UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF COLUMBIA 

GEORGIA DEPARTMENT OF 

COMMUNITY HEALTH, 

Plaintiff, 

v. Civil Action No. 13-1281 (GK) 

UNITED STATES DEPARTMENT OF 

HEALTH & HUMAN SERVICES, 

et al., 

Defendants. 

MEMORANDUM OPINION 

Plaintiff Georgia Department of Community Health 

("Georgia") brings this suit against Defendants United States 

Department of Health and Human Services ("HHS"), Centers for 

Medicare & Medicaid Services ("CMS"), Kathleen Sebelius, in her 

official capacity as Secretary of HHS, and Marilyn Tavenner, in 

her official capacity as Administrator for CMS (collectively, 

"Defendants."), to recover $90,050,230 that Georgia erroneously 

credited to CMS in 2005 and 2006. 

This matter is before the Court on Cross-Motions for 

Summary Judgment [Dkt. Nos. 13 & 14]. Upon consideration of the 

Motions, Oppositions [ Dkt. Nos. 15 & 16] , Replies [ Dkt. Nos. 18 

& 19], the entire record herein, and for the reasons stated 

below, Plaintiff's Motion for Summary Judgment is granted in 
•· 

part and denied in part and Defendants' Cross-Motion for Summary 

Judgment is granted in part and denied in part. 

I. BACKGROUND 

A. Statutory Background 

1. Medicaid Expenditures 

Title XIX of the Social Security Act ( "SSA") , commonly 

referred to as Medicaid, is a cooperative federal-state program 

that provides medical assistance to low-income families and 

individuals. 42 u.s.c. § 1396 et seq. The program is 

administered by the states and overseen by CMS. See id.; 42 

C.F.R. § 430.0. If certain requirements are met, a state is 

eligible to receive federal funds for a percentage of its 

Medicaid program expenditures. 42 U.S.C. § 1396(a). The bulk of 

a state's Medicaid expenditures consist of payments to medical 

providers for health care services provided to program 

beneficiaries. 42 C.F.R. § 430.0. 

The federal portion of the funds "Federal financial 

participation" ( "FFP") is paid to the states on a quarterly 

basis. See 42 U.S.C. § 1396b(a). Forty-five days before the 

start of each quarter, the state submits a form CMS-37, which 

contains the state's estimated Medicaid funding expenses for the 

upcoming quarter. 42 C.F.R. 430.30(b). The federal government, 

through CNS, provides the state with a "grant award," which is 

-2-
similar to a line of credit. The grant award authorizes the 

state to draw federal funds as needed over the course of the 

quarter to pay the federal share of the state's Medicaid 

disbursements. Id. at 430.30(d). 

Within 30 days after the end of the quarter, the state must 

submit to CMS a Quarterly Statement of Expenditures ("QSE"), 

also known as a form CMS-64. Id. at§ 430.30(c)(l). Unlike the 

CMS-37, which contains predicted expenditures, the QSE is an 

"accounting of actual recorded expenditures" for the quarter. 

Id. at § 430.30 (c) (2). The QSE details and reconciles how the 

federal grant award monies were spent. 

In addition to the most recent quarter's expenditures, the 

QSE contains several entries for "increasing" or "decreasing" 

adjustments to claims from prior quarters. Such adjustments are 

necessary because, for a number of reasons, a state is not 

always able to present a complete, accurate, or o-therwise final 

accounting within 30-days of the end of the most recent quarter. 

In such circumstances, a state uses a later quarter's QSE to 

adjust retroactively, either up or down, expenditure amounts 

reported in the earlier quarter's QSE or the federal share 

claimed with respect to those expenditures. 42 U.S.C. 1396b(d). 

-3-
2. Two-year Limitations Period 

Section 1132 of the SSA (codified at 42 U.S. C. § 1320b2 (a) ) provides for a two-year window during which states are 

permitted to file claims for expenditures. The Secretary of HHS 

has also issued implementing Regulations. See 45 C.F.R. §§ 95.1-

.34. They state that "[CMS] will pay a State for a State agency 

expenditure . only if the State files a claim with [CMS] for 

that expenditure within 2 years after the calendar quarter in 

which the State agency made the expenditure." Id. § 95.7. Claims 

made for expenditures after the two-year period has expired are 

"disallowed" and not paid. 

There are exceptions to the two-year period for courtordered retroactive payments, audit exceptions, and adjustments 

to prior year costs, 42 U.S.C. § 1320b-2 (a), as well as "[a]ny 

claim for which the Secretary decides there was good cause." 45 

C.F.R. § 95.19. "[N]eglect or administrative inadequacy" on the 

part of a state does not constitute good cause. 45 C.F.R. § 

95.22. 

