STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

LABORATORY CORPORATION OF AMERICA,

Petitioner,

and

QUEST DIAGNOSTICS INCORPORATED, QUEST DIAGNOSTICS NICHOLS INSTITUTE, AND QUEST DIAGNOSTICS CLINICAL LABORATORIES, INC.,

vs.

Intervenors,

Case No. 14-0010RX

AGENCY FOR HEALTH CARE ADMINISTRATION,

Respondent.

/

CONSENT FINAL ORDER

Pursuant to the Parties’ Joint Motion for Summary Final Order, a telephonic hearing was held on March 26, 2014, before Lawrence P. Stevenson, a designated Administrative Law Judge of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: J. Michael Huey, Esquire

D. Ty Jackson, Esquire GrayRobinson, P.A.

301 South Bronough Street, Suite 600 Tallahassee, Florida 32301

B. Kurt Copper, Esquire Jones Day

325 John H. McConnell Boulevard Suite 600

Columbus, Ohio 43215

For Respondent: Albert J. Bowden, Esquire

Office of the Attorney General The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050

Tracie L. Hardin, Esquire Douglas J. Lomonico, Esquire

Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

For Intervenors: Kelly Overstreet Johnson, Esquire Broad and Cassel

Post Office Drawer 11300 Tallahassee, Florida 32302

Richard D. Raskin, Esquire Sidley Austin, LLP

One South Dearborn Street Chicago, Illinois 60603

S. Craig Holden, Esquire Ober | Kaler

100 Light Street Baltimore, Maryland 21202

STATEMENT OF THE ISSUE

The issue is whether the Agency’s Lowest Charge Rule as identified in the petition filed in this matter is an invalid exercise of delegated legislative authority because it contravenes the specific provisions of law implemented as prohibited by section 120.52(8)(c), Florida Statutes (2013).

PRELIMINARY STATEMENT

On January 3, 2014, Petitioner, Laboratory Corporation of America (“LabCorp”), filed a Petition for the Administrative Determination of the Invalidity of an Existing Rule (the “Petition”) pursuant to section 120.56, Florida Statutes (the “Rule Challenge”). The Petition challenges the validity of the Agency for Health Care Administration’s (“AHCA”) rule set forth in Florida Administrative Code Rule 59G-5.110(2), (hereinafter referred to as the “Lowest Charge Rule”), and restated in part in the Florida Medicaid Provider General Handbook at page 1-4. The Florida Medicaid Provider General Handbook has been adopted pursuant to Florida Administrative Code Rule 59G-5.020. In the Petition, LabCorp alleges that the Lowest Charge Rule is an invalid exercise of delegated legislative authority pursuant to section 120.52(8)(b), (c), (d), and (e).

On January 9, 2014, Quest Diagnostics Incorporated, Quest Diagnostics Nichols Institute, and Quest Diagnostics Clinical Laboratories, Inc. (collectively, “Quest”), filed a Petition to Intervene, adopting in full the allegations in the Petition filed by LabCorp. Quest’s Petition to Intervene was granted on January 14, 2014.

On March 19, 2014, LabCorp, AHCA and Quest (collectively, the “Parties”) filed their Joint Motion for Summary Final Order (the “Joint Motion”). In the Joint Motion, the Parties stated

that they agreed that the Lowest Charge Rule contravenes the specific provisions of law implemented, which is inconsistent with section 120.52(8)(c). With the Joint Motion, the Parties filed a Proposed Summary Final Order, the substance of which has been adopted in this Consent Final Order.

FINDINGS OF FACT

1. Respondent, AHCA, is the Florida agency responsible for the administration of the Medicaid program in Florida and is the agency responsible for the adoption, implementation and enforcement of the Lowest Charge Rule at issue in this proceeding.

2. Petitioner, LabCorp, provides medical testing and clinical diagnostic services used by hospitals, physicians, and other medical providers to diagnose and treat patients in Florida and nationwide.

3. LabCorp is a Florida Medicaid provider.

   
   

4. Quest operates commercial reference laboratories in Florida and nationwide, providing a range of clinical laboratory services to assist health care providers in diagnosing and treating disease and other health conditions.

5. Quest is a Florida Medicaid provider.

   
   

6. As Florida Medicaid providers, LabCorp and Quest are subject to the rules adopted by AHCA to administer the Medicaid program in Florida, including the Lowest Charge Rule.

   
   

7. The Lowest Charge Rule substantially affects the amounts LabCorp and Quest are entitled to charge and are paid for Medicaid services under chapter 409, Florida Statutes, and the applicable Florida regulations and handbooks.

8. LabCorp and Quest are substantially affected by the Lowest Charge Rule and therefore have standing to seek an administrative determination of its invalidity.

