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
The Issue The issue is whether Respondent should grant or deny a Petition for Resolution of Reimbursement Dispute filed by a health care provider or its assignee. The dispute concerns the proper reimbursement amount for 60 units of meloxicam 15 mg.
Findings Of Fact J. G. is 30 years old and suffered a compensable injury on September 14, 2009. On December 14, 2011, J. G. visited the Advanced Pain Management office of Dr. Daitch, who dispensed to the employee 60 units of meloxicam 15 mg. Meloxicam is a prescription pain medication. Dr. Daitch obtains certain prescription drugs from Unit Dose Services for dispensing in his office. Although Dr. Daitch sees patients who are not covered by Workers' Compensation, he dispenses prescription drugs in his office only to patients covered by Workers' Compensation and has been doing so for four years. Dr. Daitch testified that he was unaware of the pricing of the prescription drugs that he dispenses in his office, and he was unaware of any contract that, in this case, might require him or his assignee, as described in the next paragraph, to discount this reimbursement claim. But he testified that the dispensing of prescription drugs through retail chains such as Walgreens and CVS is "very profitable." (Tr. of deposition of Dr. Daitch 16). All of this testimony is credited. However, it is not unusual for providers to be unaware of in-network or preferred-provider contracts when that they dispense prescription drugs to injured employees. As a certified health care provider, Dr. Daitch was presumptively aware that, whenever he dispenses prescription drugs, his reimbursement may be limited to what is authorized for an in- network or preferred provider.3/ As he did in this case, Dr. Daitch routinely assigns his claims for reimbursement for dispensed prescription drugs. Dr. Daitch testified that he or his practice has a contract with Automated Healthcare Solutions, but the assignee in this case is Prescription Partners--either as a result of a reassignment or Dr. Daitch's misunderstanding of the identity of the billing contractor. For the December 14 office visit, Dr. Daitch completed a CMS-1500, which includes a National Drug Code (NDC) for the meloxicam that he dispensed, a note that he dispensed 60 units of the drug, a reimbursement claim of $437.48 for the drug, and a reimbursement claim of $4.18 as a dispensing fee. Appearing in the upper right-hand corner of the CMS-1500 is the name, "AmTrust of North America," suggesting that Dr. Daitch or Prescription Partners believed that AmTrust North America, Inc., or AmTrust North America of Florida, Inc., was the carrier or claims administrator. The CMS-1500 states that Prescription Partners is the "billing provider" and that Prescription Partners submitted the CMS-1500 to AmTrust North America. The carrier is Petitioner. AmTrust North America, Inc., is a multistate insurance agency, although it is not licensed in Florida. Formerly known as Associated Industries Insurance Service, Inc., AmTrust North America of Florida, Inc., is an insurance agency licensed in Florida and serves as a third-party administrator of claims on policies issued by Petitioner and other carriers, including the claim involved in this case. Each of these corporations is owned by AmTrust Financial Services, Inc., although AmTrust North America of Florida, Inc., was principally owned, as of July 1, 2009, by AmTrust North America, Inc. By EOBR received on January 11, 2012, Petitioner notified Prescription Partners that Petitioner was disallowing the dispensing fee and adjusting the reimbursement amount for the 60 units of meloxicam to $385.48. The explanation for both actions is: "Paid; no modification to the information provided on the medical bill; payment made pursuant to written contractual arrangement (network or PPO named required): ."4/ There is no network or PPO identified in the space after the final colon. The EOBR advises that reconsiderations or appeals must be submitted to Petitioner and Fair Pay SOLUTIONS, if Prescription Partners had any questions about the "analysis." Prescription Partners had questions about the analysis, but addressed them to OMS by filing the Petition. The Petition, which was timely filed, shows that the petitioner is Dr. Daitch, but that the Petition is presented by Prescription Partners, as an entity acting on behalf of the health care provider. The Petition shows copies were mailed to "AmTrust" and Petitioner. The Petition states the gist of the dispute as follows: "Carrier is paying under the AWP not according to the FL fee schedule. This claim is being processed incorrectly." The Petition states that the amount in dispute is $56.18. Attached to the Petition are four documents: the above-described CMS-1500 and EOBR, a Calculation Sheet that renders the above-described details on the amounts in dispute, and a document identified as "Detailed Product Information" from the "Red Book." The "RedBook" is the Drug Topics Red Book™, which is a price index published by Medical Economics Company, Inc. The Red Book™ provides an AWP, by NDC, for all prescription drugs, including repackaged drugs. The "Detailed Product Information," which is from an online version of the Red Book™, identifies the same UDC referenced in the above-described CMS-1500 and indicates that the drug is a repackaged