STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

AGENCY FOR HEALTH CARE ADMINISTRATION,

Petitioner,

vs.

EDWARD WALTERS, DDS,

Respondent.

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) Case No. 06-3491MPI

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RECOMMENDED ORDER

This case came before Administrative Law Judge John G. Van Laningham for final hearing on March 7, 2007, in Tallahassee, Florida.

APPEARANCES

For Petitioner: Sean M. Ellsworth, Esquire

Ellsworth Law Firm, P.A.

404 Washington Avenue, Suite 750 Miami Beach, Florida 33139

For Respondent: L. William Porter, II, Esquire

Agency for Health Care Administration Fort Knox Executive Center III

2727 Mahan Drive, Building 3, Mail Stop 3

Tallahassee, Florida 32308-5403 STATEMENT OF THE ISSUE

The issue for determination is whether Respondent is personally liable to Petitioner for the principal sum of

$333,632.00, which equals the amount that the Florida Medicaid Program paid in excess of coverage on claims arising from Respondent's furnishing goods or services to patients who were seen in his dental office between January 1, 2001 and December 31, 2005.

PRELIMINARY STATEMENT

Petitioner Agency for Health Care Administration is the agency responsible for administering the Florida Medicaid Program. Respondent Edward Walters, DDS, is a dentist who has furnished goods or services to Medicaid beneficiaries.

After auditing Dr. Walters' medical records, Petitioner issued a Final Agency Audit Report on April 18, 2006, wherein it alleged that this dentist had been overpaid $333,632.00 for Medicaid claims arising from Petitioner's treating of eligible beneficiaries. On September 6, 2006, Dr. Walters served a Petition for Formal Administrative Hearing disputing the overpayment assessment. The matter was referred to the Division of Administrative Hearings on September 15, 2006.

At the final hearing, which took place as scheduled (after two continuances) on March 7, 2007, it soon became apparent that the only disputed issue was whether Dr. Walters can be held personally liable for the overpayment that he concedes exists. (Dr. Walters maintains that liability for the overpayment belongs exclusively to a corporate entity called Edward R.

Walters DDS PA.) After some discussion, the parties agreed to

1. stipulate to all the facts alleged in the Final Agency Audit Report except those suggesting that Dr. Walters was a Medicaid "provider" and (b) present their respective legal arguments regarding Dr. Walters' liability in proposed recommended orders.

   In addition to the foregoing stipulation, Petitioner's Exhibits 1 though 5 were admitted into evidence without objection. (Petitioner's Exhibit 3, a composite comprising elements of the "provider file," was supplemented at hearing, without objection, by the addition of a Medicaid re-enrollment "package" dating from July 2003.)

   The final hearing transcript was filed on March 20, 2007. The parties timely filed proposed recommended orders ahead of the established deadline, which was April 30, 2007. These papers were carefully considered in the preparation of this Recommended Order.

   Unless otherwise indicated, citations to the Florida Statutes refer to the 2006 Florida Statutes.

   FINDINGS OF FACT

   
   

   1. Petitioner Agency for Health Care Administration ("AHCA" or the "Agency") is the state agency responsible for administering the Florida Medicaid Program ("Medicaid").

   2. Respondent Edward Walters, DDS ("Walters") was, at all relevant times, a pediatric dentist who rendered professional

      services to Medicaid beneficiaries, for which services claims were submitted to, and paid by, Medicaid.

   3. On or around November 8, 1982, the Florida Department of Health and Rehabilitative Services ("HRS"), which was AHCA's predecessor as the state Medicaid agency, and "Edward R. Walters DDS PA," as the "Provider,"i entered into a Medicaid Provider Agreement (the "1982 Agreement"). Walters signed the 1982 Agreement as "authorized agent" of Edward R. Walters DDS PA (hereafter, the "Corporation"), giving his title as "dentist."

   4. Over the next two-and-a-half decades, the 1982 Agreement was modified by the parties' course of performance——if not superseded by subsequent agreements that were executed from time to time. As a result, while the parties to the 1982 Agreement might have intended then that the Corporation——and not

      Walters——be the authorized provider, this was clearly not the mutual understanding of the relevant parties 20 years later, during the period at issue (2001-05), by which time AHCA (having taken HRS's place) and Walters (having for years held himself out as the provider) had long since agreed that Walters, the individual, was the provider.

