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 to be determined is the amount payable to the Agency for Health Care Administration (AHCA or Respondent) in satisfaction of its $157,983.63 Medicaid lien asserted against medical malpractice settlement proceeds received by Hunter Lamendola (Hunter), a minor, by and through his mother and natural guardian, Ashley Lamendola (Petitioner).
Findings Of Fact On June 26, 2012, Petitioner presented to the hospital with a history of contractions for six hours prior to her arrival at the hospital. She had been placed on bed rest for gestational hypertension five days prior to arriving at the hospital. When she arrived, she had hypertension. Petitioner was admitted to the labor and delivery unit at 8:33 p.m. Petitioner was placed on a fetal monitor and progressed through her course of labor. Her initial fetal monitoring showed the baby was healthy and well-oxygenated, however, throughout the course of labor, the fetal monitor exhibited signs that the baby was in significant distress. At 4:01 a.m. on June 27, 2012, Petitioner was given an epidural, and after a course of labor, Hunter was delivered at 3:47 p.m. through an operative vaginal delivery. Hunter suffered permanent and catastrophic brain damage during his birth. As a result, Hunter is unable to eat, speak, toilet, ambulate, or care for himself in any manner. Hunter’s medical care related to the delivery was paid by Medicaid. The Medicaid program through AHCA provided $157,983.63 in benefits. The Medicaid program through the Department of Health Children’s Medical Services Title XIX MMA – Pedicare (DOH), provided $26,189.66 in benefits; the Medicaid program through a Medicaid-managed care organization, known as Amerigroup Community Care (Amerigroup), provided $51,696.99 in benefits; and the Medicaid program through a Medicaid-managed care organization, known as WellCare of Florida (WellCare), provided $13,239.19 in benefits. Accordingly, the sum of these Medicaid benefits, $249,109.47, constituted Hunter’s entire claim for past medical expenses. Petitioner brought a medical malpractice action against the medical providers and staff responsible for Hunter’s care (Defendant medical providers) to recover all of Hunter’s damages, as well as her own individual damages associated with Hunter’s injuries. The medical malpractice lawsuit was settled through a series of confidential settlements totaling $10,000,000 and this settlement was approved by the Court. During the pendency of Hunter’s medical malpractice action, AHCA was notified of the action, and AHCA asserted a $157,983.63 Medicaid lien against Hunter’s cause of action and settlement of that action. AHCA, through the Medicaid program, spent $157,983.63 on behalf of Hunter, all of which represents expenditures paid for Hunter’s past medical expenses. No portion of the $157,983.63 paid through the Medicaid program on behalf of Hunter represent expenditures for future medical expenses, and Medicaid did not make payments in advance for medical care. