Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: New York State Department of Social Services
DATE: May 17, 1991
Docket No. 90-106
Decision No. 1252
DECISION
The New York State Department of Social Services (State) appealed
a
determination by the Health Care Financing Administration
(HCFA)
disallowing $490,426 in federal financial participation (FFP) claimed
by
the State under Title XIX (Medicaid) of the Social Security Act
(Act)
for the period April 1, 1987 through September 30, 1988. The
disallowed
amount represents the federal share of costs associated with
four
contracts to provide training primarily for staff in medical
facilities
throughout New York State. 1/
The State claimed the contract costs at the enhanced FFP rate of
75
percent, the rate authorized for the training of skilled
professional
medical personnel (SPMP) involved in the administration of the
State's
Medicaid plan. 2/ HCFA determined that the training costs were
not
administrative costs at all, but rather were costs of medical
services
for which the State was properly reimbursed by the FFP paid in
the
facilities' services rates.
For the reasons discussed below, we conclude that HCFA
reasonably
determined that the subject matters of the contracts in question
were
not related to the administration of the State's Medicaid program.
As
such, even if some of the contracts' trainees were SPMPs or
other
Medicaid administrative personnel, FFP was not available. Rather,
as
discussed in a previous Board decision, New York State Dept. of
Social
Services, DAB No. 1146 (1990), these contract costs were related
to
service delivery rather than program administration and thus could
be
claimed for FFP only by means of the rate-setting mechanism
established
for reimbursement of the costs of facility services.
Accordingly, we
affirm the disallowance.
Relevant Statutes and Regulations
Title XIX authorizes federal grants to aid in financing state
programs
which provide medical assistance and related services to
needy
individuals, in accordance with a state plan. Each state
participating
in the Medicaid program is paid "the Federal medical
assistance
percentage" (in New York 50 percent) of the amounts expended as
"medical
assistance under the State plan" and 50 percent of the amounts
expended
which are "found necessary . . . for the proper and
efficient
administration of the State plan" and which are not subject to
any
enhanced reimbursement rate for administrative costs.
Section
1903(a)(1) and (a)(7) of the Act.
Title XIX authorizes an enhanced reimbursement rate of 75 percent of
"the
sums expended . . . (as found necessary . . . for the proper and
efficient
administration of the State plan) as are attributable to
compensation or
training of skilled professional medical personnel . . .
." Section
1903(a)(2) of the Act. The implementing regulations provide
that this
enhanced rate is available for specified SPMP staffing and
training
expenditures, i.e., for salary or other compensation, fringe
benefits,
travel, per diem, and training. 42 C.F.R. 432.50(a) and
(b)(1);
433.15(b)(5) (1986). The 75 percent rate is available only if
"[t]he
expenditures are for activities that are directly related to
the
administration of the Medicaid program, and as such do not
include
expenditures for medical assistance." 42 C.F.R.
432.50(d)(1)(i)
(emphasis added).
Unlike the statutorily prescribed fixed rates for FFP in
administrative
costs, expenditures for medical assistance services in the
Medicaid
program are reimbursed in another way. A state Medicaid plan
must
provide for payment for Medicaid services in hospitals and
long-term
care facilities through the use of rates determined in accordance
with
methods and standards developed by the state. The state must
submit
satisfactory assurances that its rates are reasonable and adequate
to
meet the costs incurred by efficiently and economically
operated
facilities. Section 1902(a)(13) of the Act; 42 C.F.R. Part
447,
Subparts B and C.
Factual Background
The State claimed costs as state administrative expenses at the
enhanced
FFP rate of 75% for four contracts to provide training primarily
for
employees of various medical facilities.
The following contracts remain at issue in this appeal:
1) A contract with Network, Inc. (Contract No. C-002062,
State
Ex. 1) for a training program entitled "Medical
Records
Training." The 140 trainees were to include New York City
Human
Resources Administration nurses, New York State Department
of
Health medical records specialists and reviewers, Health
and
Hospital Corporation Coders, and supervisors and data
managers.
The contract states that the purpose of the training was
to
provide medical records personnel with sufficient
understanding
of the Diagnosis Related Groups (DRG) coding system to
ensure
compliance with state and federal regulations. 3/ State
Ex. 1,
Component Summary. The State claimed $128,213 FFP for
this
contract.
2) A contract with Management and Planning Services
(Contract
No. C-002190, State Ex. 2) for a training program
entitled
"Medicare Optimization Project." Under Component I of
this
contract, Preparation for Compliance with Medicare
Optimization
Program, 2500 skilled nursing facility (SNF)
administrators,
directors of nursing, nursing supervisors, and business
office
staff were to be trained. Under Component II of this
contract,
Case Management Assistance, 762 SNF administrators, directors
of
nursing, nursing supervisors and clerical supervisors were to
be
trained. According to the State, the purpose of the
training
was to inform SNF administrative staff of Medicare
benefits
available to facility patients so as to decrease charges to
the
Medicaid program. The contract states that the object of
the
training was to "enhance Medicare revenues available to New
York
State and the nursing home industry." State Ex. 2,
Component
Summary. The State claimed $310,927 FFP for this
contract.
