DEPARTMENTAL GRANT APPEALS BOARD
Department of Health and Human Services
SUBJECT: Pennsylvania Department
of Public Welfare
Docket Nos. 85-104, 86-70, 86-112, and 86-220
Decision No. 832
DECISION
The Pennsylvania Department of Public Welfare (State) appealed
four
determinations by the Health Care Financing Administration (HCFA
or
Agency) disallowing $9,791,420 in federal financial participation
(FFP)
for the period July 1, 1981 through March 31, 1986. The
amount
disallowed represents the difference between the State's claims
for
costs at the 75 percent rate available for operation of a
Medicaid
Management Information System (MMIS) and the 50 percent rate
available
generally for administrative costs. The parties have reduced
the amount
in dispute to $5,876,361 FFP. 1/
For the reasons stated below, we uphold the Agency's disallowance as
it
relates to certain functions of two divisions of the Bureau of
Provider
Relations and reverse the Agency's disallowance for some postage
costs.
In addition, the parties agreed to a remand to separately pursue
75
percent reimbursement for certain other functions of the two
Bureau
divisions.
I. The dispute before the Board
The dispute before the Board involves whether the costs of two
divisions
of the Bureau of Provider Relations (the Division of Provider
Education
and the Division of Provider Inquiry) and certain postage costs
are
costs attributable to the operation of the State's MMIS and
thus
reimbursable at the 75 percent rate. During the Board
proceedings,
including an informal conference held by telephone on October
16, 1986,
the parties narrowed the issues and stipulated to certain facts.
2/ The
parties have agreed to the following:
o The Agency agreed that the
function of monitoring the
State
training
contract (as described in Paragraph 3.c of
the
proposed
stipulation) performed by the Division of
Provider
Education is
reimbursable at the 75 percent rate of FFP.
3/
The State must now
support its claim with
documentation
showing
which personnel performed this function and how
much
of their time was
spent performing this function. The
parties
agreed to
pursue this issue on remand.
o Similarly, the Agency agreed
that the function of
making
on-line data
entries regarding the recovery of monies
and
adjustment to
provider accounts (as described in
Paragraph
4.c. of the
proposed stipulation) performed by the Division
of
Provider Inquiry is
reimbursable at 75 percent FFP. The
State
must now support
its claim with documentation showing
which
personnel
actually made on-line data entries on the MMIS
and
how much of their
time was spent on this function. Again,
the
parties agreed to
pursue this issue on remand.
o The parties agreed that to the
extent the functions of
the
Bureau of Provider
Relations for which the State claimed
75
percent FFP for
operations of a MMIS are found ineligible
by
the Board for such
enhanced funding, the State will have
the
opportunity to
present documentation to the Agency that
the
seven RNs in the
Bureau and their supporting staff qualify
for
enhanced funding
as Skilled Professional Medical Personnel.
o Although the parties agreed to
the facts contained in
Paragraphs 3.d. and e. of the proposed stipulation, the
Board
determined that
that information alone was not enough
to
establish that the
functions performed by the Division
of
Provider Education
(to conduct group or individual
training
with certain
providers and to conduct training on
an
individual or group
basis regarding major changes in
the
program) were
functions which were attributable to
the
operation of a
MMIS. These facts together with the
record
here were not
enough to establish entitlement to 75
percent
reimbursement. Therefore, it was agreed to remand this
issue
to the parties
to allow the State to present documentation
to
show whether the
training provided under this function
was
attributable to
the operation of a MMIS.
o It was agreed that the Board
would decide whether
the
following costs
are entitled to 75 percent reimbursement
as
costs attributable
to operation of a MMIS:
- the costs of
the Division of Provider Education's
function
to develop and maintain provider handbooks.
- the costs of
the Division of Provider Education's
function
to write medical assistance bulletins.
- the costs of
the Division of Provider Inquiry's function
of
responding to certain provider questions regarding
billing
problems.
- the costs of
the Division of Provider Inquiry's function
of
processing exceptions to the State's deadline
for
submitting invoices.
Before examining these functions of the two divisions of the Bureau
of
Provider Relations, we examine the State's argument that approval of
its
cost allocation plan shows that the costs of the Bureau overall
were
properly reimbursable at 75 percent. In addition, we examine
the
various postage costs and determine whether these costs are
reimbursable
at 75 percent.
