The Issue The issue at the hearing was whether the Respondent is entitled to reimbursement for paid Medicaid benefits as a result of Respondent's treatment of certain "discounts" to a patient's account as a result of Petitioner's Preferred Patient Care Agreement as a "third party payment or benefit" for the purposes of calculating the appropriate Medicaid payment.
Findings Of Fact On June 26, 1981, Petitioner and Respondent entered into a contract entitled "Hospital Application and Agreement for Participation in the Florida Medicaid Program-Title XIX" (Participation Agreement). The Participation Agreement was drafted by HRS and is similar to other contracts between Respondent and other hospitals throughout the State which participate in the Medicaid program. The Participation Agreement provides for Medicaid payment on a Medicaid recipient's account. The payment is based on the number of days the Medicaid recipient is in the hospital, i.e. a per diem cost rate. The actual charges or costs to an individual patient are not taken into account in determining Medicaid's responsibility for payment of its per diem rate on behalf of an individual patient who is a Medicaid recipient. The per diem rate is calculated annually for each hospital based on an average of that hospital's costs for all of its patient care. The per diem rate is not based on an individual patient's cost. Federal law mandates that the per diem rate be based upon the actual costs incurred by the hospital for its patient services. 1/ Title 42 USC Sect. 1396a. Medicaid's liability for payment of its per diem rate is determined by whether the individual patient meets the Medicaid eligibility requirements of age and income. If the individual patient meets those requirements, Medicaid is responsible for payment of that patient's hospitalization based on the number of days the patient is hospitalized. Other than the hospital's established per diem rate, there is no cap on Medicaid's responsibility. However, Medicaid is a secondary payor in the sense that when there is third party liability for the individual patient's hospital care, the amounts paid by that third party will be deducted from the total amount of the Medicaid benefit due an individual patient. The Participation Agreement provides in pertinent part: The hospital shall explore any third party liability for care of the patient, shall seek assignment, and shall file appropriate claims for benefits to which the patient may be entitled. Notwithstanding the receipt of third party payments, the hospital agrees to bill Medicaid. Any insurance, or other third party payments, collected applicable to the period of hospitalization for which the State assumes responsibility up to the amount of State payment shall be refunded to the Department of Health and Rehabilitative Services within 30 days after receipt of the same by the hospital. Simply put, any third party liability collected by the hospital acts as an offset to Mecicaid's obligation. However, the offset does not eradicate Medicaid's responsibility to pay its benefits on an individual patient. The above is true even if the Medicaid benefits exceed the total charges to the individual patient. In that event, the hospital would receive one hundred percent of the charges to the patient from either Medicaid or the insurance company plus the remaining balance of the Medicaid per diem, if any. Dollar for dollar liability has never been a requirement for the payment of Medicaid benefits under the Medicaid program as long as there was some patient liability for a part of the hospital charges. Beyond the offset effect of third party benefits, the method and terms of payment of Medicaid vis a vis the third party have nothing to do with each payor's responsibility for paying its particular benefits. On December 30, 1986, and again on March 20, 1987, Charlotte Lancaster was hospitalized for two separate periods of twelve days each at Shands Hospital. On March 16, 1987, John Shelley was hospitalized for a period of seven days at Shands Hospital. Both Charlotte Lancaster and John Shelley were qualified Florida Medicaid recipients. Payment of both patient's Medicaid benefits was governed by the 1981 Participation Agreement. In addition, both patients had third party insurance coverage through a Blue Cross and Blue Shield of Florida, Inc. (BCBS) preferred patient care plan. A preferred patient care plan generally consists of a contract of insurance with an individual insured. The contract provides for a greater payment of health care charges (often 100%) if the insured utilizes medical services from a list of approved service providers. If the insured does not utilize the services of a health care provider on the Company's list then the policy pays less benefits or none at all. The list of approved health care providers consists of the health care providers with which the insurance company has negotiated a separate contract. The contract provides for the amount that that particular service provider will charge for its medical service. The reason for such agreements is to, on average, lower the amount of benefits the insurance company is required to pay to a medical service provider for patient care. It is a benefit to the insurance company as a risk management device. It is not a benefit to the insured since the insurance company is otherwise liable to pay its separately contracted for benefits under its contract of insurance with its insured. In this case, BCBS had negotiated a Preferred Patient Care Agreement (PPC Agreement) with Shands Hospital. The PPC agreement provided payment of hospitalization benefits based on the patient's diagnosis and the rate established in the agreement for that patient's diagnostically related group (DRG). Payment of insurance benefits was not based on actual hospital charges or costs. Simply put, the PPC Agreement established a fixed price for the patient services rendered by the hospital and covered under the PPC Agreement. Any service or charges not covered by the PPC Agreement remained the patient's responsibility. Paragraph 8.3 of the PPC Agreement provided that the Hospital would not bill or attempt to collect from the patient any charges other than the deductible, co-insurance, or items furnished for the patient's convenience. Neither the patient nor the insurer was liable for costs incurred by the hospital beyond the DRG rate established in the PPC agreement. The PPC Agreement provided for the same computation of payments, without regard to whether the patient was eligible for payments from Medicaid, and contained no provision limiting or excluding the insurer's obligation based on such eligibility. 2/ For each of the three admissions, Shands filed the appropriate claims for payment with both HRS and BCBS. 3/ For the first admission of Charlotte Lancaster, Shands received a third party payment of $2,186.00 from BCBS and $7,513.00 payment from Medicaid. These payments totalled $9,699.00 and were equal to the total Medicaid per diem cost rate in effect between HRS and Shands (12 days x $808.25 per day). Total charges incurred by the hospital for Charlotte Lancaster's first hospital stay were $11,477.50. For the second admission of Charlotte Lancaster, Shands received a $2,281.50 third party payment from BCBS and a $1,152.41 payment from Medicaid. These payments totalled $3,433.91 and were $6,375.61 less than the total Medicaid per diem cost rate in effect between Shands and HRS (12 days x $817.46 per day $9,809.52). Total charges incurred by the hospital on behalf of Charlotte Lancaster for her second stay were $9,635.70. For the admission of John Shelley, Shands received a $1,967.40 third party payment from BCBS and $3,754.82 in Medicaid payments from HRS. The payments from BCBS and HRS totalled $5,722.22 and equalled the total Medicaid per diem cost rate in effect between Shands and HRS (7 days x $817.46 per day). Total charges incurred by the hospital on behalf of John Shelley were $3,245.50. Under the participation agreement and the Medicaid statutes HRS was required to pay $9,699.00 and $9,809.52, respectively, for the two admissions of Charlotte Lancaster, and $5,722.22 for the single admission of John Shelley. As indicated earlier, HRS was entitled to a set-off in the amount of the third party payment made by BCBS. Therefore, HRS does not owe any further benefits to Shands for the first admission of Charlotte Lancaster and the only admission of John Shelley. However, HRS does owe further benefits to Shands on behalf of Charlotte Lancaster for her second admission in the amount of $6,375.61. By letter dated August 1, 1988, HRS advised Shands that it was due a refund of monies HRS had paid to Shands on behalf of Charlotte Lancaster and John Shelley. The amounts claimed due by HRS were $7,528.02 and $710.07, respectively, for the two admissions of Charlotte Lancaster, and $646.30 for the admission of John Shelley. HRS based its claim to the above refunds on its method of accounting for third party PPC benefits. In essence, HRS claimed that the "PPC discount", the difference between the PPC payment and the total charges incurred by the hospital, was a benefit to the Medicaid recipient. As a benefit of the recipient, HRS was entitled to offset the discount. However, since the "PPC discount" is neither a benefit to the recipient, nor is money paid on behalf of the recipient, nor a true discount to the recipient, HRS' characterization cannot stand. 4/
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Health and Rehabilitative Services enter a final order withdrawing its refund request for the accounts of Charlotte Lancaster an John Shelley and pay to Petitioner the amount of $6,375.61 as the balance due for Medicaid's responsibilty for the second admission of Charlotte Lancaster. DONE and ENTERED this 18th day of July, 1989, in Tallahassee, Florida. DIANE CLEAVINGER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 Filed with the Clerk of the Division of Administrative Hearings this 18th day of July, 1989.
The Issue The issue for consideration in this case is whether the Agency for Health Care Administration is required by law and rule of the Agency to include the gain or loss on the sale of depreciable assets as the result of a sale or disposal, in the calculation of Medicaid allowable costs.
Findings Of Fact Prior to the hearing, the parties submitted a Joint Stipulation which is incorporated in part herein as follows: Petitioner purchased Orlando General Hospital ("OGH"), Medicaid provider number 120065, on December 31, 1990. Upon its sale, OGH merged into and became part of Adventist Health System/Sunbelt, Inc., wherein after it was known as Adventist Health System/Sunbelt, Inc., d/b/a Florida Hospital East ("Florida Hospital East"). Adventist Health System/Sunbelt, Inc., d/b/a Florida Hospital East is a wholly owned subsidiary of Adventist Health System Sunbelt Healthcare Corporation. Florida Hospital East assumed all of the assets and liabilities of OGH. OGH filed a terminating cost report for the fiscal period ending December 31, 1990. On December 31, 1990, the date of sale of OGH to Petitioner, OGH incurred a loss on the sale of the hospital, a depreciable asset. The loss on the sale of OGH was included on both OGH's Medicaid and Medicare terminating cost reports. A loss on the sale of a depreciable asset is the amount that the net book value of the asset sold exceeds the purchase price. A gain or loss on the sale of a depreciable asset is a capital cost. Due to the mechanism of the cost report, a loss on the sale of a depreciable asset is divided into "periods" based upon the time period to which the loss relates. The portion of the loss related to the fiscal year in which the asset is sold is referred to as a "current period" loss. The portion of the loss that relates to all fiscal years prior to the year in which the asset is sold is referred to as a "prior period" loss. Gains and losses related to the current period are included on Worksheet A of the Medicare and Medicaid cost report. Current period capital costs flow to Worksheet B-II Part and B Part III [sic] of the Medicaid cost report. Gains and losses related to the prior period are included on Worksheet E of the Medicare and Medicaid cost reports. OGH's current period is the fiscal year ending 12/31/90. OGH's prior periods in which it participated in the Medicaid Program are 10/24/84 through 12/31/89. OGH's audited Medicaid cost report included in allowable Medicaid costs a loss on the sale of OGH related to the current period. OGH's audited Medicaid cost report did not include in allowable Medicaid costs a loss on the sale of OGH related to the prior periods. The loss on the sale of OGH related to the current period was included in Worksheet A of OGH's audited Medicaid cost report. These costs, including the loss on the sale of OGH, flowed to Worksheet B Part II. OGH's audited Medicare cost report included as allowable Medicare costs the loss on the sale of OGH related to both the current and prior periods in the amount of $9,874,047. The loss from the sale of OGH related to the current period was included on Worksheet A of OGH's audited Medicare cost report. The costs from Worksheet A of OGH's audited Medicare cost report flowed to Worksheet B Part II of OGH's audited Medicare cost report. The loss related to the prior period was included on Worksheet E Part B of OGH's audited Medicaid cost report. The Agency utilizes costs included on Worksheet A of the Medicaid cost report to calculate Medicaid allowable costs. The Agency utilizes the capital costs included on Worksheet B Part II and/or B Part III to calculate allowable Medicaid fixed costs. The Agency does not utilize costs included on Worksheet E Part III to calculate Medicaid allowable costs. The Agency reimburses providers based upon Medicaid allowable costs. aa. The Agency did not include the portion of the loss on the sale of OGH related to the prior periods in the calculation of the OGH's Medicaid allowable costs. bb. Blue Cross and Blue Shield of Florida, Inc. (Intermediary), contracted with the Agency to perform all audits of Medicaid cost reports. Agency reimbursement to Medicaid providers is governed by Florida's Title XIX Inpatient Hospital Reimbursement Plan (Plan), which has been incorporated in Rule 59G-6.020, Florida Administrative Code. The Plan provides that Medicaid reimbursement for inpatient services shall be based upon a prospectively determined per diem. The payment is based upon the facility's allowable Medicaid costs which include both variable costs and fixed costs. Fixed costs include capital costs and allowable depreciation costs. The per diem payment is calculated by the Agency based upon each facility's allowable Medicaid costs which must be taken by the agency from the facility's cost report. Capital costs, such as depreciation, are found on Worksheet B, Part II and Part III. The Plan requires all facilities participating in the Medicaid program to submit an annual cost report to the Agency. The report is to be in detail, listing their "costs for their entire reporting year making appropriate adjustment as required by the plan for the determination of allowable costs." The cost report must be prepared in accordance with the Medicare method of reimbursement and cost finding, except as modified by the Plan. The cost reports relied upon by the Agency to set rates are audited by Blue Cross/Blue Shield of Florida, Inc. which has been directed by the Agency to follow Medicare principles of reimbursement in its audit of cost reports. Prior to January 11, 1995, the Plan did not expressly state whether capital gains or losses relating to a change of facility ownership were allowable costs. The 1995 amendment to the Plan contained language expressly providing "[f]or the purposes of this plan, gains or losses resulting from a change of ownership will not be included in the determination of allowable cost for Medicaid reimbursement." No change was made by the amendment to the Medicare principles of reimbursement regarding the treatment of gains and losses on the sale of depreciable assets. The Medicare principles of reimbursement provides that gains and losses from the disposition of depreciable assets are includable in computing allowable costs. The Provider Reimbursement Manual (HIM-15)(PRM), identifies the methods of disposal for assets that are recognized. They include a bona fide sale of depreciable assets, but do not mention a change of ownership. PRM Section 132 treats a loss on a sale of a depreciable asset as an adjustment to depreciation for both the current and periods. Depreciable assets with an expected life of more than two years may not be expensed in the year in which they are put into service. They must be capitalized and a proportionate share of the cost expensed as depreciation over the life of the property. To do so, the provider must estimate the useful life of the property based upon the guidelines of the American Hospital Association, and divide the cost by the number of years of estimated life. It is this yearly depreciation figure which is claimed on the cost report and which is reimbursed. When a depreciable asset is sold for less than book value (net undepreciated value), the provider suffers a loss. Petitioner claims that Medicare holds that in such a case it must be concluded that the estimated depreciation was erroneous and the provider did not receive adequate reimbursement during the years the asset was in service. Medicare accounting procedures do not distinguish between the treatment of a loss on the sale of depreciable assets as related to current and prior periods. PIM Section 132 requires that Medicare recognize the entire loss as an allowable cost for both the current and prior periods, and Medicare treated Petitioner's loss from the