STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

HUNTER LAMENDOLA, A MINOR,

BY AND THROUGH HIS MOTHER AND NATURAL GUARDIAN, ASHLEY LAMENDOLA

Petitioner,

vs.

AGENCY FOR HEALTH CARE ADMINISTRATION,

Case No. 17-3908MTR

Respondent.

/

FINAL ORDER

An administrative hearing was held in this case on

October 12, 2017, by video teleconference at sites in Lauderdale Lakes and Tallahassee, Florida, before James H. Peterson III, Administrative Law Judge with the Division of Administrative Hearings (DOAH).

APPEARANCES

For Petitioner: Floyd B. Faglie, Esquire

Staunton & Faglie, P.L.

189 East Walnut Street Monticello, Florida 32344

For Respondent: Alexander R. Boler, Esquire Suite 300

2073 Summit Lake Drive Tallahassee, Florida 32317

STATEMENT OF THE ISSUE

The issue to be determined is the amount payable to the Agency for Health Care Administration (AHCA or Respondent) in satisfaction of its $157,983.63 Medicaid lien asserted against medical malpractice settlement proceeds received by Hunter Lamendola (Hunter), a minor, by and through his mother and natural guardian, Ashley Lamendola (Petitioner).

PRELIMINARY STATEMENT

On July 13, 2017, Petitioner filed a Petition to Determine Amount Payable to Agency for Health Care Administration in Satisfaction of Medicaid Lien, pursuant to section 409.910(17)(b), Florida Statutes (2016).1/ The final hearing was duly noticed and scheduled for October 12, 2017.

Prior to the final hearing, AHCA filed a Motion to Stay, arguing that this case should be stayed pending the outcome of Giraldo v. Agency for Health Care Administration, 208 So. 3d 244

(Fla. 1st DCA 2016), review granted, SC17-297 (Fla. S. Ct. 2017), and because of rulings in Gallarado v. Senior,2/ U.S. Dist., Case No. 4:16-cv-116-MW-CAS (N.D. Fla. 2017), preventing enforcement of certain portions of section 409.910(17)(b). The Motion to Stay was denied and the final hearing was held as scheduled. In accordance with the ruling denying the Motion to Stay, the parties stipulated, in this case, that Petitioner’s

burden was a preponderance of the evidence and that settlement proceeds for future medical expenses are not subject to AHCA’s lien.

At the final hearing, Petitioner presented the testimony of two witnesses, Daniel Harwin, Esquire, and R. Vinson Barrett, Esquire, each of whom was accepted as an expert in valuation of damages in personal injury cases. Petitioner's Exhibits P-1 through P-15 were received into evidence. Respondent submitted one exhibit which was received into evidence as Exhibit A.

At the final hearing, the parties agreed that Respondent's Exhibit A should be deemed confidential and sealed. In accordance with that agreement, an Agreed Protective Order was subsequently entered on December 20, 2017.

The proceedings were recorded and a transcript was ordered.

The parties’ were given 20 days from the filing of the transcript within which to file proposed final orders. The Transcript was filed November 8, 2017. The parties requested, and were granted, an extension of time until December 4, 2017, within which to file their proposed final orders. Thereafter, the parties timely filed their respective Proposed Final Orders. Following an Order granting Respondent’s Unopposed Motion to Amend, Respondent filed an Amended Proposed Final Order on December 5, 2017. Petitioner’s Proposed Final Order and

Respondent’s Amended Proposed Final Order were considered in rendering this Final Order.

FINDINGS OF FACT

1. On June 26, 2012, Petitioner presented to the hospital with a history of contractions for six hours prior to her arrival at the hospital. She had been placed on bed rest for gestational hypertension five days prior to arriving at the hospital. When she arrived, she had hypertension. Petitioner was admitted to the labor and delivery unit at 8:33 p.m. Petitioner was placed on a fetal monitor and progressed through her course of labor. Her initial fetal monitoring showed the baby was healthy and well-oxygenated, however, throughout the course of labor, the fetal monitor exhibited signs that the baby was in significant distress. At 4:01 a.m. on June 27, 2012, Petitioner was given an epidural, and after a course of labor, Hunter was delivered at 3:47 p.m. through an operative vaginal delivery. Hunter suffered permanent and catastrophic brain damage during his birth. As a result, Hunter is unable to eat, speak, toilet, ambulate, or care for himself in any manner.