3. Overpayments 

An "overpayment" is defined as "the amount paid by a 

Medicaid agency to a provider which is in excess of the amount 

that is allowable for services furnished and which is 

required to be refunded " 42 C.F.R. § 433.304. Stated 

-4-
I 

i 

differently, an overpayment is a payment by a state to a medical 

provider that is impermissible and therefore not eligible for 

FFP under the state's Medicaid plan. 

When a state has claimed FFP for a medical provider payment 

that is later determined to constitute an overpayment, the state 

must return to CMS the federal share of the amount overpaid. The 

state has sixty days 1 in which to return the federal share of the 

overpayment to CMS, regardless of whether the state has 

recovered the overpayment from the medical provider. See 42 

C. F. R. 433.312. The return of an overpayment is effectuated by 

listing the credit in the QSE (line lO.C). See 42 C.F.R. § 

433.320. This is considered a "decreasing adjustment." 

If, after a state has credited CMS with the federal share 

of an overpayment, that overpayment is later adjusted downward, 

the state may reclaim the amount of the downward adjustment on 

the next QSE. 42 C.F.R. § 433.320(c). In other words, if the 

state later realizes that the amount it overpaid a medical 

provider is less than it previously thought, and that it 

therefore over-credited CMS, it may reclaim the appropriate 

portion of the credit. The two-year filing limit does not apply 

1 When the events at issue in this case occurred, the period of 

time to return the federal share to CMS was 60 days from the 

date of discovery of the overpayment. The statute has since been 

modified so that the period is now one year. 

-5-
to downward adjustments of overpayments, as the "downward 

adjustment is not considered a retroactive claim but rather a 

reclaiming of costs previously claimed." Id. 

B. Factual Background 

The parties have no disagreement about the facts that led 

to Georgia's inadvertent credit of $90,050,230 to CMS and CMS's 

subsequent refusal to refund the money. In 2003, Georgia 

launched a new Medicaid Management Information System ("MMIS") 

to process claims submitted by providers. Georgia Dep't of Cmty. 

Health, HHS Departmental Appeals Board ("DAB" or "the Board") 

No. 2521, 5-6 (Jun. 28, 2013) [hereinafter DAB No. 2521]. The 

new system suffered from severe problems that resulted in 

significant delays in paying providers. Georgia received 

numerous complaints from providers that they could not continue 

to operate without payment. Id. 

In response to this crisis and to ensure the availability 

of medical services for Georgia's Medicaid recipients, Georgia 

proposed, and CMS agreed, that until the MMIS issues were 

resolved, Georgia could make "advance" payments to providers 

prior to the submission and processing of payment claims for the 

services. Id. at 6. It was understood that the advance payments 

would later be matched and reconciled with actual payment claims 

once MMIS could process them. Between April 1, 2003, and 

-6-
June 30, 2005, Georgia made approximately $2 billion in advance 

payments to providers under this arrangement. Id. 

For its own internal accounting purposes, Georgia 

classified the advance payments as "provider receivables" (i.e. 

money to be recouped from Medicaid providers). For purposes of 

the QSE, Georgia reported the advance payments as currentquarter expenditures. DAB No. 2521 at 6; Georgia Mot. at 7. 

Advance payments that were not matched and reconciled with 

provider claims within 60 days were treated as overpayments. 

Just as with standard overpayments, Georgia had to refund the 

federal share of the advance payments to CMS after 60 days. The 

refund to CMS was listed as a decreasing adjustment on line 10.C 

of the QSE (along with any other overpayments unrelated to 

Georgia's MMIS problems). DAB No. 2521 at 6. 

If, after Georgia had refunded the federal share to CMS, 

the advance payments were reconciled with medical provider 

claims, Georgia would report the reconciled amounts as "other" 

expenditures on its current-quarter QSE. Id. This procedure 

allowed Georgia to receive payment for the federal share of the 

reconciled expenditures, which it had previously and erroneously 

refunded back to CMS. This procedure was also consistent with 

how Georgia routinely reported reconciliations of the routine 

60-day provider receivables. Dubberly Decl. ~ 8. 

-7-
In 2005, Georgia decided to include the federal share of 

its provider receivables balance $45,025,115.09 as a 

liability on its financial statement for State fiscal year 

("SFY") 2005. DAB No. 2521 at 6. Of this amount, $37,402,375.33 

represented the federal share of provider receivables that had 

already been refunded to CMS (as required) as decreasing 

adjustments on QSEs submitted between 1989 and June 2005. The 

majority of the $37.4 million related to refunds to CMS of 

advance payments made between 2003 and 2005 in response to 

Georgia's MMI S problems. Id. The remaining $7,622,739.76 

represented provider receivables that were less than 60 days old 

and for which there was not yet any obligation to refund the 

federal share. Id. at 7. 

