New York Department of Social Services, DAB No. 1112 (1989)

DEPARTMENTAL APPEALS BOARD

Department of Health and Human Services

SUBJECT: New York Department of Social Services
Docket No. 88-102
Decision No. 1112
Audit No. A-02-86-60230

DATE: November 3, 1989

I. Introduction

The New York Department of Social Services (DSS or State) appealed the
decision of the Health Care Financing Administration (HCFA) disallowing
$2,268,615 in claims or federal financial participation (FFP) under
Title XIX (Medicaid) of the Social Security Act for the period January
1, 1983 to June 30, 1986.

HCFA's determination was based on an audit by the Office of Inspector
General (OIG) which found that New York had reimbursed outpatient mental
health care providers in violation of its own medical assistance program
regulations. Specifically, HCFA found that New York had improperly paid
providers who had rendered two or more non-crisis and non-collateral
services to the same recipient on the same day. Relying on Office of
Management and Budget (OMB) Circular A-87, Attachment A, C.1.b., HCFA
contended that such reimbursements were not eligible for FFP under the
Medicaid program because they were not authorized or were prohibited by
State regulation.

For the reasons stated below, we uphold the disallowance on the basis
that HCFA may properly disallow these claims under OMB Circular A-87.
However, we agree with the State that certain aspects of the
disallowance should be recalculated. At the conclusion of this
decision, we summarize those aspects and provide necessary time frames
for the recalculation.

II. Summary of the Law

A. OMB Circular A-87

HCFA based this disallowance on OMB Circular A-87, made applicable to
the Medicaid program during the disallowance period by 45 C.F.R. 74.171.
OMB Circular A-87 contains general cost principles for determining
whether costs incurred by state and local governments are allowable as
charges to federal grants. Among these principles is a provision which
requires that costs, to be allowable, be "authorized or not prohibited
under State or local laws or regulations." OMB Circular A-87,
Attachment A, C.1.b. HCFA took the position that since these payments
violated New York regulations, they were not authorized or were
prohibited by State regulation and therefore not eligible for Medicaid
FFP.

B. Recovery of Overpayments in Title XIX

Title XIX of the Act authorizes federal grants to states to aid in
financing state programs which provide medical assistance and related
services to needy individuals. Section 1903(a) of the Act, the basic
provision governing payment of FFP for Medicaid, requires the Secretary
to pay each state with an approved plan " . . . an amount equal to the
Federal medical assistance percentage of the total amount expended
during the quarter as medical assistance under the State plan . . . ."
(Emphasis supplied.) Section 1905(a) of the Act defines "medical
assistance" as "payment of part or all of the cost" of covered services.

Under the funding mechanism established by Congress, the Department of
Health and Human Services (DHHS) advances, on a quarterly basis, funds
to a state equal to the federal share of the estimated cost of the
program. After review of the state's quarterly statement of
expenditures, the Secretary may adjust future payments to reflect any
overpayment or underpayment which was made to the state for any prior
quarters. Section 1903(d) of the Act.

III. Summary of the Case

A. New York Regulatory Scheme

The State of New York participates in the Medicaid program pursuant to
New York Social Services Law Section 363 et seq. (McKinney 1983) and in
accordance with its state plan as approved by the Secretary of DHHS.
Section 1902(a) of the Act. The New York Department of Social Services
(DSS) is the single state agency under the state plan responsible for
statewide supervision of the administration of the program. The Office
of Mental Health (OMH) is the program agency responsible for the overall
administration of outpatient mental health services.

In January and February 1982, OMH and DSS promulgated a set of
regulations concerning Medicaid reimbursement for outpatient mental
health services. The portions of the regulations relevant to this case
involve reimbursement standards for services rendered to the same
patient on the same day.

While more than one reimbursable service may be provided in one visit,
the general rule is that providers may bill for only one visit per
patient per day. 14 NYCRR 579.5(c); 18 NYCRR 505.25(e)(2); New York
Medicaid Management Information System Clinic Provider Manual. The rule
applies whether the recipient seeks services from one provider or two
different providers on the same day.

The policy goal articulated by New York for this rule was that OMH was
attempting to ensure that clients had a primary provider supervising
their care and were not "ping-ponged" between providers. Audit, New
York Ex. 1, p. 3. The exceptions to this general rule of one visit per
day involve "crisis" services and services to a "collateral."

A crisis service is defined by 14 NYCRR 585.4(b)(3) as ". . . activities
in a non-inpatient setting, including the residence of the patient, that
address acute emotional distress when the patient's condition requires
immediate attention."

The other exception to the one visit per day rule is service to a
collateral. 18 NYCRR 505.25(e)(4); Part 579 Billing Guidelines, Section
3.5. Collaterals are defined by 14 NYCRR 585.4(a)(3) as ". . . members
of the patient's family or household who regularly interact with the
patient and are directly affected by, or have the capability of
affecting, the patient's condition." If appropriate standards are met,
interaction with a collateral is reimbursable. As long as these
standards are met, it is irrelevant whether the provider billed for a
patient visit on that same day.

In its Clinic Provider Manual, New York sets forth billing codes for
various types of visits. Providers are able to specifically designate
separately billable crisis visits and collateral visits by use of
specific codes.

While New York promulgated these regulations by February 1982, it did
not act promptly to implement a Medicaid Management Information System
(MMIS) computer edit which would identify multiple non-crisis or
non-collateral claims by single providers or by two providers who
rendered services on the same day. Without such edits, it was
impossible for the State's claims processing system to detect violations
of these regulations prior to reimbursing providers.

In August 1984 New York instituted an edit that would prevent the same
provider from claiming more than one non-crisis or non-collateral
outpatient mental health visit for the same client on the same day.
Audit, New York Ex. 1, p. 5. As to two providers billing for the same
client on the same day, New York considered implementing an edit but
never did so because "of its complexity and potential unfairness to the
second invoice being denied . . . ." Memo, December 1984, HCFA Ex. 3.
B. HCFA's audit process

OIG instituted an audit to ascertain whether providers were complying
with these standards, and hence whether the State was properly claiming
FFP in providers' payments. The audit reviewed services provided from
January 1, 1983 to June 30, 1986, that were paid as of July 7, 1986.
The auditors identified 155,284 occurrences where two or more same day
non-crisis and non-collateral outpatient mental health services were
provided to the same recipient. In identifying these occurrences, the
auditors used a computer program which excluded the six rate codes which
are used to claim a separately billable crisis or collateral visit.
They sought to identify only occurrences where a provider, or two
providers, had submitted bills for two non-crisis or non-collateral
visits for the same recipient on the same day.

The auditors then determined that FFP was claimed for 119,704 of these
occurrences. A random sample of 210 of the 119,704 FFP occurrences was
selected and reviewed by the auditors. The purpose of this sample was
to determine whether the universe of occurrences was accurate, i.e.,
that the cases were actually improper claims and not miscoded claims in
the MMIS. The auditors concluded that 203 of the 210 were improper
multiple same day non-crisis and non-collateral outpatient mental health
claims. By applying the results of their statistical review through a
scientific estimation process to the universe of costs ($4,814,039), the
auditors identified $2,268,615 in FFP which involved multiple same day
services.

IV. Analysis

A. The methodology HCFA used to calculate this disallowance
was not unreasonable.

New York argued that HCFA's use of statistical sampling in calculating
the disallowance was unreasonable since it precluded New York from
recovering the alleged overpayments from providers. The methodology
used by HCFA involved identifying the universe of FFP for same-day
claims, looking at a sample number of cases to establish what portion of
the claims was erroneous, and then applying that factor against the
universe to arrive at a disallowance figure. This methodology
identified a dollar amount but not the providers who violated the
regulations or the specific overpayments with which they could be
assessed.

Except as noted later in the decision, New York did not argue in this
case that HCFA's underlying statistical methodology was mathematically
wrong. Rather, it asserted that this methodology produces such sweeping
results as to place a state in an unfair position in trying to enforce
its own standards on providers and recover money erroneously paid to
them.

New York contrasted HCFA's approach with its own system of recovering
overpayments through provider-specific audits in which providers are
entitled to a full range of due process protections, including
administrative hearings and judicial review of DSS' decisions. 18 NYCRR
Pts. 517, 518.

Since it concludes that it will be unable to recover the full amount of
these overpayments, New York argued that HCFA's approach will have a
catastrophic fiscal impact on its Medicaid outpatient mental health
program. As evidence of this dire fiscal burden, New York cited HCFA's
subsequent disallowance of $13,062,445 in Board Docket No. 89-109.
There HCFA relied on the same OMB Circular A-87 provision and audit
technique to impose a disallowance which is also not provider specific.

We reject New York's argument for the following reasons. First, New
York created its present collection problem by failing to install
appropriate edits in its MMIS after enacting regulations barring payment
and has not demonstrated why these particular overpayments are not
retroactively identifiable. Second, the Board has repeatedly held that
HCFA can recoup overpayments before a state recovers the overpayment.
In those cases, the difficulty the state may have in recovering the
money has been found to be irrelevant to HCFA's right to adjust the
federal share of the overpayment.

By its failure to implement appropriate edits in its MMIS, New York has
created the dilemma in which it now finds itself. Unlike many of the
standards in Part 579, the multiple visit standard could have been
enforced through New York's MMIS. Instead, the State waited over two
years to install an edit to prevent one-provider double billing and
never installed a two-provider edit. Also, unlike many other standards
in Part 579, violations of the double billing standards can be
retroactively identified by computer runs and traced back to providers
and specific clients on specific days. Thus, contrary to the State's
contention, this would appear to make these overpayments relatively
identifiable and collectible.

Further, 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 section 1903(a)(1) and 1905(a) of the Act and therefore
constitute overpayments under section 1903(d)(2). Massachusetts Dept.
of Public Welfare, DAB No. 262 (1982); New York Dept. of Social
Services, DAB No. 311 (1982); Ohio Dept. of Public Welfare, DAB No. 637
(1985), and cases cited therein. The Board's prior holdings on
overpayments issues have been upheld in three decisions by United States
Court 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).

