Judges: MARY CLARK
Agency: Department of Health
Latest Update: Dec. 20, 1989
Summary: In its request for hearing Petitioner disputes HRS' reduction of $127,206.00 of Baker Act funds from its fiscal year 1988/89 contract, and HRS' demand of payback of an additional $50,107.00 for fiscal years 1987/88 and 1988/89. These funds relate to an expansion of crises stabilization unit beds at Petitioner's facility. The additional beds were not licensed until March, 1989. Petitioner claims that all but $42,517.00 of the disputed funds were appropriately and reasonably expended and should no
Summary: In its request for hearing Petitioner disputes HRS' reduction of $127,206.00 of Baker Act funds from its fiscal year 1988/89 contract, and HRS' demand of payback of an additional $50,107.00 for fiscal years 1987/88 and 1988/89. These funds relate to an expansion of crises stabilization unit beds at Petitioner's facility. The additional beds were not licensed until March, 1989. Petitioner claims that all but $42,517.00 of the disputed funds were appropriately and reasonably expended and should not be disallowed. Respondent claims that the beds were not filled until approximately one year after the funds were allocated, and that three months' actual operation and three months start up costs are all that can be reasonably allowed, thus requiring a $177,313.00 reduction in contract funds."Services" in rule, statute or contracts is not limited to physical occupancy of specified mental health beds. Petetioner entitled to cost reimbursement.
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89-3263STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
SEMINOLE COMMUNITY MENTAL HEALTH ) CENTER, INC., )
)
Petitioner, )
)
vs. ) CASE NO. 89-3263
)
DEPARTMENT OF HEALTH AND )
REHABILITATIVE SERVICES, )
)
Respondent. )
)
RECOMMENDED ORDER
Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, Mary Clark, held a formal hearing in the above- styled case on October 3, 1989, in Sanford, Florida.
APPEARANCES
For Petitioner: Donna L. McIntosh, Esquire
Frank C. Whigham, Esquire Stenstrom, McIntosh, Julian, Colbert, Whigham & Simmons Post Office Box 1330 Sanford, Florida 32772-1330
For Respondent: James Sawyer, Jr., Esquire
Department of Health and Rehabilitative Services District 7 Legal Office
400 West Robinson St., Suite 701 Orlando, Florida 32801
STATEMENT OF THE ISSUES
In its request for hearing Petitioner disputes HRS' reduction of
$127,206.00 of Baker Act funds from its fiscal year 1988/89 contract, and HRS' demand of payback of an additional $50,107.00 for fiscal years 1987/88 and 1988/89. These funds relate to an expansion of crises stabilization unit beds at Petitioner's facility. The additional beds were not licensed until March, 1989.
Petitioner claims that all but $42,517.00 of the disputed funds were appropriately and reasonably expended and should not be disallowed.
Respondent claims that the beds were not filled until approximately one year after the funds were allocated, and that three months' actual operation and three months start up costs are all that can be reasonably allowed, thus requiring a $177,313.00 reduction in contract funds.
PRELIMINARY STATEMENT
On June 19, 1989, the Department of Health and Rehabilitative Services referred to the Division of Administrative Hearings a letter from Dr. Barry Hershone, President of the Board of Directors of the Seminole Community Mental Health Clinic, Inc., to Paul Snead, Jr., HRS District VII Administrator. The letter outlined a series of contacts regarding mental health program funding and ended with a request for a formal hearing.
By order dated June 26, 1989, Petitioner was directed to file an amended petition in the form required by Rule 22I-6.004, FAC, more clearly specifying the nature of the controversy.
The amended petition was filed on July 14, 1989.
The hearing was set for September 21, 1989, but was continued once, for good cause, at the request of the Petitioner and concurrence of the Respondent.
At the hearing, Petitioner presented the testimony of Jim Berko, Rod Guzman, Roger Bowen, and Debbie Driscoll. Twenty-four exhibits (Petitioner's #1-24) were received in evidence.
Respondent presented the testimony of a single witness, Stanley Wagy, and two exhibits, both received without objection. Exhibit #1, a portion of the 1987/88 appropriations letter of intent, is deemed withdrawn, for failure to file (at Respondent's request) as a late-filed exhibit.
