The Issue The issues to be determined are: whether Petitioners have standing; whether the petition of Automated HealthCare Solutions, Inc. (AHCS), was timely filed1/; and whether Respondent’s proposed rules 69L-31.005(2)(d), 69L-31.016(1), and 69L-31.016(2) are invalid exercises of delegated legislative authority on the grounds raised by Petitioners.
Findings Of Fact The Challenged Proposed Rules At issue in the proposed rule challenge proceeding are three provisions that are part of an overall rulemaking exercise by Respondent Department of Financial Services, Division of Workers’ Compensation (Respondent, Department, or Division), to amend Florida Administrative Code Chapter 69L-31. That rule chapter bears the misnomer “Utilization and Reimbursement Dispute Rule”--a misnomer because, rather than a single rule, the chapter currently contains 12 rules, with a history note of one additional rule that was repealed. The existing 12 rules in chapter 69L-31, in effect without amendment since November 2006, carry out the Department’s statutory authority to receive, review, and resolve reimbursement disputes between workers’ compensation insurance carriers (carriers) and providers of health care services, medication, and supplies to injured workers. See § 440.13(7), Fla. Stat. A “reimbursement dispute” is “any disagreement” between a provider and carrier “concerning payment for medical treatment.” § 440.13(1)(q), Fla. Stat. The proposed amendments to chapter 69L-31 include revisions to existing rules, the repeal of one existing rule, and the addition of two new rules. The challenges at issue here are directed to both paragraphs of a newly proposed rule which would become rule 69L-31.016, if adopted. One challenge is also directed to an amendment of an existing rule. Proposed rule 69L-31.016, entitled “Reimbursement Disputes Involving a Contract or Workers’ Compensation Managed Care Arrangement or Involving Compensability or Medical Necessity,” would provide as follows, if adopted: When either the health care provider or carrier asserts that a contract between them establishes the amount of reimbursement to the health care provider, or where the carrier provided health care services to the injured worker through a workers’ compensation managed care arrangement pursuant to Section 440.134, F.S., the Department will not issue a finding that there has been any improper disallowance or adjustment. Instead, the determination will only indicate the reimbursement amount for the treatment established by the appropriate reimbursement schedules, practice parameters, and protocols of treatment in Chapter 440, F.S., to assist the health care provider and carrier in their independent application of the provisions of the contract or workers’ compensation managed care arrangement to resolve the dispute. When the carrier asserts the treatment is not compensable or medically necessary and as a result does not reimburse, the determination will only address line items not related to compensability or medical necessity. If the petitioner has submitted documentation demonstrating the carrier authorized the treatment, the Department will issue a finding of improper disallowance or adjustment. Although these rules were not proposed for adoption until December 2016, Respondent has been implementing an unadopted policy that is consistent with paragraph (1) since August 2015. Respondent also has been implementing an unadopted policy that is similar to paragraph (2) since November 2015. The other object of challenge is the proposed deletion of rule 69L-31.005(2)(d), which currently provides: If the answer to question 5 on the Petition for Resolution of Reimbursement Dispute Form [asking if reimbursement is pursuant to a contract or rate agreement] is yes, [submit] a copy of all applicable provision(s) of the reimbursement contract. Although the evidence was less than clear, it does not appear that Respondent is already implementing this proposed change. The Parties Petitioners and Intervenors all are regular participants (or, in the case of FSASC, an association whose members are regular participants) in provider-carrier reimbursement disputes pursuant to section 440.13(7), Florida Statutes, before the Division. Petitioners represent the provider side of these reimbursement disputes, while Intervenors represent the carrier side of the reimbursement disputes. Petitioner Oak Hill is a private, for-profit hospital that cares for thousands of Florida patients each year, including injured workers. Petitioner Parallon provides revenue cycle services for HCA-affiliated Florida hospitals, including Oak Hill. Among other things, Parallon acts on behalf of the HCA-affiliated hospitals in workers’ compensation claim disputes. Parallon acts on the hospitals’ behalf to resolve reimbursement disputes with carriers, including: acting for the hospitals to resolve reimbursement disputes under chapter 69L-31; coordinating any resultant administrative litigation before DOAH; and taking steps necessary to collect amounts owed following receipt of the Division’s determination. Parallon is expressly authorized to participate in reimbursement disputes as a “petitioner,” as defined in proposed rule 69L-31.003, on behalf of Oak Hill and other HCA-affiliated hospitals. Oak Hill and Parallon are regulated by, and must comply, with the requirements of chapter 69L-31 (which will include the proposed rules, if adopted) in reimbursement disputes with carriers. Petitioner FSASC is the primary organization of ambulatory surgical centers (ASCs) in Florida. Among the purposes of the FSASC is to advance the ASC industry, and its member centers’ interests, through governmental advocacy. To that extent, the FSASC maintains close contact with state agencies to monitor and provide input into legislation and regulations that govern or affect ASC operations. In furtherance of this role, the FSASC has been an active participant in all phases of Respondent’s rulemaking efforts with regard to the proposed rules. Another purpose of the FSASC is to promote, assist, and enhance its members’ ability to provide ambulatory surgical services to injured workers efficiently and cost effectively throughout Florida and, in so doing, promote and protect the interests of the public, patients, and FSASC members. FSASC’s participation in this proceeding is consistent with its purposes, and the relief sought--invalidation of the challenged proposed rules (with possible attorney’s fees incurred in connection with this proceeding)--is appropriate for an organization to pursue in a representative capacity. A substantial number of FSASC’s members provide health care services to patients who are injured workers in Florida and who receive workers’ compensation benefits in accordance with chapter 440. These health care services are reimbursable by the patients’ employers’ carriers. FSASC’s members are participants in reimbursement disputes with carriers and are regulated by, and must comply with, the requirements of chapter 69L-31 (which will include the proposed rules, if adopted). Petitioner AHCS is a technology and prescription medication claims processing company. Many physicians who dispense medication from their offices to injured workers assign their rights, title, and interest to the prescription medication claims to AHCS. Prescription Partners, LLC, is wholly-owned and operated by AHCS and is the billing entity of AHCS. In some instances, AHCS contracts with physicians, while Prescription Partners, LLC, pursues the billing and reimbursement disputes on behalf of the physicians under the contract of assignment. AHCS is authorized to participate in reimbursement disputes as a “petitioner,” as defined in proposed rule 69L-31.003. As a participant in reimbursement disputes, AHCS is regulated by, and must comply with, the requirements of chapter 69L-31 (which will include the proposed rules, if adopted). Respondent is the state agency tasked with administering chapter 440 in a way that promotes “an efficient and self-executing” workers’ compensation system “which is not an economic or administrative burden” and ensures “a prompt and cost-effective delivery of payments.” § 440.015, Fla. Stat. The Division’s medical services section administers the provider-carrier reimbursement dispute process and issues the required determinations pursuant to section 440.13(7). The determinations are made in accordance with chapter 440 and the applicable reimbursement manuals, which are codified as rules. Intervenor Zenith is a foreign, for-profit corporation licensed by the Department to provide workers’ compensation insurance to employers throughout Florida. As a carrier, and in the normal course of its workers’ compensation claim-handling responsibilities, Zenith regularly authorizes, adjusts, and pays for medical benefits for injured workers for causally-related and medically necessary treatment, including treatment rendered by physicians, hospitals, ASCs, pharmacies and prescription drug vendors, physical therapists, and other licensed health care providers, such as Petitioners. As a carrier, Zenith is regulated by chapter 440 and the related rules of the Division, including chapter 69L-31 (which will include the proposed rules, if adopted). All parties stipulated that the challenged proposed rules directly and immediately affect the rights and obligations of Zenith, and directly impact the financial obligations of Zenith in medical bill payment, as well as in any statutory reimbursement dispute between a health care provider and Zenith under section 440.13(7). The proposed rules dictate which processes will govern reimbursement disputes involving Zenith, and whether Zenith may rely fully on the provisions of reimbursement contracts. Intervenors, the Summit Companies, are Florida- licensed monoline workers’ compensation insurance companies that are managed by a managing general agent, Summit Consulting LLC, and regulated by the Department. Pursuant to their workers’ compensation insurance policies, the Summit Companies pay workers’ compensation claims for injured workers, including payment of medical benefits for care provided to injured workers by health care providers who have filed petitions for reimbursement dispute resolution under chapter 69L-31. Also, the Summit Companies have a workers’ compensation managed care arrangement authorized by the Agency for Health Care Administration (AHCA) pursuant to section 440.134. Their delegated managed care entity, Heritage Summit HealthCare, LLC, has its own proprietary PPO network. The Summit Companies, either corporately or through their delegated managed care entity, regularly authorize, adjust, and pay medical benefits for injured workers for causally- related and medically necessary treatment, including payment for treatment rendered by physicians, hospitals, ASCs, pharmacies and prescription drug vendors, physical therapists, and other licensed health care providers, such as Petitioners. All parties stipulated that the challenged proposed rules directly and immediately affect the rights and obligations of the Summit Companies, and directly impact their financial obligations in medical bill payment, as well as in reimbursement disputes under section 440.13(7) and chapter 69L-31. The proposed rules dictate which processes will govern reimbursement disputes involving the Summit Companies, including whether the Summit Companies may rely on their managed care arrangements and contracts regulated under the authority of AHCA. To the same extent that all Intervenors are directly and immediately impacted by the challenged proposed rules, Petitioners Oak Hill, Parallon, and AHCS, as well as the members of Petitioner FSASC, are also directly and immediately impacted by the proposed challenged rules, which govern reimbursement disputes under section 440.13(7). Just as the challenged proposed rules directly and immediately impact Intervenors’ financial obligations in medical bill payment to providers, such as Petitioners, the challenged proposed rules also directly and immediately impact Petitioners’ financial rights in having medical bills paid by carriers, such as Intervenors. The challenged proposed rules dictate what processes will be available in reimbursement disputes, not only for Intervenors, but for Petitioners. The challenged proposed rules dictate when the cost-efficient reimbursement dispute process will be, and will not be, fully available to Petitioners and FSASC’s members, and when the prompt delivery of payment envisioned as the end result of the reimbursement dispute process will, or will not be, available to them. The parties also stipulated that the Division’s challenged proposed rules immediately and substantially affect Intervenors because prior authorization, the managed care defense, provider contract disputes, and medical necessity all have been raised as issues in prior chapter 69L-31 provider disputes with these carriers. It stands to reason that the providers who are on the other side of these disputes with carriers are just as immediately and substantially impacted by the proposed rules in this regard. Reason aside, Respondent readily stipulated to the direct, immediate, and substantial impacts to Intervenors, but steadfastly disputed that Petitioners (or the members of Petitioner FSASC) must necessarily be impacted to the same degree. Yet they are, after all, the other side of the reimbursement dispute coin. It is difficult to understand how one side of a dispute could be directly, immediately, and substantially impacted by proposed rules regulating the dispute process, while the other side of the dispute would not be equally impacted. At hearing, the undersigned raised this seeming incongruity, and suggested that Respondent would need to explain its different positions with regard to the factual predicates for standing for Intervenors and for Petitioners, besides the obvious difference that Intervenors were supporting Respondent’s proposed rules while Petitioners were challenging them. Respondent offered no explanation for its incongruous positions, either at hearing or in its PFO. Respondent’s agreement that Intervenors are immediately, directly, and substantially affected by the challenged proposed rules serves as an admission that Petitioners (or Petitioner FSASC’s members) are also immediately, directly, and substantially affected by the challenged proposed rules. Specific examples were offered in evidence of the Division’s refusal to resolve reimbursement disputes because contracts and managed care arrangements were involved, or because payment was adjusted or disallowed due to compensability or medical necessity issues. FSASC provided a concrete example of the application of the unadopted policies to one of its members, resulting in immediate injury when the Division refused to resolve a reimbursement dispute because a contract was involved. Petitioner Oak Hill identified a single reimbursement dispute over a $49,000 underpayment that remained unresolved because of the Division’s refusal to resolve the dispute because either a contract or managed care arrangement was involved. Petitioner Parallon’s income is based, in part, on paid claims by carriers, so it loses income when these reimbursement disputes are not resolved and the carriers are not ordered to promptly pay an amount. Petitioner AHCS offered examples of reimbursement disputes that the Division refused to resolve because the carrier disallowed or adjusted payment due to compensability or medical necessity issues. AHCS also noted that the incidence of carrier disallowances and adjustments of payment for compensability and medical necessity reasons has increased since the Division stopped making determinations to resolve reimbursement disputes on those issues. At the very least, Petitioners have already been harmed in these ways: by the delay in resolving reimbursement disputes, which includes lost cash flow and the time value of the money that carriers are not ordered to pay; by the increased personnel costs necessary to try some other way to pursue these claims; and by the prospect of court filing fees and attorney’s fees to try to litigate their right to payment when deprived of the statutory mechanism for cost-efficient resolution of reimbursement disputes. Conceivably, providers will not have recourse in court to contest disallowance or adjustment of payment, given Respondent’s exclusive jurisdiction to decide any matters concerning reimbursement. § 440.13(11)(c), Fla. Stat. Meanwhile, carriers immediately benefit from delay, by not being ordered to promptly pay claims. In an annual report addressing reimbursement dispute determinations for the fiscal year from July 1, 2015, through June 30, 2016, the Division reported that in 85.5 percent of its reimbursement dispute determinations, it determined that the health care providers had been underpaid. Overview of Workers’ Compensation Reimbursement Dispute Process Under Florida’s statutory workers’ compensation system, injured workers report their injury to the employer and/or the carrier. With an exception for emergency care, a health care provider must receive authorization for treatment from the carrier prior to providing treatment. After providing treatment, health care providers, including hospitals and physicians, must submit their bills to employers’ carriers; they are prohibited from billing the injured employees who received the treatment. These bills typically have multiple line items, such as for pharmaceutical prescriptions, diagnostic tests, and other services rendered. Carriers are required to review all bills submitted by health care providers to identify overutilization and billing errors, and to determine whether the providers have complied with practice parameters and protocols of treatment established in accordance