STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

AGENCY FOR HEALTH )

CARE ADMINISTRATION, )

)

Petitioner, )

)

vs. ) Case No. 01-1205

)

NORTH HILL MANOR, INC., )

)

Respondent. )

________________________________)

RECOMMENDED ORDER

A hearing was held pursuant to notice on July 16 and 17, 2001, by Barbara J. Staros, assigned Administrative Law Judge of the Division of Administrative Hearings, in Pensacola, Florida.

APPEARANCES

For Petitioner: Christine T. Messana, Esquire

Agency for Health Care Administration 2727 Mahan Drive

Tallahassee, Florida 32308

For Respondent: Michael J. Glazer, Esquire

Ken Abele, Esquire Ausley & McMullen

227 South Calhoun Street Post Office Box 391 Tallahassee, Florida 32302

STATEMENT OF THE ISSUE

Whether the Respondent, North Hill Manor, Inc., committed the violations set forth in the Administrative Complaint and, if so, what penalty should be imposed.

PRELIMINARY STATEMENT

Petitioner, Agency for Health Care Administration (AHCA), filed an Administrative Complaint against North Hill Manor, Inc. (North Hill) on or about February 6, 2001. The Administrative Complaint alleges that North Hill improperly co-mingled funds of a resident with its operating funds, and failed to return advance payments made by the resident within a time period prescribed by law.

Respondent disputed the allegations in the Administrative Complaint and filed a Petition for Administrative Hearing on or about March 1, 2001. The case was referred to the Division of Administrative Hearings on or about March 29, 2001. A formal hearing was set for July 16 and 17, 2001.

Prior to the hearing, Petitioner filed a Motion to Relinquish Jurisdiction. Respondent filed a Response in Opposition to the Motion. Oral argument was heard on the Motion. Petitioner's Motion to Relinquish Jurisdiction was denied.

At hearing, Petitioner presented the testimony of three witnesses, Marcia Thompson, Sandra Corcoran, and Mary Sweeney. Petitioner's Exhibits 1 through 14 were admitted into evidence. Respondent presented the testimony of four witnesses, Kelly Koontz, Tom Baroco, Deborah Carney and Al Brandon. Respondent's Exhibits 1 through 7 were admitted into

evidence. The parties requested official recognition of the statutes and rules referenced in the Administrative Complaint.

The time for filing post-hearing submissions was set for more than 10 days after the hearing upon request of the parties.

A Transcript, consisting of two volumes, was filed on July 27, 2001. Petitioner1 and Respondent filed Proposed Recommended Orders, which have been considered in the preparation of this Recommended Order.

FINDINGS OF FACT

1. Petitioner is the agency responsible for the licensing and regulation of assisted living facilities in Florida pursuant to Chapter 400, Florida Statutes.

2. North Hill Manor is an assisted living facility which is owned by North Hill Manor, Inc. North Hill Manor is operated by the owner, Douglas Koontz, who is assisted by his wife, Kelly Koontz, as well as other family members. While North Hill Manor is a family business, both Mr. and Mrs. Koontz held employment elsewhere and are parents of five young children. North Hill Manor has a licensed capacity of 32 beds and is housed in a restored historic home located in Pensacola, Florida.

   The Surveys

   
   

3. Pursuant to a complaint, Sandra Corcoran, a registered nurse specialist employed by Petitioner, conducted a survey on September 26, 2000, of Respondent's facility.

   Ms. Corcoran concluded that there were deficiencies in two areas. First, that the facility had failed to provide a separate bank account for advance payments (Tag A106) from one of its residents (hereinafter Resident #1) and that the facility had not provided a refund of these advance payments to Resident #1 in a timely manner after she no longer lived in the facility (Tag A323). Ms. Corcoran designated the date of correction for the Tag A106 deficiency to be 10/26/00 and the date of correction for Tag A323 to be "Immediately (9/29/00)." The Koontz's were cooperative and provided Ms. Corcoran with an accounting of Resident #1's charges and payments.

