Louisiana Department of Health and Human Resources, DAB No. 979 (1988) DEPARTMENTAL GRANT APPEALS BOARD Department of Health and Human Services SUBJECT: Louisiana Department DATE: August 25, 1988 of Health and Human Resources Docket No. 87-201 Decision No. 979 DECISION The Louisiana Department of Health and Human Resources (State) appealed a determination by the Regional Administrator, Health Care Financing Administration (Agency), disallowing $141,580 in federal financial participation (FFP) claimed by the State under Title XIX of the Social Security Act (Medicaid). The FFP claims were for payments made by the State to a provider of transportation services, Arcadian Ambulance, for the period October 1, 1985 through May 21, 1986. Based on the record in this case, which includes the tape of a telephone hearing, we find that the State claimed FFP in vendor payments for ambulance transportation services which did not meet the requirements of its state plan. Therefore, we uphold the Agency's disallowance because the State has claimed FFP in expenditures for services which were not covered under its state plan. See 42 C.F.R. 440.2(b). However, we find that the disallowance amount must be recalculated consistent with a general Department of Health and Human Services (Department or HHS) policy concerning sample-based disallowances. Applicable Authority Section 1903(a)(1) of the Social Security Act authorizes payment of a percentage of the total amount expended for medical assistance under an approved Medicaid state plan. The Medicaid program regulation at 42 C.F.R. 431.53 requires that a state's Medicaid plan specify that the state "will assure necessary transportation for recipients to and from providers" of medical care. A state may meet this requirement by providing coverage of transportation as an optional item of service included in "medical assistance" when furnished by a provider to whom the state makes a direct vendor payment. 42 C.F.R. 440.170(a). In the present case, the State uses ambulance companies as providers of transportation services. The regulations provide that the state plan must describe the methods that will be used to meet the transportation requirement. A state must follow its approved state plan in order to receive FFP for the costs of any claimed expenditures. See 42 C.F.R. 431.53(a) and (b) and 440.2(b). The Louisiana state plan sets specific conditions relating to the payment of vendor claims for emergency and non-emergency medical transportation. We describe below the portions of the state plan which pertain to this case. See State Ex. C. Under its plan, the State makes a vendor payment for emergency medical transportation service one way to the nearest appropriate hospital where the emergency nature of the transportation is verified by a physician or other designated medical professional. For Medicaid recipients who are also beneficiaries of the supplemental insurance program under Part B of Title XVIII of the Social Security Act (Medicare), a physician's verification is required. The state plan requires that non-emergency medical transportation by ambulance be medically necessary, and it provides for a pre-authorization process. The state plan envisions that at least two days notice will be given the State prior to the needed transportation service; however, the State attempts to arrange for transportation even without the two-day notification. Prior to authorizing transportation by ambulance, a State worker must have a physician's oral or written certification that an ambulance is the medically necessary mode of transportation. The State worker then issues to the transportation provider an authorization form for the needed service. The only exception to the state plan's non-emergency transportation pre-authorization requirement relates to Medicare Part B beneficiaries. Pre-authorization for ambulance transportation is not required by the state plan for Medicare Part B beneficiaries for transportation to or from a hospital or skilled nursing facility since this service is covered by Medicare. After payment by Medicare, Medicaid pays the coinsurance and/or deductible, which would otherwise be the responsibility of the recipient. Background The Agency reviewed claims for ambulance services for both non-emergency and emergency transportation to determine if such services were provided in accordance with the approved state plan and, therefore, were eligible for FFP. Payments to Arcadian Ambulance were chosen for review because it submitted 64 percent of the ambulance transportation claims and received 70 percent of the total payments made by the State during a base period when no other transportation provider received more than 5 percent of the total amount paid. See "Review of Ambulance Transportation Claims" at State Ex. G; Agency brief, p. 2. The Agency reviewed a random sample of 299 claims submitted by Arcadian Ambulance and determined that 62 of them were not paid in accordance with the State's Medicaid plan requirements. The Agency found that the 62 claims fell into various categories, based on the requirements of the state plan. The Agency notified the State of its findings and listed these disallowed