A deadline of November 1, 1989, was established for filing posthearing argument and proposed recommended orders. No transcript was filed.
Petitioner's proposed findings of fact are substantially incorporated herein. Respondent filed only a written summary of argument, which has been considered in the preparation of this recommended order.
FINDINGS OF FACT
Petitioner, Seminole Community Mental Health Center, Inc. (SCMHC) is a non-profit corporation which entered into annual contracts with Respondent, Department of Health and Rehabilitative Services (HRS) for fiscal years 1987/88 and 1988/89 to provide certain alcohol, drug abuse and mental health services in Seminole County Florida, HRS District 7.
These services included a Crises Stabilization Unit (CSU) which provides brief, intensive residential treatment services to mentally ill persons in acute crisis. The CSU has been in operation since 1983, with twelve beds.
The 1987 Legislature provided a special appropriation to District 7 for additional CSU beds, including funds for construction and two months operation.
During fiscal year 1987/88, the parties amended their contract, in Amendment No. 3, to increase SCMHC's Baker Act funds by $74,896.00 for an eight
(8) bed expansion of SCMHC's existing twelve bed CSU This amendment is dated February 8, 1988. The amendment provides that $52,184.00 of the $74,896.00 is designated for operations and that $22,712.00 is designated for a one time non- recurring expense for the eight (8) bed expansion.
SCMHC received the one time non-recurring funds of $22,712.00 in March of 1988, and said funds are not at issue in this case.
During February, March and April of 1988, SCMHC and HRS worked together on the construction, renovation, hiring and financial plans for the expansion. The original goal was to have the beds on-line by May 1, 1988, but the parties soon realized that the bidding and county purchasing requirements would extend that date.
On April 26, 1988, Jim Berko, the Executive Director of SCMHC, and Stan Wagy, the District 7 Program Supervisor of HRS, worked out plans that would allow SCMHC to provide the eight (8) temporary CSU beds while undertaking renovations and construction for the eight (8) permanent new beds. The new beds were to be ready in September, 1988.
On May 12, 1988, Jim Berko sent a letter to Vince Smith, the Health Services and Facilities Consultant for the HRS Office of Licensure and Certification (OLC) requesting temporary licensure of the eight (8) new CSU beds while the renovation and construction was being completed at SCMHC. This plan for temporary licensure was developed with the involvement and approval of Stan Wagy. It included six temporary new beds at SCMHC's facility, and SCMHC's purchase of services of two beds at Florida Hospital in Altamonte Springs.
HRS never once voiced any objection to SCMHC's expansion plans or progress; however, OLC responded to the temporary license request by stating that it was premature.
In April of 1988, SCMHC began hiring the new staff required for the eight (8) bed expansion. This was necessary because of the difficulty in finding and training qualified staff, a three to six month process according to SCMHC's expert, Rod Guzman. There is a shortage of nurses, and SCMHC, as a non- profit corporation, has a hard time competing with the salaries offered to nurses by private doctors, clinics and hospitals.
Stan Wagy admitted at the hearing in this case, that if the figure for the salary and benefit expenses of the staff required for the eight (8) bed expansion for the last two months of fiscal year 1987/88 were known, said expense would be considered as an allowable operating expense by HRS. SCMHC established that its expenditure for salaries and benefits for the additional staff required by the eight (8) bed expansion for the last two months in the fiscal year 1987/88 was $27,314.00.
For fiscal year 1987/88, SCMHC spent in excess of its Baker Act funds and met the required local match for Baker Act funds, so that the entire
$27,314.00 in staff salaries and benefits required by the eight (8) bed expansion for the last two months (May and June of 1988) of fiscal year 1987/88 is an allowable cost.
No payback is due HRS for fiscal year 1987/88 according to the following:
1987/88 Contract (8 New Beds)
$74,896.00 | - Total contract amendment |
-22,712.00 | - One time non-recurring cost |
$52,184.00 | - Operating expenses |
-27,009.00 | - OCO - includes architectural |
fees and land survey (uncontroverted cost)
-27,314.00 - Staff salaries and benefits
$(2,139.00)
The parties entered into a new contract on June 30, 1988, for fiscal year 1988/89, which began on July 1, 1988 and ended on June 30, 1989. The fiscal year 1988/89 contract does not mention any number of CSU beds to be provided with the Baker Act funds. For fiscal year 1988/89, the parties' contract allocated $313,152.00 as Baker Act funds.
