STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

HUMAN DEVELOPMENT CENTER, )

)

Petitioner, )

)

vs. ) CASE NO. 81-2355RX

) STATE OF FLORIDA, DEPARTMENT ) OF HEALTH AND REHABILITATIVE ) SERVICES, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, an administrative hearing was held before Diane D. Tremor, Hearing Officer with the Division of Administrative Hearings, on October

15 and 16, 1981, in the Oakland Building, Tallahassee, Florida. The issue for determination at the hearing was whether two documents, identified as HRS Letter 0-75-2 dated July 10, 1981 and HRS Regulation 0-75-1 dated August 1, 1980, constitute rules within the meaning of the Administrative Procedure Act and are invalid exercises of delegated legislative authority.

APPEARANCE

For Petitioner: George L. Waas

Slepin, Slepin, Lambert & Waas 1114 East Park Avenue Tallahassee, Florida 32301

For Respondent: Claire D. Dryfuss

Assistant General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32301 INTRODUCTION

This cause was consolidated for hearing purposes with the case of Human Development Center v. Department of Health and Rehabilitative Services, Case No. 81-2137. The latter case involved the issue of whether the Human Development Center is entitled to payment from the Department of Health and Rehabilitative Services for certain services performed during October of 1980 and is the subject of a separate Recommended Order dated March 10, 1982.

At the consolidated hearing, petitioner presented the testimony of John Elbare, petitioner's Executive Director, and Wray Morehouse, petitioner's

Program Director. Petitioner's Exhibits 1 through 3 were received into evidence. Respondent presented the testimony of Peter Kreis, respondent's former Administrator for District VI, and Diane Nicolosi, respondent's District VI Supervisor for Developmental Services. Respondent's Exhibits 1 through 43 were received into evidence. The two documents alleged to constitute invalid rules were received into evidence as Hearing Officer's Exhibits 1 and 2.

Counsel for both parties have submitted proposed final orders containing proposed findings of fact and proposed conclusions of law. To the extent that the parties' proposed findings of fact are not contained in this Final Order, they are rejected as being either not supported by competent, substantial evidence adduced at the hearing, irrelevant or immaterial to the issues in dispute or as constituting conclusions of law as opposed to findings of fact.

FINDINGS OF FACT

Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found:

1. Petitioner Human Development Center (HDC) is a nonprofit corporation dedicated to providing services to mildly and moderately mentally retarded clients received primarily through the respondent Department of Health and Rehabilitative Services (HRS). The services provided include transportation, education, and training for the development of daily living skills, recreation skills and work-related skills.

   
   

2. A one-year written contract existed between HDC and HRS for the provision of and payment for the professional services of education, training and transportation for HRS clients. The termination date of this contract was September 30, 1900. As early as February of 1980, negotiations began as to the rates for a new written contract for the provision of these same services for the following year beginning on October 1, 1980. In August of 1980, petitioner was advised of the Grant Review Committee's recommendations concerning the rates which HRS would allow for the provision of services during the next contract year. A special audit review team conducted an analysis of petitioner's facility and found insufficient ground for awarding levels of funding in excess of those recommended by the Grant Review Committee.

   
   

3. By letter dated September 22, 1980, petitioner's Executive Director was notified by respondent that respondent was in the process of preparing the contract for the following year and the contract amounts were stated. In a letter dated September 25, 1980, petitioner's Executive Director notified respondent that the proposed contract rates were unacceptable and advised respondent of the rates it would charge effective October 1, 1980. This letter stated:

   
   

   "Should you choose to have your HRS clients continue in the Sunrise Program beyond September 30th, 1980, you will be billed at these rates."

