The Issue The issues are whether proposed and existing Florida Administrative Code rules, both numbered 59G-6.030, are valid exercises of delegated legislative authority.
Findings Of Fact The Petitioners are 120 hospitals--some not-for-profit, some for-profit, and some governmental--that are licensed under chapter 395, Florida Statutes, provide both inpatient and outpatient services, and participate in the Medicaid program. AHCA is the state agency authorized to make payments for services rendered to Medicaid patients. Before 2013, all Medicaid outpatient services were provided and paid fee-for-service. Under the fee-for-service model, hospitals submit claims to AHCA, and AHCA reimburses the hospitals based on the established rate. For many years, AHCA has set prospective Medicaid fee- for-service reimbursement rates for outpatient hospital services, either semi-annually or annually, based on the most recent complete and accurate cost reports submitted by each hospital; has re-published the Florida Title XIX Hospital Outpatient Reimbursement Plan (Outpatient Plan) that explained how the rates were determined; and has adopted the current Outpatient Plan by reference in rule 59G-6.030. In 2005, the Florida Legislature’s General Appropriations Act (GAA) stated that the funds appropriated for Medicaid outpatient hospital services reflected a cost savings of $16,796,807 “as a result of modifying the reimbursement methodology for outpatient hospital rates.” It instructed AHCA to “implement a recurring methodology in the Title XIX Outpatient Hospital Reimbursement Plan that may include, but is not limited to, the inflation factor, variable cost target, county rate ceiling or county ceiling target rate to achieve the cost savings.” AHCA responded by amending the Outpatient Plan to provide: “Effective July 1, 2005, a recurring rate reduction shall be established until an aggregate total estimated savings of $16,796,807 is achieved each year. This reduction is the Medicaid Trend Adjustment.” The amended Outpatient Plan was then adopted by reference in rule 59G-6.030, effective July 1, 2005. AHCA collaborated with the hospitals to determine how to accomplish the legislatively mandated reduction in a manner that would be fair to all the hospitals. It was decided to take the hospitals’ unaudited cost reports from the most recent complete fiscal year and the number of Medicaid occasions of service from the monthly report of AHCA’s Medicaid fiscal agent that corresponded to the hospitals’ fiscal years, and use an Excel spreadsheet program with a function called Goal Seek to calculate proportionate rate adjustments for each hospital to achieve the legislatively mandated aggregate savings. The resulting rate adjustments were incorporated in the hospital reimbursement rates, effective July 1, 2005. In 2006, there was no further Medicaid Trend Adjustment (MTA) reduction. However, in accordance with the instructions in the 2005 GAA, the 2005 MTA reduction of $16,796,807 was treated as a recurring reduction and was applied again in the 2006 Outpatient Plan, which again stated: “Effective July 1, 2005, a recurring rate reduction shall be established until an aggregate total estimated savings of $16,796,807 is achieved each year. This reduction is the Medicaid Trend Adjustment.” The 2006 Outpatient Plan also stated: “This recurring reduction, called the Medicaid Trend Adjustment, shall be applied proportionally to all rates on an annual basis.” It also came to be known as the first cut or cut 1. It again was applied by taking the hospitals’ most current unaudited cost reports and the corresponding occasions of service from the appropriate monthly report of the fiscal agent, and using the Excel spreadsheets and the Goal Seek function to calculate rate adjustments for each hospital. The cut 1 rate adjustments were incorporated in the hospital reimbursement rates, effective July 1, 2006. In 2007, the GAA stated that the funds appropriated for Medicaid outpatient hospital services were reduced by $17,211,796 “as a result of modifying the reimbursement for outpatient hospital rates, effective July 1, 2008.” This has been referred to as the second cut or cut 2. It instructed AHCA to “implement a recurring methodology in the Title XIX Outpatient Hospital Reimbursement Plan to achieve this reduction.” The 2008 Outpatient Plan again applied the first cut as a recurring reduction and stated that it was to be “applied proportionally to all rates on an annual basis.” It then made the second cut, which was to be “applied to achieve a recurring annual reduction of $17,211,796.” These cuts were again applied by taking the hospitals’ most current unaudited cost reports and the corresponding occasions of service from the appropriate monthly report of the fiscal agent, and using the Excel spreadsheets and the Goal Seek function to calculate rate adjustments for each hospital. The resulting rate adjustments were incorporated in the hospital reimbursement rates, effective July 1, 2008. This process was repeated in subsequent years. The third cut (cut 3) was in 2008; it was a $36,403,451 reduction. The fourth cut (cut 4) was in 2009, during a special session; it was a $19,384,437 reduction; however, per the GAA that made the fourth cut, it was not applied to the rates of certain children’s specialty hospitals, which were excluded from the reduction. In addition, using language similar to what AHCA had been using in the Outpatient Plans, the 2009 GAA stated: “The agency shall reduce individual hospital rates proportionately until the required savings are achieved.” The Legislature enacted cut 5 and cut 6 in 2009 and 2010. However, the GAAs stated that AHCA should not take these cuts if the unit costs before the cuts were equal to or less than the unit costs used in establishing the budget. AHCA determined that cuts 5 and 6 should not be taken. However, cuts 1 through 4 continued to be applied as recurring reductions, and rates were adjusted for cuts 1 through 4 in 2009 and 2010 in the same manner as before. In 2011, the GAA enacted cut 7; it was for $99,045,233 and was added to the previous cuts for all but certain children’s specialty and rural hospitals, which were excluded from the additional reduction. In setting the individual hospitals’ reimbursement rates, AHCA first applied cut 7 in the same manner as cuts 1 through 4. The result was a 16.5 percent rate adjustment for cut 7, which was much higher than for previous cuts. Some of the hospitals pointed this out to AHCA and to the Legislature and its staff. There was lots of discussion, and it was determined that the rate adjustment from cut 7 would be more like what the Legislature was expecting (about 12 percent), if budgeted occasions of service were used, instead of the number from the fiscal agent’s monthly report that corresponded to the most recent cost reports. AHCA agreed to change to budgeted fee-for- service occasions of service for cut 7, with the concurrence of the hospitals and the Legislature and its staff. The year 2011 was also the year the Legislature instituted what became known as the “unit cost cap.” In that year, the Legislature amended section 409.908, Florida Statutes, to provide: “The agency shall establish rates at a level that ensures no increase in statewide expenditures resulting from a change in unit costs effective July 1, 2011. Reimbursement rates shall be as provided in the General Appropriations Act.” § 409.908(23)(a), Fla. Stat. (2011). This part of the statute has not changed. The GAA that year elaborated: In establishing rates through the normal process, prior to including this reduction [cut 7], if the unit cost is equal to or less than the unit cost used in establishing the budget, then no additional reduction in rates is necessary. In establishing rates through the normal process, if the unit cost is greater than the unit cost used in establishing the budget, then rates shall be reduced by an amount required to achieve this reduction, but shall not be reduced below the unit cost used in establishing the budget. “Unit cost” was not defined by statute or GAA. To calculate what it was in 2011, AHCA divided the total dollar amount of Medicaid payments made to hospitals by AHCA by the number of Medicaid occasions of service for all hospitals. The result was $141.51. Since 2011, AHCA has applied the unit cost cap with reference to the 2011 unit cost of $141.51. Since then, AHCA has compared the 2011 unit cost to the current cost, calculated by dividing the total dollar amount of Medicaid payments made to all hospitals by AHCA by the number of Medicaid occasions of service for all hospitals, except in children’s and rural hospitals, to determine whether the unit cost cap would require a further rate reduction, after applying the MTA cuts. Using this comparison, the unit cost cap never has been exceeded, and no further rate adjustments ever have been required. It is not clear why AHCA excluded Medicaid occasions of service for children’s and rural hospitals from the unit cost calculations made after 2011. It could have been because those hospitals were excluded from cut 7 and cut 8. Cut 8 was enacted in 2012; it was for $49,078,485 and was added to the previous cuts for all but certain children’s specialty and rural hospitals, which were excluded from the additional reduction. In 2012, the Legislature specified in the GAA that budgeted occasions of service should be used in calculating the MTA reduction for inpatient hospitals. AHCA always treated inpatient and outpatient MTAs the same, and it viewed the specific legislative direction for the inpatient MTA as guidance and indicative of legislative intent that it should continue to use budgeted occasions of service for the outpatient cut 7 and should also use them for the outpatient cut 8. Again, the hospitals did not object since the result was a higher reimbursement rate. In 2014, the Florida Medicaid program began to transition Medicaid recipients from a fee-for-service model to a managed care model. Under the managed care model, AHCA pays a managed care organization (MCO) a capitation rate per patient. The MCOs negotiate contracts with hospitals to provide outpatient care at an agreed reimbursement rate per occasion of service. Since August 2014, the majority of Medicaid recipients has been receiving services through MCOs, rather than through fee-for-service. Currently, about 75 to 80 percent of Medicaid outpatient hospital occasions of service are provided through managed care In recognition of the shift to MCOs, the Legislature began to divide the Medicaid outpatient hospital reimbursement appropriation in the GAA between what AHCA reimburses directly to hospitals under the fee-for-service model and what it pays MCOs to provide those services under the MCO delivery system. This allocation of the budgets between fee-for-service and managed care necessarily accomplished a corresponding division of the recurring MTA reductions between the two delivery systems. The Legislature did not enact any statutes or GAAs requiring AHCA to change how it applies MTA reductions to determine fee-for-service outpatient reimbursement rate adjustments, or make any other changes in response to the transition to MCOs. There were no additional MTA reductions in 2015. The 2015 Outpatient Plan, which is incorporated in existing rule 59G- 6.030, applied the previous cuts as recurring reductions. The evidence was confusing as to whether cuts 7 and 8 were applied using the occasions of service in the fiscal agent’s monthly report corresponding to the hospitals’ most current unaudited cost reports, or using budgeted occasions of service. If the former, the numbers did not yet reflect much of the shift to the managed care model because of a time lag in producing cost reports, and the evidence suggested that the numbers were approximately the same as the budgeted occasions of service used previously. Whichever numbers were used, the resulting rate adjustments were incorporated in the hospitals’ reimbursement rates, effective July 1, 2015. Leading up to the 2016 legislative session, there was a legislative proposal to determine prospective Medicaid outpatient reimbursement rates using a completely new method called Enhanced Ambulatory Patient Groups (EAPGs). EAPGs would eliminate the need to depend on hospital cost reports and complicated calculations to determine the effects of MTA reductions on prospective hospital outpatient reimbursement rates, effective July 1, following the end of the legislative session each year. Hospitals, including some if not all of the Petitioners, asked the Legislature not to proceed with the proposed EAPG legislation until they had an opportunity to study