Missouri Department of Social Services, DAB No. 3156 (2024)

DECISION

The Missouri Department of Social Services (Missouri) appeals a 2016 determination by the Centers for Medicare & Medicaid Services (CMS) to disallow $10,011,389 in federal financial participation (FFP). The disallowance relates to disproportionate share hospital (DSH) payments to institutions for mental diseases (IMDs) for federal fiscal years (FFYs or FYs) 1995, 2014, and 2015.

This Decision ensues from two prior Board decisions, Missouri Department of Social Services, DAB No. 2677 (2016) (Missouri I) and Missouri Department of Social Services, DAB No. 2892 (2018) (Missouri II). Missouri I upheld in its entirety CMS’s 2015 disallowance of $2,438,638 in FFP for FFY 2014, and Missouri II upheld in its entirety the 2016 disallowance by CMS of $10,011,389 in FFP that remains at issue in this case. The state appealed Missouri II to the United States District Court for the District of Columbia, which remanded the case “for a determination as to whether §§ 1132(a) and 1923(h)” of the Social Security Act (Act) “prohibit Missouri from amending the FY 1995, 2014, and 2015 reports” at issue.¹ Mo. Dep’t of Soc. Servs. v. U.S. Dep’t of Health & Hum. Servs. No. 18-2587, 2019 WL 4709685, at *5 (D.D.C. Sept. 26, 2019); Mo. Ex. 13, at 10.

For reasons explained below, we determine that sections 1132(a) and 1923(h) of the Act, both independently and in conjunction, prohibit Missouri’s disputed amendments to its Medicaid expenditure reports for FFYs 1995, 2014, and 2015, so we again uphold CMS’s disallowance in its entirety.

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Legal Background

I. Overview of federal funding of the Medicaid program

This case concerns Medicaid program funding, which CMS administers on behalf of the Department of Health and Human Services (HHS).² Title XIX of the Act authorizes federal grants to states for Medicaid, which furnishes medical assistance to individuals in specified eligibility categories. Act §§ 1900-1903; 42 C.F.R. § 430.0; 42 C.F.R. Part 435.³ Each participating state operates a Medicaid program subject to federal requirements and the state’s CMS-approved state plan for medical assistance. Act § 1902; 42 C.F.R. §§ 430.10-430.16, 430.20.

The federal and state governments share responsibility to fund Medicaid. Once CMS has approved a state plan, CMS awards the state quarterly grants to cover the federal share of Medicaid expenditures. 42 C.F.R. § 430.30(a)(1). The quarterly payments are in “an amount equal to the Federal medical assistance percentage,” or FMAP, “of the total amount expended during such quarter as medical assistance under the State plan.” Act § 1903(a)(1). The FMAP varies by state, depending on state per capita income and other factors. Id. §§ 1903(a), (g), (j), 1905(b), 1914; 42 C.F.R. § 433.10. The FMAP also varies by year; for example, Missouri’s FMAP was 60.68% in FFY 1998, 60.24% in FFY 1999, and 62.03% in FFY 2014. 63 Fed. Reg. 54,142, 54,145-46 (Oct. 8, 1998); 79 Fed. Reg. 11,436, 11,440, 11,443 (Feb. 8, 2014).⁴

Administration of Medicaid funding relies on states’ reporting to CMS. See 42 C.F.R. § 430.30(a)(2). A state makes a “claim” for FFP by submitting a request in the manner and format that CMS program regulations, instructions, and directives require. 45 C.F.R. § 95.4 (defining “claim”). A state receives its federal Medicaid grant in advance of each calendar quarter, “and the amount advanced is based on the state’s estimate of its program funding needs.” Missouri II at 2 (citing 42 C.F.R. § 430.30(b), (d)). A state then must submit a form called the HCFA-64, CMS-64, or Quarterly Medicaid Statement of Expenditures (QSE), which is the “accounting of actual recorded expenditures” that a state considers entitled to FFP, within 30 days after each quarter ends. 42 C.F.R. § 430.30(c); see also Missouri I at 4 n.4. The State Medicaid Manual (SMM)

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communicates federal Medicaid policies and procedures to state Medicaid agencies and gives detailed instructions and guidance about completing and submitting the QSE. Missouri I at 4 n.4; Ga. Dep’t of Cmty. Health, DAB No. 2521, at 2 n.2 (2013), aff’d in part & rev’d in part, 79 F. Supp. 3d 269 (D.D.C.), amended in part, 110 F. Supp. 3d 95 (D.D.C. 2015); see SMM, CMS Pub. 45 (available at https://www.cms.gov/Regulations-and-Guidance/guidance/Manuals/Paper-Based-Manuals-Items/CMS021927.html) (last visited Oct. 1, 2024). The QSE is the vehicle for reporting not only expenditures in the most recent calendar quarter, but also “adjustments” to amounts reported for prior quarters. Missouri II at 2; SMM §§ 2500(A)(1), 2500(C), 2500.1(B); Georgia, DAB No. 2521, at 3; see also Conn. Dep’t of Soc. Servs., DAB No. 1982, at 5 n.3 (2005) (noting that CMS program instructions use “adjustment” to refer to “increases or decreases in amounts previously claimed by a state for a ‘prior period’ (that is, a period prior to the quarter for which the QSE was filed)”).

Section 1132(a) of the Act and its implementing regulations impose time limits on states’ reporting of their Medicaid expenditures. “[A]ny claim by a State for payment with respect to an expenditure” the State made in carrying out its Medicaid state plan in a given quarter “shall be filed” in compliance with applicable regulations within two years after the “first day of the calendar quarter immediately following such calendar quarter.” Act § 1132(a). CMS “shall not” make payment “if claim therefor is not made within such two-year period,” with only inapplicable exceptions. Id.; see also Missouri II at 3 n.3 (noting Missouri “does not claim that any of those exceptions applies here,” and “none does”). “In establishing the two-year filing limit, Congress wanted to discourage states from filing FFP claims long after they had made the relevant program expenditures, a practice that hampered federal budget planning and administration for Medicaid and other Social Security Act programs.” Georgia, DAB No. 2521, at 3; see also 46 Fed. Reg. 3,527 (Jan. 15, 1981) (final rule with comment period) (stating the intent of “new section 1132” of the Act “is to enable HHS to know the total amounts of its obligations for each fiscal year within a reasonable time after the end of the year”). Thus, CMS will pay FFP for a State agency expenditure “only if the State files a claim with [CMS] for that expenditure within 2 years after the calendar quarter in which the State agency made the expenditure.” 45 C.F.R. § 95.7. “In general, the requirement to file a claim within the two-year limit applies to any FFP request, whether it is the initial claim for a quarter’s expenditures or some prior-period adjustment concerning them.” Georgia, DAB No. 2521, at 12.

II. The IMD-DSH limit

The parties’ dispute arises from statutory limits on the federal government’s FFP obligations for state Medicaid payments to DSHs and IMDs. DSHs are “hospitals which serve a disproportionate number of low-income patients with special needs.” See Act § 1902(a)(13)(A)(iv). An IMD is “a hospital, nursing facility, or other institution of more than 16 beds, that is primarily engaged in providing diagnosis, treatment, or care of

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persons with mental diseases, including medical attention, nursing care, and related services.” Act § 1905(i). The Medicaid statutory scheme supports inpatient hospital services for low-income patients by requiring state DSH payments that “supplement Medicaid’s standard payments for inpatient hospital services and serve to offset a hospital’s uncompensated costs of caring for the low-income population.” Missouri I at 2; see also Act §§ 1902(a)(13)(A)(iv), 1923(a). The federal government reimburses, through FFP, a share of the state’s allowable DSH payments. Act § 1903(a); 45 C.F.R. § 95.4 (defining FFP). States “must present a complete, accurate, and full disclosure of all of their DSH programs and expenditures” and do so “in accordance with procedures established by CMS.” 42 C.F.R. § 447.299(a), (b). If a state does not comply with those reporting requirements, “future grant awards will be reduced by the amount of FFP” attributable to the improperly reported expenditures “until such time as the State complies with the reporting requirements.” Id. § 447.299(e).

The federal government’s FFP contributions for DSH payments are limited in several ways. The “DSH allotment” is an annual, state-specific cap on federal reimbursement of DSH payments. Act § 1923(f). A further limit, the “IMD exclusion,” aims “to prevent states from using federal funds to supplant state financing of mental health hospitals, which states historically operated and funded.” N.J. Dep’t of Hum. Servs., DAB No. 2737, at 4 (2016); see also Act § 1905(a)(1) (excluding several types of services in IMDs from definition of “Medical assistance”). The IMD exclusion generally prohibits states from using federal funds to pay for services to Medicaid recipients between 22 and 64 years old who are inpatients of IMDs, but an exception lets a state Medicaid program receive FFP for DSH payments to IMDs. Missouri I at 2.

