¶ 7.

You state that the commission would make payments to the County for rental of the facility. You advise that the rental payments would consist of reimbursement for all costs that could have been reported on Medicaid Program Nursing Home Cost Reports by the County had it not entered into the lease. You have not inquired about the Medicaid reimbursement aspects of the proposed lease arrangement.

¶ 8.

You state that the commission would also pay additional funds to the County for the various services that the County agrees to continue to provide. You indicate that all state and federal funds that the commission receives in connection with the operation of the facility and all assessments made by the commission against its member counties would be remitted to the County by the commission.

¶ 9.

You advise that the proposed annual assessments against the other counties would be entirely prospective and would take into consideration required lease payments, operational costs, anticipated patient days per member, capital costs, and any other expenses that the commission anticipates would be incurred in the ensuing fiscal year in order to maintain the facility in appropriate operating condition. You state that the assessments would be made against these counties on a uniform prorated basis. Although you have provided no specific examples, you advise that the proposed assessments would also take into consideration the prorated expenses to be incurred by the commission that are associated with a member county’s residents in the facility.[1] Because most persons who receive services in the specialized unit are Medicaid recipients, a substantial portion of the proposed assessments against the other member counties would therefore necessarily be used to defray deficits anticipated to occur as a result of providing care to Medicaid patients for whom each such county is responsible under Wis. Stat. § 51.42(1)(b).

¶ 10.

You advise that annual assessments against the County would consist of two components. You indicate that one component of those assessments would be computed at the same uniform, prorated rate and upon the same bases that annual assessments are made against the other counties. My understanding is that this first component of the annual assessment would therefore take into consideration the prorated expenses to be incurred by the commission that are associated with the County’s own residents in the facility. You advise that the second component of the annual assessment against the County would be a retroactive assessment that is the difference between the proceeds of all prospective assessments made against all counties at the uniform prorated rate and the actual costs of the commission’s operations, as determined in its Medicaid cost reports. You have not inquired about the Medicaid reimbursement aspects of the commission’s payment of all of the assessments to the County.

¶ 11.

The materials you have provided indicate that a county could be expelled from the commission by a two thirds vote of all member counties. Those materials also indicate that a county could withdraw from the commission at the close of any fiscal year by providing timely notice to the commission. They also indicate that a condition of commission membership for the other counties would be that upon withdrawal or expulsion each such county must take all actions necessary to remove all of its residents who are patients of the facility in a manner that is consistent with federal and state law. You state that, by prior agreement, assessments against a county that withdraws or is expelled from the commission would continue as long as the county has residents in the facility.

QUESTION PRESENTED AND BRIEF ANSWER

¶ 12.

You ask whether the mandatory assessments by the commission would violate federal and state statutory and regulatory provisions prohibiting Medicaid supplementation.

¶ 13.

In my opinion, counties may enter into joint agreements to collectively furnish and fund nursing home services if the agreements do not violate federal and state Medicaid statutes and regulations prohibiting supplementation. Assessments resulting from such agreements that are computed without reference to and that are not attributable to purchase of services contracts involving Medicaid patients would not constitute supplementation. Assessments that are computed with reference to or are attributable to purchase of services contracts involving particular Medicaid patients are not permissible. The validity of hybrid assessments that do not fit solely within either one of those two categories must be determined on a case-by-case basis.

¶ 14.

You have not specifically inquired whether any county could be forced to join the commission in order to have its residents served by the specialized unit. I decline to provide an opinion concerning that issue because I understand that a similar issue is in civil litigation between two counties. See 77 Op. Att’y Gen. Preface No. 3.D. (1988).

ANALYSIS

¶ 15.

The term “supplementation” refers to “the practice by which [Medicaid] providers [attempt to] augment th[e] [Medicaid] reimbursement rate by billing other sources.” 73 Op. Att’y Gen. 68, 68 (1984). In my opinion, the formation of a commission to fund the operation of the specialized unit would be permissible even though the commission could make mandatory assessment that would be used in part to cover deficits incurred in providing care to Medicaid recipients.

¶ 16.

