New York State Department of Social Services, DAB No. 1405 (1993)
Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: New York State Department of Social Services
DATE: April 19, 1993
Docket Nos. A-93-57 and A-93-126
Decision No. 1405
DECISION
The New York State Department of Social Services (State or
NYSDSS)
appealed disallowances by the Health Care Financing
Administration
(HCFA) totalling $10,955,355 in claims for federal
financial
participation (FFP) under title XIX (Medicaid) of the Social
Security
Act (Act). Most of the disallowances were originally appealed
to the
Board in a series of cases which were dismissed without
prejudice
pending a review by HCFA. After HCFA completed the review,
the State
reopened its appeal of the amounts listed in the Appendix to
this
decision, which have now been joined under a single docket
number
(A-93-57). In addition, appeals from disallowances for
quarters
subsequent to those involved in the disallowances in the dismissed
cases
have been consolidated and are also listed in the Appendix under
either
the same docket number or a subsequent one (A-93-126). All of
the
appeals involve the same issues at this stage.
The State claimed FFP at an enhanced rate for certain administrative
costs
associated with its Welfare Management System for Upstate New
York
(WMS/Upstate) and its Welfare Management System for New York
City
(WMS/NYC), both of which are automated eligibility
determination
systems. The amount in dispute here is the difference
between FFP at
the 75% enhanced funding rate (available for operational
costs
attributable to an approved mechanized claims processing and
information
retrieval system and FFP at 50% (the rate generally available
for
administrative costs of the Medicaid program). As of November
1989,
HCFA terminated enhanced funding for eligibility determination
systems
on the basis that they were not in reality part of an
approved
mechanized claims processing and information retrieval system.
See 54
Fed. Reg. 41,966 (Oct. 13, 1989).
The State raised two issues which remain in dispute:
(1) Do the regulations terminating enhanced funding
for
eligibility determination systems properly apply to the
State's
WMS systems?
(2) Even if the regulations do apply, are some of the costs
of
the WMS systems nevertheless still eligible for enhanced
funding
because they are attributable to the MMIS? 1/ In that
regard,
the State pointed to what it called
"post-eligibility
determination functions" performed by the WMS systems
and to the
role of the WMS systems in managing data relating to third
party
liability (TPL).
For the reasons stated below, we uphold the disallowances of
enhanced
rates for the costs of operating WMS as an eligibility
determination
system and for most of the costs of post-eligibility and TPL
functions
claimed by the State (except for any costs preceding November 11,
1989,
when the regulations became effective). However, we conclude
that
certain functions which would not be performed but for the existence
of
a mechanized claims processing and information retrieval system, such
as
the input of data into the MMIS by electronic data transfer, qualify
for
enhanced rates. We remand to HCFA to permit the State an
opportunity to
identify and document the narrow category of costs which
qualify for
enhanced funding as explained below.
I. Procedural Background
The Board has considered issues relating to the State's WMS system in
the
past. See, e.g., New York State Dept. of Social Services, DAB No.
1145
(1990). In DAB No. 1145, the Board reviewed disallowances of
enhanced
funding for operational costs for WMS/NYC. HCFA denied
enhanced funding
on the basis that WMS/NYC had never been reviewed and
approved as
required. The Board held that HCFA acted reasonably in
delaying its
review until WMS/NYC was fully operational city-wide. Id.
at 13-14.
2/ The Board noted that one of the main benefits expected
from the
implementation of WMS/NYC was an integrated database compatible
with the MMIS
without intermediate translation and edit functions then
being performed by
the MMIS Interim Recipient Eligibility File (IREF).
Id. at 14.
In its notice of appeal in Docket No. 91-1 (relating to WMS/NYC),
the
State asserted that some of the costs disallowed for enhanced funding
in
DAB No. 1145 should be eligible for the enhanced rate. The
State
asserted that it had advised HCFA that WMS/NYC became fully
operational
city-wide as of June 1989 at which date "a direct electronic
interface
[existed] between WMS and MMIS" and reliance on IREF to translate
data
from New York City's data files, known as the Medicaid Eligibility
File,
was eliminated. The State asserted that all the claims disallowed
in
DAB No. 1145 should be allowed at enhanced funding, and in
particular
the portion of the claim relating to the quarter after June 1989
(when
the State asserted that WMS/NYC became fully operational).
In Board Docket No. 91-1, the Board declined to reopen any of the
issues
decided in DAB No. 1145. However, the Board agreed to consider
whether
HCFA should conduct a review of WMS/NYC to determine the date on
which
WMS/NYC became fully operational and whether, as HCFA contended,
a
direct electronic interface between WMS/NYC and MMIS was a
prerequisite
for conducting such a review. After briefing and a hearing
in Board
Docket No. 91-1, a stipulation (the terms of which are explained
below)
was entered in that case, as well as in a series of subsequent
appeals
relating to WMS/NYC costs for later quarters, and in Board Docket
No.
90-121 (discussed below, which related to WMS/Upstate), as well as in
a
series of subsequent appeals relating to WMS/Upstate costs for
later
quarters.
The State's notice of appeal in Board Docket No. 90-121 (relating
to
WMS/Upstate) alleged that HCFA had acted improperly in revising
the
regulations to change the federal share available for
eligibility
determination systems. The Board ordered the State to show
cause why we
should not dismiss on the basis that the Board is bound by
applicable
regulations, pursuant to 45 C.F.R. . 16.14. 3/ The State did
not
contest further the validity of the regulations, reserving the right
to
pursue that issue elsewhere, but asserted that some portion of
its
claims included costs of TPL activities under WMS/Upstate
which
qualified for 75% funding as operational costs of an MMIS even under
the
revised regulations. The question of what portion of the costs can
be
documented as TPL-related was deferred, since it is significant only
if
such costs are eligible for enhanced funding at all.
The stipulation entered in all these cases, executed August 3,
1992,
provided that HCFA would perform a review of WMS/NYC. After
this
stipulation, the Board dismissed all the appeals without prejudice
to
the right of either party to reinstate the appeals after completion
of
the review. The State was notified of the results of HCFA's review
on
November 25, 1992. HCFA determined that WMS/NYC was fully
operational
as of June 30, 1989 and that its costs qualified for enhanced
funding
for the period from June 30, 1989 through November 13, 1989.
Thus, the
dispute which the Board agreed to hear in Docket No. 91-1 was
resolved.
However, the State asked to return the remaining appeals (listed in
the
Appendix to this decision) to the Board's docket, in order to
resolve
its claims that some or all of its WMS costs continued to qualify
for
enhanced funding after November 13, 1989 because (1) WMS is not the
type
of eligibility determination system for which the regulations
were
revised to deny enhanced funding after November 13, 1989, and (2)
even
if it is such a system, some WMS costs are so closely associated
with
MMIS that they should continue to qualify for enhanced funding.
