STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

WESTCHESTER GENERAL HOSPITAL, )

)

Petitioner, )

)

vs. ) CASE NO. 83-2057

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held in the above case before the Division of Administrative Hearings by its duly designated Hearing Officer, Donald R. Alexander, on May 16, 1984, in Tallahassee, Florida.

APPEARANCES

For Petitioner: Gerald B. Sternstein, Esquire

Post Office Box 2174 Tallahassee, Florida 32316

For Respondent: Robert A. Weiss, Esquire

The Perkins House, Suite 101

118 North Gadsden Street Tallahassee, Florida 32301

Theodore E. Mack, Esquire Building One, Room 406 1323 Winewood Boulevard

Tallahassee, Florida 32301 BACKGROUND

This matter came before the Division of Administrative Hearings when petitioner, Westchester General Hospital, requested a formal hearing to contest a decision by respondent, Department of Health and Rehabilitative Services, to seek reimbursement of $4,779.90 allegedly owed by petitioner for the period January 1, 1978-June 30, 1981, under its Medicaid participation agreement. This amount was determined after a routine audit of petitioner's records were made by respondent in 1981. Petitioner later amended its petition to seek some $98,000 in monies for excess payments which it claims it paid to respondent during fiscal years 1979 and 1980 under the same agreement. 1/

The matter was referred by respondent to the Division of Administrative Hearings on July 1, 1983 with a request that a Hearing Officer conduct a formal hearing. By notice of hearing dated August 8, 1983, a final hearing was scheduled for November 8, 1983, in Tallahassee, Florida. At the request of the parties, the matter was rescheduled to January 4, 1984, at the same location.

Thereafter, petitioner requested another continuance and the final hearing was rescheduled to March 28, 1984. It was again rescheduled at the parties' request to May 16, 1984, in Tallahassee, Florida.

At the final hearing, petitioner presented the testimony of Robert Sharpe, administrator of the Department's Medicaid Program and Analysis Office, George Strickland, head of the Department's office of General Accounting, John Kirby, petitioner's treasurer, and Steven Labelle, a financial consultant and expert in Medicare reimbursement and cost reports. It also offered petitioner's exhibits 1-7; all were received in evidence. Respondent presented the testimony of Richard H. Wnek, Department Manager of Medicaid Third-Party Recovery, and offered respondent's exhibits 1-3; only exhibits 1 and 3 were received.

The transcript of hearing was filed on July 12, 1984. Proposed findings of fact and conclusions of law were originally due on July 22, 1984. However, the parties requested three extensions of time, and the same were finally filed by respondent and petitioner on September 14 and 17, 1984, respectively, and have been considered by the undersigned in the preparation of this order. Proposed findings of fact not included in this order were considered irrelevant to the issues, immaterial to the results reached, or were not supported by competent and substantial evidence.

The issues herein are (1) whether petitioner should reimburse to respondent

$4,779.90 in monies allegedly owed for the period January 1, 1978 through June 30, 1981 under petitioner's Medicaid contract with the State, and (2) whether respondent should pay petitioner $142,447 which represents alleged excess payments made to respondent during fiscal years 1979 and 1980 under its Medicaid contract.

Based upon all of the evidence, the following findings of fact are determined:

FINDINGS OF FACT

1. Petitioner, Westchester General Hospital (WGH), is an osteopathic hospital located at 2500 S.W. 75th Avenue, Miami, Florida. It holds a license from respondent, Department of Health and Rehabilitative Services (HRS), and serves in an area of Dade County settled mostly by Cuban Refugees.

   
   

2. On March 5, 1973, a participation agreement was executed by WGH and HRS wherein WGH agreed to provide certain hospital services to Medicaid patients in return for payment of reasonable costs incurred by such patients. Under that agreement, reimbursement was made on the basis of an interim payment plan in the form of a per diem cost rate. These rates were established by HRS based upon cost reports submitted by WGH. For the years 1979 and 1980, which are the pertinent years in this controversy, the Medicaid per diem reimbursement rates for WGH were as follows:

   
   

   1-1-79 through 5-20-79 $175.71 per day

   5-21-79 through 5-15-80 $166.55 per day

   5-16-80 through 12-31-80 $203.52 per day

   
   

3. In 1979 and 1980, a large number of Cuban refugees settled in the Dade County area and WGH provided Medicaid services to these refugees under its participation agreement. By virtue of a special ace of Congress, the refugees were also eligible for Medicare Part B coverage which paid various hospital charges, including radiology, laboratory, EKG, EEG and nuclear medicine.

   Consequently, the patients were eligible for both Medicaid and Medicare, and WGH received reimbursement under both programs for the same patients.