2. Hunter’s medical care related to the delivery was paid by Medicaid. The Medicaid program through AHCA provided

   $157,983.63 in benefits. The Medicaid program through the Department of Health Children’s Medical Services Title XIX MMA – Pedicare (DOH), provided $26,189.66 in benefits; the Medicaid

   
   

   program through a Medicaid-managed care organization, known as Amerigroup Community Care (Amerigroup), provided $51,696.99 in benefits; and the Medicaid program through a Medicaid-managed care organization, known as WellCare of Florida (WellCare), provided $13,239.19 in benefits. Accordingly, the sum of these Medicaid benefits, $249,109.47, constituted Hunter’s entire claim for past medical expenses.

3. Petitioner brought a medical malpractice action against the medical providers and staff responsible for Hunter’s care (Defendant medical providers) to recover all of Hunter’s damages, as well as her own individual damages associated with Hunter’s injuries.

4. The medical malpractice lawsuit was settled through a series of confidential settlements totaling $10,000,000 and this settlement was approved by the Court.

5. During the pendency of Hunter’s medical malpractice action, AHCA was notified of the action, and AHCA asserted a

   $157,983.63 Medicaid lien against Hunter’s cause of action and settlement of that action.

6. AHCA, through the Medicaid program, spent $157,983.63 on behalf of Hunter, all of which represents expenditures paid for Hunter’s past medical expenses.

7. No portion of the $157,983.63 paid through the Medicaid program on behalf of Hunter represent expenditures for future

   
   

   medical expenses, and Medicaid did not make payments in advance for medical care.

8. Application of the formula set forth in section 409.910(11)(f), Florida Statutes, to Hunter’s settlement requires payment to AHCA of the full $157,983.63 Medicaid lien.

9. Petitioner has deposited the full Medicaid lien amount in an interest-bearing account for the benefit of AHCA pending an administrative determination of AHCA’s rights, and this constitutes “final agency action” for purposes of chapter 120, Florida Statutes, pursuant to section 409.910(17).

10. At the final hearing, Mr. Harwin, who represented Hunter and his family in the underlying medical malpractice action, testified, and was accepted, without objection, as an expert in the valuation of damages suffered by injured parties. Mr. Harwin is a member of several trial attorney associations, stays abreast of jury verdicts relative to birth injuries, and ascertains the value of damages suffered by injured parties as a routine part of his practice.

11. Mr. Harwin was familiar with and explained Hunter’s catastrophic brain injury giving rise to Petitioner’s claim. He also explained that, as a result of Hunter’s injury, Hunter is blind, fed through a feeding tube, unable to control his arms, legs or head, and suffers between six to eight seizures

    
    

    per day. Mr. Harwin testified that Hunter’s injury has also had a devastating impact on Hunter’s mother, Ashley Lamendola.

12. According Mr. Harwin, considering Hunter’s past medical expenses, a life care plan for Hunter’s care prepared by an economist, and the extent of non-economic damages, and in light of determinations of mock juries and a jury consultant in this case, as well as Mr. Harwin’s familiarity with jury verdicts reached in similar cases, Hunter and his mother’s damages have a value in excess of $35,000,000.

13. Mr. Harwin’s testimony as to the value of Petitioner’s claim was credible and is accepted.

14. Petitioner also presented the testimony of

    
    

    Mr. Barrett, who was accepted as an expert in the valuation of damages. Mr. Barrett has been accepted as an expert in valuation of damages in a number of other Medicaid lien cases before DOAH. Mr. Barrett has been a trial attorney for

    41 years, with a primary focus on plaintiff personal injury cases, including medical malpractice, medical products liability, and pharmaceutical products liability. Mr. Barrett stays abreast of jury verdicts and often makes assessments concerning the value of damages suffered by injured parties.

