This Medicaid case involves an effort by the Georgia Department of Medical Assistance (GDMA) to obtain reimbursement from the U.S. Department of Health and Human Services (HHS) for funds GDMA spent on abortion services for medicaid patients pursuant to a court order.

In June of 1979, a federal district court invalidated GDMA's regulations placing tight restrictions on medicaid reimbursement for abortions. Doe v. Busbee, 471 F. Supp. 1326 (N.D.Ga.1979). The district court held that while the Hyde Amendment precluded federal funding of most abortion services, Title XIX of the Social Security Act nevertheless required states to fund all medically necessary abortions. GDMA accordingly funded abortion services for medicaid patients until January of 1981 when the district court dissolved its injunction in light of the Supreme Court's decision in Harris v. McRae, 448 U.S. 297, 100 S. Ct. 2671, 65 L. Ed. 2d 784 (1980). In Harris the Court held that Title XIX does not obligate the states to fund abortion services for which federal financial assistance is precluded by the Hyde Amendment.

HHS subsequently refused to reimburse GDMA for the cost of complying with the district court's short-lived injunction. It "disallowed" the $167,392 of GDMA's medicaid expenses attributable to abortion services, finding that the Hyde Amendment precluded federal assistance. In conformity with the procedures governing "disallowances", see 42 U.S.C.A. Sec. 1316(d) (West Supp.1983); 45 C.F.R. Sec. 201.13 (1982), GDMA asked the Departmental Grant Appeals Board to reconsider HHS's decision. The Board upheld the decision.

Because there is some uncertainty about whether this court or the district court has initial jurisdiction in the matter, GDMA filed petitions for review in both the district court and this court. GDMA, asserting its belief that the district court has initial jurisdiction, moves to stay proceedings in this court pending the outcome of the district court's review. HHS agrees with GDMA's belief that the district court has initial jurisdiction but has filed a motion to dismiss the appeal for want of jurisdiction. For reasons of consistency1 and economy2 we first decide the jurisdictional issue. Concluding that we lack jurisdiction, we dismiss the appeal.

This court's jurisdiction hinges on whether HHS's decision is properly characterized as a "disallowance" or a finding of "noncompliance". While the courts of appeals have initial jurisdiction over a noncompliance determination, 42 U.S.C.A. Secs. 1316(a), 1396c (1974 & West Supp.1983), the statute does not provide for direct review in the courts of appeals in the case of disallowances. 42 U.S.C.A. Sec. 1316(d) (West Supp.1983). In fact, whether Congress intended to vest district courts with jurisdiction to review disallowance determinations remains somewhat unsettled. See 111 Cong.Rec. 3068 (1965) (remarks of Sen Javits),3 State Department of Public Welfare v. Califano, 556 F.2d 326, 329 & n. 4 (5th Cir.1977) (stating in dicta that the "statutory history ... indicates that the section's sponsors recommended against judicial review of disallowances"). Compare Medical Services Administration v. U.S., 590 F.2d 135 (5th Cir.1979) (declining to decide issue); Massachusetts v. HHS, 698 F.2d 22 (1st Cir.1983) (same); New Jersey v. HHS, 670 F.2d 1284, 1290 n. 11 (3d Cir.1982) (same) with Illinois v. Schweiker, 707 F.2d 273 at 277-78 (7th Cir.1983) (district courts have jurisdiction to review disallowance); Washington v. Schweiker, slip op. (9th Cir.1981) (same); County of Alameda v. Weinberger, 520 F.2d 344 (9th Cir.1975) (same); Georgia v. Califano, 446 F. Supp. 404 (N.D.Ga.1977) (same).