The record in the case before us includes all the submissions and
the
transcript of the hearing in Board Docket No. 91-1 (including parts
of
the record leading to DAB No. 1145 which were incorporated into
the
record in Board Docket No. 91-1), as well as submissions in Board
Docket
Nos. 91-36 and 90-121. At a telephone conference held in
the
consolidated cases on January 22, 1993, both parties agreed that
no
additional briefing was required. .II. Statutory and
Regulatory
Background
A. MMIS
Under section 1903(a)(3) of the Act, the federal government offered
an
incentive to the states to develop and operate certain kinds
of
mechanized Medicaid claims processing and information retrieval
systems
(MMIS) by providing enhanced FFP rather than the usual
administrative
rate under section 1903(a)(7). The objective of this
incentive is to
use automation to achieve "more efficient, effective, and
economical
administration" of state Medicaid programs, and to reduce costs
and
improve services. State Medicaid Manual (SMM), . 11105 (June
1990),
made applicable by 42 C.F.R. . 433.110(a)(1). The 75% rate
applies to
such "sums expended . . . as are attributable to the operation" of
the
MMIS. Section 1903(a)(3)(B) of the Act. "Operation" means
"the
automated processing of data." 45 C.F.R. . 95.605; 42 C.F.R.
.
433.111(a). To qualify for the 75% enhanced rate for operation of
an
MMIS, the system must be approved by HCFA. 42 C.F.R. . 433.116(a);
see
also 45 C.F.R. . 95.605, made applicable to MMIS by 42 C.F.R.
.
433.110(a).
The system eligible for enhanced funding is defined as follows:
"Mechanized claims processing
and
information retrieval system"
or
"system" means the system of
software
and hardware used to process
Medicaid
claims from providers of medical
care
and services furnished to
recipients
under the medical assistance program
and
to retrieve and produce
service
utilization and management information
.
. . . The system consists of (1)
Required subsystems specified in the State Medicaid Manual;
(2)
Required changes to the required system or subsystem . . .
; and
(3) Approved enhancements to the system.
Eligibility
determination systems are not part of mechanized
claims
processing and information retrieval systems or enhancements
to
those systems.
42 C.F.R. . 433.111(b) (emphasis added); see also 42 C.F.R. .
433.112(c)
(directly reducing funding rates for eligibility determination
systems).
The highlighted language was added as part of the final rule
terminating
enhanced funding for eligibility determination systems
effective
November 13, 1989, discussed below. 54 Fed. Reg. at
41,969. The six
required core subsystems for an MMIS specified in the
SMM are:
recipient; provider; reference file; claims processing; surveillance
and
utilization review; and management and administrative reporting.
SMM,
.. 1111O(N) and 11310 (June 1990). Additional subsystems which
are
optional but which qualify for enhanced FFP as system enhancements
when
they are added to a state's MMIS are Long Term Care and Early
and
Periodic Screening, Diagnosis, and Treatment. A TPL subsystem
was
previously optional, but is now required to be an integrated part of
the
MMIS, as discussed further below. It is undisputed that New York
State
has a fully-approved MMIS, with all the subsystems mentioned
here. HCFA
Brief (Br.) in Docket No. 91-36, at 4.
B. TPL
States having Medicaid programs are required to identify and pursue
third
parties having legal responsibility for medical claims of
recipients, such as
health or accident insurers or absent parents.
Thus, section 1902(a)(25)(A)
of the Act requires that a state Medicaid
plan provide: 4/
that the State or local agency administering such plan will
take
all reasonable measures to ascertain the legal liability
of
third parties . . . to pay for care and services available
under
the plan, including -- (i) the collection of
sufficient
information (as specified by the Secretary
in
regulations) to enable the State to pursue
claims
against such third parties, with such information
being
collected at the time of any determination
or
redetermination of eligibility for medical
assistance,
and (ii) the submission to the Secretary of a
plan
(subject to approval by the Secretary) for
pursuing
claims against such third parties, which plan shall
--
(I) be integrated with, and be monitored as
a
part of the Secretary's review of, the
state's
[MMIS] . . . under section 1903(r) . . .
TPL regulations were amended in 1990 to add 42 C.F.R. . 433.138(k)
to
implement the 1985 amendments at section 1902(a)(25)(A)(ii)
requiring
states to develop TPL action plans integrated with MMIS. 55
Fed. Reg.
1,423 (Jan. 16, 1990). 5/ The new regulation requires
that any state
with an MMIS "must have an action plan for pursuing third
party
liability claims and the action plan must be integrated with" the
MMIS.
42 C.F.R. . 433.138(k)(1). Further, the "portion of the plan
which is
integrated" with the MMIS will be monitored as part of the MMIS
review
process. Id. at . 433.138(k)(3). The preamble to the new
regulations
describes the TPL "system" as possessing three
capabilities: (1) "to
receive and maintain identification of third
party resources from all
sources;" (2) "to identify, control and adequately
account for"
cost-avoided claims; and (3) "to identify and control and
accurately
account for" claims for which Medicaid must seek recovery.
55 Fed. Reg.
at 1,425; see generally SMM, .. 3902.3; 11315; 11420.
The statute does not specify any enhanced funding for TPL activities
apart
from the provisions for enhanced funding for MMIS which includes
the
integrated TPL system. The TPL regulations at 42 C.F.R. Part
433,
Subpart D, specify that "FFP is available at the 50 percent rate for
the
agency's expenditures in carrying out the requirements of this
subpart."
42 C.F.R. . 433.140(b).
It is undisputed that New York has an approved TPL subsystem within
its
MMIS, and enhanced funding for that subsystem is not at issue. HCFA
Br.
in Docket No. 91-36, at 5.
C. Eligibility Determination Systems
During the initial planning and development of WMS,
eligibility
determination systems were considered to be enhancements to MMIS
and
eligible for enhanced funding on that basis. However, HCFA
regulations
were revised to reduce the matching rate for the title XIX share
of the
operational costs of eligibility determination systems such as WMS
from
75% to 50% effective November 13, 1989. 54 Fed. Reg. 41,966. The
reason
given in the preamble for the revision is that eligibility
determination
systems "do not meet the definition of" an MMIS "or of an
enhancement
to" an MMIS. Id.
It is undisputed that WMS is an automated eligibility
determination
system. However, the State contended that WMS is not the
kind of
eligibility determination system to which the reduction in FFP
was
intended to apply.
III. Factual Background
WMS collects data on applicants for various aid programs,
including
Medicaid, and processes it in order to determine eligibility for
program
services and to provide information about eligible recipients
for
program purposes. In the case of the Medicaid program, data
on
recipients is required in order to properly process claims presented
for
medical assistance services rendered to recipients.
The Medicaid data from WMS is transferred to data files within the
MMIS
Recipient Subsystem. During earlier proceedings, considerable
dispute
arose over this process. The State witnesses, Bernard Noonan
(Director
of MMIS) and David T. Meek (Director of Medicaid Systems
Development),
described the database within the MMIS Recipient Subsystem in
which data
from both WMS systems is collected as the MMIS IREF.
Hearing
Transcript, Docket No. 91-1, held September 26, 1991 (Tr.), at
310-311,
349-350, 369-370. The Board has characterized the IREF as the
"point of
interface" between WMS and MMIS. DAB No. 1145, at 4.
The federal court described the relationship between MMIS and WMS
as
follows:
Upstate WMS and WMS/NYC are not part of New York's
existing
MMIS. Rather, Upstate WMS and WMS/NYC interface with New
York's
MMIS to provide data on individuals eligible for Medicaid in
New
York State.