   
   

4. Based upon petitioner's refusal to enter into a contract with respondent, respondent orally advised petitioner on September 29 or 30, 1980 that HRS clients would be removed from petitioner's facility. On September 30, 1980, respondent's District Program Supervisor for Developmental Services went to the petitioner's facility for the purpose of removing those clients in the custody of HRS and advising other clients of the status of the contract between

   petitioner and the respondent. Many clients expressed a desire to remain at the petitioner's facility. Alternative placement plans were pursued by respondent during the month of October, 1980. Petitioner's Executive Director was advised that payments for room and board, as well as for additional other services on a pre-authorized basis, would be provided for HRS clients remaining at the facility. This agreement was affirmed in writing by letter dated October 2, 1980, which stated:

   
   

   "To facilitate counselling clients as to their rights and plan for placement in other facilities, HRS will continue to provide Long Term Residential Care funds. These monies will provide for basic care and supervision. Any additional services will be purchased on an individual client basis and is to be pre-authorized by the social worker. (Example: transportation of employed clients to place of employment through reimbursement at 19 cents a mile.) Expiration of the 1979-80 Purchase of Services Contract prohibits any payment by HRS of services previously covered by that contract."

   
   

5. Respondent did pay petitioner for its clients' room and board during October of 1980 in spite of the fact that no written contract existed. Although it never sought pre-authorization for the provision of additional services, petitioner continued to provide the additional services of education, training and transportation to HRS clients. Effective November 1, 1980, petitioner and respondent did enter into a new contract for the provision of such services for the following year.

   
   

6. On or about November 3, 1980, petitioner submitted to respondent five invoices for the payment of services performed during October of 1980. Respondent refused payment by letter dated November 18, 1980, stating, in part:

   
   

   "Lack of a contract between HRS and the Human Development Center during the month of October prohibits payment of the purchase of service invoices submitted with your letter of November 3, 1980. . ."

   
   

7. After various requests by petitioner for the payment of invoices for services provided in October, 1980, were denied by the respondent on the basis of lack of a written contract for that month, HDC petitioned for a formal administrative hearing pursuant to Section 120.57(1), Florida Statutes. The petition was referred to the Division of Administrative Hearings and that case was consolidated for hearing purposes with the instant case. Human Development Center v. Department of Health and Rehabilitative Services, DOAH Case No. 81- 2137, Recommended Order entered on March 10, 1982. In the course of discovery in DOAH Case No. 81-2137, respondent HRS denied the allegation in the petition that it had "no rules establishing how and under what circumstances emergencies will be declared in order to pay providers sums of money to which HRS claims that it would not otherwise be entitled." Respondent referred to two documents which "set out the criteria to be used for emergency certification of contracts pursuant to Sec. 287.057, F.S." The instant proceeding challenges these two documents as invalid rules.

   CONCLUSIONS OF LAW

   
   

8. The HRS documents which are the subject of this rule challenge proceeding are entitled "HRS Regulation No. 0-75-1," dated August 1, 1980, and "HRS Letter No. 0-75-2," dated July 10, 1981. The purpose of the former document is as follows:

   
   

   "This regulation establishes policy and furnishes the procedures to ensure that the Department, through its contracting process, protects the funds it disburses and derives the maximum return of service from those funds."

   
   

9. With respect to emergency certification, "HRS Regulation No. 0-75-1" has as its purpose:

   
   

   "To comply with chapter 287.057, Florida Statutes, to allow a contract to be executed after its effective date and

   to enable retroactive payment."

   
   

10. This document goes on to set forth the following criteria to qualify for emergency certification:

    
    

    "The contract is for professional or technical services.

    
    

    Services have been rendered by the provider without the benefit of an executed contract.

    
    

    A situation arises suddenly and unexpectedly that prevents preparation

    of a contract prior to receiving services.

    
    

    Clients will suffer as a direct result of termination of services."

    
    

11. The remainder of "HRS Regulation No. 0-75-1" sets forth the procedural duties of the Contract Manager with respect to emergency certifications.

    
    

12. "HRS Letter No. 0-75-2" refers to "HRSR 0-75-1" and has as its purpose the promulgation of the provisions of Chapter 80-374, Laws of Florida. The only portion of "HRS Letter No. 0-75-2" which appears relevant to this proceeding is paragraph 4(i) pertaining to emergency certifications. That paragraph reads as follows:

    
    

    "The procurement of contractual services must be evidenced by a written agreement embodying all provisions and conditions of the procurement of such services and executed prior to the rendering of any contractual service under the agreement except in cases of valid emergencies certified by the agency head. Note that

    the `professional and technical' words have been eliminated from Chapter 237.057 and therefore, emergency certifications are required on any type contract to allow execution after its effective date and to enable retroactive payment."