it and provide input, and EAPGs were not enacted in 2016. However, section 409.905(6)(b) was amended, effective July 1, 2017, to require the switch to EAPGs. See note to § 409.905, Fla. Stat.; and ch. 2016-65, § 9, Laws of Fla. (2016). When it became apparent that EAPGs would not be in use for prospective reimbursement rates for fiscal year 2016/2017, AHCA basically repeated the 2015/2016 process, but adjusted the occasions of service used for calculating the hospitals’ rate reductions for cuts 7 and 8 by adding 14,000 occasions of service. At the end of July, AHCA published new rates effective July 1, 2016. When the new rates were published, they were challenged by some of the Petitioners under section 120.57(1), Florida Statutes. Citing section 409.908(1)(f)1., AHCA took the position that there was no jurisdiction and dismissed the petitions. That decision is on appeal to the First District Court of Appeal. The Petitioners also challenged the methodology used to calculate the new prospective reimbursement rates as a rule that was not adopted as required, and challenged the validity of existing rule 59G-6.030, which incorporated the 2015 Outpatient Plan by reference. These challenges became DOAH cases 16-6398RX through 16-6414RX. In response to DOAH cases 16-6398RX through 16-6414RX, AHCA adopted the 2016 Outpatient Plan by reference in proposed rule 59G-6.030. The 2016 Outpatient Plan provides more detail than the 2015 version. AHCA’s position is that the additional detail was provided to clarify the 2015 version. However, it changed the occasions of service used for calculating the hospitals’ rate reductions for cuts 7 and 8, as indicated in Finding 22, as well as some other substantive changes. The 2015 Outpatient Plan addressed the unit cost cap by stating: “Effective July 1, 2011, AHCA shall establish rates at a level that ensures no increase in statewide expenditures resulting from a change in unit costs.” The 2016 Outpatient Plan elaborates and specifies the calculation AHCA has been using, as stated in Finding 14. The 2015 Outpatient Plan provided that an individual hospital’s prospective reimbursement rate may be adjusted under certain circumstances, such as when AHCA makes an error in the calculation of the hospital’s unaudited rate. It also stated: “Any rate adjustment or denial of a rate adjustment by AHCA may be appealed by the provider in accordance with Rule 28-106, F.A.C., and section 120.57(1), F.S.” The 2016 Outpatient Plan deleted the appeal rights language from the existing rule. The effect of the existing and proposed rules on the Petitioners through their effect on managed care contract rates is debatable. Those rates do not have to be the same as the fee- for-service outpatient reimbursement rates, although they are influenced by the fee-for-service rates, and it is not uncommon for them to be stated as a percentage of the fee-for-service rates. By law, managed care contract rates cannot exceed 120 percent of the fee-for-service rates unless the MCO gets permission from AHCA, as provided in section 409.975(6). Currently, rates paid by MCOs for Medicaid hospital outpatient services average about 105 percent of the fee-for-service reimbursement rates. AHCA has indicated that it would not expect or like to see the contract rates much higher than that. It is not clear whether that still is AHCA’s position. If higher rates were negotiated, the impact of fee-for-services rate adjustments on managed care rates could be reduced or even eliminated. The effect of the existing and proposed rules on the Petitioners through their effect on how fee-for-service reimbursement rates are calculated is not disputed. With the transition to managed care, the effect is greater and clearly substantial. The recurring MTA reductions enacted by the Legislature through 2014, which total $224,015,229 (after taking into account $10,656,238 that was reinstated, and $4,068,064 that was added in consideration of trauma centers), are being spread over fewer fee-for-service occasions of service, especially for cuts 7 and 8, which significantly lowers the fee-for-service outpatient reimbursement rates calculated under the proposed rule. The Petitioners’ objections to the validity of the proposed and existing rules can be summarized as follows: a lack of legislative authority for recurring (i.e., cumulative) MTA reductions; a failure to adopt a fixed methodology to calculate individual hospital outpatient reimbursement rate adjustments resulting from MTA reductions; specifically, a failure to derive the number of fee-for-service occasions of service used in calculating individual hospital outpatient reimbursement rate adjustments in the same manner every year; conversely, a failure to increase the occasions of service used to calculate individual hospital outpatient reimbursement rate adjustments resulting from cuts 1 through 4; a failure of the unit cost cap in the existing rule to specify how it is applied; a failure of the unit cost cap in the proposed rule to compare the 2011 unit cost to the current cost, calculated by dividing the total dollar amount of Medicaid payments made to all hospitals by AHCA by the number of Medicaid occasions of service for all hospitals, including in children’s and rural hospitals; and proposed rule’s deletion of the language in the existing rule stating that a rate adjustment or denial can be appealed in accordance with Florida Administrative Code Rule 28-106 and section 120.57.
The Issue The issues in this case are whether Respondent applied the proper reimbursement principles to Petitioners' initial Medicaid rate setting, and whether elements of detrimental reliance exist so as to require Respondent to establish a particular initial rate for Petitioners' facilities.
Findings Of Fact There are nine Petitioners in this case. Each of them is a long-term health care facility (nursing home) operated under independent and separate legal entities, but, generally, under the umbrella of a single owner, Tzvi "Steve" Bogomilsky. The issues in this case are essentially the same for all nine Petitioners, but the specific monetary impact on each Petitioner may differ. For purposes of addressing the issues at final hearing, only one of the Petitioners, Madison Pointe Rehabilitation and Health Center (Madison Pointe), was discussed, but the pertinent facts are relevant to each of the other Petitioners as well. Each of the Petitioners has standing in this case. The Amended Petition for Formal Administrative Hearing filed by each Petitioner was timely and satisfied minimum requirements. In September 2008, Bogomilsky caused to be filed with AHCA a Change of Licensed Operator ("CHOP") application for Madison Pointe.1 The purpose of that application was to allow a new entity owned by Bogomilsky to become the authorized licensee of that facility. Part and parcel of the CHOP application was a Form 1332, PFA. The PFA sets forth projected revenues, expenses, costs and charges anticipated for the facility in its first year of operation by the new operator. The PFA also contained projected (or budgeted) balance sheets and a projected Medicaid cost report for the facility. AHCA is the state agency responsible for licensing nursing homes in this state. AHCA also is responsible for managing the federal Medicaid program within this state. Further, AHCA monitors nursing homes within the state for compliance with state and federal regulations, both operating and financial in nature. The AHCA Division of Health Quality Assurance, Bureau of Long-Term Care Services, Long-Term Care Unit ("Long-Term Care Unit") is responsible for reviewing and approving CHOP applications and issuance of an operating license to the new licensee. The AHCA Division of Health Quality Assurance, Bureau of Health Facility Regulation, Financial Analysis Unit ("Financial Analysis Unit") is responsible for reviewing the PFA contained in the CHOP application and determining an applicant's financial ability to operate a facility in accordance with the applicable statutes and rules. Neither the Long-Term Care Unit nor the Financial Analysis Unit is a part of the Florida Medicaid Program. Madison Pointe also chose to submit a Medicaid provider application to the Medicaid program fiscal agent to enroll as a Medicaid provider and to be eligible for Medicaid reimbursement. (Participation by nursing homes in the Medicaid program is voluntary.) The Medicaid provider application was reviewed by the Medicaid Program Analysis Office (MPA) which, pursuant to its normal practices, reviewed the application and set an interim per diem rate for reimbursement. Interim rate-setting is dependent upon legislative direction provided in the General Appropriations Act and also in the Title XIX Long-Term Care Reimbursement Plan (the Plan). The Plan is created by the federal Centers for Medicare and Medicaid Services (CMS). CMS (formerly known as the Health Care Financing Administration) is a federal agency within the Department of Health and Human Services. CMS is responsible for administering the Medicare and Medicaid programs, utilizing state agencies for assistance when appropriate. In its PFA filed with the Financial Analysis Unit, Madison Pointe proposed an interim Medicaid rate of $203.50 per patient day (ppd) as part of its budgeted revenues. The projected interim rate was based on Madison Pointe's expected occupancy rate, projected expenses, and allowable costs. The projected rate was higher than the previous owner's actual rate in large part based on Madison Pointe's anticipation of pending legislative action concerning Medicaid reimbursement issues. That is, Madison Pointe projected higher spending and allowable costs based on expected increases proposed in the upcoming legislative session. Legislative Changes to the Medicaid Reimbursement System During the 2007 Florida Legislative Session, the Legislature addressed the status of Medicaid reimbursement for long-term care facilities. During that session, the Legislature enacted the 2007 Appropriations Act, Chapter 2007-72, Laws of Florida. The industry proposed, and the Legislature seemed to accept, that it was necessary to rebase nursing homes in the Medicaid program. Rebasing is a method employed by the Agency periodically to calibrate the target rate system and adjust Medicaid rates (pursuant to the amount of funds allowed by the Legislature) to reflect more realistic allowable expenditures by providers. Rebasing had previously occurred in 1992 and 2002. The rebasing would result in a "step-up" in the Medicaid rate for providers. In response to a stated need for rebasing, the 2007 Legislature earmarked funds to address Medicaid reimbursement. The Legislature passed Senate Bill 2800, which included provisions for modifying the Plan as follows: To establish a target rate class ceiling floor equal to 90 percent of the cost- based class ceiling. To establish an individual provider- specific target floor equal to 75 percent of the cost-based class ceiling. To modify the inflation multiplier to equal 2.0 times inflation for the individual provider-specific target. (The inflation multiplier for the target rate class ceiling shall remain at 1.4 times inflation.) To modify the calculation of the change of ownership target to equal the previous provider's operating and indirect patient care cost per diem (excluding incentives), plus 50 percent of the difference between the previous providers' per diem (excluding incentives) and the effect class ceiling and use an inflation multiplier of 2.0 times inflation. The Plan was modified in accordance with this legislation with an effective date of July 1, 2007. Four relevant sentences from the modified Plan are relevant to this proceeding, to wit: For a new provider with no cost history resulting from a change of ownership or operator, where the previous provider participated in the Medicaid program, the interim operating and patient care per diems shall be the lesser of: the class reimbursement ceiling based on Section V of this Plan, the budgeted per diems approved by AHCA based on Section III of this Plan, or the previous providers' operating and patient care cost per diem (excluding incentives), plus 50% of the difference between the previous providers' per diem (excluding incentives) and the class ceiling. The above new provider ceilings, based on the district average per diem or the previous providers' per diem, shall apply to all new providers with a Medicaid certification effective on or after July 1, 1991. The new provider reimbursement limitation above, based on the district average per diem or the previous providers' per diem, which affects providers already in the Medicaid program, shall not apply to these