STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
AGENCY FOR HEALTH CARE )
ADMINISTRATION, )
)
Petitioner, )
)
vs. ) Case No. 05-0873MPI
)
ORIETTA MEDICAL EQUIPMENT, ) INC., d/b/a PHARMCO PHARMACY, )
)
Respondent. )
)
RECOMMENDED ORDER
Pursuant to notice a formal hearing was held on August 15, 2006, in Tallahassee, Florida, before J. D. Parrish, a designated Administrative Law Judge of the Division of Administrative Hearings.
APPEARANCES
For Petitioner: David W. Nam, Esquire
Agency for Health Care Administration Fort Knox Building, Mail Station 3 2727 Mahan Drive, Suite 3431
Tallahassee, Florida 32308-5403
For Respondent: William M. Furlow, III, Esquire
Akerman Senterfitt
Highpoint Center, Suite 1200
106 East College Avenue Tallahassee, Florida 32301
STATEMENT OF THE ISSUE
The issue in this case is whether the provider, Orietta Medical Equipment, Inc., d/b/a Pharmco Pharmacy (Respondent or Provider) should repay an alleged Medicaid overpayment and, if so, in what amount. The Petitioner’s Final Agency Audit Report (FAAR) claims the Provider must repay $486,879.06.
PRELIMINARY STATEMENT
This case began on or about February 2, 2005, when the Agency for Health Care Administration (Agency or Petitioner) issued a FAAR that claimed the Respondent owed $486,879.06 as an overpayment to the Medicaid Program. The Respondent timely challenged that claim and requested an administrative hearing.
The case was then originally referred to the Division of Administrative Hearings for formal proceedings on March 8, 2005.
The case was scheduled for hearing for June 2-3, 2005. Thereafter, the parties sought continuances based upon their representations that efforts to resolve the case were proceeding. On October 4, 2005, the case was closed with jurisdiction being relinquished to the Agency, as it was represented that the parties intended to resolve the case informally.
On February 7, 2006, the Agency requested that the case be re-opened as the settlement had not been effectuated At the hearing the Agency presented testimony from Lucy Barber and Dana
Kenneth Yon. The Petitioner’s Exhibits numbered 7, 10, 11, and
14 were admitted into evidence.
The transcript of the proceeding was filed with the Division of Administrative Hearings on August 31, 2006. The parties requested and were granted leave until October 10, 2006, to file their proposed recommended orders. Both parties timely filed Proposed Recommended Orders that have been fully considered in the preparation of this Recommended Order.
FINDINGS OF FACT
The Petitioner is the state agency charged with the responsibility of administering the Medicaid Program in Florida. As such, the Petitioner monitors payments to Medicaid providers and seeks to recover reimbursements when an overpayment is claimed.
At all times material to the allegations of this case, the Respondent was a licensed pharmacy and was designated a “provider” of Medicaid pharmacy services pursuant to its provider agreement with the Petitioner.
As a provider of Medicaid pharmacy services, the Respondent was authorized to dispense drugs to Medicaid recipients and to bill the Medicaid Program for the expenses associated with such pharmacy services. The Petitioner may, after-the-fact, seek to verify the claims paid for Medicaid recipients. This “pay and chase” methodology presumes that the
Provider will maintain appropriate documentation to support the paid claims. When the Agency audits a provider, records supporting the claims paid must be produced. In this case, the Petitioner elected to perform an “invoice audit” for the audit period June 2, 2003 through May 28, 2004.
The Agency sought to review the Provider’s drug acquisition records for the same drugs that were dispensed to Medicaid recipients. The paid claims should compare to the drugs acquired and held in inventory for the subject period of time.
After performing a Provisional Agency Audit Report (PAAR) detailing an alleged overpayment, the Provider was notified of the audit results and was provided a spreadsheet of the work papers that detailed the overpayment claim.
The Provider was given an opportunity to provide additional documentation to support the Medicaid claims and to establish the inventory to support its claims.
