HHS Appellate Decision on Texas Health and Human Services Commission

8/8/2019 HHS Appellate Decision on Texas Health and Human Services Commission

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Department of Health and Human Services DEPARTMENTAL APPEALS BOARD

Appellate Division SUBJECT: Texas Heal th and Human DATE: Apr i l 1, 2009

Services CommissionDocket Nos. A-07-32Decis ion No. 2237DECISION

The Texas Heal th and Human Serv ices Commission (Texas o r HHSC)appealed a dete rmina t ion by the Centers fo r Medicare & MedicaidServices (CMS) disa l lowing $1,290,047 in f edera l f inanc ia lpar t i c i pa t i on (FFP) t h a t Texas cla imed as "medical as s i s tance"under th e Medicaid program from September 1, 1997 through August31, 2000. "Med ical ass is tance" i s def ined genera l ly fo r Medicaidpurposes to exclude se rv ices to ind iv idua l s who are res iden t s ofi n s t i t u t ions fo r mental di sease s (IMDs) and a re under th e age of65, but the s t a t u t e provides an except ion fo r " inpa t i en tp sy c h i a t r i c hosp i t a l se rv ices to ind iv idua l s under age 21." CMSdetermined t h a t Texas was sUbmitt ing FFP cla ims fo r medicalse rv ices , provided to IMD res iden t s under th e age of 21, t h a t d idno t qua l i fy for the except ion because th e se rv ices were renderedby providers outs ide of IMDs in which th e ch i ld ren res ided .Texas r a i s e s severa l l e g a l cha l l enges to CMS's pos i t ion t h a t FFPi s ava i l ab le under Medicaid only fo r s e rv ices provided in and bya f a c i l i t y t ha t qua l i f i e s to provide " inpa t i en t psych ia t r i cse rv ices to ind iv idua l s under th e age of 21." Texas recognizes ,however, t h a t th e Board has previous ly re j ec ted s imi la rarguments . Further , ,Texas admits t ha t some of its cla ims are fo rse rv ices t h a t it cannot show were provided as p a r t of th ei n p a t i e n t psych ia t r i c f a c i l i t y se rv ices th e ch i ld ren werer ece iv ing . With i t s i n i t i a l br i e f , however, Texas presentedevidence , based on a sample of the cla ims a t i s sue , which it saysshows t h a t some of the claimed profes s iona l s e rv ices werei npa t i e n t psych ia t r i c se rv ices provided by th e IMDs and weret he re fo re al lowable . In response , CMS quest ioned whether t h i sevidence was s u f f i c i e n t and also whether reimbursement fo r suchclaims would dup l ica te payments made to the IMDs, arguing t h a tthe per diem r a t e fo r th e IMD se rv ices was an a l l - i nc l us i ve r a t e .For the reasons s t a t e d below, we r e j e c t the genera l l e g a lcha l lenges t h a t Texas r a i s e s to CMS's pos i t ion regarding th e IMD


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2 exc lus ion . Thus, we uphold th e disa l lowance of FFP fo r s e rv icesfo r which Texas concedes it has no documentat ion t o e s t a b l i s ht h a t they were provided a t th e IMDs in which the ch i ld renres ided . 1 With r espec t to th e remaining sample claims, weconclude t h a t th e evidence Texas presented shows t ha t a l l butnine of the sample cla ims were fo r eva lua t ion and management,p sy c h i a t r i c , o r c l i n i c a l psychologis t serv ices provided on ani npa t i e n t b a s i s in th e IMDs in which th e ch i ld ren res ided . Thef a c t t h a t the cla ims were submit ted by the profes s iona l s , r a the rthan the IMDs, does no t mean th e IMDs could not a l so reasonab lybe considered to have provided the s e rv ices under th e Medicaidregu la t ions . Texas was permi t ted , under the app i icab le , approvedSta t e plan provis ion and under a waiver t ha t CMS approved, to payfo r profes s iona l s e rv ices provided as p a r t of t he se i n p a t i e n tp sy c h i a t r i c h o sp i t a l se rv ices s epara te ly from th e per diem r a t epa id to th e h o sp i t a l . Nothing in th e Medicaid r egu la t ions o r CMSguidance prec luded such payment being made d i rec t l y to theprofess iona l s . Texas also showed t ha t , contrary to what CMSasse r t ed , the per diem r a t e s paid to th e IMDs were not a l l -i nc lus ive r a t e s t ha t covered the cos t of the profes s iona lse rv ices . CMS has provided no ev iden t ia ry suppor t fo r itsargument t h a t Texas made dup l ica te payments for the se rv ices .Accordingly, we uphold th e disa l lowance i n pa r t and reve rse it inp a r t , in an amount to be determined, cons i s ten t with our dec i s ionbelow.Legal BackgroundTi t l e XIX o f the Act es tab l i shes th e Medicaid program, in whichthe f edera l government and the s t a t e s j o i n t l y share in the cos to f providing hea l th care to low-income persons and f ami l ies . 2Each s t a t e ope ra t e s i t s own Medicaidprogram in accordance withbroad f edera l requirements and the terms of i t s Medicaid s t a t ep lan .

1 Texas es t imated the amount re la ted to these claims to be$722,248.79 . As we di scuss below, however, th e amounts r e l a t e dto a l lowable and unal lowable c la ims must be r eca lcu la ted pursuan tto our dec i s ion .

2 The cur ren t ve rs ion of the Soc ia l Secur i ty Act can befound a t www.ssa.gov!OPHome!ssact!comp-ssa.htm . Each sec t ion o fthe Act on t ha t websi te conta ins a re fe rence to the correspondingUnited St a t e s Code chapte r and sec t ion . Also, a c ross re fe rencet a b l e fo r th e Act and th e United Sta tes Code can be found a t 42U.S.C.A. Ch. 7, Disp Table .
http:///reader/full/722,248.79http://www.ssa.gov%21ophome%21ssact%21comp-ssa.htm/http:///reader/full/722,248.79http://www.ssa.gov%21ophome%21ssact%21comp-ssa.htm/


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3 Sect ion 1903(a) (1) o f th e Act makes FFP ava i lab le on a q u a r t e r l yb a s i s (a t a r a t e ca l l ed th e \ \Federal medica l as s i s t an cepercentage") fo r amounts expended \\as medica l as s i s t an ce underth e Sta te plan .... " The term \\medical as s i s tance" i s def inedin sec t ion 1905(a) o f th e Act . That sec t ion begins by de f in ingth e term to mean payments fo r \\the fo l lowing care and se rv ice s"if they meet ce r ta in condi t ions and are provided to spec i f i ede l i g i b l e ind iv idua l s , and the.n l i s t s va r ious ca tegor ies o fse rv ices t h a t e i t h e r must o r may be covered under a Sta teMedicaid plan . Some o f t he se rv ice ca tegor ies fo r i n p a t i e n ts e r v i ce s inc lude the paren the t i ca l \ \ (o ther than se rv ices in ani n s t i t u t i o n fo r menta l diseases) .,,3 Afte r t he list o f s e r v i ce s ,th e de f in i t i on o f \\medical ass i s tanc e" conta ins the fol lowinglanguage:

[Elxcept as otherwise provided in paragraph (16), suchterm does not i nc lude -

* * *(B) any such payments with re spec t to care or s e rv icesfo r any i nd iv idua l who has not a t t a ined 65 y ea r s o f ageand who i s a pa t i e n t i n an i n s t i t u t i o n fo r mentald iseases .

(Emphasis added.)Paragraph (16) i den t i f i e s (as one o f th e ca tegor ies o f se rv icefo r which payment qua l i f i e s as \\medical ass i s t ance" ) \ \ inpa t ientp sy c h i a t r i c h o sp i t a l se rv ices fo r i nd iv idua l s under age 21, asdef ined in subsec t ion (h) . "Subsec t ion (h ) (1) o f sec t ion 1905 s t a t e s :

For purposes o f paragraph (16) of subsec t ion (a ) , th eterm \ \ inpat ient p s y ch i a t r i c h o s p i t a l s e rv ices fo rind iv idua l s under age 21" inc ludes on ly-

(A) i npa t i en t se rv ices which a re provided in ani n s t i t u t i o n (or d i s t i n c t p a r t the reof) which i s apsych ia t r i c h o s p i t a l . . . o r in ano ther i n p a t i e n ts e t t i ng tha t the Secre ta ry has spec i f i ed in

3 The term \ \ ins t i tu t ion fo r mental diseases" i s def ined insubsec t ion 1905(i ) o f th e Act to mean \\a hosp i t a l , nurs ingf a c i l i t y , o r o th e r i n s t i t u t i o n o f more than 16 beds , t h a t i sp r imar i l y engaged in providing diagnos is , t rea tment , o r ca re o fpersons wi th menta l di sease s , inc lud ing medica l a t t e n t ion ,nurs ing care , and r e l a t e d se rv ices . "


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5 t he re and rece ive t rea tment o r se rv ices provided the re t h a t a reappropr ia te t o h i s requirements ." 42 C.F.R. 435.1009.Sec t ion 440.160 de f ines " [ i ]npa t i en t psych ia t r i c se rv ices fo rind iv idua l s under age 21" to mean se rv ices t h a t

(a) Are provided under th e d i r e c t i o n of a phys ic ian;(b ) Are provided by -(1) A psych ia t r i c hosp i ta l o r an i npa t i en t psych ia t r i cprogram in a hosp i t a l , accred i ted by th e Jo i n tCommission on Accred i t a t ion o f Heal thcare Organiza t ions ,

o r (2) A psych ia t r i c f a c i l i t y which i s accred i ted by th eJo i n t Commission on Accredi ta t ion of Heal thcareOrgan iza t ions , th e Council on Accred i t a t ion ofRehab i l i t a t ion F a c i l i t i e s , o r by any o th e r accred i t ingorganizat ion , with comparable s tandards , t ha t i srecognized by the S t a ~ e . (c) Meet th e requirements in 441.151 o f t h i ssubchap ter .

(Emphasis added.) Sect ion 441.151 conta ins genera l requirementsfo r i npa t i e n t psych ia t r i c se rv ices fo r ind iv idua l s under age 21.Other provis ions in subpar t D of pa r t 441 of 42 C.F.R. exp la ino ther requirements from sec t ion 1905(h) of the Act ."Active t rea tment" means implementation of an ind iv idua l plan o fcare , meet ing spec i f i ed requirements . 42 C.F.R. 441.154. Thep lan must be "based on a diagnos t ic eva lua t ion t ha t inc ludesexaminat ion of the medical , psycho log ica l , so c i a l , behaviora l anddevelopmental aspec t s of th e r ec i p i en t ' s s i t ua t ion . " 42 C.F.R. 441.155. The plan must be "developed by an i n t e rd i s c ip l ina ryteam of phys ic i ans and o ther personne l who are employed by, o rprovide se rv ices t o pa t i e n t s in , th e f a c i l i t y . " 42 C.F.R. 441.156 (emphasis added) . The team must inc lude , as a minimum,a Board-e l ig ib le o r Board-cer t i f i ed ps yc h ia t r i s t ; a c l i n i c a lpsycho log i s t who has a doc to ra l degree and a phys ic ian l i censedt o p r a c t i c e medicine o r osteopathy; o r a l icensed phys ic ian withspec ia l i zed t r a in ing and exper ience in the d iagnos is andt r ea tment o f mental d iseases , and a psychologis t who has amaste r ' s degree in c l i n i c a l psychology o r has been c e r t i f i e d byth e s t a t e o r by the s t a t e psycho log ica l as soc ia t ion . Id .Case BackgroundThe Office o f the Inspec to r Genera l (OIG) of the f edera lDepartment of Heal th and Human Services conducted an audi t todetermine whether Texas had con t ro l s in place to prevent it from


