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.
Findings Of Fact Respondent administers Florida's Medical Assistant Program (Medicaid Program) which is jointly funded by the state and federal government under Title XIX of the Social Security Act. Under the Medicaid Program, eligible recipients receive services from providers who voluntarily participate in the program. Under the Medicaid Program, Respondent is required to reimburse providers only reasonable costs, not all costs incurred. Petitioner is a licensed Florida nursing home facility and at all times material hereto, was certified to and was participating in the Medicaid Program. Participation in the program is subject to all State and Federal laws, regulations, standards and guidelines relating to medicaid. The methodology for determining reimbursement to a nursing home such as Petitioner under the Medicaid Program is set forth in the Title XIX Long-Term Care Reimbursement Plan (Gainesville Plan) which is incorporated by reference in Rule 10C-7.0482, Florida Administrative Code. The validity of the amended rule is not being challenged in this proceeding, only its application to Petitioner. Prior to implementation of the Gainesville Plan on April 1, 1983, Medicaid's reimbursement to nursing homes was more restrictive. The Gainesville Plan resulted from settlement of a lab suit challenging the reasonableness of reimbursement to nursing homes. The Gainesville Plan as implemented on April 1, 1983, placed ceilings on the reimbursement for operating and patient care costs but not reimbursement for property costs. In 1982 Petitioner ended years of litigation when it won approval to build a nursing home without a certificate of need. Due to the extended litigation, Petitioner lost an earlier financing arrangement which, due to the then existing economic conditions, resulted in the Petitioner being forced to seek financing for the construction of the nursing home through the issuance and sale of Industrial Development Revenue Bonds authorized pursuant to City of Gainesville, Florida Resolution R- 82-13 of January 13, 1982. Under the terms of the bond issue, the facility cannot be leased, resold or refinanced before 1990 and, therefore, Petitioner is still paying the "high rate" of interest negotiated in 1982. In determining the financial feasibility of the nursing home, the auditors preparing the bond documents based their calculations on the more restrictive reimbursement methodology for Medicaid which was in effect before the Gainesville Plan. Petitioner was projecting a forty per cent (40 percent) Medicaid utilization and the bond documents warned investors of the possibility of changes in the Medicaid Program. The present Medicaid utilization is in excess of eighty per cent (80 percent) At the time it financed the nursing home, Petitioner was aware of the upcoming changes to be implemented by the Gainesville Plan but those changes were not reflected in the bond issue. The State of Florida was not involved in the bond issue. Petitioner built its nursing home to Florida licensure standards and was not required by Respondent to meet any more stringent requirements than for other Florida nursing homes. Upon entering the Medicaid Program, Petitioner was warned that its property costs appeared excessive. Petitioner's property costs were the highest of all nursing homes participating in Florida's Medicaid program as of January 1, 1985. Because the Gainesville Plan placed no A limitations on property costs, Petitioner was allowed to recover all of those costs in its Medicaid per diem rate. Petitioner could not recover all of its operating and patient care costs because those costs exceeded caps that were placed in the Gainesville Plan. The medicaid per patient day amount of such total property costs was initially approved by Respondent in the sum of $37.6740, based on a low occupancy during the start up phase of the facility. The implementation of the Gainesville Plan created a significant increase in the state funds budgeted for nursing homes. It was estimated that the first year increase would be approximately $50 million. The Florida Legislature, which appropriates the funds for Medicaid and makes recommendations as to how that money is to be spent, directed Respondent to implement ceilings on property costs. On September 1, 1984, the Gainesville Plan was amended to include caps for property costs. In determining reasonable caps, Respondent through the Gainesville Plan, utilized a formula similar to that which it utilizes in capping operating and patient care caps. That formula took the median of the per diem property costs for the 100 newest nursing homes participating in Medicaid and increased it by one standard deviation. New nursing homes were given a higher property cost cap during their first 18 months of operation to allow for startup costs. As a result of Respondent using this new formula for determining reimbursement rates for property cost, the Petitioner was notified in August, 1984 that effective in September 1, 1984 its property costs reimbursement rate would be reduced to $15.91 per patient day and further reduced to $12.56 effective January 1, 1985. Respondent considered the property costs reimbursement rate caps reasonable based upon a comparison of statewide per diem rates. As of January 1, 1985, only 38 or 10 percent of nursing homes participating in Medicaid had their property costs capped. The Gainesville Plan was subsequently approved by the federal government which considers the reasonableness of cost reimbursement in approving such plans. Since property costs reimbursement rates must be set at a level which will be adequate to reimburse allowable and reasonable property costs of an economically and efficiently operated facility, property costs of existing facilities that exceeded the "cap" were not "grandfathered" in under the September 1, 1984 amendment to the Gainesville Plan because they were considered not to be reasonable. Petitioner was immediately affected by the reduction in the property costs reimbursement rates which became effective on September 1, 1984. Because of its financing arrangement and because of a large Medicaid population, Petitioner experienced a large shortfall between actual costs incurred and costs that would be reimbursed by the Medicaid Program. Petitioner's property costs were the highest of all nursing homes participating in Florida's Medicaid Program as of January 1, 1985. Nationwide, Florida ranks in the top ten percent (10 percent) in average Medicaid nursing home per diem payment. There is no requirement that a nursing home accept Medicaid's patients. On October 1, 1985, Respondent went to a fair rental value system to determine allowable Medicaid property costs. Under that system, through negotiations with representatives of the nursing home industry, $28,500 was established as a reasonable cost per bed. In 1982, Petitioner's cost per bed, including financing, was approximately $41,000. Petitioner's Medicaid per diem rate has been calculated in accordance with the method set forth in the Gainesville Plan and Petitioner has not been treated differently than any other provider in the determination of its Medicaid per diem rate. Although Petitioner had been previously allowed to recover all its property cost under the Gainesville Plan prior to amendment, there was insufficient evidence in the record to prove that Petitioner's property costs not reimbursed under the plan as amended were allowable and reasonable costs of an economically and efficiently run facility.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record and the candor and demeanor of the witnesses, it is, therefore, RECOMMENDED that the Respondent enter a Final Order denying Petitioner's request for an adjustment to its Medicaid per diem rate. Respectfully submitted and entered this 21st day of May, 1987, in Tallahassee, Leon County, Florida. WILLIAM R. CAVE Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 21st day of May, 1987. APPENDIX TO RECOMMENDED ORDER, CASE NO. 84-3405 The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties in this case. Rulings on Proposed Findings of Fact Submitted by the Petitioner Covered in the Background. Adopted in Finding of Fact 20. Adopted in Finding of Fact 4. 4.-5. Adopted in Finding of Fact 8 but clarified. 6.-8. Adopted in Finding of Fact 12 but clarified. Adopted in Finding of Fact 12 as clarified and 14. Adopted in Finding of Fact 14. Adopted in Finding of Fact 17. Rejected as immaterial and irrelevant. Rejected as not supported by substantial competent evidence in the record and as immaterial and irrelevant. Rejected as immaterial and irrelevant. Rejected as not supported by substantial competent evidence in the record. Rejected as immaterial and irrelevant. 17.-21. Rejected as not supported by substantial competent evidence in the record. Rejected as immaterial and irrelevant. Rejected as not supported by substantial competent evidence in the record. Rulings on Proposed Findings of Fact submitted by the Respondent 1.-13. Adopted in Findings of Fact 1 through 13, respectively. 14. Adopted in Finding of Fact 21. 15. Adopted in Finding of Fact 14. 16. Adopted in Finding of Fact 15. 17. Adopted in Finding of Fact 16. 18. Adopted in Finding of Fact 17. 19. Adopted in Finding of Fact 18. 20. Adopted in Finding of Fact 19. 21. Adopted in Finding of Fact 22. 22. Adopted in Finding of Fact 23. 23. Adopted in Finding of Fact 20. 24. Adopted in Finding of Fact 24. 25. Adopted in Finding of Fact 25. COPIES FURNISHED: Grafton B. Wilson, II, Esquire Gregory L. Coler, Post Office Box 1292 Secretary Gainesville, Florida 32602 Department of HRS 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Theodore E. Mack, Esquire 1323 Winewood Boulevard Building 1, Room 40 Tallahassee, Florida 32399
