New York State Department of Social Services, DAB No. 1473 (1994)

Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Appellate Division

SUBJECT: New York State Department of Social Services

DATE: April 5, 1994
Docket No. A-93-52
Decision No. 1473

DECISION

The New York State Department of Social Services (New York) appealed a
determination by the Health Care Financing Administration (HCFA)
disallowing $21,145,762 in federal financial participation (FFP) claimed
under Title XIX (Medicaid) of the Social Security Act. HCFA's
disallowance was based on a review of New York's claim for an increasing
adjustment to administrative expenditures submitted by New York on
behalf of the New York City Human Resources Administration (City). 1/
The disallowance covers the period from April 1, 1984 through June 30,
1986. The dispute concerns whether expenditures claimed for certain
employees of the City were properly claimed at the enhanced 75 percent
FFP rate available for compensation and training of skilled professional
medical personnel (SPMP) and their support staff or at the 50 percent
FFP rate available generally for administrative costs of the Medicaid
program. At issue here is HCFA's disallowance of the portion of New
York's claim which exceeded the 50 percent rate. 2/

For the reasons explained more fully below, we conclude that the
positions at issue did not require medical subject area expertise and
were not involved in the medical aspects of the administration of the
Medicaid program. Therefore, these positions do not quality for
enhanced reimbursement as SPMP; New York is entitled to FFP only at the
50 percent rate.

Applicable authority

Section 1903(a) of the Social Security Act (the Act) provides for
payment of:

(2) . . . 75 per centum of so much of the sums expended . . . (as
found necessary by the Secretary for the proper and efficient
administration of the State plan) as are attributable to compensation or
training of skilled professional medical personnel, and staff directly
supporting such personnel, of the State agency or any other public
agency . . . .

* * * *

(7) . . . 50 per centum of the remainder of the amounts expended .
. . as found necessary by the Secretary for the proper and efficient
administration of the State plan. 3/

HCFA's implementing regulations, 42 C.F.R.  432.50(b)(1) and
433.15(b)(5), provide 75 percent FFP for SPMP and support staff.
Sections 432.50(b)(6) and 433.15(b)(7) implement the 50 percent matching
provision generally applicable to FFP claims for costs of
administration. 4/

Section 432.50(a) states generally for staffing and training costs that:

FFP is available in expenditures for salary or other compensation,
fringe benefits, travel, per diem, and training, at rates determined on
the basis of the individual's position as specified in paragraph (b) . .
. .

Section 432.50(c)(1) provides that rates of FFP higher than 50 percent
"are applicable only to those portions of the individual's working time
that are devoted to the kinds of positions or duties that qualify for
those rates."

The terms "skilled professional medical personnel" and "staff directly
supporting such personnel" are not defined in the Act. HCFA regulations
contain the following definitions at 42 C.F.R.  432.2:

"Skilled professional medical personnel" means physicians,
dentists, and other health practitioners; nurses; medical and
psychiatric social workers; medical, hospital, and public heath
administrators, and licensed nursing home administrators; and other
specialized personnel in the field of medical care.

"Supporting staff" means secretarial, stenographic, clerical, and
other subprofessional staff whose activities are directly necessary to
the carrying out of the functions which are the responsibility of
skilled professional medical personnel . . . .

"Subprofessional staff" means persons performing tasks that demand
little or no formal education; a high school diploma; or less than 4
years of college.

The regulations are supplemented by Part 2-41-20 of the Medical
Assistance Manual (Manual), issued to State Medicaid agencies in an
Action Transmittal by the Social and Rehabilitation Service (the
predecessor agency to HCFA) in July 1975, SRS-AT-75-50.

The Manual contains the following "principles" which are used to assess
claims for 75 percent FFP:

B. Principles

1. General

* * * *

a. The function of a "skilled professional medical"
position whether at the State or local level, is the principal basis for
determining eligibility for increased Federal matching. The title of a
position or its organizational placement in the Medical Assistance Unit
administering title XIX will be used as subsidiary evidence to confirm
that a staff function is eligible for 75 percent matching.

Support positions derive their eligibility for
increased Federal matching from their direct association with and
supervision by skilled professional medical personnel whether at the
State or local level.

b. Staffing will normally include some employees
engaged in functions which are neither skilled professional medical
functions nor supportive of such functions.

Therefore, salaries and related costs for the total
cadre of personnel involved in the administration of the title XIX
program are not reimbursable at the 75 percent rate.

* * * * 2. Specific

a. The function, rather than the title, of a position
is the significant factor. Staff classified as skilled professional
medical personnel must be in functions at a professional level of
responsibility in the administration of the title XIX medical assistance
program requiring medical subject area expertise.

"Professional" and "medical" functions are defined
as follows:

Professional -- the function is at a level which
requires college education or equivalent and it relates directly to
non-routine aspects of the program requiring the exercise of judgment.

Medical -- the function is peculiar to medical
programs and requires expertise in medical services care delivered,
studying and evaluating the economics of medical care, planning the
program's scope, or maintaining liaison on the medical aspects of the
program with providers of service and other agencies which provide
health care.

As a class, these functions require knowledge and
skills gained from professional training in a health science or allied
scientific field. They involve overseeing the delivery of medical care
and services.

Staff positions in which the primary function is the
application of administrative practices and procedures unrelated to the
specialized field of medical care management are eligible for 50 percent
matching. For example, a physician in charge of an accounting operation
would be eligible for staff reimbursement only at 50 percent FFP.

* * * *

c. Support positions claimed at 75 percent matching
must directly support skilled professional medical personnel functions.

Support staff must be in work assignments related in
an immediate way to the direct completion of the work of such
professional medical personnel (e.g., secretaries, statistical clerks,
administrative assistants).

