Findings Of Fact The Medicaid reimbursement program is a joint state and federal program which provides reimbursement to Florida-licensed nursing homes for long-term care provided to Medicaid eligible persons. The Florida Title XIX Long Term Care Reimbursement Plan (Plan) governs reimbursement to nursing homes for the provision of Medicaid services. The Agency for Health Care Administration (AHCA) is the State agency responsible for implementation of the Medicaid program in the State of Florida. The AHCA is the successor in interest to the Department of Health and Rehabilitative Services, the agency originally responsible for Medicaid reimbursement. At all times material to this case, Quality Health Care (Quality) is and has been a provider of services for purposes of the Medicaid program. Medicaid per diem reimbursement rates for nursing home care were historically based on a "cost" system, which included four components: operating costs, patient care costs, property asset costs and return on equity. Re-valuation of property due to property asset sales and refinancing mechanisms, resulted in a steadily increasing property cost component to the reimbursement formula. The Federal Deficit Reduction Act of 1984 (DEFRA) was enacted in part to limit the effect of property asset re-valuation on reimbursement. The DEFRA restricted the "step up" in property costs which occurred when existing facilities were sold and existing property was re-valued. The actual effect of the DEFRA provisions was to freeze property cost reimbursement. In response to DEFRA, the State of Florida revised its reimbursement program in 1984-85 to shift from the traditional cost system to the fair rental value system (FRVS.) The FRVS, designed to provide an alternative to the DEFRA imposed limits, was created by the State of Florida and the nursing home industry to address the industry's concerns about the effect of DEFRA on reimbursement rates and cash flow. The FRVS methodology imputes a provider's property asset value and indexes the value to specified inflation factors. A provider is reimbursed for a portion of the indexed value rather than actual property costs. The methodology itself is not at issue in this proceeding. On October 1, 1985, the State of Florida implemented Medicaid reimbursement on the FRVS program. At the time of implementation of the FRVS, it was determined that application of the FRVS should be temporarily deferred for some providers. The temporary deferment was intended to protect existing providers committed to long term property liability in anticipation of cost reimbursement rates from being injured by the altered reimbursement program and the resulting reduction in reimbursement rates. In order to provide for deferment of the FRVS, the creators of the system created a "hold harmless" provision designed to protect providers in existence and enrolled in the Medicaid program prior to the October 1, 1985 FRVS implementation date by continuing to reimburse such providers under the cost system for an extended period of time. For purposes of the "hold harmless" provision, Quality was in existence and was enrolled in the Medicaid program on October 1, 1985. In creating the FRVS and hold harmless provision, it was clear that facilities qualifying for cost reimbursement under the hold harmless system would receive a benefit unavailable to FRVS-reimbursed providers. It was necessary to create a mechanism by which the advantage of cost reimbursement could be negated. Accordingly the creators determined that the continued cost reimbursement would, be viewed as an "overpayment" by the agency to the facility which would need at some future date to be repaid. The overpayment is known as the "hold harmless payback liability." Because actual property costs decrease over time due to depreciation and retirement of debt, a provider's cost reimbursement eventually becomes less than the projected FRVS reimbursement rate. When a provider's projected reimbursement under the FRVS exceeds the costs system reimbursement, a provider would normally become entitled to reimbursement at the higher rate. In order to collect the hold harmless payback liability, a provider in the hold harmless program otherwise entitled to the higher FRVS reimbursement receives only cost reimbursement until the point when the "overpayment" by the agency has been "reimbursed." When the hold harmless payback liability is extinguished, the provider receives full FRVS reimbursement. Plan section IV.D. provides that during the transition period, some facilities shall continue receive cost reimbursement until such time as FRVS payments exceed cost reimbursement as specified in Section V.E.1.h. of the Plan, at which time a facility shall begin reimbursement under the FRVS. Plan section IV.D. provides as follows: Effective October 1, 1985, a fair rental value system (FRVS) shall be used to reimburse