3) A contract with the New York State Governor's Commission
on
Domestic Violence (Contract No. C-002134, State Ex. 3) for
a
training program entitled "Domestic Violence Training
for
Hospital Emergency Departments." Under Part I of this
contract,
emergency department staff including physicians,
nurses,
in-service trainers, and social workers at five public
hospitals
in upstate New York and at one pilot site in New York City
would
be trained. Under Part II of the contract, State local
district
workers would be trained. Training under this contract
would be
offered to 425 people. The purpose of this contract and
the
following one was, according to the State, to train
emergency
room staff how to make referrals to resources for victims
of
domestic violence, including the Medicaid program. The
State
claimed $38,333 FFP for this contract.
4) A contract with Victims Services Agency (Contract
No.
C-002062, State Ex. 4) for a training program entitled
"Training
on Domestic Violence for Emergency Departments." The
200
trainees would include physicians, administrators,
nursing
supervisory staff, in-service trainers, and social service
staff
in eight public hospitals in New York City. The State
claimed
$12,953 FFP for this contract.
Discussion
In two prior appeals by the State, the Board examined what rate of FFP
was
available for expenditures claimed by the State for training. In
New
York State Dept. of Social Services, DAB No. 1008 (1989), the State
claimed
FFP at the 75 percent rate for general management training of
SPMPs who were
employed in State and local administrative offices for
the Medicaid
program. In sustaining HCFA's disallowance of these
training costs, the
Board declared, "Under the regulations, the SPMP
rate is narrowly limited to
training, whether medical or administrative,
of SPMP related to their
functions as SPMP." at 6. The Board found
general administrative
training was not by its nature directly related
to SPMP functions. Also
in DAB No. 1008, the Board upheld the
disallowance of FFP claimed at the 75
percent rate for contract costs
for training provided to personnel in county-
and city-owned and
operated medical facilities. The Board then remanded
that part of the
appeal to HCFA for further consideration of whether these
costs could be
reimbursed at the 50 percent rate available generally for
administrative
costs of the Medicaid program.
In New York State Dept. of Social Services, DAB No. 1146 (1990), the
Board
then reviewed HCFA's determination that the State's entire claim
for training
contract costs for personnel in county- and city-owned and
operated medical
facilities was unallowable. HCFA had determined that
the State was
required to treat the training costs as medical services
costs properly
claimed for FFP only through the facilities' services
rates. In
affirming HCFA's disallowance, the Board stated:
Although the disputed training costs were incurred by the
single
State agency administering the Medicaid program, the scope
of
the individuals trained and the nature of the training
support
HCFA's finding that the costs were not general
administrative
costs of the Medicaid program. . . . HCFA reasonably
determined
that these costs were costs of facility services since
the
training was intended to fill gaps in the in-service
training
and enhance the service delivery capability of the
personnel
only at certain public facilities.
Id. at 4. The Board, in examining the specific training
contracts,
noted that the State admitted that the training at issue was
furnished
to employees of publicly operated facilities providing direct
services
to recipients.
Here, HCFA contended that, under 42 C.F.R. 432.50 and the two
Board
decisions discussed above, in order for the enhanced 75 percent FFP
rate
to be claimed for training the following conditions must be met:
o The people trained must be
involved in the
administration of the State Medicaid program.
o The
training must be related to
Medicaid program administration. o
The people trained must be
SPMPs. o The training must
be
related to a SPMP level of functioning.
The absence of any one of these factors, according to HCFA, is
dispositive
in invalidating a claim for the 75 percent FFP rate. For
the 50 percent
rate to be claimed, HCFA contended, the subject matter of
the training must
relate to Medicaid program administration and the
trainees must be involved
in the administration of the State Medicaid
program. HCFA argued that
each of the contracts at issue failed at
least one of these criteria --
either the subject matter of the
contracts or the employment status of the
trainees was unrelated to the
administration of the State plan.
Accordingly, HCFA contended that the
State's claim for either the 75 percent
or 50 percent FFP rate for the
costs of the training was unallowable.
The State responded that the training at issue was clearly related to
the
administration of its Medicaid State plan. The State contended
that
training in the first contract, with Network Inc., was provided
to
enable the participants to understand and use adequately the complex
DRG
coding system required by the Medicaid program; this training
would
reduce the number of errors made in the administration of the
Medicaid
program. According to the State, the people trained under this
contract
are public officials whose functions included the
administration of the
Medicaid program at both the state and local level.
As for the contract with Management and Planning Services for
Medicare
optimization, the State argued that this training aided
the
administration of its Medicaid program in that the maximization
of
Medicare benefits ensures that the Medicaid program is not
overbilled
for services, thereby complying with Medicaid program
reporting
requirements for reimbursement.
The State contended that training received under both of the
above
contracts was not related to delivery of services to recipients,
but
rather were related to the quality of claims submitted by the
State. As
such, the State asserted, the contracts were clearly related
to the
State's responsibilities under its State plan to administer the
Medicaid
program.
