of the statute and regulations.”  N.J., DAB No. 2508, at 5.  This is true “regardless of whether the claim in fact makes some adjustment to the amount of costs claimed in a prior year.”  Id.  The 45 C.F.R. § 95.19(a) exception does not apply here.

III.     The disputed claim is not timely per the State Medicaid Manual.

Under section 2560.4G.1 of the State Medical Manual, an expenditure to a public facility or provider occurs when the expenditure “is paid or recorded, whichever is earlier, by any State agency.”  State Medicaid Manual, CMS Pub. 45, § 2560.4G.1.a(1).  Section 2560.4G.1 “recognizes the realities of how public facilities are operated and reimbursed.” 

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N.Y. State Dep’t of Health, DAB No. 1867, at 19 (2003).  “[I]n the case of a public facility there is ordinarily no actual payment of cash to the Medicaid facility; rather, there is an accounting entry showing a record of a payment credited to the facility, albeit on paper.”  N.J. Dep’t of Hum. Servs., DAB No. 1016, at 12-13 (1989).  Thus, if the “interpretation of the State Medicaid Manual were not followed, a state could indefinitely delay the start of the claiming period by refraining from actually transferring funds to the public facility.”  Va., DAB No. 1838, at 8. 

The date an expenditure is first “recorded” for purposes of section 2560.4G.1(a)(1) of the State Medical Manual is the date when the state first “records the expenditure in its records.”  N.J., No. 2039, at 10.  The Board sometimes has referred to this act of recording as “a bookkeeping entry.”  N.J., DAB No. 1016, at 9, 12.  For “triggering the two-year claiming deadline for [a] service reimbursable at [an] adjusted rate,” there need only be a “bookkeeping entry of some sort recording an amount that included an amount for that particular item of service.”  N.Y., DAB No. 1867, at 21.

Connecticut DSS argues that its disallowed claim was timely per the State Medicaid Manual because no “expenditure” triggered the two-year claim filing period until Connecticut DSS filed the disputed claim itself on the March 31, 2016 QSE form.  State Br. at 13-19; State Reply at 8-13.  Without clearly addressing when (or whether) the relevant John Dempsey Hospital expenditures were “paid,” Connecticut DSS argues that its 2016 claim for them “was timely, because the claim was filed within two years of the expenditure being recorded.”  State Br. at 13.  Connecticut DSS denies that it recorded the relevant expenditures during FYs 2008 through 2012, asserting that “[w]hile those costs may have been included on John Dempsey [Hospital]’s cost reports,” merely “incurring costs for providing services is not the type of recording of ‘expenditures’ that can trigger the two-year claiming clock.”  State Reply at 9.  Instead, Connecticut DSS contends, “the additional costs were recorded at the time the [QSE form] for the quarter ending 3/31/16 was submitted and therefore were claimed within two years of the expenditure.”  Id. at 4. 

CMS contends that the disallowed expenditures were untimely under the State Medicaid Manual standard.  The expenditures necessarily must have been “paid,” CMS argues, before Connecticut DSS filed the March 2016 QSE form reporting them because that form must reflect actual recorded expenditures.  Br. of CMS at 28; see also 42 C.F.R. § 430.30(c)(2) (stating the QSE form “is the State’s accounting of actual recorded expenditures”).  The expenses were first “recorded” even earlier, CMS asserts, at the time of the CPE certifications, when Connecticut DSS “made bookkeeping entries recording [John] Dempsey [Hospital]’s DSH uncompensated care costs for []FY 2008 through []FY 2012 between October 26, 2009 and July 10, 2013.”  Br. of CMS at 29; see also Sur-reply of CMS at 9 (“Here, [Connecticut] DSS made its initial bookkeeping entries recording the DSH expenditures for [John] Dempsey [Hospital] for []FY 2008 through []FY 2012 when it accepted the internal memoranda prepared by [John] Dempsey

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[Hospital] calculating uncompensated care costs based on OHCA data.”); State Exs. 4-8 (CPE memoranda dated October 26, 2009 through July 10, 2013).  “Accordingly,” CMS concludes, “because DSS’ adjusted FFP claims were submitted on March 31, 2016, more than two years after it had recorded its initial [John] Dempsey [Hospital] DSH expenditures, [Connecticut] DSS’ claims are time barred.”  Sur-reply of CMS at 10.

