STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Petitioner, )

)

vs. ) CASE NO. 84-2228

)

MARVIN H. LEDBETTER, D.O., )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held in the above case before the Division of Administrative Hearings by its duly designated Hearing Officer, Donald R. Alexander, on December 4 and 5, 1984 and March 4, 1985 in Daytona Beach and Deland, Florida.

APPEARANCES

For Petitioner: Theodore E. Mack, Esquire

Building One, Room 407 1323 Winewood Boulevard

Tallahassee, Florida 32301

For Respondent: S. LaRue Williams, Esquire

42 South Peninsula Drive Daytona Beach, Florida 32018

BACKGROUND

This matter began on May 18, 1984 when petitioner, Department of Health and Rehabilitative Services, issued proposed agency action in the form of a letter which advised respondent, Marvin H. Ledbetter, a doctor of osteopathic medicine, that during calendar year 1981 respondent had received $9,505.06 in Medicaid payments for services deemed to be "unnecessary medical treatment." More specifically petitioner alleged that a sample review of respondent's Medicaid claims indicated "mild overutilization of hospital admissions and lengths of stay."

Respondent disputed the above claim and requested a formal hearing pursuant to Subsection 120.57(1), Florida Statutes. The matter was referred by petitioner to the Division of Administrative Hearings on June 21, 1984 with a request that a hearing officer be assigned to conduct a formal hearing.

By agreement of the parties, the final hearing was scheduled for December 4, 1984 in Daytona Beach and Deland, Florida, respectively. A continued hearing was held on March 4, 1985 in Deland, Florida.

At the final hearing petitioner presented the testimony of Mildred F. Martin, peer review coordinator for the Medicaid program, and Dr. James Conn, an expert in the general practice of medicine. Petitioner also offered the depositions of Dr. J. Orson Smith, Dr. James G. White, Dr. Williams W. Cox, and Dr. Jules J. Cohen. It also offered petitioner's exhibits 1-18, and exhibits 2ML-11ML; all were received except exhibits 8, 10, and 9ML and 10ML. 1/ A ruling on the latter two exhibits was reserved and is discussed in the conclusions of law portion of this order. Respondent testified on his own behalf and presented the testimony of Dr. James G. Hull, Dr. George W. Frison and Mildred F. Martin. He also offered respondent's exhibits 1-7; all were received in evidence.

The transcripts of hearing (three volumes) were filed on April 3, 1985. Proposed findings of fact and conclusions of law were filed by the parties on April 15, 1985. A ruling on each proposed finding of fact has been made either directly or indirectly in this Recommended Order, except where such proposed findings of fact have been rejected as subordinate, cumulative, immaterial or unnecessary.

Based upon the entire record, the following findings of fact are determined:

At issue herein is whether respondent should repay petitioner $9,505.06 for alleged excess Medicaid payments received during calendar year 1981.

FINDINGS OF FACT

1. Petitioner, Department of Health and Rehabilitative Services (HRS), is designated as the state agency responsible for the administration of federal and state Medicaid funds, and is authorized by statute to provide payments for medical services.

   
   

2. Respondent, Marvin H. Ledbetter, is a doctor of osteopathy who is enrolled as a general practitioner provider in the Medicaid Program. His professional office is in Ormond Beach, Florida where he is engaged in family practice. Under the Program, Ledbetter is assigned a provider number (48220-0) which is used to bill Medicaid for services rendered to Medicaid recipients. During calendar year 1981, which is the only time period in question, Ledbetter received $42,809 in Medicaid reimbursements from HRS, of which $28,062 related to fees for Medicaid hospital patients. The latter category of fees is at issue.

   
   

3. In order to qualify for federal matching Medicaid funds HRS must meet certain federally-imposed requirements, including the establishment of a program integrity section designed to insure that all Medicaid services are medically necessary. If they are not, HRS is obliged to seek recoupment of funds paid to the provider. This proceeding involves an attempt by HRS to recoup certain funds paid to Ledbetter for hospital services.

   
   

4. After providing medical services to various hospital patients, Ledbetter completed and sent in the necessary forms to obtain payment. As noted earlier, these payments totaled $28,062 during 1981. Upon receipt of the forms, HRS input the information from the forms into a computer data base, along with similar information from other Medicaid providers throughout the State. This information included, among other things, the number of admissions, number of

   discharges, amount paid for hospital services and length of stay. The retention of such data is necessary so that possible overpayments may be detected by HRS through the statistical analysis of claims submitted by a group of providers of a given type.