As to the third and fourth contracts at issue, concerning training on
how
to make referrals for victims of domestic violence, the State
asserted that
this training provided to health care workers and social
workers at hospital
emergency rooms was within the State's
responsibilities for the Medicaid
program to ensure that, at the time of
a patient's admittance to a hospital,
Medicaid reimbursable services
were medically necessary.
For either the 75 percent or the 50 percent rate to be claimed, the
costs
must be determined necessary for the proper and efficient
administration of
the State Medicaid plan. The State supplied the Board
with copies of
the training contracts and lists of trainees, with their
job titles and
places of employment. When we examine these documents,
however, we find
only a tangential connection, at best, between the
subject matter of the
contracts and the contracts' trainees and the
administration of the Medicaid
program.
Taking the employment status of the trainees first, we find that the
vast
majority of them were employed in health care facilities. State
Exs. 8,
10, 13, and 16. The trainees included hospital business staff,
nurses,
records specialists, bookkeepers, SNF administrators, social
workers, and
emergency room staff. Very few of the trainees had a
direct employment
relationship with the State Medicaid agency, and, as
HCFA pointed out, there
is nothing in the record to establish that these
employees had direct
administrative responsibilities for the Medicaid
program. In DAB No.
1146 the Board stated:
The regulations on personnel administration provide no
general
authority to claim as an administrative cost training
for
employees of individual service providers. While
these
employees may interact with the Medicaid program and may have
to
provide services which meet Medicaid standards, they
perform
these functions in the course of facility operation, not in
the
course of administering the State plan.
Id. at 6. While the trainees here may have worked in the
administration
of the delivery of health care, this is not tantamount to
the
administration of the State's Medicaid program.
Furthermore, the subject matters of the contracts bear little or
no
relationship to the administration of the Medicaid program.
The
contracts' component summaries explaining the training do not
even
reference the Medicaid program. State Exs. 1-4. The aim of
the first
contract was to provide facility staff instruction on the proper
coding
of clinical data under a DRG system. The second contract
concerned
available benefits under the Medicare program. The third and
fourth
contracts were for the instruction of emergency room personnel in
the
detection and treatment of domestic violence. The record before us
does
not establish that the training under these contracts has any
direct
connection with the administration of the State Medicaid plan.
Each of
the contracts related, rather, to the direct service responsibilities
of
facilities, e.g., proper coding procedures. We agree with HCFA
that
plan administration is not a function performed in connection with
the
provision of medical services, but a function wholly separate from
the
provision of medical services. As the Board said in DAB No.
1146,
The mere fact that the State Medicaid agency paid for
costs
related to the services provided by public facilities,
which
would otherwise be the responsibility of the
facilities
themselves, does not make the costs into administrative
costs of
the Medicaid program.
Id. at 8.
The only mechanism available for claiming these training costs provided
to
the facilities is through the individual reimbursement rates for
the
facilities as provided for in section 1902(a)(13) of the Act. As
the
Board found in DAB No. 1146, training costs such as these are
allocable
only to facility services, and not to the administration of the
State
Medicaid plan. Even if the State is unable as a practical matter
to
factor these costs into the rate-setting process for the facilities,
the
State cannot characterize these costs as Medicaid administration for
its
own convenience. See DAB No. 1146, at 8-9. Consequently,
reimbursement
of these costs as Medicaid administrative costs under the
training
regulation is inappropriate at either the 75 percent or 50 percent
FFP
rate.
While the State argued alternatively that the DRG and
Medicare
Optimization Project contract costs qualified as consultative
services
to providers under section 1902(a)(24) of the Act and 42 C.F.R.
431.105,
the State did not provide sufficient evidence to show this.
The State
did not provide copies of its State plan requirements for
consultative
services, nor any evidence that these contracts were designed to
meet
such requirements in connection with specific needs of the
State's
Medicaid program. Moreover, it appears that the contracts
were
initiated at the Departmental level, directed at overall State
needs,
and served some individuals who were not affiliated with
provider
facilities. Thus, we have no basis for finding that these
contracts
were for consultative services necessary for the proper and
efficient
administration of the Medicaid program.
Conclusion
For the reasons stated above, we affirm the disallowance in the
full
amount of $490,426.
__________________________ Judith
A.
Ballard
__________________________
Norval D. (John) Settle
__________________________
Cecilia
Sparks Ford
Presiding Board Member
1. The State originally appealed additional disallowances
totaling
$70,665 for two other contracts for the training of staff at
homeless
shelters. In the course of this proceeding, however, the State
withdrew
that portion of its appeal.
2. SPMPs are physicians, dentists, nurses, and other
specialized
personnel who have professional education and training in the
field of
medical care or appropriate medical practice and who are in
an
employer-employee relationship with the state Medicaid agency or
are
qualified staff of other public agencies. 42 C.F.R. 432.2.
3. The DRG classification system is a method for setting the charge
for
certain services based on a patient's condition, i.e., his
diagnosis,
rather than on the length of the patient's hospital stay (a per
diem
rate) or other measure of the cost of services. The use of DRGs
for
certain inpatient hospital costs is required for Medicare by
section
1886(d) of the