TCM Audit Appeals - Part I

11/07/2019 By Nancy Leidelmeijer

Every year the Targeted Case Management (TCM) programs and their cost reports are audited in California. State Department of Health Services (DHCS) auditors communicate with local governmental agencies (LGA) to obtain financial and other documents for their review. Many LGAs have been taken aback by extensive documentation requests and surprised by the audit findings.

Typical findings related to the cost reports are as follows:

  1. Disallowance of indirect costs
  2. Disallowance of TCM program costs
  3. Budget unit disapproval

It is important to ensure you are aware of the regulations surrounding the TCM program so that you can either fix the problems or can dispute the findings if you disagree with them. If you want to dispute audit findings, your agency will be required to submit a State of Disputed Issues within the time frame allowed to the Department of Health Care Services. Cogent arguments are necessary and must be supported by the appropriate documentation and regulatory citations, in order for the appeal to be accepted.

Once your appeal is accepted, a date will be set for the “Informal Hearing,” before an audit hearing officer at DHCS. Prior to the hearing date, additional documentation may and a position statement must be provided to the hearing officer. This is required for both DHCS and the provider (usually counties). The additional documentation and position statement must be compelling and provide evidence of your position.

While DHCS officially has the burden of proof in these cases, in practice, the providers have the burden. Hearing auditors work for DHCS. The bulk of their decisions are in favor of DHCS. It is therefore necessary to ensure you can support your assertions with state and federal regulation. In order to make the best case for your audit appeal, it is important to familiarize yourself with the following publications:

  1. 2 CFR Part 200 regarding indirect costs
  2. Medicaid reimbursement manual
  3. DHCS publications for TCM: TCM cost report instructions and SPA 10-010.

You may have to call on the experts in your department. If you are dealing with a financial audit, it is important to involve your fiscal staff, such as accountants or your fiscal manager. Involving legal counsel or consultants to help you navigate the intricacies of the audit appeal, can also help you to shape the best possible argument to support your position. However, legal counsel is not required at the informal level. The Informal Hearing is the first appeal opportunity for providers. Once the hearing has taken place, the hearing officer will typically send his/her decision within 180 days in the form of a Report of Findings.

If the hearing officer finds in favor of DHCS, the next step for the provider is to appeal at the formal level. The hearing for this appeal is held before a judge who works for DHCS. At this point, legal counsel is required to be involved. The hearing will be similar to a hearing in a court of law with both sides calling witnesses who are questioned by the attorneys. Finally, if the provider fails at the formal level, it can appeal to the superior court.

In part II of this Audit Appeal blog, we will provide information about settlement hearings and program audits.