STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
COLONIAL CUT-RATE DRUGS, INC., )
)
Petitioner, )
)
vs. ) Case No. 03-1547MPI
)
AGENCY FOR HEALTH CARE )
ADMINISTRATION, )
)
Respondent. )
)
RECOMMENDED ORDER
Pursuant to notice, a hearing was held in this case pursuant to Sections 120.569 and 120.57(1), Florida Statutes, on January 18 and 19, 2005, in Tallahassee, Florida, before
Stuart M. Lerner, a duly-designated Administrative Law Judge of the Division of Administrative Hearings.
APPEARANCES
For Petitioner: William M. Furlow, Esquire
Katz, Kutter, Alderman & Bryant, P.A.
106 East College Avenue, Suite 1200 Tallahassee, Florida 32301
For Respondent: Eric H. Miller, Esquire
Agency for Health Care Administration Fort Knox Building III, Suite 3431 2727 Mahan Drive
Tallahassee, Florida 32308-5403 STATEMENT OF THE ISSUES
Whether Medicaid overpayments were made to Petitioner and, if so, what is the total amount of those overpayments.
Whether Petitioner should be directed to submit to a "comprehensive follow-up review in six months."
PRELIMINARY STATEMENT
Petitioner is a provider of pharmacy services to eligible Medicaid recipients in Florida. By letter dated March 19, 2003 (Final Agency Audit Report), the Agency for Health Care Administration (AHCA) advised Petitioner that, following a "review of [Petitioner's] paid Medicaid claims for dates of service during the period from January 1, 1999, through
October 20, 2000," it had been determined that Petitioner "was overpaid $137,431.56 for services that in whole or in part are not covered by Medicaid."
On March 31, 2003, Petitioner filed with AHCA a Petition for Formal Administrative Hearing contesting this overpayment determination. The matter was referred to the Division of Administrative Hearings (Division) on April 30, 2003, for the assignment of a Division Administrative Law Judge to conduct the hearing Petitioner had requested. The hearing was originally scheduled for July 11, 2003, but was continued and rescheduled for October 15 through 17, 2003.
On July 11, 2003, Chapter 2003-277, Laws of Florida, which created Section 465.188, Florida Statutes, dealing with "Medicaid audits of pharmacies," was approved by the Governor
and filed in the office of the Secretary of State. It provided as follows:
Section 1. Medicaid audits of pharmacies.
Notwithstanding any other law, when an audit of the Medicaid-related records of a pharmacy licensed under chapter 465, Florida Statutes, is conducted, such audit must be conducted as provided in this section.
The agency conducting the audit must give the pharmacist at least 1 week's prior notice of the audit.
An audit must be conducted by a pharmacist licensed in this state.
Any clerical or recordkeeping error, such as a typographical error, scrivener's error, or computer error regarding a document or record required under the Medicaid program does not constitute a willful violation and is not subject to criminal penalties without proof of intent to commit fraud.
A pharmacist may use the physician's record or other order for drugs or medicinal supplies written or transmitted by any means of communication for purposes of validating the pharmacy record with respect to orders or refills of a legend or narcotic drug.
A finding of overpayment or underpayment must be based on the actual overpayment or underpayment and may not be a projection based on the number of patients served having a similar diagnosis or on the number of similar orders or refills for similar drugs.
Each pharmacy shall be audited under the same standards and parameters.
A pharmacist must be allowed at least
10 days in which to produce documentation to address any discrepancy found during an audit.
The period covered by an audit may not exceed 1 calendar year.
An audit may not be scheduled during the first 5 days of any month due to the high volume of prescriptions filled during that time.
The audit report must be delivered to the pharmacist within 90 days after conclusion of the audit. A final audit report shall be delivered to the pharmacist within 6 months after receipt of the preliminary audit report or final appeal, as provided for in subsection (2), whichever is later.
The Agency for Health Care Administration shall establish a process under which a pharmacist may obtain preliminary review of an audit report and may appeal an unfavorable audit report without the necessity of obtaining legal counsel. The preliminary review and appeal may be conducted by an ad hoc peer-review panel appointed by the agency, which consists of pharmacists who maintain an active practice. If, following the preliminary review, the agency or review panel finds that an unfavorable audit report is unsubstantiated, the agency shall dismiss the audit report without the necessity of any further proceedings.
This section does not apply to investigative audits conducted by the Medicaid Fraud Control Unit of the Department of Legal Affairs.
Section 2. This act shall take effect upon becoming a law.
On August 6, 2003, Petitioner filed with the Division a Motion to Amend Petition for Formal Administrative Hearing, which read as follows:
Petitioner, a provider of Medicaid services in Florida, filed its Petition with Respondent, Agency for Health Care Administration ("AHCA"), which regulates the Medicaid program, on March 31, 2003, requesting a formal administrative hearing to determine if, and if so by how much, Petitioner had been "overpaid" by the Medicaid program. The Petition[] was filed in response to AHCA's Notice of Intended Agency [A]ction to recoup certain alleged overpayments made to Petitioner under the Medicaid Program.
On July 11, 2003, after the Petition was filed, the Governor of the State of Florida signed into law a bill that sets forth requirements for AHCA audits of Medicaid providers, such as Petitioner. That bill is Chapter Law 2003-277.
Although Petitioner was aware of the pending legislation when it filed its Petition, it would have been premature to include in its Petition allegations that the audit was not done in accordance with requirements, which were not yet law.
Now that the new law has been enacted, Petitioner alleges that the intended agency action, on its face, is not in compliance with the requirements of law.
Accordingly, Petitioner requests that it be allowed to amend its Petition to add the allegation that AHCA's intended agency action is not in compliance with the law, as it exists now.
The proposed Amended Petition for Formal Administrative Hearing is attached hereto.
On that same date (August 6, 2003), Petitioner filed with the Division a Motion in Limine (accompanied by a Memorandum of Law), which read as follows:
Petitioner, Colonial Cut-Rate Drugs, Inc., moves to exclude from the administrative hearing as irrelevant and immaterial, any testimony or evidence that is inconsistent with Chapter 2003-2777. Chapter 2003-277 mandates what statistical methodology and documents are relevant in making Medicaid pharmacy overpayment calculations. In support of this Motion, the Petitioner states:
CHAPTER LAW 2003-277, EFFECTIVE JULY 11, 2003, GOVERNS HOW AHCA MUST DETERMINE WHETHER MEDICAID OVERPAID A PHARMACY WHEN REIMBURSING THE PHARMACY FOR DISPENSED MEDICATION. AHCA'S FINAL DECISION REGARDING AN OVERPAYMENT DETERMINATION MUST COMPLY WITH THE MANDATES OF THAT LAW.
AHCA PROPOSES TO USE STATISTICAL METHODOLOGY AND DOCUMENTS THAT DO NOT COMPLY WITH THE MANDATES OF CHAPTER LAW 2003-2777. THAT TESTIMONY AND EVIDENCE IS IRRELEVANT AND IMMATERIAL TO THE INSTANT PROCEEDING AND MUST BE EXCLUDED UNDER THE MANDATES OF CHAPTER 2003-277.
Chapter Law 2003-277 (the "Act") governing Medicaid audits of pharmacies and overpayments determination, took effect on July 11, 2003.
The Act mandates the relevant and material statistical methodology and documents the Agency for Health Care Administration ("AHCA") must use to determine whether Medicaid overpaid a pharmacy in reimbursing the pharmacy for prescriptions dispensed to Medicaid patients.
The Act addresses what evidence a pharmacist may use to validate pharmacy records.
Through the Act, the legislature has clarified what means and methods are reasonable and appropriate in determining whether Medicaid overpaid a pharmacy and AHCA must comply with the Act in making its final decision of overpayment.
This administrative protest challenges on numerous grounds the statistical methodology and documents, i.e., the "means and methods," AHCA proposes to use in determining, as final agency action, whether Petitioner was overpaid by Medicaid. These challenges are, in large part, directly addressed by the Act.
The legislature has the authority to mandate the means and methods AHCA must use in making Medicaid pharmacy overpayment determinations. AHCA has not yet made a final determination of overpayment in this case. In making that determination, AHCA must adhere to the law as it exists when its final decision is made.
Florida law requires that the overpayment determination in this case be made pursuant to the Act's mandates. The fact that AHCA has made a preliminary proposed determination as to overpayment is irrelevant. Statutory mandates regarding the means and methods for how an agency makes decisions apply when the final decision is made, not when the agency initiated the decision-making process.
AHCA intends to introduce documents and rely on statistical methodology that does not comply with the Act's mandate to support its proposed overpayment determination. Any evidence inconsistent with the Act's mandate is irrelevant and immaterial to this action and must be excluded. It would be a waste
of this court's time and resources to require Petitioner to present expert statistical testimony regarding methodology the Legislature has now determined to be improper.
Counsel for [P]etitioner has conferred with counsel for AHCA and states that AHCA's counsel objects to the relief sought in this motion.
WHEREFORE, Petitioner respectfully moves for the entry of an order excluding from the administrative hearing, as irrelevant and immaterial, any testimony or evidence that extrapolates or projects the amount of overpayment in a manner inconsistent with the mandates of the Act.
On August 11, 2003, Petitioner filed with the Division a request that "oral argument [be heard] on all Motions outstanding (Motion in Limine and Motion to Amend) filed in the above-styled case."
On August 13, 2003, AHCA filed with the Division an Objection to Petitioner's Motion to Amend Petition and Objection to Oral Argument and an Objection to Petitioner's Motion in Limine, Request for Official Notice, and Objection to Oral Argument.
In its Objection to Petitioner's Motion to Amend Petition and Objection to Oral Argument, AHCA argued that "[t]he requested amendments to the petition [we]re immaterial because Petitioner argue[d] for an impermissible retroactive application of the statutory amendment," which, according to AHCA, "directly
affect[ed] substantive rights because it conflict[ed] with and supercede[d] the rights, obligations, and duties identified in several provisions within the Agency's Medicaid provider handbooks [that were] themselves incorporated within Florida Administrative Code."
In its Objection to Petitioner's Motion in Limine, Request for Official Notice, and Objection to Oral Argument, AHCA asked the undersigned to "take official notice" of certain attached "exhibits"; deny Petitioner's request for oral argument; and enter an order denying Petitioner's Motion in Limine. AHCA contended that Petitioner's Motion in Limine should be denied because "any other result w[ould] expose [AHCA] to conflicting rulings on identical legal issues"; because the motion was being "used for an improper purpose," to wit: "to adjudicate substantive legal issues"; and because the motion was "nothing more than an argument for the impermissible retroactive application of the statutory amendment."
On August 15, 2003, Petitioner filed with the Division a Motion to Confirm Applicability of New Law (accompanied by a Memorandum of Law), requesting that the undersigned enter "an order confirming that the Act's [Chapter 2003-277, Laws of Florida's] mandates apply to this case and that, accordingly,
a finding of an overpayment or underpayment must be based on the actual overpayment or underpayment and may not be a
projection based on the number of patients served having a similar diagnosis or on the number of similar orders or refills for similar drugs; (2) the audit period cannot be greater than one year; and (3) the pharmacy may use physician[s'] records or other written orders for purposes of validating claims." Simultaneously therewith, Petitioner filed a Request for Oral Argument on its Motion to Confirm Applicability of New Law.
Oral argument was held, by telephone conference call, on August 19, 2003, to give the parties an opportunity to elaborate on their respective positions regarding the issues raised by the motions pending before the undersigned. The undersigned announced during the telephone conference call that, as requested by AHCA, he would take official recognition of the documents attached to AHCA's Objection to Petitioner's Motion in Limine, Request for Official Notice, and Objection to Oral Argument.
On August 22, 2003, AHCA filed with the Division an Objection to Petitioner's Motion to Confirm Applicability of New Law, arguing therein that the motion "must be denied as improperly seeking an advisory opinion on a binding conclusion of law which cannot be granted by the Division of Administrative Hearings."
On August 25, 2003, the undersigned issued an Order on Pending Motions which contained the following rulings:
Petitioner's Motion to Amend Petition is granted.
The applicability of the procedural requirements of Chapter 2003-277, Laws of Florida, to the instant case is "confirmed."
The undersigned will take these procedural requirements into consideration, where appropriate, in ruling on objections to the admissibility of evidence offered at the final hearing in this case.
The undersigned will not rule on the admissibility of any particular piece of evidence before such evidence is formally offered into evidence at the final hearing in this case.
On September 10, 2003, after learning that AHCA intended to seek appellate review of the undersigned's August 25, 2003, Order on Pending Motions, Petitioner filed a motion requesting that this case be held in abeyance pending the outcome of AHCA's review efforts. On September 11, 2003, the undersigned issued an Order continuing the hearing scheduled to commence on October 15, 2003, and placing the matter in abeyance, as Petitioner had requested.
On October 28, 2004, AHCA, on behalf of both parties, filed a Joint Status Report advising that the First District Court of Appeal had "rendered its decision affirming the ruling of the Administrative Law Judge in this matter" and that the parties "would be available for hearing after January 15, 2005." On November 1, 2004, the undersigned issued a Notice of Hearing
informing the parties that the final hearing in this case would be held on January 18 and 19, 2005.
