Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: Utah Department of Health
DATE: February 26, 1992
Docket No. 91-30
Decision No. 1307
DECISION
The Utah Department of Health (UDH, or State) appealed the disallowance
by
the Health Care Financing Administration (HCFA) of $1,610,445 in
federal
financial participation (FFP) claimed under Title XIX (Medicaid)
of the
Social Security Act (Act) for the period July 1, 1985 through
June 30,
1987. HCFA disallowed the federal share of overpayments for
mental
health services provided to Medicaid recipients by the Timpanogos
Community
Mental Health Center (TCMHC).
In accordance with its "freedom of choice" waiver under .1915 of the
Act,
the State Medicaid agency, UDH, entered into an agreement with the
Utah
Department of Social Services (UDSS) whereby UDSS would provide
certain
mental health services to Medicaid recipients, either directly
or through
subcontract. TCMHC provided those services under its
subsequent
agreement with UDSS. A State audit disclosed that the
federal share of
overpayments to TCMHC was $1,756,386 for the two fiscal
years ending (FYEs)
June 30, 1986 and June 30, 1987. HCFA reviewed the
State audit and
adopted its findings. 1/
Utah did not challenge the overpayment determinations. Instead,
it
noted that .1903(d)(2)(D) of the Act provides that states are
not
required to reimburse HCFA the federal share of overpayments that
are
uncollectible due to bankruptcy (the bankruptcy exception). TCMHC
filed
for bankruptcy on January 29, 1990, and Utah asserted that it is
not
required to repay the federal share of the overpayment.
HCFA did not challenge Utah's assertion that it was unable to
recover
these overpayments due to TCMHC's bankruptcy. HCFA contended
that the
bankruptcy exception and its implementing regulations applied only
to
overpayments made to a Medicaid provider, i.e., an entity having
a
provider agreement with the state Medicaid agency. HCFA maintained
that
TCMHC was not a Medicaid provider since it contracted with UDSS, and
not
UDH, the State Medicaid agency. Utah, HCFA asserted, could not
avail
itself of .1903(d)(2)(D) of the Act and the regulations
governing
overpayments to avoid repayment to HCFA of the overpayment
amounts,
since TCMHC did not have a provider agreement with UDH.
As we explain more fully below, we conclude that the bankruptcy
exception
applied so that Utah is not required to repay the federal
share of
overpayments made to TCMHC. Section 1903(d)(2)(D) of the Act
provides
that a state is not required to return the federal share of
overpayments
"made to a person or other entity" where the state is
unable to recover the
overpayment "on account of such debt having been
discharged in
bankruptcy." HCFA cannot reasonably read the language of
the statute
and its implementing regulations to limit the reach of the
bankruptcy
exception in the particular circumstances here, where TCMHC
was providing
services to Medicaid recipients under the terms of Utah's
waiver as approved
by HCFA.
We emphasize that our decision is limited to the unique factual
situation
presented here; we do not mean to imply that HCFA does not
have an
understandable and reasonable interest in reading the statutory
and
regulatory provisions conservatively to avoid exposure to liability
to lower
tier organizations who deal with but are not providers of
Medicaid
services.
We reverse the disallowance in full, subject to Utah's obligation
to
refund the federal share of overpayments which it recovers
through
discharge in bankruptcy. If Utah disputes HCFA's determination
of the
amount of recovered overpayments that must be refunded, it may return
to
the Board for review of this issue within 30 days of receipt of
HCFA's
written determination.
Statutory background
Title XIX of the Act authorizes federal grants to states to aid
in
financing state programs which provide medical assistance and
related
services to needy individuals. Any state that wishes to
participate in
the Medicaid program must develop and submit a plan that meets
certain
requirements set forth by the Secretary of the Department of Health
and
Human Services (HHS). Realizing that many states might have
difficulty
financing a Medicaid program even if subsequently reimbursed by
the
federal government, Congress also established a funding mechanism
by
which HHS advances funds to a state, on a quarterly basis, equal to
the
federal share of the estimated cost of the program. After review of
the
state's quarterly statement of expenditures, the Secretary may
adjust
future payments to reflect any overpayment or underpayment which
was
made to the state for any prior quarter. Section 1903(d) of the
Act.
Specifically, .1903(d)(2)(A) of the Act provides that amounts paid to
a
state shall be reduced to the extent of any overpayment which
the
Secretary determines was made to the state for any prior quarter
and
with respect to which adjustment has not already been made.
