STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

EXCELLENCE MEDICAL LABORATORY, ) INC., )

)

Petitioner, )

)

vs. )

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Respondent. )

Case No. 02-1442

)

RECOMMENDED ORDER

This case came before Administrative Law Judge John G. Van Laningham for final hearing on July 30, 2002, in Miami, Florida.

APPEARANCES

For Petitioner: No appearance

For Respondent: Lori C. Desnick, Esquire

Agency for Health Care Administration 2727 Mahan Drive, Suite 3431

Fort Knox Building, III Tallahassee, Florida 32308

STATEMENT OF THE ISSUE

The issue in this case is whether Petitioner is entitled to renewal of its clinical laboratory license, where Respondent has alleged that Petitioner not only is incompetent but also failed timely to correct identified deficiencies.

PRELIMINARY STATEMENT

By letter dated October 24, 2001, Respondent Agency for Health Care Administration (the “Agency”) notified Petitioner Excellence Medical Laboratory, Inc. (“EMLI”) that the Agency intended not to renew EMLI’s Clinical Laboratory License. EMLI timely requested a hearing, and on April 10, 2002, the Agency forwarded the matter to the Division of Administrative Hearings (“DOAH”), where it was assigned to an Administrative Law Judge (“ALJ”) for further proceedings.

On May 8, 2002, after some preliminary delay due to the withdrawal of EMLI’s counsel, the ALJ issued a Notice of Hearing setting the final hearing for July 20, 2002, at 10:00 a.m. in Miami, Florida. A Motion for Continuance filed by the Agency on July 25, 2002, was denied.1

Through counsel, the Agency appeared for the final hearing at the appointed place and time. EMLI did not show up. After waiting at least 30 minutes, the ALJ offered the Agency a choice: (a) make an oral motion——which would be granted——to relinquish jurisdiction on the grounds that EMLI’s nonappearance constitutes a withdrawal of its request for hearing, resulting in the absence of disputed facts; or (b) present your case for a determination on the merits, complete with factual findings and legal conclusions. The Agency elected the latter course.

The Agency called two witnesses: Patricia L. James, an Agency employee; and Carman Morales, a former EMLI employee. Additionally, it introduced in evidence 9 exhibits, numbered 1 through 8 and 17. At the Agency’s request, the ALJ officially recognized various statutes and rules.

After the hearing, on August 5, 2002, the ALJ issued an Order of Post-Hearing Instructions that, among other things, informed the parties of their right to submit a proposed recommended order and the deadline for doing so. The copy of this order that was mailed to EMLI at its address of record was returned to DOAH as undeliverable.

The final hearing transcript was filed on September 11, 2002. The Agency timely submitted a proposed recommended order, which was considered. EMLI has not been heard from.

FINDINGS OF FACT

1. EMLI is a Florida-licensed clinical laboratory, holding License No. L800014574 (the “License”).

2. The License was scheduled to expire, by operation of law, on October 7, 2001. Accordingly, in early October 2001 EMLI applied for renewal of the License. The Agency received EMLI’s license renewal application on or about October 4, 2001.

3. By letter dated October 24, 2001, the Agency notified EMLI that it intended not to renew the License. As grounds for

   its decision to deny EMLI’s application for renewal, the Agency alleged:

   1. Failure [on EMLI’s part] to correct deficiencies within the timeframe required by the Agency[; and]

      
      

   2. Demonstration of Incompetence.

      
      

4. The Agency introduced into evidence two separate documents identically titled “Statement of Deficiencies and Plan of Correction.” One sets forth findings from an investigation of EMLI conducted by the Agency on May 10, 2001, and the other details the findings of an August 27, 2001, follow-up investigation; both also contain handwritten statements, purportedly inscribed by EMLI, which appear to be plans of correction for remedying the identified problems.2 For ease of reference, these will be referred to, respectively, as the “May Survey” and the “August Survey”——and collectively as the “Surveys.”

5. According to the Surveys, the surveyor who investigated EMLI found that the licensee had committed numerous rule violations, called “deficiencies.” Neither the surveyor nor any other witness having personal knowledge of these alleged deficiencies testified at the final hearing, however.

6. Although the Surveys were received in evidence, they are hearsay as proof of the alleged deficiencies. Further, as will be discussed in the Conclusions of Law below, the Surveys

   are not admissible under any recognized exception to the hearsay rule. Therefore, the undersigned could use the Surveys only to explain or supplement other admissible evidence. See Section 120.57(1)(c), Florida Statutes.

