Conclusions THIS CAUSE comes before the State of Florida, Agency for Health Care Administration (“the Agency”) regarding Certificate of Need (“CON”) Application No. 10202, which sought the establishment of a 100-bed acute care hospital in Broward County, District 10, that had been filed by East Florida Healthcare, LLC (“East Florida”), in the second batching cycle of 2013. The Agency preliminarily denied the application. On December 30, 2013, East Florida filed a petition for formal hearing contesting the denial, which was forwarded to the Division of Administrative Hearings (“DOAH”). In January 2014, the above-named intervenors filed motions to intervene, which were granted. On April 15, Filed April 22, 2014 4:57 PM Division of Administrative Hearings 2014, East Florida filed a notice of voluntary dismissal and the DOAH issued an order closing the file and relinquishing jurisdiction back to the Agency. IT IS THEREFORE ORDERED AND ADJUDGED THAT: 1. The denial of CON Application 10202 is upheld. ) ORDERED this 5@Any of pur . 2014, in Tallahassee, Florida. , Secretary Agency For Héalth Care Administration
The Issue The issue in this case is whether the methodology for grouping hospitals adopted by the HCCB pursuant to Sections 4D- 1.03, 4D-1.12(1) and 4D-1.12(2), F.A.C., constitutes an invalid exercise of delegated legislative authority as being arbitrary or capricious? Mercy has also raised one issue as to whether the grouping methodology is violative of constitutional guarantees of administrative equal protection and due process. This issue, however, is beyond the jurisdiction of the Division of Administrative Hearings.
Findings Of Fact Introduction. The HCCB and Its Hospital Grouping Function. The HCCB was formed pursuant to Part II of Chapter 395, Florida Statutes (1979). The HCCB was created pursuant to the specific authority of Section 395.503, Florida Statutes (1979), in order to further the accomplishment of legislative intent contained in Section 395.5025, Florida Statutes (1984 Suppl.): It is the intent of the Legislature to assure that adequate health care is affordable and accessible to all the citizens of this state. To further the accomplishment of this goal, the Hospital Cost Containment Board is created to advise the Legislature regarding health care costs; inflationary trends in health care costs; the impact of health care costs on the state budget; the impact of hospital charges and third-party reimbursement mechanisms on health care costs; and the education of consumers and providers of health care services in order to encourage price competition in the health care marketplace. The Legislature finds and declares that rising hospital costs and cost shifting are of vital concern to the people of this state because of the danger that hospital services are becoming unaffordable and thus inaccessible to residents of the state. It is further declared that hospital costs should be contained through improved competition between hospitals and improved competition between insurers, through financial incentives which foster efficiency instead of inefficiency, and through sincere initiatives on behalf of providers, insurers, and consumers to contain costs. As a safety net, it is the intent of the Legislature to establish a program of prospective budget review and approval in the event that competition-oriented methods do not adequately contain costs and the access of Floridians to adequate hospital care becomes jeopardized because of unaffordable costs. As a part of its responsibilities the HCCB is required, "after consulting with appropriate professional and governmental advisory bodies and holding public hearings, and considering existing and proposed systems of accounting and reporting utilized by hospitals," to specify a uniform system of financial reporting for hospitals. Section 395.507(1), Florida Statutes Suppl.) to: In order to allow "meaningful comparisons" of data reported by hospitals under the uniform system of financial reporting, the HCCB is required by Section 395.507(2), Florida Statutes (1984 Suppl.) to group hospitals according to characteristics, including, but not limited to, a measure of the nature and range of services provided, teaching hospital status, number of medical specialties represented on the hospital staff, percentage of Medicare inpatient days, average daily census, geographical differences, and, when available, case mix. In providing for grouping of hospital, the HCCB is required to establish ten general hospital groups and additional speciality groups "as needed." Section 395.507(2), Florida Statutes (1984 Suppl.). No hospital group can contain fewer than five hospitals, however. Id. Grouping is to be provided by rule. Id. Pursuant to Section 395.509(1), Florida Statutes (1984 Suppl.), every Florida hospital is required to file its budget with the HCCB for "approval." The budget is required to be filed on forms adopted by the HCCB and based on the uniform system of financial reporting. Section 395.507(6), Florida Statutes (1984 Suppl.). To determine whether a hospital's budget is to be approved, all hospitals in Florida are to be placed in groups. A hospital's budget is then compared to the budgets of the hospitals assigned to its group. Hospital groups for this purpose are established pursuant to Section 395.509(4)(a), Florida Statutes (1984 Suppl.). The provisions of Section 395.509(4)(a), Florida Statutes (1984 Suppl.), are identical to Section 395.507(2), Florida Statutes (1984 Suppl.). In determining whether a hospital's budget is to be approved, Section 305.509(2), Florida Statutes (1984 Suppl.), establishes two initial "screens" which a hospital must meet based upon the hospital's gross revenue per adjusted admission. The term "gross revenue" is defined as: the sum of daily hospital service charges, ambulatory service charges, ancillary service charges, and other operating revenue. Gross revenues do not include contributions, donations, legacies, or bequests made to a hospital without restriction by the donors. Section 395.502(11), Florida Statutes (1984 Suppl.). "Adjusted admission" is defined by Section 395.502(1), Florida Statutes (1984 Suppl.), as: the sum of acute admissions and intensive care admissions divided by the ratio of inpatient revenues generated from acute, intensive, ambulatory, and ancillary patient services to gross revenues. Gross revenues per adjusted admission (hereinafter referred to as "GRAA") is therefore the total hospital ambulatory and ancillary service charges and other operating revenue for all acute and intensive care admissions divided by the ratio of inpatient revenues from acute, intensive, ambulatory and ancillary patient services to gross revenue; or, stated more simply , inpatient revenue per admission. The "screens" which must be met in order for a hospital's budget to be approved upon initial determination are: (1) the hospital's GRAA must not be in the upper 20th percentile of the hospitals within its group; and (2) the rate of increase in a hospital's GRAA as contained in its current budget compared to the hospital's GRAA as reported in its most recently approved budget must not exceed a "maximum allowable rate of increase" if the hospital's GRAA is in the 50th to 79th percentile of the hospitals in its group. If a hospital's GRAA is in the 49th percentile or less of the hospitals in its group, its budget is automatically approved. In determining whether a hospital's GRAA fails the screens, Section 395.509(2), Florida Statutes (1984 Suppl.), provides: Percentile values for gross operating revenue per adjusted admission shall be determined monthly by the board for each group established pursuant to s. 395.507(2) by ranking projected gross operating revenues per adjusted admission contained in the most recently approved or submitted budgets for the hospitals in each group, including any hospital that is contesting its grouping assignment. In determining the applicability of paragraph (a) or paragraph (b), the board shall consider the basis of the projections by the hospital, including consideration of the following factors: any increase in patient admissions caused by the creation of preferred provider organizations or health maintenance organiza- tions, population increases, changes in the hospital case mix or in services offered, changes in technology, or other similar factors. If a hospital's GRAA fails either of the screens (its GRAA is in the upper 20th percentile of its group or its GRAA rate of increase is excessive and its GRAA is in the 50th to 79th percentile of its group) that hospital's budget must be reviewed by the HCCB "to determine whether the rate of increase contained in the budget is just, reasonable, and not excessive." Section 395.509(5), Florida Statutes (1984 Suppl.). Pursuant to Section 395.509(6), Florida Statutes (1984 Suppl.), the HCCB is authorized, if it first determines under Section 395.509(5), Florida Statutes (1984 Suppl.), that the hospital's rate of increase is not just, reasonable and not excessive, to amend or disapprove any hospital's budget which does not meet the two screens of Section 395.509(2), Florida Statutes (1984 Suppl.), to establish a rate of increase which is "just, reasonable, and not excessive." The HCCB's authority under Section 395.509(6), Florida Statutes (1984 Suppl.), applies only if the HCCB first complies with the following pertinent provisions of Section 395.509(5), Florida Statutes (1984 Suppl.): The board shall disapprove any budget, or part thereof, as excess that contains a rate of increase which is not necessary to maintain the existing level of services of the hospital or, if the hospital increases its existing level of services, any amount not necessary to accomplish that increase. In making such deterioration . . . the board shall consider the following criteria: The efficiency, sufficiency, and adequacy of the services and facilities provided by the hospital. The cost of providing services and the value of the services to the public. The ability of the hospital to improve services and facilities. The ability of the hospital to reduce the cost of services. The ability of the hospital to earn a reasonable rate of return. The accuracy of previous budget submissions by the hospital compared to the actual experience of the hospital the The number of patient days reimbursed by Medicare or Medicaid. The number of patient days attributable to the medically indigent. The research and educational services provided by the hospital if it is a teaching hospital. The projected expenditures or revenues for or from construction of facilities or new services which are subject to regulation under s. 381.494 may not be included in the budget of a hospital until the construction or services are approved or authorized by the state health planning agency. The cost of opening a new hospital, for first 3 years. The Challenged Rules. In carrying out its duty to establish a uniform system of financial reporting, the HCCB adopted Section 4D- 1.03, F.A.C., which provides: The Board, pursuant to Section 395.505, Florida Statutes, hereby adopts and establishes a uniform system for hospitals to file the prior year audited actual data report, the interim report of financial and statistical information. This system is described and the forms, instructions, and definitions therefor are contained in the Board's publication entitled Hospital Uniform Reporting System Manual. The Chart of Accounts adopted pursuant to Section 395.507(1), Florida Statutes, and this Chapter 4D-1, and as hereafter modified, shall be utilized by each hospital for submitting the prior year audited actual data report, the interim report and the budget report. In order to determine whether a hospital's budget should be automatically approved under Section 395.509(2), Florida Statutes (1984 Suppl.), the HCCB adopted Section 4D-1.12, F.A.C. Sections 4D-1.12(1) and (2), F.A.C., provide: The staff shall review the budget report based upon the hospital's ranking for gross revenue per adjusted admission within its group and upon its rate of change in gross revenue per adjusted admission in the proposed budget as required in Section 395.507(6), Florida Statutes, and the most recently Board approved budget. As part of the budget report review process, groupings of hospitals shall be established according to the characteristics and methodology as outlined in Chapter V, Section B, Hospital Unit Uniform Reporting System Manual and as outlined in Section 395.507(2), Florida Statutes. Percentile values for gross revenue per adjusted admission shall be determined monthly for each group by ranking projected gross revenue per adjusted admission contained in the most recently approved or submitted budgets for the hospitals in each group, including any hospital that is contesting its grouping assignment. 12. Sections 4D-1.03 and 4D-1.12(1) and (2), F.A.C., are the rules challenged by Mercy. These rules, as quoted herein, were effective as of November 5, 1984. The rules were originally adopted effective June 30, 1980. The rules were amended to their present wording in response to "major" legislation enacted in 1984 which amended Part II, Chapter 395, Florida Statutes (1983), and granted authority to the HCCB for the first time to approve, disapprove or amend hospital budgets under certain circumstances. Chapter 79-106, Laws of Florida. The challenged rules essentially provide that the HCCB, when grouping of hospitals for purposes of the uniform system of financial reporting and for purposes of reviewing and comparing budgets to determine if they should be automatically approved under Section 395.509(2), Florida Statutes (1984 Suppl.), will apply the grouping methodology outlined in Chapter V, Section B of the Hospital Uniform Reporting System Manual (hereinafter referred to as the "Manual"). Section 4D-1.18, F.A.C., also adopted effective November 5, 1984, incorporates by reference the Manual within each rule in Chapter 4D-1, F.A.C., which references the Manual. This rule has not been challenged in this proceeding. The Hospital Grouping Methodology and Its Development. Generally, Chapter V, Section B of the Manual, sets out the objective of the grouping methodology, the procedure for forming groups, a list of the variables considered in forming groups and the weight to be accorded each variable. The goals of the grouping methodology, as provided in the Manual, are to "facilitate comparison of hospitals with similar patient mix and market conditions" and to "develop groups of sufficient size . . . to assure statistically valid comparisons." Based upon the procedure for forming groups contained in the Manual, hospitals are grouped into nine, non-teaching, short-term hospital groups, one Major teaching hospital group and a number of specialty hospital groups. It is the method of grouping hospitals into nine short-term hospital groups which is at issue in this proceeding. Assignment of hospitals to the nine short-term hospital groups is accomplished through the use of the "McQueen's K-means clustering algorithm included in the cluster analysis t computer program package CLAN developed by T.D. Klastorin and Robert