New York State Department of Social Services, DAB No. 1290 (1992)

Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Appellate Division

SUBJECT:  New York State Department of Social Services

DATE:  January 7, 1992
Docket No. A-92-38
Decision No. 1290

DECISION

The New York State Department of Social Services (State) appealed a
determination by the Health Care Financing Administration (HCFA)
disallowing $346,085 in federal financial participation (FFP) claimed
for the quarter ended June 30, 1991.  The disallowance amount
represented the difference between the 75 percent enhanced funding rate
available for administrative costs "attributable to the operation" of
the State's Medicaid Management Information System (MMIS) under Title
XIX of the Social Security Act (Act), and the 50 percent rate generally
available for Medicaid administrative costs.  HCFA determined that the
State had claimed FFP at the enhanced rate for MMIS overhead
expenditures not directly attributable to the MMIS cost center.  HCFA
based its determination on the State Medicaid Manual provision limiting
enhanced FFP to "[o]nly the direct overhead costs resulting from [MMIS]
operation."  Revision 8 to Part 11 of the State Medicaid Manual, section
11275.30.

The issues presented by this case were previously raised and addressed
in New York State Dept. of Social Services, DAB No. 1023 (1989), and New
York State Dept. of Social Services, DAB No. 1205 (1990).  In DAB No.
1023, the Board found that it was within HCFA's discretion to establish
a policy that distinguishes between indirect costs that originate from
the State's Medicaid agency, and would thereby qualify for the enhanced
funding rate, and statewide and department-wide indirect costs that
originate from other sources, which would thereby qualify only for the
normal 50 percent rate.  Further, the Board found in DAB No. 1023, that
the State, had notice of HCFA's policy and was therefore bound by it.

In DAB No. 1205, the Board found that New York's reliance on the
personnel costs regulation at 42 C.F.R. 432.50 to support the
availability of 75 percent FFP for the disputed expenditures was
misplaced.  The Board held that the personnel costs included in the
disallowance were clearly incurred for overhead type activities which
HCFA had reasonably determined were too remote from actual system
operation to qualify for enhanced FFP.  Further, the Board found that
the availability of enhanced FFP for costs for personnel directly
engaged in MMIS operations does not establish the availability of the
enhanced rate for any personnel whose costs are allocated down to MMIS
operations.

Although the State disagreed with the Board's analyses in DAB Nos. 1023
and 1205, the State requested that the Board issue a summary decision in
this case.  HCFA also agreed to this course of action.

We therefore sustain the disallowance of $346,085 based on the reasons
and analyses in DAB Nos. 1023 and 1205, which we incorporate here in
full.  We note, furthermore, that the Board concluded that HCFA could
reasonably restrict enhanced reimbursement for remote overhead costs in
New Jersey Dept. of Human Services, DAB No. 1071 (1989).  In New Jersey
v. U.S. Dept. of Health and Human Services, 748 F. Supp. 1120 (D.N.J.
1990), the court concluded that HCFA's policy was "valid" and upheld DAB
No. 1071.

 

 

     Judith A. Ballard

 

 

     Norval D. (John) Settle

 

 

     Cecilia Sparks Ford Presiding
     Board