facilities for property. To prevent any facility from receiving lower reimbursement under FRVS than under the former method where depreciation plus interest costs were used to calculate payments, there shall be a transition period in which some facilities shall continue to be paid depreciation plus interest until such time as FRVS payments exceed depreciation and interest as specified in Section V.E.1.h. At that time a facility shall begin reimbursement under the FRVS. Facilities entering the program after October 1, 1985 that had entered into an armslength (not between related parties) legally enforceable agreement for construction or purchase loans prior to October 1, 1985 shall be eligible for the hold harmless clause per Section V.E.1.h. Plan section V.E.1.h. sets forth the hold harmless provision and provides that if after calculation of the FRVS rate FRVS reimbursement is lower than cost reimbursement, a facility shall continue to receive cost reimbursement until such time as the hold harmless payback liability is extinguished. Plan section V.E.1.h. provides as follows: A "hold harmless" provision shall be implemented to ensure that facilities existing and enrolled in the Medicaid program at October 1, 1985 do not receive reimbursement for property and return on equity or use allowance under the FRVS method less than the property cost reimbursement plus return on equity or use allowance given at September 30, 1985. If, after calculation of the FRVS rate, that reimbursement would be lower than depreciation plus interest costs under III.G. 3.-5. of this plan, a facility shall continue to be reimbursed depreciation plus interest according to III.G. 3.-5. of this plan until such time as the net difference in total payments between III.G. 3.-5. and FRVS is -0-. Plan section III.G. 3.-5. provides the methodology for calculation of cost reimbursement. As of October 1, 1985, Quality's cost reimbursement exceeded the FRVS reimbursement and the "hold harmless" provision was applicable to Quality. As of October 1, 1985, Quality was entitled to cost reimbursement under the "hold harmless" provision based on the Plan provisions cited herein. The Medicaid program establishes reimbursement rates on a semiannual basis. Rates are communicated to providers via rate notices. For all periods except the July 1, 1987 and January 1, 1988 rate cycles, Quality's cost reimbursement rate exceeded the projected FRVS reimbursement rate. For the July 1, 1987 and January 1, 1988 rate cycles, Quality's cost reimbursement rate was less than the projected FRVS reimbursement rate. The rate fluctuation experienced by Quality in the July 1, 1987 and January 1, 1988 rate periods is best described as an anomaly. On August 19, 1993, the agency issued a retroactive notice of rate adjustment from cost to FRVS beginning in the July 1989 rate cycle and for all subsequent periods. The evidence is unclear as to why the retroactive rate adjustment was to become effective beginning in the July 1989 rate cycle. By letter of September 24, 1993, the AHCA notified Quality that its hold harmless payback liability was $212,574.32. The agency asserts that based on Plan section IV.D., Quality should be shifted to the FRVS reimbursement program based on that fact that for the two rate cycles beginning in July 1, 1987, FRVS reimbursement payments exceeded costs reimbursement. The agency's position is contrary to the language of Plan section V.E.1.h. (the hold harmless provision) which states as follows: ...If, after calculation of the FRVS rate, that reimbursement would be lower than depreciation plus interest costs under III.G. 3.-5. of this plan, a facility shall continue to be reimbursed depreciation plus interest according to III.G. 3.-5. of this plan until such time as the net difference in total payments between III.G. 3.-5. and FRVS is -0-. Based on the Plan provisions cited herein, for the July 1, 1987 and January 1, 1988 rate periods, and for the subsequent period within the time frame at issue in this proceeding, Quality would be entitled to cost reimbursement because the net difference in total payments between cost and FRVS has not reached zero. It is not unusual for reimbursement rates to be set at times other than at the beginning of a rate cycle. Such rate changes result in additional rate notices to providers. On three occasions, the agency sent notices to Quality stating that the reimbursement rate was being set at the lower FRVS level. On each occasion, Quality inquired and was informed that the reimbursement rate would remain at cost. The AHCA asserts that the responses to the Quality inquiries were erroneous and that it is entitled to correct the errors. Quality asserts that it relied to its detriment on the responses to its inquiries and that the agency should be estopped from retroactively altering the reimbursement mechanism under which Quality is paid.