On January 13, 2005, the parties filed a Joint Prehearing Stipulation, which provided, in pertinent part, as follows:
A Concise Statement of the Nature of the Controversy
Petitioner currently is, and at all times relevant to this proceeding was, a Medicaid provider and licensed pharmacy operating in Miami-Dade County, Florida. AHCA, through its contracted agent, audited Petitioner's Medicaid claims for the period January 1, 1999, through October 20, 2000. From the audit results AHCA determined the Medicaid program overpaid Petitioner. AHCA concluded certain claims paid to the Petitioner should be disallowed, resulting in a total overpayment calculation of $137,431.56.
AHCA seeks to recover this amount and impose a sanction requiring a subsequent comprehensive review of Petitioner's claims. Petitioner disputes AHCA's audit methodology and conclusions.
A Brief General Statement of Each Part[y's] Position:
Petitioner's Position
AHCA's audit is unfair, inaccurate, and not in accordance with law, as set forth in Colonial's petition. All of Colonial's claims were valid, and in substantial compliance with all requirements.
AHCA's Position
AHCA's audit of Petitioner's claims followed proper standards. A statistical sample was taken of Medicaid claims paid to the Petitioner during the audit period. AHCA's auditing agent conducted an on-site review
of Petitioner's documentation pertaining to the audit period. After initially finding certain claims should be disallowed, AHCA conducted follow up reviews and gave Petitioner the opportunity to provide additional documentation showing these discrepant claims complied with the legal requirements for payment under the Medicaid program. At the conclusion of this process, AHCA validly extrapolated the statistical sample and found a total overpayment of
$137,431.56. A separate portion of the audit analyzed Petitioner's documented product acquisitions compared with its paid Medicaid claims for the same period and determined an overpayment of $82,263.46.
AHCA seeks recovery of $137,431.56, the overpayment determined by statistical sampling of Petitioner's paid claims.
* * *
A Concise Statement of Those Facts Which Are Admitted And Will Require No Proof At Hearing, Including, But Not Limited To The Dollar Amount of Each Admitted Fact, Together With Any Reservation Directed To Such Admission:
At all times relevant to this proceeding, Petitioner was an authorized Florida pharmacy with license number PH000400.
At all times relevant to this proceeding, Petitioner was an authorized Medicaid provider with provider number 1013599 00.
At all times relevant to this proceeding, Petitioner had a valid Medicaid Provider agreement with AHCA.
4. AHCA's audit no. 01-1462-000-3/H/KNH
reviewed Petitioner's Medicaid claims paid by the Agency for the period January 1,
1999, through October 20, 2000 ("Audit Period").
During the Audit Period, Warren Blatt, R.Ph., performed all Medicaid claims billing functions on behalf of Petitioner under Medicaid provider number 1013599 00.
During the Audit Period, pharmacy services were furnished to Medicaid recipients by Petitioner and billed to the Medicaid program under Medicaid provider number 1013599 00.
Pursuant to the Medicaid Provider Agreement of Petitioner in effect during the Audit Period, Petitioner was to comply with all Medicaid handbooks in effect during the Audit Period.
Pursuant to the Medicaid Provider Agreement of Petitioner in effect during the Audit Period, Petitioner was to comply with all state and federal Medicaid Program rules and laws in effect during the Audit Period.
6. At all times during the Audit Period, Petitioner was licensed to provide pharmacy services in Florida.
At all times during the Audit Period, Petitioner was licensed pursuant to Chapter 465, Florida Statutes.
At all times during the Audit Period, Petitioner was licensed to sell or dispense drugs, as "drug" was defined under
§ 465.003(8), Florida Statutes.
During the Audit Period, Petitioner sold or dispensed drugs to Medicaid recipients.
At all times during the Audit Period, Petitioner acquired all drugs it subsequently sold or dispensed from
pharmaceutical wholesalers licensed under Florida law.[1]
Each and every claim submitted by Petitioner to AHCA during the Audit Period for payment under the Medicaid program was required to be filed electronically.
For each and every claim submitted by Petitioner to AHCA during the Audit Period for payment under the Medicaid program, Petitioner was required to retain all Medicaid records supporting the claim.
For each and every claim submitted by Petitioner to AHCA during the Audit Period for payment under the Medicaid program, Petitioner was required to make all Medicaid documents supporting the claim available to AHCA at the request of the Agency.
Prior to the issuance of the Audit Letter, Petitioner provided AHCA (or AHCA's authorized representatives) access to all of the required "Medicaid-related Records" and information supporting each and every claim submitted by Petitioner to AHCA during the Audit Period for payment under the Medicaid program.
As of May 18, 2003, the date of Respondent's First Request for Admissions, Petitioner had provided AHCA (or AHCA's authorized representatives) with all required "Medicaid-related Records" and information supporting each and every claim submitted by Petitioner to AHCA during the Audit Period for payment under the Medicaid program.
A Concise Statement Of Those Issues Of Law On Which There Is Agreement, Including, But Not Limited To, A Statement Of The Dollar Amount Of Each Agreed Issue:
The Division of Administrative Hearings has jurisdiction over the parties and the subject matter of this proceeding.
§ 120.57(1), Fla. Stat. (2003).
AHCA is the single State agency representative for the implementation and administration of the Medicaid program in Florida. § 409.902, Fla. Stat. (2003).
Section 465.188, Florida Statutes (2003), applies to the Agency's audit conducted in this case.
Section 465.188, Florida Statutes (2004), applies to the Agency's audit conducted in this case.
A Concise Statement Of Those Issues Which Remain To Be Litigated, Including, But Not Limited To, A Statement Of The Dollar Amount Of Each Issue Which Remains To Be Litigated:
Whether Petitioner was overpaid
$137,431.56 by AHCA based on the Agency's audit of Medicaid claims paid during the Audit Period.
Whether Petitioner was overpaid
$82,263.46 by AHCA based on the Agency's audit of Medicaid acquisitions compared to claims paid for the Audit Period.
Whether any of Petitioner's paid claims for the Audit Period should be disallowed by AHCA.
Whether the auditing methods utilized by AHCA are valid and acceptable.
Whether and to what extent Colonial should be sanctioned for any claims which are proven to be discrepant.
Whether AHCA has improperly ignored manufacturers['] rebates in calculating claims amounts.
A Concise Statement Of Those Issues Of Law Which Remain For Determination By The Administrative Law Judge, Including, But Not Limited To, A Statement Of The Dollar Amount Of Each Issue Of Law Remaining To Be Determined:
Whether Petitioner properly documented the services provided to satisfy the requirements for payment under the Medicaid program.
Whether AHCA may utilize statistical extrapolation to determine overpayments made to Petitioner during the Audit Period.
Whether "overpayments" can be established by hearsay evidence.
Whether any records not made at the time the goods and services were provided are admissible as evidence.
Whether Section 409.913(19) [sic] operates to override the rules of evidence.
Whether Section 409.913(13) [sic] operates to create an irrebuttable presumption.
Whether Section 409.913(13) [sic] operates to deprive due process as guaranteed by the United States and Florida Constitution[s].[2]
* * *
As noted above, the final hearing in this case was held on January 18 and 19, 2005, as scheduled. Testifying at hearing for AHCA were: Rolando Veloso, Kathryn Holland, and Mark
Johnson. In addition, AHCA offered into evidence the following exhibits, which were all admitted: Respondent's Exhibits 1 through 14, 14A, 15 through 36, and 38 through 40. Warren Blatt was Petitioner's lone witness at hearing. Petitioner also offered two exhibits, Petitioner's Exhibits 1 and 2, which were objected to by AHCA and rejected by the undersigned inasmuch as they had not been "exchanged [with AHCA] at least 14 days before the administrative hearing," as required by Section 409.913(22), Florida Statutes.3
The record was left open for 25 days for the purpose of giving Petitioner the opportunity to take the deposition of an additional witness, Jerry Wells, and to file the transcript of that deposition for receipt into evidence in lieu of Mr. Wells' live testimony.
The deadline for the filing of proposed recommended orders was originally set at ten days from the date the transcript of the hearing was filed with the Division or ten days from the date the transcript of Mr. Wells' deposition was filed with the Division, whichever was later.
The transcript of the hearing (consisting of three volumes) was filed with the Division on January 26, 2005.
On February 14, 2005, Petitioner filed, on behalf of both parties, a Joint Motion for Date Certain to File Proposed
Recommended Order[s]. On February 15, 2005, the undersigned issued an Order granting the motion and establishing February 28, 2005, as the "date certain" for the filing of proposed recommended orders.
The transcript of Mr. Wells' deposition (consisting of one volume) was filed with the Division on February 17, 2005.
AHCA and Petitioner filed their Proposed Recommended Orders on February 28, 2005.
FINDINGS OF FACT
Based upon the evidence adduced at hearing, and the record as a whole, the following findingss of fact are made to supplement the factual stipulations set forth in the parties' Joint Prehearing Stipulation4:
Petitioner
Petitioner is co-owned by two Florida-licensed pharmacists, Howard Berkowitz and Warren Blatt. Mr. Berkowitz and Mr. Blatt are cousins.
Petitioner operates Colonial Cut-Rate Drugs, a licensed community pharmacy located at 6835 West 12th Avenue in Hialeah, Florida (Pharmacy).
Mr. Berkowitz started the business in 1964. Four years later, in 1968, Mr. Blatt became a partner. The two have been partners since.
Petitioner's Participation in the Medicaid Program
During the period from January 1, 1999, through October 20, 2000, Petitioner was authorized to provide pharmacy services to eligible Medicaid recipients in Florida.
Petitioner provided such services pursuant to a Medicaid Provider Agreement Mr. Berkowitz and Mr. Blatt had signed on behalf of Petitioner (Provider Agreement). The Provider Agreement contained the following provisions, among others:
The Provider agrees to participate in the Florida Medicaid program under the following terms and conditions:
* * *
Quality of Service. . . . The services or goods must have been actually provided to eligible Medicaid recipients by the provider prior to submitting the claim.
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.
Term and signatures. The parties agree that this is a voluntary agreement between the Agency and the provider, in which the provider agrees to furnish services or goods to Medicaid recipients. . . .
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. 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.
* * *
(d) Except as provided by law, the provider agrees to provide immediate access to authorized persons (included but not limited to state and federal employees, auditors and investigators) to all Medicaid-related information, which may be in the form of records, logs, documents, or computer files, and all other information pertaining to services or goods billed to the Medicaid program. This shall include access to all patient records and other provider information if the provider cannot easily separate records for Medicaid patients from other records.
* * *
(f) Within 90 days of receipt, refund any moneys received in error or in excess of the amount to which the provider is entitled from the Medicaid program.
* * *
Prescribed Drug Services Coverage, Limitations and Reimbursement Handbook
Among the requirements with which Petitioner, in paragraph 3 of the Provider Agreement, agreed to comply were
those set forth in the Prescribed Drug Services Coverage, Limitations and Reimbursement Handbook (PDSCLR Handbook).
At all times material to the instant case, Chapter 2 of the PDSCLR Handbook contained substantially the following "record keeping requirements":
Record Keeping Requirement
The provider must retain all medical, fiscal, professional and business records on all services provided to a Medicaid recipient.
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. Rubber stamp signatures must be initialed.
The records must be accessible, legible and comprehensible.
Record Retention
Records must be retained for a period of at least five years from the date of service.
Types of Records That Must be Retained
The following types of records, as appropriate for the type of service provided, must be retained (the list is not all inclusive):
Medicaid claim forms and any documents that are attached;
Professional records, such as patient treatment plans and patient records;
Prior and past authorization, and service authorization information;
Prescription records;
Business records, such as accounting ledgers, financial statements, purchase/acquisition records, invoices, inventory records, check registers, canceled checks, sales records, etc.;
Tax records, including purchase documentation;
Patient counseling documentation; and Provider enrollment documentation.
Requirements for Prescription Records
The pharmacy must maintain a patient record for each recipient for whom new or refill prescriptions are dispensed. The record may be electronic. 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.
The patient record must contain the following information:
The recipient's first and last name, address, date of birth, and gender;
A list of all prescriptions that were obtained by the recipient at the pharmacy during the 12 months immediately preceding the most recent service that includes: the name of the drug or device, prescription number, strength of the drug, the quantity, date received, and the prescriber's full name and state license number.
Any known allergies, drug reactions, idiosyncrasies, chronic conditions or
disease states of the patient, and the identity of any over-the-counter drugs or devices currently being used by the patient that may relate to prospective drug use review;
Any related health information indicated by a licensed health care practitioner; and
The pharmacist's comments, if any, relevant to the patient's drug therapy.
Right to Review Records
Authorized state and federal agencies and their authorized representatives may audit or examine a provider's records. This includes all records that AHCA finds necessary to determine whether Medicaid payments were or are due. This requirement applies to the provider's records and records for which the provider is the custodian.[5]
Incomplete Records
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 payments for services that lack required documentation or appropriate signatures will be recouped.[6]
Note: See Chapter 5 in this handbook for information on administrative sanctions and Medicaid payment recoupment.