7. As it happens, however, there is, in the instant record, no credible, competent evidence of the alleged deficiencies.3 Consequently, there is no evidence of the deficiencies that the Surveys could fairly be said to supplement or explain.4

8. Further, there is, in the instant record, no credible, competent evidence that the Agency ever notified EMLI that the plan of correction it (apparently) submitted after the

   August 27, 2001, inspection was unacceptable. More important, there is no credible, competent evidence that EMLI failed to correct the alleged deficiencies identified in the August Survey (which included the alleged deficiencies identified in the May Survey that the surveyor concluded had not been corrected).

   Ultimate Factual Determinations

   
   

9. The Agency failed to present clear and convincing proof of the reasons for which it intended to deny EMLI’s license renewal application. No finding is made, however, and none should be inferred from the foregoing, either that EMLI timely corrected identified deficiencies or that EMLI is a competent clinical laboratory.5

   CONCLUSIONS OF LAW

   
   

10. DOAH has personal and subject matter jurisdiction in this proceeding pursuant to Sections 120.569 and 120.57(1), Florida, and the parties have standing.

11. To the extent paragraphs 6 and 7, including endnotes 3 and 4, constitute conclusions of law, they are incorporated here by this reference and adopted as such.

12. The Agency is responsible for licensing and regulating clinical laboratories, such as EMLI, that operate in Florida. See, e.g., Section 483.091, Florida Statutes. Among the Agency’s duties is inspecting, or causing the inspection of, licensed clinical laboratories. See Section 483.061, Florida Statutes.

13. The Agency agreed at final hearing that it had the burden of proving EMLI’s lack of entitlement to renewal of the License, and that the evidence needed to be clear and convincing. See Coke v. Department of Children and Family Services, 704 So. 2d 726, 726 (Fla. 5th DCA 1998).6 In its Proposed Recommended Order, however, the Agency has crawfished, arguing that a preponderance of evidence is sufficient to carry its burden. The undersigned concludes that the Agency was required to prove the stated grounds for nonrenewal by clear and convincing evidence. See Dubin v. Department of Business Regulation, 262 So. 2d 273, 274 (Fla. 1st DCA 1972)(refusal to

    renew a license cannot be used as a substitute for revocation); City of Tampa v. Islands Four, Inc., 364 So. 2d 738, 741 n.5 (Fla. 2d DCA 1978)(refusal to renew license entails same due process protections as revocation because licensee has property right in renewal).

14. Regarding the standard of proof, in Slomowitz v.

    
    

    Walker, 429 So. 2d 797, 800 (Fla. 4th DCA 1983), the Court of Appeal, Fourth District, canvassed the cases to develop a “workable definition of clear and convincing evidence” and found that of necessity such a definition would need to contain “both qualitative and quantitative standards.” The court held that

    
    

    clear and convincing evidence requires that the evidence must be found to be credible; the facts to which the witnesses testify must be distinctly remembered; the testimony must be precise and explicit and the witnesses must be lacking confusion as to the facts in issue. The evidence must be of such weight that it produces in the mind of the trier of fact a firm belief or conviction, without hesitancy, as to the truth of the allegations sought to be established.

    
    

    Id. The Florida Supreme Court later adopted the fourth district's description of the clear and convincing evidence standard of proof. Inquiry Concerning a Judge No. 93-62, 645 So. 2d 398, 404 (Fla. 1994). The First District Court of Appeal also has followed the Slomowitz test, adding the interpretive comment that “[a]lthough this standard of proof may be met where

    the evidence is in conflict, . . . it seems to preclude evidence that is ambiguous.” Westinghouse Electric Corp., Inc. v. Shuler

    Brothers, Inc., 590 So. 2d 986, 988 (Fla. 1st DCA 1991), rev. denied, 599 So. 2d 1279 (1992)(citation omitted).

15. Because no witness having personal knowledge of EMLI’s alleged deficiencies was called to testify, the Agency, to meet its burden, needed the Surveys to be received as substantive evidence. However, as previously mentioned, the Surveys are hearsay when offered (as, of necessity, they were) to prove the truth of matters asserted in them——here, that EMLI committed numerous deficiencies.7 The Agency attempted to admit the Surveys under either the public reports exception or the business records exception to the hearsay rule. Neither applies.

16. Public Reports. Section 90.803(8), Florida Statutes, provides that, in certain circumstances, the out-of-court statements of public agencies and offices can be admitted into evidence over the hearsay objection. It reads:

    PUBLIC RECORDS AND REPORTS.–Records,

    reports, statements reduced to writing, or data compilations, in any form, of public offices or agencies, setting forth the activities of the office or agency, or matters observed pursuant to duty imposed by law as to matters which there was a duty to report, excluding in criminal cases matters observed by a police officer or other law enforcement personnel, unless the sources of information or other circumstances show

    their lack of trustworthiness. The criminal case exclusion shall not apply to an affidavit otherwise admissible under s.