“During the 1990s, Congress became concerned that extensive use of the DSH payment authority could allow states to do what the IMD exclusion was intended to prevent, i.e., shift the cost of operating mental health facilities from states to the federal government.” Missouri I at 2. Therefore, in the Balanced Budget Act of 1997, Congress enacted an annual “IMD DSH limit” on state DSH expenditures to IMDs and other mental health facilities, which is codified in section 1923(h) of the Act, calculated from the base year of FFY 1995, and published annually in the Federal Register. Id. at 2-3; see also New Jersey, DAB No. 2737, at 4; Mo. Dep’t of Soc. Servs., DAB No. 2161, at 6 (2008).

For any given year after FFY 2002, a state’s annual IMD DSH limit is the lesser of two figures. The first figure is the total amount of the state’s DSH payments to IMDs and other mental health facilities in FFY 1995. Act § 1923(h)(1)(A). The second figure is determined using an “applicable percentage” reflecting the ratio of a state’s mental health facility DSH payments for FFY 1995 to its total DSH payments for that year; it is capped at 33%. See Act § 1923(h)(1)(B), (2)(B)-(C). The numerator of the “applicable percentage” ratio is the state’s FFY 1995 mental health facility DSH payments “as reported by the State not later than January 1, 1997, on [the QSE], and as approved by the Secretary.” Act § 1923(h)(2)(B)(i); Missouri II at 4 & n.5. The denominator of the

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“applicable percentage” ratio is the state’s total FFY 1995 DSH payment amount, also “as reported by the State not later than January 1, 1997, on [the QSE], and as approved by the Secretary.” Act § 1923(h)(2)(B)(ii), (C); Missouri II at 4 & 4 n.5. CMS calculates the applicable percentage and applies it “each FFY to the State’s current FFY total computable DSH allotment.” 63 Fed. Reg. at 54,144. CMS then compares this result “to the State’s FFY 1995 total computable mental health DSH expenditures . . . as reported on the Form HCFA–64 as of January 1, 1997.” Id. “The lesser of these two amounts is the State’s limitation on total computable IMD DSH expenditures for the FFY.” Id. CMS publishes notices of its preliminary and final calculations of states’ annual IMD DSH limits in the Federal Register. Missouri II at 4.

Case Background

I. The first disallowance by CMS

This case originated from CMS’s and Missouri’s differing calculations of the state’s IMD DSH limit for FFY 2014. In simplest terms, CMS calculated Missouri’s FFY 2014 IMD DSH limit from QSE data that Missouri had submitted for FFY 1995, while Missouri argued for a higher 2014 IMD DSH limit.

For 2014, CMS determined Missouri’s IMD DSH limit per the statutory formula to be $207,234,618, the amount of the state’s base-year FFY 1995 mental health facility DSH expenditures per Act § 1923(h)(1)(A). Mo. Ex. 7, at 8; Missouri I at 6.⁵ That figure controlled because it was less than the alternative limit under Act § 1923(h)(1)(B), as calculated using the “applicable percentage” per Act § 1923(h)(2). Missouri I at 6-7. Accordingly, CMS multiplied the $207,234,618 IMD DSH limit per Act § 1923(h)(1)(A) by Missouri’s FFY 2014 FMAP of 62.03% to compute a maximum federal share of $128,547,634. Id. at 7. Consequently, CMS deferred approval of $2,438,638 in FFP (the difference between Missouri’s claim for $130,986,272 in FFP for mental health DSH payments for FFY 2014 and the CMS-determined maximum federal share of $128,547,634). Id. at 7-8.

Missouri argued in response that the amount of mental health facility DSH expenditures it originally reported on its QSEs for FFY 1995 was inaccurately low, and once corrected would produce a higher IMD DSH limit and eliminate the basis for CMS’s disallowance. Missouri I at 7. Specifically, for FFY 1995, Missouri allegedly had reported $207,234,618 in DSH payments to publicly owned IMDs on line 2B of the pertinent QSE schedule, but had misreported $9,902,046 in DSH payments to privately owned IMDs on line 1B instead (as “inpatient hospital” DSH payments). Missouri II at 5. Thus, Missouri asserted its reported figure of $207,234,618 for total expenditures to IMDs and other

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mental health facilities in FFY 1995 had tallied only DSH payments to publicly owned IMDs, and mistakenly omitted $9,902,046 in DSH payments to non-public IMDs. Missouri I at 7-8. Therefore, Missouri claimed its IMD DSH limit should be $217,136,664 (that is, $207,234,618 plus $9,902,046) per Act § 1923(h)(1)(A). Id. at 7, 8 n.11. (The revised alternative IMD DSH limit under Act § 1923(h)(1)(B) would not apply because that “applicable percentage” approach “would yield a total computable IMD DSH limit greater than $217,136,664.” Id. at 8 n.11.)

On June 4, 2015, CMS disallowed $2,438,638 in FFP for Missouri’s FFY 2014 IMD DSH payments, explaining it was too late for Missouri to revise the FFY 1995 base-year expenditure data that CMS had relied on to determine Missouri’s FFY 2014 IMD DSH limit. Missouri I at 8-9; Mo. Ex. 9. CMS stated that Act § 1923(h) required basing the IMD DSH limit on 1995 DSH spending amounts “as reported by the state not later than January 1, 1997,” so CMS had no legal basis or authority to recalculate the limit using subsequently revised figures. Missouri I at 8-10 (quoting Act § 1923(h)(2)(B)). CMS also asserted that Missouri had not complied with 42 C.F.R. § 447.299(b), which requires states to report DSH payments quarterly in accordance with CMS-established procedures, and Missouri bore the onus of its baseless reporting error for FFY 1995. Id. at 9.

II. Missouri’s First Appeal to the Board (Docket No. A-15-93)

Missouri appealed to the Board in Docket No. A-15-93, requesting reversal of the 2015 disallowance because the state’s IMD DSH limit for FFY 2014, as published in the February 28, 2014 Federal Register, allegedly was incorrectly low. Missouri I at 9. In defending the disallowance, CMS relied not on the time limitation language in Act § 1923(h)(2)(B), but instead on “Missouri’s failure to report the additional $9.9 million in IMD DSH payments” properly per 42 C.F.R. § 447.299 on the state’s Medicaid expenditure report for FFY 1995. Id. at 9-10, 12-13.

The Board issued a written decision on February 11, 2016, upholding the entire disallowance. Missouri I at 1-2. We noted that “CMS’s shift in position d[id] not invalidate the disallowance,” and concluded CMS had stated “a sufficient basis for upholding the disallowance.” Id. at 10 & 10 n.13. We rejected Missouri’s request to adjust retroactively the amounts previously reported on its QSEs for FFY 1995 for three reasons. The first reason was evidentiary: Missouri relied on a “spreadsheet whose content has not been vouched for by any state official” as proof that the state had claimed $9.9 million in IMD DSH payments on the wrong line of its QSE for FFY 1995. Missouri I at 11-12. The second reason concerned “the normal expenditure reporting process”: Missouri had “not attempted to amend its FFY 1995 Medicaid expenditure report to account for any additional IMD DSH payments,” through a “‘prior period adjustment,’ entered on the appropriate schedule of the QSE.” Id. at 12. The third reason was that “CMS’s refusal to recalculate Missouri’s IMD DSH limit to reflect $9.9 million in base-year DSH payments to non-public IMDs is consistent with the Medicaid statute,”

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namely section 1923(h)(1)(A) of the Act, “and regulations,” particularly 42 C.F.R. § 447.299(b). Id. at 12-13. Under section 1923(h)(1), the IMD DSH limit is “based on reporting data specified by the State on” the QSE, and under 42 C.F.R. § 447.299(b), each state’s QSE reporting must be “in accordance with procedures established by CMS.” Thus, we concluded, Missouri’s “reporting failure justifies CMS’s refusal to recalculate Missouri’s IMD DSH limit.” Missouri I at 13. We declined to determine the allowability of either an increasing prior-period adjustment to Missouri’s QSE to account for misreported base-year DSH payments, or any retroactive adjustment of the FFY 1995 QSE after January 1, 1997. Id. at 13-14.

III. The Second Disallowance by CMS

Missouri’s first appeal triggered developments that resulted in a second disallowance. “On February 29, 2016, a few weeks after the Board issued its decision” in Missouri I, “the State filed a QSE for the quarter ending December 31, 2015, reporting ‘prior period adjustments’ to its mental health and other DSH payments for FY 1995.” Missouri II at 7; see also Mo. Ex. 11. Missouri entered an “increasing adjustment” on line 2B reporting $9,902,046 in total computable mental health DSH payments for FFY 1995, and a corresponding “decreasing” adjustment on line 1B, which together “effectively shifted $9.9 million in ‘misreported’ base-year mental health DSH payments” from line 1B to line 2B. Missouri II at 7. “The QSE for the quarter ending December 31, 2015 reported similar adjustments for FYs 2014 and 2015.” Id. The prior period adjustments to Missouri’s expenditure reports for FFYs 1995, 2014, and 2015 “increased the federal-share amounts for mental health DSH payments” by $5,926,375 for FFY 1995, $2,409,185 for FFY 2014, and $1,675,829 for FFY 2015, totaling $10,011,389. Id.

