STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DOCTORS MEMORIAL HOSPITAL, )

)

Petitioner, )

)

vs. ) CASE NO. 86-2014RX

)

HOSPITAL COST CONTAINMENT )

BOARD, EXECUTIVE OFFICE OF ) THE GOVERNOR, STATE OF FLORIDA, )

)

Respondent. )

)

FINAL ORDER

Pursuant to written notice a formal hearing was held in this case before Larry J. Sartin, duly designated Hearing Officer of the Division of Administrative Hearings, on June 24 and 25, 1986, in Tallahassee, Florida.

APPEARANCES

For Petitioner: John H. Parker, Jr., Esquire

Parker, Hudson, Rainer & Dobbs 1200 Carnegie Building

133 Carnegie Way Atlanta, Georgia 30303

and

Robert A. Weiss, Esquire Parker, Hudson, Rainer & Dobbs The Perkins House, Suite 101

118 North Gadsden Tallahassee, Florida 32301

For Respondent: Curtis A. Billingsley, Esquire

Assistant General Counsel Hospital Cost Containment Board Woodcrest Office Park

Building L, Suite 101

325 John Knox Road Tallahassee, Florida 32303

STATEMENT OF THE CASE

On June 2, 1986, the Petitioner, Doctors Memorial Hospital, filed a Petition to Determine the Invalidity of Illicit Rules of the Hospital Cost Containment Board. In its Petition, the Petitioner challenged a "certain non- rule policy of the Hospital Cost Containment Board . . ." as "an invalid exercise of delegated legislative authority "

Contemporaneously with the filing of its Petition in

this case the Petitioner filed a Petition for Formal Administrative Hearings [sic] contesting the recommendations of the Respondent, the Hospital Cost Containment Board, with regard to the Petitioner's 1987 fiscal year budget. That Petition has been assigned case number 86-2111H and was consolidated with this case for purposes of hearing. A separate Recommended Order in case number 86-2111H has been issued simultaneously with this Final Order.

At the final hearing, the Petitioner presented the testimony of Robert William Lasko, James J. Bracher, Larry Murray, Thomas Dean Meadows, Douglas E. Pierce, Aldric M. Borders, Terry Lynn Richardson and John Pattillo. Messrs.

Murray and Meadows were accepted as experts in health care finance, including hospital budgeting, and Mr. Pattillo was accepted as an expert in health care finance.

The Petitioner's exhibits 1-14, 16-21 and 26-27 were marked as "DMH" exhibits and were accepted into evidence.

The Respondent presented the testimony of Mr. Pierce and Mr. Pattillo. No exhibits were offered by the Respondent.

Prior to the commencement of the final hearing in this case, the parties filed a Joint Prehearing Stipulation in which certain facts were stipulated to. Those facts are accepted, infra.

At the commencement of the final hearing, the Respondent filed a Motion to Dismiss with Prejudice in this case. That Motion is hereby denied.

The parties have timely filed proposed orders which contain proposed findings of fact. A ruling on each proposed finding of fact has been made either directly or indirectly in this Final Order. Additionally, attached to this Final Order is an Appendix which indicates where proposed findings of fact which have been accepted have been made in this Order and why proposed findings of fact which have not been accepted have been rejected. The Appendix is hereby incorporated as a part of the Findings of Fact portion of this Final Order.

ISSUE

Whether the Respondent's policy of requiring justification of a hospital's rate of increase in its GRAA in excess of the National Hospital Input Price Index (hereinafter referred to as the "NHIPI") is an invalidly promulgated rule?

FINDINGS OF FACT

1. The following findings of fact were contained in the Joint Prehearing Stipulation:

   
   

   1. The Petitioner's name and address are Doctors Memorial Hospital, 401 E. Byrd Avenue,

      Bonifay, Florida 32425. Doctors Memorial is

      a 34-bed short-term general acute care hospital located and operating in Holmes County.

      Doctors Memorial is owned by National Healthcare of Holmes County, Inc.

   2. The name and address of the agency affected are the Hospital Cost Containment Board, Executive Office of the Governor, State of Florida, Woodcrest Office Park,

      Building L, Suite 101, 325 John Knox Road, Tallahassee, Florida 32303. The HCCB I.D. number of Doctors Memorial is 10-0078.