II. Applicable law, regulations, and guidelines
Under sections 1903(a)(3)(A) and (B) of the Social Security Act (Act),
FFP
is available in the costs of a mechanized claims processing system
at the
rate of 90 percent for design, development, or installation of a
system and
at the rate of 75 percent for costs attributable to the
operation of the
system; otherwise, administrative costs are reimbursed
at a 50 percent
rate. Section 1903(a)(7).
The Agency regulation at 42 CFR 433.111 (1980) provides
certain
definitions applicable to MMIS. Definitions relevant here
are:
"Mechanized claims processing and
information retrieval system"
means a
system of software and hardware used to process
Medicaid
claims, and to retrieve and
produce utilization and management
information about services that is required by the
Medicaid
agency or Federal Government
for administrative and audit
purposes.
"Operation" means the automated
processing of claims, payments
and
reports. "Operations" includes the use of
supplies,
software, hardware and
personnel directly associated with the
functioning of the mechanized system.
(Emphasis added.)
The regulation at 42 CFR 432.50(b)(2) (1980) provides for FFP at a rate
of
75 percent for expenditures attributable to personnel "engaged
directly in
the operation of mechanized claims processing and
information retrieval
systems." The regulation also provides that rates
of FFP in excess of
50 percent are applicable only to those portions of
the individual's working
time that are devoted to the duties that
qualify for the enhanced rate of
reimbursement. 42 CFR 432.50(c)(1).
The regulations are supplemented by Chapter 11 of the State
Medicaid
Manual (SMM or Manual). 4/ See State's Appeal File, Exs. 5 and
6.
Section 11275.21 of the SMM states that FFP at the 90 percent rate
(for
design, development, or installation of a MMIS) and the 75 percent
rate
(for operation of a MMIS) may be paid "only for those functions
which
are attributable to an MMIS." State's Ex. 5. This section
cites as an
example, for provider enrollment, that "only the costs of
entering data
into the computer system and processing computer exceptions
would be
reimbursed at 75 percent FFP" and that "[o]ther functions, even
if
performed by the same unit or individuals, are reimbursable at
50
percent FFP." Section 11275.26 of the SMM includes a detailed
checklist
of costs of a MMIS and the allowable reimbursement rates (90
percent, 75
percent, or 50 percent) for those costs. This section states
that
"anything that is not on this list as being eligible for the
higher
match will only be funded at the normal match." State's Ex.
6.
III. Bureau of Provider Relations
A. State's Arguments Concerning Cost Allocation Plan Approval
Before we discuss the disputed functions of the two divisions in
this
Bureau, we first discuss the merits of the State's general
arguments
concerning its entitlement to enhanced funding at the 75
percent
operational rate.
The State argued that it had a previously approved cost allocation
plan
(CAP) for the period in question which clearly earmarked the
cost
centers for the Bureau of Provider Relations' Division of
Provider
Inquiry and Division of Provider Education as allocable to MMIS.
5/
State's Brief, p. 2; State's Appeal File, Ex.
8, p.
III-3-52.
The State argued that the Agency is bound by the approved
CAP,
especially where the Agency is not arguing that the particular
costs
charged to MMIS cost centers were misclassified, but, instead,
is
contending that entire cost centers are not eligible for
reimbursement
at the 75 percent operational rate. State's Reply Brief,
p. 1.
Moreover, the State reasoned that the CAP serves, at a minimum,
the
function of establishing an agreed framework or contract between
the
State and Agency within which the State is entitled to budget and
claim
costs. The State also argued that the approval of the CAP
constituted
evidence of how the Agency interpreted its regulations to allow
the
activities covered by the Bureau of Provider Relations cost centers
as
eligible for enhanced funding. Therefore, the State claimed that
the
Agency was precluded from assessing this disallowance.
