STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FLORIDA HEALTH CARE ASSOCIATION, )

)

Petitioner, )

)

vs. ) CASE NO. 80-304RX

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent. )

)

FINAL ORDER

This matter came on for hearing in Tallahassee, Florida, before the Division of Administrative Hearings, by its duly designated Hearing Officer, Robert E. Benton, II, on April 17, 1980, and finished the following day. The parties were represented by counsel:

APPEARANCES

For Petitioner: A. Thomas Mihok, Esquire

605 East Robinson Street Eola Office Center, Suite 610 Orlando, Florida 32801

For Respondent: Robert A. Weiss, Esquire and

George Waas, Esquire 1323 Winewood Boulevard

Building 1, Room 406

Tallahassee, Florida 32301

1. The parties stipulated, in the event the transcript arrived more than ten days after the hearing concluded, that time for rendering decision be extended until 20 days after receipt of the transcript. The Division of Administrative Hearings received the transcript of proceedings on May 2, 1980.

   
   

2. By petition for formal hearing pursuant to Sections 120.56 and 120.57(1), Florida Statutes (1979), petitioner seeks a determination of the invalidity of certain recent amendments to Rule 10C-7.48, Florida Administrative Code. Petitioner contends that the "amendments were not accompanied by a full and adequate economic impact statement as required by Section 120.54(2)(a), Florida Statutes (1979)."

   
   

3. In pertinent part, Rule 10C-7.48, Florida Administrative Code, as amended, provides:

   
   

   * (6) The following rules apply relative to reimbursement for nursing home care:

   1. For skilled care, a facility must be certified as a dual facility to provide both

      skilled and intermediate care services. Monthly reimbursement shall be the lesser amount of Medicare's reasonable costs, usual and customary charges to private patients, or [[$680]] <<the cap established by the Medicaid Nursing Home Reimbursement Plan>> for skilled care.

   2. For intermediate care, a facility must be certified as an intermediate care facility, or be certified as a dual facility to provide both skilled and intermediate care, or must have a distinct part of the facility certified to provide intermediate care services. Monthly reimbursement shall be the lesser amount of

      the following: [[$630 per month for Leavel I and

      $535 per month for Level II,]] <<the cap established by the Florida Nursing Home Reimbursement Plan for Level I and Level II;>> or <<,>> a percentage of the skilled rate, which is determined by using Medicare standards and principles for cost determination; or <<,>> for intermediate care facilities [[for facilities]] submitting separate cost reports for a distinct

      part certified for intermediate care, a percentage of the rate which is determined by using Medicare [[Standards]] <<standards>> and principles for cost determination; or <<,>> [[a]] <<the>> [[rate of]] the usual and customary charges to private patients.

      * * *

      (g) Failure to [[comply with the submission of]] <<submit>> an annual cost report which

      is in compliance with the regulations contained herein and <<which>> is within the limits established, will result in a 10 percent reduction [[to]] <<of>> the <<Medicaid reimbursement>> rate being paid <<to the facility.>> [[for each sucessive period not submitted.]] <<The 10 percent reduction shall be effective for each successive month after 90 days following the end of the facility cost report period, the facility fiscal year.>> Continuing failure to submit the report will result in the cancellation of the contract and termination of participation in the program. [[Cost reports not submitted or post- marked within the 90 days will be subject to a

      10 percent rate reductino until the cost report is received by the Department.]] The 10 percent rate reduction will be removed the first day of the month following the <<postmark>> [[receipt]] of the cost report and <<the full reimbursement

      rate>> [[will]] <<may>> be retroactively reinstated on receipt of the cost report. Where a provider is unable [[in a given instance]] to file a timely cost report<<,>> [[due to extenuating circum- stances,]] the Department may<<,>> for good

      cause <<shown>>, grant extensions of the due date

      for the filing of the cost report. If an extension request is refused, then the facility has fifteen (15) days to submit without penalty.

      * * *

      1. Retroactive payment shall not be made to nursing homes whose cost<<s>> exceed[[s]] annual payment<<.>> [[an allowance of nine (nine percent) is provided in lieu of this. The allowance in lieu of retroactive adjustments will be one half of one percent on an annual basis for each rating category which exceeds the minimum standars as determined by the Department.]] Recovery of overpayment will be effected either by a mutually acceptable plan

      of repayment or<<,>> if no mutually acceptable plan can be negotiated, the Department [[may]]

      <<shall>> withhold regular payments to the facility

      <<until recovery of overpayment has been effected.