Connecticut DSS’s reliance on section 2560.4G.1.a of the State Medicaid Manual is misplaced.  The Board has long held, concerning public facility or public provider expenditures, that “[a]n increase in the amount paid or recorded for [a] particular item of service is not a new expenditure.”  N.Y., DAB No. 1867, at 20.  See Tex., DAB No. 2404, at 11 (“[A] transaction involving a public provider that occurs in the ‘current quarter’ does not constitute a program expenditure of that quarter when the transaction’s effect is to increase the amount of a previously claimed expenditure from a prior period.”); Kan. Dep’t of Soc. & Rehab. Servs., DAB No. 2014, at 11 (2006) (“[F]or public providers, payments are not new ‘expenditures’ if a state agency earlier recorded an amount for the particular services.”) (emphasis modified); S.C. State Health & Hum. Servs. Fin. Comm’n, DAB No. 943, at 4-5 (1988) (“Additional payments made later on for the same period, no matter how computed, [a]re not new expenditures which started. . . . another two-year period in which the State could claim them,” otherwise “additional expenditures could be claimed forever into the future.”), aff’d, No. 3:88-1313-16 (D.S.C. July 13, 1989), aff’d, 915 F.2d 129 (4th Cir. 1990).  Where “supplemental” payments “represent an adjustment to amounts for inpatient hospital services provided during the relevant cost reporting periods and claimed in ‘prior periods,’ those payments are not new expenditures that trigger a two-year filing period under section 1132(a).”  Tex., DAB No. 2404, at 12.  Interpreting section 2560.4G.1 “to permit multiple payments or recordings for a public provider is unreasonable when the context and purpose are considered.”  N.J., DAB No. 2039, at 14.

Connecticut DSS disagrees, again relying on Virginia, DAB No. 1838, but again that case is distinguishable.  See State Br. at 15; State Reply at 9-11.  In Virginia, the state did not rely on “mere bookkeeping entries,” but asserted that it “actually made payments” and produced “contemporaneous documentation” of them including “copies of cancelled checks” to the public hospitals, “all of which were dated within two years of Virginia’s claims for FFP for the payments.”  Virginia, DAB No. 1838, at 7-9.  It was undisputed that all of Virginia’s disallowed claims “were filed within two years of the actual payments to” the public hospitals.  Id. at 6.  Yet here, CMS points out, Connecticut DSS “admitted that it has not made actual payments to” John Dempsey Hospital “for the expenditures that it incurred for the adjusted FFP claims for DSH expenditures for FFY 2008 through FFY 2012.”  Sur-reply of CMS at 8.  Connecticut DSS notes that it “is willing to make a cash payment” to John Dempsey Hospital, and that CPEs “are an acceptable source of the non-federal share.”  State Reply at 12 n.3.  Yet willingness to make a future payment obviously is not the same as an actual past payment, and the only

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CPEs evident in the record are those certified from 2009 through 2013, more than two years before Connecticut DSS filed its supplemental claim in 2016.  See State Exs. 3-8.

Connecticut DSS also relies in error on Missouri Department of Social Services, DAB No. 1515 (1995), for the premise that “when an additional payment is made to a provider, the two-year clock” for claiming FFP “runs from the date of the second expenditure, not the original one.”  State Br. at 13.  That case concerned a private provider and the Board recognized the “difference between payments to public and private providers” as pivotal to the outcome.  See Mo., DAB No. 1515, at 8 (distinguishing cases in which “the states involved were making adjustments to payments made to public providers,” whereas “payments involved in the present case were made by writing a check to a private provider”).  See also Kan., DAB No. 2014, at 4, 22 (stating, in a case concerning disallowed FFP for services at “four State psychiatric hospitals,” that DAB No. 1515 “is distinguishable on several grounds, the most obvious of which is that the new payments in Missouri were made to a private provider”).

Connecticut DSS relies on other inapposite authorities as well.  For example, Connecticut DSS cites Missouri Department of Social Services, DAB No. 1511 (1995), for the permissibility of a remand to let a state “make the requisite payments” to support a claim for FFP.  State Reply at 12 n.3.  However, we allowed that step in DAB No. 1511 only to address a threshold argument by CMS “that the Board lacked jurisdiction over” one set of claims being disputed and offset against each other, in a case with a unique, “lengthy and complex” factual background.  Mo., DAB No. 1511, at 1-2, 2 n.3.  No such jurisdictional issues or extraordinary facts warrant a remand here.  Connecticut DSS argues that in New Jersey, DAB No. 1652, CMS represented that a state may resubmit claims for DSH payments if “room” becomes available under the DSH cap.  State Reply at 10.  However, when discussing that possibility, CMS was referring to the statewide “allotment cap” on total state DSH spending, set forth in section 1923(f) of the Act, not the separate per-hospital cap in section 1923(g) that is at issue here.  N.J., DAB No. 1652, at 4-5 (discussing the two different caps), 5 (discussing “room under the cap” only in the context of “the allotment cap”), 8 (same). 