3 MMLR . 123, at 540.
In addition to the data it receives from the two WMS systems, the
IREF
receives data relating to possible third party coverage from
other
sources. Tr. at 403-4. The hardware in which the IREF
resides, along
with three of the MMIS subsystems, is a mainframe computer
operated by
the NYSDSS in Albany. 6/ The data in the IREF has to be
reformatted in
various ways when it is required for claims processing,
because the MMIS
subsystems performing claims processing reside on a
different mainframe
computer operated by the State's fiscal agent and using a
different
computer language. Tr. at 305-312, 359-362. MMIS handles all
claims
processing for Medicaid claims in New York. 7/
The data collected by WMS and then transferred to MMIS concerning
Medicaid
recipients include any information obtained about possible TPL
coverage, such
as insurance coverage, which is collected during the
eligibility
determination process. The role of WMS in relation to TPL
is data
collection and transfer. 8/ The role of MMIS is to receive and
maintain
the information needed to establish whether any third party may
be liable for
a particular claim and to process the claim appropriately,
for which it uses
data obtained from many sources, including information
such as recipients'
insurance numbers obtained from WMS.
The State asserted that the costs at issue do not include the costs
of
"actual eligibility determinations," such as the personnel costs
for
eligibility workers, because the General System Design provided by
the
federal government for states to use in planning MMIS systems
provided
that --
The certification and recertification of public
assistance
recipients for assistance payments and Medicaid eligibility
is a
Social Services and SSI [Supplemental Security Income
program]
as opposed to a Medicaid function.
State Ex. 25, in Docket No. 91-36, at II-7. Therefore, the
State
conceded that the costs of actual eligibility determinations are
not
eligible for 75% FFP. State Br. in Docket No. 91-36, at 13.
The costs
at issue for which the State seeks enhanced FFP were described by
the
State as processing costs (hardware, telephones, supplies)
and
reprogramming costs (personnel services to continuously reprogram
for
changes in legal eligibility requirements or for new principal
or
prepaid providers) that are allocable to Medicaid. HCFA did not
dispute
this characterization of the costs at issue.
I. Analysis
A. WMS is an eligibility determination system and is
not
eligible for enhanced funding.
The State argued that the reduction in funding level was intended to
apply
only to certain kinds of eligibility systems and only to those
functions of
an eligibility determination system directly related to
determining
eligibility. We discuss here whether WMS is an automated
eligibility
determination system under 42 C.F.R. . 433.112(c) and
determine that it is.
9/ We address in a later section whether some
functions of WMS are
nevertheless eligible for enhanced funding. .While
it is true, as the
State pointed out, that the regulations do not define
"automated eligibility
determination system," we find that the plain
meaning of the term encompasses
a computer system such as WMS which
accepts data relating to individuals
seeking Medicaid coverage and is
programmed to determine whether they are
eligible for Medicaid services
(as well as other programs' services).
However, the State argued that the funding restriction was more
narrowly
directed at Family Assistance Management Information Systems
(FAMIS),
under sections 402(a)(30) and 403(a)(3)(B) of the Act. State
Br. in
Docket No. 91-36, at 16. Such systems are eligible for enhanced
funding
under section 402(a)(30) of the Act. The State argued that a
FAMIS
system does not include certain Medicaid-related functions, such
as
issuing medical assistance identification cards, collecting data
on
restrictions on services to particular recipients, or other
activities
which the State claimed that WMS performed. State Br. in
Docket No.
91-36, at 11-12; see our discussion of "post-eligibility
determination
functions" below.
By contrast, the State contended that WMS was designed around
the
requirements of MMIS, because Medicaid accounted for the largest
number
of recipients, and that "WMS' primary purpose was to support the
MMIS."
State Br. in Docket No. 91-36, at 10; State Ex. 25 in Docket No.
91-36
(WMS Advance Planning Document, August 1976). For example,
according to
the State, WMS, unlike FAMIS, performed functions relating
to
identifying TPL sources and other post-eligibility
determination
functions relating to Medicaid. We discuss these
functions in more
detail in relation to the State's argument that some WMS
costs are so
associated with MMIS that they should continue to receive
enhanced
funding even if the WMS system as a whole no longer qualifies.
However,
the State also relied on the level of support provided by WMS to
MMIS as
evidence that WMS "is not the type of eligibility determination
system
contemplated in the Secretary's new policy." State Br. in Docket
No.
91-36, at 15.
The Board has previously rejected a similar claim that components of
an
eligibility determination system should be eligible for enhanced
funding
because they support the operation of an MMIS even where the
system
itself is not eligible for enhanced funding. Pennsylvania Dept.
of
Public Welfare, DAB No. 996, at 3 (1988). In Pennsylvania, the
reason
that the eligibility determination system was not eligible for
enhanced
funding was because it was not fully operational (whereas here
the
funding was reduced by regulations). However, the Board's
analysis
rejecting enhanced funding for components of an
eligibility
determination system sought solely on the basis that those
portions of
the system were useful to the MMIS applies equally to the present
case.
We do not find the fact that parts of WMS "support" the MMIS
sufficient
to persuade us that WMS is exempt from the funding reduction.
10/
The State also relied on the preamble to the rule discontinuing
enhanced
funding for eligibility determination systems, which noted that
FAMIS
systems have been eligible for enhanced funding since 1981 under
title
IV-A of the Act. The State quoted the preamble language that
"[a]n
automated eligibility determination system such as . . . [FAMIS] . .
.
is in reality not part of" an MMIS to show that the rule was
only
intended to impact FAMIS systems, because those systems were
eligible
for enhanced funding from other sources. 54 Fed. Reg. at
41,968; see
State Br. in Docket No. 91-36, at 16. 11/ The State argued
that
application of this funding reduction to WMS was contrary to
the
intention of the rule since WMS is not eligible for enhanced
funding
under title IV-A.
HCFA responded that the reference to FAMIS systems was merely an
example
of automated eligibility determination systems. Further, HCFA
contended
that singling out FAMIS systems as an example was sensible because
most,
though not all, of the states with systems in development or
operation
that would be affected by the reduced funding had FAMIS-type
systems.
HCFA Br. in Docket No. 91-36, at 12. 12/ Nevertheless, HCFA
asserted
that neither the preamble nor the revised regulations
distinguished
among different kinds of automated eligibility determination
systems or
excluded those that exceeded the functions of a FAMIS system.
Reading the preamble as a whole, we find that HCFA's explanation of
the
references to FAMIS systems is credible. The reduction of funding
is
not based on the references to other sources of FAMIS funding alone,
but
also on HCFA's conclusion that eligibility determination systems are
not
really a part of Medicaid's mechanized claims processing and
information
retrieval systems. Further, the regulations themselves do
not include
any restriction to, or even reference to, FAMIS systems.
Therefore, we
conclude that the regulatory change was intended to apply to
all
automated eligibility determination systems, not just FAMIS systems.
The State also contended that HCFA's denial of enhanced funding
to
eligibility determination systems other than FAMIS systems which
receive
such funding under other authority "violates a basic principle
of
claiming FFP," i.e., that costs should not be shifted to
non-benefitting
federal programs. State Br. in Docket No. 91-36, at 17,
n.13, citing
Office of Management and Budget Circular A-87, Attachment
A.C.2. This
contention is unpersuasive for several reasons.
First, HCFA did not
deny FFP for WMS Medicaid-related costs; HCFA simply
applied the
standard 50% rate rather than an enhanced rate. Second,
the
Medicaid-related costs are not being shifted to any other
federal
program; they are simply being borne by Medicaid at a lower rate.
Having concluded that the reduction in FFP applies to
eligibility
determination systems like WMS, we turn to the State's arguments
that
some portion of WMS's costs should nevertheless continue to
receive
enhanced funding.