Recommendation Based on the foregoing, it is hereby RECOMMENDED that the Agency for Health Care Administration enter a Final Order providing that Quality Health Care Center continue to be reimbursed under the cost reimbursement system until such time as Quality's hold harmless payback liability is extinguished. DONE and RECOMMENDED this 29th day of June, 1994 in Tallahassee, Florida. WILLIAM F. QUATTLEBAUM Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 29th day of June 1994. APPENDIX TO RECOMMENDED ORDER, CASE NO. 94-0164 To comply with the requirements of Section 120.59(2), Florida Statutes, the following constitute rulings on proposed findings of facts submitted by the parties. Petitioner The Petitioner's proposed findings of fact are accepted as modified and incorporated in the Recommended Order except as follows: 24. Rejected, cumulative. 27-28. Rejected, unnecessary. 30. Rejected, unnecessary. 39-56. Rejected, unnecessary. Respondent The Respondent's proposed findings of fact are accepted as modified and incorporated in the Recommended Order except as follows: 8. Rejected, cumulative. 11. Rejected, not supported by cited testimony. 20-23. Rejected, unnecessary. 24. Rejected as to use of term "discovered." ,The agency had sent three notices Quality prior to the August 1993 action. 26-36. Rejected, unnecessary. 37. Rejected, irrelevant. The testimony is clear that the drafters of the Plan did not contemplate the situation at issue in this case. 40-43. Rejected, irrelevant, not supported by the greater weight of the evidence. There is no credible evidence that any other provider has experienced this situation. Further, such treatment would be contrary to the clear provisions of the Plan. 47. Irrelevant. There is no deadline for payment of hold harmless payback liability. 48-52. Rejected, unnecessary. COPIES FURNISHED: Douglas M. Cook, Director 2727 Mahan Drive Tallahassee, Florida 32308 Harold D. Lewis, Esquire The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303 Peter A. Lewis, Esquire 307 West Park Avenue Post Office Box 1017 Tallahassee, Florida 32302-1017 Heidi Garwood, Esquire 1317 Winewood Boulevard Building 6, Room 234 Tallahassee, Florida 32399-0700
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a final order be entered by Respondent dismissing its claim against Petitioner for recaptured depreciation. DONE and ENTERED this 19th day of August, 1982, in Tallahassee, Florida. DONALD R. ALEXANDER Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 19th day of August, 1982.
Findings Of Fact The Respondent, William C. Lovelace, has been a certified building contractor in the State of Florida since 1984, holding license number CB CO 29103. The Respondent has been a registered roofing contractor in the State of Florida since January, 1989, holding license number RC 0058368. Case No. 91-0390--The Clarks. On or about June 8, 1987, the Respondent, who was doing business as Lovelace Development Enterprises, Inc., at the time, entered into a contract with James and Nedra Clark, then residents of the State of Ohio, for residential contruction on a residential building lot they owned in a subdivision in Safety Harbor in Pinellas County, Florida. The contract price was $69,900, payable as follows: (1) $100 deposit; (2) $13,960 slab draw, paid August 9, 1987; (3) $17,450 frame draw, paid September 1, 1987; (4) $17,450 dry-in draw, paid September 16, 1987; (5) $13,960 dry wall draw, paid October 30, 1987; and (6) a $6,980 final payment, to be made when the certificate of occupancy was obtained, and paid on December 1, 1987. The contract the Respondent signed and sent to the Clarks in Ohio for their signatures provided for construction to begin within 30 days and to be substantially completed within six months of commencement. Before the Clarks signed and returned the contract to the Respondent by mail from Ohio, they modified the contract to provide for a completion date of November 1, 1987. The Respondent never commented on the Clarks' contract modification and never intimated that there would be any problem with having the Clark home ready for occupancy by November 1, 1987. The Clarks made arrangements to move to their new home one weekend in October, 1987. They flew down on the Saturday before their furnishings and belongings were to arrive by moving van. When the Clarks arrived on Saturday, they were shocked to find that the home was nowhere near ready for occupancy. The Respondent explained that he was having financial problems. The Clarks asked why he accepted their draw payments and never told them that he was having financial problems and was not progressing with construction as scheduled. The Respondent offered to, and did, put the Clarks up in an apartment building he owned until the Clark home was ready for occupancy. The Respondent did not pay three suppliers or subcontractors who worked on the Clark home and who subsequently filed claims of lien. The Clarks themselves satisfied the liens, plus the claimants' attorney fees, in addition to the contract price they had paid the Respondent. These additional payments amounted to approximately $7,000. On or about October 18, 1989, a criminal information was filed against the Respondent in Case No. CTC 8926280MMANO in the County Court for the Sixth Judicial Circuit, in and for Pinellas County, Florida. The information charged the Respondent with misapplication of the Clarks' real property improvement funds in violation of Section 713.345, Fla. Stat. (1989). After a non-jury trial, the Respondent was found and adjudicated guilty as charged and was sentenced to 60 days in jail, suspended, and placed on probation for one year. Conditions of probation