The Issue The issues are whether proposed and existing Florida Administrative Code rules, both numbered 59G-6.030, are valid exercises of delegated legislative authority.
Findings Of Fact The Petitioners are 120 hospitals--some not-for-profit, some for-profit, and some governmental--that are licensed under chapter 395, Florida Statutes, provide both inpatient and outpatient services, and participate in the Medicaid program. AHCA is the state agency authorized to make payments for services rendered to Medicaid patients. Before 2013, all Medicaid outpatient services were provided and paid fee-for-service. Under the fee-for-service model, hospitals submit claims to AHCA, and AHCA reimburses the hospitals based on the established rate. For many years, AHCA has set prospective Medicaid fee- for-service reimbursement rates for outpatient hospital services, either semi-annually or annually, based on the most recent complete and accurate cost reports submitted by each hospital; has re-published the Florida Title XIX Hospital Outpatient Reimbursement Plan (Outpatient Plan) that explained how the rates were determined; and has adopted the current Outpatient Plan by reference in rule 59G-6.030. In 2005, the Florida Legislature’s General Appropriations Act (GAA) stated that the funds appropriated for Medicaid outpatient hospital services reflected a cost savings of $16,796,807 “as a result of modifying the reimbursement methodology for outpatient hospital rates.” It instructed AHCA to “implement a recurring methodology in the Title XIX Outpatient Hospital Reimbursement Plan that may include, but is not limited to, the inflation factor, variable cost target, county rate ceiling or county ceiling target rate to achieve the cost savings.” AHCA responded by amending the Outpatient Plan to provide: “Effective July 1, 2005, a recurring rate reduction shall be established until an aggregate total estimated savings of $16,796,807 is achieved each year. This reduction is the Medicaid Trend Adjustment.” The amended Outpatient Plan was then adopted by reference in rule 59G-6.030, effective July 1, 2005. AHCA collaborated with the hospitals to determine how to accomplish the legislatively mandated reduction in a manner that would be fair to all the hospitals. It was decided to take the hospitals’ unaudited cost reports from the most recent complete fiscal year and the number of Medicaid occasions of service from the monthly report of AHCA’s Medicaid fiscal agent that corresponded to the hospitals’ fiscal years, and use an Excel spreadsheet program with a function called Goal Seek to calculate proportionate rate adjustments for each hospital to achieve the legislatively mandated aggregate savings. The resulting rate adjustments were incorporated in the hospital reimbursement rates, effective July 1, 2005. In 2006, there was no further Medicaid Trend Adjustment (MTA) reduction. However, in accordance with the instructions in the 2005 GAA, the 2005 MTA reduction of $16,796,807 was treated as a recurring reduction and was applied again in the 2006 Outpatient Plan, which again stated: “Effective July 1, 2005, a recurring rate reduction shall be established until an aggregate total estimated savings of $16,796,807 is achieved each year. This reduction is the Medicaid Trend Adjustment.” The 2006 Outpatient Plan also stated: “This recurring reduction, called the Medicaid Trend Adjustment, shall be applied proportionally to all rates on an annual basis.” It also came to be known as the first cut or cut 1. It again was applied by taking the hospitals’ most current unaudited cost reports and the corresponding occasions of service from the appropriate monthly report of the fiscal agent, and using the Excel spreadsheets and the Goal Seek function to calculate rate adjustments for each hospital. The cut 1 rate adjustments were incorporated in the hospital reimbursement rates, effective July 1, 2006. In 2007, the GAA stated that the funds appropriated for Medicaid outpatient hospital services were reduced by $17,211,796 “as a result of modifying the reimbursement for outpatient hospital rates, effective July 1, 2008.” This has been referred to as the second cut or cut 2. It instructed AHCA to “implement a recurring methodology in the Title XIX Outpatient Hospital Reimbursement Plan to achieve this reduction.” The 2008 Outpatient Plan again applied the first cut as a recurring reduction and stated that it was to be “applied proportionally to all rates on an annual basis.” It then made the second cut, which was to be “applied to achieve a recurring annual reduction of $17,211,796.” These cuts were again applied by taking the hospitals’ most current unaudited cost reports and the corresponding occasions of service from the appropriate monthly report of the fiscal agent, and using the Excel spreadsheets and the Goal Seek function to calculate rate adjustments for each hospital. The resulting rate adjustments were incorporated in the hospital reimbursement rates, effective July 1, 2008. This process was repeated in subsequent years. The third cut (cut 3) was in 2008; it was a $36,403,451 reduction. The fourth cut (cut 4) was in 2009, during a special session; it was a $19,384,437 reduction; however, per the GAA that made the fourth cut, it was not applied to the rates of certain children’s specialty hospitals, which were excluded from the reduction. In addition, using language similar to what AHCA had been using in the Outpatient Plans, the 2009 GAA stated: “The agency shall reduce individual hospital rates proportionately until the required savings are achieved.” The Legislature enacted cut 5 and cut 6 in 2009 and 2010. However, the GAAs stated that AHCA should not take these cuts if the unit costs before the cuts were equal to or less than the unit costs used in establishing the budget. AHCA determined that cuts 5 and 6 should not be taken. However, cuts 1 through 4 continued to be applied as recurring reductions, and rates were adjusted for cuts 1 through 4 in 2009 and 2010 in the same manner as before. In 2011, the GAA enacted