STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

PALM SPRINGS GENERAL HOSPITAL, )

)

Petitioner, )

)

vs. ) CASE NO. 89-2178

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, Claude B. Arrington, held a formal hearing in the above-styled cases on October 24, 1990, at Tallahassee, Florida.

APPEARANCES

For Petitioner: Paul Siegel, Esquire

Sinclair, Louis, Siegel, Heath, Nussbaum & Zavertnik, P.A.

1125 Alfred I. DuPont Building Miami, Florida 33131

For Respondent: Karel Baarslag, Esquire

Department of Health and Rehabilitative Services

1317 Winewood Boulevard Building Six, Room 230 Tallahassee, Florida 32399-0700

STATEMENT OF THE ISSUE

Whether Petitioner is entitled to interest on the subject medicaid reimbursement payment and, if so, the amount of the interest to which it is entitled.

PRELIMINARY STATEMENT

In a separate administrative proceeding, the Health Care Cost Containment Board (HCCB) and Palm Springs General Hospital, Inc. (PSGH), litigated amount of disproportionate share reimbursement to which PSGH was entitled for fiscal year 1987. During the course of the litigation between HCCB and PSGH, a stipulated resolution was reached as to the amount to which PSGH was entitled and jurisdiction of the matter was relinquished by the Division of Administrative Hearings to HCCB for final disposition. HCCB later reneged on the settlement agreement. Thereafter, the Third District Court of Appeals resolved the matter by ordering HCCB to honor the settlement agreement.

The Department of Health and Rehabilitative Services (DHRS) serves as the disbursing agency for Medicaid payments to Medicaid providers in the State of Florida. PSGH filed this separate administrative action against DHRS and initially raised in this proceeding the same issues that had been raised in the action it had brought against HCCB. At the request of the parties, this proceeding was abated pending resolution of the separate action between PSGH and HCCB. The decision of the Third District Court of Appeal filed May 8, 1990, resolved all of the issues that were initially raised in this pending matter.

While the action between PSGH and HCCB was on appeal, PSGH and DHRS entered into a stipulation dated June 12, 1989. Pursuant to this stipulation, DHRS agreed to cause its fiscal agent to hold the disputed funds until the litigation between PSGH and HCCB was resolved and PSGH agreed not to seek an injunction to preserve the disputed funds pending litigation. As a result of the stipulation, the disputed funds were held by DHRS' agent in an interest bearing account between July 21, 1989, and June 21, 1990. On June 21, 1990, shortly after the appellate decision became final, DHRS paid to PSGH $342,345 as the amount of Medicaid reimbursement to which it was entitled.

Following payment by DHRS to PSGH of the amount that had been in dispute, PSGH demanded that DHRS pay interest on the disputed funds for the period the funds had been in the interest bearing account. The pleadings in the pending matter did not address the issue of interest until PSGH's "Motion to Compel HRS to Pay Interest" was filed on July 6, 1990. The parties stipulated that the only issues to be resolved in the pending dispute was whether PSGH was entitled to interest on the subject Medicaid reimbursement payment and, if so, the amount of the interest to which PSGH is entitled. DHRS made no objection to the procedural posture of this proceeding, although it does argue that the undersigned lacks the authority to recommend the relief PSGH seeks on the grounds asserted by PSGH because each of these grounds involve the application of equitable principles and equitable remedies.

At the formal hearing, the parties presented three joint exhibits, PSGH presented 8 exhibits, and DHRS presented the testimony of one witness, Carl Bruce Morstadt. Mr. Morstadt is an attorney who initially represented DHRS in these proceedings. DHRS presented one exhibit which was marked for identification purposes, but which was not accepted into evidence. All other exhibits were accepted into evidence.

A transcript of the proceedings has been filed. At the request of the parties, the time for filing post-hearing submissions was set for more than ten days following the filing of the transcript. Consequently, the parties waived the requirement that a recommended order be rendered within thirty days after the transcript is filed. Rule 22I-6.031, Florida Administrative Code. Rulings on the parties' proposed findings of fact may be found in the Appendix to this Recommended Order.