      The Department may withhold an equal portion of each regular payment for each of the next six successive months after allegations of

      overpayment.>> [[after]] <<The provider shall have an opportunity>> [[for]] <<to request a>> fair hearing [[is offered and, if requested, completed and a decision is rendered.]] <<however,

      the pendency of fair hearing shall not affect

      the Department's ability to recover overpayments.

      This subsubsection shall be retroactively applied for all current accounts receivable

      of the Department.>> Petitioner's exhibit Nos.

      1 and 2.

      
      

      Words in type are deletions from the prior rule; words underlined are additions.

      
      

      * Note: In the above quotation, language added to the statute

      is within the <<>>; deleted language is within the [[]]. This corresponds to the strikeovers and underlining on the original document on file with the Division.

      
      

4. The recent amendments effect several distinct-changes. In order to bring the rule into conformity with the Medicaid Nursing Home Reimbursement Plan, they raised the upper limit or cap on reimbursement to medicaid nursing home providers, Rule 10C-7.48(6)(a) and (b), Florida Administrative Code, and eliminate an allowance in lieu of retroactive payments. Rule 10C-7.48(6)(i), Florida Administrative Code. In addition, there is an amendment to make it discretionary rather than mandatory, upon a provider's filing of a late annual cost report, whether respondent pays the provider moneys withheld from the provider as a penalty for failure to file its annual cost report on time. Rule 10C-7.48(6)(g), Florida Administrative Code. Amendments to Rule 10C-7.48(6)(i), Florida Adminstrative Code, require offsetting interception of monthly reimbursement payments to providers until recovery of an overpayment is effected, without regard to the pendency of any administrative hearing, rather than at the conclusion of an administrative hearing in which the fact or amount of an alleged overpayment is determined.

5. The economic impact statement prepared by respondent in promulgating the challenged amendments to Rule 10C-7.48, , Florida Administrative Code, reads as follows:

   
   

   1. Estimate of cost and Paperwork to implement:

      No additional cost or paperwork is envisioned. The Department currently notices a provider to whom the Department has made alleged overpayments and offers fair hearing if not otherwise settled. Collection efforts are initiated at the same time. The proposed

      amendment accelerates recovery time, but neither increase nor decreases recovery dollars. The current (09/30?79) outstanding alleged over- payments exceed $1.8 million and collection success is not noteworthy due to delayed hearings. Recovery of the money could be completed within six months of rule adoption

      if all providers are receiving sufficient current payments.

      
      

   2. Cost or Benefits to Persons Directly Affected:

      There will be no costs to Medicaid recipients. Medicaid nursing home providers may experience an adverse cash flow if they have not previously negotiated an acceptable repayment plan with the Department. It should be noted that the adverse cash flow is neither greater nor lesser in dollar amount than the provider has previously been noticed of; it is only the date of collection that changes.

      The Department may be unable to utilize full amount of the accelerated recovery until after final decision in the hearing process. If so, all benefits would be difficult to assess. If the accelerated collection is contested as to amount, and the appeal is successful, collection funds would be returned to the provider, possibly with costs and interest attached.

      
      

   3. Estimate of Effect on Competition and Open Market:

      No effect is anticipated for those providers on a fiscally sound basis. Marginal providers may be forced to reconsider certain operating expenses.

      
      

   4. Data Used in Making Above Estimates:

   The outstanding amounts of accounts receivable were obtained from Department of Health and Rehabilitative Services accounts. On 09/30/79 audit appeals of 31 cases totalled

   $1,661,669.50 and cost settlement appeals of

   12 cases totalled $233,377.52. Petitioner's exhibit No. 1.

   
   

   Those responsible for the drafting of the economic impact statement limited its scope to the effects of intercepting reimbursement payments before the conclusion of the administrative hearing process.

   
   

6. The economic impact statement is silent about the effects of raising the cap for skilled nursing care reimbursement to the level specified in the Medicaid Nursing Home Reimbursement Plan (Plan), $911 at the time of the amendment, from the $680 authorized by Rule 10C-7.48(6)(a), Florida Administrative Code, before it was amended; nor does the economic impact statement mention any effects to be anticipated from any of the other amendments by which Rule 10C-7.48, Florida Administrative Code, has been made to reflect the Plan. Nothing is said in the economic impact statement about the economic effects of amendments to conform to the Plan, even though, under the Plan, the reimbursement caps will change again, in October of 1980. Respondent followed the Plan for some time before Rule 10C-7.48, Florida Administrative Code, was amended, even though the Plan conflicted with the unamended rule.

