STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

BRANDON L. EADY,

vs.

Petitioner,

Case No. 17-5425MTR

AGENCY FOR HEALTH CARE ADMINISTRATION,

Respondent.

/

FINAL ORDER

On January 4, 2018, a final administrative hearing was held in this case before Lynne A. Quimby-Pennock, an Administrative Law Judge of the Division of Administrative Hearings (Division). It was conducted using video teleconferencing between sites in Tampa and Tallahassee, Florida.

APPEARANCES

For Petitioner: Floyd B. Faglie, Esquire

Staunton and Faglie, P.L.

189 East Walnut Street Monticello, Florida 32344

For Respondent: Alexander R. Boler, Esquire Suite 300

2073 Summit Lake Drive Tallahassee, Florida 32317

STATEMENT OF THE ISSUE

The issue is the amount of Petitioner’s personal injury settlement proceeds that should be paid to Respondent, Agency for

Health Care Administration (AHCA), to satisfy its Medicaid lien under section 409.910, Florida Statutes (2016).1/

PRELIMINARY STATEMENT

On September 29, 2017, Petitioner, Brandon L. Eady, filed a “Petition to Determine Amount Payable to the Agency for Health Care Administration in Satisfaction of Medicaid Lien” (Petition), pursuant to section 409.910(17)(b). Mr. Eady challenged AHCA’s lien for the recovery of medical expenses paid by Medicaid in the amount of $177,747.91, after applying the statutory formula, established in section 409.910(11)(f). The challenge was that the application of section 409.910(17)(b) warranted reimbursement of a lesser portion of the total third-party settlement proceeds than the amount calculated by AHCA pursuant to the formula.

The Division notified AHCA of the Petition on the date it was filed. The final hearing was scheduled for January 4, 2018, and the case proceeded as scheduled.

On January 3, 2018, the parties filed a Joint Pre-hearing Stipulation that contained eight statements of admitted and stipulated facts. As warranted, these statements have been incorporated into the Findings of Fact set forth below.

Petitioner postulates that because he received less remuneration in settling the case than the contemplated value of his personal injury (PI) case, AHCA should only recover the lesser percentage from that portion of Petitioner’s settlement

that represents compensation for his past medical expenses. Further, Petitioner cites Gallardo v. Dudek, Case No. 4:16cv116- MW/CAS (U.S. N.D. Fla. April 18, 2017), for two positions:

1) AHCA is enjoined from “seeking reimbursement of past Medicaid payments from portions of a recipient's recovery that represents future medical expenses,” and 2) AHCA is prohibited from using the clear and convincing standard to successfully challenge the allocation.

AHCA’s position is that through its Medicaid program, it expended $177,747.91 for medical services for Mr. Eady’s injuries. Mr. Eady settled his PI cases for $1,000,000. Under Florida and federal law, AHCA is required to be repaid for its Medicaid expenditures upon a recovery from liable parties.

Currently, there is a lien on the recovery made by Mr. Eady.

At hearing, Petitioner's Exhibits 1 through 7 were received into evidence without objection. Petitioner presented the testimony of Ralph M. Guito, III, Esquire, and R. Vinson Barrett, Esquire, each of whom was accepted as an expert in valuation of damages in PI cases. Mr. Barrett was also tendered as an expert in the allocation of expenses and the undersigned took the tender under advisement. Mr. Barrett is not accepted as an expert in the allocation of cost. AHCA did not present any witnesses.

AHCA’s Exhibit A was received into evidence.2/

At the conclusion of the hearing, Petitioner requested

15 days in which to file the proposed final orders. AHCA did not object and the undersigned granted the request that the proposed final orders would be due 15 days from the filing of the transcript. The Transcript of the proceeding was filed with the Division on February 7, 2018. After being granted one extension of time to file proposed final orders, each proposal was timely filed and each has been carefully considered by the undersigned in the preparation of this Final Order.

FINDINGS OF FACT

1. AHCA is the state agency authorized to administer Florida’s Medicaid program. See § 409.902, Fla Stat.

2. On July 6, 2011, Petitioner suffered a catastrophic injury to his spinal cord as a passenger in a car involved in a single-car accident. Petitioner was permanently rendered an incomplete quadriplegic unable to walk (for more than 10 to

   15 steps), stand, ambulate, eat or toilet without assistance.

   
   

   Prior to the accident, Petitioner was a senior at the University of South Florida, who intended to become a physical therapist.

   Additionally, he was heavily involved in mixed martial arts and won amateur of the year in 2010.

3. Petitioner’s medical care related to the car accident was paid by Medicaid. Medicaid provided $177,747.91 in benefits associated with Petitioner’s car accident. This amount,

   
   

   $177,747.91, represents the past medical expenses paid on behalf of Petitioner, and for which AHCA seeks reimbursement. There is no dispute that Medicaid paid $177,747.91 for Petitioner’s past medical expenses.

4. Petitioner brought a PI action against the driver of the car, the owner of the car and the insurance carrier providing uninsured/underinsured motorist insurance covering the accident. This PI action sought to recover all of Petitioner’s damages associated with his injuries.

5. During the pendency of Petitioner’s PI action, AHCA was notified of the action. On April 25, 2014, AHCA notified Petitioner’s then counsel (Gene Odom, Esquire) that a preliminary lien of $177,747.91 was in place, and that an itemized accounting would be provided. It was unknown if the defendants, in the PI case, knew of the Medicaid lien during the negotiations. There was no evidence presented that AHCA participated in the PI action, any settlement negotiations, agreed to any settlement(s), or executed the actual settlements.

6. The PI lawsuit was settled in 2017 through a series of confidential settlement(s) totaling $1,000,000.3/ The total settlement was comprised of $100,000 in uninsured/underinsured motorist coverage, $100,000 in bodily injury coverage, $500,000 in coverage from the leased vehicle, and $300,000 in settlement of a bad faith claim.

   
   

7. Petitioner’s condition and his need for continuing care are not in dispute. A life-care plan (Petitioner’s Exhibit 2) identifying the “medical basis for life-care planning” for Petitioner was prepared by John L. Merritt, M.D. Dr. Merritt did not testify at hearing.

8. Application of the formula in section 409.910(11)(f) to Petitioner’s settlement requires payment to AHCA of the full

   $177,747.91 Medicaid lien.

   
   

9. Petitioner deposited the full Medicaid lien amount in an interest bearing account for the benefit of AHCA pending an administrative determination of AHCA’s rights, and this constituted “final agency action” for purposes of chapter 120, Florida Statutes, pursuant to section 409.910(17).

10. The Medicaid program spent $177,747.91 towards Petitioner’s past medical expenses. There was no testimony that any portion of this amount was paid for Mr. Eady’s future medical expenses.

11. No testimony was received as to any taxable costs associated with the action at law. The parties did not stipulate to the amount of any attorneys’ fees related to the settlement(s). The parties did not divulge an amount (if any) designated in the settlement(s) to pay for Petitioner’s past medical expenses.

    
    

12. Mr. Guito is a PI attorney and Petitioner’s step- father. Mr. Guito is employed by McIntyre, Thanasides, Bringgold, Elliott, Grimaldi and Guito. He has practiced law for

    29 years and, in addition to the PI work, handles cases involving civil litigation, medical malpractice, and catastrophic injury. Mr. Guito has tried numerous jury trials and represented individuals who have suffered spinal cord injuries.

13. Mr. Guito stays abreast of jury verdicts as it is important to understand what types of damages juries are awarding, whether they are more conservative or liberal in damages, and how the juries view evidence. As a routine part of his practice, Mr. Guito evaluates the damages suffered by injured people. He has experience in dealing with life-care planners, vocational rehabilitative experts, economists, and other lawyers involved with claims for significant injuries and damages.

    Mr. Guito assisted attorneys in prosecuting Mr. Eady’s case in order to maximize his recovery.4/

14. Mr. Guito reviewed the accident report, various engineering expert reports, Mr. Eady’s medical records and his life-care plan. Mr. Guito opined that Mr. Eady’s damages are in excess of $15,000,000.

15. Mr. Barrett is a PI attorney with experience in medical malpractice, medical products and pharmaceutical products liability, and catastrophic injury cases. Mr. Barrett is a

    
    

    seasoned trial attorney. However, “as of a couple of months ago,” he is “in-between law firms” deciding whether to form a new firm or “quit it [the practice of law] all together.”

16. In response to a question about reviewing medical records and life-care plans, Mr. Barrett testified that because these types of cases are handled on a contingency fee basis, he has to evaluate each case to determine whether the contingent fee is enough to “pay a staff of -- in my case, 20 or so employees. Pay a lease, pay for a building, pay for all the things, all the overhead, [and] pay a salary.”