claims by category in six attachments to its final review report, designated Attachments A through F. In a telephone hearing on June 2, 1988, the State conceded the validity of the disallowed claims on Attachments B and F; thus, we affirm without discussion the Agency's findings on those claims. Therefore, we discuss below only the claims listed on the four remaining attachments, which were: Attachment A - Non-emergency claims without prior authorization and/or medical necessity determination for use of ambulance. (37 claims) Attachment C - Emergency certification not completed by M.D. (10 claims) Attachment D - Item 15 "hospital to hospital transfer" not completed. (8 claims) Attachment E - Prior authorization after date of service. (3 claims) Discussion As mentioned above, the applicable statute and regulations provide FFP only for expenditures for services covered in a state plan. Further, this Board has said that a state's burden to document expenditures and make expenditures in accordance with its state plan is an affirmative one, and the Board has no basis to forgive a state's failure based on a "good faith effort" to administer the program as a whole. New Hampshire Division of Human Resources, DGAB No. 583 (1984). The Act provides for submission and approval of a state plan in order to provide a process whereby the procedures a state proposes to use in administering its Medicaid program can be reviewed by the Agency for conformity with statutory and regulatory requirements. As we said in New Jersey Dept. of Human Services, DGAB No. 396 (1983), at p. 11: The methods specified in the plan were approved upon approval of the plan itself; use of other methods would have required a plan amendment. Approval of the state plan meant approval of the procedures within the plan, which we find the State was obligated to follow. We discuss separately below the attachments and the State's failure to follow its applicable state plan requirement in each instance. Attachment A On Attachment A, the Agency listed 37 non-emergency claims that it found had no prior authorization and/or medical necessity determination for the use of an ambulance. The Agency found that this was primarily the result of the State's routinely using the Medicare Part B exception for all Medicare Part B eligible beneficiaries. The Agency stated that, while two or three of the claims were for recipients who were eligible only for Medicaid, most, if not all, of the remaining claims were for Medicare Part B beneficiaries where the claims had been previously denied by Medicare. In general, these claims had been denied by Medicare because they were not the type of ambulance service covered by Medicare. (With a few exceptions not relevant here, Medicare covers only ambulance transportation to or from a hospital or to or from a skilled nursing facility). The Agency found that non-emergency ambulance services were being routinely used for dialysis, X-rays, and office visits, without a certification of medical necessity and/or the State's prior authorization. The State acknowledged that for Medicare Part B beneficiaries, at the time these transportation services were provided, it did not require its parish offices to authorize such services or to obtain a physician's oral or written certification of medical necessity, even though the state plan required this unless the exception applied. During this period, the State required the vendors to submit all claims pertaining to Medicare beneficiaries who were also Medicaid recipients to the Medicare intermediary even when the service was not covered by Medicare. (Claims for services to such dually eligible individuals are called crossover claims.) The State argued that because at one time the Medicare intermediary had required a doctor's statement to be attached to all claims, its state plan pre-authorization and medical necessity determination requirements were thereby met for crossover claims. The State said that after a change in intermediaries occurred, the new intermediary did not require doctors' statements to be attached to the bills submitted by the transportation providers. The State took steps to correct its procedures after the disallowance period. The State submitted two exhibits to support its position. The State's exhibit M, dated February 6, 1987, indicated that effective February 15, 1987, a doctor's statement had to be attached to each claim. Further, the State's exhibit U, dated August 10, 1987, documented a meeting with the Agency and additional changes that the State had agreed to make. However, the State admitted that between the time the intermediary changed and the State took corrective action, it paid these claims, even though there were no State pre-authorizations and/or certifications of medical necessity as required by the state plan. The State did not provide any argument or evidence for the disallowed Medicaid-only claims. Further, the State did not deny that it had misused the Medicare Part B exception process. Instead, the State submitted certifications, which we discuss below, that it maintained met the state plan's requirement. The State urged reversal of the disallowance based on the after-the-fact