The Issue The issues in the case are whether the allegations of the Second Administrative Complaint are correct, and, if so, what penalty, if any, should be imposed.
Findings Of Fact At all times material to this case, Respondent was an insurance agent, holding Florida license number A020887, and was licensed as a Resident Life, Health & Variable Annuity (2-15); Life (20-16); Life & Health (2-18); General Lines, Property & Casualty Insurance (2-20); and Health (2-40) agent. Respondent has been licensed in Florida since February 14, 1994, and has consistently met all continuing education requirements applicable to his licensure. At all times material to this case, Respondent was employed as an account executive by HRH of Southwest Florida, Inc. HRH of Southwest Florida, Inc., is a subsidiary of HRH, Inc., a large provider of insurance agency services. Respondent is not and has never been an officer, director, manager, or shareholder of HRH of Southwest Florida, Inc. HRH of Southwest Florida, Inc., provided insurance and risk management services to businesses. Insofar as is relevant to this case, HRH of Southwest Florida, Inc., offered to its clients both fully insured health benefit plans and partially self-funded health benefit plans. Fully insured health benefit plans are those in which an employer pays a premium (sometimes with an employee contribution) to an insurer, and health benefit insurance coverage is provided to participants in the plan. Petitioner has the responsibility for regulating fully insured health benefit plans sold in the State of Florida. Partially self-funded health benefit plans include those where an employer's funds (again sometimes with an employee contribution) are used to cover health expenses of plan participants. The employer's funds are collected by a third- party administrator responsible for paying claims out of the employer's funds, and for obtaining stop-loss insurance to cover claims in excess of the funds available from the employer. Properly created, partially self-funded health benefit plans may be exempt from regulation by state authorities under the provisions of the federal Employee Retirement Income Security Act (ERISA). In the April 2001, HRH of Southwest Florida, Inc., began offering to clients in Lee, Manatee, and Sarasota Counties, a health benefit product made available by Meridian Benefit, Inc. (MBI). MBI had no authorization to operate as an insurer in the State of Florida. Based on information provided to HRH of Southwest Florida, Inc., MBI was operating as a third-party administrator for partially self-funded health benefit plans. The information provided to HRH of Southwest Florida, Inc., initially came from Thomas Mestmaker and Associates, a managing general agency representing MBI, and was confirmed through information subsequently provided by MBI. The plans were presumed by Respondent to be exempt from regulation by Petitioner under the provisions of ERISA based on the information provided by MBI. According to the information provided to Respondent and to HRH of Southwest Florida, Inc., the MBI plan included establishment of a single employer trust (SET) on behalf of each business. Health claims from each business' employees would be paid from the funds contributed to the trust by the employer. "Stop-loss" insurance would be obtained to cover claims in excess of an employer's contribution. The information provided by Respondent to his clients was provided to Respondent or to HRH of Southwest Florida, Inc., by MBI and affiliated other sources. Based on such information, Respondent presumed that MBI was a stable organization and that the stop-loss coverage was in place. Respondent had no specific training related to ERISA- qualification of health benefit plans. He has sold other plans that he believed were ERISA-qualified plans to other employers in Florida. Typically, a business owner would initially contact HRH of Southwest Florida, Inc., seeking health benefits for employees. A representative of HRH of Southwest Florida, Inc., such as Respondent, would research a variety of options for the business owner and then present the options to the client. The evidence establishes that the MBI health benefit plan was one of several options (including both fully-insured and partially self-funded plans) presented to clients. A client was free to choose the MBI plan, another plan presented, or no plan at all. Clients generally reviewed health benefit plans on an annual basis, at which point the process of presenting various options was repeated. Respondent eventually sold the MBI plan to ten or twelve business clients seeking to provide health benefits to employees. Clients choosing to obtain health benefits through the MBI plan submitted information related to the client's employees through Respondent and HRH of Southwest Florida, Inc., to MBI, which would respond with a preliminary rate proposal. After a client chose to accept the rate proposal, representatives from HRH of Southwest Florida, Inc., including Respondent, would assist client employees in completing applications. The applications were submitted to MBI, which in turn established actual rates and communicated the actual rate directly to the client. Clients who chose to accept the final rate proposal then executed documents purportedly establishing an SET. The documents apparently were created by MBI, and were delivered to clients through representatives of HRH of Southwest Florida, Inc., including Petitioner. After execution by the clients, the documents were returned to MBI. Some clients received a general document on MBI letterhead titled "Technical Aspects of SET SINGLE EMPLOYER TRUST" wherein clients were advised that the SET was an "Employee Welfare Benefit Plan" that was "designed to conform to the Employee Retirement Income Security Act of 1974, as amended." The document described the process of establishing rates and advised that MBI was the plan administrator. The document also referenced a trust document and stated that the trust custodian was First Union National Bank. The document stated as follows: At First Union an account will be established for each single employer trust into which all contributions received by the trust from the employer group will be deposited. Any income earned from funds deposited in that account will be credited to that account and any fees charged by the bank will be charged to that account. Some clients received a disclosure document from "Hilb, Rogal and Hamilton of Sarasota" specifically applicable to the client, which provided that the client "intends to establish a SINGLE EMPLOYER TRUST Employee Welfare Benefit Plan," that client contributions would be made to a trust, and that "all benefits funded by the Plan will be paid out of the assets of the Trust." The document further provided that "[I]n its discretion, the Trust may purchase stop-loss insurance to pay any claims in excess of the amounts held in the Trust." Clients were provided with a document titled "DIRECTIVE TO ESTABLISH A HEALTH AND WELFARE BENEFIT PLAN UNDER ERISA" wherein each client provided information, including the number of total and participating employees and the plan coverage sought. The document required the signature of a client's representative and authorized MBI to establish a "Health and Welfare Benefit Plan under ERISA." Clients were provided with a document titled "HEALTH AND WELFARE PLAN - PLAN DOCUMENT," a lengthy document that set forth the specific health care benefits provided to each client under the selected benefit plan. Each client was provided with a document titled "HEALTH AND WELFARE PLAN SUMMARY" which essentially summarized the plan being provided to the client, identified as the "Plan Sponsor." The document identified MBI as the plan administrator and the claim administrator. The document provided as follows: The Plan conforms to and is governed by the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). The Plan is not a policy of insurance. Neither the Plan Sponsor, nor any trust established to fund the benefits hereunder, is an insurance company. At various times, clients were provided with a document titled "WELFARE BENEFIT PLAN TRUST." In some instances, the document purported to be a trust agreement between the client and First Union, the designated custodian. In other instances, the "WELFARE BENEFIT PLAN TRUST" document did not identify the name of the trust custodian. In all cases, the document identified the plan administrator as MBI, and provided that MBI could "elect such financial institution as it deems appropriate to serve as the custodian with respect to the Trust. . . ." The document further provided that the plan administrator could "remove the Custodian at any time upon sixty (60) days notice in writing to the Custodian . . ." and that the custodian could resign with like notice to the plan administrator. In the agreements where First Union was designated the custodian, removal of the custodian required the client to designate a replacement custodian. In the agreements where no designation was made, the document provided that the plan administrator would designate the replacement custodian. Once the documents were executed and returned to MBI, MBI directly invoiced clients for payment of funds, and clients paid such funds directly to MBI. There is no evidence that Respondent was involved in handling funds transferred from the client to MBI. There is no evidence that Respondent received any information related to any trust accounts that may or may not have been established under the agreement between the client, a trust custodian, and MBI. There is no evidence that Respondent received cancelled checks or copies of account statements. There is no credible evidence that custodial accounts were established by MBI or that contributions submitted to MBI by employers were deposited into custodial accounts. Some checks from multiple employers appear to have been deposited into a single account at First Union. Some checks were deposited into the PNC Bank. There is no credible evidence as to the distribution of the deposited funds. Although under the terms of the trust agreement not all clients were required to approve substitute custodians, there is no evidence that any client required to approve a substitute custodian was ever asked to do so. There is no evidence that the plan administrator complied with the trust document language related to removal of the custodian. At some point in 2002, questions arose about the source of funds available to pay claims in excess of employer contributions. The information initially provided to clients by Respondent was that stop-loss insurance was in place to cover such claims. However, according to a letter on MBI letterhead dated February 25, 2002, to Thomas E. Mestmaker and Associates, "MBI is responsible for any amounts due under adjudicated claims in excess of the contribution amount of its client, assuming that all payments, obligations and bills submitted to the client are timely paid, and the Plan is in good standing with MBI." The letter further states, "MBI is responsible for any excess, subject to the terms and conditions of the initial Directive together with the Plan Trust Agreement, as applicable." There were apparently concerns regarding the soundness of MBI and their ability to handle losses. In March of 2002, information available to Respondent indicated that the stop-loss coverage MBI had supposedly obtained would not be renewed. Respondent began to prepare to move his MBI clients to other benefit plans. A letter to Respondent dated April 11, 2002, on MBI letterhead and purportedly from the Controller of MBI states in part as follows: Meridian Benefit Inc. has acted as an administrator for ERISA-based health plans that it has developed for years. Meridian Benefit Inc. has credibly sufficient contributions and reserves necessary to pay claims for these plans. Moreover, the finances of Meridian Benefit Inc. have been and continue to be sound. Since Meridian Benefit Inc. is a privately held company, we cannot share our detailed financial data, however through management and underwriting Meridian Benefit Inc. has been able to control claims and group losses. MBI then advised Respondent and others that the stop- loss insurance was in place via a statement dated June 19, 2002, indicating that "reinsurance" was being provided by American National Life Insurance Company effective July 1, 2002. As MBI or affiliated entities issued statements regarding the soundness of the MBI plan and the availability of stop-loss coverage, Respondent made the information, including the aforementioned letters, available to clients. The parties have stipulated that American National Life Insurance Company did not provide "reinsurance" or stop-loss insurance relative to any health and welfare benefit plan with MBI as plan administrator. There is no credible evidence that any stop-loss insurance was actually ever obtained by MBI on behalf of employers. In early 2003, MBI informed employers that the employers would be responsible for payment of claims in excess of contributions. By letter dated February 19, 2003, MBI issued a letter to clients which indicated that if a client's claims exceeded contributions, MBI would "advance funds" against the employer's account and then would "approach the employer for repayment of the deficit." The letter further provided that if MBI and the employer "cannot successfully negotiate repayment for the advance, MBI will unfortunately, be forced to stop payment on any existing or future claims." The February 19 letter clearly contradicted earlier affirmations that stop-loss insurance was in place to cover claims in excess of contributions. The evidence fails to establish from where funds "advanced" by MBI would have come. Respondent testified that he did not know the source of the funds. The evidence establishes that Respondent made no independent effort to review MBI or the MBI plan being offered to clients, to determine whether or not stop-loss insurance was actually in place by contacting the insurer identified by MBI as the stop-loss insurer, or to determine whether client funds were being deposited into custodial accounts. By letters dated February 20, 2003 (the day after notifying employers that they would be required to reimburse MBI for funds "advanced"), MBI advised employers of account deficits and directed the employers to pay the deficits. On or about May 15, 2003, MBI filed for Chapter 7 bankruptcy in the United States District Court in New Jersey. MBI had an agreement with Healthcare Sarasota, a local employer organization with an existing network of healthcare providers (a preferred provider organization or "PPO"), to permit MBI plan participants to utilize the Healthcare Sarasota provider network. Client benefit claims were handled between the PPO and MBI. On occasion, representatives of HRH of Southwest Florida, Inc., including Petitioner, became involved in resolving claim issues at the request of clients, but Petitioner had no direct involvement in paying claims. Prior to and by the time MBI filed for bankruptcy, there were numerous unpaid health benefits claims incurred by employees of the employers who became involved with the MBI plan through Respondent. Some employers have paid the claims and are seeking restitution from various parties. Other claims remain unpaid. Although the evidence fails to clearly establish the amount of the remaining unpaid claims, it is clear that at the time of the hearing, thousands of dollars in health benefit claims remain unpaid by any responsible party. Some employees of businesses that participated in the MBI plan have had unpaid claims forwarded by health providers to debt collection agencies. Petitioner has disseminated information to the public and to licensed agents about potential difficulties that may result from participating in health benefit plans that are not subject to state regulation. There is no evidence that licensed agents are required to read the information disseminated by Petitioner, and there is no evidence that Respondent did so. Child Development Center In mid-2001, Respondent met with a representative of the Child Development Center (CDC) to present various options for health benefit coverage for CDC employees. CDC chose to provide health benefits through the MBI plan. A CDC representative executed the document titled "DIRECTIVE TO ESTABLISH A HEALTH & WELFARE BENEFIT PLAN UNDER ERISA." The document was dated June 21, 2001, with an effective date of July 1, 2001, and signed by Respondent, identified as the "Benefit Consultant." A CDC representative executed the document titled "WELFARE BENEFIT PLAN TRUST." The document provided an effective date of July 1, 2001, but was executed on September 19, 2001. The document stated that the trust custodian would be First Union. Nothing on the document indicated that First Union had agreed to be the custodian. Included with the information provided by Respondent to CDC was the letter dated February 25, 2002, from MBI to Thomas Mestmaker and Associates stating that MBI was responsible for amounts due under adjudicated claims in excess of the employer's contribution. By July 2002, there were no apparent problems with coverage or claims paid, and CDC renewed its participation in the MBI plan. By January 2003, problems with CDC claims payments were occurring and CDC representatives requested from Respondent an accounting of claims paid. The accounting was not immediately made available, although at some subsequent and unidentified time CDC received the information. In March 2003, an employee of CDC located information on the internet indicating that the States of Colorado and North Carolina had issued "cease and desist" orders against MBI. The CDC representative forwarded the information to "Tyla Heatherly" an employee at HRH of Southwest Florida, Inc., and asked that it be provided to Respondent. Respondent thereafter advised the CDC representative that the problems in other states were related to the type of plans that were being offered in those states, and that the CDC plan was an ERISA-qualified SET. By letter from MBI to CDC dated May 5, 2003, MBI advised CDC that MBI was "experiencing severe financial problems and is in the process of winding-down its business." The letter advised CDC to "make immediate arrangements" to obtain either