[Federal Register Volume 61, Number 44 (Tuesday, March 5, 1996)]
[Notices]
[Pages 8629-8630]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-5001]



-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES-
Health Care Financing Administration


Notice of Hearing: Reconsideration of Disapproval of Pennsylvania 
State Plan Amendment (SPA)

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Notice of hearing.

-----------------------------------------------------------------------

SUMMARY: This notice announces an administrative hearing on April 10, 
1996; 10:00 a.m. in Room 5020; 3535 Market Street, Philadelphia, 
Pennsylvania to reconsider our decision to disapprove Pennsylvania SPA 
94-17.

CLOSING DATE: Requests to participate in the hearing as a party must be 
received by the presiding officer by March 20, 1996.
FOR FURTHER INFORMATION CONTACT: Stan Katz, Presiding Officer, HCFA, 
C1-04-27, 7500 Security Boulevard, Baltimore, Maryland 21224-1850, 
Telephone: (410) 786-2661.

SUPPLEMENTARY INFORMATION: This notice announces an administrative 
hearing to reconsider our decision to disapprove Pennsylvania State 
plan amendment (SPA) number 94-17.
    Section 1116 of the Social Security Act (the Act) and 42 CFR, Part 
430 establish Department procedures that provide an administrative 
hearing for reconsideration of a disapproval of a State plan or plan 
amendment. The Health Care Financing Administration (HCFA) is required 
to publish a copy of the notice to a State Medicaid agency that informs 
the agency of the time and place of the hearing and the issues to be 
considered. If we subsequently notify the agency of additional issues 
that will be considered at the hearing, we will also publish that 
notice.
    Any individual or group that wants to participate in the hearing as 
a party must petition the presiding officer within 15 days after 
publication of this notice, in accordance with the requirements 
contained at 42 CFR 430.76(b)(2). Any interested person or organization 
that wants to participate as amicus curiae must petition the presiding 
officer before the hearing begins in accordance with the requirements 
contained at 42 CFR 430.76(c). If the hearing is later rescheduled, the 
presiding officer will notify all participants.
    Pennsylvania submitted SPA 94-17 for approval on December 29, 1995. 
The issues involved in this reconsideration are as follows: (1) The 
revised supplement submitted with SPA 94-17 provides for DSH payments 
to county nursing facilities prior to the proposed effective date of 
the plan amendment in violation of federal law at 42 CFR 447.256(c); 
(2) federal appropriations law, as interpreted by HCFA prohibit the 
``retroactive payment adjustments'' which would be authorized under SPA 
94-17; (3) the Department failed to publish adequate public notice in 
advance of the alleged change in its payment methods in accordance with 
the requirements at 42 CFR 447.205(c); and (4) the Department did not 
submit adequate information in support of its Medicare upper limit 
assurance at 42 CFR 447.272 and 447.253(b)(2).
    In this plan amendment, the State of Pennsylvania revises 
significantly the State's nursing facility payment plan methodology to 
provide the formula for calculating a ``disproportionate share'' 
payment to county nursing facilities for State fiscal years (SFYs) 
1993, 1994, and 1995.
    These ``disproportionate share'' payments to county nursing 
facilities began in SFY 1991 and were continued in SFY 1992 under an 
approved State plan amendment. The State has revised significantly its 
nursing facility payment methodology three times since then (SFYs 1993, 
1994 and 1995), but did not amend the State plan concerning these 
payments before the payments were made. Since Pennsylvania sought 
approval of a payment adjustment that was earlier than permissible 
under long-standing regulatory provisions governing effective dates for 
plan amendments, HCFA disapproved the amendment.

Issue Regarding Effective Date of Payment Adjustments

    Federal regulations at 42 CFR 447.256 specify that an approved 
state plan amendment becomes effective not earlier than the first day 
of the calendar quarter in which an approvable amendment is submitted. 
This amendment was submitted on December 29, 1994. Consequently, the 
earliest date for which Federal financial participation would be 
available for ``disproportionate share'' payments made under this 
amendment, if approved, was October 1, 1994. Even though this is the 
proposed effective date for SPA 94-17 requested by the State, this 
amendment could not be approved, as it would provide for retroactive 
``disproportionate share'' payments for periods prior to the proposed 
effective date.
    Pennsylvania's retroactive payment adjustments are also prohibited 
by the Department's appropriations law. The appropriations law provides 
that Medicaid payments may be made for any quarter with respect to 
state plan amendments which are in effect in that quarter, and which 
were submitted in, or prior to, that quarter and approved in that, or 
any later quarter. HCFA has interpreted this to mean that there can be 
no retroactive payments for any plan amendment which could result in an 
increase in Medicaid payments. If approved, this amendment would have 
increased Medicaid payments in quarters prior to the quarter in which 
the amendment was submitted; therefore, HCFA had no choice but to 
disapprove this SPA.