15. After familiarizing himself with Hunter’s injuries through review of pertinent medical records and Petitioner’s exhibits, Mr. Barrett offered his opinion, based upon his

    
    

    professional training and experience, as well as review of comparable jury verdicts, that a conservative value of the damages suffered would be “$35,000,000 to $50,000,000.”

16. Mr. Barrett’s testimony as to the value of Petitioner’s claim was credible and is accepted.

17. AHCA did not call any witnesses, present any evidence as to the value of Petitioner’s claim, or propose a differing valuation of the damages. Based upon the unrebutted evidence presented by Petitioner’s experts, it is found that a conservative value of Petitioner’s claim is $35,000,000.

18. Attorney’s fees for the underlying medical malpractice case leading to Petitioner’s $10,000,000.00 settlement totaled

    $4,500,000.00, with costs of $490,486.33. While the formula under section 409.910(11)(f) determines amounts distributable to Medicaid after attorney’s fees and taxable costs, there is no language in section 409.910(17)(b) suggesting that attorney’s fees or costs should be subtracted from settlement proceeds in determining whether a lesser portion of the total recovery should be allocated to reimburse Medicaid.

19. Costs and attorney’s fees are not an element of Petitioner’s damages and were not subtracted from the settlement proceeds in determining whether a lesser portion of the total recovery should be allocated to AHCA’s Medicaid lien.

    
    

20. Considering the valuation of Petitioner’s claim at

    
    

    $35,000,000.00, Petitioner’s $10,000,000.00 settlement represents only a 10/35ths recovery of Petitioner’s damages. Multiplying that same 10/35 fraction to the $157,983.63 paid by AHCA through the Medicaid program for past medical expenses results in the proportional sum of $45,138.18 from the settlement proceeds available to satisfy AHCA’s Medicaid lien.

    CONCLUSIONS OF LAW

    
    

21. The Division of Administrative Hearings has jurisdiction over the subject matter and parties in this case pursuant to sections 120.569, 120.57(1), and 409.910(17), Florida Statutes.

22. AHCA is the agency authorized to administer Florida’s Medicaid program. See § 409.902, Fla. Stat.

23. The Medicaid program “provide[s] federal financial assistance to States that choose to reimburse certain costs of medical treatment for needy persons.” Harris v. McRae, 448 U.S.

    297, 301 (1980). Though participation is optional, once a state elects to participate in the Medicaid program, it must comply with federal requirements governing the same. Id.

24. As a condition for receipt of federal Medicaid funds, states are required to seek reimbursement for medical expenses incurred on behalf of Medicaid recipients who later recover from

    
    

    legally liable third parties. See Ark. Dep't of Health & Human

    
    

    Servs. v. Ahlborn, 547 U.S. 268, 276 (2006).

    
    

25. Consistent with this federal requirement, the Florida Legislature has enacted section 409.910, which authorizes and requires the State to be reimbursed for Medicaid funds paid for a recipient's medical care when that recipient later receives a personal injury judgment or settlement from a third party. Smith v. Ag. for Health Care Admin., 24 So. 3d 590 (Fla. 5th DCA

    2009). The statute creates an automatic lien on any such judgment or settlement for the medical assistance provided by Medicaid. See § 409.910(6)(c), Fla. Stat.

26. The amount to be recovered for Medicaid medical expenses from a judgment, award, or settlement from a third party is determined by the formula in section 409.910(11)(f). Ag. for Health Care Admin. v. Riley, 119 So. 3d 514, 515 n.3 (Fla. 2d DCA 2013).

27. Application of the formula in section 409.910(11)(f) to Petitioner’s $10,000,000.00 settlement requires payment to AHCA of its full $157,983.63 Medicaid lien.

28. Respondent correctly asserts that it is not automatically bound by any allocation of damages set forth in a settlement between a Medicaid recipient and a third party that may be contrary to the formulaic amount, citing section 409.910(13). See also § 409.910(6)(c)7., Fla. Stat. (“No

    
    

    release or satisfaction of any . . . settlement agreement shall be valid or effectual as against a lien created under this paragraph, unless the agency joins in the release or satisfaction or executes a release of the lien.”). Rather, in cases such as this, where Respondent has not participated in or approved the settlement, the administrative procedure created by section 409.910(17)(b) is the means for determining whether a lesser portion of a total recovery should be allocated as reimbursement for medical expenses in lieu of the amount calculated by application of the formula in section 409.910(11)(f).

