STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
PALM BEACH PHARMACY, INC., d/b/a EDDIE’S DRUG,
Petitioner,
vs.
AGENCY FOR HEALTH CARE ADMINISTRATION,
Respondent.
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) Case No. 00-5072MPI
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RECOMMENDED ORDER
On August 30, 2001, in Miami, Florida, Administrative Law Judge John G. Van Laningham of the Division of Administrative Hearings convened a formal hearing in this matter, which was completed that day.
APPEARANCES
For Petitioner: Charles C. Papy, III, Esquire
Jacob A. Armpriester, Esquire Duane, Morris & Heckscher, LLP
200 South Biscayne Boulevard, Suite 3410 Miami, Florida 33131
For Respondent: L. William Porter, II, Esquire
Agency for Health Care Administration 2727 Mahan Drive, Suite 3431
Fort Knox Executive Center III Tallahassee, Florida 32308-5403
STATEMENT OF THE ISSUE
The issue for determination is whether Petitioner must reimburse Respondent for payments totaling $1,140,763.88 that
Petitioner received from the Medicaid Program in compensation for the provision of prescription drugs between late-August and November of 1998. Respondent contends that Petitioner is not entitled to retain the payments in question because Petitioner allegedly has failed to demonstrate that it had available during the pertinent period a sufficient quantity of the prescription
drugs in question.
PRELIMINARY STATEMENT
Respondent Agency for Health Care Administration is the agency responsible for administering the Florida Medicaid Program. Petitioner Palm Beach Pharmacy, Inc., d/b/a Eddie’s Drug, a licensed pharmacy, is enrolled as a Medicaid provider.
On October 31, 2000, Respondent issued a Final Agency Audit Report demanding that Petitioner reimburse Respondent
$1,143,612.68 in alleged Medicaid overpayments for certain prescription drugs that Petitioner purportedly had dispensed between April 1, 1998 and July 31, 1999.
In a Petition Requesting Formal Administrative Proceeding filed with Respondent on November 22, 2000, Petitioner timely requested a formal administrative hearing. Respondent referred the matter to the Division of Administrative Hearings.
Thereafter, the parties were duly notified that a final hearing would begin at 10:30 a.m. on August 30, 2001, at the Dade County
Courthouse in Miami, Florida. Both sides appeared at the scheduled time and place; the final hearing lasted one day.
At hearing, Petitioner presented the deposition testimony of the following witnesses: Steven Shafor, Algerine Wright, Miguel Reyes, and Michael Corbin. The parties stipulated that these depositions be received in evidence in lieu of personal appearances by the deponents. Petitioner also offered the deposition of Kathryn Holland, which was admitted without objection, to be considered in addition to her hearing testimony.
Petitioner introduced exhibits numbered 2, 4, 5, and 8 (comprising documents lettered A through D), all of which were received without objection.
Respondent called one witness, its employee Kathryn Holland. Respondent also offered exhibits numbered 1 through 4,
6 through 14, 19, 24 (identical to Respondent’s Exhibit No. 19), 27, and 30. Except for Respondent’s Exhibit No. 4, which was admitted for a limited purpose and not for the truth of the matters asserted therein, these documents were received into evidence without objection.
A transcript of the final hearing was filed with the Division of Administrative Hearings on October 19, 2001. The parties timely filed proposed recommended orders, and these
papers were carefully considered in the preparation of this Recommended Order.
FINDINGS OF FACT
The parties' Joint Stipulation of Facts and the evidence presented at final hearing established the facts that follow.
The Parties
The Agency for Health Care Administration (the “Agency”) is responsible for administering the Florida Medicaid Program. As one of its duties, the Agency must recover "overpayments . . . as appropriate," the term "overpayment" being statutorily defined to mean "any amount that is not authorized to be paid by the Medicaid program whether paid as a result of inaccurate or improper cost reporting, improper claiming, unacceptable practices, fraud, abuse, or mistake." See Section 409.913(1)(d), Florida Statutes.
Palm Beach Pharmacy, Inc. (“PBPI”), d/b/a Eddie’s Drug (“Eddie’s”) was, at all times material hereto, a duly contracted Medicaid provider, having entered into a Medicaid Provider Agreement with the Agency and been assigned a Medicaid Provider Number: 106343000.