Issue Regarding Public Notice

    Federal regulations provide that public notice of any significant 
proposed change in methods or standards for setting payment rates must 
be published before the proposed effective date of the change. 
Pennsylvania requested an effective date of October 1, 1994. However, 
the notice published on July 31, 1993, and relied on by the State to 
support the revised ``disproportionate share'' payments for SFY 1995, 
was defective. Even though the July 31, 1993, notice appears to be 
adequate for the SFY 1994 revised payment methodology, it is not 
sufficient for the SFY 1995 payment methodology because it did not 
contain an estimate of the expected increases in annual expenditures 
for SFY 1995, as required by Federal rules. Pennsylvania did not submit 
a plan amendment for 

[[Page 8630]]
SFY 1995 payments in accordance with the effective date rules of 42 CFR 
447.256(c). Therefore, the State's retroactive payment adjustments are 
not eligible for Federal financial participation.
    While the State did publish notice of the SFY 1993 and 1994 
adjustments, the State had indicated that public notice is not required 
because this amendment did not represent a significant change in the 
methods and standards for setting payment rates. HCFA disagreed. Since 
the State's currently approved plan provides for a nursing facility 
payment methodology for ``disproportionate share'' payments for SFYs 
1991 and 1992 only, the State does not have methods or standards to 
presently authorize making such payments. Accordingly, the submission 
of this amendment, that established a new methodology in that a 
different percentage of medical assistance cost is used to determine 
the ``disproportionate share'' payments to county nursing facilities 
for SFYs 1993, 1994, and 1995, is a significant change for setting 
payment rates that must comply with the public notice requirements of 
42 CFR 447.205(c).

Issue Regarding the Upper Limit

    The State has not provided sufficient documentation in support of 
its assurance that the Medicare upper limit will not be exceeded 
because it did not incorporate the ``disproportionate share'' payments 
in the upper limit calculation. Pennsylvania was correct in stating 
that Federal law does not prohibit these payments; however, the State 
must establish that its payment rates, including these additional 
payments, meet the requirements of 42 CFR 447.253(b)(2) and 447.272. 
These two references state that aggregate Medicaid payments, to nursing 
facilities, will not exceed the amount that can reasonably be estimated 
to have been paid for those services under the Medicare payment 
principles.

Issue Regarding ``Deemed Approval''

    The State contends TN 94-17 was deemed approved by operation of law 
because it did not receive HCFA's request for additional information 
within 90 days of HCFA's receipt of the State's amendment. The 
applicable regulations at 42 CFR 447.256(b) state that if HCFA does not 
send notice to the State of its determination as to whether the 
assurances regarding a State plan amendment are acceptable within 90 
days of the date HCFA receives the amendment, the assurances and the 
amendment will be deemed approved. In this case, the assurances and 
related rate information were received by HCFA on January 3, 1995, 
making the 90th day April 3, 1995. As HCFA requested additional 
information regarding the proposed amendment by letter dated March 31, 
1995, the 90-day requirement was met. The State's response, dated 
August 23, 1995, indicated that HCFA's request for additional 
information was postmarked April 5, 1995, and received on April 7, 
1995. By letter dated September 19, 1995, the Philadelphia Regional 
Office notified the State that the 90-day requirement does not require 
that the State receive HCFA's response within 90 days. Because the 
Regional Office sent the response on March 31, 1995, it informed the 
State that the 90-day requirement had been met and that the amendment 
was not deemed approved.
    The deficiencies described above allowed HCFA no choice but to 
recommend disapproval of Pennsylvania 94-17.
    The notice to Pennsylvania announcing an administrative hearing to 
reconsider the disapproval of its SPA reads as follows:

Ms. Feather O. Houstoun,
Secretary, Department of Public Welfare, Health and Welfare 
Building, P.O. Box 2675, Harrisburg, Pennsylvania 17120

    Dear Ms. Houstoun: I am responding to your request for 
reconsideration of the decision to disapprove Pennsylvania State 
Plan Amendment (SPA) 94-17.
    Pennsylvania submitted SPA 94-17 for approval on December 29, 
1994. The issues involved in this reconsideration are as follows: 
(1) the revised supplement submitted with SPA 94-17 provides for DSH 
payments to county nursing facilities prior to the proposed 
effective date of the plan amendment in violation of federal law at 
42 CFR 447.256(c); (2) Federal appropriations law, as interpreted by 
HCFA prohibit the ``retroactive payment adjustments'' which would be 
authorized under SPA 94-17; (3) the State failed to publish adequate 
public notice in advance of the alleged change in its payment 
methods in accordance with the requirements at 42 CFR 447.205(c); 
and (4) the State did not submit adequate information in support of 
its Medicare upper limit assurance at 42 CFR 447.272 and 
447.253(b)(2).
    I am scheduling a hearing on your request for reconsideration to 
be held on April 10, 1996, on the Fifth Floor; Room 5020; 3535 
Market Street; Philadelphia, Pennsylvania. If this date is not 
acceptable, we would be glad to set another date that is mutually 
agreeable to the parties. The hearing will be governed by the 
procedures prescribed at 42 CFR Part 430.
I am designating Mr. Stanley Katz as the presiding officer. If these 
arrangements present any problems, please contact the presiding 
officer. In order to facilitate any communication which may be 
necessary between the parties to the hearing, please notify the 
presiding officer to indicate acceptability of the hearing date that 
has been scheduled and provide names of the individuals who will 
represent the State at the hearing. The presiding officer may be 
reached at (410) 786-2661.
    Sincerely,
Bruce C. Vladeck,
Administrator.
(Section 1116 of the Social Security Act (42 U.S.C. section 1316); 
42 CFR section 430.18)

(Catalog of Federal Domestic Assistance Program No. 13.714, Medicaid 
Assistance Program)

Dated: February 23, 1996.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.
[FR Doc. 96-5001 Filed 3-4-96; 8:45 am]
BILLING CODE 4120-01-P