with chapter 440. § 440.13(6), Fla. Stat. Mr. Sabolic explained that the “protocols of treatment” are the standards of care in section 440.13(15). These include criteria for “[r]easonable necessary medical care of injured employees.” § 440.13(15)(c), Fla. Stat. The carrier review of provider bills must culminate in a determination of whether the bill reflects overutilization of medical services, whether there are billing errors, and whether the bill reflects any violations of the practice parameters and protocols of treatment (standards of care). If a carrier finds any of these to be the case, the carrier is required by statute to disallow or adjust payment accordingly. The carrier is expressly authorized to make this determination “without order of a judge of compensation claims or the department,” if the carrier makes its determination in compliance with section 440.13 and Department rules. § 440.13(6), Fla. Stat. The Department’s rules require carriers to communicate to providers the carriers’ decisions under section 440.13(6) to pay or to deny, disallow, or adjust payment, with reasons for their decisions, in an “explanation of bill review” (EOBR).5/ If a carrier contests or disputes certain line items on a medical bill, the EOBR must identify the line items disputed and the reasons for the dispute, using EOBR codes and code descriptor. The EOBR code list, with 98 codes and descriptors, is set forth in Florida Administrative Code Rule 69L-7.740(13)(b). All but two of the codes describe reasons for disallowing or adjusting payment. EOBR Code 10 means payment denial of the entire bill, when the injury or illness is not compensable. EOBR Code 11 is used for partial denial of payment, where, although there is a compensable injury or illness, a diagnosis or procedure code for a particular line item service is determined by the carrier to be unrelated to the compensable condition. The EOBR coding rule provides that up to three codes can be assigned to each line item to “describe the basis for the claim administrator’s reimbursement decision in descending order of importance[.]” In addition, there is a “free-form” box in which additional notes of explanation may be given. The carrier’s determination to disallow or adjust payment of a health care provider’s bill, made pursuant to section 440.13(6), and explained to the health care provider by means of an EOBR, is the action that sets up a potential reimbursement dispute pursuant to section 440.13(7). “Any health care provider who elects to contest the disallowance or adjustment of payment by a carrier under subsection (6) must, within 45 days after receipt of notice of disallowance or adjustment of payment, petition the department to resolve the dispute.” § 440.13(7)(a), Fla. Stat. (emphasis added). The petition must be accompanied by “all documents and records that support the allegations in the petition.” Id. The carrier whose EOBR is disputed “must” then submit to the Department within 30 days of receipt of the petition all documentation substantiating the carrier’s disallowance or adjustment. § 440.13(7)(b), Fla. Stat. Section 440.13(7)(c) and (d) provide for the culmination of the reimbursement dispute process, as follows: Within 120 days after receipt of all documentation, the department must provide to the petitioner, the carrier, and the affected parties a written determination of whether the carrier properly adjusted or disallowed payment. The department must be guided by standards and policies set forth in this chapter, including all applicable reimbursement schedules, practice parameters, and protocols of treatment, in rendering its determination. If the department finds an improper disallowance or improper adjustment of payment by an insurer, the insurer shall reimburse the health care provider, facility, insurer, or employer within 30 days, subject to the penalties provided in this subsection. (emphasis added). Section 440.13(7)(e) provides that the Department “shall adopt rules to carry out this subsection,” i.e., the reimbursement dispute process. As noted, the Department did so in 2006, in promulgating chapter 69L-31. The rules were transferred from AHCA, which was the state agency vested with the statutory authority to determine reimbursement disputes between providers and carriers until the Department took over those functions in 2005.6/ Evolution of the Policies in the Challenged Proposed Rules Reimbursement Pursuant to a Provider-Carrier Contract or Managed Care Arrangement For approximately a decade, the Division accepted petitions to resolve reimbursement disputes when the reimbursement amount was determined by a contract between the provider and carrier. The Division resolved these disputes by issuing written determinations of whether the carrier properly adjusted or disallowed payment, and if the Division determined the carrier improperly adjusted or disallowed payment, the Division would specify the contract reimbursement amount that the carrier was required to pay within 30 days. That is because section 440.13(12) expressly recognizes that reimbursement to providers shall be either an amount set as the maximum reimbursement allowance (MRA) in fee schedules (or other amount set by a statutory formula), or the agreed-upon contract price.7/ Health care network reimbursement contracts typically do not (but may) include prices stated in dollar amounts. Instead, they frequently establish the price for reimbursement as a percentage of the MRA, or a percentage of allowable charges for services rendered. The Division’s reimbursement manuals in effect today, adopted as rules, recognize in a variety of contexts that the amount a provider is to be reimbursed is the contract amount, when there is a contract between the provider and carrier. The Workers’ Compensation Health Care Provider Reimbursement Manual currently in effect provides this introductory statement: Reimbursement will be made to a Florida health care provider after applying the appropriate reimbursement policies contained in this Manual. A carrier will reimburse a health care provider either the MRA in the appropriate reimbursement schedule or a mutually agreed upon contract price. (emphasis added). Florida Workers’ Compensation Health Care Provider Reimbursement Manual (2016 edition) at 15, adopted and incorporated by reference in rule 69L-7.020, effective July 1, 2017. The manual has dozens of references to reimbursing at the contract price, such as this example for reimbursement for multiple surgeries: Reimbursement for the primary surgical procedure will be the MRA listed in Chapter 3, Part B of this Manual or the agreed upon contract price. Reimbursement for additional surgical procedure(s) will be fifty percent (50%) of the listed MRA in Chapter 3, Part B of this Manual or the agreed upon contract price. * * * Note: If there is an agreed upon contract between the health care provider and the carrier, the contract establishes the reimbursement at a specified contract price. (emphasis added). Id. at 63. Similarly, the ASC reimbursement manual in effect has multiple references to reimbursement at the contract price or contract amount, such as this example for surgical services: For each billed CPT® code listed in Chapter 6 of this Manual, the ASC shall be reimbursed either: The MRA if listed in Chapter 6 of this Manual; or The agreed upon contract price. For each billed CPT® code not listed in Chapter 6 of this Manual, the ASC shall be reimbursed: Sixty percent (60%) of the ASC’s billed charge; or The agreed upon contract price. * * * Note: If there is an agreed upon contract between the ASC and the carrier, the contract establishes the reimbursement at the specified contract price. (emphasis added). Florida Workers’ Compensation Ambulatory Surgical Center Reimbursement Manual (2015 edition) at 17, incorporated by reference in rule 69L-7.020, effective January 1, 2016. See also ASC Manual App. A at 1 (surgical implant MRA is “50% above acquisition cost; amount certified or contract amount.”). The reimbursement manual for hospitals has similar references, including this directive for inpatient services: Except as otherwise provided in this Manual, charges for hospital inpatient services shall be reimbursed according to the Per Diem Fee Schedule provided in this Chapter or according to a mutually agreed upon contract reimbursement agreement between the hospital and the insurer. (emphasis added). Florida Workers’ Compensation Reimbursement Manual for Hospitals (2014 edition) at 15, adopted and incorporated by reference in rule 69L-7.501, effective January 1, 2015. In 2013, the Division submitted a legislative proposal for the Department to consider including in its proposed bill. The Division requested an amendment to section 440.13 to “[r]emove contracted reimbursement from [reimbursement dispute] resolution authority of [the] department.” Jt. Ex. 51 at 1. That proposal did not lead to a statutory change. An example of how the Division resolved reimbursement disputes involving contracts before its recent policy is shown in Exhibit FS1, a “Resolution of Reimbursement Dispute Determination.” According to the document, at issue was a reimbursement dispute regarding a bill for one service, for which the carrier issued an EOBR disallowing payment. The Division’s finding regarding reimbursement was that the contract at issue “provides for reimbursement at the lesser of 90% of billed charges or 90% of the fee schedule.” The Division calculated the contract price and determined that the “total correct reimbursement amount” per the contract was $2,334.60. The determination, issued June 30, 2015, was: The Department of Financial Services, Division of Workers’ Compensation has determined that the petitioner substantiated entitlement to additional reimbursement of disputed services based upon the documentation in evidence and in accordance with the provisions of the Florida Workers’ Compensation Reimbursement Manual [for ASCs], 2011 Edition, Chapter 3, page 26. The respondent shall remit the petitioner the amount of $2,334.60 and provide the Division proof of reimbursement to the petitioner within thirty (30) days of receipt of this notice[.] Ex. FS1 at 2. The evolution was a little different for reimbursement disputes involving workers’ compensation managed care arrangements. Rule 69L-31.015, adopted by the Department in 2006, provided as follows: A health care provider may not elect to contest under Section 440.13(7), F.S., disallowance or adjustment of payment by a carrier for services rendered pursuant to a managed care arrangement. Mr. Sabolic explained that while this rule was in effect, the Division would dismiss petitions that disclosed managed care arrangements. But the rule was repealed in response to a challenge to the rule’s validity. As Mr. Sabolic recalled it, the challenger was Parallon or an individual HCA-affiliated hospital. According to Mr. Sabolic, the Division agreed that it did not have the authority to simply dismiss petitions. The rule history note states that the rule repeal was effective May 22, 2014.8/ For the 15-month period from late May 2014 through late August 2015, the Division accepted reimbursement dispute petitions and resolved the reimbursement disputes, even though a workers’ compensation managed care arrangement was involved, just as it had been doing for years for reimbursement disputes involving contracts. On or about August 24, 2015, the Division changed its policy on issuing determinations when a contract (including a managed care arrangement) was alleged in the petition. In all determinations of reimbursement disputes issued after August 24, 2015, if a contract or managed care arrangement was alleged, the Division stopped making findings regarding the contracted-for reimbursement amount. Instead, the Division started reciting the fee schedule/MRA amount or applicable statutory formula amount, making no determination regarding whether the carrier properly adjusted or disallowed payment, or, if an improper adjustment or disallowance, how much the reimbursement should have been under the contract and how much the carrier was required to reimburse the provider within 30 days. The Division changed the name of the form it used from “Resolution of Reimbursement Dispute Determination” to just “Reimbursement Dispute Determination,” signaling that the Division would no longer be resolving reimbursement disputes involving contracts. Instead, the following language appeared in each such determination: The amount listed above does not apply to any contractual arrangement. If a contractual arrangement exists between the parties, reimbursement should be made pursuant to such contractual arrangement. Exhibit FS3 is an example showing a Division “determination” applying its new policy to a reimbursement dispute petition filed by an ASC member of FSASC. Part IV of the form, “Reimbursement Dispute Policies and Guidelines,” reflects (as did prior determinations) that the reimbursement manual for ASCs, adopted by rule, “sets the policies and reimbursement amounts for medical bills.” As previously noted, the reimbursement manuals set reimbursement amounts at either the MRA/statutory formula or the agreed-upon contract price, consistent with the policy in section 440.13(12)(a). Nonetheless, the Division added a note to the end of part IV: NOTE: This reimbursement determination is limited in scope to standards and policies set forth in chapter 440, Florida Statutes, including all applicable reimbursement schedules, practice parameters, and protocols of treatment. It does not interpret, apply or otherwise take into account any contractual arrangement between the parties governing reimbursement for services provided by health care providers, including any workers’ compensation managed care arrangement under section 440.134, Florida Statutes. Ex. FS3 at 2. Accordingly, even though the determination form reflects that the ASC petitioner met its filing requirements for a reimbursement dispute over a bill for services in the amount of $5,188.00, none of which was paid according to the EOBR, and even though the carrier failed to file a response to the petition, the Division did not make a determination that the carrier improperly disallowed payment or that the petitioner had substantiated entitlement to additional reimbursement in the amount of the agreed-upon contract price, as it had in previous determinations. Instead, the Division set forth the “correct reimbursement” amount that would apply if the MRA applied, while noting that amount would not apply if there was a contractual arrangement providing a different amount. The carrier was not ordered to remit any amount within 30 days. Reimbursement Disputes Involving Issues of Compensability or Medical Necessity Prior to November 2015, the Division resolved reimbursement disputes by determining the issues as framed by the carrier’s actions under section 440.13(6), to disallow or adjust payment of a bill or specific line items in a bill for reasons (codes) in the EOBR, which were contested by the provider in a timely-filed petition under section 440.13(7)(a). The EOBR code list contains one code (code 10) for denial of payment of an entire claim based on non-compensability of an injury or illness. One other code (code 11) is for partial denial of payment, where there is a compensable injury, but a specific line item indicates treatment unrelated to the compensable injury. Five additional codes (codes 21 through 26) apply to disallowed payments for various medical necessity reasons. Fla. Admin. Code R. 69L-7.740(13)(b). Prior to November 2015, the Division resolved reimbursement disputes when the provider timely petitioned to contest the disallowance or adjustment of payment by a carrier, as set forth in the EOBR, including when the EOBR cited compensability and/or medical necessity code(s) as the reason(s) for disallowing or adjusting payment of a provider’s bill. On or about November 2, 2015, the Division changed its policy and no longer addressed in its reimbursement dispute determinations whether a carrier properly or improperly disallowed or adjusted payment for reasons of medical necessity or compensability. Exhibit AH6 is an example of a Division written determination that makes no determination of whether a carrier properly or improperly disallowed payment of a line item based on a medical necessity issue (EOBR Code 24). Instead, the “determination” included this note: Note: The Department will not address any disallowance or adjustment of payment where the basis for the disallowance or adjustment or payment by the carrier involves denial of compensability of the claim or assertion that the specific services provided are not medically necessary. Ex. AH6 at 2. This note has been included in all determinations issued after November 2015, where payment was disallowed or adjusted based on medical necessity or compensability. Rulemaking Process The Division began rule development to incorporate its policy changes in amendments to chapter 69L-31. A Notice of Development of Proposed Rules was published on December 16, 2015. The notice set forth the preliminary text of proposed amendments, including new proposed rule 69L-31.016, entitled “Reimbursement Disputes Involving a Contract or Workers’ Compensation Managed Care Arrangement.” The notice stated that the purpose and effect of proposed rule 69L-31.016 was “to limit the scope of dispute resolutions to compliance with standards under Chapter 440, F.S. and exclude issues of contract interpretation.” The exclusion of disallowed or adjusted payments based on issues of compensability and medical necessity, not mentioned in the statement of purpose and effect, was initially put in rule 69L-31.005, in a paragraph stating that the Department will only address specific EOBR line items where