In the process of preparing its SFY 2005 statements, 

Georgia inadvertently included the $45,025,115.09 

("$45 million") provider receivables balance in its decreasing 

adjustment on the QSE for the quarter ended September 30, 2005 

("September 2005 QSE"). Id. This mistake had the effect of recrediting to CMS $37.4 million that had been previously credited 

from 1989 to June 2005. It was also premature to credit the $7.6 

-8-
million to CMS, as the receivables were less than 60 days old. 2 

Georgia Mot. at 9. 

While preparing its financial statements for SFY 2006, 

Georgia again inadvertently credited the $45 million to CMS, 

this time on the QSE for the quarter ended June 30, 2006 ("June 

2006 QSE"). Georgia Mot. at 9; DAB No. 2521 at 7-8. 

Combined, Georgia erroneously credited CMS $90,050,230 

between 2005 and 2006 ("$90 million"). Georgia did not realize 

its errors until 2008, when issues identified by its external 

auditor triggered an in-depth internal review of its financial 

records and prior QSEs. DAB No. 2521 at 8. It was during this 

review that Georgia discovered the two $45 million credits it 

had made to CMS. 

C. Procedural Background 

Once Georgia discovered the errors, it attempted to reclaim 

the $90 million by including the amount on the "other" 

expenditures line of the QSE for the quarter ended June 30, 2009 

("June 2009 QSE"). Id. Georgia included a "footnote" on the 

first page of the QSE stating that a "significant adjustment of 

2 To the extent those receivables remained outstanding after 60 

days, they would have been credited on later QSEs as required; 

if they were reconciled, Georgia would not have had to repay the 

federal share. Georgia Mot. at 9. 

-9-
approximately $ 90M is being claimed this quarter. The basis is 

as an adjustment to 60 day receivables." AR 410 [Dkt. No. 20-1]. 

On December 11, 2009, CMS deferred3 Georgia's claim for the 

$90 million, asserting that Georgia's request was untimely. AR 

416-17. Georgia responded to the deferral with two separate 

letters, arguing why the two-year limitation was not applicable 

in this circumstance. AR 420-28. 

On June 30, 2011, CMS notified Georgia that it was 

disallowing the $90 million adjustment. DAB No. 2521 at 8. CMS 

acknowledged that Georgia was attempting to reverse the two 

inadvertent $45 million payments, and did not dispute that they 

were erroneous, but concluded that the request should be 

disallowed "because it was submitted more than two years after 

the quarter in which 'the original State payment was made." Id. 

(citing June 30, 2011 Letter from CMS to Georgia, AR 431-32). 

Georgia appealed CMS' s decision to the Board. After the 

parties submitted their briefs, the Board heard oral argument, 

and on February 8, 2013, issued a "Preliminary Analysis" 

rejecting the arguments of both parties and setting forth its 

view of the case. DAB No. 2521 at 9. Both parties then submitted 

3 CMS may issue a "deferral," or temporary withholding of FFP, if 

the CMS Administrator "questions [the] allowability [of a claim] 

and needs additional information to resolve the question." 42 

C.F.R. § 430.40. 

-10-
written comments to the Preliminary Analysis. Id. On June 28, 

2 013, the Board sustained the entire $90 million disallowance. 

See generally DAB No. 2521. 

Georgia filed its Complaint with the Court on August 23, 

2013 [Dkt. No. 1]. It then filed its Motion for Summary Judgment 

("Georgia's Mot.") [Dkt. No. 13] on March 4, 2014. Defendants 

filed their Cross-Motion for Summary Judgment and Combined 

Opposition to Georgia's Motion ("Defs.' Mot.") [Dkt. No. 14] on 

May 5, 2014. On June 4, 2014, Georgia filed' its Combined 

Opposition to Defendants' Cross-Motion and Reply in Support of 

Plaintiff's Motion ("Georgia's Reply") [ Dkt. No. 17] . On July 7, 

2014, Defendants filed their Reply in Support of Defendants' 

Cross-Motion ("Defs.' Reply") [Dkt. No. 19]. 

II. STANDARD OF REVIEW 

The Administrative Procedure Act ( "APA") requires a court 

to hold an agency action unlawful if it is "arbitrary, 

capricious, an abuse of discretion, or otherwise not in 

accordan6e with law." 5 U.S.C. § 706(2). The arbitrary and 

capricious standard of the APA is a narrow standard of review. 

Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 

416 (1971). 

It is well established in our Circuit that the "court's 

review is highly deferential" and "we are 'not to 

-11-
substitute [our] judgment for that of the agency' but must 

'consider whether the decision was based on a consideration of 

the relevant factors and whether there has been a clear error of 

judgment.'" Bloch v. Powell, 348 F.3d 1060, 1070 (D.C. Cir. 

