Maryland Department of Health, DAB No. 3153 (2024)

DECISION

On June 26, 2018, the Centers for Medicare & Medicaid Services (CMS) disallowed $34,155,857 in federal financial participation (FFP) claimed by the Maryland Department of Health (State) for payments the State made from July 1, 2010, through June 30, 2013, under its section 1915(c) Home and Community Based Services (HCBS) waiver program called Community Pathways. The payments for which CMS disallowed FFP were for “add-on residential habilitation services” furnished to developmentally disabled individuals, the population served by Community Pathways.

CMS based the disallowance on findings of an Inspector General (I.G.) audit. As set forth in a June 2015 report,¹ the I.G. found, and CMS concurred, that the State’s payments for add-on residential habilitation services during the relevant period were ineligible for FFP because they were made on behalf of waiver program participants (sometimes called “waiver beneficiaries”) who did not have the highest “level of need” for health care and supervision, as measured using the waiver program’s rating scale. 

The parties’ dispute concerns the meaning of a provision in the State’s CMS-approved section 1915(c) waiver application for the five-year period beginning July 1, 2008, and ending June 30, 2013. CMS construes the disputed provision as prohibiting payment by Community Pathways for add-on residential habilitation services unless the waiver program participant on whose behalf the payment was made had the highest level of need (a score of five) on the program’s rating scale. The State responds that the provision cannot reasonably be construed as imposing that condition. Alternatively, the State contends that the provision is at least ambiguous about whether it requires a waiver program participant to have the highest level of need to receive add-on residential habilitation services, and that it reasonably interpreted the provision as not doing so when it authorized payments and claimed FFP for those services. 

For the reasons stated below, we find CMS’s position more persuasive. We conclude that the State’s payments for add-on residential habilitation services from July 1, 2010,

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through June 30, 2013, were not eligible for FFP. Accordingly, we conclude that CMS lawfully disallowed FFP for those payments and sustain the disallowance in full.

I. LEGAL BACKGROUND

The federal Medicaid statute, title XIX of the Social Security Act, authorizes the federal government to reimburse a state Medicaid program for a percentage of the program’s costs of providing “medical assistance” (that is, medical care and services) to low-income persons and families. Social Security Act (Act) §§ 1901, 1903; 42 C.F.R. § 430.0. Section 1905 of the Act, and corresponding regulations in 42 C.F.R. Part 440, specify the types of care and services that may qualify as reimbursable medical assistance. Federal Medicaid reimbursement is known as “federal financial participation,” which we refer to as “FFP” herein.

Each state must administer its Medicaid program in accordance with a CMS-approved “State plan.” Act § 1902; 42 C.F.R. Part 430.² A state is eligible for FFP for expenditures it makes in accordance with an approved State plan. See Act § 1903; 42 C.F.R. §§ 433.10(a), 433.15(a).

Under section 1915(c) of the Act, a state may obtain from CMS a “waiver” of certain federal State plan requirements to enable its Medicaid program to provide (and receive FFP for) “home or community-based services” – services generally not available under a State plan – to persons who would otherwise need Medicaid-funded inpatient care in a hospital, nursing home, or other institutional setting. See Act § 1915(c)(1), (3); 42 C.F.R. §§ 430.25, 440.180(a), 441.300. “[T]he object of [section 1915(c) waiver authority] is to provide a less costly alternative to institutional services.” Fla. Dep’t of Health and Rehab. Servs., DAB No. 1100, at 2 (1989).

Home or community-based services (HCBS) may include the types of services listed in 42 C.F.R. § 440.180(b), “as [those services] are defined by [the state Medicaid] agency and approved by CMS.” 42 C.F.R. § 440.180(b). They include case management, personal care, “habilitation,”³ and “[o]ther services requested by the [state Medicaid] agency and approved by CMS as cost effective and necessary to avoid institutionalization.” Id. § 440.180(b)(9); see also Act § 1915(c)(4)(B). A section 1915(c) waiver program’s services must be “furnished . . . [u]nder a written person-centered service plan (also called plan of care) that is based on a person-centered

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approach and is subject to approval by the [state] Medicaid agency.” 42 C.F.R. § 441.301(b)(1)(i). Services provided in accordance with an approved section 1915(c) waiver, and which meet applicable federal requirements, constitute “medical assistance” eligible for FFP. Act § 1915(c)(1) (providing that the Secretary may “by waiver” authorize a state to treat as “medical assistance” the costs of “home or community-based services . . . approved by the Secretary”).⁴ 

To obtain or renew a section 1915(c) waiver, a state must submit to CMS a “request” – an application – concerning the HCBS program it intends to implement under the waiver. 42 C.F.R. § 430.25(e); 42 C.F.R. Part 441, subpart G (section 441.300 et seq.). Federal Medicaid regulations specify the application’s required content, which includes assurances about how the program will be administered (in accordance with federal requirements), the types of services authorized under the waiver, and the groups of individuals eligible for covered services. See 42 C.F.R. § 441.301. A waiver application is submitted in a CMS-prescribed standard format designed to elicit the information required by the regulations.⁵ See CMS Ex. 5, at 8.

CMS “approves [a] waiver request[ ] if the State’s proposed program or activity meets the requirements” of the Medicaid statute and regulations. 42 C.F.R. § 430.25(g)(1). Following an initial approval period (three years), a section 1915(c) waiver may be renewed (that is, re-approved) for five-year periods. Id. § 430.25(h)(2)(i)(A).

II. CASE BACKGROUND

A. Community Pathways – Maryland’s section 1915(c) waiver program

Community Pathways, Maryland’s section 1915(c) waiver program, has existed in some form since 1984. CMS Ex. 1, at 2. The program provides services to individuals with developmental disabilities to help them live in the community and avoid institutionalization. Id. at 1-4, 22. The Developmental Disabilities Administration 

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(DDA), which is part of the Maryland Department of Health and Mental Hygiene, operates Community Pathways. Id. at 4; CMS Ex. 3, at 9.

The State submitted an application to CMS to renew Community Pathways for a five-year period beginning on July 1, 2008, and ending on June 30, 2013. CMS Ex. 1, at 2. We refer to this application as the “2008 waiver application.” CMS approved the 2008 waiver application by letter dated June 23, 2008. CMS Ex. 2, at 1.

The following information, drawn largely from the 2008 waiver application and the I.G.’s June 2015 audit report, describes Community Pathways as it existed when the expenditures implicated by the disallowance were made.⁶

Services covered under the waiver: Community Pathways offers various types of home and community-based services – including “residential habilitation” (also referred to as “community residential habilitation”). CMS Ex. 1, at 4, 49, 50. The program provides residential habilitation services in group homes, alternative living units, or individual family care homes. Id. at 50.

The individual service plan: In accordance with 42 C.F.R. § 441.301(b)(1)(i), “a participant-centered service plan (of care) is developed for each [waiver program] participant,” and “[a]ll waiver services are furnished pursuant to the service plan.” Id. at 7, 65, 111-12. The service plan (also called the “individual plan”) must be reviewed and revised at least annually or when an individual’s health status or circumstances change. Id. at 112-13. 

The resource coordinator: Each waiver program participant has a “resource coordinator” (or case manager) who helps develop the service plan, locate services, monitor delivery of services to verify their consistency with the plan, and ensure that the participant’s health, safety, and other goals are met. Id. at 4, 14, 36, 65, 110.

