Findings Of Fact The Home The Miami Jewish Home and Hospital for the Aged is a multi-faceted operation located on an entire city block in Miami. It provides a variety of services including an adult congregate living facility, an auditorium, a nursing home and a 32-bed hospital. Residents may come to the Home bringing with them their cash, and property and other possessions, to be sold. An account is opened for the resident from which charges made by the Home may be deducted. This fund is the Resident Asset Fund. Earings on the Resident Asset Fund are applied to reduce the Home's operating deficit. The Home provides Medicare and Medicaid services. Medicaid provides for long-term care for the indigent. About 60% of the Home's patient days were devoted to Medicaid patients in 1985. By participating in the Medicaid program, the Home is required to file cost reports each year to determine its allowable costs under Medicaid rules. The fiscal year for the nursing home runs from July 1 to June 30. The Medicaid Program Medicaid costs are shared between the federal government and the State of Florida. The Medicaid program is administered at the federal level by the Department of Health and Human Services (HHS), and at the state level by the Department of Health and Rehabilitative Services (HRS). The Health Care Financing Administration (HCFA) of HHS establishes the Medicaid costs the federal government will pay for. HCFA's Provider Reimbursement Manual, also referred to as HIM-15, contains reimbursement guidelines. Medicaid reimbursement is calculated as a rate per Medicaid patient per day. Reimbursement is provided prospctively and is based on prior cost reports, inflated forward to the period of reimbursement. The Home's unaudited cost report data is used for that purpose. In order to insure the accuracy of the Medicaid cost reports, HRS performs either test reviews or full field audits of the reports. Full audits are done either by HRS auditors or by outside auditors on contract with HRS. Here the Home's cost report was audited for HRS by Peat Marwick Mitchell & Co. HRS reviews the preliminary audit reports of its contract auditors, which can result in changes before the final audit report is issued. The 1985 Medicaid Cost Report A Medicaid cost report for the fiscal year ending June 30, 985 was filed by the Home in mid-October 1985. David Farkas, the Director of Financial Operations for the nursing home prepared that Medicaid cost report; he also had it reviewed by the accounting firm of Deloitte Haskins & Sells before it was submitted to the Department. In the Medicaid cost report, a nursing home's costs are broken down into four components: (a) those from operations; (b) those from patient care, (c) return on equity and (d) property. Costs within each of those four categories are determined and then divided by the number of patient days at the nursing home to determine a cost per patient day. The cost per patient day for the categories of operating costs and patient care are compared to a ceiling or cap that is generated through surveys performed by the Department of Health and Rehabilitative Services. Caps are adjusted for the geographical location and size of the facility. Assuming that the nursing home is at or below the cap for operations and patient care determined from the survey, the cost per patient day in each of the four components are added to form a composite reimbursement rate. Costs incurred in excess of the caps for operations and patient care are not reimbursed. An inflation factor is then added to a provider's costs because the State of Florida operates on prospective reimbursement system. Patient Trust Fund A nursing home which holds residents' funds is required by Section 400.162, Florida Statutes (1987) to provide a bond equal to twice the average monthly balance of the funds it held during the preceding year in order to ensure that the funds will be available to residents. The nursing home also has the option, in lieu of a bond, to provide a self-insurance fund protecting the monies it holds in trust. By letter dated May 31, 1985, the nursing home received approval from the Department to establish a self-insurance fund under Section 400.162 Florida Statutes. Its account was opened with Sun Bank of Miami. When the account was established the Home was required to deposit in it twice the average monthly balance of its Resident Asset Fund for the preceding year. As of June 30, 1985, the Patient Trust Fund contained $2,750,000, representing twice the $1,375,000 in resident assets held in the Resident Asset Fund. The money the Home placed in the Patient Trust Fund came from donations and from the building fund for the Home. Those funds are held in the form of treasury notes and certificates of deposit. The nursing home treated the Patient Trust Fund as part of the building fund in its 1985 Medicaid cost report. When the funds which comprise the Patient Trust Fund are placed with a trustee, they are restricted. The trustee holds the securities, and the State has the right to draw against those securities when a default occurs in the nursing home's handling of residents' funds. Only the principal amount of the Home's self-insurance fund is restricted, however. The Home itself receives the benefit of interest or dividends which accrue on the monies deposited in the self-insurance fund. Those earnings accrue to the benefit of the Home's building fund. The premium for a surety bond of the type required by Section 400.162(5)(b)1. Florida Statutes in 1985 would have cost the Home 2 percent of the amount bonded; based on 2 percent of $2,750,000, the premium would have been $55,000. This bond premium would have been treated as an allowable operating cost. The Home's operating costs exceeded the cap, however, so it actually would have received no additional reimbursement for the $55,000 bond premium if a bond had been purchased. The Audit After the nursing home submitted its 1985 Medicaid cost report, Barry Scutillo of Peat Marwick contacted the Home on behalf of HRS to audit the Home's records supporting its 1985 report. The audit resulted in a number of adjustments which were discussed with representatives of the nursing home at an exit conference. The issue of the proper treatment of the nursing home's funds deposited in the Patient Trust Fund at Sun Bank was discussed during the audit. The auditor for Peat Marwick, Mr. Scutillo, thought that the Home had accounted for the use of those funds correctly by seeking a return on equity from Medicaid for the securities in the Patient Trust Fund. The Audit Report Ultimately, Mr. Scutillo's field work was reviewed by more senior members of Peat Marwick and by HRS. An audit report was issued by Peat Marwick Mitchell & Company dated November 18, 1986 which did propose adjustments to the Home's cost report arising from the treatment of the funds which had been deposited in the Patient Trust Fund in Sun Bank. The audit report proposed to reduce nursing home's equity by $2,734,270 and to adjust the return on equity before apportionment by $108,515. The other adjustments proposed are of no consequence, because the nursing home is already at or exceeds the Medicaid cost caps, and federal regulations would prevent the Home from receiving additional reimbursement on the other adjustments even if they were made in the nursing home's favor. After the nursing home filed a request for an administrative hearing on the adjustments made in the Peat Marwick audit, representatives of the nursing home and HRS met to discuss the issues, and agreed to present a joint position paper to HCFA for a non-binding determination on the issue whether the Home was entitled to a return on equity for the funds in the Patient Trust Fund at Sun Bank. The parties agreed that each would prepare a position paper which would be forwarded to the appropriate federal officials for review. The Home's position paper was submitted to HRS but HRS failed to submit it to the federal government. Instead, HRS submitted only its own position paper. After the Home discovered this, it sent its position paper directly to the HCFA. HCFA's Response The HCFA responded, after reviewing the position of both parties, that the self-insurance fund should be excludedfrom the Home's equity capital. 1/ The HCFA believed that the fund was segregated and not used to provide patient care. 2/ The manual which HCFA relied upon, (HIM-15), contains in Section 1202.1 a definition of equity capital which includes the health care provider's investment in property, plant and equipment related to patient care, and that working capital necessary for the proper operation of patient care activities. A proprietary provider is entitled to a rate of return on its equity capital which is "a percentage equal to 1 and 1/2 times the average of the rates of interest on special issues of public debt obligations issued to the Federal Hospital Insurance Trust Fund for each of the months during the provider's reporting period." (HIM-15, Section 1206). The manual also describes items which are to be excluded from the computation of equity capital, and in Section 1218.9 states: Where a provider maintains a self- insurance program in lieu of purchasing conventional insurance, the funds in the self-insurance reserve fund must be set aside in a segregated account to cover possible losses and not used to provide patient care. Therefore, the amount deposited in the fund and the earnings on the self-insurance reserve remaining in the fund are not included in equity capital. The nursing home argues that Section 1218.9 focuses on self-insurance funds which a health care provider maintains to protect itself, and that the section is inapplicable here, because the funds deposited with Sun Bank were deposited for the protection of patients, not of the nursing home. This is unpersuasive. The nursing home itself is responsible for any defalcations in the handling of residents' assets placed with it as trustee. The Patient Trust Fund which serves as self-insurance for claims against the Home for mismanagement of the Resident Trust Funds is similar to conventional insurance.
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.