2003) (quoting S. Co. Servs., Inc. v. FCC, 313 F.3d 574, 579-80 

(D.C. Cir. 2002)); see also United States v. Paddack, 825 F.2d 

504, 514 (D.C. Cir. 1987). However, this deferential standard 

cannot permit courts "merely to rubber stamp agency actions," 

Natural Res. Def. Council v. Daley, 209 F.3d 747, 755 (D.C. Cir. 

2000), nor be used to shield the agency's decision from 

undergoing a "thorough, probing, in-depth review." Midtec Paper 

Corp. v. United States, 857 F.2d 1487, 1499 (D.C. Cir. 1988) 

(internal citations and quotations omitted). 

An agency satisfies the arbitrary and capricious standard 

if it "examine[s] the _relevant data and articulate[s] a 

satisfactory explanation for its action including a 'rational 

connection between the facts found and the choice made.'" Motor 

Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 

29, 43 (1983) (quoting Burlington Truck Lines v. United States, 

371 U.S. 156, 168 (1962)); Lichoulas ,v. Fed. Energy Regulatory 

Comm'n, 606 F.3d 769, 775 (D.C. Cir. 2010). Finally, courts "do 

not defer to [an] agency's conclusory or unsupported 

-12-
suppositions." McDonnell Douglas Corp. v. U.S. Dep't of the Air 

Force, 375 F.3d 1182, 1186-87 (D.C. Cir. 2004). 

Summary judgment will be granted when there is no genuine 

issue as to any material fact. See Fed. R. Civ. P. 56(c). 

Because this case involves a challenge to a final agency 

decision, the Court's review on summary judgment is limited to 

the Administrative Record. Holy Land Found. for Relief and Dev. 

v. Ashcroft, 333 F.3d 156, 160 (D.C. Cir. 2003) (citing Camp v. 

Pitts, 411 U.S. 138, 142 (1973)); Richards v. INS, 554 F.2d 

1173, 1177 (D.C. Cir. 1977) ("Summary judgment is an appropriate 

procedure for resolving a challenge to a federal agency's 

administrative decision when review is based upon the 

administrative record."). 

III. ANALYSIS 

A. The Board Decision 

1. The $90 Million Request Is a Claim Subject to the 

Claiming Limit 

Under SSA § 1132, states must file claims for expenditures 

with CMS within a two-year period. See supra, Section I.A.2; 42 

U.S.C. § 1320b-2(a); see also 45 C.F.R. § 95.7. The Regulations 

define a "claim" as a "request for Federal financial 

participation," 45 C.F.R. § 95.4, where "Federal financial 

participation" is "the Federal government's share of an 

-13-
expenditure made by a State agency." Id. Therefore, a claim is a 

request for the Federal government's share of an expenditure. 

"Expenditure" is not explicitly defined in the Regulations. 

Georgia argues that this two-year limit is inapplicable 

because its request foT $90 million is neither a "claim" nor a 

request made "with respect to an expenditure." Georgia Mot. 

at 15. Instead, Georgia describes its request as one for the 

recovery of state funds inadvertently credited to CMS. If CMS 

were to pay it $90 million, Georgia argues, it would not be on 

account of any "expenditures" by the State, but in order to 

remedy a bookkeeping error. Id. at 15-16. 

In further support of its argument, Georgia notes that it 

had already timely claimed and received FFP with respect to the 

1988-2005 expenditures underlying the erroneous credits. Because 

it had already been paid for the expenditures, Georgia states 

that it was not seeking reimbursement for those expenditures, 

only repayment of the inadvertent re-crediting to CMS. 

The Board disagreed with Georgia, finding the $90 million 

request to be a claim and therefore subject to the two-year 

limitation. The Board stated that the two-year limitation 

"expressly covers 'any' request for federal funding 'with 

respect to' a state's expenditures." DAB No. 2521 at 10. 

Accordingly, under the Board's reasoning, if Georgia's $90 

-14-
•. 

million request is for federal 

expenditures, it necessarily falls 

funding 

within 

for 

the 

Medicaid 

two-year 

limitation statute. 

The Board reasoned that "[a]mounts reported as expenditures 

on the QSE are those which a state asks to be charged against 

the FFP award" for that quarter. Id. (citing 42 C.F.R. § 

430.30 (c)- (d); State Medicaid Manual § 2500 (A) (1). The Board 

found that Georgia, by reporting the $90 million request on a 

QSE, was representing to CMS that it was requesting FFP. Because 

FFP is "available only for expenditures on medical assistance or 

Medicaid program administration," the Board concluded that any 

request for FFP · must relate to expenditures. Therefore, 

Georgia's FFP request was a claim and was made with respect to 

expenditures. DAB No. 2521 at 10 (citing SSA § 1903 (a) (1)- (2); 

42 C.F.R. § 435.1000 et seq.; 45 C.F.R. § 95.13(d)). 

The Board's conclusion is bolstered by the fact that 

Georgia supported its request for $90 million with a schedule 

showing, as a prior period adjustment, the $90 million as 

expenditures for inpatient hospital services. AR 528. 

