DEPARTMENTAL GRANT APPEALS BOARD
Department of Health and Human Services
SUBJECT: New York State Department of Social Services
Docket Nos. 86-117 86-146
Decision No. 807
DATE: November 17, 1986
PARTIAL DECISION
The New York State Department of Social Services (State)
separately
appealed two disallowances by the Health Care Financing
Administration
(HCFA, Agency) of funds claimed under title XIX of the Social
Security
Act (Act). The amount disallowed in Docket No. 86-117 was
$966,947 and
in Docket No. 86-146, $85,293. The funds were disallowed
on the ground
that the claims were not timely filed in accordance with
the
requirements of section 1132 of the Act. The State appealed
only
$785,394 of the amount disallowed in Docket No. 86-117, conceding
that
the remaining $181,553 represented claims which were not timely
filed.
We consider the cases jointly here since the State argued in both
cases
that the disallowance must be reversed based solely on the
Agency's
failure to follow proper procedures in deferring the claims.
At the
State's request, the Board agreed to rule on this procedural
question
first, inasmuch as a ruling in the State's favor would render
further
consideration of the cases unnecessary. For the reasons
discussed
below, we conclude that reversal of the disallowances on this basis
is
not warranted. Accordingly, the parties should proceed to brief
the
substantive issues in Docket No. 86-117 in accordance with the
schedule
established elsewhere by the Board. In Docket No. 86-146, the
State
requested that, if the Board rejected its argument with respect to
the
deferral procedures, the Board issue a summary decision upholding
the
disallowance based on New York State Dept. of Social Services, DGAB
No.
521 (March 6, 1984). Accordingly, a summary decision will be
issued
separately.
Facts
The claim disallowed in Docket No. 86-117 was filed on the
State's
Quarterly Statement of Expenditures for Medical Assistance for
the
quarter ending September 30, 1985, dated December 5, 1985. The
claim
related to periods prior to September 30, 1983. The grant award
issued
by the Agency for
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the second quarter of fiscal year 1986, dated February 3, 1986, showed
a
decreasing adjustment applicable to prior periods in the amount
of
$966,947, which was explained in a footnote as follows:
$ -966,947 represents claims over two years old that
are deferred
pending review to determine
allowability (deferral
#NY/85/4/E/09/MAP).
(Docket No. 86-117, State's appeal file, Ex. 1) By letter dated May
30,
1986, the Agency notified the State of its decision to disallow
$966,947
on the ground that the claim was not timely filed. The Agency
noted:
In accordance with 45 CFR 201.15 this amount was
deferred on your
grant award for the second quarter
of fiscal year 1986, dated
February 3, 1986.
The claim disallowed in Docket No. 86-146 was filed on the
State's
Quarterly Statement of Expenditures for Medical Assistance for
the
quarter ending December 31, 1985, dated February 5, 1986. The
claim
related to periods prior to December 31, 1983. The grant award
issued
by the Agency for the third quarter of fiscal year 1986, dated April
25,
1986, showed a decreasing adjustment in the amount of $85,293 for
the
quarter ended December 31, 1985, which was explained in a footnote
as
follows:
$ -85,293 represents line 6 claims over two years
old that are
deferred pending determination of
allowability. (deferral
#NY/86/1/E/MAP)
(Docket No. 86-146, State's appeal file, Ex. 1) By letter dated June
20,
1986, the Agency notified the State of its decision to disallow
$85,293
on the ground that the claim was not timely filed. The
disallowance
letter did not mention that this amount had previously been
reduced on
the grant award dated April 25, 1986.
Applicable Regulations
The State argued that because the Agency failed to follow
proper
procedures in deferring the claim, the subsequent disallowance
was
invalid. The deferral process is established by 45 CFR 201.15,
and
applies to all claims for federal financial participation pursuant
to,
inter alia, title XIX. 45 CFR 201.15(a). Deferral action is
defined as
"the process of suspending payment with respect to a claim . . .
pending
the receipt and analysis of further information relating to
the
allowability of the claim. . . ." 45 CFR 201.15(b)(1).
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The procedures outlined in the regulation provide for the Administrator
of
HCFA to take a deferral action within 60 days after receipt of the
Quarterly
Statement of Expenditures, 45 CFR 201.15(c)(1), and to give
written notice to
the State within 15 days of the action, identifying
the claim and reason for
deferral. 45 CFR 201.15(c)(2). Within 60 days
of receipt of that
notice, the State "shall make available to the
Regional office, in readily
reviewable form, all requested documents and
materials. . . . If the State
requires additional time to make the
documents and material available, it
shall upon request be given an
additional 60 days." 45 CFR
201.15(c)(3). If the Regional Medicaid
Director finds that the
documents and materials are not in readily
reviewable form or that
supplemental information is required, he must
notify the State, and the State
then has 15 days from the date of
notification to complete the action
requested. 45 CFR 201.15(c)(5).
The Administrator has "90 days after
all documentation is available in
readily reviewable form to determine the
allowability of the deferred
claim." 45 CFR 201.15(c)(6). At that
point, he may disallow the claim,
allow the claim, or pay the claim subject
to a later determination of
allowability. 45 CFR 201.15(c)(5) and
(6).