The Issue Whether the Petitioner is entitled to reimbursement for charges billed to a workers' compensation insurance carrier for medical services rendered to an injured employee/claimant, pursuant to Section 440.13, Florida Statutes (2007).2
Findings Of Fact Based on the oral and documentary evidence presented at the final hearing and on the entire record of this proceeding, including the pertinent portions of the stipulations of fact contained in Section VI of the Joint Pre-Hearing Stipulation, the following findings of fact are made: The Department is the state agency responsible for resolving reimbursement disputes involving health care providers and workers' compensation insurance carriers and employers ("employer/carrier"). See §§ 440.13(7) and (11)(c), Fla. Stat.4 The dispute resolution process is initiated when a health care provider files a petition with the Department contesting the decision of an employer/carrier to disallow or adjust payment to the health care provider for services provided to an injured worker/claimant. The petition must be accompanied by documentation supporting the allegations in the petition; if the documentation is not complete, the Department is to dismiss the petition. See § 440.13(7)(a), Fla. Stat. The employer/carrier is then required to submit a response to the petition to the Department, together with all documentation supporting its decision to disallow or adjust the health care provider's reimbursement requests. See § 440.13(7)(b), Fla. Stat. After review of the documentation submitted by the provider and the employer/carrier, the Department must determine whether the employer/carrier properly disallowed or adjusted payment to the health care provider, and it must provide a written determination setting out its decision. See § 440.13(7)(c), Fla. Stat. Procedure followed by the Department in resolving reimbursement dispute at issue in this proceeding The reimbursement dispute at issue herein arose after Sedgwick CMS, a workers' compensation insurance carrier, issued through its agent an Explanation of Bill Review and a First Notice of Disallowance dated April 16, 2008, notifying Dr. Merayo of its decision to disallow reimbursement for medical services he provided to the Claimant on April 11, 2007, August 21, 2007, September 18, 2007, October 16, 2007, December 11, 2007, and January 22, 2008, on the grounds that there had been over-utilization; specifically, Sedgwick CMS stated that it had based its decision with regard to those dates on its conclusion that that the treatment Dr. Merayo had provided the Claimant on those dates was excessive and/or not medically necessary. After receiving the First Notice of Disallowance from Sedgwick CMS, Dr. Merayo initiated the dispute resolution process when he timely filed with the Department a Petition for Resolution of Reimbursement Dispute ("Reimbursement Dispute Petition") dated May 16, 2008. Dr. Merayo requested in the Reimbursement Dispute Petition that the Department resolve the dispute between him and Sedgwick CMS regarding reimbursement for psychiatric services that he rendered to the Claimant on the dates identified in the First Notice of Disallowance. Dr. Merayo attached to the Reimbursement Dispute Petition documentation including medical records for the Claimant, and Sedgwick CMS timely submitted a response to the Reimbursement Dispute Petition, together with extensive medical and other records related to the Claimant. Among the records submitted to the Department by Sedgwick CMS were reports of two psychiatric independent medical examinations of the Claimant, both conducted in 1999, and peer review reports completed by three psychiatrists in December 2007, January 2008, and February 2008. Department personnel reviewed the documents submitted by Dr. Merayo and by Sedgwick CMS, including the two independent medical examination reports and the three peer review reports. After reviewing the documentation, Department personnel determined that, because there was no consensus among the physicians conducting the peer reviews regarding the frequency, duration, or intensity of services for the medical management of the Claimant's psychiatric needs, an EMA should review the documentation and provide guidance to Department personnel in resolving the reimbursement dispute. As authorized by Section 440.13(9)(f), Florida Statutes, the Department referred the matter to Dr. Guthrie, a psychiatrist certified by the Department as an EMA pursuant to Section 440.13(9)(a), Florida Statutes, and requested that he prepare a report regarding the medical necessity for the treatment Dr. Merayo provided the Claimant on the dates for which Sedgwick CMS had denied reimbursement. The Department indicated that all documents contained in its records would be provided to Dr. Guthrie and that, if he required additional documentation, he should immediately contact the Department. Dr. Guthrie submitted his report to the Department on November 3, 2008. The Department based its Determination that there was over-utilization of Dr. Merayo's medical services on April 11, 2007, August 21, 2007, October 16, 2007, December 11, 2007, and January 22, 2008, on a review of the documentation submitted, "specifically the carrier-obtained peer review report prepared by Dr. Sinakin [sic] and response from the Expert Medical Advisor." It based its decision that there was no over- utilization by Dr. Merayo on September 18, 2007, on Dr. Guthrie's EMA Report. Claimant's relevant medical history and independent medical examination reports prior to her treatment by Dr. Merayo5 The Claimant suffered injuries to her back as a result of an employment-related accident on December 29, 1997. Sedgwick CMS authorized psychiatric evaluation and treatment for the Claimant in April 1999, which she received from the Center for Occupational Psychiatry of Florida. The Claimant was diagnosed by Dr. Noel Delgadillo in 1999 as suffering from adjustment disorder and disorder of chronic pain, and he recommended treatment, with maximum medical improvement expected within six months. The Claimant received psychiatric medical services involving group and individual therapy and medication prescriptions and management from Dr. Delgadillo's associate, Dr. Angel Diaz, and employees of the Center for Occupational Psychiatry of Florida. Sedgwick CMS ordered a psychiatric independent medical examination of the Claimant, which was conducted on July 23, 1999, by Dr. Marilu Sabas. Dr. Sabas diagnosed the Claimant as suffering from "adjustment disorder," and she opined that the Claimant's symptoms were "the direct result of the accident . . . and the subsequent physical pain and emotional stress." On October 1, 1999, Dr. Diaz determined that the Claimant reached maximum medical improvement and assigned a permanent impairment rating of five percent. Sedgwick CMS ordered a second independent medical examination, which was conducted on October 20, 1999, by Dr. Anastasio Castiello. In Dr. Castiello's opinion, the Claimant "presented the clinical picture of an individual manifesting the exaggerated elements of a personality disorder and her actual representation is tailored to the circumstances of the litigation." Dr. Castiello concluded that, "under the circumstances, a recommendation for further psychiatric intervention is not clinically warranted." Sedgwick CMS continued to authorize Dr. Diaz to provide psychiatric evaluation and treatment in the form of group and individual psychotherapy, together with medication prescriptions and management until December 2004, when Sedgwick CMS authorized Dr. Merayo to provide psychiatric treatment to the Claimant. Dr. Merayo's treatment of the Claimant Dr. Merayo is a board-certified psychiatrist who has treated patients suffering from work-related injuries for more than 10 years. In December 2004, Dr. Merayo diagnosed the Claimant as suffering from major depressive disorder, recurrent and severe, without psychotic features, and he recommended continued group and individual psychotherapy, which was authorized by Sedgwick CMS and which she received from the Merayo Medical Arts Group. Dr. Merayo initiated an aggressive medication treatment regimen for the Claimant and conducted individual psychotherapy sessions. The Claimant also attended group therapy sessions led by members of Dr. Merayo's group. On August 23, 2005, Dr. Merayo opined that the Claimant had reached maximum medical improvement, and he assigned her a permanent impairment rating of 15 percent. Dr. Merayo also opined that the Claimant was unable to work due to her compensable injury. In 2006, Dr. Merayo conducted nine individual psychotherapy sessions, approximately one every six weeks, and the Claimant also participated in 30 group therapy sessions. At the end of 2006, Dr. Merayo was notified by Sedgwick CMS that it would not authorize further group therapy sessions, and, beginning in January 2007, the Claimant received only individual psychotherapy and medication management reviews from Dr. Merayo. Dr. Merayo conducted monthly individual psychotherapy sessions with the Claimant in 2007, for a total of 12 sessions, and in January, February, and March 2008. Sedgwick CMS paid Dr. Merayo for the individual psychotherapy sessions he conducted in January, February, March, May, June, July, and November 2007 and February 2008. Sedgwick CMS did, however, advise Dr. Merayo in the April 16, 2008, First Notice of Disallowance that it considered the services provided on July 18, 2007, November 13, 2007, and February 22, 2008, to be excessive, not reasonable, and medically unnecessary. The treatment Dr. Merayo provided the Claimant on the dates at issue herein was no different from the treatment provided on the dates for which Dr. Merayo received reimbursement. On the dates at issue herein, Dr. Merayo documented his individual psychotherapy sessions with the Claimant on a form entitled "Progress Notes," which consisted primarily of a checklist of items that he completed during the sessions, including observations on such things as appearance, behavior, attitude toward examiner, speech, mood, affect, perceptions, thought process, thought content, orientation, and the type of therapy provided. The form had blank spaces for Dr. Merayo to enter the Claimant's subjective complaints, stressors, and functioning, testing done, side effects of medication, and referrals and interventions. Dr. Merayo's notes of the Claimant's individual psychotherapy sessions on the dates at issue indicate that the Claimant consistently complained of chronic pain in her back and legs, of anxiety, and of difficulty sleeping.6 The Claimant's diagnosis of major depression, recurrent and severe, remained the same throughout the time period at issue, and, at each psychotherapy session, Dr. Merayo prescribed medications for insomnia, depression, and anxiety. Specifically, Dr. Merayo prescribed Restoril, Wellbutrin, Effexor, and Klonopin at the Claimant's psychotherapy sessions on April 11, 2007, and on August 12, 2007. As discussed in more detail below, Dr. Merayo substituted Ambien and Vistaril for the Restoril on October 16, 2007,7 and he prescribed these two new medications, together with Wellbutrin, Effexor, and Klonopin, in December 2007 and January 2008.8 On December 11, 2007, Dr. Merayo increased the dosage of Wellbutrin, an antidepressant, from 150 milligrams to 300 milligrams because the Claimant was exhibiting increasing depression. In Dr. Merayo's opinion, prescribing only a month's supply of medications at each monthly visit was the safest procedure for the Claimant. If a patient is taking only one antidepressant and is otherwise doing well, it is appropriate to conduct a medication review for that patient every three months. The Claimant's case was complex, however, because she was taking four or five medications at any given time, including two benzodiazepines and two antidepressants. In Dr. Merayo's medical judgment, even though there was no indication that the Claimant misused the medications or had any side effects, it was necessary that he conduct medication management reviews for the Claimant every month and