STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

NORTH BROWARD HOSPITAL DISTRICT, )

)

Petitioner, )

)

vs. ) Case No. 99-3623RU

)

DEPARTMENT OF INSURANCE, )

)

Respondent. )

)

FINAL ORDER

Pursuant to notice, a formal hearing was held in this case on November 18, 1999, in Tallahassee, Florida, before Claude B. Arrington, a duly-designated Administrative Law Judge of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: George N. Meros, Jr., Esquire

Rumberger, Kirk & Caldwell Post Office Box 10507

Tallahassee, Florida 32302-2507

Wendy A. Delvecchio, Esquire Conrad and Scherer, P.A. Post Office Box 14723

Fort Lauderdale, Florida 33301

For Respondent: S. Marc Herskovitz, Esquire

John L. Brennan, III, Esquire Christopher J. Karo, Esquire Department of Insurance Division of Legal Services 612 Larson Building

Tallahassee, Florida 32399-0333

STATEMENT OF THE ISSUES

Whether the designated portion of the letter dated December 23, 1997, from Paul Stanley to Michael Robinson is an

unpromulgated rule in violation of Section 120.54(1)(a), Florida Statutes. If so, whether Petitioner (the District) is substantially affected by the alleged agency statement within the meaning of Section 120.56(4), Florida Statutes.

PRELIMINARY STATEMENT

On December 23, 1997, Paul Stanley, an auditor employed by Respondent (the Department), wrote a letter to Michael Robinson, an attorney employed by the District, that contained the statement that is being challenged in this proceeding as an unpromulgated rule. On June 12, 1998, during a meeting with an attorney for the District, Jack Herzog, an attorney for the Department, expressed his opinion that Mr. Stanley's letter correctly stated the law.

On August 27, 1999, the District filed its Petition to Determine Invalidity of Agency Statement pursuant to Section 120.56(4), Florida Statutes. Three days before the hearing was to begin on November 18, 1999, the Department moved for the entry of a summary final order. That motion was not timely and will be denied by an order entered contemporaneously with this Final Order.

At the formal hearing, the District presented the testimony of Diane Costa and Patricia Mahaney and offered three exhibits, each of which was admitted into evidence. Included among those exhibits was the deposition of Mr. Herzog.

The Department offered thirteen exhibits, each of which was accepted into evidence. Included among those exhibits were depositions of Diane Costa, Patricia Mahaney, Michelle Newell, James Bracher, and Paul Stanley.

Official recognition was taken of all relevant statutes, including Special Acts creating lien laws in various counties.

A Transcript of the proceedings was filed December 8, 1999.

The District and the Department filed Proposed Final Orders, which have been duly-considered by the undersigned in the preparation of this Final Order. 1/

FINDINGS OF FACT

1. The District is a political subdivision of the State of Florida. It operates four medical centers and numerous clinics and medical offices throughout Broward County. The District is a major provider of indigent healthcare, particularly through operation of its trauma centers. The District contracts with several health maintenance organizations (HMOs).

2. Since 1955, the District has utilized the Broward County Lien Law to help secure payment for medical services rendered to persons injured in accidents caused by the

   negligence of another, or for which some liability insurance might be payable to the injured party.

3. Chapter 30615, Laws of Florida (also found in Article II, Section 16-13, Broward County Code of Ordinance) (the Lien Law), 2/ provides in pertinent part:

   [E]very governmental unit operating a hospital shall be entitled to a lien for all reasonable charges for hospital care, treatment and maintenance of ill or injured persons upon any and all causes or action, suits, claims, counter-claims and demands accruing to the persons to whom such care, treatment and maintenance are furnished.

   
   

4. The following factual scenario typifies the circumstances under which the District has utilized the Lien Law:

   1. A person is injured in an automobile accident through the fault of another. The injured victim is transported to one of the District's medical facilities (usually a trauma center at one of the District's hospitals) and receives medical attention.

   2. Upon learning that the patient has been injured in an automobile accident, the District files a lien in circuit court for payment of the full charges for services rendered to the patient at the District's facility. The District files the lien regardless of whether the patient is an HMO subscriber.

   3. The injured victim sues the tortfeasor and his or her liability carrier for money damages arising from the accident. The injured victim claims the right to payment of damages sufficient to pay the full medical bill, regardless of whether the

      victim is an HMO subscriber or has another form of health insurance.

   4. Proceeds from the injured patient's settlement or judgment against the tortfeasor or liability insurance carrier is applied first to pay off the District's lien, and thereafter to the patient or insurance carrier or HMO.

