The Issue Whether the Department's proposed amendment of Rule 38F- 7.020, Florida Administrative Code, constitutes an invalid exercise of its delegated legislative authority under Section 120.52(8), Florida Statutes, [1996 Supp.], or whether the authority specified in the proposed rule is sufficient for the Department to adopt the proposed rule?
Findings Of Fact The Florida Society of Anesthesiologists is a voluntary, nonprofit association comprised of individual members, each of whom is licensed in the State of Florida to practice medicine. Petitioner, Robert A. Guskiewicz, M.D., is a licensed medical doctor in the State of Florida specializing in anesthesia. Pursuant to Section 440.13(12), Florida Statutes, a three-member panel is charged with the responsibility of determining the schedules of maximum reimbursement for physician treatment of workers' compensation patients. In March 1996, the three-member panel convened and adopted a resource-based relative value scale ("RBRVS") reimbursement system, which, on or about January 3, 1997, the Department published notice of its intent to embody in proposed Rule 38F-7.020, in Vol. 23, No. 1 of the Florida Administrative Law Weekly. A copy is attached and incorporated herein by reference. The proposed Rule lists Sections 440.13(7), 440.13(8), 440.13(11), 440.13(12), 440.13(13), 440.13(14), and 440.591, Florida Statutes, as specific authority. The proposed Rule implements Sections 440.13(6), 440.13(7), 440.13(8), 440.13(11), 440.13(12), 440.13(13), and 440.13(14), Florida Statutes. There are no other facts necessary for determination of the matter.
The Issue Whether Florida Hospital Medical Center is entitled to reimbursement in the amount preliminarily determined by the Department of Financial Services, Division of Workers’ Compensation, in a reimbursement dispute regarding bills submitted by Florida Hospital Medical Center to Macy’s Claims Services and Amerisure Mutual Insurance Company for medical services provided to two individuals involved in work-related accidents; and Whether Macy’s Claims Services and Amerisure Mutual Insurance Company properly adjusted those bills of Florida Hospital Medical Center in accordance with the requirements of Florida’s Workers’ Compensation law and applicable rules.
Findings Of Fact Florida Hospital is a full-service, not-for-profit hospital system located in Orlando, Florida, that operates a smaller satellite hospital in Winter Park, Florida. Florida Hospital is a “health care provider” within the meaning of Section 440.13(1)(h), Florida Statutes. Macy’s and Amerisure are “carriers” within the meaning of Sections 440.02(4) and 440.02(38), Florida Statutes. The Department has exclusive jurisdiction to resolve disputes between carriers and health care providers regarding payments for services rendered to injured workers, pursuant to Sections 440.13(7) and 440.13(11)(c), Florida Statutes. Qmedtrix is a medical bill review company.3/ Case No. 09-6871 R. P., an employee of Macy’s, slipped and fell at work on May 20, 2009, and presented to Florida Hospital Winter Park for evaluation and treatment where medical personnel documented vomiting, brain attack, and brain trauma. After evaluation and treatment, patient R. P. was diagnosed with a bruise to the head and released the same day. On September 16, 2009, Florida Hospital submitted its bill for services provided to R. P. totaling $5,547.20 to Macy’s for payment, utilizing Form DFS-F5-DWC-90, also known as UB-04 CMS-1450, identifying the charges billed for each line item by revenue code and HCPS or CPT codes. Macy’s forwarded the bill to its workers’ compensation medical bill review agent, Qmedtrix. Qmedtrix reviewed the bill by comparing the procedure codes and diagnosis codes reported by Florida Hospital with examples in the CPT book for billing of emergency department services. Florida Hospital reported ICD diagnosis code 920, which reads “contusion of face, scalp, or neck.” Use of this code means R. P. presented with a bruise or hematoma, but not a concussion. Florida Hospital also reported ICD diagnosis code 959.01 (“head injury, unspecified”) which also means that R. P. did not present with a concussion, loss of consciousness, or intracranial injuries. Florida Hospital’s bill included a charge of $2,417 with CPT code 99285 for emergency department services. The bill also included separate charges for a head CT, and various lab tests, drugs, and IV solutions. According to Mr. von Sydow, the bill was sent through Qmedtrix’s computer program for review, and was flagged for review by a physician. Mr. von Sydow further testified that one of Qmedtrix’s medical director’s suggested that the CPT code of 99285 be reduced. The medical director, who Mr. von Sydow said reviewed the bill, however, did not testify and no documentation of his recommendation was submitted at the final hearing. Qmedtrix determined that Florida Hospital should have used CPT code 99284 when billing for the emergency services rendered instead of CPT code 99285. Qmedtrix found that, while the hospital billed $2,417 with CPT code 99285, its usual charge for an emergency department visit billed with CPT code 99284 is $1,354. Macy’s paid Florida Hospital a total of $2,683.55, which amount included $1,010.24 for the emergency department visit based on [approximately] 75 percent of Florida Hospital’s usual charge for CPT code 99284. The payment was accompanied by an EOBR. The EOBR Macy’s (or its designated entity)4/ issued to Florida Hospital for services rendered to R. P. identifies the amount billed by Florida Hospital as to each line item in a column designated “Billed,” and has columns designated as “BR Red,” “PPO Red,” “Other Red,” and “Allowance,” each containing an amount for each line item in the “Billed” column. There is also a column entitled “Reason Code” which sets forth codes, as required by Florida Administrative Code Rule 69L-7.602(5)(o)3., that are supposed to explain the reason for adjustment of any line item.5/ The “reason code” set forth adjacent to the $2,417.00 billed by Florida Hospital for emergency department services is “82,” which means “Payment adjusted: payment modified pursuant to carrier charge analysis.” There is also another code, “P506” listed in the “Reason Code” column adjacent to the same line item, which, according to the key provided on the EOBR, means “[a]ny questions regarding this Qmedtrix review, please call (800)-833-1993.” “P506,” however, is not a “reason code” listed in Florida Administrative Code Rule 68L- 7.602(5)(o)3. The EOBR does not advise that the bill was adjusted because of a determination that Florida Hospital should have used CPT code 99284 when billing for the emergency services rendered instead of CPT code 99285 as originally billed. Upon receipt of the payment and the EOBR, Florida Hospital timely filed a Petition for Resolution of Reimbursement Dispute with the Department pursuant to Section 440.13(7)(a), Florida Statutes, and Florida Administrative Rule 69L-31, contending that payment should be at 75 percent of its total charges, and citing the Florida Workers’ Compensation Reimbursement Manual for Hospitals, 2006 Edition (Hospital Manual). Qmedtrix timely filed a response to Florida Hospital’s petition on behalf of Macy’s pursuant to Section 440.13(7)(b), Florida Statutes, and Florida Administrative Code Rule 69L-31, asserting that correct payment should be determined based on, first, whether the hospital in fact billed its usual charge for the services and, second, whether the hospital’s charges are in line with the charges of other hospitals in the same community, citing One Beacon Insurance v. Agency for Health Care Administration, 958 So. 2d 1127 (Fla. 1st DCA 2007) for the proposition that “SB-50 amended section 440.13 . . . [revealing] legislative intent to eliminate calculation of a “usual and customary charge” based on the fees of any one provider in favor of a calculation based on average fees of all providers in a given geographic area.” Qmedtrix’s response on behalf of Macy’s also contended that “upcoding” and “unbundling” were additional grounds for adjustment or disallowance that were not identified on the EOBR. The response explained that “upcoding” refers to billing with a procedure code that exaggerates the complexity of the service actually provided; that CPT codes 99281 through 99285 describe emergency department services; that the CPT book includes examples of proper billing with these codes; that the hospital billed $2,417 with CPT code 99285; and that the CPT book describes an “emergency department visit for a healthy, young adult patient who sustained a blunt head injury with local swelling and bruising without subsequent confusion, loss of consciousness or memory deficit” as an example of proper billing with CPT code 99283. The response requested a determination by the Department that Macy’s payment equaled or exceeded the amount usual and customary for CPT code 99283. On November 13, 2009, the Department, through its Office of Medical Services (OMS) issued a determination (Determination in 09-6871) which found, in pertinent part: The petitioner asserts that services provided by Florida Hospital Medical Center to the above-referenced injured employee on May 20, 2009, were incorrectly reimbursed. Florida Hospital Medical Center billed $5,547.20 and the carrier reimbursed $2,683.55. The petition does not address a contract and does not reflect a contract discount in the calculation of requested reimbursement. The Carrier Response to Petition for Resolution of Reimbursement Dispute disputes the reasonableness of the hospital’s “usual and customary charges”, maintains the petitioners’ charges should be based on the average fee of other hospitals in the same geographic area, references a manual not incorporated by rule, and provides CPT codes that the respondent alleges are correct. There are no rules or regulations within Florida’s Workers’ Compensation program prohibiting a provider from separately billing for individual revenue codes. The carrier did not dispute that the charges listed on the Form DFS-F5-DWC-90 (UB-92) or the charges listed on the itemized statement did not conform to the hospital’s Charge Master. Nor did the carrier submit the hospital’s Charge Master in the response or assert that the carrier performed an audit of the Charge Master to verify the accuracy of the billed charges. Therefore, since no evidence was presented to dispute the accuracy of the Form DFS-F5-DWC-90 or the itemized statement as not being representative of the Charge Master, the OMS finds that the charges billed by the hospital are the hospital’s usual and customary charges. Rule 69L-7.602, F.A.C., stipulates the appropriate EOBR codes that must be utilized when explaining to the provider the carrier’s reasons for disallowance or adjustment. The EOBR submitted with the petition conforms to the EOBR code requirements of Rule 69L-7.602(5)(q), F.A.C. Only through an EOBR is the carrier to communicate to the health care provider the carrier’s reasons for disallowance or adjustment of the provider’s bill. Pursuant to s. 440.13(12), F.S., a three member panel was established to determine statewide reimbursement allowances for treatment and care of injured workers. Rule 69L-7.501, F.A.C., incorporates, by reference, the applicable reimbursement schedule created by the panel. Section 440.13(7)(c), F.S., requires the OMS to utilize this schedule in rendering its determination for this reimbursement dispute. No established authority exists to permit alternative schedules or other methodologies to be utilized for hospital reimbursement other than those adopted by Rule 69L-7.501, F.A.C., unless the provider and the carrier have entered into a mutually agreeable contract. Rule 69L-7.501, F.A.C., incorporates, by reference, the Florida Workers’ Compensation Reimbursement Manual for Hospitals, 2006 Edition (Hospital Manual). Since the carrier failed to indicate any of the services are not medically necessary, the OMS determined proper reimbursement applying the above referenced reimbursement guidelines. Therefore, the OMS has determined that the carrier improperly adjusted reimbursement to Florida Medical Center for services rendered to the above- referenced injured employee on May 20, 2009. Based on the above analysis, the OMS has determined that correct reimbursement equals $4,160.40 ($5,547.20 x 75% [Hospital Manual]=$4,160.40). The carrier shall reimburse Florida Hospital Medical Center $4,160.40 for services rendered to the above-referenced employee; and submit proof of reimbursement of the amount determined by the OMS within thirty days of the date the Determination is received. . . . The difference between what Petitioner Macy’s paid Florida Hospital for services rendered to R. P., and the amount the Department determined that Petitioner Macy’s is required to pay for such services, equals $1,476.85. The Determination in 09-6871 did not directly address Macy’s allegation of the alleged billing error of “upcoding.” The Determination in 09-6871 provided a 21-day notice for request of an administrative hearing and, as noted in the Preliminary Statement above, Macy’s timely requested a hearing. Case No. 09-6872 J. L., an employee of Major League Aluminum, was injured in a work-related accident on the evening of May 3, 2009, and visited the emergency department of Florida Hospital Orlando. After evaluation and treatment, J. L. was diagnosed with a bruise to the knee and released the next morning. On September 23, 2009, Florida Hospital submitted its bill for services provided to J. L. totaling $2,851 to Amerisure, Major League Aluminum’s workers’ compensation insurer, for payment, utilizing Form DFS-F5-DWC-90, also known as UB-04 CMS-1450, identifying the charges billed for each line item by revenue code and HCPS or CPT codes. Amerisure forwarded the hospital bill to its medical bill review agent, Qmedtrix for review. Qmedtrix’s medical bill review in this case, as in the companion case, entailed comparing the procedure codes and diagnosis codes reported by the hospital with examples in the CPT book. The hospital reported ICD diagnosis code 924.11, which reads “contusion of . . . knee.” The hospital also reported ICD diagnosis codes 724.2 (“lumbago”), E888.1 (“fall on or from ladders or scaffolding”) and 959.7 (“injury, other and unspecified . . . knee, leg, ankle, and foot.”). Florida Hospital billed $1,354 with CPT code 9924 for emergency department services and also billed for X-rays and various drugs and IV solutions. Comparing procedure codes and diagnosis codes reported by the hospital with examples in the CPT book, Qmedtrix concluded that billing with CPT code 99284 was not appropriate, but that billing with CPT code 99282 was. Qmedtrix also found that, while the hospital billed $1,354 with CPT code 99284, the average charge in the community for a visit to the emergency department billed with CPT code 99282 is $721. Qmedtrix determined the “usual and customary charge” in the community from its own database compiled by entering all of particular hospital bills into Qmedtrix’s database, along with data from the American Hospital Directory. Qmedtrix derives the average charge in the community based upon zip codes of the hospitals. Amerisure paid Florida Hospital a total of $1,257.15, which amount included $524.70 for the emergency department visit codes based on 75 percent of what Qmedtrix determined to be the average charge in the community for CPT code 99282. The payment was accompanied by an EOBR. The EOBR Petitioner Amerisure (or its designated entity)6/ issued to Florida Hospital for services rendered to J. L. identifies the amount billed by Florida Hospital as to each line item in a column designated “Billed Charges,” and has columns designated as “FS/UCR Reductions,” “Audit Reductions,” “Network Reductions,” and “Allowance,” each containing an amount for each line item in the “Billed Charges” column. There is also a column entitled “Qualify Code” which sets forth reason codes that are supposed to explain the reason for adjustment of any line item.7/ The code set forth adjacent to the $1,354.00 billed by Florida Hospital for emergency department services is “82,” which means “Payment adjusted: payment modified pursuant to carrier charge analysis.” The EOBR does not advise that the bill was adjusted because of a determination that Florida Hospital should have used CPT code 99282 when billing for the emergency services rendered instead of CPT code 99284 as originally billed. Upon receipt of the payment and the EOBR, Florida Hospital timely filed a Petition for Resolution of Reimbursement Dispute with the Department pursuant to Section 440.13(7)(a), Florida Statutes, and Florida Administrative Code Rule 69L-31, contending that payment should be at 75 percent of its total charges, and citing the Hospital Manual. Qmedtrix timely filed a response to Florida Hospital’s petition on behalf of Amerisure pursuant to Section 440.13(7)(b), Florida Statutes, and Florida Administrative Code Rule 69L-31, asserting that correct payment should be determined based on, first, whether the hospital, in fact, billed its usual charge for the services and, second, whether the hospital’s charges are in line with the charges of other hospitals in the same community, citing One Beacon, supra. Qmedtrix’s response on behalf of Amerisure contended “upcoding” as an additional ground for adjustment or disallowance that was not identified on the EOBR. As in the companion case, the response explained “upcoding,” that CPT codes 99281 through 99285 describe emergency department services, and that the CPT book includes examples of proper billing with these codes. The response further stated that the hospital billed $1,354 with CPT code 99284, and that the CPT book describes an “emergency department visit for a patient