STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

)

RECOMMENDED ORDER

Final hearing in the above consolidated cases was held on November 9, 1988, in Orlando, Florida, before Mary Clark, Hearing Officer from the Division of Administrative Hearings.

The parties were represented as follows:

For Petitioner: James A. Burt, Esquire

Scott A. Satell, Esquire BURT & GUSTINO, P.A.

118 East Jefferson Street Orlando, Florida 32801

For Respondent: Jay Adams, Esquire

Richard Bellak, Esquire

101 North Monroe Street Tallahassee, Florida 32301

Background and Procedural Matters

Orlando General Hospital (Orlando General) is a licensed hospital and a participant in the Florida Medicaid program administered by the Department of Health and Rehabilitative Services (HRS).

As a result of its utilization review of Medicaid admissions at Orlando General for the 1986 calendar year, HRS informed the hospital that it was disallowing Medicaid costs associated with eleven patients, all admitted to Orlando General's 28-day inpatient chemical dependency program.

In each case Orlando General timely petitioned for a formal hearing to challenge the intended disallowance. The cases were consolidated as reflected above.

HRS' motion to dismiss the petitions was denied after oral argument in an order dated June 20, 1988.

Additional motions were addressed at the commencement of the final hearing as follows: HRS' motion to dismiss Dr. Randall Greene as a party and motion to use initials, rather than patient names were granted, without objection.

Orlando General's motion to preclude evidence related to the identity of personnel and procedures of the Professional Foundation for Health Care, Inc. (the PRO) was granted. HRS was in substantial agreement with the motion and has taken the consistent position that names of reviewers and procedures used by the PRO are confidential, as required by federal rules governing the Medicaid program. For that reason, HRS had opposed any pre-hearing discovery of those matters.

Orlando General's motion for recovery of fees and costs connected with the cancellation of a deposition of Dr. Levi Cohen was denied.

Orlando General presented the testimony of two witnesses: Randall Greene, D.O., the admitting and treating physician; and Daniel Glennon, M.D., an expert witness in the treatment of alcohol and substance abuse patients.

HRS presented the following witnesses: Nedra Mansager, R.N., a nurse consultant in HRS' peer review section for the Medicaid program integrity office; Peter Macaluso, M.D., an expert witness in the treatment of alcohol and substance abuse patients; and Lee Nasehi, an HRS human services program specialist in the alcohol, drug and mental health program office.

The parties stipulated to the admission of Petitioner's Composite Exhibit #1, the patients' records; and Respondent's Exhibit #1, a utilization review screen.

After preparation of the transcript, both parties submitted proposed recommended orders. The findings of fact proposed by each are addressed in the appendix attached to this recommended order.

ISSUES

As stipulated by the parties at the commencement of the hearing, the following cases were settled and are no longer at issue in the proceeding:

The remaining cases and amounts at issue are:

AMOUNT RETROACTIVELY

AMOUNT PAID DENIED BY PATIENT CASE NO. BY MEDICAID MEDICAID

The parties stipulated that all the patients were personally eligible for Medicaid and that the disallowances were not based on lack of quality of care or Orlando General's failure to meet all quality standards. (Prehearing Stipulation, filed August 29, 1988)

The issue for determination is whether in the cases above (except for A. J.) the admission and treatment at Orlando General were "medically necessary". For A. J., HRS contests the medical necessity of the last three days only.

FINDINGS OF FACT

1. Orlando General is a state-licensed acute-care hospital in Orange County, Florida. Orlando General participates in the Florida Medicaid program.

   
   

2. Randall Greene, D.O., is now, and was at all relevant periods, Director of Orlando Generals 28-day inpatient chemical dependency (CD) program. The program treats both alcohol and drug abuse patients. Dr. Greene is certified as an addictionologist by the American Society of Physicians Treating Alcohol and Chemical Dependencies.

   
   

   Dr. Greene has no pecuniary interest in admitting Medicaid patients to the CD program. He is reimbursed by Medicaid, but only at 10 to 20 percent of his usual and customary fee, an amount which does not cover his administrative costs of the paperwork for Medicaid. In addition, the unit has 26 beds. The acceptance of a Medicaid patient precludes the use of that bed for a commercially insured, more lucrative, patient.

   
   

3. In the first 72 hours after admission to Orlando General's CD program, the patient is evaluated to see whether he or she is appropriate for continued hospitalization or whether it is possible to simply complete detoxification and refer the patient to an outpatient program. The evaluation includes the taking of a history, a physical examination and a psychosocial evaluation by a certified counselor. In a staffing after the evaluations the decision is made to retain the patient in the

   program, or to refer the patient to a residential or outpatient program.

   
   

4. The goals of Orlando General's CD program are medical detoxification, medical evaluation and treatment of ancillary medical problems and introduction to the 12-step recovery program called Alcoholics Anonymous (AA) or Narcotics Anonymous (NA). The patient is also introduced to the disease concept of chemical dependency and is provided the tools to lead a chemical-free life style. Upon discharge, the patient is often referred to a non-hospital residential program or to an outpatient program.

   
   

5. The patients who are admitted to Orlando General's CD program are "end- state" abusers. This means their disease of alcoholism or drug abuse has progressed to the stage where they have lost control and the alcohol or drug becomes an obsession. Liver disease and other medical problems are prevalent. They are unable to function socially, are morally degraded, and have impaired thinking. They are paranoid and experience hallucinations. If untreated, the next stage is death.

   
   

6. F. C. was a 36-year old male patient who was treated at Orlando General for chemical dependency from December 12, 1986, until January 2, 1987. He used heroin, cocaine and marijuana and was spending from $70 to $300 per day on his habit. He was inducing the heroin and cocaine intravenously. He had been involved in criminal activity to support his addiction and had been in prison. Prior outpatient treatments were unsuccessful.

   
   

   In the initial medical work-up he tested positive for AIDS-related complex and for hepatitis.

   
   

   He was placed on detoxification using methadone, but did not tolerate the drug and was switched to Catapres. Catapres must be closely supervised, as it can cause life-threatening low blood pressure.

   
   

   In addition to his detoxification and his counselling, F. C. received symptomatic treatment by a specialist for his infectious diseases. He was maintained on body and fluid precautions. He was progressing and had accepted the fact that he would need additional treatment in a residential setting after discharge from Orlando General; however, he was confronted in a group session with regard to his need to avoid contact with other patients involving exchange of bodily fluids. He then left the hospital against medical advice. (Petitioner'S Exhibit 1, discharge summary).

   
   

7. C. M. was a 28-year old female who was treated at Orlando General from October 10, 1986, until October 14, 1986. She was unemployed and spending $200 a day on whisky and free- base cocaine.

   
   

   She had syphilis and gonorrhea and a trichomonas infection.

   She had blood in her urine and was malnourished. She also had a skin infection. She suffered from organic brain syndrome and experienced memory loss.

   
   

   C. M. was medically detoxed from the alcohol and cocaine. She was treated for the skin disease, venereal disease and the gynecological condition.

   
   

   She resisted change in her thinking and behavior and did not bond with the other patients. She was given a 3-hour pass when she said that she had to go sign some papers for her 2- month old baby. She did not return, and was discharged against medical advice.

   
   

8. D. M. was a 27-year old female who was treated at Orlando General for chemical dependency from August 6, 1986, until August 24, 1986. She was addicted to cocaine and reported free-basing. At the time of her admission, D.

   M. complained of a variety of medical problems, including abdominal pain, pain on urination, constipation, and a vaginal discharge. She gave a history of thyroid disease and a deformed pancreas. She was also malnourished. She was treated for the urinary tract infection and vaginal infections.

   
   

   She did not require "psycho-pharmacological intervention" for her detoxification. The radiology report in her record revealed an unremarkable gall bladder and pancreatic ultrasound. Her progress notes indicate that she frequently was excused from counselling sessions when she complained of illness. A progress note dated 8/23/86 reflects that she was not cooperating: "...seems to feel ill everytime there is a group session or activity. May be reluctant to attend meetings...". (Petitioner's Composite Exhibit #1).

   
   

   D. M. was therapeutically discharged on August 24, 1986. Dr. Green's discharge summary states that she was difficult to deal with and failed to make significant changes.

   
   

9. A. J. was a 24-year old male patient who was treated at Orlando General from July 9, 1986, until July 23, 1986. He was dependent on cocaine and used it intravenously and by smoking. He had a $100 to $300 a day habit and was also drinking. He had a history of blackouts. His record does not document the number of medical problems experienced by the other patients.

   
   

   A. J. was defiant and did not cooperate. He slept when he was supposed to be on the unit with a group. He was found in a female patient's room and was admonished. He lied about going to NA meetings. After being warned that further infractions would result in discharge, he immediately violated the rules again. He was therapeutically discharged as medically stable.

   
   

10. S. F. was a 21-year old female patient treated at Orlando General from September 6, 1986, until October 6, 1986.

    She was dependent on free-base cocaine and alcohol.

    
    

    She was malnourished and had significantly low protein and- albumin levels.

    She also had tachycardia (increased heart rate) and a history of vaginitis and pelvic inflammatory disease.

    
    

    S. F. was referred to Orlando General by HRS, who had taken custody of her children.

    
    

    S. F. was therapeutically discharged when she was found to have used cocaine and alcohol while on a temporary pass.

    
    

11. L. C. was a 54-year old female who was treated at Orlando General from December 17, 1986, until January 15, 1987. She was an alcoholic and schizophrenic. She was referred to Orlando General by Lake Sumpter Mental Health Clinic.

    
    

    At the time of her admission, she had a variety of medical complaints including headaches, chest pains, and abdominal pains.

    
    

    It was difficult to predict what complications would arise during her treatment because her mental-problems made her a poor historian. She had problems with fluctuating blood pressure and required a cardiology work-up. Her treatment was complicated by her need for medication for her schizophrenia at the same time that she needed withdrawal from chemical dependency.

    
    

    L. C. was discharged when she was determined to be medically stable. The plan, according to her discharge summary, was for her to be involuntarily committed under the Myers Act to a long-term residential facility.

    
    

12. Every hospital that is a Medicaid provider must have an approved utilization review mechanism in place. This must include an admissions criteria and continued stay criteria. The mechanism must be approved by HRS' Peer Review Organization (PRO), an organization with whom HRS has contracted to conduct the state's utilization review responsibilities.

    
    

13. One aspect of Orlando General's approved mechanism is the use of a review "screen", called an "ISD", outlining examples of the intensity of services needed to justify continued hospital treatment, the severity of illness to justify admission, and discharge criteria.

    
    

    This screen is used for every admission by a registered nurse on the staff of the hospital who is designated as the utilization review coordinator. If, in the nurse's opinion, the patient does not meet the criteria, the medical record is referred to a physician on the hospital's utilization review committee. This physician reviews the record to determine whether, in his judgment, medical necessity is present. If he has questions, he can discuss the case with the attending physician. If the two disagree, a third physician is consulted, also a member of the utilization review committee at the hospital, and his opinion is the tie-breaker.