same providers beginning with the rate semester in which the target reimbursement provision in Section V.B.16. of this plan does not apply. This new provider reimbursement limitation shall apply to new providers entering the Medicaid program, even if the new provider enters the program during a rate semester in which Section V.B.16 of this plan does not apply. [The above cited sentences will be referred to herein as Plan Sentence 1, Plan Sentence 2, etc.] Madison Pointe's Projected Medicaid Rate Relying on the proposed legislation, including the proposed rebasing and step-up in rate, Madison Pointe projected an interim Medicaid rate of $203.50 ppd for its initial year of operation. Madison Pointe's new projected rate assumed a rebasing by the Legislature to eliminate existing targets, thereby, allowing more reimbursable costs. Although no legislation had been passed at that time, Madison Pointe's consultants made calculations and projections as to how the rebasing would likely affect Petitioners. Those projections were the basis for the $203.50 ppd interim rate. The projected rate with limitations applied (i.e., if Madison Pointe did not anticipate rebasing or believe the Plan revisions applied) would have been $194.26. The PFA portion of Madison Pointe's CHOP application was submitted to AHCA containing the $203.50 ppd interim rate. The Financial Analysis Unit, as stated, is responsible for, inter alia, reviewing PFAs submitted as part of a CHOP application. In the present case, Ryan Fitch was the person within the Financial Analysis Unit assigned responsibility for reviewing Madison Pointe's PFA. Fitch testified that the purpose of his review was to determine whether the applicant had projected sufficient monetary resources to successfully operate the facility. This would include a contingency fund (equal to one month's anticipated expenses) available to the applicant and reasonable projections of cost and expenses versus anticipated revenues.2 Upon his initial review of the Madison Pointe PFA, Fitch determined that the projected Medicaid interim rate was considerably higher than the previous operator's actual rate. This raised a red flag and prompted Fitch to question the propriety of the proposed rate. In his omissions letter to the applicant, Fitch wrote (as the fourth bullet point of the letter), "The projected Medicaid rate appears to be high relative to the current per diem rate and the rate realized in 2006 cost reports (which includes ancillaries and is net of contractual adjustments). Please explain or revise the projections." In response to the omissions letter, Laura Wilson, a health care accountant working for Madison Pointe, sent Fitch an email on June 27, 2008. The subject line of the email says, "FW: Omissions Letter for 11 CHOW applications."3 Then the email addressed several items from the omissions letter, including a response to the fourth bullet point which says: Item #4 - Effective July 1, 2007, it is anticipated that AHCA will be rebasing Medicaid rates (the money made available through elimination of some of Medicaid's participation in covering Medicare Part A bad debts). Based on discussions with AHCA and the two Associations (FHCA & FAHSA), there is absolute confidence that this rebasing will occur. The rebasing is expected to increase the Medicaid rates at all of the facilities based on the current operator's spending levels. As there is no definitive methodology yet developed, the rebased rates in the projections have been calculated based on the historical methodologies that were used in the 2 most recent rebasings (1992 and 2002). The rates also include the reestablishment of the 50% step-up that is also anticipated to begin again. The rebasing will serve to increase reimbursement and cover costs which were previously limited by ceilings. As noted in Note 6 of the financials, if something occurs which prevents the rebasing, Management will be reducing expenditures to align them with the available reimbursement. It is clear Madison Pointe's projected Medicaid rate was based upon proposed legislative actions which would result in changes to the Plan. It is also clear that should those changes not occur, Madison Pointe was going to be able to address the shortfall by way of reduced expenditures. Each of those facts was relevant to the financial viability of Madison Pointe's proposed operations. Madison Pointe's financial condition was approved by Fitch based upon his review of the PFA and the responses to his questions. Madison Pointe became the new licensed operator of the facility. That is, the Long-Term Care Unit deemed the application to have met all requirements, including financial ability to operate, and issued a license to the applicant. Subsequently, MPA provided to Madison Pointe its interim Medicaid rate. MPA advised Madison Pointe that its rate would be $194.55 ppd, some $8.95 ppd less than Madison Pointe had projected in its PFA (but slightly more than Madison Pointe would have projected with the 50 percent limitation from Plan Sentence 1 in effect, i.e., $194.26). The PFA projected 25,135 annual Medicaid patient days, which multiplied by $8.95, would equate to a reduction in revenues of approximately $225,000 for the first year of operation.4 MPA assigned Madison Pointe's interim Medicaid rate by applying the provisions of the Plan as it existed as of the date Madison Pointe's new operating license was issued, i.e., September 1, 2007. Specifically, MPA limited Madison Pointe's per diem to 50 percent of the difference between the previous provider's per diem and the applicable ceilings, as dictated by the changes to the Plan. (See Plan Sentence 1 set forth above.) Madison Pointe's projected Medicaid rate in the PFA had not taken any such limitations into account because of Madison Pointe's interpretation of the Plan provisions. Specifically, that Plan Sentence 3 applies to Madison Pointe and, therefore, exempts Madison Pointe from the new provider limitation set forth in Plan Sentences 1 and 2. However, Madison Pointe was not "already in the Medicaid program" as of July 1, 2007, as called for in Plan Sentence 3. Rather, Madison Pointe's commencement date in the Medicaid program was September 1, 2007. Plan Sentence 1 is applicable to a "new provider with no cost history resulting from a change of ownership or operator, where the previous operator participated in the Medicaid program." Madison Pointe falls within that definition. Thus, Madison Pointe's interim operating and patient care per diems would be the lesser of: (1) The class reimbursement ceiling based on Section V of the Plan; (2) The budgeted per diems approved by AHCA based on Section III of the Plan; or (3) The previous provider's operating and patient care cost per diem (excluding incentives), plus 50 percent of the difference between the previous provider's per diem and the class ceiling. Based upon the language of Plan Sentence 1, MPA approved an interim operating and patient care per diem of $194.55 for Madison Pointe. Plan Sentence 2 is applicable to Madison Pointe, because it applies to all new providers with a Medicaid certification effective after July 1, 1991. Madison Pointe's certification was effective September 1, 2007. Plan Sentence 3 is the primary point of contention between the parties. AHCA correctly contends that Plan Sentence 3 is not applicable to Petitioner, because it addresses rebasing that occurred on July 1, 2007, i.e., prior to Madison Pointe coming into the Medicaid system. The language of Plan Sentence 3 is clear and unambiguous that it applies to "providers already in the Medicaid program." Plan Sentence 4 is applicable to Madison Pointe, which entered the system during a rate semester, in which no other provider had a new provider limitation because of the rebasing. Again, the language is unambiguous that "[t]his new provider reimbursement limitation shall apply to new providers entering the Medicaid program. . . ." Madison Pointe is a new provider entering the program. Detrimental Reliance and Estoppel Madison Pointe submitted its CHOP application to the Long-Term Care Unit of AHCA for approval. That office has the clear responsibility for reviewing and approving (or denying) CHOP applications for nursing homes. The Long-Term Care Unit requires, as part of the CHOP application, submission of the PFA which sets forth certain financial information used to determine whether the applicant has the financial resources to operate the nursing home for which it is applying. The Long-Term Care Unit has another office within AHCA, the Financial Analysis Unit, to review the PFA. The Financial Analysis Unit is found within the Bureau of Health Facility Regulation. That Bureau is responsible for certificates of need and other issues, but has no authority concerning the issuance, or not, of a nursing home license. Nor does the Financial Analysis Unit have any authority to set an interim Medicaid rate. Rather, the Financial Analysis Unit employs certain individuals who have the skills and training necessary to review financial documents and determine an applicant's financial ability to operate. A nursing home licensee must obtain Medicaid certification if it wishes to participate in the program. Madison Pointe applied for Medicaid certification, filing its application with a Medicaid intermediary which works for CMS. The issuance of a Medicaid certification is separate and distinct from the issuance of a license to operate. When Madison Pointe submitted its PFA for review, it was aware that an office other than the Long-Term Care Unit would be reviewing the PFA. Madison Pointe believed the two offices within AHCA would communicate with one another, however. But even if the offices communicated with one another, there is no evidence that the Financial Analysis Unit has authority to approve or disapprove a CHOP application. That unit's sole purpose is to review the PFA and make a finding regarding financial ability to operate. Likewise, MPA--which determines the interim Medicaid rate for a newly licensed operator--operates independently of the Long-Term Care Unit or the Financial Analysis Unit. While contained within the umbrella of AHCA, each office has separate and distinct duties and responsibilities. There is no competent evidence that an applicant for a nursing home license can rely upon its budgeted interim rate--as proposed by the applicant and approved as reasonable by MPA--as the ultimate interim rate set by the Medicaid Program Analysis Office. At no point in time did Fitch tell Madison Pointe that a rate of $203.50 ppd would be assigned. Rather, he said that the rate seemed high; Madison Pointe responded that it could "eliminate expenditures to align them with the available reimbursement." The interim rate proposed by the applicant is an estimate made upon its own determination of possible facts and anticipated operating experience. The interim rate assigned by MPA is calculated based on the applicant's projections as affected by provisions in the Plan. Furthermore, it is clear that Madison Pointe was on notice that its proposed interim rate seemed excessive. In response to that notice, Madison Pointe did not reduce the projected rate, but agreed that spending would be curtailed if a lower interim rate was assigned. There was, in short, no reliance by Madison Pointe on Fitch's approval of the PFA as a de facto approval of the proposed interim rate. MPA never made a representation to Madison Pointe as to the interim rate it would receive until after the license was approved. There was, therefore, no subsequent representation made to Madison Pointe that was contrary to a previous statement. The Financial Analysis Unit's approval of the PFA was done with a clear and unequivocal concern about the propriety of the rate as stated. The approval was finalized only after a representation by Madison Pointe that it would reduce expenditures if a lower rate was imposed. Thus, Madison Pointe did not change its position based on any representation made by AHCA.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by Respondent, Agency for Health Care Administration, approving the Medicaid interim per diem rates established by AHCA and dismissing each of the Amended Petitions for Formal Administrative Hearing. DONE AND ENTERED this 23rd day of February, 2009, in Tallahassee, Leon County, Florida. R. BRUCE MCKIBBEN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 23rd day of February, 2009.
The Issue The issue for determination in this case is whether Respondent’s application of a fair rental value system of property cost reimbursement to Petitioner under the Florida Title XIX Long-Term Care Medicaid Reimbursement Plan is appropriate.