    
    

13. The factual and legal contentions of the parties in this proceeding are as follows. Petitioner contends that it is substantially affected by the two challenged documents inasmuch as respondent is relying on these documents to deny payment for services rendered by petitioner in October of 1980 when no written contract existed. It is further contended that the two documents constitute "rules" within the meaning of the Administrative Procedure Act and are invalid because they were never promulgated in accordance with the requirements of that Act. The respondent contends that petitioner is without standing to challenge these documents since it never applied for emergency certification to allow a contract to be executed after its effective date and to enable retroactive payment. It is further argued by respondent that the situation which existed during October of 1980 was not an "emergency" or if an emergency situation did exist, it was at the sole behest of the petitioner. Additionally, respondent contends that the documents in question are not "rules" within the meaning of the APA in that they are either internal management memoranda or they simply paraphrase statutory language and do not create or interpret rights or require compliance beyond Section 287.057, Florida Statutes.

    
    

14. Petitioner is ultimately seeking payment for certain services it performed on behalf of HRS clients during a period of time in which no contract for the provision of such services existed between petitioner and HRS. In refusing payment, respondent HRS has consistently maintained that expiration of the contract for those services prohibits payment for those services. By asserting that payment can not be made in the absence of a written contract or without the certification of an emergency, respondent has conferred standing upon the petitioner to challenge any "rules" which respondent may have on the subject. Whether or not the petitioner complied with any of the requirements which would allow payment pursuant to said "rules" is not the issue in this proceeding. That issue may be a consideration in the companion Section 120.57, Florida Statutes, proceeding, but it is not determinative of the question of petitioner's substantial interest in the "rules" being challenged herein. It is concluded that petitioner has demonstrated that it has standing to challenge those portions of the two documents which are being relied upon, at least in part, by respondent in denying petitioner's request for payment for services performed in the absence of a written contract.

    
    

15. The next issue is whether or not those portions of the two challenged documents pertaining to retroactive payments fit within the definition of a "rule" contained in the APA. A rule is defined in Section 120.52(14), Florida Statutes, as an "agency statement of general applicability that implements, interprets, or prescribes law or policy or describes the organization, procedure, or practice requirements of an agency. . ." It does not include

    
    

    "internal management memoranda which do not affect either the private interests of any person or any plan or procedure important to the public and which have no application outside the agency issuing the memorandum."

    Section 120.52(14)(a), Florida Statutes.

16. As further defined in the case of McDonald v. Department of Banking and Finance, 346 So.2d 569, 581 (Fla. 1st DCA, 1977), rules are "those statements which are intended by their own effect to create rights, or to require compliance, or otherwise to have the direct and consistent effect of law." Measuring the two challenged documents by these definitions and guidelines, it is concluded that "HRS Letter No. 0-75-2," dated July 10, 1981, is not a "rule" and that "HRS Regulation No. 0-75-1," dated August 1, 1980 is a "rule" within the meaning of the APA.

    
    

17. Section 207.057, Florida Statutes (1981) , presently provides, in pertinent part, as follows:

    
    

    "(1) No procurement of contractual services shall be made by the state or any agency thereof, except:

    1. Services procured by the Legislature.

    2. Services the procurement of which is evidenced by a written agreement embodying all provisions and conditions of the procurement of such services and executed prior to the rendering of any contractual service under

       the agreement except in cases of valid emergencies certified by the agency head."

18. Prior to October 1, 1980, the language of this section read: "(1) No purchase of professional or technical

    services shall be made by the state or any

    agency thereof, except by the Legislature, unless the same is evidenced by a written agreement embodying all provisions and conditions of the purchase and executed prior to the rendering of any service under the agreement except in cases of valid emergencies certified by the agency head." Section 287.057(1), Florida Statutes (1979).

