STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

AGENCY FOR HEALTH CARE ADMINISTRATION,

Petitioner,

vs.

BROWN PHARMACY,

Respondent.

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) Case No. 05-3366MPI

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RECOMMENDED ORDER

This cause came on for formal proceeding and hearing before

1. Michael Ruff, a duly-designated Administrative Law Judge of the Division of Administrative Hearings. The formal hearing was conducted in Tallahassee, Florida, concluding on March 1, 2006. The appearances were as follows:

   APPEARANCES

   
   

   For Petitioner: Debora E. Friedie, Esquire

   Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3

   Tallahassee, Florida 32308-5407

   
   

   For Respondent: Lester Makofka, Esquire

   Makofka and Makofka

   24 North Market Street, Suite 402 Jacksonville, Florida 32202

   
   

   STATEMENT OF THE ISSUES

   
   

   The issues to be resolved in this proceeding concern whether the Respondent properly maintained and supplied required

   records to support and document prescription claims, which it billed to Medicaid and for which it received payment from the Medicaid program during the audit period of April 1, 2000 through December 31, 2001. If that is not the case, it must be determined whether the Agency is entitled to recoup from the Respondent the sum it seeks of $108,478.77, as the purported amount overpaid to the Respondent by the Agency. It must also be determined whether the applicable laws and regulations referenced herein were complied with by the Respondent, in terms of its accepting and filling prescriptions, dispensing relevant drugs, and recording and documenting such activities in its pharmacy records. Finally, it must be determined whether the statistical methodologies employed by the Agency, through its audit and investigation of the Respondent, were sufficiently representative and accurate so as to support the calculation of estimated overpayments.

   PRELIMINARY STATEMENT

   
   

   This cause arose as the result of an audit conducted of the Respondent, Brown Pharmacy, for the audit period of April 1, 2000, through December 31, 2001, regarding pharmacy prescription drug claims paid to the Respondent by the Medicaid system for that audit period.

   The audit was conducted by Heritage Information Systems, Inc. (Heritage), a private corporation which contracted with the

   Agency to conduct such pharmacy Medicaid prescription reviews, and related audits, to determine whether overpayments by the Medicaid program have occurred. Heritage initially determined and reported to the Agency that Brown Pharmacy had been overpaid approximately $150,037.71 by the Medicaid program. It made this determination through an extrapolation process and calculation, based upon "overage" charges found in a random sample, when added to documented overcharges found in a judgmental sample taken of the universe of Brown Pharmacy prescriptions for that audit period. Heritage also purportedly found that Brown did not have invoice records which substantiated billings to Medicaid during the audit period in that the invoice audit showed purported purchase shortages totaling approximately

   $87,942.13, compared to the prescriptions that were actually billed to Medicaid.

   Based upon the audit report from Heritage, the Agency issued a provisional agency audit report (PAAR) notifying the Respondent that it had been overpaid by Medicaid in the amount of $150,036.71. It informed the Respondent this was based upon a statistical random sample of claims paid during the audit period and an extrapolation methodology using purportedly acceptable statistical formulas and methods. The PAAR also identified $87,942.13 as the alleged amount billed to the Medicaid system, above the amount of drug purchases documented

   by the Respondent pharmacy based upon the invoice review for the audit period.

   The Respondent contacted the Agency and sent additional documentation for the agency to consider. The documentation was reviewed and the final agency audit report (FAAR) dated November 30, 2004, was issued, whereby the Agency informed the Respondent of an adjusted overpayment amount of $109,455.04 it had calculated by use of the judgmental sample and extrapolation of the random sample of claims and additional documentation submitted by the Respondent.

   The Respondent requested a formal proceeding and hearing to challenge the Agency action, and the cause was ultimately transferred to the Division of Administrative Hearings and the undersigned Administrative Law Judge for formal proceeding.

   Thereafter, on February 24, 2006, the Agency filed a Notice of Amended Medicaid Overpayment, amending the amount of overpayment it calculated and sought from the Respondent, through the above-referenced statistical extrapolation methodology, as being $108,478.77. The Agency announced on the record during the hearing that it was seeking repayment in that amount, based on the judgmental sample and random sample of claims, and related extrapolation of the random sample. It was not seeking overpayment based upon the invoice review in the amount of $87,942.13.

   The cause came on for hearing as noticed. The Petitioner presented the testimony of Mark Johnson, Ph.D., a professor of statistics at the University of Central Florida and expert witness as to statistics and sampling in the calculation of Medicaid overpayments; Greg Beller, a Virginia licensed pharmacist employed by Heritage; Ramona Stewart, a Florida licensed pharmacist employed by the Agency; and Dana Kenneth Yon, a program administrator with the Agency, who is a licensed pharmacist. Additionally, the Agency presented Exhibits 1 through 41, as more particularly described on pages 6 through 10 of the Petitioner's Proposed Recommended Order and in the transcript of the evidential record of the proceeding. The parties stipulated to the admissibility of all exhibits, subject to their reserved right to argue the weight, sufficiency and relevancy of each of them or some of them in their Proposed Recommended Orders.

   Additionally, the Agency filed a Motion for Official Recognition of specific pertinent Federal Statutes and Rules of the Code of Federal Regulation (CFR), as well as specific Florida Statutes and Rules of the Florida Administrative Code, including the Florida Medicaid Prescribed Drugs, Services, Coverage and Limitations Handbook, also known as the PDSCLR handbook (incorporated by reference in the rules). The Motion for Official Recognition was granted.

   The Respondent presented the testimony of Gary Steinberg, a New Jersey licensed pharmacist and consultant to various healthcare providers. Mr. Steinberg was accepted as an expert witness in the areas of Medicaid policy, audits and pharmacy practice, including Florida pharmacy practice.

   Upon conclusion of the proceeding the parties ordered the transcript thereof and requested an extended briefing schedule. Thereafter, an additional lengthy extension was stipulated to and granted, including a waiver of the 40-page limitation for the proposed recommended orders. The Proposed Recommended Orders were thus timely filed and have been considered in the rendition of this Recommended Order.

   FINDINGS OF FACT

   
   

   1. The Petitioner is an Agency of the State of Florida charged by the statutes and rules referenced herein with ensuring that proper reimbursement is effected to providers, including pharmacies, by the Medicaid system. Because of its duty to enforce and regulate the Medicaid system, the Petitioner Agency has an audit and oversight function, as well as an enforcement function, to ensure that Medicaid payments and the general operations of the Medicaid system are carried out correctly. It is through this duty imposed by the cited Florida Statutes and rules, as well as the federal regulations it is charged with enforcing, that the Petitioner carried out an audit

      of the Respondent, Brown Pharmacy, concerning the audit period of April 1, 2000 through December 31, 2001. The Petitioner conducts audits of providers such as Brown in order to ensure compliance with the Medicaid provisions and Medicaid provider agreements. These are called "integrity audits" and are routinely performed by auditors contracted from private firms such as Heritage.

   2. Brown Pharmacy (Brown) is licensed in the State of Florida as a pharmacy (license Number PH562). Brown maintained a business location at 312 West 8th Street, Jacksonville, Florida 32206, at times pertinent to this case.

