STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

THE RETREAT, )

)

Petitioner, )

vs. ) CASE NOS. 89-3436RU

) STATE OF FLORIDA, HEALTH CARE ) COST CONTAINMENT BOARD, )

)

Respondent, )

and )

) CITIZENS OF THE STATE OF FLORIDA, )

)

Intervenor. )

)

FINAL ORDER

Pursuant to written notice a formal hearing was held in this case before Larry J. Sartin, a duly designated Hearing Officer of the Division of Administrative Hearings, on November 20, 1989, in Tallahassee, Florida.

APPEARANCES

For Petitioner: Michael J. Glazer, Esquire

Ausley, McMullen, McGehee, Carothers & Proctor

Post Office Box 391 Tallahassee, Florida 32302

For Respondent: Robert D. Newell, Jr., Esquire

Newell & Stahl, P.A.

817 North Gadsden Street Tallahassee, Florida 32303-6313

For Intervenor: Peter Schwarz, Esquire

David R. Terry, Esquire Office of the Public Counsel c/o The Florida Legislature 801 Claude Pepper Building

111 W. Madison Street Tallahassee, Florida 32399-1400

STATEMENT OF THE ISSUES

Whether the non-rule policy of the Respondent, the Health Care Cost Containment Board, requiring the Petitioner, The Retreat, to file a detailed budget for 1990, constituted an invalid "rule" under Section 120.52(14), Florida Statutes?

PRELIMINARY STATEMENT

On June 29, 1989, the Petitioner, The Retreat, filed a Petition to Determine The Invalidity of a Rule with the Division of Administrative Hearings. The Petition was assigned case number 89-3436RU by the Division of Administrative Hearings. The case was consolidated with Division of Administrative Hearings' case numbers 89-3579H and 89-4219RP. A Recommended Order has been issued in case number 89-3579H and a separate Final Order has been issued in case number 89-42191PR.

The Citizens of the State of Florida, represented by the Office of the Public Counsel, intervened in the consolidated cases.

Prior to the commencement of the formal hearing, The Retreat filed a Motion to Stay and Petitioner's Motion to Quash. At the commencement of the formal hearing The Retreat indicated that the issues raised in those Motions had been resolved.

Official recognition of Chapter 407, Florida Statutes (1988 Supp.), and Chapter 88-394, Laws of Florida, was taken.

The parties filed a Stipulation prior to the commencement of the formal hearing. To the extent that the parties stipulated to relevant facts concerning this case, they have been incorporated into this Final Order.

At the formal hearing The Retreat presented the testimony of Sarah Fitzgerald. Ms. Fitzgerald was accepted as an expert in health care finance. The Retreat also presented the deposition testimony of James Bracher. Four exhibits were offered by The Retreat. All four exhibits were accepted into evidence.

The Respondent, the Health Care Cost Containment Board, presented the testimony of Duane A. Ashe. Mr. Ashe was accepted as an expert in financial analysis of health care facilities and hospital cost containment. Respondent's exhibit 1 was offered and accepted into evidence.

The Intervenor, the Citizens of the State of Florida, did not call any witnesses or offer any exhibits.

The parties have filed proposed final orders containing proposed findings of fact. A ruling on each proposed finding of fact has been made either directly or indirectly in this Final Order or the proposed finding of fact has been accepted or rejected in the Appendix which is attached hereto.

The Retreat has filed one proposed final order addressing the issues raised in this case and case number 89-4219RP. To the extent that proposed findings of fact contained in The Retreat's proposed final order are relevant to this case, they have been addressed in the Appendix. Proposed findings of fact pertaining to case number 89-4219RP have been addressed in the Appendix of the Final Order in case number 89-4219RP, issued simultaneously with this Final Order.

The Intervenor has filed a separate proposed final order in this case and case number 89-4219RP and a proposed recommended order in case number 89-3579H. The proposed findings of fact contained in the proposed final orders and the proposed recommended order are identical. Only those proposed findings of fact contained in the Intervenor's proposed final order filed in this case which are relevant to this case have been addressed in the Appendix.

FINDINGS OF FACT

1. The parties stipulated to the following facts:

   1. The Retreat is a 100 bed short-term psychiatric specialty and substance abuse hospital located at 555 S.W. 148th Avenue, Sunrise, Broward County, Florida.

