STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

)

Petitioners, )

)

and )

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Intervenors. )

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vs. ) CASE NOS. 96-1418RU

) 96-1759RU

STATE OF FLORIDA, AGENCY FOR ) 96-1760RU

HEALTH CARE ADMINISTRATION, ) 96-1975RX

)

Respondent, )

)

and )

) CITIZENS OF THE STATE OF FLORIDA, )

)

Intervenors. )

)

FINAL ORDER

Pursuant to notice, the Division of Administrative Hearings, by its designated Administrative Law Judge, Don W. Davis, conducted a formal hearing in the above-styled case on October 29-November 6, 1996, in Tallahassee, Florida.

APPEARANCES

For Petitioners, Aventura, et al., Intervenors Shands Teaching Hospital and Clinics, Inc., d/b/a Shands Hospital at the University of Florida and Shands Teaching Hospital and Clinics, Inc., d/b/a Shands Homecare, Florida Hospital Association, and Florida League of Hospitals:

Steven T. Mindlin, Esquire Rose, Sundstrom and Bentley 2548 Blairstone Pines Drive Tallahassee, Florida 32301

For Petitioners, Tenet and Morton Plant:

Michael J. Glazer, Esquire Ausley and McMullen

227 South Calhoun Street Tallahassee, Florida 32301

For Intervenor Association of Voluntary Hospitals:

R. Terry Rigsby, Esquire Richard A. Lotspeich, Esquire Blank, Rigsby and Meehan

204 South Monroe Street Tallahassee, Florida 32301

For Intervenor Orlando Regional Hospital:

James M. Barclay, Esquire Cobb, Cole and Bell

131 North Gadsden Street Tallahassee, Florida 32301

For Respondent Agency for Health Care Administration: John F. Gilroy, Esquire

Mark Thomas, Esquire

Agency for Health Care Administration 2727 Mahan Drive, Suite 3431

Tallahassee, Florida 32308-5403

For Intervenor Citizens of the State of Florida:

Stephen M. Presnell, Esquire Office of Public Counsel

111 West Madison Street, Room 812 Tallahassee, Florida 32399-1400

STATEMENT OF THE ISSUES

Whether policies of the Agency For Health Care Administration (Agency) which impose certain obligations upon hospitals with regard to classification in Prior Year Reports of activity related to certain home health agencies violate the requirement that those statements, rules by definition, be adopted as rules.1 Sections 120.54(1)(a) and 120.56(4), Fla. Stat. (1996 Supp). An additional issue for consideration is whether certain provisions of the Florida Hospital Uniform Reporting System (FHURS) Manual, incorporated by reference in Rule 59E-5.102, Florida Administrative Code, constitute invalid exercises of delegated legislative authority as otherwise set forth in Section 120.52(8), Fla. Stat. (1996 Supp.)

PRELIMINARY STATEMENT

This matter involves nine Petitions, including initial petitions and petitions for intervention that were consolidated for final hearing. The first Petition was filed March 20, 1996 and the last was filed June 21, 1996. All of these Petitions were based on the then-existing Sections 120.535 and 120.56, Fla. Stat., (1995). Between the filing of the Petitions and the final hearing, there were significant changes adopted to Florida's Administrative Procedures Act in Chapter 120, Fla. Stat. These changes went into effect October 1, 1996. Although there appears, with a few

significant exceptions, to have been very little difference in the procedural laws applicable to this case in the “old” and “new” APAs, this case is considered in accordance with the amended law because it was heard after October 1, 1996.

At hearing, Petitioners, and intervenors aligned with Petitioners, presented the testimony of Susanne Moran, an expert in HHA management and operations; Michael Poland, an expert in healthcare finance and healthcare accounting; Sarah Fitzgerald, an expert in healthcare finance, accounting and cost containment regulation; Phil Detweiler, a regulatory analyst employed by AHCA; Elton Scott, Ph.D., an expert in healthcare finance and healthcare economics; Victoria Montanaro, former Bureau Chief and former Regulatory Analyst Supervisor at AHCA; and Glenn Hubbard, of Morton Plant Mease Health Care. Petitioners' Exhibits 1 through 97 were offered and admitted into evidence.

Respondents (Agency and Intervenors aligned with Agency) presented the testimony of Chris Augsburger, an expert in accounting, hospital budget and financial analysis and Florida healthcare budget regulation within AHCA's regulatory system from the agency's perspective; Lynn Riley, an expert in accounting and Florida hospital budget and financial regulation; Liz Dudek, current Chief of AHCA's Certificate of Need and Budget Review Sections; and Allen Pearman, an expert in healthcare economics and healthcare data analysis. Respondents’ Exhibits 1, 29-31, 35, 36A, 36B, 39, 43, and 67-71 were offered and admitted into evidence.

The transcript of the final hearing was filed with the

Division of Administrative Hearings on December 19, 1996, and the parties submitted Proposed Final Orders on January 22, 1997. The parties requested and were granted leave to file post-hearing submissions more than 10 days after the filing of the transcript.

Based upon all of the evidence presented at final hearing, including the demeanor and candor of the witnesses who testified, the following Findings of Fact are made:

FINDINGS OF FACT

1. In accordance with stipulation of the parties, all parties to this proceeding have standing in, and are parties to, each of the consolidated cases.

   1. Background

      Hospital Regulatory System Overview

2. Under Florida law, hospitals are subject to a regulatory program commonly known as the budget review or hospital cost containment program. The cost containment program is currently administered by the Agency.

3. Under the cost containment regulatory system, the State of Florida regulates a hospital's gross revenues per adjusted admission ("GRAA") and net revenues per adjusted admission ("NRAA"). GRAA is defined in statute and refers to a hospital's average charges per case. NRAA is defined in statute and refers to the average amount which a hospital collects per case. The Florida regulatory system does not directly regulate hospital charges.

4. Florida hospitals must annually submit a budget to the Agency for its review. The statute creates a process for the

   detailed review of those budgets for hospitals which are requesting a rate of increase in GRAA or NRAA greater than the "maximum allowable rate of increase" as defined in statute. The maximum allowable rate of increase ("MARI") is different for various hospitals, based upon hospital-specific inputs of data as delineated in statute. Hospitals which exceed the MARI are subject to administrative fines and/or penalties. As part of the review process for hospital budgets or budget amendments, the Agency groups hospitals to attempt to compare like hospitals to like hospitals for analysis purposes.

5. The Agency's cost containment regulatory process and actual report review process applies only to hospitals. Section 408.07, et al., Fla. Stat. "Hospital" is defined as an entity which holds a license to operate a hospital in the State of Florida. Section 408.07(33), Fla. Stat.

6. A hospital must be licensed to operate in the State of Florida. Hospital licenses in Florida are issued by the Agency under Chapter 395, Fla. Stat.2 A hospital license does not permit a hospital to offer home health services.

7. A hospital is not a HHA. Hospitals and HHAs are licensed by the State to provide different types of services in different locations. A HHA is required to operate under a separate license from a hospital license. A hospital cannot bill for home health services.

   Home Health Agencies

8. A HHA is an agency that is licensed by the State of Florida under Chapter 400, Fla Stat., to provide home health services. The State of Florida has various rules and regulations governing the operation of HHAs. The budget review and penalty system which applies to Florida hospitals is not applicable to HHAs. The HHA license does not permit a HHA to offer hospital services.

