SUBJECT: New York State Department of Health

DECISION

The New York State Department of Health (New York) appealed the determination of the Centers for Medicare & Medicaid Services (CMS)⁽¹⁾ disallowing $1,152,621 claimed by New York under title XIX of the Social Security Act (Act) for federal financial participation (FFP) in amounts expended between January 1, 1996 and December 31, 1997 for hospital services for individuals eligible for Medicaid. CMS determined that the claims for this amount were untimely under section 1132 of the Act because they were not filed within two years of the end of the calendar quarter in which the expenditures were incurred. New York took the position that the two-year filing deadline did not bar payment of the claims, which New York asserted merely reclassified expenditures for which claims had already been timely filed. New York argued specifically that the same expenditures had previously been claimed under title XIX as disproportionate share hospital (DSH) payment adjustments.

As explained in detail below, we conclude that the disallowed claims were new claims that were not filed within the two-year filing deadline. The record does not support New York's attempt to characterize its actions as merely reclassifying expenditures for which claims had already been timely filed. Instead, the record shows that the expenditures at issue here were payments to hospitals for a different type of service than New York's previous claims. New York voluntarily made decreasing adjustments that in effect withdrew its previous claims for those DSH payments that admittedly exceeded applicable limits. Permitting New York to belatedly offset different expenditures against unallowable costs that were arguably timely claimed would undercut the purposes of the timely claims requirement. Accordingly, we sustain the disallowance in full.

Relevant Statutory and Regulatory Provisions

Section 1132(a) of the Act prohibits the payment of FFP for any expenditure for which no claim has been filed within two years of the end of the calendar quarter in which the expenditure was incurred. The statute reads in relevant part:

[A]ny claim by a State for payment with respect to an expenditure made during any calendar quarter by the State -- (1) in carrying out a State plan approved under title . . . XIX . . . of this Act . . . shall be filed (in such form and manner as the Secretary shall by regulations prescribe) within the two-year period which begins on the first day of the calendar quarter immediately following such calendar quarter; and payment shall not be made under this Act on account of any such expenditure if the claim therefor is not made within such two-year period. . . .

Similarly, 45 C.F.R. § 95.7 provides that "we will pay a State for a State agency expenditure . . . only if the State files a claim with us for that expenditure within 2 years after the calendar quarter in which the State agency made the expenditure." In enacting the two-year filing limitation, Congress addressed the Department of Health and Human Services' need to plan and administer effectively the budgets for Social Security Act programs by controlling states' ability to make delayed claims. See Connecticut v. Schweiker, 684 F.2d 979, 982 (D.C. Cir. 1982), cert. denied, 459 U.S. 1207 (1983); see also New York State Dept. Of Social Services, DAB No. 521 (1984), aff'd New York v. Sullivan, No. 92 Civ. 2832 (LMM), 1993 WL 266616 (S.D. N.Y. Apr. 7, 1993).⁽²⁾

Section 1132 of the Act and 45 C.F.R. § 95.19 provide several exceptions to the two-year limit for filing claims. The exceptions include: claims for adjustments to prior year costs; claims resulting from audit exceptions or from court-ordered retroactive payments; and any claim for which the Secretary of the Department of Health and Human Services (HHS) decides there was "good cause" for the late filing. Section 1132(b) provides that a "failure to file a claim within [the two-year] time period which is attributable to neglect or administrative inadequacies shall be deemed not to be for good cause." See also 45 C.F.R. § 95.22(c).

Definitions relating to the filing limitation are set forth at 45 C.F.R. § 95.4. The regulation defines the term "claim" as "a request for Federal financial participation in the manner and format required by our program regulations, and instructions or directives issued thereunder." "Federal financial participation" in turn is defined as "the Federal government's share of an expenditure made by a State agency under any of the programs listed in § 95.1."