   3. On or about March 27, 1986, Doctors Memorial submitted to the HCCB its projected 1987 fiscal year budget. Doctors Memorial's 1987 fiscal year begins on July 1, 1986, and runs through June 30, 1987.

   4. On May 16, 1986, Doctors Memorial received the Staff analysis and preliminary findings

      and recommendations relative to its 1987 fiscal year budget. Doctors Memorial was advised that the Staff would recommend to the HCCB that Doctors Memorial's budgeted gross revenue per adjusted admission and net operating revenue per adjusted admission for fiscal 1987 be adjusted downward for reasons

      set forth in the Staff analysis. Doctors Memorial timely filed its petition challenging Staff's recommendations on May 30, 1986.

   5. Doctors Memorial has standing in these matters based on the facts alleged in its petitions.

      
      

2. The Respondent indicated in its preliminary findings and recommendations that the following policy applied to the review of the Petitioner's 1987 budget:

   
   

   Current agency policy states that hospital's [sic] exceeding the MARI can only increase gross revenue per adjusted admission to the National Hospital Input Price Index (NHIPI) of 3.7 percent without further justification.

   Any increase in excess of the NHIPI must be sufficiently justified and quantified to staff.

   
   

3. The NHIPI is an average rate of inflation for hospitals in the United States. It represents the additional costs of providing services by hospitals in the country caused by inflation.

   
   

4. The policy contained in the Respondent's preliminary findings and recommendations was developed and imposed upon the Petitioner after the Respondent's analysis, Mr. Lasko, had made an initial draft of his review of the Petitioner's budget for fiscal year 1987.

   
   

5. After learning of the policy, Mr. Lasko redrafted his review which was signed on May 15, 1986 and subsequently sent to the Petitioner.

   
   

6. The policy contained in the Respondent's preliminary findings and recommendations was contained in a memorandum dated May 16, 1986 (hereinafter referred to as the "May 16 Memorandum"), and signed by Mr. Pattillo, the Chief Financial Analyst of the Respondent, on May 22, 1986.

   
   

7. In the May 16 Memorandum it was stated that:

   
   

   Any increase over the previous year's GR/AA inflated by the NHIPI, shall be justified

   by the hospital to the staff's satisfaction utilizing the statutory review criteria of section 395.509(5), Florida Statutes.

   
   

8. The policy contained in the Respondent's preliminary findings and recommendations and its May 16 Memorandum, based upon instructions contained in the May 16 Memorandum, is to apply to all 1987 budgets that are subject to budget review.

   
   

9. The policy contained in the May 16 Memorandum was further explained in a memorandum dated June 19, 1986 (hereinafter referred to as the "June 19 Memorandum"). The June 19 Memorandum was signed by Mr. Pattillo.

   
   

10. In the June 19 Memorandum it was indicated that hospitals subject to review may even have to justify an amount of increase less than the NHIPI.

    
    

11. The policy of the Respondent embodied in its May 16 Memorandum and its June 19 Memorandum has not been adopted as a rule pursuant to Section 120.54, Florida Statutes (1985).

    
    

    CONCLUSIONS OF LAW

    
    

12. The Division of Administrative Hearings has jurisdiction of the parties to, and the subject matter of, these proceedings. Section 120.56, Florida Statutes (1985).

    
    

13. The term "rule" is defined in Section 120.52(15), Florida Statutes (1985), as:

    
    

    each agency statement of general applicability that implements, interprets, or prescribes

    law or policy or describes the organization, procedure, or practice requirements of an agency and includes any form which imposes any requirement or solicits any information not specifically required by statute or by an existing rule . . . .

    
    

14. Several exceptions to the definition of the term "rule" are contained in Section 120.52(15), Florida Statutes (1985). None of those exceptions apply in this case.

    
    

15. The definition of a "rule" as contained in the Administrative Procedure Act defines a rule "broadly . . . to reach . . . invisible policy- making." Straughn v. O'Riordan, 338 So.2d 832, 834 ft. n. 3 (Fla. 1976).

