Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: Nebraska
Department DATE: November 22,
1993 of
Social Services Docket No. 93-158 Decision
No. 1449
DECISION
The Nebraska Department of Social Services (Nebraska) appealed
a
disallowance by the Health Care Financing Administration (HCFA)
under
Title XIX (Medicaid) of the Social Security Act (Act). HCFA
disallowed
$644,839 of Nebraska's claim for federal funding for costs
incurred
under its home and community-based services (HCBS) waiver for the
period
July 1, 1990 through June 30, 1991. The amount disallowed
represents 10
percent of direct residential staff costs.
The first three months of this time period (July 1, 1990 - September
30,
1990) were governed by the original HCBS waiver which was at issue
in
Nebraska Department of Social Services, DAB No. 1354 (1992)
(henceforth
cited as Nebraska I), and Nebraska Department of Social Services,
DAB
No. 1389 (1993) (henceforth cited as Nebraska II). This
waiver
expressly provided that 10 percent of direct residential staff costs
had
to be excluded from Nebraska's reimbursement claims. The purpose
of
this 10-percent deduction was to eliminate the cost of
non-reimbursable
room and board services performed by the staff. Both
the applicable
statute and regulations require that room and board costs be
excluded
from reimbursement under the waiver. Section 1915(c)(1) of the
Act; 42
C.F.R. . 441.310(a)(3). The remaining nine months of the
disallowance
(October 1, 1990 - June 30, 1991) were governed by a renewal
waiver,
which HCFA approved on January 15, 1991, effective October 1,
1990.
Nebraska Exhibit (Ex.) 13. The renewal waiver did not include
the
10-percent deduction for room and board which had been in the
original
waiver, nor any other means of deducting the portion of staff
costs
attributable to room and board services. HCFA disallowed the
costs at
issue on the basis of the approved methodology in the original
waiver
and Nebraska's failure to substantiate that a different
methodology
would properly implement the room and board deduction for the
period
covered by the renewal waiver.
For the reasons explained below, we uphold the disallowance in full.
We
conclude that it was reasonable for HCFA to apply a 10-percent
deduction
throughout the entire disallowance period. For the first
three months
of the disallowance, Nebraska was bound by the express terms of
the
original waiver, which specifically required a 10-percent
deduction.
The renewal waiver specifically excluded room and board
from
reimbursement under the waiver and Nebraska did not allege any change
in
residential staff responsibilities or otherwise substantiate that
no
room and board services were performed. The 10-percent
deduction
proposed by Nebraska in the original waiver was the only deduction
which
HCFA had already approved; thus, it remained a reasonable means
of
removing room and board costs from direct residential staff costs.
ANALYSIS
With respect to the first three months of the period at issue,
Nebraska
made many of the same arguments which it had made in Nebraska I
and
Nebraska II. As for the last nine months of the disallowance
period,
Nebraska argued that no room and board deduction was necessary
since
HCFA approved the renewal waiver without any provision for
deducting
room and board. Finally, Nebraska contended that none of its
claims for
reimbursement included room and board costs, because all room and
board
costs were reported as unallowable operating expenses and capital
outlay
expenses, which were excluded from the calculation of
reimbursable
habilitation expenses. We address each of these points
below.
1. Nebraska was bound by the terms of its approved waiver for the
first
three months of the disallowance period at issue.
While Nebraska raised many of the same arguments here as it did
in
Nebraska I and Nebraska II, it did not offer any explanation of why
the
Board's decisions were wrong. Nor did Nebraska offer any new
evidence
for the Board's consideration, other than conclusory affidavits of
the
type the Board had previously rejected and the evidence discussed
in
section three below, which we find to be irrelevant. Thus, as
we
summarize below, we see no reason to decide these issues
differently
here.
Nebraska argued again here, as it did in Nebraska I, that it
removed
any unallowable room and board costs from provider reimbursement
rates
when, pursuant to HCFA's recommendations, it separated the costs
of
assisted residential living from supported residential living. As
we
explained in Nebraska I, however, separating these costs did nothing
to
eliminate unallowable room and board expenses. Nebraska I at
7.
Nebraska merely removed the direct residential staff costs in
the
supported residential living context, as it was required to do,
since
these costs were not funded under the HCBS waiver. The
unallowable room
and board costs inherent in assisted residential staff
costs, however,
remained in providers' reimbursement rates.
Nebraska also contended in the case before us now, as well as in
both
Nebraska I and Nebraska II, that at a meeting between state and
federal
officials, Nebraska proposed eliminating the 10-percent deduction
from
the waiver methodology and HCFA officials agreed to the
modification.
We concluded, however, that there was no definitive and
binding
modification of this express waiver term arising from the
meeting. All
five HCFA participants denied that they had agreed that
Nebraska could
ignore the deduction. They further asserted that they
did not review,
audit, or approve the regional worksheet that Nebraska had
supplied at
the meeting. We also noted, in Nebraska I, that where the
original
waiver request and its approval must both be made in written form by
the
appropriate officials, any approved modification must also be
in
writing. There was absolutely no evidence in the record of
an
authorized written approval for a waiver modification. Nebraska II
at
3-4.