prescribe only a 30-day supply of medications because of the number and nature of the medications. Dr. Merayo noted in his Progress Notes on the dates at issue that the Claimant's ego defenses were weak and that her recent memory was not very sharp. Dr. Merayo was particularly concerned about the Claimant because her weak ego defenses indicated possible regression. At the Claimant's psychotherapy session on October 16, 2007, Dr. Merayo decided to substitute Ambien and Vistaril for Restoril because he was concerned about the possible addictive effects of Restoril and because of his concern that Restoril was related to the Claimant's declining recent memory. Dr. Merayo also noted in his Progress Notes for the October 16, 2007, psychotherapy session that the Claimant complained of pain all over her body and expressed frustration that she was not getting any better. The Claimant's treatment plan, consisting of cognitive behavior therapy, supportive therapy, coping skills, and anxiety control, remained unchanged on the dates at issue, and Dr. Merayo indicated in the Progress Notes for each of the psychotherapy sessions that the Claimant's condition was the same. On all of the dates at issue except for October 16, 2007, Dr. Merayo checked the box on the Progress Notes specifying that the Claimant's progress toward the treatment goals was between 30 percent and 40 percent; on October 16, 2007, Dr. Merayo checked the box on the Progress Notes specifying that the Claimant's progress toward the treatment goals was between 20 percent and 30 percent. There are, however, no treatment goals stated in any of the Progress Notes. Additionally, the observations Dr. Merayo recorded on the Progress Notes for almost all of the dates at issue indicated that the Claimant's appearance was casual9; her behavior was quiet and needy; her eye contact was fair; her attitude toward Dr. Merayo was cooperative; her speech was spontaneous; her mood was depressed and anxious; her affect was labile; her thought process was goal oriented; her thought content was logical10; she was not suicidal; her orientation was "OK"; her consciousness was alert; her sleep was "OK"; her appetite was "OK"; her libido was low; her concentration was poor; her attention was good; her judgment was fair; and her coping skills were fair. In Dr. Merayo's opinion, the appropriate treatment for the Claimant, or any patient with her diagnosis, is medication management and psychotherapy. Dr. Merayo described the Claimant as a person who is in need of psychotherapy because of her diagnosis and explained that she needed the 45 minutes allotted for each of her monthly psychotherapy sessions on the dates at issue. In Dr. Merayo's opinion, the Claimant was regressing during the time period covering the dates at issue and required psychotherapeutic intervention for chronic mental illness to avoid moving from major depression to exhibiting psychotic features. In his years of medical practice, Dr. Merayo has observed that patients having the Claimant's diagnosis and amount of medication often end up in the hospital if they go for too long a period without being seen. Dr. Merayo acknowledged, however, that many patients probably do not need the level of service he provided to the Claimant after reaching maximum medical improvement and that most patients could be adequately treated with 25-minute psychotherapy sessions conducted less frequently than those he conducted with the Claimant. In Dr. Merayo's opinion as a board-certified psychiatrist, the quality, quantity, and duration of medical care that he provided to the Claimant on each of the dates at issue were medically reasonable and necessary in order to prevent the Claimant from regressing and to provide her with psychotherapy that she needed and that provided her relief. He was aware of no guidelines setting forth the frequency and intensity of psychiatric services to be provided to a claimant after a declaration of maximum medical improvement except the sound medical judgment of the health care provider. Notwithstanding the reimbursement dispute at issue herein, Dr. Merayo was authorized by Sedgwick CMS to provide psychiatric treatment to the Claimant at the time of the final hearing. EMA Report Dr. Guthrie was appointed by the Department as an expert medical advisor to render an opinion as to the medical necessity/over-utilization issues presented in the reimbursement dispute between Sedgwick CMS and Dr. Merayo. In its Order Referring Matter for Expert Medical Advisor Review, the Department requested that Dr. Guthrie assist in resolving the reimbursement dispute by specifically answering the following question: Whether the type, intensity and duration of the evaluation and treatment provided on April 11, 2007, August 21, 2007, September 18, 2007, October 16, 2007, December 11, 2007, and January 22, 2008, are consistent with the medically necessary standard of care for the clinical problem(s) documented by the Petitioner in the medical record of the Injured Employee? Please identify the standard(s) of care that support the opinion provided. Dr. Guthrie submitted his EMA Report on November 3, 2008, and he listed the documents he reviewed in an appendix to the report. The documents listed by Dr. Guthrie were all those submitted to the Department by Sedgwick CMS and by Dr. Merayo regarding the medical services provided to the Claimant since the date of her injury in 1997. Dr. Guthrie did not examine the Claimant in the course of preparing his EMA Report. In his report, Dr. Guthrie opined "within a reasonable degree of medical certainty" that reimbursement for the psychotherapy sessions conducted by Dr. Merayo with the Claimant on April 11, 2007, August 21, 2007, September 18, 2007, October 16, 2007, December 11, 2007, and January 22, 2008, should be disallowed by Sedgwick CMS because these psychotherapy sessions "would not be expected to be necessary."11 Dr. Guthrie noted, however, that, in his opinion, Sedgwick CMS should reimburse Dr. Merayo for the psychotherapy session conducted September 18, 2007, because "if all three of those visits [August, September, and October] are disallowed, then there would be a four month gap from July to November without adequate follow-up."12 Dr. Guthrie stated the basis for his opinion in pertinent part as follows: Typically, following a declaration of maximum medical improvement, it is anticipated that the frequency and to some degree, the intensity of therapeutic treatments would gradually decrease with the ultimate expectation that therapeutic follow-ups (which might include simply medication management or at times, might necessarily include medication management plus individual therapy of a supportive nature) would be necessary on an every two to three month basis, requiring at most, four to six such appointments per year. * * * Given what would be considered a more typical need to treatment following a declaration of maximum medical improvement, it would be anticipated that during the year 2007, there would typically need to be four follow-up appointments unless some extraordinary situation developed. No such extraordinary situation is discernable from Dr. Merayo's records. Dr. Guthrie summarized his opinion as follows: Therefore, given the expectation of follow- up care requiring four to at most six appointments per year subsequent to an [sic] maximum medical improvement declaration, it is my opinion, within a reasonable degree of medical certainty, that Dr. Merayo's continued monthly appointments of forty-five minutes duration suggest a pattern of over- utilization of services, [13] Dr. Guthrie also observed: From the clinical status of the claimant/patient indicated in Dr. Merayo's notes, it is clear that she has continued to struggle emotionally and with chronic pain despite aggressive treatment provided by Dr. Merayo. It is quite possible that his pattern of over-utilization has been in an attempt to assist an ill patient; however, given his declaration of maximum medical improvement on August 23, 2005, we are left with no other conclusion than a pattern of over-utilization. Summary The evidence presented by Dr. Merayo is sufficient to establish with the requisite degree of certainty that he should be reimbursed for medical services he provided the Claimant on April 11, 2007; August 21, 2007; October 16, 2007; December 11, 2007; and January 22, 2008. For reasons discussed in more detail below in the Conclusions of Law, the opinions of Dr. Merayo and Dr. Guthrie are the only evidence presented on which a determination of the medical necessity of the Claimant's monthly psychotherapy and medical management sessions with Dr. Merayo can be based. After consideration of all of the creditable evidence, Dr. Merayo's opinion is accepted as more persuasive and more grounded in the medical needs of the Claimant than the opinion of Dr. Guthrie. Dr. Guthrie's opinion was not based on an articulated "medically necessary standard of care for the clinical problem(s) documented by the Petitioner in the medical record of the Injured Employee," as required by the Department when it referred the reimbursement dispute to Dr. Guthrie,14 nor did Dr. Guthrie identify an established standard of care for psychiatric treatment of a patient with problems similar to the Claimant's. Rather, Dr. Guthrie's opinion was based on the "expectation" that, after a patient is found to have reached maximum medical improvement, the number of psychotherapy and medication management sessions would decrease to a maximum of four to six sessions per year, at a frequency of once every two to three months. In reaching his opinion regarding the frequency of psychotherapy and medication management review sessions that Dr. Merayo should have provided the Claimant, Dr. Guthrie imposed a standard that reflected "a more typical need" for treatment after maximum medical improvement of four sessions annually, but he never refers to the source of this standard of "typical need." In addition, there is only one reference to the medical necessity of monthly treatments for the Claimant, given her clinical problems and the complexity of her medications, in the Conclusion and Opinion section of Dr. Guthrie's EMA report. In that reference, Dr. Guthrie acknowledged that the Claimant continued to struggle with emotional issues and chronic pain and that the frequency of Dr. Merayo's psychotherapy sessions with the Claimant may have been "in an attempt to assist an ill patient."15 Nonetheless, because of the "expectation" regarding the frequency of treatment after a declaration of maximum medical improvement to which he referred in his report, Dr. Guthrie found that, regardless of the Claimant's need for treatment, he "is left with no other conclusion than a pattern of over-utilization" based solely on Dr. Merayo's having declared that the Claimant attained maximum medical improvement in August 2005.16 In the absence of reference by Dr. Guthrie to an established practice parameter, a protocol of treatment, or a standard of care for a psychiatrist treating a patient with a diagnosis, symptoms, and medications similar to those of the Claimant to support the opinion expressed in his EMA report, the opinion expressed in Dr. Guthrie's EMA Report is rejected. Dr. Merayo's testimony that the frequency and duration of his psychotherapy and medication management review sessions with the Claimant were, in his medical judgment, medically necessary to avoid deterioration of the Claimant's mental state and her possible lapse into psychotic features is accepted.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services enter a final order requiring Sedgwick CMS to remit payment to Huberto Merayo, M.D., for medical services he provided the Claimant on April 11, 2007; August 21, 2007; September 18, 200726; October 16, 2007, December 11, 2007; and January 22, 2008, in accordance with the rates established in the applicable Health Care Provider Reimbursement Manual. DONE AND ENTERED this 17th day of June, 2009, in Tallahassee, Leon County, Florida. PATRICIA M. HART Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 17th day of June, 2009.