State's Position
The State argued that the Agency's failure to send it a notice of
deferral
in accordance with section 201.15 rendered the Agency's
withholding of the
funds illegal. The State asserted that this
withholding of funds by the
Agency caused financial harm to the State,
which must continue to provide
medical services for eligible individuals
regardless of the availability of
federal financial participation. The
State also asserted that the
Agency's failure to send a notice of
deferral deprived the State of an
opportunity to document its claims.
Although the State acknowledged that it
would have, on appeal to the
Board, an opportunity to submit documentation in
support of its claims,
the State asserted that it might have already
destroyed certain
documentation supporting the claims which it would have
retained had it
been notified that the Agency found the claims of
questionable
allowability.
Agency's Position
The Agency argued that it gave the notice of deferral required by
section
201.15 by indicating in the notice of grant award that claims
over two years
old were being deferred. The Agency argued that this
gave the State
adequate notice of the ground on which the Agency
questioned its claims, and
that the State could have proceeded to
provide documentation in support of
the claims. The Agency also
asserted that the State had not in fact
shown that the documentation
necessary to support its claims was no longer
available because of the
Agency's - 4 -
failure to defer the claims properly. The Agency also took the
position
that deferral was not a condition precedent for a valid
disallowance, so
that any failure to comply with section 201.15 was
immaterial. Finally,
the Agency argued that reversal of the
disallowances was not an
appropriate remedy for the failure to comply with
section 201.15, since
the Agency could not be required to pay untimely claims
in violation of
section 1132 of the Act.
Discussion
We agree with the Agency that deferral of the claim in Docket No.
86-146
does not appear to have been required, so that any failure by the
Agency
to follow the deferral procedures does not affect the validity of
the
disallowance in that case. There was no reason for the Agency
to
request any additional documents or material in support of the
claim
before proceeding to disallowance if, as the State acknowledged,
the
claim was on its face untimely under the Board's reasoning in DGAB
No.
521. Thus, it is immaterial that the Agency for some unexplained
reason
deferred the claim and, in so doing, may have failed to
follow
appropriate procedures.
We do not agree, however, with the Agency's assertion here that this
Board
has previously held that deferral is never a condition precedent
to a valid
disallowance. In New York State Dept. of Social Services,
DGAB No. 542
(June 4, 1984), the Agency took the position, which we did
not contradict,
that deferral was required only when the Agency could
not determine that the
claims were clearly allowable or unallowable.
Deferral of the claim in Docket
No. 86-117 may have been required under
this standard; thus, it is not clear
that any failure to follow the
deferral procedures in that case was
immaterial on the basis that
deferral was not a necessary step. Even if
deferral was required in
Docket No. 86-117 and the Agency failed to follow
the proper procedures
1/, we are not persuaded that there was any prejudice
to
1/ We need not decide whether the Agency failed to comply with
the
deferral procedures. We note, however, that it is not clear that
the
statement in the notice of grant award was tantamount to a notice
of
deferral, as the Agency asserted. The description of the
deferred
claims as "over two years old" fell short of fulfilling the
requirement
for a reason for deferral since there was no reference to any
deadline
for filing the claims. In addition, the notice of grant award
was not
signed by the Administrator (or his designee) as required by
section
201.15(c)(2). Thus, there was at least a technical failure to
comply
with the regulation. - 5 -
the State as a result. The State has not shown in either case
that
supporting documentation is no longer available because of the
alleged
lack of notice of deferral.
Moreover, assuming that the State could have established during
the
deferral process that the claim in Docket No. 86-117 was timely
(which
it apparently could not have done in Docket No. 86-146), the
withholding
of funds to which the State was entitled did not significantly
harm the
State. Under the deferral procedures, the Agency has more than
seven
months from receipt of the Quarterly Statement of Expenditures
before
payment of the claim is required (including the time-without
any
extension--provided in the regulation for the State to make
the
requested documents and materials available to the Agency). Thus,
the
State's claim in Docket No. 86-117 would not have been paid before
July
1986 had all the steps of the deferral process taken place. The
fact
that the State is temporarily obliged to finance Medicaid services for
a
few more months than if it had been able to demonstrate during
the
deferral process that the claim was allowable does not clearly have
any
substantial adverse impact on the State. Moreover, since the claim
was
a retroactive claim for services rendered more than two years
earlier,
the State most likely paid long ago for the services covered by
the
claim, so that the few extra months which the State must now wait
for
payment (assuming the State can demonstrate allowability) are
relatively
insignificant.
Finally, we agree with the Agency that reversal of the disallowances
is
not appropriate regardless of any prejudice to the State since
the
effect would be to require the Agency to perform an illegal
act--payment
of untimely claims contrary to section 1132 of the Act. 2/ Thus,
we
conclude that there is no basis here for the reversal of
the
disallowances.
Conclusion
For the foregoing reasons, we conclude that, even if the Agency failed
to
follow the procedures set out in 45 CFR 201.15 when it deferred the
claims,
the disallowances should not be reversed on this basis.
Accordingly, briefing
on the substantive issues in Docket No. 86-117
should proceed in accordance
with the schedule established in the letter
2/ We assume for purposes of this decision that the amount in
dispute
in Docket No. 86-117 represents untimely claims.
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forwarding this decision to the parties. The Board will issue a
summary
decision separately in Docket No. 86-146 as requested by the
State.
________________________________ Cecilia Sparks Ford
________________________________ Norval D. (John) Settle
________________________________ Alexander G. Teitz
Presiding
Board