Ledingham (June, 1980 version)." A clustering analysis is a method of grouping a set of objects (in this case, hospitals) into relatively homogeneous groups. The goal of a clustering algorithm is to minimize the differences between the members of the group. The objects are grouped based upon a set of variables which are considered significant for purposes of comparing the objects. In order to account for the significance of each variable, the variables are weighted. The variables have a numerical score and after weighing, the weighted sum of the variables for each object is compared and the objects are grouped based upon their variable scores. There are a number of clustering algorithms which can be used to group hospitals. The HCCB chose to use the "McQueen's K-means" clustering algorithm. The use of McQueens K-means clustering algorithm has not bean challenged in this proceeding. Nor does the evidence establish that the selection of McQueen's K-means clustering algorithm is arbitrary and capricious. The clustering algorithm is performed by computer. The computer program utilized by the HCCB to perform the algorithm is called "CLAN" and was developed by T.D. Klastorin and Robert Ledingham. The evidence at the hearing supports a finding that the selection of this computer program is reasonable. Once hospitals are grouped, they are notified of their group designation and allowed to request reconsideration of their group assignment. The request must made within thirty days after notification. Following the creation of the HCCB in 1979, Price Waterhouse & Company was engaged by the HCCB as a consultant to assist in still establishing an appropriate hospital grouping methodology. The HCCB also created an advisory committee to assist the HCCB and Price Waterhouse & Company in developing the grouping methodology. This committee, designated as the Technical Advisory Committee (hereinafter referred to as the "TAC") was comprised of individuals from the hospital industry and academia and certified public accountants. The TAC worked with Price Waterhouse & Company in developing the grouping methodology and the uniform reporting system. Because of time constraints, the TAC's involvement with evaluating the methodology was limited. The HCCB ultimately decided to pattern the grouping methodology it adopted after the grouping methodology then being used by the State of Washington, as recommended by Price Waterhouse & Company. The Washington system was not adopted exactly; a number of changes to Washington's methodology were made to the grouping methodology adopted by the HCCB. Mercy has proposed several findings of fact beginning on page 35 and ending on page 38 of its proposed order concerning the "Differences in Washington Hospital Characteristics and Grouping Methodology Model." Those proposed findings of fact can be and are hereby disposed of by the following finding of fact: because of differences in the hospital industries of the States of Florida and Washington and other differences between the two States, Florida's grouping methodology cannot be justified solely on the basis that Washington's grouping methodology was used as a starting point in developing Florida's grouping methodology. Those differences, however, do not support a finding of fact that Florida's grouping methodology is arbitrary and capricious since the Washington system was not adopted without substantial modifications, including a reduction of Washington's eighteen variables initially to fourteen and ultimately to seven, and the use of unequal weighting of the variables. The TAC reviewed and discussed the grouping methodology initially approved by the HCCB prior to its approval. Some of Mercy's witnesses, who were members of the TAC, indicated during their testimony that the TAC never decided anything because no "vote" was ever taken of TAC members and that the TAC did not advise the HCCB but instead advised the staff of the HCCB. Their testimony in this regard has been given little weight. The fact that no formal "vote" was taken of TAC members does not mean that the TAC did not take a position on matters it discussed. The consensus of the TAC could be, and was, gleaned from its discussions. The staff of the HCCB in fact reported decisions of the TAC to the HCCB verbally and by minutes of TAC meetings. Although the accuracy of staff's reports was sometimes questioned, no question was raised about whether TAC had taken positions. The fact that the HCCB staff reported TAC actions to the HCCB also disputes the testimony to the effect that TAC did not advise the HCCB but instead advised the staff of the HCCB. While it may be true that TAC did not deal directly with the HCCB, its analysis was reported, to the HCCB. The HCCB ultimately adopted rules effective June 30, 1980, which incorporated by reference to the Manual, the general outline of the grouping methodology adopted by the HCCB. The TAC ceased to exist following adoption of the HCCB's initial rules. Two new advisory committees were formed: a Technical Advisory Panel (hereinafter referred to as "TAP") on grouping and a TAP for financial analysis. The grouping TAP was made up of individuals from the hospital industry. The grouping TAP met in November and December of 1980 and reviewed the results of test runs of the grouping methodology initially adopted by the HCCB. The results of the initial run were described as "bizarre." This run used equal weighting of the variables. Equal weighting was abandoned and three to four more test runs were made and reviewed by the grouping TAP. After each run the variable weights were adjusted until the results appeared to be "reasonable." The HCCB also established a committee consisting of members of the HCCB designated as the Research and Development Committee (hereinafter referred to as the "R & D Committee"). The R & D Committee reviewed the results of test runs and also found the final groups reasonable. The HCCB met in January, 1981, and adopted the grouping methodology with the adjusted variable weights arrived at as a result of the test runs for use in establishing hospital groups for use in 1981. The grouping methodology was reviewed every year after its initial adoption in 1980. The methodology was reviewed by the HCCB, HCCB's staff, the TAP's and the R & D Committee each year. Throughout the period from 1980 to the present, criticisms of the grouping methodology have been made. Some of these criticisms were agreed with and others were rejected by the HCCB or its staff. Following review of the grouping methodology by the TAP's and the R & D Committee in 1981, the original fourteen variables were reduced to eight. In January, 1982, the weight of one of the variables was changed and one variable was replaced by another variable. In December, 1982, a variable was deleted; seven variables remained. In 1983, clustering analysis was limited in its application to the formation of short-term acute care general hospital groups. In 1984, following the significant amendment of Chapter 395, Florida Statutes (1983), the HCCB adopted the present challenged rules. The rules were effective November 5, 1984. The only change in the grouping methodology approved by the HCCB was the substitution of the Florida price level index variable for percent of population over age 65. The weight assigned to the Florida price level index was the same as the weight that had been assigned to the percent of population over age 65. The changes made to the grouping methodology in 1984 were first suggested by the staff of the HCCB to the grouping TAP in June of 1984. The grouping TAP met on July 11, 1984 and considered and discussed the proposed changes. A number of problem areas were discussed. Although no test run results were presented at this TAP meeting, they were provided to TAP members before the HCCB adopted the grouping methodology changes. Concerns about the geographic or exogenous variables expressed at the grouping TAP meeting suggested a belief that too much or too little emphasis was being placed on geographic considerations. Mercy has proposed a number of findings of fact beginning on page 33 and ending on page 35 of its proposed order concerning the significance of the changes made by the Legislature in 1984 to Part II of Chapter 395, Florida Statutes (1983). Those proposed findings of fact essentially deal with the fact that the powers of the HCCB after the 1984 amendments may have a more significant impact on hospitals and that, therefore, the grouping methodology is of greater interest to hospitals. Mercy's proposed findings of fact are not, however, relevant in determining whether the challenged rules are arbitrary and capricious. The fact that the effect of the grouping methodology on a hospital may now be different does not mean that the use of the grouping methodology, as modified after the 1984 legislative changes to the law, which was developed when the purpose of grouping was different, is not an appropriate methodology. The evidence does not support such a conclusion. Therefore, to the extent that Mercy's proposed findings of fact under Section II, A, of its proposed order have not already been made, they are rejected as unnecessary. Mercy and the HCCB have proposed findings of fact as to whether Mercy has ever questioned the HCCB's grouping methodology since it was first adopted prior to instituting this proceeding. Those proposed findings of fact are not deemed relevant in determining whether the grouping methodology is arbitrary and capricious. If the grouping methodology is in fact arbitrary and capricious, the fact that Mercy did not challenge the methodology when it was first adopted will not make it any less arbitrary and capricious today. Mercy's Challenge. A. Introduction. Mercy is a not-for-profit, general acute care hospital with 550 licensed beds located in Dade County, Florida. Mercy has raised a number of points in this proceeding and its proposed order in challenging the rules in question. All of those points, according to Mercy, prove that the rules are an invalid exercise of delegated legislative authority. In determining whether the facts support such a conclusion, the following standard must be kept in mind: [I]n a 120.54 hearing, the hearing officer must look to the legislative authority for the rule and determine whether or not the proposed rule is encompassed within the grant. The burden is upon one who attacks the proposed rule to show that the agency, if it adopts the rule, would exceed its authority; that the requirements of the rule are not appropriate to the ends specified in the legislative act; that the requirements contained in the rule are not reasonably related to the purpose of the enabling legislation or that the proposed rule or the requirements thereof are arbitrary or capricious. A capricious action is one which is taken without thought or reason or irrationally. An arbitrary decision is one not supported by facts or logic or despotic. Administrative discretion must be reasoned and based upon competent substantial evidence. Competent substantial evidence has been described as such evidence as a reasonable person would accept as adequate to support a conclusion. Agrico Chemical Company v. State, Department of Environmental Regulation, 365 So.2d 759, 763 (Fla. 1st DCA 1978), cert. denied, 376 So.2d 74 (1979). Additionally, the following must be kept in mind: The well recognized general rule is that agencies are to be accorded wide discretion in the exercise of their lawful rulemaking authority, clearly conferred or fairly implied and consistent with the agencies' general statutory duties. . . . An agency's construction of the statute it administers is entitled to great weight and is not to be overturned unless clearly erroneous. . . . Where, as here, the agency's interpretation of a statute has been promulgated in rulemaking proceedings, the validity of such rule must be upheld if it is reasonably related to the purposes of the legislation interpreted and it is not arbitrary and capricious. The burden is upon petitioner in a rule challenge to show by a preponderance of the evidence that the rule or its requirements are arbitrary and capricious. . . . Moreover, the agency's interpretation of a statute need not be the sole possible interpretation or even the most desirable one; it need only be within the range of possible interpretations. Department of Professional Regulation v. Durrani, 455 So. 2d 515, 517 (Fla. 1st DCA 1984). The witnesses who testified in this proceeding who were accepted as experts were qualified in a number of different areas. Those witnesses qualified as experts in statistical analysis or related areas and health care finance rendered opinions as to the appropriateness of the HCCB's grouping methodology. The method of grouping hospitals adopted by the HCCB is a statistical method. Therefore, the determination of whether the HCCB's methodology is arbitrary and capricious depends largely upon whether the methodology is statistically sound. Mercy and the HCCB therefore presented the testimony of witnesses qualified in the area of statistics: Rick Zimmerman, Ph.D., an expert in statistical analysis and social science statistics (for Mercy), and Duane Meeter, Ph.D., an expert in economics and applied statistical analysis and Frank Fox, Jr., Ph.D., an expert in applied statistics (for the HCCB). All three witnesses were knowledgeable and credible. Dr. Zimmerman testified that the HCCB's grouping methodology was "clearly inappropriate." Dr. Zimmerman's opinion was based upon a three step analysis in which he determined: (1) whether the variables selected by the HCCB are appropriate; (2) whether the weights assigned to the variables by the HCCB are appropriate; and, (3) the effect changing the variables and/or weights would have on hospital groups. The results of Dr. Zimmerman's analysis, which formed the basis for his opinion that the HCCB's grouping methodology is not appropriate, are discussed, infra. Mercy has proposed a number of findings of fact in its proposed order concerning the credibility of Dr. Meeter's and Dr. Fox's testimony. Some of those proposed findings of fact have been considered in determining the weight given to their testimony. Both Dr. Meeter and Dr. Fox were, however, knowledgeable and credible. In addition to the opinion of its statistical expert, Mercy presented the testimony of three witnesses who were accepted as experts in health care finance: Messrs. Lawrence R. Murray, Jerry A. Mashburn and Anthony Krayer. All three are certified public accountants. All testified that it was his opinion that the HCCB's grouping methodology was arbitrary. The bases for their opinions are discussed, infra. Selection of "Seed" Hospitals. In order to use a clustering algorithm, a starting point is needed; the first object (hospital) to be placed in each group must be selected. The first objects selected are called "seed" objects. Mercy has attached the HCCB's method of selecting the nine "seed" hospitals in initially performing the McQueen's K-means clustering algorithm. Mercy has proposed the following findings of fact with regard to this point: While none of the parties challenged the use of McQueen's and the CLAN program, no support was offered during the hearing for the method by which the HCCB had selected the nine seed hospitals as initial clustering points. The HCCB's own statistician criticized the HCCB's selection method. The Rankis-Zimmerman report indicates that the final groupings based upon the HCCB's seed hospitals were vastly different than groupings based upon the utilization of seed hospitals selected on a statistical basis. Both the HCCB's and Mercy's statisticians proposed statistically sound methods for selecting seed hospitals, which had not been employed by the HCCB in the Grouping Methodology. [Citations omitted] These proposed findings of fact are not relevant to this proceeding. The burden is on Mercy to show that the selection of "seed" hospitals was arbitrary and capricious; the HCCB is not required to show "support" for its method of selecting the seed hospitals. Additionally, whether there are other methods of selecting seed hospitals is not the test. The HCCB's interpretation of the statute need not be the sole interpretation or even the most desirable one; it only needs to be within the range of possible interpretations. Durrani, supra. Therefore, even if the Rankis-Zimmerman report does indicate that the final groupings of hospitals of the HCCB were vastly different than groupings based upon other methods of selecting seed hospitals, it does not automatically follow that the HCCB's method of selecting seed hospitals was not "within the range of possible interpretations. The weight of the evidence does not prove that the HCCB's method of selecting seed hospitals was arbitrary and capricious. Selection of the Variables. In delegating legislative authority to the HCCB to establish a grouping methodology, the Legislature provided that the following relevant characteristics are to be taken into account: A measure of the nature and range of services provided; Number of medical specialties represented on the hospital staff; Percentage of Medicare inpatient days; Average daily census; Geographic differences; and Case mix, "when available." In response to the Legislature's mandate, the HCCB has adopted seven variables or characteristics. The variables selected by the HCCB include five hospital- specific (endogenous) variables and two geographic (exogenous variables). The variables are as follows: Endogenous Variables: Average occupied beds. Available services. Physician mix. Number of residents. Percent Medicare days. Exogenous Variables: Florida price level index. Personal income. The following findings of fact are made with regard to each of the specific characteristics required to be taken into account by the Legislature and the variables adopted by the HCCB: 1. A measure of the nature and range of services provided. The HCCB has provided in the Manual that "available services" or a service index will be considered. The specific services considered are listed on Table B, Chapter V, of the Manual. Table B also weights or provides a score for each of the various services listed. Each hospital gets the specified score if it has a particular service available. The available services listed are based upon a survey of hospital administrators and chief financial officers in New York, New York, made in the 1970's. Problems with the list of available services have been pointed out to the HCCB and its staff. The primary problem is that the volume of services provided is not taken into account. The problems with the service index, however, relate to the fact that the service index is a proxy for case mix. To date, there is no alternative available which would be a better proxy for case mix. The Legislature contemplated this fact by providing that a measure of the services provided by a hospital will be considered and that case mix will be taken into account "when available." Therefore, while there are "problems" with the service index, consideration of available services is mandated by the Legislature and there are no acceptable alternatives available use for by the HCCB. 2. Number of medical specialties represented on the hospital staff. 52. The HCCB has provided that a physician specialties mix be considered in grouping hospitals. This physician specialties mix is based upon a list of twenty- six specialties for which a hospital gets a single credit for each specialty available regardless of the number of physician specialists available in each specialty or the volume of patients admitted by a physician. 52. Like the service index, the physician specialties mix is a proxy for ease mix and has problems associated with its use. Also like the service index, consideration of this factor is mandated and there are no acceptable alternatives available for use by the HCCB. 3. Percentage of Medicare inpatient days. 53. The HCCB has provided that "percentage Medicare days be considered in grouping hospitals. Consideration of this variable has not been shown to be arbitrary and capricious. 4. Average daily census. 53. The HCCB has provided that "average occupied beds" is to be considered in grouping hospitals. It does not appear that this variable's use was proper, as discussed, infra. 5. Geographic differences. The HCCB has provided that geographic differences be considered in grouping hospitals by providing for the inclusion of the Florida price level index, by county, and median income, by county, as variables to be considered. The only thing that the evidence established with regard to these variables was that they are not "very good" predictors, that "if" they are intended as a measure of input prices they are "poor substitutes," and that there may be "better" measures of the cost of doing business. The evidence does not, however, show that the use of these variables is arbitrary and capricious. Mercy has proposed a number of findings of fact concerning geographic influences in part II, H of its proposed order. The proposed findings of fact begin on page 29 and end on page 33. Most of these proposed findings of fact are not made in this Final Order because they are not deemed relevant or material and are unnecessary to the resolution of this proceeding. The proposed findings of fact contained in part II, H of Mercy's proposed order purportedly show that the HCCB has inadequately accounted for geographic influences. The evidence does establish that the financial characteristics of Florida hospitals and GRAA are affected by the geographic location of a hospital. This is especially true in Florida because of the impact on parts of the State from tourism, language barriers, the number of elderly residents, the available labor markets, and competition. It is also true that the combined weights of the two geographic variables the HCCB has selected for consideration in the grouping methodology--the Florida price level index and median income--is only one-seventh of the combined weights of all the HCCB's variables. It is also true that the grouping methodology results in hospitals from different areas of the State being grouped together, i.e., Mercy's hospital group includes twenty- three hospitals, four of which are located in Dade County and three of which are located in Escambia County. It does not necessarily follow, however, that the HCCB has been arbitrary and capricious in designating only two variables to take into account geographic differences between hospitals. The evidence also does not support a conclusion that it was not proper for the HCCB to limit the weight of the geographic variables to one-seventh of the total weight of the variables. Nor does the evidence demonstrate that the inclusion of hospitals from different areas of the State in the same group is not a proper result just because geographic influences are important. The fact that a large percentage of Dade County and south Florida hospitals do not qualify for automatic approval of their budgets under Section 395.509(2), Florida Statutes (1984 Suppl.), because they are in the upper 20th and the upper 50th to 79th percentiles does not necessarily prove that geographic influences have not been adequately accounted for either, as suggested be Mercy on page 30 of its proposed order. The evidence simply does not support such a conclusion. Nor does it necessarily follow that because Dade County hospitals are "efficient" in the minds of some of Mercy's witnesses and yet are unable to achieve automatic approval of their budgets that the grouping methodology does not adequately account for geographic influences, as suggested by Mercy on pages 30 and 31 of its proposed order. First, the Legislature has provided that factors other than geographic differences are to be considered, which the HCCB has provided for. It may therefore be that some Dade County hospitals do not achieve automatic approval of their budgets because of the other variables. The fact that not all Dade County hospitals fail to achieve automatic approval of their budgets supports such a conclusion. Also, even though a hospital's budget is not automatically approved it does not necessarily mean that it is considered inefficient. If that were the case, its budget would probably be subject automatically to amendment or disapproval. That is not the case. If a hospital's budget is not automatically approved its budget is subject to further review under Section 395.509(5), Florida Statutes (1984 Suppl.). It may still be determined that the hospital is "efficient" based upon this review. The Legislature, in enacting Part II of Chapter 395, Florida Statutes, did indicate that it intended to promote competition and efficiency among hospitals in order to contain hospital costs. Section 395.5025, Florida Statutes (1984 Suppl.). The grouping methodology and, in particular, the comparison of hospitals' GRAA under Section 395.509(2), Florida Statutes (1984 Suppl.), does not alone achieve that intent. Therefore the opinion of several of Mercy's witnesses that Dade County hospitals and in particular, Mercy, are efficient does not support a conclusion that the methodology is arbitrary and capricious or that geographic influences are not adequately considered. On pages 31 and 32 of its proposed order, Mercy suggests that Dade County hospitals only compete with other Dade County hospitals and therefore grouping hospitals from all sections of the State is illogical. In support of this suggestion, Mercy proposes findings of fact to the effect that the HCCB has recognized that consumers are interested in comparing hospital charges on a regional basis and has provided information about hospital cost on a county-by- county basis in the past. Mercy's proposed findings of fact are not accepted for essentially the same reasons that its proposed findings of fact with regard to the efficiency of hospitals were rejected. These proposed findings of fact do not support a finding that the HCCB's grouping methodology is arbitrary and capricious or that geographic differences have not been adequately taken into account. Mercy's has also proposed findings of fact with regard to geographic differences to the effect that after the Legislature specifically required that "geographic differences" be considered in an amendment to Chapter 395, Florida Statutes (1981), in 1982, the HCCB has not added any additional geographic factors to be considered. Although no additional geographic variables have been added, geographic variables have been reviewed and have been changed since 1982. More importantly, these proposed findings of fact do not prove that the existing variables are not adequate. 6. Case Mix. 66. Case mix is to be taken into account "when available." The evidence does not establish that case mix is available at this time. 7. Other variables. The HCCB is not limited to a consideration of the factors which the Legislature specifically provided are to be considered. Sections 395.507(2) and 395.509(4)(a), Florida Statutes (1984 Suppl.). The only other variable the HCCB has provided for consideration is "number of residents." No evidence of significance concerning this variable was presented at the hearing. There was testimony at the hearing that there are other variables which would be appropriate for consideration in grouping hospitals. The evidence does not, however, establish that failure to consider other variables means that the grouping methodology adopted by the HCCB is arbitrary and capricious. Dr. Zimmerman opined that he had determined that the variables selected by the HCCB were not appropriate. Dr. Zimmerman based his opinion upon the fact that he had conducted a "multiple regression analysis." According to Dr. Zimmerman, a "multiple regression analysis is a statistical procedure used to evaluate the relationship of a given set of independent, predictor variables (the HCCB's seven variables) to a single dependent variable (GRAA)." Based upon his application of multiple regression analysis, Dr. Zimmerman concluded that three of the variables used in the HCCB's grouping methodology are not statistically significant predictors of GRAA: available services, average occupied beds and median income. Two of these variables (available services and average occupied beds) are required by Sections 395.507(2) and 395.509(4)(a), Florida Statutes (1984 Suppl.), to be taken into account in the grouping methodology. These Sections also require that geographic factors, which median income is, be taken into account. This does not, however, mean that median income must be included as a variable by the HCCB. Dr. Meeter testified that the statistical significance of the HCCB's variables can be determined by the use of "log transformation." Based upon Dr. Meeter's use of log transformation, median income and available services are statistically significant variables; average occupied beds is not statistically significant. Although the HCCB was required to include "average daily census" as a factor in grouping hospitals, the HCCB was not required to use "average occupied beds." Based upon Dr. Zimmerman's and Dr. Meeter's testimony, the use of average occupied beds as a variable was not proper. Whether the use of available services and median income as variables was proper depends upon whether log transformation is a proper method of determining the statistical significance of variables. Although the evidence on this question was in conflict, it appears that the use of log transformation was proper. The inclusion of available services and median income is therefore not arbitrary and capricious. A second problem with the variables used by the HCCB suggested by Dr. Zimmerman involves the correlation between the seven predictor variables or "multicollinearity." The existence of multicollinearity can invalidate a clustering program. Dr. Zimmerman determined that the correlation between the physician mix, available services and average occupied beds variables and between the Florida price level index and median income variables is large enough that there is a "potential" problem. Dr. Zimmerman's determination that there is a "potential" problem was made through two techniques. He first used "paired correlation." Based upon paired correlation, Dr. Zimmerman used a "rule of thumb" that a