9. There are three types of HHAs operating in the State of Florida: stand alone agencies, hospital affiliated agencies, and chain-affiliated home health agencies. Stand alone agencies are those with no affiliation with another entity. All three types of agencies are licensed by the State, and are authorized to provide similar services.

10. There is great competition among HHAs for the provision of those services. Marketplace changes have resulted in more patients receiving more treatment in the home. The rise of managed care has also resulted in an increase in home care in Florida and throughout the nation.

    Medicare

11. The Medicare program is a federal program designed to pay for the cost of services provided to the elderly by healthcare providers.

12. The Medicare program covers home health services provided to Medicare-eligible patients. For a provider to participate in the Medicare program, it must be certified by

    Medicare under applicable federal statutes and regulations. Every Medicare provider is issued a provider number by the Health Care Financing Administration (HCFA), the federal agency which administers the Medicare program. Medicare-certified home health agencies have separate Medicare provider numbers from hospitals.

13. The three types of HHAs operating in Florida can be designated by HCFA as Medicare-certified. Only Medicare-certified HHAs are able to provide services to Medicare patients, bill Medicare recipients, and receive payment from the federal government for the provision of services to Medicare-eligible patients.

14. In addition, hospital-based home health agency (HBHHA) is a federal Medicare reimbursement term. A HBHHA is not a defined term under Florida Statutes or regulations.

15. The Medicare reimbursement system for home health care is a cost reimbursed system. The federal government reimburses home care providers based upon their allowable costs, up to a certain cost cap. The Medicare program utilizes a cost allocation process to allocate costs by comparison to costs incurred by similar organizations that provide home health services. There are similar cost allocation processes applied to HBHHAs and Medicare-certified chain affiliated HHAs. These costs are subject to audit, and providers must submit an annual Medicare Cost Report pursuant to applicable federal regulations. The Medicare program then subjects allowable costs to a cost limit, which is the maximum payment which will be made by the federal government for home health visits.

16. It takes only a few seconds to determine if a Medicare Cost Report includes the activity of a Medicare-certified HBHHA.

17. It is HCFA's decision whether or not to certify a given HHA as being a HBHHA. The applicable federal regulations governing certification of home health agencies as hospital-based are found in the 1980 Federal Register. As applied, HCFA has certified agencies as HBHHAs if these agencies have common control and ownership with the affiliated hospital.3

18. HHAs bill for Medicare services on HCFA Form 1500. Hospitals bill on form UB-92. HHA charges do not appear on a hospital bill.

    AHCA Hospital Prior Year Reports

19. In addition to filing budgets or budget letters, hospitals are required under statute to file with the Agency an annual report known as the Prior Year Report. Section 408.061, Fla. Stat. A hospital Prior Year Report is made up of three distinct parts: 1) the hospital's prior year actual report, which consists of a standardized set of forms; 2) the hospital's audited financial statements; and 3) the hospital's Medicare Cost Report. The prior year actual reporting forms are found in the FHURS Manual. The Agency began collecting the Medicare Cost Report as part of the Prior Year Report in approximately 1988.

20. The FHURS Manual, a uniform reporting system utilized by the Agency governing the filing of Prior Year Reports, was developed in approximately 1980. The FHURS Manual contains the prior year actual report forms which hospitals file with the

    Agency. In all material respects, the current version of the FHURS Manual is substantially similar to its predecessors.

21. If the hospital prior year actual reporting forms do not tie to the audited financial statements, the hospital must provide a reconciliation. The hospital prior year reporting forms contain Worksheet X-4, which is a blank form to be utilized for detailed explanations including any reconciliation’s between the prior year actual report forms and the audited financial statements. There is no statute or rule requiring the prior year actual reporting forms to be reconciled to the Medicare Cost Report.

22. The statute governing reporting for Prior Year Reports defines hospitals and HHAs as two separate types of health care facilities. Sections 408.061(3), 407.07(27), (31), (33), Fla. Stat. The Agency does not require HHAs to file Prior Year Reports.

23. The Agency has the responsibility to review hospital Prior Year Reports, and to determine that the Prior Year Report has been filed in compliance with applicable rules and regulations.

    The Agency is required to determine that a hospital's Prior Year Report has been "accepted." Accepted is a defined term in Florida Statutes.4 After a hospital's Prior Year Report has been "accepted" by the Agency, the Agency then calculates penalties, administrative fines and Public Medical Assistance Trust Fund (PMATF) and Health Care Cost Containment Trust Fund (HCCCTF) taxes based upon the Prior Year Report.

24. The regulatory system governing hospital Prior Year Report review is not a voluntary system. Although it is the

    hospital that decides how to classify items on its Prior Year Report for filing, it is the sole responsibility of the Agency to determine whether or not the report is to be "accepted." As part of its review process, the Agency typically asks hospitals a series of detailed questions that are provided to the hospital in a form known as a Notice of Violation.

25. The Agency sends a Notice of Violation on virtually every hospital Prior Year Report. If a hospital does not respond to a Notice of Violation, the hospital can be subject to administrative fines.

    Audited Financial Statements

26. The audited financial statements included as part of the hospital's Prior Year Report submission must, by law, be examined by an independent certified public accountant. In preparing audited financial statements, auditors opine on the financial statements of management, and issue what is known as a "clean opinion" if, in the auditor's opinion, management's financial statements do not materially misstate the financial position of the entity being audited and if the statements are prepared in accordance with generally accepted accounting principles.

27. Financial statements can be issued for a division of an overall corporation, provided that appropriate disclosures are made in the footnotes to the financial statements. The standard place for a footnote disclosing the organization being audited and related organizations is in footnote 1 to the audited financial statements.

28. Generally accepted accounting principles allow management the discretion to determine what are the principal and central ongoing operations of the entity being audited.

    PMATF and HCCTF

29. The PMATF was established in 1984 to fund certain expansions to Florida's Medicaid program. Chapter 84-35, Laws of Florida. Under Section 395.701, Fla Stat., hospitals are taxed 1.5 percent of their annual net operating revenue, with the assessments to be based upon the hospital's Prior Year Report filed with the Agency. The HCCTF tax was established to fund certain data collection functions of the Agency. Section 408.20, Fla. Stat. Those revenues and expenses which appear on the hospital's Prior Year Report as "operating" are subject to PMATF and HCCTF tax. Those revenues or expenses which appear as "non-operating" or are excluded from a hospital Prior Year Report are not subject to PMATF and HCCTF tax.

30. In 1991, the Florida Legislature expanded the PMATF tax base to include certain other specified health care providers. These specified providers included clinical laboratories, ambulatory surgery centers, and diagnostic imaging centers. See, Section 395.7015, Fla. Stat. HHAs were not included in the list of expanded taxable entities by the Legislature. HHAs do not pay PMATF or HCCTF tax.

    Hospital-Home Health Agency Relationships

31. As the healthcare marketplace has evolved, hospitals have increasingly established relationships with HHAs. The operational

    and structural relationship between hospitals and HHAs varies from hospital to hospital and agency to agency. Corporate organizational structure and operational relationships between the hospitals and affiliated HHAs will vary. A variety of corporate structures can be employed, including separating the HHA and the hospital into separate corporations, parent/subsidiary relationships, sibling corporations, or one corporation with more than one operating division.

32. Some hospitals have affiliations with both a Medicare- certified and a non-Medicare certified HHA. Not every hospital affiliated HHA is designated as a Medicare-certified HBHHA. A hospital can have the same operational relationship with two home health agencies, with one being a certified agency and one being non-certified.