   
   

4. The hospital's problems began when it first received preliminary or interim payments from the Federal government based upon charges for providing Medicare services to these indigents. Because charges are generally higher than costs in a hospital setting, the payments were later adjusted downward by the government at year-end when WGH's Medicare cost report was prepared. Nonetheless, under the then effective Rule 10C-7.36, Florida Administrative Code, WGH was required to submit its Medicaid claims for payment within forty- five days after services were rendered or the patient discharged. Therefore, WGH submitted its requests for payment to HRS before the true-up at year-end was performed by the Federal government. These claims reflected that WGH had been reimbursed by Medicare at the interim payment level rather than the year-end adjusted amount since the latter amounts were not yet known. As discussed in greater detail hereinafter, the interim payments were used as an offset to the Medicaid payments due from the state.

   
   

5. In 1979, after being gently nudged by the Federal government, HRS discovered that a number of patients on the State Medicaid eligibility file also were eligible for Medicare coverage and that Medicare, rather than Medicaid, was responsible for at least a part of their bills. This was determined by comparing the State's Medicaid file with Medicare computer tapes obtained from the Federal government. As a result of this discovery, HRS advised WGH on November 16, 1979, by letter that WGH must bill Medicare for hospital charges incurred by Medicaid patients with Medicare Part B coverage. The letter pointed out that Medicaid is the payer of last resort, and pays only after other third parties, including Medicare, pay their applicable portion of the medical bills. This was consistent with federal regulations which obligated HRS to identify third-party resources of Medicaid recipients, and to seek reimbursement from such third-party resources within 30 days after the end of the month in which it first determined a third party was responsible for the claim. Had it not pursued these third party resources, HRS risked the loss of federal funds. However, the same regulations also required HRS to "take reasonable measures to determine the legal liability of third parties to pay for services under the plan." Other than relying upon the interim payment amounts reflected on WGH's Medicaid claims, HRS made no effort to determine the actual legal liability of Medicare. Indeed, it was not until after May, 1980 that HRS had the capability to take reasonable measures to determine a third party's liability. On that date, it formed, at the insistence of the Federal government, a special "unit" for that specific purpose. Prior to that time, it was unable to comply with Federal regulations.

   
   

6. In compliance with the letter, WGH reflected the interim Medicare payments on its Medicaid payment claims filed with HRS. However, to its consternation, it later learned that HRS did not take into account the interim nature of the payments, and used those amounts vis a vis adjusted amounts to calculate the amount of WGH's Medicaid reimbursement. The net result was the filing of Medicaid payment claims by WGH in 1979 and 1980 which reflected Medicare reimbursement at a much higher level than it actually received after year-end adjustments were made, and a concomitant reduction in Medicaid receipts from the State.

   
   

7. WGH recognized its dilemma in early 1981. Accordingly, on March 10, 1981, its treasurer wrote HRS's Medicaid Third Party Reimbursement Manager complaining that it had been under-reimbursed for Medicaid patients with Medicare Part B Coverage for periods beginning in 1978. He stated that the

   ancillary services covered by Medicare Part B were reimbursable only at 80 percent cost, and resulted in a substantial amount of the reimbursement being refunded back to the Federal program. This in turn had caused a shortfall on the hospital's part, and payment less than its Medicaid per diem rate. It accordingly requested that Medicaid return the funds necessary to bring its "reimbursement back to the level not less than the established Medicaid per diem rate of the given period." The request was authorized by Rule 10C-7.36(3), Florida Administrative Code, which allowed providers such as WGH to demonstrate "undue hardships" on the part of the provider if it submitted its Medicaid claim for payment in accordance with the forty-five day time schedule prescribed by rule, and by Florida law which authorized HRS to "make appropriate settlements" in determining third party liability in the Medicaid program. HRS did not respond to this letter.

   
   

8. Although it did not respond to WGH's request, HRS was nevertheless fully aware of the problem by that time for it already had rule amendments in the mill which would cure the problem. Effective March 18, 1981, HRS amended its Rule 10C-7.36 to provide that providers who had claims that were crossed over to Medicaid from Medicare due to recipient eligibility in both programs were relieved from the time constraints for filing claims imposed by the rule. But because the rule operated on a prospective basis only, it did not apply to the 1979 and 1980 fiscal years.

   
   

9. The parties have stipulated that if WGH owes HRS for excess Medicaid funds paid to WGH during January 1, 1978 through June 30, 1981, the proper amount is $4,779.90.