Findings Of Fact In 1975 the Florida Legislature passed the Medical Malpractice Reform Act, Chapter 75-9, Laws of Florida, now codified in Chapter 768, Florida Statutes. Part of this legislative package included the creation of the Fund. This legislation was passed in response to a medical malpractice insurance crisis which arose when the primary underwriter for the Florida Medical Association sought to stop issuing medical malpractice policies in Florida, thus making it difficult, if not impossible, for physicians or hospitals to obtain medical malpractice insurance coverage at reasonable rates. As a result of this problem, many physicians began to practice defensive medicine, curtail or abandon their practices or practice without coverage of any kind. The Fund is a private not-for-profit organization, participation in which is totally voluntary for its member health care providers. Insofar as Petitioners are concerned, membership in the Fund is but one of several options available to provide legally required evidence of financial responsibility in order to obtain licensure as a hospital facility in Florida. In fact, of the approximately 260 hospitals in Florida, only 125 satisfy their financial responsibility requirement via membership in the Fund. Physicians, hospitals, health maintenance organizations and ambulatory surgical centers who become members of the Fund must maintain at least $100,000 in primary professional liability insurance. Membership in the Fund grants to each participant a limitation of liability above the $100,000 in primary coverage. To the extent that any settlement or judgment exceeds the primary coverage of the participant, it is paid by the Fund without limitation. The Fund is operated subject to the supervision and approval of a board of governors whose membership is required by law to consist of representatives of the insurance industry, the legal and medical professions, physicians' insurers, hospitals, hospitals' insurers and the general public. The Department is charged by statute with certain regulatory functions concerning the Fund. The base fee for Fund membership is set by statute at $500 for physicians, after an initial $1,000 enrollment fee for the first year of participation, and at $300 per bed for hospital members. The statute requires the Department to set additional fees based upon the classifications of health care providers contained in the statute. In the event that base fees are insufficient to pay all claims asserted against the Fund for a given Fund year, the Department is empowered, upon request of the Board of Governors of the Fund, to order additional assessments against Fund participants to meet any such deficiency. Under the original legislation, all classes of health care providers could be assessed unlimited amounts to make up any deficiencies. As a result of legislative amendments in 1976, however, the amount which participants, other than hospitals, could be assessed was limited to the amount each Fund member had paid to join the Fund for that particular coverage year. 1976 legislative amendments also required that each fiscal year of the Fund be operated independently of preceding fiscal years, and further required that occurrences giving rise to claims in a particular Fund year be paid only from fees or investment income on these fees collected for that particular year. Thus, it is entirely possible for the Fund to experience deficits in a given year, and yet hold surplus funds for other years. The dispute in these consolidated proceedings arises from assessments for deficits incurred for the Fund years 1977-1978 and 1978-1979. Each of the hospitals named as Petitioners in the Petition for Administrative Proceedings in Case No. 82-776 were members of the Fund during the Fund year 1977-1978. Each of the hospitals named in the style and listed on Exhibit "A" to the Amendment to Petition for Administrative Proceedings in Case Nos. 82-530 and 82-571 were members of the Fund during the Fund year 1978-1979. On October 31, 1981, the Fund certified to the Department a deficiency in the amount of $1,350,672 for the Fund year 1977-1978. On January 18, 1982, the Fund certified to the Department an additional deficiency for the Fund year 1977-1978 in the amount of $1,759,591. On January 18, 1982, the Fund certified to the Department a deficiency of $13,935,927 for the Fund year 1978-1979. On January 13, 1982, the Department issued an "order" assessing various classes of health care providers the deficiency originally certified by the Fund for the Fund year 1977-1978. The "order" of January 13, 1982, was amended by the "order" of February 1, 1982, for the Fund year 1977-1973. The amended order contained the same dollar amount of assessments, but altered the amount charged to various classes of Fund members. On February 17, 1982, the Department issued its "order" granting the second assessment for the Fund year 1977-1978. On January 22, 1982, the Department issued its "order" granting the assessment for the 1978-1979 Fund year. The Department has not promulgated any rules pursuant to Chapter 120, Florida Statutes, pertaining to its regulation of or duties in conjunction with the Fund under Section 768.54, Florida Statutes. As members of the Fund, each of the Petitioners' interests are substantially affected by the Orders of January 13, 1982; January 22, 1982; February 1, 1982; and February 17, 1982. For the Fund year 1977-1978 the total assessment ordered by the Department is $3,110,263. The total assessment for the Fund year 1978-1979 is $13,935,972. For the Fund year 1977-1978, physicians and professional association members are proposed to be assessed $1,730,207. During the Fund year 1977-1978, hospital members paid into the Fund, exclusive of interest earned on the fees, the amount of $5,292,498. For the Fund year 1977-1978, physicians and professional association members paid into the Fund the sum of $2,326,541. For the Fund year 1978-1979, hospital members paid into the Fund, exclusive of interest earned on their fees, the sum of $5,627,553. Interest earned through December 31, 1981, on these fees is $1,725,845. For the Fund year 1978-1979, physicians and professional association members paid into the Fund, exclusive of interest earned on their fees, the sum of $2,411,205. Interest earned through December 31, 1981, on the fees contributed by physicians and professional associations is $739,463. For the Fund year 1977-1978, the proposed assessments against hospital members of the Fund is $1,374,827. For the Fund year 1978-1979, the Fund retained the services of an independent actuarial firm to study and recommend appropriate additional fees to charge its members. The following table reflects the statutory base fees, the fees recommended by the actuary, the fees sought by the Fund and the fees ordered by the Department of Insurance for the 1977-1978 Fund year. Base Fees Actuary's Additional Additional Paid Recommended Fees Fees Pursuant Additional Requested Ordered to Stat. Fees by FPCF By DOI Class I Physicians $ $ $ $ Dade/Broward Co. 500.00 2,233.00 2,233.00 -0- Rest of State 500.00 l,749.00 1,749.00 -0- Class II Physicians Dade/Broward Co. 500.00 4,420.00 4,420.00 -0- Rest of State 500.00 3,549.00 3,549.00 -0- Class III Physicians Dade/Broward Co. 500.00 12,619.00 12,619.00 -0- Rest of State 500.00 10,297.00 10,297.00 -0- Hospitals (per occupied bed) 300.00 222.00 222.00 -0- Ambiatory Surgical Centers -0- 22.00 22.00 -0- (per 100 patients) Health Maintenance Organizations -0- 150.00 150.00 -0- (per 100 subscribers) Professional -0- 20 percent of additional (SAME) -0- fee to be paid by each individual member For the Fund year 1978-1979, the Department made no independent actuarial study of the recommended fees proposed by the independent actuary employed by the Fund, and no member of the Casualty Actuarial Society evaluated the Fund's recommendations on behalf of the Department. The independent actuary employed by the Fund was the only actuary who presented any evidence at the hearing conducted by the Department on the Fund's fee increase request for the Fund year 1978-1979. Each year since the Fund year 1977-1979 the Fund has employed the services of an actuary who, among other things, projected the expected losses above the claims previously paid and reserves established for known claims. These expected losses are reported as IBNR ("incurred but not reported") for each Fund year. The IBNR projected by the actuary employed by the Fund in the most recent report (October 1981) for the Fund year 1977-1978 is $6,306,036, and for the Fund year 1978-1979 is $15,965,324. The Department computed the portion of the assessment to be paid by the different classes of health care providers for the Fund year 1977-1978 based upon an approach known as the "indicated rate method." It is concluded from the record that this method is the most feasible of all suggested alternatives under existing law for reflecting the statutory classifications and, at the same time, providing immediate funds necessary to meet all claims against the Fund. This method is represented by the following formula: The Department started with rates which should have been charged each class in 1981-1982. This is called the "indicated rate by class." (The indicated rates were taken from the October, 1980 report by the Fund actuary.) The Department then applied the