certifications and its action to correct the problem with crossover claims. There is no dispute that the state plan requires certain specific procedures for prior authorization by the State for use of Medicaid funds for non-emergency medical transportation by ambulance. State Ex. C, Item 18(a). The only exception to this procedure provided for in the state plan is when the Medicaid recipient is also a Medicare Part B beneficiary who requires ambulance transportation to or from a hospital or skilled nursing facility. The State admitted that it had relied on the transportation provider's billing to the Medicare intermediary as satisfying the state plan requirements for all of its non-emergency transportation for crossover claims, even if the Medicare Part B exception provision did not apply. We find that the State's practice was to pay a provider's claim although the state plan's prior authorization process had not been followed. In a belated attempt to document that these claims were allowable under its state plan, the State provided medical transportation certification forms. State Ex. A. The certifications were signed and dated, purportedly by physicians, in 1987, approximately 1 1/2 years after the services in question were provided. (The State submitted a few forms that were undated and/or unsigned.) The forms do no more than restate the State's unsubstantiated categorization of the claims as medically necessary; they do not show that a determination of medical necessity was made before the services were provided. The State did not submit any contemporaneous documentation of prior authorization for these non-emergency ambulance trips. Based on the State's failure to comply with the prior authorization and medical necessity requirements detailed in its state plan, we find that FFP is not available in the State's payments for these claims. See 42 C.F.R. 440.2(b). Although the State argued that it took steps to rectify its procedures, that does not cure the defect in these claims since, in actuality, the State's corrective action was taken after the period in question here. The non-contemporaneous documentation supplied by the State does not show that the State complied with the prior-authorization procedures specified in its state plan. Attachment C On Attachment C, the Agency listed ten emergency transportation claims that it found had no physician's certification of the medical necessity of the emergency transportation services, as required by the state plan for Medicaid recipients who have Medicare Part B coverage. The State did not dispute that the claim forms did not contain the necessary certification. Rather, the State maintained that, with the exception of one claim, it has submitted subsequent certification of the emergency nature of the service. State brief, p. 6; State Ex. A. The State appeared to argue that these certifications should be sufficient under its state plan. The Agency rejected the State's after-the-fact documentation, noting that the state plan requires verification of emergency transportation before payment to the provider is made. The Agency argued that to accept these certifications would "render meaningless" the procedures established for such claims in the state plan. We agree. Not only are the certifications facially inadequate for the purpose submitted here (as explained in the discussion of the claims on Attachment A, some of the certifications are unsigned and undated), but the state plan requires that verification of the emergency occur before the vendor payment. Attachment 3.1-A, Item 17(a), of the Louisiana State Plan provides, in part: (1) Emergency Medical Transportation * * * Vendor payment shall be made for Emergency Medical Transportation as subject to the following conditions: * * * * (B) The medical necessity of the emergency medical transportation service is verified by (1) a physician (for Medicaid eligibles who have Medicare Part B coverage, this verification is mandatory); * * * * On the face of the plan provision, the Agency appears reasonable in arguing that the clear language requires verification before vendor payment; in any event, the State never argued explicitly otherwise. Essentially, the State merely presented documentation which it alleged was after-the-fact verification. Assuming arguendo that the state plan provision on its face did not resolve the issue, we still would not be persuaded by the only two alternative arguments which we can infer from the State's enigmatic presentation. One argument would be that the words of the provision do not explicitly require contemporaneous verification. Our response is that the common sense of the state plan provision, as well as the State's own implementation of it, does. To read the provision otherwise would mean that the plan provision contemplates some process of ineligible payments accompanied by recoupment. This would be an absurd reading. Indeed, the State's form shows that this was not the State's own reading; the form contemplated obtaining the verification prior to payment. The State did not argue that it had, in fact, interpreted its plan differently. The second argument we might infer from the State's presentation