   3. During the audit period Brown was an enrolled Medicaid provider authorized to provide Medicaid prescriptions pursuant to a provider agreement with the Agency. The terms of the provider agreement governed the contractual relationship between Brown and the Agency. Pursuant to that provider agreement, Brown was to maintain the Medicaid-related records and documentation for at least five years. Any Medicaid provider, such as Brown, not in compliance with the Medicaid documentation and record retention policies may be subject to the recoupment of Medicaid payments.

   4. During the audit period, Brown dispensed prescription drugs to Medicaid recipients. Medicaid claims were filed and paid electronically as "point of sale" transactions during the

      audit period. Each claim reviewed and at issue in this case was a paid Medicaid claim subject to the provider agreement and pertinent regulations.

   5. As a condition of participating in the Medicaid program, a Medicaid provider must comply with all provisions of a provider agreement, which is a voluntarily agreement between the Agency and the provider. Those provisions include the provider's agreement to comply with all relevant local, state and federal laws, rules, regulations, licensure laws, bulletins, manuals, and handbooks, etc. The provider must agree to keep and maintain, in a systematic and orderly manner, all Medicaid- related records as may be required by the Agency and make them available for state and federal agencies and review. It must maintain complete and accurate medical, business, and fiscal records that will justify and disclose the extent of goods and services rendered to customers or patients and rendered as billings to the Medicaid system.

   6. Florida Administrative Code Rule 59G-4.250 promulgates, as part of the rule, the above-referenced handbook (handbook) which sets out Medicaid polices and rules. The polices and rules govern the rights and responsibilities of drug providers, such as Brown, including coverage and payment methodologies for services and goods rendered to Medicaid recipients and billed to the Medicaid program.

   7. The types of records that must be maintained are as follows:

      Medicaid claim forms, professional records such as patient treatment plans, prior and post authorization information, prescription records, business records, including accounting ledgers, financial statements, purchase and acquisition records etc., tax records, patient counseling information and provider enrollment documentation.

      
      

      Providers who are not in compliance with the Medicaid documentation and record retention policies described in the handbook are subject to administrative sanctions and/or recoupment of Medicaid payments. Medicaid payments for services that lack required documentation and/or appropriate signatures will be recouped.

   8. Chapter five of the handbook, in defining overpayment provides that any amount not authorized to be paid by the Medicaid program, whether paid as a result of inaccurate or improper cost reporting, improper claims, unacceptable practices, fraud, abuse or mistake, constitutes overpayment. Incomplete records are records that lack documentation that all requirements or conditions for the providing of services have been met. Medicaid may recoup payments for services or goods when the provider has incomplete records or cannot locate the records.

   9. The Agency contracted with Heritage to conduct an on- site audit at Brown. The audit was conducted March 18th through March 20, 2002. Heritage isolated a sample of 205 prescription claims, known as the "judgmental sample" out of a total universe of paid pharmacy claims from Brown totaling 16,727 for the audit period. Heritage also selected 250 random prescription claims out of the remaining total universe of paid pharmacy claims of 16,522, which remained after the 205 judgmental sample claims had been removed or isolated from the remainder of the total claims.

   10. With the acquiescence of the Agency, Heritage chose the 205 claims by weighing it in favor of the "high dollar" or more expensive drug prescriptions. Those prescriptions are primarily for HIV and Aids therapy drugs and psychotherapeutic drugs for various mental conditions, including schizophrenia. Weighing of the judgmental sample strongly in favor of the high dollar prescription claims would seem to render the judgmental sample fundamentally unfair against Brown if the judgmental sample had then been extrapolated to the entire universe of claims ($16,727). This was not done, however. The judgmental sample was audited and compiled by doing an actual count and totaling of claim amounts in dollars represented by all the discrepant prescriptions, including all those the Agency and Heritage maintained resulted in "overpayments" to Brown.

       Therefore, the judgmental sample is an actual number rather than an extrapolated calculation so that weighing the sample in favor of the high dollar prescriptions does not result in an unfair or biased sample, as to the judgmental sample.

   11. Because the judgmental sample was drawn from the total pool of audited claims and removed from that claim pool prior to the identification and drawing of the random sample, the two are mutually exclusive and the amounts calculated do not represent a duplication or overlap. Thus the findings from the judgmental sample and then the random sample may be properly added together.

   12. The randomly selected claims (random sample) were taken of the remaining 16,522 claims in the audit claim pool after the judgmental sample of 205 claims had been removed. According to the report rendered by Heritage, the 250 randomly selected claims totaled $10,632.59 in paid Medicaid dollars. The Heritage auditors determined that there were 56 discrepant claims out of these which totaled, according to their calculation, $2,450.13 in apparent overpayments. This resulted in an average overcharge per claim of $9.80 (determined by dividing the documented "sanction amount" by the total number of claims in the random sample (250), multiplied by the universe of claims from which the random sample was taken (16,522) which yielded an extrapolated overcharge of $161,924.19. Applying the

       statistically appropriate 95 percent "one-sided" lower confidence limit of this extrapolation resulted in a purported overpayment extrapolated from the randomly selected claims of

       $102,700.85. This means that the overpayment amount calculated by Heritage represents an amount statistically 95 percent certain to be the lowest amount overpayment based on the extrapolation of the overpayment represented in the 250 randomly selected claims.

   13. The non-extrapolated judgmental findings showed, according to Heritage, that there were 72 discrepant claims. Heritage then determined that, of these, there were $29,381.09 in apparent actual overcharges.

   14. The discrepancies determined by Heritage involved the failure to produce documentation of refill authorizations for 80 prescription claims; 31 prescription claims containing an incorrect Medicaid provider number; the failure to produce 12 "hard copy" prescriptions representing 25 claims; four claims that did not have the prescriber's DEA number on the prescription for controlled substances; three claims for prescriptions that did not contain the original date of service; two claims that were billed for quantities greater than that authorized by the physician; one claim that was billed for an incorrect day's supply; one claim that was billed in excess of the maximum allowable quantity of prescription of the drug, set

       by Medicaid policy; and one prescription claim that was billed for an incorrect prescriber's Medicaid provider number (although this should not be a discrepancy because the correct prescriber was documented in the pharmacy's computer, which the regulations allowed). Additionally, there was one claim billed for a drug different than that prescribed by the physician, according to Heritage in its report.

   15. Heritage also conducted an invoice review using utilization reports provided by the Respondent. This was apparently a review of 25 different drugs that purportedly showed that the prorated purchases of those drugs were insufficient to cover the number of units billed to Medicaid for all 25 drugs reviewed, and thus yielded a purported shortage of

       $87,942.13, representing the amount billed to Medicaid above the amount the records of purchases from suppliers proved that Brown had purchased of those drugs.

   16. Based upon the Heritage audit as well as documentation findings and overpayments calculations (see Exhibit 8), the Agency issued a PAAR dated September 27, 2002, determining that Brown had been overpaid $150,036.71 for Medicaid claims during the audit period. That report advised Brown that it was a provisional report only and encouraged Brown to submit any additional information or documentation which might serve to change the overpayment. The report listed examples of

       documentation that the Agency would consider for a possible reduction in the overpayment amount initially claimed.