4. The survey form used by AHCA provides space for a corrective action plan to be written. Mrs. Koontz inserted the following as to Tag A106 and Tag A323, respectively:

   North Hill Manor has changed its policy to no longer accept any advanced payments. In addition, all bookkeeping including accounts payable and receivable, are being transferred to an independent accountant.

   Transfer is to be completed by January 1, 2001.

   
   

   On October 11, 2000, an additional

   $31,200.00 was sent to guardian of client. The total amount refunded to date is

   $60,500.00. There is approximately

   $30,000.00 remaining. However, expenditures on behalf of client have to be adjusted from this amount. In addition, North Hill Manor is diligently working to secure the liquidity of the money needed to make final refund. We anticipate complete settlement within 30 days.

   
   

5. Mrs. Koontz discussed this corrective action plan with Kathy Roland of AHCA. The notation, "POC accepted

   KR 10-19-00" appears on the corrective action portion of the form.

6. On October 23, 2000, Mary Sweeney, a registered nurse specialist surveyor employed by Petitioner, conducted a follow-up survey of North Hill Manor. Ms. Sweeney concluded that the deficiencies referenced in the September 26, 2000 survey had not been met. However, at the time of both the September 26, 2000 survey and the October 23, 2000 survey, Respondent was no longer accepting advance payments from residents and was not co-mingling residents' funds with

   Respondent's business account (Tag A106). As for the issue of the refund (Tag A323), Mrs. Sweeney noted that the facility had not refunded a $30,000.00 balance to the resident. The date of correction was designated as 11/24/00 on the

   October 23, 2000 survey. The corrective action plan written by Mrs. Koontz stated in pertinent part as to Tag A323:

   HUD has approved the re-financing of the mortgage and the $30,000.00 minus the cost of armoire and drug bill will be completed within 45 days. We will also keep you

   updated by mailing a copy of the commitment letter to you from the HUD lender as soon as possible . . . .

   
   

7. There is no indication on the October 23, 2000 form as to whether the corrective action plan was accepted or not by AHCA. The Koontz's continued to be cooperative with the investigation.

8. Another follow-up survey of North Hill Manor was conducted on December 1, 2000, by Ms. Sweeney. The survey continued to cite Tag A106 regarding co-mingling of funds stating that this deficiency had not been corrected. However, funds were no longer co-mingled at the time of this report, as was the case on the dates of the two previous survey reports. As to Tag A323, Ms. Sweeney noted on the December 1, 2000, survey that, based on a telephone interview with Mrs. Koontz, the deficiency had not been corrected in that North Hill was still waiting for the HUD commitment letter and that funds would be available no later than December 31, 2000.

   Resident #1

   
   

9. Resident #1 moved into North Hill Manor in 1996. She had very little family involvement. As a consequence, the Koontz's did a lot of things for her on a more personal level than with other residents including taking her to their home on holidays and purchasing birthday presents for her. The Koontz’s considered Resident #1 to be part of their family.

   In March or April of 1998, Resident #1 began making prepayments to North Hill. Mrs. Koontz tried to persuade Resident #1 not to make prepayments but Resident #1 insisted. The prepayments were deposited into North Hill Manor's account and apparently were used for the operation of North Hill Manor.2

   Accounting System/Computer Crashes

   
   

10. During 1998, Resident #1 made $12,800.00 in advance payments to North Hill. At that time, North Hill used a computer program called Quick Books for its accounting system. There was a resident account for each resident that enabled the administrator to track payments by Resident #1 and credit them to her account.

11. In May of 1998, North Hill Manor, Inc., began expanding by acquiring another facility in Milton, Florida. In March 1999, North Hill experienced the first of two computer crashes that erased all of its accounting records. The Koontz's contacted Tom Bacarro who is experienced with diagnosing computers with problems and computer troubleshooting. He determined that the computer was damaged and the information on the hard drive was lost. The first computer crash necessitated recreating all of the accounting records by hand. The process was extremely time consuming.

