GAB Decision 285
April 29, 1982 North Carolina Department of Human Resources; Docket No.
81-63-NC-HD Garrett, Donald; Settle, Norval Ford, Cecilia
The North Carolina Department of Human Resources (State/Department)
appealed part of a disallowance of $30,225 in federal financial
participation (FFP) issued by the Office of Human Development Services
(Agency). The disallowance was based upon an audit conducted by the HHS
Audit Agency. The Audit Agency recommended disallowance upon finding
that the State paid provider claims for certain sterilizations before
obtaining consent forms as required by 42 CFR 441.256. For the reasons
discussed below, we uphold the disallowance.
I. BACKGROUND
The HHS Audit Agency audited the State's implementation of revised
sterilization regulations for the period March 8, 1979 through June 30,
1979. The audit covered three programs administered by three divisions
of the Department, including Title XX of the Social Security Act which
is administered by the Division of Social Services. The auditors found
that the State had improperly paid $30,225 in FFP from Title XX funds
for sterilization claims, since it had not first obtained proper
documentation of informed consent.
The State appealed $17,497 /1/ of the disallowed costs, maintaining
that it had completed consent forms on hand for claims in this amount.
/2/
The material facts of this appeal are not in dispute. The State's
sterilization program under Title XX operates in the following manner.
A social worker from the County Department of Social Services meets (2)
with the person who wishes to be sterilized. Before the patient signs
the consent form, the social worker counsels the patient regarding the
prospective sterilization so that the person is aware of the
consequences of the operation. After the patient consents to the
procedure, the patient is referred to the surgeon who will perform the
operation. The surgeon receives the original signed consent form from
the Department of Social Services, as well as a form authorizing payment
for the surgery. The surgeon then must wait an additional 30 days
before completing the consent form and performing the operation. When
the surgeon receives the original consent form and the authorization
form, the surgeon forwards only an authorization form to the providers
of ancillary services (also known as secondary providers), such as the
anesthesiologist. At the time of the operation, the surgeon completes
and signs the original consent form.
The surgeon has a twelve month period in which to submit a claim for
services. In presenting its case to the Board, the State indicated that
no strict pattern is followed in submitting the claims, that is, some
surgeons may accumulate claims while others submit claims as they arise.
Claims for payment of FFP for Title XX sterilization services are
processed and paid by a contractor. The State indicated that the
contractor was instructed to pay claims from secondary providers only
after receiving a valid consent form from the surgeon. However, the
State admits that, contrary to its instructions, the contractor
processed and paid a group of claims from secondary providers without
first receiving the surgeons' claims containing the completed consent
forms. Claims from the secondary providers did, however, include the
appropriate authorization forms (secondary providers were not required
to include consent forms with their claims).
Since appealing to the Board, the State has repaid the amount in
controversy. The State indicated that it had not sought reimbursement
from the providers whose claims were paid, because they were not at
fault. The State argued that a reasonable resolution to this appeal
would be to allow the State to resubmit the claims in question, since it
had now obtained complete documentation.
The Agency argued that the controlling regulation prohibits paying
FFP for sterilizations if the State paid the provider before receiving a
properly executed consent form. Any resubmission of the State's claims,
as is requested here, would, in the Agency's opinion, (3) circumvent the
clear language of the regulation. /3/
II ANALYSIS
The controlling regulation, for purposes of this appeal, is found at
42 CFR 441.256 and states:
FFP is not available in expenditures for any sterilization or
hysterectomy unless the Medicaid agency, before making payment, obtained
documentation showing that the requirements of this subpart were met.
This documentation must include a consent form . . . . /4/
The legislative history of federal sterilization regulations reflects
an underlying concern for the well being of those persons who might be
sterilized. (See, 43 Fed. Reg. 52146-48 et. seq., November 8, 1978)
States seeking fedeal reimbursement for sterilizations translate this
concern into a reality by complying with regulations such as those found
at 441.256. Without proof of compliance, there is no federal
reimbursement.