following formula for each class: Indicated Rate by Class x Number of Members in the Class = Total indicated fees by Class Total Indicated Fees by Class - Total Indicated Fees for ALL Classes Percentage of Indicated Fees by Class. Percentage of Indicated Fee by Class x Total Expected Loss for ALL Classes Expected Loss by Class. (Expected loss is all losses for the fund year included claims previously paid, reserves established on claims asserted and IBNR (incurred but not reported) Expected Loss by Class - Actual Fees paid by Class = Potential Loss Assessment by Class. Potential Loss Assessment by Class - Potential Loss Assessment for ALL Classes Percentage of Potential Loss Assessment by Class. Percentage of Potential Loss Assessment by Class x Total Assessment to be Ordered by the DOI = Amount of Assessment by Class. The following chart shows the amount each class would have paid under the "indicated rate method" for the Fund year 1977-1978, and the amount actually proposed to be assessed in the "orders" of the Indicated Rate Assessment Department: Actual Assessment a) Class I Physicians $ 146,487.00 $ 138,000.00 b) Class II Physicians 213,502.00 438,297.00 c) Class III Physicians 2,195,383.00 813,048.00 d) Hospitals 521,560.00 1,374,827.00 e) HMO 614.00 Surgical Centers 1,381.00 79,953.00 Professional Associations 28,336.00 Based upon the "indicated rate method" and based upon the application of Section 768.54, Florida Statutes, employed by the Department, assessments for the Fund year 1977-1978 which would otherwise be attributable to physician members of the Fund in the approximate amount of $1,500,000 were not charged to any class of physician. Based upon the "indicated rate method" and based upon the application of Section 768.54, Florida Statutes, employed by the Department, assessments for the Fund year 1978-1979 otherwise attributable to physician members of the Fund in the approximate amount of $9,000,000 were not charged to any class of physicians. The assessments described in the "orders" of the Department for the Fund year 1977-1978 which could not be applied to physician members, based upon the Department's interpretation of Section 768.54, Florida Statutes, were spread among the other classes of health care providers based upon their percentage of "expected losses." The Petitioners in this case, each of whom are members of the Fund, consist of 30 government hospitals, 43 private, nonprofit hospitals, and seven private, for-profit hospitals. During the Fund years 1977-1978 and 1978-1979, the Fund consisted of the following classes and numbers of members: 1977-1978 1978-1979 a) Class I Physicians 1392 1516 b) Class II Physicians 814 971 c) Class III Physicians 1584 1690 d) Hospitals 120 130 e) HMO 2 3 f) Surgical Centers 11 14 g) Professional Associations 572 855 The "orders" of the Department dated January 13, 1982; January 22, 1982; February 1, 1982; and February 17, 1982, were the first time any member of the Fund has been assessed under Section 768.54, Florida Statutes. The fees paid into the Fund; the investment income earned through December 31, 1981, on such fees; the expenses incurred through December 31, 1981; the amounts paid on claims through December 31, 1981; reserves established through and the IBNR for each Fund year for 1975-1976 through 1980-1981 are reflected on the table on page 10a. (IBNR figures are projections of future losses prepared by the Fund's actuary in October 1981.) The rates applicable to physicians and hospital members of the Fund for the years 1977-1978 and 1978-1979 were the base fees provided in Section 768.54, Florida Statutes. No additional fees were set for those Fund years. The rate order for the 1978-1979 year entered by the Department on June 9, 1978, was not appealed. The Fund in fact experienced deficits in both Fund years in controversy in this proceeding. The Fund certified to the Department the amount of its projected deficit for the years in question. The amount of money ultimately certified by the Fund to the Department accurately reflects the amounts derived from the following formula: FUND YEAR: 1975-1976 1976-1977 1977-1978 FEES PAID $2,928,672 $6,303,257 $7,467,605 INTEREST EARNED 1,475,41 3,000,118 2,592,179 ADMINISTRATIVE EXPENSES (54,846) (95,002) (148,113) NET FUNDS AVAILABLE 4,349,227 9,208,373 9,911,671 TO PAY LOSSES LOSSES PAID TO DATE (3,004,273) (6,869,395) (8,271,696) INDEMNITY EXPENSES (300,334) (343,433) (391,858) RESERVED LOSSES (971,733) (4,249,604) (3,663,348) RESERVED EXPENSES (57,584) (111,466) (172,869) PRESENT SURPLUS/DEFICIT (14,697) (2,365,525) (2,588,100) LOSSES INCURRED NOT YET REPORTED (IBNR) (AS OF 6/30/81) (1,189,136) (3,878,887) (7,970,235) FUND YEAR: 1978-1979 1979-1980 1980-1981 FEES PAID $8,060,374 $9,836,157 $11,225,275 INTEREST EARNED 2,543,698 2,589,547 1,882,319 ADMINISTRATIVE EXPENSES (128,556) (279,838) (406,641) NET FUNDS AVAILABLE 10,475,506 12,145,866 12,700,953 TO PAY LOSSES LOSSES PAID TO DATE (9,760,650) (3,410,358) (37,500) INDEMNITY EXPENSES (532,197) (206,616) (32,619) RESERVED LOSSES (13,782,271) (6,445,000) (3,750,000) RESERVED EXPENSES (267,932) (342,787) (114,417) PRESENT SURPLUS/DEFICIT (13,867,544) (1,741,105) (8,766,417) LOSSES INCURRED NOT YET (14,979,237) (28,295,428) (51,500,564) REPORTED (IBNR) (AS OF 6/30/81) FUND YEAR: TOTALS FEES PAID $45,821,340 INTEREST EARNED 14,083,262 ADMINISTRATIVE EXPENSES (1,113,006) NET FUNDS AVAILABLE 58,791,596 TO PAY LOSSES LOSSES PAID TO DATE (31,353,872) INDEMNITY EXPENSES (1,837,057) RESERVED LOSSES (32,861,956) RESERVED EXPENSES (1,067,055) PRESENT SURPLUS/DEFICIT (8,328,344) LOSSES INCURRED NOT YET (107,813,487) REPORTED (IBNR) (AS OF 6/30/81) Total fees paid during the Fund Year + Investment Income attributable to the Fund Year Expenses allocated to that Fund Year Amount paid on claims for that Fund Year Amount reserved for all known claims for that Fund Year. The Department entered orders levying the assessments on January 13, 1982; January 22, 1982; February 1, 1982; and February 17, 1982. The parties to this proceeding stipulated that the assessments entered by the Department for 1977-1978 and 1978-1979 are to be considered to be proposed agency action as to such parties. The Department limited the amount assessed against any physician member to an amount equal to the annual membership fee paid by the physician for the year giving use to the assessment. According to the "orders" of the Department for the Fund year 1977- 1978, Class III physicians' share of the assessment, based upon the assessment formula utilized, was in excess of the amount of membership fees paid by that group, and the balance was spread over the rest of the classes of health care providers. According to the "orders" of the Department for the Fund year 1978- 1979, Class I, II, and III physicians' share of the assessment, based upon the assessment formula utilized, was in excess of the amount of membership fees paid by those groups, and the balance was spread among those health care providers described in Section 768.54(1)(b)l.,5.,6., and 7., Florida Statutes. The Department, by order dated June 9, 1978, denied the Fund's request for additional fees for the year 1978-1979. In April 1981, at the request of the Department, the Fund filed a "Retrospective Rating Plan." This plan provided that at such time as the Fund dropped below 25 percent of the original fees paid in any fund year an assessment would be triggered. The plan further provided for the assessment to be based upon all settlements or final judgments entered but unpaid at the time of the assessment, and all reserves established by the Fund at the time of the assessment. This "Retrospective Rating Plan" was approved by the Department, but not adopted pursuant to Chapter 120, Florida Statutes. Although the Fund sought to amend the plan both before and after the assessments now at issue, the original plan remained in effect at all times material to this cause. Although Petitioners have not disputed the amount of the reserves set by the Fund, such reserves constitute a substantial portion of the assessment amounts requested by the Fund. The Department has not made any evaluation of the accuracy of the case reserves, nor has the Department made any analysis of the method employed by the Fund in setting case reserves. There was some evidence that the cash shortages experienced by the Fund for the Fund years 1977-1978 and 1978-1979 may have been caused in part by the manner in which the Fund has paid claims. In 1976 the Florida Legislature limited the amount which the Fund could payout on claims to $100,000 per person, per year. In addition, the law provides that reasonable attorneys' fees and costs shall be paid to a successful claimant within the first 90 days following a judgment or settlement. In most instances, the Fund does not inquire into the fee arrangement between plaintiffs and their attorneys. Moreover, no claim for attorneys' fees is required to be submitted to the Fund or the trial court to set a reasonable percent fee for such services. The Fund has indicated that for claims paid for the Fund years 1977-1978 and 1978-1979, the Fund simply assumed that attorneys' fees and costs equalled 40 percent of the amount of the settlement or judgment. In most cases, the Fund does not consider any portion of the attorneys' fees as having been paid by the primary insurance carrier. In some instances, it appears that payments made by the Fund may have disregarded the $100,000 per person, per year payout limitation, and in other instances the Fund has been ordered to pay amounts in excess of the statutory limit and has not pursued an appeal of such orders. In still other instances the Fund has purchased annuities to fund settlements or judgments, the cost of which annuities exceeded the $100,000 payout limitation. The Fund does not consider such payments to be subject to the payout limitation although no rights of ownership in the annuities are retained by the Fund. It is possible that the cumulative effect of these practices has been significant. Petitioners adduced evidence estimating "excess payments" by the Fund for 1977-1978 over the statutory limit could be as high as $2,684,737. For the Fund year 1978-1979 these "excess payments" could be as high as $4,827,690. Under the Department's application of Section 768.54, Florida Statutes, no physician member will again be assessed for the Fund years 1977- 1978 and 1978-1979. Yet, based upon the latest estimates by the Fund's consulting actuary, additional claims for those two years which have not yet been reported could reach as high as $22,949,472. Under the Department's construction of the statute, hospital members will have to pay all of these additional losses, if the actuary's projections prove correct.