12. While North Hill was in the process of recreating its accounting system, Resident #1 continued to make advance payments to North Hill. During 1999, Resident #1 made

    $61,200.00 in advance payments.

    
    

13. In early 2000, Mrs. Koontz became concerned further about the advance payments made by Resident #1. She spoke to Resident #1 about getting a trust officer to look after her finances. Mrs. Koontz contacted Resident #1's bank to inquire as to whether they offered such services and was informed that it did not.

14. Also in early 2000, North Hill experienced a second computer crash. The Koontz's had installed a security system at their new Milton facility and somehow a glitch in that system caused the North Hill computer to crash, once again wiping out their accounting records. Employees of the Milton facility had access to the computer which may have caused the computer problem. Thereafter, North Hill purchased a laptop computer with restricted access to use exclusively for maintaining their accounting system.

    Guardianship of Resident #1

    
    

15. On July 18, 2000, Mr. Carl Martin of the Department of Children and Family Services (DCF) came to North Hill Manor to make inquiries regarding the advance payments made by Resident #1. On July 25, 2000, Lutheran Services Florida,

    Inc. (Lutheran Services), was appointed Emergency Temporary Guardian of Resident #1. On July 26, 2000, Lutheran Services arrived at North Hill Manor and removed Resident #1. Lutheran Services did not provide any advance notice to North Hill of its intention to relocate Resident #1.

16. When Lutheran Services removed Resident #1 from North Hill Manor, it also removed her belongings. Additionally, Lutheran Services removed some property that did not belong to Resident #1 but was property of North Hill Manor. The property belonging to North Hill Manor that was removed was a television set valued at $408.48 and an antique armoire estimated to be worth approximately $1,000.00.

17. Resident #1 had also incurred charges related to medicine and medically related items during her stay at North Hill Manor, in the amount of $302.66.

    Partial Refund of Resident #1's Advance Payments

    
    

18. On July 28, 2000, the attorney for Lutheran Services wrote to Mr. Koontz requesting that he transfer any remaining items of Resident #1 including all funds held in trust.

19. On August 3, 2000, North Hill made a payment of

    
    

    $16,500.00 to Lutheran Services’ attorney. This amount was what Mr. Koontz calculated to be due Resident #1 for the year 2000. His letter accompanying the $16,500.00 check stated

    that they were attempting to reconstruct records for the other years.

20. On August 15, 2000, Mr. Koontz again wrote the attorney for Resident #1 and enclosed a check for $12,800.00 which was the amount of overpayment he calculated for 1999. In that letter, he also advised that the armoire had been removed by the movers, and that while there was no hurry, he wanted the armoire to be returned.

21. On September 21, 2000, Mr. Koontz again wrote to the attorney for Lutheran Services and stated that an accounting of 1999 records revealed a credit balance due Resident #1 in the amount of $61,200.00, subject to final verification for Resident #1’s medication and other expenses. He enclosed a check for $31,200.00 also dated September 21, 2000. The Koontz's then began to explore and pursue other avenues to secure enough money to repay the remainder of the refund.

22. On May 15, 2001, the attorney for North Hill Manor wrote the attorney for Lutheran Services and enclosed a check for $26,852.77 with the words, "Full/Final Advance Pmts" on the face of the check. The letter stated:

    This amount represents the remainder of the advance payments made by [Resident #1] less several offsets. These offsets include:

    1. $1,612.90 for prorated rent from August 1, to August 25; 2) $234.33 for the twenty-five inch color television that

       was removed by the movers; 3) $1,000.00 as was the estimated cost of replacing the

       antique wardrobe closet that was removed from the facility; and finally 4) $300 for the estimate cost of medication related charges incurred by [Resident #1].

       
       

23. The attorney for Lutheran Services returned the check objecting to the reference to full and final advance payments on the check. She also requested that any offsets not be included in the calculation and requested a detailed itemization for any requested reimbursement for the items which North Hill asserted were mistakenly taken the day Resident #1 was removed from the facility.

