DEPARTMENTAL GRANT APPEALS BOARD
Department of Health and Human Services
SUBJECT: Massachusetts Department of Public Welfare
Docket No. 86-197
Decision No. 867
DATE: May 7, 1987
DECISION
The Massachusetts Department of Public Welfare appealed a determination
by
the Health Care Financing Administration (HCFA) disallowing $777,525
in
federal financial participation (FFP) claimed by the State under
title XIX of
the Social Security Act. HCFA disallowed the costs of
increasing
adjustments made to the per diem reimbursement rates for six
State mental
health hospitals for the period July 1, 1981 to June 30,
1982 (FY
1982). HCFA found that the rate adjustments, although approved
by the
Massachusetts Rate Setting Commission (RSC), were based on
provisions that
were not contained in the Medicaid State Plan. HCFA's
finding was based
in part on this Board's decision in Massachusetts
Department of Public
Welfare, Decision No. 730, March 20, l986, which
found that certain
adjustments to per diem rates for intermediate care
facilities for the
mentally retarded for FY 1982 were not authorized by
the State Plan.
The State argued here that Decision No. 730 was not dispositive of
this
case because the State was advancing two new arguments here that
were
not advanced there (namely, that the adjustments were authorized
by
section 10b of the State Plan and that they were also authorized by
a
provision in the RSC regulations, which was subsumed within the
State
Plan). In its reply brief, the State also argued in effect that
the
adjustments were necessary to fulfill statutory intent.
For the reasons stated below, we conclude that section 10b does
not
authorize the rate adjustments in question here. We further
conclude
that the rate adjustments were inconsistent with the RSC's
own
regulations. HCFA's action in questioning the adjustments was
not
inconsistent with title XIX, but, rather, furthered program
goals.
Accordingly, we uphold the disallowance.
The Medicaid statute and regulations
Under title XIX of the Social Security Act (Act), as in effect at
the
beginning of the rate year in question here, inpatient hospital
services
were to be reimbursed on a "reasonable cost" basis. The
Omnibus
Reconciliation Act of l981, Public Law 97-35 (OBRA), amended title
XIX
to provide that inpatient hospital services should be reimbursed
through
rates "which the State finds, and makes assurances satisfactory to
the
Secretary [of HHS], are reasonable and adequate to meet the costs
which
must be incurred by efficiently and economically operated facilities .
.
. ." Section 1902(a)(13) of the Act. OBRA also provided that
hospital
rates must take into account the situation of hospitals which serve
a
disproportionate number of low income patients with special needs.
Interim final regulations implementing the OBRA provisions were
published
September 30, 198l. 46 Fed. Reg. 47964. The preamble to
these
regulations provided that inpatient hospital plans that had been
previously
approved under the reasonable cost criteria in effect before
OBRA could
continue in operation, since these plans had been subjected
to a more
rigorous statutory standard, both substantively and in terms
of federal
review, than the amended statute required.
Both before and after the OBRA amendments, section 1902(a)(13) of the
Act
and the implementing regulations provided that (1) a state Medicaid
plan must
set out the methods and standards to be used by the state
Medicaid agency in
determining rates and (2) payments to providers must
be at rates determined
in accordance with those methods and standards.
See 42 CFR 447.201 (1980); 42
CFR 447.201, 447.252 (1981).
The State Medicaid Plan and RSC regulations
During FY 1982, the Massachusetts State Plan provided (at
Attachment
4.19-A) that the costs of inpatient hospital services were to
be
reimbursed "in accordance with the principles adopted by
the
Massachusetts Rate Setting Commission under sections 31-46 of Chapter
6A
of the Massachusetts General Laws and as approved by the Secretary"
of
HHS. State's appeal file, Ex. 8.
Both the State Plan and the RSC regulations provided for use of
a
prospective rate-setting method to compute the per diem rates for
State
mental hospitals. Under this method, actual costs reported by
a
facility for a "base year" (defined in this case as two years prior
to
the year for which the rate was being set) are adjusted for
inflation
and divided by total base year patient days to reach a per diem
rate for
that facility. This rate is multiplied by the number of
Medicaid
patient days in the rate year to determine the amount subject to
FFP.
