Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: Colorado Department of Social Services
DATE: November 9, 1992
Docket Nos. A-92-93 & A-92-181
Decision No. 1369
DECISION
The Colorado Department of Social Services (Colorado/State) appealed
two
determinations by the Health Care Financing Administration
(HCFA)
disallowing a total of $409,026 in federal financial participation
(FFP)
claimed by Colorado under the Medicaid program of the Social
Security
Act (Act). 1/ These disallowances were the result of a
State
Performance Evaluation and Comprehensive Test of Reimbursement
Under
Medicaid (SPECTRUM) audit of intermediate care facilities for
the
mentally retarded (ICFs/MR) for the period July 1, 1987 through
December
31, 1990.
The audit revealed that Colorado had unilaterally established an
enhanced
reimbursement rate for certain long-term care patients. Over
the course
of three years the State claimed enhanced federal funding for
seven
unidentified facilities without having amended its Medicaid State
plan to
reflect the enhanced rate. 2/ Consequently, HCFA disallowed
$398,517 in
FFP for enhanced payments claimed by Colorado from June 1,
1985.through
September 30, 1988. See Notice of Disallowance in Board
Docket No.
A-92-93. On appeal, in addition to raising substantive
arguments which
we discuss below, Colorado challenged HCFA's calculation
of this part of the
disallowance. See Colorado Brief (Br.) at 5-6;
Colorado Exhibits (Exs.)
B-D. Subsequently, HCFA indicated that the
parties have stipulated that
the amount in dispute regarding the
enhanced payment rate is $327,464.
See HCFA Letter, October 15, 1992.
The audit also revealed that, from 1988 through 1990, the
reimbursement
rate calculations for the Pueblo Regional Center had
included
unallowable eye care costs. HCFA disallowed $10,509 in FFP
claimed for
these costs. See Notice of Disallowance in Board Docket No.
A-92-181.
Based on the analysis below, we sustain HCFA's revised
disallowance
totalling $337,973.
Analysis
I. The enhanced payment rates
Effective December 1, 1984, Colorado enacted the Long Term Care
Hospital
Patients Program, known here as the Hospital Back-Up Program
(HBP). The
HBP was designed to provide low cost care to nursing
facility patients
who would normally be hospitalized. From June 1, 1985
through September
30, 1988, Colorado claimed Medicaid reimbursement for HBP
services, at a
higher rate than provided in its Medicaid State plan, without
amending
its plan to reflect the enhanced rate. 3/ Thus, HCFA
disallowed the
difference in FFP between what the State could have claimed
for HBP
services under the nursing home reimbursement rate contained in
its
State plan and its claim at the enhanced rate.
Colorado did not deny that its State plan did not reflect the
enhanced
reimbursement rate for HBP facilities during the period at
issue.
Rather, Colorado maintained that it had been instructed by HCFA to
make
its State plan more general, and thus Colorado had not included the
HBP
rate in it. Consequently, Colorado argued that HCFA was estopped
from
taking a disallowance based on Colorado's failure to include a
provision
for enhanced rates for HBP services in its State plan.
Additionally,
Colorado noted that the amount of FFP it claimed for the HBP
over
the.three years at issue represented an insignificant amount of
the
State's annual Medicaid expenditures. Thus, the State reasoned,
the
development of the HBP was not a material change in its Medicaid
program
which had to be reflected in its State plan.
Medicaid is a co-operative program which provides medical assistance
to
the needy. Medicaid is administered by the states and is funded by
the
states and the federal government. If a state chooses to
participate in
Medicaid, it must submit a plan for operation of its program
that
conforms with federal requirements. Section 1903 of the Act.
States
are given considerable flexibility in selecting the
reimbursement
provisions to be included in their plan. HCFA will
approve the plan if
the state meets certain substantive requirements and
provides specific
assurances and related information. See Section 1902
of the Act.
