STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Petitioner, )

)

vs. ) CASE NO. 77-1523

) CASE NO. 77-1524

SHORE ACRES NURSING AND )

CONVALESCENT HOME, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, K. N. Ayers, held a consolidated hearing in the above styled cases on October 6, 1978 at Largo, Florida.

APPEARANCES

For Petitioner: Barbara D. McPherson, Esquire

Post Office Box 5046 Clearwater, Florida 33518

For Respondent: Robert P. Kalle, Esquire

101 Second Avenue North, Suite 301 St. Petersburg, Florida 33701

By letters dated July 7, 1977 the Department of Health and Rehabilitative Services (HRS), Petitioner, demanded repayment of $6,109 as overpayment on the Medicaid payments made to Shore Acres Nursing and Convalescent Center, Respondent, for the year ending December 31, 1975 and $3,419 for the year ending December 31, 1976. By letters dated August 6, 1977 Respondent contested the audits and overpayments alleged and requested hearings. These cases were initially scheduled for hearing on June 13, 1978 and, at the request of both parties, were continued to October 6, 1978.

At the hearing Respondent's Motion to Compel Specific Response to Motion to Produce was denied after each party had presented arguments. Thereafter one witness was called by Petitioner, one witness was called by Respondent and one exhibit was admitted into evidence. There was no real dispute regarding the facts here involved and near the close of the hearing the parties agreed that the sole issue was whether the deductions for costs associated with Medicare payments were required to be deducted in determining the allowable Medicaid reimbursement.

FINDINGS OF FACT

1. As a result of an audit report submitted December 13, 1976 for the Shore Acres Nursing and Convalescent Center for the fiscal year ending December

   31, 1975, an adjustment in the Cost of Operations totaling $119,387 was made which resulted in an overpayment to Respondent of $6,109 (Exhibit 1).

   
   

2. A similar audit for the period ending December 31, 1976 produced adjustments resulting in an overpayment of $3,419.

   
   

3. Petitioner contends that the laws and regulations pertaining to Medicaid payments require an adjustment be made for certain costs paid by Medicare. It is this Medicare adjustment that is in dispute.

   
   

4. Medicare will pay for certain costs which will not be paid by Medicaid, such as drugs and physical therapy. Medicare has a coinsurance requirement which can be paid by the individual, his insurance carrier, or Medicaid. Medicaid is a full coverage program but all services, e.g. drugs, physical therapy and speech therapy, are not covered by Medicaid. It is the Medicaid payments that are here involved and which Petitioner contends are computed after deductions in operating costs are made for those costs associated with Medicare. Some of these costs involve services that are not part of the covered services of the Medicaid program. Indirect costs associated with the direct costs for services associated with Medicare are also deducted.

   
   

5. Using the figures supplied by Respondent, the auditor deducted indirect costs due to depreciation, operation and maintenance of plant of $1,432; other indirect various general services costs of $2,309; ancillary costs of $16,772 for physical therapy; drugs costs of $15,732; speech therapy of $2,983; outpatient costs of $4,515; the distinct part of room and board charge of

   $164,621 less $65,475 for non-Medicaid per diem costs; and less adjustment for return on equity for inpatient days and outpatient days. After these adjustments are made, the audit resulted in overpayments as noted above.

   
   

6. Respondent contends, and Petitioner concurs, that when the first audits were made (and the 1975 audit here involved was the first), none of the nursing homes were deducting the Medicare adjustment in submitting their claim for payments to HRS.

   
   

7. Respondent contends that making the adjustments here involved resulted in removing costs which affect the average cost per patient day. It is also contended that the majority of those deductions come from the full-care patients which have the highest per diem costs and this results in lower payments to the providers.

   
   

   CONCLUSIONS OF LAW

   
   

8. The Social Security Health Insurance Act, in 42 USC 1395 x(v)(i)(A) provides in pertinent part:

   
   

   The reasonable cost of any services shall be the cost actually incurred, excluding there- from any part of the incurred cost found to be unnecessary in the efficient delivery of needed health services, and shall be deter- mined in accordance with regulations esta- blishing the method or methods to be used, and the items to be included Such

   regulations shall (i) take into account both direct and indirect costs of providers of services (excluding therefrom any such costs,

   including standby costs, which are determined in accordance with regulations to be unneces- sary in the efficient delivery of services covered by the insurance programs established under this title) in order that, under the methods of determining costs, the necessary costs of efficiently delivering covered ser- vices to individuals covered by the insurance programs established by this title will not be borne by individuals not so covered, and the cost with respect to individuals not so covered will not be borne by such insurance programs . . . .

   
   

9. Regulations promulgated in accordance with the above statute are contained in 42 CFR 405.451(b)(1) which provides in pertinent part:

   
   

   The objective is that in determining costs, the costs with respect to individuals covered

   by the program will not be borne by individuals not so covered, and the costs with respect to individuals not so covered will not be borne by the program.

   
   

10. The above quoted provisions require all costs relating to Medicare patients be separated out in determining the costs for which reimbursement will be made under Medicaid. The Medicare adjustments here presented are for the purpose of accomplishing this objective and are adjustments HRS is required to make.

    
    

11. From the foregoing it is concluded that Shore Acres Nursing and Convalescent Home received excess Medicaid payments for the 1975 fiscal year of

$6,109 and for the fiscal year 1976 of $3,419. It is therefore

RECOMMENDED that Shore Acres Nursing and Convalescent Home be required to remit the overpayments, or in lieu thereof that these overpayments be deducted from future Medicaid payments to Respondent.

Done and entered this 22nd of November, 1978.

COPIES FURNISHED:

Barbara D. McPherson, Esquire Post Office Box 5046 Clearwater, Florida 33518

K. N. AYERS Hearing Officer

Division of Administrative Hearings Room 101, Collins Building

MAILING ADDRESS:

Room 530, Carlton Building Tallahassee, Florida 32304

(904) 488-9675

Robert P. Kalle, Esquire

101 Second Avenue North Suite 301

St. Petersburg, Florida 33701

Docket for Case No: 77-001523

Orders for Case No: 77-001523