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6 claiming FFP under Medicaid fo r "medical se rv ices , excepti npa t i e n t psych ia t r i c se rv ices , provided to [IMD] res iden t s underth e age of 21." TX Ex. 1, Execut ive Sununary. The aud i to r s foundt h a t the Medicaid Management Information System opera ted by ~ h e Nat iona l Her i t age Insurance Company (which was the Texasadmin is t r a t ive con t rac to r a t the t ime) did not have e d i t s o rmechanisms " to d e t e c t and preven t FFP from being cla imed fo r IMDr e s i d e n t s under th e age of 21." Id .The aud i to rs examined cla ims fo r s e rv ices during th e pe r iodSeptember 1, 1997 through August 31, 2000. The aud i to r s focusedon 27 pr iva t e and 10 State-operated psych ia t r i c h o sp i t a l s ,ob ta in ing l i s t s of the Medica id-e l ig ib le res iden t s under the ageo f 21 admit ted to th e hosp i t a l s during th e au d i t pe r iod . Theaud i to rs "used computer progranuning to match the r e s ide n t s ' IMDadmission and discharge da tes to the Medicaid payments toide n t i f y payments fo r s e rv ices t ha t were provided during th e t imethe ind iv idua l was a r e s id en t of the IMD, and thus unal lowablefo r FFP." Id . a t 2. The au d i t r epor t s t a t e s : "Any cla ims fo ri npa t i e n t psych ia t r i c se rv ices were then removed, as they a rea l lowable fo r IMD res iden t s under the age of 21." Id . Theaud i to rs found t ha t Texas had improper ly cla imed $1,290,047 inFFP.Based on the aud i t repor t , CMS disal lowed $1,290,047 in FFP fo rpayments t h a t CMS descr ibed as cla ims fo r "ou tpa t ien t h o sp i t a l ,phys ic i an , l abora to ry , pharmacy, and t ranspor t a t ion se rv icesrendered by prov ide rs outs ide of th e psych ia t r i c f a c i l i t y . " TXEx. 2, a t 1 . CMS based th e disa l lowance on i t s reading of theIMD exc lus ion and its except ion, and the implementingr e gu la t i ons . , CMS reads those prov i s ions to mean t ha t FFP i sava i l ab le fo r s e rv ices provided to a Medicaid r e c ip i e n t under theage of 21 who r es ides in an IMD (and has not been uncondi t ional lyre leased) only if those se rv ices qua l i fy as " inpa t i en tp sy c h i a t r i c f a c i l i t y se rv ices fo r ind iv idua l s under the age of21" as def ined in sec t ion 440.160. In o ther words, CMS reads th es t a tu t e and r egu la t ions to mean t ha t FFP i s not ava i l ab le fo rse rv ices to ind iv idua l s under th e age of 21 who res ide in IMDsun les s the s e rv ices a re provided in and by a qua l i fy ing IMD.Texas appealed the CMS dete rmina t ion . Afte r a s t ay in which thep a r t i e s t r i e d unsuccessful ly to resolve the case , th e Board s e t abr i e f ing schedule . CMS's br i e f ra i sed fo r the f i r s t t ime ani s sue regarding whether the IMDs received an "a l l - i n c l u s i v e "re imbursement r a t e . Texas objec ted to t h i s in its r ep ly b r i e f .The Board then s e t procedures to ensure t h a t Texas had anadequate oppor tun i ty to supplement i t s r ep ly and evidence toaddress th e new i s sue , and th e par t i e s j o i n t l y requested fu r t h e r


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ex tens ions o f t ime . Texas then presented fu r the r evidence andargument to show t ha t its approved Sta te plan and f edera l andSt a t e r egu la t ions permi t ted it to separa te ly re imbursep r o f e s s io n a l s fo r s e rv ices provided as pa r t of i n p a t i e n tp sy c h i a t r i c se rv ices , and t ha t th e cos t s of those se rv ices werenot inc luded in th e IMDs' p e r diem r a t e s . eMS f i l ed a su r rep lyand Texas f i l ed a response .Analys isBelow, we f i r s t address th e arguments Texas made about th e l e g a lpremises fo r th e disa l lowance . We then discuss the evidenceTexas submit ted to show t ha t some o f the c la ims disa l lowed werenot , a s eMS a s s e r t s , fo r se rv ices provided ou t s ide o f t he IMDs inwhich the ch i ld ren res ided , but in s tead were fo r s e rv ices t h a ta re a l lowable i npa t i en t p sych ia t r i c hosp i ta l s e rv ices . F ina l ly ,we address eMS's argument t ha t the IMDs were pa id an a l l -i n c lu s iv e r a t e .I . eMS i s correct regarding the scope o f the general IMD

exc lus ion and i t s exception.A. This Board has prev ious ly upheld eMS's reading basedon the p la in language o f i t he Medicaid s ta tu t e and

o ther f ac tor s .Previous Board dec i s ions have upheld eMS's pos i t ion on th e scopeo f FFP ava i l ab le fo r s e rv ices to ch i ld ren in IMDs. New YorkSt a t e Dept . of Heal th , DAB No. 2066 (2007); Virg in ia Dept. ofMedical Assis tance DAB No. 2222 (2008) . .The Board ' s majorreasons fo r upholding eMS's pos i t ion in those cases were: eMS's reading of the Act i s based on th e p la in wordingof the IMD exc lus ion and of the except ion fo r " i n p a t i e n tpsych ia t r i c h o s p i t a l s e rv ices fo r ind iv idua l s under age21." While sec t ion 1905(a) of th e Act de f ine s the term"medica l as s i s tance" as meaning payment fo r th e l i s t e dcovered se rv ices , it goes on to say t ha t the term does

not inc lude "any such payments" fo r any ind iv idua l underage 65 who i s a pa t i e n t i n an IMD "except as o therwiseprovided in paragraph (16) ." That paragraph in t u rnprovides fo r payment only fo r " inpa t i en t p sych ia t r i chosp i t a l se rv ices fo r ind iv idua l s under age 21" asdef ined in subsec t ion 1905(h) of the Act .


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Subsect ion 1905(h) de f ines " inpa t i en t psych ia t r i chosp i t a l se rv ices fo r i nd iv idua l s under age 2111 toinc lude "only" c e r t a i n inpa t i en t se rv ices provided in aqua l i fy ing psyc h ia t r i c hosp i ta l (or d i s t i n c t p a r tthe reof) or o ther qua l i fy ing i n p a t i e n t s e t t i n g . Theimplementing r egu la t ions def ine the term to inc lude onlyi n p a t i e n t se rv ices provided by a qual i fy ing h o sp i t a l ,hosp i t a l program, o r f a c i l i t y . Thus, th e Act and th er egu la t ions do i n d i ca t e t ha t th e excep t ion makes FFPava i l ab le only fo r s e rv ices provided in and by th equa l i fy ing IMD.

The s t a t u t e and l eg i s l a t i ve h i s t o ry confirm t h a tCongress in tended to exclude payment fo r a l l s e r v i c e ~ , inc luding medica l se rv ices , provided to ind iv idua l sunder age 65 i n s t i t u t i ona l i z e d in IMDs because th es t a t e s had t r ad i t i ona l l y been respons ib le for suchs e r v i ce s . Nei ther th e s t a t u t e nor its l eg i s l a t i veh i s to ry sugges t tha t , in crea t ing th e excep t ion to t h a texc lus ion , Congress in tended to assume r e s pons ib i l i t yfo r a l l Medicaid se rv ices provided to ch i ld reni n s t i tu t i o n a l i z e d i n qua l i fy ing IMDs, no mat te r whoprovided them. Indeed, th e except ion was narrowlyt a i l o r e d to ensure t h a t the covered i n p a t i e n tpsych ia t r i c se rv ices would promote ac t ive t rea tment in as e t t i n g meeting fede ra l s tandards . The l eg i s l a t i veh i s t o ry o f th e except ion i s cons i s ten t with CMS'sread ing o f the s t a tu to ry language to mean t ha t Congressin tended fo r Medicaid to assume r e s pons ib i l i t y only fo rth e ca tegory of se rv ices defined in subsec t ion 1905(h) .

CMS po l icy i ssuances have fo r over ten years c l e a r ly s e tout CMS's i n t e rp r e t a t i on tha t th e except ion does n otmake FFP ava i lab le fo r non ins t i tu t iona l se rv icesprovided out s ide o f . the qua l i fy ing IMD by o th e rprov ide rs .

While the expec ta t ion i s t h a t an IMD t ha t qua l i f i e s fo rth e except ion w i l l provide care and se rv ices to meet th ec h i l d ' s medica l needs, t ha t does not mean t h a t FFP i sava i l ab le fo r medica l se rv ices provided by o th e rhosp i t a l o r non-hospi ta l providers outs ide o f th e IMD.

Texas acknowledges t ha t th e Board has prev ious ly upheld CMS ont h i s i s sue , and we incorpora te i n to t h i s dec is ion our f u l lana lys i s from our p r i o r dec i s ions . We next turn to th e argumentsTexas made about why we should recons ider our p r i o r ana lys i s andexp la in below why those arguments a re n ot pe rsuas ive .


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9 B. Texas ' re l iance on the l eg i s l a t i ve h i s t o r y o f th e

except ion i s misplaced.Texas submits t h a t th e i n t e n t o f th e 1972 Amendments c r ea t i n g th eexcept ion to th e IMD exc lus ion fo r i nd iv idua l s under th e age o f21 (and in some i n s t ances up to 22 ) "was to c l a r i f y t h a t th es t a t e could provide those ind iv idua l s with psych ia t r i c hosp i t a lse rv ices in add i t ion to , r a t h e r than in l i eu of , the o thermedical se rv ices a l ready provided to t ha t popula t ion ." TX Br. a t8-9 . According to Texas, th e l eg i s l a t i ve h i s t o ry o f th eexcept ion i nd ica tes t ha t Congress in tended to add funding fo ri npa t i e n t care of menta l ly ill ch i ld ren , and no mention was madeo f e l imina t ing benef i t s fo r which these ch i ld ren were a l readye l i g i b l e . TX B r. a t 9-10, c i t i ng and quot ing from H.R. Conf.

92 nd 2ndRep. 1605, Congo Sess . (1972); 118 Congo Rec. 32472,92 nd 2nd32477; S. Rep. No. 1230, Congo Sess . (1972) .

This argument miss ta tes th e s t a tus of ch i ld ren such as those a ti s sue here p r i o r to the 1972 Amendments. Under th e genera l IMDexc lus ion , the s t a tus o f chi ldren i n s t i t u t i ona l i z e d in an IMDsuch a s a psych ia t r i c h o s p i t a l was t h a t no FFP was ava i l ab leunder Medicaid fo r any se rv ices provided to th e ch i ld ren . "Forthose ch i ld ren , th e genera l IMD exc lus ion had th e e f f e c t o fexcluding from th e term "medical as s i s tance" any payment fo rs e r v i ce s to th e i n s t i t u t i ona l i z e d ch i ld ren , whether they wereprovided i n s ide o r out s ide of th e hosp i t a l .Thus, th e s ta tements in th e l e g i s l a t i v e h i s t o ry o f th e 1972Amendments do no t suppor t th e pos i t ion taken by Texas , much l e s sove r r ide the p l a i n language of th e s t a t u t e regard ing whats e r v i ce s Congress in tended to cover .

