STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

STADTLANDER DRUG COMPANY, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 96-1709

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, this matter was heard before the Division of Administrative Hearings by its assigned Hearing Officer, Donald R. Alexander, on July 16, 1996, in Tallahassee, Florida.

APPEARANCES

For Petitioner: Mark Herron, Esquire

Post Office Box 10555 Tallahassee, Florida 32302-2555

For Respondent: Roger R. Maas, Esquire

Building 3, Suite 3431

2727 Mahan Drive

Tallahassee, Florida 32308-5403 STATEMENT OF THE ISSUE

The issue is whether petitioner's request for enrollment as an out-of-state Medicaid provider should be approved.

PRELIMINARY STATEMENT

This matter began on February 28, 1996, when respondent, Agency for Health Care Administration, issued a letter denying a request by petitioner, Stadtlander Drug Company, Inc., for enrollment as a Medicaid provider. As reasons for the denial, the agency stated that petitioner did not "meet the requirements for enrollment of out-of-state providers as outlined in Rule 59G- 5.050, F. A. C.," and its "locality would create undue hardship on AHCA for meeting the requirements and oversight duties set forth in applicable federal laws, state statutes, administrative rules, regulations and manuals." Petitioner then requested a formal hearing under Section 120.57(1), Florida Statutes, to contest the proposed action.

The matter was referred by respondent to the Division of Administrative Hearings on April 5, 1996, with a request that a Hearing Officer be assigned to conduct a formal hearing. By Notice of Hearing dated May 1, 1996, a final

hearing was scheduled on June 18, 1996, in Tallahassee, Florida. At petitioner's request, the hearing was continued to July 16, 1996, at the same location.

At final hearing, petitioner presented the testimony of William P. McCormick, its general counsel. The parties also offered joint exhibits A-J. All exhibits were received in evidence.

The transcript of hearing was filed on July 26, 1996. Proposed findings of fact and conclusions of law were filed by petitioner and respondent on August 6 and 9, 1996, respectively. A ruling on each proposed finding of fact has been made in the Appendix attached to this Recommended Order.

FINDINGS OF FACT

Based upon all of the evidence, the following findings of fact are determined:

1. Petitioner, Stadtlander Drug Company, Inc. (SDC), is a provider of pharmacy services located at 600 Penn Center Boulevard, Pittsburgh, Pennsylvania. It is licensed by respondent, Agency for Health Care Administration (AHCA), as a special non-resident mail order pharmacy having been issued License No. PH 0013072.

   
   

2. Petitioner is now enrolled as a Medicaid provider in twenty-three states around the country and provides mail-order drugs in all those states. In addition, it holds at least forty pharmacy licenses in various states, as well as thirty-five drug wholesale licenses. Petitioner's specialty is to target certain "disease states" and provide expensive, "high-tech" drugs to persons with serious, chronic illnesses such as cancer and AIDS.

   
   

3. On November 7, 1995, petitioner submitted an application to respondent for enrollment as an out-of-state Medicaid provider. If the application is approved, petitioner would be assigned a Medicaid provider number and be able to provide prescription drugs by mail to Florida residents who reside within the State of Florida. It would then be reimbursed under the state's Medicaid program.

   
   

4. After reviewing the application, including a supplemental submission by SDC, on February 28, 1996, AHCA denied the application on the following grounds:

   
   

   (Y)ou have failed to demonstrate that SDC meet the requirements for enrollment of out-of-state providers as outlined in Rule 59G-5.050, Florida Administrative Code (F.A.C.) Furthermore, SDC's locality would create an undo hardship on AHCA for meeting the requirments and oversight duties set forth in applicable federal laws, state statutes, administrative rules, regulations and manuals. For example, conducting on site audit reviews of your pharmacy operations, which requires (that) our field auditors take a physical inventory of the pharmacy department, and enforcing the oversight provisions cited in Section 409.913, Florida Statutes (F.S.), would be difficult and create an unwarranted expense.

   After receiving this advice, SDC filed a petition for hearing claiming that it had satisfied all pertinent requirements for enrollment.

   
   

5. The parties have stipulated that there are no federal laws, administrative rules or manuals that would preclude SDC's enrollment as a Florida Medicaid provider and prevent it from providing prescribed drug services to qualified Medicaid beneficiaries who reside in the State of Florida.

   
   

6. Under both federal and state law, AHCA is authorized to conduct audits of Medicaid pharmacy providers. The manner in which such audits are to be performed is set forth in the "Florida Medicaid/Unisys, Inc. Pharmacy Audit Program" manual. As a ground for denial, AHCA contends that, if the application is approved, an undue burden would be placed on the agency in auditing petitioner's records in Pittsburg.

   
   

7. SDC acknowledges that there could be some hardship to AHCA in performing its audit responsibilities. SDC has, however, made accommodations to other states in attempting to address their concerns about the need to audit Medicaid pharmacy providers. For example, for the State of California, SDC maintains certified copies of all documents within that state to permit on-site inspection and comparison of records in California by the auditor. SDC has proposed to make the same kind of accommodation for AHCA.

   
   

8. In addition to this accommodation, SDC is willing to answer by telephone any questions raised by Medicaid auditors and provide documentation for specific patients. Alternatively, if a Florida auditor found it necessary to make an audit of petitioner's offices in Pittsburg, SDC would willingly allow an on-site inspection.

   
   

9. Other than the ground cited in its letter of denial, respondent offered no evidence to rebut SDT's showing that the accommodations are reasonable and adequate. Further, given these accommodations, there is no evidence that AHCA would suffer "an undue hardship" or that it would be unable to perform its auditing responsibilities under the Medicaid manual. Finally, since no Medicaid auditors from any of the twenty-three states in which SDC is certified as a Medicaid provider have found it necessary to make an audit in SDC's home office during the last four years, it is fair to draw an inference that the proffered accommodations would be satisfactory.