The Issue The issues are whether Respondent has made unauthorized payments to Superior Insurance Group, its corporate parent, and whether Respondent has properly disclosed these payments on its financial reports filed with Petitioner.
Findings Of Fact Respondent is a domestic stock insurance company operating under a certificate of authority to transact in Florida the business of property and casualty insurance. As a nonstandard automobile insurer, Respondent primarily deals with policyholders whose driving records and accident histories preclude their coverage by standard automobile insurers. Superior Insurance Group, Inc. (formerly GGS Management, Inc. (GGS)) owns Respondent; Symons International Group, Inc. (Symons) owns Superior Insurance Group, Inc. (Superior Group); and Goran Capital, Inc. (Goran) owns 73 percent of Symons. Although publicly traded, Goran was founded, and probably is still controlled, by the Symons family. Superior Group serves as Respondent’s managing general agent. GGS changed its name to Superior Group in early 2000; where appropriate, this Recommended Order refers to this entity as GGS/Superior Group. Respondent owns Superior American Insurance Company (Superior American) and Superior Guaranty Insurance Company (Superior Guaranty), which are both domestic stock insurance companies authorized to conduct in Florida the business of property and casualty insurance. Also engaged in the nonstandard automobile insurance business, Superior American and Superior Guaranty transfer all of their premiums and losses to Respondent under a reinsurance agreement. All financial information concerning Superior American and Superior Guaranty, which, for the purpose of this case, are mere conduits to Respondent, are included in the financial information of Respondent. On or about April 30, 1996, GGS acquired the stock of Respondent, as well as other assets, from an unrelated corporation, Fortis, Inc. or one of its subsidiaries. From the regulatory perspective, the acquisition started when, as required by law, on or about February 5, 1996, GGS filed with Petitioner a Form A application for Petitioner’s approval of the acquisition of Respondent. This was an extensive document, consisting of more than 1000 pages. One of the purposes of the application process, as described in Section 628.461, Florida Statutes, is to assure the adequacy of the funds used by the entity acquiring the insurer. The proposed acquisition is described by the Statement Regarding the Acquisition of More Than Five Percent of the Outstanding Voting Securities of Superior Insurance Company . . . by GGS Management, Inc., dated February 5, 1996 (Acquisition Statement). The Acquisition Statement states that GGS Management Holdings, Inc. owned GGS. (The distinction between GGS and GGS Management Holdings, Inc. is irrelevant to this case, so “GGS,” as used in this Recommended Order, shall also refer to GGS Management Holdings, Inc.) According to the Acquisition Statement, Symons owned 52 percent of GGS; GS Capital Partners II, L.P., owned 30 percent of GGS; GS Capital Partners II Offshore, L.P., owned 12 percent of GGS; and three mutual funds (probably all affiliates of Goldman Sachs) owned the remaining 6 percent of GGS. GS Capital Partners II, L.P., was owned by 100 investors, including The Goldman Sachs Group, L.P. (16.54 percent), “wealthy individuals and trusts, corporate pension funds, foundations and endowments, family trusts/corporations and one state pension fund.” The ownership of GS Capital Partners II Offshore, L.P., resembled the ownership of GS Capital Partners II, L.P. The Acquisition Statement states that GGS “will be the manager of all insurance operations for [Respondent] and will act as the holding company for [Respondent] and [an Indiana nonstandard automobile insurer known as Pafco whose stock Symons was contributing to GGS].” The Acquisition Statement projects the stock-purchase price, which was expressed as a formula, to be about $60 million. Citing the $2 billion in capital of the two Goldman Sachs limited partnerships and the $50 million in capital of Goran, the Acquisition Statement assures that “GGS has tremendous wherewithal to fund the growth needs of [Respondent] . . ..” Alluding to Goran’s 20 years’ experience in managing nonstandard automobile insurance companies, the Acquisition Statement represents that the Goldman Sachs limited partnerships and Goran “possess the capital and leadership resources to support the proposed activities of [Respondent].” According to the Acquisition Statement, the Goldman Sachs limited partnerships and Goran “anticipate that the acquisition of [Respondent] is but the first step in an effort to build a significant non-standard auto insurance company.” The Acquisition Statement describes the respective contributions of the two owners of GGS: Symons will contribute Pafco, which then had a current GAAP book value of $14 million, and the Goldman Sachs limited partnerships will contribute $20 million in cash. With the backing of Symons and the Goldman Sachs limited partnerships and secured by all of the stock of Respondent and GGS, GGS will execute a six-year promissory note with The Chase Manhattan Bank (Chase) for $44 million. Drawing $40 million from this credit extension and using the $20 million cash contribution of the Goldman Sachs limited partnerships, GGS will fund the anticipated cash purchase price of $60 million. The Acquisition Statement represents that GGS will be able to service the debt. Due to the cash contribution of the Goldman Sachs limited partnerships, the Chase debt represents only two-thirds of the purchase price. Due to the cash contribution of the Goldman Sachs limited partnerships and the stock contribution by Symons, the Chase debt represents only about one-half of the initial capital of GGS. The Acquisition Statement states that GGS will service the Chase debt in part by “the combination of the management activities of both Pafco and [Respondent] within GGS, billing fees, other non-insurance company activities and anticipated insurance company operating economies which will result from the combination of these two operations [Pafco and Respondent].” The equity contributions of cash and stock “contribute significantly to the financial stability of GGS, allowing GGS to service the debt using operating cash flows only, including, if necessary, normal dividends from earned surplus as a secondary source of debt service funds. GGS does not anticipate using dividends from either Pafco or [Respondent] as a primary source of debt service funds.” The Chase Credit Agreement, which is dated April 30, 1996, requires GGS to use its best efforts to cause Respondent to pay "cash dividends or other distributions or payments in cash including . . . the payment of Billing Fees and Management Fees" in sufficient amounts to pay all principal and interest due under the financing instrument. The Chase Credit Agreement defines "Billing Fees" as: "fees with respect to the payment of premiums on an installment basis that are received by an Insurance Subsidiary from policyholders and in turn paid to [GGS] or received directly by [GGS] . . .." The Chase Credit Agreement defines "Management Fees" as: "all fees paid by an Insurance Subsidiary to [GGS] that are calculated on the basis of gross written premiums." With respect to the "Management Fees" described in the Chase Credit Agreement, the Acquisition Statement describes a five-year management agreement to be entered into by GGS with Pafco and Respondent (Management Agreement). The Management Agreement, which GGS and Respondent executed on April 30, 1996, provides that GGS “will provide management services to both Pafco and [Respondent] and will receive from [Respondent] as compensation 17% of [Respondent’s] gross written premium” and a slightly lower percentage of premiums from Pafco (Management Fee). Under the Management Agreement, Respondent “will continue to pay premium taxes, boards and bureaus costs, legal and audit fees and certain computer costs.” The Acquisition Statement states that Respondent’s “operating costs" were about 21%, so the 17% cap “will allow [Respondent] to see a significant and immediate improvement in its overall financial performance”-- over $1 million in 1994, which was the last year for which financial information was then available. The Management Agreement gives GGS the exclusive right and nondelegable and nonassignable obligation to perform a broad range of business actions on Respondent’s behalf. These actions include accepting contracts, issuing policies, appointing adjustors, and adjusting claims. The Management Agreement requires GGS to "pay [Respondent’s] office rent and occupancy operating expenses from the amounts that it receives pursuant to this Agreement.” In return, the Management Agreement requires Respondent to pay GGS “fees for the business placed with [Respondent as follows:] Agents commission plus 17% not to exceed 32% in total.” The scope of the services undertaken by GGS in the Management Agreement is similarly described in the Plan of Operation, which GGS filed with Petitioner as part of the application. The Plan of Operation provides that, in exchange for the 17 percent “management commission,” GGS assumes the responsibility for all aspects of the operating expenses of the book including underwriting, claims handling and administration. The only expenses which remain the responsibility of [Respondent] directly are those expenses directly related to the insurance book, such as premium taxes, boards and bureaus, license fees, guaranty fund assessments and miscellaneous expenses such as legal and audit expenses and certain computer costs associated directly with [Respondent]. In response to a request for additional information, Goran’s general counsel, by letter dated March 13, 1996, to Petitioner’s application coordinator, added another document, Document 26. The new document was a pro forma financial projection for 1996-2002 (Proforma) showing the sources of funds for GGS to service the Chase debt. The seven-year Proforma contains only two significant sources of income for GGS: “management fee income” and “finance & service fee income" (Finance and Service Fees). By year, starting with 1996, these respective figures are $28.6 million and $7.0 million, $34.2 million and $8.6 million, $38.1 million and $9.9 million, $42.6 million and $11.0 million, $47.5 million and $12.3 million, $53.0 million and $13.7 million, and $59.3 million and $15.3 million. Accounting for the principal and interest payments over the six-year repayment term of the Chase Credit Agreement, the Proforma shows ending cash balances, during each of the covered years, culminating in a final cash balance, in 2002, of $43.9 million. By letter dated March 29, 1996, Goran’s general counsel informed Petitioner that an increase in Respondent’s book value had triggered an increase in the purchase price from $60 million to $66 million. Also, the book value of Pafco had increased from $14 million to $15.3 million, and the cash required of the Goldman Sachs limited partnerships had increased from $20 million to $21.2 million. Additionally, the letter states that Chase had increased its commitment from $44 million to $48 million. A revised Document 26 accompanied the March 29 letter and showed the same income projections. Reflecting increased debt-service projections, the revised Proforma projected lower cash balances, culminating with $39.8 million in 2002. During a meeting in March 1996, Mr. Alan Symons, president and chief executive officer of Goran and a director of Superior Group and Respondent, met with three of Petitioner's representatives, including Mary Mostoller, Petitioner's employee primarily responsible for the substantive examination of the GGS application. During that meeting, Mr. Symons informed Petitioner that GGS would receive Finance and Service Fees from Respondent's policyholders who paid their premiums by installments. Ms. Mostoller did not testify, and the sole representative of Petitioner who attended the meeting and testified candidly admitted that he could not recall whether they discussed this matter. In response to another request for additional information, Respondent’s present counsel, by letter dated April 12, 1996, informed Petitioner that the “finance and service fee income” line of the Proforma “is composed primarily of billing fees assessed to policyholders that choose to make payments on a monthly basis,” using the same rate that Respondent had long used. The letter explains that the projected increase in these fees is attributable solely to a projected increase in business and not to a projected increase in the rate historically charged policyholders for this service. In an internal memorandum dated April 18, 1996, Ms. Mostoller noted that GGS would pay the Chase Credit Agreement through a “combination of the management fees and other billing fees of both Pafco and [Respondent].” Later in the April 18 memorandum, though, Ms. Mostoller suggested, among other things, that Petitioner condition its approval of the acquisition on the right of Petitioner to reevaluate annually the reasonableness of the “management fee and agent’s commission”--omitting any mention of the "other billing fees." On April 30, 1996, Petitioner entered a Consent Order Approving Acquisition of Stock Pursuant to Section 628.461, Florida Statutes (Consent Order). Incorporating all of Ms. Mostoller's recommendations, the Consent Order is signed by Respondent and GGS, which "agree to and consent to all of the above cited terms and conditions . . .." The Consent Order does not incorporate by reference the application and related documents, nor does the Consent Order contain an integration clause, which, if present, would merge all prior written and unwritten agreements into the Consent Order so as to preclude the implementation of such agreements in conjunction with the Consent Order. Among other things, the Consent Order mandates the following: [Respondent] shall give advance notice to [Petitioner] of any proposed changes in the [Management Agreement] and shall receive written approval from [Petitioner] prior to implementing those changes. In addition, for a period of three (3) years, [Petitioner] shall reevaluate at the end of each calendar year the reasonableness of the fees as reflected on Addendum A of the [Management] Agreement[.] Furthermore, [Petitioner] may at its sole discretion, and after consideration of the performance and operating percentages of [Respondent] and any other pertinent data, require [Respondent] to make adjustments in the [M]anagement [F]ee and agent's commission. GGS . . . shall file each year an audited financial statement with [Petitioner] . . .. In addition to the above, for a period of 4 years from the date of execution of this Consent Order . . .: [Respondent] shall not pay or authorize any stockholder dividends to shareholders without prior written approval of [Petitioner]. Any direct or indirect contracts, agreements or transactions of any type or nature including but not limited to the sale or exchange of assets among or between [Respondent] and any member of the Goran . . . holding company system shall receive prior written approval of [Petitioner]. That failure to adhere to one or more of the above terms and conditions shall result WITHOUT FURTHER PROCEEDINGS in the Treasurer and Insurance Commissioner DENYING the above acquisition, or the REVOCATION of the insurers' certification of authority if such failure to adhere occurs after the issuance of the Consent Order approving the above acquisition. The Consent Order addresses the Management Fees and the commissions payable to the independent agents who sell Respondent's insurance policies. However, the Consent Order omits any explicit mention of the Finance and Service Fees, even though GGS and Respondent had clearly and unambiguously disclosed these fees to Petitioner on several occasions prior to the issuance of the Consent Order. On its face, the Consent Order requires prior approval for the payment of Finance and Service Fees, which arise due to a contract or agreement between Respondent and GGS/Superior Group. The Consent Order prohibits "direct or indirect contracts, agreements or transactions of any type or nature including . . . the sale or exchange of assets among or between [Respondent] and any member of the Goran . . . holding company system," without Petitioner's prior written approval. The exact nature of these Finance and Service Fees facilitates the determination of their proper treatment under the Consent Order and the facts of this case. Ostensibly, the Finance and Service Fees pertain to items not covered by the Management Fees, which cover a wide range of items. In fact, the Finance and Service Fees arise only when a policyholder elects to pay his premium in installments; if no policyholder were to pay his premium by installments, no Finance and Service Fees would be due. The testimony in the record suggests that the Finance and Service Fees pertain to services that necessarily must be performed when policyholders pay their premiums by installments. This suggestion is true, as far as it goes. Installment payments require an insurer to incur administrative and information-management costs in billing and collecting installment payments. Other costs arise if late installment payments necessitate the cancellations and if reinstatements follow cancellations. Installment-payment transactions are undeniably more expensive to the insurer than single-payment transactions. The record as to these installment-payment costs, which are more in the nature of a service charge, is well- developed. However, the Finance and Service Fees also pertain to the cost of the loss of the use of money when policyholders pay their premiums by installments. Installment-payment transactions cause the insurer to lose the use of the deferred portion of the premium for the period of the deferral. The record as to these costs, which are more in the nature of a finance charge or interest, is relatively undeveloped. At the hearing, Mr. Symons testified that an insurer does not lose the use of the deferred portion of the premium for an established book of business. Mr. Symons illustrated his point by analyzing over a twelve-month period the development of a hypothetical book of business consisting of twelve insureds. If an insurer added its first insured in the first month, added a second in the third, and so forth, until it added its twelfth insured in the twelfth month, and each insured chose to pay a hypothetical $120 annual premium in twelve installments of $10 each, the cash flow in the twelfth and each succeeding month (assuming no changes in the number of insureds) would be $120-- the same that it would have been if each of the insureds chose to pay his premium in full, rather than by installment. Thus, Mr. Symons' point was that, after the first eleven months, installment payments do not result in the loss of the use of money by the insurer. Mr. Symons' illustration assumes a constant book of business after the twelfth month. However, while the insurer is adding installment-paying insureds, the insurer loses the use of the portion of the first-year premium that is deferred, as is evident in the first eleven months of Mr. Symons' illustration. Also, if the constant book of business is due to a constant replacement of nonrenewing insureds with new insureds--a distinct possibility in the nonstandard automobile market--then the insurer will again suffer the loss of the use of money over the first eleven months. Either way, Mr. Symons' illustration does not eliminate the insurer's loss of the use of money when its insureds pay by installments; the illustration only demonstrates that the extent of the loss of the use of the money may not be as great as one would casually assume. The Finance and Service Fee is sufficiently broad to encompass all of the terms used in this record to describe it: "installment fee," "billing fee," "service charge," "premium fee," and even "premium finance fee." However, only "installment fee" is sufficiently broad as to capture both types of costs covered by the Finance and Service Fee. The dual components of the Finance and Service Fee are suggested by the statute authorizing its imposition. Section 627.902, Florida Statutes, authorizes an insurer or affiliate of the insurer to "finance" premiums at the "service charge or rate of interest" specified in Section 627.901, Florida Statutes, without qualifying as a premium finance company under Chapter 627, Part XV, Florida Statutes. If the insurer or affiliate exceeds these maximum impositions, then it must qualify as a premium finance company. The "service charge or rate of interest" authorized in Section 627.901, Florida Statutes, is either $1 per installment (subject to limitations irrelevant to this case) or 18 percent simple interest on the unpaid balance. The charge per installment, which is imposed without regard to the amount deferred, suggests a service charge, and the interest charge, which is imposed without regard to the number of installments, suggests a finance charge. The determination of the proper treatment of the Finance and Service Fees under the Consent Order is also facilitated by consideration of the process by which these fees were transferred to GGS/Superior Group. As anticipated by the parties, after the acquisition of Respondent by GGS, Respondent retained no employees, and GGS/Superior Group employees performed all of the services required by Respondent. The process by which Respondent transferred the Finance and Service Fees to GGS/Superior Group began with Respondent issuing a single invoice to the policyholder showing the premium and the Finance and Service Fee, if the policyholder elected to pay by installments. As Mr. Symons testified, Respondent calculated the Finance and Service Fee on the basis of the 1.5 percent per month on the unpaid balance, rather than the specified fee per installment. The installment-paying policyholder then wrote a check for the invoiced amount, payable to Respondent, and mailed it to Respondent at the address shown on the invoice. Employees of GGS/Superior Group collected the checks and deposited them