STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

MAYHUGH DRUGS, INC., )

)

Petitioner, )

)

vs. ) Case No. 00-4065

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Respondent. )

)

RECOMMENDED ORDER

A formal hearing was conducted in this case on December 18, 2000, in Green Cove Springs, Florida, before the Division of Administrative Hearings, by its Administrative Law Judge, Suzanne F. Hood.

APPEARANCES

For Petitioner: Melvin H. Fletcher, R.Ph.

Corporate Representative Mayhugh Drugs, Inc.

200 South Orange Avenue

Green Cove Springs, Florida 32043

For Respondent: L. William Porter, II, Esquire

Agency for Health Care Administration 2727 Mahan Drive

Building 3, Suite 3431

Tallahassee, Florida 32308

STATEMENT OF THE ISSUES

The issues are whether Petitioner is liable to Respondent for Medicaid reimbursement overpayments, and if so, in what amount.

PRELIMINARY STATEMENT

By letter dated August 16, 2000, Respondent Agency for Health Care Administration (Respondent) advised Petitioner Mayhugh Drugs, Inc. (Petitioner) that it had been overpaid

$13,798.70 in connection with claims submitted to Medicaid during the December 25, 1998, through December 24, 1999, audit period. Petitioner requested a formal hearing to contest Respondent's decision relative to Medicaid reimbursement overpayments.

Respondent referred this case to the Division of Administrative Hearings on October 3, 2000. The parties filed a Joint Response to Initial Order on October 11, 2000.

A Notice of Hearing dated October 13, 2000, scheduled the hearing for December 18 through 19, 2000. The parties filed a Pre-hearing Stipulation on December 11, 2000.

At the hearing, Respondent presented the testimony of three witnesses and offered Respondent's Exhibits R2-R6, R10-R12, R14, R16-R17, R19, and R21, which were accepted into evidence.

Petitioner presented the testimony of its corporate representative, but offered no other exhibits.

Pursuant to the requests of the parties, the undersigned hereby officially recognizes applicable sections of the following: (a) Chapters 409 and 465, Florida Statutes (1997) (Supp. 1998), and (1999); (b) Rules 59G-4, 64B16-27, and 64B16-

28, Florida Administrative Code; and (c) excerpts from Prescribed Drug Services Coverage, Limitations, and Reimbursement Handbook, 1997, 1998, and 1999 editions.

A Transcript of the proceeding was filed on January 2, 2001. Petitioner and Respondent filed their Proposed Findings of Fact and Conclusions of Law on January 11, 2001, and January 12, 2001, respectively.

FINDINGS OF FACT

1. Respondent is the agency charged with administration of the Medicaid program in Florida pursuant to Section 409.907, Florida Statutes.

2. Petitioner provides services to Medicaid beneficiaries under provider No. 1000098-00 pursuant to a contract with Respondent. Under the provider agreement dated March 31, 1997, Petitioner agreed to comply with all local, state and federal laws, rules, regulations, licensure laws, Medicaid bulletins, manuals, handbooks, and statements of policy. The contract also sets forth Petitioner's responsibilities to keep and maintain in

   a systematic and orderly manner all medical and Medicaid-related records, and to make them available for state and federal audits for five years.

3. Heritage Information Systems, Inc. (Heritage) is and has been a pharmacy audit company since 1980. In 1999, Respondent contracted with Heritage to perform audits of pharmacies enrolled in the Florida Medicaid program.

4. Respondent and Heritage subsequently created a list of violations to be investigated during an audit. The list is based upon provisions in the Florida Statutes and federal Medicaid policies and regulations. The purpose of the list is to guide Heritage in performing its duty during an audit.

5. Heritage conducts its audits based on a standard methodology and protocol. During the course of an audit, Heritage examines a provider's records to determine whether a pharmacy is compliant with all rules and regulations that apply to the pharmacy.

6. Heritage uses an established set of neutral criteria to select pharmacies for participation in an audit. Using these criteria, Heritage selected Petitioner as a candidate for audit.