   5. The intent of the parties in this regard is reflected in numerous written agreements and formal communications exchanged between them during the many years that Walters rendered services to Medicaid recipients. The table below

      summarizes the most pertinent of these papers that are in evidence.

      
      

      Date	Document	Named Provider	Signatory	Comments
      11-18-85	Medicaid Provider Enrollment Application	Walters——the Corporation was not mentioned.	Walters, as "provider" or "authorized	Walters was unambiguously designated the
      			agent." By	provider, thereby
      			signing, he	preventing ambiguity
      			certified that	as to whether
      			"the	Walters signed as
      			information	"provider" or
      			furnished in	"authorized agent."
      			this
      			application is
      			true, accurate
      			and complete
      			to the best of
      			my knowledge."
      9-14-88	Provider Re-Enrollment Request Sheet	Walters' name given as part of	Walters——no indication	Applicants were instructed to
      		both the "practice	that he signed	"[d]raw a line
      		address" and the	in a	through [any]
      		"pay-to address."	representative	incorrect item and
      		The Corporation was not mentioned.	capacity.	circle the corrected information in red
      				ink." This was done
      				for a couple of
      				items——but, notably,
      				not to advise that
      				the Corporation
      				should be the
      				provider.
      4-18-90	Electronic Claims Submission Agreement	Walters, twice named as provider.	Walters, not explicitly in	Clear designations of Walters as
      		The Corporation	representative	provider prevent
      		was not mentioned.	capacity, but	ambiguity as to
      			title given as	whether he signed as
      			"Dr.	"president" of an
      			President."	unnamed entity.
      1-6-95	Authorization	Walters. The	Walters——no
      	Agreement for	Corporation was	indication
      	Automatic	identified, not as	that he signed
      	Payments/Deposits	provider, but in	in a
      		connection with	representative
      		the "bank account	capacity.
      		name."

      Date	Document	Named Provider	Signatory	Comments
      11-22-96	Provider Reenrollment Request Form	Walters was named as provider in the form, beneath a caption that that read: "Listed below are excerpts from the Medicaid provider file for your provider number. Please review and change it [sic] as necessary. Provide accurate information for each question. Draw a line through the incorrect item and write the correct item in red ink."	Walters signed, apparently as "authorized agent," next to lines above which he had inscribed the provider's name as "Edward R. Walters, D.D.S., PA," and his title as "President- DDS."	This document is ambiguous as to the provider's identity, given the conflict between the body of the form, where Walters is named as the provider, and the form of Walters' signature, which denotes that he signed in a representative capacity. The ambiguity was resolved, however, by the ensuing agreement, noted in the next row below.
      12-4-96	Medicaid Provider Agreement	Provider not named in body of agreement.	Walters signed above the line requesting "signature of provider," giving no indication that he meant to execute the contract in a representative capacity. Above the line asking the signatory to "legibly print the above signature," Walters wrote: "Edward R. Walters, D.D.S."	This Agreement, the first in the record to which AHCA was a party, made no mention of the Corporation.
      8-27-98	Electronic Claims Submission Agreement	Walters——the Corporation was not mentioned.	Walters——no indication that he signed in a representative capacity.
      4-19-99	Electronic Claims Submission Agreement	Walters——the Corporation was not mentioned.	Walters——no indication that he signed in a representative capacity.
      12-3-02	Authorization Agreement for Electronic Funds Transfer	Walters——the Corporation was not mentioned.	Walters——no indication that he signed in a representative capacity.

      Date	Document	Named Provider	Signatory	Comments
      10-1-04	Medicaid Provider	Walters——the	Walters——no	Item No. 1 on the
      	Change of Address	Corporation was	indication	form states: "The
      	Request	not mentioned.	that he signed	undersigned affirms
      			in a	that he or she is
      			representative	the Medicaid
      			capacity.	provider indicated
      				below." Just below
      				that, the "Provider
      				Name" was given as
      				"Edward R. Walters."
      				Further down the
      				page, right next to
      				Walters's notarized
      				signature (by which
      				he swore or affirmed
      				that the information
      				in the document was
      				correct)——and above
      				the line
      				instructing,
      				"Legibly Print
      				Provider Name"——was
      				written: "Edward R.
      				Walters."
      11-5-03	Authorization	Walters. An	Walters——no
      	Agreement for	entity named	indication
      	Electronic Funds	"Edward Walters,	that he signed
      	Transfer	DDS, Inc." was	in a
      		identified, not as	representative
      		provider, but as	capacity.
      		the "name on bank
      		account."
      7-10-03	Florida Medicaid Re-	Walters. The	Walters——no	Although a complete
      	enrollment Individual	instructions	indication	copy of the ensuing
      	Profile Verification	state: This is	that he signed	Medicaid Provider
      		the information as	in a	Agreement is not in
      		it appears in your	representative	the record, a copy
      		Provider file as	capacity.	of the signature
      		of 06/13/2003.	Signature	page is in evidence,
      		Please review and	verified that	and it shows that
      		update if	signer had	Walters signed the
      		necessary using	"reviewed this	agreement without
      		the space	information	manifesting any
      		provided." No	and ha[d] made	intention of doing
      		attempt was made	any necessary	so on behalf of the
      		to amend the	updates."	Corporation (or
      		provider name,		other person or
      		which was:		entity).
      		"Walters, Edward
      		R. DDS."

