Judges: WILLIAM J. KENDRICK
Agency: Department of Children and Family Services
Latest Update: Jun. 19, 1985
Summary: This case raises the issue of whether a Medicaid provider may apply for an adjustment to its prospective reimbursement rate under Florida Title XIX Long Term Care Reimbursement Plan when the request is filed after the close of that cost reporting period. At final hearing Petitioner, Greynolds Park Manor, Inc. (Greynolds), called Martin E. Casper--Executive Director of Greynolds, Saul H. Silverman, CPA--an expert in health care accounting, and Donald E. Harder, CPA--an expert in health care accou
Summary: This case raises the issue of whether a Medicaid provider may apply for an adjustment to its prospective reimbursement rate under Florida Title XIX Long Term Care Reimbursement Plan when the request is filed after the close of that cost reporting period. At final hearing Petitioner, Greynolds Park Manor, Inc. (Greynolds), called Martin E. Casper--Executive Director of Greynolds, Saul H. Silverman, CPA--an expert in health care accounting, and Donald E. Harder, CPA--an expert in health care accounting, and by way of deposition Donald Meyer, Thomas W. Arnold, John Bush, and Sebastian Gomez, as witnesses. Greynolds offered Exhibits 1 and 21, and Exhibits 1 through 20 were received into evidence. Respondent, Department of Health and Rehabilitative Services (HRS), called Carlton Dyke Snipes--Medical Health Care Program Manager, Medicaid Office, HRS, and Donaldson--an Audit Evaluation and Review Analyst, HRS, an expert in health care accounting. HRS offered Exhibits 1 through 5, and they were received into evidence. The Hearing Officer was requested to take, and took, judicial notice of the Final Order entered in Greynolds Park Manor, Inc. v. Department of Health and Rehabilitative Services, DOAH Case Nos. 82-3208 and 82-3474, Greynolds Park Manor, Inc. v.Rule prohibited retroactive payment for nursing homes whose cost exceeds annual payment.
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vs. ) CASE NO. 83-3705
Respondent. )
Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, William J. Kendrick, held a public hearing in the above-styled case on December 4 and 5, 1984, at Miami, Florida.
For Petitioner: Michael J. Bittman, Esquire
Dempsey & Slaughter, P. A. Suite 500, Dade Building 605 East Robinson Street Post Office Box 1980 Orlando, Florida 32802
For Respondent: Amy M. Jones, Esquire
This case raises the issue of whether a Medicaid provider may apply for an adjustment to its prospective reimbursement rate under Florida Title XIX Long Term Care Reimbursement Plan when the request is filed after the close of that cost reporting period.
At final hearing Petitioner, Greynolds Park Manor, Inc. (Greynolds), called Martin E. Casper--Executive Director of Greynolds, Saul H. Silverman, CPA--an expert in health care accounting, and Donald E. Harder, CPA--an expert in health care accounting, and by way of deposition Donald Meyer, Thomas W. Arnold, John Bush, and Sebastian Gomez, as witnesses. Greynolds offered Exhibits 1 and 21, and Exhibits 1 through 20 were received into evidence. Respondent, Department of Health and Rehabilitative Services (HRS), called Carlton Dyke Snipes--Medical Health Care Program Manager, Medicaid Office, HRS, and Donaldson--an Audit Evaluation and Review Analyst, HRS, an expert in health care accounting. HRS offered Exhibits 1 through 5, and they were received into evidence. The Hearing Officer was requested to take, and took, judicial notice of the Final Order
entered in Greynolds Park Manor, Inc. v. Department of Health and Rehabilitative Services, DOAH Case Nos. 82-3208 and 82-3474, Greynolds Park Manor, Inc. v.
Department of Health and Rehabilitative Services, 454 So. 2d 29 (Fla. 1st DCA 1984), the Final Order entered in G & J Investment Corporation, Inc. v.