7. By letter dated January 17, 2000, Heritage advised Petitioner that it would be audited on January 26, 2000. The letter stated as follows in relevant part:

   The auditor(s) will require access to original hard-copy prescription records, third party signature logs, and, in some cases, pharmacy computer screens relating to a sample of prescription claims billed by your pharmacy between 12/25/1998 and 12/24/1999. Please note that the sample claim may actually be a refill of a prescription originally dispensed prior to the audit period. Because of this, we recommend that you also have the prior twelve months of prescription records available the day of the audit.

   
   

   For your reference, the audit terms are defined in your participating provider agreement and the prescribed drug services handbook. If you have any additional questions prior to the audit, please call Heritage Information Systems, Inc. . . .

   
   

8. Between December 25, 1998, and December 24, 1999, Petitioner submitted claims and received payments from the Medicaid program for 7,065 claims. Using an industry standard software application, Heritage selected a random sample of 101 of Petitioner's claims to be analyzed during the audit.

9. In performing the audit, Heritage utilized a methodology similar to that used by auditing agencies who examined Medicaid providers in previous years.

10. During the audit, Heritage identified four areas of noncompliance for Petitioner. First, Heritage requested Petitioner's staff to produce hard-copy prescription records for the 101 sampled claims. Hard-copy prescriptions include those ordered and signed by a physician on a handwritten form and the

    records created by the pharmacists immediately after receiving verbal authorization from a physician by telephone. In this case, Petitioner could not produce hard-copy prescriptions for five claims.

11. The second area of noncompliance involved unauthorized refills. In seven instances, Petitioner refilled prescriptions more times than the number authorized on the documented prescription. There were no notations on the hard-copy prescriptions or in the pharmacy computer to indicate that the doctors or someone from their office called to increase the number of authorized refills.

12. The third area of noncompliance involved one instance in which Petitioner claimed payment for a "days supply value" that was inconsistent with the quantity and directions on the prescription. The prescription at issue was for sixty tablets with directions for the patient to take the drug once a day, constituting a sixty-day supply of medicine. Petitioner filled this prescription as a thirty-day supply and claimed Medicaid payment accordingly. Respondent did not include this violation in the calculation of overpayment.

13. The fourth area of noncompliance involved a prescription that was refilled 30 days earlier than appropriate with respect to the quantity and directions for use that

    appeared on the prescription. This was the same prescription referenced above in paragraph twelve.

14. After completing the audit, Heritage completed a final audit report. Said report documents the following: (a) 7,310 claims submitted by Petitioner; (b) $350,639.95 paid by Respondent for all claims; (c) 101 claims in total random sample; (d) $3,839.33 paid by Respondent for claims in total random sample; (e) 13 discrepant claims in random sample;

    1. $778.09 paid by Respondent for discrepant claims;

       
       

    2. 13 documented sanctions in random sample; (h) $724.91 paid by Respondent for documented sanctions in random sample;

    (i) $52,466.25 as the total calculated overpayment; and

    
    

    (j) $13,798.70 as the amount of the overpayment based on a 95 percent one-sided lower confidence limit. The final audit report also contained a listing of the violations discovered during the audit.

15. The final audit report contained the following comments/notes in relevant part:

    Five prescriptions could not be found by auditors and could not be found by pharmacist Geiger and technician Daniels either. Many unauthorized refills were noticed. Pharmacy staff stated some information may be on the old computer system that was not functioning because of Y2K problems. Any authorization or documentation that was found on the computer system was accepted.

16. Under cover of a letter dated March 2, 2000, Petitioner furnished Respondent with statements relative to the discrepant claims/documented sanctions signed by several physicians. All of the statements included the following:

    (a) statements that the doctors had prescribed the medication(s) for their patients; (b) the patient name; (c) the prescription number; (d) a print-out of a computer screen; and (e) opinions that Petitioner would not fill or refill prescriptions without authority and approval. None of these physicians testified at the hearing.