Eddie’s is a Florida licensed pharmacy.1 As an enrolled Medicaid provider, Eddie’s is authorized to dispense drugs and supplies to Medicaid recipients. In return, Eddie’s has agreed to comply with all governing statutes, rules, and policies,
including those policies set forth in the Florida Medicaid Prescribed Drug Services Coverage, Limitations and Reimbursement Handbook (the “Handbook”). The Agency, which prepared the Handbook and furnishes it to Medicaid providers, has incorporated the Handbook by reference into Rule 59G-4.250(2), Florida Administrative Code.
PBPI, which owned and operated a number of pharmacies (including Eddie’s), maintained its corporate headquarters in West Palm Beach, Florida. Eddie’s was located in Miami, Florida.
On July 1, 1998, PBPI acquired a drug store known as Jay’s Drugs (“Jay’s”). Jay’s was located in Miami, Florida, across the street from Eddie’s. Thus, before both stores came under common ownership, they had been competitors.
This case arises out of the Agency's attempt to recover alleged overpayments on Medicaid claims for which Eddie’s was paid several years ago. The "audit period" that is the subject of the Agency's recoupment effort is April 1, 1998 to July 31, 1999, although the actual period in controversy is much shorter. From July 1, 1998, until the end of the audit period, PBPI owned and operated both Eddie’s and Jay’s.
The Underlying Facts
The transactions at the heart of this case occurred between late-August and November of 1998, during which period
(the “Focal Period”) Medicaid reimbursed Eddie’s more than $1 million for prescription drugs including Neupogen and Epogen/Procrit (collectively, the “Drugs”). The Drugs are used to treat AIDS patients and persons infected with HIV.
Prior to the Focal Period, Eddie’s had not dispensed $1 million worth of the Drugs——or any figure approaching that amount——in three or four months’ time.
The reason for the dramatic spike in Eddie’s business is that Eddie’s was dispensing the Drugs to customers of Jay’s pursuant to an arrangement designed to manipulate PBPI’s contractual obligations to the former owner of Jay’s under the purchase and sale agreement by which PBPI had acquired Jay’s.
Essentially, the arrangement was this. Jay’s was dispensing the Drugs to a large number (approximately 150) of Medicaid beneficiaries who were receiving treatment at a nearby clinic. Because the Drugs were administered to the patients via intravenous infusion, the clinic typically obtained the Drugs from Jay’s in bulk. To fill these prescriptions, Jay’s ordered the Drugs from a wholesale supplier, which usually delivered the Drugs to Jay’s the next day.
At some point before the Focal Period, arrangements were made to have the clinic present its prescriptions for the Drugs to Eddie’s rather than Jay’s.2 The evidence does not show, exactly, how this was accomplished, but whatever the means, the
clinic abruptly began bringing prescriptions for the Drugs to Eddie’s.3
This diversion of Jay’s’ business to Eddie’s was intended to deprive Jay’s of Medicaid reimbursements to which Jay’s’ former owner had access as a source of funds for paying down a note that PBPI had given for the purchase of Jay’s. By having Eddie’s dispense the Drugs and submit the Medicaid claims, Medicaid money flowed into Eddie’s’ bank account (rather than Jay’s’ bank account) and hence was not immediately available to the former owner of Jay’s to reduce PBPI’s debt.
During the Focal Period, Eddie’s did not purchase the Drugs from a wholesaler but instead acquired them from Jay’s. The process by which this was accomplished involved a pharmacy technician named Wright, who was employed at Eddie’s, and a pharmacist named Shafor, who worked at Jay’s.
Wright (at Eddie’s) accepted the prescriptions for the Drugs as the clinic brought them in Then, she called Shafor (at Jay’s) and told him the quantities needed to fill the prescriptions. Shafor ordered the Drugs from a wholesaler, which delivered them in bulk to Jay’s, usually the next day. Upon receiving the Drugs, Shafor personally delivered them to Wright, who, recall, was across the street at Eddie’s. Wright labeled and dispensed the Drugs. Eddie’s submitted a claim for the Drugs to Medicaid, and Medicaid paid Eddie’s.
