The Issue The issue for consideration in this case is whether the Agency for Health Care Administration is required by law and rule of the Agency to include the gain or loss on the sale of depreciable assets as the result of a sale or disposal, in the calculation of Medicaid allowable costs.
Findings Of Fact Prior to the hearing, the parties submitted a Joint Stipulation which is incorporated in part herein as follows: Petitioner purchased Orlando General Hospital ("OGH"), Medicaid provider number 120065, on December 31, 1990. Upon its sale, OGH merged into and became part of Adventist Health System/Sunbelt, Inc., wherein after it was known as Adventist Health System/Sunbelt, Inc., d/b/a Florida Hospital East ("Florida Hospital East"). Adventist Health System/Sunbelt, Inc., d/b/a Florida Hospital East is a wholly owned subsidiary of Adventist Health System Sunbelt Healthcare Corporation. Florida Hospital East assumed all of the assets and liabilities of OGH. OGH filed a terminating cost report for the fiscal period ending December 31, 1990. On December 31, 1990, the date of sale of OGH to Petitioner, OGH incurred a loss on the sale of the hospital, a depreciable asset. The loss on the sale of OGH was included on both OGH's Medicaid and Medicare terminating cost reports. A loss on the sale of a depreciable asset is the amount that the net book value of the asset sold exceeds the purchase price. A gain or loss on the sale of a depreciable asset is a capital cost. Due to the mechanism of the cost report, a loss on the sale of a depreciable asset is divided into "periods" based upon the time period to which the loss relates. The portion of the loss related to the fiscal year in which the asset is sold is referred to as a "current period" loss. The portion of the loss that relates to all fiscal years prior to the year in which the asset is sold is referred to as a "prior period" loss. Gains and losses related to the current period are included on Worksheet A of the Medicare and Medicaid cost report. Current period capital costs flow to Worksheet B-II Part and B Part III [sic] of the Medicaid cost report. Gains and losses related to the prior period are included on Worksheet E of the Medicare and Medicaid cost reports. OGH's current period is the fiscal year ending 12/31/90. OGH's prior periods in which it participated in the Medicaid Program are 10/24/84 through 12/31/89. OGH's audited Medicaid cost report included in allowable Medicaid costs a loss on the sale of OGH related to the current period. OGH's audited Medicaid cost report did not include in allowable Medicaid costs a loss on the sale of OGH related to the prior periods. The loss on the sale of OGH related to the current period was included in Worksheet A of OGH's audited Medicaid cost report. These costs, including the loss on the sale of OGH, flowed to Worksheet B Part II. OGH's audited Medicare cost report included as allowable Medicare costs the loss on the sale of OGH related to both the current and prior periods in the amount of $9,874,047. The loss from the sale of OGH related to the current period was included on Worksheet A of OGH's audited Medicare cost report. The costs from Worksheet A of OGH's audited Medicare cost report flowed to Worksheet B Part II of OGH's audited Medicare cost report. The loss related to the prior period was included on Worksheet E Part B of OGH's audited Medicaid cost report. The Agency utilizes costs included on Worksheet A of the Medicaid cost report to calculate Medicaid allowable costs. The Agency utilizes the capital costs included on Worksheet B Part II and/or B Part III to calculate allowable Medicaid fixed costs. The Agency does not utilize costs included on Worksheet E Part III to calculate Medicaid allowable costs. The Agency reimburses providers based upon Medicaid allowable costs. aa. The Agency did not include the portion of the loss on the sale of OGH related to the prior periods in the calculation of the OGH's Medicaid allowable costs. bb. Blue Cross and Blue Shield of Florida, Inc. (Intermediary), contracted with the Agency to perform all audits of Medicaid cost reports. Agency reimbursement to Medicaid providers is governed by Florida's Title XIX Inpatient Hospital Reimbursement Plan (Plan), which has been incorporated in Rule 59G-6.020, Florida Administrative Code. The Plan provides that Medicaid reimbursement for inpatient services shall be based upon a prospectively determined per diem. The payment is based upon the facility's allowable Medicaid costs which include both variable costs and fixed costs. Fixed costs include capital costs and allowable depreciation costs. The per diem payment is calculated by the Agency based upon each facility's allowable Medicaid costs which must be taken by the agency from the facility's cost report. Capital costs, such as depreciation, are found on Worksheet B, Part II and Part III. The Plan requires all facilities participating in the Medicaid program to submit an annual cost report to the Agency. The report is to be in detail, listing their "costs for their entire reporting year making appropriate adjustment as required by the plan for the determination of allowable costs." The cost report must be prepared in accordance with the Medicare method of reimbursement and cost finding, except as modified by the Plan. The cost reports relied upon by the Agency to set rates are audited by Blue Cross/Blue Shield of Florida, Inc. which has been directed by the Agency to follow Medicare principles of reimbursement in its audit of cost reports. Prior to January 11, 1995, the Plan did not expressly state whether capital gains or losses relating to a change of facility ownership were allowable costs. The 1995 amendment to the Plan contained language expressly providing "[f]or the purposes of this plan, gains or losses resulting from a change of ownership will not be included in the determination of allowable cost for Medicaid reimbursement." No change was made by the amendment to the Medicare principles of reimbursement regarding the treatment of gains and losses on the sale of depreciable assets. The Medicare principles of reimbursement provides that gains and losses from the disposition of depreciable assets are includable in computing allowable costs. The Provider Reimbursement Manual (HIM-15)(PRM), identifies the methods of disposal for assets that are recognized. They include a bona fide sale of depreciable assets, but do not mention a change of ownership. PRM Section 132 treats a loss on a sale of a depreciable asset as an adjustment to depreciation for both the current and periods. Depreciable assets with an expected life of more than two years may not be expensed in the year in which they are put into service. They must be capitalized and a proportionate share of the cost expensed as depreciation over the life of the property. To do so, the provider must estimate the useful life of the property based upon the guidelines of the American Hospital Association, and divide the cost by the number of years of estimated life. It is this yearly depreciation figure which is claimed on the cost report and which is reimbursed. When a depreciable asset is sold for less than book value (net undepreciated value), the provider suffers a loss. Petitioner claims that Medicare holds that in such a case it must be concluded that the estimated depreciation was erroneous and the provider did not receive adequate reimbursement during the years the asset was in service. Medicare accounting procedures do not distinguish between the treatment of a loss on the sale of depreciable assets as related to current and prior periods. PIM Section 132 requires that Medicare recognize the entire loss as an allowable cost for both the current and prior periods, and Medicare treated Petitioner's loss from the sale of its facility as an allowable cost for Medicare reimbursement under both current and prior periods. With the adoption of the January 1995 amendment, however, the wording of the state plan was changed to specifically prohibit gains or losses from a change of ownership from being included in allowable costs for Medicaid reimbursement. This was the first time the state plan addressed gains and losses on the disposal of depreciable assets resulting from a change of ownership. The Agency contends, however, that it has never reimbursed for losses on disposal of property due to a change of ownership, and that the inclusion of the new language was to clarify a pre-existing policy which was being followed at the time of the 1995 amendment, and which goes back to the late 1970s. It would appear, however, that the policy was never written down; was never conveyed to Blue Cross/Blue shield; was never formally conveyed to Medicaid providers; and was never conveyed to the community at large. When pressed, the Agency could not identify any specific case where the policy was followed by the Agency. While admitting that it is Agency practice not to treat losses from the sale of depreciable assets in prior periods as an allowable cost, Petitioner contends that it has been the Agency's practice to treat the loss on the sale of depreciable assets relating to the current period as an allowable cost, and cited several instances where this appears to have been done. The Agency contends that any current period losses paid were paid without knowledge of the Agency, in error, and in violation of the plan. On October 25, 1996, the Agency entered a Final Order in a case involving Florida