GAB Decision 442
Docket No. 82-188
June 30, 1983
Massachusetts Department of Public Welfare;
Settle, Norval; Teitz, Alexander Garrett, Donald
The Massachusetts Department of Public Welfare (State) appealed the
disallowance by the Health Care Financing Administration (HCFA, Agency)
of $5,115,610 in federal financial participation (FFP) claimed under
Title XIX (Medicaid) of the Social Security Act (Act). The disallowance
arose from HCFA's implementation of a prior Board decision involving the
parties.
The major question presented is whether the Board should consider
issues which were within the scope of its previous decision and which
were not expressly reserved by that decision for further appeal. For
reasons stated below, we conclude that the State here has, in effect,
requested that the Board reopen and reconsider its prior decision. We
find, however, that the State has neither made a timely request nor
alleged a clear error in our prior decision. Accordingly, we will not
reopen that decision. Furthermore, with respect to the one issue
reserved for further determination by our earlier decision, HCFA
notified the Board on June 7, 1983, that it verified that the State had
repaid $976,690 to HCFA from amounts collected from providers.
Our decision is based on the written records and briefs and two
telephone conferences.
Case Background
On February 26, 1982 the Board issued its decision in Massachusetts
Department of Public Welfare, Docket No. 80-54-MA-HC, Decision No. 262.
The Board upheld HCFA's denial of $5,115,610 in FFP representing the
federal share of payments identified as overpayments to Medicaid
providers not recovered from the providers as of September 30, 1979.
The Board found that the excess payments were not allowable Medicaid
costs and that HCFA could accordingly treat that payments as
overpayments to be adjusted under section 1903(d)(2) of the Act,
regardless of whether the State had recovered the overpayments from (2)
the providers. /1/ In sustaining the disallowance, the Board recognized
the State's claim that it may have already paid back the federal share
of some of the excess payments. The Board directed HCFA to provide the
State with a reasonable opportunity to produce documentation of any such
repayment. The Board also gave the State the opportunity to appeal to
the Board any redetermination of the disallowance amount after HCFA
reviewed the State's documentation concerning repayment.
On September 20, 1982 HCFA sent the State a letter conveying its
final determination concerning the implementation of Decision No. 262.
The letter detailed HCFA's attempt to implement the decision and noted
that the State had received several extensions of time over a period of
four and a half months to submit any documentation, but, as of August
27, 1982, had failed to do so. The letter stated that the original
disallowance amount of $5,115,610 remained unchanged, but also gave the
State the opportunity to appeal this final Agency decision to the Board.
On October 19, 1982 the State filed a Notice of Appeal, and on
December 27, 1982 submitted its brief and appeal file. The appeal file
contained documentation previously promised by the State concerning
repayment as well as documentation concerning additional issues. In its
brief the State claimed the disallowance should be reduced by $2,550,340
(from $5,115,610 to $2,565,230) in the following areas:
$986,336 already collected and credited to HCFA.
$632,201 representing increases in final rates for two providers,
Medico and Carex, which were approved by the State Rate Setting
Commission. The State argued that to the extent increases in these
rates had been approved by the Commission, there would be no
overpayments required to be returned to HCFA.
(3) $920,829 representing 70 separate final rates which were the
subjects of State administrative appeals as of September 30, 1979 (the
end of the audited period in Board Docket No. 80-54-MA-HC). The State
argued that, since the State appeals process had not completed review of
the rate appeals before the close of the audit, no overpayment could be
determined by HCFA and thereafter recovered.
$10,974 representing overpayments which were not found before March
30, 1979 (two quarters before September 30, 1979). The State argued
that since these overpayments had not been "found" at least two quarters
before the close of the audit, HCFA could not recover them pursuant to
regulations in effect at the time of the audit.
Initially HCFA stated that it would review only the documentation
pertaining to the amount purportedly already collected and credited to
HCFA. This was the only issue which the Board left unresolved in its
Decision No. 262. Later, in the course of the appeal, HCFA agreed to
review all the documentation submitted by the State except for that
concerning the $920,829 allegedly representing rates in the
administrative appeals process (the third item above). HCFA did not
seek to verify the amount of $920,829 attributable to providers in the
appeals process as of September 30, 1979, because it considered the
appeal status question irrelevant to the disposition of this case. On
June 7, 1983 HCFA reported in findings on the documentation submitted by
the State:
HCFA verified that the State had repaid $976,690 to HCFA from amounts
collected from providers. The difference of $9,646 from that claimed by
the State pertained to two providers which had not participated in the
Medicaid program.
