[Federal Register: December 10, 2004 (Volume 69, Number 237)]
[Notices]
[Page 71817-71818]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10de04-73]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
Notice of Hearing: Reconsideration of Disapproval of Oklahoma
State Plan Amendment (SPA) 03-26
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Notice of hearing.
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SUMMARY: This notice announces an administrative hearing on January 14,
2005, at 10 a.m., 1301 Young Street, Room 1113, Dallas, Texas 75202, to
reconsider our decision to disapprove Oklahoma's Medicaid State Plan
Amendment (SPA) 03-26.
DATES: Requests to participate in the hearing as a party must be
received by the presiding officer by December 27, 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 CMS' decision to disapprove Oklahoma's Medicaid
State Plan Amendment (SPA) 03-26.
Oklahoma submitted SPA 03-26 on January 2, 2004. This SPA would
modify language regarding the rate-setting process for inpatient and
outpatient hospital services. Specifically, this SPA would provide for
supplemental payments to hospitals located in hospital districts
pursuant to the Oklahoma Hospitals Public Trust and Authority Act.
The Centers for Medicare & Medicaid Services (CMS) was unable to
approve SPA 03-26 because the SPA did not comply with sections 1902(a),
1902 (a)(19), 1903(w), and 1905(b) of the Social Security Act (the
Act).
The payments proposed under SPA 03-26 would be funded through
transfers from the Tulsa Hospital Public Trust Authority (THPTA) that
CMS has determined are not consistent with the provisions of sections
1903(w)(1) and 1902(a) of the Act. Although the State has indicated
that State law recognizes any such entity as a ``government entity * *
* with powers of government,'' State law specifically withholds the
governmental powers that are characteristic of a unit of government.
THPTA is an association of hospitals (formed by the action of hospitals
and with a board controlled by hospitals) that has no powers of
taxation, or police or business regulation, and is not a sub-unit of
the State government or any other local government that exercises such
powers. While it has the power to impose assessments on member
hospitals, the State has indicated that Oklahoma law specifically
indicates that this power is not taxation. THPTA more closely resembles
a private association that collects dues from its members. As a result,
CMS has concluded that THPTA is not within the scope of a ``unit of
government,'' and its assessments are not within the scope of ``state
or local taxes'' as those terms are used under section 1903(w)(6) of
the Act. Transfers of funds made by THPTA would thus not qualify for
protected status under section 1903(w)(6)of the Act. Absent protected
status, THPTA is within the definition of a provider-related entity
under section 1903(w)(7) of the Act. As such, the transfers are subject
to the provider-related donation requirements in section 1903(w)(l) of
the Act and the implementing regulations in 42 CFR Part 433. Under
those provisions, because payment of supplemental payments to member
hospitals (the provider class) is contingent upon the receipt of
donations from a provider-related entity, there is a hold harmless
arrangement and the donation is not ``bona fide,'' as set forth in 42
CFR 433.54. Under section 1903(w)(l) of the Act, a donation that is not
bona fide cannot be recognized as the non-Federal share of Medicaid
expenditures that is required under section 1902(a) of the Act.
Nor is SPA 03-26 consistent with the requirement of section
1902(a)(19) of the Act 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
payment structure that is designed primarily to divert Medicaid
payments from the providers to the State, and to shift financial
burdens from the State to the Federal 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.
Finally, section 1905(b) of the Act specifies how the Federal
medical assistance percentage (FMAP) will be calculated for states.
This section clearly illustrates Congress' intentions as to how the
financial partnership of the Medicaid program should operate. The
formula in this cite clearly and explicitly states that the FMAP for
any state shall be 100 per centum less the state percentage, and then
further
[[Page 71818]]
defines how the state percentage is to be determined. Any creative
funding mechanism that effectively increases the FMAP would undermine
the clear direction of Congress. Since Oklahoma proposes to claim
Federal matching funds for payments that are funded through
impermissible donations, CMS must conclude that effective FMAP being
paid to Oklahoma is not consistent with section 1905(b) of the Act, and
that the funding of payments under Oklahoma's Attachments 4.19-A and
4.19-B of its Medicaid State plan does not uphold the basic Federal and
state financial partnership.
For these reasons, and after consulting with the Secretary as
required by 42 CFR 430.15, CMS disapproved this SPA.
