The Issue The issue is whether the pharmacy permit issued to the Respondent, North Florida Drug Corporation, d/b/a Scottie Discount Drugs, should be revoked or otherwise penalized based on the acts alleged in the Administrative Complaint.
Findings Of Fact North Florida Drug Corporation, d/b/a Scottie Discount Drugs, currently holds permit No. PH 0004096 as a Community Pharmacy. Respondent is located at 1448 Bakers Square, Macclenny, Florida. On December 24, 1987, Gustave Goldstein, who had been the designated prescription department manager for Respondent, resigned as a pharmacist at the Respondent's location. He notified Frankie Rosier, the owner and operator of the Respondent, that he was leaving and he notified the DPR that he would no longer be the designated prescription department manager. Carl Messina is the relief pharmacist for the Respondent. From the time of Goldstein's resignation, Messina has told Ms. Rosier many times that it is illegal to operate without a prescription department manager. DPR inspected the Respondent's pharmacy in December, 1987, and determined that there was no prescription department manager after Goldstein quit. DPR conducted an inspection of the Respondent's premises on February 16, 1988, and discovered that there still was no prescription department manager employed there. Frankie Rosier was made aware of this deficiency. On February 16, 1988, the official records of DPR showed that no new designation of a prescription department manager had been filed by Respondent and Goldstein was still listed as the prescription department manager by Respondent. On May 22, 1988, DPR again inspected the premises and determined that there was still no prescription department manager. It is important that each permittee have a designated prescription department manager to assure that all required records are kept and that the pharmacy complies with all legal requirements. This is especially important regarding control and accountability for controlled substances. Without a prescription department manager, a non-pharmacist owner, like Ms. Rosier, would and does have access to these controlled substances without any accountability. By Final Order entered and filed with the agency clerk on December 17, 1987, this same permittee was fined and placed on probation for operating a community pharmacy with an expired permit and for obtaining a permit by misrepresentation or fraud or through an error of the department or the board.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Professional Regulation, Board of Pharmacy, enter a Final Order finding North Florida Drug Corporation, d/b/a Soottie Discount Drugs, guilty of the violations alleged and revoking the community pharmacy permit No. PH 0004096. DONE and ENTERED this 14th day of October, 1988, in Tallahassee, Florida. DIANE K. KIESLING Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 14th day of October, 1988. COPIES FURNISHED: Michael A. Mone' Staff Attorney Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32399-0750 North Florida Drug Corporation Scottie Discount Drugs 1448 Bakers Square Macclenny, Florida 32063 Bruce Lamb General Counsel Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32399-0750 Rod Presnell, Executive Director Board of Pharmacy Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32399-0750
Findings Of Fact At all pertinent times, Aubrey Moran, who holds a Florida pharmacist's license, No. 0010982, was the managing pharmacist and the dispensing pharmacist at Lake Mary Pharmacy, 185 North Country Club Road, Lake Mary, Florida, a community pharmacy that holds permit No. 0007301. Half a block away from Lake Mary Pharmacy Robert L. Bevier, M.D., who was then Lake Mary's "principal general practitioner," had his office. COCAINE In the fall of 1981, Dr. Bevier brought respondent an article from a medical journal, which read, as follows: Make Your Own TAC; It Works Well Atlanta--An Atlanta emergency physician has reported good results with a topical anesthetic called TAC made of tetracaine, cocaine, and epinephrine. Dr. Michael Kessler, director of a seminar on Outpatient Surgical Techniques for the Non-Surgeon, said his group at a freestanding emergency clinic sees large numbers of pediatric patients, and TAC has worked well as a topical anesthetic for children as well as adults. The recipe for TAC (taken from the January 1980 Journal of the American College of Emergency Physicians, according to Kessler) calls for 300 mg. tetracaine hydrochloride powder; one-fourth ounce (7,090 mg.) cocaine flakes; 30 cc 1:1000 inject epinephrine, and distilled water. The tetracaine is dissolved in a small amount of distilled water; the epinephrine and cocaine added; and the mixture combined with distilled water to make 60 cc volume. It should be stored in a brown bottle and has a shelf-life of 21 to 30 days. Dr. Bevier asked Mr. Moran to compound some of this mixture. Mr. Moran did not keep cocaine in stock ordinarily, but he acquired some from a wholesaler and dispensed 60 cc. amounts of the TAC solution to Dr. Bevier on three occasions. On each occasion Dr. Bevier wrote a prescription for himself on a form on which "AB 8796510" appeared just under his signature. The prescriptions were dated September 8, November 3 and November 23, 1981, and were filled on the dates written, except for the first, which was not filled until September 14, 1981, perhaps because of a delay in obtaining ingredients. Mr. Moran was under the impression that Dr. Bevier was using the solution as a local anesthetic in his practice for procedures like the removal of warts. Solutions of this type are also used to anesthetize mucous membranes. Cocaine in solution with epinephrine is of no use to an abuser. Deposition of Charles L. Park, p. Testimony of Respondent. (T. 112) In early December of 1981, Dr. Bevier asked Mr. Moran for the TAC ingredients to keep on hold in his office so that he could mix the solution up along, as needed. Mr. Moran's only information about shelf life was what he had read in the article from the medical journal Dr. Bevier had shown him. He did in fact deliver the ingredients to Dr. Bevier, including four quarter ounce packages of cocaine hydrochloride flakes, on December 3, 1982. Dr. Bevier signed the official Drug Enforcement Administration form (DEA 222) required in connection with this transaction, and delivered it to the pharmacy. INVESTIGATOR ARRIVES After the cocaine flake purchases, Will A. Merrill, an investigator for petitioner Department of Professional Regulation visited Mr. Moran in the course of investigating Dr. Bevier. On May 27 and 28, 1982, Mr. Merrill examined respondent's records, and talked to Mr. Moran. Precisely what was said is a matter of dispute. At the very least, Mr. Merrill advised Mr. Moran that irregularities in Dr. Bevier's record keeping regarding Schedule II drugs were being looked into. Cocaine, Demerol (Meperidine) and Dilaudid are all controlled substances, and are listed on Schedule II in Chapter 893, Florida Statutes. The investigation culminated in an emergency suspension of Dr. Bevier's license to practice medicine on September 12, 1982. Thereafter the investigation of respondents began. DEMEROL AND DILAUDID Lige Williams, a cancer victim, was Dr. Bevier's stepfather. On July 14, 1982, and again on August 2, 1982, Mr. Moran filled prescriptions for Mr. Williams written by Dr. Bevier, each for sixty 100 milligram tablets of Demerol. He dispensed the medicine to Mr. Williams. On August 9, 1982, Mr. Moran dispensed a 20 milliliter ampule of Demerol to Dr. Bevier for office use after Dr. Bevier signed the appropriate Form 222. Dr. Bevier himself came into Lake Mary Pharmacy with a prescription for one hundred 100 milligram tablets of Demerol for Lige Williams on August 13, 1982, and Mr. Moran filled the prescription. On August 16, 1982, Mr. Moran dispensed a second 20 milliliter ampule of Demerol to Dr. Bevier for office use, again after Dr. Bevier signed the appropriate Form 222. Three days later Dr. Bevier presented another prescription for a hundred 100 milligram tablets of Demerol for Lige Williams, which Mr. Moran filled. On August 26 and September 8, 1982, Dr. Bevier signed two more Form 222s and Mr. Moran dispensed two more 20 milliliter ampules of Demerol for office use. Dr. Bevier told Mr. Moran that the Demerol ampules were "primarily . . . for Mr. Williams' use." (T. 103) The parties stipulated that Mr. Moran dispensed another fifty 100 milligram tablets of Demerol at some time "from or about May 1, 1981 until August 30, 1982" to unspecified person(s) under unspecified circumstances. On September 9, 1982, Mr. Moran filled a prescription Dr. Bevier wrote and personally presented for Lige Williams for 100 four milligram tablets of Dilaudid. When Mr. Moran questioned the quantity of tablets, Dr. Bevier said that Lige Williams was leaving Lake Mary to go back to his own home and that he "want[ed] him to have enough tablets to get him up there and hold him until he can be seen by a physician up there." (T. 93) Dilaudid and Demerol in the sequence and dosages to be inferred from the prescriptions Mr. Moran filled for Mr. Williams, even assuming Mr. Williams received the full contents of all four ampules, are commonly and appropriately prescribed for terminally ill cancer patients, according to the uncontroverted medical testimony.