33. Not every relationship between a hospital and related HHA results in increased reimbursement or a dollar benefit to the hospital.

34. While the Agency has never adopted a uniform reporting system for HHAs, uniform reporting systems covering the four types of health care facilities that were included in the increased PMATF assessment beginning in 1991, have been adopted by the Agency.

35. A hospital does not always control which HHA will treat a patient after discharge from the hospital. HBHHA’s compete with other HHAs for patients. Some HBHHAs are located far from the affiliated hospital, and serve virtually none of the patients who were patients of the hospital.5

36. There are several HHAs in Florida which have been certified as HBHHAs to hospitals which are located outside the State of Florida. Memorial Hospital Savannah has in the past been affiliated with numerous HHAs in Florida. Flowers Hospital in Dothan, Alabama has also maintained an affiliation with a HHA located in Florida.

    Separate Reporting for Separately Licensed Facilities

37. Under Florida law, separately licensed health care facilities must separately report financial data to the Agency. Section 408.061(3), Fla. Stat. The definition of "health care facility" applicable to this reporting requirement was changed in 1992, and now specifically refers to "hospitals" and "home health agencies" as two separate types of health care facilities.6

    1. The Way We Were -- Agency Prior Action

38. The Agency has reviewed and "accepted" the Prior Year Reports of Florida hospitals for more than a decade. The Agency reviews between 320 and 325 Prior Year Reports every year.

39. The applicable definition of an "accepted" report is one that is determined by the Agency to have been filed in a manner conforming with applicable rules and the FHURS Manual in force at the time of filing the report.

40. The Agency has accepted hospital Prior Year Reports which classified HHA activity as "operating" activity of the hospital, has accepted hospital Prior Year Reports in which home health activity was reported as "non-operating" activity of the hospital, and has accepted reports where HHA activity was excluded entirely

    from the report. In all such cases, the hospital made disclosure to the Agency that the hospital was related in some fashion to a HHA.

41. The Agency has accepted reports presented in a variety of manners, and has interpreted its applicable rules and the FHURS Manual to allow all such filings. The "accepted" reports have all been used by the Agency for regulatory purposes including the calculation of hospital MARIs, the review of hospital budgets and budget amendments, the formation of hospital peer groups for budget review, and the calculation of penalties for hospitals potentially exceeding allowable levels of GRAA and NRAA. All of the accepted reports have also been utilized for the purposes of taxing hospitals under the PMATF assessment and the HCCCTF assessment. Hospitals have reasonably relied upon the acceptance of these reports as evidencing that the reports were filed in a manner conforming to Agency rules.

42. The Petitioners presented extremely extensive documentation, all drawn from public records, to establish the Agency's prior actions regarding the classification of HHA activity on Agency accepted hospital Prior Year Reports. This documentation included more than 40 notebooks which were accepted into evidence.7

    Although detailed findings of fact could be made regarding each of the items in each of the books, this would result in unnecessary cumulative findings of fact. In place of such findings, the following summary findings are made:

    Acceptance of Hospital-Only Reports

43. The Agency accepted the Prior Year Reports of numerous hospitals in numerous years in which the prior year actual report forms were prepared on a hospital-only basis, excluding all HHA activity.

44. Many hospitals excluded HHA activity from the hospitals' audited financial statements, but provided disclosure of the existence of a related HHA.8 These hospitals submitted prior year actual report forms which excluded HHA activity from the report. The following hospital Prior Year Reports were accepted by the Agency prepared in the above-described manner: Morton Plant Hospital, FY 1986 - FY 1994 (Pet. Ex. 35); Sarasota Memorial Hospital, FY 1986 - FY 1994 (Pet. Ex. 36); Winter Haven Hospital, FY 1989 - 1994 (Pet. Ex. 37); Manatee Memorial Hospital, FY 1989 - FY 1994 (Pet. Ex. 38); Cedars Medical Center, FY 1991 - FY 1993 (Pet. Ex. 23, 47); Memorial Hospital of Hollywood, FY 1993 - FY 1995 (Pet. Ex. 39); Orlando Regional Medical Center, FY 1990 - FY 1994 (Petitioners Ex. 40); Leesburg Regional, FY 1989, FY 1990, FY 1993, FY 1994 (Pet. Ex. 41); St. Joseph's Hospital Tampa, FY 1991 - FY 1995 (Pet. Ex. 42); Mt. Sinai Medical Center, FY 1993, FY 1994 (Pet. Ex. 43).

45. The accepted hospital reports referenced above were all "hospital only" reports, and all provided disclosure to the Agency of the existence of a HHA that was related in some fashion to the hospital.9

46. In addition to the reports accepted as described above, the Agency has also accepted "hospital only" reports in which the audited financial statements included the activity of a HHA as operating activity of the entity being audited, and in which the audited financial statements included what is known as "other financial information" or "OFI" which separated out the HHA, the hospital, and other activities. However, the prior year actual reports of the hospitals excluded the home health activity from hospital "operating" activity, and provided a reconciliation to the audited financial statements on Worksheet X-4. The following hospital reports were accepted by the Agency prepared in the above- described manner: Morton Plant Hospital, FY 1984 - FY 1985 (Pet. Ex. 35); Mease Hospital, FY 1994 (Pet. Ex. 51); Lee Memorial Hospital, FY 1990 - FY 1994 (Pet. Ex. 44); Hialeah Hospital, FY 1989 - FY 1994 (Pet. Ex. 45); Mt. Sinai Hospital, FY 1992 (Pet. Ex. 23, 43); Suncoast Hospital, FY 1990 - FY 1994 (Pet. Ex. 46); Cedars Medical Center, FY 1990 (Pet. Ex. 47, 23); Leesburg Regional, FY 1991 - FY 1992 (Pet. Ex. 41).

47. The Agency accepted the Prior Year Reports of numerous hospitals in numerous years in which the audited financial statements included HHA activity as operating activity of the entity being audited without OFI, but in which the prior year actual report forms excluded HHA activity, with a reconciliation on Worksheet X-4. The following reports were accepted by the Agency that were presented in this manner: Cedars Medical Center, 12/31/93 Partial Prior Year Report (Pet. Ex. 23, 47); University-

    Tamarac, FY 1993 and FY 1994 (Pet. Ex. 48); Doctors Hospital of Sarasota, FY 1993 and original 5/31/94 Partial Year Report (Pet. Ex. 49); Florida Hospital, Revised FY 1993 Report, FY 1994 Report (Pet. Ex. 50); Mease Hospital, Revised FY 1993 Report (Pet. Ex.

    51); Palms of Pasadena Hospital, FY 1994 Report (Pet. Ex. 52); Shands Teaching Hospital, FY 1994 Report (Pet. Ex. 53; Resp. Ex. 71 at p. 32).

48. Prior to accepting the above-referenced reports, the Agency would have had to reconcile the prior year actual report which excluded HHA activity to the audited financial statements which included HHA activity as operating with or without OFI. To perform this reconciliation, the Agency analyst would have reviewed Worksheet X-4, and would have been aware of the hospital's disclosure of a relationship to a HHA.