9. This action challenges the validity of the Lowest Charge Rule, which is included in both the first sentence of rule 59G- 5.110(2), and in the Provider General Handbook at page 1-4.

10. Rule 59G-5.110(2), states:

Charges for services or goods billed to the Medicaid program shall not exceed the provider’s lowest charge to any other third party payment source for the same or equivalent medical and allied care, goods, or services provided to person [sic] who are not Medicaid recipients. Any services or goods customarily provided free of charge to patients may not be billed to Medicaid when provided to Medicaid recipients. Any payment made by Medicaid for services or goods not furnished in accordance with these provisions is subject to recoupment and the agency may, in such instances, initiate other appropriate administrative or legal action.

1. The Provider General Handbook, adopted pursuant to rule 59G-5.020, repeats the Lowest Charge Rule at page 1-4:

   What the Provider May Charge for Services

   
   

   The provider’s charges for services billed to Medicaid must not exceed the provider’s lowest charge to any other third party source

   
   

   for the same or equivalent medical and allied care, goods, or services provided to individuals who are not Medicaid recipients.

   
   

   CONCLUSIONS OF LAW

   
   

2. DOAH has jurisdiction over the parties to and subject matter of this proceeding pursuant to section 120.56(1) and (3), Florida Statutes.

3. Section 120.56(1)(a), provides that “[a]ny person substantially affected by a rule . . . may seek an administrative determination of the invalidity of the rule on the ground that the rule is an invalid exercise of delegated legislative authority.”

4. To demonstrate that a person is “substantially affected” by an agency rule, a person must establish “(1) a real and sufficiently immediate injury in fact; and (2) that the alleged interest is arguably within the zone of interest to be protected or regulated.” Lanoue v. Fla. Dep't of Law Enf., 751

   So. 2d 94, 96 (Fla. 1st DCA 1999) (quoting Ward v. Bd. of Trs. of

   
   

   the Int. Imp. Trust Fund, 651 So. 2d 1236, 1237 (Fla. 4th DCA 1995)).

5. LabCorp and Quest are substantially affected parties and have standing to bring this proceeding.

6. An “invalid exercise of delegated legislative authority” is an “action that goes beyond the powers, functions,

   
   

   and duties delegated by the Legislature.” § 120.52(8), Fla. Stat. A rule is an “invalid exercise of delegated legislative authority” if any one of the following applies:

   1. The agency has materially failed to follow the applicable rulemaking procedures or requirements set forth in this chapter;

      
      

   2. The agency has exceeded its grant of rulemaking authority, citation to which is required by s. 120.54(3)(a)1.;

      
      

   3. The rule enlarges, modifies, or contravenes the specific provisions of law implemented, citation to which is required by s. 120.54(3)(a)1.;

      
      

   4. The rule is vague, fails to establish adequate standards for agency decisions, or vests unbridled discretion in the agency;

      
      

   5. The rule is arbitrary or capricious. A rule is arbitrary if it is not supported by logic or the necessary facts; a rule is capricious if it is adopted without thought or reason or is irrational; or

      
      

   6. The rule imposes regulatory costs on the regulated person, county, or city which could be reduced by the adoption of less costly alternatives that substantially accomplish the statutory objectives.

      
      

      § 120.52(8), Fla. Stat.

      
      

7. Furthermore, section 120.52(8) provides that:

   
   

   A grant of rulemaking authority is necessary but not sufficient to allow an agency to adopt a rule; a specific law to be implemented is also required. An agency may adopt only rules that implement or interpret the specific powers and duties granted by the enabling statute. No agency shall have authority to adopt a rule only because it is

   
   

   reasonably related to the purpose of the enabling legislation and is not arbitrary and capricious or is within the agency’s class of powers and duties, nor shall an agency have the authority to implement statutory provisions setting forth general legislative intent or policy. Statutory language granting rulemaking authority or generally describing the powers and functions of an agency shall be construed to extend no further than implementing or interpreting the specific powers and duties conferred by the enabling statute.

   
   

8. Rule 59G-5.110(2), which includes the Lowest Charge Rule, cites to sections 409.902, 409.907, and 409.908, Florida Statutes, and 42 C.F.R. § 447.25 as law implemented. Rule 59G- 5.020, adopting the Provider General Handbook in which the Lowest Charge Rule is restated, cites to sections 409.902, 409.905, 409.906, 409.907, 409.908, 409.912, and 409.913 as law implemented (collectively referred to as the “implementing authorities”).