the carrier adjusted or disallowed payment and are disputed by the provider, but then stating that the Department will not address specific EOBR adjustment or disallowance items involving compensability or medical necessity, even if disputed. A rule development workshop was held on January 12, 2016. The Department published a second Notice of Development of Proposed Rules, revising the proposed changes to chapter 69L-31, including both the contract/managed care exclusion and the compensability/medical necessity exclusion. On June 10, 2016, the Division held a second rule development workshop addressing the proposed rule revisions. On December 7, 2016, the Division published a Notice of Proposed Rules, formally initiating rulemaking to revise chapter 69L-31. The notice set forth a revised proposed rule 69L-31.016. Its new title was “Reimbursement Disputes Involving a Contract or Workers’ Compensation Managed Care Arrangement or Involving Compensability or Medical Necessity,” joining in one rule all of the new exceptions, for which the Division would not be making determinations of whether carriers properly or improperly adjusted or disallowed payments. As proposed, the rule provided: When either the health care provider or carrier asserts that a contract between them establishes the amount of reimbursement to the health care provider, or where the carrier provided health care services to the injured worker through a workers’ compensation managed care arrangement pursuant to Section 440.134, F.S., the Department will not issue a finding that there has been any improper disallowance or adjustment. Instead, the determination will only indicate the reimbursement amount for the treatment established by the appropriate reimbursement schedules, practice parameters, and protocols of treatment under Chapter 440, F.S., to assist the health care provider and carrier in their independent application of the provisions of the contract or workers’ compensation managed care arrangement to resolve the dispute. When the carrier asserts the treatment is not compensable or medically necessary and as a result does not reimburse, the Department will not issue a finding that there has been any improper disallowance or adjustment. Instead, the determination will only indicate the reimbursement amount for the treatment established by the appropriate reimbursement schedules, practice parameters, and protocols of treatment under Chapter 440, F.S., should compensability or medical necessity be later established. The stated purpose of proposed rule 69L-31.016 was to specify “that the scope of Department determinations involving reimbursement disputes is limited to findings relating to reimbursement schedules, practice parameters, and protocols of treatment, and [to clarify] that the Department will issue no findings regarding an improper disallowance or adjustment in reimbursement involving managed care contracts or when the carrier asserts that medical treatment was either not compensable or not medically necessary[.]” Jt. Ex. 3. As published in December 2016, proposed rule 69L- 31.016 cited sections 440.13(7)(e) and 440.591 as the “rulemaking authority,” and sections 440.13(7) and (12)(a) and 440.134(15) as the “laws implemented.” The Division’s notice stated that, based on its determinations as to adverse impact and regulatory costs: “A SERC has not been prepared by the Agency.” Jt. Ex. 3. By letter dated December 28, 2016, Parallon proposed a LCRA to the proposed rule 69L-31.016(1) (and to other proposed rules not at issue in this proceeding). The LCRA explained that Parallon was already experiencing increased costs because of the Division’s unadopted policy, and Parallon proposed that the most appropriate lower cost alternative to accomplish the statutory objectives was not to adopt proposed rule 69L-31.016(1). On January 5, 2017, the Division held a public hearing on the proposed rules. Petitioners (through counsel) offered comments in opposition to the proposed rules. Parallon’s counsel also submitted the LCRA letter into the record. On May 2, 2017, the Division published a Notice of Correction. The notice stated that, contrary to the statement in the Notice of Proposed Rules, SERCs had been prepared for the proposed rules, and that the SERC for proposed rule 69L-31.016 now had been revised to address the LCRA. The impression given by the various documents identified as a SERC or revised SERC, half of which are entitled “Department of Financial Services Analysis to Determine if a [SERC] is Required,” all of which are similar or identical in content, and none of which bear a date, is that, prior to the LCRA, Respondent did not prepare a SERC for proposed rule 69L- 31.016; it prepared a document by which it determined that no SERC was required. After the LCRA was filed, Respondent added a reference to the LCRA, but otherwise did not change the content of its non-SERC. In the Notice of Correction, the Division stated: “The [SERC] for each of the above-referenced proposed rules is available by accessing the Department’s website at http://www.myfloridacfo.com/Division/WC/noticesRules.htm.” The document titled “Department of Financial Services Analysis to Determine if Statement of Estimated Regulatory Costs Is Required,” referred to by the Division as the SERC, was not available on the DFS website on May 2, 2017, as the Notice of Correction indicated. Instead, it was available at the referenced website location on or after May 3, 2017. Upon request by counsel for Parallon on May 3, 2017, the document referred to as a SERC was also provided to Parallon. Mr. Sabolic testified that the document referred to as the SERC was actually available at the Division on May 2, 2017, and would have been made available to someone if it was requested on that day. However, the noticed means by which the document would be “made available” was at a specific website location that was not functional until May 3, 2017. The so-called SERC document for proposed rule 69L- 31.016 suffers from several obvious deficiencies. As to the Division’s “economic analysis,” the document states: “N/A.” That is because the Division did no economic analysis.9/ In response to two separate prompts, for the Division to set forth a “good faith estimate of the number of individuals and entities likely to be required to comply with the rule,” and separately, to give a “general description of the types of individuals likely to be affected by the rule,” the Division gave the identical response: “This Rule changes how the Medical Services Section review Petitions for Resolution of Reimbursement Disputes. Only the Medical Services Section will be required to comply.” In addition, the document indicates (with no explanation or analysis) that there will be no transactional costs to persons required to comply with the new rule, and no adverse impact at all on small businesses. In contrast to the so-called SERC document indicating that only the medical services section will be required to comply with, or be impacted by, the proposed rule, in the Division’s 2013 legislative proposal seeking to remove its statutory authority to determine reimbursement disputes involving contracts, the Division was able to identify persons who would be affected by the proposal, acknowledging as follows: “Workers’ compensation carriers, including self- insurers (DFS Div. of Risk Mgmt), third party administrators, and health care providers, including facilities, are affected.” And, of course, the Division was well aware by May 2017 of the variety of providers and carriers expressing their interests and concerns during the rule development that had been ongoing for 17 months by then. To say that the Division gave the SERC task short shrift would be generous. The Division did not take this task seriously. The so-called SERC document also identified the Parallon LCRA. In response to the requirement to describe the LCRA and provide either a statement adopting it or a statement “of the reasons for rejecting the alternative in favor of the proposed rule,” the Division stated: Parallon’s lower cost regulatory alternative consisted of a cost-based argument against the adoption of the proposed rule on the basis that the existing rule provides a lower cost alternative. The Division rejected the regulatory alternative and intends to move forward with adoption on the proposed rule, but will revise the proposed rule to read as follows[.] Jt. Ex. 12, at bates-stamp p. 48. The reference to a revision to the proposed rule does not belong in the statement of reasons for rejecting the LCRA. Its placement there was misleading, as if the revision to the proposed rule helped to explain why the Division rejected the LCRA. But no revision was made to the rule to which the LCRA was directed--proposed rule 69L-31.016(1). The revision was to proposed rule 69L- 31.016(2), not addressed by the LCRA. At hearing, Mr. Sabolic attempted to provide the statement of reasons for rejecting the LCRA, missing in the so- called SERC document. He said that the cost-based argument was considered speculative and lacked data (but that explanation was not in the so-called SERC document). Although he thought that the SERC document stated that the LCRA was rejected because it was based on a “faulty” cost-based argument, the word “faulty” was not in the SERC. On its face, the SERC offers no reason why the “cost-based argument” was rejected— just that it was rejected. The amendment to proposed rule 69L-31.016(2) mentioned in the SERC document was also published on May 2, 2017, in a Notice of Change. The change was shown as follows: When the carrier asserts the treatment is not compensable or medically necessary and as a result does not reimburse, the Department will not issue a finding that there has been any improper disallowance or adjustment. Instead, the determination will only address line items not related to indicate the reimbursement amount for the treatment established by the appropriate reimbursement schedules, practice parameters, and protocols of treatment under Chapter 440, F.S., should compensability or medical necessity be later established. If the petitioner has submitted documentation demonstrating the carrier authorized the treatment, the Department will issue a finding of improper disallowance or adjustment. The Notice of Change did not change either of the other challenged provisions—proposed rule 69L-31.016(1) and the proposed deletion of rule 69L-31.005(2)(d). The Notice of Change deleted the prior citation to section 440.13(12)(a) as one of the laws implemented by proposed rule 69L-31.016, leaving only sections 440.13(7) and 440.134(15) as the laws implemented. Division’s Justifications for the Challenged Proposed Rules Mr. Sabolic was Respondent’s hearing representative and sole witness to explain and support the challenged rules. Mr. Sabolic testified that when a contract dictates the reimbursement amount, the Division does not believe it has statutory authority to interpret or enforce contract terms. Yet he acknowledged that the Division’s reimbursement determinations were required to be based on policies set forth in chapter 440, and that the Division was required to apply its reimbursement manuals that are promulgated as rules. Both chapter 440 and the reimbursement manuals expressly require reimbursement at the agreed-upon contract price, as detailed above. The Division recognized this for a decade, during which it applied chapter 440 and its reimbursement manuals to determine the agreed-upon contract price, resolve reimbursement disputes, and order carriers to pay the amount required by their contracts. The Division’s rationale stands in stark contrast to the Division’s 2013 request for a legislative amendment to remove its statutory authority to determine reimbursement disputes when reimbursement is dictated by contracts. The Division’s request constitutes an admission that it believes it has the statutory authority it now says it lacks. Apart from statutory authority, Mr. Sabolic indicated that in the decade during which the Division did resolve reimbursement disputes involving contracts, it was sometimes difficult to determine whether there was a contract in effect between the parties. There was a variety of contracts, and sometimes they were complex. With regard to managed care arrangements, Mr. Sabolic said that, similar to contracts, the Division does not think it has the power to interpret or enforce managed care arrangements, because that power lies within AHCA under section 440.134. He said that section 440.134(15) was cited as a law implemented by proposed rule 69L-31.016 because the statute addresses grievance or complaint procedures under a managed care arrangement. Intervenors Summit Companies attempted to prove that providers are required to resolve reimbursement disputes involving workers’ compensation managed care arrangements by using the grievance process described in section 440.134(15). The evidence failed to support that contention. The evidence showed that the grievance form used by the Summit Companies’ managed care arrangement, approved by AHCA, describes the grievance process as encompassing “dissatisfaction with medical care issues provided by or on behalf of a workers’ compensation managed care arrangement.” Tr. 323. As confirmed by the definitions of “complaint” and “grievance” in the workers’ compensation managed care law, the grievance process is used to resolve an injured worker’s dissatisfaction with an insurer’s managed care arrangement, including a refusal to provide medical care or the care provided. See § 440.134(1)(b) and (d), Fla. Stat. Although under AHCA’s rules and the Summit Companies’ form, providers may initiate the grievance process, they would be doing so essentially on behalf of the injured worker or in tandem with the injured worker to resolve the injured worker’s dissatisfaction with medical care issues. When the issue is the insurer’s refusal to provide medical care, the grievance process is an administrative remedy for the injured worker that has to be exhausted before an injured worker can file a petition for benefits pursuant to section 440.192. Not surprisingly, providers have not attempted to file grievances to raise reimbursement disputes with insurers, as nothing in section 440.134(15), the rules, or the Summit Companies’ approved form contemplate use of the process for that purpose, much less mandate it. Strangely, Mr. Sabolic attempted to justify the proposed rule’s carve-outs from the reimbursement dispute process by reference to section 440.13(11)(c), which gives the Department “exclusive jurisdiction to decide any matters concerning reimbursement[.]” As he put it: I think that the statute indicates we can decide any matter relating to reimbursement under 440.13(11)(c), and that’s how we’re deciding to deal with those situations when a managed care arrangement or a contract is involved. That’s our decision. Our decision is that that determination’s going to reflect the amount that is in the applicable reimbursement manual for that service date. Tr. 232. It must be noted that section 440.13(11)(c) was not cited as one of the laws implemented by the proposed rules, even if the premise could be accepted that a grant of exclusive jurisdiction to decide any matter concerning reimbursement includes authority to decide never to decide certain matters concerning reimbursement. Mr. Sabolic admitted that under proposed rule 69L-31.016(1), the Division does not and will not issue a written determination of whether the carrier properly adjusted or disallowed payment when a contract or managed care arrangement is involved. Mr. Sabolic testified that the proposed deletion of rule 69L-31.005(2)(d) (requiring a copy of the contract or managed care arrangement addressing reimbursement) is tied to proposed rule 69L-31.016(1) that gets the Division out of the business of looking at contracts. The Division will not require any proof that a contract or managed care arrangement governs reimbursement so as to trigger the no-decision decision. Instead, if either a provider indicates in its petition or a carrier indicates in its response that reimbursement is pursuant to a contract or managed care arrangement, that ends the inquiry, and the Division will not determine whether the carrier properly adjusted or disallowed payment. Mr. Sabolic said that he was not concerned with the potential for abuse, because in the decade when the Division was in the business of interpreting and applying reimbursement provisions in contracts, it was very rare that the parties disagreed on whether a contract was in effect between them that governed reimbursement. Mr. Sabolic offered no justification for carving out from reimbursement disputes carrier adjustments or disallowances of payment based on compensability or medical necessity issues. He just reported the Division’s decision that if a carrier disallows or adjusts payment for line items on bills and cites reasons (EOBR codes) involving compensability or medical necessity, “we will indicate that we’re not going to issue a determination on those line items and [we will] only issue a determination on those line items which don’t reflect the carrier’s disallowance related to compensability or medical necessity.” But if the petitioner gives “proof that the carrier authorized treatment,” the Division “will proceed with rendering a determination related to those line items.” Tr. 197. The Division’s determinations under proposed rules 69L-31.016(1) (when a contract or managed care arrangement is alleged) and 69L-31.016(2) (when payment is disallowed or adjusted for compensability or medical necessity reasons) are characterized by the Division as “neutral determinations” in which there is no winner and no loser. A more fitting characterization is “non-determination.”