included the requirement that the Respondent make restitution to the Clarks in the amount of $9,036.96, payable within one year, with minimum monthly payments set at $100. The Respondent appealed from the judgment of conviction. Execution of the sentence is stayed pending appeal. The appeal was pending at the time of the final hearing. Case No. 91-0391--The Parows. On or about December 28, 1987, the Respondent entered into a contract with George and Barbara Parow for residential contruction on a residential building lot they owned in a subdivision in Pinellas County, Florida, called Windsor Woods II. The contract price was $103,892, payable as follows: (1) $5,750 deposit; (2) $14,721 slab draw, paid February 17, 1988; (3) $14,721 lintel pour draw, paid February 23, 1988; (4) $14,721 frame draw, paid March 18, 1988; (5) $19,629 dry-in draw, paid April 22, 1988; (6) a $19,629 dry wall draw, paid May 11, 1988; and (7) $14,721 final payment to be paid when the certificate of occupancy was obtained. Construction on the Parow home was to begin on January 19, 1988, and actually began on or about February 5, 1988. The Respondent did not pay several suppliers and subcontractors who worked on the Parow home and who subsequently filed claims of lien. As construction progressed, the Parows became aware of liens and discussed them with the Respondent. The Respondent assured the Parows that they all would be taken care of. Instead, more liens of other suppliers and subs were filed. On advice of legal counsel, the Parows withheld the final draw. They also decided to refinance their property in order to finish construction themselves. To do so, they had to file a civil suit in Case Number 88-013508- 023 in Circuit Court, Sixth Judicial Circuit, in and for Pinellas County, Florida. They also had the bank deposit the last draw under the contract with the Respondent into the court registry. In the course of litigation, all valid liens were paid from the money in the court registry. In addition, the Parows were required to pay $957 for a certificate of occupancy, $1,254 that the Respondent was supposed to have paid for carpeting in the home, and $628 for appliances the Parows had paid for but did not get from the Respondent. Additional items were paid by the Parows to finish the house. All told, the Parows paid about $5,000 more out-of-pocket than they should have under the contract with the Respondent, as modified by extras and changes, to complete their home. On or about October 31, 1989, a criminal information was filed against the Respondent in Case No. CTC 8928044MMANO in the County Court for the Sixth Judicial Circuit, in and for Pinellas County, Florida. The information charged the Respondent with misapplication of the Parows' real property improvement funds in violation of Section 713.345, Fla. Stat. (1989). After a non-jury trial, the Respondent was found and adjudicated guilty as charged and was sentenced to 60 days in jail, suspended, and placed on probation for one year, to run concurrent with the probation imposed in Case No. 9826280MMANO (the Clark case). Conditions of probation included the requirement that the Respondent make restitution to the Parows in the amount of $10,178.73, payable $1,000 a month. The Respondent also appealed from the judgment of conviction in the Parow case. Execution of the sentence is stayed pending appeal. The appeal was pending at the time of the final hearing.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Construction Industry Licensing Board enter a final order: (1) finding the Respondent, William C. Lovelace, guilty as charged; (2) imposing an administrative penalty in the amount of $2,000, payable within 30 days; (3) requiring the Respondent to pay the costs associated with the investigation and prosecution of these matters, payable as determined by the Board in consideration of the amount of the costs; (4) requiring the Respondent to make full restitution to the Clarks and the Parows within two years; (5) placing the Respondent on probation for two years conditioned on (a) timely payment of the fine, of the costs, and of the restitution to the Clarks and the Parows, (b) successful completion of continuing education in the areas of financial or general business practices, and (c) such other conditions of probation as the Board may deem appropriate. RECOMMENDED this 19th day of June, 1991, in Tallahassee, Florida. J. LAWRENCE JOHNSTON 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 20th day of June, 1991. APPENDIX TO RECOMMENDED ORDER To comply with the requirements of Section 120.59(2), Fla. Stat. (1989), the following rulings are made on the Department's proposed findings of fact: 1.-4. Accepted and incorporated. The final draw was $14,721. Otherwise, accepted and incorporated. The $250 was designated "fines and costs," and is unnecessary. Otherwise, accepted and incorporated. 7.-8. Accepted and incorporated. 9. The $250 was designated "fines and costs," and is unnecessary. Otherwise, accepted and incorporated. COPIES FURNISHED: Robert B. Jurand, Esquire Senior Attorney Department of Professional Regulation Northwood Centre, Suite 60 1940 North Monroe Street Tallahassee, Florida 32399-0792 William C. Lovelace, pro se 1961 Cove Lane Clearwater, Florida 34624 Daniel O'Brien, Executive Director Construction Industry Licensing Board Post Office Box 2 Jacksonville, Florida 32202 Jack McRay, Esquire General Counsel Department of Professional Regulation Northwood Centre 1940 North Monroe Street Tallahassee, Florida 32399-0792
The Issue Whether Petitioner is entitled to the amounts claimed in the challenges to the IRR determinations as set forth in the cost settlement documents.
