STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FOOD WITH A FLAIR, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 97-0465

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Respondent. )

)

RECOMMENDED ORDER

On May 8, 1997, a formal administrative hearing was held in this case by televideo before J. Lawrence Johnston, Administrative Law Judge, Division of Administrative Hearings. (The Administrative Law Judge was in a specially-equipped hearing room in Tallahassee, and the other hearing participants were in a specially-equipped hearing room in Tampa, Florida. The two hearing rooms were connected by televideo.)

APPEARANCES

For Petitioner: R. Jeffrey Stull, Esquire

Daniel R. Kirkwood, Esquire 602 South Boulevard

Tampa, Florida 33606

For Respondent: Gordon Scott, Esquire

Agency for Health Care Administration 2727 Mahan Drive, Suite 3431

Tallahassee, Florida 32308-5403

STATEMENT OF THE ISSUES

The issue in this case is whether the parties’ agreement in paragraph 9 of the Medicaid Provider Agreement was to allow for arbitrary and capricious termination without cause.

PRELIMINARY STATEMENT

On November 25, 1996, the Agency for Health Care Administration (AHCA) issued a Notice of Termination of its Medicaid Provider Agreement with the Petitioner, Food With A Flair, Inc. The Notice of Termination gave the Petitioner the right to request proceedings under Section 120.57, Florida Statutes.

A Petition in Opposition to Notice of Termination and Request for Hearing was timely filed on December 18, 1996, but stated in part that the Petitioner could not specify the disputed issues of fact because the Notice of Termination did not state the reasons for termination of the Petitioner’s Medicaid Provider Agreement and the Petitioner did not know what they were.

The AHCA did not respond to the Initial Order in the case; the Petitioner attempted to respond but again stated that it did not know the reasons for the Notice of Termination and stated that it could not estimate the length of the final hearing. In view of the Petitioner’s allegations, an Order to Show Cause was issued on February 28, 1997, requiring the AHCA to show cause why it should not be recommended that the AHCA’s action terminating the Petitioner’s Medicaid Provider Agreement should not be

dismissed as being an administrative complaint that did not comply with F.A.C. Rule 28-6.009.

After entry of the Order to Show Cause: the Petitioner filed a Motion for Specification of Charges; AHCA filed a Response to Order to Show Cause, a Response to Motion for Specification of Charges, and a Motion to Relinquish Jurisdiction; and the Petitioner filed a Response to Motion to Relinquish Jurisdiction.

On March 28, 1997, an Order on Pending Motions was entered holding: (1), as to the Order to Show Cause, this is not a proceeding to suspend, revoke or withdraw a license, and F.A.C. Rule 28-6.009 did not apply; (2), that the Petitioner’s Motion for Specification of Charges was moot since it was clear that there were no charges against the Petitioner but rather that the AHCA terminated the Petitioner’s Medicaid Provider Agreement for no cause; and (3), as to the Motion to Relinquish Jurisdiction, that there was one disputed issue of material fact for resolution in proceedings under Section 120.57(1), Fla. Stat. (Supp. 1996)— namely, whether the parties’ agreement in paragraph 9 of the Medicaid Provider Agreement was to allow for arbitrary and capricious termination without cause. A Notice of Final Hearing (Video) was issued setting final hearing on the sole issue for May 8, 1997.

On May 6, 1997, the Petitioner filed a Motion in Limine seeking to exclude all evidence on the AHCA’s reasons for

terminating the Petitioner’s Medicaid Provider Agreement. The Motion in Limine was heard during a prehearing conference held just prior to start of the final hearing (during a delay while the video connection was being established) and was denied.

However, the ruling made it clear that the issues for determination at final hearing were not expanded.

At final hearing, the parties agreed to the admission of the Medicaid Provider Agreement as Joint Exhibit I. The Petitioner called one witness. The AHCA called two witnesses and had Respondent’s Exhibits II through IV admitted in evidence.

After the presentation of evidence, the parties ordered the preparation of a transcript of the final hearing, and the parties were given ten days after the filing of the transcript in which to file their proposed recommended orders. The transcript was filed on May 21, 1997.

FINDINGS OF FACT

1. On October 10, 1995, the Petitioner, Food With A Flair, Inc., entered into a Non-Institutional Professional and Technical Medicaid Provider Agreement (the Provider Agreement) with the Respondent, the Agency for Health Care Administration (the AHCA). Through this Provider Agreement, the Petitioner became a participant in the Florida Medicaid Program administered by the AHCA. The Petitioner’s role in the Program was to provide meals for the Program’s HIV clients.

2. The Provider Agreement had 12 numbered paragraphs, 8 and

   9 of which stated:

   
   

   1. The provider and the Agency agree to abide by the Florida Administrative Code, Florida Statutes, policies, procedures, manuals of the Florida Medicaid Program and Federal laws and regulations.