9. None of the implementing authorities allows AHCA to limit Medicaid reimbursement to, or require providers to charge Medicaid, the lowest charge that they charge to any other third party payment source for the same or equivalent medical and allied care, goods, or services provided to persons who are not Medicaid recipients. For example, section 409.907(5)(a) states that a provider’s Medicaid claim form “shall require certification that the services or good have been completely furnished to the recipient and that . . . the amount billed does

   
   

   not exceed the provider’s usual and customary charge for the same services or good.” Moreover, section 409.908(11), the primary statute governing Medicaid payments to independent laboratories, states that the laboratory “shall be reimbursed on the basis of competitive bidding or for 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.”

10. The word “contravene” means to contradict. Because the Lowest Charge Rule contradicts its implementing authorities, which do not require providers to charge Medicaid the lowest charge that they charge to any other third-party payment source for the same or equivalent medical and allied care, goods, or services, it does not implement them, and, as such, it contravenes the specific laws implemented. For that reason, the Lowest Charge Rule is an invalid exercise of delegated legislative authority under section 120.52(8)(c).1/

ORDER

Based on the foregoing Findings of Fact and Conclusions of Law, it is ORDERED that:

1. The following portion of Florida Administrative Code Rule 59G-5.110(2), is an invalid exercise of delegated legislative authority pursuant to section 120.52(8)(c), Florida Statutes, because it contravenes the specific provisions of law implemented:

   
   

   Charges for services or goods billed to the Medicaid program shall not exceed the provider’s

   
   

   lowest charge to any other third party payment source for the same or equivalent medical and allied care, goods, or services provided to person [sic] who are not Medicaid recipients.

   
   

2. The following portion of the Florida Medicaid Provider General Handbook, at page 1-4, which is adopted pursuant to Florida Administrative Code Rule 59G-5.020, is an invalid exercise of delegated legislative authority pursuant to section 120.52(8)(c), Florida Statutes, because it contravenes the specific provisions of law implemented:

What the Provider May Charge for Services

The provider’s charges for services billed to Medicaid must not exceed the provider’s lowest charge to any other third party source for the same or equivalent medical and allied care, goods, or services provided to individuals who are not Medicaid recipients.

DONE AND ORDERED this 28th day of March, 2014, in Tallahassee, Leon County, Florida.

S

LAWRENCE P. STEVENSON

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675

Fax Filing (850) 921-6847 www.doah.state.fl.us

Filed with the Clerk of the Division of Administrative Hearings this 28th day of March, 2014.

ENDNOTE

1/ This Order addresses only the issue of whether the Lowest Charge Rule is inconsistent with section 120.52(8)(c), Florida Statutes, because of the stipulations made by the parties in their Joint Motion.

COPIES FURNISHED:

J. Michael Huey, Esquire GrayRobinson, P.A.

301 South Bronough Street, Suite 600 Post Office Box 11189

Tallahassee, Florida 32302-3189

R. Christopher Cook, Esquire Jones Day

51 Louisiana Avenue, Northwest Washington, DC 20001

B. Kurt Copper, Esquire Jones Day

Suite 600

325 John H. McConnell Boulevard Columbus, Ohio 43215

Douglas James Lomonico, Esquire Agency for Health Care Administration Mail Stop 3

2727 Mahan Drive

Tallahassee, Florida 32308

Kelly Overstreet Johnson, Esquire Broad and Cassel

Post Office Drawer 11300 Tallahassee, Florida 32302

Albert J. Bowden, Esquire Office of the Attorney General The Capitol, Plaza Level 01

Tallahassee, Florida 32399-1050

Richard D. Raskin, Esquire Sidley Austin, LLP

One South Dearborn Street Chicago, Illinois 60603

Scott D. Stein, Esquire Sidley Austin, LLP

One South Dearborn Street Chicago, Illinois 60603

S. Craig Holden, Esquire Ober | Kaler

100 Light Street Baltimore, Maryland 21202

Kelly J. Davidson, Esquire Ober | Kaler

100 Light Street Baltimore, Maryland 21202

Richard J. Shoop, Agency Clerk

Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

Stuart Williams, General Counsel Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

Elizabeth Dudek, Secretary

Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 1

Tallahassee, Florida 32308

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this Final Order is entitled to judicial review pursuant to section 120.68, Florida Statutes. Review proceedings are governed by the Florida Rules of Appellate Procedure. Such proceedings are commenced by filing the original notice of administrative appeal with the agency clerk of the Division of Administrative Hearings within 30 days of rendition of the order to be reviewed, and a copy of the notice, accompanied by any filing fees prescribed by law, with the clerk of the District Court of Appeal in the appellate district where the agency maintains its headquarters or where a party resides or as otherwise provided by law.

Docket for Case No: 14-000010RX

Orders for Case No: 14-000010RX