The service funding plan: A waiver program participant’s plan of care “is supported by a “service funding plan” (or “budget”) developed by the resource coordinator and the service provider. See id. at 14, 65, 86, 113, 168. The service funding plan “outlines the services to be provided and the cost of the services (rate-based and non-rate-based) which will be billed to the state directly.” Id. at 168. DDA reviews all service funding plans to “ensure that the services to be billed under the waiver are legitimate waiver services eligible for FFP.” Id. at 168.

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A service funding plan reflects a formal assessment of the participant’s “level of service needs.” Id. at 14, 167. That assessment is performed by a state contractor using DDA’s Individual Indicator Rating Scale (IIRS). Id.; CMS Ex. 3, at 9. The IIRS measures the participant’s need in two general areas: “health/medical,” and “supervision/assistance.” CMS Ex. 1, at 167. Each general area of need is assigned a score of one to five, with one indicating the lowest and five the highest level of need. Id.; CMS Ex. 3, at 4, 9; Code of Maryland Regulations (COMAR) 10.22.17.06F-G. The combined scores yield an “IIRS matrix level which is then translated into an individual budget using rates” established by DDA (and published in state regulations) for residential and other habilitation services. CMS Ex. 1, at 14, 167-68; see also COMAR 10.22.17.06G (showing budget rates for IIRS matrix levels).

Determination of payment rates for residential habilitation: In general, Community Pathways pays service providers for covered waiver services in accordance with provisions of Title 10, subtitle 22, chapter 17 of the Code of Maryland Regulations (“Chapter 17 regulations”). CMS Ex. 1, at 167-69 (noting that payment rates for waiver services are published under chapter 10.22.17 of the State’s regulations and regularly updated); see also COMAR 10.22.17.01A (stating that the regulations “establish[ ] the methodology that [the State] shall use” to make Medicaid-funded payments to licensed providers of residential, habilitation, vocational, and other services to individuals with disabilities).

Under the Chapter 17 regulations, relevant provisions of which were in effect during the renewal period covered by the 2008 waiver application, Community Pathways’ payment “rate” for habilitation services is an amount paid to the service provider for a day of services and is the sum of three components (or dollar amounts): 

• an “individual component” constituting reimbursement for the provider’s direct services to a program participant;
• a “provider component” reimbursing the provider for “indirect expenses” (such as administrative costs); and
• “any add-on component.”

COMAR 10.22.17.10B, 10.22.17.02B(17) (defining “individual component” as “one of the two parts of the rate based on an assessment of an individual’s level of need”), 10.22.17.02B(26) (defining “provider component”), 10.22.17.02B(27) (defining the term “rate” to mean a “reimbursement amount for an attendance day of service”); see also MD Ex. 11, ¶ 9 (indicating that the Chapter 17 regulations governing payment for habilitation services were adopted in 2001). The individual component varies in amount depending on: (1) the region where the service was provided; and (2) the waiver program participant’s “IIRS matrix level,” which, as noted, reflects the scores on both dimensions

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(health/medical and supervision/assistance) of the IIRS level-of-need assessment.⁷ See COMAR 10.22.17.06G. 

An “add-on component” is defined in the Chapter 17 regulations as one or more “units of service”⁸ whose cost is not covered by the sum of the individual and provider components applicable to the rate-based services specified in the participant’s service funding plan. See COMAR 10.22.17.02B(1); CMS Ex. 3, at 9 (noting that Community Pathways “pays providers a daily rate for each beneficiary that includes a component for the habilitation services and a fee for administrative costs related to those services,” and that “add-on services” are those “in addition to the services covered under the per diem rate” derived from the applicable individual and provider components). COMAR 10.22.17.08D provides that DDA may authorize add-on components for an individual if it determines that: (1) the “[i]ndividual’s particular circumstances warrant units of add-on components to implement the [individual’s] IP [individual plan]”; and (2) the “[i]ndividual requires more services than the provider can provide with the sum of the provider and individual components.” COMAR 10.22.17.08E identifies various circumstances that may warrant add-on components, including an individual’s need for: “[a]wake-overnight support for an individual”; “professional services” (such as occupational and physical therapy); “[o]ngoing, intensive support . . . for an individual whose individual component is level 5”; and “[a]dditional support for an individual whose individual component is less than level 5 and for whom approval of an add-on component would be more cost effective than an increase in the individual component.” And COMAR 10.22.17.08F establishes procedures for requesting DDA authorization of add-on components. Those procedures state that a provider must furnish, among other things, a “justification” that includes “[r]ecommendations from the individual’s team and appropriate professionals” and specification of “[s]ervices that the provider can provide with existing resources.” COMAR 10.22.17.08F(2).

Waiver terms and conditions concerning add-on components: The terms “add-on component” and “add-on services”⁹ do not appear in the 2008 waiver application. However, the parties apparently agree that the following paragraph in Appendix I-2(a) of the application specifies conditions or circumstances under which a provider of residential habilitation services could request and receive add-on components during the 2008-2013 waiver renewal period:

Licensed providers serving individuals with extraordinary needs may make a request in writing for additional funding on behalf of that individual when

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the following conditions are met: 1) The individual has the highest IIRS rating of five (5) on either the IIRS health/medical needs scale or supervision/assistance needs scale; 2) when an extraordinary service or level of support is required to safely maintain the individual in the community beyond what the base budget can support, and; 3) when the extraordinary service or support (i.e., awake overnight services) is recommended by their Resource Coordinator.

CMS Ex. 1, at 167; see also Appellant’s Brief (MD Br.) at 3 (quoting the passage quoted above and stating that Community Pathways made add-on services “available to participants who met the . . . [stated] criteria”); Response Br. at 6 n.5 (stating that “both parties agree that this specific paragraph within Appendix I-2 for rate determination methods addresses payment conditions for add-on services”). 

B. I. G. audit of FFP claims for add-on components provided in 2010-2013

For the three-year period beginning July 1, 2010, the State claimed and received $178.7 million in FFP for add-on components provided by Community Pathways to residential habilitation providers. CMS Ex. 3, at 8. The I.G. audited a portion of those claimed payments (that is, $34.2 million of $178.7 million), id., and found the following: 

• During the period under review (2010-2013), the State paid habilitation providers “a daily rate for each beneficiary that include[d] a component for the habilitation services [i.e., the individual component] and a fee for administrative costs related to these services [i.e., the provider component].”¹⁰ Id.at 9.
• The individual component of the daily rates for habilitation services “varie[d] according to the beneficiary’s individual plan and the level of need identified on the [IIRS]” and also “reflect[ed] slight differences in the cost for services in different geographical areas of the State.” Id. The individual component “ranged from $16.23 to $148.27 per day and the [provider component] was a flat rate of $56.27 per day.” Id.
• For some beneficiaries, “the daily rate . . . also include[d] a third component for add-on services available under the waiver.” Id. That component “ranged from $16.26 to $30.27 per day, depending on the type of support provided.” Id.
• A waiver participant was potentially eligible for add-on services “when the [individual] component of the daily rate [was] insufficient to meet the

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• requirements of the plan of care or when the condition of the patient change[d], requiring additional care.” Id.
• The types of services whose costs could be covered by add-on components included: (1) “direct one-on-one support services, including any habilitation services deemed necessary to carry out the individual plan, provided by the residential staff”; (2) “professional support services (e.g., occupational therapy and physical therapy) provided by authorized health professionals directly to the beneficiary”; and (3) “direct overnight services, which include services of an aide who must stay awake during the overnight hours to provide medications or to monitor the beneficiary for potentially violent behavior.” Id. at 10.