49. The Agency has accepted "hospital only" reports in contexts other than those involving HHAs. The Agency has instructed numerous Community Mental Health Centers ("CMHCs") to exclude certain activity not provided in hospital-licensed beds from the Prior Year Reports submitted to the Agency. The Agency instructed CMHCs to exclude certain outpatient revenues from the hospital Prior Year Report, even though this activity was included in the entity's Medicare Cost Report. The Agency has instructed at least one of these facilities that it should also have its own audit for the hospital only (Pet. Ex. 74, p. 248).10

50. Victoria Montanaro served as the Bureau Chief and Regulatory Analyst Supervisor for the Agency for a two-year period

    covering May 1993 through June 1995. In these roles, Ms. Montanaro was the senior person responsible for the review and acceptance of hospital Prior Year Reports. Ms. Montanaro was aware that the Agency had accepted hospital Prior Year Reports prepared on a hospital-only basis, with HHA activity excluded.

51. The Agency does not know how many hospital Prior Year Reports it accepted in which home health activity was excluded. There is no electronic data base which currently captures this information.

    Acceptance of Hospital Prior Year Reports as Non-Operating

52. The Agency has accepted the reports of numerous hospitals in which hospitals submitted their prior year actual report forms with HHA activity reported as non-operating activity. The Agency accepted the following hospital reports in which HHA activity was included as operating activity on the audited financial statements, but in which HHA activity was reported as non-operating on the prior year actual report forms, with a reconciliation provided on Worksheet X-4: Westside Hospital, FY 1994 (Pet. Ex. 54); Largo Medical Center, FY 1994 (Pet. Ex. 55); St. Petersburg General Hospital, FY 1994 (Pet. Ex. 56); Columbia Hospital Palm Beaches, FY 1994 (Pet. Ex. 57); Northwest Regional, FY 1994 (Pet. Ex. 58); Doctors Hospital of Sarasota, 6/1/94 - 12/31/94 Partial Prior Year Report (Pet. Ex. 49); Winter Park Memorial Hospital, FY 1994 (Pet. Ex. 59); Lake City Medical Center, FY 1994 (Pet. Ex. 62); Clearwater Community Hospital, FY 1994 (Pet. Ex. 63); South Bay

    Medical Center, FY 1994 (Pet. Ex. 64); Bay Medical Center, FY 1994 (Pet. Ex. 65); South Miami Hospital, Revised FY 1994 (Pet. Ex. 66); Palmetto, Revised FY 1994 (Pet. Ex. 67); Mercy Hospital, Revised FY 1993 and FY 1994 (Pet. Ex. 68); Cedars, FY 1994 (Pet. Ex. 47).

53. For the Agency to accept the above-referenced hospitals' Prior Year Reports, the Agency would have reconciled the prior year actual report to the audited financial statements, and in so doing would have been aware of the existence of the HHA.11

54. The Agency does not know how many hospital Prior Year Reports it accepted in which HHA activity was included as non- operating activity. There is no current data base from which the Agency can determine how many hospitals had their reports accepted in this fashion.

55. The Agency has in at least one case not involving home health revenues, directed a hospital to record certain non-hospital activity in non-operating revenues. The Agency instructed The Willough at Naples to include those activities which were not related to hospital activities, but rather related to separately- licensed activities, as hospital non-operating activity in its Prior Year Reports (Pet. Ex. 69).

    Acceptance of Hospital Reports as Operating

56. The Agency has also accepted the reports of numerous hospitals in which home health activity was classified as operating in both the audited financial statements and prior year actual report forms. The Agency is able to capture a complete list of reports that were accepted in this fashion, based upon existing

    data bases. The Agency presented a summary table of this information which was admitted into evidence as Respondents' Exhibit 1. Respondents' Ex. 1 lists all of the hospital Prior Year Reports which were accepted in which HHA activity was reported as operating from 1982 through the present.12

    Agency-Industry Communications Regarding Home Health Agency Reporting

57. Prior to filing the FY 1993 short period Prior Year Report for Cedars Medical Center, healthcare consultant Sarah Fitzgerald met with Victoria Montanaro, who at that time was the Agency Chief in charge of the review of hospital Prior Year Reports. At that meeting, the issue regarding how Cedars Medical Center would report HHA activity was discussed, as well as similar reporting for University Hospital-Tamarac. Ms. Fitzgerald was told by Ms. Montanaro that reporting as non-operating would be acceptable and was preferred (See Pet. Ex. 21). The Cedars and University-Tamarac reports were accepted by the Agency (Pet. Ex. 47, 48).

58. Mills Smith, a healthcare consultant, also inquired of Ms. Montanaro regarding the classification of HHA activity on hospital Prior Year Reports (Pet. Ex. 20). Ms. Montanaro informed Mr. Smith by letter dated March 2, 1994, that hospitals should not include HHA activity as hospital operating activity in the hospital Prior Year Report (Pet. Ex. 20).

59. Prior to her leaving the Agency, Ms. Montanaro prepared an internal memorandum to Diane Berryhill, who was at the time

    employed by the Agency as a regulatory analyst reviewing hospital

    Prior Year Reports (Pet. Ex. 21). This memorandum reflected Ms. Montanaro's understanding of the Agency's position regarding HHA reporting as of the date of the memo. At the time that Ms.

    Montanaro wrote her memorandum, she had purview over the acceptance of Prior Year Reports, had the authority to accept reports, and had the authority to respond to questions from hospitals regarding how to fill out Prior Year Reports. The memo, a copy of which was sent by Ms. Montanaro to Ms. Fitzgerald, stated that the Agency's position was not to require that HHA activity be reported as hospital operating activity. The memorandum also states that a legal opinion was going to be sought by the Agency, and that prior to any changes in policy, a work plan would be implemented. The legal opinion was requested by Ms. Montanaro because she was concerned about whether reporting HHA activity as "hospital operating" activity was even an option after the 1992 statutory changes.

60. The legal opinion referenced in Ms. Montanaro's memorandum was never provided. The work plan referenced in Ms. Montanaro's memorandum was never implemented.

    Acceptance of Hospital Revised Prior Year Reports

61. Florida Hospital revised its FY 1993 report to exclude HHA activity. This report was accepted by the Agency (Pet. Ex. 50, pp. 65, 90, 109). Mease Hospital also revised its FY 1993 report, and highlighted the changes in the revised report (Pet. Ex. 51; p. 78). In each of these cases, the Agency was aware of changes in the reporting, and accepted the reports as filed.

62. In FY 1993, Mercy Hospital filed its Prior Year Report and included revenues and expenses associated with a HBHHA as hospital operating revenues (Pet. Ex. 68). The Agency accepted this report. The Hospital then filed with the Agency a revision to its FY 1993 Prior Year Report, moving the HHA activity from operating to non-operating. The Agency accepted the revised report. After the revised FY 1993 report was accepted, Mercy Hospital asked the Agency for a refund of PMATF assessments which had been calculated and paid based upon the inclusion of HHA activity as hospital operating activity in the original accepted FY 1993 Prior Year Report (Pet. Ex. 68, p. 128). The Agency issued a refund check to Mercy Hospital to reimburse it for the PMATF assessment which it had paid based upon HHA activity.

