The Issue Whether Petitioners, as members of the Florida Patient's Compensation Fund, are liable for additional assessments for Fund Years 1980-81 and 1981-82, as set forth in the Notice of Assessment filed on April 22, 1985. This proceeding arose as a result of petitions filed by two groups of hospitals contesting a Notice of Assessment issued by the Department of Insurance on April 22, 1985, based upon the certification by the Board of Governors of the Florida Patient's Compensation Fund to the Insurance Commissioner of a deficiency in the amount of money available to pay claims for the 1980-81 and 1981-82 fiscal Fund years. The proposed assessment seeks payment of the alleged deficiency in the total amount of $40,480,556.00 from health care providers who were members of the Fund during the Fund years in question, pursuant to Section 768.54, Florida Statutes. By Order, dated June 11, 1985, the two cases were consolidated into one proceeding, and the Florida Patient's Compensation Fund was granted intervention. Petitioners originally consisted of Southeast Volusia Hospital District and 58 other hospitals (Case No. 85-1650), and Tallahassee Memorial Regional Medical Center and 39 other hospitals (Case No. 85-1664). However, prior to final hearing, a majority of the hospitals from both groups voluntarily dismissed or otherwise withdrew their claims for relief in the proceeding. By Notice of Joinder, dated July 30, 1985, American Hospital, Northridge General Hospital and Pan American Hospital abandoned their claims in Case No. 85- 1650 and adopted the Amended Petition in Case No. 85-1664. As a result, the only remaining party of record in Case No. 85-1650 was St. Petersburg Osteopathic Hospital, Inc. which by Order, dated August 13, 1985, was ordered to show cause why it should not be dismissed as a party for failing to advise the Hearing Officer as to its status pursuant to Order dated July 12, 1985. No response to the Order to Show Cause having been received, it will be recommended herein that St. Petersburg osteopathic Hospital Inc. be dismissed as a party in Case No. 85-1650. Further, inasmuch as there are no longer any parties to that case, it will also be recommended for dismissal herein. By Prehearing Conference Order, dated July 11, 1985, Case No. 85-1664 was restyled to reflect Petitioners as Duval County Hospital Authority, et al. The parties remaining in Case No. 85-1664 at time of hearing were American Hospital of Miami, Inc., Duval County Hospital Authority, Gateway Community Hospital, Hialeah Hospital, Northshore Medical Center, Inc., Northridge General Hospital, Inc., Pan American Hospital, and St. Joseph's Hospital. By Prehearing Orders, dated July 11 and July 29, 1985, it was determined that questions concerning the setting or adequacy of base fees or additional fees, the statutory "cap" on physician assessments! the statutory cumulative "cap" on maintenance of the Fund per fiscal year, and the effect of payment limitations placed on the Fund by statute, were not properly at issue in this proceeding. However, one issue presented in the Amended Petition in Case No. 85-1664 as to whether the Fund has statutory authority to estimate reserves as a basis for an assessment was deemed to be an issue within the scope of this proceeding. The parties entered into a Prehearing Stipulation (Joint Exhibit 1), which included certain factual matters, subject to relevance, and the unresolved question of law as to whether the Fund and Department may include reserves on known claims other than those resolved by settlement or verdict in calculating the amount needed for assessments. At the final hearing, the parties stipulated that the Fund certification includes full credit for all previously noticed assessments, whether collected or not. They further stipulated as to the expertise of Charles Portero in claims handling and reserving practices. The parties also stipulated that there was no issue of fact as to the reasonableness of any individual claim reserve existing as of January 31, 1985, or included in the certification, except as to the Von Stetina claim. Testimony of Charles Portero concerning the Von Stetina claim was made confidential and the transcript of such testimony was extracted and submitted under seal pursuant to order of* *NOTE: Page 4 of the Recommended Order is omitted from the document on file with DOAH and, therefore, is not included in this research database. amount of the projected excess or insufficiency to the Insurance Commissioner with a request that he levy an assessment against Fund participants for that fiscal year. Petitioner hospitals were members of the Fund during one or more of Fund years 1980-81 and 1981-82 Each month, the Administrative Manager of the Fund follows a prescribed procedure to determine if an assessment is required for a particular Fund year, utilizing what is termed a "retrospective rating plan." The plan provides that assessments will not be levied in any year until the cash available for paying claims in that membership year is down to 50 percent of the loss and expense reserves for all known losses. It further provides that the amount should be sufficient to create enough cash flow to pay known reserved claims for the year showing such deficit. In reviewing the Fund's monthly financial report of January 1, 1985, it was determined that a sufficient deficit existed to warrant the levy of an assessment. Thereafter, an outside audit of the Fund accounts was conducted and presented to the Fund Board for Certification. On March 25, 1985, the Florida Patient's Compensation Fund certified a deficiency to the Department in the following amounts: 1980-81 Membership Year $14,866,718.00 1981-82 Membership Year 25,613,838.00 TOTAL $40,480,556.00 This certification was authorized by the Board of Governors of the Florida Compensation Fund on March 19, 1985. An audit substantiating the need for the assessment was performed by Catledge, Sanders and Sanders, certified public accountants. On April 22, 1985, the Department of Insurance issued a Notice of Assessment for Fund years 1980-81 and 1981-82. Notice was published in Volume II, No. 8 at page 1907 of the Florida Administrative Weekly on May 3, 1985. The Notice of Assessment announced the Department's intent to levy and authorize the Fund to collect an assessment in the amount certified by the Fund ($40,480,556.00). The Notice of Assessment further provided that the assessment be divided among the various classes of health care providers for each year as follows: (i) Physicians and Surgeons 1980-81 1981-8 Class 1 0 0 Class 2 0 0 Class 3 0 0 (ii) Hospitals $14,754,672 $25,388,773 (iii) HMO 35,621 161,102 Ambulatory Surgical Centers 76,425 63,963 Professional Associations 0 0 The Department computed the portion of the assessments to be paid by the different classes of health care providers for all years in question based upon the "indicated rate method," modified to all5w for the statutory proscription against assessing certain health care providers more than "an amount equal to the fees originally paid by such health care provider." This is the same method utilized in five previous assessment proceedings and specifically approved by the Florida Supreme Court in Department of Insurance v. Southeast Volusia Hospital District, 438 So. 2d 815, 821 (Fla. 1983). The appropriateness of the procedure has not been placed at issue in this proceeding. The amounts of the assessments sought by the Fund, and described in the Notice of Assessment, were calculated by the Fund by using the following formula: Total fees paid for the Fund year + Investment Income attributable to the Fund year + Amounts previously noticed as assessments Expenses allocated to that Fund year Amount paid on claims for that Fund year Amount reserved for all known claims for that Fund year The Fund used the same procedure calculating the amount of this assessment as it used in the first five assessments. The Department used the same procedure and methodology (indicated rate method) in allocating the assessment among the various classes as it used in the first five assessments. The amount of the assessment is based on the amount needed to pay known claims. This amount needed to pay known claims includes the amount reserved as the estimated loss and expense payments. The Fund follows standard industry reserving practices, as modified in several respects by its particular needs and procedures. Each claim is assigned to a claims supervisor who obtains information concerning the claims incident from the primary insurance carrier. The initial reserve on a claim is based on a variety of factors, including the type of injury, potential damages, liability considerations, geographic location, and the particular attorney for the claimant. After a determination that a reserve is needed on the file, the claims supervisor makes an initial determination of the amount which is referred to the claims manager for approval. Final approval of the posted reserve lies in the hands of the Claims Committee of the Fund. The figure is usually fixed at a sum for which it is believed that the claim could be settled and the potential liability arising from a jury verdict. The necessity of obtaining approval of the Claims Committee for the initial reserve and any subsequent changes creates a certain amount of delay in obtaining such decisions. Changes may be effected in the reserve when injuries are found to be greater than anticipated, or because of the discovery of additional facts affecting potential liability. It is not unusual for a particular claim to be submitted three or four times to the Claims Committee before it is settled.
