STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

VALEX DIAGNOSTIC LAB, INC., ) FENIX DIAGNOSTIC LAB, INC., ) QUALITY DIAGNOSTIC LAB, INC., ) and AMAT DIAGNOSTIC LAB, INC., )

)

Petitioners, )

)

vs. ) CASE NO. 91-6506

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent. )

)

ORDER RELINQUISHING JURISDICTION

Petitioners are service providers who participate in the Florida Medicaid program. By written correspondence dated September 18, 1991, from the Chief of its Medicaid Program Integrity Office, John M. Whiddon, Respondent advised Petitioners that it had discovered "evidence of willful misrepresentation[s] on [their] part in that there [was] an indication of gross billing for services that appear[ed] to be inappropriate, unnecessary, and not provided in accordance with recognized health care standards" and that, as a result, pending the completion of its investigation of the matter, it was "withholding all Medicaid payments submitted by [Petitioners] since March 20, 1991, effective immediately." Whiddon asserted in his correspondence that such withholding action was "[i]n accordance with 42 CFR 455.23."

On September 27, 1991, Petitioners filed with Respondent a Petition for Formal Administrative Proceeding contesting Respondent's withholding action. In their petition, they disputed the factual assertions upon which Respondent's action was based, to wit: that there was evidence of willful misrepresentations on their part. In addition, they argued that under Florida law Respondent was without authority to withhold all Medicaid payments pending the completion of its investigation of the matter. On October 8, 1991, the petition was referred to the Division of Administrative Hearings. It was subsequently assigned to the undersigned Hearing Officer.

On November 8, 1991, Petitioners filed a Motion for Summary Recommended Order "directing [Respondent] to reimburse the Petitioners for all services they have provided to Medicaid recipients and to release all Medicaid payments relating to claims submitted by the Petitioners that are currently being withheld." In their motion, Petitioners contended that Respondent's "withholding all Medicaid payments submitted by the Petitioners since March 20, 1991 is not authorized by [42 C.F.R. Section 455.23, the authority cited in Whiddon's correspondence] because such [withholding] action 'contradicts specific State law.'"

The "specific State law" to which Petitioners were referring was Section 409.913(17), Florida Statutes, which was created by Chapter 91-282, Florida Statutes, effective October 1, 1991, and provides as follows:

The department may withhold Medicaid payments to a provider, up to the amount of the alleged overpayment, pending completion of an investigation under this section if it has reasonable cause to believe that the provider has committed one or more violations in relation to such payments. With the exception of providers terminated under the provisions of s. 120.59(3), in which case all payments shall be immediately terminated, the department may withhold payments under this provision, the monthly Medicaid payment may not be reduced by more than 10 percent, and the payments withheld must be paid to the provider within 60 days with interest at the rate of 10 percent a year upon determining that no such violation has occurred. If the amount of the alleged overpayment is in excess of $75,000, the department may reduce Medicaid payments up to $25,000 per month.

In support of its position, Petitioners also cited Rule 10C-7.060(9), Florida Administrative Code, which provides as follows:

The Assistant Secretary for Medicaid shall approve the withholding of future Medicaid assistance payments to a provider pending completion of an investigation when there is reasonable cause to believe that a provider has committed one or more violations specified herein resulting in overpayments. However, when payments are withheld, the monthly Medicaid assistance payments shall not be reduced by more than 10 percent. Payments withheld under this section shall be paid to a provider within 60 days at 10 percent interest per year upon determining that no such violation has occurred. Interest is separately computed on each amount withheld for the period of time held ending on the date a refund voucher is delivered to the State Comptroller's Office.

On November 14, 1991, Respondent filed a response in opposition to Petitioners' Motion for Summary Recommended Order. In its response, Respondent argued, among other things, that Florida law on the subject of withholding was "permissive and not mandatory" and that it therefore "was not required to proceed under [Florida law] but instead could choose to pend claims under 42 CFR 455.23."

On November 25, 1991, Petitioners filed a reply to Respondent's response.

In their response, they indicated that, in advancing the argument that the withholding of all Medicaid payments was in derogation of Florida law, they were

also relying upon Section 409.266(13), Florida Statutes, which provides as follows:

Medicaid assistance payments to a provider, received as a result of a violation of this section, may be withheld pending completion of an investigation under this section when there is reasonable cause to believe that a provider has committed one or more violations resulting in such payments. However, when payments are withheld, the monthly medical assistance payment shall not be reduced by

more than 10 percent. Payments withheld under this section shall be paid to a provider within 60 days at 10 percent interest per year upon determining that no such violation has occurred.