sale of its facility as an allowable cost for Medicare reimbursement under both current and prior periods. With the adoption of the January 1995 amendment, however, the wording of the state plan was changed to specifically prohibit gains or losses from a change of ownership from being included in allowable costs for Medicaid reimbursement. This was the first time the state plan addressed gains and losses on the disposal of depreciable assets resulting from a change of ownership. The Agency contends, however, that it has never reimbursed for losses on disposal of property due to a change of ownership, and that the inclusion of the new language was to clarify a pre-existing policy which was being followed at the time of the 1995 amendment, and which goes back to the late 1970s. It would appear, however, that the policy was never written down; was never conveyed to Blue Cross/Blue shield; was never formally conveyed to Medicaid providers; and was never conveyed to the community at large. When pressed, the Agency could not identify any specific case where the policy was followed by the Agency. While admitting that it is Agency practice not to treat losses from the sale of depreciable assets in prior periods as an allowable cost, Petitioner contends that it has been the Agency's practice to treat the loss on the sale of depreciable assets relating to the current period as an allowable cost, and cited several instances where this appears to have been done. The Agency contends that any current period losses paid were paid without knowledge of the Agency, in error, and in violation of the plan. On October 25, 1996, the Agency entered a Final Order in a case involving Florida Hospital/Waterman, Inc., as Petitioner, and the Agency as Respondent. This case was filed by the Petitioner to challenge the Agency's treatment of the loss on the sale of Waterman Medical Center, Inc., another of Adventist Health Systems/Sunbelt Healthcare Corporation, and the Final Order in issue incorporated a stipulation into which the parties had entered and which addressed the issue in question here. The stipulation included certain position statements including: A loss on the sale of depreciable assets is an allowable cost under the Medicare Principles of Reimbursement. The State Plan does not specify that the loss on the sale of a depreciable asset is to be treated in a manner different than under the Medicare Principles of Reimbursement. Thus the loss on the sale of a depreciable asset is an allowable cost under the State Plan. The Agency agrees, in accordance with the Medicare Principles of Reimbursement, that under the terms of the State Plan, prior period losses for Waterman will be allocated to prior periods and included in the calculation of the per diem and per visit rates. According to William G. Nutt, Petitioner's director of reimbursement, the only difference between the facts of the Waterman case and the instant case is that they relate to the sale of different facilities. The treatment of loss on the sale of depreciable assets as outlined in the Waterman stipulation is in conflict with the amended Plan and with the unwritten and unuttered Agency policy as urged by the Agency in this case. The Agency agreed in one case to a treatment of loss which it now rejects in the instant case. Petitioner urges that subsequent to the settlement of the Waterman case, but before the instant case was set for hearing, the parties engaged in settlement negotiations during which, according to counsel for the Agency, they made "significant" progress toward applying the settlement in the Waterman case to the current case. In a motion filed to delay the setting of this case for hearing, counsel for the Agency indicated the parties were "finalizing" settlement to resolve the case without resorting to a final hearing, and in a follow-up agreed motion for continuance, advised that the "parties [had] finalized a settlement document [which they were] in the process of executing. The settlement agreement reached by the parties was signed by a representative of the Petitioner and then forwarded to the Agency for signature. The document was not signed by the Agency, and when Petitioner sought enforcement of the "settlement" by an Administrative Law Judge of the Division of Administrative Hearings, the request was denied as being outside the jurisdiction of the judge, and the matter was set for hearing.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Agency for Health Care Administration enter a Final Order including the loss on the sale of Orlando General Hospital as an allowable cost for determining Petitioner's entitlement to Medicaid reimbursement for both current and prior years. DONE AND ENTERED this 30th day of June, 1999, in Tallahassee, Leon County, Florida. ARNOLD H. POLLOCK 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) 921-6947 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 30th day of June, 1999. COPIES FURNISHED: Joanne B. Erde, Esquire Broad and Cassel Miami Center Suite 3000 201 South Biscayne Boulevard Miami, Florida 33131 Jonathan E. Sjostrom, Esquire Steel Hector & Davis LLP 215 South Monroe Street Suite 601 Tallahassee, Florida 32301-1804 Mark S. Thomas, Esquire Madeline McGuckin, Esquire Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building 3, Suite 3431 Tallahassee, Florida 32308 Sam Power, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building 3, Suite 3431 Tallahassee, Florida 32308 Julie Gallagher General Counsel Agency for Health Care Administration 2727 Mahan Drive Building 3 Tallahassee, Florida 32308
Findings Of Fact There is no genuine issue as to any of the following material facts: The Petitioner is 78 years old and, since at least 1995, has been eligible for Medicare based on her age. The Petitioner's monthly income is $594, and she has no assets or resources. Since at least 1995, she has been eligible for Medicaid based on her income and assets. F.A.C. Rule 59G-3.010(4) provides: (b) Medicare Supplemental Insurance (Part B) The monthly Medicare insurance premium is paid by the Agency directly to the Depart- ment of Health and Human Services for the Medicare and Medicaid eligible recipient. The deductible and co-insurance under Part B, Medicare, are paid for the Medicare and Medicaid eligible recipient by the Medi- caid fiscal agent. For physician services, Medicaid will cover the deductible and co- insurance only to the extent that the total payment received by the physician will not exceed the recognized Medicaid payment or, if there is no comparable Medicaid payment, 100 percent of the deductible and 75 percent of the co-insurance. In these situations, whether the physician did nor did not receive a payment from Medicaid, by billing Medicaid he is bound to the Medicaid payment schedule as payment in full. F.A.C. Rule 59G-3.230(6)(e) provides: Payment Methodology for Covered Services. * * * (e) Services provided to individuals who are covered by both Medicare and Medicaid must be billed to Medicare first. Medicaid will consider payment of the deductible and coinsurance, but in no case shall the combined Medicare and Medicaid payments exceed the maximum allowable Medicaid amount for the procedure. Pages 4-1, 4-2, 4-4, 4-5 and 4-6 and Appendix A-34-35 of The Florida Medicaid Provider Reimbursement Handbook, HCFA-1500, Nov. 1994, incorporated by reference in F.A.C. Rule 59G-3.230(8), contain language that essentially implements F.A.C. Rules 59G-3.010(4) and 59G-3.230(6)(e). When rules on this subject initially were adopted on January 1, 1977, they did not include the challenged provisions. The challenged provisions were added by amendment adopted January 6, 1978. The preamble to the adopting rule's description of the impact of the challenged rules states that the rule "could . . . decrease . . . the number of physicians [and] result in Medicaid eligible individuals paying their own deductible and co-insurance, . . . changing physicians, or maintaining the same physician with the physician accepting a loss in income." (Fla. Admin. Weekly, Vol. 4, No. 1, Jan. 6, 1978, at 224-25.) Some Florida physicians who accept other patients, including patients eligible for Medicare based on age but not eligible for Medicaid, do not accept "dual eligible" patients like the Petitioner (i.e., patients eligible for both Medicare and Medicaid) because the physician makes less money providing services for "dual eligible" patients under the terms of F.A.C. Rules 59G-3.010(4) and 59G-3.230(6)(e) and The Florida Medicaid Provider Reimbursement Handbook than the physician can make providing services for other patients, including patients eligible for Medicare based on age but not eligible for Medicaid. In 1995, the Petitioner's physician required her to pay him fees for service in addition to the reimbursement he received from the Respondent under the terms of F.A.C. Rules 59G-3.010(4) and 59G-3.230(6)(e) and The Florida Medicaid Provider Reimbursement Handbook although those provisions as well as his agreement with the Respondent prohibit him from doing so. The Intervenor asserts that other Florida physicians participating the Medicaid program, likewise in violation of F.A.C. Rules 59G-3.010(4) and 59G-3.230(6)(e) and The Florida Medicaid Provider Reimbursement Handbook as well as their agreements with the Respondent, also "attempt to collect Medicare coinsurance and deductibles from patients who are indigent."
The Issue The issue for determination in this case is whether Respondent’s application of a fair rental value system of property cost reimbursement to Petitioner under the Florida Title XIX Long-Term Care Medicaid Reimbursement Plan is appropriate.
Findings Of Fact Petitioner, CONSULTING MANAGEMENT AND EDUCATION, INC., d/b/a GULF COAST NURSING AND REHABILITATION CENTER (CME), is the licensed operator of a 103-bed nursing home in Clearwater, Florida, which is presently known as GULF COAST NURSING AND REHABILITATION CENTER (GULF COAST). CME participates in the Florida Medicaid Program as an enrolled provider. Respondent, AGENCY FOR HEALTH CARE ADMINISTRATION (AHCA), is the agency of the State of Florida authorized to implement and administer the Florida Medicaid Program, and is the successor agency to the former Department of Health and Rehabilitative Services, pursuant to Chapter 93-129, Laws of Florida. Stipulated Facts Prior to 1993, the GULF COAST nursing home facility was known as COUNTRY PLACE OF CLEARWATER (COUNTRY PLACE), and was owned and operated by the Clearwater Limited Partnership, a limited partnership which is not related to CME. In 1993 CME agreed to purchase, and did in fact purchase, COUNTRY PLACE from the Clearwater Limited Partnership. Simultaneous with the purchase of COUNTRY PLACE, CME entered into a Sale/Leaseback Agreement with LTC Properties, Inc., a Maryland real estate investment trust which engages in the financing of nursing homes. The Purchase and Sale Agreement between Clearwater Limited Partnership and CME was contingent upon the Sale/Leaseback Agreement and the proposed Lease between CME and LTC Properties, Inc. On September 1, 1993, CME simultaneously as a part of the same transaction purchased COUNTRY PLACE, conveyed the facility to LTC Properties, Inc., and leased the facility back from LTC Properties, Inc. As required, CME had notified AHCA of the proposed transaction. AHCA determined that the transaction included a change of ownership and, by lease, a change of provider. CME complied with AHCA's requirements and became the licensed operator and Medicaid provider for COUNTRY PLACE. Thereafter, CME changed the name of the facility to GULF COAST. After CME acquired the facility and became the licensed operator and Medicaid provider, AHCA continued to reimburse CME the same per diem reimbursement which had been paid to the previous provider (plus certain inflation factors) until CME filed its initial cost report, as required for new rate setting. In the normal course of business, CME in 1995 filed its initial Medicaid cost report after an initial period of actual operation by CME. Upon review of the cost report, AHCA contended that the cost report was inaccurate and engaged in certain "cost settlement" adjustments. During this review, AHCA took the position that CME's property reimbursement should be based on FRVS methodologies rather than "cost" due to the lease. In November of 1995, CME received from AHCA various documents which recalculated all components of Petitioner's Medicaid reimbursement rates for all periods subsequent to CME's acquisition of the facility. In effect, AHCA placed CME on FRVS property reimbursement. The practical effect of AHCA's action was to reduce CME's property reimbursement both retroactively and prospectively. The retroactive application would result in a liability of CME to AHCA, due to a claimed overpayment by AHCA. The prospective application would (and has) resulted in a reduction of revenues. CME is substantially affected by AHCA's proposed action and by Sections I.B., III.G.2.d.(1), V.E.1.h., and V.E.4. of the Florida Medicaid Plan. Additional Findings of Fact The Florida Medicaid Plan establishes methodologies for reimbursement of a nursing home's operating costs and patient care costs, as well as property costs. The dispute in this matter relates only to reimbursement of property costs. CME as the operator of the GULF COAST nursing home facility is entitled to reimbursement of property costs in accordance with the Florida Medicaid Plan. CME as the operator of the GULF COAST facility entered into a Florida Medicaid Program Provider Agreement, agreeing to abide by the provisions of the Florida Medicaid Plan. The Sale/Leaseback Agreement entered into by CME and LTC Properties Inc. (LTC) specifically provides for a distinct sale of the nursing home facility to LTC. LTC holds record fee title to GULF COAST. LTC, a Maryland corporation, is not related to CME, a Colorado corporation. The Florida Medicaid Plan is intended to provide reimbursement for reasonable costs incurred by economically and efficiently operated facilities. The Florida Medicaid Plan pays a single per diem rate for all levels of nursing care. After a nursing home facility's first year of operation, a cost settling process is conducted with AHCA which results in a final cost report. The final cost report serves as a baseline for reimbursement over the following years. Subsequent to the first year of operation, a facility files its cost report annually. AHCA normally adjusts a facility's reimbursement rate twice a year based upon the factors provided for in the Florida Medicaid Plan. The rate-setting process takes a provider through Section II of the Plan relating to cost finding and audits resulting in cost adjustments. CME submitted the appropriate cost reports after its first year of operation of the GULF COAST facility. Section III of the Florida Medicaid Plan specifies the areas of allowable costs. Under the Allowable Costs Section III.G.2.d.(1) in the Florida Title XIX Plan, a facility with a lease executed on or after October 1, 1985, shall be reimbursed for lease costs and other property costs under the Fair Rental Value System (FRVS). AHCA has treated all leases the same under FRVS since that time. AHCA does not distinguish between types of leases under the FRVS method. The method for the FRVS calculation is provided in Section V.E.1.a-g of the Florida Medicaid Plan. A “hold harmless” exception to application of the FRVS method is provided for at Section V.E.1.h of the Florida Medicaid Plan, and Section V.E.4 of the Plan provides that new owners shall receive the prior owner’s cost-based method when the prior owner was not on FRVS under the hold harmless provision. As a lessee and not the holder of record fee title to the facility, neither of those provisions apply to CME. At the time CME acquired the facility, there was an indication that the Sale/Leaseback transaction with LTC was between related parties, so that until the 1995 cost settlement, CME was receiving the prior owner’s cost-based property method of reimbursement. When AHCA determined that the Sale/Leaseback transaction between CME and LTC was not between related parties, AHCA set CME’s property reimbursement component under FRVS as a lessee. Property reimbursement based on the FRVS methodology does not depend on actual period property costs. Under the FRVS methodology, all leases after October 1985 are treated the same. For purposes of reimbursement, AHCA does not recognize any distinction between various types of leases. For accounting reporting purposes, the Sale/Leaseback transaction between CME and LTD is treated as a capital lease, or “virtual purchase” of the facility. This accounting treatment, however, is limited to a reporting function, with the underlying theory being merely that of providing a financing mechanism. Record fee ownership remains with LTC. CME, as the lease holder, may not encumber title. The Florida Medicaid Plan does not distinguish between a sale/leaseback transaction and other types of lease arrangements. Sections IV.D., V.E.1.h., and V.E.4., the “hold harmless” and “change of ownership” provisions which allow a new owner to receive the prior owner’s method of reimbursement if FRVS would produce a loss for the new owner, are limited within the Plan’s organizational context, and within the context of the Plan, to owner/operators of facilities, and grandfathered lessee/operators. These provisions do not apply to leases executed after October 1, 1985. Capital leases are an accounting construct for reporting purposes, which is inapplicable when the Florida Medicaid Plan specifically addresses this issue. The Florida Medicaid Plan specifically addresses the treatment of leases entered into after October 1985 and provides that reimbursement will be made pursuant to the FRVS method.