Hospital/Waterman, Inc., as Petitioner, and the Agency as Respondent. This case was filed by the Petitioner to challenge the Agency's treatment of the loss on the sale of Waterman Medical Center, Inc., another of Adventist Health Systems/Sunbelt Healthcare Corporation, and the Final Order in issue incorporated a stipulation into which the parties had entered and which addressed the issue in question here. The stipulation included certain position statements including: A loss on the sale of depreciable assets is an allowable cost under the Medicare Principles of Reimbursement. The State Plan does not specify that the loss on the sale of a depreciable asset is to be treated in a manner different than under the Medicare Principles of Reimbursement. Thus the loss on the sale of a depreciable asset is an allowable cost under the State Plan. The Agency agrees, in accordance with the Medicare Principles of Reimbursement, that under the terms of the State Plan, prior period losses for Waterman will be allocated to prior periods and included in the calculation of the per diem and per visit rates. According to William G. Nutt, Petitioner's director of reimbursement, the only difference between the facts of the Waterman case and the instant case is that they relate to the sale of different facilities. The treatment of loss on the sale of depreciable assets as outlined in the Waterman stipulation is in conflict with the amended Plan and with the unwritten and unuttered Agency policy as urged by the Agency in this case. The Agency agreed in one case to a treatment of loss which it now rejects in the instant case. Petitioner urges that subsequent to the settlement of the Waterman case, but before the instant case was set for hearing, the parties engaged in settlement negotiations during which, according to counsel for the Agency, they made "significant" progress toward applying the settlement in the Waterman case to the current case. In a motion filed to delay the setting of this case for hearing, counsel for the Agency indicated the parties were "finalizing" settlement to resolve the case without resorting to a final hearing, and in a follow-up agreed motion for continuance, advised that the "parties [had] finalized a settlement document [which they were] in the process of executing. The settlement agreement reached by the parties was signed by a representative of the Petitioner and then forwarded to the Agency for signature. The document was not signed by the Agency, and when Petitioner sought enforcement of the "settlement" by an Administrative Law Judge of the Division of Administrative Hearings, the request was denied as being outside the jurisdiction of the judge, and the matter was set for hearing.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Agency for Health Care Administration enter a Final Order including the loss on the sale of Orlando General Hospital as an allowable cost for determining Petitioner's entitlement to Medicaid reimbursement for both current and prior years. DONE AND ENTERED this 30th day of June, 1999, in Tallahassee, Leon County, Florida. ARNOLD H. POLLOCK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6947 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 30th day of June, 1999. COPIES FURNISHED: Joanne B. Erde, Esquire Broad and Cassel Miami Center Suite 3000 201 South Biscayne Boulevard Miami, Florida 33131 Jonathan E. Sjostrom, Esquire Steel Hector & Davis LLP 215 South Monroe Street Suite 601 Tallahassee, Florida 32301-1804 Mark S. Thomas, Esquire Madeline McGuckin, Esquire Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building 3, Suite 3431 Tallahassee, Florida 32308 Sam Power, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building 3, Suite 3431 Tallahassee, Florida 32308 Julie Gallagher General Counsel Agency for Health Care Administration 2727 Mahan Drive Building 3 Tallahassee, Florida 32308
Findings Of Fact Petitioner, Greynolds Park Manor, Inc. (Greynolds), operates a skilled nursing home facility at 17400 West Dixie Highway, North Miami Beach, Florida. The facility was constructed in 1968 and has been certified in the Medicaid Program since 1971. It is licensed by Respondent, Department of Health and Rehabilitative Services (HRS), to operate 324 beds. However, its average patient census in 1979 through 1981 was between 220 and 225 patients. It is the largest nursing home in Dade and Broward Counties. HRS is the state agency designated to administer Florida's Medical Assistance (Medicaid) Program pursuant to Section 409.266, et seq., Fla. Stat. HRS and Greynolds have entered into a written agreement, "Agreement for Participation in Florida's Medical Assistance Program," for each fiscal year that Greynolds has participated in the program. Greynolds' fiscal year runs from June 1 through May 31. Effective October 1, 1977, HRS adopted the "Florida Title XIX Long Term Care Reimbursement Plan" (Plan). The Plan is a prospective reimbursement plan, designed to aid the State in containing health care costs for Medicaid recipients. The prospective reimbursement rate for a provider is based on the actual allowable costs of a provider for the previous fiscal year, to which an inflationary factor is added. The mechanics utilized to establish the prospective reimbursement rate under the Plan are clear. The provider is required to submit a uniform cost report within 90 days after the conclusion of its fiscal year. HRS audits the uniform cost report, determines allowable costs, adds an inflationary factor, and thereby sets the provider's prospective reimbursement rate. This rate is effective the first day of the month following receipt of the uniform cost report by HRS, and remains in effect until a new cost report is filed by the provider. Under the provisions of the Plan, all cost reports are desk reviewed within six months after their submission to HRS. HRS, under the terms of the Plan, may perform an audit on the cost report. An on-site audit is a more extensive review of the cost report than desk review. During an on-site audit the financial and statistical records of the provider are examined to ensure that only allowable costs were included in the cost report. The audit findings prevail over those made at desk review. Greynolds submitted its cost report for fiscal year 1979 on September 27, 1979. Previously, by letter dated September 10, 1979, Greynolds had been advised by HRS that an on-site audit was to be done of its ficsal year 1979 cost report, and that Greynolds' Medicare cost report would be a subject of inquiry. The cost report Greynolds submitted to HRS on September 27, 1979, did not make a Medicare cost adjustment, and none was made at desk review. 1/ A rather anomalous situation existed in 1979 through 1980 which lent itself to potential abuse. The Medicare cost adjustment was never made at desk review. It was only made if there was an audit. Yet only one in three providers were designated for audit each year, and even if designated the audit could be terminated at any time. Consequently, if no audit were made, or if terminated prematurely, the provider would not be required to make a Medicare adjustment and would reap a substantial windfall. Greynolds was fully aware of HRS' practice. In 1981 HRS altered its practice and began to make the Medicare adjustment at desk review. The audit of Greynolds' cost report for fiscal year 1979 was actually begun in October 1979 by the Fort Lauderdale Office of HRS. At the same time, the desk review of the cost report was undertaken by HRS' Jacksonville Office and was ultimately finalized on February 29, 1980. The desk review findings contained adjustments to expenditures totaling $46,592, but made no Medicare adjustment, consistent with HRS policy at that time. Based upon these adjustments, HRS' desk review established prospective reimbursement rates effective October 1, 1979. However, HRS advised Greynolds that these rates were "subject to change by any on-site audit." Greynolds used these rates for the period October 1, 1979 through August 31, 1980. In June 1980, HRS' Supervisor of Audit Services requested additional information before the field audit of the 1979 cost report could be completed. Greynolds presumably furnished this information because the field work was completed in September 1980. On June 24, 1981, Greynolds was notified by letter that the audit had been completed and was pending final review. The letter further advised Greynolds that "since this audit will supersede the desk review, the adjustments we made in our desk review letter of February 29, 1980, must stand until the on- site audit results are released." On June 9, 1982, HRS' Fort Lauderdale Office advised Greynolds that its on-site audit of the 1979 cost report had been completed. The audit adjustments to the cost report had been increased from $46,592 to $803,592. Most of this was due to a Medicare adjustment in the amount of $654,282. An exit conference was held by HRS' field representatives and Greynolds on June 21, 1982. None of the adjustments were changed as a result of this meeting. At that time, Greynolds first requested that it be allowed to file an interim rate change. Greynolds was advised, however, that the Office of Audit Services had no authority to approve such a request. On September 23, 1982, the final audit report of Greynolds' 1979 cost report was issued. The audit concluded that the reported allowable expenses of Greynolds would be reduced by $725,953, resulting in an overpayment of $288,024. Most of this was, again, the result of the Medicare adjustment of $654,282. The report further advised Greynolds of the right to request that any audit adjustment in dispute be addressed in a hearing pursuant to Section 120.57, Fla. Stat. Greynolds duly petitioned for a Section 120.57 hearing on the audit adjustments of September 23, 1982. This matter was forwarded to the Division of Administrative Hearings and docketed as Case No. 82-3208. At the outset of the hearing in that case, Greynolds withdrew its challenge to the Medicare adjustment of $654,282. Following receipt of the final audit report of September 23, 1982, Greynolds requested, by letter dated November 2, 1982, an interim rate change for its fiscal year 1980, "in accordance with the Florida Title XIX Long Term Care Reimbursement Plan IVA-10." The reasons assigned by Greynolds for making the request were: A substantial decrease in Medicare patient days in the fiscal year ended May 31, 1980 and the corresponding decrease in the Medicare adjustment; and A change in the percentage of skilled and intermediate Medicaid patients. The request was denied by HRS on January 12, 1983, on the ground that "interim rates will not be granted for a closed cost reporting period." HRS' denial failed, however, to inform Greynolds of its right to request a hearing. On June 7, 1983, Greynolds renewed its request for an interim rate change for its fiscal year ended May 31, 1980. This request was denied October 12, 1983, on the ground that: To grant an interim rate for a closed cost reporting period would be the same as making a retroactive payment to a nursing home whose costs exceed annual payment. Retroactive payments such as this are specifically prohibited by Section 10C-7.48(6)(1), Florida Administrative Code, which was in effect during the cost reporting period in question. Greynolds filed a timely request for a Section 120.57(1), Fla. Stat., hearing. The circumstances relied on by Greynolds to justify an interim rate request were primarily the result of a substantial decline in its Medicare patient census resulting from a staphytococcus bacterial infection among its patients. The bacterial infection arose in February 1979 and continued through May 31, 1980 (the end of Greynolds' 1980 fiscal year). Greynolds is a dual provider facility, treating both Medicare and Medicaid eligible patients. The bacterial infection, which was contained within the Medicare section of the facility, resulted in a 45 percent decline in Medicare admissions during the period. Under the Medicare and Medicaid reimbursement systems, a provider is required to first request payment from Medicare if the patient is Medicare eligible. Medicare reimburses at a higher rate than does Medicaid. Consequently, a substantial decrease in the number of Medicare patient days would result in a substantial decrease in the revenue received by the provider. Greynolds was fully aware of the change in the patient mix, as it occurred, during fiscal year 1980. Greynolds opined that it did not apply for an interim rate request at that time because the prospective reimbursement rate which had been set October 1, 1980, based on its cost report for fiscal year 1979, was "adequate" until the Medicare adjustment was finally made. The facts, however, reveal a different motivation. Under the Plan, whether on desk review or on audit, a Medicare adjustment is made to a provider's uniform cost report when developing a prospective reimbursement rate. The Medicare adjustment is made by excluding the Medicare patient days and Medicare costs from the provider's cost report, since these items are reimbursed by Medicare. The reimbursement rate is then established by adding an inflationary factor to the remaining patient days and costs. This reimbursement rate remains in effect until the provider files its next cost report. If the provider maintains its costs under the reimbursement rate, it may retain the difference; if the provider's costs exceed the reimbursement rate, it will not be reimbursed for its inefficiency. The Plan is predicated on a cost containment methodology. It is designed to encourage efficient administration by nursing home providers when providing services to Medicaid recipients. The Plan does, however, permit an adjustment to a provider's prospective reimbursement rate ("an interim rate") when unforeseen events during that fiscal year occur which were not contemplated in setting the provider's prospective reimbursement rate predicated on the previous year's costs. Greynolds was aware of the change, as it occurred, in its 1980 patient mix. Therefore, it could have applied for an interim rate adjustment at that time. To have done so, however, would have required it to make the Medicare cost adjustment to its 1979 cost report since its justification for an increase was the substantial decrease in Medicare patients and the corresponding decrease in the Medicare adjustment it was currently experiencing. To raise the Medicare adjustment issue was not, however, to its financial advantage. If it "escaped" the Medicare adjustment to its 1979 cost report, it would profit by the amount of that adjustment ($288,024). Greynolds' request for an increase in its reimbursement rate for 1980, after the 1980 cost reporting period was closed, also raises the disquieting specter that Greynolds will be reimbursed for the same costs twice. Since each year's reimbursement rate is based on the previous year's cost report, to retrospectively pick one reimbursement period from the series of years is disruptive of all the rates which were subsequently established. Under the Plan, if a provider experiences a substantial decrease in Medicare patient days and costs for a cost reporting period, the Medicaid reimbursement rate for the next period, based on that cost report, would substantially increase. Accordingly, Greynolds' 1981 reimbursement rate would be reflective of the loss of Medicare patient days in 1980. To now ignore the effect 1980 costs had in establishing 1981 reimbursement rates, and to reimburse Greynolds for 1980 without regard to the reimbursement rate for the subsequent year, ignores reality. Greynolds has on one other occasion availed itself of an interim rate request. On June 17, 1981, Greynolds applied for an interim rate for its fiscal year 1981. Greynolds' request was based on the fact that it had negotiated a union contract effective April 1, 1981, which resulted in a substantial increase in salaries for its employees. Since this factor was not reflected in its cost report for fiscal year 1980, upon which its current reimbursement rate was predicated, HRS, by letter dated July 29, 1981, granted Greynolds' request. Greynolds asserts that the granting of its 1981 interim rate request occurred after the close of its 1981 cost reporting period and is, therefore, evidence that the denial by HRS of its interim rate request in this case is inconsistent and improper. HRS asserts that the granting of Greynolds' interim rate request in 1981 was proper, and that it was not granted outside a closed cost reporting period. HRS interprets "cost reporting period" to be that period within which the provider must file its cost report for the previous fiscal year ("the cost report period"). Rule 10C-7.48(5)(c), F.A.C., in effect at the time, provided A cost report will be submitted as prescribed by the Department to cover the facility's fiscal year, along with the facility's usual and customary charges to private patients receiving comparable medicaid service, within 90 days after the end of the cost report period. According to HRS, the "cost reporting period" would be closed when the provider submits its cost report, which could be as much as 90 days after the "cost report period" had ended. HRS' interpretation is certainly reasonable, within the range of possible interpretations, and is therefore adopted. The interim rate request, granted Greynolds in 1981, was not granted after a closed cost reporting period. The reimbursement rate in effect on June 17, 1981, had commenced September 1, 1980. This rate remained in effect until the interim rate was granted, which interim rate remained in effect until Greynolds submitted its cost report for fiscal year 1981. Greynolds' 1981 cost report was submitted August 31, 1981, and its new reimbursement rate was therefore effective September 1, 1981. Accordingly, the grant of Greynolds' 1981 interim rate request was not inconsistent with the position it has adopted in this case. Had Greynolds "timely filed" its interim rate request in this case, HRS concedes the circumstances which gave rise to the request would have entitled the request to consideration under the provisions of Florida Title XIX Long Term Care Reimbursement Plan, paragraph IVA-10. However, since HRS rejected Greynolds' interim rate request as untimely, it never addressed, by review or audit, the accuracy or prospective impact of Greynolds' request.
Findings Of Fact The Provider received the Final Audit Report that gave notice of Provider’s right to an administrative hearing regarding the audit adjustments. The Provider filed a petition requesting an administrative hearing, and then caused that petition to be Page 1 of 4 Filed January 13, 2010 4:55 PM Division of Administrative Hearings. dismissed and the administrative hearing case to be closed. Provider chose not to dispute the facts set forth in the Final Audit Report; they are hereby deemed admitted and adopted by the Agency.
