California Department of Health Services, DAB No. 646 (1985)

GAB Decision 646

May 7, 1985

California Department of Health Services;
Settle, Norval D. (John); Teitz, Alexander G. Ford, Cecilia Sparks
Docket No. 83-264


The California Department of Health Services (State) appealed a
disallowance of $189,985 in federal financial participation (FFP) made
by the Health Care Financing Administration (Agency). The disallowance
was for compensation, travel, and training costs for personnel in the
Child Health Information Claiming Unit (CHIC) of the Child Health and
Disability Prevention Branch (CHDP) claimed during the fiscal year ended
June 30, 1980. The disallowed amount is the difference between the
State's claim for the 75% rate of FFP (which we will call the "enhanced
rate") for skilled professional medical personnel (SPMP) and support
staff and the 50% rate generally available for administrative
expenditures not qualifying for a higher rate under Title XIX of the
Social Security Act (Medicaid). During the course of the appeal, the
Agency agreed that one position was a SPMP position ($3,392.80); the
State conceded that it had no documentation for 24 positions and that 5
positions were not eligible for SPMP reimbursement ($48,361.35). Left
in dispute, therefore, is $138,231.64 for 64 positions. The State
argued that all 64 positions were eligible for increased FFP as support
staff for SPMP; alternatively, 56 positions were part of California's
Medicaid Mangement Information System (MMIS) and were eligible for 75%
FFP on that basis. As was emphasized in New York State Department of
Social Services, Decision No. 204, August 7, 1981, the State has the
burden to provide documentation sufficient to show that its claim for
75% FFP for the costs of support personnel (and, in this case, MMIS
workers) was proper. The State bears the burden of showing how a
position qualifies for a higher rate but has not provided sufficient
information to support a determination that it is entitled to anything
other than the 50% rate. The remaining disallowance must therefore be
upheld in its entirety. SUPPORT STAFF FOR SPMP 1. Applicable law,
regulations, and guidelines Section 1903(a) of the Social Security Act
provides for payment of:

(2) . . . 75 per centum . . . of the sums expended . . . as are
attributable to compensation or training of skilled professional medical
personnel, and staff directly supporting such personnel. . . .

* * * *

(7) 50 per centum of the remainder of the amounts expended . . . as
found necessary by the Secretary for the proper and efficient
administration of the State plan. Agency implementing regulations, 42
CFR 432.50(b)(1) (1979) and 433.15(b)(5), provide 75% FFP for SPMP and
support staff. Sections 432.50(b)(6) and 433.15(b)(6) implement the 50%
matching provision generally applicable to FFP claims for costs of
administration. Section 432.50(c)(1) provides that rates of FFP higher
than 50% "are applicable only to those portions of positions or duties
that qualify for those rates." The term "staff directly supporting such
personnel" is not defined in Title XIX. Agency regulations contain the
following definition at 42 CFR 432.2:

"Supporting staff" means secretarial, stenographic, clerical, and
other subprofessional staff whose activities are directly necessary to
the carrying out of the functions which are the responsibility of
skilled professional medical personnel. . . . The regulations are
supplemented by Part 2-41-20 of the Medical Assistance Manual (Manual).
This Part was issued in an Action Transmittal by the Social and
Rehabilition Services (predecessor agency to the Health Care Financing
Administration) in July 1975, SRS-AT-75-50. The Action Transmittal
describes Part 2-41-20 as an "(i)mplementation and interpretation of the
regulation on Federal financial participation in State expenditures for
staffing of the medical assistance program." The Manual contains the
following "principles" which are used to assess claims for 75% FFP:

B. Principles

1. General

* * * *

Support positions derive their eligibility for increased Federal
matching from their direct association with and supervision by skilled
professional medical personnel whether at the State or local level.

b. Staffing will normally include some employees engaged in functions
which are neither skilled professional medical functions nor supportive
of such functions.

Therefore, salaries and related costs of the total cadre of personnel
involved in the administration of the title XIX program are not
reimbursable at the 75 percent rate.

2. Specific

* * * *

Staff positions in which the primary function is the application of
administrative practices and procedures unrelated to the specialized
field of medical care management are eligible for 50 percent matching.