generic. The "Detailed Product Information" also contains "current pricing information" for meloxicam 15 mg. The "current pricing information" shows that the AWP is $218.74 and "HCFA"-- evidently referring to Medicare reimbursement through the Health Care Financing Administration (HCFA)--is $6.28. These prices appear to apply to 30 units. The AWP is a price that is designated by the manufacturer or repackager and reported to the Red Book™ publisher. Contrary to its name, the AWP does not necessarily correspond to the mean price of all of the arm's length, wholesale transactions in the drug over a period of time; the AWP more closely resembles the "undiscounted sticker price" assigned to a drug by its manufacturer or repackager.5/ Unlike AWP, repackaging is self-explanatory. A repackager purchases a drug from its manufacturer in bulk--say, 1000 units--and repackages the drug in small quantities--say, 30 units--for dispensing by physicians and other appropriate health care providers. The repackager provides a package and label and obtains a unique UDC for the repackaged drug. By obtaining a unique UDC for the repackaged drug, the repackager is able to set a different AWP from the AWP assigned the drug by its manufacturer. In general, the AWPs assigned by repackagers are 80%-200% higher than the AWPs assigned by manufacturers. As between manufacturers and repackagers of meloxicam at the time in question, the AWP for 60 units ranged from about $290 for manufacturers to about $450 for repackagers. At the time in question, meloxicam was a generic. Now a MAC drug, which means it carries a "maximum allowable cost" because it is now manufactured by several manufacturers, meloxicam presently supports an AWP of $60.91 for 60 units. Petitioner timely filed a carrier response to the Petition. The response states that the carrier has contracted with Carlisle for the reimbursement of prescription drugs at reduced prices. The response states that neither Prescription Partners nor Dr. Daitch is a party to the contract, and they must accept the reduced reimbursement rate. The response includes a copy of a written contract between Carlisle and AmTrust North America (Written Contract); a letter dated January 12, 2012, from the president of Carlisle to the Claims Manager of AmTrust North America of Florida, Inc.; an invoice showing the reduced reimbursements for the subject transaction; and Informational Bulletin DFS-02-2009 dated August 12, 2009. Signed by both parties on August 2, 2012, and, from all appearances, taking effect on that date, the Written Contract is only 22 lines long, exclusive of headings. Its provisions are as follows: AmTrust North America will "exclusively" use Carlisle's "PBM" services. Carlisle will provide PBM services for AmTrust North America throughout the United States. Carlisle's PBM program includes over 64,000 pharmacies, including all of the major retail chains--Walgreens, CVS, Target, and Rite-Aid. If there are no contracted pharmacies that are "reasonably accessible" to an employee, the employee may use an out-of-network pharmacy. Carlisle will submit all pharmacy invoices on a form acceptable to AmTrust North America. The "terms" are "net-30, or as mandated by the appropriate state law." Carlisle will maintain pharmacy records for three years from the last activity. "Insurance. See attachment." (The versions of the contract submitted into evidence have no attachments.) g. The agreement is for one year, after which the agreement automatically renews unless either party provides written notice of termination at least 90 days prior to the renewal date. Carlisle is not an affiliate of AmTrust North America, Inc. Carlisle has a contract with an entity that has contracts with large chains of retail pharmacies. This networking-forming entity obtains discounts from AWPs for various classes of prescription drugs: brand name drugs, generic drugs, and MAC drugs. Pursuant to these contractual arrangements, Carlisle obtains for AmTrust North America, Inc., and its affiliates discounts of 12% off AWP for generic drugs. Eric Lloyd, OMS Program Administrator, testified that this is a relatively low percentage among in-network or preferred providers; this testimony is credited. The January 12, 2012, letter from Carlisle to AmTrust North America of Florida states that AmTrust North America of Florida has the right, under the Written Contract, to reimburse an out-of-network or nonpreferred provider at the same rate that applies to an in-network or preferred provider. The letter states that the pricing worksheet that Carlisle supplies to AmTrust North America of Florida, Inc., shows the reimbursement amount for prescription drugs obtained through in-network or preferred-provider pharmacies. Carlisle uses Medi-Span, which provides AWPs by NDCs like the Red Book™, as the source of the AWP for every prescription drug, to which Carlisle then applies the appropriate discount, depending on whether the drug is a brand name, generic, or MAC drug. Respondent's Information Bulletin DVS-02-2009, which was issued on August 12, 2009, is irrelevant to this case.6/ OMS resolved this reimbursement dispute in favor of Prescription Partners. In its Reimbursement Dispute Determination, OMS cites two grounds for this proposed agency action: 1) the Written Contract is between Carlisle and AmTrust North America, not Petitioner, and 2) the Written Contract provides no drug pricing methodology by which OMS could validate the accuracy of the discount that Petitioner applied to the AWP. The Reimbursement Dispute Determination mentions the Florida Workers' Compensation Health Care Provider Reimbursement Manual, 2008 edition (Provider Manual), which is incorporated by reference at Florida Administrative Code Rule 69L-7.020. Provider Manual II.F.1.b.