The Issue The issue to be decided is the amount to be paid by Petitioner to Respondent, Agency for Health Care Administration ("AHCA"), out of his settlement proceeds, as reimbursement for past Medicaid expenditures pursuant to section 409.910, Florida Statutes.
Findings Of Fact On January 1, 2013, Josiah Delva ("Josiah"), who was only 18-months-old, was presented to a hospital with a fever and emesis. He was discharged only one and a half hours later after he was misdiagnosed with a "normal" condition. The following day, Josiah's fever continued, and he began suffering from a purpuric rash on his body and decompensated septic shock. He was taken back to the Emergency Room where he was diagnosed with meningococcal meningitis and meningococcal bacteremia and grew Moraxella catarrhalis in his sputum. Josiah was admitted to and remained in the intensive care unit of the hospital for five months. Due to the necrosis, which was caused by the meningococcus, Josiah's left arm below the elbow, his right leg below his knee, and the toes of his left foot were all amputated. In addition, he required bilateral patellectomies (removal of his knee caps). Josiah's medical care related to the injury was paid by AHCA's Medicaid program. Medicaid provided $237,408.60 of the costs associated with Josiah's injury. The $237,408.60 paid by Medicaid constituted Josiah's entire claim for past medical expenses. Josiah's parents and natural guardians, Jennifer Paulino Delva and Johnny Delva, brought a medical malpractice suit against the medical providers and staff responsible for Josiah's care ("Defendant medical providers") to recover all of Josiah's damages as associated with his injuries. As a condition of Josiah's eligibility for Medicaid, Josiah assigned to AHCA his right to recover from liable third parties any medical expenses paid by Medicaid. See 42 U.S.C. § 1396a(a)(25)(H); § 409.910(6)(b), Fla. Stat. During the pendency of the medical malpractice action, AHCA was notified of the action, and it asserted a $237,408.60 Medicaid lien against Josiah's cause of action and future settlement of that action. AHCA made payments totaling $237,408.60 related to Josiah's injuries for which the defendant medical providers are liable. Josiah's lawsuit ultimately settled in December of 2018 or January of 2019 for the gross unallocated sum of $550,000.00. 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 constitutes "final agency action" for purposes of chapter 120, Florida Statutes, pursuant to section 409.910(17). There were $146,110.61 in attorney's fees and costs incurred to make the recovery. The parties stipulated that operation of the statutory formula to Josiah's settlement would require repayment to AHCA in the amount of $185,694.69. Witness Testimony Zarahi Nunez was accepted, with no objection, as an expert in life care planning. She met with the Delva family and consulted with medical professionals regarding the treatment needs and options for Josiah. She also reviewed the appropriate manuals to determine a course of treatment for Josiah. Ms. Nunez developed a life care plan, along with dollar figures for each aspect of treatment totaling $5,998,080.19.2/ Mrs. Delva testified how she noticed that Josiah developed a fever and was vomiting on New Year's Eve (December 31, 2012). After midnight, he vomited again, so Mrs. Delva brought him to the hospital. He was discharged a few hours later around 4:00 a.m. on New Year's Day (January 1, 2013). Josiah was diagnosed with a stomach flu, and was given a prescription to stop vomiting. Josiah developed a rash, which concerned Mrs. Delva. Upon talking to medical professionals via phone, Mrs. Delva determined that Josiah's rash would not change with pressure on his skin. This apparently indicated that his white blood cell count was low. Mrs. Delva immediately rushed Josiah to the hospital upon the doctor's instruction. At the hospital, Josiah bypassed triage as the rash continued to spread and as symptoms of sepsis became apparent. The doctors diagnosed Josiah as having a bacterial meningitis infection and treated him. His organs began shutting down and his body turned colors from the rash. Mrs. Delva vividly explained the horror of: watching multiple physicians rush to her son's bedside; seeing the Emergency Room go into quarantine due to her son's infection; providing the names of all the people Josiah had come into recent contact so that they could be given precautionary antibiotics; having the health department remove all of Josiah's things from the house to prevent the spread of the infection; and seeing her son essentially die on the table and be resuscitated. Josiah was in the hospital from January 1 through May 2, 2013. Due to the lack of blood circulation, Josiah lost multiple body parts. His left hand at the wrist, his right leg at the ankle, and part of his left foot were amputated, and both knee caps were removed. His skin is tough and scarred. According to Mrs. Delva, had the doctor properly diagnosed Josiah when they first arrived after midnight on New Year's Day, he would not have suffered the extent of his injuries. Mrs. Delva and her husband have four children, including Josiah, and she detailed the extent to which the family facilitates Josiah's needs. Josiah's siblings do not always understand the extra attention needed by Josiah from their parents. She explained every day is a constant struggle, and most notably explained, the need to travel from Miami to Tampa to Shriner's Hospital ten or more times per year for check-ups and to update Josiah's prosthetics. No witness testified to Josiah's or his parents claim for noneconomic damages. While it is clear that the malpractice caused grievous pain and suffering to the family that will last Josiah's entire life, no expert was presented to discuss the valuation of these damages. No testamentary or other evidence was advanced to show how the $550,000.00 settlement amount should be allocated between past medical expense damages and other elements of damages. Petitioner's Theory of the Case Petitioner's counsel argues that the total value of the case that Petitioner should reasonably have expected to be awarded by a jury was $110,735,488.79. Counsel explained that this number represents the past medicals paid by Medicaid, $6 million for future medicals, $20 million for past pain and suffering, $80 million for future pain and suffering, and $2 million each (a total of $4 million) for Mr. and Mrs. Delva's loss of consortium claims. Petitioner argues that the past medicals, as paid by Medicaid in the amount of $234,408.60, represent 0.0021 percent of the total value of the case of $110,735,488.79. Petitioner argues that applying this 0.0021 percent times the actual recovery of $550,000.00 results in Medicaid's pro rata recovery being reduced to $1,155.00 as the portion of the settlement allocable to past medicals.3/ No expert testimony was introduced on the calculation of any element of damages other than future medical expenses.4/ In support of the $110 million dollar plus "total value" of the case, Petitioner provided three jury verdicts to establish comparable pain and suffering awarded in similar circumstances. These cases include: A.H., a minor, et al. v. Trustees of Mease Hospital, Inc., et al., 2018 FL Jury Verdict Rptr. LEXIS 277; Lisa-Marie Carter v. Larry Roy Glazerman, M.D., et al., 2018 FL Jury Verdict Rptr. LEXIS 175; and Cynthia N. Underwood and Stephen R. Underwood v. Katherine Strong, 2017 FL Jury Verdict Rptr. LEXIS 11578. The facts of how the injuries happened and the effects of the injuries, in these cited cases, differ highly from Josiah's case. The first of the three jury verdicts shows a gross verdict award of $9,250,000.00. The third of the jury verdicts show a gross award of $6,132,642. The second of the three jury verdicts shows an award of $109,760,930. This includes the staggering figure of $94 million for pain and suffering damages. The undersigned took official recognition of the docket for the Carter case and the Notice of Appeal filed on March 22, 2018, which show that the Carter verdict is on appeal. Unfortunately, these jury verdicts provide no guidance for calculating Josiah's or his parents' claims for noneconomic damages or the total value of the case.
The Issue The issue to be determined in this matter is the amount of money to be reimbursed to the Agency for Health Care Administration for medical expenses paid on behalf of Petitioner, John Gray, a Medicaid recipient, following Petitioner’s recovery from a third-party.