   5. If the injured patient is an HMO subscriber, and if the settlement or judgment proceeds are sufficient to pay off the District's lien, the subscriber's HMO is not obligated to pay any money for medical services. If the settlement or judgment proceeds satisfy only a portion of the lien amount, the District will thereafter look to the HMO for payment of services at the HMO contracted rate.

   6. The District does not seek to charge or collect against an HMO subscriber for any services rendered to that subscriber.

      
      

5. Section 627.4235, Florida Statutes, entitled Coordination of Benefits, provides, in pertinent part, as follows:

   1. A group hospital, medical, or surgical expense policy, group health-care services plan, or group-type self-insurance plan that provides protection or insurance against hospital, medical, or surgical expenses delivered or issued for delivery in the state must contain a provision for coordinating its benefits with any similar benefits provided by any other group hospital, medical, or surgical expense policy, any group healthcare services plan or any group-type self insurance plan that provides protection or insurance against hospital, medical, or surgical expense for the same loss.

   2. A hospital, medical, or surgical expense policy, healthcare services plan, or self-insurance plan that provides protection

   for insurance against hospital, medical, or surgical expenses issued in this state or issued for delivery in this state may contain a provision whereby the insurer may reduce or refuse to pay benefits otherwise payable thereunder solely on account of the existence of similar benefits provided under insurance policies issued by the same or another insurer, healthcare services plan, or self-insurance plan which provides protection or insurance against hospital, medical or surgical expenses only if, as a condition of coordinating benefits with another insurer, the insurers together pay 100% of the total reasonable expenses actually incurred of the type of expense within the benefits described in the policies and presented to the insurer for payment.

   
   

6. A purpose of Florida's Automobile No Fault Law (Sections 627.730-627.7405, Florida Statutes), is to require motor vehicle insurance providing medical, surgical, funeral, and disability insurance benefits without regard to fault. See

   Section 627.731, Florida Statutes.

   
   

7. Section 627.736, Florida Statutes, entitled Required Personal Injury Protection Benefits; Exclusions; Priority, provides in pertinent part as follows:

   1. Required Benefits - every insurance policy complying with the security requirements of s. 627.733 shall provide personal injury protection to the named insured, relatives residing in the same household, persons operating the insured motor vehicle, passengers in such motor vehicle, and other persons struck by such motor vehicle and suffering bodily injury while not an occupant of a self propelled vehicle, subject to the provisions of

      Section (2) and paragraph (4)(d), to a limit of $10,000.00 for losses sustained by any such person as a result of bodily injury, sickness, disease, or death arising out of the ownership, maintenance, or use of a motor vehicle as follows:

      1. Medical Benefits - Eighty percent of all reasonable expenses for necessary medical, surgical, X-ray, dental, and rehabilitative services, including prosthetic devices, and necessary ambulance, hospital and nursing services. Such benefits shall also include necessary remedial treatment and services recognized and permitted under the laws of the state for an injured person who relies upon spiritual means through prayer alone for healing, in accordance with his or her religious beliefs.

   
   

   * * *

   
   

   (4) Benefits: When Due. - Benefits due from an insurer under Sections 627-730 - 627.7405 shall be primary, except that benefits received under any workers compensation law shall be credited against the benefits provided by subsection (1).

   
   

   * * *

   
   

   (f) Medical payments insurance, if available in a policy of motor vehicle insurance, shall pay the portion of any claim for personal injury protection medical benefits which is otherwise covered but is not payable due to the co-insurance provision of paragraph (1)(a), regardless of whether the full amount of personal injury protection coverage has been exhausted.

   
   

8. Section 641.37(7), Florida Statutes, provides that an HMO is entitled to coordinate benefits on the same basis as an insurer under Section 627.4235, Florida Statutes.

9. The District has contracted with HIP Network of Florida, Inc. (HIP), a health maintenance organization duly licensed by the Department to furnish hospital and related services to HIP subscribers. 3/

10. The contract between the District and HIP provides that the District shall look only to HIP for compensation of services rendered to a member (of HIP) when such services are covered by HIP's subscriber contracts (individual or group contracts). The District agrees not to bill, charge, or otherwise seek compensation or remuneration from the member of persons acting on behalf of the member (other than HIP) except to the extent that copayments are specified in the subscriber contracts. The District agrees not to maintain any action at law or equity against a member to collect sums that are owed by HIP to the District under the terms of the contract, even in the event HIP fails to pay, becomes insolvent, or otherwise breaches the terms and conditions of the Agreement.