At all times material to the instant case, Chapter 5 of the PDSCLR Handbook contained the following provisions, among others:
Provider Abuse Abuse
Abuse means provider practices that are inconsistent with generally accepted business or medical practices and that result in an unnecessary cost to the Medicaid program or in reimbursement for goods or services that are not medically necessary or that fail to meet professionally recognized standards for health care.
Financial Abuse
Financial abuse means abuse resulting in overpayments to providers.
Overpayment
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 claims, unacceptable practices, fraud, abuse, or mistake.
* * * Incomplete or Missing Records
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.
Note: See Chapter 2 in this handbook for Medicaid record keeping and retention requirements.
At all times material to the instant case, Chapter 6 of the PDSCLR Handbook required that providers, in preparing a
claim for reimbursement, enter on the claim form, among other things, "the prescriber's professional license number," the quantity dispensed, and "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."
Florida Administrative Code Rule Provisions
Additional requirements with which Petitioner, in paragraph 3 of its Provider Agreement, agreed to comply were those contained in the following provisions of the Florida Administrative Code governing the practice of pharmacy:
Florida Administrative Code Rule 64B16- 27.103
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, and 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, prepare a copy of a prescription or read a prescription to any person for purposes of providing reference concerning treatment of the person or animal for whom the prescription was written, and when said copy is given a notation shall be made upon the prescription that a copy has been given, the date given, and to whom given.
Florida Administrative Code Rule 64B16- 27.400
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(3) Only a Florida licensed pharmacist may make the final check of the completed prescription thereby assuming the complete responsibility for its preparation and accuracy.
Florida Administrative Code Rule 64B16- 28.140
(1) Requirements for records maintained in a data processing system.
* * *
Original prescriptions, including prescriptions received as provided for in Rule 64B16-28.130, F.A.C., Transmission of Prescription Orders, shall be reduced to a hard copy 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 filling. To the extent authorized by 21 C.F.R. Section 1304.04, a pharmacy may, in lieu of retaining the actual original prescriptions, use an electronic imaging recordkeeping 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 filling.
Original prescriptions shall be maintained in a two or three file system as specified in 21 C.F.R. 1304.04(h).
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(3) Records of dispensing.
Each time a prescription drug order is filled or refilled, a record of such dispensing shall be entered into the data processing system.
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:
Unique identification number of the prescription;
Date of dispensing;
Patient name;
Prescribing practitioner's name;
Name and strength of the drug product actually dispensed, if generic name, the brand name or manufacturer of drug dispensed;
Quantity dispensed;
Initials or an identification code of the dispensing pharmacist; and
If not immediately retrievable via CRT display, the following shall also be included on the hard-copy printout:
Patient's address;
Prescribing practitioner's address;
Practitioner's DEA registration number, if the prescription drug order is for a controlled substance;
Quantity prescribed, if different from the quantity dispensed;
Date of issuance of the prescription drug order, if different from the date of dispensing; and
Total number of refills dispensed to date for that prescription drug order.
The daily hard-copy printout shall be produced within 72 hours of the date on which the prescription drug orders were dispensed and shall be maintained in a separate file at the pharmacy. Records of controlled substances shall be readily retrievable from records of non-controlled substances.
Each individual pharmacist who dispenses or refills a prescription drug order shall verify that the data indicated on the daily hard-copy printout is correct, by dating and signing such document in the same manner as signing a check or legal document (e.g., J.H. Smith, or John H. Smith) within seven days from the date of dispensing.
In lieu of producing the printout described in subparagraphs (b) and (c) of this section, the pharmacy shall maintain a log book in which each individual pharmacist using the data processing system shall sign a statement each day, attesting to the fact that the information entered into the data processing system that day has been reviewed by him or her and is correct as entered. Such log book shall be maintained at the pharmacy employing such a system for a period of two years after the date of dispensing provided, however, that the data processing system can produce the hard-copy printout on demand by an authorized agent of the Department of Health. If no printer is available on site, the hard-copy printout shall be available within 48 hours with a certification by the individual providing the printout, which states that the printout is true and correct as of the date of entry
and such information has not been altered, amended or modified.
The prescription department manager and the permit holder are responsible for the proper maintenance of such records and responsible that such data processing system can produce the records outlined in this section and that such system is in compliance with this subsection.
Failure to provide the records set out in this section, either on site or within 48 hours for whatever reason, constitutes failure to keep and maintain records.
In the event that a pharmacy which uses a data processing system experiences system downtime, the following is applicable:
An auxiliary procedure shall ensure that refills are authorized by the original prescription drug order and that the maximum number of refills has not been exceeded or that authorization from the prescribing practitioner has been obtained prior to dispensing a refill; and
All of the appropriate data shall be retained for on-line data entry as soon as the system is available for use again.
* * *
(5) Authorization of additional refills. Practitioner authorization for additional refills of a prescription drug order shall be noted as follows:
On the daily hard-copy printout; or
Via the CRT display.
The Audit and Aftermath
Commencing in December 2000, Heritage Information Systems, Inc. (Heritage), on behalf of AHCA, conducted an audit of Petitioner's paid Medicaid claims for the period from January 1, 1999, through October 20, 2000 (Audit Period).7 Petitioner had submitted 37,798 such claims (Audit Period Claims), for which it had received payments totaling
$2,019,662.47. The purpose of the audit was to determine whether, and if so to what extent, Petitioner was overpaid for these Audit Period Claims.
At the outset of the audit, Heritage's lead auditor, Rolando Veloso, provided Pharmacy personnel a Notice to Medicaid Provider of Initiation of On-Site Audit,8 which read as follows:
The Agency for Health Care Administration (Agency), under federal and state laws, has the responsibility to oversee the activities of Medicaid providers. This is to advise you that an on-site audit of your billings to the Medicaid program has been initiated. Audits are performed in order to determine if Medicaid billings conform to applicable laws, rules, and policies.
The fact that an audit is performed carries with it no implication of any wrongdoing.
Audits are conducted as part of the responsibility of Medicaid for ensuring the integrity of the program.
Medicaid audits generally involve a review of provider medical, professional, financial, and business records as required to determine the propriety of billings.
Attachment B is a summary of applicable laws
and rules governing the access to required information.
If additional information is desired, please notify the auditor named below.
In conducting the audit, Heritage performed both a "claims analysis" and a "purchase invoice analysis."
For the "claims analysis," Heritage first selected a non-random, "judgmental sample" of 326 "high-dollar" Audit Period Claims, for which Petitioner had received payments totaling $175,838.54. It then selected (from the remaining Audit Period Claims) a "random sample" of 250 claims,9 for which Petitioner had received payments totaling $13,041.76. Thereafter, Petitioner's records were examined to determine whether they contained documentation sufficient to support the claims in the "judgmental sample" and in the "random sample."
For the "purchase invoice analysis," Heritage selected the "top 20 drugs billed" for review. As Heritage explained in a May 15, 2001, Final Report it provided to AHCA, the purpose of the "purchase invoice analysis" was:
to verify that the provider purchased selected drugs in quantities sufficient to account for the total number of units of each drug billed to Medicaid for the selected drugs over the same time period. The auditors compiled wholesaler and direct- account purchases for the selected drugs and calculated the number of units of each drug purchased during the audit period. Auditors then tabulated the number of units of each drug billed to Medicaid during the review
period. Credits and returns were also considered in the tabulation. This model assumes that all drugs purchased were dispensed to Medicaid recipients. A prorated analysis was also performed.
Auditors requested a "utilization report" (a standard report available from most pharmacy computers) from the pharmacy computer. The report states the total number of units of each drug allegedly dispensed by the pharmacy during the review period -- to all parties, not just Medicaid. Using this report, auditors were able to determine what percentage of the pharmacy's business (for each drug) Medicaid represents. This percentage was then applied to the pharmacy purchases for the corresponding drug. Since a portion of the purchases would have been dispensed to non-Medicaid patients, this proration allows a more realistic analysis than comparing Medicaid claims to all purchases.
* * *
In conducting the "purchase invoice analysis," the assumption was made that "the [Pharmacy's] shelf stock is going to remain equivalent month to month."
During the audit, Mr. Veloso interviewed Mr. Blatt.
As Mr. Veloso's "notes" of the interview indicate:
Mr. Blatt stated to auditors that the pharmacy fills approximately 175 prescriptions daily. Of these, 60%-70% are for Medicaid prescriptions. He indicated that both he and Mr. Berkowitz own the pharmacy, and that Mr. Berkowitz has been the owner since 1964.
Mr. Blatt was questioned regarding refill documentation. He indicated to auditors that he usually gives the prescriptions additional refills once he receives
authorization from the physician. Mr. Blatt explained that he does not document refill authorizations routinely. He stated that instead, he automatically adds refills to existing prescriptions without generating a new prescription number or documenting the additional authorization electronically.
Mr. Blatt indicated that he has been practicing pharmacy for a number of years and was unaware that refill authorizations must be documented.
Auditors explained to Mr. Blatt that all claims must have a legitimate order to them. Mr. Blatt acknowledged the problem with refill authorizations and stated is was, "poor bookkeeping." Mr. Blatt continually questioned auditors about possible penalties for lack of refill documentation. Auditors explained that Medicaid would likely contact the pharmacy regarding any findings the auditors documented. Mr. Blatt stated at the conclusion of the audit, "if it's a fine for poor bookkeeping on the refills, I'll pay it."
Heritage's May 15, 2001, Final Report to AHCA of the audit of the Pharmacy contained an Executive Summary, which summarized what the audit had revealed to date. This Executive Summary read as follows:
Heritage Information Systems, Inc. ("Heritage") conducted an in-depth audit of Colonial Cut-Rate Drugs, Inc. ("Colonial") at the request of the Florida Agency for Health Care Administration ("AHCA"). The audit documented possible billing, policy and regulatory violations that resulted in apparent overpayments. The audit findings include the following:
Auditors sampled 326 judgmental and 250 random prescription claims. A review of the judgmental sample documented $26,282.73 in
overcharges. Findings from the random sample extrapolated to $243,699.90. The 95% one-sided lower confidence limit totals
$177,658.67 in overcharges. Discrepancies documented in the sample include the following:
The most common discrepancy documented was the Unauthorized Refill ("UR"). The pharmacy was unable to produce documentation of refill authorizations for 81 prescription refills.
Pharmacy staff was unable to produce hard copy prescription records corresponding to ten (10) claims ("CF").
The pharmacy billed seven (7) claims for quantities greater than ordered by the prescriber and/or dispensed to the patient ("OBQ").
A comparison of paid Medicaid claims to the pharmacy's drug purchases yielded apparent purchase shortages totaling an estimated
$24,848.68. A prorated purchase analysis yielded more significant overcharges totaling $82,263.46. Colonial's invoice records could not substantiate claims to Medicaid for this amount.
Possible usual and customary pricing violations were identified. Medicaid paid more than other third party payers for the prescriptions reviewed by auditors.
Heritage's audit documented apparent overcharges of $177,658.67. This figure represents the $26,283.73 in non- extrapolated findings from the judgmental sample, plus the 95% one-sided lower confidence limit of the extrapolated random sample ($151,375.94).
This report is submitted to AHCA for action deemed appropriate.
Based on the information Heritage provided, AHCA preliminarily determined that Petitioner had been overpaid a total of $177,658.67 for the Audit Period Claims. By letter dated January 25, 2002, which it denominated its Provisional Agency Audit Report, AHCA advised Petitioner of this preliminary determination. AHCA's Provisional Agency Audit Report read, in pertinent part, as follows:
An on-site audit of your pharmacy was initiated on December 18, 2000. The Florida Medicaid Program through the Agency for Health Care Administration has determined that you have been overpaid $177,658.67 in connection with claims submitted to Medicaid during the audit period(s). This conclusion is supported by the audit results.
This review and the determination were made in accordance with the provisions of Chapter 409, Florida Statutes (F.S.), and Chapter 59G, Florida Administrative Code (F.A.C.).
In applying for Medicaid reimbursement, providers are required to follow applicable statutes, rules, Medicaid provider handbooks, statements of Medicaid policy, and federal laws and regulations. Medicaid cannot properly pay for claims that do not meet Medicaid requirements. When a provider receives payment in violation of these provisions, those funds must be repaid.
This is, however, a provisional finding and we encourage you to submit any additional information or documentation that you may have that you feel may serve to change the overpayment.
REVIEW DETERMINATION
The audit included a judgmental sample review of selected paid claims and a
separate review of a statistically valid random sample taken from the remaining population of paid claims with dates of service during the audit period. The overpayment found in the random sample was extended to the population using generally accepted statistical formulas and methods. The audit period for this review was from January 1, 1999, through October 20,
2000. This review identified an overpayment of $177,658.67. . . .
The audit also included a comparison of your lawful documented product acquisitions with your paid Medicaid claims. The audit period for this review was from January 1, 1999, through October 20, 2000. The drug quantity paid for by Medicaid, in many instances, exceeded the quantity available to dispense to Medicaid recipients. This review identified an overpayment of
$82,263.46. . . .
Accordingly, we have determined at this time that you have been overpaid by the Medicaid program in the amount of $177,658.67.