a different third party administrator or to obtain other health benefit coverage. Beginning June 20, 2001, CDC paid funds by check to MBI pursuant to the invoices that MBI delivered directly to CDC. Although the CDC checks to MBI were deposited, the evidence fails to establish that the CDC funds were deposited into a custodial trust account for the benefit of CDC. Family Counseling Center of Sarasota, Inc. At some point in 2001, Respondent met with a representative of the Family Counseling Center of Sarasota, Inc. (FCCS), to present various options for health benefit coverage for FCCS employees. FCCS chose to provide health benefits through the MBI plan. An FCCS representative executed the document titled "DIRECTIVE TO ESTABLISH A HEALTH & WELFARE BENEFIT PLAN UNDER ERISA" dated October 31, 2001, and signed by Respondent, as the "Benefit Consultant." By his signature, an FCCS representative acknowledged receipt of the "HEALTH AND WELFARE PLAN SUMMARY" document indicating an effective date of December 1, 2001, which was also signed by Respondent. An FCCS representative executed the document titled "WELFARE BENEFIT PLAN TRUST." The document has an effective date of December 1, 2001, but the date of execution was January 3, 2002. The document stated that the trust custodian would be First Union. Nothing on the document indicated that First Union had agreed to be the custodian. Included with the information provided by Respondent to FCCS was the letter dated February 25, 2002, from MBI to Thomas Mestmaker and Associates stating that MBI was responsible for amounts due under adjudicated claims in excess of the employer's contribution. Respondent provided to FCCS the MBI letter to Respondent dated April 11, 2002, advising that MBI had sufficient contributions and reserves necessary to pay claims and was in sound condition. Respondent provided to FCCS the document on MBI letterhead dated June 19, 2002, stating that American National Life Insurance Company was providing "reinsurance." Towards the end of the first year of the MBI plan, FCCS learned that renewal of the MBI plan would involve a substantial cost increase. FCCS initially intended to change benefit plans due to the cost increase, but Respondent apparently negotiated with MBI to reduce the price increase to 40 percent over the initial year cost. FCCS renewed the MBI plan because even with the rate increase the MBI plan was still less expensive than other available benefit plans. FCCS received the MBI letter dated February 19, 2003, stating that if a client's claims exceeded contributions, MBI would "advance funds" against the client's account and then would "approach the employer for repayment of the deficit." The evidence fails to establish whether the letter was provided to FCCS by Respondent or by MBI. By letter from MBI to FCCS dated February 20, 2003, MBI advised FCCS that the client needed to submit "a one-time payment of $163,670.75 to bring your account into a positive position or an increase in your contribution of 200% effective 5/1/2003." The letters of February 19 and 20, 2003, contradicted the assurances by Respondent to FCCS that stop-loss coverage was in place to address claims in excess of employer contributions. FCCS contacted Respondent to advise him of the situation. By letter from FCCS to the chief executive officer of HRH of Southwest Florida, Inc., dated April 25, 2003, FCCS advised that MBI was not paying claims and that some of the staff were having accounts turned over to collection agencies for non-payment. By letter from MBI to FCCS dated May 5, 2003, MBI advised FCCS that MBI was "experiencing severe financial problems and is in the process of winding-down its business." The letter advised FCCS to "make immediate arrangements" to obtain either a different third party administrator or to obtain other health benefit coverage. FCCS paid funds by check to MBI pursuant to the invoices that MBI delivered directly to FCCS. Although the FCCS checks to MBI were deposited, the evidence fails to establish that the FCCS funds were deposited into a custodial account for the benefit of FCCS. Sarasota Land Services In the beginning of 2002, Respondent met with a representative of Sarasota Land Services (SLS) to present various options for health benefit coverage for SLS employees. SLS chose to provide health benefits though the MBI plan. An SLS representative executed the document titled "DIRECTIVE TO ESTABLISH A HEALTH & WELFARE BENEFIT PLAN UNDER ERISA." The document was executed on February 11, 2002, with an effective date of March 1, 2002, and was signed by Respondent, as the "Benefit Consultant." By her signature, the SLS representative acknowledged receipt of the "HEALTH AND WELFARE PLAN SUMMARY" document indicating an effective date of March 1, 2002, which was also signed by Respondent. An SLS representative executed the document titled "WELFARE BENEFIT PLAN TRUST." The document indicates the agreement was executed on February 11, 2002, and was effective as of March 1, 2002, but the SLS representative's signature was dated September 10, 2002. The document did not identify the name of the trust custodian, but provided that MBI could "elect such financial institution as it deems appropriate to serve as the custodian with respect to the Trust. " SLS received the disclosure document from "Hilb, Rogal and Hamilton of Sarasota" titled "DISCLOSURE AND ACKNOWLEDGEMENT REGARDING THE SARASOTA LAND SERVICES BENEFIT PLAN" dated March 1, 2002. The SLS representative's signature on the disclosure form is dated September 10, 2002. By letter from MBI to SLS dated February 20, 2003, MBI advised SLS that the claims history required an increase in SLS's contribution of 100 percent effective March 1, 2003. Upon receipt of the letter, the SLS representative contacted Respondent and discussed the situation. The discussion included references to the stop-loss insurance coverage that the SLS representative expected to cover claims in excess of contributions. SLS did not renew its participation in the MBI plan. Beginning February 12, 2002, SLS paid funds by check to MBI pursuant to the invoices that MBI delivered directly to SLS. Although the SLS checks to MBI were deposited, the evidence fails to establish that the SLS funds were deposited into a custodial account for the benefit of SLS. SLS also paid an administrative fee directly to HRH of Southwest Florida, Inc. The evidence does not establish what, if any, of the administrative fee was paid to Respondent. Center For Sight In the fall of 2001, the Center For Sight (CFS) entered into an agreement with MBI to obtain health benefit services for CFS employees. CFS was already participating in the MBI plan in March 2002, at the time the CFS representative who testified at the hearing became employed at CFS. A CFS representative executed on July 17, 2001, the document titled "DIRECTIVE TO ESTABLISH A HEALTH & WELFARE BENEFIT PLAN UNDER ERISA." The document indicated an effective date of August 1, 2001, and was signed by Respondent, as the "Benefit Consultant." By their signatures, CFS representatives acknowledged receipt of the "HEALTH AND WELFARE PLAN SUMMARY" document indicating an effective date of August 1, 2001. CFS representatives executed the document titled "WELFARE BENEFIT PLAN TRUST" with an effective date of August 1, 2001, although the document was executed on September 1, 2001. The document indicated that the trust custodian would be First Union. Nothing on the document indicated that First Union had agreed to be the custodian. The CFS representative who testified at the hearing was the chief operating officer for CFS. He reviewed the MBI plan upon beginning his employment. He testified that claims payment problems began "instantaneously," but stated that Respondent was helpful in getting claims processed and paid. He testified that he had no problems with Respondent. The CFS representative had concerns about the provision of stop-loss insurance and asked Respondent to obtain a copy of a policy, but the policy was never provided to CFS. However, prior to renewal in July 2002, Respondent provided to CFS the MBI document dated June 19, 2002, stating that American National Life Insurance Company was providing "reinsurance." At the end of the first year, Respondent presented various health benefit options to CFS, but despite the claims payment problems, CFS renewed the MBI plan in July 2002 because the MBI plan was substantially less expensive than other benefit plans. At some subsequent time, Sarasota Memorial Hospital and other local providers began to refuse services to CFS employees covered under the MBI plan, apparently because claims were not being paid. CFS received the MBI letter dated February 19, 2003, stating that if a client's claims exceeded contributions, MBI would "advance funds" against the client's account and then would "approach the employer for repayment of the deficit." By letter from MBI to CFS dated February 20, 2003, MBI advised FCCS that the client needed to submit "a one-time payment of $5,471.66 to bring your account into a positive position or an increase in your contribution of 15% effective 4/1/2003." By letter dated April 18, 2003, to MBI and copied to Respondent, CFS set forth a list of concerns related to claims which were unpaid or had been denied and to "high administrative cost" and asked that there be a resolution to the problems. Eventually CFS paid approximately $300,000 in pending employee claims using CFS funds and sought health benefits from another source. Beginning July 19, 2001, CFS paid funds by check to MBI pursuant to the invoices that MBI delivered directly to CFS. Although CFS checks to MBI were deposited, the evidence fails to establish that the CFS funds were deposited into a custodial account for the benefit of CFS. Michael's Gourmet Group Prior to 2002, Respondent had an existing relationship with Michael's Gourmet Group (MGG) and had previously assisted MGG in obtaining health benefits from various sources. In March of 2002, Respondent met with a representative of MGG to present various options for health benefit coverage for MGG employees. MGG chose to provide health benefits through the MBI plan. As he did in presenting available health benefit options to clients, Respondent informed MGG that the MBI plan was a partially self-funded plan and that stop-loss insurance would cover claims in excess of the MGG contributions. An MGG representative executed the document titled "DIRECTIVE TO ESTABLISH A HEALTH & WELFARE BENEFIT PLAN UNDER ERISA." The document was executed on February 27, 2002, with an effective date of March 1, 2002, and was signed by Respondent, as the "Benefit Consultant." Although the evidence includes a "HEALTH AND WELFARE PLAN SUMMARY" document applicable to MGG and indicating an effective date of March 1, 2002, there are no signatures on the document. An MGG representative executed the document titled "WELFARE BENEFIT PLAN TRUST" with an effective date of March 1, 2002, although the document was executed July 24, 2002. The document did not identify the name of the trust custodian, but provided that MBI may "elect such financial institution as it deems appropriate to serve as the custodian with respect to the Trust. " MGG received a document from "Hilb, Rogal and Hamilton of Sarasota" titled "DISCLOSURE AND ACKNOWLEDGEMENT REGARDING THE SARASOTA LAND SERVICES BENEFIT PLAN" dated March 15, 2002. The MGG representative's signature on the disclosure form is dated July 24, 2002. MGG received the MBI letter dated February 19, 2003, which stated that if a client's claims exceeded contributions, MBI would "advance funds" against the client's account and then would "approach the employer for repayment of the deficit." By letter from MBI to MGG dated February 20, 2003, MBI advised MGG that the claims history required an increase in MGG's contribution of 300 percent effective March 1, 2003. Subsequent to receipt of the two letters, MGG discontinued its participation in the MBI plan. Beginning February 27, 2002, MGG paid funds by check to MBI pursuant to the invoices that MBI delivered directly to MGG. Although MGG's checks to MBI were deposited, the evidence fails to establish that MGG's funds were deposited into a custodial account for the benefit of MGG. MGG also paid an administrative fee directly to HRH of Southwest Florida, Inc. The evidence does not establish what, if any, of the administrative fee was paid to Respondent. Cheddar's Casual Cafe In September 2001, Respondent met with a representative of a restaurant chain known as Cheddar's Casual Cafe (Cheddar's). Respondent presented various options for health benefits to Cheddar's, and the Cheddar's representative chose to provide health benefits through the MBI plan. A Cheddar's representative executed the document titled "DIRECTIVE TO ESTABLISH A HEALTH & WELFARE BENEFIT PLAN UNDER ERISA" dated December 18, 2001, and signed by Respondent, as the "Benefit Consultant." By his signature, the Cheddar's representative acknowledged receipt of the "HEALTH AND WELFARE PLAN SUMMARY" document indicating an effective date of January 1, 2002. By his signature, the Cheddar's representative on January 14, 2002, executed the document titled "WELFARE BENEFIT PLAN TRUST" with an effective date of January 1, 2002. The document indicated that the trust custodian would be First Union. Nothing on the document indicated that First Union had agreed to be the custodian. Beginning February 5, 2002, Cheddar's paid funds by check to MBI pursuant to the invoices that MBI delivered directly to Cheddar's. Although Cheddar's checks to MBI were deposited, the evidence fails to establish that Cheddar's funds were deposited into a custodial account for the benefit of Cheddar's. Cheddar's also paid an administrative fee directly to HRH of Southwest Florida, Inc. The evidence does not establish what, if any, of the administrative fee was paid to Respondent. Cheddar's representative inquired as to the stability of MBI and was advised by Respondent that MBI was stable. The Cheddar's representative relied on Respondent's representation when the Cheddar's health benefit plan came up for renewal towards the end of 2002. Although Respondent presented health benefit plans from several companies, Cheddar's renewed the MBI plan, even though some employees had experienced late claims payments. By claim denial dated February 28, 2003, MBI denied the hospital claim for a Cheddar's employee because the claim was over 120 days old, but there is no evidence that Respondent was advised of the denied claim. By letter dated April 29, 2003, to MBI, Cheddar's cancelled coverage as of April 1, 2003. The letter states that "there are a substantial number of unpaid claims from calendar years 2002 and 2003" and asserts that MBI has been unresponsive to complaints about the problems. A copy of the April 29, 2003, letter was sent to Respondent with a cover letter expressing dissatisfaction with the MBI plan, with the MBI operation, and with Respondent's representation of MBI.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services enter a final order suspending the insurance licensure of Bradley W. Beshore for a period of 78 months. DONE AND ENTERED this 10th day of March, 2005, in Tallahassee, Leon County, Florida. S WILLIAM F. QUATTLEBAUM Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 10th day of March, 2005.
Conclusions THE PARTIES resolved all disputed issues and executed a Settlement Agreement. The parties are directed to comply with the terms of the attached Settlement Agreement. Based on the foregoing, this file is CLOSED. DONE and ORDERED on this the Kday of - fj_A_' ( , 2010, m Tallahassee, Florida. THOMAS W. ARNOLD, SECTAR Agency for Health Care Administration 1 Filed May 19, 2010 4:40 PM Division of Administrative Hearings. A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO A JUDICIAL REVIEW WHICH SHALL BE INSTITUTED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF AHCA, AND A SECOND COPY ALONG WITH FILING FEE AS PRESCRIBED BYLAW, WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE AGENCY MAINTAINS ITS HEADQUARTERS OR WHERE A PARTY RESIDES. REVIEW PROCEEDINGS SHALL BE CONDUCTED IN ACCORDANCE WITH THE FLORIDA APPELLATE RULES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED. Copies furnished to: Daniel Lake, Esquire Agency for Health Care Administration (Interoffice Mail) Gary Clarke, Esquire Stemstein, Rainer & Clarke, P.A. 411 East College Avenue Tallahassee, Florida 32301 (U.S. Mail) Lawrence P. Stevenson Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 Ken Yon, Chief, Medicaid Program Integrity Finance and Accounting HQA CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of the foregoing has been furnished to 1$,-- the above named addressees by U.S. Mail on this the /.X_ day of_ -+---' 2010. Richard Shoop, Esquire Agency Clerk State of Florida Agency for Health Care Administration 2727 Mahan Drive, Building #3 Tallahassee, Florida 32308-5403 (850) 412-3630
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.
The Issue Petitioner, Blue Cross and Blue Shield of Florida, Inc. (BCBS), has challenged the Agency for Health Care Administration's (AHCA) proposed award of contract pursuant to Request for Proposals No. SHP 95-002 to Unisys Corporation (Unisys). The ultimate issue in this proceeding is whether that proposed award is fraudulent, dishonest, arbitrary or illegal. In their pleadings and presentations the parties have framed these subsidiary issues: Whether the Unisys bid was responsive to and met the mandatory requirements of the RFP; Whether the allocation of scoring weights was arbitrary and capricious and likely to result in the state's expenditure of excessive funds for health care in favor of much smaller savings in administrative costs; Whether the scores assigned by the proposals' evaluators were unreliable and biased; Whether the evaluation of proposals illegally failed to apply "present- value methodology" required by section 287.0572, Florida Statutes; and Whether the award is illegal because AHCA is unconstitutionally structured in violation of Article IV, Section 6, Florida Constitution. Although all parties concede that determination of the constitutional issue is beyond the jurisdiction of the hearing officer, BCBS claims that the issue is "preserved" for judicial determination and AHCA and Unisys argue the issue has been waived.
Findings Of Fact The Parties The Agency for Health Care Administration (AHCA or agency), as provided in section 110.123(3)(b), Florida Statutes, is responsible for all aspects of the purchase of health care for state employees under the state group health insurance plan and the health maintenance organization plans. The responsibilities include the development of requests for proposals for state employee health services, the determination of benefits to be provided and negotiation of contracts for health care and health care administrative services. Blue Cross and Blue Shield of Florida, Inc. (BCBS) is a large managed care company providing a wide range of health care services including a full array of insured products, traditional indemnity products and preferred provider organization (PPO) products to large and small groups. It has provided health services to state employees since the 1940's. In 1978, when the state switched from offering a fully insured product to a self-insured product, BCBS became the administrator of the self-insured program and has remained the administrator since that time. Unisys Corporation (Unisys) is a publicly held corporation, incorporated in the State of Delaware. It has been actively engaged in the health information services and technology market since 1976, and its health information management group, headquartered in Reston, Virginia, has experience in all facets of health care claims processing. The Request for Proposals (RFP) The state group health insurance plan (plan) is self-insured, which means that payment for services rendered by health care providers to covered recipients is paid by the state from a trust fund established for this purpose. The plan currently covers approximately 235,000 persons, including employees and their dependents and retired persons. BCBS' contract to administer the plan expires on December 31, 1995. In July, 1994 AHCA began to develop an RFP for the new contract to run for four years, commencing January 1, 1996, with four one-year extensions, at the state's option. Previous RFP's for state employees' health services had been prepared by the Department of Management Services (DMS) or its predecessor agency, and this is the first time AHCA has had the responsibility. The principal authors of the RFP were Rick Lutz, AHCA's Director of the Division of State Health Purchasing, and Kate Morgan, Chief of the Bureau of State Employee Health Insurance. Ms. Morgan reports directly to Mr. Lutz. Both individuals had prior experience in the state's Medicaid program and both had supervised or directly developed RFP's for health services-related procurements. The RFP requested interested offerors to submit proposals to provide services in one or more of three categories of services: 1) third party administrative services (TPA); 2) use of a preferred provider organization network (PPO); and 3) utilization review and case management services (UR). A single offeror could submit a proposal in one, two or all three categories. A single offeror could also submit a proposal to provide services in all three categories, but utilizing subcontractors. The RFP was divided into sections as follows: Section 10 - introductory information. Section 20 - description of the RFP process. Section 30 - contract terms and conditions. Section 40 - State's obligations. Section 50 - specifications for third party administration (TPA) services, including claims examination and payment, participant relations, and coordination of benefits. Section 60 - questions and requests for information on the offeror's ability to perform TPA services. Section 70 - specifications for preferred provider organization (PPO) services, including recruiting and maintaining a network of qualified providers to perform health care services under pre-negotiated fee schedules. Section 80 - questions eliciting information on the offeror's ability to perform the PPO services. Section 90 - specifications for utilization review and care management (UR) services to determine the medical efficacy and necessity of requested services as a cost-saving and quality enhancing measure. Section 100 - questions eliciting information on the offeror's ability to perform the UR services. Section 110 - the cost proposal, or the amount the offeror would charge to provide the TPA, PPO and UR services. Section 120 - evaluation procedure. RFP Sections 50, 70 and 90 contained the specifications; Sections 60, 80 and 100 contained the scoring elements describing the offeror's capability and prospects for performance. The RFP sought administrative services only. It did not solicit offerors to provide direct medical services to participants, and the amounts to be paid to health care providers for medical services to participants were not determined or covered by the contract. The RFP directed offerors to submit their proposals in two parts. In the technical part, the offeror certified that it would comply with the specifications and responded to the questions to be scored. The cost part contained the offeror's price to perform the TPA, PPO and UR services for the contract term, calculated at present value according to a provided formula. Before proposals were submitted, potential offerors were informed that the cost proposal was assigned 4000 points, and the technical proposal was assigned 6000 points, consisting of 2400 points for TPA services, 2400 points for PPO network services, and 1200 points for UR services. Potential offerors also knew the individual scoring questions relating to TPA, PPO and UR services, but did not know the preassigned internal weights of these individual questions. These weights were ascribed in advance by the RFP administrators, Mr. Lutz and Ms. Morgan, but were sealed and locked away in order to assure that both offerors and scorers would deal diligently with every question and would not concentrate on heavily weighted questions. The RFP was issued on March 3, 1995. The RFP specifically provided that potential offerors could protest the contents of the RFP itself. On March 16, 1995, BCBS filed a protest challenging numerous provisions of the RFP. This protest was resolved by a settlement agreement on March 31, 1995, in which the agency modified some provisions and BCBS abandoned all other issues that were raised or might have been raised in the protest. The RFP provided potential offerors an extended opportunity to pose questions to clarify the specifications and evaluation criteria. BCBS posed numerous questions, including questions concerning how the agency would weight and score criteria concerning PPO networks. AHCA responded in a general manner without disclosing the weights that would be assigned to various questions. Other potential offerors also posed questions. All responses by AHCA were incorporated as addenda to the RFP. Four integrated proposals and two component proposals (less than all three categories) were submitted. Only integrated proposals were evaluated because the component proposals , considered together, failed to comprise a complete package of all three services. The Proposals and Their Scoring The four proposals were by Health Plan Services (later disqualified after the cost proposals were opened), by Humana, by Unisys and by BCBS. The technical proposals were opened on May 18, 1995. The BCBS proposal offered to provide all three components, TPA, PPO and UR. The Unisys proposal described Unisys as the prime contractor and TPA, with Beech Street, a separate company, providing the PPO component and Cost Care, another company, providing the UR component. Rick Lutz selected 24 staff personnel to score the technical merits of the responses to Sections 60, 80, and 100. They were selected based on their experience in areas involving finance and accounting, management information, claims processing, customer relations, reporting, network development, and utilization review. Half of the scorers were from offices supervised by Mr. Lutz, and half were from other offices within AHCA. In his twenty-five years of experience Mr. Lutz was familiar with the backgrounds and abilities of the individuals. He attempted to recruit other scorers from the Department of Management Services (DMS) but was informed that DMS' workload precluded such participation. The scorers were assigned questions to score in the same area as their functional backgrounds. They were also given a one-half day training session and a workbook containing specific guidance on factors to consider in scoring each assigned question. The scorers were directed to consider all relevant information contained in the proposal in scoring each question. They were allowed to ask written questions concerning the scoring, and written answers were provided. The RFP schedule provided one month scoring the proposals. The scorers were to score each assigned question on a 0-10 scale and to record (in the workbooks) their reasons for each score given. Three scorers were assigned to score each question; however, each scorer was instructed to form an independent judgement as to the appropriate score and to not discuss the score given with anyone else. The instructions provided for a debriefing session in which scorers whose scores were more than three points apart on a particular question could confer to ensure that each scorer had considered all information relevant to that question. Scorers were allowed to change their scores on the basis of information that they had previously overlooked or they were allowed to leave them unchanged. The three raw scores for each question were averaged, and the averaged score was multiplied by the predetermined weight to produce a raw score for each question. Scores were then added and adjusted to the 6000 point scale. Unisys received the best raw scores for the TPA and the UR components. BCBS received the best raw scores for the PPO component. However, BCBS' advantage in the PPO component was sufficient to place it ahead in the aggregate raw score for the technical proposal, so it was awarded the maximum raw score of 6000 points. On June 22, 1995, the agency opened and scored the cost proposals. Humana had the lowest cost proposal and was awarded the maximum cost score of 4000 points. The Unisys cost proposal was $86,618,919 present value, and received a prorated score of 3,458.65 points. The BCBS cost proposal was the highest, $102,200,263.22 present value, and received 2,931.35 points, the lowest prorated cost score. Scoring the cost proposals was a mechanical, non- subjective function. Unisys had the highest combined score for the technical and cost proposals under the framework described in the RFP, as summarized in the following chart: ============================================================== ELEMENT UNISYS RAW BCBS RAW SCORE SCORE UNISYS ADJUSTED SCORE BCBS ADJUSTED SCORE TPA 1624.97 1602.33 PPO 1274.63 1515.83 5744.97 6000.00 UR Cost 751.28 694.78 3458.65 2931.35 Total 9203.62 8931.35 ============================================================== The agency made a minor math error in its original calculation of the BCBS score for the technical proposal. When the BCBS score is corrected by adding 16 points, the effect narrows the gap, but does not materially affect the result. Based on the results of the overall scoring, Mr. Lutz prepared a brief report summarizing the evaluation process and sent it to a steering committee comprised of four senior managerial level employees: Ms. Morgan, Tom Wallace, the agency's second-in-command; Dr. James Howell, and Mildred Seay of DMS. The committee met with Mr. Lutz on June 26 for approximately two to three hours. There was general discussion regarding medical costs under a plan offered by BCBS, as opposed to Unisys' plan. The pricing analysis found in RFP section 80.10 was explained and discussed; and the committee discussed whether Unisys, through its subcontractor, Beech Street, could expand the provider network (PPO) to achieve utilization and prices comparable to those reported by BCBS. The committee unanimously approved the scorers' ranking and recommended the contract award to Unisys. The recommendation was forwarded to Douglas Cook, Executive Director of AHCA and William Lindner, Secretary of DMS, in a brief memorandum. Notice of intent to award the contract to Unisys was posted by the agency on June 27, 1995. Responsiveness of Unisys Proposal In creating a mandatory requirement checklist in Section 120.2 of the RFP, Mr. Lutz sought a simplified process that would assure that proposals were evaluated on their merits. The agency desired an open competition process that would score the proposals on the adequacy of the responses, rather than a process that would eliminate proposals from the evaluation. Mr. Lutz chose two AHCA employees who were not members of the evaluation team to check the proposals against the checklist and to verify whether the proposals contained a tabbed section corresponding to that item on the list. Mr. Lutz anticipated that if the response were wholly deficient, the evaluators would ascribe a zero score. None of the four proposals was rejected in this stage of the process. Subcontractors' Certificates of Compliance and Public Entity Crime Forms Were Not Required RFP Section 30.4 requires a Certificate of Compliance "from each offeror regardless of whether the offeror submits an integrated proposal or a component proposal." Section 30.42 requires a Public Entity Crime form to be submitted by "a[n] offeror submitting a proposal." Section 120.2 contains a checklist of requirements including the following: d. Did the offeror submit a signed certificate of compliance? * * * f. Is a completed Public Entity Crimes Statement included? (Joint Exhibit Number 1) These requirements are expressly directed to the "offeror," and do not refer to subcontractors. Unisys submitted an "integrated" proposal in which it was the sole offeror and prime contractor responsible for providing all services called for under the RFP. A Unisys representative signed the Certificate of Compliance and Public Entity Crime Form, which BCBS concedes was sufficient as to Unisys. The Unisys proposal specified that it would engage two subcontractors, Beech Street for the PPO component and Cost Care for the UR component. AHCA did not intend or expect subcontractors to submit the Certificate of Compliance and Public Entity Crime form. RFP Section 30.19 reserved the agency's right to approve subcontractors, while confirming that the prime contractor is responsible for all contract performance. The purpose of the Certificate of Compliance is to provide assurance similar to that in PUR 7033 that the offeror is bound to the specifications of the RFP. PUR 7033 is a form at the front of the RFP, a contractual services acknowledgment form required only from the "offeror" or prime contractor. The Certificate of Compliance expressly contemplates that subcontractors are included in the prime contractor's commitment. The Public Entity Crime form sought assurance that the offeror or "its officers, directors, executives, partners, shareholders, employees, members or agents who are active in the management of the entity" (emphasis added) were not disqualified to contract as a result of a conviction of certain procurement crimes. The form also sought assurances that "affiliates" of the offeror entity, meaning its predecessor or successor, or an entity controlled by a natural person who is not active in the management of the offeror entity, were not disqualified. BCBS admits that Unisys was qualified and its form was sufficient as to Unisys itself. (Transcript, p. 769-70) The form does not solicit any information with regard to subcontractors. None of the subcontractors identified in the Unisys proposal is active in the management of Unisys or is an affiliate of Unisys. Neither Unisys nor any of its subcontractors was on the published convicted vendors list established by section 287.133, Florida Statutes. There is no evidence to suggest that they are disqualified to contract. At the time the RFP was issued, the controlling statute required contractors to sign this form only at the time the contract is executed. Section 287.133(3)(a), Florida Statutes (Supp. 1994). Submitting the form with the proposal was not essential to protect the state's interests, but was a convenience. While the proposals were under review, this statutory provision was repealed to eliminate use of this form entirely. Chapter 95-196, Section 33, Laws of Florida, effective June 8, 1995. This issue arose, in part, out of confusion related to RFP Section 20.14, which described a situation in which two or more offerors combined as a partnership, and directed that such a partnership designate one partner to act as the "prime contractor"; in effect, treating that situation like the Unisys proposal, which involved a prime contractor and subcontractors. In responding to offerors' questions, AHCA initially directed that each partner in a partnered proposal would be required to submit the forms as multiple contractors. However, in Addendum 4 of the RFP, the agency later clarified that only one prime contractor in each proposal was responsible for contractual issues: This is to notify all potential offerors of a correction to an answer that was provided in Addendum Number 2. Specifically, the answer to Cost Care's first question is deleted... When an integrated proposal is submitted in response to this RFP, one of the partners in the bid shall be designated in the proposal as the prime contractor. The other partners in the integrated proposal shall be subcontractors and any contract that may result with the state shall be between the state and the prime contractor. The state shall hold the prime contractor responsible for all contractual issues... (Joint Exhibit Number 1) AHCA intended Addendum 4 to mean that only the prime contractor was required to submit the forms in question and did not consider the absence of separate forms for subcontractors to be a defect. Beech Street's Financial Statements Each technical scoring component of the RFP requested the offeror to furnish two years' audited financial statements. AHCA did not intend this request to create a precondition for evaluating the proposal, and did not include these statements as part of the mandatory specifications in Sections 50, 70 and 90. Rather, the agency designed the RFP to treat the presentation of audited financial statements as a technical scoring issue. In response to the request for financial statements in Question 80.2.g, Unisys presented a narrative statement explaining that Beech Street was a privately held corporation that kept its financial statements confidential; but that Beech Street's auditors, Arthur Anderson & Co., had issued unqualified "clean options" for the two preceding fiscal years, and that the operations had been profitable in each year, resulting in year end cash reserves exceeding $4.2 million and $5.2 million, respectively. The statement further advised that current year operations indicated even greater revenue and profit growth. The proposal also showed Beech Street's longevity and client base and retention rate, consistent with a financially stable operation. Unisys provided full information available on its subcontractors, Beech Street and Cost Care. It was not requested to provide any information concerning Beech Street's subcontractors (who were sub-subcontractors of Unisys). Judy Hefren, one of the three scorers who graded Question 80.2.g, is a CPA with several years' accounting experience. Although she reviewed enough financial information to satisfy herself concerning Beech Street's ability to perform as a subcontractor, Ms. Hefren strictly interpreted Question 80.2.g and gave Unisys a zero for that question. Audited financial statement were not mandatory because other information could show capacity to perform. AHCA looks to the prime contractor to cover any deficiency in its subcontractors, and required the prime contractor to post a substantial performance and payment bond. The prime contractor's and surety's financial stability assures continuing performance of all obligations. The PPO subcontractor is never in possession of any state funds, but simply is paid an access or rental fee for the term in which its network is used. BCBS presented no evidence that significant adverse consequences to the state would ensue from a hypothetical subcontractor bankruptcy, and Mr. Lutz's and Ms. Hefren's characterization of such a hypothetical event as an "inconvenience" is accepted. Maternity Counseling Material Not Required RFP Section 90.5.a stated that "The contractor shall provide educational materials to all pregnant plan participants to include information about the program, basic prenatal care and reference to specialty physicians and facilities." The agency considered this specification to be part of the UR services that the offeror certified it will perform. RFP Question 100.7.b solicits information on how the offeror plans to meet this specification, including samples of educational materials to be furnished. Unisys responded that "Cost Care emphasizes direct communication with both mother and physician, in addition to the educational materials we provide." The response described direct contacts with the mother and physician. It offered to produce additional materials for plan participants generally for additional cost. The RFP treated this as a scoring issue. Although the scorers gave Unisys relatively low scores for this response (4, 4 and 