Given that the Board's interpretation of the relevant 

statutes is reasonable and rationally connected to the facts, 

Georgia has failed to demonstrate that the Board acted 

-15-
arbitrarily and capriciously when it found the $90 million 

request to be a claim with respect to an expenditure. 

2. The $90 Million Request Is Outside the Two-Year 

Claiming Limit 

Having determined that Georgia's $90 million request was a 

claim with respect to expenditures, and therefore subject to the 

two-year limit in 42 U.S.C. § 1320b-2, the Board then evaluated 

whether the claim was made within two years of the expenditures. 

In order to do so, it needed to identify what the expenditures 

were that trigg~red application of the two-year limitation. 

As noted earlier, "expenditure" is not specifically defined 

in the SSA. See generally 42 U.S.C. § 1396 et seq. In this 

context, the Board defined "expenditure" to mean "a Medicaid 

payment by the state to a health care provider." DAB No. 2521 at 

11 (citing 45 C.F.R. 95.13(b)). 

To identify the expenditures, the Board reviewed the 

history of the payments at issue. It explained that Georgia had 

timely requested and received FFP for the provider payments it 

made between 1988 and 2005. A large percentage of those payments 

were considered to be overpayments, for which Georgia had also 

credited back to CMS the federal share on a timely basis. 

According to the Board, when Georgia made the two $45 million 

credits, it was merely adjusting those prior claims for FFP. The 

-16-
$45 million credits were not "expenditures" themselves. 

Similarly, the Board stated that when Georgia· made its $90 

million claim on the June 2009 QSE, it "was the last in a series 

of prior-period adjustments concerning Medicaid provider 

payments (expenditures)" made between 1988 and 2005. DAB No. 

2521 at 13. 

Having characterized the mistaken payments and the request 

for the $90 million refund as prior-period adjustments, the 

Board concluded that the "expenditures" in question were the 

provider payments made between 1988 and 2005. Viewing the 

expenditures as having taken place between 1988 and 2005, the 

Board concluded that Georgia's claim for $90 million on the June 

2009 QSE was long past the two-year deadline and untimely. 

Georgia does not directly contest the Board's determination 

that the "expenditures" at issue were the underlying payments to 

the medical providers, but instead reiterates its arguments for 

why its request was not a claim. Georgia also does not suggest 

an alternative 

expenditures 

limitations. 

are 

definition or description for 

that triggered the two-year 

what 

statute 

the 

of 

Georgia does note that the Board's conclusion that the 

expenditures took place between 1988 and 2005 creates unworkable 

result. Georgia points out that because the Board concluded the 

-17-
expenditures took place between 1988 and 2005, the two-year 

statutes of limitations began running between 1988 and 2005. 

Therefore, even if Georgia had immediately realized its $45 

million mistake on the September 2005 QSE and tried to recover 

the $45 million on the next QSE (or even the very next day), it 

would have already been time barred for many of the 

expenditures. 

Defendant's only response is that CMS may allow a state to 

revise a QSE to correct an error if the state discovers the 

error "within a short time" after submitting the QSE. Defs.' 

Mot. at 22. Defendants do not cite any authority for this 

position or define what constitutes a "short time." It appears 

that, under the Board's interpretation of "expenditure", a 

state's ability to recover erroneous credits to CMS is left 

completely to the discretion of CMS if the errors are in any way 

derivative of provider payments more than two years old. 

Though the Court urges CMS to issue guidance to the states 

on 0hen it will permit them to revise QSEs, so as to avoid being 

immediately time-barred from correcting their errors, the Court 

finds the Board's interpretation of the statutes and regulations 

to be reasonable. The Board did not act arbitrarily or 

capriciously when it found the expenditures underlying Georgia's 

request for $90 million to be the 1988-2005 medical provider 

-18~ 
expenditures. It was also reasonable when it concluded that 

Georgia's $90 million request was a claim for FFP outside of the 

statutorily required two-year period and affirmed CMS's 

disallowance. 

3. The $90 Million Request Is Not a Downward 

Adjustment of Overpayments 

While Georgia disputes that its $90 million request 

constitutes a claim, it argues in the alternative that, should 

the request be found to constitute a claim, then the request was 

a downward adjustment to prior overpayment credits to CMS and 

therefore not subject to the two-year limitation. 