If you have documentation that you wish to submit that you feel would alter these findings, submit your written explanation and legible copies of the organized documentation to us within 30 days of receipt of this notice. . . .
If you concur or accept these findings, please send your check in the amount of
$177,658.67 for this identified overpayment . . . .
If you have not submitted a written explanation and documentation or made payment within 30 days, we will send you notice regarding the agency's final determination.
* * *
On January 29, 2002, Petitioner's attorney sent AHCA a letter, which read as follows:
This is to let you know that I have been retained to represent Colonial Cut Rate Drugs and Warren Blatt with respect to the Medicaid audit. We are in the process of locating the misfiled prescriptions, and obtaining statements from the physicians that the questioned refills were, in fact, authorized. We will get that documentation to you as quickly as possible, but it will take more than 30 days since there are 81 claims that need to be verified. Thanks for your patience.
In response this letter, AHCA granted Petitioner an extension of time to provide additional documentation.
Petitioner provided AHCA with additional documentation in early May 2002.
On or about May 15, 2002, AHCA sent this additional documentation to Heritage for "review, placement in [Heritage's] file, and action deemed appropriate."
By letter dated November 8, 2002, AHCA informed Petitioner of its opportunity "to submit [any] further documentation" it wanted AHCA to consider. The letter read, in pertinent part, as follows:
An audit of your pharmacy was initiated on December 18, 2000. The Florida Medicaid Program, through the Agency for Health Care Administration (Agency), issued a Provisional Agency Audit Report, dated January 25, 2002, and made a provisional overpayment determination. Subsequent to this determination, your pharmacy submitted
additional documentation. However, the Agency extends to you an opportunity to submit further documentation that has not already been submitted that may change the overpayment.
This review and determination were made in accordance with the provisions of Chapter 409, Florida Statutes (F.S.), and Chapter 59G, Florida Administrative Code (F.A.C.). In applying for Medicaid reimbursement, providers are required to follow the applicable statutes, rules, Medicaid provider handbooks, statements of Medicaid policy, and federal laws and regulations. Medicaid cannot properly pay for claims that do not meet Medicaid requirements.
We encourage you to submit any additional information or documentation not already sent that you may have that you feel may serve to change the provisional overpayment.
* * *
Documentation standard for statistical audit review: Documents submitted after the completion of an audit may require an affidavit or other sworn statement, in addition to the documents, as a means to authenticate the documentation.
Documentation that appears to be altered, or in any other way appears not to be authentic, will not serve to reduce the overpayment. Furthermore, additional documentation must clearly identify which discrepancy (claim) as set forth in the
attached audit findings it purports to support.
Documentation to be submitted: All documentation submitted will be considered even if it does not fall within one of the below categories. These are merely suggestions and are not stipulations that the suggested documentation will result in a reduction of the overpayment. It is
recommended that you submit the best evidence of compliance with the Medicaid and Pharmacy laws, and that the documentation was on file at the time of the audit.
Contemporaneous original hard-copy prescriptions found after the time of the audit (legible and complete copies of both front and back of prescription)
Contemporaneous doctor/medical records specifically reflecting prescription ordered.
Contemporaneous physician order.
Contemporaneous approved MAR by physician or physician's agent.
Contemporaneous dated print out of computer screen with DEA disclosed.
Contemporaneous dated daily logs identifying the DEA number.
Contemporaneous dated label identifying the DEA number.
Dated one-year historical patient profile that includes drug name, quantity, directions for use, and/or strength.
Written explanation and documentation to support rationale for different strengths or dosage forms dispensed.
Written explanation and documentation to support that the physician's license number was incorrectly assigned to physician in computer system, or physician's name was incorrectly chosen from computer list with similar name, due to a data entry error.
For the invoice review, additional proof of product acquisitions for the drugs listed in the invoice review.
Any question you may have about this matter or any requests to submit further documentation should be directed to Kathryn
N. Holland . . . .
AHCA received no further documentation from Petitioner after sending this November 8, 2002, letter.
After having reviewed the documentation that Petitioner had provided AHCA in early May 2002, Heritage prepared and submitted to AHCA an Addendum, dated February 27, 2003, to the Final Report it had previously submitted.
The Addendum contained an Executive Summary, Revised Findings, and Conclusions, which read as follows:
EXECUTIVE SUMMARY
Colonial Cut-Rate Drugs, Inc. 6835 West 12th Avenue Hialeah, Florida 33014
Medicaid Provider Number: 101359900
Heritage Information Systems, Inc. ("Heritage") conducted an in-depth audit of Colonial Cut-Rate Drugs, Inc. ("Colonial") at the request of the Florida Agency for Health Care Administration ("AHCA"). The audit documented possible billing, policy and regulatory violations that resulted in apparent overpayments. An invoice analysis indicated that Colonial did not purchase sufficient quantities of seven [sic] drugs to substantiate claims billed to Medicaid. The apparent prorated purchase shortage was estimated to be $82,263.46.
Auditors also reviewed a random sample of
250 claims and a judgmental sample of 326 claims. Record-keeping and regulatory violations were documented on 100 claims between the two samples. Based on the findings from the judgmental and the extrapolated (using a 95% one-sided lower confidence limit) random sample, Heritage's audit documented overcharges in the amount of $177,658.67.
Post audit documentation from the pharmacy was forwarded to Heritage by AHCA and received on 5/21/02. Post audit
documentation included copies of prescriptions, letters of explanation and photocopies of invoices.
The accepted documentation was incorporated into the audit findings and a revised overcharge amount was calculated. The revised analysis by Heritage results in apparent overcharges of $137,431.56 based on the sum of the findings from the judgmental and the extrapolated findings (using a 95% one-sided lower confidence limit) from the random sample.
REVISED FINDINGS
Prescription Record Review
Four prescription records submitted by Colonial as supplemental documentation were deemed acceptable, and resulted in the following changes:
- Eight claims had Can't Find ("CF") discrepancies removed, however, based on the number of authorized refills, an Unauthorized Refill ("UR") was assessed on one claim.
Invoice Audit
Post audit documentation included photocopies of invoices dated prior to the invoice audit review period. Therefore, there were no changes to the invoice analysis.
CONCLUSIONS
The additional documentation supplied by Colonial has been incorporated into the original audit findings, resulting in a reduction in overcharges to $137,431.56 based on the 95% one-sided lower confidence limit combined with findings of the judgmental sample. A copy of the revised audit findings and lists of the discrepant
prescriptions [sic] is provided in Exhibit 1.
The report is submitted to AHCA for action deemed appropriate.
Appended to the Addendum were, what Heritage referred to as, "discrepancy listings." These "discrepancy listings" correctly specified those Audit Period Claims in the "judgmental sample" and in the "random sample" that were "discrepant" and, with respect to each such "discrepant" claim, accurately identified, using the following "codes," the nature of the "discrepancy" from which the claim suffered and, in addition, set forth (in the "overcharges" column) the correct amount of any resulting overpayment:
CF (Original hard copy prescription cannot be found on file during the audit)
DS (The days supply value submitted by the pharmacy is not consistent with the quantity and directions)
OBQ (Quantity paid exceeds the quantity authorized by the prescriber or dispensed to the recipient)
UR (The number of refills billed and paid to the pharmacy exceeds the number authorized by the prescriber. Refills are dispensed without documented authorization from the prescriber)
WMDC (The claim for the prescription contains an incorrect prescriber license number, but the correct prescriber's name is documented in the pharmacy computer or is similar to the name of the prescriber billed)
There were a total of 90 "discrepant" claims listed: two coded "CF" (with associated "overcharges" equal to the total amount paid for these claims); one coded "DS" (with no associated "overcharge"); four coded "OBQ" (with associated "overcharges" equal to the amount paid for the quantity in excess of that authorized); 82 coded "UR" (with associated "overcharges" equal to the total amount paid for these claims10); and one coded "WMBC" (with an associated "overcharge" equal to that portion of the payment denominated the "dispensing fee," which was $4.23). Of the 90 "discrepant claims, 67 were in the "judgmental sample" and 23 were in the "random sample." The total amount that Petitioner was overpaid for the discrepant claims in the "judgmental sample" was $25,088.30. The total amount that Petitioner was overpaid for the 23 "discrepant" claims in the "random sample" was $1,311.57, or 5.24628 dollars for each of the 250 claims in the sample. Extrapolating or projecting this result, in accordance with generally accepted statistical principles, to the entire universe of Audit Period Claims (which numbered 37,798) minus the 326 claims in the "judgmental sample" (a total of 37,472 claims), using a "95%
one-sided lower confidence limit," yields an overpayment of
$112,343.26.11 Adding this $112,343.26 overpayment to the
$25,088.30 overpayment for the "discrepant" claims in the "judgmental sample" produces a total overpayment of $137,431.56.
After having received Heritage's February 27, 2003, Addendum, AHCA prepared and sent to Petitioner its Final Agency Audit Report,12 which was dated March 19, 2003, and read, in pertinent part, as follows:
Medicaid Integrity has completed the review of your Medicaid claims for dates of service during the period January 1, 1999, through October 20, 2000. A Provisional Agency Audit Report, dated January 25, 2002, was sent to you indicating that we had determined you were overpaid $177,658.67.
Based upon a review of all documentation submitted, we have determined that you were overpaid $137,431.56 for services that in whole or in part are not covered by Medicaid. Pursuant to Section 409.913, Florida Statutes (F.S.), this letter shall serve as notice of the following sanction(s): The provider is subject to comprehensive follow-up review in six months.
In determining the appropriateness of Medicaid payment pursuant to Medicaid policy, the Medicaid program utilizes procedure codes, descriptions, policies, limitations and requirements found in the Medicaid provider handbooks and Florida Statutes, Section 409.913. In applying for Medicaid reimbursement providers are required to follow the guidelines set forth in the applicable rules and Medicaid fee schedules, as promulgated in the Medicaid policy handbooks, billing bulletins, and the Medicaid provider agreement. Medicaid cannot pay for services that do not meet these guidelines.
The following is our assessment of why certain claims paid to your provider number do not meet Medicaid requirements. The audit work papers detailing the claims affected by this assessment are attached.
REVIEW DETERMINATION(S)
The audit included the review of a judgmental sample of selected claims and a statistically valid random sample taken from the population of paid claims with dates of service during the audit period. The overpayment found in the random sample was extended to the population using generally accepted statistical formulas and methods.
The audit period for this review was from January 1, 1999, through October 20,
2000. This review identified an overpayment of $137,431.56. Attached are the overpayment calculations, a summary of documented discrepancies, and an itemized listing of discrepancies noted in the review of the judgmental and random sample[s].
The audit also included a comparison of your lawful documented product acquisitions with your paid Medicaid claims. The audit period for this review was from January 1, 1999, through October 20, 2000. The drug quantity paid for by Medicaid, in many instances, exceeded the quantity available to dispense to Medicaid recipients. This review identified an overpayment of
$82,263.46. Attached are the overpayment calculations.
* * *
If you are not in bankruptcy and you concur with our findings, remit by check in the amount of $137,431.56. . . .
* * *
You have a right to request a formal or informal hearing pursuant to Section 120.569, F.S. . . . . [I]f a request for a hearing is made, the petition must be received by the Agency within twenty-one
(21) days of receipt of this letter. . . .
* * *
AHCA has made no additional revisions to its overpayment calculation in the instant case. It continues to maintain (and correctly so) that Petitioner received $137,431.56 in Medicaid overpayments for services claimed to have been provided during the Audit Period.13
CONCLUSIONS OF LAW
"Congress enacted the Medicaid program in 1965 in an effort to assist states with the cost of providing health care for the poor. . . . [A]ctual Medicaid relief is administered through state agencies pursuant to a Medicaid program that has been submitted to and approved by the U.S. Department of Health and Human Services. This cooperative venture between the federal and state governments is governed by the terms of Title XIX of the Social Security Act (SSA), §§ 1901-1935, codified at
42 U.S.C. §§ 1396-1396v. . . . One large and growing part of the Medicaid program is the coverage of outpatient prescription drugs. Under 42 U.S.C. § 1396r-8, a drug is eligible for Medicaid coverage only if its manufacturer enters into an agreement with the Secretary of the Department of Health and Human Services to make a specified rebate on each covered drug. With a few limited exceptions, this rebate is set by statute at
15.1 percent of the average manufacturer price." Pharmaceutical
Research and Manufacturers of America v. Meadows, 304 F.3d 1197, 1199-1200 (11th Cir. 2002). "Over the last several years, state
legislatures have enacted supplemental rebate programs to achieve additional cost savings on Medicaid purchases [of prescription drugs] . . . ." Pharmaceutical Research and Manufacturers of America v. Walsh, 538 U.S. 644, 649, 123 S. Ct.