      
      

      
      

   6. Exercising its statutory authority to oversee the integrity of Medicaid, the Agency conducted an audit of Walters' medical records to verify that claims paid by Medicaid during the period from January 1, 2001 to December 31, 2005 (the "Audit Period") had not exceeded authorized amounts. At the conclusion

      of the audit, the Agency determined that Walters had received "overpayments" (i.e. payments for claims not covered under Medicaid) totaling $333,632.00 (the "Overpayment"). Walters, conceding the Overpayment's existence, does not dispute these determinations, which the undersigned accordingly adopts as findings of fact.

   7. The Agency determined, further, that each of the claims which, in the aggregate, gave rise to the Overpayment fell into one of the following four categories:

      Category Description

      
      

      Upcodes Medicaid was billed for a more expensive procedure (non- intravenous conscious sedation) than that actually provided (analgesia).

      
      

      Undocumented Services Medicaid was billed for a

      procedure (non-intravenous conscious sedation) whose provision was not substantiated by contemporaneous documentation.

      
      

      Duplicative Charges Medicaid was billed for both an

      inclusive procedure (either "pre- orthodontic visit" or "orthodontic exam and treatment plan") and for the individual goods or services (e.g. film, photographs, and/or casts) covered by the inclusive procedure.

      Undocumented Necessity Medicaid was billed for goods and

      services (e.g. film, photographs, and/or casts) whose medical necessity was not substantiated by contemporaneous documentation.

      
      

      Walters does not dispute these determinations either, and consequently they, too, are adopted as the undersigned's findings of fact.

      CONCLUSIONS OF LAW

      
      

   8. The Division of Administrative Hearings has personal and subject matter jurisdiction in this proceeding pursuant to Sections 120.569 and 120.57(1), Florida Statutes.

   9. The Agency is empowered to "recover overpayments . . . as appropriate." § 409.913, Fla. Stat. An "overpayment" includes "any amount that is not authorized to be paid by the Medicaid program whether paid as a result of inaccurate or improper cost reporting, improper claiming, unacceptable practices, fraud, abuse, or mistake." § 409.913(1)(e), Fla. Stat.

   10. The burden of establishing an alleged Medicaid overpayment by a preponderance of the evidence falls on the Agency. South Medical Services, Inc. v. Agency for Health Care Admin., 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).ii

   11. One method of recovering overpayments is through "recoupment," which is "the process by which the department [i.e. AHCA] recovers an overpayment or inappropriate payment from a Medicaid provider." Fla. Admin. Code R. 59G- 1.010(245)(emphasis added).

   12. The term "Medicaid provider" or "provider" denotes "a person or entity that has a Medicaid provider agreement in effect with the agency and is in good standing with the agency."

       § 409.901(16), Fla. Stat. The "provider agreement" is "a contract between the agency and a provider for the provision of services or goods, or both, to Medicaid recipients pursuant to Medicaid." § 409.901(17), Fla. Stat.

   13. It is Walters' position that the Agency cannot recover the undisputed Overpayment from him (as opposed to the Corporation) because he (unlike the Corporation) was not a party to the 1982 Agreement and thus was never a provider who could potentially be found personally liable in a recoupment proceeding. This contention, in fact, constitutes Walters' only

       defense. As he explained in his Proposed Recommended Order: "If Dr. Walters can be held to account in his individual capacity, he concedes the overpayment and must suffer the consequences set out by the Agency. If he cannot, the Agency has targeted the wrong party, and the case must be dismissed." Dr. Walters' Prop. Rec. Order at 4.