(1) requires carriers to reimburse certified Florida health care providers pursuant to the reimbursement guidelines contained in the manual: the reimbursement shall be the "agreed upon contract price (whether agreed upon prior to rendering service(s) or upon submission of bill) or the maximum reimbursement allowance (MRA) in the appropriate schedule pursuant to section 440.13(12)(a), F.S." Provider Manual V.A recognizes that prescription drugs may be dispensed by pharmacists or dispensing physicians. Provider Manual V.A.5.a. limits reimbursement to the pharmacist or dispensing practitioner, pursuant to the formula contained in the manual. For prescription drugs, Provider Manual V.A.5.b states that reimbursement shall be by the "pharmaceutical reimbursement formula," which is either the AWP plus a $4.18 dispensing fee or the "contracted reimbursement amount determined in accordance with the contractual arrangement between the provider and insurer." The Provider Manual does not address the dispensing of prescription drugs by an out-of- network or nonpreferred provider. Alan McClain, Jr., Carlisle executive vice-president, negotiated the Written Contract. In testimony, Mr. McClain identified a few contractual provisions that are not contained in the Written Contract, such as that the discounts are confidential, but that AmTrust North America could disclose them if it wished, and that the affiliates of AmTrust North America, including Petitioner, are parties to the Written Contract. Mr. McClain also testified that the three levels of discounts are primarily derived from course of dealing, rather than a formal schedule to the Written Contract. Mr. McClain's testimony is credited. Nothing in this record suggests any discord between the AmTrust family of corporations, on the one hand, and Carlisle and its direct and indirect contractual counterparties described above, on the other hand. To the contrary, the business relationships among all of these parties appear to be entirely satisfactory. This simple fact, not fraud or collusion, explains the readiness of the parties freely to supplement the Written Contract with layers of oral agreements-- some express and some implied in fact from course of dealing--in order to perpetuate, reinforce, and extend these advantageous business relationships. These same written and oral contracts, both express and implied, that have produced such satisfaction among the parties on the carrier side of the transaction have produced no similar effect on Respondent, which has limited its consideration to the Written Contract and rejected the oral contracts and course of dealing. Petitioner objects to Respondent's treatment of these contractual arrangements on the ground that Respondent has not scrutinized as closely the business relationships and their documentation on the provider's side of the transaction. In its least appealing form, Petitioner's argument is: if Respondent casually accepts the role of Prescription Partners as assignee without insisting on documentation, it must do the same as to the right of Petitioner to access the discounts provided by Carlisle and impose them on out-of-network or nonpreferred providers such as Dr. Daitch. The ultimate question, as a matter of law, is whether the operative reimbursement provisions of the Workers' Compensation Law support Respondent's proposed agency action. But Petitioner's argument, as a matter of fact, exposes serious flaws in Respondent's posture in this case. Nothing in the record suggests any problems demanding regulatory intervention in the form of Respondent's prosecution of Prescription Partner's claim to an additional reimbursement of $56.18. There is no suggestion that Petitioner or its contractual counterparties have disrupted the reimbursement process. In particular, there is no suggestion that the 12% discount from AWP at issue in this case is excessive by industry standards; to the contrary, it is a relatively modest discount. In a more appealing form, Petitioner's argument reflects that multiple parties may be involved in what would seem to the injured employee to be the simplest of transactions--obtaining 60 pills for chronic or recurring pain-- and the business relationships among these parties are defined by a variety of oral and written, express and implied, contracts. In this light, Respondent's failure to demand documentation of the contractual arrangements among the multiple parties on the provider side of the transaction implicitly acknowledges the role of oral contracts and course of dealing in defining business relationships. By contrast, Respondent's insistence on documentation of the business relationships among the multiple parties on the carrier side of the transaction is inconsistent with legitimate business practices. The Conclusions of Law will consider the extent to which Respondent's insistence on documentation on the carrier side of the transaction finds any support among the operative reimbursement provisions.
