STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

MERCY HOSPITAL, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 85-0333H

)

HOSPITAL COST CONTAINMENT ) BOARD, DEPARTMENT OF INSURANCE, ) STATE OF FLORIDA )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to written notice a formal hearing was held in this ease before Larry J. Sartin, duly designated Hearing Officer of the Division of Administrative Hearings, from April 1, 1985, through April 3, 1985, in Tallahassee, Florida.

APPEARANCES

For Petitioner: John H. Parker, Jr., Esquire

PARKER, HUDSON, RAINER, DOBBS & KELLY

1200 Carnegie Building

133 Carnegie Way Atlanta, Georgia 30303

and

Robert A. Weiss, Esquire

PARKER, HUDSON, RAINER, DOBBS & KELLY

The Perkins House

118 North Gadsden Street, Suite 101 Tallahassee, Florida 32301

For Respondent: Douglas A. Mang, Esquire

Charles T. Collette, Esquire MANG & STOWELL, P.A.

Post Office Box 1019 Tallahassee, Florida 32302

STATEMENT OF THE CASE

Mercy Hospital, Inc. (hereinafter referred to as "Mercy") filed a Petition for Formal Administrative Hearing challenging its assignment to "group 9" by the Hospital Cost Containment Board (hereinafter referred to as the "HCCB"), for purposes of 1985 budget year review. Mercy contends that its grouping assignment is inappropriate as being arbitrary and capricious, contrary to statutory law, not supported by competent substantial evidence or violative of constitutional guarantees of administrative equal protection and due process.

Mercy has also filed a Petition to Determine the Invalidity of Rules 4D-1.03, 4D-1.12(1), and 4D-1.12(2), in which it seeks a final determination that the cited rules are invalid to the extent that they provide for the methodology for grouping hospitals for purposes of budget review. This challenge has been assigned case number 85- 0160R.

Case number 85-0160R and this case were consolidated for purposes of hearing. A separate Final Order in case number 85-0160R has been issued simultaneously with this Recommended Order.

In its Petition for Formal Administrative Hearing, Mercy alleged that the ultimate facts in this proceeding are:

that the grouping methodology currently employed by HCCB and the current assignment of Mercy to Group 9 are arbitrary and capricious and contrary to The Act, which requires meaningful comparisons of hospitals; that Mercy has been denied administrative equal protection and due process; that Mercy should be reassigned to another reformulated group that will allow a meaningful

comparison of Mercy with other hospitals; and that an appropriate adjustment to the gross revenue per adjusted admission screen is necessary prior to ranking of hospitals within Mercy's group in order to allow a meaningful comparison of Mercy to other hospitals within its group.

Based upon these allegations, Mercy seeks reassignment to a reformulated group and adjustment of the gross revenue per adjusted admission screen for geographic influences prior to ranking Mercy within its group. Mercy's request that it be assigned to a reformulated group is basically a challenge to the underlying methodology for grouping hospitals which depends entirely upon the ruling in case number 85-0160R.

The following witnesses testified at the hearing and were qualified as experts in the areas indicated:

For Mercy Area of Expertise Lawrence R. Murray Health care finance,

including rate control programs.

Jerry A. Mashburn Health care finance.

Rich Zimmerman, Ph.D Statistical analysis

and social science statistics.

Anthony C. Kraye, III Health care finance,

including the Florida Hospital Cost Containment Board program.

For HCCB

Allen Pearman Economics, regional planning and construction and implementation of

the HCCB grouping methodology.

Frank Fox, Jr., Ph.D. Economics, applied

statistical analysis and the State of Washington's grouping methodology.

Duane Meeter, Ph.D. Applied statistics.

Mercy also presented the testimony of Kenneth G. McGee and Diane Templeton. Mercy's exhibits 1-2 and 5-21 were received into evidence.

