STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

THE HOPE CENTER. INC. )

)

Petitioner, )

)

vs. ) CASE NO. 84-4454

)

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 October 31 and November 1, 1985, in Miami, Florida.

APPEARANCES

For Petitioner: Alice K. Nelson, Esquire

518 Tampa Street, Number 214 Tampa, Florida 33602

For Respondent: R. S. Power, Esquire

Building One, Room 402 1323 Winewood Boulevard

Tallahassee, Florida 32301 BACKGROUND

In this proceeding, petitioner, The Hope Centers, Inc., seeks to challenge the assessment of a $62,631 liability under the Developmental Services Program imposed after an audit by respondent, Department of Health and Rehabilitative Services. The audit period includes the two years ending September 30, 1983, and the assessment relates to "tuition" payments paid by families of nineteen clients to petitioner during the audit period.

Petitioner disputed the audit findings and requested a formal hearing pursuant to Subsection 120.57(1), Florida Statutes. The matter was referred to the Division of Administrative Hearings on December 21, 1984, with a request that a Hearing Officer be assigned to conduct a formal hearing.

By notice of hearing dated January 25, 1985, a final hearing in the case was scheduled for April 21, 1985, in Miami, Florida. At the request of respondent, the final hearing was rescheduled to July 2 and 3, 1985, at the same location. By agreement of the parties, the matter was rescheduled to October 31 and November 1, 1985, in Miami, Florida. At final hearing, petitioner presented the testimony of Beverly Steinberg, Dr. Judy Holland, Barbara Glaser, Bernard I. Miller, Connie Hietlaf and Raquel Abell. It also offered petitioner's exhibits 1-3, 5-23 and 25-42. All were received in evidence. Respondent presented the

testimony of Paula Raker, Max B. Rothman, Stanley W. Swindling, Jr., John Douglas Hillhouse and Orlando Garcia. It also offered respondent's exhibits A-

1. All were received in evidence except exhibits Q and R.

   
   

   The transcripts of hearing (three volumes) were filed on December 2, 1985.

   Proposed findings of fact and conclusions of law were filed by respondent and petitioner on December 24, 1985, and January 21, 1986, respectively. 1/ A ruling on each proposed finding of fact has been made in the Appendix attached to this Recommended Order.

   
   

   As clarified through a prehearing stipulation and further narrowed at the outset of the hearing, the issue herein is whether petitioner's reimbursement for participation in the Developmental Services Program should have been reduced by $62,631 for the two fiscal years ended September 30, 1983. 2/

   
   

   Based upon all of the evidenced the following findings of fact are determined:

   
   

   FINDINGS OF FACT

   
   

   1. Petitioner, The Hope Center, Inc. (Hope Center), is a nonprofit corporation which operates a retardation facility at 666 S.W. 4th Street, Miami, Florida. At all times relevant hereto, petitioner was a participant in the Developmental Services Program (Program) administered by respondent, Department of Health and Rehabilitative Services (HRS). Under this Program, Hope Center provided a full array of living and therapeutic services to HRS retarded clients, including long term residential care services (LTRC) pursuant to a contract executed by Hope Center and HRS. The contract specifies a rate of reimbursement for all services provided by Hope Center.

      
      

   2. Under the above agreements Hope Center is reimbursed a monthly rate per client for LTRC services provided to retarded clients at its facility. To claim reimbursement, Hope Center must submit a monthly invoice to HRS on HRS Form 3029. It did so during the two fiscal years ended September 30, 1983, and was reimbursed for the amounts reflected on the forms. In 1984, HRS performed an audit of Hope Center's records. This ultimately resulted in the issuance of an audit report on October 17, 1984. The report found that Hope Center had collected fees from its HRS clients for services already paid for by HRS, and had failed to reflect these fees as third party payments on Form 3029. If they had been reported as suggested in the report, Hope Center's reimbursement would have been reduced during the applicable twenty-four month period by $62,631.00. That same date, HRS issued proposed agency action demanding repayment of that amount. The proposed agency action precipitated the instant proceeding.

      
      

   3. Hope Center, which was once known as Mary Black Knight School, has been operating since 1955 in the Miami area. It began accepting retarded clients long before the State began its assistance program, and when HRS first entered the field in the 1970s, Hope Center willingly accepted HRS clients, some without any reimbursement. Hope Center presently accepts both HRS clients and private pay clients. During the audit period, Hope Center was serving approximately eighty HRS clients.