    1. This is Now--New AHCA Policy and Actions AHCA's Statements and Actions Evidencing

       New Policy or Rule Interpretation

63. Beginning with the FY 1994 Prior Year Reports of 14 hospitals owned by Columbia/HCA who are Petitioners in this case, the Agency changed its practice regarding the acceptance of Prior Year Reports. Where in the past the Agency accepted Prior Year Reports classifying home health activities in the numerous ways described above, the Agency determined that it would only accept hospital Prior Year Reports that include HHA activity as "hospital operating" activity. Beginning with the 14 Columbia hospital FY 1994 Prior Year Reports, the Agency has sent out numerous notices of violation involving hospital Prior Year Reports which were filed with the Agency and which classified HHA activity as non-operating

    or which excluded HHA activity from the Prior Year Report with disclosure of the existence of a hospital-related HHA (Pet. Ex. 53). This change in practice has not been accompanied by any change in statute or the FHURS Manual.

64. Prior to the review of these fourteen FY 1994 Prior Year Reports, the Agency never told a hospital that it had to report HHA activity as operating in order to have its Prior Year Report accepted.

65. By requiring hospitals to include HHA activity as hospital operating activity in Prior Year Reports, the Agency is also requiring that hospitals pay PMATF and HCCTF taxes on HHA activity. The Agency has admitted that its new practice is a statement of general applicability (Pet. Ex. 8, Tabs A, B, C, Requests 2, 3, 7, 8, 9 and 10).

    Dudek April 5 and 9 Letters

66. On April 5 and April 9, 1996, the Agency sent letters to every Florida hospital concerning the reporting of HHA activity in FY 1995 Prior Year Reports. These letters were signed by Liz Dudek, AHCA Chief of Certificate of Need and Budget Review (Pet. Ex. 15, 16). The letters state that if a hospital includes the activity of a HHA on its Medicare Cost Report, it must be included as operating activity in the Hospital's FY 1995 Prior Year Report submitted to the Agency. The April 9 letter does not refer to any factors to be considered aside from the Medicare Cost Report.

    The Agency's New Practice As Applied

67. The Agency's new practice is to require that every hospital that includes a HBHHA on its Medicare Cost Report must report to the AHCA the activity of home health agencies as "operating" activity on the hospital Prior Year Report (Pet. Ex. 15, 16, 35, 41, 45, 46). The Agency's reliance upon the Medicare Cost Report as the basis for requiring such reporting with the Agency is a new practice.

68. The Medicare Cost Report is a document submitted to the federal government for review by HCFA. The Medicare Cost Report itself has not been adopted as a rule in the State of Florida.

69. Phil Detweiler, a regulatory analyst whose primary duty at the Agency is to review Prior Year Reports, testified that the Agency now looks for evidence that HHAs have a relationship to the hospital, but that this was not an area of inquiry before the fall of 1995. Mr. Detweiler was told by his supervisor in late December 1995 or early January 1996 to send notices of violations to all hospitals if a HBHHA is included in its Medicare Cost Report and HHA activity was classified as other than operating activity in the hospitals' Prior Year Report. Mr. Detweiler testified that he did not need to know anything about the operational relationship between a hospital and a HHA in order to send out a Notice of Violation requiring that a hospital reclassify HHA activity to operating activity.

70. In determining that the FY 1995 budget amendment of Osceola Regional Hospital was incorrect in its classification of

    HHA activity as non-operating, the sole factor relied upon by Chris Augsburger, who was reviewing this report for the Agency, was the inclusion in the Medicare Cost Report of a HBHHA. Mr. Augsburger testified that he considered the inclusion on the Medicare Cost Report to be conclusive evidence of the relationship such as to require reporting as hospital "operating," and that he did not ask any additional questions of the hospital regarding the relationship of the hospital to the HHA, or rely upon other information which could relate to that relationship. Mr. Augsburger stated that the determinative factor for reporting is whether the HBHHA is included on the Medicare Cost Report, not whether the hospital "operates" a HHA.13

    Hospital "Operation" of Home Health Agencies

71. There is no definition in Florida law of what it means for a hospital to "operate" a HHA. The Agency never attempted to define the term "operated by" or "operated as a part of" a hospital. Nothing in the FHURS Manual offers any test or guidance to determine what it means for a hospital to operate a HHA, or to describe any factors which would be utilized in determining whether any given relationship between a hospital and a HHA meets this supposed test.

72. Although the Agency maintained through some of its witnesses that in addition to the Medicare Cost Report, hospitals must report on HHAs if the hospital "operates" a HHA, the Agency has no formalized set of factors by rule to provide any standards regarding how this test would be applied.

73. The Agency has never made inquiry of a hospital, outside of this proceeding, regarding the nature of the operational relationship between a hospital and any HHAs. In addition, the Agency has never asked any hospital, in the course of the review of a hospital Prior Year Report, whether a HHA was operated as a department of the hospital.

74. Not all HHAs related to a hospital are Medicare- certified. Non-Medicare-certified HHAs will not appear on any hospital's Medicare Cost Report. For non-certified HHAs, the Agency maintains that such agencies are required to be reported as "operating" on a Prior Year Report, if there is a close enough operational relationship between the hospital and the HHA. There is, however, nothing in rule to provide any guidance as to how such a requirement would be implemented, and there is nothing from the factors delineated by Agency witnesses in this case which would provide the answer of whether reporting is required in a given instance or not.

    Rulemaking is Feasible and Practicable

75. The new Agency practice described above has not been promulgated as a rule.

76. The Agency has been receiving and reviewing hospital Prior Year Reports for over a decade. The Agency has accepted reports, and was made aware through disclosure of the existence of relationships between hospitals and home health agencies, for more than a decade.

77. The Agency's new practice is distinguishable from its old

    practice only in the result of whether a given report is to be accepted, not in the information required by the Agency to make that decision. The Agency's witnesses testified that the Agency could have "discovered the inconsistency" between Medicare cost reporting and AHCA prior year reporting earlier than it did.

78. When the FHURS Manual was created, the Agency was required to go through a process prior to adopting the Manual which included obtaining the input of Hospital personnel and industry representatives in the promulgation of the Manual, as required by Section 408.061 (2), Fla Stat. The Agency went through the required process. Based upon the 1992 change in the legislation, the Agency is required to go through a similar process if it wishes to collect data from other types of health care facilities, including HHAs. The Agency has chosen not to go through the process required by statute.

79. The Agency presented the testimony of Chris Augsburger that the Agency had not discovered any problem with HHA activity reporting earlier because the disclosure by hospitals in Prior Year Reports was "too subtle to get anyone's attention." This contention regarding disclosure is specifically found to be not credible, given the overwhelming weight of evidence presented by Petitioners to the contrary.

80. Rulemaking in this matter would be feasible and practicable.

    1. Affect of Changed Policy/Rule Interpretation

81. The Agency's requirement regarding the filing of HHA activity as "operating" activity on hospital Prior Year Reports will substantially affect hospitals and HHAs in the State of Florida. Among the impacts of the Agency's new practice are increased penalties, administrative fines, and taxes on hospitals which are required to report HHA activity as "operating" activity.

    There are additional regulatory impacts regarding the budget review process, as found in greater detail below.

    Penalties

82. The Agency annually calculates regulatory penalties and administrative fines based upon whether a hospital has generated "excess" GRAA and NRAA in a given fiscal year, based upon Prior Year Reports accepted by the Agency. The inclusion of HHA activity in hospital's operating activity could increase or create a penalty, when the Agency reviews a hospital Prior Year Report.

