Florida Agency for Health Care Administration, DAB No. 3031 (2021)

DECISION

The Florida Agency for Health Care Administration (Florida or State), which operates Florida's Medicaid program, challenges a January 19, 2017 determination by the Centers for Medicare & Medicaid Services (CMS) to disallow over $97 million in federal financial participation (FFP), or the federal share of payments Florida made to hospitals under Florida's Medicaid reform waiver demonstration project pursuant to section 1115 of the Social Security Act (Act), to help defray the hospitals' uncompensated costs of providing care to low-income individuals in Florida.  The challenged disallowance amount concerns payments alleged to have been made to the hospitals in excess of cost limits set in accordance with the waiver terms during demonstration years 1-7 (July 2006-June 2013).1

At the center of the parties' dispute is the issue of whether the hospitals were required to offset all payments received from Medicare or other payers (such as private insurance sources) on behalf of Florida Medicaid patients against costs to be reimbursed in accordance with the waiver terms.  Florida denies that the hospitals were required to do so.  Florida's position is based in part on federal court decisions and other developments concerning the calculation of FFP for disproportionate share hospital (DSH) payments without offsetting for certain payments.  By drawing an analogy between the calculation of DSH payments and the calculation of cost limits under the waiver, Florida asserts that the payment offsets were not required.  CMS, in contrast, takes the position that cost reconciliation procedures to which Florida and CMS have agreed under the waiver required offsetting of all payments that amounted to revenue to the hospitals related to otherwise-uncompensated care costs, including those omitted by Florida.  We explain

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below why we determine that Florida's position has no legal support.  We uphold the disallowance of $97,570,183 in full.

Background

Overview of the Medicaid program

The Medicaid program, established under title XIX of the Act, is jointly funded by the federal government and states to provide medical assistance (that is, health insurance benefits) to financially needy and disabled persons.  Act §§ 1902(a)(10)(A), 1902(e)-(f); 42 C.F.R. Parts 430, 435, 436.  Each state that chooses to participate administers its own Medicaid program under broad federal requirements and the terms of its "plan for medical assistance" (commonly referred to as the "state plan"), which must be approved by CMS on behalf of the Secretary of Health and Human Services.  Act § 1902; 42 C.F.R. Part 430, subpart B.  Once the state plan is approved, a state becomes entitled to receive FFP for a percentage of its program-related expenditures.  Act § 1903(a).  Thus, Medicaid is "a partnership between the federal government and individual states" in which each shares in the cost of the program pursuant to formulae established in the Medicaid statute and regulations.  Ga. Dep't of Cmty. Health, DAB No. 1973, at 1 (2005).

In addition to authorizing federal reimbursement to states for medical assistance provided to eligible Medicaid recipients for inpatient hospital services, the federal Medicaid statute provides for state Medicaid programs to make supplemental payments to hospitals that serve disproportionately high numbers of low-income patients.  Act §§ 1902(a)(13)(A)(iv), 1923(a)(1)(B).  Such DSH payments supplement Medicaid rates, serve to offset a hospital's uncompensated costs of caring for the low-income population, and ensure that Medicaid recipients will continue to have access to care.  See id. § 1923(a)-(c).  The federal government reimburses (or provides FFP to) a state for a share of its allowable DSH payments.  Id. § 1903(a); 45 C.F.R. § 95.4 (defining "federal financial participation").  Federal reimbursement of DSH payments is subject to an annual, state-specific cap known as the "DSH allotment," and other restrictions.  Act § 1923(f).

Overview of Florida's section 1115 waiver demonstration project

The Secretary of Health and Human Services, acting through CMS, has authority to waive compliance with certain statutory requirements applicable to the Medicaid program and approve experimental, pilot or demonstration projects that promote Medicaid program objectives.  See Act § 1115.  A section 1115(a) waiver demonstration project "may, for example, expand coverage to individuals not eligible for Medicaid, provide services typically not covered by Medicaid, or use innovative service delivery systems to improve care, increase efficiency, or reduce costs."  N.J. Dep't of Human Servs., DAB

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No. 2780, at 3 (2017).  "CMS approves each section 1115(a) demonstration project subject to specific terms and conditions."  Id.

Florida proposed a section 1115 waiver demonstration project designed to improve coverage and quality of care provided to Florida's Medicaid beneficiaries through a change in the structure of its Medicaid program from a fee-for-service model to a managed-care model.  In 2005, CMS approved Florida's plan to launch the project beginning in 2006.  In 2011, CMS extended the project through June 30, 2014.  FL Exs. 1, 2; FL Ex. 48 (A-17-65).

Florida states that, prior to the implementation of the demonstration project, it paid annual supplemental payments (which represented the difference between standard Medicaid payment rates and what Medicare would pay, in the aggregate, for specific classes of providers for comparable services) under the Upper Payment Limit program to reimburse uncompensated costs of certain types of care provided to Medicaid beneficiaries, underinsured patients, and uninsured patients.  FL Br. (A-17-65) at 2.  Florida recognized that Upper Payment Limit funding is not available under a capitation model.  Id. (citing 42 C.F.R. § 438.60).  According to Florida, the waiver included a Low Income Pool (LIP) (with funding capped at $1 billion annually, as discussed in more detail below) to replace the Upper Payment Limit payments and both increase the total funding available for uncompensated costs of providing care to low-income individuals and expand the types of providers eligible to receive such funding.  Id. at 2-3.  Low-income individuals included the uninsured and the underinsured, and those participating in Medicaid for whom Medicaid payments did not fully cover the costs of care provided to those individuals.

The waiver is governed by agreements between CMS and Florida called "Special Terms and Conditions" (STCs), "which set forth in detail the nature, character, and extent of Federal involvement in the [waiver] and [Florida's] obligations to CMS during the life of the [waiver]."  FL Ex. 1, at 1; FL Ex. 2, at 1.2   The STCs in turn refer to a separate document titled "Reimbursement and Funding Methodology."3   FL Ex. 1, at 24; FL Ex. 2, at 17.  The RFMD sets out specific provisions concerning the LIP, including which expenditures may be reimbursed from the LIP and what limits apply to LIP payments to a provider ("LIP Cost Limit").  These provisions form the main subjects of the parties' dispute in this appeal.

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The waiver also included a LIP payment "reconciliation" process, which required Florida to verify the amount of LIP payments made to a provider for the fiscal period being reconciled, and then to compare that payment total to the provider's LIP Cost Limit for that period.  FL Ex. 4, at 21-22.  If the provider's LIP payments for the fiscal period exceeded its LIP Cost Limit, the provider was required to return the excess payment to Florida.  Florida was then required to refund the federal share of that payment to CMS.  Id.at 14-15, 18, 21; see also FL Ex. 5, at 4.

The disallowance determinations

Following a review of Florida's LIP payment reconciliation schedules, CMS determined that Florida had made LIP payments that exceeded the providers' LIP Cost Limits in each demonstration year from year 1 through year 8.  Accordingly, by initial determination dated September 28, 2016, CMS disallowed $146,113,363 in FFP related to LIP expenditures allegedly made in excess of the allowable limits.  On reconsideration, by determination dated January 19, 2017, CMS reduced some of the disallowed amounts from demonstration years 5 and 8, resulting in a revised disallowance of $97,570,183, which represents the aggregate of the remaining disallowed amounts from each of the first seven demonstration years.  In the January 19, 2017 determination, CMS alleged, again, that the LIP payments exceeded permissible cost limits.