Regarding the Medico and Carex facilities, HCFA determined that of
the $332,112 attributable to Medico, $26,673 had been recovered by the
State and repaid to HCFA. HCFA, however, was not able to verify any of
the claimed Medico rate increases. Of the $300,089 attributable to
Carex, HCFA was able to verify some of the rate increases claimed by the
State and accordingly withdrew $134,456 of the disallowance.
HCFA affirmed the disallowance of $10,974 because, although the
overpayment was not determined until May 1979 (less than two quarters
prior to the (4) quarter ending September 30, 1979), HCFA's review of
the State's records indicated that the amount had not been repaid to the
federal government. HCFA stated that it did not believe the State would
be prejudiced by including this amount in the disallowance and that it
would be more practical for the Board to consider this amount with the
rest of the disallowance rather than opening a separate appeal.
During the course of the appeal the focus of the case narrowed
primarily to the $920,829 provider appeal issue concerning which HCFA
had refused to review documentation. While briefing on that issue was
proceeding HCFA reviewed the State's documentation on the other issues
previously identified. After completing its June 7 review, HCFA
concluded that the documentation was deficient in certain respects. We
will discuss briefly the procedural and substantive issues relating to
those issues at the close of our decision. First, however, we discuss
whether the disallowance should be reduced for amounts attributable to
final rates which were the subject of administrative appeals by
providers on September 30, 1979.
Citing a regulation, 42 CFR 447.296 (1978), and an Agency
Transmittal, HCFA-AT-77-85 (September 1, 1977), the State argued that it
was under no obligation to account for these amounts because no
"overpayment" had been "found" within the meaning of the
regulation
until the State administrative appeal had been concluded and the rate
calculation upheld. The State reasoned, "Since HCFA's disallowance was
calculated as of September 30, 1979, the amount attributable to Final
Rates pending appeal on that date must be deducted from the
disallowance." (State's Brief, p. 8)
HCFA responded by arguing that, on the basis of the doctrine of res
judicata, the Board should not consider the State's argument. HCFA
contended that all the facts involved in this appeal were identical to
those involved in Decision No. 262. HCFA argued that there the State
had a reasonable opportunity to advance all its arguments, and the
State's failure to present its arguments and develop facts at that time
barred the State from asserting them in this appeal. Even if the Board
should decide to review the State's argument concerning the rates being
administratively appealed, HCFA argued, the Board should find that the
regulation relied upon by the State has been rescinded, thereby
nullifying the Action Transmittal which was based on the regulation.
Furthermore, according to (5) HCFA, both the regulation and the Action
Transmittal were only procedural in nature, pertaining to when states
were required to repay overpayments, and not affecting the substantive
basis for a disallowance.
In response the State argued that res judicata was inapplicable to
the facts of this appeal. Rather, the State contended, the doctrine of
the law of the case should apply because this appeal involved questions
of law or facts that were not decided by the Board in the previous
decision.
Discussion
I. Was the issue of the propriety of HCFA's adjustment for overpayments
that were the subject of provider appeals covered in Board Decision No.
262?
The State argued that this issue had not been resolved with finality
by the Board's previous decision. The State contended, "(It) is readily
apparent from inspection of the decision and the Docket in 80-54 that
the rate appeal argument presented by the State in the present
proceeding was not squarely ruled on, nor were the facts which support
the State's position on this issue presented to the Board." (State
Response to HCFA's Reply Brief, p. 5) According to the State, the Board
"did not fully grasp the precise argument which the State was attempting
to present," apparently because the Board did not understand that the
crux of the State's argument was that the rates were not final because
the appeals were pending on September 30, 1979. The State contended
that it was not until the conference calls held in the present appeal
that the Board acquired a complete understanding of the State's
argument. Having submitted all the relevant facts pertaining to this
argument, the State concluded, "Since Decision 262 did not squarely
address and overrule the State's argument on this point, the decision is
not law of the case as concerns this argument and the Board is not
barred from now considering it." (Id., p. 6)
An exhaustive review of the record in Docket No. 80-54-MA-HC reveals
that the State never raised this argument in the earlier case. At the
most, there was, as noted on page 17 of Decision No. 262, a cursory
reference in the State's summary analysis of its own documentation to
"Appeals" with no additional information or explanation. Even if our
review of the record overlooked an instance where the State may ave
raised this argument, the State had the opportunity, as it was in
possession of (6) its own records, to present facts regarding the
appeals, yet failed to do so.
Thus, we think it sufficient to declare the State did not raise the
issue of the provider appeals in the earlier case despite the
opportunity to do so. The Board fully dealt with all issues before it
and reached a determination that HCFA had a right to rely on as final.
In Decision No. 262 the Board did leave open one area, concerning
whether the State had already repaid certain amounts. But we believe
that the issue of the provider appeals was covered, to the extent it was
raised, within the scope of our earlier decision.