The HCCB also presented the testimony of James J. Bracher. HCCB exhibits 1 and 3-7 were received into evidence. A ruling on the admissibility of parts of HCCB composite exhibit 2 was reserved until after the receipt of post-hearing written arguments. HCCB exhibit 2 consists of

50 tabbed documents or sets of documents which are maintained in the records of the HCCB. Included in HCCB

exhibit 2 are minutes of meetings of the HCCB. Those minutes were accepted into evidence at the hearing.

The admissibility of the bulk of HCCB exhibit 2 has been objected to as inadmissible hearsay. Section 90.802, Florida Statutes (1983). The HCCB has argued that the documents are admissible under the public records exception to the hearsay rule of Section 90.803(8), Florida Statutes (1983), and under Section 120.58(1)(a), Florida Statutes (1984 Suppl.).

In addition to the minutes of HCCB meetings, the minutes of Research and Development Committee meetings and any documents issued by the HCCB or its staff are accepted into evidence. Minutes of Technical Advisory Panel meetings and the Technical Advisory Committee meetings and any other documents included in HCCB exhibit 2 are admitted to the extent that they supplement or explain other evidence.

The parties submitted proposed orders which included proposed findings of fact pursuant to Section 120.57(1)(b)4, Florida Statutes (1984 Suppl.). A ruling on each proposed finding of fact has been made either directly or indirectly in this Recommended Order, except where a proposed finding of fact has been rejected as subordinate, cumulative, immaterial, or unnecessary.

ISSUE

The issues in this case are (1) whether the methodology for grouping hospitals adopted by the HCCB pursuant to Sections 4D-1.03, 4D-1.12(1) and 4D-1.12(2), F.A.C., constitutes an invalid exercise of delegated legislative authority as being arbitrary or capricious and

1. whether the gross revenue per adjusted admission screen should be adjusted by the geographic price level index adjustment factor? Mercy has also raised an issue as to whether the grouping methodology is violative of constitutional guarantees of administrative equal protection and due process. This issue, however, is beyond the jurisdiction of the Division of Administrative Hearings.

   
   

   FINDINGS OF FACT

   1. As a part of its responsibilities, the HCCB is required to specify a uniform system of financial reporting for Florida hospitals. Section 395.507(1), Florida Statutes (1984 Suppl.). So that meaningful comparisons of data reported can be made, the HCCB is required by Section 395.507(2), Florida Statutes (1984 Suppl.), to provide a method of grouping hospitals.

      
      

   2. Pursuant to Section 395.509(1), Florida Statutes (1984 Suppl.), every Florida hospital is required to file a budget with the HCCB for approval. Section 395.509(2), Florida Statutes (1984 Suppl.), requires that the budgets of certain hospitals be automatically approved based upon a comparison of the gross revenue per adjusted admission of hospitals within groups established pursuant to Section 395.509(4)(a), Florida Statutes (1984 Suppl.). The language of Section 395.509(4)(a), Florida Statutes (1984 Suppl.), which requires the HCCB to establish a method of grouping hospitals, is identical to the language of Section 395.507(2), Florida Statutes (1984 Suppl.).

      
      

   3. The grouping methodology required by Sections 395.507(2) and 395.509(4)(a), Florida Statutes (1984 Suppl.), is included in Chapter V, Section B of the Hospital Uniform Reporting System Manual (hereinafter referred to as the "Manual"). This methodology has been incorporated by reference in Sections 4D-1.03 and 4D- 1.12(1) and (2), F.A.C., as the method of grouping hospitals for purposes of the uniform system of financial reporting under Section 395.507, Florida Statutes (1984 Suppl.), and the comparison of gross revenue per adjusted admission for purposes of budget review under Section 395.509, Florida Statutes (1984 Suppl.).

      
      

   4. After hospitals are grouped, Chapter V, Section C of the Manual provides that the screens used to identify hospitals subject to further review are to be adjusted by adjustment factors. Two adjustment factors are provided; one is a geographic price level index adjustment factor.