    
    

14. A further review is conducted when the hospital submits a claim for reimbursement after the patient is discharged. A list of paid claims is sent to the PRO office in Tampa, and a sample is selected for oversight review. In those cases, the PRO applies the same mechanism as the hospital, with the use of the screen by a nurse reviewer, then reference to PRO utilization review physicians. If the PRO physicians do not see a medical necessity for the

    admission or treatment, the attending physician is notified and is given an opportunity to respond in writing. After that response, the PRO makes its final decision.

    
    

15. In the cases at issue here, the final PRO decision was that medical necessity was not present for the admissions, except in A. J. `s case, where only the final three days of treatment were questioned.

    
    

16. The approved ISD screen applied to these cases was developed for psychiatric cases and is not specific to chemical dependency cases, although some criteria apply to both types of cases. Compliance with the screen is considered presumptive evidence of medical necessity and the screen is utilized by the nurse reviewer as a tool to determine which cases require further physicians' review and professional judgment as to medical necessity. The screen is not binding, therefore.

    
    

17. Under the category, "severity of illness", the ISD screen requires such conditions as a "comatose or impending comatose patient", recent onset of"...suicide attempt, assaultive behavior, self-mutilative behavior, deliria and/or mania hallucinations (visual or auditory), total body rigidity or immobility...", and like symptoms. (Respondent's Exhibit #1).

    
    

    Dr. Greene concedes that the patients at issue do not meet those criteria.

    
    

18. In support of its position that medical necessity justified Orlando General's reimbursement for each of the six patients in issue, the hospital presented Dr. Greene's testimony and that of Daniel C. Glennon, M.D. Dr. Glennon is presently Medical Director of the dual diagnosis unit at Laurel Oaks Hospital, a licensed psychiatric hospital for children and adolescents in Orange County, Florida. The dual diagnosis unit treats chemically dependent adolescents. Dr. Glennon is a certified addictionologist.

    
    

    Dr. Glennon is familiar with non-hospital alternatives in the area and from April 1979, until January 1986, he was Medical Director of the Metropolitan Alcoholism Council (MACO), one of the two residential treatment facilities with whom the state had a contract in the Orlando area during the relevant period.

19. Dr. Glennon had personal knowledge of some of the patients at issue, but based his opinion at hearing on his review of their medical records and his knowledge of alternative treatment facilities.

    
    

    In each case, in Dr. Glennon's opinion, the admission and treatment of the six patients at Orlando General was medically necessary.

    
    

20. Each were end-stage chemical dependents with a variety of related and unrelated medical complications, or the imminent threat of medical complication. Not all end stage chemical dependents need acute care hospitalization, but the frequency or intensity of intravenous drug usage and the use of free-base or "crack" cocaine found in most of these patients indicated the need for medical evaluation and treatment in a hospital.

    
    

    Not all detoxification needs occur in an acute care hospital, but the presence or the high probability of complications in each of these patients indicates the medical necessity for the treatment they received.

    
    

21. Peter M. Macaluso, M.D., testified as an expert witness on behalf of HRS. Dr. Macaluso is also a certified addictionologist and practices in Tallahassee, Florida.

    
    

    Dr. Macaluso reviewed the medical records of the six patients and concluded that most needed a good, structural residential program with medical backup, but not treatment in an acute hospital setting.

    
    

    For his opinion, Dr. Macaluso relied, in part, on the ISD screens. Dr.

    Macaluso admitted that he had no knowledge of the residential programs available in the Orange County area. Residential programs vary widely in the kind and quality of services provided.

    
    

22. During the relevant period, there were two non- hospital residential programs under state contract in the Orlando and adjacent areas, MACO, and the Center for Drug-Free Living (also known as Phoenix South). The state paid approximately $45 a day for the services in those facilities, substantially less than the approximately $500 per diem reimbursed to Orlando General.

    
    

23. The opinions of Dr. Greene and Dr. Glennon were more credible than that of Dr. Macaluso on the necessity of admission and treatment and the availability of alternatives for the six patients. The admission and treatment of each at Orlando General was proven medically necessary.

    
    

24. The record does not support HRS' position that Orlando General failed to comply with its approved utilization review plan with regard to the patients. Although Dr. Greene does not personally use the ISD screen, the CD program which he directs does have admission criteria. Dr. Greene does not remember whether a hospital utilization review committee physician contacted him about the cases, but under the process described by HRS nurse consultant, Nedra Mansager, the attending physician would be brought in only if the first reviewing physician had questions or disagreed that there was a medical necessity for the patient's admission and treatment at the hospital. (Transcript, p.121).

    CONCLUSIONS OF LAW

    
    

25. The Division of Administrative Hearings has jurisdiction over the parties and subject matter in these proceedings pursuant to Section 120.57(1), Florida Statutes and Rule 10C-7.035, Florida Administrative Code.

    
    

26. Under the rules governing HRS' administration of the Medicaid program, inpatient hospital services are reimbursable only if those services are "medically necessary". Rules 10C-7.039(1)(a) and 10C-7.039(4)(a)3 , Florida Administrative Code.

    
    

27. The term "medically necessary" is not defined in HRS' rules or in the federal regulations governing the Medicaid program, but the term encompasses not only whether the admission and treatment was necessary, but also whether it could have been provided in a more economical setting than an acute care hospital. 42 CFR, Section 466.70(c).