In accordance with section 1903(a) of the Act, a state with an approved Medicaid state plan may receive FFP for expenditures for "medical assistance." Various types of medical care and services that qualify as "medical assistance" are listed in section 1905(a) of the Act, including inpatient hospital services (section 1905(a)(1)).

In setting Medicaid payment rates for hospital services, states must "take into account the situation of hospitals which serve a disproportionate number of low income patients with special needs," referred to here as disproportionate share hospitals (DSHs). Section 1902(a)(13)(A)(iv) of the Act.⁽³⁾ Detailed requirements pertaining to DSHs are found in section 1923 of the Act, captioned "Adjustment in Payment for Inpatient Hospital Services Furnished by Disproportionate Share Hospitals." The State Medicaid plan must provide for "an appropriate increase in the rate or amount of payment" for inpatient hospital services provided by such hospitals. Section 1923(a)(1)(B) of the Act. This increase is referred to as a "payment adjustment." Section 1923(c) of the Act.

The Act provides for a national DSH limit (eliminated in 1997) and individual state allotments for total DSH payments by each state. Section 1923(f) of the Act. Section 447.297(d)(2) provides that if "HCFA determines that at any time a State has exceeded its final DSH allotment for a Federal fiscal year, FFP attributable to the excess DSH expenditures will be disallowed." In addition, section 1923(g)(1) of the Act restricts DSH payments to any DSH to the cost of uncompensated care incurred by that DSH. Section 1923(g)(1) provides in pertinent part that a payment adjustment may not exceed "the costs incurred during the year of furnishing hospital services . . . by the hospital to individuals who either are eligible for medical assistance under the State plan or have no health insurance (or other source of third party coverage) for services provided during the year."

Factual Background

At issue here are $508,658 in FFP claimed as prior period adjustments for fiscal year (FY) 1996 and $643,963 in FFP claimed as prior period adjustments for FY 1997.⁽⁴⁾ CMS determined that these claims constituted new requests for FFP which were made more than two years after the expenditures were made. Accordingly, CMS disallowed the claims as untimely under section 1132 of the Act. Id. at 1-2.

New York asserted that the same expenditures were originally claimed as DSH payment adjustments for fiscal years 1996 and 1997. According to New York, the $508,658 FFP disallowed for FY 1996 was first claimed as part of $369,056,139 shown on a report dated 11/07/96 captioned "Allocation of Disproportionate Share Hospital Payment Adjustments to Applicable FFYS," and the $643,963 FFP disallowed for FY 1997 was first claimed as part of $406,443,177 shown on a similar report dated 11/10/97. New York response to Board questions, at 2, n.2., and enclosure at 12^th unnumbered page (FY 1996) and 13^th unnumbered page (FY 1997).⁽⁵⁾ These totals included some payment adjustments made pursuant to a state plan provision authorizing "additional" payment adjustments for services provided by DSHs to individuals who are eligible for Home Relief.⁽⁶⁾ Disallowance letter dated 8/29/01, at 1; New York response to Board questions, at 2, and enclosure at 3^rd and 4^th unnumbered pages (excerpts from State plan Attachment 4.19-A, Part I). The state plan further provided that the amount of such adjustment "will vary by hospital" and "be paid in the normal Medicaid payment process . . . according to established rates or fees," based on a claim submitted by the hospital. Id., at 3^rd unnumbered page. The documentation in the record does not show for which quarter New York claimed the DSH payment adjustments; however, CMS asserted, and New York did not dispute, that these claims were made on the QER for the quarter ended June 30, 1999. CMS Br. at 4.

However, New York withdrew part of the amount claimed for DSH payment adjustments for FY 1996 and FY 1997 upon determining that it had exceeded the hospital-specific limits for DSH payments in section 1923(g)(1) of the Act in each of those fiscal years. Disallowance letter dated 8/29/01, at 1. Accordingly, on its QER for the quarter ended June 30, 1999, New York reported a decreasing adjustment of $1,325,721 FFP to its DSH payment adjustments for line 10 inpatient hospital services for FY 1996.⁽⁷⁾ On its QER for the quarter ended September 30, 2000, New York reported a decreasing adjustment of $1,381,960 FFP to its DSH payment adjustments for line 10 inpatient hospital services for FY 1997. New York response to Board questions, at 2, n.1, and enclosure at 6^th unnumbered page (FY 1996) and 9^th unnumbered page (FY 1997); New York Br. at 2.