cut 7; it was for $99,045,233 and was added to the previous cuts for all but certain children’s specialty and rural hospitals, which were excluded from the additional reduction. In setting the individual hospitals’ reimbursement rates, AHCA first applied cut 7 in the same manner as cuts 1 through 4. The result was a 16.5 percent rate adjustment for cut 7, which was much higher than for previous cuts. Some of the hospitals pointed this out to AHCA and to the Legislature and its staff. There was lots of discussion, and it was determined that the rate adjustment from cut 7 would be more like what the Legislature was expecting (about 12 percent), if budgeted occasions of service were used, instead of the number from the fiscal agent’s monthly report that corresponded to the most recent cost reports. AHCA agreed to change to budgeted fee-for- service occasions of service for cut 7, with the concurrence of the hospitals and the Legislature and its staff. The year 2011 was also the year the Legislature instituted what became known as the “unit cost cap.” In that year, the Legislature amended section 409.908, Florida Statutes, to provide: “The agency shall establish rates at a level that ensures no increase in statewide expenditures resulting from a change in unit costs effective July 1, 2011. Reimbursement rates shall be as provided in the General Appropriations Act.” § 409.908(23)(a), Fla. Stat. (2011). This part of the statute has not changed. The GAA that year elaborated: In establishing rates through the normal process, prior to including this reduction [cut 7], if the unit cost is equal to or less than the unit cost used in establishing the budget, then no additional reduction in rates is necessary. In establishing rates through the normal process, if the unit cost is greater than the unit cost used in establishing the budget, then rates shall be reduced by an amount required to achieve this reduction, but shall not be reduced below the unit cost used in establishing the budget. “Unit cost” was not defined by statute or GAA. To calculate what it was in 2011, AHCA divided the total dollar amount of Medicaid payments made to hospitals by AHCA by the number of Medicaid occasions of service for all hospitals. The result was $141.51. Since 2011, AHCA has applied the unit cost cap with reference to the 2011 unit cost of $141.51. Since then, AHCA has compared the 2011 unit cost to the current cost, calculated by dividing the total dollar amount of Medicaid payments made to all hospitals by AHCA by the number of Medicaid occasions of service for all hospitals, except in children’s and rural hospitals, to determine whether the unit cost cap would require a further rate reduction, after applying the MTA cuts. Using this comparison, the unit cost cap never has been exceeded, and no further rate adjustments ever have been required. It is not clear why AHCA excluded Medicaid occasions of service for children’s and rural hospitals from the unit cost calculations made after 2011. It could have been because those hospitals were excluded from cut 7 and cut 8. Cut 8 was enacted in 2012; it was for $49,078,485 and was added to the previous cuts for all but certain children’s specialty and rural hospitals, which were excluded from the additional reduction. In 2012, the Legislature specified in the GAA that budgeted occasions of service should be used in calculating the MTA reduction for inpatient hospitals. AHCA always treated inpatient and outpatient MTAs the same, and it viewed the specific legislative direction for the inpatient MTA as guidance and indicative of legislative intent that it should continue to use budgeted occasions of service for the outpatient cut 7 and should also use them for the outpatient cut 8. Again, the hospitals did not object since the result was a higher reimbursement rate. In 2014, the Florida Medicaid program began to transition Medicaid recipients from a fee-for-service model to a managed care model. Under the managed care model, AHCA pays a managed care organization (MCO) a capitation rate per patient. The MCOs negotiate contracts with hospitals to provide outpatient care at an agreed reimbursement rate per occasion of service. Since August 2014, the majority of Medicaid recipients has been receiving services through MCOs, rather than through fee-for-service. Currently, about 75 to 80 percent of Medicaid outpatient hospital occasions of service are provided through managed care In recognition of the shift to MCOs, the Legislature began to divide the Medicaid outpatient hospital reimbursement appropriation in the GAA between what AHCA reimburses directly to hospitals under the fee-for-service model and what it pays MCOs to provide those services under the MCO delivery system. This allocation of the budgets between fee-for-service and managed care necessarily accomplished a corresponding division of the recurring MTA reductions between the two delivery systems. The Legislature did not enact any statutes or GAAs requiring AHCA to change how it applies MTA reductions to determine fee-for-service outpatient reimbursement rate adjustments, or make any other changes in response to the transition to MCOs. There were no additional MTA reductions in 2015. The 2015 Outpatient Plan, which is incorporated in existing rule 59G- 6.030, applied the previous cuts as recurring reductions. The evidence was confusing as to whether cuts 7 and 8 were applied using the occasions of service in the fiscal agent’s monthly report corresponding to the hospitals’ most current unaudited cost reports, or using budgeted occasions of service. If the former, the numbers did not yet reflect much of the shift to the managed care model because of a time lag in producing cost reports, and the evidence suggested that the numbers were approximately the same as the budgeted occasions of service used previously. Whichever numbers were used, the resulting rate adjustments were incorporated in the hospitals’ reimbursement rates, effective July 1, 2015. Leading up to the 2016 legislative session, there was a legislative