    316.1934 or s. 327.354.

    
    

17. At first glance, this exception seems applicable, given the Agency’s duty to inspect licensees. See Section 483.061, Florida Statutes; Desmond v. Medic Ayers Nursing Home,

    492 So. 2d 427, 430 & n.3 (Fla. 1st DCA 1986). But closer inspection reveals a different picture. As the Florida Supreme Court has instructed:

    Under [Section 90.803(8), Florida Statutes], two types of public records and reports are admissible into evidence: (1) records setting forth “the activities of the office or agency”; and (2) records of a public office or agency which set forth “matters observed pursuant to duty imposed by law as to which matters there was a duty to report.” Ehrhardt, supra, § 803.8. In adopting this exception, Florida specifically excluded a third type of record that is admissible under the corresponding federal rule: that is, “a record setting forth factual findings resulting from an investigation made pursuant to authority granted by law.” Id. Records that rely on information supplied by outside sources or that contain evaluations or statements of opinion by a public official are inadmissible under this provision. Id. “In Florida, rather than offering this type of record, a witness must be called who has personal knowledge of the facts.” Id.

    
    

    Lee v. Department of Health and Rehabilitative Services, 698 So. 2d 1194, 1200-01 (Fla. 1997).

18. The Surveys are textbook examples of the “third type” of report described above. Reading the Surveys leads to the inescapable conclusion that the surveyor evaluated and relied upon data beyond that which she acquired from personal observation. Indeed, many of the surveyor’s self-described “findings” were based largely on information supplied by outside sources such as EMLI’s records (which are not before the undersigned) and EMLI’s personnel (none of whom was specifically named or quoted).8 Moreover, based on information acquired from a variety of sources in addition to her own senses, the surveyor determined——and reported——that deficiencies existed; these ultimate determinations are not facts that one observes but the public official’s evaluations or statements of opinion.

19. Following Lee, it is concluded that the Surveys were not admissible under the public reports exception. Accordingly to prove the alleged deficiencies at final hearing, the Agency needed to call the surveyor or other witnesses with personal knowledge of the facts, rather than offering the Surveys.

20. Business Records. Section 90.803(6), Florida Statutes, provides that the following are excepted from the hearsay rule:

    (6) RECORDS OF REGULARLY CONDUCTED BUSINESS ACTIVITY.–

    
    

    1. A memorandum, report, record, or data compilation, in any form, of acts, events,

       conditions, opinion, or diagnosis, made at or near the time by, or from information transmitted by, a person with knowledge, if kept in the course of a regularly conducted business activity and if it was the regular practice of that business activity to make such memorandum, report, record, or data compilation, all as shown by the testimony of the custodian or other qualified witness, unless the sources of information or other circumstances show lack of trustworthiness. The term “business” as used in this paragraph includes a business, institution, association, profession, occupation, and calling of every kind, whether or not conducted for profit.

       
       

    2. No evidence in the form of an opinion or diagnosis is admissible under paragraph

    (a) unless such opinion or diagnosis would be admissible under ss. 90.701-90.705 if the person whose opinion is recorded were to testify to the opinion directly.

    
    

    Thus, to admit a business record, the proponent must show that the document was:

    1. made at or near the time of the event recorded,

       
       

    2. by or from information transmitted by a person with knowledge, and

       
       

    3. kept in the course of a regularly conducted business activity and

       
       

    4. that it was the regular practice of that business to make such a record.

    
    

    Quinn v. State, 662 So. 2d 947, 953 (Fla. 5th DCA 1995)(footnote omitted).

21. To lay the proper predicate for invoking this exception,

    it is necessary to call a witness who can show that each of the foundational requirements set out in the statute is present. . . . It is not necessary to call the person who actually prepared the document. The records custodian or any qualified witness who has the necessary knowledge to testify as to how the record was made can lay the necessary foundation.

    . . . If the offering party does not lay the necessary foundation, the evidence is not admissible under [the business records exception].

    
    

    Forester v. Norman Roger Jewell & Brooks Intern., Inc., 610 So. 2d 1369, 1373 (Fla. 1st DCA 1992)(citations omitted).