The State Plan further provided:
Base year cost increases beyond actual
inflation may be allowed
only on grounds
described in Section 10 below, headed
Administrative Adjustments.
Section 10 provided:
A hospital may apply at any time for an
administrative
adjustment. The
following incidents may give rise to
adjustments
to the prospective rate or
to the allowed base cost.
The section contained four separate bases for
administrative
adjustments. The specific provision on which the State
relied here is
subsection b., which provided for an administrative adjustment
based on
a "substantial program change which did not require a determination
of
need." State's appeal file, Ex. 8 (emphasis added).
In requesting the rate adjustments in question here, the
Massachusetts
Department of Mental Health (DMH), which operates the State
mental
hospitals, did not specifically mention section 10b of the State
Plan.
The request invoked an RSC regulation, 114.1 CMR 5.09(1)(i), as a
basis
for the adjustments. That regulatory provision lists, as one of
ten
possible grounds for administrative adjustments to the per diem
rates,
the following:
A hospital not subject to the licensing
provisions of M.G.L.c.11,
s.51, which
did not utilize a significant number of beds
during
the base, intermediate, or rate
year due to a substantial program
change
affecting Patient days, and for which it would
be
inequitable to utilize base year
patient days in establishing
rates and
charges.
State's appeal file, Ex. 5 (emphasis added).
Based on this provision, DMH requested on April 7, 1982 that the
RSC
approve increases in the FY l982 rates for six State mental
health
hospitals. DMH proposed using intermediate year (198l) patient
days in
place of the base year (1980) patient days. The request was
made due to
"an intense deinstitutionalization effort" which had been ongoing
for
eight years and would continue for several more years. State's
appeal
file, Ex. 1. 1/ The request did not specifically allege
that it would
be inequitable to fail to raise the rates, but stated:
Attached you will find a schedule
showing the new recommended
rate for
fiscal 1982. This schedule also indicates a
8.29%
decrease in patient days. Also
attached is a schedule showing the
Medicaid dollar impact if these new rates are approved.
State's appeal file, Ex. 1.
Based on this information (and apparently without considering whether
the
existing rates were adequate), the RSC approved DMH's request at an
RSC
meeting on April 13, 1982, making the new rates effective
retroactively to
July 1, 1981.
The issues
HCFA found that the rate increases were not authorized by the State
Plan
or the RSC regulations and that, in any event, they were not
justified
by the State's deinstitutionalization efforts since even the
unadjusted
rates would have resulted in the State receiving FFP in excess of
the
federal share of actual 1982 costs for Medicaid patients in
the
hospitals. HCFA relied for its position on Board Decision No.
730. In
that decision, the Board rejected the State's argument that
rate
increases for six State-owned intermediate care facilities for
the
mentally retarded (determined by substituting intermediate year
patient
days for base year patient days in the rate calculation) were
authorized
by State Plan provisions at sections 10c and 10d and parallel
provisions
in the RSC regulations. Although the State had originally in
that case
relied on section 10b of the State Plan, the provision at issue
here,
the State did not rely on section 10b on appeal to the Board.
The
apparent reason for this was that RSC Information Bulletin
74-26-9
defined "substantial program change" to mean a new service
with
additional annual operating expenses exceeding $100,000. A
simple
decrease in patient days due to deinstitu- tionalization, the
reason
given for the rate increases, would not qualify under this
definition.
Here, the State said that it had mistakenly assumed in the prior case
that
deinstitutionalization was not a "substantial program change" under
the State
Plan or the RSC regulations. The State argued that the
history of the
RSC regulation at section 5.09(1)(i) showed that that
section was intended to
supersede the definition of "substantial program
change" in Information
Bulletin 74-26-9 and to make
deinstitutionalization a "substantial program
change" warranting an
administrative adjustment to a rate.