A "disallowance", in archetypal form, involves technical audit dispute concerning specific and isolated payments. See H.Rep.No. 213, 89th Cong., 1st Sess. 132 (1965) U.S.Code Cong. & Admin.News 1965, p. 1943 ("disallowances usually take the form of audit exceptions"). See also Medical Services Administration, supra at 136; Massachusetts, supra at 26-27; New Jersey v. HHS, 670 F.2d 1262, 1275 (3d Cir.1982) (New Jersey I). In contrast, the classic case of "noncompliance" involves a determination that the state's overall rate methodology has been so changed that it no longer complies with federal requirements or that the state's administration of its plan violates federal requirements. See 42 U.S.C.A. Sec. 1396c. Administrative determinations often do not fall neatly into one distinct category or the other. In such cases courts have resorted to a variety of different tests to aid them in distinguishing between disallowances and noncompliance determinations.4 Our cases have drawn the distinction with reference to the character of the administrative determination, viewed in light of the policies underlying Sec. 1316(a)'s provision for direct review in the court of appeals. See Medical Services Administration, supra; State Department of Public Welfare, supra.5

HHS's finding here contains elements of both a disallowance and a noncompliance determination. As with a noncompliance determination, this dispute does not center on the accuracy of HHS's audit; the parties do not disagree on the amount GDMA spent on abortion services pursuant to the court order. Rather, the nature of the controversy is primarily legal, focusing on HHS's alleged obligation to reimburse states for payments made in complying with a district court order that is ultimately overturned. See New Jersey I, supra at 1273. Additionally, GDMA, in complying with the district court's order, can be viewed as amending its plan to provide reimbursement for abortion services. HHS's decision to deny reimbursement to GDMA can accordingly be characterized as a finding that GDMA's "amendment", insofar as it contemplated federal financial assistance, did not comply with federal law.6

HHS's determination also possesses characteristics indicative of a disallowance. HHS, in processing GDMA's claim, has used disallowance procedures rather than the more formal noncompliance procedures.7 Although the agency's treatment of the claim does not control this court's characterization of the dispute, State Department of Public Works, it is nevertheless relevant. Massachusetts, supra at 29-30.8 Further, unlike the typical noncompliance determination, HHS's decision does not frustrate an ongoing desire of the state to implement a general reimbursement method or practice. Because GDMA does not seek to pay for abortion services now or in the future, the issue here involves "an isolated and highly focused inquiry" into specific past payments and has no wide-ranging implications for future administration of the state plan. Medical Services Administration, 590 F.2d at 136.

Although the characteristics of HHS's determination do not alone compel a particular result, cf. Medical Services Administration, the purposes underlying Sec. 1316(a)'s provision for initial review in the court of appeals persuade us that the matter should be classified as disallowance. A finding of noncompliance, generally appropriate to remedy a broad, pervasive defect in the state's plan as a whole, see New Jersey I, supra at 1269, impairs the state's ability to implement an important aspect of its reimbursement plan. Further, HHS, in cases of noncompliance, may utilize the rather drastic sanction of halting the flow of all federal funds. See note 7 supra. Because the adverse consequences associated with a noncompliance determination might be severe, Congress eliminated one tier of judicial review, giving states a more expeditious opportunity to vindicate their asserted rights. As the Senate Report explains, the provisions for administrative and judicial review of noncompliance determinations were

designed to assure that the States will not encounter undue delays in obtaining Federal determinations on acceptability of proposed State plan material under the public assistance programs ....

S.Rep. No. 404, 89th Cong., 2d Sess. (1965) (emphasis added), reprinted in 1965 U.S.Code Cong. & Ad.News 1943, 2090. Congress thought that expeditious judicial review would place " 'the States on a more equal basis with the Federal Government in the administration of the public assistance program' and thereby reduce intergovernmental friction." State Department of Public Works, 556 F.2d at 331 (quoting 111 Cong.Rec. 5048 (1965) (remarks of Rep. Dwyer)).

Here the policies underlying Sec. 1316(a) do not apply. There is no special need for speed. HHS does not seek a general cessation of federal funds and its action does not implicate the future design or administration of the state plan. GDMA's belief that "judicial review ... in District Court is an appropriate procedural mechanism to resolve its appeal", Petitioner's Motion to Stay Proceedings at 2, persuasively indicates that the state's interests can be adequately accommodated without treating the matter as a noncompliance determination subject to initial review in this court.

We accordingly characterize HHS's decision as a disallowance and dismiss for want of jurisdiction. We need not decide the availability of review in the district court. See Medical Services Administration, supra at 136.

Petitioner's motion to stay is DENIED and respondent's motion to dismiss is GRANTED.