To be eligible for 75 percent matching all such
support personnel must report directly to the skilled professional
medical staff and be supervised by such skilled staff members. Support
functions not related in such direct manner to skilled medical functions
are eligible for 50 percent matching.

Functional flow charts can provide documentation
that support positions claimed at 75 percent matching are in direct
support of skilled professional medical staff.

d. Where staff time is split among functions at
different levels of Federal matching, the portion of time in each
function must be documented.

Section 2-41-20(B)(2)(b) of the Manual provides that the official
position descriptions are the "basic substantiation" for a position's
professional medical status. This section also provides for
consideration of "[j]ob announcements emphasizing requirements at or
above the college level in medical care and medical care
administration." Further, its listing in an "appropriate medical
classification" in a dictionary or handbook of occupational titles is a
secondary indicator that a position is a skilled professional medical
position.

The determination of whether a position is a skilled professional
medical one or support staff is not an exact science. Rather, the
determination is based upon the examination of information about the
actual tasks performed by questioned personnel and a reasonable
application of the guidelines set out in the Manual, which implement and
interpret the statute and regulations.

Factual Background

The disallowance is based upon HCFA's Regional Office review entitled
"Review of Adjustment for Skilled Professional Medical Personnel (SPMP)
Costs incurred by the New York City Human Resources Administration (HRA)
for the period of April 1, 1984 through June 30, 1986." New York Exhibit
(Ex.) 1. The purpose of the review was to determine the allowability of
New York's claim for enhanced FFP for expenditures by the City. The
expenditures at issue were claimed as an increasing adjustment to
administrative expenditures previously claimed at 50 percent FFP; New
York reclaimed these expenditures at the 75 percent FFP rate for
reimbursement of salaries, fringe benefits, and training of skilled
professional medical personnel and support staff. HCFA reviewed whether
the costs now claimed at 75 percent FFP met the applicable criteria for
SPMP or support staff reimbursement.

HCFA determined that the case manager (CM) position and its line
supervisor positions, Supervisor I, II and III, involved in the
administration of the City's home care services program did not qualify
as SPMP. HCFA concluded that the CM position did not require medical
expertise or make medical judgments. Rather, HCFA found that the CMs
made non-medical recommendations as to the need for personal care and
housekeeping services. Based on its financial management review, HCFA
issued the disallowance appealed here.

Analysis

A. Notice and comment rulemaking procedures were not required for the
Manual provisions. The Manual provisions are a reasonable
interpretation binding on New York because it had actual notice.

New York argued that the disallowance must be reversed because it was
based on HCFA's application of rules set forth in the Manual which were
not promulgated in accordance with notice and comment rulemaking
procedures pursuant to the Administrative Procedure Act (APA), 5 U.S.C.
 551 et seq. New York contended that the Manual provisions were
substantive rules, subject to these APA rulemaking requirements, because
they implemented the statute by creating legal requirements affecting
the substantial rights and obligations of those states participating in
the Medicaid program. New York Brief at 8; New York Reply at 9. New
York asserted that the Manual was not an interpretative rule or general
statement of policy, and thereby excepted from notice and comment
procedures, because of its significant effect to narrowly define those
instances where enhanced FFP is available. New York Brief at 8-9. New
York asserted that actual notice of the Manual provisions would not
overcome the failure to comply with the APA. New York therefore
maintained that since the disallowance was based on these Manual
provisions, it should be dismissed. New York Reply at 11.

We disagree. The APA requires an agency to publish a notice of proposed
rulemaking in the Federal Register and to solicit comments only if the
agency is promulgating a substantive, i.e., legislative, rather than an
interpretative rule. 5 U.S.C.  553(b)(A). Legislative rules create
law or obligations, while interpretative rules are statements of what an
administrative agency thinks a statute or regulation means. Under
prevailing case law, even if a rule has a significant impact on a party,
this alone does not require that it be treated as a legislative rule.
Because both interpretative and substantive rules may affect vital
interests, the substantial impact test "has no utility in distinguishing
between the two." Louisiana Dept. of Health and Hospitals, DAB No.
1176, at 7-8 (1990) (citing Cabais v. Egger, 690 F.2d 234, at 237-238
(D.D.C. 1982), and inter alia United States v. Picciotto, 875 F.2d 345
(D.C.Cir. 1989)).

The cases cited by New York do not support its assertion that the Manual
required notice and comment rulemaking procedures because of its effect
on "substantial rights and obligations". New York Brief at 8. New York
relied primarily on Morton v. Ruiz, 415 U.S. 199, at 233 (1974). This
case does not discuss notice and comment rulemaking or the factors which
distinguish legislative from interpretative rules. Other cases cited by
New York also do not address the issue it raised and concerned the
purpose served by the notice and comment process (which was not at issue
here), whether agency actions were adequate as notice and comment
procedures, and whether an agency had properly invoked the good cause
exception from notice and comment rulemaking.

New York's brief quoted specifically from sections (B)(1)(a) and (b).
and (B)(2)(a) and (c) of the Manual, covering most of the provisions
repeated earlier in this decision. However, New York presented only the
conclusory assertions described above for the proposition that the
principles stated in the Manual for evaluation of the SPMP status of
administrative positions were substantive rules.

