STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FRIENDLY VILLAGE OF BREVARD ) INC., and FRIENDLY VILLAGE ) OF ORANGE, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 88-4530RX

) DEPARTMENT OF HEALTH AND ) REHABILITATIVE SERVICES, )

)

Respondent. )

)

FINAL ORDER

Pursuant to notice, the Division of Administrative Hearings by its duly designated Hearing Officer, Mary Clark, held a formal hearing in the above- styled case on February 6, 1989, in Tallahassee, Florida.

APPEARANCES

For Petitioner: Karen L. Goldsmith, and

Michael Bittman

Suite 500, Day Building 605 East Robinson Street Post Office Box 1980 Orlando, Florida 32802

(407) 422-5166

For Respondent: Kenneth Muszynski, and

Carl Bruce Morstadt 1323 Winewood Boulevard Building One

Tallahassee, Florida 32399-0700

(904) 488-2381

STATEMENT OF THE ISSUE

The issue for determination in this case is whether the agency's interpretation of its Title XIX, ICF/MR Reimbursement Plan is a rule, and if so, whether it is an invalid rule.

PRELIMINARY STATEMENT

On September 15, 1988, Petitioners filed their Petition for Administrative Determination of the Invalidity of an Existing Rule, pursuant to section 120.56, Florida Statutes.

Without objection, the Hearing Officer granted Petitioner's motion for consolidation with a section 120.57(1), Florida Statutes, case arising out of

the same facts. (Division of Administrative Hearings #88-2938). At the joint request of the parties, a consolidated hearing scheduled in November was continued until February 1989.

At the final hearing, Petitioners presented the testimony of five witnesses, in support of its claims in both cases. Twelve exhibits, marked Petitioners' exhibits #1-12, were received by stipulation. Respondent presented three witnesses, and its two exhibits were received in evidence without objection.

After hearing, a transcript was prepared and was filed on February 22, 1989. Thereafter both parties experienced changes in counsel. Separate proposed orders were submitted by Petitioners. Both parties agreed to an extension of deadline for Respondent and the opportunity for response by Petitioners.

These submittals have been carefully considered in the preparation of this order and the findings of fact proposed by both parties have been substantially adopted here, as there is no dispute as to the material facts.

FINDINGS OF FACT

1. Friendly Village of Brevard, Inc. d/b/a Washington Square (herein, Washington Square) is an intermediate care facility for the mentally retarded (ICF/MR), located at 2055 North U.S. 1, in Titusville, Florida. Friendly Village of Orange, Inc., d/b/a Lake View Court (herein, Lake View Court), is also an ICF/MR located at 920 W. Kennedy Boulevard, in Eatonville, Florida.

   
   

   Both facilities are operated by Developmental Services, Inc. Both are certified ICF/MR's participating in the Florida Medicaid Program.

   
   

2. The Department of Health and Rehabilitative Services (HRS) is the state agency responsible for overseeing the ICF/MR Medicaid Program.

   
   

3. Representatives of HRS and Florida's ICF/MR industry began negotiations on a new state Medicaid reimbursement plan in 1982 and 1983. The participants in the negotiations sought to remove certain cost limitations and to insure that individual facilities would receive fair reimbursement of their allowable costs. The negotiations resulted in the Title XIX ICF/MR Reimbursement Plan dated July 1, 1984 (the 1984 Plan).

   
   

4. The 1984 Plan provides, in part, for the establishment of reimbursement rates for new ICF/MR's entering the Florida Medicaid program after January 1, 1983. Under the plan, a provider is required, prior to beginning operations, to prepare a budgeted costs report projecting what it expects to spend in allowable costs during the next year for care to its residents.

   
   

5. HRS reviews these budgets and establishes a per diem rate, using the budgeted costs and the number of patients, arriving at a per patient, per day rate. Each month, as services are provided, the ICF/MR bills the state Medicaid program for the number of patient days times the per diem.

   
   

6. During the period in question, cost settlement occurred at the conclusion of the budgeted period. The provider filed his cost report detailing what was actually spent in allowable costs, HRS compared that amount with the amount budgeted and settled with the provider.

7. Washington Square entered the Florida Medicaid program on January 19, 1983; Lake View Court entered the program in February 1983.

   
   

   Both facilities filed cost reports for periods ending on February 29, 1984.

   
   

8. Sometimes cost settlements occur quickly through a desk review. Other times, as here, audits are performed and settlement may occur much later. The audits of Washington Square and Lake View Court were conducted in 1985 for their initial cost reports ending February 1984. The audits were issued in April and May 1988.

   
   

9. Those audits state that prior to July 1, 1984, the Florida Medicaid Program recognized only those interim rate settlements resulting in an overpayment.

   
   

10. This is an interpretation of the 1984 Plan which Petitioners dispute and which, in this case, Petitioners contend is an invalid rule.