17. Mr. Barrett did not “honestly . . . remember how the tender was stated” when asked if he was tendered specifically as an expert in the allocation of settlements in a Division hearing. When asked if it mattered how damages are allocated in a settlement, Mr. Barrett provided there might be tax consequences because in punitive damages “you don’t get the same percentages,” which “could have an affect [sic] on lien recoveries.” He further qualified his answer by stating “you’ve already . . . won the case because you’ve got an allocation in the jury verdict.” This case is based on confidential settlements, not a jury verdict.

18. Mr. Barrett explained Mr. Eady’s damages:

    
    

    [Mr. Eady] was a passenger in a Jaguar, which, I took from the complaint, was a new car or a car that belonged to an agency. And

    
    

    it was driven by an employee, or Bailee, or something of that agency. Who took too tight a turn and rolled the car. And, apparently, there was some intrusion from the top of the car, from the ceiling of the car. And from the nature of the damage, it’s almost certain that he hit his head on the top of the car and broke, or dislocated several vertebrae in his neck. Such that his fourth cervical vertebrae was – well, I would call it a crush or a burst fracture, down to where it intruded on the fifth cervical vertebrae.

    And there was extreme, not total, damage to his spinal cord, in the area of the fourth and fifth cervical vertebrae, such that he became what’s called a partial quadriplegic. By “partial,” we can firmly define and say that he had, initially, no feeling or use at all in his lower extremities, with a lot of pain and some partial movement of his upper extremities.

    
    

    ***

    
    

    [H]e was very motivated to recover. . . .

    [H]e was still striving to get better. And he had made some progress, he was able to -- some use of his arms.

    
    

19. Mr. Barrett “paid most attention to . . . [Mr. Eady’s] life care plan,” which Mr. Barrett thought was a “preliminary” plan.

20. Mr. Barrett acknowledged the $1,000,000 settlement, but opined that the settlement did “not in any way” fully compensate Mr. Eady for the full amount of his damages. Mr. Barrett suggested that Petitioner’s damages were in the range of

    $25,000,000 to $35,000,000. There was no suggestion that the settlement was forced upon Petitioner.

    
    

21. Mr. Guito and Mr. Barrett spoke in generalities, speculations, and reasonableness as to the settlement in relation to the Medicaid lien. Each suggested what they thought a jury would do, if presented with the facts in this case. Their testimony suggested that a lesser amount of the total recovery should be allocated for Mr. Eady’s past medical expenses in this instance.

22. Mr. Barrett accepted Mr. Guito’s suggestion that

    
    

    $15,000,000 was a conservative damage estimate. They postulated that because Petitioner only received $1,000,000 in settlement of what should have been at least a $15,000,000 award (or 6.66 percent of the $1,000,000 settlement), then Medicaid should only recover 6.66 percent from the settlement. The witnesses asserted that AHCA’s reimbursement for Petitioner’s past medical expenses should only be $11,838.01, or 6.66 percent of the $1,000,000 settlement amount. This is often referred to as the “proportionality test” or “pro-rata test.” For the reasons set forth below, the undersigned does not agree with Petitioner’s position.

23. Application of the formula contained in section 409.910(11)(f) to Petitioner’s $1,000,000 settlements would require payment to ACHA in the amount of $177,747.91, the actual amount of the funds expended by Medicaid.

    
    

    CONCLUSIONS OF LAW

    
    

24. The Division has jurisdiction over the subject matter, the parties in this case, and final order authority pursuant to sections 120.569, 120.57(1), and 409.910(17), Florida Statutes.

25. Petitioner had his past medical expenses paid for with Medicaid funds.

26. AHCA is the agency authorized to administer Florida’s Medicaid program. § 409.902, Fla. Stat.

27. The Medicaid program “provide[s] federal financial assistance to States that choose to reimburse certain costs of medical treatment for needy persons.” Harris v. McRae, 448 U.S. 297, 301 (1980). Though participation is optional, once a state elects to participate in the Medicaid program, it must comply with federal requirements governing the same. Id.

28. As a condition for receipt of federal Medicaid funds, states are required to seek reimbursement for medical expenses incurred on behalf of beneficiaries who later recover from third- party tortfeasors. See Ark. Dep't of Health & Hum. Servs. v. Ahlborn, 547 U.S. 268, 276 (2006); see also Estate of Hernandez,

    190 So. 3d 139, 142 (Fla 3Rd DCA 2016)(noting that one such requirement is that “each participating state implement a third party liability provision which requires the state to seek reimbursement for Medicaid expenditures from third parties who

    
    

    are liable for medical treatment provided to a Medicaid Recipient”).

