STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

AMERICAN HEALTH AND REHABILITATION ) CENTER, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 78-239

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice an administrative hearing was held in Room 104, Collins Building, Gaines and Adams Streets, Tallahassee, Florida, commencing at 2:30 p.m., April 11, 1978, before Delphene C. Strickland, State Hearing Officer, Division of Administrative Hearings.

APPEARANCES

For Petitioner: Patricia Hintz, Administrator

American Health and Rehabilitation Center, Inc.

7751 West Broward Boulevard Plantation, Florida 33324

For Respondent: James Mahorner, Esquire

Department of Health and Rehabilitative Services

1323 Winewood Boulevard

Tallahassee, Florida 32301 STATEMENT OF THE ISSUE

Whether the cost settlement for the year ending Jun 30, 1976, was fair and reasonable.

FINDINGS OF FACT

1. The American Health and Rehabilitation Center, Inc., is a nursing home located in Plantation, Florida.

   
   

2. The subject administrative hearing was requested by Petitioner in order to settle a dispute as to $17,356 disallowed by the Respondent, Department of Health and Rehabilitative Services, under Medicaid guidelines. The disputed disallowed costs were as follows: $6,855 - Lawn Maintenance; $1,975 - Telephone Advertising and long distance calls; $6,470 - Owner/Administrator auto rental; and $2,056 - Auto Expense for the year ending June 30, 1976.

3. (a) Yellow Pages Advertising

   
   

   Petitioner contends: that the yellow pages advertising had never been disallowed before and having been paid under HIM 15 should now be paid.

   
   

   Respondent contends: that only a telephone listing in the yellow pages is allowable; that a display advertisement is not compensable, and that even though such display advertising might have been paid in the past, it should not have been paid and should not be allowed as a result of this hearing.

   
   

   1. Lawn/Landscape Maintenance

      
      

      Petitioner contends: that there was a "bookkeeping error" in the amount of $2,853 charged for additional trees and plants and agrees that amount should not have been charged to "maintenance" expense; that the maintenance service that was utilized was less expensive for the services they required and gave better protection against loss of trees and other lawn and landscaping materials; that the equipment needed to service the lawn would not be supplied by the men they could hire.

      
      

      Respondent contends: that a fee of $12,000 for lawn and landscape maintenance is not supportable and that the occupancy of the home had always been full and therefore did not improve with the tripling of annual landscaping expenses; that there is a poor cost-benefit ratio with such charges and that a full time maintenance man could have been employed at near minimum wage to care for the lawn.

      
      

   2. Undocumented Use of Automobile

      
      

      Petitioner contends: that they had been previously allowed such costs and were audited each year and they had no way of knowing that they would be disallowed for the subject cost period; that they had some staff who used the cars for errands; that automobile expense is an acceptable business expense.

      
      

      Respondent contends: that transportation of Medicaid patients to physicians was arranged by direct payment to third party transportation providers or by having the physicians see the patients at the nursing home; that because of the lack of documentation by Petitioner there was no way to determine the business and non-business endeavors which included the use of the automobile and therefore the full amount should have been disallowed..

      
      

4. The yellow page display was designed primarily to advertise the nursing home to those seeking nursing home care.

   
   

5. Evidence presented showed that Petitioner was charged a sum of $700 per month or $8,400 per year. Whereon Petitioner claimed $12,000. The lawn covers approximately 1-1/2 acres.

   
   

6. No documentation was presented or testimony established as to the portion of the disallowed automobile use attributable to business use, the Mercedes used by the Petitioner and the complete lack of documentation as to its business use was not substantiated.

   CONCLUSIONS OF LAW

   
   

   Prudent Buyer Concept

   
   

7. Provider Reimbursement Manual, Chapter 21, Section 5852 provides in part:

   
   

   "Prudent Buyer" Concept -- Implicit in the intention that actual program costs be paid, to the extent they are reasonable, is the expectation that the provider will seek to minimize its costs and that its actual costs will not exceed what a "prudent" and cost- conscious buyer would pay for a given item or service. If costs are determined to exceed the level that such buyers incur, the absence of clear evidence that the higher costs were unavoidable, the excess costs are not reimbursable (5858, 5868).

   
   

8. Yellow page advertising 42 CfR 405.451, Section 2136.2 provides in part:

   
   

   Unallowable Advertising Costs (Prov. Reimb. Man., Part 1, Section 2136.2)

   
   

   Fund-raising costs, including advertising, promotional, or publicity costs incurred for such a purpose, are not allowable.