Florida timely appealed the January 19, 2017 determination disallowing $97,570,183, in accordance with section 1116(e)(2) of the Act.  The parties filed briefs in accordance with the briefing schedule set by the Board and the applicable regulations in 45 C.F.R. Part 16.  Also, the Safety Net Hospital Alliance of Florida (Alliance), a statewide organization of member hospital systems that collectively function as the primary "safety net" provider of hospital services to low-income Floridians,4 sought to file briefs in appeals A-17-64 and A-17-65.  The Board determined that the Alliance "has a clearly identifiable and substantial interest in the outcome" of the dispute between Florida and CMS and that the Alliance's participation in these appeals would be helpful to the Board's resolution of the appeals.  Accordingly, the Board permitted the Alliance to file briefs as an intervenor.  June 13, 2018 Ruling Granting Request to Submit Amicus Brief (quoting 45 C.F.R. § 16.16(b)).

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Standard of review

The Board is authorized to review specified "final written decisions," including "disallowances" under title XIX of the Act (Medicaid).  45 C.F.R. Part 16, App. A, ¶ B(a)(1).  The Board must sustain a disallowance "if it is supported by the evidence submitted and is consistent with the applicable statutes and regulations."  W. Va. Dep't of Health & Human Res., DAB No. 2185, at 20 (2008) (citing 45 C.F.R. §§ 16.14, 16.21).  In decisions reviewing disputed disallowances, the Board "has consistently held that a state has the burden to document the allowability and allocability of its claims for FFP" once CMS has set out a lawful basis for its action.  N.J. Dep't of Human Servs., DAB No. 2328, at 4-5 (2010).

Discussion

Below, in section I, we set out the LIP payment provisions that are at the center of the dispute.

In section II.A, we set out the parties' arguments before we next explain, in sections II.B, II.C, and II.D why we reject Florida's arguments on the basis of the disallowance.  We find unpersuasive Florida's contention that federal court decisions and other developments concerning the calculation of FFP for DSH payments should inform our determination about whether, under the waiver, the hospitals were required to offset all payments received from Medicare or other payers on behalf of Medicaid patients against costs to be reimbursed.  We reject Florida's argument that the hospitals were not required to do so because the argument has no legal support.  We explain why we agree with CMS that the DSH statute, the regulations, and related CMS guidance and court decisions do not govern a determination of whether CMS properly disallowed the LIP payments in accordance with the waiver terms.  We determine that the waiver required Florida to offset, in determining uncompensated costs, reimbursement received from all sources on behalf of Medicaid patients, not only Medicaid payments made by the state on their behalf.  We therefore decline to remand this case to CMS for recalculation of the hospitals' LIP Cost Limits based on Florida's argument in reliance on inapplicable DSH authorities and related developments, as Florida urges us to do.

In section III, we explain why we decline to allow the alternative relief Florida seeks – reduction of the disallowance amount to eliminate altogether the LIP payment overage attributable to Jackson Memorial Hospital based on its asserted affiliation with the University of Miami Health System, whose hospitals Florida says were paid well under their LIP Cost Limits for demonstration years and 6 and 7.  FL Br. at 18.

We conclude that CMS properly disallowed $97,570,183 and uphold this disallowance in full.

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I.     Low Income Pool payment provisions and LIP Cost Limit

LIP payments may be used for "permissible expenditures" for services (including inpatient and outpatient hospital services) provided to Medicaid patients, the "uninsured," and the "underinsured."  FL Ex. 1, at 24-25 (STCs 91, 93, 94); FL Ex. 2, at 16-18 (STCs 51, 53 and 54).  "LIP permissible expenditures" – the uncompensated medical care costs for which LIP payments may be made – are further defined in the "Reimbursement and Funding Methodology, Florida Medicaid Reform Section 1115 Waiver, Low Income Pool" (FL Ex. 4, the RFMD mentioned earlier).5   See FL Ex. 1, at 24 (STC 93), 25 (STC 97), and 26 (STC 100.a.); FL Ex. 2, at 17 (STC 53), 19 (STC 57); FL Ex. 4, at 6-7.  "Uninsured" are "[p]ersons with no source of third party coverage"; "[u]nderinsured" are similarly defined as "[p]ersons with no source of third party coverage for services provided."  FL Ex. 4, at 6; see also FL Ex. 5 ("Amended Special Term and Condition 105, Reconciliation draft Review Tool and Written Procedures for Reconciliation of LIP Expenditures to Allowable Provider Costs"), at 5 ("Uninsured/Underinsured" are "[p]ersons with no source of third party coverage for the services provided.").

The overarching requirement of LIP permissible hospital expenditures is that no LIP payments will be made "in excess of cost."  STCs 97 and 57 state as follows:

Hospital cost expenditures from the LIP will be paid at cost and will be further defined in the [RFMD] utilizing methodologies from the CMS-2552 cost report plus mutually agreed upon additional costs.  The State agrees that it shall not receive FFP for Medicaid and LIP payments to hospitals in excess of cost.

FL Ex. 1, at 25 (STC 97) (emphasis added); FL Ex. 2, at 19 (STC 57); see also FL Ex. 1, at 25 (STC 94) and FL Ex. 2, at 18 (STC 54) (setting out a definition of "Low Income Pool Permissible Expenditures," which we will discuss in more detail later).

The RFMD broadly defines "LIP Cost Limit" as follows:

The LIP Cost limit calculation is the total allowable expenditures less any reimbursement from Medicaid, the underinsured, or the uninsured.  The reimbursement includes Medicaid claims payment for services rendered to Medicaid recipients to each provider and for hospitals, DSH payments.  Payments on behalf of the underinsured and uninsured are already included

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in the cost limit.  The remaining amount is the Medicaid, underinsured and uninsured shortfall.

FL Ex. 4, at 21; see also id.at 3, 20, 21.  LIP payments are subject to an annual, provider-specific LIP Cost Limit, which represents the maximum amount of "uncompensated" health care costs for which the provider may receive LIP payments in the fiscal year for which the limit is calculated.  FL Ex. 19 (A-17-65), at 21.  Therefore, in accordance with the RFMD, the LIP Cost Limit is the sum of the "Medicaid shortfall"6 and the "uninsured and underinsured shortfall."  See FL Ex. 4, at 14 (describing the LIP Cost Limit as the "total cost of the allowed uninsured and Medicaid shortfall costs").

The RFMD (FL Ex. 4) § IV.A includes instructions for calculating a hospital's LIP Cost Limit, which provide that total allowable hospital "expenditures" (or costs) are equal to the sum of –

"Medicaid FFS [fee-for-service] costs" (allowable "routine," "ancillary," and "organ acquisition" costs as determined using the hospital's Medicare cost report and auditable hospital records) (see FL Ex. 4, at 7-9) AND

"Medicaid managed care costs" (allowable "routine," "ancillary," and "organ acquisition" costs as determined using the hospital's Medicare cost report and auditable hospital records) (see FL Ex. 4, at 9-10) AND

"Uninsured costs" (allowable "routine," "ancillary," and "organ acquisition" costs associated with "uninsured" patients) (see FL Ex. 4, at 11-13) AND

"Hospital Provider Additional Medicaid Costs" (see FL Ex. 4, at 13)

minus

"Hospital Payments and Recoveries," as defined in RFMD § IV.A.5 (see FL Ex. 4, at 14).

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RFMD § IV.A.5, "Hospital Payments and Recoveries," states that the "costs computed in [the] Sections" above – clearly referring to Medicaid FFS costs, Medicaid managed care costs, "additional Medicaid costs," and uninsured costs – shall be offset against "payments and recoveries" from "all" of the following:

Managed Care Organizations (MCO); Behavioral Health Organization's (BHOs); the Medicaid enrollees and the uninsured; supplemental payments; the amount of GME [graduate medical education] funds received that exceeded the hospital's Medicaid GME expenditures; any DSH payments received; and other sources including any related patient copayments, or payments from other non-State payers.

FL Ex. 4, at 14 (emphasis added).