B. Enhanced funding is available only for WMS costs which
would
not be incurred but for the operation of the MMIS.
1. TPL
HCFA acknowledged that enhanced funding is available for certain
TPL
expenses, i.e., those incurred by the TPL subsystem which is
an
integrated part of the MMIS. It is undisputed that New York has
an
approved MMIS and has a TPL subsystem integrated into that MMIS
for
which the State receives 75% reimbursement. However, HCFA argued
that
the WMS's TPL activities at issue here are not associated with the
MMIS'
TPL subsystem and do not qualify for the MMIS funding rate.
The State argued that the statute provides for an enhanced rate for
TPL
activities. State Br. in Docket No. 90-121, at 6. However,
the State
relied only on subsection 1903(a), cited above, which provides
enhanced
rates for approved MMIS systems but does not specifically mention
TPL
activities. This section thus does not support enhanced funding for
TPL
apart from MMIS. The regulations provide that funding for
TPL
activities generally is at the 50% rate. 42 C.F.R. . 433.140(b).
13/
The eligibility of certain TPL system costs for enhanced funding
thus
derives from their association with the MMIS system. 14/
Some confusion in this case was created because certain TPL costs
not
within the integrated TPL subsystem of MMIS previously were
reimbursed
at enhanced rates. However, the enhanced rates applied only
because of
the association of these TPL costs with WMS, which formerly
qualified
for 75% funding as an enhancement to the State's MMIS. This
status of
the WMS as an enhancement to the approved MMIS ended on November
13,
1989, when the regulations became effective reducing the FFP rate
for
eligibility determination systems. After this regulatory change,
the
prior rationale for 75% funding for these TPL costs as a part of the
WMS
enhancement to MMIS was no longer valid. The State provided no
valid
alternative rationale or authority to support 75% funding for TPL
data
collection and handling within WMS.
The distinction between data collection activities related to TPL
(which
are funded at 50%) and the TPL subsystem for pursuing claims (which
is
integrated with MMIS and funded at 75%) reflects the division
between
subparts (i) and (ii) in section 1902(a)(25)(A), quoted above.
15/ The
collection of data is intended to occur as part of
eligibility
determination, according to section 1902(a)(25)(A)(i), 16/ while
only
the plan for "pursuing claims" is expected to "be integrated with"
the
State's MMIS, and therefore eligible for the MMIS' enhanced
rate,
according to Section 1902(a)(25)(A)(ii) of the Act.
It is thus clear that the only TPL activities eligible for
enhanced
funding under the revised regulation are those "integrated with"
the
MMIS. The next question must then be whether WMS, or its TPL
portion,
is integrated with MMIS. The TPL activities housed in WMS
received
enhanced funding while WMS itself qualified for such funding as
an
enhancement to MMIS, but WMS was never integrated with MMIS.
Rather,
WMS "interfaces with" MMIS in order to transfer database information
to
it. New York State Dept. of Social Services, DAB No. 1145, at 4
(1990).
We reached this decision in the context of the WMS/NYC, but the
parties
have not identified any difference in the relationship
between
WMS/Upstate and MMIS and between WMS/NYC and MMIS which would lead to
a
different conclusion regarding WMS/Upstate. Thus, for example,
the
State did not contend that, in processing a provider claim, MMIS
has
direct access to WMS, as opposed to relying on data from the
Recipient
Subsystem of MMIS itself which contains data received from WMS, as
well
as other sources, in its database. See generally 54 Fed. Reg. at
41,971
(rejecting comments that equated eligibility determination systems
with
the MMIS recipient subsystems and distinguishing data transfer
from
direct access during individual claims processing).
At several points, the State suggested that denying enhanced funding
for
TPL activities because they were housed in WMS rather than in MMIS
was
inequitable, since the State had constructed its systems with
federal
approval and in response to federal guidelines. Thus, the
State
submitted a portion of the federal 1973 guidelines for MMIS
development
which suggests that having the eligibility caseworker ascertain
and code
the existence of a TPL source is a "more effective way" of
controlling
TPL than getting the information only from provider claims.
State Ex.
4, in Docket No. 90-121, at II-12. The State then pointed out
that
using WMS as "the first step in the MMIS TPL process" was in accord
with
this recommended approach. The State argued that the same
functions
would otherwise have to be accomplished more expensively by
collecting
data and entering it directly into MMIS. State Reply Br. in
Docket No.
90-121, at 2. Similarly, in the telephone conference in
Docket No.
90-121, the State argued that the TPL data collected by WMS is
essential
to MMIS functions. According to the State, it is unfair for
HCFA to
require collection of TPL data on applicants without paying 75% FFP
for
its entry into WMS. State Reply Br. in Docket No. 90-121, at 3,
citing
42 C.F.R. . 433.138.
We see no inequity here. TPL data certainly is essential to
claims
processing by MMIS as is much other raw data from many sources, and
its
collection at eligibility determination is now required rather
than
recommended. HCFA shares in these data collection costs, but
offers
enhanced rates only for MMIS costs, not for all costs relating
to
identifying and pursuing TPL sources. We have held before
that
eligibility for enhanced funding is "special," must be provided
for
specifically by statute or regulation, and is available only when
the
state has shown that it meets all the qualifications for
enhanced
funding. Pennsylvania Dept. of Public Welfare, DAB No. 996, at
3
(1988); Missouri Dept. of Social Services, DAB No. 395, at 6
(1983).
Further, the statute and regulations have narrowly defined
the
integrated TPL system eligible for enhanced funding as part of MMIS,
and
the State has neither met the burden of proving that the TPL
functions
of WMS fulfill the necessary qualifications nor shown any other
specific
authority for enhanced funding.
The statute makes enhanced funding available only for costs
"attributable
to" MMIS. Section 1903(a)(3). The purpose of offering
higher
rates for such costs is to encourage states to automate their
claims
processing and information retrieval functions. HCFA's
long-standing
"overall policy" has been to consider as costs
"attributable to the operation
of the MMIS," and therefore eligible for
enhanced funding, only "a relatively
narrow and circumscribed group."
New York State Dept. of Social Services, DAB
No. 1023, at 8-9 (1989);
New York State Dept. of Social Services, DAB No.
1205, at 3 (1990). The
State would have had to collect TPL data
regardless of whether it had an
automated system for using that data in
processing claims. Thus, HCFA
could reasonably determine that the costs
of TPL data collection were
not "attributable to" MMIS.
The State also referred generally to the preamble to the final
rule
denying enhanced funding for eligibility systems as supportive of
its
claims for WMS TPL costs. The language to which the State
apparently
referred responds to comments asking the "effect of the revisions
on the
. . . [TPL] subsystem," and assures states of continued enhanced
funding
for any changes to "the required system." 54 Fed. Reg. at
41,969. The
State read this to mean that --
the regulations do not limit to 50% TPL activities
not
part of MMIS. All that is required is a plan of
action
for TPL and that the State use its system to carry
out
such plan. . . . Since the federal agency has
already
approved the State's method for conducting
TPL
activities . . . [i.e., through its approval of
WMS],
the State has met federal regulatory
requirements.
.State Br. in Docket No. 90-121, at 8 (citations omitted).