Department of Health and Rehabilitative Services, DOAH Case No. 83-1769, and an Order of the District Court of Appeal, 1st District, entered November 5, 1984, in the matter of G & J Investment Corporation, Inc. v. Department of Health and Rehabilitative Services, Case No. BA-57.
The transcript of hearing was filed on January 11, 1985. Pursuant to the parties' request, an extension of time was given in which to submit proposed findings of fact and conclusions of law. The parties waived the requirement set in Rule 28-5.402, F.A.C., that a recommended order be entered within 30 days after the transcript of hearing was filed.
Petitioner and Respondent have submitted proposed findings of fact and conclusions of law. The parties' proposed findings and conclusions have been reviewed and considered. To the extent that any proposed findings have not been adopted in this Recommended Order, they have been rejected as being subordinate, cumulative, immaterial, or unnecessary, or as contrary to the facts as found in this Recommended Order.
Petitioner, Greynolds Park Manor, Inc. (Greynolds), operates a skilled nursing home facility at 17400 West Dixie Highway, North Miami Beach, Florida. The facility was constructed in 1968 and has been certified in the Medicaid Program since 1971. It is licensed by Respondent, Department of Health and Rehabilitative Services (HRS), to operate 324 beds. However, its average patient census in 1979 through 1981 was between 220 and 225 patients. It is the largest nursing home in Dade and Broward Counties.
HRS is the state agency designated to administer Florida's Medical Assistance (Medicaid) Program pursuant to Section 409.266, et seq., Fla. Stat. HRS and Greynolds have entered into a written agreement, "Agreement for Participation in Florida's Medical Assistance Program," for each fiscal year that Greynolds has participated in the program. Greynolds' fiscal year runs from June 1 through May 31.
Effective October 1, 1977, HRS adopted the "Florida Title XIX Long Term Care Reimbursement Plan" (Plan). The Plan is a prospective reimbursement plan, designed to aid the State in containing health care costs for Medicaid recipients. The prospective reimbursement rate for a provider is based on the actual allowable costs of a provider for the previous fiscal year, to which an inflationary factor is added.
The mechanics utilized to establish the prospective reimbursement rate under the Plan are clear. The provider is required to submit a uniform cost report within 90 days after the conclusion of its fiscal year. HRS audits the uniform cost report, determines allowable costs, adds an inflationary factor, and thereby sets the provider's prospective reimbursement rate. This rate is effective the first day of the month following receipt of the uniform cost report by HRS, and remains in effect until a new cost report is filed by the provider.
Under the provisions of the Plan, all cost reports are desk reviewed within six months after their submission to HRS. HRS, under the terms of the
Plan, may perform an audit on the cost report. An on-site audit is a more extensive review of the cost report than desk review. During an on-site audit the financial and statistical records of the provider are examined to ensure that only allowable costs were included in the cost report. The audit findings prevail over those made at desk review.
Greynolds submitted its cost report for fiscal year 1979 on September 27, 1979. Previously, by letter dated September 10, 1979, Greynolds had been advised by HRS that an on-site audit was to be done of its ficsal year 1979 cost report, and that Greynolds' Medicare cost report would be a subject of inquiry. The cost report Greynolds submitted to HRS on September 27, 1979, did not make a Medicare cost adjustment, and none was made at desk review. 1/
A rather anomalous situation existed in 1979 through 1980 which lent itself to potential abuse. The Medicare cost adjustment was never made at desk review. It was only made if there was an audit. Yet only one in three providers were designated for audit each year, and even if designated the audit could be terminated at any time. Consequently, if no audit were made, or if terminated prematurely, the provider would not be required to make a Medicare adjustment and would reap a substantial windfall. Greynolds was fully aware of HRS' practice. In 1981 HRS altered its practice and began to make the Medicare adjustment at desk review.