Therefore, the State argued, section 5.09(1)(i) of the RSC regulations
was
subsumed in section 10b of the State Plan because
deinstitutionalization is a
"substantial program change not requiring a
determination of need."
The State also took the position that, while it is appropriate for
HCFA
(and the Board) to decide whether a rate adjustment is eligible for
FFP
under the State Plan, the issue of whether a rate adjustment
is
warranted under RSC regulations is properly decided only by the
RSC.
Thus, according to the State, if the rate adjustments were authorized
by
the State Plan, it does not matter for purposes of FFP whether DMH
met
additional criteria stated only in the RSC regulations.
The State contested HCFA's position in its brief that a rate
adjustment
was authorized only if justified by an increase in a facility's
costs.
The State also challenged HCFA's calculations intended to show that
the
unadjusted rates would have resulted in the State receiving more
than
$.3 million in excess of the federal share of actual costs for
Medicaid
patients in the six State mental hospitals in FY 1982. The
State
objected to HCFA's insinuation that the State was attempting "to
fatten
its treasury by circumventing the 'normal' rate setting standards
for
private facilities." Reply brief, p. 17.
Finally, the State argued in its reply brief that section 5.09 of
the
RSC regulations was designed to allow adjustments
if
deinstitutionalization reduced rates below the "reasonable and
adequate"
standard mandated by Congress. The State pointed to the OBRA
provision
regarding hospitals which serve a disproportionate number of low
income
patients with special needs, and a later legislative clarification
of
this section. The State implied that this provision showed that
the
State could properly treat public facilities differently from
private
facilities, as section 5.09 of the RSC regulations did, and that
the
rate increases were warranted because, unlike private facilities,
the
State could not recover unreimbursed costs by passing them on to
private
pay patients.
Discussion
While we do not agree with HCFA's supporting rationale in every
respect,
we conclude that the rate increases in question here were not
authorized
by section 10b of the State Plan because deinstitutionalization
was not
the type of "substantial program change" contemplated by that
section.
We further conclude that under the circumstances here, HCFA was
not
bound to accept the RSC determination approving the rate increases;
the
adjustments were inconsistent with the formal interpretation in
RSC
regulations and were based on insufficient grounds, particularly
with
respect to four of the six hospitals. Finally, we conclude that
the
disallowance is consistent with the statute, including the
OBRA
provision concerning hospitals serving a disproportionate number of
low
income patients.
We explain each of these conclusions below.
The meaning of section 10b of the State Plan
The State is correct that section 5.09(1)(i) of the RSC regulations is
not
on its face inconsistent with section 10b of the State Plan.
Section 10b
requires only a "substantial program change not requiring a
determination of
need" and section 5.09(1)(i) refers to "a substantial
program change
affecting the number of patient days," which would not
necessarily require a
determination of need. The point, however, is
that section 5.09(1)(i)
as interpreted by the State here is inconsistent
with the State Plan
provision and, therefore, cannot reasonably be
considered "subsumed within"
the State Plan with that interpretation.
In essence, the State's position is that section 5.09(1)(i) permits a
rate
adjustment where patient population has decreased regardless of
whether any
new service is being provided or whether there is any
substantial cost
increase. This interpretation clearly conflicts with
the use of the
term "substantial program change" in both the RSC
regulation and section
10b. For the reasons discussed below, we reject
the State's contention
that the definition of "substantial program
change" in the RSC regulations
was superseded by the enactment of
section 5.09(1)(i). 2/ Even if
there were no formal interpretation of
that term, however, we would find that
section 509(1)(i) cannot
reasonably be read as encompassing a mere reduction
in patient
population. The section requires a "substantial program
change
affecting patient days." Moreover, as used in the RSC
regulations, the
concept of "program change" appears to refer to a change in
the program
of services offered by a facility; the regulations refer
elsewhere to
the "programs of health care and services" provided by
facilities.