PBPI maintained separate accounting ledgers for Eddie’s and Jay’s, respectively. The company’s accountants recorded the subject transactions in these ledgers so that Jay’s——not Eddie’s——would “recognize” the sales of the Drugs. In a nutshell, this was done through “inter-company” transfers whereby all of the money that Eddie’s received from Medicaid for
the Drugs was moved, on the books, into an account of Jay’s. In this way, any profit from the sales of the Drugs (the difference between the wholesale cost of the Drugs and the Medicaid reimbursement therefor, less overhead) was realized on Jay’s’ books.4
The Medicaid payments to Eddie’s that the Agency seeks to recoup were included in four remittance vouchers dated September 2, 1998; September 30, 1998; October 28, 1998; and November 25, 1998, respectively.
The September 2 payment to Eddie’s totaled
$287,205.52. Of this amount, $276,033.23 reimbursed Eddie’s for dispensing the Drugs. Eddie’s’ accounting ledger reflects that, as of September 30, 1998, the sum of $276,033.23 had been transferred from an account of Eddie’s to an account of Jay’s.
The September 30 payment to Eddie’s totaled
$439,175.77, of which $432,700.36 was paid in consideration of the Drugs. The October 28 Medicaid payment was $431,753.82, of which total the Drugs accounted for $424,202.76. Eddie’s’
accounting ledger reflects that, as of October 31, 1998, the sum of $870,929.59 (439,175.77 + 431,753.82) had been transferred from an account of Eddie’s to an account of Jay’s.
The November 25 payment to Eddie’s totaled
$407,088.00. Of this amount, $393,063.00 reimbursed Eddie’s for dispensing the Drugs. Eddie’s’ accounting ledger reflects that, as of November 30, 1998, the sum of $407,088.00 had been transferred from an account of Eddie’s to an account of Jay’s.
The Agency’s Allegations
On October 31, 2000, the Agency issued its Final Agency Audit Report (“Audit”) in which Eddie’s was alleged to have received $1,143,612.68 in overpayments relating to the Drugs. In the Audit, the Agency spelled out its theory of the case; indeed, the Audit is the only document in the record that does so.
The Agency cited several statutory provisions. First, Section 409.913(7)(e), Florida Statutes, was referenced. This section states:
When presenting a claim for payment under the Medicaid program, a provider has an affirmative duty to supervise the provision of, and be responsible for, goods and services claimed to have been provided, to supervise and be responsible for preparation and submission of the claim, and to present a claim that is true and accurate and that is for goods and services that:
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(e) Are provided in accord with applicable provisions of all Medicaid rules, regulations, handbooks, and policies and in accordance with federal, state, and local law.
Section 409.913(7)(e), Florida Statutes. The Agency did not allege (or prove), however, that Eddie’s had violated Section 409.913(7)(e), Florida Statutes.5 Put another way, the Agency did not plead or prove lack of supervision, submission of a false claim, or that the Drugs were not provided in accordance with applicable law.
Next, the Agency cited Section 409.913(8), Florida Statutes, which provides:
A Medicaid provider shall retain medical, professional, financial, and business records pertaining to services and goods furnished to a Medicaid recipient and billed to Medicaid for a period of 5 years after the date of furnishing such services or goods. The agency may investigate, review, or analyze such records, which must be made available during normal business hours.
However, 24-hour notice must be provided if patient treatment would be disrupted. The provider is responsible for furnishing to the agency, and keeping the agency informed of the location of, the provider's Medicaid- related records. The authority of the agency to obtain Medicaid-related records from a provider is neither curtailed nor limited during a period of litigation between the agency and the provider.
The Agency further alleged, as fact, that Eddie’s had failed, upon request, “to submit invoices from [its] suppliers to
substantiate the availability of drugs that [were] billed to Medicaid” and thus had not “fully substantiated such availability.” The Agency, however, did not invoke any of the available remedial provisions as authority to impose a sanction for this alleged failure to turn over Medicaid-related records. See, e.g., Sections 409.913(14)(b), (c), and (d), Florida Statutes.
