GAB Decision 606
December 12, 1984
Virginia Department of Health;
Ford, Cecilia; Garrett, Donald Ballard, Judith
Docket Nos. 83-260 and 83-263
The Virginia Department of Health (State) appealed two disallowances
by the Health Care Financing Administration (Agency). Docket No.
83-260 involves $371,917 in claims made for Medicaid reimbursement on a
Quarterly Statement of Expenditures (QER) for the quarter ended December
31, 1982; Docket No. 83-263 involves $7,408 claimed on a QER for the
quarter ended March 31, 1983.
The primary issue raised in these appeals was decided in the State's
favor in Joint Consideration - Timely Filing of Claims, Decision 576,
October 5, 1984. The sole remaining issue is whether the State's claims
were timely filed under section 306 of Public Law 96-272.
Based on a preliminary review of the record, it appeared to the Board
that the claims fell within an exception to the section 306 filing
deadlines for an adjustment to prior year costs and, therefore, were
timely filed. The Board issued an order, dated October 19, 1984,
directing the Agency to show cause why the disallowances should not be
reversed based on the analysis set out in the order. The Agency
subsequently notified the Board that it did not intend to respond
substantively to the order. (Letter dated November 19, 1984 from James
S. Feight, Jr.)
Accordingly, for the reasons stated in the order, which is attached
to this decision and made part of it, we conclude that the disallowances
should be reversed.
(2) ORDER TO SHOW CAUSE
The Health Care Financing Administration disallowed federal financial
participation (FFP) of $371,917 (Docket No. 83-260) and $7,408 (Docket
No. 83-263) claimed by the Virginia Department of Health on its
statements of expenditures for the quarters ending December 31, 1982 and
March 31, 1983, for costs related to the Medical College of Virginia and
Central State Hospital.
The primary basis for the disallowance was that the State's claims
were not timely filed under certain appropriations act provisions which
the Agency interpreted as permanently barring payment for any pre-fiscal
year 1979 expenditures not filed within a one-year time limit. in Joint
Consideration - Timely Filing of Claims, Decision No. 576, October 5,
1984, the Board held that the appropriations act provisions relied on by
the Agency did not permanently extinguish claims for pre-fiscal year
1979 expenditures.
Given the Board's holding in Decision No. 576, the question of
whether a claim has been timely filed is governed by section 306 of
Public Law 96-272. Under section 306(b), claims for pre-fiscal year
1980 expenditures must be filed by May 15, 1981.
Section 306 provides, however, that the time limits should not be
applied so as to deny payment with respect to any expenditure involving
"adjustments to prior year costs."
HHS regulations define the exception for an adjustment to prior year
costs as follows:
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 CFR 95.4 (1981).
(3) The relevant preamble explained that this exception was "limited
to claims for services or medical assistance based on interim rates that
subsequently are determined to be higher or lower than originally
claimed." 46 Fed. Reg. 3528, January 15, 1981. The preamble also noted:
"It has been our experience that in these areas subsequent adjustments
are unforeseen and unavoidable." Id.
In this case, a preliminary review of the record indicates that the
disputed claims fall within the regulatory definition of an adjustment
to prior year costs. In its appeal brief, the State described its claim
related to the Medical College of Virginia as being based on a final
settlement of cost reports and said that it had previously made and
claimed FFP in tentative payments. Similarly, the claims related to
Central State Hospital were described as based on a desk audit, where
tentative payments had previously been made and claimed for FFP. In its
response, the Agency stated that the providers "were reimbursed on an
interim basis" and that the State claimed FFP after final settlements.
Agency's brief, p. 1.
Thus, based on our preliminary analysis, it appears that the
exception applies and that the claims should be considered to be timely
filed under section 306(b).
We note that this case also raises the question of when the
expenditures were incurred. Various states have disputed the Agency
position that an expenditure related to a public provider of Medicaid
services is incurred when the provider incurs costs, rather than when
the State Medicaid agency adjusts the reimbursement rate as a result of
a cost settlement. However, in view of our preliminary analysis that
the costs in question here fall within the exception for "adjustment to
prior year costs," it does not appear at this time that it will be
necessary for the Board to reach the issue of when the expenditures were
incurred.
Accordingly, the Agency is directed to show cause, in writing, why
the Board should not proceed to decision in this case, reversing the
disallowance on the basis of Decision No. 576 and the further conclusion
that the costs in question here fall within the exception for an
"adjustment to prior year costs" and, therefore, the State's claim
was
timely filed under section 306 of Public Law 96-272 and the HHS
implementing regulations. If the Agency determines that the Board's
preliminary analysis is correct, the Agency may wish to simply notify
the Board and the State that it is (4) withdrawing the disallowance on
that basis. Otherwise, the Agency's response to this order should be
filed within 30 days of the date the Agency receives this order. The
Agency representative may wish to note that the Board is issuing similar
orders in the Board cases identified on the attached list. The Agency
may, if it wishes, submit a coordinated response.
The State is not required to respond to this order. If the Agency's
response to this order raises any new issue, the State will be given an
opportunity to reply, if fairness requires.
MARCH 19, 1985