    
    

11. ICF/MR Reimbursement plans prior to July 1, 1984, had one-way cost settlement, which meant that if the provider as overpaid, the funds had to be returned to HRS; if the facility as underpaid, it did not receive additional reimbursement. The 1984 ICF/MR Plan was changed to allow two-way cost settlement, thus allowing an underpaid provider to recover its approved costs.

    
    

12. Petitioners claim that a proper interpretation of the 1984 Plan, especially when read with the 1985 Plan, is that two-way cost settlement is retroactive to January 1983, for new providers entering the program after January 1, 1983. HRS disagrees with that interpretation and this issue is the subject of the consolidated case, #88-2938.

    
    

    HRS' interpretation means that Petitioners will not be reimbursed for underpayments received during their first reporting period.

    
    

13. The 1984 Plan was adopted as a rule by incorporation, in Rule 10C- 7.49(4)(a)2. Florida Administrative Code.

    
    

    CONCLUSIONS OF LAW

    
    

14. The Division of Administrative Hearings has jurisdiction in this case pursuant to section 120.56, Florida Statutes.

    
    

15. Section 120.56(1), Florida Statutes provides:

    
    

    Any person substantially affected by a rule may seek an administrative determination of the invalidity of the rule on ground that the rule is an invalid exercise of delegated legislative authority.

    
    

16. The parties have stipulated that Petitioners are substantially affected and have standing to bring this action.

    
    

17. The threshold determination required is whether the interpretation by HRS, reflected in its audit and applied against Petitioners is a "rule", as defined in section 120.52(16), Florida Statutes.

18. Section 120.52(16), Florida Statutes provides, in pertinent part:

    
    

    "Rule" means each agency statement of general applicability that implements, interprets, or prescribes law or policy or describes the organization, procedure, or practice requirements of an agency and includes any form which imposes any requirement or solicits any information not specifically required by statute or by an existing rule.

    The term also includes the amendment or repeal of a rule.

    
    

19. In Department of Transportation v. Blackhawk Quarry Co., 528 So.2nd 447, 449 (Fla. 5th DCA 1988), citing Balsam v. Department of Health and Rehabilitative Services, 452 So.2nd 976, 977-978 (Fla. 1st DCA 1984), the court describes the following test in considering whether a particular agency pronouncement constitutes a "rule":

    
    

    [a]ny agency statement is a rule if it "purports in and of itself to create certain rights and adversely affect others," [citation omitted], or serves "by [its] own effect to create rights, or to require compliance, or otherwise to have the direct and consistent effect of law" [citation omitted].

    
    

20. As more fully reflected in the Recommended Order in case #88-2938, entered this same date, HRS' interpretation of the 1984 Plan is proper and reasonable.

    
    

21. The challenged methodology is an interpretation of the 1984 Plan, which plan is adopted as a rule. The methodology is not itself a rule. It does not, in any of itself, create some rights or adversely affect other rights. In this regard it is like the inmate handbook in Harris v. Department of Corrections, 499 So.2nd 9 (Fla. 1st DCA 1986), found not to be a rule because it was not the primary source of the regulations contained therein.

    
    

22. As argued by HRS, this proceeding is merely a case of two conflicting interpretations of a published rule. The threshold test has not been met.

Based on the foregoing, it is hereby, ORDERED:

The Petitioner of Washington Square and Lake View Court for determination of the invalidity of a rule is DISMISSED.

DONE and ENTERED this 14th day of June, 1989 in Tallahassee, Florida.

MARY CLARK

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, FL 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 14th day of June, 1989.

COPIES FURNISHED:

Michael Bittman, and Karen L. Goldsmith

P.O. Box 1980

Orlando, Florida 32802

Carl Bruce Morstadt and Kenneth Muszynski

1323 Winewood Boulevard, Bldg. One Tallahassee, Florida 32399-0700

Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32399-0700

John Miller, General Counsel Department of Health and Rehabilitative Services

1323 Winewood Boulevard

Tallahassee, Florida 3239-0700

R.S. Power, Agency Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32399-0700

Liz Cloud, Chief

Bureau of Administrative Code 1802 The Capitol

Tallahassee, Florida 32399-0250

Carroll Webb, Executive Director Administrative Procedures Committee

120 Holland Building Tallahassee, Florida 32399-1300

NOTICE OF RIGHT TO JUDICIAL REVIEW

A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO JUDICIAL REVIEW PURSUANT TO SECTION 120.68, FLORIDA STATUTES. REVIEW PROCEEDINGS ARE GOVERNED BY THE FLORIDA RULES OF APPELLATE PROCEDURE. SUCH PROCEEDINGS ARE COMMENCED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF THE DIVISION OF ADMINISTRATIVE HEARINGS AND A SECOND COPY, ACCOMPANIED BY FILING FEES PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL, FIRST DISTRICT, OR WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE PARTY RESIDES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED.

Docket for Case No: 88-004530RX

Orders for Case No: 88-004530RX