proposal to determine prospective Medicaid outpatient reimbursement rates using a completely new method called Enhanced Ambulatory Patient Groups (EAPGs). EAPGs would eliminate the need to depend on hospital cost reports and complicated calculations to determine the effects of MTA reductions on prospective hospital outpatient reimbursement rates, effective July 1, following the end of the legislative session each year. Hospitals, including some if not all of the Petitioners, asked the Legislature not to proceed with the proposed EAPG legislation until they had an opportunity to study it and provide input, and EAPGs were not enacted in 2016. However, section 409.905(6)(b) was amended, effective July 1, 2017, to require the switch to EAPGs. See note to § 409.905, Fla. Stat.; and ch. 2016-65, § 9, Laws of Fla. (2016). When it became apparent that EAPGs would not be in use for prospective reimbursement rates for fiscal year 2016/2017, AHCA basically repeated the 2015/2016 process, but adjusted the occasions of service used for calculating the hospitals’ rate reductions for cuts 7 and 8 by adding 14,000 occasions of service. At the end of July, AHCA published new rates effective July 1, 2016. When the new rates were published, they were challenged by some of the Petitioners under section 120.57(1), Florida Statutes. Citing section 409.908(1)(f)1., AHCA took the position that there was no jurisdiction and dismissed the petitions. That decision is on appeal to the First District Court of Appeal. The Petitioners also challenged the methodology used to calculate the new prospective reimbursement rates as a rule that was not adopted as required, and challenged the validity of existing rule 59G-6.030, which incorporated the 2015 Outpatient Plan by reference. These challenges became DOAH cases 16-6398RX through 16-6414RX. In response to DOAH cases 16-6398RX through 16-6414RX, AHCA adopted the 2016 Outpatient Plan by reference in proposed rule 59G-6.030. The 2016 Outpatient Plan provides more detail than the 2015 version. AHCA’s position is that the additional detail was provided to clarify the 2015 version. However, it changed the occasions of service used for calculating the hospitals’ rate reductions for cuts 7 and 8, as indicated in Finding 22, as well as some other substantive changes. The 2015 Outpatient Plan addressed the unit cost cap by stating: “Effective July 1, 2011, AHCA shall establish rates at a level that ensures no increase in statewide expenditures resulting from a change in unit costs.” The 2016 Outpatient Plan elaborates and specifies the calculation AHCA has been using, as stated in Finding 14. The 2015 Outpatient Plan provided that an individual hospital’s prospective reimbursement rate may be adjusted under certain circumstances, such as when AHCA makes an error in the calculation of the hospital’s unaudited rate. It also stated: “Any rate adjustment or denial of a rate adjustment by AHCA may be appealed by the provider in accordance with Rule 28-106, F.A.C., and section 120.57(1), F.S.” The 2016 Outpatient Plan deleted the appeal rights language from the existing rule. The effect of the existing and proposed rules on the Petitioners through their effect on managed care contract rates is debatable. Those rates do not have to be the same as the fee- for-service outpatient reimbursement rates, although they are influenced by the fee-for-service rates, and it is not uncommon for them to be stated as a percentage of the fee-for-service rates. By law, managed care contract rates cannot exceed 120 percent of the fee-for-service rates unless the MCO gets permission from AHCA, as provided in section 409.975(6). Currently, rates paid by MCOs for Medicaid hospital outpatient services average about 105 percent of the fee-for-service reimbursement rates. AHCA has indicated that it would not expect or like to see the contract rates much higher than that. It is not clear whether that still is AHCA’s position. If higher rates were negotiated, the impact of fee-for-services rate adjustments on managed care rates could be reduced or even eliminated. The effect of the existing and proposed rules on the Petitioners through their effect on how fee-for-service reimbursement rates are calculated is not disputed. With the transition to managed care, the effect is greater and clearly substantial. The recurring MTA reductions enacted by the Legislature through 2014, which total $224,015,229 (after taking into account $10,656,238 that was reinstated, and $4,068,064 that was added in consideration of trauma centers), are being spread over fewer fee-for-service occasions of service, especially for cuts 7 and 8, which significantly lowers the fee-for-service outpatient reimbursement rates calculated under the proposed rule. The Petitioners’ objections to the validity of the proposed and existing rules can be summarized as follows: a lack of legislative authority for recurring (i.e., cumulative) MTA reductions; a failure to adopt a fixed methodology to calculate individual hospital outpatient reimbursement rate adjustments resulting from MTA reductions; specifically, a failure to derive the number of fee-for-service occasions of service used in calculating individual hospital outpatient reimbursement rate adjustments in the same manner every year; conversely, a failure to increase the occasions of service used to calculate individual hospital outpatient reimbursement rate adjustments resulting from cuts 1 through 4; a failure of the unit cost cap in the existing rule to specify how it is applied; a failure of the unit cost cap in the proposed rule to compare the 2011 unit cost to the current cost, calculated by dividing the total dollar amount of Medicaid payments made to all hospitals by AHCA by the number of Medicaid occasions of service for all hospitals, including in children’s and rural hospitals; and proposed rule’s deletion of the language in the existing rule stating that a rate adjustment or denial can be appealed in accordance with Florida Administrative Code Rule 28-106 and section 120.57.