      
      

   4. When Hope Center accepted private pay clients exclusively, such clients either paid their own fees or had their expenses covered by donations raised from the general public. In addition, many years ago a parent offered Hope

      Center's executive director, Judy Holland, a voluntary donation to help defray a part of her child's expenses. Holland called this donation a "tuition" payment, and from then on used either that term or "contribution" to describe any donations received from the families of clients.

      
      

   5. Over the years a policy evolved whereby, at the end of the enrollment process, Hope Center began requesting donations (or tuition payments) from parents of new clients enrolling at the school. After advising the parents of the cost of care, the parents were then asked to consider the matter, and suggest an amount that they could afford each month. The donations were not mandatory, and the child was always accepted at the school regardless of the parent's decision. No financial statements were taken from the parents, and once a parent pledged to make a monthly donation, the parent was not subject to formal collection procedures or legal action, or the child dismissed, if payments were not made as promised. However, the school acknowledges that it made written requests to the parent if payments lagged and on at least one occasion Holland was urged by her board of directors to obtain some proof of income from the parents, presumably to verify whether the donation suggested by the parents, or lack thereof, was reasonable and justified.

      
      

   6. When Hope Center began accepting state clients, the practice of receiving "tuition" payments (now "contributions") continued where those parents could afford to do so. Again, they were voluntary, and had no bearing on whether a client received treatment. During the audit period in question, such payments were made by the families of nineteen HRS clients and represented approximately 20 percent of Hope Center's operating budget. One such client requested HRS to waive its HRS fee because of financial difficulties caused in part by having to also make a tuition payment to Hope Center. Her appeal was denied on the ground she was not obliged to pay tuition to Hope Center. The parent later voluntarily withdrew her son from Hope Center for both personal and financial reasons.

      
      

   7. On August 24, 1982, Holland wrote a letter to all parents in an effort to clarify the distinction between social security or supplemental income checks and tuition payments. The letter has been received in evidence as petitioner's exhibit 11. It was prompted because some parents were sending Hope Center their government checks and designating a portion of the check as the tuition payment. The letter pointed out that HRS required the entire social security or supplemental income check to be turned over to HRS. It also advised the parents that because "Hope Center receives no portion of this money, we must insist on payment of your tuition as well. If this will present a hardships a copy of your income tax statement will be required so that an appropriate sliding scale can be determined." Only one such tax return was ever filed by a parent.

      
      

   8. Hope Center did not credit the tuition payments as an offset to the service payments on Form 3029 since it understood third party benefits to be social security benefits or insurance benefits received by the parents of a client or paid directly to Hope Center as representative payee. In that event, such payments were properly credited on the form.

      
      

   9. Respondent's instructions on the use of the form were extremely limited. A Hope Center representative attended one HRS meeting where instructions were given, but the definition of third party payments was not discussed. There is no direct evidence of any other HRS meeting concerning this subject. At no time during the audit period was any member of the Hope Center staff specifically instructed regarding the proper definition of third party payments.

   10. Although Hope Center prepared the voucher, no payments could be made until the voucher had been signed by the HRS social worker assigned to Hope Center. In addition, at least one other HRS official was required to sign the voucher.

       
       

   11. In August 1981, the HRS District II Program Supervisor wrote a memorandum explaining HRS policies applicable to all Long Term Care providers, including Hope Center. Attached to this memorandum was an excerpt from an HRS Client Services Manual which explained, inter alia, the difference between tuition payments and contributions. However, due to a mail mix-up, or some other unexplained reason, Hope Center did not receive the documents.

       
       

   12. On numerous occasions Hope Center requested manuals, but none were received until after the audit period. At the same time, there is evidence establishing that the then District II program manager was frequently inaccessible during that period of time; and would not return telephone calls. Moreover, his staff could not answer vendor questions concerning the Program. This contributed to Hope Center's lack of knowledge as to whether it was properly filling out Form 3029. Finally, there is evidence (petitioner's exhibit 36) indicating that during the audit period the Program itself was being mismanaged by local HRS representatives.