Recommendation Upon consideration of the foregoing, it is RECOMMENDED: That petitioner dismiss the administrative complaints filed against respondents. DONE and ENTERED this 21st day of June, 1984, in Tallahassee, Florida. ROBERT T. BENTON II Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 21st day of June, 1984. COPIES FURNISHED: Bruce D. Lamb, Esq. Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32301 W. C. Hutchison, Jr., Esq. Hutchison & Mamele 230 North Park Avenue Sanford, Florida 32771 Fred Roche, Secretary Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32301 Wanda Willis, Executive Director Department of Professional Regulation Board of Pharmacy 130 North Monroe Street Tallahassee, Florida 32301
Findings Of Fact Respondent holds community pharmacy license No. PH0007711, renewed January 13, 1983. On May 21, 1981, Lester J. Henderson signed a new establishment permit application as owner, officer, manager and registered pharmacist. On June 9, 1981, petitioner conducted a new establishment inspection of Tampa Park Plaza Pharmacy. On June 19, 1981, Mr. Henderson wrote that "Andrew Mobley is no longer the Pharmacy Manager of Tampa Park Plaza Pharmacy, but I am . . . ." Petitioner's Exhibit No. 1. Petitioner received this notification on June 24, 1981, and, on the following day, wrote Mr. Henderson "to advise that effective as of June 19, 1981, our records were amended to reflect that you are the pharmacist manager." MBHS Corp., Inc. (MBHS), owns Tampa Park Plaza Pharmacy, (the pharmacy) and MBHS is owned in turn by its three officers. MBHS' president, Andrew Mobley, and Lester Henderson, an MBHS vice-president, are registered pharmacists. Samuel Snowden, also an MBHS vice-president and the third stockholder, is not a pharmacist. After the pharmacy opened for business, Andrew Mobley left Florida, and left the every day operation of the pharmacy to Lester Henderson, whom he knew to have had no retail experience as a pharmacist. In December of 1981, Mr. Mobley returned from Oklahoma to find a complete dearth of pharmaceutical records. Mr. Henderson explained that he did not like paperwork. Mr. Mobley returned to Oklahoma, again leaving the every day operation of the pharmacy to Mr. Henderson, but returned to Tampa when a bank that had made the pharmacy a loan threatened to call it in. He found scheduled drugs mixed in together, with unscheduled drugs, and a continued lack of records. Mr. Mobley then set up an inventory control book, something that had been neglected to that point. It developed that some Dilaudid was missing, which seemed to be news to Mr. Henderson. Mr. Mobley told Mr. Henderson the fact that the drugs were missing would have to be reported to the Department of Professional Regulation and Mr. Mobley got forms from the Department of Professional Regulation's office on Henderson Boulevard, which he gave to Mr. Henderson to fill out. Mr. Henderson never did fill them out and reportedly said "Andrew . . . must be crazy if he thinks I'm going to fill out those papers and send them in to those people." (T. 35) Mr. Mobley worked with Mr. Henderson in an effort to straighten out record keeping at the pharmacy, but also took a job at Walgreen's beginning in February of 1983. He left this job in June to take over from Mr. Henderson as pharmacy manager at the pharmacy. Mr. Henderson has not been employed at the pharmacy since. Edward G. Bludworth and Merry L. Paige, investigators in petitioner's employ, visited the pharmacy about ten o'clock on February 16, 1983. The prescription department was open; it was unlocked and there was no "closed" sign, but there was no pharmacist on duty. When the investigators asked to speak to the pharmacist, the store clerk made several telephone calls. She was only able to locate Mr. Henderson at about two o'clock, after the investigators had left. Mr. Bludworth and Ms. Paige conducted an audit of scheduled drugs at the pharmacy on February 16, 1983. Because of the lack of an inventory report as of the spring of 1981, they assumed no drugs on hand as of June 9, 1981. On this assumption they concluded that 296 tablets of Dilaudid 2 mg. were missing and unaccounted for. Dilaudid contains dihy dromorphinone [sic]. On the same assumption, they found a shortage of 41 Percodan tablets, which contain oxycodone, and an overage of 97 Demerol tablets 50 mg. Petitioner's Exhibit No. During the audit period, the pharmacy purchased 400 tablets of Dilaudid 2 mg. and 500 Percodan tablets. Id. The discrepancies uncovered by the audit exceeded significantly the five percent error rate that the investigators commonly see. Mr. Bludworth and Ms. Paige returned for a second visit on April 19, 1983, at about ten o'clock in the morning. Once again, the prescription department was unlocked and open. There was no "closed" sign and no pharmacist to be seen. This time Mr. Henderson's presence was procured by noon. On one of their visits, Mr. Henderson told the investigators that there had been a break-in at the pharmacy more than a year earlier. He said he had reported the incident at the time to the authorities but was unable to produce documentation of any such report. The investigators requested such documentation at the time of the visit, and Ms. Paige later telephoned him to ask again for documentation.
