STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DELAND CONVALESCENT CENTER, INC. )

)

Petitioner, )

)

vs. ) CASE NO. 82-1895

) 82-1904

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held in the above cases before the Division of Administrative Hearings by its duly designated Hearing Officer, DONALD R. ALEXANDER, on December 7, l982, in Orlando, Florida.

APPEARANCES

For Petitioner: A. Thomas Mihok, Esquire

Gary L. Summers, Esquire Post Office Box 1980 Orlando, Florida 32802

For Respondent: Joseph L. Shields, Esquire

Building One, Room 406 1323 Winewood Boulevard

Tallahassee, Florida 32301 BACKGROUND

In these proceedings, Petitioner, Deland Convalescent Center, Inc., seeks to challenge certain adjustments to its Medicaid cost reports made by Respondent, Department of Health and Rehabilitative Services. The time periods in question are the year ending June 30, 1980 (DOAH Case No.: 82-1895), and the year ending June 30, 1981 (DOAH Case No.: 82-1904). The effect of the adjustments is to reduce the reimbursement that Petitioner receives for costs incurred while participating in the Medicaid program.

The matters were originally scheduled for informal adjudication before Respondent pursuant to Subsection 120.57(2), Florida Statutes. Prior to adjudication, disputed issues of material fact arose, and the matters were transferred to the Division of Administrative Hearings on July 9, 1982, with a request that a Hearing Officer be assigned to conduct a formal hearing.

By notice of hearing dated September 28, 1982, a final hearing in both cases was scheduled for December 7, 1982, in Orlando, Florida. At the final hearing, Petitioner presented the testimony of Fred A. Lane, administrator of the nursing home, and Ray P. Bolt, a certified public accountant, and offered Petitioner's Exhibits 1A, 2 through 6, 9 and 12; all were received in evidence.

Respondent presented the testimony of John T. Donaldson, audit supervisor for the Department's Office of Audit and Quality Control Services, and offered Respondent's Exhibit A which was received in evidence.

The transcript of hearing was filed on January 5, 1983. Proposed findings of fact and conclusions of law were filed by the parties on January 24 and 25, 1983, and have been considered by the undersigned in the preparation of this order. Findings of fact not included in this order were considered irrelevant to the issues, immaterial to the results reached, or were not supported by competent and substantial evidence.

As clarified through a prehearing stipulation and further narrowed at the outset of the hearing, the issue herein is whether Petitioner's reimbursement for participation in the Medicaid program should have been reduced by $10,547 and $4,680 respectively for fiscal years 1980 and 1981.

Based upon all the evidence, the following findings of fact are determined: FINDINGS OF FACT

1. Petitioner, Deland Convalescent Center, Inc., operates a licensed nursing home facility in Deland, Florida. At all times relevant hereto, Petitioner was a participant in the Florida Medicaid Program. The facility is licensed for sixty-five beds, and its patient census generally ranged from fifty-eight to sixty-five patients with an average ninety percent occupancy rate.

   
   

2. Pursuant to applicable regulations, Petitioner filed costs reports for the fiscal years ending June 30, 1980 and June 30, 1981, with Respondent, Department of Health and Rehabilitative Services.

   
   

3. The cost reports were subsequently audited by Peat, Marwick, Mitchell and Company, an outside independent accounting firm employed by Respondent, and audit reports and management letters were issued by the firm on November 21, 1980 and October 16, 1981. As is pertinent here, the audit reports recommended that reimbursable costs be reduced by $10,547 and $4,680 in fiscal years 1980 and 1981, respectively.

   
   

4. The proposed disallowance of expenditures prompted this proceeding.

   
   

   1. Automobile Expenses

      
      

5. During fiscal year 1980 the facility owned four automobiles. These included a 1970 Cadillac, a 1973 Lincoln, a 1977 Plymouth Trailduster and a 1977 Ford LTD. Except for the Lincoln, which was disposed of prior to 1981, all vehicles were also owned by the facility during the following fiscal year.

   
   

6. During fiscal year 1980, the Cadillac was used "very little" because of its age and state of disrepair. The administrator considered it to be unsafe to transport patients, and for that reason it was used only "occasionally to go to the store and to pick up various sundry items needed on an emergency basis." The remaining time it was parked at the facility. When used, it was driven by members of the dayshift staff. In 1981, the car's condition had apparently deteriorated even more, and, according to the administrator, it was "not usable" at all. However, the costs of the vehicle were claimed by the facility in 1981 on the theory that the Cadillac could serve as a backup vehicle in the event of an emergency.

