An Act To Establish Guidelines and Criteria for Audits Conducted by the Department of Health and Human Services
Maine Legislature, Session 122, LD 1951
Committee: Health and Human Services
Sponsors: TARDY, LERMAN, LEWIN, SHIELDS, ROSEN, STRIMLING
Amends: 22 MRSA §41-B, 22 MRSA §42

Legislative Document 
No. 1951 
H.P. 1368 
House of Representatives, January 9,2006 
An Act To Establish Guidelines and Criteria for Audits Conducted 
by the Department of Health and Human Services 
Approved for introduction by a majority of the Legislative Council pursuant to Joint Rule 
203. 
Reference to the Committee on Health and Human Services suggested and ordered printed. 
Presented by Representative TARDY of Newport. 
~171~ 1/1. 71!0£~ 
MILLICENT M. MacFARLAND 
Clerk 
Cosponsored by Representatives: LERMAN of Augusta, LEWIN of Eliot, McCORMICK of 
West Gardiner, SHIELDS of Auburn, Senators: ROSEN of Hancock, STRIMLING of 
Cumberland. 
Printed on recycled paper 
Be it enacted by the People of the State of Maine as follows: 
Sec. 1. 22 MRSA §41-B is enacted to read: 
§41-B. 
Auditing andi).SJ:iy,;il;ing of health and community 
service provider costs 
This section governs the rules of the department and the 
practices of its auditors in interpreting and applying those 
rules with respect to payments of providers under the MaineCare 
program 
and 
payments 
by 
the 
department 
under 
grants 
and 
agreements alldited pursuant to the Maine Uniform Accounting and 
Auditing Practices Act for Community Agencies. 
1. 
Revised 
audit 
interpretations 
to 
be 
applied 
pXQ&pectively. 
Whenever 
the 
department's 
auditors 
revise 
an 
interpretation of a rule, agreement. circular or guideline in a 
manner that results in a negative adjustment of a provider's or 
agency's 
allowable 
costs, 
the 
revised 
interpretation 
may 
be 
applied only to provider or agency fiscal years beginning after 
the date of the examination report or audit report in which the 
provider 
or 
agency 
receives 
notice 
of 
the 
revised 
interpretation. 
For 
the 
fiscal 
year 
to 
which 
the 
report 
containing the revised interpretation applies, and any subseguent 
fiscal 
year 
ending 
prior 
to 
the 
issuancJ; 
of 
the 
revi_sed 
interpretation, 
the Office of Audit for MaineCare 
and Social 
Services, referred to in this section as "the office of aUdit." 
may not make any negative adjustment to allowable costs that 
reflects 
the 
revised 
interpretation. 
For 
purposes 
of 
thi& 
subsection, "revised interpretation" includes an interpretation 
supporting an adjustment that was not made in the prior year, 
when facts existed on which a substantially similar adjustment 
could have been made in the prior year if the same interpretation 
had been applied, even if reports in prior years were silent with 
respect to any such adjustment. 
2. 
Timing of audits. 
Unless otherwise agreed to by the 
~rganization subject to audit. the department shall complet{Llnts 
audit and issue an examination report or audit report no later 
than 12 months following the filing of any cost report, financial 
statement or other schedule that is subject to audit. 
3. 
Appe.il~~J;"9me1i. 
The 
d_epartme~t shall 
allow 
a 
provider 60 days after the provider's receipt of an audit report, 
examination report or other audit determination to seek informal 
review of that determination. 
The department shall allow 60 days 
after its receipt Qf 
a 
final informal 
review decision for 
a 
provider to reguest an appeal hearing for review of that decision. 
Page l-LR2882(1) 
4. 
DetermiJJ,~J:~ion 9~'J;)xdinary," "p,~Lc;essary" or "reasonable" 
~osts. 
In 
making 
findings 
concerning 
whether 
costs 
are 
"ordinary," 
"necessary" 
or 
"reasonable," 
the office of 
alldit 
shall consider any practice, type, guantity, freguency or price 
level of an expenditure to be reasonable, ordinary and necessary 
if the expenditure meets any of the following standards. 
A. 
A substantial number of providers of health care or 
community 
services 
in 
Maine 
incur 
costs 
of 
similar 
magnitude, freguency, guantity or price level to the costs 
under review. 
B. 
The 
expenditure 
1S 
reasonably 
incurred 
to 
produce, 
accomplish, 
facilitate or compensate persons for providing 
an item or service related to the purpose of a program or 
activity for which thft State has contracted or for which the 
State otherwise provides payment. 
~ 
__ ~he expenditure is comparable to one incurred by 
a 
de-l2artment or agency of the State responsible for services 
Q.Ll;>£QgXS\lTIS similar to those to which the finding applies. 
D. 
The expenditure, when considered in combination with all 
amounts expended for the program under review, results in an 
overall cost that is reasonable relative to other providers 
of 
the 
same 
or 
similar 
items 
or 
services, 
taking 
into 
account any special needs of the population served and any 
innovative or specialized services offered by a particular 
provider. 
5. 
Employee co~sation and benefit costs. 
In evaluating 
the reasonableness and allowability of employee wages, salaries 
and benefits, the department shall apply the following criteria. 
A. 
The department may not disallow any employee benefits, 
wa~or salar ies, 
or 
any 
expenditures 
as 
described in 
paragraph 
B, 
if the total 
of 
employee 
salaries, 
wages, 
benefits and expenses described in paragraph B is less than 
QL~l 
__ to tlle 
totQ._.l~os~ __ 9f wages, salar :i,_e..~ beJ!~ef i ~_~!.lcl 
exp-enses described in parq.graph B for employees of the State 
~rformin-9- similar functions. 
This paragraph may not be 
construed to reguire disallowance of greater compensation 
~_Qsts that are otherwise reasonable under applicable facts 
and_~circumstances . 