Recommendation Upon consideration of the foregoing, it is RECOMMENDED: That petitioner suspend respondent's license for one (1) year. DONE and ENTERED this 20th day of October, 1983, in Tallahassee, Florida. ROBERT T. BENTON II Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 20th day of October, 1983. COPIES FURNISHED: Bruce D. Lamb, Esquire Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32301 Andrew Mobley Tampa Park Plaza Pharmacy 1497 Nebraska Avenue Tampa, Florida 33602 Fred M. Roche, Secretary Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32301 Wanda Willis, Executive Director Department of Professional Regulation Board of Pharmacy 130 North Monroe Street Tallahassee, Florida 32301 =================================================================
Findings Of Fact At all times material hereto, Respondent Alberto Calil was the owner of Farmacia La Familia, the holder of a permit to operate a pharmacy under the laws of the State of Florida, having been issued permit number 0007056. At all times material hereto, Respondent Hildelisa M. Hernandez has been licensed as a pharmacist under the laws of the State of Florida, having been issued license number 0016352. At all times material hereto, Hernandez has been the managing pharmacist at Farmacia La Familia and, specifically, has been the only pharmacist employed there. Prior to the events alleged in the Administrative Complaints filed herein, Respondent Nelson Torres had an ownership interest in Farmacia La Familia. In February 1982, he transferred his interest in the business, and his shares of stock in the corporation owning the business, to Respondent Calil. At the time of the formal hearing in this cause, Torres did not own or operate a pharmacy. The Miami office of the Department of Professional Regulation received an anonymous letter advising, essentially, that a number of pharmacies were being operated other than in compliance with the law. Georgina Auspitz, an investigator with the Department of Professional Regulation, was instructed by her supervisor to visit each of the pharmacies named in that letter to investigate the allegation. On Friday, March 26, 1982, Auspitz entered the Farmacia La Familia. After a brief conversation with Respondent Hernandez and a customer of the pharmacy, Auspitz asked Hernandez for three dollars' worth of Tranxene 3.75 mg. Hernandez went into the dispensary part of the pharmacy and returned with a manila envelope containing 15 capsules. At no time during this transaction did Auspitz present Hernandez with a prescription. On Monday, March 29, 1982, Auspitz took the envelope and its contents to the Dade County Public Safety Department. A subsequent chemical analysis of the capsules revealed the presence of the controlled substance known as clorazepate, the active ingredient in Tranxene. On April 6, 1982, Auspitz returned to the Farmacia La Familia. She asked Manuel J. Diaz Garcia1 an employee of the pharmacy, for three dollars' worth of Tranxene 7.5 mg. Diaz went into the dispensary part of the pharmacy, had a discussion with an unidentified female, and returned to the main part of the pharmacy to wait on customers. After being advised that the order was ready, Diaz gave Auspitz a manila envelope containing 11 capsules. Auspitz paid Diaz, Diaz placed the money in the cash register, and Auspitz left the pharmacy. At no time during this transaction did Auspitz present to Diaz a prescription. Auspitz took the manila envelope and its contents to the Dade County Public Safety Department. A subsequent chemical analysis of the capsules revealed the presence of the controlled substance known as clorazepate, the active ingredient in Tranxene. After she had made her second "buy" at Farmacia La Familia, Auspitz contacted the City of Miami Police Department to ascertain if one of its narcotics detectives would accompany her on subsequent "buys." As a result of her request, Detective Noel Rojas was assigned to accompany her. On April 8, 1982, Auspitz and Rojas went to the Farmacia La Familia. Crus Caballero, an employee of the pharmacy, approached them. Auspitz told Caballero she wanted three dollars' worth of Ativan, and Rojas told Caballero he wanted five dollars' worth of Valium 5 mg. Caballero wrote something on a scrap piece of paper and went into the dispensary portion of the pharmacy, left the piece of paper, and returned to wait on other customers. Respondent Hernandez came to the door of the dispensary area, "looked over" Auspitz and Rojas, and returned to the dispensary. A few moments later, Caballero brought two manila envelopes to where Auspitz and Rojas were waiting. Although Auspitz had ordered three dollars' worth of Ativan, Caballero only brought her two dollars' worth. After Auspitz agreed to take the smaller quantity, Caballero placed both manila envelopes into one bag, and Auspitz and Rojas paid for their purchases and left the pharmacy. At no time during this transaction did Auspitz or Rojas present Caballero with a prescription. Upon leaving the pharmacy, Auspitz and Rojas separated their purchases. Auspitz took hers to the Dade County Public Safety Department, and Rojas took his to the City of Miami Police Department. The chemical analysis performed on the six tablets purchased by Auspitz revealed the presence of the controlled substance lorazepam, the active ingredient in Ativan. The chemical analysis performed on the 23 tablets purchased by Rojas revealed the presence of the controlled substance diazepam, the active ingredient in Valium. Neither Manuel J. Diaz Garcia nor Crus Caballero is licensed as a pharmacist or registered as a pharmacy intern in the State of Florida.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered dismissing the Administrative Complaint filed against Respondent Nelson Torres with prejudice; finding Respondents Farmacia La Familia, Alberto Calil and Hildelisa M. Hernandez guilty of each and every count in the Administrative Complaints filed against them; and revoking pharmacy permit number 0007056 issued to Respondents Farmacia La Familia and Alberto Calil, and further revoking pharmacist license number 0016352 issued to Respondent Hildelisa M. Hernandez DONE and RECOMMENDED this 5th day of April, 1983, in Tallahassee, Leon County, Florida. LINDA M. RIGOT, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 5th day of April, 1983. COPIES FURNISHED: W. Douglas Moody, Esquire 119 North Monroe Street Tallahassee, Florida 32301 Raul A. Cossio, Esquire 1900 Coral Way, Suite 404 Miami, Florida 33145 Frederick Roche, Secretary Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32301 Hinton F. Bevis, Executive Director Board of Pharmacy 130 North Monroe Street Tallahassee, Florida 3230123
The Issue The issue for determination is whether Petitioner must reimburse Respondent for payments totaling $1,140,763.88 that Petitioner received from the Medicaid Program in compensation for the provision of prescription drugs between late-August and November of 1998. Respondent contends that Petitioner is not entitled to retain the payments in question because Petitioner allegedly has failed to demonstrate that it had available during the pertinent period a sufficient quantity of the prescription drugs in question.