C. CMS's pos i t ion does no t c o n f l i c t with the prov i s ionsof the Ac t re qu i r ing the EPSDT Program.Texas a l so argues , as d id New York, t ha t coverage o f th e se rv icesa t i s sue i s requi red under the Ear ly and Per iodic Screening,Diagnosis , and Treatment (EPSDT) program. The EPSDT program i ses tab l i shed by paragraph 1905(a) (4) (B) o f th e Act , which inc ludesin th e list o f se rv ices in the d e f i n i t i o n of "medical as s i s tance"th e fo l lowing: "Early and Per iodic Screening , Diagnost i c , andTreatment Services (as def ined in subsec t ion ( r) fo r ind iv idua l swho a re e l i g i b l e under the p lan and are. under th e age o f 21) . "Texas argues t h a t th e "CMS i n t e rp r e t a t i on tha t the Medicaid Actdoes not cover medica l se rv ices provided out s ide the IMD duringth e t ime t he ind iv idua l i s a r e s id en t o f th e IMD i s in d i r e c tc o n f l i c t with th e i n t e n t o f th e EPSDT requirements o f th e f edera l


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10 Medicaid s t a t u t e , pa r t i c u l a r ly th e 1989 amendments t o t h a ts t a t u t e . " TX B r. a t 16. Texas po in t s out t ha t , in 1989,Congress "expanded EPSDT benef i t s to r equ i re s t a t e s pa r t i c ipa t ingin th e Medicaid program to provide coverage fo r a l l Medicaidsc reening, d iagnos t ic , and t rea tment se rv ices to ind iv idua l sunder th e age o f 21, whether o r not those se rv ices a re covereds e r v i ce s under th e s t a t e Medicaid program fo r ad u l tbe ne f i c i a r ie s . " I d . , c i t i ng Omnibus Reconci l ia t ion Act o f 1989,Pub. L. No . 101-239, 6403. Spec i f i ca l ly , Congress amendedsubsec t ion 1905(r} (5) o f th e Act to def ine EPSDT se rv ices toinc lude spec i f i ed screen ing se rv ices , v i s ion se rv ices , den ta lse rv ices , hear ing se rv ices , and "other necessary h ea l t h ca re ,d iagnos t ic s e rv ices , t rea tment , and othe r measures descr ibed insec t ion 1905(a) to co r r ec t o r amel io ra te defec t s and phys ica l andmental i l l nes ses and condi t ions discovered by the screen ingse rv ices , whether o r not such se rv ices a re covered under th eS t a t e p lan ." Act , 1905 (r) (5) (emphasis added) . According toTexas, th e l a s t c lause in t h i s amended sec t ion requ i res s t a t e s tocover a l l medica l ly necessary se rv ices fo r any condi t ion " i f th ese rv ice i s within the sec t ion 1905(a) list o f se rv ices t h a t maybe funded under t he fede ra l Medicaid s t a t u t e . " TX B r. a t 17,

(9 thc i t i ng Katie A. v . Los Angeles County, 481 F.3d 1150, 1154Cir . 2007) and cases c i ted t h e r e in .Texas fu r t h e r argues t h a t CMS's i n t e rp r e t a t i on " t h a t psych ia t r i co r medical care provided dur ing th e t ime a ch i ld under th e age o f21 i s a res iden t in an IMD i s not a covered se rv ice fo r which th es t a t e i s e n t i t l e d to FFP i s contrary ' to th e i n t e n t o f Congress"in enac t ing p rov i s ions t h a t " requ i re the s t a t e to prov idei npa t i e n t psych ia t r i c hosp i ta l s e rv ices in add i t ion to any o th e rse rv ices l i s t e d in [sec t ion 1905(a) when medical ly necessary ."TX B r. a t 20. Texas a l so argues t ha t Congress c l e a r ly consideredbo th mental h ea l t h and medica l care to be components o f its 1989expansion o f EPSDT b e n e f i t s . I d . , c i t i ng 135 Congo Rec. S 6900(da i ly ed. June 19, 1.989) ("This b i l l r equ i res s t a t e s t o o f f e rEPSDT se rv ices whenever docto rs suspec t medica l o r mental hea l thproblems. It a l so r equ i res prompt t rea tment once a cond i t ion hasbeen diagnosed. ) .There a re two fundamenta l f laws with the l ega l arguments Texasmakes. F i r s t , Texas does not accura te ly s t a t e th e CMS pos i t ion .CMS does no t t ake the pos i t ion t ha t p s y ch i a t r i c o r medica l ca reprovided while a ch i ld i s an IMD r es iden t i s never a coveredse rv ice . Ins t ead , CMS's p o s i t i o n i s t ha t FFP i s ava i l ab le onlywhen such care and se rv ices f a l l within th e excep t ion to th e IMDexc lus ion - t h a t i s , only when they are p a r t of i n p a t i e n tp sy c h i a t r i c f a c i l i t y se rv ices fo r ind iv idua l s under age 21 t h a tmeet th e s t a tu to ry and regu la to ry requirements fo r such se rv ices .


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11 Second, T e ~ a s misreads t he r e fe rence to sec t ion 1905(a) insec t ion 1905(r) as being a r e fe rence to th e " l i s t " of se rv i ces insec t ion 1905(a) . Ins tead , t he r e fe rence i s to "measures. descr ibed" in sec t ion 1905(a) "whether o r no t such se rv ices a r ecovered under the s t a t e p lan . " Act, 1905 ( r) .We see no c o n f l i c t between CMS's reading of the scope of the IMDexc lus ion and t he p rov i s ion in sUbsect ion ( r ) , r equ i r ing s t a t e sto prov ide se rv ices fo r which the need i s determined by an EPSDTscreen "whether o r no t such se rv ices a r e covered under th e St a t ep lan . " The list of se rv ices in subsect ion 1905(a) inc ludes somese rv ices t h a t a re cons idered mandatory and some t h a t a recons idered op t iona l . Spec i f i ca l ly , a Medicaid Sta t e plan mustinc lude " a t l e a s t t he ca re and se rv ices l i s t e d in paragraphs (1)th rough (5) , (17) and (21) of sec t ion 1905(a)" fo r theca t ego r i ca l l y needy and o the r spec i f i ed se rv ices fo r themedical ly needy ( i f e l i g i b l e under th e s t a t e p l a n ) . Act , 1902(a) (10) ; see 42 C.F.R. 440.210, 440.220, 440.225.Genera l ly , FFP i s ava i l ab le fo r payments fo r se rv ices only ifthey a re expended as "medical ass i s t ance under the St a t e p lan . "Act , 1903(a) (1) . Thus, th e c l ea r purpose of the phrase insubsec t ion (r) i s to provide fo r some EPSDT se rv ices t h a totherwise would no t be covered because they a re op t iona lse rv ices , no t covered in the r e levan t s t a t e p lan . Texas po i n t sto no suppor t in th e l e g i s l a t i v e his to ry o r elsewhere fo ri n t e r p r e t i ng t h i s language as meaning t h a t a s t a t e must providese rv ices even if f ede ra l pa r t i c ipa t i on i n expendi tures fo r thosese rv ices i s prec luded because th e chi ld i s in an IMD.Kat ie A. and th e r e l a t ed cas es c i t ed by Texas a re no t d i r e c t l y onpo i n t . Moreover, as Texas acknowledges, what those cases sa idwas t ha t " s t a t e s must cover every type of heal th care or se rv icenecessary fo r EPSDT co r rec t ive o r amel iora t ive purposes t ha t i sa l lowable" under sec t ion 1905(a) . Id . Thus, sec t ion 1905(r)t r igge r s a requirement fo r a s t a t e to provide a se rv ice only ifsec t ion 1905(a) a l lows it. As noted above, th e genera l IMDexc lus ion in sec t ion 1905(a) provides t ha t , "except as o therwiseprovided in paragraph (16) ," th e term "medical ass i s t ance" doesnot inc lude "any such payments with r e spec t to care or se rv icesfo r any ind iv idua l who has not a t t a ined 65 years of age and whoi s a pa t i en t " in an IMD. The phrase "any such payments" r e fe r sback to th e payments previous ly def ined as payments cons idered tobe "medica l ass i s t ance" - t h a t i s , payments fo r the l i s t e d careand se rv ices , inc luding EPSDT se rv ices . 4 Nothing in th e c i t ed

4 In New York, we a lso noted t ha t , i n Medicaid St a t e(cont inued. . )


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12 dec i s ions sugges t s t h a t Medicaid must cover se rv ices fo r whichFFP would n ot be al lowable as "medical as s i s tance" under s ec t i o n1905 (a) .Texas a l so seeks to d i s t ingu i sh New York on th e f a c t s , po in t ingto th e Board ' s s t a tements i n t ha t dec is ion t ha t "New York ' sargument assumes t h a t th e serv ices fo r which payment weredisa l lowed were EPSDT se rvices" and t h a t "New York did no t ,however, provide any evidence to suppor t t h i s a s se r t i o n . " TX Br.a t 17, c i t i ng New York a t 50. Texas a s s e r t s t ha t " a l l o f th edisa l lowed cla ims are fo r i nd iv idua l s under the age o f 21 and fo rEPSDT se rv ices . " Id . Texas po in t s out t ha t the 1989 l eg i s l a t i onexpanded th e EPSDT Program to provide fo r in t ' e rper iodic sc reen sand t h a t eMS guidance t r ea t s any encounter with a h ea l t h carep r o f e s s io n a l ac t ing within th e scope o f prac t i ce to be an EPSDTsc reen . Id . a t 18. Texas a l so argues t ha t , in accordance withMedica id requirements , ch i ld ren a re not hosp i ta l i zed without adete rmina t ion by a hea l th care profes s iona l t ha t h o sp i t a l i z a t i o ni s requ i red and t ha t s t a t e s a re requi red by th e EPSDT prov i s ionsto prov ide se rv ices i f , dur ing th e c h i l d ' s hosp i t a l s tay , ahea l th ca re profes s iona l determines t h a t e i t he r psych ia t r i c o rnon-psych ia t r i c medica l care i s needed, and th e se rv ices a rel i s t e d in sec t ion 1905(a) , whether o r not th e s t a t e otherwiseof f e r s t he se se rv ices . Id . a t 19. Texas argues t ha t a l l of thedisa l lowed se rv ices except t ranspor t a t ion se rv ices were providedby hea l th care profes s iona l s ac t ing within th e scope o f p ra c t i c e ,and, thus , the se rv ices were EPSDT se rv ices . Id . a t 20. Withr espec t to th e t ranspor t a t ion se rv ices , Texas argues t ha t eMS'sS t a t e Medicaid Manual r equ i res it to prov ide necessaryt r a n sp o r t a t i o n and t h a t th e OIG aud i t did no t ques t ion th enecess i ty o f th e t ranspor t a t ion cla ims a t i s sue .These arguments have no mer i t . Fi r s t , Texas er roneously assumest h a t , if New York had es tab l i shed th e f ac tua l p red ica te fo r itsargument , it would have preva i led . The Board concluded in t h a t

4( cont inued)Operat ions Le t t e r 91-36, th e eMS Regional Admin is t ra to r fo r theNew York reg ion informed New York, in response to ques t ions abou twhether FFP i s av a i l ab l e fo r s e rv ices to ch i ld ren in IMDs, t h a tth e " fa c t t h a t a need fo r th e se rv ices was determined through anEPSDT sc reen would not provide a bas i s fo r paying fo r s e rv icesfo r which we otherwise could not pay because o f th e IMD exc lus ionand th e only excep t ion to th e exc lus ion i s th e psych under 21be ne f i t . " New York a t 14-15. eMS submit ted t ha t l e t t e r as eMSExhib i t 3 here , bu t does not a s s e r t t h a t Texas had no t ice o f t h a tl e t t e r .