Findings Of Fact The legal issue presented by agreement to the Hearing Officer for a recommended order is whether the Hospital Cost Containment Board has the authority to amend or adjust a hospital's net revenue per adjusted admission when the budget of the hospital has triggered budget review pursuant to sections 395.509(2)(a) and (b), Fla. Stat. (1984). The petition in case number 85-2465H contains this legal issue with respect to a reduction of net revenue per adjusted admission of an additional $84. Neither of the petitions in case numbers 85-2296H and 85-2297H contain any allegations raising this legal issue. At the final hearing, the parties stipulated that these three cases should be consolidated for the final hearing, and a single recommended order should be entered concerning the stipulated legal issue.
Recommendation For these reasons, it is recommended in the final order to be entered in these cases, that the Hospital Cost Containment Board conclude that it has statutory authority to alter or adjust the net revenues per adjusted admission of a hospital budget if that budget has triggered review pursuant to either of the criteria found in sections 395.509(2)(a) or (b), Fla. Stat. (1984). DONE and ENTERED this 17th day of September, 1985, in Tallahassee, Florida. Hearings Hearings 1985. WILLIAM C. SHERRILL, JR. Hearing Officer Division of Administrative The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904)488-9675 FILED with the Clerk of the Division of Administrative this 17th day of September, COPIES FURNISHED: Curtis Ashley Billingsley, Esquire Hospital Cost Containment Board Woodcrest Office Park 325 John Knox Road, Suite 101 Tallahassee, Florida 32303 Ralph H. Haben, Esquire Robert S. Cohen, Esquire Post Office Box 669 Tallahassee, Florida 32302 Jack Shreve, Esquire Kevin O'Donnell, Esquire The Public Counsel 624 Crown Building 202 Blount Street Tallahassee, Florida 32301 Mr. James J. Bracher, Executive Director Hospital Cost Containment Board Woodcrest Office Park 325 John Knox Road Building L, Suite 101 Tallahassee, Florida 32303
Findings Of Fact Notice of intended agency action was received by the Petitioner, Halifax Medical Center (Halifax), by a letter from HRS dated February 6, 1989. A Petition for Formal Administrative Hearing was filed timely by Halifax with HRS on March 3, 1989 requesting an administrative hearing on the agency's computation of its disproportionate share distribution (DSD). (See Petition, paragraph four and Exhibit "4".) Halifax operates a hospital at 303 North Clyde Morris Boulevard, Daytona Beach, Florida. Halifax is a Florida Medicaid provider which serves Medicaid recipients and is eligible for reimbursement under the Florida Medicaid program's hospital reimbursement plan. (See Petition, paragraph two and Pre- Hearing Stipulation, paragraph five.) The Respondent, Department of Health and Rehabilitative Services (HRS), is a state agency designated to administer Florida's Medicaid program pursuant to Chapter 409.266, et. seq., Florida Statutes. The Medicaid program is governed by state and federal laws, rules, and regulations. HRS and HCCCB are designated to administer the provisions of Chapter 88-294, Laws of Florida, (See Petition, paragraph one and Pre-Hearing Stipulation, paragraph four and Chapter 88-294, Laws of Florida.) The HCCCB, a state agency, was the Respondent in DOAH case number 89- 1143H, which was consolidated with this case number. Based on the representation that HCCCB would recompute the disproportionate share distribution based upon data received from HRS, the HCCCB was dismissed and Case No. 89-1143H was closed by order of the Hearing Officer dated April 14, 1989. (Order 4/14/89) Pursuant to the Federal Omnibus Budget Reconciliation Act of 1986 ("OBRA"), HRS is required to provide disproportionate share distributions of money to Medicaid hospital providers who provide a higher percentage of the Medicaid and charity days of care. (See Pre-Hearing Stipulation, paragraph six) OBRA allows flexibility by the states in payment methodology, but requires that hospitals meet federal minimum requirements to receive payments. If a hospital did not qualify under state law, but did qualify under OBRA, the Florida Disproportionate Share Program included those hospitals under the federal minimum criteria to satisfy federal requirements. (See transcript, pages 58-62 and 245-247.) Chapter 88-294, Laws of Florida, sets forth the methodology for calculating the disproportionate share distribution amount for hospitals meeting the state's eligibility requirements. Chapter 88-294, Laws of Florida, became effective on July 1, 1988 and provided that the disproportionate share distribution be calculated using data required to have been reported by hospitals for other purposes on or before July 1, 1988. (See Prehearing Stipulation, paragraph nine.) In the previous year, Section 12, paragraph five of Chapter 87-92, Laws of Florida, making distributions to hospitals from the Public Medical Assistance Trust Fund, allowed a ninety (90) day grace period in which a hospital could amend data after the effective day of the act. As a result of the ninety (90) day grace period in