STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

CITIZENS OF THE STATE OF )

FLORIDA, )

)

Petitioner, )

)

vs. ) CASE NO. 90-5630RP

) STATE OF FLORIDA, HEALTH CARE ) COST CONTAINMENT BOARD, )

)

Respondent, )

)

and )

)

ASSOCIATION OF VOLUNTARY ) HOSPITALS OF FLORIDA, INC., ) FLORIDA HOSPITAL ASSOCIATION, ) FLORIDA LEAGUE OF HOSPITALS, ) INC., and TALLAHASSEE MEMORIAL ) REGIONAL MEDICAL CENTER, INC., )

)

Intervenors. )

)

FINAL ORDER

Pursuant to a Joint Pre-Hearing Stipulation no formal hearing was held in this case.

APPEARANCES

For Petitioner: Jack Shreve

Public Counsel Stephen M. Presnell

Associate Public Counsel Peter Schwarz

Associate Public Counsel c/o The Florida Legislature

111 West Madison Street Room 812

Tallahassee, Florida 32399-1400

For Respondent: Julia P. Forrester

Senior Attorney

Health Care Cost Containment Board

301 The Atrium

325 John Knox Road Tallahassee, Florida 32303

For Intervenor Association of Voluntary Hospitals of Florida, Inc.:

John H. Parker, Jr., Esquire Jonathan L. Rue, Esquire 1200 Carnegie Building

133 Carnegie Way Atlanta, Georgia 30303

-and-

John M. Knight, Esquire

The Perkins House, Suite 101

118 North Gadsden Street Tallahassee, Florida 32301

For Intervenors Florida Hospital Association and Florida League of Hospitals, Inc.:

Steven T. Mindlin, Esquire Post Office Box 10095 Tallahassee, Florida 32302

For Intervenor Tallahassee Memorial Regional Medical Center, Inc.:

Michael J. Cherniga, Esquire Post Office Drawer 1838 Tallahassee, Florida 32301

STATEMENT OF THE ISSUES

Whether proposed Rule 10N-5.0235(1)(c) and (d), Florida Administrative Code, is an invalid exercise of delegated legislative authority?

PRELIMINARY STATEMENT

On September 6, 1990, the Petitioner, the Citizens of the State of Florida, by and through Jack Shreve, Public Counsel, filed a Petition to Determine Invalidity of a Proposed Rule and Request for Hearing. The Petitioner challenged portions of proposed Rule 10N-5.0235, Florida Administrative Code, (hereinafter referred to as the "Proposed Rule"), promulgated by the Respondent, the Florida Health Care Cost Containment Board (hereinafter referred to as the "Board"). The Petition was designated case number 90-5630RP and was assigned to the undersigned.

Petitions to Intervene were filed by the Association of Voluntary Hospitals of Florida, Inc. (hereinafter referred to as "AVH"), Florida Hospital Association (hereinafter referred to as "FHA"), Florida League of Hospitals, Inc. (hereinafter referred to as "FLH") and Tallahassee Memorial Regional Medical Center, Inc. (hereinafter referred to as "TMRMC"). AVH's request to intervene was granted by Order entered September 14, 1990. FLH's request to intervene was granted by Order entered September 25, 1990. FHA's request to intervene was granted by Order entered October 1, 1990. Finally, TMRMC's request to intervene was granted by Order entered October 2, 1990.

On September 17, 1990, TMRMC filed a Motion to Strike. The Petitioner filed a Response to the Motion indicating that the Petitioner had no objection to the Motion. Accordingly, by Order entered October 2, 1990, the Motion to Strike was granted and Paragraph 5 of the "Wherefore" clause found at page 8 of the Petition filed in this case was struck.

The formal hearing was scheduled for October 3 and 4, 1990, by Notice of Hearing issued September 12, 1990. By Order Granting Joint Unopposed Motion for Continuance and Rescheduling Formal Hearing entered October 1, 1990, the formal hearing was rescheduled for October 17 and 18, 1990.

On October 15, 1990, the parties filed a Joint Pre-Hearing Stipulation (hereinafter referred to as the "Stipulation"). Pursuant to the Stipulation the parties agreed that there were no disputed issues of material fact to be decided in this case. Therefore, the parties agreed that the case should proceed without a formal evidentiary hearing. The parties agreed that this Final Order should be rendered based upon the Stipulation and written briefs to be filed on or before October 18, 1990, by the parties. By Order entered October 16, 1990, the formal hearing scheduled for October 17 and 18, 1990, was cancelled and the Stipulation was accepted.

On October 23, 1990, AVH filed a Motion to Strike. AVH represented in the Motion that the other Intervenors joined in the Motion. AVH also represented that the Board had no objection to the Motion but did not join in it. The Petitioner filed Citizens Response to Intervenors' Motion to Strike. AVH's Motion to Strike requests that one prayer for relief and the related conclusion of law found at page 27 of the Petitioner's proposed final order in this case be struck. On page 27 of the Petitioner's proposed final order, the Petitioner objected to the admissibility of Joint Exhibit #3. AVH's Motion to Strike is hereby denied.

The Petitioner's objection to the admission into evidence of Joint Exhibit #3, however, is overruled. The parties agreed in the Stipulation that all exhibits were "submitted for introduction into evidence." The Petitioner stipulated specifically that it did not "contest the authenticity of [Joint Exhibit #3] nor its introduction into evidence, but maintains the exhibit is irrelevant and will present argument thereon in its written brief." It has been concluded that Joint Exhibit #3 is relevant to this proceeding.