17. By letter dated August 16, 2000, Respondent notified Petitioner of the determination of a Medicaid overpayment in the amount of $13,798.70. The greater weight of the evidence indicates that Petitioner received an overpayment in that amount or more.

    CONCLUSIONS OF LAW

    
    

18. The Division of Administrative Hearings has jurisdiction over this subject matter and the parties to this action pursuant to Sections 120.569 and 120.57(1), Florida Statutes.

19. Respondent has the burden of proving by a preponderance of the evidence that Petitioner has been overpaid for Medicaid services. South Medical Services, Inc. v. Agency

    for Health Care Administration, 653 So. 2d 440 (Fla. 3rd DCA

    
    

    1995).

    
    

20. The statutes, rules, regulations and Prescribed Drug Services, Coverage, Limitation, and Reimbursements Handbook (Handbook) in effect during the period for which the services were provided govern the outcome of the dispute. Toma v. Agency for Health Care Administration, Case No. 95-2419 (Div. Of Admin. Hearings, 1996). The 1998 Florida Statutes are cited here because there are no material changes in the applicable law between 1998 and the present.

21. Respondent is required to oversee the Florida Medicaid program and recover any overpayments of Medicaid funds. Section 409.913, Florida Statutes (Supp. 1998), states as follows in pertinent part:

    409.913 Oversight of the integrity of the Medicaid program.--The agency shall operate a program to oversee the activities of Florida Medicaid recipients, and providers and their representatives, to ensure that fraudulent and abusive behavior and neglect of recipients occur to the minimum extent possible, and to recover overpayments and impose sanctions as appropriate.

    (1) For the purposes of this section, the term:

    
    

    * * *

    
    

    (d) "Overpayment" includes any amount that is not authorized to be paid by the Medicaid program whether paid as a result of

    inaccurate or improper cost reporting, improper claiming, unacceptable practices, fraud, abuse, or mistake.

    
    

    * * *

    
    

    1. When presenting a claim for payment under the Medicaid program, a provider has an affirmative duty to supervise the provision of, and be responsible for, goods and services claimed to have been provided, to supervise and be responsible for preparation and submission of the claim, and to present a claim that is true and accurate and that is for goods and services that:

       
       

       * * *

       
       

       (b) Are Medicaid-covered goods or services that are medically necessary.

       
       

       * * *

       
       

       1. Are provided in accord with applicable provisions of all Medicaid rules, regulations, handbooks, and policies and in accordance with federal, state, and local law.

       2. Are documented by records made at the time the goods or services were provided, demonstrating the medical necessity for the goods or services rendered. Medicaid goods or services are excessive or not medically necessary unless both the medical basis and the specific need for them are fully and properly documented in the recipient's medical record.

    2. A Medicaid provider shall retain medical, professional, financial, and business records pertaining to services and goods furnished to a Medicaid recipient and billed to Medicaid for a period of 5 years after the date of furnishing such services or goods. . . .

    
    

    * * *

    (10) The agency may require repayment for inappropriate, medically unnecessary, or excessive goods or services from the person furnishing them, the person under whose supervision they were furnished, or the person causing them to be furnished.

    
    

    * * *

    
    

    (14) The agency may seek any remedy provided by law, including, but not limited to, the remedies provided in subsections (12) and (15) and s. 812.035, if:

    
    

    * * *

    
    

    1. The provider has failed to maintain medical records made at the time of service, or prior to service if prior authorization is required, demonstrating the necessity and appropriateness of the goods or services rendered;

    2. The provider is not in compliance with provisions of Medicaid provider publications that have been adopted by reference as rules in the Florida Administrative Code; with provisions of state or federal laws, rules, or regulations; with provisions of the provider agreement between the agency and the provider; or with certifications found on claim forms or on transmittal forms for electronically submitted claims that are submitted by the provider or authorized representative, as such provisions apply to the Medicaid program;

    
    

    * * *

    
    

    1. In making a determination of overpayment to a provider, the agency must use accepted and valid auditing, accounting, analytical, statistical, or peer-review methods, or combinations thereof. Appropriate statistical methods may include, but are not limited to, sampling and extension to the population, parametric and

       nonparametric statistics, tests of hypotheses, and other generally accepted statistical methods. . . .