The eight (8) bed expansion of SCMHC's CSU required construction of 1,600 square feet of additional clinical space and major renovations of the existing facilities. The renovation and construction of SCMHC's physical facilities began in June of 1988 and terminated in September of 1988. This time schedule was in accord with the time schedule discussed with the HRS program office on at least a monthly basis. The eight (8) beds were on-line in September, 1988. They were purchased from Florida Hospital until the SCMHC license was issued.
A mental health center must be ready to put clients in their beds before they can send in their application for licensure to the Office of Licensure and Certification. SCMHC's application for licensure was sent to OLC on September 20, 1988. A memorandum dated September 19, 1988 from Stan Wagy, District VII Program Supervisor of HRS, to Vince Smith, Program Manager of OLC, verifies the addition of the eight (8) beds in SCMHC's CSU. It was uncontroverted that the application for licensure in September of 1988 was in accordance with the parties' agreed upon time schedule.
On November 8 and 9, 1988, OLC performed a site survey of the facilities and staff at SCMHC, and on November 30, 1988, sent their Deficiency Report to SCMHC. SCMHC's responses to OLC were immediate.
On March 1, 1989, OLC acknowledged receipt of SCMHC's Quality Assurance Plan and enclosed regular license number 510, which increased SCMHC's licensed CSU capacity from twelve (12) to twenty (20) beds. SCMHC did everything possible to expedite the licensure of its eight (8) new CSU beds and had no basis to anticipate the time it would take for approval.
The first time Jim Berko heard that HRS had reduced SCMHC's Baker Act funds was during lunch with Stan Wagy on March 14, 1989, when Stan Wagy casually mentioned that HRS had reduced SCMHC's 1987/88 and 1988/89 Baker Act funds by approximately $127,000.00. On March 15, 1989, at the request of Jim Berko, official written notification was provided to SCMHC stating that a payback of
$127,206.00 was due HRS from SCMHC's 1987/88 and 1988/89 Baker Act funds.
On June 5, 1989, Paul Snead wrote a letter to Dr. Barry Hersone, President of the Board of Directors of SCMHC, requesting an additional
$50,107.00 in payback by SCMHC of their 1987/88 and 1988/89 Baker Act funds.
At the hearing in this case, the parties agreed that the year-end audited Baker Act expenditures of SCMHC should be utilized by the Hearing Officer instead of the projected or estimated annual Baker Act expenditures utilized in the June 5, 1989 letter of Paul Snead, Administrator of District VII.
The actual year end audited Baker Act expenditures of SCMHC for fiscal year 1988/89 are as follows:
1988/89 Contract (20 Beds) TOTAL BAKER ACT EXPENDITURES
Salaries and Benefits | $556,155.00 |
Contractual Services | 68,650.00 |
Operating Expenses | 138,883.00 |
OCO/Renovations | 31,609.00 |
Occupancy | 59,499.00 |
The total allowable expenditures for SCMHC's Baker Act funds for fiscal year 1988-1989 attributable to the new beds are $360,847.00, which are calculated as follows:
1988-1989 Contract (prorated for the 8 new beds)
TOTAL EXPENDITURES
40%
Salaries and Benefits $556,155.00 divided by 20 x 8 = 222,462.00 Contractual Services 68,650.00 divided by 20 x 8 = 27,424.00
Operating Expenses 138,883.00 divided by 20 x 8 = 55,553.00
OCO/Renovations 31,609.00 31,609.00
Occupancy 59,499.00 divided by 20 x 8 = 23,799.00 FISCAL YEAR 1988/89 TOTAL ALLOWABLE EXPENDITURES $360,847.00
The State's share of the 1988/89 Total Allowable Expenditures is
$270,635.00, which is calculated as follows:
1988/89 Total Allowable Expenditure $360,847.00 State's Share (less local match of 25%) x .75
$270,635.00
For fiscal year 1988/89, SCMHC met the required local match for its Baker Act funds.