After an additional review of the Provider's information, the Agency issued its FAAR dated February 2, 2005, which claimed a Medicaid overpayment in the amount of
$486,879.06. This amount has not been repaid to the Petitioner.
Instead, the Provider disputed the amount of the overpayment and requested an administrative proceeding. That request was timely submitted.
All of the audit results were provided to the Provider at the time of the issuance of the FAAR and were, in fact, attached to the request for hearing submitted by the Provider on or about February 7, 2005.
Florida Medicaid providers are required by their agreements with the state to comply with the Florida Medicaid
Prescribed Drug Services Coverage, Limitations, and Reimbursement Handbook (the handbook). The handbook is furnished to providers and is also available on-line. The handbook outlines requirements for record keeping, as well as other pertinent information to assist providers. In this case, the Provider was obligated to maintain records to support the Medicaid claims paid by the State.
The Agency contracted with Heritage Information Systems, Inc., to conduct the audit in this case. Auditors went to the Provider’s business location in Hialeah, Florida, to analyze the Respondent’s business records.
More specifically, the auditors sought the records from the Provider to show that it had acquired sufficient inventory of the specific drugs for which claims had been paid during the audit period. It stands to reason that the drug inventory on hand for the Provider had to exceed the drugs dispensed during the audit period (presumably some of the Provider’s patients were not Medicaid recipients).
In fact, in this case, the Provider could not produce inventory records to support the claims paid for the audit period. As the records did not support the claims, the Agency deemed the claims to be overpayments. As such, the Agency maintains the Provider was, under the terms of the guidelines set forth in the handbook, required to reimburse the Petitioner for the overpayment.
To compute the overpayment the Agency used a methodology that established the use rate of the product for the audit period. For example, for the drug Acetylcysteine the Medicaid recipient use rate for the audit period was 97.27 percent. Applying this percentage to the units purchased for the audit period would establish the expected claims. Therefore, since the Respondent purchased 16,890 units of this drug, the number of units billed would be expected to be 97.27 percent (the Medicaid use rate) of that amount. Instead, the claims for this drug for the audit period totaled 96,120-- a difference of 79,691 units. The difference (79,691) must then be multiplied by the drug's $.56 cost to show an apparent overcharge in the amount of $44,626.96 for this drug.
The Agency applied the same methodology described above for 20 different drugs that were billed during the audit period. The total overcharge for these drugs was $486,879.06.
The Respondent presented no evidence to refute the audit findings. No acquisition records were produced to reduce the calculated overpayment. That is to say, no purchase records could demonstrate that the Provider had on hand the number of units of the drugs billed to Medicaid.
The Respondent has not disputed that the pharmacy was a provider, was subject to the handbook and pertinent guidelines, was required to maintain records to support the claims, and was paid for claims submitted to the Agency.
Moreover, the Respondent does not dispute that the audit, the audit work papers, and the spreadsheets describing the methodology used to compute the overpayment were provided to the Provider more than 14 days prior to the hearing. It claims the trial book of exhibits was not provided 14 days prior to the hearing date.
The hearing in this cause was originally scheduled for two days, to commence on August 15, 2006. The Agency provided a trial book of its exhibits to the Respondent on or about
4:00 p.m., August 1, 2006. The Respondent maintains that all evidence presented by the Agency in this cause must be excluded pursuant to Section 409.913(22), Florida Statutes (2005).
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties to, and the subject matter of, these proceedings. §§ 120.57(1), Fla. Stat. (2006).
The Petitioner bears the burden of proof in this matter to establish that a Medicaid overpayment was paid and should be reimbursed by the Provider. The burden to establish the overpayment must be shown by a preponderance of the evidence. See South Medical Services, Inc. v. Agency for Health Care Administration, 653 So. 2d 440 (Fla. 3rd DCA 1995).
To meet its burden of proof the Agency may rely on the audit records and report. Subsections 409.913(21) and (22), Florida Statutes (2005), provide:
When making a determination that an overpayment has occurred, the agency shall prepare and issue an audit report to the provider showing the calculation of overpayments.
The audit report, supported by agency work papers, showing an overpayment to a provider constitutes evidence of the overpayment. 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.