Findings Of Fact The following Findings of Fact are based on the evidence presented at the hearing: The parties stipulated to the reasonableness of all established claim reserves reflected in the current assessment sought by the Fund. However, Petitioners questioned the reasonableness of the Fund reserve on the Von Stetina claim which had been included in a previous assessment. Although it is questionable as to whether the adequacy of such a prior reserve should be addressed in a proceeding contesting a subsequent assessment, it is clear that the determination of a deficit necessarily involves deductions or credits for prior reserves in determining a current deficit. In any event, the Von Stetina reserve was established according to the standards practices of the Fund, and no evidence was presented by Petitioners to show that it was unreasonable or otherwise incorrect either on January 31, 1985, when it was determined that a sufficient deficit existed to warrant the levy of an assessment, or at the present time. The Von Stetina case is presently pending in the judicial process and, accordingly, there is no basis at the present time to reduce the previously established reserve. (Stipulation, Testimony of Portero) As heretofore found, the Fund includes a "claim" as a basis for an assessment as soon as a reserve for the claim is established. Petitioners presented the testimony of an accountant who expressed the opinion that the term "claim" as used in pertinent statutes should be restricted to final judgments or settlements against a health care provider in excess of the provider's primary coverage. This "cash basis" methodology would require the entry of a final judgment or settlement before the claim could be considered in determining whether a deficit exists for any particular Fund year. On the other hand, expert testimony from the Fund's Claims Manager shows that the definition of "claim" as used by the Fund is basically in accordance with the generally accepted meaning and usage of that term by the insurance industry. The reserving practices of the Fund are found to constitute a reasonable basis for arriving at the projected amounts required to meet the claims made against the Fund account for a particular fiscal year. (Testimony of Cherry,Portero) It is further found that the present assessment was prepared in accordance with standard procedures, that the amounts proposed to be levied as an assessment for each Fund year in question represent a deficiency in the Fund account for such years, and that the proposed allocations of such amounts among the specified health care providers are appropriate. (Respondent's Exhibits 1-7, Joint Exhibit 1- Stipulation, Testimony of Portero)
Recommendation In view of the foregoing, it is RECOMMENDED that a final order be issued by the Department of Insurance dismissing Case No. 85-1650, and levying assessments in accordance with the Notice of Assessment, dated April 22, 1985, for the Fund years specified therein. DONE and ENTERED this 15th day of October, 1985, in Tallahassee, Florida. THOMAS C. OLDHAM Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 Filed with the Clerk of the Division of Administrative Hearings this 15th day of October, 1985. APPENDIX PETITIONERS' PROPOSED FINDINGS OF FACT Paragraphs 1-7: Adopted by Stipulation (Joint Exhibit 1) in Findings of Fact 1-3, 5, 8. Paragraphs 8-10: These are conclusions of law and are therefore rejected as not being Proposed Findings of Fact. See Conclusions of Law in Recommended Order. Paragraph 11: Rejected as unsupported by the evidence. See Finding of Fact 10. Paragraph 12: Adopted in Finding of Fact 8. Paragraph 13: First sentence rejected as unsupported by evidence. Remainder adopted in Finding of Fact 10. Paragraph 14: Rejected as unsupported by the Evidence. (Confidential Portion) Paragraphs 1-6: Irrelevant and unnecessary except as set forth in Findings of Fact 9. RESPONDENT'S PROPOSED FINDINGS OF FACT Paragraphs 1, 3-10: Adopted in Findings of Fact 1-8. Paragraph 2: Rejected as Conclusion of Law rather than Finding of Fact. Paragraphs 11 & 12: Substantially adopted in Findings of Fact 9 Copies furnished: Honorable William Gunter Insurance Commissioner The Capitol Tallahassee, Florida 32301 William C. Owen and W. Douglas Hall, Esquires Carlton, Fields, Ward, Emmanuel, Smith, and Cutler Post Office Drawer 190 Tallahassee, Florida 32301 David A. Yon, Esquire Department of Insurance 413-B Larson Building Tallahassee, Florida 32301 Clay McGonagill 241 East Virginia Street Tallahassee, Florida 32301 St. Petersburg Osteopathic Hospital, Inc. 401 15th Street, North St. Petersburg, Florida Information Copy to Neil H. Butler, Cathi C. O'Halloran and Ben Wilkinson, Esquires, Pennington, Wilkinson, Dunlap, Butler & Gautier Post Office Box 13527 Tallahassee, Florida 32317-3527
The Issue The issues in this case are (1) whether the methodology for grouping hospitals adopted by the HCCB pursuant to Sections 4D-1.03, 4D-1.12(1) and 4D-1.12(2), F.A.C., constitutes an invalid exercise of delegated legislative authority as being arbitrary or capricious and whether the gross revenue per adjusted admission screen should be adjusted by the geographic price level index adjustment factor? Mercy has also raised an issue as to whether the grouping methodology is violative of constitutional guarantees of administrative equal protection and due process. This issue, however, is beyond the jurisdiction of the Division of Administrative Hearings.