   
   

10. In support of its claim against HRS, WGH produced worksheets reflecting under-reimbursement from HRS in the amounts of $41,905 and $100,542 for fiscal years 1979 and 1980, respectively, under the Medicaid program. They are derived from a log prepared by Blue Cross, the fiscal intermediary retained by HRS to conduct audits on Medicaid providers in the state. The deficiencies were caused by HRS applying full credit to the interim payments that WGH received from Medicare even though a portion of the same were subsequently returned to Medicare by WGH after the year-end audit was completed. In preparing the revenue deficiencies, WGH applied a cost-to-charge ratio which was based on the average of the five ancillary services included under Medicare Part B rather than reviewing each patient's actual billing records to determine the percentage of patients receiving a particular ancillary service. However, it was impossible to perform the latter analysis in 1979 since a "combination method" was used for the various cost centers, and the principle of consistency required that the 1980 log be prepared in the same manner as 1979.

    
    

    CONCLUSIONS OF LAW

    
    

11. The Division of Administrative Hearings has jurisdiction of the subject matter and the parties thereto pursuant to Subsection 120.57(1), Florida Statutes.

    
    

12. The controlling law in effect when the disputed claims arose was Subsection 409.266(3)(a), Florida Statutes. It provided as follows:

    
    

    (3)(a) Third-party coverage for medical services shall be primary coverage and shall be exhausted before any payment authorized under this section shall be made on the behalf

    of any person eligible for services under this section.

    
    

    In recovering third party payments for Medicaid settlement purposes, Subsection 409.266(3), Florida Statutes, authorized HRS "to make appropriate settlements." It also instructed HRS to "recover to the fullest extent possible the amount of all medical assistance payments made on the behalf of the recipient." At the same time, HRS was bound to observe 42 CFR 433 in determining third party liability. As is pertinent here, section 433.138 of the federal regulations required HRS to "take reasonable measures to determine the legal liability of third parties to pay for services under the plan." Finally, Rule 10C-7.36(3), Florida Administrative Code, as it existed prior to March 18, 1981, and which governed the submission of Medicaid payment claims by providers, is relevant and provides as follows:

    
    

    (3). . .Exceptions will also be considered for those providers who can demonstrate that submission of the Request for Payment (claim) within forty-five days will cause undue hardship on the part of the provider.

    
    

13. Initially, it is recognized that in 1979 and 1980, HRS was laboring under an agreement with the Federal government which required it to ". . .seek reimbursement from any liable third party to the limit of legal liability." Indeed, after learning of the existence of a liable third party, HRS was required to ". . .seek reimbursement from the third party, within 30 days after the end of the month it learned of the existence of the liable third party" [42 CFR 433.139(2)] or risk the loss of federal funds. But even with those constraints, HRS was nonetheless obliged to take all reasonable measures to determine the actual liability of third parties and in doing so, had the statutory ability to make settlements in resolving those claims.

    
    

14. The record discloses that HRS had no mechanism by which to determine the actual liability of third parties who provided additional coverages to Medicaid recipients until after May, 1980, when a special unit for that purpose was formed. Because of this, it was unable to comply with federal regulations which imposed that duty. As a consequence, WGH found itself on the horns of a dilemma when HRS ordered that it pay interim (not actual) third party benefits before they were finalized for the years 1979 and 1980. By failing to take any reasonable measures whatsoever to determine the hospital's actual liability to the State as required by law, or to honor WGH's request in March, 1981 for exemption from the 45-day filing requirement for Medicaid payment claims due to hardship as authorized by rule, or to settle the charges as permitted by statute, HRS improperly collected $41,905 and $100,542 from WGH in the years 1979 and 1980, respectively. Therefore, it is concluded that HRS should refund (or credit) those amounts to WGH. However, this total ($142,447) should be offset by $4,779.90 which is owed by WGH to the state for the period January 1, 1978 through June 30, 1981 under its participation agreement.

    
    

15. In reaching the above conclusion, the undersigned has considered the many arguments raised by respondent in its proposed order. While HRS may be correct in asserting that it was obligated to collect all of the Medicare payments within a short time frame, or risk loss of federal funds, this in no way excuses it from failing to later settle the claims after the true-up was made, or granting WGH an extension of time to file the claims as authorized by its own rule. The argument that WGH's calculations supporting its $142,447 claim are merely "reasonable estimates," and not the result of a more detailed

analysis, is unavailing, for such an analysis could not be made in 1979, and consistency required that 1980 be developed in the same manner as the preceding year. Finally, HRS's reliance upon DHRS v. Gulf Coast Community Hospital, DHRS Case No. 82-112PH, is misplaced for it is factually distinguishable from the case at bar. The remaining arguments have been considered and found to be without merit.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Health and Rehabilitative Services repay

Westchester General Hospital $142,447 less $4,779.90 by virtue of it having been under-reimbursed under the Medicaid program for fiscal years 1979 and 1980.