the 1987 legislation, an inordinate number of delays and problems were experienced in calculating hospital distributions. (See transcript, pages 72-73, 180, 196-197, 217-218, and 232-235, and Exhibit "20," and Chapter 87-92, Laws of Florida, Section 12, paragraph five.) Representatives from the Florida House of Representatives, Senate, HRS, HCCCB, and hospital associations met on July 12, 1988 and all agreed on the procedures for implementing the disproportionate share distribution. An important issue was avoidance of the prior years' delays. (See transcript, pages 193-196, 228-232, 263-264 and Exhibit "18".) It was determined at the July 12, 1988 meeting that neither HRS nor HCCCB would accept amended disproportionate share data from hospitals after June 30, 1988. (See transcript, pages 193-196, and 230-232.) The disproportionate share distribution for 1988 was calculated for Halifax utilizing HCCCB data and the per diem rate established by HRS for Medicaid. (Prehearing Stipulation) HRS determined Halifax's Medicaid per diem rate on May 31, 1988, from data submitted by Halifax on January 15, 1988. (Prehearing Stipulation; T-35; E-4-5) This was the most recent period reported and Halifax received notice of the per diem rate shortly after May 31, 1988. The per diem rate was effective July 1, 1988. (Prehearing Stipulation; T-27, 29; E-2, 5, 6) No one knew when the January 15, 1988 cost report was filed that the Medicaid per diem rate would be used for calculating the disproportionate share distribution. (T-125) Hospitals, including Halifax, were required by law to submit the cost report which is an audited report. Halifax admits it knew there was a problem with the Medicaid rate by no later than mid-June, because its rate had dropped. (T-124; E-5) Halifax had time to correct the data and resubmit it prior to July 1, 1988. The error in the data submitted by Halifax resulted from its failure to report cost data on psychiatric care on Schedule D-1. Halifax's cost report contained the correct number of Medicaid days, but its psychiatric unit days were not reported separately from its routine hospital days on its Schedule D-1. Halifax had broken out its psychiatric data on the S-3 worksheet but the data was not included in Schedule D-1 for Medicaid purposes. (T-126-138, 149-153; E- 6) Individual cost items cannot be identified without the appropriate schedules. (See transcript, page 159.) It is the provider's responsibility to put the costs and days in the schedules. It is not HRS's responsibility to pull costs and days from one place in a cost report and put them where they belong. (See transcript, page 153.) Accordingly, Halifax received the lower per diem for routine hospital days rather than the higher per diem for psychiatric days. (See transcript, pages 151-152 and Exhibits "6" and "7", Schedules D-1.) It is understood in the hospital industry that Schedule D-1 is the proper place to report hospital costs. (See transcript, page 160.) Unlike Chapter 88-294, Laws of Florida, Rule 10C-7.0391, Florida Administrative Code, allows a hospital to submit an amended cost report up to three years after the Medicaid reimbursement rate was established. HRS does not interpret this rule to create an extension of time in which to file or amend reports for disproportionate share distribution purposes. (See transcript, pages 50-51, 89, 285-286, and 305). Halifax submitted an amended cost report to HRS on July 21, 1988. (T- 30, 124; E-3, 7) The amended cost report was used for retroactive adjustment of Medicaid per diem rates (T-43, 139; E-8), a fact known to hospitals. (Prehearing Stipulation; T-43; E-1) For purposes of Medicaid reimbursement, Halifax's amended cost report was utilized by HRS to establish a Medicaid per diem rate of $465.82 for Halifax on August 31, 1988. (Prehearing Stipulation; T-26; E-1) Although HRS recalculated the Medicaid per diem rate using data in Halifax's amended report, Halifax was notified in February of 1989 that its DSD was $322,586 based upon a per diem rate of $347.93 computed on the basis of the data contained in its original report filed in January 1988. (T-140) If Halifax's DSD were calculated using the amended Medicaid per diem rate based upon data filed on July 21, 1988, the DSD would be $431,597. 1/ (See transcript, page 76 and Exhibits "1" and "5".) Medicaid cost reports are not normally reported to the HCCCB. (T-182, 183). HRS did not transmit Medicaid per diem rates to the HCCCB until August or September of 1988, and HRS received the amended cost report from Halifax before it transmitted the data to HCCCB. HRS interpreted Chapter 88-294, Laws of Florida, to preclude use of data received from the hospitals after July 1, 1988 to compute DSD. (T-37, 80- 81, 232, 257-259, 308-310; E-10) The HRS interpretation of Chapter 88-294, Laws of Florida, was based upon the need for administrative simplicity, the HRS understanding of legislative intent to avoid the prior year's delays, and the HRS reading of the statute. (T-307) Its interpretation is entitled to great weight. Section 30, Chapter 88-294, Laws of Florida, had an effective date of July 1, 1988; was approved by the Governor July 6, 1988; and