Michigan Department of Social Services, DAB No. 971 (1988)

DEPARTMENTAL GRANT APPEALS BOARD

Department of Health and Human Services

SUBJECT:  Michigan Department  of Social Services

Docket No. 88-8
Decision No. 971

DATE:  July 28, 1988

DECISION

The Michigan Department of Social Services (Michigan) appealed a
determination by the Health Care Financing Administration (HCFA)
disallowing $7,258,000 in federal financial participation (FFP) claimed
under Title XIX (Medicaid) of the Social Security Act (Act).  The
disallowance was based on a HCFA review of State records which indicated
that Michigan had not credited the federal government with its share of
excess or improper payments to hospitals, to long-term care providers,
and to certain providers identified through the Surveillance Utilization
Review System.

For the reasons stated below, we uphold the disallowance in part and
reverse it in part, subject to the conditions discussed below.

I.   HCFA may require a state to adjust for the federal share of
overpayments regardless of whether the state has recovered from the
provider.

Title XIX of the Act authorizes federal grants to aid in financing state
programs which provide medical assistance and related services to needy
individuals, in accordance with a state plan.  The Secretary of Health
and Human Services is required to pay a percentage of the "total amount
expended as medical assistance under the State plan" and associated
administrative costs.  Section 1903(a) of the Act.  "Medical assistance"
is defined in section 1905(a) of the Act generally as payment for
covered services provided to individuals who meet specified eligibility
requirements.  Other provisions require states to establish methods and
standards setting provider reimbursement rates, and to follow those
methods and standards.  See, e.g., sections 1902(a)(13)(A) and (a)(30)
of the Act; 42 C.F.R. 447.252(a)(2) and 447.253(b)(1982).

The Secretary is authorized to make quarterly advances of the federal
share of estimated Medicaid expenditures in amounts:

     reduced or increased to the extent of any overpayment or
     underpayment which the Secretary determines was made under this
     section to such State for any prior quarter and with respect to
     which adjustment has not already been made under this subsection. .
     . .

Section 1903(d)(2).

In numerous cases involving excess or improper payments by states to
Medicaid providers, this Board has held that, under section 1903(d)(2),
HCFA may require adjustment of the grant award for the federal share of
firmly established overpayments, even if a state has not yet recovered
these amounts from the providers.  The Board reasoned that excess or
improper payments are not "medical assistance" within the meaning of
sections 1903(a)(1) and 1905(a) of the Act.  The Board recognized that a
state plan may permit a state to pay an interim rate (essentially an
estimate of a provider's per diem costs) but found that any excess over
the final rate, determined in accordance with the reimbursement methods
set out in the state plan, was not "medical assistance" in which the
federal government had agreed to participate.

The Board found no basis for concluding that adjustment of the grant
award should be limited to the federal share of those improper or excess
payments which a state has already recouped from a provider.  The Board
considered arguments, such as those repeated by Michigan in its appeal
here, that the term "overpayment" in section 1903(d)(2) is not clearly
defined and is limited in the context of the Act by section 1903(d)(3)
to include only amounts which the State has already recouped.  Section
1903(d)(3) of the Act states:

     The pro rata share to which the United States is equitably entitled
     . . . of the net amount recovered during any quarter by the State .
     . . with respect to medical assistance furnished under the State
     plan shall be considered an overpayment to be adjusted under this
     subsection.

In prior Board cases, the Board found that section 1903(d)(3) applies
only to those amounts which would be allowable as "medical assistance
furnished under the State plan."  This would include recoveries from
third parties, such as relatives or insurers, of amounts properly paid
as medical assistance.  The Board concluded that the section does not
preclude treatment as overpayments of amounts unallowable as medical
assistance.   See, e.g., Arkansas Dept. of Human Services, DGAB No. 717
(1986); New York Dept. of Social Services, DGAB No. 311 (1982).

The Board's prior holdings on overpayments issues have been upheld in
three decisions by United States Courts of Appeals:  Massachusetts v.
Secretary, 749 F.2d 89 (1st Cir. 1984), cert. denied, 472 U.S. 1017
(1985); Perales v. Heckler, 762 F.2d 226 (2d Cir. 1985); and Missouri
Department of Social Services v. Bowen, 804 F.2d 1035 (8th Cir. 1986).