In 2010, Florida submitted to CMS "Amended Special Terms and Conditions 105, Reconciliation draft Review Tool and Written Procedures for Reconciliation of LIP Expenditures to Allowable Provider Costs" (Reconciliation Procedures).7   FL Ex. 5.  Florida submitted the Reconciliation Procedures to implement an amendment to STC 105, which in part called for "retroactive adjustment and reconciliation of all previous waiver Demonstration Year cost limit calculations."  Id. at 1.  The Reconciliation Procedures include step-by-step instructions for calculating a hospital's LIP Cost Limit.  Id. at 5-20.  Like RFMD § IV.A, the Reconciliation Procedures require that a hospital's LIP Cost Limit reflect the sum of allowable routine and ancillary Medicaid FFS and Managed Care costs (FL Ex. 5, at 7-11), Medicaid's share of organ acquisition costs (id. at 8, 11-12), "additional Medicaid costs" (id. at 15-17), and allowable costs of services furnished to uninsured or underinsured persons (id. at 5, 12) – minus "payments and recoveries" (id. at 17).  Table 8 in the Reconciliation Procedures specifies eight general categories of offsetting "hospital payments and recoveries" (or "Revenues").  Id. at 17-18.  They include "Medicaid reimbursements" (Medicaid FFS payments), payments received from Medicaid managed care organizations, payments from the uninsured, DSH payments received, and "any payments" from "[o]ther sources including any related patient co-payments, or payments from other non-State payers."  Id. at 18.  The procedures state that "all payments received to help cover uncompensated care cost not included" in the first seven revenue categories "should be captured" on the line designated for "any payments" from "other sources" (line 8).  Id. at 17.

With this detailed survey of the governing provisions, we turn next to the parties' opposing views on whether these authorities support CMS's position.

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II.     CMS properly disallowed the LIP payments

A.     The parties' arguments

Florida does not deny that the LIP payment reconciliations it submitted for demonstration years 1-7 show LIP overpayments of over $97 million.  Florida also does not dispute that CMS may lawfully disallow FFP for LIP payments that exceeded LIP Cost Limits.  Florida moreover does not disagree that the waiver terms govern a determination of whether Florida exceeded applicable cost limits.

Florida nevertheless urges the Board to remand this appeal to CMS for recalculation of the disallowed amount.  Florida argues that various legal developments relating to different provisions on payments to DSH hospitals ought to be carried over to change how LIP Cost Limits are calculated.  Certain federal court decisions suggest that a DSH hospital need not account for payments received from Medicare or other third-party (non-Medicaid) payers on behalf of Medicaid-eligible patients in computing its DSH payment limit under section 1923(g) of the Act.  Florida maintains that recalculating uncompensated costs for LIP Cost Limit purposes should follow the same methodology as the computation of the DSH payment limit under the court decisions.  FL Br. at 6.  Florida argues that LIP payments and DSH payments share a common goal – to provide "compensation for uncompensated costs incurred" by hospitals to deliver health care services to the Medicaid, underinsured, and uninsured populations – and, moreover, the LIP payment structure is similar to, and modeled after, the DSH payment structure.  Id.  Florida also asserts that it is "apparent" that both the original and extension STCs "are modeled after the definition of uncompensated costs in the DSH context."  Id. at 11-12 (citing FL Ex. 1 (STC 94) and FL Ex. 2 (STC 54)).  The STCs, says Florida, contemplate that a Medicaid shortfall is derived when Medicaid costs are deducted from Medicaid payments, which do not include payments received from Medicare or private insurers on behalf of Medicaid patients with dual coverage.  Id.at 12.  Florida contends the LIP Cost Limits should be recalculated without offsetting for Medicare and other third-party payments to be consistent with court determinations that DSH uncompensated costs exclude such payments.  Id. at 14.

Florida states that section 1923(g) of the Act and 42 C.F.R. § 447.299(c)(16) (containing a formula for calculating the hospital-specific cap for DSH payments) required states "to subtract only Title XIX [Medicaid] revenue and revenues associated with services provided to the uninsured."  Id. at 8.  Florida thus contends that states were not required "to deduct third-party payments for services provided to Medicaid enrollees who also had Medicare or private insurance coverage."  Id.  CMS, however, did not agree with this interpretation and, in January 2010, issued guidance explaining its view of the DSH requirements.  In "Additional Information on the Disproportionate Share Hospital (DSH) Reporting and Audit Requirements," CMS provided answers to frequently asked questions (DSH FAQs) and instructions for hospitals in determining their DSH payment

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limits under section 1923(g).  FL Ex. 3.  This guidance document, says Florida, directed hospitals and auditors to deduct, or offset, third-party revenues in determining uncompensated costs.8   FL Br. at 8.  According to Florida, the DSH FAQs were contrary to the practice many states and hospitals had followed in calculating their uncompensated costs, leading to lawsuits by hospitals that had been determined to have received DSH overpayments (under calculations consistent with 42 C.F.R. § 447.299(c) promulgated in 2008) to stop the application of the DSH FAQs.  Id. at 7-8 (citing 73 Fed. Reg. 77,904 (Dec. 19, 2008)).

Florida now points to a number of later court decisions that rejected CMS's position that third-party payments had to be treated as revenue in computing disproportionate share hospitals' net costs.  Id. at 8-9 (citing cases).  The courts agreed with the hospitals that the

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DSH FAQs guidance exceeded statutory and regulatory requirements, and CMS therefore could not implement the guidance instructions without undergoing notice-and-comment procedures consistent with the Administrative Procedure Act.  Id.  While these cases were being litigated, CMS published a proposed rule (81 Fed. Reg. 53,980 (Aug. 15, 2016)), made final effective June 2, 2017, that amended section 447.299 to state that "costs incurred . . . [a]re defined as costs net of third-party payments, including, but not limited to, payments by Medicare and private insurance."  Id. at 9 (quoting 82 Fed. Reg. 16,114, 16,118 (Apr. 3, 2017)).  Some courts reviewing the 2017 regulation determined that it, like the DSH FAQs guidance, is substantively inconsistent with section 1923(g), i.e., that complying with the Administrative Procedure Act did not cure what the courts viewed as incorrect statutory construction.  Id. at 9-11 (citing Mo. Hosp. Ass'n v. Hargan, 2018 WL 814589 (W.D. Mo. 2018) and Children's Hosp. Ass'n of Tex., 2018 WL 1178024 (D.D.C. 2018)9 ).

In a bulletin issued on December 31, 2018, CMS withdrew its guidance in DSH FAQs 33 and 34.10   Thereafter, on August 13, 2019, the United States Court of Appeals for the District of Columbia Circuit reversed the district court's decision in Children's Hospital Association of Texas v. Azar, 300 F. Supp. 3d 190 (D.D.C. 2018).  The D.C. Circuit held that the DSH payment limits established by the 2017 revision of section 447.299 are not inconsistent with the Medicaid statute, so that computation of DSH payment limits should include payments from third parties, including Medicare and private insurers.  The court rejected the hospitals' argument that the regulation exceeded authority under the Medicaid statute and was arbitrary and capricious.  Children's Hosp. Ass'n of Texas v. Azar, 933 F.3d 764 (D.C. Cir. 2019), cert. denied, 141 S. Ct. 235 (2020) (Mem).  On November 4, 2019, the United States Court of Appeals for the Eighth Circuit reversed the district court's 2018 decision in Missouri Hospital Association v. Hargan.  Mo. Hosp. Ass'n v. Azar, 941 F.3d 896 (8th Cir. 2019).