Citing the 2008 waiver application’s provision regarding add-on components, the I.G. further found that the approved waiver authorized add-on services only if all three conditions enumerated in that provision – including that the waiver participant receiving the services have the “highest level of need rating (level 5) on the [IIRS] for either the health/medical standard or supervision/assistance standard” – were met. Id. at 9 n.7, 10-11. Based on that understanding, the I.G. determined that the State had improperly claimed $62,918,678, $34,155,857 of which was the federal share, for Community Pathways’ payments for “add-on services for beneficiaries who did not meet the waiver’s level-of-need requirement for those services.” Id. at 10-11, 14.

The I.G. gave the State an opportunity to comment on its findings before issuing a final report. In written comments on the draft report, the State contended that the 2008 waiver application’s provision concerning add-on components should be understood as authorizing those components if any one of the conditions enumerated in that provision was met. CMS Ex. 3, at 17, 19. In support of that position, the State asserted that the enumerated conditions (see CMS Ex. 1, at 167) contained a “grammatical error” – namely, use of the conjunction “and,” instead of “or,” after the second condition. CMS Ex. 3, at 5, 12, 17. The State asserted that “and” should be understood to mean “or” because the first enumerated condition subsumed the second. Id. at 17.¹¹

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The State further contended that “DDA [the Maryland government component responsible for administering Community Pathways] ha[d] consistently interpreted” the provision of the 2008 waiver application concerning add-on components “to mean that an individual need not have a[n] [IIRS] score of five, but, rather, need only meet one of the three criteria in order to be eligible for add-on services.” Id. at 18. The State claimed that its interpretation was consistent with pre-2008 DDA policies, regulations, and program guidance. Id. In addition, the State suggested that the I.G.’s position, if sustained, “would place [Community Pathways] at risk of being out of compliance with federal requirements” obligating it to ensure that “‘all participants’ assessed needs . . . and personal goals’” are addressed “either by the provision of waiver services or through other means.’” Id. at 19 (quoting CMS Ex. 1, at 116, and alluding to requirement in 42 C.F.R. § 441.301(c)(2)). 

In response to the State’s arguments, the I.G. maintained that its audit findings were “valid,” stating: 

States are required to comply with the terms and conditions of their CMS-approved waivers. The State agency’s argued interpretation of its waiver (that only one of the three requirements must be met) is not reasonable based on the plain language of the waiver, which uses the word “and” to indicate that all three conditions must be met. Moreover, the State failed to provide compelling evidence to support its position that the use of the word “and” in the waiver was a mistake. While the State agency argued that its State regulations provide such evidence, the State regulations and the approved waiver contain different requirements for the program. CMS guidance is clear that a “state must implement the waiver as specified in the approved application.” As a result, the waiver provisions are the applicable criteria and not the State regulations. In Maryland’s approved waiver application, the waiver provides that all three requirements must be met. Thus, all three requirements were necessary to receive additional benefits for add-on services.

CMS Ex. 3, at 13 (footnote omitted). 

C. 2013 renewal of Maryland’s HCBS waiver

In 2013, the State submitted, and CMS approved, Maryland’s section 1915(c) waiver renewal application for the five-year period beginning July 1, 2013. See CMS Ex. 3, at 5; MD Ex. 9. According to the I.G.’s June 2015 audit report, the 2013 renewal application, as originally submitted, “also required” that the three conditions for add-on services specified in Appendix I-2(a) of the 2008 waiver application be met, but that the State later (in 2014) amended the 2013 application “to require that two of the three conditions

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be met and eliminated the requirement for a level of need of 5 on the [IIRS].” CMS Ex. 3, at 5, 11 n.9. 

D. CMS’s disallowance and the State’s appeal

Concurring with the I.G.’s audit findings, CMS notified the State in a June 26, 2018 letter that it was disallowing $34,155,857 in FFP for Community Pathways’ payments for add-on services during the audit period (July 1, 2010 through June 30, 2013). Notice of Appeal, Ex. 1. As justification for the disallowance, CMS indicated that the State had failed to “‘implement [Community Pathways] as specified in the approved [2008 waiver] application’” by approving add-on services for waiver beneficiaries who did not have the highest level-of-need rating, rendering the State’s payments for those services ineligible for FFP. Id. at 1-2 (quoting CMS Ex. 5, at 12).

On August 23, 2018, the State requested that CMS reconsider its disallowance determination. CMS Ex. 4. CMS denied the reconsideration request on October 23, 2018. See Notice of Appeal, Ex. 2.

On December 17, 2018, the State filed a timely notice of appeal seeking Board review of the disallowance. The parties then filed written briefs and evidence. 

The State’s evidence includes an affidavit by Kimberly D. Gscheidle, director of the Eastern Shore Regional Office for the Maryland Department of Health’s Developmental Disabilities Administration (MD Ex. 11). The State also submitted a July 8, 2002 memorandum authored by DDA Director Diane K. Coughlin (MD Ex. 14); and memoranda authored by DDA Deputy Director Scott M. Uhl and dated April 20, 2000, November 21, 2000, and February 12, 2001 (MD Exs. 10, 12, and 13). The pre-2008 DDA memoranda reflect the development and implementation of regulations, policies, and procedures concerning add-on components under Maryland’s Fee Payment System – Maryland’s methodology for paying for habilitation, vocational, and other non-institutional services furnished to individuals with disabilities. See COMAR 10.22.17.01.

E. Parties’ contentions on appeal

In this appeal, the State restates or elaborates on arguments it made before the I.G. In general, the State contends that CMS misconstrued the 2008 waiver application’s provision concerning add-on services (or components) as requiring that all three conditions enumerated in that provision – including the condition that the waiver program participant have a level-five IIRS score – be met in order for Community Pathways to pay (and the State to claim FFP) for those services. See MD Br. at 7-8, 13-14. The State further contends that the provision’s meaning is at best ambiguous; that the Board should defer to the State’s interpretation of the provision as setting out “disjunctive” conditions (meaning that the existence of any one of the three conditions was sufficient to warrant

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add-on services, not that all three conditions must have been met); and that such deference is justified because that interpretation is reasonable in light the provision’s purpose and language, consistent with the State’s intent in drafting or proposing the provision, and also consistent with Community Pathways’ “long-standing administrative practice” of “allow[ing] add-on services for individuals with IIRS scores of less than 5.” Id. at 5-7, 8-13. 

CMS responds that the disallowance is proper because: (1) the disputed provision in the 2008 waiver application concerning add-on components is unambiguous and clearly required an individual to have the highest level of need in order for Community Pathways to provide and claim FFP for such funding (Response Br. at 8-12); (2) “Maryland’s intent in drafting its waiver is irrelevant” in determining the meaning of the disputed provision because “the provision itself is unambiguous” (id. at 14); (3) even if the provision is ambiguous, the State’s interpretation of it is unreasonable and “cannot bind the federal government” (id. at 7, 11); and (4) Maryland may not claim FFP for funding that is not authorized under its approved section 1915(c) waiver (id. at 8, 6 (further asserting that the add-on services provision in the 2008 waiver application “controls the State’s receipt of FFP” for the waiver program’s expenditures for those services)). 

III. THE PARTIES’ BURDENS AND THE BOARD’S SCOPE OF REVIEW

The State’s appeal of the disallowance is governed by the Board’s regulations in 45 C.F.R. Part 16. “Board review under [45 C.F.R. Part 16] is generally limited to resolving disputes about material facts and deciding whether the appealed decision is consistent with applicable law and regulations.” Va. Dep’t of Med. Assist. Servs., DAB No. 3108, at 17 (2023); see also 45 C.F.R. § 16.14 (captioned “How Board review is limited” and stating that the Board is “bound by all applicable laws and regulations”). 