3), AHCA was satisfied that there was nothing wrong with this response and that specification 90.5.a would be met. Whether the Agency's Allocation of Weights Among the Questions in the RFP Was Arbitrary and Illegal RFP Question 80.10 required offerors to perform two historical "pricing analyses" based on data from the period July 1, 1993 to June 30, 1994, or 1.5 to 2.5 years before the new contract was to commence. Part (a) of Question 80.10 required offerors to price physician costs for designated medical procedures in each of 19 counties. Offerors were permitted to report the price available from any physician with whom they had a negotiated fee schedule in that county; if the offeror had no negotiated fee with a physician serving that county, then it had to report a state average charge for that procedure. BCBS reported the lowest aggregate price for physician services, and was awarded the maximum score of 10 points for Question 80.10(a). Unisys was awarded 9.92 points, reflecting less than one percent difference in the aggregate reported prices for physician services. Part (b) of Question 80.10 required offerors to price 1,174 claims in 55 specified hospitals, as of specified dates in 1993-94. The hospitals selected were those that had provided the most services to state employees in fiscal year 1993-94. If an offeror had a contract with a specified hospital on the specified transaction date, then that offeror could report its negotiated fee with that hospital. If the offeror had no contract with that hospital on that date, then it had to report that hospital's full reported charge for services, even if a contract was subsequently negotiated. The question did not allow equivalent hospitals to be substituted. The question favored the incumbent. BCBS was able to report low prices for the hospitals chosen because almost all of these hospitals were already in its network in 1993-94. BCBS received the maximum score of 10 points on Question 80.10(b); Unisys received 3.01 points. Question 80.10 served a limited purpose to help illustrate previous network development. It was never intended to become a basis for measuring or comparing future medical costs per employee or medical cost savings to be realized from selection of a particular offeror, nor would it be accurate for this purpose. Provider networks are "dynamic," changing over time in response to evolving client needs. A PPO administrator cannot effectively recruit providers or achieve favorable prices until it establishes a market share in the provider's market area. It was intended that during the six-month transition period the successful offeror would use the increased market share resulting from the contract award to expand and tailor its network to serve state employees. Mr. Lutz commented on the agency's reasons for assigning limited weight to Question 80.10 as follows: We certainly did assume that other proposers would be able to come in, develop a network, and in the process achieve discounts that would have been greater than the discounts that they might have had a year ago. If we didn't believe that -- there is no sense in going through a competitive procurement to start with. If we wanted to start with the premise that the only entity that could establish a network and achieve discounts was the one that we had, then why bother? It seems to me that the conclusion is we don't want a competitive procurement, we simply want to issue a new contract. (Transcript, p. 133) All parties agreed that it is "very hard" or "impossible" to predict future network growth and its effect on health care prices. There is no specific formula available to compute the amount of future medical costs. RFP Question 80.9 asked offerors to predict percentage changes in health care prices over the eight year potential contract term, and to provide assurances that the prediction would be accurate. Unisys predicted a percentage change for the first four years; BCBS referenced various indices for the first four years. Neither Unisys nor BCBS predicted anything beyond four years or guaranteed its prediction by sharing substantial risk if health care prices were to exceed their predicted levels. These responses help confirm that future health care prices are volatile and unpredictable. Because the network development and other factors affecting the future cost of medical care are not easily quantified or predicted, the great majority of RFP questions concerned evaluations of the offeror's experience and expertise in developing and managing networks, its specific plans to implement the network contemplated by the RFP, and its provider credentialling, quality assurance and payment methodology, as well as performance of TPA and UR functions. All of these questions concern the offeror's capability to provide a satisfactory network and reflect its ability to control future medical costs. AHCA intended that the questions in Section 80 would collectively demonstrate the offeror's capability and prospects for developing a cost-effective PPO network. BCBS, through its State Business Director and expert witness, Sheffield Kenyon, asserted that the agency should have increased the weight assigned to Question 80.10 from 240 points (10 percent of the PPO component weight) to 1000 points. Mr. Kenyon viewed the historical price analysis as the "single best proxy" for a future health care price prediction, and was surprised that the agency had not given it greater weight. His opinion was not based on any mathematical formula; nor did he identify any industry standard concerning the weight to be given such historical analysis. His opinion, competent though it was, was based on exactly what Mr. Lutz and Ms. Morgan brought to the process of ascribing weights: a rich, full, varied background and years of experience. BCBS State Employee Market Director, Robert Nay, prepared medical cost projections which purported to show that the Unisys proposal could result in significantly larger expenditures by the state and its covered persons for medical care than would be the case with BCBS. He acknowledged that preparing projections was not a part of his normal work. His analysis was limited to two factors, network utilization rate and reported discount rate. Mr. Nay compared a projected savings for BCBS with three projected scenarios for Unisys/Beech Street. The first scenario assumes the network available to Unisys and Beech Street will remain static from 1993-94. However, the testimony was unrefuted that network development is driven by the client base. It is unrealistic to assume that there has been, and would be, no development prior to contract implementation in January 1996. Even Mr. Nay agreed this was not likely to occur. (Transcript, p. 417). Scenario 2 also assumes that Unisys would be unable to achieve a network utilization rate in Florida comparable to BCBS', and is likewise speculative and unsupported by the weight of the evidence. Scenarios 1 and 2 used Beech Street's 1994 national average discount rate as stated in Question 80.2 of the Unisys proposal, and scenario 3 assumed a slightly improved discount rate. However, there was no evidence to show that the 1994 national average discount rate would be applicable to the proposed Florida contract. The Unisys proposal in Section 80.2 reported that Beech Street's national savings averages may be understated, as most of its network hospitals are nonprofit hospitals which generally charge less than for-profit facilities. In Section 80.9, Unisys and BCBS provided information showing rate changes the state should expect to experience. Unisys reported an actual 9 percent decrease in inpatient hospital rates, and a 13 percent decrease in outpatient rates for 1995. The Unisys proposal also projected that the state should experience a 4 percent decline in inpatient and outpatient hospital rates for 1996 and 2 percent or greater decline in those rates for 1997, 1998 and 1999. BCBS projected increases in these rates for the years 1996-99. These projections were not included in Mr. Nay's analysis. Beech Street representatives, Doreen Corwin and Carol Lockwood, described successful efforts in adding provider groups to the Beech Street network. Beech Street has been received favorably in negotiations with providers. The final award of the contract should enable Beech Street to finalize its relationships with Unisys and with sub-subcontractors and providers. The current Beech Street Florida network includes approximately 1.1 million covered lives. The addition of the state plan's approximately 240,000 covered lives will significantly add to Beech Street's bargaining power to negotiate prices in markets where participants live. Although there is conflicting evidence of whether providers are more or less anxious now than in the past to negotiate discounted agreements with a PPO, it is reasonable to expect that most providers who currently have contracts with BCBS would be very likely to enter into similar arrangements with Beech Street to avoid losing patients. The plan encourages covered employees to utilize the less expensive network providers, so loss of network status would be detrimental to a provider who relies on that employee patient base. Utilization review services can substantially affect cost of health care. Cost Care representative, Sandra O'Toole, described its independent utilization review services for state governments in Mississippi, Alabama, and Georgia, as well as for other clients around the country, based on a clinical model using board-certified physicians to review cases. The Cost Care average number of inpatient admissions per thousand plan participants is approximately BCBS, which performs both PPO network and UR functions in-house, reports approximately 90 inpatient admissions per thousand in Florida, with a decrease from highs of approximately 109 in 1990 and 1991. (Joint Exhibit Number 5, exhibit to question Number 60.6.2.a, p. 15). Cost savings or impact on costs to the trust fund and individual employees are thus reflected throughout the RFP, and not simply in Section 80.10, giving additional credence to the weights ascribed by the RFP framers. BCBS speculates that the state and its plan participants will inevitably incur substantial extra health care expenses if AHCA's evaluation turns out to be wrong. However, even if the Unisys-Beech Street network fails to fully achieve comparable prices, there are safety net features in the contract. Participants can elect to use HMO's or private insurance in lieu of the plan, and the Legislature is considering additional options. The agency has reserved the right to carve out particular health care services for separate direct contracts with providers or to provide services through Community Health Purchasing Alliances (CHPA's) in lieu of the plan. The agency also has reserved the right to terminate the contract entirely for convenience, without obligation except to pay for services rendered. Finally, the agency will evaluate Unisys- Beech Street's implementation plan for expanding the PPO network to meet the plan's needs within 30 days after the contract award and can seek remedies for any deviation from that plan. The agency's weighting of the technical questions must be considered in light of all circumstances, including the known administrative costs reflected in the competing proposals. BCBS's evidence does not prove that the agency's weighting of the limited purpose historical price analysis in Question 80.10 produced an irrational evaluation of competing proposals, nor that any potential risk so clearly outweighs known administrative cost savings as to make the contract award to Unisys irrational. BCBS argued that additional weight should have been given to other questions of the RFP. However, BCBS presented no evidence that would indicate the subjective determinations of weighting calculated by BCBS are any better or worse than the determinations of weighting made by the agency. Reasonable persons can, and do (as in this case) differ. The evidence, as developed through the testimony of Mr. Lutz and Ms. Morgan, has shown that the agency's weighting scheme was a carefully designed, strict implementation of AHCA's goals and intent. Statistical Analysis of the Scores BCBS presented statistical analyses of the overall scoring through its expert, Dr. James T. McClave, along with charts and graphs prepared by Dr. McClave. The analyses prepared and presented by Dr. McClave included an analysis of inter-rater agreement, as well as several tests that Dr. McClave said showed a statistical bias in one of eight groups of evaluators. In order to test inter-rater agreement, Dr. McClave applied a statistical model called the Kappa method. With this method, Dr. McClave compared the scores given by three evaluators for each of approximately 235 scored questions on the score sheets generated for BCBS, Unisys and Humana. Dr. McClave compared the scores on the 0-10 category scale, as well as a series of "collapsed" scales (i.e. a five-category scale based on 0, 1-3, 4-6, 7-9, 10), with one of the scales using as few as two categories (i.e., 0-5, 6-10). In order to find an "agreement" between evaluators using the Kappa method for the 0-10 point scale, Dr. McClave defined agreement as "pure agreement," in other words, the scores had to be the same. To expect high agreement or exact agreement for the 0-10 scale was a tough standard from a statistical point of view and therefore he began to look at "collapsed" scales which, according to Dr. McClave, would be relatively easier to meet. For the other "collapsed" scales, the scores still needed to fall into the same category to be considered perfect agreement. All of the Kappa tests presented by Dr. McClave had percentages of perfect agreement of less than 40 percent, which, according to the scale picked from the statistics text used by Dr. McClave, represented "poor" agreement. Based upon the Kappa method that he employed and the scale set forth in the text, Dr. McClave concluded that the level of inter-rater reliability was poor, and that the evaluation cannot be trusted. He conceded that there was no precise way to identify the reasons why the reliability was so low, but conjectured that a lack of training or amount of time allowed for the scoring could have been a cause. Dr. McClave also described a statistical method which he referred to as the weighted Kappa. The weighted Kappa gives more weight to the level of agreement, for example, a four versus a three is higher than a one versus a four. The unweighted Kappa method employed by Dr. McClave assigned the same "zero" agreement value for a score of four versus three as it did to a score of one versus four. Dr. McClave did not use the weighted Kappa because in his "review of the literature the statistical theory behind the weighted Kappa has not been sufficiently developed to the point where one can use it in the case we have." (Transcript, p. 635) Weighted Kappa, in his view, compares two evaluators, one against the other. Dr. McClave admitted that unweighted Kappa was designed for nominal data, the most basic category of data. The scores in the evaluation were done in ordinal fashion and according to widely recognized authorities in the field, weighted Kappa is the appropriate statistical method for analyzing ordinal data. Dr. McClave has no expertise in any of the substantive areas of the technical proposal (TPA, PPO or UR), or in the development, weighting or scoring of RFP's in these substantive areas. He admitted that he had no reason to believe that any of the scorers was not conscientious and diligent, or that they used any improper scoring method or standard. BCBS did not offer a single incident to show scoring was improper, nor any basis to claim that scorers were not motivated to be conscientious and fair. Unisys presented Erwin Bodo, Ph.D., as its statistical expert witness. Dr. Bodo reviewed the circumstances in which the scoring was performed, i.e., use of 24 evaluators with diverse backgrounds and perspectives; use of questions involving the application of judgement and subjective standards; and use of the 0-10 scoring scale without any exact or true score for any questions. Under these circumstances, substantial disagreement is ordinarily expected. The difference between the highest and lowest scores was two points or less for 50 percent of the questions, and three points or less for 80 percent of the questions. This constitutes reasonably good agreement among scorers, according to Dr. Bodo. The question of whether or not scorers on a particular question were consistent is irrelevant to whether the evaluation was valid. As long as each particular scorer was internally consistent, the overall scoring would be fair. The Kappa analysis proves nothing relative to the fairness or validity of the scoring, but simply reflects that the scorers saw the merits differently. Dr. McClave's second statistical analysis separated the 24 scorers based on the offices in which they worked. He found that the aggregate mean scores of five scorers from the Bureau of State Employees Insurance (BSI) were more favorable to Unisys or less favorable to BCBS in a statistically significant degree from the aggregate mean scores from each of the other seven offices. Dr. McClave used the term "statistical bias" to describe the differences between the five BSI scorers' aggregate scores and the other 19 scorers' aggregate scores, grouped by their respective offices. However, this analysis does not prove actual prejudice or unfairness because the statistical tests will not demonstrate such matters. Dr. McClave acknowledged that the disagreement could be related to differences in scorers' backgrounds and perspectives. He had no knowledge of the scorers' backgrounds beyond what offices they worked in. He acknowledged that the questions were subjective, that the scorers applied the scale in different ways, and that there was no perfect answer because human judgement was involved. Dr. McClave did not know which scores were right and which were wrong, and could not say that disagreement among scorers made either score wrong. He did not analyze individual questions to determine whether they were properly scored. He had no basis to assume that any BSI scorers were unfair. He nevertheless proposed disqualifying all BSI scorers and eliminating their scores, giving BCBS enough additional technical points to win the contract. Dr. McClave's proposed disqualification would effectively eliminate ten questions that were scored by BSI scorers only. He admitted this was a problem. It would also reduce the scoring of other questions to one or two scorers, violating the RFP requirement that at least three persons score each question. There were numerous questions in which BSI scorers gave BCBS a higher score than non-BSI scorers, or in which BSI scorers gave Unisys a lower score than non-BSI scorers. This evidence supports a finding that there was no systematic prejudice exhibited by the BSI scorers. Give the subjective nature of the technical proposal, the use of scorers with diverse backgrounds and perspectives enhanced the fairness of the process. RFP Sections 120.3, 120.3.1 and 120.6 described how the scoring process would be conducted, resulting in the ranking of proposals by the total of scores awarded. There was no requirement for any supermajority or any particular statistical level of agreement among the scorers beyond that which results in a majority of the points, and BCBS did not challenge the absence of such a requirement when it challenged the RPP. SUMMARY OF FINDINGS The disputed issues in this case arise from the differing opinions of competent and articulate experts rather than from the underlying facts, which facts are generally uncontroverted. Drawing on the experience of its staff and borrowing some guidance from its predecessor agency, AHCA developed its first RFP for state employee health services. The process was designed to enhance competition and the prospective offerors had ample opportunity for input. The questions they asked and answers provided by the agency were incorporated into the RFP document. The agency's preparation of the RFP, its interpretation of the document and its scoring of the parties' responses were careful, well-intended and fair. Competent experts differ on the agency's interpretation of the RFP as applied to items not included in the Unisys responses; they differ on the weights assigned to segments of the RFP. But the agency's interpretation and weighting were not proven arbitrary or illegal. Competent experts disagreed on whether the scores were statistically reliable or biased. Their evidence was informative, and even entertaining, but in the end had little practical application. None suggested that the scorers colluded, conspired or falsified their scores. Any explanation for near-random results (assuming that Dr. McClave's methodology was appropriate) is based on conjecture and not on any real evidence. The scorers were experienced, were trained and were afforded the time to accomplish their assignments. Statistical bias by one group is irrelevant in the absence of actual prejudice. The statistical bias, like the suggested inter-rater unreliability, can be made to appear or to vanish with simple manipulation of methodology or realignment of the groups under scrutiny. Such evidence is too tenuous to establish the agency's misprision. The agency's intended award is appropriate and fair, and not arbitrary or illegal.