As noted, this entire line of authority deals with DSH payment limits, not with the LIP Cost Limits under Florida's waiver, which is the issue in the present case.  Florida submits that the interpretation of the DSH payment limit computation is nevertheless germane to the interpretation of the waiver terms here, because of the similarity in wording and purpose of the statutory DSH provisions and the LIP payments.  FL Br. at 5-6; Reply Br. at 1.  Accordingly, Florida submits that the meaning of "uncompensated

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costs" under the waiver and DSH payment structure "should be synchronized . . . by taking into account the recent court decisions that have uniformly rejected CMS's methodology for calculating uncompensated cost amounts under DSH."11   FL Br. at 6.  Florida asks us to remand this case to CMS to recalculate the LIP Cost Limits to "remove any offsets of Medicare and private insurance revenues."  Id. at 14.12

CMS, in contrast, asserts that "[t]his case does not involve statutory or regulatory construction"; that section 1115 of the Act which authorized the waiver project "does not address the issue in this case"; that the calculation of the LIP Cost Limits and reconciliations are governed by the STCs and RFMD as agreed to by CMS and Florida, not by statutes or regulations; and that the issue for the Board's resolution is whether CMS and Florida entered into the waiver agreement "with the understanding that Medicaid costs available for LIP payments would not be 'offset' by third party payments that covered these costs."  CMS Response Br. at 7-8.

CMS further contends that the RFMD requires that the allowable hospital costs included in the LIP Cost Limit must be "offset" by "payments from . . . non-State payers."  Id. at 3.  CMS asserts that "Medicare and private insurance payments made on behalf of 'dual eligible beneficiaries' are 'payments from non-State payers.'"  Id. at 5.  Moreover, CMS argues that the phrase "payments . . . from non-State payers" cannot "credibl[y]" be interpreted to exclude payments from Medicare or private health insurers.  Id. at 12.  CMS submits that including such payments (meaning deducting them) in the LIP Cost Limit calculation "makes sense" because the "LIP was designed to help defray a hospital's costs for treating the uninsured, underinsured and Medicaid patients where hospital revenue received by or on behalf of these individuals was less than [the] cost of providing medical care."  Id. at 3, 6 (citing STCs 94 and 54).  CMS emphasizes that LIP payments are intended to cover "uncompensated" costs, not to "provide additional payment for costs covered by Medicare and/or private insurance," and that "[i]t is illogical for CMS to provide FFP for LIP payments for costs that are already covered by a different program."  Id.at 6-8, 9-10, 13 ("Payments from Medicare and private insurance companies are in fact 'compensation' to the hospitals and should be treated as such.").

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Finally, CMS contends that, "[a]t the time that the STCs and RFMD were drafted (between 2006 and 2011), both CMS and Florida believed that the offsets for these third party payments were appropriate."  Id. at 8.

B.     The DSH statute, regulations, and related CMS guidance and court decisions do not govern a determination of whether CMS properly disallowed the LIP payments in accordance with the waiver terms.

As the preceding discussion explains, the parties' dispute centers on how the LIP Cost Limit should be calculated.  We do not find Florida's contention that the LIP Cost Limit should be recalculated without offsetting for Medicare payments and any private insurance payments made to providers for Medicaid patients who are also covered by Medicare or have other health insurance coverage to be persuasive.

The LIP payments and DSH payments do share a common purpose – to provide supplemental funding to hospitals that provide care to low-income individuals – and to some extent are similar in how their payments are computed.  Nevertheless, they stem from different authorities (CMS section 1115 waiver authority versus statutory DSH program authority) and are defined in different language used in different provisions.  We do not find the account of litigation around interpreting the scope of the statutory and regulatory DSH provisions helpful here.

The validity of this disallowance determination does not turn on the language of the Medicaid statute defining DSH payments.  This appeal does not involve the disallowance of FFP for DSH payments or the calculation of the hospital-specific limit on DSH payments.  The LIP payments are instead a feature of the waiver demonstration project authorized under section 1115 of the Act.  The LIP payment provisions are a product of an agreement between CMS and Florida on the terms (as drafted by Florida and approved by CMS) that would govern the waiver project.  Those terms included provisions concerning permissible LIP expenditures and computation of the LIP Cost Limit, and they do not refer to the DSH statute or implementing DSH regulations, or the hospital-specific DSH payment limit.  They do not indicate that the computation of the LIP Cost Limit is to be consistent with or synchronized with computation of the hospital-specific DSH payment limit.  We therefore do not consider the district court decisions cited by Florida and the Alliance to be authoritative in this dispute in which we must interpret the waiver terms rather than statutory or regulatory DSH provisions.

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Accordingly, the question before the Board is whether the waiver terms to which CMS and Florida agreed permit Florida to calculate the LIP Cost Limit without accounting for Medicare and other third-party (non-Medicaid) insurance payments.13   We have reviewed the waiver terms bearing in mind that the Board has long stated that a state is, in general, bound by the terms of a waiver to which it has agreed.  See Fla. Dep't of Health & Rehab. Servs., DAB No. 1100, at 11 (1989); Mass. Div. of Medical Assistance, DAB No. 1678, at 6 (1999); see also Neb. Dep't of Soc. Servs., DAB No. 1389, at 4 (1993) (where the federal agency had not approved changes in methodology for determining waiver rate, the state was "bound by the terms of its approved waiver"); N.M. Children, Youth & Families Dep't, DAB No. 2100, at 18 (2007) ("explicit agreement" between the federal agency and the state "in the waiver terms and conditions set the term of the project as the period over which cost neutrality was to be measured").

C.     The waiver terms applicable during demonstration years 1-7, as set out in the STCs and RFMD, do not permit hospitals to calculate their LIP Cost Limits without accounting for Medicare and other third-party insurance payments.

As noted, CMS and Florida agreed that the waiver would be governed by "Special Terms and Conditions," or STCs.  The STCs in turn refer to a separate document, the RFMD.  The RFMD sets out provisions concerning the LIP, including provisions about the expenditures that may be reimbursed from the LIP and limits on LIP payments.  In this subsection, we examine the language in the STCs and the RFMD.

In reviewing the terms of the waiver, we are conscious of the nature and purpose of the LIP payment provisions.  The LIP funds, as Florida acknowledges, are supplemental funds intended to defray the uncompensated costs incurred by hospitals that provide care to those who are uninsured or underinsured, and to Medicaid patients.  FL Br. at 6; FL Br. (A-17-65) at 2.  The word "uncompensated" appears in a number of STCs that discuss the purpose of the Low Income Pool or describe permissible LIP expenditures.  See, e.g., FL Ex. 1, at 25 (STC 94); FL Ex. 2, at 2, 16-17 (STC 51).  The purpose is to pay for medical care costs for which compensation is not available.  See FL Ex. 1, at 24 (STC 91), 25 (STCs 94, 97); FL Ex. 2, at 2, 16-17 (STC 51), 18 (STC 54).  A plain, reasonable reading of the word "uncompensated," in context, would be that "uncompensated" refers to costs that exceed the reimbursements or revenue the hospitals

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take in from all funding sources to deliver care to individuals intended to benefit from the LIP funds.  This overarching purpose must inform the significance of the specific provisions on how to determine the cost limits.

We begin by examining the waiver provision describing how the LIP Cost Limit is calculated.  The RFMD states as follows:

The LIP Cost Limit calculation is the total allowable expenditures less any reimbursement from Medicaid, the underinsured, or the uninsured.  The reimbursement includes Medicaid claims payment for services rendered to Medicaid recipients to each provider and for hospitals, DSH payments.  Payments on behalf of the underinsured and uninsured are already included in the cost limit.  The remaining amount is the Medicaid, underinsured and uninsured shortfall.  This amount, referred to as the LIP Cost Limit, is the maximum amount a provider is eligible to receive in a LIP distribution.

FL Ex. 4, at 21.  This discussion makes clear that all Medicaid payments are to be included in the reimbursements, that is, revenues, and that all reimbursements on behalf of the underinsured or uninsured are included too, but does not explicitly address what is to be done about third-party reimbursement for Medicaid recipients.  It would be incongruous, however, to assume that a service paid for by Medicare and/or private insurance would be in any sense an "uncompensated" cost simply because the individual on whose behalf it was paid was a dually-eligible Medicaid recipient rather than, say, an underinsured patient.