      
      

   5. Mercy is a not-for-profit corporation which operates a general acute care hospital with 550 licensed beds located in Dade County, Florida. Based upon the application of the HCCB's grouping methodology as contained in Chapter V, Section B of the Manual, Mercy was assigned to group 9. Mercy was notified of its assignment by a memorandum dated October 10, 1984.

      
      

   6. Mercy challenged its group assignment by letter dated November 13, 1984. In its letter, Mercy challenged the grouping methodology used by the HCCB and requested a "more relevant and objective method of establishing the weights utilized in the grouping methodology . . . be developed." Further, Mercy requested that "new weights be applied and that the groups be reformulated," and that "the screening value, Gross Revenue per Adjusted Admission, be adjusted for geographic influences prior to ranking, as has been done in previous budget reviews."

      
      

   7. Mercy presented its reassignment request before the HCCB on December 13-14, 1984. The HCCB orally rejected Mercy's request. By memorandum dated December 19, 1984, the HCCB denied in writing mercy's request for reassignment.

      
      

   8. Whether Mercy should be reassigned to a reformulated group depends upon whether Mercy's challenge to Sections 4D-1.03 and 4D-1.12(1) and (2), F.A.C. is successful. If that challenge is not successful, the grouping methodology was properly applied to Mercy.

      
      

   9. The Final Order issued simultaneously with this Recommended Order holds that the grouping methodology is not arbitrary and capricious and therefore, the HCCB's adoption of Sections 4D-1.03 and 4D-1.12(1) and (2), F.A.C., does not constitute an invalid exercise of delegated legislature authority. Mercy's assignment to group 9 was therefore proper.

      
      

   10. Based upon the evidence presented at the hearing, it does not appear that the point at which the geographic price level index adjustment factor is to be applied to Mercy has been reached. Despite the fact that the evidence shows that the HCCB has decided not to apply this adjustment factor, even though it is specifically provided for in the HCCB's own Manual, the HCCB has not yet failed to do so in Mercy's case. Therefore, the question of whether the geographic price level index adjustment factor should be applied to Mercy's 1985 budget is premature.

       
       

       CONCLUSIONS OF LAW

       
       

   11. The Division of Administrative Hearings has jurisdiction of the parties to, and the subject matter of,

       this proceeding. Section 120.57(1), Florida Statutes (1984 Suppl.).

       
       

   12. The HCCB's grouping methodology is not arbitrary and capricious. The HCCB did not invalidly exercise its delegated legislative authority in adopting Sections 4D-

       1.03 and 4D-1.12(1) and (2), F.A.C. See Mercy Hospital, Inc. v. Hospital Cost Containment Board, DOAH Case Number 85-0160R, June 28, 1985. Therefore, Mercy's assignment to hospital group 9 was not arbitrary and capricious.

       
       

   13. The HCCB has not refused to adjust Mercy's gross revenue per adjusted admission screen for geographic influences. Therefore, Mercy's request that the adjustment be made is premature.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is

RECOMMENDED that the request for reassignment to a reformulated hospital group and the request to adjust the gross revenue per adjusted admission screen for the geographic price level index adjustment factor be denied.

DONE and ENTERED this, 28th day of June, 1985, in Tallahassee, Florida.

LARRY J. SARTIN

Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 28th day of June, 1985.

COPIES FURNISHED:

John H. Parker, Jr., Esquire PARKER, HUDSON, PAINER

DOBBS & KELLY

1200 Carnegie Bldg.

133 Carnegie Way Atlanta, Georgia 30303

James J. Bracher Executive Director

Hospital Cost Containment Board Woodcrest Office Park

325 John Knox Road, Building L, Suite 101 Tallahassee, Florida 32303

Douglas A. Mang, Esquire Charles T. Collette, Esquire MANG & STOWELL, P.A.

P.O. Box 1019

Tallahassee, Florida 32302

Robert A. Weiss, Esquire PARKER, HUDSON, RAINER,

DOBBS & KELLY

The Perkins House, Suite 101

118 N. Gadsden Street Tallahassee. Florida 32301

Docket for Case No: 85-000333

Orders for Case No: 85-000333