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13 dec i s ion , however, t ha t th e l ega l pred ica te fo r the argument hadno mer i t . New York a t 25-27. Second, Texas d id not e s t a b l i s h asa mat te r o f f a c t t h a t a l l of the se rv ices a t i s sue were EPSDTse rv ices .We recognize t h a t a medical neces s i ty dete rmina t ion must be madebe fore a ch i ld may rece ive i npa t i en t psych ia t r i c f a c i l i t yse rv ices under Medicaid. 42 C.F.R. 441.151(a} (4) . Also, fo r achi ld r es id ing in a qual i fy ing IMD, the IMD had to ensure t h a tthe c h i l d ' s needs were eva lua ted pr io r t o o r sh o r t l y a f t e radmission and p e r i o d ~ c a l l y t he r e a f t e r while th e ch i ld was ar e s i d e n t and to provide se rv ices to meet th e c h i l d ' s needs( inc luding medical needs) , as determined by th e i n t e rd i s c ip l ina ryteam. Thus, Texas would be obl igated to provide those se rv icesunder the EPSDT Program, whether o r not the Texas Sta te Plancovered i npa t i en t psych ia t r i c f a c i l i t y se rv ices fo r ind iv idua l sunder age 21.With r espec t to any cla ims fo r ou tpa t ien t s e rv ices fo r such ach i ld , however, the mere fac t t ha t hea l th care profes s iona l ssubmit ted th e cla ims does not e s t a b l i s h e i t he r t h a t Texas had topay fo r th e se rv ices as a requi red EpSDT per iod ic o r o ther sc reeno r t h a t the s e rv ices were medical ly necessary. Texas has n otexpla ined why th e requi red eva lua t ions and se rv ices to beprovided by th e IMD would not be s u f f i c i e n t to meet th e EPSDTrequi rements while the ch i ld was a res iden t . Moreover, s ince thech i ld ren were r es id ing in th e IMDs a t the t ime the s e rv ices werea l l eged ly provided , separate o u tp a t i en t cla ims fo r s e rv ices suchas t ranspor t a t ion are inheren t ly ques t ionable . In any even t ,Texas d id n ot provide any evidence to suppor t i t s a s se r t i o n t h a tthe ou tpa t i en t se rv ices cons t i tu t ed requi red , per iod ic EPSDTsc reens o r were fo r s e rv ices t ha t had been determined by a sc reento be medica l ly necessary .In sum, Texas ' re l i ance on th e EPSDT requirements i s misplaced.

D. The IMD exc lus ion does no t impermiss ib ly discr iminateagains t ind iv idua ls on th e bas i s o f d i sab i l i t y .

Texas argues t h a t th e "CMS pos i t ion t ha t s t a t e s pa r t i c ipa t ing inth e Medicaid program are requi red to provide EPSDT-eligiblei n d iv id u a l s a l l medica l se rv ices l i s t e d in [sec t ion 1905(a}] ,unless those ind iv idua l s have an emotional dis turbance o r mentali l l n e s s so se r ious t ha t they r equ i re admission to an i n s t i t u t i o nfo r mental d iseases , c o n s t i t u t e s discr iminat ion on th e bas i s o fd i s a b i l i t y and i s incons i s ten t with th e requirements imposed onth e s t a t e s by sec t ion 504 of the Rehab i l i ta t ion Act of 1973, asamended, 29 U.S.C. 794, and the Americans with Disab i l i t i e s Act


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14 (ADA), 42 U.S.C. 12101, e t seq ." TX Br. a t 22 ( i t a l i c s inor i g i na l ) . According to Texas, "CMS's pos i t ion t h a t EPSDTe l i g i b l e s can g e t ou tpa t i en t hea l th care only if they do no t havea mental hea l th problem severe enough to warranti n s t i t u t i o n a l i z a t i o n screens out ind iv idua l s with more severemental d i s a b i l i t i e s . " Id . Texas concludes t ha t " [ s ]uch c r i t e r i adeny ind iv idua l s with ser ious mental d i s a b i l i t i e s EqualPro tec t ion of the law in v io l a t i on of th e Due Process Clause o fth e 5 t h Amendment to th e United Sta tes Cons t i tu t ion ." Id .This argument aga in miss ta tes CMS's pos i t ion and th e e f f e c t ofth e genera l IMD exc lus ion . The i s sue here i s not whether th ech i ld ren r ece ive the s e rv ices they need, but whether FFP i sava i l ab le fo r se rv ices provided out s ide th e IMDs in which theyr e s i d e . I f a ch i ld i s i n s t i t u t i ona l i z e d in an IMD, FFP i sava i l ab le only if th e se rv ices the ch i ld rece ives meet thes t a t u t o ry and r egu la to ry requirements to qua l i fy for theexcept ion to the exc lus ion in sec t ion 1905(a) (16). The reasonfo r th e funding d i s t i nc t ion i s t ha t se rv ices in an IMD weret r ad i t i ona l ly the re spons ib i l i ty of th e s t a t e s . Contrary to whatTexas argues , th e d i s t i nc t ion i s not on the bas i s of the sever i tyo f th e mental d isease .S imi la r arguments about th e IMD exc lus ion were re j ec ted by theBoard many yea rs ago, based on th e Supreme Court decis ion inSchweiker v . Wilson, 450 U.S. 221 (1980) . New York Sta te Dept.of Soc ia l Se rv ice s , DAB No. 1577, a t 11 (1996) . In Schweiker,the Supreme Court held t ha t a s t a tu to ry prov i s ion makingSupplemental Secur i ty Income benef i t s unava i lable to IMDr e s i d e n t s who were not rece iv ing Medicaid "made a d i s t i nc t i on n otbetween th e menta l ly ill and a group composed of non-menta l lyill, bu t between res iden t s in publ i c i n s t i t u t i ons receiv ingMedicaid funds and . . . res iden t s in such i n s t i t u t i ons n o tr ece iv ing Medicaid funds." 450 U.S. a t 232. Similar ly , th e IMDexc lus ion does n ot d i s t ingu i sh ind iv idua l s on th e bas i s o f t h e i rmental i l l n e s s (o r i t s se v e r i t y ) , but in s tead p ro h i b i t s FFP ince r t a i n se rv ices provided to ind iv idua l s by reason of t h e i ri n s t i t u t i o n a l s t a tus , age, and the na ture of the se rv ices .I I . The evidence submitted by Texas es tab l i shes that , contraryto what eMS asser t s , some o f the claims at i s sue were forserv i ces provided on an inpat ient bas i s by profe s s iona l s who werepermitted to b i l l for the serv i ces .

A. Texas showed t ha t the fac tual premises on which th edisa l lowance was based were i l l - f o u n d e d .CMS found t h a t th e se rv ices a t i s sue were provided ou ts ide of th e


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15 IMDs in which th e ch i ld ren res ided, by providers ' o ther than th eIMDs. The aud i t r epor t , on which CMS based t h i s f inding, sa idt h a t any cla ims fo r i npa t i en t p s y ch i a t r i c se rv ices were r e m o v e d ~ TX Ex. 1, a t 2. A dec la ra t ion o f one o f th e aud i to r s i nd ica test h a t th e aud i to r s thought t h a t a l l o f th e disal lowed cla ims werefo r ou tpa t i en t se rv ices based th e f a c t t h a t th e cla ims were not submit ted by th e IMDsj th e a u d i t o r s ' unders tanding of what they had rece ivedfrom Texas and its cla ims process ing con t rac to r j and t h e i r understanding t ha t the i n t e rn a l con t ro l number(ICN) fo r each c la im ind ica ted it was fo r s e rv ices

provided on an o u tp a t i en t b a s i s .CMS Ex. 1 (Declara t ion o f Cla i re Huerta) .On appea l , Texas presented evidence and argument to show t h a t th emere f a c t t h a t th e cla ims were not submit ted by th e IMDs d id n o tdef i n i t i ve l y show t ha t th e se rv ices were not p a r t o f th ei npa t i e n t se rv ices provided by the IMDs.With r espec t to who may b i l l fo r Medicaid se rv ices , Texas p o in t sto th e Medicaid r egu la t ion a t 42 C.F.R. 447.10, e n t i t l e d"Proh ib i t ion aga ins t reass ignment o f provider c la ims ." Thatr eg u l a t i o n prov ides :

Ca) Basis and purpose. This sec t ion implementssec t ion 1902(a) (32) o f th e Act which p ro h i b i t s S t a t epayments fo r Medicaid se rv ices to anyone o th e r than aprov ide r o r r e c i p i e n t , except in spec i f i edci rcumstances.

(b ) Def ini t ions. For purposes o f t h i s sec t ion :Faci l i ty means an i n s t i t u t i o n t h a t fu rn i shes hea l th

care se rv ices t o i n p a t i e n t s .* * *

(d) Payment may be made only-(1) To the provider j o r(2) To th e r e c i p i e n t . . . j o r(3) In accordance with paragraphs (e ) , ( f ) , and (g) o f

t h i s sec t ion .* * *

(g) Individual pract i t ioners . Payment may be made to -


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17 and render appropr ia te se rv ices . " Id . a t 3-5 . CMS concludesfrom t h i s t ha t the provis ion a t sec t ion 441.156 does "notau tho r ize payment fo r se rv ices to non-IMD prov ider s or over r ideth e s t a tu to ry and r egu la to ry r e s t r i c t i o n s which l i m i t t h i sbene f i t t o qu a l i f ied se rv ices provided in and by an IMD." Id . a t5 .CMS i s c o r r e c t t h a t the r egu la t ions ( i f not the s ta tu te ) requi ret h a t ac t ive t rea tment pursuant to a plan of care be providedthe f a c i l i t y as wel l as in the f a c i l i t y . As Texas poin t s out ,however, CMS i s confusing th e i s sue of se rv ices fo r which FFP i sava i l ab le , with th e ques t ion of who may b i l l fo r those s e rv i c e s .There i s no f ind ing or evidence here t h a t the physic ians ,p s y c h i a t r i s t s , or c l in i ca l psychologis t s who submit ted c la ims fo rse rv ices they furn ished on an i npa t i e n t bas i s d id not have th er equ i s i t e qua l i f i ca t i ons and c redent i a l s or t h a t they were notimplementing th e ch i ld ' s plan of ca re . Moreover, while sec t ion441.156 does not spec i f i ca l ly author ize payment to "non-IMDprovide rs , " the reference to non-employees who provide se rv icesin th e f a c i l i t y i nd ica t e s t h a t CMS was aware t h a t qua l i f i edpersonnel might be cons ide red as "providing" se rv ices t h a t a rep a r t of th e ac t ive t rea tment the f a c i l i t y has the r e s pons ib i l i t yto provide to its re s iden t s , even if the profess iona l s a re no tf a c i l i t y employees. While CMS as se r t s t h a t Congress in tended thepayments to be made to the IMD, CMS c i t e s to no suppor t fo r t h i sas s e r t i on and concedes t h a t it has i ssued no pol i cy guidancerequi r ing t h a t a f a c i l i t y b i l l fo r a l l i npa t i e n t se rv ices itprov ides . CMS Surreply a t 10. 6

6 We note t h a t CMS d id recen t ly c l a r i fy t ha t , fo r purposesof ca lcu la t ing a hos p i t a l - s pec i f i c l im i t fo r d isp ropor t iona teshare hos p i t a l payments , cos ts a hospi t a l incurs for p rofess iona lse rv ices may be included in ca lcu la t ing the h o s p i t a l ' suncompensated care cos t s only if the s t a t e plan def ines i npa t i en tor ou t pa t i e n t hos p i t a l se rv ices to inc lude the se rv ices and th ehosp i ta l b i l l s fo r those se rv ices . 73 Fed. Reg. 77,904 (Dec. 19,2008). In so doing, CMS recognized t ha t s t a t e s have th ef l e x i b i l i t y to t r e a t pro fess iona l se rv ices as p a r t of hos p i t a lse rv i ces under Medicaid, even though Medicare reasonable cos tpr inc ip l e s t r e a t only ce r t a in cos t s fo r pro fess iona l s asal lowable fo r r a t e - s e t t i n g purposes. Id . Simi lar ly , CMS hasapparen t ly recognized t h a t s t a t e s have f l e x i b i l i t y to inc ludeprofess iona l se rv ices as pa r t of " inpa t i en t psychia t r i c f a c i l i t yse rv ices for ind iv idua l s under age 21." Texas asse r t ed , and CMSdoes no t deny, t h a t CMS has approved r a t e s fo r t h i s category ofse rv ices t h a t inc lude th e cos t s of pro fess iona l se rv ices .