CMS’s burden in a Part 16 appeal is “minimal”: it must “articulate the basis for its decision such that the non-federal party can understand the issues raised by the agency’s decision.” Virginia at 16. “If the federal agency meets that burden, . . . then the non-federal party bears the burden to demonstrate that the federal agency’s decision was wrong.” Id. at 17.

CMS met its minimal burden in its June 26, 2018 letter notifying the State of the disallowance. The letter informed the State that the disallowance was based on CMS’s concurrence with the I.G.’s audit findings concerning payments by Maryland’s section 1915(c) waiver program for add-on services, including the finding that the payments violated that program’s terms and conditions. The State does not claim that it is unable to discern or understand CMS’s reasons for the disallowance or the issues presented by that determination. Consequently, the State has the burden in this proceeding to demonstrate that the expenditures for which CMS disallowed FFP were in fact eligible for FFP under the terms and conditions of its section 1915(c) waiver (as they existed during the 2008-

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2013 renewal period) and other applicable federal requirements. Wash. State Health Care Auth., et al., DAB No. 3037, at 15 (2021) (stating that the nonfederal party, if adequately notified of the disallowance’s grounds, bears the burden to “demonstrate that any disputed payments are allowable [eligible for FFP] under all applicable authorities”).

IV. DISCUSSION

The parties have framed a narrow issue for the Board to decide. CMS’s position is that Community Pathways’ expenditures for add-on residential habilitation services during the audit period were eligible for FFP only if they were authorized by, or made in accordance with, the 2008 waiver application. See, e.g., Response Br. at 19 (contending that “FFP is unavailable” for disputed waiver program services to the extent they were “not provided in accordance with” its approved waiver application). The State does not disagree with that general proposition.¹² Nor does the State disagree that the 2008 waiver application’s provision concerning add-on services enumerates three conditions under which Community Pathways would pay for such services. In addition, the State does not dispute that the disallowance relates to Community Pathways’ expenditures for add-on residential habilitation services when the first condition – that the waiver program participant have the “highest IIRS rating of five” – was not met. Consequently, the dispositive issue, as framed by the parties, is whether the 2008 waiver application authorized add-on residential habilitation services if any of the three enumerated conditions was met, or only if all three conditions – including the highest-level-of-need requirement – were met. See MD Br. at 8 (asserting that “the criteria” were “alternative, not cumulative, requirements”); Response Br. at 9 (taking the position that “all three criteria” had to be met “in order to receive FFP for add-on services”).

We see no error in CMS’s determination that the provision authorized add-on residential habilitation services only if all three conditions were met. We therefore affirm the disallowance in full.

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A. CMS reasonably construed the 2008 waiver application as authorizing add-on services only for individuals with the highest IIRS scores.

In stating their positions regarding the meaning of the 2008 waiver application, both parties cite principles of statutory and regulatory interpretation (or judicial decisions applying those principles).¹³ See, e.g., MD Br. at 6-7 (citing, among other authorities, the Sutherland Statutory Construction treatise). Application of these principles helps CMS more than it does the State. 

The disputed provision in the 2008 waiver application begins by stating that a licensed provider serving an individual with “extraordinary needs” could request “additional funding” for such an individual “when the following conditions are met.” CMS Ex. 1, at 167 (italics added). The provision then lists three conditions connected (after the second) with the conjunction “and.” Id. The “three conditions” language that is at the center of the parties’ disagreement is as follows:

1) The individual has the highest IIRS rating of five (5) on either the IIRS health/medical needs scale or supervision/assistance needs scale; 2) when an extraordinary service or level of supports is required to safely maintain the individual in the community beyond what the base budget can support, and; 3) when the extraordinary service or support (ie. awake overnight services) is recommended by their Resource Coordinator.

Id. (italics and emphasis added). In these circumstances – where “and” connects a series of conditions – the conjunction is ordinarily understood as signaling that all conditions must exist or be met. Mass. Dep’t of Pub. Welfare, DAB No. 161, at 2 (1981) (“The regulatory requirements for FFP are stated in the conjunctive. It is, therefore, necessary for the facility to meet both requirements in order for services provided by the facilities to be eligible for FFP.”); United States v. Palomar-Santiago, 593 U.S. 321, 326 (2021) (interpreting a statute setting out enumerated requirements connected by the conjunction “and” to mean that all requirements had to be met).

The State suggests that applying this interpretive rule is improper because doing so “renders the second listed criterion superfluous.” MD Br. at 7 (asserting that the first two criteria are essentially duplicative, making the use of “and” redundant); Reply Br. at 2 (stating that the context “compels the conclusion that the word ‘and’ in the [relevant] provision . . . should be read to mean ‘or’”). According to the State, the first two conditions “are essentially the same” and “cover the same people – those with extraordinary needs who need additional funding to obtain the services that they need.” Reply Br. at 2.

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This argument is unconvincing because the first and second conditions are not “essentially the same” but set out distinct (albeit related) requirements. The first condition is that the waiver program participant have a level-five IIRS rating – a rating from which an individual component of the program’s payment rate for residential habilitation is derived. The second requirement, on the other hand, relates to the adequacy of that payment rate: it provides that the participant’s “base budget” – that is, the service funding plan derived from the applicable individual and provider components – be inadequate to provide an “extraordinary” service or support needed to “safely maintain the individual in the community.” We agree with CMS that “[t]he second criteri[on] recognizes that the base level of funding for an individual with an IIRS score of 5 may be sufficient to provide for all of a waiver participant’s listed services and that a provider should only seek additional funding [for that individual] if the standard per diem rate is inadequate to provide necessary services.” Response Br. at 11.

Also unconvincing is the State’s broader suggestion that the “context” of the disputed provision compels construing the word “and” as meaning the disjunctive “or.”¹⁴ It is of course a tenet of legal interpretation that the meaning of a word or text may depend on its context.¹⁵ However, we see no context supporting the State’s reading of the disputed provision. That provision begins by stating that a licensed provider serving an individual with “extraordinary needs” may request “additional funding” for that individual “when the following conditions are met.” CMS Ex. 1, at 167 (emphasis added). It then lists and links the three conditions using the conjunctive “and.” Id. Considering the “three conditions” language within the context of the full paragraph, the disputed language is reasonably read as meaning that all three conditions must be met. Replacing the word “and” with the word “or” would result in arguably confusing and inconsistent language in which the paragraph begins with words that reasonably could be understood as meaning that all three criteria must be met but ends with a list of criteria joined by the disjunctive

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“or” that ordinarily would be understood as meaning that only one of the three criteria must be met. The State fails to explain why the first two conditions’ alleged redundancy logically or necessarily requires that the remaining two conditions (that is, the third condition and the conflated first and second conditions) be treated as disjunctive rather than conjunctive.