The audit of Greynolds' cost report for fiscal year 1979 was actually begun in October 1979 by the Fort Lauderdale Office of HRS. At the same time, the desk review of the cost report was undertaken by HRS' Jacksonville Office and was ultimately finalized on February 29, 1980. The desk review findings contained adjustments to expenditures totaling $46,592, but made no Medicare adjustment, consistent with HRS policy at that time. Based upon these adjustments, HRS' desk review established prospective reimbursement rates effective October 1, 1979. However, HRS advised Greynolds that these rates were "subject to change by any on-site audit." Greynolds used these rates for the period October 1, 1979 through August 31, 1980.
In June 1980, HRS' Supervisor of Audit Services requested additional information before the field audit of the 1979 cost report could be completed. Greynolds presumably furnished this information because the field work was completed in September 1980.
On June 24, 1981, Greynolds was notified by letter that the audit had been completed and was pending final review. The letter further advised Greynolds that "since this audit will supersede the desk review, the adjustments we made in our desk review letter of February 29, 1980, must stand until the on- site audit results are released."
On June 9, 1982, HRS' Fort Lauderdale Office advised Greynolds that its on-site audit of the 1979 cost report had been completed. The audit adjustments to the cost report had been increased from $46,592 to $803,592. Most of this was due to a Medicare adjustment in the amount of $654,282.
An exit conference was held by HRS' field representatives and Greynolds on June 21, 1982. None of the adjustments were changed as a result of this meeting. At that time, Greynolds first requested that it be allowed to file an interim rate change. Greynolds was advised, however, that the Office of Audit Services had no authority to approve such a request.
On September 23, 1982, the final audit report of Greynolds' 1979 cost report was issued. The audit concluded that the reported allowable expenses of Greynolds would be reduced by $725,953, resulting in an overpayment of $288,024. Most of this was, again, the result of the Medicare adjustment of $654,282. The report further advised Greynolds of the right to request that any audit adjustment in dispute be addressed in a hearing pursuant to Section 120.57, Fla. Stat.
Greynolds duly petitioned for a Section 120.57 hearing on the audit adjustments of September 23, 1982. This matter was forwarded to the Division of Administrative Hearings and docketed as Case No. 82-3208. At the outset of the hearing in that case, Greynolds withdrew its challenge to the Medicare adjustment of $654,282.
Following receipt of the final audit report of September 23, 1982, Greynolds requested, by letter dated November 2, 1982, an interim rate change for its fiscal year 1980, "in accordance with the Florida Title XIX Long Term Care Reimbursement Plan IVA-10." The reasons assigned by Greynolds for making the request were:
A substantial decrease in Medicare patient days in the fiscal year ended May 31, 1980 and the corresponding decrease in the Medicare adjustment; and
A change in the percentage of skilled and intermediate Medicaid patients.
The request was denied by HRS on January 12, 1983, on the ground that "interim rates will not be granted for a closed cost reporting period." HRS' denial failed, however, to inform Greynolds of its right to request a hearing.
On June 7, 1983, Greynolds renewed its request for an interim rate change for its fiscal year ended May 31, 1980. This request was denied October 12, 1983, on the ground that:
To grant an interim rate for a closed cost reporting period would be the same as making a retroactive payment to a nursing home whose costs exceed annual payment. Retroactive payments such as this are specifically prohibited by Section 10C-7.48(6)(1), Florida Administrative Code, which was in effect during the cost reporting period in question.
Greynolds filed a timely request for a Section 120.57(1), Fla. Stat., hearing.
The circumstances relied on by Greynolds to justify an interim rate request were primarily the result of a substantial decline in its Medicare patient census resulting from a staphytococcus bacterial infection among its patients. The bacterial infection arose in February 1979 and continued through May 31, 1980 (the end of Greynolds' 1980 fiscal year).
Greynolds is a dual provider facility, treating both Medicare and Medicaid eligible patients. The bacterial infection, which was contained within the Medicare section of the facility, resulted in a 45 percent decline in Medicare admissions during the period.