DONE and ORDERED this 28th day of September, 1984, in Tallahassee, Florida.

DONALD R. ALEXANDER

Hearing Officer

Division of Administrative Hearings 2009 Apalachee Parkway

Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 28th day of September, 1984.

ENDNOTE

1/ This amount was subsequently revised upward to $41,905 and $100,542 for the years 1979 and 1980, respectively, or a total of $142,447.

COPIES FURNISHED:

David Pingree, Secretary Dept. of Health and

Rehabilitative Services 1323 Winewood Blvd.

Tallahassee, Florida 32301

Gerald B. Sternstein, Esquire Post Office Box 2174 Tallahassee, Florida 32316

Robert A. Weiss, Esquire

The Perkins House, Suite 101

118 North Gadsden Street Tallahassee, Florida 32301

Theodore E. Mack, Esquire Bldg. 1, Room 406

1323 Winewood Blvd.

Tallahassee, Florida 32301

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AGENCY FINAL ORDER

=================================================================

STATE OF FLORIDA

DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES

WESTCHESTER GENERAL HOSPITAL,

Petitioner,

vs. CASE NO. 83-2057

DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES,

Respondent.

/

FINAL ORDER

This cause came on before me for the purpose of issuing a final agency order. The hearing officer assigned by the Division of Administrative Hearings (DOAH) in the above-styled matter has submitted a Recommended Order to the Department of Health and Rehabilitative Services (HRS). A copy of that Recommended Order is attached hereto.

1. PDDM -- meaning the HRS Medicaid Program Office -- filed Exceptions to the Recommended Order. A copy of PDDM's Exceptions is attached hereto as Exhibit A.

HRS Statement and Ruling on the Exceptions

(AA) PDDM Exceptions (1) through (8) - These Exceptions are sufficiently clear and self-explanatory. They have merit and accordingly they are sustained. The Recommended Order must be rejected.

FINDINGS OF FACT

1. Portions of the findings of fact are rejected and modified as explained in the Exceptions submitted by PDDM. Please see Exceptions (1), (2) and (3).

   
   

   CONCLUSIONS OF LAW

   
   

2. The overall conclusion of law stated by the Hearing Officer is rejected. The conclusion amounts to an erroneous or otherwise inappropriate interpretation and application of law. The correct interpretation and

   application which compels a different result, is set out in PDDM Exceptions. Please see Exceptions (4) through (8).

   
   

3. The decision of HRS as set forth in its final order in the case of Dept. of H. & R. S. v. Gulf Coast Community Hospital, DHRS Case No. 82-113PH, Final Order dated March 21, 1983, is directly on point and is controlling. As stated in that final order, in situations involving Medicaid/Medicare Part B eligible recipients, where Medicaid has made per diem payment, the amount of the third-party refund due DHRS is the entire Medicare Part B payment.

It is ADJUDGED that the Recommended Order submitted herein is rejected.

The Exceptions submitted by PDDM have merit and are sustained.

ORDERED this 9th day of September, 1985, in Tallahassee, Florida.

COPIES FURNISHED:

Donald R. Alexander, Esquire Hearing Officer, DOAH

2009 Apalachee Parkway

Tallahassee, Florida 32301

Theodore E. Mack, Esquire 1323 Winewood Boulevard

Tallahassee, Florida 32301

Gerald B. Sternstein, Esquire Post Office Box 2174 Tallahassee, Florida 32316

Robert A. Weiss, Esquire

The Perkins House, Suite 101

118 North Calhoun Street Tallahassee, Florida 32301

DAVID H. PINGREE

Secretary

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a copy of the foregoing was sent to the above named people by U. S. Mail, at 3:30 P.M. o'clock this 11th day of September, 1985.

HARDEN KING

Acting Agency Clerk Assistant General Counsel Division of Health and

Rehabilitative Services 1323 Winewood Boulevard Building One, Suite 407 Tallahassee, Florida 32301

A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO JUDICIAL REVIEW WHICH SHALL BE INSTITUTED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF HRS, AND A SECOND COPY, ALONG WITH FILING FEE AS PRESCRIBED BY LAW, WITH THE DISTRICT WHERE THE AGENCY MAINTAINS ITS HEADQUARTERS OR WHERE A PARTY RESIDES. REVIEW PROCEEDING SHALL BE CONDUCTED IN ACCORDANCE WITH THE FLORIDA APPELLATE RULES.

Docket for Case No: 83-002057

Orders for Case No: 83-002057