Specifically, section 1902(a)(13)(A) requires a state plan to provide --
for payment . . . of . . . services in an intermediate
care
facility for the mentally retarded provided under the
plan
through the use of rates . . . which the State finds, and
makes
assurances satisfactory to the Secretary, are reasonable
and
adequate to meet the costs which must be incurred by
efficiently
and economically operated facilities . . . .
The implementing regulations require that a state plan contain
the
information necessary for HCFA to determine whether it can be
approved,
and thus serve as the basis for FFP. 42 C.F.R. .
430.10. A state
Medicaid agency is required to pay for inpatient
hospital and long-term
care services through rates determined according to
methods and
standards approved in the state plan. 42 C.F.R. .
447.253(g). See also
California Dept. of Health Services, DAB No. 1007
at 6 (1989); Arkansas
Dept of Human Services, DAB No. 998 at 12 (1988).
A state plan must
specify comprehensively the methods and standards used by
the state to
set payment rates in a manner consistent with 42 C.F.R. .
430.10. See
42 C.F.R. . 447.252(b). Additionally, 42 C.F.R. .
430.12(c)(1)(ii)
requires that a state plan be amended to reflect
material changes in
state policy or operation of its Medicaid program.
A State plan
amendment can be effective no earlier than the first day of the
calendar
quarter in which an approvable amendment is submitted. See 42
C.F.R. .
447.256(c).. A. There is no
basis for estoppel.
Colorado contended that "sometime in 1982" a HCFA official, who had
the
authority to advise the State regarding the correct format for its
State
plan, gave the State instructions to make its State plan more
general.
Colorado Ex. A (Affidavit of Richard C. Allen). Consequently,
Colorado
alleged that it revised its State plan to remove language which
mirrored
State regulations and to describe its Medicaid program in more
general
terms. Given these instructions, Colorado maintained that, when
it
implemented the HBP in late 1984, it was in no position to know that
it
would be required to describe, in detail, a program with such
an
insignificant fiscal impact on its Medicaid program. Colorado
asserted
that, but for those instructions, it would have included a
detailed
description of the HBP in its State plan. Thus, based on
the
traditional elements of estoppel, Colorado argued that HCFA should
be
estopped from disallowing these funds. Colorado Br. at 1-2.
At the outset we note that estoppel is not available against the
federal
government on the same terms as would apply to private parties.
As we
have stated elsewhere--
There can be no estoppel absent the traditional requirements
of
a misrepresentation of fact, reasonable reliance, and
detriment
to the opposing party. Heckler v. Community Health
Services of
Crawford County, Inc., 467 U.S. 51, 59 (1984); see
also
Tennessee Dept. of Human Services, DAB No. 1054
(1989).
Moreover, estoppel against the federal government, if
available
at all, is presumably not available absent
affirmative
misconduct by the federal government. Schweiker v.
Hansen, 450
U.S. 785 (1981).
Texas Dept. of Human Services, DAB No. 1344 at 9 (1992);
Acadia-Vermillion
Community Action Program, Inc., DAB No. 1201 at 8
(1990).
The Supreme Court has expressed a reluctance to estop the Government.
In
Office of Personnel Management v. Richmond, 496 U.S. 414, 423 (1990),
reh'g
denied, 111 S.Ct. 5 (1990), the Court stated that it would "leave
for another
day whether an estoppel claim could ever succeed against the
Government."
The facts of this case would not support a finding of estoppel even if
the
federal government could be estopped. There is no evidence of
a
misrepresentation of fact by the HCFA official. Colorado's affiant
set
out.the elements of a conversation which occurred "[s]ometime in
1982,"
in which he was told that the State plan should be made "less
specific
and cover only the major features of the reimbursement
system."
Colorado Ex. A. The general nature of this conversation
renders it
incapable of establishing even the most tenuous link between
HCFA's
advice and the implementation of the HBP. Further, the HBP was
not
enacted until at least two years following this conversation. There
is
no evidence that the HBP was raised in this conversation or that
the
alleged statement by the HCFA official was based on knowledge of
the
HBP. Moreover, as we discuss below, a change in a reimbursement
rate is
a material change to the State plan so Colorado could not
reasonably
believe that the comments of the HCFA official could apply to
it.