Findings Of Fact The parties' Joint Stipulation of Facts and the evidence presented at final hearing established the facts that follow. The Parties The Agency for Health Care Administration (the “Agency”) is responsible for administering the Florida Medicaid Program. As one of its duties, the Agency must recover "overpayments . . . as appropriate," the term "overpayment" being statutorily defined to mean "any amount that is not authorized to be paid by the Medicaid program whether paid as a result of inaccurate or improper cost reporting, improper claiming, unacceptable practices, fraud, abuse, or mistake." See Section 409.913(1)(d), Florida Statutes. Palm Beach Pharmacy, Inc. (“PBPI”), d/b/a Eddie’s Drug (“Eddie’s”) was, at all times material hereto, a duly contracted Medicaid provider, having entered into a Medicaid Provider Agreement with the Agency and been assigned a Medicaid Provider Number: 106343000. Eddie’s is a Florida licensed pharmacy.1 As an enrolled Medicaid provider, Eddie’s is authorized to dispense drugs and supplies to Medicaid recipients. In return, Eddie’s has agreed to comply with all governing statutes, rules, and policies, including those policies set forth in the Florida Medicaid Prescribed Drug Services Coverage, Limitations and Reimbursement Handbook (the “Handbook”). The Agency, which prepared the Handbook and furnishes it to Medicaid providers, has incorporated the Handbook by reference into Rule 59G-4.250(2), Florida Administrative Code. PBPI, which owned and operated a number of pharmacies (including Eddie’s), maintained its corporate headquarters in West Palm Beach, Florida. Eddie’s was located in Miami, Florida. On July 1, 1998, PBPI acquired a drug store known as Jay’s Drugs (“Jay’s”). Jay’s was located in Miami, Florida, across the street from Eddie’s. Thus, before both stores came under common ownership, they had been competitors. This case arises out of the Agency's attempt to recover alleged overpayments on Medicaid claims for which Eddie’s was paid several years ago. The "audit period" that is the subject of the Agency's recoupment effort is April 1, 1998 to July 31, 1999, although the actual period in controversy is much shorter. From July 1, 1998, until the end of the audit period, PBPI owned and operated both Eddie’s and Jay’s. The Underlying Facts The transactions at the heart of this case occurred between late-August and November of 1998, during which period (the “Focal Period”) Medicaid reimbursed Eddie’s more than $1 million for prescription drugs including Neupogen and Epogen/Procrit (collectively, the “Drugs”). The Drugs are used to treat AIDS patients and persons infected with HIV. Prior to the Focal Period, Eddie’s had not dispensed $1 million worth of the Drugs——or any figure approaching that amount——in three or four months’ time. The reason for the dramatic spike in Eddie’s business is that Eddie’s was dispensing the Drugs to customers of Jay’s pursuant to an arrangement designed to manipulate PBPI’s contractual obligations to the former owner of Jay’s under the purchase and sale agreement by which PBPI had acquired Jay’s. Essentially, the arrangement was this. Jay’s was dispensing the Drugs to a large number (approximately 150) of Medicaid beneficiaries who were receiving treatment at a nearby clinic. Because the Drugs were administered to the patients via intravenous infusion, the clinic typically obtained the Drugs from Jay’s in bulk. To fill these prescriptions, Jay’s ordered the Drugs from a wholesale supplier, which usually delivered the Drugs to Jay’s the next day. At some point before the Focal Period, arrangements were made to have the clinic present its prescriptions for the Drugs to Eddie’s rather than Jay’s.2 The evidence does not show, exactly, how this was accomplished, but whatever the means, the clinic abruptly began bringing prescriptions for the Drugs to Eddie’s.3 This diversion of Jay’s’ business to Eddie’s was intended to deprive Jay’s of Medicaid reimbursements to which Jay’s’ former owner had access as a source of funds for paying down a note that PBPI had given for the purchase of Jay’s. By having Eddie’s dispense the Drugs and submit the Medicaid claims, Medicaid money flowed into Eddie’s’ bank account (rather than Jay’s’ bank account) and hence was not immediately available to the former owner of Jay’s to reduce PBPI’s debt. During the Focal Period, Eddie’s did not purchase the Drugs from a wholesaler but instead acquired them from Jay’s. The process by which this was accomplished involved a pharmacy technician named Wright, who was employed at Eddie’s, and a pharmacist named Shafor, who worked at Jay’s. Wright (at Eddie’s) accepted the prescriptions for the Drugs as the clinic brought them in Then, she called Shafor (at Jay’s) and told him the quantities needed to fill the prescriptions. Shafor ordered the Drugs from a wholesaler, which delivered them in bulk to Jay’s, usually the next day. Upon receiving the Drugs, Shafor personally delivered them to Wright, who, recall, was across the street at Eddie’s. Wright labeled and dispensed the Drugs. Eddie’s submitted a claim for the Drugs to Medicaid, and Medicaid paid Eddie’s. PBPI maintained separate accounting ledgers for Eddie’s and Jay’s, respectively. The company’s accountants recorded the subject transactions in these ledgers so that Jay’s——not Eddie’s——would “recognize” the sales of the Drugs. In a nutshell, this was done through “inter-company” transfers whereby all of the money that Eddie’s received from Medicaid for the Drugs was moved, on the books, into an account of Jay’s. In this way, any profit from the sales of the Drugs (the difference between the wholesale cost of the Drugs and the Medicaid reimbursement therefor, less overhead) was realized on Jay’s’ books.4 The Medicaid payments to Eddie’s that the Agency seeks to recoup were included in four remittance vouchers dated September 2, 1998; September 30, 1998; October 28, 1998; and November 25, 1998, respectively. The September 2 payment to Eddie’s totaled $287,205.52. Of this amount, $276,033.23 reimbursed Eddie’s for dispensing the Drugs. Eddie’s’ accounting ledger reflects that, as of September 30, 1998, the sum of $276,033.23 had been transferred from an account of Eddie’s to an account of Jay’s. The September 30 payment to Eddie’s totaled $439,175.77, of which $432,700.36 was paid in consideration of the Drugs. The October 28 Medicaid payment was $431,753.82, of which total the Drugs accounted for $424,202.76. Eddie’s’ accounting ledger reflects that, as of October 31, 1998, the sum of $870,929.59 (439,175.77 + 431,753.82) had been transferred from an account of Eddie’s to an account of Jay’s. The November 25 payment to Eddie’s totaled $407,088.00. Of this amount, $393,063.00 reimbursed Eddie’s for dispensing the Drugs. Eddie’s’ accounting ledger reflects that, as of November 30, 1998, the sum of $407,088.00 had been transferred from an account of Eddie’s to an account of Jay’s. The Agency’s Allegations On October 31, 2000, the Agency issued its Final Agency Audit Report (“Audit”) in which Eddie’s was alleged to have received $1,143,612.68 in overpayments relating to the Drugs. In the Audit, the Agency spelled out its theory of the case; indeed, the Audit is the only document in the record that does so. The Agency cited several statutory provisions. First, Section 409.913(7)(e), Florida Statutes, was referenced. This section states: When presenting a claim for payment under the Medicaid program, a provider has an affirmative duty to supervise the provision of, and be responsible for, goods and services claimed to have been provided, to supervise and be responsible for preparation and submission of the claim, and to present a claim that is true and accurate and that is for goods and services that: * * * (e) Are provided in accord with applicable provisions of all Medicaid rules, regulations, handbooks, and policies and in accordance with federal, state, and local law. Section 409.913(7)(e), Florida Statutes. The Agency did not allege (or prove), however, that Eddie’s had violated Section 409.913(7)(e), Florida Statutes.5 Put another way, the Agency did not plead or prove lack of supervision, submission of a false claim, or that the Drugs were not provided in accordance with applicable law. Next, the Agency cited Section 409.913(8), Florida Statutes, which