A payback of $42,517.00 was due HRS from SCMHC for fiscal year 1988/89, which is calculated as follows:
1988/89 Total Baker Act Fund Contract Allocation | $313,152.00 |
Less Total State Share of Expenditures | -270,635.00 |
PAYBACK DUE STATE FOR FISCAL YEAR 1988/89 | $ 42,517.00 |
HRS contends that since the eight (8) beds were not licensed until March, 1988, the center in not entitled to operating funds for those beds until that time. Stan Wagy conceded that some start-up time is reasonable and he estimated that three months would be sufficient. For that reason HRS disallowed all but six months expenses prorated for the eight (8) beds.
No basis for the three-month cut-off was presented by HRS.
SCMHC, however, presented competent substantial evidence that the funds were spent, and reasonably so, well in advance of the date of license for the eight (8) beds.
Hiring of staff commenced in March, 1988 and was finished by July, 1988.
Some turnover was experienced, and vacancies were filled.
The patients for the eight (8) beds were treated elsewhere until licensure, but the center was paying for that treatment.
Once the renovation and construction was complete in September, 1988, costs associated with those beds were incurred, even without licensure. Those costs include, but are not limited to, rent and utilities and sub-contractual expenses related to the provision of the additional eight-bed services elsewhere.
At the time that the parties' contract for 1988/89 was executed in June, 1988, all were aware of the status of the eight (8) additional beds, yet no provision was made at that time to prorate the expenses or to condition compensation on the actual number of licensed beds.
It was reasonable and necessary for SCMHC to incur the full
$360,847.00 expenses in fiscal year 1988/89.
Because HRS has already erroneously reduced SCMHC's Baker Act funds by
$127,206.00 for fiscal year 1988/89, HRS is calculated as follows:
Amount Reduced from SCMHC | owes SCMHC a return of $84,689, which |
for Fiscal Year 1988/89 Less Correct Payback Figure to HRS from SCMHC for Fiscal Year 1988/89 | $127,206.00
-42,517.00 |
AMOUNT OWED TO SCMHC FROM HRS | $ 84,689.00 |
The remaining payback of $50,107.00 requested by HRS for fiscal years 1987/88 and 1988/89 is not owed to HRS by SCMHC.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction in this proceeding pursuant to Section 120.57(1), F.S.
Section 394.457(1) F.S. designates the Department of Health and Rehabilitative Services the "mental health authority" of Florida, with executive and administrative supervision over all mental health facilities, programs and services. Section 394.457(3) F.S. provides the department's authority to contract for services.
Specific appropriation 812 of the 1987/88 Appropriations Act, Chapter 87-98, Laws of Florida, is a special category, grant and aids, Baker Act services appropriation. The note to that line item provides in pertinent part:
From general revenue funds in specific appropriation 812, $2,784,240 is provided for crises stabilization unit beds. Operating expenses for two months and non-recurring renovation funds are to be allocated as follows ... $374,480 to District 7 for 40 beds; ...
Chapter 10E-14, FAC governs the contractual funding of alcohol, drug abuse and mental health services by HRS. Rule 10E-14.017(2) FAC, defines "reasonable costs" as follows:
Reasonable costs. A cost is reasonable if, in its nature or amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the costs. In determining the reasonableness of a given cost, consideration shall be given to:
Whether the cost is of a type generally recognized as ordinary and necessary for the operation of the organization or the performance of the contract;
The restraints or requirements imposed by such factors as generally accepted sound business practices, arm's length bargaining, Federal and State laws and regulations, and terms and conditions of the contract;
Whether the individuals concerned acted with prudence in the circumstances, considering their responsibilities to the organization, its members, employees, clients, and the public at large; and
Significant deviations from the established practices of the organization which may unjustifiably increase the contract costs.
HRS does not argue that the costs claimed by SCMHC violate any of the above, or any other rule or statute governing its contractual relationships.
Its argument is simply that it paid for fourteen months of services and received only three months of services.
Nowhere in the above-cited rules or statute, or in the parties' contracts is "services" tied to the physical occupancy of specified beds.
HRS does not dispute that staffing in advance of actual occupancy is reasonable and necessary. SCMHC provided uncontroverted competent evidence of the need to hire staff in April for anticipating occupancy in September. When the September occupancy goal was not met, SCMHC nonetheless provided services and incurred reasonable costs attributable to those eight (8) beds. It is entitled to reimbursement of those costs.