17/
The essential flaw in this reasoning is that, as the discussion
above
revealed, the "required system," the funding of which is continued
at
75%, is the TPL system integrated in the MMIS. Neither the
quoted
language, nor any other provision in the preamble or the
new
regulations, in any way suggests that parts of eligibility
determination
systems that collect TPL data are to be exempted from the
funding
reduction. The State's argument also ignores the continued
existence of
regulations that do in fact explicitly limit FFP to 50% for the
costs of
"carrying out the requirements" of TPL determinations. 42
C.F.R. .
433.140(b).
Furthermore, other language in the preamble directly contradicts
the
State's position. The preamble states that under the 1985
amendments
states must have an approved TPL action plan and must "use the
system to
carry out the plan of action." 54 Fed. Reg. at 41,967.
18/ Also,
"these statutory TPL changes" are considered part of the
"core system"
for which enhanced funding is available. The preamble
also points out
that the term "system" replaces "MMIS" as the official short
form for
the "mechanized" claims processing and information retrieval
system."
Id.; 42 C.F.R. . 433.111(b). The mandate that the State "use
its
system" to pursue TPL claims thus must be read in this context to
mean
that states must use MMIS to carry out TPL claims pursuit and
will
receive enhanced funding if necessary to modify an MMIS to do so.
The
reference to "system" in that context cannot reasonably be understood
to
make data collection in the eligibility determination process part
of
the integrated TPL subsystem.
The State contended that the TPL component of WMS was covered by
a
provision in the SMM making "other mechanized information
retrieval
systems under Title XIX," such as Early and Periodic
Screening,
Diagnosis, and Treatment, Long Term Care, and TPL eligible for
enhanced
rates, not as "part of the required MMIS" but as "optional
integral
components" if they meet certain conditions. SMM Revision
(Rev.) 8 at .
11125 (July 1986). However, TPL has been deleted from the
current
version of the provision. SMM Rev. 11 at . 11125 (June
1990). Under
the 1985 amendments, the TPL system must be integrated
into the required
MMIS and so can no longer be considered an optional
component. The
version on which the State relied was simply outdated,
and could not
provide an alternative option for structuring the State's TPL
subsystem,
since the statute now directly requires an integrated system as
part of
the core MMIS.
The State charged that the denial of an enhanced rate for TPL costs
within
WMS violates the requirement that grantees "have the primary
responsibility
for employing whatever form of organization and
management techniques may be
necessary to assure proper and efficient
administration." Office of
Management and Budget Circular A-87,
Attachment A, A.2.c; State Br. in Docket
No. 90-121, at 7. However, we
find that this policy guideline is not
violated here, since HCFA did not
dictate any particular form of organization
or technique of management
to the State. Certain TPL activities are
required by law to be
integrated with the MMIS and are reimbursed at an
enhanced rate. Those
TPL activities which are not part of the required
MMIS may be carried
out as the State sees fit and are reimbursed at the
standard rate. The
placement of those functions, or some portion of
them, in the WMS
framework is within the State's discretion.
The State also complained that the decision to use WMS for
certain
functions, such as TPL data collection, was made when WMS was
eligible
for enhanced funding, and that redesign would be too
expensive. State
Br. in Docket No. 90-121, at 7; Letter from State
counsel to DAB, dated
Aug. 9, 1991, at 2. First, this argument
overlooks the fact that the
State has a TPL system which is already
integrated into its MMIS as
required by law, so no redesign is
necessary. Second, the State did not
demonstrate that WMS performed any
functions in regard to TPL which the
1985 amendments would require to be part
of the integrated system, so
again no redesign is required. Third, to
the extent that the regulatory
changes regarding eligibility determination
systems and TPL systems
affected the requirements for MMIS funding, the
regulations inform
states that such changes may occur and that states will be
given notice
and an "appropriate period" to come into compliance. 42
C.F.R. .
433.123. The regulations clearly do not contemplate that
choices made
by states in designing their MMIS systems will preclude HCFA
from
enforcing future changes to its requirements for enhanced
funding.
Finally, in its WMS Advance Planning Document of August 1976, the
State
expressly agreed "to abide by existing and future federal
regulations
pertaining to programs affected by the development of" WMS.
State Ex.
26, in Docket No. 91-36, at 38.
For the reasons explained above, we conclude that the WMS costs related
to
TPL are not independently eligible for enhanced funding.
2. Other post-eligibility determination functions
The State asserted that some of the functions performed by WMS
occurred
after eligibility was determined and were actually MMIS functions
that
the State had chosen to perform in its WMS systems. State Br. in
Docket
No. 91-36, at 7. Among the functions which the State
characterized as
MMIS or post-eligibility determination functions of the WMS
are the
following:
a. WMS provides uniform formatting, editing for
completeness
and validity, and overall State control of data on
recipients to
update MMIS so that "part of the computer control that
the MMIS
Recipient System is required to possess is built into
WMS."
State Br. in Docket No. 91-36, at 7.
b. WMS is used by 20 of the State's social service districts
in
paying claims for transportation services which are not
paid
through MMIS, which the State characterized as "WMS and
the
district[s] . . . acting together as a mechanized
claims
processing and information retrieval system." Id. at
9.
c. WMS contains files not used in determining eligibility
but
needed for MMIS claims processing, such as the
restricted
recipient file (to identify those eligible for some but not
all
Medicaid services), the principal provider file (for payments
of
nursing home care), and the pre-paid capitation file
(for
recipients in managed care programs). The data in these
files
is important in the later processing of specific categories
of
claims by MMIS. Id. at 10-11.
d. WMS collects data on recipients to be used for
the
Electronic Medicaid Eligibility Verification System
(EMEVS),
which is a part of MMIS. The State asserted that "EMEVS,
like
the MMIS, has some of its operational functions organized
in
WMS," including TPL, "principal provider," and
"restricted
recipient" information. EMEVS involves issuing cards
to
recipients which can be read electronically by special
equipment
in providers' offices to immediately verify the
cardholder's
status. Without WMS, EMEVS would have to replicate
the data
collection, editing, updating and storage facilities that
WMS
now provides. Id. at 9-10.
The State further argued that the functions of WMS and MMIS "are so
merged
that it is now unreasonable to conclude that all of WMS in
reality is not
part of the mechanized claims processing and information
retrieval
system." State Br. in Docket No. 91-36, at 16. In support,
the
State cited DAB No. 1145 as holding that "WMS, which produces
Medicaid
related information, is a mechanized claims processing and
information
retrieval system covered by the" SMM. State Br. in Docket
No. 91-36, at
16-17, citing DAB No. 1145, at 6-7. This assertion
misreads the Board's
decision. In the cited portion of DAB No. 1145,
the Board rejected the
State's argument that WMS/NYC was eligible for
enhanced funding but was not
subject to the HCFA review requirements
relating to mechanized claims
processing information retrieval systems.
The Board concluded that WMS/NYC
had been eligible for enhanced funding
for its developmental costs only
because HCFA then considered it to be
an enhancement to the MMIS. As
such, WMS/NYC must also be subject to
the review requirements applicable to
MMIS and enhancements thereto.
Nothing in DAB No. 1145 purported to prevent
HCFA from changing its mind
about whether eligibility determination systems
in general, or WMS in
particular, should be considered part of MMIS.
The disallowances
appealed in DAB No. 1145 were all for quarters before the
regulations
reducing funding for eligibility determination systems were
adopted.
Generally, HCFA's position was that no function performed by WMS can be
an
MMIS function because "only the MMIS itself can perform
MMIS
functions." HCFA Br. in Docket No. 91-36, at 14. Therefore,
HCFA
argued that no costs of WMS could be eligible for enhanced
funding
whether they were incurred before or after eligibility
determination.