11. The contract between the District and HIP also provides a schedule of fees to be paid by HIP to the District for the payment of services covered by the contract. HIP agrees to pay those specified amounts and the District agrees to accept these amounts as payment in full for such services, except for authorized copayments. The contract provides that amounts received by the District as a result of coordination of benefits

    are to be deducted from amounts payable to the District by HIP. The contract also provides that HIP may coordinate the costs of providing benefits with any other group coverage or policy of insurance including Workman's Compensation and automobile insurance, under which the member is covered to the extent allowed by law. Specifically, if a member is eligible to receive benefits under another plan(s) for services provided at HIP expense, HIP and the District reserve the right to obtain reimbursement from any such plan(s) for the cost of the services provided, but not in excess of the amount payable under each other plan(s). Coordination of benefits received by the District will be deducted from the amount owed by HIP. The District agrees to cooperate in obtaining coordination of benefits reimbursement.

12. The District has contracts with other HMOs with similar provisions to the HIP contract.

13. At all times pertinent to this proceeding, Paul Stanley, was a Financial Examiner, Analyst II employed by the Department. Mr. Stanley's job description and practical function was to prepare and conduct audits of HMOs and other health care entities licensed by the Department. In the course of his employment, Mr. Stanley conducted a routine audit of HIP/NET and found three instances where a member of HIP/NET had received medical services from one of the District's facilities

    after the member had been in an automobile accident. In each of these three cases, the District filed a lien in circuit court pursuant to the Lien Law, but it did not file a claim with HIP for services rendered to the member.

14. Section 641.315, Florida Statutes, provides, in pertinent part, as follows:

    1. Whenever a contract exists between a health maintenance organization and a provider and the organization fails to meet its obligations to pay fees for services already rendered to a subscriber, the health maintenance organization shall be liable for such fee or fees rather than the subscriber; and the contract shall so state.

    2. No subscriber of an HMO shall be liable to any provider of health care services for any services covered by the HMO.

    3. No provider of services or any representative of such provider shall collect or attempt to collect from an HMO subscriber any money for services covered by an HMO and no provider or representative of such provider may maintain any action at law against a subscriber of an HMO to collect money owed to such provider by an HMO.

    4. Every contract between an HMO and a provider of health care services shall be in writing and shall contain a provision that the subscriber shall not be liable to the provider for any services covered by the subscriber's contract with the HMO.

    5. The provisions of this section shall not be construed to apply to the amount of any deductible or copayment which is not covered by the contract of the HMO.

    
    

15. By letter dated December 23, 1997, Mr. Stanley notified Michael Robinson, an attorney employed by the District,

    that in these three instances where he found HIP had not been billed when its members had been involved in an automobile accident, the District's liens violated Section 641.315, Florida Statutes.

16. After advising Mr. Robinson of his audit, Mr. Stanley identified the three HIP members by name and stated, in pertinent part, as follows:

    After reviewing the situation, it was determined that all members were involved in automobile accidents and medical care was rendered at a North Broward facility. To date, no claim has been submitted to HIP Health Plan. After contacting the attorneys for the individuals, I was informed that North Broward refuses to submit a claim in the proper format to HIP Health Plan. I also ascertained that North Broward has attached a lien against the settlement in all three cases. I contacted Ms. Diane Costas of North Broward to gain information as to why no claims had been submitted to HIP Health Plan for services rendered by the facilities. In essence, Ms. Costas stated that since North Broward is a contracted provider for HIP Health Plan, and is paid by the HMO at a negotiated rate, payment from HIP would be substantially lower than billed charges. By refusing to submit a claim to HIP, North Broward would realize greater revenues. As a result, the members, in this case, would receive a lesser portion of the final settlement.

    After consultation with the appropriate personnel at The Florida Department of Insurance, The Agency for Health Care Administration, and The Health Care Finance Administration (Ms. Gurland is a Medicare Risk member) be advised that The Florida Department of Insurance deems this action as a violation of section 641.315, Florida

    Statutes. The action North Broward has taken prevents the member from availing themselves [sic] of the coverage by their [sic] HMO and payment of services rendered at the lower contracted rate in effect by paying the difference between what HIP would pay pursuant to the contract and what North Broward has determined to be billed charges. Therefore, North Broward is balance billing the members.

    
    

17. Prior to sending the letter of December 23, 1997, Mr. Stanley did not request or receive approval to do so from his superiors at the Department. At the time he wrote the letter asserting that he had consulted with appropriate

    personnel at the Department, Mr. Stanley had, in fact, not done

    
    

    so.

    
    

18. John W. (Jack) Herzog is an Executive Senior Attorney

    
    

    with the Department of Insurance who supervises other attorneys, serves on a board of directors that manages the Department's Division of Legal Services, drafts legislation, and reviews rules. Mr. Herzog does not make policy on behalf of the Department.