    2. When making a determination that an overpayment has occurred, the agency shall prepare and issue an audit report to the provider showing the calculation of overpayments.

    3. The audit report, supported by agency work papers, showing an overpayment to a provider constitutes evidence of the overpayment. . . .

    
    

22. The Medicaid Provider Agreement signed by Petitioner in March 1997 specifically states as follows in relevant part:

    (3) Compliance. The provider agrees to comply with all local, state, and federal laws, rules, regulations, licensure laws, Medicaid bulletins, manuals, handbooks and Statements of Policy as they may be amended from time to time.

    
    

    * * *

    
    

    (5) Provider Responsibilities. The Medicaid provider shall:

    
    

    * * *

    
    

    (b) Keep and maintain in a systematic and orderly manner all medical and Medicaid related records as the Agency may require and as it determines necessary; make available for state and federal audits for five years, complete and accurate medical, business, and fiscal records that fully justify and disclose the extent of the goods and services rendered and billings made under the Medicaid [program]. The provider agrees that only records made at the time the goods and services were provided will be admissible in evidence in any proceeding relating to the Medicaid program.

23. Section 409.907, Florida Statutes (Supp. 1998), states as follows in relevant part:

    1. Each provider agreement shall require the provider to comply fully with all state and federal laws pertaining to the Medicaid program, as well as all federal, state, and local laws pertaining to licensure, if required, and the practice of any of the healing arts, and shall require the provider to provide services or goods of not less than the scope and quality it provides to the general public.

       
       

       * * *

       
       

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

       
       

       * * *

       
       

       1. Maintain in a systematic and orderly manner all medical and Medicaid-related records that the agency requires and determines are relevant to the services or goods being provided.

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

       
       

24. Section 465.015(2), Florida Statutes (Supp. 1998), states as follows in pertinent part:

    (2) It is unlawful for any person:

    
    

    * * *

    
    

    (c) To sell or dispense drugs as defined in

    s. 465.003(7) without first being furnished with a prescription.

25. Section 465.016(1), Florida Statutes (Supp. 1998), states as follows in relevant part:

    1. The following acts shall be grounds for disciplinary action set forth in this section:

       
       

       * * *

       
       

       1. Compounding, dispensing, or distributing a legend drug, including any controlled substance, other than in the course of the professional practice of pharmacy. For purposes of the paragraph, it shall be legally presumed that the compounding, dispensing, or distributing of legend drugs in the excessive or inappropriate quantities is not in the best interest of the patient and is not in the course of the professional practice of pharmacy.

          
          

26. Section 465.003(13), Florida Statutes (Supp. 1998), states as follows:

(13) "Prescription" includes any order for drugs or medicinal supplies written or transmitted by any means of communication by a duly licensed practitioner authorized by the laws of the state to prescribe such drugs or medicinal supplies and intended to be dispensed by a pharmacist. The term also includes an orally transmitted order by the lawfully designated agent of such practitioner. The term also includes an order written or transmitted by a practitioner licensed to practice in a jurisdiction other than this state, but only if the pharmacist called upon to dispense such order determines, in the exercise of her or his professional judgment, that the order is valid and necessary for the treatment of a chronic or recurrent illness. The term "prescription" also includes a pharmacist's order for a product selected

from the formulary created pursuant to s.

465.186. Prescriptions may be retained in written form or the pharmacist may cause it to be recorded in a data processing system, provided that such order can be produced in printed form upon lawful request.