7. The 1977 Ford LTD was used primarily in both fiscal years by the administrator, Mr. Fred A. Lane. Because he used the vehicle for transportation to and from the facility, the car was parked each evening at his home. Lane also used the vehicle for other personal use, which he characterized as being "very limited." However, he decreased vehicle reimbursement in both fiscal years to account for any personal use. The reimbursement by Lane was in the form of a reduction in his salary. In 1980, the reimbursement totaled $1,560, and in 1981 an additional $1,130 was removed from vehicle costs.

   
   

8. The 1977 Plymouth Trailduster was utilized primarily by maintenance personnel to assist in caring for the facility's grounds, including taking debris and materials to the city dump.

   
   

9. The 1973 Lincoln was involved almost exclusively in the use of patient care. This included transporting patients to outside events such as stopping trips, meals and special events. The Lincoln was disposed of prior to fiscal year 1981.

   
   

10. Because of the threat of vandalism from a nearby housing project, on many occasions all cars except the Cadillac were parked overnight at the administrator's home. In those instances, the cars were driven to and from the facility by the administrator's wife and son.

    
    

11. On its cost report for 1980, Petitioner claimed automobile expenses in the amount of $10,988. This figure represents the sum total of separate entries made on the cost report for insurance, depreciation, repairs, maintenance, gasoline and interest on loans attributable to the four vehicles.

    
    

12. In its cost report for 1981, Petitioner claimed total automobile expenses of $7,453 attributable to the use of three vehicles (excluding the Lincoln).

    
    

13. Respondent's audit reports recommended that all Cadillac costs be allowed in both fiscal years, and that one-third of the costs of the Plymouth and Ford be allowed in 1981. These amounts represented approximately thirteen and thirty-nine percent, respectively, of total vehicle expenses claimed by Petitioner in 1980 and 1981. Respondent's rationale for doing so was that (a) the Cadillac was the only vehicle remaining on the facility's premises twenty- four hours per day, and (b) inadequate documentation was maintained to support the other disallowed expenses. In total, the Department allowed only $1,595 in expenses for 1980, and $3,763 for 1981.

    
    

14. With the exception of an undisclosed amount of personal use by Lane, all automobiles were apparently used exclusively for patient care. The personal use was merely an estimate by Lane, and no documentation was available to support his claim. Although at one point Respondent suggested that Petitioner maintain a mileage log for each of the vehicles, Petitioner did not do so. It contended that none were maintained because (a) the cars made many short trips which made logs impractical, (b) no logs had been maintained in prior years, and the Department had approved its vehicle expenses, and (c) there was other "audit evidence" to verify the claims. As to the latter point, Petitioner suggested that credit card receipts for gasoline purchases made by the facility's personnel, the petty cash disbursements accounts, a tire receipt, other unidentified miscellaneous documentation, and the two-week visit to the premises by the Peat, Marwick firm would enable the Department to confirm and verify the disputed amounts.

15. Applicable federal regulations adopted by the State require that cost information regarding expenditures kept in sufficient detail to support the payments in question. There is no requirement that an automobile log be maintained, nor is there any requirement that a facility be reimbursed for only one vehicle. However, the Department does utilize a one vehicle per facility guideline contained in an in-house procedures manual.

    
    

16. Although the documentation to support the vehicle expenses was essentially the same in 1980 and 1981, the Department justified the varying amounts of permissible expenses (thirteen percent in 1980 vis a vis thirty-nine percent in 1981) on the ground that reported costs in 1981 were already reduced by Petitioner prior to the 1981 audit so that a larger percent of legitimate costs remained.

    
    

    1. Utilization Review Costs

       
       

17. Utilization review consists of a committee comprised of two physicians, the director of nursing, the administrator and a secretary who meet on a monthly basis to review patient charts and to determine the necessity for medical care, the level of care and the length of stay for each patient.

    
    

18. The Medicare program requires utilization review by providers participating in the program. If a provider is required to conduct utilization review because of its participation in the Medicare program, and if the provider also has Medicaid patients, the Medicaid patients must be included in the utilization review process.