Under the Medicare and Medicaid reimbursement systems, a provider is required to first request payment from Medicare if the patient is Medicare eligible. Medicare reimburses at a higher rate than does Medicaid. Consequently, a substantial decrease in the number of Medicare patient days would result in a substantial decrease in the revenue received by the provider. Greynolds was fully aware of the change in the patient mix, as it occurred, during fiscal year 1980.
Greynolds opined that it did not apply for an interim rate request at that time because the prospective reimbursement rate which had been set October 1, 1980, based on its cost report for fiscal year 1979, was "adequate" until the Medicare adjustment was finally made. The facts, however, reveal a different motivation.
Under the Plan, whether on desk review or on audit, a Medicare adjustment is made to a provider's uniform cost report when developing a prospective reimbursement rate. The Medicare adjustment is made by excluding the Medicare patient days and Medicare costs from the provider's cost report, since these items are reimbursed by Medicare. The reimbursement rate is then established by adding an inflationary factor to the remaining patient days and costs. This reimbursement rate remains in effect until the provider files its next cost report.
If the provider maintains its costs under the reimbursement rate, it may retain the difference; if the provider's costs exceed the reimbursement rate, it will not be reimbursed for its inefficiency. The Plan is predicated on a cost containment methodology. It is designed to encourage efficient administration by nursing home providers when providing services to Medicaid recipients. The Plan does, however, permit an adjustment to a provider's prospective reimbursement rate ("an interim rate") when unforeseen events during that fiscal year occur which were not contemplated in setting the provider's prospective reimbursement rate predicated on the previous year's costs.
Greynolds was aware of the change, as it occurred, in its 1980 patient mix. Therefore, it could have applied for an interim rate adjustment at that time. To have done so, however, would have required it to make the Medicare cost adjustment to its 1979 cost report since its justification for an increase was the substantial decrease in Medicare patients and the corresponding decrease in the Medicare adjustment it was currently experiencing. To raise the Medicare adjustment issue was not, however, to its financial advantage. If it "escaped" the Medicare adjustment to its 1979 cost report, it would profit by the amount of that adjustment ($288,024).
Greynolds' request for an increase in its reimbursement rate for 1980, after the 1980 cost reporting period was closed, also raises the disquieting specter that Greynolds will be reimbursed for the same costs twice. Since each year's reimbursement rate is based on the previous year's cost report, to retrospectively pick one reimbursement period from the series of years is disruptive of all the rates which were subsequently established. Under the Plan, if a provider experiences a substantial decrease in Medicare patient days and costs for a cost reporting period, the Medicaid reimbursement rate for the next period, based on that cost report, would substantially increase. Accordingly, Greynolds' 1981 reimbursement rate would be reflective of the loss of Medicare patient days in 1980. To now ignore the effect 1980 costs had in establishing 1981 reimbursement rates, and to reimburse Greynolds for 1980 without regard to the reimbursement rate for the subsequent year, ignores reality.
Greynolds has on one other occasion availed itself of an interim rate request. On June 17, 1981, Greynolds applied for an interim rate for its fiscal year 1981. Greynolds' request was based on the fact that it had negotiated a union contract effective April 1, 1981, which resulted in a substantial increase in salaries for its employees. Since this factor was not reflected in its cost report for fiscal year 1980, upon which its current reimbursement rate was predicated, HRS, by letter dated July 29, 1981, granted Greynolds' request.
Greynolds asserts that the granting of its 1981 interim rate request occurred after the close of its 1981 cost reporting period and is, therefore, evidence that the denial by HRS of its interim rate request in this case is inconsistent and improper. HRS asserts that the granting of Greynolds' interim rate request in 1981 was proper, and that it was not granted outside a closed cost reporting period.
HRS interprets "cost reporting period" to be that period within which the provider must file its cost report for the previous fiscal year ("the cost report period"). Rule 10C-7.48(5)(c), F.A.C., in effect at the time, provided
A cost report will be submitted as prescribed by the Department to cover the facility's fiscal year, along with the facility's usual and customary charges to private patients receiving comparable medicaid service, within
90 days after the end of the cost report period.