In numerous cases involving excess or improper payments by states
to
Medicaid providers, this Board has held that, under .1903(d)(2) of
the
Act, HCFA may require adjustment of the grant award for the
federal
share of firmly established overpayments, even if a state has not
yet
recovered these amounts from the providers. The Board reasoned
that
excess or improper payments are not "medical assistance" within
the
meaning of .1903(a)(1) and .1905(a) of the Act. See, e.g.,
California
Dept. of Health Services, DAB No. 1015 (1989); California Dept.
of
Health Services, DAB No. 977 (1988); California Dept. of
Health
Services, DAB No. 619 (1985); Massachusetts Dept. of Public Welfare,
DAB
No. 262 (1982). The Board's prior holdings on overpayments issues
have
been upheld in three decisions by United States Courts of
Appeals:
Massachusetts v. Secretary, 749 F.2d 89 (1st Cir. 1984), cert.
denied,
472 U.S. 1017 (1985); Perales v. Heckler, 762 F.2d 226 (2d Cir.
1985);
and Dept. of Social Services v. Bowen, 804 F.2d 1035 (8th Cir.
1986).
The Board has upheld HCFA's ability to require adjustment for
the
federal share of overpayments even where the state is unable to
recover
them due to provider bankruptcy. See, e.g., DAB No. 977;
California
Dept. of Health Services -- Accounts Receivable, DAB No. 334
(1982);
Massachusetts v. Secretary.
Congress created an exception to the adjustment requirements
for
overpayments to bankrupt or out of business providers identified
for
quarters beginning on or after October 1, 1985. Section 9512 of
the
Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), Pub.
L.
No. 99-272, amended .1903(d) of the Act to give states 60 days in
which
to refund the federal share of overpayments, and relieved states
from
the requirement of refunding overpayments where they were
uncollectible
due to provider bankruptcy or insolvency. As amended,
.1903(d) reads in
pertinent part as follows:
(2)(A) The Secretary shall then pay to the State, in
such
installments as he may determine, the amounts so
estimated,
reduced or increased to the extent of any overpayment
or
underpayment which the Secretary determines was made under
this
section to such State for any prior quarter and with respect
to
which adjustment has not already been made under
this
subsection. . . .
(C) For the purposes of this
subsection, when
an overpayment is discovered, which was made by
a State to a person or
other entity, the State shall have a
period of 60 days in which to
recover or attempt to recover such
overpayment before adjustment is
made in the Federal payment to
such State on account of such
overpayment. Except as otherwise
provided in subparagraph (D),
the adjustment in the Federal
payment shall be made at the end of the
60 days, whether or not
recovery was made.
(D) In any case where the State is
unable to
recover a debt which represents an overpayment (or any
portion thereof)
made to a person or other entity on account of
such debt having been
discharged in bankruptcy or otherwise
being uncollectible, no
adjustment shall be made in the Federal
payment to such state on
account of such overpayment (or portion
thereof).
Factual background
In March, 1984, the State of Utah was granted a "freedom of choice"
waiver
in order to establish a prepaid health plan (PHP) to provide
mental health
services to certain groups of Medicaid recipients. 2/
Utah's waiver requests
noted that the Medicaid Agency planned to enter
into a PHP contract with
UDSS, and that the PHP would provide services
to recipients either through
its own employees or through subcontracts.
State Exhibits (Exs.) I and
II. UDH and UDSS subsequently entered into
an agreement whereby UDSS
would provide specified services to Medicaid
eligibles as a nonrisk PHP
provider under 42 C.F.R. Parts 431 and 434.
UDSS agreed to provide the
services either directly or through
subcontractors, and further agreed to pay
UDH any amount determined to
be an overpayment, and to pay for any
disallowances of FFP as a result
of services failing to comply with Title XIX
requirements. The
agreement was for July 1, 1985 through June 30, 1986,
and was
subsequently extended by agreement through June 30, 1987. State
Ex.
III.
Under a June, 1985 contract with UDSS, TCMHC provided mental
health
services to eligible Title XIX recipients. TCMHC's contract
was
effective July 1, 1985 through June 30, 1986, and was
subsequently
extended through June 30, 1987. State Ex. IV.
