The opinion of the court was delivered by: Ambrose, District Judge
OPINION and ORDER OF COURT
The Commonwealth of Pennsylvania's Department of Public Welfare ("DPW") seeks judicial review of a final agency decision of the United States Secretary of Health and Human Services ("Secretary") to disallow approximately $15.1 million in federal Medicaid funding paid to DPW. Pending before the Court are Cross-Motions for Summary Judgment (Docket Nos. 13 and 18). The issue is whether the Secretary erred in denying DPW an evidentiary hearing. After a careful review of the parties' submissions and for the reasons discussed in this Opinion, Defendants' Motion for Summary Judgment is granted and Plaintiff's Motion for Summary Judgment is denied.
I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY
Unless otherwise indicated, the following facts are undisputed.
DPW brings this action under the Administrative Procedure Act ("APA"), 5 U.S.C. § 704, for review of the final agency decision of the Departmental Appeals Board ("DAB" or the "Board") of the United States Department of Health and Human Services ("HHS") upholding the decision of the Centers for Medicare and Medicaid Services ("CMS") to disallow $15,070,548 in federal financial participation ("FFP") claimed by the Commonwealth under the joint Federal-State Medicaid program.
The amount of federal funding the Commonwealth receives for its Medicaid expenditures is normally around 54%, but Congress has provided 90% enhanced funding for family planning services. At issue here is a claim by DPW for $114.4 million for the costs of family planning services that Managed Care Organizations ("MCOs") under contract to Pennsylvania's Medicaid program provided to Medicaid recipients for the period October 2000 through February 2004. During the relevant time period, Pennsylvania operated its mandatory Medicaid managed care program in twenty-five of its sixty-seven counties. The $114.4 million was calculated for family planning services provided through Pennsylvania's mandatory Medicaid managed care program, not for family planning services provided on either a fee-for-service or a voluntary managed care basis in the remaining forty-two counties.
DPW provided CMS with a letter and other documentation in April 2001 describing the claiming methodology that it planned to use for assessing family planning service expenditures in the managed care program. According to the letter, DPW would "develop a 'Family Planning Percentage or Factor' . . . to determine what proportion (presented as a simple percentage factor or Per Member Per Month amount) or amount of managed care premiums related to the provision of family planning services in order to claim 90 percent FFP for the identified portion of premiums."
R. 4, 361. The family planning factor statistic -- a ratio consisting of a numerator and denominator -- was supposed to represent the ratio of family planning expenditures to total health care expenditures. The letter indicated that a "key factor" in developing the family planning factor "is assuring that the methodology represents family planning costs associated with populations eligible to enroll in managed care." Id. In a section of the submission entitled "Calculation of the Numerator: Identification of total family planning fee for services costs," DPW also told CMS that "the Numerator was developed by summarizing total gross family planning service expenditures reported on the HCFA 64 for the period 7/1/95 - 6/30/96." Id. at 369. The HCFA-64 form contains statewide figures. The letter also requested a meeting with CMS staff "to provide documentation about this process or to answer questions about this methodology." Id. at 361. DPW met with CMS's Regional Office staff on May 18, 2001 and July 12, 2001. Using its family planning factor, DPW ultimately claimed a total of $114.4 million -- $102.9 million of which was the federal share -- for the period October 2000 through February 2004.
HHS Office of Inspector General ("OIG") conducted audit reviews of family planning service costs for several states, including Pennsylvania. In January 2006, the OIG issued an audit report pertaining to DPW's $114.4 million claim. Id. at 289-310. The OIG concluded that Pennsylvania had overstated that claim by $44.4 million. Among other things, the OIG found that DPW had used statewide data in the numerator of its calculation instead of data for only the mandatory managed care counties. According to the audit report, "[b]y claiming these costs at the enhanced family planning rate of 90 percent, rather than at the FMAP rate of about 54 percent, Pennsylvania received $15.1 million in unallowable Federal reimbursement." Id. at 298. Based on the OIG's audit, CMS issued a notice of disallowance to Pennsylvania in November 2006, disallowing $15,070,548 of FFP.
DPW appealed the disallowance decision to the DAB. DPW also requested an evidentiary hearing before the DAB to cross-examine certain CMS staff members who had submitted declarations stating that they had not understood that DPW intended to use statewide data in the numerator of its family planning calculation, and to elicit testimony from the OIG regarding the claim file they used to recalculate that numerator. On April 27, 2009, the DAB issued a nineteen-page decision, upholding the disallowance in full. The DAB also denied DPW's request for an evidentiary hearing. The DAB issued its decision based solely on the written submissions, but did not consider (and struck from the record) the declarations from the CMS staff members DPW sought to cross- examine.
On June 23, 2009, DPW filed its Complaint in this Court seeking judicial review of the DAB's decision, including the DAB's denial of DPW's request for an evidentiary hearing. (Docket No. 1). Defendants filed an Answer on August 24, 2009. (Docket No. 2). On November 23, 2009, DPW filed a motion for summary judgment, concise statement of material facts, and supporting brief. (Docket Nos. 13-15). Defendants filed a cross motion for summary judgment, concise statement of material facts, supporting brief, and response to DPW's concise statement of material facts on February 1, 2010. (Docket Nos. 18-21). Each party opposes the other's motion. (Docket Nos. 24-27). The motions are now ripe for my review.
I have jurisdiction to review the Secretary's disallowance decision under the APA, 5 U.S.C. §§ 702 and 704, as well as under 28 U.S.C. § 1331.*fn1 See Massachusetts v. Bowen, 487 U.S. 879 (1988). CMS initially makes disallowance decisions on behalf of the Secretary as outlined by federal regulations. See 42 C.F.R. § 430.42. If a state disputes a disallowance decision, it may request reconsideration by the DAB. See 42 C.F.R. §§ 430.3, 430.42; see also 45 C.F.R. part 16 (setting forth reconsideration procedures). For disallowance cases in which a state files an appeal with the DAB, the DAB issues the final agency decision from which the state may seek judicial review. Courts typically review agency action under the APA on summary judgment motions because they do not engage in independent fact-finding. Rather, a reviewing ...