Nebraska also asserted, as in Nebraska I, that the only staff cost
claimed
under the waiver was the salary cost for staff members providing
24-hour
supervision and training. Thus, contended Nebraska, no room and
board
expenses were included in the reimbursement rates. According
to
Nebraska, because these staff members had to be available to
assist
clients on a 24-hour basis and because they were responsible
for
training residents to be more self-sufficient in tasks of
everyday
living, they did not perform any room and board functions. 1/
We found
that these factors, even if true, did not mean that no room and
board
services were performed by the staff. Nebraska I at 5. As
we stated in
Nebraska I, any number of tasks relating to room and board
could
conceivably be performed by the residential staff: shopping for
food,
food planning and preparation, kitchen cleanup, housekeeping
chores,
building maintenance, etc. Id.
Moreover, we see no reason to conclude that no room and board
services
were performed simply because the residential staff had to be on
duty
24-hours a day or because the staff trained residents to be
more
self-sufficient. The 10-percent allocation of costs is a
relatively
small proportion of total costs and might reasonably include room
and
board services that do not involve any element of training
and
supervision. A small allocation might be appropriate even if room
and
board services are provided as an integral part of client training or
as
part of the overall 24-hour supervision of the residences.
Nebraska
never argued that the residential staff were not in any way involved
in
the preparation of meals or the maintenance and cleaning of
the
residences. Furthermore, in our prior appeals and this appeal,
Nebraska
failed to provide the Board with a description of residential
staff
duties or a breakdown of the amount of staff time spent
performing
different functions. Thus, Nebraska failed to prove that
none of the
services performed by the residential staff were attributable to
room
and board. 2/
Accordingly, we conclude here, as we concluded in Nebraska I and
Nebraska
II, that Nebraska was bound by the terms of its approved waiver
for the first
three months of the disallowance period.
2. HCFA's application of the 10-percent deduction for expenses charged
to
the waiver during the last nine months of the disallowance period
was
reasonable.
Nebraska argued that HCFA could not require it to implement the
10-percent
deduction for the last nine months of the disallowance period
since HCFA
approved the renewal waiver without any provision for a room
and board
deduction. The renewal waiver did not include the old
Appendix J (which
provided for the 10-percent deduction requirement in
the "Methodology Used to
Determine Waiver Rates"), but included a new
Appendix J which had nothing to
do with calculating waiver rates. See
Nebraska Ex. 12, June 28, 1990
letter at 1-2. Nebraska contended that
during the waiver renewal
process, HCFA did not ask why the 10-percent
deduction had been eliminated or
require that it be included before
authorizing the renewal waiver; thus,
according to Nebraska, HCFA cannot
now demand that it be implemented.
Nebraska relied on a prior Board
decision (Florida Department of Health and
Rehabilitative Services, DAB
No. 1100 (1989)) in support of its argument that
"the Agency (HCFA) is
not permitted to avoid the logical consequence of an
approved state
plan." Nebraska Brief at 8-9.
While it is true that the renewal waiver lacked a specific provision for
a
10-percent deduction, it does not follow that no deduction for room
and board
costs was intended. The waiver specifically stated that
"[r]oom and
board is excluded from the service definition and is not
reimbursable under
the waiver." Nebraska Ex. 12, HCBS waiver at 7.
Thus, the waiver as a
whole clearly contemplated that to the extent that
residential staff
performed room and board functions, an appropriate
deduction based on staff
costs should still be made from reimbursable
costs. Thus, Nebraska's
reliance on the Florida decision is clearly
misguided.
Nebraska conceded, in fact, that room and board costs were
unallowable
under the waiver; however, it failed to substantiate that no room
and
board expenses related to residential staff costs were included
in
provider reimbursement rates. This Board has consistently held that
a
state has the burden of documenting the existence and allowability
of
all of its costs. West Virginia Department of Health and
Human
Services, DAB No. 1257 (1991); New York City Human
Resources
Administration, DAB No. 1199 (1990). In addition, OMB
Circular A-87
(made applicable through 45 C.F.R. . 74.171) requires grantees
to submit
time distribution records in order to receive reimbursement for
salaries
and wages "which are chargeable to more than one grant program or
other
cost objective." OMB Circular A-87, Attachment B, (10)(b)
(emphasis
added). 3/ As we stated earlier, Nebraska did not submit any
time
distribution records or breakdown of staff duties which would prove
that
residential staff did not perform any room and board
functions.
Nebraska merely submitted affidavits from state officials
which
conclusively stated that all room and board costs were paid for
directly
by the residents and that the staff only performed
"habilitation"
services. Nebraska Ex. 15. The affiants, however,
did not contend that
the room and board costs charged to their clients
included any staff
costs related to staff performance of room and board
services. Nor did
the affiants provide persuasive explanation or
supporting analysis of
services actually performed or why none of the
services could be
allocated to room and board functions. 4/
Nebraska also alleged that it documented its costs by submitting
a
1990-1991 cost report to HCFA and asserted that HCFA clearly
accepted
this documentation since it used the same cost figures when it
issued
the disallowance. We fail to see how this cost report is
relevant to
the issue of room and board costs attributable to the
assisted
residential staff. The cost report would not be probative
evidence of
how much staff time was allocable to room and board
activities.