Reprising an argument made to the I.G., the State contends that CMS’s reading of the disputed provision leads to an “absurd result” – namely, the waiver program’s noncompliance with an applicable federal requirement. MD Br. at 6, 13-14; Reply Br. at 5. In support of that contention, the State asserts that 42 C.F.R. § 441.301(b)(1)(i) obligated Community Pathways to provide services to each participant under an “individualized service plan” that addressed the “‘full range’” of the participant’s service needs. MD Br. at 13 (quoting CMS’s January 2008 guidance titled Application for a § 1915(c) Home and Community-Based Waiver [Version 3.5], Instructions, Technical Guide and Review Criteria (“Waiver Technical Guide”)); see also 42 C.F.R. § 441.301(b)(1)(i) (requiring a state waiver program to furnish services “[u]nder a written person-centered service plan . . . that is based on a person-centered approach”); CMS Ex. 5 (Waiver Technical Guide), at 184 (stating that a “service plan must reflect the full range of a participant’s service needs and include both the Medicaid and non-Medicaid services along with informal supports that are necessary to address those needs”). According to the State, “[a]uthorization of add-on services is the principal way in which the Community Pathways Waiver ensures that ‘the full range of . . . service needs’ are met, as required by CMS,” and that “[w]ithout access to add-on services,” individuals with IIRS scores less than five but needing extraordinary services or supports identified in the service plan would not receive those services and would “require institutionalization” instead. MD Br. at 14.¹⁶

This argument does not persuade us that CMS misconstrued the disputed provision. The State cited no evidence that authorization of add-on services was Community Pathways’ “principal way” of ensuring that waiver program participants with IIRS scores less than five received the “full range” of necessary services identified in their service plans.¹⁷ See

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MD Br. at 14. Nothing in the text of the disputed provision suggests it was written to help achieve that objective, and the State does not explain how its interpretation of the provision did so either.¹⁸ In addition, the State did not substantiate its implicit claim that the disallowance of FFP for add-on services furnished to waiver program participants with IIRS scores less than five effectively rendered Community Pathways noncompliant with the service-plan requirement in 42 C.F.R. § 441.301(b)(1)(i). The State presented no evidence that the planned-for service needs of any waiver program participants, or the goal of preventing their institutionalization, could not (or would not) have been met without the add-on services for which CMS disallowed FFP.

B. The 2008 waiver application’s provision concerning add-on services is not ambiguous, and even assuming it is, the State has not shown that it made the disallowed expenditures based on a reasonable interpretation of that provision. 

The State argues that the 2008 waiver application is at least “ambiguous” about whether the highest (level-five) IIRS score was a necessary condition for add-on services under Community Pathways. MD Br. at 6, 14. The State further asserts that “drafters of the Waiver intended that the three criteria [enumerated in the application] be alternative bases for the award of add-on services”; that “[t]hose who have administered the Waiver over the years also viewed the criteria in the alternative”; and that its “interpretation of the [disputed provision] is reasonable in light of its purpose and program requirements.” Id. at 6, 8 (further claiming that its interpretation is “supported by contemporaneous, documentary evidence of [its] intent”). For these reasons, the State asserts that the Board should defer to its interpretation of the provision in accordance with Board decisions that resolve disputes involving ambiguous Medicaid State plan provisions. Id. at 5-6, 14.¹⁹ 

The Board has resolved disputes about the meaning of State plan language using the following analytical framework: 

[T]he Board first looks to the language of the plan itself. If the language is clear, it will control. If, however, the provision is ambiguous, the Board will consider whether the state’s interpretation gives reasonable effect to

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the language of the plan as a whole and whether it is reasonable in light of the purpose of the provision and program requirements. The Board also will consider the intent of the provision, as alleged by the state. Absent contemporaneous documentation evidencing intent, the Board may look to consistent administrative practice as evidence of intent. Whether a state has consistently administered a plan provision over time may be an indication of whether the state in fact was applying an intended, official interpretation or has merely advanced an interpretation as an after-the-fact attempt to justify acting inconsistently with or simply ignoring its plan.

Utah Dep’t of Health, DAB No. 2131, at 12 (2007) (citations omitted); see also Tex. Health and Hum. Servs. Comm’n, DAB No. 3066, at 23 n.18 (2022) (holding that “the Board will generally defer to the state’s interpretation” of an ambiguous State plan provision if that interpretation “is reasonable in light of the purpose of the provision and program requirements, gives reasonable effect to the language of the plan as a whole, and, if lacking contemporaneous documentary evidence of intent, the state’s interpretation is supported by consistent administrative practice”). The Board has found this framework “instructive” in determining the meaning of terms and conditions of an approved Medicaid waiver. Fla. Agency for Health Care Admin., DAB No. 3031, at 19 (2021).

Looking first at the language of the disputed provision, we find no ambiguity there. The provision’s statement allowing a provider to seek “additional funding” (add-on components) “when the following conditions [plural] are met,” followed by an enumeration of the conditions connected with the conjunction “and,” plainly indicates that all listed conditions – including the requirement that the individual for whom add-on-service funding is sought have an IIRS score of five – needed to be satisfied in order for a provider to qualify for such funding under Community Pathways.

The State contends that the 2008 waiver application’s general references to the Chapter 17 regulations render the disputed provision ambiguous. MD Br. at 8; Reply Br. at 2-3. In support of that contention, the State accurately notes that these regulations specify various circumstances besides an individual’s level-five IIRS rating that might warrant add-on components. MD Br. at 9-10; Reply Br. at 2-3 (citing or quoting COMAR 10.22.17.08E). Those circumstances include “a need for . . . [a]dditional support for an individual whose individual component is less than level 5 and for whom approval of an add-on component would be more cost effective than an increase in the individual component.” COMAR 10.22.17.08E(1). According to the State, the existence of these particular provisions and the 2008 waiver application’s general references to the Chapter 17 regulations mean that the application can be reasonably interpreted as setting out “two contradictory descriptions” of permissible add-on components, “rendering the Waiver provision [regarding add-on components] ambiguous.” Reply Br. at 2-3.

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We might find the State’s argument persuasive if the application included language indicating that Community Pathways could provide add-on components to the extent allowed under, or consistent with, the Chapter 17 regulations. We see no such language in the application, however. In fact, the application does not mention, allude to, or purport to incorporate by reference the state regulations (COMAR 10.22.17.08D and 10.22.17.08E) that identify conditions in which DDA may authorize add-on components. Ultimately, the approved waiver application and its provision explicitly addressing add-on services – not Maryland’s regulations – govern the extent to which those services were authorized (and hence eligible for FFP) under Community Pathways.

Because the 2008 waiver application’s provision regarding add-on services is not ambiguous and clearly required that all three enumerated conditions be met in order for Community Pathways to pay for such services, CMS properly applied that requirement in determining that the audited payments for add-on residential habilitation services were ineligible for FFP. Cf. Ark. Dep’t of Hum. Servs., DAB No. 1328, at 6 (1992) (holding that when state plan language is unambiguous, the Board “appl[ies] the clear language of the plan regardless of the interpretation urged by the state”); La. Dep’t of Health and Hospitals, DAB No. 1176, at 12 (1990) (noting that the “long-standing rule of statutory construction is that the plain meaning of a law should be given effect, so that the pursuit of intent in the legislative history is unnecessary absent ambiguity in the language”). Even if we found the disputed provision ambiguous (we do not), we would not overturn the disallowance because the State has not shown that its interpretation of the provision – as authorizing add-on services if any one of the three “alternative” conditions was met – is reasonable and reflects the State’s actual intent in drafting or proposing it. 