The costs at issue here were claimed on New York's quarterly expenditure report (QER) for the quarter ended September 30, 2000 (dated December 29, 2000), which reported the costs as line 7 medical assistance payments under the category "Other Care Services." New York response to Board questions, at 2, n.1, and enclosure at 8^th unnumbered page (FY 1996) and 11^th unnumbered page (FY 1997). CMS's filing instructions identify "Other Care Services" as the services specified in sections 440.110, 440.120, 440.130 and 440.170(a), (b) and (c) of 42 C.F.R., and not meeting the definition of any category of service on any other line of the QER, including inpatient hospital services. New York response to Board questions, at 3, and enclosure at 26^th unnumbered page. These claims were for services provided to Home Relief recipients whom New York later determined met Medicaid eligibility requirements. Disallowance letter dated 8/29/01, at 1.

New York took the position that the disallowed claims were not new claims barred by the two-year filing deadline. Instead, New York argued, it was "simply seeking to reclassify part of the costs that were timely claimed within the two-year period." New York Br. at 4. According to New York, it reclassified as increasing adjustments for the quarter ended September 30, 2000 some of the amounts claimed as DSH payment adjustments and later withdrawn (via decreasing adjustments). New York argued that all it had done was "mov[e] the claim from one line of the QER to another, from HR DSH to regular Medicaid costs." Id. New York asserted, moreover, that "[t]he costs claimed on both lines of the QER are the same expenditures for the same hospitals, recipients and time periods in the same dollar amounts." New York Reply Br. at 2. New York noted that it was "not attempting to claim any additional costs beyond those contained in the original claim, or claim these costs at a higher rate of reimbursement," nor was it "attempting to move the costs from one program to another." New York Br. at 4.

We note preliminarily that New York's arguments assume that New York's "regular" Medicaid claims would be timely if they could be considered filed as of the date the claims for the DSH payment adjustments were filed. If in fact the DSH payment adjustments were claimed on the QER for the quarter ended June 30, 1999, however, only the expenditures made from April 1, 1997 through October 31, 1997 would be timely. The expenditures made from January 1, 1996 through March 31, 1997 would have had to be filed earlier than June 30, 1999 in order to be timely since the two-year period for filing a claim begins on the first day after the end of the calendar quarter in which the expenditures were made. Accordingly, even if we accepted New York's arguments, we would be required to uphold the disallowance of the expenditures made from January 1, 1996 through March 31, 1997 on the ground that those expenditures were not timely claimed.⁽⁸⁾

In any event, New York's position that the claims for the disallowed expenditures should not be considered new claims is not supported by the documentation in the record for this appeal. That documentation indicates that the expenditures CMS disallowed as untimely claimed were not the same expenditures shown by New York as DSH payment adjustments on the 11/6/96 and 11/10/97 reports. Under section 1923(a)(1)(B) of the Act, DSH payment adjustments increase the rate or amount of payment for inpatient hospital services. Indeed, as noted above, New York showed the decreasing adjustments to the DSH payment adjustments as adjustments to inpatient hospital services. However, New York claimed the disallowed expenditures as medical assistance payments under the category "Other Care Services," which do not include inpatient hospital services. Thus, the DSH claims and the later regular Medicaid claims were not made for the same types of expenditures. Moreover, New York provided no support for its assertion that the regular Medicaid claims and the DSH claims were for the same hospitals, recipients and time periods. Finally, New York did not even allege that the amount paid to any individual hospital as an "additional" DSH payment adjustment for a particular recipient served by the hospital corresponded to the payment amount for the "other care service" provided to that individual which New York included in its regular Medicaid claims.

