Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: Georgia Department of Medical Assistance
DATE: May 19, 1993
Docket No. 92-250
Decision No. 1413
DECISION
The Georgia Department of Medical Assistance (Georgia) appealed
a
decision by the Health Care Financing Administration (HCFA)
disallowing
$999,425 in federal financial participation (FFP) claimed by
Georgia for
the period July 1, 1988 through June 30, 1990. Georgia
claimed federal
funding under Medicaid, Title XIX of the Social Security Act
(Act), for
the salaries of nurse aides hired to replace regular nurse aides
who
were participating in federally mandated training and testing
programs.
Georgia claimed these funds as general administrative expenses of
its
Medicaid program pursuant to section 1903(a)(7) of the Act.
HCFA
disallowed the claim on the ground that the salaries were
not
administrative costs but rather nursing facility services costs
which
had to be claimed pursuant to section 1903(a)(1) of the Act.
For the reasons set out below, we sustain the disallowance in
its
entirety.
BACKGROUND
1. Federal law and the history of the claim at issue
The Omnibus Budget Reconciliation Act (OBRA) of 1987 (Public Law
No.
100-203) imposed extensive nursing facility reform requirements
on
nursing facilities participating in the Medicaid program. The
reform
requirement relevant to this appeal, section 1919(b)(5)(A) of the
Act,
prohibited nursing facilities from using any individual as a nurse
aide
on or after January 1, 1990 unless the individual had completed
a
training and competency evaluation program, or a competency
evaluation
program (NATCEP). Section 1919(b)(5)(B) also required
nursing
facilities to provide, for any individual used as a nurse aide as
of
July 1, 1989, for a competency evaluation program and such
preparation
as was necessary for the individual to complete such a program
by
January 1, 1990. 1/
As a result of the OBRA '87 NATCEP mandate, states and nursing
facilities
incurred a range of different types of costs. In the case
before us,
the costs at issue are for the salaries of replacement nurse
aides, i.e.,
nurse aides who were hired to provide services in nursing
facilities so that
the facilities' regular nurse aides could participate
in training and testing
programs.
Consideration of how these salaries should be reimbursed involves
three
sections of the Act authorizing reimbursement of state
expenditures:
section 1903(a)(1) which authorizes FFP in amounts expended as
"medical
assistance"; section 1903(a)(2)(B), which authorizes FFP in
amounts
expended for NATCEPs "as found necessary by the Secretary for the
proper
and efficient administration of the State plan" including the "costs
for
nurse aides to complete such competency evaluation programs . . . ";
and
section 1903(a)(7), which authorizes FFP in "the remainder of
the
amounts expended . . . as found necessary by the Secretary for
the
proper and efficient administration of the State plan."
Initially, Georgia claimed reimbursement for these costs as
"amounts
expended for nurse aide training and competency evaluation programs,
and
competency evaluation programs" pursuant to section 1903(a)(2)(B).
HCFA
disallowed Georgia's claim on the grounds that the salaries
of
replacement nurse aides were not a training cost but rather a cost
of
providing services to nursing home residents. HCFA took the
position
that such services costs could be properly claimed only under
section
1903(a)(1), as "medical assistance" pursuant to per diem
rates
established in Georgia's state plan. 2/ Georgia then appealed and
the
Board upheld HCFA's disallowance of Georgia's claims for
reimbursement
under section 1903(a)(2)(B). Georgia Dept. of Medical
Assistance, DAB
No. 1312 (1992).
Subsequently, Georgia reclaimed these costs pursuant to section
1903(a)(7)
as a general administrative expense. That claim is the
subject of this
appeal. Georgia was unable to claim the costs pursuant
to section
1903(a)(1) as medical assistance because its Medicaid state
plan, at the time
the costs were incurred, did not provide for such
costs to be included in
nursing facilities' per diem rates.