B. Effect of Cost Allocation Plan Approval
Approval of a CAP does not mean that the costs "approved" are
then
automatically allowable. In Oregon Department of Human
Resources,
Decision No. 729, March 20, 1986, we recognized that, although 45
CFR
95.517 provides that in order for costs to be claimed, they must be
in
accordance with an approved CAP, that language does not mean that
costs
allocated and claimed in accordance with an approved CAP are per
se
allowable under programmatic and grants management regulations. 6/
In
fact, we specifically rejected Oregon's argument that the Agency had
no
authority to take a disallowance if costs were claimed via an
approved
CAP. We found that the regulations in 45 CFR Part 95 did not
support
this position.
Moreover, as we stated previously, CAPs function primarily to
delineate
proper cost allocation methods and procedures and do not address
the
full range of substantive issues raised by the Agency's
programs.
Approvals of the plans cannot be viewed as policy judgments on the
part
of the Agency about cost allowability. Furthermore, the approvals
are
specifically limited and do not purport to be approval of
the
allowability of particular costs. See, e.g., New York State
Department
of Social Services, Decision No. 449, July 29, 1983. Here,
the
transmittal letters for the State's CAPs for 1982 and 1983 provide
the
following caveat:
The plan is approved and costs claimed
in conformance with the
plan are subject
to the following conditions:
(2) the costs
which are actually claimed by the State
are
allowable under prevailing Department cost
principles,
program regulations and law.
(3) the claims
conform with the administrative and
statutory
limitations of the programs against which they are made.
State's Appeal File, Ex. 8.
While the State argued that the Agency should especially be bound by
the
approved CAP where the Agency contends an entire
cost center is not
eligible for 75 percent reimbursement, the State has
not shown why this
circumstance should be any different from the situation
where the Agency
disallows particular costs charged to MMIS cost centers.
The regulation, 45 CFR 95.507, specifies that a CAP contain "a
description
of the activities performed by each organizational unit and,
where not
self-explanatory, an explanation of the benefits provided to
federal
programs." See also 42 CFR 433.34(d) (1980). The CAP
provisions
which provide narrative descriptions of the Division of
Provider Inquiry and
Division of Provider Education do not mention any
relation to or activities
involved with the State's MMIS. See State's
Appeal File, Ex. 8, pp.
37-38 and Ex. 9, pp. 60a-61a. Rather, under the
narrative descriptions
in the CAP of the various Bureaus and Divisions,
the only division for which
the description states specific
responsibility for the State MMIS and assigns
specific cost centers to
the operational rate (75 percent), the developmental
rate (90 percent),
and the general administrative rate (50 percent) is the
Bureau of
Operations' Division of Medical Assistance Management Information
System
(MAMIS). See State's Appeal File, Ex. 8, pp. 40a-41a. The
only
reference in the CAP, moreover, of the Bureau of Provider
Relations'
Division of Provider Education and the Division of Provider
Inquiry cost
centers as allocable to the MMIS appears as follows:
The expenditures in the following cost
centers are utilized for
capturing MAMIS
[State's MMIS] activity and will be
claimed
accordingly.
* * *
81 & 82-310 - 11,200 - MAMIS - 75% 11,300
State's Appeal File, Ex. 8, p. 43a.
There is no mention of why all the costs of these cost centers as
opposed
to only certain costs related to specific functions were
properly claimed at
the 75 percent rate. As the Agency pointed out, the
State here claimed
all the costs of the Division of Provider Inquiry and
the Division of
Provider Education as qualifying for enhanced
reimbursement for operation of
a MMIS. As we discuss below in our
analysis of the specific functions, there
are functions performed by
these divisions which the State has now conceded
are not attributable to
operation of a MMIS, i.e., costs attributable to
drafting parts of the
provider handbook and medical assistance
bulletins. Since the State
claimed all the costs in these divisions at
the enhanced rate without
any showing that all the functions performed by
these divisions are
attributable to the operation of the MMIS, and where
admittedly certain
functions are not entitled to enhanced funding, the Agency
could
reasonably have initially questioned the entire cost center. The
State
has the obligation to come forward and show that the costs
disallowed
are entitled to enhanced funding. New York Department of
Social
Services, Decision No. 204, August 7, 1981. As we indicated
previously,
approvals of CAPs cannot be viewed as a policy judgment on the
part of
the Agency about cost allowability. Thus, we cannot agree with
the
State that approval of the CAP constituted dispositive evidence that
the
Agency interpreted its regulations to allow the activities covered
by
these two divisions as eligible for enhanced funding. 7/ Thus, the
CAP
approval does not preclude the Agency from taking a disallowance
here.