HCFA's appeal file, Ex. 1, section 5.01(2). We also note
that the State
provided no evidence that, in approving the State Plan, HCFA
was aware
that the RSC had made any change to the concept of "substantial
program
change" as it had been used in the RSC regulations from at least
1974.
3/
The State argued that "deinstitutionalization" was a substantial
program
change because it was associated with consent decrees and mental
health
planning in the State which required it to establish
community-based
facilities, as well as to upgrade services in the existing
institutions.
This ignores the fact that the adjustments here were not based
on
program improvements in the facilities to which the rates applied
but
merely on the decrease in patient days.
In addition, an analysis of the history of the RSC regulations
indicates
that section 5.09(1)(i) was not intended as merely a more
detailed
implementation by the RSC of the rate adjustment provision appearing
as
section 10b in the State Plan. Instead, another section of the
RSC
regulations implements, or at least parallels, section 10b of the
State
Plan. The RSC regulation in effect in 1974 contained a provision
using
almost the exact wording of section 10b. This was the provision
(then
designated section 9.3(b)) which was interpreted in Information
Bulletin
74- 6-9. As the State acknowledged, the successor provision to
section
9.3(b) in the version of the RSC regulations in effect for the 1982
rate
year was section 5.09(1)(f), not the provision the State relied on
here.
Indeed, section 5.09(1)(f) is essentially section 10b with
the
definitions from Information Bulletin 74-6-9 included. 4/
Finally, the history of section 5.09(l)(i), the provision on which
the
State relied here, indicates that this section was not intended
merely
to be one example of a substantial program change not requiring
a
determination of need. Rather, the proponents of section
5.09(1)(i)
clearly viewed it as an amendment to the RSC regulations, not
merely a
clarification or more detailed implementation of existing State
Plan
provisions. See, e.g., State's
appeal file, Ex. 6, pp. 4, 6, 7, 9. The logical conclusion is
that
section 5.09(l)(i) was considered a separate basis for an
administrative
adjustment, rather than one example of an adjustment
authorized by
section 10b of the State Plan.
In summary, section 5.09(l)(i), as interpreted by the State
here,
conflicts with the published interpretation and plain meaning of
section
10b of the State Plan and, in any event, was considered a separate
basis
for adjustment. The State failed to amend its State Plan to add
this
basis for adjustment. Therefore, we conclude that the adjustments
at
issue here were not made in accordance with the methods and
standards
set out in the State Plan and that no FFP is available in the
resulting
rate increases.
The RSC regulations
We agree with the State that the key issue for purposes of
Medicaid
funding for per diem rate increases is whether they were
authorized
under the State Plan. The State also took the position,
however, that
the RSC determines whether increases are warranted under RSC
regulations
and that it is not appropriate for HCFA (or this Board) to look
behind
the RSC actions. We disagree. As we discussed in Decision
No. 730,
rate increases for State-owned facilities do not add to the
State's
costs, but merely increase federal Medicaid revenues. Where, as
here,
the wording of the request by DMH which led to the rate
increases
indicates that DMH's primary concern was increasing federal
revenues,
rather than ensuring that the facilities be reimbursed for costs
which
are reasonable and adequate for an efficiently and economically
operated
facility, HCFA and this Board may properly examine the question
of
whether the rate increases were properly granted. While our
conclusions
above are sufficient as a basis for the disallowance here,
further
support for the conclusion that the rate increases were not
authorized
is provided by an analysis of the RSC actions in approving the
rate
increases.
The logical reading of the RSC provision at 5.09(1)(i), since it uses
the
phrase "substantial program change," is that an adjustment would be
permitted
only when the circumstances constituting a "substantial
program change" under
the definition of that term in RSC Information
Bulletin 74-26-9 are
present. As HCFA pointed out, section 5.12(2) of
the RSC regulations in
effect at the time the rate increases were
approved incorporated Information
Bulletin 74-26-9 into the RSC
regulations.