A hearing on Petitioners' Motion for Summary Recommended Order was held by telephone conference call on December 2, 1991. Thereafter, on December 19, 1991, Petitioners filed a Partial Waiver of Request for Formal Administrative Hearing, in paragraph 10 of which they stated the following:

Petitioners advise the Hearing Officer that they waive their respective rights to contest the factual allegations underlying the Department's action of September 18, 1991.

Moreover, Petitioners waive their respective rights to contest the Department's legal authority to withhold up to (10%) of the reimbursement related to the Medicaid claims which the Department has placed in a pended status. These waivers are not intended in any respect to mean that Petitioners agree to the allegations of fact underlying the Department's action of September 18, 1991.

As stated above, Petitioners vigorously dispute those allegations of fact. Rather, these waivers are intended to remove from these proceedings any disputed issues of material fact which would otherwise prevent the Hearing Officer from granting the relief sought by Petitioners. In the event that the Hearing Officer declines to grant such relief, or in the event that the Department declines to adopt any recommended order by the Hearing Officer granting such relief, Petitioners expressly reserve the right to go forward with

their request for formal administrative hearing.

In view of their "partial waiver," Petitioners requested that "the Hearing Officer enter a recommended order remanding this matter to the Department for the issuance of a final order directing the Department to release ninety percent (90%) of all reimbursement presently due to Petitioners relating to all pending Medicaid claims submitted by Petitioners." According to its certificate of service, a copy of this pleading was served on Respondent by hand delivery on December 19, 1991. To date, no response to this pleading has been filed.

Given Petitioners' waiver of "their respective rights to contest the factual allegations underlying the Department's action of September 18, 1991," which action is the subject of the instant proceeding, there are no longer any disputed issues of material fact in this case. Accordingly, the final hearing in this cause is cancelled and jurisdiction of this matter is relinquished to Respondent 1/ for the entry of a final order consistent with Florida law, specifically the provisions of Sections 409.266(13) and 409.913(17), Florida Statutes, and Rule 10C-7.060(9), Florida Administrative Code, which limit the amount of Medicaid payments Respondent may withhold pending the completion of a Medicaid fraud investigation. 2/ See Magnolias Nursing and Convalescent Center

v. Department of Health and Rehabilitative Services, 438 So.2d 421, 424 (Fla. 1st DCA 1983); United States Service Industries- Florida v. Department of Health and Rehabilitative Services, 383 So.2d 728 (Fla. 1st DCA 1980).

DONE AND ENTERED in Tallahassee, Leon County, Florida, this 31st day of December, 1991.

STUART M. LERNER

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 31st day of December, 1991.

ENDNOTES

1/ Such action renders Petitioners' motion to consolidate the instant case with Case Nos. 91-7354, 91-7355, 91-7356 and 91-7357 moot.

2/ The Hearing Officer agrees with Petitioners that these provisions must be followed by Respondent in determining the amount of Medicaid payments to be withheld and that, in the instant case, in "withholding all Medicaid payments submitted by [Petitioners] since March 20, 1991," Respondent has acted in derogation of these provisions and therefore now must take corrective a action. While these provisions are "permissive" in the sense that they do not require Respondent to take any witholding action, if Respondent decides to exercise its discretion to take such action, it must do so in the manner prescribed by these provisions. As a creature of state statute, Respondent's "powers, duties and authority are those and only those that are conferred expressly or impliedly by statute of the State." City of Cape Coral v. GAC Utilities, Inc. of Florida,

281 So.2d 493, 496 (Fla. 1973). Nowhere has the Florida Legislature conferred upon Respondent the authority to withold all Medicaid payments as it has done in the instant case. Indeed, it has expressly prohibited Respondent from taking such action. Even if Respondent were of the view that this prohibition was contrary to federal law, which it appears not to be, Respondent would still be obliged to act in a manner consistent with the dictates of the Florida Legislature regarding this matter. As Petitioners point out in their Motion for Summary Recommended Order, an administrative agency has no authority to declare

a statute void or unenforceable on the grounds that it is in conflict with controlling federal law or for any other reason. Only the courts have such authority. See Palm harbor Special Fire Control District v. Kelly, 516 So.2d 249, 250 (Fla. 1987).

COPIES FURNISHED:

Robert A. Weiss, Esquire John M. Knight, Esquire

118 N. Gadsen Street, Suite 200 Tallahassee, Florida 32301

Karel Baarslag, Esquire Gordon B. Scott, Esquire 1317 Winewood Boulevard Building Six, Room 234

Tallahassee, Florida 32399-0700

R.S. Power, Agency Clerk Department of Health and

Rehabilitative Services Building Six, Room 233 Tallahassee, Florida 32399-0700

Docket for Case No: 91-006506

Orders for Case No: 91-006506