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 respondent's proposed rule 10N-5.0605 is an invalid exercise of delegated legislative authority?
Findings Of Fact The respondent Health Care Cost Containment Board (HCCCB) published proposed Rule 10N-5.0605, "Fine for Exceeding Approved Gross Revenue per Adjusted Admission," in the Florida Administrative Weekly, Vol. 16, No. 49, on December 7, 1990.The proposed rule reads: 10N-5.0605 Fine For Exceeding Approved Gross Revenue Per Adjusted Admission. For each hospital subject to the provisions of Section 407.50, Florida Statutes, the Board shall annually compare the audited actual experience of each hospital to its approved budget gross revenue per adjusted admission for purposes of levying an administrative fine in accordance with Section 407.06, Florida Statutes. Determination of Potential Excess. For a hospital with a budget letter approved in accordance with Section 407.502(2), and Rule 10N-5.014 for the year at issue, the Board shall subtract the gross revenue per adjusted admission certified in that budget letter from the gross revenue per adjusted admission contained in its audited actual report for the year at issue. If the result is a positive integer, a potential excess for this rule exists. For a hospital with a Board approved budget, the Board shall subtract the gross revenue per adjusted admission contained in that budget from the gross revenue per adjusted admission contained in its audited actual report for the year at issue. If the result is a positive integer, a potential excess for this rule exists. In no case shall the provisions of section , below, create a potential excess when the application of (2)(a) or (2)(b), above, has determined that a potential excess does not exist. Adjusting the Excess. The Board shall adjust the potential excess by demonstrated changes in a hospital's case mix and outlier experience. The Board shall consider changes in case mix in levying a fine. A hospital must demonstrate any changes in its case mix, to the Board's satisfaction based on case mix data, which shall include, but not be limited to, reports filed pursuant to Sections 407.02(1) and 407.50, F.S., and rules promulgated thereunder. Demonstration of changes in case mix must be based upon case mix data reported as required in the FHURS Manual. A consistent set of DRG weights shall be used for all periods of data submitted, and shall correspond to the weight set used as published by the Health Care Finance Administration. The amount determined in paragraph (2) for budget letters or Board-approved budgets for which changes in case-mix or average length of stay for psychiatric hospitals was not used to justify cost increases, shall be adjusted for case mix as follows: For acute care hospitals, the Board shall adjust the potential excess in the following manner. The percentage increase, or decrease, in the case mix score between the year prior to the year at issue and the year at issue less the case mix, threshold as established in Rule 10N-5.020, shall be multiplied by the gross revenue per adjusted admission as reported in the hospital's budget letter or Board approved budget for the year at issue. The total adjustment will then be subtracted from the potential excess in determining the adjusted excess. For psychiatric hospitals, demonstration of changes in average length of stay shall be based upon data available to the Board for acute and intensive care patients, except for hospitals treating sub-acute patients, exclusively, for which demonstration of changes in average length of stay shall be based upon data available to the Board for all patients. The Board shall multiply the percentage increase, or decrease, in average length of stay from the year prior to the year at issue to the year at issue, by the gross revenue per adjusted admission reported in the hospital's budget letter or Board approved budget for the year at issue. This total adjustment will then be subtracted from the potential excess in determining the adjusted excess. The amount determined in paragraph (2)(b) for a hospital with a Board approved budget for which changes in case-mix or average length of stay were used to justify cost increases, shall be adjusted for case mix as follows: For acute care hospitals, the year at issue actual case mix score will be compared to the entire case mix score used in calculating the approved budget for the year at issue. The same grouper will be utilized in computing the entire year's case mix score as was used in the budget. The percentage increase, or decrease, without applying the threshold adjustment, will be multiplied by the Board-approved gross revenue per adjusted admission to determine the case mix, adjustment. This total adjustment will then be subtracted from the potential excess in determining the adjusted excess. For psychiatric hospitals, demonstration of changes in average length of stay shall be based upon data available to the Board for acute and intensive care patients, except for hospitals treating sub-acute patients, exclusively, for which demonstration of changes in average length of stay shall be based upon data available to the Board for all patients. The year at issue actual length of stay will be compared to the length of stay used in calculating the approved budget for the length of stay used in calculating the approved budget for the year at issue. The Board shall multiply the percentage increase, or decrease, in average length of stay, by the Board approved gross revenue per adjusted admission. This total adjustment will then be subtracted from the potential excess in determining the adjusted excess. The Board shall consider in levying a fine, changes in patient intensity and severity of illness documented by quantifiable evidence of changes in the hospital's actual proportion of outlier cases to total cases and dollar increases in outlier cases' average charges per case. An outlier case is defined as those inpatient cases in a DRG which exceed the threshold established for each DRG. The base year is the year prior to the year at issue. The threshold is established by multiplying the hospital's actual gross revenue per adjusted admission (GRAA) for the base year by the HCFA weight for the DRG and multiplying the result by the mean variance factor (MVF), 2.11. The HCFA weight shall be from the same set of DRG weights used by the hospital in calculating the case mix score submitted in (3)(a) above. The thresholds for the year at issue are established by multiplying the hospital's approved GRAA for the year at issue by the HFCA weight for each DRG and multiplying the result by the MFV of 2.11. Hospitals requesting a case mix outlier adjustment shall submit detailed documentation of actual outlier cases, providing an auditable record ID number sufficient to protect the confidentiality of patient identity, DRG, date of discharge and gross charges for each outlier case for all DRGs on the Outlier Detail Worksheet and Summary Outlier Report described in FHURS Chapter V-G. A consistent grouper shall be used for all data submitted. The grouper used shall be that used in calculating case mix scores submitted in (3)(a) above. Proportional Outlier Adjustment Determine the average actual inpatient revenue per admission for the base year by dividing total inpatient revenue by total admissions. Calculate an outlier adjusted revenue per admission in the year at issue by: Multiplying the year at issue outlier discharges by the average gross revenue per outlier discharge for the base year. Multiplying the year at issue inlier discharges (defined as report admissions for the period minus outlier discharges, which do not include the discharges for outliers occurring in DRGs 390 and 391) by the average gross revenue per inlier discharge for the base year (gross revenue per inlier discharge is defined as inpatient revenue for the period minus outlier revenue, which does include the revenue generated by outliers in DRGs 390 and 391). Sum the products in i. and ii. and divide by the total admissions in the year at issue. Calculate the percent change between the result obtained in (3)(b)3.a. and the result obtained in (3)(b)3.b. This percent change is the proportional outlier adjustment. Outlier Dollar Increase (Decrease) Adjustment Calculate the increased (decreased) outlier revenue due to the increase (decrease) in average outlier charges per case by multiplying these average