Findings Of Fact As a part of its responsibilities, the HCCB is required to specify a uniform system of financial reporting for Florida hospitals. Section 395.507(1), Florida Statutes (1984 Suppl.). So that meaningful comparisons of data reported can be made, the HCCB is required by Section 395.507(2), Florida Statutes (1984 Suppl.), to provide a method of grouping hospitals. Pursuant to Section 395.509(1), Florida Statutes (1984 Suppl.), every Florida hospital is required to file a budget with the HCCB for approval. Section 395.509(2), Florida Statutes (1984 Suppl.), requires that the budgets of certain hospitals be automatically approved based upon a comparison of the gross revenue per adjusted admission of hospitals within groups established pursuant to Section 395.509(4)(a), Florida Statutes (1984 Suppl.). The language of Section 395.509(4)(a), Florida Statutes (1984 Suppl.), which requires the HCCB to establish a method of grouping hospitals, is identical to the language of Section 395.507(2), Florida Statutes (1984 Suppl.). The grouping methodology required by Sections 395.507(2) and 395.509(4)(a), Florida Statutes (1984 Suppl.), is included in Chapter V, Section B of the Hospital Uniform Reporting System Manual (hereinafter referred to as the "Manual"). This methodology has been incorporated by reference in Sections 4D-1.03 and 4D- 1.12(1) and (2), F.A.C., as the method of grouping hospitals for purposes of the uniform system of financial reporting under Section 395.507, Florida Statutes (1984 Suppl.), and the comparison of gross revenue per adjusted admission for purposes of budget review under Section 395.509, Florida Statutes (1984 Suppl.). After hospitals are grouped, Chapter V, Section C of the Manual provides that the screens used to identify hospitals subject to further review are to be adjusted by adjustment factors. Two adjustment factors are provided; one is a geographic price level index adjustment factor. Mercy is a not-for-profit corporation which operates a general acute care hospital with 550 licensed beds located in Dade County, Florida. Based upon the application of the HCCB's grouping methodology as contained in Chapter V, Section B of the Manual, Mercy was assigned to group 9. Mercy was notified of its assignment by a memorandum dated October 10, 1984. Mercy challenged its group assignment by letter dated November 13, 1984. In its letter, Mercy challenged the grouping methodology used by the HCCB and requested a "more relevant and objective method of establishing the weights utilized in the grouping methodology . . . be developed." Further, Mercy requested that "new weights be applied and that the groups be reformulated," and that "the screening value, Gross Revenue per Adjusted Admission, be adjusted for geographic influences prior to ranking, as has been done in previous budget reviews." Mercy presented its reassignment request before the HCCB on December 13-14, 1984. The HCCB orally rejected Mercy's request. By memorandum dated December 19, 1984, the HCCB denied in writing mercy's request for reassignment. Whether Mercy should be reassigned to a reformulated group depends upon whether Mercy's challenge to Sections 4D-1.03 and 4D-1.12(1) and (2), F.A.C. is successful. If that challenge is not successful, the grouping methodology was properly applied to Mercy. The Final Order issued simultaneously with this Recommended Order holds that the grouping methodology is not arbitrary and capricious and therefore, the HCCB's adoption of Sections 4D-1.03 and 4D-1.12(1) and (2), F.A.C., does not constitute an invalid exercise of delegated legislature authority. Mercy's assignment to group 9 was therefore proper. Based upon the evidence presented at the hearing, it does not appear that the point at which the geographic price level index adjustment factor is to be applied to Mercy has been reached. Despite the fact that the evidence shows that the HCCB has decided not to apply this adjustment factor, even though it is specifically provided for in the HCCB's own Manual, the HCCB has not yet failed to do so in Mercy's case. Therefore, the question of whether the geographic price level index adjustment factor should be applied to Mercy's 1985 budget is premature.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the request for reassignment to a reformulated hospital group and the request to adjust the gross revenue per adjusted admission screen for the geographic price level index adjustment factor be denied. DONE and ENTERED this, 28th day of June, 1985, in Tallahassee, Florida. LARRY J. SARTIN 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 28th day of June, 1985. COPIES FURNISHED: John H. Parker, Jr., Esquire PARKER, HUDSON, PAINER DOBBS & KELLY 1200 Carnegie Bldg. 133 Carnegie Way Atlanta, Georgia 30303 James J. Bracher Executive Director Hospital Cost Containment Board Woodcrest Office Park 325 John Knox Road, Building L, Suite 101 Tallahassee, Florida 32303 Douglas A. Mang, Esquire Charles T. Collette, Esquire MANG & STOWELL, P.A. P.O. Box 1019 Tallahassee, Florida 32302 Robert A. Weiss, Esquire PARKER, HUDSON, RAINER, DOBBS & KELLY The Perkins House, Suite 101 118 N. Gadsden Street Tallahassee. Florida 32301
The Issue Whether the Respondent may reject a budget letter for The Retreat's 1990 fiscal year and require The Retreat to file a detailed budget pursuant to a non- rule policy of the Respondent?
Findings Of Fact 1. The parties stipulated to the following facts: The Retreat is a 100 bed short-term psychiatric specialty and substance abuse hospital located at 555 S.W. 148th Avenue, Sunrise, Broward County, Florida. The Retreat admitted its first patient on September 12, 1988. The Retreat operates on a fiscal year from September 1, through August Therefore, The Retreat's 1989 fiscal year was for the period beginning when The Retreat opened on September 12, 1988, through August 31, 1989. The Retreat filed its 1989 budget with the Respondent on June 3, 1988. The Retreat's 1989 budget was approved by the Respondent on August 25, 1988, with an approved gross revenue per adjusted admission (hereinafter referred to as "GRAA"), of $20,323.00, and a net revenue per adjusted admission (hereinafter referred to as "NRAA"), of $17,973.00. The Retreat's 1990 fiscal year is from September 1, 1989, through August 31, 1990. Pursuant to Section 407.50(2)(a), Florida Statutes (1988 Supp.), The Retreat submitted a budget letter described in Section 407.50(2)(a), Florida Statutes, to the Respondent on May 24, 1989, for its 1990 fiscal year. The budget letter submitted by The Retreat certified that its FY 1990 maximum allowable rate of increase in GRAA over its budgeted GRAA in FY 1989 would be 7.8% and that its GRAA would not exceed $21,908.00 in FY 1990. Said rate of increase stated in The Retreat's budget letter represented the National Hospital Input Price Index (hereinafter referred to as the "NHIPI"), for the 1990 fiscal year plus two percentage points. At the time the Respondent received said budget letter, no administrative rule had yet been adopted that required a hospital entering into its second fiscal year of operation to file a full budget subject to detailed budget review. By letter dated June 5, 1989, the Respondent's staff advised The Retreat that, based on staff's interpretation of the controlling statute, staff could not accept said budget letter filed by The Retreat and a detailed budget would be required for The Retreat's 1990 fiscal year. The June 5, 1989, letter enunciated a non-rule agency policy based upon staff's interpretation of Section 407.50, Florida Statutes (1988 Supp.), that a hospital filing a budget for its second fiscal year is not eligible to file a budget letter and must file a budget subject to detailed review. On June 29, 1989, The Retreat filed a Petition to determine the invalidity of the non-rule policy explicated in said June 5, 1989, letter. Also on June 29, 1989, The Retreat filed a Petition for Formal Administrative Hearing regarding the decision by HCCCB to reject its budget letter. Said Petition was assigned DOAH Case No. 89-3579H. On May 25, 1989, proposed Rule 10N-5.015 was approved by the HCCCB. Said proposed rule was published in the Florida Administrative Weekly, in Volume 15, No. 27, Florida Administrative Weekly (July 7, 1989). The last sentence of proposed Rule 10N-5.015(15), Florida Administrative Code, provides as follows: A new hospital or replacement hospital relocated to a different medical services area shall submit a budget report for review in the first two years of operation, but may submit a budget letter for its third year of operation if it does not