Recommendation Based on the foregoing, it is hereby, RECOMMENDED: That the Agency for Health Care Administration issue its final order awarding the contract to Unisys, as intended. DONE and ORDERED this 27th day of September, 1995, in Tallahassee, Florida. MARY W. CLARK, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 27th day of September, 1995. APPENDIX The following constitute specific rulings on the findings of fact proposed by the Petitioner. The findings proposed by the agency and Intervenor have been substantially adopted. Petitioner's Proposed Findings 1. Adopted in paragraph 1. 2 & 3. Adopted in paragraph 4. 4 & 5. Adopted in substance in paragraph 2. Rejected as unnecessary. Adopted in paragraphs 4 and 12. Adopted in paragraph 5. Adopted in paragraph 6. 10 and 11. Adopted in substance in paragraph 7. Rejected as unnecessary. Adopted in paragraph 5. Adopted in paragraph 10. Adopted in part in paragraph 16. The characterization of the Unisys proposal as a "Unisys/Beech Street/Cost Care proposal" is rejected as misleading. Adopted in paragraph 15. Adopted in paragraph 29. Adopted in substance in paragraph 30. 19 & 20. Rejected as unnecessary. 21. Adopted in substance in paragraph 30. 22. Rejected as a conclusion contrary to the evidence. One proposal was disqualified in the second phase. 23. Adopted in substance in paragraph 17. 24. Adopted in substance in paragraph 8. 25. Adopted in part in paragraph 18. The lack of "formal training" or interviews is rejected as immaterial and misleading. The staff were trained and were amply instructed. 26. Adopted in summary in paragraph 19. 27. Adopted in paragraphs 11 and 21. 28. Adopted in paragraphs 9 and 23. 29. Adopted in substance in paragraph 23. 30. Adopted in paragraph 24. 31 & 32. Adopted in substance in paragraphs 26 and 27. 33. Adopted in paragraph 28. 34. Addressed in Preliminary Statement. 35. Rejected as contrary to the evidence (the conclusion of "arbitrary and capricious"). 36. Rejected as misleading as the experience of both was found to be appropriate to the task. 37. Adopted in substance in paragraphs 50 - 52. 38. Adopted in part in paragraph 52; otherwise rejected as misleading argument. 39. Rejected as unnecessary. 40 - 42. Rejected as unnecessary and argument that is not supported by the weight of evidence. 43 & 44. Adopted in summary in paragraphs 51 and 53. 45 - 61. Rejected as irrelevant or argument that is not supported by the greater weight of evidence, which evidence did support the agency's contention that section 80.10 is only a piece of the financial outlook picture. 62 - 64. Rejected as unnecessary. The contract is not for direct medical services and the cost of those services over the term is incalculable. 65 - 66. Adopted in summary in paragraph 31. 67 - 77. Rejected as unnecessary or argument that is unsupported by the weight of evidence, which evidence supports the interpretation by the agency that the forms were not required from contractors, and Beech Street and Cost Care were subcontractors rather than "offerors". 78. Adopted in substance in paragraph 42. 79 - 82. Rejected as unnecessary. The evaluators did review the financial statements, but not as a mandatory item, and scored the responses based on the review. Although it is accepted that the audited financial statements are important, so also are other indicia of financial viability and stability. 83. Adopted in paragraph 47. 84. Adopted in paragraph 48. 85. Adopted in paragraph 71. 86. Adopted in paragraph 72. 87 - 91. Adopted in summary in paragraphs 72 through 76. 92 & 93. Adopted in part in paragraph 74, as to the results of Dr. McClave's statistical analysis; rejected as to the conclusions that the agency's evaluation was unreliable or arbitrary and capricious, as the statistical analysis does not support that conclusion. 94. Adopted in paragraph 80. 95 - 98. Adopted in part in paragraphs 80 through 82; otherwise rejected as irrelevant. 99 - 103. Rejected as irrelevant. See Conclusion of Law Number 92. COPIES FURNISHED: Michael J. Glazer, Esquire Stephen C. Emmanuel, Esquire Steven P. Seymoe, Esquire MACFARLANE, AUSLEY, FERGUSON & MCMULLEN Post Office Box 391 227 South Calhoun Street Tallahassee, Florida 32302 Paul Martin, Assistant Attorney General Office of the Attorney General PL-01, The Capitol Tallahassee, Florida 32399-1050 James H. Peterson, III Steven Grigas Agency for Health Care Administration 2727 Mahan Drive, Suite 3400 Tallahassee, Florida 32308 Stephen Turner, P.A. David K. Miller, P.A. BROAD & CASSEL 215 South Monroe Street, Suite 400 Post Office Box 11300 Tallahassee, Florida 32302 Jerome W. Hoffman General Counsel Agency for Health Care Administration 2727 Mahan Drive Tallahassee, Florida 32309 Mr. Sam Power, Agency Clerk Agency for Health Care Administration Building 3, Room 3431 2727 Mahan Drive Tallahassee, Florida 32308
Conclusions Having reviewed the Administrative Complaint dated June 10, 2008, attached hereto and incorporated herein (Exhibit 1) , and all other matters of record, the Agency for Health Care Administration ("Agency") has entered into a Settlement Agreement (Exhibit 2) with the parties to these proceedings, and being otherwise well-advised in the premises, finds and concludes as follows: ORDERED: The attached Settlement Agreement is approved and adopted as part of this Final Order, and the parties are directed to comply with the terms of the Settlement Agreement. Respondent shall pay, within thirty (30) days of the date of rendition of this Order, the amount of five hundred twenty-five dollars ($525.00). Filed July 16, 2010 3:23 PM Division of Administr1ative Hearings. Checks should be made payable to the "Agency for Health Care Administration." The check, along with a reference to this case number, should be sent directly to: Agency for Health Care Administration Office of Finance and Accounting Revenue Management Unit 2727 Mahan Drive, MS #14 Tallahassee, Florida 32308 Unpaid amounts pursuant to this Order will be subject to statutory interest and may be collected by all methods legally available. The Respondent's request for an Administrative proceeding is hereby withdrawn. Each party shall bear its own costs and attorney's fees. The above-styled case is hereby closed. DONE and ORDERED this dday of { in Tallahassee, Leon County, Florida. , 2010, Thomas W. Ar old, Secretary Agency for Ith Care Administration A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO JUDICIAL REVIEW WHICH SHALL BE INSTITUTED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF AHCA, AND A SECOND COPY, ALONG WITH FILING FEE AS PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE AGENCY MAINTAINS ITS HEADQUARTERS OR WHERE A PARTY RESIDES. REVIEW OF PROCEEDINGS SHALL BE CONDUCTED IN ACCORDANCE WITH THE FLORIDA APPELLATE RULES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED. Copies furnished to: David C. Ashburn, Esq. Counsel for Respondent P.O. Drawer 1838 Tallahassee, Florida 32302 (U.S. Mail) Thomas J. Walsh II, Senior Attorney Agency for Health Care Admin. 525 Mirror Lake Drive N. #330H St. Petersburg, Florida 33701 (Interoffice Mail) Jan Mills Agency for Health Care Admin. 2727 Mahan Drive, Bldg #3, MS #3 Tallahassee, Florida 32308 (Interoffice Mail) Agency for Health Care Admin. Office of Finance and Accounting Revenue Management Unit 2727 Mahan Drive, MS #14 Tallahassee, Florida 32308 (Interoffice Mail) Lawrence P. Stevenson Administrative Law Judge Division of Administrative Hearings 1230 Apalachee Parkway Tallahassee, Florida 32399 (U.S. Mail) CERTIFICATE OF SERVICE 7 I HEREBY CERTIFY that a true and correct copy of this Final Order was served on the above-named person(s) and entities by U.S. Mail, or the method designated, on this the ay of , 2010. Richard Shoop, Agency Cieri< Agency for Health Care Administration 2727 Mahan Drive, Building #3 Tallahassee, Florida 32308-5403 (850) 412-3630
Conclusions THE PARTIES resolved all disputed issues and executed a Settlement Agreement. The parties are directed to comply with the terms of the attached settlement agreement, attached hereto and incorporated herein as Exhibit “1.” Based on the foregoing, this file is CLOSED. DONE and ORDERED on this the Wray of SJ tembos 2014, in Tallahassee, Florida. LI [for ELIZABETH{BUDEK, SECRETARY Agency for Health Care Administration Final Order Invoice No. NH16766 Page 1 of 3 Filed October 3, 2014 11:45 AM Division of Administrative Hearings A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO A JUDICIAL REVIEW WHICH SHALL BE INSTITUTED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF AHCA, AND A SECOND COPY ALONG WITH FILING FEE AS PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE AGENCY MAINTAINS ITS HEADQUARTERS OR WHERE A PARTY RESIDES. REVIEW PROCEEDINGS SHALL BE CONDUCTED IN ACCORDANCE WITH THE FLORIDA APPELLATE RULES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED. ‘ " Peter A. Lewis, Esquire Peter A Lewis, P.L. 3023 North Shannon Lakes Drive Suite 101 Tallahassee, Florida 32309 palewis@petelewislaw.com (Via Electronic Mail) _ Bureau of Health Quality Assurance Agency for Health Care Administration (Interoffice Mail) Stuart Williams, General Counsel Agency for Health Care Administration (Interoffice Mail) Shena Grantham, Chief Medicaid FFS Counsel (Interoffice Mail} Agency for Health Care Administration Bureau of Finance and Accounting (Interoffice Mail) Jeffries Duvall, Esquire Assistant General Counsel Agency for Health Care Administration (Interoffice Mail) Zainab Day, Medicaid Audit Services Agency for Health Care Administration (Interoffice Mail) State of Florida, Division of Administrative Hearings The Desoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (Via U.S. Mail) Final Order Invoice No, NH16766 Page 2 of 3 CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of the foregoing has been furnished to the above named addressees by the designated method of delivery on this the / day of ( Niles , 2014. Richard J. Shoop, Esquire Agency Clerk State of Florida Agency for Health Care Administration 2727 Mahan Drive, Building #3 Tallahassee, Florida 32308-5403 (850) 412-3671 Final Order Invoice No. NH16766 Page 3 of 3 STATE OF FLORIDA AGENCY FOR HEALTH CARE ADMINISTRATION SUNBELT HEALTH AND REHAB CENTER, INC, Petitioner, PROVIDER NO.: 032041200 vs. INVOICE NO.: NH16766 STATE OF FLORIDA, AGENCY FOR HEALTH CARE ADMINISTRATION, Respondent. / ETTLE: ENT The Respondent, Agency for Health Care Administration (“AHCA” or “Agency"}, and the Petitioner, Sunbelt Health and Rehab Center, Inc., (“PROVIDER”), stipulate and agree as follows: 1. This Agreement is entered into between the parties to resolve disputed issues arising from a collection matter assigned case number NH16766. 2. The PROVIDER is a Medicaid provider, Provider Number 032041200, in the State of Florida operating a nursing home facility. 3. On July 15, 2013, the Agency notified the PROVIDER of its determination that PROVIDER was responsible to the Agency for an overpayment in the amount of $95,610.99. 4. The PROVIDER timely filed an appeal regarding this determination challenging the Agency’s application of the interest rate in the FRVS property component that had been used to set the Medicaid per diem rate generating the overpayment. 5. Subsequent to the filing of the petition for administrative hearing, AHCA and the PROVIDER exchanged documents and discussed the adjustment to the interest rate used to determine the FRVS component of the Medicaid per diem. As a result of the aforementioned exchanges, the parties agree that AHCA will revise the PROVIDER’s January 1, 2014 per diem rates to reflect a fixed FRVS interest rate of 5.65%. The 5.65% fixed interest rate shall be used to establish the FRVS component of PROVIDER’s Medicaid per diem rate for all subsequent rate semesters unless the interest rate is required to be Sunbelt Health & Rehab Center, Inc. Settlement Agreement Page 1of5 Exhibst | revised in accordance with the provisions of the Florida, Title XIX, Long-Term Care Reimbursement Plan. 6. In order to resolve this matter without further administrative proceedings, the PROVIDER and AHCA expressly agree to the adjustment resolutions, as set forth in paragraph 5 above, completely resolve and settle this case and this agreement constitutes the PROVIDER'S withdrawal of its petition for administrative hearing, with prejudice. 7. The PROVIDER and AHCA further agree that the Agency shall recalculate the per diem rates for the above-stated period and issue a notice of the recalculation. Where the PROVIDER was overpaid, the PROVIDER will reimburse the Agency the full amount of the overpayment within thirty (30) days of such notice. Where the PROVIDER was underpaid, AHCA will pay the PROVIDER the full amount of the underpayment within forty- five (45) days of such notice. Payment shall be made to: AGENCY FOR HEALTH CARE ADMINISTRATION Medicaid Accounts Receivable—Mail Stop 14 2727 Mahan Drive, Building 2, Suite 200 Tallahassee, Florida 32308 Notices to the PROVIDER shall be made to: Peter A. Lewis, Esquire Peter A. Lewis, P.L. 3023 North Shannon Lakes Drive, Suite 101 Tallahassee, Florida 32309 Payment shall clearly indicate it is pursuant to a settlement agreement and shall reference the case number and the Medicaid provider number. 8. PROVIDER agrees that failure to pay any monies due and owing under the terms of this Agreement shall constitute the PROVIDER'S authorization for the Agency, without further notice, to withhold the total remaining amount due under the terms of this agreement from any monies due and owing to the PROVIDER for any Medicaid claims. 9. Either party is entitled to enforce this Agreement under the laws of the State of Florida; the Rules of the Medicaid Program; and all other applicable federal and state Sunbelt Health & Rehab Center, Inc. Settlement Agreement Page 2 of 5 laws, rules, and regulations, 10. This settlement does not constitute an admission of wrongdoing or error by the parties with respect to this case or any other matter. 11. Each party shall bear their respective attorney's fees and costs, if any. 12. The signatories to this Agreement, acting in their respective representative capacities, are duly authorized to enter into this Agreement on behalf of the party represented, 13. The parties further agree that a facsimile or photocopy reproduction of this Agreement shail be sufficient for the parties to enforce the Agreement. The PROVIDER agrees, however, to forward a copy of this Agreement to AHCA with original signatures, and understands that a Final Order may not be issued until said original Agreement is received by AHCA. 14. This Agreement shall be construed in accordance with the provisions of the laws of Florida. Venue for any action arising from this Agreement shall be in Leon County, Florida. 15. This Agreement constitutes the entire agreement between the PROVIDER and AHCA, including anyone acting for, associated with, or employed by them, respectively, concerning all matters and supersedes any prior discussions, agreements, or understandings: There are no promises, representations, or agreements between the PROVIDER and AHCA other than as set forth herein. No modifications or waiver of any provision shall be valid unless a written amendment to the Agreement is completed and properly executed by the parties. 16. This is an Agreement of settlement and compromise, recognizing the parties may have different or incorrect understandings, information and contentions, as to facts and law, and with each party compromising and settling any potential correctness or incorrectness of its understandings, information, and contentions as to facts and law, so that no misunderstanding or misinformation shall be a ground for rescission hereof. 17. The PROVIDER expressly waives in this matter their right to any hearing pursuant to §§120.569 or 120.57, Florida Statutes, the making of findings of fact and conclusions of law by the Agency, and all further and other proceedings to which it may be Sunbelt Health & Rehab Center, Inc. Settlement Agreement Page 3 of 5 entitled by law or rules of the Agency regarding these proceedings and any and all issues raised herein, other than enforcement of this Agreement. The PROVIDER further agrees the Agency shall issue a Final Order which adopts this Agreement. 18. This Agreement is and shall be deemed jointly drafted and written by all parties to it and shall not be construed or interpreted against the party originating or preparing it. 19. To the extent any provision of this Agreement is prohibited by law for any reason, such provision shall be effective to the extent not so prohibited, and such prohibition shall not affect any other provision of this Agreement. 20. This Agreement shall inure to the benefit of and be binding on each party’s successors, assigns, heirs, administrators, representatives, and trustees. SUNBELT HEALTH AND REHAB CENTER, INC. Dated: Spt 2014 Seen Dated: Printed Title of Providers’ OCF Dated: 4-9- Providers’ Representative ——_____, 2014 > 2014 Legal Counsel for Provider Sunbelt Health & Rehab Center, Inc. Settlement Agreement Page 40fS FLORIDA AGENCY FOR HEALTH CARE | ADMINISTRATION 2727 Mahan Drive, Mail Stop #3 Tallahassee, Florida 32308-5403 | 4 Lh : Dated: G/26 2014 Justin Senio Deputy Secretary, Medicaid .S AGI pated: Z//F 2014 Stuart Williams General Counsel Dated: ) | 19 , 2014 Sh¢ya Gran Medicaid FFS Sunbelt Health & Rehab Center, Inc. Settlement Agreement Page 5 of 5 FLORIDA AGENCY FOR HEATH CARE ASMINISTRATION, pecan Better Heaith Care for aif Floridians cS ETARY EK CERTIFIED MAIL RECEIPT REQUESTED: Of 7108 2433 3937 6307 1806 July 15, 2013 Nursing Home Administrator Sunbelt Health & Rehab Center 305 East Oak Street Apopka, FL 327@2 Dear Administrator: You have been notified by the Office of Medicaid Cost Reimbursement Analysis of adjustments to your Medicaid reimbursement rates on the remittance voucher run dated: 7/13/13. The adjustments resulted from changes in your cost reports. This action has resulted in a balance due to the Agency in the amount of $95,610.99 for provider number 03204 1200/ invoice number NH 16766. If payment is not received, or arranged for, within 30 days of receipt of this letter, the Agency shall withhold Medicaid payments in accordance with the provisions of Chapter 409.913(27), F.S. Furthermore, pursuant to Sections 409.913(25) and 409.913(15), F.S., failure to pay in full, or enter into and abide by the terms of any repayment schedule set forth by the Agency may result in termination from the Medicaid Program. Likewise, failure to comply with all sanctions applied or due dates may result in additional sanctions being imposed. If the overpayment cannot be recouped by this office, Florida law authorizes referral of your account to the Department of Health and to a collection agency. All costs incurred by the Agency resulting from collection efforts will be added to your balance. Additionally, be advised that this referral does not relieve you of your obligation to make payment in full or contact this office to arrange mutually agreeable repayment terms. In addition, amounts due to the Agency shall bear interest at ten percent (10%) per annum from the date of this letter on the unpaid balance until the account is paid in full. The interest accrual will not be assessed if payment is received by the Agency within 30 days. You have the right to request a formal or informal hearing pursuant to Section 120.569, F.S. Ifa request for a formal hearing is made, the petition must be made in compliance with Section 28- 106.201, F.A.C. and mediation may be available. If a request for an informal hearing is made, the petition must be made in compliance with rule Section 28-106.301, F.A.C. Additionally, you are hereby informed that if a request for a hearing is made, the petition must be received by the Agency within twenty-one (21) days of receipt of this letter. For more information regarding your hearing and mediation rights, please see the attached Notice of Administrative Hearing and Mediation Rights. 