[Federal Register Volume 78, Number 87 (Monday, May 6, 2013)]
[Notices]
[Pages 26371-26372]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-10695]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services


Notice of Hearing: Reconsideration of Disapproval of Kentucky 
State Plan Amendments (SPA) 10-007

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

ACTION: Notice of Hearing.

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SUMMARY: This notice announces an administrative hearing to be held on 
June 27, 2013, at the CMS Atlanta Regional Office, Atlanta Federal 
Center, 61 Forsyth Street, South West, Atlanta, Georgia 30303-8909, to 
reconsider CMS' decision to disapprove Kentucky SPA 10-007.
    Closing Date: Requests to participate in the hearing as a party 
must be received by the presiding officer by May 21, 2013.

FOR FURTHER INFORMATION CONTACT: Benjamin Cohen, Presiding Officer, 
CMS, 2520 Lord Baltimore Drive, Suite L, Baltimore, Maryland 21244, 
Telephone: (410) 786-3169.

SUPPLEMENTARY INFORMATION: This notice announces an administrative 
hearing to reconsider CMS's decision to disapprove Kentucky SPA 10-007 
which was submitted on September 30, 2010, and disapproved on April 2, 
2013. The SPA proposed a payment methodology based on actual, incurred, 
costs for services provided by Community Mental Health Clinics (CMHCs).
    At issue in the hearing is whether the proposed cost-based Medicaid 
payment methodology is consistent with the requirements of section 
1902(a)(30)(A) of the Social Security Act (Act) when Kentucky did not 
specifically document that, under the proposed methodology, non-
Medicaid costs would be excluded from the Medicaid payment calculation. 
Specifically, it appears that the methodology would rely on a cost 
reporting mechanism which results in over-allocation of both indirect 
and direct cost to Medicaid services. Specifically, for CMHCs that 
function within a larger parent organization, the state proposed an 
inappropriate transfer of cost from the parent organization to the 
CMHCs. Additionally, the state did not demonstrate that it had an 
acceptable method of allocating practitioner cost between reimbursable 
and non-reimbursable activities.
    Section 1902(a)(30)(A) of the Act requires that states have methods 
and procedures in place to ensure payments are consistent with economy, 
efficiency, and quality of care. Because the proposed payment 
methodology is based on each provider's reconciled cost, CMS requested 
that Kentucky document the cost-finding and provider reporting 
mechanisms used to determine payment. This information would allow CMS 
to ensure that the proposed payment would be limited to amounts 
economic and efficient for covered Medicaid services, and were 
sufficient to ensure quality of care. Upon review of Kentucky's 
response, CMS determined that Kentucky was not able to document that 
its cost reporting mechanism properly allocated cost to Medicaid 
covered services. Specifically, CMS was concerned that Kentucky's 
methodology did not demonstrate the exclusion of costs incurred outside 
of these clinics for non-Medicaid activities and services. CMS worked 
with Kentucky on its cost reporting methodology over an extended period 
of time; however, CMS was not able to resolve questions surrounding the 
issue of including non-Medicaid costs. As a result, CMS could not 
conclude that Kentucky's proposed plan for payment was economic and 
efficient, or consistent with quality of care. In the absence of this 
specific information, CMS could not conclude that the requirements of 
section 1902(a)(30)(A) were satisfied.
    Section 1116 of the Act and federal regulations at 42 CFR Part 430, 
establish Department 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.
    The notice to Kentucky announcing an administrative hearing to 
reconsider the disapproval of its SPA reads as follows:

Mr. Lawrence J. Kissner,
Commissioner,
Cabinet for Health and Family Services,
Department for Medicaid Services,
275 East Main Street, 6W-A,
Frankfort, KY 40621.

Dear Mr. Kissner:

    I am responding to your request for reconsideration of the 
decision to disapprove the Kentucky State Plan Amendment (SPA) 10-
007 which was submitted on September 30, 2010, and disapproved on 
April 2, 2013. The SPA proposed a payment methodology based on 
actual, incurred, costs for services provided by Community Mental 
Health Clinics (CMHCs).
    I disapproved Kentucky SPA 10-007 because I could not conclude 
that it complied with section 1902(a)(30)(A) of the Social Security 
Act (the Act), which requires payments to be consistent with economy 
efficiency and quality of care. In order to meet this requirement, 
the Centers for Medicare & Medicaid Services (CMS) requested that 
Kentucky document the cost-finding and provider reporting mechanisms 
used to determine payment. Upon review of the commonwealth's 
response to CMS's formal Request for Additional Information (RAI), 
CMS determined that Kentucky had not sufficiently documented that 
its cost reporting mechanism properly allocated cost to Medicaid 
covered services by excluding non-Medicaid costs from the Medicaid 
payment calculation.
    The CMS worked with Kentucky on its cost reporting methodology 
over an extended period of time; however, CMS was not able to 
resolve questions surrounding the issue of including non-Medicaid 
costs. As a result, CMS could not conclude that Kentucky's proposed 
plan for payment was economic and efficient, or consistent with 
quality of care. In the absence of this specific information, CMS 
could not conclude that the requirements of section 1902(a)(30)(A) 
of the Act were satisfied.
    At issue in this appeal is whether the proposed cost-based 
Medicaid payment methodology is consistent with the requirements of 
section 1902(a)(30)(A) of the

[[Page 26372]]

Act when Kentucky did not specifically document that, under the 
proposed methodology, non-Medicaid costs would be excluded from the 
Medicaid payment calculation. Specifically, it appears that the 
methodology would rely on a cost reporting mechanism which results 
in over-allocation of both indirect and direct cost to Medicaid 
services. Specifically, for CHMCs that function within a larger 
central office unit, the state proposed an inappropriate transfer of 
cost from the larger central office unit to the CHMCs. Additionally, 
the state did not demonstrate that it had an acceptable method of 
allocating practitioner cost between reimbursable and non-
reimbursable activities.
    I am scheduling a hearing on your request for reconsideration to 
be held on June 27, 2013, at the CMS Atlanta Regional Office, 
Atlanta Federal Center, 61 Forsyth Street, South West, Atlanta, 
Georgia 30303-8909.
    If this date is not acceptable, I would be glad to set another 
date that is mutually agreeable to the parties. The hearing will be 
governed by the procedures prescribed by federal regulations at 42 
CFR Part 430.
    I am designating Mr. Benjamin Cohen as the presiding officer. If 
these arrangements present any problems, please contact Mr. Cohen at 
(410) 786-3169. In order to facilitate any communication that may be 
necessary between the parties prior 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.
Sincerely,

Marilyn Tavenner,
Acting Administrator.

Section 1116 of the Social Security Act (42 U.S.C. 1316; 42 CFR 
430.18)

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

    Dated: April 29, 2013.
Marilyn Tavenner,
Acting Administrator, Centers for Medicare & Medicaid Services.
[FR Doc. 2013-10695 Filed 5-3-13; 8:45 am]
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