increase (decrease) in gross revenue per outlier discharge between the base period and the year at issue by the number of outlier discharges for the year at issue. Divide the product achieved in (3)(b)4.a. above by the total admissions for the actual period and calculate the percent it represents of the amount determined in (3)(b)3.a. This percent change is the dollar increase (decrease) outlier adjustment. The total outlier charge adjustment is the sum of the proportional outlier adjustment percentage described in (3)(b)3.c. above and the outlier dollar increase (decrease) adjustment percentage described in (3)(b)4.c. above. The percentage computed in (3)(b)5. above shall be reduced by the outlier adjustment percentage applied in the Board approved budget for the year at issue. The result, will be multiplied by the Board approved or budget letter gross revenue per adjusted admission for the year at issue to determine the outlier adjustment. This total adjustment will then be subtracted from the potential excess in determining the adjusted excess. Calculating the Fine. If the adjusted excess computed in (3) above results in a negative integer, no fine will be imposed pursuant to this rule. If the integer is positive, it will be multiplied by the actual admissions for the year at issue to compute excess gross revenue. The budgeted gross revenue per adjusted admission for the year at issue will be multiplied by the actual adjusted admissions for the year at issue to compute approved total gross operating revenue. The excess gross revenue shall be divided by the approved total gross operating revenue for the year at issue to compute the excess revenue percentage. The excess gross revenue calculated in above shall be multiplied by the excess revenue percentage calculated in (4) above to compute the base fine amount. The base fine amount calculated in (4)(a) shall be multiplied by the applicable occurrence factor to compute the cash fine. For the first occurrence within in a 5-year period, the applicable occurrence factor shall be 0.25; For the second occurrence within the 5-year period following the first occurrence as set forth in paragraph 1., the applicable occurrence factor shall be 0.55. For the third occurrence within the 5-year period following the first occurrence as set forth in paragraph 1, the applicable occurrence factor shall be 1.0. The cash fine calculated pursuant to section (4) shall not exceed $365,000. Within thirty days after the Board's action to impose a fine pursuant to this rule, the hospital shall pay any fine imposed. However, if the hospital has been assessed a cash fine in accordance with the provisions of Rule 10N-5.062 for the same period in which a cash fine was imposed pursuant to this rule, the hospital shall pay the greater of the two cash fines. The remaining cash fine amount shall not be imposed, but shall be considered an occurrence. Special Provisions. A hospital with a fiscal year ending during calendar year 1992 shall not be subject to the provisions of this rule if the amount determined in paragraph (2)(a) or (2)(b), as appropriate is less than or equal to the result of multiplying its approved budget gross revenue per adjusted admission for the year at issue by 10%. A hospital with a fiscal year ending during calendar year 1993 shall not be subject to the provisions of this rule if the amount determined in paragraph (2)(a) or (2)(b), as appropriate, is less than or equal to the result of multiplying its approved budget gross revenue per adjusted admission for the year at issue by 5%. A hospital in its initial year of licensure shall not be subject to the provisions of this rule. For purposes of this rule, a "hospital in its initial year of licensure" shall mean a "new hospital", and shall not include any facility which has been in existence as a licensed hospital, regardless of ownership, for over one year. For a "new hospital" in its second year of operation, the provisions of (7)(a), above, shall apply. For a "new hospital" in its third year of operation, the provisions of (7)(b), above, shall apply. The Board may reduce any excess or fine determined pursuant to this rule, based upon additional data that the hospital may present directly to the Board, or if the imposition of such a fine would have a severe adverse effect which would jeopardize the continued existence of an otherwise economically viable hospital. This rule shall be in effect for fiscal years ending after January 1, 1992. As law implemented, the notice published in the Florida Administrative Weekly lists Sections 407.002, 407.003, 407.02, 407.03, 407.06 and 407.50, Florida Statutes (1989 and 1990 Supp.) The parties stipulated to the following findings of fact, set out in paragraphs 2 through 21. The petitioner, Florida League of Hospitals is a non-profit corporation which is organized and maintained for the benefit of the 83 investor-owned hospitals which comprise its membership. One of the primary purposes of FLH is to act on behalf of its members by representing their common interests before the various governmental entities of the state, including the HCCCB. The Florida League of Hospitals has standing to appear in this matter. The petitioner, Florida Hospital Association is a non-profit corporation which is organized and maintained for the benefit of the hospitals which comprise its membership. One of the primary purposes of FHA is to act on behalf of its members by representing their common interests before the various governmental entities of this state, including the HCCCB. The FHA has standing to participate in this matter. The petitioner, Association of Voluntary Hospitals of Florida, Inc., is a Florida not-for-profit corporation, which is organized and maintained for the benefit of the 91 public and non-profit Florida hospitals which comprise its membership. One of the primary purposes of AVHF is to act on behalf of its members by representing their common interests before the various governmental entities of the State of Florida, including the Health Care Cost Containment Board. The AVHF has standing to sue in this matter. The intervenor is charged under Sections 407.54 and 350.061-350.0614, Florida Statutes, with representing the interest of the general public in any proceeding before the HCCB conducted pursuant to Section 120.57, Florida Statutes, as are provided in Sections 350.061-350.0614, Florida Statutes. Such powers include the capacity to initiate proceedings by petition in order to urge any position which is deemed by the Public Counsel to be in the public interest. Pursuant to the powers and duties as provided in Sections 407.54 and 350.061-350.0614, Florida Statutes, the Public Counsel has standing to participate in the challenge to proposed Rule 10N-5.0605. Both gross and net revenues are included in any hospital budget, where: gross revenues represent all charges for hospital services (as well as certain other operating revenues); and net revenues represent dollars actually received for the provision of hospital services, i.e., gross revenues less certain deductions from revenues resulting from an inability to collect payment of charges. Gross and net revenues are not the same thing nor is there necessarily a fixed relationship between these two measures. It is possible for a hospital to exceed its Board-approved or hospital certified GRAA while its NRAA is at or below its budget. Hospital budgets and amended budgets are approved or certified for a specified future time period. The GRAA contained in a hospital budget or amended budget is a calculated average which is based upon projected data for a specified future time period. A hospital's experience for GRAA can vary from day to day during a fiscal year. Generally, a hospital's fiscal year is 365 days. In fiscal year 1987, 154 out of 215 general acute care hospitals had gross revenues per adjusted admissions that averaged 4.4% over their Board approved budgets for a total excess of $506 million. In fiscal year 1988, 148 out of 205 general acute care hospitals had gross revenues per adjusted admissions that averaged 5.1% over Board approved budget for a total excess of $682 million. In fiscal year 1989, 154 out of 205 general acute care hospitals had gross revenues per adjusted admissions that averaged 7.3% over Board approved budget for a total of $1.1 billion in excess gross revenues. The numbers referred to in paragraphs 13, 14, and 15 are not case mix and outlier adjusted. General acute care hospitals' actual experience compared to prior year for GRAA increased 13.8% in 1987, 13.5% in 1988, and 16.6% in 1989. Hospital input prices -- a measure of hospital inflation -- increased 3.8% in 1987, 5.0% in 1988, and 5.1% in 1989. The Board has estimated, based upon calculations from survey results based on FY 1989 data that the charges for approximately 50% of Florida hospital patients are the responsibility of private payors and approximately 46.4% of those patients or 345,000, paid based upon a discount from charges. There is some currently undetermined number of patients in Florida who pay full charges. Hospitals generally exercise direct control over charges and charge structures. Hospitals influence, but do not directly control utilization of facilities, goods and services, and mix of patients treated. Hospitals do not generally directly control case mix or outliers. Hospitals influence, but do not directly control physician practice or admission patterns. Fifty-five out of 282 hospitals submitted budgets for fiscal year 1989 in which the approved GRAA was less than the hospital's 1988 actual GRAA experience.