As discussed above, the statutory determinant of enhanced
funding is
whether costs are "attributable to the operation of" an automated
claims
processing and information retrieval system, i.e., MMIS.
Section
1903(a)(3)(B) of the Act. HCFA has some flexibility to define
in policy
its reasonable interpretation of what costs are "attributable to
the
operation" of an MMIS. Compare New York State Dept. of Social
Services,
DAB No. 1023, at 7 (1989) (upholding disallowance after HCFA's
issuance
of a policy defining which indirect costs are eligible for
enhanced
funding) to New Jersey Dept. of Human Services, DAB No. 648
(1985)
(reversing disallowance of similar costs on grounds that HCFA had
not
adequately articulated a policy limiting eligible indirect costs
to
those "directly" attributable to the operation of an MMIS). HCFA
has
exercised that flexibility here to reclassify the costs of
operating
eligibility determination systems as no longer attributable to
operation
of an MMIS.
In looking at the costs which the State grouped as
post-eligibility
determination functions, we think it is significant that
MMIS in New
York City was implemented before WMS became fully
operational.
Consequently, some elements of WMS may well have been designed
to
operate efficiently with the MMIS, but MMIS met all required
system
capabilities without WMS. Furthermore, the State did not point
to any
evidence that HCFA ever approved the use of WMS as a part of the
MMIS
Recipient Subsystem, and HCFA denied that such approval was
ever
granted. HCFA Ex. R-6 in Docket No. 91-36, at 6 (Declaration of
Jim
Bernschein). When WMS was approved for 75% FFP, it was deemed
an
enhancement to MMIS as an eligibility determination system, not as
a
part of the Recipient Subsystem. We therefore reject the State's
basic
contention that WMS has somehow become merged with the
Recipient
Subsystem. We turn next to the specific costs to which the
State
pointed as eligible for enhanced funding.
In regard to the allegation that WMS provides data in formats
necessary
for MMIS' computer control, the record indicates that not all
Medicaid
data in WMS is coded in a manner compatible with MMIS. See,
e.g., Tr.
at 322, 346, 372. To the extent that WMS was designed with
formats
compatible with MMIS (or MMIS was planned to accept WMS formats), it
is
reasonable to assume that maximizing compatibility was a sensible
design
choice. See, e.g., Tr. at 394. 19/ However, the need to
collect and
store the data required by the eligibility determination system
would
exist regardless of whether that data would be used in automated
or
manual claims processing. The State provided no evidence that the
use
of some uniform formats resulted in additional costs attributable to
the
operation of an MMIS.
In regard to the use of WMS by social services districts in
transportation
claims processing, the State did not allege that WMS
processed these claims,
but only that the districts used data "derived
from WMS" in making
payments. State Br. in Docket No. 91-36, at 9. The
State did not
demonstrate that HCFA's approval of an Advanced Planning
Document for WMS
including its collection of data for this purpose could
properly be treated
as approval of the process of districts using WMS
data to make direct
payments for transportation costs as a mechanized
claims processing and
information retrieval system separate from MMIS.
Cf. SMM . 11225.
Basically, the State here attempted to recast anything
other than or more
than pure eligibility determination housed in the WMS
as eligible for
enhanced funding. However, in setting FFP rates, the
statute and
regulations nowhere distinguish between costs on the basis
that they were
incurred before eligibility determination or were
incurred afterward.
The State did not tie these costs into the
operation of an MMIS, nor cite to
any HCFA policy defining these costs
as attributable to the operation of an
MMIS, which is the applicable
standard.
In regard to the various files for which data is collected in WMS
although
not required for making eligibility determinations, these are
best described
as databases, not functions. The State did not contend
that these
databases are accessed directly by MMIS, as opposed to being
transferred to
the MMIS, through IREF, along with other Medicaid-related
data which was used
in eligibility determinations. 20/ The data on
these subjects, like
that related to TPL, is appropriately gathered at
the time of collecting
eligibility information from an applicant. This
data would be necessary
for the Medicaid agency to collect regardless of
whether claims processing
was automated in an MMIS or performed
manually. Again, the State did
not identify any policy making the
collection or housing of this data
attributable to the operation of an
MMIS.
In regard to EMEVS, the State did not demonstrate that WMS was
performing
functions of the EMEVS. Although the State referred to
"operational
functions" of EMEVS being performed by WMS, the State did
not describe
specifically any functions being performed by WMS that are
necessary
functions of an EMEVS. The role of WMS relative to EMEVS, as
with the
databases discussed above, appears to be no more than data
collection,
editing, update and storage. The role of MMIS is to receive
this data
and use it in performing the EMEVS functions. Although the
State
referred to the nightly updating of EMEVS data, the frequency with
which the
database is updated is irrelevant to this role division.
Furthermore, the SMM
specifically provides that enhanced FFP is not
available when the eligibility
determination system is used for EMEVS
processing. SMM, . 11281; see
also SMM, . 11281.1(A).
For the reasons explained above, we conclude that none of the costs
which
the State characterized as post-eligibility determination
functions are
independently eligible for enhanced funding.
3. Data transfer to input data into MMIS
Finally, we turn to the costs incurred by WMS in the process
of
transferring its databases into the MMIS for use by MMIS in
claims
processing and other functions. Unlike the costs discussed
above, these
costs would not necessarily be incurred by the Medicaid agency
but for
the operation of an MMIS. To understand this distinction, it is
useful
to imagine the situation if no MMIS were operating in New York.
In that
case, the law would still require that data on recipients, on TPL,
and
on the information needed to restrict coverage when appropriate
be
collected, organized and stored. See, e.g., section 1902(a)(8),
(10),
(19) and (25). Once stored (whether in manual files or
computer
databases), the data would be used by claims processing workers to
make
determinations manually. However, because the claims processing
and
information retrieval process has been computerized, the data
must
instead be inputted into the MMIS before it can be used. Thus,
the
input of the data is attributable to operation of an MMIS.
In New York, the input is accomplished by the nightly transfer of the
WMS
database into the MMIS IREF. HCFA did not dispute that the costs
of
receiving the data transfer into MMIS are eligible for enhanced
funding.
Although HCFA asserted that data transfer was not eligible for
enhanced
funding until the data was received into MMIS, it pointed to
no
authority articulating this policy. In fact, there is authority to
the
contrary. The preamble to the rule reducing funding for
eligibility
determination systems states that "[o]nce eligibility
determinations are
made the input and use of data on the recipients by the
approved MMIS
system" is eligible for enhanced funding. 54 Fed. Reg. at
41,971
(emphasis added). Had the Secretary intended to restrict
enhanced
funding for data transfer to the costs incurred within the MMIS
system,
the preamble would have referred to the receipt of data rather
than
input of data. 21/ Furthermore, the language cannot logically be
read
to mean the input of data by MMIS, since the data involved would have
to
be transferred from the eligibility determination system into MMIS.
The
phrase "by the approved MMIS system" must therefore modify only the
use
of the data. We conclude, absent explicit HCFA policy
statements
stating otherwise, that the Secretary did not intend for the
reduction
of enhanced funding for eligibility determination systems to
prevent
enhanced funding for the input of data into MMIS after
eligibility
determinations are made.