It is not clear whether the parties intended to preclude any findings of fact based upon the Joint Exhibits filed by the parties because of the following stipulation contained in the Stipulation: "[t]here are no issues of fact which remain to be litigated, and this case is being presented to the Hearing Officer on the basis of the facts stipulated herein." To construe this stipulation literally would be inconsistent with the agreement of the parties to submit the Joint Exhibits. Why submit the Joint Exhibits if no findings of fact can be based upon the exhibits? The only reasonable way to reconcile this apparent conflict is to allow additional findings of fact concerning the Joint Exhibits but limited to facts concerning what information is contained in the Joint Exhibits and the interpretation of that information.

The parties have filed proposed final orders containing proposed findings of fact. Generally, the proposed findings of fact are those stipulated to by the parties in their Stipulation. Those findings of fact have been accepted in this Final Order. The Respondent and Intervenors have also proposed findings of

fact based upon the Joint Exhibits filed by the parties. Those proposed findings of fact (18-22) merely paraphrase or cite language contained in the Joint Exhibits and are hereby accepted.

FINDINGS OF FACT

The following findings of fact were stipulated by the parties and are hereby accepted:

1. The Division of Administrative Hearings has jurisdiction over the parties and the issues to be presented in this rule challenge proceeding.

   
   

2. Petitioner is a substantially affected party and has standing to bring the above-styled action.

   
   

3. Intervenors AVH, FHA and FLH are all substantially affected as associations which represent a large number of hospitals which are subject to the regulations of the Board, including the Proposed rule which is the subject of the hearing in the above-styled case. These Intervenors have standing to participate in this case as full parties Respondent.

   
   

4. Intervenor TMRMC is substantially affected as a hospital which is subject to the regulations of the Board, including the proposed regulation, and has standing to appear in the above-styled case as a full party Respondent.

   
   

5. The Board published proposed Rule 10N-5.0235 in the Florida Administrative Weekly, Volume 16, No. 34, August 24, 1990, at Page 3795.

   
   

6. Through the Proposed Rule, the Board would permit and require hospitals to file amended and corrected budget letters in circumstances described in the Proposed Rule.

   
   

7. The Proposed Rule was promulgated by the Board to implement the provisions of Chapter 407, Florida Statutes.

   
   

8. The Board has recently instituted a program for auditing hospital books and records, and will be increasing its audit activities in the future.

   
   

9. Each hospital which does not request a rate of increase in gross revenue per adjusted admission in excess of the maximum allowable rate of increase for the hospital's next fiscal year, or each hospital utilizing "banked percentage points" and requesting a rate of increase not in excess of the maximum allowable rate of increase, may file a budget letter.

   
   

10. A budget letter acknowledges a hospital's maximum allowable rate of increase in gross revenue per adjusted admission and the hospital's maximum projected gross revenue per adjusted admission.

    
    

11. A budget letter affirms that the hospital will not exceed its maximum allowable rate of increase.

    
    

12. Budget letters are approved by operation of law. However, the Board has 30 days from receipt of the budget letter to determine that the gross revenues per adjusted admission certified by the hospital are within the maximum allowable rate of increase for that hospital.

13. The base to be used in budget letters prior to fiscal years ending in 1992 is the higher of the prior year actual inflated by the hospital's applicable current year maximum allowable rate of increase or the current year's Board approved budget for gross revenue per adjusted admission.

    
    

14. Some hospitals have current year budget amendments subject to the detailed review which are approved by the Board in sufficient time to permit the GRAA approved for the budget amendment to serve as the base to be used in a budget letter for the next fiscal year under Section 407.50(2)(a).

    
    

15. Some hospitals have current year budget amendments subject to detailed review which are approved by the Board after the prescribed time for filing a budget letter under Section 407.50(2)(a) for the next fiscal year.

    
    

16. Proposed Rule 10N-5.0235 would require a hospital to file an amended and corrected budget letter instead of a detailed review budget amendment which is within the MARI approved by the Board in the previously filed budget letter. However, the base used for the amended and corrected budget letter GRAA would be the GRAA approved by the Board in the detailed review of a current year budget amendment.

    
    

17. The cost of filing and justifying a budget for detailed review is greater than the cost of filing a budget letter.

    
    

    CONCLUSIONS OF LAW

    
    

    1. Jurisdiction.

       
       

18. The Division of Administrative Hearings has jurisdiction of the parties to and the subject matter of this proceeding. Section 120.54(4), Florida Statutes (1989).

    
    

    1. Standing.

       
       

19. The parties have stipulated that the Petitioner and Intervenors are substantially affected by the Proposed Rule. The Petitioner has standing to bring this action and the Intervenors have standing to participate in the proceedings.

    
    

    1. Standard of Review and Burden of Proof.

       
       

20. In Florida a state agency has no inherent power to promulgate rules. Department of Professional Regulation v. Florida Society of Professional Land Surveyors, 475 So.2d 939 (Fla. 1st DCA 1985); and Grove Isle, Ltd. v. Department of Environmental Regulation, 454 So.2d 571 (Fla. 1st DCA 1984). If an agency is granted statutory authority to adopt rules, the agency cannot enlarge, modify or contravene that statutory authority. Department of Business Regulation, Division of Alcoholic Beverages and Tobacco v. Salvation Limited, Inc., 452 So.2d 65 (Fla. 1st DCA 1984); and Department of Health and Rehabilitative Services v. Florida Psychiatric Society, Inc., 382 So.2d 1280 (Fla. 1st DCA 1980). If, however, an agency adopts rules which are reasonably related to the purpose of the enabling legislation and the rules are not arbitrary and capricious, the rules must be sustained. Florida Waterworks Association v. Florida Public Service Commission, 473 So. 2d 237 (Fla. 1st DCA 1985); and Grove Isle, supra.