2727 Mahan Drive, MS#14 Visit AHCA online at Tallahassee, Florida 32308 http://ahca.myflorida.com Please include a copy of the enclosed remittance advice to assure Proper posting of payments to your provider account. Should you have any questions regarding the Medicaid provider account balance information contained in this notice, please contact Julie Chasar (850) 412-4877. Questions regarding the reimbursement rate changes should be directed to Thomas Parker, Office of Medicaid Cost Reimbursement, at (850) 412-4110, Sincerely, Julie Chasar Medicaid Accounts Receivable JFC - July 15, 2013 PLEASE INCLUDE THIS REMITTANCE ADVICE WITH YOUR PAYMENT — eR EES REIS ANCE ADVICE WITH YOUR PAYMENT Remit Payment to: Agency for Health Care Administration Medicaid Accounts Receivable MS# 14 2727 Mahan Drive Bldg. 2 Ste. 200 Tallahassee, FL 32308 Attn: Sharon Dixon FROM: Sunbelt Health & Rehab Center 305 East Oak Street Apopka, FL 32703 Provider No. 032041200 Invoice No. NH16766 STATEMENT OF ACCOUNT CERTIFIED MAIL: 91 7108 2133 3937 6307 1800 VOUCHER RUN DATE: 7/13/13 BALANCE DUE: — $05.610.96 PAYMENT IS DUE WITHIN 30 DAYS FROM THE DATE OF THIS LETTER. Amount Enclosed: $ NOTICE OF ADMINISTRATIVE HEARING AND MEDIATION RIGHTS RE SE ARING AND MEDIATION RIGHTS The written request for an administrative hearing must conform to the requirements of either Rule 28-1 06.201(2) or Rule 28-} 06.301 (2), Florida Administrative Code, and must be received by the Agency for Health Care Administration, by 5:00 P.M. no later than 21 days after you received the SBR. The address for filing the written request for an administrative hearing is: Richard J. Shoop, Esquire Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Mail Stop #3 Tallahassee, Florida 32308 Fax: (850) 921-0158 The request must be legible, on 8 % by 11-inch white paper, and contain: 1. Your name, address, telephone number, any Agency identifying number on the SBR, if known, and name, address, and telephone number of your representative, if any; 2. An explanation of how your substantial interests will be affected by the action described in the SBR; 3. A statement of when and how you received the SBR; 4. Fora request for formal hearing, a statement of al] disputed issues of material fact; 5. Fora request for formal hearing, a concise statement of the ultimate facts alleged, as well as the rules and statutes which entitle you to relief: 6. For a request for formal hearing, whether you request mediation, if it is available; 7. Fora request for informal hearing, what bases Support an adjustment to the amount owed to the Agency; and 8. A demand for relief. A formal mediation may be available in conjunction with a formal hearing. Mediation is a way to use a f you and the Agency agree to mediation, it does not mean that you give up the right to a hearing. Rather, you and the Agency will try to settle your case first with mediation, If a written request for an administrative hearing is not timely received you will have waived your right to have the intended action reviewed pursuant to Chapter 120, Florida Statutes, and the action set forth in the SBR shall be conclusive and final.
The Issue The issues to be determined are: whether Petitioners have standing; whether the petition of Automated HealthCare Solutions, Inc. (AHCS), was timely filed1/; and whether Respondent’s proposed rules 69L-31.005(2)(d), 69L-31.016(1), and 69L-31.016(2) are invalid exercises of delegated legislative authority on the grounds raised by Petitioners.
Findings Of Fact The Challenged Proposed Rules At issue in the proposed rule challenge proceeding are three provisions that are part of an overall rulemaking exercise by Respondent Department of Financial Services, Division of Workers’ Compensation (Respondent, Department, or Division), to amend Florida Administrative Code Chapter 69L-31. That rule chapter bears the misnomer “Utilization and Reimbursement Dispute Rule”--a misnomer because, rather than a single rule, the chapter currently contains 12 rules, with a history note of one additional rule that was repealed. The existing 12 rules in chapter 69L-31, in effect without amendment since November 2006, carry out the Department’s statutory authority to receive, review, and resolve reimbursement disputes between workers’ compensation insurance carriers (carriers) and providers of health care services, medication, and supplies to injured workers. See § 440.13(7), Fla. Stat. A “reimbursement dispute” is “any disagreement” between a provider and carrier “concerning payment for medical treatment.” § 440.13(1)(q), Fla. Stat. The proposed amendments to chapter 69L-31 include revisions to existing rules, the repeal of one existing rule, and the addition of two new rules. The challenges at issue here are directed to both paragraphs of a newly proposed rule which would become rule 69L-31.016, if adopted. One challenge is also directed to an amendment of an existing rule. Proposed rule 69L-31.016, entitled “Reimbursement Disputes Involving a Contract or Workers’ Compensation Managed Care Arrangement or Involving Compensability or Medical Necessity,” would provide as follows, if adopted: When either the health care provider or carrier asserts that a contract between them establishes the amount of reimbursement to the health care provider, or where the carrier provided health care services to the injured worker through a workers’ compensation managed care arrangement pursuant to Section 440.134, F.S., the Department will not issue a finding that there has been any improper disallowance or adjustment. Instead, the determination will only indicate the reimbursement amount for the treatment established by the appropriate reimbursement schedules, practice parameters, and protocols of treatment in Chapter 440, F.S., to assist the health care provider and carrier in their independent application of the provisions of the contract or workers’ compensation managed care arrangement to resolve the dispute. When the carrier asserts the treatment is not compensable or medically necessary and as a result does not reimburse, the determination will only address line items not related to compensability or medical necessity. If the petitioner has submitted documentation demonstrating the carrier authorized the treatment, the Department will issue a finding of improper disallowance or adjustment. Although these rules were not proposed for adoption until December 2016, Respondent has been implementing an unadopted policy that is consistent with paragraph (1) since August 2015. Respondent also has been implementing an unadopted policy that is similar to paragraph (2) since November 2015. The other object of challenge is the proposed deletion of rule 69L-31.005(2)(d), which currently provides: If the answer to question 5 on the Petition for Resolution of Reimbursement Dispute Form [asking if reimbursement is pursuant to a contract or rate agreement] is yes, [submit] a copy of all applicable provision(s) of the reimbursement contract. Although the evidence was less than clear, it does not appear that Respondent is already implementing this proposed change. The Parties Petitioners and Intervenors all are regular participants (or, in the case of FSASC, an association whose members are regular participants) in provider-carrier reimbursement disputes pursuant to section 440.13(7), Florida Statutes, before the Division. Petitioners represent the provider side of these reimbursement disputes, while Intervenors represent the carrier side of the reimbursement disputes. Petitioner Oak Hill is a private, for-profit hospital that cares for thousands of Florida patients each year, including injured workers. Petitioner Parallon provides revenue cycle services for HCA-affiliated Florida hospitals, including Oak Hill. Among other things, Parallon acts on behalf of the HCA-affiliated hospitals in workers’ compensation claim disputes. Parallon acts on the hospitals’ behalf to resolve reimbursement disputes with carriers, including: acting for the hospitals to resolve reimbursement disputes under chapter 69L-31; coordinating any resultant administrative litigation before DOAH; and taking steps necessary to collect amounts owed following receipt of the Division’s determination. Parallon is expressly authorized to participate in reimbursement disputes as a “petitioner,” as defined in proposed rule 69L-31.003, on behalf of Oak Hill and other HCA-affiliated hospitals. Oak Hill and Parallon are regulated by, and must comply, with the requirements of chapter 69L-31 (which will include the proposed rules, if adopted) in reimbursement disputes with carriers. Petitioner FSASC is the primary organization of ambulatory surgical centers (ASCs) in Florida. Among the purposes of the FSASC is to advance the ASC industry, and its member centers’ interests, through governmental advocacy. To that extent, the FSASC maintains close contact with state agencies to monitor and provide input into legislation and regulations that govern or affect ASC operations. In furtherance of this role, the FSASC has been an active participant in all phases of Respondent’s rulemaking efforts with regard to the proposed rules. Another purpose of the FSASC is to promote, assist, and enhance its members’ ability to provide ambulatory surgical services to injured workers efficiently and cost effectively throughout Florida and, in so doing, promote and protect the interests of the public, patients, and FSASC members. FSASC’s participation in this proceeding is consistent with its purposes, and the relief sought--invalidation of the challenged proposed rules (with possible attorney’s fees incurred in connection with this proceeding)--is appropriate for an organization to pursue in a representative capacity. A substantial number of FSASC’s members provide health care services to patients who are injured workers in Florida and who receive workers’ compensation benefits in accordance with chapter 440. These health care services are reimbursable by the patients’ employers’ carriers. FSASC’s members are participants in reimbursement disputes with carriers and are regulated by, and must comply with, the requirements of chapter 69L-31 (which will include the proposed rules, if adopted). Petitioner AHCS is a technology and prescription medication claims processing company. Many physicians who dispense medication from their offices to injured workers assign their rights, title, and interest to the prescription medication claims to AHCS. Prescription Partners, LLC, is wholly-owned and operated by AHCS and is the billing entity of AHCS. In some instances, AHCS contracts with physicians, while Prescription Partners, LLC, pursues the billing and reimbursement disputes on behalf of the physicians under the contract of assignment. AHCS is authorized to participate in reimbursement disputes as a “petitioner,” as defined in proposed rule 69L-31.003. As a participant in reimbursement disputes, AHCS is regulated by, and must comply with, the requirements of chapter 69L-31 (which will include the proposed rules, if adopted). Respondent is the state agency tasked with administering chapter 440 in a way that promotes “an efficient and self-executing” workers’ compensation system “which is not an economic or administrative burden” and ensures “a prompt and cost-effective delivery of payments.” § 440.015, Fla. Stat. The Division’s medical services section administers the provider-carrier reimbursement dispute process and issues the required determinations pursuant to section 440.13(7). The determinations are made in accordance with chapter 440 and the applicable reimbursement manuals, which are codified as rules. Intervenor Zenith is a foreign, for-profit corporation licensed by the Department to provide workers’ compensation insurance to employers throughout Florida. As a carrier, and in the normal course of its workers’ compensation claim-handling responsibilities, Zenith regularly authorizes, adjusts, and pays for medical benefits for injured workers for causally-related and medically necessary treatment, including treatment rendered by physicians, hospitals, ASCs, pharmacies and prescription drug vendors, physical therapists, and other licensed health care providers, such as Petitioners. As a carrier, Zenith is regulated by chapter 440 and the related rules of the Division, including chapter 69L-31 (which will include the proposed rules, if adopted). All parties stipulated that the challenged proposed rules directly and immediately affect the rights and obligations of Zenith, and directly impact the financial obligations of Zenith in medical bill payment, as well as in any statutory reimbursement dispute between a health care provider and Zenith under section 440.13(7). The proposed rules dictate which processes will govern reimbursement disputes involving Zenith, and whether Zenith may rely fully on the provisions of reimbursement contracts. Intervenors, the Summit Companies, are Florida- licensed monoline workers’ compensation insurance companies that are managed by a managing general agent, Summit Consulting LLC, and regulated by the Department. Pursuant to their workers’ compensation insurance policies, the Summit Companies pay workers’ compensation claims for injured workers, including payment of medical benefits for care provided to injured workers by health care providers who have filed petitions for reimbursement dispute resolution under chapter 69L-31. Also, the Summit Companies have a workers’ compensation managed care arrangement authorized by the Agency for Health Care Administration (AHCA) pursuant to section 440.134. Their delegated managed care entity, Heritage Summit HealthCare, LLC, has its own proprietary PPO network. The Summit Companies, either corporately or through their delegated managed care entity, regularly authorize, adjust, and pay medical benefits for injured workers for causally- related and medically necessary treatment, including payment for treatment rendered by physicians, hospitals, ASCs, pharmacies and prescription drug vendors, physical therapists, and other licensed health care providers, such as Petitioners. All parties stipulated that the challenged proposed rules directly and immediately affect the rights and obligations of the Summit Companies, and directly impact their financial obligations in medical bill payment, as well as in reimbursement disputes under section 440.13(7) and chapter 69L-31. The proposed rules dictate which processes will govern reimbursement disputes involving the Summit Companies, including whether the Summit Companies may rely on their managed care arrangements and contracts regulated under the authority of AHCA. To the same extent that all Intervenors are directly and immediately impacted by the challenged proposed rules, Petitioners Oak Hill, Parallon, and AHCS, as well as the members of Petitioner FSASC, are also directly and immediately impacted by the proposed challenged rules, which govern reimbursement disputes under section 440.13(7). Just as the challenged proposed rules directly and immediately impact Intervenors’ financial obligations in medical bill payment to providers, such as Petitioners, the challenged proposed rules also directly and immediately impact Petitioners’ financial rights in having medical bills paid by carriers, such as Intervenors. The challenged proposed rules dictate what processes will be available in reimbursement disputes, not only for Intervenors, but for Petitioners. The challenged proposed rules dictate when the cost-efficient reimbursement dispute process will be, and will not be, fully available to Petitioners and FSASC’s members, and when the prompt delivery of payment envisioned as the end result of the reimbursement dispute process will, or will not be, available to them. The parties also stipulated that the Division’s challenged proposed rules immediately and substantially affect Intervenors because prior authorization, the managed care defense, provider contract disputes, and medical necessity all have been raised as issues in prior chapter 69L-31 provider disputes with these carriers. It stands to reason that the providers who are on the other side of these disputes with carriers are just as immediately and substantially impacted by the proposed rules in this regard. Reason aside, Respondent readily stipulated to the direct, immediate, and substantial impacts to Intervenors, but steadfastly disputed that Petitioners (or the members of Petitioner FSASC) must necessarily be impacted to the same degree. Yet they are, after all, the other side of the reimbursement dispute coin. It is difficult to understand how one side of a dispute could be directly, immediately, and substantially impacted by proposed rules regulating the dispute process, while the other side of the dispute would not be equally impacted. At hearing, the undersigned raised this seeming incongruity, and suggested that Respondent would need to explain its different positions with regard to the factual predicates for standing for Intervenors and for Petitioners, besides the obvious difference that Intervenors were supporting Respondent’s proposed rules while Petitioners were challenging them. Respondent offered no explanation for its incongruous positions, either at hearing or in its PFO. Respondent’s agreement that Intervenors are immediately, directly, and substantially affected by the challenged proposed rules serves as an admission that Petitioners (or Petitioner FSASC’s members) are also immediately, directly, and substantially affected by the challenged proposed rules. Specific examples were offered in evidence of the Division’s refusal to resolve reimbursement disputes because contracts and managed care arrangements were involved, or because payment was adjusted or disallowed due to compensability or medical necessity issues. FSASC provided a concrete example of the application of the unadopted policies to one of its members, resulting in immediate injury when the Division refused to resolve a reimbursement dispute because a contract was involved. Petitioner Oak Hill identified a single reimbursement dispute over a $49,000 underpayment that remained unresolved because of the Division’s refusal to resolve the dispute because either a contract or managed care arrangement was involved. Petitioner Parallon’s income is based, in