require an increase in GRAA in excess of its hospital specific MARI calculated pursuant to Rule 10N-5.013. The last sentence of proposed Rule 10N-5.015(15), Florida Administrative Code, codifies, in rule form, the non-rule policy set forth in the HCCCB letter of June 5, 1989. The Retreat filed a Petition to Determine the Invalidity of Proposed Rule 10N-5.015(15), Florida Administrative Code, on July 28, 1989. Said Petition was assigned DOAH Case No. 89-4219R. DOAH Case No. 89-3436R, 89-3579H and 89-4219R were subsequently consolidated for a single final hearing. The Retreat has standing in each of the three above-styled causes. Florida hospitals subject to Section 395.509(1), Florida Statutes (1985), were required to file detailed budgets before the start of each fiscal year prior to 1990. The Respondent reviewed each budget, including the hospital's GRAA. Depending upon the rank of a hospital's GRAA among the hospitals it was assigned to for budget review, the hospital's budget would either be automatically approved or subject to detailed review. During the 1988 legislative session Chapter 88-394, Laws of Florida, was enacted. Chapter 88-394, which was codified in Chapter 407, Florida Statutes (1988 Supp.), applies to a hospital's 1990 fiscal year and to later fiscal years. Section 407.50, Florida Statutes (1988 Supp.), provides that a hospital is required to file either a detailed budget or a "budget letter". In particular, Section 407.50(2)(a), Florida Statutes (1988 Supp.), provides that each hospital, "[e]xcept for hospitals filing a budget pursuant to subsection (3) . . . shall file with the board a certified statement, hereafter known as the 'budget letter' . . . ." If a budget letter is filed the hospital must acknowledge its maximum rate of increase in its GRAA from the previous year "as calculated pursuant to s. 407.002(17) . . ." and its maximum rate of increase for the next fiscal year, and it must affirm that it will not exceed the applicable maximum allowable rate of increase. If a budget letter is filed by a hospital the hospital's base for budget review is governed by Section 407.50(1), Florida Statutes (1988 Supp.): The base for hospital budget review for fiscal year 1990-1991 shall be the hospital's prior year actual gross revenues per adjusted admission inflated forward by the hospital's applicable current year's maximum allowable rate of increase or the board-approved budgeted gross revenues per adjusted admission, whichever is higher; provided that, in cases where the board has approved a rate of increase below the MARI, the board-approved maximum allowable rate of increase shall apply. For a 1990-1991 budget, a hospital's base is the greater of the hospital's GRAA for its 1988 fiscal year increased by its 1989 MARI or its 1989 budgeted GRAA. Section 407.50(3), Florida Statutes (1988 Supp.), requires the submission of a detailed budget for "each hospital requesting a rate of increase in gross revenue per adjusted admission in excess of the maximum allowable rate of increase for the hospital's next fiscal year . . . ." [Emphasis added]. If a detailed budget is filed, Section 407.50(3), Florida Statutes (1988 Supp.), provides that the hospital's "base" shall be determined as follows: In determining the base, the hospital's prior year audited actual experience shall be used unless the hospital's prior year audited actual experience exceeded the applicable rate of increase in which case the base shall be the gross revenue per adjusted admission from the year before the prior year, increased by the applicable rate of increase for the prior year, and then inflated by the applicable rate of increase for the current year. . . . The filing of a detailed budget requires a more complicated form than a budget letter. If The Retreat is required to file a detailed budget, it would incur the additional cost of hiring a consultant. Therefore, The Retreat would be substantially and adversely affected if it is required to file a detailed budget for its second year of operation pursuant to the Respondent's policy. The "maximum allowable rate of increase" for budget letters or detailed budget requests is defined by Section 407.002(17), Florida Statutes (1988 Supp.), as follows: (17) "Maximum allowable rate of increase" or "MARI" means the maximum rate at which a hospital is normally expected to increase its average gross revenues per adjusted admission for a given period. The board, using the most recent audited actual experience for each hospital, shall calculate the MARI for each hospital as follows: the projected rate of increase in the market basket index shall be divided by a number which is determined by subtracting the sum of one-half of the proportion of Medicare days plus the proportion of Medicaid days and the proportion of charity days from the number one. Two percentage points shall be added to this quotient. The formula to be employed by the board to calculate the MARI shall take the following form: MARI = NHIPI +2 1-[(Me x .5) + Md +Cc] where: MARI = maximum allowable rate of increase applied to gross revenue. NHIPI = national hospital input price index which shall be the projected rate of change in the market basket index. Me = proportion of Medicare days, including when available and reported to the board Medicare HMO days, to total days. Md = proportion of Medicaid days, including when available and reported to the board Medicaid HMO days, to total days. Cc = proportion of charity care days to total days with a 50-percent offset for restricted grants for charity care and unrestricted grants form local governments. Pursuant to this definition of "maximum allowable rate of increase" hospitals are entitled to a base of the NHIPI plus two percentage points inflated by the hospital's prior year Medicare, Medicaid and charity care days, if any. The Respondent rejected The Retreat's effort to file a budget letter for its second year of operation pursuant to Section 407.02(a), Florida Statutes (1988 Supp.), pursuant to a non-rule policy. Pursuant to this non-rule policy the Respondent requires that all hospitals in their first and second year of operation file detailed budgets pursuant to Section 407.50(3), Florida Statutes (1988 Supp.) (the non-rule policy of the Respondent will hereinafter be referred to as the "Policy"). Pursuant to the Policy the Respondent requires that a hospital have both a prior year actual and a current year budgeted GRAA in order to use the budget letter base of Section 407.50(1), Florida Statutes (1988 Supp.). The Policy applied to The Retreat is an agency statement of general applicability intended to apply to all new hospitals that file budget letters for their second year of operation. The Respondent has not accepted a budget letter from any second-year hospital pursuant to the Policy. The Policy had not been adopted as a rule when it was applied to The Retreat. The Respondent has suggested that the Policy is supported by the intent of the Legislature in enacting Chapter 407, Florida Statutes, that timely and accurate data be collected from regulated health care institutions subject to Chapter 407, Florida Statutes. The Respondent perceives this to be the "ultimate goal" of Chapter 407, Florida Statutes. It is true that the Respondent must collect and report accurate data pursuant to Sections 407.003 and 407.02(1), Florida Statutes. The requirements of Sections 407.003 and 407.02(1), do not, however, specifically apply to Section 407.50, Florida Statutes (1988 Supp.). Nothing in Sections 407.003 or 407.02(1), require that The Retreat file the type of information The Retreat would have to file if is not allowed to file a budget letter pursuant to Section 407.50(2), Florida Statutes (1988 Supp.). Additionally, the Respondent has failed to explain why the perceived enhancement of the goal of Chapter 407, Florida Statutes, through application of the Policy should only apply to hospitals in their first and second years of operation. The Respondent's perceived "ultimate goal" of collecting timely and accurate data does not support the Policy as applied in this case to The Retreat. The Respondent has also suggested that the calculation of the MARI in accordance with Section 407.002(17), Florida Statutes, is a prerequisite to filing a budget letter and that Section 407.002(17), Florida Statutes, requires that audited actual experience be available in order for the Respondent to calculate the MARI for a hospital. In support of its position, the Respondent has suggested that it cannot "certify that a budget letter is correct pursuant to s. 407.50(2)(a) . . . ." This argument does not justify