29. Section 409.910(1), provides the Legislature’s clear intent that Medicaid is to be repaid in full for medical care furnished to Medicaid recipients.

30. Section 409.910(7), authorizes AHCA to recover the monies paid from any third-party, the recipient, the provider of the recipient’s medical services, and any person who received the third-party benefits.

31. Section 409.910(6), creates an automatic lien against any such judgment, award, or settlement to reimburse the state for the medical assistance provided. Smith v. Ag. for Health

    Care Admin., 24 So. 3d 590 (Fla. 5th DCA 2009). As a condition for providing Medicaid funds, AHCA is placed in a priority position for recovery of all funds expended.

32. Section 409.910(13), ensures that the Medicaid lien is solid, and no settlement impairs it. This section specifically excludes AHCA from restrictions of allocations that were included in a settlement (or settlements) to which AHCA was not a party. This record is silent as to any AHCA participation in the settlements reached. Although the amount listed in AHCA’s Exhibit A is different than the amount sought, the parties stipulated on the amount expended by Medicaid as $177,747.91.

    
    

33. Section 409.910(11), provides the procedure by which ACHA can seek reimbursement for medical assistance paid for by Medicaid. In simple terms, the amount to be recovered for Medicaid medical expenses from a judgment, award, or settlement from a third party is determined by the formula in section 409.910(11)(f). That amount is one-half of the total recovery, after deducting attorney’s fees of 25 percent of the recovery and all taxable costs up to, but not to exceed the total amount actually paid by Medicaid on the recipient’s behalf. Ag. for Health Care Admin. v. Riley, 119 So. 3d 514, 515 n.3 (Fla. 2d DCA

    2013). This record is silent on the amount of attorney’s fees and taxable costs. This record is clear as to the amount of Medicaid funds expended for Petitioner’s care.

34. Within section 409.910(17), the administrative procedure is created for determining whether a lesser portion of a total recovery should be allocated as reimbursement for medical expenses in lieu of the amount calculated by application of the formula in section 409.910(11)(f).

35. Section 409.910(17)(b) makes it clear that the formula set forth in section 409.910(11) constitutes a default allocation of the amount of a settlement that is attributable to medical costs, and sets forth an administrative procedure for adversarial testing of that allocation. See Harrell v. State, 143 So. 3d

    478, 480 (Fla. 1st DCA 2014)(adopting the holding in Riley that

    
    

    petitioner “should be afforded an opportunity to seek the reduction of a Medicaid lien amount established by the statutory default allocation by demonstrating, with evidence, that the lien amount exceeds the amount recovered for medical expenses”)(quoting Roberts v. Albertson’s, Inc., 119 So. 3d 457,

    465-466 (Fla. 4th DCA 2012); and Giorgione v. Albertson’s, Inc., 2013 Fla. App. LEXIS 10067 (Fla. 4th DCA June 26, 2013)).

36. Section 409.910(17)(b) allows a Medicaid recipient to rebut the statutory maximum calculated under section 409.910(11)(f) by proving, “by clear and convincing evidence, that a lesser portion of the total recovery should be allocated as reimbursement for past and future medical expenses than the amount calculated by the agency pursuant to the formula set forth in paragraph (11)(f) or that Medicaid provided a lesser amount of medical assistance than that asserted by the agency.”

37. Glosses have been placed on the statute to strike future medical expenses from consideration and to reduce the standard of proof from “clear and convincing” to a “preponderance of the evidence” in order to harmonize the statute with recent federal court decisions. See Museguez, etc., et al. v. Ag. for Health Care Admin., Case 16-7379MTR (Fla. DOAH Sept. 19, 2017).

38. Applying the gloss to section 409.910(17)(b), Petitioner did not prove, by a preponderance of the evidence, that a lesser portion of the total recovery should be allocated

    
    

    as reimbursement for past medical expenses. The percentage suggested by Petitioner was speculative.

39. To be clear, section 409.910(17)(b) clearly affords Petitioner a procedure for establishing that the amount of AHCA’s lien should be reduced from the full amount claimed so that it would not be paid from portions of the settlement recovery other than the portion allocated to past medical expenses (applying the gloss to account for the federal decisions), contrary to the federal Medicaid anti-lien law and the federal decisions interpreting it. See Ark. Dep’t of Health and Human Servs. v.