C. Division of Provider Education's Functions
The Division of Provider Education is responsible for developing
and
maintaining provider handbooks. The State agreed that the
State
Medicaid Manual expressly states that provider handbooks
are
reimbursable only at 50 percent. Section 11275.26 of the
Manual. The
State, however, contended that, while the handbooks as a
whole are not
entitled to enhanced funding, those portions of the handbook
which
provide detailed instructions to providers on how to submit
invoices
should be considered "publications necessary for the operation of
the
system" which the SMM lists as reimbursable at 75 percent.
Section
11275.26 of the Manual, State's Appeal File, Ex. 6, p. 9a.
Similarly,
the State agreed it was not entitled to enhanced funding for
the
function of writing medical assistance bulletins to the extent
those
bulletins are for general program purposes. The State,
however,
contended that these bulletins should also be considered
publications
necessary for the operation of the system and entitled to 75
percent
funding to the extent the bulletins provided detailed
billing
instructions for providers. The State argued that the Agency
intended
to distinguish in the Manual between what is entitled to
enhanced
funding and what is not on the basis of whether the function is to
tell
the provider how to get a bill paid (enhanced funding) rather than
just
to tell the provider about general policy (non-enhanced funding).
As the Agency pointed out, the Manual expressly states that
provider
handbooks and bulletins are reimbursable only at 50 percent.
While
section 11275.26 of the SMM provided that "publications necessary
for
the operation of a system (e.g., claims forms such as HCFA-1500,
UB-16)"
are reimbursable at 75 percent, in context, this section
cannot
reasonably be read to override the specific provisions
regarding
provider handbooks and medical assistance bulletins. The
examples given
have a more direct relationship with the computerized
processing of
claims than mere instructions about billing procedures, which
would be
necessary regardless of the nature of the billing system. In
addition,
the State has not pointed to any evidence showing that the Agency
has
made any distinction on whether something is entitled to
enhanced
finding on the basis of whether the function pertains to
billing
procedures.
Consequently, we find no basis for allowing costs of certain portions
of
provider handbooks and medical assistance bulletins to be reimbursed
at
the enhanced rate. Thus, we sustain the Agency's disallowance.
D. Division of Provider Inquiry's Functions
The State contended that the primary responsibility of the Division
of
Provider Inquiry is to respond to individual provider
inquiries
regarding particular billing problems. The State explained
that this
involved checking the status of invoices on the computer, reviewing
the
MMIS paid claims history files, checking the enrollment status
of
clients on the computer, reviewing remittance advices and invoices
on
microfiche, and making on-line inquiries to see if a service is
covered.
Proposed Stipulation, Paragraph 4.a.
In addition, the State argued during the October 16, 1986 conference
call
that these functions are equivalent to "exception claims processing
by claims
type (correction of suspended claim)" which is listed under
section 11275.26
of the Manual as a function reimbursable at 75 percent.
The State conceded
that the claims which this division responds to are
not suspended claims.
Rather, a provider with a rejected claim might
call up this office to find
out why its claim was rejected. The State
also contended that the
personnel of this office should be considered
"Provider Representatives and
Related Personnel" "directly related to
claims operations," which is listed
in section 11275.26 of the SMM as a
function reimbursable at 75 percent.
State's Appeal File, Ex. 6, p. 9a.
The State queried what kind of activity
these representatives would be
performing that is directly related to claims
operations if not
answering questions for providers on the claims being
processed.
The State also indicated that another function of the Division of
Provider
Inquiry is to process exceptions to the State's deadline for
submitting
invoices. The State contended that this function involved
personnel
reviewing particular claims documentation, reviewing rejected
invoices and
remittance advices on microfiche, and checking the status
of clients on the
computer system. Proposed Stipulation, Paragraph 4.b.
For the reasons explained below, we find that these functions are
not
functions reimbursable at 75 percent for operation of a MMIS.
"Operation" in 42 CFR 433.111 is defined as the "automated processing
of
claims, payments, and reports," and includes the use of
personnel
"directly associated with the functioning of the mechanized
system."