According to HRS, the "cost reporting period" would be closed when the provider submits its cost report, which could be as much as 90 days after the "cost report period" had ended. HRS' interpretation is certainly reasonable, within the range of possible interpretations, and is therefore adopted.
The interim rate request, granted Greynolds in 1981, was not granted after a closed cost reporting period. The reimbursement rate in effect on June 17, 1981, had commenced September 1, 1980. This rate remained in effect until the interim rate was granted, which interim rate remained in effect until Greynolds submitted its cost report for fiscal year 1981. Greynolds' 1981 cost report was submitted August 31, 1981, and its new reimbursement rate was therefore effective September 1, 1981. Accordingly, the grant of Greynolds' 1981 interim rate request was not inconsistent with the position it has adopted in this case.
Had Greynolds "timely filed" its interim rate request in this case, HRS concedes the circumstances which gave rise to the request would have entitled the request to consideration under the provisions of Florida Title XIX Long Term Care Reimbursement Plan, paragraph IVA-10. However, since HRS rejected Greynolds' interim rate request as untimely, it never addressed, by review or audit, the accuracy or prospective impact of Greynolds' request.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties to, and the subject matter of, these proceedings.
Greynolds alleges that it is entitled to file an interim rate request for fiscal year 1980, notwithstanding the close of that cost reporting period or, alternatively, that HRS should be estopped to raise the timeliness of its
application because of HRS' delay in issuing the final audit of Greynolds' 1979 cost report and its adjusted reimbursement rates for fiscal year 1980. HRS asserts that Greynolds' request is barred as untimely under Rule 10C-7.48(6)(i), F.A.C., and that the facts do not support an estoppel.
Fule 10C-7.48(6)(i), F.A.C. provides in pertinent part:
Retroactive payment shall not be made to nursing homes whose cost exceeds annual payment.
HRS interprets Rule 10C-7.48(6)(i) to prohibit the granting of an interim rate for a closed cost reporting period since that would be the same as making a retroactive payment to a nursing home whose costs exceed annual payment. If Greynolds' request were granted, it would be reimbursed on both a prospective basis and on a retrospective cost settlement basis. This would be contrary to the Plan's purpose of containing health care costs for Medicaid recipients by prospectively reimbursing providers.
Were retroactive cost settlement permitted, the Plan would no longer be prospective in nature, would not aid in the containment of health care costs, and would not reward efficient operation. Retroactive payment would ring the death knell of cost containment. No longer would a health care provider be restrained. The provider could receive a prospective rate for each period and, after its actual costs were established, file for an "interim rate." This would simply convert the Plan from a prospective reimbursement system to a retrospective cost settlement system.
The Plan is not, however, unreasonable. It authorizes adjustments to prospective reimbursement rates under certain circumstances. Section IVA-10 of the Plan provides:
The prospectively determined provider's rate will be adjusted if:
The information supplied by a particular provider is later found to be incorrect
through error or intentional misrepresenta- tion;
The provider experiences extraordinary circumstances which may include but is not limited to riot, strike, civil insurrection, earthquakes, or floods; or
Other circumstances as such adjustments shall not exceed the class ceiling established for each level of care.
Greynolds argues that since the circumstances would have authorized it to file for an adjustment to its prospective reimbursement rate in 1980, and since there is no time limit specified in the Plan within which such a request must be filed, that its request in November 1981 was timely and proper. The simplicity of Greynolds' agreement is appealing, but it ignores the purpose of the Plan, and Rule 10C-7.48(6)(i), F.A.C.
The facts are impossible to ignore. Whether Greynolds wishes to call its 1982 request an application for "an adjustment to its prospective reimbursement rate" or "an interim rate," its request still seeks a retroactive
payment to a nursing home whose costs have exceeded annual payment. Greynolds' request is barred by Rule 10C-7.48(6)(i), F.A.C.