    
    

16. The facts in this case clearly demonstrate that the Respondent's NHIPI policy constitutes a rule. The policy set out in the May 16 Memorandum clearly applies to all 1987 budgets subject to review by the Respondent. The policy is clearly an "agency statement of general applicability that implements, interprets, or prescribes policy" within the definition of "rule" contained in Section 120.52(15), Florida Statutes (1985). The documents involved in this case are similar to the documents challenged in Department of Administration v. Stevens, 344 So.2d 290, 296 (Fla. DCA 1977), where it was stated that the challenged

    
    

    documents clearly are agency policy state-

    ments of general applicability which were applied and were intended to be applied with the force of a rule of law. They are not internal management memoranda which do not affect either the private interests of any person or any plan or procedure important

    to the public. They do not fall within any of the other exceptions to the statutory definition.

    
    

17. The documents in this case clearly affect the "private interests" of any hospital which is subject to budget review under Section 395.509(5), Florida Statutes (1985). The memoranda were also issued for implementation by staff of the Respondent with little or no room for discretionary modification. See Department of Administration v. Stevens, supra.

    
    

18. The fact that the Respondent has not designated its policy as a rule is not dispositive. In Department of Administration v. Harvey, 356 So.2d 323,

    325 (Fla. 1st DCA 1978), the Court stated the following:

    
    

    Whether an agency statement is a rule turns on the effect of the statement, not on the agency's characterization of the statement by some appellation other than "rule."

    
    

    See also, Amos v. Department of Health and Rehabilitative Services, 444 So.2d 43 (Fla. 1st DCA 1984).

    
    

19. The case cited by the Respondent in its Motion to Dismiss with Prejudice are all distinguishable from this case. In all of those cases, it was determined that the challenged "rule" did not constitute an agency policy within the definition of the term "rule" contained in Section 120.52(15), Florida Statutes (1985). This case clearly involves an agency policy within the definition of "rule."

    
    

20. It is also clear that the policy at issue has not been adopted as a rule by the Respondent pursuant to Section 120.54, Florida Statutes (1985). Therefore, it is clear that the Respondent's unpromulgated rule must be declared to be invalid.

    
    

21. The Respondent raised a number of grounds in support of its Motion to Dismiss with Prejudice. First, the Respondent argued that the ultimate relief that can be granted in this case and the Section 120.57 proceeding instituted by the Petitioner in case number 86-2111H are identical: "approval of Doctors Memorial Hospital's budget for its 1987 fiscal year." This allegation is clearly incorrect. The Petitions filed in this case and in case number 86-2111 seek different relief. In this case the Petitioner properly seeks a determination that the policy of the Respondent at issue constitutes a rule which should be declared invalid. The Petition in case number 86-2111H seeks a determination that the Petitioner's 1987 fiscal year budget should be approved as submitted. As counsel for the Respondent admitted at the commencement of the final hearing, even if the policy challenged in this proceeding is declared invalid, there may be other reasons why the Petitioner's budget should not be approved in the Section 120.57 proceeding. Additionally, it is clear that even if the Respondent's policy is declared invalid the Respondent may still rely on that policy in support of its action in reviewing the Petitioner's budget. See Department of Administration v. Harvey, supra.

22. Next, the Respondent argues that the policy at issue does not constitute a rule. That argument has already been disposed of.

    
    

23. The Respondent also has argued that the interest of judicial economy will be served by going forward with the Section 120.57 proceeding only. Both proceedings were consolidated for purposes of final hearing. It does not appear that any evidence necessary to decide the rule challenge case in addition to the evidence which was necessary to decide the Section 120.57 case was presented.

    
    

24. All of the cases cited by the Respondent in support of its next argument, that the appropriate method of relief is limited to a Section 120.57 proceeding, are distinguishable from this case. None of those cases involved a rule as that term is defined in Section 120.52(15), Florida Statutes (1985). Since the policy at issue constitutes a rule in this case, the Petitioner is entitled to a determination that it is invalid. See Hasper v. Department of Administration 459 So.2d 398 (Fla. 1st DCA 1984).