The Issue The issue in this proceeding is whether the Agency for Health Care Administration's denial of Petitioners', Brookwood- Walton County Convalescent Center and Brookwood-Washington County Convalescent Center (Brookwood), interim rate request for general and professional liability insurance was proper and in keeping with state and federal laws and the rules and regulations governing Florida's Medicaid program.
Findings Of Fact Petitioners, Brookwood-Washington County Convalescent Center and Walton County Convalescent Center (Brookwood) are licensed nursing homes in the State of Florida. The Brookwood facilities have historically been high Medicaid providers. Both participate in the Florida Medicaid program. Washington County Convalescent Center is currently 90 percent Medicaid and Walton County Convalescent Center is 85 percent Medicaid. The statewide average for all nursing homes in Florida is 50-55 percent Medicaid. Such high Medicaid participation makes Brookwood extremely sensitive to changes in its allowable costs and its ability to recover those costs. Florida's Medicaid program is needs-based, providing nursing home care to persons eligible for such care who fall below a certain level of income and assets. Medicaid is a "prospective" reimbursement program in that reimbursement to a nursing home is based on the facility's cost history adjusted or inflated to approximate future costs. Adjustments are made and reimbursement rates are set based on a nursing home's cost report for allowable costs it has incurred in the past year. In determining allowable reimbursable costs, AHCA utilizes the Florida Title XIX Long-Term Care Reimbursement Plan, Version XIX, dated November 27, 1995 (Reimbursement Plan), the reimbursement principles of the Federal Medicare Program's Health Insurance Manual (also known as the Provider Reimbursement Manual, PRM, or HIM-15), and Generally Accepted Accounting Principles (GAAP) or accepted industry practice. In making determinations as to allowable reimbursable costs, one first looks to the Plan, then HIM-15 and finally, GAAP. With certain exceptions not relevant here, The Florida Medicaid program reimburses all allowable costs, as those costs are defined in the Reimbursement Plan and HIM-15. Premiums paid by a nursing home for liability insurance are an allowable cost under the Reimbursement Plan. Allowable costs are broken out in the categories of property, patient care, and operating expenses. As indicated, in determining the prospective rate, AHCA inflates the reported allowable costs in each category forward subject to various class ceiling limitations and target limitations. A class ceiling is an upper limit on the cost that will be reimbursed. A target limitation is a limit on the rate of increase of costs from year to year. In short, a nursing home provider may be under its class ceilings; however, any increase in its costs that exceeds a certain percentage amount will not be recognized for reimbursement purposes. After applying the inflation factor, the class ceilings and the target limitations to allowable costs, AHCA arrives at a per-patient, per-day rate that the nursing home will be paid during the next year. Because nursing home reimbursement is prospective and subject to target limits, a nursing facility might be unable to recover its allowable costs of providing services if it experiences unanticipated expenses that cause its allowable costs to unexpectedly rise. In such cases, the Plan has provisions that allow, under very limited circumstances, an interim rate adjustment for an unexpected increase in costs. Such interim rate increases are covered in Section IV.J. of the Plan. In 1999, Brookwood's liability insurance premium cost was $400,000 for its six Florida facilities and one North Carolina facility. In the year 2000, Brookwood's liability insurance premium cost increased to $4,000,000. Of that amount, the premium cost for Walton County Convalescent Center increased from $56,000 to $546,000 and the premium cost for Washington County Convalescent Center increased from $84,000 to $819,000. The premium increase occurred after Brookwood's rates had been set based on its 1999 insurance costs. Additionally, in September of 2000, Brookwood's liability insurer left the state. Brookwood has since been unable to obtain liability insurance for its Florida facilities. It was possible for Brookwood to self-insure, but it did not. Self-insurance is generally only feasible for facilities larger than Brookwood. However, the evidence did not demonstrate that Brookwood could not self-insure. On May 30, 2000, faced with this unforeseen increase in liability insurance premiums, Brookwood applied to AHCA for an interim rate effective retroactively to January 1, 2000. This was necessary because the large increase in costs would not be covered by the normal rate of inflation allowed by the department and the cost of the increase would not be recoverable through the normal prospective reimbursement methodology due to the lag time between the cost increase and the filing of the cost report. In addition, without an interim rate Brookwood would not receive an adjustment to its target rate, thereby, limiting reimbursement for any increased costs it did report on its cost reports. Brookwood only requested interim rates for these two facilities because its other four facilities were at or above the cost ceilings and could get no relief from an interim rate. In other words, for those four facilities, Medicaid will not participate in payment for the extra costs incurred by the increased liability insurance premiums. Even for the two facilities at issue here, if an interim rate is granted, AHCA will not reimburse for any costs that exceed the cost ceilings. The increase of premiums and subsequent pull out by several insurance companies were part of a reaction to increased loss in the area of nursing home liability. The crisis was, in part, due to an increase in civil litigation against nursing homes being brought under Sections 400.022 and 400.023, Florida Statutes. Indeed, Florida's rate of nursing home liability litigation is significantly above the national average. However, Florida's nursing home population is also significantly larger than the national average. However, the crisis was also due to many other factors which impact liability and rates in Florida. While there may be some debate about the causes of the increased litigation, there is no debate that the cost of liability insurance increased significantly over a short period of time with some insurance companies ceasing to write liability insurance for nursing homes in Florida. The Agency denied Brookwood's request because no new interpretation of law by the state or federal government pertaining to liability insurance had occurred which caused Brookwood's costs to increase. As indicated earlier, the Plan contains provisions that allow a nursing home participating in the Medicaid program to request an interim change in its reimbursement rate when it incurs costs resulting from patient care or operating changes made to comply with existing state regulations and such costs are at least $5,000 or one percent of its per diem. The language of Section IV.J.2 of the Estate's Long- Term Care Reimbursement Plan states that: J. The following provisions apply to interim changes in component reimbursement rates, other than through the routine semi- annual rate setting process. * * * 2. Interim rate changes reflecting increased costs occurring as a result of patient care or operating changes shall be considered only if such changes were made to comply with existing State or Federal rules, laws, or standards, and if the change in cost to the provider is at least $5000 and would cause a change of 1 percent or more in the provider's current total per diem rate. Other subsections of Section J of the Reimbursement Plan deal with new requirements or new interpretation of old requirements. Those subsections do not apply in this case. The term standards as used in Section J refers to standards in the Reimbursement Plan, Section IV titled "Standards," the standards of care and operation detailed by the Medicaid program in its provider handbooks and such standards as are detailed in the Code of Federal Regulations, and HCFA/HHS guidelines, as well as state statutes and rules. These standards are the usual or customary method or practice used by the nursing home industry to gain reimbursement from Medicaid. The term standards include reimbursement standards, methods or principles for medicaid providers. In essence, a nursing home would have to incur additional or new costs to receive an interim rate adjustment. Brookwood's increase in insurance premiums was such an increase in costs, which would be allowable subject to ceiling and target limitations. At the time of Brookwood's request, there was no specific requirement in the state Reimbursement Plan, state or federal law requiring that liability insurance be carried by a nursing home. Additionally, there was no change to the Reimbursement Plan, state, or federal law or regulation requiring that liability insurance be carried by a nursing home. On the other hand, the reimbursement standards or requirements set forth in HIM-15 make it clear that a prudent Medicaid provider is expected to carry liability insurance or self-insurance in order to be reimbursed for any uninsured losses. Specifically, Section 2160.2 of the Provider Reimbursement Manual states: Liability damages paid by the provider, either imposed by law or assumed by contract, which should reasonably have been covered by liability insurance, are not allowable. Section 2161 of HIM-15 states that the reasonable costs of such insurance are allowable. Section 2162.1 of HIM-15 states that losses in excess of the deductible or co-insurance are allowable costs so long as the amount of insurance was consistent with sound management practices. Section 2162.5 of HIM-15 recognizes the allowability of deductibles, so long as they do not exceed 10 percent of the entity's net worth or $100,000 per provider. It also states that if you set a deductible higher than those amounts (or assume all the risk), any losses exceeding the 10 percent or $100,000 will not be allowable as recognized costs. The general implication of these and other related sections of HIM-15 is that a prudent provider is expected to carry liability insurance or be self-insured. Thus, a provider will be reimbursed for the reasonable costs of liability insurance, any reasonable deductible, and any losses in excess of reasonable insurance coverage. These limitations on loss recovery or reimbursement are standards for purposes of determining whether a interim rate increase is allowable. These standards were in effect at the time Brookwood's premiums increased. Thus, in order to comply with Medicaid's reimbursement standards, Brookwood had to remain insured or self-insured. The choice of which type of insurance to utilize to meet the reimbursement standard is left to the provider. Brookwood reasonably chose to insure through an insurance company. Since Brookwood was required to make such a choice in order to comply or conform to Medicaid's reimbursement standards, Brookwood is entitled to an interim rate increase. However, the interim rate provisions of the Plan only recognize such rates submitted within 60 days prior to the date of the interim rate request. Based on this limitation, Petitioners' rate increase is limited to the increase in premium incurred 60 days prior to its interim rate request around May 30, 2000.
Recommendation Based upon the foregoing findings of fact and Conclusions of Law, it is RECOMMENDED that A final order be entered granting Brookwood's interim rate request limited to the 60 days prior to the initial rate request. DONE AND ENTERED this 31st day of September, 2001, in Tallahassee, Leon County, Florida. DIANE CLEAVINGER 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 21st day of September, 2001. COPIES FURNISHED: Steven A. Grigas, Esquire Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building 3, Suite 3431 Tallahassee, Florida 32308-5403 Theodore E. Mack, Esquire Powell & Mack 803 North Calhoun Street Tallahassee, Florida 32303 Diane Grubbs, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building 3, Suite 3431 Tallahassee, Florida 32308-5403 Julie Gallagher, General Counsel Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building 3, Suite 3431 Tallahassee, Florida 32308-5403
The Issue Whether the agency's audit adjustment of an interim rate should be sustained.