Michigan presented no new arguments concerning the interpretation of the
statutory language.  After considering Michigan's arguments on related
issues discussed below, we reject Michigan's contention that the Board
misinterpreted the scope of section 1903(d)(2) and we reaffirm the
Board's prior holdings.  Thus, we conclude that, in general, HCFA may
require Michigan to adjust for the federal share of excess or improper
payments to providers, and need not wait until Michigan recovers the
overpayments from the providers.

     a.   The federal-state cooperative relationship does not compel a
     different result.

Michigan argued that placing the full burden of unrecoverable Medicaid
overpayments on the State is inconsistent with the nature of the program
as a federal-state partnership, as discussed in the case of Harris v.
McRae, 448 U.S. 297 (1980).  The Board has considered this argument in
several cases and has concluded that, in light of the fact that the
states have primary responsibility for administering the program and
preventing or recouping improper payments in the first instance, it is
indeed consistent with the partnership concept to place the burden of
unrecoverable payments on states.   New York State Dept. of Social
Services, DGAB No. 311 (1982).  As the First Circuit stated in
Massachusetts v. Secretary, supra, in which it upheld the Board on the
issue of which party should bear the loss when a provider has declared
bankruptcy:

     Since only Massachusetts [the appellant state] deals directly with
     the providers, and since the state is empowered to perform on-site
     audits of these institutions, it is clearly the party best able to
     minimize the risks resulting from dealing with insolvent providers.
     The fact that Massachusetts will in any event bear a share of the
     loss, and so already has some incentive to minimize these risks,
     diminishes but does not destroy the force of this observation.
     Placing an additional burden on the state will increase its
     incentive to take care, whereas the Secretary remains powerless to
     reduce the risks no matter what the costs imposed on her.

Id. at 96.

For these reasons, we reject Michigan's argument that placing the burden
of unrecoverable overpayments on states is inconsistent with the
federal-state partnership.

     b.   The federal government did not "agree" to participate in
     excess or improper payments which were proper when made.

Michigan also argued that, because many of the disputed amounts were
proper payments under the approved State plan when made, section
1903(d)(2) should not apply until there is a final determination that
the amounts were overpayments and until the erroneous amounts are
recovered.  Michigan asserted that the federal government "has given its
approval for the state to make these payments to the provider, but now
does not want to participate in the consequences of that approval."
Michigan's Brief, p. 12.  Michigan argued, essentially, that excess
payments, and the possibility of their loss, are necessary
administrative costs of administering the state plan in which the
federal government should share, particularly when the payments were
proper when originally made to the provider.

The fact that the payments may have been proper at one time under the
particular payment reimbursement system adopted by Michigan does not
justify federal participation after Michigan itself has determined that
the payments were excessive.  As the Board held in New York Dept. of
Social Services, DGAB No. 311 (1982), HCFA may disallow FFP in payments
which exceed the rates ultimately determined to be proper under the
state plan.  Congress specifically provided for adjustment for
overpayments, and did not make an exception for overpayments unrecovered
by states (except as noted below).

Although the Board has recognized in prior cases that some excess or
improper payments may be unavoidable in administering a medical
assistance program, this does not provide a basis to require federal
participation in these overpayments, for reasons similar to those
discussed in reference to the nature of the federal-state partnership.
Congress provided for federal participation only in amounts expended for
designated purposes: for example, as medical assistance under the state
plan (section 1903(a)(1) of the Act) and for the proper and efficient
administration of the state plan, in amounts found by the Secretary to
be necessary (section 1903(a)(7) of the Act).  Congress did not provide
for federal participation in all "out-of-pocket" costs which might be
incurred by states, such as payments outside the scope of state plans
and state reimbursement systems.  See Massachusetts v. Secretary, supra,
at 95.  Since improper or excess payments do not further the purposes of
Title XIX, HCFA reasonably determined that, in administering medical
assistance programs, states bear the burden of minimizing such payments
and recouping them in a timely manner.

     c.   The federal government is not required to participate in
     improper or excess payments to bankrupt or insolvent providers.

The reasoning discussed above applies equally to improper or excess
payments to both solvent and insolvent providers.  Michigan argued,
however, that the federal government should participate in overpayments
to bankrupt providers since states are precluded from recovery by
federal bankruptcy law and thus it is "logical" that the federal
government be precluded from collecting a share of the
federally-discharged debt.  In this argument, Michigan erred in two
basic assumptions.  The first is that a connection can be drawn between
the federal role in bankruptcy law and the federal interest in the
Medicaid program.  The federal involvement in bankruptcy is based on the
federal interest in uniform laws among the states in this important area
of commercial regulation, see Railway Labor Executives Association v.
Gibbons, 455 U.S. 457, 471-72 (1982), not on a federal commitment to
assume responsibility for adjudicated debts.  Michigan's logic also
neglects the federal and state governments' different roles in the
Medicaid program; states administer the program and contract directly
with providers.  The federal government does not control that
contractual relationship, and is not directly liable under it.  The
states have the ability to ensure that the program contracts with
responsible providers, and there is no inherent logic in the federal
government sharing in risks that a particular provider will become
insolvent (although Congress and HCFA are not precluded from choosing to
do so).