The State admitted in the October 16th conference call that neither
of
these disputed functions involve making on-line computer changes or
data
entry to the MMIS. The State here stated that these two
functions
involve using the information in the system and, as a result,
involve
operation of the system. The Agency pointed out that the
Division of
Provider Inquiry obtains information from the MMIS to answer
providers'
inquiries on the status of their claims. We agree with the
Agency that
while the Division's staff is getting the benefit of the system,
the
State has not shown that this staff was actually operating the
MMIS.
Mere use of information from the system does not constitute
"automated
processing of claims, payments, and reports". Consequently,
under the
regulatory definition neither of the Division's functions
is
attributable to the operation of the MMIS.
In addition, we find both that a function of this division is
not
"exception claims processing by claim type" and that the personnel
are
not "provider representatives and related personnel" "directly
related
to claims operations" as defined in section 11275.26 of the
Manual.
"[E]xception claims processing" involves correcting "on-line" in
the
system a suspended claim. The Agency stated that this involves
actually
effectuating a change in a claim by entering or changing data in
the
system. The State admitted here, however, that the function
of
responding to the provider's inquiries does not involve on-line
data
entries or changes to the system.
Moreover, we find that the function of this office to respond to
provider
inquiries on billings is not equivalent to provider
representatives directly
related to claims operations. While the
Provider Inquiry staff resolves
provider questions on billing problems
and processes exceptions to the
deadline for submitting services, these
functions are not actually part of
claims processing. Section 11275.23
of the Manual states that staff who
perform follow-up investigations are
not considered part of the MMIS.
The State has not shown that these
functions amount to anything other than
this. As the Agency pointed
out, section 11275.21 of the Manual
provides that 75 percent FFP may be
paid only for those functions
attributable to a MMIS and cite, as an
example, that, with respect to
provider enrollment, "only the costs of
entering data into the computer
system and processing computer
exceptions would be reimbursed at 75 percent
FFP. Other functions, even
if performed by the same unit or
individuals, are reimbursable at 50
percent FFP." The State has failed
to show that this provision is not
also applicable here.
While the State argued that section 11275.21 of the Manual is
inconsistent
with the list of functions at section 11275.26 of the
Manual, we do not
agree. The State contended that section 11275.21 of
the Manual states
that the Agency will pay the enhanced operational rate
of 75 percent only if
the function involves some direct interaction of
"inputting" data into the
system, yet under section 11275.26 the Agency
will pay the operational rate
under provider enrollment for training the
provider. The State argued
that this activity does not involve
"inputting" data into the system; hence,
the State contended that
section 11275.21 is inconsistent and section
11275.26, which was
published later, takes precedence.
We do not find that the Manual provisions are inconsistent. The
Manual
does not refer to activities which involve inputting of data as
being
the only activities for which enhanced funding at 75 percent
is
available. Rather, the Manual refers simply to functions which are
of
direct benefit to the MMIS. Consequently, functions which would
occur
regardless of the MMIS, simply because providers submit claims, are
not
functions which directly benefit the MMIS and, consequently, are
not
functions which warrant the incentive of an enhanced rate
of
reimbursement. It might always be necessary to have staff available
to
answer provider inquiries about billing problems and to
provide
exceptions to the deadline for submitting invoices whether or not
the
MMIS existed. Therefore, we do not find that these provisions
are
inconsistent where the purpose of the Manual, and, specifically,
the
list at section 11275.26, is to state the direct costs considered
to
directly benefit the MMIS.
Here, the State has not shown that the functions of answering
provider
questions concerning billing problems and that processing exceptions
to
the deadline for submitting invoices are functions which benefit
the
ongoing operation of a mechanized information system. Thus, we
conclude
that these functions are not reimbursable at the 75 percent
for
operation of a MMIS and therefore, we uphold the disallowance.
IV. Postage Costs
The State argued that certain postage costs incurred by the
contractor
carrying out some of the State claims processing functions were
entitled
to the enhanced operational rate of 75 percent. Specifically,
the
postage expenses incurred and claimed at 75 percent which
were
disallowed by the Agency were for the following items:
a. Invoices that could not be
processed. b. Tapes that could not
be processed. c. CHR forms that could not be processed.
d.