The State’s interpretation of the disputed provision is not reasonable because it is inconsistent with the very regulations – the Chapter 17 regulations – that the State cites to support its claim of ambiguity. Under the State’s interpretation of the disputed provision, a provider could have received add-on components for an individual based on either an “IIRS rating of five” (condition one) or the recommendation of the participant’s resource coordinator (condition three), regardless of whether the individual’s “base budget” – that is, the budget reflecting the sum of the applicable individual and provider components – was adequate to “safely maintain the individual in the community” (condition two). However, the Chapter 17 regulations (and, apparently, DDA policy) make clear that add-on components may be authorized for an individual only if the costs of services needed by that individual exceed the funding available for those services based on the individual and provider components of the applicable payment rate methodology (and only if DDA determines that the “[i]ndividual’s particular circumstances warrant units of add-on components to implement the IP [the individual plan]”). COMAR 10.22.17.08D; see also MD Ex. 14, at 2 (stating that “[a]dd-on components are to be used for consumers who have extraordinary needs beyond what the FPS rate [the rate paid based on the individual and provider components specified in Maryland regulations] pays for their care” (italics added)). 

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Further undermining the State’s interpretation is the absence of any “contemporaneous documentation of the State’s intent.” Utah, DAB No. 2131, at 16 (finding the declaration of a state program official unpersuasive evidence of intent because the official did not “point to any evidence going to his intent that existed contemporaneously with the drafting of” the purportedly ambiguous State plan provision). The State proffered no evidence supporting its claim (MD Br. at 8) that the “drafters” of the 2008 waiver application, or any other DDA employee responsible for approving or submitting the application, intended that the three conditions enumerated in the application’s provision concerning add-on services be understood as “alternative conditions.” The absence of any such evidence, together with the fact that Maryland’s waiver application for the 2013-2018 renewal period was amended to require that two of those conditions be met (see CMS Ex. 3, at 5), strongly suggest that the disputed provision in the 2008 waiver application was never intended to state disjunctive or “alternative” requirements. 

The State asserts that the existence of COMAR 10.22.17.08D and 10.22.17.08E when the 2008 waiver application was approved is “contemporaneous . . . evidence” that the disputed provision was intended to state alternative conditions for add-on components. MD Br. at 6, 8, 11 (stating that the “regulations, read together, support the conclusion that [the State] intended the Waiver to authorize payment for add-on services, if any one of the three criteria were met”); Reply Br. at 2-3. As indicated, however, the 2008 waiver application neither cites nor alludes to these regulations, so the fact that the regulations were in effect when the application was approved itself is hardly probative of the State’s intent in drafting or proposing the disputed provision.

In a related vein, the State observes that a passage in Appendix I-2(a) of the 2008 waiver application refers generally to COMAR Chapter 17 regulations establishing the rate-setting methodology applicable to residential habilitation services as well to the rates for individual and provider components published in those regulations. MD Br. at 8 (alluding to CMS Ex. 1, at 167). However, the passage does not mention add-on components or cite any provisions in the Chapter 17 regulations governing their availability. We agree with CMS that the application’s general reference to the applicable rate-setting methodology and published rates for rate-based services (such as habilitation) “does not mean that CMS approved the State’s regulatory structure for when an add-on service was eligible for reimbursement . . . .” CMS Surreply at 2. 

The State argues that three other Maryland regulations – COMAR 10.09.26.13C(4), 10.09.26.17, and 10.09.36.10 – demonstrate relevant intent.²⁰ See MD Br. at 10-11.

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However, none of these regulations (which have remained unchanged in material respects since 2008) is identified in the 2008 waiver application as embodying terms or conditions of the approved waiver. Moreover, none addresses, directly or indirectly, the extent to which Community Pathways provides add-on services. 

COMAR 10.09.26.13C(4) states that “payments” to habilitation and other service providers “shall be made according to the prospective payment system specified in COMAR 10.22.17.” The State suggests that COMAR 10.09.26.13C(4) shows that COMAR 10.17.22.08 authorized Community Pathways to provide add-on services to the extent allowed under the latter’s provisions. See MD Br. at 10. However, COMAR 10.09.26.13C(4) contains no language to that effect. Nor does it cite COMAR 10.17.22.08 or mention add-on components. COMAR 10.09.26.13C(4) merely suggests that “payments” for services provided under the waiver will be calculated and made based on the prospective rate-setting methodology described in COMAR 10.22.17. The substance of COMAR 10.09.26.13C(4) is irrelevant in any event because Community Pathways’ authorization to provide add-on services stems from the program’s approved waiver application, not from state regulations. 

COMAR 10.09.26.17 and 10.09.36.10 instruct that DDA’s regulations “be interpreted in conformity with applicable federal statutes and regulations.” The State submits that interpreting the regulations in this manner “permit[s] federal financial participation whenever possible.” MD Br. at 10. The State does not clearly explain what it means by this, but these two regulations are irrelevant in any event because the outcome of this case does not turn an interpretation of state regulations, but on an understanding of terms and conditions in a CMS-approved waiver.²¹ No federal statute or regulation required CMS in these circumstances to interpret the 2008 waiver application as incorporating or adopting state regulations governing administration of a waiver or medical assistance program.

C. The State has not shown it had a relevant consistent “administrative practice.”

As noted, Board decisions hold that when a state Medicaid agency lacks “contemporaneous documentation” of its actual intent in developing or proposing ambiguous State-plan language, the Board may infer such intent from evidence that the

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agency consistently administered its Medicaid program in accordance with its claimed interpretation of the ambiguous language. Utah, DAB No. 2131, at 12. That holding does not apply here because the meaning of the disputed provision in the 2008 waiver application is clear and unambiguous. However, for the sake of discussion, we assume the holding’s applicability and proceed to address the State’s argument that it had an administrative practice consistent with its interpretation of the disputed provision.

The State alleges that “those who have administered the waiver” understood the disputed provision in the 2008 waiver application as setting out “criteria in the alternative.” MD Br. at 8. However, the State submitted no evidence that it administered Community Pathways in accordance with that understanding during the five-year renewal period beginning in 2008. We thus have no basis to find that the State’s claimed interpretation of the disputed provision was its “official” policy or position during the audit period, rather than an “after-the-fact” justification for acting “inconsistently with or simply ignoring” a requirement of its approved waiver application. Utah at 12.

The State asserts that its present interpretation of the 2008 waiver application warrants deference because prior to 2008 it consistently administered Community Pathways to authorize add-on services for individuals with IIRS scores less than five. The State asserts that its pre-2008 practice is evidenced by: (1) DDA memoranda from 2000 to 2002 concerning the establishment of add-on components under Maryland’s “fee payment system” (FPS) for services provided to developmentally disabled individuals, and the adoption of regulations (in COMAR 10.22.17) to that effect; (2) a February 2019 affidavit from a DDA regional office director (Kimberly D. Gscheidle) involved in overseeing the provision of services for individuals with developmental disabilities; and (3) excerpts from the waiver application approved by CMS for the five-year period beginning in 2003. MD Br. at 6, 8, 11-13. Although some of that evidence supports the State’s claim that DDA authorized add-on components for developmentally disabled individuals with IIRS ratings less than five prior to 2008,²² we agree with CMS that the evidence is not proof of a relevant administrative practice because the State was not implementing waiver terms and conditions similar to the disputed provision in the 2008 waiver renewal application.²³ See Response Br. at 17 (arguing that the State’s pre-2008-

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administrative-practice argument is unfounded because it does not reflect an interpretation of the “operative document [the 2008 waiver application] underlying OIG’s audit and CMS’ disallowance”); Tex. Health & Hum. Servs. Comm’n, DAB No. 2097, at 9 n.8 (2007) (holding that statements purporting to show an administrative practice consistent with the state’s claimed interpretation of disputed State plan language were insufficient proof of such a practice because they were “neither contemporaneous with the approval or implementation of,” and did not purport to interpret, any specific language in the State plan). 