22. It is doubtful that Ms. James——the only Agency employee who testified——was a qualified witness for purposes of laying the foundation needed to admit the Surveys under the business records exception. But even if Ms. James were qualified, she did not lift the Surveys over the hurdle of the second element (as numbered by the court in Quinn, supra). On that particular requirement, the Quinn court wrote:

    It is well established that although the person who made the report need not have personal knowledge of the matter recorded, the information contained in the report “must be supplied by persons with knowledge who are acting within the course of the regularly conducted business activity. If the initial supplier of information is not acting within the course of the business, the information in the record cannot qualify for admission. Statements from persons who are not acting within the regular course of the business may be admissible if they fall within another exception.” Charles

    Ehrhardt, Florida Evidence Vol I (1994) at 625-6.

    
    

    662 So. 2d at 953-54.

    
    

23. The Surveys present information——and findings based upon information——obtained not from persons with knowledge who were acting within the course of a regularly conducted business activity, as required for the business records exception, but from statements that are themselves merely inadmissible hearsay. For example, the surveyor reviewed and relied upon EMLI’s records. However, the contents of those records——none of which was offered at hearing——were not, when read by the surveyor, the statements of persons there and then communicating with the surveyor as part of a regularly conducted business activity. Indeed, there is not even any evidence at hand upon which to determine whether the records reviewed by the surveyor would have been admissible as EMLI’s business records. Similarly, the verbal statements that the surveyor elicited from EMLI’s personnel were not likely the statements of persons acting in the ordinary course of business——and, in any event, there is no evidence that they were, because there was no testimony from a qualified witness concerning EMLI’s regular business practices in this regard. Finally, since the interviewees were neither quoted nor named, there is no way to determine whether another hearsay exception, e.g. Section 90.803(18) regarding admissions,

    might have applied. Thus, to admit the Surveys would bootstrap the underlying hearsay (EMLI’s records and the out-of-court statements of its unnamed employees) into admissible evidence.

24. In sum, it is concluded that the Surveys are not admissible under the business records exception.

25. Finally, although it is clear that the Agency cannot prevail without the Surveys, it is determined, alternatively, that the Agency would fail even with them. The reasons are, first, that the Surveys, being more in the nature of a charging document like an Administrative Complaint, do not, standing alone, produce in this trier-of-fact’s mind a firm belief or conviction, without hesitancy, that the findings therein (which are more akin to allegations than proof) are clearly true; in other words, without the surveyor’s testimony, the Surveys simply do not carry sufficient evidential weight to satisfy the clear and convincing standard of proof. Second, and more important, the absence of evidence showing that EMLI failed to cure the alleged deficiencies (a fact of which the Surveys are not probative) precludes the undersigned from finding that this fundamental allegation (which is essential to the Agency’s case) was proved under any standard of proof, much less the strict one operating here.

CONCLUSION

Because, as set forth in the foregoing Findings of Fact and Conclusions of Law, the Agency has failed to prove, clearly and convincingly, that EMLI is not entitled to licensure, it is RECOMMENDED, as the law requires, that the Agency enter a final order renewing EMLI’s license.

DONE AND ENTERED this 29th day of October, 2002, in Tallahassee, Leon County, Florida.

JOHN G. VAN LANINGHAM

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 29th day of October, 2002.

ENDNOTES

1/ As one of several grounds for a continuance, the Agency asserted that its “primary witness” was on vacation and hence unavailable to testify at the final hearing. In its motion, the Agency did not explain the significance of this witness’s testimony. The undersigned later learned, through information presented at hearing, that this particular witness was the surveyor who has personal knowledge of the facts upon which the Agency intended to base its denial of EMLI’s license renewal application. Her absence was devastating to the Agency’s case.

The unavailability of a crucial witness would be good cause for a continuance in any number of circumstances. However, when, as here, a final hearing has been scheduled on 12 weeks’

notice, it simply will not do for a party to seek a continuance a few days before the hearing on the ground that a witness who is the party’s own employee is on vacation. Last-minute continuances not only disrupt the schedules of parties, lawyers, and witnesses who have prudently made plans to appear at the final hearing, but also they can play havoc with the ALJ’s docket, the efficient and cost-effective management of which demands that cases scheduled to be tried in the same or a nearby location be set for final hearing on consecutive days, so that multiple matters can be heard during a single out-of-town trip.

Finally, as pointed out in the text that follows, after it became clear that EMLI was not going to appear for the final hearing, the Agency was offered something better than a continuance: the opportunity to enter a final order without a hearing. It rejected that option.

2/ While all indications within the documents suggest that the handwritten plans of correction were, in fact, the work of EMLI, no witness having personal knowledge established this fact or otherwise authenticated the correction plans. Further, the correction plan incorporated in the August Survey repeatedly references an attachment that was not included with the Agency’s exhibit; this particular plan, therefore, is incomplete.