On November 21, 2016, CMS notified Missouri of a $10,011,389 disallowance of FFP claimed for the quarter ending December 31, 2015 based on the State’s “prior period adjustments” for FFYs 1995, 2014, and 2015. Id.; Mo. Ex. 10. CMS determined that Missouri’s increasing adjustments for FFY 1995 and the first quarter of FFY 2014 were untimely under section 1132(a) of the Act, and Missouri’s other increasing adjustments for FFY 2014 and 2015 were barred for seeking FFP in excess of the IMD DSH limits for those years. Missouri II at 7-8. On January 20, 2017, Missouri filed a reconsideration request with documentation purportedly supporting the increasing adjustment for FFY 1995, but CMS upheld the disallowance in full. Id. at 8; Mo. Exs. 19-20.

IV. Missouri’s Second Appeal to the Board (Docket No. A-17-79)

Missouri appealed the second disallowance to the Board under Docket No. A-17-79. Missouri II at 1, 8. Missouri primarily “focuse[d] on CMS’s rejection of the prior-period increasing adjustment for FY 1995,” which was the foundation for Missouri’s contention that the IMD DSH limits for FFYs 2014 and 2015 were higher than CMS had determined them to be. Id. at 8. Missouri contended that its increasing adjustment for FFY 1995 was

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not time-barred because it was not a claim within the meaning of section 1132(a) of the Act and 45 C.F.R. § 95.7. Id. at 8-9. Missouri’s rationale was that its decreasing and increasing adjustments for FFY 1995 merely moved the amount of DSH payments to private IMDs from one line on the QSE to another and thus had no impact on the amount of FFP the state claimed or received for FFY 1995. Id. at 9.

CMS asserted two principal arguments for upholding the disallowance. Missouri II at 1. First, CMS maintained that Missouri’s increasing adjustments for FFY 1995 and the first quarter of FFY 2014 were untimely claims for FFP under section 1132(a) of the Act, which requires a state to file such requests within two years after the calendar quarter when the state made the underlying expenditure(s). Id. Second, CMS contended that the prior-period adjustments for FFYs 2014 and 2015 would enable Missouri to recover FFP exceeding the annual IMD DSH limit established under section 1923(h) of the Act. Id.

The Board affirmed the November 21, 2016 disallowance determination, ruling that both of CMS’s stated grounds for it were valid. Missouri II at 1. We rejected Missouri’s position that the increasing adjustment for FFY 1995 was not a time-barred claim under section 1132(a) of the Act. Id. at 9-14. We explained, relying on precedent, that “[a] prior-period adjustment that corrects an expenditure reporting error constitutes a claim when it increases the amount of FFP sought with respect to a specific expenditure or category of expenditures,” and “[t]hat is precisely what the increasing adjustment did here.” Id. at 10 (citing N.Y. State Dep’t of Soc. Servs., DAB No. 818 (1986) and N.J. Dep’t of Hum. Servs., DAB No. 1655 (1998)). We also pointed out that, if Missouri was correct and the base-year increasing adjustment was not a disallowed “claim,” then the Board seemingly had no jurisdiction under 45 C.F.R. Part 16, Appendix A, ¶ B(a)(1), to resolve the dispute. Id. at 13. Having concluded that Missouri’s prior-period increasing adjustments were indeed claims, we upheld CMS’s disallowance of the adjustments for FFY 1995 and the first quarter of FFY 2014 because they were not timely filed within two years as section 1132(a) of the Act and 45 C.F.R. § 95.7 required. Id. at 13-14. Finally, we held that CMS also properly disallowed Missouri’s increasing adjustments for the remaining three quarters of FFY 2014 and FFY 2015, which, though timely, exceeded the applicable IMD DSH limits per section 1923(h) of the Act. Id. at 14-16.

The Board declined to decide two issues. The first was whether section 1923(h) of the Act “required CMS, or permitted the Board, to revise Missouri’s IMD DSH limit calculations in order to account for the [FFY 1995 base-year] adjustment,” even if Missouri’s filing of it “had been timely made under section 1132(a).” Missouri II at 15 n.9. Secondly, “even if CMS had discretion” to revise Missouri’s IMD DSH limits “based on the State’s belated expenditure reporting,” the Board would not “decide whether CMS should have exercised that discretion,” as the Board’s role was only to determine if the disallowance was factually and legally supported. Id. at 15.

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V. Missouri’s appeal to the United States District Court

Missouri appealed the Board’s Missouri II decision to the United States District Court for the District of Columbia. On August 13, 2019, the court issued a Memorandum Opinion and Order stating that both parties had moved for summary judgment but the matter would “require supplemental briefing.” Mo. Dep’t of Soc. Servs. v. U.S. Dep’t of Health & Hum. Servs., No. 18-2587, 2019 WL 3802945, at *1 (D.D.C. Aug. 13, 2019). The court explained that the Board had based its decision for CMS in Missouri II on section 1132(a), not section 1923(h), of the Act, yet CMS’s briefing “makes barely a mention of § 1132(a).” Id. at *2. Instead, the court stated, CMS “argues in its briefing here that § 1923(h) places its own bar on amending base-year numbers,” as that statute “refers to reports made ‘not later than January 1, 1997.’” Id. at *3. After stating the “tenet of administrative law that a Court can only sustain an agency’s decision on the ground offered by the agency,” the court ordered the parties to file supplemental briefs clarifying their positions. Id. at *3-*4.

“Aided by the parties’ supplemental briefing,” the district court remanded, concluding that CMS had “forfeited” the only affirmable argument (concerning Act § 1132(a)) and apparently had “embraced a new rationale” (under Act § 1923(h)) instead. Mo. Ex. 13, at 1. Construing CMS’s supplemental briefing as “a request for a voluntary remand,” the court remanded for the Board to consider CMS’s “new rationale” under Act § 1923(h), yet without vacating Missouri II. Id. at 9-10. The remand Order directed that “the Board shall determine whether §§ 1132(a) and 1923(h) of the Social Security Act (both in conjunction and in isolation) prohibit Missouri from amending its FY 1995, 2014, and 2015 Medicaid reports.” Mo. Ex. 14. The Board now decides those issues.

Standard of Review

The Board applies a de novo standard of review to disallowances of state Medicaid claims under Title XIX of the Act. Tex. Health & Hum. Servs. Comm’n, DAB No. 3066, at 7 (2022), recon. denied, DAB Ruling No. 2024-1 (Oct. 27, 2023); see also “Appeals to Board,” https://www.hhs.gov/about/agencies/dab/different-appeals-at-dab/appeals-to-board/index.html (last visited Oct. 1, 2024). The state has the burden of documenting the allowability of its claims for FFP. 42 C.F.R. § 430.42(g)(1). The Board considers a state’s appeal from a disallowance (or from CMS’s unfavorable reconsideration of one) on the basis of the documentation the state submits and that the Board may require. Act § 1116(e)(2)(B). In deciding whether to uphold any part of a disallowance, the Board is bound by all applicable laws and regulations and thoroughly reviews the issues, taking into account all relevant evidence. Id.; 45 C.F.R. §§ 16.14, 16.21. The Board must sustain a disallowance that the evidence supports and that is consistent with applicable statutes and regulations. Me. Dep’t of Health & Hum. Servs., DAB No. 2931, at 4 (2019).

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Analysis

Missouri maintains that its IMD DSH limit “is too low because it was based on an error” in the state’s FFY 1995 expenditure reporting, so “CMS should adjust the cap” for FFY 2014 and following years. Mo. Br. at 1. Missouri argues that CMS’s position (that section 1132(a) of the Act bars Missouri’s 2016 attempt to adjust the state’s previously reported FFY 1995 mental health facility DSH expenditures) “is inconsistent with the text and purpose of that statute.” Id. at 2. Missouri contends that its prior-period adjustments for FFY 1995 seek to “correctly categorize” certain FFY 1995 DSH expenditures for which FFP “has already been claimed,” rather than to claim “additional federal funds” for those expenditures. Id. at 2-3. Concerning section 1923(h) of the Act, Missouri argues that, “[u]nder CMS’s interpretation, Missouri is forever bound, year-after-year indefinitely into the future, by an IMD DSH limit that is indisputably erroneously low.” Id. at 2; see also id. at 10. “Congress did not intend such an absurd result,” Missouri posits, “and nothing in the text of Section 1923(h) requires it.” Id. at 2.