Findings Of Fact Petitioner, CONSULTING MANAGEMENT AND EDUCATION, INC., d/b/a GULF COAST NURSING AND REHABILITATION CENTER (CME), is the licensed operator of a 103-bed nursing home in Clearwater, Florida, which is presently known as GULF COAST NURSING AND REHABILITATION CENTER (GULF COAST). CME participates in the Florida Medicaid Program as an enrolled provider. Respondent, AGENCY FOR HEALTH CARE ADMINISTRATION (AHCA), is the agency of the State of Florida authorized to implement and administer the Florida Medicaid Program, and is the successor agency to the former Department of Health and Rehabilitative Services, pursuant to Chapter 93-129, Laws of Florida. Stipulated Facts Prior to 1993, the GULF COAST nursing home facility was known as COUNTRY PLACE OF CLEARWATER (COUNTRY PLACE), and was owned and operated by the Clearwater Limited Partnership, a limited partnership which is not related to CME. In 1993 CME agreed to purchase, and did in fact purchase, COUNTRY PLACE from the Clearwater Limited Partnership. Simultaneous with the purchase of COUNTRY PLACE, CME entered into a Sale/Leaseback Agreement with LTC Properties, Inc., a Maryland real estate investment trust which engages in the financing of nursing homes. The Purchase and Sale Agreement between Clearwater Limited Partnership and CME was contingent upon the Sale/Leaseback Agreement and the proposed Lease between CME and LTC Properties, Inc. On September 1, 1993, CME simultaneously as a part of the same transaction purchased COUNTRY PLACE, conveyed the facility to LTC Properties, Inc., and leased the facility back from LTC Properties, Inc. As required, CME had notified AHCA of the proposed transaction. AHCA determined that the transaction included a change of ownership and, by lease, a change of provider. CME complied with AHCA's requirements and became the licensed operator and Medicaid provider for COUNTRY PLACE. Thereafter, CME changed the name of the facility to GULF COAST. After CME acquired the facility and became the licensed operator and Medicaid provider, AHCA continued to reimburse CME the same per diem reimbursement which had been paid to the previous provider (plus certain inflation factors) until CME filed its initial cost report, as required for new rate setting. In the normal course of business, CME in 1995 filed its initial Medicaid cost report after an initial period of actual operation by CME. Upon review of the cost report, AHCA contended that the cost report was inaccurate and engaged in certain "cost settlement" adjustments. During this review, AHCA took the position that CME's property reimbursement should be based on FRVS methodologies rather than "cost" due to the lease. In November of 1995, CME received from AHCA various documents which recalculated all components of Petitioner's Medicaid reimbursement rates for all periods subsequent to CME's acquisition of the facility. In effect, AHCA placed CME on FRVS property reimbursement. The practical effect of AHCA's action was to reduce CME's property reimbursement both retroactively and prospectively. The retroactive application would result in a liability of CME to AHCA, due to a claimed overpayment by AHCA. The prospective application would (and has) resulted in a reduction of revenues. CME is substantially affected by AHCA's proposed action and by Sections I.B., III.G.2.d.(1), V.E.1.h., and V.E.4. of the Florida Medicaid Plan. Additional Findings of Fact The Florida Medicaid Plan establishes methodologies for reimbursement of a nursing home's operating costs and patient care costs, as well as property costs. The dispute in this matter relates only to reimbursement of property costs. CME as the operator of the GULF COAST nursing home facility is entitled to reimbursement of property costs in accordance with the Florida Medicaid Plan. CME as the operator of the GULF COAST facility entered into a Florida Medicaid Program Provider Agreement, agreeing to abide by the provisions of the Florida Medicaid Plan. The Sale/Leaseback Agreement entered into by CME and LTC Properties Inc. (LTC) specifically provides for a distinct sale of the nursing home facility to LTC. LTC holds record fee title to GULF COAST. LTC, a Maryland corporation, is not related to CME, a Colorado corporation. The Florida Medicaid Plan is intended to provide reimbursement for reasonable costs incurred by economically and efficiently operated facilities. The Florida Medicaid Plan pays a single per diem rate for all levels of nursing care. After a nursing home facility's first year of operation, a cost settling process is conducted with AHCA which results in a final cost report. The final cost report serves as a baseline for reimbursement over the following years. Subsequent to the first year of operation, a facility files its cost report annually. AHCA normally adjusts a facility's reimbursement rate twice a year based upon the factors provided for in the Florida Medicaid Plan. The rate-setting process takes a provider through Section II of the Plan relating to cost finding and audits resulting in cost adjustments. CME submitted the appropriate cost reports after its first year of operation of the GULF COAST facility. Section III of the Florida Medicaid Plan specifies the areas of allowable costs. Under the Allowable Costs Section III.G.2.d.(1) in the Florida Title XIX Plan, a facility with a lease executed on or after October 1, 1985, shall be reimbursed for lease costs and other property costs under the Fair Rental Value System (FRVS). AHCA has treated all leases the same under FRVS since that time. AHCA does not distinguish between types of leases under the FRVS method. The method for the FRVS calculation is provided in Section V.E.1.a-g of the Florida Medicaid Plan. A “hold harmless” exception to application of the FRVS method is provided for at Section V.E.1.h of the Florida Medicaid Plan, and Section V.E.4 of the Plan provides that new owners shall receive the prior owner’s cost-based method when the prior owner was not on FRVS under the hold harmless provision. As a lessee and not the holder of record fee title to the facility, neither of those provisions apply to CME. At the time CME acquired the facility, there was an indication that the Sale/Leaseback transaction with LTC was between related parties, so that until the 1995 cost settlement, CME was receiving the prior owner’s cost-based property method of reimbursement. When AHCA determined that the Sale/Leaseback transaction between CME and LTC was not between related parties, AHCA set CME’s property reimbursement component under FRVS as a lessee. Property reimbursement based on the FRVS methodology does not depend on actual period property costs. Under the FRVS methodology, all leases after October 1985 are treated the same. For purposes of reimbursement, AHCA does not recognize any distinction between various types of leases. For accounting reporting purposes, the Sale/Leaseback transaction between CME and LTD is treated as a capital lease, or “virtual purchase” of the facility. This accounting treatment, however, is limited to a reporting function, with the underlying theory being merely that of providing a financing mechanism. Record fee ownership remains with LTC. CME, as the lease holder, may not encumber title. The Florida Medicaid Plan does not distinguish between a sale/leaseback transaction and other types of lease arrangements. Sections IV.D., V.E.1.h., and V.E.4., the “hold harmless” and “change of ownership” provisions which allow a new owner to receive the prior owner’s method of reimbursement if FRVS would produce a loss for the new owner, are limited within the Plan’s organizational context, and within the context of the Plan, to owner/operators of facilities, and grandfathered lessee/operators. These provisions do not apply to leases executed after October 1, 1985. Capital leases are an accounting construct for reporting purposes, which is inapplicable when the Florida Medicaid Plan specifically addresses this issue. The Florida Medicaid Plan specifically addresses the treatment of leases entered into after October 1985 and provides that reimbursement will be made pursuant to the FRVS method.
Findings Of Fact In its 1969 legislative session, the Florida Legislature enacted Section 409.266, Florida Statutes, entitled "Medical Assistance for the Needy," providing the original state legislative basis and authority for Florida's entry into the Medicaid program. Section 409.266(2), Florida Statutes, as enacted, authorized the Florida Department of Social Services or any other department that the Governor might designate to: Enter into such agreement with other state agencies or any agency of the federal government and accept such duties with respect to social welfare or public aid as may be necessary to implement the provisions of subsection (1) and to qualify for federal aid including compliance with provisions of Public Law 86-778 and the "Social Security Amendments of 1965" [estab- lishing Title XIX of the Social Security Act] Section 409.266(3), Florida Statutes, as enacted, stated that: The Department is authorized and directed to prepare and operate a program and budget in order to implement and comply with the provisions of public law 86-778 and the "Social Security Amendments of 1965." No provisions of Florida law other than Section 409.266, Florida Statutes, as enacted, authorized any agency to perform any function specifically to implement the Medicaid program. The State of Florida formally commenced participation in the Medicaid program effective January 1, 1970. At all times pertinent to this controversy, respondent, Florida Department of Health and Rehabilitative Services or its predecessor agencies (referred to as "HRS"), has been and continues to be the "State Agency" identified in 42 U.S.C. Section 1396a(a)(5), and charged under Section 409.266, Florida Statutes, as amended, with the formulation of a State Plan for Medical Assistance ("State Plan"), 42 U.S.C. Section 1396a, and with the ongoing responsibility for the administration of the Medicaid program in the State of Florida. Since Florida's entry into the Medicaid program in 1970, HRS has been authorized essentially to "[e]nter into such agreements with appropriate agents, other State agencies, or any agency of the Federal Government and accept such duties in respect to social welfare or public aid as may be necessary or needed to implement the provisions of Title XIX of the Social Security Act pertaining to medical assistance." Section 409.266(2)(a), Fla. Stat., as amended. HRS has never been authorized to enter into any agreements, accept any duties, or perform any functions with respect to the Medicaid program that are in contravention of or not authorized by Title XIX of the Social Security Act and implementing federal regulations and requirements. As a prerequisite for Florida's entry into the Medicaid program, HRS prepared and filed with the United States Department of Health, Education, and Welfare ("HEW") a State Plan, pursuant to Title XIX of the Social Security Act, and pursuant to its delegated legislative authority set forth in Section 409.266(2)(a), Florida Statutes. (In May, 1980, HEW was redesignated the United States Department of Health and Human Services, but for purposes of this action both shall be referred to as HEW.) C.W. Hollingsworth was the HRS official who had the responsibility for supervising the preparation, the filing, and for obtaining the approval of HEW of Florida's initial State Plan. Florida's initial State Plan was approved by HEW effective January 1, 1970. At the time that Florida received approval of its initial State Plan, Title XIX of the Social Security Act required state plans to provide for the payment of the reasonable cost of inpatient hospital services. At the time that Florida received approval of its initial State Plan, HEW regulations governing reimbursement for inpatient hospital services under Medicaid required the State Plan to provide for reimbursement of Medicaid inpatient hospital services furnished by those hospitals also participating in the Medicare program, applying the same standards, cost reimbursement principles, and methods of cost apportionment used in computing reimbursement to such hospitals under Medicare. 45 C.F.R. Section 250.30(a), and (b), 34 Fed. Reg. 1244 (January 25, 1969). At the time that Florida entered the Medicaid program, Medicare cost reimbursement principles in effect governing reimbursement for the cost of inpatient hospital services required payment of a participating hospital's actual and reasonable costs of providing such services to Medicare beneficiaries, and, moreover, that such payment be made on the basis of the hospital's current costs rather than upon the costs of a prior period or upon a fixed negotiated rate. 42 U.S.C. Section 1395x(v)(1)(A); 20 C.F.R. Sections 405.451(c)(2), 405.402(a) [later renumbered 42 C.F.R. Section 405.451(c)(2) and Section 405.402(a)]. Such Medicare principles and standards also provided for interim payments to be made to the hospital during its fiscal year. At the conclusions of the subject fiscal year, the hospital was required to file a cost report wherein the hospital included all of its costs of providing covered inpatient services to Medicare beneficiaries. A settlement or "retroactive adjustment" process then was required to reconcile the amount of interim payments received by the hospital during the fiscal period with its allowable costs incurred during that period. If the hospital had been overpaid during the year, it was required to refund the amount of that overpayment to the Medicare program. Conversely, if the hospital had been underpaid during the year, the Medicare program was required to make an additional payment to the hospital, retroactively, in the amount of the underpayment. 