Action Transmittal SRS-AT-75-50, which transmitted Part 2-41-20 of the
Manual to the states in 1975, specifically described this Part as an
"implementation and interpretation of the regulation on Federal
financial participation in State expenditures for staffing of the
medical assistance program." That regulation, at 42 C.F.R.  432.2,
defined SPMP to include certain types of personnel, such as physicians,
dentists, other health practitioners, nurses, and medical and
psychiatric social workers, as well as "other specialized personnel in
the field of medical care." However, the regulation did not provide any
guidance on what personnel appropriately may be considered "other
specialized personnel," and neither the regulation nor the statute
defined "professional" or "medical." The Manual provisions defined
those terms and listed various types of SPMP positions, and thus served
the classic interpretative function of stating what the administering
agency believed the statutory and regulatory provisions meant. The
Manual provisions also provided guidance concerning how the statutory
and regulatory provisions would be applied. The Manual addressed the
importance of the function of a position and described what
documentation would generally be useful in determining SPMP status.

Since the general availability of FFP at the 50 percent rate except
where positions qualify for an enhanced rate is set by statute, we see
no basis for New York's assertion that the Manual creates legal
requirements that can only be imposed through notice and comment
rulemaking. The availability of more than one FFP rate for
administrative personnel makes it self-evident that not all positions
would qualify for the higher rate. That the Manual elaborates on how to
determine which positions are eligible for funding at the higher rate
does not support New York's assertion that the disallowance should be
dismissed. New York did not explain why we should conclude that the
Manual provisions narrowly defined the availability of enhanced
reimbursement or why this would be a basis for requiring notice and
comment rulemaking procedures. 5/ Indeed, New York did not even argue
that the positions at issue here would be SPMP under the language of the
statute and regulations alone. Therefore, we conclude that the Manual
provisions were not legislative rules requiring notice and comment
rulemaking. 6/

Moreover, we have previously held that "if an interpretation by a
federal agency of a regulation it is charged with enforcing is a
reasonable one, and the State had notice of it, then it will be upheld
by the Board." Indiana Dept. of Public Welfare, DAB No. 970 (1988);
Maine Dept. of Human Services, DAB No. 712 (1985); and Nebraska Dept. of
Health, DAB No. 373 (1982). In this instance, the Manual was issued in
1975, prior to the disallowance period, and was in effect throughout
this period. There is no question that New York had actual notice of
these provisions. The Manual was issued to the states and it is clear
from earlier SPMP appeals by New York that New York was aware of the
Manual provisions in question. See, e.g., New York State Dept. of Social
Services, DAB Nos. 204 (1981) and 307 (1982). Thus, for this period,
these provisions were long-standing agency guidance. Moreover, New York
did not assert that the Manual provisions were substantively
unreasonable. In addition, we have applied the Manual provisions many
times and found these general principles to be a reasonable guide to
determining whether state and local personnel involved in the
administration of the Medicaid program are appropriately considered SPMP
or SPMP support staff. In DAB No. 307, we stated that since the Act did
not "elaborate on the meaning of `skilled professional medical
personnel,' we must look to the regulations and to the implementing
Manual provisions" to determine whether personnel qualified. See also
California Dept. of Health Services, DAB No. 1149 (1990); DAB No. 729.

Thus, we conclude that Part 2-41-20 of the Manual does nothing more than
provide a reasonable interpretation of the statutory and regulatory
provisions HCFA is charged with enforcing. Since the Manual provisions
are not legislative rules, the APA requirement for notice and comment
rulemaking procedures was not applicable. Therefore, since New York had
actual notice of the interpretations stated in the Manual, the HCFA
reviewers properly used the Manual provisions to evaluate whether the
personnel reclaimed at the enhanced rate were SPMP or SPMP support
staff.

B. HCFA was not required to conduct a statistically valid random sample
in order to evaluate the SPMP status of these positions.

HCFA's review report described a "judgmental sample" of 35 employees for
whom HCFA reviewed supporting documentation. New York argued that the
"judgmental sample" used by the HCFA reviewers was not statistically
valid and, therefore, could not be used to compute an amount disallowed
beyond the value of any cases in the sample that were found to be in
error. New York contended that a judgmental sample is not a statistical
sample either in respect to the entire universe or in respect to job
categories within that universe. Thus, asserted New York, when a
nonstatistical sample is taken -- in this case a judgmental sample which
involves the use of an auditor's judgment in the selection of the sample
rather than a random selection -- only those items identified as an
error in the sample may be disallowed; extrapolation to the universe is
improper.

We find New York's contention without merit. As explained below, New
York's discussion of the policies of the Office of the Inspector General
(OIG) and the American Institute of Certified Public Accountants, as
well as the affidavit of its statistical expert, Dr. Heiner, regarding
statistical sampling, are not relevant under the circumstances here
where HCFA performed a 100 percent review of all the job titles claimed
by New York for reimbursement at the enhanced FFP. New York Exs. 2 and
3.

During the time period in dispute, the functions of a particular
position were the principal basis for determining eligibility for
reimbursement at the enhanced SPMP rate. 7/ Moreover, New York did not
dispute that the functions of the position of CM for home care services,
as well as of the positions for Supervisor I, II, and III, are common to
the position and are not personal to the individual employee in the
position. Consequently, each individual in the position of CM has
functions identical to every other employee in that job title, and the
same holds true for each employee in a Supervisor I, II or III position.
Since the individual employees within each job title all have the same
functions, there is no need to review the job descriptions and other
relevant documentation for all the employees in that position.

During its review, HCFA examined "mission statements, job descriptions,
and job evaluations" for particular employees and case files, the
employee training program, and the City's procedures for the home care
assessment process. Sampled employees included 5 CMS, 5 Supervisor I's,
4 Supervisor II's and 6 Supervisor III's. There was no need for HCFA to
review job descriptions and evaluations for every employee under a
particular job title (or alternatively, to take a random sample of
employees under a particular job title) when each employee performs
identical functions. Moreover, while HCFA may have termed its review a
"judgmental sample" in the review report, the fact that it reviewed each
job title in dispute indicates that a "sample" in the statistical sense
of the word was not actually taken. Thus, the policies cited by New York
for use of judgmental samples are simply inapplicable here.