the Respondent's Policy because there is no requirement in Section 407.50, Florida Statutes, that the Respondent provide such a certification. Additionally, the Respondent has not adequately explained why it is only concerned about its calculation of the MARI for hospitals in their first or second years of operation and not all hospitals. The problem with the Respondent's position is that, while Section 407.002(17), Florida Statutes, does require that the Respondent use audited actual experience to calculate the MARI, Sections 407.50(1) and (2), Florida Statutes (1988 Supp.), do not require that the Respondent calculate the MARI. If a budget letter is filed by a hospital, the Respondent is only required to "determine if the gross revenues per adjusted admission submitted by the hospital are within the maximum allowable rate of increase for that hospital." The Respondent can accomplish this task without calculating the MARI; it can rely upon the MARI acknowledged by the hospital. If a hospital files a budget letter, only the hospital is required to calculate its MARI. The hospital, unlike the Respondent, is not required by Section 407.002(17), Florida Statutes to use audited actual experience in its calculation of the MARI. All of the elements of the MARI may be obtained from unaudited experience. The NHIPI is a national standard that is not hospital specific. The two percentage points are also not hospital specific. The only hospital specific information taken into account is the number of Medicare, Medicaid and charity care days. Even the Respondent agrees that audited actuarial experience is not necessary to calculate Medicare, Medicaid and charity care days. Therefore, hospitals may calculate the MARI for purposes of Section 407.50(2), Florida Statutes (1988 Supp.), without audited actual experience. The Respondent has failed to prove that the definition of the MARI of Section 407.002(17), Florida Statutes, supports the Policy as applied in this case. In further support of its Policy, the Respondent has characterized the action of The Retreat as using a "'zero', to represent an absence of value, in lieu of audited actual 1988 GRAA for purposes of calculating its budget letter base for 1990 . . . ." See the Respondent's proposed finding of fact 20. The Respondent suggests that Section 407.50(1), Florida Statutes (1988 Supp.), requires a "comparison" of the two values which may be used as a hospital's base and that The Retreat's action circumvents such a comparison. The plain language of Section 407.50(1), Florida Statutes (1988 Supp.), does not require any comparison of the two values which may be used as a hospital's base. Section 407.50(1), Florida Statutes (1988 Supp.), simply provides that a hospital's base for 1990-1991 shall be the greater of the two values. If a hospital only has one of the values, that is obviously the greater value and should be used as the hospital's base. In applying its Policy, the Respondent requires that hospital's subject to the Policy file a detailed budget pursuant to Section 407.50(3), Florida Statutes (1988 Supp.). There is no specific language in Section 407.50, Florida Statutes (1988 Supp.), that requires a hospital in its second year of operation to file a detailed budget. By its specific terms, Section 407.507(3), Florida Statutes (1988 Supp.), only requires that a detailed budget be filed if a hospital is seeking an increase in GRAA in excess of the MARI. It does not require detailed budgets for hospitals seeking an increase in GRAA at or below the MARI. The Retreat has not sought an increase in GRAA for 1990 in excess of the MARI. The Respondent has failed to sufficiently explicate the Policy. The weight of the evidence failed to prove that the Policy is valid. The Policy is inconsistent with the Respondent's delegated legislative authority and has been inconsistently applied by the Respondent to only those hospitals in their first or second years of operation. In a Final Order issued in case number 89-4219R simultaneously with this Recommended Order, it has been concluded that the Respondent's Proposed Rule 10N-5.015(15), Florida Administrative Code, adopting the Policy is an invalid exercise of delegated legislative authority. Absent the Policy and Proposed Rule 10N-5.015(15), Florida Administrative Code, The Retreat's 1990 budget letter would have been accepted by the Respondent.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Respondent enter a Final Order accepting The Retreat's May 24, 1989, budget letter as its budget for its 1990 fiscal year. DONE and ENTERED this 21st day of May, 1990, in Tallahassee, Florida. LARRY J. SARTIN 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 21st day of May, 1990. APPENDIX TO RECOMMENDED ORDER The parties have submitted proposed findings of fact. It has been noted below which proposed findings of fact have been generally accepted and the paragraph number(s) in the Recommended Order where they have been accepted, if any. Those proposed findings of fact which have been rejected and the reason for their rejection have also been noted. The Retreat has filed a proposed recommended order in this case and a proposed final order addressing the validity of the Respondent's Policy and the validity of the rule adopting the Policy. The proposed findings of fact contained in The Retreat's proposed recommended order filed in this case have been addressed in this Appendix. To the extent that proposed findings of fact contained in The Retreat's proposed final order are relevant to this case, they have also been addressed in this Appendix. Proposed findings of fact pertaining to case number 89-4219R have been addressed in the Appendix of the Final Order in case number 89-4219R, issued simultaneously with this Recommended Order. The Intervenor has filed a separate proposed final order in case number 89- 3436R and in case number 89-4219R and a proposed recommended order in this case. The proposed findings of fact contained in the proposed final orders and the proposed recommended order are identical. Only those proposed findings of fact contained in the Intervenor's proposed recommended order filed in this case which are relevant to this case have been addressed in the Appendix. The Retreat's Proposed Findings of Fact (Proposed Recommended Order) Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 1. 2 1 and 10. 3 Hereby accepted. The last sentence is rejected as an incorrect conclusion of law. 4 27. 5-6 8. The Retreat's Proposed Findings of Fact (Proposed Final Order) Proposed Finding of Fact Number Paragraph Number of Acceptance or in Recommended Order Reason for Rejection 1 1. 2-4 2. 5 3. 6 4. 7 Hereby accepted. 8 6. 9-10 Hereby accepted. 11 8 and 9. 12 9. 13-14 5. 15 10. 16 Not a finding of fact. 17-30 Hereby accepted. 31 See 12-21. 32 10 and 21. 33 21. 34-36 Hereby accepted. 37 7, 22 and hereby accepted. 38-39 23. 40 Hereby accepted. 41 15. 42-43 18 and 19. 44-53 Hereby accepted. 54 12 and 13. 55 Hereby accepted. 56 13 and 14. 57-58 Not relevant. Hereby accepted. Not supported by the weight of the evidence. 61 1 and 11. 62-63 8. The Respondent's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1-14 1. See 12. See 13. See 15. See 11 and 16. This proposed finding of fact does correctly explain the "HCCCB's view" but the weight of the evidence failed to prove the Respondent's conclusion is correct. See 20. 21-22 See 20 and 21. 23-24 The weight of the evidence failed to prove that inaccuracies not acceptable under Section 407.50(2), Florida Statutes (1988 Supp.), will occur just for hospitals in their first or second years of operation. The weight of the evidence failed to prove that any inaccuracy Section 407.50, Florida Statutes (1988 Supp.), is intended to prevent will occur if The Retreat is allowed to file a budget letter. 25 18. The last two sentences are consistent with the Respondent's position but the weight of the evidence failed to prove that the Respondent's interpretation is correct. The Intervenor's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1-2 1. 3 See 20. 4 1. 5-6 See 15. 7 1 and 15. The first sentence is not supported by the weight of the evidence. 8 1. 9-13 These proposed findings of fact are correct. In light of the stipulation of the parties that The Retreat has standing in all three cases, however, the proposed findings are not relevant. See City of Destin v. Department of Transportation, 541 So. 2d 123 (Fla. 1st DCA 1989). 14 Not supported by the weight of the evidence. See 20 and 21. 15 1. 16-17 The weight of the evidence failed to prove that these facts apply in this case or that all inaccuracies are inconsistent with the intent of Section 407.50, Florida Statutes (1988 Supp.). 