in Respondent's bank account. From these funds, the employees of GGS/Superior Group then paid the commissions to the independent agents, the Management Fee (calculated without regard to the Finance and Service Fee) to GGS/Superior Group, and the Finance and Service Fee to GGS/Superior Group. Respondent retained the remainder. Finance and Service Fees can be considerable in the nonstandard automobile insurance business. Many policyholders in this market lack the financial ability to pay premiums in total when due, so they commonly pay their premiums in installments. At the time of the 1996 acquisition, for instance, about 90 percent of Respondent's policyholders paid their premiums by installments. For 1996, on gross premiums of $156.4 million, Respondent earned net income (after taxes) of $1.978 million, as compared to gross premiums of $97.6 million and net income of $5.177 million in 1995. At the end of 1996, Respondent's surplus was $57.1 million, as compared to $49.3 million at the end of the prior year. "Surplus" or "policyholder surplus" for insurance companies is like net worth for other corporations. In 1996, Respondent received $2.154 million in Finance and Service Fees, as compared to $1.987 million in the prior year. However, Respondent did not pay any Finance and Service Fees to GGS in 1996. For related-party transactions in 1996, Respondent's financial statements disclose the payment of $155,500 to GGS and Fortis for "management fees," assumed reinsurance premiums and losses, and a capital contribution of $5.558 million from GGS, of which $4.8 million was in the form of a note. These related-party disclosures for 1996 were adequate. In August 1997, Symons bought out Goldman Sachs' interest in GGS for $61 million. Following the 1996 acquisition, Goldman Sachs had invested another $3-4 million, but, with a total investment of about $25 million, Goldman Sachs enjoyed a handsome return in a little over one year. Mr. Symons attributed the relatively high price to then-current valuations, which were 100 percent of annual gross premiums. More colorfully, Mr. Symons' brother, also a principal in the Goran family of corporations, attributed the purchase price to Goldman Sachs' "greed. " At the same time that Symons bought out Goldman Sachs, Symons enabled GGS to retire the Chase acquisition debt. The elimination of Goldman Sachs and Chase may be related by more than the need for $61 million to buy out Goldman Sachs. The 1996 Annual Statement that Respondent filed with Petitioner reports "total adjusted capital" of $57.1 million and "authorized control level risk-based capital" of $20.7 million, for a ratio of less than 3:1. Section 8.10 of the Chase Credit Agreement states that GGS "will not, on any date, permit the Risk Based Capital Ratio . . . of [Respondent] to be less than 3 to 1." Section 1 of the Chase Credit Agreement defines the ”Risk-Based Capital Ratio" as the ratio of Respondent's "Total Adjusted Capital" to its "Authorized Control Level Risk-Based Capital." In August 1997, Symons raised $135 million in a public offering of securities that probably more closely resemble debt than equity. After paying $61 million to Goldman Sachs and the $45-48 million then due Chase under the Credit Agreement (due to additional advances), Symons applied the remaining loan proceeds to various affiliates, as additional capital contributions, and possibly itself, for cash-flow purposes. The $135 million debt instrument, which remains in place, requires payments over a 30- year term, provides for no repayment of principal until the end of the term, and allows for the deferral of the semi-annual dividend/interest payments for up to five years. Symons exercised its right to defer dividend/interest payments for an undetermined period of time in 2000. The payments that are the subject of this case took place from 1997 through 1999. During this period, on a gross basis, Respondent paid GGS $35.2 million in Finance and Service Fees. In fact, $1.395 million paid in 1999 were not Finance and Service Fees, but were SR-22 policy fees, which presumably are charges attributable to the preparation and issuance by GGS of certificates of financial responsibility. Because Respondent's financial statements did not separate any SR-22 fees from Finance and Service Fees for 1997 or 1998, it is impossible to identify what, if any, portion of the Finance and Service Fees in those years were actually SR-22 fees. Even though SR-22 fees represent a service charge without an interest component, they are included in Finance and Service Fees for purposes of this Recommended Order. For 1997, on gross premiums of $188.3 million, Respondent earned net income of $379,000. For 1998, on gross premiums of $179.8 million, Respondent suffered a net loss of $8.122 million. For 1999, on gross premiums of $170.5 million, Respondent suffered a net loss of $19.232 million. Respondent's surplus decreased from $65.1 million at the end of 1997, to $57.6 million at the end of 1998, to $34.2 million at the end of 1999. In its Quarterly Statement filed as of September 30, 2000, Respondent disclosed, for the first nine months of 2000, a net loss of $5.89 million and a decline in surplus to $24.0 million. By the end of 2000, Respondent's surplus decreased to $21.6 million. However, at all times, Respondent's surplus exceeded the statutory minimum. For 1999, for example, Respondent's surplus of $34.2 million doubled the statutory minimum. Respondent also satisfied the statutory premium-to-surplus ratio, although possibly not the statutory risk-based capital ratio. As of the final hearing, Petitioner had required Respondent to file a risk-based capital plan, Respondent had done so, Petitioner had required amendments to the plan, Respondent had declined to adopt the amendments, and Petitioner had not yet taken further action. From 1997-1999, Respondent's annual statements, quarterly statements, and financial statements inadequately disclosed the payments that Respondent made to GGS. The annual statements disclose "Service Fee on Ceded Business," which is a write-in item described in language chosen by Respondent. Petitioner's contention that this item appears to be a reinsurance transaction in which Respondent is ceding risk and premiums to a third-party is rebutted by the fact that the Schedule F, Part 5, on each annual statement discloses relatively minor reinsurance transactions whose ceded premiums would not approach those reported as "Service Fee on Ceded Business." Notwithstanding the unconvincing nature of Petitioner's contention as to the precise confusion caused by Respondent's reporting of the payment of Finance and Service Fees, Respondent's reporting was clearly inadequate and even misleading. The real problem in the annual statements, quarterly statements, and financial statements is their failure to disclose Respondent's payments to a related party, GGS. Respondent unconvincingly attempts to explain this omission by an imaginative recharacterization of the Finance and Service Fee transactions as pass-through transactions. These were not pass-through transactions in 1996 when Respondent retained the Finance and Service Fees. These were not pass- through transactions in 1997-1999 when Respondent properly accounted for these payments from policyholders as income and payments to GGS as expenses. The proper characterization of these transactions involving the Finance and Service Fees does not depend on the form that Respondent and GGS/Superior Group selected for them-- in which policyholders pay Respondent and Respondent pays GGS/Superior Group--although this form does not serve particularly well Respondent's present contention. Even if Respondent had changed the form so that the policyholders paid the Finance and Service Fees directly to GGS/Superior Group, the economic reality of the transactions would remain the same. Even if policyholders paid their installments to Respondent, GGS/Superior Group, or any other party, the Finance and Service Fees would initially vest in Respondent, which, under an agreement, would then owe them to GGS/Superior Group. The inadequacy of the disclosure of the Finance and Service Fees is a relatively minor issue, in itself, in this case. In its proposed recommended order, Respondent invites direction as to how Petitioner would like Respondent to report these payments in the future. The major impact of Respondent's nondisclosure of these payments is that none of the statements filed after the 1996 acquisition notified Petitioner of the existence of these payments. It is thus impossible to infer an agreement or even acquiescence on the part of Petitioner regarding Respondent's payment of Finance and Service Fees to GGS/Superior Group. The major issue in this case is whether the Consent Order authorizes Respondent to pay $35 million in Finance and Service Fees after the 1996 acquisition or, if not, whether Petitioner has approved of such payments by any other means. As already noted, the Consent Order authorizes the payment of agents' commissions and Management Fees, but not Finance and Service Fees. To the contrary, the Consent Order prohibits the payment of Finance and Service Fees for four years, at least without Petitioner's approval, because of the provision otherwise prohibiting agreements, contracts, and the transfer of assets involving Respondent and its affiliates. As noted in the Conclusions of Law, the absence of an integration clause invites consideration of oral agreements that may have preceded the execution of the Consent Order. The Consent Order is somewhat of a hybrid: Petitioner orders and Respondent consents. However, the Consent Order is sufficiently an agreement to be subject to interpretation under normal principles governing the interpretation of contracts. Respondent contends that such agreements encompassed the payment of Finance and Service Fees because Respondent disclosed such payments several times to Petitioner prior to the issuance of the Consent Order. (Any testimonial assertion of an explicit agreement by Petitioner to the payment of the Finance and Service Fees is discredited.) Respondent repeated disclosures to Petitioner of the Finance and Service Fees began with the Acquisition Statement at the start of the application process. The parties discussed these fees in March 1996. The Proformas disclose two main revenue sources from which GGS/Superior Group could service its acquisition debt: Management Fees and Finance and Service Fees. And the Proformas project almost exactly the amount that Respondent paid GGS in Finance and Service Fees from 1997-99. Although the ratio of Management Fees to Finance and Service Fees was 4:1 in the Proformas, this ratio does not minimize the role of the Finance and Service Fees. Based on gross revenues, this ratio is no indication of the relative profitability of these two sources of revenue. In fact, in 1999, the expenses covered by the Management Agreement exceeded the Management Fees by $3 million. The Finance and Service Fees are thus an important component of the revenue on which GGS intended to rely in servicing the acquisition debt. However, neither