Even if we were to conclude that the policies cited were applicable
here, these policies do not preclude the use of nonstatistical
(nonrandom) sampling. Instead, the policies cited merely point out the
disadvantages that may be encountered when nonstatistical sampling is
used. Furthermore, we do not find that the disadvantages cited in these
policies and the reason cited by Dr. Heiner for why a judgmental sample
is not a valid statistical sample exist here. The OIG policy indicates
that the disadvantage to nonstatistical sampling is that such sampling
is not "necessarily representative of the population and generalizations
cannot be made beyond the items reviewed." New York Ex. 2, at 12.
Here, however, the position descriptions reviewed were representative of
the population of all employees in a particular job title. In paragraph
12 of Dr. Heiner's affidavit, he expresses his opinion that the reason a
judgmental sample is not a valid statistical sample --

is because there is no way of knowing the probability of inclusion
for each member of the population or sampling frame. In the absence of
this information there is no way to estimate what the auditors would
have found had they reviewed the entire population of employees and case
managers.

New York Ex. 3, at 4. In this case, however, all employees working
under the same job title perform the same functions; there is no
differentiating between them. As HCFA correctly points out, either all
the employees under a specific job title will be SPMP or none will. As
a result, it is possible to know exactly what the auditor would have
found had he or she reviewed the entire population of employees under a
particular job title. Thus, in this case, additional review by HCFA was
unnecessary to reach a valid result.

Furthermore, New York has presented no evidence to suggest that HCFA's
review of the functions of each job title in dispute was insufficient.
New York has not provided any specific examples to show that by not
performing a random sample, HCFA failed to examine individual employee
data that would have been relevant to determining SPMP status under the
regulatory and Manual principles properly applied during this time
period.

Thus, we conclude that HCFA's review was valid for purposes of this
disallowance.

C. New York had sufficient information to identify the issues involved
in this matter and prepare its appeal.

New York contended that HCFA did not follow prescribed audit policies
and procedures and that the lack of audit workpapers and an audit
program prejudiced New York in preparing its appeal. New York argued
that because of the lack of audit workpapers, it did not have sufficient
information concerning the criteria used and analysis performed by HCFA
which led to the conclusions in the HCFA review report. New York
therefore requested that the Board dismiss the disallowance.

We disagree. The regulations that provide for disallowance of claims
for FFP under the Medicaid program state that when HCFA determines that
a claim or portion of a claim is not allowable, a disallowance letter
will be sent promptly to the state which includes the "[f]indings of
fact on which the disallowance determination is based or a reference to
other documents previously or contemporaneously furnished to the State
or included with the notice (such as a report of a financial review or
audit) which contain the findings of fact on which the disallowance
determination is based" and "[p]ertinent citations to the law,
regulations, guides and instructions supporting the action taken." 45
C.F.R.  201.14(b) (1986). Moreover, the regulations at 45 C.F.R. 
74.304(c) (1986) specify what HCFA must include in final decision
letters to grantees. The final decision letter should contain "[a]
complete statement of the background and basis of the component's
decision, including reference to the pertinent statutes, regulations, or
other governing documents" and "[e]nough information to enable the
grantee and any reviewer to understand the issues and the position of
the HHS component" issuing the decision letter.

In this case, both the disallowance letter and the HCFA review report
issued to New York provided New York the requisite information. The
review report indicated the complete factual background; it explained
the scope of the review; it indicated what documentation and information
was presented and what information the reviewers examined. New York was
also informed of the findings of facts on which the disallowance
determination was based in both the disallowance letter and the review
report. Moreover, the disallowance letter also specifically referenced
and incorporated the review report findings. The disallowance letter
and the review report also indicated the pertinent authority relied upon
for HCFA's determination. Clearly, there was sufficient information
here to enable New York and the Board, which reviews the dispute, to
understand the issues and HCFA's positions on the issues.

Furthermore, while it may be generally true that OIG auditors should
follow OIG audit procedures, New York has not shown that the HCFA review
here is governed by those procedures. The review here was not an OIG
audit, nor is there a requirement that an OIG audit must be used. A
disallowance determination may be based upon but is not limited to, any
number of methods of reviewing a state's expenditures for compliance
with applicable law, for example, an OIG audit, or a HCFA financial
management review. Thus, the HCFA reviewers, in performing a limited
review of one particular aspect of New York's claim, were not bound to
use the OIG audit procedures. See Oregon Dept. of Human Resources, DAB
NO. 874, at 2 (1987).

The review report indicated that New York's claim for the disputed
positions, which pertained to expenditures which had been previously
claimed at the 50 percent general administrative rate and were now being
claimed at the 75 percent SPMP enhanced rate, were submitted on the HCFA
quarterly statement of expenditures. HCFA defers such a claim if it
believes the claim or a specific portion of the claim is of questionable
allowability, notifies the state that it will defer the claim, and
requests the state to make available for inspection all documents and
materials which the Regional Office believes necessary to determine the
allowability of the claim. 45 C.F.R.  201.15(c)(1) and (2). Based on
the information provided and any supplemental information requested,
HCFA makes a determination on the allowability of the claim. 45 C.F.R.
 201.15(c). In this matter, the HCFA review report indicates that its
review was nothing more than the review described in these regulations.
HCFA simply reviewed New York's claim for a prior period increasing
adjustment and requested New York to submit documentation to determine
if the claim or a portion of the claim was allowable. As the report
states, "HCFA deferred this claim and requested all related documents
and materials from NYSDSS [New York] to determine the allowability of
the claim. . . . [t]his special review report is on the results of
HCFA's in-depth review of NYSDSS [New York] and NYCHRA [City]
documentation which was ultimately submitted as support for the State's
claim" for the additional FFP. New York Ex. 1, at 3. Consequently,
this was not a fiscal audit or an audit of the type conducted by OIG
that requires the making of audit workpapers and an audit program;
rather, this was a HCFA review of the allowability of a claim or portion
of a claim submitted. New York has not shown that such reviews are
governed by OIG audit policies and procedures.

