[Federal Register Volume 69, Number 166 (Friday, August 27, 2004)]
[Notices]
[Pages 52708-52710]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-19574]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services


Notice of Hearing: Reconsideration of Disapproval of Minnesota's 
Medicaid State Plan Amendment 03-06

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Notice of hearing.

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SUMMARY: This notice announces an administrative hearing on October 21, 
2004, at 10 a.m., 233 North Michigan Avenue,Suite 600; RE-6E Board 
Room; Chicago, Illinois 60601 to reconsider our decision to disapprove 
Minnesota State PlanAmendment (SPA) 03-06.

DATES: Requests to participate in the hearing as a party must be 
received by the presiding officer by September 13, 2004.

FOR FURTHER INFORMATION CONTACT: Kathleen Scully-Hayes; Presiding 
Officer,CMS,Lord Baltimore Drive,Mail Stop: LB-23-20,Baltimore, 
Maryland 21244,Telephone: 410-786-2055.

SUPPLEMENTARY INFORMATION: This notice announces an administrative 
hearing to reconsider our decision to disapprove Minnesota's Medicaid 
State Plan Amendment (SPA) 03-06. This SPA was submitted on March 31, 
2003, with a proposed effective date of January 1, 2003. This amendment 
would modify the State's reimbursement methodology for nursing facility 
services. Specifically, it would increase a disproportionate share 
nursing facility add-on made to 14 of the State's county-owned nursing 
facilities. The Centers for Medicare & Medicaid Services (CMS) was 
unable to approve SPA 03-06 because the State did not document that the 
proposed payment methodology, in combination with funding requirements 
under section 4.19 D of the State's plan, meet the conditions specified 
in sections 1902(a)(2), 1902(a)(30)(A), and 1902(a)(19) of the Social 
Security Act (the Act) and are consistent with the overall Federal-
state financial partnership under title XIX of the Act.
    In formal requests for additional information and several 
subsequent discussions, CMS asked that the State describe any transfers 
of funds between providers and State or local governments, and indicate 
whether the providers kept 100 percent of the total computable funds 
given as Medicaid payments. The State did not provide the requested 
information on transfers of funds between providers and local 
governments, nor did it indicate that the providers keep 100 percent of 
the total computable funds given as Medicaid payments.
    The State provided information about the flow of funds between the 
State and local governments and from the State to providers. However, 
the State did not provide information about the flow of funds from 
providers to the State or to local governments. This information is 
necessary in order to validate the funding sources of the non-Federal 
share of Medicaid payments and to determine the appropriateness of the 
payment levels. If providers refund part or all of the Medicaid 
payments to the State or its political subdivisions, the proposed 
payment rate would not reflect the net expenditure by the State, and 
the net non-Federal share would not meet the requirements of section 
1902(a)(2) of the Act. Moreover, if such refunds are made by providers, 
it is an indication that the full payment amount is not required to 
ensure Medicaid beneficiaries access to the providers' services. The 
result is that payments under this section of the plan would not be in 
compliance with the requirement under section 1902(a)(30)(A) of the Act 
that payment rates must be consistent with ``efficiency, economy, and 
quality of care.''
    Since the State has not provided the necessary information 
regarding provider payment retention, CMS could not find that SPA 03-06 
is consistent with the requirement of section 1902(a)(19) of the Act 
that requires that care and services will be provided consistent with 
``simplicity of administration and the best interests of the 
recipients.'' The best interest of recipients is not served by a 
proposed payment structure that would divert Medicaid payments from the 
providers to the State and shift financial burdens from the State to 
the Federal

[[Page 52709]]

Government. The best interest of recipients requires that the full 
amount of Medicaid payments should be available to support access to 
quality care and services. Furthermore, SPA 03-06 was not consistent 
with the requirements for a State plan that are set forth in the 
regulations implementing section 1902(a) of the Act. Under 42 CFR 
430.10, the State plan must contain all the information necessary for 
CMS to determine whether the plan can serve as a basis for Federal 
financial participation (FFP) availability under section 1903(a)(1) of 
the Act. CMS could not determine whether the proposed plan amendment 
sets forth a payment methodology that could be a basis for FFP without 
information about whether providers refund payments and, if so, whether 
these refunds are offset against expenditures as an applicable credit.
    Moreover, absent the requested information, the State did not 
document whether the proposed payment methodology set forth under SPA 
03-06 is consistent with the basic Federal and State financial 
partnership of the Medicaid program set forth by the Congress. Section 
1905(b) of the Act specifies how the Federal medical assistance 
percentage will be calculated for states. This section clearly sets 
forth how the financial partnership of the Medicaid program should 
operate, including a definition of the required non-Federal 
expenditure. The requested information is necessary to determine 
whether the proposed payments under SPA 03-06 would accurately reflect 
net expenditures with a sufficient non-Federal share consistent with 
the Federal and State financial partnership set forth in section 
1905(b) of the Act.
    For these reasons, and after consultation with the Secretary as 
required by Federal regulations at 42 CFR 430.15, CMS disapproved this 
SPA.
    Section 1116 of the Act and 42 CFR, part 430 establish Departmental 
procedures that provide an administrative hearing for reconsideration 
of a disapproval of a State plan or plan amendment. CMS 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. Therefore, based on the 
reasoning set forth above, and after consultation with the Secretary as 
required under 42 CFR 430.15(c)(2), CMS disapproved Minnesota SPA 03-
06.
    The notice to Minnesota announcing an administrative hearing to 
reconsider the disapproval of its SPA reads as follows:

Ms. Mary Kennedy, Medical Director, Department of Human Services, 
444 Lafayette Road, St. Paul, MN 55155-3852.
Dear Ms. Kennedy: Minnesota submitted State Plan Amendment (SPA) 03-
06 on March 31, 2003, with a proposed effective date of January 1, 
2003. This amendment proposes to modify the State's reimbursement 
methodology for nursing facility services. Specifically, this 
amendment increases a disproportionate share nursing facility add-on 
made to 14 of the State's county-owned nursing facilities. The 
Centers for Medicare & Medicaid Services (CMS) was unable to approve 
SPA 03-06 because the State did not document that the proposed 
payment methodology, in combination with funding requirements under 
section 4.19 D of the State's plan, meet the conditions specified in 
sections 1902(a)(2), 1902(a)(30)(A), and 1902(a)(19) of the Social 
Security Act (the Act) and are consistent with the overall Federal-
state financial partnership under title XIX of the Act.
    In formal requests for additional information and several 
subsequent discussions, CMS asked that the State describe any 
transfers of funds between providers and State or local governments, 
and indicate whether the providers keep 100 percent of the total 
computable funds given as Medicaid payments. The State did not 
provide the requested information on transfers of funds between 
providers and local governments, nor did it indicate that the 
providers keep 100 percent of the total computable funds given as 
Medicaid payments.
    The State provided information about the flow of funds between 
the State and local governments and from the State to providers. 
However, the State did not provide information about the flow of 
funds from providers to the State or to local governments. This 
information is necessary in order to validate the funding sources of 
the non-Federal share of Medicaid payments and to determine the 
appropriateness of the payment levels. If providers refund part or 
all of the Medicaid payments to the State or its political 
subdivisions, the proposed payment rate would not reflect the net 
expenditure by the State, and the net non-Federal share would not 
meet the requirements of section 1902(a)(2) of the Act. Moreover, if 
such refunds are made by providers, it is an indication that the 
full payment amount is not required to ensure Medicaid beneficiaries 
access to the providers' services. The result is that payments under 
this section of the plan would not be in compliance with the 
requirement under section 1902(a)(30)(A) of the Act that payment 
rates must be consistent with ``efficiency, economy, and quality of 
care.''
    Since the State did not provide the necessary information 
regarding provider payment retention, CMS could not find that SPA 
03-06 is consistent with the requirement of section 1902(a)(19) of 
the Act that care and services are consistent with ``simplicity of 
administration and the best interests of the recipients.'' The best 
interest of recipients is not served by a proposed payment structure 
that would divert Medicaid payments from the providers to the State 
and shift financial burdens from the State to the Federal 
Government. The best interest of recipients requires that the full 
amount of Medicaid payments are available to support access to 
quality care and services. Furthermore, SPA 03-06 is not consistent 
with the requirements for a State plan that are set forth in the 
regulations implementing section 1902(a) of the Act. Under 42 CFR 
430.10, the State plan must contain all the information necessary 
for CMS to determine whether the plan can serve as a basis for 
Federal financial participation (FFP) that would be available under 
section 1903(a)(1) of the Act. CMS cannot determine whether the 
proposed plan amendment sets forth a payment methodology that could 
be a basis for FFP without information about whether providers 
refund payments and, if so, whether these refunds are offset against 
expenditures as an applicable credit.
    Moreover, absent the requested information, the State did not 
document whether the proposed payment methodology set forth under 
SPA 03-06 is consistent with the basic Federal and State financial 
partnership of the Medicaid program set forth by the Congress. 
Section 1905(b) of the Act specifies how the Federal medical 
assistance percentage will be calculated for states. This section 
clearly sets forth how the financial partnership of the Medicaid 
program should operate, including a definition of the required non-
Federal expenditure. The requested information is necessary to 
determine whether the proposed payments under SPA 03-06 would 
accurately reflect net expenditures with a sufficient non-Federal 
share consistent with the Federal and State financial partnership 
set forth in section 1905(b) of the Act.
    For these reasons, and after consultation with the Secretary as 
required by 42 CFR 430.15(c)(2), CMS disapproved Minnesota SPA 03-
06.
    I am scheduling a hearing on your request for reconsideration to 
be held on October 21, 2004, at 10 a.m., at 233 North Michigan 
Avenue, Suite 600, RE-6E Board Room, Chicago, Illinois 60601. 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 Ms. Kathleen Scully-Hayes as the presiding 
officer. If these

[[Page 52710]]

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) 786-2055.
    Sincerely,
Mark B. McClellan, M.D., Ph.D.

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: August 18, 2004.
Mark B. McClellan,
Administrator, Centers for Medicare & Medicaid Services.
[FR Doc. 04-19574 Filed 8-26-04; 8:45 am]
BILLING CODE 4120-03-P