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18 CMS says t h a t th e pr iva te hosp i t a l s were not proh ib i ted by s t a t eo r f edera l law from b i l l i ng fo r th e p r a c t i t i o n e r s ' se rv ices bu tt h a t Texas has chosen to l e t t he ind iv idua l pra c t i t i one r s b i l ld i rec t l y . ld . a t 9. CMS argues t h a t th e Texas Occupat ions Codeon which Texas r e l i e s does not c l e a r ly l im i t employment o fphys ic i ans to s t a t e h o sp i t a l s . CMS does not d i rec t l y deny th ea s s e r t i on by Texas t ha t sec t ion 447.10(g) s pe c i f i c a l l y a l lows th eind iv idua l pra c t i t i one r s to b i l l d i r e c t ly , b u t desc r ibes t h a tsec t ion as meaning t ha t i nd iv idua l pra c t i t i one r s may rece ivepayment " e i the r through (1 ) th e employer o f th e p r a c t i t i o n e r , if, the prac t i t i one r i s requi red as a condi t ion o f employment t o tu rnover h is fees to th e employer; o r (2 ) th e f a c i l i t y in which th es e r v i ce s i s [s ic] prov ided if th e pra c t i t i one r has a co n t r ac tunder which th e f a c i l i t y submits th e c la im." ld . a t 8.We agree wi th CMS t ha t ne i the r th e Texas Occupat ions Code nors ec t i o n 447.10 proh ib i t s a h o s p i t a l from ever b i l l i n g on beha l fo f a p r a c t i t i o n e r who provides se rv ices in the hosp i t a l as p a r to f its i n p a t i e n t se rv ices . Texas has c l e a r ly overs ta ted itscase . On the o ther hand, th e p l a i n language o f sec t ion 447.10c l e a r ly r e s t r i c t s th e s i t ua t ions in which a prov ide r f a c i l i t y mayb i l l fo r ind iv idua l pra c t i t i one r se rv ices to s i t ua t ions where th ep r a c t i t i o n e r i s a f a c i l i t y employee whose employment co n t r ac tprov ides fo r such b i l l i n g o r where th e pra c t i t i one r has aco n t r ac t with th e f a c i l i t y permi t t ing it to b i l l . The r eg u l a t i o nthus t r e a t s an i nd iv idua l pra c t i t i one r as a "prov ider" o ff a c i l i t y se rv ices fo r purposes o f b i l l i ng , and permi t s th ep r a c t i t i o n e r to b i l l fo r th e profes s iona l component o f th ef a c i l i t y s e r v i ce s , unless th e pra c t i t i one r has agreed to l e t th ef a c i l i t y b i l l .Moreover, even if d i r e c t b i l l i n g by th e p r a c t i t i o n e r i sconsidered a cho ice -' made e i t h e r by th e f a c i l i t y andprac t i t i one r t oge the r o r by a s t a t e - r a t h e r than a requ i rement ,t h a t does no t change th e import o f the p ra c t i c e . Since se rv icesprovided by a p r a c t i t i o n e r as pa r t of i npa t i en t psych ia t r i ch o sp i t a l se rv ices may be b i l l ed by the p r a c t i t i o n e r who furnishedth e s e r v i ce s , th e f a c t t ha t a se rv ice i s b i l l ed by th ep r a c t i t i o n e r does not by i t s e l f e s t a b l i s h t h a t th e se rv ice i s no tp a r t o f th e i n p a t i e n t se rv ices provided by th e lMD.eMS provided no evidence to suppor t a genera l f inding t h a t a l l o fth e c la ims a t i s sue were fo r s e rv ices provided out s ide the lMDsby non-lMD prov ide rs o ther than th e a ud i to r ' s d ec l a r a t i o nregarding her understanding of th e claims provided by Texas fo ra u d i t review and h er unders tand ing t ha t th e lCNs ass igned to th eclaims ind ica ted they were fo r ou tpa t ien t s e rv ices .


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19 with r espec t to th e IeNs, Texas submit ted an a f f i d a v i t from DianeBroadhurst , an experienced c la ims processor , averr ing t ha t , whileth e IeNs fo r cla ims from a h o s p i t a l (submitted on a eMS UB-40/1350 form) would ind ica te whether th e se rv ice was an i n p a t i e n to r ou tpa t i en t se rv ice , th e IeNs assigned to cla ims fo rp ro fes s iona l s e rv ices (on eMS 1500 cla ims forms) would no t .Reply Br. Ex. A. We f ind t h i s sta tement to be cred ib le , givenh e r exper ience and given eMS's f a i l u r e to fu r the r address t h i si s sue d es p i t e an oppor tuni ty to do so . eMS d id no t provide anyb a s i s on which we could determine t ha t th e IeNs fo r th e eMS 1500claims forms a t i s sue in d i ca t e t ha t th e se rv ices were fo rou tpa t i en t s e r v i ce s .In any even t , as we di scuss below, to rebu t th e au d i t f ind ings ,Texas presen ted evidence t ha t i n f a c t some of th e r e levan t cla imsforms con ta in p l ace o f se rv ice codes and o ther in fo rmat ion t h a tshows t h a t th e claimed se rv ices were provided in th e IMDsinwhich th e ch i ld ren re s ided . Thus, th e a u d i t o r ' s understandingt h a t a l l of the cla ims disal lowed were fo r se rv ices providedou ts ide th e IMDs was c l e a r ly er roneous .

B. Texas presen ted convincing, re l i a b l e ev idence tha tsome (but no t a l l ) o f th e disa l lowed c la ims were fo ral lowable i n p a t i e n t p s y c h ia t r ic s e r v ic e s .

Texas a s s e r t s t h a t - th e aud i to r s d id not remove from the d i sa l lowed cla ims

a l l cla ims fo r al lowable i npa t i en t psych ia t r i c s e r v i ce s ; th e au d i t workpapers did not conta in s u f f i c i e n t c la imsd e t a i l fo r anyone to determine what type o f se rv ice was

provided o r where it was provided, so Texas obta inedmore de ta i l ed cla ims data ; and the ana lys i s /evidence o f a random, s t a t i s t i c a l sample o fth e de ta i l ed cla ims documentat ion shows t ha t 48.7% o f

th e disal lowed cla ims fo r medica l se rv ices were fo rp sy c h i a t r i c - r e l a t e d se rv ices o r i n p a t i e n t medicaleva lua t ion and management se rv ices provided byphys ic ians o r c l i n i c a l psychologis t s a t th e IMD in whichth e ch i ld r es ided and t ha t 44.0479% of the managed ca rese rv ices (which Texas l a t e r c l a r i f i e d meant pr imary ca rephys ic ian management se rvices) were fo r such se rv icesprovided a t th e IMD in which th e ch i ld re s ided .

To suppor t th e r e l i a b i l i t y of its sampling methodology and th econclus ions Texas reached based on i t s ana lys i s o f the sample


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20 c la ims documentation, Texas submit ted wi th i t s appeal b r i e f thefo l lowing: copies of paper o r e lec t ron ic cla ims forms for thesample cla ims (TX Ex. 11) ; and a f f i dav i t s expla in ing the bases fo r the ana lys i s andconclus ions reached and th e sampling method used (with

suppor t ing at tachments) (TX Exs. 6-8) .Exhib i t 6 i s an a f f i d a v i t by Diane Broadhurst , who i s u n i t Leadin the Claims Adminis t ra tor Contrac t Management sec t ion of th eMedicaid/CHIP Divis ion , HHSC, and was formerly employed by theNat iona l Her i tage Insurance Company (NHIC), which processedcla ims fo r Texas dur ing th e r e levan t pe r iod . She a t t e s t s t h a tshe i s fami l i a r with th e Texas cla ims process ing system, t h a t shereques ted copies of the paper o r e lec t ron ic cla ims formscon ta in ing d e t a i l s such as the p lace of se rv ice , the se rv ice ( s )a c tua l ly rendered (by procedure code) , the provider t h a t renderedthe se rv ice (by prov ide r number), and the pa id amount p er cla im,p er d e t a i l . She a l so supervi sed Policy Analyst Rhonda Reed inh e r review and ana lys i s of disa l lowed c la ims . Ms. Broadhursta t t e s t s t h a t th e ana lys i s showed t ha t a l a rge percentage o f th edisa l lowed c la ims were cla ims fo r p ro fes s iona l i n p a t i e n t se rv icesand t h a t fu r t h e r ana lys i s of profes s iona l i npa t i en t se rv icesc la ims revea led t h a t the cla ims were fo r p ro fes s iona l i npa t i e n tse rv ices ac tua l ly rendered ons i t e a t the IMD. Ms. Broadhursta t t e s t s t h a t "based on my extens ive knowledge and exper t i se o fc la ims f i l i ng requirements par t i cu l a r l y as it r e l a t e s to theTexas Medicaid Program[,] I agree wi th th e methodology [Ms. Reed]used in h e r ana lys i s and with the r e su l t i n g f indings ." TX. Ex.6, a t page.Exhib i t 7 i s the a f f i dav i t of Rhonda Reed, who descr ibes he r s e l fas c u r re n t l y re spons ib l e fo r ana lyz ing and implementing c la imsprocess ing po l i c i e s and fo r ensuring con t rac to r compliance. Shehas been in her cur ren t pos i t ion fo r only 17 months bu t hasworked fo r 16 years with HHSC. She a t t e s t s t ha t she worked withth e cla ims admin is t r a to r to re t r i eve de ta i l ed informat ion r e l a t e dto th e disa l lowed cla ims. She expla ins t ha t , us ing informat ionobta ined from th e au d i t workpapers, the cur ren t Texas cla imsadmin is t r a to r was able to pu l l up th e cla ims d e t a i l s shown inTexas Exhib i t 5, based on which she was able to determine t h a tmany o f the p ro fes s iona l s e rv ices were ac tua l ly rendered on- s i t e2nda t th e IMD in which th e c l i e n t was a re s iden t . TX Ex. 7,page.Ms. Reed fu r t h e r expla ins in her a f f i dav i t t ha t , s ince no t a l l ofth e cla ims d e t a i l contained a provider name o r number fo r th e


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21 f a c i l i t y , she reques ted copies of th e o r i g i n a l cla ims images fo rth e c la ims. ~ o r th e cla ims processed by former con t rac to r NHIC,they had to use "a l abor - in tens ive and manual process" tor e t r i e ve and p r i n t images, so she decided to reques t as t a t i s t i c a l l y va l id random sample. Id . In response , th e HHSCS t ra t e g i c Decision Suppor t re turned l i s t s t ha t cons t i tu t eds t a t i s t i c a l l y va l id random samples of th e claims, a t t ached asExhib i t s 9 (medical se rvices) and 10 (managed care cla ims) .Exhib i t 11 conta ins cop ies o f th e ac tu a l paper c la ims t h a t weremailed in by th e prov ide r o r th e e lec t ron ic cla im images that"were submit ted e l e c t ron ic a l ly . Ms. Reed used place o f se rv icecodes to determine whether se rv ices were rendered on an i n p a t i e n tb a s i s ; s tandard procedure (CPT) codes to v a l i d a t e t ha t th e codeswere e i t h e r fo r psych ia t r i c /counse l ing se rv ices o r medicaleva lua t ion and management serv ices t ha t are commonly used byp s y c h i a t r i s t s to b i l l fo r th e se rv ices they render to pa t i e n t s ;and th e name and address o f the f a c i l i t y where se rv ices wererendered to determine whether th e se rv ices were rendered a t th eIMD in which th e c l i e n t was a res iden t . Based on t he se da tae lements , Ms. Reed a t t e s t s , she determined if th e se rv ices "werea c tua l ly rendered a t th e IMD" and " i f the se rv ices being renderedwere fo r th e profes s iona l components t ha t were fo r s e rv ices t h a tranged from Psychologica l and /or p s y ch i a t r i c Serv ices toEvalua t ion and Management Serv ices as def ined by CPT." Id . a t 3dpage. She then crea ted th e Excel spreadshee t a t Texas Exhib i t12. She determined t ha t o f th e 577 medica l se rv ices cla imsreviewed, a t l e a s t 48.7% o f th e cla ims were rendered a t th e IMDfo r va l id psych ia t r i c re l a t ed se rv ices , and t ha t o f th e 252managed care cla ims reviewed, a t l e a s t 44.0479% were rendered a tth e IMD fo r va l id psych ia t r i c r e l a t e d se rv ices . Id . a t 4 t h page .Exhib i t 8 i s th e a f f i d a v i t of Monica Smoot, who has a mastersdegree in psychology with a subspec ia l ty in s t a t i s t i c s and 11yea rs o f exper ience . Ms. Smoot expla ins why she chose th e samples i z e s she d id ( in order to g e t a 95% confidence l eve l ) . and whats t a t i s t i c a l sof tware package she used to genera te th e randomsamples . She a f f i rms t ha t th e computer package genera ted th elists o f sample cla ims a t Texas Exhibi t s 9 and 10.Texas reques ted an oppor tuni ty to submit cla ims forms fo r a l l o fth e cla ims if the Board decided t ha t th e sample documenta t ion i sn ot su f f i c i en t . 7