Moreover, we see no basis to find the review here deficient when the
review was based on documentation that was in New York's possession and
which New York was required to present to the reviewers to justify its
claim at the enhanced FFP rate. While the specific documentation may
not have been included in the review report, New York does not deny that
it presented this documentation to HCFA and that the reviewers reviewed
it and used it to reach their conclusions. New York also had the
opportunity to present further evidence to the reviewers at the time the
draft report was issued and certainly was not prevented during the
course of this appeal from presenting evidence that would contradict the
reviewers' findings. Finally, the relevant issue in this dispute,
whether a position claimed for enhanced FFP qualifies for that enhanced
rate, is an issue with which New York is thoroughly familiar,
particularly the criteria and documentation necessary for substantiating
its claim. See New York Brief at 20-28. We have stated previously that
a state has a burden to provide documentation sufficient to show that
its claim for enhanced FFP is proper, thus necessarily showing that the
audit findings were wrong. New York State Dept. of Social Services, DAB
No. 204 (1981). We have also stated that where a state is claiming
reimbursement of costs at a rate higher than the 50 percent rate
generally available for administrative costs, the state has the initial
burden to show its claim for reimbursement is proper. Missouri Dept. of
Social Services, DAB No. 395, at 6 (1983). Consequently, New York has
the burden to document its claim, and to present documentation to HCFA
(and to this Board) that is sufficient to show that claim was entitled
to the higher rate of reimbursement. 8/

Therefore, we conclude that New York had sufficient information
concerning the criteria used in HCFA's review and that there is no basis
for finding that New York's ability to pursue its appeal of this
disallowance was prejudiced. We therefore deny New York's request to
dismiss the disallowance on this basis.

D. The CM positions and the Supervisor I, II, and III positions do not
qualify for the SPMP rate of reimbursement.

Before proceeding to our analysis on whether the disputed positions
qualify for 75 percent reimbursement, we note, as we have noted in prior
SPMP cases, that whether federal funding is available at all is not an
issue. Rather, the question is whether federal matching is available at
the 75 percent rate as opposed to the 50 percent rate generally
available for expenditures necessary for administration of the Medicaid
program under section 1903(a)(7) of the Act. The Act provides for
enhanced FFP only for expenditures for compensation, travel, and
training for SPMP. In this regard, where the record does not show that
the Manual provisions clearly include a disputed position's functions as
SPMP, they are excluded and appropriately matched only at 50 percent.
Furthermore, as we stated immediately above, where a state is claiming
reimbursement of costs at a rate higher than 50 percent, the state has
the burden to show that the costs claimed are entitled to the higher
rate of reimbursement. Below, we examine the disputed positions and
explain why 75 percent FFP is not available.

1. CM Positions - General background

The record shows that prior to March 31, 1986, home care case management
was performed by about 2000 CMs who worked in the 39 General Social
Service (GSS) field offices throughout the City. New York Supplemental
Ex. 1; New York Ex. 1, at 7. GSS was part of the New York City Human
Resources Administration. Because the CMs' duties consisted of matters
in addition to home care and unrelated to the Medicaid program, the SPMP
claims for the CMs during the period from April 1, 1984 through March
31, 1986 were allocated to Medicaid based on a random moment study. Id.
For the quarter ended June 30, 1986, 356 CMs were integrated into the
Community Alternative System Agency (CASA) program, part of the NYCHRA.
Id. Because the CMs in CASA dealt only with home care for the Medical
Assistance Program, the costs for these 356 CMs were charged in full to
the Medicaid program. Id.

New York described the primary function of the CM position as case
management. New York stated that the CM job description indicates that
a CM "interviews applicants and related necessary persons . . . to
determine and document eligibility and the need and type of services
required," makes "on-going evaluation of the case situation," and "reads
and analyzes case records and pertinent documents . . . to determine and
evaluate a service plan." New York Brief at 20-21; New York Ex. 9; New
York Supplemental Ex. 1.B. 9/

The City explained that the CM received a request for home care services
on a medical assessment form filled out by the applicant's physician.
City Ex. D at 2-4. This form "includes a diagnosis, information about
medications prescribed for the applicant, a description of the
applicant's physical and mental limitations, and a listing of the
household chores and `Activities of Daily Living' that the applicant is
not able to perform" as a result of his or her condition. City Ex. D at
2. The CM reviews the form and visits the applicant to observe the
applicant's physical and mental status and to talk to the applicant and
the applicant's relatives to assess home care needs. If necessary, the
CM may contact the physician to discuss discrepancies between the CM's
observation of the applicant's condition and the physician's assessment
of the applicant's condition as set forth on the medical assessment
form. The CM then recommends the appropriate amount and type of home
care services. This recommendation is given to the CM's supervisor, a
Supervisor I, for review. The recommendation ultimately goes to a
medical social worker or nurse in a medical review team at the Bureau of
Medical and Professional Review who makes the final decision on the care
required. There is no dispute that members of the medical review team
qualify as SPMP. After the medical social worker or nurse makes the
final determination, the CM continues to monitor the case, making
periodic home visits to see if there are any changes in the applicant's
physical or social condition that require changes in the level of home
care provided.