The Agency cited Section 409.913(10), Florida Statutes, which authorizes the Agency to “require repayment for inappropriate, medically unnecessary, or excessive goods or services from the person furnishing them, the person under whose supervision they were furnished, or the person causing them to be furnished.” There was no allegation (or proof), however, that the Drugs which Eddie’s had purported to dispense (i.e. the Drugs for which it had submitted Medicaid claims) were “inappropriate, medically unnecessary, or excessive.” Thus, Eddie’s was not alleged (or shown) to have violated Section 409.913(10), Florida Statutes.
Finally, the Agency relied upon Section 409.913(14)(n), Florida Statutes, which is the basis of the Agency’s legal theory. This section provides:
The agency may seek any remedy provided by law, including, but not limited to, the remedies provided in subsections (12) and (15) and s. 812.035, if:
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(n) The provider fails to demonstrate that it had available during a specific audit or review period sufficient quantities of goods, or sufficient time in the case of services, to support the provider's billings to the Medicaid program[.]
The Agency contended, additionally, that “[b]illing Medicaid for drugs that have not been demonstrated as available for dispensing is a violation of the Medicaid laws and regulations and has resulted in the finding that [Eddie’s] ha[s] been overpaid by the Medicaid program.” (Emphasis added). The Agency explained, “Medicaid payments that have been substantiated by documented inventory are assumed to be valid; and payments in excess of that amount are regarded to be invalid.”
Thus, the Agency’s theory of recovery is that Eddie’s must forfeit “overpayments” arising from its failure to demonstrate the availability, in inventory, of a sufficient quantity of the Drugs for which claims were submitted, as required by Section 409.913(14)(n), Florida Statutes.
After the Audit was issued, the Agency accepted a handwritten note regarding the transfer of a small quantity of Drugs from Jay’s to Eddie’s as sufficient to demonstrate the availability of such amount. This resulted in a slight
reduction of the amount of the alleged overpayment, to
$1,140,763.88.
The Separate Audit of Jay’s
The Agency conducted a separate audit of Jay’s, concerning which some evidence was introduced at hearing. Without getting into unnecessary detail, the audit of Jay’s revealed that Jay’s had purchased, during and around the Focal Period, a quantity of the Drugs that exceeded the number of units that Jay’s had billed to Medicaid. It was Eddie’s theory that this “excess inventory” of Jay’s matched, more or less, the alleged inventory shortfall at Eddie’s, thereby corroborating the testimony concerning the transfer of these Drugs from Jay’s to Eddie’s for dispensation.
At hearing, the parties sharply disputed whether, in fact, Jay’s had transferred the Drugs to Eddie’s. The Agency, of course, maintained that such transfers were not properly documented; Eddie’s argued that the documents and other evidence, including testimony about the transactions in question, adequately demonstrated that the transfers had, in fact, occurred. There was no dispute, however, that if it were found that such transfers had occurred, and if, further, the documents (and other evidence) pertaining to the inventory of Jay’s were accepted as proof of the quantities of Drugs so transferred, then all but $176,078.30 worth of the Drugs could
be accounted for. Thus, as counsel for Eddie’s conceded at hearing, the Agency is entitled to recoup some sum of money. The question is whether that sum is $1,140,763.88 or
$176,078.30.
Ultimate Factual Determination
Based on all of the evidence in the record, including the deposition testimony received through the parties’ joint stipulation, it is determined that, more likely than not, Eddie’s had available during the Focal Period a sufficient quantity of the Drugs to support all but $176,078.30 worth of
the claims in dispute.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has personal and subject matter jurisdiction in this proceeding pursuant to Sections 120.569 and 120.57(1), Florida Statutes.
The burden of establishing an alleged Medicaid overpayment by a preponderance of the evidence falls on the Agency. South Medical Services, Inc. v. Agency for Health Care
Administration, 653 So. 2d 440, 441 (Fla. 3d DCA 1995); Southpointe Pharmacy v. Department of Health and Rehabilitative Services, 596 So. 2d 106, 109 (Fla. 1st DCA 1992).