Michigan also alleged that Congress had intended that the federal
government should participate in overpayments to bankrupt or insolvent
providers.  Michigan cited section 9512 of COBRA, which added section
1903(d)(2)(D) to the Act, and which provided that, for overpayments
identified for quarters beginning on or after October 1, 1985, states
would not be required to return the federal share of unrecoverable
overpayments, including those to bankrupt providers or those which are
"otherwise uncollectable."  Although Michigan did not deny that the
disputed amounts in this case had been paid for quarters prior to 1985,
Michigan argued that Congress, in passing this amendment, "merely wished
to clarify past intent."  Michigan's Brief, pp. 22-23.

Michigan's argument ignores the fact that Congress did not explicitly
make the amendment retroactive.  In the legislative history, Congress
recognized that the prior practice was that states must refund the
federal share of an overpayment immediately upon discovery but did not
indicate that it wished to change this practice retroactively.  S. Rep.
No. 146, 99th Cong., 1st Sess., 314-15 (1985).

Thus, we conclude that HCFA may require states to adjust claims for
federal funds to account for excess or improper payments, even when a
state may be unable to recover the funds from providers.

II.  HCFA may rely on state overpayment records absent some showing why
those findings were not reliable.

Michigan argued that HCFA should not rely on state records for this
disallowance since those records may not be final determinations
concerning these overpayments.  The Board has considered the use of
state overpayment audits and other records in numerous prior decisions.
See, e.g., Ohio Dept. of Public Welfare, DGAB No. 637 (1985).  The Board
has held that HCFA may reasonably rely on state records when the
following criteria have been met:

     -    HCFA provides sufficient detail to identify the records from
     which the disallowed amounts are derived.

     -    The State is provided an opportunity to show that:

  - adjustments have been made to the state findings;

   - the records were not reliable for some reason;

   - the State has already recovered the amount identified as an
   overpayment and has already adjusted its claims to account for
   the federal share; and

   - the State never claimed FFP in the overpayment in the first
   place.

See Pennsylvania Dept. of Public Welfare, DGAB No. 765 (1986).

The Board developed this approach in the absence of any clear HCFA
policy on when a state would be considered to have "identified" or
"found" overpayments so that the state would be required to report the
overpayment and credit the federal government with its share.  See Ohio,
supra; Pennsylvania, supra.  The resolution of this issue does not
affect the underlying obligation to account for overpayments; it affects
only the timing of the accounting.  The Board has said that, in
analyzing the issue, it would consider the particular circumstances in
determining the adequacy of the record to support a proposed
disallowance including factors such as the nature of the overpayments
involved, the extent to which HCFA independently determined that the
state claimed unallowable costs, the issues raised by the state, and the
evidence the state provided in support of its positions.

In this case, Michigan has had an opportunity to present arguments and
evidence about why HCFA should not rely on state records for its
disallowance.  We discuss these arguments below.

     a.   Amounts no longer disputed because of repayment or revision of
     State findings

Michigan alleged that of the $1,910,249 in outstanding overpayments to
hospitals which the federal auditors had found in State records, $12,414
had been collected from Grant Hospital, a closed but not bankrupt
hospital.  Michigan also alleged that revised audits had been accepted
by it which documented that $548,279 had been incorrectly identified as
an overpayment to the Wayne County General Hospital.  HCFA agreed to
reduce the disallowance by the federal share, amounting to $280,539, to
account for these adjustments subject to receipt of appropriate
documentation that the federal government had been credited with its
share of the Grant Hospital repayment.  HCFA's Brief, pp. 3-4.  Michigan
provided some of the requested documentation with its reply brief, in
Exhibit T.

Michigan also alleged that $666,313 of the $1,581,031 in overpayments to
providers identified through Michigan's Surveillance Utilization Review
System (SURS) was no longer "unrecoverable."  It is unclear whether
Michigan meant that it had, in fact, recovered these overpayments from
providers and credited the federal share appropriately.  Michigan
further stated that, of the remaining amount identified through its
SURS, it is contesting only $788,918 in overpayments, or $394,488 of
disallowed FFP.  Again it is unclear whether Michigan had already
credited the federal government with a share of these uncontested
amounts.