Findings Of Fact Petitioner, Sunrise Community, Inc., is a non-profit organization that offers assistance and support to people with developmental disabilities. It specializes in residential services but also provides day programs, supported living services, and other programs to assist people in the lower functioning ranges of mental retardation. Respondent, Agency for Health Care Administration, is the state agency charged with the responsibility of administering and supervising Medicaid reimbursements. At all times material to this cause, Petitioner was an authorized Medicaid provider. The quality of care provided by Petitioner and its facilities has never been disputed in this cause. The disputes in this matter arose due to challenges to the rates of reimbursement to Petitioner and its facilities. In Florida, Medicaid providers such as Petitioner are reimbursed on a prospective basis. Each provider gets a rate for reimbursement that is established based upon the actual allowable costs from a prior, fixed period of time which is then utilized to pay for a subsequent time period. For convenience of review this rate is sometimes thought of as the "budgeted rate" in this record. It assumes costs from past experience will be incurred in the future and provides for a known, fixed amount of compensation to hopefully cover such expenses. All Medicaid providers are required to disclose their actual costs for an entire reporting period. A cost report must be prepared using the accrual basis of accounting in accordance with generally accepted accounting principles as set forth in the rules governing Medicare reimbursement. After the fact, providers then "settle up" with the Agency by comparing the actual allowable costs incurred in the rate period with the rate. Providers cannot make a profit or excess revenue on the rate. Where a rate for a given period proves to be too low or inadequate, the cost settlement procedure is designed to adjust the amounts owed to cover the deficit funding. Thus each Medicaid facility receives a rate which must be "cost settled" separately based upon its actual allowable expenses. Petitioner and its related facilities are entitled to rates that will cover the actual allowable costs of doing business. Petitioner is not entitled to a profit nor is it required to operate at a loss. Should a provider be overpaid, that is, if it is established during cost settlement that the rate received by the provider was more than the actual allowable costs incurred for the rate period, then the provider "repays" the overage to the Agency. Otherwise, the rate is fixed for the time period it relates to unless an IRR is approved to increase the rate. IRRs are submitted to the Agency when a provider’s rate does not provide adequate compensation. An approved interim rate is to give assurance that the original rate can be adjusted to accommodate the new costs incurred by the provider. Approved interim rates are also cost settled after the rate period as with budgeted rates. In 1995 Petitioner sought approval of interim rate increases from the Agency. Such requests were denied by the Agency but successfully appealed by Petitioner. Thereafter, because the period governed by the rates had passed, the Agency sought to cost settle the amounts owed to Petitioner. When the Agency refused to remit the court-ordered interim rate Petitioner lost the amount of the rate increase as well as an opportunity for use of those funds during the pending cases. The parties attempted to resolve the amounts claimed by Petitioner through the cost settlement process. As to each denied claim, Petitioner sought an administrative review and the matter was forwarded to the Division of Administrative Hearings. IRRs are designed to give providers relief so that unanticipated costs can be reimbursed. This is important since laws may change which require providers to offer additional programs or services the costs of which are not encompassed in the budgeted rate in effect at the time of the change in law. At the time of settlement, if there is an overpayment of the difference between the approved interim rate and the actual allowable costs, the provider refunds the overpayment. Similarly, if there is an underpayment as a result of the actual allowable cost being greater than the interim rate, the provider is entitled to receive additional payment. Petitioner is entitled to additional payments. The amount of the payments is the center of the disputes in this cause. First, the Agency has refused to remit monies associated with interest payments on a bond issue. The Agency refused to include payment for the bond interest because it maintains that, while bond interest expense is an actual allowable cost incurred by Petitioner, it was reported twice in the cost reports. The bond interest disallowed is itemized in Petitioner's Exhibit 17. Such exhibit accurately lists the amounts that the Agency should have approved for the IRR cost settlements for the facilities listed. The bond interest is appropriately allocated