FINDINGS OF FACT

1. Petitioner, Palm Springs General Hospital, Inc. (PSGH) is a hospital operating in the State of Florida that provides Medicaid services. In a separate administrative proceeding that was initially referred to the Division of Administrative Hearings (DOAH), PSGH and the Health Care Cost Containment Board (HCCB) litigated the method by which PSGH's entitlement for Medicaid disproportionate share reimbursement under Chapter 88-294, Laws of Florida, for the fiscal year 1987 should be calculated.

2. In April 1989, while the litigation between PSGH and HCCB was pending before DOAH, the PSGH and HCCB entered a written settlement agreement which settled the dispute. Consequently, DOAH's file in that matter was closed and the matter was returned to HCCB for final disposition.

   
   

3. Respondent, Department of Rehabilitative Services (DHRS), serves as the disbursing agency for medicaid payments to medicaid providers in the State of Florida. In the pending matter, PSGH initially raised the same issues with DHRS that it had raised in its dispute with HCCB - the manner by which PSGH's medicaid reimbursement entitlement had been calculated. At the request of the parties, the dispute between PSGH and DHRS was abated until the conclusion of the litigation between PSGH and HCCB.

   
   

4. After the dispute between PSGH and HCCB had been returned to HCCB pursuant to the settlement agreement, HCCB reneged on the settlement agreement. PSGH thereafter appealed HCCB's decision not to honor the settlement agreement. In an opinion filed May 8, 1990, Florida's Third District Court of Appeal reversed the refusal by HCCB to honor the settlement agreement and remanded the cause to HCCB for the entry of a final order adopting the settlement agreement. The Court referred to the HCCB's action in attempting to renounce its agreement as a "gross abuse of the agency's discretion" and awarded appellate attorney's fees to PSGH against HCCB. Palm Springs General Hospital, Inc., v. Health Care Cost Containment Board, et al. 560 So.2d 1348, 1350 fn. 2 (Fla. 3rd DCA 1990).

   
   

5. During the pendency of the litigation between HCCB and PSGH, counsel for PSGH became concerned that DHRS might disburse the medicaid funds in its possession before the extent of PSGH's entitlement was determined. To avoid additional litigation, PSGH and DHRS entered into a stipulation in the pending case on June 12, 1989. That stipulation provided as follows:

   
   

   The parties, by and through their undersigned attorneys, hereby stipulate and agree as follows:

   
   

   1. In a related administrative proceeding, Palm Springs General Hospital, Petitioner vs. Health Care Cost Containment Board (HCCB), Respondent, Case No. 89-0633H, Palm Springs and the HCCB are litigating an issue which might be described in general terms as the number of Medicaid patient days delivered by the hospital during 1987 to be used in calculating the amount of disproportionate share reimbursement as to which the hospital may be entitled under Section 30 of Chapter 88-294, Laws of Florida.

   2. The Department of Health & Rehabilitative Services is the agency which receives from the HCCB calculations of entitlement of hospitals to the trust funds described in Chapter

      88-294. HRS gives administrative direction for distribution of the trust funds.

   3. Palm Springs and other qualifying hospitals have received three of the four partial disproportionate share distributions for the trust funds described in Section 30 of Chapter 88-294. The final distribution under the

      program is expected to be made in early July 1989.

   4. A dispute exists between HRS and HCCB on the one hand and Palm Springs on the other hand with respect to the disproportionate share distribution to which Palm Springs is entitled. The initial calculations made by HRS and the HCCB show that Palm Springs is entitled to a disproportionate share distri- bution of $201,366. Palm Springs has challenged this in the administrative proceeding set forth in paragraph 1 and in the captioned proceeding. Palm Springs claims that it is entitled to a dispropor- tionate share distribution of approximately

      $530,000, rather than the $201,366 presently calculated by the HCCB.

   5. As the disbursing agency, HRS agrees to retain in the trust fund sufficient monies to pay the full claim of Palm Springs General Hospital until completion of all litigation relating to the amount of the distribution to which Palm Springs is entitled.