As explained above in Section I. A. 3, if an overpayment is 

made to a Medicaid provider, the state must refund the federal 

share of the amount overpaid to CMS within a specified period of 

time. Section 433.320(c) provides that if, after the state has 

credited the federal share to CMS, the overpayment amount is 

adjusted downward, then the state may reclaim the amount of the 

downward adjustment. For example, if it is determined that a 

provider was overpaid by $100, and the federal medical 

assistance percentage for the state is 62%, the state must 

refund $62 to CMS, regardless of whether it has recouped the 

$100 from the provider. If it is later determined that the 

provider was only overpaid by $75, the $100 overpayment would be 

-19-
adjusted downward and the state may reclaim the relevant federal 

share of the $25 downward adjustment (62%, or $15.50). 

Such reclaimings of downward adjustments are not subject to 

the two-year filing limit. 42 C.F.R. § 433.320 (c). The 

regulation further states that the downward adjustment "is 

allowed only if it is properly based on the approved State plan, 

Federal law and regulations governing Medicaid, and the appeals 

resolution processes specified in State administrative policies 

and procedures." Id. 

The bulk of Georgia's erroneous $45 million credits 

represented the federal share of the cumulative total of 

provider receivables (overpayments) going back to 1988 that had 

been outstanding for over 60 days, which Georgia had already 

refunded back to CMS. Georgia argues that the $45 million 

credits were "upward adjustments" to the refund amount due to 

the federal government, and that the $90 million request was a 

"downward adjustment to those same previously credited 

overpayment amounts." DAB No. 2521 at 17 (quoting Feb. 27, 2013 

Comments of Ga. Dept. of Cty. Health on Prelim. Analysis, 8) 

(emphasis omitted) . 

. The Board rejected this argument on several grounds. The 

first ground was that Georgia did not classify the credits as 

overpayment refunds on the QSEs. Id. Given that both parties 

-20-
acknowledge that the $45 million credits were inadvertent, 

limited weight should be given to their classification on the 

QSE when determining the nature of the credits. 

The Board's second, more persuasive, ground is that there 

was no "downward adjustment" (or reduction) to the amount of· 

provider overpayments. Id. The Board reasonably defined a 

"downward adjustment" as "a finding or determination by a state 

that a provider is entitled to receive a Medicaid payment (or a 

portion of a Medicaid payment) that the state earlier identified 

as improper, excessive, or otherwise unallowable under the state 

plan or federal requirements." Id. In other words, because more 

of the provider payment is found to be permissible, the amount 

of the impermissible overpayment is reduced, or adjusted 

downward. 

Although Georgia's $90 million request relates generally to 

overpayments (specifically, erroneously re-credi ting refunds of 

overpayments) , it is not a result of downward adjustments. The 

Board found no evidence that Georgia determined that any of the 

overpayments to providers, which were previously refunded to 

CMS, "were in fact allowable under the state plan and federal 

requirements." Id. at 18. That is to say, the amounts determined 

to have been overpayments have not changed, and therefore there 

is no downward adjustment. 

-21-
Section 433.320(c) addresses disputes to overpayment 

determinations, the resolution of which may take longer than two 

years, and provides an exception to the two-year limit in 

circumstances where the overpayment amount is adjusted downward. 

The Court agrees with the Board that there is nothing to 

indicate that the two-year limit exception in section 

433. 320 (c) (2) was intended to be so expansive as to include 

every transaction that relates to overpayments. The Board 

correctly held that the two-year exception only applies to 

downward adjustments, as defined as a reclaiming of refunded 

amounts due to a determination that the overpayment itself was 

reduced. Georgia's attempt to reclaim what it overpaid to CMS 

did not involve a reduction in overpayments to medical 

providers. Therefore, there was no "downward adjustment" of 

overpayments as defined by § 433.320. 

The Board's finding that Georgia's request was not a 

downward adjustment and therefore not exempt from the two-year 

filing was not arbitrary, capricious, or an abuse of discretion. 

-22-
B. Equitable Claims 

In addition to its statutory claim, Georgia makes equitable 

claims for money had and received and unjust enrichment. While 

Georgia asked the Board to consider equitable principles when 

interpreting the two-year limit, it brought no equitable claims 

before the Board. Therefore, the Court evaluates Georgia's 

equitable claims de novo. 

1. Adequate Legal Remedy 

Before the Court may consider equitable remedies, Georgia 

must show that it did not have an adequate remedy at law. "It is 

a basic doctrine of equality jurisprudence that courts of equity 

should not act 

remedy at law 

when 'the moving party has an adequate 

. " Morales v. Trans World Airlines, Inc., 

504 U.S. 374, 381 (1992). Defendants argue that the statute and 

its Regulations provide an adequate remedy at law, and 

"therefore no resort to equitable remedies is necessary." CMS 

Mot. at 3. 

