STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

BROOKWOOD EXTENDED CARE OF ) HIALEAH GARDENS, LLP, d/b/a ) THE WATERFORD CONVALESCENT ) CENTER, )

)

Petitioner, )

)

vs. ) Case No. 00-1491

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Respondent. )

______________________________) BROOKWOOD-WASHINGTON COUNTY ) CONVALESCENT CENTER, INC., ) d/b/a WASHINGTON COUNTY )

CONVALESCENT, )

)

Petitioner, )

)

vs. ) Case No. 00-1493

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Respondent. )

______________________________)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held in these case on April 27, 2001, in Tallahassee, Florida, before J. D. Parrish, a designated Administrative Law Judge of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Theodore E. Mack, Esquire

Powell and Mack

803 North Calhoun Street Tallahassee, Florida 32303

For Respondent: Steven A. Grigas, Esquire

Agency for Health Care Administration

2727 Mahan Drive, MLC #3

Tallahassee, Florida 32308 STATEMENT OF THE ISSUE

Whether the agency's audit adjustment of an interim rate should be sustained.

PRELIMINARY STATEMENT

At the hearing, the parties announced that all issues of material fact involving DOAH Case No. 00-1491 had been resolved. Accordingly, jurisdiction is relinquished in that matter and the file in DOAH Case No. 00-1491 is hereby closed. All findings and conclusions reached by this order pertain to DOAH Case No. 00-1493.

As to that case, the Petitioner, Brookwood- Washington County Convalescent Center, Inc., d/b/a Washington County Convalescent (Petitioner or Brookwood) presented testimony from Steven Robert Jones, an expert in health care accounting and Medicaid reimbursement; and Jerry Wayne Hinson, an expert in nursing home administration. Brookwood's Exhibits 1 through 6 were admitted into evidence.

The Respondent, Agency for Health Administration (Respondent or AHCA), presented testimony from Wesley Dale Haigler, an expert in Medicaid cost settlement and rate setting; Mary Ann Stewart, an expert in Medicaid audit principles and policies; and Charles Patrick Patterson, an expert in health care accounting and auditing. The Respondent's Exhibit 1 was also received into evidence.

A Joint Exhibit numbered 1 was received from the parties. It is a composite document containing six tabbed entries.

The transcript of these proceedings was filed with the Division of Administrative Hearings on May 15, 2001. The time for filing proposed recommended orders was extended by stipulation of the parties. All parties timely filed proposed recommended orders on June 21, 2001. Such orders have been fully considered in the preparation of this Recommended Order.

FINDINGS OF FACT

1. The Petitioner is a licensed nursing home located in Chipley, Washington County, Florida.

2. The Petitioner is located in a rural county in Florida's panhandle with high numbers of Medicaid- eligible patients.

3. The Petitioner participates in the Florida Medicaid Program and has agreed to provide skilled or intermediate nursing care services for Medicaid patients.

4. The Respondent is the state agency responsible for administering the Florida Medicaid Program.

5. The parties have entered into an agreement that governs the provision of Medicaid services and the reimbursement to the provider (Petitioner). Such plan authorizes reimbursement based upon rates agreed between the parties and limited by rules and regulations applicable to the Medicaid Program.

6. In this regard, Medicaid reimbursements are made in accordance with the Florida Title XIX Long-Term Care Reimbursement Plan (the Plan). The Plan was adopted and incorporated by reference in Rule Chapter 59G, Florida Administrative Code.

7. To set a reimbursement rate, cost reports are reviewed by AHCA to determine the actual Medicaid allowable costs incurred by the provider. The allowable costs are used to set a prospective rate for the provider. Payments to the provider in subsequent periods are then based upon the rate adjusted for inflation.

8. There are limits on costs and reimbursements.

   
   

   If a provider incurs an expense above the allowed level,

   it will not be reimbursed. In this regard the approved rate for the provider may not compensate the provider for expenses that were more than anticipated.

9. Medicaid is not intended to pay for luxury care.

   
   

   The Medicaid Program covers rates for providers that are efficiently operated. The providers are not compensated for luxury services, excessive charges, or operating costs that exceed what a prudent, efficiently operated facility would incur.

10. Once the reimbursement rate is set it continues until the next rate-setting period. If circumstances change such that the rate unfairly impacts the provider's ability to provide care, an interim rate adjustment may be requested. An increased interim rate could assist the provider until the regular rate is re-calculated.

11. Nursing homes are subject to inspections or surveys that are performed by AHCA to assure compliance with all applicable standards of operation. The standards are to assure that patients receive a quality of care at or above minimum levels. Pertinent to this case was a survey that found Petitioner deficient due to inadequate staffing levels. Inadequate staffing directly impacts the quality of care a facility is able to provide.

12. Given its rural location and the wages it was offering, the Petitioner could not offer competitive opportunities in order to recruit and retain qualified staff. For entry level employees the Petitioner found itself competing against even McDonald's restaurant for employees. As a result, when a survey found the facility deficient, the Petitioner sought financial relief through a request for an interim rate increase. The provider faced a financial loss if the deficiency were corrected without a corresponding increase in its rate as it would not be able to cover the additional costs within its reimbursement rate.

13. To correct the deficiencies Petitioner sought six additional Certified Nursing Assistants and wage enhancements. As a result, it sought an interim rate increase of $3.56 per day in patient care and $.12 per day in operating cost.