HCFA did not deny that enhanced funding would be available for the
(much
higher) costs of the alternative of manually entering into MMIS data
now
provided electronically to MMIS by WMS. The SMM specifically
lists
among operational costs of an MMIS eligible for enhanced funding
"entry
. . . of provider enrollment data," staff costs for data
entry
generally, and "other direct non-personnel costs." SMM, .
11276.11.
None of HCFA's arguments persuasively explains why manual data
entry
would be eligible for enhanced funding while computerized data
entry
would not. 22/ .If the MMIS did not receive data input from WMS,
the
same data would have to be entered manually from the
original
applications for assistance or from a printout, which would be
a
duplicative exercise involving considerable cost. State Ex. 3
in
90-121, at 2-3 (Affidavit of Raoul Anderson). HCFA was aware that
WMS
was substituting for other means of data input into MMIS at
substantial
costs savings. For example, the Supplemental Planning
Document for
WMS/Upstate dated December 1980, approved by HCFA, states that
--
The interface relationship provides Medicaid
recipient
eligibility data directly from the Welfare Management System
to
the Medicaid Management Information System. . . . This
interface
capability results in the significant reduction of
data
collection and entry by local district staff which
would
otherwise be required.
State Ex. 1, in Docket No. 90-121, at 23.
The State asserted that the costs of data entry into other MMIS
subsystems
were reimbursed at 75%, such as the input of data on
providers' licenses,
medical specialties, and diagnoses and procedures.
Telephone conference in
Docket No. 90-121; Letter to DAB from counsel
for State, dated June 20, 1991;
State Exs. 5 and 6, in Docket No.
90-121. Bernard Noonan, Director of
the State's MMIS, described the
input process for various kinds of
data. State Ex. 5, in Docket No.
90-121, at 2-5. For the MMIS
Provider Subsystem, data input included
magnetic tape transmission of medical
specialty information from the
Department of Health (DOH) and provider
licenses from the Education
Department to NYSDSS for entry into MMIS, as well
as data from the
NYSDSS Division of Audit and Quality Control on provider
ownership
entered by MMIS staff. For the MMIS Reference Subsystem, data
input
included manual keying of fee and rate information (except for
nursing
home rates which are transmitted from DOH on tape),
pharmaceutical
formularies, and DOH diagnoses files. Roger Nelligan,
Chief of NYSDSS
Cost Allocation, described the FFP rates charged for these
data
transmission efforts. State Ex. 6, in Docket No. 90-121, at
2-5. For
Education Department license data, the cost of collecting the
data is
not charged to HCFA. However, the computer time used in reading
the
magnetic tape into the Provider Subsystem is used to calculate
a
percentage of computer operation costs to be charged at 75%. For
the
entry of ownership data and other data from manual sources, MMIS
staff
time is charged at 75%. For the data from DOH, DOH accounts for
its
costs in preparing and transmitting the data and charges it at 75%
FFP,
while the costs of reading the tapes into the MMIS are accounted for
as
described for license data.
HCFA denied that it knowingly paid enhanced FFP for
"preliminary
functions," such as setting provider rates and fees or dealing
with
licensure. Letter to DAB from counsel for HCFA in Docket No.
90-121,
dated July 12, 1991. Further, HCFA stated that "the data
transfer
function to the provider and reference files of MMIS is considered
a
preliminary function, which is not eligible for enhanced FFP." Id.
at
1. Rather, HCFA contended, enhanced FFP would be available only for
use
of the data after it was received into MMIS. However, HCFA stated
that
the entry of data into the computer by MMIS staff is eligible
because
"this information is considered to have been received by MMIS."
Id.;
HCFA Ex. 1 to that letter (Dunstan affidavit, July 12, 1991). HCFA
did
not cite any authority to support its conclusion that data
being
manually keyed in is considered already received, while data being
read
electronically is not.
We agree that preliminary functions which would have to be performed
in
any case, such as determining rates for medical services,
licensing
providers, or obtaining health insurance information from
applicants,
are not attributable to the operation of an MMIS. On the
other hand,
the input of the data into MMIS for its use, whether by manual
keypunch
by MMIS staff, by magnetic tape or by electronic transmission,
occurs
only because of the operation of MMIS. 23/
In its submissions, the State did not distinguish clearly between
the
costs of entering data into WMS and of transferring data from WMS
to
MMIS. See, e.g., Letter to DAB from counsel for the State, dated
August
9, 1991, at 2. We agree with HCFA that the cost of entering data
into
WMS is a cost of the eligibility determination system that would
be
incurred regardless of whether the claims processing methods
were
automated. However, transferring the data to MMIS would not
be
necessary but for its use in MMIS, yet may involve some costs to the
WMS
system. We therefore conclude that the State should.have a
further
opportunity to demonstrate whether it can identify costs of the
WMS
system which result from the transfer of data to MMIS.
Conclusion
For the reasons explained above, we conclude that the
regulations
eliminating enhanced funding for eligibility determination
systems apply
to WMS and that the TPL and other post-eligibility
determination costs
of WMS described by the State do not independently
qualify for enhanced
funding. However, we conclude that some portion of
the costs at issue
pertaining solely to the input or transmission of data to
the MMIS (as
opposed to its collection, storage, or use in WMS) is eligible
for
enhanced funding. We therefore remand to HCFA to permit the State
to
provide any documentation of what costs, if any, relating to data
input
or transmission into MMIS may be allowable. We uphold the
disallowances
of all other costs at issue, subject to adjustment to the
extent that
any portion of the disallowances precedes the effective date of
the
regulations. The State may return to the Board within 30 days of
HCFA's
written determination as to the amount of data input or
transmission
costs, if any, that can be identified as allowable, on that
issue only.
___________________________ Judith A. Ballard
___________________________ Norval D.
(John)
Settle
___________________________ M. Terry
Johnson
Presiding Board Member
1. MMIS is an abbreviation for Medicaid Management
Information System,
which was the prototype for Medicaid mechanized claims
processing and
information retrieval systems, and has been commonly used as a
shorthand
reference to the State's system by both parties.
2. The Board's decision was affirmed in State of New York Dept.
of
Social Services v. Sullivan, Civ. No. 91 CIV 8300(KC), 3 MMLR .
123
(S.D.N.Y., Jan. 29, 1993). The court upheld HCFA's authority to
deny
enhanced funding for WMS/NYC until the State could demonstrate that
it
was fully implemented city-wide. Id.
3. All citations to the Code of Federal Regulations are to the
1991
Revision. Where relevant changes in regulations occurred during
the
period at issue, they are discussed in the text.
4. This section was amended by section 9503 of the
Consolidated
Omnibus Budget Reconciliation Act of 1985, Pub. L. No. 99-272
(1986).
5. This revision was not effective until February 15, 1990 and
part
ofthe disallowance period precedes this effective date. However,
both
parties relied on the regulatory provision at 42 C.F.R. .
433.138(k),
and the outcome here would not have been different under the
statute
even before this revision of the regulations.
6. The State asserted that WMS shares the same mainframe computer
and
that data is transmitted to the MMIS IREF within the mainframe.
State
Br. in 91-36, at 8. HCFA contended that the MMIS was housed
solely on
the fiscal agent's computer, while WMS was located in the
State's
mainframe. HCFA Br. in 91-36, at 6, n.4. The issues
before us do not
turn on which hardware is used for each system, but rather
on whether
particular costs were attributable to the operation of the
MMIS.