2. Federal funding for the NATCEP requirement
Section 1919, enacted by OBRA '87, established a wide range of
nursing
facility reform requirements including the NATCEP standard found
at
section 1919(b)(5). In recognition that such requirements
would
increase nursing facility costs, Congress amended two sections of
the
Act: section 1902(a)(13)(A) and section 1903(a)(2)(B).
Section 1902(a)(13)(A) concerns state plan standards for payment
of
services in facilities such as hospitals, nursing facilities
and
intermediate care facilities for the mentally retarded. It
requires
that such services be reimbursed by the state through the use of
rates
"which the State finds . . . are reasonable and adequate to meet
the
costs which must be incurred by efficiently and economically
operated
facilities . . . ." OBRA '87 amended section 1902(a)(13)(A) to
require
that, in the case of nursing facilities, these rates "take into
account
the costs . . . of complying with subsections 1919(b) (other
than
paragraph (3)(F) thereof), (c), and (d)." (Emphasis added).
In addition to requiring that nursing facility per diem rates take
into
account the costs of complying with the NATCEP requirement,
Congress
enacted section 1903(a)(2)(B) to provide funding for "amounts
expended
for" NATCEPs by states. For a limited period of time,
section
1903(a)(2)(B) expenditures were to be reimbursed at an enhanced
rate,
i.e., the state's federal medical assistance percentage plus
25
percentage points, not to exceed 90 percent. 3/ However,
determining
what constituted a "cost of complying" with the NATCEP
requirement under
section 1902(a)(13)(A) as opposed to an "amount expended"
for NATCEPs
under section 1903(a)(2)(B) was the subject of the
following sequence
of events.
o In March 1989 in HCFA Transmittal 61, HCFA
interpreted
section 1903(a)(2)(B) to be limited to state
administrative
expenditures incurred for nurse aide training
programs. Georgia
Exhibit (Ex.) 11, Docket No. A-91-112.
HCFA advised states that
section 1903(a)(2)(B) did not include the
actual costs of the
training and competency evaluation programs (except
for
competency evaluations in facility-based programs) and
that
states must amend their nursing facility per diem rates
to
reflect such costs. Georgia did not file a plan amendment
in
response to this transmittal and therefore its nursing
facility
per diem rate did not reflect any of the costs of a facility
in
complying with the NATCEP requirement.
o Subsequently, in OBRA '89 (Public Law No. 101-239)
Congress
added language to section 1903(a)(2)(B) to clarify that,
in
addition to state administrative costs, states were entitled
to
claim section 1903(a)(2)(B) reimbursement for "the costs
for
nurse aides to complete such competency evaluation
programs."
(Emphasis added.)
o Following OBRA '89 in May 1990, HCFA issued HCFA
Transmittal
66. Georgia Ex. 8, Docket No. A-91-112. This
revision was
intended "to implement the requirements for NATCEPs as
enacted
by . . . [OBRA '87] and amended by OBRA 1989 . . .
." HCFA
Transmittal 66 recognized that under section
1903(a)(2)(B) state
payments for costs incurred by a nursing facility
"in relation
to training and competency evaluation of nurse aides,
current
and future, will be considered as State administrative
expenses"
and therefore would be eligible for an enhanced rate.
HCFA
Transmittal 66 did not address exactly what types of
costs
would be considered costs incurred by a nursing facility
"in
relation to" NATCEPs.
o In June 1990, the HCFA Regional Office for the
region
encompassing Georgia issued a Transmittal Notice to
State
Medicaid Agencies (Regional Transmittal Notice) clarifying
the
types of nursing facility costs eligible for enhanced
funding
under section 1903(a)(2)(B). Georgia Ex. 7, Docket
No.
A-91-112. Salaries of nurse aides in training and salaries
of
replacement aides were specifically identified as not
eligible
for enhanced funding. States were instructed to include
those
expenses in their approved Medicaid rate-setting
procedures
since they would be reimbursed as part of each
nursing
facility's rate.