Findings Of Fact The Petitioner is a licensed nursing home located in Chipley, Washington County, Florida. The Petitioner is located in a rural county in Florida's panhandle with high numbers of Medicaid- eligible patients. The Petitioner participates in the Florida Medicaid Program and has agreed to provide skilled or intermediate nursing care services for Medicaid patients. The Respondent is the state agency responsible for administering the Florida Medicaid Program. The parties have entered into an agreement that governs the provision of Medicaid services and the reimbursement to the provider (Petitioner). Such plan authorizes reimbursement based upon rates agreed between the parties and limited by rules and regulations applicable to the Medicaid Program. In this regard, Medicaid reimbursements are made in accordance with the Florida Title XIX Long-Term Care Reimbursement Plan (the Plan). The Plan was adopted and incorporated by reference in Rule Chapter 59G, Florida Administrative Code. To set a reimbursement rate, cost reports are reviewed by AHCA to determine the actual Medicaid allowable costs incurred by the provider. The allowable costs are used to set a prospective rate for the provider. Payments to the provider in subsequent periods are then based upon the rate adjusted for inflation. There are limits on costs and reimbursements. If a provider incurs an expense above the allowed level, it will not be reimbursed. In this regard the approved rate for the provider may not compensate the provider for expenses that were more than anticipated. Medicaid is not intended to pay for luxury care. The Medicaid Program covers rates for providers that are efficiently operated. The providers are not compensated for luxury services, excessive charges, or operating costs that exceed what a prudent, efficiently operated facility would incur. Once the reimbursement rate is set it continues until the next rate-setting period. If circumstances change such that the rate unfairly impacts the provider's ability to provide care, an interim rate adjustment may be requested. An increased interim rate could assist the provider until the regular rate is re-calculated. Nursing homes are subject to inspections or surveys that are performed by AHCA to assure compliance with all applicable standards of operation. The standards are to assure that patients receive a quality of care at or above minimum levels. Pertinent to this case was a survey that found Petitioner deficient due to inadequate staffing levels. Inadequate staffing directly impacts the quality of care a facility is able to provide. Given its rural location and the wages it was offering, the Petitioner could not offer competitive opportunities in order to recruit and retain qualified staff. For entry level employees the Petitioner found itself competing against even McDonald's restaurant for employees. As a result, when a survey found the facility deficient, the Petitioner sought financial relief through a request for an interim rate increase. The provider faced a financial loss if the deficiency were corrected without a corresponding increase in its rate as it would not be able to cover the additional costs within its reimbursement rate. To correct the deficiencies Petitioner sought six additional Certified Nursing Assistants and wage enhancements. As a result, it sought an interim rate increase of $3.56 per day in patient care and $.12 per day in operating cost. The interim reimbursement rate was approved by AHCA in 1996. The reimbursements to this provider then continued based upon the new rate. It then became the facility's objective to follow the plan of correction to assure that the deficiency was, in fact, alleviated. In November of 1997, new rates were established for the Petitioner which became the settled rate. Based upon the cost reports filed with AHCA, the Petitioner's rate was settled with increases of $3.91 per day in patient care and $1.62 in the operating category. The instant case resulted from an audit conducted at the facility. The audit was to verify that the expenses reported were correct and allowable. An audit should also confirm that the statistical information reported by the provider was correct. The auditors used $3.56 instead of $3.91 as the starting point for the cost report figures. The Petitioner had relied on the higher number as the cost- settled figure for the audit. More important, the Petitioner relied on the same accounting methodology it had relied on for the interim rate request. The auditors, an independent accounting firm, did not accept the prior methodology. Subsequent to the audit, the Respondent issued a letter to the Petitioner claiming it was owed $364,621.12 for Medicaid over-payments. The Respondent maintains it is entitled to recoup the over-payments as part of the future reimbursements to the provider. The Petitioner argues that such action will adversely impact the provider's ability to provide the quality of care expected by AHCA. All of the costs reported by this Petitioner are allowable under the Medicaid guidelines. The crux of the issue in the case results from the settled interim rate not being accepted and carried forward by the independent auditors. Because some amounts exceeded the "budgeted" estimates, the auditors disallowed the additional expenses. The amounts, all within the category of wage or salary enhancements, were not deemed proper because they exceeded or altered the granted 50- cent-an-hour pay raise within the original request. Although allowable, the expenditures fell outside the parameters of the budget that support the interim rate increase. Bonuses and wage enhancements paid by the Petitioner during the audited period were not one-time expenses but are on-going programs to encourage and support the retention of qualified employees. This was within the parameter of curing the deficiency that the interim rate sought to address. None of the expenses fell outside of operation and patient care costs. It is anticipated that the reduction in Petitioner's rate will result in reduced staffing. Otherwise, the facility will not be a financially feasible operation. The reimbursement rate for this provider is not higher than other rates for the other providers serving the geographical region served by the Petitioner. When a provider goes through the cost settlement process, AHCA is authorized to and may seek additional information to clarify any form submitted by a Medicaid provider. In this case, the rate was cost- settled without additional information being sought by AHCA. The allowable expenses incurred by the Petitioner support the reimbursement rate paid to this provider.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Administration enter a Final Order reinstating the provider's Medicaid rate to include the interim rate as previously settled and accepted by the Respondent. AHCA should affirm the interim rate established and committed by the cost report allowing $3.91 for patient care and $1.62 for operating costs. DONE AND ENTERED this 30th day of July, 2001, in Tallahassee, Leon County, Florida. _____________________________ J. D. Parrish Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 30th day of July, 2001. COPIES FURNISHED: Theodore E. Mack, Esquire Powell and Mack 803 North Calhoun Street Tallahassee, Florida 32303 Steven A. Grigas, Esquire Agency for Health Care Administration 2727 Mahan Drive Building 3 Tallahassee, Florida 32308 Ruben J. King-Shaw, Jr., Director Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building, Suite 3116 Tallahassee, Florida 32308 Julie Gallagher, General Counsel 2727 Mahan Drive Fort Knox Building Three, Suite 3431 Tallahassee, Florida 32308
The Issue Whether the Petitioner should receive benefits for the services requested.
Findings Of Fact The Petitioner is a 20-year-old male who has been diagnosed with mental retardation. The Petitioner resides with his parents who provide for his care. Currently the Petitioner receives medical benefits through the father's health insurance. He also receives some funding through social security benefits. The Petitioner is a client of the Developmental Disabilities Program and his eligibility to receive benefits is not disputed by the Department. The Petitioner is eligible for benefits. The Petitioner applied for, and has been denied, dental, companion, personal care assistance, and respite benefits. The Petitioner would have received the benefits requested but for the lack of funding in the appropriations for the Department. Because of the lack of funding, the Department prioritizes those who will receive benefits. Unfortunately, the Petitioner is on a waiting list for the Medicaid Waiver Program, and the Individual and Family Support Program does not have sufficient funds appropriated to pay for the services requested by the Petitioner. The Department may not use general revenue funds to fund services for persons awaiting enrollment in the Medicaid Waiver program. The Petitioner's parents need assistance in providing for the care of their son. The Petitioner must be attended lest he be considered "at risk." The parents have incurred debt to provide for their son, have pursued all avenues for assistance known to them, and have unselfishly tended to his needs. The only way the Petitioner may now receive additional benefits would be if the parents abandon their son so that he might be deemed "in crisis." The Petitioner did not become a client of the Developmental Disabilities Program until after July 1, 1999.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Children and Family Services enter a Final Order denying the benefits sought by the Petitioner at this time. DONE AND ENTERED this 1st day of November, 2002, in Tallahassee, Leon County, Florida. ___________________________________ J. D. PARRISH Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 1st day of November, 2002. COPIES FURNISHED: Hilda Fluriach, Esquire Department of Children and Family Services 401 Northwest Second Avenue Suite N-1020 Miami, Florida 33128 Alejandro A. Penaloza c/o Alejandro O. Penaloza 12205 Northwest 6th Street Miami, Florida 33182 Jerry Reiger, Secretary Department of Children and Family Services 1317 Winewood Boulevard Building 1, Room 202 Tallahassee, Florida 32399-0700 Josie Tomayo, General Counsel Department of Children and Family Services 1317 Winewood Boulevard Building 2, Room 204 Tallahassee, Florida 32399-0700 Paul F. Flounlacker, Jr., Agency Clerk Department of Children and Family Services 1317 Winewood Boulevard Building 2, Room 204B Tallahassee, Florida 32399-0700
Findings Of Fact In 1975 the Florida Legislature passed the Medical Malpractice Reform Act, Chapter 75-9, Laws of Florida, now codified in Chapter 768, Florida Statutes. Part of this legislative package included the creation of the Fund. This legislation was passed in response to a medical malpractice insurance crisis which arose when the primary underwriter for the Florida Medical Association sought to stop issuing medical malpractice policies in Florida, thus making it difficult, if not impossible, for physicians or hospitals to obtain medical malpractice insurance coverage at reasonable rates. As a result of this problem, many physicians began to practice defensive medicine, curtail or abandon their practices or practice without coverage of any kind. The Fund is a private not-for-profit organization, participation in which is totally voluntary for its member-health care providers. Insofar as Petitioners are concerned, membership in the Fund is but one of several options available to provide legally required evidence of financial responsibility in order to obtain licensure as a hospital facility in Florida. Physicians, hospitals, health maintenance organizations and ambulatory surgical centers who become members of the Fund must maintain at least $100,000 in primary professional liability insurance. Membership in the Fund grants to each participant a limitation of liability above the $100,000 in primary coverage. To the extent that any settlement or judgment exceeds the primary coverage of the participant, it is paid by the Fund without limitation. The Fund is operated subject to the supervision and approval of a board of governors whose membership is required by law to consist of representatives of the insurance industry, the legal and medical professions, physicians' insurers, hospitals, hospitals' insurers and the general public. The Department is charged by statute with certain regulatory functions concerning the Fund. The base fee for Fund membership is set by statute at $500 for physicians, after an initial $1,000 enrollment fee for the first year of participation, and at $300 per bed for hospital members. The statute requires the Department to set additional fees based upon the classifications of health care providers contained in the statute. In the event that base fees are insufficient to pay all claims asserted against the Fund for a given fund year, the Department is empowered, upon request of the Board of Governors of the Fund, to order additional assessments against Fund participants to meet any such deficiency. Under the original legislation, all classes of health care providers could be assessed unlimited amounts to make up any deficiencies. As a result of legislative amendments which became effective July 1, 1976, the amount which participants, other than hospitals, could be assessed was limited to the amount each Fund member had paid to join the Fund for that particular coverage year. 1976 legislative amendments also required that each fiscal year of the Fund, which runs from July 1 through June 30, be operated independently of preceding fiscal years, and further required that occurrences giving rise to claims in a particular fund year be paid only from fees or investment income on those fees collected for that particular year. Thus, it is entirely possible for the Fund to experience deficits in a given year, and yet hold surplus funds for other years. On September 22, 1982, the Department of Insurance issued a "Notice of Assessment for 1976-77 Fiscal Fund Year" and a "Notice of Assessment for 1979-80 Fiscal Fund Year" (hereinafter called the "Notice of Assessment"). The Notice of Assessment for the 1976-77 fund year announced that the Insurance Commissioner intended to levy and authorized the Fund to collect an assessment in the amount of $2,395,092 from those health care providers that were members of the Fund in fund year 1976-77. The Notice of Assessment for the 1979-80 fund year announced that the Insurance Commissioner intended to levy and authorized the Fund to collect an assessment in the amount of $16,268,997 from health care providers that were members of the Fund in fund year 1979-80. Each of the hospitals named as Petitioners in the Petition for Administrative Proceedings in Case Nos. 82-3128 and 82-3130 were members of the Florida Patient's Compensation Fund during the fund year 1976-77. Each of the hospitals named as Petitioners in the Petition for Administrative Proceedings in Case Nos. 82-3129 and 82-3130 were members of the Florida Patient's Compensation Fund during the fund year 1979-80. Each of the hospital Petitioners who were members of the Florida Patient's Compensation Fund in the fund years 1976-77 and 1979-80 paid a base fee of $300.00 per bed for participation in the Fund. The Department has never promulgated any rules pursuant to Section 768.54 and Chapter 120, Florida Statutes, pertaining to its regulation of or duties in conjunction with the Fund. The chart below contains the following information concerning fund years 1976-77 and 1979-80: the amount of the total proposed assessment described in the Notices of Assessment (dated September 22, 1982); the amount of the losses experienced by doctors and hospitals, respectively; the amount of the fees paid by doctors and hospitals; the amount of the assessments for doctors and hospitals as described in the Notices of Assessment (dated September 22, 1982); and the amount of the additional assessments sought by the Fund at the final hearing on February 14, 1983. 1976-1977 Fund Year - Total Assessment $2,395,092 DOCTORS HOSPITALS Losses $8,235,261 Losses $2,358,457 Fees Paid 1,888,258 Fees Paid 4,449,442 Assessments 1,888,258 Assessments 496,479 Addt'l Assessments -0- Addt'l Assessments 1,581,541 1979-1980 Fund Year - Total Assessment $16,268,997 DOCTORS HOSPITALS Losses $16,565,196 Losses $ 8,171,883 Fees Paid 3,361,682 Fees Paid 5,995,934 Assessments 3,681,682 Assessments 12,413,616 Addt'l Assessments -0- Addt'l Assessments 3,655,809 The following chart shows the comparison, by dollar amount and percentage, of the fees paid by each class of health care provider, the losses incurred by each class of health care provider and the surplus or deficit created by each class of health care provider for the fund Year 1976-1977: FUND YEAR 1976-1977 SURPLUS/ FEES PAID LOSS INCURRED (DEFICIT) Class I Phy. $788,495 12.3* $1,925,000 18.2* ($1,136,505) Class II Phy. 74,887 1.2 200,000 1.9 (125,113) Class III Phy. 1,024,876 15.9 6,110,261 57.6 (5,085,385) Pro. Assoc. 87,436 1.4 10,000 0.1 77,436 Hospitals 4,449,442 69.1 2,358,457 22.2 2,090,985 Amb. Surg. 5,359 0.1 0 0 5,359 HMO's 0 0 0 0 0 TOTAL *percent $6,430,495 100.0* $10,603,718 100.0* $(4,173,223) The following chart shows the comparison, by dollar amount and percentage, of the fees paid by each class of health care provider, the losses incurred by each class of health care provider and the surplus or deficit created by each class of health care provider for the fund year 1979-1980: FUND YEAR 1979-1980 SURPLUS- FEES PAID LOSS INCURRED (DEFICIT) Class I Phy. $ 860,170 8.8* $3,223,194 13.0* ($ 2,363,024) Class II Phy. 876,207 8.9 994,475 4.0 (118,268) Class III Phy. 1,625,305 16.6 12,347,500 50.0 (10,722,195) Prof. Assoc. 