21. Pursuant to Section 120.54(4), Florida Statutes (1989), a rule proposed by an agency in Florida may be challenged by any person substantially affected by the rule as "an invalid exercise of delegated legislative authority." The terms "invalid exercise of delegated legislative authority" are defined, in pertinent part, in Section 120.52(8), Florida Statutes (1989):

    
    

    (8) "Invalid exercise of delegated legislative authority" means action which goes beyond the powers, functions, and duties delegated by the Legislature. A proposed or existing rule is an invalid exercise of delegated legislative authority if any one or more of the following apply:

    . . . .

    1. The agency has exceeded its grant of rulemaking authority, citation to which is required by s. 120.54(7);

    2. The rule enlarges, modifies, or contravenes the specific provisions of law implemented, citation to which is required by s. 120.54(7);

       . . . .

       
       

22. The burden of proving that paragraphs (1)(c) and (d) of the Proposed Rule constitute an invalid exercise of delegated legislative authority is on the Petitioner. See Agrico Chemical Company v. Department of Environmental Regulation, 365 So.2d 759 (Fla. 1st DCA 1978), cert. denied, 376 So.2d 74. The Petitioner's burden is a heavy one. See, Austin v. Department of Health and Rehabilitative Services, 495 So.2d 777 (Fla. 1st DCA 1986).

    
    

    1. Statutory Authority for the Proposed Rule.

       
       

23. The Board cited Sections 407.02, 407.03 and 407.50, Florida Statutes, in support of the Proposed Rule. Section 407.03, Florida Statutes (1989), provides, in pertinent part:

    
    

    Rules; public hearings; investigations, subpoena power.---In addition to the powers granted to the board elsewhere in this chapter, the board is authorized to:

    1. Adopt, amend, and repeal rules respecting the exercise of the powers conferred by this chapter which are applicable to the promulgation of rules.

       . . . .

       (3) Exercise, subject to the limitations and restrictions herein imposed, all other powers which are reasonably necessary or essential to carry out the expressed objects and purposes of this chapter.

       
       

       This provision gives the Board general authority to adopt rules to carry out the purposes of Chapter 407, Florida Statutes (1989).

       
       

24. Sections 407.02 and 407.50, Florida Statutes (1989), provide the more specific authority the Board has relied upon in support of the Proposed Rule. These Sections are discussed, infra.

1. Specific Authority for the Proposed Rule; Sections 407.02 and 407.50, Florida Statutes.

   
   

   1. Section 407.02, Florida Statutes.

   
   

   25. Section 407.02, Florida Statutes (1989), provides, in pertinent part:

   
   

   Powers and duties of board.---To properly carry out its authority, the board:

   . . . .

   (2) Shall approve, disapprove, or disapprove in part the budget of each hospital requesting increases above the maximum allowable rate of increase, including its projected expenditures and projected revenues.

   
   

   This provision, when read in conjunction with Section 407.50, Florida Statutes (1989), evidences the intent of the Legislature that a hospital's budget is to be reviewed by the Board only if the hospital seeks a rate of increase in its gross revenues ("gross revenues per adjusted admissions" or "GRAA") in excess of a statutorily authorized rate of increase (the "maximum allowable rate of increase" or "MARI").

   
   

   2. Section 407.50, Florida Statutes.

   
   

   1. In general, Section 407.50, Florida Statutes (1989), provides the procedures to be followed in the review of hospital budgets.

      
      

      1. Budget Letters.

         
         

   2. Generally, if a hospital does not intend to request a rate of increase in its GRAA for its next fiscal year in excess of the MARI, the hospital may file a certified statement, referred to as a "budget letter", with the Board. See Section 407.50(2)(a), Florida Statutes (1989).

      
      

   3. In pertinent part, Section 407.01, Florida Statutes (1989), provides that for fiscal year 1990-1991 the base amount of GRAA to which the MARI is to be applied if a hospital files a budget letter shall be its current year "board- approved budgeted gross revenues per adjusted admission" (or, if greater, another amount not relevant to this proceeding). If a hospital's current year GRAA is its base, the hospital's GRAA for its next fiscal year is determined by multiplying its current year board-approved GRAA times the MARI for the next fiscal year.

      
      

   4. If a hospital files a budget letter, it must be filed "at least 90 days prior to the commencement of [the hospital's] next fiscal year "

      Section 407.50(2)(a), Florida Statutes (1989).

      
      

   5. If a hospital files a budget letter Section 407.50(2)(a), Florida Statutes (1989), provides that the budget letter "shall be deemed to be the budget for the hospital . . . ." Section 407.002(4), Florida Statutes (1989), defines the term "budget" to include a budget letter.

   6. A budget letter filed with the Board is "automatically approved by operation of law." The Board's role in reviewing a hospital's budget letter is therefore limited. The Board is only authorized to determine if the GRAA submitted by the hospital is within the MARI of the hospital. The Board must make this determination within 30 days after a budget letter is filed.

      
      

      1. Budgets Subject to Detailed Budget Review.

         
         

   7. If a hospital intends to request a rate of increase in its GRAA for its next fiscal year in excess of the MARI, the hospital must file a budget pursuant to Section 407.50(3), Florida Statutes (1989), and the budget is subject to a "detailed budget review" according to the procedures prescribed in Section 407.50(5), Florida Statutes (1989). In pertinent part, Section 407.50(5), Florida Statutes (1989), provides:

      
      

      The board shall review each budget filed pursuant to subsection (3) and amendments filed pursuant to subsection (6) to determine whether the rate of increase contained in the budget or amendment is just, reasonable, and not excessive. In making such determination, the board shall consider and the hospital may use the following criteria in the following priority with (a) the highest priority and (l) the lowest priority:

      . . . .