The Issue Whether Medicaid overpayments were made to Petitioner by the Agency for Health Care Administration ("AHCA") for services performed during the audit period of August 1, 2000, to August 1, 2002 (the "audit period"), and, if so, what is the total amount of these overpayments.
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: Parties Respondent, William O. Kabry, M.D., is a licensed physician in the State of Florida, having been issued license number 28394. During the audit period, Dr. Kabry's specialty area of practice was general or family practice, and his office was in Naples, Florida. Dr. Kabry is now retired. AHCA is the agency responsible for administering the Florida Medicaid Program. One of AHCA's duties is to recover Medicaid overpayments from physicians providing care to Medicaid recipients. §§ 409.901, 409.902, and 409.9131, Fla. Stat. (2006). The Provider Agreement During the audit period, Dr. Kabry was authorized to provide physician services to eligible Medicaid patients, pursuant to a valid, voluntary Medicaid provider contract agreement with AHCA, Medicaid Provider No. 065342000. The 1996 Provider Agreement, in effect at the time of the audit, contained the following provisions, among others: Quality of Service. The provider agrees to provide medically necessary services or goods of not less than the scope and quality it provides to the general public. The provider agrees that services or goods billed to the Medicaid program must be medically necessary, of a quality comparable to those furnished by the provider's peers, and within the parameters permitted by the provider's license or certification. The provider further agrees to bill only for the services performed within the specialty or specialties designated in the provider application on file with the Agency. The services or goods must have been actually provided to eligible Medicaid recipients by the provider prior to submitting the claim. Compliance. The provider agrees to comply with all local, state and federal laws, rules, regulations, licensure laws, Medicaid bulletins, manuals, handbooks and Statements of Policy as they may be amended from time to time. * * * 5. Provider Responsibilities. The Medicaid provider shall: * * * (b) Keep and maintain in a systematic and orderly manner all medical and Medicaid related records as the Agency may require and as it determines necessary; make available for state and federal audits for five years, complete and accurate medical, business, and fiscal records that fully justify and disclose the extent of the goods and services rendered and billings made under the Medicaid [sic]. The provider agrees that only records made at the time the goods and services were provided will be admissible in evidence in any proceeding relating to the Medicaid program. * * * (d) Except as otherwise provided by law, the provider agrees to provide immediate access to authorized persons (including but not limited to state and federal employees, auditors and investigators) to all Medicaid- related information, which may be in the form of records, logs, documents, or computer files, and all other information pertaining to services or goods billed to the Medicaid program. This shall include access to all patient records and other provider information if the provider cannot easily separate records for Medicaid patients from other records. * * * (f) Within 90 days of receipt, refund any moneys received in error or in excess of the amount to which the provider is entitled from the Medicaid program. Handbook Provisions Among the "manuals and handbooks" referenced in paragraph 3 of the Provider Agreement in effect during the audit period were the Medicaid Provider Reimbursement Handbook, HFCA- 1500 and Child Health Check-Up 221 ("Reimbursement Handbook") and the Physician Coverage and Limitations Handbook ("C&L Handbook"), with their periodic updates. The term "medically necessary" was defined in Appendix D of the Reimbursement Handbook as follows, in relevant part: Medically Necessary or Medical Necessity Means that the medical or allied care, goods, or services furnished or ordered must: Meet the following conditions: Be necessary to protect life, to prevent significant illness or significant disability, or to alleviate severe pain; Be individualized, specific, and consistent with symptoms or confirmed diagnosis of the illness or injury under treatment, and not in excess of the patient's needs; Be consistent with generally accepted professional medical standards as determined by the Medicaid program, and not experimental or investigational; Be reflective of the level of service that can be safely furnished, and for which no equally effective and more conservative or less costly treatment is available statewide; and Be furnished in a manner not primarily intended for the convenience of the recipient, the recipient's caretaker, or the provider. * * * The fact that a provider has prescribed, recommended, or approved medical or allied care does not, in and of itself, make such care, goods, or services medically necessary or a medically necessary service. The Reimbursement Handbook sets out record keeping requirements for Medicaid providers. Chapter 2 of the Reimbursement Handbook states in pertinent part that Record Keeping Requirement: The provider must retain all medical, fiscal, professional and business records on all services provided to a Medicaid recipient. Records may be kept on paper, magnetic material, film, or other media. In order to qualify as a basis for reimbursement, the records must be signed and dated at the time of service, or otherwise attested to as appropriate to the media. Rubber stamp signatures must be initialed. Record Retention: The records must be retained for a period of at least five (5) years from the date of service. Types of Records That Must be Retained: The following types of records, as appropriate for the type of service provided, must be retained (the list is not all inclusive): Medicaid claim forms and any documents that are attached; Professional records, such as appointment books, patient treatment plans and physician referrals; Medical, dental, optometric, hearing, and other patient records; Copies of sterilization and hysterectomy consents; Prior and post authorization, and service authorization information; Prescription records; Orders for laboratory tests and test results; X-ray, MRI, and CAT scan records; Business records, such as accounting ledgers, financial statements, invoices, inventory records and check registers; Tax records, including purchase documentation; Partnership records; Purchase documentation; Provider enrollment documentation; and Utilization review and continued stay approvals for psychiatric or substance abuse inpatient stays. Right to Review Records: Authorized state and federal agencies and their authorized representatives may audit or examine a provider’s or facility’s records. This examination includes all records that the agency finds necessary to determine whether Medicaid payment amounts were or are due. This requirement applies to the provider’s records and records for which the provider is the custodian. The provider must give authorized state and federal agencies and their authorized representatives access to all Medicaid patient records and to other information that cannot be separated from Medicaid-related records. The provider must send, at his or her expense, legible copies of all Medicaid- related information to the authorized state and federal agencies and their authorized representatives. Requirements for Medical Records: Medicaid records must state the necessity for and the extent of services provided. The following minimum requirements may vary according to the service rendered: History; Physical assessment; Chief complaint on each visit; Diagnostic tests and results; Diagnosis; Treatment plan, including prescriptions; Medications, supplies, scheduling frequency for follow-up or other services; Progress reports, treatment rendered; The author of each (medical record) entry must be identified and must authenticate his or her entry by signature, written initials, or computer entry; Dates of service; and Referrals to other services. Note: See the service-specific Coverage and Limitations Handbook for record keeping requirements that are specific to a particular service. Incomplete Records: Providers who are not in compliance with the Medicaid documentation and record retention policies described in this chapter may be subject to administrative sanctions and/or recoupment of Medicaid payments. Medicaid payments for services that lack required documentation and/or appropriate signatures will be recouped. Chapter 5 of the Reimbursement Handbook, titled "Medicaid Abuse and Fraud," defines "overpayment" and "incomplete or missing records" as follows: Overpayment. Overpayment includes any amount that is not authorized to be paid by the Medicaid Program whether paid as a result of inaccurate or improper cost reporting, improper claims, unacceptable practices, fraud, abuse, or mistake. * * * Incomplete or Missing Records. Incomplete records are records that lack documentation that all requirements or conditions for service provision have been met. Medicaid may recoup payment for services or goods when the provider has incomplete records or cannot locate the records. Chapter 3 of the C&L Handbook sets forth procedure codes to be used by physicians in claiming reimbursement for services provided to Medicaid recipients. The origin of the procedural and diagnosis codes is as follows, in relevant part: The procedure codes listed in this chapter are Health Care Financing Administration Common Procedure Coding System (HCPCS) Levels 1, 2, and 3. These are based on the Physician's Current Procedural Terminology (CPT) book. The CPT includes HCPCS descriptive terms and numeric identifying codes and modifiers for reporting services and procedures. . . . The CPT book is a systematic listing and coding of procedures and services provided by physicians. Each procedure or service is identified with a five digit code. For purposes of this proceeding, the relevant section of the CPT book is "Evaluation and Management-- Office or Other Outpatient Services," which sets forth the codes used to report evaluation and management services provided in the physician's office or in an outpatient or other ambulatory facility. The CPT book sets forth instructions for selecting the proper level of Evaluation and Management ("E/M") service, as follows in relevant part: Review the Level of E/M Service Descriptors and Examples in the Selected Category or Subcategory The descriptors for the levels of E/M services recognize seven components, six of which are used in defining the levels of E/M services. These components are: history; examination; medical decision making; counseling; coordination of care; nature of presenting problem; and time. The first three of these components (i.e., history, examination, and medical decision making) should be considered the key components in selecting the level of E/M services. An exception to this rule is in the case of visits which consist predominantly of counseling or coordination of care (See numbered paragraph 3, page 7).[1] Determine the Extent of History Obtained The extent of the history is dependent upon clinical judgment and on the nature of the presenting problem(s). The levels of E/M services recognize four types of history that are defined as follows: Problem focused: chief complaint; brief history of present illness or problem. Expanded problem focused: chief complaint; brief history of present illness; problem pertinent system review. Detailed: chief complaint; extended history of present illness; problem pertinent system review extended to include a review of a limited number of additional systems; pertinent past, family, and/or social history directly related to the patient's problems. Comprehensive: chief complaint; extended history of present illness; review of systems which is directly related to the problem(s) identified in the history of the present illness plus a review of all additional body systems; complete past, family and social history. The comprehensive history obtained as part of the preventive medicine evaluation and management service is not problem-oriented and does not involve a chief complaint or present illness. It does, however, include a comprehensive system review and comprehensive or interval past, family and social history as well as a comprehensive assessment/history of pertinent risk factors. Determine the Extent of Examination Performed The extent of the examination performed is dependent on clinical judgment and on the nature of the presenting problem(s). The levels of E/M services recognize four types of examination that are defined as follows: Problem focused: a limited examination of the affected body area or organ system. Expanded problem focused: a limited examination of the affected body area or organ system and other symptomatic or related organ system(s). Detailed: an extended examination of the affected body area(s) and other symptomatic or related organ system(s). Comprehensive: a general multi-system examination or a complete examination of a single organ system. Note: The comprehensive examination performed as part of the preventive medicine evaluation and management service is multi- system, but its extent is based on age and risk factors identified. For the purposes of these CPT definitions, the following body areas are recognized: Head, including the face Neck Chest, including breasts and axilla Abdomen Genitalia, groin, buttocks Back Each extremity For the purposes of these CPT definitions, the following organ systems are recognized: Eyes Ears, Nose, Mouth and Throat Cardiovascular Respiratory Gastrointestinal Genitourinary Musculoskeletal Skin Neurologic Psychiatric Hematologic/Lymphatic/Immunologic Determine the Complexity of Medical Decision Making Medical decision making refers to the complexity of establishing a diagnosis and/or selecting a management option as measured by: the number of possible diagnoses and/or the number of management options that must be considered; the amount and/or complexity of medical records, diagnostic tests, and/or other information that must be obtained, reviewed and analyzed; and the risk of significant complications, morbidity and/or mortality, as well as comorbidities, associated with the patient's presenting problem(s), the diagnostic procedure(s) and/or the possible management options. Four types of medical decision making are recognized: straightforward; low complexity; moderate complexity; and high complexity. To qualify for a given type of decision making, two of the three elements in Table 2 below must be met or exceeded. Comorbidities/underlying diseases, in and of themselves, are not considered in selecting a level of E/M services unless their presence significantly increases the complexity of the medical decision making. The referenced Table 2, titled "Complexity of Medical Decision Making," sets forth guidelines for the four types of decision-making (straightforward, low complexity, moderate complexity, and high complexity) in terms of the relative number and/or complexity of three elements: number of diagnoses or management options (minimal, limited, multiple, or extensive), amount and/or complexity of data to be reviewed (minimal or none, limited, moderate, or extensive), and risk of complications and/or morbidity or mortality (minimal, low, moderate, or high). The "Office or Other Outpatient Services" section of the CPT book provides the codes for those services in terms of the guidelines set forth above. Five codes of increasing complexity are provided for new patients, and five counterpart codes are provided for established patients: New Patient 99201 Office or other outpatient visit for the evaluation and management of a new patient, which requires these three key components: a problem focused history; a problem focused examination; and straightforward medical decision making. Counseling and/or coordination of care with other providers or agencies are provided consistent with the nature of the problem(s) and the patient's and/or family's needs. Usually, the presenting problems are self- limited or minor. Physicians typically spend 10 minutes face-to-face with the patient and/or family. 