CMS responds that the Board should affirm the November 21, 2016 disallowance. CMS Br. at 2. CMS argues that, “as the Board previously concluded,” Missouri’s increasing adjustment of its FFY 1995 QSE “qualifies as a claim under section 1132(a) of the Act,” is “beyond the statutory 2-year limit,” and in fact “is two decades too late.” Id. Regarding section 1923(h), CMS argues that the statute bars Missouri from adjusting its reported FFY 1995 data for setting the IMD DSH limit after the statutory deadline of “not later than January 1, 1997,” and “without the Secretary’s approval.” Id. CMS further argues that “[e]ven if one were to read section 1923(h) and be left with the sense that ambiguity existed, then CMS’s interpretation should be given deference.” Id. at 12.

After thoroughly reviewing this case’s procedural history, the parties’ arguments, and relevant authorities, the Board concludes that Missouri has not met its burden of establishing its claims for FFP are allowable under sections 1132(a) and 1923(h) of the Act. Therefore, the Board must sustain the entire disallowance.

I. Section 1132(a) of the Act, in isolation, prohibits Missouri’s increasing adjustments to its Medicaid reports for FFY 1995 and the first quarter of FFY 2014.

Regarding the two-year time limit on filing claims for FFP under section 1132(a) of the Act, Missouri argues that “it would be inappropriate, and fundamentally unfair” for CMS to revive its prior argument after “abandoning and forfeiting” it in federal court. Mo. Br. at 17. “However,” Missouri asserts, “if CMS attempts to revive the Section 1132(a) argument,” the Board “must re-visit its prior ruling, given the later decision by CMS and DOJ not to defend it” and because Missouri II misapplied Board precedents interpreting the statute, particularly Georgia, DAB No. 2521. See id. at 17, 20-22. Missouri argues that the Board “incorrectly cited” Georgia as supporting “the proposition that the fact that

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Missouri’s FY 1995 prior period adjustment resulted in no overall net increase in FFP sought for that year is immaterial to the question of whether that prior period adjustment is a claim.” Id. at 18 (internal quotation marks and brackets and citation omitted). Missouri attempts to distinguish Georgia as a case in which “the State was indisputably seeking additional federal funds from CMS for the year in which it was making the adjustment, which Missouri is not.” Id.

CMS counters that “Missouri’s prior year adjustment for FY 1995 is a ‘claim’ within the meaning of section 1132(a)” of the Act, “and Missouri is beyond the two-year timeframe to make a claim for FY 1995 under section 1132(a).” CMS Br. at 14. CMS further argues that “[t]he Board’s prior reasoning was sound, and CMS’s disallowance should once again be affirmed on those grounds.” Id.

We first reject Missouri’s arguments that CMS has forfeited its reliance on section 1132(a) of the Act. The district court’s memorandum opinion instructs that on remand the Board “should address whether § 1923(h) standing alone bars Missouri from amending the FY 2014 and 2015 reports,” and “may also consider the interrelation between §§ 1132(a) and 1923(h).” Mo. Ex. 13, at 9 (emphasis added). The district court’s remand order requires that “the Board shall determine whether §§ 1132(a) and 1923(h) of the Social Security Act (both in conjunction and in isolation) prohibit Missouri from amending its FY 1995, 2014, and 2015 Medicaid reports.” Mo. Ex. 14, at 1 (emphasis added). Thus, the district court’s directives on remand at least permit, and seemingly require, the Board to revisit its analysis and holding in Missouri II concerning section 1132(a) of the Act. See Anderson v. Yungkau, 329 U.S. 482, 485 (1947) (recognizing that the usual meaning of “may” is “permissive” and of “shall” is “mandatory”). Also, Missouri’s arguments that this course of action would be “fundamentally unfair,” and that CMS “should not get another bite at the apple before the Board,” Mo. Br. at 17, are inherently equitable in nature and “the Board has no authority to waive a disallowance based on equitable principles.” Mun. of Santa Isabel, DAB No. 2230, at 11 (2009); see also Depression & Bipolar Support Alliance, DAB No. 2444, at 12 (2012) (“The Board is bound by applicable laws and regulations and has no authority to waive a disallowance based on equitable principles.”).

We next conclude, after thoroughly reviewing the entire record, that in Missouri II the Board correctly upheld CMS’s disallowance of Missouri’s “prior-period adjustments for FY 1995 and the first quarter of FY 2014” because they “constituted untimely requests for FFP under section 1132(a).” Missouri II at 1. Missouri attempts to distinguish Georgia, Connecticut, and other Board decisions “in which a State moved an expenditure to a different category” on the QSE because, unlike those states, “Missouri will not receive another penny in federal funds for the year (1995) for which it is seeking to adjust its reporting.” Mo. Br. at 18-23. However, that distinction makes no difference. Each of those cases, like the present one, “involves a state’s attempt to claim additional FFP by moving previously claimed costs from one reimbursement category to another outside the

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two year time limit, even though the actual costs for the services provided have not changed.” Connecticut, DAB No. 1982, at 13 n.8. “The statute and regulations do not allow this.” Id.

Missouri’s arguments, like similar previous arguments by other states, “have no merit because they require us to ignore the plain language of section 1132(a)” of the Act. See id. at 15. “The two-year filing requirement at issue here is clear on its face,” and section 1132(a) “simply imposes a two-year deadline, with limited exceptions, for the filing of claims.” Cal. Dep’t of Health Servs., DAB No. 1472, at 6-7 (1994).

Significantly, Congress specified the few exceptions to section 1132(a) of the Act: it “shall not be applied so as to deny payment with respect to [1] any expenditure involving court-ordered retroactive payments or [2] audit exceptions, or [3] adjustments to prior year costs.” Act § 1132(a). The statute also allows a fourth exception when the Secretary “determines (in accordance with regulations) that there was good cause for the failure by the State to file such claim within the period prescribed.” Id. § 1132(b). “Thus, the scope of the exceptions was clearly meant to be limited.” California, DAB No. 1472, at 4. “We can think of no reason why Congress would take the trouble to specify these exceptions in the statute if it also intended to give states additional (non-specified) avenues of avoiding the two-year rule.” Connecticut, DAB No. 1982, at 15.

Missouri does not contend that any of the specified exceptions apply in this case, and none does. See Missouri II at 3 n.3. To accept Missouri’s arguments would create an implicit fifth exception to the statute’s operation for late-filed corrections of originally misreported data. Facing comparable arguments in the past, the Board has held that no exception in section 1132(a) allows a state to submit revised reports past the two-year deadline when the state discovered “inadvertently” omitted data causing federally reimbursable costs to be “underreported” in the state’s initial quarterly reporting. California, DAB No. 1472, at 2-4. Under such circumstances, CMS’s interpretation of section 1132 as excluding such late-filed claims is “consistent with legislative intent,” and a contrary interpretation “is so broad as to defeat the purpose of the time limit altogether.” Id. at 4-5.

“Any effort to discern the meaning of a statute must also take into account its intended purposes,” and CMS’s construction of section 1132(a) of the Act, which best serves the statutory purposes, therefore is the best – indeed, the only reasonable – reading. See Orton Motor Co., DAB No. 2717, at 8 (2016), aff’d, 884 F.3d 1205 (D.C. Cir. 2018); see also Breton Lee Morgan, M.D., DAB No. 2264, at 5 (2009) (“A cardinal rule of statutory interpretation is that a statute should be read . . . in a manner that furthers the statute’s purposes.”), aff’d, No. 3:09-1059, 2010 WL 3702608 (S.D. W.Va. Sept. 15, 2010), aff’d per curiam, 694 F.3d 535 (4th Cir. 2012). “In enacting the two-year filing limitation, Congress addressed [HHS’s] need to plan and administer effectively the budgets for Social Security Act programs by controlling states’ ability to make delayed claims.” New

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Jersey, DAB No. 1655, at 2; see also California, DAB No. 1472, at 4 (“In enacting the two-year filing limitation, Congress’ intent was to facilitate federal budget planning for programs under the Act by controlling states’ ability to make delayed claims.”). The statute’s purpose “was to prevent states from claiming FFP, or transferring claims for FFP from one program to another, many years after expenditures were made and without any time limit.” New Jersey, DAB No. 1655, at 8 (emphasis added). “Such delayed claims make it difficult for [HHS] to plan its budget; claims for millions of dollars for expenditures in years long gone could turn up at any time.” Id.; see also N.Y. State Dep’t of Health, DAB No. 1867, at 7 (2003) (“Claiming delays had in the past made it difficult for [HHS] to plan its budget since claims for millions of dollars for expenditures in years long past could turn up at any time.”). CMS’s reading best serves the statute’s purpose by preventing states from claiming large additional sums of FFP through perpetual use of the two-year claims adjustment window to upset CMS’s determination of relevant base-year expenditure amounts many years and even decades after the fact.