    
    

    A clear and concise definition of medical necessity is found in an unreported case appended to HRS' proposed recommended order. A service is "medically necessary" if:

    
    

    1. The requested service is reasonably calculated to prevent, diagnose, correct, cure, alleviate, or prevent the worsening of conditions in the recipient that:

       1. endanger life; or

       2. cause suffering or pain; or

       3. result in illness or infirmity; or

       4. threaten to cause or aggravate a handicap; or

       5. cause physical deformity or malfunction; and

    2. There is no other equally effective

    1. more conservative, or

    2. substantially less costly

    course of treatment available or suitable for the recipient requesting the service.

    For the purpose of this section "course

    of treatment" may include mere observation or, where appropriate, no treatment at all. (Emphasis added.)

    Mead, et al v. Burdman, et al, Case 818663, In the Superior Court of the State of Washington for King County, Consent Order entered March 20, 1978.

    
    

28. The ultimate determination of medical necessity requires independent case by case scrutiny. The treating physician is not entitled to deference, or the purpose of the system, to safeguard against unnecessary or inappropriate use of medicaid services and against excess payments, would be frustrated. 42 CFR, Section 456.3. The provider has the burden of proving entitlement to reimbursement.

    
    

    Petitioner met its burden of proving that the admissions and treatment of the six patients at issue met the relevant criteria. Dr. Macaluso did not contend that treatment was not needed. Although substantially less costly courses of treatment were available, they were not equally effective. No HRS witness testified regarding existing programs in rebuttal of Dr. Greene's and Dr. Glennon's opinions that available non- hospital residential programs would not have been effective and suitable in these cases.

    
    

29. The record does not support HRS' contention that Orlando General failed to comply with the system of utilization review. The determination of medical necessity requires the exercise of professional medical judgment. It is entirely conceivable that Orlando General's utilization review physician shared the same opinion as Drs. Greene and Glennon, while the unnamed and unknown PRO reviewers disagreed.

RECOMMENDATION

Based on the foregoing, it is hereby

RECOMMENDED that a final order be entered approving Medicaid reimbursement in cases 88-1154, 88-1155, 88-1258, 88- 1259, 88-1260 and 88-1379, and disposing of the remaining cases in a manner consistent with the agreement of the parties.

DONE and ENTERED this 23rd day of February, 1989, in Tallahassee, Leon County, Florida.

MARY CLARK, Hearing Officer Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the

Division of Administrative Hearings this 23rd day of February, 1989.

APPENDIX TO THE RECOMMENDED ORDER IN CASE NO. 88-0642

The following constitute my rulings on the findings of fact proposed by each party.

Petitioner's Proposed Findings of Fact

1. Adopted in paragraph #1.

2. Adopted in paragraph #2.

3. Adopted in paragraph #3.

4. Adopted in paragraph #4.

5. Adopted in paragraph #2.

6. Adopted in paragraph #5. 7.-15. Rejected as unnecessary.

16.-30. Adopted in substance in paragraph #6

31.-35. Rejected as cumulative and unnecessary. The conclusion as to medical necessity is adopted, however, in paragraph #23

36.-55. Adopted in substance in paragraph #7 56.-72. Adopted in substance in paragraph #8. 73.-84. Adopted in substance in paragraph #9. 85.-97. Adopted in substance in paragraph #10. 98.-113. Adopted in substance in paragraph #11.

Respondent's Proposed Findings of Fact

1. Addressed in background.

2. Addressed in conclusion of law #3.

3. Adopted in paragraphs 1 and 2.

4. Rejected as immaterial. Substance abuse patients can be treated in a non-hospital setting, as found in paragraph #20.The issue, however, is the need of these six patients. HRS failed to rebut the competent testimony by Drs. Greene and Glennon that these patients needed the acute-care hospital treatment. HRS' witnesses could not provide specific information on the alternate programs in Orlando. They could only describe alternate types of treatment facilities generally.

5. Adopted in part in paragraph #22, otherwise rejected as irrelevant.

6. Rejected as contrary to the evidence. If no alternatives available, the patient must be treated in the hospital.

7. Rejected as contrary to the evidence.

8. Rejected as immaterial.

9.-16. Rejected as contrary to the weight of evidence.

1. Adopted in paragraphs #12 and #13.

2. Adopted in paragraph 13, except that the evidence (Ms. Mansager's testimony) does not establish that the attending physician is consulted in every case by the "physician advisor."

3. Adopted in paragraph 17, except for the conclusion that the plan required consultation with the attending physician.

4. Rejected as immaterial.

5. Rejected as unsupported by the record.

6. Rejected as contrary to the evidence (the conclusion that medical necessity was not met), otherwise adopted in paragraph 16.

23.-26. Rejected as cumulative and immaterial.

27. Rejected as contrary to the weight of evidence. 28.-30. Rejected as irrelevant.

COPIES FURNISHED:

James A. Burt, Esquire Scott A. Satell, Esquire

118 East Jefferson Street Orlando, Florida 32801

Jay Adams, Esquire Richard Bellak, Esquire

101 North Monroe Street Tallahassee, Florida 32301

Gregory L. Coler, Secretary Department of Health and

Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32399-0700

1. S. Power, Clerk Department of HRS

   1323 Winewood Boulevard

   Tallahassee, Florida 32399-0700

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

   AGENCY FINAL ORDER

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

   
   

   STATE OF FLORIDA

   DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES

   
   

   ORLANDO GENERAL HOSPITAL, CASE NO.: 88-0642 88-0643

   Petitioner, 88-1154

   88-1155

   vs. 88-1258

   88-1259

   DEPARTMENT OF HEALTH AND 88-1260

   REHABILITATIVE SERVICES, 88-1261

   88-1379

   Respondent. 88-1879

   / 88-2227

   
   

   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 case submitted a Recommended Order to the Department of Health and Rehabilitative Services (HRS). A copy of that Recommended Order is attached hereto.