   
   

7. Effects of the amendment to Rule 10C-7.48(6)(g), Florida Administrative Code, authorizing respondent to retain the ten percent penalty for late filings were not discussed in the economic impact statement. This amendment was not an effort to conform the rule either to the Plan or to existing agency practice, yet the economic impact statement is devoid of any reference to the anticipated economic consequences of this amendment.

   
   

8. In preparing the economic impact statement, respondent's employees did not examine the debt structure or cash flow of any individual nursing home provider, did not determine how many nursing homes were on a fiscally sound basis, and did not examine the mix of private and medicaid patients in any particular nursing home. Although the persons responsible for the drafting of the economic impact statement knew that respondent's allegations of overpayment had been upheld in 96 or 97 percent of the instances in which disputes ripened into formal administrative or judicial proceedings, these personnel were unaware of the frequency of downward adjustments before formal administrative proceedings began. Such downward adjustments have sometimes been dramatic. Petitioner's exhibit No. 21.

   
   

9. Respondent notified all nursing homes with which it contracts for the provision of medicaid services that it proposed to amend Rule 10C-7.48, , Florida Administrative Code, and gave them an opportunity to be heard. Petitioner sought and obtained a public hearing pursuant to Section 120.54(3), Florida Statutes (1979), at which petitioner's representatives made their opposition to the proposed amendment known. Robert B. Williams, respondent's deputy assistant secretary for medicaid, reviewed the transcript of the public hearing before deciding to go forward with adoption of the amendments challenged in these proceedings. The enforcement became effective on February 14, 1980, although application of the amended rule was subsequently stayed by court order. Florida Health Care Association v. Florida Department of Health and Rehabilitative Services, No. UU-124 (Fla. 1st DCA; stay entered March 3, 1980.)

   
   

10. On February 14, 1980, respondent mailed a form letter to nursing homes to which overpayments had allegedly been made, apprising them of the amended rule and stating "If payment in full is not received by (March 3, 1980), the Department will initiate appropriated legal action to collect the amount due." Petitioner's exhibit No. 8. The form letter also stated, "Upon showing of

    hardship, the Department will develop a repayment schedule not to exceed six (6) months." Petitioner's exhibit No. 8. In practice, respondent has agreed to longer periods of repayment of nursing home over-payments, both before and after the adoption of the rule amendments challenged in this proceeding.

    
    

11. Of approximately 300 nursing homes in Florida, some 43 nursing homes would be affected by the retroactive application of the amendment to Rule 10C- 7.48(6)(i), , Florida Administrative Code. As of March of 1980, Concordia Manor Nursing Home in St. Petersburg had received overpayments allegedly totalling some $32,000.00 Frank Yinger, administrator and proprietor of Concordia Manor Nursing Home, testified that the physical plant was already twice mortgaged and that repayment of $32,000.00 over a six month period would have a "disastrous effect, whenever such prompt repayment might be required, whether at the conclusion of an administrative hearing or not. It would involve cashing a

    $20,000.00 money market certificate and borrowing most of the rest at high interest rates. If necessary, Mr. Yinger would reduce the nursing care provided by Concordia Manor Nursing Home to minimum standards.

    
    

12. By form letter dated February 14, 1980, Paul Allen, administrator of the Convalescent Center of Gainesville was advised that the Convalescent Center had received overpayments allegedly aggregating $56,183.00 Petitioner's exhibit No. 8. He conceded that the Center did receive overpayments of approximately

    $30,000.00 as reimbursement for expenses he incurred personally. When he received the February letter, Mr. Allen tried unsuccessfully to borrow money from two banks. Application to the Convalescent Center of Rule 10C-7.48(6)(i), Florida Administrative Code, as amended, would mean that Mr. Allen would "either not pay [the Center's] suppliers or not pay [the Center's] employees." (T. 226) Respondent reimbursed Convalescent Center of Gainesville for the provision of skilled nursing care at the monthly rate of $732.00, at the time of the hearing.