B. 
The 
department 
shall 
modify 
its 
rules 
governing 
t-iaineCgSJ~ ___ ~mQursement 
and 
reimbursement 
-l2..lJ..Lsuant 
to 
grants, contracts or otherwise for health care providers and 
other agencies providing communi ty services. 
The off ice of 
audi t 
shall 
interpret _--.2~ existing -p-rovisions 
of 
the 
department's 
rules 
to 
allow 
the 
costs 
of 
employee 
information 
publicatiQn.~_ health or first-aid clinics or 
_infirmaries, 
recreational 
activities, 
em~~ counseling 
services and any other ex~nses incurred in accordance with 
the organization's established practice or custom for the 
improvement 
of 
working 
conditions, 
employer-e1!lP1.Qyee 
relations, 
employee 
morale 
and 
employee 
performance, 
j.Jl\:':J .. uding~ithoutc_~UJJ1.i.J~ati_Ql,l_9..11Y._,ill~:i.den~ift~~arcl~~_r 
rewards given to 
employ~es as incentives for recognition of 
performance 
or 
to 
encourage 
or 
foster 
cooperation 
or 
aoducti vi ty. 
6. 
Revi~~thJ;:e.~bolds. 
The ~artment shall, 
by 
ruJ,~ 
establish 
minimum 
dollar 
amounts 
or 
other 
limi t5 
on 
the 
significance or magnitude of adjustments that will be made during 
an audit, in order to avoid imposing undue burdens on providers 
bY-J~y~j.ewing and 
adj].Lstill9-~~~s wLth_QU insignificant impact on 
overall expenses. 
Rules adopted pursuant to this subsection are 
major 
substantive rules 
as defined in Title 
5, 
chapter 
375, 
subchapter 2-A. 
7. 
Traj.ning and technical assistance f0L-.Providers. 
The 
department shall ensure that the office of audit makes available 
a 
regular 
program 
of 
training 
to 
enable 
providers 
to 
have 
complete 
and 
current 
information 
regarding 
the 
process 
of 
auditing 
cost 
repor:ts 
and 
agreements 
and 
the 
substantive 
standards that will be applied in conducting such audits. 
The 
departm~t shall ensure that the office of audit makes available 
to providers, on reguest, knowledgeable members of its staff to 
provide such technical assistance 
a~oviders m~eguire in 
order to achieve compliance '"ith the standards applied by the 
office of audit. 
Sec. 2. 22 MRSA §42. sub-§7. W. as enacted by PL 2003, c. 419, 
§2, is amended to read: 
F. 
By July 1, 2004 the department shall make available on 
its publicly accessible si te on the Internet the decisions 
in all MaineCare provider appeals beginning January 1, 2004, 
including the recommendations of the hearing officer and the 
decision 
of 
the 
commissioner. 
By 
August 
1, 
2006 
the 
department shall make available on the same site all final 
informal 
review 
decisions 
issued 
with 
regard 
to 
audit 
reports or examination reports, 
as well as copies of any 
decisions issued by the department or on appeal from the 
pepartment in anY_9Ppeal filed pursuant to the Maine Uniform 
Accounting and Auditing Practices Act for Community Agencies. 
(1) 
The 
users 
to 
interest. 
site must include a 
obtain 
information 
search feature allowing 
on 
specific 
issues 
of 
(2) 
The site must protect information that is personal 
or confidential. 
The parties to a consent decree or 
settlement 
agreement 
m,~a~y~ __ ~p~r~o~v~i~d~e~ __ ~f~o~r _____ t~h~e 
confidentiality of the decision. 
Sec.3. 22 MRSA §42, sub-§7, 1fI is enacted to read: 
I. 
By January 1, 
2007 all hear ing officers to whom the 
department 
refers appeals 
to 
the 
commissioner 
concerning 
MaineCare payment and cost report audit and review issues 
must be employed and supervised by a person or agency of 
State 
Government 
independent 
of 
the 
department 
and 
not 
subject to the department's supervision or discipline. 
Sec. 4. Rules: effective date. 
The 
Department of Health and 
Human 
Services shall 
amend its rules governing reimbursement, 
contracting, 
grants, 
payments, 
cost 
reports 
and 
audits 
with 
respect to providers of health and community services to ensure 
that all of the requirements of this Act are applied to all 
audits completed on or after the effective date of this Act. 
Unless the law requiring the department to adopt or amend these 
rules indicates otherwise, rules adopted pursuant to this section 
are 
routine 
technical 
rules 
as 
defined in the Maine 
Revised 
Statutes, Title 5, chapter 375, subchapter 2-A. 
SUMMARY 
This bill requires several 
reforms 
and 
revisions of the 
practices of the Department of Health and Human Services, Office 
of Audit for MaineCare and Social Services in order to ensure 
3G 
that providers 
of health care 
and 
other 
community 
services, 
subject to aud_t of their financial statements or their cost 
reports, 
are 
treated 
fairly 
and 
reasonably 
with 
respect 
to 
amounts 
paid 
to 
them 
and 
with 
respect 
to 
any 
changes 
in 
interpretation or policy that might affect amounts to be returned 
to the department retroactively. 
The bill requires changes in 
interpretation to be applied prospectively, bars disallowance of 
compensation costs if they are no greater in aggregate than those 
paid to 
state 
employees 
with 
comparable 
responsibilities 
and 
requires 
industry 
standards 
to 
be 
applied 
when 
determining 
reasonableness of costs. 
To encourage consistency, all informal 
review 
decisions, 
as 
well 
as 
appeal 
decisions, 
must 
be 
published. 
To promote fairness, the office that hears appeals of 
MaineCare payments must be made independent of the department by 
January 1, 2007.