filed in the Office of the Secretary of State on July 6, 1988. It would have been impossible for HRS to have noticed the public of the preclusion of data filed after July 1, 1988 prior to the effective date of the Disproportionate Share Program. (See Chapter 88-294, Laws of Florida, and transcript, page 276.) HRS published notice of its revised payment methodology for inpatient hospital services in the Florida Administrative Weekly on September 23, 1988. The rule became effective January 10, 1989 and is codified at 10C-7.0391, Florida Administrative Code. The rule incorporates by reference the Florida Title XIX Inpatient Hospital Reimbursement Plan, and uses basically the same language as Chapter 88-294, Laws of Florida. (See transcript, pages 89-91 and Exhibit "9".) The rule was effective before the first disproportionate share payments were made on February 6, 1989. HCCCB used data developed after July 1, 1988 in its calculations of the disproportionate share distribution (T-165; E-10, 11, 12, 14, 15) The HCCCB audited Desoto Hospital and Lake Wales Hospital after July 1, 1988 and utilized the audit findings instead of the data reported by HRS to determine the disproportionate share distribution for those hospitals. (T-166, 169-170, 174; E-14) The HCCCB settled a dispute with Palm Springs Hospital in DOAH Case Number 89-0633H involving issues similar to those involved in this case by agreeing to utilize data provided after July 1, 1988. (T-175-176; E-15) HRS made two "technical" adjustments by redistributing payments after the disqualification of previously participating hospitals and to correct its own mistakes. (T-235-236; E-11) George E. Weems Hospital was one of four hospitals which were Medicaid providers without a Medicaid per diem rate and the only one which met the state's qualifications for disproportionate share payments. HRS accidentally left Weems Hospital off the distribution list; however, when this was discovered, HRS corrected the error and posted a Medicaid per diem rate for Weems Hospital of $484.71. Weems Hospital submitted no amended data after July 1, 1988. Weems Hospital made no error in reporting its costs to HRS. (See transcript, pages 81-82, 84, 97, 104, and 114.) HRS credited St. Mary's Hospital with the wrong Medicaid per diem rate. Prior to July 1, 1988, St. Mary's Hospital had been granted an interim rate to be effective July 1, 1988. By oversight, HRS did not utilize the interim rate in computing DSD. When this was discovered, HRS corrected the error after July 1, 1988. St. Mary's Hospital made no error in reporting its costs to HRS and submitted no amended reports. (See transcript, pages 82, 84, 97, 104, 114, and 164.) When HRS became aware of a divergence in policy of the two agencies, HRS and the HCCCB discussed using data submitted after July 1, 1988 to compute the DSD. (T-178) Based upon his understanding of a meeting held between the executive director of the HCCCB and the head of the HRS Medicaid program, a representative of the HCCCB testified that the HCCCB intended to reverse its position on the changes made for Desoto, Lake Wales, and Palm Springs Hospitals. (T-188, 198- 199, 201) HCCCB attempted to settle two cases involving disputes over disproportionate share distributions. These settlements would have involved using data developed after July 1, 1988. HCCCB has withdrawn or attempted to withdraw from these settlements. HCCCB's action in at least one of these cases is currently being appealed to the appellate court. (Official Notice of Pending Court Proceedings) HRS realizes that its position means that some hospitals will not receive as great a disproportionate share distribution as they would have received and other hospitals, such as Halifax, will receive less. HRS refuses to use corrections of submitted data in computing DSD. (T-219, 316) HRS has authority to direct payment of disproportionate share distributions. HRS plans to cancel or prevent payment of the check that would have gone to DeSoto Hospital and to cut a check for Lake Wales Hospital that has never been sent but which was based on their pre-HCCCB audited data received prior to July 1, 1988. (See transcript, page 303.) HRS has attempted to treat all qualifying hospitals equally and has uniformly applied the statutory cutoff date for the application of data used to compute each such hospital's disproportionate share. (See transcript, pages 304-305. HRS will propose to the Legislature that it be the sole agency to determine the disproportionate share distribution and have the authority to recover over payments discovered by audits. (T-265, 266, 319)
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is recommended that the petition be denied and the disproportionate share distribution to Halifax not be altered DONE and ORDERED this 19th day of July, 1989, in Tallahassee, Florida. STEPHEN F. DEAN Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 19th day of July, 1989.
The Issue The issue to be decided is the amount payable to Respondent in satisfaction of the Agency’s Medicaid lien from a settlement, judgment, or award received by Petitioner from a third-party under section 409.910(17), Florida Statutes.