paired correlation of 0.7 or higher should be looked at closer. Finding a paired correlation between physician mix, available services and average occupied beds of .74 and between the Florida price level index and median income of .71, Dr. Zimmerman then calculated "R squared" to determine if a potential problem did in fact exist. Dr. Zimmerman indicated that the calculation of R squared is the most highly recommended method of determining if multicollinearity is a problem but agreed there are other methods of making such a determination. Dr. Meeter indicated that Dr. Zimmerman's rule of thumb that based upon paired correlations of 0.7 or higher indicates the problem should be looked at more closely is too strict. Other than Dr. Zimmerman's "experience" (which according to Dr. Zimmerman, consisted of a class he took), Dr. Zimmerman did not cite any authority which supported his rule of thumb. The only other source Dr. Zimmerman referred to--the "SPSS" manual--only indicates that the .82-1.0 range indicates that extreme collinearity exists. Another problem raised by Dr. Meeter with Dr. Zimmerman's conclusions as to multicollinearity, involves the use of "variance inflation factors" (hereinafter referred to as VIF is another technique used by statisticians to determine if multicollinearity is a problem. Dr. Zimmerman did not look at VIF. VIF can be determined by transforming R squared: VIF 1/1- R2. A VIF in excess of 5 or 10 is an indication that multicollinearity exists. One source quoted by Dr. Meeter even indicates that a much higher VIF is necessary to conclude that multicollinerity exists. Transforming Dr. Zimmerman's R squared calculations indicates that VIF is in excess of 5 in only one instance. As discussed more fully, infra, Dr. Zimmerman used a number of alternative methods of grouping hospitals which he designated as "Schemes." Based upon Dr. Zimmerman's "Scheme 3," Dr. Zimmerman found an R squared value of .819. The VIF for an R squared value of .819 is in excess of 5. Scheme 3, however, is not an application of the HCCB's grouping methodology; it is a grouping methodology in which the variables are assigned different weights. As indicated by Dr. Meeter, the weights used in grouping can effect the correlation of the variables. Therefore, the fact that Scheme 3 indicates a possible multicollinearity problem does not prove that multicollinearity is in fact a problem with the HCCB's grouping methodology. Based upon the foregoing it is found that multicollinearity does not exist sufficiently to conclude that the variables used by the HCCB are arbitrary and capricious. Dr. Zimmerman only testified that there was a "potential" problem. Additionally, although multicollinearity may invalidate a clustering program, the evidence does not prove that the HCCB's clustering program is in fact invalid because of any existing "potential" problem. In light of the foregoing findings of fact, it is clear that the HCCB's variables are appropriate with the exception of average occupied beds. The fact that this one variable is not statistically significant, however, does not by itself support a finding that the grouping methodology is inappropriate. The Lack of Testing of the Grouping Methodology. A third point raised by Mercy is entitled "Lack of Testing" in its proposed order and includes several proposed findings of fact on pages 17 and 18 of Mercy's proposed order. Mercy has essentially proposed findings of fact that: (1) it had been recommended to the HCCB when it originally adopted its grouping methodology in 1980 that a statistician be hired to test the grouping methodology; (2) that the failure to do so had been criticized in the past; that it had been recommended that the HCCB obtain assistance of individuals knowledgeable in Florida hospital characteristics to evaluate the grouping process but had failed to do so; (4) that the HCCB had not, until just prior to the hearing of this case, hired a statistician; (5) that the HCCB has not used multiple regression analysis or within-cluster co- variance weighting; and, (6) that the State of Washington's State Hospital Commission has employed a statistician to test its methodology and has effectively been advised by individuals knowledgeable with Washington's hospital characteristics. These proposed findings of fact do not establish that the grouping methodology adopted by the HCCB is arbitrary and capricious even if they were all correct findings of fact. All that these proposed findings of fact show is that the HCCB may not have gone about the adoption of its grouping methodology in the most appropriate manner. Any such shortcomings, based upon 20/20 hindsight, in the manner in which the methodology was adopted do not prove that the grouping methodology itself is not appropriate. Additionally, the evidence does not support all of these proposed findings. In particular, as was discussed, supra, the HCCB did in fact look to individuals knowledgeable in Florida hospital characteristics to evaluate its grouping methodology. The Weight of the Variables. The most significant and troublesome challenge made by Mercy to the HCCB's grouping methodology involves the weights assigned to the variables considered in grouping hospitals. The weights assigned by the HCCB to the seven HCCB variables are: Variable Weight Endogenous: Average occupied beds. 1.0 Available services. 2.0 Physician mix. 0.5 Number of residents. 0.5 Percent Medicare days. 2.0 Exogenous: Florida price level index. 0.5 Personal income. 0.5 The determination of whether the weights selected by the HCCB are arbitrary and capricious depends largely upon the evidence presented at the hearing by those witnesses knowledgeable in the field of statistics. Three witnesses were qualified as experts in statistically related fields. All three were well qualified in their fields and were credible and persuasive. According to Dr. Zimmerman, "the weights used currently by the HCCB are clearly inappropriate." In Mercy exhibit 17, Dr. Zimmerman reaches the following conclusion with regard to the HCCB's variable weights: These weights clearly do not reflect the relationship of the various variables to GRAA and thus appear as arbitrary and inappropriate for use in clustering hospitals on the basis of cost-related variables. Dr. Zimmerman's opinion is based upon the use of "multiple regression analysis," which, according to Mercy exhibit 17, "assesses the relationship of each of the predictor variables to the dependent measure (GRAA)." The evidence, however, does not support a finding of fact that multiple regression analysis is the only statistically valid method of establishing weights to be used in clustering analysis. In fact, there are a number of statistically valid methods of establishing variable weights. One of those acceptable methods is the "subjective" method which was used by the HCCB. Doctors Meeter and Fox substantiated this finding of fact. The use of the subjective method involves the participation of individuals knowledgable in the Florida hospital industry in reviewing and commenting on the weights used. The evidence clearly supports a finding that individuals with such knowledge participated in the process of developing the HCCB's grouping methodology including the selection of variable weights. Even one of Mercy's witnesses provided testimony which supports this conclusion: Mr. Kenneth G. McGee testified that "[i] t was just a trial and error process of changing weights until we ended up with something that people considered more reasonable than what had been produced in the past." Mercy has questioned Dr. Meeter's testimony with regard to the use of the subjective method of weighting variables based upon a number of proposed findings of fact. First, Mercy has proposed findings of fact to the effect that Dr. Meeter indicated that the subjective method is "bad" if not carefully applied. What Dr. Meeter actually said was that any method should be applied carefully. Secondly, Mercy has proposed a finding of fact that in a book relied upon by Dr. Meeter in rendering his opinion about the subjective method--John Hardigan's 1975 book, Clustering Algorithms--the author describes the subjective method as an "unsatisfactory" one. What Dr. Meeter's testimony proves is that Hardigan's comment was a tongue- in-cheek comment that there are several appropriate methods of weighting variables all of which are unsatisfactory, including regression analysis (used by Dr. Zimmerman) and the subjective method (use by the HCCB). Dr. Meeter also relied upon other statistical literature in rendering his opinion as to the use of the subjective method in determining variable weights. Finally, Mercy has suggested that Dr. Meeter did not undertake any independent "statistical" analysis which would support his opinions. Based upon the nature of Dr. Meeter's testimony, it does not appear that such a statistical analysis is a prerequisite to concluding that the use of the subjective method is an acceptable method of determining variable weights. Mercy has proposed a finding that the subjective method of weighting is inappropriate based upon Dr. Zimmerman's testimony. Dr. Zimmerman was asked the following questions and gave the following responses concerning the subjective method: Q Now, in your understanding of how the Board arrived at its weights, is it your opinion that that is totally inappropriate methodology for clustering? Yes or no or maybe? A I am looking to counsel for counsel here. MR. PARKER: Do you understand the questions? THE WITNESS: I do understand the question. And let me give you my full answer as I best understand it. The weights -- and I think what I have commented on at great length -- the weights used by the Hospital Cost Containment Board are clearly on statistical grounds inappropriate. There's no question about that. BY MR. COLLETTE: Now, on these clustering grounds, you testified as to your familiarity with clustering grounds, on clustering grounds, are they totally inappropriate? A If the question is -- I wouldn't say that. Hearing that there is no objection, I will continue. I would rule out the use of a purely subjective weighting scheme as a final solution for cluster analysis. I think it might be one that would be considered at a very early step, but never used, as kind of a preliminary idea. However, I would clearly rule out the use of a purely subjective weighting scheme as something to be proud of and actually put into application. So, if that means yes to your question, I guess yes in that specific way. Dr. Zimmerman's responses are not totally clear with regard to whether the subjective method is, in his opinion, an acceptable method of determining variable weights. Nor would his response, if totally clear, overcome the weight of the evidence in support of a conclusion that the HCCB's method of determining variable weights is not arbitrary and capricious. Alternative Methods of Grouping Hospitals. Mercy has proposed a number of findings of fact under a section of its proposed order entitled "Alternative Variables and Weights Indicated by Statistical Analyses." Pages 22 to 29 of Mercy's proposed order. Some of the proposed findings included therein have been dealt with in other portions of this Final Order, including those findings of fact dealing with the use of multiple regression analysis and multicollinearity. In Dr. Zimmerman's report (Mercy exhibit 17) and during his testimony a number of alternative methods of grouping hospitals were tested and evaluated. Dr. Zimmerman concluded that a number of these alternative methods would be preferable to the methodology adopted by the HCCB. Dr. Zimmerman tested twelve different methods (referred to as "Schemes" by Dr. Zimmerman): the HCCB's, the State of Washington's and ten other methods which used some or all of the seven variables designated by the HCCB. Scheme 3 used all seven variables selected by the HCCB but with different weights. Dr. Zimmerman rejected this scheme because of multicollinearity. In Scheme 4, Dr. Zimmerman used only the four variables which he found to be statistically significant: physician specialties mix, number of residents, percent Medicare days and the Florida price level index. Dr. Zimmerman recognized that this Scheme was not acceptable because of the statutory mandate as to the types of factors which must be taken into account. In order to recognize the requirement of Sections 395.507(2) and 395.509(4)(a), Florida Statutes (1984 Suppl.), that certain variables be taken into account and to alleviate the purported multicollinearity problem, Dr. Zimmerman combined the variables he considered highly correlated into two "scales." "Scale 1" combined physician specialties mix, available services and average occupied beds and "Scale 2" combined the Florida price level index and median income. The weights assigned to these scale were based upon the weights Dr. Zimmerman felt were more appropriate as discussed, supra. Dr. Zimmerman then used multiple regression analysis and a variety of combinations of variables and Scales in Schemes 6-12. Of these Schemes, Dr. Zimmerman testified that Schemes 6 and 10 were preferable, if Scheme 4 could not be used. Scheme 6 involved the use of all of the variables: percent Medicare days, number of residents and Scales 1 and 2. Scheme 10 involved the use of all of the variables except median income: percent Medicare days, number of residents, the Florida price level index and Scale 1. Dr. Zimmerman compared the results of using the HCCB's grouping methodology to the results from using Schemes 3,4,6 and 10. The results showed that more Dade County hospitals had GRAA's, in comparison to the hospitals in the resulting groups under Schemes 3,4,6 and 10, which would result in automatic approval of their budgets than under the HCCB's methodology. Mercy's position within its group also improved as a result of using Schemes 3,4,6 and 10. These proposed findings of and Mercy's proposed findings of fact concerning alternatives considered by Dr. Meeter do not prove that the HCCB's grouping methodology is arbitrary and capricious. As found, supra, six of the seven variables selected by the HCCB are reasonable. The weights assigned to those variables have also been found to be reasonable and Mercy's suggested findings of fact with regard to multicollinearity have been rejected. Mercy has failed to prove that the HCCB's grouping methodology is arbitrary and capricious. Therefore, any alternative methods or Schemes and the results of using such methods cannot and do not overcome such findings. Conclusions. Based upon the foregoing, it is clear that the bases for the opinions that the HCCB's grouping methodology is inappropriate are not supported by a preponderance of the evidence. Dr. Zimmerman's opinion, which was based upon a number of conclusions, was only supported by the fact that one of the variables selected by the HCCB is not proper. The evidence, however, does not support a finding that this fact alone means that the grouping methodology adopted by the HCCB is inappropriate. The facts do not support a conclusion that the grouping methodology adopted by the HCCB is arbitrary and capricious.