Findings Of Fact On January 18, 2007, Petitioner was involved in a devastating automobile accident. Another vehicle, driven by Damil Belizaire, crossed a median and collided head-on into the car Petitioner was driving. No evidence indicates that any negligence on the part of Petitioner caused or contributed to the accident or his injury. Petitioner suffered catastrophic injuries from the collision, including a spinal cord injury resulting in paraplegia. Following the accident, Petitioner was transported to UF Health Shands Hospital (“Shands”) in Jacksonville, Florida. Petitioner remained in Shands receiving medical treatment for 77 days. Once Petitioner became medically stable, he was transferred to the Brooks Rehabilitation Center (“Brooks”) in Jacksonville, Florida. There, Petitioner received intensive physical and occupational therapy care. Petitioner remained at Brooks until June 1, 2007, when he was discharged. Petitioner is permanently paraplegic. On April 7, 2008, Petitioner sued Mr. Belizaire seeking to recover his damages from the automobile accident. Petitioner’s lawsuit was filed in the Circuit Court of the Fourth Judicial Circuit, in Duval County, Case No. 16-2008-CA-004366. On April 1, 2013, Petitioner received a jury verdict in his favor and was awarded a Final Judgment against Mr. Belizaire in the amount of $2,859,120.56, including statutory interest. The damages award was allocated as follows: $128,760.56 for past medical expenses; $1,301,268.00 for future medical expenses; $202,670.00 for the loss of earnings in the past; $916,422.00 for loss of earning capacity in the future; $50,000.00 for pain and suffering, disability, physical impairment, disfigurement, mental anguish, inconvenience, and loss of capacity for the enjoyment of life in the past; and $260,000.00 for pain and suffering, disability, physical impairment, disfigurement, mental anguish, inconvenience, and loss of capacity for the enjoyment of life in the future. Despite his verdict awarding damages, Petitioner has only been able to recover $10,000.00 from Mr. Belizaire. Mr. Belizaire’s automobile liability insurance company paid Petitioner $10,000, which was the limit of his bodily injury liability insurance policy. The Agency, through its Medicaid program, paid a total of $65,615.05 for Petitioner’s medical care resulting from the 2007 automobile accident.2/ This administrative matter centers on the amount the Agency is entitled to be paid to satisfy its Medicaid lien following Petitioner’s recovery of $10,000 from a third-party. Under section 409.910, the Agency may be repaid for its Medicaid expenditures from any recovery from liable third-parties. The Agency claims that, pursuant to the formula set forth in section 409.910(11)(f), it should collect $3,750 regardless of the full value of Petitioner’s damages. (The Agency subtracted a statutorily recognized attorney fee of $2,500 from $10,000 leaving $7,500. One-half of $7,500 is $3,750.) Petitioner asserts that pursuant to section 409.910(17)(b), the Agency should be reimbursed a lesser portion of Petitioner’s recovery than the amount it calculated using the section 409.910(11)(f) formula. Petitioner specifically argues that the Agency’s Medicaid lien must be reduced pro rata, taking into account the full value of Petitioner’s personal injury claim as determined by the Final Judgment entered in the underlying negligence lawsuit. Otherwise, application of the default statutory formula under section 409.910(11)(f) would permit the Agency to collect more than that portion of the settlement representing compensation for medical expenses. Petitioner maintains that such reimbursement violates the federal Medicaid law’s anti-lien provision, 42 U.S.C. § 1396p(a)(1), and Florida common law. Petitioner contends that the Agency’s allocation from Petitioner’s recovery should be reduced to the amount of $230.00. Based on the evidence in the record, Petitioner failed to prove, by clear and convincing evidence, that a lesser portion of Petitioner’s total recovery should be allocated as reimbursement for medical expenses than the amount the Agency calculated pursuant to the formula set forth in section 409.910(11)(f). Accordingly, the Agency is entitled to recover $3,750.00 from Petitioner’s recovery of $10,000 from a third- party to satisfy its Medicaid lien.
Findings Of Fact Background Petitioner, United Health, Inc. (United), is the owner and operator of approximately one hundred and twenty-three nursing homes in thirteen states. In the State of Florida, it owns and operates sixteen nursing homes and one intermediate care facility for the mentally retarded that are licensed by respondent, Department of Health and Rehabilitative Services (HRS). At issue in this proceeding are the cost reports and supplemental schedules filed by thirteen nursing home facilities.1 In accordance with Medicaid guidelines, petitioner was required to annually submit cost reports to HRS reflecting its allowable costs in providing Medicaid services to its patients. HRS is designated as the state agency responsible for the administration of Medicaid funds under Title XIX of the Social Security Act. In order to be reimbursed for said costs, the facility was required to show that the costs were in conformity with Federal and State Medicaid reimbursement principles. Those principles are embodied in the Long Term Care Reimbursement Plan (Plan) adopted by the State.2 This document contains the reimbursement methodology to be used for nursing homes who provide Medicaid services. In addition, providers must comply with Health Insurance Manual 15 (HIM-15), a compendium of federal cost reimbursement guidelines utilized by HRS, and generally accepted accounting principles. By letter dated September 9, 1985 petitioner requested that HRS adjust its July 1, 1985 reimbursement rates for the thirteen facilities to reflect certain annualized costs incurred during the preceding fiscal year ending December 31, 1984. According to the letter, the adjustment was appropriate under Section V.B.I.b. of the September 1, 1984 Plan. On October 21, 1985, an HRS Medicaid cost reimbursement analyst issued a letter denying the request on the following grounds: Our review of the information submitted with the fiscal year end 12/31/84 cost reports revealed that the annualized operating and patient care costs were not documented to be new and expanded services or related to licensure and certification requirements. The annualized property cost appeared to be 1 2 various purchases, repairs and maintenance and was not documented to be capital improvements. The denial prompted the instant proceeding. B. Reimbursement Principles In General Under the Medicaid reimbursement plan adopted for use in Florida, nursing homes are reimbursed by HRS on a prospective basis for their allowable costs incurred in providing Medicaid services. This method is commonly referred to as the prospective plan, and has been in use since 1977. Under this concept, a nursing home files with HRS, within ninety days after the close of its fiscal year, a cost report reflecting its actual costs for the immediate preceding fiscal year. Within the next ninety days, the nursing home is given a per diem reimbursement rate (or ceiling) to be used during the following twelve months.3 For example, if a provider's fiscal year ended December 31, 1984, its cost report would be due by March 31, 1985. HRS would then provide estimated reimbursement rates to be used during the period from July 1, 1985 through June 30, 1986. As can be seen, there is a time lag between the end of a cost reporting year and the provider's receiving the new rate. The new reimbursement rate is based upon the provider's actual costs in the preceding fiscal year (reporting period) adjusted upward by an inflation factor that is intended to compensate the provider for cost increases caused by inflation. The prospective plan enables a provider to know in advance what rates it will be paid for Medicaid services during that year rather than being repaid on a retroactive basis. If a provider operates efficiently at a level below the ceiling, it is "rewarded" being allowed to keep a portion of the difference. Conversely, if it exceeds the caps, it is penalized to the extent that it receives only the rates previously authorized by HRS, and must absorb the shortfall. At the same time, it should be noted that the reimbursement rate is not intended to cover all costs incurred by a provider, but only those that are reasonable and necessary in an efficiently operated facility. These unreimbursed costs are covered through other provider resources, or by a future cut in services. When the events herein occurred, there were two types of adjustments allowed under the prospective plan. The first adjustment is the inflation factor, and as noted above, it 3 authorizes the provider to adjust certain reported costs by the projected rate of inflation to offset anticipated cost increases due to inflation. However, because the prospective plan (and the inflation factor) ignores other cost increases that occur during the given year, HRS devised a second type of adjustment for providers to use. This adjustment is known as the gross-up provision, and allows the annualization of certain costs incurred by a provider during a portion of the reporting period. The concept itself .s embodied in subparagraph B.1.b. of Part V of the September 1, 1984 Plan. Its use may be illustrated with the following example. A provider constructs an addition to its facility with an in-service date at the end of the sixth month of the reporting period. By reflecting only the depreciation associated with the addition during the last six months of the reporting period, the facility understates its actual costs, and is reimbursed for only one-half of the facility's depreciation during the following year. Under the gross-up provision the provider grosses up, or annualizes, the reported cost to give it a full year's effect, thereby ensuring that the next year's rates will be more realistic. Although the provision has application to this proceeding, over objection by the nursing home industry it was eliminated from the Plan on October 1, 1985 and is no longer available to providers. At hearing HRS contended the provision should have been eliminated in 1984, but through oversight remained in effect until 1985. However this contention is rejected as not being credible, and is contrary to the greater weight of evidence. Finally, neither party could recall if a request under this provision had ever been filed. They do acknowledge that HRS has never approved such a request during the more than two years when the provision was operative. In addition to the gross-up and inflation provisions, there exists an alternative means for additional rate reimbursement through what is known as the interim rate provision. Under this provision, a provider can request an interim rate increase from HRS during the period when its prospective rates are in effect to cover major unexpected costs. Assuming a request is valid and substantiated, a provider is eligible for immediate cash relief dating back to the date of the actual expense. However, because of HRS' concern that this provision was being "abused", only those costs which exceed $5,000 and