   
   

   RULING ON EXCEPTIONS FILED BY THE DEPARTMENT

   
   

   Counsel excepts to findings of fact number two (2), paragraph two (2) as irrelevant. A witness' financial interest or lack thereof is relevant in evaluating the credibility of a witness' testimony. It is noted that Dr. Greene was the hospital staff member responsible for admitting and treating patients in petitioner's $500.00 per patient per day program.

   
   

   Counsel excepts to findings of fact three (3), five (5), six (6), seven (7), eight (8), nine (9), ten (10), and eleven (11) as irrelevant. "Medical necessity" for purposes of Medicaid reimbursement must be established by the provider claiming entitlement to Medicaid reimbursement. The Hearing Officer correctly stated the two-pronged test for "Medical necessity" in conclusion of law three (3). The Hearing Officer accepted the opinions of Doctors Green and Glennon that hospital admission and treatment was medically necessary for the six (6) patients whose Medicaid coverage was at issue.

   
   

   At this level of review the question is whether the opinions of Doctors Green and Glennon constitute competent, substantial evidence 1/ to support the Hearing Officer's finding: that the hospitalization of the six (6) patients was "medically necessary" for purposes of Medicaid coverage. Critical to this question is whether petitioner demonstrated that Doctors Green and Glennon

   understood that for purposes of Medicaid coverage "medically necessary" encompasses not only whether the treatment was necessary, but also whether the treatment could have been provided in a more economical setting than a hospital. Upon reviewing the record I found no such foundation supporting Doctors Green and Glennon's opinions. Thus their opinion that the hospitalization of the six

   1. patients was medically necessary does not constitute substantial evidence. 2/

      
      

      The general principle of administrative law 3/ that the party seeking relief has the burden of proof is applicable here. The challenged findings of fact address the first prong of the test for medical necessity, but not the second. Thus, the findings are not irrelevant, they are simply insufficient to establish "medical necessity".

      
      

      Counsel excepts to the Hearing Officer's implication in finding of fact number 16 that the Medicaid screening criteria are "not binding" on physicians. A Medicaid provider's physicians may not disregard the Medicaid screening criteria. The Medicaid screening criteria are not binding in the sense that they are not all inclusive as to symptoms and severity of the disease process. Thus, there is room for the physician's professional judgment in screening a patient. Counsel excepts the second paragraph in findings of fact 18 and 19 as irrelevant. Because petitioner failed to establish the second prong of the test for "medical necessity" the findings are insufficient, not irrelevant. Any implication by the Hearing Officer that the Orlando area is the appropriate geographic measure of the availability of less costly treatment alternatives is rejected. The Medicaid program routinely transports patients across the state in pursuit of the most cost-effective facility and there is no basis for justifying hospitalization merely for lack of a less costly and appropriate facility in the immediate vicinity. The policy consideration underlying this is apparent and urgent: the preservation of scarce funds for patients who truly have no alternative to hospitalization.

      
      

      Counsel excepts to finding of fact number 20. As previously noted the Hearing Officer's conclusion regarding medical necessity for purposes of Medicaid coverage is based on the flawed opinions of Doctors Green and Glennon. Thus, the finding is rejected as it is not supported by competent, substantial evidence. To the contrary, the preponderance of the competent, substantial evidence proves that the patients at issue could have been appropriately treated in a non-hospital setting at much less cost to the public treasury.

      
      

      Counsel excepts to that part of finding of fact number 21 wherein the Hearing Officer found that Dr. Macaluso was not familiar with non-hospital residential treatment programs in the Orange County area. The challenged finding is irrelevant in light of the department's policy of utilizing treatment resources on a statewide basis.

      
      

      Counsel excepts to finding of fact number 23. As previously noted the opinions of Doctors Green and Glennon regarding medical necessity do not constitute substantial evidence because of lack of a foundation as to the two pronged test for purposes of Medicaid. Thus, finding number 23 is rejected as it is not based on competent, substantial evidence.

      
      

      Counsel excepts to finding of fact number 24. The finding is rejected as it is not supported by competent, substantial evidence.

      
      

      Counsel excepts to the second (2) paragraph of conclusion of law number four (4) which reiterates the Hearing Officer's findings that treatment of the six (6) patients was medically necessary. The findings are rejected as they are not supported by competent, substantial evidence.

      
      

      Counsel excepts to conclusion of law number five (5) which finds that petitioner complied with a Medicaid approved system of utilization review regarding the six (6) patients. Again, the finding is rejected as it is not supported by competent, substantial evidence.

      
      

      FINDINGS OF FACT

      
      

      The Department hereby adopts and incorporates by reference the findings of fact set forth in the Recommended Order except for the findings rejected in the rulings on the exceptions. The entire record was reviewed pursuant to Section 120.57(1)(b)10, Florida Statutes.

      
      

      CONCLUSIONS OF LAW

      
      

      The Department hereby adopts and incorporates by reference the conclusions of law set forth in the Recommended Order except where inconsistent with the rulings on the exceptions.

      
      

      As the first formal challenge to a reimbursement denial by the Peer Review Organization, this is a significant case. Moreover, the subject matter is also significant because the petitioner is seeking reimbursement for hospital treatment which is much more costly than treatment in a non-hospital residential treatment facility. HRS agrees that the Hearing Officer selected the correct legal criteria:

      
      

      1. the two-pronged definition of medical necessity and the burden of proof on the petitioner to prove medical necessity

      2. the lack of deference to the admitting physician on admission/treatment compliance with Utilization Review.

