Opinion ID: 684140
Heading Depth: 2
Heading Rank: 1

Heading: Change in Rate-Setting Methods and Standards.

Text: 14 Oklahoma argues that it set its inflation factor in the same way for three years in a row, and therefore SPA 89-18 made no change in methods and standards. See Petitioner's Br. at 5, 6, 16; Petitioner's Reply Br. at 8. But the Administrator found that the inflation adjustment described in SPA 89-18 was a change in amount, the methodology for which was not described in either SPA 89-18 or the state plan. R. at 6. Therefore, he said, the new inflation factor altered the equation used to calculate payment rates and constituted a change in the methods or standards for setting rates. Id. 15 The Administrator relied on Missouri Dept. of Social Servs. v. Sullivan, 957 F.2d 542, 544 (8th Cir.1992): When an unexplained inflation adjustment operates as a sort of black box, HCFA may reasonably view the new adjustment as an alteration of [the state's] methodology, not as new data plugged into an unchanged equation. Missouri Dept., 957 F.2d at 544. Oklahoma does not quarrel with this principle, but rather attempts to distinguish its circumstances from those in Missouri Dept. The State argues that the 5.9 percent inflation adjustment in SPA 89-18 is not an unexplained number, because the methodology underlying it had previously been described in SPA 88-3. The description to which the State points in SPA 88-3 is identical to that contained in SPA 87-13 and SPA 89-18. It states briefly that the inflation adjustment was [b]ased upon a review of Oklahoma cost report factors as reflected in the two most recently submitted cost reports. 4 We must review, then, the Administrator's implicit finding that this language did not constitute a description of methods or standards. 16 The applicable statute, 42 U.S.C. Sec. 1396a(a)(13)(A), refers to methods and standards for determining reimbursement rates, but neither the statute nor HCFA regulations define the two terms. HCFA has required by rule, though, that a state plan specify comprehensively the methods and standards used by the agency to set payment rates in a manner consistent with Sec. 430.10 of this chapter. 42 C.F.R. Sec. 447.252(b) (1993). A plan must be comprehensive and contain all information necessary for HCFA to determine whether the plan can be approved to serve as a basis for Federal financial participation (FFP) in the State program. 42 C.F.R. Sec. 430.10 (1993). 17 In making the finding that no methodology was set forth in SPA 89-18 or the state plan, the Administrator implicitly interpreted the regulations as requiring that a comprehensive description contain something more than the single sentence in question, which does not specify what cost report factors were used, how they were used, or whether they were the only factors considered. This interpretation is not plainly erroneous. The plain meaning of the term 'specify comprehensively' implies both some degree of detail and some sense of thoroughness or completeness in the description of the methods and standards used to set the rates. Oklahoma Nursing Home Ass'n v. Demps, 816 F.Supp. 688, 698 (W.D.Okla.1992), appeal dismissed, 9 F.3d 117 (1993), vacated by district court order March 3, 1994. 5 18 Substantial evidence supports the finding that neither SPA 89-18 nor the state plan contained any legally sufficient description of the methods and standards used to derive the 5.9 percent inflation factor. The State's own post hoc description of its methodology, submitted during the administrative appeal, demonstrates the incompleteness of the one-sentence description included in the various plan amendment transmittals. The later, more comprehensive description shows that the cost report numbers were not the only data considered in the rate-setting process; the Division of Medical Services also considered unspecified other economic indices. See R. at 85, 91. HCFA had previously made clear to the State that if it relied on indices to set its adjustment, those indices must be identified and their use explained, or the resulting number would be considered a change in methods and standards. See R. at 215, 331. In addition, it appears that deriving the median of the percentage changes in five cost factor categories from the hospital cost reports was only the beginning, not the end, of a discretionary decision-making process that culminated in the Commission's final selection of a number. See R. at 85-87, 91-93. By almost any definition of methods and standards, the single-sentence description of the methodology included in SPA 87-13, SPA 88-3 and SPA 89-18, is not a comprehensive description of what Oklahoma was doing. 6 The Administrator reasonably determined that the 5.9 percent figure was an inadequately explained number that should be treated as a change in the State's methods and standards for setting reimbursement rates. 19