with a minor traumatic injury of an extremity with localized pain, swelling, and bruising” as an example of proper billing with CPT code 99282. The response requested a determination by the Department that Amerisure’s payment equaled or exceeded the usual and customary charge for CPT code 99282. On October 20, 2009, the Department’s OMS issued a determination (Determination in 09-6872) which found, in pertinent part: The petitioner asserts that services provided by Florida Hospital Medical Center to the above-referenced injured employee on May 3, 2009, and May 4, 2009, were incorrectly reimbursed. Florida Hospital Medical Center billed $2,851.00 and the carrier reimbursed $1,257.15. The petition does not address a contract and does not reflect a contract discount in the calculation of requested reimbursement. The Carrier Response to Petition for Resolution of Reimbursement Dispute disputes the reasonableness of the hospital’s “usual and customary charges”, maintains the petitioners’ charges should be based on the average fee of other hospitals in the same geographic area, and references a manual not incorporated by rule. There are no rules or regulations within Florida’s Workers’ Compensation program prohibiting a provider from separately billing for individual revenue codes. Therefore, the charges, as billed by the hospital, did not constitute billing errors. The carrier did not dispute that the charges listed on the Form DFS-F5- DWC-90 (UB-92) or the charges listed on the itemized statement did not conform to the hospital’s Charge Master. Nor did the carrier submit the hospital’s Charge Master in the response or assert that the carrier performed an audit of the Charge Master to verify the accuracy of the billed charges. Therefore, since no evidence was presented to dispute the accuracy of the Form DFS-F5- DWC-90 or the itemized statement as not being representative of the Charge Master, the OMS finds that the charges billed by the hospital are the hospital’s usual and customary charges. Rule 69L-7.602, F.A.C., stipulates the appropriate EOBR codes that must be utilized when explaining to the provider the carrier’s reasons for disallowance or adjustment. The EOBR submitted with the petition conforms to the EOBR code requirements of Rule 69L-7.602(5)(q), F.A.C. Only through an EOBR is the carrier to communicate to the health care provider the carrier’s reasons for disallowance or adjustment of the provider’s bill. Pursuant to s. 440.13(12), F.S., a three member panel was established to determine statewide reimbursement allowances for treatment and care of injured workers. Rule 69L-7.501, F.A.C., incorporates, by reference, the applicable reimbursement schedule created by the panel. Section 440.13(7)(c), F.S., requires the OMS to utilize this schedule in rendering its determination for this reimbursement dispute. No established authority exists to permit alternative schedules or other methodologies to be utilized for hospital reimbursement other than those adopted by Rule 69L-7.501, F.A.C., unless the provider and the carrier have entered into a mutually agreeable contract. Rule 69L-7.501, F.A.C., incorporates, by reference, the Florida Workers’ Compensation Reimbursement Manual for Hospitals, 2006 Edition (Hospital Manual). Since the carrier failed to indicate any of the services are not medically necessary, the OMS determined proper reimbursement applying the above referenced reimbursement guidelines. Therefore, the OMS has determined that the carrier improperly adjusted reimbursement to Florida Medical Center for services rendered to the above- referenced injured employee on May 3, 2009, and May 4, 2009. Based on the above analysis, the OMS has determined that correct reimbursement equals $2,138.25 ($2,851.00 x 75% [Hospital Manual]=$2,138.25). The carrier shall reimburse Florida Hospital Medical Center $2,138.25 for services rendered to the above-referenced employee; and submit proof of reimbursement of the amount determined by the OMS within thirty days of the date the Determination is received. . . . The difference between what Petitioner Amerisure paid Florida Hospital for services rendered to J. L. and the amount the Department determined that Petitioner Amerisure is required to pay for such services equals $881.10. The Determination in 09-6872 did not directly address Amerisure’s allegation of the alleged billing error of “upcoding.” The Determination in 09-6872 provided a 21-day notice for request of an administrative hearing and, as noted in the Preliminary Statement above, Amerisure timely requested a hearing. Alleged “Upcoding” for Emergency Department Services The Petitioners’ responses in both cases allege that Florida Hospital “upcoded” its bill for emergency department evaluation and management services. Neither EOBR submitted to Florida Hospital, however, reported alleged “upcoding” as an explanation for the Petitioners’ adjustment or disallowance of reimbursement. While the Dispute Determinations by the Department do not directly address the carrier’s allegation of the alleged billing error of “upcoding” raised in the Petitioners’ responses, they found that “Rule 69L-7.602, F.A.C., stipulates the appropriate EOBR codes that must be utilized when explaining to the provider the carrier’s reasons for disallowance or adjustment[, and that] [o]nly through an EOBR is the carrier to communicate to the health care provider the carrier’s reasons for disallowance or adjustment of the provider’s bill.” According to Mr. von Sydow, who was offered by Petitioners as an expert in billing, coding, reimbursement, and payment issues,8/ the “reason codes” that workers’ compensation carriers are to use pursuant to Florida Administrative Code Rule 69L-7.602, do not mention “upcoding,” and therefore an EOBR could not be generated with a reason code explaining reduction or disallowance based on “upcoding.” The following reason codes, however, are included in Florida Administrative Code Rule 69L-7.602: 23 – Payment disallowed: medical necessity: diagnosis does not support the services rendered. – Payment disallowed: insufficient documentation: documentation does not substantiate the service billed was rendered. – Payment disallowed: insufficient documentation: level of evaluation and management service not supported by documentation. Neither EOBR submitted to Florida Hospital includes reason code 23, 40, or 41. And neither EOBR explains or otherwise suggests that that Florida Hospital’s level of billing was not supported by medical necessity, services rendered, or sufficient documentation. In fact, Petitioners did not disallow reimbursement and do not contend that reimbursement should be denied for any services rendered by Florida Hospital to R. P. and J. L. on the grounds that the billed services were not medically necessary for the injured employees’ compensable injuries. In addition, Petitioners did not adjust or disallow payment for any of the billed procedures on the grounds that the procedures were not provided. In sum, the EOBR’s did not give Florida Hospital notice that alleged “upcoding” was an issue. Even if Petitioner’s EOBR’s gave Florida Hospital notice that it was asserting “upcoding” as a reason to reduce or adjust the hospital’s bill, the evidence does not support a finding that Florida Hospital utilized the wrong code in its billing for emergency department evaluation and management services. The CPT® 2009 Current Procedural Terminology Professional Edition, (Copyright 2008), (CPT book), is adopted by reference in Florida Administrative Code Rule 69L-7.602(3)(d) and Florida Administrative Code Rule 60L-7.020(2). The CPT book sets forth the procedure codes for billing and reporting by hospitals and physicians. The CPT book sets forth CPT codes ranging from 99281 through 99285 used to report evaluation and management services provided in a hospital’s emergency department, described as follows: 99281: Emergency department visit for the evaluation and management of a patient, which requires these 3 key components: A problem focused history; A problem focused examination; and Straightforward medical decision making. Counseling and/or coordination of care with other providers or agencies and provided consistent with the nature of the problem(s) and the patient’s and/or family’s needs. Usually, the presenting problem(s) are self limited or minor. 99282: Emergency department visit for the evaluation and management of a patient, which requires these 3 key components: An expanded problem focused history; An expanded problem focused examination; and Medical decision making of low complexity. Counseling and/or coordination of care with other providers or agencies and provided consistent with the nature of the problem(s) and the patient’s and/or family’s needs. Usually, the presenting problem(s) are of low to moderate severity. 99283: Emergency department visit for the evaluation and management of a patient, which requires these 3 key components: An expanded problem focused history; An expanded problem focused examination; and Medical decision making of moderate complexity. Counseling and/or coordination of care with other providers or agencies and provided consistent with the nature of the problem(s) and the patient’s and/or family’s needs. Usually, the presenting problem(s) are of moderate severity. 99284: Emergency department visit for the evaluation and management of a patient, which requires these 3 key components: A detailed history; A detailed examination; and Medical decision making of moderate complexity. Counseling and/or coordination of care with other providers or agencies and provided consistent with the nature of the problem(s) and the patient’s and/or family’s needs. Usually, the presenting problem(s) are of high severity, and require urgent evaluation by the physician but do not pose an immediate significant threat to life or physiologic function. 99285: Emergency department visit for the evaluation and management of a patient, which requires these 3 key components: A comprehensive history; A comprehensive examination; and Medical decision making of high complexity. Counseling and/or coordination of care with other providers or agencies and provided consistent with the nature of the problem(s) and the patient’s and/or family’s needs. Usually, the presenting problem(s) are of high severity and pose an immediate significant threat to life or physiologic function. Mr. von Sydow testified that a Qmedtrix “medical director,” reviewed Florida Hospital’s bill for services rendered to R. P., but not the medical records, and recommended that the hospital’s charge for emergency department services under CPT 99285 be “re-priced” to Qmedtrix’s determination of the “usual and customary charge” for CPT 99284. Mr. von Sydow acknowledged the need for physician review for some cases (as opposed to review by non-physician coders) by testifying, “The more complicated the medicine, the more likely it is that he [a medical director at Qmedtrix] wants to see it.” Despite Qmedtrix’s original determination to “reprice” the bill from CPT code 99285 to CPT code 99284 (reflected in the reduced payment but not explained in the EOBR), Mr. von Sydow opined that the correct CPT code for emergency department services provided to patient R. P. was 99283, as opposed to 99285 billed by the hospital. Mr. von Sydow testified that his opinion was based upon his own review of the medical records, without the assistance of a medical director or medical expert, and review of examples for the CPT codes for emergency department services from the CPT book, and various provisions of ICD-9 and CPT book coding resources. Aside from the fact that Mr. von Sydow’s opinion differed from the purported recommendation of a Qmedtrix “medical director,” Mr. von Sydow is not a physician. Moreover, Qmedtrix failed to provide the testimony of the medical director, or anyone else with medical expertise to evaluate the medical records and services provided or to validate either the opinion of Mr. von Sydow or the original recommendation to “re- price” Florida Hospital’s use of CPT Code 99285 in its bill for emergency department services rendered to patient R. P. Mr. von Sydow offered similar testimony and examples to explain Qmedtrix’s “re-pricing” of Florida Hospital’s bill from CPT code 99284 to CPT code 99282 for emergency services rendered to patient J. L. on behalf of Amerisure. According to Mr. von Sydow, an internal Qmedtrix coder (not a medical director) reviewed the bill for emergency services rendered to J. L. and determined it should be re-priced to the usual and customary charge, as determined by Qmedtrix, using that CPT code 99282. While knowledgeable of the various codes and their uses, given the manner in which preliminary diagnostics under emergency circumstances drives Florida Hospital’s determination of the appropriate CPT code for billing emergency department services, without the testimony of a medical expert familiar with the medical records generated in these cases in light of the facts and circumstances surrounding the emergency care rendered to patients R. P. and J. L., Mr. von Sydow’s testimony was unpersuasive. Ross Edmundson, M.D., an employee, vice-president, and medical manager for Florida Hospital, explained that, unlike other settings, hospitals generally do not have the medical histories of patients presenting for emergency hospital services. When a patient comes to Florida Hospital for emergency services, they are triaged by a nurse to determine the level of urgency, then a doctor sees the patient, conducts a differential diagnosis to rule out possible causes, obtains the patient’s history, and then performs a physical examination. While emergency room physicians at Florida Hospital do not decide which CPT code is utilized for the evaluation and management services provided by its emergency department, the various tests and procedures they undertake to evaluate and treat emergency department patients do. James English, the director of revenue management for Florida Hospital explained the process through his deposition testimony. Florida Hospital, like over 400 other hospitals, uses the “Lynx System” – a proprietary system for creating and maintaining medical records electronically. The program captures each medical service, supply, and physician order that is inputted into the electronic medical record. The hospital’s emergency evaluation and management CPT code is generated from the electronic record. A “point collection system” in the Lynx System translates physician-ordered services, supplies it to a point system, and then assigns the CPT code that is billed based upon the total number of “points” that are in the system at the time the patient is discharged from the emergency department. The level of the evaluation and management CPT code (99281 to 99285) that is reported on Florida Hospital’s bill is a direct reflection of the number and types of medical services that a patient receives from his or her arrival through discharge. In light of evidence showing the manner in which emergency services are provided and the importance of medical records in generating the appropriate billing code for emergency evaluation and management services, it is found that Petitioners failed to provide an adequate analysis of the medical records of either R. P. or J. L. to show that the appropriate CPT codes were not utilized by Florida Hospital in billing for those services. On the other hand, both Petitions for Resolution of Reimbursement Dispute filed by Florida Hospital with the Department attached appropriately itemized bills utilizing Form DFS-F5-DWC-90, also known as UB-04 CMS-1450, identifying the charges billed for each line item by revenue code and HCPS or CPT codes. In addition, medical records for the evaluation and treatment provided by Florida Hospital for both patients R. B. and J. L. supporting the itemized bills were submitted to the Department. These documents were also received into evidence at the final hearing. Florida Hospital’s bills at issue correctly identified the hospital’s usual charges for each individual and separately chargeable item, service or supply, with the corresponding code assigned to such billable items as maintained in Florida Hospital’s “charge master.” In addition, Petitioners concede the compensability of both patients’ work-related injuries and do not dispute whether any service or supply rendered and billed by Florida Hospital for these two cases were “medically necessary.”9/ Unbundling As noted above, in Case No. 09-6871, Qmedtrix’s response to Florida Hospital’s petition for resolution of reimbursement dispute contended “unbundling” as a ground for adjustment or disallowance of reimbursement. At the final hearing, Arlene Cotton, the nurse who issued the Dispute Determinations, explained that reason code 63 regarding “unbundling” is inapplicable to hospital billing, as there is no rule that requires hospitals to bundle bill for its services. Mr. von Sydow agreed that reason code 63 was inapplicable. In addition, footnote 2 of Petitioners’ Proposed Recommended Order states, “they did not pursue the allegations of unbundling.” Therefore, it is found that Petitioners did not prove and otherwise abandoned their claim of “unbundling” as a ground to adjust or disallow reimbursement to Florida Hospital. Usual and Customary Charges The Dispute Determinations issued by the Department found that correct payment in both cases equaled 75% of billed charges, citing “Rule 69L-7.501, F.A.C., [which] incorporates, by reference, the Florida Workers’ Compensation Reimbursement Manual for Hospitals, 2006 Edition (Hospital Manual). Both Section 440.13(12)(a), Florida Statutes, and the Hospital Manual provide that hospital services provided to patients under the workers’ compensation law “shall be reimbursed at 75 percent of usual