STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

COLONIAL HEALTH CARE SERVICES, ) INC., )

)

Petitioner, )

)

vs. ) Case No. 06-1882MPI

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a hearing was held in this case pursuant to Sections 120.569 and 120.57(1), Florida Statutes,1 on September 6, 7, and 8, 2006, in Tallahassee, Florida, before Stuart M. Lerner, a duly-designated Administrative Law Judge of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Steven J. Strelzik, Esquire

Law Offices of Steven J. Strelzik, P.C. 3355 Lenox Road, Northeast, Suite 1100

Atlanta, Georgia 30326

Mark L. Pomeranz, Esquire Pomeranz & Associates, P. A.

12955 Biscayne Boulevard, Suite 202 North Miami, Florida 33181

For Respondent: Daniel M. Lake, Esquire

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

Tallahassee, Florida 32308-5403

STATEMENT OF THE ISSUES

1. Whether Medicaid overpayments were made to Petitioner and, if so, what is the total amount of those overpayments.

2. Whether Petitioner should be directed to submit to a "comprehensive follow-up review in six months."

   PRELIMINARY STATEMENT

   
   

   Petitioner is a provider of pharmacy services to eligible Medicaid recipients in Florida. By letter dated April 8, 2005 (Final Agency Audit Report), the Agency for Health Care Administration (AHCA) advised Petitioner that, following a review of Petitioner's paid Medicaid claims "for dates of service during the period from May 23, 1999, through

   February 23, 2001," it had been determined that Petitioner was "overpaid $527,176.65 for services that in whole or in part are not covered by Medicaid." In its letter, AHCA further advised, in pertinent part:

   Additionally, pursuant to Section 409.913, F.S., this letter shall serve as notice of the following sanctions(s): The provider is subject to a comprehensive follow-up review in six months.

   
   

   On May 2, 2005, Petitioner filed with AHCA a Petition for Formal Hearing contesting this overpayment determination. In its petition, Petitioner described its dispute with the AHCA's determination as follows:

   [Petitioner] contends that AHCA's findings in its final audit letter are as a result of inaccurate audits. The validity of AHCA's findings depends upon disputed facts. The fairness of the AHCA's proceeding or the correctness of the action may have been impaired by a material error in procedure.

   The AHCA made a determination in its provisional agency audit report dated February 20, 2002 that [Petitioner] was overpaid the sum of $1,323,952.29 for services that in whole or in part are not covered by Medicaid. Based upon a review of all documentation submitted, AHCA has determined that [Petitioner] was overpaid

   $527,176.65 for services that in whole or in part are not covered by Medicaid. After the accounting of [Petitioner] reviewed the records of the specific audit on [Petitioner] and employed the formula utilized by [M]edicaid, the accounting concluded that [Petitioner] had not been overpaid the sum of $527,176.65 for [M]edicaid by AHCA.

   
   

   The matter was referred to the Division of Administrative Hearings (DOAH) on July 7, 2005, for the assignment of a DOAH Administrative Law Judge to conduct the hearing Petitioner had requested. It was docketed by DOAH's Clerk as DOAH Case No. 05- 2436MPI.

   The hearing was originally scheduled to commence on September 20, 2005. On August 11, 2005, AHCA filed a Motion to Continue Final Hearing based on Petitioner's delay in responding to AHCA's discovery requests and, in addition, AHCA's counsel having a scheduling conflict. On August 12, 2005, the

   undersigned issued an order granting the motion and rescheduling the final hearing for early December 2005.

   On November 3, 2005, AHCA filed a second Motion to Continue Final Hearing based on Petitioner's further delay in responding to AHCA's discovery requests. On November 9, 2005, the undersigned issued an order granting the motion. The undersigned subsequently, after receiving information from the parties regarding the dates they would be unavailable for hearing, rescheduled the final hearing for March 6 through 9, 2006.

   On February 13, 2006, AHCA filed a third Motion to Continue Final Hearing. This motion was precipitated by then-counsel for AHCA being "unable to leave her mother," who was in the final stage of a terminal illness. "Because of the nature of the basis for the request to continue the final hearing in this cause, [AHCA further] requested that the [case] be placed in abeyance for a period of 90 days." Rather than placing the case in abeyance, the undersigned, on February 15, 2006, issued an order closing the file in DOAH Case No. 05-2436MPI and relinquishing jurisdiction to AHCA, "without prejudice to the matter being returned to the Division of Administrative Hearings upon the request of either party after 90 days from the date of this Order should a hearing conducted pursuant to Section 120.57(1), Florida Statutes, still be necessary."

   On May 16, 2006, Petitioner filed a Motion to Re-Open Case. On May 19, 2006, the undersigned issued an order reopening DOAH Case No. 05-2436MPI as DOAH Case No. 06-1882MPI. The

   undersigned subsequently, after receiving information from the parties regarding the dates they would be unavailable for hearing, scheduled the final hearing in the case for July 12 through 14, 2006.

   On July 10, 2006, Petitioner filed a motion requesting that the final hearing be continued "to allow [Petitioner] sufficient time to depose [Mark] Tripodi," one of AHCA's listed witnesses. On July 11, 2006, the undersigned issued an order granting the motion. The undersigned subsequently, after receiving information from the parties regarding the dates they would be unavailable for hearing, rescheduled the final hearing for September 6 through 8, 2006.

   Prior to the commencement of the hearing both parties filed separate proposed prehearing stipulations in which they, among other things, stated their respective positions. Petitioner stated its position as follows:

   [Petitioner's] position is that [AHCA's] determination was not done properly, by for example:

   
   

   1. documentation problems, if any, are based upon the time delay in AHCA bringing the case and cannot be used against [Petitioner].

   2. the six years' delay from May 23, 1999 (actual audit) through April 8, 2005 (the audit notification), without other action or notice by AHCA to [Petitioner] during the intervening time period resulted in prejudice to [Petitioner].

2. Additionally, based upon a review and accounting of the records of [Petitioner] of the specific audit for said time period, [Petitioner's] position is that it was not overpaid the sum of $527,176.65 for [M]edicaid by AHCA.

AHCA stated its position as follows:

AHCA's audit of [Petitioner's] claims followed proper standards. A statistical sample was taken of Medicaid claims paid to [Petitioner] during the audit period.

AHCA's auditing agent conducted an on-site review of [Petitioner's] documentation pertaining to the audit period. After initially finding certain claims should be disallowed, AHCA conducted follow up reviews and gave [Petitioner] the opportunity to provide additional documentation showing these discrepant claims complied with the legal requirements for payment under the Medicaid program. At the conclusion of the process, AHCA validly extrapolated the statistical sample and found a total overpayment of $527,176.65. A separate portion of the audit analyzed [Petitioner's] documented product acquisitions compared with its paid Medicaid claims for the same period and determined an overpayment of

$31,806.61. AHCA seeks recovery of

$527,176.65, the overpayment. The agency's review and determination of overpayment were made in accordance with the provisions of Section 409.913, F.S. In determining the appropriateness of Medicaid payment pursuant to Medicaid policy, the Medicaid program utilizes procedures, descriptions, policies, and requirements found in the Medicaid provider handbooks and Section 409.913, F.S.

and other applicable laws. In applying for Medicaid reimbursement, providers are required to follow the guidelines set forth in the applicable Rules and Medicaid fee schedule, as promulgated in the Medicaid policy handbooks, and Medicaid provider agreements. Medicaid cannot pay for services that do not meet these guidelines.

As noted above, the final hearing in this case was held on September 6 through 8, 2006, as scheduled. Testifying at hearing for AHCA were: Dana Kenneth Yon; Mark Johnson, Ph.D.; Mark Tripodi; and Ramona Stewart. In addition, AHCA offered into evidence the following exhibits, all of which were admitted: Respondent's Exhibits 1 through 7, 10 through 15, 18,

20, 22, 38, and 39. Furthermore, AHCA requested that official recognition be taken of various pertinent statutory and rule provisions and Medicaid-related publications, a request that the undersigned granted. Yuval Levy was Petitioner's lone witness at hearing. Petitioner also offered two exhibits, Petitioner's Exhibits 1 and 2, which were received by the undersigned. The parties jointly offered Joint Exhibits 1 and 2, which were also received by the undersigned.

The deadline for the filing of proposed recommended orders was originally set at 45 days from the date of the filing (with DOAH) of the transcript of the hearing.

The hearing Transcript (consisting of four volumes) was filed with the DOAH on September 22, 2006.

On October 26, 2006, the parties filed a motion jointly requesting that the deadline for the filing of proposed recommended orders be extended to November 21, 2006. By order issued October 27, 2006, the motion was granted. On

November 21, 2006, Petitioner filed a motion requesting a further one-week extension of the filing deadline. The motion was granted.

AHCA and Petitioner filed their Proposed Recommended Orders on November 22, 2006, and November 29, 2006, respectively.

FINDINGS OF FACT

Based upon the evidence adduced at hearing, and the record as a whole, the following findings of fact are made: Petitioner

1. Petitioner is owned by Yuval Levy, a Florida-licensed consultant pharmacist and registered pharmacist since 1990. Mr. Levy has served as Petitioner's president and chief executive officer since the "end of 1995."

2. At all times material to the instant case, Petitioner has operated Colonial Drug (Pharmacy), a Florida-licensed closed system pharmacy located in Broward County, Florida.

3. At all times material to the instant case, Petitioner acquired from pharmaceutical wholesalers licensed under Florida law all of the drugs dispensed through the Pharmacy.

4. During the period from May 23, 1999, through February 23, 2001 (Audit Period), the Pharmacy filled

   approximately 180,000 prescriptions annually. A quarter of them (25 percent) were dispensed to Medicaid recipients.

   Petitioner's Participation in the Medicaid Program

   
   

5. Petitioner was authorized during the Audit Period to provide pharmacy services to eligible Medicaid recipients in Florida.

6. Petitioner provided such services pursuant to a Medicaid Provider Agreement (Provider Agreement). The Provider Agreement contained the following provisions, among others:

   The Provider agrees to participate in the Florida Medicaid program under the following terms and conditions:

   
   

   * * *

   
   

   1. Quality of Service. The provider agrees to provide medically necessary services or goods of not less than the scope and quality it provides to the general public. The provider agrees that services or goods billed to the Medicaid program must be medically necessary, of a quality comparable to those furnished by the provider's peers, and within the parameters permitted by the provider's license or certification. The provider further agrees to bill only for the services performed within the specialty or specialties designated in the provider application on file with the Agency. The services or goods must have been actually provided to eligible Medicaid recipients by the provider prior to submitting the claim.

   2. Compliance. The provider agrees to comply with all local, state and federal laws, rules, regulations, licensure laws, Medicaid bulletins, manuals, handbooks and Statements of Policy as they may be amended from time to time.