Findings Of Fact On June 7, 2005, 14-year-old Michael Mobley attended a beach party. The party occurred on, near, or about the beach premises of a hotel. Michael became intoxicated through consumption of alcohol, and drowned in the Gulf of Mexico. He was revived but suffered brain damage, leaving him unable to communicate, ambulate, eat, toilet, or care for himself in any manner. Michael is now dependent on his father for all aspects of his daily life. As a result of this incident, Michael suffered both economic and noneconomic damages. These damages included, at least, physical and mental pain and suffering, past and future medical expenses, disability, impairment in earning capacity, and loss of quality and enjoyment of life. Michael’s parents also suffered damages. Michael’s father’s employer maintained a self-funded Employee Benefit Plan governed by the Employee Retirement Income Security Act (ERISA Plan). The Florida Statutes provide that Respondent, Agency for Health Care Administration (AHCA), is the Florida state agency authorized to administer Florida’s Medicaid program. § 409.902, Fla. Stat.1/ Michael’s past medical care related to his injury was provided through health benefits from the ERISA Plan administered through CIGNA HealthCare and Horizon Blue Cross Blue Shield of New Jersey, and the Florida Medicaid program. The health benefits extended to Michael through his father’s employer totaled $515,860.29. The Florida Medicaid program provided $111,943.89 in benefits. The combined amount of medical benefits Michael received as a result of his injury is $627,804.18. The ERISA Plan provided the employer (through its administrators CIGNA and Horizon Blue Cross Blue Shield), with subrogation and reimbursement rights which provided entitlement to reimbursement from any settlement of 100 percent of what the plan had paid. ACS Recovery Services represented CIGNA and Horizon Blue Cross Blue Shield, the administrators of the Employee Benefit Plan, and on behalf of these clients ACS Recovery Services asserted a $515,860.29 claim against any settlement Michael received. The Florida Statutes provide that Medicaid shall also be reimbursed for medical assistance that it has provided if resources of a liable third party become available. § 409.910(1), Fla. Stat. In 2006, Michael’s parents, David Mobley and Brenda Allerheiligen, brought a lawsuit in Okaloosa County Circuit Court to recover all of Michael’s damages. By letter dated May 24, 2011, Petitioner’s attorney sent AHCA a Letter of Representation requesting the amount of any Medicaid lien and the itemization of charges. The letter also invited AHCA to participate in litigation of the claim or in settlement negotiations. AHCA through ACS Recovery Services by letter of June 9, 2011, asserted a Medicaid lien against any settlement in the amount of $111,943.89. Testimony at hearing established that a conservative “pure value” of Michael’s economic damage claims in the case, before consideration of such factors as comparative fault, application of the alcohol statute, a defendant’s bankruptcy, and the novel theories of legal liability, was $15 million. A Joint Petition for Approval of Settlement was filed in the Circuit Court in and for Okaloosa County, Florida, on or about June 14, 2012. It stated that although the damages Michael received far exceeded the sum of $500,000, the parties had agreed to fully resolve the action for that amount in light of the parties’ respective assessments of the strengths and weaknesses of their cases. The Petition specifically alluded to pending bankruptcy proceedings, summary judgment dismissal of claims premised upon a duty to provide lifeguarding services, Plaintiff’s remaining theories of liability, available defenses, specifically including the statutory “alcohol defense” as interpreted by the Florida courts, and anticipated costs of trial and appeal. The Petition also stated: “Plaintiff’s claim for past medical expenses related to the incident total $627,804.18. This claim consists of $515,860.29 paid by a self-funded ERISA plan and $111,943.89 paid by Medicaid.” As an attached exhibit, the Petition incorporated a Distribution Sheet/Closing Statement which allocated the $500,000 total recovery among the categories of attorneys’ fees, costs, outside attorneys’ fees, lien/subrogation/medical expenses, and net proceeds to client. The Distribution Sheet allocated $140,717.54 to “lien/subrogation/medical expenses,” subdivided into $120,000.00 to Blue Cross Blue Shield of Florida/CIGNA and $20,717.54 to Medicaid Lien. The proposed settlement did not further describe the $331,365.65 amount identified as “net proceeds to client,” or allocate that amount among distinct claims or categories of damages, such as physical or mental pain and suffering, future medical costs discounted to present value, disability, impairment in earning capacity, or loss of quality and enjoyment of life. Under the Joint Petition for Approval of Settlement, most of the total recovery thus remains uncategorized as to the type of damages it represents. The Joint Petition for Approval of Settlement was submitted on behalf of the Defendants and Plaintiffs in the lawsuit, including Michael Mobley, Petitioner here. Respondent did not participate in settlement negotiations or join in the Release, and no one represented its interests in the negotiations. The Agency has not otherwise executed a release of the lien. A Release was signed by the Plaintiffs contingent upon court approval of the Petition for Approval of Settlement. The court approved the settlement, with the exception of the Medicaid lien, pending an administrative determination of the amount of the lien to be paid. This $500,000 settlement is the only settlement received and is the subject of AHCA’s claim lien. In regard to the $500,000 settlement: Michael’s parents, Brenda Allerheiligen and David Mobley waived any claim to the settlement funds in compensation for their individual claims associated with their son’s injuries; The law firm of Levin, Papantonio, Mitchell, Rafferty & Proctor, P.A., agreed to waive its fees associated with its representation of Michael and his parents; The law firm of Levin, Papantonio, Mitchell, Rafferty & Proctor, P.A., agreed to reduce its reimbursement of the $60,541.22 in costs it advanced in the litigation of the case by 75% and accept $15,135.31 in full payment of its advanced costs; and ACS Recovery Services on behalf of CIGNA and Horizon Blue Cross Blue Shield agreed to reduce its $515,860.29 ERISA reimbursement claim asserted against the settlement and accept $120,000 in satisfaction of its $515,860.29 claim. AHCA is seeking reimbursement of $111,943.89 from the $500,000 settlement in satisfaction of its $111,943.89 Medicaid lien. AHCA correctly computed the lien amount pursuant to statutory formula. Deducting 25 percent for attorney’s fees and $60,541.22 taxable costs from the $500,000.00 recovery leaves a sum of $314,458.78, half of which is $157,229.39. In this case, application of the formula therefore results in a statutory lien amount of $111.943.89, the amount actually paid. § 409.910(17), Fla. Stat. The settlement agreement allocated $120,000.00 to be paid to the ERISA plan in partial reimbursement of the $515,860.29 it had paid for medical expenses. This amount must be added to the amount of $20,717.54 allocated for other medical expenses paid by Medicaid, to reflect a total amount of $140,717.54 allocated for past medical expenses in the settlement. The $500,000 total recovery represents approximately 3.3 percent of the $15 million total economic damages. The $20,717.54 allocated to “Medicaid Lien” in the distribution sheet of the settlement represents approximately 3.3 percent of the $627,804.18 of total past medical expenses. The sum of $3,694.15 represents approximately 3.3 percent of the $111,943.89 in medical costs paid by Medicaid. The Petitioner has deposited the full Medicaid lien amount in an interest-bearing account for the benefit of AHCA pending an administrative determination of AHCA’S rights. The parties have stipulated that this constitutes “final agency action” for purposes of chapter 120, pursuant to section 409.910(17). Petitioner filed his Petition on December 13, 2013, within 21 days after the Medicaid lien amount was deposited in an interest-bearing account for the benefit of AHCA. While the evidence presented as to the settlement agreement was not sufficient to show the full amount allocated to medical expenses, the evidence does show that the total recovery includes at least $140,717.54 allocated as reimbursement for past medical expenses, which was to be divided unevenly between the ERISA plan and Medicaid. Petitioner failed to prove by clear and convincing evidence that the statutory lien amount of $111,943.89 exceeds the amount actually recovered in the settlement for medical expenses.