For purposes of this case the term “overpayment” is defined as “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.” See § 409.913(1)(e), Fla. Stat. (2005).
A claim presented under the Medicaid program imposes on the provider an affirmative duty to be responsible for and to assure that the claim is true and accurate and that the item for which payment is claimed has been furnished to the Medicaid recipient prior to the submission of the claim. See § 409.913(7), Fla. Stat. (2005).
Additionally, a Medicaid provider is required by law to retain medical, professional, financial, and business records pertaining to the goods furnished for a period of five years. See § 409.913(9), Fla. Stat. (2005). For the instant case, the Provider was within the five-year period for the audit at issue. Thus the Provider was required, as matter of law, to have the records to support the claims at issue.
In this case, it is concluded that the Agency provided the documents supporting the overpayment to the Provider more than 14 days prior to the hearing. The documents relied on to reach the conclusions herein were provided to the Respondent at the time of the issuance of the FAAR. Moreover, the corporate representative for the Respondent was deposed and the pertinent documents were appended to the deposition. That deposition took place more than 14 days prior to the commencement of the hearing. The Provider was well aware of the position of the Agency and the basis for its overpayment claim.
It is concluded that the Legislature has determined that the audit reports in these matters may be considered evidence of the overpayment. As such, the Agency met its prima facie burden to establish the overpayment and the amount claimed to be due.
The Provider did nothing to refute the overpayment.
The Respondent relied on its technical legal argument to support its position that the Agency failed to meet its burden of proof. Such argument must fail. Courts do not allow the construction of a statute to cause an absurd result. The Provider had all of the audit records well in advance of the 14-day statutory notice provision. The audit was the genesis of this case. But for the FAAR there would be no adverse interest to support the request
for an administrative proceeding. To hold otherwise creates an absurd result.
Finally, some mention must be made regarding the delay in trying this case. These matters are to be conducted within
90 days following assignment. See § 409.913(31), Fla. Stat. (2005). Because both parties represented that the case would settle, continuances were granted, and the time to conduct this matter was extended an inordinate amount. Attorneys are given great deference when they represent that good faith efforts to settle a matter are being pursued. Absent some abuse of that deference (to bring into play a challenge to the credibility of such representations), continuances that will avoid unnecessary expenses associated with trying a case may be appropriate. As the attorneys in this matter made assurances of a settlement, it is concluded the parties established good cause for the delay demonstrated by this record.
Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration enter a Final Order sustaining the Medicaid overpayment in the amount of $486,879.06.
DONE AND ENTERED this 1st day of December, 2006, in Tallahassee, Leon County, Florida.
S
J. D. PARRISH Administrative Law Judge
Division of Administrative Hearings The DeSoto Building
1230 Apalachee Parkway
Tallahassee, Florida 32399-3060
(850) 488-9675 SUNCOM 278-9675
Fax Filing (850) 921-6847 www.doah.state.fl.us
Filed with the Clerk of the Division of Administrative Hearings this 1st day of December, 2006.
COPIES FURNISHED:
Richard J. Shoop, Agency Clerk
Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3
Tallahassee, Florida 32308
William Roberts, Acting General Counsel Agency for Health Care Administration Fort Knox Building, Suite 3431
2727 Mahan Drive, Mail Stop 3
Tallahassee, Florida 32308
Christa Calamas, Secretary
Agency for Health Care Administration Fort Knox Building, Suite 3116
2727 Mahan Drive
Tallahassee, Florida 32308
David W. Nam, Esquire
Agency for Health Care Administration Fort Knox Building, Mail Station 3 2727 Mahan Drive, Suite 3431
Tallahassee, Florida 32308
William M. Furlow, III, Esquire Akerman Senterfitt
Highpoint Center, Suite 1200
106 East College Avenue Tallahassee, Florida 32301
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 |
|---|---|---|
| Jan. 04, 2007 | Agency Final Order | |
| Dec. 01, 2006 | Recommended Order | The overpayment is supported by the audit findings, which provided the evidence to support them. |