Prior authorization notification
forms. e. Reconciliation tapes
to
service bureaus. f. Return of successfully processed tapes.
The Agency's disallowance was based on section 11275.26 of the
Manual
which provides 75 percent operational FFP for only three types
of
postage costs, i.e., postage for: (1)
Issuance of Explanation of
Benefits
(EOBs); (2)
Issuance of receipt ID cards; and (3)
Issuance of remittance statements.
State's Appeal File, Ex. 6,
p.
12.a.
The State essentially argued that some, if not all, of the items for
which
postage was incurred and claimed at 75 percent are equivalent to
remittance
statements. The State and Agency agreed that a remittance
statement is
a notification to a provider whether a claim submitted for
payment will be
paid, rejected, or pended. The parties agreed that the
Agency has never
specified in what form a remittance statement must be
made, nor has the
Agency specified that a particular form be used.
During the October 16th conference call, the State described
more
specifically the items for which postage was claimed. The
State
indicated that "invoices which cannot be processed" are claims
submitted
by a provider on hardcopy where a problem is found by the
contractor
prior to entering the claim into the system. The State
indicated that
it is a problem so severe that the claim should not even enter
the
system and the claim is returned to the provider. A "tape which
cannot
be processed" is the same thing, but for the fact that the
provider
submits its claim on computer tape rather than by hardcopy.
Again,
prior to even processing the tape, the tape is returned because of
a
problem. A "CHR form that cannot be processed" is similar to a
prior
authorization form. It is a form submitted by a hospital to get
prior
approval of a hospital stay. This form is returned before it
is
processed because a problem is found. A "prior
authorization
notification form" is the State's answer on a provider's
request for
prior authorization of a service. A "reconciliation tape
sent to
service bureaus" is a magnetic or computer tape sent to those
providers
who submit their claims by electronic media and request
that
notification of the disposition of their claims, i.e., whether the
claim
is paid, rejected or pended, be given back on tape. This allows
the
provider to run the tape through its computer system to reconcile
its
accounting system. A "return of successfully processed tape" is
the
postage cost of returning the provider's tape which contained
the
provider's claim.
As we explain below, we agree with the State that the postage costs
for
reconciliation tapes were properly payable at the 75 percent rate.
The
State Medicaid Manual indicates that costs of postage for
remittance
statements are reimbursable at 75 percent. Section 11275.26 of
the
Manual. The Manual, however, does not specify that the
remittance
statement must be in hardcopy or by tape. The State pointed
out that
when the Manual was written it was not contemplated that
electronic
billing would be prevalent. Consequently, we agree with the State
that
just because the notification of disposition of the provider's claim
is
on tape rather than on hardcopy does not mean it is not a
remittance
statement.
The Agency here has not shown any reason why the reconciliation tape
is
not the equivalent of the remittance statement. The Agency
instead
indicated that the State's argument here might be valid but that
the
State was obligated, where it knew that such postage costs were
not
listed in the Manual, to ask for the Agency's prior approval to
claim
these costs at the enhanced rate. We do not agree that the State
was
obligated to receive prior approval of these costs. The parties
have
agreed that the Manual does not specify what form a remittance
statement
must take. The Agency has not shown why the reconciliation
tape is not
a remittance statement. We find that there is no reasonable
basis for
making a distinction between a remittance statement submitted to
the
provider on tape or one submitted to the provider on hardcopy.
Thus, we
find that the cost of postage for reconciliation tapes are
reimbursable
at 75 percent as postage for remittance statements and the
disallowance
is overturned in part accordingly. Since we do not know
how much of the
disallowance is attributable to these costs, this is left for
the
parties' determination on remand.
We find that the Agency can reasonably disallow 75 percent
reimbursement
for postage costs other than those specifically listed in the
Manual as
reimbursable at that rate. As the Agency pointed out, these
items are
not the same as a remittance statement. In the case of the
invoices,
tapes, and CHR forms that cannot be processed, the claims here
were
submitted in so incomplete a fashion that the claims were not
entered
into the system and were rejected up front. As a result, the
system is
not even used. We agree with the Agency that there is no
direct
relation then to operation of the MMIS here. In the case of the
prior
authorization forms, these are forms that must be filed in order for
the
provider to even make a claim for reimbursement. Thus, this form,
too,
is not directly related to the operation of the system.