   
   

5. Because Ledbetter's total discharges exceeded the average of other family physicians throughout the State, the computer generated a report which flagged Ledbetter for further review and examination. An HRS analyst conducted such a review of Ledbetter's records, and found his average hospital length of stay for patients to be acceptable when compared to the average physician in the State. This report was forwarded to the HRS peer review coordinator who randomly selected thirty of Ledbetter's patients from the computer, and obtained their patient charts (numbering sixty-eight). Such a statistical calculation is authorized by Rule 10C-7.6(4)(b), Florida Administrative Code. A medical consultant employed by HRS then reviewed twelve of the sixty-eight charts and recommended the records be sent to a Peer Review Committee (PRC) for its review and recommendation. This committee is authorized by Rule 7C-7.61(4)(c), Florida Administrative Code serves under contract with HRS, and is composed of eight members of the Florida Osteopathic Medical Association. It is their responsibility to review the files of physicians whose Medicaid payments are questioned by HRS's program integrity section. When Ledbetter's records were forwarded to the PRC by HRS, the transmittal letter stated that a "study" of his records had been made, and that said study revealed "overutilization of inpatient hospital services" and "excessive lengths of stay."

   
   

6. After a PRC review was conducted in early 1984, the records were returned to HRS with a notation that "mild overutilization" had occurred. According to informal guidelines used by the PRC, this meant that Ledbetter's overutilization fell within the range of 0 percent to 20 percent. HRS accepted these findings but for some reason initially determined that a 40 percent overutilization had occurred, and that Ledbetter was overpaid in 1981 by 40 percent for his hospital services. Finding this amount to be inconsistent with the mild overutilization guidelines, HRS arbitrarily added back two days to each patient's hospital stay, which decreased overutilization to 33.8 percent, or

   $9,505.06 in overpayments. By proposed agency action issued on May 18, 1984, it billed Ledbetter this amount, thereby precipitating the instant controversy.

   
   

7. All of the patients in question were from the lower income category, and most were black. Their home conditions were generally less than desirable, and the ability of the parents to supply good nursing care to ill or sick children was in doubt. At the same time, in 1981 Ledbetter was working an average of 56 hours per week in the emergency room of a local hospital and devoted only minimal time to his family practice. Because of this Ledbetter's number of hospital admissions greatly exceeded the norm when compared to general practitioners who engaged in an office practice. Consequently, he received most of these patients through the emergency room rather than his office and was dealing with patients whose socioeconomic conditions were an important consideration. These factors must be taken into account in analyzing Ledbetter's patient records.

   
   

8. HRS does not contend that Ledbetter failed to perform the services for which he was paid--rather, it questions only whether some of the admissions were medically necessary and whether some of the lengths of stay were too long. In this regard, conflicting expert testimony was offered by the parties concerning the amount of overutilization, if any. Expert testimony by two local doctors of osteopathy support a finding that only mild overutilization of admissions and lengths of stay occurred. This is corroborated by HRS's expert (Dr. Smith) and

   by the testimony of its "live" expert, Dr. Conn, who conceded that lengths of stay were only "a little bit too long." The more persuasive testimony also establishes that while mild overutilization falls within the range of 0 percent to 20 percent, 10 percent is an appropriate median in this proceeding. Using this yardstick, Ledbetter should reimburse HRS for 10 percent for his billings, or $2,806.20.

   
   

   CONCLUSIONS OF LAW

   
   

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

   
   

10. It has been long established that "Section 120.57 proceedings are intended to formulate formal agency action, not to review action taken earlier and preliminarily." McDonald v. Department of Banking and Finance 346 So.2d 569, 584 (Fla. 1st DCA 1977). As such, a 120.57(1) hearing is de novo in nature, and requires the party seeking a change in the status quo to justify by a preponderance of evidence the action which it has proposed. With this in mind, it is axiomatic that petitioner cannot rely on its preliminary agency findings as being conclusive and offer nothing more to support its allegations. Instead, it must prove each and every aspect of the factual allegations which underlie its ultimate claim for reimbursement in the amount of $9,505.06. Therefore, in Medicaid reimbursement cases such as this, peer review committee findings and other preliminary action are nothing more than free-form action, are clearly not conclusive, and must be proven anew and subjected to examination and rebuttal by the provider.

    
    

11. Requiring resolution before conclusions of law can be made is the admissibility and weight, if any, to be accorded petitioner's exhibits 9-ML and 10-ML. These exhibits are (a) "hospital review sheets" prepared by unknown members of the peer review committee which reflect certain criticisms on various patient charts, and (b) a worksheet translating the findings on use review sheets into a dollar amount of Medicaid overpayments owed by Ledbetter. Because exhibit 10-ML is based upon declarations contained in exhibit 9-ML, its reliability is directly dependent upon that of exhibit 9-ML.

    
    

12. Respondent objects to both exhibits on the ground they constitute "blatant hearsay." He does not challenge their authenticity. Petitioner concedes the exhibits are hearsay, but contends exhibit 9-ML is admissible as an exception to the hearsay rule under the business records exception codified in Subsection 90.803(6)(a), Florida Statutes, and because it supplements and explains other competent evidence presented by Dr. Cohen (by deposition) and Dr. Conn, HRS's expert. HRS further argues that exhibit 10-ML is admissible under the same theory.