       
       

   13. On September 12, 1983, the District II HRS program supervisor advised Holland by letter that one of HRS's concerns with the Hope Center program was "the accounting of donations/contributions made by parents and use of said monies." These concerns apparently arose after a quality assurance review of petitioner's facility was made by HRS auditors in April 1983. Prior to that time, HRS had conducted similar monitoring visits on several occasions. On at least one of those visits, the auditors were shown client ledger cards on which the word "tuition" was clearly reflected. Even so, HRS auditors did not pursue the matter, make inquiry about the charges, or advise Hope Center that it was improper. According to the then District II administrator, although the visits were not full scale audits, this lack of action was inappropriate, for the word "tuition" should have prompted further inquiry on the auditors' part. Therefore, petitioner was justified in concluding that because HRS auditors did not question the item, it was recorded in a proper manner. After receiving the September 12 letter, Hope Center immediately called a meeting of parents to explain this apparent change in policy, and stopped billing parents for "tuition" payments effective October 1, 1983. All such subsequent payments received from parents have been characterized as donations. Thereafter, HRS advised Hope Center by letter dated October 14, 1983, that "tuition charges to parents are forbidden under HRS Rules and Regulations," and that "[i]f donations or contributions are asked of parents it must be made on a Voluntary basis and appropriate documentation of such recorded in [the] accounts." That letter represented the first written notice by HRS to Hope Center specifically stating that its treatment of tuition payments was incorrect. Until that time, the evidence supports a finding that Hope Center believed its prior practice of not treating tuition payments as third party benefits on Form 3029 was in accord with HRS regulations.

       
       

   14. Paragraph 2-2(o.) of HRS Manual 55-7 defines third party benefits as follows:

       
       

       Any payments received or owing to the client, responsible party, or the Department as reimbursement for the cost of services pro-

       vided by the Department. Such benefits included but are not limited to, commercial insurance, Civilian Health and Medical Pro- gram of the Uniformed Services (CHAMPUS), Medicare, and Medicaid. A personal allowance may not be provided a client from third party benefits. Cash benefits which are specifi- cally designated to meet the current needs of the clients will be treated as third party benefits. A personal allowance not in excess of $40 may be provided to the client from these payments. Cash benefits will be re- ferred to in this manual as benefit payments, to distinguish them from other third party benefits.

       
       

       Cited by the Manual as examples of third party payments are social security retirement, survivors and disability insurance, supplemental security income, veteran's benefits black lung benefits and railroad retirement. At the same time, HRS Manual 160-2 defines a donation in the following manner:

       
       

       A donation is defined as a gift or contribu- tion as to a charitable organization, etc.; i.e., anything given to the facility for which services rendered to a particular client are not contingent upon receipt of the donation. (Emphasis added)

       
       

       According to the same Manuals a fee is distinguished from a donation because "a fee is an amount paid for services rendered to a particular clients" and includes "payment asked or given for professional services, admissions, licenses, tuition, etc." There is also a definition of third-party benefits in both Subsection 402.33(1)(f), Florida Statutes, and Rule 10-6.01(17), Florida Administrative Code. Neither definition is as explicit as those appearing in the Manuals. Based upon the definitions in the Manuals, it is found that the tuition payments fall within the category of a donation, as set forth in HRS Manual 160-2. Moreover, the fact that the donations were called "tuition" payments does not change their character, since the "services rendered to a particular client (were) not contingent upon receipt of the donation."

       
       

   15. There was a great deal of confusion and misunderstanding on the part of HRS as to how donations or tuition payments, if voluntary, should have been accounted for by Hope Center during the audit period. For example, the District II legal counsel issued an opinion on November 15, 1983, holding that donations were permissible so long as "the care [the] child receives is not dependent on such contributions donation or pledge." This opinion was disseminated to area vendors, including Hope Center. On the other hand, the District 10 internal audit supervisor interpreted the regulations to mean that any voluntary donation must be credited against the service payment unless the donation exceeded the service payment. Conversely, the District 11 developmental services program supervisor was under the impression that if a truly voluntary donation was made by a parent, it did not have to be offset or credited against the service payment on Form 3029. This understanding was also conveyed by the HRS District

       11 residential services director.