In these cases, states have repeatedly argued that actual recovery of
the overpayments would be difficult, impractical or impossible. States
have argued, as New York did here, that placing the full burden of
unrecoverable Medicaid overpayments on the state is inconsistent with
the nature of the Medicaid program as a federal-state partnership, as
discussed in the case of Harris v. McRae, 448 U.S. 297 (1980). The
Board has repeatedly considered these arguments and concluded that, in
light of the fact that the states have primary responsibility for
administering the program and preventing or recouping improper payment
in the first instance, it is consistent with the partnership concept to
place the burden of unrecoverable payment on the states. New York,
supra; Michigan, supra; Massachusetts, supra. 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.

Id. at 96.

Even if New York had demonstrated that it would have difficulty
recovering this money, the policy rationale supporting those prior cases
applies here: New York is the primary administrator of the Medicaid
program; it had the ability to install edits which would have prevented
these erroneous payments; it has the responsibility of monitoring its
providers to ensure that they are complying with program standards; it
has the ability to penalize them when they fail to comply and to recover
excess and erroneous payments.

New York did not address this line of cases or present alternative
authority in support of its position. Therefore, on the basis of the
evidence and authority cited in this case, we see no reason why the
result in this case should be different from those in our prior line of
cases.

B. Section 1903(d)(2)(D) of the Act does not bar HCFA from
recouping these overpayments.

New York argued that section 1903(d)(2)(D) of the Act bars HCFA from
recovering these overpayments. Section 1903(d)(2)(D) of the Act
provides:

In any case where the State is unable to recover a debt which
represents an overpayment (or any portion thereof) made to a
person or other entity on account of such debt having been
discharged in bankruptcy or otherwise being uncollectable, no
adjustment shall be made in the federal payment to such State on
account of such overpayment (or portion thereof).

New York asserted that all these overpayments should be considered
"uncollectable" within the meaning of section 1903(d)(2)(D) or,
alternatively, a portion of the overpayments would be uncollectable
since they were received by providers which are currently out of
business.

Section 1903(d)(2)(D) became effective October 1, 1985. Consolidated
Omnibus Budget Reconciliation Act of 1985 (COBRA), Pub. L. 99-272,
section 9512(a)(3). The Board has previously held that section
1903(d)(2)(D) applies to overpayments identified for quarters beginning
on or after October 1, 1985. Michigan, supra, p. 7; California Dept. of
Health Services, DAB No. 977 (1988), p. 4. New York offered no new
arguments about why this provision should be given retroactive effect.
Therefore, to the extent that these overpayments occurred in quarters
prior to October 1, 1985, section 1903(d)(2)(D) is not relevant.

As to the portion occurring after that date, we reject New York's broad
construction of section 1903(d)(2)(D) for the following reasons.

First, the legislative history to this provision indicates that Congress
was trying to protect states in cases in which providers had filed for
bankruptcy or gone out of business and thereby made the debt
uncollectable. "The provision would provide that a State is not liable
for the Federal share of overpayments which cannot be collected from
bankrupt or out-of-business providers." S. Rep. No. 146, 99th Cong.,
1st Sess. 314-15 (1985). Reading this section to cover circumstances in
which a state will have difficulty collecting for reasons unrelated to
provider solvency is not warranted by the legislative history.

Second, New York has not shown that these particular overpayments are in
fact uncollectable. As we observed above, presumably it can do the same
computer run that HCFA did and identify offending providers, recipients
and the days on which double billings occurred.

Finally, New York argued that section 1903(d)(2)(D) prevents recovery of
statistically projected disallowances relating to services provided by
the providers in the sample which are currently out of business.

In order for New York to avail itself of section 1903(d)(2)(D), it must
meet certain conditions. New York must show that the overpayments in
the sample to these providers occurred after October 1, 1985. It also
must show that the provider has filed for bankruptcy, or the provider is
out of business and the debt is uncollectable. New York has not
introduced such evidence in this case. If New York wishes to submit
adequate documentation to HCFA that these conditions can be satisfied as
to any of the cases in the sample, it must do so under procedures set
out in the conclusion of this decision.

C. HCFA can initiate an audit to determine whether payments
have been made in violation of state regulations and OMB
Circular A-87 and can disallow FFP based on such an audit.

New York argued that "neither OIGOA nor the Respondent are empowered to
conduct audits designed to disallow expenditures which have, in their
view, been made in violation of State regulatory requirements."
Supplemental Brief, p. 11. New York argued that there was no statute or
regulation that expressly authorized HCFA to take disallowances on the
basis of State programmatic standards. It concluded that in the absence
of such an express grant of authority, the disallowance was ultra vires,
and, consequently, unreasonable as a matter of law. In support of its
argument, it cited Vitarelli v. Seaton, 359 U.S. 535 (1959), and Service
v. Dulles, 354 U.S. 363 (1957).

We reject this argument. The Secretary is expressly authorized by Title
XIX to determine if an overpayment has been made to a state and to
recoup such an overpayment. Section 1903(d)(2)(A) of the Act. Such
authority necessarily encompasses the ability to determine whether a
grantee has complied with program standards. Without such power, the
Secretary would be completely dependent on the grantee's findings of
noncompliance.

The Medicaid program standards include those general principles for
determining allowable costs set forth in OMB Circular A-87. 45 C.F.R.
74.171. In order to be allowable under those standards, a cost must be
"authorized or not prohibited under State or local laws or regulations."
In view of the explicit language in the cost principles, the federal
government necessarily has the power to determine whether a state has
complied with its own laws and regulations.

Given the terms of the New York regulations and DSS' prior practice in
conducting its own audits, we find that HCFA was reasonable in
concluding that reimbursements which violated the standards set forth in
Parts 579, 585, and 505 were not "authorized" or were "prohibited." The
language of New York's reimbursement regulations at issue is mandatory
and does not grant DSS any discretion in paying for services which
violate the regulations. Further, the DSS audits in the record
demonstrate that DSS regarded these regulations as prohibiting
reimbursement and based its own provider-specific disallowances on them.
HCFA Ex. 6.

In California Dept. of Health Services, DAB No. 564 (1984), the Board
found that OMB Circular A-87, Attachment A, C.1.b. provides a basis for
a Medicaid disallowance even where HCFA did not assert that any specific
federal Medicaid standards had been violated. There HCFA based a
disallowance on state audit findings of provider noncompliance with
California statutes and regulations in a community mental health
services program. Since the disallowance was based solely on a state
audit, the Board found that HCFA could not recover its portion of the
overpayments until California had completed its own administrative
adjudication process.

Finally, we find that New York's reliance on Vitarelli and Service is
misplaced. These cases involved fact patterns in which federal agencies
had affirmatively violated their own regulations and procedures in
firing employees. The Supreme Court ruled that the agencies were bound
by their own procedures and therefore the dismissals were invalid.
Since New York has not shown how HCFA violated any of its own
regulations or other standards in taking this disallowance, these cases
are not relevant here.

D. The method by which the disallowance was calculated
should be adjusted.

New York raised a number of arguments as to why the audit procedure used
by HCFA was flawed. These arguments concerned the effective date of the
regulations at issue, the dollar amounts of the claims which were
disallowed, and disputes as to the correctness of HCFA's determination
in 34 specific cases. As discussed below, we find for New York on some
of these issues. These changes justify the recalculation of the
disallowance, but do not, as New York argued, provide a basis to
invalidate it.

1. HCFA should adjust the disallowance amount to
reflect changes in the standards used to determine which
same day service should be reimbursed.

HCFA used the following standards for determining which of the same day
claims should be allowed and which denied:

o In cases in which the claims had been paid on different
days, the auditors allowed the claim which had been paid first.

o In cases in which the claims were paid the same day, the
auditors allowed the lower claim.

There are two categories of cases involved here: one- provider cases and
two-provider cases. Because of the different considerations presented
by each, we come to different conclusions as to how reimbursement should
be determined depending on whether the cases involved one or two
providers.

As to the cases involving claims submitted by one provider, we agree
with New York that HCFA should have selected the higher of the two
claims for reimbursement. We come to this conclusion for the following
reasons.

o When New York conducted provider audits and found
duplicate same day claims, its practice was to credit providers
with the higher claim. DSS Audit of DePaul Clinic, p. 2; DSS
Draft Audit of New York Psychotherapy and Counseling Center, p.
1; HCFA Ex. 6.

o The higher claim ordinarily reflects the more
significant or substantial service provided that day to the
patient. Since the provider rendered two services but can be
compensated only for one, it is appropriate to compensate it for
the greater service. On the other hand, reimbursing the
provider based on which service was paid first appears to be
arbitrary and unrelated to the benefit or significance of the
service to the individual.

o HCFA's argument that its approach was consistent with
Edit 703, which would have paid the first claim presented, is
not dispositive in this context. This portion of the
overpayment was incurred prior to Edit 703. Allowing the higher
claim is consistent with the State's audit policy prior to the
installation of this edit. Further, there is no showing that
even after Edit 703, a provider would not have recourse to
adjust the order of its claims and receive reimbursement for the
higher amount.

o While HCFA also argued that its audit methodology is
conservative, we do not think that this should preclude
adjusting the calculation methodology to reflect the State's
actual practice during this time in administering its own
regulations.

The foregoing reasoning, however, does not apply to the situation in
which two providers rendered services on the same day. Here, the State
would have to establish a consistent method of resolving disputes
between two providers and would not appear to have the same discretion
to pick the higher reimbursement amount in resolving such a dispute.

HCFA maintained that its method of allowing the first claim paid was
fair since it had an equal chance of allowing the higher claim. It
argued that its method of allowing the lower claim when claims were paid
on the same day was fair because its audit was conservative.

Since HCFA can recover these overpayments without regard to the State's
ability to recoup from providers, we find that the audit methodology
should more accurately reflect the position in which the State will find
itself when it does try to recoup the improper claim from the
disqualified provider. In some cases this might be the higher claim and
in others the lower claim. Consistently disallowing either the higher
or the lower claim would distort the total amount of erroneous claims
and the State's position in relation to its providers.