   17. Thereafter, the Agency agreed to an extension of time for Brown to submit additional documentation and sent a letter to Brown dated October 31, 2003, advising that the audit had been placed in abeyance pending the outcome in a related case, but that the Agency expected to resume the audit and that therefore all Medicaid-related records and documentation regarding paid claims should be maintained and preserved until the audit was finalized.

   18. The FAAR was addressed in the testimony of Ms. Stewart for the Agency. Through her testimony it was revealed that certain corrections should be made to the FAAR updating it from the findings in the Heritage initial audit report. The Agency corrected the information in the FAAR for this reason and for the reason that it secured some additional information from the Respondent. Thus, for the audit period it was established that there were 16,727 total claims for prescriptions dispensed by Brown, for which it was paid $795,564.59 during the 21-month audit period, of those claims, 205 were pulled out from the total universe of claims as the judgmental sample. There were some 72 allegedly "discrepant claims" totaling $36,393.51 in dollars paid to Brown. The Agency's position is that $29,381.09 of those are so called "documented overcharges."

   19. The random sample of 250 claims was extrapolated to the remaining universe of 16,522 prescription claims. The Agency now takes the position that it found 49 "discrepant claims" in the random sample which totaled $2,154.40 in dollars paid to Brown's pharmacy and of that it maintains that $1,927.55 are "documented overcharges" for the 250 randomly selected claims (for which Brown had been paid $10,632.59). Thus the Agency found an average overcharge for the 250 randomly sampled claims of $7.71 per claim. The $7.71 average per claim overcharge was then multiplied by the remaining universe of 16,522 claims, yielding an extrapolated purported overcharge of

       $127,387.92. The Agency then applied the 95 percent "one-sided lower confidence limit" to this extrapolation, that is, that it or its statistician, Dr. Johnson, felt that there was a 95 percent chance that the lower confidence limit number it calculated was accurate. That number is $79,097.68. When that number is combined with the Agency's position as to overcharges from the judgmental sample results in a total postulated overcharge of $108,478.77. This is the final amount the Agency claims as an overpayment that must be recouped for Medicaid.

   20. The FAAR summarized the discrepant claims for the judgmental sample as follows:

       1. 61 claims involve refills which exceeded the authorized number of refills without documentation of

          reauthorization;

          
          

       2. 10 claims showed an incorrect prescriber license number but the correct prescriber license number was documented in the pharmacy's computer; and

       3. For two claims the hard copy description did not have an original date of service depicted on it and did not reference a DEA number.

   21. The discrepant claims shown in the FAAR as to the random sample were as follows:

       1. There were 19 claims for refills without documentation of refill authorization (refills had been previously authorized, but for the 19 claims at least one refill had been issued beyond the authorization limit);

       2. Fifteen claims showed an incorrect prescriber license number on the claim and the license number was not documented in the Respondent's computer;

       3. Seven claims showed an incorrect prescriber license number, but the correct license number was documented in the pharmacy's computer;

       4. There were seven claims for which the original hard copy prescriptions could not be found on file during the audit period;

       5. For one claim the hard copy prescription did not

          have an original date of service or DEA number;

          
          

       6. For one claim the quantity paid exceeded the quantity authorized by the prescriber or dispensed to the recipient; and

       7. For one claim the number of days supply submitted by the pharmacy was not consistent with the quantity and directions of the prescriber and the quantity exceeded the limit set by the plan.

   22. The most common discrepancies with regard to the judgmental sample and the random sample occurred when the Respondent billed refills in excess of the number authorized by the prescriber, without any written authorization for such being provided in the audit process or later. Concerning the random sample, the second most common discrepancy occurred when the claim depicted an incorrect precriber number on the claim and the license number of the prescriber was not documented in the computer. In the judgmental sample the second most common discrepancy occurred when the claim showed an incorrect prescriber number, but the correct prescriber number was documented in the pharmacy's computer.

   23. The discrepancies in the FAAR with the indication "UR", references "unauthorized refills." The records of the pharmacy showed that Brown issued refills of prescriptions to Medicaid recipients in excess of the presriber's limit depicted

       on the prescriptions but showed no written record of a telephonic or written authorization by the prescriber allowing the additional refill or refills. It is also true that as to some or even many of these the Respondent may have obtained verbal authorization, but failed to document that re- authorization.

   24. Medicaid policy, the statutory authority cited herein, and the PDSCLR Handbook provide that all verbal orders authorized by the prescriber of a prescription must be recorded either as a "hard copy" or noted in the pharmacy's computer in order to comply with the relevant law cited herein, for record- keeping and auditing purposes under Medicaid policy.

       The Agency's Statistical Methodology

       
       

   25. Mark E. Johnson, Ph.D., testified on behalf of the Petitioner. He was qualified as an expert witness in the area of statistical formulas, statistical methodology, and random sampling, including the random sample statistical methodology employed by the Agency in determining the overpayment amount. He is a professor of statistics at the University of Central Florida.

   26. Dr. Johnson reviewed the statistical methodology, numbers and calculations arrived at by the Agency and its extrapolation method of arriving at the overpayment amount. He also used his own independent analysis based upon a software

       package he commonly uses in the practice of his discipline in testing the methodology employed by the Agency and the random sample employed by the Agency and Heritage.

   27. The statistical formula employed by Dr. Johnson and the Agency is a standard one routinely used in Dr. Johnson's profession and statistical sampling. He established through his own testing of the methodology that the random sample was appropriate for Medicaid program integrity audits and determinations as employed in this case. The random sampling, according to Dr. Johnson, was employed because it would be time and cost prohibitive to examine individually each of 16,522 claims regarding overpayment issues. The random sampling methodology using 250 randomly chosen samples is a time and cost saving device and yet still presents a "plausible estimate" as established by Dr. Johnson.

   28. He established that for the universe of 16,522 claims which were subjected to the random sample and extrapolation statistical analysis and calculation, that such is a reasonable sample for purposes of this audit and that the 250 random samples employed by the Agency are indeed statistically appropriate random samples. His calculation of overpayment was at variance with the Agency's by 55 cents. He established that is not a significant difference since the 95 percent certainty

       limit of $79,097.68 for the random sample extrapolation analysis is so much lower than the estimate established at $108,478.22.

   29. Dr. Johnson established that the Agency had employed appropriate and valid statistical methods in its determination of the above-referenced overpayment amount based upon the random sample of paid claims.

   30. The expert testimony of Dr. Johnson, together with his written report in evidence, is credible and persuasive as to the validity of the random sampling of the claims during the audit period and as to the random sample portion of the analysis employed in arriving at the final overpayment calculation and numbers depicted in the FAAR.

   31. Dr. Johnson established the appropriateness of the statistical formula, including extrapolation, used to calculate the overpayment amount, the appropriateness of the sample size relative to the universe of claims, and the improbability that the overpayment amount is attributable to chance causes alone. Thus Dr. Johnson's testimony is accepted as credible and persuasive in establishing the validity of the Agency's method of overpayment calculation, and the overpayment calculation in conjunction with the statistical evidence in this record, except as modified by the findings below.1/

       The Respondent's Position

       
       

   32. Gary Steinberg testified on behalf of the Respondent, Brown Pharmacy. He was accepted as an expert witness in the areas of Medicaid policy, audits and pharmacy practice, including Florida pharmacy practice.