UDH provided TCMHC final cost settlements seeking recovery of the
federal
share of overpayments for FYEs June 30, 1986 and June 30, 1987
by letters
dated December 1, 1989. State Exs. VI and VII. Also by
letter
dated December 1, 1989, UDH notified HCFA of the overpayments and
requested
partial forgiveness of the debt, or a plan for extended
payback. HCFA
Ex. 3. TCMHC filed a petition in bankruptcy on January
29, 1990, and
UDH filed a proof of claim with the U.S. Bankruptcy Court
on May 15,
1990. State Ex. VIII.
Analysis
It is undisputed here that HCFA's determination as to the
overpayment
amounts is correct and that Utah is unable to recover these
amounts due
to TCMHC's bankruptcy. The question presented is whether
the bankruptcy
exception in .1903(d)(2)(D) of the Act applied to relieve Utah
of its
obligation to repay the federal share of the overpayments.
HCFA
asserted that the exception did not apply since TCMHC did not have
a
provider agreement with the State Medicaid agency and was thus not
a
"provider" for the purposes of the bankruptcy exception under either
the
statute or the subsequently promulgated regulations. HCFA argued
that
under the regulation, the bankruptcy exception applies only to
such
"providers," and that this limitation is consistent with the concept
of
a single state agency with responsibility and authority for the
program,
delivering services through entities that have entered into
provider
agreements, as authorized by Title XIX of the Act.
.1903(d)(2)(D) of the Act
Before the enactment of COBRA .9512, and .1903(d)(2)(D) of the Act,
the
rule that states were responsible for uncollectible overpayments made
to
bankrupt providers was based on HCFA's interpretation of .1903(d)
as
upheld on appeal by the Board and U.S. Courts of Appeals. See,
e.g.,
DAB No. 977; DAB No. 334; DAB No. 262; Massachusetts v.
Secretary. The
Board reasoned that states administer the Medicaid
program, contract
directly with providers, and have the ability to ensure
that the program
contracts only with responsible providers. The state
was the party able
to ensure timely audit and collection of identified
overpayment amounts,
since it, and not HCFA, dealt directly with the
providers.
In DAB No. 262, the Board concluded that since HCFA had no direct role
in
the recovery of overpayments, it was not unreasonable to require the
state
alone to bear the burden which might result from delays in the
collection of
overpayments, notwithstanding the fact that some might
declare
bankruptcy. As the Court of Appeals noted in Massachusetts
v.
Secretary,
Since only (the state) deals directly with the
providers, and since
the state is empowered to
perform on-site audits of these
institutions, it is
clearly the party best able to minimize the
risks
resulting from dealing with insolvent providers. . .
.
Placing an additional burden on the state will
increase its
incentive to take care, whereas the
Secretary remains powerless to
reduce the risks no
matter what the costs imposed on her. 749 F.2d
at 96.
The states, rather than HCFA, bore the cost of overpayments
uncollectible
due to bankruptcy as they had more direct contact with
providers. This
policy was changed by the enactment of .1903(d)(2) and
the bankruptcy
exception. The legislative history of the bankruptcy
exception, cited
by both parties, at S. Rep. No. 99-146, 99th Cong., 2d
Sess. 314, 315,
reprinted in 1986 U.S. Code Cong. & Admin. News 281, 282
provides
that:
Current law.---State Medicaid agencies are allowed
to
pay nursing homes and hospitals at interim rates
until
final rates are established. If the final rate is
less
than the interim rate, the institution was overpaid
and
the State is responsible for the collection of
the
"overpayment". The State must refund the Federal
share
of the overpayment to the Federal Government.
Under
current program administrative instructions the
State
must refund the Federal share immediately
upon
discovering the overpayment. Further, refunds must
be
made for all overpayments even where they are
not
collectable because the providers have gone
into
bankruptcy or have gone out of business.
These
administrative instructions have been upheld by
the
courts. Explanation of provision.---The provision
would
allow States up to sixty days (from the date
of
discovery) to recover overpayments from providers
and
refund the Federal share. The provision would
provide
that a State is not liable for the Federal share
of
overpayments which cannot be collected from bankrupt
or
out-of-business providers. Effective date.---October
1,
1985.
HCFA argued that the references to "providers" and the description of
the
prior law as concerning provider bankruptcy and the payment
practices of
state Medicaid agencies show that the bankruptcy exception
is limited to
overpayments made by a state Medicaid agency to providers
of services under
provider agreements, and should not be applied here.