cause a change of 1% or more in the total prospective per diem rate are now eligible for reimbursement. These monetary thresholds on interim rate requests became effective September 1, 1984. When these higher thresholds were imposed, HRS made representations to the nursing home industry that a provider could still utilize the gross-up provision to cover other unexpected costs. Finally, it is noted that unlike the prospective rate, an interim rate is cost settled. This means the provider's cost reports are later audited, and excess reimbursements must be repaid to HRS. This differs from the prospective plan where any "overpayments" are not subject to recoupment by HRS. Even so, a provider is limited by the reasonableness and prudent buyer concepts which serve as a check on potential abuse by a provider. The Gross-Up Feature In its relevant form, the gross-up provision was first adopted for use by HRS in its April 1, 1983 Plan.4 It required HRS to: Review and adjust each provider's cost report referred to in A. (1.) as follows: * * * b. to compensate for new and expanded or discontinued services, licensure and certification requirements, and capital improvements which occurred during the reporting year but were not included or totally accounted for in the cost report. This language was incorporated with only minor changes into the September 1, 1984 Plan and is applicable to the cost reports in issue. In its 1984 form, the provision required HRS to review and adjust each provider's cost report as follows: b. To compensate for new and expanded or discontinued services, licensure and certification requirements, and capital improvements not included or totally accounted for in the reporting year. For additional costs to be provided, the provider must furnish adequate supporting documentation. 4 Accordingly, if a cost fits within one of the three categories, HRS is required to adjust a provider's report to compensate it for the expenditure. The April 1, 1983 Plan was negotiated by the nursing home industry and HRS representatives at a meeting in Gainesville, Florida. For this reason, it is commonly referred to as the Gainesville Plan. Through testimony of negotiators who participated at the meeting, it was established that the Plan had three objectives: to give proper payment to nursing homes; to meet state and federal regulations; and to help upgrade care in the nursing homes. At the same time, the negotiators recognized that a prospective plan based on inFla.ion alone overlooked other cost increases that occurred during a given year. Therefore, the gross-up provision was added to the Plan to ensure that providers could estimate (and recoup) their future costs in as accurate a manner as possible, and to bring the plan into compliance with federal guidelines. It was also designed to ensure that a provider did not have to wait an extraordinarily long time for expenses to be recognized. In addition, HRS was hopeful that the gross-up provision would minimize the providers' reliance upon the interim rate feature (which was intended to cover only major items) thereby reducing the agency's overall workload. Indeed, the interim and gross-up features were intended to complement each other, in that one provided immediate relief on major unexpected items while the other provided a means to adjust partial year costs incurred during the reporting period. The implementation of thresholds on the interim rate provision in September, 1984 increased the importance of the gross-up provision to handle smaller items. Therefore, HRS' contention that the interim and gross-up provisions are in conflict is hereby rejected. In order for a cost to be eligible for annualization, it must fall within one of three categories: new or expanded service, a capital improvement, or a cost to meet HRS' licensure and certification requirements. The parties have stipulated that HRS' denial of United's request was based solely upon HRS' perception that the costs did not fall within any of the three categories. The three types of costs within the feature are not defined in the Plan. Testimony from the Plan's negotiators established that the language in the gross-up feature was meant to be construed broadly and to encompass many costs. For this reason, no limitations were written into the Plan. Even so, the provision was not intended to give carte blanche authority to the providers to annualize every partial cost. There is conflicting testimony regarding the meaning of the term "capital improvement" and what expenditures are included within this category. However, Sections 108.1 and 108.2 of HIM-15, of which the undersigned has taken official notice, define a capital item as follows: If a depreciable asset has, at the time of its acquisition, an estimated useful life of at least 2 years and a historical cost of at least $500, its cost must be capitalized, and written off ratably over the estimated useful life of the asset. . . * * * Betterments and improvements extend the life or increase the productivity of an asset as opposed to repairs and maintenance which either restore the asset to, or maintain it at, its normal or expected service life. Repairs and maintenance costs are always allowed in the current accounting period. With respect to the costs of betterments and improvements, the guidelines established in Section 108.1 must be followed, i.e., if the cost of a betterment or improvement to an asset is $500 or more and the estimated useful life of the asset is extended beyond its original estimated life by at least 2 years, or if the productivity of the asset is increased significantly over its original productivity, then the cost must be capitalized. The above guidelines are more credible and persuasive than the limited definition of capital item enunciated at final hearing by HRS personnel. Therefore, it is found that the HIM-15 definition is applicable to the gross-up feature and will be used to determine the validity of petitioner's claim to gross up certain expenditures. There is also conflicting testimony as to what the term "new and expanded or discontinued services" includes. Petitioner construes this item to include any costs that increase the volume of services to a resident. Therefore, petitioner posits that an increase in staffing which likewise increases services to residents is subject to annualization. Conversely, HRS construes the term to cover any costs for new or expanded services that enable a facility to provide patients with services not previously provided or to expand an existing service to more patients in the facility. The latter definition is more credible and persuasive and will be used by the undersigned in evaluating petitioner's request. Finally, petitioner interprets the term "licensure and certification requirements" to cover any costs incurred to meet staffing requirements that are required by HRS rules. According to petitioner, the category would include expenditures that are made for so-called preventive maintenance purposes and to avoid HRS sanctions. On the other hand, HRS construes the language to cover costs incurred by a provider to either meet a new licensure and certification requirement, or to correct a cited deficiency. It also points out that salary increases were intended to be covered by the inflation factor rather than through this feature of the plan. This construction of the term is more reasonable, and is hereby accepted as being the more credible and persuasive. Petitioner's Request Petitioner's fiscal year ends on December 31. According to HRS requirements its cost reports must be filed by the following March 31. In accordance with that requirement petitioner timely filed its December 31, 1984 cost reports for the thirteen facilities on or before March 31, 1985. The reports have been received into evidence as petitioner's composite exhibit 3. Attached to the reports were schedules supporting a request for gross-up of certain capital items, additions and deletions of various personnel, and union salary increases that exceeded the inflation rate. The parties have not identified the actual dollar value of the items since only the concepts are in issue. In preparing the supporting schedules, United's assistant director of research reviewed all so-called capital items purchased by the thirteen facilities during the fiscal year, and determined which were purchased after the beginning of the year.5 He then calculated the depreciation on those 5 expenditures made after the beginning of the year and has included those amounts on the supporting schedules to be annualized. Consistent with the definition contained in Sections 108.1 and 108.2 of HIM-15, those items that are in excess of $500 (after annualization), that extend the useful life of the asset for two years or more, or that increase or extend the productivity of the asset are subject to annualization. It should be noted that repairs and maintenance items, as defined in Sections 108.1 and 108.2, are excluded from this category. Petitioner next seeks to adjust its rates by grossing up the net increase in costs associated with additions and deletions of various staff during the reporting period. Any net staffing additions that provide patients with services not previously provided or that expand an existing service to more patients in a given facility are properly subject to the gross- up provision. All others should be denied. Petitioner also contends that these costs should be considered as a licensure and certification requirement since they satisfy staffing requirements under HRS rules. To the extent the filling of old positions occurred, such expenditures are appropriately covered by the gross-up provision. The remainder do not fall within the purview of the provision. Finally, petitioner seeks to adjust its rates to cover all salary increases over and above the inflation factor that were awarded to union employees pursuant to its union contract. Under petitioner's theory, if such costs were not paid, United stood to lose staff through a strike which in turn could result in licensure and certification problems. But these concerns are speculative in nature, and such an interpretation would result in automatic approval of any salary increase called for by a union contract, no matter how unreasonable it might be. Since the expenditures do not meet the previously cited criteria, they must be denied.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED: That petitioner's request to have its July 1, 1985 reimbursement rates adjusted for thirteen facilities to reflect annualized costs as submitted on supplemental schedules with its 1984 cost reports be approved in part, as set forth in the conclusions of law portion of this order. The remaining part of its request should be DENIED. DONE AND ORDERED this 31st day of October, 1986, in Tallahassee, Florida. DONALD R. ALEXANDER, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 31st day of October, 1986.
The Issue The issue to be determined is the amount payable to the Agency for Health Care Administration (AHCA or Respondent) in satisfaction of its $157,983.63 Medicaid lien asserted against medical malpractice settlement proceeds received by Hunter Lamendola (Hunter), a minor, by and through his mother and natural guardian, Ashley Lamendola (Petitioner).