and customary charges.” The Department interprets the term “usual and customary charges” as set forth in the Hospital Manual and Section 440.13(12)(a), Florida Statutes, quoted above, to mean a hospital’s usual charges of the hospital, whereas Petitioners contend that “usual and customary charges” means the average fee of all providers in a given geographical area. While apparently not contending that Petitioners failed to raise the issue of “usual and customary” charges in their EOBR’s,10/ at the final hearing, the Department argued that “nowhere in [either Macy’s or Amerisure’s] response is the issue of customary charges raised.” A review of the responses filed by Qmedtrix to Florida Hospital’s reimbursement dispute petitions filed with the Department reveal that both raise the issue of “usual and customary charges.” Paragraphs 3 and 4 of Mr. von Sydow’s letter attached to both responses state: As you may know, the proposed adoption of Medicare’s Outpatient Prospective Payment System as a methodology for reimbursing hospitals 60% and 75% of “usual and customary charges” follows from the decision of the First District Court of Appeals in One Beacon Insurance v. Agency for Health Care Administration, No. 1D05-5459 (Fla. 1st DCA 2007) (SB-50 amended section 440.13 to remove all reference to the charges of any individual service provider; this amendment reveals the legislative intent to eliminate calculation of a “usual and customary charge” based on the fees of any one provider in favor of a calculation based on average fees of all providers in a given geographical area). This court decision requires DFS to define payment rates for out patient service that are uniformly applicable to all hospitals in a given geographic area. In addition, at the final hearing, the Department argued that the petitions for administrative hearing did “not raise as a disputed issue of fact or law whether or not usual and customary charges should apply in this case.” Indeed, a review of the request for relief set forth in the petitions for administrative hearings filed by Petitioners do not mention the issue of “usual and customary charges.” Rather, the relief requested by both petitions for administrative review of the Dispute Determinations, as summarized in the Joint Prehearing Stipulation, is: Petitioner[s] seeks reversal of OMS’ Determination(s) and the matters remanded for the Department to: direct payment based upon the actual treatment required/provided and pursuant to the correct CPT code; find that the hospital upcoded and that Petitioner properly reimbursed (or exceeded amount due); and determine that the hospital has the burden of proof to substantiate its billing and the use of the chosen CPT code. Contrary to the Department’s argument, however, both petitions for administrative hearing raise the issue of “usual and customary charges.” Page 9 of Macy’s petition, in pertinent part states: Petitioner submits that in issuing the above findings OMS failed to consider the holding in One Beacon Insurance v. Agency for Health Care Administration (wherein the Court determined that reimbursement should not be based solely upon a mathematical equation [as found within the Reimbursement Manual] and applying it to the fee charged by a particular provider; and that by eliminating the reference to any one facility’s charges, the legislature intended that the charges be based on average fees of all providers in a geographical area as opposed to the fees of the particular provider in question). Likewise, review of Amerisure’s petition for administrative hearing reveals that the issue of “usual and customary charges” was raised. Pages 7 and 8 of Amerisure’s petition state, in pertinent part: Further, if the Hospital is permitted to utilize incorrect revenue codes it would be impossible to determine whether the charges are consistent with the Hospital’s own [usual and customary] charges for the service, procedure or supplies in question and, further, whether such charges are consistent with charges by other like facilities (in the same geographical area) for the same services, procedures, or supplies. See One Beacon Insurance, supra. In addition, Amerisure’s petition on page 12 states with regard to the Department’s determination: Such finding was issued without consideration of . . . the amounts charged for the same services in the Orlando area where this hospital is located. Petitioners further preserved the issue of “usual and customary charges” in the first paragraph of their statement of position on page 3 of the Joint Prehearing Statement, as follows: Petitioners, Macy’s and Amerisure, take the position that the Determinations must be reversed as the Department has the duty to scrutinize the bills in question in order to determine, first, whether the hospital, in fact, charged its usual charge for the services provided, and second, whether the billed charges are in line with the customary charges of other facilities in the same community (for the same or similar services) and that the Department failed to do so. As such, Petitioners contend that payment for services provided by Florida Hospital should have been based upon 75% of usual and customary charges, not 75% of billed charges. Therefore, it is found that Petitioners have preserved the issue of “usual and customary charges” for consideration in this administrative proceeding. Although preserved, Petitioners failed to demonstrate that their interpretation of “usual and customary charges” should prevail. The Department has consistently interpreted the term “usual and customary charges” as used in the Hospital Manual, Section 440.13(12)(a), Florida Statutes, and rules related to hospital reimbursement under the workers’ compensation law as the “usual and customary charges” of the hospital reflected on the hospital’s “charge master.” The Hospital Manual requires each hospital to maintain a charge master and to produce it “when requested for the purpose of verifying its usual charges. . . .” (Emphasis added). Petitioners did not conduct or request to conduct an audit to verify whether the charges billed by Florida Hospital corresponded with the Florida Hospital’s charge master. In fact, Mr. von Sydow conceded at the final hearing that Florida Hospital’s bills at issue were charged in accordance with Florida Hospital’s charge master. Nor did Petitioners institute rule challenge proceedings against the Department regarding the Hospital Manual, incorporated by reference into Florida Administrative Code Rule 38F-7.501. Instead, Petitioners assert that they should be able to reduce Florida Hospital bills based upon a different interpretation of the phrase “usual and customary charges” to mean the average charge in the community as determined by Qmedtrix. Qmedtrix is not registered with the Florida Department of State, Division of Corporations, and does not employ any Florida-licensed insurance adjuster, physician, or registered nurse. Qmedtrix earns 12 to 15 percent of “savings” realized by carriers utilizing their bill review services. For example, if a bill is reduced by $100, Qmedtrix is paid $12.11/ Qmedtrix uses a proprietary bill review system called “BillChek.” According to Qmedtrix’s website: BillChek reviews out-of-network medical charges for all bill types in all lines of coverage, including group health, auto, medical, and workers’ compensation. BillChek is a unique specialty cost- containment service that determines an accurate and reasonable reimbursement amount for non-network facility and ancillary medical charges. BillChek incorporates historical data to help determine reasonable payment recommendations across all sectors of the health care industry. All BillCheck recommendations are backed by extensive medical and legal expertise, and supported by Qmedtrix’s experienced Provider Relations and Dispute Resolution teams. According to the testimony of Mr. von Sydow, Qmedtrix collects and maintains data from various sources, including Florida’s Agency for Health Care Administration (AHCA), the American Hospital Directory (AHD.com), and HCFA 2552’s (data reported to the Centers of Medicare and Medicaid Services on HCFA 2522) in order to construct a database of health care providers’ usual charges. Mr. von Sydow advised that AHD.com data was a principle source for constructing the database. He also advised that AHCA data was included in the database even though Qmedtrix found the AHCA data defective. Examples of data downloaded from AHD.com for Florida Hospital showing a profile of the facility was received into evidence as P-5. The data did not, however, show usual charges for the CPT codes for emergency department services at issue in this case. Petitioners also introduced into evidence Exhibits P-6 and P-7, which contained AHD.com data showing average charges for Florida Regional Medical Center and Florida Hospital, respectively, for Level 1 through Level 5 emergency room visits (corresponding to CPT codes 99281 through 99285). Mr. von Sydow explained that the data was part of the information Qmedtrix used to construct the average charge in the community. Petitioners failed to provide similar AHD.com data for other hospitals in the area Qmedtrix determined to be the “community.” In addition, Petitioners introduced AHCA’s Florida Health Finder Web-site, as Exhibit P-8, which ostensibly included average charges for all hospitals in Florida for the subject emergency department CPT codes (99281 through 99285). Mr. von Sydow explained, however, “[w]e find that [the AHCA data] is not refreshed very often, unfortunately, and some other defects in the scrubbing of the data by the agency, which they know, I will say. But this is incorporated in our database to a large extent.” The exhibit was received into evidence for the purpose of helping to explain how Qmedtrix constructed its database, with the recognition that it was largely composed of hearsay. In sum, while Petitioners showed their methodology of constructing the database, other than the AHD.com data for Orlando Regional Medical Center and Florida Hospital, Petitioners failed to introduce reliable evidence sufficient to show the “usual and customary charge” of all providers in a given geographical area as determined by Qmedtrix. In addition, the AHCA data, though characterized by Mr. von Sydow as unreliable, indicates that there is a wide range of differences in emergency room charges between hospitals in Florida. Petitioners’ interpretation of “usual and customary charge” to mean the average fee of all providers in a given geographical area does not take into account an individual hospital’s indigent care, cost of labor, overhead, number of beds, size, age, or various other differences between facilities that could affect amounts each hospital charges for emergency department and other services; the Department’s interpretation does.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers’ Compensation, enter a Final Order consistent with this Recommended Order that: Directs Macy’s Claims Services to reimburse Florida Hospital Medical Center $4,160.40 for services rendered to patient R. P., and to submit proof of reimbursement of that amount within 30 days from the date the Final Order is received; Directs Amerisure Mutual Insurance Company to reimburse Florida Hospital Medical Center $2,138.25 for services rendered to patient J. L., and submit proof of reimbursement of that amount to the Department within 30 days from the date the Final Order is received. DONE AND ENTERED this 17th day of June, 2010, in Tallahassee, Leon County, Florida. S JAMES H. PETERSON, III Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 17th day of June, 2010.
The Issue Whether Petitioner's September 29, 1993, claim (Claim No. 34092993) for reimbursement of expenses for medical services rendered in 1992 should be denied on the ground that said claim was not timely filed with Department of Management Services, Division of State Employees' Insurance (hereinafter referred to as the "Department")?
Findings Of Fact Based upon the evidence adduced at hearing, and the record as a whole, the following Findings of Fact are made: Petitioner is now, and has been at all times material to the instant case, a participant in the State of Florida Flexible Benefits Plan (hereinafter referred to as the "Plan") with an established Medical Reimbursement Account. The following were among the medical expenses incurred by Petitioner and members of her immediate family during the 1992 calendar year: DATE TYPE OF SERVICE AMOUNT 6/29/92 Dental $70.00 7/9/92 Dental $310.00 7/11/92 Endodontic $450.00 7/17/92 Optical $266.75 7/22/92 Dental $500.00 7/27/92 Optical $84.70 8/19/92 Optical $416.50 12/29/92 Dental $210.00 In August of 1992, Hurricane Andrew ravaged parts of South Florida. Petitioner's residence was extensively damaged by the storm. Most of the contents of the residence, including medical records and receipts, were destroyed. Petitioner and her family were forced to vacate the premises. They packed their remaining belongings and moved to another location in Dade County, with the intention of returning to their home once the damage to the structure had been repaired. As of the date of the hearing in this case, all of the necessary repairs to the home had yet to be made and therefore the family had not moved back in. Petitioner and the other members of her family were among those residents of South Florida whose lives were significantly disrupted by the hurricane and the destruction and devastation it caused In the aftermath of the hurricane, Petitioner directed her energies toward obtaining a return to normalcy in her life. Although she realized that there were medical expense reimbursement claims that she needed to file with the Department, filing these claims was not a priority of hers. She focused her attention on other matters that she considered to be more deserving of her time given her situation. In January or February of 1993, Petitioner telephoned the Department to inquire if extensions of time for filing reimbursement claims were being given to Plan participants, such as herself, who were still suffering from the consequences of Hurricane Andrew. The person to whom Petitioner spoke advised her that such extensions were indeed being given. Based upon what she had been told by this Department representative, Petitioner reasonably believed that she would be able to file reimbursement claims for 1992 medical expenses after March 1, 1993, without having these claims rejected on the ground that they had been untimely filed. She therefore felt that there was no urgency with respect to the filing of these claims and she acted accordingly. Shortly after gathering all of the supporting documentation she believed she needed, 1 Petitioner, on September 29, 1993, filed a claim with the Department requesting that she be reimbursed from her Medical Reimbursement Account for the medical expenses enumerated in Finding of Fact 2 of this Recommended Order. The Department designated the claim as Claim No. 34092993. Petitioner also sought reimbursement, through the filing of this claim, of certain medical expenses incurred in 1993, including $140.00 for dental work that Petitioner had inadvertently indicated on the claim form had been performed in July of 1992. The work had actually been done in July of 1993. By letter dated October 8, 1993, the Department advised Petitioner that "[o]nly expenses for services rendered during the January 1, 1993 through December 31, 1993 plan year are eligible for reimbursement" and that "[s]ince [her] 1992 expense does not fall within this plan year, it is not reimbursable." Petitioner responded to this advisement by sending the following letter, dated November 28, 1993, to the Department: This is a petition or application requesting a formal hearing on my Claim #34092993 for Payment/Reimbursement for expenses incurred during my period of coverage for 1992. This Claim was denied. My Name is: Luretha F. Lucky My Address is: 10430 S.W. 162nd Terrace (temporary) Miami, Florida 33157 My permanent address is: 10361 S.W. 139th Street Miami, Florida 33176 I am employed at Florida International University, Miami, Florida 33199. I filed my claim late because my home was severely damaged when hit [b]y Hurricane Andrew, August 24, 1992. In addition, the content[s] in my home w[ere] destroyed, therefore, it took awhile for me to collect documentation for my claim from medical personnel. Also, I had to move and the few items saved were packed away. Lastly, I called the Department of Management Services, Division of State Employees' Insurance to inform them of what had happened to me and asked if . . . they were providing extensions on submitting claims. I was told they were. My mistake was not asking and recording the name of the person with whom I spoke. As you can see from my temporary address, I am still not back in my home! In fact we just settled (with the assistance of the Insurance Commissioner's Office) with our insurance company to complete the work on our home. We had to request an extension on filing our income tax for 1992. This past year has been an awful experience for us, and I do hope you will provide me a hearing on my reimbursement. My Claim # is: 34092993. The decision that my claim was denied was received by regular mail. Thank you very much for considering my request.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby: RECOMMENDED that the Department enter a final order finding Petitioner's September 29, 1993, claim (Claim No. 34092993) for reimbursement of expenses for medical services rendered in 1992 to have been timely filed and therefore subject to consideration on its merits. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 15th day of April, 1994. STUART M. LERNER 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 15th day of April, 1994.