Although the Agency bears the ultimate burden of persuasion and thus must present a prima facie case through the introduction of competent substantial evidence before the
provider is required to respond, Section 409.913(21), Florida Statutes, provides that "[t]he audit report, supported by agency work papers, showing an overpayment to the provider constitutes evidence of the overpayment." Thus, the Agency can make a prima facie case merely by proffering a properly supported audit report, which must be received in evidence. See Maz
Pharmaceuticals, Inc. v. Agency for Health Care Administration, DOAH Case No. 97-3791, 1998 WL 870139, *2 (Recommended Order issued Mar. 20, 1998); see also Full Health Care, Inc. v. Agency for Health Care Administration, DOAH Case No. 00-4441, 2001 WL 729127, *8-9 (Recommended Order issued June 25, 2001)(adopted in toto, Sept. 28, 2001, AHCA Rendition No. 01-262-FOF-MDO).
In addition, Section 409.913(21), Florida Statutes, heightens the provider's duty of producing evidence to meet the Agency's prima facie case, by requiring that the provider come forward with written proof to rebut, impeach, or otherwise undermine the Agency's statutorily-authorized evidence; it cannot simply present witnesses to say that the Agency lacks evidence or is mistaken.
The pertinent statutes, rules, Handbook, and Medicaid Provider Reimbursement Handbook that were in effect during the audit period govern this dispute. See Toma v. Agency for Health
Care Administration, DOAH Case No. 95-2419, 1996 WL 1059900, *23
(Recommended Order issued July 26, 1996) (adopted in toto, Sept. 24, 1996, 18 F.A.L.R. 4735).
As mentioned above, the specific charge against Eddie’s is that it failed “to demonstrate that it had available during a specific audit or review period sufficient quantities of goods, or sufficient time in the case of services, to support the provider's billings to the Medicaid program.” See Section 409.913(14(n), Florida Statutes.6 This deficiency is punishable by “any remedy provided by law, including, but not limited to, the remedies provided in subsections (12) and (15) and s. 812.035.” Section 409.913.
The Agency has not sought any of the remedies provided in subsections (12) or (15) of Section 409.913, nor has it sought relief under Section 812.035, Florida Statutes. Instead, the Agency is traveling under the theory that Eddie’s received “overpayments.” See paragraphs 20-25, supra.
The Agency is empowered to “recover overpayments . . . as appropriate.” Section 409.913, Florida Statutes. An “overpayment” is defined to include “any amount that is not authorized to be paid by the Medicaid program whether paid as a result of inaccurate or improper cost reporting, improper claiming, unacceptable practices, fraud, abuse, or mistake.” Section 409.913(1)(d), Florida Statutes (emphasis added). Thus,
for an overpayment to exist, some act must have caused the amount in controversy to have been paid.
In this case, the Agency did not attempt to place the alleged causative act (failure to demonstrate adequate inventory) into one of the categories of acts (“inaccurate or improper cost reporting, improper claiming, unacceptable practices, fraud, abuse, or mistake”) enumerated in Section 409.913(1)(d), Florida Statutes, nor did it prove that the alleged deficiency caused the alleged overpayment. Therefore, it is not obvious that the amount sought to be recovered constitutes an “overpayment” as that term is statutorily defined.
To be sure, one might plausibly argue that any offense described in Section 409.913(14) constitutes, say, an “unacceptable practice” for purposes of Section 409.913(1)(d). The Agency, however, has not so argued here. In any event, moreover, a provider’s present failure to demonstrate adequate past inventory (= a Section 409.913(14)(n) deficiency), without more, does not establish that previously-made payments for claims not currently supported by presently-available evidence of availability were paid as a result of the provider’s current lack of evidence. In short, there is no readily apparent causal connection between a Section 409.913(14)(n) deficiency and a prior Medicaid payment that compels one to conclude that all
failures to demonstrate adequate inventory produce an “overpayment” as that term is defined statutorily.