   However, the Hearing Officer's finding that the hospital treatment of the six (6) patients was medically necessary was founded solely on the opinions of Doctors Green and Glennon, and as previously noted there was no foundation for the opinions regarding the Medicaid two (2) pronged test for medical necessity. Additionally, petitioner failed to prove that it complied with an approved Medicaid utilization review plan.

   
   

   The professional conclusion of Doctors Green and Glennon as to the need of the treatment they gave these patients do not establish medical necessity for purposes of Medicaid reimbursement. The position asserted by Orlando General and its witnesses is a "cost is no object" approach to care which is completely at odds with the responsibility of the department to preserve funds for necessary hospital care of Medicaid patients. It is an approach for which the legal standards of Medicaid reimbursement, both federal and state, are specifically designed to guard against.

   
   

   Based upon the foregoing, it is

   
   

   ADJUDGED, that petitioner's claims for Medicaid coverage in Cases 88-1154, 88-1155, 88-1258, 88-1259, 88-1260, and 88-1379 are DENIED. The remaining cases are no longer at issue on the basis of a settlement reached by the parties.

   
   

   DONE and ORDERED this 17th day of April 1989, in Tallahassee, Florida.

   
   

   Gregory L. Coler Secretary

   Department of Health and Rehabilitative Services

   
   

   by Deputy Secretary for Programs

   
   

   ENDNOTES

   
   

   1/ See DeGroct vs. Sheffield, 95 So2d 912, 916 (Fla. 1957).

   
   

   2/ There is less deference to fact finding by the Hearing Officer in matters infused with overriding policy consideration. Baptist Hospital vs. HRS, 500 So2d 620, 623 (1st DCA 1986)

   
   

   3/ See Graham vs. Estuarv Properties, Inc., 399 So2d 1374, 1379 (Fla. 1981)

   
   

   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 COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE AGENCY MAINTAINS ITS HEADQUARTERS OR WHERE A PARTY RESIDES. REVIEW PROCEEDINGS SHALL BE CONDUCTED IN ACCORDANCE WITH THE FLORIDA APPELLATE RULES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED

   Copies furnished to:

   
   

   James A. Burt, Esquire Scott A. Satell, Esquire BURT & GUSTINO, P. A.

   118 East Jefferson Street Orlando, Florida 32801

   
   

   Jay Adams Esquire Richard Bellak, Esquire

   101 North Monroe Street Tallahassee, Florida 32301

   
   

   Mary Clark Hearing Officer

   Division of Administrative Hearings The DeSoto Building

   1230 Apalachee Parkway

   Tallahassee, Florida 32399-1550

   
   

   CERTIFICATE OF SERVICE

   
   

   I HEREBY CERTIFY that a copy of the foregoing was sent to the above-named people by U.S. Mail this 17th day of April 1989.

   
   

   R. S. Power, Agency Clerk Assistant General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407

   Tallahassee, Florida 32399-0700 904/488-2381

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   DISTRICT COURT OPINION

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   DISTRICT COURT OF APPEAL OF FLORIDA FIFTH DISTRICT

   
   

   ORLANDO GENERAL HOSPITAL,

   
   

   Appellant,

   
   

   v. No. 89-976

   DOAH No. 88-0642

   DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES,

   
   

   Appellee.

   /

   
   

   Opinion issued September 27, 1990.

   
   

   Hospital sought review of Department of Health and Rehabilitative Service's (HRS) final order denying payment for treatment of chemically dependent Medicaid patients. The District Court of Appeal, Peterson, J., held that: (1) hearing Officer's conclusion that hospital was entitled to payment for the treatment of the chemically dependent Medicaid patients was based on substantial competent evidence found in the record and HRS was not free to substitute its findings nor to make new findings, and (2) physician testimony that hospital admissions were medically necessary supported hearing officer's findings.

   
   

   Reversed

   
   

   1. Social Security and Public Welfare 241.105

      
      

      Department of Health and Rehabilitative Services was not free to substitute its own findings or make new findings in denying payment for treatment of chemically dependent Medicaid patients after hearing officer recommended that hospital be paid for patients based on substantial, competent evidence found in record; agency was not allowed to give less deference to fact finding by hearing officer even though matter was infused with policy considerations.

      
      

   2. Social Security and Public Welfare 241.105

      
      

      Department of Health and Rehabilitative Services (HRS) did not present at original hearing its finding that Medicaid program routinely transported patients across state in pursuit of most cost-effective facility, an, thus, HRS was prohibited from using that reasoning to deny payment for treatment of chemically dependent Medicaid patients.

      
      

   3. Social Security and Public Welfare 241.105

      
      

      Physician testimony that hospital admissions were medically necessary for treatment of chemically dependant Medicaid patients supported hearing officer's recommendation that hospital be reimbursed for treatment, even though on

      physician disagreed that admission was necessary. West's F.S.A. s 120.57(1)(b)10.

   4. Social Security and Public Welfare 241.75

      
      

      Department of Health and Rehabilitative Services would not be allowed to deny payment for treatment of chemically dependent Medicaid patients by making an after the fact determination that provider of medical services to indigent substance abusers is not entitled to payment under public program if provider followed prescribed broad procedures which could be overridden by treating physician.

      
      

      James A. Burt and James A. Gustino of Burt and Gustino, P.A., Orlando, for appellant.