      
      

   8. If a hospital files a budget seeking an increase in its GRAA in excess of the MARI the Board is required to disapprove the budget or amendment or part thereof as excessive if the rate of increase is not necessary to maintain total hospital costs at a level reasonably related to total services provided by the hospital and which is not necessary to maintain a prudently managed hospital. Section 407.50(7), Florida Statutes (1989). Although Section 407.50(7), Florida Statutes (1989), specifically applies to any "budget," this provision does not apply to budget letters because the Board's role in reviewing a budget letter is limited to the ministerial task of determining if the GRAA submitted by a hospital in its budget letter is within the MARI of the hospital and because a budget letter is deemed approved by operation of law.

      
      

   9. Pursuant to Section 407.50(8), Florida Statutes (1989), the Board is given the authority to "disapprove, in its entirety or in part, any budget or any budget amendment that contains a rate of increase which the board finds, pursuant to subsection (5), to be unjust, unreasonable, or excessive." [Emphasis added]. Although Section 407.50(8), Florida Statutes (1989), also specifically applies to any "budget," this provision does not apply to budget letters because the Board's role in reviewing a budget letter is limited to the ministerial task of determining if the GRAA submitted by a hospital in its budget letter is within the MARI of the hospital and because a budget letter is deemed approved by operation of law.

      
      

   10. Finally, Section 407.50(9), Florida Statutes (1989), provides specific procedures governing the manner in which the staff of the Board is to review "a budget or an amendment to a budget." [Emphasis added]. Although Section 407.50(9), Florida Statutes (1989), specifically applies to any "budget," this provision, like Sections 407.50(7) and (8), Florida Statutes (1989), does not apply to budget letters because the Board's role in reviewing a budget letter is

       limited to the ministerial task of determining if the GRAA submitted by a hospital in its budget letter is within the MARI of the hospital and because a budget letter is deemed approved by operation of law.

       
       

       1. Budget Amendments.

          
          

   11. Pursuant to Section 407.50(6), Florida Statutes (1989), "[a]fter a hospital budget is approved, approved as amended, or disapproved for a given fiscal year . . ." the hospital may amend "such budget" only by following the procedures set out in Section 407.50(6), Florida Statutes (1989). If an amendment is filed by a hospital it is subject to detailed budget review under Section 407.50(5), Florida Statutes (1989).

       
       

   12. Budget amendments may be filed by a hospital no later than 90 days prior to the end of the fiscal year to which the amendment applies. Section 407.50(6)(a), Florida Statutes (1989). The Board has 120 days after a budget amendment is filed to complete its detailed budget review of the amendment.

       This time limitation can be waived or extended by agreement of the parties. Id.

       
       

   13. Rule 10N-1.0205, Florida Administrative Code, provides procedures governing the filing of budget amendments. This Rule was promulgated pursuant to Part II, Chapter 395, Florida Statutes (1987), the predecessor of Chapter 407, Florida Statutes (1989). Rule 10N-1.0205, Florida Administrative Code, although promulgated prior to the enactment of Chapter 407, Florida Statutes (1989), continues to apply to the extent that it is not in "direct conflict" with the provisions of Chapter 407, Florida Statutes (1989). Section 407.035, Florida Statutes (1989). Of significance in this case, Rule 10N-1.0205, Florida Administrative Code, provides, in part, that no amendment to a budget shall be made after "Board action" except as provided in the Rule. "Board action" is defined in Rule 10N-1.0205(1), as "approval, approval as amended, or disapproval of a projected budget by the Board and includes approval of a projected budget by operation of law." [Emphasis added].

       
       

   14. Rule 10N-1.002(11), Florida Administrative Code, defines the term "budget." This definition of "budget", unlike the definition of "budget" contained in Chapter 407, Florida Statutes (1989), does not include budget letters.

       
       

       1. Board Audits.

       
       

   15. Finally, Section 407.02(5), Florida Statutes (1989), authorizes the Board to audit hospital books and records to insure compliance with Chapter 407, Florida Statutes. The Board has recently instituted a program to audit hospital books and records pursuant to this authority.

       
       

2. Effect of Paragraphs (1)(c) and (d) of the Proposed Rule.

   
   

   1. The Petitioner has challenged proposed Rule 10N-5.0235(1)(c) and (d), Florida Administrative Code. The Proposed Rule provides the following:

      
      

      10N-5.0235 Amended and Corrected Budget Letters.

      1. Hospitals which file a budget letter pursuant to Section 407.50, Florida Statutes, shall file an amended or corrected budget letter within 60 days from the date of any of the following:

         1. Notification that the hospital's maximum allowable rate of increase ("MARI") for the current fiscal year is incorrect due to a mathematical error;

         2. Notification that the hospital's MARI for the current fiscal year is incorrect because the computation was based upon incorrect data;

         3. Notification that the hospital's base gross revenue per adjusted admission ("GRAA") in effect at the time that the hospital's original budget letter was submitted has changed due to subsequent Board approval of an amended budget; and

         4. Notification that the hospital's base

            GRAA in effect at the time that the hospital's original budget letter was submitted has changed because of a correction or a revision to the hospital's prior year report.

      2. Hospitals which file a budget letter pursuant to Section 407.50, Florida Statutes, may file an amended or corrected budget letter after being notified by Board Staff that the Hospital has earned banked percentage points pursuant to Section 407.50(2) and Rule

         10N-5.014.

      3. The Board shall have 30 days from receipt of the amended or corrected budget letter to determine if the GRAA submitted by the Hospital is within the maximum allowable rate of increase for that hospital.