    
    

19. Medicare reimburses the nursing home for utilization review expenses based upon the percentage of the total number of patients comprised by Medicare patients. For example, if a provider incurred utilization review expenses in the amount of $1,000, and fifty percent of the patients were Medicare patients, Medicare would reimburse the facility $500.

    
    

20. Under the Medicaid program Petitioner was reimbursed five dollars for each chart reviewed by the physicians at each monthly meeting during both fiscal years. However, the facility paid each physician $50 per meeting, or a total of

    $100, and it claimed reimbursement on the cost report for the difference between the amount paid to the physicians and the five dollars per chart reimbursement from Medicaid. The claimed amounts on the cost reports were $475 and $990 for the fiscal years in question.

    
    

21. Respondent adjusted the cost reports by disallowing the claimed utilization review costs on the grounds that (a) the State has adopted a fee schedule for reimbursement for these costs and is therefore restricted to the amounts already paid, and (b) the utilization review program is administered and funded by a separate program, and any deficiencies in that program should not be covered by another.

    
    

    1. Miscellaneous Items

    
    

22. The parties have agreed that return on equity should be recomputed in accordance with any adjustments made herein.

    CONCLUSIONS OF LAW

    
    

23. The Division of Administrative Hearings has jurisdiction of the subject matter and the parties thereto pursuant to Subsection 120.57(1), Florida Statutes.

    
    

24. The burden of proof in this proceeding rests upon Petitioner. Therefore, it must affirmatively demonstrate its entitlement to reimbursement of expenses incurred while participating in the Medicaid program. Department of Transportation v. J.W.C. Company, Inc., 396 So.2d 778 (Fla. 1st DCA 1981); Rule 10C-7.481(6), Florida Administrative Code.

    
    

25. Initially, two arguments raised by Petitioner may be disposed of prior to reaching a decision on the merits. First, Petitioner contends that Respondent's policies of limiting reimbursable costs of two categories of expenses (vehicle and utilization review expenses) constitutes rulemaking in accordance with Chapter 120. Because formal rulemaking procedures were not followed, it reasons that the implementation of those reimbursement policies is illegal. This argument must fail since such a contention should more properly be raised in a Section 120.56 proceeding. Second, Petitioner objects to Respondent relying upon HIM, 2304 as a basis for disallowing automobile expenses when the audit reports relied solely upon 2102.2. However, at the outset of the hearing the undersigned inquired of counsel as to whether "there (was) any dispute as to the basis for the Department to disallow these particular costs." Counsel indicated there was none, and made no objection during the course of the course of the hearing when Respondent raised 2304 as an additional reason for disallowing the costs. Accordingly, any objection as to the use of that ground was waived, and the undersigned shall consider that section in making a proper determination of those costs. 2/

    
    

26. Automobile Expenses - This category of expenses is a continually troubling item in the health care area, and seems to reoccur whenever an audit of a provider's cost report is made. The problem arises when the nursing home generally represents in good faith without contradiction that all vehicles owned by the home were used in providing patient care, but fails to maintain adequate documentation from an auditing standpoint to verify the legitimacy of those costs. Stated differently, the provider offers oral testimony that all costs are patient related, while the agency counters with a request for tangible documentation to verify the claim. The same is true in the case at bar.

    
    

27. In support of the vehicle expenses, Petitioner pointed out that the hospital administrator testified without contradiction that all expenses on the cost report were related to patient care. Apparently the estimate of personal use of the Ford by Mr. Lane was accepted by the Department, and requires no further discussion. Further, the fact that all vehicles (except the Cadillac) were frequently parked overnight one mile from the home because of potential vandalism does not by itself constitute a reason to disallow all or a portion of the costs. In the absence of evidence to the contrary, the assertion by Petitioner that all costs were patient related is initially accepted, tempered by the subsequent discussion on supporting documentation. 3/ Petitioner next contends the Department's one vehicle policy is not supported my Medicaid reimbursement principles. However, this argument is rejected since the so- called "policy" is not inflexible and authorizes more than one vehicle if a provider can substantiate the same.