to the facilities listed and was not claimed or duplicated by another entity for the periods noted. Thus each of the listed facilities should have received an adjusted rate with the bond interest cost included in the calculation. Secondly, Petitioner claims that had the Agency timely remitted the funds associated with the IRR, it would have had the benefit of those monies for the interim period of time. As such, it maintains it should be paid interest on the monies not paid. The basis for the lost interest claim arguably stems from the Medicare rule that allows interest in some situations. Florida historically has not remitted interest on underpayment amounts. In calculating the amounts owed to Petitioner, interest lost on the IRR was therefore disallowed. There is no provision governing the Florida Medicaid plan that specifies the payment of interest on a rate. A provider’s rate can be broken down into four cost components: operating, resident care, property, and return on equity. Had Petitioner received the full IRR it might have been given a "return of equity" or "use allowance." It might have resulted in a positive average equity. Petitioner has not established through credible evidence that factually this "return of equity" would have been applicable to the situations of the facilities affected by the IRRs. Speculation as to the financial posture of the facilities has not been deemed persuasive. The third dispute in this cause relates to the computation of the amounts owed for the Pablo facility. The Pablo facility incurred expenses over a 140-day period which were annualized over a 366-day period to compute the interim rate amount. In so doing, the Agency abandoned the methodology previously utilized to compute the rate owed and determined that the actual allowable costs in the subsequent period (which were known) had to be considered. Had the Agency used the established methodology it claims it would have overpaid the provider in the subsequent period. While mathematically accurate in this single example, such methodology has not been used except in this instance (when it benefited the Agency). The abandonment of the methodology also ignores the cost settlement process that is designed to reconcile amounts after the fact. The plan used by these parties recognizes the settlement process as the procedure by which all actual allowable costs are reconciled. If after having received an inflated rate the Pablo facility had owed monies back, such funds would have been remitted through the cost settlement process. Of course in this case, the Agency did not remit an increased rate so the crux of the problem is to resolve the dispute artificially as if from one point in time to another the rate had been appropriately increased. The settlement should have utilized the 140-day period to calculate the rate. That is, the per diem should have used the expense amount divided by 140 not 366 to compute the daily expense. The fourth disputed amount is the IRR for Country Meadows. The Agency has conceded that this IRR could have been granted with an accounting clarification. The final disputed amount relates to attorney's fees. Petitioner maintains it is entitled to include an amount of attorney's fees that is based upon a contingency fee agreement. Although the Agency does not dispute that providers may include attorney's fees as an allowable cost, it argues that such costs are not reported until incurred. Moreover, such costs must be what a prudent buyer would pay and relate to the IRR. In this instance the plan provides that: Implicit in any definition of allowable costs is that those costs do not exceed what a prudent and cost-conscious buyer pays for a given service or item. If costs are determined by AHCA, utilizing the Title XVIII principles of reimbursement, HCFA PUB 15-1 (1993), and this plan to exceed what a prudent buyer would pay, then the excess costs shall not be reimbursable under this plan. Attorney's fees are considered part of the operating component of the rate calculation. It is an administrative cost and is reported on a provider’s cost report as such. In selecting the attorneys to represent it, Petitioner did not interview applicants, solicit proposals, or inquire of other attorneys as to a reasonable fee for this type of representation. Petitioner presented no credible evidence of the reasonable fee for representation in this type of proceeding. Petitioner’s lead counsel served on its Board of Directors at the time the contingency fee agreement was entered into. The contingency fee agreement provided for an alternative method of payment in the amount of $250.00 per hour. The attorney's fee agreement provided, in pertinent part: The attorney’s fee shall be 40% of the total of all funds received as a result of the reversal of the wrongful denial of the interim rate request covering the period from the date of filing the interim rate request through the date of final settlement. The lawyer shall have no claim on the future value of the interim rate request past the