The mere existence of a remedy at law is not sufficient to 

warrant denial of equitable relief. See Council of & for the 

Blind of Delaware Cnty. Valley, Inc. v. Regan, 709 F.2d 1521, 

1550 n.76 (D.C. Cir. 1983); Interstate Cigar Co. v. United 

States, 928 F.2d 221, 223 (7th Cir. 1991). The legal remedy, 

both in respect to the final relief and the mode of obtaining 

-23-
it, must be "as efficient as the remedy which equity would 

afford under the same circumstances." Regan, 709 F. 2d at 1550, 

n.76 (citing Gormley v. Clark, 134 U.S. 338, 349 (1890)). 

Therefore, the Court must evaluate whether Georgia's legal 

remedy in this situation is adequate. 

The Board's interpretation of the facts and regulations 

renders any attempt by Georgia to recover a portion of the 

erroneous credits time-barred the moment it made the mistaken 

credits. Under the Board's interpretation, requests to recover 

erroneous credits to CMS are prior-period adjustments and are 

evaluated for purposes of the two-year limitation based on the 

underlying expenditure. Therefore, any erroneous credits that 

relate to expenditures that occurred more than two years prior 

are time-barred the moment the erroneous credit is made. 

Defendants counter that simply because relief is timebarred does not make a remedy inadequate. Defs.' Mot.· at 31. 

The Court agrees as a general matter that equitable remedies are 

not meant to be used as an end-run around statutes of 

limitation. However, in the case at hand, there was literally no 

time window in which Georgia could have sought to recover a 

portion of the erroneous credits. For another portion of the 

credits, the limitations period was, in practice, less than the 

two years contemplated by the statute. 

-24-
When a claim is effectively time-barred the moment it 

arises, it cannot be said that the legal remedy is "adequate to 

meet the ends of justice." Regan, 709 F.2d 1550, n. 76 (internal 

citation and quotation omitted). Similarly, there is no adequate 

remedy at law when the two-year period provided by Congress is 

truncated, as it was for many of the expenditures that had taken 

place less than two years before the mistaken credits were made. 

Therefore, the Court finds that there is no adequate remedy at 

law available for Georgia that prevents 

considering equitable remedies. 

2. Unjust Enrichment 

the Court from 

Georgia's claims for unjust enrichment and money had and 

received rely on the same principles of restitution, namely that 

a "person who is unjustly enriched at the expense of another is 

subject to liability in restitution." Restatement (Third) of 

Restitution and Unjust Enrichment § 1. Though the remedies are 

similar and the parties conflate their arguments for each at 

times, they will be addressed separately. 

Recovery under a theory of unjust enrichment requires a 

showing that "a person retains a benefit . which in justice 

and equity belongs to another." United States ex rel. Modern 

Elec., Inc. v. Ideal Elec. Sec. Co., 81 F. 3d 2 4 0 (D.C. Cir. 

1996). Plaintiff's claim fits squarely within this definition. 

-25-
Measured against many metrics, Georgia is not considered a 

wealthy state. Approximately 18.2% of Georgia's population lives 

in poverty, giving it the undesirable distinction of having the 

eighth highest poverty level in the 50 United States. See U.S. 

Census Bureau 2009-2013 American Community Survey 5-Year 

Estimates [hereinafter "ACS Estimates"] . The estimated median 

household income for the state is $49,179. With regard to 

personal income per capita, Georgia again has the undesirable 

distinction of ranking 40th out of all 50 states. Id.; Bureau of 

Economic Analysis, State Personal Income 2013 (Mar. 25, 2014). 

It was projected that Georgia would spend $2.85 billion on 

Medicaid and PeachCare 4 in 2017, or approximately 15.57% of the 

state's revenue. See DCH Presentation to 2013 Joint Study 

Committee on Medicaid Reform, 11 (Aug. 28, 2013) [hereinafter 

"DCH Presentation"]. 

The loss of $90 million in credits due to the mistakes of 

one Georgia employee, 5 Georgia Mot. at 14-15, will harm hundreds 

of thousands of Georgia's most vulnerable citizens. The 

population of the State of Georgia i~ roughly 9.8 million, and 

approximately 1.89 million of those people were enrolled in 

4 PeachCare is Georgia's Children's Health Insurance Program. 

5 Georgia refers several times to "a State employee" and does 

not mention the involvement of any other employees. 

-26-
Medicaid in 2013. See ACS Estimates; DCH Presentation at 11. 

Put in perspective, close to 20% of Georgia's population is 

enrolled in Medicaid. These are the people who will be hurt the 

most by Georgia's administrative errors and the subsequent 

crediting of $90 million of Georgia's Medicaid credits to CMS. 