Conclusions THIS CAUSE came before me for issuance of a Final Order on a Final Audit Report dated October 13, 2006 (Audit Period/Engagement No.: August 31, 2001/NH05- 126C). By the Final Audit Report, the Agency for Health Care Administration (“AHCA” or “Agency”), informed the Petitioner, CLEARWATER CENTER (“Provider”) that Medicaid reimbursement principles required adjustment of the cost allocations stated in the Provider’s cost report. The Agency notified the Provider of the adjustments AHCA was making to the cost report. In response to AHCA’s Audit Report, the Provider filed a timely petition for administrative hearing. | Subsequent to the petition for administrative hearing, the Provider filed a voluntary dismissal of the hearing request. As such, the Audit Report, and the cost report adjustments as set forth in Audit Report are final.
The Issue The issues in this case are whether Respondent applied the proper reimbursement principles to Petitioners' initial Medicaid rate setting, and whether elements of detrimental reliance exist so as to require Respondent to establish a particular initial rate for Petitioners' facilities.
Findings Of Fact There are nine Petitioners in this case. Each of them is a long-term health care facility (nursing home) operated under independent and separate legal entities, but, generally, under the umbrella of a single owner, Tzvi "Steve" Bogomilsky. The issues in this case are essentially the same for all nine Petitioners, but the specific monetary impact on each Petitioner may differ. For purposes of addressing the issues at final hearing, only one of the Petitioners, Madison Pointe Rehabilitation and Health Center (Madison Pointe), was discussed, but the pertinent facts are relevant to each of the other Petitioners as well. Each of the Petitioners has standing in this case. The Amended Petition for Formal Administrative Hearing filed by each Petitioner was timely and satisfied minimum requirements. In September 2008, Bogomilsky caused to be filed with AHCA a Change of Licensed Operator ("CHOP") application for Madison Pointe.1 The purpose of that application was to allow a new entity owned by Bogomilsky to become the authorized licensee of that facility. Part and parcel of the CHOP application was a Form 1332, PFA. The PFA sets forth projected revenues, expenses, costs and charges anticipated for the facility in its first year of operation by the new operator. The PFA also contained projected (or budgeted) balance sheets and a projected Medicaid cost report for the facility. AHCA is the state agency responsible for licensing nursing homes in this state. AHCA also is responsible for managing the federal Medicaid program within this state. Further, AHCA monitors nursing homes within the state for compliance with state and federal regulations, both operating and financial in nature. The AHCA Division of Health Quality Assurance, Bureau of Long-Term Care Services, Long-Term Care Unit ("Long-Term Care Unit") is responsible for reviewing and approving CHOP applications and issuance of an operating license to the new licensee. The AHCA Division of Health Quality Assurance, Bureau of Health Facility Regulation, Financial Analysis Unit ("Financial Analysis Unit") is responsible for reviewing the PFA contained in the CHOP application and determining an applicant's financial ability to operate a facility in accordance with the applicable statutes and rules. Neither the Long-Term Care Unit nor the Financial Analysis Unit is a part of the Florida Medicaid Program. Madison Pointe also chose to submit a Medicaid provider application to the Medicaid program fiscal agent to enroll as a Medicaid provider and to be eligible for Medicaid reimbursement. (Participation by nursing homes in the Medicaid program is voluntary.) The Medicaid provider application was reviewed by the Medicaid Program Analysis Office (MPA) which, pursuant to its normal practices, reviewed the application and set an interim per diem rate for reimbursement. Interim rate-setting is dependent upon legislative direction provided in the General Appropriations Act and also in the Title XIX Long-Term Care Reimbursement Plan (the Plan). The Plan is created by the federal Centers for Medicare and Medicaid Services (CMS). CMS (formerly known as the Health Care Financing Administration) is a federal agency within the Department of Health and Human Services. CMS is responsible for administering the Medicare and Medicaid programs, utilizing state agencies for assistance when appropriate. In its PFA filed with the Financial Analysis Unit, Madison Pointe proposed an interim Medicaid rate of $203.50 per patient day (ppd) as part of its budgeted revenues. The projected interim rate was based on Madison Pointe's expected occupancy rate, projected expenses, and allowable costs. The projected rate was higher than the previous owner's actual rate in large part based on Madison Pointe's anticipation of pending legislative action concerning Medicaid reimbursement issues. That is, Madison Pointe projected higher spending and allowable costs based on expected increases proposed in the upcoming legislative session. Legislative Changes to the Medicaid Reimbursement System During the 2007 Florida Legislative Session, the Legislature addressed the status of Medicaid reimbursement for long-term care facilities. During that session, the Legislature enacted the 2007 Appropriations Act, Chapter 2007-72, Laws of Florida. The industry proposed, and the Legislature seemed to accept, that it was necessary to rebase nursing homes in the Medicaid program. Rebasing is a method employed by the Agency periodically to calibrate the target rate system and adjust Medicaid rates (pursuant to the amount of funds allowed by the Legislature) to reflect more realistic allowable expenditures by providers. Rebasing had previously occurred in 1992 and 2002. The rebasing would result in a "step-up" in the Medicaid rate for providers. In response to a stated need for rebasing, the 2007 Legislature earmarked funds to address Medicaid reimbursement. The Legislature passed Senate Bill 2800, which included provisions for modifying the Plan as follows: To establish a target rate class ceiling floor equal to 90 percent of the cost- based class ceiling. To establish an individual provider- specific target floor equal to 75 percent of the cost-based class ceiling. To modify the inflation multiplier to equal 2.0 times inflation for the individual provider-specific target. (The inflation multiplier for the target rate class ceiling shall remain at 1.4 times inflation.) To modify the calculation of the change of ownership target to equal the previous provider's operating and indirect patient care cost per diem (excluding incentives), plus 50 percent of the difference between the previous providers' per diem (excluding incentives) and the effect class ceiling and use an inflation multiplier of 2.0 times inflation. The Plan was modified in accordance with this legislation with an effective date of July 1, 2007. Four relevant sentences from the modified Plan are relevant to this proceeding, to wit: For a new provider with no cost history resulting from a change of ownership or operator, where the previous provider participated in the Medicaid program, the interim operating and patient care per diems shall be the lesser of: the class reimbursement ceiling based on Section V of this Plan, the budgeted per diems approved by AHCA based on Section III of this Plan, or the previous providers' operating and patient care cost per diem (excluding incentives), plus 50% of the difference between the previous providers' per diem (excluding incentives) and the class ceiling. The above new provider ceilings, based on the district average per diem or the previous providers' per diem, shall apply to all new providers with a Medicaid certification effective on or after July 1, 1991. The new provider reimbursement limitation above, based on the district average per diem or the previous providers' per diem, which affects providers already in the Medicaid program, shall not apply to these same providers beginning with the rate semester in which the target reimbursement provision in Section V.B.16. of this plan does not apply. This new provider reimbursement limitation shall apply to new providers entering the Medicaid program, even if the new provider enters the program during a rate semester in which Section V.B.16 of this plan does not apply. [The above cited sentences will be referred to herein as Plan Sentence 1, Plan Sentence 2, etc.] Madison Pointe's Projected Medicaid Rate Relying on the proposed legislation, including the proposed rebasing and step-up in rate, Madison Pointe projected an interim Medicaid rate of $203.50 ppd for its initial year of operation. Madison Pointe's new projected rate assumed a rebasing by the Legislature to eliminate existing targets, thereby, allowing more reimbursable costs. Although no legislation had been passed at that time, Madison Pointe's consultants made calculations and projections as to how the rebasing would likely affect Petitioners. Those projections were the basis for the $203.50 ppd interim rate. The projected rate with limitations applied (i.e., if Madison Pointe did not anticipate rebasing or believe the Plan revisions applied) would have been $194.26. The PFA portion of Madison Pointe's CHOP application was submitted to AHCA containing the $203.50 ppd interim rate. The Financial Analysis Unit, as stated, is responsible for, inter alia, reviewing PFAs submitted as part of a CHOP application. In the present case, Ryan Fitch was the person within the Financial Analysis Unit assigned responsibility for reviewing Madison Pointe's PFA. Fitch testified that the purpose of his review was to determine whether the applicant had projected sufficient monetary resources to successfully operate the facility. This would include a contingency fund (equal to one month's anticipated expenses) available to the applicant and reasonable projections of cost and expenses versus anticipated revenues.2 Upon his initial review of the Madison Pointe PFA, Fitch determined that the projected Medicaid interim rate was considerably higher than the previous operator's actual rate. This raised a red flag and prompted Fitch to