   33. Mr. Steinberg acknowledged that Brown had not properly documented all claims that had been paid by the Medicaid program nor maintained all required records. He emphasized in his testimony, however, that Brown had not fraudulently billed the Medicaid program with claims for prescription medications that it had not actually dispensed to the patients or recipients. Rather, all medications involved in the subject prescription claims had actually been dispensed. There is no evidence or claim on the part of the Agency that Brown charged and collected more than the appropriate approved price for the prescriptions at issue.

   34. Through the explanation given in his testimony,

       
       

       Mr. Steinberg opined that although Brown was guilty of technical errors in record keeping and documentation as to the prescriptions involved in the subject claims, Brown had made substantial compliance with the Medicaid program requirements of the Medicaid provider agreement and the statutes and rules at issue and policies embodied in the subject handbook. He explained in his testimony that in the pharmacy practice setting

       in which Brown has operated, whereby it serves a large indigent population in an inner city environment, it is difficult to contact a prescriber at the time when a patient needs a critical prescription refilled in order to get a refill authorization.

       The prescriptions at issue mostly involve critical medications for HIV/Aids and psychotropic medications for severe mental conditions such as schizophrenia. The patients who need these critical medications (and there are very few patients, since most of the procedures involve filling and refilling for a small number of such recipients) are patients of clinics operated at the nearby university hospital (Shands). In these circumstances, where the patient literally needs the HIV/Aids medication refilled on an immediate basis, possibly even to prevent death, and the mental health patient critically needs a refill in order to prevent harm to the patient or harm to the members of the public if the patient goes without medication and "decompensates," the ethical thing for a pharmacist to do is to refill the prescription and seek authorization later.

   35. Mr. Steinberg established that it is often difficult to obtain authorization from the original prescriber since the medication were prescribed by residents practicing in the various clinics at the Shands Hospital and that the residents can not always be identified or contacted easily since they do not maintain a fixed medical practice in the area.

       Consequently, some of the prescriptions were not documented as to authorization, although in some cases the pharmacy actually obtained authorization and entered it in its computer. In some cases, being unable to obtain re-authorization from the resident who originally prescribed the medication the pharmacy used the DEA license or prescribing number of the hospital itself. He explained that although under the law a pharmacy can refill a prescription on an emergency basis for up to a 72-hour supply, that this is generally impracticable and unsafe for patients in this plight because such indigent, mental health and HIV/Aids patients tend to be non-compliant with their medication regimes quite often anyway, and it is often unreasonable to expect them to return to the pharmacy for another refill within two or three days. He thus opined that the ethical and safe thing for the pharmacist to do was to refill and re-dispense the medical approved medication for up to a 30 or 34-day supply (the normal refill supply duration).

   36. He further explained that the Shands Hospital license number was used in some of these circumstances because the resident doctor who originally issued the prescription could not be identified on the Shands Hospital prescription forms and because the resident doctors at the Shands clinics only have and can use Shands Hospital prescription forms in any event. Mr. Steinberg thus established that 35 percent of those prescription

       claims classified as "WMP," that is the prescription claims contained an incorrect prscriber license number were for these reasons and the pharmacist could only use the Shands Hospital license number because the resident could not be identified from the Shands Hospital prescription forms. He thus opined that 35 percent of the random sample extrapolation amount, the 95 percent statistical confidence limit amount of $79,097.00, should be deleted from that amount in determining the correct amount of overpayment predicated on the random sample.

   37. Likewise, with regard to the judgmental sample concerning the HIV/Aids and mental health patient prescriptions and related claims, he opined that, in effect, $19,500.00 of the total $29,381.09 overpayment amount claimed by the Agency pursuant to the judgmental sample portion of the claims, should be deleted from that portion of the overpayment claim by the Agency; this is a result of his explanation regarding "substantial compliance" in the critical refill situation he described concerning the HIV/Aids and mental health patients and their prescription drugs.

   38. The preponderant, persuasive evidence does establish (and indeed the Agency acknowledged in its Proposed Recommended Order) with regard to the judgmental sample, that 10 of the claims at issue listed an incorrect prescriber license number, but that the correct prescriber license number was actually

       documented in the pharmacy's computer record with the name of the prescriber. This circumstances comports with the law referenced below and in the Petitioner's Proposed Recommended Order. This results in a reduction in the overpayment claim with regard to the judgmental sample of 13.88 percent of the judgmental sample claims or a reduction of $4,078.09.

   39. Likewise, with regard to the random sample extrapolation calculation of overpaid claims, the preponderant, persuasive evidence, also as acknowledged by the Agency in its Proposed Recommended Order, disclosed that seven claims listed an incorrect prescriber license number on the claims, but had been correctly documented in the pharmacy's computer system and therefore were in compliance with the relevant statutes, rules, and the subject handbook. Thus the discrepant claims and the overpayment amount related to the random sample portion of the audit claims should be reduced by 14.28 percent of the total amount of $79,097.00 for a $11,295.05 reduction of that

       $79,097.00 random sample overpayment amount.

       
       

   40. Mr. Steinberg demonstrated that Brown was not overcharging on the drugs prescribed and dispensed and was charging the Medicaid-authorized amount for the drugs involved in the prescription claims at issue. The Agency is not claiming that there was any fraudulent practice or illegal overcharging for the prescriptions involved. In fact, Brown was earning only

       a very small profit on the drugs dispensed that are the subject of the prescription claims at issue. Mr. Steinberg thus opined that since Brown did indeed dispense all the drugs at issue and was only paid the legal authorized amounts for the drugs and prescriptions at issue that recoupment of the amounts sought by the Agency or, in effect, established in these findings of fact, would be fundamentally unfair. He and the Respondent contend, rather, that since Brown performed substantial compliance, but was guilty of technical non-compliance with the relevant rules, agreement, and Medicaid policy, that the Agency should impose a lesser fine instead of seeking recoupment.

   41. In summary, in view of the preponderant persuasive evidence establishing the above facts, it has been shown that the documentation and record-keeping, dispensing errors, and omissions in the manner found above, with regard to the prescription claims and types of claims addressed in the above findings of fact, occurred. If those deficiencies amount to violations of the authority cited and discussed below which justify recoupment, then the amount of overpayment established by the above findings of fact is $93,104.95.

       CONCLUSIONS OF LAW

       
       

   42. The Division of Administrative Hearings has jurisdiction of the subject matter of and the parties to this proceeding. §§ 120.569 and 120.57(1) Fla. Stat. (2006).

   43. The Agency for Health Care Administration is the state agency designated to administer the Medicaid program in the State of Florida in accordance with relevant federal and state law. §§ 409.901 and 409.902, Fla. Stat. (2006).

   44. As the party asserting the overpayment, the Agency has the burden to establish the alleged overpayment by a preponderance of the evidence. See Southpointe Pharmacy v. Department of Health and Rehabilitative Services, 596 So. 2d 106, 109 (Fla. 1st DCA 1992).

   45. The statutes, rules and handbook, adopted by rule, in effect during the period for which the services were provided (the audit period) govern the outcome of this dispute. See Toma v. Agency for Health Care Administration, DOAH Case No. 95-2419 (Recommended Order filed July 26, 1996).