In its reply, the State asserts that “neither the 2008 nor 2003 renewal waiver applications indicated any changes to the add-on services,” and “thus, the evidence of the Department’s interpretation of those services for times before 2008 applies to the proper construction of the 2008 Waiver as well.” Reply Br. at 6. The implication here is that the 2008 and 2003 waiver applications contain essentially the same language concerning add-on services. In fact, they do not contain the same language. For example, unlike the 2008 waiver application, the 2003 application contains no enumeration of conditions for providing add-on services.²⁴ Compare CMS Ex. 1, at 167 with MD Ex. 15, at 34, 36. The State does not allege any material similarities. 

According to the State, DDA regional office director Gscheidle “confirmed” in her affidavit that “she and other DDA staff . . . always interpreted and understood the Waiver to permit add-on services for individuals with IIRS scores of less than five.” MD Br. at 13 (citing MD Ex. 11, ¶ 11). This is an inaccurate summary of Gscheidle’s statements, which fail to support the State’s consistent-administration argument. 

Gscheidle stated that when an individual is found eligible for DDA services, an “individual plan of services to meet that individual’s total needs, as determined by the Individual Indicator Rating Scale (‘IIRS’), is developed, along with a corresponding service funding plan.” MD Ex. 11, ¶ 4. Gscheidle further stated that when a DDA-

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program-eligible individual’s needs change, “either temporarily or permanently, a request for a modified service funding plan is developed”; that she was responsible for reviewing and approving modified service funding plans; and that “[a]dd on services are services to meet the extraordinary needs of individuals that are not covered by their original service funding plan.” Id., ¶¶ 5-6. Gscheidle stated that it was her “understanding that the [Maryland] regulations regarding add-on services were consistent with the Community Pathways Waiver requirements,” and that she “consistently applied those regulations in [her] review of requests for add-on services.” Id., ¶ 11 (italics added). Gscheidle also stated that it was her “understanding that the staff at the three other DDA regional offices consistently applied the [Maryland] regulations based on their belief that the regulations and waiver requirements were the same.” Id.²⁵

Gscheidle, who began serving as a DDA regional office director in 1999 (id. ¶ 2), did not assert she personally was involved in developing or drafting the disputed 2008 waiver application language or otherwise has personal knowledge of that process. She did not indicate how she understood, interpreted, or applied the disputed provision during the audit period. Nor did she explain how she came to understand her DDA colleagues’ purported belief that “the regulations and waiver requirements were the same.” Most significantly, Gscheidle did not indicate that she and her colleagues consistently applied the interpretation of the 2008 waiver application advanced by the State in this appeal. Gscheidle indicated only that she consistently applied Maryland’s regulations in reviewing and approving requests for add-on services. Although she stated that she believed the regulations were “consistent with” applicable waiver requirements, she did not specify how the two were consistent. 

CONCLUSION

We uphold the disallowance of $34,155,857.

Endnotes

¹ The I.G.’s June 2015 report (number A-03-13-00202) is titled “Maryland Claimed Unallowable Medicaid Costs for Residential Habilitation Add-on Services Under Its Community Pathways Waiver Program.” CMS Ex. 3.

² The State plan is a “comprehensive written statement submitted by the [state’s Medicaid] agency describing the nature and scope of [the state’s] Medicaid program and giving assurance that it will be administered in conformity with” the federal Medicaid statute (title XIX of the Act), federal Medicaid regulations, and “other applicable official issuances of the Department [of Health and Human Services].” 42 C.F.R. § 430.10.

³ “Habilitation services” are defined in the Medicaid statute as those “designed to assist individuals in acquiring, retaining, and improving the self-help, socialization, and adaptive skills necessary to reside successfully in home and community-based settings.” Act § 1915(c)(5)(A).

⁴ See also 42 C.F.R. § 430.25(c)(2) (stating that a section 1915(c) waiver allows a state to include home or community-based services as “medical assistance” that is “reimbursable under the State plan”); id. § 440.2(b) (stating that, subject to limitations in 42 C.F.R. Part 441, FFP is “available in expenditures under the State plan for medical or remedial care and services as defined in” 42 C.F.R. Part 440, subpart A (sections 440.1 to 440.185), which include, as specified in section 440.180, home or community-based services furnished under a section 1915(c) waiver). 

⁵ CMS has issued detailed written guidance to help states complete the standard application and understand CMS’s review-and-approval process for waiver applications. See CMS Ex. 5 (“Application for a § 1915(c) Home and Community-Based Waiver [Version 3.5], Instructions, Technical Guide and Review Criteria” (January 2008)). CMS’s guidance instructs states that an approved application “specifies the operational features of the waiver”; that “[a] state must implement the waiver as specified in the approved application”; and that “[i]f the state wants to change the waiver while it is in effect, it must submit an amendment to CMS for its review and approval.” Id. at 12.

⁶ The State asserts that Community Pathways was amended five times during the five-year renewal term that began July 1, 2008, but that none of the amendments concerned the add-on residential habilitation services at issue in this case or the State’s payment rate-setting methods for those services. See Appellant’s Brief (MD Br.) at 2 n.1. CMS asserts that the program was amended six (not five) times during the 2008-2013 renewal term, and that the State “correctly notes that none of the amendments [during that term] . . . changed the language regarding add-on-services or rate-setting methods.” Response Br. at 3 n.3.

⁷ The provider-component amount does not vary by a participant’s IIRS scores or geographic region. See COMAR 10.22.17.07.

⁸ The term “unit of service,” as used in the definition of add-on component, is defined variously depending on the type of service or program. COMAR 10.22.17.02B(36).

⁹ The parties use the terms “add-on component” and “add-on services” interchangeably.

¹⁰ The I.G. used the term “service component” to refer to the “individual component” of the daily payment rate for habilitation services.

¹¹ The State explained: 

The first criterion [highest IIRS rating] actually includes the second criterion [an extraordinary service or support need]. In order to have an IIRS score of five, an individual must need an extraordinary service or level of services, because that is an element of the IIRS score. The reverse, however, is not true: a person needing an extraordinary service does not necessarily have an IIRS score of five. Therefore, if a person meets criterion one, criterion two is unnecessary. Under the OIG auditors’ interpretation that all three elements must be met, the second criterion becomes superfluous. However, when the provision is read correctly, an individual who needs an extraordinary service or level of services but does not have an IIRS score of five is nonetheless eligible for add on services. Under that interpretation, the second criterion is not superfluous, and must be correct under rules of construction.

CMS Ex. 3, at 17.

¹² CMS’s position is consistent with Board decisions which hold that a state Medicaid program expenditure is entitled to federal reimbursement if it was made in accordance with an approved State plan and applicable federal requirements. See Tex. Health & Hum. Servs. Comm’n, DAB No. 2404, at 15 (2011) (“Federal law provides that a state’s Medicaid expenditures are eligible for FFP only if they are made in accordance with the State Plan.”); Neb. Dep’t of Soc. Servs., DAB No. 1354, at 5 (1992) (holding that a “state is generally bound by the provisions of its waiver request,” and “[a]n approved waiver sets the parameters for a state’s administration of home and community-based services under its state plan and in this sense operates as the equivalent of the state plan itself”); Florida, DAB No. 1100, at 11 (“[S]ince the terms of an approved waiver do have a direct effect on the operation of a state’s program under its state plan, . . . a state is bound to follow the provisions of an approved waiver request.”). 