99202 Office or other outpatient visit for the evaluation and management of a new patient which requires these three key components: an expanded problem focused history; an expanded problem focused examination; and straightforward medical decision making. Counseling and/or coordination of care with other providers or agencies are provided consistent with the nature of the problem(s) and the patient's and/or family's needs. Usually, the presenting problems are of low to moderate severity. Physicians typically spend 20 minutes face-to-face with the patient and/or family. 99203 Office or other outpatient visit for the evaluation and management of a new patient which requires these three key components: a detailed history; a detailed examination; and medical decision making of low complexity. Counseling and/or coordination of care with other providers or agencies are provided consistent with the nature of the problem(s) and the patient's and/or family's needs. Usually, the presenting problems are of moderate severity. Physicians typically spend 30 minutes face-to-face with the patient and/or family. 99204 Office or other outpatient visit for the evaluation and management of a new patient which requires these three key components: a comprehensive history; a comprehensive examination; and medical decision making of moderate complexity. Counseling and/or coordination of care with other providers or agencies are provided consistent with the nature of the problem(s) and the patient's and/or family's needs. Usually, the presenting problems are of moderate to high severity. Physicians typically spend 45 minutes face-to-face with the patient and/or family. 99205 Office or other outpatient visit for the evaluation and management of a new patient which requires these three key components: a comprehensive history; a comprehensive examination; and medical decision making of high complexity. Counseling and/or coordination of care with other providers or agencies are provided consistent with the nature of the problem(s) and the patient's and/or family's needs. Usually, the presenting problems are of moderate to high severity. Physicians typically spend 60 minutes face-to-face with the patient and/or family. Established Patient 99211 Office or other outpatient visit for the evaluation and management of an established patient that may or may not require the presence of a physician. Usually, the presenting problem(s) are minimal. Typically, 5 minutes are spent performing or supervising these services. 99212 Office or other outpatient visit for the evaluation and management of an established patient, which requires at least two of these three key components: a problem focused history; a problem focused examination; straightforward medical decision making. Counseling and/or coordination of care with other providers or agencies are provided consistent with the nature of the problem(s) and the patient's and/or family's needs. Usually, the presenting problem(s) are self- limited or minor. Physicians typically spend 10 minutes face-to-face with the patient and/or family. 99213 Office or other outpatient visit for the evaluation and management of an established patient, which requires at least two of these three key components: an expanded problem focused history; an expanded problem focused examination; medical decision making of low complexity. Counseling and/or coordination of care with other providers or agencies are provided consistent with the nature of the problem(s) and the patient's and/or family's needs. Usually, the presenting problem(s) are of low to moderate severity. Physicians typically spend 15 minutes face-to-face with the patient and/or family. 99214 Office or other outpatient visit for the evaluation and management of an established patient, which requires at least two of these three key components: a detailed history; a detailed examination; medical decision making of moderate complexity. Counseling and/or coordination of care with other providers or agencies are provided consistent with the nature of the problem(s) and the patient's and/or family's needs. Usually, the presenting problem(s) are of moderate to high severity. Physicians typically spend 25 minutes face-to-face with the patient and/or family. 99215 Office or other outpatient visit for the evaluation and management of an established patient, which requires at least two of these three key components: a comprehensive history; a comprehensive examination; medical decision making of high complexity. Counseling and/or coordination of care with other providers or agencies are provided consistent with the nature of the problem(s) and the patient's and/or family's needs. Usually, the presenting problem(s) are of moderate to high severity. Physicians typically spend 40 minutes face-to-face with the patient and/or family. Medicaid reimburses physicians according to the level of complexity of the office visit. The more complex the visit (and hence the higher the CPT code number), the greater the level of reimbursement. The Audit During the audit period, Dr. Kabry submitted 3,109 Medicaid claims for services rendered to 760 patients, for which he received Medicaid payments of $195,708.93. Out of those 3,109 claims, 589 were billed at CPT code 99205 (the highest level for a new patient) and 2,332 were billed at CPT code 99215 (the highest level for an established patient). An additional 80 claims were billed at CPT code 99214, the second-highest level for an established patient. The audit was triggered by Dr. Kabry's unusually high percentage of claims billed at the highest levels of service in a family practice setting.2 In making a determination of overpayment, AHCA is not required to review each and every Medicaid claim submitted by a provider. Subsection 409.913(19), Florida Statutes (2002), permits the agency to employ "appropriate statistical methods," including "sampling and extension to the population," to make its determination. In this instance, AHCA randomly selected a "cluster sample" of 30 patients from the 760 Medicaid patients to whom Petitioner had provided services during the audit period and asked Petitioner to produce the medical records he had on file for these 30 patients. AHCA chose the cluster sample of 30 patients according to a statistical formula indicating a 95 percent probability that any overpayment amount would be at least the amount identified. By selecting the 95 percent confidence factor, AHCA attempted to ensure that any potential error in the audit would be resolved in favor of the audited physician. AHCA's statistical expert, Professor Fred Huffer, professor of statistics at Florida State University, validated the methodology used by AHCA. Professor Huffer reviewed AHCA's work and then conducted his own independent analysis that reproduced AHCA's results. Professor Huffer's testimony as to the reliability of AHCA's methodology is credited. Dr. Kabry had submitted a total of 135 claims for services rendered to the 30 patients in the cluster sample during the audit period. Dr. Kabry had been paid $8,396.46 for these 135 claims. Each of these claims was reviewed by AHCA to determine whether it was supported by information contained in the medical records produced by Petitioner in response to AHCA's request. AHCA retained the services of Dr. E. Rawson Griffin to review all the claims for the 30-patient cluster sample. Dr. Griffin is a physician who has been in active practice continuously for 25 years, is board-certified in family practice and geriatrics, and is licensed to practice medicine in Florida, Georgia, and Virginia. Dr. Griffin is qualified as an expert witness and physician peer reviewer consultant to review the claims in the audit for issues of medical necessity, appropriateness, quality of care, and coding issues as required by Section 409.9131, Florida Statutes (2002). Based upon the initial review by Dr. Griffin, AHCA issued the PAAR with a determination that Dr. Kabry had been overpaid $89,589.10 during the audit period. Dr. Kabry communicated with AHCA and sent additional records. Based upon the additional documentation sent and a second review by Dr. Griffin, the overpayment amount was reduced to $89,095.70. The FAAR issued by AHCA on October 25, 2004, stated as follows, in pertinent part: Based upon a review of all documentation submitted, we have determined that you were overpaid $89,095.70 for services that in whole or in part are not covered by Medicaid. Be advised that pursuant to Section 409.913(22)(a), F.S., the Agency is entitled to recover all investigative, legal, and expert witness costs. * * * The following is our assessment of why certain claims paid to your provider number do not meet Medicaid requirements. * * * Review Determination(s) Medicaid policy defines the varying levels of care and expertise required for the evaluation and management procedure codes for office and hospital visits. The documentation you provided supports a lower level of office or hospital visit than the one for which you billed and received payment. The difference between the amount you were paid and the correct payment for the appropriate level of service is considered an overpayment. The overpayment was calculated using a random sample of 30 recipients for whom you submitted 135 claims having dates of service from August 1, 2000 through August 1, 2002. The statistical calculation used the formula appropriate to this sample, which is the cluster sample calculation. Recipients are sampled and all the claims respecting a given recipient form a cluster. In his deposition, Dr. Griffin discussed his review of the records Dr. Kabry had provided regarding the 30 patients in the cluster sample. Dr. Griffin found that Dr. Kabry had almost exclusively billed the highest levels of CPT coding for outpatient services, i.e., 99205 for new patients and 99215 for established patients. Out of 135 claims, Dr. Kabry billed all 23 new patient visits at CPT code 99205, of which Dr. Griffin found only eight fully justified. Dr. Kabry billed 101 out of 108 existing patient visits at CPT code 99215, and the remaining seven at CPT code 99214. Dr. Griffin found that Dr. Kabry failed to document a level of service consistent with these codes. Dr. Griffin performed his own review of Dr. Kabry's medical records and noted his conclusions as to the level of CPT coding that could be supported by the record of each patient for each visit to Dr. Kabry's office. Dr. Griffin found that all 108 of the existing patient visits and 15 out of 23 new patient visits should have been billed at lower levels, based on the documentation provided by Dr. Kabry.3 Dr. Griffin's testimony is credited as to his review of Dr. Kabry's records. Margarete Johnson, AHCA's registered nursing consultant, performed the calculations by which Dr. Griffin's conclusions as to the proper coding were translated into dollar figures. These calculations were a simple function of addition and subtraction, using the relevant Medicaid reimbursement amounts for the various codes. Dr. Kabry had been reimbursed $8,396.46 for the claims related to the 30 patients in the cluster sample. Following Dr. Griffin's analysis, Ms. Johnson calculated that $4,080.09 of that amount constituted overpayments. Using the generally accepted, appropriate, and valid statistical formula described by Dr. Huffer, AHCA extended this result to the total population of 3,109 Medicaid claims that Dr. Kabry had submitted for services rendered during the audit period, and correctly calculated that Petitioner had been overpaid a total of $89,095.70. In his case-in-chief, Dr. Kabry offered two points. First, he contended that the amount of time he spent with each patient justified the higher codings. Both Dr. Kabry and his wife, who worked as an LPN and billing clerk for Dr. Kabry, credibly testified that their Medicaid patients were largely uneducated, spoke little or no English, and required lengthy counseling to make them understand the treatments for such endemic diseases as high blood pressure and diabetes. However, Dr. Kabry did not document in his medical records the amount of time spent with each patient, and thus may not employ time as a controlling factor in his Medicaid billings. See footnote 1, supra. Second, Dr. Kabry contended that AHCA came into his office on several occasions, reviewed selected files, and gave his office a clean bill of health as to its Medicaid practices. As evidence, Dr. Kabry submitted a letter dated December 13, 2000, from Fran Nieves, a Medicaid field office manager from Fort Myers. The letter thanked Dr. Kabry for his assistance and cooperation "with the Medipass chart reviews that were conducted on 12/12 . . . These efforts provide the program with the ability to confirm that services were provided in accordance with the Medipass program, assuring that Medipass members have the access and quality health care that has been guaranteed to them." In rebuttal, Margarete Johnson testified that Ms. Nieves, the Fort Myers field office manager, is not employed by MPI and does not have the authority of MPI employees to check for possible fraud and abuse and Medicaid overpayments. Ms. Johnson testified that Medipass has a separate mission from MPI. Among other duties, Medipass is responsible for training and furnishing information to providers, and for enrolling recipients in Medipass as a cost containing measure. Relevant provisions of the Reimbursement Handbook confirm that Medipass is a "primary, case-management program designed to assure Medicaid recipients access to medical care, decrease inappropriate service utilization, and control costs." Medipass is not charged with MPI's task of recovering provider overpayments and is certainly not authorized to approve a provider's CPT coding practices so as to immunize the provider from a subsequent audit by a peer reviewer, as suggested by Dr. Kabry. Dr. Kabry did not submit any written documentation or exhibits into evidence to rebut AHCA's final overpayment determination of $89,095.07. Dr. Kabry presented no expert testimony or evidence to rebut the expert testimony presented by Dr. Griffin and Dr. Huffer. On the strength of the evidence and testimony presented by AHCA, and in the absence of any evidence or testimony to the contrary, it is found that Petitioner received Medicaid overpayments in the amount of $89,095.07.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that AHCA enter a final order finding that Respondent received $89,095.07 in Medicaid overpayments for services rendered to his Medicaid patients from August 1, 2000, to August 1, 2002, and requiring him to repay this amount to the agency. DONE AND ENTERED this 5th day of March, 2007, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 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 March, 2007.