20 C.F.R. Sections 405.402(b)(2), 405.451(b)(2). Essentially the same Medicare principles and standards governing reimbursement of inpatient hospital services described in the two preceding paragraphs have been in effect at all times pertinent to this controversy. 42 C.F.R. Section 405.401, et seq. Florida's approved State Plan as of January 1, 1970, governing reimbursement of inpatient hospital services under the Medicaid program, committed HRS to reimburse hospitals that also participated in the Medicare program for their reasonable costs of providing inpatient hospital services to Medicaid patients, applying Medicare cost reimbursement principles and standards. The only versions of Florida's State Plan provisions that have been approved by HEW and that have governed HRS's reimbursement of inpatient hospital services prior to July 1, 1981, each commit HRS to reimburse hospitals that also participated in the Medicare program for their reasonable costs of providing inpatient hospital services to Medicaid patients, applying Medicare cost reimbursement principles and standards. Attached as an appendix to the recommended order is the form agreement drafted with the supervision of C.W. Hollingsworth, which has been in use from January 1, 1970, until July 1, 1981. From the inception of the Florida Medicaid program, and as a prerequisite for participation therein, a hospital has been required to execute a copy of the form agreement. A hospital may not participate in the Medicaid program without having executed such an agreement, nor may it propose any amendments thereto. The intent and effect of the form agreement is to require HRS to reimburse hospitals that also participated in the Medicare program for their reasonable costs of providing inpatient hospital services to Medicaid patients, applying Medicare cost reimbursement principles and standards. The form agreement requires HRS to compute a percentage allowance in lieu of the retroactive adjustments ("percentage allowances") in determining the rates that hospitals will be paid for providing inpatient hospital services to Medicaid patients. The form agreement requires HRS to compute a new percentage allowance each year based on hospital cost trends. The meanings of the terms "allowance in lieu of retroactive adjustments" in all pertinent state plans and "percentage allowance for the year in lieu of retroactive payment adjustment" contained in the form agreement are identical. In drafting the form agreement HRS intended that the "percentage allowance for the year in lieu of retroactive payment adjustment" be set at a level sufficient to ensure that hospitals participating in the Medicaid program would be reimbursed their "reasonable costs" of providing inpatient hospital services to Medicaid patients, applying Medicare cost reimbursement principles and standards. At all times pertinent to this controversy, participating hospitals, like petitioner, have been reimbursed by HRS for inpatient hospital services provided to Medicaid patients in the following manner: Within ninety (90) days following the close of its fiscal year, the partici- pating hospital files a Form 2551 or 2552 Annual Statement of Reimbursable Costs, as applicable, with both Blue Cross of Florida, Inc., the major fiscal intermediary respon- sible for the administration of Part A of the federal Medicare program in the State of Florida, and with HRS. This document, also referred to as a "cost report" details various hospital and financial statistical data relating to the patient care activities engaged in by the hospital during the sub- ject fiscal period. Upon receipt of the participating hospital's cost report for a fiscal period, HRS makes an initial determination based upon Medicare cost reimbursement principles and standards of the hospital's total allow- able inpatient costs, charges, and total patient days during the subject fiscal period, and then determines an inpatient per diem reimbursement rate for the period. To the inpatient per diem reimburse- ment rate is then added a percentage allow- ance in lieu of making any further retroactive corrective adjustments in reimbursement which might have been due the hospital applicable to the reporting period. The adjusted inpa- tient per diem reimbursement rate is applied prospectively, and remains in effect until further adjustments in the rate are required. If HRS determines that total inpa- tient Medicaid reimbursement to a partici- pating hospital during a fiscal period exceeds the hospital's allowable and rea- sonable costs of rendering such covered inpatient services applying Medicare cost reimbursement principles and standards, then the hospital is required to remit to HRS the amount of such overpayment. If, however, HRS determines that the total inpatient Medicaid reimbursement received by a participating hospital is less than the hospital's actual and reason- able costs of rendering such covered inpa- tient services to Medicaid patients during the period applying Medicare cost reimburse- ment principles and standards, no further retroactive corrective adjustments are made; provided, however, that should an overpayment occur in a fiscal period, it may be offset and applied retroactively against an under- payment to the participating hospital which occurred during the next preceding fiscal period only. HRS has used the following "percentage allowances" in determining Medicaid reimbursement rates for inpatient hospital services: a. January 1, 1970 - June 30, 1972 . . . 12 percent July 1, 1972 - approximately March 30, 1976 . . . . . . . . . . 9 percent Approximately March 31, 1976 - June 30, 1981 . . . . . . . . . . . 6 percent Since at least January 1, 1976, HRS has not recomputed the "percentage allowance" on an annual basis. Since at least January 1, 1976, HRS has not based the "percentage allowance" that it has applied in determining Medicaid inpatient hospital reimbursement rates upon hospital cost trends. HRS has used no technical methodology based upon hospital cost trends to develop any of the "percentage allowances." At least since January 1, 1974, HRS's "percentage allowances" have been less than the corresponding average annual increases in the costs incurred by Florida hospitals of providing inpatient hospital services. Prior to March 30, 1976, all of HRS's published regulations addressing reimbursement of participating hospitals for their costs of providing inpatient hospital services to Medicaid patients required HRS to reimburse such hospitals in accordance with Medicare cost reimbursement principles and standards. In certain internal documents, Petitioner's Exhibits P-44 and P-12, HRS states that the average costs of providing inpatient hospital services in the State of Florida rose at least 18 percent during calendar year 1975. In November, 1975, the Secretary of HRS was informed by HRS officials that HRS faced a projected budgetary deficit for its fiscal year ended June 30, 1976. A decision memorandum presented options to the HRS Secretary for reducing the projected deficit. Among such options presented to and approved by the HRS Secretary was to reduce the "percentage allowance" from 9 percent to 6 percent. The reduction of the "percentage allowance" by HRS from 9 percent to 6 percent was effected in response to HRS's projected deficit, and was not based upon an analysis of hospital cost trends. HRS incorporated the 6 percent "percentage allowance" into its administrative rules which were published on March 30, 1976. In response to objections raised by the Florida Hospital Association to the reduction in the percentage allowance by HRS from 9 percent to 6 percent, HRS officials reexamined that reduction. During HRS's reexamination of its previous "percentage allowance" reduction, HRS was aware of and acknowledged the fact that Florida hospital costs were increasing at an average annual rate in excess of both the earlier 9 percent and the resulting 6 percent "percentage allowance." In a memorandum dated September 13, 1976, from HRS official Charles Hall to the Secretary of HRS, Petitioner's Exhibit P-45, Charles Hall informed the Secretary that the methods and standards then used by HRS to reimburse participating hospitals for their costs of providing inpatient hospital services to Medicaid patients was out of compliance with federal requirements. Charles Hall further informed the Secretary that the reason HRS had not theretofore been cited by HEW for noncompliance was the manner in which the Florida State Plan had been drafted, i.e., that the State Plan required HRS to reimburse hospitals under Medicaid for the reasonable costs that they would have been reimbursed applying Medicare cost reimbursement principles and standards. In a letter dated September 20, 1976, Petitioner's Exhibit P-31, HEW informed HRS that HEW had received a complaint from the Florida Hospital Association that the methods HRS was actually using to reimburse hospitals for the costs of providing inpatient hospital services to Medicaid patients were in violation of Federal Regulation 45 C.F.R. Section 250.30(a). A proposed amendment to Florida's State Plan submitted by HRS to HEW in November, 1976, Petitioner's Exhibit P-49, if approved, would have allowed HRS to reimburse hospitals for the cost of providing inpatient hospital services to Medicaid patients under methods differing from Medicare cost reimbursement principles and standards (an "alternative plan"). "Alternative plans" have been permitted under applicable federal regulations since October 21, 1974. A state participating in the Medicaid program may elect to establish an "alternative plan, but may not implement such "alternative plan" without the prior written approval of HEW. Florida has not had in effect an "alternative plan" of reimbursing participating hospitals for their costs of providing inpatient hospital services to Medicaid patients that was formally approved by HEW at any time prior to July 1, 1981. By letter dated January 7, 1977, Petitioner's Exhibit P-32, HEW notified HRS that it had formally cited HRS for noncompliance with federal regulations governing reimbursement of inpatient hospital services under Medicaid. HRS acknowledged their noncompliance and between November, 1976, and October 30, 1977, HRS attempted to revise its proposed "alternative plan" on at least two occasions in an attempt to obtain HEW approval. In October, 1977, HRS withdrew its proposed "alternative plan" then pending with HEW. HRS then contracted with an outside consultant, Alexander Grant & Company, to assist in the formulation of a new "alternative plan" proposal. In January, 1978, Alexander Grant & Company delivered its draft of an "alternative plan" to HRS. In October, 1978, HRS submitted a draft "alternative plan" to HEW for review and comment, and HEW expected HRS to submit a formal "alternative plan" proposal to HEW for its approval by November 1, 1978. HRS did not submit the formal "alternative plan" proposal to HEW until August 12, 1980. In a letter dated February 21, 1979, from Richard Morris, HEW Regional Medicaid Director, Region IV, to United States Senator Richard Stone of Florida, Mr. Morris advised Senator Stone: For more than two years the Florida Medicaid Program has not met Federal Requirements for inpatient hospital services reimbursement. Their payment methodology under-reimburses certain hospitals year after year. The pros- pective interim per diem rate paid by Florida to hospitals includes a percentage allowance to cover increased costs during the forthcom- ing year that is consistently less than increased costs in some hospitals. If the payments are less than costs, the difference is not reimbursed. This results in underpay- ments. We have worked closely with Florida to develop an acceptable alternative system that would meet Federal requirements. To date, Florida has not implemented such a system despite having received informal HEW agreement on a draft plan developed more than a year ago. It is our understanding that this alternative plan is not a high priority item at this time. We will continue to work with HRS staff to secure Florida compliance re- garding this requirement. Petitioner's Exhibit P-46. Since August 12, 1980, HRS has submitted to HEW for its approval at least four more versions of an "alternative plan." Petitioner's Exhibits P-120, P-121, P-123, and P-152. Each of these versions was approved by the Secretary of HRS, and HRS believes each to comply with applicable Florida law. Mr. Erwin Bodo, Ph.D., was and is the HRS