To see this, suppose that, for example, at the time a claim for prescription drugs was made and paid, the provider had ample documentation of adequate inventory, but thereafter all of its records were destroyed in a hurricane. If the provider thereafter could not, as a consequence, demonstrate the contemporaneous availability of sufficient quantities of the medicines dispensed, then the facts might sustain a charge under Section 409.913(14)(n), were the Agency inclined to prosecute under such circumstances. In that situation, however, it would not be true that the prior claim was paid “as a result” of the provider’s subsequent inability to demonstrate the availability of adequate inventory.7 Thus, Medicaid’s payment of such a claim, at least arguably, would not constitute an “overpayment” within contemplation of Section 409.913(1)(d), Florida Statutes.8
Whatever its merits, however, Eddie’s did not make this argument; rather, it accepted the premise that if the Agency is correct on the facts (which of course Eddie’s disputed), then the amount in controversy is an “overpayment.” For the purposes of this case, therefore, the undersigned will also accept the Agency’s premise.
Lest this seem unfair or uncritical, the undersigned further has concluded independently that, if and to the extent
that the payments sought to be recovered for a Section 409.913(14)(n) deficiency are not properly characterized as “overpayments” under the statutory definition, recoupment is nevertheless an available remedy (i.e. one “provided by law”), in most cases, for the subject offense.
To support this conclusion, the Handbook must be consulted. It states:
[p]roviders who are not in compliance with the Medicaid documentation and record retention policies described in this chapter may be subject to administrative sanctions and recoupment of Medicaid payments.
Medicaid payments for services that lack required documentation or appropriate signatures will be recouped.
Handbook at 2-20 (emphasis added). Since the Handbook has been adopted as a rule, its terms have the effect of law.
Recoupment, therefore, is a “remedy provided by law” for payments on claims that “lack required documentation.”
From this it follows that if the provider is obligated to produce “required documentation” in order properly to “demonstrate” adequate inventory within the meaning of Section 409.913(14)(n), then a Section 409.913(14)(n) deficiency can be remedied with recoupment because, in that event, goods not demonstrated to be available in the provider’s inventory would lack required documentation.
The legislature intended to impose the foregoing evidential burden. Consider Section 409.913(21), Florida Statutes, mentioned briefly above, which provides:
The audit report, supported by agency work papers, showing an overpayment to a provider constitutes evidence of the overpayment. A provider may not present or elicit testimony, either on direct examination or cross-examination in any court or administrative proceeding, regarding
the purchase or acquisition by any means of drugs, goods, or supplies;
sales or divestment by any means of drugs, goods, or supplies; or
inventory of drugs, goods, or supplies,
unless such acquisition, sales, divestment, or inventory is documented by written invoices, written inventory records, or other competent written documentary evidence maintained in the normal course of the provider's business.
(Emphasis and bracketed numbers added). The “written invoices, written inventory records, or other competent written document[s] . . . maintained in the normal course of the provider's business” that a provider must adduce before presenting testimony about its “inventory of drugs, goods, or supplies” clearly fall within the set of all “medical, professional, financial, and business records pertaining to services and goods furnished to a Medicaid recipient and billed
to Medicaid” that the provider is required to keep for a period of five years. See Section 409.913(8), Florida Statutes.9
Under Section 409.913(21), Florida Statutes, then, a provider should not be permitted at hearing, over objection, to “demonstrate” the availability of inventory for purposes of Section 409.913(14)(n), Florida Statutes, without introducing “required documentation.”10 Consequently, a provider’s failure to “demonstrate” the availability of sufficient goods will ordinarily be tantamount to a failure to “document” such inventory. For that reason, Sections 409.913(14) and 409.913(21), Florida Statutes, read in conjunction with the Handbook, authorize the Agency in most cases to recoup payments made on Medicaid claims for which the provider lacks required documentation demonstrating the availability of sufficient quantities of the goods dispensed, even if such payments are not, strictly speaking, “overpayments” within the meaning of Section 409.913(1)(d), Florida Statutes.
This case, however, turns out to be an exception.
As the Agency correctly contends, Eddie’s has failed to document the transfer of Drugs from Jay’s to Eddie’s. While the parties’ stipulations and the exhibits in evidence establish that funds were transferred from Eddie’s to Jay’s, the documents themselves do not reveal why these transfers were made. To the point, the documents, without more, fail to demonstrate that
Eddie’s had an adequate supply of the Drugs available during the Focal Period.