¹³ We need not and do not consider or decide whether rules of statutory and regulatory constructions are the only, or best, tools for discerning the meaning of a waiver renewal application’s terms. We consider them here because the parties appear to agree that they are appropriately applied in this context. 

¹⁴ The word “and” ordinarily connotes “connection or addition” of items or elements, whereas the word “or” is commonly used to indicate an “alternative.” See https://www.merriam-webster.com/dictionary/and and https://www.merriam-webster.com/dictionary/or. The simplest way to convey that only one of two or more things need be shown would be to use the word “or.” As CMS points out, if the drafters had believed criterion one and criterion two to be essentially the same and intended for the disputed provision to be read to mean “or,” they could have simply written the provision to include two requirements using “or.” See Response Br. at 10 n.14. (As noted earlier, in response to the I.G.’s draft report of audit findings, the State claimed that the use of “and” when it meant “or” was a mere grammatical error. See CMS Ex. 3, at 5, 12, 17.) Moreover, as CMS also points out, in its 2013 renewal waiver application, the State did not remove one of the first criteria and replace the word “and” with “or” to link the two criteria but made significant changes to the rate determination description for add-on services to include situations where an individual has an IIRS score less than five and requires additional support beyond the daily rate. Id. at 6, 10 n.14; compare MD Ex. 1, at 133 with MD Ex. 9, at 4. 

¹⁵ See, e.g., Woodstock Care Ctr., DAB No. 1726, at 19 (2000) (noting that “[w]here a regulation employs a term without a specialized legal meaning, its meaning generally should be derived from the context and purpose for which it is used and from ordinary understanding and usage”), aff’d, 363 F.3d 583 (6th Cir. 2003); Va. Dep’t of Soc. Servs., DAB No. 2379, at 6 (2011) (“Seemingly plain language may need to be read in context in order to discern its intended meaning.”). 

¹⁶ Quoting CMS guidance concerning the section 1915(c) waiver application, the State also asserts that a waiver program’s “‘cost limit’” must “‘take into account the full range of supports that the person requires in the community.’” MD Br. at 14 (quoting CMS Ex. 5 (Waiver Technical Guide), at 86). The State does not explain the relevance of that assertion, and its relevance is otherwise unclear because the 2008 waiver application indicates that Maryland does not apply an “individual cost limit.” CMS Ex. 1, at 23.

¹⁷ The Chapter 17 regulations suggest that Community Pathways had at least one other possible way (in lieu of add-on services) to ensure that participants received services identified in their individual plans – namely, a level-of-need reassessment and corresponding increase in the participant’s IIRS matrix level and individual component. See COMAR 10.22.17.08E(1) (indicating that the circumstances warranting add-on components include “[a]dditional support for an individual whose individual component is less than level 5 and for whom approval of an add-on component would be more cost effective than an increase in the individual component” (italics added)). The State did not indicate the extent to which Community Pathways relied, or could have relied, upon that approach to meet its regulatory obligations during the audit period. 

¹⁸ The available evidence suggests that the State authorized add-on components when a participant had “extraordinary” service needs that could not have been met (or fully met) with the funding provided based on individual and provider components, or when the participant’s needs increased or changed following approval of the service funding plan, and then only when the unmet needs related to “health” or “safety.” See MD Ex. 11, ¶¶ 4-7; MD Ex. 14, at 2.

¹⁹ As noted, in response to the I.G.’s draft report of audit findings, the State asserted that the waiver terms’ use of the word “and” in place of “or” should be understood as a simple grammatical error; the State did not assert then that the waiver terms themselves were ambiguous. The “grammatical error” argument, which the State made before and again during the appeal, appears to be at odds with the “ambiguity” argument apparently developed later during litigation.

²⁰ COMAR 10.09.26.13C(4) – a provision of a subchapter (10.09.26) governing provision of community-based services for developmentally disabled individuals – states: “Payments to most residential habilitation and day habilitation service providers, some intensive behavior management providers, and some supported employment and residential option providers shall be made according to the prospective payment system specified in COMAR 10.22.17.” COMAR 10.09.26.17 states: “State regulations shall be interpreted as specified in COMAR 10.09.36.” COMAR 10.09.36.10 states: “Except when the language of a specific regulation indicates an intent by the Department to provide reimbursement for covered services to Program recipients without regard to the availability of federal financial participation, State regulations shall be interpreted in conformity with applicable federal statutes and regulations.” 

²¹ For the same reason, the Maryland court decision cited by the State (Crofton Convalescent Center, Inc. v. Department of Health & Mental Hygiene, 991 A.2d 1257 (Md. 2010)) – which applied a state Medicaid regulation instructing that other state regulations be “interpreted in conformity with applicable federal statutes and regulations” – is also irrelevant.

²² DDA Director Coughlin’s July 8, 2002 memorandum, with the subject line “Policies and Procedures (Add-on components),” states that add-on components were “to be used for consumers who have extraordinary needs beyond what the FPS rate pays for their care”; that DDA would “only consider requests for add-on components that [were] directly related to health/safety issues”; and that if a participant’s “individual component” was less than five, then that individual’s “matrix level [would] be reviewed for possible adjustment after the individual ha[d] received add-on components (or augmentation funding) for one year.” CMS Ex. 14, at 2 (italics added); see also MD Ex. 10 (April 20, 2000 Uhl declaration), at 1 (stating that “circumstances that would trigger eligibility for add-on rates” included a need for “[t]emporary support” or “[o]ngoing support” for individuals “not at the top of the matrix scale for whom a matrix adjustment would not be in the best interest of the State”).

²³ The State, moreover, does not assert or show that it considered and relied on any of the 2000-2002 memoranda or the 2003 waiver application – all of which pre-dated the 2008 waiver application by at least five years – in preparing the 2008 waiver application’s payment rate-determination provisions.

²⁴ Appendix B-1 to Maryland’s CMS-approved section 1915(c) waiver application for the five-year renewal period beginning July 1, 2003 defines authorized “residential habilitation,” indicating that such services could include “medical services, nursing services, occupational therapy, psychiatric services, psychological services, physical therapy,” and other professional services “to enable an individual to live successfully in the community.” MD Ex. 15, at 33-34. The 2003 application does not characterize these professional services as add-on services, but we understand them to be so because the Chapter 17 regulations provide that add-on components may include “professional services” (see COMAR 10.22.17.08A(3)) and because the 2003 application indicates that those services needed to meet the regulations’ preauthorization requirements applicable to add-on components (see MD Ex. 15, at 34, citing COMAR 10.22.17.08F). The relevance of the 2003 application’s inclusion of professional services in the definition of residential habilitation is nonetheless unclear because the disputed provision in the 2008 waiver application does not mention professional services (only “awake overnight services”), and because that application mentions professional services only in connection with “traditional day habilitation,” a service category distinct from “residential habilitation,” the latter being the service category implicated by the disallowance. Compare CMS Ex. 1 (2008 waiver application), at 71 (stating that traditional day habilitation included “preauthorized” professional services “to enable an individual to successfully participate in day activities”), and CMS Ex. 1, at 49-50 (defining “residential habilitation” without mentioning supportive professional services). The State does not mention these discrepancies in its briefs or attempt to explain or discount their significance. 

²⁵ The State did not submit the declaration of any DDA regional office director other than Gscheidle or that of any other state official with comparable responsibility for administering Community Pathways.