Since both parties' proposed methods of choosing which claim to
reimburse are problematic, we find, subject to further comment from the
parties, that the disallowance should be recalculated based on the
principle of allowing the average of the two claims. Of all the
proposed methods, averaging will most nearly reflect the actual amount
of the total overpayment to these providers and the State's exposure to
the overpayments. On the other hand, if each of the two-provider sample
cases was reviewed to determine which claim would have actually been
allowed, such a review could well be time consuming and difficult. If
either party objects to the proposed means of resolving the two-provider
cases, that party may return to the Board with comments within 10 days
of receipt of this decision.

In summary, we hold that:

o As to one-provider cases, the higher claim should be
allowed;

o As to two-provider cases, subject to comment from the
parties, the disallowance is upheld on the basis of allowing the
average of the two claims.

2. HCFA correctly included the first quarter of
1983 in the audit period.

The audit examined services from January 1, 1983 to June 30, 1986 that
were paid as of July 7, 1986. New York argued that its regulations were
not in full effect until April 1, 1983 and, therefore, HCFA could not
include the first quarter of 1983 in the audit period. HCFA maintained
that the regulations were in effect as of February 1982.

While there is conflicting evidence on this issue, we find that the
weight of the evidence supports HCFA's position that these regulations
were effective during the disallowance period. We base our finding on
the following factors.

o Under the New York State Administrative Procedure Act,
an agency promulgating rules must publish a notice of action in
the state register which includes the anticipated effective date
of the new rule. On January 19, 1982 the Office of Mental
Health published such a notice as to 14 NYCRR 579 and 585. It
identified the "effective date" of the regulations as "Feb. 1,
1982." The historical notes in NYCRR also identify the
effective date of these regulations as February 1982.

o On February 2, 1982, DSS published in the state register
an emergency agency action to conform DDS's Medicaid
reimbursement standards for outpatient facilities for the
mentally ill to the new OMH rules (Part 579). They contain the
new 18 NYCRR 505.25(e)(2) which precludes DSS from reimbursing
more than one non-collateral non-crisis service per day. The
notice identified the effective date as February 2, 1982. If
the Part 579 standards were not actually effective until April
1983, it is difficult to understand why DSS would resort to an
emergency procedure to conform its reimbursement standards to
them.

o New York Exhibit 28 is a state audit covering the period
March 1983 to February 1986 in which DSS imposed a disallowance
for violating the same day service regulations at issue here.
There is no indication in the record that DSS excluded the month
of March 1983 from the disallowance period. We therefore must
assume that DSS itself was taking disallowances based on these
rules prior to April 1, 1983.

In asserting that the effective date was really April 1, 1983, New York
relied on three pieces of evidence. First, it argued that the notice of
action defined the actual effective date as April 1, 1983. The
sentences on which it relied read:

Implementation of these regulations will begin April 1, 1982.
All existing certified outpatient programs will be reviewed for
compliance with these regulations during the period April 1,
1982 to March 31, 1983.

Contrary to what the State argued this passage does not support an
implementation date of April 1983 and at most supports a date of April
1982. It seems to say that providers will be held accountable under
these new rules as of April 1, 1982, thus giving the State and the
providers a two-month grace period in which to prepare to comply. It
also seems to inform the providers that OMH will review 100 percent of
the providers for compliance over the next year. It does not say that
providers are not accountable for non-compliance prior to April 1983.

Second, New York submitted the affidavit of Larry Chase, the Director of
the Bureau of Inspection and Certification of OMH, who was involved with
drafting and implementing these regulations. He asserted in his
affidavit:

It was the intent of the Office of Mental Health that
implementation of these regulations be phased in over a one-year
period commencing on April 1, 1982 and running through March 31,
1983, as is indicated by the publication in the State Register.
. . . The Office of Mental Health promulgated the regulations
to effectuate this intent, and has consistently interpreted them
accordingly.

We find that Mr. Chase's affidavit is too conclusory to be adequate.
There is no evidence as to how OMH "consistently interpreted them [the
regulations] accordingly," (e.g. notices to providers, audit practices,
claims manual instructions, etc.) In the absence of any information as
to how OMH actually implemented the rules, we cannot rely on Mr. Chase's
statement of intent.

Third, New York asserted that the issue of the effective date was
discussed with the auditors prior to the sample selection "and an
agreement with the Office of Mental Health had been reached to exclude
the January through March, 1983 period from the application of this
regulation." DSS Letter of February 10, 1988, New York Ex. 2, p. 2.
HCFA denied these representations. Auditors' Comments, HCFA Ex. 4, p.
64. We find New York's evidence as to any agreement insubstantial. New
York introduced no contemporary documents reflecting such an agreement.
Further, the author of the letter on which the State relied was a DSS
employee who did not assert first hand knowledge of the agreement which
was allegedly made with OMH.

In light of this evidence, we find that these regulations were effective
in the first quarter of 1983 and that HCFA's audit could properly review
provider compliance in that quarter.

3. Disposition of 34 disputed cases

New York disputed HCFA's allegations of error in 34 of the 203 sample
cases. It argued that eleven of the cases were payable as crisis
services, six of the cases were payable as collateral services, six of
the cases involved billing errors, eight of the cases involved FFP which
had been previously returned to HCFA, and three of the cases involved
closed facilities.

The 34 disputed cases are discussed in the attached appendix. The
results of our determinations in these cases are summarized below.

a. Eleven as crisis services

As to the cases which New York maintained were reimbursable as crisis
services, we uphold HCFA's determination in Federal Sample Nos. 34, 35,
59, 118, 144, 162 and reverse HCFA's determination in Federal Sample
Nos. 27, 113, 38, 151, 163.

b. Six collateral services

As to the cases which New York maintained were reimbursable as services
to a collateral, we uphold HCFA's determination in all six cases:
Federal Sample Nos. 23, 81, 84, 107, 115, 169.

c. Six concerning billing errors

We uphold HCFA's determination in Federal Sample Nos. 3, 52, 61, 65, 146
and reverse HCFA's determination in Federal Sample No. 78.

d. Eight previously audited (FFP returned)

We uphold HCFA's determination in Federal Sample Nos. 86 and 154. As to
Federal Sample Nos. 18, 51, 72, 77, 105, 124, which New York maintained
were reimbursable because the cases were previously audited by the State
and the federal share had been returned to the federal government, we
uphold HCFA's findings generally but afford New York the opportunity to
demonstrate to HCFA that the federal share of the overpayments
identified in the state audits has been credited to HCFA.

e. Three closed facilities

As to the cases involving closed facilities, we uphold HCFA's finding in
all three cases: Federal Sample Nos. 62, 103, 148.

V. Conclusion

For the reasons stated above, we find that HCFA properly disallowed
these claims under OMB Circular A-87. However, the following aspects of
the disallowance, which we discussed in the decision above, should be
recalculated.

(1) As to facilities which are currently out of business, if
New York submits adequate documentation to HCFA that these
overpayments occurred after October 1, 1985 and are
uncollectable, HCFA should remove those amounts from the total
of the sample error and recalculate the disallowance. See page
11 of this decision.

(2) As to multiple claims submitted by one provider, HCFA
should recalculate the disallowance based on the principle of
allowing the higher claim. See pages 14-15 of the decision.

(3) As to multiple claims submitted by two providers, we hold
provisionally that HCFA should recalculate the disallowance
based on the principle of allowing the average of the two
claims. See pages 15-16 of the decision. Either party may
return to the Board within 10 days of receipt of this decision
to propose an alternative method of choosing between the two
provider claims.

(4) Where we reversed HCFA's findings in six particular cases
(see pages 19-20 of the decision), HCFA should remove those
amounts from the total of the sample error and recalculate the
disallowance.

(5) As to Federal Sample No. 18 involving the DePaul Clinic and
Federal Sample Nos. 51, 72, 77, 105, 124 involving NYPCC, New
York may submit documentation to HCFA that the federal share of
the overpayments identified in these audits has been credited to
HCFA. See pages 30-32 of the Appendix. If New York submits
such documentation, HCFA should remove those amounts from the
total of the sample error and recalculate the disallowance.

New York should supply this further documentation to HCFA within 30 days
of receiving this decision or within such further time as HCFA may
allow. HCFA should review the documentation and recalculate the
disallowance as HCFA finds appropriate based on the documentation and in
accordance with our conclusions herein. HCFA should supply New York
with the methodology and calculations used in determining the amount of
the revised disallowance. If New York is dissatisfied with HCFA's
evaluation of its documentation or with HCFA's calculation methodology,
it may return to the Board within 30 days of notification of HCFA's
determination of the revised disallowance.


Judith A. Ballard

Norval D. (John) Settle

Donald F. Garrett Presiding Board Member.APPENDIX

CRISIS SERVICES

A crisis service is defined as " . . . activities . . . that address
acute emotional distress when the patient's condition requires immediate
attention." 14 NYCRR 585.4(b)(3). In each of these sample cases, New
York argued that at least one of the services provided was a crisis
service and therefore separately billable under 14 NYCRR 579.5(c).

Federal Case No. 27 (New York Exs. 4, 41, 42; HCFA Ex. 7)

Occupations, Inc. was reimbursed for a group session and an individual
therapy session for one patient on June 6, 1983.

In support of its contention that the individual therapy session was a
crisis service, New York submitted the following evidence:

o A letter of June 29, 1988 from the Director of Clinical
Services at Occupations, Inc. New York Ex. 4. According to the
letter the patient's treatment plan called for weekly group
therapy sessions and quarterly visits with the psychiatrist.
The patient received unscheduled individual therapy sessions
during that quarter on April 21, 1983, May 31, 1983 and June 6,
1983. "In each case it appeared that [the patient] had an
immediate need that had to be addressed. . . . On 5/31/83 the
session focused on a problem that day that related to her issues
regarding sexuality. Again on 6/06/83 the session was held to
discuss [patient's] difficulties with her relationship with two
men. The session included working on issues of multiple
relationships, jealousy, sexuality, and her relationship with
her parents." The letter went on to explain that the group
sessions focused on the patient's efforts to deal with her
mother's illness and that in the end of May additional problems
had surfaced as to her sexuality and relationships with men.
The individual sessions were offered to address these immediate
problems. The letter concludes: "I believe that, given
[patient's] diagnosis of Moderate Mental Retardation with
Behavioral Abnormalities . . . and the recentness of the
reoccurrences of this problem, it is reasonable to consider the
session on 6/06/83 as a crisis visit."

o An affidavit from Elizabeth A. Salerno, a registered
nurse with a Master's degree in Psychiatric Nursing who is
employed by OMH as the Director of the Bureau of Professional
Development. She reviewed the records at issue and concluded
that the June 6, 1983 service was properly claimed as a crisis
service because of the patient's dual diagnosis, the content of
the individual sessions, and the fact that the patient did not
have a scheduled individual session.