      
      

   3. Term and signatures. The parties agree that this is a voluntary agreement between the Agency and the provider, in which the provider agrees to furnish services or goods to Medicaid recipients. . . .

      
      

   4. Provider Responsibilities. The Medicaid provider shall:

      
      

      * * *

      
      

      (b) Keep and maintain in a systematic and orderly manner all medical and Medicaid related records as the Agency may require and as it determines necessary; make available for state and federal audits for five years, complete and accurate medical, business, and fiscal records that fully justify and disclose the extent of the goods and services rendered and billings made under the Medicaid. The provider agrees that only records made at the time the goods and services were provided will be admissible in evidence in any proceeding relating to the Medicaid program.

      
      

      * * *

      
      

      (d) Except as provided by law, the provider agrees to provide immediate access to authorized persons (included but not limited to state and federal employees, auditors and investigators) to all Medicaid-related information, which may be in the form of records, logs, documents, or computer files, and all other information pertaining to services or goods billed to the Medicaid program. This shall include access to all patient records and other provider information if the provider cannot easily

      separate records for Medicaid patients from other records.

      
      

      * * *

      
      

      (f) Within 90 days of receipt, refund any moneys received in error or in excess of the amount to which the provider is entitled from the Medicaid program.

      
      

      * * *

      
      

      (i) . . . . The provider shall be liable for all overpayments for any reason and pay interest at 12% per annum on any fine or repayment amount that remains unpaid 30 days from the date of any final order requiring payment to the Agency.

      
      

      * * *

      
      

      (l) If submitting claims to the Agency electronically, abide by the terms of the Standard Electronic Claims Submission Agreement.

      
      

      * * *

      
      

7. Petitioner executed such a Standard Electronic Claims Submission Agreement (Submission Agreement), through which it expressed its understanding of and agreement to the following, among other things:

* * *

3. Providers must correctly enter the claims data, monitor the data, and certify that the data entered is correct.

* * *

1. Providers must have on file the applicable source data to substantiate the claim submitted to the Medicaid program.

   
   

2. Providers must allow the Agency or any of its designees . . . to review and copy all records, including source documents and data related to information entered through electronic claims submission.

   
   

3. Providers must abide by all Federal and State statutes, rules, regulations, and manuals governing the Florida Medicaid program.

   
   

4. Providers must sign and adhere to all conditions of the Medicaid Provider Agreement and be officially enrolled in the Medicaid program to participate in the electronic claims submission.

1. Currently, and at all times material to the instant

   
   

   case, Petitioner "bill[ed] everything electronically."

   
   

   Prescribed Drug Services Coverage, Limitations and Reimbursement Handbook

   
   

2. Among the requirements with which Petitioner, in paragraph 3 of the Provider Agreement and in paragraph 7 of the Submission Agreement, agreed to comply were those set forth in the Prescribed Drug Services Coverage, Limitations and Reimbursement Handbook (PDSCLR Handbook).

3. During the Audit Period, Chapter 2 of the PDSCLR Handbook contained substantially the following "record keeping requirements" (with the underlined language reflecting additions to these requirements made effective July 20, 20002):

   Record Keeping Requirements

   
   

   The provider must retain all medical, fiscal, 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.

   
   

   The records must be accessible, legible and comprehensible.

   
   

   Record Retention

   
   

   Records must be retained for a period of at least five 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 (the list is not all inclusive):

   
   

   Medicaid claim forms and any documents that are attached;

   
   

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

   
   

   Prior and past authorization, and service authorization information;

   
   

   Prescription records;

   
   

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

   
   

   Tax records, including purchase documentation;

   
   

   Patient counseling documentation; and

   
   

   Provider enrollment documentation. Requirements for Prescription Records

   The pharmacy must maintain a patient record for each recipient for whom new or refill prescriptions are dispensed. The record may be electronic. The pharmacy's patient record system must provide for the immediate retrieval of the information necessary for the pharmacist to identify previously dispensed drugs when dispensing a new or refill prescription.

   
   

   The patient record must contain the following information:

   
   

   • The recipient's first and last name, address, date of birth, and gender;

     
     

   • A list of all prescriptions that were obtained by the recipient at the pharmacy during the 12 months immediately preceding the most recent service that includes: the name of the drug or device, prescription number, strength of the drug, the quantity, date received, and the prescriber's full name and state license number;

     
     

   • Any known allergies, drug reactions, idiosyncrasies, chronic conditions or disease states of the patient, and the identity of any over-the-counter drugs or devices currently being used by the patient that may relate to prospective drug use review;

     
     

   • Any related health information indicated by a licensed health care practitioner; and

     
     

   • The pharmacist's comments, if any, relevant to the patient's drug therapy.

   Right to Review Records

   
   

   Authorized state and federal agencies and their authorized representatives may audit or examine a provider's records. This includes all records that AHCA finds necessary to determine whether Medicaid payments were or are due. This requirement applies to the provider's records and records for which the provider is the custodian. The provider must give authorized state and federal agencies and their authorized representatives access to all Medicaid patient records and to other information that cannot be separated from Medicaid-related records.

   
   

   The provider must send, at his or her expense, legible copies of all Medicaid- related information to the authorized state and federal agencies and their authorized representatives.

   
   

   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 recoupment of Medicaid payments.

   
   

   Medicaid payments for services that lack required documentation or appropriate signatures will be recouped.[3]

   Note: See Chapter 5 in this handbook for information on administrative sanctions and Medicaid payment recoupment.

   
   

4. During the Audit Period, Chapter 5 of the PDSCLR Handbook contained the following provisions, among others:

   Provider Abuse Abuse

   Abuse means provider practices that are inconsistent with generally accepted business or medical practices and that result in an unnecessary cost to the Medicaid program or in reimbursement for goods or services that are not medically necessary or that fail to meet professionally recognized standards for health care.

   
   

   Financial Abuse

   
   

   Financial abuse means abuse resulting in overpayments to providers.

   
   

   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 service provision have been met. Medicaid may recoup payment for services or goods when the provider has incomplete records or cannot locate the records.

   
   

   Note: See Chapter 2 in this handbook for Medicaid record keeping and retention requirements.

   
   

5. During the Audit Period, other portions of the PDSCLR Handbook contained requirements regarding the information that

   providers, in preparing a claim for reimbursement, had to include, while elsewhere in the handbook other billing requirements, as well as billing prohibitions, were discussed. Florida Administrative Code Rule Provisions

6. Additional requirements with which Petitioner, in paragraph 3 of its Provider Agreement and in paragraph 7 of the Submission Agreement, agreed to comply included those contained in the following provisions of the Florida Administrative Code governing the practice of pharmacy:

   Florida Administrative Code Rule 64B16- 27.103

   
   

   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 writing, 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 written, 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.

   Florida Administrative Code Rule 64B16- 27.400

   
   

   * * *

   
   

   (3) Only a Florida licensed pharmacist may make the final check of the completed prescription thereby assuming the complete responsibility for its preparation and accuracy.

   
   

   * * *

   
   

   Florida Administrative Code Rule 64B16- 28.140

   
   

   (1) Requirements for records maintained in a data processing system.

   
   

   * * *

   
   

   1. 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 filling. 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 filling.

      
      

   2. Original prescriptions shall be maintained in a two or three file system as specified in 21 C.F.R. 1304.04(h).

   
   

   * * *

   (3) Records of dispensing.

   
   

   1. Each time a prescription drug order is filled or refilled, a record of such dispensing shall be entered into the data processing system.

      
      

   2. The data processing system shall have the capacity to produce a daily hard-copy printout of all original prescriptions dispensed and refilled. This hard copy printout shall contain the following information:

      
      

      1. Unique identification number of the prescription;

         
         

      2. Date of dispensing;

         
         

      3. Patient name;

         
         

      4. Prescribing practitioner's name;

         
         

      5. Name and strength of the drug product actually dispensed, if generic name, the brand name or manufacturer of drug dispensed;

         
         

      6. Quantity dispensed;

         
         

      7. Initials or an identification code of the dispensing pharmacist; and

         
         

      8. If not immediately retrievable via CRT display, the following shall also be included on the hard-copy printout:

      
      

      1. Patient's address;

         
         

      2. Prescribing practitioner's address;

         
         

      3. Practitioner's DEA registration number, if the prescription drug order is for a controlled substance;

         
         

      4. Quantity prescribed, if different from the quantity dispensed;

      5. Date of issuance of the prescription drug order, if different from the date of dispensing; and

         
         

      6. Total number of refills dispensed to date for that prescription drug order.

      
      

   3. The daily hard-copy printout shall be produced within 72 hours of the date on which the prescription drug orders were dispensed and shall be maintained in a separate file at the pharmacy. Records of controlled substances shall be readily retrievable from records of non-controlled substances.

      
      

   4. Each individual pharmacist who dispenses or refills a prescription drug order shall verify that the data indicated on the daily hard-copy printout is correct, by dating and signing such document in the same manner as signing a check or legal document (e.g., J. H. Smith, or John H. Smith) within seven days from the date of dispensing.

      
      

   5. In lieu of producing the printout described in subparagraphs (b) and (c) of this section, the pharmacy shall maintain a log book in which each individual pharmacist using the data processing system shall sign a statement each day, attesting to the fact that the information entered into the data processing system that day has been reviewed by him or her and is correct as entered. Such log book shall be maintained at the pharmacy employing such a system for a period of two years after the date of dispensing provided, however, that the data processing system can produce the hard-copy printout on demand by an authorized agent of the Department of Health. If no printer is available on site, the hard-copy printout shall be available within 48 hours with a certification by the individual providing the printout, which states that the printout is true and correct as of the date of entry

      and such information has not been altered, amended or modified.

      
      

   6. The prescription department manager and the permit holder are responsible for the proper maintenance of such records and responsible that such data processing system can produce the records outlined in this section and that such system is in compliance with this subsection.

      
      

   7. Failure to provide the records set out in this section, either on site or within 48 hours for whatever reason, constitutes failure to keep and maintain records.

      
      

   8. In the event that a pharmacy which uses a data processing system experiences system downtime, the following is applicable:

   
   

   1. An auxiliary procedure shall ensure that refills are authorized by the original prescription drug order and that the maximum number of refills has not been exceeded or that authorization from the prescribing practitioner has been obtained prior to dispensing a refill; and

      
      

   2. All of the appropriate data shall be retained for on-line data entry as soon as the system is available for use again.

   
   

   * * *

   
   

   (5) Authorization of additional refills. Practitioner authorization for additional refills of a prescription drug order shall be noted as follows:

   
   

   1. On the daily hard-copy printout; or

      
      

   2. Via the CRT display.

   The Audit and Aftermath

   
   

7. Commencing on April 16, 2001, Heritage Information Systems, Inc. (Heritage), on behalf of AHCA, conducted an audit of Petitioner's paid Medicaid claims for the period from May 23, 1999, through February 23, 2001.4 Petitioner had submitted 37,416 such claims (Audit Period Claims), for which it had received payments totaling $2,797,964.36. The purpose of the audit was to determine whether, and if so to what extent, Petitioner was overpaid for these Audit Period Claims.