official responsible for the development and drafting of Exhibits P-120, P-121, P-123, and P-152. In June, 1981, HEW approved an "alternative plan" for the State of Florida (Exhibit P-152), and such "alternative plan" was implemented effective July 1, 1981. Until July 1, 1981, HRS continued to use the 6 percent "percentage allowance" to compute inpatient hospital reimbursement under Medicaid. Even after its repeal, Rule 10C-7.39(6), Florida Administrative Code, is applied by respondent in calculating reimbursement for Medicaid services provided between March 30, 1976, and July 1, 1981. From November 20, 1976, until July 1, 1981--the period in which HRS was attempting to secure HEW approval for an alternative plan--HRS was aware that the costs of inpatient hospital se vices were increasing at an average annual rate in excess of the 6 percent "percentage allowance." From September 1, 1976, through July 1, 1981, HRS has been out of compliance with its a proved State Plan provisions, and HEW regulations governing reimbursement for inpatient hospital services under Medicaid because HRS's methods for reimbursing hospitals for the cost of providing those services to Medicaid patients have resulted in a substantial number of hospitals-- including petitioner--being reimbursed at a lower rate than the hospitals would have been reimbursed applying Medicare cost reimbursement principles and standards. Since the quarter ending December 31, 1976, until July 1, 1981, HEW has formally cited HRS as being in contravention of its approved State Plan provisions, and HEW (now HHS) regulations, governing reimbursement for inpatient hospital services under Medicaid because HRS's methods for reimbursing hospitals for the cost of providing those services to Medicaid patients have resulted in a substantial number of hospitals--including petitioner--being reimbursed at a lower rate than the hospitals would have been reimbursed applying Medicare cost reimbursement principles and standards. PAN AMERICAN HOSPITAL CORPORATION Petitioner, Pan American Hospital Corporation, is a not-for-profit corporation, duly organized and existing under the laws of the State of Florida. Petitioner is a tax-exempt organization as determined by the Internal Revenue Service pursuant to Section 501(c)(3) of the Internal Revenue Code of 1954, as amended. At all times pertinent to this controversy, petitioner has operated and continues to operate a duly licensed 146-bed, short-term acute care general hospital, located at 5959 Northwest Seventh Street, Miami, Florida 33126. At all times pertinent to this controversy, petitioner has been and continues to be a duly certified provider of inpatient hospital services, eligible to participate in the Florida Medicaid program since January 27, 1974. The appendix to this recommended order is a true and correct copy of the "Participation Agreement" entered into between petitioner and HRS, whereunder, inter alia, petitioner became eligible to receive payment from HRS for covered inpatient hospital services provided to Medicaid patients. At all times pertinent to this controversy, petitioner has been a certified "provider of services" participating in the Medicare program. During the fiscal periods in dispute in this action, petitioner did provide covered inpatient hospital services to Medicaid patients, and became eligible for payment by HRS of its reasonable costs of providing such services, determined in accordance with Medicare cost reimbursement principles and standards. With respect to each of the fiscal periods in dispute in this action, petitioner timely filed all cost reports and other financial data with HRS or its contracting agents, including Blue Cross of Florida, Inc., to enable HRS to determine petitioner's reasonable costs of providing covered inpatient hospital services to Medicaid patients. During each of the fiscal periods in dispute in this action, to reimburse petitioner for its reasonable costs of providing covered inpatient hospital services to Medicaid patients, determined in accordance with applicable Medicare cost reimbursement principles and standards. Such costs incurred by petitioner were reasonable, necessary, related to patient care, and less than customary charges within the meaning of those Medicare principles and standards. With respect to each of the fiscal periods in dispute, HRS and/or its contracting agent, Blue Cross of Florida, Inc., reviewed and audited the cost reports filed by petitioner, and as a result of such review and audits set or adjusted, as applicable, the Medicaid inpatient per diem reimbursement rate at which petitioner would be paid during the next succeeding fiscal period or until that rate was again adjusted. On May 3, 1976, a Notice of Program Reimbursement was issued to petitioner applicable to its fiscal year ended March 31, 1975, and setting forth the audited amount of petitioner's reasonable costs of providing covered inpatient hospital services to Medicaid patients during such period and the amount of interim Medicaid payments made to petitioner by HRS during the period in respect to those services. During its fiscal year ended March 31, 1975, petitioner received $86,469 less than its reasonable costs of providing covered inpatient hospital services to Medicaid patients, and no retroactive corrective adjustment has been made in connection with such underpayment. On February 14, 1979, a Notice of Program Reimbursement was issued to petitioner applicable to its fiscal year ended March 31, 1976, and setting forth the audited amount of petitioner's reasonable costs of providing covered inpatient hospital services to Medicaid patients during such period and the amount of interim Medicaid payments made to petitioner by HRS during the period with respect to those services. During its fiscal year ended March 31, 1976, petitioner received $199,328 less than its reasonable costs of providing covered inpatient hospital services to Medicaid patients, and no retroactive corrective adjustment has been made in connection with such underpayment. On September 29, 1978, a Notice of Program Reimbursement was issued to petitioner applicable to its fiscal year ended March 31, 1977, and setting forth the audited amount of petitioner's reasonable costs of providing covered inpatient hospital services to Medicaid patients during such period and the amount of interim Medicaid payments made to petitioner by HRS during the period with respect to those services. During its fiscal year ended March 31, 1977, petitioner received $6,083 less than its reasonable costs of providing covered inpatient hospital services to Medicaid patients, and no retroactive corrective adjustment has been made in connection with such underpayment. On March 13, 1980, a Notice of Program Reimbursement was issued to petitioner applicable to its fiscal year ended March 31, 1978, and setting forth the audited amount of petitioner's reasonable costs of providing covered inpatient hospital services to Medicaid patients during such period and the amount of interim Medicaid payments made to petitioner by HRS during the period with respect to those services. During its fiscal year ended March 31, 1978, petitioner received $178,506 less than its reasonable costs of providing covered inpatient hospital services to Medicaid patients, and no retroactive corrective adjustment has been made in connection with such underpayment. On June 30, 1981, a Notice of Program Reimbursement was issued to petitioner applicable to its fiscal year ended March 31, 1979, and setting forth the audited amount of petitioner's reasonable costs of providing covered inpatient hospital services to Medicaid patients during such period and the amount of interim Medicaid payments made to petitioner by HRS during the period with respect to those services. During its fiscal year ended March 31, 1979, petitioner received $302,347 less than its reasonable costs of providing covered inpatient hospital services to Medicaid patients, and no retroactive corrective adjustment has been made in connection with such underpayment. On or about June 30, 1981, the audit of petitioner's Medicaid cost report for the period ending March 31, 1980, was concluded. A formal Notice of Program Reimbursement had not been issued at the time of the hearing. MOTION TO DISMISS DENIED Respondent contends that these proceedings should be summarily concluded "for failure to join an indispensable party," viz., the Federal Government, because it "is Respondent's intention, should any liability result from this action, to make a claim for federal financial participation as to approximately fifty-nine percent of such liability . . . [See generally] 42 U.S.C. Section 1320b-2(a)(2)." Motion to Dismiss, p. 2. This contention must fail for several reasons. Neither the Division of Administrative Hearings nor the Department of Health and Rehabilitative Services has the power or means to bring an unwilling party into a proceeding instituted pursuant to Section 120.57, Florida Statutes (1979). At most, "the presiding officer may, upon motion of a party, or upon his own initiative enter an order requiring that the absent person be notified of the proceeding and be given an opportunity to be joined as a party of record." Rule 28-5.107, Florida Administrative Code. There exists no administrative writ for joining a non-petitioning party in a substantial interest proceeding in the way judicial process can join a party within a court's jurisdiction in a pending judicial proceeding. The two cases respondent cites in support of its motion, Bannon v. Trammell, 118 So. 167 (Fla. 1928), and Heisler v. Florida Mortgage Title and Bonding Co., 142 So.2d 242 (Fla. 1932), are inapposite, because both cases involve judicial, not administrative proceedings. HRS does not really seek joinder of the United States Department of Health and Human Services; instead, HRS argues that the petition should be dismissed and the controversy relegated to federal court because it "believes that the Secretary [of the United States Department of Health and Human Services] will not succumb voluntarily to the jurisdiction of the Division of Administrative Hearings." 2/ Motion to Dismiss, p. 3. Participation by the Department of Health and Human Services in the present proceedings would have been welcomed, as the Hearing Officer indicated at the prehearing conference, but neither the Department itself nor either of the parties requested such participation. In any event, petitioner is seeking additional reimbursement from respondent HRS, not from any federal agency. Medicaid providers like petitioner do not receive any funds directly from the Department of Health and Human Services. Since "[t]he contracts involved are clearly between the hospitals and [H]RS [, n]o third party requirement appears," Montana Deaconess Hospital v. Department of Social and Rehabilitation Services, 538 P.2d 1021, 1024 (Mont. 1975), and the Department of Health and Human Services is not an indispensable party to administrative proceedings arising out of contracts between HRS and Medicaid providers. HRS protests that it might find itself making additional reimbursement to petitioner, yet be deprived of the federal component of such expenditures. See 42 U.S.C. Section 1396b. This prospect is an unlikely one in view of the fact that the Department of Health, Education, and Welfare has repeatedly cited HRS for noncompliance because of under-reimbursements to Medicaid providers. If the Federal Government fails to contribute to any additional reimbursement, it would not be for want of a forum in which HRS could present its claim. There are administrative mechanisms within the Department of Health and Human Services, including its Grant Appeals Board. See 42 U.S.C. Section 1116(d). After exhaustion of administrative remedies, HRS would have access to the courts, if necessary. See Georgia v. Califano, 446 F. Supp. 404 (N.D. Ga. 1977). There is no danger that HRS will be deprived of an opportunity to litigate any question about federal contribution because the United States Department of Health and Human Services is not a party to the present proceedings. MOTION FOR PARTIAL SUMMARY JUDGMENT Petitioner's motion for partial summary judgment was amended ore tenus at the final hearing to delete "and FYE March 31, 1981," on page 1 of the motion, after leave to amend was granted, without objection by respondent. As a technical matter, the motion is a misnomer, since substantial interest proceedings before the Division of Administrative Hearings eventuate in recommended orders, not judgments. But, petitioner's contention that there is no genuine issue as to any material fact is well founded. The parties have so stipulated. (T. 70; Mr. Weiss's letter of November 12, 1981.) At the time the petition was filed, the parties contemplated numerous factual disputes which, however, had all been resolved by the time of final hearing through the commendable efforts of counsel. In the absence of a disputed issue of material fact, the Administrative Procedure Act provides for informal proceedings pursuant to Section 120.57(2), Florida Statutes (1979), "[u]nless otherwise agreed." Section 