Recommendation It is RECOMMENDED that the Division of Workers' Compensation enter a final order dismissing the petition of Dr. Jonathan Daitch and Prescription Partners, LLC, for resolution of a reimbursement dispute. DONE AND ENTERED this 7th day of May, 2013, in Tallahassee, Leon County, Florida. S ROBERT E. MEALE 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 7th day of May, 2013.
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.
Findings Of Fact Petitioner, Indigo Manor, is a Florida licensed nursing home and Medicaid provider. Petitioner is a long term provider, and the successor in interest in the facility originally built by Health Care and Retirement Corporation of America (HCRC). Petitioner's address is 595 Williamson Boulevard, Daytona Beach, Florida. Respondent is the single state agency responsible for administering the Florida Medicaid program pursuant to Section 409.913, Florida Statutes, and rules promulgated thereunder. Reimbursement to nursing homes is governed by the Florida Title XIX Long-Term Care Reimbursement Plan (the Plan). The Plan is adopted by reference by Rule 10C-7.0482, Florida Administrative Code. Under the Plan, long-term care providers are reimbursed under a prospective reimbursement methodology. Rates are projected for a rate semester based on historical cost data. The provider is either reimbursed for depreciation and interest or is reimbursed under the Fair Rental Value System ("FRVS") for the property cost component of the provider's rate. Under FRVS, reimbursement is based on the acquisition costs of a capital asset. These acquisition costs are indexed forward based on a portion of the rate of increase in the Dodge Construction Index. (See Long-Term Care Reimbursement Plan at Section V.E.I.a.) Nursing homes participating in the Medicaid program on October 1, 1985, when the FRVS was implemented, were allowed to base their reimbursement on depreciation of actual property and interest costs. Most facilities entering the program after October 1, 1985, were put on FRVS. To prevent any facility from receiving lower reimbursement under the FRVS method as opposed to the depreciation plus interest method, there was a transition period during which some facilities continued to be paid depreciation plus interest payments until the FRVS payments exceeded the depreciation and interest payments as specified in Section V.E.1.h. of the Plan. At that time, a facility would receive reimbursement under the FRVS method. (See Long-Term Care Reimbursement Plan at Section IV.D.) Frank D. Hughes, an expert in Medicaid reimbursement to nursing homes, testified in behalf of the Department. He identified a chart, Respondent's Exhibit 1, which shows that costs reimbursement to a provider may start at a higher reimbursement per diem than FRVS, but that component of the provider's total reimbursement rate will decline over time; and FRVS will start a provider at a lower initial rate, but the property component of the total reimbursement rate will increase over time. Section IV.D. of the Department's Plan limits applicability of the hold harmless/payback clause to facilities entering the Medicaid program after October 1, 1985, which had committed to construction or purchase loans prior to October 1, 1985. The Department's witness clarified that the Department interpreted the language "committed to construction or purchase loans" in the disjunctive, i.e., "committed to construction" or "committed to purchase loans" prior to October 1, 1985. Further, the witness clarified that the Department interpreted the language "committed to construction" to be limited to providers who were subject to legally enforceable agreements for construction or financing. The Department's rationale was that only those providers who were subject to legally enforceable agreements would be adversely effected by the Plan's new method, and needed that protection of the hold harmless/payback clause. Mr. Hughes clarified that, if enforceable commitments had been made for loans, the Department would consider the entity to have met the "commitment" requirement. Mr. Hughes also clarified that, if a provider was able to finance a construction project without loans and accomplish the construction itself, the Department would consider the provider "committed" to construction at the point it entered into subcontracts for the project, or alternatively, at the point actual construction of the facility was begun. A stated intent to build a nursing home or nonbinding preparation prior to October 1, 1985 was insufficient to establish a commitment to construction. In September through November 1985, Health Care and Retirement Corporation of America (HCRC) began the permitting process to construct the subject nursing home on property it owned in Daytona Beach, Volusia County, Florida. The Department conceded that HCRC, the predecessor of Indigo Manor, had