403,947 4.1 0 0 403,947 Hospitals 5,995,934 61.1 8,171,883 33.0 (2,175,949) Amb. Surg. 28,151 0.3 0 0 0 HMO's 15,180 0.2 0 0 0 TOTAL $ 9,804,894 *percent 100.0* $24,737,052 100.0* $(14,975,489) The Department computed the portion of the assessment to be paid by the different classes of health care providers for the 1976-1977 and 1979-1980 fund years based upon an "indicated rate method". This method is represented by the following formula: The Department started with the actuarially indicated rate for each class of health care provider as described in the October, 1981 Actuarial Report prepared by Tillinghast, Nelson, et al. This is called the "indicated rate by class." The Department then applied the following formula for each class: Indicated Rate by Class x No. of Members in the Class Total = indicated fees by Class Total Indicated Fees by Class divided by Total Indicated Fees for ALL Classes = Percentage of Indicated Fee by Class Percentage of Indicated Fee by Class x Total Expected Loss for ALL Classes = Expected Loss by Class (Expected loss is ALL losses for the fund year including claims previously paid, reserves established on claims asserted and IBNR (incurred but not reported).) Expected Loss by Class - Actual Fees paid by Class = Potential Loss Assessment by Class. Potential Loss Assessment by Class divided by Potential Loss Assessment for ALL Classes = Percentage of Potential Loss Assessment by Class. Percentage of Potential Loss Assessment by Class x Total Assessment to be Ordered by the DOI = Amount of Assessment by Class. The "indicated rate method" for allocating assessments among the various classes of health care providers was selected by the Department as the method which most fairly reflected the classifications prescribed in Section 768.54(3)(c), Florida Statutes. The record in this proceeding establishes that this method is the most feasible mechanism for fairly reflecting classifications established by statute, and, at the same time, providing immediate funds necessary to meet all claims against the Fund. The Notices of Assessment issued by the Department of Insurance for fund years 1976-77 and 1979-80 allocated the "excess assessments" (which could not be applied to physician members based upon the Department's "statutory cap" interpretation) among the other classes of health care providers based upon their percentage of "expected losses". The charts below show the amount each class of health care provider would have been assessed under the "indicated rate method" absent the "statutory cap" for the fund years 1976-77 and 1979-80 and compares that amount to the assessment described in the 1976-77 and 1979-80 Notices of Assessment: 1976-1977 FUND YEAR INDICATED RATE ASSESSMENT ACTUAL ASSESSMENT a) Class I Physicians $ 106,792 $ 788,495 b) Class II Physicians 34,712 74,887 c) Class III Physicians 2,253,588 1,024,876 d) Hospitals -0- 496,479 e) HMO -0- -0- f) Surgical Centers -0- 597 g) Professional Association -0- 9,758 1979-1980 FUND YEAR INDICATED RATE ASSESSMENT ACTUAL ASSESSMENT a) Class I Physicians $1,388,234 $ 860,170 b) Class II Physicians 1,389,633 876,207 c) Class III Physicians 9,997,395 1,625,305 d) Hospitals 3,251,180 12,413,616 e) HMO 8,232 31,442 f) Surgical Centers 15,277 58,310 g) Professional Association 219,046 403,947 The difference between the results derived by the "indicated rate method" and the amounts reflected in the Notices of Assessment is due to the application of the statutory cap on assessments against physician members, as applied by the Department. As a result of the application of the statutory cap, physician members of the Fund will not be assessed for fund years 1976-1977 and 1979-1980 in any amounts greater than those in the Notices of Assessment dated September 22, 1982. The amounts of the assessments sought by the Fund, and described in the Notices of Assessment, were calculated by the Fund by using the following formula: Total fees paid during the Fund Year +Investment Income attributable to the Fund Year -Expenses allocated to that Fund Year -Amount paid on claims for that Fund Year -Amount reserved for all known claims for that Fund Year. The Department conducted no independent actuarial study regarding fees for fund years 1976-77 and 1979-80. The fees ordered by the Department and collected by the Fund plus the interest income generated by such fees for fund years 1976-77 and 1979-80 have proven to be inadequate to cover claims against the Fund for those years. For fund years 1976-77 and 1979-80, the Fund did not seek to have the Department of Insurance increase fees for any classes of health care providers. The only fees set for or collected from physician and hospital members for the fund year 1976-77 were the statutory base fees. For the 1979-1980 year the statutory base fee was charged to all hospital health care providers. The base fee was also charged physician health care providers; however this base fee was modified by the application of relativities according to each physician's class and territory. This application resulted in the following additional fee charges or credits which generated an additional $775,000 in fees: NO SURGERY CLASS 1 MINOR SURGERY CLASS 2 SURGERY CLASS 3 Territory 01 Dade and Broward 0 250 500 Counties Territory 02 Remainder of State 88cr 117 323 The Fund requires as part of its regular course of business that all health care providers sign a membership application whereby the health care provider agrees to pay all fees and assessments charged or levied against it. Notice describing the fees to be charged is included with the membership application. All members of the Fund, including Petitioners, for the 1976-1977 and the 1979-1980 fund years signed such agreements. In addition, all health care providers were sent notice of the fee changes made for the 1979-1980 fund year. Petitioners, for purposes of this proceeding, do not contest: (a) the method by which the Fund establishes reserves; (b) the amount of the reserves established for any individual claim file; or (c) the amount of the total deficit described in the Notices of Assessment dated September 22, 1982 for fund years 1976-77 and 1979-80. Nonetheless, Petitioners do not concede that the Fund needs all of the money described in the Notices of Assessment dated September 22, 1982 for fund years 1976-77 and 1979-80 at this time. At the final hearing, the Fund contended that it should be allowed to levy and collect assessments from the hospitals for amounts in excess of the assessments described in the Notices of Assessment. To support this contention, the Fund introduced a "Monthly Financial Report" dated December 31, 1982 prepared by the Fund's staff. The Monthly Financial Report purportedly shows the Fund's deficit for the 1976-1977 and 1979-1980 fund years as of December 31, 1982. However, the report itself contains an express disclaimer stating that the report was "Unaudited -- Prepared For Managerial Purposes Only." The Fund's Board of Governors has always in the past reviewed and approved any calculations concerning an alleged deficit before a deficit is certified to the Commissioner. The Fund then submits a written request to the Department for an assessment. In this case, the Board of Governors has not certified any amount to the Commissioner other than the amounts described in the Notices of Assessment dated September 22, 1982. The record in this cause establishes that as of September 22, 1982, there existed a deficiency in the Fund's account for the 1976-1977 fund year of $2,395,092 for the payment of settlements, final judgments and reserves on existing and known claims. The record in this cause establishes that as of September 22, 1982, there existed a deficiency in the Fund's account for the 1979-1980 fund year of $16,268,997 for the payment of settlements, final judgments and reserves on existing and known claims. In view of the statutory cap on the amounts that may be assessed against physician members of the Fund, the foregoing dollar amounts for assessments for the 1976-1977 and 1979-1980 fund years, and the manner in which they are proposed to be allocated among the remaining classes of health care providers are appropriate. Both Petitioners and Respondent have submitted proposed findings of fact for consideration by the Hearing Officer. To the extent that those proposed findings of fact are not included in this Recommended Order, they have been specifically rejected as being either irrelevant to the issues involved in this cause, or as not having been supported by evidence of record.
The Issue The issue is whether Respondent discriminated against Petitioner based on marital status in determining his monthly retirement benefits in violation of the provisions of the Florida Civil Rights Act of 1992.
Findings Of Fact Petitioner Kenneth Fritz (Petitioner or Mr. Fritz) has been a firefighter with the City of Pembroke Pines (Respondent or the City) since 1991. His date of birth is June 6, 1948, and he entered the Deferred Retirement Option Program (DROP) on December 1, 2006, at age 58.5 years old. As Respondent's employee, Mr. Fritz participated in the City's Pension Plan for Firefighters and Police Officers (the Plan). The DROP option that Mr. Fritz chose allowed him to name a joint annuitant and contingent survivors. Mr. Fritz, who has been divorced since 1986, chose his daughter who on December 1, 2006, was 32.25 years old, and his son who was 29.333 years old, as his surviving beneficiaries. Each will receive a 50 percent share of the retirement income upon his death payable for the remainder of their lives. Mr. Fritz alleged that the pension fund benefit system discriminates against him based on marital status. There is no factual dispute that his benefits, with a 32-year-old daughter are $3,938.12 a month, as compared to $4,366.59 a month if he had a 32-year-old wife. The benefits are not affected by his having named his son as an additional beneficiary. Mr. Fritz brought his concerns to the attention of Patricia Shoemaker, the Benefits Administrator for Municipal Police Officers' and Firefighters' Retirement Funds for the State of Florida Department of Management Services. On January 29, 2008, March 17, 2008, July 9, 2008, and September 25, 2008, Ms. Shoemaker sent letters to Mr. Anthony Napolitano, Chairman of the Pembroke Pines Firefighter's Pension Plan, requesting an explanation of the apparent violation of the following statutory provisions: § 175.333. Discrimination in benefit formula prohibited; restrictions regarding designation of joint annuitants. For any municipality, special fire control district, chapter plan, local law municipality, local law special fire control district, or local law plan under this chapter: and (1) No plan shall discriminate in its benefit formula based on color, national origin, sex, or marital status. § 175.071(2) Any and all acts and decisions shall be effectuated by vote of a majority of the members of the board; however, no trustee shall take part in any action in connection with the trustee's own participation in the fund, and no unfair discrimination shall be shown to any individual firefighter participating in the fund. (Emphasis added.) In her letter of September 25, 2008, Ms. Shoemaker noted that she had received no responses to her previous letters and that "[W]hile state premium tax moneys were released this year based on our understanding that the Board was researching this matter, future state tax moneys will not be released unless the plan is determined to be in compliance with Chapters (sic) 175, F.S." On October 15, 2008, Deputy City Attorney Julie F. Klahr finally responded to Ms. Shoemaker as follows: Your letter to the Pembroke Pines Police and Fire Retirement Plan has been referred to this office for reply. The issue is whether a spouse only benefit is discriminatory on the basis of marital status. For the reasons which follow, the benefit is fully in compliance with Florida law. Section 175.333(2)(a), Florida Statutes, clearly recognizes the propriety of a plan offering a spouse only survivorship benefit that alone should resolve this issue. The benefit at issue in Pembroke Pines is a spouse-only benefit, which not only exceeds the minimums required by Chapter 175, but also pre-dates the enactment of Ch. 99-1, Laws of Florida (1999). The complaining employee sought to designate a child as a beneficiary but without an age appropriate actuarial reduction. Nothing in Chapter 175, or any other law, mandates a retirement plan to provide a costly, generation skipping benefit without providing for actuarial equivalence. To the extent that your view is that the plan provision must be altered, it is a "minimum benefit" which is required, only if unencumbered Chapter 175 insurance premium tax rebates are present to pay the full cost as provided in §175.351. The City does not concede this is a correct interpretation, nor does any such Chapter money exist. Any required action to the contrary is an improper unfunded mandate. Moreover, the provisions of the Internal Revenue Code and corresponding regulations of the Department of the Treasury mandated the use of the actuarial factors at issue. Nothing in Chapter 175, Florida Statutes, directs a plan to violate tax provisions necessary to maintain qualification. It is the City's position that according a benefit to a spouse of a deceased member, provided the plan otherwise exceeds minimum benefits under Chapter 175, is a matter reserved to the City under its home rule powers in the Florida Constitution and Chapter 166, Florida Statutes. If any member feels aggrieved by the structure of the Ordinance Code, that person may seek remedies under Chapter 760, Florida Statutes. It should be observed, however, that the status at issue is that of the purported survivor and not the member. As a result, no violation of Florida's civil rights law is presented. See, Donato v. AT & T, 767 So.2d 1146 (Fla. 2000). Further §760.10(8)(b), Florida Statutes, exempts bona fide retirement plans from coverage under this law. The first provision cited as support for the City's position is as follows: § 175.333(2)(a) If a plan offers a joint annuitant option and the member selects such option, or if a plan specifies that the member's spouse is to receive the benefits that continue to be payable upon the death of the member, then, in both of these cases, after retirement benefits have commenced, a retired member may change his or her designation of joint annuitant or beneficiary only twice. Although the Deputy City Attorney asserted that this section alone should resolve the matter, Mr. Fritz observed the subsection does not authorize discrimination based on marital status but only limits the number of times that a joint annuitant or beneficiary may be changed. The City also relied on the fact that the Plan predates Chapter 99-1, Laws of Florida, but the statement of legislative intent indicates that the law is applicable to existing plans, and reads as follows: Legislative declaration. It is hereby declared by the Legislature that firefighters, as hereinafter defined, perform state and municipal functions; . . . and that their activities are vital to the public safety. It is further declared that firefighters employed by special fire control districts serve under the same circumstances and perform the same duties as firefighters employed by municipalities and should therefore be entitled to the benefits available under this chapter. Therefore, the Legislature declares that it is a proper and legitimate state purpose to provide a uniform retirement system for the benefit of firefighters as hereinafter defined and intends, in implementing the provisions of s. 14, Art. X of the State Constitution as they relate to municipal and special district firefighters' pension trust fund systems and plans, that such retirement systems or plans be managed, administered, operated, and funded in such manner as to maximize the protection of the firefighters' pension trust funds . . . This chapter hereby establishes, for all municipal and special district pension plans existing now or hereafter under this chapter, including chapter plans and local law plans, minimum benefits and minimum standards for the operation and funding of such plans, hereinafter referred to as firefighters' pension trust funds. The minimum benefits and minimum standards set forth in this chapter may not be diminished by local charter, ordinance, or resolution or by special act of the Legislature, nor may the minimum benefits or minimum standards be reduced or offset by any other local, state, or federal law that may include firefighters in its operation, except as provided under s. 112.65. (Emphasis added.) The City claimed, but Ms. Shoemaker's reference in her letter to the release of state premium tax moneys appears to contradict its claim, that it does not have to pay minimum benefits required by Chapter 175, although not conceding its applicability, because it has no unencumbered insurance premium tax money, a prerequisite the imposition of the following requirement: § 175.351. Municipalities and special fire control districts having their own pension plans for firefighters. For any municipality, special fire control district, local law municipality, local law special fire control district, or local law plan under this chapter, in order for municipalities and special fire control districts with their own pension plans for firefighters, or for firefighters and police officers, where included, to participate in the distribution of the tax fund established pursuant to s. 175.101, local law plans must meet the minimum benefits and minimum standards set forth in this chapter. * * * However, local law plans in effect on October 1, 1998, shall be required to comply with the minimum benefit provisions of this chapter only to the extent that additional premium tax revenues become available to incrementally fund the cost of such compliance as provided in s. 175.162(2)(a). (Emphasis added.) Apparently, not satisfied with the answer, on January 20, 2009, Ms. Shoemaker wrote again, this time to Ms Klahr, as follows: Dear Ms. Klahr This is to acknowledge receipt of your October 15, 2008 letter in response to my July 9, 2008 letter to the Board of the Firefighters' Pension Plan. While we appreciate your response regarding the propriety of a plan offering a spousal benefit and the appropriateness of an age appropriate actuarial reduction, our question for the Board was a different one relating to the plan's compliance with the provisions of ss. 175.333(1) and 175.071(2), F. S. as they relate to discrimination based on marital status. Based on our understanding of the issue relating to the calculation of the member's benefits, Mr. Fritz does not have a spouse, but wishes to designate his daughter as his beneficiary. He understands and agrees that it is appropriate to actuarialty [sic] adjust his benefit based on the age of his daughter. The actuary provided two calculations, one based on a spouse that was his daughter's age and one based on a beneficiary that was his daughter's age. His benefit when calculated with a young age spouse was greater than his benefit when calculated with the same young age beneficiary. It appears that the only difference in the two calculations is the marital status of the member and not the age of the joint annuitant. If our understanding of the facts relating to this issue are incorrect, please let me know. We have asked that the Board review the plan provisions with their plan attorney and actuary and provide an explanation as to how the plan meets the statutory provisions, specifically ss. 175.333(1) and 175.071 (2), F. S. Mr. Fritz pointed out that, in addition to the statutory provisions cited in Ms. Shoemaker's letter and various others that he cited, the City's Employee Handbook also includes a statement that the City does not discriminate based on marital status. The City's actuary noted that, however outdated, the additional benefit is based on the assumption that a firefighter's spouse is more dependent on the employee's income and pension then any other adult relative. In addition, the deputy city attorney testified that the Plan was adopted in the firefighters' collective bargaining agreement.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law it is RECOMMENDED that the FCHR issue a final order finding that Respondent did not commit an unlawful employment practice. DONE AND ENTERED this 1st day of September, 2009, in Tallahassee, Leon County, Florida. S ELEANOR M. HUNTER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 1st day of September, 2009. COPIES FURNISHED: James A. Cherof, Esquire Goren, Cherof, Doody & Ezrol, P.A. 3099 East Commercial Boulevard Fort Lauderdale, Florida 33308 Kenneth R. Fritz 16389 Malibu Drive Fort Lauderdale, Florida 33326 Denise Crawford, Agency Clerk Florida Commission on Human Relations 2009 Apalachee Parkway, Suite 100 Tallahassee, Florida 32301 Larry Kranert, General Counsel Florida Commission on Human Relations 2009 Apalachee Parkway, Suite 100 Tallahassee, Florida 32301
The Issue Whether Petitioner is entitled to receive retroactive retiree health subsidy payments from the Florida Retirement System in addition to those already received.