HCFA responded to that evidence with the following arguments:

o The therapist contemporaneously coded this as a clinic
visit instead of crisis intervention.

o The progress notes from the session do not indicate that
the patient was in acute emotional distress requiring immediate
attention.

o There is no showing in the records that the patient left
the building and one of the administrators said that he did not
think the patient left the building. Therefore, HCFA maintained
that changing the visit to crisis would violate OMH billing
guidelines that required a separate visit for a separately
billable crisis service.

o Edit 703 would have rejected one of these bills if it had
been in place on June 6, 1983.

o This provider had a pattern of billing two services on the
same day for the same patient. Of the 210 sample cases, this
provider was involved in four cases, three of which had two
claims billed on the same day for the same patient.

We find that this case should be reclassified as a crisis service for
the following reasons:

o In this case, New York construed "acute emotional distress"
to include circumstances of unusual emotional distress requiring
intervention, rather than an extreme state of psychological
disequilibrium, as HCFA proposed. Since New York in this
instance is applying its own program rules, its interpretation
is entitled to deference as long as the interpretation has a
reasonable basis in the language of the State's regulations.

o While the circumstances and content of the notes for the
June 6 session do not indicate that the patient was decomposing
or in a life threatening condition, her therapists apparently
thought that her re-emerging sexuality problems needed prompt
attention. Two individual visits, not called for in her
treatment plan, were scheduled within one week to discuss
sexuality. According to the State's expert, this patient, who
was diagnosed as "Moderate Mental Retardation with Behavior
Abnormalities," was particularly vulnerable for inappropriate
behavior.

o While HCFA correctly points out the therapist originally
coded this as a regular clinic visit, this does not preclude
reclassifying it if there is sufficient evidence in the record
to support a reclassification.

o The fact that this case would have been rejected by Edit
703 or that this provider had submitted other incorrect bills is
not dispositive. The question here is whether this particular
visit can be appropriately reclassified as a crisis and we find
that it can be.

o New York argued that the guideline requiring a "separate
visit" for a separately billable crisis service did not require
the person to leave the building. Here, the patient was seen in
two different settings, group and individual, and thus, New York
could reasonably conclude that the person had left the original
location and that the second service was not part of an
"uninterrupted treatment episode."

Federal Sample No. 34 (New York Ex. 5, HCFA Ex. 8)

South Bronx Mental Health Council, Inc. was reimbursed for psychiatric
day care and a clinic visit for the same patient on April 21, 1983.

In support of its contention that the clinic visit was a crisis service,
New York submitted a letter from the Associate Executive Director of the
Council. In the letter she explained that the patient had been
hospitalized from April 6, 1983 to April 16, 1983 for hepatitis. The
clinic visit was to evaluate whether the patient could continue without
psychotropic medicine or if he should be placed on medication which
would have less impact on his liver given his recent problems with
hepatitis. She concluded that this was a crisis visit because it "was
of extreme importance that he immediately be evaluated" as to his
medication.

For the following reasons, we uphold HCFA's finding:

o There is no showing in the record that this patient was
or had been in any psychiatric distress which would rise to even
the broadest reading of "acute emotional distress." He
apparently had been taken off his psychotropic medication in the
hospital and needed to be evaluated for appropriate medication
therapy, as part of his participation in the continuing
treatment program. This would seem to be the service of
"medication therapy" which is a reimbursable pursuant to 18
NYCRR 505.25(b)(3)(iii). However, medication therapy is not a
separately reimbursable service.

o While the provider represented that checking the
medication was of extreme importance, it did not do so for 5
days after his discharge. In that interval, the provider billed
Medicaid for continuing treatment services for this patient on
the 18th, 19th, and 20th before he was seen by the psychiatrist
on the 21st.

Federal Sample No. 35 (New York Ex. 6; HCFA Ex. 9)

Bronx Municipal Hospital Center-HCC and Soundview Throggs Neck Community
Mental Health received reimbursement for the same patient on May 7,
1984.

In support of its position that the service by Bronx Municipal should be
allowed, the State introduced a letter of August 10, 1988 from an
official of the New York City Health and Hospitals Corporation. She
explained that this patient attended the outpatient clinic at Bronx
Municipal on a weekly basis for psychotherapy and medication. The
patient went to Soundview for rehabilitation and vocational training.
She concluded: "We feel that Bronx Municipal services should be allowed
since it was for medication and therapy with physician intervention
whereas the patient received training--not psychiatric services--at
Soundview." In its brief, the State maintained that the provider had
termed this case a "crisis case"; however, that phrase is not used in
the letter of August 10, 1988.

For the following reasons, we uphold HCFA's finding:

o From its site visit, HCFA determined that the patient
had been attending Bronx since 1981 on a regular basis and there
was nothing in the record for the May 7 visit that the patient
was experiencing a crisis.

o New York presented no evidence to indicate that a crisis
was involved. Instead the provider seems to be arguing that its
service was more "medical" since it included a doctor and
medicine, and therefore it should be reimbursed. This is not
grounds for reclassification.

Federal Sample No. 38 (New York Exs. 7, 42; HCFA Ex. 10)

Two providers, New York Psychotherapy and Counseling Center (NYPCC) and
the Federation for Employment and Guidance Service, were reimbursed for
seeing the same patient on May 28, 1985.

HCFA Ex. 10 establishes that this patient was a resident of the Surf
Manor Adult Home where NYPCC operated a clinic program. Beginning April
30, 1985, the patient had his medication changed, and the NYPCC
psychiatrist began seeing him weekly rather than monthly because the
patient was refusing to take his medicine. The psychiatrist saw him on
April 30, May 7, May 15, May 17, May 21, and May 28. The May 17 session
was labeled and billed as a crisis visit; the remaining visits were
labeled as regular.

The progress notes in the patient's file show that the patient was
resisting taking his medication; that on May 17 he was extremely anxious
and delusional/paranoid; that on May 21 he seemed to be cooperating; and
that on May 28, the day in question, he had seriously regressed. He was
anxious, pressured, psychotic, having severe paranoid thought disorder
and screaming at the doctor.

In support of its contention that the service by NYPCC was a crisis
visit, New York submitted the following evidence:

o A letter from the Medical Director of NYPCC who had
reviewed the patient's charts. He asserted that the visit was a
crisis ". . . required because [the patient] was decompensating
severely, and was refusing medication."

o An affidavit from Elizabeth A. Salerno, an OMH
registered nurse. She wrote: "This patient had a reported
history of decompensation secondary to medication refusal. . . .
The claim of crisis service is substantiated on the basis of the
patient's history of decompensation associated with medication
issues, the symptomatology exhibited during this visit, the
intervention (change in medication) and that the visit was
extended to a full session when visits ordinarily were brief
sessions."

In support of its contention that this was not a crisis visit, HCFA
makes that following arguments:

o The patient was seen on May 17, two days after his
session on May 15, and that visit was labeled a crisis visit.
Therefore, the provider knew how to properly claim a crisis
visit. All the other visits from April 30 to May 28 simply
followed the weekly regimen.

o Because this was regularly scheduled visit, it by
definition could not be a crisis visit since a crisis is
something which cannot be planned and scheduled.

o The May 28 progress notes did not indicate that there was
crisis. The issue of possible hospitalization on that date was
exaggerated by the State. While the May 28 notes indicate the
patient may require hospitalization, the June 6 notes say
hospitalization was to be considered only if patient's failure
to medicate resulted in decompensation. The patient was not
subsequently hospitalized.

For the following reasons, we find that this case should be
reclassified:

o HCFA is correct in its assertion that the visit on May
28 was part of the regularly scheduled weekly routine. However,
the notes from the patient's record establish that this patient
was in crisis and would have required attention during this time
whether or not there had been a visit scheduled for that
particular day. We find that if the patient is in acute
emotional distress at the time of a scheduled visit, it can
properly be claimed as a crisis visit in spite of the fact it
was scheduled.

o We find that the progress notes of May 17, 21, 28 and 29
support the State's position that the patient was in crisis on
May 28.

Federal Sample No. 59 (New York Ex. 8; HCFA Ex. 11)

Two providers, Advanced Center for Psychotherapy and Post Graduate
Center for Mental Health received reimbursement for seeing the same
patient on March 19, 1986.

New York claimed that the service by the Advanced Center was a crisis
visit. In support of this contention, it introduced the following
evidence and arguments:

o A letter from the director of the Advanced Center. He
wrote: "[The patient] has a diagnosis of Schizophrenia, Chronic
Undifferent . . . . This patient has had a history of repeated
psychiatric hospitalizations since age 17. A patient with a
degree of illness such as outlined here who finds it necessary
to come for a session of psychotherapy is coming in crisis."

o New York also argued that HCFA relied on progress notes
for dates other than the date in question and such notes were
irrelevant.

We uphold HCFA's finding for the following reasons:

o This patient was attending regular programs at both of
these providers. At the Advanced Center, her treatment plan
called for weekly individual visits and between January 1, 1986
and March 31, 1986, the provider billed Medicaid for at least 16
regular clinic visits for this patient. At the Post Graduate
Center she was attending the Social Rehabilitation Clinic, often
7 days a week.

o The fact that she had had prior hospitalization is not
dispositive of what was happening on March 19, 1986 and whether
this was a crisis. The State's position that a person who has
been previously hospitalized and diagnosed as seriously mentally
ill always comes to therapy "in crisis" is unreasonable and
would result in these regulations having virtually no meaning.

o The progress notes show that the patient was not in
constant crisis but improving. In the progress notes for the
March 2, 1986, March 18, March 19, March 26, April 2, and April
9, 1986 visits, one of which was the visit in question, there
are no indications that the patient was in any unusual distress
or experiencing unusual problems.

o The State's objection to HCFA's reliance on progress
notes for dates proximate to the date in question is ill
founded. If such information is reasonably probative of what
was occurring on the date in question, it is relevant.