   
   

   While costs of advertising for the purpose of recruitment of physicians as members of the provider's salaried staff are allowable, (See Section 2136.1, [p. 5996A]), costs of advertising of a teneral nature designed to invite physicians to utilize the provider's facilities in their capacity as independent practitioners are not allowable.

   Professional contact costs, as discussed below, are allowable if reasonable.

   
   

   Advertising costs incurred in connection with the issuance of a provider's own stock, or the sale of stock held by the provider in another corporation, are considered as reductions in the proceeds from the sale and, therefore, are not includable in allowable costs.

   
   

   Costs of advertising to the general public which seeks to increase patient utilization of the provider's facilities are not allowable. Situations may occur where advertising which appears to be in the nature of the provider's public relations activity is, in fact, an effort to attract more patients. An analysis by the intermediary of

   the advertising copy and its distribution may then be necessary to determine the specific objective. While it is the policy of the Social Security Administration and other Federal agencies to promote the growth and expansion of needed provider facilities, general advertising to promote an increase in the patient utilization of services cannot properly be related to the care of patients.

   
   

   The advertising display of Petitioner was to maintain public utilization of the Respondent's facilities and is not allowed under the foregoing statutes since such general advertising is not related to the care of the patients.

   
   

9. Lawn Maintenance

   
   

   42 CfR 405.451; 2102.3; 2103 provides in part:

   
   

   Costs Not Related to Patient Care (Prov. Reimb. Man., Part 1, Section 2102.3)

   
   

   Costs not related to patient care are costs which are not appropriate or necessary and proper in developing and maintaining the operation of patient care facilities and activities. Such costs are not allowable in computing reimbursable costs.

   * * *

   Prudent Buyer (Prov. Reimb. Man., Part 1,

   $2103)

   
   

   A. General --The prudent and cost-conscious buyer not only refuses to pay more than the going price for an item or service, he also seeks to economize by minimizing cost. This is especially so when the buyer is an institution or organization which makes bulk purchases and can, therefore, often gain discounts because of the size of its purchases. It is quite common that discounts are given in these instances. In addition, bulk purchase of items or services often gives the buyer leverage in bargaining with suppliers for other items or services. Any alert and cost-conscious buyer seeks advantages, [and] it is to be expected that Medicare providers of services will also seek them.

   
   

   The Respondent has documented a $700 per month lawn maintenance expense which should be allowed for the subject year, however, this appears to be more than should be allowable in the future under the "prudent buyer" concept and a lower cost plan should be available and used for this relatively small lawn space.

   
   

10. Automobile Expense

    42 CfR 405.453; Section 2364 provides in part:

    
    

    Adequate Cost Data and Cost Finding (Reg. Section 405.453; Principle 2-3)

    
    

    Section 405.453. (a) Principle. Providers receiving payment on the basis of reimbursable cost must provide adequate cost data. This must be based on their financial and statistical records which must be capable of verification by qualified auditors. The cost data must be based on an approved method of cost finding and on the accrual basis of accounting. However, where governmental institutions operate on a cash basis of accounting, cost data based on such basis of accounting will be acceptable, subject to appropriate treatment of capital expenditures.

    * * *

    (c) Adequacy of cost information. Adequate cost information must be obtained from the provider's records to support payments made for services rendered to beneficiaries. The requirement of adequacy of data implies that the data be accurate and in sufficient detail to accomplish the purposes for which it is intended. Adequate data capable of being audited is consistent with good business concepts and effective and efficient management of any organization, whether it is operated for profit or on a nonprofit basis. It is a reasonable expectation on the part of any agency paying for services on a cost- reimbursement basis. In order to provide the required cost data and not impair comparability, financial and statistical records should be maintained in a manner consistent from one period to another.

    * * *

    
    

11. There is no showing that the automobile expense was related to the care of those for whom the Medicaid program exists.

RECOMMENDATION

Allow telephone listing expense only and $700 per month for lawn maintenance. Disallow the undocumented automobile use.

Unwarranted payments for advertisements, excessive lawn care and undocumented automobile expenses that have been made in the past is no reason that such undue payments should be continued.

DONE AND ENTERED this 2nd day of August 1978 in Tallahassee, Florida.

DELPHENE C. STRICKLAND

Hearing Officer

Division of Administrative Hearings

530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 2nd day of August 1978.

COPIES FURNISHED:

James Mahorner, Esquire Department of Health and

Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32301

Miss Patricia E. Hintz Administrator American Health and

Rehabilitation Center 7751 West Broward Boulevard Plantation, Florida 33324

Docket for Case No: 78-000239

Orders for Case No: 78-000239