As discussed below, we conclude that the legislative history
neither
supports HCFA's position nor addresses the particular circumstances
of
this appeal. It fails to indicate any explicit intent by Congress
to
preclude application of the bankruptcy exception to the
overpayments
made by Utah to TCMHC. The reference to "providers" is
more reasonably
regarded as an explanation identifying the generic class of
entity whose
bankruptcy the law was designed to include; to read more into
the term
is to overburden it with undeserved meaning.
As the Board has previously observed, the legislative history of
the
bankruptcy exception indicates that Congress was trying to
protect
states in cases in which providers had filed for bankruptcy or gone
out
of business and thereby made the debt uncollectible. New York Dept.
of
Social Services, DAB No. 1112, at 10 (1989). The amendment
represented
a decision that in such instances it was HCFA, rather than the
states,
that would bear responsibility for the federal share of
uncollectible
overpayments. Since under the freedom of choice waiver
and the PHP
TCMHC's position was analogous to that of an entity with which
the
Medicaid agency has a provider agreement, this policy would not
be
served if the State in this appeal is denied resort to the
bankruptcy
exception and forced to account for the federal share of
the
uncollectible overpayments. Here, the loss to Utah, and its
treasury,
is not altered by the fact that the contract between TCMHC and Utah
was
with UDSS, instead of with UDH, the State Medicaid agency.
Additionally, HCFA's argument that the reference to "providers" in
the
legislative history indicates an intent to exclude application of
the
bankruptcy exception to this case is not consistent with HCFA's
earlier
explanation in the preamble to 42 C.F.R. Part 433, at 54 Fed.
Reg.
5,452, 5,453 (February 3, 1989):
The Conference Report accompanying COBRA
refers only to
overpayments made to
providers. . . . In view of this
Congressional intent and our past practice not to
consider
overpayments due to recipient
eligibility errors to be
overpayments to
providers, we have not made these
regulations
applicable to
eligibility-related overpayments.
HCFA noted that the federal share of overpayments involving
recipients
must be refunded immediately following discovery pursuant
to
.1903(d)(2), or, if during a period when Medicaid Quality Control
(MQC)
systems were in effect, on the basis of MQC penalties. 54 Fed.
Reg.
5,453, 5,454. HCFA's explanation in the preamble suggests that the
use
of the term "providers" in the legislative history was meant
to
distinguish overpayments to providers from those due to
recipient
eligibility errors, to which the amendment did not apply;
nothing
indicates an intent to limit application of the bankruptcy
exception
under the circumstances here.
We conclude that application of the bankruptcy exception here is
fully
consistent with .1903(d)(2)(D) of the Act, which by its terms applies
to
overpayments made by a state to a person or other entity. Utah
should
not be deprived of its ability to utilize the bankruptcy
exception
because UDH was not a signatory to the agreement, as the potential
loss
to Utah resulting from TCMHC's bankruptcy appears to be specifically
the
kind of harm that the COBRA amendment was designed to cure.
Other provisions of the Act
HCFA asserted that the Act generally uses "state" and "state
agency"
interchangeably, and requires states to designate a single state
agency.
Thus, in the absence of any different intent, the general reference
to
states in the bankruptcy exception should be interpreted as referring
to
that particular state's Medicaid agency. HCFA asserted that UDH was
the
State Medicaid agency, and that its provider agreement was with
UDSS,
which is not bankrupt. UDH's actions in entering into the
agreement
with UDSS, HCFA argued, were consistent with the Act's requirements
of
single state agencies which enter into provider agreements.
However, as noted above, there is nothing in the legislative history
of
the bankruptcy exception which would indicate any intent to exclude
its
application to Utah's overpayments to TCMHC, the provider of
Medicaid
services, simply because TCMHC was the second tier contractor under
an
agreement with Utah's State Medicaid agency. As Utah noted, the
Act
does not define state as state Medicaid agency such that Utah's
payments
to TCMHC for Medicaid services would fall outside the realm
of
overpayments subject to the relief afforded states by .1903(d)(2)(D)
of
the Act. Additionally, this Board has held that a state as a whole
must
be viewed as a single unit responsible for the administration of
grant
funds. Louisiana Dept. of Health and Hospitals, DAB No. 1176, at
10
(1990). This is apparent from the use of the word "State"
in
.1903(a)(1) of the Act, and from the definition of "grantee" at
45
C.F.R. .74.3. That TCMHC's agreement with the State was with UDSS,
and
not UDH, does not alter its status as an entity which provided
services
in accordance with the Act and to which overpayments were made.