   2. The Retreat admitted its first patient on September 12, 1988.

   3. The Retreat operates on a fiscal year from September 1, through August 31. Therefore, The Retreat's 1989 fiscal year was for the period beginning when The Retreat opened on September 12, 1988, through August 31, 1989.

   4. The Retreat filed its 1989 budget with the Respondent on June 3, 1988.

   5. The Retreat's 1989 budget was approved by the Respondent on August 25, 1988, with an approved gross revenue per adjusted admission (hereinafter referred to as "GRAA"), of $20,323.00, and a net revenue per adjusted admission (hereinafter referred to as "NRAA"), of $17,973.00.

   6. The Retreat's 1990 fiscal year is from September 1, 1989, through August 31, 1990.

   7. Pursuant to Section 407.50(2)(a), Florida Statutes (1988 Supp.), The Retreat submitted a budget letter described in Section 407.50(2)(a), Florida Statutes, to the Respondent on May 24, 1989, for its 1990 fiscal year.

   8. The budget letter submitted by The Retreat certified that its FY 1990 maximum allowable rate of increase in GRAA over its budgeted GRAA in FY 1989 would be 7.8% and that its GRAA would not exceed $21,908.00 in FY 1990. Said rate of increase stated in The Retreat's budget letter represented the National Hospital Input Price Index (hereinafter referred to as the "NHIPI"), for the 1990 fiscal year plus two percentage points.

   9. At the time the Respondent received said budget letter, no administrative rule had yet been adopted that required a hospital entering into its second fiscal year of operation to file a full budget subject to detailed budget review.

   10. By letter dated June 5, 1989, the Respondent's staff advised The Retreat that, based on staff's interpretation of the controlling statute, staff could not accept said budget letter filed by The Retreat and a detailed budget would be required for The Retreat's 1990 fiscal year.

   11. The June 5, 1989, letter enunciated a non-rule agency policy based upon staff's interpretation of Section 407.50, Florida Statutes (1988 Supp.), that a hospital filing a budget for its second fiscal year is not eligible to file a budget letter and must file a budget subject to detailed review.

   12. On June 29, 1989, The Retreat filed a Petition to determine the invalidity of the non-rule policy explicated in said June 5, 1989, letter. Also on June 29, 1989, The Retreat filed a Petition for Formal Administrative Hearing regarding the decision by HCCCB to reject its budget letter. Said Petition was assigned DOAH Case No. 89-3579H.

   13. On May 25, 1989, proposed Rule 10N-5.015 was approved by the HCCCB. Said proposed rule was published in the Florida Administrative Weekly, in Volume 15, No. 27, Florida Administrative Weekly (July 7, 1989).

   14. The last sentence of proposed Rule 10N-5.015(15), Florida Administrative Code, provides as follows:

       A new hospital or replacement hospital relocated to a different medical services area shall submit a budget report for review in the first two years of operation, but may submit a budget letter for its third year of operation if it does not require an increase in GRAA in excess of its hospital specific MARI calculated pursuant to Rule 10N-5.013.

   15. The last sentence of proposed Rule 10N-5.015(15), Florida Administrative Code, codifies, in rule form, the non-rule policy set forth in the HCCCB letter of June 5, 1989.

   16. The Retreat filed a Petition to Determine the Invalidity of Proposed Rule 10N-5.015(15), Florida Administrative Code, on July 28, 1989. Said Petition was assigned DOAH Case No. 89-4219RP.

   17. DOAH Case No. 89-3436RU, 89-3579H and 89-4219RP were subsequently consolidated for a single final hearing.

   18. The Retreat has standing in each of the three above-styled causes.

   
   

2. In pertinent part, the Respondent's June 5, 1989, letter to The Retreat provided the following:

   
   

   In some cases, it may not be possible for us to calculate a revenue limit for a hospital due to the absence of key data. In these cases it is appropriate to require the hospitals concerned to file complete budget packages with us until such time as appropriate base year data is available.

   According to our records, your hospital is one that lacks the appropriate base year data for us to calculate a statutory revenue limit for 1990.

   Therefore, we require that your facility file a complete budget report for the 1990 fiscal year which will require justification of the revenue and expense levels it contains.

   
   

3. The Respondent has consistently applied the policy expressed in its letter of June 5, 1989, of not permitting a hospital in its second year of operation to file a budget letter. The policy was fully formed and uniformly applied on a statewide basis by the Respondent at the time of its application to The Retreat.