The Issue The issue is the amount payable to Respondent, Agency for Health Care Administration (Respondent or AHCA), in satisfaction of Respondent's Medicaid lien from a settlement offer received on behalf of Petitioner, Ciara Thomas.
Findings Of Fact Ciara Thomas is a six-year-old female who currently resides in St. Petersburg, Florida. Respondent is the state agency authorized to administer Florida's Medicaid program. See § 409.902, Fla. Stat. On October 18, 2012, Ciara, then two and one-half weeks shy of her third birthday, was severely injured when she fell into a bathtub and was scalded by hot water. At that time, Ciara, her mother, and a brother were tenants of a residential dwelling located at 8181 91st Terrace, Seminole, Florida, which was owned by Selvie Berberi, the landlord. Ciara suffered from second- and third-degree burns over 65 percent of her total body surface area, and in particular, to her back, buttocks, chest, bilateral tower extremities, bilateral upper extremities, and genitals. Ciara received extensive medical care and treatment for her scald burns at Tampa General Hospital, where she was hospitalized from October 18, 2012, through January 9, 2013. The parties have stipulated that through the Medicaid program, AHCA spent $174,675.05 on behalf of Ciara. Because of the extensive nature of the burns on her lower extremities and entire back, Ciara has undergone five skin grafts. She has completed physical therapy in the burn center and does not anticipate any further medical treatment until she is fully grown. Ciara has very visible scars over much of her body, which will not likely improve over time. The skin feels rubbery, with no smooth texture, and it is affected by the weather. Whenever she is outside, Ciara must be completely covered with clothing. She attends school but cannot play outdoors due to potential injury or infection. Because of the condition of her skin, she is subjected to stares by other persons and students, causing her to be extremely self- conscious. Petitioner filed suit in Pinellas County Circuit Court against the landlord in negligence for her failure to provide safe and proper working plumbing to the rental home. Among other things, the water heater had been set far above the legal limits of 120 degrees. During the pendency of that litigation, the landlord's homeowner's insurance company offered payment in settlement in the amount of $101,000.00, representing the $100,000.00 coverage limit for bodily injury liability, and $1,000.00 as payment of the coverage limit of the policy's medical payments provisions. At hearing, Ciara's mother indicated that she intends to accept the offer if it is approved by the court. AHCA contends it should be reimbursed for Medicaid expenditures on behalf of Petitioner pursuant to the formula set forth in section 409.910(11)(f). Under the formula, the lien amount is computed by deducting a 25 percent attorney's fee ($25,250.00) and taxable costs ($879.59) from the $101,000.00 recovery, which yields a sum of $74,870.41. This amount is then divided by two, which yields $37,435.21. Under the statute, Respondent is limited to recovery of the amount derived from the statutory formula or the amount of the lien, whichever is less. Petitioner agrees that under the statutory default allocation, AHCA would be entitled to $37,435.21. Section 409.910(17)(b) provides that a Medicaid recipient has a right to rebut the default allocation described above. Utilizing that provision, Petitioner asserts that reimbursement should be limited to the same ratio as her recovery amount is to the full or total value of her damages. Under this theory, Petitioner contends that had her case gone to trial, a jury would have awarded at least $3.5 million, or the mid-point between $3 million and $4 million. Because the settlement represents a recovery of 2.9 percent of the valuation of her total damages, Petitioner contends she should pay 2.9 percent of AHCA's past medical expenses, or $5,066.00, to satisfy the Medicaid lien. The statute requires that Petitioner substantiate her position by clear and convincing evidence. To support the proposed full value of damages, Petitioner presented the testimony of Keith Ligori, a trial attorney in Tampa for the last 15 years, who specializes in all types of personal injury cases. Mr. Ligori has handled similar cases "numerous times," and on a daily basis he makes assessments of the valuation of potential claims. He is familiar with the reasonable valuation of personal injury cases in the greater Tampa Bay area, including Pinellas County. Mr. Ligori presented fact and opinion testimony on the issue of valuation of damages. Before forming his opinion on damages in this case, Mr. Ligori reviewed the medical records, including photographs of Ciara, interviewed the child and her mother, and discussed the case with her trial counsel. He also relied on his training and experience and familiarity with other cases in the Tampa Bay area. Based on his review of the case, Mr. Ligori valued total damages, conservatively, at $3.5 million. This figure took into account non-economic factors, including mental anguish, loss of ability or capacity to enjoy life, disability, and scarring and disfigurement, and economic damages consisting of the medical expenses paid by AHCA. Mr. Ligori testified that if he was actually trying the case before a jury, he would seek damages of between $5 million and $10 million. The undersigned finds the valuation of damages at $3.5 million to be credible and persuasive and is hereby accepted. In summary, by clear and convincing evidence, Petitioner has demonstrated that, conservatively, the full value of her damages is $3.5 million. The settlement amount of $101,000.00 is 2.9 percent of the total value of Petitioner's damages. The application of this factor to total medical expenses incurred by AHCA results in an allocation of $5,066.00 as a reasonable payment of the Medicaid lien.