      4. In no instance shall an amended or corrected budget letter be required by Board Staff pursuant to subsection (1) after the conclusion of the fiscal year in question.

         
         

   2. If a hospital files a budget amendment during its current fiscal year which amends its GRAA for its current fiscal year and the Board approves the amendment prior to the date the hospital is required to file a budget letter for its next fiscal year, the hospital's Board-approved budgeted GRAA for purposes of determining the hospital's base under Section 407.50(1), Florida Statutes (1989), is the hospital's amended GRAA. If, however, the budget amendment is not approved by the Board until after the deadline for filing the hospital's budget letter for its next fiscal year, the hospital will have to file its budget letter using its Board-approved GRAA before the amendment is approved. Once the amendment is approved, the hospital's amended GRAA becomes its Board approved budgeted GRAA for its current fiscal year. Despite this fact, the hospital's GRAA for its next fiscal year will still be based upon its GRAA prior to the approval of its amendment and not its Board-approved budgeted GRAA unless the hospital corrects it budget letter. Unless the hospital is allowed to file an amended budget letter reflecting its Board-approved budgeted GRAA as amended, the hospital will be treated differently merely because its amendment was approved by the Board after the deadline for filing its budget letter instead of prior to the deadline.

   3. Paragraph (1)(c) of the Proposed Rule requires that, if a hospital receives approval of a budget amendment which changes the hospital's current fiscal year GRAA after it has filed its budget letter, the hospital must file an amended budget letter reflecting its new Board-approved budgeted GRAA. Pursuant to the Proposed Rule, the Board would not subject the amended budget letter to detailed review under Section 407.50(5), Florida Statutes (1989). The effect of paragraph (1)(c) of the Proposed Rule is to require a hospital which obtains approval of an amendment to its current year GRAA to calculate its next fiscal year's GRAA on the amended Board-approved budgeted GRAA if it files a budget letter regardless of when the hospital receives approval of its amendment:

      prior to or after the date it is required to file its budget letter.

      
      

   4. To treat a hospital which receives approval of a budget amendment after it has filed its budget letter differently from a hospital which receives approval of a budget amendment before it has filed its budget letter creates a distinction without reason or justification. Such treatment would be unreasonable and unfair. Paragraph (1)(c) of the Proposed Rule eliminates such potential inconsistent treatment of hospitals.

      
      

   5. Paragraph (1)(d) of the Proposed Rule requires that a hospital which receives notice that its current year GRAA as reported in its budget letter has been modified "because of a correction or a revision to the hospital's prior year report" must file an amended budget letter to reflect the change. The purpose of this paragraph of the Proposed Rule is to insure that, if a hospital is audited pursuant to Section 407.02(5), Florida Statutes (1989), and it is determined as a result of the audit that the hospital's current year GRAA as reported in its budget letter was incorrect, the hospital files an amended budget letter to reflect the corrected current year GRAA in its budget letter for the next fiscal year. Like paragraph (1)(c) of the Proposed Rule, paragraph (1)(d) of the Proposed Rule insures that a hospital that files a budget letter calculates its increase in GRAA for its next fiscal year by applying the MARI to the hospital's correct Board-approved budgeted GRAA.

   
   

3. The Validity of Paragraphs (1)(c) and (d) of the Proposed Rule.

   
   

   1. General.

1. The statutory authority relied upon by the Board in support of the Proposed Rule grants the Board broad discretion to adopt any rule designed to assist the Board in the exercise of the powers conferred by, and in carrying out the purposes of, Chapter 407, Florida Statutes. In determining whether the Board, by virtue of its adopting the Proposed Rule, is properly exercising the powers conferred to it, it must be kept in mind that an agency is to be afforded wide discretion in the exercise of its lawful rulemaking authority clearly conferred, or fairly implied, and consistent with the agency's general statutory duties. Austin, supra.; and Florida Commission on Human Relations v. Human Development Center, 413 So.2d 1251 (Fla. 1st DCA 1982). An agency's interpretation and construction of the statutes it is charged to enforce are entitled to great weight and will not be overturned if the interpretation and construction are not clearly erroneous or unauthorized. Pan American World Airways, Inc. v. Public Service Commission, 427 So.2d 716 (Fla. 1983); Satellite Television Engineering, Inc. v. Department of General Services, 522 So.2d 440 (Fla. 1st DCA 1988); and Department of Professional Regulation v. Durrani, 455 So.2d 515 (Fla. 1st DCA 1984).

2. The deference to be accorded an agency's interpretation and construction of statutes it is charged to enforce is not, however, without limitation. Satellite Television Engineering, Inc., supra.

   
   

3. The determination of whether the Board's interpretation and construction of Chapter 407, Florida Statutes (1989), evidenced by the Proposed Rule is valid, depends upon whether the Board's interpretation and construction is consistent with the legislative intent in enacting Chapter 407, Florida Statutes (1989). In making that determination, certain rules of statutory construction must be followed.

   
   

4. It is a fundamental rule of statutory construction that legislative intent is the polestar by which a court must be guided. Parker v. State, 406 So.2d 1089 (Fla. 1982). Legislative intent must be determined primarily from the language of the statutes. State v. Atlantic C. L. R. Co., 56 Fla. 617, 47 So. 969 (1908). If the intent of the legislature is clear and unambiguous based upon the language of a statute, that intent will be given effect. Holly v. Auld, 450 So.2d 217 (Fla. 1984); and Englewood Water District v. Tate, 334 So.2d 626 (Fla. 2d DCA 1976). If the language of a statute is clear and unambiguous and conveys a clear and definite meaning, there is no occasion for resorting to the rules of statutory interpretation and construction; the statute must be given its plain and obvious meaning. Holly v. Auld, supra.