   46. The Agency has the burden to establish the overpayment and entitlement to recoupment thereof by preponderance of the evidence. The Agency has met this burden by submitting the FAAR into evidence as Exhibit 15, together with its work papers supporting its conclusions, and the Heritage work papers and data used in conducting its audit and emanating from its audit. (Exhibits 13, 14, and 16 in evidence). Additionally, the supporting documentation which Ms. Stewart used to prepare the FAAR was submitted into evidence (Exhibits 1, 3, 4, 5, 6, 7, 8, and 9 in evidence).

   47. The testimony of Ms. Stewart and Mr. Beller is credible and persuasive as to their review of the documentation provided by Brown and their determinations based upon Medicaid policy, the handbook, and statutory authority. Professor Mark Johnson's testimony is credible and persuasive concerning the validity, accuracy and applicability of the random sample of paid claims and the statistical formula used in calculating the overpayment amount by extrapolation and application of the 95 percent, one-sided lower confidence limit, to arrive at the amount of $79,096.68, which is accepted as credible and persuasive as modified by the above findings of fact and the reasons depicted in the above findings of fact.

   48. Mr. Yon's testimony is persuasive in establishing the duties and responsibilities of the Agency in its oversight of the integrity of the Medicaid program as provided in Section 409.913, Florida Statutes.

   49. Section 409.913 (2001), Florida Statutes, provides in pertinent part as follows:

       Oversight of the Integrity of the Medicaid Program. The Agency shall operate a program to oversee the activities of Florida Medicaid recipients, and providers and their representatives, to ensure that fraudulent and abusive behavior and neglect of recipients occur to the minimum extent possible, and to recover overpayments and impose sanctions as appropriate.

       
       

       1. For the purposes of this section, the

          term:

          
          

          * * *

          
          

          (d) "Overpayment" includes 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.

          
          

          * * *

          
          

       2. The agency shall conduct, or cause to be conducted by contract or otherwise, reviews, investigations, analyses, audits, or any combination thereof, to determine possible fraud, abuse, overpayment or recipient neglect in the Medicaid program and shall report the findings of any overpayments in audit reports as appropriate.

       
       

       * * *

       
       

       1. 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:

          
          

          1. Have actually been furnished to the recipient by the provider prior to submitting the claim.

             
             

             * * *

             
             

             (c) Are of a quality comparable to those furnished to the general public by the provider's peers.

             
             

             * * *

             1. Are provided in accord with applicable provisions of all Medicaid rules, regulations, handbooks, and policies and in accordance with federal and state law.

                
                

             2. Are documented by records made at the time the goods or services were provided,

             
             

             demonstrating the medical necessity for the goods or services rendered.

             
             

             * * *

             
             

       2. 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 five (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 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 a provider.

       
       

       * * *

       
       

       (14) 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:

       
       

       * * *

       
       

       1. The provider has not furnished or has failed to make available such Medicaid- related records as the agency has found necessary to determine whether Medicaid

          overpayments are or were due and the amounts thereof;

          
          

       2. The provider has failed to maintain medical records made at the time of service, or prior to service if prior authorization is required, demonstrating the necessity and

          
          

          appropriateness of the goods or services rendered;

          
          

       3. The provider is not in compliance with provisions of Medicaid provider publications that have been adopted by reference as rules in the Florida Administrative Code; with provisions of state or federal law, rules, or regulations; with provisions of the provider agreement between the Agency and the provider; or with certifications found on claim forms or on transmittal forms for electronically submitted claims that are submitted by the provider or authorized representative, as such provisions apply to the Medicaid Program.

          
          

       4. The provider or person who ordered or prescribed the care, services, or supplies has furnished, or ordered the furnishing of, goods or services to a recipient which are inappropriate, unnecessary, excessive, or harmful to the recipient or are of inferior quality.

       
       

       * * *

       
       

       (n) The provider fails to demonstrate that it had during a specific audit period 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.

       
       

       * * *

       
       

       1. In making a determination of overpayment to a provider, the agency must

          use accepted and valid auditing, accounting, analytical, statistical, or peer-review methods, or combinations thereof.

          Appropriate statistical methods may include, but are not limited to, sampling and extension to the population, parametric and nonparametric statistics, tests of hypotheses, and other generally accepted statistical methods. Appropriate analytical methods may include, but are not limited to, reviews to determine variances between the quantities of products that a provider had on hand and available to be purveyed to Medicaid recipients during the review period and the quantities of the same products paid for by the Medicaid program for the same period, taking into appropriate consideration sales of the same products to non-Medicaid customers. In meeting its burden of proof in any administrative or court proceeding, the agency may introduce the results of such statistical methods as evidence of overpayment.

          
          

       2. When making a determination that an overpayment has occurred, the agency shall prepare and issue an audit report to the provider showing a calculation of overpayments.

          
          

       3. The audit report, supported by agency workpapers, 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.

       
       

   50. Section 409.07, Florida Statutes (2001), provides in pertinent part:

       Medicaid Provider Agreements. The Agency may make payments for medical assistance and related services rendered to Medicaid recipients only to an individual or entity who has a provider agreement in effect with the agency, who is performing services or supplying goods in accordance with federal, state, and local law and who agrees that no person shall, on the grounds of handicap, race, color, or national origin, or for any reason, be subjected to discrimination under any program or activity for which the provider receives payment from the agency.

       
       

       1. Each provider agreement shall require the provider to comply fully with all state and federal laws pertaining to the Medicaid program, as well as all federal, state, and local laws pertaining to licensure, if required, and the practice of any of the healing arts, and shall require the provider to provide services or goods of not less than the scope and quality it provides to the general public.

          
          

       2. Each provider agreement shall be a voluntary contract between the Agency and the provider, in which the provider agrees to comply with all laws and rules pertaining to the Medicaid program when furnishing a service or goods to the Medicaid program when furnishing a service or goods to a Medicaid recipient and the agency agrees to pay a sum, determined by fee schedule payment methodology, or other manner, for the service or goods provided to the Medicaid recipient. Each provider agreement shall be effective for a stipulated period of time, shall be terminable by either party after reasonable notice, and shall be renewable by mutual agreement.

       3. The provider agreement developed by the Agency, in addition to the requirements specified in subsections (1) and (2), shall require the provider to

       
       

       * * *

       
       

       1. Maintain in a systematic and orderly manner all medical and Medicaid-related records that the agency requires and determines are relevant to the services or goods being provided.

          
          

       2. Retain all medical and Medicaid-related records for a period of 5 years to satisfy all necessary inquiries by the Agency.

       
       

       * * *

       
       

       (g) Promptly report any monies received in error or in excess of the amount to which the provider is entitled from the Medicaid program, and promptly refund such moneys to the Agency.

       
       

   51. Florida Administrative Code Rule 59G-1.010(245) defines "recoupment" as "the process by which the Department recovers an overpayment or inappropriate payment from a Medicaid provider." See Henry Lepely, M.D. v. Agency for Health Care Administration, DOAH Case No. 04-3025MPI (Recommended Order filed March 25, 2005).