The Issue The issues for decision in these cases, based upon the relief sought by Petitioners1 in their Petitions for Formal Administrative Hearing, are: whether Petitioners are entitled to "full credit or refunds of Medical Assistance Trust Fund assessments" paid by Petitioners to Respondent, the Agency for Health Care Administration, and if so, the amount of the refund each Petitioner is entitled to; whether Respondent denied the requested credit or refunds by an unadopted rule which constitutes an "invalid exercise of delegated legislative authority"; and whether Petitioners are entitled to reasonable costs and attorneys' fees pursuant to Section 120.595, Florida Statutes (2004).
Findings Of Fact The Parties. Each of the Petitioners is a hospital licensed in the State of Florida. Petitioners have standing to participate in this proceeding. Respondent, the Agency for Health Care Administration (hereinafter referred to as the "Agency"), is the agency of the State of Florida charged with the responsibility for, among other things, management of the Public Medical Assistance Trust Fund (hereinafter referred to as the "PMATF"). The PMATF. Establishment and Purpose of the PMATF The PMATF, which was established by the Legislature in 1984, is provided for, and its purpose described in, Section 409.918, Florida Statutes (2004): It is declared that access to adequate health care is a right which should be available to all Floridians. However, rapidly increasing health care costs threaten to make such care unaffordable for many citizens. The Legislature finds that unreimbursed health care services provided to persons who are unable to pay for such services cause the cost of services to paying patients to increase in a manner unrelated to the actual cost of services delivered. Further, the Legislature finds that inequities between hospitals in the provision of unreimbursed services prevent hospitals that provide the bulk of such services from competing on an equitable economic basis with hospitals that provide relatively little care to indigent persons. Therefore, it is the intent of the Legislature to provide a method for funding the provision of health care services to indigent persons, the cost of which shall be borne by the state and by hospitals that are granted the privilege of operating in this state. All moneys collected pursuant to s. 395.701 shall be deposited into the Public Medical Assistance Trust Fund, which is hereby created. Moneys deposited into the Public Medical Assistance Trust Fund shall be used solely for the purposes specified by law. [Emphasis added]. Funding of the PMATF Funding of the PMATF is provided for, in relevant part, by Section 395.701(2), Florida Statutes (2004). Section 395.701(2), Florida Statutes (2004), provides that all hospitals, with a few exceptions not relevant to this matter, are responsible for the partial funding of the PMATF. The following definitions pertinent to assessments of PMATF funds from Florida hospitals are provided in Section 395.701(1), Florida Statutes (2004): For the purposes of this section, the term: "Agency" means the Agency for Health Care Administration. "Gross operating revenue" or "gross revenue" means the sum of daily hospital service charges, ambulatory service charges, ancillary service charges, and other operating revenue. "Hospital" means a health care institution as defined in s. 395.002(11), but does not include any hospital operated by the agency or the Department of Corrections. "Net operating revenue" or "net revenue" means gross revenue less deductions from revenue. "Total deductions from gross revenue" or "deductions from revenue" means reductions from gross revenue resulting from inability to collect payment of charges. Such reductions include bad debts; contractual adjustments; uncompensated care; administrative, courtesy, and policy discounts and adjustments; and other such revenue deductions, but also includes the offset of restricted donations and grants for indigent care. In addition to amounts paid into the PMATF by hospitals, funds, referred to as "matching" funds, are also paid into the PMATF by the Federal government. The Rate of, and Basis for, the PMATF Assessment In providing for the imposition of a PMATF assessment against hospitals, the Legislature has established a rate of assessment and designated what that rate is to be assessed against, or the hospital's assessable basis. Prior to the 2000 legislative amendment of Section 395.701(2), Florida Statutes, which is at issue in these cases, the rate of assessment established by the Legislature was 1.5 percent. The Legislature has also provided that the assessable basis is a hospital's "net operating revenue." The Legislature has defined "net operating revenue" for purposes of the PMATF assessment as a hospital's "gross revenue less deductions from revenue." § 395,701(1)(d), Fla. Stat. (2004). "Gross revenue" is defined as "the sum of daily hospital service charges, ambulatory service charges, ancillary service charges, and other operating revenue," more commonly referred to as inpatient services revenue, outpatient services revenue, and other operating revenue. § 395.701(1)(b), Fla. Stat. (2004). Prior to the amendment of Section 395.701(2), Florida Statutes, adopted during the 2000 legislative session at issue in these cases, the PMATF assessment was imposed on a hospital's "net operating revenue" at the same rate regardless of whether the revenue was derived from inpatient services, outpatient services, or other operating services.9 Hospital PMATF Reporting Requirements Hospitals in Florida are required to provide extensive financial information to the Agency utilizing the Florida Hospital Uniform Reporting System, Florida Administrative Code Chapter 59E-5 (hereinafter referred to as "FHURS"). In particular Florida Administrative Code Rule 59E-5.201, provides that "[e]ach hospital shall submit to the Agency, not more than 120 days subsequent to the end of its fiscal year, its prior year report for the fiscal year then ended." A hospital's FHURS report (hereinafter referred to as "Prior Year Report") is received and processed by the Agency's Financial Analysis section, which is contained in the Agency's Bureau of Health Facility Regulation. Once received, Financial Analysis is required to review the report and determine if the report is "accepted" or "not accepted." Fla. Admin. Code R. 59E- 5.204(3). Financial Analysis is required by Florida Administrative Code Rule 59E-5.204(3) to notify the submitting hospital as to whether its Prior Year Report has been accepted or not within 90 days after the report is received by the Agency. Prior Year Reports contain, in addition to numerous other items of financial information, the information required by the Agency to actually calculate the amount of a hospital's PMATF assessment. The Agency's Determination of the Amount of a Hospital's PMATF Assessment; Hospital Notification Once a hospital's fiscal year has ended and it has filed its Prior Year Report, Section 395.701(2), Florida Statutes (2004), charges the Agency with the responsibility for calculating and collecting the hospital's PMATF assessment. Pursuant to Florida Administrative Rule 59E-5.605(1), it is contemplated that the Agency's Bureau of Health Facility Regulation, through its Financial Analysis section, will make the calculation of the amount of a hospital's PMATF assessment and "certify" that amount to the Agency's Bureau of Finance and Accounting (hereinafter referred to as the "Bureau of F&A"). The financial information necessary to calculate a hospital's PMATF assessment is obtained from the hospital's Prior Year Report. This information may be obtained before Financial Analysis has decided whether a Prior Year Report will be accepted or not. Once informed by Financial Analysis of the PMATF assessment, the Bureau of F&A is then responsible for notifying the hospital of the amount of the assessment and then collecting the hospital's payment thereof. Florida Administrative Code Rule 59E- 5.605(3) provides that, once a hospital is notified of its assessment the hospital "[m]ay request a hearing pursuant to Section 120.57, F.S." The request for hearing is to be made "[w]ithin 21 days of receipt of notification of the assessment amount . . . ." Fla. Admin. Code R. 59E-5.605(3). Section 395.701(2), Florida Statutes (2004), provides that the Bureau of F&A is to certify the amount of a hospital's PMATF assessment "[w]ithin 6 months after the end of each hospital fiscal year . . ." and, therefore, it is contemplated that the calculation by the Agency of the PMATF assessment will be accomplished within the same period of time. Payment and Deposit of PMATF Assessments Section 395.701(2), Florida Statutes (2004), provides that, once the Agency has calculated a hospital's PMATF assessment and notified the hospital thereof, the hospital will pay the assessment to the Agency as follows: The assessment shall be payable to and collected by the agency in equal quarterly amounts, on or before the first day of each calendar quarter, beginning with the first full calendar quarter that occurs after the agency certifies the amount of the assessment for each hospital. § 395.701(2), Fla. Stat. (2004). All PMATF assessments received by the Agency are to be deposited into the PMATF. Id. Application of Section 395.701, Florida Statutes (1999), to a Hypothetical Hospital, Using the 1999 Rate of Assessment and Assessable Basis In an effort to demonstrate how Section 395.701, Florida Statutes, is intended to operate, the following hypothetical may be helpful. Assume a hospital has a fiscal year ending December 31, 1999, and, during that fiscal year, it had net operating revenue of $10,000,000.00. Applying the PMATF assessment rate prior to the 2000 amendment of Section 395.701(2), Florida Statutes (1999), at issue in these cases, which was 1.5 percent, the hypothetical hospital's PMATF assessment would be $150,000.00 and the assessment would be payable in equal quarterly amounts of $37,500.00. The hypothetical hospital would be subject to the following time-lines relevant to the assessment and payment of its PMATF1: Fiscal year end: December 31, 1999; 1999 Prior Year Report due: April 30, 2000; Agency notification to the hospital that the Prior Year Report is accepted or not accepted: July 29, 2000; and Certification of the PMATF assessment: June 30, 2000; Time to request an administrative hearing: July 21, 2000; Quarterly payments of the PMATF assessment due: July 1, 2000, October 1, 2000, January 1, 2001, and April 1, 2001. Application of Section 395.701(2), Florida Statutes, in Reality While the hypothetical application of Section 395.701(2), Florida Statutes (1999), supra, is consistent with the statute and applicable rules, in reality the times-lines noted in paragraph 23 are inconsistent with actual practices of hospitals and the Agency. These inconsistencies are relevant to the extent that they ultimately impact the actual payment and receipt of PMATF funds from hospitals, which in turn has some bearing on the resolution of these cases. First, a Prior Year Report for a December 31, 1999, fiscal year-end hospital would not likely have been filed on or before April 30, 2000.11 Even though Prior Year Reports are generally required to be filed within 120 days after the end of a hospital's fiscal year, hospitals often request and are granted extensions of time to file the reports. Secondly, the Agency would not have been likely to determine by July 29, 1999, whether a Prior Year Report for a December 31, 1999, fiscal year-end hospital was accepted or not accepted. Even after a hospital has filed its Prior Year Report, it is often determined that additional information is necessary before the Agency can proceed. Requesting and obtaining this additional information can delay the time when a Prior Year Report is actually "accepted" or "not accepted." Thirdly, as a result of the fact that the applicable statute and rules do not require that a hospital's Prior Year Report be accepted or not accepted prior to the certification of a PMATF assessment and due to delays in the filing of Prior Year Reports and the Agency's acceptance thereof, the Agency is not able to base its calculation of a PMATF assessment on an accepted Prior Year Report in the great majority of instances. Approximately 70 percent of Petitioners had their 2000 fiscal year Prior Year Reports used to calculate the amount of their PMATF assessments before those reports had been accepted or not accepted. The fact that Prior Year Reports have not been "accepted" or "not accepted" does not in practice, however, delay the Agency's calculation of the PMATF assessment. In practice, the Agency determines that the Prior Year Report is provisionally accepted and goes forward with the calculation of the PMATF assessment without regard to whether Financial Analysis has completed its review of the Prior Year Report. Fourthly, although it is contemplated that the Agency's Financial Analysis section is to calculate and certify the amount of a PMATF assessment to the Bureau of F&A, the Bureau of F&A actually makes the calculation. Fifthly, the Agency has abandoned the practice, required by Section 395.701(2), Florida Statutes, of "certifying" the amount of a hospital's PMATF assessment. Instead, the Agency simply sends an invoice to the hospital which informs the hospital of the amount of its quarterly assessment.12 The Agency does not notify the hospital in the invoice of any point of entry or time constraint on requesting an administrative hearing to challenge the invoice. Due to some of the foregoing described practices, in reality the actual payment of the assessment by a hospital of its PMATF assessment is likely to be significantly later than contemplated by the statute. For example, Petitioners' Exhibit numbered 8 is an example of the actual experience of one of Petitioners, Brandon Hospital. Despite the fact that this hospital's fiscal year ended December 31, 1995, the invoice for its PMATF assessment for that year was dated March 2, 1998, and its first quarterly payment was not due until April 3, 1998, more than two years after the end of its fiscal year. Summary Based upon the foregoing, it is clear that the Legislature, prior to its amendment of Section 395.701, Florida Statutes, during the 2000 session, and as implemented by relevant rules of the Agency, had established the following necessary components of the PMATF assessment: Who the PMATF assessment is imposed on: hospitals; The rate of the PMATF assessment: 1.5 percent; The assessable basis for the PMATF assessment: annual net operating revenue (inpatient, outpatient, and other incomes) actually experienced during the hospital's previous fiscal year; Who provides the information necessary to compute annual net operating revenue: hospitals; Who calculates the PMATF assessment: the Agency; How a hospital learns of its PMATF assessment: the Agency is supposed to "certify" the assessment, but in reality merely invoices the hospital; and When a PMATF assessment is payable: in quarterly installments beginning with the first full calendar quarter after the Agency "certifies" (invoices, in practice) the amount of the assessment. The one necessary component of the PMATF assessment which Section 395.701, Florida Statutes, both before or after its amendment in 2000, does not specifically state is the exact point in time that the PMATF assessment is to be imposed. In other words, while the statute specifically states that the rate of assessment is "1.5 percent," it does not specifically state that the assessment will be imposed "at one second after the end of the hospital's fiscal year" or other equivalent language. This lack of a specific "statement," however, does not mean that the determination of when a PMATF assessment is intended by the Legislature to be imposed, the dispositive issue in these cases, is not clear from the language of the statute.13 That intent, which is concluded to be unambiguous, will be discussed, infra. The 2000 Legislative Change to the PMATF; Chapter 2000- 256, Laws of Florida. The Relevant Changes in Section 395.701(2), Florida Statutes During the 2000 legislative session, Chapter 2000-256, Laws of Florida, the "Patient Protection Act of 2000" (hereinafter referred to as the "Act"), was passed. Relevant to this proceeding, the Act modified Section 395.701(2), Florida Statutes (1999), as follows: (2)(a) There is imposed upon each hospital an assessment in an amount equal to 1.5 percent of the annual net operating revenue for inpatient services for each hospital, such revenue to be determined by the agency, based on the actual experience of the hospital as reported to the agency. Within 6 months after the end of the each hospital fiscal year, the agency shall certify the amount of the assessment for each hospital. The assessment shall be payable to and collected by the agency in equal quarterly amounts, on or before the first day of each calendar quarter, beginning with the first full calendar quarter that occurs after the agency certifies the amount of the assessment for each hospital. All moneys collected pursuant to this subsection shall be deposited in the Public Medical Assistance Trust Fund. (b) There is imposed upon each hospital an assessment in an amount equal to 1 percent of the annual net operating revenue for outpatient services for each hospital, such revenue to be determined by the agency, based on the actual experience of the hospital as reported to the agency. Within 6 months after the end of the each hospital fiscal year, the agency shall certify the amount of the assessment for each hospital. The assessment shall be payable to and collected by the agency in equal quarterly amounts, on or before the first day of each calendar quarter, beginning with the first full calendar quarter that occurs after the agency certifies the amount of the assessment for each hospital. All moneys collected pursuant to this subsection shall be deposited in the Public Medical Assistance Trust Fund. [Emphasis in original; words and letters underlined denote additions to Section 395.701(2), Florida Statutes.]