8. Prior to the audit, Heritage provided Pharmacy personnel a Notice to Medicaid Provider of Initiation of On-Site Audit, which read as follows:

   The Agency for Health Care Administration (Agency), under federal and state laws, has the responsibility to oversee the activities of Medicaid providers. This is to advise you that an on-site audit of your billings to the Medicaid program has been initiated. Audits are performed in order to determine if Medicaid billings conform to applicable laws, rules, and policies.

   
   

   The fact that an audit is performed carries with it no implication of any wrongdoing.

   Audits are conducted as part of the responsibility of Medicaid for ensuring the integrity of the program.

   
   

   Medicaid audits generally involve a review of provider medical, professional, financial, and business records as required to determine the propriety of billings.

   Attachment B is a summary of applicable laws and rules governing the access to required information.

   If additional information is desired, please notify the auditor named below.

   
   

9. In conducting the audit, Heritage performed both a "prescription record review" and "purchase invoice analysis."5

10. For the "prescription record review," Heritage first selected a non-random, "judgmental sample" of 271 Audit Period Claims, for which Petitioner had received payments totaling

    $222,559.65. It then selected (from the remaining Audit Period Claims) a "random sample" of 250 claims,6 for which Petitioner had received payments totaling $18,250.05. Thereafter, Petitioner's records were examined to determine whether they contained documentation sufficient to support the claims in the "judgmental sample" and in the "random sample."

11. Heritage's December 10, 2001, Final Report: In-Depth Audit (Final Heritage Report) contained an Executive Summary, which summarized what the audit had revealed to date. This Executive Summary read, in pertinent part, as follows:

    Heritage Information Systems, Inc. ("Heritage") conducted an in-depth audit of Colonial Drug ("Colonial") at the request of the Florida Agency for Health Care Administration ("AHCA"). The audit documented possible billing, policy and regulatory violations that resulted in apparent overpayments. The audit findings include the following:

    
    

    Auditors sampled 271 judgmental and 250 random prescription claims. A review of the judgmental sample documented $134,926.14 in overcharges. Findings from the random

    sample extrapolated to $1,568,499.62. The 95% one-sided lower confidence limit extrapolation is $1,189,026.15. Adding the judgmental sample findings to the 95% one- sided lower confidence limit for the extrapolated random sample findings totals

    $1,323,952.29. The discrepancies identified in the sample include the following:

    
    

    • Pharmacy staff was unable to produce hard copy prescription records corresponding to

      253 claims ("CF").

      
      

    • Fifteen (15) claims were billed for quantities greater than those ordered by the prescribers or dispensed to the patients ("OBQ").

      
      

    • Days supply amounts for nine (9) claims were billed incorrectly ("DS").

      
      

    • Nine (9) hard copy prescription records for controlled substances did not contain the prescribers' addresses ("NDAD").

      
      

    • Nine (9) hard copy prescriptions for controlled substances did not contain the prescribers' DEA numbers ("NDEA").

      
      

    • Seven (7) quantities were cut resulting in additional dispensing fees paid to the pharmacy ("CQ").

      
      

    • Seven (7) hard copy prescription records for controlled substances did not indicate the quantities of drug to be dispensed ("NQTY").

      
      

    • Two (2) prescription claims were billed for drugs that differed from those ordered by the prescriber (WDB").

    
    

    * * *

    
    

    Heritage's audit documented apparent overcharges of $1,323,952.29. This figure represents a combination of non-extrapolated

    findings from the judgmental sample plus the 95% one-sided lower confidence limit for the extrapolated random sample findings.

    
    

    This report is submitted to AHCA for action deemed appropriate.

    
    

12. Based on the information Heritage provided, AHCA preliminarily determined that Petitioner had been overpaid a total of $1,323,952.29 for the Audit Period Claims. By letter dated February 20, 2002, which it denominated its Provisional Agency Audit Report, AHCA advised Petitioner of this preliminary determination. AHCA's Provisional Agency Audit Report read, in pertinent part, as follows:

    An on-site audit of your pharmacy was initiated on April 16, 2001. The Florida Medicaid Program through the Agency for Health Care Administration has determined that you have been overpaid $1,323,952.29 in connection with claims submitted to Medicaid during the audit period(s). This conclusion is supported by the audit results.

    
    

    This review and the determination were made in accordance with the provisions of Chapter 409, Florida Statutes (F.S.), and Chapter 59G, Florida Administrative Code (F.A.C.).

    In applying for Medicaid reimbursement, providers are required to follow applicable statutes, rules, Medicaid provider handbooks, statements of Medicaid policy, and federal laws and regulations. Medicaid cannot properly pay for claims that do not meet Medicaid requirements. When a provider receives payment in violation of these provisions, those funds must be repaid.

    
    

    This is, however, a provisional finding and we encourage you to submit any additional information or documentation that you may

    have that you feel may serve to change the overpayment.

    
    

    REVIEW DETERMINATION

    
    

    The audit included a judgmental sample review of selected paid claims and a separate review of a statistical[ly] valid random sample taken from the remaining population of paid claims with dates of service during the audit period. The overpayment found in the random sample was extended to the population using generally accepted statistical formulas and methods. The audit period for this review was from May 23, 1999, through February 23, 2001.

    This review identified an overpayment of

    $1,323,952.29. Attached are the overpayment calculations, a summary of documented discrepancies, and an itemized listing of discrepancies noted in the review of the judgmental and random sample.

    
    

    * * *

    
    

    Accordingly, we have determined at this time that you have been overpaid by the Medicaid program in the amount of $1,323,952.29.

    
    

    If you have documentation that you wish to submit that you feel would alter these findings, submit your written explanation and legible copies of the organized documentation to us within 30 days of receipt of this notice. . . .

    
    

    If you concur or accept these findings, please send your check in the amount of

    $1,323,952.29 for the identified overpayment . . . .

    
    

    If you have not submitted a written explanation and documentation or made payment within 30 days, we will send you notice regarding the agency's final determination.

    * * *

    
    

13. Petitioner subsequently furnished additional documentation to AHCA.

14. On or about May 30, 2002, AHCA sent this additional documentation to Heritage for "review, placement in [Heritage's] file, and action deemed appropriate."

15. By letter dated November 15, 2002, AHCA informed Petitioner of its opportunity "to submit [any] further documentation" it wanted AHCA to consider. The letter read, in pertinent part, as follows:

    An audit of your pharmacy was initiated on April 16, 2001. The Florida Medicaid Program, through the Agency for Health Care Administration (Agency), issued a Provisional Agency Audit Report, dated February 20, 2002, and made a provisional overpayment determination. Subsequent to this determination, your pharmacy submitted additional documentation. However, the Agency extends to you an opportunity to submit further documentation that has not already been submitted that may change the overpayment.

    
    

    This review and determination were made in accordance with the provisions of Chapter 409, Florida Statutes (F.S.), and Chapter 59G, Florida Administrative Code (F.A.C.). In applying for Medicaid reimbursement, providers are required to follow the applicable statutes, rules, Medicaid provider handbooks, statements of Medicaid policy, and federal laws and regulations. Medicaid cannot properly pay for claims that do not meet Medicaid requirements.

    We encourage you to submit any additional information or documentation not already sent that you may have that you feel may serve to change the provisional overpayment.

    
    

    * * *

    
    

    Documentation standard for statistical audit review: Documents submitted after the completion of an audit may require an affidavit or other sworn statement, in addition to the documents, as a means to authenticate the documentation.

    Documentation that appears to be altered, or in any other way appears not to be authentic, will not serve to reduce the overpayment. Furthermore, additional documentation must clearly identify which discrepancy (claim) as set forth in the attached audit findings it purports to support.

    
    

    * * *

    
    

16. Having reviewed the additional documentation that Petitioner had provided AHCA, Heritage prepared and submitted to AHCA an Addendum, dated May 13, 2003, to the Final Heritage Report it had previously submitted.7

17. The Addendum contained an Executive Summary, which stated the following, in pertinent part, regarding the "post audit review" conducted by Heritage:

    Post Audit Review/Revised Findings

    
    

    Post audit documentation from the pharmacy was forwarded to Heritage by AHCA and received on 1/3/03. Post audit documentation included copies of prescriptions and clinical records.

    The accepted documentation was incorporated into the audit findings and a revised overcharge amount was calculated. The revised judgmental sample review resulted in documented overcharges of $42,987.50.

    Revised findings from the random sample extrapolated to $701,790.88. The 95% one- sided lower confidence limit for this extrapolation is $484,189.15. Adding the judgmental sample findings to the 95% one- sided lower confidence limit of the random sample findings totals $527,176.65.

    
    

18. Appended to the Addendum were, what Heritage referred to as, "discrepancy listings," accompanied by "edit sheets." The "discrepancy listings" specified those Audit Period Claims in the "judgmental sample" and in the "random sample" that were "discrepant" and, with respect to each such "discrepant" claim, identified, using the following "codes," the nature of the "discrepancy" from which the claim suffered and, in addition, set forth (in the "overcharges" column) the amount of any resulting overpayment:

    CF (Original hard copy prescription cannot be found on file during the audit)[8]

    CQ (A quantity less than that prescribed and less than that allowed, is billed and additional refills are dispensed resulting in undue dispensing fees)[9]

    DS (The days supply value submitted by the pharmacy is not consistent with the quantity and directions)

    
    

    DUP (Multiple claims for the same prescription fill are submitted and paid)[10]

    NDAD (The hard copy prescription does not include the prescriber's address)[11]

    NDEAC (The hard copy prescription does not contain a DEA number)

    
    

    NQTYC (The hard copy prescription does not indicate the quantity of drug to be dispensed)

    
    

    OBQ (Quantity paid exceeds the quantity authorized by the prescriber or dispensed to the recipient)

    
    

    UR (The number of refills billed and paid to the pharmacy exceeds the number authorized by the prescriber. Refills are dispensed without documented authorization from the prescriber)

    
    

    WDB (A pharmacy submits a claim for a medication that is different from the medication authorized to be dispensed to the patient)[12]

    WDBC (A pharmacy submits a claim for a medication that is different from the medication authorized to be dispensed to the patient, but with a showing of cause)

    
    

    WMDC (The claim for the prescription contains an incorrect prescriber license number, but the correct prescriber's name is documented in the pharmacy computer or is similar to the name of the prescriber billed)[13]

    
    

    WPB (The patient identified on a hard copy prescription is not the patient on the paid claim)

    
    

    These "discrepancy listings" are accurate as to all listed claims other than those denominated in Joint Exhibit 1 as

    "discrepant" claims 26 (August 9, 2000, fill), 52, 56, 61, 81,

    
    

    and 91.