With respect to the standard articulated in the State Medicaid Manual, we conclude that when Connecticut DSS filed its disputed claim for additional FFP in 2016, the two-year filing period already had expired.  Regardless of whether or when the relevant John Dempsey Hospital DSH expenditures for FY 2008 through FY 2012 were “paid,” they were “recorded” at the latest when Connecticut DSS made bookkeeping entries accepting and adopting the University of Connecticut Health Center’s CPE certifications for those FYs.  See State Exs. 4-8; 1st Gilbert Decl. at 2 (“In 2008 through 2012, [Connecticut] DSS claimed DSH payments” to John Dempsey Hospital based on OHCA’s figures “and the hospital’s corresponding certifications” that the stated amounts “represented the hospital’s uncompensated care costs in each year.”).  The latest of the CPE certification memoranda, for FY 2012, was dated July 10, 2013.  State Ex. 8, at 1.  That date was more

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than two years before Connecticut DSS filed the disputed claim for additional FFP in its QSE form for the quarter ending March 31, 2016.  Connecticut DSS has not met its burden of demonstrating that any later date was the commencement of the two-year filing period.

IV.    The disputed claim was not in accordance with the state plan.

“A State’s expenditures are eligible for federal Medicaid reimbursement only if they are made in accordance with the state plan.” Me. Dep’t of Health & Hum. Servs., DAB No. 2292, at 10 (2009) (citing Act § 1903(a)), aff’d, 766 F. Supp. 2d 288 (D. Me. 2011); see also N.J., DAB No. 1652, at 3 (stating that to receive FFP, “a state must claim the costs of medical assistance in accordance with its approved Medicaid state plan”).

The parties disagree on whether Connecticut DSS’s disputed 2016 claim for additional FFP for FYs 2012 through 2018 – regardless of whether that claim was timely or not – complied with the state plan.  CMS asserts that “the subject state plan amendments regarding DSH calculations are unambiguous,” Br. of CMS at 17.  CMS contends the disputed claim was not allowable because Connecticut DSS calculated it “by using the independent auditor’s definition of uncompensated care” rather than the state plan’s definition “and the independent auditors’ source data” rather than OHCA’s.  Id. at 14.  In reply, Connecticut DSS does not claim the plan language is ambiguous, but asserts that “the additional claim was fully in accord with the state plan.”  State Reply at 4.  Connecticut DSS argues that the plan definition of uncompensated care costs is “exactly” what the auditors measured, and OHCA and the auditors used the same “source data,” meaning “audited financial and cost report data submitted by the hospitals.”  Id. at 4-6.  CMS counters that no evidence shows the disputed claim was “based on a definition of uncompensated care that was included in the approved state plan for the time period in question” or “that the term ‘source data’” refers to anything but “OHCA’s calculation of uncompensated care costs.”  Sur-Reply of CMS at 2-3. 

Applying the controlling standards to the record evidence, we conclude CMS’s interpretation of the state plan is reasonable and Connecticut DSS’s interpretation is not.

1. A.    The disputed claim was not in accordance with the state plan definition of uncompensated care costs.

SPAs 03-009 and 11-012 define what uncompensated care includes: 

Uncompensated care includes the actual cost of care provided free of charge as either uninsured bad debt or charity care and the difference between the costs incurred and the payments received by disproportionate share hospitals in providing services to patients eligible for the State Medical Assistance Program. The single state agency makes payments to

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qualified disproportionate share hospitals based upon the costs they incurred for uncompensated services, the federal upper limit on aggregate state disproportionate share payments which are eligible for federal matching payments, and the amount determined to be available under state law.

State Ex. 2, at 4; State Ex. 3, at 1. 