   
   

5. If some ambiguity exists it is settled that in construing the statute the history of the statute, the evil to be corrected, the intention of the lawmaking body and the subject regulated and object to be obtained should be considered in determining legislative intent. State v. Webb, 398 So. 2d 820 (Fla. 1981); and Englewood Water District v. Tate, supra.

   
   

6. Finally, interpretations of statutes which would produce unreasonable consequences are to be avoided. Williams v. State, 492 So.2d 1051 (Fla. 1986); State v. Webb, supra.; and Wakulla County v. Davis, 395 So.2d 540 (Fla. 1981).

   
   

7. In general, the Petitioner has suggested that paragraphs (1)(c) and

1. of the Proposed Rule are an invalid exercise of delegated legislative authority for essentially two reasons: (1) the challenged portions of the Proposed Rule are contrary to the general legislative intent of Chapter 407, Florida Statutes; and (2) the challenged portions of the Proposed Rule are contrary to Section 407.50, Florida Statutes.

2. Legislative Intent of Chapter 407, Florida Statutes.

1. The Petitioner has argued that paragraphs (1)(c) and (d) of the Proposed Rule are contrary to the legislative purpose of Chapter 407, Florida Statutes, to "assure access of Floridians to adequate hospital care which may become jeopardized because of unaffordable costs." Section 407.003(3)(b), Florida Statutes (1989). Additionally, the Petitioner has argued that the Proposed Rule is contrary to the legislative purpose to protect the public interest and assure access to adequate hospital care by regulating hospital revenues through a process of budget review and approval. See, Sections 407.02(2) and 407.003(3)(a), Florida Statutes (1989).

   
   

2. The weight of the evidence in this case failed to prove that the portions of the Proposed Rule challenged by the Petitioner are contrary to the legislative purposes of Chapter 407, Florida Statutes. The Petitioner failed to prove that hospitals will be able to impose charges on the citizens of the State of Florida which are excessive or contrary to the intent of Chapter 407, Florida

   Statutes, to assure affordable access to hospital care. While it is true that hospitals may be able to increase GRAA without filing a budget amendment subject to detalied budget review under the Proposed Rule, the weight of the evidence failed to prove that such an increase in GRAA is contrary to Chapter 407, Florida Statutes. Paragraphs (1)(c) and (d) of the Proposed Rule both require that a hospital that files a budget letter must calculate its base using a hospital's most recent Board-approved budgeted GRAA. Additionally, the Petitioner's position assumes that the portions of the Proposed Rule it challenges will allow a hospital to file an amended budget letter and avoid detailed budget review only if the hospital's GRAA increases. The evidence failed to prove this to be the case. The Proposed Rule does not by its terms require an amended budget letter only if a hospital is increasing its GRAA. Nor did the evidence prove that the factual circumstances under which an amended budget letter is required will only involve increases in a hospital's GRAA.

   
   

3. The challenged portions of the Proposed Rule are in fact consistent with the intent of the Legislature to allow hospital's to avoid filing a budget subject to detailed budget review by the Board if the hospital is willing to accept a rate of increase in GRAA which does not exceed the MARI. Section 407.003(3)(a), Florida Statutes (1989), which contains the legislative intent of Chapter 407, Florida Statutes (1989), supports this conclusion. In pertinent part, Section 407.003(3)(a) provides that "as a safety net, it is the intent of the Legislature to . . . [e]stablish a program which will contain hospital charges that exceed certain thresholds . . . ." Therefore, if a hospital's proposed rate of increase in GRAA does not exceed the MARI the Legislature has provided that the hospital is not subject to detailed budget review. See also, Section 407.02(2), Florida Statutes (1989). Additionally, the legislative intended that a hospital that files a budget letter calculate its next year's GRAA on its current year's Board-approved budgeted GRAA. The portion of the Proposed Rule challenged by the Petitioner insures that this legislative intent is followed by requiring that the most current Board-approved budgeted GRAA be used by a hospital in its budget letter.

   
   

4. In light of the fact that the legislative intent of Chapter 407, Florida Statutes (1989), is clear and unambiguous from the language of the statute, there is no need to resort to aides to statutory construction. There is, however, no prohibition against taking into account the legislative history of Chapter 407, Florida Statutes (1989), as long as that history is not relied upon to give a different intent to Chapter 407, Florida Statutes (1989).

   
   

5. The Final Staff Analysis and Economic Impact Statement issued for CS/HB 1673 (1988), which was codified as Chapter 407, Florida Statutes (1988), recognized that the legislature, in enacting Chapter 407, Florida Statutes, intended to only subject a hospital to detailed budget review if it sought a rate of increase in its GRAA in excess of the MARI. The Staff Analysis provided the following analysis of pertinent parts of the Act:

Section 24. Substantially amends, transfers and renumbers s. 395.509, F.S., relating to review of hospital budgets, to s. 407.50, F.S. Eliminates hospitals from filing a detailed budget with the board unless the hospital wishes to exceed the maximum allowable rate

of increase (MARI). Requires, as an alternative, for hospitals to file a "budget letter" which specifies what the hospitals expected gross revenues per adjusted admission

will be for its next fiscal year, and a statement affirming it intends to stay within the MARI. Requires all hospitals which exceed the MARI, either through submission of a budget request or by filing a budget amendment, to be subject to detailed budget review regardless of where they fall in their group. Allows hospitals staying below the MARI to "bank" percentage points to be used

in the future, up to a cumulative maximum of

3 points. . . . [Emphasis added].