    
    

19. There were a total of 190 "discrepant" claims listed (including "discrepant" claims 26 (August 9, 2000, fill), 52, 56, 61, 81, and 91), some of which had "multiple discrepancies"14: 69 coded "CF"15 (with associated "overcharges" equal to the total amount paid for these claims); seven coded "CQ" (with associated "overcharges" equal to the undue "dispensing fees");16 11 coded "DS" (with no associated "overcharges"); four coded "DUP" (with associated "overcharges" equal to the total amount paid for these duplicate claims); nine coded "NDAD" (with no associated "overcharges"); 11 coded "NDEAC" (with associated "overcharges" equal to the "dispensing fees"); 8 coded "NQTYC" (with associated "overcharges" equal to the "dispensing fees"); 30 coded "OBQ" (with associated "overcharges" equal to the amount paid for the quantity in excess of that authorized); 16 coded "UR" (with associated "overcharges" equal to the total amount paid for these claims); one coded "WDB" (with an associated "overcharge" equal to the total amount paid for this claim); two coded "WDBC" (with associated "overcharges" equal to the "dispensing fees"); 59 coded "WMBC" (with associated overcharges " equal to the "dispensing fees"); and two coded "WPB" (with associated "overcharges" equal to the total amount paid for these claims).

    Of the 190 "discrepant" claims, 96 were in the "judgmental sample" and 94 were in the "random sample."

20. On or about October 31, 2003, AHCA sent Petitioner a letter advising Petitioner of the status of AHCA's audit of the Audit Period Claims. The letter read, in pertinent part, as follows:

    The Agency for Health Care Administration, Office of Medicaid Program Integrity, with regard to the above-referenced audit, made a preliminary overpayment determination and sent a Preliminary Agency Audit Report to your attention. At this time, the Agency is temporarily placing this audit on hold, pending the outcome of litigation in an unrelated audit. Therefore, please maintain all of your Medicaid-related records and all documentation that supports the claims at issue in this matter until such time as this audit is finalized.

    
    

21. Almost two years after having received Heritage's

    
    

    May 13, 2003, Addendum, AHCA prepared and sent to Petitioner its Final Agency Audit Report,17 which was dated April 8, 2005, and read, in pertinent part, as follows:

    The Agency for Health Care Administration, Office of Medicaid Integrity has completed the review of your Medicaid claims for the procedures specified below for dates of service during the period May 23, 1999, through February 23, 2001. A provisional agency audit report, dated February 20, 2002, was sent to you indicating that we had determined you were overpaid $1,323,952.29. Based upon a review of all documentation submitted, we have determined that you were overpaid $527,176.65 for services that in whole or in part are not covered by

    Medicaid. This report is not intended to imply any particular claim is or was covered. At a later date, the Agency may again review claims submitted during this period of time. Be advised that pursuant to Section 409.913(23)(a), Florida Statutes (F.S.), the Agency is entitled to recover all investigative, legal, and expert witness costs. Additionally pursuant to Section 409.913, F.S., this letter shall serve as notice of the following sanction(s): The provider is subject to a comprehensive follow-up review in six months.

    
    

    This review and the determinations of overpayment were made in accordance with the provisions of Section 409.913, F.S. In determining payment pursuant to Medicaid policy, the Medicaid program utilizes procedure codes, descriptions, policies, and the limitations and exclusions found in the Medicaid provider handbooks. In applying for Medicaid reimbursement, providers are required to follow the guidelines set forth in the applicable rules and Medicaid fee schedules, as promulgated in the Medicaid policy handbooks, billing bulletins, and the Medicaid provider agreement. Medicaid cannot pay for services that do not meet these guidelines.

    
    

    Below is a discussion of the particular guidelines related to our review of your claims and an explanation of why these claims do not meet Medicaid requirements. The audit work papers are attached, referencing the claims that were reviewed and found to be discrepant by this determination.

    
    

    REVIEW DETERMINATION(S)

    
    

    The audit included the review of a judgmental sample of selected claims and the review of a statistically valid random sample taken from the population of paid claims with dates of service during the

    audit period. The overpayment found in the random sample was extended to the population using generally accepted statistical formulas and methods. The audit period for this review was from May 23, 1999, through February 23, 2001. This review identified an overpayment of $527,176.65. Attached are the overpayment calculations, a summary of documented discrepancies, and an itemized listing of discrepancies noted in the review of the judgmental and the random sample[s].

    
    

    * * *

    
    

    If you are not in bankruptcy and you concur with our findings, remit by check in the amount of $527,176.65. . . .

    
    

    * * *

    
    

    You have a right to request a formal or informal hearing pursuant to Section 120.569, F.S. . . . . [I]f a request for a hearing is made, the petition must be received by the Agency within twenty-one

    (21) days of receipt of this letter. . . .

    
    

    * * *

    
    

22. As noted in the Preliminary Statement of this Recommended Order, Petitioner requested a "formal hearing," which ultimately was held on September 6 through 8, 2006.

23. During the course of the hearing, AHCA made another downward revision in its total overpayment calculation (to

    $480,832.31), after determining that one "discrepant" claim in the "judgmental sample" ("discrepant" claim 26 (August 9, 2000, fill) previously coded "OBQ" should instead be coded "WMDC" (and that therefore the "overcharge" associated with this

    "discrepant" claim was $4.23, not $601.50), and further determining that five claims in the "random sample" ("discrepant" claims 52, 56, 61, 81, and 91) previously determined to be "discrepant" were in fact not "discrepant" (and that therefore Petitioner was not overpaid anything for these claims). Joint Exhibit 1 reflects this recalculation made by AHCA.

24. The total amount that Petitioner was overpaid for the "discrepant" claims in the "judgmental sample" was $42,310.17. The total amount that Petitioner was overpaid for the 89 "discrepant" claims in the "random sample" was $4,339.32, or

    17.36 dollars for each of the 250 claims in the sample.

    
    

    Extrapolating or projecting this result, in accordance with accepted statistical principles, to the entire universe of Audit Period Claims (which numbered 37,416) minus the 271 claims in the "judgmental sample" (a total of 37,145 claims), using a "95% one-sided lower confidence limit," yields an overpayment of

    $438,522.14. Adding this $438,522.14 overpayment to the

    
    

    $42,310.17 overpayment for the "discrepant" claims in the "judgmental sample" produces a total overpayment of $480,832.31

25. AHCA has made no additional revisions to its overpayment calculation in the instant case. It continues to maintain (and correctly so) that Petitioner received $480,832.31

    in Medicaid overpayments for services claimed to have been provided during the Audit Period.18

    CONCLUSIONS OF LAW

    
    

26. "Congress enacted the Medicaid program in 1965 in an effort to assist states with the cost of providing health care for the poor. . . . [A]ctual Medicaid relief is administered through state agencies pursuant to a Medicaid program that has been submitted to and approved by the U.S. Department of Health and Human Services. This cooperative venture between the federal and state governments is governed by the terms of Title XIX of the Social Security Act (SSA), §§ 1901-1935, codified at

    42 U.S.C. §§ 1396-1396v. . . . One large and growing part of the Medicaid program is the coverage of outpatient prescription drugs. Under 42 U.S.C. § 1396r-8, a drug is eligible for Medicaid coverage only if its manufacturer enters into an agreement with the Secretary of the Department of Health and Human Services to make a specified rebate on each covered drug. With a few limited exceptions, this rebate is set by statute at

    15.1 percent of the average manufacturer price." Pharmaceutical Research and Manufacturers of America v. Meadows, 304 F.3d 1197, 1199-1200 (11th Cir. 2002). "Over the last several years, state legislatures have enacted supplemental rebate programs to achieve additional cost savings on Medicaid purchases [of prescription drugs] . . . ." Pharmaceutical Research and

    Manufacturers of America v. Walsh, 538 U.S. 644, 649 (2003). The "supplemental rebate programs" enacted by the Florida Legislature are described in Section 409.912(39)(a)6. and 7, Florida Statutes.19

27. AHCA is statutorily charged with the responsibility of "operat[ing] 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[20] and impose sanctions as appropriate."

    § 409.913(1), Fla. Stat. In discharging this responsibility, AHCA must act within the parameters established by the Legislature through legislative enactments. It may not exceed the authority expressly delegated to it by statute. See City of

    Cape Coral v. GAC Utilities, Inc., of Florida, 281 So. 2d 493, 495-96 (Fla. 1973)("All administrative bodies created by the Legislature are not constitutional bodies, but, rather, simply mere creatures of statute. This, of course, includes the Public Service Commission . . . . As such, the Commission's powers, duties and authority are those and only those that are conferred expressly or impliedly by statute of the State. Any

    reasonable doubt as to the lawful existence of a particular power that is being exercised by the Commission must be resolved against the exercise thereof, . . . and the further exercise of

    the power should be arrested.");and Schiffman v. Department of Professional Regulation, Board of Pharmacy, 581 So. 2d 1375, 1379 (Fla. 1st DCA 1991) ("An administrative agency has only the authority that the legislature has conferred it by statute.").

28. "Overpayment," as that term is used in Section 409.913, Florida Statutes, "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."

    § 409.913(1)(e), Fla. Stat. "[T]he plain meaning of the statute dictates that it is within the AHCA's power to demand repayment" of such monies, regardless of the circumstances that produced the unauthorized payment, provided the overpayment is not "attributable to error of [AHCA] in the determination of eligibility of a recipient." Colonnade Medical Center, Inc. v. State, Agency for Health Care Administration, 847 So. 2d 540, 541-42 (Fla. 4th DCA 2003); and § 409.907(5)(b), Fla. Stat.

29. "Under federal law, the '[state Medicaid] agency must refund the Federal share of overpayments at the end of the 60- day period following discovery . . . ,[21] whether or not the State has recovered the overpayment from the provider.' 42

    C.F.R. § 433.312(a)(2) (emphasis added). It also provides a mechanism for 'reclaiming' the federal share if the overpayment is 'adjusted downward' under approved procedures. 42 C.F.R. §

    433.320(c)." Finnerty v. Thornton Hall, Inc., 593 S.E.2d 568, 573 (Va. App. 2004).

30. In the instant case, AHCA is seeking to recover

    
    

    $480,832.31 in Medicaid overpayments allegedly made to Petitioner for pharmacy services Petitioner claimed it rendered during the Audit Period.