    
    

13. Initially, it is noted that the hospital review sheets were prepared solely for litigation purposes and have no other business purpose. That is to say, if Ledbetter's records had not been flagged by the agency computer, the committee would not have reviewed his records and prepared the documents in question. However, once they were "flagged," the process for possible recoupment of excess payments from Ledbetter began, and the challenged documents were prepared solely for this purpose. As such the reports lack the reliability which business records are ordinarily assumed to have and are therefore inadmissible under the business records exception. See, for example, Stambor v. One Hundred Seventy-Second Collins House d/b/a Rascal House, So.2d

    (Fla. 3rd DCA 1985, op. filed 3-12-85). Moreover, respondent has cast considerable doubt on their trustworthiness by questioning the time, methodology and thoroughness devoted to this task by the committee members, and possible bias created by adverse preliminary agency findings furnished to the members prior to their meeting. 2/

    
    

14. Next, HRS argues that they supplement or explain other competent evidence of record and are accordingly admissible under Rule 22I-6.26(3) Florida Administrative Code which tracks Subsection 120.58(1)(a), Florida Statutes. But Dr. Cohen, upon whom HRS first relies, did not provide competent testimony concerning purported deficiencies noted in the hospital charts of Ledbetter. Instead, he simply repeated the conclusions made by other unidentified members of the panel. Indeed, Cohen was the panel's chairman, and had no specific knowledge concerning the individual patient hospital charts. Finally, Dr. Conn gave competent testimony concerning certain hospital charts, but the notations on the bottom of the review sheets do not amplify or explain his testimony. Rather they are abbreviated generalities by unknown authors with minimal reliability and accordingly have no probative value in this proceeding.

    However, to the extent the review sheets contain data taken directly from the charts (that data which is typed rather than handwritten), such as the patient's name, number, date of hospital stay, and diagnosis, they provide supplemental admissible data. Accordingly, all handwritten notations on the documents have been disregarded. Because the handwritten notations serve as the basis for admitting exhibit 10-ML, the objection to that exhibit is sustained. In summary, then only the typed portion of exhibit 9-ML is received in evidence-- the remainder has been disregarded and the objection to exhibit 10-ML is hereby sustained.

    
    

15. Rule 7C-7.61(2)(b), Florida Administrative Code provides in relevant part as follows:

    
    

    (b) Providers may be overpaid because of being paid for services that were:

    2. Inappropriate or medically unnecessary.

    
    

    Accordingly, HRS may seek recoupment of Medicaid payments to a provider when it determines that the provider was paid for serv- ices that were "medically unnecessary." Such action is mandated by Subsection 409.355(1), Florida Statutes.

    
    

16. The more persuasive and credible evidence reveals that during 1981 respondent's Medicaid hospital admissions and lengths of stay in the hospital indicated mild overutilization. It is further concluded that such overutilization equates to approximately 10 percent overutilization, and that he should accordingly reimburse petitioner in the amount of $2,806.20 for excess payments received for calendar year 1981 claims.

    
    

17. In its posthearing pleading, respondent raises a number of due process violations allegedly committed by HRS during the preliminary stages of this proceeding. These alleged violations center around (a) pre-hearing prejudice on the part of the agency, and (b) flaws in the peer review committee process. Errors in the probable cause phase of the proceeding may, of course, constitute a basis for reversing an agency s action. See, for example Kibler v. Department of Professional Regulation, 418 So.2d 1081 (Fla. 4th DCA 1982); Turner v. Department of Professional Regulation, 460 So.2d 395 (Fla. 5th DCA 1984). However, such errors are not jurisdictional and a prompt assertion of noncompliance with probable cause procedures must be made. Cf. Sheppard v.

    Board of Dentistry, 385 So.2d 143 (Fla. 1st DCA 1980). Here no such assertion was made until final hearing. Therefore, such assertions are deemed to be untimely.

    
    

18. The remaining arguments concerning the agency methods of determining overpayment, its statistical methodology, burden of proof, and comparison of Ledbetter with other physicians in the State, have been considered and addressed in this order, or deemed to be without merit.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that respondent repay petitioner $2,086.20 in excess Medicaid

payments received for calendar year 1981 claims.

DONE and ORDERED this 16th day of May, 1985, 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 16th day of May, 1985.

ENDNOTES

1/ This case was originally consolidated with Case Nos. 84-2227 and 84-2229, which later settled. A part of petitioner's exhibits in this proceeding pertain to those two cases.

2/ Even if the records were not prepared solely for litigation purposes, they would be inadmissible under Subsection 90.803(6)(a) since they contain opinion declarations and the declarants were not qualified as experts. See Subsection 90.803(6)(b), Florida Statutes.