. Of significance to the resolution of these cases, the Legislature, in passing the Act, made the following changes in the PMATF, and no others: First, the 1.5 percent PMATF assessment rate was limited to net operating revenue from inpatient services; Secondly, the rate imposed on net operating revenue from outpatient services was reduced from 1.5 percent to 1.0 percent; and Finally, the imposition of the PMATF assessment on other operating revenue was eliminated. Also of significance to the resolution of these cases, is the fact that the Legislature, in passing the Act, did not make any change to the following necessary components of the PMATF assessment: Who the PMATF assessment is imposed on; Who provides the information necessary to compute net operating revenue; Who calculates the PMATF assessment; How a hospital learns of its PMATF assessment; and When a PMATF assessment is payable. Of greatest significance to the resolution of these cases, is the fact that the Legislature, in passing the Act, did not make any change or even discuss when it intended for a PMATF assessment to be imposed. The Effective Date of the Act Generally, and the Changes to the PMATF in Particular Section 64 of the Act provides that "except as otherwise provided herein, this Act shall take effect on July 1, 2000." Section 22 of the Act provides the following concerning the effective date of the relevant changes to the PMATF: The amendments to Sections 395.701 and 395.701(5), Florida Statutes, by this Act shall take effect only upon the Agency for Health Care Administration receiving written confirmation from the Federal Health Care Financing Administration that the change outlined in such amendments will not adversely affect the use of the remaining assessments as state match for the State's Medicaid Program. The effect of Section 22 of the Act was to require that the Agency, as a condition upon the imposition of the changes to the PMATF, seek and obtain assurances from the Federal Health Care Financing Administration (hereinafter referred to as "HCFA"), that the reduction in the rate of the PMATF assessment on outpatient revenues and the other PMATF changes would not have any adverse effect on the amount of "matching funds" which the Federal government would pay to Florida's Medicaid Program. On or about June 9, 2000, the Agency sought the required assurances contemplated by the Act from HCFA. Those assurances were received prior to July 1, 2000.14 Based upon the foregoing, there is not dispute in these cases that the effective date of the reduction in the rate of the PMATF assessment on revenue from outpatient services, the elimination of the PMATF on other operating revenue, and the other PMATF changes included in the Act was July 1, 2000. The $28.3 Million Appropriation of PMATF Funds When considering the adoption of the changes to the PMATF ultimately made by the Legislature during the 2000 legislative session, the Legislature realized that the reduction of the rate of the PMATF applicable to a hospital's net operating revenue from outpatient services, from 1.5 percent to 1.0 percent (hereinafter referred to as the "Reduced Rate") and the elimination of the PMATF assessment on other operating revenue would cause a significant reduction in the total payments made to the PMATF by hospitals and, consequently, the amount of matching funds from the Federal government. The Legislature also realized that the reduction would begin to occur during the state's fiscal year beginning July 1, 2000, the effective date of the Act. It was also realized that the reduction in PMATF funds would be a recurring one. In recognition of the need to continue to fund the PMATF and to avoid the loss of Federal matching funds, the Legislature attempted to make up for the loss in PMATF funds by including the following in the Act: Section 20 - The Legislature shall appropriate each fiscal year from either the General Revenue Fund or the Agency for Health Care Administration Tobacco Settlement Trust Fund, an amount sufficient to replace the funds lost due to reduction by this Act of the assessment on other health care entities under Section 395.7015, Florida Statutes, and the reduction by this Act on the assessment on hospitals under Section 395.701, Florida Statutes, and to maintain federal approval of the reduced amount of funds deposited into the Public Medical Assistance Trust fund under Section 395.701, Florida Statutes, as state match for the state's Medicaid Program. Section 21 -There is hereby appropriated the sum of $28.3 million from the General Revenue Fund to the Agency for Health Care Administration to implement the provisions of this Act relating to the Public Medical Assistance Trust Fund, provided, however, that no portion of this appropriation shall be effective that duplicates a similar appropriation for the same purpose contained in other legislation from the 2000 Legislative Session that becomes law. Thus, the Legislature indicated its intention to replace the recurring loss of PMATF collections from hospitals caused by the Act and provided for the replacement of funds expected to be lost during the first fiscal year for which the changes were effective, the July 1, 2000 to June 30, 2001, fiscal year. The $28.3 million appropriation was arrived at by first estimating the total collections projected to be made during the state's fiscal year beginning July 1, 2000, of PMATF assessments without the modifications to the PMATF adopted in the Act, and then estimating the extent to which those collections would be reduced as a result of the modifications to the PMATF. Total PMATF collections projected for the fiscal year, without the modifications adopted in the Act, were estimated to be $84.9 million and it was estimated that approximately one-third of projected collections, or $28.3 million, would be lost as a result of the modifications to the PMATF.15 The Agency did not suggest to the Legislature that the $28.3 million appropriation was excessive and yet, when the amount of the appropriation approved by the Legislature is compared with the amount which the Agency has argued in these cases hospitals should receive in refunds, the amount of the appropriation is excessive. The Agency has made no effort to explain its apparent inconsistent positions.16 The Agency's Analysis of the Act On May 31, 2000, following the passage of the Act but before it became law, the Agency submitted a bill analysis and economic impact statement on the Act to the Office of the Governor, accompanied by a cover letter under the signature of the then Agency Secretary, Ruben King-Shaw, Jr. In the cover letter, Mr. King-Shaw recommended that the Governor sign the Act into law. In the Agency's analysis of the Act, the Agency describes the changes to the PMATF adopted in the Act, including the Reduced Rate, and suggests that the fiscal impact of the provisions of the Act related to the PMATF would be a $23.1 million17 reduction in PMATF assessment revenues during the state's fiscal year beginning July 1, 2000. Explaining the projected loss, the Agency stated the following: The reduction in the rate of assessments outlined above will mean that approximately $28.3 million in revenue will be lost to the Public Medical Assistance Trust Fund. Alternative state funding will be required. If the alternative state funding is not appropriated, the Medicaid Program will be required to reduce services by $65.2 million ($28.3 million state, and $36.9 million federal matching funds). The bill provides for an appropriation from the general revenue fund of $28.3 million to replace the funds lost due to the repeal of the assessments. Petitioners' Exhibit 2, Bate Stamp Page 2-19. The Agency's analysis of the Act also contains, beginning at Bate Stamp Page 2-32 of Petitioners' Exhibit 2, a "Fiscal Impact on State Agencies/Funds" section describing the projected financial impact of the Act. Among other things, this Fiscal Impact section notes that, during the state's fiscal year beginning on the effective date of the Act, the projected loss of just over $28.3 million in total PMATF assessment collections from hospitals expected during that fiscal year would be made up for by the $28.3 million appropriated by the Legislature in the Act. Again, the Agency's analysis is inconsistent with the position it was later to take and the position it now takes in this proceeding as to when the Reduced Rate should apply to PMATF assessments. The Agency's analysis is, however, consistent with the conclusion that the Reduced Rate was to have an immediate impact on PMATF assessment collections during the state's fiscal year beginning on the effective date of the Act. Again, the inconsistency in the Agency's position in these cases with the analysis provided to the Governor was not explained by the Agency during the hearing of these cases. The Agency's Changed Interpretation of the Act. Although the Agency's analysis of the Act's impact on the PMATF provided to the Office of the Governor suggests that it believed that the Reduced Rate would have an impact during the fiscal year beginning July 1, 2000, the Agency did not take any immediate steps to implement the Reduced Rate and ultimately changed its position on the issue before it could do so. When exactly the Agency decided to interpret the changes to the PMATF of the Act differently from the position it took during the legislative session and its analysis provided to the Office of the Governor has not been explained by the Agency. Nevertheless, at some point after its analysis was provided to the Office of the Governor, the Agency did indeed formulate an inconsistent interpretation. In an e-mail dated November 2, 2000, Lamon Lowe of the Agency's Medicaid office reported the following to Chris Augsburger, head of the Agency's Financial Analysis section: Dyke asked me to notify you about the Agency's position on the date that the reduction of assessments from 1.5% to 1.0% for the PMATF would go into effect. Dyke had a recent conversation with Secretary King-Shaw. Per Secretary King-Shaw, any revenue earned after July 1, 2000, would be assessed at the new rate of 1.0%. Petitioners' Exhibit 4, Bate Stamp Page 4-1. Based upon this e-mail, it appears that the Agency's position taken in this proceeding was formulated at some time immediately before the e-mail was sent by Mr. Lowe. Despite the fact that the position of the Agency reflected in Mr. Lowe's e-mail is inconsistent with the position taken by the Agency in its analysis of the Act, the Agency gave no explanation of the e-mail or its meaning at the hearing of these cases. Social Services Estimating Conference of November 9, 2000. On November 9, 2000, the Agency, through Tony Swinson, Senior Management Analyst Supervisor for the Agency, attended a meeting known as the Social Services Estimating Conference18 (hereinafter referred to as the "SSE Conference"). The purpose of the SSE Conference held on November 9, 2000, was to compare the state's fiscal year 2000-2001 projected expenditures to appropriations and to estimate and project Medicaid fund needs for the state's fiscal year 2001-2002. At the time of the SSE Conference held on November 9, 2000, the Agency projected a $519 million deficit in Medicaid services to individuals and a $640 million deficit in all Medicaid services for the state's fiscal year beginning July 1, 2000. These projections are contained in the report, Respondent's Exhibit 22, prepared by the SSE Conference. These findings suggest a motive for the change in the Agency's position: the need to deal with what was projected to be a significant deficit in funds available to meet Medicaid expenditures. The change in Agency position allowed the use of the $28.3 million appropriation to the PMATF, the continued collection of PMATF funds from hospitals during the fiscal year beginning July 1, 2000, and federal matching funds on both amounts. At some time after issuance of the SSE Conference's report of its November 9, 2000, meeting, the Agency, through Mr. Swinson, added the following footnote to the report on what has been marked as page 3 of Respondent's Exhibit 22: The estimated expenditures for FY 2000-2001 assume the $28.3 million in General Revenue appropriated to replace the revenue lost from reductions in assessments deposited into the Public Medical Assistance Trust Fund will be available for use even though the implementation of the reduction in assessment will be based on provider net operating revenues earned after June 30, 2000. Revenue to the PMATF will not be impacted until FY 2001-2002 if the reduced assessment rate is implemented for revenues earned after June 30, 2000. A similarly worded footnote was added to the SSE Conference's report on what has been marked as page 9 of Respondent's Exhibit 22: The Agency has implemented the reduction in the rate of the assessment on net operating revenues for hospital outpatient services and for other health care facilities authorized by HB 2339 by interpreting that the reduced rates apply to net operating revenues earned after June 30, 2000. Because of the timing of the receipt of provider financial reports by the Agency and the certification of the revenues, the projection above assumes that PMATF revenues will not be impacted until FY 2001- 2002. While the footnotes, although stated with what appears to be some doubt as to their accuracy, are consistent with the Agency's position in these cases, the Agency gave no explanation as to why they were added after the SSE Conference had ended and its report had been prepared. In light of the fact that the footnotes were added not too long after the first evidence of the formulation of the Agency's current position was reported in Mr. Lowe's November 2, 2000, e-mail to Mr. Augsburger, it is inferred that the Agency added the footnotes in an effort to bolster its changing position on the issue of how to implement the changes to the PMATF adopted in the Act. The Agency's Implementation of the Act. Despite the fact that the Agency suggested in its analysis of the Act that the loss of PMATF revenues would be experienced during the state's fiscal year beginning July 1, 2000, and did not apparently change its position until the fall of that year, the Agency continued to calculate, bill, and collect hospital PMATF assessments after July 1, 2000, at the 1.5 percent rate of assessment (hereinafter referred to as the "Old Rate"). In fact, the Agency continued to calculate, bill, and collect PMATF assessments from hospitals at the Old Rate and, imposed the Old Rate on the hospital's total net operating revenue, through December 31, 2002. The Agency did so even though the Agency now takes the position that hospitals' should have begun to benefit from the Reduced Rate beginning with April 1, 2001, invoices. In the early fall of 2002 a meeting was held between the Agency and hospital representatives to discuss the fact that the Agency had not yet implemented the Reduced Rate. The issue for resolution in these cases was not discussed in the meeting. The only matter discussed was the fact that the Agency had taken no steps to apply the Reduced Rate. Subsequent to the Agency's meeting with hospital representatives, a memorandum dated November 25, 2002, was sent to "all hospital PMATF facilities" with quarterly PMATF invoices due January 1, 2003. The memorandum evidenced the Agency's first effort to apply the Reduced Rate, but even then, only partially.19 Even though the Agency realized at the time it sent the memorandum that hospitals were entitled to the full benefit of the Reduced Rate and the other changes to the PMATF adopted in the Act, the Agency, because of the lack of available PMATF funds, simply authorized some hospitals, although not all,20 to take a partial credit against their PMATF payments beginning with the January 1, 2003, quarterly payment. Hospital Refund Requests and the Agency's Denial Thereof. Beginning in September 2002 Petitioners filed requests with the Agency seeking a refund of alleged PMATF overpayments made by them since July 1, 2000. Those refund requests were calculated consistent with the position of Petitioners taken in these cases concerning the proper implementation of the PMATF modifications of the Act. The refund requests filed by Petitioners in these cases were filed pursuant to Section 215.26, Florida Statutes, and utilized a form previously accepted by the Agency for requests for refunds of overpayments. The Agency responded21 to the refund requests of Petitioners by letter (hereinafter referred to as the "Refund Denial Letter"). The Refund Denial Letter sent to each Petitioner was substantially identical to Petitioners' Exhibit 8D. The Refund Denial Letter included the following: No refunds will be made for assessments on net operating revenues for outpatient services earned prior to July 1, 2000. All revenue earned in this period was correctly assessed at 1.5%. . . . . This constitutes AHCA’s final determination as to the impact of the effective date of Laws of Florida, Chapter 2000-256, §16, and the period subject to the reduced rate of assessment on net operating revenue for outpatient services. This is not a final determination as to the availability or amount of a refund for a particular hospital. Those whose substantial interests are affected by the Agency’s final determination may request a hearing pursuant to §120.569, Florida Statutes. Only AHCA’s final determination about the impact of the effective date of the statute is subject to administrative challenge at this time. A petition for administrative hearing must comply with the requirements of Florida Administrative Code, Rule 28-106.201. The petition must be received at the address specified below no later than twenty-one (21) days from receipt of this letter. Failure to timely file a petition shall constitute a waiver of the right to a hearing. . . . [Emphasis in original]. Petitioners filed Petitions for Formal Administrative Hearing in response to the Agency's refund denial letters. The Central Legal Issue: How to Apply the Reduced Rate. The Central Legal Issue: There is no dispute that on July 1, 2000, and thereafter, the rate of the PMATF assessment applicable to a hospital's net operating revenue from outpatient services was reduced from 1.5 percent, the Old Rate, to 1.0 percent, the Reduced Rate. The first issue for decision in these cases, which was first addressed in the Preliminary Order, is how exactly the Reduced Rate is to be implemented in practice. To the extent that other changes to the PMATF included in the Act impact the amount of the refunds sought by Petitioners, the conclusions concerning the application of the Reduced Rate reached in this Recommended Order apply equally. Petitioners' Position in These Cases It is the position of the Petitioners' that the Reduced Rate should apply to all PMATF assessment quarterly payments made by a hospital on or after July 1, 2000, regardless of when the hospital's fiscal year ended or when the hospital's net operating revenue was actually earned. Petitioners' position has been referred to throughout this proceeding as the "Invoice" method. In support of their position, Petitioners argue that the focus of the analysis required in these cases (the determination of legislative intent) should be the Act and, in particular, the Legislature's decision to appropriate $28.3 million to make up with what was believed would be the fiscal impact of the Act. In Petitioners' Additional Written Argument, Petitioners argue the following: The clearest statement regarding what the Legislature intended when it amended [Section] 395.701(2) is the language of Section 21 of Chapter 2000-256, Laws of Florida. The Legislature specifically appropriated those funds necessary to offset the anticipated reduction in PMATF collections in the fiscal year that began on the day the new law was effective, July 1, 2000. The estimate of a $28.3 [million] impact, as demonstrated at Hearing, was based upon the work of the PMATF Task Force. (Pet. Ex. 15, 16). The agency itself expected, when it recommended that the Act be signed by the Governor, that the effect of the rate reduction would be a $28.3 million reduction in PMATF collections from providers for the state fiscal year beginning July 1, 2000. (Pet. Ex. 