   
   

10. AHCA has also denied the application on the ground petitioner does not meet any of the four criteria in Rule 59G-5.050(1), Florida Administrative Code. That rule specifies the circumstances under which an out-of-state provider may enroll in the Florida Medicaid program. Those criteria apply, however, when

    out-of-state providers intend to provide services to Florida recipients who purchase drugs while out of the State of Florida. In this case, petitioner intends to provide services by mail to recipients who reside within the State of Florida. Therefore, the rule does not apply.

    
    

11. Because SDC has completed a provider agreement, is not under suspension in Florida or any other state, and has a current pharmacy license from AHCA, and its locality will not create an undue auditing hardship on AHCA, its application for enrollment as an out-of-state Medicaid provider should be approved.

    CONCLUSIONS OF LAW

    
    

12. The Division of Administrative Hearings has jurisdiction over the subject matter and the parties hereto pursuant to Section 120.57(1), Florida Statutes.

    
    

13. Because petitioner is the party seeking relief, as in most Medicaid- related proceedings, it bears the burden of proving by a preponderance of the evidence that its application should be approved. See, e. g., Golfcrest Nursing Home v. State, Agency for Health Care Admin., 662 So.2d 1330, 1334 (Fla. 1st DCA 1995).

    
    

14. Rule 59G-4.250(2)(a), Florida Administrative Code, requires that an applicant for enrollment as a Medicaid provider:

    
    

    1. Sign a participating agreement with a state agency;

    2. Not be currently under suspension from the Florida Medicaid program or any other state's Medicaid program; and

    3. Have a current pharmacy license or dispensing practitioner's license from the agent in the state in which the pharmacy is located.

       
       

       The undisputed evidence shows clearly that SDC meets all requirements of this rule.

       
       

15. Section 409.913(1), Florida Statutes, imposes upon AHCA a requirement that it "conduct . . . investigations, analyses, and audits of possible fraud, abuse and neglect in the Medicaid program." The evidence shows that AHCA will be able to carry out this responsibility without undue hardship if SDC's application is approved.

    
    

16. Respondent further contends that petitioner has failed to satisfy the requirements of Rule 59G-5.050(1), Florida Administrative Code. That rule specifies the criteria for enrollment as an out-of-state provider when the applicant intends to provide services to Florida residents while they are in another state. Although respondent contends that the rule is controlling in the case at bar, this is not so since the rule merely implements 42 C.F.R. s. 431.52, which requires each state plan to contain provisions that Medicaid services be furnished to its residents while absent from the state. Since SDC does not intend to provide the type of services contemplated by this rule, the provision is deemed to be inapplicable.

    
    

17. Finally, in its proposed recommended order, respondent has cited the case of Nutritional Support Services, L.P. et al v. Miller, 806 F.Supp. 977 (N.D. Ga. 1992) to support its position. In that case, the State of Georgia imposed a new policy which required suppliers of durable medical supplies to Georgia Medicaid recipients to have a valid business license and an in-state business location or be located within a fifty mile radius of the state border. Plaintiffs, who were out-of-state suppliers, filed a motion for preliminary injunction to prevent the state from enforcing the new policy. They did so on the theory that the policy violated the Social Security Act and various federal constitutional precepts. In denying the motion for an injunction, the court held that the plaintiffs had failed to prove that they would have a substantial likelihood of ultimate success on the merits of their claims. For purposes of

ruling on the motion, the court accepted the state's contention that the challenged restrictions were "intended to ensure that services can be monitored in a manner that protects the best interests of the recipients," and that these restrictions were consistent with the statutory Medicaid scheme. Id. at 981.

Drawing upon this language in the opinion, AHCA suggests here that its "restrictions" are likewise reasonable and in the best interests of the recipients. While this may be true, the purpose and reasonableness of the restrictions are not in issue. Rather, SDC contends only that it has satified all pertinent requirements for enrollment, and that the remaining requirement is not relevant. This being so, the case is not deemed to be controlling, and SDC's application for enrollment should be approved.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration enter a final

order granting petitioner's application for enrollment as an out-of-state Medicaid provider.

DONE AND ENTERED this 16th day of August, 1996, in Tallahassee, Florida.

DONALD R. ALEXANDER, 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 16th day of August, 1996.

18-19. Partially accepted in finding of fact 9.

1. Partially accepted in finding of fact 7.

2. Partially accepted in finding of fact 10.

3. Rejected as being unnecessary.

Respondent:

1. Rejected as being unnecessary.

2. Rejected. See finding of fact 10.

3. Partially accepted in finding of fact 10.

4. Rejected as being unsupported by the evidence.

Note - Where a proposed finding of fact has been partially accepted, the remainder has been rejected as being irrelevant, not supported by the evidence, unnecessary, subordinate, or a conclusion of law.

COPIES FURNISHED:

Mark Herron, Esquire Post Office Box 10555

Tallahassee, Florida 32302-2555

Roger R. Maas, Esquire Building 3, Suite 3431

2727 Mahan Drive

Tallahassee, Florida 32308-5403

R. S. Power, Agency Clerk

Agency for Health Care Administration Building 3, Suite 3431

2727 Mahan Drive

Tallahassee, Florida 32308-5403

Jerome W. Hoffman, General Counsel Agency for Health Care Administration Building 3, Suite 3431

2727 Mahan Drive

Tallahassee, Florida 32308-5403

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit to the agency written exceptions to this Recommended Order. All agencies allow each party at least ten days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should contact the Agency for Health Care Administration concerning its rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the Agency for Health Care Administration.

Docket for Case No: 96-001709

Orders for Case No: 96-001709