   6. The purpose of entering into this stipu- lation is to eliminate any need for Palm Springs to file a court action seeking an injunction to assure availability of the disproportionate share distribution to which the hospital claims it is entitled, should it ultimately prevail on the issue.

   7. The parties enter into this stipulation to avoid litigation. It is not the purpose of the stipulation to prejudice or aid the position of either of the parties in connec- tion with the amount of money to which the hospital is entitled under the dispropor- tionate share program. The fact that HRS has agreed to retain the claimed money in trust in no fashion is an admission by HRS or the HCCB that Palm Springs is entitled

      to this money.

      
      

6. There were no other written documents reflecting the agreement of counsel, other than the foregoing stipulation, and the stipulation was not modified by the parties. At the formal hearing, the parties agreed that the reference to "trust funds" or to maintaining the money "in trust" referred to the public medical assistance trust fund that is referred to in Chapter 88-294, Laws of Florida, and not to a separately established trust by which DHRS would hold the disputed funds.

   
   

7. Consultec, Inc. is the Medicaid fiscal agent contractor for the State of Florida. It maintains an interest bearing bank account at Barnett Bank of Tallahassee in which it deposits sums entrusted to it by DHRS and from which it issues checks to Medicaid providers after the entitlement of each provider has been determined and appropriately processed. On July 20, 1989, Consultec, Inc. wrote check number 103077 made payable to PSGH in the amount of $391,028.50. Consultec, Inc. deposited into the Barnett Bank account the sum of

   $19,458,498.75 to cover checks written to Medicaid providers on July 20, 1989. Included in this deposit were the funds necessary to pay check number 103077.

   
   

8. Had it not been for the dispute between PSGH and HCCB, check number 103077 would have been routinely delivered to PSGH. However, because of the dispute between PSGH and HCCB, check number 103077 was intercepted by DHRS. At the instruction of DHRS, check number 103077 was voided and two separate checks, both made payable to PSGH, were drafted by Consultec, Inc. The first check, in the amount of $48,684.50 was delivered to PSGH. The second check, in the amount of $342,345, represented the amount that was in dispute between PSGH and HCCB. The second check was held pending resolution of the dispute between PSGH and HCCB, and the funds necessary to cover that check remained in the Barnett Bank account between July 21, 1989, and June 21, 1990. This procedure was followed by DHRS to ensure that the disputed funds would be available for distribution consistent with its stipulation with PSGH dated June 12, 1989.

   
   

9. After being advised by PSGH of the resolution of its dispute with HCCB by the Third District Court of Appeal, DHRS instructed Consultec, Inc. to remit to PSGH the sum of $342,345. On June 21, 1990, the sum of $342,345 was paid to PSGH.

   
   

10. The Consultec, Inc. account at the Barnett Bank drew interest between July 21, 1989, and June 21, 1990, at the average daily rate of 7 1/4%.

    
    

11. After the payment to PSGH of $342,345 on June 21, 1990, PSGH demanded, for the first time, interest on that sum. The appellate opinion that resolved the related litigation between PSGH and HCCB did not speak to the issue of whether PSGH was entitled to interest on the disputed funds. There was no evidence that the settlement agreement between HCCB and PSGH addressed that issue. The pleadings in the pending matter did not address the issue of interest until PSGH's "Motion to Compel HRS to Pay Interest" was filed on July 6, 1990.

    
    

12. The stipulation between PSGH and DHRS dated June 12, 1989, resulted in the sum of $342,345 being held in the Consultec, Inc. account at the Barnett Bank and drawing interest between July 21, 1989 and June 21, 1990. However, the stipulation did not provide for the disposition of any interest that might be earned pending the resolution of the HCCB litigation and the stipulation was not intended to create an express or implied trust.

    
    

    CONCLUSIONS OF LAW

    
    

13. The jurisdiction of the Division of Administrative Hearings was properly invoked by the request for formal hearing that was initially filed in this matter. Section 120.57(1), Florida Statutes. All issues raised in the initial request for hearing were resolved by the litigation between the Health Care Costs Containment Board (HCCB) and Palm Springs General Hospital (PSGH). The only issues remaining to be litigated in this proceeding were raised by PSGH in its "Motion to Compel HRS to Pay Interest" filed on July 6, 1990.