19. On June 12, 1998, Mr. Herzog attended a meeting that included an attorney representing the District. During the course of that meeting, Mr. Herzog expressed his opinion as an attorney for the Department that Section 641.315, Florida Statutes, prohibits the District from filing liens under the Lien Law under circumstances similar to those outlined in

    Mr. Stanley's letter. Mr. Herzog was not expressing any official position of the Department.

20. Whether the Department has adopted an official position consistent with Mr. Stanley's discussion of hospital liens is a central issue in this proceeding. Based on the totality of the evidence, it is found that the Department has taken no official position as to the District's ability to utilize the Lien Law under the circumstances described in Mr. Stanley's letter. 4/

21. On June 16, 1998, the District was sued in a class action lawsuit over the issue of filing liens against HMO subscribers. Shortly thereafter, in late June or July of 1998, the District stopped filing liens against HMO subscribers who had been involved in an automobile accident.

22. The District has suffered a substantial monetary loss since it stopped filing liens against HMO subscribers who had been involved in an automobile accident and will likely continue to suffer substantial losses in the future if it can no longer file such liens pursuant to the Lien Law.

    CONCLUSIONS OF LAW

    
    

23. The Division of Administrative Hearings has jurisdiction of the parties to and the subject of this proceeding. Section 120.57(1), Florida Statutes.

24. The District has the burden of going forward with the evidence in this proceeding and the ultimate burden of persuasion. Young v. Department of Community Affairs, 625 So. 2d 831 (Fla. 1993).

25. The term "rule" is defined in Section 120.52(15), Florida Statutes, as follows:

    (15) "Rule" means each agency statement of general applicability that implements, interprets, or prescribes law or policy or describes the 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. The term also includes the amendment or repeal of a rule.

    
    

26. The District failed to establish that the challenged portion of Mr. Stanley's letter of December 23, 1997, is a rule within the meaning of Section 120.52(15), Florida Statutes.

27. The conclusion that the challenged statement does not reflect the position of the Department and is not a rule renders moot the remaining arguments asserted by the District and the Department.

28. The core dispute between the parties is the appropriate construction of the various statutes they cite in support of their respective positions. It is not necessary to resolve that core dispute in this proceeding to resolve the

issue of whether the Department is relying on an unpromulgated

rule.

ORDER

Based on the foregoing Findings of Fact and Conclusions of Law, it is ORDERED that the Petition to Determine Invalidity of Agency Statement filed by the District on August 27, 1999, is hereby DISMISSED.

DONE AND ORDERED this 17th day of February, 2000, in Tallahassee, Leon County, Florida.

CLAUDE B. ARRINGTON

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675 SUNCOM 278-9675

Fax Filing (850) 921-6847 www.doah.state.fl.us

Filed with the Clerk of the Division of Administrative Hearings this 17th day of February, 2000.

ENDNOTES

1/ Following the close of the formal hearing, the Department filed a motion for attorney's fees and costs, to which the District responded. Because the Department did not make its position clear until after the District filed this proceeding, the motion will be denied by an order entered contemporaneously with this Final Order.

2/ Since 1951, the Florida Legislature has enacted twenty-two lien laws affording health care providers in various counties certain rights to secure payment for medical services rendered.

3/ The parties' Pretrial Stipulation admitted the findings of fact contained in this paragraph and the next three paragraphs. The HIP contract, absent the schedule of rates, was admitted as an exhibit.

4/ Michelle Newell and James J. Bracher are employees of the Department who were in positions of authority over Mr. Stanley at times pertinent to this proceeding. The undersigned finds their testimony that there was no official agency position on this issue credible and persuasive. Further, other than Mr.

Stanley's correspondence and Mr. Herzog's comments, there was no evidence that anyone else had made a similar statement on behalf of the agency or that the agency had taken any action against a provider or an HMO based on such an agency position.

COPIES FURNISHED:

George N. Meros, Jr., Esquire Rumberger, Kirk & Caldwell Post Office Box 10507

Tallahassee, Florida 32302-2507

Wendy A. Delvecchio, Esquire Conrad and Scherer, P.A. Post Office Box 14723

Fort Lauderdale, Florida 33301

S. Mark Herskovitz, Esquire James L. Brennan, III, Esquire Christopher J. Karo, Esquire Department of Insurance Division of Legal Services

612 Larson Building

Tallahassee, Florida 32399-0333

Honorable Bill Nelson

State Treasurer and Insurance Commissioner The Capitol, Plaza Level 11

Tallahassee, Florida 32399-0300

Daniel Y. Sumner, General Counsel Department of Insurance

The Capitol, Lower Level 26 Tallahassee, Florida 32399-0300

Carroll Webb

Executive Director and General Counsel Joint 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: 99-003623RU

Orders for Case No: 99-003623RU