We believe the State has demonstrated its willingness to insure that
the dangers these regulations seek to control are overcome, since it has
implemented a detailed informed consent process for its Title XX (4)
program. As described above, sterilizations under the State's Title XX
program are performed only after a period of counseling by a social
worker, followed by the waiting period prescribed by regulation. This
is in contrast to Title XIX (Medicaid) sterilizations where the State is
not actively involved in the informed consent process. Also, the Title
XX claims from ancillary providers were accompanied by authorization
forms which indicated that at least the initial informed consent
requirements were met.
Unfortunately, for the State, the regulation governing the
availability of FFP for sterilizations does not differentiate between
Title XIX, Title XX or any other program to which it applies. It
clearly states that FFP is not available for sterilizations unless the
State agency, before making payment, obtained the proper documentation
including a consent form.
The Agency interpretation that failure to meet this condition bars
FFP is supported by the language of the regulation, which establishes,
as a condition precedent to FFP, that the State must have obtained the
consent form before making payment. The preamble to the final rule
promulgating section 441.256 indicates that this condition had a purpose
separate from the general purpose of ensuring informed consent in
sterilizations, i.e., to facilitate enforcement of the informed consent
provisions. (43 Fed. Reg. 52147, November 8, 1978)
The State agreed that its contractor erroneously paid claims by
secondary providers prior to obtaining the consent forms. The State
merely argued that those forms are now on hand and show full compliance
by the State, the providers, and the patients. The State did not
dispute the applicability of section 441.256, per se, but rather the
unfair result of the Agency's rigid interpretation that violation of the
provision is a bar to FFP even after the State obtains the necessary
documentation and it is clear that the substantive requirements for
informed consent were met. Thus, the State has asked the Board if it
may resubmit the claims.
Under 45 CFR 16.14 (1981) the Board is "bound by all applicable laws
and regulations." We do not decide here that the State cannot resubmit
its claim, but rather that the Board cannot require the Agency to apply
its regulation to permit FFP under these circumstances. We agree with
the State that the regulatory purpose of ensuring that informed consent
was given for these sterilizations was met. The regulations further
require, however, that a specific precedure must be followed as a (5)
condition for FFP. The State's contractor did not follow the procedure
dictated by the regulation. /5/
While we uphold the disallowance based on the regulation, we
nevertheless find the Agency's literal application of the regulation in
the facts of this case unfortunate. We suggest that the Agency may wish
to examine further whether it has any authority to waive the
procondition to payment set out in the regulation, under the particular
circumstances here.
III. CONCLUSION
We uphold the disallowance in the amount of $17,497. /1/ The amount
in controversy resulted from claims totalling $19,441 submitted
by the State and disallowed by the Agency. Those claims would have been
eligible for FFP at a 90% rate. Hence, 90% x $19,441 = $17,497 in
disallowed FFP. /2/ The parties first attempted to resolve this
dispute through mediation, as provided for at 45 CFR 16.18 (1981). When
they were unsuccessful, they terminated the mediation process so the
Board could issue a decision on the merits. Each party then submitted a
summary of its position on appeal. /3/ The Agency also maintained that
the State's request that the Board rule that the State may resubmit its
claims was a request for a declaratory judgment, and that a decision now
would be premature and would exceed the Board's authority since the
Agency had not issued a final written decision on a resubmitted claim.
(Summary of Agency's Position, pp. 1-2, April 21, 1982) We do not agree
that the State must resubmit its claims before the Board can consider
this dispute. When it appealed the disallowance, the State asserted
that it had received the required consent forms. The question is whether
the Agency can continue to deny FFP based on the requirements of 42 CFR
441.256 once the State (or its contractor) has obtained the necessary
documentation and it is clear that the substantive informed consent
requirements were met. The Board will not avoid deciding that issue
merely because the State has, in good faith, repaid the disallowance and
wants to resubmit its claim. The same question would be presented if
the State had retained the disallowed funds and merely asserted that the
disallowance should be overturned. /4/ This regulation is made
applicable to Title XX sterilizations by 45 CFR 228.63(c). /5/
The Agency also indicated that there may be other bars to the State's
ability to successfully resubmit, although it has not elaborated on
them.
OCTOBER 22, 1983