27. Rules 64B16-27.103 and 64B16-27.810, Florida Administrative Code, provide as follows in relevant part:

64B16.27.103 Oral Prescriptions and Copies. Only a Florida Registered pharmacist or registered pharmacy intern acting under the direct personal supervision of a Florida registered pharmacist may, in the State of Florida, accept an oral prescription of any nature. Upon so accepting such oral prescription it must immediately be reduced to writing. . . .

* * *

64B16-27.810 Prospective Drug Use Review.

1. A pharmacist shall review the patient record and each new refill prescription presented for dispensing in order to promote therapeutic appropriateness by identifying:

   1. over-utilization or under utilization;

   2. therapeutic duplication;

   3. drug-disease contraindications;

   4. drug-drug interactions;

   5. incorrect drug dosage or duration of drug treatment;

   6. drug-allergy interactions;

   7. clinical abuse/misuse.

2. Upon recognizing any of the above, the pharmacist shall take appropriate steps to avoid or resolve the potential problems which shall, if necessary, include consultation with the prescriber.

1. Rule 64B16-28.140, Florida Administrative Code, states as follows in relevant part:

   1. Requirements for records maintained in a data processing system.

      
      

      * * *

      
      

      1. Original prescriptions, including prescriptions received as provided for in Section 64B16-28.130, F.A.C., Transmission of Prescription Orders, shall be reduced to writing if not received in written form.

         All original prescriptions shall be retained for a period of not less than two years from date of last filing. To the extent authorized by 21 C.F.R. Section 1304.4, a pharmacy may, in lieu of retaining the actual original prescriptions, use an electronic imaging record keeping system, provided such system is capable of capturing, storing, and reproducing the exact image of the prescription, including the reverse side of the prescription if necessary, and that such image be retained for a period of no less than two years from the date of last filing.

      2. Original prescriptions shall be maintained in a two or three file system as specified in 21 C.F.R. 1304.04(h).

      
      

      * * *

      
      

      (3) Records of dispensing.

      1. Each time a prescription drug order is filled or refilled, a record of such dispensing shall be entered into the data processing system.

      2. The data processing system shall have the capacity to produce a daily hard-copy printout of all original prescriptions dispensed and refilled. This hard copy printout shall contain the following information:

      1. Unique identification number of the prescription;

      2. Date of dispensing;

      3. Patient name;

      4. Prescribing practitioner's name;

      5. Name and strength of the drug product actually dispensed, if generic name, the brand name or manufacturer of drug dispensed;

      6. Quantity dispensed;

      7. Initials or an identification code of the dispensing pharmacist;

      8. If not immediately retrievable via CRT display, the following shall also be included on the hard-copy printout;

      1. Patient's address;

      2. Prescribing practitioner's address;

      3. Practitioner's DEA registration number, if the prescription drug order is for a controlled substance;

      4. Quantity prescribed, if different from the quantity dispensed;

      5. Date of issuance of the prescription drug order, if different from the date of dispensing; and

      6. Total number of refills dispensed to date for that prescription drug order.

      
      

      * * *

      
      

      (5) Authorization of additional refills. Practitioner authorization for additional refills of a prescription drug order shall be noted as follows:

      1. On the daily hard-copy printout; or

      2. Via the CRT display.

      
      

2. Respondent routinely amends Rule 59G-4.250, Florida Administrative Code, to incorporate by reference the most current version of the Handbook. The 1997, 1998, and 1999 versions of the Handbook require pharmacies to maintain prescription records on all services provided to a Medicaid recipient. The Handbook states as follows in relevant part:

   Records may be kept on paper, magnetic material, film, or other media. In order to qualify as a basis for reimbursement, the

   records must be signed and dated at the time of service, or otherwise attested to as appropriate to the media. . . . (July 1999, page 2-17; August 1998, page 2-14; November

   1997, page 2-13.)

   
   

   * * *

   
   

   Providers who are not in compliance with the Medicaid documentation and record retention policies described in this chapter may be subject to administrative sanctions and recoupment of Medicaid payments.