       
       

   16. It was also established that not only was there confusion by HRS on the treatment of donations or voluntary payments, there existed similar

       confusion and misunderstanding by the agency as to the billing and collecting of actual third party benefits (social security payments). This is evidenced by the fact that during the period in question District 11 was under a "corrective action" to rectify its problems in the collection of such fees, and the District had actually sent a bill to the parents of a deceased client. Moreover, the agency designated itself as representative payee for all such checks, but such action resulted in the monies going into the general revenue fund instead of directly to HRS. Finally, there is evidence that HRS frequently sent incorrect bills to parents for monies due the agency.

       
       

   17. There are around fifty facilities in District 11 that serve retarded clients. At least three or more have received "tuition" payments from parents of clients during the years 1982 and 1983. None offset the tuition against the service payment reimbursement on their Form 3029. According to HRS, it is awaiting the result of this "test" case until deciding whether to seek reimbursement from those vendors.

       
       

   18. The HRS reimbursement (around $418 per month) for LTRC clients does not cover all expenses incurred by a facility in providing services. This is true even if state funds from other contracted services are included. Indeed, an HRS representative described the state reimbursement as only enough to provide a "bare-bones" type of service. 3/ In the case of Hope Center, the facility provides speech, music and recreational therapy, and professional and parent counseling, in addition to the services to be provided under its state contract. The estimated cost of serving each client runs between $1,600 and

       $2,200 per month. The donations (or tuition payments) are designed to defray the cost of providing these additional services, and to enhance the quality of care provided the clients.

       
       

       CONCLUSIONS OF LAW

       
       

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

       
       

   20. The principal issue herein is whether the "tuition" payments received by Hope Center are third-party benefits that should be used as a credit towards reimbursement payments received by Hope Center from HRS for providing developmental services to HRS clients. An ancillary issue raised by Hope Center is that, even if the tuition payments are third party benefits, HRS is nonetheless estopped from assessing liability for said payments because of its acquiescence and tacit approval of such payments over a period of many years.

       
       

   21. Subsection 402.33(2), Florida Statutes, imposes the duty upon HRS to "either charge, assess, or collect, or cause to be charged, assessed, or collected, fees for any service it may provide its clients either directly or through its agencies or contractors . . . ." Pursuant to this duty, HRS has

       sought to collect tuition payments by characterizing them as third party benefits. The term "third party benefits" is defined by both statute and rule. Subsection 402.33(1)(f), Florida Statutes, defines the term as follows:

       
       

       1. "Third-party benefits" means moneys re- ceived by or owing to a client or responsible party because of the client's need for or receipt of services such as those provided by the department. Such benefits include, but are not limited to, benefits from insurers, Medicare, and workers' compensation.

          
          

          In addition, Rule 10-6.01(17), Florida Administrative Code, defines the same term in the following manner:

          
          

          Any benefits received or owing to the client's spouse or parents of a minor child:

          1. Which is [sic] specifically designated to meet the cost of maintenance and/or service(s) will be used to reduce the client's liability for the maintenance and/or service(s) fee;

          2. Which is [sic] not designated to meet the cost of maintenance and/or service(s) will be included in the determination of gross income.

             
             

             The statute appears to define third party benefits to be social security payments and the like. However, the statute includes the provision that the three examples contained therein are not exclusive, but may include other payments as well. 4/ In this regard, HRS has drafted (but not adopted by formal rulemaking) various manuals which provide further insight into its policy.

             
             

   22. The manuals, which have been received into evidence as HRS exhibits B and D, clearly provide that voluntary gifts and donations are not third party payments, and need not be deducted from a vendor's gross rate of payment. The manuals further establish that if payments are required for services rendered, they are properly classified as third party benefits, otherwise, they constitute gifts and donations which are not subject to HRS's fee collection procedures.

       
       

   23. The question then arises whether the tuition payments are voluntary donations, or whether they were required for services rendered. It is immaterial to the undersigned as to what the payments were called, for the real question is whether they were truly voluntary, and not a condition to the receipt of services. By a preponderance of the evidence petitioner has shown that the payments were not mandatory, and were not a prerequisite to enrollment in the school. Moreover, no child was ever dismissed because his parents failed to make a pledge, or to honor one once a pledge had been made. 5/ Therefore, it is concluded that the payments were voluntary donations, were not required to be offset against service payments, were properly omitted from Form 3029, and that Hope Center is not liable for repayment of $62,631 to the agency.