HCFA agreed to reduce the disallowance to the extent that Michigan
provides documentation of the providers and amounts which Michigan is
not contesting (presumably necessary only if Michigan alleges that it
has already accounted for the federal share), documentation of the basis
for Michigan reducing amounts identified as "unrecoverable," and proof
that Michigan has returned the federal share of these uncontested or
recovered amounts.  HCFA's Brief, p. 5.  Michigan provided some of the
requested documentation with its reply brief, in Exhibit U, and agreed
to provide supplemental documentation.  Michigan's Reply Brief, pp. 3-4.

Our decision in this case incorporates HCFA's agreement to reduce the
disallowance by $280,539, subject to HCFA's review of documentation that
Michigan credited the federal government with a share of the Grant
Hospital collection, and HCFA's agreement to further reduce the
disallowance in accordance with documentation to be submitted by
Michigan, as discussed immediately above.  Michigan must submit any such
documentation within 30 days after receiving this decision (or such
longer period as HCFA allows).

     b.   Judicial reversal of state determinations of depreciation
     recapture

Michigan alleged that $4,474,354 of the disallowance was attributable to
alleged excess payments which represented recapture of excess
depreciation payments under the state plan.  Depreciation recapture is
an adjustment to a prior allowance for depreciation costs, made upon the
sale or transfer of a facility and based on a finding of the amount
which the facility actually depreciated.  Michigan stated that the
Michigan court of appeals had held that, as of January 1, 1982 (the date
the facility in dispute in a case before that court was sold), there was
no state plan provision requiring providers to pay depreciation
recapture.  Michigan's Ex. L, Provincial House, Inc. & Living Centers,
Inc. v. Michigan Department of Social Services, Docket No. 97573 (March
7, 1988).  Michigan is appealing the state court ruling, but argued that
it is presently precluded from collecting depreciation recapture and
should not be required to refund the federal share.

Since FFP is available in "the total amount expended as medical
assistance under the State plan" under section 1903(a)(1) of the Act,
Michigan argued that there is no basis for HCFA to recoup FFP if the
state court ruling remains in effect holding that the state Medicaid
plan did not provide for depreciation recapture.  As Michigan noted,
there is no federal requirement that a state plan must provide for
depreciation recapture in the Medicaid reimbursement rate system.

HCFA stated that, in light of the possibility that further action by the
Michigan Supreme Court would affect this disallowance, HCFA would not
object to a "stay of the disallowance" with respect to amounts
attributable to depreciation recapture, until further action by the
Michigan Supreme Court.  HCFA requested a stay, rather than a remand,
apparently on the basis that it would need to take no further action if
the Michigan Supreme Court reverses the current judicial determinations
in favor of the provider.  HCFA nonetheless also presented arguments
explaining why it believed the state court had erred in interpreting the
state plan.

Since HCFA may be willing to accept the resolution of the depreciation
recapture issues by the Michigan Supreme Court, it is unnecessary for us
to resolve them at this time.  We note that the state plan provisions at
issue in the court case were not federally mandated and were not so
clear that questions regarding their proper interpretation can be
resolved based only on the evidence in the record before the Board.  The
Michigan court appears to have examined evidence, such as testimony
concerning the intent of the drafters of the state plan provision, which
is not in the record before the Board and which the Board has, in the
past, recognized as relevant in interpreting ambiguous plan provisions.
See, e.g., South Dakota Dept. of Social Services, DGAB No. 934 (1988).

Thus, in view of the State court ruling that the payments in question
are not in excess of the amount permitted under the state plan, HCFA may
not adjust at this time the federal share of amounts representing
depreciation recapture within the scope of the court ruling.  Our
decision requires, however, that if that ruling is overturned on appeal,
Michigan must adjust the federal share of the depreciation recapture
amounts on its next quarterly statement of expenditures, regardless of
whether Michigan has recovered the amounts from the providers.  If the
lower court ruling is upheld, and HCFA takes the position that the
applicable state plan provisions required depreciation recapture, HCFA
may reinstate the disallowance determination by issuing a written
statement of reasons why HCFA believes the court ruling does not
preclude the disallowance.