Section 1116 of 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. 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 Oklahoma announcing an administrative hearing to
reconsider the disapproval of its SPA reads as follows:
Mr. Jim Hancock,
Director, Health Policy Division, Oklahoma Health Care Authority,
4545 North Lincoln Blvd., Suite 124, Oklahoma City, OK 73105.
Dear Mr. Hancock: I am responding to your request for
reconsideration of the decision to disapprove Oklahoma State Plan
Amendment (SPA) 03-26, which was submitted to the Centers for
Medicare & Medicaid Services (CMS) on January 2, 2004, with a
proposed effective date of January 19, 2004. This SPA would modify
language regarding the rate-setting process for inpatient and
outpatient hospital services. Specifically, this SPA would provide
for supplemental payments to hospitals located in hospital districts
pursuant to the Oklahoma Hospitals Public Trust and Authority Act.
CMS reviewed this proposal, and for the reasons set forth below, was
unable to approve SPA 03-26.
The CMS was unable to approve SPA 03-26 because the SPA did not
comply with sections 1902(a), 1902(a)(19), 1903(w), and 1905(b) of
the Social Security Act (the Act).
The payments proposed under SPA 03-26 would be funded through
transfers from the Tulsa Hospital Public Trust Authority (THPTA)
that CMS has determined are not consistent with the provisions of
sections 1903(w)(1) and 1902(a) of the Act. Although the State has
indicated that State law recognizes any such entity as a
``government entity * * * with powers of government,'' State law
specifically withholds the governmental powers that are
characteristic of a unit of government. THPTA is an association of
hospitals (formed by the action of hospitals and with a board
controlled by hospitals) that has no powers of taxation, or police
or business regulation, and is not a sub-unit of the State
government or any other local government that exercises such powers.
While it has the power to impose assessments on member hospitals,
the State has indicated that Oklahoma law specifically indicates
that this power is not taxation. THPTA more closely resembles a
private association that collects dues from its members.
As a result, CMS has concluded that THPTA is not within the
scope of a ``unit of government,'' and its assessments are not
within the scope of ``state or local taxes'' as those terms are used
under section 1903(w)(6) of the Act. Transfers of funds made by
THPTA would thus not qualify for protected status under section
1903(w)(6) of the Act. Absent protected status, THPTA is within the
definition of a provider-related entity under section 1903(w)(7) of
the Act. As such, the transfers are subject to the provider-related
donation requirements in section 1903(w)(l) of the Act and the
implementing regulations in 42 CFR Part 433.
Under those provisions, because payment of supplemental payments
to member hospitals (the provider class) is contingent upon the
receipt of donations from a provider-related entity, there is a hold
harmless arrangement and the donation is not ``bona fide,'' as set
forth in 42 CFR 433.54. Under section 1903(w)(l) of the Act, a
donation that is not bona fide cannot be recognized as the non-
Federal share of Medicaid expenditures that is required under
section 1902(a) of the Act.
Nor is SPA 03-26 consistent with the requirement of section
1902(a)(19) of the Act 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 payment structure that is designed primarily to
divert Medicaid payments from the providers to the State, and to
shift financial burdens from the State to the Federal 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.
Finally, section 1905(b) of the Act specifies how the Federal
medical assistance percentage (FMAP) will be calculated for states.
This section clearly illustrates Congress' intentions as to how the
financial partnership of the Medicaid program should operate. The
formula in this cite clearly and explicitly states that the FMAP for
any state shall be 100 per centum less the state percentage, and
then further defines how the state percentage is to be determined.
Any creative funding mechanism that effectively increases the FMAP
would undermine the clear direction of Congress. Since Oklahoma
proposes to claim Federal matching funds for payments that are
funded through impermissible donations, CMS must conclude that
effective FMAP being paid to Oklahoma is not consistent with section
1905(b) of the Act, and that the funding of payments under
Oklahoma's Attachments 4.19-A and 4.19-B of its Medicaid State plan
does not uphold the basic Federal and state financial partnership.
For these reasons, and after consulting with the Secretary as
required by 42 CFR 430.15, CMS disapproved this SPA.
I am scheduling a hearing to be held on January 14, 2005, at
10:00 a.m., 1301 Young Street, Room 714, Dallas, Texas 75202, to
reconsider our decision to disapprove Oklahoma SPA 03-26. 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 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: December 3, 2004.
Mark B. McClellan,
Administrator, Centers for Medicare & Medicaid Services.
[FR Doc. 04-27144 Filed 12-9-04; 8:45 am]
BILLING CODE 4120-03-P