18 Not relevant. 19-20 Not relevant. The weight of the evidence failed to prove that these proposed facts are true of this matter. 21 12. 22-24 Hereby accepted. The weight of the evidence, however, failed to prove that these facts justify the Policy. 25-26 See 20 and 21. 27 Not supported by the weight of the evidence. 28 1 and 10. Not supported by the weight of the evidence. The weight of the evidence failed to prove that this proposed finding is true in this case. 31-32 Hereby accepted. 33-36 Not relevant. 37-8 Not supported by the weight of the evidence. 39 1 and 10. 40 Hereby accepted. 41 1. 42 10. 43-44 Hereby accepted. COPIES FURNISHED: Michael J. Glazer, Esquire Post Office Box 391 Tallahassee, Florida 32302 Robert D. Newell, Jr., Esquire 817 North Gadsden Street Tallahassee, Florida 32303-6313 Jack Shreve Public Counsel David R. Terry Associate Public Counsel Peter Schwarz Associate Public Counsel c/o The Florida Legislature 111 West Madison Street Room 801 Tallahassee, Florida 32399-1400 Stephen Presnell, General Counsel Health Care Cost Containment Board Woodcrest Office Park 325 John Knox Road Building L, Suite 101 Tallahassee, Florida 32303 =================================================================
Conclusions Having reviewed the Administrative Complaint, and all other matters of record, the Agency for Health Care Administration finds and concludes as follows: 1, The Agency has jurisdiction over the above-named Respondent pursuant to Chapter 408, Part II, Florida Statutes, and the applicable authorizing statutes and administrative code provisions. 2. The Agency issued the attached Administrative Complaint and Election of Rights form to the Respondent. (Ex. 1) The Election of Rights form advised of the right to an administrative hearing. 3. The parties have since entered into the attached Settlement Agreement. (Ex. 2) Based upon the foregoing, it is ORDERED: 1. The Settlement Agreement is adopted and incorporated by reference into this Final Order. The parties shall comply with the terms of the Settlement Agreement. 2. The Respondent shall pay the Agency $16,000.00. If full payment has been made, the cancelled check acts as receipt of payment and no further payment is required. If full payment has not been made, payment is due within 30 days of the Final Order. Overdue amounts are subject to statutory interest and may be referred to collections. A check made payable to the “Agency for Health Care Administration” and containing the AHCA ten-digit case number should be sent to: Office of Finance and Accounting Revenue Management Unit Agency for Health Care Administration 2727 Mahan Drive, MS 14 Tallahassee, Florida 32308 3. Conditional licensure status is imposed on the Respondent beginning on November 30, 2012, and ending December 3, 2012. Filed August 12, 2013 8:57 AM Division of Administrative Hearings ORDERED at Tallahassee, Florida, on this y day of Ausaat 2013. RA Elizabgth \ es Agent for Health Care Administration
Other Judicial Opinions A party who is adversely affected by this Final Order is entitled to judicial review, which shall be instituted by filing one copy of a notice of appeal with the Agency Clerk of AHCA, and a second copy, along with filing fee as prescribed by law, with the District Court of Appeal in the appellate district where the Agency maintains its headquarters or where a party resides. Review of proceedings shall be conducted in accordance with the Florida appellate rules. The Notice of Appeal must be filed within 30 days of rendition of the order to be reviewed. CERTIFICATE OF SERVICE I CERTIFY that a true and correct_copy of this Final Order was seryed on the below-named persons by the method designated on this eeu ot Sk Agency for Health Care Administration 2727 Mahan Drive, Bldg. #3, Mail Stop #3 Tallahassee, Florida 32308-5403 Telephone: (850) 412-3630 Jan Mills Finance & Accounting Facilities Intake Unit Revenue Management Unit (Electronic Mail) (Electronic Mail) Thomas J. Walsh II Margaret A. Chamberlain, Esquire Office of the General Counsel Kitch Drutchas et al Agency for Health Care Administration 2379 Woodlake Drive (Electronic Mail) Suite 400 Okemos, Michigan 48864 (U.S. Mail) J. D. Parrish Administrative Law Judge Division of Administrative Hearing (Electronic Mail)
The Issue The issue is whether an amendment to Rule 59G-6.010, Florida Administrative Code (1995), was an invalid exercise of delegated legislative authority due to the Agency's failure to follow applicable rulemaking procedures.
Findings Of Fact This case concerns a challenge by Petitioners to a version of the Florida Title XIX Long-Term Care Reimbursement Plan ("the Plan") which was noticed for adoption and incorporation by reference into Rule 59G-6.010, Florida Administrative Code,in the June 30, 1995 Florida Administrative Weekly. The Plan, including the version under challenge as well as prior and subsequent versions of the Plan, explains in detail how the state of Florida calculates reimbursement for Florida nursing facilities which care for Medicaid-eligible residents. The state of Florida calculates reimbursement for nursing facilities for caring for Medicaid eligible residents based on three components of nursing facility costs: operating costs, patient care costs, and property costs. Nursing facilities are reimbursed for their operating costs on a per diem basis; operating costs include such items as maintenance supplies, maintenance staff, utilities, laundry, and administration. Florida divides nursing facilities into six classes for reimbursement purposes, based on a facility's location (northern, central, or southern Florida) and size (100 beds or fewer, or more than 100 beds). Operating cost ceilings are established by Respondent for each of the classes of nursing facilities based on the operating costs achieved by nursing facilities in the class and in all classes in the state of Florida. Under both the version of the Plan under challenge here, and the immediately preceding version of the Plan, a nursing facility which achieved a per diem operating cost lower than its respective class ceiling could receive an upward adjustment to its operating cost reimbursement rate as an incentive to operate efficiently. This upward adjustment is known as an "operating incentive." In the June 30, 1995 Florida Administrative Weekly, Volume 21, Number 26, Respondent published as a proposed rule the adoption of Version XIII of the Plan. As was the case with prior versions of the Plan, Version XIII of the Plan is incorporated by reference into Rule 59G-6.010, Florida Administrative Code. The intended adoption of Version XIII of the Plan would replace Version XII of the Plan, dated May 22, 1995, as the version of the Plan incorporated by reference into Rule 59G- 6.010, Florida Administrative Code. Version XIII of the Plan, among other changes, changed the methodology used to determine the eligibility of nursing homes providing care to Medicaid patients for operating cost incentives, as well as the methodology used to calculate the dollar amount of operating cost incentives for such eligible nursing homes. The intent of the changes is to reduce the total dollar amount paid to nursing homes as operating incentives by a combination of reducing the number of nursing homes eligible to receive operating incentive payments, and reducing the dollar amount of the operating incentive payment to each eligible nursing home. Respondent's adoption of Version XIII of the Plan was in response to proviso language contained in the Florida General Appropriations Act for fiscal year 1995-96, Chapter 95-429, Laws of Florida. The proviso language was attached to specific appropriation 265, and indicated that total state Medicaid funding for nursing home care was being reduced by $13,574,661 "for the operating incentive component of Medicaid nursing home reimbursement." Chapter 95-429 did not specifically present a reimbursement formula or specify particular changes to the calculation of operating incentives to achieve these changes. Under both Version XII and Version XIII of the Plan, the threshold eligibility of a nursing facility to receive an operating incentive payment is determined based on two factors: (1) its licensure rating (superior, standard, or conditional) during a specified prior 6-month period, and (2) the utilization of the facility by Medicaid-eligible residents, stated as a percentage of the total patient days of care provided by the facility. Under both Version XII and Version XIII of the Plan, the dollar amount of operating incentives to be