COPIES FURNISHED:

Theodore E. Mack, Esquire Bldg. One, Room 407

1323 Winewood Blvd.

Tallahassee, Florida 32301

S. LaRue Williams, Esquire

42 S. Peninsula Drive Daytona Beach, Florida 32018

=================================================================

AGENCY FINAL ORDER

=================================================================

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES,

Petitioner,

vs. CASE NO. 84-2228

MARVIN H. LEDBETTER, D.O.,

Respondent.

/

FINAL ORDER

This cause came on before me for the purpose of issuing a final agency order. The Hearing Officer assigned by the Division of Administrative Hearings (DOAH) in the above-styled case has submitted a Recommended Order to the Department of Health and Rehabilitative Services (HRS). A copy of that Recommended Order is attached hereto as Exhibit A.

Respondent, HRS, filed Exceptions to the Recommended Order.

RULING ON EXCEPTIONS

1. Paragraph 6, sentence 3, of the findings of fact, in that it implies that HRS's decision was arbitrary and/or unexplained, is not based upon competent substantial evidence, based upon a review of the complete record. HRS's first exception is granted.

   
   

2. Paragraph 8, last two sentences of the findings of fact contained in the Recommended Order is not based upon competent substantial evidence based upon a review of the complete record. HRS's second exception is granted.

   
   

3. HRS's exceptions to conclusions of law 2 and 3 of the Recommended Order are granted. The appropriate standard applicable to the burden of persuasion is competent substantial evidence. Petitioner's exhibits 9-ML and 10-ML are admissible into evidence under the business records exception found at s. 90.803(6)(a). HRS's exceptions 3 and 4 are granted.

FINDINGS OF FACT

Paragraphs 1, 2, 3, 4, 5, and 7 of the Findings of Fact contained in the Recommended Order are adopted and incorporated by reference. Paragraphs 6 and 8 of the Findings of Fact contained in the Recommended Order are specifically not adopted but are modified as follows for the reasons set forth in the ruling on exceptions and exceptions filed by HRS:

6. After a PRC review was conducted in early 1984, the records were returned to HRS with a notation that "mild overutilization" had occurred. According to informal guidelines used by the PRC, this meant that Ledbetter's overutilization fell within the range of 0 percent to 20 percent. HRS accepted these overall findings and utilized the PRC's specific findings as to each of the thirty patients reviewed by the PRC. When the specific number of days denied by the PRC was applied to Ledbetter's overall practice to determine the amount of recoupment due, it was found that the PRC had actually found 40 percent overutilization. Finding this amount to be inconsistent with the mild overutilization guidelines, HRS arbitrarily added back two days to each patient's hospital stay, which decreased overutilization to 33.8 percent, or

$9,505.06 in overpayments. By proposed agency action issued on May 18, 1984, it billed Ledbetter this amount, thereby precipitating the instant controversy.

8. HRS does not contend that Ledbetter failed to perform the services for which he was paid--rather, it questions only whether some of the admissions were medically necessary and whether some of the lengths of stay were too long. In this regard, conflicting expert testimony was offered by the parties concerning the amount of overutilization, if any. Expert testimony by two local doctors of osteopathy support a finding that only mild overutilization of admissions and lengths of stay occurred. This is corroborated by HRS's expert (Dr. Smith) and by the testimony of its "live" expert, Dr. Conn, who conceded that lengths of stay were only "a little bit too long."

CONCLUSIONS OF LAW

Paragraphs 1, 4, 5, and 6 of the Conclusions of Law contained in the Recommended Order are adopted and incorporated herein as though set out in full.

Based upon the foregoing, it is

ADJUDGED that Respondent repay DHRS Two Thousand Eighty-Six and 20/100 Dollars ($2,086.20) in excess Medicaid payments received for calendar year 1981.

DONE and ORDERED this 9th day of October, 1985, in Tallahassee, Florida.

DAVID H. PINGREE

Secretary

A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED

TO JUDICIAL REVIEW WHICH SHALL BE INSTITUTED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF HRS, And A SECOND COPY, ALONG WITH FILING FEE AS PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE AGENCY MAINTAINS ITS HEADQUARTERS OR WHERE A PARTY RESIDES. REVIEW PROCEEDINGS SHALL BE CONDUCTED IN ACCORDANCE WITH THE FLORIDA APPELLATE RULES.

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a true copy of the foregoing was

sent to the following named people at 3:30 p.m. o'clock, this 11th day of October, 1985.

Theodore E. Mack, Esquire Department of HRS

1323 Winewood Blvd.

Tallahassee, Florida 32301

S. LaRue Williams, Esquire

42 S. Peninsula Drive Daytona Beach, Florida 32018

Donald R. Alexander, Hearing Officer Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301

LESLEY MENDELSON, Agency Clerk

Docket for Case No: 84-002228

Orders for Case No: 84-002228