Findings Of Fact On June 26, 2012, Petitioner presented to the hospital with a history of contractions for six hours prior to her arrival at the hospital. She had been placed on bed rest for gestational hypertension five days prior to arriving at the hospital. When she arrived, she had hypertension. Petitioner was admitted to the labor and delivery unit at 8:33 p.m. Petitioner was placed on a fetal monitor and progressed through her course of labor. Her initial fetal monitoring showed the baby was healthy and well-oxygenated, however, throughout the course of labor, the fetal monitor exhibited signs that the baby was in significant distress. At 4:01 a.m. on June 27, 2012, Petitioner was given an epidural, and after a course of labor, Hunter was delivered at 3:47 p.m. through an operative vaginal delivery. Hunter suffered permanent and catastrophic brain damage during his birth. As a result, Hunter is unable to eat, speak, toilet, ambulate, or care for himself in any manner. Hunter’s medical care related to the delivery was paid by Medicaid. The Medicaid program through AHCA provided $157,983.63 in benefits. The Medicaid program through the Department of Health Children’s Medical Services Title XIX MMA – Pedicare (DOH), provided $26,189.66 in benefits; the Medicaid program through a Medicaid-managed care organization, known as Amerigroup Community Care (Amerigroup), provided $51,696.99 in benefits; and the Medicaid program through a Medicaid-managed care organization, known as WellCare of Florida (WellCare), provided $13,239.19 in benefits. Accordingly, the sum of these Medicaid benefits, $249,109.47, constituted Hunter’s entire claim for past medical expenses. Petitioner brought a medical malpractice action against the medical providers and staff responsible for Hunter’s care (Defendant medical providers) to recover all of Hunter’s damages, as well as her own individual damages associated with Hunter’s injuries. The medical malpractice lawsuit was settled through a series of confidential settlements totaling $10,000,000 and this settlement was approved by the Court. During the pendency of Hunter’s medical malpractice action, AHCA was notified of the action, and AHCA asserted a $157,983.63 Medicaid lien against Hunter’s cause of action and settlement of that action. AHCA, through the Medicaid program, spent $157,983.63 on behalf of Hunter, all of which represents expenditures paid for Hunter’s past medical expenses. No portion of the $157,983.63 paid through the Medicaid program on behalf of Hunter represent expenditures for future medical expenses, and Medicaid did not make payments in advance for medical care. Application of the formula set forth in section 409.910(11)(f), Florida Statutes, to Hunter’s settlement requires payment to AHCA of the full $157,983.63 Medicaid lien. Petitioner has 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 constitutes “final agency action” for purposes of chapter 120, Florida Statutes, pursuant to section 409.910(17). At the final hearing, Mr. Harwin, who represented Hunter and his family in the underlying medical malpractice action, testified, and was accepted, without objection, as an expert in the valuation of damages suffered by injured parties. Mr. Harwin is a member of several trial attorney associations, stays abreast of jury verdicts relative to birth injuries, and ascertains the value of damages suffered by injured parties as a routine part of his practice. Mr. Harwin was familiar with and explained Hunter’s catastrophic brain injury giving rise to Petitioner’s claim. He also explained that, as a result of Hunter’s injury, Hunter is blind, fed through a feeding tube, unable to control his arms, legs or head, and suffers between six to eight seizures per day. Mr. Harwin testified that Hunter’s injury has also had a devastating impact on Hunter’s mother, Ashley Lamendola. According Mr. Harwin, considering Hunter’s past medical expenses, a life care plan for Hunter’s care prepared by an economist, and the extent of non-economic damages, and in light of determinations of mock juries and a jury consultant in this case, as well as Mr. Harwin’s familiarity with jury verdicts reached in similar cases, Hunter and his mother’s damages have a value in excess of $35,000,000. Mr. Harwin’s testimony as to the value of Petitioner’s claim was credible and is accepted. Petitioner also presented the testimony of Mr. Barrett, who was accepted as an expert in the valuation of damages. Mr. Barrett has been accepted as an expert in valuation of damages in a number of other Medicaid lien cases before DOAH. Mr. Barrett has been a trial attorney for 41 years, with a primary focus on plaintiff personal injury cases, including medical malpractice, medical products liability, and pharmaceutical products liability. Mr. Barrett stays abreast of jury verdicts and often makes assessments concerning the value of damages suffered by injured parties. After familiarizing himself with Hunter’s injuries through review of pertinent medical records and Petitioner’s exhibits, Mr. Barrett offered his opinion, based upon his professional training and experience, as well as review of comparable jury verdicts, that a conservative value of the damages suffered would be “$35,000,000 to $50,000,000.” Mr. Barrett’s testimony as to the value of Petitioner’s claim was credible and is accepted. AHCA did not call any witnesses, present any evidence as to the value of Petitioner’s claim, or propose a differing valuation of the damages. Based upon the unrebutted evidence presented by Petitioner’s experts, it is found that a conservative value of Petitioner’s claim is $35,000,000. Attorney’s fees for the underlying medical malpractice case leading to Petitioner’s $10,000,000.00 settlement totaled $4,500,000.00, with costs of $490,486.33. While the formula under section 409.910(11)(f) determines amounts distributable to Medicaid after attorney’s fees and taxable costs, there is no language in section 409.910(17)(b) suggesting that attorney’s fees or costs should be subtracted from settlement proceeds in determining whether a lesser portion of the total recovery should be allocated to reimburse Medicaid. Costs and attorney’s fees are not an element of Petitioner’s damages and were not subtracted from the settlement proceeds in determining whether a lesser portion of the total recovery should be allocated to AHCA’s Medicaid lien. Considering the valuation of Petitioner’s claim at $35,000,000.00, Petitioner’s $10,000,000.00 settlement represents only a 10/35ths recovery of Petitioner’s damages. Multiplying that same 10/35 fraction to the $157,983.63 paid by AHCA through the Medicaid program for past medical expenses results in the proportional sum of $45,138.18 from the settlement proceeds available to satisfy AHCA’s Medicaid lien.
The Issue The issue for determination in this case is whether Respondent’s application of a fair rental value system of property cost reimbursement to Petitioner under the Florida Title XIX Long-Term Care Medicaid Reimbursement Plan is appropriate.
Findings Of Fact Petitioner, CONSULTING MANAGEMENT AND EDUCATION, INC., d/b/a GULF COAST NURSING AND REHABILITATION CENTER (CME), is the licensed operator of a 103-bed nursing home in Clearwater, Florida, which is presently known as GULF COAST NURSING AND REHABILITATION CENTER (GULF COAST). CME participates in the Florida Medicaid Program as an enrolled provider. Respondent, AGENCY FOR HEALTH CARE ADMINISTRATION (AHCA), is the agency of the State of Florida authorized to implement and administer the Florida Medicaid Program, and is the successor agency to the former Department of Health and Rehabilitative Services, pursuant to Chapter 93-129, Laws of Florida. Stipulated Facts Prior to 1993, the GULF COAST nursing home facility was known as COUNTRY PLACE OF CLEARWATER (COUNTRY PLACE), and was owned and operated by the Clearwater Limited Partnership, a limited partnership which is not related to CME. In 1993 CME agreed to purchase, and did in fact purchase, COUNTRY PLACE from the Clearwater Limited Partnership. Simultaneous with the purchase of COUNTRY PLACE, CME entered into a Sale/Leaseback Agreement with LTC Properties, Inc., a Maryland real estate investment trust which engages in the financing of nursing homes. The Purchase and Sale Agreement between Clearwater Limited Partnership and CME was contingent upon the Sale/Leaseback Agreement and the proposed Lease between CME and LTC Properties, Inc. On September 1, 1993, CME simultaneously as a part of the same transaction purchased COUNTRY PLACE, conveyed the facility to LTC Properties, Inc., and leased the facility back from LTC Properties, Inc. As required, CME had notified AHCA of the proposed transaction. AHCA determined that the transaction included a change of ownership and, by lease, a change of provider. CME complied with AHCA's requirements and became the licensed operator and Medicaid provider for COUNTRY PLACE. Thereafter, CME changed the name of the facility to GULF COAST. After CME acquired the facility and became the licensed operator and Medicaid provider, AHCA continued to reimburse CME the same per diem reimbursement which had been paid to the previous provider (plus certain inflation factors) until CME filed its initial cost report, as required for new rate setting. In the normal course of business, CME in 1995 filed its initial Medicaid cost report after an initial period of actual operation by CME. Upon review of the cost report, AHCA contended that the cost report was inaccurate and engaged in certain "cost settlement" adjustments. During this review, AHCA took the position that CME's property reimbursement should be based on FRVS methodologies rather than "cost" due to the lease. In November of 1995, CME received from AHCA various documents which recalculated all components of Petitioner's Medicaid reimbursement rates for all periods subsequent to CME's acquisition of the facility. In effect, AHCA placed CME on FRVS property reimbursement. The practical effect of AHCA's action was to reduce CME's property reimbursement both retroactively and prospectively. The retroactive application would result in a liability of CME to AHCA, due to a claimed overpayment by AHCA. The prospective application would (and has) resulted in a reduction of revenues. CME is substantially affected by AHCA's proposed action and by Sections I.B., III.G.2.d.