31. To determine the merits of AHCA's allegation that Petitioner received a total of $480,832.31 in overpayments from Medicaid that AHCA is entitled to recover, it is necessary to examine the substantive law governing Medicaid payments to Florida providers like Petitioner that was in effect during the Audit Period. See Toma v. Agency for Health Care Administration, No. 95-2419, slip op at 26 (Fla. DOAH July 26, 1996)(Recommended Order)("The statutes, rules, Medicaid Physician Provider Handbook and Medicaid EPSDT Provider Handbook in effect during the period for which the services were provided govern the outcome of the dispute."); see also Hassen v. State Farm Mutual Automobile Insurance Co., 674 So. 2d 106, 108 (Fla. 1996)("It is a well established rule of statutory construction that, in the absence of an express legislative statement to the contrary, an enactment that affects substantive rights or creates new obligations or liabilities is presumed to apply prospectively."); Allegheny Casualty Co. v. Roche Surety, Inc., 885 So. 2d 1016, 1018 (Fla. 5th DCA 2004)("As a general rule, in

    the absence of clear legislative intent to the contrary, a law affecting substantive rights is presumed to apply prospectively."); Division of Workers' Compensation, Bureau of Crimes Compensation v. Brevda, 420 So. 2d 887, 891 (Fla. 1st DCA 1982)("If, however, a right has somehow vested under a statute, repeal of the statute does not divest the holder of the right."); and Peacock Fruit & Cattle Corp. v. Prescott, 397 So. 2d 390, 391 (Fla. 1st DCA 1981)("The weekly rate of compensation to be awarded is a matter of substantive law fixed by the statute in effect at the time of the accident.").

32. 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."

33. During the Audit Period, Section 409.907(1)-(3) and (5), Florida Statutes, provided as follows:

    The agency [AHCA] 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 other 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 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. Have in its possession at the time of signing the provider agreement, and maintain in good standing throughout the period of the agreement's effectiveness, a valid professional or facility license pertinent to the services or goods being provided, as required by the state or locality in which the provider is located, and the Federal Government, if applicable.

          
          

       2. Maintain in a systematic and orderly manner all medical and Medicaid-related records[22] that the agency requires and determines are relevant to the services or goods being provided.

          
          

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

          
          

       4. Safeguard the use and disclosure of information pertaining to current or former Medicaid recipients and comply with all state and federal laws pertaining to confidentiality of patient information.

          
          

       5. Permit the agency, the Attorney General, the Federal Government, and the authorized agents of each of these entities access to all Medicaid-related information, which may be in the form of records, logs, documents, or computer files, and other information pertaining to services or goods billed to the Medicaid program, including access to all patient records and other provider information if the provider cannot easily separate records for Medicaid patients from other records.

       6. Bill other insurers and third parties, including the Medicare program, before billing the Medicaid program, if the recipient is eligible for payment for health care or related services from another insurer or person, and comply with all other state and federal requirements in this regard.

          
          

       7. Promptly report any moneys 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.

          
          

       8. Be liable for and indemnify, defend, and hold the agency harmless from all claims, suits, judgments, or damages, including court costs and attorney's fees, arising out of the negligence or omissions of the provider in the course of providing services to a recipient or a person believed to be a recipient.

          
          

       9. At the option of the agency, provide proof of liability insurance and maintain such insurance in effect for any period during which services or goods are furnished to Medicaid recipients.

          
          

       10. Accept Medicaid payment as payment in full, and prohibit the provider from billing or collecting from the recipient or the recipient's responsible party any additional amount except, and only to the extent the agency permits or requires, copayments, coinsurance, or deductibles to be paid by the recipient for the services or goods provided. The Medicaid payment-in-full policy does not apply to services or goods provided to a recipient if the services or goods are not covered by the Medicaid program.

           
           

           * * *

           (5) The agency:

           
           

           1. Is required to make timely payment at the established rate for services or goods furnished to a recipient by the provider upon receipt of a properly completed claim form. The claim form shall require certification that the services or goods have been completely furnished to the recipient and that, with the exception of those services or goods specified by the agency, the amount billed does not exceed the provider's usual and customary charge for the same services or goods.

              
              

           2. Is prohibited from demanding repayment from the provider in any instance in which the Medicaid overpayment is attributable to error of the department in the determination of eligibility of a recipient.

              
              

           3. May adopt, and include in the provider agreement, such other requirements and stipulations on either party as the agency finds necessary to properly and efficiently administer the Medicaid program.

           
           

           * * *

           
           

34. During the Audit Period, Section 409.913(7), (8), and (10), Florida Statutes, provided as follows:

    1. When presenting a claim[23] 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.

       2. Are Medicaid-covered goods or services that are medically necessary.

          
          

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

          
          

       4. Have not been billed in whole or in part to a recipient or a recipient's responsible party, except for such copayments, coinsurance, or deductibles as are authorized by the agency.

          
          

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

          
          

       6. Are documented by records made at the time the goods or services were provided, demonstrating the medical necessity for the goods or services rendered. Medicaid goods or services are excessive or not medically necessary unless both the medical basis and the specific need for them are fully and properly documented in the recipient's medical record.

          
          

    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 5 years after the date of furnishing such services or goods. The agency may investigate, review, or analyze such records, which must be made available during normal business hours. However, 24-hour notice must be provided if patient treatment would be disrupted. The provider is responsible for furnishing to the agency, and keeping the agency informed of the location of, the provider's Medicaid-related records. The authority of the agency to obtain Medicaid- related records from a provider is neither curtailed nor limited during a period of

    litigation between the agency and the provider.

    
    

    * * *

    
    

    (10) The agency may require repayment for inappropriate, medically unnecessary, or excessive goods or services from the person furnishing them, the person under whose supervision they were furnished, or the person causing them to be furnished.

    
    

35. During the Audit Period, there were also provisions of the PDSCLR Handbook and Florida Administrative Code (specified in the Findings of Fact portion of this Recommended Order) in effect that contained recordkeeping requirements that had to be met by providers seeking Medicaid reimbursement from AHCA for the provision of pharmacy services.

36. As a general rule, the law now in effect governs the procedures that AHCA must follow in determining whether a provider has been overpaid by Medicaid. See Agency for Health Care Administration, v. Colonial Cut-Rate Drugs, Inc., 878 So. 2d 479, 480 (Fla. 1st DCA 2004)("Section 465.18, Florida Statutes (2003), is procedural and remedial. The decision of the Administrative Law Judge [that he would take these procedural requirements of the statute into consideration, where appropriate, in ruling on objections to the admissibility of evidence offered at the final hearing] is AFFIRMED.); Gupton v.

    Village Key & Saw Shop, Inc., 656 So. 2d 475, 477 (Fla. 1995)("Statutes that relate only to procedure or remedy

    generally apply to all pending cases."); Turro v. Department of Health and Rehabilitative Services, 458 So. 2d 345, 346 (Fla.

    1st DCA 1984)("In part because Rule 10-5.11(23) did not become formally effective until after commencement of the hearing on the applications, Community argues that it was improper to apply the standards stated in the rule to their application. However, the rule prescribes an evidentiary standard and is thus procedural in nature. As such it became applicable and controlling on its effective date."); and Batch v. State, 405 So. 2d 302, 304 (Fla. 4th DCA 1981)("This section became effective on October 1, 1978, which was after appellant's criminal act but before his trial and sentencing. Nevertheless, the section is procedural and such statutory changes apply to pending cases.").

37. Section 465.188, Florida Statutes, prescribes procedural requirements for "Medicaid audits of pharmacies." It provides as follows:

    1. Notwithstanding any other law, when an audit of the Medicaid-related records of a pharmacy licensed under chapter 465 is conducted, such audit must be conducted as provided in this section.

       
       

       1. The agency conducting the audit must give the pharmacist at least 1 week's prior notice of the initial audit for each audit cycle.

          
          

       2. An audit must be conducted by a pharmacist licensed in this state.

       3. Any clerical or recordkeeping error, such as a typographical error, scrivener's error, or computer error regarding a document or record required under the Medicaid program does not constitute a willful violation and is not subject to criminal penalties without proof of intent to commit fraud.

          
          

       4. A pharmacist may use the physician's record or other order for drugs or medicinal supplies written or transmitted by any means of communication for purposes of validating the pharmacy record with respect to orders or refills of a legend or narcotic drug.

          
          

       5. A finding of an overpayment or underpayment must be based on the actual overpayment or underpayment and may not be a projection based on the number of patients served having a similar diagnosis or on the number of similar orders or refills for similar drugs.

          
          

       6. Each pharmacy shall be audited under the same standards and parameters.

          
          

       7. A pharmacist must be allowed at least

          10 days in which to produce documentation to address any discrepancy found during an audit.

          
          

       8. The period covered by an audit may not exceed 1 calendar year.

          
          

       9. An audit may not be scheduled during the first 5 days of any month due to the high volume of prescriptions filled during that time.

          
          

       10. The audit report must be delivered to the pharmacist within 90 days after conclusion of the audit. A final audit report shall be delivered to the pharmacist within 6 months after receipt of the preliminary audit report or final appeal, as

           provided for in subsection (2), whichever is later.

           
           

       11. The audit criteria set forth in this section applies only to audits of claims submitted for payment subsequent to July 11, 2003. Notwithstanding any other provision in this section, the agency conducting the audit shall not use the accounting practice of extrapolation in calculating penalties for Medicaid audits.

           
           

    2. The Agency for Health Care Administration shall establish a process under which a pharmacist may obtain a preliminary review of an audit report and may appeal an unfavorable audit report without the necessity of obtaining legal counsel. The preliminary review and appeal may be conducted by an ad hoc peer review panel, appointed by the agency, which consists of pharmacists who maintain an active practice. If, following the preliminary review, the agency or review panel finds that an unfavorable audit report is unsubstantiated, the agency shall dismiss the audit report without the necessity of any further proceedings.

       
       

    3. This section does not apply to investigative audits conducted by the Medicaid Fraud Control Unit of the Department of Legal Affairs.

       
       

    4. This section does not apply to any investigative audit conducted by the Agency for Health Care Administration when the agency has reliable evidence that the claim that is the subject of the audit involves fraud, willful misrepresentation, or abuse under the Medicaid program.

       
       

38. The 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. See Department of Revenue v. Zuckerman-Vernon Corp., 354 So. 2d 353, 358 (Fla. 1977)("The 1977 Legislature's inclusion of an effective date of July 1, 1977, in Ch. 77-281 effectively rebuts any argument that retroactive application of the law was intended."); A. R. Douglass, Inc., v. McRainey, 137 So. 157, 159 (Fla. 1931)("The intention and meaning of the Legislature must primarily be determined from the language of the statute itself and not from conjectures aliunde. When the language of the statute is clear and unambiguous and conveys a clear and definite meaning, there is no occasion for resorting to the rules of statutory interpretation and construction; the statute must be given its plain and obvious meaning."); and Fogg v. Southeast Bank, N.A., 473 So. 2d 1352, 1353-54 (Fla. 4th DCA 1985)("Generally, statutes operate only prospectively as they might otherwise impinge upon vested rights or create new liabilities. On the other hand, statutes relating to remedies or procedure and including forfeitures operate retrospectively in the sense that all pending proceedings, including matters on appeal, are determined under the law in effect at the time of decision rather than that in effect when the cause of action arose or some earlier time. In either event, whether the statutory change is substantive or procedural, a clear statement of legislative intent may, under appropriate circumstances,

    determine whether the amendment is to have retroactive effect.").