      
      

   2. The agreement may be terminated upon thirty days written notice by either party. The Agency may terminate this agreement in accordance with Chapter 120, F.S.

      
      

3. During the time the Petitioner was providing meals under the Provider Agreement, the AHCA received complaints about the meals being provided by the Petitioner and the manner in which the Petitioner’s meals and services were being provided.

   Although the complainants have not been identified, some may have been competitors of the Petitioner, and some were anonymous.

4. The AHCA investigated the complaints and decided that, if true, they were serious enough to warrant termination of the Petitioner’s Provider Agreement. However, the AHCA chose not to terminate the Petitioner’s Provider Agreement for cause out of concern that the release of the identity of some of the Program’s HIV clients would result, in violation of their legal rights to confidentiality. For that reason, the AHCA chose to terminate the Petitioner’s Provider Agreement without cause.

5. The AHCA’s Notice of Termination issued on November 25, 1996, not only purported to terminate the Petitioner’s Provider Agreement “thirty days from receipt of this notice,” it also gave the Petitioner notice that it had “the right to request a hearing pursuant to Section 120.57, Florida Statutes.”

6. The Provider Agreement was drafted by Unisys Corporation in consultation with the AHCA’s General Counsel. It is a form agreement, and the terms were not negotiable by the Petitioner. If the Petitioner wanted to participate in the Program, it had to accept the form agreement.

7. The Provider Agreement was signed by Thomas Barcia as president/director of the Petitioner and by W. A. Hardy, Jr., apparently an employee of Unisys, on behalf of the AHCA.

8. Neither Hardy nor the AHCA’s General Counsel testified at final hearing. Neither of the AHCA’s two witnesses could testify as to the meaning of the Provider Agreement, particularly paragraphs 8 and 9.

9. Thomas Barcia testified that he understood the Provider Agreement to mean that the Petitioner could terminate on thirty days notice but that termination by the AHCA also had to be fair and for just cause and subject to due process; otherwise, he thought the Provider Agreement was to last for five years, or for as long as the Petitioner’s services were needed.

10. In support of the Petitioner’s interpretation of the Provider Agreement, Barcia pointed to paragraph 1 of the Provider Agreement, which required the Petitioner to “keep for 5 years complete and accurate medical and fiscal records that fully justify and disclose the extent of the services rendered and billings made under the Medicaid program . . .”

11. Barcia also testified that he and others made

    investments in the Petitioner’s business that would not have been made had they known that the AHCA could terminate the Provider Agreement without cause. He testified that major personal and corporate financial hardships would befall him and the Petitioner if the AHCA terminated the Provider Agreement on 30 days notice, including defaults on building and vehicle leases; he testified that personal and corporate bankruptcy could result.

    CONCLUSIONS OF LAW

    
    

12. Section 409.907, Fla. Stat. (Supp. 1996), dealing with Medicaid provider agreements, provides in pertinent part:

    1. Each provider agreement shall be a voluntary contract between the agency and the provider, in which the provider agrees to comply with all laws and rules pertaining to the Medicaid program when furnishing a service or goods to a Medicaid recipient and the agency agrees to pay a sum, determined by fee schedule, payment methodology, or other manner, for the service or goods provided to the Medicaid recipient. Each provider agreement shall be effective for a stipulated period of time, shall be terminable by either party after reasonable notice, and shall be renewable by mutual agreement.

       
       

    2. The provider agreement developed by the agency, in addition to the requirements specified in subsections (1) and (2), shall require the provider to:

    
    

    * * *

    
    

    (c) Retain all medical and Medicaid-related records for a period of 5 years to satisfy all necessary inquiries by the agency.

    
    

13. It is concluded that the second sentence of Section 409.907(2) means that the Provider Agreement was to be “effective for a stipulated period of time,” and that it was either

    terminable by either party, without cause, at the end of the “stipulated time,” on reasonable notice, or it could be renewed by mutual consent. It is concluded that Section 409.907(2) was not intended to authorize the termination of the agreement without cause before the end of the “stipulated time.”

14. Unfortunately, the Provider Agreement does not clearly state a “stipulated time” of duration. Unless construed to provide for a “stipulated time,” the Provider Agreement would not be in conformity with the requirements of Section 409.907(2).

15. In addition, paragraph 9 states that it “may be terminated upon thirty days written notice by either party.” If the Provider Agreement is construed to be terminable at will upon thirty days notice by either party, it would not be in conformity with the requirements of Section 409.907(2).

16. The Petitioner contends that the Provider Agreement has a “stipulated time” of five years. The Petitioner bases its contention on paragraph 1 of the Provider Agreement, which required the Petitioner to “keep for 5 years complete and accurate medical and fiscal records . . ..” If the “stipulated time” is five years, the Provider Agreement would not be terminable at will at this time. But it is more likely that paragraph 1 of the Provider Agreement was meant only to comply with paragraph (c) of Section 409.907(3), not to state a “stipulated time” of five years.