taken certain actions towards constructing the facility to include purchasing the property, architectural and engineering drawings and plans, obtaining building permits, and obtaining a Certificate of Need. In November 1985, construction on the project actually began. On November 25, 1985, HCRC entered into a construction contract with a subsidiary of HCRC to construct the nursing home. Funds for construction were obtained through internal transfers at HCRC via lines of credit available to HCRC. It was conceded by Petitioner that there were no loans obtained for the construction of the facility. The facility was completed and enrolled in the Medicaid program in July 1987. At that time, it was placed on the FRVS for its property costs. Subsequently, in December of 1987, the facility was transferred to the cost reimbursement system, effective retroactively to its date of entry in July. There is no documentation in the Department's files to indicate the reason the change was made, and no documentation to indicate additional or revised information was submitted to the Department to justify the change. The facility remained on the cost basis until February 1992, when the Department reviewed the audits in the facility's reimbursement file and determined the facility should not have been changed to cost, but instead should have remained on FRVS. Revised rate sheets dated February 20, 1992, covering all rate setting periods since July 22, 1987, were provided to the Petitioner that advised Petitioner would have its rate recalculated using the FRVS method and indicated the amended rates. On June 1, 1992, Petitioner's accounting firm sent a letter to the Department's Medicaid Cost reimbursement Administrator stating the facility believed the Department made a mistake by recalculating the rates. The letter asked that the matter be reviewed and the "error" corrected. On June 22, 1992, Petitioner was advised that the Department had determined the amount of overpayment received by Indigo Manor based upon the recalculated rates. Petitioner was directed to repay $250,935.46 which represented the difference between the actual rate paid which used the cost reimbursement method, and the rate that should have been paid using the correct FRVS method. By letter dated June 23, 1992, Mr. Hughes explained that, based on the Florida Title XIX Long-Term Care Reimbursement Plan, facilities entering the Medicaid program after October 1, 1985, would have their property costs recognized under the FRVS method. The letter pointed out that the Plan held harmless only those new facilities that had committed to facility construction or purchase loans prior to October 1, 1985. The letter, Petitioner Exhibit 1-B, also stated: The Department has consistently interpreted "committed" to mean enforceable agreements regarding facility construction or purchase loans specific to the facility in question, e.g. a contract for construction or an agreement for purchase loans specific to the facility in question. Based on the Department's June 23, 1992 letter, Petitioner filed a request for formal proceedings pursuant to Section 120.57(1), Florida Statutes, to challenge the Department's determination it should be on FRVS. Subsequent to the filing of that petition, Indigo Manor filed the instant petition alleging the Department is relying on non-rule policy. As of the date of the hearing, the Department had not initiated rulemaking regarding its challenged statement of policy, and the Department offered no evidence showing that rulemaking was not feasible or practicable. Petitioner conceded the phrase "committed to construction or purchase loans" is found within 109C-7.0482, Section IV, D., Florida Administrative Code. Petitioner does not allege that 10C-7.0482, Florida Administrative Code, is not a validly promulgated rule. Petitioner further concedes that contracts were not executed for construction of the facility, and actual construction was not begun until after October 1, 1985. At the formal hearing, the Department did not dispute that Petitioner was substantially affected by the Department's action. The Department did argue, however, that Petitioner did not have standing to bring the instant action as it did not actually own the property or facility at issue, nor did it have a contract in effect with the owner, Health Care and Retirement Corporation (HCRC), prior to October 1, 1985. While the Petitioner did not own the facility, the Department recognizes that Petitioner is the successor in interest to HCRC and is the entity impacted by the Department's rule and Department's policy of construing the term "committed to construction" to be limited to enforceable contracts for construction or purchase loans. HCRC has no present interest in the facility, and the Department's action.
The Issue Whether the agency's audit adjustment of an interim rate should be sustained.