date of settlement. If an appeal is required the fee shall be 50% instead of 40%. If, due to circumstances beyond the control of the parties to this fee agreement, such as changes in law, or constructions of law inconsistent with this agreement, including constructions of law that would not permit the reimbursement of attorney's fees to Sunrise Community, Inc., the parties agree that in no event shall the fee be less than a reasonable fee based on the hours of work multiplied by the rate of $250.00 per hour. The attorney's fee agreement was executed on October 25, 1995 on behalf of Sunrise Community, Inc. Such agreement did not name the facilities whose IRRs were governed by the agreement. The agreement did not specify how the attorney fee would be allocated among the providers who would be affected by the successful challenge to the IRR denials. The opinion of the First District Court of Appeal that upheld the IRRs and directed the Agency to grant them was entered on January 27, 1998.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration enter a Final Order that grants the bond interest as claimed by Petitioner; denies the interest on unpaid IRR amounts; grants the amounts claimed by Petitioner for Pablo; grants the Country Meadows IRR; and denies the attorney's fees. DONE AND ENTERED this 30th day of December, 1999, in Tallahassee, Leon County, Florida. J. D. PARRISH Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 30th day of December, 1999. COPIES FURNISHED: Steven M. Weinger, Esquire Kurzban, Kurzban, Weinger & Tetzeli, P.A. 2650 Southwest 27th Avenue Second Floor Miami, Florida 33133 Steven A. Grigas, Esquire Agency for Health Care Administration Fort Knox Building 3 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32308-5403 Ruben J. King-Shaw, Director Agency for Health Care Administration 2727 Mahan Drive, Suite 3116 Tallahassee, Florida 32308 Julie Gallagher, General Counsel Agency for Health Care Administration Fort Knox Building 3 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32308
Findings Of Fact The incorporation of the condominium association of the Orchards of Radcliffe, a Condominium, (hereinafter "Radcliffe Condominium") occurred on October 19, 1981, and the declaration of condominium occurred on or about December 12, 1981. Interrogatory answers 7 and 9, P. Ex. 3. The Developer of the Radcliffe Condominium, was the Respondent, Radcliffe Condominium, Inc., d/b/a Orchards of Radcliffe, a Condominium. The Developer of the Radcliffe Condominium elected pursuant to section 718.116(8)(a)1, Fla. Stat. (1985), to be excused from the payment of its share of the common expenses and obligated itself to pay that portion of the common expenses incurred during the election period which exceeded the amount assessed against other unit owners. Answer to interrogatory 2(a), P. Ex. 3. The Developer did not offer a guarantee of common expenses pursuant to section 718.116(8)(a)2, Fla. Stat. (1985). The first closing of a condominium unit at Radcliffe Condominium occurred on January 6, 1982. Interrogatory answer 1, P. Ex. 3. The turnover of control from the Developer to the condominium association occurred on January 22, 1986. P. Ex. 2. The Developer of the Radcliffe Condominium did not make monthly payments on the common expenses incurred from about May, 1982, through January, 1986, on some of the units owned by the Developer. The Developer contends that by using funds from related corporations, it paid expenses of maintenance directly to suppliers and creditors as needed, and that in so doing, it paid more than what it had obligated itself to pay monthly for assessments for common expenses on Developer owned units. The Department contends that the Developer did not pay the monthly obligations for units owned, that the failure to make such payments was the cause of the association not having enough funds to pay expenses when due, and that the Developer now owes a substantial amount for back payments. The Developer did in fact pay some bills directly from funds from related corporations. During the course of the final hearing, the Petitioner withdrew all issues that may have existed in this case concerning whether the Respondent owes any amount for past assessments, or the amount owed. As a result, the Respondent was not permitted to attempt to prove the amount of payments of expenses that were paid directly rather than as monthly unit assessments. Consequently, on this record, no finding of fact can be made as to the amount of direct payments, or whether the amount of such direct payments exceeded the amount of unit assessments owed by the Developer, but not paid. Within sixty days after turnover, a Developer is required to provide the condominium association with a turnover review. A turnover review is intended to provide the association with an accounting only for the period during which the Developer had control. A turnover review is intended to show whether the Developer fulfilled its stewardship responsibilities toward the condominium association. It is