United States District Court, D. Columbia.
[Copyrighted Material Omitted]
For GEORGIA DEPARTMENT OF COMMUNITY HEALTH, Plaintiff: Carolyn Frances Corwin, Paige M. Jennings, Caroline Montrose Brown, COVINGTON & BURLING LLP, Washington, DC.
For UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, CENTERS FOR MEDICARE AND MEDICAID SERVICES, KATHLEEN SEBELIUS, Secretary of the United States Department of Health and Human Services, in her official capacity, MARILYN B. TAVENNER, Administrator for the Centers for Medicare and Medicaid Services, in her official capacity, Defendants: Peter C. Pfaffenroth, LEAD ATTORNEY, U.S. ATTORNEY'S OFFICE, Civil Division, Washington, DC.
Gladys Kessler, United States District Judge.
Plaintiff Georgia Department of Community Health (" Georgia" ) brings this suit against Defendants United States Department of Health and Human Services (" HHS" ), Centers for Medicare & Medicaid Services (" CMS" ), Kathleen Sebelius, in her official capacity as Secretary of HHS, and Marilyn Tavenner, in her official capacity as Administrator for CMS (collectively, " Defendants." ), to recover $90,050,230 that Georgia erroneously credited to CMS in 2005 and 2006.
This matter is before the Court on Cross-Motions for Summary Judgment [Dkt. Nos. 13 & 14]. Upon consideration of the Motions, Oppositions [ Dkt. Nos. 15 & 16], Replies [ Dkt. Nos. 18 & 19], the entire record herein, and for the reasons stated below, Plaintiff's Motion for Summary Judgment is granted in part and denied in part and Defendants' Cross-Motion
for Summary Judgment is granted in part and denied in part.
A. Statutory Background
1. Medicaid Expenditures
Title XIX of the Social Security Act (" SSA" ), commonly referred to as Medicaid, is a cooperative federal-state program that provides medical assistance to low-income families and individuals. 42 U.S.C. § 1396 et seq. The program is administered by the states and overseen by CMS. See id.; 42 C.F.R. § 430.0. If certain requirements are met, a state is eligible to receive federal funds for a percentage of its Medicaid program expenditures. 42 U.S.C. § 1396(a). The bulk of a state's Medicaid expenditures consist of payments to medical providers for health care services provided to program beneficiaries. 42 C.F.R. § 430.0.
The federal portion of the funds -- " Federal financial participation" (" FFP" ) -- is paid to the states on a quarterly basis. See 42 U.S.C. § 1396b(a). Forty-five days before the start of each quarter, the state submits a form CMS-37, which contains the state's estimated Medicaid funding expenses for the upcoming quarter. 42 C.F.R. 430.30(b). The federal government, through CNS, provides the state with a " grant award," which is similar to a line of credit. The grant award authorizes the state to draw federal funds as needed over the course of the quarter to pay the federal share of the state's Medicaid disbursements. Id. at 430.30(d).
Within 30 days after the end of the quarter, the state must submit to CMS a Quarterly Statement of Expenditures (" QSE" ), also known as a form CMS-64. Id. at§ 430.30(c)(1). Unlike the CMS-37, which contains predicted expenditures, the QSE is an " accounting of actual recorded expenditures" for the quarter. Id. at § 430.30(c)(2). The QSE details and reconciles how the federal grant award monies were spent.
In addition to the most recent quarter's expenditures, the QSE contains several entries for " increasing" or " decreasing" adjustments to claims from prior quarters. Such adjustments are necessary because, for a number of reasons, a state is not always able to present a complete, accurate, or otherwise final accounting within 30-days of the end of the most recent quarter. In such circumstances, a state uses a later quarter's QSE to adjust retroactively, either up or down, expenditure amounts reported in the earlier quarter's QSE or the federal share claimed with respect to those expenditures. 42 U.S.C. 1396b(d).
2. Two-year Limitations Period
Section 1132 of the SSA (codified at 42 U.S.C. § 1320b-2(a)) provides for a two-year window during which states are permitted to file claims for expenditures. The Secretary of HHS has also issued implementing Regulations. See 45 C.F.R. § § 95.1-.34. They state that " [CMS] will pay a State for a State agency expenditure only if the State files a claim with [CMS] for that expenditure within 2 years after the calendar quarter in which the State agency made the expenditure." Id. § 95.7. Claims made for expenditures after the two-year period has expired are " disallowed" and not paid.
There are exceptions to the two-year period for court-ordered retroactive payments, audit exceptions, and adjustments to prior year costs, 42 U.S.C. § 1320b-2 (a), as well as " [a]ny claim for which the Secretary decides there was good cause." 45 C.F.R. § 95.19. " [N]eglect or administrative inadequacy" on the part of a state does not constitute good cause. 45 C.F.R. § 95.22.
An " overpayment" is defined as " the amount paid by a Medicaid agency to a provider which is in excess of the amount that is allowable for services furnished and which is required to be refunded " 42 C.F.R. § 433.304. Stated differently, an overpayment is a payment by a state to a medical provider that is impermissible and therefore not eligible for FFP under the state's Medicaid plan.