14. The interim reimbursement rate was approved by AHCA in 1996. The reimbursements to this provider then continued based upon the new rate. It then became the facility's objective to follow the plan of correction to assure that the deficiency was, in fact, alleviated.

15. In November of 1997, new rates were established for the Petitioner which became the settled rate. Based

    upon the cost reports filed with AHCA, the Petitioner's rate was settled with increases of $3.91 per day in patient care and $1.62 in the operating category.

16. The instant case resulted from an audit conducted at the facility. The audit was to verify that the expenses reported were correct and allowable. An audit should also confirm that the statistical information reported by the provider was correct.

17. The auditors used $3.56 instead of $3.91 as the starting point for the cost report figures. The Petitioner had relied on the higher number as the cost- settled figure for the audit. More important, the Petitioner relied on the same accounting methodology it had relied on for the interim rate request. The auditors, an independent accounting firm, did not accept the prior methodology.

18. Subsequent to the audit, the Respondent issued a letter to the Petitioner claiming it was owed

    $364,621.12 for Medicaid over-payments. The Respondent maintains it is entitled to recoup the over-payments as part of the future reimbursements to the provider. The Petitioner argues that such action will adversely impact the provider's ability to provide the quality of care expected by AHCA.

19. All of the costs reported by this Petitioner are allowable under the Medicaid guidelines. The crux of the issue in the case results from the settled interim rate not being accepted and carried forward by the independent auditors. Because some amounts exceeded the "budgeted" estimates, the auditors disallowed the additional expenses. The amounts, all within the category of wage or salary enhancements, were not deemed proper because they exceeded or altered the granted 50- cent-an-hour pay raise within the original request. Although allowable, the expenditures fell outside the parameters of the budget that support the interim rate increase.

20. Bonuses and wage enhancements paid by the Petitioner during the audited period were not one-time expenses but are on-going programs to encourage and support the retention of qualified employees. This was within the parameter of curing the deficiency that the interim rate sought to address. None of the expenses fell outside of operation and patient care costs.

21. It is anticipated that the reduction in Petitioner's rate will result in reduced staffing. Otherwise, the facility will not be a financially feasible operation.

22. The reimbursement rate for this provider is not higher than other rates for the other providers serving the geographical region served by the Petitioner.

23. When a provider goes through the cost settlement process, AHCA is authorized to and may seek additional information to clarify any form submitted by a Medicaid provider. In this case, the rate was cost- settled without additional information being sought by AHCA.

24. The allowable expenses incurred by the Petitioner support the reimbursement rate paid to this provider.

    CONCLUSIONS OF LAW

    
    

25. The Division of Administrative Hearings has jurisdiction over the parties to and the subject matter of these proceedings. Section 120.57(1), Florida Statutes.

26. In this case AHCA has interpreted the provisions of the Plan to conclude that the overpayment between the budgeted costs and the actual costs must be repaid by the provider. Under the facts of this case, such interpretation is erroneous. An agency's interpretation does not have to be the sole possible interpretation, the most logical interpretation, or even

    the most desirable interpretation. See State Board of Optometry v. Florida Society of Ophthalmology, 538 So. 2d 878 (Fla. 1st DCA 1988). It does, however, have to be within the boundaries of correctness. AHCA is charged with assuring that payments to providers are consistent with efficiency, economy, and quality of care. To enforce an interpretation of the Plan that defeats that purpose is clearly erroneous.

27. This provider sought relief from AHCA to correct deficiencies. All of the expenses incurred went to the areas identified in the request for interim rate increase, i.e. patient care and operations. The expenses related to wage and salary enhancements are on-going and are allowable under Medicaid.

28. To recoup the alleged overpayment some three years after the interim rate was cost settled will work a financial hardship for this provider. The quality of care at the facility will be adversely impacted if the staffing levels are reduced or if experienced personnel cannot be retained. The enforcement of the recoupment at this time would undermine the integrity of the settlement process and result in an adverse future rate and budgeting crisis for this provider. Not because the costs were not reasonable, allowable, or incurred but

because they were not incurred exactly as budgeted. Such an interpretation cannot stand. Medicaid eligible patients at this provider should not suffer a reduction of quality of care merely because an accountant did not correctly estimate a budget amount and include the correct amount within the interim rate request.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Administration enter a Final Order reinstating the provider's Medicaid rate to include the interim rate as previously settled and accepted by the Respondent. AHCA should affirm the interim rate established and committed by the cost report allowing $3.91 for patient care and

$1.62 for operating costs.

DONE AND ENTERED this 30th day of July, 2001, in Tallahassee, Leon County, Florida.

_____________________________

J. D. Parrish 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 30th day of July, 2001.

COPIES FURNISHED:

Theodore E. Mack, Esquire Powell and Mack

803 North Calhoun Street Tallahassee, Florida 32303

Steven A. Grigas, Esquire

Agency for Health Care Administration 2727 Mahan Drive

Building 3

Tallahassee, Florida 32308

Ruben J. King-Shaw, Jr., Director Agency for Health Care Administration 2727 Mahan Drive

Fort Knox Building, Suite 3116 Tallahassee, Florida 32308

Julie Gallagher, General Counsel 2727 Mahan Drive

Fort Knox Building Three, Suite 3431 Tallahassee, Florida 32308

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: 00-001491

Orders for Case No: 00-001491