HCFA also cited sections 1902(a)(5) and 1902(a)(27) of the Act, as well
as
Federal court decisions recognizing the state Medicaid
agency-provider
relationship, which it contended recognize a statutory
requirement for
Medicaid provider agreements. See WJM, Inc. v.
Massachusetts Dept. of
Public Welfare, 840 F.2d 996, 999 (1st Cir.
1988); Danvers Pathology
Associates v. Atkins, 757 F.2d 427, 428 (1st
Cir. 1985). It cited other
decisions as recognizing the requirement of
a single state agency responsible
for administering the Medicaid
program. See West Virginia University
Hospitals, Inc. v. Casey, 885
F.2d 11 (3d Cir. 1989); Planned Parenthood of
Utah v. Dandoy, 810 F.2d
984 (10th Cir. 1987). However, these decisions
mention the requirement
of provider agreements and single state agencies only
as part of
introductory recitations of Medicaid law, and do not address
whether
Utah is precluded from treating TCMHC as a provider simply because
its
agreement to provide services was with UDSS and not UDH.
Although
Danvers refers to 42 U.S.C. .1396a(a)(27) (.1902(a)(27) of the Act)
as
requiring that a person or entity providing services enter into
a
"provider agreement" with the state, that section (and its
implementing
regulations at 42 C.F.R. .431.107) requires only that each
person or
entity providing services agree to make certain information
available to
the state. The legislative history of .1902(a)(27)
indicates that its
focus was assuring that the state had access to records of
suppliers of
Medicaid services to assure that payments under the plan are
proper;
this provision was added to cure HHS's predecessor's apparent lack
of
authority to review records of suppliers, even when strong
indications
of fraud were present. S. Rep. No. 744, 90th Cong., 1st.
Sess.,
reprinted in 1967 U.S. Cong. Code & Admin. News 2834, 3025,
3140. Here,
the agreement between UDSS and TCMHC provided state and
federal auditors
access to its records, and provided state and federal
reviewers access
to client records as necessary to assure compliance with
state and
federal requirements. State Ex. IV-A. Thus, those
agreements fulfilled
the requirement of .1902(a)(27) of the Act that entities
providing
Medicaid services have agreements containing these
provisions. The
sections of the Act cited by HCFA do not support its
position that
.1903(d)(2)(D) does not apply to Utah's uncollectible
overpayments to
TCMHC.
The overpayment regulation
The COBRA overpayment provisions, including the bankruptcy exception,
are
implemented at 42 C.F.R. .433.300 et. seq. 54 Fed. Reg. 5,460
(1989),
effective April 4, 1989. In relevant portion, the regulation
provides
that a state Medicaid agency is not required to refund the
federal share of
an overpayment made to a provider when the state is
unable to recover the
overpayment amount because of the provider's
bankruptcy. The regulation
applies to overpayments that occur and are
discovered in any quarter that
begins on or after October 1, 1985. 42
C.F.R. .433.312(b), (c).
"Overpayment" is defined as excessive amounts
"paid by a Medicaid agency to a
provider," and "provider" as "(in
accordance with
.400.203), any individual or entity furnishing
Medicaid services under a
provider agreement with the Medicaid agency."
42 C.F.R. .433.304.
42 C.F.R. .400.203, "Definitions specific to Medicaid," states that --
As used in connection with the Medicaid
program, unless the
context indicates
otherwise-- Medicaid agency or agency means
the
single State agency administering or
supervising the
administration of a
State Medicaid plan. Provider means
any
individual or entity furnishing
Medicaid services under a
provider
agreement with the Medicaid agency.
HCFA argued that under the regulations, (1) UDH was the state
Medicaid
agency, not UDSS; (2) UDSS, and not TCMHC, was the signatory to
the
Medicaid provider agreement and the Medicaid provider of services,
and
UDSS is not bankrupt; and, (3) UDH did not enter into a
Medicaid
provider agreement with TCMHC nor does it have any legal
relationship
with TCMHC that is recognized under the statute and the
regulations.