Further, the State could not reasonably rely on this conversation in
the
manner suggested here. The affiant understood the HCFA official to
be
"responsible for reviewing . . . Medicaid reimbursement state
plans."
Colorado Ex. A. At that time, 45 C.F.R. . 201.3(c) vested state
plan
approval authority in the Regional Medicaid Director. 4/ Clearly,
the
HCFA official did not have plan approval authority.
As in the Schweiker decision quoted above, the key element in a finding
of
estoppel against the federal government is affirmative misconduct.
Absent a
misrepresentation of fact, there is simply no affirmative
misconduct
here.
Finally, in Office of Personnel Management v. Richmond, the Court
ruled
that a government agent cannot obligate the government to pay funds
in
violation of statutory authority. Id. at 424. If we were to
accept
Colorado's position here, we would be authorizing the release of
FFP
based on a reimbursement rate not included in its State plan.
This
would violate sections 1902(a)(13)(A) and 1903(a) of the Act.
For the foregoing reasons, HCFA cannot be estopped.
B. The HBP was a material change to the State plan.
The State did not dispute that the enhanced rate claimed for the
HBP
services differed from that generally available for ICFs/MR under
its
State plan. Rather, it.argued that the most obvious measure of
the
materiality of the HBP relative to its State plan was the amount
of
money involved in that program compared to Colorado's entire
Medicaid
budget. Colorado indicated that the Medicaid expenditure for
the HBP
during the three years in issue amounted to just under 8.5% of
the
State's Medicaid expenditures for any one year. Based on
this
reasoning, Colorado asserted that the enhanced rate for HBP did
not
constitute a material change in its State plan. Colorado Br. at
4-5.
For the reasons set out below, Colorado's arguments are not persuasive.
We have previously found that a change in a state's reimbursement
system
is clearly the type of change in operation or policy envisioned by
42
C.F.R. . 430.12(c)(1)(ii). See Delaware Dept. of Health and
Social
Services, DAB No. 1166 (1990). Our holding in Delaware applies
here as
well. As indicated above, section 1902(a)(13) of the Act
requires a
state to make assurances satisfactory to the Secretary that
its
reimbursement rates are reasonable and adequate to meet the costs
which
must be incurred by efficiently and economically operated
ICFs/MR. By
changing its ICF/MR reimbursement rates to accommodate the
HBP, Colorado
abandoned its previous assurances that the rates contained in
its
approved State plan were reasonable and adequate. Having made
those
assurances under its pre-HBP State plan, it follows that a
subsequent
rate change would require similar assurances. In other
words, submittal
of a plan amendment was needed here to allow HCFA to
determine whether
the plan continues to meet the requirements for
approval.
Further, Colorado indicated that the HBP was implemented by
regulation.
Colorado Br. at 3. Thus, the very manner in which the HBP
was
implemented belies Colorado's contention that the program did
not
represent a material change to its Medicaid reimbursement system.
Finally, we are not persuaded by Colorado's argument that since
the
federal funding associated with the HBP represented only a
small
percentage of Colorado's annual FFP for Medicaid, the HBP was not
a
material change to its State plan. We note at the outset that we
could
hardly consider an expenditure in excess of $325,000
insignificant. Any
change in a state's rate impacts on federal
funding. A change which
increases a previously established and approved
rate provides a state
with federal funding not envisioned by its state plan
and thus not
approved by HCFA. It is well-established that where.a
state pays a
provider at a rate in excess of that established by its approved
state
plan, the federal share of that excess constitutes an
overpayment
subject to disallowance. California at 4. As we have
noted, allowing a
state to unilaterally engage in ad hoc revisions to its
Medicaid payment
rate methodology violates the clear statutory mandate that
the rates be
part of a state plan approved by the Federal government.
See
Massachusetts Dept. of Public Welfare, DAB No. 853 at 7, n.7
(1987).