Consequently,
we find that the Agency correctly disallowed these costs as not
properly
costs of operation of a MMIS reimbursable at 75 percent. As
for the
costs of postage to return successfully processed tapes, we see no
basis
for providing the operational rate for these costs. As the
State
pointed out, it returns the tapes to the providers because of the
cost
of these computer tapes and because they are the providers'
property.
The State here has not shown that return of these processed tapes
is
equivalent to a remittance statement. In fact, the State indicated
that
the tapes are returned at the same time a reconciliation tape
or
remittance statement is sent. Moreover, once a tape is processed
the
cost of operation of the system has passed. The State has not
shown
that the cost of postage for returning processed tapes should
be
reimbursed at any higher rate than the general administrative rate. 8/
Conclusion
We uphold the disallowance for the disputed functions of the Bureau
of
Provider Relations: specifically, the Division of Provider
Education's
functions to develop and maintain provider handbooks and to
write
medical assistance bulletins; and the Division of Provider
Inquiry's
function to respond to provider questions regarding billing
problems and
processing exceptions to the State's deadline for submitting
invoices.
We overturn the disallowance for the postage costs for
reconciliation
tapes, the amount to be determined by the parties on remand,
and uphold
the disallowance for the remainder of the postage costs. In
addition,
as explained earlier on pages 2 and 3, the parties have agreed
to
discuss certain other matters on remand.
_________________________ Judith A. Ballard
_________________________ Norval D.
(John)
Settle
_________________________ Cecilia
Sparks
Ford
Presiding Board Member
1. The Agency withdrew $3,510,624 FFP of its
disallowance. The State
then conceded the disallowance of $369,755 FFP for 14
job
classifications and $34,680 for invoices submitted by its
contractor
that were not covered by the approved contract. Of course,
while the
amount the State conceded is no longer in dispute here, the State
must
still return this amount to the Agency.
2. The disallowance in Docket No. 86-220 was issued
October 28,
1986. Because the issues in this appeal were identical to
the issues
before the Board in Docket Nos. 85-104, 86-70 and 86- 112, the
State
requested that Docket No. 86-220 be consolidated with those
cases. The
State indicated that it waived further filings in this later
case.
Since the Agency had no objection, these cases were consolidated and
the
record in the former cases also applies to Docket No. 86-220.
3. Prior to the October 16, 1986 conference call, the
State
submitted a stipulation to the Agency. The Agency stipulated to
some,
but not all, of the proposed stipulation during the October
16th
conference call.
4. The regulation at 42 CFR 433.110 (1980) made the
provisions of
the Medical Assistance Manual applicable. The Medical
Assistance Manual
was replaced by the State Medicaid Manual in July,
1981. Chapter 11 of
the Manual covers mechanized claims processing
systems.
5. In the October 16, 1986 conference call, the State
admitted that
there was no express provision in the CAP that a function of
the
Division of Provider Education was to write provider handbooks.
6. The regulatory provision, 45 CFR 95.517, was not
codified until
April 1982. Prior to this, however, 42 CFR 433.34(f)(1)
(1980) also
provided that in order for Medicaid costs to be claimed, they
must be
claimed in accordance with an approved CAP.
7. The State also contended that the Bureau of
Provider Relations
costs are attributable to the "operation" of a MMIS based
on the Board's
Ruling on Request for Reconsideration of New Jersey Department
of Human
Services, Decision No. 648, November 22, 1985. However, the
ruling on
reconsideration of Decision No. 648 simply does not apply
here.
Decision No. 648 involved statewide and Department-wide indirect
costs
which had been properly allocated under OMB Circular A-87 to
the
operation of the MMIS and which the Agency had disallowed as too
remote
from the actual operation of the MMIS. That case did not
address, as we
must here, whether certain direct costs and associated
indirect costs
were attributable to the operation of the MMIS.
8. Our decision is based on the fact that the State
had notice of
the Agency's interpretation which is a reasonable one. Our
decision does
not preclude the Agency from considering enhanced reimbursement
for
other types of postage costs related to technological advances in
the
way claims are