      
      

      Richard C. Bellak and Hala Mary Ayoub of Fowler, White, Gillen, Boggs, Villareal and Banker, P.A., Tallahassee, for appellee.

      
      

      PETERSON, Judge.

      
      

      The Florida Department of Health and Rehabilitative Services (HRS) rendered a final order denying payment for the treatment of chemically-dependent Medicaid patients in an administrative appeal from which Orlando General Hospital (OGH) appeals. We reverse.

      
      

      After HRS refused payment for six patients based upon HRS's conclusion that treatment was not medically necessary, a formal hearing was held upon a petition for a formal administrative proceeding filed by OGH pursuant to section 120.57(1), Florida Statutes. The hearing officer recommended that payment be made to OGH for the patients. HRS rejected the recommendation indicating that the case was significant since it represented "the first formal challenge to a reimbursement denial" and that "[t]here is less deference to fact finding by the Hearing Officer in matters infused with overriding policy consideration." Baptist Hospital, Inc. v. Department of Health and Rehabilitative Services, 500 So.2d 620 (Fla. 1st DCA 1986), was cited in support of the last quoted "deference" rule. We will review later HRS's interpretation of the authority for the deference rule which is contrary to the rule that an agency may not substitute its own factual findings for those of the hearing officer unless it states with particularity in its order that the officer's findings of fact were not based on competent substantial evidence. B.B. v. Department of Health and Rehabilitative Services, 542 So.2nd 1362 (Fla. 3d DCA 1989); see also s 120.57(1)(b)(10), Fla.Stat. (1987). 1/

      
      

      HRS urges that a treating facility should be paid to provide only necessary hospital care and should not be paid for what HRS views as a liberal "cost-is- no-object" approach to care of

      indigent patients who are drug addicts and alcoholics. There can be no doubt that HRS's concern for protecting public funds is admirable and in conformity with the duties assigned to it. On the other hand, medical providers are placed in an awkward position where reimbursement by HRS may be denied. Medical providers are constantly supplied with new, more sophisticated, and more costly tools with which to administer treatment, and the failure to use these tools may be regarded by some as tortious.

      
      

      In this case, OGH used inpatient treatment while HRS found alternative, less costly, outpatient centers were available and that the physicians at OGH did not consider these alternatives in prescribing treatment. The hearing officer appropriately found that the test to apply to OGH's claim for Medicaid reimbursement is whether the treatment was a "medical necessity." Rules 10C- 7.039(1)(a) and 10C-7.039(4)(a)(3) of the Florida Administrative Code allow reimbursement for inpatient hospital services under the Medicaid program only if those services are medically necessary. The hearing officer also found that it appeared no statutory definition of the term "medically necessary" existed, but determined from an unreported case furnished to her by HRS that a service is medically necessary if:

      
      

      1. The requested service is reasonably calculated to prevent, diagnose, correct, cure, alleviate, or prevent the worsening of conditions in the recipient that:

         (i) endanger life; or (ii) cause suffering

         or pain; or (iii) result in illness or infirmity; or (iv) threaten to cause or aggravate a handicap; or (v) cause physical deformity or malfunction; and

      2. There is no other equally effective (i) more conservative, or (ii) substantially less costly course of treatment available or suitable for the recipient requesting the service. For the purpose of this section "course of treatment" may include mere observation or, where appropriate, no treatment at all.

Mead v. Burdman, case number 818663, Superior Court, State of Washington for King County, Consent Order, May 20, 1978. HRS's final order stated that the two-pronged test adopted by the hearing officer was correct, that is, whether the admission and treatment alleviated a harmful medical condition as the first prong and whether treatment could have been provided in a more economical setting than an acute care hospital as the second prong.

Several of the hearing officer's findings of fact relating to the second prong were rejected by HRS. The rejections included the hearing officer's finding that the results through Medicaid screening criteria, published by Interquality Publishers, are not binding upon physicians and that OGH complied with a Medicaid system of utilization review regarding the patients. The Medicaid screening criteria are referred to by those in the industry as "ISD screens," an acronym for "intensity of service, severity of illness, and discharge." ISD screens are applied to each patient admission by a registered nurse who is a "utilization review coordinator." The coordinator is an integral part of a "utilization review plan" that the federal regulations require each hospital to have in effect in order to ensure that each Medicare patient meets medical necessity criteria for admission. If the coordinator determines that a patient does not meet the ISD screen criteria, the matter is referred to a "utilization review physician" who then confers with the patient's attending

physician if he feels initially that the criteria are not met. If both physicians feel that the criteria are not met, a third physician may be brought into the process. The review does not end at this point, however. After the treatment is completed and payment is requested, the decision to provide inpatient services is reviewed for HRS by a peer review organization (PRO). In the instant case, it was PRO's initial determination that the treatment "was not medically necessary because it could have been provided in an outpatient setting" that precipitated OGH's hearing before the hearing officer.

At the hearing, HRS presented an ISD-9 screen, and an OGH physician/witness testified he had seen the screen but had not used it in relation to the six disputed patients. The physician explained that the screen was designed for psychiatric admissions and that, while there may be over-lapping applications for chemically-dependent patients, use of the screen for chemically-dependent patients would be inappropriate. Another OGH physician/witness used criteria that were not derived from Medicaid rules because he had never seen them. A PRO representative testified that, if a patient's symptoms did not fit within the screens, the "system" allows the utilization review physicians or "committee" to make a decision as to medical necessity completely independent of the ill- fitting screen. HRS's physician/witness, Dr. Macaluso, testified that ISD psychiatric criteria are "conditionally relevant to chemical dependencies but that there is certainly debate in this field." While he disagreed that the criteria used by OGH physicians for admission to the acute care hospital were appropriate, he did not think any physician is absolutely bound by the ISD psychiatric screen criteria. He testified, "If we admit. . . Medicaid patients, to some extent we're limited by those criteria. And we can override them. I have done it."