Findings Of Fact The Petitioner is a licensed nursing home located in Chipley, Washington County, Florida. The Petitioner is located in a rural county in Florida's panhandle with high numbers of Medicaid- eligible patients. The Petitioner participates in the Florida Medicaid Program and has agreed to provide skilled or intermediate nursing care services for Medicaid patients. The Respondent is the state agency responsible for administering the Florida Medicaid Program. The parties have entered into an agreement that governs the provision of Medicaid services and the reimbursement to the provider (Petitioner). Such plan authorizes reimbursement based upon rates agreed between the parties and limited by rules and regulations applicable to the Medicaid Program. In this regard, Medicaid reimbursements are made in accordance with the Florida Title XIX Long-Term Care Reimbursement Plan (the Plan). The Plan was adopted and incorporated by reference in Rule Chapter 59G, Florida Administrative Code. To set a reimbursement rate, cost reports are reviewed by AHCA to determine the actual Medicaid allowable costs incurred by the provider. The allowable costs are used to set a prospective rate for the provider. Payments to the provider in subsequent periods are then based upon the rate adjusted for inflation. There are limits on costs and reimbursements. If a provider incurs an expense above the allowed level, it will not be reimbursed. In this regard the approved rate for the provider may not compensate the provider for expenses that were more than anticipated. Medicaid is not intended to pay for luxury care. The Medicaid Program covers rates for providers that are efficiently operated. The providers are not compensated for luxury services, excessive charges, or operating costs that exceed what a prudent, efficiently operated facility would incur. Once the reimbursement rate is set it continues until the next rate-setting period. If circumstances change such that the rate unfairly impacts the provider's ability to provide care, an interim rate adjustment may be requested. An increased interim rate could assist the provider until the regular rate is re-calculated. Nursing homes are subject to inspections or surveys that are performed by AHCA to assure compliance with all applicable standards of operation. The standards are to assure that patients receive a quality of care at or above minimum levels. Pertinent to this case was a survey that found Petitioner deficient due to inadequate staffing levels. Inadequate staffing directly impacts the quality of care a facility is able to provide. Given its rural location and the wages it was offering, the Petitioner could not offer competitive opportunities in order to recruit and retain qualified staff. For entry level employees the Petitioner found itself competing against even McDonald's restaurant for employees. As a result, when a survey found the facility deficient, the Petitioner sought financial relief through a request for an interim rate increase. The provider faced a financial loss if the deficiency were corrected without a corresponding increase in its rate as it would not be able to cover the additional costs within its reimbursement rate. To correct the deficiencies Petitioner sought six additional Certified Nursing Assistants and wage enhancements. As a result, it sought an interim rate increase of $3.56 per day in patient care and $.12 per day in operating cost. The interim reimbursement rate was approved by AHCA in 1996. The reimbursements to this provider then continued based upon the new rate. It then became the facility's objective to follow the plan of correction to assure that the deficiency was, in fact, alleviated. In November of 1997, new rates were established for the Petitioner which became the settled rate. Based upon the cost reports filed with AHCA, the Petitioner's rate was settled with increases of $3.91 per day in patient care and $1.62 in the operating category. The instant case resulted from an audit conducted at the facility. The audit was to verify that the expenses reported were correct and allowable. An audit should also confirm that the statistical information reported by the provider was correct. The auditors used $3.56 instead of $3.91 as the starting point for the cost report figures. The Petitioner had relied on the higher number as the cost- settled figure for the audit. More important, the Petitioner relied on the same accounting methodology it had relied on for the interim rate request. The auditors, an independent accounting firm, did not accept the prior methodology. Subsequent to the audit, the Respondent issued a letter to the Petitioner claiming it was owed $364,621.12 for Medicaid over-payments. The Respondent maintains it is entitled to recoup the over-payments as part of the future reimbursements to the provider. The Petitioner argues that such action will adversely impact the provider's ability to provide the quality of care expected by AHCA. All of the costs reported by this Petitioner are allowable under the Medicaid guidelines. The crux of the issue in the case results from the settled interim rate not being accepted and carried forward by the independent auditors. Because some amounts exceeded the "budgeted" estimates, the auditors disallowed the additional expenses. The amounts, all within the category of wage or salary enhancements, were not deemed proper because