In reaching this conclusion, we recognize that issues being litigated
between a provider and a state may not be dispositive of whether FFP is
available to the state.  However, when the relevant issue is
interpretation of a state plan provider reimbursement system provision
which is not federally mandated, it makes sense and promotes judicial
economy to await resolution of that issue by the state courts.  Cf.
Washington Dept. of Social and Health Services, DGAB No. 693 (1985).

As this Board has previously recognized, a state's involvement in
litigation with a provider may limit its ability to defend against a
disallowance issued by HCFA.  In California Dept. of Social Services,
DGAB No. 159 (1981), the Board found that a state's involvement in
litigation with a provider should be a factor in determining the burden
on the state in contesting the federal disallowance.  Here, we find that
Michigan has provided sufficient evidence that the state records which
HCFA reviewed do not provide a supportable basis for a disallowance with
respect to alleged overpayments for depreciation which are within the
scope of the court ruling.  Our finding does not encompass disputed
depreciation payments for periods subsequent to the period considered in
the outstanding state court ruling.

     c.   Provider appeals pending at the administrative level

Michigan argued that a "substantial number of cases cited by both the
audit and disallowance contain providers who are currently involved in
legal proceedings which include administrative reviews, judicial
reviews, court orders and repayment agreements."  Michigan said:
"Providers must be granted full due process (in whatever stage of
proceedings) prior to HCFA's claim for FFP."  Michigan's Brief, p. 25.
We considered above judicial review of depreciation issues; with respect
to other court orders, HCFA, in the audit report, agreed to adjust the
overpayment balance for any "errors, omissions and changes as a result
of appeal conferences and hearing/court decisions. . ." upon receipt of
basic documentation.  Michigan Ex. C., p. 5.  We also considered above
adjustments due to repayment.  Below, we address the effect of pending
court cases and the special situation of court orders establishing
public health receivers.  Thus, in this section we address only the
effect of administrative-level provider appeals.

Michigan did not cite to any statutory or regulatory authority requiring
HCFA to wait until provider appeals are completed before adjusting the
federal share of a provider overpayment.  Michigan relied on the
district court case, Arkansas v. Heckler, No. LR-C 83-467 (E.D. Ark.,
Sept. 17, 1984) on remand, Arkansas Dept. of Human Services, DGAB No.
717 (1986).  In Arkansas, the district court found essentially that it
was arbitrary to require Arkansas to repay the federal share of the
alleged overpayments when the approved state plan established a provider
appeal process and appeals by the providers were still pending.

We note first that the reasoning in Arkansas v. Heckler has been
rejected in other court cases, such as Missouri Department of Social
Services v. Bowen, 804 F.2d 1035 (8th Cir. 1986).  The court in Arkansas
properly noted that the central issue in the case was the timing of
repayments of excess FFP, since there was no authority for FFP in
unallowable costs.  But the court's holding was based primarily on its
view that the Board had not adequately explained why it found that HCFA
did not have to wait until exhaustion of the provider appeal process
based on the fact that the overpayments there had been independently
established by a federal audit of the providers' records.  See DGAB No.
717.  In Missouri, the court upheld a Board decision holding that the
mere fact that providers had appealed state overpayment determinations
did not preclude HCFA from relying on those determinations where the
state itself considered the determinations sufficiently final so that it
could collect from the providers irrespective of any appeal.

In this case, the facts require a different analysis from either
Arkansas or Missouri.  In its reply brief, Michigan provided evidence
that it is precluded by state law from recovering disputed amounts from
a provider until after administrative appeals are completed (except in
the event of a threat to the health, safety, or welfare of recipients or
the general public).  Michigan Ex. R, R400.3407 Rule 7(1).  Furthermore,
Michigan provided evidence which indicates that all the disputed amounts
which are in litigation are either contested depreciation recapture or
cost settlements with providers who are also contesting depreciation
recapture.  Michigan's Ex. S.  This exhibit does not clearly indicate,
however, whether any of the cost settlement disputes are still at the
administrative level.

Since 1) HCFA's position in this case assumed that the State could
collect disputed overpayments pending appeal; 2) there may not be any
administrative appeals pending for cost settlement disputes; 3) HCFA has
agreed to examine further documentation related to other issues; and 4)
as discussed below, HCFA has not had an opportunity to respond to the
State's explanation of why it delayed processing these appeals, we
remand this issue for further consideration by HCFA.