    
    

28. Clearly, a provider is required to maintain cost information (supporting documentation) that is "current, accurate, and in sufficient detail

    to support payments made for services rendered to beneficiaries." Section 2304, HIM 15. It is true that this regulation does not specify that a mileage log be kept, but such a log is the best evidence from an auditing standpoint, and anything less than that detracts from the quality of the provider's evidence.

    
    

29. Petitioner's rationale that testimony alone is sufficient to support its claim for vehicle expenses must be rejected. Except by auditing tangible documentation, or physically observing an activity, an auditor has no means by which to independently verify alleged payments for services rendered by a provider, Here the documentation was simply gasoline credit card receipts, a tire receipt, perhaps some other miscellaneous unidentified records, and a visit by the auditors to the nursing home's premises for two weeks while conducting the audit. This is clearly insufficient audit evidence to verify Petitioner's claim that such costs related to patient care, or to meet the requirements of Section 2304, supra. While providers may find it difficult, expensive or bothersome to maintain a more sophisticated system of record keeping, anything short of this will trigger a controversy, and place the provider in an untenable position from an auditing standpoint. 4/ Therefore, Petitioner should be reimbursed $1,595 and $3,763 for vehicle expenses in fiscal years 1980 and 1981. 5/

    
    

30. Utilization Review Costs - The costs in question total only $1,465 for both fiscal years, and turn on whether costs from one program should be covered by another. Clearly, a deficiency in administering the program exists, and Petitioner does not receive full reimbursement for its costs. It is also undisputed that the costs in question are related to patient care, and Petitioner is required to engage in utilization review by federal regulations adopted by the State.

    
    

31. Petitioner contends that Section 2102.1, HIM 15, upon which Respondent relies, doesn't support the proposition that costs incurred in one program should not be borne by another. The section reads in pertinent part:

    
    

    The objective is that under the methods of determining costs, the costs with respect to individuals covered by the program will not be borne by others not so covered, and the costs with respect to individuals not so covered will not be borne by the program.

    The disputed costs relate to the Utilization Review Program; however, Petitioner seeks reimbursement of certain deficiencies incurred therein under the Nursing Home Program. This is specifically prohibited by Section 2102.1, and cannot be done. While Petitioner understandably seeks to be reimbursed for all legitimate costs, its only remedies appear to be (a) to seek a change

    in the State's fee schedule for patient review, or (b) to change the regulation in question. Therefore, the claimed costs of

    $1,465 should be disallowed.

    
    

32. Miscellaneous Items - The return of equity should be computed in accordance with the foregoing adjustments.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that Petitioner he reimbursed for vehicle costs and utilization

review costs for fiscal years 1980 and 1981 in accordance with the conclusions of law portion of this order.

DONE and ENTERED this 4th day of February, 1983, in Tallahassee, Florida,

DONALD R. ALEXANDER

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 4th day of February, 1983.

ENDNOTES

1./ The fee schedule generally provides a reimbursement of five dollars per patient reviewed by the physician. After 21 patients are reviewed, the reimbursement is decreased to $3.50 per patient.

2/. Compare Kernon's Su Casa, Inc. v. DHRS, DOAH Case Nos. 82-517 and 82-1573, Recommended Order entered December 17, /1982 (sustaining a timely raised objection on the very same issue).

1. / The cases cited by Respondent's witness at the final hearing, which involve Provider Reimbursement Review Board decisions at the federal level, are distinguishable from the factual situation herein and are therefore inapplicable to the instant case.

   
   

2. / This case is distinguishable from Kernon's Su Casa, fn. 2, supra, for there the Department merely argued that vehicle costs were unrelated to patient care and failed to timely assert the provisions of Section 2304. Further, the Department agreed the amount of costs claimed was not unreasonable, and did not question the estimate of personal use.

   
   

3. / Because the Cadillac was described as being "useless" in 1981, it is difficult to understand the Department's rationale in allowing any of its costs. However, in view of the lack of adequate supporting documentation, it is unnecessary to reconcile the reasoning of the Department.

COPIES FURNISHED:

A. Thomas Mihok, Esquire

and Gary L. Summers, Esquire Post Office Box 1980 Orlando, Florida 32802

Joseph L. Shields, Esquire Building One, Room 406 1323 Winewood Boulevard

Tallahassee, Florida 32301

Alicia Jacobs, Esquire General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32301

David H. Pingree, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32301

Docket for Case No: 82-001895

Orders for Case No: 82-001895