The State acknowledged that HCFA was correct that RSC regulation 74-26
was
still in effect, but argued that "the legislative history
clearly
demonstrates that Section 5.09 was intended to permit rate
adjustments
due to deinstitutionalization and, therefore, under principles
of
statutory construction the new provision should prevail." Reply
brief,
p. 11.
We reject this argument for the following reasons:
o The plain meaning of section 5.12(2) of the RSC
regulations is that
the definitions in Information
Bulletin 74-26-9 apply whenever the
terms defined in
that bulletin are used in Part 5 of the RSC
regulations. Section 5.12(2) provides that the
Information
Bulletin is "to be applied as appro-
priate to the requirements of
114.1 CMR 5.00.
HCFA's appeal file, Ex. 1, p. 52.24.
o The "legislative history" on which the State relied
consists of the
transcript of a hearing held on
proposed amendments to Part 5. The
Commission
Chairman conducting the hearing stated at the outset
that the purpose of the hearing was to receive data, views,
and
arguments, and that the RSC would not discuss
its position on any
matter. The statements
from the transcript on which the State
relied were
made by persons testifying at the hearing in support
of
the amendment which resulted in section
5.09(1)(i), not by the
Commission members.
Thus, the statements are not persuasive
evidence of
what the Commission intended in adopting that section.
o The statements made at the hearing by individuals
supporting the
adoption of section 5.09(1)(i) speak
of "deinstitutionalization" to
mean not only a
reduction in population in the State facilities,
but
also to encompass other changes required by consent decrees
and
State mental health plans which required the
facilities to expand
their staff and services and
therefore increase their costs.
State's appeal file,
Ex. 6, pp. 11, 13. Thus, the "legislative
history" permits a reading of section 5.09(1)(i) which does
not
conflict with the definitions in Information
Bulletin 74-26-9.
In summary, the record simply does not support the State's position
that
section 5.09(1)(i) should be interpreted as meaning that an
adjustment
can be warranted simply on the basis of a decrease in patient days
and
that this interpretation supersedes the definition of
"substantial
program change" in Information Bulletin 74-26-9.
Even if we agreed with the State that the term "substantial
program
change" in section 5.09(1)(i) is not limited by the
regulatory
definitions, however, we would question whether the rate increases
here
were justified under that section. Section 5.09(1)(i) requires
a
finding that use of base year patient days would be inequitable.
HCFA
found that the unadjusted rates for FY 1982 would still have resulted
in
the State receiving a total of $.3 million in FFP in excess of
the
amount of federal funds which would have been provided if
reimbursement
was based on actual FY 1982 costs.
The State challenged HCFA's figures, arguing that HCFA was basing
its
calculations on "projected revenue" rather than actual revenue for
the
hospitals. According to the State, in determining whether the
hospitals
received excess reimbursement, we should consider only the $14
million
in non-State funds actually received by the hospitals, which was
clearly
insufficient to cover the $77 million in FY 1982 actual costs.
This
argument has no merit, however. The issue is not whether the
State
actually received sufficient revenue to cover all of its costs for
the
hospitals, but whether the per diem rate is reasonable and adequate
to
cover the costs that would be incurred by an efficiently
and
economically operated facility to provide a patient day of service.
We do not here adopt HCFA's calculations in their entirety because in
our
view the appropriate calculations should be performed on
a
facility-by-facility basis. The rates were set individually for
each
facility and, therefore, the adjustments should have been
considered
separately for each facility. HCFA calculated the excess of
FFP over
costs for all the facilities combined. The flaw in what HCFA
did,
however, points up a similar defect in the State's request for
the
adjustments, which also did not analyze the data relating to decrease
in
patient days by facility, but attempted to justify the rate increases
by
presenting an average decrease in patient days.
The record here indicates that, while some facilities did have
dramatic
decreases in patient days, not all of them did. Indeed, for
one
hospital (Metropolitan), the decrease in patient days during FY l981
was
almost entirely offset by an increase in patient days during FY
1982.