part, on paid claims by carriers, so it loses income when these reimbursement disputes are not resolved and the carriers are not ordered to promptly pay an amount. Petitioner AHCS offered examples of reimbursement disputes that the Division refused to resolve because the carrier disallowed or adjusted payment due to compensability or medical necessity issues. AHCS also noted that the incidence of carrier disallowances and adjustments of payment for compensability and medical necessity reasons has increased since the Division stopped making determinations to resolve reimbursement disputes on those issues. At the very least, Petitioners have already been harmed in these ways: by the delay in resolving reimbursement disputes, which includes lost cash flow and the time value of the money that carriers are not ordered to pay; by the increased personnel costs necessary to try some other way to pursue these claims; and by the prospect of court filing fees and attorney’s fees to try to litigate their right to payment when deprived of the statutory mechanism for cost-efficient resolution of reimbursement disputes. Conceivably, providers will not have recourse in court to contest disallowance or adjustment of payment, given Respondent’s exclusive jurisdiction to decide any matters concerning reimbursement. § 440.13(11)(c), Fla. Stat. Meanwhile, carriers immediately benefit from delay, by not being ordered to promptly pay claims. In an annual report addressing reimbursement dispute determinations for the fiscal year from July 1, 2015, through June 30, 2016, the Division reported that in 85.5 percent of its reimbursement dispute determinations, it determined that the health care providers had been underpaid. Overview of Workers’ Compensation Reimbursement Dispute Process Under Florida’s statutory workers’ compensation system, injured workers report their injury to the employer and/or the carrier. With an exception for emergency care, a health care provider must receive authorization for treatment from the carrier prior to providing treatment. After providing treatment, health care providers, including hospitals and physicians, must submit their bills to employers’ carriers; they are prohibited from billing the injured employees who received the treatment. These bills typically have multiple line items, such as for pharmaceutical prescriptions, diagnostic tests, and other services rendered. Carriers are required to review all bills submitted by health care providers to identify overutilization and billing errors, and to determine whether the providers have complied with practice parameters and protocols of treatment established in accordance with chapter 440. § 440.13(6), Fla. Stat. Mr. Sabolic explained that the “protocols of treatment” are the standards of care in section 440.13(15). These include criteria for “[r]easonable necessary medical care of injured employees.” § 440.13(15)(c), Fla. Stat. The carrier review of provider bills must culminate in a determination of whether the bill reflects overutilization of medical services, whether there are billing errors, and whether the bill reflects any violations of the practice parameters and protocols of treatment (standards of care). If a carrier finds any of these to be the case, the carrier is required by statute to disallow or adjust payment accordingly. The carrier is expressly authorized to make this determination “without order of a judge of compensation claims or the department,” if the carrier makes its determination in compliance with section 440.13 and Department rules. § 440.13(6), Fla. Stat. The Department’s rules require carriers to communicate to providers the carriers’ decisions under section 440.13(6) to pay or to deny, disallow, or adjust payment, with reasons for their decisions, in an “explanation of bill review” (EOBR).5/ If a carrier contests or disputes certain line items on a medical bill, the EOBR must identify the line items disputed and the reasons for the dispute, using EOBR codes and code descriptor. The EOBR code list, with 98 codes and descriptors, is set forth in Florida Administrative Code Rule 69L-7.740(13)(b). All but two of the codes describe reasons for disallowing or adjusting payment. EOBR Code 10 means payment denial of the entire bill, when the injury or illness is not compensable. EOBR Code 11 is used for partial denial of payment, where, although there is a compensable injury or illness, a diagnosis or procedure code for a particular line item service is determined by the carrier to be unrelated to the compensable condition. The EOBR coding rule provides that up to three codes can be assigned to each line item to “describe the basis for the claim administrator’s reimbursement decision in descending order of importance[.]” In addition, there is a “free-form” box in which additional notes of explanation may be given. The carrier’s determination to disallow or adjust payment of a health care provider’s bill, made pursuant to section 440.13(6), and explained to the health care provider by means of an EOBR, is the action that sets up a potential reimbursement dispute pursuant to section 440.13(7). “Any health care provider who elects to contest the disallowance or adjustment of payment by a carrier under subsection (6) must, within 45 days after receipt of notice of disallowance or adjustment of payment, petition the department to resolve the dispute.” § 440.13(7)(a), Fla. Stat. (emphasis added). The petition must be accompanied by “all documents and records that support the allegations in the petition.” Id. The carrier whose EOBR is disputed “must” then submit to the Department within 30 days of receipt of the petition all documentation substantiating the carrier’s disallowance or adjustment. § 440.13(7)(b), Fla. Stat. Section 440.13(7)(c) and (d) provide for the culmination of the reimbursement dispute process, as follows: Within 120 days after receipt of all documentation, the department must provide to the petitioner, the carrier, and the affected parties a written determination of whether the carrier properly adjusted or disallowed payment. The department must be guided by standards and policies set forth in this chapter, including all applicable reimbursement schedules, practice parameters, and protocols of treatment, in rendering its determination. If the department finds an improper disallowance or improper adjustment of payment by an insurer, the insurer shall reimburse the health care provider, facility, insurer, or employer within 30 days, subject to the penalties provided in this subsection. (emphasis added). Section 440.13(7)(e) provides that the Department “shall adopt rules to carry out this subsection,” i.e., the reimbursement dispute process. As noted, the Department did so in 2006, in promulgating chapter 69L-31. The rules were transferred from AHCA, which was the state agency vested with the statutory authority to determine reimbursement disputes between providers and carriers until the Department took over those functions in 2005.6/ Evolution of the Policies in the Challenged Proposed Rules Reimbursement Pursuant to a Provider-Carrier Contract or Managed Care Arrangement For approximately a decade, the Division accepted petitions to resolve reimbursement disputes when the reimbursement amount was determined by a contract between the provider and carrier. The Division resolved these disputes by issuing written determinations of whether the carrier properly adjusted or disallowed payment, and if the Division determined the carrier improperly adjusted or disallowed payment, the Division would specify the contract reimbursement amount that the carrier was required to pay within 30 days. That is because section 440.13(12) expressly recognizes that reimbursement to providers shall be either an amount set as the maximum reimbursement allowance (MRA) in fee schedules (or other amount set by a statutory formula), or the agreed-upon contract price.7/ Health care network reimbursement contracts typically do not (but may) include prices stated in dollar amounts. Instead, they frequently establish the price for reimbursement as a percentage of the MRA, or a percentage of allowable charges for services rendered. The Division’s reimbursement manuals in effect today, adopted as rules, recognize in a variety of contexts that the amount a provider is to be reimbursed is the contract amount, when there is a contract between the provider and carrier. The Workers’ Compensation Health Care Provider Reimbursement Manual currently in effect provides this introductory statement: Reimbursement will be made to a Florida health care provider after applying the appropriate reimbursement policies contained in this Manual. A carrier will reimburse a health care provider either the MRA in the appropriate reimbursement schedule or a mutually agreed upon contract price. (emphasis added). Florida Workers’ Compensation Health Care Provider Reimbursement Manual (2016 edition) at 15, adopted and incorporated by reference in rule 69L-7.020, effective July 1, 2017. The manual has dozens of references to reimbursing at the contract price, such as this example for reimbursement for multiple surgeries: Reimbursement for the primary surgical procedure will be the MRA listed in Chapter 3, Part B of this Manual or the agreed upon contract price. Reimbursement for additional surgical procedure(s) will be fifty percent (50%) of the listed MRA in Chapter 3, Part B of this Manual or the agreed upon contract price. * * * Note: If there is an agreed upon contract between the health care provider and the carrier, the contract establishes the reimbursement at a specified contract price. (emphasis added). Id. at 63. Similarly, the ASC reimbursement manual in effect has multiple references to reimbursement at the contract price or contract amount, such as this example for surgical services: For each billed CPT® code listed in Chapter 6 of this Manual, the ASC shall be reimbursed either: The MRA if listed in Chapter 6 of this Manual; or The agreed upon contract price. For each billed CPT® code not listed in Chapter 6 of this Manual, the ASC shall be reimbursed: Sixty percent (60%) of the ASC’s billed charge; or The agreed upon contract price. * * * Note: If there is an agreed upon contract between the ASC and the carrier, the contract establishes the reimbursement at the specified contract price. (emphasis added). Florida Workers’ Compensation Ambulatory Surgical Center Reimbursement Manual (2015 edition) at 17, incorporated by reference in rule 69L-7.020, effective January 1, 2016. See also ASC Manual App. A at 1 (surgical implant MRA is “50% above acquisition cost; amount certified or contract amount.”). The reimbursement manual for hospitals has similar references, including this directive for inpatient services: Except as otherwise provided in this Manual, charges for hospital inpatient services shall be reimbursed according to the Per Diem Fee Schedule provided in this Chapter or according to a mutually agreed upon contract reimbursement agreement between the hospital and the insurer. (emphasis added). Florida Workers’ Compensation Reimbursement Manual for Hospitals (2014 edition) at 15, adopted and incorporated by reference in rule 69L-7.501, effective January 1, 2015. In 2013, the Division submitted a legislative proposal for the Department to consider including in its proposed bill. The Division requested an amendment to section 440.13 to “[r]emove contracted reimbursement from [reimbursement dispute] resolution authority of [the] department.” Jt. Ex. 51 at 1. That proposal did not lead to a statutory change. An example of how the Division resolved reimbursement disputes involving contracts before its recent policy is shown in Exhibit FS1, a “Resolution of Reimbursement Dispute Determination.” According to the document, at issue was a reimbursement dispute regarding a bill for one service, for which the carrier issued an EOBR disallowing payment. The Division’s finding regarding reimbursement was that the contract at issue “provides for reimbursement at the lesser of 90% of billed charges or 90% of the fee schedule.” The Division calculated the contract price and determined that the “total correct reimbursement amount” per the contract was $2,334.60. The determination, issued June 30, 2015, was: The Department of Financial Services, Division of Workers’ Compensation has determined that the petitioner substantiated entitlement to additional reimbursement of disputed services based upon the documentation in evidence and in accordance with the provisions of the Florida Workers’ Compensation Reimbursement Manual [for ASCs], 2011 Edition, Chapter 3, page 26. The respondent shall remit the petitioner the amount of $2,334.60 and provide the Division proof of reimbursement to the petitioner within thirty (30) days of receipt of this notice[.] Ex. FS1 at 2. The evolution was a little different for reimbursement disputes involving workers’ compensation managed care arrangements. Rule 69L-31.015, adopted by the Department in 2006, provided as follows: A health care provider may not elect to contest under Section 440.13(7), F.S., disallowance or adjustment of payment by a carrier for services rendered pursuant to a managed care arrangement. Mr. Sabolic explained that while this rule was in effect, the Division would dismiss petitions that disclosed managed care arrangements. But the rule was repealed in response to a challenge to the rule’s validity. As Mr. Sabolic recalled it, the challenger was Parallon or an individual HCA-affiliated hospital. According to Mr. Sabolic, the Division agreed that it did not have the authority to simply dismiss petitions. The rule history note states that the rule repeal was effective May 22, 2014.8/ For the 15-month period from late May 2014 through late August 2015, the Division accepted reimbursement dispute petitions and resolved the reimbursement disputes, even though a workers’ compensation managed care arrangement was involved, just as it had been doing for years for reimbursement disputes involving contracts. On or about August 24, 2015, the Division changed its policy on issuing determinations when a contract (including a managed care arrangement) was alleged in the petition. In all determinations of reimbursement disputes issued after August 24, 2015, if a contract or managed care arrangement was alleged, the Division stopped making findings regarding the contracted-for reimbursement amount. Instead, the Division started reciting the fee schedule/MRA amount or applicable statutory formula amount, making no determination regarding whether the carrier properly adjusted or disallowed payment, or, if an improper adjustment or disallowance, how much the reimbursement should have been under the contract and how much the carrier was required to reimburse the provider within 30 days. The Division changed the name of the form it used from “Resolution of Reimbursement Dispute Determination” to just “Reimbursement Dispute Determination,” signaling that the Division would no longer be resolving reimbursement disputes involving contracts. Instead, the following language appeared in each such determination: The amount listed above does not apply to any contractual arrangement. If a contractual arrangement exists between the parties, reimbursement should be made pursuant to such contractual arrangement. Exhibit FS3 is an example showing a Division “determination” applying its new policy to a reimbursement dispute petition filed by an ASC member of FSASC. Part IV of the form, “Reimbursement Dispute Policies and Guidelines,” reflects (as did prior determinations) that the reimbursement manual for ASCs, adopted by rule, “sets the policies and reimbursement amounts for medical bills.” As previously noted, the reimbursement manuals set reimbursement amounts at either the MRA/statutory formula or the agreed-upon contract price, consistent with the policy in section 440.13(12)(a). Nonetheless, the Division added a note to the end of part IV: NOTE: This reimbursement determination is limited in scope to standards and policies set forth in chapter 440, Florida Statutes, including all applicable reimbursement schedules, practice parameters, and protocols of treatment. It does not interpret, apply or otherwise take into account any contractual arrangement between the parties governing reimbursement for services provided by health care providers, including any workers’ compensation managed care arrangement under section 440.134, Florida Statutes. Ex. FS3 at 2. Accordingly, even though the determination form reflects that the ASC petitioner met its filing requirements for a reimbursement dispute over a bill for services in the amount of $5,188.00, none of which was paid according to the EOBR, and even though the carrier failed to file a response to the petition, the Division did not make a determination that the carrier improperly disallowed payment or that the petitioner had substantiated entitlement to additional reimbursement in the amount of the agreed-upon contract price, as it had in previous determinations. Instead, the Division set forth the “correct reimbursement” amount that would apply if the MRA applied, while noting that amount would not apply if there was a contractual arrangement providing a different amount. The carrier was not ordered to remit any amount within 30 days. Reimbursement Disputes Involving Issues of Compensability or Medical Necessity Prior to November 2015, the Division resolved reimbursement disputes by determining the issues as framed by the carrier’s actions under section 440.13(6), to disallow or adjust payment of a bill or specific line items in a bill for reasons (codes) in the EOBR, which were contested by the provider in a timely-filed petition under section 440.13(7)(a). The EOBR code list contains one code (code 10) for denial of payment of an entire claim based on non-compensability of an injury or illness. One other code (code 11) is for partial denial of payment, where there is a compensable injury, but a specific line item indicates treatment unrelated to the compensable injury. Five additional codes (codes 21 through 26) apply to disallowed payments for various medical necessity reasons. Fla. Admin. Code R. 69L-7.740(13)(b). Prior to November 2015, the Division resolved reimbursement disputes when the provider timely petitioned to contest the disallowance or adjustment of payment by a carrier, as set forth in the EOBR, including when the EOBR cited compensability and/or medical necessity code(s) as the reason(s) for disallowing or adjusting payment of a provider’s bill. On or about November 2, 2015, the Division changed its policy and no longer addressed in its reimbursement dispute determinations whether a carrier properly or improperly disallowed or adjusted payment for reasons of medical necessity or compensability. Exhibit AH6 is an example of a Division written determination that makes no determination of whether a carrier properly or improperly disallowed payment of a line item based on a medical necessity issue (EOBR Code 24). Instead, the “determination” included this note: Note: The Department will not address any