83. Petitioners gave two examples of the potential penalty impact on specific hospitals. In the case of Southwest Florida Regional Medical Center, the effect of including HHA activity in both the FY 1995 and the FY 1994 Prior Year Report would be to create a $2,000,000 penalty, where none existed based upon a comparison of the reports without home health activity (Pet. Ex. 28). If the Agency were to compare the 1995 report for Southwest Florida Regional Medical Center including home health activity to the accepted FY 1994 Prior Year Report of Southwest Florida Regional Medical Center which did not include such activity as

    operating, the penalty increases from $2,000,000 to $9,000,000.

84. The potential penalty impact on Morton Plant Hospital should the Agency require Morton Plant to report HHA activity as operating in 1995 would exceed $12,500,000. This penalty would have a substantial and adverse impact on Morton Plant, and would result in a permanent reduction to Morton Plant.

85. Morton Plant Hospital has had its Prior Year Reports accepted by the Agency for more than 10 years in a manner which excluded HHA activity from the Prior Year Report, with disclosure. Morton Plant Hospital is not in a penalty situation if its 1995 Prior Year Report is compared to its FY 1994 Prior Year Report, with both reports excluding HHA activity, as has been accepted by the Agency for more than 10 years.

86. Southwest Florida Regional Medical Center and Morton Plant Hospital are only two examples of the potential penalty impact of an Agency requirement that HHA activity be reported as "operating" -- many more hospitals would be affected. Ms. Dudek was not aware of the potential penalty impact involving Morton Plant, and stated that the amount of the fine or penalty was "beyond her control."

    Administrative Fines Relating to Filing

87. In addition to the penalties described above, the Agency has notified hospitals that, if it prevails in this litigation, hospitals would be subject to fines up to $1,000 per day for failing to file FY 1995 Prior Year Reports including HHA activity as "operating" (Pet. Ex. 33). Ms. Dudek sent such a letter to

    Morton Plant, although she was not aware of how Morton Plant had reported HHA activity in the past.

    Regulatory Impact on Budget Review

88. In addition to the penalty and fine implications described above, including HHA activity as "hospital operating" activity would also have an impact on the regulatory program through which hospital budgets are reviewed by the Agency. The inclusion of HHA activity for certain hospitals could increase those hospitals' NRAA and cost per adjusted admission, and could result in those hospitals artificially appearing less cost efficient as compared to other hospitals in their peer group. The finding of inefficiency would affect the budget review process for the hospitals in question. In addition to increasing the NRAA and cost per adjusted admission of those hospitals with HHA relationships, the comparability of hospital to hospital upon which the peer group system is based would be impacted, as HHA activity is not a variable utilized in the creation of hospital groups.

    Increased PMATF and HCCTF Taxes

89. Under Florida Law, the Agency imposes a 1.5 percent PMATF tax on the operating revenues reported to the Agency by hospitals (Section 395.701, Fla. Stat.). This tax, which is not assessed against stand alone or chain-related HHAs, is based upon the operating revenues of hospitals reported in their Prior Year Reports. If hospitals are forced to include HHA activity as operating revenue on their Prior Year Reports, the PMATF tax would be increased.

90. The Agency also imposes the HCCTF tax on hospital operating expenses as reported to the Agency. If HHA activity is required to be included in operating expenses, this would result in increased HCCTF taxes for hospitals so reporting.

91. Imposing PMATF assessments on HHA activity would raise the costs to those home health agencies by 1.5 percent.

92. For Morton Plant Hospital alone, the additional PMATF tax would be approximately $750,000 in additional taxes annually. The overall increased taxes as a result of this classification change would be approximately $10,000,000 to $20,000,000 annually.

    Retrospective Application of New Practice

93. In the past, when the Agency has made changes in rules or policy, these changes have been applied prospectively. The Agency knows how to make prospective changes in rules, and has done so in other cases.

94. The Agency has recently decided to change how it would require Community Mental Health Centers to report in hospital Prior Year Reports, and has notified affected providers that this change in policy or practice would be applied prospectively only. The prospective application of rules is especially important in a case such as this where a hospital cannot take corrective action to avoid penalties or fines after the close of a given fiscal period.

    
    

95. In this instance, the Agency has rejected the FY 1995 actual reports of numerous hospitals which were filed in the same manner as accepted 1994 reports. The Agency has notified numerous

    hospitals of the change in practice after the conclusion of the hospital's fiscal year 1995. The Agency did not notify these hospitals of the requested change in time for the facilities to file a FY 1995 budget amendment. The Agency did not notify these hospitals early enough to enable the hospitals to lower charges to remove or lower any potential penalty caused by the Agency's change in practice.

    1. Anti-Competitive Effect

96. The marketplace for HHA services is very competitive. Imposing PMATF assessments on certain HHAs would raise costs to those agencies by 1.5 percent of net operating revenues. The tax would negatively impact competition, as it would impair the taxed HHAs' ability to compete against other HHAs not subject to tax. In the current marketplace, the additional 1.5 percent tax could be the difference between HHAs obtaining or not being able to fairly compete for managed care contracts.

97. In addition to the inequity of taxing only certain HHAs based upon whether they are related to a hospital, the Agency's proposal is anti-competitive in that there are HHAs which are associated with hospitals that are not located in the State of Florida. The Agency does not have authority to impose PMATF taxes on hospitals located outside of the State of Florida. It would be a competitive disadvantage to HHAs having to pay the tax to compete against other hospital-based HHAs which do not have to pay the tax simply because the hospital to which the HHA is related is located out of state.

    1. New Agency Practice Reviews The Same Information And Reaches A Result Different Than That In The Past.

98. The Agency has accepted Prior Year Reports filed by numerous hospitals for more than a decade with HHA activity reported in ways other than as "hospital operating" activity. The Agency is now taking the same information, and without promulgating a rule, changing its interpretation to require that all hospitals report as operating.

    The Agency's Actions in this Case are not "Mistakes"

99. Over the course of more than 10 years of accepting hospital reports in manners classifying home health agencies as other than "operating," a number of AHCA staffers have been involved in the review and acceptance of these reports. The acceptance of these reports has spanned many administrations at the Agency. In the case of Leesburg Regional Hospital, at least twelve different analysts, supervisors, or bureau chiefs reviewed Leesburg's Prior Year Reports, all of which were accepted for 1988- 1994, with no questions asked regarding the classification of HHA activity until 1995. Ms. Montanaro, the former Bureau Chief and Regulatory Analyst Supervisor responsible for the acceptance of reports, testified that the Agency accepted reports in three separate manners, and that the Agency did not require that any individual hospital with a HBHHA relationship identified in its Medicare Cost Report report HHA activity as "operating" on the hospital's Prior Year Report.

100. Agency witnesses characterized the acceptance of Prior

     Year Reports in a manner other than "operating" as being a mistake.

     Mr. Augsburger testified that he did not know why certain reports had been accepted that he reviewed in prior years. The contention by current Agency staffers that all past actions of the Agency regarding the acceptance of these reports were "mistakes" is not credible, given the overwhelming weight of evidence presented by Petitioners in this case. In accepting hospital Prior Year Reports in these manners for over 10 years, the Agency has declared that such reports were conforming to applicable rules including the FHURS Manual. Section 408.07(1), Fla. Stat. The Agency's actions demonstrate that the Agency now seeks to consciously change its practice regarding the acceptance of hospital Prior Year Reports.

101. The Agency's requirement that HHA activity be classified as hospital operating activity is not found in existing rules, and is a new policy which has the effect of rule.

