GAB Decision 607
December 12, 1984
Maryland Department of Health and Mental Hygiene;
Ballard, Judith; Ford, Cecilia Garrett, Donald
Docket Nos. 84-144 and 84-232
The Maryland Department of Health and Mental Hygiene (State) appealed
a disallowance by the Health Care Financing Administration of costs
claimed on Quarterly Statements of Expenditures (QERs) for the Medicaid
program. Docket No. 84-144 involves $2,120,417 claimed on the QER for
the quarter ended September 30, 1984. Docket No. 84-232 involves
$552,640 claimed on the QER for the quarter ended December 31, 1983.
The primary issue raised in these appeals was dediced 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 primary basis for the disallowance here 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. The claim here was contained on the Quarterly Statement of
Expenditures for the quarter ending September 30, 1983. 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).
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 (3) 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.
Here, the State alleged that its claims involved adjustments to FY
1975 costs for which there were cost settlements in 1982 and 1983, and
the Agency did not deny that allegation.
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 raises the additional 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 agency incurs the costs, rather
than when the State 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 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.
(4) 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