provides: A Medicaid provider shall retain medical, professional, financial, and business records pertaining to services and goods furnished to a Medicaid recipient and billed to Medicaid for a period of 5 years after the date of furnishing such services or goods. The agency may investigate, review, or analyze such records, which must be made available during normal business hours. However, 24-hour notice must be provided if patient treatment would be disrupted. The provider is responsible for furnishing to the agency, and keeping the agency informed of the location of, the provider's Medicaid- related records. The authority of the agency to obtain Medicaid-related records from a provider is neither curtailed nor limited during a period of litigation between the agency and the provider. The Agency further alleged, as fact, that Eddie’s had failed, upon request, “to submit invoices from [its] suppliers to substantiate the availability of drugs that [were] billed to Medicaid” and thus had not “fully substantiated such availability.” The Agency, however, did not invoke any of the available remedial provisions as authority to impose a sanction for this alleged failure to turn over Medicaid-related records. See, e.g., Sections 409.913(14)(b), (c), and (d), Florida Statutes. The Agency cited Section 409.913(10), Florida Statutes, which authorizes the Agency to “require repayment for inappropriate, medically unnecessary, or excessive goods or services from the person furnishing them, the person under whose supervision they were furnished, or the person causing them to be furnished.” There was no allegation (or proof), however, that the Drugs which Eddie’s had purported to dispense (i.e. the Drugs for which it had submitted Medicaid claims) were “inappropriate, medically unnecessary, or excessive.” Thus, Eddie’s was not alleged (or shown) to have violated Section 409.913(10), Florida Statutes. Finally, the Agency relied upon Section 409.913(14)(n), Florida Statutes, which is the basis of the Agency’s legal theory. This section provides: The agency may seek any remedy provided by law, including, but not limited to, the remedies provided in subsections (12) and (15) and s. 812.035, if: * * * (n) The provider fails to demonstrate that it had available during a specific audit or review period sufficient quantities of goods, or sufficient time in the case of services, to support the provider's billings to the Medicaid program[.] The Agency contended, additionally, that “[b]illing Medicaid for drugs that have not been demonstrated as available for dispensing is a violation of the Medicaid laws and regulations and has resulted in the finding that [Eddie’s] ha[s] been overpaid by the Medicaid program.” (Emphasis added). The Agency explained, “Medicaid payments that have been substantiated by documented inventory are assumed to be valid; and payments in excess of that amount are regarded to be invalid.” Thus, the Agency’s theory of recovery is that Eddie’s must forfeit “overpayments” arising from its failure to demonstrate the availability, in inventory, of a sufficient quantity of the Drugs for which claims were submitted, as required by Section 409.913(14)(n), Florida Statutes. After the Audit was issued, the Agency accepted a handwritten note regarding the transfer of a small quantity of Drugs from Jay’s to Eddie’s as sufficient to demonstrate the availability of such amount. This resulted in a slight reduction of the amount of the alleged overpayment, to $1,140,763.88. The Separate Audit of Jay’s The Agency conducted a separate audit of Jay’s, concerning which some evidence was introduced at hearing. Without getting into unnecessary detail, the audit of Jay’s revealed that Jay’s had purchased, during and around the Focal Period, a quantity of the Drugs that exceeded the number of units that Jay’s had billed to Medicaid. It was Eddie’s theory that this “excess inventory” of Jay’s matched, more or less, the alleged inventory shortfall at Eddie’s, thereby corroborating the testimony concerning the transfer of these Drugs from Jay’s to Eddie’s for dispensation. At hearing, the parties sharply disputed whether, in fact, Jay’s had transferred the Drugs to Eddie’s. The Agency, of course, maintained that such transfers were not properly documented; Eddie’s argued that the documents and other evidence, including testimony about the transactions in question, adequately demonstrated that the transfers had, in fact, occurred. There was no dispute, however, that if it were found that such transfers had occurred, and if, further, the documents (and other evidence) pertaining to the inventory of Jay’s were accepted as proof of the quantities of Drugs so transferred, then all but $176,078.30 worth of the Drugs could be accounted for. Thus, as counsel for Eddie’s conceded at hearing, the Agency is entitled to recoup some sum of money. The question is whether that sum is $1,140,763.88 or $176,078.30. Ultimate Factual Determination Based on all of the evidence in the record, including the deposition testimony received through the parties’ joint stipulation, it is determined that, more likely than not, Eddie’s had available during the Focal Period a sufficient quantity of the Drugs to support all but $176,078.30 worth of the claims in dispute.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency enter a final order requiring Eddie’s to repay the Agency the principal amount of $176,078.30. DONE AND ENTERED this 12th day of March, 2002, in Tallahassee, Leon County, Florida. JOHN G. VAN LANINGHAM 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 12th day of March, 2002.
The Issue Whether Emergency Rule 10CER89-21 and an amendment of Rule 10C-7.0482, Florida Administrative Code, constitute an invalid exercise of delegated legislative authority?
Findings Of Fact The Parties and The Petitioners' Standing. The Petitioners, Hillhaven, United, Diversicare, HCRA, Americare and Waverly, are providers of long-term care services to elderly and disabled persons including Medicaid recipients. (S.F. 1). Petitioners have standing to raise their respective claims in this matter. (S.F. 38). The Department is an agency of the State of Florida. The Department is responsible for administering the Florida Medicaid program. (S.F. 3). The Federal Medicaid Program. General. Title XIX of the Social Security Act, codified at 42 U.S.C. 1396-1396s, and commonly referred to as the Medicaid Act, is a cooperative federal-state program. Under the Medicaid program, the federal government provides matching funds to states to help them provide their needy residents with necessary medical services. (S.F. 1). State Participation in the Program. State participation in the Medicaid program is not mandatory. A state which opts to participate, however, must submit to the Health Care Financing Administration (hereinafter referred to as "HCFA") of the Department of Health and Human Services (hereinafter referred to as "HHS") a "state plan for medical assistance" which meets all relevant federal requirements. 42 U.S.C. 1396a. (S.F. 2). Once HCFA approves a state's plan, that state is entitled to federal financial participation (hereinafter referred to as "FFP"), which means that HHS pays the state a certain percentage of amounts expended under the plan. 42 U.S.C. 1396b. The state must then administer the program in accordance with federal law, regulations and the approved state plan. 42 U.S.C. 1396c. (S.F. 2). Each state that participates in the Medicaid program must designate an agency to implement the Medicaid program in that state. 