Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: Nebraska Department of Social Services
DATE: February 10, l993
Docket No. 92-166 Decision No. 1389
DECISION
The Nebraska Department of Social Services (Nebraska) appealed
a
disallowance by the Health Care Financing Administration (HCFA)
under
Title XIX (Medicaid) of the Social Security Act (Act). HCFA
disallowed
$607,238 of Nebraska's claim for federal funding for costs
incurred
under its home and community-based services (HCBS) waiver for the
period
July 1, 1989 through June 30, 1990. HCFA concluded that the
costs at
issue represented 10 percent of direct residential staff costs
incurred
in implementing the waiver for this period, and under the terms of
the
waiver must be excluded from Nebraska's claim.
For the reasons explained below, we uphold the disallowance in full.
We
find that this disallowance presents the same basic issue which
was
resolved in Nebraska Department of Social Services, DAB 1354
(1992)
(henceforth cited as Nebraska I). This issue was whether 10
percent of
direct residential staff costs must be excluded from reimbursement
under
the terms of Nebraska's approved HCBS waiver. We found that
Nebraska
could not be reimbursed for these costs since it was bound under
the
terms of the HCBS waiver, which expressly considered 10 percent
of
direct residential staff costs to be non-reimbursable "room and
board"
costs. (The approved waiver at issue here covered the period
ending
June 30, 1990 and is precisely the same waiver considered in
Nebraska
I.) Furthermore, we held that even if Nebraska was not bound
by its
approved waiver request, it had not demonstrated why it would
be
entitled to attribute no residential staff costs to "room and
board"
activities in the assisted living context.
In the case before us now, Nebraska relied upon two arguments, one
of
which had been raised in its prior appeal leading to Nebraska I.
First,
Nebraska argued that its approved waiver had been amended at a
meeting
between officials from HCFA and Nebraska on October 27, 1989 and
that
under this amendment a deduction for room and board costs was no
longer
required. Second, Nebraska contended that even if a deduction
was still
required, the only amount that should be disallowed is the actual
cost
of assisted residential staff attributable to room and board
functions,
which Nebraska alleged was substantially less than the
10-percent
deduction.
ANALYSIS
1. Nebraska was bound by the terms of its approved waiver.
Nebraska argued that it should not be bound by the terms of its
approved
waiver because officials from HCFA and Nebraska had modified the
terms
of the waiver on October 27, 1989. Nebraska argued that
HCFA's
subsequent actions served to confirm that a modification had been
made.
On January 15, 1991 HCFA approved Nebraska's application for a
new
waiver, covering a five year period effective October 1, 1990, and
that
waiver did not contain an express 10-percent deduction for room
and
board costs. 1/ Nebraska argued that HCFA's renewal of the
waiver,
without a demand that Nebraska retain the 10-percent
deduction,
demonstrates that the parties had earlier agreed to disregard
the
deduction. Nebraska contended that this deletion of the room and
board
deduction was a significant revision of the waiver, and that if
HCFA
truly disagreed with the revision, HCFA should have communicated
its
concern to Nebraska. Nebraska alleged that it only discovered
with the
disallowance letter in Nebraska I, coming 17 months after its
claim,
that no agreement had been reached on the room and board
deduction.
Nebraska Reply Br. at 2. 2/
HCFA disputed that it had ever agreed to an modification to the
original
waiver and quoted from the Board's decision in Nebraska I where
the
Board concluded that it was unable to find a definitive and
binding
agreement between the parties to modify the orginal HCBS
waiver. HCFA
asserted that it had not been aware of Nebraska's
elimination of the 10
percent room and board deduction from Appendix J of the
new waiver
request effective October 1, 1990 when it approved that
waiver. HCFA
alleged that this oversight was due to the fact that
Nebraska did not
indicate in the cover letter to the waiver renewal
application that it
had removed the 10 percent deduction requirement, nor did
it explicitly
ask for a change in the reimbursement methodology or for a
change in the
waiver terms requiring the removal of room and board.
HCFA also argued
that, in any event, Nebraska's argument is not relevant to
the
disallowance period at issue. The waiver renewal was approved for
a
five year period beginning October 1, 1990, whereas the
disallowance
period at issue related to costs incurred from July 1, 1989 to
June 30,
1990. 3/ HCFA also contended that Nebraska did not request
HCFA's
approval to change its methodology for determining the waiver rate
until
August 4, 1992. This request, according to HCFA, has not yet
been
approved.