We reject Missouri’s contention that the state made no “claim” subject to section 1132(a) by merely “moving an item from one line to the other” in the FFY 1995 base-year data, such that the state “will not receive another penny in federal funds” for FFY 1995. Mo. Br. at 20. Missouri is seeking additional federal funds by adjusting and re-reporting its FFY 1995 data, and would have no claim for additional FFP in FFYs 2014 and 2015 but for that adjustment. If Missouri were correct, then any state could timely claim millions of dollars in increased FFP merely by adjusting decades-old base-year data, so long as the adjustment sought no additional FFP for the base year itself. The Board has rejected comparable contentions concerning late-filed adjustments. For example, in California, DAB No. 1472, the state asserted that certain adjustments submitted in 1992 for 1989 were timely under section 1132(a) of the Act because they were “part and parcel” of prior claims rather than “new” ones. Id. at 2-3, 6. The Board found that reasoning “unavailing,” as “section 1132(a) of the Act does not distinguish ‘new’ from ‘old’ claims, but simply imposes a two-year deadline” for filing any claims at all. Id. at 6.

We reaffirm that CMS correctly construed and applied section 1132(a) of the Act, based on our analysis in Missouri II (which we incorporate by reference) and in this Decision.⁶ “The purpose of the claiming deadline” in section 1132(a) of the Act and 45 C.F.R. § 95.7, we reiterate, “is to ensure that states submit reimbursement requests in a timely fashion.” New York, DAB No. 1867, at 7. “A state must claim FFP for its Medicaid program expenditures in accordance with program regulations, instructions, or other directives.” Pa. Dep’t of Hum. Servs., DAB No. 2883, at 3 (2018). We again conclude that Missouri’s 2016 increasing adjustment for FFY 1995 was a “claim” per section 1132(a) of the Act and 45 C.F.R. § 95.7, those authorities impose a two-year filing deadline that Missouri missed, and on that basis CMS lawfully disallowed $5,926,375

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FFP for FFY 1995. See Missouri II at 13; Mo. Ex. 10, at 3. We also again uphold (and Missouri does not challenge) the $646,763 portion of the $2,409,185 in FFP that CMS disallowed for FFY 2014, because Missouri’s untimely increasing adjustment for FFY 2014’s first quarter was due at the latest by December 31, 2015, but was not filed until 2016. See Missouri II at 14; Mo. Br. at 11 n.4. Thus, we uphold CMS’s determination to disallow $6,573,138 (the total of $5,926,375 in FFP for FFY 1995 and $646,763 for the first quarter of FFY 2014) as untimely claimed under section 1132(a).

II. Section 1923(h) of the Social Security Act, in isolation, prohibits Missouri from amending its FFY 1995, 2014, and 2015 Medicaid reports with respect to mental health DSH payments and the IMD DSH limit.

We first briefly summarize the Board’s discussion and conclusion, in Missouri II, regarding the role of section 1923(h) of the Act. The Board recognized that Missouri’s increasing adjustments for the last three quarters of FFY 2014 and the entirety of FFY 2015 were timely under section 1132(a) of the Act (and 45 C.F.R. § 95.7). Missouri II at 14. Yet the Board also recognized that those increasing adjustments undisputedly caused the state to “exceed its IMD DSH limits for FYs 2014 and 2015 (as published by CMS in the Federal Register).” Id. “Section 1923(h) does not require CMS to revise, or permit the Board to disregard” such published IMD DSH limits, the Board concluded, “based on an unallowable prior-period adjustment to a state’s reporting of base-year mental health DSH payments.” Id. at 15. “Furthermore,” we stated, “even if CMS had discretion to revise Missouri’s FY 2014 and 2015 IMD DSH limits based on the State’s belated expenditure reporting” for FFY 1995, “it is not the Board’s role to decide whether CMS should have exercised that discretion.” Id. The increasing adjustment that Missouri reported for FFY 1995 “was not approved by CMS (the agency to which the Secretary has delegated authority to implement section 1923(h)),” CMS’s “disapproval was legally valid,” and therefore we upheld it. Id.

Missouri contends that section 1923(h) of the Act does not prohibit the state’s IMD DSH limit “from being corrected” as to the amount of Missouri’s DSH Payments to IMDs in FFY 1995. Mo. Br. at 12-17. Missouri’s construction of section 1923(h) of the Act relies on the “longstanding principle of statutory interpretation” that Congress presumably acts intentionally and purposely when it includes particular language in one section of a statute but omits it in another. Id. at 15; see also Mo. Reply at 5. The language at issue is the phrase, “as reported by the State not later than January 1, 1997.” Mo. Br. at 14. Missouri argues that “the plain language of the statute makes clear that there is no January 1, 1997 deadline for reporting DSH payments for purposes of calculating the total-IMD-DSH-in-1995 formulation, which sets Missouri’s IMD DSH limit.” Id. at 15.

CMS counters that “Section 1923(h) required the information for calculating the cap to have been reported not later than January 1, 1997,” by “the statute’s plain language.” CMS Br. at 13. CMS further argues that, “even if the statute permits the cap to be

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calculated on information reported later than the January 1, 1997, deadline, the statute entrusts the decision to approve the changes (and to revise the cap) to the Secretary’s sole discretion—that is, ‘as approved by the Secretary.’” Id. at 14 (quoting Act § 1923(h)).

For purposes of discussion, we present below the full text of section 1923(h) of the Act, with subheadings italicized and the disputed phrase in bold type:

(h) Limitation on certain State DSH expenditures

(1) In general
Payment under section 1396b(a) of this title shall not be made to a State with respect to any payment adjustments made under this section for quarters in a fiscal year (beginning with fiscal year 1998) to institutions for mental diseases or other mental health facilities, to the extent the aggregate of such adjustments in the fiscal year exceeds the lesser of the following:

(A) 1995 IMD DSH payment adjustments
The total State DSH expenditures that are attributable to fiscal year 1995 for payments to institutions for mental diseases and other mental health facilities (based on reporting data specified by the State on HCFA Form 64 as mental health DSH, and as approved by the Secretary).

(B) Applicable percentage of 1995 total DSH payment allotment
The amount of such payment adjustments which are equal to the applicable percentage of the Federal share of payment adjustments made to hospitals in the State under subsection (c) that are attributable to the 1995 DSH allotment for the State for payments to institutions for mental diseases and other mental health facilities (based on reporting data specified by the State on HCFA Form 64 as mental health DSH, and as approved by the Secretary).

(2) Applicable percentage

(A) In general
For purposes of paragraph (1), the applicable percentage with respect to –

(i) each of fiscal years 1998, 1999, and 2000, is the percentage determined under subparagraph (B); or

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(ii) a succeeding fiscal year is the lesser of the percentage determined under subparagraph (B) or the following percentage:

(I) For fiscal year 2001, 50 percent.
(II) For fiscal year 2002, 40 percent.
(III) For each succeeding fiscal year, 33 percent.

(B) 1995 percentage
The percentage determined under this subparagraph is the ratio (determined as a percentage) of –

(i) the Federal share of payment adjustments made to hospitals in the State under subsection (c) that are attributable to the 1995 DSH allotment for the State (as reported by the State not later than January 1, 1997, on HCFA Form 64, and as approved by the Secretary) for payments to institutions for mental diseases and other mental health facilities, to (ii) the State 1995 DSH spending amount.

(C) State 1995 DSH spending amount
For purposes of subparagraph (B)(ii), the “State 1995 DSH spending amount”, with respect to a State, is the Federal medical assistance percentage (for fiscal year 1995) of the payment adjustments made under subsection (c) under the State plan that are attributable to the fiscal year 1995 DSH allotment for the State (as reported by the State not later than January 1, 1997, on HCFA Form 64, and as approved by the Secretary).

Missouri argues that “the language in Section 1923(h) defining the total-IMD-DSH-in-1995 formulation,” meaning subsection 1923(h)(1)(A), “does not include any reference to a January 1, 1997 reporting deadline.” Mo. Br. at 14. By contrast, Missouri asserts, “the applicable percentage formulation,” meaning section 1923(h)(2), “does reference a January 1, 1997 reporting deadline.” Id. at 14-15. Thus, Missouri contends, “the plain language of the statute makes clear that there is no January 1, 1997 deadline for reporting DSH payments for purposes of calculating the total-IMD-DSH-in-1995 formulation,” under section 1923(h)(1)(A), “which sets Missouri’s IMD DSH limit.” Id. at 15.

For the reasons explained below, we conclude that CMS’s interpretation of section 1923(h) of the Act is reasonable, Missouri’s is not, and Missouri had timely and adequate notice of CMS’s interpretation.

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A. CMS’s interpretation of section 1923(h) of the Act is reasonable and consistent with applicable principles of statutory construction, and Missouri’s reading is not.