When a state has claimed FFP for a medical provider payment that is later determined to constitute an overpayment, the state must return to CMS the federal share of the amount overpaid. The state has sixty days in which to return the federal share of the overpayment to CMS, regardless of whether the state has recovered the overpayment from the medical provider. See 42 C. F. R. 433.312. The return of an overpayment is effectuated by listing the credit in the QSE (line 10.C). See 42 C.F.R. § 433.320. This is considered a " decreasing adjustment."
If, after a state has credited CMS with the federal share of an overpayment, that overpayment is later adjusted downward, the state may reclaim the amount of the downward adjustment on the next QSE. 42 C.F.R. § 433.320(c). In other words, if the state later realizes that the amount it overpaid a medical provider is less than it previously thought, and that it therefore over-credited CMS, it may reclaim the appropriate portion of the credit. The two-year filing limit does not apply to downward adjustments of overpayments, as the " downward adjustment is not considered a retroactive claim but rather a reclaiming of costs previously claimed." Id.
B. Factual Background
The parties have no disagreement about the facts that led to Georgia's inadvertent credit of $90,050,230 to CMS and CMS's subsequent refusal to refund the money. In 2003, Georgia launched a new Medicaid Management Information System (" MMIS" ) to process claims submitted by providers. Georgia Dep't of Cmty. Health, HHS Departmental Appeals Board (" DAB" or " the Board" ) No. 2521, 5-6 (Jun. 28, 2013) [hereinafter DAB No. 2521]. The new system suffered from severe problems that resulted in significant delays in paying providers. Georgia received numerous complaints from providers that they could not continue to operate without payment. Id.
In response to this crisis and to ensure the availability of medical services for Georgia's Medicaid recipients, Georgia proposed, and CMS agreed, that until the MMIS issues were resolved, Georgia could make " advance" payments to providers prior to the submission and processing of payment claims for the services. Id. at 6. It was understood that the advance payments would later be matched and reconciled with actual payment claims once MMIS could process them. Between April 1, 2003, and June 30, 2005, Georgia made approximately $2 billion in advance payments to providers under this arrangement. Id.
For its own internal accounting purposes, Georgia classified the advance payments as " provider receivables" (i.e. money to be recouped from Medicaid providers). For purposes of the QSE, Georgia reported the advance payments as current-quarter expenditures. DAB No. 2521 at 6; Georgia Mot. at 7.
Advance payments that were not matched and reconciled with provider claims within 60 days were treated as overpayments. Just as with standard overpayments, Georgia had to refund the federal share of the advance payments to CMS after 60 days. The refund to CMS was listed as a decreasing adjustment on line 10.C of the QSE (along with any other overpayments unrelated to Georgia's MMIS problems). DAB No. 2521 at 6.
If, after Georgia had refunded the federal share to CMS, the advance payments were reconciled with medical provider claims, Georgia would report the reconciled amounts as " other" expenditures on its current-quarter QSE. Id. This procedure allowed Georgia to receive payment for the federal share of the reconciled expenditures, which it had previously and erroneously refunded back to CMS. This procedure was also consistent with how Georgia routinely reported reconciliations of the routine 60-day provider receivables. Dubberly Decl. ¶ 8.
In 2005, Georgia decided to include the federal share of its provider receivables balance -- $45,025,115.09 -- as a liability on its financial statement for State fiscal year (" SFY" ) 2005. DAB No. 2521 at 6. Of this amount, $37,402,375.33 represented the federal share of provider receivables that had already been refunded to CMS (as required) as decreasing adjustments on QSEs submitted between 1989 and June 2005. The majority of the $37.4 million related to refunds to CMS of advance payments made between 2003 and 2005 in response to Georgia's MMI S problems. Id. The remaining $7,622,739.76 represented provider receivables that were less than 60 days old and for which there was not yet any obligation to refund the federal share. Id. at 7.
In the process of preparing its SFY 2005 statements, Georgia inadvertently included the $45,025,115.09 (" $45 million" ) provider receivables balance in its decreasing adjustment on the QSE for the quarter ended September 30, 2005 (" September 2005 QSE" ). Id. This mistake had the effect of re-crediting to CMS $37.4 million that had been previously credited from 1989 to June 2005. It was also premature to credit the $7.6 million to CMS, as the receivables were less than 60 days old. Georgia Mot. at 9.
While preparing its financial statements for SFY 2006, Georgia again inadvertently credited the $45 million to CMS, this time on the QSE for the quarter ended June 30, 2006 (" June 2006 QSE" ). Georgia Mot. at 9; DAB No. 2521 at 7-8.
Combined, Georgia erroneously credited CMS $90,050,230 between 2005 and 2006 (" $90 million" ). Georgia did not realize its errors until 2008, when issues identified by its external auditor triggered an in-depth internal review of its financial records and prior QSEs. DAB No. 2521 at 8. It was during this review ...