2). Petitioners also suggest that the change in the Agency's position as evidenced in Mr. Lowe's e-mail, the footnotes to the SSE Conference report, and the Agency's implementation of the Act, all suggest that the Agency's position is incorrect. Finally, Petitioners have relied upon a number of extrinsic facts which they argue support their interpretation of how the Reduced Rate should be applied. Those extrinsic facts, which have been discussed in detail in Petitioners' Joint Proposed Findings of Fact, Conclusions of Law and Preliminary Recommended Order of Petitioners, include the following general subjects: The Agency's treatment of PMATF assessments for hospitals that closed before making all of their quarterly payments; The Agency's treatment of a hospital's legal liabilities for purposes of the PMATF; The Agency's application of the PMATF to new hospitals; and The types of Prior Year Reports accepted by the Agency in the past. The Agency's Position in These Cases It is the Agency's position that the Reduced Rate should apply to all PMATF assessments on net operating revenue from outpatient services earned on or after July 1, 2000, regardless of when a hospital's fiscal year ends or when the hospital actually makes a quarterly payment. In essence, the Agency's position assumes that the PMATF "accrues" continuously during a hospital's fiscal year and that it does so at the rate then in effect. Pursuant to this argument, which was referred to throughout this proceeding as the "Earned" method, every dollar of revenue from outpatient services earned by a hospital on or before June 30, 2000, is subject to the PMATF at the Old Rate and, every dollar of revenue from outpatient services earned by the same hospital on or after July 1, 2000, is subject to the PMATF at the Reduced Rate. In addition to arguing that the language of the statute and the Act clearly support its position, the Agency has argued that its position is supported by "agency expertise" and a general accounting principle, described as "the 'matching principle' under accrual accounting, in which the revenue and expense effects of an economic event are realized and recorded contemporaneously." To explain the "matching principle" under accrual accounting, the Agency presented the testimony of Mr. Thurston, who opined that the PMATF liability attaches as dollars are earned, although the final calculation of the assessment does not occur until the end of the hospital's fiscal year. Mr. Thurston opined, as an expert in public accounting, that when an economic event occurs in business, the financial implications of that event should be recorded both from the revenue and expense side, an idea he characterized as a basic "matching" concept, when the economic event occurs. Applying this theory to Section 395.701(2), Florida Statutes, Mr. Thurston suggested that the PMATF constitutes an expense against revenues as they are earned and, therefore, the expense should be matched contemporaneously with the revenue. Resolution of the Central Legal Issue: How the Legislature Intended the Reduced Rate to be Applied or the Proper Application of Section 395.701(2), Florida Statutes (2000). Where to Look To Determine Legislative Intent Ultimately, the resolution of in these cases depends upon a determination of legislative intent. That determination first requires a decision on where to look for the Legislature's intent: the Act; the language of Section 395.701, Florida Statutes, as amended; the history of the PMATF; the Agency's implementation of the PMATF, including the matters described in Finding of Fact 73; accounting principles; or some combination of these sources and/or others. Petitioners argue that it is the Act, or more precisely, the $28.3 million appropriation which the Legislature provided for which should be reviewed to determine legislative intent. While Petitioners' position was rejected in the Preliminary Order and is rejected in this Recommended Order, if Petitioners' are correct, that it is the Act and the history surrounding its adoption that controls the determination of legislative intent in this proceeding, then Petitioners are entitled to the refunds, calculated pursuant to the Invoice method, which they seek. The $28.3 million appropriation is essentially the same as the total amount of the reduction in PMATF assessments which hospitals should have seen during the fiscal year 2000-2001 if the Legislature intended that the Reduced Rate was to be applied consistent with the Invoice method. This fact is undisputed. This fact, coupled with the fact that the Agency did nothing to discourage the Legislature from making the appropriation, the fact that the Agency supported the notion that the reduction in assessments would be $28.3 million when it supported the Act with the Office of the Governor, and the fact that the Agency failed to explain at hearing why it took the various positions it did or why it changed those positions, further supports the position of Petitioners. As discussed more fully, infra, it has been concluded, however, that it is not the Act or the Legislature's actions while adopting it that should be the central focus of the determination of legislative intent in these cases. Instead, it has been concluded that the main focus of the determination of legislative intent should be the language of Section 395.701, Florida Statutes (2000). The fact that this focus will likely result in a significant inconsistency between the fiscal impact of the methodology recognized in this Recommended Order, the Imposition Method, and the $28.3 million appropriation may be disconcerting, but, if the correct focus for the determination of legislative intent is the language of Section 395.701, Florida Statutes (2000), that inconsistency simply cannot be avoided. Legislative Intent, Based Upon Section 395.701, Florida Statutes (2000). The ultimate resolution of these cases turns on the determination of one significant necessary component of the PMATF assessment which is not as specifically stated by the Legislature in Section 395.701(2), Florida Statutes, as the other necessary components of the PMATF such as, for example, who the assessment is imposed upon (hospitals).22 That component of the PMATF assessment is the moment when the Legislature intended that a PMATF assessment is deemed to actually be imposed. The exact point in time when the Legislature intended for the assessment to be imposed is significant, because, until the PMATF assessment is actually imposed, the rate of the PMATF assessment and the revenues or assessable basis upon which the rate is to apply, have little bearing. It simply does not matter under the law, what the rate of assessment or the assessable basis of a PMATF assessment is until it is time for the PMATF assessment to be imposed. While the Legislature has not specifically stated that the assessment is to be imposed at "X" point in time, it does not mean that legislative intent is not clear. Based upon the language of Section 395.701, Florida Statutes (2000), read as a whole, it is clear that the Legislature intended that the PMATF assessment is to be imposed, and, indeed, can only finally and accurately be imposed, when the condition or conditions established by the Legislature for the imposition of the assessment have all occurred. Although described as two conditions in the Preliminary Order, there is actually only one condition that has been established by the Legislature for the imposition of the PMATF assessment: the hospital must have an "annual net operating revenue" which in turn must be based upon the "actual experience of the hospital . . . " from its just completed fiscal year. This condition can occur only at the end of the hospital's fiscal year. The condition will not occur during the year as the hospital earns a dollar of revenue or when the hospital actually pays its PMATF assessment. The PMATF was not intended, therefore, to be "imposed" during a hospital's fiscal year as argued by the Agency. Nor did the Legislature intend that the imposition of the assessment must wait until a hospital is required to actually make its quarterly payment, as argued by Petitioners. The precise time when the condition for imposition of the PMATF assessment has been met and, thus, when the PMATF assessment is intended by the Legislature to be imposed, takes place immediately after the end of the hospital's fiscal year for which the PMATF assessment is made. It is only at that time that a hospital has an "annual net operating revenue" which can be "based on the actual experience of the hospital . . . ." Thus, if a hospital's fiscal year ends on June 30, 2000, the PMATF assessment for that hospital's 1999-2000 fiscal year may only be assessed immediately after its fiscal year ends at midnight, or as July 1 begins. The Invoice Method is Inconsistent with the Imposition Method In order to accept the Invoice Method, it would be necessary to find that the Legislature intended that a PMATF assessment is considered imposed when a hospital makes each payment. Any PMATF payment made by a hospital on or after July 1, 2000, would be subject to the Reduced Rate and any payment made by the same hospital before July 1, 2000, would be subject to the Old Rate. Accepting this position defies logic. Regardless of when a PMATF payment is made, all events contemplated by Section 395.701(2), Florida Statutes (1999 and 2000), for imposition of the assessment have occurred. When information necessary to actually compute the amount of the assessment is provided to the Agency by a hospital, when the Agency actually computes the assessment and informs the hospital of the amount of the assessment, and when the hospital actually makes the payments are not events contemplated or required by Section 395.701(2), Florida Statutes (2000), for the assessment to be considered imposed. The Earned Method is Inconsistent with the Imposition Method In order to accept the Earned Method, it would be necessary to find that the Legislature intended that a PMATF assessment is imposed at the time a hospital earns a dollar of applicable revenue in order to accept the Agency's position concerning how to apply the Reduced Rate. Any dollar of revenue for outpatient services earned by a hospital on or after July 1, 2000, would be subject to the Reduced Rate and any dollar of revenue for outpatient services earned by the same hospital before July 1, 2000, would be subject to the Old Rate. Neither of these findings is reasonable or supported by the language of Section 395.701, Florida Statutes. Mr. Thurston's testimony was also not persuasive. Mr. Thurston simply explained the accrual method of accounting, a method routinely followed by accountants and bookkeepers in reflecting the economic operations of individuals, businesses, and other entities. Mr. Thurston failed to explain, however, what the Agency relies on to support a conclusion that the Legislature intended for the PMATF to be applied consistent with that accounting method. Additional "Conditions" for Imposition Suggested by Petitioners. In Petitioners' Additional Argument, it has been argued that, if the Legislature truly intended that the Reduced Rate is to be applied when the PMATF assessment is imposed and that imposition of the assessment may only occur when all the conditions for imposition have been met, there are other conditions which must be met in order for the assessment to be imposed which the undersigned did not consider. In particular, Petitioners have suggested that two other conditions must be met before the PMATF assessment may be imposed: The hospital's actual experience based upon its completed fiscal year must be 'reported to the agency;' and Within six months after the end of the hospital fiscal year, the Agency shall certify the amount of the assessment for each hospital. [Footnote omitted]. The additional "conditions" suggested by Petitioners, while conditions for the actual payment or collection of a PMATF assessment, are not conditions which must be met in order for the assessment to be imposed on or owed by a hospital. Once a hospital realizes an “annual net operating revenue” no conditions for the imposition of the PMATF remain. The Amount of Petitioners' Refunds. Subsequent to the entry of the Preliminary Order on December 23, 2003, and the filing of the February 3, 2005, Stipulation, the parties were able to come to agreement as to the amount of refund which is due to each Petitioner based upon the three rate reduction application methodologies addressed in this Recommended Order: the Imposition Method; the Invoice Method; and the Earned Method. Those amounts are contained in the Refund Calculation Notebooks, Joint Composite Joint Exhibit 1. Contained within the Refund Calculation Notebooks is a folder for each remaining Petitioner containing supporting data and the calculation of refunds based upon all three methodologies. The folders for each hospital include all source data required to calculate refunds as Exhibits 1 through 7, a list of all PMATF payments as Exhibit 8, a summary of the foregoing data as Exhibit 9, the application of the Earned Method as Exhibit 10, a calculation of the refund due each Petitioner based upon Attachment B of each Petitioner's Refund Request as Exhibit 11, the application of the Invoice Method as Exhibit 12, and the application of the Imposition Method as Exhibits 13 and 14. The application of the Imposition Method contained on Exhibits 13 and 14 is the same except for hospitals with fiscal year-ends of May 31, June 30, and July 31. For those hospitals, the parties disagreed as to how the Imposition Method should be applied. Petitioners assert that those hospitals are entitled to refunds for their fiscal years ending in 2000 based upon the reduced rate while the Agency asserts that they are not. Exhibit 13 for those hospitals reflects the amount of refund based upon the Imposition Method with no refund due for their fiscal year ending in 2000. Exhibit 14 for those hospitals reflects the amount of refund based upon the Imposition Method if they are entitled to any refund for their fiscal year ending in 2000. Based upon the conclusions reached in this Recommended Order, the amount of refund due to Petitioners with fiscal year- ends of April 30 and May 31, 2000, is reflected in Exhibit 13. All events necessary for imposition of the PMATF assessment for these Petitioners for their fiscal year ending in 2000 occurred before the effective date of the Act. For Petitioners with June 30, 2000, September 30, 2000, and December 31, 2000, fiscal year-ends, the amount of refund due to them is reflected in Exhibit 14. The Agency's Alleged Unadopted Rule. The Agency's Refund Denial Letter provides, in part, the following statement which Petitioners have argued in their proposed order constitutes an unadopted rule: No refunds will be made for assessments on net operating revenues for outpatient services earned prior to July 1, 2000. All revenue earned in this period was correctly assessed at 1.5%. . . . . This constitutes AHCA’s final determination as to the impact of the effective date of Laws of Florida, Chapter 2000-256, §16, and the period subject to the reduced rate of assessment on net operating revenue for outpatient services. The foregoing statement, while ultimately based upon the Agency's interpretation of Section 395.701(2), Florida Statutes (2000), does not express that interpretation. That interpretation is not explained in the quoted portion of the Refund Denial Letter or any other document offered by Petitioners. The statement quoted by Petitioners merely informs the entity to which it was sent that its requested refund was being denied. The Refund Denial Letter then goes on to inform the entity that the denial is "not a final determination as to the availability or amount of a refund for a particular hospital [but rather is preliminary agency action]" and that the Agency's proposed decision could be challenged administratively. The fact that the Agency was required to develop an interpretation of the applicable law when it made its preliminary decision to deny refund requests filed by Petitioners does not make the complained of "statement" of the Agency a rule. Nor does the fact that the Agency explicated that interpretation in its defense of its preliminary decision during these proceedings make is notice that it was denying Petitioners' request for refunds a rule. Petitioners have failed to prove any actual "statement" of the Agency of the interpretation of Section 395.701(2), Florida Statutes (2000), advanced in these proceedings, was published by the Agency. The Refund Denial Letter does not contain an "agency statement" of "general applicability" which implements, interprets, and prescribes law. It merely announces proposed agency action. The Agency's Refund Denial Letter is not a "rule," as that term is defined in Section 120.52(15), Florida Statutes (2004). Leesburg Regional Medical Center. Leesburg Regional Medical Center (hereinafter referred to as "Leesburg"), Petitioner in DOAH Case No. 04-1882, uses a July 1 to June 30 fiscal year for purposes of the PMATF. Invoices sent to Leesburg by the Agency for PMATF assessments for quarterly payments due July 2000 through October 2002 were based upon a rate of 1.5% for inpatient and outpatient net operating revenue and other operating revenue. Leesburg paid these assessments. Leesburg received the November 25, 2002, Memorandum described in paragraph 62, supra, on or about December 2, 2002. That Memorandum was the Agency's first attempt to apply, at least in part, the Reduced Rate. In December 2003 Leesburg filed a refund request for what it believed were overpayments of its PMATF assessments due on and after July 1, 2000. The amount of the refund being sought by Leesburg was identified in a supplement to its refund request filed with the Agency in February 2004. Leesburg refund request for payments attributable to the first two quarters (ending September 30 and December 31) of its fiscal year 2000-2001 (hereinafter referred to as the "Disputed Quarters") totaled $31,116.00. While Leesburg Exhibit 8 of the Refund Calculation Notebooks indicates the total amount of Leesburg's PMATF assessments for the Disputed Quarters and the fact that those assessments were paid, the exhibit does not indicate when the payments were made. Nor was any other evidence presented to prove when the payments were actually made.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Agency: Concluding that the Legislature intended that the changes adopted in the Act are to be applied to Petitioners consistent with the Imposition Method described in this Recommended Order; Providing that Petitioners, other than those with a June 30, 2000, fiscal year-end, are entitled to refunds of PMATF payments calculated on Exhibit 14 of the Refund Calculation Notebooks; Providing that Petitioners with a June 30, 2000, fiscal year-end are entitled to refunds of PMATF payments calculated on Exhibit 14 of the Refund Calculation Notebooks. DONE AND ENTERED this 23rd day of May, 2005, in Tallahassee, Leon County, Florida. S LARRY J. SARTIN 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 23rd day of May, 2005.