Findings Of Fact Petitioner is a duly licensed nursing home located in Dania, Florida, and is authorized to participate in the Medicaid program. In 1975, Makhlouf Suissa, his wife Lorraine Suissa, and his father-in- law Moses Farkas, purchased 100 percent of the stock of Dania Nursing Home, Inc. The Suissas purchased the said stock with the intention of becoming the owners of the nursing home and personally managing it, which they have done since 1975. Makhlouf Suissa is the assistant administrator, and Lorraine Suissa is the administrator. The Suissas were unaware at the time of their stock purchase that there was any distinction between a purchase of 100 percent of the stock of Dania Nursing Home, Inc., and a purchase of 100 percent of the assets of that corporation for purposes of reimbursement for depreciation and/or interest expense. Petitioner submitted its Medicaid cost reports for the fiscal years ending July 31, 1979, and July 31, 1980. Respondent thereafter made adjustments after conducting audits of the Petitioner's records. Respondent disallowed $1,424 expended by Petitioner during each of the fiscal years in question for a one-quarter page advertisement in the yellow pages of the telephone directory. The ad was not introduced in evidence. Rather, Petitioner's witness testified that the ad stated that Petitioner accepts Medicaid patients and provides physical therapy and 24-hour nursing care. Respondent disallowed $2,260 paid by Petitioner as a professional fee to Moses Farkas for administering the nursing home during the Suissas' vacation and for performing certain maintenance tasks. Farkas, the father of Lorraine Suissa and a one-third owner of Petitioner, is not a licensed nursing home administrator in the State of Florida. No documentation was presented by Petitioner to reflect exactly what was done by Farkas, when it was done, and what the services would have cost if performed by someone other than an owner. For the 1979 fiscal year, Respondent disallowed $2,395 in automobile and travel expenses incurred by the Petitioner, since the costs were not properly documented and some of the expense was applicable to the owner's personal use. Although the automobile was owned by Petitioner and used for purchasing items for the facility and patients, Mr. Suissa drove the automobile to and from work. In 1980, the amount of $2,106 was disallowed as that portion of automobile expense applicable to the owner's personal use. Although Petitioner maintained no records proportioning the use of the automobile between personal and business, the percentage of expense disallowed was accepted by Respondent based upon Petitioner's statements. For the fiscal year ending in 1979, Respondent disallowed $787 of Petitioner's insurance expense applicable to the owner's personal use of the Petitioner's automobile. During the fiscal year ending in 1980, Respondent disallowed the amount of $1,222 as auto insurance applicable to the owner's personal use. Respondent disallowed the amount of $1,419 as utilization review expenses during the fiscal year ending July 31, 1979. For the fiscal year ending in 1979, Petitioner claimed as combined workmen's compensation insurance and hospitalization group insurance the amount of $17,476.69. Of this amount, Respondent disallowed the sum of $4,286. For the fiscal year ending in 1979, Respondent disallowed the amount of $1,828 as that portion of the depreciation on Petitioner's automobile which was applicable to the owner's personal use after determining that 60 percent of the automobile's use that year was personal. For the fiscal year ending in July, 1980, Respondent disallowed the amount of $1,586 as that portion of depreciation on the automobile applicable to the owner's personal use after determining that 50 percent of the automobile's use was personal. For 1979, Respondent disallowed $20,613 in interest expense, that amount representing the interest on the loan obtained by the Suissas in order to purchase Petitioner's stock. For the fiscal year ending July, 1980, the amount of $19,455 was disallowed by Respondent as interest on the loan used to purchase the corporate stock from Petitioner's former owners. In Petitioner's 1979 cost report, Petitioner claimed the amount of $853 representing the cost of food purchased from a delicatessen, and in its 1980 cost report, Petitioner claimed the amount of $1,021 representing food purchased from a delicatessen. Although Petitioner's policy has been to provide food for employees during the time that they are working, the special food purchase from the delicatessen was made because Mr. and Mrs. Suissa are Orthodox Jews and Petitioner did not at that time have a kosher kitchen facility. For 1979, Respondent disallowed Petitioner's Medicare adjustment in the amount of $70,721 to remove expenses allocated to the Medicare program. Medicare actually reimbursed Petitioner only the amount of $58,127. For the fiscal year ending July 31, 1980, Respondent disallowed the amount of $59,994 as a Medicare adjustment for expenses to be paid pursuant to the Medicare program. Medicare actually paid Petitioner the amount of $50,451 in Medicare benefits for that fiscal year. In the fiscal year ending July 31, 1980, Respondent disallowed the amount of $230 for flowers given to employees by Petitioner as an expense not related to patient care.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered finding the Petitioner entitled to reimbursement in the amount of $15,074.36 by Respondent for allowable costs which it accrued during the fiscal year ending July 31, 1979; finding Petitioner entitled to be reimbursed in the amount of $9,543 by Respondent for allowable costs which it accrued during the fiscal year ending July 31, 1980; and approving all other adjustments made by Respondent to Petitioner's cost reports for those two fiscal years. DONE and RECOMMENDED this 27th day of January, 1983, in Tallahassee, Leon County, Florida. LINDA M. RIGOT, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 27th day of January, 1983. COPIES FURNISHED: Edward S. Jaffry, Esquire William L. Grossenbacher, Esquire 800 Barnett Bank Building Post Office Drawer 1140 Tallahassee, Florida 32302 Joseph L. Shields, Esquire Department of HRS 1317 Winewood Boulevard Building 3, Room 218 Tallahassee, Florida 32301 David H. Pingree, Secretary Department of HRS 1323 Winewood Boulevard Tallahassee, Florida 32301 =================================================================
The Issue Whether the challenged portion of Rule 10N-5.015(15), Florida Administrative Code, as proposed by the Respondent, the Health Care Cost Containment Board, is an invalid exercise of delegated legislative authority?
Findings Of Fact The parties stipulated to the following facts: The Retreat is a 100 bed short-term psychiatric specialty and substance abuse hospital located at 555 S.W. 148th Avenue, Sunrise, Broward County, Florida. The Retreat admitted its first patient on September 12, 1988. The Retreat operates on a fiscal year from September 1, through August 31. Therefore, The Retreat's 1989 fiscal year was for the period beginning when The Retreat opened on September 12, 1988, through August 31, 1989. The Retreat filed its 1989 budget with the Respondent on June 3, 1988. The Retreat's 1989 budget was approved by the Respondent on August 25, 1988 with an approved gross revenue per adjusted admission (hereinafter referred to as "GRAA"), of $20,323.00, and a net revenue per adjusted admission (hereinafter referred to as "NRAA"), of $17,973.00. The Retreat's 1990 fiscal year is from September 1, 1989, through August 31, 1990. Pursuant to Section 407.50(2)(a), Florida Statutes (1988 Supp.), The Retreat submitted a budget letter described in Section 407.50(2)(a), Florida Statutes, to the Respondent on May 24, 1989, for its 1990 fiscal year. The budget letter submitted by The Retreat certified that its FY 1990 maximum allowable rate of increase in GRAA over its budgeted GRAA in FY 1989 would be 7.8% and that its GRAA would not exceed $21,908.00 in FY 1990. Said rate of increase stated in The Retreat's budget letter represented the National Hospital Input Price Index (hereinafter referred to as the "NHIPI"), for the 1990 fiscal year plus two percentage points. At the time the Respondent received said budget letter, no administrative rule had yet been adopted that required a hospital entering into its second fiscal year of operation to file a full budget subject to detailed budget review. By letter dated June 5, 1989, the Respondent's staff advised The Retreat that, based on staff's interpretation of the controlling statute, staff could not accept said budget letter filed by The Retreat and a detailed budget would be required for The Retreat's 1990 fiscal year. The June 5, 1989, letter enunciated a non-rule agency policy based upon staff's interpretation of Section 407.50, Florida Statutes (1988 Supp.), that a hospital filing a budget for its second fiscal year is not eligible to file a budget letter and must file a budget subject to detailed review. On June 29, 1989, The Retreat filed a Petition to determine the invalidity of the non-rule policy explicated in said June 5, 1989, letter. Also on June 29, 1989, The Retreat filed a Petition for Formal Administrative Hearing