The Issue The issue is whether Petitioner received a Medicaid overpayment in the amount of $11,077.65 for claims filed between April 15, 1998, and December 31, 2001.
Findings Of Fact Respondent is the agency responsible for administering the Florida Medicaid Program. One of its duties is to recover Medicaid overpayments from physicians providing care to Medicaid recipients. Petitioner is a licensed chiropractor in the State of Florida. His Medicaid provider number is No. 3801578-00. At all times relevant here, Petitioner provided services to Medicaid patients pursuant to a valid Medicaid provider agreement. Therefore, Respondent was subject to all statutes, rules, and policy guidelines that govern Medicaid providers. Specifically, Petitioner was required to follow the guidelines set forth in the Medicaid Coverage and Limitation Handbook and the Medicaid Reimbursement Handbook. Additionally, Petitioner was required to maintain all "Medicaid-related records" that supported his Medicaid invoices and claims and to furnish those records to Respondent upon request. In 1997 and until April 1998, Petitioner's advertisement in the yellow pages of the Panama City, Florida, telephone book invited the public to make an appointment for a "free spinal exam," which specifically included two X-rays, if medically necessary. The advertisement indicated that Petitioner's office accepted patients with major medical insurance, workers' compensation insurance, and Medicare and Medicaid coverage. The advertisement did not specifically exclude Medicare and Medicaid patients, but specifically stated that the free spinal exam did not include further examination, treatment, or workers' compensation and personal injury cases. However, Petitioner's subsequent advertisements in the telephone book specifically included Medicaid as a type of case that Petitioner excluded from the offer of free services. The original and subsequent advertisements further stated as follows: Our office policy: The patient and any other person responsible for payment has the right to cancel payment, or be reimbursed for payment for any other service, exam, or treatment which is performed as a result of and within 72 hours of responding to the ad for the free service, exam or treatment. ($99.00 value) Respondent's investigator, Julie Canfield-Buddin, saw the advertisement excluding Medicaid patients as recipients of the free services. After confirming that Petitioner was a Medicaid provider, Ms. Canfield-Buddin performed an audit of Petitioner's paid Medicaid claims between April 15, 1998, and December 31, 2001. The audit revealed that Petitioner had not provided the advertised free services to Medicaid patients. In other words, Petitioner had received Medicaid reimbursements for initial office visits and X-rays of new patients who were Medicaid eligible. Petitioner received reimbursements for these services even though Medicaid policy prohibits payments to providers for services that are given to non-Medicaid patients free of charge. In April 2002, Respondent sent Petitioner a preliminary audit report. The preliminary report indicated that for the period beginning April 15, 1998, up to and including December 31, 2001, Petitioner had received $13,522.02 for certain claims that were not covered by Medicaid. The report included a request for Petitioner to send Respondent that amount for the Medicaid overpayment. After receiving the preliminary report, Petitioner's office contacted Ms. Canfield-Buddin, stating that Petitioner had some issues with the denied claims. Ms. Canfield-Buddin responded that Petitioner should state his concerns in writing and furnish Respondent with any additional medical documentation that would serve to reduce the overpayment. Petitioner sent Ms. Canfield-Buddin a letter dated April 25, 2002. Petitioner did not send Respondent any additional medical documentation with the letter to substantiate his position regarding the denied claims. Additionally, Petitioner did not provide Respondent with any written office policy that delineated any difference in the services provided to Medicaid and non-Medicaid patients. In a final audit report dated May 9, 2002, Respondent informed Petitioner that he had been overpaid $13,522.02 for Medicaid claims that, in whole or in part, were not covered by Medicaid. The final audit report included a request for Petitioner to pay that amount for the Medicaid overpayment. Ms. Canfield-Buddin subsequently received a telephone call from Petitioner's office on May 30, 2002. She received Petitioner's written request for a formal administrative hearing on June 3, 2002. After receiving Petitioner's request for a hearing, Ms. Canfield-Buddin reviewed Petitioner's account statements that related to the Medicaid overpayments. Based on that review, Ms. Canfield-Buddin reduced the amount of overpayment to $11,077.65. The revised overpayment reversed denied charges for X-rays of Medicaid patients in excess of the two X-rays that should have been provided free of charge pursuant to the offer for free services. For example, Petitioner was reimbursed for services provided to B.A. on August 10, 2001. These charges included an initial office visit under the Current Procedures Terminology (CPT) code 99203, two X-rays under the CPT code 7240, two X-rays under the CPT code 72072, and two or three X-rays under the CPT code 72100. The final audit denied reimbursement for all charges except the two or three X-rays under CPT code 72100. The revised overpayment reversed the denied charges for two X-rays under the CPT code 72070. The end result was that Respondent denied Petitioner reimbursement only for the initial office visit and two X-rays that ordinarily would have been provided free to non-Medicaid patients. Medicaid allows reimbursement for services equal to the lesser of the Medicaid fee or the provider's usual and customary charge. Petitioner's advertisement offered free services to the public at large with certain exceptions. Petitioner cannot exclude Medicaid patients from that offer by also excluding patients with personal injury or workers' compensation claims. All patients who are not Medicaid eligible are non-Medicaid patients regardless of their payment source. Just because Petitioner excludes free services to non-Medicaid patients with personal injury and workers' compensation claims, does not mean that he can deny those free services to Medicaid patients when his usual and customary practice is to provide the services free to non-Medicaid patients. Some of the denied charges at issue here allegedly involve spinal manipulations that Petitioner claims he performed on Medicaid patients during their initial office visits. Medicaid reimbursement policy requires a spinal manipulation performed during an initial office visit under a 99203 CPT code for a new patient visit to be included as part of the examination conducted during that visit. Medicaid does not allow Petitioner to be separately reimbursed for a spinal manipulation performed on the same day of service as an initial office visit. Petitioner did not include more than two X-rays or any spinal manipulations in his offer of free services for any patient. When a patient has an initial office visit in response to Petitioner's offer of free services, Petitioner first takes the patient's history, performs an examination, and reviews the first two free X-rays. Depending on the results of the evaluation, Petitioner may or may not advise the patient that additional X-rays and/or a spinal manipulation are medically necessary. Petitioner then allows the patient to arrange for payment of those services with his office staff. If the patient is non-Medicaid eligible and is able to pay for services, Petitioner proceeds to take the additional X-rays and/or to perform the spinal manipulation immediately or during a subsequent visit with payment due as arranged. If a non-Medicaid patient requires subsequent examinations during the course of treatment, Petitioner bills the patient or his or her insurance carrier for those services. If the patient is Medicaid eligible, Petitioner may either proceed with taking the X-rays and/or performing the spinal examination immediately, knowing that he will not be separately reimbursed for the spinal manipulation, or make an appointment for the Medicaid patient to return on another day so that he can be reimbursed for the spinal manipulation. In any event, Medicaid regulations do not allow reimbursement for further examinations within a three-year period. During the hearing, Petitioner testified that some of the denied charges for initial office visits under the CPT code 99203 included spinal manipulations that he never intended to be free and that he did not provide spinal manipulations as a free service to non-Medicaid patients. Petitioner's testimony in this regard is not credited for two reasons. First, he did not produce any medical documentation to support his testimony as to any Medicaid patient receiving a spinal manipulation during an initial office visit. Second, he did not identify any such patient during his testimony. Respondent performs Medicaid audits after a provider renders services. Therefore, it is essential for providers like Petitioner, who contest denied claims, to be able to substantiate their billing with appropriate documentation. Such documentation must be created at the time of service, maintained pursuant to statutory and rule requirements, and furnished to Respondent upon request. Petitioner never responded to Ms. Canfield-Buddin's request for medical documentation to substantiate Petitioner's challenge to the denied claims. Additionally, Petitioner testified that the services he performed for some Medicaid patients were not equivalent to the free services he performed for non-Medicaid patients because they often involved a higher level of service, including additional services, tests, or examinations. According to Petitioner, some of the Medicaid patients required more extensive screening and counseling that consumed more of Petitioner's time. Despite this testimony, Petitioner admitted that the histories he took of Medicaid patients and non-Medicaid patients were basically the same. Petitioner testified that the difference in the level of service provided to all patients varied based upon the individual patients and did not depend on whether they were or were not Medicaid patients. He had no written or unwritten guidelines or policies that limited the scope of screening or level of service in an initial office visit for either type of patient. Petitioner's testimony that the level of services provided to Medicaid patients differed from the level of services offered to non-Medicaid patients is not persuasive. Once again, Petitioner failed to provide the required medical documentation to support his testimony or to identify in his testimony Medicaid patients who required a higher level of service. Moreover, Petitioner knew, when he made his offer of free services, that he would not be able to claim reimbursement for services provided to Medicaid patients that were not separately reimbursable even if Petitioner was entitled to exclude Medicaid patients from the offer. This includes cases where a Medicaid patient may have required a high level of service in terms of the time expended during the screening or a spinal manipulation during the initial office visit. Petitioner provides free services to members of his family. The provision of free services to family does not establish that Petitioner had a usual and customary practice of providing free services. At times, Petitioner treats police officers and indigent persons free of charge. However, Petitioner does not publicly advertise that he treats these patients free of charge because he does not want to be overrun with people taking advantage of the offer. There is no persuasive evidence that Petitioner routinely treats police officers covered by private health insurance and indigent patients covered by Medicaid free of charge. Therefore, it cannot be said that Petitioner's usual and customary practice is to furnish services to these patients free of charge. A Medicaid provider is allowed to use the CPT code 99203 for a new patient visit once per recipient every three years. Petitioner's offer of free services for non-Medicaid patients allows them one free office visit and two free X-rays regardless of the passage of time. According to Petitioner, this means that Respondent's interpretation of Medicare regulations would entitle a Medicaid patient to the free services every three years whereas a non-Medicaid patient would not be so entitled, showing yet another difference in the services provided to Medicaid and non-Medicaid patients under the offer of free services. However, Petitioner's testimony in this regard is not persuasive because it is not based on medical documentation or testimony showing that Petitioner ever treated a Medicaid patient as a new patient more than once.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That Respondent enter a final order determining that Petitioner owes $11,077.65 for Medicaid reimbursement overpayments. DONE AND ENTERED this 18th day of November, 2002, in Tallahassee, Leon County, Florida. SUZANNE F. HOOD 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 18th day of November, 2002. COPIES FURNISHED: Anthony L. Conticello, Esquire Grant P. Dearborn, Esquire Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3 Tallahassee, Florida 32308-5403 Hal Cowen ChiroNetwork Health Care Centers 127 West 23rd Panama City, Florida 32405 Lealand McCharen, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3 Tallahassee, Florida 32308 Valda Clark Christian, General Counsel Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building, Suite 3431 Tallahassee, Florida 32308