7. It was not disputed that WMS has no claims processing capacity
and
MMIS does not perform eligibility determination functions. HCFA Br.
in
Docket No. 90-121, at 6; Dunstan affidavit, Jan. 31, 1991, at 12; Tr.
at
373.
8. The State often referred in its submissions to TPL "functions"
in
WMS, but its descriptions of the actual involvement of WMS in the
TPL
process related only to elements of data collected in WMS and
later
relayed to the MMIS. See, e.g., State Br. in Docket No. 90-121,
at 5;
State Ex. 3, in Docket No. 90-121, at 2-3 (Declaration of
Raoul
Anderson). This confusion of "functions" with "databases" or
"files"
which maintain data but do not perform functions using the
data
persisted throughout the State's briefing in relation to its
claims
relating to "post-eligibility determination functions." Since
the State
had the burden of supporting its claims, wherever the State failed
to
demonstrate that WMS was in fact performing specific functions
as
opposed to housing databases or files, we have construed the absence
of
specific evidence on WMS "functions" against the State.
9. We note that one disallowance period partially precedes
the
effective date of this change in the regulations. The issue was
raised
during a telephone conference in Docket No. 90-121, and HCFA
never
offered any basis for disallowing WMS costs before November 13,
1989.
We therefore presume that HCFA will correct the amount of
the
disallowance, if necessary, to reflect any portion attributable to
the
period before the regulations became effective.
10. We discuss below those costs which are actually attributable
to
the operation of an MMIS, as opposed to the costs referred to here
which
would be incurred by WMS regardless of the existence of an MMIS
but
which may be useful to or supportive of MMIS functions.
11. Actually, the State asserted that the "Secretary stated that
FAMIS
systems were `in reality not part of'" a Medicaid MMIS, omitting
the
reference to eligibility determination systems such as FAMIS at
the
beginning of the sentence from the preamble.
12. The State questioned whether New York was treated differently
than
other States in regard to the reduction of funding for
eligibility
determination systems. Specifically, the State raised
questions as part
of its discovery efforts about (1) whether the only
eligibility systems
for which funding was reduced in other states were
FAMIS-type systems
and (2) what functions of those systems lost enhanced
funding. State
letter to HCFA counsel, dated September 6, 1991.
HCFA responded with
copies of letters to six states reducing funding for
eligibility
determination systems and noting that "the entire systems lost
75%
federal funding, not solely specific functions." HCFA pointed to
North
Dakota as a state that, like New York, lost 75% FFP for operating
its
eligibility determination system, which was not a FAMIS system.
HCFA
Br. in Docket No. 91-36, at 12. The State did not demonstrate that
HCFA
made any distinction among state eligibility determination systems
or
among the functions performed by those systems.
13. The changes in the TPL regulations discussed above did not
affect
42 C.F.R. . 433.140(b). Costs of TPL activities have never
qualified
for an enhanced rate independently, but have received enhanced
funding
only to the extent that they qualified under the MMIS provisions,
i.e.,
as costs of optional (now required) MMIS subsystems.
14. Further, the SMM points out that, in "a systems context,
TPL
usually refers only to those automated, TPL related activities which
are
contained in core parts of the MMIS." SMM Rev. 11 at . 1111O(Y)
(June
l99O) (emphasis added). Thus, where HCFA uses the abbreviation
"TPL" in
the context of references to systems or to MMIS, it is to be
understood
as referring not to all activities undertaken in an effort to
identify
possible alternative payors, but rather only to the automated TPL
claims
pursuit efforts required to be integrated into the core MMIS, called
the
"TPL system."
15. Thus, it is not significant that the clarification of the
meaning
of TPL "in a systems context" (described in the prior footnote)
was
added to SMM in the June 1990 revision.
16. In regard to HCFA's expectation that TPL data collection
should
begin with eligibility determination, while the MMIS Recipient
Subsystem
should receive and use the data obtained through
eligibility
determination efforts as well as other sources, see SMM .. 3902,
3903.1,
and 11315.
17. The State's reference to federal approval was based on an
approved
advance planning document for WMS submitted as evidence that
HCFA
approved of housing certain TPL activities there. State Ex. 1,
in
Docket No. 90-121. However, all automated data processing systems
must
have an approved advance planning document in order to receive any
FFP;
such approval does not automatically guarantee future enhanced
funding.
See 45 C.F.R. Part 95, Subpart F. MMIS systems must meet all
the
general requirements for data processing systems, as well as
specific
additional statutory and regulatory requirements. 45 C.F.R. .
95.601.
The State's TPL subsystem within MMIS meets these requirements; WMS
does
not.
18. New York apparently has never submitted a plan of action for
its
TPL system in response to the 1985 amendments. New York argued that
its
TPL system already is integrated with its MMIS, and therefore no
new
action and no action plan are needed. Its plan consists of
the
TPL-related references in the advance planning documents for WMS
and
MMIS, the State alleged during the telephone conference in Docket
No.
90-121. HCFA disagreed, asserting that the 1985 amendments required
an
action plan distinct from other planning documents and regardless of
the
existing integration of the State's TPL system. Such a document
might
have been helpful here, since no one document describes how New
York's
TPL process is performed. However, HCFA did not base the
disallowances
on the absence of an action plan, and our decision is not
affected by
it.
19. We also note that the developmental costs of WMS were funded
at a
90% enhanced rate of FFP because of its former status as an
enhancement
to MMIS, so any developmental costs resulting from the need to
maximize
uniformity in codes between WMS and MMIS have already been recouped
by
the State.
20. We discuss in the next section the costs of the actual
transfer of
the data into MMIS for its use, which may cut across several of
the
post-eligibility functions.
21. The preamble also states that in those cases where the
MMIS
directly accesses an "integrated" eligibility determination system
to
obtain data HCFA will pay 75% FFP for "the cost of gaining access to
or
obtaining these data." However, the preamble comments that
"[m]ost
State eligibility determination systems send data to MMIS
recipient
subsystems on a regular basis" and "[f]ew if any MMIS systems
gain
access to the eligibility determination systems directly during
the
processing of each claim." 54 Fed. Reg. at 41,971. It is not
clear
what the references to direct access to an integrated
eligibility
determination system means. In the context of a discussion
of cost
allocation between Title IV and Title XIX, "integrated
eligibility
determination systems" would appear to refer to those that
handle
eligibility data for various aid programs in an integrated
manner,
rather than to integration with an MMIS. To the extent that
"direct
access" may have been meant to refer to case-by-case data access, we
see
no distinction for funding of data transfer costs between an
eligibility
determination system that provides data for MMIS to use in
processing
each claim and transferring it into MMIS and one that
electronically
transfers batch data to MMIS each night. The regulations
are clear that
neither eligibility determination system is to be treated as a
part of
or enhancement to an MMIS. If the cost to the eligibility
determination
system of providing data input to the MMIS case by case is
eligible for
enhanced funding, the cost of nightly data transfer should be
similarly
funded. We therefore decline to interpret this ambiguous
language to
reach a result inconsistent with the clearer language on the same
page
providing enhanced funding for data input.
22. The SMM specifically states a preference for minimizing
manual
processing costs, since "[o]ne of the aims of system improvements is
the
mechanization of front-end manual editing operations to achieve . .
.
the reduction of clerical workload." SMM, .. 11276.3 and 11276.6.
23. As noted, HCFA did not cite to any authority to support
its
references to whether data had been "received" into MMIS. We
therefore
refer to the statutory criteria of whether a cost was attributable
to
operation of an