regarding the decision by HCCCB to reject its budget letter. Said Petition was assigned DOAH Case No. 89-3579H. On May 25, 1989, proposed Rule 10N-5.015 was approved by the HCCCB. Said proposed rule was published in the Florida Administrative Weekly, in Volume 15, No. 27, Florida Administrative Weekly (July 7, 1989). The last sentence of proposed Rule 10N-5.015(15), Florida Administrative Code, provides as follows: A new hospital or replacement hospital relocated to a different medical services area shall submit a budget report for review in the first two years of operation, but may submit a budget letter for its third year of operation if it does not require an increase in GRAA in excess of its hospital specific MARI calculated pursuant to Rule 10N-5.013. The last sentence of proposed Rule 10N-5.015(15), Florida Administrative Code, codifies, in rule form, the non-rule policy set forth in the HCCCB letter of June 5, 1989. The Retreat filed a Petition to Determine the Invalidity of Proposed Rule 10N-5.015(15), Florida Administrative Code, on July 28, 1989. Said Petition was assigned DOAH Case No. 89-4219RP. DOAH Case No. 89-3436RU, 89-3579H and 89-4219RP were subsequently consolidated for a single final hearing. The Retreat has standing in each of the three above-styled causes. Florida hospitals subject to Section 395.509(1), Florida Statutes (1985), were required to file detailed budgets before the start of each fiscal year prior to 1990. The Respondent reviewed each budget, including the hospital's GRAA. Depending upon the rank of a hospital's GRAA among the hospitals it was assigned to for budget review, the hospital's budget would either be automatically approved or subjected to detailed review. During the 1988 legislative session, Chapter 88-394, Laws of Florida, was enacted. Chapter 88-394, which was codified in Chapter 407, Florida Statutes (1988 Supp.), applies to a hospital's 1990 fiscal year and to later fiscal years. Section 407.50, Florida Statutes (1988 Supp.), provides that a hospital is required to file either a detailed budget or a "budget letter". In particular, Section 407.50(2)(a), Florida Statutes (1988 Supp.), provides that each hospital, "[e]xcept for hospitals filing a budget pursuant to subsection (3) . . . shall file with the board a certified statement, hereafter known as the 'budget letter' . . . ." If a budget letter is filed the hospital must acknowledge its maximum rate of increase in its GRAA from the previous year "as calculated pursuant to s. 407.002(17) . . ." and its maximum rate of increase for the next fiscal year, and it must affirm that it will not exceed the applicable maximum allowable rate of increase. If a budget letter is filed by a hospital the hospital's base for budget review is governed by Section 407.50(1), Florida Statutes (1988 Supp.): The base for hospital budget review for fiscal year 1990-1991 shall be the hospital's prior year actual gross revenues per adjusted admission inflated forward by the hospital's applicable current year's maximum allowable rate of increase or the board- approved budgeted gross revenues per adjusted admission, whichever is higher; provided that, in cases where the board has approved a rate of increase below the MARI, the board-approved maximum allowable rate of increase shall apply. For a 1990-1991 budget, a hospital's base is the greater of the hospital's GRAA for its 1988 fiscal year increased by its 1989 MARI or its 1989 budgeted GRAA. Section 407.50(3), Florida Statutes (1988 Supp.), requires the submission of a detailed budget for "each hospital requesting a rate of increase in gross revenue per adjusted admission in excess of the maximum allowable rate of increase for the hospital's next fiscal year . . . ." [Emphasis added]. If a detailed budget is filed, Section 407.50(3), Florida Statutes (1988 Supp.), provides that the hospital's "base" shall be determined as follows: In determining the base, the hospital's prior year audited actual experience shall be used unless the hospital's prior year audited actual experience exceeded the applicable rate of increase in which case the base shall be the gross revenue per adjusted admission from the year before the prior year, increased by the applicable rate of increase for the prior year, and then inflated by the applicable rate of increase for the current year. . . . The "maximum allowable rate of increase" for budget letters or detailed budget requests is defined by Section 407.002(17), Florida Statutes (1988 Supp.), as follows: (17) "Maximum allowable rate of increase" or "MARI" means the maximum rate at which a hospital is normally expected to increase its average gross revenues per adjusted admission for a given period. The board, using the most recent audited actual experience for each hospital, shall calculate the MARI for each hospital as follows: the projected rate of increase in the market basket index shall be divided by a number which is determined by subtracting the sum of one-half of the proportion of Medicare days plus the proportion of Medicaid days and the proportion of charity days from the number one. Two percentage points shall be added to this quotient. The formula to be employed by the board to calculate the MARI shall take the following form: MARI = NHIPI +2 1-[(Me x .5) + Md +Cc] where: MARI = maximum allowable rate of increase applied to gross revenue. NHIPI = national hospital input price index which shall be the projected rate of change in the market basket index. Me = proportion of Medicare days, including when available and reported to the board Medicare HMO days, to total days. Md = proportion of Medicaid days, including when available and reported to the board Medicaid HMO days, to total days. Cc = proportion of charity care days to total days with a 50-percent offset for restricted grants for charity care and unrestricted grants form local governments. Pursuant to this definition of "maximum allowable rate of increase" hospitals are entitled to a base of the NHIPI plus two percentage points inflated by the hospital's prior year Medicare, Medicaid and charity care days, if any. The Respondent has suggested that calculation of the MARI in accordance with Section 407.002(17), Florida Statutes, is a prerequisite to filing a budget letter and that Section 407.002(17), Florida Statutes, requires that audited actual experience be available in order for the Respondent to calculate the MARI for a hospital. In support of the Proposed Rule, the Respondent has suggested that it cannot "certify that a budget letter is correct pursuant to s. 407.50(2)(a) . . . ." This argument is rejected because there is no requirement in Section 407.50, Florida Statutes, that the Respondent provide such a certification. Additionally, the Respondent has not adequately explained why it is only concerned about its calculation of the MARI for hospitals in their first or second years of operation and not all hospitals. The problem with the Respondent's position is that, while Section 407.002(17), Florida Statutes, does require that the Respondent use audited actual experience to calculate the MARI, Sections 407.50(1) and (2), Florida Statutes (1988 Supp.), do not require that the Respondent calculate the MARI. If a budget letter is filed by a hospital, the Respondent is only required to "determine if the gross revenues per adjusted admission submitted by the hospital are within the maximum allowable rate of increase for that hospital." The Respondent can accomplish this task without calculating the MARI; it can rely upon the MARI acknowledged by the hospital. If a hospital files a budget letter, only the hospital is required to calculate its MARI. The hospital, unlike the Respondent, is not required by Section 407.002(17), Florida Statutes to use audited actual experience in its calculation of the MARI. All of the elements of the MARI may be obtained by the hospital from unaudited experience. The NHIPI is a national standard that is not hospital specific. The two percentage points are also not hospital specific. The only hospital specific information taken into account is the number of Medicare, Medicaid and charity care days. Even the Respondent agrees that audited actuarial experience is not necessary to calculate Medicare, Medicaid and charity care days. Therefore, hospitals may calculate the MARI for purposes of Section 407.50(2), Florida Statutes (1988 Supp.), without audited actual experience. In further support of the Proposed Rule, the Respondent has characterized the action of The Retreat as using a "zero" in lieu of audited actual 1988 GRAA for purposes of calculating its budget letter base for 1990. The Respondent suggests that Section 407.50(1), Florida Statutes (1988 Supp.), requires a "comparison" of the two values which may be used as a hospital's base and that The Retreat's action circumvents such a comparison. The plain language of Section 407.50(1), Florida Statutes (1988 Supp.), does not require any comparison of the two values which may be used as a hospital's base. Section 407.50(1), Florida Statutes (1988 Supp.), simply provides that a hospital's base for 1990-1991 shall be the greater of the two values. If a hospital only has one of the values, that is obviously the greater value and should be used as the hospital's base.