120.57, Florida Statutes (1979). On December 7, 1981, the parties filed their Stipulation and Agreement to proceed pursuant to Section 120.57(1), Florida Statutes (1979), notwithstanding the absence of any factual dispute. DISPUTE COGNIZABLE In the present case, as in Graham Contracting, Inc. v. Department of General Services, 363 So.2d 810 (Fla. 1st DCA 1978), there "can be no doubt that the Department's contract . . . calls for agency action which potentially affects . . . substantial interests," 363 So.2d at 812, of the petitioning contractor. Cf. Solar Energy Control, Inc. v. State Department of Health and Rehabilitative Services, 377 So.2d 746 (Fla 1st DCA 1979) (reh. den. 1980) (disappointed bidder substantially affected). See Section 120.52(10)(a), Florida Statutes (1979). In Graham Contracting, Inc. v. Department of General Services, 363 So.2d 810 (Fla. 1st DCA 1978), the petitioner sought "additional money and construction time under its contract," 363 So.2d at 813, with a state agency. The court found "no difficulty . . . with sovereign immunity," 363 So.2d at 813, and held that a contractor with a state agency could invoke the Administrative Procedure Act in order to enforce its contract, even though the contract purported to establish another method for settling the contract dispute. A clause in the contract at issue in the Graham Contracting case contemplated agency action outside the parameters of Chapter 120, Florida Statutes, in resolving certain disputes under the contract. In contrast, each of the successive contracts on which petitioner predicates its claim in the present case contains the following provision: "The hospital agrees to comply with the rules, policies, and procedures required by [HRS's] Division of Family Services for this program." Among the rules thus incorporated by reference into the contracts between petitioner and respondent is Rule 10C-7.35, Florida Administrative Code, which provides: An official representative of a facility participating in Medicaid, . . . or . . . representative, may appeal Medicaid Program policy, procedure, or administrative rulings whenever the provider feels there has been an unfair, illegal or inappropriate action by the Department affecting them or their facility. (1) Provider Appeals The Administrative Procedures [sic] Act, Chapter 120 F.S., provides for provider appeals and hearings, which are conducted by the Division of Administrative Hearings in the Department of Administration. The spe- cific rule relative to the appeal and hearing process is Chapter 28-3 [sic] of the Florida Administrative Rules. . . Since, by reference to Rule 10C-7.35, Florida Administrative Code, the contract in the present case incorporates Chapter 120, Florida Statutes, the applicability of the Administrative Procedure Act is even clearer here than in the Graham Contracting case. THE MERITS The parties have stipulated that petitioner has been reimbursed by respondent less than its reasonable costs of providing covered inpatient hospital services over the time period in question. Under-reimbursement of this kind is not authorized by Section 409.266, Florida Statutes, which incorporates the federal statutory requirement that hospitals which, like petitioner, provide Medicaid services be reimbursed by respondent for reasonable costs incurred, in accordance with an approved State Plan, and not some lesser amount. 42 U.S.C. Section 1396a(a)(13)(B), Pub. L. 89-97, Section 121(a) redesignated 42 U.S.C. Section 1396a(a)(13)(D), Pub. L. 90-248, Section 224(a). All Florida "State Plan provisions . . . approved by HEW and . . . govern[ing] HRS's reimbursement of inpatient hospital services prior to July 1, 1981, commit HRS to reimburse hospitals [like petitioner] that also participated in the Medicare program for their reasonable costs of providing inpatient hospital services to Medicaid patients, applying Medicare cost reimbursement principles and standards." Prehearing Stipulation, Paragraph 19. The record is clear. Respondent consistently reimbursed petitioner less than its reasonable costs of providing inpatient hospital services in order to cut its own expenses and in doing so jeopardized the entire Medicaid program. This cannot be condoned, even though respondent acted under color of law, viz., Rule 10C-7.39(6), Florida Administrative Code [now repealed and declared invalid; see Pan American Hospital Corporation v. Department of Health and Rehabilitative Services, No. 81-1480R (DOAH; December 4, 1981)], and even though a lack of money or, at least, an apparent shortage was the reason for respondent's parsimony. The question remains, however, whether this dereliction on respondent's part should inure to the benefit of petitioner; and the answer turns on the construction of the agreement between the parties attached as an appendix to this order. Petitioner argues cogently that public policy has clearly been enunciated by statute to be full reimbursement for costs reasonably incurred by Medicaid providers in furnishing covered services. There can be no clearer expression of public policy than a statute duly enacted; and the reasons behind the full reimbursement policy are themselves compelling: to deal fairly with the providers, not only for fairness sake, but also to assure their participation in the program, and to remove any temptation to give indigent patients substandard care, inter alia. But, there is surely an overriding public policy requiring that a contractor with state government who voluntarily agrees to forego a claim against the public fisc be held to that agreement in administrative proceedings like these. The form agreement between petitioner and respondent, which they renewed annually, states: "It is understood that reimbursement will be made on the basis of an interim payment plan in the form of a per diem cost rate, plus a percentage allowance for the year in lieu of retroactive payment adjustment. However, . . . in the event the hospital did not receive its audited reasonable costs in the year prior to the current year then the hospital may deduct from the refund the prior year deficiency." (Emphasis supplied.) The agreement thus contemplated under-reimbursement and specified the method for recoupment, if there was to be any. Any "retroactive payment adjustment," as the result of administrative proceedings or otherwise, is specifically ruled out. Elsewhere in the parties' agreement is found this language: [T]he fiscal responsibility of [respondent's] Division of Family Services is subjected [sic] to the appropriation and availability of funds to the Medicaid program . . . by the state legislature every year." The terms of the agreement make clear that under-reimbursement is not in itself a breach. Respondent's failure to compute annually a "new percentage . . . based on hospital cost trends" was attributable to a shortage of funds; and the agreement provided that respondent's "fiscal responsibility" was subject to just such a shortage. In sum, provisions of the agreement petitioner voluntarily entered into with respondent operate in much the same way as a liquidated damages clause and preclude the relief petitioner seeks. Petitioner's invocation of the parol evidence rule is unavailing. Even if the stipulated facts outside the four corners of the form agreement are looked to, the course of dealing between these parties buttresses the construction outlined above. The fact that respondent may have settled a case it litigated against another hospital in some other way, as asserted by petitioner, is technically irrelevant.
Recommendation Upon consideration of the foregoing, it is RECOMMENDED: That respondent deny the prayer of the petitioner for additional reimbursement. DONE AND ENTERED this 10th day of December, 1981, in Tallahassee, Florida. ROBERT T. BENTON II Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 10th day of December, 1981.
The Issue Whether the Department's proposed amendment of Rule 38F- 7.020, Florida Administrative Code, constitutes an invalid exercise of its delegated legislative authority under Section 120.52(8), Florida Statutes, [1996 Supp.], or whether the authority specified in the proposed rule is sufficient for the Department to adopt the proposed rule?
Findings Of Fact The Florida Society of Anesthesiologists is a voluntary, nonprofit association comprised of individual members, each of whom is licensed in the State of Florida to practice medicine. Petitioner, Robert A. Guskiewicz, M.D., is a licensed medical doctor in the State of Florida specializing in anesthesia. Pursuant to Section 440.13(12), Florida Statutes, a three-member panel is charged with the responsibility of determining the schedules of maximum reimbursement for physician treatment of workers' compensation patients. In March 1996, the three-member panel convened and adopted a resource-based relative value scale ("RBRVS") reimbursement system, which, on or about January 3, 1997, the Department published notice of its intent to embody in proposed Rule 38F-7.020, in Vol. 23, No. 1 of the Florida Administrative Law Weekly. A copy is attached and incorporated herein by reference. The proposed Rule lists Sections 440.13(7), 440.13(8), 440.13(11), 440.13(12), 440.13(13), 440.13(14), and 440.591, Florida Statutes, as specific authority. The proposed Rule implements Sections 440.13(6), 440.13(7), 440.13(8), 440.13(11), 440.13(12), 440.13(13), and 440.13(14), Florida Statutes. There are no other facts necessary for determination of the matter.
The Issue Whether the Department of Health and Rehabilitative Services improperly determined the Petitioners' rate of Medicaid reimbursement for the period January 1, 1990, through June 30, 1990?
Findings Of Fact The Emergency Rule and the Permanent Rule have been determined to be valid in a Final Order entered simultaneously with this Recommended Order. The Department's action in freezing the Medicaid reimbursement rate of the Petitioners in these cases was taken pursuant to the Emergency Rule and the Permanent Rule.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department enter a Final Order in these cases dismissing the Petitioners' amended petitions. DONE and ENTERED this 26 day of May, 1992, in Tallahassee, Florida. LARRY J. SARTIN Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this day of May, 1992. APPENDIX Case Numbers 91-4893, 91-4894, 91-4895, 91-4914, 91-4929, 91-5837 and 91-6191 The parties have submitted proposed findings of fact. It has been noted below which proposed findings of fact have been generally accepted and the paragraph number(s) in the Recommended Order where they have been accepted, if any. Those proposed findings of fact which have been rejected and the reason for their rejection have also been noted. The Petitioners' Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 1 and 4. 2 5-6. 3 13. 4 7. 5 3 and 13-14. 6 15. 7 17-19. 8 20. 9 21. 10 22. 11 23. 12 8. 13 12. 14 11. 15 24. 16 25-27. 17 28-29. 18 29. 19 30-32. 20 34-37. See 39. The last three sentences are not relevant. The determination of compliance with specific federal requirements for the Department's action was the responsibility of HCFA. HCFA presumably determined that the Department complied with all federal requirements since it approved the Department's plan amendment. 39. The last two sentences are not relevant. The determination of compliance with specific federal requirements for the Department's action was the responsibility of HCFA. HCFA presumably determined that the Department complied with all federal requirements since it approved the Department's plan amendment. 23 40-41. 24 43. 25 45. 26 46. 27 47. 28 48. The last two sentences are argument. 29 49. 30 42. 31 29 and 32. The weight of the evidence failed to prove the Department's motive for providing assurances to HCFA were anything other than to meet federal requirements. 32 28. 33 55. 34 34-35. See 59-60 and 63. The detailed findings of fact concerning the nature of the Department's inflationary analysis are not necessary. HCFA rejected this analysis and based its decision on other information provided by the Department. Additionally, the determination of compliance with specific federal requirements for the Department's action was the responsibility of HCFA. HCFA presumably determined that the Department complied with all federal requirements since it approved the Department's plan amendment. 35 See 60-63. 36 52-54. 37 54. 38 55 and hereby accepted. 39 59 and hereby accepted. 40 See 60-65. HCFA did not "reject" the Department's proposed plan amendment. 41 See 63. 42-43 See 60-66. 44-46, 50-54 Although the proposed findings of fact concerning what the Department told HCFA are generally correct, these proposed findings of fact are not relevant to this proceeding. As previously stated, the determination of compliance with specific federal requirements for the Department's action was the responsibility of HCFA. HCFA presumably determined that the Department complied with all federal requirements since it approved the Department's plan amendment. 47 Hereby accepted. 48-49 Hereby accepted except for the proposed findings that the Department "misled", "misrepresented" or provided "inaccurate and misleading information." The last sentence of proposed finding of fact 49 is not relevant. 55 67. 56 Hereby accepted. 57 Not relevant. 58 69. 59 70. 60 71. 61 50 and 73. The Department's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 1. 2 4. 3 5. 4 6. 5 3 and 13-14. 6 15. 7 17-19. 8 20. 9 21. 10 22. 11 23. 12 8. 13 11. 14 24. 15 25-26. 16 Hereby accepted. 17 27 and 29-32. 18 34-37. 19 39-41. 20 41. 21 43. 22 33. 23 42. 24 52-53 and 58. 25 54. 26 55. 27 56. 28 57. 29 60-65. 30 67. 31 68. 32 69. 33 70. 34 71. 35 50 and 73. 36 72. 37 73. 38 Hereby accepted. COPIES FURNISHED: Sam Power Agency Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 John Slye General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 Thomas C. Fox, Esquire Michael D. Smith, Esquire 1200 18th Street, N.W. Washington, D.C. 20036 Alfred W. Clark, Esquire Post Office Box 623 Tallahassee, Florida 32302 W. David Watkins, Esquire Post Office Box 6507 Tallahassee, Florida 32314-6507 David Pius Medicaid Counsel Department of Health and Rehabilitative Services 1317 Winewood Boulevard Building 6, Room 230 Tallahassee, Florida 32399-0700