the clear disclosure of the Finance and Service Fees nor Petitioner's recognition of the importance of these fees in servicing the acquisition debt necessarily means that Petitioner agreed to their payment. By a preponderance of, although less than clear and convincing, evidence, the record precludes the possibility that Petitioner agreed in preclosing discussions or the Consent Order to preapprove the Finance and Service Fees. In this respect, Petitioner treated the Finance and Service Fees differently from the Management Fees, which Petitioner agreed to preapprove, subject to annual reevaluation for the first three years. At the level of a preponderance of the evidence, it is possible to harmonize this construction of the Consent Order with Respondent's repeated disclosures of the Finance and Service Fees. The Acquisition Statement mentions dividends as a revenue source--although a "secondary" source--and the Consent Order clearly did not impliedly preapprove the payment of dividends. Aware of the reliance of GGS upon the Finance and Service Fees to service the Chase acquisition debt, Petitioner may have chosen, for the first four years, to consider Respondent's requests for approval of the Finance and Service Fees, based on the circumstances in existence at the time of the requests. This interpretation is consistent with the testimony of Petitioner's employee that he believed that Petitioner would be able to restrict Respondent's payment of Finance and Service Fees to GGS/Superior Group because Petitioner's approval was required for the payment of dividends. The payments are pursuant to a contract or agreement for services and, as such, are not dividends, but the Consent Order requires Petitioner's approval for all contracts and agreements during the first four years. The common point is that Petitioner understood that its approval would be required for Finance and Service Fees, which had not been preapproved like Management Fees. During the application process, GGS may not have been concerned by Petitioner's failure to preapprove the Finance and Service Fees. At the time of the 1996 acquisition, as contrasted to the period after the 1997 refinancing, GGS enjoyed a relatively light debt load due to Goldman Sachs' equity investment and the "tremendous wherewithal" of its 48 percent co-owner. Another practical distinction between the Finance and Service Fees and the Management Fees militates against finding that the Consent Order impliedly approves the Finance and Service Fees and militates in favor of a finding that GGS viewed these fees as more contingent and less likely to be needed than the Management Fees. At the start of the application process, GGS submitted to Petitioner a form Management Agreement. At no time did GGS ever submit to Petitioner a form Finance and Service Agreement. The contingent nature of the Finance and Service Fees, relative to the Management Fees, is reinforced by the fact that, in 1996, Respondent retained the Finance and Service Fees. Respondent's contention that the Finance and Service Fees were a component of the agreement between it and Petitioner is not without its appeal. The contention is sufficient to preclude a finding by clear and convincing evidence that the agreement between the parties did not include a preapproval of Finance and Service Fees. Unlike the Management Fees, the maximum amount of the Finance and Service Fees is set by statute. Two consequences follow. First, Petitioner might not have found it necessary to incorporate these fees in a written agreement, as long as the maximum amount were acceptable to Petitioner, because the law establishes a ceiling on the fees and identifies the services for which they are compensation. Second, Petitioner might not have found it necessary provide for annual reevaluation of the fees, again due to the applicable statutory maximum. In one respect, the relatively contingent quality of the Finance and Service Fees inures to Respondent's benefit, at least in theory. If no policyholder paid by installments, there would be no Finance and Service Fees; however, as a practical matter, the Finance and Service Fees are almost as pervasive as the Management Fees. More importantly, though, the Finance and Service Fees, especially when imposed as a percentage of the unpaid balance, contain a significant interest component. Paying these fees to GGS/Superior Group, Respondent denies itself the investment income attributable to this forbearance. Alternatively, to the extent that the Finance and Service Fees defray services, as they do to some unknown extent, the greater weight of the evidence, although not clear and convincing evidence, establishes that these services are among the services that GGS/Superior Group undertook in the Management Agreement. These factors militate strongly against treating the Finance and Service Fees as an implied exception to the provision of the Consent Order requiring approval of all contracts or agreements with affiliates during the first four years. For these reasons, Petitioner has proved by a preponderance of the evidence, although not clear and convincing evidence, that GGS/Superior Group and Respondent needed Petitioner's approval for all payments of Finance and Service Fees prior to April 30, 2000. To the extent that, as discussed in the Conclusions of Law, Petitioner withholds such approval, the next issue is to determine the amount of Finance and Service Fees that GGS/Superior Group must return to Respondent. The determination of the amount of the repayment is substantially affected by two facts. First, Petitioner's approval is not required for any Finance and Service Fees that Respondent paid GGS/Superior Group after April 30, 2000. The Consent Order did not require Petitioner's approval for such payments, which were not dividends, for which approval would always be required, if inadequate surplus existed. Second, GGS/Superior Group is entitled to a dollar-for-dollar credit, against any liability for improperly received Finance and Service Fees, for about $20 million that it directly or indirectly transferred to Respondent since the 1996 acquisition. Half of the $20 million credit arises from Management Fees that GGS did not collect from Respondent in 1996 and 1998. As Petitioner notes, there is little, if any, documentation concerning these uncollected fees. Mr. Symons persuasively testified that the proper characterization of these amounts is dependent upon the outcome of Petitioner's effort to disallow the Finance and Service Fees already paid by Respondent. Petitioner must credit to GGS/Superior Group these $10 million in fees as an offset to the $35.2 million (or such lesser amount remaining after any retroactive approvals from Petitioner) that Respondent improperly paid GGS/Superior Group in Finance and Service Fees. Also, in 1997, GGS contributed about $10 million to Respondent's capital. As was the case with the uncollected Management Fees in 1996 and 1998, the record contains little, if any, documentation concerning the transfer, including any conditions that may have attached to it. Petitioner should credit GGS/Superior Group with this sum as an offset against the $35.2 million (or such lesser amount remaining after any retroactive approvals from Petitioner) that Respondent improperly paid GGS/Superior Group in Finance and Service Fees. As for the remaining $15 million in Finance and Service Fees that Respondent improperly paid to GGS through 1999 and any additional amounts through April 30, 2000, the impropriety arises because Respondent failed first to obtain Petitioner's approval--not because any transaction was otherwise necessarily improper. Concerning the remaining $15 million, then, Petitioner should give Respondent and GGS/Superior Group an opportunity to request retroactive approval for the payment of all or part of this sum, without regard to the lateness of the request. Applying any and all factors that Petitioner would ordinarily apply in considering such requests, Petitioner can then reach an informed determination as to the propriety of this $15 million in Finance and Service Fees. If Petitioner determines that Respondent must obtain from GGS/Superior Group repayment of any Finance and Service Fees, then Petitioner may consider the issue of the timing of the repayment. As Petitioner mentions in its proposed recommended order, an evidentiary hearing might be useful for this purpose. Obvious sources would be setoffs against Management Fees and Finance and Service Fees that Respondent is presently paying Superior Group.
Recommendation It is RECOMMENDED that the Department of Insurance enter a final cease and desist order: Determining that, without the prior written consent of the Department, Superior Insurance Company paid Finance and Service Fees to GGS/Superior Group in the net amount of approximately $15 million, plus all such amounts paid after the period covered by this case through April 30, 2000. Requiring that Superior Insurance Company immediately file all necessary documentation with the Department to seek the retroactive approval of all or part of the sum set forth in the preceding paragraph. If any sum remains improperly paid after implementing the procedure set forth in the preceding paragraph, establishing a reasonable repayment schedule for Respondent to impose upon Superior Group--if necessary, in the form of setoffs of Management Fees and Finance and Service Fees due at the time of, and after, the Final Order. Determining that Superior Insurance Company inadequately disclosed related-party transactions and ordering that Superior Insurance Company comply with specific guidelines for the reporting of these transactions in the future. DONE AND ENTERED this 1st day of June, 2001, in Tallahassee, Leon County, Florida. ROBERT E. MEALE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 1st day of June, 2001. COPIES FURNISHED: Honorable Tom Gallagher State Treasurer/Insurance Commissioner Department of Insurance The Capitol, Plaza Level 02 Tallahassee, Florida 32399-0300 Mark Casteel, General Counsel Department of Insurance The Capitol, Lower Level 26 Tallahassee, Florida 32399-0307 S. Marc Herskovitz Luke S. Brown Division of Legal Services Department of Insurance 200 East Gaines Street, Sixth Floor Tallahassee, Florida 32399-0333 Clyde W. Galloway, Jr. Austin B. Neal Foley & Lardner 106 East College Avenue, Suite 900 Tallahassee, Florida 32301
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that Petitioner he reimbursed for vehicle costs and utilization review costs for fiscal years 1980 and 1981 in accordance with the conclusions of law portion of this order. DONE and ENTERED this 4th day of February, 1983, in Tallahassee, Florida, DONALD R. ALEXANDER Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 4th day of February, 1983.
The Issue Whether the Agency for Health Care Administration's ("AHCA" or "the agency") Medicaid lien of $267,072.91 should be reimbursed in full from the $1 million settlement recovered by Petitioner or whether Petitioner proved that a lesser amount should be paid under section 409.910(17)(b), Florida Statutes.