Prior to the Regional Transmittal Notice in June 1990, Georgia
assumed
that all costs associated with NATCEPs, including replacement
aide
salaries, were reimbursable under section 1903(a)(2)(B) and that it
did
not need to amend its per diem rates to include such costs. Georgia
Ex.
10, Unnumbered Page 7 (Assurances to State Plan Amendment 90-9),
Docket
No. A-91-112. At the first opportunity after receipt of the
Regional
Transmittal Notice, Georgia amended its state plan to include the
costs
of replacement aides in its nursing facility per diem rate.
Georgia Ex.
6, Docket No. A-91-112. This state plan amendment was
effective July 1,
1990.
ANALYSIS
A. HCFA's refusal to allow Georgia to claim replacement
nurse
aide salaries, which were medical assistance costs, as
general
administrative costs was consistent with the
reimbursement
provisions of the Medicaid program.
In our prior decision concerning these costs, we upheld HCFA's
position
that replacement nurse aide salaries are medical assistance costs
rather
than section 1903(a)(2)(B) costs of competency evaluation
programs. We
determined that the phrase "costs for nurse aides to
complete such
competency evaluation programs" did not include replacement
salaries for
the following reasons:
o The replacement aides were not in training; rather they
were
providing services to nursing facility residents. The
Act
provides for reimbursement of nursing facility services
as
"medical assistance" at the federal medical
assistance
percentage. Section 1903(a)(1). In the case of
nursing
facilities, reimbursement is determined according to the
per
diem rate established in the state plan.
Section
1902(a)(13)(A).
o Under the Act, training expenses or training related
expenses
for employees of facilities are traditionally reimbursed
through
the facilities' reimbursement rates. See New York State
Dept.
of Social Services, DAB No. 1287 (1991). While
Congress
established an exception to that practice in
section
1903(a)(2)(B) by permitting some training costs incurred
by
facilities to be treated as state administrative expenses,
such
an exception should be read narrowly.
o The OBRA '87 amendments to section 1902(a)(13)(A)
plainly
provided that some costs associated with the NATCEP
requirement
are properly reimbursed through the nursing facility per
diem
rate and that state plans should be amended to reflect
such
costs. Therefore, Georgia's reading of the phrase "the
costs
for nurse aides to complete such competency evaluation
programs"
in section 1903(a)(2)(B) was clearly over-broad because it
could
encompass any costs which bear any relationship to
such
programs, no matter how remote, and render
section
1902(a)(13)(A) meaningless.
o Section 1903(a)(2)(B) limits NATCEP costs for which
enhanced
FFP is available to those "found necessary by the Secretary
for
the proper and efficient administration of the State
plan."
Therefore, Georgia could not reasonably rely on its
own
interpretation of section 1903(a)(2)(B) absent some
indication
from HCFA that replacement aide salaries were indeed a
section
1903(a)(2)(B) cost.
Further, we note that when Congress amended section 1903(a)(2)(B)
to
include "the costs for nurse aides to complete such
competency
evaluation programs," it also amended section 1919(f)(2)(A) by
adding a
new subsection (iv)(II). That subsection provides that the
Secretary
should establish requirements which would "prohibit the imposition
on a
nurse aide . . . of any charges (including any charges for textbooks
and
other required course materials and any charges for the
competency
evaluation) for either such program." Thus, Congress
simultaneously
prohibited imposition of any costs on nurse aides for training
or
evaluation and clarified that states were entitled to
enhanced
reimbursement for "the costs for nurse aides to complete such . .
.
programs." The simultaneous enactment of these two provisions
supports
HCFA's construction of the phrase "the costs for nurse aides to
complete
such . . programs" as being limited to the costs of actually
providing
training or evaluation, i.e., the types of costs that, but for
section
1919(f)(2)(A)(iv)(II), might be imposed on nurse aides. The
ancillary
costs of running a facility whose staff is being trained or
evaluated
are not such costs. 4/
Georgia, DAB No. 1312, determined that replacement nurse aide
salaries
were nursing facility services costs. As nursing facility
services
costs, these salaries should ordinarily have been reimbursed
pursuant to
the per diem rate as medical assistance costs under section
1903(a)(1).