42 U.S.C. 1396(a)(5) and 42 C.F.R. 431.10. The state agency designated is not allowed to delegate its authority to administer or supervise the state plan. 42 C.F.R. 431.10(e). Amendment of a State Medicaid Plan. The mechanism for amending a state's Medicaid plan is set forth in 42 C.F.R. 447.256(c) and 430.20. (S.F. 10). In pertinent part, 42 C.F.R. 447.256(c), provides: A state plan amendment that is approved will become effective no earlier than the first day of the calendar quarter in which an approvable amendment is submitted in accordance with [42 C.F.R.] 430.20 and 447.253. In pertinent part, 42 C.F.R. 20(b)(2), provides that "[f]or a plan amendment that changes the State's payment method and standards, the [effective date] rules of [42 C.F.R.] 447.256 apply." The requirements for public notice of a proposed amendment to a state's Medicaid plan are set forth in 42 C.F.R. 447.205. (S.F. 11). The notice, pursuant to 42 C.F.R. 447.205(c), must include: Describe the proposed change in methods and standards; Give an estimate of any expected increase or decrease in annual aggregate expenditures; Explain why the agency is changing its methods and standards; Identify a local agency in each county (such as the social services agency or health department) where copies of the proposed changes are available for public review; Give an address where written comments may be sent and reviewed by the public; and If there are public hearings, give the location, date and time for hearings or tell how this information may be obtained. One of the requirements for federal approval of an amendment to a state plan is the requirement that the state provide payment rates in compliance with the "Boren Amendment", 42 U.S.C. 1396a(a)(13), and make findings and submit assurances to HCFA that: The Medicaid agency pays for . . . long-term care facility services through the use of rates that are reasonable and adequate to meet the costs that must be incurred by efficiently and economically operated providers to provide services in conformity with applicable State and Federal laws, regulations, and quality and safety standards. 42 C.F.R. 447.253(b)(1). The Medicaid Program in Florida. Florida's Participation. Florida participates in the Medicaid program pursuant to Section 409.266, Florida Statutes, and the Florida Title XIX Long-Term Care Reimbursement Plan (hereinafter referred to as the "Florida Medicaid Plan"). (S.F. 3). The Department is the agency responsible for administering the Florida Medicaid Plan. The Florida Medicaid Plan authorizes payments for nursing home services provided to eligible individuals in accordance with Medicaid regulations. (S.F. 3). Adoption and Approval of a Medicaid Plan. The Florida Medicaid Plan as revised January 1, 1988, was submitted by the Department to HCFA in accordance with 42 U.S.C. 1396A. The Department provided assurances to HCFA that Medicaid reimbursement rates under the January 1, 1988 Florida Medicaid Plan were reasonable and adequate to meet the costs which must be incurred by efficiently and economically operated facilities. See 42 U.S.C. 1396(a)(13)(A). (S.F. 4). HCFA approved the January 1, 1988, Florida Medicaid Plan effective January 1, 1988. (S.F. 4). The Florida Medicaid Plan. Under the January 1, 1988, Florida Medicaid Plan, long-term care providers such as the Petitioners are reimbursed under a prospective reimbursement methodology. Rates are set in advance of the rate semester based on historical cost data trended forward for inflation with no retroactive adjustment to account for actual costs for a cost reporting period (as opposed to actual reimbursement for the same period). (S.F. 5). Florida long-term care providers are divided into four classes based on geographic location and size. (S.F. 5). Each provider's rate consists of four components: (1) the property cost component; (2) the operating cost component; (3) the patient care cost component; and (4) a return on equity or use allowance. (S.F. 5). Reimbursement ceilings for patient care and operating cost components are established for each of the four classes. Ceilings are effective semiannually on January 1 and July 1. A statewide ceiling for the property cost component applies to providers who are reimbursed on the basis of depreciation and interest. Section 4B of the January 1, 1988 Florida Medicaid Plan. (S.F. 6). Providers that do not receive depreciation and interest for their property costs are reimbursed under the Fair Rental Value Systems (hereinafter referred to as "FRVS"). Under FRVS, reimbursement is based on the acquisition costs of a capital asset including capital additions and improvements subsequent to acquisition. These acquisition costs are indexed forward to October 1, 1985 by a portion of the rate of increase in the Dodge Construction Index. Id. Subsection V.E.I.a. (S.F. 7). The January 1, 1988 Florida Medicaid Plan also requires that the FRVS component of a provider's rate be adjusted semiannually using the change in the Dodge Index for the most recent six month period published prior to the rate semester. Id. Subsection V.E.I.a. The January 1, 1988 Florida Medicaid Plan requires semiannual inflationary adjustments, to become effective on July 1 and January 1 of each year. (S.F. 8). The January 1, 1988 Florida Medicaid Plan established Petitioners' Medicaid rates during the period January 1, 1988 through December 31, 1989. (S.F. 9). The Legislature's Appropriation of Funds for Medicaid. The appropriation for Florida's fiscal year 1989-1990 from the Florida Legislature included funds to reimburse Medicaid long-term care facility providers for the fiscal year July 1, 1989 through June 30, 1990 in accordance with the January 1, 1988 Florida Medicaid Plan. (S.F. 12). Florida's Budget Cuts and The Department's Response. During the fiscal year ending June 30, 1990, Florida experienced a shortfall in general revenue collections, and then-Governor Bob Martinez certified that a deficit would occur in the Florida state budget. (S.F. 13). In order to deal with the budget deficit, the Department was asked to provide cost containment alternatives to the Administration Commission (consisting of the Governor and the cabinet) which the Department did. (S.F. 13). Among the alternatives recommended by the Department was an amendment to the current Florida Medicaid Plan which would maintain Medicaid reimbursement rates for long-term care facilities at their December 31, 1989 level. This alternative was advocated by the Department as the most appropriate and fair of all the alternatives presented by the Department. (S.F. 13). In effect, the Department suggested that the Florida Medicaid Plan be amended to eliminate those provisions of the Florida Medicaid Plan providing for semiannual adjustments to the Medicaid reimbursement rate. Exhibit 2 is a true, correct and complete copy of an Impact Statement prepared by the Department and submitted to the Administration Commission concerning the proposed rate freeze that was accepted by the Administration Commission. This document was not submitted to HCFA. (S.F. 13). In the Impact Statement provided to the Administration Commission on November 21, 1989, the Department concluded that Florida nursing homes would receive 4% less than their anticipated costs due to the proposed freeze: Nursing Home Care ($13,131,931 GR) - This proposal will not allow nursing home per diem rates to increase based on their projected cost increases. The Medicaid Program will be reimbursing nursing homes 4.0% less than their anticipated costs. This price level reduction will impact on 489 participating nursing homes. There is no basis upon which to project the impact this will have on our clients [sic] ability to access those services of the quality of care received. This was the only analysis conducted by the Department prior to January 1, 1990, of Florida nursing home anticipated costs compared to the rates nursing homes would receive under the proposed rate freeze. On November 21, 1989, the Administration Commission, under the procedure outlined in Section 216.221, Florida Statutes, accepted the Department's proposal effective December 1, 1989 and reduced the Department's budget accordingly. (S.F. 13). The budget reductions ordered by the Administration Commission were taken from the Department's general revenue appropriation effective January 1, 1990, through mandatory reserves, or a holdback, of appropriations. The impact on the Department was that it had less authority to spend funds. The rate freeze approved by the Administration Commission allowed changes in rates due to licensure rating changes pursuant to Section V.D. of the January 1, 1988 Florida Medicaid Plan. (S.F. 13). A letter from the Department to nursing home administrators in Florida, including the Petitioners, dated January 29, 1990, was sent to Florida facilities affected by the rate freeze. The Department stated in the January 29, 1990, letter (exhibit 5), that the rate freeze would remain in effect until monies were appropriated by the Florida Legislature to recalculate new rates and ceilings. (S.F. 17). Promulgation of Rules Implementing the Rate