Moreover, taking each hospital's rate as it would have been using
base
year patient days and comparing it with the figure obtained by
dividing
actual FY 1982 costs by actual patient days shows that the
unadjusted
rates would have been sufficient to reimburse the actual per diem
costs
per patient for four out of the six facilities. 5/ Thus,
since it
would not have been inequitable to use the unadjusted rates in
those
four facilities, the adjustments granted for them were not
warranted,
even under the interpretation of section 5.09(1)(i) advanced by
the
State here.
In summary, the record supports HCFA's conclusion that the
rate
adjustments here were sought solely to increase federal
Medicaid
revenues to the State and were not justified on the basis that
a
substantial program change had rendered the rates using base
year
patient days inequitable.
The OBRA provision
HCFA took the position here that the State was circumventing the
normal
rate-setting standards applicable to private facilities in order
to
enhance the State's own treasury from federal Medicaid funds. In
its
reply brief, the State responded by pointing to the OBRA provision
which
mandated that "methods and standards developed by the State . . .
take
into account the situation of hospitals which serve a
disproportionate
number of low income patients with special needs . . .
." Section
1903(a)(13) of the Act. The State said that Congress
had reaffirmed
this mandate, as recently as October 21, 1986. According
to the State,
the administrative adjustment provision at section 5.09(1)(i)
properly
applies only to public facilities because, unlike private
facilities,
public facilities cannot shift the cost of non-charge payors such
as
Medicaid and Medicare to charge payors such as insurance companies.
The
State argued that the rate adjustments here exist to implement
Congress'
mandate regarding "reasonable and adequate" rates, especially
for
facilities serving a largely indigent population.
Contrary to what HCFA's argument suggested, we find nothing in
the
applicable provisions that prohibits a state from establishing
different
methods and standards for reimbursement of public and
private
facilities; however, states must follow the methods and standards
set
out in their state plans for all facilities to obtain FFP. As
discussed
above, the problem with the rate adjustments here is that they were
not
authorized by the State Plan.
Moreover, there is no indication that either section 10b of the State
Plan
or section 5.09(1)(i) of the RSC regulations was enacted to
implement the
OBRA provision on hospitals serving low income patients
with special needs.
Both sections predated the OBRA amendments. 6/
Nor do we think that the 1986 clarification of the OBRA provisions
applies
here. The Omnibus Reconciliation Act of 1986 contained the
following
provision, effective as though it had originally been included
in OBRA:
Nothing in . . . title [XIX] (including
section (a)(13) and
(a)(30) of this
section) shall be construed as authorizing
the
Secretary to limit the amount of
payment adjustments that may be
made
under a plan under this title with respect to hospitals
that
serve a disproportionate number of
low-income patients with
special
needs.
Pub.L. 99-509, section 9433 (emphasis added).
This provision was enacted in response to proposed regulations issued
by
HCFA which would have limited rates which states could pay to the
amount
of reimbursement which would have been paid under the system
of
reimbursement used in the Medicare program. H.R. Rep. 727, 99th
Cong.
2d Sess. 121-122 (1986); H.Conf. Rep. 1012, 99th Cong. 2d Sess.
409
(1986). Clearly, it does not prohibit a disallowance on the basis that
a
state has paid an amount which was not authorized under the state
plan.
While OBRA was intended to provide states with greater flexibility
in
adopting methods and standards for reimbursement, and HCFA's role
in
approving those methods and standards was limited to determining
whether
a state had given the requisite assurances about its methods
and
standards, each state was still required to follow the system set out
in
the state plan.
Moreover, the intent behind the OBRA amendments as a whole was to
permit
states to develop reimbursement systems designed to reduce
Medicaid
costs, such as prospective rate methodologies. As HCFA pointed
out, the
purpose behind such methodologies is circumvented if
unwarranted
adjustments are granted on a basis such as the adjustments
here. See
Decision No. 730, p. 5; see also Massachusetts Department of
Public
Welfare, Decision No. 853, March 30, 1987.