The first flaw in Missouri’s construction of section 1923(h) of the Act is that Missouri assumes a parallelism between paragraphs (h)(1) and (h)(2) that does not exist. “It is indeed a common canon of construction that Congress should be presumed to act intentionally in its choice to use different words in otherwise parallel sections of a statute.” Henry L. Gupton, DAB No. 2058, at 9 (2007) (emphasis added), aff’d, 575 F. Supp. 2d 874 (E.D. Tenn. 2008). However, section 1923(h)(1) and (h)(2) are not parallel. Section 1923(h)(1) merely states the general rule for establishing the IMD DSH limit as the lesser of two figures, one of which is the “applicable percentage” figure. Section 1923(h)(2) provides the specifications for calculating the “applicable percentage” ratio, including the requirement that both its numerator and denominator must derive from data “as reported by the State not later than January 1, 1997.” Act § 1923(h)(2)(B)(i) (specifying that requirement for numerator); id. § 1923(h)(2)(B)(ii) and (C) (specifying that requirement for denominator).

Missouri’s reading of section 1923(h) of the Act also is illogical and would produce an absurd result, meaning one that “is contrary to common sense” and “inconsistent with the clear intentions of the statute’s drafters.” See Mova Pharm. Corp. v. Shalala, 140 F.3d 1060, 1068 (D.C. Cir. 1998). Missouri does not explain why Congress would require or even permit CMS to determine states’ IMD DSH limits by comparing belatedly adjusted total FFY 1995 data under section 1923(h)(1)(A) with originally reported FFY 1995 data under section 1923(h)(2)(B)-(C). As CMS argues, “[a] comparison based on a common set of expenditures is only useful if the set of expenditures remains common between them.” CMS Br. at 11. Missouri’s illogical reading would require an apples-to-oranges comparison between different data sets without any apparent rationale, and also is inconsistent with Congress’s intent to curb state cost-shifting. As CMS argues, Missouri’s reading would leverage the absence of a phrase (“not later than January 1, 1997”) from the text of section 1923(h)(1)(A) into an “invitation for states to adjust the FY 1995 Medicaid reports and resulting caps forever, year-after-year indefinitely.” CMS Br. at 10. We reject such an untenable reading. See Maine, DAB No. 2931, at 19 (rejecting interpretation that “would render the statutory language absurd and untenable,” and instead interpreting the provisions “[i]n context . . . read together,” to produce “the only reading that makes sense of the words used”). We also reject Missouri’s misapprehension that CMS’s reading itself lacks “symmetry.” Mo. Reply at 4 & 4 n.2. CMS merely states, correctly, that section 1923(h) imposed the IMD DSH limit – however calculated – beginning with FFY 1998. CMS Br. at 10-11 (citing Act § 1923(h)(1)).

We also reject Missouri’s statutory interpretation because it “would permit states . . . to manipulate the statutory payment scheme,” again contrary to the legislative intent. See

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N.J. Dep’t of Hum. Servs., DAB No. 2780, at 12 (2017); CMS Br. at 11 n.10 (arguing that Congress set the IMD DSH limit “based on information reported not later than January 1, 1997” to “limit the opportunities for gamesmanship in the data used to calculate the cap”). Missouri raises a hypothetical that “if a State mistakenly over-reported its DSH payments to IMDs (instead of under-reporting them, as Missouri did),” then after January 1, 1997, the state could claim excessive FFP indefinitely and “CMS would be unable to lower the IMD DSH cap.” Mo. Br. at 16; see also Mo. Reply at 8-9 (raising same argument). However, Missouri’s argument overlooks an equally troubling hypothetical: if the Board adopted Missouri’s position, CMS could face increased claims for FFP from state after state alleging newly discovered errors in decades-old reporting, leaving CMS perpetually embroiled in multi-million-dollar disputes and facing a strained and uncertain budget. As CMS points out, “[i]f Congress wanted an ever-changing cap, it could have written the statute to include anticipated future action” expressly, but Congress did not do so. CMS Br. at 11. Regardless of hypothetical future inequities to either party, the Board must reach its decision by applying the law as written to the facts of record. See Commonwealth of Virginia, DAB No. 2876, at 22 (2018) (stating that “the Board has consistently held that it lacks the power to grant equitable relief because it is bound by all applicable laws and regulations”) (citing cases).

Moreover, the statute requires that the base-period DSH expenditure data for setting the IMD DSH limit must be “as approved by the Secretary,” and those words cannot be mere surplusage. Their significance is not a new issue, despite Missouri’s complaint that CMS now relies on this language “for the first time” in “years of litigation.” See Mo. Reply at 1. CMS quoted and relied on this statutory language when explaining the initial disallowance determination, Mo. Ex. 9, at 1, and the Board emphasized the requirement for Secretarial approval both in Missouri I at 11, and Missouri II at 15. To the extent CMS has developed this argument more fully in current briefing than formerly, “[t]he Board has held that the federal agency may raise new grounds for a disallowance after a disallowance letter is issued as long as the appellant is afforded an opportunity to respond.” New York, DAB No. 1867, at 12-13 n.10; see also Pennsylvania, DAB No. 2883, at 14 (“The Board has long held that the federal agency may revise the basis for a disallowance during the Board proceeding as long as the grantee receives an adequate opportunity to respond to the change in position.”). Missouri has had and used the opportunity to respond during these lengthy proceedings.

As CMS argues, “even if the statute permits the cap to be calculated on information reported later than the January 1, 1997, deadline, the statute entrusts the decision to approve the changes (and revise the cap) to the Secretary’s sole discretion.” CMS Br. at 14. By insisting that the Secretary must accept the state’s modified base-year data, Missouri effectively erases Congress’s express delegation of approval authority to the Secretary from section 1923(h) of the Act. We cannot accept interpretations “that would render statutory language irrelevant or superfluous.” Connecticut, DAB No. 1982, at 15; see also Ky. Dep’t for Medicaid Servs., DAB No. 1524, at 8 (1995) (reasoning that, “in

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interpreting a statute, it is best to favor an interpretation which gives meaning to all the terms of the law,” and concluding CMS’s interpretation of the Act was “preferable in that it gives effect to all the terms of the statute”), aff’d, Ky. Cabinet for Health Servs. v. Sec., HHS, No. 96-707 (GK) (D.D.C. May 29, 1997).

In giving due effect to section 1923(h)’s express requirement for base-year data to be “as approved by the Secretary,” the Board need not – and does not – decide whether CMS correctly argues that the statute affords the Secretary “such a broad grant of discretion” as to be “typically unreviewable.” CMS Br. at 14. Even if we assume the reviewability of the Secretary’s exercise (through CMS) of discretion in this instance, the record presents no basis for reversal. “The Board’s review of decisions committed to the federal agency’s discretion is narrow, limited to determining whether the decision was arbitrary, capricious, an abuse of discretion or otherwise not in accordance with the law.” River E. Econ. Revitalization Corp., DAB No. 2087, at 7 (2007); accord Or. Dep’t of Hum. Servs., DAB No. 3054, at 7 (2021). “Accordingly,” in reviewing a discretionary agency action, “we will not substitute our judgment for that of” the agency, “and instead ask only whether the agency has articulated a reasonable basis for its decision, not whether it was the only reasonable decision.” River E., DAB No. 2087, at 9. In this case, the record evidence shows CMS had and stated a reasonable basis for its decision from the outset. See Mo. Ex. 9 (June 4, 2015 disallowance letter); Mo. Ex. 10 (Nov. 21, 2016 disallowance letter).

We conclude that CMS’s construction of section 1923(h) of the Act is reasonable and consistent with applicable principals of statutory construction and Missouri’s is not.

B. Missouri was on notice of CMS’s reasonable interpretation of section 1923(h) of the Act since at least 1998 and did not detrimentally rely on a reasonable alternative interpretation.

For the reasons explained above, the Board concludes that CMS’s interpretation of section 1923(h) of the Act is reasonable; as explained below, we also conclude that Missouri had actual, timely notice of CMS’s interpretation.

On October 8, 1998, CMS gave notice in the Federal Register that the agency construed all subparagraphs of section 1923(h) of the Act as requiring calculation of total FFY 1995 mental health facility DSH expenditures based on expenditure data reported on a state’s QSE by January 1, 1997. 63 Fed. Reg. at 54,142-48. CMS explained that it “has interpreted the aggregate [IMD DSH] limit to be the lesser of” two figures. Id. at 54,143. The first figure – per section 1923(h)(1)(A) – was “a State’s FFY 1995 total computable (State and Federal share) IMD and other mental health facility DSH expenditures applicable to the State’s FFY 1995 DSH allotment (as reported to HCFA on the Form HCFA–64 as of January 1, 1997).” Id. (emphasis added). CMS further explained that the second, “applicable percentage” figure per section 1923(h)(2) was “the

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product of the State’s current year total computable DSH allotment and the applicable percentage,” again derived from data “reported on the Form HCFA–64 as of January 1, 1997.” Id. at 54,143-44. CMS warned that “FFP is not available” for IMD DSH payments exceeding the lesser of a state’s FFY 1995 total mental health expenditure figure “as reported to HCFA on the Form HCFA–64 as of January 1, 1997” or the applicable percentage figure. Id. at 54,144 (emphasis added).