Federal Sample Case No. 113 (New York Ex. 9, 42; HCFA Ex. 9)

This patient was seen by Woodhull Medical and Mental Health Center-HCC
and then referred to Kings County Hospital Center-HCC on August 20,
1985. Both providers were reimbursed.

New York introduced the following evidence as to this case:

o A letter of August 10, 1988 from the Senior Director,
Revenue Management, New York City Health and Hospitals
Corporation stating that the patient was treated at both places
on March 31, 1978. (In its reply brief, New York explains that
the writer mistakenly inserted the child's birth date for the
treatment date but the date at issue is August 20, 1985.) The
letter continues: "The patient was seen first at Woodhull who
then sent him to Kings County because it was felt that inpatient
services might be required. Woodhull Hospital did not have
child psychiatric beds and therefore couldn't admit him there.
Kings County was able to stabilize the patient and therefore,
avoid admission."

o The affidavit of Elizabeth A. Salerno, an OMH nurse.
After reviewing the patient's charts, she found:

Prior to these visits, the record indicates that the
patient had been setting fire to his mother's furniture
on a daily basis. The evaluation at Woodhull suggested
a need for admission. However, this facility had no
child psychiatric beds available and referred the
patient to Kings County for evaluation for admission.
At Kings County the evaluation indicated that the
patient could be stabilized without admission. Given
the patient's recent history of fire setting, he clearly
met the admission criteria of danger to self and/or
others.

HCFA noted the confusions concerning the dates at issue and noted that
for the August 20 visit, Woodhull was unable to produce any
documentation at the time of HCFA's visit other than a monthly patient
trial balance run dated September 30, 1985. The OIG auditors
represented that the Kings County records indicated it was an assessment
and evaluation visit, not a crisis visit. (However, the auditors'
hand-written notes in HCFA Ex. 9 indicate that it was an "assessment and
evaluation to establish if the patient should be admitted to Kings
Hosp." emphasis added)

For the following reasons, we find that this case should be reclassified
as a crisis service:

o According to the State's expert, this child had a recent
history of setting fire to his mother's furniture on a daily
basis.

o The first hospital considered the child's psychiatric
condition on August 20, 1985 so serious as to justify
hospitalization, certainly a form of "immediate attention" as
contemplated by the regulation. Since it did not have any child
psychiatric beds, the hospital had to refer the child to the
second hospital, thereby creating a second claim.

o The purpose articulated by New York for this rule was to
prevent providers from "ping-ponging" patients between
themselves to the patient's detriment. This is not an example
of the type of provider behavior New York was trying to
discourage. Instead, one hospital found that it could not meet
what it considered to be the patient's need, hospitalization,
and referred to a facility that could.

Federal Sample No. 118 (New York Ex. 10; HCFA Ex. 12)

Advanced Center for Psychotherapy and the Post Graduate Center for
Mental Health received reimbursement for seeing the same patient on July
20, 1984.

In support of its contention that the visit with the Advanced Center was
a crisis visit, New York introduced a letter from its director. He
wrote: "This patient made a suicide attempt following which he was
hospitalized, and at the time he was seen at the Advanced Center he had
auditory hallucinations with a voice telling him "a man's voice
threatening to kill. He was diagnosed as Manic-Depressive . . . ."

For the following reasons, we uphold HCFA's finding:

o The patient's Advanced Center treatment plan called for
individual therapy two to three times a week. The provider's
notes on and around the July 20 date show a pattern of services
whereby the patient received therapy twice a week: July 11, July
13; July 18, July 20; July 25, July 27; and August 1, and August
3, 1984. The July 20 was apparently a regularly scheduled
clinic visit and billed as such, as were all the others.

o The May 18, 1982 psychiatric evaluation indicates that
the suicide attempt occurred in 1976, eight years before the
visit in question. The quote "a man's voice threatening to
kill" also comes from the 1982 evaluation and is not recorded in
the records or progress notes on or around the July 20, 1984
date in question. Therefore, New York's reliance on the
Director's statements concerning the suicide attempt and
auditory hallucination is misleading and ill founded since they
occurred years before the date in question.

o New York introduced no competent evidence that this
patient was doing anything other than routinely attending his
regularly scheduled clinic sessions. The treatment notes for
this and the other July visits are illegible. New York made no
attempt to decipher them to show that this patient was in
crisis. The fact that the July 20 notes are two lines long
would indicate nothing extraordinary was occurring in that
visit.

Federal Sample No. 144 (New York Exs. 11, 43; HCFA Ex. 13)

The Federation of Employment and Guidance Service (FEGS) was reimbursed
for a full day continuing treatment program and New Horizon Counseling
Center (NHCC) was reimbursed for a clinic visit on March 21, 1985 for
the same patient.

In support of its position that NHCC provided a crisis service, New York
introduced the following evidence:

o A letter from NHCC's director in which he asserted that
the visit was "to prevent resumption of alcohol abuse and to
encourage continuation in her day program [FEGS]. She had
stopped attending the day program and began abusing alcohol on
March 11, 1985. On March 21, 1985 she was judged to still be in
a crisis situation and in need of intensive psychotherapy."

o A letter from a NHCC clinic social worker detailing the
patient's "most recent hospitalizations." These occurred
October, 1986; March, 1987; April 20, 1987; April 21, 1987. The
writer concluded that "In view of the above, the visit in
contention was absolutely necessary to evaluate her psychiatric
condition and to provide psychotherapy thus enabling her to be
maintained in the Adult Home and prevent re-hospitalization."

We uphold HCFA's finding for the following reasons:

o The patient's treatment plan and plan updates indicated
that she was to receive therapy sessions three times a month.
Two of the sessions were to be rendered by a social worker and
one by a doctor. The progress notes and claims submitted to
Medicaid for March 1985 show exactly this pattern. The social
worker saw the patient on March 11 and March 21. The doctor saw
her on March 29. The service on March 21 fit in the regularly
scheduled pattern and was coded and billed as a regular visit.

o The progress notes for the March 21 visit do not
indicate the patient was in crisis. They do indicate that the
patient reported that she had resumed her FEGS participation and
denied drinking that week.

o Further, there is no evidence that as of March 11, the
onset of the alleged crisis, the patient even received any
immediate intervention. While this was the date she reported
she was stopping FEGS, no special intervention was instituted.
Instead, she was seen on her next regular treatment interval
some ten days later.

o While the State attempted to portray a crisis involving
the patient's stopping participation at FEGS, she apparently did
not interrupt her participation. FEGS billed Medicaid for her
attendance on March 12, 13, 14, 15, 18, 19, 20 and 21, 1985.
Therefore, the patient was apparently attending her day
treatment program during this time.

o New York relied on an administrator's construction of
the treatment records but the records contradict the
administrator's conclusory assertions. While the records
indicate that the patient was drinking during this time, they
also indicate that she was drinking much of the other time she
was in this program. The treatment records of both providers
contradict the State's position that the patient was in a
particularly sensitive situation requiring immediate
intervention.

o The second letter detailing the "most recent
hospitalizations" actually lists incidents which are subsequent
to the date at issue and which do not begin until some 18 months
after that date.

Federal Sample No. 151 (New York Exs. 12, 42; HCFA Ex. 14)

Capital District Psychiatric Center was reimbursed for transporting the
patient to Samaritan Hospital on May 24, 1984. Samaritan received
reimbursement for evaluating the patient that same day.

In support of its position that the service by Capital was a crisis
service, New York introduced the following evidence:

o A letter from the treatment team leader of parent
organization of Capital explaining that the patient was
transported by Capital's staff to the clinic as a result of
"concerns expressed by [the Fifth Avenue] Social Club staff as
to [the patient's] confused and psychotic behavior." He was
evaluated at the clinic by the psychiatrist who found him in
need of immediate observation and possible admission for
inpatient care at Samaritan Hospital. The psychiatrist "wrote
that [the patient] was afraid of going into the street because
someone might steal his body, and that he was angry, and that he
escalated when questioned by staff. He noted that [the patient]
usually attempted self injury under such circumstances. He also
noted that [the patient] threatened 'something will be done' if
'they' continue to bother him."

o An affidavit from Elizabeth A. Salerno, an OMH
registered nurse. In support of her conclusion that this was a
crisis service, she described the patient's condition and the
action taken to transport the patient to the hospital.

In support of its position that this was not a crisis service, HCFA
introduced the following evidence and made the following arguments:

o HCFA pointed out the contradiction in the records: the
letter from the team leader said that Tim Symer transported the
patient while the progress notes reflect that Carol Gardner,
Community Mental Health Nurse, Nancy Wilson and Bill Koch
transported him.

o HCFA contacted Carol Gardner who said that in her
opinion that this was a case management service, not a crisis
service. She also said the staff went to the patient's home and
drove him to the hospital.

o HCFA maintained that the notes from the evaluation at
Samaritan Hospital for May 24, 1984, do not indicate that the
patient was in crisis on that day. They read:

[The patient] was friendly and cooperative with the
interview. * * * The patient appeared in good spirits
with no evidence of depression. He did not appear
agitated during the interview. He denies any
suicidal/homicidal ideation. Recent and remote memory
appear fair and intact. Insight appear[s] fair while
judgment appears fair as well. The patient denies any
disturbances with appetite or sleep. He also denies any
history of alcohol or drug use. No psychotic symptoms
evident at this time.

o Samaritan Hospital did not find that the patient was in
crisis and did not admit him.