Findings Of Fact Based on the stipulation between the parties (paragraphs 1 through 13 below), the evidence presented, and the record as a whole, the undersigned makes the following Findings of Fact: On January 13, 2016, Mr. Jay Hosek was operating his 1999 Chevy Trailblazer northbound on U.S. Highway 1, near mile marker 56, in Monroe County. At that same time and place, his vehicle was struck by a southbound tractor trailer. Hosek suffered catastrophic physical injuries, including permanent brain damage. Hosek is now unable to walk, stand, eat, toilet, or care for himself in any manner. Hosek's medical care related to the injury was paid by Medicaid, Medicare, and United Healthcare ("UHC"). Medicaid provided $267,072.91 in benefits, Medicare provided $93,952.97 in benefits and UHC provided $65,778.54 in benefits. Accordingly, Hosek's entire claim for past medical expenses was in the amount of $426,804.42. Jirina Hosek was appointed Hosek's legal guardian. As legal guardian, Jirina Hosek brought a personal injury lawsuit against the driver and owner of the tractor trailer that struck Hosek ("defendants") to recover all of Hosek's damages associated with his injuries. The defendants maintained only a $1 million insurance policy and had no other collectable assets. Hosek's personal injury action against the defendants was settled for the available insurance policy limits, resulting in a lump sum unallocated settlement of $1 million. Due to Hosek's incompetence, court approval of the settlement was required and the court approved the settlement by Order of October 5, 2018. During the pendency of Hosek's personal injury action, AHCA was notified of the action and AHCA asserted a $267,072.91 Medicaid lien against Hosek's cause of action and settlement of that action. AHCA did not commence a civil action to enforce its rights under section 409.910 or intervene or join in Hosek's action against the defendants. By letter, AHCA was notified of Hosek's settlement. AHCA has not filed a motion to set aside, void, or otherwise dispute Hosek's settlement. The Medicaid program through AHCA spent $267,072.91 on behalf of Hosek, all of which represents expenditures paid for Hosek's past medical expenses. Application of the formula at section 409.910(11)(f) to Hosek's $1 million settlement requires payment to AHCA of the full $267,072.91 Medicaid lien. Petitioner has deposited AHCA's 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). While driving his vehicle northbound, Hosek drifted into oncoming traffic, crossed over the center line, and struck a southbound vehicle in its lane head on. Petitioner had an indisputable and extremely high degree of comparative negligence in causing this tragic vehicle accident. Petitioner presented the testimony of Brett Rosen ("Rosen"), Esquire, a Florida attorney with 12 years' experience in personal injury law. His practice includes catastrophic and wrongful death cases. Rosen is board-certified in civil trial by the Florida Bar. He is a member of several trial attorney associations. Rosen represented Hosek and his family in the personal injury case. As a routine part of his practice, Rosen makes assessments regarding the value of damages his injured client(s) suffered. He stays abreast of personal injury jury verdicts by reviewing jury verdict reports and searching verdicts on Westlaw. Rosen regularly reads the Daily Business Review containing local verdicts and subscribes to the "Law 360," which allows him to review verdicts throughout the country. Rosen was accepted by the undersigned as an expert in the valuation of damages in personal injury cases, without objection by the agency. Rosen testified that Hosek's case was a difficult case for his client from a liability perspective, since all the witnesses blamed Hosek for the crash and the police report was not favorable to him. In his professional opinion, had Hosek gone to trial, the jury could have attributed a substantial amount of comparative negligence to him based upon the facts of the case. There was also a high possibility that Hosek might not receive any money at all, since Hosek's comparative negligence in the accident was very high. Rosen explained the seriousness of Hosek's injuries, stating that Hosek may have fallen asleep while driving and his car veered over and crossed the centerline. It hit an oncoming commercial truck, which caused his vehicle to flip resulting in severe injuries to him. Rosen testified that Hosek is unable to communicate since he received catastrophic brain injury from the accident and is unable to care for himself. Rosen provided an opinion concerning the value of Hosek's damages. He testified that the case was worth $10 million, and that this amount is a very conservative valuation of Hosek's personal injuries. He also generalized that based on his training and experience, Hosek's damages could range anywhere from $10 to $30 million at trial. He testified that Hosek would need future medical care for the rest of his life. This future medical care has a significant value ranging from $15 to $25 million.1/ Rosen testified that he reviewed other cases and talked to experts in similar cases involving catastrophic injuries. After addressing various ranges of damages, Rosen clarified that the present value of Hosek's damages in this case was more than $10 million dollars. Although he did not state specific amounts, he felt that Hosek's noneconomic damages would have a significant value in addition to his economic damages.2/ Rosen believed that a jury would have returned or assigned a value to the damages of over $10 million. He testified that his valuation of the case only included the potential damages. He did not take into account Hosek's "substantial amount" of comparative negligence and liability.3/ Despite doing so in other personal injury cases, Rosen did not conduct a mock trial in an effort to better assess or determine the damages in Hosek's case. Rosen testified that Hosek sued the truck driver, Alonzo, and Alonzo's employer. He further testified that Hosek was compensated for his damages under the insurance policy carried by the truck driver and his company and settled for the policy limits of $1 million dollars representing 10 percent of the potential total value of his claim. Rosen did not obtain or use a life care plan for Hosek, nor did he consider one in determining his valuation of damages for Hosek's case. Rosen did not provide any specific numbers or valuation concerning Hosek's noneconomic damages. Instead, he provided a broad damage range that he said he "would give the jury" or "be giving them a range of $50 Million for past and future."4/ Rosen testified that he relied on several specific factors in making the valuation of Hosek's case. The most important factor for him was to determine what his client was "going through" and experience his client's "living conditions."5/ Secondly, he considers the client's medical treatment and analyzes the client's medical records. Based on these main factors, he can determine or figure out what the client's future medical care will "look like."6/ Petitioner also presented the testimony of R. Vinson Barrett ("Barrett"), Esquire, a Tallahassee trial attorney. Barrett has more than 40 years' experience in civil litigation. His practice is dedicated to plaintiff's personal injury, as well as medical malpractice and medical products liability. Barrett was previously qualified as an expert in federal court concerning the value of the wrongful death of an elderly person. This testimony was used primarily for tax purposes at that trial. Barrett has been accepted as an expert at DOAH in Medicaid lien cases in excess of 15 times and has provided testimony regarding the value of damages and the allocation of past medical expenses. Barrett has handled cases involving catastrophic brain injuries. He stays abreast of local and state jury verdicts. Barrett has also reviewed several life care plans and economic reports in catastrophic personal injury cases. He routinely makes assessments concerning the value of damages suffered by parties who have received personal injuries. Barrett determines the value of these damages based primarily on his experience and frequent review of jury verdicts. Barrett was accepted by the undersigned as an expert in the valuation of damages in personal injury cases, without objection by the agency.7/ Barrett testified that Hosek had a catastrophic brain injury with broken facial bones and pneumothoraxes, all sustained during an extremely violent head-on collision with a commercial truck. This assessment was based on the case exhibits and the "fairly limited medical records" he reviewed. He believed that Hosek would need extensive and expensive medical care for the rest of his life. However, no details were offered by Barrett.8/ Barrett provided an opinion concerning the value of Hosek's damages. This was based on his training and experience. Barrett did not provide a firm number for Hosek's damages. Instead, he offered a nonspecific and broad range of damages. Barrett testified that Hosek's damages "probably" have a value in the range of $25 to $50 million, and the range of Hosek's future medical care would be $10 to $20 million. However, he felt that $10 million was a "very, very, very conservative" estimate of damages, primarily because he felt that future medical expenses would be so high. Barrett stated that Hosek's economic damages would have a significant value exceeding $10 million and that Hosek's noneconomic damages would have an additional value exceeding $10 million. Barrett acknowledged that he did not consider or take into account Hosek's "huge comparative negligence" in estimating the total value of the case. Instead, he only considered the amount(s) that would be awarded for damages. He testified that Petitioner's degree of comparative negligence would reduce each element of damages he was awarded. As a result of Hosek's very significant comparative negligence, Barrett testified that a trial would have likely resulted in a "complete defense verdict" against Hosek or with only minor negligence attributed to the truck driver or his company. Barrett felt that a jury in Hosek's case would not have awarded Hosek "more than one million dollars or so." Barrett explained that in a trial for personal injuries that each element of damages awarded by the jury to the plaintiff on the verdict form is reduced by the percentage of the plaintiff's comparative negligence. Barrett also explained that when the jury verdict assigns ten percent of the negligence to the defendant and 90 percent of the negligence to the plaintiff, then the defendant is liable for paying only ten percent of each element of the damages awarded to the plaintiff. Barrett testified that he does not believe that the $1 million settlement fully compensated Hosek for his injuries and that a potential award of $10 million would be a conservative value of Hosek's claim. While both experts provided broad and nonspecific ranges for the value of Hosek's claims, they both summed up their testimony by concluding that $10 million was a very conservative estimate of Hosek's total claim. AHCA did not call any witnesses. The agency presented Exhibit 1, entitled "Provider Processing System Report." This report outlined all the hospital and medical payments that AHCA made on Hosek's behalf, totaling $267,072.91. On the issue of damages, the experts did not provide any details concerning several of Petitioner's claims, including the amount of past medical expenses, loss of earning capacity, or damages for pain and suffering. The burden was on Petitioner to provide persuasive evidence to prove that the "proportionality test" it relied on to present its challenge to the agency's lien under section 409.910(17)(b) was a reliable and competent method to establish what amount of his tort settlement recovery was fairly allocable to past medical expenses. In this case, the undersigned finds that Petitioner failed to carry this burden.9/ There was no credible evidence presented by Petitioner to prove or persuasively explain a logical correlation between the proposed total value of Petitioner's personal injury claim and the amount of the settlement agreement fairly allocable to past medical expenses. Without this proof the proportionality test was not proven to be credible or accurate in this case, and Petitioner did not carry his burden. There was a reasonable basis in the record to reject or question the evidence presented by Petitioner's experts. Their testimony was sufficiently contradicted and impeached during cross-examination and other questioning. Even if the experts' testimony had not been contradicted, the "proportionality test" proposed by Petitioner was not proven to be a reliable or accurate method to carry Petitioner's burden under section 409.910(17)(b). To reiterate, there was no persuasive evidence presented by Petitioner to prove that (1) a lesser portion of the total recovery should be allocated as reimbursement for past medical expenses than the amount calculated by the agency, or (2) that Medicaid provided a lesser amount of medical assistance than that asserted by the agency.