24. On May 31, 2001, North Hill’s attorney again tendered a check in the amount of $26,852.77 to the attorney for Lutheran Services without reference to full and final payment. The letter stated:

    In regards to the offsets, while we appreciate that you may dispute North Hill Manor’s entitlement to these offsets, we believe they are legitimate offsets.

    However, we again emphasize that the tender of this check is made in good faith and without prejudice for you to contest any of the offsets. (emphasis in original)

25. This check was also returned by Lutheran Services with a request that the offsets not be included and that a detailed itemization with supporting documentation regarding the offsets claimed by North Hill be provided.

26. On June 19, 2001, the attorney for North Hill again tendered a check for $26,852.77 which apparently was accepted by the attorney for Lutheran Services.

27. At the time Resident #1 was removed from North Hill, her rent was $2,000.00 per month.

28. The document entitled, "Admission/Retention/Discharge Policies" in effect between Resident #1 and North Hill Manor contains a provision which states in pertinent part:

    A resident’s occupancy at North Hill Manor will be terminated with a notice of at least 30 days, under the following conditions:

    
    

    * * *

    
    

    d. the resident and his or her family decide to seek residency elsewhere.

    
    

29. A document entitled, "North Hill Manor's Accounting of Personal Funds & Refund Procedures" reads in pertinent part:

    Occupancy at North Hill Manor is on a month to month basis. . . . North Hill Manor asks that a notice of at least 30 days be given when a resident decides to move. If the move is by choice only, and not based on the

    appropriateness of placement, then no refund for days remaining in the month paid for is issued . . . .

30. Lutheran Services acknowledges that it was aware that the contract used by North Hill Manor contained a 30 day notice provision and that such provisions are very common.

31. The total amount repaid from North Hill to Lutheran Services is $87,352.77. That amount reflects Resident #1's prepayments, less the value of the armoire ($1,000), the cost of the television set ($408.48), and miscellaneous medically related expenses ($302.66). Further, this took into account a

    $1,612.90 charge for the remainder of rent for August 2000, as North Hill was entitled to a 30 day notice.

32. These offsets, which totaled $1,711.14, were legitimate offsets against the total amount North Hill was to repay Resident #1. Further, North Hill notified the attorney for Lutheran Services in correspondence dated August 15, 2000, and September 21, 2000, regarding these items. These items were again referenced in correspondence from North Hill's attorney to Lutheran Services' attorney.

    CONCLUSIONS OF LAW

    
    

33. The Division of Administrative Hearings has jurisdiction of the parties and the subject matter pursuant to Section 120.57, Florida Statutes.

34. The Administrative Complaint cited Class III deficiencies for violations of Sections 400.427(4) and 400.424(3)(a), Florida Statutes. A Class III violation is

    defined in Section 400.419(1), Florida Statutes (2000), as follows:

    400.419 Violations; administrative fines.--

    
    

    (1) Each violation of this part and adopted rules shall be classified according to the nature of the violation and the gravity of its probable effect on facility residents. The agency shall indicate the classification on the written notice of the violation as follows:

    
    

    * * *

    
    

    (c) Class "III" violations are those conditions or occurrences related to the operation and maintenance of a facility or to the personal care of residents which the agency determines indirectly or potentially threaten the physical or emotional health, safety, or security of facility residents, other than class I or class II violations. A class III violation is subject to an administrative fine of not less than $100 and not exceeding $1,000 for each violation. A citation for a class III violation shall specify the time within which the violation is required to be corrected. If a class III violation is corrected within the time specified, no fine may be imposed, unless it is a repeated offense.

    
    

    * * *

    
    

    1. In determining if a penalty is to be imposed and in fixing the amount of the fine, the agency shall consider the following factors:

       
       

       1. The gravity of the violation, including the probability that death or serious physical or emotional harm to a resident will result or has resulted, the severity of the action or potential harm,

          and the extent to which the provisions of the applicable laws or rules were violated.