The Issue The issues are whether Petitioner overpaid Medicaid reimbursements to Respondent for inpatient hospital services due to the lack of medical necessity for such services and, if so, the amount of the overpayment.
Findings Of Fact Respondent is a 226-bed community hospital in Sanford. It is an acute-care hospital with an emergency department. At all material times, Respondent has been an authorized Medicaid provider. For inpatient services, Respondent receives, under Medicaid, an all-inclusive per diem rate for all goods and services provided during a 24-hour period, less any third-party payments. Petitioner is the state agency responsible for the regulation of the Medicaid program in Florida. Petitioner is required to perform Medicaid audits of providers and to recover any overpayments. Pursuant to this authority, Petitioner conducted an audit of Respondent for the period from January 1, 2001, through March 31, 2002. Pursuant to its procedures, Petitioner duly informed Respondent of the audit, obtained from Respondent relevant medical and hospital records, issued a Provisional Agency Audit Report on January 24, 2006, obtained additional information from Respondent pertinent to the provisional findings, and issued a Final Agency Audit Report on October 19, 2006, which claimed a total overpayment of $286,357.54 based on Medicaid payments made to Respondent on behalf of 35 different recipients. (The report indicates two separate denials for each of four recipients, so 39 total transactions are listed.) The dispute in this case concerns the medical necessity of the inpatient hospitalization of each recipient. The Florida Medicaid Hospital Services Coverage and Limitations Handbook (Handbook) states that the purpose of the Medicaid program is "to provide medically necessary inpatient and outpatient services to recipients in the hospital." Handbook, page 1-1. This case involves paid claims for inpatient, not outpatient, services. The Handbook defines inpatient services as those services "rendered to recipients who are admitted to a hospital and are expected to stay at least 24 hours and occupy a bed, even though a bed is not actually utilized because the recipient is discharged or transferred to another hospital." Handbook, page 1-1. The Handbook provides that the day of admission is covered, but the day of discharge is not covered, unless it is also the day of admission. Handbook, page 2-22. The Handbook defines "grace days" as non-medically necessary days following the day of formal discharge when the recipient continues to occupy a hospital bed until an outside facility or residence can be found. These days are not reimbursable by Medicaid except for children under 21 years of age on "Department of Children and Families hold . . .." Medicaid will pay up to 48 hours of inpatient stay beyond the formal discharge day for these children while an alternative placement is located. The Handbook incorporates the limitation of medical necessity as follows: Medicaid reimburses for services that are determined medically necessary, do not duplicate another provider's service, and are: individualized, specific, consistent with symptoms or confirmed diagnosis of the illness or injury under treatment, and not in excess of the patient's needs; not experimental or investigational; reflective of 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; 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 service medically necessary or a covered service. Note: See Appendix D, Glossary, in the Florida Medicaid Provider Reimbursement Handbook, UB-92, for the definition of medically necessary. Handbook, pages 2-1 to 2-2. The Florida Medicaid Provider Reimbursement Handbook, UB-92, Appendix D, defines "medically necessary" as follows: 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 that is not primarily intended for the convenience of the recipient, the recipient's caretaker, or the provider. "Medically necessary" or "medical necessity" for inpatient hospital services requires that those services furnished in a hospital on an inpatient basis could not, consistent with the provisions of appropriate medical care, be effectively furnished more economically on an outpatient basis or in an inpatient facility of a different type. 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 medical necessity or a covered service. The Florida Medicaid Provider Reimbursement Handbook, UB-92, Appendix D, page D-10. E. A. was admitted on January 6, 2001. Petitioner does not contest the medical necessity of inpatient services to treat E. A.'s acute exacerbation of chronic bronchitis from January 6-8. The parties' dispute concerns the medical necessity of the remaining ten days of E. A.'s hospitalization. (All calculations of duration of hospitalizations omit the day of discharge, pursuant to the above-cited provision from the Handbook. In this case, for instance, E. A. was discharged on January 19.) E. A., a 60-year-old male, presented to the emergency department with shortness of breath and a history of chronic obstructive pulmonary disease (COPD), emphysema, and hypertension. He had been unable to eat for the preceding four days due to respiratory distress. At the time of his admission, E. A. had been living for a short while with his sister, who was suffering from cancer. His relevant history included a shotgun wound to the left lung 30 years earlier. Respondent states in its proposed recommended order that E. A.'s chest X-rays showed acute infiltrate demonstrating pneumonia, although the discharge summary reveals that chest X-rays fail to reveal this condition, but acknowledged that sputum grain stains revealed a polymicrobial infection. More to the point, the X-ray reports dated January 6 and 8 note: "no focal infiltrate." However, the discharge summary described E. A.'s prognosis as poor because he was in "end-stage lung disease." In the emergency department, after treatment with bronchodilators, E. A.'s oxygen saturation rate was only 87 percent--not 94-100 percent, as mistakenly stated by Petitioner's expert, Dr. Ellen Silkes, an otolaryngologist whose practice is largely limited to outpatients. This low rate of oxygen saturation evidences hypoxia. E. A.'s arterial blood gases bore a pH of 7.28, evidencing, on the facts of this case respiratory acidosis, which results from excessive retained carbon dioxide due to poor lung function. E. A. was started on Albuterol and Atrovent by nebulizer at four-hour intervals, as well as a corticosteroid intravenously every six hours to relieve the swelling in the lungs. He received oxygen by nasal cannula. On January 10, the physician's notes state that E. A. still suffered from "severe COPD" secondary to smoking with bronchospasms. According to the notes, the first day that E. A. showed any improvement was January 12. On January 14 and 16, E. A. was still retaining excessive carbon dioxide and remained hypoxic, but showed some improvement by January 16 in terms of arterial blood gases. The physician's note for January 17 states that E. A. could be discharged as soon as arrangements for home health care were completed. E. A.'s hospitalization was medically necessary from January 6-17. His hospitalization after January 17 was not medically necessary. Petitioner improperly denied January 9-16, given that the day of discharge is excluded. Thus, for E. A., Petitioner should have denied two days, not all ten days. A. A. was admitted on June 19, 2001. Petitioner does not contest the medical necessity of inpatient services to treat A. A.'s gastrointestinal bleeding from June 19-20. The parties' dispute concerns the medical necessity of the remaining 12 days of A. A.'s hospitalization. (Some of Petitioner's calculations are incorrect. For instance, in this case, Petitioner does not deny July 2-5, even though, undoubtedly, its position as to the lack of medical necessity as to the earlier dates would mandate the same position as to the later dates. This recommended order does not disturb Petitioner's implicit acceptance of the medical necessity of any dates, even when it appears to be in error.) A. A., a 51-year-old male, presented to the emergency department with abdominal pain, diarrhea, and black tarry stools. His recent history included bloody vomit and a diagnosis, a few months earlier, of a pulmonary embolism. A. A. had discontinued taking Coumadin, a blood thinner, due to nosebleeds. A. A. had been diagnosed with AIDS in 1998 and had lost 30 pounds in one month. At admission, A. A.'s hemoglobin and hematocrit levels were critically low at 5.1 and 15.5, respectively, and remained critically low the following day when, after A. A. received transfusions of two units of packed red blood cells, his hemoglobin and hematocrit levels were only 6.8 and 20.0, respectively. Dr. Silkes denied the hospitalization after June 20 because an upper gastrointestinal endoscopy revealed, on June 19, no acute bleeding, and a bleeding scan the following day was negative. However, according to the physician's notes, A. A. was continuing to experience diarrhea on June 20, even though he was starting to feel better. The course of treatment of A. A. was complicated by his recent history of pulmonary embolism and his inability to report an accurate history. By June 21, A. A.'s severe anemia had been corrected, but he was diagnosed with candida, an opportunistic fungal infection common in AIDS patients. This diagnosis would explain the vomiting of blood. Generally, the treatment dilemma posed by A. A. was that efforts to increase his clotting time to stop the bleeding raised the risk of pulmonary embolism. The physicians debated whether to install a Greenfield filter to stop the passage of a blood clot. The filter is introduced under X-ray control through the femoral vein into the inferior vena cava, where it is anchored, so that it allows the passage of blood, but not the passage of a blood clot. But the Greenfield filter is contraindicated in the presence of A. A.'s fever of 101 degrees and elevated white blood counts. Physicians introduced Coumadin to minimize the risk of clots, but A. A.'s low platelet count required the discontinuation of Coumadin on June 30. A. A.'s International Normalization Ratio (INR) was 4.2, which is well above the range of 2.0-3.0 and thus indicative of the fact that A. A.'s blood was taking too long to clot. The standard of care in 2001 precluded safe outpatient management of a complicated patient such as A. A., given his twin risks of pulmonary embolism and bleeding, either of which could result in his death. A. A.'s Coumadin could not safely have been adjusted on an outpatient basis. The physicians restarted the Coumadin on June 24 and doubled its dosage the following day. As they were working on adjusting the blood thinner, though, A. A. continued to suffer nightly fevers of 103 degrees, and the physicians needed to monitor him closely for the next week for this reason too. On June 28, A. A. reported that he was feeling better, but the physicians needed to monitor him for a recent reduction in his Coumadin dosage. A. A. was reported as "alert and comfortable" on July 2. A. A.'s hospitalization was medically necessary from June 19 through at least July 2. Petitioner improperly denied all ten days of this hospitalization. T. B. was admitted on May 15, 2001. Petitioner does not contest the medical necessity of inpatient services to treat T. B.'s esophageal cancer and tuberculosis from May 15-17 and The parties' dispute concerns the medical necessity of the ten days that Dr. Silkes denied of the remaining 14 days of T. B.'s hospitalization. (It is unclear why Petitioner denied only ten days when Dr. Silkes denied May 18-20 and May 22-June 1--a total of 14 days, or 13 days exclusive of the day of discharge. But, as noted above, in cases such as this, the recommended order will consider only whether up to ten days within this period are allowable as medically necessary.) T. B., a 47-year-old male, presented to the emergency department with difficulty swallowing. He had visited a physician in February 2001 with the same complaint, and the physician had recommended an upper gastrointestinal series. Due to financial constraints, T. B. did not undergo this procedure until late April, when he was found to have a high-grade obstruction consistent with a tumor. T. B.'s recent history included the loss of 25 pounds. An endoscopy with biopsy performed on May 16 revealed a high-grade carcinoma of the esophagus. The physician planned to commence preoperative chemotherapy and radiation therapy to shrink the lesion, but, based on sputum collected on May 18, it was discovered that T. B. had mycobacterium tuberculosis. Physicians had suspected the tuberculosis from the time of admission when they