1855, 1860 (2003). The "supplemental rebate programs" enacted by the Florida Legislature are described in Section 409.912(39)(a)6. and 7, Florida Statutes.14
AHCA is statutorily charged with the responsibility of "operat[ing] 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[15] and impose sanctions as appropriate." Section 409.913(1), Florida Statutes. In discharging this responsibility, AHCA must act within the parameters established by the Legislature through legislative enactments. It may not exceed the authority expressly delegated to it by statute. See City of Cape Coral v. GAC Utilities, Inc., of Florida, 281 So. 2d 493, 495-96 (Fla. 1973)("All administrative bodies created by the Legislature are not constitutional bodies, but, rather, simply mere creatures of statute. This, of course, includes the Public Service Commission . . . . As such, the Commission's powers, duties and authority are those and only those that are conferred expressly or impliedly by statute of the State. . . .
Any reasonable doubt as to the lawful existence of a particular power that is being exercised by the Commission must be resolved against the exercise thereof, . . . and the further exercise of the power should be arrested."); Schiffman v. Department of Professional Regulation, Board of Pharmacy, 581 So. 2d 1375, 1379 (Fla. 1st DCA 1991) ("An administrative agency has only the authority that the legislature has conferred it by statute."); Lewis Oil Co., Inc. v. Alachua County, 496 So. 2d 184, 189 (Fla. 1st DCA 1986)("Administrative agencies have only the powers delegated by statute."); and Fiat Motors of North America, Inc.
v. Calvin, 356 So. 2d 908, 909 (Fla. 1st DCA 1978)("Administrative agencies are creatures of statute and have only such powers as statutes confer.").
"Overpayment," as that term is used in Section 409.913, Florida Statutes, "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." § 409.913(1)(e), Fla. Stat. "[T]he plain meaning of the statute dictates that it is within the AHCA's power to demand repayment" of such monies, regardless of the circumstances that produced the unauthorized payment. Colonnade Medical Center, Inc. v.
State, Agency for Health Care Administration, 847 So. 2d at 541- 42.
"Under federal law, the '[state Medicaid] agency must refund the Federal share of overpayments at the end of the 60- day period following discovery . . . ,16 whether or not the State has recovered the overpayment from the provider.' 42 C.F.R. § 433.312(a)(2) (emphasis added). It also provides a mechanism for 'reclaiming' the federal share if the overpayment is 'adjusted downward' under approved procedures. 42 C.F.R. § 433.320(c)." Finnerty v. Thornton Hall, Inc., 593 S.E.2d 568, 573 (Va. App. 2004).
In the instant case, AHCA is seeking to recover
$137,431.56 in Medicaid overpayments allegedly made to Petitioner for pharmacy services Petitioner claimed it rendered during the Audit Period.
To determine the merits of AHCA's allegation that Petitioner received a total of $137,431.56 in overpayments from Medicaid that AHCA is entitled to recover, it is necessary to examine the substantive law governing Medicaid payments to Florida providers like Petitioner that was in effect during the Audit Period. See Toma v. Agency for Health Care Administration, No. 95-2419, 1996 WL 1059900 *23 (Fla. DOAH
July 26, 1996)(Recommended Order)("The statutes, rules, Medicaid Physician Provider Handbook and Medicaid EPSDT Provider Handbook in effect during the period for which the services were provided govern the outcome of the dispute."); see also Hassen v. State
Farm Mutual Automobile Insurance Co., 674 So. 2d 106, 108 (Fla. 1996)("It is a well established rule of statutory construction that, in the absence of an express legislative statement to the contrary, an enactment that affects substantive rights or creates new obligations or liabilities is presumed to apply prospectively."); Allegheny Casualty Co. v. Roche Surety, Inc., 885 So. 2d 1016, 1018 (Fla. 5th DCA 2004)("As a general rule, in the absence of clear legislative intent to the contrary, a law affecting substantive rights is presumed to apply prospectively."); Division of Workers' Compensation, Bureau of
Crimes Compensation v. Brevda, 420 So. 2d 887, 891 (Fla. 1st DCA 1982)("If, however, a right has somehow vested under a statute, repeal of the statute does not divest the holder of the right."); and Peacock Fruit & Cattle Corp. v. Prescott, 397 So. 2d 390, 391 (Fla. 1st DCA 1981)("The weekly rate of compensation to be awarded is a matter of substantive law fixed by the statute in effect at the time of the accident.").
During the Audit Period, Section 409.906(20), Florida Statutes, authorized AHCA to make Medicaid payments "for medications that [were] prescribed for a recipient by a physician or other licensed practitioner of the healing arts authorized to prescribe medications and that [were] dispensed to the recipient by a licensed pharmacist . . . in accordance with applicable state and federal law." Pursuant to Section 409.908,
Florida Statutes, such payments were required to be made, "in accordance with state and federal law, according to methodologies set forth in the rules of the agency and in policy manuals and handbooks incorporated by reference therein" and were to be in an amount equal to "the least of the amount billed by the provider, the provider's usual and customary charge, or the Medicaid maximum allowable fee established by the agency, plus a dispensing fee."
During the Audit Period, Section 409.907(1)-(3) and (5), Florida Statutes, provided as follows:
The agency [AHCA] may make payments for medical assistance and related services rendered to Medicaid recipients only to an individual or entity who has a provider agreement in effect with the agency, who is performing services or supplying goods in accordance with federal, state, and local law, and who agrees that no person shall, on the grounds of handicap, race, color, or national origin, or for any other reason, be subjected to discrimination under any program or activity for which the provider receives payment from the agency.
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.
Each provider agreement shall be a voluntary contract between the agency and
the provider, in which the provider agrees to comply with all laws and rules pertaining to the Medicaid program when furnishing a service or goods to a Medicaid recipient and the agency agrees to pay a sum, determined by fee schedule, payment methodology, or other manner, for the service or goods provided to the Medicaid recipient. Each provider agreement shall be effective for a stipulated period of time, shall be terminable by either party after reasonable notice, and shall be renewable by mutual agreement.
The provider agreement developed by the agency, in addition to the requirements specified in subsections (1) and (2), shall require the provider to:
Have in its possession at the time of signing the provider agreement, and maintain in good standing throughout the period of the agreement's effectiveness, a valid professional or facility license pertinent to the services or goods being provided, as required by the state or locality in which the provider is located, and the Federal Government, if applicable.
Maintain in a systematic and orderly manner all medical and Medicaid-related records[17] that the agency requires and determines are relevant to the services or goods being provided.
Retain all medical and Medicaid-related records for a period of 5 years to satisfy all necessary inquiries by the agency.
Safeguard the use and disclosure of information pertaining to current or former Medicaid recipients and comply with all state and federal laws pertaining to confidentiality of patient information.
Permit the agency, the Attorney General, the Federal Government, and the
authorized agents of each of these entities access to all Medicaid-related information, which may be in the form of records, logs, documents, or computer files, and other information pertaining to services or goods billed to the Medicaid program, including access to all patient records and other provider information if the provider cannot easily separate records for Medicaid patients from other records.
Bill other insurers and third parties, including the Medicare program, before billing the Medicaid program, if the recipient is eligible for payment for health care or related services from another insurer or person, and comply with all other state and federal requirements in this regard.
Promptly report any moneys received in error or in excess of the amount to which the provider is entitled from the Medicaid program, and promptly refund such moneys to the agency.
Be liable for and indemnify, defend, and hold the agency harmless from all claims, suits, judgments, or damages, including court costs and attorney's fees, arising out of the negligence or omissions of the provider in the course of providing services to a recipient or a person believed to be a recipient.
At the option of the agency, provide proof of liability insurance and maintain such insurance in effect for any period during which services or goods are furnished to Medicaid recipients.
Accept Medicaid payment as payment in full, and prohibit the provider from billing or collecting from the recipient or the recipient's responsible party any additional amount except, and only to the extent the agency permits or requires, copayments,
coinsurance, or deductibles to be paid by the recipient for the services or goods provided. The Medicaid payment-in-full policy does not apply to services or goods provided to a recipient if the services or goods are not covered by the Medicaid program.
* * *
(5) The agency:
Is required to make timely payment at the established rate for services or goods furnished to a recipient by the provider upon receipt of a properly completed claim form. The claim form shall require certification that the services or goods have been completely furnished to the recipient and that, with the exception of those services or goods specified by the agency, the amount billed does not exceed the provider's usual and customary charge for the same services or goods.
Is prohibited from demanding repayment from the provider in any instance in which the Medicaid overpayment is attributable to error of the department in the determination of eligibility of a recipient.
May adopt, and include in the provider agreement, such other requirements and stipulations on either party as the agency finds necessary to properly and efficiently administer the Medicaid program.
* * *
During the Audit Period, Section 409.913(7), (8), and (10), Florida Statutes, provided as follows:
* * *
When presenting a claim[18] 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:
Have actually been furnished to the recipient by the provider prior to submitting the claim.
Are Medicaid-covered goods or services that are medically necessary.
Are of a quality comparable to those furnished to the general public by the provider's peers.
Have not been billed in whole or in part to a recipient or a recipient's responsible party, except for such copayments, coinsurance, or deductibles as are authorized by the agency.
Are provided in accord with applicable provisions of all Medicaid rules, regulations, handbooks, and policies and in accordance with federal, state, and local law.
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.
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. The agency may investigate, review, or analyze such records, which must be made available during normal business hours. However, 24-hour notice must be provided if patient treatment would be disrupted. The provider is responsible for furnishing to the agency, and keeping the agency informed of the location of, the provider's Medicaid-related records. The authority of the agency to obtain Medicaid- related records from a provider is neither curtailed nor limited during a period of litigation between the agency and the provider.
* * *
(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.
During the Audit Period, Section 465.015(2), Florida Statutes, made it unlawful for any person:
* * *
To fill, compound, or dispense prescriptions[19] or to dispense medicinal drugs if such person does not hold an active license as a pharmacist in this state, is not registered as an intern in this state, or is an intern not acting under the direct and immediate personal supervision of a licensed pharmacist.
To sell or dispense drugs as defined in
s. 465.003(8) without first being furnished with a prescription.
* * *
During the Audit Period, there were provisions of the PDSCLR Handbook and Florida Administrative Code (specified in the Findings of Fact portion of this Recommended Order) in effect that contained recordkeeping requirements that had to be met by providers seeking Medicaid reimbursement from AHCA for the provision of pharmacy services.
As a general rule, the law now in effect governs the procedures that AHCA must follow in determining whether a provider has been overpaid by Medicaid. See Agency for Health Care Administration, v. Colonial Cut-Rate Drugs, Inc., 878 So. 2d 479, 480 (Fla. 1st DCA 2004); Gupton v. Village Key & Saw Shop, Inc., 656 So. 2d 475, 477 (Fla. 1995)("Statutes that relate only to procedure or remedy generally apply to all pending cases."); Young v. Altenhaus, 472 So. 2d 1152, 1154 (Fla. 1985)("[S]tatutes which relate only to the procedure or remedy are generally held applicable to all pending cases."); Turro v. Department of Health and Rehabilitative Services, 458 So. 2d 345, 346 (Fla. 1st DCA 1984)("In part because Rule 10- 5.11(23) did not become formally effective until after commencement of the hearing on the applications, Community argues that it was improper to apply the standards stated in the rule to their application. However, the rule prescribes an evidentiary standard and is thus procedural in nature. As such it became applicable and controlling on its effective date.");
Batch v. State, 405 So. 2d 302, 304 (Fla. 4th DCA 1981)("This section became effective on October 1, 1978, which was after appellant's criminal act but before his trial and sentencing. Nevertheless, the section is procedural and such statutory changes apply to pending cases."); Florence Western Medical Clinic v. Coye, 91 Cal. Rptr. 2d 609, 616 (Cal. App. 2000)("A statute addressing procedures to be utilized in legal proceedings not yet concluded operates prospectively for acts to be performed after the effective date of the statute."); Union of American Physicians and Dentists v. Kizer, 272 Cal. Rptr.
886, 894-95 (Cal. App. 1990)("The Department submits that since statistical probability sampling is a currently effective procedure or process and not a matter of substance, it properly may be utilized on reexamination of individual Medi-Cal providers. The UAPD contends the use of CCR section 51458.2 in audits commenced prior to its effective date would be an impermissible retroactive application of the regulation. The UAPD's retroactivity argument lacks merit. . . . CCR section 51458.2 does not substantially alter the legal effect of past events and merely serves to expedite provider audits. Assuming the use of random sampling and extrapolation is statistically valid, such audit method does nothing to alter the amount of compensation to which a provider otherwise is entitled. Because the use of statistical sampling and extrapolation pursuant to
CCR section 51458.2 will not substantially change the legal effect of events which occurred prior to its May 13, 1988 effective date, the regulation may be utilized in audits which were commenced prior to that date."); State v. Kummer, 741 S.W.2d 285, 289 (Mo. App. 1987)("The State contends that §§ 577.020.3, 577.026.1 and 577.037.4 do not require that the method of analysis be approved at the time of the incident but that it is sufficient if the method of analysis was approved at the time it is offered in evidence. We agree. It is sufficient if the method of gas chromatography analysis is approved at the time the results are offered, despite the respondent's position that this would constitute a retrospective application of the rules and regulations. . . . The methods and techniques 'approved' by the Department of Health deal with the 'admissibility' of blood alcohol chemical analysis. As such, the rules and regulations relate to 'evidence' and the admissibility of such evidence. These regulations are 'procedural' so that the respondent cannot complain that the rules were not promulgated at the time of the fatal incident.