is that even if the plan required pre-payment verification, there was an implied right of after-the-fact "correction". Aside from suffering from the same infirmities as the first argument, this would drive a giant loophole in the plan provision that simply is not reasonable in the absence of explicit supporting language. Again, and in short, the State has offered nothing substantial in support of an alternative reading to the plain meaning of the state plan provision in question -- that verification must precede provider payment. Therefore, FFP is not available in State payments for these claims. Attachment D The eight sample claims disallowed on Attachment D involved claims for transportation from one hospital to another. In its appeal file, the Agency submitted the State form used by providers for billing for ambulance transportation services. Agency Ex. B. The Agency disallowed these claims because Item number 15 of that form, "Hospital to Hospital Transfer Due To", was not completed. In the Agency's view, since Item 15 had been left blank, the State had not documented that it met the requirements of its state plan. The State relied, once again, on after-the-fact certifications as to the emergency nature of the transport. State Ex. A. The state plan, however, provides that emergency medical transportation service is provided one way to the nearest appropriate hospital. The state plan also provides that: The equipment, its personnel, and its capabilities to provide the services necessary to support the required medical care designates the hospital as appropriate. State Ex. C, Item 17(a). Consequently, in order to support such an emergency transfer, the claim must document that the initial hospital was inappropriate due to its equipment, personnel or other inability to provide the required medical care. There is no dispute that the claims submitted to the State did not document compliance with that requirement of the state plan, since the form did not contain the reason for the transfer. See Agency Ex. B. The State's after-the-fact certifications are faulty as well. This non-contemporaneous documentation does not state the reason for the hospital transfers. Thus, the State's documentation is simply not responsive to the basis for the Agency's disallowance. We therefore affirm the Agency's finding that the claims on this attachment were not paid in accordance with the state plan. Thus, FFP is not available in State payments for these claims. Attachment E The last attachment at issue, Attachment E, listed three non-emergency claims which the Agency disallowed because the authorization was apparently made after the date of the service. The Agency used the date of the parish office worker's signature on the provider claim forms as the date of the authorization. The State argued that the authorization for these non-emergency transportation claims was given orally by the parish worker to the provider prior to the service being provided. The State maintained that the date listed on the claim form is the date that the State office worker completed the form and had nothing to do with the authorization process. State brief, p. 7; June 2, 1988 Telephone Hearing. Even assuming that the state plan contemplates oral prior authorizations, this does not alleviate the State's responsibility to document that authorization. In past decisions, the Board has found that a grantee has the burden of documenting the allowability of its claim. See Indiana Dept. of Public Welfare, DGAB No. 772 (1986); 42 C.F.R 431.17 (1985). This burden does not diminish because of the type of original authorization. In this case, the State presented nothing to substantiate the alleged prior authorizations. The State argued that its Title XIX procedures give the State worker up to two days in which to provide the signed form to the service provider so that sometimes the form is not given to the provider until after the date of service. The fact that the worker has two days to give the form to the provider, however, does not excuse the State's failure to document that the authorization was, in fact, given prior to the service being provided. Without evidence that the state plan requirement of prior authorization was met, we must affirm the disallowance of FFP in payments for these claims. Other Issues In addition to the arguments by the parties regarding the specific attachments discussed above, additional issues arose during the development of this case, which we now discuss. In its initial brief, the State argued that the errors made by the State were "technical errors" as opposed to "erroneous payments." Thus, asserted the State, these were "valid claims with most of the deficiencies in documentation . . . corrected." State brief, p. 4. The State cited the definitions at 42 C.F.R. 431.804(b) to support its position. We find that the regulation at 42 C.F.R. 431.804 is inapplicable. The definitions there pertain to the Medicaid quality control system. Specifically, section 431.804(a)(1) defines the purpose of this section: This section establishes rules and procedures for disallowing Federal financial participation (FFP) in erroneous medical assistance payments due to