placed T. B. in a negative airflow isolation room. Treatment of the tuberculosis necessarily preceded the preoperative chemotherapy recommended for T. B.'s carcinoma. The sputum sample revealed rare acid-fast bacilli, for which the standard of care in 2001 typically required two to three weeks of treatment before isolation precautions could be discontinued. T. B. remained in isolation at least through May 31. In addition, T. B. suffered significant pain from the carcinoma. By May 23, he was on patient-controlled analgesia in the form of a morphine pump, which is not available outside of an acute-care hospital. T. B.'s hospitalization was medically necessary from May 15 through at least June 1. Petitioner improperly denied all ten days of this hospitalization that it denied. R. B. was admitted on December 3, 2001. Petitioner does not contest the medical necessity of inpatient services to treat R. B.'s respiratory failure from December 3, 2001, to January 2, 2002, and January 8, 2002. Based on Petitioner's prehearing stipulation, the dispute concerns only seven days' hospitalization. R. B., a 59-year-old female, presented to the emergency department with acute respiratory distress and respiratory failure. She was immediately intubated. Her family insisted upon aggressive treatment of, among other things, her bilateral pneumonia caused by a virulent staph infection. R. B. required a tracheotomy on December 20 due to the difficulty in weaning her from the ventilator. She required the placement of a percutaneous endoscopic gastrostomy (PEG) tube on January 1. The discharge summary describes R. B. as "very frail and fragile" and her hospitalization as "very prolonged and complicated." On December 23, when R. B. was finally weaned from the ventilator, her family agreed to a do-not-resuscitate (DNR) code for her. The dispute arises from an incident on January 3 when R. B. fell when trying to get out of bed. Her mental status deteriorated, probably due to malignant disease. Physicians ruled out sepsis in the bloodstream, but X-rays revealed multiple nodules in the lung and liver. On January 8, a CT- guided lung biopsy of one of the nodules confirmed malignant disease. Two days later, the physician stated that a consultation with hospice was indicated. Upon the agreement of the family, R. B. was discharged to her home under hospice care on January 12. Dr. Silkes is substantially correct in her opinion. The diagnostic work after January 2 only supported the poor prognosis that had become obvious to R. B.'s family ten days earlier and certainly was not palliative in nature. R. B.'s hospitalization after January 2, 2002, was not medically necessary--except for January 8, which Dr. Silkes initially conceded, and an additional two days, which Petitioner conceded in its prehearing stipulation. Petitioner properly denied seven days of this hospitalization. J. B. was admitted on January 5, 2002. Petitioner does not contest a 23-hour observation on January 5, but this would generate a reimbursement considerably smaller than that sought by Respondent for inpatient services for that day, so Petitioner has essentially denied the entire hospitalization, which consists of 16 days. J. B., a 59-year-old male, presented to the emergency department with shortness of breath and atrial fibrillation with fast ventricular rate. He had been diabetic for 25 years. He had been laid off from construction work in August 2001, and had arthritic knees which prevented his return to work. Since losing his job, J. B. had been feeling poorly and had lost 20 pounds. J. B.'s pulse at the time of his arrival was 165, and it dropped to 105 within his first six hours at the hospital. J. B.'s relevant history included congestive heart failure, edema of the extremities, and nocturnal dyspnea. A chest X-ray on the day of admission revealed a dense mass in the left lobe. Physicians started a calcium channel blocker to regulate J. B.'s rapid heart beat and a diuretic to eliminate his excess fluids and swelling. J. B. was feeling much better by January 7, as the physicians had controlled his rapid heart beat. On that day, J. B. underwent a stress test, which was negative. However, a CT scan performed on January 8 and reported the following day revealed a left hilum mass that proved to be advanced carcinoma. The physicians decided that J. B. needed a bronchoscopy to biopsy the lung mass and a thoracentesis, in which a needle is inserted between the ribs to extract fluid for the purpose of determining the fluid's source. However, J. B.'s atrial fibrillation complicated their plans. On January 8, J. B. remained in atrial fibrillation, and the physicians were considering starting him on Coumadin because patients with atrial fibrillation are at high risk of clotting due to the poor expulsion of blood into the ventricle. Introduction of this blood-thinning agent before other invasive procedures requires first that the physicians stabilize the patient. This dilemma delayed the introduction of the blood- thinning agent and prevented treating J. B. as an outpatient. Once stabilized on Coumadin, J. B. underwent the two diagnostic procedures on January 11. They revealed that he was suffering from stage IV squamous cell carcinoma, according to a physician's report dictated on January 14 and transcribed the following day. The physician ordered additional CT scans to determine the extent of the metastatic disease before deciding on a course of treatment. A whole body bone scan was performed on January 15 and was essentially negative. However, the carcinoma had metastasized to the left hilum and, by report dated January 15, a physician noted that J. B. would not benefit from surgery, chemotherapy, or radiation, although palliative radiation could offer him some relief. An IV port for chemotherapy (not radiation) was placed on January 16--not January 6, as noted by Dr. Silkes in her report. Coumadin had been discontinued in advance of the procedure and resumed on the day of the procedure, but required adjustment for the next several days, as J. B.'s INR was too low, indicative of excessive clotting. Although the administration of the chemotherapy through the IV port could have been done on an outpatient basis, J. B. was comfortable at all times after January 15, and with no effective treatment possible, his hospitalization remained medically necessary until the physicians were able to adjust his Coumadin so that his INR reached the normal range. J. B.'s hospitalization was medically necessary from January 5 through January 22, on which date he was discharged. Petitioner improperly denied the 16 days of inpatient services. N. C. was admitted on February 8, 2002. Petitioner does not contest the medical necessity of inpatient services to treat N. C.'s intracranial hemorrhage from February 8-10. The parties' dispute concerns the medical necessity of the remaining 21 days of N. C.'s hospitalization. N. C., a 40-year-old female, presented to the emergency department with a complaint of passing out and no significant medical history. N. C. was a single mother of a developmentally disabled child. Her father resided in a nursing home and suffered from dementia, so her siblings were her decisionmakers concerning care. At admission, N. C. was already in a vegetative state, suffering from a massive intracranial hemorrhage. Her blood pressure was 213/107. She was immediately intubated and given Mannitol to reduce intracranial pressure and Dilantin to prevent seizures. On February 8, a neurologist evaluated N. C. and found her a poor candidate for surgery to evacuate the intracranial hematoma due to the likelihood of extensive consequent neurological deficits. The neurologist discussed the possibilities and the "extremely poor" prognosis with the siblings, who decided not to pursue surgery and instead allow N. C. to be "managed medically." The physicians asked the siblings to consider a DNR code for N. C. N. C. made no meaningful progress in the following days. Respondent was unable to contact her siblings until February 19, and they asked for two days within which to make the decision whether to place N. C. on a DNR code. On February 22, they decided to place N. C. on a DNR code and withdraw the ventilator. Three days later, the physician discussed with the siblings the possibility of placement in a nursing home. Three days after this discussion, the siblings agreed on inpatient hospice care for N. C. On March 4, IV fluids and medications and the nasogastric feeding tube were withdrawn, and N. C. was transferred to a nursing home under hospice care. N. C.'s hospitalization was medically necessary through February 22 because a nursing home cannot accept a patient on a ventilator, N. C.'s course following the stroke could reasonably be observed for a couple of weeks to determine if improvement--however unlikely--might take place, and the siblings reasonably required this long to make this difficult decision. From February 23 through discharge, the inpatient services provided N. C. were no longer medically necessary, so Petitioner properly denied nine days of the 21 days that it denied for this recipient. N. Ch. was admitted on May 23, 2001. Petitioner does not contest the medical necessity of inpatient services to treat N. Ch.'s cellulitus and osteomyelitis from May 23 to June 24. The parties' dispute concerns the medical necessity of the remaining 46 days of N. Ch.'s hospitalization. N. Ch., a 38-year-old male, presented to the emergency department with wounds to both legs and loss of feeling in both feet and a history of fractures to both tibias 20 years ago followed by osteomyelitis four years ago. Despite considerable hospital treatment to both legs, consisting of antibiotics, hyperbaric oxygen, debridement, and skin grafts, drainage of the wounds persisted. Four grainy wounds on both legs penetrated to the bone, and N. Ch. had suffered some bony damage from the persistence of these infected wounds. A physician performed a surgical debridement of the wounds on May 26, and a vacuum- assisted closure device was applied to the wound on the following day. This device produces negative air pressure to stimulate a chemical change in the tissues to enhance the migration of new blood vessels and granulation tissue over the area of the wound. The pump was changed often. On June 22, N. Ch. underwent a second debridement and a pump was reapplied to the wounds on June 24. The issue in this case involves the use of hyperbaric oxygen treatment on an inpatient basis. On June 7, a physician reasonably recommended 20, 90-minute hyperbaric oxygen treatments. The treatments, which accelerate wound healing, began the next day. Dr. Silkes correctly finds no medical necessity after N. Ch. became stable after the second debridement. Although he later suffered some fever, apparently from his reaction to an antibiotic, and gastroesophagael reflux, as well as some adverse reactions to IV and peripherally inserted central catheter lines, N. Ch. could have been managed as an outpatient after June 24. Nothing suggests that the vacuum-`assisted closure device requires hospitalization, and hyperbaric oxygen treatment clearly does not require hospitalization. Respondent contends that inpatient services remained medically necessary after June 24 because Medicaid would not pay for hyperbaric oxygen treatment on an outpatient basis. Medical necessity is driven by medical, not legal, considerations. If the sole reason for hospitalization is to obtain a medically necessary good or service that Respondent has restricted to the inpatient setting, then the provider community improperly circumvents Petitioner's restriction. If there is no other reason to continue to hospitalize a recipient, such as N. Ch., the decision to do so in order to obtain for him a concededly medically necessary service--that does not otherwise require hospitalization--is unwarranted. Petitioner properly denied the 46 days of inpatient services for N. Ch. after June 24. J. C. was admitted on February 24, 2002. Petitioner does not contest the medical necessity of inpatient services to treat J. C.'s coronary artery disease and lymphoma on February 24 and March 3-8. In its proposed recommended order, Respondent does not contest Petitioner's denial of the "last two days," which apparently are March 9-10. The parties' dispute concerns the medical necessity of the remaining six days of hospitalization from February 25 through March 2. J. C., a 61-year-old female, presented to the emergency department with worsening chest pain over the past two weeks and a history of coronary artery disease. She also had an undiagnosed mass on her neck. She had previously failed outpatient treatment and was admitted to the hospital. Two weeks earlier, J. C. was