Findings Of Fact At all times pertinent to the issues herein either the Florida Department of Health and Rehabilitative Services, (Department), or the Florida Agency for Health Care Administration, (Agency), its successor agency, operated the Medicaid Program in Florida, a state and federally funded program to provide medical services to indigent and eligible individuals, including children, in Florida. Petitioner, Neonatology Associates, Inc., (NAI), is a provider to the Medicaid Program of the State of Florida, and is located in St. Petersburg, Florida. Its Medicaid provider number is 067920-01. It has been a Medicaid provider for approximately thirty years. Medicaid and Children's Medical Services (CMS) were, at one time, both separate components of the Department of Health and Rehabilitative Services. On July 1, 1993, responsibility for Medicaid was assigned to the Agency for Health Care Administration. Medicaid, and its fiscal agent, FMMIS, are not now and never have been a part of either Children's Medical Services or Regional Perinatal Intensive Care Center (RPICC) and neither CMS nor RPICC have ever been a part of Medicaid or its fiscal agent. RPICC serves only peripherally to Medicaid as a claims transmittal agency or billing agent. That relationship was formalized by a contract which is considered by FMMIS as a billing agent contract. The parties stipulated prior to the hearing that the medical services, which are represented by Petitioner to have been performed were actually performed and rendered, and that all of the patients for the disputed claims are assumed to be Medicaid eligible. The parties stipulated at the hearing that the five claims were submitted by Petitioner to RPICC in a timely manner; that the five claims were received by RPICC within a twelve month period from the date of service; that there was a problem at RPICC which precluded the transmittal of these five claims in a timely manner to the Florida Medicaid Management Information System, (FMMIS), the office with which they were to be filed for payment; and that there was communication by telephone and in person between officials of Petitioner, RPICC, and the Department/Agency, (CMS), in an effort to resolve the filing difficulty. These claims relate to five patients, M.H., M.C., C.J., B.A. and R.W. Claims which are not received by Medicaid or its fiscal agent within twelve months of service may not be paid pursuant to law described in the trade as the "twelve month rule." The five claims in issue here were transmitted electronically to RPICC by NAI's agent, Ms. Chandler, the RPICC billing clerk at All Children's Hospital, where the service was rendered, for subsequent re- transmittal by RPICC to FMMIS. This procedure is authorized by the Agency. However, due to technical problems not further identified, the claims were never received by FMMIS. RPICC, a part of the Department's Children's Medical Services, and operated by the University of Florida, does not adjudicate claims but merely gathers and analyzes neonatology data for statistical reporting. FMMIS, Medicaid's fiscal agent since July 1, 1993, is operated by a private vendor. The contract between Medicaid and the University under which RPICC data services are provided, and that between NAI and Medicaid, which provides for medical services, both contain the same "boiler plate" clauses. Both NAI and RPICC transmit electronic claims to Medicaid for adjudication, but neither is a party of or agent of Medicaid. FMMIS is Medicaid's agent for payment. RPICC data processing services charges are paid to the University of Florida by Children's Medical Services under their contract. Medicaid pays only for the actual medical care provided to indigent mothers and their sick newborn children. NAI has a contract with Medicaid. RPICC has a contract with Medicaid. Children's Medical Services has a contract with RPICC at the University of Florida. These are the only formal agreements involved in this situation. The contract between NAI and Medicaid provides that NAI will submit Medicaid claims "in accordance with program policies." Medicaid policy provides that receipt of electronic claims submission to Medicaid or its fiscal agent, FMMIS, takes place only upon acceptance and confirmation by FMMIS. Acceptance occurs when each claim is assigned its own identification number. Medicaid policy also provides that submittal of a claim to RPICC does not constitute receipt of the claim by Medicaid or its fiscal agent, and submittal of a claim to RPICC does not toll the running of time accounted for under the twelve month rule. The relationship between Medicaid and the RPICC data center may be likened to that of RPICC's being a billing transmittal agent for FMMIS. RPICC does not process claims submitted to it but merely forwards those it receives to the fiscal agent which operates the FMMIS. Medicaid, by letter from Mr. Thomas Arnold, dated March 5, 1990, authorized FMMIS to receive Medicaid claims from RPICC. That letter does no more than offer providers an option to have RPICC bill the fiscal agent for them, thereby creating a "billing agent" status for RPICC. It does not state that submittal of claims by providers to RPICC constitutes filing a claim with Medicaid or the fiscal agent so as to toll the running of the twelve months limit. The Medicaid Physician Provider Handbook made available to all providers expressly states that all claim inquiries be made to Consultec, a private computer services provider. Both Mr. Blasioli and the Agency's regional claims representative noted that NAI did not contact Consultec regarding the computer problems regarding the instant claims prior to the expiration of the twelve month claim filing limit. Neither did NAI make use of RPICC's internal claims tracking system during the period in issue. The evidence establishes that NAI experienced difficulty in submitting the five claims in issue. Nonetheless, within a month of being employed by NAI, its billing administrator advised Medicaid that he had addressed the problem and had established procedures with RPICC's data center to prevent future claims from exceeding the twelve month limit. NAI's difficulty with the five claims in issue were first brought to the attention of Medicaid personnel after the twelve month filing limit had expired. Though the claims in issue here were submitted electronically, NAI could have submitted these claims directly to FMMIS by traditional paper claim, omitting the RPICC channel and its potential for technical problems. It chose not to do so. The "twelve month rule" provides for exceptions which are expressly limited to those claims which are delayed by either legal action or lack of proof of recipient eligibility. An additional exception is afforded claims delayed by "crossovers" with Medicare. The rule does not provide for extension of time due to computer system error unless such error relates to processing errors which arise subsequent to Medicaid's acknowledgment of claim receipt. In essence, to justify an exception to the twelve month rule, the computer error must be Medicaid's. The Medicaid program cannot deviate from federally imposed requirements. Should it do so, it faces the potential loss of federal expenditure reimbursement which constitutes fifty-five percent of all money spent by Florida in its operation of the Medicaid program. The program processes 100,000,000 claims annually from more than 60,000 providers, paying out approximately $6,700,000,000 each year. Even minor exceptions to the rules governing the adjudication process could have extensive impact on and consequences to the program and the benefits it imparts to the indigent health care recipients it serves.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Agency for Health Care Administration enter a final order denying as untimely Petitioner's five claims in issue. DONE and ENTERED this 22nd day of May, 1996, in Tallahassee, Florida. ARNOLD H. POLLOCK, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 22nd day of May, 1996. APPENDIX TO RECOMMENDED ORDER, CASE NO. 95-3049 To comply with the requirements of Section 120.59(2), Florida Statutes (1993), the following rulings are made on the parties' proposed findings of fact: Petitioner's Proposed Findings of Fact. 1. - 3. Accepted and incorporated herein. First sentence accepted. Balance accepted as definitions, not Findings of Fact. - 12. Accepted. Merely a restatement of testimony in support of Petitioner's position. Not a proper Finding of Fact. Accepted. Rejected as no more than a comment on the evidence and a statement of party position. - 20. Accepted as a statement of position, but rejected as probative of any material factual issue. 21. - 24. Accepted. Accepted. & 27. Not Findings of Fact but citations of statute. 28. & 29. Accepted. Not Findings of fact but cites of agency rule. A restatement of Handbook matter. Accepted. - 35. Accepted. Accepted but non-probative argument. Rejected as contra to the weight of the evidence. - 43. Accepted. Not a Finding of Fact but a restatement of testimony. - 49. Accepted. 50. & 51. Accepted and incorporated herein. 52. - 55. Accepted. 56. - 58. Accepted. 59. & 61. Accepted, but no evidence exists that RPICC's actions constitute receipt of the claim. The evidence of record better suggests that RPICC receives information from providers based upon which it acts as billing agent for the provider and it remains incumbent upon the provider to insure it gets the pertinent information to RPICC in sufficient time for the claim to be billed within the tweleve month constrains. 62. - 65. Rejected as contra to the better evidence of record. Respondent's Proposed Findings of Fact. 1. & 2. Accepted and incorporated herein. Not a Finding of Fact but a restatement of the issue. - 7. Accepted and incorporated herein. 8. & 9. Accepted. 10. - 14. Accepted. Accepted. - 18. Accepted. 19. & 20. Accepted and incorporated herein. Not a Finding of Fact but a restatement of and comment on testimony. & 23. Accepted and incorporated herein. 24. Accepted but not probative of any material issue of issue of fact. COPIES FURNISHED: Frank P. Rainer, Esquire Ruden, McClosky, Smith, Schuster, and Russell, P.A. 215 South Monroe Street, Suite 815 Tallahassee, Florida 32310 Mark S. Thomas, Esquire Agency for Health Care Administration 2727 Mahan Drive, Suite 3407 Tallahassee, Florida 32308 Sam Power Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32308 Jerome W. Hoffman General Counsel Agency for Health Care Administration 2727 Mahan Drive Tallahassee, Florida 32309
The Issue Whether Medicaid overpayments were made to Respondent and, if so, what is the total amount of those overpayments. Whether, as a "sanction," Respondent should be directed to submit to a "comprehensive follow-up review in six months."
Findings Of Fact Based upon the evidence adduced at hearing, and the record as a whole, the following findings s of fact are made to supplement and clarify the factual stipulations set forth in the parties' Joint Prehearing Stipulation and their January 26, 2007, pleading:4 Respondent and his Practice Respondent is a pediatric physician whose office is located in a poor neighborhood in Hialeah, Florida. He has a very busy practice, seeing approximately 50 to 60 patients each day the office is open. Respondent documents patient visits by making handwritten notations on printed "progress note" forms. Because of the fast-paced nature of his practice, he does not always "have time to write everything as [he] would like, because [there] is too much" for him to do. Respondent's Participation in the Medicaid Program During the Audit Period, Respondent was authorized to provide physician services to eligible Medicaid patients. Respondent provided such services pursuant to a valid Provider Agreement (Provider Agreement) with AHCA, which contained the following provisions, among others: The Provider agrees to participate in the Florida Medicaid program under the following terms and conditions: * * * Quality of Services. The provider agrees to provide medically necessary services or goods of not less than the scope and quality it provides to the general public. The provider agrees that services or goods billed to the Medicaid program must be medically necessary, of a quality comparable to those furnished by the provider's peers, and within the parameters permitted by the provider's license or certification. The provider further agrees to bill only for the services performed within the specialty or specialties designated in the provider application on file with the Agency. The services or goods must have been actually provided to eligible Medicaid recipients by the provider prior to submitting the claim. Compliance. The provider agrees to comply with all local, state and federal laws, rules, regulations, licensure laws, Medicaid bulletins, manuals, handbooks and Statements of Policy as they may be amended from time to time. Term and signatures. The parties agree that this is a voluntary agreement between the Agency and the provider, in which the provider agrees to furnish services or goods to Medicaid recipients. . . . Provider Responsibilities. The Medicaid provider shall: * * * (b) Keep and maintain in a systematic and orderly manner all medical and Medicaid related records as the Agency may require and as it determines necessary; make available for state and federal audits for five years, complete and accurate medical, business, and fiscal records that fully justify and disclose the extent of the goods and services rendered and billings made under the Medicaid. The provider agrees that only records made at the time the goods and services were provided will be admissible in evidence in any proceeding relating to the Medicaid program. * * * (d) Except as otherwise provided by law, the provider agrees to provide immediate access to authorized persons (including but not limited to state and federal employees, auditors and investigators) to all Medicaid- related information, which may be in the form of records, logs, documents, or computer files, and all other information pertaining to services or goods billed to the Medicaid program. This shall include access to all patient records and other provider information if the provider cannot easily separate records for Medicaid patients from other records. * * * (f) Within 90 days of receipt, refund any moneys received in error or in excess of the amount to which the provider is entitled from the Medicaid program. * * * (i) . . . . The provider shall be liable for all overpayments for any reason and pay to the Agency any fine or overpayment imposed by the Agency or a court of competent jurisdiction. Provider agrees to pay interest at 12% per annum on any fine or repayment amount that remains unpaid 30 days from the date of any final order requiring payment to the Agency. * * * Respondent's Medicaid provider number (under which he billed the Medicaid program for providing these services) was (and remains) 370947700. Handbook Provisions The handbooks with which Petitioner was required to comply in order to receive Medicaid payment for services rendered during the Audit Period included the Medicaid Provider Reimbursement Handbook, HCFA-1500 (MPR Handbook); Physician Coverage and Limitations Handbook (PCL Handbook); the Early and Periodic Screening, Diagnosis and Treatment Coverage and Limitations Handbook (EPSDTCL Handbook); and the Child Health Check-up Coverage and Limitations Handbook (CHCUCL Handbook). Medical Necessity The PCL Handbook provided that the Medicaid program would reimburse physician providers for services "determined [to be] medically necessary" and not duplicative of another provider's service, and it went on to state as follows: In addition, the services must meet the following criteria: the services must be individualized, specific, consistent with symptoms or confirmed diagnosis of the illness or injury under treatment, and not in excess of the recipient's needs; the services cannot be experimental or investigational; the services must reflect the level of services that can be safely furnished and for which no equally effective and more conservative or less costly treatment is available statewide; and the services must be furnished in a manner not primarily intended for the convenience of the recipient, the recipient's caretaker, or the provider. The fact that a provider has prescribed, recommended, or approved medical or allied care, goods, or services does not, in itself, make such care, goods or services medically necessary or a covered services. Note See Appendix D, Glossary, in the Medicaid Provider Reimbursement Handbook, HCFA-1500 and EPSDT 224, for the definition of medically necessary.