Ordinarily, as discussed above, the provider’s failure to introduce in evidence required documents showing the availability of adequate inventory would compel a determination in the Agency’s favor on a Section 409.913(14)(n) theory because, pursuant to Section 409.913(21), no other evidence (i.e. testimony) could be elicited as a result. Yet here, when the unrebutted deposition testimony proffered by Eddie’s (and received in evidence through a joint stipulation) is considered, it is concluded that Eddie’s successfully has demonstrated that it had available a sufficient quantify of the Drugs during the Focal Period to support most of the claims at issue.11
In sum, the evidence does not establish as serious a Section 409.913(14)(n) deficiency as the Agency alleged.12 Accordingly the Agency is not entitled to recoup $1,140,763.88, as sought.
Eddie’s admitted, however, that its proof, taken as a whole, failed to support $176,078.30 worth of claims relating to the dispensation of the Drugs. Therefore, Eddie’s must repay the Agency this sum.
Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency enter a final order
requiring Eddie’s to repay the Agency the principal amount of
$176,078.30.
DONE AND ENTERED this 12th day of March, 2002, in Tallahassee, Leon County, Florida.
JOHN G. VAN LANINGHAM
Administrative Law Judge
Division of Administrative Hearings The DeSoto Building
1230 Apalachee Parkway
Tallahassee, Florida 32399-3060
(850) 488-9675 SUNCOM 278-9675
Fax Filing (850) 921-6847 www.doah.state.fl.us
Filed with the Clerk of the Division of Administrative Hearings this 12th day of March, 2002.
ENDNOTES
1/ It is not clear whether Eddie’s and PBPI are separate corporate entities. The parties have treated Eddie’s as if it were a subsidiary of PBPI, even though that technically might not be correct. The outcome is not affected one way or the other, however, and so, following the convention of the parties, the name “Eddie’s” as used herein references the drug store known as Eddie’s and located in Miami, Florida, while “PBPI” refers to the “parent” company whose headquarters is located in West Palm Beach, Florida.
2/ During the Focal Period, some Drugs apparently were dispensed to individual patients who brought in their own prescriptions, but most of the Drugs were provided directly to the clinic in bulk, as described above. For simplicity, the text refers only to the clinic.
3/ The direct evidence does not establish that the sales of the Drugs at issue during the Focal Period would have been made by Jay’s but for PBPI’s acquisition of Jay’s a few months earlier. As will be shown, however, the only reasonable inference
consistent with the totality of the evidence presented is that, with regard to these sales, Eddie’s was serving as a straw man for Jay’s. See endnote 4, infra.
4/ Here is an explication of reasoning behind the inference stated supra in paragraph 11 of the text. If one assumes (as the undersigned has not) that the sales of the Drugs at Eddie’s during the Focal Period would have occurred at Eddie’s regardless of PBPI’s purchase of Jay’s, then the plan to “divert” Medicaid dollars from Jay’s’ Medicaid bank account to Eddie’s’ Medicaid bank account should never have been conceived or carried out, as it was in fact, because those dollars would not have gone to Jay’s in any event. Further, if the Drugs were being dispensed during the Focal Period to “real” customers of Eddie’s, then the inter-company transfers of Medicaid reimbursement money from Eddie’s to Jay’s, which in fact occurred, would have made no business sense whatsoever—— especially in light of the expressed purpose of the overall scheme, which was to keep money out of the hands of Jay’s’ former owner. Thus comes the reasonable inference that, somehow, Jay’s’ customers were directed to Eddie’s.
The question remains: If the goal were to keep money away from Jay’s’ former owner (and there is no evidence to rebut the testimony that this was the goal), then why did Eddie’s itself not order the Drugs from a wholesaler and recognize the profits on its own books? The explanation offered at hearing was that PBPI’s management did not want a pharmacist named White, who worked at Eddie’s, to get credit for the sales of the Drugs, because such credit would entitle him to a bonus which, it was felt, he did not deserve. This rationale is persuasive only if it is inferred (as it has been) that the business in question really belonged to Jay’s and would have occurred at Jay’s but for PBPI’s acquisition of Jay’s.