102. It is extremely easy to determine, from the Medicare Cost Report, whether a HBHHA is included in the cost report. The existence of a HBHHA is disclosed on pages 1 and 2 of a typical cost report. The information available to the Agency regarding hospital relationships with HHAs has not changed. The Agency has been collecting Medicare Cost Reports since 1988, and not until 1995 has it sought to equate the filing of the Medicare Cost Report with a requirement to classify activity as "hospital operating" in the Prior Year Reports filed with the Agency.

     FHURS Manual Provisions

103. The FHURS Manual has been in place since 1980, and is

     incorporated by reference in Rule 59E-5.102, Florida Administrative Code. The Manual has not been changed significantly regarding references to HHA activity. The FHURS Manual does not clearly describe the circumstances under which hospitals must report HHA activity as "operating activity." The FHURS Manual contains numerous lines and spaces that are never used by the Agency. The FHURS Manual is, on its face, a hospital manual, and not a manual which was designed to capture information from or about HHAs.

104. The present statutory definition of “[h]ealth care facility” includes HHAs. Section 408.07(27), Fla. Stat. The definition in the FHURS Manual is more restrictive, providing only that a health care facility is “[a] hospital, skilled nursing facility, or intermediate care facility.” The Manual does not define hospital department nor does it define operations of a hospital. The definition of ambulatory services is unclear under the FHURS Manual as it relates to HHA activity.14 The FHURS Manual is a hospital manual and covers services that are provided by hospitals. The FHURS Manual does not use or define the terms "controlled by a hospital" or "integral and subordinate part of a hospital." There is nothing in the FHURS Manual that offers factors to instruct a reader as to what it means for a hospital to "provide" services. The terms "hospital-based HHA," "operated by a hospital," "component of a hospital," and "department of a hospital" are not defined in the FHURS Manual. Referenced federal regulations involving the filing of Medicare Cost Reports have not been promulgated as rules in the State of Florida, although

     specific provisions for adoption of federal standards are set forth in Section 120.54(6), Fla. Stat. (1996 Supp).

105. The Agency has presented numerous factors which it states that it could utilize in determining whether the operational relationship between a hospital and a HHA is close enough so that reporting as “operating” would be required. None of these factors are contained in current rule or in the current FHURS Manual. In addition, none of these factors have ever been utilized by the Agency in its review of a Prior Year Report, nor was it explained how these factors would be applied to reach a final decision.15

     CONCLUSIONS OF LAW

106. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter. Sections 120.54 and 120.56, Fla. Stat.

107. The Petitioners have demonstrated, through an overwhelming preponderance of the evidence, that the Agency has changed its practice regarding the acceptance of hospital Prior Year Reports involving hospital-related HHA activity. Reports which had for years been accepted by the Agency under its rules, including the FHURS Manual, are now being rejected, based upon no change in circumstances or receipt of additional information and by using new approaches without amending the existing rules.

108. In accordance with Section 120.56(4), Fla. Stat. (Supp. 1996), Petitioners have established that the Agency's new practice constitutes a statement of general applicability that implements, interprets, or prescribes law or policy and which substantially

     affects the rights of regulated parties including Petitioners.

     This new practice has not been and should be promulgated as a rule.

     Here it is feasible and practicable to adopt the practice as a rule. Section 120.54(1)(a), Fla. Stat. (Supp. 1996).

109. Under the Administrative Procedures Act,16 once Petitioners demonstrated that a non-rule policy, utilized by the Agency, met the definition of a rule, the burden shifted to the Agency to prove that rulemaking was not feasible or practicable. Tarpon Springs Hospital Foundation v. AHCA, 16 FALR 3421, 3436.

110. In this instance, the Agency has failed to rebut the statutory presumption. It is therefore determined that rulemaking in this matter is feasible and practicable. Section 120.54(1)(a), Fla. Stat. (Supp. 1996).

111. To the extent that the Agency claims that the FHURS Manual covers its new policy, such a claim cannot be sustained, based both upon the Agency's 10 years of interpreting the FHURS Manual in a different manner, and based upon the FHURS Manual's language itself which is contrary to the new practice.17

112. An agency cannot change a longstanding rule interpretation, without first going through rulemaking. Cleveland Clinic Florida Hospital v. Agency for Health Care Administration,

     So.2d , 21 Fla. L. Weekly D2002, D2003-4 (Fla. 1st DCA 1996); Price Wise Buying Group v. Nuzum, 343 So.2d 115, 116 (Fla. 1st DCA 1977) See also, Section 120.52(15), Fla. Stat. (Supp.

     1996)

113. The Agency has not yet promulgated a rule incorporating

     any of the criteria utilized by HCFA to determine HBHHA certification. In order to apply the Medicare Cost Report or any of its parts as a statement of general applicability, the Agency must first go through the rule promulgation process.18

114. Notably, the FHURS Manual, at page 1.1, states that it is a reporting system which operates "regardless of third party reimbursement policies." For this reason, on its face the Manual cannot be equated, by reference and without rulemaking, to a federal Medicare Cost Report, which is utilized solely for third party reimbursement purposes. The Agency's attempt to utilize federal regulations cannot substitute for rule-making requirements under Florida law.

115. Concerning challenges to the existing provisions of the FHURS Manual as invalid exercises of delegated legislative authority, the term is defined as a rule which: 1) enlarges, modifies, or contravenes the specific provisions of law implemented

     2) fails to establish adequate standards for agency decisions 3) vests unbridled discretion in the agency 4) is vague, or 5) is arbitrary and capricious. Section 120.52(8), Fla. Stat (Supp. 1996). The Petitioners have demonstrated that the challenged portions of the FHURS manual are invalid exercises of delegated legislative authority.

116. The challenged provisions of the FHURS Manual are vague, lacking in adequate standards and vest unbridled discretion in the Agency. Section 120.52(8)(d), Fla. Stat.; See, Barrow v. Holland,

125 So. 2d 749, 752 (Fla. 1960). The Manual in those sections

simply does not provide adequate standards to inform parties when and under what circumstances a hospital must report activity of a related HHA as hospital operating activity on its Prior Year Report.

ORDER

BASED upon the foregoing, it is hereby ORDERED THAT:

(i.) The Agency has utilized non-rule policy in determining that hospitals must report HHA activity as hospital operating activity on prior year reports and has failed to comply with applicable rule making requirements of Chapter 120, Florida Statutes;

(ii.) Challenged provisions of the FHURS Manual, incorporated by reference in Rule 59E- 5.102, Florida Administrative Code, constitute invalid exercises of delegated legislative authority as otherwise set forth in Section 120.52(8), Fla. Stat. (1996 Supp). (iii.) Petitioners are entitled to attorney fees and costs per Section 120.595, Fla. Stat.

Jurisdiction is retained to determine “reasonable amounts” of such fees and costs upon initiation of that proceeding by Petitioners.

DONE AND ORDERED this 4th day of March, 1997, in Tallahassee, Leon County, Florida.

DON W. DAVIS

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(904) 488-9675 SUNCOM 278-9675

Fax Filing (904) 921-6847

Filed with the Clerk of the Division of Administrative Hearings this 4th day of March, 1997.