The minimum requirement for a CM position is "[a] baccalaureate degree
from an accredited college." New York Supplemental Ex. 1.C. Candidates
are selectively certified to fill vacancies based on the results of a
required examination for caseworker positions. The CMs receive a
five-day in-service training and then additional training for one day
per week for eight additional weeks focusing on different aspects of the
CM's responsibilities. The training agenda specifies the following
topics: social work in a public agency; social assessment: a
theoretical perspective; interviewing as a form of communication; the
home care program--goals, client population, eligibility criteria and
procedure; Medicaid application process; reinforcement training on
procedures, application of home care standards and case studies. HCFA
Ex. R-3. New CMs are gradually phased in to responsibility for a full
caseload over the first three months of employment. HCFA Ex. R-3 at 2.

2. The CM positions are not SPMP.

New York contended that the CMs are SPMP because they assess the
necessity and adequacy of medical care and services required by
individual recipients. According to New York, these positions are
"medical" positions because in assessing the necessity for and adequacy
of services required by applicants, CMs must have "expertise in medical
services care delivery" which qualifies them for SPMP reimbursement
under the Manual. New York Brief at 21 and 22. New York and the City
both argued that HCFA was incorrect to find the CMs were ineligible for
SPMP status because CMs do not make medical judgments. New York and the
City contended that during the period in dispute, the applicable
authorities did not require that a position involve "medical" judgments
in order to qualify for SPMP status. New York Brief at 22-24; City
Brief at 10-11.

Neither the regulatory definition of SPMP nor the Manual specifically
mentions CM positions. The question then is whether these positions
qualify for 75 percent reimbursement based on the general principles set
forth in the Manual for assessment of SPMP status. As indicated above,
the CM position requires a college degree. Moreover, the position
requires the exercise of some judgment in nonroutine aspects of the
administration of the home care services component of New York's
Medicaid program. Thus, the position meets the definition of
"professional" in the Manual. However, the key question here is whether
the position functions are "medical" as that term is defined in the
Manual.

We disagree with New York that applicable authorities did not require
that a position's function involve the exercise of "medical" judgments
or medical subject area expertise. The Manual explicitly states that a
position must require "medical subject area expertise" and that SPMP
functions, "as a class . . . require knowledge and skills gained from
professional training in a health science or allied scientific field."
Manual, Part 2-41-20(B)(2)(a). New York contended that in DAB No. 729,
the Board rejected arguments that positions were not reimbursable at 75
percent merely because they did not involve the exercise of "medical
judgment." New York Brief at 24. New York misconstrued the Board's
reasoning in DAB No. 729. There we concluded that the function of a
position is the critical factor to examine and that the function of a
position must require the exercise of medical subject area expertise.
However, we did not necessarily focus on the qualifications of the
incumbent in a position; we focused instead on the expertise necessary
to carry out the functions of a position. In so doing, we recognized
that an individual who performs functions requiring medical subject area
expertise may have professional experience gained on the job and that
this factor did not mean that a position could not be SPMP. The Manual,
however, also explains that a job description or job announcement
emphasizing requirements at or above the college level in medical care
and medical care administration will be considered as evidence that the
functions of the position require medical subject area expertise.
Manual, Part 2-41-20(B)(2)(b). Therefore, HCFA was not misapplying the
applicable principles in this case when it applied a requirement for
medical subject area expertise for SPMP positions.

Furthermore, we find no basis for concluding that the functions of the
CM position require medical subject area expertise, expertise in medical
services delivery, or, that, as a class, the functions of the position
require knowledge and skills gained from professional training in a
health science or allied scientific field (whether obtained in academia
or on the job). Manual, Part 2-41-20. The CM position functions
require nothing more than general social services casework expertise.
Such expertise pertains to any social services program. Moreover, the
limited in-person training provided to CMs focused on the application of
general casework skills. The CMs did not acquire through this training
the requisite medical subject area expertise for SPMP status, such as
that possessed by the SPMP members of the medical review team who
actually make the final determination on home care services.

Moreover, the CM does not assess the medical diagnosis or make any
recommendations concerning the adequacy or necessity of medical services
provided the client. For example:

o The CM merely makes an assessment of the extent to which the
client is able, or relatives or other adults are available, to provide
personal care needs such as bathing, dressing, feeding, and toileting as
well as basic housekeeping services such as housecleaning, laundry,
shopping, and food preparation for the client -- all of which are
non-medical services. 10/

o This assessment is based on specific standards for the
assessment process issued by the City and which provide the step by step
process the assessment must take.

o If the CM has any questions concerning the client's conditions,
the CM may contact the client's doctor.

o Based upon this assessment, the CM makes a recommendation to the
medical review team as to how many hours of home care services should be
provided.

Thus, the CM is merely making a preliminary determination regarding
whether a client is eligible for home care services, which are
non-medical services, based upon the client's doctor's recommendation
and specific non-medical standards set forth by the City. The fact that
the CM may contact the client's doctor indicates that the CM is not
making an independent medical evaluation. Thus, the functions of this
position could be performed by any caseworker. As a matter of fact, the
CM positions were initially organized within the City's GSS division and
the functions of the CM were to apply general casework skills to a broad
spectrum of programs in addition to the Medicaid program. New York
Supplemental Ex. 1.A, B, and C. Furthermore, the job announcement for
this position does not specify as a prerequisite for the position any
"knowledge and skills gained from professional training in a health
science or allied scientific field." Instead, the only prerequisite
needed to perform the functions is a college degree in any field.
Finally, another indication that the functions of this position do not
require medical subject area expertise is if the position is classified
under a medical category in a handbook or dictionary of occupational
titles. Manual, Part 2-41-20(B)(2)(b). The Dictionary of Occupational
Titles does not list the CM/caseworker position under a medical
classification. New York Supplemental Ex. 2.