1. The record also reveals that detailed testimony was devoted to the conditions and symptoms of the individual patients to which the criteria were applied. While the experts may have disagreed on some aspects of treatment, they all agreed that physicians could override the ISD screen criteria. The hearing officer resolved those conflicts with findings of fact, necessarily rejected some testimony and accepted others, and found that a utilization review procedure had been in use. The hearing officer's acceptance, rejection, and findings were based

   upon substantial, competent evidence found in the record, and HRS was not free to substitute its findings nor make new findings. B.B. v. Department of Health and Rehabilitative Services, 542 So.2nd 1362 (Fla. 3d DCA 1989); South Fla.

   Water Mgt. Dist. v. Caluwe, 459 So.2d 390 (Fla. 4th DCA 1984); s 120.57(1)(b)(10), Fla. Stat. (1987).

   
   

   HRS misapplies the Baptist Hospital rule when it contends that the agency need give less deference to fact finding by the hearing officer in matters infused with overriding policy considerations. The Baptist Hospital opinion indicated that "[m]atters that are susceptible of ordinary methods of proof, such as determining the credibility of witnesses or the weight to accord evidence, are factual matters to be determined by the hearing officer." 500 So.2d at 623. The court found in First Baptist that he hearing officer correctly determined that the hospital offered skilled rehabilitation nursing care on a regular basis, and that such constituted comprehensive medical rehabilitative service. This matter was held to be determinable by ordinary methods of proof. But the manner in which these services were provided involved overriding agency considerations reserved to agency discretion. The manner in which the services had been provided was found by HRS to have been provided in different parts of Baptist Hospital's facility as opposed to having been provided in a district unit of the hospital as required by HRS's interpretation of Florida Administrative Code Rule 10-5.11(24). Thus, in Baptist Hospital, HRS exercised its discretionary authority to interpret its own rules to require that, before a certificate of need could be issued, the rules required consolidated rehabilitation services to have been offered for a 12-month period in a distinct unit rather than in different parts or locations of the hospital. We are not concerned in the instant case with the interpretation of an administrative rule to satisfy the second prong of the "medically necessary" rule. The term "medically necessary," although included in Rules 10C- 7.039(1)(a) and 10C-7.039(4)(a)(3), was defined by HRS for use by the hearing officer when it supplied the officer the definition set out in the Mead opinion. The hearing officer then made the findings of fact in compliance with the second prong of the definition.

   
   

2. The second prong of the definition of "medically necessary" requires a finding that no other equally effective course of treatment is available or suitable that is more conservative or substantially less costly. HRS's final order recited, "The Medicaid program routinely transports patients across the state in pursuit of the most cost-effective facility, and there is no basis for justifying hospitalization merely for lack of a less costly and appropriate facility in the immediate vicinity." This recital was used to negate the idea that the Orlando area where OGH is located is the appropriate geographic measure of the availability of less costly treatment alternatives. The record indicates that HRS did not present any such information at the hearing. This fact-finding beyond the record by HRS is prohibited. See, e.g., B.B. v. Department of Health and Rehabilitative Services, supra; Sneij v. Department of Professional Regulation, Bd. of Medical Examiners, 454 So.2d 795 (Fla. 3d DCA 1984); Borovina

   v. Florida Constr. Industry Licensing Bd., 369 So.2d 1038 (Fla. 4th DCA 1979); Austin v. Gordon, 333 So.2d 118 (Fla. 2d DCA 1976).

   
   

3. HRS's physician/witness, Dr. Macaluso testified that, while the acute hospital inpatient treatment offered by OGH was not required for the patients involved in the case, highly structured, residential programs were required for some of the patients. When asked if he knew of any such residential programs in the area, he was unable to name them. No one asked him about programs outside the area to support HRS's post-hearing finding that transportation of patients to such facilities was routinely available. While Dr. Macaluso disagreed with

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the other physicians/witnesses that hospital admissions were medically necessary for the OGH patients, the hearing officer had to resolve the differences in testimony by weighing the evidence, observing the demeanor of the witnesses, and judging their credibility. There was more than ample competent, substantial evidence to support her findings in the recommended order.

[4] We agree with HRS that referral of patients to alternative treatment facilities in the place of $500 per day acute hospital inpatient treatment centers is an urgent policy consideration that is required to preserve scarce funds for patients who truly have no alternative to hospitalization. The medical determination of those who qualify for hospitalization is a difficult task and a risky one for physicians and hospitals in today's litigious society. Both of these policy considerations require more appropriate ISD screens for substance abusers than screens appropriate for psychiatric patients. Whatever criteria are dictated for use in selecting the mode and intensity of publicly funded treatment should be more precise than is demonstrated in this case. An after-the-fact determination that a provider of medical services to indigent substance abusers is not entitled to payment under a public program when the provider followed prescribed broad procedures which, as was established by all witnesses in this case, can be overridden by the treating physician, is simply unfair. The final order of HRS is reversed with instructions to enter an order in conformity with the recommended order of the hearing officer.

REVERSED

COWART and HARRIS, JJ.,

concur. 2

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Docket for Case No: 88-000642

Orders for Case No: 88-000642