This conclusion is the result of the following reimbursement
structure
set forth in the Act:
o Section 1903(a)(1) authorizes Medicaid reimbursement
for
amounts expended as "medical assistance."
o Section 1905(a)(4)(A) defines "medical assistance" to
include
payment for nursing facility services.
o Section 1902(a)(13)(A) requires state plans to provide
for
payment of nursing facility services through the use of
rates
determined in accordance with methods and standards developed
by
the state.
Therefore, the per diem rate established by the state plan determines
the
costs for which the state will reimburse nursing facilities and the
costs for
which HCFA will reimburse the state as "medical assistance"
pursuant to
section 1903(a)(1).
While Georgia, DAB No. 1312, determined that the replacement salaries
were
properly reimbursable pursuant to the per diem rate, it did not
determine
whether Georgia could also properly claim these costs pursuant
to section
1903(a)(7) as general administrative expenses. As explained
below, we
conclude that Georgia cannot claim these costs pursuant to
section
1903(a)(7).
In New York Dept. of Social Services, DAB No. 1146 (1990), we dealt
with
the question of whether facility services costs could be claimed
as
general administrative expenses pursuant to section 1903(a)(7). In
that
case, New York first claimed certain training costs at the enhanced
rate
authorized by section 1903(a)(2)(A) for training skilled
professional
medical personnel. The Board determined that the costs
were not section
1903(a)(2)(A) costs and sustained the disallowance.
New York then
reclaimed the costs as section 1903(a)(7) administrative
costs. The
Board found that, because the costs were incurred for
training related
to service delivery, the costs were medical assistance
costs. As
medical assistance costs, the Board concluded that, absent
some specific
exception to the general rule that medical assistance costs
must be
reflected in the per diem rate, the costs must be claimed pursuant
to
the per diem rate mechanism and could not be claimed as
section
1903(a)(7) administrative costs.
The Board based its decision in New York, DAB No. 1146, on the
fundamental
role per diem rates play in determining what facility
services costs are
allowable under Medicaid. We concluded that HCFA was
reasonable in
insisting that New York adhere to its per diem rate
because consistent use of
rate methodologies to reimburse facilities for
Medicaid services is essential
to ensure the integrity of the entire
reimbursement system and is not a mere
technical requirement. 5/
Rates are not set by simply accumulating a facility's actual costs.
Rather
there are certain limits on rates that a state may pay as well as
ways of
grouping facilities for purposes of setting rates that further
distance the
rate from the facilities' underlying costs. 42 C.F.R. .
447.271 and .
447.272. Thus, the effect on the amount of the per diem
rate for any
particular facility had a given cost been reflected in the
rate calculation
is unclear. Further, if a state pays for the costs
associated with
facility services, outside the rate system, then there
is no way to assure
that any upper limit requirements which apply are
met or to assure that the
amount actually paid for services at a
particular facility is at the
appropriate level. Finally, unless all
medical care costs are
reimbursed through the rate system, a state
cannot compare its costs at
different facilities to determine the most
economical means of providing
Medicaid services. New York, DAB No.
1146, at 9.
Therefore, unless the rate system is utilized, a state cannot meet
its
responsibility to determine whether the rates are "reasonable
and
adequate to meet the costs which must be incurred by efficiently
and
economically operated facilities" under section 1903(a)(13)(A).
Id.