(1), V.E.1.h., and V.E.4. of the Florida Medicaid Plan. Additional Findings of Fact The Florida Medicaid Plan establishes methodologies for reimbursement of a nursing home's operating costs and patient care costs, as well as property costs. The dispute in this matter relates only to reimbursement of property costs. CME as the operator of the GULF COAST nursing home facility is entitled to reimbursement of property costs in accordance with the Florida Medicaid Plan. CME as the operator of the GULF COAST facility entered into a Florida Medicaid Program Provider Agreement, agreeing to abide by the provisions of the Florida Medicaid Plan. The Sale/Leaseback Agreement entered into by CME and LTC Properties Inc. (LTC) specifically provides for a distinct sale of the nursing home facility to LTC. LTC holds record fee title to GULF COAST. LTC, a Maryland corporation, is not related to CME, a Colorado corporation. The Florida Medicaid Plan is intended to provide reimbursement for reasonable costs incurred by economically and efficiently operated facilities. The Florida Medicaid Plan pays a single per diem rate for all levels of nursing care. After a nursing home facility's first year of operation, a cost settling process is conducted with AHCA which results in a final cost report. The final cost report serves as a baseline for reimbursement over the following years. Subsequent to the first year of operation, a facility files its cost report annually. AHCA normally adjusts a facility's reimbursement rate twice a year based upon the factors provided for in the Florida Medicaid Plan. The rate-setting process takes a provider through Section II of the Plan relating to cost finding and audits resulting in cost adjustments. CME submitted the appropriate cost reports after its first year of operation of the GULF COAST facility. Section III of the Florida Medicaid Plan specifies the areas of allowable costs. Under the Allowable Costs Section III.G.2.d.(1) in the Florida Title XIX Plan, a facility with a lease executed on or after October 1, 1985, shall be reimbursed for lease costs and other property costs under the Fair Rental Value System (FRVS). AHCA has treated all leases the same under FRVS since that time. AHCA does not distinguish between types of leases under the FRVS method. The method for the FRVS calculation is provided in Section V.E.1.a-g of the Florida Medicaid Plan. A “hold harmless” exception to application of the FRVS method is provided for at Section V.E.1.h of the Florida Medicaid Plan, and Section V.E.4 of the Plan provides that new owners shall receive the prior owner’s cost-based method when the prior owner was not on FRVS under the hold harmless provision. As a lessee and not the holder of record fee title to the facility, neither of those provisions apply to CME. At the time CME acquired the facility, there was an indication that the Sale/Leaseback transaction with LTC was between related parties, so that until the 1995 cost settlement, CME was receiving the prior owner’s cost-based property method of reimbursement. When AHCA determined that the Sale/Leaseback transaction between CME and LTC was not between related parties, AHCA set CME’s property reimbursement component under FRVS as a lessee. Property reimbursement based on the FRVS methodology does not depend on actual period property costs. Under the FRVS methodology, all leases after October 1985 are treated the same. For purposes of reimbursement, AHCA does not recognize any distinction between various types of leases. For accounting reporting purposes, the Sale/Leaseback transaction between CME and LTD is treated as a capital lease, or “virtual purchase” of the facility. This accounting treatment, however, is limited to a reporting function, with the underlying theory being merely that of providing a financing mechanism. Record fee ownership remains with LTC. CME, as the lease holder, may not encumber title. The Florida Medicaid Plan does not distinguish between a sale/leaseback transaction and other types of lease arrangements. Sections IV.D., V.E.1.h., and V.E.4., the “hold harmless” and “change of ownership” provisions which allow a new owner to receive the prior owner’s method of reimbursement if FRVS would produce a loss for the new owner, are limited within the Plan’s organizational context, and within the context of the Plan, to owner/operators of facilities, and grandfathered lessee/operators. These provisions do not apply to leases executed after October 1, 1985. Capital leases are an accounting construct for reporting purposes, which is inapplicable when the Florida Medicaid Plan specifically addresses this issue. The Florida Medicaid Plan specifically addresses the treatment of leases entered into after October 1985 and provides that reimbursement will be made pursuant to the FRVS method.
The Issue The issue to be decided in this proceeding is the amount to be paid to Respondent, Agency for Health Care Administration (“AHCA” or the “Agency”), from the proceeds of a personal injury settlement received by Petitioner, Joseph Pinto Domingo, referred to herein as either “Petitioner” or “Domingo,” to reimburse Medicaid for expenditures made on his behalf.
Findings Of Fact The following findings of fact are derived from the exhibits and oral testimony at final hearing, as well as from the stipulated facts between the parties. On July 13, 2012, Domingo’s parents took him to a hospital emergency room (“ER”) with complaints of a persistent fever, runny nose, congestion and a cough. He was 24 months old at the time and had been sick for a few days. After evaluation by hospital ER staff, Domingo was found to have a fever of 103 degrees Fahrenheit. He was treated with Tylenol, but minutes later began to have seizures. He experienced on-going seizure activity that compromised his ability to breathe, resulting in a catastrophic hypoxic ischemic brain injury. As a result of his brain injury, Domingo is permanently disabled and unable to stand, walk, ambulate, speak, eat, toilet or care for himself in any manner. As a result of Domingo’s injuries, he suffered both economic and non-economic damages, including but not limited to: pain and suffering, mental anguish, loss of ability to enjoy life, disability, disfigurement, lost ability to earn money, and extensive medical expenses, past and future. Of course Domingo’s parents also suffered extensively because of Domingo’s injuries. The medical care Domingo received for treatment of his injuries was paid for by Medicaid. The amount paid by Medicaid for his treatment was $641,174.03 (the “Lien Amount”). Domingo’s parents brought medical malpractice claims against the ER physician, the ER nurse practitioner, a professional association to which the doctor belonged, and the hospital. During the course of litigation, it was determined that a conservative value of Domingo’s claim for damages would be thirty million dollars ($30,000,000.00), referred to herein as the “Claim Amount.” After years of litigation, a settlement was reached wherein Domingo was to be paid ten million dollars ($10,000,000), which will be called the “Settlement Amount.” An undisclosed portion of the Settlement Amount, presumably 25 percent or $2,500,000, was paid for attorneys’ fees. Domingo’s recovery was therefore less than $10,000,000. The Settlement Amount was paid by two separate entities: 1) the physician, nurse practitioner, and their professional associations (collectively the “Association”); and 2) the hospital where Domingo presented to the ER for treatment. The Association paid $2,000,000 of the Settlement Amount and the hospital paid $8,000,000. Both entities entered into settlement agreements with Domingo (through his parents). Domingo offered into evidence a Complete Liability Release from the Association and a General Release from the hospital which Domingo’s representatives had signed. In the releases, the Association and the hospital were released from further liability for and in consideration of payments made to Domingo in the amounts described above. The releases, by their terms, are considered “settlement agreements” between the parties thereto. The hospital’s settlement agreement indicated that $170,937 was being allocated for Domingo’s past medical expenses, recognizing that the Settlement Amount was less than the perceived value of Domingo’s claim. The Association’s settlement agreement did not allocate any of the $2,000,000 sum specifically to past medical expenses; it did acknowledge that the Settlement Amount was less than the value of the Claim Amount. Domingo’s parents and legal counsel signed the releases, wherein all future claims against the defendants were barred. Neither the defendants in the malpractice case nor AHCA were signatories to the releases. The copies of the documents entered into evidence at final hearing were not signed by the Association or the hospital. Oddly, the documents do not even provide a place for the defendants to sign. Nor was there testimony from any principal of the Association or the hospital to verify the terms of the releases-qua-settlement agreements. Nonetheless, the gross Settlement Amount received by Domingo was only one-third, i.e., 33.3 percent, of the Claim Amount. All the parties hereto acknowledge that Domingo did not receive the full potential value of his claim in the Settlement Amount. Domingo continues to reside with his parents, who, despite the difficulties associated with Domingo’s injury and the stress related thereto, have remained married. The parents will be responsible for Domingo’s care for the rest of his life. The parties do not dispute that Domingo’s life situation is grave and serious. But that is not the issue in this proceeding. The economic and non-economic damages for Domingo include several factors: future medical expenses, loss of income, and past medical expenses comprise the economic portion; pain and suffering, loss of consortium, mental anguish, loss of enjoyment of life, and disability, to name a few, make up the non-economic damages. Of all the postulated damages, only the past medical expenses (i.e., the Lien Amount) are finite and absolute. In fact, the parties have stipulated that “[Domingo’s] medical care related to the injury was paid by Medicaid and Medicaid provided $641,174.03 associated with [Domingo’s] injury.” All the other damages are estimates by experts, based on comparisons of other cases and/or their professional experience. Domingo asserts that inasmuch as he received only about 33.3 percent of his Claim Amount, he should only have to pay 33.3 percent of the Lien Amount. His assertion is essentially based on a mathematical calculation which seeks to make Domingo as whole as possible. The calculation is offered as an equitable way to provide Domingo with more of the Settlement Amount than he might otherwise retain. As discussed more fully below, the mathematical calculation runs afoul of statutory provisions. The amount allocated by the hospital for Domingo’s past medical expenses ($170,397), is 26.6 percent of the Lien Amount. This is because the hospital’s share of the $10,000,000 settlement ($8,000,000) represents 26.6 percent of the alleged value of the claim, according to Petitioner. (The undersigned could not mathematically reconcile this percentage, but based on the findings and conclusions herein, the calculation is not relevant.) The Association did not allocate a specific amount for past and medical expenses, but Domingo argues that a factor of 33.3 percent should be applied to their settlement payment, as the Settlement Amount is 33.3 percent of the Claim Amount. Other than the accuracy of that mathematical calculation, Petitioner does not provide any basis for applying the percentage to the Lien Amount. AHCA was made aware of the settlement discussions between Domingo and his healthcare providers, but chose not to be involved in the process. Rather, AHCA established the amount of the lien and asserts that the entire Lien Amount should be paid from the Settlement Amount.