       
       

   24. In light of the above conclusion, it is not necessary to reach the question of whether estoppel lies against the agency.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that petitioner's Form 3029, for the two fiscal years ending

September 30, 1983, be approved, and that no liability be assessed against petitioner for tuition payments received during those years.

DONE and ORDERED this 29th day of January 1986, in Tallahassee Florida.

DONALD R. ALEXANDER

Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

FILED with the Clerk of the Division of Administrative Hearings this 29th day of January 1986.

ENDNOTES

1/ Proposed findings of fact were originally due on December 22, 1985. However, petitioner requested an extension of time to and including January 21, 1986.

2/ The agency initially claimed it was due $66,101.00 in overpayments. The parties later agreed the liability, if valid, was $62,631.00.

3/ For examples the LTRC contract is designed, in the words of an HRS witness, to provide each client with "three hots and a cot." Translated, this means three hot meals per day and a bed.

4/ The rule is of little value in this controversy, for it sheds no light on the issues, and there was no testimony as to how the language therein is construed.

5/ Hope Center's procedure of sending notices to parents when payments lagged, and suggesting that donations be made at the initial interview, tend to support the agency's position that the payments were not voluntary. However, in the absence of any evidence that the payments were a condition to receiving services, the greater weight of evidence supports a conclusion favorable to petitioner.

APPENDIX

Petitioner:

1. Covered in finding of fact 1.

2. Partially covered in findings of fact 3 and 4.

3. Rejected as unnecessary.

4. Rejected as unnecessary.

5. Covered in finding of fact 3.

6. Covered in finding of fact 3.

7. Rejected as duplicating proposed finding of fact 5.

8. Covered in finding of facts 3 and 4.

9. Covered in finding of fact 4.

10. Covered in finding of fact 4.

11. Covered in finding of fact 4.

12. Covered in finding of fact 14.

13. Rejected as unnecessary.

14. No proposed finding 14; submitted.

15. Covered in findings of fact 1 and 2.

16. Covered in finding of -fact 2.

17. Covered in finding of fact 8.

18. Rejected as unnecessary.

19. Rejected as unnecessary.

20. Covered in- finding of fact 9.

21. Covered in finding of fact 10.

22. Covered in finding of fact 9.

23. Covered in finding of fact 11.

24. Partially covered in finding of fact 12.

25. Covered in finding of fact 12.

26. Covered in finding of fact 12.

27. Covered in finding of fact 13.

28. Rejected as unnecessary.

29. Covered in finding of fact 16.

30. Covered in finding of fact 16.

31. Covered in finding of fact 16.

32. Covered in finding of fact 16.

33. Covered in finding of fact 16.

34. Rejected as unnecessary.

35. Rejected as unnecessary.

36. Partially covered in finding of fact 13.

37. Covered in finding of fact 13.

38. Covered in finding of fact 13.

39. Covered in finding of fact 13.

40. Covered in finding of fact 6.

41. Covered in finding of fact 13.

42. Covered in finding of fact 13.

43. Rejected as unnecessary.

Respondent:

1. First two sentences covered in findings of fact 1 and 3. The last sentence is rejected as being contrary to the greater weight of evidence.

2. Covered in finding of fact 6.

3. Covered in findings of fact 1 and 2.

4. Covered in findings of fact 1 and 18.

5. Rejected as unnecessary.

6. Rejected as unnecessary.

7. Partially covered in findings of fact 5, 6, and 7. Conclusionary statements that payments were third party benefits are rejected as being contrary to the greater weight of evidence.

8. Covered in findings of fact 11, 12 and 14.

9. Covered in finding of fact 13.

10. Covered in finding of fact 13.

11. Partially covered in finding of fact 13.

12. Covered in finding of fact 12.

13. Covered in finding of fact 11.

14. Rejected as being contrary to the weight of the evidence.

COPIES FURNISHED:

Alice K. Nelson, Esquire

518 Tampa St., No. 214 Tampa, Florida 33602

R. S. Power, Esquire Building One, Room 402 1323 Winewood Blvd. Tallahassee, Florida 32301

David S. Pingree, Secretary 1317 Winewood Blvd.

Tallahassee Florida 32301

Docket for Case No: 84-004454

Orders for Case No: 84-004454