The rationale of New York, DAB No. 1146, applies to this case:
the
replacement salaries were nursing facility services costs;
services
costs, absent a specific exception, are reimbursed through a per
diem
rate pursuant to section 1903(a)(1); use of section 1903(a)(7)
to
reimburse nursing facility services costs would set up a
reimbursement
mechanism outside the per diem rate and undermine the function
of the
per diem rate. 6/
Further, reimbursement through use of a facility's rate allocates
to
Medicaid only the services costs attributable to Medicaid
recipients,
and not those attributable to Medicare or private pay residents
of the
facility. Questions of allocation are particularly relevant
here
because Congress treated allocation of section 1902(a)(13)(A) costs
and
section 1903(a)(2)(B) costs differently. After OBRA '87,
HCFA
instructed states in HCFA Transmittal 61 that Medicaid could not
be
charged for nursing facility expenses associated with NATCEPs which
were
properly charged to Medicare or private pay activity. In OBRA
'89,
Congress altered HCFA's approach and specifically provided that,
until
October 1990, states should not allocate section 1903(a)(2)(B)
NATCEP
costs between Medicare and Medicaid patients but should allocate
them
all to Medicaid. Pub. L. No. 101-239, . 6901(b)(5)(B).
However,
Congress did not address the allocation of the section
1902(a)(13)(A)
NATCEP costs. Consequently, it appears that any NATCEP
costs not
subject to section 1903(a)(2)(B) are still to be allocated
among
Medicaid, Medicare and private pay patients pursuant to the per
diem
rate mechanism.
For the preceding reasons, we conclude that HCFA's refusal to
allow
Georgia to claim replacement nurse aide salaries as
general
administrative costs was reasonable and consistent with
the
reimbursement provisions of the Medicaid program.
B. Georgia's arguments are not persuasive.
Georgia argued that Congress clearly intended HCFA to contribute to
the
costs of nurse aide training and that HCFA's disallowance
was
inconsistent with this congressional mandate.
We conclude that the fact that Congress authorized reimbursement for
nurse
aide training does not compel HCFA to reimburse expenses not
claimed and
accounted for through the rate mechanism described above.
While Congress
clearly intends for HCFA to participate in many types of
Medicaid
reimbursement, a state still must claim reimbursement in
accordance with the
Act and its state plan. Section 1903. Here,
section
1902(a)(13)(A) instructed states to amend their state plans so
that per diem
rates would reflect the costs of complying with section
1919(b)(5).
Georgia did not do so; thus, there is no mechanism
available for Georgia to
receive federal funding in these costs since,
for the reasons set out above,
Georgia cannot claim Medicaid services
costs as administrative expenses under
section 1903(a)(7).
Georgia also cited language in a House Report referring to a
prohibition
on the Secretary from taking any compliance action against
states
concerning the OBRA '87 NATCEP requirements. H.R. Rep. No. 247,
101st
Cong., 1st Sess. 458, reprinted in 1989 U.S. Code Cong. & Admin.
News
2184. The statutory provision containing such a prohibition is
found at
section 4801(a)(1) of Public Law No. 100-508 and provides:
The Secretary of Health and Human Services shall not take
(and
shall not continue) any action against a State under
section
1904 of the [Act] on the basis of the State's failure to
meet
the requirement of section 1919(e)(1)(A) of such Act before
the
effective date of guidelines, issued by the
Secretary,
establishing requirements under section 1919(f)(2)(A) of
such
Act, if the State demonstrates to the satisfaction of
the
Secretary that it has made a good faith effort to meet
such
requirement before such effective date.
Georgia argued that this prohibition meant that HCFA could not sanction
or
penalize any state that was making such a good faith effort to comply
with
section 1919 and therefore HCFA could not impose this disallowance.
Georgia's argument is not persuasive. This prohibition concerns
actions
pursuant to section 1904. Section 1904 deals with compliance
actions,
i.e., actions the Secretary takes when she determines that a
state's
Medicaid plan does not comply with section 1902 or that the
state's
administration of a plan fails to comply substantially with
section
1902. In compliance actions, the Secretary gives the state
prospective
notice that part or all of the future payments that otherwise
would be
made, will not be made to the state until the Secretary is
satisfied
that the state is in compliance.
In this case, however, HCFA is not proceeding pursuant to section
1904.