   
   

4. The Respondent had not adopted its policy as a rule pursuant to Section 120.54, Florida Statutes, at the time of its application to The Retreat.

   
   

   CONCLUSIONS OF LAW

   
   

5. The Division of Administrative Hearings has jurisdiction of the parties to and the subject matter of this proceeding. Section 120.56, Florida Statutes (1989).

   
   

6. Section 120.54, Florida Statutes (1987), specifically defines and describes detailed rulemaking procedures Florida governmental agencies are required to follow. Section 120.52(16), Florida Statutes (1988 Supp.), defines "rule", in pertinent part, as follows:

   
   

   (16) "Rule" means 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. . . . .

   
   

7. The courts of Florida have invalidated any agency policy that comes within the definition of a "rule" pursuant to Section 120.52(16), Florida Statutes, if an agency fails to adopt the policy as a rule in accordance with the rulemaking procedures of Section 120.54, Florida Statutes. Florida Public Service Commission v. Central Corp., 551 So. 2d 568 (Fla. 1st DCA 1989), Gar-Con

   Development, Inc. v. Department of Environmental Regulation, 468 So. 2d 413 (Fla. 1st DCA 1985), cert. denied, 479 So. 2d 117 (1985).

   
   

8. The policy applied by the Respondent in this case to The Retreat was fully formed and uniformly applied on a statewide basis by the Respondent. The Respondent's policy should, therefore, have been adopted as an agency rule pursuant to Section 120.54, Florida Statutes, at the time it was applied to The Retreat. Even the Respondent accepts this conclusion. Accordingly, the Respondent's policy is invalid to the extent that it was not promulgated as a rule.

   
   

9. The Retreat has argued in its proposed final order in case numbers 89- 3436RU and 89-4219RP that the policy is also invalid because Section 407.02, Florida Statutes, requires rulemaking. This argument is rejected.

ORDER

Based upon the foregoing Findings of Fact and Conclusions of Law, it is ORDERED that the non-rule policy applied by the Respondent to The Retreat

in denying acceptance of The Retreat's 1990 budget letter is an invalid rule.

DONE and ORDERED this 21st day of May, 1990, in Tallahassee, Florida.

LARRY J. SARTIN

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 21st day of May, 1990.

APPENDIX

Case Number 89-3436RU

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 have been accepted, if any. Those proposed findings of fact which have been rejected and the reason for their rejection have also been noted.

The Retreat has filed one proposed final order addressing the issues raised in this case and case number 89-4219RP. To the extent that proposed findings of fact contained in The Retreat's proposed final order are relevant to this case, they have been addressed below. Proposed findings of fact pertaining to case number 89-4219RP have been addressed in the Appendix of the Final Order in case number 89-4219RP, issued simultaneously with this Final Order.

The Intervenor has filed a separate proposed final order in this case and case number 89-4219RP and a proposed recommended order in case number 89-3579H.

The proposed findings of fact contained in the proposed final orders and the proposed recommended order are identical. Therefore, only those proposed findings of fact contained in the Intervenor's proposed final order filed in this case which are relevant to this case have been addressed below.

The Retreat's Proposed Findings of Fact

Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection

1 1.

The Respondent's Proposed Findings of Fact

Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection

1-8 1.

9 1 and 2.

10 1.

11 3.

12-15 1.

The Intervenor's Proposed Findings of Fact

Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection

1-2, 8-9, 15 1.

Copies Furnished To:

Michael J. Glazer, Esquire Post Office Box 391 Tallahassee, Florida 32302

Robert D. Newell, Jr., Esquire 817 North Gadsden Street Tallahassee, Florida 32303-6313

Jack Shreve Public Counsel David R. Terry

Associate Public Counsel Peter Schwarz

Associate Public Counsel c/o The Florida Legislature

111 West Madison Street Room 801

Tallahassee, Florida 32399-1400

Stephen Presnell, General Counsel Health Care Cost Containment Board Woodcrest Office Park

325 John Knox Road Building L, Suite 101

Tallahassee, Florida 32303

Liz Cloud, Chief

Bureau of Administrative Code The Capitol, Room 1802 Tallahassee, Florida 32399-0250

Carroll Webb, Executive Director Administrative Procedures Committee Holland Building, Room 120 Tallahassee, Florida 32399-1300

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: 89-003436RU

Orders for Case No: 89-003436RU