The record supports CMS’s position that Connecticut DSS relies on a “different definition of uncompensated care that was not approved in its state plan.”  See Br. of CMS at 2.  By contrast with the approved state plan, the auditors defined uncompensated care costs variously as:

• “the cost of providing inpatient and outpatient hospital services to Medicaid eligible and uninsured individuals, less the payments received for these services,” State Ex. 9, at 3, 5;
• “the net uncompensated costs of providing inpatient and outpatient hospital services to Medicaid eligible individuals and individuals with no source of third party coverage for the inpatient and outpatient hospital services received,” id. at 6-7; and
• “the net uncompensated care costs of providing inpatient and outpatient hospital services to patients that fall into one of the following Medicaid in-State and out-of-State payment categories: Fee-for-Service Medicaid primary, Fee-for-Service Crossovers, Managed Care Medicaid primary, Managed Care Medicaid Crossover, and Uninsured individuals with no source of third party coverage for the inpatient and outpatient hospital services received,” id.

Because the auditors and OHCA applied different definitions of uncompensated care costs, their calculation methodologies and results differed also.  See State Ex. 10, at 2-4.  Connecticut DSS acknowledges that the auditors’ methodology “differs in some respects from that used by” OHCA “and that this difference is what led to the additional claim.”  State Reply at 5; see also id. at 7 (acknowledging “that the State’s initial DSH claims with respect to John Dempsey [Hospital] were calculated under a different (OHCA) methodology” than the auditors used) (emphasis omitted); State Br. at 7 (stating OHCA “explained the differences in methodology that had led to the different results”).

We disagree with Connecticut DSS’s assertion that calculating the initial DSH claims for John Dempsey Hospital under the OHCA methodology did not preclude using an alternative methodology “for purposes of the final, additional claim up to actual costs.”  See State Reply at 7.  The Board has held that a state reasonably could “revise the costs

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included in its rate calculations based on its evolving experience and collection of actual cost data,” but only where “the disputed rate recalculations do not violate the express terms of” the relevant SPA.  W. Va. Dep’t of Health & Hum. Res., DAB No. 2536, at 15, 17 (2013), recons. denied, DAB Ruling No. 2014-2 (Mar. 25, 2014).  That is not the case here.  States do have “considerable flexibility in choosing standards, methods and payment rates for each type of service included under [the] state plan.”  Utah Dep’t of Health, DAB No. 2131, at 10 (2007).  However, “states are not free to implement ad hoc changes or to ignore the methodology set out in their approved state plans.”  La. Dep’t of Health & Hosps., DAB No. 1542, at 2 (1995), aff’d, No. 3:95-1942 (M.D. La. Dec. 18, 1997); accord Utah, DAB No. 2131, at 10.  “States must use the methodology in the state plans, once adopted and approved.”  La., DAB No. 1542, at 2.  Here, Connecticut DSS did not.

We also reject Connecticut DSS’s argument that the auditors’ methodology was in fact the “CMS-dictated methodology.”  State Reply at 5.  Connecticut DSS argues that the auditor necessarily followed “the methodology that CMS has required in 42 C.F.R. § 455.304(b) and implementing guidance.”  Id.  The first problem with this assertion is one of historical timing.  SPA 11-012 (effective July 1, 2011) did reference “protocols established in the DSH Audit procedures developed by CMS,” but that SPA only came into effect during the fourth of the five FYs at issue.  Furthermore, we consider this case akin to Colorado Department of Health Care and Policy Financing, DAB No. 2057 (2006).  In that case the Board upheld disallowance of FFP that a state claimed “pursuant to rates calculated under a revised methodology that constituted a significant and substantial change from the methodology” originally submitted to CMS.  Id. at 1 (internal quotation marks omitted).  In that case, as in this, the plan referred to the performance of audits and the state sought to make “corrections” to provider costs based on audit results.  Colo., DAB No. 2057, at 3, 10-11; see State Ex. 2, at 4; State Ex. 3, at 2; State Br. at 6-7 (stating auditors found “OHCA had underestimated” John Dempsey Hospital’s uncompensated costs, so Connecticut DSS claimed “additional uncompensated costs” on the QSE form for the quarter ending March 31, 2016).  Here, as previously, “we conclude that the revisions resulting in this disallowance constitute material modifications to the rate calculation methodology itself, rather than correction of errors in the application of the methodology.”  Colo., DAB No. 2057, at 6-7. 