   52. Florida Administrative Code Rule 64B16-27.103 provides in pertinent part as follows:

       Only a Florida registered pharmacist or registered pharmacy intern acting under the direct personal supervision of a Florida registered pharmacist may, in the State of Florida, accept an oral prescription of any nature. Upon so accepting such oral

       prescription it must immediately be reduced to a hard copy, and only a Florida registered pharmacist or registered pharmacy intern acting under the direct personal supervision of a Florida registered pharmacist may, in the State of Florida, prepare a copy of a prescription or read a prescription to any person for purposes of providing reference concerning treatment of the person or animal for whom the prescription was given, and when said copy is given a notation shall be made upon the prescription that a copy has been given, the date given, and to whom given.

       
       

   53. Florida Administrative Code Rule 64B16-28.140 specifically regulates how a pharmacy must maintain records, either by data processing system, in compliance with 21 C.F.R. Section 1304.04, or a manual record-keeping system as specified in Florida Administrative Code Rule 64B16-27.800, and Section 893.07, Florida Statutes. Florida Administrative Code Rule 64B16-28.140 states in pertinent part that:

       (1)(d) Original prescriptions, including prescriptions received as provided for in Rule 64B16-28.130, F.A.C., 'Transmission of Prescription Orders' shall be reduced to a hard copy if not received in written form. All original prescriptions shall be retained for a period of not less than two years from date of last filing. To the extent authorized by 21 C.F.R. Section 1304.04, a pharmacy may, in lieu of retaining the actual original prescriptions, use an electronic imaging recordkeeping system, provided such system is capable of capturing, storing, and reproducing the exact image of the prescription, including the reverse side of the prescription if necessary, and that such image be retained for a period of no less than two years from

       the date of last filing.

       
       

       * * *

       
       

       (5) Authorization of additional refills. Practitioner authorization for additional

       
       

       refills of a prescription drug shall be noted as follows:

       
       

       1. On the daily hard-copy printout; or

          
          

       2. via the CRT display.

       
       

   54. The Florida Medicaid Prescribed Drugs, Services, Coverage, and Limitations Handbook (PDSCLR) or "handbook" is promulgated in law as Florida Administrative Code Rule 59G-

       4.250. It sets out relevant Medicaid policies and rules. The Medicaid polices and rules govern the rights and responsibilities of Medicaid prescribed drugs providers, and coverage and payment methodologies for services and goods rendered to Medicaid recipients and billed to the Medicaid program.

   55. The handbook has record-keeping requirements. Chapter

       
       

       2 of the handbook states in pertinent part that:

       
       

       Record keeping requirement: The provider must retain all medical, physical, professional and business records on all services provided to a Medicaid recipient. Records may be kept on paper, magnetic material, film, or other media. In order to qualify as a basis for reimbursement, the records must be signed and dated at the time of service, or otherwise attested to as appropriate to the media. Rubber stamp signatures must be initialed.

       
       

       Record retention: The records must be retained for a period of at least five (5) years from the date of service.

       
       

       Types of records that must be retained: The following types of records, as appropriate for the type of service provided, must be retained [non-inclusive list]:

       
       

       Medicaid claim forms and any documents that are attached.

       
       

       Professional records, such as patient treatment plans and patient records.

       
       

       Prior and post authorization, and service authorization information;

       
       

       Prescription records;

       
       

       Business records, such as accounting ledgers, financial statements, purchase/acquisition records, invoices, inventory records, check registers, cancelled checks, sales records, etc.

       
       

       Tax records, including purchase documentation;

       
       

       Patient counseling information;

       
       

       And provider enrollment documentation.

       
       

       * * *

       
       

       Incomplete records: Providers who are not in compliance with the Medicaid documentation and record retention policies described in this chapter may be subject to administrative sanctions and/or recoupment of Medicaid payments.

       
       

       Medicaid payments for services that lack required documentation and/or appropriate signatures will be recouped.

   56. That portion of the handbook also provides a right by all relevant authorized state and federal agencies to audit and examine the provider's records, including all records that AHCA finds necessary to determine whether Medicaid payment amounts are due.

       
       

   57. Chapter 5 of the Handbook states in pertinent part as follows:

       Overpayment: Overpayment includes 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 claims, unacceptable practices, fraud, abuse or mistake.

       
       

       Incomplete or missing records: Incomplete records are records that lack documentation that all requirements or conditions for services provision have been met. Medicaid may recoup payment for services or goods when the provider has incomplete records or cannot locate the records.

       
       

   58. The Agency has established by persuasive evidence that, for the paid claims in which the Respondent billed the Medicaid program for refills in excess of the number authorized by the prescriber, with no written authorization for those refills, that it failed to comply with the record-keeping requirements of Section 409.913, Florida Statutes, the Florida Administrative Code Rules referenced as to pharmacy practice, as well as the record-keeping requirements of the handbook. As

       required by Florida Administrative Code Rule 64B16-28.140(d), there was no notation authorizing additional refills for the above-referenced requirements and found unauthorized refill discrepant claims, except for those which were noted in the computerized record of the pharmacy, as referenced in the above findings of fact.

   59. It has also been thus established that for the paid claims billed by Brown to the Medicaid program which listed an incorrect prescriber number, without documenting the prescriber number in the pharmacy's computer, that the Respondent Brown failed to comply with the record-keeping requirements of Section 409.913, Florida Statutes, as well as the record-keeping and billing requirements of the handbook.

   60. With regard to the paid claims billed by the Respondent to the Medicaid program in which the original hard copy prescription could not be located on file during the audit, that the Respondent failed to comply with the record-keeping requirements of Section 409.913, Florida Statutes, and of the handbook. Additionally, as to the "CF" discrepancies for controlled substances, the Respondent violated provisions of federal and state law regarding controlled substances. See

       § 409.913(7)(e) and (f), § 409.913(8), § 409.913(14)(c)(d) and

       
       

       (e), Florida Statutes; § 465.003(13), § 465.015(2)(c), 465.023(1)(c), Fla. Stat.; and § 893.04(1)(f), Fla. Stat.; Fla.

       Admin. Code R. 64B16-28.140 and the referenced provisions of the handbook, in evidence.

   61. Regarding the paid claim billed by the Respondent to the Medicaid Program in which the hard-copy prescription did not have an original date of service (NDOS) and the hard-copy prescription did not reference a DEA number, and no DEA number was listed in its computer, the Respondent failed to comply with the above-referenced record-keeping requirements of Section 409.913, Florida Statutes, and of the handbook, as well as the record-keeping requirements as to controlled substances applicable to this proceeding contained in 21 C.F.R. Section 1306.05; Section 465.023, Florida Statutes; Section 893.04, Florida Statutes, as well as Sections 409.913(7)(e) and (f), and 409.913(8)(14)(c)(d) and (e), Florida Statutes.

   62. Regarding the paid claim billed by the Respondent in which the quantity paid exceeded the quantity authorized by the prescriber and dispensed to the recipient (OBQ), the Respondent over-billed the Medicaid Program in violation of the above-cited statutes and the Handbook. The Agency had furnished advance notice of a policy change through "remittance voucher banners" dated September 17, 1999, and October 20, 1999, to the effect that rounding up quantities of drugs billed to the nearest whole number was no longer necessary and might result in the submission of a false claim and an overpayment.

       § 409.913(1)(d) and (7)(e), Fla. Stat. See also Exhibits 23, 24, 32, and 33.