* * * *

c. Support positions claimed at 75 percent matching must directly
support skilled professional medical personnel functions.

Support staff must be in work assignments related in an immediate way
to the direct completion of the work of such professional medical
personnel (e.g., secretaries, statistical clerks, administrative
assistants).

To be eligible for 75 percent matching all such support personnel
must report directly to the skilled professional medical staff and be
supervised by such skilled staff members. Support functions not related
in such direct manner to skilled medical functions are eligible only for
50 percent matching.

Functional flow charts can provide documentation that support
positions claimed at 75 percent matching are in direct support of
skilled professional medical staff.

d. Where staff time is split among functions at different levels of
Federal matching, the portion of time in each function must be
documented.

* * * *

C. Examples of Organizational Functions

Following are examples of functions needed to operate State title XIX
programs and the expected level of Federal matching. . .

5. Audit Staff - 50 or 75 percent FFP

Personnel engaged in routine claims review, such as auditing whether
the codes correctly coincide with billed charges, are matched at 50
percent. Matching at 75 percent would apply to those skilled
professional medical personnel (and directly supporting staff) whose
function involves assessing the necessity for and adequacy of the
medical care and services provided, as in utilization review. While the
Medical Assistance Manual is not crystal clear in its discussions of
whether there is "direct association" or "direct support" or whether
work relates "in an immediate way to direct completion" of SPMP work, it
provides a basic context for examining California's evidence. We do so
with the understanding that the Agency did not intend everyone who
worked in the Medicaid program to be classified as SPMP or support
staff. As here, a state's classification of an entire unit as support
staff would be subject to close scrutiny. 2. Positions at issue The only
information about the positions in question comes from a memorandum by
the head of CHDP prepared in 1984 for this appeal (State's Exhibit G),
with an organizational flow chart attached. /1/

According to the memorandum, CHDP established Medicaid health care
requirements for children in California. The primary function of CHIC
was to process the Confidential Screening/Billing Report PM 160 claim
forms received from CHDP providers resulting in payment for authorized
medical services rendered. The form documents the medical care provided
and the needs of the child for further health services. CHIC was also
responsible for maintaining CHDP provider files and the initial handling
of PM 160s for all required program data. State's Exhibit G, p. 2. The
State originally claimed 75% FFP for every employee in CHIC. The Agency
considered the CHDP Branch Chief and a nurse consultant as SPMPs. The
Agency also allowed the enhanced rate for 7 employees of CHDP as support
staff. In the Agency's view, uncontradicted by the State, the work done
by CHIC was the routine claims processing functions such as routine
error identification, maintenance of a file listing Medicaid providers,
general data collection, and flagging of claims that might require fee
adjustments or might indicate overutilization. While these tasks were
helpful, and maybe even an essential first step, in identifying claims
and providers that a SPMP may later choose to examine further, they lack
the "immediate" and "direct" nexus that is required for 75% FFP. These
functions were performed prior to the SPMPs' involvement in a SPMP
capacity. The organizational chart submitted by the State implies
through the use of arrows that there was some sort of direct association
between the employees and the SPMP. But it does not indicate that the
specific work assignments were initiated by the SPMP in an SPMP role and
that the SPMP directly supervised the employee in the work performed.
To use a lesser standard would lead to the conclusion that almost any
function performed by an employee of the State Medicaid agency would
qualify for 75% FFP, and the limited exception to the routine 50% FFP
for administrative expenditures would be rendered meaningless. We have
no evidence that the tasks performed by the employees in question were
anything other than routine claims review. The Medical Assistance
Manual does not permit enhanced FFP for such tasks. While the SPMPs who
headed CHDP might have assessed "the necessity for and adequacy of the
medical care and services provided, as in utilization review" --
functions which qualify for 75% FFP -- there is no evidence that the
CHIC employees had the direct relationship with the SPMPs that was
necessary for the State to receive enhanced funding for them also. MMIS
STAFF Alternatively, the State argued that 56 of the 64 people in
question were working on the State's MMIS; therefore, those costs could
be reimbursed at the enhanced rate. We find that the State has not
proven that it had an HHS-approved MMIS during the period in question
and even if it had, the State provided no evidence that these people
were MMIS workers. /2/