    
    

14. PSGH's first contention in support of its claim for interest is that DHRS would be unjustly enriched if it were allowed to retain the interest earned on the disputed funds between July 21, 1989 and June 21, 1990.

    
    

15. PSGH's second contention is that the stipulation between PSGH and DHRS dated June 12, 1989, constituted a trust and that DHRS is required to account for the interest earned as the trustee of the disputed funds. In support of

    this second theory, PSGH argues that the stipulation created an express trust between PSGH and DHRS. In the alternative, PSGH argues that the total circumstances created an implied trust relationship (without stating whether the implied trust would be a constructive trust, a resulting trust, or some other type of trust). PSGH argues that as the trustee under this trust, whether express or otherwise, DHRS is required to account for the income (interest) on the trust principal.

    
    

16. An argument made in the proposed recommended order submitted by PSGH, but not made at the formal hearing, is that it is entitled to interest because a debtor-creditor relationship existed between DHRS and PSGH. PSGH argues that if a fund is held by a debtor so that it earns interest, the interest goes to the party entitled to the fund.

    
    

17. In this proceeding PSGH seeks, in the alternative, an adjudication of its legal and equitable rights pursuant to its written stipulation or the imposition of equitable remedies based on the total circumstances presented by this proceeding. The adjudication of PSGH's rights under the stipulation is an action at law which is beyond the scope of administrative proceedings and the authority conferred on the undersigned. Section 26.012(2)(a), Florida Statutes, grants original jurisdiction to circuit courts of all actions at law not cognizable by the county courts. The amount of interest claimed by PSGH exceeds the jurisdictional limits of the county courts. Consequently, jurisdiction to determine its claim to interest pursuant to the stipulation between it and DHRS must be filed in circuit court. Similarly, original jurisdiction to invoke the equitable remedies sought by PSGH is exclusively vested in the circuit courts by Section 26.012(2)(c), Florida Statutes.

    
    

18. There remain no issues for disposition in this proceeding over which the undersigned has the authority to make a recommended disposition.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is recommended that a Final Order be entered which dismisses the above-styled proceeding.

RECOMMENDED in Tallahassee, Leon County, Florida, this 2nd day of January, 1991.

CLAUDE B. ARRINGTON

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 2nd day of January, 1991.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 89-2178

The following rulings are made on the proposed findings of fact submitted on behalf of the Petitioner.

1. The proposed findings of fact in paragraphs 1-13 and 18 are adopted in material part by the Recommended Order.

2. The proposed findings of fact in paragraphs 14-17 and 19-21 are rejected as being subordinate to the findings made.

The following rulings are made on the proposed findings of fact submitted on behalf of the Respondent.

1. The proposed findings of fact in paragraphs 1-3, 5-7A, 8, 10-12 are adopted in material part by the Recommended Order.

2. The proposed findings of fact in paragraphs 4 and 7B are rejected as being unnecessary to the conclusions reached.

3. The proposed findings of fact which precede the semicolon in paragraph 9 are adopted in material part by the Recommended Order. The proposed findings of fact subsequent to the semicolon in paragraph 9 are rejected as being subordinate to the findings made.

4. The proposed findings of fact in paragraph 13 are rejected as being unnecessary to the conclusions reached.

COPIES FURNISHED:

Paul Siegel, Esquire

Sinclair, Louis, Siegel, Heath, Nussbaum & Zavertnik, P.A.

1125 Alfred I. DuPont Building Miami, Florida 33131

Karen Baarslag, Esquire Department of Health and

Rehabilitative Services 1317 Winewood Boulevard Building Six, Room 230

Tallahassee, Florida 32399-0700

Sam Power, Agency Clerk Department of Health and

Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32399-0700

Linda K. Harris, Acting General Counsel Department of Health and

Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32399-0700

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS:

All parties have the right to submit written exceptions to this Recommended Order. All agencies allow each party at least 10 days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should contact the agency that will issue the final order in this case concerning agency rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the final order in this case.

Docket for Case No: 89-002178

Orders for Case No: 89-002178