Since Nebraska's renewal waiver did not provide any specific deduction
for
room and board expenses, yet required that these costs be excluded,
it was
appropriate for HCFA to use a reasonable methodology for
excluding
them. HCFA chose to implement the 10-percent deduction used
in the
original waiver since this was the deduction which Nebraska had
proposed for
earlier periods. Indeed, the 10-percent deduction was the
only
deduction which both parties had agreed upon. Moreover, absent
any
evidence that staff duties had changed, we presume that the
10-percent
deduction remained an appropriate methodology. Thus, HCFA
acted
reasonably in applying it in calculating the provider
reimbursement
rates charged under the waiver from October 1, 1990 through
June 30,
1991.
3. Nebraska's exclusion of operating expenses and capital outlay
expenses
from its claims for reimbursement did not eliminate the room
and board costs
inherent in staff salary expenses.
Nebraska contended that its providers' reimbursement rates did not
include
room and board costs because all room and board expenses were
reported as
operating expenses and capital outlay expenses which were
excluded from
reimbursable costs charged to the waiver. Nebraska
submitted its
Accounting System Manual to demonstrate that its providers
were instructed to
report certain room and board expenses, such as fuel,
electricity and water,
as non-reimbursable operating expenses. Nebraska
Ex. 16 at 4.
Other expenses such as building construction and
acquisition of land were to
be reported as reimbursable capital outlay
expenses. Nebraska Ex. 16 at
9. As for staff salary expenses, the
Accounting System Manual
instructed providers to report "[e]xpenditures
for salaries, wages and
related employee benefits" as personal services
expenses, which were
reimbursable under the waiver. Nebraska Ex. 16 at
1. Thus,
Nebraska asserted that it removed all non-reimbursable room
and board costs
from costs charged to the waiver by separating
unallowable operating expenses
and capital outlay expenses from
allowable expenses, such as salary.
Nebraska contended that this
practice eliminated the need for a 10-percent
deduction.
This argument, however, ignores the underlying basis for
this
disallowance. The $644,839 which has been disallowed in this
case
represents that portion of provider staff salary costs attributable
to
room and board services performed by the staff which
Nebraska
inappropriately charged to its HCBS waiver. Although expenses
such as
fuel and building construction may be classified as room and
board
expenses, they were never at issue in this appeal, since they are
not
salary costs. The exclusion of these room and board expenses did
not
eliminate the cost of room and board services in question here
from
provider reimbursement rates.
Thus, throughout its appeals to this Board, Nebraska has not addressed
the
central issues in the cases: whether the services provided by
the
residential staff compensated under Nebraska's HCBS waiver included
any
element of room and board, and if so, whether these costs
were
eliminated from Nebraska's provider reimbursement claims.
Since
Nebraska has once again failed to prove that no room and board
costs
were reflected in the providers' reimbursement rates, and since it
has
not suggested any means of eliminating unallowable room and board
costs
from amounts claimed under the waiver, other than the
10-percent
deduction it agreed to in the original waiver, we uphold
HCFA's
application of the 10-percent deduction.
Conclusion
On the basis of the foregoing analysis, as well as our analysis
in
Nebraska I and Nebraska II, we uphold the disallowance in full.
___________________________
M.
Terry Johnson
___________________________
Norval
D. (John)
Settle
___________________________
Donald
F.
Garrett
Presiding
Board
Member
1. Nebraska also argued here that all staff costs were
allowable
because they were necessary for providers to comply with
waiver
regulations requiring staff to give individualized attention
to
residents in the form of client program plans. In accordance with
the
regulations, each client was evaluated and a program plan was created
to
ensure that the client received all necessary training and
24-hour
supervision. Nebraska Reply at 2-3. We do not here, or in
our previous
decisions, imply that the staff did not perform training and
supervisory
functions. However, as we state in our analysis below, this
would still
not preclude them from performing room and board services as
well.
2. See also our discussion below concerning Nebraska's
burden to
document the allowability of its claim.
3. Since any room and board activities performed by
residential staff
could not be charged to the waiver, staff salary costs
attributable to
room and board services were, in essence, chargeable to
another cost
objective.
4. In Nebraska II, Nebraska had also submitted
affidavits which
listed the cost, per region, of staff time spent performing
room and
board services. Nebraska argued that these estimates indicated
that if
a disallowance was warranted, it should be for an amount less than
the
10-percent disallowance amount. We rejected this argument,
however,
because the 10-percent deduction was required by the express terms
of
the waiver, and the affidavits which Nebraska provided were
highly
conclusory. Nebraska II at 4-5. Moreover, several
affidavits conceded
that some room and board functions were in fact performed
by the staff.
See Nebraska II, Nebraska Ex. 15, submitted in the record for
that
appeal (Board Docket