39. After the "decision of the Administrative Law Judge" that was "affirmed" in Colonial Cut-Rate Drugs, 878 So. 2d at 480, the Legislature enacted Chapter 2004-344, Laws of Florida, which amended the 2003 version of Section 465.188, Florida Statutes, effective July 1, 2004, to read as it does today, by substituting "notice of the initial audit for each audit cycle" for "notice of the audit" in Subsection (1)(a) and adding Subsections (1)(k) and (4).

40. It is true that, inasmuch as Section 465.188, Florida Statutes, addresses Medicaid audits of pharmacy providers specifically, within the scope of its operation it controls over any conflicting statutory provision dealing with Medicaid audits in general. See State v. J. M., 824 So. 2d 105, 112 (Fla. 2002)("[E]ven if we were to find conflict between the provisions of section 985.233 and the Predator Act (which we do not), we would apply the long-recognized principle of statutory construction that where two statutory provisions are in conflict, the specific statute controls over the general statute."); McKendry v. State, 641 So. 2d 45, 46 (Fla. 1994)("[A] specific statute covering a particular subject area always controls over a statute covering the same and other subjects in more general terms. The more specific statute is

    considered to be an exception to the general terms of the more comprehensive statute.")(citations omitted); and Ortiz v.

    Department of Health, Board of Medicine, 882 So. 2d 402, 405 (Fla. 4th DCA 2004)("[T]he more specific statute controls over the general one."). Section 465.188's scope of operation, however, has been limited (as a result of the amendments made by Chapter 2004-344, Laws of Florida) in a way that impacts the instant case. It now plainly provides that the "audit criteria set forth in this section appl[y] only to audits of claims submitted for payment subsequent to July 11, 2003,"24 with the caveat (contained in the second sentence of Subsection (1)(k) of the statute) that, regardless of when the audited claims were submitted for payment, the "accounting practice of extrapolation" may not be used "in calculating [any] penalties" to be assessed.

41. The instant case involves an audit of "claims submitted for payment [prior] to July 11, 2003." Such being the case, in determining whether, and, if so to what extent, Petitioner was overpaid for these Audit Period Claims, the "audit criteria" set forth in Section 465.188, Florida Statutes, as amended by Chapter 2004-344, Laws of Florida, including the requirement that "[a] finding of an overpayment . . . must be based on the actual overpayment . . . and may not be a projection," are inapplicable. Furthermore, employing the

    "accounting practice of extrapolation" in calculating the amount of any overpayment is not prohibited by the second sentence of Subsection (1)(k) of the current version of Section 465.188 since the recovery of an overpayment (that is, monies the provider should not have received from AHCA in the first place) is not a penalty. See Mitchel v. Cigna Property & Casualty Ins.

    Co., 625 So. 2d 862 (Fla. 3rd DCA 1993)("[A]ny ordinary, dictionary definition and understanding of the words in question, a requirement to make 'restitution to the victim for damage or loss caused . . . by the defendant's offense,' . . . is neither a 'fine' nor a 'penalty.' Simply put, a penalty or fine involves punishment which is not designed to effect compensation for or restoration of the damages caused by a specific act; section 775.089-type 'restitution' is."); Sun

    Coast International Inc. v. Department of Business Regulation, Division of Florida Land Sales, Condominiums and Mobile Homes, 596 So. 2d 1118, 1120-21 (Fla. 1st DCA 1992)("[W]e consider it essential to point out that the terms 'restitution' and 'penalty' are not synonymous. . . . The primary purpose of restitution is to restore the plaintiff to the position in which he or she was before the defendant received the benefit which gave rise to the obligation to restore; hence the plaintiff is entitled to recover that which he or she parted with, or that which the defendant has received. . . . A penalty, on the other

    hand, is not designed as a means of restoring an aggrieved person to his or her original position."); and Hyman v. State,

    Department of Business Regulation, Division of Pari-Mutuel Wagering, 431 So. 2d 603, 604-05 (Fla. 3d DCA 1983)("We cannot consider that this process, which accomplishes the restitution of sums to individuals who should have received them in the first place from those who in fairness, should not, imposes a 'penalty' within the meaning of the constitutional proscription.")(citations omitted).

42. Overpayment-determining audits, like the one performed in the instant case, of "claims submitted [by Medicaid pharmacy providers] for payment [prior] to July 11, 2003," must comply with the "audit criteria" set forth, not in Section 465.188, Florida Statutes, as amended by Chapter 2004-344, Laws of Florida, but in Section 409.913(20), Florida Statutes, which addresses Medicaid audits in general and provides as follows:

    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 during the same period. 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.

    
    

43. Pursuant to Section 409.913(21), Florida Statutes, "[w]hen making a determination that an overpayment has occurred, [AHCA must] prepare and issue an audit report to the provider showing the calculation of overpayments."

44. A provider who is the subject of an audit report that reveals overpayments is entitled to an administrative hearing pursuant to Chapter 120, Florida Statutes, before AHCA takes final agency action ordering repayment.

45. At any such hearing, AHCA has the burden of establishing, by a preponderance of the evidence, that Medicaid overpayments in the amount it is seeking to recoup were made to the provider. See South Medical Services, Inc. v. Agency for Health Care Administration, 653 So. 2d 440, 441 (Fla. 3d DCA 1995); Southpointe Pharmacy v. Department of Health and Rehabilitative Services, 596 So. 2d 106, 109 (Fla. 1st DCA 1992); Florida Department of Transportation v. J. W. C. Co., Inc., 396 So. 2d 778, 788 (Fla. 1st DCA 1981); Florida

    Department of Health and Rehabilitative Services, Division of

    Health v. Career Service Commission, 289 So. 2d 412, 415 (Fla. 4th DCA 1974); and Full Health Care, Inc. v. Agency for Health

    Care Administration, No. 00-4441, slip op at 18 (Fla. DOAH June 25, 2001)(Recommended Order).

46. Section 409.913(22), Florida Statutes, provides that "[t]he audit report, supported by agency work papers, showing an overpayment to a provider constitutes evidence of the overpayment." It has been said that this language enables AHCA to "make a prima facie case without doing any heavy lifting: it need only proffer a properly-supported audit report, which must be received in evidence." Full Health Care, slip op at 19. "[O]nce [AHCA] has put on a prima facie case of overpayment----

    which may involve no more than moving a properly-supported audit report into evidence----the provider is obligated to come forward with written proof to rebut, impeach, or otherwise undermine the [AHCA's] statutorily-authorized evidence; it cannot simply present witnesses to say that [AHCA] lacks evidence or is mistaken."25 Id. at 19-20.26

47. As is reflected in the Findings of Fact set forth above, at the administrative hearing that Petitioner requested and was granted in the instant case, AHCA met its burden of proving, by a preponderance of the evidence, that Petitioner received Medicaid overpayments in the amount AHCA is seeking to recover from Petitioner ($480,832.31).

48. AHCA met its burden of proof through the presentation of documentary evidence (including the Final Agency Audit Report, as revised by Joint Exhibit 1,27 and supporting audit work papers) and testimonial evidence (including testimony authenticating these documents, as well as the unrebutted expert testimony of Dr. Johnson establishing that the statistical methods used in the "prescription record review" portion of the audit were compliant with the requirements of Section 409.913(20), Florida Statutes28).

49. Petitioner failed to present evidence sufficient to overcome AHCA's prima facie case (showing $480,832.31 in overpayments). It did not offer any documentation relating to any of the Audit Period Claims or payments it received therefor. Neither did it present any expert testimony establishing that AHCA's $480,832.31 overpayment determination was the product of statistical methods not meeting the requirements of Section 409.913(20), Florida Statutes. In brief, its presentation (of evidence, as well as argument) was unpersuasive in light of the controlling law,29 and it fell short of "undermining [AHCA's] statutorily-authorized evidence."30

50. Petitioner's not having overcome AHCA's prima facie showing, AHCA should enter a final order finding that Petitioner was overpaid a total of $480,832.31 for Medicaid claims submitted for pharmacy services assertedly rendered during the

    Audit Period. Were AHCA to do otherwise it would be acting in derogation of its statutory responsibility, under Section 409.913, Florida Statutes, to exercise oversight of the integrity of the Florida's Medicaid program.

51. Not only is AHCA seeking to recover the $480,832.31 in overpayments Petitioner received, it also seeks to impose a "sanction" on Petitioner: subjecting Petitioner to a "comprehensive follow-up review in six months."

52. AHCA acknowledges in its Proposed Recommended Order (citing Department of Banking and Finance, Division of

    Securities and Investor Protection v. Osborne Stern and Co., 670 So. 2d 932, 935 (Fla. 1996)) that "[t]he basis for imposing [this sanction] must be proven by clear and convincing evidence."

53. Although AHCA now has the authority, pursuant to Section 409.913(16)(h), Florida Statutes, to "sanction" providers by ordering "[c]omprehensive followup

    reviews . . . every 6 months to ensure that they are billing Medicaid correctly," it was not authorized to impose this "sanction" until June 7, 2002, the effective date of Chapter 2002-400, the legislative enactment which added to Section 409.913 the language now found in Subsection (16)(h) of the statute.

54. Since the wrongdoing alleged in the instant case occurred prior to June 7, 2002, AHCA may not "sanction" Petitioner for engaging in such wrongdoing by ordering a "comprehensive follow-up review in six months."31 See Willner v. Department of Professional Regulation, Board of Medicine, 563 So. 2d 805, 806 (Fla. 1st DCA 1990)("[A]ppellant argues that the fines imposed against him are in violation of the ex post facto provisions of the state and federal constitutions. We agree.

In 1986, Section 458.331(2)(d), Florida Statutes, was amended to increase the amount of the maximum administrative fine which could be assessed by appellee for violations of Section 458.331(1), Florida Statutes. The 1986 amendment increased the maximum fine from $1,000 per violation to $5,000 per violation. Since all the violations for which appellant was found guilty occurred prior to the effective date of the 1986 amendment, the maximum fine which could lawfully be imposed by appellee was

$1,000 per violation.")(citation omitted); and Baker v. State,

499 So. 2d 15, 16 (Fla. 2d DCA 1986)("Appellant argues that the order requiring him to pay costs violated the constitutional prohibition against ex post facto laws (U.S. Const. art. I, § 9; Fla. Consti. Art. I, § 10), since it imposed a penalty that was not in effect at the time that appellant committed the

offense. . . . Appellant's crime occurred on June 25, 1985, and the section under which appellant was ordered to pay costs

(section 27.3455, Florida Statutes (1985)) became effective on July 1, 1985. We agree . . . that the imposition of costs here pursuant to section 27.3455 violated the constitutional prohibition against ex post facto laws and is, as such, invalid.")(citation omitted).