The RFMD provides more detail supporting this understanding.  It states that hospital expenditures or costs computed in accordance with RFMD section IV.A.5 are to be offset by "all" of the following "payments and recoveries":

Managed Care Organizations (MCO); Behavioral Health Organization's (BHOs); the Medicaid enrollees and the uninsured; supplemental payments; the amount of GME [graduate medical education] funds received that exceeded the hospital's Medicaid GME expenditures; any DSH payments received; and other sources including any related patient copayments, or payments from other non-State payers.

FL Ex. 4, at 14 (emphasis added).  The plain language of the RFMD – which Florida states "has remained the same in later iterations of the RFMD and was in effect during all time periods applicable to the disallowance" (FL Br. at 12) – thus contemplates that all recoveries or payments (that is, reimbursements or revenue) derived from providing care to patients benefitting from the LIP payment scheme are to be considered.

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Neither party offers extrinsic evidence of what the parties understood the words "other sources" or "payments from other non-State payers" to mean in the context of when they developed, submitted, or approved the RFMD and the Reconciliation Procedures.  Florida submits that "[t]he reference to 'payments from other non-State payers' in the RFMD is not explained" in the waiver documents.  Id.; FL Ex. 4, at 14.  Florida, however, maintains that this language should not be construed to include third-party insurance payments for Medicaid patients with other sources of coverage because the phrase does not reference Medicare or private insurance, and that to construe the phrase as including third-party payments with respect to Medicaid costs (as opposed to uninsured costs) would be inconsistent with the STCs, which state that Medicaid costs are to be net only of title XIX payments.  FL Br. at 12.  Florida urges us to read the reference to payments from "non-State payers" in a limited way, as referring to non-State payments with respect to uninsured patients (from a tort recovery or charity, for example), asserting that such a reading is "consistent with the fact that DSH payments and LIP payments have a parallel purpose to support providers serving Medicaid and the uninsured when Medicaid payments (and payments from uninsured patients) are not adequate to cover the costs of doing so."  Id. at 12-13.

We reject Florida's strained reading of the RFMD language in Florida's exhibit 4, page 14.  Nothing in the wording remotely indicates that only a limited subset of non-state sources such as tortfeasors was contemplated.  We take a direct, common-sense approach to interpret the meaning of that language, which Florida itself drafted and to which Florida and CMS have agreed.  Medicare payments and any private insurance payments made on behalf of patients who have Medicare and Medicaid coverage plainly constitute payments from "other sources."  Any payment from the Medicare program – a federal funding source – plainly would be payment from a "non-State" payer.  Any payment made by a private insurance carrier likewise would be payment from a "non-State" payer.

Florida could have negotiated limiting "payments from other non-State payers," as it now seeks to do, to payments on behalf of uninsured or underinsured patients such as a tort recovery.  The parties agreed on language that has no such express limitation.  The word "non-State" in referring to payment sources, unless otherwise qualified or specifically defined in the waiver documents (which it is not), is most reasonably understood as inclusive of all payments from a federal source (Medicare) and private health insurance payment sources regardless of the status of the patient on whose behalf they are made.

Moreover, Florida's narrow focus on the words "non-State payers" in the RFMD, FL Ex. 4, at 14, appears to disregard words that immediately precede them.  The RFMD states that LIP costs are to be offset by payments and recoveries from "other sources including any related patient copayments, or payments from other non-State payers."  Id. (emphasis added).  The reference to "other sources" is very broad and inclusive, and, in context, is most reasonably understood to mean that payments from "non-State payers" are considered to fall within the larger group of all payment sources not previously identified

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or specified.  Payments from non-State payers is not a limitation on the possible sources in this language, but one of the examples of the breadth of potential sources.  This supports a reading requiring all payments covering patient care costs, including those from any "non-State" source, such as Medicare or private insurance, to be offset in computing the LIP Cost Limit.

Furthermore, we see no inconsistency in the fact that the RFMD in one place (FL Ex. 4, at 21) states that the cost limit is calculated by deducting reimbursement from "Medicaid, the underinsured, or the uninsured," whereas, elsewhere (FL Ex. 4, at 14), it expressly mentions payments and recoveries from "Medicaid" and the "uninsured" (although omitting the "underinsured"14 ).  The latter provision simply makes clear that the reimbursement to be captured is not limited to Medicaid and individual patients but includes any payment on behalf of recipients or patients by referring to "other sources including any related patient copayments, or payments from other non-State payers."

Nor are we persuaded that the provision in the RFMD that "reimbursement includes Medicaid claims payment for services rendered to Medicaid recipients to each provider and for hospitals, DSH payments" somehow implies that the only reimbursement to be accounted for as to Medicaid recipients is Medicaid claims payments plus DSH payments as to hospitals.  FL Ex. 4, at 21.  Considering the context surrounding this statement, we read it as conveying that, with respect to Medicaid patients specifically, reimbursement to be offset includes not only individual claims payments for such patients, but also DSH payments made to hospitals providing care to such patients (which might not otherwise be obvious to include), but not as precluding consideration of any other reimbursement that might be made on behalf of such patients.

We now turn to the language in STCs 94 (original) and 54 (extension), under the heading "Low Income Permissible Expenditures."  The parties disagree about how to read the STC language.  To frame the dispute, we first quote the STCs verbatim, bolding the language CMS emphasizes and italicizing the language Florida emphasizes.

Funds from the LIP may be used for health care expenditures (medical care costs or premiums) that would be within the definition of medical assistance in Section 1905(a) of the Act.  These health care expenditures may be incurred by the State, by hospitals, clinics, or by other provider types for uncompensated medical care costs of medical services for the uninsured, Medicaid shortfall (after all other Title XIX payments are made) may include premium payments, payments for provider access systems

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(PAS) and insurance products for such services provided to otherwise uninsured individuals, as agreed upon by the State and CMS[.]

FL Ex. 1, at 25 (STC 94).

Funds from the LIP may be used for health care costs (medical care costs or premiums) that would be within the definition of medical assistance in Section 1905(a) of the Act.  These health care costs may be incurred by the State, by hospitals, clinics, or by other provider types to furnish medical care for the uninsured and underinsured for which compensation is not available from other payors, including other Federal or State programs.  Such costs may include premium payments, payments for provider access systems (PAS) and insurance products for such services provided to otherwise uninsured individuals, as agreed upon by the State and CMS.  These health care costs may also include costs for Medicaid services that exceed Medicaid payments (after all other title XIX payments are made, including disproportionate share hospital payments).

FL Ex. 2, at 18 (STC 54).

Florida takes issue with CMS's emphasis on the bolded STC language, asserting that the references to "uncompensated" care and "compensation . . . not available from other payors" appear in the context of the costs of services provided to the uninsured and underinsured, not in the context of the costs of services provided to Medicaid patients.  Reply Br. at 1-2.  "Rather," says Florida, "both STCs refer solely to the difference between Medicaid costs and Medicaid payments" (meaning the Medicaid shortfall).15   Id. at 2.  Florida maintains that, while the RFMD provides that the costs of providing services to Medicaid patients and the uninsured be offset by several types of payments including payments from other non-State payers, it does not state whether the offset should be applied to all costs as CMS argues, or only to costs of providing services to the uninsured, which is all that the plain language of the STCs requires.  Id. at 3.

We reject Florida's crabbed reading of selected STC language and reiterate two important points.  Considered together, STCs 94 and 54, like the STC provisions we discussed earlier, repeatedly reinforce the basic purposes of the LIP payment scheme.  Those are

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that, first, LIP payments are intended to cover uncompensated costs of providing care to LIP patients (i.e., Medicaid patients and the uninsured and underinsured), and, second, all payments made for LIP patients are to be considered in determining the LIP Cost Limit.  The revised, extension STC 54 in particular makes this point clearly:  that LIP payments pay for care for LIP patients "for which compensation is not available from other payors, including other Federal or State programs."  Only after this language does STC 54 discuss in two additional sentences other costs that also may be included, including the Medicaid shortfall concept.  The word "include," in context, is not a word of limitation.