    
    

25. Finally, the Respondent's argument that "perpetuation of Case No. 86- 2014RX would improperly delegate this authority [the authority to approve a hospital's budget] to the Hearing Officer and is in direct conflict with Section 395.504(2)" is without merit. As the Petitioner has pointed out in its proposed order, the sole remedy sought by the Petitioner in this proceeding is a determination that the Respondent's NHIPI policy is invalid. Even though that determination is proper, the Respondent may still use that policy in support of its position in the Section 120.57 proceeding. The determination that the policy is invalid simply shifts the burden of supporting the use of the policy to the Respondent. See Home Health Professional Services, Inc. v. Department of Health and Rehabilitative Services, 463 So.2d 345 (Fla. 1st DCA 1985).

    
    

26. Based upon the foregoing, it is concluded that the Respondent's Motion to Dismiss with Prejudice should be denied.

ORDER

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

1. The Respondent's Motion to Dismiss with Prejudice is DENIED; and

   
   

2. The Respondent's policy that hospitals subject to budget review must justify any increase in their budgeted gross revenue per adjusted admission in excess of the maximum rate of increase is an invalid exercise of delegated legislative authority because the rule was not adopted in compliance with Section 120.54; Florida Statutes (1985).

DONE and ORDERED this 25th day of July 1987, in Tallahassee, Florida.

LARRY J. SARTIN

Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

FILED with the Clerk of the Division of Administrative Hearings this 25th day of July 1987.

APPENDIX

The parties have submitted proposed findings of fact. It has been noted below which proposed findings of fact have been generally accepted and the paragraph number(s) in the Final Order where they were accepted. Those proposed findings of fact which have been rejected and the reasons for their rejection have also been noted. Paragraph numbers in the Final Order are referred to as "FO ."

Petitioner's Proposed Findings of Fact Paragraph Number:

1. Accepted in FO 1.

2. To the extent that this proposed finding of fact includes facts contained in the Joint Prehearing Stipulation, they have been accepted in FO 1.

3. Accepted in FO 1.

4-8. These proposed findings of fact are relevant to the Section 120.57 proceeding in case number 86-2111H.

9. To the extent that this proposed finding of fact includes facts contained in the Joint Prehearing Stipulation, they have been accepted in FO 1.

10-46. These proposed findings of fact are relevant to the Section 120.57 proceeding in case number 86-2111H.

47. Accepted in FO 2 and 4-11.

48-54. These proposed findings of fact are relevant to the Section 120.57 proceeding in case number 86-2111H.

55. Accepted in FO 1.

Respondent's Proposed Findings of Fact Paragraph Number:

1. To the extent that this proposed finding of fact includes facts contained in the Joint Prehearing Stipulation, they have been accepted in FO 1.

2-4. These proposed findings of fact are relevant to the Section 120.57 proceeding in case number 86-2111H.

1. The third sentence of this proposed finding of fact is accepted in FO 2-10.

2. These proposed findings of fact are relevant to the Section 120.57 proceeding in case number 86-2111H.

COPIES FURNISHED:

Robert A. Weiss, Esquire Parker, Hudson, Rainer & Dobbs The Perkins House, Suite 101

118 N. Gadsden Street Tallahassee, Florida 32301

Curtis A. Billingsley, Esquire Assistant General Counsel Hospital Cost Containment Board Woodcrest Office Park

Building L, Suite 101

325 John Knox Road Tallahassee, Florida 32303

James Bracher Executive Director

Hospital Cost Containment Board Woodcrest Office Park

Building L, Suite 101

325 John Knox Road Tallahassee, Florida 32303

Liz Cloud, Chief

Bureau of Administrative Code 1802 The Capitol

Tallahassee, Florida 32301

Carroll Webb, Executive Director Administrative Procedures Committee

120 Holland Building Tallahassee, Florida 32301

John H. Parker, Jr., Esquire Parker, Hudson, Rainer & Dobbs 1200 Carnegie Building

133 Carnegie Way Atlanta, Georgia 30303

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this final order is entitled to judicial review pursuant to Section 120.68, Florida Statutes. Review proceedings are governed by the Florida Rules Of Appellate Procedure. Such proceedings are commenced by filing one copy of a notice of appeal with the Agency Clerk Of The Division Of Administrative Hearings and a second copy, accompanied by filing fees prescribed by law, with the District Court Of Appeal, First District, or with the District Court Of Appeal in the appellate district where the party resides. The notice of appeal must be filed within 30 days of rendition of the order to be reviewed.

Docket for Case No: 86-002014RX

Orders for Case No: 86-002014RX