disallowance or adjustment of payment where the basis for the disallowance or adjustment or payment by the carrier involves denial of compensability of the claim or assertion that the specific services provided are not medically necessary. Ex. AH6 at 2. This note has been included in all determinations issued after November 2015, where payment was disallowed or adjusted based on medical necessity or compensability. Rulemaking Process The Division began rule development to incorporate its policy changes in amendments to chapter 69L-31. A Notice of Development of Proposed Rules was published on December 16, 2015. The notice set forth the preliminary text of proposed amendments, including new proposed rule 69L-31.016, entitled “Reimbursement Disputes Involving a Contract or Workers’ Compensation Managed Care Arrangement.” The notice stated that the purpose and effect of proposed rule 69L-31.016 was “to limit the scope of dispute resolutions to compliance with standards under Chapter 440, F.S. and exclude issues of contract interpretation.” The exclusion of disallowed or adjusted payments based on issues of compensability and medical necessity, not mentioned in the statement of purpose and effect, was initially put in rule 69L-31.005, in a paragraph stating that the Department will only address specific EOBR line items where the carrier adjusted or disallowed payment and are disputed by the provider, but then stating that the Department will not address specific EOBR adjustment or disallowance items involving compensability or medical necessity, even if disputed. A rule development workshop was held on January 12, 2016. The Department published a second Notice of Development of Proposed Rules, revising the proposed changes to chapter 69L-31, including both the contract/managed care exclusion and the compensability/medical necessity exclusion. On June 10, 2016, the Division held a second rule development workshop addressing the proposed rule revisions. On December 7, 2016, the Division published a Notice of Proposed Rules, formally initiating rulemaking to revise chapter 69L-31. The notice set forth a revised proposed rule 69L-31.016. Its new title was “Reimbursement Disputes Involving a Contract or Workers’ Compensation Managed Care Arrangement or Involving Compensability or Medical Necessity,” joining in one rule all of the new exceptions, for which the Division would not be making determinations of whether carriers properly or improperly adjusted or disallowed payments. As proposed, the rule provided: When either the health care provider or carrier asserts that a contract between them establishes the amount of reimbursement to the health care provider, or where the carrier provided health care services to the injured worker through a workers’ compensation managed care arrangement pursuant to Section 440.134, F.S., the Department will not issue a finding that there has been any improper disallowance or adjustment. Instead, the determination will only indicate the reimbursement amount for the treatment established by the appropriate reimbursement schedules, practice parameters, and protocols of treatment under Chapter 440, F.S., to assist the health care provider and carrier in their independent application of the provisions of the contract or workers’ compensation managed care arrangement to resolve the dispute. When the carrier asserts the treatment is not compensable or medically necessary and as a result does not reimburse, the Department will not issue a finding that there has been any improper disallowance or adjustment. Instead, the determination will only indicate the reimbursement amount for the treatment established by the appropriate reimbursement schedules, practice parameters, and protocols of treatment under Chapter 440, F.S., should compensability or medical necessity be later established. The stated purpose of proposed rule 69L-31.016 was to specify “that the scope of Department determinations involving reimbursement disputes is limited to findings relating to reimbursement schedules, practice parameters, and protocols of treatment, and [to clarify] that the Department will issue no findings regarding an improper disallowance or adjustment in reimbursement involving managed care contracts or when the carrier asserts that medical treatment was either not compensable or not medically necessary[.]” Jt. Ex. 3. As published in December 2016, proposed rule 69L- 31.016 cited sections 440.13(7)(e) and 440.591 as the “rulemaking authority,” and sections 440.13(7) and (12)(a) and 440.134(15) as the “laws implemented.” The Division’s notice stated that, based on its determinations as to adverse impact and regulatory costs: “A SERC has not been prepared by the Agency.” Jt. Ex. 3. By letter dated December 28, 2016, Parallon proposed a LCRA to the proposed rule 69L-31.016(1) (and to other proposed rules not at issue in this proceeding). The LCRA explained that Parallon was already experiencing increased costs because of the Division’s unadopted policy, and Parallon proposed that the most appropriate lower cost alternative to accomplish the statutory objectives was not to adopt proposed rule 69L-31.016(1). On January 5, 2017, the Division held a public hearing on the proposed rules. Petitioners (through counsel) offered comments in opposition to the proposed rules. Parallon’s counsel also submitted the LCRA letter into the record. On May 2, 2017, the Division published a Notice of Correction. The notice stated that, contrary to the statement in the Notice of Proposed Rules, SERCs had been prepared for the proposed rules, and that the SERC for proposed rule 69L-31.016 now had been revised to address the LCRA. The impression given by the various documents identified as a SERC or revised SERC, half of which are entitled “Department of Financial Services Analysis to Determine if a [SERC] is Required,” all of which are similar or identical in content, and none of which bear a date, is that, prior to the LCRA, Respondent did not prepare a SERC for proposed rule 69L- 31.016; it prepared a document by which it determined that no SERC was required. After the LCRA was filed, Respondent added a reference to the LCRA, but otherwise did not change the content of its non-SERC. In the Notice of Correction, the Division stated: “The [SERC] for each of the above-referenced proposed rules is available by accessing the Department’s website at http://www.myfloridacfo.com/Division/WC/noticesRules.htm.” The document titled “Department of Financial Services Analysis to Determine if Statement of Estimated Regulatory Costs Is Required,” referred to by the Division as the SERC, was not available on the DFS website on May 2, 2017, as the Notice of Correction indicated. Instead, it was available at the referenced website location on or after May 3, 2017. Upon request by counsel for Parallon on May 3, 2017, the document referred to as a SERC was also provided to Parallon. Mr. Sabolic testified that the document referred to as the SERC was actually available at the Division on May 2, 2017, and would have been made available to someone if it was requested on that day. However, the noticed means by which the document would be “made available” was at a specific website location that was not functional until May 3, 2017. The so-called SERC document for proposed rule 69L- 31.016 suffers from several obvious deficiencies. As to the Division’s “economic analysis,” the document states: “N/A.” That is because the Division did no economic analysis.9/ In response to two separate prompts, for the Division to set forth a “good faith estimate of the number of individuals and entities likely to be required to comply with the rule,” and separately, to give a “general description of the types of individuals likely to be affected by the rule,” the Division gave the identical response: “This Rule changes how the Medical Services Section review Petitions for Resolution of Reimbursement Disputes. Only the Medical Services Section will be required to comply.” In addition, the document indicates (with no explanation or analysis) that there will be no transactional costs to persons required to comply with the new rule, and no adverse impact at all on small businesses. In contrast to the so-called SERC document indicating that only the medical services section will be required to comply with, or be impacted by, the proposed rule, in the Division’s 2013 legislative proposal seeking to remove its statutory authority to determine reimbursement disputes involving contracts, the Division was able to identify persons who would be affected by the proposal, acknowledging as follows: “Workers’ compensation carriers, including self- insurers (DFS Div. of Risk Mgmt), third party administrators, and health care providers, including facilities, are affected.” And, of course, the Division was well aware by May 2017 of the variety of providers and carriers expressing their interests and concerns during the rule development that had been ongoing for 17 months by then. To say that the Division gave the SERC task short shrift would be generous. The Division did not take this task seriously. The so-called SERC document also identified the Parallon LCRA. In response to the requirement to describe the LCRA and provide either a statement adopting it or a statement “of the reasons for rejecting the alternative in favor of the proposed rule,” the Division stated: Parallon’s lower cost regulatory alternative consisted of a cost-based argument against the adoption of the proposed rule on the basis that the existing rule provides a lower cost alternative. The Division rejected the regulatory alternative and intends to move forward with adoption on the proposed rule, but will revise the proposed rule to read as follows[.] Jt. Ex. 12, at bates-stamp p. 48. The reference to a revision to the proposed rule does not belong in the statement of reasons for rejecting the LCRA. Its placement there was misleading, as if the revision to the proposed rule helped to explain why the Division rejected the LCRA. But no revision was made to the rule to which the LCRA was directed--proposed rule 69L-31.016(1). The revision was to proposed rule 69L- 31.016(2), not addressed by the LCRA. At hearing, Mr. Sabolic attempted to provide the statement of reasons for rejecting the LCRA, missing in the so- called SERC document. He said that the cost-based argument was considered speculative and lacked data (but that explanation was not in the so-called SERC document). Although he thought that the SERC document stated that the LCRA was rejected because it was based on a “faulty” cost-based argument, the word “faulty” was not in the SERC. On its face, the SERC offers no reason why the “cost-based argument” was rejected— just that it was rejected. The amendment to proposed rule 69L-31.016(2) mentioned in the SERC document was also published on May 2, 2017, in a Notice of Change. The change was shown as follows: When the carrier asserts the treatment is not compensable or medically necessary and as a result does not reimburse, the Department will not issue a finding that there has been any improper disallowance or adjustment. Instead, the determination will only address line items not related to indicate the reimbursement amount for the treatment established by the appropriate reimbursement schedules, practice parameters, and protocols of treatment under Chapter 440, F.S., should compensability or medical necessity be later established. If the petitioner has submitted documentation demonstrating the carrier authorized the treatment, the Department will issue a finding of improper disallowance or adjustment. The Notice of Change did not change either of the other challenged provisions—proposed rule 69L-31.016(1) and the proposed deletion of rule 69L-31.005(2)(d). The Notice of Change deleted the prior citation to section 440.13(12)(a) as one of the laws implemented by proposed rule 69L-31.016, leaving only sections 440.13(7) and 440.134(15) as the laws implemented. Division’s Justifications for the Challenged Proposed Rules Mr. Sabolic was Respondent’s hearing representative and sole witness to explain and support the challenged rules. Mr. Sabolic testified that when a contract dictates the reimbursement amount, the Division does not believe it has statutory authority to interpret or enforce contract terms. Yet he acknowledged that the Division’s reimbursement determinations were required to be based on policies set forth in chapter 440, and that the Division was required to apply its reimbursement manuals that are promulgated as rules. Both chapter 440 and the reimbursement manuals expressly require reimbursement at the agreed-upon contract price, as detailed above. The Division recognized this for a decade, during which it applied chapter 440 and its reimbursement manuals to determine the agreed-upon contract price, resolve reimbursement disputes, and order carriers to pay the amount required by their contracts. The Division’s rationale stands in stark contrast to the Division’s 2013 request for a legislative amendment to remove its statutory authority to determine reimbursement disputes when reimbursement is dictated by contracts. The Division’s request constitutes an admission that it believes it has the statutory authority it now says it lacks. Apart from statutory authority, Mr. Sabolic indicated that in the decade during which the Division did resolve reimbursement disputes involving contracts, it was sometimes difficult to determine whether there was a contract in effect between the parties. There was a variety of contracts, and sometimes they were complex. With regard to managed care arrangements, Mr. Sabolic said that, similar to contracts, the Division does not think it has the power to interpret or enforce managed care arrangements, because that power lies within AHCA under section 440.134. He said that section 440.134(15) was cited as a law implemented by proposed rule 69L-31.016 because the statute addresses grievance or complaint procedures under a managed care arrangement. Intervenors Summit Companies attempted to prove that providers are required to resolve reimbursement disputes involving workers’ compensation managed care arrangements by using the grievance process described in section 440.134(15). The evidence failed to support that contention. The evidence showed that the grievance form used by the Summit Companies’ managed care arrangement, approved by AHCA, describes the grievance process as encompassing “dissatisfaction with medical care issues provided by or on behalf of a workers’ compensation managed care arrangement.” Tr. 323. As confirmed by the definitions of “complaint” and “grievance” in the workers’ compensation managed care law, the grievance process is used to resolve an injured worker’s dissatisfaction with an insurer’s managed care arrangement, including a refusal to provide medical care or the care provided. See § 440.134(1)(b) and (d), Fla. Stat. Although under AHCA’s rules and the Summit Companies’ form, providers may initiate the grievance process, they would be doing so essentially on behalf of the injured worker or in tandem with the injured worker to resolve the injured worker’s dissatisfaction with medical care issues. When the issue is the insurer’s refusal to provide medical care, the grievance process is an administrative remedy for the injured worker that has to be exhausted before an injured worker can file a petition for benefits pursuant to section 440.192. Not surprisingly, providers have not attempted to file grievances to raise reimbursement disputes with insurers, as nothing in section 440.134(15), the rules, or the Summit Companies’ approved form contemplate use of the process for that purpose, much less mandate it. Strangely, Mr. Sabolic attempted to justify the proposed rule’s carve-outs from the reimbursement dispute process by reference to section 440.13(11)(c), which gives the Department “exclusive jurisdiction to decide any matters concerning reimbursement[.]” As he put it: I think that the statute indicates we can decide any matter relating to reimbursement under 440.13(11)(c), and that’s how we’re deciding to deal with those situations when a managed care arrangement or a contract is involved. That’s our decision. Our decision is that that determination’s going to reflect the amount that is in the applicable reimbursement manual for that service date. Tr. 232. It must be noted that section 440.13(11)(c) was not cited as one of the laws implemented by the proposed rules, even if the premise could be accepted that a grant of exclusive jurisdiction to decide any matter concerning reimbursement includes authority to decide never to decide certain matters concerning reimbursement. Mr. Sabolic admitted that under proposed rule 69L-31.016(1), the Division does not and will not issue a written determination of whether the carrier properly adjusted or disallowed payment when a contract or managed care arrangement is involved. Mr. Sabolic testified that the proposed deletion of rule 69L-31.005(2)(d) (requiring a copy of the contract or managed care arrangement addressing reimbursement) is tied to proposed rule 69L-31.016(1) that gets the Division out of the business of looking at contracts. The Division will not require any proof that a contract or managed care arrangement governs reimbursement so as to trigger the no-decision decision. Instead, if either a provider indicates in its petition or a carrier indicates in its response that reimbursement is pursuant to a contract or managed care arrangement, that ends the inquiry, and the Division will not determine whether the carrier properly adjusted or disallowed payment. Mr. Sabolic said that he was not concerned with the potential for abuse, because in the decade when the Division was in the business of interpreting and applying reimbursement provisions in contracts, it was very rare that the parties disagreed on whether a contract was in effect between them that governed reimbursement. Mr. Sabolic offered no justification for carving out from reimbursement disputes carrier adjustments or disallowances of payment based on compensability or medical necessity issues. He just reported the Division’s decision that if a carrier disallows or adjusts payment for line items on bills and cites reasons (EOBR codes) involving compensability or medical necessity, “we will indicate that we’re not going to issue a determination on those line items and [we will] only issue a determination on those line items which don’t reflect the carrier’s disallowance related to compensability or medical necessity.” But if the petitioner gives “proof that the carrier authorized treatment,” the Division “will proceed with rendering a determination related to those line items.” Tr. 197. The Division’s determinations under proposed rules 69L-31.016(1) (when a contract or managed care arrangement is alleged) and 69L-31.016(2) (when payment is disallowed or adjusted for compensability or medical necessity reasons) are characterized by the Division as “neutral determinations” in which there is no winner and no loser. A more fitting characterization is “non-determination.”