to have had an outpatient biopsy of the neck mass, but the anesthesiologist declined to administer anesthesia until her unstable angina was addressed. J. C. went to her primary care physician, who referred her to a cardiologist, but, prior to seeing him, J. C. went to the emergency department. On February 25, the physician's notes indicate that J. C. was stable and without chest pain. The cardiologist performed a cardiac catheterization on February 26 and found 100 percent blockage of the left anterior descending artery, 80 percent blockage of the proximal circumflex, and other narrowings that were not amenable to angioplasty and stenting, so he recommended coronary artery bypass grafting. Heart surgery could not proceed until physicians learned the nature of the neck mass. A biopsy was performed on February 28, which revealed B-cell malignant lymphoma. The oncologist preferred to commence chemotherapy after the bypass operation, so this was performed on March 3. J. C. was extubated on March 4, but developed acute respiratory distress on March 5 and required a transfusion the following day. However, Dr. Silkes is correct in finding the hospitalization from February 25 through March 2 medically unnecessary. The procedures performed during this period could have been done on an outpatient basis. The record does not support Respondent's argument that her unstable angina required inpatient management. Petitioner properly denied these six days of inpatient services. R. LaB. was admitted on April 2, 2001. The parties' dispute concerns the medical necessity of the last day of inpatient service on April 12. This is the first case considered in this recommended order handled by Dr. Alan Yesner, an internist whose practice is more evenly divided between inpatients and outpatients than is Dr. Silkes' practice. R. LaB., a 47-year-old female, presented to the emergency department with abdominal pain of two days' duration and a history of COPD, hypertension, and diabetes. She was rushed to abdominal surgery to reduce an incarcerated hernia. The surgery was long. R. LaB. suffered respiratory failure and required intubation. Dr. Yesner is correct in opining that R. LaB.'s hospitalization after April 11 was not medical necessary. She was stable and on appropriate medication, so Petitioner properly denied one day of inpatient service for R. LaB. J. L. was admitted on June 12, 2001. The parties' dispute concerns the medical necessity of the seven days of inpatient services. J. L., a 47-year-old male, presented to the emergency department with complaints of a gradual increase of abdominal girth and was found to have blood in his stool. Lab work indicated an elevated INR, elevated bilirubin, and bacteria in his urine. The physician concluded that J. L. suffered from primary biliary cirrhosis, for which he had been treated since at least 1998. J. L. admitted that he had become noncompliant with his medication after a divorce. A CT scan revealed a probable stone obstructing the right ureter, causing urine to back up and flood the right kidney. A successful laser lithotripsy was performed on June 17 with the complete fragmentation of the stone and the installation of a stent, which would facilitate drainage, to be removed a few days later. J. L. tolerated the procedure well, and on the next day he reported feeling better without any pain in his flank. Dr. Yesner notes the "late schedule" of the lithotripsy, but Respondent did not have a lithotripter in 2001 and had to schedule it for use at the hospital. The hospitalization was medically necessary through June 17 due to the pain, advanced kidney disease, and potential kidney problems presented by the blockage, prior to its surgical fragmentation. Petitioner should have denied two days, not seven days. C. M. was admitted on April 2, 2001. Petitioner does not contest the medical necessity of admission for 23-hour observation only on April 2 for end-stage sarcoidosis, pneumonia, and gastrointestinal bleeding. The parties' dispute concerns the medical necessity of the remaining 31 days of C. M.'s hospitalization, which concluded with her death. C. M., a 55-year-old female, presented to the emergency department with shortness of breath and weakness. She is a Jehovah's Witness, so she declines blood transfusions on religious grounds. By April 4, C. M.'s blood gases, although not within normal ranges, were out of critical ranges. C. M. suffered respiratory failure and required intubation on April 16. Her hemoglobin gradually dropped after this, but treatment was limited to iron and vitamins due to the refusal of the patient to accept a blood transfusion. This treatment was unsuccessful. The family supported C. M.'s decision not to accept a blood transfusion, but insisted on full, aggressive treatment, including CPR. C. M. went into cardiac arrest on May 3 and CPR failed to revive her. Dr. Silkes states that Respondent should have arranged for hospice care during the first day of hospitalization. C. M. was not then on a ventilator, so a hospice would not have objected to taking C. M. on that ground, but her respiration was critically impaired for the first three days of her hospitalization and her prognosis was not such as to render hospital care medically unnecessary. It was medically necessary to stabilize C. M.'s respiration during these first three days, but her hemoglobin issues could have been addressed by home health care for the next 11 days. The medical necessity of inpatient services resumes, though, after C. M.'s respiratory failure of April 16 and continues to the end of her hospitalization. The first three days of inpatient services were medically necessary, the next 11 days of inpatient services were not medically necessary, and the last 17 days of inpatient services were medically necessary, so Petitioner should have denied 11 days, not 31 days. M. M. was admitted on March 3, 2001. Petitioner does not contest the medical necessity of inpatient services to treat acute asthmatic bronchitis with a history of coronary artery bypass graft, asthma, sarcoidosis of the lung, and diabetes from March 3-12, which Petitioner later extended to March 13. The parties' dispute concerns the medical necessity of the remaining three days of M. M.'s hospitalization, which Respondent's expert frankly conceded was difficult to justify. As Dr. Yesner noted, M. M. was stabilized on oral medication by March 11, and he allowed a couple of additional days to monitor her. M. M. experienced hypoglycemia on March 16, but this is a condition that, according to Dr. Yesner, is not unusual with the Prednisone that M. M. was taking, and hypoglycemia is typically managed on an outpatient basis. Petitioner properly denied the last three days of M. M.'s hospitalization. J. P. S. was admitted on January 4, 2001. Petitioner does not contest the medical necessity of inpatient services to treat J. P. S.'s obstruction of the common bile duct. The parties' dispute concerns the medical necessity of the last three days of his hospitalization. J. P. S., a 54-year-old male, presented to the emergency department with severe jaundice and a history of diabetes, congestive heart failure, and triple coronary artery bypass graft performed in 1997, although he displayed no significant cardiac abnormalities during this hospitalization. During the initial examination, J. P. S. went into respiratory arrest and required intubation. The gastroenterologist found J. P. S. ready for discharge, from a gastroenterological perspective, on January 13. but J. P. S. immediately developed COPD symptoms, including shortness of breath and edema. According to the physician notes, J. P. S. was sufficiently stable for discharge on January 15, but a note for the next day says to hold the discharge pending cardiac evaluation. Respondent discharged J. P. S. three days later, after physicians could monitor the level of Digoxin to ensure that J. P. S. was safe for discharge. P. S.'s entire hospitalization was medically necessary. Petitioner improperly denied the last three days of inpatient services. J. P. was admitted on December 8, 2001. Petitioner does not contest the medical necessity of services to treat J. P.'s fever from December 8-12. The parties' dispute concerns the medical necessity of the remaining 14 days of J. P.'s hospitalization. J. P., a 27-year-old male, presented to the emergency department with high-grade fevers and severe headaches and a history of AIDS. Dr. Silkes approved the treatment of the fever until it ended on December 12. The fever was likely caused by J. P.'s toxoplasmosis of the central nervous system. This is an opportunistic condition not unusual in immunocompromised patients. Candida fungal infection likely caused J. P.'s complaints of pain on swallowing, as this too is an opportunistic condition. Additionally, a blood culture revealed a staph infection. Through December 18, J. P. was continuing to experience fevers of up to 101 degrees. At the same time, it was necessary to address the toxoplasmosis before it extended to other organs. This required the sequential administration of IV antibiotics and careful, continual monitoring of the patient for his clinical response to treatment. On December 20, J. P. underwent a bone marrow biopsy to rule out the extension of toxoplasmosis in the bone marrow or the presence of tuberculosis. This test was negative, which was a precondition for discharge. The pathology report was "received" on December 21, but not "printed" until December 27. However, J. P. did not complete his IV administration of Doxycycline until December 23, when the medical necessity for his inpatient services ended. Petitioner should have denied three days, not 14 days. W. P. was admitted on June 18, 2001. Dr. Silkes would allow only a 23-hour observation on the day of admission for the treatment of lung cancer and tuberculosis. The parties' dispute concerns the medical necessity of 13 days of his hospitalization from June 18 through July 1 (even though he was not discharged until July 13). W. P., a 59-year-old male, presented to the emergency department with severe coughing up of blood and a recent loss of 40 pounds. A chest X-ray at admission revealed a large mass in the upper left lobe of the lungs. Lab work suggestive of anemia correlated with a malignancy as its source. Sputum to test for acid fast bacillus was taken, and a consult was immediately arranged with a pulmonary specialist to consider a bronchoscopy and to take a biopsy. A CT scan of the chest on June 18 revealed abnormal soft tissue density filling the right upper lobe, two tumors, and numerous nodes. The bronchoscopy on June 19 revealed 80 percent obstruction of the right main bronchus secondary to an endobronchial lesion and 100 percent obstruction of the right upper lobe. A biopsy of the right mainstem bronchus revealed a squamous cell carcinoma. A physician noted in his consultation report that W. P. was to complete his metastatic survey on the day of the report--June 22--after which they would discuss palliative treatment. The report states that the patient understands that he will unlikely live more than six months. Subsequently, acid fast bacillus, which had originally not been detected, was found, so W. P. was placed in isolation on June 26. He had been experiencing elevated white blood counts and fevers. He was placed on antituberculosis treatment, which, as noted above, typically takes two or three weeks until the patient can be removed from isolation. July 10 was W. P.'s first day without fever. On this date, Respondent sent his records to the Health Department to facilitate a transfer to a tuberculosis hospital. He was discharged on July 13. W. P.'s entire hospitalization was medically necessary. Petitioner should not have denied any of the 13 days that it denied. M. Pr. was admitted on December 18, 2001. Petitioner does not contest the medical necessity of inpatient services to treat M. Pr.'s coronary artery disease from December 18-27. The parties' dispute concerns the medical necessity of the remaining seven days of M. Pr.'s hospitalization. M. Pr., a 58-year-old male, presented to the emergency department with a recent cardiovascular accident while out of state. A cardiac catheterization revealed severe triple vessel coronary artery disease. On December 19, M. Pr. underwent a four-vessel bypass. Post-operatively, however, M. Pr. fell while on the commode. The dispute in this case arises due to the unavailability of rehabilitation facilities that would take M. Pr. after his fall. He was suitable for discharge on December 28, but no facility could be found to receive him. These are "grace days," as noted in the Handbook and are available, on a limited basis, for persons under 21 years of age, but, by negative