5/ A provider’s failure to comply with applicable rules, regulations, and laws is specifically remediable under Section 409.913(14)(e), Florida Statutes——a section not cited in the Audit.
6/ It should be noted that a failure to demonstrate the availability of adequate inventory——the specific offense charged here——is not the same as, for example, the failure to make available particular Medicaid-related records upon request, which is remediable under Section 409.913(14)(c), Florida
Statutes. This is important because, again, the Agency only alleged a Section 409.913(14)(n) violation.
7/ Suppose in a different case the Agency alleged that the provider knowingly had made claims for prescription drugs that it never actually dispensed. If proved, the allegation clearly would establish that the provider was guilty of “improper claiming, unacceptable practices, fraud, abuse, or mistake”——and hence that any payments resulting therefrom were “overpayments.” In this alternative scenario, the provider’s failure to demonstrate the availability of adequate inventory would be evidence of the alleged misconduct, but not misconduct per se (unless, separately, a violation of Section 409.913(14)(n) were also alleged). The causal connection between the wrongdoing and the overpayment could be established by showing that the claims would not have been paid had the Agency known the true facts.
In the example in the text, in contrast, the facts justified the payment of the claim at the time it was made.
8/ Accepting the argument that at least some Section 409.913(14)(n) deficiencies do not produce “overpayments” would leave intact the Agency’s ability to sanction a provider for failing to demonstrate the availability of sufficient inventory; there are, as it happens, many remedies (other than recoupment) expressly provided in subsections (12) and (15) of Section 409.913, Florida Statutes, for such deficiency. The argument suggests, however, that recoupment might not always be the appropriate remedy for the violation described in Section 409.913(14)(n).
9/ See also Handbook at 2-18 (Required documentation includes, but is not limited to, “[b]usiness records, such as accounting ledgers, financial statements, purchase/acquisition records, invoices, inventory records, check registers, canceled checks, [and] sales records[.]”).
10/ Notice that the provider’s burden under Section 409.913(21), Florida Statutes, of introducing competent documentary evidence regarding purchases, sales, or inventories of supplies as a condition precedent to the introduction of testimony on these matters arises not just in “overpayment” cases but in any court or administrative proceeding.
11/ Because the Agency stipulated to the admission of the depositions, the undersigned was compelled to consider this uncontroverted evidence and, finding it to be sufficiently
credible and consistent with the stipulated facts and other evidence, to credit the testimony.
12/ No opinion is expressed herein regarding whether Jay’s and/or Eddie’s violated other laws in connection with the transfers of the Drugs from Jay’s to Eddie’s.
COPIES FURNISHED:
Charles C. Papy, III, Esquire Jacob A. Armpriester, Esquire Duane, Morris & Heckscher, LLP
200 South Biscayne Boulevard, Suite 3410 Miami, Florida 33131
L. William Porter, II, Esquire
Agency for Health Care Administration 2727 Mahan Drive, Suite 3431
Fort Knox Executive Center III Tallahassee, Florida 32308-5403
Virginia Daire, Agency Clerk
Agency for Health Care Administration 2727 Mahan Drive
Fort Knox Building Three, Suite 3431 Tallahassee, Florida 32308
William Roberts, Acting General Counsel Agency for Health Care Administration 2727 Mahan Drive
Fort Knox Building Three, Suite 3431 Tallahassee, Florida 32308
Rhonda M. Medows, M.D., Secretary Agency for Health Care Administration 2727 Mahan Drive
Fort Knox Building Three, Suite 3116 Tallahassee, Florida 32308
NOTICE OF RIGHT TO SUBMIT EXCEPTIONS
All parties have the right to submit written exceptions within
15 days from the date of this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the Final Order in this case.
| Issue Date | Document | Summary |
|---|---|---|
| Dec. 05, 2002 | Agency Final Order | |
| Mar. 12, 2002 | Recommended Order | Respondent established that Petitioner was overpaid a total of $176,078.30 in Medicaid reimbursements for prescription drugs, where Petitioner was unable to demonstrate that it had available a sufficient quantity of the drugs in question. |