    
    

13. Margaret Zebedee Brock, administrator of Appalachicola Valley Nursing Center, also received a from letter dated February 14, 1980, alleging an overpayment to Appalachicola Valley Nursing Center in the amount of $25,483.00. Petitioner's exhibit No. 19. Respondent had earlier advised Ms. Brock of this claimed overpayment. At that time, she demanded an administrative hearings and respondent wrote her on October 17, 1979, to the effect that collection efforts would be suspended pending the outcome of the hearing. Petitioner's exhibit No.

1. Although the February form letter demanded payment by March 3, 1980, unless other arrangements were made, petitioner's exhibit No. 19, respondent later conceded that the allegation of overpayment was in error. If respondent had begun intercepting reimbursement checks, Appalachicola Valley Nursing Center would have been obliged to borrow money possibly from a bank or from Ms. Brock, a part owner, in order to continue operating.

   
   

   1. By motion to dismiss, respondent raised the issue whether petitioner has standing to maintain a challenge to the validity of the amendments to Rule 10C-7.48(6), Florida Administrative Code. In support of its contention that petitioner lacks standing, respondent cited a single case, Florida Department of Education v. Florida Education Association/United, AFT-AFL-CIO, 378 So.2d 893 (Fla. 1st DCA 1979). There a teachers' union, "a confederation of bargaining units," at 893, was denied standing to challenge the validity of certain procedures used, at an accused teacher's election, in teaching certificate revocation proceedings. The court observed that "no party has sustained or is in immediate danger of sustaining some direct injury as a result of the challenged rule." At 894. But no teacher in danger of injury from the challenged rule, since any injury could be averted by electing the alternative, unchallenged procedures.

   2. Respondent's motion to dismiss petitioner's pending appeal from the adoption of Rule 10C-7.48(6)(i), Florida Administrative Code, which also cited Florida Department of Education v. Florida Education Association/United, AFT- AFL-CIO, 378 So.2d 893 (Fla. 1st DCA 1979), has been denied. Florida Health Care Association v. Department of Health and Rehabilitative Services, No. VV-124 (Fla. 1st DCA; April 3, 1980). This supports the conclusion that the present case is distinguishable from the teachers' union case. See also Department of Health and Rehabilitative Services v. The Florida Psychiatric Society, Inc. and John L. Mason, No. NN-238 (Fla. 1st DCA; April 16, 1978). An association has standing to challenge a rule on behalf of its members when it can show that one or more of them would have standing individually.

      
      

   3. Petitioner proved that member nursing homes were "substantially affected," Section 120.56(1), Florida Administrative Code, by the enhanced threat of an interception of reimbursement payments posed by amended Rule 10C- 7.48(6)(i), Florida Administrative Code. The evidence showed that Concordia Manor Nursing Home and Convalescent Center of Gainesville had not repaid "alleged overpayments," at the time of the hearing.

      
      

   4. Petitioner did not prove that respondent had withheld money from any member nursing home as a penalty for failure to file an annual cost report on time. For that reason, petitioner did not establish its standing to challenge the validity of the amendments to Rule 10C-7.48(6)(g), Florida Administrative Code. Florida Department of Offender Rehabilitation v. Jerry, 353 So.2d 1230 (Fla. 1st DCA 1978).

      
      

   5. Since the Convalescent Center of Gainesville receives more money as reimbursement for the provision of skilled nursing care than was allowed under the rule before its amendment, it is, in one sense, substantially affected by the amendments made to conform the rules to the Plan. But this member nursing home is substantially affected favorably and not adversely. Standing to maintain a rule challenge pursuant to Section 120.56, Florida Statutes (1979), requires injury in fact or the "immediate danger of sustaining some direct injury as a result of the challenged rule." Florida Department of Education v. Florida Education Association/United AFT-AFL-CIO, 378 So.2d 893, 894 (Fla. 1st DCA 1979) (emphasis supplied). In the absence of any proof either of injury or of threat of injury to any member nursing home as a result of the amendments to conform the rule to the Plan, petitioner lacks standing to urge the invalidity of those amendments.

      
      

   6. Respondent has not questioned the propriety of petitioner's proceeding in this forum while its appeal from the adoption of Rule 10C-7.48(6)(i), Florida Administrative Code, is pending in the District Court of Appeal, First District. Neither has respondent contended that the District Court's stay deprives petitioner of standing to challenge Rule 10C-7.48(6), Florida Administrative Code, on grounds of inadequacy of the economic impact statement. Both of these possible objections to reaching the merits of petitioner's claim are therefore waived.