       2. Actions taken by the owner or administrator to correct violations.

          
          

       3. Any previous violations.

          
          

       4. The financial benefit to the facility of committing or continuing the violation.

          
          

       5. The licensed capacity of the facility. (emphasis supplied)

          
          

35. Section 400.427(4), Florida Statutes (2000), reads in pertinent part:

    400.427 Property and personal affairs of residents.--

    
    

    1. Any funds or other property belonging to or due to a resident, or expendable for his or her account, which is received by a facility shall be trust funds which shall be kept separate from the funds and property of the facility and other residents or shall be specifically credited to such resident. Such trust funds shall be used or otherwise expended only for the account of the resident. At least once every 3 months, unless upon order of a court of competent jurisdiction, the facility shall furnish the resident and his or her guardian, trustee, or conservator, if any, a complete and verified statement of all funds and other property to which this subsection applies, detailing the amount and items received, together with their sources and disposition. In any event, the facility shall furnish such statement annually and upon the discharge or transfer of a resident.

36. Paragraph 5A(1)(a) of the Administrative Complaint seeks to impose a fine of $500.00 for violation of Tag A106.

    However, the facility had corrected this deficiency before the

    surveys took place. While it is clear that the facility had not been in compliance with this requirement prior to the surveys, it had come into compliance by the time the agency conducted its surveys. Further, actions had clearly been taken by the administrator to correct this Class III deficiency. Accordingly, based upon the parameters outlined in Section 400.419, Florida Statutes, no fine should be imposed as to Tag A106 as the statute clearly states that a citation for a Class III violation must specify the time within which the violation is required to be corrected and if it is corrected within the time frame, no fine may be imposed, unless it is a repeated offense.

37. Paragraph 5B(1)(a) of the Administrative Complaint seeks to impose an administrative fine in the amount of

    $1,000.00 pursuant to Section 400.419(1)(c), Florida Statutes, for North Hill's failure to be in compliance with Tag A323.

    North Hill provided evidence of mitigation as contemplated by Section 400.419(3)(b) and (e), Florida Statutes (2000), in that the owner or administrator took action to correct the violations. Further, the license capacity of the facility is small resulting in a greater impact of any fine. Accordingly, a fine of $100.00 is more appropriate.

38. Section 400.424(3)(a), Florida Statutes (2000), reads in pertinent part as follows:

    400.424 Contracts.--

    
    

    (3)(a) The contract shall include a refund policy to be implemented at the time of a resident's transfer, discharge, or death.

    The refund policy shall provide that the resident or responsible party is entitled to a prorated refund based on the daily rate for any unused portion of payment beyond the termination date after all charges, including the cost of damages to the residential unit resulting from circumstances other than normal use, have been paid to the licensee. For the purpose of this paragraph, the termination date shall be the date the unit is vacated by the resident and cleared of all personal belongings. If the amount of belongings does not preclude renting the unit, the facility may clear the unit and charge the resident or his or her estate for moving and storing the items at a rate equal to the actual cost to the facility, not to exceed 20 percent of the regular rate for the unit, provided that 14 days' advance written notification is given. If the resident's possessions are not claimed within 45 days after notification, the facility may dispose of them. The contract shall also specify any other conditions under which claims will be made against the refund due the resident. Except in the case of death or a discharge due to medical reasons, the refunds shall be computed in accordance with the notice of relocation requirements specified in the contract.

    However, a resident may not be required to provide the licensee with more than 30 days' notice of termination. If after a contract is terminated, the facility intends to make a claim against a refund due the resident, the facility shall notify the resident or responsible party in writing of the claim and shall provide said party with a reasonable time period of no less than 14 calendar days to respond. The facility shall provide a refund to the resident or responsible party within 45

    days after the transfer, discharge, or death of the resident. The agency shall impose a fine upon a facility that fails to comply with the refund provisions of the paragraph, which fine shall be equal to three times the amount due to the resident. One-half of the fine shall be remitted to the resident or his or her estate, and the other half to the Health Care Trust Fund to be used for the purpose specified in s.