[5] The EPSDTCL and CHCUCL Handbooks had similar provisions. Documentation Requirements The MPR Handbook required the provider to keep "accessible, legible and comprehensible" medical records that "state[d] the necessity for and the extent of services" billed the Medicaid program and that were "signed and dated at the time of service." The handbook further required, among other things, that the provider retain such records for "at least five years from the date of service" and "send, at his or her expense, legible copies of all Medicaid-related information to the authorized state and federal agencies and their authorized representatives." The MPR Handbook warned that providers "not in compliance with the Medicaid documentation and record retention policies [described therein] may be subject to administrative sanctions and recoupment of Medicaid payments" and that "Medicaid payments for services that lack required documentation or appropriate signatures will be recouped." EPSDT Screening/Child Health Check-Up The EPSDTCL Handbook provided: To be reimbursed by Medicaid, the provider must address and document in the recipient's medical record all the required components of an EPSDT screening. The following required components are listed in the order that they appear on the optional EPSDT screening form: Health and developmental history Nutritional assessment Developmental assessment Physical examination Dental screening Vision screening Hearing screening Laboratory tests Immunization Health education Diagnosis and treatment The CHCUCL Handbook, which replaced the EPSDTCL Handbook in or around May 2000, similarly provided as follows: To be reimbursed by Medicaid, the provider must assess and document in the child's medical record all the required components of a Child Health Check-Up. The required components are as follows: Comprehensive Health and Developmental History, including assessment of past medical history, developmental history and behavioral health status; Nutritional assessment; Developmental assessment; Comprehensive Unclothed Physical Examination Dental screening including dental referral, where required; Vision screening including objective testing, where required; Hearing screening including objective testing, where required; Laboratory tests including blood lead testing, where required; Appropriate immunizations; Health education, anticipatory guidance; Diagnosis and treatment; and Referral and follow-up, as appropriate. Coding Chapter 3 of the PCL Handbook "describe[d] the procedure codes for the services reimbursable by Medicaid that [had to be] used by physicians providing services to eligible recipients." As explained on the first page of this chapter of the handbook: The procedure codes listed in this chapter [were] Health Care Financing Administration Common Procedure Coding System (HCPCS) Levels 1, 2 and 3. These [were] based on the Physician[]s['] Current Procedural Terminology (CPT) book. The Current Procedural Terminology (CPT) book referred to in Chapter 3 of the PCL Handbook was a publication of the American Medical Association. It contained a listing of procedures and services performed by physicians in different settings, each identified by a "procedure code" consisting of five digits or a letter followed by four digits. For instance, there were various "procedure codes" for office visits. These "procedure codes" included the following, among others: New Patient * * * 99204 Office or other outpatient visit for the evaluation and management of a new patient which requires these three key components: a comprehensive history; a comprehensive examination; and medical decision making of moderate complexity. Counseling and/or coordination of care with other providers or agencies are provided consistent with the nature of the problem(s) and the patient's and/or family's needs. Usually, the presenting problem(s) are of moderate to high severity. Physicians typically spend 45 minutes face-to-face with the patient and/or family. * * * Established Patient * * * 99213 Office or other outpatient visit for the evaluation and management of an established patient, which requires at least two of these three key components: an expanded problem focused history; an expanded problem focused examination; medical decision making of low complexity. Counseling and coordination of care with other providers or agencies are provided consistent with the nature of the problem(s) and the patient's and/or family's needs. Usually, the presenting problem(s) are of low to moderate severity. Physicians typically spend 15 minutes face-to-face with the patient and/or family. 99214 Office or other outpatient visit for the evaluation and management of an established patient, which requires at least two of these three key components: a detailed history; a detailed examination; medical decision making of moderate complexity. Counseling and/or coordination of care with other providers or agencies are provided consistent with the nature of the problem(s) and the patient's and/or family's needs. Usually, the presenting problem(s) are of moderate to high severity. Physicians typically spend 25 minutes face-to-face with the patient and/or family. * * * Fee Schedules In Appendix J of the PCL Handbook, there was a "fee schedule," which established the amount physicians would be paid by the Medicaid program for each reimbursable procedure and service (identified by "procedure code"). For both "new patient" office visits (99201-99205 "procedure code" series) and "established patient" office visits (99211-99215 "procedure code" series), the higher numbered the "procedure code" in the series, the more a physician would be reimbursed under the "fee schedule." The Audit and Aftermath Commencing in or around August 2002, AHCA conducted an audit of Respondent's Medicaid claims for services rendered during the Audit Period (Audit Period Claims).6 Respondent had submitted 18,102 such Audit Period Claims, for which he had received payments totaling $596,623.15. These Audit Period Claims involved 1,372 different Medicaid patients. From this group, AHCA randomly selected a "cluster sample" of 40 patients. Of the 18,102 Audit Period Claims, 713 had been for services that, according to the claims, had been provided to the 40 patients in the "cluster sample" (Sample Claims). Respondent had received a total of $23,263.18 for these 713 Sample Claims. During an August 28, 2002, visit to Respondent's office, AHCA personnel "explain[ed] to [Respondent] what the audit was about [and] why [AHCA] was doing it" and requested Respondent to provide AHCA with copies of the medical records Respondent had on file for the 40 patients in the "cluster sample" documenting the services provided to them during the Audit Period. The originals of these records were not inspected by AHCA personnel or agents during, or any time after, this August 28, 2002, site visit. Sometime within approximately 30 to 45 days of the August 28, 2002, site visit, Respondent, through his office staff, made the requested copies (First Set of Copies) and provided them to AHCA. There is nothing on the face of these documents to suggest that they were not true, accurate, and complete copies of the originals in Respondent's possession, as they existed at the time of copying (Copied Originals). They do not appear, upon visual examination, to be the product of "bad photocopying." While the handwritten entries and writing are oftentimes difficult (at least for the undersigned) to decipher, this is because of the poor legibility of the handwriting, not because the copies are faint or otherwise of poor quality. Each of the Sample Claims was reviewed to determine whether it was supported by information contained in the First Set of Copies. An initial review was conducted by AHCA Program Analyst Theresa Mock and AHCA Registered Nurse Consultant Blanca Notman. AHCA then contracted with Larry Deeb, M.D., to conduct an independent "peer review" in accordance with the provisions of Section 409.9131, Florida Statutes. Since 1980, Dr. Deeb has been a Florida-licensed pediatric physician, certified by the American Board of Pediatrics, in active practice in Tallahassee. AHCA provided Dr. Deeb with the First Set of Copies, along with worksheets containing a "[l]isting of [a]ll claims in [the] sample" on which Ms. Notman had made handwritten notations indicating her preliminary determination as to each of the Sample Claims (Claims Worksheets). In conducting his "peer review," Dr. Deeb did not interview any of the 40 patients in the "cluster sample," nor did he take any other steps to supplement the information contained in the documents that he was provided. Dr. Deeb examined the First Set of Copies. He conveyed to AHCA his findings regarding the sufficiency of these documents to support the Sample Claims by making appropriate handwritten notations on the Claims Worksheets before returning them to AHCA. Based on Dr. Deeb's sufficiency findings, as well as Ms. Notman's "no documentation" determinations, AHCA "provisional[ly]" determined that Respondent had been overpaid a total $80,788.23 for the Audit Period Claims. By letter dated July 7, 2003 (Provisional Agency Audit Report), AHCA advised Petitioner of this "provisional" determination and invited Respondent to "submit further documentation in support of the claims identified as overpayment," adding that "[d]ocumentation that appear[ed] to be altered, or in any other way appear[ed] not to be authentic, [would] not serve to reduce the overpayment." Appended to the letter were "[t]he audit work papers [containing a] listing [of] the claims that [were] affected by this determination." In the Provisional Agency Audit Report, AHCA gave the following explanation as to how it arrived at its overpayment determination: REVIEW DETERMINATION(S) Medicaid policy defines the varying levels of care and expertise required for the evaluation and management procedure codes for office visits. The documentation you provided supports a lower level of office visit than the one for which you billed and received payment. The difference between the amount you were paid and the correct payment for the appropriate level of service is considered an overpayment. Medicaid policy specifies how medical records must be maintained. A review of your medical records revealed that some services for which you billed and received payment were not documented. Medicaid requires documentation of the services and considers payment made for services not appropriately documented an overpayment. Medicaid policy addresses specific billing requirements and procedures. You billed Medicaid for Child Health Check Up (CHCUP) services and office visits for the same child on the same day. Child Health Check- Up Providers may only bill for one visit, a Child Health Check-Up or a sick visit. The difference between the amount you were paid and the appropriate fee is considered an overpayment. The overpayment was calculated as follows: A random sample of 40 recipients respecting whom you submitted 713 claims was reviewed. For those claims in the sample which have dates of service from January 01, 2000 through December 31, 2001 an overpayment of $4,168.00 or $5.84667601 per claim was found, as indicated on the accompanying schedule. Since you were paid for a total (population) of 18,102 claims for that period, the point estimate of the total overpayment is 18,102 x $5.84667601= $105,836.33. There is a 50 percent probability that the overpayment to you is that amount or more. There was then an explanation of the "statistical formula for cluster sampling" that AHCA used and how it "calculated that the overpayment to [Respondent was] $80,788.23 with a ninety-five percent (95%) probability that it [was] that amount or more." After receiving the Provisional Agency Audit Report, Respondent requested to meet with Dr. Deeb to discuss Dr. Deeb's sufficiency findings. The meeting was held on September 25, 2003, approximately six months after Dr. Deeb had reviewed the First Set of Copies and a year after AHCA had received the First Set of Copies from Respondent. At the meeting, Respondent presented to Dr. Deeb what Respondent represented was a better set of copies of the Copied Originals than the First Set of Copies (on which Dr. Deeb had based the sufficiency findings AHCA relied on in making its "provisional" overpayment determination). According to Respondent, the First Set of Copies "had not been properly Xeroxed." He stated that his office staff "had not copied the back section of the documentation and that was one of the major factors in the documentation not supporting the [claimed] level of service." The copies that Respondent produced at this meeting (Second Set of Copies) had additional handwritten entries and writing (both on the backs and fronts of pages) not found in the First Set of Copies: the backs of "progress note" pages that were completely blank in the First Set of Copies contained handwritten narratives, and there were handwritten entries and writing in numerous places on the fronts of these pages where, on the fronts of the corresponding pages in the First Set of Copies, just blank, printed lines appeared (with no other discernible markings). The Second Set of Copies was not appreciably clearer than the First Set of Copies. In the two hours that he had set aside to meet with Respondent, Dr. Deeb only had time to conduct a "quick[]," partial review of the Second Set of Copies. Based on this review (which involved looking at documents concerning approximately half of the 40 patients in the "cluster sample"), Dr. Deeb preliminarily determined to "allow" many of the Sample Claims relating to these patients that he had previously determined (based on his review of the First Set of Copies) were not supported by sufficient documentation. Following this September 25, 2003, meeting, after comparing the Second Set of Copies with the First Set of Copies and noting the differences between the two, AHCA "made the decision that [it] would not accept the [S]econd [S]et [of Copies]" because these documents contained entries and writing that appeared to have been made, not contemporaneously with the provision of the goods or services they purported to document (as required), but rather after the post-Audit Period preparation of the First Set of Copies. Instead, AHCA, reasonably, based its finalized overpayment determination on the First Set of Copies. Thereafter, AHCA prepared and sent to Respondent a Final Agency Audit Report, which was in the form of a letter dated June 29, 2004, advising Respondent that AHCA had finalized the "provisional" determination announced in the Provisional Agency Audit that he had been overpaid $80,788.23 for the Audit Period Claims (a determination that the preponderance of the record evidence in this case establishes is a correct one).
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that AHCA enter a final order finding that Respondent received $80,788.23 in Medicaid overpayments for the Audit Period Claims, and requiring Respondent to repay this amount to AHCA. DONE AND ENTERED this 30th day of April, 2007, 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 30th day of April, 2007.
The Issue The issues in this case are whether Respondent applied the proper reimbursement principles to Petitioners' initial Medicaid rate setting, and whether elements of detrimental reliance exist so as to require Respondent to establish a particular initial rate for Petitioners' facilities.