they exceeded or altered the granted 50- cent-an-hour pay raise within the original request. Although allowable, the expenditures fell outside the parameters of the budget that support the interim rate increase. Bonuses and wage enhancements paid by the Petitioner during the audited period were not one-time expenses but are on-going programs to encourage and support the retention of qualified employees. This was within the parameter of curing the deficiency that the interim rate sought to address. None of the expenses fell outside of operation and patient care costs. It is anticipated that the reduction in Petitioner's rate will result in reduced staffing. Otherwise, the facility will not be a financially feasible operation. The reimbursement rate for this provider is not higher than other rates for the other providers serving the geographical region served by the Petitioner. When a provider goes through the cost settlement process, AHCA is authorized to and may seek additional information to clarify any form submitted by a Medicaid provider. In this case, the rate was cost- settled without additional information being sought by AHCA. The allowable expenses incurred by the Petitioner support the reimbursement rate paid to this provider.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Administration enter a Final Order reinstating the provider's Medicaid rate to include the interim rate as previously settled and accepted by the Respondent. AHCA should affirm the interim rate established and committed by the cost report allowing $3.91 for patient care and $1.62 for operating costs. DONE AND ENTERED this 30th day of July, 2001, in Tallahassee, Leon County, Florida. _____________________________ J. D. Parrish Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 30th day of July, 2001. COPIES FURNISHED: Theodore E. Mack, Esquire Powell and Mack 803 North Calhoun Street Tallahassee, Florida 32303 Steven A. Grigas, Esquire Agency for Health Care Administration 2727 Mahan Drive Building 3 Tallahassee, Florida 32308 Ruben J. King-Shaw, Jr., Director Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building, Suite 3116 Tallahassee, Florida 32308 Julie Gallagher, General Counsel 2727 Mahan Drive Fort Knox Building Three, Suite 3431 Tallahassee, Florida 32308
Findings Of Fact Petitioner, Westchester General Hospital (WGH), is an osteopathic hospital located at 2500 S.W. 75th Avenue, Miami, Florida. It holds a license from respondent, Department of Health and Rehabilitative Services (HRS), and serves in an area of Dade County settled mostly by Cuban Refugees. On March 5, 1973, a participation agreement was executed by WGH and HRS wherein WGH agreed to provide certain hospital services to Medicaid patients in return for payment of reasonable costs incurred by such patients. Under that agreement, reimbursement was made on the basis of an interim payment plan in the form of a per diem cost rate. These rates were established by HRS based upon cost reports submitted by WGH. For the years 1979 and 1980, which are the pertinent years in this controversy, the Medicaid per diem reimbursement rates for WGH were as follows: 1-1-79 through 5-20-79 $175.71 per day 5-21-79 through 5-15-80 $166.55 per day 5-16-80 through 12-31-80 $203.52 per day In 1979 and 1980, a large number of Cuban refugees settled in the Dade County area and WGH provided Medicaid services to these refugees under its participation agreement. By virtue of a special ace of Congress, the refugees were also eligible for Medicare Part B coverage which paid various hospital charges, including radiology, laboratory, EKG, EEG and nuclear medicine. Consequently, the patients were eligible for both Medicaid and Medicare, and WGH received reimbursement under both programs for the same patients. The hospital's problems began when it first received preliminary or interim payments from the Federal government based upon charges for providing Medicare services to these indigents. Because charges are generally higher than costs in a hospital setting, the payments were later adjusted downward by the government at year-end when WGH's Medicare cost report was prepared. Nonetheless, under the then effective Rule 10C-7.36, Florida Administrative Code, WGH was required to submit its Medicaid claims for payment within forty- five days after services were rendered or the patient discharged. Therefore, WGH submitted its requests for payment to HRS before the true-up at year-end was performed by the Federal government. These claims reflected that WGH had been reimbursed by Medicare at the interim payment level rather than the year-end adjusted amount since the latter amounts were not yet known. As discussed in greater detail hereinafter, the interim payments were used as an offset to the Medicaid payments due from the state. In 1979, after being gently nudged by the Federal government, HRS discovered that a number of patients on the State Medicaid eligibility file also were eligible for Medicare coverage and that Medicare, rather than Medicaid, was responsible for at least a part of their bills. This was determined by comparing the State's Medicaid file with Medicare computer tapes obtained from the Federal government. As a result of this discovery, HRS advised WGH on November 16, 1979, by letter that WGH must bill Medicare for hospital charges incurred by Medicaid patients with Medicare Part B coverage. The letter pointed