question the propriety of the proposed rate. In his omissions letter to the applicant, Fitch wrote (as the fourth bullet point of the letter), "The projected Medicaid rate appears to be high relative to the current per diem rate and the rate realized in 2006 cost reports (which includes ancillaries and is net of contractual adjustments). Please explain or revise the projections." In response to the omissions letter, Laura Wilson, a health care accountant working for Madison Pointe, sent Fitch an email on June 27, 2008. The subject line of the email says, "FW: Omissions Letter for 11 CHOW applications."3 Then the email addressed several items from the omissions letter, including a response to the fourth bullet point which says: Item #4 - Effective July 1, 2007, it is anticipated that AHCA will be rebasing Medicaid rates (the money made available through elimination of some of Medicaid's participation in covering Medicare Part A bad debts). Based on discussions with AHCA and the two Associations (FHCA & FAHSA), there is absolute confidence that this rebasing will occur. The rebasing is expected to increase the Medicaid rates at all of the facilities based on the current operator's spending levels. As there is no definitive methodology yet developed, the rebased rates in the projections have been calculated based on the historical methodologies that were used in the 2 most recent rebasings (1992 and 2002). The rates also include the reestablishment of the 50% step-up that is also anticipated to begin again. The rebasing will serve to increase reimbursement and cover costs which were previously limited by ceilings. As noted in Note 6 of the financials, if something occurs which prevents the rebasing, Management will be reducing expenditures to align them with the available reimbursement. It is clear Madison Pointe's projected Medicaid rate was based upon proposed legislative actions which would result in changes to the Plan. It is also clear that should those changes not occur, Madison Pointe was going to be able to address the shortfall by way of reduced expenditures. Each of those facts was relevant to the financial viability of Madison Pointe's proposed operations. Madison Pointe's financial condition was approved by Fitch based upon his review of the PFA and the responses to his questions. Madison Pointe became the new licensed operator of the facility. That is, the Long-Term Care Unit deemed the application to have met all requirements, including financial ability to operate, and issued a license to the applicant. Subsequently, MPA provided to Madison Pointe its interim Medicaid rate. MPA advised Madison Pointe that its rate would be $194.55 ppd, some $8.95 ppd less than Madison Pointe had projected in its PFA (but slightly more than Madison Pointe would have projected with the 50 percent limitation from Plan Sentence 1 in effect, i.e., $194.26). The PFA projected 25,135 annual Medicaid patient days, which multiplied by $8.95, would equate to a reduction in revenues of approximately $225,000 for the first year of operation.4 MPA assigned Madison Pointe's interim Medicaid rate by applying the provisions of the Plan as it existed as of the date Madison Pointe's new operating license was issued, i.e., September 1, 2007. Specifically, MPA limited Madison Pointe's per diem to 50 percent of the difference between the previous provider's per diem and the applicable ceilings, as dictated by the changes to the Plan. (See Plan Sentence 1 set forth above.) Madison Pointe's projected Medicaid rate in the PFA had not taken any such limitations into account because of Madison Pointe's interpretation of the Plan provisions. Specifically, that Plan Sentence 3 applies to Madison Pointe and, therefore, exempts Madison Pointe from the new provider limitation set forth in Plan Sentences 1 and 2. However, Madison Pointe was not "already in the Medicaid program" as of July 1, 2007, as called for in Plan Sentence 3. Rather, Madison Pointe's commencement date in the Medicaid program was September 1, 2007. Plan Sentence 1 is applicable to a "new provider with no cost history resulting from a change of ownership or operator, where the previous operator participated in the Medicaid program." Madison Pointe falls within that definition. Thus, Madison Pointe's interim operating and patient care per diems would be the lesser of: (1) The class reimbursement ceiling based on Section V of the Plan; (2) The budgeted per diems approved by AHCA based on Section III of the Plan; or (3) The previous provider's operating and patient care cost per diem (excluding incentives), plus 50 percent of the difference between the previous provider's per diem and the class ceiling. Based upon the language of Plan Sentence 1, MPA approved an interim operating and patient care per diem of $194.55 for Madison Pointe. Plan Sentence 2 is applicable to Madison Pointe, because it applies to all new providers with a Medicaid certification effective after July 1, 1991. Madison Pointe's certification was effective September 1, 2007. Plan Sentence 3 is the primary point of contention between the parties. AHCA correctly contends that Plan Sentence 3 is not applicable to Petitioner, because it addresses rebasing that occurred on July 1, 2007, i.e., prior to Madison Pointe coming into the Medicaid system. The language of Plan Sentence 3 is clear and unambiguous that it applies to "providers already in the Medicaid program." Plan Sentence 4 is applicable to Madison Pointe, which entered the system during a rate semester, in which no other provider had a new provider limitation because of the rebasing. Again, the language is unambiguous that "[t]his new provider reimbursement limitation shall apply to new providers entering the Medicaid program. . . ." Madison Pointe is a new provider entering the program. Detrimental Reliance and Estoppel Madison Pointe submitted its CHOP application to the Long-Term Care Unit of AHCA for approval. That office has the clear responsibility for reviewing and approving (or denying) CHOP applications for nursing homes. The Long-Term Care Unit requires, as part of the CHOP application, submission of the PFA which sets forth certain financial information used to determine whether the applicant has the financial resources to operate the nursing home for which it is applying. The Long-Term Care Unit has another office within AHCA, the Financial Analysis Unit, to review the PFA. The Financial Analysis Unit is found within the Bureau of Health Facility Regulation. That Bureau is responsible for certificates of need and other issues, but has no authority concerning the issuance, or not, of a nursing home license. Nor does the Financial Analysis Unit have any authority to set an interim Medicaid rate. Rather, the Financial Analysis Unit employs certain individuals who have the skills and training necessary to review financial documents and determine an applicant's financial ability to operate. A nursing home licensee must obtain Medicaid certification if it wishes to participate in the program. Madison Pointe applied for Medicaid certification, filing its application with a Medicaid intermediary which works for CMS. The issuance of a Medicaid certification is separate and distinct from the issuance of a license to operate. When Madison Pointe submitted its PFA for review, it was aware that an office other than the Long-Term Care Unit would be reviewing the PFA. Madison Pointe believed the two offices within AHCA would communicate with one another, however. But even if the offices communicated with one another, there is no evidence that the Financial Analysis Unit has authority to approve or disapprove a CHOP application. That unit's sole purpose is to review the PFA and make a finding regarding financial ability to operate. Likewise, MPA--which determines the interim Medicaid rate for a newly licensed operator--operates independently of the Long-Term Care Unit or the Financial Analysis Unit. While contained within the umbrella of AHCA, each office has separate and distinct duties and responsibilities. There is no competent evidence that an applicant for a nursing home license can rely upon its budgeted interim rate--as proposed by the applicant and approved as reasonable by MPA--as the ultimate interim rate set by the Medicaid Program Analysis Office. At no point in time did Fitch tell Madison Pointe that a rate of $203.50 ppd would be assigned. Rather, he said that the rate seemed high; Madison Pointe responded that it could "eliminate expenditures to align them with the available reimbursement." The interim rate proposed by the applicant is an estimate made upon its own determination of possible facts and anticipated operating experience. The interim rate assigned by MPA is calculated based on the applicant's projections as affected by provisions in the Plan. Furthermore, it is clear that Madison Pointe was on notice that its proposed interim rate seemed excessive. In response to that notice, Madison Pointe did not reduce the projected rate, but agreed that spending would be curtailed if a lower interim rate was assigned. There was, in short, no reliance by Madison Pointe on Fitch's approval of the PFA as a de facto approval of the proposed interim rate. MPA never made a representation to Madison Pointe as to the interim rate it would receive until after the license was approved. There was, therefore, no subsequent representation made to Madison Pointe that was contrary to a previous statement. The Financial Analysis Unit's approval of the PFA was done with a clear and unequivocal concern about the propriety of the rate as stated. The approval was finalized only after a representation by Madison Pointe that it would reduce expenditures if a lower rate was imposed. Thus, Madison Pointe did not change its position based on any representation made by AHCA.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by Respondent, Agency for Health Care Administration, approving the Medicaid interim per diem rates established by AHCA and dismissing each of the Amended Petitions for Formal Administrative Hearing. DONE AND ENTERED this 23rd day of February, 2009, in Tallahassee, Leon County, Florida. R. BRUCE MCKIBBEN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 23rd day of February, 2009.