      
      

   7. On the merits, the only issue raised by petitioner is the adequacy of the economic impact statement. The "[f]ailure to provide an adequate statement of economic impact is grounds for holding the rule invalid." Section 120.54(3), Florida Statutes (1979). Department of Health and Rehabilitative Services v. Delray Hospital Corporation, 373 So.2d 75 Fla. 1st DCA 1979); Department of Environmental Regulation v. Leon County, 344 So.2d 297, 299 (Fla. 1st DCA 1977). Petitioner takes the position that "in the entirety the economic impact

      statement was inadequate because it failed to address certain parts of the rule change.: (T. 126). Since the economic impact statement ignores the consequences of amending subsections (6)(1)(b) and (g), argues petitioner, subsection (6)(i) must be invalidated. No authority is cited for this unlikely proposition. The statute plainly says that a "hearing officer may declare all or part of a rule invalid." Section 120.56(3), Florida Statutes (1979). Where rule provisions are severable, the absence or inadequacy of an economic impact statement as to one provision is no justification for invalidating another provision as to which the economic impact statement is adequate.

      
      

   8. But petitioner also contends that the economic impact statement is inadequately detailed even as to the one rule provision it does address. Section 120.54(2)(a), Florida Statutes (1979), requires:

      
      

      Each agency, prior to the adoption, amendment, or repeal of any rule, shall provide information on its proposed action by preparing a detailed economic impact statement shall include:

      1. An estimate of the cost to the agency of the implementation of the proposed action,

         including the estimated amount of paperwork;

      2. An estimate of the cost or the economic benefit to all persons directly affected

         by the proposed action;

      3. An estimate of the impact of the proposed action on competition and the open market

         for employment, if applicable; and

      4. A detailed statement of the data and method used in making each of the above estimates.

         
         

         With respect to the only amendment petitioner has standing to challenge, which is found in Rule 10C-7.48(6)(i), Florida Administrative Code, the economic impact statement speaks to all four questions required by Section 120.54(2)(a) to be addressed. More detail might have been preferable, but a departure from the ideal cannot be said to be fatal where the "economic impact upon nursing home providers brought about by the amendments to Rule 10C-7.48(6)(i) is obvious." Petitioner's proposed findings of fact, No. 21, p. 11. If medicaid beneficiaries do not receive proper care in a nursing home, for whatever reason, respondent is authorized and required to place them elsewhere. Any lack of detail in the economic impact statement as it relates to the amendment authorizing offsetting interception of reimbursement payments is harmless.

         Florida-Texas Freight, Inc. v. Hawkins, 379 So.2d 944 (Fla. 1979) (reh. den. 1980); School Board of Broward County v. Gramith, 375 So.2d 340 (Fla. 1st DCA 1979); Polk v. School Board of Polk County, 373 So. 2d 960 (Fla. 2d DCA 1979).

         
         

   9. Petitioner's proposed findings of fact and conclusions of law and memorandum of law in support and respondent's proposed order have been considered in preparation of this order. The parties' proposed findings of fact have been adopted insofar as consistent with the foregoing, but not otherwise.

It is, accordingly, ORDERED:

1. The petition is dismissed insofar as it relates to amendments made to conform Rule 10C-7.48(6), Florida Administrative Code, to the Medicaid Nursing

   Home Reimbursement Plan; and insofar as it relates to the penalty for untimely filing of annual cost reports.

   
   

2. The petition is otherwise denied.

DONE AND ENTERED this 20th day of May, 1980, in Tallahassee, Florida.

ROBERT T. BENTON, II

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 21st day of May, 1980.

COPIES FURNISHED:

A. Thomas Mihok, Esq. 605 East Robinson Street

Eola Office Center, Suite 610 Orlando, Florida 32801

Robert A. Weiss, Esq. George Waas, Esq.

Assistant General Counsels Department of HRS

1323 Winewood Boulevard Building One, Suite 406 Tallahassee, Florida 32301

Carroll Webb, Executive Director Administrative Procedures Committee Room 120, Holland Building Tallahassee, Florida 32301

Ms. Liz Cloud

Room 1802, The Capitol Bureau of Administrative

Code

Tallahassee, Florida 32301

Docket for Case No: 80-000304RX

Orders for Case No: 80-000304RX