Specifically, HCFA should consider whether the Board's reasoning in
Pennsylvania Dept. of Public Welfare, DGAB No. 765 (1986), would apply.
In that case, the Board found that Pennsylvania state law precluded
Pennsylvania from recovering alleged overpayments pending provider
appeals, and that HCFA had failed to give notice to Pennsylvania of a
change in its policy regarding the timing of accounting for overpayments
to long-term care facilities.  (HCFA previously accorded a grace period
until after completion of administrative-level provider appeals.  See
note 5 above.)

We also note that the parties in Pennsylvania agreed that HCFA could
impose a disallowance if a state had been remiss in processing
administrative appeals in a timely fashion.  In Pennsylvania, HCFA
agreed to provide Pennsylvania an opportunity to explain why appeals
might have been delayed.  Michigan explained here that it had not been
actively pursuing its claims against providers with depreciation
recapture disputes because it was awaiting resolution of the Provincial
House case, which it considered as a test case, in order to use its
resources efficiently.  Michigan's Reply Brief, p. 6.  HCFA did have an
opportunity to directly address this explanation (although HCFA had
previously stated that the delays might limit Michigan's chances of ever
recovering the disputed funds).  HCFA's Response, pp.19-20.  It appears
from Exhibit S, however, that ultimate resolution of the depreciation
recapture issue in favor of the providers may require Michigan to pay
out a significant amount to adjust for underpayments to these providers.
Since HCFA may accept Michigan's explanation, and is in any event
precluded by our decision from adjusting now for depreciation recapture
amounts, we remand this issue to HCFA for further consideration.

 d.      Effect of pending court appeals

We find no authority, in either Arkansas or any of the Board cases
examining timing issues, which would support Michigan's argument that
HCFA may not generally rely on state-level findings after the provider
appeal process has concluded at administrative levels and these findings
have been affirmed.  The mere fact that a provider has appealed to court
does not render administrative findings unreliable (although, as we
discussed earlier, judicial reversal of administrative findings may do
so).

Michigan argued that it has no control over the time expended during
court litigation.  While we recognize that a state may not exert as much
control over court proceedings as over its own administrative processes,
we do not think this justifies a state retaining FFP in amounts it has
found to be excessive or improper.

     e.   Public health receivers

Michigan alleged that $164,169 of the disallowance was not an
overpayment to a provider, but represented "excess amounts paid for
medical care because of a court appointed public health receiver."
Michigan's Brief, p. 26.  Michigan provided copies of court orders
appointing public health receivers, named by Michigan pursuant to
Michigan state law, to administer two facilities after the providers
failed to meet state standards.   Michigan conceded that the costs were
"beyond the limit of costs that would have been reimbursable to the
provider had the facility not closed."  Michigan's Brief, p. 27.
Michigan argued, however, that "[t]he additional expenditures were for
the actual medical care needed to move the patients to another facility
in an orderly manner."  Id.

The court orders appointing public health receivers do not provide a
basis for considering the disputed payments to be appropriate
expenditures under the state Medicaid program.  The court orders are
related to the traditional responsibilities of states in the area of
public health (which Michigan apparently implemented in state laws
providing for public health receivers), not to Michigan's
responsibilities as administrator of the Medicaid program.  Michigan's
Medicaid program is described in the state plan, and there is no basis
to extend its coverage beyond that state plan to require federal
participation in any health-related expenditure Michigan may incur.

Although Michigan argued that the disputed payments were for medical
care, Michigan provided no evidence that the medical services themselves
were allowable under the state plan, or that the costs of the medical
services were reimbursable to either the provider, the receiver, or
Michigan itself.  Michigan's own records indicate that the disputed
payments were overpayments.  Absent any evidence that the payments were
allowable costs for covered services, we find that HCFA can reasonably
rely on Michigan's own determination that these payments were not within
the scope of reimbursement under the state plan.

Conclusion

For the reasons discussed above, we uphold the disallowance with the
following exceptions: we find that the disallowance should be reduced to
the extent that Michigan can provide documentation that the alleged
overpayments were collected or withdrawn and the federal government
credited with its share as appropriate; we remand the cost settlement
amounts involved in provider appeals pending at the administrative level
for further consideration by HCFA; and we find that HCFA may not adjust
at this time the alleged overpayments for depreciation recapture
directly within the scope of the Provincial House case, but the
disallowance may be reinstated on the conditions noted above.
Michigan's documentation must be submitted within 30 days after Michigan
receives this decision (or such longer period as HCFA allows).

 


 ________________________________ Donald F. Garrett

 

 ________________________________ Alexander G. Teitz

 

 ________________________________ Judith A. Ballard Presiding
 Board