Connecticut DSS’s interpretation of the state plan also lacks the support of contemporaneous documentation and evidence of consistent administrative practice.  “Whether a state has consistently administered a plan provision over time may be an indication of whether the state in fact was applying an intended, official interpretation or has merely advanced an interpretation as an after-the-fact attempt to justify acting inconsistently with or simply ignoring its plan.”  Utah, DAB No. 2131, at 12.  If Connecticut’s state plan allowed upward adjustments for prior FYs based on audit results, then it is inexplicable why Connecticut DSS did not file such supplemental claims promptly after receiving the audit results for each FY.  For example, on December 29,

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2011, Connecticut DSS transmitted the audit results for FY 2008 to CMS, but in doing so never mentioned any intention, expectation, or even possibility of using the audit results to support a supplemental claim for FFP.  See State Ex. 13, at 1-2.  Subsequent transmittals from Connecticut DSS to CMS were also silent on this point.  State Ex. 14, at 1-2; State Ex. 15, at 1-2; State Ex. 16, at 1-2; State Ex. 17, at 1-3.  We recognize that Connecticut DSS “believed that OHCA would need to endorse” the use of audit calculations before Connecticut DSS filed any such claims.  1st Gilbert Decl. at 3.  Yet Connecticut DSS’s belief that it needed OHCA confirmation for its approach merely underscores that it was not the state’s prior administrative practice.   

1. B.    The disputed claim was not in accordance with the state plan requirements concerning source data.

Both SPA 03-009 and SPA 11-012 provide:

The Commissioner of Social Services determines the amount of the disproportionate share payments to be made under this section based on information provided by the Office of Health Care Access (OHCA).  The source data for calculating payments is based on data from OHCA.

State Ex. 2, at 4; State Ex. 3, at 1.  This language leaves no reasonable doubt as to the respective responsibilities of OHCA (to provide the source data for calculating DSH payments) and Connecticut DSS (to base its determination of DSH payment amounts on the source data from OHCA).

We reject Connecticut DSS’s suggestions of ambiguities in the plan that are not there.  See Md., DAB No. 3153, at 18 (“Even if we found the disputed provision ambiguous (we do not), we would not overturn the disallowance because the State has not shown that its interpretation of the provision . . . is reasonable and reflects the State’s actual intent in drafting or proposing it.”). Connecticut DSS asserts that “‘source data’ refers to inputs,” and that both OHCA and the auditors used the same “source data” of “audited financial and cost report data submitted by the hospitals.”  State Reply at 6.  However, the SPAs nowhere refer to any source for the “source data” other than OHCA.  Connecticut DSS also contends that “it was reasonable and appropriate” to conclude that “DSS could use the audits as source data for an additional claim” if OHCA agreed.  State Br. at 10.  However, as OHCA correctly recognized, Connecticut DSS “is required to adhere to the State Medicaid Plan in which it is required to use the financial data collected by OHCA.”  State Ex. 10, at 3.  The audit results are not “information provided by” OHCA or “data from OHCA,” as the plain language of the state plan requires.  State Ex. 2, at 4; State Ex. 3, at 1.  The SPAs do not authorize Connecticut DSS to base DSH payment determinations on information and data that OHCA merely approved, not provided. 

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Connecticut DSS misinterprets the unambiguous state plan provisions concerning source data for DSH payment determinations in one other key respect.  A state plan (including any amendments to it) must contain “all information necessary for CMS to determine whether the plan can be approved to serve as a basis for” FFP in the state program.  See 42 C.F.R. § 430.10; see also id. § 430.12(c)(2)(i).  Neither SPA 03-009 nor SPA 11-012 specified that Connecticut DSS could use data from audits to make upward adjustments to previously submitted claims for FFP.  Both SPA 03-009 and SPA 11-012 required that Connecticut DSS would base its payment calculations on “data from OHCA,” not auditors.  State Ex. 2, at 4; State Ex. 3, at 1.  SPA 11-012 added that DSS would follow “DSH Audit procedures developed by CMS” to “test” annual DSH payments for each hospital, but did not alert CMS in any way that Connecticut DSS planned to use auditors’ data as a basis to file supplemental claims for FFP.  Thus, Connecticut DSS’s reading of the SPAs is inconsistent with the requirement that they had to contain “all information necessary” for CMS to determine whether to approve the plan.  See 42 C.F.R. § 430.10.   

Conclusion

We uphold CMS’s disallowance of FFP in the amount of $21,627,547.