    Ahlborn, 547 U.S. 268 (2006); and Wos v. E.M.A. ex rel. Johnson, 568 U.S. 627, 133 S. Ct. 1391, 185 L. Ed. 2d 471 (2013). Neither

    the statutes nor the courts have provided clear guidance on how to determine the proper allocation. However, the lack of certain information, shielded from the undersigned via the confidential settlements, thwarts Petitioner’s position and his ability to prove via the preponderance of evidence standard that the lesser amount is warranted.

40. There are restrictions on AHCA’s ability to recoup its expenditures on Petitioner’s behalf. AHCA cannot receive settlement proceeds, which are not designated as payments for medical care, because those proceeds qualify as a recipient’s property. Ahlborn, 547 U.S. at 283-86; Goheagan v. Perkins, 197

    So. 3d 112, 116 (Fla. 4th DCA 2016). In this instance, we have

    
    

    Petitioner and AHCA stipulating to the amount of Petitioner’s past medical expenses.

41. Petitioner has demonstrated by a preponderance of the evidence that he recovered $1,000,000 pursuant to the confidential settlement agreements. However, Petitioner failed to prove by a preponderance of the evidence that those settlement agreements provided that the recovery represented 6.66 percent of his total past medical expenses, or that he should reimburse

Medicaid the lower amount.

DISPOSITION

Based on the foregoing Findings of Fact and Conclusions of Law, it is determined and ordered that AHCA is entitled to payment of $177,747.91 in satisfaction of its Medicaid lien.

DONE AND ORDERED this 5th day of April, 2018, in Tallahassee,

Leon County, Florida.

S

LYNNE A. QUIMBY-PENNOCK

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 5th day of April, 2018.

ENDNOTES

1/ Statutory references are to the 2016 codification of the Florida Statutes, which was in effect at the time of Petitioner’s settlement. See Cabrera v. Ag. for Health Care Admin., Case

No. 17-4557MTR, 2018 Fla. Div. Adm. Hear. LEXIS 43 n.1 (Fla. DOAH

Jan. 23, 2018)(citing Suarez v. Port Charlotte HMA, 171 So. 3d 740 (Fla. 2d DCA 2015)). Further, the parties stipulated at the Final Hearing that the 2016 version of the statute was the applicable version. Section 409.910 remained the same from 2013 through 2016. There were amendments to section 409.910 in 2017 (effective July 1, 2017); however, the revisions were not retroactive.

Consistent with the federal requirement, the Florida Legislature has enacted section 409.910, which authorizes and requires the State to be reimbursed for Medicaid funds paid for a recipient's medical care when that recipient later receives a personal injury judgment or settlement from a third party. Smith v. Ag. for Health Care Admin., 24 So. 3d 590 (Fla. 5th DCA 2009). The statute creates an automatic lien on any such judgment or settlement for the medical assistance provided by Medicaid.

See § 409.910(6)(c), Fla. Stat.

2/ Respondent’s Exhibit 2 is a “Provider Processing System Report.” The parties stipulated to the amount Medicaid paid for the past medical expenses ($177,747.91). This exhibit reflects a different amount, but was offered to demonstrate that monies were expended, but a “current” report was not available.

3/ The undersigned was not made privy to any language contained in any of the confidential settlements.

4/ The civil complaint was executed by an attorney of a different law firm than Mr. Guito’s.

COPIES FURNISHED:

Alexander R. Boler, Esquire Suite 300

2073 Summit Lake Drive Tallahassee, Florida 32317 (eServed)

Floyd B. Faglie, Esquire Staunton and Faglie, P.L.

189 East Walnut Street Monticello, Florida 32344 (eServed)

Kim Annette Kellum, Esquire

Agency for Health Care Administration Mail Stop 3

2727 Mahan Drive

Tallahassee, Florida 32308 (eServed)

Justin Senior, Secretary

Agency for Health Care Administration Mail Stop 1

2727 Mahan Drive

Tallahassee, Florida 32308 (eServed)

Stefan Grow, General Counsel

Agency for Health Care Administration Mail Stop 3

2727 Mahan Drive

Tallahassee, Florida 32308 (eServed)

Richard J. Shoop, Agency Clerk

Agency for Health Care Administration Mail Stop 3

2727 Mahan Drive

Tallahassee, Florida 32308 (eServed)

Shena Grantham, Esquire

Agency for Health Care Administration Mail Stop 3

2727 Mahan Drive

Tallahassee, Florida 32308 (eServed)

Thomas M. Hoeler, Esquire

Agency for Health Care Administration Mail Stop 3

2727 Mahan Drive

Tallahassee, Florida 32308 (eServed)

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: 17-005425MTR

Orders for Case No: 17-005425MTR