   
   

   Medicaid payment for services that lack required documentation or appropriate signatures will be recouped. (July,

   1999, page 2-20; August 1998, page 2-16;

   November 1997, page 2-15.)

   
   

   * * *

   
   

   The pharmacy must maintain a patient record for each recipient for whom new or refill prescriptions are dispensed. The record may be electronic or hard copy. The pharmacy's patient record system must provide for the immediate retrieval of the information necessary for the pharmacist to identify previously dispensed drugs when dispensing a new or refill prescription. (August

   1998, page 2-15; November 1997, page 2-14.)

   
   

   * * *

   
   

   Incomplete records are records that lack documentation that all requirements or conditions for service provision have been met. Medicaid may recoup payment for services or goods when the provider has incomplete records or cannot locate the records. (July 1999, 5-7; November 1997,

   page 5-7.)

   
   

   * * *

   Enter the estimated number of days that the prescription will last if it is consumed at the prescribed rate, based on the pharmacist's professional judgment and the prescription date.

   If the directions for use are "PRN," the pharmacist must still enter an estimated number of days the prescription will last based on reasonable judgment. (July 1999, page 6-24; November 1997, page 6-22.)

   
   

   * * *

   
   

   Medicaid reimburses for services that are determined medically necessary, [and] do not duplicate another provider's service. . . .

   (July 1999, page 9-2); November 1997, page

   9-2.)

   
   

   EOB Codes and Corrective Actions . . .

   Refill Too Early

   This edit occurred because the recipient has another prescription claim for the same drug dispensed by the same provider and the existing supply of the drug has not been exhausted. . . . (July 1999, page A-27; November 1997, Page A-22.)

   
   

   Prescribed Drug Services Coverage and Limitations Handbook, July 1999, August 1998, and November 1997.

3. In this case, Heritage correctly determined that Petitioner violated Medicaid's record-keeping requirements fourteen times in 101 claims. First, Petitioner did not have hard-copy prescriptions on file for five of its claims. Seeking written verification from physicians after an audit is complete, is insufficient to meet the requirement of a physician's hand- written prescription or a pharmacist's immediate documentation of a verbal order.

4. In seven instances, Petitioner refilled prescriptions more times than originally authorized without documenting the prescriber's additional authorizations. It is insufficient for a pharmacist to pull up original prescriptions that have been documented on a computer screen and change the number of refills originally authorized. Petitioner should have made more detailed notations on the computer regarding the additional refills.

5. In one instance, Petitioner filled a prescription in which the "days supply" value was not consistent with the quantity and directions of the original prescription. Respondent did not include this violation in calculating Petitioner's overpayment.

6. Finally, Petitioner filled one prescription sooner than appropriate with respect to quantity and directions for use on the original prescription. When prescriptions are refilled too early, patients receive medicine that is medically

unnecessary.

RECOMMENDATION

Based upon the findings of fact and conclusions of law, it

is

RECOMMENDED:

That Respondent enter a final order finding that Petitioner must timely pay Respondent $13,798.70 for Medicaid reimbursement overpayments from December 25, 1998, through December 24, 1999.

DONE AND ENTERED this 30th day of January, 2001, in

Tallahassee, Leon County, Florida.

SUZANNE F. HOOD

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 January, 2001.

COPIES FURNISHED:

Melvin H. Fletcher, R.Ph. Corporate Representative Mayhugh Drugs, Inc.

200 South Orange Avenue

Green Cove Springs, Florida 32043

L. William Porter, II, Esquire

Agency for Health Care Administration 2727 Mahan Drive

Building 3, Suite 3431

Tallahassee, Florida 32308

Sam Power, Agency Clerk

Agency for Health Care Administration 2727 Mahan Drive

Building 3, Suite 3431

Tallahassee, Florida 32308

Julie Gallagher, General Counsel Agency for Health Care Administration 2727 Mahan Drive

Building 3, Suite 3431

Tallahassee, Florida 32308

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

Building 3, Suite 3116

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: 00-004065

Orders for Case No: 00-004065