Findings Of Fact The Medicaid reimbursement program is a joint state and federal program which provides reimbursement to Florida-licensed nursing homes for long-term care provided to Medicaid eligible persons. The Florida Title XIX Long Term Care Reimbursement Plan (Plan) governs reimbursement to nursing homes for the provision of Medicaid services. The Agency for Health Care Administration (AHCA) is the State agency responsible for implementation of the Medicaid program in the State of Florida. The AHCA is the successor in interest to the Department of Health and Rehabilitative Services, the agency originally responsible for Medicaid reimbursement. At all times material to this case, Quality Health Care (Quality) is and has been a provider of services for purposes of the Medicaid program. Medicaid per diem reimbursement rates for nursing home care were historically based on a "cost" system, which included four components: operating costs, patient care costs, property asset costs and return on equity. Re-valuation of property due to property asset sales and refinancing mechanisms, resulted in a steadily increasing property cost component to the reimbursement formula. The Federal Deficit Reduction Act of 1984 (DEFRA) was enacted in part to limit the effect of property asset re-valuation on reimbursement. The DEFRA restricted the "step up" in property costs which occurred when existing facilities were sold and existing property was re-valued. The actual effect of the DEFRA provisions was to freeze property cost reimbursement. In response to DEFRA, the State of Florida revised its reimbursement program in 1984-85 to shift from the traditional cost system to the fair rental value system (FRVS.) The FRVS, designed to provide an alternative to the DEFRA imposed limits, was created by the State of Florida and the nursing home industry to address the industry's concerns about the effect of DEFRA on reimbursement rates and cash flow. The FRVS methodology imputes a provider's property asset value and indexes the value to specified inflation factors. A provider is reimbursed for a portion of the indexed value rather than actual property costs. The methodology itself is not at issue in this proceeding. On October 1, 1985, the State of Florida implemented Medicaid reimbursement on the FRVS program. At the time of implementation of the FRVS, it was determined that application of the FRVS should be temporarily deferred for some providers. The temporary deferment was intended to protect existing providers committed to long term property liability in anticipation of cost reimbursement rates from being injured by the altered reimbursement program and the resulting reduction in reimbursement rates. In order to provide for deferment of the FRVS, the creators of the system created a "hold harmless" provision designed to protect providers in existence and enrolled in the Medicaid program prior to the October 1, 1985 FRVS implementation date by continuing to reimburse such providers under the cost system for an extended period of time. For purposes of the "hold harmless" provision, Quality was in existence and was enrolled in the Medicaid program on October 1, 1985. In creating the FRVS and hold harmless provision, it was clear that facilities qualifying for cost reimbursement under the hold harmless system would receive a benefit unavailable to FRVS-reimbursed providers. It was necessary to create a mechanism by which the advantage of cost reimbursement could be negated. Accordingly the creators determined that the continued cost reimbursement would, be viewed as an "overpayment" by the agency to the facility which would need at some future date to be repaid. The overpayment is known as the "hold harmless payback liability." Because actual property costs decrease over time due to depreciation and retirement of debt, a provider's cost reimbursement eventually becomes less than the projected FRVS reimbursement rate. When a provider's projected reimbursement under the FRVS exceeds the costs system reimbursement, a provider would normally become entitled to reimbursement at the higher rate. In order to collect the hold harmless payback liability, a provider in the hold harmless program otherwise entitled to the higher FRVS reimbursement receives only cost reimbursement until the point when the "overpayment" by the agency has been "reimbursed." When the hold harmless payback liability is extinguished, the provider receives full FRVS reimbursement. Plan section IV.D. provides that during the transition period, some facilities shall continue receive cost reimbursement until such time as FRVS payments exceed cost reimbursement as specified in Section V.E.1.h. of the Plan, at which time a facility shall begin reimbursement under the FRVS. Plan section IV.D. provides as follows: Effective October 1, 1985, a fair rental value system (FRVS) shall be used to reimburse facilities for property. To prevent any facility from receiving lower reimbursement under FRVS than under the former method where depreciation plus interest costs were used to calculate payments, there shall be a transition period in which some facilities shall continue to be paid depreciation plus interest until such time as FRVS payments exceed depreciation and interest as specified in Section V.E.1.h. At that time a facility shall begin reimbursement under the FRVS. Facilities entering the program after October 1, 1985 that had entered into an armslength (not between related parties) legally enforceable agreement for construction or purchase loans prior to October 1, 1985 shall be eligible for the hold harmless clause per Section V.E.1.h. Plan section V.E.1.h. sets forth the hold harmless provision and provides that if after calculation of the FRVS rate FRVS reimbursement is lower than cost reimbursement, a facility shall continue to receive cost reimbursement until such time as the hold harmless payback liability is extinguished. Plan section V.E.1.h. provides as follows: A "hold harmless" provision shall be implemented to ensure that facilities existing and enrolled in the Medicaid program at October 1, 1985 do not receive reimbursement for property and return on equity or use allowance under the FRVS method less than the property cost reimbursement plus return on equity or use allowance given at September 30, 1985. If, after calculation of the FRVS rate, that reimbursement would be lower than depreciation plus interest costs under III.G. 3.-5. of this plan, a facility shall continue to be reimbursed depreciation plus interest according to III.G. 3.-5. of this plan until such time as the net difference in total payments between III.G. 3.-5. and FRVS is -0-. Plan section III.G. 3.-5. provides the methodology for calculation of cost reimbursement. As of October 1, 1985, Quality's cost reimbursement exceeded the FRVS reimbursement and the "hold harmless" provision was applicable to Quality. As of October 1, 1985, Quality was entitled to cost reimbursement under the "hold harmless" provision based on the Plan provisions cited herein. The Medicaid program establishes reimbursement rates on a semiannual basis. Rates are communicated to providers via rate notices. For all periods except the July 1, 1987 and January 1, 1988 rate cycles, Quality's cost reimbursement rate exceeded the projected FRVS reimbursement rate. For the July 1, 1987 and January 1, 1988 rate cycles, Quality's cost reimbursement rate was less than the projected FRVS reimbursement rate. The rate fluctuation experienced by Quality in the July 1, 1987 and January 1, 1988 rate periods is best described as an anomaly. On August 19, 1993, the agency issued a retroactive notice of rate adjustment from cost to FRVS beginning in the July 1989 rate cycle and for all subsequent periods. The evidence is unclear as to why the retroactive rate adjustment was to become effective beginning in the July 1989 rate cycle. By letter of September 24, 1993, the AHCA notified Quality that its hold harmless payback liability was $212,574.32. The agency asserts that based on Plan section IV.D., Quality should be shifted to the FRVS reimbursement program based on that fact that for the two rate cycles beginning in July 1, 1987, FRVS reimbursement payments exceeded costs reimbursement. The agency's position is contrary to the language of Plan section V.E.1.h. (the hold harmless provision) which states as follows: ...If, after calculation of the FRVS rate, that reimbursement would be lower than depreciation plus interest costs under III.G. 3.-5. of this plan, a facility shall continue to be reimbursed depreciation plus interest according to III.G. 3.-5. of this plan until such time as the net difference in total payments between III.G. 3.-5. and FRVS is -0-. Based on the Plan provisions cited herein, for the July 1, 1987 and January 1, 1988 rate periods, and for the subsequent period within the time frame at issue in this proceeding, Quality would be entitled to cost reimbursement because the net difference in total payments between cost and FRVS has not reached zero. It is not unusual for reimbursement rates to be set at times other than at the beginning of a rate cycle. Such rate changes result in additional rate notices to providers. On three occasions, the agency sent notices to Quality stating that the reimbursement rate was being set at the lower FRVS level. On each occasion, Quality inquired and was informed that the reimbursement rate would remain at cost. The AHCA asserts that the responses to the Quality inquiries were erroneous and that it is entitled to correct the errors. Quality asserts that it relied to its detriment on the responses to its inquiries and that the agency should be estopped from retroactively altering the reimbursement mechanism under which Quality is paid.
Recommendation Based on the foregoing, it is hereby RECOMMENDED that the Agency for Health Care Administration enter a Final Order providing that Quality Health Care Center continue to be reimbursed under the cost reimbursement system until such time as Quality's hold harmless payback liability is extinguished. DONE and RECOMMENDED this 29th day of June, 1994 in Tallahassee, Florida. WILLIAM F. QUATTLEBAUM Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 29th day of June 1994. APPENDIX TO RECOMMENDED ORDER, CASE NO. 94-0164 To comply with the requirements of Section 120.59(2), Florida Statutes, the following constitute rulings on proposed findings of facts submitted by the parties. Petitioner The Petitioner's proposed findings of fact are accepted as modified and incorporated in the Recommended Order except as follows: 24. Rejected, cumulative. 27-28. Rejected, unnecessary. 30. Rejected, unnecessary. 39-56. Rejected, unnecessary. Respondent The Respondent's proposed findings of fact are accepted as modified and incorporated in the Recommended Order except as follows: 8. Rejected, cumulative. 11. Rejected, not supported by cited testimony. 20-23. Rejected, unnecessary. 24. Rejected as to use of term "discovered." ,The agency had sent three notices Quality prior to the August 1993 action. 26-36. Rejected, unnecessary. 37. Rejected, irrelevant. The testimony is clear that the drafters of the Plan did not contemplate the situation at issue in this case. 40-43. Rejected, irrelevant, not supported by the greater weight of the evidence. There is no credible evidence that any other provider has experienced this situation. Further, such treatment would be contrary to the clear provisions of the Plan. 47. Irrelevant. There is no deadline for payment of hold harmless payback liability. 48-52. Rejected, unnecessary. COPIES FURNISHED: Douglas M. Cook, Director 2727 Mahan Drive Tallahassee, Florida 32308 Harold D. Lewis, Esquire The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303 Peter A. Lewis, Esquire 307 West Park Avenue Post Office Box 1017 Tallahassee, Florida 32302-1017 Heidi Garwood, Esquire 1317 Winewood Boulevard Building 6, Room 234 Tallahassee, Florida 32399-0700
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.