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby

RECOMMENDED that AHCA enter a final order finding that Petitioner received $480,832.31 in Medicaid overpayments for paid claims covering the period from May 23, 1999, through February 23, 2001, and requiring Petitioner to repay this amount to AHCA; and that AHCA decline to order a "comprehensive follow- up review [of Petitioner] in six months."

DONE AND ENTERED this 14th day of December, 2006, in Tallahassee, Leon County, Florida.

S

STUART M. LERNER

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 14th day of December, 2006.

ENDNOTES

1 Unless otherwise indicated, references to Florida Statutes in this Recommended Order are to Florida Statutes (2006).

2 This was the date that the July 1999 version of the PDSCLR Handbook was "incorporated by reference" in Florida Administrative Code Rule 59G-4.250, replacing the August 1998 version of the handbook that had previously been "incorporated by reference" in the rule.

3 Because Petitioner's entitlement to payment for a claim was dependent upon its having the "required [supporting] documentation," the "lack [of this] required documentation" cannot be dismissed as a mere technical error. See Colonnade Medical Center, Inc. v. State, Agency for Health Care Administration, 847 So. 2d 540, 542-43 (Fla. 4th DCA 2003)("Colonnade also contends that the final order [directing that Colonnade repay $49,965.30 in Medicaid overpayments] is unsupported by competent, substantial evidence. . . .

Colonnade's arguments lack merit. Colonnade argues that there is no evidence that the services rendered were inappropriate, medically unnecessary, or excessive. This argument misconstrues the final judgment. The judgment was not based on any finding as to the quality of care received. Instead, the judgment was based on Colonnade's failure to comply with the Medicaid billing requirement of prior authorization. Colonnade stipulated to not receiving prior authorization and, thus, competent, substantial evidence existed to support the judgment on this basis.").

4 In requesting Heritage to take such action on its behalf, AHCA was exercising its statutory authority under Section 409.913(2), Florida Statutes, to "cause to be conducted . . . audits . . .

to determine possible . . . overpayment . . . in the Medicaid program."

5 AHCA has announced that it is not relying, in this proceeding, on the results of the "purchase invoice analysis" to establish Petitioner's overpayment liability.

6 The lone witness to give expert testimony regarding the matter, Mark Johnson, Ph.D., a professor of statistics at the

University of Central Florida, testified that this sample "constitute[d] a genuine random sample," "representative of the full population as a whole," of sufficient size to be extrapolated, with a statistically acceptable level of confidence, to all Audit Period Claims not in the "judgmental sample." Having no reason to reject this conclusion reached by Dr. Johnson, the undersigned has accepted it. See Wiederhold v. Wiederhold, 696 So. 2d 923, 924 (Fla. 4th DCA 1997)("[W]hile the trial court can reject unrebutted expert testimony, it must offer a reasonable explanation for doing so. In other words, the trial court as fact-finder cannot arbitrarily reject unrebutted expert testimony.")(citation omitted). It is true, as Petitioner points out in its Proposed Recommended Order, that Dr. Johnson, in his testimony, did not address what effect, if any, the parties' stipulation (entered into at the outset of the hearing, after Dr. Johnson had conducted his analysis) "that certain of the claims [in] the random sample were to be removed as overpayments" had on his previously-formed opinion regarding the randomness of that sample. Petitioner, however, never asked him that question, and there is no reason to believe that, if the question had been asked, it would have yielded a response favorable to the Petitioner's position. (Dr. Johnson testified (on page 20 of the hearing transcript) that, in conducting his analysis to determine whether the "random sample" was a "genuine random sample," he had considered the average dollar value of all claims in the "random sample," not just those claims AHCA had deemed to be "discrepant.")

7 There is no record evidence that this Addendum was, at that time, also provided to Petitioner.

8 At all times material to the instant case, Section 465.015(2)(c), Florida Statutes, made it unlawful for any person:

To sell or dispense drugs as defined in s. 465.003(8) without first being furnished with a prescription.

At all times material to the instant case, a "prescription," as that term was used in Section 465.015, Florida Statutes, was defined in Section 465.003, Florida Statutes, as follows:

"Prescription" includes any order for drugs or medicinal supplies written or transmitted by any means of communication by a duly

licensed practitioner authorized by the laws of the state to prescribe such drugs or medicinal supplies and intended to be dispensed by a pharmacist. The term also includes an orally transmitted order by the lawfully designated agent of such practitioner. The term also includes an order written or transmitted by a practitioner licensed to practice in a jurisdiction other than this state, but only if the pharmacist called upon to dispense such order determines, in the exercise of her or his professional judgment, that the order is valid and necessary for the treatment of a chronic or recurrent illness. The term "prescription" also includes a pharmacist's order for a product selected from the formulary created pursuant to s.

465.186. Prescriptions may be retained in written form or the pharmacist may cause them to be recorded in a data processing system, provided that such order can be produced in printed form upon lawful request.

9 At all times material to the instant case, the PDSCLR Handbook prohibited a provider from "split[ting]" a prescription in "multiple orders" or "multiple claims" in order "to facilitate Medicaid billing."

10 At all times material to the instant case, the PDSCLR Handbook specifically provided that, "[w]hen a claim is identified as a duplicate of a claim already paid by Medicaid, it will be denied."

11 At all times material to the instant case, Section 893.04(1), Florida Statutes, provided, in pertinent part, as follows:

A pharmacist, in good faith and in the course of professional practice only, may dispense controlled substances upon a written or oral prescription of a practitioner, under the following conditions:

* * *

(c) There shall appear on the face of the prescription or written record thereof for the controlled substance the following information:

* * *

2. The full name and address of the prescribing practitioner and the practitioner's federal controlled substance registry number shall be printed thereon.

* * *

4. The name of the controlled substance prescribed and the strength, quantity, and directions for use thereof.

* * *

12 At all times material to the instant case, Section 465.016, Florida Statutes, prohibited a pharmacist from "[u]sing in the compounding of a prescription, or furnishing upon prescription, an ingredient or article different in any manner from the ingredient or article prescribed."

13 At all times material to the instant case, the PDSCLR Handbook required that providers, in preparing a claim for reimbursement, enter on the claim form, among other things, "the prescriber's professional license number."

14 For this reason, the total number of "discrepancies" exceeded the total number of "discrepant" claims.

15 Noteworthy among these "discrepant" claims because they are specifically mentioned in Petitioner's Proposed Recommended Order are (as denominated in Joint Exhibit 1) "discrepant" claim

2 (June 1, 1999, fill and June 17, 1999, fill) and "discrepant" claim 37. A review of the documents provided by Petitioner in support of these claims reveals that, consistent with the position taken by AHCA, they do not constitute the required contemporaneous documentation of authorization from the prescriber to Petitioner to dispense the medication referenced in the documents.

Two documents were provided in support of "discrepant" claim 2 (June 1, 1999, fill and June 17, 1999, fill). The first is what

purports to be a record of a "telephone order" taken on May 21, 1999, by "Jenn" for various medications, including Vanceril.

Next to each medication listed is what appears to be a prescription number. The prescription number next to the Vanceril entry is 721271, which is the prescription number that Petitioner used for both the June 1, 1999, fill and the June 17, 1999, fill. The document contains the patient's name, but does not indicate who called in the order. No information at all about the prescriber, including his or her identity, appears on the document. The second supporting document is a computer screen printout providing information about a May 26, 2002, fill of Vanceril under the same prescription number (721271) as the June 1 and 17, 1999, fills. This printout reflects that the prescription was originally issued November 24, 1998. A copy of this original prescription was not furnished by Petitioner.

"Discrepant" claim 37 relates to a June 1, 2000, fill of Clozaril (Clozapine) under prescription number 342309, which was first filled on May 9, 2000. The only document supporting this claim is Petitioner's copy of a laboratory report, dated May 31, 2000 (which was after the original prescription was issued), reflecting that the patient has an "acceptable WBC count" to take Clozaril (Clozapine). On the top of the report is following instruction directed to the "doctor":

This form is for recording required WBC count. This information must be supplied to the pharmacist weekly, in advance of dispensing. Prescriptions will NOT be filled without a current, acceptable WBC count. Please retain pink copy for your files.

It is clear from the face of this report that it is not from the patient's "treating physician" (whose name appears on the report), and it certainly does not constitute authorization from the physician that any medication be dispensed to the patient.

16 Petitioner received a "dispensing fee" of $4.23 for each fill.

17 This Final Agency Audit Report represented, in actuality, only proposed, and not final, agency action. See Beverly Enterprises-Florida, Inc. v. Department of Health and Rehabilitative Services, 573 So. 2d 19, 23 (Fla. 1st DCA 1990)("A request for a formal administrative hearing commences a

de novo proceeding intended to formulate agency action, and not to review action taken earlier or preliminarily."); Boca Raton Artificial Kidney Center, Inc. v. Florida Department of Health and Rehabilitative Services, 475 So. 2d 260, 261-62 (Fla. 1st DCA 1985)("Although the CON in question does not so state, it represents preliminary agency action. That the actual certificate fails to state that it is a 'notice of intent to issue CON' or that it is 'subject to administrative review' does not change the character of the certificate as preliminary agency action. Such action is subject to administrative review via Section 120.57(1) or (2) hearings on the petition of a substantially affected party."); Capeletti Brothers, Inc. v.

Department of General Services, 432 So. 2d 1359, 1363 (Fla. 1st DCA 1983)("Capeletti misconceives the purpose of the [Section]

120.57 hearing. The rejection of bids never became final agency action. As we have previously held, APA hearing requirements are designed to give affected parties an opportunity to change the agency's mind."); and McDonald v. Department of Banking and Finance, 346 So. 2d 569, 584 (Fla. 1st DCA 1977)("Section 120.57 proceedings are intended to formulate final agency action, not to review action taken earlier and preliminarily.").

18 There has been no allegation made, nor proof submitted, that Petitioner's overbillings were the product of anything other than simple mistake or inadvertence on Petitioner's part.

19 Section 409.912(39)(a)6. and 7., Florida Statutes, provides as follows:

The agency shall implement a Medicaid prescribed-drug spending-control program that includes the following components:

* * *

1. The agency may enter into arrangements that require manufacturers of generic drugs prescribed to Medicaid recipients to provide rebates of at least 15.1 percent of the average manufacturer price for the manufacturer's generic products. These arrangements shall require that if a generic-drug manufacturer pays federal rebates for Medicaid-reimbursed drugs at a level below 15.1 percent, the manufacturer must provide a supplemental rebate to the

   
   

   state in an amount necessary to achieve a 15.1-percent rebate level.