3/ Although Ms. James, the Agency’s first witness, had reviewed the Surveys and thus had personal knowledge of their contents, she possessed no personal knowledge that EMLI had committed the alleged deficiencies. Ms. Morales, the Agency’s other witness, had been fired from her job with EMLI in February 2001; she therefore had no personal knowledge of the alleged deficiencies, all of which were alleged to have occurred months later, in May and August of that year.

4/ The Agency urges that the Surveys be received, pursuant to the statutory residuum rule, as supplemental or explanatory information, citing L.G.H. v. Department of Children and Family Services, 735 So. 2d 548 (Fla. 1st DCA 1999), and Orasan v.

Agency for Health Care Administration, Board of Medicine, 668 So. 2d 1062 (Fla. 1st DCA 1996). The problem with the Agency’s position is that there is simply nothing in the record for the Surveys to explain or supplement. Section 120.57(1)(c), Florida Statutes, does not allow otherwise inadmissible hearsay to be relied upon as the sole basis for extensive findings of fact simply because a bit of arguably or remotely related non-hearsay evidence (establishing, for example, general background facts)

was introduced. The terms “explain” and “supplement” should not be construed so broadly that a tiny tail of testimony (such as Ms. Morales’s largely, if not entirely, irrelevant testimony) is allowed to wag a big hearsay dog like the Surveys.

5/ The Agency’s failure clearly and convincingly to prove the negatives it needed to establish as grounds for nonrenewal of EMLI’s License is not, of course, tantamount to evidence of the corresponding positive propositions——for which, here, there was no evidence. See Department of Health, Board of Massage Therapy v. Keys, 2001 WL 1018338, *7 n.2, DOAH Case No. 01-0322PL

(Recommended Order Sept. 4, 2001), adopted in toto, DOH Case No. 98-837 (Final Order Nov. 14, 2001).

6/ The Coke court articulated the correct standard of proof for a license nonrenewal case; unfortunately for the licensee, however, the standard of proof was not applied correctly. In that case, a proceeding to determine whether a family day care license should be renewed, the ALJ had found that the evidence was insufficient to establish, clearly and convincingly, that a child’s injury had occurred while the child was in the licensee’s care. Thereafter, the agency improperly had substituted its judgment for the ALJ’s on the weight of the evidence——which is fundamentally a factual determination——and ruled against the licensee in its final order. Ratifying the agency’s usurpation of the trier’s near-exclusive authority to determine the relative persuasiveness of the evidence adduced, the appellate court affirmed on the dubious ground that the licensee had failed to prove that the injury had not happened while the child was under her supervision. Id. at 727. This, of course, improperly put the burden on the licensee to disprove her culpability, subverting the purpose of the clear and convincing standard, which is to reduce the margin for error in favor of the party whose protected interest is at stake. The Coke case, in sum, was wrongly decided and is cited here solely for its correct statement of the burden of proof.

7/ The Agency contends that the Surveys can be used as proper proof because they were received without objection at the final hearing. See Tri-State Systems, Inc. v. Department of Transportation, 500 So. 2d 212, 215 (Fla. 1st DCA 1986), rev. denied, 506 So. 2d 1041 (1986). This is a compelling argument—— when the party against whom the hearsay was offered was present at the final hearing. When, however, that party fails to appear and the agency elects to proceed with an evidentiary hearing, as here, the First DCA requires that hearsay be excluded unless it

is admissible under a recognized exception to the hearsay rule or as secondary evidence under Section 120.57(1)(c), Florida Statutes. Scott v. Department of Professional Regulation, 603 So. 2d 519 (Fla. 1st DCA 1992).

8/ Additionally, some findings followed from the surveyor’s express determination that there was “no evidence” showing EMLI’s compliance with one rule or the other. To receive such findings as evidence of EMLI’s noncompliance effectively would flip the burden of proof.

COPIES FURNISHED:

Excellence Medical Laboratory, Inc. 8232 Northwest 103 Street

Hialeah Gardens, Florida 33016

Lori C. Desnick, Esquire

Agency for Health Care Administration 2727 Mahan Drive, Suite 3431

Fort Knox Building, III Tallahassee, Florida 32308

Lealand McCharen, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive

Fort Knox Building Three, Suite 3431 Tallahassee, Florida 32308

Valda Clark Christian, General Counsel Agency for Health Care Administration 2727 Mahan Drive

Fort Knox Building Three, Suite 3431 Tallahassee, Florida 32308

Rhonda M. Medows, M.D., Secretary Agency for Health Care Administration 2727 Mahan Drive

Fort Knox Building Three, 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: 02-001442

Orders for Case No: 02-001442