To construe the regulations as excluding TCMHC from the reach of
the
bankruptcy exception ignores the regulatory language "unless the
context
indicates otherwise." Here the "context" reasonably requires
that HCFA
recognize the provider status of an organization providing
services
under the terms of a freedom of choice waiver. HCFA pointed to
no
requirement under the waiver that UDH structure the relationships
with
UDSS or TCMHC differently. Furthermore, HCFA did not argue that
the
overall purposes and objectives for using the provider
agreement
mechanism to establish a state Medicaid agency's relationships
with
providers were not adequately served by the agreements actually
used
here.
TCMHC was effectively acting as a Medicaid provider under the
particular
circumstances of the PHP, where Utah had to deal with various
county
entities to furnish the specified Medicaid services. HCFA was
further
aware through the State's waiver requests of the unique arrangement
by
which UDH was obtaining services for beneficiaries through the
PHP.
Utah provided evidence that HCFA acted in accord with the
understanding
that the subcontractors under the PHP, like TCMHC, were
Medicaid
providers, and not UDSS. It noted that HCFA's FY 1986 Critical
Medicaid
Issues Program (CMIP) review of the PHP established pursuant to
the
waiver repeatedly referred to the subcontractors as providers,
and
specifically described UDSS as a state agency, rather than as a
provider
of medical services. The CMIP review found that UDSS had
claimed its
total costs for the PHP, including administrative costs, as
medical
assistance payments, and that "(s)ince DSS is another State
Agency
rather than a provider of medical services," the administrative
costs
would have been claimed at a lower rate had the services been
provided
on a fee-for-service basis rather than through the PHP. 3/
State Ex. B,
p. 5.
Furthermore, the agreement between UDSS and TCMHC had the
characteristics
of a provider agreement. It referenced various
provisions of Title XIX
of the Act, the Medicaid regulations, and the
Utah State Medicaid Plan, and
stated that the UDH Division of Health
Care Financing was charged with
interpreting Medicaid regulations to
adjust the payments. State Ex.
IV-A, Att. G. Additionally, final cost
settlements were provided to
TCMHC by UDH, the State Medicaid Agency,
and the agreement provided that
TCMHC could request a hearing from UDH.
State Ex. VI, VII. The proof of
bankruptcy lists UDH as TCMHC's
creditor. State Ex. VIII.
The agreement between UDSS and TCMHC was substantively similar to the
one
between UDSS and UDH, which HCFA would characterize as a
provider
agreement. It appears to be UDH's absence as a signatory to
the
agreement between TCMHC and UDSS for the period in question that
led
HCFA to bar application of the bankruptcy exception. We believe
that
this position promotes form over substance and ignores TCMHC's status
in
fact as a provider of Medicaid services under the Act and under
the
regulations when read in the context of the unique, but
HCFA-approved
method for providing the specified mental health services
pursuant to
Utah's PHP. We conclude that under the circumstances of
this PHP which
resulted in TCMHC's agreement with Utah to furnish services,
it is
reasonable to read the statutory language and the regulations to
include
TCMHC as a provider. 4/
We also note that Utah asserted that it changed its contracts at
renewal
in 1987 to include a direct contractual relationship between the
PHP
providers and UDH, after receiving an October, 1986 State
Medicaid
Manual issuance defining "overpayment" as an excessive amount which
is
paid by a state Medicaid agency to a provider. State brief, pp.
22-23.
At the time that it received the issuance, however, there
were
agreements in effect consistent with Utah's freedom of choice
waiver
under which UDSS could provide services through subcontract.
Utah was
entitled to some reasonable notice that its method for
providing
services under the approved PHP might deprive it of its ability to
use
the bankruptcy exception as implemented by HCFA. The Board
has
previously held that we cannot hold a state accountable for an
agency
policy interpretation that is not compelled by the plain meaning of
a
statutory or regulatory provision unless the state has received
actual
notice. Maine Medicaid Fraud Control Unit, DAB No. 1182, at 12
(1990).
Other provisions of the regulations
HCFA cited other provisions of the Medicaid regulations, at 42
C.F.R.
Parts 431 and 447, which impose specific requirements on
relations
between Medicaid providers and state Medicaid agencies 5/.
HCFA also
referred to the regulatory definition of PHP as an entity
providing
services under contract with the state Medicaid agency. 42
C.F.R.
.434.2. HCFA maintained, in effect, that TCMHC may not be
treated as a
provider for purposes of overpayments while avoiding the
legal
requirements imposed by other provisions of the regulations.
However,
HCFA did not allege any failure by Utah to observe the
specified
regulatory requirements. Similarly, we do not believe that
any of the
cited provisions bear directly on the question of whether Utah may
seek
the benefit of .1903(d)(2)(D) of the Act.