The Issue The issue is whether Petitioner overpaid Respondent Medicaid funds, for which Section 409.913(10), Florida Statutes (2002), authorizes Petitioner to seek repayment from Respondent.
Findings Of Fact During 1998, Respondent was an authorized Medicaid provider, pursuant to Medicaid provider number 105425200, and was a party to a valid Medicaid Provider Agreement with Petitioner. Respondent filed claims with Petitioner for payment, under the Medicaid program, for the goods and services that are the subject of the audit described below, and Petitioner paid Respondent for these claims. The audit period in this case is 1998. During 1998, Respondent submitted to Petitioner 36,257 claims for nearly 5.5 million units of over one thousand types of drugs. These claims totaled $3,075,449.88, which Petitioner paid Respondent. On June 2, 1999, Petitioner sent a letter to Respondent informing it of a review of its pharmacy claims for 1998. The letter requests documentation of all purchases of 12 named drugs for 1998 and documentation of all credits for these drugs during the same period. The letter states that acceptable documentation includes itemized wholesaler sales history reports, itemized manufacturer sales history reports, itemized invoices, and credit return receipts. By letter dated June 5, 1999, Respondent provided the requested information. By letter dated June 23, 2000, Petitioner advised Respondent that it had examined the paid Medicaid claims for 1998 and the acquisition documentation that Respondent had provided in June 1999. The letter states: "You have failed to provide adequate documentation to the effect that the available quantity of certain drugs of given strength was as great as the quantity of those drugs billed to and reimbursed by Medicaid.” Thus, Petitioner made a "provisional" determination that it had overpaid Respondent $1,092,205.32. The letter invites Respondent to provide additional information to reduce the overpayment determination. The June 23 letter contains an Overpayment Attachment that lists ten of the twelve drugs for which Petitioner had sought documentation in its earlier letter. For each of these ten drugs, the Overpayment Attachment lists the generic code, number of units for which Medicaid paid, the total amount of Medicaid payments, the total units documented by Respondent to have been available during the relevant period, and the number of units for which Respondent provided no availability documentation. The Overpayment Attachment also calculates the amount of Medicaid payments attributable to the unavailable units and the total overpayment, which is $1,092,205.32. The overpayment calculations described in the preceding paragraph assume that all available units of the audited drugs were sold to Medicaid patients. The effect of this improbable scenario reduces the amount of the overpayment. The overpayment calculations attempt no extrapolation of overpayments on the over 10,000 other drugs for which Respondent received Medicaid payments during 1998. The effect of limiting the overpayment calculation to the ten listed drugs reduces the amount of the overpayment. However, the ten listed drugs are the drugs that generated the most Medicaid payments to Respondent and account for over one-third of the total Medicaid payments during the relevant period. Respondent provided additional information to Petitioner on August 30 and November 3, 2000. However, after examining the information, Petitioner advised Respondent, by letter dated April 8, 2002, that its final determination was that Respondent owed $1,096,489.77 due to its receipt of Medicaid overpayments. The overpayment increased by over $4000 due to the determination that Respondent's records documented 1000 fewer available units of two dosages of Risperdone than Petitioner had previously determined.
Recommendation It is RECOMMENDED that the Agency for Health Care Administration enter a final order directing Respondent to pay Petitioner $1,096,489.77, plus interest, to repay overpayments that it received from the Medicaid program for the sale of drugs in 1998. DONE AND ENTERED this 3rd day of November, 2003, in Tallahassee, Leon County, Florida. S ROBERT E. MEALE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 3rd day of November, 2003. COPIES FURNISHED: Rhonda M. Medows, M.D., Secretary Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building, Suite 3116 Tallahassee, Florida 32308 Valda Clark Christian, General Counsel Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building, Suite 3431 Tallahassee, Florida 32308 Grant P. Dearborn Assistant General Counsel Building 3, Mail Stop 3 2727 Mahan Drive Tallahassee, Florida 32308-5407 Jose M. Herrera Jose M. Herrera, P.A. 1401 Ponce de Leon Boulevard Suite 200 Coral Gables, Florida 33134