7 Texas a l so sa id t h a t because th e au d i t was based onclaims da ta t ha t i s o ld (from 9/97 to 8/2000) , Texas was n ot ab leto ob ta in a l l o f th e cla ims forms. Texas sa id t ha t , if th e Board(cont inued ... )


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22 In response , CMS d id not chal lenge th e s t a t i s t i c a l methods Texasused to choose the sample on a random b as i s and to determinesample s i z e . We f ind the methods to be va l id , based on therecord before u s . CMS a l so did not submit any evidence tod ispu te the accuracy of th e in format ion on the cla ims forms o rt h e i r a u the n t i c i t y .CMS p o in t s out t h a t Texas in e f f e c t has conceded t h a t , fo r someo f th e sample c la ims , Texas .has no documentat ion to show t h a tthey were fo r i n p a t i e n t se rv ices provided in th e IMD in which th echi ld r es ided . We agree and uphold the pa r t of th e disa l lowancer e l a t e d t o such cla ims on t ha t b a s i s .On the o ther hand, CMS concedes t ha t some of the sample cla imsforms have informat ion showing as the p lace of se rv ice the IMD inwhich the i de n t i f i e d Medicaid ch i ld res ided . CMS B r. a t 13. CMSsugges ts , however, t ha t only th e paper , non-e lec t ron ic cla imsforms i de n t i f y the place where the s e rv ices were rendered and th ei den t i t y o f the b i l l i n g prov ide r . This i s i ncor rec t . Not onlydo th e e l e c t ro n i c .claims copies in Texas Exhibi t 11 conta ini npa t i e n t p lace of se rv ice codes , but many of them a l sospec i f i ca l l y i de n t i f y th e IMD in which the ch i ld res ided as th e" f a c i l i t y prov ider" (as d i s t i n c t from th e " h i l l i ng prov ider" o r" re fe r r ing prov ider" ) . As Ms. Reed explained in h er a f f i d a v i t ,the e lec t ronic cla ims show place of serv ice under th e columnheading "PS" and in a box fo r "FAC PROV NUMBER" and "NAME." TX

3 rdEx. 7, a t page. s

7( cont inued)were to cons ider the percentage of cla ims disal lowed in e r r o rbased on th e number of cla ims f i l e s t ha t were located , then theBoard could f ind t ha t approximately 58.6% of the disal lowedmedical se rv ices cla ims were fo r s e rv ices provided in th e IMD.We dec l ine to make any such f inding. Texas provided no evidencebased on which we could determine t ha t cla ims fo r which Texascould n o t l oca te any documentat ion would have been fo r i n p a t i e n tp sy c h i a t r i c se rv ices in the same percentage as th e cla ims fo rwhich Texas could loca te documentat ion.

S CMS complained t ha t seve ra l of th e cla ims forms itrece ived were " too i l l e g i b l e to read ." CMS Br. a t 15, n. 5. Inr ep ly , Texas of fe red to provide l eg ib le cop ies , and CMS d id n otr e i t e r a t e t h i s complaint . The e lec t ron ic forms submit ted to usa re su f f i c i en t l y c lea r to al low us t o a sc e r t a i n the c r i t i c a linformat ion , when read with th e o ther informat ion in th e record .


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23 Even with r espec t to th e paper c la ims t ha t CMS concedes show th epe r t i ne n t IMD as the p lace of se rv ice ( in Box #32) and th eb i l l i n g prov ide r ( in Box #33), CMS argues t ha t th e cla ims da tasubmit ted by Texas do not demonstra te t ha t those se rv icesprovided in an IMD were provided by the IMD because - the b i l l i n g phys ic ians a re not l i s t e d on th e OIG list o fIMD prov ide rs ; and Texas has not presented any evidence t ha t the b i l l i n g phys ic ians have a provider agreement with Texas to

provide IMD se rv ices pursuant to th e Texas Adminis t ra t ive Code.

CMS Br. a t 13-14, c i t ing 25 TAC 419.373(5) . In reply , Texaspo in t s out t ha t th e Texas Admin is t ra t ive Code provis ion c i t e d byCMS (TAC 419.373) app l ies only to IMD se rv ices to ind iv idua l sover age 65. Texas also po in t s out t ha t , in any even t , th e terms"IMD" and "IMD prov ider" in t ha t prov i s ion r e f e r only to the 'f ac i l i t y o r hosp i t a l , n o t to the profess iona ls /prac t i t ione rs whoprov ide se rv ices in th e f a c i l i t y o r hosp i t a l . Texas providedevidence t h a t shows t h a t it permi t s a p r a c t i t i o n e r to b i l l fo rh i s / h e r se rv ices provided as pa r t of a f ac i l i t y ' s i n p a t i e n tse rv ices if th e p r a c t i t i o n e r i s "enrol led" in th e Texas Medicaidprogram. TX Reply Br. Ex. B, a t 2nd page. In response , CMSpo in t s to nothing in f edera l o r s t a t e r egu la t ions o r po l i c i e st h a t would r equ i re a phys ic ian o r c l i n i c a l psychologis t tosepara te ly qua l i fy as an IMD and to have an IMD prov ide ragreement with a s t a t e in orde r to eva lua te o r t r e a t pa t i e n t s inan IMD and to b i l l fo r those se rv ices . 9Thus, we r e j e c t CMS's pos i t ion t ha t the fac t t ha t th e "b i l l i ngproviders" shown on th e cla ims forms were no t IMDs with IMD

9 For purposes of a Medicaid fee - fo r -se rv ice programgenera l ly , the term "provider" means "any ind iv idua l o r en t i tyfurn ish ing Medicaid se rv ices under an agreement with th e Medicaidagency." 42 C.P.R. 400.3 ; compare 400.2 (Medicare de f in i t i ono f "provider ." ) Not a l l Medicaid providers a re requi red ,however, to have th e ' type of "prov ider agreement" t ha t f a c i l i t i e sa re requ i red to have under 42 C.F.R. Par t 489, s ince the term"provider" i s def ined more narrowly fo r t ha t purpose and does no tinc lude ind iv idua l pra c t i t i one r s . We a l so note t ha t , unl ike th e

, de f i n i t i on of " inpa t i en t psych ia t r i c h o s p i t a l se rv ice s" fo rpurposes o f Medicare, th e Medicaid de f in i t i on of " inpa t i en tp sy c h i a t r i c h o sp i t a l se rv ices fo r ch i ld ren under age 21" does notspec i f i ca l l y exclude th e pro fes s iona l s e rv ices of phys ic i ans andc l i n i c a l psychologis ts . Compare Act 1861 with Act 1905(h) .


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24 prov ide r agreements undercuts th e evidence presented by Texas toshow t h a t th e cla ims were, in fac t , fo r i npa t i en t psych ia t r i cse rv ices provided by th e IMDs in which th e ch i ld ren wereres id ing .CMS does, in response to th e evidence Texas presented , argue t h a tsome of the sample cla ims Texas sa id were provided in an IMD were" c l e a r ly improper" because they were provided outs ide the IMD bynon-IMD prov ider s . CMS Br. a t 14. Spec i f i ca l ly , CMS r a i s e sques t ions abou t nine o f the paper c la ims, ind ica t ing t h a t thesea re j u s t examples o f s imi la r c la ims. For these c la ims , CMS l i s t sthe in fo rmat ion in Box #3 2 (Place of Service) and Box #33(B i l l ing Provider) . Id . a t 15. CMS says t ha t , s ince Bo x #32 oneach of these cla ims "does not list an IMD provider t h a t wasinc luded on th e OIG's list of IMD prov ider s , " CMS proper lydisa l lowed these c la ims. Id . a t 16.In reply , Texas submit ted a second a f f i dav i t from DianeBroadhurst as Exhibi t A to th e r ep ly b r i e f . In t h i s a f f i d a v i t ,Ms. Broadhurst di scusse s the CMS examples of se rv ices it sa idwere provided o ~ t s i d e th e f a c i l i t y , and expla ins why Texas s t a f fdetermined these were va l id cla ims fo r i npa t i en t psych ia t r i cse rv ices . She says it i s a common p ra c t i c e fo r i n p a t i e n tf a c i l i t i e s to have re l a t ionsh ips with e i t he r phys ic ian ,psych ia t ry , o r o ther hea l th p ro fes s iona l groups t ha t come in toth e f a c i l i t y to provide medical , behaviora l hea l th , o r o therprofes s iona l t rea tment to th e pa t i e n t s , and t ha t th e group thenb i l l s us ing as place of se rv ice e i t he r code 51 ( inpa t i en tp sy c h i a t r i c f ac i l i t y ) o r code 21 ( inpa t ien t hos p i t a l ) , e i t h e r o f5thwhich i s acceptable on th e cla im. TX Reply Br. Ex. A, a tunnumbered page. With i t s supplemental reply , Texas a l sosubmit ted Ins t ruc t ions from th e Texas Medicaid ProviderProcedures Manuals from 1997-2000, which conta in in fo rmat ion suchas b i l l i n g i n s t ru c t i o n s , model cla ims forms, and codeinformat ion . TX Supplemental (Supp.) Exs. 15-18.The f i r s t s ix examples given by CMS in i t s response b r i e f arefrom cla ims forms t h a t appear in Texas Exhibi t 11a, a t pages 12,18, 21, 25, 28, and 37. With r espec t to these examples, Ms.Broadhurst expla ins t ha t -

both th e b i l l i n g and f a c i l i t y prov ide rs a re l i s t e d ' i nblocks 33 and 32 as SW Psych ia t r i c :Physicians a t 8535Tom Sl ick Dr. , San Antonio, Texas 78229-3363. Inresearching t h i s psych ia t r i c phys ic ians group it wasdetermined t h a t they a re d i rec t l y a f f i l i a t e d withSouthwest Mental Health Center (SMHC) , an IMD loca ted a t8535 Tom Sl ick Dr. , San Antonio, Texas 78229-3363. SW


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25 Psych ia t r i c Physicians group provides both i n p a t i e n t andou tpa t i en t care a t SMHC (IMD f a c i l i t y ) . While th ecla ims forms fo r examples 1 through 6 o f [CMS's] t ab ledo not show SMHC as th e f a c i l i t y prov ide r in block 32,block 24(b) does show a place o f se rv ice code o f 51( Inpa t ien t psych ia t r i c f a c i l i t y ) . Based on th edocumented cla ims data and the fac t t ha t th e p sy c h i a t r i cgroup and the IMD are loca ted a t th e same address , it i sapparen t t h a t the se rv ices were rendered a t th e IMD(SMHC) .