It is sufficient, for procedural admissibility and evidentiary purposes, that the rules were approved at the time of the motion hearing and that the test and analysis were conducted in accordance with those rules."); and Colgan v. Hammond, 472 A.2d 497, 500 (Md. App. 1984)("The 1982 Amendment is procedural in
nature, changing the evidentiary rule governing admissibility of the blood test results. The amendment does not modify the parties' substantive rights. Ordinarily, where a statute makes a change affecting procedure only, and not substantive rights, the change applies to all actions whether accrued, pending or future, unless a contrary intention is expressed.")(citation omitted).
This general rule that procedural statutes apply to pending cases gives way where the Legislature has provided otherwise in the procedural statute in question, as it has done in the version of Section 465.188, Florida Statutes, currently in effect. See Department of Revenue v. Zuckerman-Vernon Corp., 354 So. 2d 353, 358 (Fla. 1977)("The 1977 Legislature's inclusion of an effective date of July 1, 1977, in Ch. 77-281 effectively rebuts any argument that retroactive application of the law was intended."); A. R. Douglass, Inc., v. McRainey, 137 So. 157, 159 (Fla. 1931)("The intention and meaning of the Legislature must primarily be determined from the language of the statute itself and not from conjectures aliunde. When the language of the statute is clear and unambiguous and conveys a clear and definite meaning, there is no occasion for resorting to the rules of statutory interpretation and construction; the statute must be given its plain and obvious meaning."); and Fogg v. Southeast Bank, N.A., 473 So. 2d 1352, 1353-54 (Fla. 4th DCA
1985)("Generally, statutes operate only prospectively as they might otherwise impinge upon vested rights or create new liabilities. On the other hand, statutes relating to remedies or procedure and including forfeitures operate retrospectively in the sense that all pending proceedings, including matters on appeal, are determined under the law in effect at the time of decision rather than that in effect when the cause of action arose or some earlier time. In either event, whether the statutory change is substantive or procedural, a clear statement of legislative intent may, under appropriate circumstances, determine whether the amendment is to have retroactive effect.").
Following the issuance of the undersigned's August 25, 2003, Order on Pending Motions in the instant case, in which he "confirmed" the applicability to the instant case of the "procedural requirements" of the then-current version of Section 465.188, Florida Statutes (that had been enacted by Chapter
2003-277, Laws of Florida), the Legislature, in what can reasonably be viewed as a response to this holding,20 enacted Chapter 2004-344, Laws of Florida, which amended Section 465.188, Florida Statutes, effective July 1, 2004, to read as follows (with the underlined language having been added to the statute):
Notwithstanding any other law, when an audit of the Medicaid-related records of a pharmacy licensed under chapter 465 is conducted, such audit must be conducted as provided in this section.
The agency conducting the audit must give the pharmacist at least 1 week's prior notice of the initial audit for each audit cycle.
An audit must be conducted by a pharmacist licensed in this state.
Any clerical or recordkeeping error, such as a typographical error, scrivener's error, or computer error regarding a document or record required under the Medicaid program does not constitute a willful violation and is not subject to criminal penalties without proof of intent to commit fraud.
A pharmacist may use the physician's record or other order for drugs or medicinal supplies written or transmitted by any means of communication for purposes of validating the pharmacy record with respect to orders or refills of a legend or narcotic drug.
A finding of an overpayment or underpayment must be based on the actual overpayment or underpayment and may not be a projection based on the number of patients served having a similar diagnosis or on the number of similar orders or refills for similar drugs.
Each pharmacy shall be audited under the same standards and parameters.
A pharmacist must be allowed at least
10 days in which to produce documentation to address any discrepancy found during an audit.
The period covered by an audit may not exceed 1 calendar year.
An audit may not be scheduled during the first 5 days of any month due to the high volume of prescriptions filled during that time.[21]
The audit report must be delivered to the pharmacist within 90 days after conclusion of the audit. A final audit report shall be delivered to the pharmacist within 6 months after receipt of the preliminary audit report or final appeal, as provided for in subsection (2), whichever is later.
The audit criteria set forth in this section applies [sic] only to audits of claims submitted for payment subsequent to July 11, 2003. Notwithstanding any other provision in this section, the agency conducting the audit shall not use the accounting practice of extrapolation in calculating penalties for Medicaid audits.
The Agency for Health Care Administration shall establish a process under which a pharmacist may obtain a preliminary review of an audit report and may appeal an unfavorable audit report without the necessity of obtaining legal counsel. The preliminary review and appeal may be conducted by an ad hoc peer review panel, appointed by the agency, which consists of pharmacists who maintain an active practice. If, following the preliminary review, the agency or review panel finds that an unfavorable audit report is unsubstantiated, the agency shall dismiss the audit report without the necessity of any further proceedings.
This section does not apply to investigative audits conducted by the Medicaid Fraud Control Unit of the Department of Legal Affairs.
This section does not apply to any investigative audit conducted by the Agency for Health Care Administration when the agency has reliable evidence that the claim that is the subject of the audit involves fraud, willful misrepresentation, or abuse under the Medicaid program.
It is true that, inasmuch as Section 465.188, Florida Statutes, addresses Medicaid audits of pharmacy providers specifically, within the scope of its operation it controls over any conflicting statutory provision dealing with Medicaid audits in general. See Palm Beach County Canvassing Board v. Harris, 772 So. 2d 1273, 1287 (Fla. 2000)("[I]t is well settled that where two statutory provisions are in conflict, the specific statute controls the general statute."); McKendry v. State, 641 So. 2d 45, 46 (Fla. 1994)("[A] specific statute covering a particular subject area always controls over a statute covering the same and other subjects in more general terms. The more specific statute is considered to be an exception to the general terms of the more comprehensive statute.")(citations omitted); and Ortiz v. Department of Health, Board of Medicine, 882 So. 2d 402, 405 (Fla. 4th DCA 2004)("[T]he more specific statute controls over the general one."). Section 465.188's scope of operation, however, has been limited (as a result of the amendments made by Chapter 2004-344, Laws of Florida) in a way that impacts the instant case. It now plainly provides that the "audit criteria set forth in this section appl[y] only to audits
of claims submitted for payment subsequent to July 11, 2003,"22 with the caveat (contained in the second sentence of Subsection (1)(k) of the statute) that, regardless of when the audited claims were submitted for payment, the "accounting practice of extrapolation" may not be used "in calculating [any] penalties" to be assessed.
The instant case involves an audit of "claims submitted for payment [prior] to July 11, 2003." Such being the case, in determining whether, and, if so to what extent, Petitioner was overpaid for these Audit Period Claims, the "audit criteria" set forth in Section 465.188, Florida Statutes, as amended by Chapter 2004-344, Laws of Florida, including the requirement that "[a] finding of an overpayment . . . must be based on the actual overpayment . . . and may not be a projection,"23 are inapplicable. Furthermore, employing the "accounting practice of extrapolation" in calculating the amount of any overpayment is not prohibited by the second sentence of Subsection (1)(k) of the current version of Section 465.188 since the recovery of an overpayment (that is, monies the provider should not have received from AHCA in the first place) is not a penalty. See Bennett v. Kentucky Department of Education, 470 U.S. 656, 662-63, 105 S. Ct. 1544, 1548-49 (1985)("We note initially that the Court of Appeals erred in characterizing the issue to be the fairness of imposing
sanctions against the State for its failure to comply substantially with the requirements of Title I. Although recovery of misused Title I funds clearly is intended to promote compliance with the requirements of the grant program, a demand for repayment is more in the nature of an effort to collect upon a debt than a penal sanction. The State gave certain assurances as a condition for receiving the federal funds, and if those assurances were not complied with, the Federal Government is entitled to recover amounts spent contrary to the terms of the grant agreement. More specifically, the State gave assurances that Title I funds would be used only for programs which had been reviewed and approved by the state education agency and which met applicable statutory and regulatory requirements. The issue in this case is not the fairness of imposing punitive measures, but instead whether the Secretary properly determined that Kentucky failed to fulfill its assurances by approving programs that violated the requirements of Title I.")(citations omitted); Watson v Sullivan, 940 F.2d 168, 172 (6th Cir.
1991)("[T]he repayment [of $6,265 in social security disability benefits Watson was overpaid] is not punitive in nature. A mistake occurred, of which Watson was the beneficiary. Now he has to make the public fisc whole."); City of Camden, N.J. v.
U.S. Department of Labor, 831 F.2d 449, 451 (3d Cir. 1987)("[W]e note that this [action to recover misspent CETA funds] is an
action to recover a debt; it is not a proceeding to impose penal sanctions."); Stone Boat Yard v. N.L.R.B., 715 F.2d 441, 446 (9th Cir. 1983)("Stone's first contention, that the order [requiring payment of past due contributions to the union's health and welfare and pension funds] is punitive rather than remedial, conflicts with existing Ninth Circuit
precedent. . . . The company is merely required to repay what it has unlawfully withheld."); Sun Coast International Inc. v. Department of Business Regulation, Division of Florida Land Sales, Condominiums and Mobile Homes, 596 So. 2d 1118, 1120-21 (1st DCA 1992)("[W]e consider it essential to point out that the terms 'restitution' and 'penalty' are not synonymous. The
primary purpose of restitution is to restore the plaintiff to the position in which he or she was before the defendant received the benefit which gave rise to the obligation to restore; hence the plaintiff is entitled to recover that which he or she parted with, or that which the defendant has received. . . . A penalty, on the other hand, is not designed as a means of restoring an aggrieved person to his or her original position."); Hyman v. State, Department of Business Regulation, Division of Pari-Mutuel Wagering, 431 So. 2d 603,
604-05 (Fla. 3d DCA 1983)("We cannot consider that this process, which accomplishes the restitution of sums to individuals who should have received them in the first place from those who in
fairness, should not, imposes a 'penalty' within the meaning of the constitutional proscription.")(citations omitted); In re
Application of A.R.E.B.A. Casriel, Inc., 748 N.Y.S.2d 547, 548 (N.Y. App. Div. 2002)("In directing repayment of the overpaid amounts, respondent was not required to consider the enumerated factors under 18 NYCRR § 515.4(b), since petitioner's reimbursement of the unauthorized [Medicaid] payments is not a sanction or penalty, but merely a remedy in the nature of recoupment."); Calabro v. Department of Aging, 689 A.2d 347, 352 (Pa. Commw. Ct. 1997)("[W]e hold that the recoupment of all monies involved in such claims is not excessive and constitutes liquidated damages, recoverable under the provider Agreement and applicable regulations, not a 'penalty.'"); Mitchell v. Leslie,
46 Cal.Rptr.2d 419, 422 (Cal. App. Dep't Super. Ct.
1995)("[R]estitution of excess rent is not a penalty ");
and Perrin v. Johnson, 124 S.W.2d 551, 555 (Mo. App. 1939)("While failure to tender the release charge, within itself, defeated plaintiff's cause of action for a recovery of a penalty, it did not affect his right to recover for overpayments, if any.").
Overpayment-determining audits, like the one performed in the instant case, of "claims submitted [by Medicaid pharmacy providers] for payment [prior] to July 11, 2003," must comply with the "audit criteria" set forth, not in Section 465.188,
Florida Statutes, as amended by Chapter 2004-344, Laws of Florida, but in Section 409.913(20), Florida Statutes, which addresses Medicaid audits in general and provides as follows:
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.
Appropriate analytical methods may include, but are not limited to, reviews to determine variances between the quantities of products that a provider had on hand and available to be purveyed to Medicaid recipients during the review period and the quantities of the same products paid for by the Medicaid program for the same period, taking into appropriate consideration sales of the same products to non-Medicaid customers during the same period. In meeting its burden of proof in any administrative or court proceeding, the agency may introduce the results of such statistical methods as evidence of overpayment.
Pursuant to Section 409.913(21), Florida Statutes, "[w]hen making a determination that an overpayment has occurred, [AHCA must] prepare and issue an audit report to the provider showing the calculation of overpayments."
A provider who is the subject of an audit report that reveals overpayments is entitled to an administrative hearing pursuant to Chapter 120, Florida Statutes, before AHCA takes final agency action ordering repayment.
At any such hearing, AHCA has the burden of establishing, by a preponderance of the evidence, that Medicaid overpayments in the amount it is seeking to recoup were made to the provider. See South Medical Services, Inc. v. Agency for Health Care Administration, 653 So. 2d 440, 441 (Fla. 3d DCA 1995); Southpointe Pharmacy v. Department of Health and
Rehabilitative Services, 596 So. 2d 106, 109 (Fla. 1st DCA 1992); Florida Department of Transportation v. J.W.C. Co., Inc.,
396 So. 2d 778, 788 (Fla. 1st DCA 1981); Florida Department of Health and Rehabilitative Services, Division of Health v. Career
Service Commission, 289 So. 2d 412, 415 (Fla. 4th DCA 1974); and Full Health Care, Inc. v. Agency for Health Care Administration, No. 00-4441, 2001 WL 729127 *8 (Fla. DOAH June 25, 2001)
(Recommended Order).