   63. The paid claim billed by the Respondent in which the days supply value submitted by the pharmacy is not consistent with the quantity and directions of the prescription and the quantity paid exceeded the limit set by the Plan (EQL), involved an over-billing to the Medicaid Program in violation of the above-cited statutes and the handbook. See Exhibits 23, 24, 32, and 35.

   64. The Respondent presented testimony concerning certain refills for psychotropic drugs and HIV/Aids-related drugs, which it maintains, in effect, were issued in emergency situations for specific Medicaid patients who had to have the drugs to avoid serious mental health consequences and possible danger to the patient or to others, as well as the risk of death with regard to the HIV/Aids patients. If, indeed, such an emergency situation did arise on a number of occasions during the audit period, emergency prescriptions refills are provided for under specified circumstances in the statutes regulating pharmacy practice. Thus Section 465.0275, Florida Statutes, states in pertinent part that:

       In the event a pharmacist receives a request for a prescription refill and the pharmacist is unable to readily obtain refill authorization from the prescriber, the pharmacist may dispense a one-time emergency

       refill of up to a 72-hour supply of the prescribed medication, with the exception of those area or countries included in an emergency order or proclamation of a state of emergency declared by the Governor, in which the executive order may authorize the pharmacist to dispense up to a 30-day supply, providing that:

       
       

       1. The prescription is not for a medicinal drug listed in Schedule II appearing in Chapter 893.

          
          

       2. The medication is essential to the maintenance of life or the continuation of therapy in a chronic condition.

          
          

       3. In the pharmacist's professional judgment, the interruption of therapy might reasonably produce undesirable health consequences or may cause physical or mental discomfort.

          
          

       4. The dispensing pharmacist creates a written order containing all of the prescription information required by this chapter and chapters 499 and 893 and signs that order.

          
          

       5. The dispensing pharmacist notifies the prescriber of the emergency dispensing within a reasonable time after such dispensing.

       
       

   65. That statutory provision however does not authorize a pharmacist to give more than a one-time emergency supply of a medication under the specified conditions. Nor does that statute excuse the pharmacist from creating a written record of the transaction or from notifying the prescriber of the emergency dispensing. That statute also does not over-ride the record-keeping and documentation requirements referenced above

       from the handbook and from Section 409.907, Florida Statutes.

       
       

   66. Section 465.188, Florida Statutes (2004), outlawed the use of statistical extrapolation in calculating overpayments with regard to Medicaid Pharmacy audits. That statute states in pertinent part that "[t]he audit criteria set forth in this section applies only to audits of claims submitted for payment subsequent to July 11, 2003." The audit of Brown Pharmacy took place for an audit period of April 1, 2000 through December 31, 2001, well before July 11, 2003. The Respondent acknowledges this, but maintains that, because of that intent expressed by the legislature, statistical extrapolation should not be used to calculate overpayment and that it would be fundamentally unfair to apply that to Brown for the audit period in question.

   67. That statute, however, finally only applies to audits of claims submitted for payment subsequent to July 11, 2003. Moreover, the issue of using statistical extrapolation to calculate overpayments in Medicaid pharmacy audits has been litigated and ruled upon prior to this case such that statistical extrapolation has been deemed legitimate for audits occurring on claims submitted before July 11, 2003. See State of Florida, Agency for Health Care Administration v. Colonial Cut-Rate Drugs, Inc., 878 So. 2d 479, 480 (Fla. 1st DCA 2004) (a petition to review non-final agency action, holding that Section 465.188, Florida Statutes (2003), is procedural and remedial in

       affirming the administrative law judge's decision). The Administrative Law Judge subsequently ruled then that this general rule, that procedural statutes apply to pending cases, gives way where the legislature has provided otherwise in the procedural statute in question, as it has done in the version of Section 465.188, Florida Statutes, currently in effect (case citations omitted). Colonial Cut-Rate Drugs, Inc., v. Agency for Health Care Administration, DOAH Case No. 03-1547MPI (Recommended Order filed March 14, 2005).

   68. The audit and recoupment claim occurred prior to July 11, 2003, thus the auditing mandates set forth in Section 465.188, Florida Statutes (2004), are not applicable. See

       Colonial, supra. Additionally, since the Agency is not seeking a penalty in this matter, the current law prohibiting the use of extrapolation as a method of calculating penalties does not prohibit the use of extrapolation. It is concluded that the calculation of an overpayment using extrapolation for audits for claims paid before July 11, 2003, does not prohibit using extrapolation because calculation of an overpayment is not a penalty. See Bennett v. Kentucky Department of Education, 470

       U.S. 656, 662-63 (1985). In this case the Agency is merely attempting to collect monies paid to a provider who cannot produce the documentation to support the paid claims. In a technical sense, it is the recoupment of funds paid to a

       provider that did not comply with the strict letter of its agreement to maintain appropriate records, which agreement it voluntarily entered into.

   69. In complying with the relevant federal mandates referenced herein, AHCA is held to a high standard and must assure that overpayments are recouped. See 42 C.F.R. § 433.312(a)(2). Compscript, Inc. d/b/a Conscript v. Agency for Health Care Administration, DOAH Case No. 03-3238MPI (Recommended Order filed October 6, 2005); Medical Services Consortium, Inc., d/b/a Medical Services Consortium v. Agency

       for Health Care Administration, DOAH Case No. 04-4450MPI (Recommended Order entered February 28, 2006).

   70. The Respondent also argues that the use of a 21-month audit period is fundamentally unfair, citing, among other reasons, the post-audit enactment of the above-referenced statutory change embodied in Section 465.188, Florida Statutes (2004), which also forbids audit periods extending longer than

       12 months. Brown, however, did not adduce any evidence that the 21-month audit period is inherently less reliable than a shorter period of time for calculating an overpayment through use of the Medicaid pharmacy audit. The Respondent also presented no federal or state statute, rule, policy or other law in effect during the audit period which prohibits the Agency from auditing a provider over a 21-month period.

   71. Brown also contends that the Agency or its Agent Heritage, wrongfully deliberately selected "high-dollar" drugs to audit in order to enhance the recoupment amount. Brown, however, presented no evidence that the selection of high dollar drugs was made in bad faith, nor did it present any extant law or policy that was in effect during the time of the audit which restricts the Agency from auditing only "high dollar drugs" which are billed to the Medicaid program. Moreover, as indicated in the above findings of fact, since the judgmental sample did not involve extrapolation, but rather each sampled discrepant claim was actually counted individually in arriving at the total overpayment amount, based upon the judgmental sample (i.e. the actual dollar amounts were used in the calculation), the use of high dollar drugs in the judgmental sample portion of the audit was not shown to unfairly skew the audit process. It represented the sum of the dollar amounts of each such claim, not an extrapolation. In any event, the audits of both judgmental sample and the random sample of the claims were conducted during the same audit period. The claims examined as part of the judgmental sample were removed from the universe of claims prior to making and applying the random sample process. Therefore, the claims examined in the judgmental sample had no impact on the random sample of claims and did not skew upward the amount of overpayment claimed as a

       result of the random sample.