Indeed, it appears that the DSH expenditures and the regular Medicaid expenditures were similar only in that they both had some connection to Home Relief: services provided to Home Relief eligibles were the basis for the additional payments to DSHs claimed by New York, while the individuals who received the services that were claimed as regular Medicaid expenditures had originally been determined eligible only for Home Relief. New York therefore failed to establish that it had previously submitted timely claims for the same expenditures CMS has disallowed as untimely claimed.

In effect, New York is attempting to substitute presumably allowable expenditures (for which it is too late to submit a claim) for other expenditures which were timely claimed but determined to be unallowable. The Board has previously rejected similar attempts. See, e.g., New York State Dept. of Social Services, DAB No. 982 (1988); Illinois Dept. of Public Aid, DAB No. 715 (1986). In DAB No. 982, the Board stated that-

[b]y adjusting downward its claims . . . , the State was not then giving up something to which it had a legitimate claim. The State simply had no right to payment for non-Medicaid eligible services. And in accepting the downward adjustment, HCFA was not being relieved of any obligation for payment it owed the State.

At 6. Thus, the Board concluded that, notwithstanding the state's downward adjustment for overpayments, section 1132 of the Act required the Agency to disallow untimely claims for underpayments. A contrary conclusion would, moreover, allow a state to circumvent the timely filing requirements by submitting inflated claims in case the state identifies allowable claims after the filing deadline has passed.

New York contended that the case now before us is distinguishable from DAB No. 982 on the ground that the DSH claims that New York withdrew were "eligible" claims that were withdrawn simply to comply with a cap on DSH payments. New York argued that "[r]eclassification of some of the State's timely filed claims is not the same as attempting to get reimbursement for claims that were both ineligible and untimely." New York response to Board questions, at 3. In describing the DSH claims as "eligible," New York implied that these claims were allowable. We disagree. The Board has previously held that DSH payments exceeding the state allotment are unallowable (New Jersey Dept. of Human Services, DAB No. 1652 (1998)), and we see no reason why this holding should not apply to DSH payments exceeding hospital-specific limits as well.

New York also contended that the case now before us is distinguishable from DAB No. 715 on the ground that the late-filed regular Medicaid claims at issue here "always existed as reimbursable claims under Medicaid," while the claims in DAB No. 715 "did not exist until after the State internally identified them as being mischaracterized as ineligible for" FFP. New York response to Board questions, at 3. However, this assertion is inconsistent with New York's prior statement that it filed the regular Medicaid claims only after determining that individuals previously identified as eligible for Home Relief were also eligible for Medicaid.

Finally, New York sought to distinguish the case before us now from the cited decisions on the ground that the appellants there relied on the audit exception to the two-year claiming requirement. Regardless of the arguments advanced on appeal, however, the substance of what the states sought to do is the same.

CMS's decision to disallow the claims as untimely is also reasonable because New York cannot possibly meet its burden to document the costs claimed. The Board has long held that "the State carries the burden of proof with respect to documentation of its claims." New York State Dept. of Social Services, DAB No. 433, at 9 (1983). Moreover, a state must "show that the documentation is related both in subject matter and in amount to the claims made in the State's QER." New York State Dept. of Social Services, DAB No. 445, at 8 (1983). Documentation that does not relate to the claim "constitutes in effect a new claim." New York State Dept. of Social Services, DAB No. 433, at 6 (1983). If, as New York asserted in the case now before us, the regular Medicaid claims merely reclassified the expenditures previously claimed as DSH payments, the same documentation must support both the regular Medicaid claims and the DSH claims. Since the DSH claims were for inpatient hospital services and the regular Medicaid claims were for other care services, however, the supporting documentation would necessarily be different in subject matter, if not amount.