Section 409.913(22), Florida Statutes, provides that "[t]he audit report, supported by agency work papers, showing an overpayment to a provider constitutes evidence of the overpayment." It has been said that this language enables AHCA to "make a prima facie case without doing any heavy lifting: it need only proffer a properly-supported audit report, which must be received in evidence." Full Health Care, Inc. v. Agency for Health Care Administration, 2001 WL 729127 *8.
Section 409.913(22), Florida Statutes, further provides as follows:
. . . . A provider may not present or elicit testimony, either on direct examination or cross-examination in any court or administrative proceeding, regarding the purchase or acquisition by any means of drugs, goods, or supplies; sales or divestment by any means of drugs, goods, or supplies; or inventory of drugs, goods, or supplies, unless such acquisition, sales, divestment, or inventory is documented by written invoices, written inventory records, or other competent written documentary evidence maintained in the normal course of the provider's business. Notwithstanding the applicable rules of discovery, all documentation that will be offered as evidence at an administrative hearing on a Medicaid overpayment must be exchanged by all parties at least 14 days before the administrative hearing or must be excluded from consideration.
"In other words, once [AHCA] has put on a prima facie case of overpayment----which may involve no more than moving a properly- supported audit report into evidence----the provider is obligated to come forward with written proof to rebut, impeach, or otherwise undermine the Agency's statutorily-authorized evidence; it cannot simply present witnesses to say that the Agency lacks evidence or is mistaken."24 Full Health Care, Inc. v. Agency for Health Care Administration, 2001 WL 729127 *9.25
As is reflected in the Findings of Fact set forth above, at the administrative hearing that Petitioner requested and was granted in the instant case, AHCA met its burden of proving, by a preponderance of the evidence, that Petitioner
received Medicaid overpayments in the amount AHCA is seeking to recover from Petitioner ($137,431.56).
AHCA met its burden of proof through the presentation of documentary evidence (including the Final Agency Audit Report26 and supporting audit work papers) and testimonial evidence (including testimony authenticating these documents, as well as expert testimony establishing that the statistical methods used in the "claims analysis" portion of the audit were compliant with the requirements of Section 409.913(20), Florida Statutes27).
Petitioner failed to present evidence sufficient to overcome AHCA's prima facie case (showing $137,431.56 in overpayments). It did not offer any documentation relating to any of the Audit Period Claims or payments it received therefor. Neither did it present any expert testimony establishing that AHCA's $137,431.56 overpayment determination was the product of statistical methods not meeting the requirements of Section 409.913(20), Florida Statutes. In brief, its presentation (of evidence, as well as argument) was unpersuasive in light of the controlling law,28 and it fell short of "undermining [AHCA's] statutorily-authorized evidence."29
Petitioner's not having overcome AHCA's prima facie
showing, AHCA should enter a final order finding that Petitioner was overpaid a total of $137,431.56 for Medicaid claims
submitted for pharmacy services assertedly rendered during the Audit Period.30 Were AHCA to do otherwise it would be acting in derogation of its statutory responsibility, under Section 409.913, Florida Statutes, to exercise oversight of the integrity of the Florida's Medicaid program.
Not only is AHCA seeking to recover the $137,431.56 in overpayments Petitioner received, it also seeks to impose a "sanction" on Petitioner: subjecting Petitioner to a "comprehensive follow-up review in six months."
AHCA acknowledges in its Proposed Recommended Order (citing Department of Banking and Finance, Division of Securities and Investor Protection v. Osborne Stern and Co., 670 So. 2d 932, 935 (Fla. 1996)) that "[t]he basis for imposing [this sanction] must be proven by clear and convincing evidence."
Although AHCA now has the authority, pursuant to Section 409.913(16)(h), Florida Statutes, to "sanction" providers by ordering "[c]omprehensive followup
reviews . . . every 6 months to ensure that they are billing Medicaid correctly," it was not authorized to impose this "sanction" until June 7, 2002, the effective date of Chapter 2002-400, the legislative enactment which added to Section 409.913 the language now found in Subsection (16)(h) of the statute.
Since the wrongdoing alleged in the instant case occurred prior to June 7, 2002, AHCA may not "sanction" Petitioner for engaging in such wrongdoing by ordering a "comprehensive follow-up review in six months."31 See Willner v. Department of Professional Regulation, Board of Medicine, 563 So. 2d 805, 806 (Fla. 1st DCA 1990)("[A]ppellant argues that the fines imposed against him are in violation of the ex post facto provisions of the state and federal constitutions. We agree.
In 1986, Section 458.331(2)(d), Florida Statutes, was amended to increase the amount of the maximum administrative fine which could be assessed by appellee for violations of Section 458.331(1), Florida Statutes. The 1986 amendment increased the maximum fine from $1,000 per violation to $5,000 per violation. Since all the violations for which appellant was found guilty occurred prior to the effective date of the 1986 amendment, the maximum fine which could lawfully be imposed by appellee was
$1,000 per violation.")(citation omitted); and Baker v. State,
499 So. 2d 15, 16 (Fla. 2d DCA 1986)("Appellant argues that the order requiring him to pay costs violated the constitutional prohibition against ex post facto laws (U.S. Const. art. I, § 9; Fla. Consti. Art. I, § 10), since it imposed a penalty that was not in effect at the time that appellant committed the
offense. . . . Appellant's crime occurred on June 25, 1985, and the section under which appellant was ordered to pay costs
(section 27.3455, Florida Statutes (1985)) became effective on July 1, 1985. We agree . . . that the imposition of costs here pursuant to section 27.3455 violated the constitutional prohibition against ex post facto laws and is, as such, invalid.")(citation omitted).
Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby
RECOMMENDED that AHCA enter a final order finding that Petitioner received $137,431.56 in Medicaid overpayments for paid claims covering the period from January 1, 1999, through October 20, 2000, and requiring Petitioner to repay this amount to AHCA; and that AHCA decline to order a "comprehensive follow- up review [of Petitioner] in six months."
DONE AND ENTERED this 14th day of March, T2005, in allahassee, Leon County, Florida.
S
STUART M. LERNER
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 14th day of March, 2005.
ENDNOTES
1 Given this factual stipulation, the undersigned is precluded from making a finding that, during the Audit Period, Petitioner acquired, from sources other than "pharmaceutical wholesalers licensed under Florida law," any of the "drugs it subsequently sold or dispensed." See Columbia Bank for Cooperatives v. Okeelanta Sugar Cooperative, 52 So. 2d 670, 673 (Fla. 1951)("When a case is tried upon stipulated facts the stipulation is conclusive upon both the trial and appellate courts in respect to matters which may validly be made the subject of stipulation. Indeed, on appeal neither party will be heard to suggest that the facts were other than as stipulated or that any material facts w[ere] omitted"); Schrimsher v. School Board of Palm Beach County, 694 So. 2d 856, 863 (Fla. 4th DCA 1997)("The hearing officer is bound by the parties' stipulations."); and Palm Beach Community College v. State, Department of Administration, Division of Retirement, 579 So. 2d 300, 302 (Fla. 4th DCA 1991)("When the parties agree that a case is to be tried upon stipulated facts, the stipulation is binding not only upon the parties but also upon the trial and reviewing courts. In addition, no other or different facts will be presumed to exist.").
2 Although the parties have listed this as one of the "issues of law which remain for determination by the Administrative Law Judge," neither the undersigned, nor AHCA (which has final order authority in this case) is empowered to declare a statute unconstitutional. See Palm Harbor Special Fire Control District v. Kelly, 516 So. 2d 249, 250 (Fla. 1987)("[I]t is axiomatic that an administrative agency has no power to declare a statute void or otherwise unenforceable."); Lennar Homes, Inc. v. Department of Business and Professional Regulation, Division of Florida Land Sales, Condominiums and Mobile Homes, 888 So. 2d 50, 53 (Fla. 1st DCA 2004)("[A]n agency does not possess the authority to determine the constitutionality of statutes."); and Florida Hospital v. Agency for Health Care Administration, 823 So. 2d 844, 849 (Fla. 1st DCA 2002)("Administrative agencies lack the power to consider or determine constitutional issues.").
3 Even if these exhibits had been admitted and considered, the outcome of the instant case would be the same.
4 These factual stipulations have been accepted. See cases cited in endnote 1, supra.
5 In July 1999, this "Right to Review Records" provision in the PDSCLR Handbook was revised to read as follows:
Authorized state and federal agencies and their authorized representatives may audit or examine a provider's or facility's records. This examination includes all records that the agency finds necessary to determine whether Medicaid payments were or are due. This requirement applies to the provider's records and records for which the provider is the custodian. The provider must give authorized state and federal agencies and their authorized representatives access to all Medicaid patient records and to other information that cannot be separated from Medicaid- related records.
The provider must send, at his or her expense, legible copies of all Medicaid- related information to the authorized state and federal agencies and their authorized representatives.
6 Because Petitioner's entitlement to payment for a claim was dependent upon its having the "required [supporting] documentation," the "lack [of this] required documentation" cannot be dismissed, as Petitioner in its Proposed Recommended Order suggests it should be, as a "mere technical error." See Colonnade Medical Center, Inc. v. State, Agency for Health Care Administration, 847 So. 2d 540, 542-43 (Fla. 4th DCA 2003)("Colonnade also contends that the final order [directing that Colonnade repay $49,965.30 in Medicaid overpayments] is unsupported by competent, substantial evidence. . . .
Colonnade's arguments lack merit. Colonnade argues that there is no evidence that the services rendered were inappropriate, medically unnecessary, or excessive. This argument misconstrues the final judgment. The judgment was not based on any finding as to the quality of care received. Instead, the judgment was
based on Colonnade's failure to comply with the Medicaid billing requirement of prior authorization. Colonnade stipulated to not receiving prior authorization and, thus, competent, substantial evidence existed to support the judgment on this basis.").
7 In requesting Heritage to take such action on its behalf, AHCA was exercising its statutory authority under Section 409.913(2), Florida Statutes, to "cause to be conducted . . . audits . . . to determine possible . . . overpayment . . . in the Medicaid program."
8 At the request of AHCA, Petitioner was not given advance notice of the audit.
9 The lone witness to give expert testimony regarding the matter, Mark Johnson, a professor of statistics at the University of Central Florida, testified that this "random sample appear[ed] to be appropriate," a conclusion that the undersigned, having no reason to believe otherwise, has accepted. See Wiederhold v. Wiederhold, 696 So. 2d 923, 924 (Fla. 4th DCA 1997)("[W]hile the trial court can reject unrebutted expert testimony, it must offer a reasonable explanation for doing so. In other words, the trial court as fact-finder cannot arbitrarily reject unrebutted expert testimony.")(citation omitted).
10 In its Proposed Recommended Order, Petitioner argues that, even assuming it "did fail to properly document refill authorizations" as alleged in the "discrepancy listings," the "total recovery" of the payments made for these claims (or, for that matter, the recovery of anything "more than the $4.23 dispensing fee" for each such claim) would be unreasonable. The undersigned disagrees, inasmuch as Petitioner's "properly document[ing] refill authorizations" was a prerequisite to its being entitled to receive any payment for these claims under the Provider Agreement and therefore all monies AHCA paid Petitioner for these claims constitute "overcharges" subject to recoupment.
11 The formula employed to produce this result is a well- established one that is found "in standard statistics [text]books such as the one [Professor Johnson] used last fall [semester] at UCF."
12 This Final Agency Audit Report represented, in actuality, only proposed, and not final, agency action. See Beverly Enterprises-Florida, Inc. v. Department of Health and
Rehabilitative Services, 573 So. 2d 19, 23 (Fla. 1st DCA 1990)("A request for a formal administrative hearing commences a de novo proceeding intended to formulate agency action, and not to review action taken earlier or preliminarily."); Boca Raton Artificial Kidney Center, Inc. v. Florida Department of Health and Rehabilitative Services, 475 So. 2d 260, 261-62 (Fla. 1st DCA 1985)("Although the CON in question does not so state, it represents preliminary agency action. That the actual certificate fails to state that it is a 'notice of intent to issue CON' or that it is 'subject to administrative review' does not change the character of the certificate as preliminary agency action. Such action is subject to administrative review via Section 120.57(1) or (2) hearings on the petition of a substantially affected party."); Capeletti Brothers, Inc. v.
Department of General Services, 432 So. 2d 1359, 1363 (Fla. 1st DCA 1983)("Capeletti misconceives the purpose of the [Section]
120.57 hearing. The rejection of bids never became final agency action. As we have previously held, APA hearing requirements are designed to give affected parties an opportunity to change the agency's mind."); and McDonald v. Department of Banking and Finance, 346 So. 2d 569, 584 (Fla. 1st DCA 1977)("Section 120.57 proceedings are intended to formulate final agency action, not to review action taken earlier and preliminarily.").
13 There has been no allegation made, nor proof submitted, that Petitioner's overbillings were the product of anything other than simple mistake or inadvertence on Petitioner's part.