The foregoing legislative history further supports the conclusion that the Proposed Rule is consistent with the legislative intent of Chapter 407, Florida Statutes (1989), that a hospital will be subjected to detailed budget review only if the hospital seeks approval of a rate of increase in GRAA in excess of the MARI. Paragraphs (1)(c) and (d) of the Proposed Rule are consistent with this legislative intent. The Petitioner's position on the other hand that an amended budget letter reflecting a hospital's correct GRAA must be subjected to detailed budget review is inconsistent with this legislative intent and would produce an unreasonable consequence.

1. Express Provisions of Chapter 407, Florida Statutes.

   
   

   1. General.

      
      

      1. The Petitioner has argued that several specific provisions of Chapter 407, Florida Statutes (1989), support the Petitioner's challenge in this case. Based upon the legislative intent of Chapter 407, Florida Statutes (1989), that a hospital will be subjected to detailed budget review only if the hospital seeks approval of a rate of increase in GRAA in excess of the MARI and that a hospital calculate its GRAA based upon Board-approved budgeted GRAA, the Petitioner's arguments are rejected.

         
         

   2. Section 407.50(6), Florida Statutes (1989).

      
      

      1. The Petitioner has argued that an amended budget letter is an "amendment to such budget" which must be filed in accordance with Section 407.50(6), Florida Statutes (1989), and is, therefore, subject to detailed budget review pursuant to Section 407(5), Florida Statutes (1989). A very strict and literal interpretation of Sections 407.50(5) and (6), Florida Statutes (1989), may lend some support to this argument. Such a strict and literal interpretation of Section 407.50, Florida Statutes (1989), must be rejected, however, for a number of reasons.

         
         

      2. First, the Petitioner's interpretation ignores the overall requirements and the legislative intent of Section 407.50, Florida Statutes (1989). Section 407.50, Florida Statutes (1989), specifically provides that a hospital may file a budget letter which is automatically approved without detailed review unless the hospital intends to request a rate of increase in its GRAA for its next fiscal year in excess of the MARI. Only if a hospital seeks an increase in its GRAA in excess of the MARI is the hospital required to submit to detailed budget review. The Petitioner's interpretation of Section 407.50, Florida Statutes (1989), would require that a hospital which files a budget letter reflecting current year GRAA which is subsequently modified by the Board as a result of detailed review of a budget amendment or as the result of a Board audit also submit to detailed budget review. The Petitioner has offered no

         competent substantial evidence to support a conclusion that such review is contemplated by Chapter 407, Florida Statutes (1989), or would serve any legislative purpose.

         
         

      3. Secondly, the Petitioner's interpretation can be accepted only if it is concluded that a budget letter constitutes a "budget" which "is approved, approved as amended, or disapproved for a given fiscal year . . . ." See, Section 407.50(6), Florida Statutes (1989). While it is true that the term "budget" is defined by Section 407.002(4), Florida Statutes (1989), to included a budget letter, the Petitioner has failed to prove that it would be reasonable to conclude that the use of the term "budget" in Section 407.50, Florida Statutes (1989), was intended to include a budget letter. Sections 407.50(5), (7), (8) and (9), Florida Statutes (1989), all provide the specific manner in which a "budget" is subject to detailed budget review. The detailed budget review of a "budget" contemplated by these provisions is inconsistent with the manner in which budget letters are to be treated pursuant to Section 407.50(2), Florida Statutes (1989). Therefore, although a budget letter is a "budget" pursuant to Sections 407.002(4) and 407.50(2)(a), Florida Statutes (1989), it is clear that the use of the term "budget" in Sections 407.50(5), (7), (8) and (9) Florida Statutes (1989), was not intended to apply to budget letters. To conclude otherwise, would render the treatment of budget letters as being approved by operation of law meaningless. Therefore, it is doubtful that the use of the term "budget" in Section 407.50(6), Florida Statutes (1989), which requires the filing of budget amendments, was intended to apply to budget letters. The more reasonable interpretation of Section 407.50, Florida Statutes (1989), is that the use of the term "budget" in the portions of Section 407.50, Florida Statutes (1989), providing for detailed budget review, was not intended to apply to a hospital that does not seek a rate of increase in its GRAA in excess of the MARI.

         
         

      4. Finally, Section 407.50(2), Florida Statutes (1989), requires that a hospital calculate its next fiscal year's GRAA based upon its current year "board-approved budgeted gross revenues per adjusted admission." The Petitioner's interpretation of Section 407.50(6), Florida Statutes (1989), fails to recognize that the effect of paragraphs (1)(c) and (d) of the Proposed Rule is to require a hospital to correct its GRAA as reported in a budget letter to reflect its current year Board-approved budgeted GRAA if it is modified by the Board after the budget letter is filed. It is reasonable for the Board to require a hospital that files a budget letter to calculate its GRAA based upon its correct "board-approved budgeted gross revenues per adjusted admission" without being subjected to the detailed budget review amendments are subjected to.

         
         

   3. Provisions Governing the Time for Filing Budget Letters and the Time for Board Review.

      
      

      1. The Petitioner has argued that the challenged portions of the Proposed Rule are contrary, by operation of paragraph (3) of the Proposed Rule, to the requirement of Section 407.50(2)(a), Florida Statutes (1989), that budget letters are to be filed no later than ninety (90) days prior to a hospital's next fiscal year. The Petitioner has suggested that, because budget letters are to be filed at least 90 days prior to the next fiscal year, a hospital must use its GRAA as of the date it files a budget letter regardless of whether the hospital's GRAA is amended or corrected at a later date. Closely related to this argument, the Petitioner has argued that the challenged portions of the Proposed Rule are also contrary, by operation of paragraph (3) of the Proposed

         Rule, to the requirement of Section 407.50(2)(a), Florida Statutes (1989), that the Board complete its review of a budget letter within 30 days after it is filed.