Findings Of Fact The Division of Retirement (Division) is, and was at the times material to this case, the state agency charged with the responsibility of administering the Florida Retirement System (FRS). Petitioner, Olga Magnusen, was employed by Florida International University (FIU) from February 18, 1974, until her retirement. FIU is an FRS-participating employer. Thus, by reason of her employment, Petitioner was enrolled in the FRS. Mrs. Magnusen requested an estimate of her retirement benefits in September 2003. In response to this request, the Division audited Petitioner’s account and sent her an "Estimate of Retirement Benefit" for purposes of the Deferred Retirement Option Program (DROP). The benefit estimate was mailed to Petitioner’s address of record which was 11441 SW 83rd Terr, Miami, Florida 33173-3617 (Miami address). Enclosed with Petitioner’s benefit estimate was an option selection document and an informational booklet or brochure entitled "Preparing to Retire," which reads in pertinent part as follows: THE RETIREE PACKET After your name is placed on the retired payroll to begin receiving monthly benefits, we will mail you a Retiree Packet. You should receive this packet around the same time you receive your first benefit payment. If you are a DROP participant, your name will not be placed on the retired payroll until your DROP participation ends and the Division receives a properly completed DROP Termination Notification, Form DP-TERM. Retiree Packets contain the following items: -An information letter This letter summarizes your retirement information and lists the contents of your Retiree Packet. It also highlights issues of importance to you as a new retiree. * * * Health Insurance Subsidy Certification, Form HIS-1. This form is used to apply for additional payment to assist you with some of the cost of maintaining health insurance. Please refer to the 'Health Insurance Subsidy' section on page 17 for eligibility information. * * * An After You Retire Booklet This booklet contains helpful information and answer [sic] questions you might have as a new retiree. You should review and retain this booklet. If you have questions related to your FRS benefit that are not addressed by this booklet, please contact the Division. * * * HEALTH INSURANCE SUBSIDY (HIS) The HIS is additional money available to eligible FRS retirees to help offset some of the cost of maintaining health insurance coverage. DROP participants are not eligible to receive HIS payments until after their DROP participation ends. . . . * * * The current subsidy is $5 per month for each year of creditable service at retirement. The minimum HIS payment is $30 per month and the maximum is $150 per month. A Health Insurance Subsidy Certification, Form HIS-1, will be included in the Retiree Packet mailed so you may apply for the HIS benefit. You will receive your packet around the time you receive your first monthly benefit payment. You must return a completed Form HIS-1 to the Division of Retirement within six months after your monthly retirement benefits start in order for the subsidy to be paid retroactive to your retirement date or, in the case of DROP retirees, to the month following your DROP termination date. If you do not return the form within this six month period, retroactive subsidy payments will be limited to a maximum of six months. You are responsible for obtaining certification of your health insurance coverage and applying for the HIS. The HIS benefit is included in your monthly FRS retirement benefit. (emphasis in original) A copy of the booklet and forms sent to Petitioner are not reflected in Petitioner’s file, as the Division does not place copies of forms or booklets sent automatically. Mrs. Magnusen completed the necessary forms to enter the DROP program and entered DROP on or about March 1, 2004. By letter dated April 14, 2004, the Division sent another letter to Mrs. Magnusen advising her of the completion of the final calculation of her monthly FRS DROP accrual for the retirement benefit option she selected. The letter provided in pertinent part: At the end of the DROP, your name will be placed on the regular retired payroll. You will receive information about withholding federal taxes from your retirement benefits, an application for the Health Insurance Subsidy and an application for the direct deposit of your monthly retirement benefit payment with the bank or financial institution of your choice. The above-referenced letter was again sent to Petitioner’s Miami address referenced in paragraph 3 above. By letter dated September 29, 2005, Petitioner notified FIU of her intention to terminate her employment effective on or about December 29, 2005. By letter dated October 20, 2005, FIU provided the Division with a copy of Petitioner’s resignation letter and requested that the Division begin processing Petitioner’s DROP termination. On October 24, 2005, the Division sent a letter with certain forms and informational material relevant to her DROP termination to Petitioner at the Miami address. The letter read in pertinent part as follows: When your name is added to the retired payroll, you will receive a 'retiree packet' that contains an information letter, 'After you Retire' booklet, W-4P 'Witholding Certificate for Pension Payments', Health Insurance Subsidy application, and Direct Deposit Authorization. The retiree packet is mailed approximately one week before you receive your first monthly benefit. By letter dated December 9, 2005, the Division acknowledged receipt of Petitioner’s DROP payout form in a letter mailed to Petitioner’s Miami address. The letter read in pertinent part as follows: After your name is added to the retired payroll, you will receive a ‘retiree packet’ that contains an information letter, 'After you Retire' booklet, W-4P 'Witholding Certificate for Pension Payments', Health Insurance Subsidy application, and Direct Deposit Authorization. The retiree packet is mailed approximately one week before you receive your first monthly benefit. In late December 2005, Mrs. Magnusen and her husband moved from Miami to 2044 Darlington Drive, The Villages, 32162 (The Villages address.) While Petitioner did not expressly testify that she notified the Division of her change of address, Mrs. Magnusen and her husband "notified people and organizations about our address change and made provisions with the Post Office to forward our mail from the old to the new address." A state warrant dated January 6, 2006, in the amount of $51,483.36, Petitioner’s net lump sum DROP payment amount, was issued and mailed to Petitioner at the Miami address. The warrant was endorsed by Petitioner for deposit on or about January 18, 2006. It is presumed, therefore, that the warrant was forwarded to The Villages address. It is the Division’s practice to send each retiree added to the system a 'retiree packet' that includes, among other things, an application for the HIS and an explanation of the subsidy, as well as a booklet containing an explanation of all of the benefits available to retirees and beneficiaries under the FRS. The process of sending out retiree packets is automated, so that a packet is sent to every retiree and beneficiary when he or she are first entered into the system. Pursuant to this automated regular practice, Petitioner's retiree packet would have been sent in late January 2006. Included in the retiree packet was an informational letter which included the following: YOUR RETIREMENT PACKET INCLUDES: 'After You Retire' Brochure-PLEASE READ FOR ADDITIONAL INFORMATION * * * Health Insurance Subsidy Certification (Form HIS-1) * * * HEALTH INSURANCE SUBSIDY (HIS): It is your responsibility to obtain certification of health insurance coverage and apply for the HIS. The HIS is money added to your retirement benefit to help pay the cost of health insurance. The member or other payee who is the spouse or financial dependent of the member may be eligible if he/she has health insurance, Medicare, or CHAMPUS. Please read the instructions on Form HIS-1. If the HIS-1 form is not received by the Division within six months, retroactive subsidy payments will be limited to a maximum of six months. (Emphasis supplied in original) Also included in the retiree packet was an informational booklet entitled "After You Retire" which reiterated that it is the retiree’s responsibility to obtain health insurance coverage and apply for this benefit, and that a retiree will not automatically receive the HIS. Ms. Shirley Beauford is a Benefits Administrator in the retired payroll section of the Division. She has worked at the Division for approximately 19 and one-half years. According to Ms. Beauford, a report is generated each month when the payroll is approved, which indicates which retirees have not participated in the HIS. Ms. Beauford reviewed the "hardcopy documentation" of the June 2006 list of retirees not receiving the HIS and saw Petitioner’s name on the list. The Division automatically sends a reminder letter about five months after the beginning of a person’s retirement benefits to those retirees who have not applied for the HIS. Because Petitioner’s name appears on the June 2006 list, Ms. Beauford is confident that Petitioner was sent the reminder, as it is the standard practice of the Division to do so. There is no evidence that the Division deviated from its standard practice. The reminder would have been sent to Petitioner’s address of record in June 2006. The record is not clear whether Petitioner’s address of record was the Miami address or The Villages address at that time. Mrs. Magnusen does not recall receiving the packet and acknowledges that the nine-month period from the summer of 2005 to March 2006 was a tumultuous time for her and her husband. They moved, were affected by two hurricanes, and were confronted with some health problems. Mrs. Magnusen also recalls making numerous phone calls during that time regarding her husband’s health insurance coverage and premiums because of some confusion regarding his coverage. Mrs. Magnusen believes these calls were made to both FIU and the Division. However, the Division does not administer health insurance coverage for retirees. Twice a year, the Division automatically distributes a newsletter to all FRS retirees and beneficiaries. The HIS was specifically referenced in articles in the July 2007, January 2008, and July 2008 newsletters, including a reminder to retirees and beneficiaries to look under the summary of benefits and deductions on their statements for a "Health Ins. Subsidy" listing. Respondent mails retired members a Statement of Benefit Payments at the end of January and July each year, and any other time the retiree’s benefit changes. The Division sent statements to Petitioner’s address of record in February 2006, June 2006, July 2006, January 2007, April 2007, July 2007, December 2007, and January 2008. None of the statements has a Health Insurance Subsidy listing under the summary of benefits and deductions section. Additionally, the Division mails retired members an annual statement in January each year. These annual statements contain a category entitled "Health Ins. Subsidy." The amount of $0.00 is reflected on Petitioner’s 2006, 2007, and 2008 annual statements under the category "Health Ins. Subsidy." In contrast, the summaries reflect specific amounts under the category "Retirement Benefit." There is no evidence of record to indicate that any of the statements or mailings of any kind from the Division to Petitioner were returned. Mrs. Magnusen called the Division on or about January 5, 2009, to inquire about changing banks for the direct deposit of her FRS payments. During this telephone conversation, the Division’s representative reminded Petitioner that she was not receiving the HIS benefit. As Petitioner’s insurance premiums were already being deducted, Petitioner’s HIS application was taken over the phone. Petitioner began receiving the $150 per month HIS benefit effective January 30, 2009 and a six-month retroactive HIS benefit of $900. On January 10, 2009, Mrs. Magnusen sent a letter to the Division requesting three years of retroactive HIS benefits retroactive to her DROP termination date. By letter dated January 16, 2009, the Division’s Director informed Petitioner that retroactive HIS benefits are limited by law to six months, citing Section 112.363(9), Florida Statutes, as authority. Petitioner sent another letter in response requesting further consideration of her request for a full retroactive HIS payment. By letter dated February 23, 2009, the Division informed Petitioner that a detailed review had been completed of her retirement account, again informed that the retroactive payments are limited to six months, and provided Petitioner with a point of entry into the administrative hearing process.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law set forth herein, it is RECOMMENDED: That Respondent enter a final order denying Mrs. Magnusen’s request for additional HIS benefits retroactive to the date of her termination of DROP. DONE AND ENTERED this 30th day of July, 2009, in Tallahassee, Leon County, Florida. S BARBARA J. STAROS 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 30th day of July, 2009.