We find that this case should be reclassified as a crisis service for
the following reasons:

o The Capital progress notes and the hospital evaluation
summary reflect that the patient was taken to Samaritan because
he recently had been demonstrating "confused [and] psychotic
behavior reported by Social Club staff (upset, afraid someone
would steal his body)." The notes of the psychiatrist who
issued the transportation order are not in the exhibits but are
referred to in the progress notes and New York Exhibit 12. The
psychiatrist found the patient was afraid someone would steal
his body, he was angry and escalated when questioned, he usually
attempted self injury under such circumstances and was
threatening that "something will be done" if "they" continued to
bother him.

o While the hospital staff found that the patient was calm
by the time he was interviewed, they concluded that the
patient's condition had changed because of the presence of his
prior Capital advisor, Nancy Wilson. According to the hospital
evaluation, the patient was mentally retarded and mentally ill
and his "support structure is primarily psychiatric services in
the area." Recently, his Capital advisor, Nancy Wilson, had
been changed so she was spending less time with him. According
to the evaluation: "This appears to be the main precipitant for
the current situation. . . . Reportedly the patient had done
quite well prior to his change in advisors." The "clinical
assessment and disposition" portion reads: "It would appear that
the patient's current agitated behavior is a result of an
advisor change. The patient appeared to enjoy the one to one
time with Ms. Wilson during the interview. Ms. Wilson reported
that the patient now appears his usual self and offered to spend
an increase in time with the patient." (Emphasis added).

o The fact that the patient was not in crisis by the time
he reached the hospital does not prove that there was never a
crisis need to transport him there. In fact, the treatment
records show that the patient had been doing "quite well" prior
to his change in advisors and that change had precipitated a
recent a decomposition which included psychotic fears, hostile
behavior and threatening statements. The clinic psychiatrist in
charge of his case found that he needed immediate intervention.

o The fact HCFA reports that one staff member said this
was a non-crisis service, without offering facts which
contradict those on which we rely, is not grounds for
disregarding the findings of the clinic psychiatrist and
hospital clinician.

o The team leader's error concerning who actually took the
patient to the hospital does not preclude the reclassification
since the progress notes establish who was with the patient and
they are consistent with the hospital evaluation notes.

Federal Case No. 162 (New York Exs. 13, 42; HCFA Ex. 15)

Ulster County Mental Health Services and Hudson River Psychiatric Center
were reimbursed for seeing the same patient on June 29, 1983.

In support of its contention that Ulster County rendered a crisis
service, New York introduced the following evidence:

o A letter from the Standards Compliance Coordinator of
Ulster County describing the visit as a crisis service. The
Coordinator explained that the patient:

is a chronic alcoholic who does quite well when he is
sober, but has frequent drinking episodes that result in
psychiatric hospitalizations and sometimes the need for
new housing. He becomes aggressive, explosive and the
police frequently need to be called for assistance.
This regression was evident in the chart around April,
1983 and can be found clearly in the progress
notes--statements such as 4/25/83--"Steve had another
drinking bout, became belligerent and called the
police," and in a Comprehensive Treatment Plan date
4/23/83 stating: "Steve has begun to drink on a regular
basis which has caused problems at his place of
residence." On the 6/29/83 visit, there is still great
evidence of the crisis continuing and the possibility of
[the patient] being thrown out of his present residence.

The Coordinator indicated that the progress notes of the second
provider, Hudson River, also showed that the patient was
drinking. The notes indicated that the patient was drinking the
weekend of June 25, 1983 and had been referred to the alcohol
detoxification program at the Community General Hospital.

o An affidavit from Elizabeth A. Salerno, an OMH
registered nurse. She wrote that on June 29, 1983 the patient
had presented at the Ulster County program in an intoxicated
state and been transported to the local hospital's
detoxification program..We uphold HCFA's finding in this case
for the following reasons:

o The patient was enrolled in Ulster County's continuing
treatment program. In a continuing treatment program, progress
notes are to be written at least every two weeks. 14 NYCRR
585.14(c)(7)(iii). The May 2, May 16, June 8, June 14, June 29
and July 13 notes were entered approximately every two weeks as
required by 585.14. The primary therapist in the case indicated
to the HCFA auditors that the June 29 entry was a regular
biweekly progress note covering all services from the previous
note and not a crisis note for the service date in question. In
order to document a crisis, 14 NYCRR 579.5(4)(d)(2) require that
"Crisis services may be provided as needed and documented in the
patient record. Such documentation shall include a statement of
the problem, the actions taken during the visit, and the
services that will be provided as follow-up." The notes do not
approach this standard.

o Attendance records at Ulster County indicate that the
patient spent the entire day at the facility. The patient's
primary therapist indicated to the HCFA auditors that if the
patient spent the entire day and was able to interact in
scheduled activities, then the patient could not have been in
crisis.

o The Ulster County Coordinator who wrote New York Ex. 13
had no personal contact with the patient. His construction of
events was contradicted by the primary therapist.

o The information in the affidavit submitted by Ms.
Salerno is completely contradicted by the progress notes
submitted by HCFA. Ms. Salerno says that the patient was
transported from the continuing treatment program, which was
Ulster County, to the hospital on June 29, 1989. However, the
Ulster County progress notes reflect that the patient had an
uneventful session on June 29 and there is no indication that he
was transported to the hospital on that day. Therefore, we find
Ms. Salerno's factual representations to be unsupported and
cannot rely on her conclusions.

Federal Case No. 163 (New York Exs. 14, 44, 45; HCFA Ex. 16)

Jewish Guild for the Blind and Post Graduate Center received
reimbursement for services to the same patient on September 27, 1983.

In support of its contention that the service provided by Jewish Guild
was a crisis service, New York submitted a letter from the Guild's
Director of Social Services. She represented that she had reviewed and
attached the relevant charts although the charts were not included in
the State's exhibit. She explained that for the previous 18 months the
patient had been suicidal and experienced four prolonged
hospitalizations. The Jewish Guild determined that the patient needed a
different level of services than it could provide and arranged to
transfer the patient to another provider. The patient was resistant and
so unstable that it was necessary for both providers to see her over a
period of time in order to effectuate the transfer without endangering
the patient.

In support of its contention that this was not a crisis service, HCFA
offered the following arguments:

o For the quarter of July 1, 1983 to September 30, 1983,
the Jewish Guild claimed Medicaid reimbursement for 14 dates of
service, all of which were claimed as regular clinic visits.

o The patient was receiving services from the Jewish Guild
on a regular basis under a treatment plan calling for weekly
services. The September 27 visit fell within the prescribed
intervals and was not out of the ordinary.

o The progress note for the September 27 visit indicated
that the visit was a regular visit and was labeled as such.

o HCFA's site visits to the provider "confirmed" that the
September 27 date was not a crisis service.

We find that this visit should be reclassified as a crisis service for
the following reasons:

o We find the Director's letter describing this patient's
period of crisis persuasive: the patient had been with the
Jewish Guild since 1977; in 1982, because of a suicide attempt
and repeated hospitalizations, it became apparent that the
patient needed more intensive help than the Jewish Guild could
provide; the patient resisted changing providers and the process
of transferring was de-stabilizing and dangerous to the patient;
managing the transfer required that the patient be seen by both
providers. We find that this sequence of events and patient's
need can reasonably be classified as a crisis situation.

o According to the State, the purpose of this rule was to
keep providers from "ping-ponging" patients between themselves
and to ensure that a patient had a primary provider. We find
that in this case the transfer between providers created a
crisis situation which was appropriately addressed by duplicate
services. This was not a case of "ping-ponging."

COLLATERAL SERVICE

A collateral is defined as ". . . members of the patient's family or
household who regularly interact with the patient and are directly
affected by, or have the capability of affecting, the patient's
condition." 14 NYCRR 585.4(a)(3). New York argued that each of these
cases involved a service to a collateral and therefore was separately
billable under 18 NYCRR 505.25(e)(4).

Federal Sample No. 23 (New York Exs. 15, 42; HCFA Ex. 17)

Western Monroe Mental Health Center and Rochester Psychiatric Center
received reimbursement for services to the same patient on September 12,
1985.

New York argued that the service by the Rochester Center should have
been billed as a service to a collateral since it involved delivery of
bus tokens to the patient's Family Care Home. In support of this
position it introduced a letter from the provider and the affidavit of
Elizabeth Salerno, an OMH registered nurse.

We find that this was not a service to a collateral for the following
reasons:

o OMH and DSS regulations and the MMIS Clinic Provider
Manual all require that progress notes in the treatment record
be made after each visit for clinic treatment services. The
closest progress note in this file was entered on September 9,
1985 indicating that the patient's prescriptions were renewed on
September 10 and the medications will be delivered on September
13.

o As to collateral visits, the regulations provide: "The
purpose and result of the consultation must be documented in the
progress notes." 14 NYCRR 579.5(g). There was no progress note
for September 12 or September 13, 1985.

o While the provider's letter, written almost three years
after the event, represents that the purpose of the trip was to
deliver bus tokens, it does not set forth the basis of this
representation or any supporting documentation. The delivery of
bus tokens contradicts what notes there are in the progress
notes that medications were to be delivered.

o If this service was actually rendered on September 13 it
creates another duplicate service for that day with Western
Monroe Mental Health Center.

o The service code and billing code used contradict the
State's assertion that this was a service to a collateral. The
progress notes are silent. Particularly in the face of New
York's very specific standards for documenting service to
collaterals, this contrary documentation and absence of progress
notes is very persuasive.

Federal Sample No. 81 (New York Ex. 16)

St. Luke's Roosevelt Hospital Center was reimbursed twice for services
to the same patient on August 20, 1985.

New York argued that one of these services should have been classified
as a collateral visit because the patient's brother-in-law was present.

We find that this visit could not have been billed as a collateral
visit:

o It is clear from the treatment notes that the patient
was the recipient of the services. The primary purpose of the
session was evaluation and the brother-in-law's presence was
incidental.

o There are notations on the progress note that the
session lasted one half hour. In order to bill for a collateral
visit when the collateral is present in the same session with
the patient, the session must have lasted the length of a
patient visit and a separate collateral visit. Section 3.7,
Billing Guidelines. The regulations require that a collateral
visit last a minimum of 30 minutes. 14 NYCRR 579.7 Therefore,
since this visit lasted only 30 minutes, it apparently was not
of sufficient duration to justify a separate collateral bill.

Federal Sample No. 84 (New York Exs. 17, 42)

Bedford-Stuyvesant Community Mental Health Center, Inc. and Blueberry
Treatment Center received reimbursement for seeing the same patient on
May 18, 1983.