out that Medicaid is the payer of last resort, and pays only after other third parties, including Medicare, pay their applicable portion of the medical bills. This was consistent with federal regulations which obligated HRS to identify third-party resources of Medicaid recipients, and to seek reimbursement from such third-party resources within 30 days after the end of the month in which it first determined a third party was responsible for the claim. Had it not pursued these third party resources, HRS risked the loss of federal funds. However, the same regulations also required HRS to "take reasonable measures to determine the legal liability of third parties to pay for services under the plan." Other than relying upon the interim payment amounts reflected on WGH's Medicaid claims, HRS made no effort to determine the actual legal liability of Medicare. Indeed, it was not until after May, 1980 that HRS had the capability to take reasonable measures to determine a third party's liability. On that date, it formed, at the insistence of the Federal government, a special "unit" for that specific purpose. Prior to that time, it was unable to comply with Federal regulations. In compliance with the letter, WGH reflected the interim Medicare payments on its Medicaid payment claims filed with HRS. However, to its consternation, it later learned that HRS did not take into account the interim nature of the payments, and used those amounts vis a vis adjusted amounts to calculate the amount of WGH's Medicaid reimbursement. The net result was the filing of Medicaid payment claims by WGH in 1979 and 1980 which reflected Medicare reimbursement at a much higher level than it actually received after year-end adjustments were made, and a concomitant reduction in Medicaid receipts from the State. WGH recognized its dilemma in early 1981. Accordingly, on March 10, 1981, its treasurer wrote HRS's Medicaid Third Party Reimbursement Manager complaining that it had been under-reimbursed for Medicaid patients with Medicare Part B Coverage for periods beginning in 1978. He stated that the ancillary services covered by Medicare Part B were reimbursable only at 80 percent cost, and resulted in a substantial amount of the reimbursement being refunded back to the Federal program. This in turn had caused a shortfall on the hospital's part, and payment less than its Medicaid per diem rate. It accordingly requested that Medicaid return the funds necessary to bring its "reimbursement back to the level not less than the established Medicaid per diem rate of the given period." The request was authorized by Rule 10C-7.36(3), Florida Administrative Code, which allowed providers such as WGH to demonstrate "undue hardships" on the part of the provider if it submitted its Medicaid claim for payment in accordance with the forty-five day time schedule prescribed by rule, and by Florida law which authorized HRS to "make appropriate settlements" in determining third party liability in the Medicaid program. HRS did not respond to this letter. Although it did not respond to WGH's request, HRS was nevertheless fully aware of the problem by that time for it already had rule amendments in the mill which would cure the problem. Effective March 18, 1981, HRS amended its Rule 10C-7.36 to provide that providers who had claims that were crossed over to Medicaid from Medicare due to recipient eligibility in both programs were relieved from the time constraints for filing claims imposed by the rule. But because the rule operated on a prospective basis only, it did not apply to the 1979 and 1980 fiscal years. The parties have stipulated that if WGH owes HRS for excess Medicaid funds paid to WGH during January 1, 1978 through June 30, 1981, the proper amount is $4,779.90. In support of its claim against HRS, WGH produced worksheets reflecting under-reimbursement from HRS in the amounts of $41,905 and $100,542 for fiscal years 1979 and 1980, respectively, under the Medicaid program. They are derived from a log prepared by Blue Cross, the fiscal intermediary retained by HRS to conduct audits on Medicaid providers in the state. The deficiencies were caused by HRS applying full credit to the interim payments that WGH received from Medicare even though a portion of the same were subsequently returned to Medicare by WGH after the year-end audit was completed. In preparing the revenue deficiencies, WGH applied a cost-to-charge ratio which was based on the average of the five ancillary services included under Medicare Part B rather than reviewing each patient's actual billing records to determine the percentage of patients receiving a particular ancillary service. However, it was impossible to perform the latter analysis in 1979 since a "combination method" was used for the various cost centers, and the principle of consistency required that the 1980 log be prepared in the same manner as 1979.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Health and Rehabilitative Services repay Westchester General Hospital $142,447 less $4,779.90 by virtue of it having been under-reimbursed under the Medicaid program for fiscal years 1979 and 1980. DONE and ORDERED this 28th day of September, 1984, in Tallahassee, Florida. DONALD R. ALEXANDER Hearing Officer Division of Administrative Hearings 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 28th day of September, 1984.
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.