    400.418. (emphasis supplied)

    
    

39. The fine imposed by Section 400.424(3)(a), Florida Statutes, is separate and in addition to the fine imposed by Section 400.419(1)(c), Florida Statutes. The language of Section 400.424(3)(a), Florida Statutes, regarding the fine it imposes is clear and unambiguous with no reference to mitigation.

40. Section 400.424(3)(a), Florida Statutes, mandates that for the purpose of this paragraph, the termination date shall be the date the unit is vacated by the resident. The unit was vacated by Resident #1 on July 26,2000. Forty-five days after the day the unit was vacated was September 11, 2000. North Hill paid a total of $29,300.00 before the expiration of the 45-day time period. Thus, according to the clear language of the statute, the agency is required to impose a fine equal to three times the amount due to the resident.

41. However, Section 400.424(3)(a), Florida Statutes, also clearly provides that the refund shall be computed in

    accordance with the notice of relocation requirements specified in the contract. Thus, the amount of $1,612.90, which is the amount of prorated rent for August 1 through 25, 2000, should not be included in computing the fine as this is in accordance with the 30-day notice provision in the contract as referenced in Section 400.424(3)(a), Florida Statutes.

42. As of September 11, 2000, North Hill had paid a total of $29,300.00. North Hill's next payment of $31,200.00 was made on September 21, 2000. North Hill argues that the 45 days should run from August 25, 2000, as they were entitled to

    30 days' notice in the contract. While the 30 days' notice provision applies to the calculation of the amount of the refund, the statute is clear that the 45 days runs from the date the resident vacated the facility. While it is a harsh result not to exclude the September 21, 2000 payment (made 10 days after the expiration of the 45 day time frame) from the calculation of the fine, the statutory language of Section 400.424(3)(a), Florida Statutes, leaves no room for that interpretation.

43. Having repaid $29,300.00 before the expiration of the 45 days, this left a remaining balance of $57,875.96 which is composed of $61,200.00 less the $1,612.90 for prorated August rent and $1,711.14 for the offsets previously

described. Accordingly, the appropriate fine imposed pursuant to Section 400.424(3)(a), Florida Statutes, is $173,627.88.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law set forth herein, it is

RECOMMENDED:

That the Agency for Health Care Administration enter a final order imposing fines in the amounts of $100.00 for the Class III violation of Tag A323 and $173,627.88 pursuant to Section 400.424(3)(a), Florida Statutes. This recommendation is not intended to discourage the parties from negotiating a reduction of the fine imposed under Section 400.424(3)(a), Florida Statutes, if so inclined.

DONE AND ENTERED this 27th day of September, 2001, in Tallahassee, Leon County, Florida.

BARBARA J. STAROS

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 27th day of September, 2001.

ENDNOTES

1/ Petitioner filed its Proposed Recommended Order by fascimile minutes after the close of business on the date designated as the "due date" for filing. It was docketed the following business day.

2/ There was no evidence presented that the Koontz's converted this money for personal use.

COPIES FURNISHED:

Christine T. Messana, Esquire

Agency for Health Care Administration 2727 Mahan Drive

Tallahassee, Florida 32308

Michael J. Glazer, Esquire Ken Abele, Esquire

Ausley & McMullen

227 South Calhoun Street Post Office Box 391 Tallahassee, Florida 32302

Diane Grubbs, Agency Clerk

Agency for Health Care Administration Fort Knox Building Three, Suite 3431 2727 Mahan Drive

Tallahassee, Florida 32308

William H. Roberts, Acting General Counsel Agency for Health Care Administration

Fort Knox Building Three, Suite 3431 2727 Mahan Drive

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.

Docket for Case No: 01-001205

Orders for Case No: 01-001205