New York argued that the Bedford-Stuyvesant visit should have been
billed as a collateral visit. In support of its position it introduced
the following documents:

o The treatment notes from the May 18, 1983 visit. These
notes reflected that the patient was accompanied by his mother
and siblings and that the therapist spent time talking with the
patient and his mother. She wrote: "In collateral visit,
therapist received feedback re Ms. Pierre's case for PA. Her
case is to be reopened. Pt's mother seems less depressed; was
verbal and spontaneous."

o An affidavit from Elizabeth A. Salerno, an OMH
registered nurse. She maintained that this service should have
been reported as a service to a collateral because the note
reflects that the therapist talked with the mother and described
the interaction as a collateral visit. She concluded that the
therapist erroneously checked only the full clinic session as
the service provided to the patient.

In support of its position that this was not a collateral visit, HCFA
made the following arguments:

o The letter accompanying the progress note indicates that
the patient was attending his regular psychotherapy session.
The progress notes confirm this and the provider billed Medicaid
for an individual clinic visit.

o The progress note form had a box to check if service to
a collateral was rendered in a session. The therapist did not
check this box.

o The progress note plainly indicates that the therapist
was assessing the patient during the visit.

o The duration of the visit was one hour but it is
impossible to tell whether the collateral was seen for at least
30 minutes as required by the regulations.

o HCFA agreed that there is reference to the collateral in
the notes, but argued that even if the provider was entitled to
bill a collateral visit in addition to the clinic visit, this
would not have negated the duplicate claim. The additional
collateral claim would not have impacted the review since there
would still have been two individual claims for this patient on
the same day.


We find that this visit should not be reclassified as a service to a
collateral. The letter and progress note in New York Exhibit 17 clearly
indicate that this was a regular clinic visit for the child.

Federal Sample No. 107 (New York Ex. 18; HCFA Ex. 18)

Northern New York Center and St. Lawrence Psychiatric received
reimbursement for services to the same patient on October 12, 1984.

In this case there are three conflicting documents: a service recording
document which reports the service under the code for a service to
collateral, the billing code which indicates that the service was a
continuing treatment program visit rather than a collateral visit, and
the progress note in the patient's file which reflects interaction with
the patient only. New York relied on the first code while HCFA relied
on the later code and progress note.

In support of its position that the St. Lawrence service was service to
a collateral, New York submitted a letter from the director of St.
Lawrence saying that he had spoken to a Ms. Jane Tobin, the case manager
who delivered the service at issue who had since retired, and she "has
informed me that she erroneously reported two services on October 12,
1984 as Service to Collateral (Service Code 164) and that one of those
services should have been reported as a 20-minute Individual Session
(Service Code 121)." New York maintains that this is sufficient
documentation.

We find that this service was not a service to a collateral for the
following reasons:

o The State's case rests on the service recording document
in which Ms. Tobin twice used the service to collaterals code.
According to the Director's version of what she subsequently
said, the service recording document was incorrectly filled out
and only one of the services should have been listed as a
collateral service. Therefore, the accuracy of the service
recording document has been put into question by the State's own
evidence.

o The service recording document is in direct conflict
with the progress note for the day at issue. The progress note
reflects conversations only with the patient and does not refer
to conversations, much less conversations of at least 30 minutes
duration, with the staff of the Family Care Home.

o The auditors actually met with the case manager, Jane
Tobin, who is quoted in the director's letter. Reportedly Ms.
Tobin told them that the service on October 12, 1984 was an
individual session and not a collateral service and had been
erroneously coded on the service recording document. In the
face of such conflict and the plain language of the progress
note, the State should have made some further attempt to resolve
these conflicts through more explanation from Ms. Tobin or a
statement directly from her.

o The New York regulations require that service to
collaterals must be documented in the progress notes.

Federal Sample No. 115 (New York Ex. 19; HCFA Ex. 19)

Family Services of Chemung and Elmira Psychiatric Center received
reimbursement for services to the same patient on March 21, 1986. New
York argued that the Elmira service was a service to a collateral.

In support of its position that the Elmira service was a service to a
collateral, New York introduced a "screening and admission note" from
the patient's inpatient admission record of March 25, 1986, four days
after the service in question. That report reflects that someone on the
Elmira staff talked with the family care provider during a home visit on
March 21. The relevant sentence reads: "Patient was reported by the
family care provider that he was not sleeping well and has been singing
loudly at the top of his lungs, creating a disturbance in the home."

In support of its position that this was correctly billed as a home
visit to the patient, HCFA introduced the following evidence and
arguments:

o The service recording document for this service was
coded under the program code for "clinic treatment - home" which
reflects that the patient received service at the home.

o Three separate service codes were recorded on the
service recording document. One code was for an individual
therapy session with the patient while a second code was for
service to a collateral.

o There was no progress note for the March 21 visit but
there was a progress note for a March 25 visit which discusses
the March 21 visit. From this progress note is apparent that
Elmira staff person interacted with the patient and the provider
staff about the patient on March 21.

o From the progress note and the service recording
document, a collateral visit could have been claimed in addition
to the home visit. However, if the collateral had been claimed,
it would not have negated the duplicate identified by the
initial computer run in that the Elmira home visit and the
Family Service of Chemung continuing treatment claim would still
have intersected as duplicates.

We find that New York is not entitled to reclassify this visit as a
service to a collateral. The evidence clearly indicates that this was a
home visit to the client and that the provider meant to bill it as such.
The fact that the provider could also have billed for a collateral visit
does not negate the fact that duplicate services were provided.

Federal Sample No. 169 (New York Ex. 20; HCFA Ex. 20)

Ulster County Mental Health Services and Hudson River Psychiatric Center
were reimbursed for services to the same patient on September 5, 1984.
New York argued that Hudson River should have been billed as a service
to a collateral.

In support of its position, New York introduced a service recording
document with a service code of "164" which is service to collateral.
It argued that this was sufficient documentation.

We find that this case should not be reclassified as a service to a
collateral for the following reasons:

o The Hudson River entered progress notes on a monthly
basis, rather than a biweekly basis as required by the
regulations. The progress note dated September 29, 1984 refers
to services on August 29, September 10, September 13, and
September 17. It makes no mention of services on September 5,
the date in issue.

o The involvement of a collateral in a patient's case must
be an integral component of the treatment plan and services to
collaterals must be documented. 14 NYCRR 579.5(g). The
progress notes for August, September, and October do not mention
the involvement of any third person as a possible collateral,
nor did the State introduce any portion of the treatment plan or
other progress note which would indicate that a collateral even
existed in this case.

BILLING ERRORS

New York argued that all of these cases presented billing errors such as
failure to aggregate services properly, claims entered against the wrong
patient's Medicaid number, and claims entered for the wrong day. The
State contended that if these mistakes were corrected, there would have
been no improper duplicate claims in these cases.

Federal Sample No. 3 (New York Ex. 21; HCFA Ex. 21)

The Hutchings Psychiatric Center billed Medicaid for half day ($18) and
brief day ($12) services for the same patient on December 16, 1983.

New York argued that the error this provider made was in not aggregating
its services. If it had, it could have billed for a full day ($36).
Since the two amounts the provider did receive are less than the one it
could have properly received, New York asserted that this case should be
considered a billing error rather than a duplicate claim. In support of
its position, New York introduced a "Computer Generated Service
Recording Form," portions of which are completely illegible.

We uphold HCFA's finding that this was a duplicate bill. We base our
conclusion on the following factors.

o We cannot rely on New York's Ex. 21 to establish that at
least 5 hours of service were rendered to this patient on
December 16, 1983. Portions of this exhibit are completely
illegible and there is no explanation of what the numbers in the
various columns signify or to whom they relate. According to
HCFA, the document demonstrates that the provider rendered four
hours of total service.

o Title 18 NYCRR 505.25(i)(3) mandates that in continuing
treatment programs, full day visits involve a duration of at
least 5 hours; half day visits involve a duration of at least 3
hours but less than 5 hours; and brief day visits are at least
one hour but less than 3 hours. It is possible that this
provider met the 5 hour standard for a full day visit, but it is
also possible that the half day and brief day visits did not add
up to five hours of service. In the absence of any credible
proof to the contrary, we must rely on the provider's initial
characterization of these visits as half day and brief day
rather than full day.

Federal Sample No. 52 (New York Exs. 29, 49; HCFA Ex. 28)

Buffalo General Hospital was reimbursed for two services to "Robert" on
November 21, 1983.

New York argued that these claims were erroneously billed to a "Robert"
when actually "Richard" received one of the services on November 21,
1983. In support of its argument, New York introduced two sets of
"adjudicated claims" computer printouts. New York did not explain how
the printouts support its argument. Apparently they show that Medicaid
was billed twice for services to "Robert" on November 21, 1983 and was
not billed for any services to "Richard" on that day. They also show
that there was a "Richard" who was receiving services from this provider
during this general time period, i.e., there are claims for Richard
during September and December of 1983 but not October or November, the
month at issue.

This exhibit and argument were submitted in New York's Reply Brief.
Although given an opportunity to do so, HCFA did not comment on this
evidence. In the auditors' comments to the State's initial brief, the
auditors did report that when they made a site visit to Buffalo General
Hospital, the official they talked with speculated that "Richard" was
accidentally billed as "Robert." However, the official had no records
to support this hypothesis and the State has produced none since.

We uphold HCFA's finding that this was a duplicate claim for "Robert."
The hospital billed it to "Robert." If in fact "Richard" was seen that
day, and according to the claims forms, numerous other times at this
facility, then the State should have introduced some documentation from
these files to support its position that this was a billing error.
Merely demonstrating that a "Richard" was a patient during this general
time period at this facility is not sufficient to overcome the
facility's initial claim that it saw "Robert" twice on November 21,
1983.

Federal Sample No. 61 (New York Ex.22; HCFA Ex. 22)

Harlem Valley Psychiatric Center and White Plains Hospital Medical
Center received reimbursement for the same patient for services on June
28, 1985.

New York argued that this was a billing error because the White Plains'
services were actually rendered on June 27, 1985 and not June 28, 1985.
It introduced a letter from the White Plains' vice president saying that
the progress note in the patient's chart reflected that the visit had
been on the 27th and it had been erroneously submitted as if on the
28th.