implication, are unavailable for adults. Thus, medical necessity dictated that Respondent discharge M. Pr. on December 27, so the inpatient services are not reimbursable after December 28, given that the day of discharge is not allowable. Dr. Silkes' determination was correct in this case. Petitioner properly denied seven days' inpatient services for M. Pr. A. R. was admitted on December 30, 2001. Petitioner has denied the entire 14 days of A. R.'s hospitalization, although Dr. Silkes approved one day's inpatient services, on the day of admission, for the treatment of ovarian cancer. A. R., a 63-year-old female, presented to the emergency department with vomiting on the day of admission, progressive abdominal distension, anorexia, weight loss over the past month, and a 15-year history of bronchial asthma. A CT scan of A. R.'s thorax at the time of admission revealed a large collection of fluid in the abdominal cavity. At this time, a physician removed 4.5 liters of fluid from the cavity, and A. R., not surprisingly, began to feel much better. A report on January 3--delayed probably due to the holidays-- indicated the presence of scattered malignant cells in the withdrawn fluid compatible with carcinoma. Metastatic ovarian cancer was subsequently confirmed. A. R.'s case was complicated by the withdrawal of this large volume of fluids, which required continual monitoring of her electrolytes, and the sudden exacerbation of her dementia on January 2, which would impede outpatient services, as well as the initiation of chemotherapy. The dementia, which had been progressive for the past six months, was likely a reaction to the carcinoma. By January 11, a physician recommended hospice placement given A. R.'s incurable tumor. A. R.'s daughter agreed on this day to hospice placement. This is the day that medical necessity for inpatient services ended. Petitioners should have denied three days, not 14 days. The remaining days were medically necessary. E. S. was admitted on May 4, 2001. Petitioner does not contest the medical necessity of inpatient services to treat E. S.'s pancreatitis and multisystem failure from May 4-23. The parties' dispute concerns the medical necessity of the remaining 24 days of her hospitalization, which ended with her death. E. S., a 64-year-old female, presented to the emergency department with nausea and abdominal pain and a history of hypertension and abuse of alcohol and tobacco. She was found to have elevated pancreatic enzymes. On May 8, E. S. underwent a laparoscopic removal of her gallbladder, which she tolerated well, but soon afterwards suffered respiratory failure. E. S. was then placed on a ventilator. Problems with malnourishment and then kidney failure precluded a successful weaning her off the ventilator. On May 23, the family agreed to a DNR code. May 23 marks the last day that Dr. Silkes found that E. S.'s hospitalization was medically necessary. Care after this date was entirely supportive and not medically necessary; however, no hospice or skilled nursing facility would take E. S. because she could not be weaned off the ventilator. The unavailability of an alternative, less costly setting does not automatically render the inpatient care of a recipient medically necessary. The circumstances dictate whether inpatient services to such a patient are medically necessary. Here, it is impossible to find that services after May 23 were medically necessary. Dr. Silkes was correct in her opinion. Petitioner properly denied all 24 days of inpatient services for E. S. D. S. was admitted on March 24, 2001. Petitioner does not contest the medical necessity of inpatient services to treat D. S.'s osteomyelitis of the right foot from March 24-25 and March 30-April 10. (Originally, Dr. Silkes allowed only March 24-25 and March 30-April 6, but, on February 7, 2007, she revised her opinion to allow the additional four days to April 10.) In its prehearing statement, Petitioner conceded that only three of the original ten denied days remained at issue, as it was agreeing that an additional seven days were medically necessary. The parties' dispute concerns the medical necessity of the remaining three days, although it is not clear what three days Petitioner is contesting. D. S., a 57-year-old female, presented at the emergency department with a "hole in the right foot" and a history of diabetes. She dropped a can of juice on her foot on January 1, and the foot had become progressively infected since that time. On the day of admission, she underwent surgery for the removal of fourth and fifth metatarsal bones and toes of the right foot. She did not heal properly and required followup surgery on April 7 to trim some of the necrotic flap, as the physicians considered the possibility of a below-knee amputation. On April 13, the surgeon probed the wound, found no hidden pockets, and discharged D. S. Regardless what three days that Petitioner continues to find were not medically necessary, the entire hospitalization was medically necessary. J. W. was admitted on August 20, 2001. Petitioner does not contest the medical necessity of inpatient services to treat J. W.'s multiple organ failure from August 20 to September 14. The parties' dispute concerns the medical necessity of the remaining two days of J. W.'s hospitalization, at which time he died. J. W., a 48-year-old male, presented to the emergency department with a two or three-day history of progressive congestive heart failure with pulmonary edema, atypical chest pain, and increasing abdominal girth. His history included nonischemic cardiomyopathy with minimal coronary artery disease, chronic alcohol abuse, pulmonary hypertension, chronic atrial fibrillation requiring anticoagulation therapy, hepatitis B and C, chronic renal insufficiency, and chronic congestive heart failure with multiple hospitalizations. On admission, his INR was 6.6, indicative of very slow clotting. Despite the care of numerous consultants, J. W. suffered increased respiratory failure on September 5, at which time he was intubated. He received a Greenfield filter on September 7 to prevent further pulmonary clots. Starting September 10, and continuing everyday thereafter, J. W. required dialysis due to renal failure. J. W. was on total parenteral feeding as of September 14. The family, whose availability had been a problem, agreed to a DNR code on September 17. Respondent claims in its proposed recommended order that a DNR code is a precondition to hospice care, but no competent evidence establishes this fact. Dr. Silkes and Petitioner properly denied the last two days because they were not medically necessary. M. W. was admitted on June 10, 2001. Petitioner does not contest the medical necessity of inpatient services to treat M. W.'s ventricular fibrillation and complications from June 10- The parties' dispute concerns the medical necessity of the remaining seven days of M. W.'s hospitalization. M. W., a 31-year-old male, presented to the emergency department with cardiopulmonary arrest after his wife found him slumped on the sofa, seizing. On arrival, he was found to be in ventricular fibrillation, and he was intubated. Physicians restored a normal rhythm, but M. W. suffered a seizure in the emergency department, so he was given large doses of Dilantin. M. W. had suffered brain damage from cerebral anoxia. M. W. was extubated on June 13, and his breathing remained stable. He remained in normal sinus rhythm. M. W. began to receive Librium on June 13 to sedate him. The cardiologist proposed a cardiac catheterization, but M. W. refused. An EKG on June 15 found a conduction defect in M. W.'s heart that was suggestive of Wolff Parkinson White syndrome. The cardiologist then determined, on June 16, that M. W. required an electrophysiology study to rule out Wolff Parkinson White syndrome. In 2001, Respondent lacked the equipment to perform this study, for which M. W. remained too confused to participate on June 18 anyhow. Physicians continued to monitor M. W.'s cardiac rhythm, and, when a bed opened at Florida Hospital, Orlando, which had the necessary equipment, Respondent promptly transferred M. W. on June 22. During the transfer, the cardiac monitor continued to check M. W.'s rhythm due to the risk of another cardiac incident until the underlying cardiac abnormality was assessed and treated. Petitioner improperly denied the final seven days of M. W.'s hospitalization. M. W. had suffered a serious cardiac event. Physicians had not yet ruled out all possible reasons for the event and needed to address a promising possibility of Wolff Parkinson White syndrome, so M. W. remained at risk for another event. He was confused from the brain damage. All of these factors militate in favor of finding that the remaining seven days of inpatient services were medically necessary. E. A. $1666.62 R. B. $5703.18 N. C. $7332.66 N. Ch. $38,332.26 J. C. $4888.44 R. LaB. $833.31 J. L. $1666.62 C. M. $9166.41 M. M. $2499.93 The total overpayment is $104,309.97, which breaks down as follows: J. P. $2444.22 M. Pr. $5703.18 A. R. $2444.22 E. S. $19,999.44 J. S. $1629.48
Recommendation It is RECOMMENDED that the Agency for Health Care Administration enter a final order finding overpayments totaling $104,309.97 during the audit period and requiring that Respondent repay this amount, imposing an administrative fine of $1000, requiring Respondent to prepare a corrective action plan, and reserving jurisdiction to remand the case to the Division of Administrative Hearing for a determination of Petitioner's entitlement to statutory costs, if any. DONE AND ENTERED this 6th day of June, 2007, in Tallahassee, Leon County, Florida. S ROBERT E. MEALE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 6th day of June, 2007. COPIES FURNISHED: Richard J. Shoop, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3 Tallahassee, Florida 32308 Craig H. Smith, General Counsel Agency for Health Care Administration Fort Knox Building, Suite 3431 2727 Mahan Drive, Mail Stop 3 Tallahassee, Florida 32308 Dr. Andrew C. Agwunobi, Secretary Agency for Health Care Administration Fort Knox Building 3116 2727 Mahan Drive Tallahassee, Florida 32308 Richard M. Ellis, Esquire Rutledge, Ecenia, Purnell & Hoffman, P.A. 215 South Monroe Street, Suite 420 Post Office Box 551 Tallahassee, Florida 32304-0551 William Blocker, Esquire Agency for Health Care Administration Fort Knox Building III, Mail Stop 3 2727 Mahan Drive, Building 3 Tallahassee, Florida 32308 Daniel Lake, Esquire Agency for Health Care Administration 2727 Mahan Drive, Suite 3431 Fort Knox Building III, Mail Stop 3 Tallahassee, Florida 32308 Tracy Cooper, Esquire Agency for Health Care Administration Fort Knox Building III, Mail Stop 3 2727 Mahan Drive Tallahassee, Florida 32308
The Issue Whether the Division of Administrative Hearings (DOAH) has jurisdiction to conduct a formal hearing under the provisions of Sections 120.569 and 120.57(1), Florida Statutes, if the Florida Commission on Human Relations (FCHR) does not make a "cause" or "no cause" determination, as provided in Section 760.11(3), Florida Statutes, but rather issues a Notice of Dismissal, pursuant to Section 760.11(8), Florida Statutes. Whether DOAH has jurisdiction to conduct a formal hearing under the provisions of Sections 120.569 and 120.57(1), Florida Statutes, if the Petition for Relief was not timely filed pursuant to Section 760.11(6), Florida Statutes. Whether DOAH has jurisdiction to conduct a formal hearing under the provisions of Sections 120.569 and 120.57(1), Florida Statutes, if Petitioner fails to name Respondent in the Petition for Relief filed with the FCHR, as required by Section 760.11(1), Florida Statutes.
Recommendation Based on the foregoing facts and conclusions of law, it is RECOMMENDED that a final order be entered dismissing with prejudice the Petition of Manuel Pedraza in DOAH Case No. 02-0237, and FCHR Case No. 99-0849, for failure to timely file his Petition for Relief and for failure to properly name Respondent in the Petition. DONE AND ENTERED this 21st day of June, 2002, in Tallahassee, Leon County, Florida. ___________________________________ DANIEL M. KILBRIDE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 21st day of June, 2002. COPIES FURNISHED: Susan K. W. Erlenbach, Esquire Erlenbach Law Offices, P.A. 2532 Garden Street Titusville, Florida 32796 W. Russell Hamilton, III, Esquire Morgan, Lewis & Bockius, LLP 5300 First Union Financial Center 200 South Biscayne Boulevard Miami, Florida 33131-2339 Denise Crawford, Agency Clerk Florida Commission on Human Relations 2009 Apalachee Parkway, Suite 100 Tallahassee, Florida 32301 Cecil Howard, General Counsel Florida Commission on Human Relations 2009 Apalachee Parkway, Suite 100 Tallahassee, Florida 32301