D.     Any ambiguity in the waiver terms with respect to inclusion of Medicare and other third-party insurance payments in calculating the LIP Cost Limit must be resolved against Florida.

We have explained above why CMS's reading of the applicable waiver terms is more reasonable on its face.  To the extent that any ambiguity exists, we conclude that it would not be appropriate to defer to Florida's proposed reinterpretation under the circumstances here, especially given that Florida's own practice was not consistent with the interpretation it now propounds.

Board decisions discussing state plans and interpretation of state plan language are instructive here in the context of a section 1115 waiver and the terms of that waiver as drafted by Florida and agreed to by both parties.  The Board has determined that, when state plan language is unambiguous, the Board "appl[ies] the clear language of the plan regardless of the interpretation urged by the state."  Ark. Dep't of Human Servs., DAB No. 1328, at 6 (1992).  If, however, the state plan provision in question is ambiguous or silent, then the Board will generally defer to the state's interpretation of the provision if it is reasonable in light of the purpose of the provision and program requirements, gives reasonable effect to the language of the plan as a whole, and, if lacking contemporary documentary evidence of intent, the state's interpretation is supported by consistent administrative practice.  W. Va. Dep't of Health & Human Res., DAB No. 2536, at 9 (2013) (and cited cases).  "The Board [has] developed this approach [to analyzing ambiguous state plan language] for circumstances in which a state has flexibility in what state plan provisions to adopt, particularly with respect to reimbursement methodologies."  La. Dep't of Health & Hosps., DAB No. 2350, at 9 (2010), aff'd, La. Dep't of Health & Hosp. v. U.S. Dep't of Health & Human Servs., No. 11-76-BAH-CN (M.D. La. Feb. 7, 2013), aff'd, 566 Fed. App'x 384 (5th Cir. 2014). "The importance of administrative practice is in part determining whether the state in fact was applying an official interpretation of a plan provision or has advanced an interpretation only as an after-the-fact attempt to justify acting inconsistently with or simply ignoring its plan."  S.D. Dep't of Soc. Servs., DAB No. 934, at 4 (1988).

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The question, then, is whether Florida may retrospectively reinterpret the waiver terms to allow hospitals to exclude Medicare and other third-party payments for LIP patients in computing the LIP Cost Limits.  As we have explained, the waiver terms are most reasonably read as contemplating that LIP payments are to be used only for uncompensated costs of care, regardless of source of compensation (that is, reimbursement for or revenue derived from providing care to LIP patients).  Florida's arguments urging us to now interpret the waiver terms as permitting Florida not to offset for certain reimbursements – arguments developed long after the fact for purposes of this litigation and relying heavily on unrelated developments concerning DSH payments – raise concerns.

First, the interpretation Florida now advances is a novel one inconsistent with Florida's own prior practice.  Florida, which ultimately must show that it is entitled to retain the disallowed amount, has not proffered any extrinsic evidence that, at the time the STCs and RFMD were drafted (between 2006 and 2011), the parties intended for Medicare and third-party insurance payments not to offset allowable hospital costs in computing the LIP Cost Limit.  Nor has it proffered any evidence suggesting or indicating that, any time before CMS issued the disallowance, Florida and CMS had any discussions about permitting hospitals to exclude Medicare and other third-party insurance payments from the cost-limit calculations.  Florida performed reconciliations by offsetting Medicare and private insurer payments in computing the cost limits, and did so consistently.  Florida does not now argue otherwise.  Its reconciliation of the LIP payments in such a way appears consistent with CMS's position before the Board that both parties understood that such payments would be offset.  See CMS Response Br. at 8 ("At the time that the STCs and RFMD were drafted (between 2006 [and] 2011), both CMS and Florida believed that the offsets for these third party payments were appropriate.").16   Florida does not squarely respond to, or dispute, CMS's position.

Second, we have no argument or evidence before us indicating that Florida – which, as it says, "prepared" the RFMD and "presumably" could "change[ ]" it "subject to CMS approval" (Reply Br. at 7-8) – sought to revise any of the waiver terms concerning the computation of the cost limits.  If Florida believed the waiver terms as written were not clear about how the limits were to be computed, or that those terms did not accurately capture Florida's understanding of the computation rules, then Florida presumably could have sought to revise them.  Nothing in the waiver documents appears to preclude Florida from proposing prospective changes to waiver terms to expressly state that the cost limits

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will not be offset by certain payments.  Florida made no effort to do so or even to communicate that the waiver terms were not clear enough or otherwise unacceptable.  Instead, Florida appears to have interpreted and complied with the waiver terms based on the same understanding as CMS had until the litigation regarding the DSH payment limits presented an alternative approach that could significantly reduce or avoid its LIP overpayment liability.

Third, Florida has not shown that the hospitals themselves were confused or raised questions about what the waiver required with respect to Medicare and third-party payments for computing their LIP Cost Limits.  At most, Florida now maintains that, based on its reviews of the LIP calculation worksheets submitted by the LIP providers, "it appears that providers were inconsistent in their treatment of costs and revenues associated with Medicaid eligible individuals who also had other Medicare coverage."  FL Br. at 13.  Furthermore, Florida acknowledges that "often hospitals that provide services to Medicaid-eligible individuals with other coverage receive no Medicaid payment at all, because the other coverage pays first, and the Medicaid rate is lower than the payment received from Medicare or private insurance," and, "[t]hus, prior to the [DSH] FAQs, many hospitals excluded costs and revenues" for such individuals "in their DSH calculations."  Id. n.4.  Whether hospitals exclude both costs and revenues for dual-eligible Medicaid recipients whose costs are covered by third-party sources in making their DSH calculations is not relevant to the meaning of the waiver provisions at issue here.

We conclude that Florida was required under the applicable waiver provisions to offset, in determining uncompensated costs, reimbursement received from all sources on behalf of Medicaid recipients, not only Medicaid payments by the State on their behalf.

III.   Jackson Memorial Hospital's and University of Miami Health System hospitals' LIP-eligible costs may not be aggregated to determine whether Florida received FFP not authorized by the waiver.

Florida advances an alternative argument.  It asserts that, even were the Board to disagree with Florida that the LIP Cost Limits need not be offset by Medicare and private insurance revenues for Medicaid recipients, a portion of the disallowance should be reversed for an "independent reason."  FL Br. at 5.  Florida maintains that it is reasonable to interpret the STCs to permit Florida to consider Jackson Memorial Hospital's LIP payments in conjunction with the University of Miami Health System hospitals' LIP payments in light of the close integration of and cooperation between Jackson Memorial and the University of Miami Health System hospitals.  Id. at 1, 5, 15-16.  Florida notes, among other things, that "payments . . . flow between the two institutions in a variety of ways."  Id. at 16.  Florida comments that "[a]ll of the questioned payments to Jackson Memorial," the primary teaching hospital for the University of Miami's Leonard M. Miller School of Medicine, "could have instead been made to the University of Miami

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hospitals, where they would have been used for many of the same purposes, given the numerous programs" (such as trauma and burn care, newborn intensive care, transplant procedures) "that the two institutions operate together."  Id.