         
         

      2. Paragraph (3) of the Proposed Rule provides that the Board has 30 days after an amended budget letter is filed to determine if the GRAA submitted in the amended budget letter is within the MARI for the hospital.

         
         

      3. The Petitioner has suggested that, by requiring a hospital to file an amended budget letter after the latest date that an original budget letter may be filed and allowing the Board 30 days thereafter to review the amended budget letter, the Board has enlarged, modified, or contravened the express requirement of Section 407.50(2)(a), Florida Statutes (1989), by treating a hospital that files an amended budget letter as if it had filed a budget letter no later than

         90 days prior to the hospital's next fiscal year.

         
         

      4. The foregoing arguments are rejected. To accept the Petitioner's arguments would require accepting form over substance. The Petitioner's position emphasizes the time requirements of Section 407.50(2), Florida Statutes (1989), and ignores the requirement that a hospital filing a budget letter calculate its GRAA for the next fiscal year on its "board-approved budgeted gross revenues per adjusted admission." Interpreting the requirements of Section 407.50, Florida Statutes (1989), concerning the time for filing a budget letter and the time during which the Board's review must take place in the manner suggested by the Petitioner ignores the intent of the Legislature to allow a hospital to avoid detailed budget review if it is not seeking a rate of increase in its GRAA in excess of the MARI. The proposed Rule merely requires that a hospital use its most recent Board-approved budgeted GRAA.

         
         

   4. Section 407.50(2)(b), Florida Statutes (1989).

      
      

      1. The Petitioner has suggested that because an amendment to a budget letter is specifically authorized in Section 407.50(2)(b), Florida Statutes (1989), an amended budget letter for other purposes is prohibited. Section 407.50(2)(b), Florida Statutes (1989), requires a hospital to amend its budget letter to increase the MARI of the hospital to reflect "banked" percentage points (certain percentage points which may be used in the calculation of the MARI), in the event that "a budget amendment would have been required to keep a hospital out of a penalty situation . . . ." Although the Petitioner is correct that Section 407.50(2)(b), Florida Statutes (1989), does not specifically authorize budget amendments as contemplated by the Proposed Rule, it is also true that Section 407.50(2)(b), Florida Statutes (1989), does not prohibit such budget amendments. Therefore, it is concluded that the portion of Section 407.50(2)(b), Florida Statutes (1989), relied upon the Petitioner does not provide justification to reject the conclusion that the Proposed Rule is consistent with the legislative intent to allow a hospital to avoid detailed budget review if it is not seeking a rate of increase in its GRAA in excess of the MARI.

         
         

   5. Rule 10N-1.0205, Florida Administrative Code.

1. Finally, the Petitioner has argued that Rule 10N-1.0205, Florida Administrative Code, which provides for the filing of budget amendments, specifically applies to budgets approved "by operation of law." Therefore, because a budget letter is approved by operation of law, the Petitioner argues that an amended budget letter must be reviewed in the same manner as any other budget amendment.

2. The Petitioner's argument ignores the fact that the term "budget", as used in Rule 10N-1.0205, Florida Administrative Code, and as defined in Rule 10N-1.002(11), Florida Administrative Code, does not include budget letters. Based upon the definition of the term "budget" in Rule 10N-1.002(11), Florida Administrative Code, it is apparent that the Board did not consider whether budget letters, which were not provided for in Chapter 395, Florida Statutes (1987), should be treated as a "budget" for purposes of filing amendments when Rule 10N-1.0205, Florida Administrative Code, was adopted. Therefore, the Petitioner's reliance on Rule 10N-1.0205, Florida Administrative Code, is misplaced.

ORDER

Based upon the foregoing Findings of Fact and Conclusions of Law, it is concluded that the Petitioner has failed to prove that Proposed Rule 10N-5.0235, Florida Administrative Code, is an invalid exercise of delegated authority.

Accordingly, it is

ORDERED that the Petition to Determine Invalidity of a Proposed Rule and Request for Hearing is DISMISSED.

DONE and ORDERED this 19th day of November, 1990, in Tallahassee, Florida.

LARRY J. SARTIN

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 19th day of November, 1990.

COPIES FURNISHED:

Jack Shreve Public Counsel

Stephen M. Presnell Associate Public Counsel Peter Schwarz

Associate Public Counsel c/o The Florida Legislature

111 West Madison Street Room 812

Tallahassee, Florida 32399-1400

John H. Parker, Jr., Esquire Jonathan L. Rue, Esquire 1200 Carnegie Building

133 Carnegie Way Atlanta, Georgia 30303

John M. Knight, Esquire

The Perkins House, Suite 101

118 North Gadsden Street Tallahassee, Florida 32301

Julia P. Forrester Senior Attorney

Health Care Cost Containment Board

301 The Atrium

325 John Knox Road Tallahassee, Florida 32303

Steven T. Mindlin, Esquire Post Office Box 10095 Tallahassee, Florida 32302

Michael J. Cherniga, Esquire Post Office Drawer 1838 Tallahassee, Florida 32301

Carroll Webb, Executive Director Administrative Procedures Committee Holland Building, Room 120 Tallahassee, Florida 32399-1300

Liz Cloud, Chief

Bureau of Administrative Code The Capitol, Room 1802 Tallahassee, Florida 32399-0250

Sam Power, Agency Clerk Department of Health and

Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32399-0500

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: 90-005630RP

Orders for Case No: 90-005630RP