17. Regardless whether the Provider Agreement has a

    “stipulated time” of five years, it is concluded it is not terminable at will at this time. In addition to providing that the Provider Agreement “may be terminated upon thirty days written notice by either party,” paragraph 9 also provided that the “Agency may terminate this agreement in accordance with Chapter 120, F.S.” The AHCA attempted to follow the requirement of that provision by stating in its Notice of Termination that the Petitioner had “the right to request a hearing pursuant to Section 120.57, Florida Statutes.” The latter provision of paragraph 9 of the Provider Agreement, together with the Notice of Termination language, create an ambiguity as to whether the Chapter 120 procedural rights given to the Petitioner placed an obligation on the AHCA to justify the exercise of its discretion to terminate the Petitioner.

18. The Medicaid Provider Agreement between the parties clearly was a contract of adhesion, and its ambiguity must be resolved in the light most favorable to the Petitioner. See Utica Mutual Ins. Co. v. Penn. Nat’l Mutual Casualty Ins. Co., 639 So.2d 41 (5th DCA 1994); Dataline Corp. v. L.D. Mullins Lumber Co., 588 So.2d 1078 (Fla. 4th DCA 1991); Maines v. Davis,

    491 So.2d 1233 (Fla. 1st DCA 1986). In addition, because of the ambiguity, extrinsic evidence is admissible under the parol evidence rule to resolve the ambiguity. See Bacardi v. Bacardi,

    386 So.2d 1201 (Fla. 3d DCA 1980). In this case, the only evidence as to the intent of the parties came from the Petitioner

    and supported the interpretation that the AHCA was required to justify the exercise of its discretion to terminate the Petitioner.

19. In addition to the rules for interpretation of ambiguous contract provisions, the Florida Administrative Procedures Act also requires the AHCA to justify the exercise of its discretion to terminate the Petitioner. See Recommended Order, Beverly Transport, Inc., v. Agency for Health Care Admin., DOAH Case No. 95-4661, entered March 5, 1996. See also Gonzalez v. Dept. of Health and Rehab. Services, 418 So.2d 1128 (Fla. 1st DCA 1982)(under due process requirements of the Administrative Procedures Act, agency had “the burden of demonstrating proof justifying the exercise of that discretion” to revoke pest control licensee for alleged violations of a stipulation providing for revocation for such violations).

20. The rationale of Board of Trustees of the Internal Improvement Trust Fund v. Barnett, 533 So.2d 1202 (Fla. 3d DCA 1988), also is applicable. In that case, the agency changed the variance status of construction of a private dock, contending that “rights acquired from the State in its proprietary capacity may be revoked at any time before the holder changes his position in reliance on the right.” Id., at 1206. The court held:

    [The agency] has cited no legal authority to support this contention. The freedom to act in an arbitrary manner is not available to government in either its proprietary or regulatory capacity.

    Moreover, there is ample uncontroverted evidence that [the property owners] substantially changed

    their positions in reliance on the Consent of Use

    . . ., at considerable expense.

    
    

    Id. Similarly, in this case, the evidence was uncontroverted that the Petitioner changed its position in reliance on the Provider Agreement.

21. It is concluded that the AHCA cannot terminate the Provider Agreement without cause. The AHCA’s desire to protect clients from disclosure of their identities in the course of the process of terminating the Petitioner for cause does not justify or give the AHCA the option of termination arbitrarily for no cause. If necessary, there are appropriate ways to avoid or minimize disclosure of the identities of those clients.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is

RECOMMENDED that the AHCA enter the final order reinstating the Petitioner’s Medicaid Provider Agreement without prejudice to possible proceedings to terminate the Provider Agreement for cause.

RECOMMENDED this 16th day of June, 1997, at Tallahassee, Florida.

J. LAWRENCE JOHNSTON Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675 SUNCOM 278-9675

Fax FILING (904) 921-6847

Filed with the Clerk of the Division of Administrative Hearings this 16th day of June, 1997.

COPIES FURNISHED:

Gordon Scott, Esquire

Agency for Health Care Administration Fort Knox Building 3, Suite 3431

2727 Mahan Drive

Tallahassee, Florida 32308-5403

R. Jeffrey Stull, Esquire Daniel R. Kirkwood, Esquire 602 South Boulevard

Tampa, Florida 33606

Sam Power, Agency Clerk

Agency for Health Care Administration Fort Knox Building 3, Suite 3431

2727 Mahan Drive

Tallahassee, Florida 32308-5403

Jerome W. Hoffman, General Counsel Agency for Health Care Administration 2727 Mahan Drive

Tallahassee, Florida 32308-5403

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within 15 days from the date of 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: 97-000465

Orders for Case No: 97-000465