While HCFA contested whether the service was actually on the 27th rather
than the 28th, it also introduced evidence to show that service on the
27th would have also created a duplicate bill with Harlem Valley.
Therefore we find that the dispute as to the date of service is
irrelevant since either date creates a duplicate payment.

New York replied that HCFA's "claim that two services were thereby
rendered on June 27, 1985 is unsupported and would mean a substitution
for a sampled item."

We uphold HCFA's finding that this is a duplicate bill for two reasons.
First, HCFA's claim is not unsupported; the computer printout for this
patient reflects Harlem Valley service on June 27, 1985. Second, this
is not a substitution of a sampled item. New York's defense rested on
changing the date of service. If that is the defense, HCFA is entitled
to re-examine this case to ascertain whether the second date of service
creates a duplicate bill. This is only fair since the error New York
now relies on prevented the real duplicate of June 27 from being
identified when the initial set of duplicate billing cases were
identified.

Federal Sample No. 65 (New York Ex. 23)

Creedmoor Psychiatric Center received reimbursement for brief day and
half-day services for the same patient on November 17, 1983.

New York argued that this was a billing error since Creedmoor could have
aggregated these two charges and submitted a claim for full day
services. In support of its argument, New York submitted treatment
records from Creedmoor for this patient which show that on November 17,
1983 he attended two activities: the therapeutic community meeting from
9:00 to 9:30 and the small group from 9:30 to 10:15.

We find that this case does not involve the billing error that New York
describes, and therefore uphold HCFA's finding on this case. The total
of services on November 17, 1983 according to the treatment records in
New York Ex. 23 was one hour fifteen minutes. Since a full day service
requires that the patient participate in the program for a minimum of
five hours (14 NYCRR 579.7; 18 NYCRR 505.25), the provider could not
have billed for a full day.

Federal Sample No. 78 (New York Exs. 24, 47; HCFA Ex. 23)

Oneida County Department of Mental Health received reimbursement for
full-day care and half-day care for the same patient on January 24,
1983.

New York claimed that the services were actually provided on two
different dates and mistakenly billed on the same day: the full-day
service should have been dated January 19 and the half-day service was
correctly dated January 24. New York introduced the patient ledger card
showing that on January 24, 1983 the patient received only half-day
services. It introduced a copy of the provider's claim form and a
letter from a commissioner saying that the program inadvertently billed
Medicaid for two services on January 24 while not billing for a service
on the 19th.

In response HCFA argued that copies of the actual claims forms show that
the provider submitted two claims on the same day for the same patient
and was reimbursed for these two claims. HCFA did note that, because
the State had not yet identified which claim was actually billed on the
wrong date, it was difficult to respond. Subsequently in Exhibit 47,
New York did identify the incorrect bill but HCFA did not comment
further on this case.

We find that this case should be excluded from the sample because it
presented a billing error in which the provider erroneously claimed
services for the same day that had been rendered on different days. The
patient ledger card corroborates the provider's representations.

Federal Sample No. 146 (New York Exs. 25, 48; HCFA Ex. 24).

Occupations, Inc. was reimbursed for a clinic visit and a group visit
for the same patient on November 15, 1983.

In its brief, New York wrote that "it is documented that group therapy
was rendered on 11/18/83 and individual therapy on 11/15/83." While New
York did not explain how this was "documented" or introduce evidence to
document it, New York explained that the medical records cards, from
which the billing is prepared, indicate that both services were rendered
on November 15. It introduced a patient ledger card which indicated the
patient received both group and clinic visits on November 15, 1983, and
a billing statement which shows both group and clinic bills for November
15, 1983. Subsequently with its Supplemental Appeal File, New York
introduced a letter from the provider's director of finance saying that
they had reviewed "other clients in the group and attendance records and
can confirm that the group did occur on the 18th and the only error made
was one of a clerical nature by recording it on the log for November
15."

We uphold HCFA, finding that this provider billed for two services for
the same patient on the same day:

o All of the evidence from the provider's records
indicates that this was a duplicate service: the ledger card,
the service recording document, and the billing information.
Further, HCFA represented that it ascertained in its site visit
that no service for this patient was recorded for November 18.

o In its initial brief, the State said "it is documented"
that the services actually occurred on different days. However,
the State did not introduce or even describe this documentation.
The provider's letter that it finally did introduce to support
this representation was written after the brief.

o The only evidence supporting the representation that the
services were on different days is a letter prepared five years
after the incident which refers to reviewing records of other
patients in the group and attendance records, but does not
include those records.

Federal Sample No. 208 (New York Ex. 26; HCFA Ex. 25)

The State is no longer contesting the correctness of the auditor's
determinations about this case. Respondent's Brief, p. 21.

PREVIOUSLY AUDITED

New York argued that Federal Sample Numbers 18, 51, 72, 77, 86, 105, 124
and 154 should be removed from the federal sample as previously audited.
It represented that these cases involved two providers which had been
audited by the New York and the federal share of these providers'
overpayments had been returned to the federal government. Appeal Brief,
p. 8. These cases involve the DePaul Clinic and the New York
Psychotherapy and Counseling Center (NYPCC). (The State reclassified
its original challenge to the Buffalo General Hospital claim (Federal
Sample No. 52) from an audited case to a billing error and it was
discussed in the foregoing section.)

HCFA raised three arguments which applied to both providers. First, it
argued that the documentary evidence did not establish that the federal
share of the amounts disallowed in the State audits had been returned to
the federal government. Second, it argued that the methodologies used
by the DSS auditors to determine which claims to question were different
and would result in different disallowance amounts for certain of the
cases. Third, it argued that New York would have to show that the
federal sample cases were actually reviewed and appropriately questioned
in the State's audit.

As to its first argument, HCFA is correct that New York has not proved
that the federal share of the overpayments identified through these
audits has been credited to the federal government. HCFA Ex. 4, p. 60.
Nevertheless, in our decision, we concluded that New York should have an
opportunity to submit such documentation to HCFA for its evaluation.

Second, HCFA is also correct that the methodologies used by the state
and federal governments differed in that the New York audits disallowed
the lower priced claim amount while HCFA based its disallowance on the
date of payment or the higher amount. HCFA Ex. 4, p. 60. However, as
we concluded in the decision, we find that the State's methodology is
appropriate under these circumstances and within the State's
administrative prerogative as the primary administrator of State
regulations.

Third, HCFA argued these cases could not be excluded until New York
submits proof that "the duplicate included in our review was part of the
State's review and was questioned appropriately by the State." HCFA Ex.
4, p. 56. Presumably HCFA is requesting proof that these cases were
actually reviewed by New York as part of its audits' sample cases. We
find that these cases should not be retained as part of the federal
sample merely because they were not selected as part of New York's case
sample in its audits of the two providers. New York based its review of
these providers on a randomly selected sample of cases that was not
intended to duplicate the exact sample selected in the federal audit.
HCFA has not challenged New York's sample methodology or audit practices
for either audit. Since the validity of New York's audits would not
rest on whether it examined the same cases that were examined in the
federal audit, there is no need for New York to demonstrate that any
particular case examined in the federal audit was reviewed by it in the
course of its audits. Thus, these cases (Federal Sample Nos. 18, 51,
72, 77, 105 and 124) should be excluded from the federal sample if the
State can demonstrate to HCFA that the federal share of these audit
disallowances was previously credited to HCFA.

HCFA also raised arguments that were specific to the two providers. As
to the DePaul Clinic, it argued that two of the sample cases (Federal
Sample Nos. 86 and 154) could not have been included in the State's
audit universe since the service dates and one of the claim payment
dates in each case was prior to the period of time covered by the State
audit. HCFA Ex. 4, p. 56. While the State represented in its brief
that these cases were included in its audit, it went on to write: "It is
the Appellant's position that it is not necessary to have both claims
for each Federal Sample included in the State's audit universe if both
claims fall within the federal audit universe." We disagree. Since
these cases were not in the State audit universe, we find that they were
not previously audited and cannot be excluded from these sample cases.

As to the NYPCC audit, HCFA argued that those five cases (Federal Sample
Nos. 51, 72, 77, 105, 124) could not be excluded because the State
issued its audit results after the State had notice of which NYPCC cases
HCFA was questioning. HCFA Ex. 4, p. 57. We reject this argument and
find that the New York audit should prevail as to cases in the federal
audit which were within the universe of cases reviewed in the New York
audit. HCFA did not question the methodology used in New York's audit
or New York's motive in conducting the audit. The regulations being
reviewed in these audits were state regulations. There were no federal
regulations at issue in these cases. As the primary administrator of
these standards, DSS is entitled to deference in its judgments.
Further, it does not appear that New York was attempting to preempt HCFA
by conducting provider audits since this case raises questions about
only two audits and only one of those was issued after HCFA's. Also New
York purportedly began its field work for this audit prior to HCFA's
notification that NYPCC was included in its questioned cases.

Therefore, we find that Federal Sample No. 18 from the DePaul Clinic and
Federal Sample Nos. 51, 72, 77, 105 and 124 should be excluded from the
HCFA disallowance if New York can demonstrate to HCFA that it has
credited HCFA with the federal share of the overpayments which it
assessed against DePaul Clinic and NYPCC.

CLOSED FACILITIES

New York represented that Federal Sample Nos. 62, 103 and 148 (New York
Ex. 36, New York Ex. 37, HCFA Ex. 29) involved three facilities which
had been closed and that it had been unable to obtain records to
substantiate the federal auditors' conclusions. It argued that
therefore these cases should be excluded from the sample.

We find that HCFA is entitled to rely on these cases as part of its
sample for the following reasons:

o New York established codes by which providers could
identify separately billable crisis and collateral services in
their claims to the MMIS. In these cases the providers did not
use any codes which would indicate that these were crisis or
collateral services. Instead, the codes used by the providers
indicate that the services were duplicate non-crisis
non-collateral services. They establish a prima facie violation
of the regulations at issue.

o Since HCFA has made a prima facie case that these were
improper payments, and since New York has the burden of proving
they were proper, the cost of the absence of records necessarily
falls on New York. It cannot remove these cases from the sample
simply because it does not have access to the necessary