STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

HILLSHAVEN CONVALESCENT CENTER ) OF GAINESVILLE, )

)

Petitioner, )

)

vs. ) CASE NO. 79-586

) FLORIDA DEPARTMENT OF HEALTH ) AND REHABILITATIVE SERVICES, )

)

Respondent. )

)

FINDINGS OF FACT, CONCLUSIONS OF LAW, AND RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, G. Steven Pfeiffer, conducted a final hearing in this matter on June 26, 1979.

APPEARANCES

This matter involves the amount of compensation that the Petitioner should receive under the "Medicaid Program" for services that the Petitioner provided to nursing home patients for the fiscal year ending March 31, 1977. The Department conducted an audit of the Petitioner's records and determined that the Petitioner had been overpaid and should reimburse the Department. The Petitioner requested a formal hearing in accordance with provisions of Section 120.57(1), Florida Statutes. The Department forwarded the matter to the Division of Administrative Hearings for the assignment of a Hearing Officer and the scheduling of a final hearing. The only issue in this matter is how the Petitioner's per diem reimbursement rate for Medicare patients should be determined. Petitioner contends that all of its patients should be considered in calculating the per diem rate. The Department contends that Medicare patients should not be included in the calculation.

Robert Kearney, the Petitioner's reimbursement manager, testified on behalf of the Petitioner. Ken Conners, the Department's audit evaluation and review analyst testified on behalf of the Department. Exhibits 1 through 9 were offered into evidence and were received. The parties requested an extended period within which to submit post-hearing legal memoranda, and several extensions to that schedule were granted.

FINDINGS OF FACT

1. Hillhaven Convalescent Center is a 120-bed skilled nursing care facility, and it participates in Florida's medical assistance program (Medicaid) as a provider of skilled nursing home care. The Department reimburses the Petitioner for the Petitioner's cost in providing such services to eligible patients. As a part of the reimbursement system, Petitioner is required to calculate a per diem reimbursement rate for its Medicaid patients. The

   Petitioner computed this rate by dividing its total of appropriate expenses ($828,628) by its total patient days (39,399). The resulting per diem rate is

   $21.03. The total expense and total patient day figures were based upon all categories of patients served by the Petitioner, including Medicare, Medicaid, private and Veterans Administration patients.

   
   

2. The Department retained a private accounting firm, Coopers & Lybrand, to audit the Petitioner's 1977 fiscal cost report. The accounting firm concluded that the per diem rate calculated by the Petitioner was erroneous. The firm subtracted total expenses and total patient days attributable to Medicare patients from the figure utilized by the Petitioner. The result of this adjustment was to substantially reduce the Center's per diem rate, and the amount of compensation that the Petitioner is entitled to receive for its participation in the Medicaid Program.

   
   

3. Medicare patients generally require a more profound degree of care than do Medicaid patients. Including Medicare patients in a determination of per diem rates at nursing homes will almost universally result in an increase in the rate.

   
   

4. The Department has not adopted its policy to exclude Medicare expenses and Medicare days in determining Medicaid per diem rates as a rule in accordance with the Administrative Procedure Act. The Department has uniformly enforced the policy with respect to nursing home facilities participating in the Medicaid Program that it has audited.

   
   

5. The parties have stipulated and agreed that the decision in this matter will be applicable to a companion case involving a different nursing home owned by the same corporation.

   
   

6. The Petitioner has submitted proposed findings of fact and conclusions of law. To the extent that the proposals have not been substantively adopted herein, they have been rejected either as not supported by the evidence, or as not relevant.

   
   

   CONCLUSIONS OF LAW

   
   

7. The Division of Administrative Hearings has jurisdiction over the subject matter of this proceeding and over the parties. Section 120.57(1), Florida Statutes.

   
   

8. The issue of whether costs relating to Medicare patients should be separated out in determining the cost for which reimbursement will be made under the Medicaid Program has been considered and resolved in favor of the position being taken by the Department in this case in two previous matters before the Division of Administrative Hearings. Department of Health and Rehabilitative Services v. Fountainhead Nursing and Convalescent Home, DOAH Case No. 79-765, Recommended Order entered August 30, 1979, adopted by Final Order entered September 13, 1979; Department of Health and Rehabilitative Services v. Shore Acres Nursing and Convalescent Home, DOAH Case Nos.77-1523, 77-1524, Recommended Order entered November 22, 1978, adopted by Final Order entered December 13, 1978. In the Shore Acres matter the Hearing Officer stated: (at p. 4)

   
   

   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 determined

   in accordance with regulations establishing 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 ser vices (excluding therefrom any such costs, including standby costs, which are de termined in accordance with regulations

   to be unnecessary 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 deliver ing covered services 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...

   
   

   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 indi viduals 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.

   
   

   The above quoted provisions require all costs relating to Medicare patients he 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.

   
   

   It appears that including figures relating to Medicare patients in computing a per diem rate under the Medicaid program has the effect of inflating the Medicaid rate. This is because the cost of caring for Medicare patients is greater than for Medicaid patients. In order that the per diem rate accurately reflect costs of Medicaid patients, it is appropriate that figures respecting Medicare patients be deleted.

   
   

9. The Petitioner has contended that the Department's policy of excluding Medicare figures should not be followed because the policy has not been formally

   adopted as a rule. The contention is without merit. Agencies are free to adopt policies without in every case resorting to formal rule-making. McDonald v.

   Department of Banking and Finance, 346 So.2d 569 (1 DCA Fla. 1977). In the instant case the Department has established that it consistently enforces its policy and an opportunity for presentation of countervailing evidence and argument has been permitted.

   
   

10. The Petitioner's Medicaid reimbursement for the fiscal year ending March 31, 1977, should be recomputed deleting costs and patient days relating to Medicare patients from the determination of a per diem rate of compensation for Medicaid patients.

RECOMMENDATION

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

RECOMMENDED:

That a final order be entered affirming the audit exceptions respecting the Petitioner's Medicaid reimbursement for the fiscal year ending March 31, 1977, and requiring that the per diem rate of compensation for Medicaid patients be recomputed by deleting expenses and patient days relating to Medicare patients.

DONE and ENTERED this 7th day of December, 1979, in Tallahassee, Florida.

G. STEVEN PFEIFFER Hearing Officer

Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 7th day of December, 1979.

Docket for Case No: 79-000586

Orders for Case No: 79-000586