paid to an eligible facility was calculated using: (1) the difference between the facility's per diem operating cost and the operating cost ceiling for its class; (2) fractional adjustment factors for the number of days of superior and standard licensure ratings; (3) an upward adjustment cap tied to the pertinent class ceiling; and (4) a prorated adjustment factor for facilities with less than 90 percent Medicaid utilization. Version XIII of the Plan reduced the number of nursing homes eligible for operating incentives by raising the threshold percentage of a facility's total patient days represented by its Medicaid patient days. Under Version XII of the Plan, a facility had to provide at least 20 percent of its patient days to Medicaid residents, and meet other criteria, to receive even a partial operating incentive; under Version XIII, that threshold increased to 65 percent. In other words, under Version XIII of the Plan, facilities providing fewer than 65 percent of their patient days to Medicaid residents would not be eligible for any operating incentive regardless of their cost efficiency. Version XIII of the Plan also reduced the dollar amount of operating incentives to be paid to an eligible nursing home by implementing the additional following revisions: The fractional adjustment factor to a facility's operating cost savings, as compared to the class ceiling for the number of days of superior licensure rating was reduced from .6667 to .64, and the factor for days of standard licensure rating was reduced from .3333 to .32. The cap on a facility's operating incentive upward adjustment was lowered from 15 percent of its class ceiling to 10 percent of its class ceiling. The Medicaid utilization proration formula was modified to reduce the partial operating incentive payments to those eligible facilities whose utilization was between 65 percent and 90 percent, as compared to the partial operating incentive payments paid to nursing homes with the same utilization percentage under Version XII of the Plan. A copy of an Respondent’s internal memorandum, dated June 20, 1995, summarizes the Version XIII changes to the operating incentive calculation. Beginning July 1, 1995, Respondent began determining the eligibility of nursing homes for operating incentives and calculating the dollar amount of operating incentives to eligible nursing homes, by using the same formulas which were contained in Version XIII of the Plan. Prior to July 1, 1995, Respondent did not publish notice in any newspaper of general circulation, other than in the June 30, 1995 Florida Administrative Weekly, concerning revisions to the Plan to change the methodology used to calculate operating incentives for periods beginning on or after July 1, 1995. The June 30, 1995 notice of adoption of Version XIII of the Plan did not furnish an estimate of any expected increase or decrease in annual aggregate Medicaid expenditures; did not explain reasons for changes in the reimbursement methods; and did not identify a local agency in each county of the state where a copy of the Plan was available for review. Respondent estimated that implementation of the changes in operating incentive calculations contained in Version XIII of the Plan would result in a reduction or elimination of operating incentives for over 400 nursing homes, with over 200 of these nursing homes experiencing a loss of more than $20,000 annually. Respondent did not consult with the Florida Medical Care Advisory Committee prior to publication of notice of the intended adoption of Version XIII of the Plan, or prior to filing the Plan with the Department of State. By transmittal letter dated September 28, 1995, Respondent submitted Version XIII of the Plan to the federal Health Care Financing Administration (HCFA). The submittal to HCFA included an Institutional State Plan Amendment Assurance and Finding Certification Statement which indicated that, among other things, the state complied with the public notice requirements of 42 C.F.R. 447.205 by publishing notice of the Plan amendment on June 30, 1995. Within 21 days of the June 30, 1995 publication of notice in the Florida Administrative Weekly, four challenges to Version XIII of the Plan were filed pursuant to Section 120.54, Florida Statutes. These challenges were consolidated, and were styled: National Healthcare, L.P. v. AHCA, DOAH Case No. 95-3689RP National Healthcare, L.P. v. AHCA, DOAH Case No. 95-3690RP Servicemaster Diversified Health Services, L.P. v. AHCA, DOAH Case No. 95-3691RP Florida Convalescent Center, Inc. v. AHCA, DOAH Case No. 95-3692RP Each of these four challenges to Version XIII concerned how the Plan dealt with the determination of "related party" status, and the impact of such a determination on reimbursement. On August 18, 1995, in Volume 21, Number 23 of the Florida Administrative Weekly, at page 5517, Respondent published a Notice of Change to Version XIII of the Plan. The language modified by this change concerned the "related party" issues referenced in paragraph 16 above. On October 13, 1995, Respondent executed and filed an Agreed Upon Suggestion of Mootness in DOAH Case Nos. 95-3689RP, 95-3690RP, 95-3691RP and 95-3692RP. On October 16, 1995, the undersigned entered an Order Closing File and Relinquishing Jurisdiction in Case Nos. 95-3689RP, 95-3690RP, 96-3691RP and 95- 3692RP. On November 7, 1995, Respondent filed Version XIII of the Plan and a Certification concerning compliance with rulemaking requirements with the Department of State. The Certification, signed by Respondent’s General Counsel, Jerome Hoffman, identified the effective date of the rule revision as November 27, 1995. The first page of Version XIII of the Plan, filed with the Department of State, also identifies November 27, 1995 as the effective date of Version XIII of the Plan. On or about July 1, 1995, Respondent sent a letter to each nursing facility in the state of Florida briefly summarizing the reimbursement methodology changes contained in Version XIII of the plan, and advising each facility of the Medicaid reimbursement per diem rate pursuant to Version XIII of the Plan. In the June 28, 1996 Florida Administrative Weekly, Volume 22, Number 26, at pages 3854-3855, Respondent published as a proposed rule the revision of Rule 59G-6.010, Florida Administrative Code to adopt Version XIV of the Plan. Respondent intended for Version XIV of the Plan to replace Version XIII. On July 19, 1996 two separate petitions challenging the proposed revision to Rule 59G-6.010, Florida Administrative Code, and Version XIV of the Plan were filed with the Division of Administrative Hearings. These challenges were styled: Mediplex Rehabilitation of Bradenton v. AHCA, DOAH Case No. 96-3399RP HCP III Bradenton, Inc. d/b/a Riverfront Health Care and Rehabilitation Center v. AHCA, DOAH Case No. 96-3401RP As of the date of the parties’ Stipulation of Facts in the instant cases, Case Nos. 96-3399RP and 96-0340RP remained pending at the Division of Administrative Hearings. Prior scheduled final hearings were canceled on motion of the Petitioners in Case Nos. 96-3399RP and 96-3401RP, and status reports were submitted to Administrative Law Judge William A. Buzzett on September 25, 1996. Respondent had not filed Version XIV of the Plan with the Department of State for adoption as of the date of the parties’ Stipulation of Facts in the instant cases. For purposes of disposition of the instant Motions for Summary Final Order only, Respondent agrees that Petitioners Hillhaven, HCR and IHS have standing to bring this rule challenge. Representatives of both Hillhaven and HCR sat on the Reimbursement Committee of the Florida Health Care Association at the time that Committee held discussions, in May or June of 1995, concerning Respondent's proposed reduction in operating incentive payments to nursing facilities. Respondent contends that, as a result, Hillhaven and HCR had actual notice of the proposed reduction in operating incentives prior to Respondent's publication of Notice of Intent to adopt Plan Version XIII; as Hillhaven and HCR are unable to independently verify receipt of actual notice during the time period in question at this time, for purposes of consideration of the pending motions only, Hillhaven and HCR do not contest Respondent's assertion that they had actual notice.
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
The Issue The issue is whether the methodology employed by respondent in calculating petitioners' budget letter gross revenues per adjusted admission is a rule, not duly promulgated, and thus is an illegal exercise of delegated legislative authority.