RECOMMENDATION
Based on the foregoing, it is hereby RECOMMENDED:
That a Final Order be entered finding Petitioner entitled to the disputed funds and to restoration of $84,689.00 of the Baker Act funds withheld from its 1988/89 contract payments.
DONE and RECOMMENDED this 20th day of December, 1989, in Tallahassee, Florida.
MARY CLARK
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 20th day of December, 1989.
COPIES FURNISHED:
Donna L. McIntosh, Esquire Frank C. Whigham, Esquire Post Office Box 1330 Sanford, Florida 32772-1330
James Sawyer, Jr., Esquire Dept. of Health and Rehabilitative Services District 7 Legal Office
400 West Robinson St., Suite 701 Orlando, Florida 32801
Gregory L. Coler, Secretary Dept. of Health and Rehabilitative Services 1323 Winewood Blvd.
Tallahassee, Florida 32399-0700
John Miller, General Counsel Dept. of Health and Rehabilitative Services
1323 Winewood Blvd.
Tallahassee, Florida 32399-0700
R. S. Power, Agency Clerk Dept. of Health and Rehabilitative Services 1323 Winewood Blvd.
Tallahassee, Florida 32399-0700
=================================================================
AGENCY FINAL ORDER
=================================================================
STATE OF FLORIDA
DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES
SEMINOLE COMMUNITY MENTAL HEALTH CENTER, INC.,
Petitioner,
vs. CASE NO.: 89-3263
DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES,
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 submitted a Recommended Order to the Department of Health and Rehabilitative Services (HRS). A copy of that Recommended Order is attached hereto.
RULING ON EXCEPTIONS FILED BY THE DEPARTMENT
The exceptions and petitioner's response have been considered. The exceptions are denied for the reasons set forth in the attached Order on Remand. Counsel questions the accuracy of some of the fact finding, but does not maintain that the findings were not supported by competent, substantial evidence, which is the only allowable grounds for rejecting findings of fact.
FINDINGS OF FACT
The department hereby adopts and incorporates by reference the findings of fact set forth in the Recommended Order except as corrected in the Order on Remand.
CONCLUSIONS OF LAW
The department hereby adopts and incorporates by reference the conclusions of law set forth in the Recommended Order. The conclusions of law set forth in the attached Order on Remand are adopted.
Based upon the foregoing, it is
ADJUDGED that the department shall restore $84,689.00 withheld from the 1988 - 1989 contract payments.
DONE and ORDERED this 27th day of July, 1990, in Tallahassee, Florida.
Gregory L. Coler Secretary
Department of Health and Rehabilitative Services
by Deputy Secretary for Operations
COPIES FURNISHED:
James Sawyer, Jr., Esquire District 7 Legal Office
400 West Robinson, Suite 701 Orlando, Florida 32801
Donna L. McIntosh, Esquire Frank C. Whigham, Esquire STENSTROM, McINTOSH, JULIAN COLBERT, WHIGHAM & SIMMONS
Post Office Box 1330 Sanford, Florida 32772-1330
Mary Clark Hearing Officer
Division of Administrative Hearings The DeSoto Building
1230 Apalachee Parkway
Tallahassee, Florida 32399-1550
John W. Hedrick, Esquire Assistant General Counsel Department of Health and Rehabilitative Services 1323 Winewood Blvd.
Building One, Room 407 Tallahassee, Florida 32399-0700
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that a copy of the foregoing was sent to the above-named people by U.S. Mail this 3rd day of August, 1990.
R. S. Power, Agency Clerk Assistant General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407
Tallahassee, Florida 32399-0700 904/488-2381
NOTICE OF RIGHT TO JUDICIAL REVIEW
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. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED.
Docket for Case No: 89-003263
Orders for Case No: 89-003263
| Issue Date |
Document |
Summary |
|
Jul. 27, 1990 |
Agency Final Order
|
|
|
Dec. 20, 1989 |
Recommended Order
|
"Services" in rule, statute or contracts is not limited to physical occupancy of specified mental health beds. Petetioner entitled to cost reimbursement.
|