Findings Of Fact There are nine Petitioners in this case. Each of them is a long-term health care facility (nursing home) operated under independent and separate legal entities, but, generally, under the umbrella of a single owner, Tzvi "Steve" Bogomilsky. The issues in this case are essentially the same for all nine Petitioners, but the specific monetary impact on each Petitioner may differ. For purposes of addressing the issues at final hearing, only one of the Petitioners, Madison Pointe Rehabilitation and Health Center (Madison Pointe), was discussed, but the pertinent facts are relevant to each of the other Petitioners as well. Each of the Petitioners has standing in this case. The Amended Petition for Formal Administrative Hearing filed by each Petitioner was timely and satisfied minimum requirements. In September 2008, Bogomilsky caused to be filed with AHCA a Change of Licensed Operator ("CHOP") application for Madison Pointe.1 The purpose of that application was to allow a new entity owned by Bogomilsky to become the authorized licensee of that facility. Part and parcel of the CHOP application was a Form 1332, PFA. The PFA sets forth projected revenues, expenses, costs and charges anticipated for the facility in its first year of operation by the new operator. The PFA also contained projected (or budgeted) balance sheets and a projected Medicaid cost report for the facility. AHCA is the state agency responsible for licensing nursing homes in this state. AHCA also is responsible for managing the federal Medicaid program within this state. Further, AHCA monitors nursing homes within the state for compliance with state and federal regulations, both operating and financial in nature. The AHCA Division of Health Quality Assurance, Bureau of Long-Term Care Services, Long-Term Care Unit ("Long-Term Care Unit") is responsible for reviewing and approving CHOP applications and issuance of an operating license to the new licensee. The AHCA Division of Health Quality Assurance, Bureau of Health Facility Regulation, Financial Analysis Unit ("Financial Analysis Unit") is responsible for reviewing the PFA contained in the CHOP application and determining an applicant's financial ability to operate a facility in accordance with the applicable statutes and rules. Neither the Long-Term Care Unit nor the Financial Analysis Unit is a part of the Florida Medicaid Program. Madison Pointe also chose to submit a Medicaid provider application to the Medicaid program fiscal agent to enroll as a Medicaid provider and to be eligible for Medicaid reimbursement. (Participation by nursing homes in the Medicaid program is voluntary.) The Medicaid provider application was reviewed by the Medicaid Program Analysis Office (MPA) which, pursuant to its normal practices, reviewed the application and set an interim per diem rate for reimbursement. Interim rate-setting is dependent upon legislative direction provided in the General Appropriations Act and also in the Title XIX Long-Term Care Reimbursement Plan (the Plan). The Plan is created by the federal Centers for Medicare and Medicaid Services (CMS). CMS (formerly known as the Health Care Financing Administration) is a federal agency within the Department of Health and Human Services. CMS is responsible for administering the Medicare and Medicaid programs, utilizing state agencies for assistance when appropriate. In its PFA filed with the Financial Analysis Unit, Madison Pointe proposed an interim Medicaid rate of $203.50 per patient day (ppd) as part of its budgeted revenues. The projected interim rate was based on Madison Pointe's expected occupancy rate, projected expenses, and allowable costs. The projected rate was higher than the previous owner's actual rate in large part based on Madison Pointe's anticipation of pending legislative action concerning Medicaid reimbursement issues. That is, Madison Pointe projected higher spending and allowable costs based on expected increases proposed in the upcoming legislative session. Legislative Changes to the Medicaid Reimbursement System During the 2007 Florida Legislative Session, the Legislature addressed the status of Medicaid reimbursement for long-term care facilities. During that session, the Legislature enacted the 2007 Appropriations Act, Chapter 2007-72, Laws of Florida. The industry proposed, and the Legislature seemed to accept, that it was necessary to rebase nursing homes in the Medicaid program. Rebasing is a method employed by the Agency periodically to calibrate the target rate system and adjust Medicaid rates (pursuant to the amount of funds allowed by the Legislature) to reflect more realistic allowable expenditures by providers. Rebasing had previously occurred in 1992 and 2002. The rebasing would result in a "step-up" in the Medicaid rate for providers. In response to a stated need for rebasing, the 2007 Legislature earmarked funds to address Medicaid reimbursement. The Legislature passed Senate Bill 2800, which included provisions for modifying the Plan as follows: To establish a target rate class ceiling floor equal to 90 percent of the cost- based class ceiling. To establish an individual provider- specific target floor equal to 75 percent of the cost-based class ceiling. To modify the inflation multiplier to equal 2.0 times inflation for the individual provider-specific target. (The inflation multiplier for the target rate class ceiling shall remain at 1.4 times inflation.) To modify the calculation of the change of ownership target to equal the previous provider's operating and indirect patient care cost per diem (excluding incentives), plus 50 percent of the difference between the previous providers' per diem (excluding incentives) and the effect class ceiling and use an inflation multiplier of 2.0 times inflation. The Plan was modified in accordance with this legislation with an effective date of July 1, 2007. Four relevant sentences from the modified Plan are relevant to this proceeding, to wit: For a new provider with no cost history resulting from a change of ownership or operator, where the previous provider participated in the Medicaid program, the interim operating and patient care per diems shall be the lesser of: the class reimbursement ceiling based on Section V of this Plan, the budgeted per diems approved by AHCA based on Section III of this Plan, or the previous providers' operating and patient care cost per diem (excluding incentives), plus 50% of the difference between the previous providers' per diem (excluding incentives) and the class ceiling. The above new provider ceilings, based on the district average per diem or the previous providers' per diem, shall apply to all new providers with a Medicaid certification effective on or after July 1, 1991. The new provider reimbursement limitation above, based on the district average per diem or the previous providers' per diem, which affects providers already in the Medicaid program, shall not apply to these same providers beginning with the rate semester in which the target reimbursement provision in Section V.B.16. of this plan does not apply. This new provider reimbursement limitation shall apply to new providers entering the Medicaid program, even if the new provider enters the program during a rate semester in which Section V.B.16 of this plan does not apply. [The above cited sentences will be referred to herein as Plan Sentence 1, Plan Sentence 2, etc.] Madison Pointe's Projected Medicaid Rate Relying on the proposed legislation, including the proposed rebasing and step-up in rate, Madison Pointe projected an interim Medicaid rate of $203.50 ppd for its initial year of operation. Madison Pointe's new projected rate assumed a rebasing by the Legislature to eliminate existing targets, thereby, allowing more reimbursable costs. Although no legislation had been passed at that time, Madison Pointe's consultants made calculations and projections as to how the rebasing would likely affect Petitioners. Those projections were the basis for the $203.50 ppd interim rate. The projected rate with limitations applied (i.e., if Madison Pointe did not anticipate rebasing or believe the Plan revisions applied) would have been $194.26. The PFA portion of Madison Pointe's CHOP application was submitted to AHCA containing the $203.50 ppd interim rate. The Financial Analysis Unit, as stated, is responsible for, inter alia, reviewing PFAs submitted as part of a CHOP application. In the present case, Ryan Fitch was the person within the Financial Analysis Unit assigned responsibility for reviewing Madison Pointe's PFA. Fitch testified that the purpose of his review was to determine whether the applicant had projected sufficient monetary resources to successfully operate the facility. This would include a contingency fund (equal to one month's anticipated expenses) available to the applicant and reasonable projections of cost and expenses versus anticipated revenues.2 Upon his initial review of the Madison Pointe PFA, Fitch determined that the projected Medicaid interim rate was considerably higher than the previous operator's actual rate. This raised a red flag and prompted Fitch to question the propriety of the proposed rate. In his omissions letter to the applicant, Fitch wrote (as the fourth bullet point of the letter), "The projected Medicaid rate appears to be high relative to the current per diem rate and the rate realized in 2006 cost reports (which includes ancillaries and is net of contractual adjustments). Please explain or revise the projections." In response to the omissions letter, Laura Wilson, a health care accountant working for Madison Pointe, sent Fitch an email on June 27, 2008. The subject line of the email says, "FW: Omissions Letter for 11 CHOW applications."3 Then the email addressed several items from the omissions letter, including a response to the fourth bullet point which says: Item #4 - Effective July 1, 2007, it is anticipated that AHCA will be rebasing Medicaid rates (the money made available through elimination of some of Medicaid's participation in covering Medicare Part A bad debts). Based on discussions with AHCA and the two Associations (FHCA & FAHSA), there is absolute confidence that this rebasing will occur. The rebasing is expected to increase the Medicaid rates at all of the facilities based on the current operator's spending levels. As there is no definitive methodology yet developed, the rebased rates in the projections have been calculated based on the historical methodologies that were used in the 2 most recent rebasings (1992 and 2002). The rates also include the reestablishment of the 50% step-up that is also anticipated to begin again. The rebasing will serve to increase reimbursement and cover costs which were previously limited by ceilings. As noted in Note 6 of the financials, if something occurs which prevents the rebasing, Management will be reducing expenditures to align them with the available reimbursement. It is clear Madison Pointe's projected Medicaid rate was based upon proposed legislative actions which would result in changes to the Plan. It is also clear that should those changes not occur, Madison Pointe was going to be able to address the shortfall by way of reduced expenditures. Each of those facts was relevant to the financial viability of Madison Pointe's proposed operations. Madison Pointe's financial condition was approved by Fitch based upon his review of the PFA and the responses to his questions. Madison Pointe became the new licensed operator of the facility. That is, the Long-Term Care Unit deemed the application to have met all requirements, including financial ability to operate, and issued a license to the applicant. Subsequently, MPA provided to Madison Pointe its interim Medicaid rate. MPA advised Madison Pointe that its rate would be $194.55 ppd, some $8.95 ppd less than Madison Pointe had projected in its PFA (but slightly more than Madison Pointe would have projected with the 50 percent limitation from Plan Sentence 1 in effect, i.e., $194.26). The PFA projected 25,135 annual Medicaid patient days, which multiplied by $8.95, would equate to a reduction in revenues of approximately $225,000 for the first year of operation.4 MPA assigned Madison Pointe's interim Medicaid rate by applying the provisions of the Plan as it existed as of the date Madison Pointe's new operating license was issued, i.e., September 1, 2007. Specifically, MPA limited Madison Pointe's per diem to 50 percent of the difference between the previous provider's per diem and the applicable ceilings, as dictated by the changes to the Plan. (See Plan Sentence 1 set forth above.) Madison Pointe's projected Medicaid rate in the PFA had not taken any such limitations into account because of Madison Pointe's interpretation of the Plan provisions. Specifically, that Plan Sentence 3 applies to Madison Pointe and, therefore, exempts Madison Pointe from the new provider limitation set forth in Plan Sentences 1 and 2. However, Madison Pointe was not "already in the Medicaid program" as of July 1, 2007, as called for in Plan Sentence 3. Rather, Madison Pointe's commencement date in the Medicaid program was September 1, 2007. Plan Sentence 1 is applicable to a "new provider with no cost history resulting from a change of ownership or operator, where the previous operator participated in the Medicaid program." Madison Pointe falls within that definition. Thus, Madison Pointe's interim operating and patient care per diems would be the lesser of: (1) The class reimbursement ceiling based on Section V of the Plan; (2) The budgeted per diems approved by AHCA based on Section III of the Plan; or (3) The previous provider's operating and patient care cost per diem (excluding incentives), plus 50 percent of the difference between the previous provider's per diem and the class ceiling. Based upon the language of Plan Sentence 1, MPA approved an interim operating and patient care per diem of $194.55 for Madison Pointe. Plan Sentence 2 is applicable to Madison Pointe, because it applies to all new providers with a Medicaid certification effective after July 1, 1991. Madison Pointe's certification was effective September 1, 2007. Plan Sentence 3 is the primary point of contention between the parties. AHCA correctly contends that Plan Sentence 3 is not applicable to Petitioner, because it addresses rebasing that occurred on July 1, 2007, i.e., prior to Madison Pointe coming into the Medicaid system. The language of Plan Sentence 3 is clear and unambiguous that it applies to "providers already in the Medicaid program." Plan Sentence 4 is applicable to Madison Pointe, which entered the system during a rate semester, in which no other provider had a new provider limitation because of the rebasing. Again, the language is unambiguous that "[t]his new provider reimbursement limitation shall apply to new providers entering the Medicaid program. . . ." Madison Pointe is a new provider entering the program. Detrimental Reliance and Estoppel Madison Pointe submitted its CHOP application to the Long-Term Care Unit of AHCA for approval. That office has the clear responsibility for reviewing and approving (or denying) CHOP applications for nursing homes. The Long-Term Care Unit requires, as part of the CHOP application, submission of the PFA which sets forth certain financial information used to determine whether the applicant has the financial resources to operate the nursing home for which it is applying. The Long-Term Care Unit has another office within AHCA, the Financial Analysis Unit, to review the PFA. The Financial Analysis Unit is found within the Bureau of Health Facility Regulation. That Bureau is responsible for certificates of need and other issues, but has no authority concerning the issuance, or not, of a nursing home license. Nor does the Financial Analysis Unit have any authority to set an interim Medicaid rate. Rather, the Financial Analysis Unit employs certain individuals who have the skills and training necessary to review financial documents and determine an applicant's financial ability to operate. A nursing home licensee must obtain Medicaid certification if it wishes to participate in the program. Madison Pointe applied for Medicaid certification, filing its application with a Medicaid intermediary which works for CMS. The issuance of a Medicaid certification is separate and distinct from the issuance of a license to operate. When Madison Pointe submitted its PFA for review, it was aware that an office other than the Long-Term Care Unit would be reviewing the PFA. Madison Pointe believed the two offices within AHCA would communicate with one another, however. But even if the offices communicated with one another, there is no evidence that the Financial Analysis Unit has authority to approve or disapprove a CHOP application. That unit's sole purpose is to review the PFA and make a finding regarding financial ability to operate. Likewise, MPA--which determines the interim Medicaid rate for a newly licensed operator--operates independently of the Long-Term Care Unit or the Financial Analysis Unit. While contained within the umbrella of AHCA, each office has separate and distinct duties and responsibilities. There is no competent evidence that an applicant for a nursing home license can rely upon its budgeted interim rate--as proposed by the applicant and approved as reasonable by MPA--as the ultimate interim rate set by the Medicaid Program Analysis Office. At no point in time did Fitch tell Madison Pointe that a rate of $203.50 ppd would be assigned. Rather, he said that the rate seemed high; Madison Pointe responded that it could "eliminate expenditures to align them with the available reimbursement." The interim rate proposed by the applicant is an estimate made upon its own determination of possible facts and anticipated operating experience. The interim rate assigned by MPA is calculated based on the applicant's projections as affected by provisions in the Plan. Furthermore, it is clear that Madison Pointe was on notice that its proposed interim rate seemed excessive. In response to that notice, Madison Pointe did not reduce the projected rate, but agreed that spending would be curtailed if a lower interim rate was assigned. There was, in short, no reliance by Madison Pointe on Fitch's approval of the PFA as a de facto approval of the proposed interim rate. MPA never made a representation to Madison Pointe as to the interim rate it would receive until after the license was approved. There was, therefore, no subsequent representation made to Madison Pointe that was contrary to a previous statement. The Financial Analysis Unit's approval of the PFA was done with a clear and unequivocal concern about the propriety of the rate as stated. The approval was finalized only after a representation by Madison Pointe that it would reduce expenditures if a lower rate was imposed. Thus, Madison Pointe did not change its position based on any representation made by AHCA.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by Respondent, Agency for Health Care Administration, approving the Medicaid interim per diem rates established by AHCA and dismissing each of the Amended Petitions for Formal Administrative Hearing. DONE AND ENTERED this 23rd day of February, 2009, in Tallahassee, Leon County, Florida. R. BRUCE MCKIBBEN 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 23rd day of February, 2009.