       
       

   72. The Respondent also advances the argument that the recoupment should be limited to the recovery of a dispensing fee paid to Brown, rather than the entire amounts billed and collected by the Respondent pharmacy represented in the overpayments. In essence it contends that there was very little profit in the sale of the prescription drugs at issue in these claims and that there is no allegation or proof that the drugs were not actually dispensed to the patients. Indeed, the evidence shows that the drugs were dispensed to the patients in question and there is no claim by the Agency that any fraud was committed by the Respondent.

   73. The Administrative Law Judge in Colonial Cut Rate Drugs Inc. v. Agency for Health Care Administration, supra, discussed the applicability of a dispensing fee in an overpayment case:

       During the audit period, Section 409.906(20), Florida Statutes, authorized AHCA to make Medicaid payments 'for medications that [were] prescribed for a recipient by a physician or other licensed practitioner of the healing arts authorized to prescribe medications and that [were] dispensed to the recipient by a licensed pharmacist . . . in accordance with applicable state and federal law.' Pursuant to Section 409.908, Florida Statutes, such payments were required to be made, 'in accordance with state and federal law, according to methodologies set forth in the rules of the agency and in policy manuals

       and handbooks incorporated by reference therein' and were to be in an amount equal to 'the least of the amount billed by the provider, the provider's usual and customary charge, or the Medicaid maximum allowable fee established by the agency, plus a dispensing fee.'

       
       

   74. The Administrative Law Judge in that case rejected the argument by the pharmacy that even if it failed to properly document refill authorizations in some of the listed claim discrepancies, the Agency should not recoup as an overpayment any more than the dispensing fee paid for the discrepant claims. The Administrative Law Judge opined: "The undersigned disagrees, inasmuch as Petitioner's 'properly document[ing] refill authorizations' was a prerequisite to its being entitled to receive any payment for these claims under the Provider Agreement and therefore all monies AHCA paid Petitioner for these claims constitute 'overcharges' subject to recoupment." Colonial Cut-Rate Drugs, Inc. v. Agency for Health Care Administration, DOAH Case No. 03-1547MPI, paragraph 33, FN10 (Recommended Order entered February 28, 2006).

   75. The Respondent also argues that it serves an indigent, urban population with serious and life-threatening ailments and illnesses, including HIV and Aids and mental health conditions. It further suggests that at times it is difficult to reach a practitioner for authorization to refill a prescription.

   76. This well may be true and is somewhat understandable;

       however, having an indigent, unsophisticated patient population does not excuse a Medicaid provider from following the federal and state laws, rules, and regulations of the Medicaid program, as well as those pertaining to the practice of pharmacy or the pharmacy profession. Having an indigent, unsophisticated patient population does not excuse a Medicaid provider from providing the same standard of care as to any other population, including careful monitoring of drug therapy. A provider is not excused from the record-keeping requirements or proper claims billing requirements of the Medicaid program, despite any perceived difficulties in maintaining the required records or obtaining information to justify the billings.

   77. The Respondent voluntarily participated in the Medicaid program. Its requirements dictate strict compliance with all federal and state rules, regulations, licensure laws, Medicaid bulletins, manuals, handbooks, and statements of policy with respect to services and goods furnished to Medicaid recipients, records required to be kept and the billing of the claims to Medicaid. If a provider fails to comply strictly with the rules and regulations of the Medicaid Program, its Provider Agreement, as well as those of his own profession, including, but not limited to, failing to comply strictly with the record- keeping requirements of the Medicaid Program, the Agency is entitled to recoup all monies paid for the claims billed under

       the authority cited above.

       
       

   78. The Agency here seeks to recoup an overpayment amount of $108,478.22 (as calculated by Dr. Mark Johnson). The Agency has established that the Respondent failed to comply with the referenced federal and state statutes, rules, regulations, licensure laws, Medicaid bulletins, handbooks, and statements of policy governing the Medicaid Program, as well as the relevant federal and state statutes, and rules referenced above governing the practice of pharmacy and pharmacists. The Agency is required by law to apply standards of record-keeping and compliance as directed by the above-referenced legal authority with respect to the oversight of Medicaid Program Integrity.

   79. The Agency allowed the Respondent an opportunity to provide documentation for each of the discrepant claims. To the extent that such documentation was produced by the Respondent, the Agency did reduce some of the preliminary overpayment determinations. Be that as it may, the competent, persuasive evidence and the above legal authority establish that the Agency is justified in recouping the amount of $108,478.22, which amount should be reduced by the amounts required by the above findings of fact as to those claims which the preponderant evidence shows were properly recorded in the pharmacy's computer system. Thus, the Agency has established preponderant, persuasive evidence entitling it to recoup the amount of

       $93,104.95.

       
       

   80. The Agency has requested an award of investigative, legal, and expert witness costs envisioned in Section 409.913(23), Florida Statutes (2004). The Agency, however, admits that there is no authority for the Administrative Law Judge to retain jurisdiction on the issue of those costs, according to Section 409.913(23), Florida Statutes. See also Meji, Inc., d/b/a 7th Avenue Pharmacy, DOAH Case No. 03-1195MPI (Recommended Order entered July 15, 2003). Rather, any claim for costs may be raised once it is determined that the Petitioner has prevailed in this case, whereupon, if it should attempt to assess them against the Respondent, the Respondent would have the opportunity, by separate proceeding, to contest the matter before the Division of Administrative Hearings. Henry Lepely, M.D. v. Agency for Health Care Administration, DOAH Case No. 04-3025MPI (Recommended Order March 25, 2005).

RECOMMENDATION

Having considered the foregoing findings of fact, conclusions of law, the evidence of record, the candor and demeanor of the witnesses, and the pleadings and arguments of the parties, it is, therefore,

RECOMMENDED that a final order be entered by the Agency for Health Care Administration providing for recoupment of

$93,104.95, and that the Respondent, Brown Pharmacy, must re-pay

that amount to the Petitioner Agency, through a reasonable re- payment plan established between the parties.

DONE AND ENTERED this 3rd day of November, 2006, in Tallahassee, Leon County, Florida.

S

P. MICHAEL RUFF 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 Clerk of the

Division of Administrative Hearings this 3rd day of November, 2006.

ENDNOTE

1/ See also Medical Services Consortium, Inc., DBA Medical Services Consortium v. Agency for Health Care Administration, DOAH Case No. 04-4450MPI (Recommended Order entered February 28, 2006); Colonial Cut-Rate Drugs, Inc., v. Agency for Health Care Administration, DOAH Case No. 03-1547MPI (Recommended Order entered March 14, 2005), citing to Winderhold v. Winderhold, 696 So. 2d 923, 924 (Fla. 4th DCA 1997).

COPIES FURNISHED:

Debora E. Friedie, Esquire

Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308-5407

Lester Makofka, Esquire Makofka and Makofka

24 North Market Street, Suite 402 Jacksonville, Florida 32202

Richard Shoop, Agency Clerk

Agency for Health Care Administration 2727 Mahan Drive, Mail Station 3

Tallahassee, Florida 32308

Christa Calamas, General Counsel Agency for Health Care Administration Fort Knox Building, Suite 3431

2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

Alan Levine, Secretary

Agency for Health Care Administration Fort Knox Building, Suite 3116

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: 05-003366MPI

Orders for Case No: 05-003366MPI