   14. The undersigned agrees with Walters that he and the Corporation are separate and distinct "persons" whose respective liabilities are not necessarily, or even likely, coterminous. The undersigned further agrees with Walters that the evidence in this case is probably insufficient to pierce the corporate veil and impose the Corporation's liabilities on its shareholder(s), even assuming for argument's sake that corporate veils are "piercable" in administrative proceedings.

   15. The undersigned nevertheless concludes that Walters' defense is unsound. The problem with Walters' position is not that its foundational premises are false; the problem, rather, is that the Audit Period is not, say, 1983-85, but some 20 years later, by which time the 1982 Agreement was water under the bridge, a piece of history belonging to the past. Over time, the relationship between the Corporation and its principal practitioner, on the one hand, and the state Medicaid agency, on the other, clearly had evolved, as the parties' actions repeatedly made manifest.

   16. Black-letter law holds that a "written contract can be modified by subsequent oral agreement between the parties or by the parties' course of dealing." E.g., Kiwanis Club of Little Havana, Inc. v. De Kalafe, 723 So. 2d 838, 841 (Fla. 3d DCA 1998)(collecting cases; emphasis added). Moreover, "[w]hether a

       written contract has been modified by subsequent oral agreement or by course of dealing is a question of fact[.]" Id.

   17. Here, the evidence of the parties' course of dealing—— which shows that Walters frequently held himself out, and was treated by the Agency, as the provider——has persuaded the undersigned to determine, as a matter of fact, that the 1982 Agreement (to the extent it remained operative during the Audit Period, which is debatable given that subsequent written agreements were executed) was modified prior to the Audit Period by the parties' conduct, which conduct reflected an intention to substitute Walters in place of the Corporation as provider.

   18. Having determined that Walters was, in fact, the provider during the Audit Period, the conclusion necessarily follows (as he himself would agree) that Walters is liable to the Agency for the Overpayment.

   19. There is, additionally, an alternative basis for concluding that Walters must personally reimburse the Agency for at least a substantial portion of the Overpayment——one that does not depend on his status as a provider. This separate and independent ground will be addressed below.

   20. Besides recovering overpayments via recoupment, the Agency is authorized to "require repayment for inappropriate, medically unnecessary, or excessive goods or services from the person furnishing them, the person under whose supervision they

       were furnished, or the person causing them to be furnished." § 409.913(11), Fla. Stat. (emphasis added).

   21. As used in Section 409.913, Florida Statutes, the term "person" means "any natural person, corporation, partnership, association, clinic, group, or other entity, whether or not such person is enrolled in the Medicaid program or is a provider of health care." § 409.913(1)(f), Fla. Stat. Walters obviously falls within this statutory definition of "person," even if he were not a provider. Being a "person," Walters is potentially liable to the Agency for repayment of sums expended by Medicaid for all inappropriate, medically unnecessary, or excessive goods or services for whose provision he was responsible.

   22. To be liable under Section 409.913(11), a person must have provided (or otherwise been responsible for causing the provision of) goods or services that, for at least one of three reasons, should not have been provided. In this instance, the causal connection between Walters, as a practitioner, and the claims that the Overpayment comprises, which stem exclusively from goods or services provided to patients in Walters' dental office, is beyond dispute. The only question affecting Walters' personal liability under Section 409.913(11), therefore, is whether the goods or services giving rise to the Overpayment were inappropriate, medically unnecessary, or excessive.

   23. On this latter question, the statute says: "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." § 409.913(7)(f), Fla. Stat. In other words, goods and services are deemed to be either excessive or medically unnecessary whenever they are not substantiated by contemporaneously prepared documentation.

   24. Here, none of the overpaid claims falling into the category Upcodes, Undocumented Services, or Duplicative Charges (as described in paragraph 7 above) was "fully and properly documented in the recipient's medical record." Thus all of the goods or services that were the subject of such claims must be deemed "excessive or not medically necessary," pursuant to Section 409.913(7)(f). AHCA is authorized under Section 409.913(11), Florida Statutes, to require that Walters repay Medicaid for all such goods or services because he was the "person" responsible for furnishing them.