The Issue Whether the Petitioner should be subjected to a penalty pursuant to Section 395.5094, Florida Statutes (1987), or Section 407.51, Florida Statutes (1989)?
Findings Of Fact The Respondent, the Health Care Cost Containment Board, is an agency of the State of Florida charged with the responsibility of regulating hospital budgets. The Office of the Public Counsel is authorized pursuant to Section 407.54, Florida Statutes, to represent the general public in budget review proceedings before the Respondent. The Petitioner, Centro Asturiano Hospital, is a 144-bed acute care hospital located in Tampa, Florida. During all times relevant to this proceeding, the Petitioner's fiscal year was the calendar year. During 1984, 1985 and 1986, the accounting firm of Peat, Marwick and Main (hereinafter referred to as "Peat") prepared financial statements and Medicare reports for the Petitioner. Peat also performed audits of the Petitioner during 1984, 1985 and 1986. During all times relevant to this proceeding, the Petitioner's comptroller, Hilda Smith, prepared reports filed with the Respondent on behalf of the Petitioner. For the fiscal year 1987, the Respondent had approved the Petitioner's budgeted gross revenue per adjusted admission (hereinafter referred to as "GRAA") of $7,536.00 and net revenue per adjusted admission (hereinafter referred to as "NRAA") of $4,913.00. Based upon the Petitioner's audited actual experience for fiscal year 1987, the Petitioner's actual NRAA exceeded its budgeted NRAA. Therefore, the Respondent proposed to impose a penalty (hereinafter referred to as the "Main Penalty") on the Petitioner pursuant to Section 395.5094, Florida Statutes (1987), and Rule 10N-1.062, Florida Administrative Code. By letter dated May 12, 1988, the Respondent notified the Petitioner that it was imposing a Main Penalty on the Petitioner for 1987. A second letter dated August 15, 1988, was sent by the Respondent to the Petitioner revising the amount of the penalty. In calculating the revised penalty the Respondent took into account the Petitioner's case-mix and outlier activity. The total recommended penalty was $609,218.00. The penalty consists of a budget reduction to net revenue of $566,938.00 with a corresponding reduction to gross revenue of $854,425.00, and a cash fine of $42,280.00. The reason for imposing the Main Penalty was explained in the Respondent's letter of August 15, 1988, as follows: Preliminary findings indicated that an excess of net revenue per adjusted admission in the amount of $381.00 had occurred. These findings are based upon a comparison [sic] of the previous year's audited actual experience inflated by the MARI, and the Board approved budget for the fiscal year ended December 31, 1987. The total excess has been adjusted by case-mix and outlier activity and results in a total recommended penalty of $609,218. . . . The proposed penalty could have been avoided if the Petitioner had sought a budget amendment for 1987 or if the Petitioner had modified its operations during 1987 when it learned that its actual experience would exceed its approved budget. The Petitioner believes that the difference in the Petitioner's actual experience for 1987 and its approved budget for 1987 was caused primarily by an adjustment to Medicare contractual allowances. When a hospital treats a patient eligible for Medicare payment for the patient's services, the hospital records the gross amount of the hospital's charges for the patient's services. Medicare, however, only pays a portion of the total charges. The difference between the hospital's charges and the amount actually paid by Medicare is referred to as "Medicare contractuals." For example, if a patient is charged $1,000.00 by a hospital for services but Medicare will only pay $800.00 for those services, the $200.00 difference is referred to as a Medicare contractual. If the $200.00 is not paid from some other source it must be deducted from gross revenue to arrive at net revenue on the books of the hospital. The Petitioner receives a substantial portion of its revenue for Medicare reimbursed services. Therefore, Medicare contractuals constitute a significant item in the Petitioner's budget. An adjustment to the Petitioner's Medicare contractuals could have a significant impact on the Petitioner's budget. During April, 1987, Peat notified the Petitioner's comptroller, Ms. Smith, that the Petitioner's Medicare contractuals needed to be adjusted by $488,000.00. This adjustment was the result of Peat's audit of Petitioner's 1986 financial records and was related to Medicare cost reports for 1983, 1984 and 1985. Peat also determined that an additional $200,000.00 adjustment was required. The Petitioner knew that the adjustments were material. The net effect of Peat's 1986 audit was that the Petitioner was required in 1987 to reduce 1986 Medicare and other contractual deductions from gross revenue by $688,000.00. This amount was a significant amount. The $688,000.00 adjustment was reported by Peat to the Board of Directors of the Petitioner and accepted by the Board in April, 1987. Between June, 1987, and July, 1987, Ms. Smith, the Petitioner's comptroller, prepared a Current Year Actual and Estimated Interim Report (hereinafter referred to as the "1987 Interim Report"). In the 1987 Interim Report the Petitioner compared actual GRAA for the first 6 months of 1987 and projected GRAA for the last 6 months of 1987 with 1987 budgeted GRAA. Based upon this computation it was apparent that the Petitioner was operating in excess of the Petitioner's budget for 1987 as approved by the Respondent. The Petitioner, therefore, could have sought a budget amendment or modified its operations. Ms. Smith testified that she believed that the excess of actual GRAA and NRAA over budgeted GRAA and NRAA had been caused by the Medicare contractual adjustment recommended by Peat for 1986. The Petitioner failed to prove what the cause of the excess actually was. Ms. Smith testified that the Petitioner did not realize what the affect of the contractual adjustment was until the 1987 Interim Report was prepared. The Petitioner, however, could have determined in April of 1987 what affect the Medicare contractual adjustment would have on its 1987 budget. Therefore, if the Medicare contractual adjustment was the cause of the excess of its actual experience over its budget, the Petitioner could have taken steps as early as April, 1987, to seek a budget amendment for its 1987 fiscal year or to modify its operations. In July, 1987, Ms. Smith contacted staff of the Respondent. She spoke with Pete Pearcy and Bill Summers. She also spoke to these staff members in September, 1987. Ms. Smith contacted the Respondent because of her concern about the excess of the Petitioner's actual 1987 experience over its 1987 approved budget. She contacted the Respondent seeking assistance in determining what steps the Petitioner should take to resolve the potential problem the excess in the Petitioner's actual experience over its approved budget could cause. The Petitioner failed to prove that Ms. Smith's explanation of the problem adequately informed the Respondent what the Petitioner's problem was. Generally, the Respondent's staff will consult and/or counsel hospitals concerning matters within the Respondent's responsibilities. The Respondent's policy prohibits staff from advising hospitals, however, as to whether a budget amendment should be filed; that decision is left up to each individual hospital. Consistent with the Respondent's policy, staff of the Respondent attempted to assist Ms. Smith. During September, 1987, Ms. Smith asked Mr. Summer of the Respondent's staff whether the Petitioner should file a budget amendment. Mr. Summer responded "amend what?" This response was based upon the inability of Ms. Smith to explain to Mr. Summer what exactly the Petitioner believed it needed to amend or exactly how the Medicare contractual adjustments affected the Petitioner's 1987 budget. Mr. Summer did not specifically recommend to Ms. Smith that the Petitioner file or not file a budget amendment. Nor did anyone else on the Respondent's staff advise the Petitioner that a budget amendment should or should not be filed. Mr. Summer asked Ms. Smith to send him information concerning the problem. Mr. Summer told Ms. Smith that he would review the material before discussing the problem further. Mr. Summer did not, however, contact Ms. Smith. Nor did Ms. Smith attempt to contact Ms. Summer before the end of the Petitioner's 1987 fiscal year. The Petitioner was aware of the fact that any budget amendment for its 1987 fiscal year had to be filed before the end of the 1987 fiscal year. The Petitioner was also familiar with the manner in which a budget amendment was to be filed since the Petitioner had obtained approval of a budget amendment for its 1986 fiscal year. The Petitioner did not file a budget amendment for its 1987 fiscal year. The Petitioner was aware that it was required to operate within its 1987 approved budget. Ms. Smith indicated that she believed that the Respondent's staff would have warned her if the Petitioner had been in danger of having a penalty imposed. The Petitioner, however, was not informed by the Respondent that the Main Penalty would not be imposed upon it for its 1987 fiscal year. The Petitioner's actual GRAA for 1987 was $8,096.00 and its approved GRAA was $7,536. Therefore, the Petitioner's actual GRAA for 1987 exceeded its approved GRAA by 7.4%. The Petitioner's actual NRAA for 1987 was $5,294.00 and its approved NRAA was $4,913.00. The excess of actual NRAA over approved NRAA was 7.7%. The percentage of excess of actual GRAA and NRAA over budget is almost the same. Therefore, it is possible that whatever caused the Petitioner's excessive GRAA also caused its excessive NRAA. GRAA is not affected by Medicare contractual adjustments. NRAA is affected by Medicare contractual adjustments. Therefore, since the Petitioner's percentage excess in GRAA (7.4%) and NRAA (7/7%) for 1987 was almost the same, it is questionable whether the Petitioner's Medicare contractual adjustments were the sole cause for the excess of the Petitioner's actual experience over its budget for 1987. It is more likely that the excessive GRAA and NRAA were caused by the same problem. The Petitioner, therefore, failed to prove that its discussions with the Respondent about the Medicare contractual adjustment would have helped the Petitioner avoid the penalty proposed in this proceeding. The Petitioner filed its 1988 budget and the 1987 Interim Report with the Respondent on or about September 29, 1987. The 1987 Interim Report includes information concerning the Petitioner's actual experience for the first 7 months of 1987 and projections for the remaining 5 months of 1987. The 1987 Interim Report was submitted for informational purposes. For the first 7 months of 1987 the Petitioner's actual gross revenue was $10,171,658.00. Gross revenue for the last 5 months of 1987 was projected at $7,265,470.00. The Petitioner's estimated adjusted admissions for 1987 were 1,221 for the first 7 months and 873 for the last 5 months. Gross revenue divided by adjusted admissions for 1987 yields GRAA of $8,337.00 for the first 7 months and projected GRAA of $8,322.00 for last 5 months. Based upon the information contained in the 1987 Interim Report, the Petitioner's GRAA for the entire 1987 fiscal year was projected to be $8,331.00. The Petitioner's approved GRAA, which was included in the 1987 Interim Report, was only $7,536.00. Therefore, the Petitioner should have been aware that it would very likely exceed its approved 1987 budgeted GRAA by approximately $795.00 (approximately 10.5%) in June of 1987. Accordingly, the Petitioner should have taken steps in September of 1987 to amend its budget or to modify its operations. The Petitioner had sufficient information during 1987 (April, June and September, 1987) to warn it that its actual experience would exceed its approved budget. Although the Petitioner's comptroller did discuss what she believed to be the cause of the Petitioner's problem (the Medicare contractual adjustment) with the Respondent, the evidence failed to prove that it was reasonable for the Petitioner to wait for the Respondent to take some action while the Petitioner took no action on its own behalf to rectify the problem.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Respondent issue a final order dismissing the Petitioner's petition. DONE and ENTERED this 23rd day of July, 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 23rd day of July, 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 Petitioner's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 3. 1 and hereby accepted. hereby accepted. 2 and hereby accepted. 5 4. 6 15. 7-8 16. 9 17. 10-11 Hereby accepted. 12-13 Not supported by the weight of the evidence. 14 7. NRAA was $4,913.00 and not $4,938.00. 15 19. 16 33. 31 and hereby accepted. Not supported by the weight of the evidence. 19 22. 20 24. Hereby accepted. The last sentence is not supported by the weight of the evidence. Not supported by the weight of the evidence. Not relevant. Not supported by the weight of the evidence. See 22 and 25. Several of the contacts with the Respondent took place after 1987 and are not relevant to this proceeding. The second sentence is hereby accepted. The last sentence is not supported by the weight of the evidence. Not supported by the weight of the evidence. The Respondent's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 3. 2 4. 3 5-6. 4 8-9. 10 and hereby accepted. Hereby accepted. 7 11. 8 8 and 11. 9 13 and 20. 10 16. See 21. 18 and hereby accepted. See 22. See 25. 15 27. 16 Hereby accepted. 17-18 Although true, not relevant to this proceeding. 19-21 Hereby accepted. 22 21. 23 See 21. 24 19 and 33-36. 25 11. Not relevant. See 21. Incorrect conclusion of law. Ms. Smith testified what she was told. Her testimony about what she heard is not hearsay. 29 14. 30-32 Hereby accepted. 33 33-34. 34 35 and hereby accepted. 35 36. 36 32 37 Cumulative. 38 12. 39 31-32. The Intervenor's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 3. 2 4. 3 6. 4 5 and hereby accepted. 5 5-6. 6 hereby accepted. 7 7. 8 14. 9-10 15. 11 16. 12-13 17. 14 16. 15 18. 16 16. Hereby accepted. See 21. Hereby accepted. See 16. 21-22 Hereby accepted. 23-24 Not relevant. 25 Hereby accepted. 26 27. 27 21. First contact with the Respondent was in July, and not August. 28 19. 29 19-20. 30 Cumulative. 31 22. 32-33 24. 34-35 Hereby accepted. 36-37 25. 38 30. 39 Hereby accepted. 40 29. Not relevant. Hereby accepted. 43-44 Not relevant. 45 31-32. 46 33. 47-51 36. 52-54 19. 55-57 31. 58-59 32. 60 Not supported by the weight of the evidence. 61-62 Hereby accepted. 63 31-32. 64 Hereby accepted. 65 9. 66 10-11. COPIES FURNISHED: Julia P. Forrester Senior Attorney Health Care Cost Containment Board Building L, Suite 101 325 John Knox Road Tallahassee, Florida 32303 David D. Eastman, Esquire Patrick J. Phelan, Jr., Esquire Post Office Box 669 Tallahassee, Florida 32302 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