Findings Of Fact Petitioner, Greynolds Park Manor, Inc. (Greynolds), operates a skilled nursing home facility at 17400 West Dixie Highway, North Miami Beach, Florida. The facility was constructed in 1968 and has been certified in the Medicaid Program since 1971. It is licensed by Respondent, Department of Health and Rehabilitative Services (HRS), to operate 324 beds. However, its average patient census in 1979 through 1981 was between 220 and 225 patients. It is the largest nursing home in Dade and Broward Counties. HRS is the state agency designated to administer Florida's Medical Assistance (Medicaid) Program pursuant to Section 409.266, et seq., Fla. Stat. HRS and Greynolds have entered into a written agreement, "Agreement for Participation in Florida's Medical Assistance Program," for each fiscal year that Greynolds has participated in the program. Greynolds' fiscal year runs from June 1 through May 31. Effective October 1, 1977, HRS adopted the "Florida Title XIX Long Term Care Reimbursement Plan" (Plan). The Plan is a prospective reimbursement plan, designed to aid the State in containing health care costs for Medicaid recipients. The prospective reimbursement rate for a provider is based on the actual allowable costs of a provider for the previous fiscal year, to which an inflationary factor is added. The mechanics utilized to establish the prospective reimbursement rate under the Plan are clear. The provider is required to submit a uniform cost report within 90 days after the conclusion of its fiscal year. HRS audits the uniform cost report, determines allowable costs, adds an inflationary factor, and thereby sets the provider's prospective reimbursement rate. This rate is effective the first day of the month following receipt of the uniform cost report by HRS, and remains in effect until a new cost report is filed by the provider. Under the provisions of the Plan, all cost reports are desk reviewed within six months after their submission to HRS. HRS, under the terms of the Plan, may perform an audit on the cost report. An on-site audit is a more extensive review of the cost report than desk review. During an on-site audit the financial and statistical records of the provider are examined to ensure that only allowable costs were included in the cost report. The audit findings prevail over those made at desk review. Greynolds submitted its cost report for fiscal year 1979 on September 27, 1979. Previously, by letter dated September 10, 1979, Greynolds had been advised by HRS that an on-site audit was to be done of its ficsal year 1979 cost report, and that Greynolds' Medicare cost report would be a subject of inquiry. The cost report Greynolds submitted to HRS on September 27, 1979, did not make a Medicare cost adjustment, and none was made at desk review. 1/ A rather anomalous situation existed in 1979 through 1980 which lent itself to potential abuse. The Medicare cost adjustment was never made at desk review. It was only made if there was an audit. Yet only one in three providers were designated for audit each year, and even if designated the audit could be terminated at any time. Consequently, if no audit were made, or if terminated prematurely, the provider would not be required to make a Medicare adjustment and would reap a substantial windfall. Greynolds was fully aware of HRS' practice. In 1981 HRS altered its practice and began to make the Medicare adjustment at desk review. The audit of Greynolds' cost report for fiscal year 1979 was actually begun in October 1979 by the Fort Lauderdale Office of HRS. At the same time, the desk review of the cost report was undertaken by HRS' Jacksonville Office and was ultimately finalized on February 29, 1980. The desk review findings contained adjustments to expenditures totaling $46,592, but made no Medicare adjustment, consistent with HRS policy at that time. Based upon these adjustments, HRS' desk review established prospective reimbursement rates effective October 1, 1979. However, HRS advised Greynolds that these rates were "subject to change by any on-site audit." Greynolds used these rates for the period October 1, 1979 through August 31, 1980. In June 1980, HRS' Supervisor of Audit Services requested additional information before the field audit of the 1979 cost report could be completed. Greynolds presumably furnished this information because the field work was completed in September 1980. On June 24, 1981, Greynolds was notified by letter that the audit had been completed and was pending final review. The letter further advised Greynolds that "since this audit will supersede the desk review, the adjustments we made in our desk review letter of February 29, 1980, must stand until the on- site audit results are released." On June 9, 1982, HRS' Fort Lauderdale Office advised Greynolds that its on-site audit of the 1979 cost report had been completed. The audit adjustments to the cost report had been increased from $46,592 to $803,592. Most of this was due to a Medicare adjustment in the amount of $654,282. An exit conference was held by HRS' field representatives and Greynolds on June 21, 1982. None of the adjustments were changed as a result of this meeting. At that time, Greynolds first requested that it be allowed to file an interim rate change. Greynolds was advised, however, that the Office of Audit Services had no authority to approve such a request. On September 23, 1982, the final audit report of Greynolds' 1979 cost report was issued. The audit concluded that the reported allowable expenses of Greynolds would be reduced by $725,953, resulting in an overpayment of $288,024. Most of this was, again, the result of the Medicare adjustment of $654,282. The report further advised Greynolds of the right to request that any audit adjustment in dispute be addressed in a hearing pursuant to Section 120.57, Fla. Stat. Greynolds duly petitioned for a Section 120.57 hearing on the audit adjustments of September 23, 1982. This matter was forwarded to the Division of Administrative Hearings and docketed as Case No. 82-3208. At the outset of the hearing in that case, Greynolds withdrew its challenge to the Medicare adjustment of $654,282. Following receipt of the final audit report of September 23, 1982, Greynolds requested, by letter dated November 2, 1982, an interim rate change for its fiscal year 1980, "in accordance with the Florida Title XIX Long Term Care Reimbursement Plan IVA-10." The reasons assigned by Greynolds for making the request were: A substantial decrease in Medicare patient days in the fiscal year ended May 31, 1980 and the corresponding decrease in the Medicare adjustment; and A change in the percentage of skilled and intermediate Medicaid patients. The request was denied by HRS on January 12, 1983, on the ground that "interim rates will not be granted for a closed cost reporting period." HRS' denial failed, however, to inform Greynolds of its right to request a hearing. On June 7, 1983, Greynolds renewed its request for an interim rate change for its fiscal year ended May 31, 1980. This request was denied October 12, 1983, on the ground that: To grant an interim rate for a closed cost reporting period would be the same as making a retroactive payment to a nursing home whose costs exceed annual payment. Retroactive payments such as this are specifically prohibited by Section 10C-7.48(6)(1), Florida Administrative Code, which was in effect during the cost reporting period in question. Greynolds filed a timely request for a Section 120.57(1), Fla. Stat., hearing. The circumstances relied on by Greynolds to justify an interim rate request were primarily the result of a substantial decline in its Medicare patient census resulting from a staphytococcus bacterial infection among its patients. The bacterial infection arose in February 1979 and continued through May 31, 1980 (the end of Greynolds' 1980 fiscal year). Greynolds is a dual provider facility, treating both Medicare and Medicaid eligible patients. The bacterial infection, which was contained within the Medicare section of the facility, resulted in a 45 percent decline in Medicare admissions during the period. Under the Medicare and Medicaid reimbursement systems, a provider is required to first request payment from Medicare if the patient is Medicare eligible. Medicare reimburses at a higher rate than does Medicaid. Consequently, a substantial decrease in the number of Medicare patient days would result in a substantial decrease in the revenue received by the provider. Greynolds was fully aware of the change in the patient mix, as it occurred, during fiscal year 1980. Greynolds opined that it did not apply for an interim rate request at that time because the prospective reimbursement rate which had been set October 1, 1980, based on its cost report for fiscal year 1979, was "adequate" until the Medicare adjustment was finally made. The facts, however, reveal a different motivation. Under the Plan, whether on desk review or on audit, a Medicare adjustment is made to a provider's uniform cost report when developing a prospective reimbursement rate. The Medicare adjustment is made by excluding the Medicare patient days and Medicare costs from the provider's cost report, since these items are reimbursed by Medicare. The reimbursement rate is then established by adding an inflationary factor to the remaining patient days and costs. This reimbursement rate remains in effect until the provider files its next cost report. If the provider maintains its costs under the reimbursement rate, it may retain the difference; if the provider's costs exceed the reimbursement rate, it will not be reimbursed for its inefficiency. The Plan is predicated on a cost containment methodology. It is designed to encourage efficient administration by nursing home providers when providing services to Medicaid recipients. The Plan does, however, permit an adjustment to a provider's prospective reimbursement rate ("an interim rate") when unforeseen events during that