Conclusions THE PARTIES resolved all disputed issues and executed a Settlement Agreement. The parties are directed to comply with the terms of the attached settlement agreement, attached hereto and incorporated herein as Exhibit “1.” Based on the foregoing, this file is CLOSED. DONE and ORDERED on this the Wray of SJ tembos 2014, in Tallahassee, Florida. LI [for ELIZABETH{BUDEK, SECRETARY Agency for Health Care Administration Final Order Invoice No. NH16766 Page 1 of 3 Filed October 3, 2014 11:45 AM Division of Administrative Hearings A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO A JUDICIAL REVIEW WHICH SHALL BE INSTITUTED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF AHCA, AND A SECOND COPY ALONG WITH FILING FEE AS PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE AGENCY MAINTAINS ITS HEADQUARTERS OR WHERE A PARTY RESIDES. REVIEW PROCEEDINGS SHALL BE CONDUCTED IN ACCORDANCE WITH THE FLORIDA APPELLATE RULES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED. ‘ " Peter A. Lewis, Esquire Peter A Lewis, P.L. 3023 North Shannon Lakes Drive Suite 101 Tallahassee, Florida 32309 palewis@petelewislaw.com (Via Electronic Mail) _ Bureau of Health Quality Assurance Agency for Health Care Administration (Interoffice Mail) Stuart Williams, General Counsel Agency for Health Care Administration (Interoffice Mail) Shena Grantham, Chief Medicaid FFS Counsel (Interoffice Mail} Agency for Health Care Administration Bureau of Finance and Accounting (Interoffice Mail) Jeffries Duvall, Esquire Assistant General Counsel Agency for Health Care Administration (Interoffice Mail) Zainab Day, Medicaid Audit Services Agency for Health Care Administration (Interoffice Mail) State of Florida, Division of Administrative Hearings The Desoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (Via U.S. Mail) Final Order Invoice No, NH16766 Page 2 of 3 CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of the foregoing has been furnished to the above named addressees by the designated method of delivery on this the / day of ( Niles , 2014. Richard J. Shoop, Esquire Agency Clerk State of Florida Agency for Health Care Administration 2727 Mahan Drive, Building #3 Tallahassee, Florida 32308-5403 (850) 412-3671 Final Order Invoice No. NH16766 Page 3 of 3 STATE OF FLORIDA AGENCY FOR HEALTH CARE ADMINISTRATION SUNBELT HEALTH AND REHAB CENTER, INC, Petitioner, PROVIDER NO.: 032041200 vs. INVOICE NO.: NH16766 STATE OF FLORIDA, AGENCY FOR HEALTH CARE ADMINISTRATION, Respondent. / ETTLE: ENT The Respondent, Agency for Health Care Administration (“AHCA” or “Agency"}, and the Petitioner, Sunbelt Health and Rehab Center, Inc., (“PROVIDER”), stipulate and agree as follows: 1. This Agreement is entered into between the parties to resolve disputed issues arising from a collection matter assigned case number NH16766. 2. The PROVIDER is a Medicaid provider, Provider Number 032041200, in the State of Florida operating a nursing home facility. 3. On July 15, 2013, the Agency notified the PROVIDER of its determination that PROVIDER was responsible to the Agency for an overpayment in the amount of $95,610.99. 4. The PROVIDER timely filed an appeal regarding this determination challenging the Agency’s application of the interest rate in the FRVS property component that had been used to set the Medicaid per diem rate generating the overpayment. 5. Subsequent to the filing of the petition for administrative hearing, AHCA and the PROVIDER exchanged documents and discussed the adjustment to the interest rate used to determine the FRVS component of the Medicaid per diem. As a result of the aforementioned exchanges, the parties agree that AHCA will revise the PROVIDER’s January 1, 2014 per diem rates to reflect a fixed FRVS interest rate of 5.65%. The 5.65% fixed interest rate shall be used to establish the FRVS component of PROVIDER’s Medicaid per diem rate for all subsequent rate semesters unless the interest rate is required to be Sunbelt Health & Rehab Center, Inc. Settlement Agreement Page 1of5 Exhibst | revised in accordance with the provisions of the Florida, Title XIX, Long-Term Care Reimbursement Plan. 6. In order to resolve this matter without further administrative proceedings, the PROVIDER and AHCA expressly agree to the adjustment resolutions, as set forth in paragraph 5 above, completely resolve and settle this case and this agreement constitutes the PROVIDER'S withdrawal of its petition for administrative hearing, with prejudice. 7. The PROVIDER and AHCA further agree that the Agency shall recalculate the per diem rates for the above-stated period and issue a notice of the recalculation. Where the PROVIDER was overpaid, the PROVIDER will reimburse the Agency the full amount of the overpayment within thirty (30) days of such notice. Where the PROVIDER was underpaid, AHCA will pay the PROVIDER the full amount of the underpayment within forty- five (45) days of such notice. Payment shall be made to: AGENCY FOR HEALTH CARE ADMINISTRATION Medicaid Accounts Receivable—Mail Stop 14 2727 Mahan Drive, Building 2, Suite 200 Tallahassee, Florida 32308 Notices to the PROVIDER shall be made to: Peter A. Lewis, Esquire Peter A. Lewis, P.L. 3023 North Shannon Lakes Drive, Suite 101 Tallahassee, Florida 32309 Payment shall clearly indicate it is pursuant to a settlement agreement and shall reference the case number and the Medicaid provider number. 8. PROVIDER agrees that failure to pay any monies due and owing under the terms of this Agreement shall constitute the PROVIDER'S authorization for the Agency, without further notice, to withhold the total remaining amount due under the terms of this agreement from any monies due and owing to the PROVIDER for any Medicaid claims. 9. Either party is entitled to enforce this Agreement under the laws of the State of Florida; the Rules of the Medicaid Program; and all other applicable federal and state Sunbelt Health & Rehab Center, Inc. Settlement Agreement Page 2 of 5 laws, rules, and regulations, 10. This settlement does not constitute an admission of wrongdoing or error by the parties with respect to this case or any other matter. 11. Each party shall bear their respective attorney's fees and costs, if any. 12. The signatories to this Agreement, acting in their respective representative capacities, are duly authorized to enter into this Agreement on behalf of the party represented, 13. The parties further agree that a facsimile or photocopy reproduction of this Agreement shail be sufficient for the parties to enforce the Agreement. The PROVIDER agrees, however, to forward a copy of this Agreement to AHCA with original signatures, and understands that a Final Order may not be issued until said original Agreement is received by AHCA. 14. This Agreement shall be construed in accordance with the provisions of the laws of Florida. Venue for any action arising from this Agreement shall be in Leon County, Florida. 15. This Agreement constitutes the entire agreement between the PROVIDER and AHCA, including anyone acting for, associated with, or employed by them, respectively, concerning all matters and supersedes any prior discussions, agreements, or understandings: There are no promises, representations, or agreements between the PROVIDER and AHCA other than as set forth herein. No modifications or waiver of any provision shall be valid unless a written amendment to the Agreement is completed and properly executed by the parties. 16. This is an Agreement of settlement and compromise, recognizing the parties may have different or incorrect understandings, information and contentions, as to facts and law, and with each party compromising and settling any potential correctness or incorrectness of its understandings, information, and contentions as to facts and law, so that no misunderstanding or misinformation shall be a ground for rescission hereof. 