Wisconsin Stat. § 66.0301(2) authorizes counties to contract with each other for “the joint exercise of any power or duty required or authorized by law.” Counties have “primary responsibility for the well-being, treatment and care of the mentally ill, [and] developmentally disabled” who are county residents. Wis. Stat. § 51.42(1)(b). Counties possess statutory authority to establish facilities that provide various forms of medical care, including nursing home care and mental health care. See Wis. Stat. §§ 49.70, 49.71, 49.72, 49.73, and 51.09. See also Wis. Stat. § 46.20 (authorizing the establishment of joint county institutions). Counties may therefore contract with each other under Wis. Stat. § 66.0301(2) to collectively provide nursing home and related mental health services to their residents. Any such contract may contain “provisions as to proration of the expenses involved” and may provide for “creation of a commission[.]” Wis. Stat. § 66.0301(3). A single county that owns or leases a nursing home that provides direct care including mental health services must cover all of the costs associated with the upkeep and operation of the facility, including all deficits incurred as a result of providing direct care to Medicaid patients. The formation of a commission under Wis. Stat. § 66.0301(3) appears to be designed to permit the counties that are commission members to jointly share all costs associated with the upkeep and operation of a multi-county specialized nursing home unit and to determine how those costs should be prorated among member counties. Costs associated with the upkeep and operation of a multi‑county facility necessarily include any deficits incurred as a result of providing care to patients who are Medicaid recipients. Cost‑sharing between counties is specifically authorized by statute.

¶ 17.

Although Wis. Stat. § 66.0301(3) does provide statutory authorization for the proration of expenses among counties, it does not permit counties to prorate expenses in a manner that violates prohibitions upon Medicaid supplementation. See 73 Op. Att’y Gen. at 70. For purposes of the Medicaid program, transactions that lack economic substance and are entered into to avoid Medicaid statutes and regulations can be disregarded as sham transactions. See Estate of Hagenstein v. Wisc. Health & Family Servs., 2006 WI App 90, ¶ 29, 292 Wis. 2d 697, 715 N.W.2d 645; Cox v. Secretary, Louisiana Dept. of Health and Hospitals, 939 So.2d 550, 554 (La. App.), writ denied, 944 So.2d 1274 (La. 2006); Deerbrook Pavilion, LLC v. Shalala, 235 F.3d 1100, 1104 (8th Cir. 2000), cert. denied, 534 U.S. 992 (2001). See also Cedar Hill Manor, L.L.C. v. Dep’t of Social Serv., 145 S.W.3d 447 (Mo. App. 2004). Cf. Credit Recovery Systems, LLC v. Heike, 158 F. Supp. 2d 689, 696 (E.D. Va. 2001); Illinois Council for Long Term Care v. Miller, 503 F. Supp. 1091, 1096 (N.D. Ill. 1980); Moehle v. Miller, 513 N.E.2d 612, 614 (Ill. App. 1987), appeal denied, 520 N.E.2d 387 (Ill. 1988). These cases consider all of the facts and circumstances when determining whether a transaction is a sham for purposes of the Medicaid program. Compare Milwaukee Reg’l Med. Ctr. v. City of Wauwatosa, 2007 WI 101, ¶ 35 n.8, 304 Wis. 2d 53, 735 N.W.2d 156 (“court evaluates all the facts and circumstances surrounding the case” when determining whether an entity is the beneficial owner of property).[2]

¶ 18.

One form of supplementation involves seeking payments from Medicaid recipients that are in addition to reimbursement received from the Medicaid program for providing medical care. Subject to certain limited exceptions, Wis. Stat. § 49.49(3m) provides that it is a felony for a Medicaid provider to knowingly seek payments from a Medicaid recipient that are in addition to payments received by the provider under the Medicaid program. Similar language is contained in 42 U.S.C. § 1396a(a)(25)(C) (2009). As proposed, the assessments would not impose any additional charges upon Medicaid recipients themselves and therefore would not violate provisions such as 42 U.S.C. § 1396a(a)(25)(C) (2009) or Wis. Stat. § 49.49(3m) insofar as they prohibit Medicaid providers from seeking additional payments for covered services from Medicaid recipients.