fiscal year occur which were not contemplated in setting the provider's prospective reimbursement rate predicated on the previous year's costs. Greynolds was aware of the change, as it occurred, in its 1980 patient mix. Therefore, it could have applied for an interim rate adjustment at that time. To have done so, however, would have required it to make the Medicare cost adjustment to its 1979 cost report since its justification for an increase was the substantial decrease in Medicare patients and the corresponding decrease in the Medicare adjustment it was currently experiencing. To raise the Medicare adjustment issue was not, however, to its financial advantage. If it "escaped" the Medicare adjustment to its 1979 cost report, it would profit by the amount of that adjustment ($288,024). Greynolds' request for an increase in its reimbursement rate for 1980, after the 1980 cost reporting period was closed, also raises the disquieting specter that Greynolds will be reimbursed for the same costs twice. Since each year's reimbursement rate is based on the previous year's cost report, to retrospectively pick one reimbursement period from the series of years is disruptive of all the rates which were subsequently established. Under the Plan, if a provider experiences a substantial decrease in Medicare patient days and costs for a cost reporting period, the Medicaid reimbursement rate for the next period, based on that cost report, would substantially increase. Accordingly, Greynolds' 1981 reimbursement rate would be reflective of the loss of Medicare patient days in 1980. To now ignore the effect 1980 costs had in establishing 1981 reimbursement rates, and to reimburse Greynolds for 1980 without regard to the reimbursement rate for the subsequent year, ignores reality. Greynolds has on one other occasion availed itself of an interim rate request. On June 17, 1981, Greynolds applied for an interim rate for its fiscal year 1981. Greynolds' request was based on the fact that it had negotiated a union contract effective April 1, 1981, which resulted in a substantial increase in salaries for its employees. Since this factor was not reflected in its cost report for fiscal year 1980, upon which its current reimbursement rate was predicated, HRS, by letter dated July 29, 1981, granted Greynolds' request. Greynolds asserts that the granting of its 1981 interim rate request occurred after the close of its 1981 cost reporting period and is, therefore, evidence that the denial by HRS of its interim rate request in this case is inconsistent and improper. HRS asserts that the granting of Greynolds' interim rate request in 1981 was proper, and that it was not granted outside a closed cost reporting period. HRS interprets "cost reporting period" to be that period within which the provider must file its cost report for the previous fiscal year ("the cost report period"). Rule 10C-7.48(5)(c), F.A.C., in effect at the time, provided A cost report will be submitted as prescribed by the Department to cover the facility's fiscal year, along with the facility's usual and customary charges to private patients receiving comparable medicaid service, within 90 days after the end of the cost report period. According to HRS, the "cost reporting period" would be closed when the provider submits its cost report, which could be as much as 90 days after the "cost report period" had ended. HRS' interpretation is certainly reasonable, within the range of possible interpretations, and is therefore adopted. The interim rate request, granted Greynolds in 1981, was not granted after a closed cost reporting period. The reimbursement rate in effect on June 17, 1981, had commenced September 1, 1980. This rate remained in effect until the interim rate was granted, which interim rate remained in effect until Greynolds submitted its cost report for fiscal year 1981. Greynolds' 1981 cost report was submitted August 31, 1981, and its new reimbursement rate was therefore effective September 1, 1981. Accordingly, the grant of Greynolds' 1981 interim rate request was not inconsistent with the position it has adopted in this case. Had Greynolds "timely filed" its interim rate request in this case, HRS concedes the circumstances which gave rise to the request would have entitled the request to consideration under the provisions of Florida Title XIX Long Term Care Reimbursement Plan, paragraph IVA-10. However, since HRS rejected Greynolds' interim rate request as untimely, it never addressed, by review or audit, the accuracy or prospective impact of Greynolds' request.
The Issue This matter concerns the amount of money to be reimbursed to the Agency for Health Care Administration for medical expenses paid on behalf of Scott R. Brown, a Medicaid recipient, following a settlement recovered from a third party.
Findings Of Fact This proceeding determines the amount the Agency should be paid to satisfy a Medicaid lien following Petitioner’s recovery of a $300,000.00 settlement from a third party. The Agency asserts that it is entitled to recover the full amount of its $112,500.00 lien. The incident that gave rise to this matter occurred on December 22, 2010. On that day, Petitioner, a Florida resident, was visiting relatives in Talladega County, Alabama. Petitioner was shot while sitting in the backseat of a car. The bullet struck Petitioner in his abdomen. Immediately following the incident, Petitioner was taken to UAB Hospital in Birmingham, Alabama. Petitioner received medical care and treatment from December 22, 2010, through January 27, 2011, which included surgical repair of his abdominal injuries. Following his release from UAB Hospital, Petitioner was admitted to Spain Rehabilitation on January 28, 2011. There, Petitioner was diagnosed with a T-10 ASIA-A spinal cord injury, which caused paralysis from the waist down, as well as: a T-12 vertebral fracture; L1 - 2 vertebral fracture; small bowel injury; pancreatic head laceration; and duodenal laceration. Petitioner was also noted to be incontinent and required assistance for all transfers and bed mobility. In short, the gunshot rendered Petitioner a paraplegic. He will continue to require medical treatment for the rest of his life. In June 2011, Petitioner brought a negligence lawsuit in Alabama against the two gunmen. Petitioner was represented by Michael J. Crow, Esquire. Mr. Crow litigated Petitioner’s case over the course of two years. In 2013, Mr. Crow was able to resolve the lawsuit for $300,000, which was the full amount of the gunmen’s homeowner’s insurance. At the final hearing, Mr. Crow testified that the homeowner’s insurance policy was the only available coverage or recoverable asset he identified that could be used to compensate Petitioner for his injuries. Consequently, Mr. Crow believed that it was in Petitioner’s best interests to settle the lawsuit for the policy limits. A portion of Petitioner’s medical care was paid for by the Medicaid programs in Alabama and Florida in the total amount of $262,536.95.2/ Following Petitioner’s settlement, the Alabama Medicaid Agency asserted a lien of $139,169.94 against Petitioner’s recovery. On November 21, 2013, Mr. Crow was able to settle the Alabama Medicaid lien for $6,000.00. This amount represents approximately 4.31 percent of the total Alabama Medicaid lien. Mr. Crow testified that he thought the settlement payment should have been lower based on the full value he placed on Petitioner’s damages (discussed below) versus the actual amount Petitioner recovered. However, he believed that it was in Petitioner’s best interests to settle the Alabama Medicaid lien to avert protracted litigation. The Agency, through the Florida Medicaid program, paid a total of $123,366.95 for Petitioner’s medical treatment from the gunshot injury. All of the expenditures that Florida Medicaid spent on Petitioner’s behalf are attributed to past medical expenses. No portion of the Agency’s Medicaid lien represents future medical expenses. Under section 409.910, the Agency is to be repaid for its Medicaid expenditures out of any recovery from liable third parties. Accordingly, when the Agency was notified of the settlement of Petitioner’s lawsuit, it asserted a Medicaid lien against the amount Petitioner recovered. The Agency claims that, pursuant to the formula set forth in section 409.910(11)(f), it should collect $112,500.00 to satisfy the medical costs it paid on Petitioner’s behalf. (As discussed below, the formula in section 409.910(11)(f) allows the Agency to collect $112,500.00 to satisfy its Medicaid lien.) The Agency maintains that it should receive the full amount of its lien regardless of the fact that Petitioner settled for less than what Petitioner believes is the full value of his damages. Petitioner, on the other hand, asserts that, pursuant to section 409.910(17)(b), the Agency should be reimbursed a lesser portion of the settlement than the amount it calculated using the section 409.910(11)(f) formula.3/ Petitioner specifically argues that the Agency’s Medicaid lien should be reduced proportionately, taking into account the full value of Petitioner’s damages. Otherwise, the application of the default statutory formula would permit the Agency to collect more than that portion of the settlement that fairly represents Petitioner’s compensation for past medical expenses. Petitioner insists that reimbursement of the full lien amount violates the federal Medicaid law’s anti-lien provision (42 U.S.C. § 1396p(a)(1)) and Florida common law. Petitioner requests that the Agency’s allocation from Petitioner’s recovery be reduced to $1,389.00. To establish the value of his damages, Petitioner testified regarding the extent of, and the impact on his life from, the injuries he suffered from the gunshot wound. Petitioner relayed that he has received 18 surgeries on his stomach and intestines. Petitioner further described his future medical expenditures. Petitioner anticipates receiving a hernia operation. Petitioner also requires medication