17. The PROVIDER expressly waives in this matter their right to any hearing pursuant to §§120.569 or 120.57, Florida Statutes, the making of findings of fact and conclusions of law by the Agency, and all further and other proceedings to which it may be Sunbelt Health & Rehab Center, Inc. Settlement Agreement Page 3 of 5 entitled by law or rules of the Agency regarding these proceedings and any and all issues raised herein, other than enforcement of this Agreement. The PROVIDER further agrees the Agency shall issue a Final Order which adopts this Agreement. 18. This Agreement is and shall be deemed jointly drafted and written by all parties to it and shall not be construed or interpreted against the party originating or preparing it. 19. To the extent any provision of this Agreement is prohibited by law for any reason, such provision shall be effective to the extent not so prohibited, and such prohibition shall not affect any other provision of this Agreement. 20. This Agreement shall inure to the benefit of and be binding on each party’s successors, assigns, heirs, administrators, representatives, and trustees. SUNBELT HEALTH AND REHAB CENTER, INC. Dated: Spt 2014 Seen Dated: Printed Title of Providers’ OCF Dated: 4-9- Providers’ Representative ——_____, 2014 > 2014 Legal Counsel for Provider Sunbelt Health & Rehab Center, Inc. Settlement Agreement Page 40fS FLORIDA AGENCY FOR HEALTH CARE | ADMINISTRATION 2727 Mahan Drive, Mail Stop #3 Tallahassee, Florida 32308-5403 | 4 Lh : Dated: G/26 2014 Justin Senio Deputy Secretary, Medicaid .S AGI pated: Z//F 2014 Stuart Williams General Counsel Dated: ) | 19 , 2014 Sh¢ya Gran Medicaid FFS Sunbelt Health & Rehab Center, Inc. Settlement Agreement Page 5 of 5 FLORIDA AGENCY FOR HEATH CARE ASMINISTRATION, pecan Better Heaith Care for aif Floridians cS ETARY EK CERTIFIED MAIL RECEIPT REQUESTED: Of 7108 2433 3937 6307 1806 July 15, 2013 Nursing Home Administrator Sunbelt Health & Rehab Center 305 East Oak Street Apopka, FL 327@2 Dear Administrator: You have been notified by the Office of Medicaid Cost Reimbursement Analysis of adjustments to your Medicaid reimbursement rates on the remittance voucher run dated: 7/13/13. The adjustments resulted from changes in your cost reports. This action has resulted in a balance due to the Agency in the amount of $95,610.99 for provider number 03204 1200/ invoice number NH 16766. If payment is not received, or arranged for, within 30 days of receipt of this letter, the Agency shall withhold Medicaid payments in accordance with the provisions of Chapter 409.913(27), F.S. Furthermore, pursuant to Sections 409.913(25) and 409.913(15), F.S., failure to pay in full, or enter into and abide by the terms of any repayment schedule set forth by the Agency may result in termination from the Medicaid Program. Likewise, failure to comply with all sanctions applied or due dates may result in additional sanctions being imposed. If the overpayment cannot be recouped by this office, Florida law authorizes referral of your account to the Department of Health and to a collection agency. All costs incurred by the Agency resulting from collection efforts will be added to your balance. Additionally, be advised that this referral does not relieve you of your obligation to make payment in full or contact this office to arrange mutually agreeable repayment terms. In addition, amounts due to the Agency shall bear interest at ten percent (10%) per annum from the date of this letter on the unpaid balance until the account is paid in full. The interest accrual will not be assessed if payment is received by the Agency within 30 days. You have the right to request a formal or informal hearing pursuant to Section 120.569, F.S. Ifa request for a formal hearing is made, the petition must be made in compliance with Section 28- 106.201, F.A.C. and mediation may be available. If a request for an informal hearing is made, the petition must be made in compliance with rule Section 28-106.301, F.A.C. Additionally, you are hereby informed that if a request for a hearing is made, the petition must be received by the Agency within twenty-one (21) days of receipt of this letter. For more information regarding your hearing and mediation rights, please see the attached Notice of Administrative Hearing and Mediation Rights. 2727 Mahan Drive, MS#14 Visit AHCA online at Tallahassee, Florida 32308 http://ahca.myflorida.com Please include a copy of the enclosed remittance advice to assure Proper posting of payments to your provider account. Should you have any questions regarding the Medicaid provider account balance information contained in this notice, please contact Julie Chasar (850) 412-4877. Questions regarding the reimbursement rate changes should be directed to Thomas Parker, Office of Medicaid Cost Reimbursement, at (850) 412-4110, Sincerely, Julie Chasar Medicaid Accounts Receivable JFC - July 15, 2013 PLEASE INCLUDE THIS REMITTANCE ADVICE WITH YOUR PAYMENT — eR EES REIS ANCE ADVICE WITH YOUR PAYMENT Remit Payment to: Agency for Health Care Administration Medicaid Accounts Receivable MS# 14 2727 Mahan Drive Bldg. 2 Ste. 200 Tallahassee, FL 32308 Attn: Sharon Dixon FROM: Sunbelt Health & Rehab Center 305 East Oak Street Apopka, FL 32703 Provider No. 032041200 Invoice No. NH16766 STATEMENT OF ACCOUNT CERTIFIED MAIL: 91 7108 2133 3937 6307 1800 VOUCHER RUN DATE: 7/13/13 BALANCE DUE: — $05.610.96 PAYMENT IS DUE WITHIN 30 DAYS FROM THE DATE OF THIS LETTER. Amount Enclosed: $ NOTICE OF ADMINISTRATIVE HEARING AND MEDIATION RIGHTS RE SE ARING AND MEDIATION RIGHTS The written request for an administrative hearing must conform to the requirements of either Rule 28-1 06.201(2) or Rule 28-} 06.301 (2), Florida Administrative Code, and must be received by the Agency for Health Care Administration, by 5:00 P.M. no later than 21 days after you received the SBR. The address for filing the written request for an administrative hearing is: Richard J. Shoop, Esquire Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Mail Stop #3 Tallahassee, Florida 32308 Fax: (850) 921-0158 The request must be legible, on 8 % by 11-inch white paper, and contain: 1. Your name, address, telephone number, any Agency identifying number on the SBR, if known, and name, address, and telephone number of your representative, if any; 2. An explanation of how your substantial interests will be affected by the action described in the SBR; 3. A statement of when and how you received the SBR; 4. Fora request for formal hearing, a statement of al] disputed issues of material fact; 5. Fora request for formal hearing, a concise statement of the ultimate facts alleged, as well as the rules and statutes which entitle you to relief: 6. For a request for formal hearing, whether you request mediation, if it is available; 7. Fora request for informal hearing, what bases Support an adjustment to the amount owed to the Agency; and 8. A demand for relief. A formal mediation may be available in conjunction with a formal hearing. Mediation is a way to use a f you and the Agency agree to mediation, it does not mean that you give up the right to a hearing. Rather, you and the Agency will try to settle your case first with mediation, If a written request for an administrative hearing is not timely received you will have waived your right to have the intended action reviewed pursuant to Chapter 120, Florida Statutes, and the action set forth in the SBR shall be conclusive and final.