29. Section 409.910(17)(b) provides:

    
    

    A recipient may contest the amount designated as recovered medical expense damages payable to the agency pursuant to the formula specified in paragraph (11)(f) by filing a petition under chapter 120 within 21 days after the date of payment of funds to the agency or after the date of placing the full amount of the third-party benefits in the trust account for the benefit of the agency pursuant to

    paragraph (a). The petition shall be filed with the Division of Administrative Hearings. For purposes of chapter 120, the payment of funds to the agency or the placement of the full amount of the third- party benefits in the trust account for the benefit of the agency constitutes final agency action and notice thereof. Final order authority for the proceedings specified in this subsection rests with the Division of Administrative Hearings. This procedure is the exclusive method for challenging the amount of third-party

    
    

    benefits payable to the agency. In order to successfully challenge the amount payable to the agency, the recipient must prove, by clear and convincing evidence, that a lesser portion of the total recovery should be allocated as reimbursement for past and future medical expenses than the amount calculated by the agency pursuant to the formula set forth in paragraph (11)(f) or that Medicaid provided a lesser amount of medical assistance than that asserted by the agency.

    
    

30. The language of section 409.910(17)(b), quoted above, makes it clear that the formula set forth in subsection (11) constitutes a default allocation of the amount of a settlement that is attributable to medical costs, and sets forth an administrative procedure for adversarial testing of that allocation. See Harrell v. State, 143 So. 3d 478, 480 (Fla. 1st

    DCA 2014)(adopting the holding in Riley that petitioner “should

    
    

    be afforded an opportunity to seek the reduction of a Medicaid lien amount established by the statutory default allocation by demonstrating, with evidence, that the lien amount exceeds the amount recovered for medical expenses”)(quoting Roberts v.

    Albertson’s, Inc., 119 So. 3d 457, 465-466 (Fla. 4th DCA 2012), reh’g and reh’g en banc denied sub nom. Giorgione v.

    Albertson’s, Inc., 2013 Fla. App. LEXIS 10067 (Fla. 4th DCA

    
    

    June 26, 2013)).

    
    

31. Notwithstanding the language of section 409.910(17)(b), because of rulings in Gallarado v. Senior, U.S. Dist., Case

    
    

    No. 4:16-cv-116-MW-CAS (N.D. Fla. 2017), and stipulations of the parties, Petitioner’s burden in this case is a preponderance of the evidence and any settlement proceeds attributed to future medical expenses shall not be considered in calculation of AHCA’s lien.

32. In this case, Petitioner proved by a preponderance of the evidence that the settlement proceeds of $10,000,000 represent only 10/35ths of Petitioner’s claim valued at

$35,000,000. It is concluded that AHCA’s full Medicaid lien amount should be reduced by the percentage (or fraction)3/ that Petitioner’s recovery represents of the total value of Petitioner’s claim.4/ Multiplying that same 10/35 fraction by AHCA’s full Medicaid lien sum of $157,983.63,5/ results in

$45,138.18, which constitutes a fair, reasonable, and accurate share of the total recovery for past medical expenses actually paid by AHCA through the Medicaid program.6/

CONCLUSION

Consistent with the above Findings of Fact and Conclusions of Law, it is hereby

ORDERED that:

The Agency for Health Care Administration is entitled to

$45,138.18 in satisfaction of its Medicaid lien.

DONE AND ORDERED this 5th day of January, 2018, in Tallahassee, Leon County, Florida.

S

JAMES H. PETERSON, III

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675

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

Filed with the Clerk of the Division of Administrative Hearings this 5th day of January, 2018.

ENDNOTES

1/ Unless otherwise noted, all statutory references to section 409.910 and other statutes are to the 2016 versions, which are the versions in effect in 2016 when Petitioner’s medical malpractice case settled. There were substantive amendments to section 409.910 in 2017 (effective July 1, 2017), but those amendments are not retroactive.