Freeze. In order to effectuate the freeze, the Department caused to be published in the Florida Administrative Weekly on December 22, 1989, notice of Emergency Rule 10CER89-21 (10C-7.0482) (hereinafter referred to as the "Emergency Rule"). See exhibit 3. (S.F. 14). The Emergency Rule amended the Department's rules by providing that Florida Medicaid reimbursement would be in accordance with the January 1, 1988 Florida Medicaid Plan as revised January 1, 1990. See exhibit 4. (S.F. 14). The January 1, 1990 modifications to the January 1, 1988 Florida Medicaid Plan were attached to the notice of the Emergency Rule and were incorporated therein. (S.F. 14). The effect of the Emergency Rule was to eliminate the provisions of the January 1, 1988 Florida Medicaid Plan providing for recalculation of reimbursement rates, which recalculation would have included an inflationary adjustment, for the Petitioners' per diem Medicaid rates for the period beginning January 1, 1990. The Emergency Rule had the effect of maintaining the Petitioners' per diem Medicaid rates at the level in effect on December 31, 1989, excluding changes based on licensure rating reclassifications. The Emergency Rule did not limit the rate freeze to the period prior to June 30, 1990, and did not specify the date or approximate date on which the rate freeze would end. (S.F. 14). Emergency rules, however, are only effective for ninety days in Florida. Although the public notice of the Emergency Rule did not specify the anticipated increase or decrease in annual expenditures, notice of the general impact of the Emergency Rule was provided. On February 2, 1990, the Department caused to be published in the Florida Administrative Weekly notice of an amendment to Rule 10C-7.0482, Florida Administrative Code (hereinafter referred to as the "Permanent Rule"). See exhibit 6. (S.F. 15). The Permanent Rule eliminated the recalculation of reimbursement rates, which recalculation would have included an inflationary adjustment for Petitioners' per diem Medicaid rates for the period beginning January 1, 1990. The Permanent Rule maintained the Petitioners' per diem Medicaid rates at the level in effect on December 31, 1989, excluding changes based on licensure rating reclassifications. (S.F. 15). The Permanent Rule did not limit the rate freeze to the period prior to June 30, 1990 or specify the date or approximate date on which the rate freeze would end. The "purpose and effect" section of the Permanent Rule stated that the rate freeze would be in effect until sufficient funds were appropriated by the Legislature to recalculate rates and ceilings for Medicaid providers. (S.F. 15). By letter date March 15, 1990 (exhibit 8), a "Notice of Change" was filed by the Department with the Joint Administrative Procedures Committee. The Notice of Change modified the effective date of the Permanent Rule from March 22, 1990 to March 26, 1990. The Notice of Change was published in the Florida Administrative Weekly on March 23, 1990. Exhibit 27. (S.F. 19). No other public notices, or emergency or permanent rules, were published by the Department subsequent to February 2, 1990, which would have affected the Petitioners' Medicaid rates for the period January 1, 1990 through June 30, 1990. (S.F. 16). There are no documents which indicate that the Department enacted the Emergency Rule or the Permanent Rule for reasons other than those stated in the public notices for the Emergency Rule and the Permanent Rule and the January 29, 1990, letter. (S.F. 18). The Department enacted the Emergency and Permanent Rules solely due to the budgetary cuts ordered by the Administration Commission. The preamble to the Emergency Rule stated "[b]ased on a recent decision made by the Governor and Florida Cabinet, Medicaid rates were frozen at the December 31, 1989 levels for all providers of these institutions." The preamble to the Emergency Rule also stated that "a shortfall in general revenue requires the state to reduce or eliminate payment for needed services to medicaid recipients." Neither the preamble to the Emergency Rule nor the Permanent Rule indicated that Florida nursing homes had received excess reimbursement in relation to their costs under the 1988 Medicaid Plan. There was, however, no Florida law which required any other reason for the Emergency Rule or the Permanent Rule be provided by the Department. In a previous filing in this matter, the Department stated: "[i]n response to a shortfall in general revenue collections. . . , the Administration Commission (composed of the Governor and the cabinet) ordered the Department to "freeze" rates at the December 31, 1989 level. The amendment was made effective by [the Emergency Rule and the Permanent Rule]." See also Florida Nursing Home Association v. Department of Health and Rehabilitative Services, 12 FALR at 667 ("The Emergency Rule simply carries out the reductions ordered by the Administration Commission on November 21, 1989"). On January 29, 1990, Gary J. Clarke, Assistant Secretary for Medicaid of the Department, wrote to Nursing Home Administrators, including Petitioners, and stated that the rate freeze was enacted due to a decision made by the Administration Commission: Due to a projected general revenue deficit of $280 million for the State of Florida for fiscal year ending June 30, 1990, the Administration Commission met on November 21, 1989, to determine the appropriate budget reductions for all state programs. In order to reduce the Medicaid budget for its portion of the [DHRS] required reductions, yet avoid gross disruption of services, the Commission required that Medicaid reimbursement rates and ceilings for nursing home providers be frozen at their December 31, 1989 levels, beginning with the new rate Semester on January 1, 1990. . . There are no documents which include a representation contrary to the above quoted portion of the January 29, 1990 letter that the Department enacted the Emergency Rule or Permanent Rule for reasons other than the budgetary cuts ordered by the Administration Commission. The January 29, 1990 letter from the Department also indicated that the length of the rate freeze was indefinite: This policy shall remain in effect until such time that monies are appropriated by the Florida legislature to recalculate new rates and ceilings. Impact of the Emergency Rule and Permanent Rule on the Petitioners. The Petitioners received an inflationary adjustment in their Medicaid per diem rates on July 1, 1989 in accordance with the terms of the January 1, 1988 Florida Medicaid Plan. The Petitioners did not receive an inflationary adjustment in their per diem rates which would have been due on January 1, 1990 under the January 1, 1988 Florida Medicaid Plan for the period January 1, 1990 through June 30, 1990. Instead, Petitioners' rates calculated effective January 1, 1990 used the same cost reports and inflation adjustment that had already been included in their July 1, 1989 rates. (S.F. 36). The fact that the Petitioners did not receive an inflationary adjustment in their per diem rates for the period January 1, 1990 through June 30, 1990, was because the Emergency Rule and the Permanent Rule eliminated the rate increase provisions of the January 1, 1988 Florida Medicaid Plan. Notification to HCFA of the Rate Freeze. On March 30, 1990, HCFA received a letter dated March 22, 1990, from the Secretary of the Department submitting for consideration "a Title XIX state plan amendment to our state plan." (S.F. 20). The Secretary of the Department stated the following in the letter: This amendment TN 90-8 revises the plan by freezing the reimbursement rates and ceilings of all nursing home providers at the rates of reimbursement for services rendered on December 31, 1989. . . . . The assurances required by 42 CFR 447.253 and proof of public notice are attached. Exhibit 9. Attached to the Secretary's March 22, 1990, letter was a letter dated March 29, 1990, which along with State Plan Amendment Transmittal Number ("TN") 90-08 and proof of public notice, constituted all the documentation submitted by the Department to HCFA prior to July 1, 1990 concerning the rate freeze. (S.F. 20). TN 90-08, as submitted by the Department to HCFA on March 29, 1990, proposed to modify the Florida Medicaid Plan, as the Department had provided for in the Emergency Rule and the Permanent