We concluded in Nebraska I that the waiver at issue contained an
express
provision which required a 10-percent deduction in assisted
residential
staff costs because those costs were viewed as non-reimbursable
"room
and board." After fully discussing the circumstances surrounding
the
meeting between officials from HCFA and Nebraska on October 27, 1989,
we
found no definitive and binding modification of this express waiver
term
arising from the meeting. All five HCFA participants denied that
they
had agreed that Nebraska could ignore the deduction. They
further
asserted that they did not review, audit, or approve the
regional
worksheet that Nebraska had supplied at the meeting. See
Nebraska I,
pp. 7-9, and HCFA Exhibits (Exs.) 2-6 submitted in the record for
that
appeal (Board Docket No. 91-75). We noted, moreover, in Nebraska I
that
where the original waiver request and its approval must both be made
in
written form by the appropriate officials, any approved
modification
must also be in writing. There was absolutely no evidence
in the record
of an authorized written approval for a waiver
modification.
Moreover, the disallowance period at issue here only relates to
costs
incurred from July 1, 1989 to June 30, 1990. Since the new
waiver
approved on January 15, 1991 was effective October 1, 1990, it
is
inapplicable to the facts of this case. As HCFA argued, the new
waiver
does not even address specifically how the room and board
reimbursement
prohibition will be implemented through the provider rate
methodology,
and the parties are still negotiating a methodology for setting
the
rate. 4/ In any event, we fail to see how the timing of
the
disallowance in Nebraska I could be viewed as further evidence of
the
existence of a modification. Simply because HCFA issued
its
disallowance 17 months after the claim does not in any way serve
to
confirm Nebraska's position concerning the existence of a
modification.
Accordingly, we conclude here, as we concluded in Nebraska I,
that
Nebraska is bound by the terms of its approved waiver. The
specific
deduction in question was originally proposed by Nebraska and
was
expressly included to implement the statutory and regulatory
prohibition
on reimbursement for room and board in HCBS waivers.
Moreover, Nebraska
failed to substantiate that HCFA ever approved a
modification of the
room and board deduction in the approved waiver.
2. Nebraska's evidence does not support a reduction in
the
disallowance.
Nebraska also argued that even if a deduction was still required, the
only
amount that should be disallowed is the actual cost of assisted
residential
staff services attributable to room and board functions,
which Nebraska
alleged "range[d] from zero (0) to two (2) percent of the
provider's
budget." Nebraska supported this argument with affidavits
from several
regional directors and heads of provider agencies located
in various parts of
Nebraska. While a few of these affiants
acknowledged that a portion of
the assisted residential staffs' duties
included room and board functions,
others alleged that their assisted
residential staff performed no room and
board functions. Nebraska
argued that these estimates indicated that if
a disallowance is
warranted, it should be for an amount less than the
10-percent
disallowance amount.
We reject Nebraska's argument because the primary basis for our
decision
both here and in Nebraska I is that a 10-percent deduction was
required
by the express terms of the waiver. This deduction was
presumably meant
to eliminate the difficult task of differentiating between
"room and
board" and all other aspects of staff services, and then allocating
the
separate costs incurred in every instance. In proposing this
deduction,
Nebraska effectively acknowledged that 10-percent of residential
staff
costs would accurately reflect the amount of non-reimbursable room
and
board services performed by the staff. Nebraska has never
persuasively
substantiated why the waiver provision it proposed should now
be
disregarded. Nor has it argued and substantiated that the duties
and
responsibilities of the residential staff have changed during the
waiver
period.
Furthermore, the affidavits Nebraska provided are highly conclusory,
and
do not include any explanation or supporting analysis as to how
the
affiants derived their estimates of "actual" room and board costs.
It
is even unclear whether these seven affidavits encompass the
entire
universe of Nebraska providers. Moreover, Nebraska did not
attempt to
explain why some providers or regions found it necessary to
provide room
and board services and others did not. If nothing else,
these
affidavits undercut Nebraska'a primary position that
assisted
residential staff never provided room and board services.
Conclusion
On the basis of the foregoing analysis as well as our analysis in
Nebraska
I, we uphold the disallowance in full.
____________________________ M.
Terry
Johnson
_____________________________ Norval
D.
(John) Settle
_____________________________ Donald
F.
Garrett Presiding Board Member
1. The new HCBS waiver, covering the period beginning October 1,
1990,
included a new Appendix J that made no reference to a 10
percent
deduction for room and board costs.
2. In its Reply Brief, Nebraska alleges that it received
notification
of HCFA's disallowance "two fiscal years and 17 months after the
claim
had been submitted . . . ." State Reply Br. at 2. (emphasis
added).
Since the time span Nebraska is referring to ran from November 22,
1989
to April 26, 1991, we assume that Nebraska meant part of two
fiscal
years or 17 months.
3. Nebraska neglected to make this particular argument in Nebraska
I
even though HCFA approved the new waiver well before it issued
the
disallowance in that case on April 26, 1991.
4. Whether or not the new methodology contains a 10-percent
deduction
identical to the one considered here, it must still conform with
the
statutory and regulatory provisions barring reimbursement for room
and