Colorado won’t back down, challenges $12M disallowance in federal court

After the Departmental Appeals Board (DAB) recently found that CMS properly disallowed $12 million in federal financial participation (FFP) in Medicaid expenditures claimed by the Colorado Department of Health Care Policy and Financing (HCPF), the department filed suit against the federal government challenging that decision. The complaint alleges that HHS wrongly denied the $12 million in payments based on FFP services between 2000 and 2006.

DAB Decision

Previously, the DAB found that the HCPF’s claims over the FFP service payments were time barred. Specifically, the DAB found that section 1132 of the Social Security Act provided that claims for expenditures be filed within two years after the end of the quarter in question and the HCPF’s claims that the delay in filing was due to the time it took to ensure the submissions were accurate were irrelevant (see Colorado loses $12 million in federal funds for twiddling their thumbs, Health Law Daily, August 10, 2015).


The FFP services in question are related to the requirement that state Medicaid plans include outstationing services for low-income individuals to more easily access the Medicaid application process. These services are to be outstationed to alternative locations such as disproportionate share hospitals (DSHs) and federally qualified health centers (FQHCs). In the Colorado matter, Denver Health, an integrated health care network, received repayment for outstationing services but later CMS notified HCPF that it was disallowing $12,064,042 in FFP for those outstationing services provided by Denver Health.


The complaint before the district court for the District of Colorado asks the court to set aside the DAB’s decision and to allow Colorado to avoid repayment of the $12 million in FFP funds to the federal government. Specifically, the HCPF states that the DAB decision was arbitrary and capricious, and that the disallowance constitutes a violation of the Medicaid Act. In response to finding that the claims were time barred, the HCPF argues in its complaint that the two-year time period for claiming did not begin to run until the state made the payments to Denver Health or until Denver Health calculated the costs associated with outstationing and certified that those costs were eligible for Medicaid reimbursement.