The Issue The issue for determination in this case is whether Respondent’s application of a fair rental value system of property cost reimbursement to Petitioner under the Florida Title XIX Long-Term Care Medicaid Reimbursement Plan is appropriate.
Findings Of Fact Petitioner, CONSULTING MANAGEMENT AND EDUCATION, INC., d/b/a GULF COAST NURSING AND REHABILITATION CENTER (CME), is the licensed operator of a 103-bed nursing home in Clearwater, Florida, which is presently known as GULF COAST NURSING AND REHABILITATION CENTER (GULF COAST). CME participates in the Florida Medicaid Program as an enrolled provider. Respondent, AGENCY FOR HEALTH CARE ADMINISTRATION (AHCA), is the agency of the State of Florida authorized to implement and administer the Florida Medicaid Program, and is the successor agency to the former Department of Health and Rehabilitative Services, pursuant to Chapter 93-129, Laws of Florida. Stipulated Facts Prior to 1993, the GULF COAST nursing home facility was known as COUNTRY PLACE OF CLEARWATER (COUNTRY PLACE), and was owned and operated by the Clearwater Limited Partnership, a limited partnership which is not related to CME. In 1993 CME agreed to purchase, and did in fact purchase, COUNTRY PLACE from the Clearwater Limited Partnership. Simultaneous with the purchase of COUNTRY PLACE, CME entered into a Sale/Leaseback Agreement with LTC Properties, Inc., a Maryland real estate investment trust which engages in the financing of nursing homes. The Purchase and Sale Agreement between Clearwater Limited Partnership and CME was contingent upon the Sale/Leaseback Agreement and the proposed Lease between CME and LTC Properties, Inc. On September 1, 1993, CME simultaneously as a part of the same transaction purchased COUNTRY PLACE, conveyed the facility to LTC Properties, Inc., and leased the facility back from LTC Properties, Inc. As required, CME had notified AHCA of the proposed transaction. AHCA determined that the transaction included a change of ownership and, by lease, a change of provider. CME complied with AHCA's requirements and became the licensed operator and Medicaid provider for COUNTRY PLACE. Thereafter, CME changed the name of the facility to GULF COAST. After CME acquired the facility and became the licensed operator and Medicaid provider, AHCA continued to reimburse CME the same per diem reimbursement which had been paid to the previous provider (plus certain inflation factors) until CME filed its initial cost report, as required for new rate setting. In the normal course of business, CME in 1995 filed its initial Medicaid cost report after an initial period of actual operation by CME. Upon review of the cost report, AHCA contended that the cost report was inaccurate and engaged in certain "cost settlement" adjustments. During this review, AHCA took the position that CME's property reimbursement should be based on FRVS methodologies rather than "cost" due to the lease. In November of 1995, CME received from AHCA various documents which recalculated all components of Petitioner's Medicaid reimbursement rates for all periods subsequent to CME's acquisition of the facility. In effect, AHCA placed CME on FRVS property reimbursement. The practical effect of AHCA's action was to reduce CME's property reimbursement both retroactively and prospectively. The retroactive application would result in a liability of CME to AHCA, due to a claimed overpayment by AHCA. The prospective application would (and has) resulted in a reduction of revenues. CME is substantially affected by AHCA's proposed action and by Sections I.B., III.G.2.d.(1), V.E.1.h., and V.E.4. of the Florida Medicaid Plan. Additional Findings of Fact The Florida Medicaid Plan establishes methodologies for reimbursement of a nursing home's operating costs and patient care costs, as well as property costs. The dispute in this matter relates only to reimbursement of property costs. CME as the operator of the GULF COAST nursing home facility is entitled to reimbursement of property costs in accordance with the Florida Medicaid Plan. CME as the operator of the GULF COAST facility entered into a Florida Medicaid Program Provider Agreement, agreeing to abide by the provisions of the Florida Medicaid Plan. The Sale/Leaseback Agreement entered into by CME and LTC Properties Inc. (LTC) specifically provides for a distinct sale of the nursing home facility to LTC. LTC holds record fee title to GULF COAST. LTC, a Maryland corporation, is not related to CME, a Colorado corporation. The Florida Medicaid Plan is intended to provide reimbursement for reasonable costs incurred by economically and efficiently operated facilities. The Florida Medicaid Plan pays a single per diem rate for all levels of nursing care. After a nursing home facility's first year of operation, a cost settling process is conducted with AHCA which results in a final cost report. The final cost report serves as a baseline for reimbursement over the following years. Subsequent to the first year of operation, a facility files its cost report annually. AHCA normally adjusts a facility's reimbursement rate twice a year based upon the factors provided for in the Florida Medicaid Plan. The rate-setting process takes a provider through Section II of the Plan relating to cost finding and audits resulting in cost adjustments. CME submitted the appropriate cost reports after its first year of operation of the GULF COAST facility. Section III of the Florida Medicaid Plan specifies the areas of allowable costs. Under the Allowable Costs Section III.G.2.d.(1) in the Florida Title XIX Plan, a facility with a lease executed on or after October 1, 1985, shall be reimbursed for lease costs and other property costs under the Fair Rental Value System (FRVS). AHCA has treated all leases the same under FRVS since that time. AHCA does not distinguish between types of leases under the FRVS method. The method for the FRVS calculation is provided in Section V.E.1.a-g of the Florida Medicaid Plan. A “hold harmless” exception to application of the FRVS method is provided for at Section V.E.1.h of the Florida Medicaid Plan, and Section V.E.4 of the Plan provides that new owners shall receive the prior owner’s cost-based method when the prior owner was not on FRVS under the hold harmless provision. As a lessee and not the holder of record fee title to the facility, neither of those provisions apply to CME. At the time CME acquired the facility, there was an indication that the Sale/Leaseback transaction with LTC was between related parties, so that until the 1995 cost settlement, CME was receiving the prior owner’s cost-based property method of reimbursement. When AHCA determined that the Sale/Leaseback transaction between CME and LTC was not between related parties, AHCA set CME’s property reimbursement component under FRVS as a lessee. Property reimbursement based on the FRVS methodology does not depend on actual period property costs. Under the FRVS methodology, all leases after October 1985 are treated the same. For purposes of reimbursement, AHCA does not recognize any distinction between various types of leases. For accounting reporting purposes, the Sale/Leaseback transaction between CME and LTD is treated as a capital lease, or “virtual purchase” of the facility. This accounting treatment, however, is limited to a reporting function, with the underlying theory being merely that of providing a financing mechanism. Record fee ownership remains with LTC. CME, as the lease holder, may not encumber title. The Florida Medicaid Plan does not distinguish between a sale/leaseback transaction and other types of lease arrangements. Sections IV.D., V.E.1.h., and V.E.4., the “hold harmless” and “change of ownership” provisions which allow a new owner to receive the prior owner’s method of reimbursement if FRVS would produce a loss for the new owner, are limited within the Plan’s organizational context, and within the context of the Plan, to owner/operators of facilities, and grandfathered lessee/operators. These provisions do not apply to leases executed after October 1, 1985. Capital leases are an accounting construct for reporting purposes, which is inapplicable when the Florida Medicaid Plan specifically addresses this issue. The Florida Medicaid Plan specifically addresses the treatment of leases entered into after October 1985 and provides that reimbursement will be made pursuant to the FRVS method.