Rule, to eliminate the recalculation of rates, which recalculation would have included an inflationary adjustment for Petitioners' per diem Medicaid rates for the period beginning January 1, 1990. TN 90-08 proposed to maintain the Petitioners' per diem Medicaid rates at the level in effect on December 31, 1989, excluding changes based on licensure rating reclassifications. TN 90-08, as submitted on March 29, 1990, did 12not limit the rate freeze to the period prior to June 30, 1990. (S.F. 21). In the March 29, 1990 letter to HCFA, the Department referenced a telephone survey in which it had compared Florida Medicaid per diem rates to the per diem rates paid to long-term care facilities along the state borders between Florida and Georgia, and Florida and Alabama, under the Georgia and Alabama Medicaid programs. The Department estimated that this telephone survey was performed during the time period December, 1989 through February, 1990. In conducting the Georgia and Alabama telephone survey, the Department did not determine whether Georgia's or Alabama's long-term care facilities per diem rates were reasonable and adequate to cover the costs of efficiently and economically operating Georgia or Alabama facilities, and the Department did not determine whether Georgia or Alabama Medicaid programs covered the same or similar costs as the Florida Medicaid program. A copy of the survey materials was submitted as exhibit 10. Exhibit 10 was not provided to HCFA. (S.F. 22). In the March 29, 1990 letter, the Department referenced an analysis in which it stated that it had compared the increase in an inflationary index from 1989 to 1990 to the increase in the Medicaid rates paid to Florida long-term care facilities from 1989 to 1990. This analysis was performed during the period January, February, or March 1990. These materials were not submitted to HCFA. (S.F.23). The Georgia and Alabama telephone survey, the inflation analysis, and that portion of the data in Exhibit 15 generated prior to March 29, 1990 by the Department relating to Florida long-term care facility historical costs and prospective per diem rates were the only reports, surveys, analyses or studies performed by the Department (as of March 29, 1990) to support its assurances to HCFA that its rates for the period beginning January 1, 1990 were reasonable and adequate to cover the costs of efficiently and economically operated facilities in order to provide care and services in conformity with applicable state and federal laws, regulations, and quality and safety standards. (S.F.23). TN 90-08 was submitted to HCFA during the calendar quarter to which the Florida Medicaid Plan amendment was to be effective. TN 90-08 was reviewed by HCFA and a memorandum dated April 30, 1990, was written and circulated within HCFA concerning the proposed amendment. The memorandum indicates what the proposed amendment proposes, states that the review was conducted in accordance with Federal requirements and lists the assurances the State had given. The memorandum concludes, however, that "[a]fter review of the State's assurances and related information, HCFA does not yet have a reasonable basis upon which to accept the State's assurance that the proposed rates meet the 'reasonable and adequate' statutory standard of section 1902(a)(13)(A) of the Social Security Act " By letter dated May 9, 1990, HCFA notified the Department that: . . . we find that we cannot approve [the Plan amendment] as submitted. We are exercising our rights under section 1915(f) of the Social Security Act to request additional information and clarification as discussed below: . . . . Although HCFA did not deny or reject the Florida Medicaid Plan amendment submitted by the Department in the May 9, 1990, letter, HCFA did indicate that it could not approve the proposed amendment as submitted. It was recognized in the May 9, 1990, HCFA letter, as it was in the April 30, 1990, memorandum that a state may use budgetary considerations as one factor in establishing the rates to be paid providers as long as the rates are reasonable and adequate. It was also recognized in the May 9, 1990, HCFA letter that "the fact that rates in surrounding States are comparable to Florida's rates provides no justification whatsoever that its rates are reasonable and adequate. Rather, the HRS must compare its proposed rates with the costs that Florida facilities must incur in providing care and services." In the May 9, 1990, HCFA letter it is noted that the Department noted in its March 29, 1990, letter that rates are to be recalculated for the period beginning July 1, 1990, but that inconsistent language is included elsewhere in its proposal. Therefore, HCFA recommended that the Plan amendment be revised to limit the freeze to the six month period beginning January 1, 1990. The May 9, 1990, HCFA letter indicates that processing of the amendment would cease until the additional information and clarification were provided to HCFA. It is readily apparent from HCFA's April 30, 1990, memorandum and its letter of May 9, 1990, that HCFA was well aware of the requirements for amending a state Medicaid plan and the requirements that states must meet in setting Medicaid rates. The April 30, 1990, memorandum and the May 9, 1990, letter indicate that the original proposal submitted by the Department did not meet those requirements without further information being provided. HCFA did not, however, reject the Department's proposal or make any determination as to whether the proposed freeze was appropriate. HCFA merely indicated that more information was necessary and gave the Department an opportunity to provide it. On May 20, 1991, the Department submitted a letter to HCFA in response to the May 9, 1990, HCFA letter limiting the rate freeze to the six month period prior to July 1, 1990, and submitted a revised TN 90-08 to HCFA which included this change. Exhibit 18. (S.F. 30). In the May 20, 1991, Department letter the Department also referenced a second inflationary analysis. This inflationary analysis was performed by the Department in March or April, 1991. The inflationary analysis along with data generated by the Department relating to Florida long-term care facility historical costs and prospective per diem rates (exhibit 15) were the only reports, surveys, analyses or studies performed by the Department to support its May 20, 1991 assurances to HCFA that its rates for the period beginning January 1, 1990 were reasonable and adequate to cover the costs of efficiently and economically operated facilities in order to provide care and services in conformity with applicable State and Federal laws, regulations, and quality and safety standards. Exhibit 19 is a true, correct and complete copy of the written materials prepared by the Department in performing the inflationary analysis referenced in the May 20, 1991 letter. These documents were not submitted to HCFA. (S.F. 31). HCFA'S Approval of the Plan Amendment. By letter dated July 2, 1991, HCFA notified the Department that the Florida Medicaid Plan amendment TN 90-08 was approved with an effective date of March 26, 1990. By letter dated September 16, 1991, the Department advised HCFA that, as stated in the March 29, 1990, letter, the originally requested effective date of March 26, 1990, was an inadvertent error. It was pointed out that the correct effective date was January 1, 1990. By letter dated October 3, 1991, HCFA notified the Department that HCFA had approved the amendment to the Florida Medicaid Plan effective January 1, 1990. Elimination of the Rate Freeze. Effective July 1, 1990 the Florida Medicaid Plan was amended to remove the language of the Emergency Rule and Permanent Rule added effective January 1, 1990 which froze rates to their December 31, 1989 level. (S.F. 37). On August 7, 1991, HCFA approved the subsequent amendment, TN 90-13, with an effective date of July 1, 1990. This subsequent Florida Medicaid Plan amendment calculated the July 1, 1990 long-term care facility Medicaid reimbursement rates using the same inflation adjustment which would have been used on July 1, 1990 had the January 1, 1990 amendment never been implemented. No reimbursement relative to the January 1, 1990 amendment, however, was made retroactively to long-term care facilities for the period January 1, 1990 through June 30, 1990. (S.F. 37).