It is Georgia's poor, elderly, disabled, and pregnant 

populations that will suffer the most should these 

administrative errors stand uncorrected. 

Defendants do not claim that CMS is entitled to the $90 

million in credits, but rather that Georgia is precluded from 

recovering the credits. 

Defendants argue that Georgia's negligence in failing to 

timely file its claim for the return of the $90 million in 

credits is relevant to the evaluation of its unjust enrichment 

claim because the "good cause" exception to the two-year filing 

limit explicitly states that neglect and administrative 

inadequacies do not constitute good cause. See Defs.' Mot. 

at 34. 

First, the Court has already determined that the relevant 

statutes and regulations do not provide an adequate remedy at 

law, and therefore the Court's unjust enrichment analysis is not 

bound by their contours, including the good cause exception. 

-27-
•· 

Second, Defendants' argument focuses on the incompetence of 

Georgia in failing to file for the return of the $90 million in 

credits within the two year statute of limitations. However, as 

discussed previously, under the Board's interpretation, the 

statute of limitations had already run for a portion of those 

expenditures the moment Georgia established each of the 

inadvertent $45 million credits. 

While it is not disputed that Georgia was at fault in 

making the two $45 million payments in the first place, that 

fact is of limited relevance. In cases where a benefit is 

conferred by mistake, "the fact that the claimant may have acted 

negligently in making a mistaken payment is normally irrelevant 

to the [unjust enrichment] claim." Restatement (Third) of 

Restitution and Unjust Enrichment § 6 cmt. a (2011). 

Defendants contend that Georgia's claim that the erroneous 

credits "resulted in unjust enrichment fails because CMS has not 

been any more unjustly enriched than it would have been had 

Georgia failed to claim the $90 million in expenditures within 

the two-year limit." Defs.' Mot. at 32-33. The two situations 

are totally different and therefore not comparable. 

In the case of time-barred reimbursements for expenditures, 

a state would have had to have failed to make any timely filing 

for the expenditures. Here, Georgia did timely file for 

-28-
reimbursement for all the expenditures, only to, years later, 

inadvertently refund to CMS a portion of the reimbursements. In 

addition, the statutes and regulations clearly provide for how a 

state can and must seek reimbursement for expenditures. 

Significantly, there is no comparable guidance for recovering 

mistaken payments. 

The foundation of Georgia's unjust enrichment claim is that 

the credits are in essence the equivalent of money rightfully 

belonging to the State and should never have been given to CMS. 

While it is not disputed that Georgia is in its current position 

as a result of the very egregious errors it made, that does not 

change the fact that CMS is now in possession of $90 million of 

Georgia's credits to which it is not entitled. 

While the Court does not lose sight of the fact that 

Georgia's predicament is one of its own making, it also bears in 

mind the distressing financial environment Georgia Medicaid 

faced that led to the $90 million in erroneous credits. The bulk 

of the $90 million was the result of Georgia making advance 

payments to its providers in 2003-2005 who were threatening to 

stop treating their Medicaid patients unless they were paid. 

Moreover, with CMS's knowledge, and its approval, Georgia began 

making advance payments to Medicaid providers (a practice not 

normally permitted). DAB No. 2521 at 6. 

-29-

This "required complex 
reconciliation of advance payments to providers with actual 

claims" and greatly inflated Georgia's provider receivables. 

Georgia Reply at 18. 

In this uncharted terri tory, Georgia was trying to comply. 

with CMS' s provider overpayment regulations, as well as 

accurately represent the situation in the State's internal 

financial statements. Id. 

Taking into account all these considerations, the Court 

concludes that the balance of equities weighs in favor of 

Georgia and that Defendants have been unjustly enriched by 

Georgia's crediting of $90 million to CMS. CMS does not even 

claim, nor has it shown, that the $90 million in credits 

rightfully belongs to it. While the Court recognizes the 

importance of timeliness and CMS' s ability to plan its budget, 

as well as Georgia's role in causing the mistake, the reality is 

that the credits are Georgia's and the United States Government 

would be unjustly enriched if permitted to keep them. Georgia's 

ineptitude in making errors and delay in discovering them is 

confounding, but does not justify permitting the federal 

government keeping the $90 million in credits to the detriment 

of Georgia's 1.89 million Medicaid recipients. 

-30-
Because Georgia prevails . on its claim for unjust 

enrichment, the Court need not address its second claim of money 

had and received. 

IV. CONCLUSION 

For all of the foregoing reasons, Georgia's Motion shall be 

granted and Defendants' Cross Motion shall be denied. An Order 

shall accompany this Memorandum Opinion. 

February 10, 2015 

Gladys Ke sler • 

United States District Judge 

Copies via ECF to all counsel of record 

-31-