   
   

2. The agency may establish a preferred drug list as described in this subsection, and, pursuant to the establishment of such preferred drug list, it is authorized to negotiate supplemental rebates from manufacturers that are in addition to those required by Title XIX of the Social Security Act and at no less than 14 percent of the average manufacturer price as defined in 42

U.S.C. s. 1936 on the last day of a quarter unless the federal or supplemental rebate, or both, equals or exceeds 29 percent. There is no upper limit on the supplemental rebates the agency may negotiate. The agency may determine that specific products, brand-name or generic, are competitive at lower rebate percentages. Agreement to pay the minimum supplemental rebate percentage will guarantee a manufacturer that the Medicaid Pharmaceutical and Therapeutics Committee will consider a product for inclusion on the preferred drug list. However, a pharmaceutical manufacturer is not guaranteed placement on the preferred drug list by simply paying the minimum supplemental rebate. Agency decisions will be made on the clinical efficacy of a drug and recommendations of the Medicaid Pharmaceutical and Therapeutics Committee, as well as the price of competing products minus federal and state rebates. The agency is authorized to contract with an outside agency or contractor to conduct negotiations for supplemental rebates. For the purposes of this section, the term "supplemental rebates" means cash rebates. Effective

July 1, 2004, value-added programs as a substitution for supplemental rebates are prohibited. The agency is authorized to seek any federal waivers to implement this initiative.

20 "The Medicaid program provides reimbursement to service providers on a 'pay-and-chase' basis. In other words, claims are paid initially subject to preliminary review. [AHCA} or its agent may later subject these claims to closer scrutiny during periodic audits. If overpayments are found, [AHCA] obtains reimbursement from the service provider." Agency for Health Care Administration v. Cabrera, No. 92-1898, 1994 Fla. Div. Adm. Hear. LEXIS 5127 *3 (Fla. DOAH January 24, 1994)(Recommended Order).

21 Pursuant to 42 C.F.R. § 433.316(c):

An overpayment resulting from a situation other than fraud or abuse is discovered on the earliest of--

1. The date on which any Medicaid agency official or other State official first notifies a provider in writing of an overpayment and specifies a dollar amount that is subject to recovery;

   
   

2. The date on which a provider initially acknowledges a specific overpaid amount in writing to the medicaid agency; or

   
   

3. The date on which any State official or fiscal agent of the State initiates a formal action to recoup a specific overpaid amount from a provider without having first notified the provider in writing.

22 "Medicaid-related records," as used in Sections 409.901 through 409.920, Florida Statutes, were defined in Section 409.901 as "records that relate to the provider's business or profession and to a Medicaid recipient."

23 "Claim," as that term was used in Sections 409.901 through 409.920, Florida Statutes, was defined in Section 409.901 as "any communication, whether written or electronic (electronic impulse or magnetic), which is used by any person to apply for payment from the Medicaid program or its fiscal agent for each item or service purported by any person to have been provided by a person to any Medicaid recipient."

24 July 11, 2003, was the effective date of Chapter 2003-277, Laws of Florida, the enactment which produced the original (2003) version of Section 465.188, Florida Statutes.

25 "[O]bligat[ing] [a provider] to come forward with written proof to rebut, impeach, or otherwise undermine [AHCA's] statutorily-authorized evidence" of overpayment is not an unreasonable burden to place on the provider. See Illinois Physicians Union v. Miller, 675 F.2d 151, 158 (7th Cir. 1982)("We see nothing arbitrary or capricious about requiring physicians who are benefitting from the [Medicaid] program to bear this burden, particularly when the state has already borne the cost of the initial audit and the evidence to rebut that initial determination is uniquely within the physician's control.").

26 In an endnote, the Administrative Law Judge in Full Health Care, slip op at 34 n.9, added the following observation:

Theoretically, a provider might advance so compelling an argument as to convince the fact-finder to disbelieve the Agency's audit report (assuming the Agency had rested on that evidence alone) and thereby defeat the Agency's recoupment effort without offering any evidence. In that situation, the Agency would lose, not because it had failed to make a prima facie case (the audit report being enough evidence to carry the Agency across the threshold of legal sufficiency), but because it had failed to persuade the trier of fact that the evidence established the probable truth of the Agency's allegations. As a practical matter, however, such an outcome is unlikely.

27 Relying on Florida Administrative Code Rule 28-106.213(3) (which, consistent with Section 120.57(1)(c), Florida Statutes, provides that, in administrative hearings involving disputed issues of material fact, "[h]earsay evidence, whether received in evidence over objection or not, may be used to supplement or explain other evidence, but shall not be sufficient in itself to support a finding unless the evidence falls within an exception to the hearsay rule as found in Chapter 90, F.S."), Petitioner argues in its Proposed Recommended Order that the Final Agency Audit Report and supporting work papers constitute

uncorroborated hearsay evidence insufficient to support any finding of overpayment. To accept this argument would require the undersigned to ignore the clear and unambiguous language of the first sentence of Section 409.913(22), Florida Statutes, which, unlike Florida Administrative Code Rule 28-106.213(3) and Section 120.57(1)(c), Florida Statutes, deals specifically with Medicaid audit reports as evidence in administrative hearings, such as the instant one, involving challenges to proposed Medicaid overpayment determinations made by AHCA. This the undersigned cannot do. See Solid Waste Authority of Palm Beach County v. Parker, 622 So. 2d 1014, 1014-15 (Fla. 4th DCA 1993)("Section 73.131(2), Florida Statutes (1989), is plain and unambiguous and mandates an award. While under other statutes containing different language, appellate fees may be denied where the sole issue is the reasonableness of an award of fees, we cannot ignore the very specific language of the statute. If we were to hold that attorney's fees are not allowable in these circumstances, we would be adding a policy judgment of this court's which would conflict with the specific legislative language. If condemning authorities believe that the result is wrong, then they should ask the legislature to change the law.")(citations omitted); and Department of Health and Rehabilitative Services v. American Healthcorp of Vero Beach, Inc., 471 So. 2d 1312, 1315 (Fla. 1st DCA 1985), opinion adopted, 488 So. 2d 864 (Fla. 1986)("Balsam reflects that section 381.494(8)(c) --not section 120.60(2) --supplies the remedy for a delay in determination of a CON application. That view is supported by the rule of statutory construction applied when two statutes are inconsistent or in conflict: '[A] more specific statute covering a particular subject is controlling over a statutory provision covering the same subject in more general terms.'").

28 In presenting this expert testimony, AHCA did more than was necessary to make out a prima facie case.

29 As noted above, that law does not prohibit AHCA from using extrapolation to determine the overpayment in this case.

30 Petitioner's evidentiary presentation included testimony from its president and chief executive officer, Mr. Levy, regarding the amount ("around $165,000 to $168,000") that Mr. Levy contended AHCA owed Petitioner for its dispensing medication in "unit dose" packages to Medicaid recipients during the Audit Period. According to the argument made by Petitioner at hearing, it is entitled to an "offset" in that amount against

any overpayment liability it may have. Mr. Levy, however, in his testimony did not provide any particulars as to the specific instances when Petitioner provided this "unit dose" packaging, nor was any documentation offered disclosing this information.

Moreover, Mr. Levy conceded that Petitioner never submitted any claims for reimbursement for having provided these services (which was a prerequisite to its being reimbursed). The purpose of the audit conducted in the instant case was to ascertain whether Petitioner was overpaid for services it billed Medicaid during the Audit Period, not to determine whether there were any services Petitioner provided during the Audit Period for which it could have billed Medicaid but did not.

Petitioner has also raised the equitable affirmative defense of laches, pointing out that the "[a]udit covered claims originating as early as 1999, with the final Audit report being issued in 2005," almost six years later. See Van Meter v.

Kelsey, 91 So. 2d 327, 332 (Fla. 1956)("Laches is an affirmative defense. As such, the burden of proving it is on those who assert it, and it must be proved by very clear and positive evidence."); and Goodwin v. Blu Murray Insurance Agency, Inc., 939 So. 2d 1098 (Fla. 5th DCA 2006)("The equitable defense[]

of . . . laches require[s] clean hands . . . ."). "Laches is based on an unreasonable delay in asserting a known right which causes undue prejudice to the party against whom the claim is asserted. Delay, standing alone, is not enough." Baker v.

Baker, 920 So. 2d 689, 693 (Fla. 2d DCA 2006). The "[l]oss of [helpful] evidence due to lapse of time can provide the element of prejudice necessary for laches to apply." Department of Community Affairs v. Ridgewood Properties, Inc., No. 87-1443, 1988 Fla. Tax LEXIS 599 *44 (Fla. DOAH June 8, 1988)(Recommended Order). To make the necessary showing of such a "loss of [helpful] evidence" there must be proof that the evidence at one time existed, but is no longer available because of the other party's "unreasonable delay" in taking action. While Petitioner failed to produce documentation establishing its entitlement to reimbursement for the Audit Period Claims in controversy in the instant case, the record is devoid of evidence that any such documentation ever existed, much less that it became unavailable as a result of any "unreasonable delay" on AHCA's part in pursuing the audit of these claims (which audit began well within the five-year period Petitioner was required to retain and make "immediate[ly] access[ible]" its records concerning the audited claims, and was preceded by Petitioner's being advised that there would a review of its "records as required to determine the propriety of [its] billings"). Petitioner did, in

October 2003, place the audit "temporarily . . . on hold, pending the outcome of litigation in an unrelated audit," but it so advised Petitioner at that time, instructing Petitioner to "maintain all of [its] Medicaid-related records and all documentation that support[ed] the claims at issue in this matter until such time as this audit [was] finalized." Under the foregoing circumstances, the proof in the instant case is inadequate to establish a "[l]oss of [helpful] evidence"/laches defense. Compare with Source, Inc. v. SourceOne, Inc., No.

3:05-CV-1414-G ECF, 2006 U.S. Dist. LEXIS 62401 *25 (N.D. Tex.

August 16, 2006)("In the case at bar, Source, by way of the cease and desist letter, clearly notified SourceOne of its objection to SourceOne's use of the word "source" in its name. As a result of this letter, any prejudice suffered by SourceOne during the interim between the letter and the filing of this suit is not attributable to the delay. Therefore, SourceOne is precluded from establishing the third element of its defense (i.e. undue prejudice).").

31 In its Proposed Recommended Order (in endnote 17), AHCA indicates that it has no "intention to impose any other 'sanction' on Petitioner."

COPIES FURNISHED:

Steven J. Strelzik, Esquire

Law Offices of Steven J. Strelzik, P.C. 3355 Lenox Road, Northeast, Suite 1100

Atlanta, Georgia 30326

Mark L. Pomeranz, Esquire Pomeranz & Associates, P. A.

12955 Biscayne Boulevard, Suite 202 North Miami, Florida 33181

Daniel M. Lake, Esquire

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

Tallahassee, Florida 32308-5403

Richard J. Shoop, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Mail Station 3

Tallahassee, Florida 32308

William Roberts, Acting General Counsel Agency for Health Care Administration Fort Knox Building, Suite 3431

2727 Mahan Drive

Tallahassee, Florida 32308

Christa Calamas, 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: 06-001882MPI

Orders for Case No: 06-001882MPI