Contrary to New York's arguments, the functions of these positions are
not analogous to those considered in New Jersey Dept. of Human Services,
DAB No. 1434 (1993). There, we concluded that certain medical social
worker positions qualified as SPMP under the post-1986 requirements even
though the positions were not limited to only those who could meet the
regulation's education and training limitation. Here, New York has not
asserted that these are medical social worker positions.

We do find these positions to be analogous to those we considered in
California Dept. of Health Services, DAB No. 1149 (1990). There we
found that analysts responsible for Medicaid disability determinations
were not SPMP. We found that these positions utilized medical data and
evaluations in an administrative adjudicatory capacity, and that these
employees relied on the expertise of SPMP (medical consultants). The
CMs' recommendations are referred on to a SPMP; the CMs do not
themselves make judgments requiring medical subject area expertise, but
rather recommend a level of home care services based on detailed
criteria and medical judgments of others. See DAB No. 1149, at 12; see
also New Jersey Dept. of Human Services, DAB No. 688 (1985).

Therefore, while the CM position required professional personnel skilled
in administering the Medicaid program, that does not mean that the
position required SPMP. Neither the statute or the regulations
contemplated that any person with a college degree who is involved in
any aspect of administration of the Medicaid program could be properly
considered SPMP. If this were the case, there would be no reason to
reimburse certain personnel at different FFP rates for the
administration of the Medicaid program. The CMs here function as
professional general caseworkers and are not SPMP. Accordingly, these
positions are properly matched at 50 percent as opposed to 75 percent.

3. The Supervisor I, II, and III positions are not SPMP.

The City describes the Supervisor I positions as being the direct line
of supervision above the CMs. They review difficult cases with the CM,
provide CMs with on the job training and sign off on the CMs'
recommendations. City Ex. D and New York Supplemental Ex. 1. The
supervisor position for all the CM teams (teams were comprised of case
managers and a Supervisor I and there could be more than one team in a
particular office) in a particular field or CASA office was either a
Supervisor II or Supervisor III, depending on the size of the office and
the availability of personnel. New York Supplemental Ex. 1.A and B.
The functions of these positions were virtually the same as for the
Supervisor I. City Exs. D and F; New York Supplemental Ex. 1.D, E, and
F. The final decision on the provision of home care services was still
made by the medical social worker or nurse on the medical review team.
Moreover, the only difference in the minimum requirements for these
positions from the CM requirements is the requirement for one year, two
years and three years paid, satisfactory experience in social casework,
for the Supervisor I, II, and III positions respectively in addition to
a college degree. New York Supplemental Ex. 1.D, E, and F. Moreover,
the job descriptions indicate that the direct line of promotion from
caseworker is to Supervisor I, then Supervisor II, and then to
Supervisor III. New York has not demonstrated that the functions of
these positions require any different expertise than the functions of
the CM.

New York argued that one of the Supervisor I functions was identical to
an SPMP function described in the Manual as "maintaining liaison on the
medical aspects of the program with providers of services and other
agencies which provide health care." Manual, Part 2-41-20(B)(2)(a). The
Supervisor I function was to "maintain cooperative relationships and act
as liaison with medical facilities and vendor agencies." New York Brief
at 22. We disagree that the Supervisor I functions are identical to the
SPMP function described in the Manual. The critical factor is that the
SPMP function provides liaison with providers on the "medical aspects"
of the program. Here, the Supervisor I function was merely to provide
liaison with providers generally in connection with home care services
aspects of the program.

Thus, we find that the functions required to perform these positions
require nothing more than general casework skills with the added
supervisory requirement. These functions did not require any medical
subject area expertise. Moreover, there is no evidence to show that at
a minimum, the performance of these positions' functions required
education in medical care and medical care administration at the college
level or above. The positions are not listed in the Dictionary of
Occupational Titles under a medical classification. Furthermore, as we
found with the CM positions, the supervisor positions do not have
responsibility for making the final determination regarding the
provision of the home care services. Thus, we conclude that the
Supervisor I, II, and III positions are professional general caseworkers
with supervisory duties, not SPMP. Accordingly, these positions are
properly matched at 50 percent as opposed to 75 percent.

4. The CM and Supervisor I, II, and III positions do not qualify as
SPMP supporting staff.

New York argued that it is undisputed that the CMs and the Supervisors,
all of whom comprised the case management team, supplied the information
used by the medical social workers on the medical review team in making
their final decision regarding the amount and type of services the
client will receive. New York Brief at 26. New York therefore
contended that if the case management team positions do not qualify as
SPMP, they nevertheless qualify for 75 percent reimbursement as SPMP
supporting staff on this basis.