and medical supplies to address his pain and infections. In addition, Petitioner desires a handicap-equipped van that he can use for transportation to his medical visits. Petitioner would also like to install “trapeze” bars in his home to help him exercise. Mr. Crow also testified regarding the full value of Petitioner’s injuries. Mr. Crow has practiced law for 32 years and is a partner with the law firm of Beasley Allen in Montgomery, Alabama. In his practice, Mr. Crow handles serious personal injury and death cases involving car and truck litigation, premise liability cases, and brain injury cases. Mr. Crow has been involved in 15 to 25 lawsuits involving paralyzed clients. As part of his personal injury practice, Mr. Crow regularly evaluates damages similar to those Petitioner suffered. Mr. Crow asserted that the $300,000 settlement was far less than the true value of the injuries Petitioner suffered from this incident. Mr. Crow opined that the full value of Petitioner’s damages equals $26,639,170.00. Mr. Crow explained that this figure consists of $6.5 million present value for Petitioner’s future medical expenses, $5 million for pain and suffering, $10 million for mental anguish and loss of quality of life, $139,170 for the Alabama Medicaid lien, and $5 million in punitive damages. In deriving the value of Petitioner’s injuries, Mr. Crow considered that Petitioner is a younger individual suffering from paraplegia. Mr. Crow explained that Petitioner can live in his community with appropriate nursing support. However, he will require pain management on a monthly basis. His current medications include Baclofen, Colace, Cymbalta, Lopressor, Neurontin, Oxycodone, Senokot, and Glycerine suppositories. Petitioner will also need attendant care to help administer his medications, as well as with bathing, cooking, cleaning, dressing, grooming, and personal hygiene. In addition, Petitioner will require follow-up treatment involving physiatry, physical therapy, urology, and a wheelchair clinic. Furthermore, although Petitioner does not have sensory awareness from his waist down, he continues to experience severe pain in his back and legs. Mr. Crow represented that Petitioner is able to propel himself in a wheelchair, but he can only travel short distances due to fatigue and pain. Petitioner does not have access to a power wheelchair. Regarding transportation, Petitioner will need assistance to drive a van with a wheelchair lift. Finally, Petitioner offered the testimony of David A. Paul, Esquire. Mr. Paul has practiced law in Florida for 22 years as a plaintiff personal injury lawyer and is board- certified in Civil Trial Law by the Florida Bar. Mr. Paul handles catastrophic and serious personal injury cases involving birth injuries, medical malpractice, trucking accidents, and wrongful death. As part of his practice, Mr. Paul regularly evaluates catastrophic injuries. Mr. Paul testified that he has handled many cases with similar injuries to Petitioner. Mr. Paul was accepted as an expert regarding the value of personal injury damages and resolving liens in personal injury cases. At the final hearing, Mr. Paul supported Mr. Crow’s valuation of Petitioner’s injuries. Mr. Paul opined that a “fair full value” of Petitioner’s damages equals in excess of $26 million. In formulating his injury valuation, Mr. Paul considered Petitioner’s past medical expenses, anticipated future medical expenses, the cost of attendant care with daily living activities, past and future lost wages, pain and suffering, as well as mental anguish and loss of quality of life. Regarding the Medicaid liens, Mr. Paul relayed that the norm when resolving liens in Florida is to compare the total value of the injured party’s injuries to the amount of the actual recovery. The lien is then reduced proportionally by this ratio. Mr. Paul commented that he typically resolves Medicaid liens in workers compensation cases using this “equitable formula.” Based on the testimony from Mr. Crow and Mr. Paul that the $300,000 settlement did not fully compensate Petitioner for his damages, Petitioner argues that a lesser portion of the settlement should be allocated to reimburse Florida Medicaid, instead of the full amount of the lien. Petitioner proposes that a ratio should be applied based on the ultimate value of Petitioner’s damages ($26,639,170.00) compared to the amount that Petitioner actually recovered ($300,000). Using these numbers, Petitioner’s settlement represents approximately a 1.126 percent recovery of the full value of Petitioner’s damages. In like manner, the Florida Medicaid lien should be reduced to 1.126 percent or approximately $1,389.00 ($123,366.95 times .01126). Therefore, Petitioner asserts that $1,389.00 is the portion of his third-party settlement that represents the equitable, fair, and reasonable amount the Florida Medicaid program should recoup for its payments for Petitioner’s medical care. The Agency was not a party to the Alabama wrongful injury lawsuit or Petitioner’s settlement. Petitioner was aware of both the Alabama and Florida Medicaid liens and past medical expense damages at the time he settled the lawsuit. No portion of the $300,000 settlement represents reimbursement for future medical expenses. The undersigned finds that Petitioner met his burden of proving, by a preponderance of the evidence, that the full value of his damages from this incident equals $21,639,170.00.4/ Further, based on the evidence in the record, Petitioner proved that a lesser portion of Petitioner’s settlement should be allocated as reimbursement for medical expenses than the amount the Agency calculated pursuant to the formula set forth in section 409.910(11)(f). Finally, the undersigned finds that the evidence establishes that the Agency should be reimbursed in the amount of $5,317.95 from Petitioner’s recovery of $300,000 from a third party to satisfy the Florida Medicaid lien.
Findings Of Fact Provider received the correspondence giving notice of Provider’s right to an administrative hearing regarding the improper Medicaid reimbursement. Provider filed a petition requesting an administrative hearing, and then caused that petition to be withdrawn and the administrative hearing case to be closed. Provider chose not to dispute the facts set forth in the letter dated August 1, 2011. The facts alleged in the letter are hereby deemed admitted, including the total improper reimbursement amount of twelve thousand, one hundred sixty-four dollars ($12,164.00). The Agency hereby adopts the facts as set forth in the letter, including the improper reimbursement amount of twelve thousand, one hundred sixty-four dollars ($12,164.00). CONCLUSIONS OF LAW. The Agency incorporates and adopts each and every relevant statement and conclusion of law set forth in the August 1, 2011, letter. The admitted facts support the legal conclusion that the improper reimbursement in the amount of twelve thousand, one hundred sixty-four dollars ($12,164.00) was appropriate. As partial payment has previously been made, five thousand, eight hundred sixty-four dollars ($5,864.00) is now due and owing from Provider to the Agency. Based on the foregoing it is ORDERD AND ADJUDGED that Provider remit, forthwith, the amount of five thousand, eight hundred sixty-four dollars ($5,864). Provider’s request for an administrative hearing is hereby dismissed. DONE and ORDERED on this the We day of fojtimla__. 2012, in Tallahassee, Florida. and Mf SECRETARY Agency for Health Care Administration A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO A JUDICIAL REVIEW WHICH SHALL BE INSTITUTED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF AHCA, AND A SECOND COPY ALONG WITH FILING FEE AS PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE AGENCY MAINTAINS ITS HEADQUARTERS OR WHERE A PARTY RESIDES. REVIEW PROCEEDINGS SHALL BE CONDUCTED IN ACCORDANCE WITH THE FLORIDA APPELLATE RULES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED. Copies furnished to: Rachic’ Wilson, Esquire Agency for Health Care Administration (Interoffice Mail) Roberto E. Moran, Esq. Rasco, Klock, Reininger, et al 283 Catalonia Avenue Second Floor Coral Gables, Florida 33134 (U.S. Mail) June C. McKinney Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 Mike Blackburn, Chief, Medicaid Program Integrity Finance and Accounting HOA Agency for Persons with Disabilities (Facility) CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of the foregoing has been furnished to the above named addressees by U.S. Mail on this the Ainot Sek W12. = —az, Richard Shoop, Esquire Agency Clerk State of Florida Agency for Health Care Administration 2727 Mahan Drive, Building #3 Tallahassee, Florida 32308-5403 (850) 412-3630
Conclusions THIS CAUSE came before me for issuance of a Final Order on an August 1, 2011, letter from the Agency for Health Care Administration (“Agency”) to Bay Point Schools, Inc. (“Provider”) notifying Provider that it had been improperly reimbursed twelve thousand, one hundred sixty-four dollars ($12,264.00) by Medicaid. The August 1, 2011, letter indicated that partial payment had already been remitted by Provider and that five thousand, eight hundred sixty-four dollars ($5,864.00) remained due and owing from Provider to the Agency. The August 1, 2011, letter provided full disclosure and notice to Provider of procedures for requesting an administrative hearing to contest the allegations made in the letter. Provider filed a petition with the Agency requesting a formal administrative hearing on September 6, 2011. The Agency forwarded Provider’s hearing request to the Division of Administrative Hearings (“DOAH”) for a formal administrative hearing. On March 9, 2012, Provider filed a Motion to Withdraw Petition for Formal Hearing. DOAH issued an Order Filed September 6, 2012 1:46 PM Division of Administrative Hearings Closing File and Relinquishing Jurisdiction on March 12, 2012, closing the above-styled cause and relinquishing jurisdiction back to the Agency.