CMS's determination that the regular Medicaid claims were untimely is also supported by the definition of "claim" in the applicable regulations as "a request for Federal financial participation in the manner and format required by program regulations, and instructions or directives issued thereunder." 45 C.F.R. § 95.4. Pursuant to this regulation, an evaluation of "how costs are claimed on departmental forms . . . is integral to determining whether, under applicable legal standards, a claim has been made." New Jersey Dept. of Human Services, DAB No. 1655, at 6 (1998). Thus, the Board held in that decision that a claim filed in a manner and format different from that of an earlier claim was a new claim subject to the two-year filing limit even where the same expenditures under the same Social Security Act program were involved.

New York did not deny that its claims for regular Medicaid expenditures were not filed in the same manner and format as its claims for DSH expenditures. New York argued, however, that Congress did not intend to preclude "[r]evisions to claims that necessitate examination of different program directives from those in the previously-filed claim . . . ." New York Br. at 2. This argument has no merit, however, since, as previously discussed, the regular Medicaid claims were not a revision of the DSH claims but claims for different expenditures. Moreover, New York's characterization of its actions here as simply moving a claim from one line on a form to another line is not consistent with the record. New York had made the decreasing adjustment for the FY 1996 DSH expenditures prior to the time it filed the increasing adjustment for its FY 1996 regular Medicaid expenditures. Moreover, since the claims for the FY 1996 DSH expenditures had in effect been voluntarily withdrawn, HHS had no reason to think that those expenditures needed to be taken into account for budget planning purposes. As a general matter, permitting a state to reinstate at any time a claim that it voluntarily withdrew would clearly undercut the purposes of the timely claims requirement.

Accordingly, we conclude that the two-year filing deadline was applicable to the regular Medicaid claims filed by New York in this case and was not met. This conclusion would not bar payment of those claims if New York were to request and receive a waiver of the deadline "for good cause" pursuant to section 1132(b) of the Act and 45 C.F.R. § 95.19(d). There is no indication in the record for this case that New York requested that CMS grant such a waiver, however. Moreover, before the Board, New York did not allege good cause for its late filing of the claims or explain why New York could not have identified the individuals in question as Medicaid eligible before the expiration of the two-year period for filing a claim.

Conclusion

For the reasons discussed above, we sustain the disallowance of $1,152,621 in full.

Donald F. Garrett

M. Terry Johnson

Judith A. Ballard
Presiding Board Member

1. CMS was previously named the Health Care Financing Administration (HCFA). See 66 Fed. Reg. 35,437 (July 5, 2001). We use "CMS" in this decision except where quoting a document that refers to HCFA.

2. The court in Schweiker stated in relevant part:

For a number of reasons, the states have regularly included in their quarterly reports previously unreported expenditures incurred in earlier quarters. Known as prior-period adjustments, these are, in effect, claims for reimbursement for earlier expenditures. Until 1980, the Social Security Act contained no time limits on submitting claims for prior-period expenditures. The absence of any time limits apparently made it more difficult for HHS to plan and administer the budget for the various Social Security Act programs.

684 F.2d 979, at 982.

3. We quote the statute prior to its amendment by Public Law No. 105-33 (Balanced Budget Act of 1997). The amendment inserted a cross-reference to section 1923 of the Act.

4. Although both parties stated that the disallowance covered expenditures made between January 1, 1996 and December 31, 1997, the quarter ended December 31, 1997 was the first quarter of federal FY 1998. Thus, claims for FY 1997 would not have included expenditures made in the quarter ended December 31, 1997.

5. New York did not provide the pages of the QER on which these expenditures were actually claimed.

6. Home Relief is New York's state-funded cash public assistance program.

7. New York did not provide the page of the QER on which this decreasing adjustment was actually made.

8. CMS did not raise this issue, instead mistakenly asserting that, under section 1132 of the Act, "the FY 1996 costs would have had to be claimed no later than January 1, 1999, and the FY 1997 costs would have had to be claimed no later than January 1, 2000." CMS Br. at 6.