less formal than an audit, but more formal than a mere compilation. The Developer provided the condominium association with the turnover review on or about November 28, 1986, eight months late. A substantial reason for the delay was that the Developer did not completely pay the Certified Public Accountant who was hired to do the review. Another substantial reason for the delay was the fact that the Developer did not keep good records of payments of association expenses, and failed to follow good accounting practices in making payments directly rather than through association accounts. See finding of fact 13. The turnover review reviewed the balance sheet as of June 30, 1986, and the related statements of assessments, revenues, expenses and fund balance, and changes in cash position for the six months ended as of June 30, 1986. P. Ex. 1. The turnover review covered only the six months from January 1, 1986 to June 30, 1986. Thus, the turnover review failed to cover only the period of time that the Developer had control and had stewardship responsibilities toward the condominium association. The turnover review incorrectly assumed that the Developer had made a guarantee of common expenses pursuant to section 718.116(8)(a)2, Fla. Stat. (1985). The turnover review did not address the question whether the Developer paid its unit assessments of common expenses pursuant to section 718.116(8)(a)1, Fla. Stat. (1985) because of the erroneous assumption in the review that the Developer had made a guarantee of common expenses pursuant to section 718.116(8)(a)2, Fla. Stat. (1985). Payment by the Developer of association expenses directly, rather than through association accounts, is contrary to good accounting practices. Failure to pay assessments when due results in retention by the Developer of funds owed the association. Thus, the failure of the Developer to pay assessments when due resulted in a form of commingling of Developer and association accounts and funds. Payment of expenses owed by the association by the Developer's related corporations was another form of commingling of accounts and funds.
Recommendation It is therefore recommended that the Department of Business Regulation, Division of Florida Land Sales, Condominiums, and Mobile Homes enter its final order assessing a civil penalty of $4,000 against Radcliffe Condominium, Inc., d/b/a Orchards of Radcliffe, a Condominium, and requiring Radcliffe Condominium, Inc., d/b/a Orchards of Radcliffe, a Condominium, within sixty (60) days of the date of the final order to provide the condominium association with a turnover review that complies with the requirements of section 718.301(4)(c), Fla. Stat. (1985) and all other requirements of law governing turnover reviews. DONE and ENTERED this 17th day of July, 1987 WILLIAM C. SHERRILL, JR. Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 17th day of July, 1987. APPENDIX TO RECOMMENDED ORDER, CASE NO. 87-1227 The following are rulings upon findings of fact proposed by the parties, using the numbers or designations used by each party, which have been rejected in this Recommended Order: Findings of fact proposed by the Petitioner: 1. The second sentence has been adopted as a conclusion of law. Rejected for the reasons stated in finding of fact 7. A conclusion as to whether "enough" money would have been available in association accounts cannot be made since a full accounting of all payments and expenses has not been made or placed in evidence. The second sentence has been adopted as a conclusion of law. 9. Most of this proposed finding of fact has been adopted as a conclusion of law. Findings of fact proposed by the Respondent: The testimony as to discussions with the Petitioner was not sufficiently precise in time for a conclusion to be drawn that either the Respondent was acting diligently toward obtaining the turnover review, or that the Petitioner had consented to the delay. As a matter of law, the responsibility for the turnover review is upon the Developer, and is not the responsibility of the association's agent. Section 718.301(4)(c), Fla. Stat. (1985). The second paragraph does not establish a defense since the Developer had the responsibility to maintain good records. The commingling occurred by the retention of funds due the association and the payment of association expenses from accounts not associated with the expenses. COPIES FURNISHED: Richard Coats, Director Department of Business Regulation Florida Land Sales, Condominiums and Mobile Homes The Johns Building 725 South Bronough Street Tallahassee, Florida 32399-1000 James Kearney, Secretary Department of Business Regulation The Johns Building 725 South Bronough Street Tallahassee, Florida 32399-1000 Thomas A. Bell, Esquire Department of Business Regulation The Johns Building 725 South Bronough Street Tallahassee, Florida 32399-1000 Karl M. Scheuerman, Esquire Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32399-1000 Paul Haggar, President Radcliffe Condominium, Inc. 7939 Radcliffe Circle Port Richey, Florida 33568