According to Florida, considering the hospitals' LIP-eligible costs together would eliminate Jackson Memorial's LIP overpayments from both demonstration years 6 and 7 for which CMS determined Jackson Memorial had received payments in excess of its LIP Cost Limit, because the University of Miami hospitals were paid well under their LIP Cost Limits for those two years.  Id. at 15, 16.  Based on Florida's representations, Jackson Memorial accounts for $163,552,262 in payments in excess of the LIP Cost Limit for combined demonstration years 6 and 7 – a substantial majority of the $171,379,694 total payment in excess of the LIP Cost Limit attributable to all providers for demonstration years 1-7 encompassed in the January 2017 disallowance determination (A-17-64).  Id. at 4.  Florida's opening brief sets out the following table:

Jackson/U. Miami Combined LIP Analysis17

Year	Jackson Memorial Over/(Under) LIP Cost Limit	University of Miami Hosp. Over/(Under) LIP Cost Limit	U. of Miami Hospital/Clinics Over/(Under) LIP Cost Limit	A.B. Leach Eye Hospital Over/(Under) LIP Cost Limit	Combined
DY 6	$78,364,371	($84,159,754)	($8,746,313)	($15,734,282)	($30,275,978)
DY 7	$85,187,891	($94,419,820)	Not calculated	Not calculated	($9,231,929)

FL Br. at 17; see also id. at 4 (table setting out the disallowed amounts at issue, by hospital provider, which indicates that the total amount allegedly paid to Jackson Memorial in excess of the LIP Cost Limit for demonstration years 6 and 7 is $163,552,262).  Combining Jackson Memorial's LIP Cost Limit with that of the University of Miami Health System, says Florida, would eliminate the disallowance attributable to Jackson Memorial, reducing the total disallowance amount attributable to the other providers to $4,709,95118 in FFP.  Id. at 17; Reply Br. at 8.

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We see no language in either the STCs or the RFMD, and Florida points to none, that reasonably may be read as providing "flexibility" to treat the hospitals "on a combined basis for LIP purposes" (FL Br. at 17) based on the hospitals' integration or cooperation with one another, or for any reason.  At best, Florida asserts that neither STC 97 (original) nor STC 57 (extension) (FL Ex. 1, at 25; FL Ex. 2, at 19) "specifically requires that [Florida] consider each hospital separately."  FL Br. at 17.  To redefine hospitals in some undefined flexible way retrospectively is not reasonable in the absence of some explicit basis in the STCs or RFMD.  On the contrary, that "the RFMD . . . envisions a provider-specific cap" on LIP payments (Reply Br. at 7) contradicts Florida's claims.  To allow Florida discretion to join hospitals in order to offset excess revenue at one against higher costs at another in effect would permit a hospital to exceed its specific cap and allow Florida to claim FFP in payments beyond that hospital's uncompensated costs.  Florida's argument amounts to an after-the-fact attempt to eliminate a significant portion of its overall overpayment liability for excess LIP payments by having a hospital system that purportedly was paid well under the limit simply assume the overage amount attributable to a hospital that CMS says received payments well over the limit.  We see no support for this attempt in the waiver terms and conditions to which Florida was bound.

Florida again states that the RFMD, which Florida drafted, "presumably can be changed by Florida, subject to CMS approval."  Reply Br. at 7-8.  But Florida itself reports that it proposed to CMS that Jackson Memorial's and the University of Miami hospitals' LIP Cost Limits be considered together and that CMS rejected the proposal.  FL Br. at 15.  We note, moreover, that, under the STCs, any change to cost sharing, LIP, and FFP (all of which would be affected by this approach) not only must be approved in advance by CMS, it may not have retroactive effect.  See FL Ex. 1, at 3 (¶ 6) and FL Ex. 2, at 4 (¶ 6) (both setting out STC 6, "Changes Subject to the Demonstration Amendment Process," stating that changes to, among other things, cost sharing, LIP, and FFP, must be submitted as amendments to the demonstration project and approved in advance by CMS and that amendments to cost sharing, LIP, and FFP are "not retroactive").  Florida may not now seek to retroactively eliminate Jackson Memorial's overage, having seen the outcome of applying the waiver under the agreed terms, by the expedient of creating a new combined provider entity retroactively for purposes of LIP calculations.

CMS notes that, in accordance with the RFMD, each hospital is to rely on its Medicare cost report to determine appropriate costs, as follows:

The CMS 2552 costs (Medicare cost report) determined through the method prescribed for the payment year will be reconciled to the as filed CMS 2552 cost report for the payment year once the cost report has been filed with the Medicare Fiscal Intermediary (FI).  If, at the end of the interim reconciliation process, it is determined that a hospital received an overpayment, the overpayment will be properly credited to the Federal

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government and if an underpayment is determined, the State will make the applicable claim from the Federal government.

CMS Response Br. at 14-15 (quoting FL Ex. 4 (RFMD), at 15).  As CMS points out, Jackson Memorial and the University of Miami Health System submit separate Medicare cost reports, and each hospital that has received an overpayment is to properly credit it to the federal government.  Id. at 15.  CMS maintains that, even were it possible to combine the hospitals' cost reports, such an act would be inconsistent with the cost reporting process outlined in the RFMD.  Id.  Florida's reply does not respond to CMS's point that the cost reporting process as set out in the document that Florida itself prepared and agreed to by CMS would not support such a proposal.

Conclusion

The Board upholds CMS's decision to disallow $97,570,183.

1. Florida filed another appeal (Board docket number A-17-65) challenging CMS's disallowance of over $63 million in FFP for payments to hospitals allegedly exceeding the waiver's cost limits during demonstration years 1-3 (July 2006–June 2009).  Although appeals A-17-64 and A-17-65 involve similar types of payments and overlap in terms of the demonstration years at issue, there is no duplication in the disallowed amounts in dispute.  FL Br. at 2 n.2.  Moreover, the parties' briefs in appeal A-17-65 raise arguments that are different from those raised in appeal A-17-64.  For these reasons, we issue separate decisions for the two appeals.  However, in this decision for appeal A-17-64, we will cite or refer to the briefs and exhibits submitted for appeal A-17-65 as appropriate for relevant background information.
• back to note 1
2. The STCs governing the first five demonstration years are of record as Florida's exhibit 1; the STCs in effect for subsequent demonstration years are of record as Florida's exhibit 2.  Florida refers to the first set of STCs as "Original STCs" and the second set as "Extension STCs."  Both sets of STCs provide that "[a]ll requirements of the Medicaid Program expressed in law, regulation, and policy statement" that the waiver documents did not "expressly waive[ ]" or "identif[y] as not applicable" govern the waiver project.  FL Ex. 1, at 3; FL Ex. 2, at 1.
• back to note 2
3. The parties refer to this document as the "Reimbursement and Funding Methodology Document" or the "RFMD," as do we.
• back to note 3
4. The Alliance states that there is no uniform definition of "safety net" provider, which could be a hospital, clinic, or health center.  The meaning of the term, says the Alliance, varies from state to state and from community to community, depending on numerous factors, e.g., size of the uninsured population.  Safety net providers, the Alliance states, serve vulnerable populations in urban and rural communities that rely on them for access to comprehensive medical and ancillary services, and such providers, in turn, rely on payments from various sources, including Medicaid DSH payments, waiver payments such as LIP payments, and targeted grants and other supplemental funding to help defray the costs of providing uncompensated and charity care.  Alliance Br. (A-17-64) at 4.  According to the Alliance, all of the disallowed amount at issue in appeal A-17-64 relates to LIP payments received by Alliance members, and one such member (Jackson Memorial Hospital, the predominant safety net hospital in South Florida) accounts for over 80 percent of the disallowance in appeal A-17-64, and for over 95 percent of the disallowance in appeal A-17-65.  Id. at 6.
• back to note 4
5. Florida submitted the RFMD (FL Ex. 4) to CMS in June 2006, shortly before the commencement of the waiver.  CMS did not approve the 2006 RFMD as submitted, or the revised version of the RFMD submitted in 2008.  In June 2009, Florida submitted a revised RFMD, which CMS approved in December 2009.  The Board's decision in appeal A-17-65 discusses in more detail the revisions to the RFMD terms and intervening events between Florida's submittal of its 2006 RFMD and CMS's approval of a revised RFMD in 2009.  We discuss the revisions to certain waiver language as relevant to our analysis in this appeal later in our decision.
• back to note 5
6. The "Medicaid shortfall" is the difference between Title XIX Medicaid costs and Medicaid payments.  See FL Ex. 4, at 21; see also FL Ex. 1, at 25 (stating in STC 94 that permissible or allowable "expenditures" eligible for LIP payments include "Medicaid shortfall (after all other Title XIX payments are made)"; FL Ex. 2, at 18 (stating in STC 54 that LIP-reimbursable "health care costs may also include costs for Medicaid services that exceed Medicaid payments (after all other title XIX payments are made, including disproportionate share hospital payments)").
• back to note 6
7. Along with the written reconciliation procedures, Florida developed and gave hospitals a "Hospital Cost Limit Calculation Form," a spreadsheet containing "locked formulas or equations that reflect the various policy decisions that have been approved by [Florida] and CMS."  FL Ex. 4, at 5.  The record does not include a copy of that spreadsheet but neither party has suggested that it would be material to our decision.
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8. The January 2010 guidance document's FAQs 33 and 34 read as follows:



33.  Would days, costs, and revenue associated with patients that have both Medicaid and private insurance coverage (such as Blue Cross) also be included in the calculation of the MIUR percentage and the DSH limit in the same way States include days, costs and revenues associated with individuals dually eligible for Medicaid and Medicare?

