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From Health Law Daily, February 11, 2015

Georgia needs $90M in erroneous credits more than the fed

By Harold M. Bishop, J.D.

Georgia’s Medicaid agency has been allowed to recover $90 million that it erroneously credited to CMS through bookkeeping errors. CMS and HHS’ Departmental Appeals Board (DAB) barred the recovery of the erroneous credits due to untimely filing by Georgia. While the court recognized the importance of timeliness, and recognized Georgia’s role in causing the mistake, it found that Georgia had no adequate remedy at law, that the credits rightly belonged to Georgia and its Medicaid recipients, and that the U.S. government would be unjustly enriched if permitted to keep the credits (Georgia Department of Community Health v. HHS, February 10, 2015, Kessler, G.).

Background. The parties had no disagreement about the facts that led to the Georgia Department of Community Health’s (Georgia) inadvertent credit of $90 million to CMS and CMS’ subsequent refusal to refund the money.

In the process of preparing its state fiscal year (SFY) 2005 statements, Georgia inadvertently included a $45 million provider receivables balance in its decreasing adjustment on the Quarterly Statement of Expenditures (QSE) for the quarter ended September 30, 2005. Also, 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. Combined, Georgia erroneously credited CMS $90 million between 2005 and 2006. 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.

Once Georgia discovered the errors, it attempted to reclaim the $90 million by including the $90 million amount on the “other” expenditures line of the QSE for the quarter ended June 30, 2009. On December 11, 2009, CMS withheld payment on the $90 million claim, asserting that Georgia's request was untimely. Georgia responded with two separate letters, arguing that the two-year limitation contained in Section 1132 of the Social Security Act (42 U.S.C. §1320b-2) was not applicable in this circumstance. On June 30, 2011, CMS notified Georgia that it was disallowing the $90 million adjustment. On appeal to the DAB, the Board sustained the entire $90 million disallowance (see Georgia Department of Community Health v. CMS, June 28, 2013). Georgia then brought suit against HHS and CMS to recover the $90 million. Both parties moved for summary judgment.

Court review of the DAB’s decision. According to the court, the DAB found that: (1) Georgia’s $90 million refund request was a claim with respect to expenditures, and thereby subject to the two-year limitation contained in 42 U.S.C. §1320b-2; and (2) the expenditures in question were provider payments made between 1998 and 2005 and therefore Georgia’s claim for a $90 million on its June 2009 QSE was long past the two-year deadline.

Georgia responded that under the Board’s finding that the expenditures took place between 1998 and 2005, even if it had immediately realized its mistake on its September 2005 QSE and had tried to recover the $45 million on the next QSE (or even the next day), it would have already been time-barred from most of the expenditures. The court noted this fact, and urged CMS to issue guidance to the states on when it will permit them to revise QSEs, so as to avoid being immediately time-barred from correcting their errors.

Nevertheless, the court found the Board’s interpretation of the statutes and regulations to be reasonable and not arbitrary, capricious, or an abuse of discretion.

Equitable claim. The court found that because there was literally no time window in which Georgia could have sought to recover a substantial portion of the erroneous credits, it had no adequate remedy at law. This lack of an adequate remedy at law allowed the court to consider other equitable remedies such as unjust enrichment.

The court decided that the loss of $90 million in credits due to bookkeeping mistakes would harm the close to 20 percent of Georgia’s population that is enrolled in Medicaid. In addition, the court noted the distressing financial environment Georgia Medicaid faced that led to the $90 million in erroneous credits. Apparently the bulk of the $90 million was the result of Georgia making advance payments to its providers in 2003-2005 who were threatening to stop treating their Medicaid patients unless they were paid. This practice of making advance payments, not normally permitted, was done with CMS’ knowledge and approval. This was uncharted territory, according to the court, and Georgia was trying to comply with CMS’ overpayment regulations while accurately reflecting the situation on its internal financing statements. This apparently led to some confusion for Georgia and the bookkeeping errors.

While the court recognized the importance of timeliness and CMS’ ability to plan its budget, as well as Georgia’s role in causing the mistake, it concluded that the balance of the equities weighed in favor of Georgia and that CMS would be unjustly enriched if permitted to keep the erroneous credits.

Summary judgment was granted to Georgia.

The case is Civil Action No. 13-1281 (GK).  

Attorneys: Carolyn Frances Corwin (Covington & Burling LLP) for Georgia Department of Community Health. Peter C. Pfaffenroth, U.S. Attorney's Office, for U.S. Department of Health and Human Services, and Centers for Medicare and Medicaid Services.

Companies: Georgia Department of Community Health; U.S. Department of Health and Human Services; Centers for Medicare and Medicaid Services

MainStory: TopStory MedicaidPaymentNews CMSNews AuditNews ClaimsAppealsNews CostReportNews GeorgiaNews

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