    
    

19. "HRS Letter No. 0-75-2" contains language relating to competitive bidding and sole source procurement. These provisions are apparently not being challenged in this proceeding. The only provision in "HRS Letter No. 0-75-2" pertinent to petitioner's situation is set forth in paragraph 4.i and is quoted above. As can be readily seen, the language of the quoted paragraph 4.i simply restates the statutory language of Section 287.057, Florida Statutes, and notes the recent legislative changes in the statute. It does not create rights or implement, interpret or prescribe law or policy, nor does it, by itself, describe the organization, procedure or practice requirements of the respondent agency. It does no more than track the statutory language and note changes in the law with regard to the procurement of contractual services by state agencies.

    
    

20. The same conclusion can not be drawn with respect to "HRS Regulation No. 0-75-1", dated August 1, 1980. This document sets forth four criteria which must be met in order to qualify for emergency certification, thus enabling retroactive payment for services rendered in the absence of a written contract under Section 287.057, Florida Statutes. While the first two criteria simply paraphrase the former statutory language--to wit: that the contract be for

    professional or technical services and that there be no executed contract--the latter two criteria go further and define and interpret the term "valid emergencies." The challenged document prescribes that an emergency certification will only be granted when

    
    

    "A situation arises suddenly and unexpectedly that prevents preparation of

    a contract prior to receiving services," and "clients will suffer as a direct result of termination of services."

    
    

21. Such language clearly constitutes an "agency statement of general applicability that implements, interprets, or prescribes law or policy" within the APA's definition of a "rule." It is definitive of those situations in which the respondent will allow retroactive payment for services provided in the absence of a written contract for those services. In and of itself, this agency statement of what constitutes a valid emergency purports to create certain rights and adversely affect other rights with regard to the payment for services provided to HRS clients. Inasmuch as the grant or denial of emergency certification affects individual private interests, is important to the public and has application outside the agency, it is not an "internal management memoranda" excluded from the definition of a "rule".

    
    

22. The Administrative Procedure Act, Section 120.54, Florida Statutes, contains specific requirements for the proper promulgation of "rules". It is undisputed that "HRS Regulation No. 0-75-1," dated August 1, 1980, was not promulgated in accordance with the rulemaking and adoption procedures required by the APA. Thus, that portion of "HRS Regulation No. 0-75-1" pertaining to the criteria for qualification for emergency certification constitutes an invalid exercise of delegated legislative authority.

    
    

23. One final matter deserves treatment. Subsequent to the close of the hearing in this case, petitioner sought to amend the pleadings to conform to the evidence and to challenge yet another document which was received into evidence as Exhibit 42 as an unpromulgated agency rule." Having failed to allege or establish its substantial interest in this document, its motion to amend the pleadings is denied.

FINAL ORDER

Based upon the findings of fact and conclusions of law recited above, IT IS ORDERED THAT

Petitioner has demonstrated that it is substantially affected by "HRS Letter No. 0-75-2" dated July 10, 1981, and "HRS Regulation No. 0-75-1," dated

August 1, 1980;

"HRS Letter No. 0-75-2" does not constitute a rule within the meaning of the Administrative Procedure Act;

"HRS Regulation No. 0-75-1" does constitute a rule within the definition of Section 120.52(14), Florida Statutes; and

Having failed to properly promulgate the rule in accordance with Section 120.54, Florida Statutes, "HRS Regulation No. 0-75-1," dated August 1, 1980 constitutes an invalid exercise of delegated legislative authority.

ORDERED and ENTERED this 10th day of March, 1982, in Tallahassee, Florida.

DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 10th day of March, 1982.

COPIES FURNISHED:

George L. Waas, Esquire Slepin, Slepin, Lambert & Waas 1114 East Park Avenue Tallahassee, Florida 32301

Claire D. Dryfuss, Esquire Department of Health and Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32301

Mr. David Pingree Secretary

Department of Health and Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32301

Mr. Carroll Webb Executive Director

Administrative Procedures Committee

120 Holland Building Tallahassee, Florida 32301

Liz Cloud, Bureau Chief Administrative Code Section Department of State

1802 The Capitol

Tallahassee, Florida 32301

Docket for Case No: 81-002355RX

Orders for Case No: 81-002355RX