2/ Originally styled Gallardo v. Dudek, the case was restyled after Justin Senior replaced AHCA’s former secretary, Elizabeth Dudek.

3/ Petitioner used rounded percentages derived from the fractions in its calculations. Actual fractions, which are more accurate than rounded percentages, are used in the calculations set forth in this Final Order (i.e., 10/35 x $157,983.63 =

$45,138.18).

4/ This method of lien-reduction has been recognized in this and other venues but has not been universally accepted. As observed in the Final Order entered by Administrative Law Judge Nelson in Museguez v. Agency for Health Care Administration, DOAH Case

No. 16-7379MTR, FO at 53 (Fla. DOAH Sept. 19, 2017):

To be clear, while some administrative law judges have accepted the premise that the amount to be paid should be measured by a percentage of the “fair value” of the claim, this one does not. In Willoughby, [v.

Agency for Health Care Administration, 212 So. 3d 516 (Fla. 2d DCA 2017)], the court acknowledged the “total value” methodology method and stated:

We do not condemn this approach; we recognize that ALJ’s frequently resort to this methodology in calculating amounts available to satisfy Medicaid liens. But we also acknowledge that the U.S. Supreme Court has not explicitly endorsed this method.

The Supreme Court “in no way adopted the formula as a required or sanctioned method to determine the medical expense portion of an overall settlement amount.” Smith v.

Agency for Health Care Admin., 24 So. 3d 590 So. 590, 591 (Fla. 5th DCA 2009).

Willoughby, 212 So. 3d at 522-23.

5/ AHCA suggested that, if the 10/35 fraction is to be applied, it should be applied to the Petitioner’s entire $249,109.47 in past medical expenses, resulting in a recovery of $71,174.13 to be paid to AHCA. AHCA’s suggestion is rejected. AHCA’s full Medicaid lien of $157,983.63 at issue in this case represents only a fraction of the Petitioner’s $249,109.47 in past medical expenses. Multiplying AHCA’s figure of $71,174.13 by the portion of medical expenses represented by AHCA’s full Medicaid lien results in the same $45,138.18 calculated in this Final Order (i.e., $71,174.13 x 157,983.63/249,109.47 = $45,138.18).

6/ Petitioner argued that AHCA’s lien amount should be even less because costs and attorney fees should be subtracted from the settlement proceeds before calculating the percentage of recovery compared to the value of Petitioner’s claim. Section 409.910(17)(b), however, does not provide support for that subtraction and those expenses were not otherwise included in the calculation of Petitioner’s damages or valuation of Petitioner’s claim. Therefore, no further reduction of AHCA’s lien amount is warranted.

COPIES FURNISHED:

Alexander R. Boler, Esquire

2073 Summit Lake Drive, Suite 300

Tallahassee, Florida 32317 (eServed)

Floyd B. Faglie, Esquire Staunton & Faglie, P.L.

189 East Walnut Street Monticello, Florida 32344 (eServed)

Richard J. Shoop, Agency Clerk

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

Tallahassee, Florida 32308 (eServed)

Stefan R. Grow, General Counsel Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308 (eServed)

Justin Senior, Secretary

Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 1

Tallahassee, Florida 32308 (eServed)

Thomas M. Hoeler, Esquire

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

Tallahassee, Florida 32308 (eServed)

Kim Kellum, Esquire

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

Tallahassee, Florida 32308 (eServed)

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this Final Order is entitled to judicial review pursuant to Section 120.68, Florida Statutes. Review proceedings are governed by the Florida Rules of Appellate Procedure. Such proceedings are commenced by filing one copy of a Notice of Administrative Appeal with the agency clerk of the Division of Administrative Hearings and a second copy, accompanied by filing fees prescribed by law, with the District Court of Appeal, First District, or with the District Court of Appeal in the appellate district where the party resides. The Notice of Administrative Appeal must be filed within 30 days of rendition of the order to be reviewed.

Docket for Case No: 17-003908MTR

Orders for Case No: 17-003908MTR