"Supporting staff" is defined in the regulation as "secretarial,
stenographic, clerical and other subprofessional staff." 42 C.F.R. 
432.2. Subprofessional staff is defined as "persons performing tasks
that demand little or no formal education," meaning a high school
diploma or less than four years in college. 42 C.F.R.  432.2. Even if
we were to find that these positions performed functions directly
necessary for the medical review team to carry out its functions, the
regulation clearly excludes positions which require a college degree
from the definition of "other subprofessional staff." Moreover, in DAB
No. 729, the Board indicated that where it has been determined that a
position is a professional one, it cannot later be determined that the
same position is a subprofessional one for purposes of allowing 75
percent matching as SPMP support staff. Thus, New York cannot have it
both ways. Either the positions are professional or they are
subprofessional. Since we have already determined that these positions
were "professional," the CM and Supervisor I, II, and III positions
cannot qualify as SPMP support staff. 11/

5. The team clerk position is not an SPMP support staff position.

New York indicated that the organization charts show that each case
management team is supported by a team clerk. New York Supplemental Ex.
1.A and B. The regulation defines "supporting staff" as clerical staff
whose activities are directly necessary to the carrying out of the
functions which are the responsibility of SPMP. New Jersey Dept. of
Human Services, DAB No. 845 (1987). Thus, in order to qualify as SPMP
support staff, the team clerk must be providing services directly to a
SPMP and be under the supervision of a SPMP. In this case, the team
clerk provided clerical services for the case management team. Since we
have determined that none of the positions in the case management team
qualify as SPMP, the team clerk cannot qualify as SPMP support staff.
Thus, the team clerk positions were properly matched at the 50 percent
rate.

Conclusion

For the reasons explained above, we uphold the disallowance in full.

_____________________________ M. Terry Johnson

_____________________________ Norval D. (John)
Settle

_____________________________ Cecilia Sparks
Ford Presiding Board Member

1. The City was allowed to intervene in this matter. Thus, in
addition to the parties' submissions in this appeal, we considered the
City's brief, reply brief, and response to questions posed to New York
and the City by the Board. Because the City's submissions generally
reiterate the arguments set forth in New York's brief, we will generally
refer to New York's briefs.

2. The parties clarified what positions are disputed as follows: (1)
an allocable share, as determined by a random moment study, of 2,000
case manager positions for the period April 1, 1984 through March 31,
1986; (2) 356 case manager positions for the quarter ended June 30,
1986; and (3) Supervisor I, II, and III (Welfare) positions with direct
involvement in case management and the supporting staff position, team
clerk (civil service title "Office Aide III"), for the quarter ended
June 30, 1986 (the precise number of each to be determined on remand
should the Board determine any of the appealed positions qualify as
SPMP). New York does not dispute the disallowance for the quarter ended
June 30, 1986 for other professional positions. Also, New York is not
challenging HCFA's reduction for a calculation error in the claim for 23
employees or HCFA's disallowance as duplicative of the claim for two
employees in the Office of Psychiatry.

3. In paragraphs (1), (3), (4), (5) and (6), section 1903(a) sets
the rate of FFP for other types of expenditures for the Medicaid
program.

4. The applicable regulations are set forth in the 1985 C.F.R.
codification. Final regulations amending the requirements for SPMP at
the 75 percent rate were published at 50 Fed. Reg. 46,663 (1985) and
were to be effective on February 10, 1986. HCFA chose to deem these
amended requirements effective as of July 1, 1986. The amendments
substantially narrowed the availability of FFP for SPMP positions. See
Montana Dept. of Social and Rehabilitative Services, DAB No. 1024, at 12
(1989). The 1985 regulations and implementing Manual provisions cited
in this decision apply to govern the FFP rate properly paid for the
expenditures at issue, which were incurred prior to the effective date
of the amended regulations.

5. The Manual provisions might be better described as a generous
interpretation of the meaning of the statutory and regulatory
provisions. As we noted earlier, in regulations effective in 1986, HCFA
redefined the term SPMP and established various limitations which
substantially narrowed the availability of enhanced reimbursement for
SPMP positions.

6. The City contended that the Board did not apply HCFA's 1982
"Title XIX Financial Management Review Guide for Identification of
Skilled Professional Medical Personnel" in Oregon Dept. of Human
Resources, DAB No. 729 (1986), because we had concluded that the guide
had not been promulgated in accordance with APA procedures. City Brief
at 10. This is not correct. The Board did not apply the Review Guide
in DAB No. 729 because we concluded that the guide substantially
narrowed the standards used to evaluate a position's status as SPMP
since it reflected the provisions of proposed regulations which were not
effective until after the period in dispute in that appeal. The Board
concluded the Manual provisions at issue here were properly used to
evaluate a disputed position's status. See DAB No. 729, at 8-11.

7. Although New York argued that the Manual provisions here were
inapplicable because it was not promulgated as a rule pursuant to the
APA, it also argued in the alternative that under the Manual the primary
basis for deciding whether a position qualified for the enhanced SPMP
reimbursement was the function of the position. New York Brief at 20
and 21.

8. Even if we were to find that there was a procedural defect in the
HCFA review here, that defect would be cured in this proceeding since
New York had ample opportunity to present documentation to the Board to
justify that its claim for these positions at the enhanced rate was
proper and to show the Board that the review findings were wrong.

9. New York submitted a job description pertinent to the CM position
for the period when the CM's time was allocated between Medicaid and
other programs as well as for the position after the reorganization when
the CM worked in the CASA office. New York also submitted narratives of
interviews with CMs, in which they describe the functions they
performed, a statement of the functions listed in their performance
evaluations, and a job announcement for the CM position. New York
Supplemental Ex. 1.C.

10. Home care services are not provided when the client's medical
condition requires in-home health related tasks or professional nursing
care, or when a client's mental capacity is diminished and there is no
relative or other adult able to assume responsibility for the client's
financial affairs and for the direction of the home care worker.

11. New York argued that since the Act referred to "staff directly
supporting such [SPMP] personnel" the regulation was invalid because it
excluded higher level jobs such as the case manager from enhanced
reimbursement as supporting personnel. This argument has no merit. The
definition of supporting personnel as clerical or other subprofessional
personnel is a patently reasonable application of the statutory
language. We are bound by the regulation in any event. 45 C.F.R.