Rather, under 45 C.F.R. . 201.15 and section 1903(d)(2)(A), HCFA
has
deferred and disallowed specific expenditures claimed by Georgia
for a
discrete period prior to the time Georgia amended its plan to
recognize
these kinds of costs. A disallowance action is a remedy
separate from a
compliance action. New York State Dept. of Social
Services, DAB No.
1246 (1991); New Jersey Dept. of Human Services, DAB No.
259 (1982).
Therefore, the fact that Congress prohibited the Secretary
from
instituting a compliance action is irrelevant to this
disallowance
proceeding.
CONCLUSION
Based on the preceding analysis, we sustain the entire disallowance
of
$999,425.
_________________________
Judith
A. Ballard
_________________________
M.
Terry Johnson
_________________________
Norval
D. (John) Settle
Presiding Board
Member
1. The January 1, 1990 deadline by which nursing
facilities could
use only nurse aides who had completed a NATCEP was extended
to October
1, 1990 by Public Law No. 101-239, . 6901(b)(1). The July 1,
1989 and
January 1, 1990 deadlines by which nursing facilities had to
provide
competency evaluation programs were extended to January 1, 1990
and
October 1, 1990 respectively. Id.
2. "Medical assistance" is defined in section 1905(a)
of the Act as
including nursing facility services. Payments for such
services must be
determined according to methods set out in the Medicaid
state plan. 42
C.F.R. . 447.253(i).
3. The enhanced rate was initially enacted by section
4211(d)(2) of
OBRA '87 for fiscal years 1988 and 1989. Subsequently,
section
6901(b)(5)(A)(ii) of OBRA '89 (Public Law No. 101-239) amended
section
1903(a)(2)(B) by including the enhanced rate in the text of that
section
and extending its applicability to the calendar quarters preceding
July
1, 1990; section 4801(a)(8) of Public Law No. 101-508 further
extended
the applicability of the enhanced rate to the calendar
quarters
preceding October 1, 1990.
4. We note that in the prior Board decision, DAB No.
1312, we found
that Georgia had claimed the enhanced rate of FFP under
section
1903(a)(2)(B) for payments to the facilities for both the salaries
of
the nurse aides employed by the facilities while they were being
trained
or evaluated and replacement nurse aides hired to take the
employees'
place while they were being trained or evaluated, as well as
claiming
FFP in payments made at the per diem rates. This clearly would
be an
unreasonable interpretation of section 1903(a)(2)(B) because
the
facilities would have received duplicate reimbursement.
In the course of this proceeding, Georgia represented that it had
not
claimed or received enhanced funding for the salaries of the nurse
aides
employed by the facilities. If, indeed, DAB No. 1312 incorrectly
found
that Georgia was claiming enhanced funding for both sets of nurse
aides
(and that HCFA had disallowed costs associated with only one
set),
Georgia should have promptly requested reconsideration of DAB No.
1312
as permitted under the Board's rules. 45 C.F.R. . 16.13. Had
Georgia
done so, we would have been faced with a different issue from the
one
presented in this case. Instead, Georgia simply reclaimed the costs
as
section 1903(a)(7) costs. Therefore, this decision addresses
whether
these costs are reimbursable under section 1903(a)(7).
5. A state determines the amount of Medicaid
reimbursement for each
facility by multiplying a per diem rate by the number
of Medicaid
patient-days of service provided at the facility during the
relevant
time period.
6. We note that HCFA relied on New York in its brief
in this case.
In its reply brief, Georgia did not offer any specific
arguments as to
how New York was distinguishable.
Georgia did argue, however, that the Act "linked nurse aide training
costs
to administrative costs." Georgia brief dated December 14, 1992,
at
10. We agree that section 1903(a)(2)(B), which was enacted after
the
period to which New York applied, provided a limited exception to
the
principle applied in New York that training costs of facility staff
are
not state administrative costs. We do not agree, however, that
this
limited exception created a "link" between nurse aide costs
and
administrative costs authorizing reimbursement under section
1903(a)(7)
of the facility-incurred costs of providing Medicaid services,
merely
because those costs have some connection to nurse aide training.