Findings Of Fact Background Petitioner, United Health, Inc. (United), is the owner and operator of approximately one hundred and twenty-three nursing homes in thirteen states. In the State of Florida, it owns and operates sixteen nursing homes and one intermediate care facility for the mentally retarded that are licensed by respondent, Department of Health and Rehabilitative Services (HRS). At issue in this proceeding are the cost reports and supplemental schedules filed by thirteen nursing home facilities.1 In accordance with Medicaid guidelines, petitioner was required to annually submit cost reports to HRS reflecting its allowable costs in providing Medicaid services to its patients. HRS is designated as the state agency responsible for the administration of Medicaid funds under Title XIX of the Social Security Act. In order to be reimbursed for said costs, the facility was required to show that the costs were in conformity with Federal and State Medicaid reimbursement principles. Those principles are embodied in the Long Term Care Reimbursement Plan (Plan) adopted by the State.2 This document contains the reimbursement methodology to be used for nursing homes who provide Medicaid services. In addition, providers must comply with Health Insurance Manual 15 (HIM-15), a compendium of federal cost reimbursement guidelines utilized by HRS, and generally accepted accounting principles. By letter dated September 9, 1985 petitioner requested that HRS adjust its July 1, 1985 reimbursement rates for the thirteen facilities to reflect certain annualized costs incurred during the preceding fiscal year ending December 31, 1984. According to the letter, the adjustment was appropriate under Section V.B.I.b. of the September 1, 1984 Plan. On October 21, 1985, an HRS Medicaid cost reimbursement analyst issued a letter denying the request on the following grounds: Our review of the information submitted with the fiscal year end 12/31/84 cost reports revealed that the annualized operating and patient care costs were not documented to be new and expanded services or related to licensure and certification requirements. The annualized property cost appeared to be 1 2 various purchases, repairs and maintenance and was not documented to be capital improvements. The denial prompted the instant proceeding. B. Reimbursement Principles In General Under the Medicaid reimbursement plan adopted for use in Florida, nursing homes are reimbursed by HRS on a prospective basis for their allowable costs incurred in providing Medicaid services. This method is commonly referred to as the prospective plan, and has been in use since 1977. Under this concept, a nursing home files with HRS, within ninety days after the close of its fiscal year, a cost report reflecting its actual costs for the immediate preceding fiscal year. Within the next ninety days, the nursing home is given a per diem reimbursement rate (or ceiling) to be used during the following twelve months.3 For example, if a provider's fiscal year ended December 31, 1984, its cost report would be due by March 31, 1985. HRS would then provide estimated reimbursement rates to be used during the period from July 1, 1985 through June 30, 1986. As can be seen, there is a time lag between the end of a cost reporting year and the provider's receiving the new rate. The new reimbursement rate is based upon the provider's actual costs in the preceding fiscal year (reporting period) adjusted upward by an inflation factor that is intended to compensate the provider for cost increases caused by inflation. The prospective plan enables a provider to know in advance what rates it will be paid for Medicaid services during that year rather than being repaid on a retroactive basis. If a provider operates efficiently at a level below the ceiling, it is "rewarded" being allowed to keep a portion of the difference. Conversely, if it exceeds the caps, it is penalized to the extent that it receives only the rates previously authorized by HRS, and must absorb the shortfall. At the same time, it should be noted that the reimbursement rate is not intended to cover all costs incurred by a provider, but only those that are reasonable and necessary in an efficiently operated facility. These unreimbursed costs are covered through other provider resources, or by a future cut in services. When the events herein occurred, there were two types of adjustments allowed under the prospective plan. The first adjustment is the inflation factor, and as noted above, it 3 authorizes the provider to adjust certain reported costs by the projected rate of inflation to offset anticipated cost increases due to inflation. However, because the prospective plan (and the inflation factor) ignores other cost increases that occur during the given year, HRS devised a second type of adjustment for providers to use. This adjustment is known as the gross-up provision, and allows the annualization of certain costs incurred by a provider during a portion of the reporting period. The concept itself .s embodied in subparagraph B.1.b. of Part V of the September 1, 1984 Plan. Its use may be illustrated with the following example. A provider constructs an addition to its facility with an in-service date at the end of the sixth month of the reporting period. By reflecting only the depreciation associated with the addition during the last six months of the reporting period, the facility understates its actual costs, and is reimbursed for only one-half of the facility's depreciation during the following year. Under the gross-up provision the provider grosses up, or annualizes, the reported cost to give it a full year's effect, thereby ensuring that the next year's rates will be more realistic. Although the provision has application to this proceeding, over objection by the nursing home industry it was eliminated from the Plan on October 1, 1985 and is no longer available to providers. At hearing HRS contended the provision should have been eliminated in 1984, but through oversight remained in effect until 1985. However this contention is rejected as not being credible, and is contrary to the greater weight of evidence. Finally, neither party could recall if a request under this provision had ever been filed. They do acknowledge that HRS has never approved such a request during the more than two years when the provision was operative. In addition to the gross-up and inflation provisions, there exists an alternative means for additional rate reimbursement through what is known as the interim rate provision. Under this provision, a provider can request an interim rate increase from HRS during the period when its prospective rates are in effect to cover major unexpected costs. Assuming a request is valid and substantiated, a provider is eligible for immediate cash relief dating back to the date of the actual expense. However, because of HRS' concern that this provision was being "abused", only those costs which exceed $5,000 and cause a change of 1% or more in the total prospective per diem rate are now eligible for reimbursement. These monetary thresholds on interim rate requests became effective September 1, 1984. When these higher thresholds were imposed, HRS made representations to the nursing home industry that a provider could still utilize the gross-up provision to cover other unexpected costs. Finally, it is noted that unlike the prospective rate, an interim rate is cost settled. This means the provider's cost reports are later audited, and excess reimbursements must be repaid to HRS. This differs from the prospective plan where any "overpayments" are not subject to recoupment by HRS. Even so, a provider is limited by the reasonableness and prudent buyer concepts which serve as a check on potential abuse by a provider. The Gross-Up Feature In its relevant form, the gross-up provision was first adopted for use by HRS in its April 1, 1983 Plan.4 It required HRS to: Review and adjust each provider's cost report referred to in A. (1.) as follows: * * * b. to compensate for new and expanded or discontinued services, licensure and certification requirements, and capital improvements which occurred during the reporting year but were not included or totally accounted for in the cost report. This language was incorporated with only minor changes into the September 1, 1984 Plan and is applicable to the cost reports in issue. In its 1984 form, the provision required HRS to review and adjust each provider's cost report as follows: b. To compensate for new and expanded or discontinued services, licensure and certification requirements, and capital improvements not included or totally accounted for in the reporting year. For additional costs to be provided, the provider must furnish adequate supporting documentation. 4 Accordingly, if a cost fits within one of the three categories, HRS is required to adjust a provider's report to compensate it for the expenditure. The April 1, 1983 Plan was negotiated by the nursing home industry and HRS representatives at a meeting in Gainesville, Florida. For this reason, it is commonly referred to as the Gainesville Plan. Through testimony of negotiators who participated at the meeting, it was established that the Plan had three objectives: to give proper payment to nursing homes; to meet state and federal regulations; and to help upgrade care in the nursing homes. At the same time, the negotiators recognized that a prospective plan based on inFla.ion alone overlooked other cost increases that occurred during a given year. Therefore, the gross-up provision was added to the Plan to ensure that providers could estimate (and recoup) their future costs in as accurate a manner as possible, and to bring the plan into compliance with federal guidelines. It was also designed to ensure that a provider did not have to wait an extraordinarily long time for expenses to be recognized. In addition, HRS was hopeful that the gross-up provision would minimize the providers' reliance upon the interim rate feature (which was intended to cover only major items) thereby reducing the agency's overall workload. Indeed, the interim and gross-up features were intended to complement each other, in that one provided immediate relief on major unexpected items while the other provided a means to adjust partial year costs incurred during the reporting period. The implementation of thresholds on the interim rate provision in September, 1984 increased the importance of the gross-up provision to handle smaller items. Therefore, HRS' contention that the interim and gross-up provisions are in conflict is hereby rejected. In order for a cost to be eligible for annualization, it must fall within one of three categories: new or expanded service, a capital improvement, or a cost to meet HRS' licensure and certification requirements. The parties have stipulated that HRS' denial of United's request was based solely upon HRS' perception that the costs did not fall within any of the three categories. The three types of costs within the feature are not defined in the Plan. Testimony from the Plan's negotiators established that the language in the gross-up feature was meant to be construed broadly and to encompass many costs. For this reason, no limitations were written into the Plan. Even so, the provision was not intended to give carte blanche authority to the providers to annualize every partial cost. There is conflicting testimony regarding the meaning of the term "capital improvement" and what expenditures are included within this category. However, Sections 108.1 and 108.2 of HIM-15, of which the undersigned has taken official notice, define a capital item as follows: If a depreciable asset has, at the time of its acquisition, an estimated useful life of at least 2 years and a historical cost of at least $500, its cost must be capitalized, and written off ratably over the estimated useful life of the asset. . . * * * Betterments and improvements extend the life or increase the productivity of an asset as opposed to repairs and maintenance which either restore the asset to, or maintain it at, its normal or expected service life. Repairs and maintenance costs are always allowed in the current accounting period. With respect to the costs of betterments and improvements, the guidelines established in Section 108.1 must be followed, i.e., if the cost of a betterment or improvement to an asset is $500 or more and the estimated useful life of the asset is extended beyond its original estimated life by at least 2 years, or if the productivity of the asset is increased significantly over its original productivity, then the cost must be capitalized. The above guidelines are more credible and persuasive than the limited definition of capital item enunciated at final hearing by HRS personnel. Therefore, it is found that the HIM-15 definition is applicable to the gross-up feature and will be used to determine the validity of petitioner's claim to gross up certain expenditures. There is also conflicting testimony as to what the term "new and expanded or discontinued services" includes. Petitioner construes this item to include any costs that increase the volume of services to a resident. Therefore, petitioner posits that an increase in staffing which likewise increases services to residents is subject to annualization. Conversely, HRS construes the term to cover any costs for new or expanded services that enable a facility to provide patients with services not previously provided or to expand an existing service to more patients in the facility. The latter definition is more credible and persuasive and will be used by the undersigned in evaluating petitioner's request. Finally, petitioner interprets the term "licensure and certification requirements" to cover any costs incurred to meet staffing requirements that are required by HRS rules. According to petitioner, the category would include expenditures that are made for so-called preventive maintenance purposes and to avoid HRS sanctions. On the other hand, HRS construes the language to cover costs incurred by a provider to either meet a new licensure and certification requirement, or to correct a cited deficiency. It also points out that salary increases were intended to be covered by the inflation factor rather than through this feature of the plan. This construction of the term is more reasonable, and is hereby accepted as being the more credible and persuasive. Petitioner's Request Petitioner's fiscal year ends on December 31. According to HRS requirements its cost reports must be filed by the following March 31. In accordance with that requirement petitioner timely filed its December 31, 1984 cost reports for the thirteen facilities on or before March 31, 1985. The reports have been received into evidence as petitioner's composite exhibit 3. Attached to the reports were schedules supporting a request for gross-up of certain capital items, additions and deletions of various personnel, and union salary increases that exceeded the inflation rate. The parties have not identified the actual dollar value of the items since only the concepts are in issue. In preparing the supporting schedules, United's assistant director of research reviewed all so-called capital items purchased by the thirteen facilities during the fiscal year, and determined which were purchased after the beginning of the year.5 He then calculated the depreciation on those 5 expenditures made after the beginning of the year and has included those amounts on the supporting schedules to be annualized. Consistent with the definition contained in Sections 108.1 and 108.2 of HIM-15, those items that are in excess of $500 (after annualization), that extend the useful life of the asset for two years or more, or that increase or extend the productivity of the asset are subject to annualization. It should be noted that repairs and maintenance items, as defined in Sections 108.1 and 108.2, are excluded from this category. Petitioner next seeks to adjust its rates by grossing up the net increase in costs associated with additions and deletions of various staff during the reporting period. Any net staffing additions that provide patients with services not previously provided or that expand an existing service to more patients in a given facility are properly subject to the gross- up provision. All others should be denied. Petitioner also contends that these costs should be considered as a licensure and certification requirement since they satisfy staffing requirements under HRS rules. To the extent the filling of old positions occurred, such expenditures are appropriately covered by the gross-up provision. The remainder do not fall within the purview of the provision. Finally, petitioner seeks to adjust its rates to cover all salary increases over and above the inflation factor that were awarded to union employees pursuant to its union contract. Under petitioner's theory, if such costs were not paid, United stood to lose staff through a strike which in turn could result in licensure and certification problems. But these concerns are speculative in nature, and such an interpretation would result in automatic approval of any salary increase called for by a union contract, no matter how unreasonable it might be. Since the expenditures do not meet the previously cited criteria, they must be denied.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED: That petitioner's request to have its July 1, 1985 reimbursement rates adjusted for thirteen facilities to reflect annualized costs as submitted on supplemental schedules with its 1984 cost reports be approved in part, as set forth in the conclusions of law portion of this order. The remaining part of its request should be DENIED. DONE AND ORDERED this 31st day of October, 1986, in Tallahassee, Florida. DONALD R. ALEXANDER, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 31st day of October, 1986.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that Petitioner be reimbursed for fiscal year 1979 and 1980 in accordance with the foregoing adjustments. DONE and ENTERED this 17th day of December, 1982, in Tallahassee, Florida. DONALD R. ALEXANDER 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 17th day of December, 1982.