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: A. Parties Petitioners, Easte Point Hospital, Inc. and others, are fourteen hospitals in the State of Florida who are subject to the regulatory jurisdiction of respondent, Health Care Cost Containment Board (Board). Petitioner, Florida League of Hospitals, Inc., is a nonprofit organization which is organized and maintained for the benefit of the proprietary hospitals which comprise its membership. The Board is a state agency charged with the responsibility of annually reviewing hospital budgets to insure that a hospital's charges do not exceed certain established thresholds. Intervenor, Citizens of the State of Florida, is represented by the Office of the Public Counsel. That office has the duty of representing citizens in all proceedings before the Board. Events Leading to the Filing of the Rule Challenges Petitioners are required to annually file their projected budgets with the Board for its review and approval. This controversy pertains to the filing of budgets for fiscal year 1992. There are two types of budget filings authorized by law. First, a hospital may file what is known as a budget letter, which is a one- page submission on a form provided by the Board. In preparing such a letter, the hospitals are required to provide information regarding their gross revenues per adjusted admission (GRAA) and maximum allowable rate of increase (MARI), two financial indicators that are used by the Board in measuring the reasonableness of a hospital's charges. A budget letter is to be filed whenever a hospital does not intend to increase its charges (GRAA) in the next fiscal year by more than the percentage amount specified in its approved MARI. Secondly, a hospital may file a detailed budget which is much more complicated than the budget letter and requires the completion of a twenty-seven page form. The preparation of a detailed budget is obviously more time- consuming and expensive than a budget letter and requires the hospital to justify its entire budget. The detailed budget is to be filed whenever a hospital intends to increase its charges (GRAA) from one fiscal year to the next by a greater percentage amount than is specified in the MARI. These cases deal with the legitimacy of a methodology used by the Board in determining whether a hospital is eligible to file a budget letter. In this proceeding, each of the fourteen hospitals filed budget letters with the Board in May 1991. After the budget documents were reviewed by the Board's staff, on June 21, 1991, the Board issued virtually identical proposed agency action to each hospital advising the hospital that its budget letter was "nonconforming for the following reason: The hospital's maximum GRAA should be $ , instead of $ , ", with the appropriate dollar amounts inserted in the blanks. The letter went on to advise each hospital that it should resubmit a corrected budget document and until it did so, its submission would be considered incomplete. The effect of the Board's action was to reduce each hospital's budget letter GRAA and the amount of revenues (charges) it could receive in the next fiscal year unless it agreed to file a detailed budget. The hospitals are accordingly affected by the proposed agency action and thus have standing to being this action. Likewise, since the methodology employed by the Board in rejecting the budget letters affects all members of the Florida League of Hospitals, Inc. who file budget letters, that organization also has standing to participate. The parties have further stipulated to the standing of intervenor, Citizens of the State of Florida. Although the proposed agency action does not show the methodology used by the Board in reaching its conclusion that the "maximum GRAA" was overstated, the record reveals that the Board utilized a certain methodology to calculate the "base GRAA", the first calculation in the budget letter review process. /2 This methodology is described in the second sentence of Subsection 407.50(3), Florida Statutes (1989) as follows: In determining the base, the hospital's prior year audited actual experience shall be used unless the hospital's prior year audited experience exceeded the applicable rate of increase in which case the base shall be the gross revenue per adjusted admission from the year before the prior year, and then inflated by the applicable rate of increase for the current year. Petitioners concede that the methodology used by the Board tracks the language in the above statute verbatim. However, they contend that, when the language in subsection 407.50(2)(a) is considered, it becomes apparent that the use of this methodology is the review of budget letters is not clearly called for, and thus the methodology is a policy having all of the attributes of a rule which has not been adopted pursuant to chapter 120. Conversely, respondent and intervenor claim the methodology is not a policy but simply an interpretation of the controlling statute. Is the Methodology a Rule? By virtue of rather extensive amendments to the law in 1988, budget letters were first authorized for use by hospitals beginning with budget years 1990 and 1991. Prior to that time, all hospitals filed detailed budgets. There was no quarrel over the manner in which hospitals performed their calculations in the first two budget letter filings since subsection 407.50(1) clearly specified the methodology for making all calculations during the first two years. This controversy arises because all subsequent filings of budget letters are controlled by language found in other portions of section 407.50. The relevant portions of that statute read as follows: (a) Except for hospitals filing a budget pursuant to subsection (3), each hospital, at least 90 days prior to the commencement of its next fiscal year, shall file with he board a certified statement, hereafter known as the "budget letter", acknowledging its applicable maximum allowable rate of increase in gross revenue per adjusted admission from the previous fiscal year as calculated pursuant to s. 407.002(17) and its maximum projected gross revenue per adjusted admission for the next fiscal year, and shall affirm that the hospital shall not exceed such applicable maximum allowable rate of increase. . . * * * At least 90 days prior to the beginning of its fiscal year, each hospital requesting a rate of increase in gross revenue per adjusted admission in excess of the maximum allowable rate of increase for the hospital's next fiscal year, shall be subject to detailed budget review and shall file its projected budget with the board for approval. In determining the base, the hospital's prior year audited actual experience shall be used unless the hospital's prior year audited actual experience exceeded the applicable rate of increase in which case the base shall be the gross revenue per adjusted admission from the year before the prior year, increased by the then applicable rate of increase for the current year. * * * A reading of the above statute indicates that subsection 407.50(2) (a) prescribes the form and manner for a budget letter submission. The submission consists primarily of a certified statement by the hospital acknowledging "its applicable maximum allowable rate of increase in gross revenue per adjusted admission from the previous fiscal year as calculated pursuant to s. 407.0C2(17) and its maximum projected gross revenue per adjusted admission for tie next fiscal year, and shall affirm that the hospital shall not exceed such applicable maximum allowable rate of increase. At the same time, subsection 407.50(2) (a) provides that its provisions shall apply to all hospitals "except those filing a (detailed) budget pursuant to subsection (3)". However, the subsection does not prescribe the manner in which the budget letter's base GRAA should be calculated. On the other hand, subsection 407.50(3) appears, at least facially, to impose certain requirements upon detailed budget filings, including the time requirements for filing a detailed budget, who must file one, and the manner in which to calculate the "base". Thus, a literal reading of the statute could lead the reader to reasonably conclude that, while subsection 407.50(2) (a) does not prescribe the manner in which the base GRAA should be calculated for purposes of a budget letter submission, the same judgment can be reached with respect to subsection 407.50(3). In other words, an affected person would not necessarily know from a reading of the law that the base GRAA for a budget letter submission filed under subsection (2) (a) would be calculated using a methodology found in subsection (3). Accordingly, it is found that the methodology used by the Board in calculating the budget letter GPAA is not a statutory interpretation but instead is a policy. While respondent and intervenor presented evidence to justify and explain the rationale for calculating the budget letter base GRAA in this manner, this evidence is more relevant in the companion section 120.57(1) cases. The methodology employed by the Board is one of general applicability since it applies to all hospitals who file budget letters in fiscal year 1992 and beyond. It is applied uniformly without discretion by agency personnel to all hospitals, requires compliance and has the direct and consistent effect of law. The policy has not been adopted as a rule.