eligibility and beneficiary liability errors, as detected through the Medicaid quality control (MQC) system required under section 431.800. (Emphasis added.) The regulation's stated purpose clearly indicates that the definitions cited by the State were intended to apply to the Medicaid quality control system requirements. We are not dealing here with a quality control sample of erroneous payments resulting from recipient eligibility errors or beneficiary liability errors. Rather, the claims involved in this case involve state plan requirements for payment of vendor claims. The types of "errors" made by the State are neither related to the recipient's eligibility nor do they logically relate to any of the errors defined as technical in the regulation at 42 C.F.R. 431.804(b) ("technical errors means errors in eligibility conditions" such as work incentive program requirements). The regulation, on its face, simply does not apply here. We, therefore, reject the State's argument. Finally, the last issue raised in this appeal concerned the computation of the disallowance amount. In the Review of Ambulance Transportation Claims, State Ex. G, pp. 3-4, the Agency reviewers said: We computed confidence limits of the mean error for the 90th percent confidence level based on statistical sampling data. This analysis showed that at the 90 percent confidence level, the overpayment ranged from a lower limit of $186,753 ($119,167 FFP) to an upper limit of $296,672 ($189,306 FFP). The Federal share was computed using an FMAP of 63.81. The point estimate (which is the mid-point between the upper and lower limit) was calculated at $241,713 ($154,237 FFP). Based on the reviewers' calculations, the Agency disallowed an amount which was the point estimate. The State argued that the Agency should have used the lower limit value rather than the point estimate. The Agency maintained that the lower limit value would have favored the State and, similarly, that the upper limit value would have favored the Agency; therefore, the Agency chose the point estimate as a balance. The Agency asserted that this method is reasonable, and that there is no "wrong" figure anywhere between the lower and the upper limit. Agency's June 23, 1988 submission, p. 1. Absent any other consideration, we likely would agree with the Agency. After all, assuming the sampling methodology is otherwise valid, using the point estimate means the parties are equally sharing the risk that the unknown true value is higher or lower. However, there is another factor which we cannot ignore: there is a general, Department-wide audit policy which, if applied to the facts here, would result in use of the lower limit value (or other recalculation). The Office of Inspector General (OIG) in HHS frequently performs audits of HHS-funded programs, and often uses statistical sampling. Based on our experience with many disputes involving sampling-based disallowances, we take notice of the fact that OIG auditors have considerable experience and substantial expertise in the application of sampling methodology. In a memorandum to all Regional Audit Directors dated April 22, 1980, the Acting Assistant Inspector General for Auditing articulated standards for determining amounts of disallowances. It is undisputed that these standards remain in effect. A simple calculation shows that these standards would not allow the use of the point estimate in the facts of this case. The OIG standards do not appear to be specifically binding on the Agency here, and we suppose the Agency could announce a policy in regulations or guidelines which established and explained a different policy. But in the absence of any such general official stance, it would appear arbitrary for one part of the Department to ignore long-standing standards of the part of the Department with the most experience and expertise in the use of statistical sampling. Thus, while the OIG standards may not provide the only answer to the question of what the disallowance amount should be, the existence of the OIG standards effectively placed a burden on the Agency to justify a deviation from those standards. This in part involves a factual issue of how much deviation there is; here, we note that the amounts of the sampled claims ranged from $1.50 to over $200.00 and that the sampling error was substantial (as noted, the sampling error may have been as much as 45 percent of the point estimate, or over four times as much as the OIG standards would allow). In this context, the Agency's justification for use of the point estimate -- which essentially was only that the point estimate seemed more fair -- is too insubstantial to withstand a challenge of arbitrariness. Therefore, while we sustain the disallowance, we find that the Agency has not in this case justified the use of the point estimate and, accordingly, the disallowance amount should be reduced. Conclusion Based on the foregoing, we uphold the Agency's disallowance in principle, subject to the reduction discussed at pages 11 to 13. ________________________________ Judith A. Ballard ________________________________ Norval D. (John) Settle ________________________________ Cecilia Sparks Ford Presiding Board