Thus, CMS gave public notice in 1998 of its interpretation that section 1923(h) of the Act imposed an IMD DSH limit based on state-submitted data “as of January 1, 1997,” without exception, whether calculated by total expenditure per section 1923(h)(1)(A) or by applicable percentage per section 1923(h)(1)(B) and (h)(2). Missouri’s assertion that CMS’s Notice was not a “‘thorough’ articulation of its interpretation of Section 1923(h)” is not persuasive. See Mo. Reply at 6. The Notice repeatedly and clearly stated that CMS interpreted the statute as requiring states’ foundational data for computing the IMD DSH limit by either authorized method to be the data reported as of January 1, 1997. Missouri complains that “CMS did not seek confirmation that its calculations were correct or invite comments from States or other parties regarding its calculations.” Mo. Br. at 6. Yet CMS provided, in the Notice, the names and telephone numbers of two individuals to contact for further information if needed. 63 Fed. Reg. at 54,142. There is no evidence that Missouri used that access to CMS to question CMS’s calculations, comment on CMS’s interpretations, or seek clarification of them. Thus, Missouri is not in the position of states that have taken prompt, affirmative steps to ascertain the correctness of their understanding of CMS policy. See, e.g., Alaska Dep’t of Health & Soc. Servs., DAB No. 1919, at 19-20 (2004). Missouri had timely and adequate notice of CMS’s reasonable interpretation of section 1923(h).

Furthermore, even if Missouri had lacked due notice of CMS’s interpretation of section 1923(h) of the Act, the evidence shows the state “did not rely to its detriment on another reasonable interpretation.” See Ariz. Health Care Cost Containment Sys., DAB No. 2824, at 12 (2017), aff’d, No. CV-17-04462, 2020 WL 805235 (D. Ariz. Feb. 18, 2020). For instance, Missouri presents no internal memoranda, contemporaneous with enactment of section 1923(h), discussing its ramifications for the state’s reporting of IMD and DSH claims. Missouri has submitted written declarations of its acting director (as of January 2017) and an assistant deputy director employed with the state agency since 1994. Mo. Exs. 3, 4. Yet neither provides any information on when, how, or why Missouri adopted a reading of the Act that contradicted the official published interpretation by CMS, the federal agency charged with administering the statute. Missouri’s first evident assertion of its construction of section 1923(h) appears in the state’s March 9, 2015 letter disputing CMS’s initial deferral, at the outset of this litigation. Mo. Ex. 6, at 1, 3. The Board gives greater weight to a nonfederal party’s interpretation when it “predates a disallowance” or deferral rather than when, as here, it “represents a position first articulated in litigation.” See New Jersey, DAB No. 2780, at 6.

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We thus conclude that Missouri was on actual, timely notice of CMS’s reasonable interpretation of section 1923(h) of the Act since at least 1998. Even if Missouri had lacked that actual and timely notice, we further conclude that the state has not shown that it detrimentally relied on a reasonable alternative interpretation of its own. Accordingly, none of the increasing adjustments that Missouri submitted in 2016 for FFYs 1995, 2014, and 2015 – even those claims that were timely under section 1132(a) – is allowable, because all of them depended on an alteration of the base-period DSH expenditure data that section 1923(h) does not permit. We uphold the $10,011,389 disallowance in its entirety on this basis.

III. The Supreme Court’s decision in Loper Bright does not alter the Board’s conclusions.

CMS has argued that the language of section 1923(h) of the Act is “plain,” but even if it is ambiguous, CMS’s interpretation should receive “Chevron deference” or at least is “entitled to Skidmore deference.” CMS Br. at 12-13. CMS thus refers to two Supreme Court decisions concerning the proper level of deference for courts to afford to a federal agency’s interpretation of a statute that the agency administers. Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, reh’g denied, 468 U.S. 1227 (1984); Skidmore v. Swift & Co., 323 U.S. 134 (1944). Under the Skidmore standard, an agency’s official interpretations are “not controlling upon the courts” but “do constitute a body of experience and informed judgment to which courts and litigants may properly resort for guidance.” Skidmore, 323 U.S. at 140. “The weight of such a judgment in a particular case will depend upon the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control.” Id. The subsequently adopted, more deferential Chevron standard required that where Congress “has explicitly left a gap for the agency to fill,” agency regulations elucidating statutory provisions were “given controlling weight unless they are arbitrary, capricious, or manifestly contrary to the statute.” Chevron, 467 U.S. at 843-44. However, “Chevron did nothing to eliminate Skidmore’s holding that an agency interpretation may merit some deference whatever its form,” it “left Skidmore intact,” and the Supreme Court has confirmed that “continued recognition of Skidmore is necessary.” United States v. Mead Corp., 533 U.S. 218, 234, 237-38 (2001). Furthermore, resorting to Chevron deference was needless where the agency interpretation satisfied the less lenient requirements for Skidmore deference. See Orton Motor, 884 F.3d at 1211.

Missouri argues that CMS’s interpretation of section 1923(h) of the Act “is not entitled to deference under Chevron or any other authority.” Mo. Reply at 5. Missouri argues that CMS’s interpretation deserves no deference because it reflects no thorough consideration, valid reasoning, or consistency by the agency, but instead is merely a position taken in litigation. Id. at 6-8.

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On June 28, 2024, while this case was pending before the Board, the Supreme Court decided Loper Bright Enterprises v. Raimondo, 144 S. Ct. 2244 (2024), which left Skidmore intact, id. at 2262, 2267, but overruled Chevron, id. at 2273. Neither party asked to present supplemental briefing about Loper Bright’s effect on this case. Nevertheless, we think it prudent to address that issue, particularly given this case’s current posture on remand. We conclude for several reasons, explained below, that the overruling of Chevron does not affect our analysis or decision here.

We first state, as we have said before, that “the degree of deference which courts accord to various agency pronouncements concerning the meaning of applicable statutes and regulations is certainly a complex and evolving area of law, but it need not long detain us here.” Orton Motor, DAB No. 2717, at 6. The Board sits “as part of the administrative adjudication process, not as a federal court,” so “[w]hile the various court approaches to reviewing agency action inform our thinking, they do not directly apply to our role.” Id.; see also Arizona, DAB No. 2824, at 8 (“The Board, however, is not a court; it is an appellate adjudicative body in an administrative appeal process.”).

The Board has explained its own analytical approach to deference as follows. “When the language of a statute or regulation is clear, the Board will apply it by its terms.” New Jersey, DAB No. 2780, at 5. “When the language of a statute or regulation is ambiguous, the Board generally defers to the [federal] agency’s interpretation of the text if it is reasonable and the nonfederal party had timely and adequate notice of that interpretation or did not rely to its detriment on another reasonable interpretation.” Meindert Niemeyer, M.D., DAB No. 2865, at 8 (2018).

In this case, neither party characterizes section 1132(a) of the Act as ambiguous, and even if they did, the Board concludes that the statutory language is so sweeping, clear, and well-defined that questions of deference to agency interpretation need not and do not come into play. See Act § 1132(a) (imposing two-year filing deadline on “any claim by a State for payment with respect to an expenditure made during any calendar quarter by the State”); 45 C.F.R. § 95.4 (defining “claim”); California, DAB No. 1472, at 7 (stating that section 1132(a)’s “two-year filing requirement . . . is clear on its face”).

However, while both parties in this case assert “plain language” readings of section 1923(h) of the Act, those readings are directly contrary, so the statutory language is obviously subject to more than one interpretation and at least arguably ambiguous. Accordingly, we have assessed how much deference to give to CMS’s interpretation by weighing factors the Board traditionally considers:

The degree of deference that the Board accords to a particular CMS interpretation depends on a number of factors, such as whether it has been published and in what form, how widely and at what level it has been distributed, what authority the source within CMS has, whether the

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interpretation is consistent with other issuances, and whether the interpretation is a long-standing one or appears to be a position adopted in litigation which the agency seeks to enforce retroactively.

Alaska, DAB No. 1919, at 14. We recognize the similarity of this approach to the Skidmore rubric. See id. at 14-15. As Loper Bright repeatedly invoked and adhered to Skidmore, we conclude this analytical approach remains valid. See Loper Bright, 144 S. Ct. at 2259, 2262, 2265, 2267.