We also reject the State's position that it is permissible to
charge
Medicaid a higher amount for public facilities because the State
cannot
pass its costs on to charge payors such as insurance companies.
The
OBRA provision on hospitals serving a disproportionate number
of
patients with special needs simply recognizes that such hospitals
may
have higher than average costs. Nothing in the statute indicates
an
intent to reimburse public hospitals under Medicaid for more than
the
costs of services to Medicaid patients that would be incurred by
an
efficiently and economically operated facility, as determined
in
accordance with the methods and standards set out in the state plan.
Accordingly, we conclude that the decision here, disallowing FFP in
the
cost of rate increases for these six hospitals because those
rate
increases were not made in accordance with the State Plan, is
consistent
with the statute, including the OBRA amendments.
Conclusion
For the reasons stated above, we uphold the disallowance of FFP in
rate
increases for six State hospitals which were not authorized by the
State
Plan.
________________________________ Norval
D.
(John) Settle
________________________________ Charles
E.
Stratton
________________________________ Judith
A.
Ballard
1. The term "deinstitutionalization" generally
means the movement of
patients for whom it is appropriate out of institutions
into community
placements. As discussed below, the State sometimes used
the term to
encompass also improvements in services in the institutions,
mandated by
consent decrees or by State mental health planning efforts.
2. Information Bulletin 76-24-9 does not define
"substantial program
change" as one term, but instead defines
"substantiality" (stating:
"Total additional annual operating expenses for
the program must exceed
one hundred thousand dollars . . .") and "program
change" (stating:
"The program for which an adjustment is sought must
constitute a new
service, different in nature from existing services . .
."). As
discussed below, section 5.12 of the RSC regulations provided
that
Information Bulletin 74-26-9 was adopted under section 5.12(2) and
was
"to be applied as appropriate to the requirements of 114.1 CMR
5.00."
HCFA's appeal file, Ex. 1, p. 52.24.
3. Section 5.09(1)(i) of the RSC regulations was
enacted in 1979.
It is possible that the State Plan provisions including
section 10b were
approved earlier although the record is not clear on this
point.
Indeed, both parties submitted versions of the relevant provisions
which
had dates later than the period in question. Since the parties
agreed
on the wording of the provisions in effect during the time period,
we
did not inquire further.
4. Section 5.09(1)(f) provides:
A health care facility has undertaken a substantial
new service
during the base, intermediate, or rate
year which has generated
additional annual operating
costs in excess of $100,000 and which
is not subject
to a determination of need. . . . .
State's appeal file, Ex. 5.
5. HCFA's original explanation of its figures was
somewhat general,
but HCFA responded to the State's challenge by providing a
detailed
analysis of its calculations and how they were affected by
adjustments
to the hospitals' audited costs. The State did not in its
reply
directly contest HCFA's figures, and those figures appear
consistent
with the documents provided by the State. Using figures from
HCFA's
Exhibit 3 and State's Exhibit 10, we calculated the actual per diem
cost
and compared it to the rates as they would have been using base
year
patient days (BYPD) to obtain the following:
Facility Rate using BYPD Actual per diem cost
Taunton
$ 198.94
$ 139.25
Westborough
133.38
140.52 Metropolitan
108.41
100.11
Danvers
113.79
182.42
Medfield
150.52
132.98 Northhampton
180.33
176.81
This comparison shows that only Westborough and Danvers, the two
hospitals
with the greatest decrease in patient days, had actual per
diem costs in
excess of the rates using BYPD. Although the State could
not be
expected to anticipate in advance exactly what its actual costs
and patient
days would be, the rate increases here were not requested
until most of the
rate year had passed.
6. As mentioned above, regulations implementing the
OBRA amendments
were not published until September 30, 1981. These
regulations were
effective immediately, but did not apply to rates for fiscal
years
beginning before that date. Provisions similar to section 10b of
the
State Plan had been in effect apparently since at least 1974 and
section
5.09(1)(i) was added to the RSC regulations in