II. Should the Board reconsider Decision No. 262?
The State further argued that if Decision No. 262 did resolve the
issue, it did so erroneously. Although the State never made a formal
request, we consider that the State, by implication, has requested that
the Board reconsider its previous decision.
Among the Board's powers and responsibilities is the power "to
reconsider a Board decision where a party promptly alleges a clear error
of fact or law." 45 CFR 16.13. Thus, in order for a party to get
reconsideration of an adverse decision, it must act in a timely fashion
and specifically allege how the decision was factually or legally
incorrect.
As to the first requirement of promptness, the Board's records
indicate that the State received Board Decision No. 262 on March 13,
1982. If the State felt that the decision was incorrect because the
Board overlooked some factual matter or misinterpreted the applicable
law, it could have sought immediate reconsideration from the Board. The
State, however, did not contact the Board until October 19, 1982, only
ater HCFA had issued its letter stating it would implement the decision.
This letter resulted from the State's continued failure to present
documentation as requested in December No. 262. Thus, we conclude that
the State failed to act promptly as required by the Board's regulations.
Nor do we find that the State alleged a clear error of fact or law.
Under section 1903(d)(2) of the Act, HCFA may begin proceedings to
recover an overpayment immediately after having determined it to exist.
The regulation at issue, 42 CFR 447.296, giving the State two quarters
to adjust for an overpayment once it is found was rescinded on September
30, 1981. (46 Fed. Reg. 47971) As HCFA argued, this regulation and
implementing policy (7) instruction /2,/, setting out the procedures for
according for overpayments by the State, need not be applied by HCFA
following its recision in determining which overpayments are within the
parameters of the disallowance.
Finally, even if 42 CFR 447.296 were somehow applicable, it arguably
addresses the situation where the State itself must adjust for an
overpayment, not when HCFA, based on its own disallowance determination,
may adjust for overpayments.
We also note that the State here had never even demonstrated that it
would be entitled to relief under 42 CFR 447.296. The State has not
identified which, if any, of the alleged provider appeals are still
pending within the State administrative review system. Indeed, the
State would have us conclude that such a demonstration is not necessary
since, according to the State, an adjustment under the regulation would
not have been required before the close of the audit period based on the
alleged pendency of the provider appeals at that time. This argument is
surprising, given the fact that the State is requesting (and the Agency
has permitted) downward revisions in the disallowance amount based on
factors favoring the State which transpired after the audit period,
e.g., State repayments to HCFA based on what the State had actually
recovered from the providers.
For the above reasons, we will not reconsider Decision No. 262.
III. The issues raised by HCFA's review of the State's documentation:
the rate increases for Medico and Carex, and the $10,974.
As stated on page 2 of this decision, the State alleged that the rate
increases for Medico and Carex had been approved, and that the $10,974
alleged overpayment had not been found at least two quarters before the
close of the audit.
(8) HCFA argued that its review of these issues after a Board
decision negative to the State was purely discretionary. The issues
were not directly raised in the prior decision nor had they been
reserved by the Board in that decision. Accordingly, it is our view
that the Board may consider these issues only if the State demonstrates
that it meets the standard for reconsideration of a prior Board decision
which it has not yet done. Therefore, we need not address the issues
further here. This, of course, is not intended to preclude further
negotiation by the parties should they wish to do so.
Further, with respect to the issue of the overpayments in the amount
of $10,974, we would not in any event be persuaded that the State should
not repay this amount for the reasons already developed in our
discussion of the provider appeal issue. The State is, in effect,
requesting HCFA to go through the needless formality of issuing an new
disallowance for the $10,974, when we have already decided that
overpayments in that amount occurred during the audit period.
Conclusion
The State appealed $2,550,340 of the disallowance of $5,115,610
originally sustained in Decision No. 262. For the reasons stated above,
we sustain that portion of the original disallowance, appealed by the
State in this appeal, in the reduced amount of $1,412,521. /3/
/1/ The Board subsequently reached the same determination in
several other cases. See, e.g., Florida Department of Health and
Rehabilitative Services, Decision No. 296, May 14, 1982; New York State
Department of Social Services, Decision No. 311, June 16, 1982; and
Illinois Department of Public Aid, Decision No. 404, March 31, 1983.
/2/ HCFA-AT-77-85 defined "the quarter in which found" provision of
the
regulation as "the quarter during which the administrative hearing
procedures of the State have been exhausted and a determination of
overpayment has been sustained." Although never formally repealed, this
Action Transmittal became inoperative when the regulation on which it
was based was rescinded. /3/ $2,550,340 - $976,690 (amounts
already repaid) - $26,763 (amount for Medico repaid) - $134,456 (rate
increase for Carex) = $1,412,521.
JULY 07, 1984