6 thId . a t unnumbered page. We examined these cla ims forms andth e r e l a t e d informat ion from th e aud i to r s in Texas Exhibi t 5, a t455, 448, 434, 428, 324, and 413. The comparison shows t h a t , fo reach o f these c la ims, Southwest Mental Health Center was th e IMDin which th e ch i ld re s ided , and th e admission and discharge da tesfo r the ch i ld correspond to the per iod i de n t i f i e d on th e cla imsforms as "hosp i t a l i za t ion dates re l a t ed to cur ren t se rv ices . " Inadd i t ion , th e " type of se rvice" and procedure codes used (99232and 99233) on th e c la ims forms ind ica te "subsequent d a i l yh o sp i t a l care . " See, e . g . , TX Supp. Ex. 15, a t page 33-5 . Thus,based on th e record as a whole, we f ind t ha t Texas adequate lydocumented t h a t t he se sample cla ims q u a l i f y as cla ims fo rs e r v i ce s provided in and by th e IMD.On th e o th e r hand, we agree with CMS t h a t documentat ion t h a t i scomparable to t h a t fo r th e cla ims CMS gives as examples 7 through9 i s no t adequate to suppor t th e a l lowab i l i ty o f th e c la ims, evenconsidered wi th th e support ing a f f i d a v i t s .For CMS example 7 (from Texas Exhib i t 11d, a t 836) , Ms.Broadhurs t j u s t i f i e s a conclusion t ha t th e se rv ices were fo ri npa t i e n t psych ia t r i c se rv ices by expla in ing t h a t -

th e b i l l i n g provider i s Psych ia t r i c Aff i l i a t e s o f Texasin block 33 and th e f a c i l i t y provider in block 32 i sMed-Forest Springs a t 1120 Cypress Sta t ion , Houston.The cla ims shows a POS code of 3, which i s a va l idi n p a t i e n t f a c i l i t y POS code fo r paper c la ims. Theaddress 1120 Cypress Sta t ion , Houston i s In t raca re NorthHospi t a l , an i de n t i f i e d Texas IMD. An assumption can bemade t h a t th e se rv ices were rendered a t th e IMD and th eb i l l e r en te red the wrong f a c i l i t y name.

6 thTX Reply Br . , Ex. A, a t to 7 th pages . For CMS examples 8 and9, Ms. Broadhurs t s t a t e s t ha t - th e b i l l i n g provider i s l i s t e d as Primary Medicine


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26C l in i c s in block 33, with Drs. Timothy Sharma and WayneKel le r as th e performing phys ic ians , who arep s y c h i a t r i s t s . Primary Medicine Cl in ics i s a l so l i s t e das th e f a c i l i t y provider in block 32, with a POS code o f21 in block 24(b) . In block 17(a) of bo th claim forms,th e name of th e r e f e r r i n g provider i s l i s t e d as e i t h e rIn t raca re North Hospi ta l o r In t r acare Med C tr Hosp. Iti s a common b i l l i n g e r ro r fo r f i l e r s to reve rse th eplacement o f the f a c i l i t y and r e f e r r i n g prov ide rs , whichi s most l i ke l y th e case in these two examples.

Id . a t a t 7th page. Ms. Broadhurs t a t t e s t s t ha t the re i s a"reasonab le c e r t a in ty t ha t these se rv ices were rendered ons i t e a tth e IMD and are va l id cla ims fo r th e profes s iona l behaviora lhea l th se rv ices rendered to th e IMD res iden t s . " Id .We f i r s t note t ha t examples 7-9 in CMS's b r i e f are fo r managedcare cla ims which Texas d id not include in the list o f th e 111managed care sample cla ims its ana lys i s found were fo r i n p a t i e n tp sy c h i a t r i c se rv ices rendered in th e IMD in which th e ch i ldr es ided . TX Ex. 12b, informat ion fo r ICNs 204400175216033 (MedFores t Spr ings ) , 204400143325045 (primary Medicine C l in i c s , and2044001433253038 (Primary Medicine Clinics) .1 0 On th e o th e rhand, s i m i l a r cla ims documentat ion was submit ted fo r some sampleclaims t h a t were included in the 111 sample managed care cla imsTexas a s s e r t s were al lowable . Spec i f i ca l ly , documenta t ion fo rone paper c la im (with ICN 204400220374058) shows Med Fores tSpr ings as the p l ace o f se rv ice in Box #32 and Psych ia t r i cAssoc ia tes as th e b i l l i n g provider in Box #33. TX Ex. 11e, a t989. Simi la r ly , th e documents fo r e igh t sample e lec t ron ic cla imsshow In t raca re as the r e f e r r i n g provider and Primary MedicineC l in i c s as th e f a c i l i t y prov ide r . TX Ex. 11e, a t 997, 999, 1001,1003, 1005, 1009, 1025, 1031. 11 Also, the p lace o f se rv ice code

10 The documents re l a t ed to th e 111 cla ims fo r which th eTexas summary shows "yes" in th e column l abe led "Rendered in IMD"a re in Texas Exhib i t 11e, r a t h e r than in Exhibi t l1d .Apparent ly , CMS d id not r e a l i z e t h i s because th e Reed A f f id av i tmistaken ly says they a re in Exhib i t 11d. See TX Ex. 7.

11 We note t ha t th e paper cla im form a t page 1048 o f TexasExhib i t l l e a l so has Primary Medicine Cl in ics in Box 32, b u t itc l e a r ly was a t t ached to the form a t page 1047, which has th e sameICN, 394400111681054, and shows In t r acare Hospi ta l , with itsc o r re c t address , as the p lace o f se rv ice . Moreover, both formshave 12/09/99 to 12/21/99 as th e "hosp i t a l i za t ion da te s r e l a t e d(cont inued ... )


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27 fo r t he se cla ims i s 21, which could be used fo r i n p a t i e n th o sp i t a l se rv ices othe r than se rv ices in th e IMD in which th ec h i l d r es ided . Id . While it may be t r u e , as Ms. Broadhurs ta t t e s t s , t h a t th e f laws in th e documentat ion were simply th er e s u l t o f common b i l l i n g e r ro r s , we dec l ine to make t h a tassumption fo r t he se c la ims. The ana lys i s she and Ms. Reedperformed t r ea ted some s imi la r cla ims documentat ion as no ts u f f i c i e n t to show t ha t th e se rv ices were rendered in an IMD. TXEx. 12b ( l ines re fe r r i n g to Med Fores t Springs o r PrimaryMedicine Cl in ics , with a "no" in th e re l evan t column). Thea f f i d a v i t s provide no explana t ion fo r t r e a t i ng t he se s i m i l a rclaims d i f f e r e n t l y .For a l l of the o th e r sample cla ims, however, we f ind t h a t th edocumentation and evidence submit ted by Texas, inc luding p lace o fse rv ice codes and procedure codes t ha t i n d i ca t e th e cla ims werefo r i n p a t i e n t p sy c h i a t r ic , psychotherapy, o r eva lua t ion andmanagement s e r v i ce s , adequate to rebut th e au d i t f indings t h a tth e se rv ices were provided outs ide the IMD by prov ide rs o th e rthan th e IMD in which th e ch i ld re s ided .In sum, we uphold th e disa l lowance r e l a t e d t o cla ims fo r whichTexas concedes its ana lys i s d id not show th e cla ims were fo ri npa t i e n t se rv ices . For nine o f th e 111 sample managed careclaims Texas i de n t i f i e d as i npa t i en t psych ia t r i c se rv ices , wef ind th e evidence inadequate to show t ha t the se rv ices werea l lowable . For th e remaining sample claims, we f ind t h a t Texashas submit ted adequate evidence to suppor t its a n a l y s i s , a n d t h a tCMS has provided no persuas ive reason fo r r e j e c t i n g t h a tevidence.I I I . eMS's argument that payments for the profess ionals 'inpat ient serv ices would dupl icate payments to the IMDs becauseTexas used an "a l l inclusive" per diem rate to reimburse the IMDsfor the ir serv ices i s unfounded.

11 ( cont inued)to cu r r en t se rv ices . " This per iod corresponds to t he da te s o fadmiss ion to and discharge from In t r acare fo r t he ch i ld a t i s sue(Medicaid #510734869). TX Ex. 5, Managed Care Claims Tab a t 58.,The procedure code i s 99233 (subsequent h o s p i t a l care) fo r eachs e r v i ce da te between 12/10/99 and 12/20/99 , and 99239 (hosp i ta ldischarge day management) fo r 12/21/99 , th e day the ch i ld wasdischarged from In t raca re . TX. Ex. 11e, a t 1047-1048. Thus, wef ind t h i s documentat ion adequate to show th e cla ims on th e formwere fo r th e i n p a t i e n t psych ia t r i c hosp i ta l s e rv ices In t r a c a reprovided to th e ch i ld .


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28

In its response br i e f , CMS ra i sed fo r th e f i r s t t ime a ques t ionabout whether separate payments to p ro fes s iona l s prov id ingse rv ices in th e IMDs would dup l ica te payments al ready made to thef a c i l i t i e s . CMS c i t e s to provis ions of chapte rs 355 and 419 ofthe Texas Adminis t ra t ive Code regard ing the reimbursementmethodology fo r "IMD se rv ices . " CMS Response Br. a t 7. CMSacknowledges t ha t the c r i t e r i a and methodology in t he seprov is ions dea l with "serv ices to ind iv idua l s aged 65 and o lder , "bu t asse r t s t ha t t he p rov i s ions a re "re levant and prov ideguidance to a prov ider ' s e l i g i b i l i t y fo r reimbursement" fo rse rv ices to ind iv idua l s aged 21 and younger. Id . Based on th ec i t ed prov is ions of the Texas Admin is t ra t ive Code, CMS arguest h a t the payments were not cons i s ten t with th e Texasreimbursement methodology, which provides t ha t the per diem r a t ei s " inc lus ive of a l l cos ts" so t ha t , to the ex ten t a b i l l i n gphys ic i an seeks reimbursement fo r IMD se rv ices , he must "submitcos t s to an IMD provider fo r inc lus ion in th e IMD's Medicare co s tr e por t . " Id . a t 17.A f te r Texas objec ted in i t s reply br i e f to CMS r a i s ing t h i s newi s sue , th e Board se t fu r the r procedures . Texas was given anoppor tun i ty to supplement i t s r ep ly and exh ib i t s , fo l lowed by aCMS su r rep ly and a f i na l Texas response . The evidence Texaspresen ted shows persuas ive ly t ha t the re i s no mer i t to CMS's newa s s e r t i on .

A. Texas presented persuas ive evidence tha t th e IMDs'p er diem ra tes did not inc lude the cos t s o f pro fes s iona lserv ices .

The evidence shows t ha t Texas had two approved reimbursementmethodologies fo r in pa t i en t psych ia t r i c hosp i t a l s during th ea u d i t per iod . The f i r s t was th e Sta te Plan methodology under th efo l lowing prov i s ion , which has been in e f f e c t s ince 1992:

EPSDT DIAGNOSTIC AND TREATMENT SERVICES NOT OTHERWISECOVERED UNDER THE STATE PLANInpa t i en t psych ia t r i c h o s p i t a l s e rv ices furnished toEPSDT rec ip ien ts . The psych ia t r i c hosp i t a l must beaccred i ted by th e Jo i n t Commission on Accredi ta t ion ofHeal thcare Operat ions (JCAHO). The s ing le s t a t e agencyo r i t s designee re imburses psych ia t r i c h o sp i t a l s us ingMedicare pr inc ip les of reasonable cos t reimbursementfound a t 42 CFR 413, but without applying the Tax Equi tyand F i s ca l Respons ib i l i ty Act (TEFRA) r a t e of increasel i m i t s . The s ing le s t a t e agency o r i t s des igneee s t a b l i sh e s in ter im payment r a t e s ....