Rule 10C-7.48(6)(i), F.A.C., prohibits retroactive payment for nursing homes whose cost exceeds annual payment. HRS' interpretation of this rule to preclude an adjustment to a prospective reimbursement rate (an "interim rate") after the close of the cost reporting period in which such rate is being paid, is not only reasonable but is mandated by the purpose of the Plan and sheer logic. Obviously one can only amend a prospective reimbursement rate while it is prospective--while it is in effect. Once a new rate is set, the old prospective rate no longer exists. The Plan contemplates amendment to an existing rate only while that rate is being paid. To rule otherwise ignores the prospective nature of the Plan.
Greynolds had a clear point of entry in 1980 to apply for an adjustment to its existing prospective reimbursement rate. It was, at that time, fully cognizant of all facts necessary to request a change. 2/ Accordingly, Greynolds was at liberty to elect its course of conduct. It could stand silent, and hope the Medicare adjustment would not be caught, or it could apply for the adjustment. To apply for the adjustment would have required, however, that Greynolds itself make the Medicare adjustment to its 1979 cost report. 3/
Greynolds' decision not to file for an adjustment in 1980 was an informed business decision by which it looked to reap the Medicare adjustment windwall, but lost.
The creative accounting and gamesmanship which pervade this case, and the relief sought, would emasculate the Plan.
Protection of the public fisc requires that those who seek public funds act with scrupulous regard for the requirements of law; [Greynolds] could expect no less than to be held to the most demanding standards in its quest for public funds.
Heckler v. Community Health Services of Crawford, 104 S. Ct. 2218, 2225 (1984).
Greynolds argues that Greynolds Park Manor, Inc. v. Department of Health and Rehabilitative Services, DOAH Case Nos. 82-3208 and 82-3474 (Greynolds I) compels the conclusion that its request was timely filed. Notwithstanding any dicta to the contrary, Greynolds I does not control this case. Greynolds I simply afforded Greynolds a point of entry to request a Section 120.57(1), Fla. Stat., hearing on the denial of its interim rate request. The hearing officer in Greynolds I did not have before him an interim rate request, and could not pass on its propriety.
Finally, Greynolds asserts that if its "interim rate" request were untimely, HRS should be estopped from raising its timeliness because of the delay in issuing the final audit report on Greynolds' fiscal 1979 cost report. HRS is not estopped. There was no misrepresentation, no justifiable reliance, and no change of position which could have been caused by any representation of HRS. The record is devoid of the proof necessary to establish the requisite elements of an estoppel. See Greenhut Const. Co., Inc. v. Harry A. Knott, Inc., 247 So. 2d 517 (Fla. 1st DCA 1971).
RECOMMENDED that the relief requested by Petitioner, Greynolds Park Manor, Inc., be denied, and its petition dismissed with prejudice.
DONE AND ENTERED this 28th day of February, 1985, at Tallahassee, Florida.
WILLIAM J. KENDRICK
Filed with the Clerk of the Division of Administrative Hearings this 28th day of February, 1985.
1/ The Medicare cost adjustment removes the Medicare patient days and Medicare costs from the provider' s cost report, since these items are reimbursed separately by Medicare. The prospective reimbursement rate is then established based on the provider's remaining costs.
2/ Greynolds knew the Medicare adjustment had not been made at desk review and that it would be made by the audit in progress, if that audit were completed.
Greynolds also knew the change in its patient mix as it occurred.
3/ If Greynolds wished to contest the Medicare adjustment, it could have applied for an adjusted reimbursement rate and protested the Medicare adjustment at the same time. It is worthy of note, however, that Greynolds withdrew its protest to this Medicare adjustment in DOAH Case Nos. 82-3208 and 82-3474.
Michael J. Bittman, Esquire Dempsey & Slaughter, P. A. Suite 500, Dade Building 605 East Robinson Street Post Office Box 1980 Orlando, Florida 32802
Amy M. Jones, Esquire Assistant General Counsel Department of Health and
David H. Pingree, Secretary Department of Health and