1. Applicable law and regulations Section 1903(a)(3)(B) of the Social
Security Act provides for payment of:

75 per centum of . . . the sums expended . . . as are attributable to
the operation of (mechanized claims processing and information retrieval
systems) which are approved by the Secretary. . . . Agency
implementating regulations, 42 CFR 432.50(b)(2), 433.15(b)(4), and
433.113(a) provide 75% FFP for personnel "engaged directly" in the
operation of an MMIS which has been approved by the Administrator of the
Agency. Apparently, the Administrator has delegated this function to
the Regional Administrators (Agency Brief, p. 6). 2. Was there an
approved system? The State argued that its Exhibits C through H
demonstrated that there was an approved CHDP automated information
retrieval system in 1978 which was enhanced to do claims processing in
1979 and was approved for enhanced funding later, relating back to the
period in question. The evidence provided by the State, in conjunction
with two documents provided by the Agency (Agency Exhibit D), does not
present a clear picture of when the MMIS section upon which the CHIC
employees supposedly worked was eligible for enhanced FFP. What can be
deduced is that some sort of limited data retrieval system within CHDP
had been approved by HHS in 1977 (State's Exhibit C). In 1981, the
State received approval for enhanced reimbursement for the design,
development, and implementation of the CHDP claims processing and
information retrieval system. The State was told further that
operational costs for the CHDP claims processing subsystem would be
matched at 50% FFP "until such time as the State's inpatient/outpatient
and medical professional claim types have been reviewed and found MMIS
certifiable" (State's Exhibit D). In December 1982, the HCFA Regional
Administrator notified the State that:

The California MMIS is now considered fully operational and Federal
financial participation at the 75 percent rate may be claimed for
operational costs associated with physician provider claims effective
January 1, 1982.

(Agency's Exhibit D) Since CHIC only processed claims associated with
physician providers (Agency's Exhibit D), it does not appear that there
was approval for the section of the system on which the CHIC employees
would have been working until 1982, after the time period in question in
this appeal. 3. Did the 56 employees work on the MMIS? Even if the
State had convinced us that the CHIC MMIS section had been approved in
1979-1980, it did not provide any convincing evidence that the people in
question actually worked on the system. The Medicaid regulations state
that:

Rates of FFP in excess of 50 percent are applicable only to those
portions of the individual's working time that are devoted to the kinds
of positions or duties that qualify for those rates.

(42 CFR 432.50(c)) As set forth on page 1 of this decision and in 45
CFR Part 74, Appendix C, Part II, B.10(b), the State has a general
obligation to document costs as well as a specific obligation to support
its payroll charges with time and attendance or equivalent records for
individual employees. Salaries charged to more than one cost objective
must be supported by appropriate time distribution records. All the
State has provided for evidence that 56 CHIC employees worked on the
MMIS is a hand-written chart which lists names and what amount of salary
for each should be charged to different categories such as SPMP, support
personnel, and MMIS (State's Exhibit B). The amounts listed under both
support staff and MMIS are identical for each employee; some of the
amounts could not possibly represent full salaries since some are less
than $5000. This chart was prepared by State personnel after the
disallowance was taken, based on a list of personnel prepared by the
federal auditors and the recollection of State workers as to what these
people did in 1979-1980, according to the State (Board's Summary of
Telephone Conference Call dated September 20, 1984). A chart constructed
three or four years after the events took place based on recollections
of anonymous workers is clearly not sufficient proof that the 56
employees worked on the MMIS for a certain amount of time equal to the
amount of salary noted on the chart. Furthermore, on its face, the
chart raises as many questions as it purports to answer. We, therefore,
reject the State's alternative argument. CONCLUSION For the reasons
stated above, we find that the State has proven neither that the workers
in question were support staff to skilled professional medical personnel
nor that they worked on an approved MMIS. Therefore, we uphold the
entire disallowance. /1/ After the normal briefing schedule had been
completed, the State was given two more opportunities to add
further documentation or information into the record, but the State
indicated that it had nothing further that it could add. /2/
Because of these findings, we do not have to reach the question raised
by the Agency of whether the State could have received 75% reimbursement
for MMIS-related expenditures only if they were identified with MMIS
when the State initially claimed FFP.

JULY 18, 1985