   25. As for the goods or services that were the subject of the overpaid claims falling into the category Duplicative Charges, these cannot be deemed excessive or medically unnecessary pursuant to Section 409.913(7)(f) because there is no evidence establishing that the medical basis and need for them were not properly documented in the patients' respective

       records. Nor is there any other evidence proving that these goods or services were inappropriate, medically unnecessary, or excessive. Indeed, as far as the evidence shows, the problem with the claims in the Duplicative Charges category had nothing to do with the goods and services per se. The problem, rather, was that Medicaid was billed twice for these goods and services. In other words, the impropriety with regard to these claims involved the billing practices, not the goods and services themselves, which latter appear to have been appropriate and necessary.

   26. Consequently, if Walters were not a provider, then the Agency would be without authority, under Section 409.913(11), to require that he repay Medicaid for the goods or services which were the subject of the overpaid claims falling into the category Duplicative Charges.iii But, to be clear, only the overpayments associated with these particular claims would be beyond the scope of Walters' liability as a furnishing "person." He could still be held personally responsible for repaying the remainder of the Overpayment.

   27. There is one final matter to discuss. The Agency seeks to impose a fine of $2,000 against Walters. The authority to impose such a fine is given in Section 409.913(16), Florida Statutes, which provides in pertinent part as follows:

       The agency shall impose any of the following sanctions or disincentives on a provider or a person for any of the acts described in subsection (15):

       
       

       * * *

       
       

       (c) Imposition of a fine of up to $5,000 for each violation.

       
       

   28. Among the acts described in subsection (15) are the following:

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

       
       

       § 409.913(15)(f), Fla. Stat.

       
       

   29. As discussed above, Walters furnished goods or services that were excessive or medically unnecessary. Therefore, whether he be considered a provider or a furnishing person, Walters has committed multiple violations, for each of which AHCA may impose a fine of up to $5,000. The fine of

$2,000 that AHCA wants to impose is well within its statutory

authority.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency enter a final order requiring Walters to repay the Agency the principal amount of

$333,632.00, together with an administrative fine of $2,000.

DONE AND ENTERED this 5th day of June, 2007, in Tallahassee, Leon County, Florida.

S

JOHN G. VAN LANINGHAM

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675 SUNCOM 278-9675

Fax Filing (850) 921-6847 www.doah.state.fl.us

Filed with the Clerk of the Division of Administrative Hearings this 5th day of June, 2007.

ENDNOTES

i/ The term "provider" is a statutorily defined term of art in the law governing Medicaid, denoting an entity or person who has entered into a provider agreement with the state Medicaid agency. Because the dispute at the heart of this case concerns whether Walters, in his individual capacity, was a "provider," the word "provider" will be used in this Recommended Order exclusively as a term of art. To avoid confusion, the term "practitioner" will be used when referring to a licensed professional who renders health care services without being, necessarily, a Medicaid provider.

ii/ Although the Agency bears the ultimate burden of persuasion and thus must present a prima facie case through the introduction of competent substantial evidence before the provider is required to respond, Section 409.913(22), Florida Statutes, provides that "[t]he audit report, supported by agency work papers, showing an overpayment to the provider constitutes evidence of the overpayment." Thus, the Agency can make a prima facie case merely by proffering a properly supported audit report, which must be received in evidence. See Maz Pharmaceuticals, Inc. v. Agency for Health Care Administration,

DOAH Case No. 97-3791, 1998 Fla. Div. Adm. Hear. LEXIS 6245, *6-

*7 (Mar. 20, 1998); see also Full Health Care, Inc. v. Agency for Health Care Administration, DOAH Case No. 00-4441, 2001 WL 729127, *8-9 (Fla.Div.Admin.Hrgs. June 25, 2001)(adopted in toto, Sept. 28, 2001, AHCA Rendition No. 01-262-FOF-MDO).

iii/ The precise amount of the Overpayment attributable to the goods or services that were the subject of the overpaid claims falling into the Duplicative Charges category could be ascertained as a ministerial matter, were it necessary to do so, based upon the evidence in the record.

COPIES FURNISHED:

L. William Porter, II, Esquire

Agency for Health Care Administration Fort Knox Executive Center III

2727 Mahan Drive, Building 3, Mail Stop 3

Tallahassee, Florida 32308-5403

Sean M. Ellsworth, Esquire Ellsworth Law Firm, P.A.

404 Washington Avenue, Suite 750 Miami Beach, Florida 33139

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

Tallahassee, Florida 32308

Craig Smith, General Counsel

Agency for Health Care Administration Fort Knox Building, Suite 3431

2727 Mahan Drive

Tallahassee, Florida 32308

Andrew Agwunobi, M.D., 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: 06-003491MPI

Orders for Case No: 06-003491MPI