The Issue Whether Respondent owes $1,568,399.00 or $2,323,765.60 as a penalty for failing to secure workers' compensation insurance for its employees, as required by Florida law.
Findings Of Fact Based on the evidence adduced at hearing, and the record as a whole, the following findings of fact are made to supplement and clarify the sweeping factual stipulations set forth in the parties' June 1, 2005, Joint Stipulation3: Legislative History of the "Penalty Calculation" Provisions of Section 440.107(7), Florida Statutes Since October 1, 2003, the effective date of Chapter 2003-412, Laws of Florida, Section 440.107(7)(d)1., Florida Statutes, has provided as follows: In addition to any penalty, stop-work order, or injunction, the department shall assess against any employer who has failed to secure the payment of compensation as required by this chapter a penalty equal to 1.5 times the amount the employer would have paid in premium when applying approved manual rates to the employer's payroll during periods for which it failed to secure the payment of workers' compensation required by this chapter within the preceding 3-year period or $1,000, whichever is greater. Prior to its being amended by Chapter 2003-412, Laws of Florida, Section 440.107(7), Florida Statutes, read, in pertinent part, as follows: In addition to any penalty, stop-work order, or injunction, the department shall assess against any employer, who has failed to secure the payment of compensation as required by this chapter, a penalty in the following amount: An amount equal to at least the amount that the employer would have paid or up to twice the amount the employer would have paid during periods it illegally failed to secure payment of compensation in the preceding 3-year period based on the employer's payroll during the preceding 3- year period; or One thousand dollars, whichever is greater. The Senate Staff Analysis and Economic Analysis for the senate bill that ultimately became Chapter 2003-412, Laws of Florida, contained the following explanation of the "change" the bill would make to the foregoing "penalty calculation" provisions of Section 440.107(7), Florida Statutes4: The department is required to assess an employer that fails to secure the payment of compensation an amount equal to 1.5 times, rather than 2 times, the amount the employer would have paid in the preceding three years or $1,000, which is greater. There was no mention in the staff analysis of any other "change" to these provisions. The NCCI Basic Manual The National Council on Compensation Insurance, Inc. (NCCI) is a licensed rating organization that makes rate filings in Florida on behalf of workers' compensation insurers (who are bound by these filings if the filings are approved by Florida's Office of Insurance Regulation, unless a "deviation" is permitted pursuant to Section 627.11, Florida Statutes). The NCCI publishes and submits to the Office of Insurance Regulation for approval a Basic Manual that contains standard workers' compensation premium rates for specified payroll code classifications, as well as a methodology for calculating the amount of workers' compensation insurance premiums employers may be charged. This methodology is referred to in the Basic Manual as the "Florida Workers Compensation Premium Algorithm" (Algorithm). According to the Algorithm, the first step in the premium calculating process is to determine the employer's "manual premium," which is accomplished by applying the rates set forth in the manual (or manual rates) to the employer's payroll as follows (for each payroll code classification): "(PAYROLL/100) x RATE)." Adjustments to the "manual premium" are then made, as appropriate, before a final premium is calculated. Among the factors taken into consideration in determining the extent of any such adjustments to the "manual premium" in a particular case are the employer's loss experience, deductible amounts, premium size (with employers who pay "larger premium[s]" entitled to a "Premium Discount"), and, in the case of a "policy that contains one or more contracting classifications," the wages the employer pays its employees in these classifications (with employers "paying their employees a better wage" entitled to a "Contracting Classification Premium Adjustment Program" credit). Petitioner's Construction of the "Penalty Calculation" Provisions of Section 440.107(7), Florida Statutes In discharging its responsibility under Section 440.107(7), Florida Statutes, to assess a penalty "against any employer who has failed to secure the payment of compensation as required," Petitioner has consistently construed the language in the statute, "the amount the employer would have paid," as meaning the aggregate of the "manual premiums" for each applicable payroll code classification, calculated as described in the NCCI Basic Manual. It has done so under both the pre- and post-Chapter 2003-412, Laws of Florida, versions of Section 440.107(7). This construction is incorporated in Petitioner's "Penalty Calculation Worksheet," which Florida Administrative Code Rule 69L-6.027 provides Petitioner "shall use" when "calculating penalties to be assessed against employers pursuant to Section 440.107, F.S." (Florida Administrative Code Rule 69L-6.027 first took effect on December 29, 2004.) Penalty Calculation in the Instant Case In the instant case, "1.5 times the amount the [Respondent] would have paid in premium when applying approved manual rates to [Respondent's] payroll during periods for which it failed to secure the payment of workers' compensation" equals $2,323,765.60.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner order Respondent to pay a $2,323,765.60 penalty for failing to secure workers' compensation insurance for its employees. DONE AND ENTERED this 5th day of August, 2005, in Tallahassee, Leon County, Florida. S STUART M. LERNER 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 5th day of August, 2005.
The Issue Whether the Petitioner is entitled to receive Health Insurance Subsidy payments retroactive to July 1995, the month she began to receive retirement benefits from the Respondent as the surviving spouse of a member of the Florida Retirement System.
Findings Of Fact Based on the oral and documentary evidence presented at the final hearing and on the entire record of this proceeding, the following findings of fact are made: The Division is, and was at the times material to this case, the state agency charged with the responsibility of administering the Florida retirement and pension systems. Section 121.025, Florida Statutes (1995). The Division is, and was at the times material to this case, also responsible for administering the Retiree Health Insurance Subsidy. Section 112.363(7), Florida Statutes (1995). Harold Mosser, the former husband of Mrs. Kirkley, retired from his job as a school principal in August 1979, and he was a member of the Florida Retirement System. Mr. Mosser received a monthly state retirement benefit, and, as a supplement to the retirement benefit, he received a monthly Health Insurance Subsidy. Mrs. Kirkley retired from her job as a schoolteacher in 1989, and she is a member of the Florida Retirement System. Since her retirement, Mrs. Kirkley has received a monthly state retirement benefit and a monthly Health Insurance Subsidy. Mr. Mosser died on April 28, 1995. Mrs. Kirkley did not advise the Division of Mr. Mosser's death. Rather, the Division learned of his death in July 1995, when conducting a routine check of the Bureau of Vital Statistics "death tape." As Mr. Mosser's surviving spouse and the person he named as his joint annuitant, Mrs. Kirkley was entitled to receive an "Option 3" monthly retirement benefit for the remainder of her lifetime, pursuant to Section 121.09, Florida Statutes (1995). Mrs. Kirkley was also eligible to receive a monthly Health Insurance Subsidy upon filing an application for the subsidy with the Division, and this benefit included payment of the subsidy from the date of Mr. Mosser's death or for the six months prior to the date the application was filed.1 In a Statement of Retirement Benefit Payments dated 1/31/95, the components of Mr. Mossers's monthly retirement benefit payments were identified. At the time of his death, Mr. Mosser received a gross monthly retirement benefit of $1,730.60, plus a Health Insurance Subsidy of $90.00, minus $250.00 withholding tax, for total net monthly benefits of $1,570.60. Because the Division did not learn of Mr. Mosser's death until July 1995, his monthly benefit check was issued in May and June 1995 and electronically deposited in NationsBank. When the Division learned of Mr. Mosser's death, a Division representative tried to reach Mrs. Kirkley by telephone but could not obtain her unlisted telephone number. The representative then sent Mrs. Kirkley a letter dated July 20, 1995, in which the representative advised Mrs. Kirkley that Mr. Mosser's estate was entitled to receive his benefits for the month of April 1995 in the net amount of $1,570.60 and that she must apply for a continuing monthly benefit as Mr. Mosser's designated beneficiary. The representative also advised Mrs. Kirkley to complete the Division Form FST-11b that was enclosed with the letter and to return it to the Division together with Mr. Mosser's death certificate. Mrs. Kirkley completed the form enclosed with the letter and mailed it to the Division as directed. The Division changed Mr. Mosser's account over to Mrs. Kirkley, and she began receiving a monthly retirement benefit check in October 1995.2 Mr. Mosser's Health Insurance Subsidy was terminated effective July 1995, and the net monthly benefit received by Mrs. Kirkley as Mr. Mosser's beneficiary did not include a Health Insurance Subsidy payment. It is the Division's practice to send each retiree added to the system a "retiree packet" that includes, among other things, an application for the Health Insurance Subsidy and an explanation of the subsidy, as well as a booklet containing an explanation of all of the benefits available to retirees and beneficiaries under the Florida Retirement System. The process of sending out the retiree packets is automated, so that a packet is sent to every retiree and beneficiary when they are first entered into the system. Pursuant to the Division's regular practice, Mrs. Kirkley would have been sent the retiree packet in October 1995, when she was added to the system as Mr. Mosser's beneficiary. The Division also sends retirees and beneficiaries an annual newsletter, and the Health Insurance Subsidy was discussed in the 1995 and 1996 newsletters. Mrs. Kirkley received a Statement of Retirement Benefit Payments, as Mr. Mosser's beneficiary, each July, December, and January. This statement includes a separate entry for the Health Insurance Subsidy, with the amount of the subsidy noted; Mrs. Kirkley would have been aware of this entry because the Statement of Retirement Benefit Payments that she had been receiving on her own account would have shown an amount paid as her Health Insurance Subsidy. Mrs. Kirkley received her first statement in December 1995, and it would have been apparent from the statement that no amount was included for the Health Insurance Subsidy. Mrs. Kirkley does not recall having any direct contact with the Division between the time she submitted her application for the retirement benefit as Mr. Mosser's beneficiary and late September 1997, when she called the Division to request that the monthly check be electronically deposited in her bank account. During the conversation in September 1997, the Division's representative advised Mrs. Kirkley that she was entitled to receive a monthly Health Insurance Subsidy as Mr. Mosser's surviving spouse, in addition to the monthly retirement benefit she received as Mr. Mosser's beneficiary. The representative told Mrs. Kirkley that she would send her an application for the Health Insurance Subsidy, which the representative did in September 1997. Mrs. Kirkley completed the application she received from the Division and sent it to the Division with a cover letter dated October 17, 1997. The application required certification of health insurance coverage, which Mrs. Kirkley satisfied by attaching a copy of her Medicare Health Insurance card. Mrs. Kirkley did not hear anything from the Division for quite a long time. She contacted the Division and was told that they had not received her application for the Health Insurance Subsidy. The Division sent her another application form, which she completed and sent to the Division in January 1998, and she began receiving a monthly Health Insurance Subsidy as Mr. Mosser's surviving spouse; she also received retroactive benefits effective July 1997 through December 1997, a period of six months prior to January 1998. The Division eventually located Mrs. Kirkley's October 1997 application, and it advised her in a letter dated April 6, 1998, that she would receive retroactive Health Insurance Subsidy payments for an additional three months, moving the effective date of her entitlement to the benefits back to April 1997. Including the retroactive benefits she received, Mrs. Kirkley has been receiving a Health Insurance Subsidy as Mr. Mosser's surviving spouse since April 1997. She also had the benefit of Mr. Mosser's May and June 1995 Health Insurance Subsidy, which were paid by the Division because it was not aware that Mr. Mosser was deceased. Mrs. Kirkley seeks to recover an additional $1890.00 in retroactive Health Insurance Subsidy payments as Mr. Mosser's surviving spouse, which is the difference between the total Health Insurance Subsidy payments she has received and the total Health Insurance Subsidy payments she would have received had the benefits been paid to her retroactive to Mr. Mosser's death (21 months x $90.00 per month = $1890.00). Summary The evidence presented by Mrs. Kirkley is insufficient to establish her entitlement to retroactive Health Insurance Subsidy payments from July 1995 to March 1997. It is uncontroverted that she submitted her application for the Health Insurance Subsidy with her certification of health insurance coverage in October 1997 and that the Division paid retroactive Health Insurance Subsidy payments for the six months prior to the date it received the application. In addition, Mrs. Kirkley has not presented sufficient evidence to establish that the Division should be required to pay her the additional retroactive Health Insurance Subsidy payments because it failed to send her an application until September 1997. The Division did not make any specific representations to her regarding her entitlement to the Health Insurance Subsidy payments until September 1997, and she failed to establish by the greater weight of the credible evidence that she did not receive any general information from the Division that included information regarding the Health Insurance Subsidy. In addition, Mrs. Kirkley knew or should have known in December 1995 that she was not receiving a Health Insurance Subsidy as Mr. Mosser's surviving spouse, when she received her first statement detailing the components of her gross monthly benefit as Mr. Mosser's beneficiary, and she could have made inquiry of the Division at that time.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Management Services, Division of Retirement, enter a final order dismissing the Petition for Review of Final Agency Action filed by Mary J. Mosser, now known as Mary J. Kirkley. DONE AND ENTERED this 20th day of November, 2001, in Tallahassee, Leon County, Florida. PATRICIA HART MALONO 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 20th day of November, 2001.