CMS’s interpretation of section 1923(h) of the Act not only deserves credence under the Board’s traditional analytical approach, but also is the best statutory reading under the standards of Skidmore and Loper Bright, for several reasons. First, CMS’s interpretation is thoroughly and expertly considered, as demonstrated by its nationwide distribution and authorization at the highest official levels. As discussed above, CMS nationally published a detailed statement of the agency’s interpretation by Notice in the Federal Register in 1998. 63 Fed. Reg. 54,142 (Oct. 8, 1998). CMS Administrator Nancy-Ann Min Deparle and HHS Secretary Donna E. Shalala subscribed that Notice, giving it their imprimatur and signifying its consideration and approval at the highest level of agency authority. Id. at 54,148. In the past, the Board has applied “any reasonable and permissible interpretation by CMS of ambiguous statutory language if CMS’s interpretation was timely published in the Federal Register.” Alaska, DAB No. 1919, at 15 (citing Administrative Procedure Act, 5 U.S.C. § 552(a)(1)). Here, we consider the agency’s timely, published interpretation to be not only reasonable and permissible, but also an informed and thorough application of the highest level of agency expertise to a complex and specialized program. See Loper Bright, 144 S. Ct. at 2267 (“Such expertise has always been one of the factors which may give an Executive Branch interpretation particular ‘power to persuade, if lacking power to control’” (quoting Skidmore, 323 U.S. at 140)); CMS Br. at 12 (“The statute here involves a specialized issue—IMD DSH payments—that is uniquely within the realm of CMS’s expertise.”). As such, it is particularly deserving of deference.

CMS’s interpretation of section 1923(h) also is highly persuasive because “interpretations issued contemporaneously with the statute at issue, and which have remained consistent over time, may be especially useful in determining the statute’s meaning.” Loper Bright, 144 S. Ct. at 2262; see also Mahin Oil Co., DAB No. 2747, at 7 (2016); Orton Motor, DAB No. 2717, at 6. CMS issued its 1998 Notice in the Federal Register interpreting section 1923(h) nearly contemporaneously with Congress’s enactment of that statute as part of the Balanced Budget Act of 1997. Missouri points us to no instance when CMS has interpreted section 1923(h) differently in over two decades since then. Even an agency’s consistent application of a disputed statutory provision for much less time (five years) can be sufficient to merit judicial respect under Skidmore. See Orton Motor, 884 F.3d at 1214. Moreover, Missouri notes a December 10, 1997, CMS State Medicaid Director letter (SMDL) that described the IMD DSH limit as being determined by a

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State’s 1995 total mental health DSH expenditures “‘as reported to the Secretary on the HCFA 64 as of January 1, 1997.’” Mo. Reply at 7-8 n.4 (emphasis added). CMS’s initial disallowance letter referred to that same SMDL and consistently explained that by statute, “IMD limits were to be based on 1995 DSH spending amounts ‘as reported by the state not later than January 1, 1997.’” Mo. Ex. 9, at 2 (emphasis added).⁷ Thus, CMS explained, “there is no basis or authority for CMS to recalculate the IMD limit” and the disallowance was appropriate. Id. While CMS chose at times during litigation to give more emphasis to other defenses of the disallowance, CMS never has forfeited or altered its interpretation of section 1923(h) as requiring determination of a state’s IMD DSH limit using base-year expenditure data reported as of January 1, 1997.

Inasmuch as the Supreme Court has concluded that “statutes, no matter how impenetrable, do—in fact, must—have a single, best meaning,” we conclude that the single, best reading of section 1923(h) of the Act is the one CMS published in 1998 and has maintained consistently since then. See Loper Bright, 144 S. Ct. at 2266. We reach that conclusion by applying our own traditional standard of review, as harmonious with both Skidmore and Loper Bright.

IV. Sections 1132(a) and 1923(h) of the Social Security Act, in conjunction, prohibit Missouri from amending its FFY 1995, 2014, and 2015 Medicaid reports.

As discussed above, we uphold part of the disallowance ($6,573,138) under section 1132(a) of the Act, and the entirety of the disallowance ($10,011,389) under section 1923(h) of the Act. Because we uphold the entirety of the disallowance on the latter ground (and most of it under the former ground as well), the answer to the question whether these statutory sections “both in conjunction and in isolation” support the disallowance is a clear “yes.” See Mo. Ex. 14 (remand Order).

Missouri nevertheless argues that sections 1132(a) and 1923(h) of the Act “are not ‘intertwined’ or ‘interrelated,’ and they do not collectively accomplish what neither does independently.” Mo. Br. at 21. “Nothing in the text of either Section 1132(a) or Section 1923(h) suggests they should be read together,” Missouri asserts, “to prohibit adjustments that do not involve a claim for additional federal funds after January 1, 1997.” Id. at 22.

“A cardinal rule of statutory interpretation is that a statute should be read as a harmonious whole, with its various parts being interpreted within their broader statutory context in a manner that furthers the statute’s purposes.” Morgan, DAB No. 2264, at 5; see also

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Ridgeview Hosp., DAB No. 2593, at 8 (2014) (applying “the basic principle of statutory construction that the text must always be interpreted as a whole”). Obviously, sections 1132(a) and 1923(h) of the Act are parts of the self-same, if sprawling, statute. An undisputed purpose of section 1132(a) is to facilitate federal budget planning by controlling states’ ability to make delayed claims. See 46 Fed. Reg. at 3,527; Mo. Br. at 2 & 2 n.1. The undisputed purpose of section 1923(h) is “to cap the amount of DSH that could be used for IMDs,” and thus facilitate federal budget planning by preventing states from “shift[ing] the cost of state psychiatric facilities from the State to the federal government.” Mo. Br. at 2-3.

Reading the Act as a harmonious whole, and reading sections 1132(a) and 1923(h) within their broader statutory context, we conclude that CMS’s interpretation of those provisions best furthers the Congressional intent of facilitating predictable and sustainable federal budgeting. Missouri has acknowledged “error” in the state’s original FFY 1995 expenditure reporting. Mo. Br. at 1. We commend the state’s candor on that point, and we are not unsympathetic to the state’s predicament. However, we have no authority to add an exception to statutory language to remove an apparent hardship. See Keene Corp. v. United States, 508 U.S. 200, 217-18 (1993). We conclude that both sections 1132(a) and 1923(h) express the Congressional will that the fiscal burden of any such errors properly falls upon the state that unfortunately made them and only belatedly discovered them, rather than on the federal agency responsible for administering Medicaid program funding for all participating states.

Conclusion

We uphold in its entirety CMS’s disallowance of FFP in the amount of $10,011,389.

Endnotes

¹ Sections 1132 and 1923 of the Act are codified at 42 U.S.C. §§ 1320b-2 and 1396r–4, respectively. We cite to the Act throughout this Decision, for brevity and for consistency with the district court’s remand order.

² The former Health Care Financing Administration (HCFA) became CMS in 2001. See 66 Fed. Reg. 35,437 (July 5, 2001).

³ When reviewing a disallowance, we apply the substantive law in effect during the time period for which the state claimed the disallowed FFP, which in this case was FFYs 2014 and 2015. See Cal. Dep’t of Health Care Servs., DAB No. 3099, at 1 n.2 (2023). Missouri submitted a prior period adjustment for 1995 that was a “claim” for purposes of section 1132(a) of the Act, see infra, but sought no additional FFP for 1995, Mo. Br. at 20.

⁴ The post-remand appeal file contains 21 exhibits, which include excerpts from the Federal Register; for the sake of clarity and concision we cite only to the Federal Register rather than the exhibits. See Mo. Exs. 1 (46 Fed. Reg. 3,527 (Jan. 15, 1981)); 5 (63 Fed. Reg. 54,142 (Oct. 8, 1998)); 7 (79 Fed. Reg. 11,436 (Feb. 28, 2014)); 8 (81 Fed. Reg. 74,432 (Oct. 26, 2016)); and 12 (82 Fed. Reg. 51,259 (Nov. 3, 2017)).

⁵ A typographical error in the Board’s 2016 Decision misstates the figure as $207,234,218 on one page, Missouri I at 7, but the rest of the decision uses the correct figure of $207,234,618, id. at 6-8, 11.

⁶ For the Board’s pertinent prior analysis, see Missouri II at 9-14. The Board may incorporate by reference its prior discussions of an issue, in the interests of brevity, in appropriate cases. See, e.g., Alaska Dep’t of Health & Soc. Servs., DAB No. 1919, at 8 n.6 (2004).

⁷ Missouri asserts that “CMS does not rely on” the 1997 SMDL “to support its position in this case.” Mo. Reply at 7-8 n.4. CMS’s brief does not cite to the 1997 SMDL and it is not an exhibit, but the appeal file includes, without objection, CMS’s June 4, 2015 disallowance letter, which references and relies on the December 10, 1997 SMDL in explaining the basis for the disallowance. Mo. Ex. 9, at 2. The disallowance letter did not detail the 1997 SMDL’s contents, but CMS’s initial burden to provide sufficient detail about the basis for a disallowance decision does not require a lengthy exposition of every single reason stated within such a decision.