14 Section 409.912(39)(a)6. and 7., Florida Statutes, provides as follows:
The agency shall implement a Medicaid prescribed-drug spending-control program that includes the following components:
The agency may enter into arrangements that require manufacturers of generic drugs prescribed to Medicaid recipients to provide rebates of at least 15.1 percent of the average manufacturer price for the manufacturer's generic products. These arrangements shall require that if a generic-drug manufacturer pays federal rebates for Medicaid-reimbursed drugs at a level below 15.1 percent, the manufacturer must provide a supplemental rebate to the
state in an amount necessary to achieve a 15.1-percent rebate level.
The agency may establish a preferred drug formulary in accordance with 42 U.S.C. 1396r-8, and, pursuant to the establishment of such formulary, it is authorized to negotiate supplemental rebates from manufacturers that are in addition to those required by Title XIX of the Social Security Act and at no less than 14 percent of the average manufacturer price as defined in 42
U.S.C. s. 1936 on the last day of a quarter unless the federal or supplemental rebate, or both, equals or exceeds 29 percent. There is no upper limit on the supplemental rebates the agency may negotiate. The
agency may determine that specific products, brand-name or generic, are competitive at lower rebate percentages. Agreement to pay the minimum supplemental rebate percentage will guarantee a manufacturer that the Medicaid Pharmaceutical and Therapeutics Committee will consider a product for inclusion on the preferred drug formulary.
However, a pharmaceutical manufacturer is not guaranteed placement on the formulary by simply paying the minimum supplemental rebate. Agency decisions will be made on the clinical efficacy of a drug and recommendations of the Medicaid Pharmaceutical and Therapeutics Committee, as well as the price of competing products minus federal and state rebates. The agency is authorized to contract with an outside agency or contractor to conduct negotiations for supplemental rebates. For the purposes of this section, the term "supplemental rebates" means cash rebates. Effective
July 1, 2004, value-added programs as a substitution for supplemental rebates are prohibited. The agency is authorized to seek any federal waivers to implement this initiative.
15 "The Medicaid program provides reimbursement to service providers on a 'pay-and-chase' basis. In other words, claims are paid initially subject to preliminary review. Petitioner or its agent may later subject these claims to closer scrutiny during periodic audits. If overpayments are found, Petitioner obtains reimbursement from the service provider." Agency for Health Care Administration v. Cabrera, No. 92-1898, 1994 WL 1027571 *2 (Fla. DOAH January 24, 1994)(Recommended Order).
16 Pursuant to 42 C.F.R. § 433.316(c):
An overpayment resulting from a situation other than fraud or abuse is discovered on the earliest of--
The date on which any Medicaid agency official or other State official first notifies a provider in writing of an overpayment and specifies a dollar amount that is subject to recovery;
The date on which a provider initially acknowledges a specific overpaid amount in writing to the medicaid agency; or
The date on which any State official or fiscal agent of the State initiates a formal action to recoup a specific overpaid amount from a provider without having first notified the provider in writing.
17 "Medicaid-related records," as that term was used in Sections 409.901 through 409.920, Florida Statutes, was defined in Section 409.901 as "records that relate to the provider's business or profession and to a Medicaid recipient."
18 "Claim," as that term was used in Sections 409.901 through 409.920, Florida Statutes, was defined in Section 409.901 as "any communication, whether written or electronic (electronic impulse or magnetic), which is used by any person to apply for payment from the Medicaid program or its fiscal agent for each item or service purported by any person to have been provided by a person to any Medicaid recipient."
19 "Prescription," as that term was used in Section 465.015, Florida Statutes, was defined in Section 465.003 as follows:
"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 them to be recorded in a data processing system, provided that such order can be produced in printed form upon lawful request.
20 See Nicoll v. Baker, 668 So. 2d 989, 991 (Fla. 1996)("[W]e must presume that when the legislature amended the statute in 1992 it knew of our ruling in Quigley: 'The legislature is presumed to be cognizant of the judicial construction of a statute when contemplating making changes in the statute. '
Quigley, 463 So. 2d at 226. Thus, our holding in Quigley has been superseded by the 1992 amendment."); Bidon v. Department of Professional Regulation, 596 So. 2d 450, 452 (Fla. 1992)("For purposes of ascertaining the legislative intent in limiting reimbursement under the subsection, the legislature is presumed to have been aware of the case law excluding attorney's fees from the recovery of actual or compensatory damages."); Health Options, Inc. v. Agency For Health Care Administration, 889 So. 2d 849, 851 (Fla. 1st DCA 2004)(There is a "long-recognized presumption that the legislature is presumed to know both existing law and the judicial constructions placed
thereon . . . ."); and Bermudez v. Florida Power & Light Co.,
433 So. 2d 565, 567 (Fla. 3d DCA 1983)("The legislature is presumed to know the existing law when it enacts a statute. And, it is presumed that the legislature was acquainted with the judicial construction of former laws on the subject concerning which some statute is enacted.").
21 Legislative findings, such as the finding (included in Section 465.188(1)(i), Florida Statutes) that there is a "high volume of prescriptions filled" during the first five days of every month, are "presumed to be correct but are not binding upon the courts under all conditions. The courts will abide by such legislative decisions unless such are clearly erroneous, arbitrary or wholly unwarranted." Moore v. Thompson, 126 So. 2d 543, 549 (Fla. 1961). While they may be challenged in a judicial proceeding, legislative findings are not subject to challenge in an administrative proceeding. See Communications Workers of America, Local 3170 v. City of Gainesville, 697 So. 2d 167, 170 (Fla. 1st DCA 1997)("The Administrative Procedure Act does not purport to confer authority on administrative law judges or other executive branch officers to invalidate statutes on constitutional or any other grounds.").
22 July 11, 2003, was the effective date of Chapter 2003-277, Laws of Florida, the enactment which produced the original version of Section 465.188, Florida Statutes.
23 The undersigned has considered, but has rejected as unpersuasive, the argument made by Petitioner in its Proposed Recommended Order that this prohibition (contained in Subsection (1)(e) of Section 465.188, Florida Statutes, as amended by Chapter 2004-344, Laws of Florida, against the use of projections in conducting Medicaid audits of pharmacies to determine if any overpayments were made) is not among the "audit criteria" referred to in Subsection (1)(k) of the statute (which "appl[y] only to audits of claims submitted for payment subsequent to July 11, 2003").
24 "[O]bligat[ing a provider] to come forward with written proof to rebut, impeach, or otherwise undermine the Agency's statutorily-authorized evidence" of overpayment is not an unreasonable burden to place on the provider. See Illinois Physicians Union v. Miller, 675 F.2d 151, 158 (7th Cir. 1982)("We see nothing arbitrary or capricious about requiring physicians who are benefitting from the [Medicaid] program to bear this burden, particularly when the state has already borne
the cost of the initial audit and the evidence to rebut that initial determination is uniquely within the physician's control.").
25 In an endnote, the Administrative Law Judge in Full Health Care, Inc. v. Agency for Health Care Administration, 2001 WL 729127 *14 n.9 added the following observation:
Theoretically, a provider might advance so compelling an argument as to convince the fact-finder to disbelieve the Agency's audit report (assuming the Agency had rested on that evidence alone) and thereby defeat the Agency's recoupment effort without offering any evidence. In that situation, the Agency would lose, not because it had failed to make a prima facie case (the audit report being enough evidence to carry the Agency across the threshold of legal sufficiency), but because it had failed to persuade the trier of fact that the evidence established the probable truth of the Agency's allegations. As a practical matter, however, such an outcome is unlikely.
26 Relying on Section 120.57(1)(c), Florida Statutes (which provides that, in administrative hearings involving disputed issues of material fact, "[h]earsay evidence may be used for the purpose of supplementing or explaining other evidence, but it shall not be sufficient in itself to support a finding unless it would be admissible over objection in civil actions"), Petitioner makes the argument in its Proposed Recommended Order that the Final Agency Audit Report "cannot be relied upon to support a finding of fact" that Petitioner "received any overpayments for its dispensed claims" because the Final Agency Audit Report contains hearsay evidence regarding this matter not "supported or buttressed by any . . . non-hearsay evidence." To accept this argument would require the undersigned to ignore the clear and unambiguous language of the first sentence of Section 409.913(22), Florida Statutes, which, unlike Section 120.57(1)(c), Florida Statutes, deals specifically with Medicaid audit reports as evidence in administrative hearings, such as the instant one, involving challenges to proposed Medicaid overpayment determinations made by AHCA. This the undersigned cannot do. See Solid Waste Authority of Palm Beach County v. Parker, 622 So. 2d 1014, 1014-15 (Fla. 4th DCA 1993)("Section
73.131(2), Florida Statutes (1989), is plain and unambiguous and mandates an award. While under other statutes containing different language, appellate fees may be denied where the sole issue is the reasonableness of an award of fees, we cannot ignore the very specific language of the statute. If we were to hold that attorney's fees are not allowable in these circumstances, we would be adding a policy judgment of this court's which would conflict with the specific legislative language. If condemning authorities believe that the result is wrong, then they should ask the legislature to change the law.")(citations omitted); and Department of Health and Rehabilitative Services v. American Healthcorp of Vero Beach, Inc., 471 So. 2d 1312, 1315 (Fla. 1st DCA 1985), opinion adopted, 488 So. 2d 864 (Fla. 1986)("Balsam reflects that section 381.494(8)(c) --not section 120.60(2) --supplies the remedy for a delay in determination of a CON application. That view is supported by the rule of statutory construction applied when two statutes are inconsistent or in conflict: '[A] more specific statute covering a particular subject is controlling over a statutory provision covering the same subject in more general terms.'").
27 In presenting this expert testimony, AHCA did more than was necessary to make out a prima facie case.
28 As noted above, that law, contrary to the position Petitioner has taken, does not prohibit AHCA from "us[ing] extrapolation to determine the overpayment in this case."
29 Petitioner's evidentiary presentation included testimony regarding the rebates AHCA receives from drug manufacturers whose drugs are dispensed to Medicaid recipients in Florida. In its Proposed Recommended Order, Petitioner is critical of AHCA's failure to [have] "factor[ed these] rebates" into its overpayment calculation, arguing as follows:
These mandatory rebates reduce the amount Medicaid has to pay for the drugs and were not considered by AHCA in determining the value of the claims identified as being discrepant. Thus, in seeking reimbursement for an alleged overpayment and not reducing that amount by the rebate amount, AHCA seeks to collect a far greater amount from the provider than AHCA has invested in the claim. In addition to wholly undermining
the validity of the proposed overpayment determination, AHCA's action are improper because those amounts give AHCA a windfall at the expense of the pharmacies.
The argument is unconvincing. Any rebates AHCA may have received were obtained, not from Petitioner, but from drug manufacturers. These rebates have nothing to do with calculating the amount that Petitioner was overpaid by AHCA. To the extent that AHCA's recouping the monies Petitioner was overpaid in their entirety and its "not reducing that amount by the rebate amount" would "give AHCA a windfall," such a "windfall" would come "at the expense of" the drug manufacturers who provided the rebates, not Petitioner. Petitioner therefore is not in any position to complain about AHCA enjoying such a potential "windfall"; nor can it persuasively argue that equity demands that its overpayment liability be reduced "by the rebate amount." Effecting such a reduction would simply give Petitioner an undeserved "windfall" by allowing it to keep Medicaid monies it was paid in error, an outcome inconsistent with the law. See Colonnade Medical Center, Inc. v. State, Agency for Health Care Administration, 847 So. 2d at 543 ("We have also considered and reject the argument that the agency is unjustly enriched by this recovery because it was benefitted by Colonnade's rendering of services to Medicaid patients. Any benefit here, however, was received by the AIDS patients, not the AHCA. Furthermore, were Colonnade allowed to keep the funds, it would be receiving a benefit in violation of the rules and regulations imposed on Medicaid providers.").
30 Since this overpayment determination is based on the "claims analysis," not the "purchase invoice analysis," it is unnecessary to address Petitioner's criticism of the latter.
31 AHCA has not expressed an intention to impose any other "sanction" on Petitioner.
COPIES FURNISHED:
William M. Furlow, Esquire
Katz, Kutter, Alderman & Bryant, P.A.
106 East College Avenue, Suite 1200 Tallahassee, Florida 32301
Eric H. Miller, Esquire
Agency for Health Care Administration Fort Knox Building III, Suite 3431 2727 Mahan Drive
Tallahassee, Florida 32308-5403
Richard Shoop, Agency Clerk
Agency for Health Care Administration 2727 Mahan Drive, Mail Station 3
Tallahassee, Florida 32308
Valda Clark Christian, General Counsel Agency for Health Care Administration Fort Knox Building, Suite 3431
2727 Mahan Drive
Tallahassee, Florida 32308
Alan Levine, Secretary
Agency for Health Care Administration Fort Knox Building, Suite 3116
2727 Mahan Drive
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.
| Issue Date | Document | Summary |
|---|---|---|
| May 10, 2005 | Agency Final Order | |
| Mar. 14, 2005 | Recommended Order | Petitioner failed to overcome Respondent`s prima facie showing that Petitioner was overpaid $137,431.56 for Medicaid claims submitted from January 1, 1999 through October 20, 2000. |
| Jul. 30, 2004 | Opinion |