Days, cost, and revenue associated with patients that are dually eligible for Medicaid and private insurance should be included in the calculation of the Medicaid inpatient utilization rate (MIUR) for the purposes of determining a hospital eligible to receive DSH payments.  Section 1923(g)(1) does not contain an exclusion for individuals eligible for Medicaid and also enrolled in private health insurance.  Therefore, days, costs, and revenues associated with patients that are eligible for Medicaid and also have private insurance should be included in the calculation of the hospital-specific DSH limit.  As Medicaid should be the payer of last resort, hospitals should also offset both Medicaid and third-party revenue associated with the Medicaid eligible day against the costs for that delay to determine any uncompensated amount.

34.  The regulation states that costs for dual eligibles should be included in uncompensated care costs.  Could you please explain further?  Under what circumstances should we include Medicare payments?

Section 1923(g) of the Act defines hospital-specific limits on FFP for Medicaid DSH payments.  Under the hospital-specific limits, a hospital's DSH payment must not exceed the costs incurred by that hospital in furnishing services during the year to Medicaid and uninsured patients less payments received for those patients.  There is no exclusion in section 1923(g)(1) for costs for, and payment made, on behalf of individuals dually eligible for Medicare and Medicaid.  Hospitals that include dually-eligible days to determine DSH qualification must also include the costs attributable to dual eligibles when calculating the uncompensated costs of serving Medicaid eligible individuals.  Hospitals must also take into account payment made on behalf of the individual, including all Medicare and Medicaid payments made on behalf of dual eligibles.  In calculating the Medicare payment for service, the hospital would have to include the Medicare DSH adjustment and any other Medicare payments (including, but not limited to Medicaid IME and GME) with respect to that service.  This would include payments for Medicare allowable bad debt attributable to dual eligibles.

FL Ex. 3, at 18.
• back to note 8
9. Children's Hosp. Ass'n of Texas v. Azar, 300 F. Supp. 3d 190 (D.D.C. 2018).
• back to note 9
10. On January 11, 2019, Florida submitted to the Board CMS's December 31, 2018 Medicaid.gov bulletin titled "Updated FAQs:  Additional Information on the DSH Reporting and Audit Requirements," which announced that questions 33 and 34 in the 2010 DSH FAQs document were being withdrawn, as well as the revised DSH FAQs document, with the text in Frequently Asked Questions 33 and 34 stricken.  The revised DSH FAQs document may be accessed at https://www.medicaid.gov/medicaid/downloads/part-1-additional-info-on-dsh-reporting-and-auditing.pdf (last accessed on February 25, 2021).
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11. The appellate decisions in Children's Hospital and Missouri Hospital Association were issued after the parties and the intervenor filed their briefs with the Board.
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12. Florida's briefs say little specific about how recalculation of the cost limits on remand is expected to affect the cost limits or by how much the disallowance is likely to be reduced.  Florida does, however, represent that, with respect to the disallowance in appeal A-17-64, based on its records, over $171 million in payments in excess of the LIP Cost Limits are attributable to 13 hospital-providers, and that over $163 million of this amount are attributable to one of those hospitals, Jackson Memorial Hospital, for demonstration years 6 and 7 (2012 and 2013).  FL Br. at 4 (table), 17.  According to Florida, "[i]t is not possible to determine from Jackson's LIP calculations how much Medicare and private insurance revenues were included, because these appear to be combined generally with Medicaid revenues[,]" but Florida nevertheless does refer to certain dollar figures for Medicare and private insurance payments for Jackson Memorial for demonstration years 6 and 7.  Id. at 14.
• back to note 12
13. Despite urging the Board to remand this appeal for recalculation of the LIP Cost Limit based on its view of the DSH statute and regulations, and related district court decisions, Florida does not dispute that the waiver terms govern a determination of whether applicable cost limits were exceeded.  Florida states that it "does not argue that the federal court cases striking down CMS's interpretation of uncompensated costs in the context of [DSH] payments are dispositive[,]" but rather asserts that "those cases are clearly germane to the interpretation of the STCs."  Reply Br. at 1.  Florida also acknowledges that "[t]he parties appear to be in agreement that the validity of the disallowance turns on the [STCs] governing" the waiver project.  Id.  As is clear in the text, we conclude that the context, history, and language of the STCs, read with the RFMD, weigh against importing an interpretation of the DSH authorities' wording.
• back to note 13
14. We attribute no significance to the omission of the word "underinsured."  Neither party suggests that third-party payments made on behalf of underinsured patients would be treated differently than such payments on behalf of uninsured patients.
• back to note 14
15. "Medicaid shortfall" is not a defined legal term, though CMS has used it in policy statements and rulemaking preambles to identify one component of the hospital-specific DSH payment limit in section 1923(g) – namely, the uncompensated care costs of providing inpatient and outpatient hospital services to Medicaid enrollees.  See Ill. Dep't of Healthcare & Family Servs., DAB No. 2863, at 3 (2018), reversed and remanded for further proceedings, ___ F. Supp. 3d ___, 2020 WL 5751186 (N.D. Ill. 2020), appeal docketed, No. 20-3292 (7th Cir. Nov. 25, 2020); 73 Fed. Reg. 77,904, 77,916, 77,920, 77,922 (Dec. 19, 2008).  (The other component of the hospital-specific DSH limit is the cost of hospital services provided to the uninsured net of any payments by or on behalf of those individuals.  DAB No. 2863, at 3.)
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16. CMS also states that, even as recently as late March 2017, when Florida filed its notice of appeal of the reconsidered disallowance determination to the Board, Florida did not assert that Medicare and private insurance payments should not be offset in computing the cost limits.  CMS asserts that Florida's argument about the offsets appears to have been developed in or around 2017 for purposes of appeal to the Board even though the parties, CMS says, understood all along that the offsets were to be made to compute the cost limits.  CMS Response Br. at 8.  Florida does not state that CMS's statements are inaccurate or otherwise challenge this aspect of CMS's position.
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17. Florida submitted the declaration of Thomas J. Wallace, Jr., Florida's Assistant Deputy Secretary for Finance and Analytics, within the Division of Medicaid, in which Mr. Wallace attested that these figures are based on the results of his staff's calculation of the LIP Cost Limit for Jackson Memorial and the University of Miami hospitals for 2012 and 2013.  FL Ex. 7.  CMS does not dispute these figures, and in any case the accuracy of the figures as represented by Florida is not an issue we need to resolve in this appeal.  As we explain in the text, we reject Florida's arguments related to the proposal to combine the LIP Cost Limits to eliminate altogether the disallowance amount attributable to Jackson Memorial.
• back to note 17
18. Florida does not explain exactly how it arrived at $4,709,951, but we need not decide the accuracy of this figure.
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