HCFA also noted that the agreement between UDSS and UDH expressly
made
UDSS the provider and imposed a duty on it to refund any
overpayments,
and that UDSS is not bankrupt. However, we do not believe
that this
language in the agreement is dispositive on the question of
UDH's
ability to avail itself of .1903(d)(2)(D) of the Act, or on its
ability
to challenge the disallowance. This language affects only the
financial
responsibility between two state agencies in the event a
disallowance
becomes final. Although similar language might be found in
Medicaid
provider agreements, it should not be construed to limit a
state's
ability to present arguments on its behalf or to avail itself of
the
bankruptcy exception or any other provision to which it might
be
entitled under the law and regulations. The language does not
address
the questions of whether TCMHC is a Medicaid provider, and whether
Utah
is entitled to claim relief from reimbursement of the federal share
of
the overpayment.
We thus conclude, under the specific and limited circumstances of
this
appeal, that TCMHC was providing Medicaid services and
received
overpayments from Utah for the purposes of .1903(d)(2)(D) of the
Act,
and that Utah is entitled to relief from having to reimburse HCFA
for
the federal share of the overpayments which are uncollectible due to
the
bankruptcy of TCMHC.
We note, however, that pursuant to 42 C.F.R. .433.320(e), Utah must
refund
to HCFA the federal share of any overpayments to TCMHC which it
may recover
through discharge of bankruptcy. Materials that Utah
submitted in
response to the Board's order to develop the record
indicate that as of
October 24, 1991, Utah had received a total of
$744,100.76 from TCMHC
pursuant to an order of the bankruptcy court
confirming TCMHC's plan of
reorganization. Utah reported that
$144,748.08 was intended to
reimburse it for overpayments made to TCMHC
prior to the bankruptcy
exception, for which the federal share has
already been refunded to
HCFA. We leave it to HCFA to determine how
much of the funds recovered,
and of any funds that remain to be
recovered, represents the federal share
which must be refunded to HCFA.
If Utah disagrees with HCFA's determination,
it may return to the Board
for review of this limited issue.
Conclusion
We reverse the disallowance in full, subject to Utah's obligation
to
refund the federal share of overpayments which it recovers
through
discharge of bankruptcy. If Utah disputes HCFA's determination
of the
amount of recovered overpayments that must be refunded, it may return
to
the Board for review of this issue within 30 days of receipt of
HCFA's
written determination.
Donald F. Garrett
Norval D. (John) Settle
Cecilia Sparks Ford Presiding Board
Member
1. Utah appealed only $1,610,445 of the disallowance, and did
not
challenge that portion of the disallowance consisting of
overpayments
made prior to the enactment of the Social Security Act provision
at
issue here.
2. Section 1902(a)(23) of the Act requires state Medicaid plans
to
provide that eligible individuals may obtain services from
anyone
qualified to perform the services. Section 1915(b)(4) of the
Act
authorizes the Secretary to waive this requirement and permit a state
to
restrict the providers from whom Medicaid recipients may
obtain
services, to the extent that such a waiver is cost-effective,
efficient,
and not inconsistent with the purposes of Title XIX.
3. Our conclusion that Utah is entitled to the relief afforded by
the
bankruptcy exception is not based on any notion of estoppel arising
from
HCFA's CMIP review. Rather, the CMIP review is an additional
element of
evidence supporting our determination that TCMHC was acting as
a
Medicaid provider.
4. As we conclude that TCMHC may be considered a provider under
the
language and intent of the statute and within the context of
the
regulation such that Utah may claim the bankruptcy exception, we
need
not consider Utah's assertion that the overpayment regulations
are
invalid to the extent they would operate to support this
disallowance.
5. These regulations include 42 C.F.R. .431.54, which states in
part
that providers must be afforded due process rights prior to
restriction
by the state Medicaid agency; 42 C.F.R. .431.107, requiring plans
to
provide for an agreement with the provider to make records
and
information available; 42 C.F.R. .447.15, which requires state plans
to
provide that the state Medicaid agency limit participation to
providers
who accept state payments as payments in full; 42 C.F.R.
.447.31,
permitting state Medicaid agencies to request that HCFA
withhold
Medicare payments to providers to recover Medicaid overpayments; and
42
C.F.R. .447.45, providing deadlines for submission of claims
by