Consequently, even though the State might consider the impact of the
HBP
to be insubstantial, the law clearly dictates a finding that
the
disallowance should be sustained.
We therefore sustain HCFA's disallowance of $327,464 in FFP claimed
by
Colorado at an enhanced payment rate.
II. Eye care costs
The Colorado State Hospital in Pueblo (CSH) provides a variety of
clinical
medical services to ICF/MR residents in the Pueblo Regional
Center
(PRC). HCFA found that, from 1988 through 1990, PRC claimed
FFP
for the costs of visits to eye, optical and refraction clinics at
CSH.
Noting that Colorado's State plan specifically precluded
Medicaid
reimbursement for eye examinations as well as eyeglasses and
repairs,
HCFA disallowed Colorado's claim for $10,509 in FFP for eye care
costs
for those three years. See HCFA Ex. 3 at 5; Notice of
Disallowance,
Board Docket No. A-92-181 (June 3, 1992).
Colorado did not dispute HCFA's assertion that its State plan did
not
include reimbursement for eye care costs. Rather, as with the
HBP
costs, Colorado asserted that the insignificant amount of FFP
claimed
for eye care should have precluded the need for a State plan
amendment
addressing these costs. Colorado also asserted that
regulations at 42
C.F.R. .. 442.47, 442.338(a) and 442.342 (1988)
specifically require an
ICF/MR to provide preventative health care services,
including eye care,
to its residents. Consequently, Colorado argued,
the disallowance
should be reversed. Colorado Br. at 6.
Colorado's arguments are not persuasive. As we noted earlier,
only
services set out in an approved state plan are eligible for
federal
reimbursement under Medicaid. The eye care services in question
were
not included in Colorado's State plan. In fact, included in
the
Colorado State plan's list of specific services not eligible
for
Medicaid reimbursement are eye examinations, eyeglasses
and
repairs..Finally, Colorado's reliance on the Medicaid regulations at
42
C.F.R. .. 442.47, 442.338(a) and 442.342 is misplaced.
Sections
442.338(a) and 442.342 are found in Part 42, Subpart F which is
entitled
"Standards for Intermediate Care Facilities Other Than Facilities
for
the Mentally Retarded." This subpart provides the regulatory
authority
under which the Secretary prescribes standards for care, safety
and
sanitation in ICFs other than ICFs/MR. See 42 C.F.R. .
442.300.
Colorado did not dispute that the costs in issue involved
services
provided in an ICF/MR. These regulations are clearly
inapplicable to
ICFs/MR and the State cited no other regulation that would
require
reimbursement here. 5/
HCFA's disallowance of $10,509 in FFP claimed by Colorado for eye
care
costs was therefore correct.
Conclusion
Based on the preceding analysis, we sustain HCFA's disallowance of
FFP
claimed by Colorado for the HBP and eye care costs in the revised
amount
of $337,973.
_________________________
Donald
F. Garrett
_________________________
Norval
D. (John) Settle
_________________________
M.
Terry Johnson
Presiding Board Member
1. Colorado's request for joint consideration of the appeals
was
granted on July 1, 1992.
2. We use the term "enhanced rate" in this decision, as the
parties
did, to refer to a rate of reimbursement higher than that which
Colorado
established for ICFs/MR in its State plan. It should not be
confused
with an enhanced percentage of federal reimbursement for
medical
assistance above the Federal medical assistance percentage
specifically
authorized by statute. See section 1903(a) of the
Act. There is no
issue here that the services in question could qualify
for an enhanced
percentage of federal funding.
3. Effective October 1, 1988, Colorado's Medicaid State Plan
was
amended to reflect the enhanced rate for HBP services.
4. Since 1988 this authority lies with the HCFA Regional
Administrator.
42 C.F.R. . 430.15(b). See 53 Fed. Reg. 36571
(September 21, 1988).
5. There is no regulation at 42 C.F.R. . 442.47 and we have been
unable
to determine what regulation the State