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29Except fo r payment as descr ibed in t h i s a t tachment fo ri n p a t i e n t hosp i t a l se rv ices , payment fo r au thor i zedmedica l ly necessary se rv ices requi red to diagnose andt r e a t a condi t ion found on EPSDT medical screen ing w i l lbe based on ex i s t ing Medicare and Medicaid reimbursementmethodologies .

TX Supp. Ex. 1 . As Texas expla ins , the Medicare hosp i t a lprospec t ive payment system d id n ot a t th e t ime apply top sy c h i a t r i c hosp i t a l s o r u n i t s , and the reasonable cos tre imbursement methodology appl ied only to payments to th eh o sp i t a l fo r s e rv ices covered by P a r t A s ince Medicare reimbursesfo r p ro fes s iona l se rv ices under Par t B. TX Supp. Br. a t 9-10 .The ev idence support ing t h i s inc ludes th e Medicare Prov iderReimbursement Manual and an a f f i d a v i t by Richard Bledsoe . TXSupp. Exs. 4 and 9.The Medicare manual d is t ingu ishes between se rv ices a profes s iona lprov ides to a hosp i t a l t ha t b e n e f i t th e g en e ra l popula t ion o f th ehosp i t a l o r a re emergency se rv ices (which are ca l l ed "prov iderserv ices" fo r purposes o f reasonable cos t reimbursement) ands e r v i ce s th e profes s iona l provides to i nd iv idua l pa t i e n t s ( ca l l ed"pro fes s iona l se rvices") t ha t a re not considered an al lowablecos t fo r purposes o f determining a hosp i t a l ' s p er diemre imbursement r a t e . According to the Bledsoe A f f id av i t , s inceCMS approved Texas using th e Medicare methodology, Medicaid IMDsin Texas were requi red to use CMS-approved Medicare sof tware fo rt h e i r co s t repor t s . TX Supp. Ex. 9, a t 2. The sof twareau toma t i ca l ly excludes th e cos t of th e profes s iona l componentfrom th e al lowable cos t s used i n s e t t i ng th e p e r diem r a t e . Id .a t 3-4 . The IMDs a l so were requi red to fo l low i n s t ru c t i o n s t h a tprovided fo r exclud ing such co s t s . Id . a t 2-3. Attachments toth e Bledsoe Aff idav i t inc lude th e i n s t ruc t ions and the IMDs' co s trepor t s showing ad jus tments fo r profes s iona l s e rv ices c o s t s .These cos t repor t s each conta in Worksheet A-8-2, which i d e n t i f i e sthe p ro fes s iona l s e rv ices cos t s , if any, to be excluded from th eIMDs' co s t s used fo r r a t e - se t t i ng .The second reimbursement methodology was under a se l e c t i v econ t rac t ing program ca l l ed the LoneSTAR Waiver. Texas nego t ia tedwith IMDs in th e l a rge s t metropo l i t an a reas fo r p er diem r a t e st h a t were pa id on a prospec t ive b as i s ( i . e . , n ot sub jec t toad jus tment based on ac tu a l c o s t s ) . Texas expla ins t h a t , s inceth e s t a r t i n g po in t fo r t he se nego t ia t ions was based on th eh o s p i t a l ' s l a t e s t aud i t ed cos t r epor t (and the r e su l t i n g p e r diemva lue) , the nego t i a t ed reimbursement ra te s n eces s a r i l y excludedth e co s t s as soc ia ted with profe s s iona l se rv ices . TX Supp. Br. a t14, c i t i ng A f f id av i t of Richard Pe te r s , TX Supp. Ex. 8.


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30Texas a l so submi t t ed fu r the r suppor t fo r i t s a s se r t i o n s ,i nc lud ing an a f f i d a v i t by Kevin Nolt ing , Direc tor of Hospi ta lReimbursement fo r HHSC, and formerly Chief Financ ia l O f f i ce r ofthe Texas Department of Mental Heal th and Mental Retarda t ion . TXReply Br. Ex. B. Attached to t h i s a f f i dav i t i s an example of aMedicare cos t r epor t fo r the Aust in Sta te Hospi ta l (withi n s t ruc t ions ) , showing " typ ica l " adjustments to exclude from th eca lcu la t ion of th e i npa t i en t p er diem r a t e cos t s as soc ia ted withse rv ices provided to , individual pa t i e n t s by profes s iona l s such aspsychologis ts , ps yc h ia t r i s t s , and genera l phys ic i ans .

B. eMS presented no evidence to support a f ind ing t ha tTexas was paying an "al l - inc lus ive" ra te to th e IMDs,and its arguments about the evidence Texas presentedhave no mer i t .eMS submi t t ed no evidence to suppor t i t s a s se r t i o n t h a t Texas waspaying an "a l l - i n c l u s i v e " per diem r a t e fo r i npa t i en t psych ia t r i ch o sp i t a l se rv ices fo r ch i ld ren dur ing th e disa l lowance per iod .Ins tead , CMS t r i e s to undercu t th e evidence Texas submi t t ed , byr a i s ing quest ions , based on the evidence presented by Texas. Noneo f these arguments has mer i t .F i r s t , CMS ques t ions whether th e quoted Sta te Plan provis ion infac t app l i ed to the s e rv ices a t i s sue . CMS claims in e f f e c t t h a tit cannot t e l l if th e quoted prov i s ion app l ies because Texas hasno t provided evidence t h a t the se rv ices a t i s sue were EPSDTse rv ices . As Texas po in t s out , however, th e a u d i t found th ese rv ices were provided to ind iv idua l s under age 21, and apre r e qu i s i t e fo r claims fo r i npa t i en t psych ia t r i c f a c i l i t yse rv ices fo r ind iv idua l s under age 21 i s t h a t they be medica l lynecessary . Also, CMS's own Sta te Medicaid Manual (a t 4390)r equ i res a s t a t e to provide i npa t i en t psych ia t r i c se rv ices fo ri n d iv id u a l s under age 21 as EPSDT se rv ices i f they a re determinedto be medica l ly necessary (even if the Sta te plan does not coversuch se rv i c e s ) . Texas would need a plan p rov i s ion spec i f i ca l l ye s t a b l i sh i n g a reimbursement method f9 r i npa t i en t psych ia t r i cse rv ices requ i red by th e EPSDT Program if th e Texas Sta te Pland id not opt to cover such se rv ices genera l ly . Documents r e l a t e dto the Sta te Plan prov i s ion on which Texas r e l i e s show t ha t , a tth e t ime it was submit ted, CMS ques t ioned why Texas was n o tsubmi t t ing an amendment to cover th e se rv ices , bu t only areimbursement prov i s ion , acknowledging t ha t th e reason fo r t h i smight be t h a t th e se rv ices were being provided only as an EPSDTbe ne f i t . TX Supp. Ex. 2.CMS s t a t e s no reason fo r no t cred i t ing a l l of th e evidence Texassubmi t t ed showing tha t , in f a c t , it was using th e Medicare


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31 reasonab le cos t methodology t o ca lcu la t e th e r e levan t pe r diemr a t e s fo r IMDs not in the LoneSTAR program. As noted above, CMSacknowledges t h a t th e Texas Admin is t ra t ive Code prov i s ions onwhich its argument r e l i e s apply to se rv ices to ind iv idua l s aged65 and o lder . Moreover, CMS ci tes , to no o ther Sta te Planprov is ion apply ing t o inpa t i en t psych ia t r i c hosp i t a l se rv icesdur ing th e disa l lowance pe r iod . CMS argues merely t h a t th e TexasAdminis t ra t ive Code prov i s ion Texas c i t e s as the app l icab le one( sect ion B063(w was not e f fec t ive u n t i l 200B. CMS Surreply a t9, c i t i ng CMS Ex. 4: Yet, the ve rs ion o f t h i s prov i s ion t h a t CMSsubmit ted i s c l e a r ly th e vers ion t ha t Texas amended to adopt aprospec t ive reimbursement system, not th e vers ion t ha t was ine f f e c t during th e disa l lowance pe r iod . CMS Ex. 4. Texasexp la ins t h a t CMS approved i t s new system in 200B. TX Responseto Surreply a t 4.CMS a l so asse r t s t ha t -

Texas also did not inform CMS through its Sta te Plant h a t Texas in tended to claim FFP fo r payments made toind iv idua l s o r e n t i t i e s o ther than i npa t i en t psych ia t r i cf ac i l i t i e s o r programs. Clear ly , Texas d id n o t p laceCMS on no t ice t ha t IMDs were going to "out source" th ei n t e g ra l pa r t o f the IMD coverage fo r reimbursement o fFFP purposes namely, i npa t i en t psych ia t r i c se rv iceswhich involve act ive t rea tment of the p a t i e n t s ' mentalhea l th condi t ion .

CMS Sur rep ly a t 7. CMS should have known t h a t profes s iona lse rv ices would be reimbursed separa te ly from th e p e r diem r a t e ,however, s ince the Sta te Plan prov i s ion in ques t ion adopted a CMSr a t e - s e t t i n g methodology t ha t s pe c i f i c a l l y excludes the cos t s o fp r o f e s s io n a l se rv ices from the r a t e ca lcu la t ion . The Sta t e Planprov is ion a l so re fe r s to o ther approved reimbursement methods,and, as d iscussed above, Texas presented evidence t ha t shows itcons i s ten t ly i n t e rp re ted its plan to al low phys ic ians o r t h e i rb i l l i n g groups to b i l l separa te ly fo r Medicaid i n p a t i e n t se rv icesus ing those methods.CMS appears to have misread a s ta tement in th e Nolt ing Aff idav i t ,moreover. In expla in ing th e Medicare reasonable cos treimbursement methodology, Mr. Nolt ing s t a t e s t h a t the "per diemonly covers what would be descr ibed by a layperson as ' room andboard . ' " TX Reply Br . , Ex. A, a t 4 t h page. CMS read t h i s tomean t ha t , in fac t , only room and board was covered by the r a t e s ,argu ing t h a t such a system i s incons i s ten t with th e ac t ivet rea tment requirement . The only cos t s Mr. Nolt ing mentions asbeing excluded from th e r a t e ca lcu la t ions , however, a re th e cos t s


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32 of "pro fes s iona l s such as psychologis t s , ps yc h ia t r i s t s and

3rdgenera l phys ic ians . " Id . a t page. In any even t ,notwi ths tanding Mr. Nol t ing ' s s ta tement about how a l aypersonwould descr ibe the cos t s covered by th e p er diem r a t e , the cos trepor t s submit ted by Texas (and the manual prov i s ions on CMS'sown Medicare reasonable cos t methodology) show t h a t the. p er diemr a t e covered the hosp i t a l rou t ine care cos t s , such as nurs ingse rv ices , no t j u s t room and board. This ev idence i s s t ronger andmore r e l i ab l e evidence about what the r a t e s included than th eambiguous s ta tement in th e a f f i dav i t . Thus, we r e j e c t CMS'sarguments t h a t a re based on the erroneous premise t ha t Texas waspaying only fo r cus tod ia l care , contrary to th e regu la t ions .CMS fu r t h e r argues t ha t Texas represented t h a t payments under theLoneSTAR con t rac t ing program would be "a cos t -e f fec t ive means ofproviding a ful l range of certain inpat ient services to thereques ted Medicaid popula t ion ." eMS Surreply a t 5 (emphasis inor i g i na l ) , c i t i ng TX Supp. Ex. 11, a t 1-2 . eMS says t h a t theTexas Legis la tu re d i rec ted the HHSC to ensure t h a t prov ide rsr ece iv ing con t rac t s meet the needs of Medicaid r e c ip i e n t s . I d . ,c i t i ng TX Ex. 11, a t 2-3. According to CMS, any payments tophys ic i ans made in add i t ion to the cont rac ted per diem r a t e s"were made con t ra ry to the Le g i s l a t u re ' s d i r e c t ive to ensure t

HHS Appellate Decision on Texas Health and Human Services Commission

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