ENDNOTES

1/ Although Petitioners seek to have Respondent’s unpromulgated policies addressed on grounds of facial invalidity in addition to alleged failure to comply with rule-making requirements of Chapter 120, Florida Statutes, authority for such disposition is not found. Federation Of Mobile Home Owners Of Florida, Inc., and Department Of Business And Professional Regulation, Division Of Florida Land Sales, Condominiums And Mobile Homes v. Florida Manufactured Housing Association, Inc., 21 Fla. L. Weekly D2447 (Fla. 1st DCA 1996), and Christo v. Florida Dep’t of Banking and Finance, 649 So.2d 318 (Fla. 1st DCA), review dismissed mem., 660 So. 2d 712 (Fla. 1995).

2/ The Agency for Health Care Administration prepares hospital licenses, based upon license applications provided to the Agency. Hospital licensure information is maintained by the Agency, and is readily available to Agency personnel.

3/ There is a current attempt by HCFA to change how it applies Medicare regulations as regards the certification of HBHHAs. HCFA is apparently looking at applying some new criteria for the certification of HBHHAs. (Respondent’s Ex. 70) These new criteria would actually result in fewer HHAs being considered hospital- based. The new criteria are to be applied prospectively. These new criteria constitute a major change to prior HCFA practice.

4/ The definition is: “Accepted” means that the board has found that a report or data submitted by a health care facility or a health care provider contains all schedules and data required by the board and has been prepared in the format specified by the board, and otherwise conforms to applicable rule or Florida Hospital Uniform Reporting System manual requirements regarding reports in effect at the time such report was submitted, and the data are mathematically reasonable and accurate. Section 408.07(1), Fla. Stat.

5/ For example, Shands Home Care operates approximately 32 licensed HHAs in the State of Florida. Shands HHAs are spread out throughout the State, including locations in Pensacola, Miami and Jacksonville. Of the 32 Shands HHAs, 29 are Medicare-certified HBHHAs. Approximately 10 percent of Shands Home Care patients come from Shands Hospital. This percentage varies depending upon the geographic location of the Shands Home Care agency, with some agencies having less than 1 percent of patients being discharged from Shands Hospital.

6/ The Agency has relied upon the new language contained in Section 408.061(3) to attempt to require hospitals to file two separate reports where two distinct hospital campuses are maintained under a single Chapter 395 hospital license.

Inexplicably, the same statute is being relied upon by the Agency to require a hospital to include HHA activity on the hospital’s

Prior Year Report, even through the hospital and the HHA operate under separate licenses.

7/ Petitioners’ evidence was extensive but not exhaustive. Due to limitations in the data base, the Agency is able to identify all hospitals that have reported home health revenue as operating.

However, the evidence from Petitioners probable does not cover every hospital that has excluded home health activity.

8/ The disclosure was made by hospitals in various ways, including both letters to the Agency and inclusion in an organizational footnote.

9/ It must be remembered that, beginning with FY 1988, a Medicare Cost Report was filed with the Agency that disclosed the existence of a HBHHA to anyone who bothered to look.

10/ In this instance, the Agency informed the facility that it should report hospital only, even though the entity in question had relationships involving the provision of not only non-hospital community mental health services, but also with a HHA (Petitioners’ Ex. 74).

11/ The Worksheet X-4 reconciliation provided by numerous hospitals included a specific disclosure that the home health agency services which were excluded from the Hospital’s Prior Year Report were services that were provided off-site by a separately-licensed entity (See Petitioners’ Ex. 63, 64, 65).

12/ This Exhibit does list fourteen Petitioner hospitals, which in FY 1994 submitted two reports pursuant to a Settlement Agreement, one of which included hospital HHA activity as operating, and one of which included HHA activity as non-operating. (Respondent’s Ex. 1, Petitioners’ Ex. 77, pp. 6-10)

13/ Mr. Augsburger stated that his reasoning was that the affidavit on the front of the Medicare Cost Report says that it is prepared to comply with applicable rules and regulations. The rules and regulations referenced by Mr. Augsburger are federal requirements which have not been promulgated or incorporated as rules in the State of Florida. To “reinforce” his decision regarding HHA reporting, Mr. Augusburger also relied upon a chart of accounts, which has also not been promulgated as a rule in the State of Florida.

14/ Accounts 3990 and 6990 of the FHURS Manual place home health services within a category of services called “ambulatory” services. According to the definition of ambulatory services in the FHURS Manual, an essential characteristic of ambulatory services is that the patient comes to or is brought to the hospital for care. By definition, home health services are provided in a patient’s home. Section 400.462(6), Fla. Stat. This inclusion of home health services within ambulatory services renders these provisions of the FHURS Manual vague.

15/ The Agency did not, in making any determinations regarding the review of Prior Year Reports, rely upon the Internet, phone books, advertisements, Specialty Care and Referral Reports filed with the Agency, or Joint Venture Survey Responses filed with the Agency.

16/ The recent amendments to the Administrative Procedure Act are applicable in this case. See, Ch. 96-159, Laws of Florida; Life Care Centers of America, Inc. v. Sawgrass Care Center, Inc., So. 2d . 21, Fla. L. Weekly D2487 (Fla. 1st DCA 1996).

17/ AHCA’s reinterpretation of the FHURS Manual is also an invalid exercise of delegated legislative authority because the agency has materially failed to follow the applicable rulemaking procedures in Section 120.54, Fla. Stat. Section 120.52(8)a), Fla. Stat.

Material that is incorporated by reference in a promulgated rule may not be amended without a simultaneous amendment to the rule that incorporates this material. Section 120.54(1)(i), Fla. Stat.

AHCA has materially failed to follow the procedures described in Section 120.54(1)(i), by attempting to change the FHURS Manual without amending the rule that incorporates the FHURS Manual (Rule 59E-5.102, Florida Administrative Code). The agency’s change in its interpretation of the FHURS Manual has the effect of amending the provisions of the Manual, and such a change has no effect unless Rule 59E-5.102 is amended to incorporate those changes.

Section 120.54(1)(i), Fla. Stat.

18/ See, Section 120.54(6), Fla. Stat. (1996 Supp).

COPIES FURNISHED:

Stephen M. Presnell, Esquire Office of Public Counsel

111 West Madison Street, Room 812 Tallahassee, Florida 32399-1400

John Gilroy, Esquire

Agency for Health Care Admin. Fort Knox Executive Center

2728 Mahan Drive, Room 3403 A and B Tallahassee, Florida 32308

Michael J. Glazer, Esquire Ausley and McMullen

Post Office Box 391 Tallahassee, Florida 32302

R. Terry Rigsby, Esquire Richard A. Lotspeich, Esquire Blank, Rigsby and Meenan

204 South Monroe Street Tallahassee, Florida 32301

Steven R. Bechtel, Esquire Mateer and Harbert

Post Office Box 2854 Orlando, Florida 32802

James M. Barclay, Esquire Cobb, Cole and Bell

131 North Gadsden Street Tallahassee, Florida 32301

Douglas M. Cook, Director

Agency for Health Care Administration 2727 Mahan Drive

Tallahassee, Florida 32308

Jerome W. Hoffman, Esquire

Agency for Health Care Administration 2727 Mahan Drive

Tallahassee, Florida 32308

R. Sam Power, Esquire

Agency for Health Care Administration 2727 Mahan Drive

Tallahassee, Florida 32308

Carroll Webb, Executive Director Administrative Procedure Committee

120 Holland Building Tallahassee, FL 32399-1300

NOTICE OF RIGHT TO APPEAL

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 the 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: 96-001418RU

Orders for Case No: 96-001418RU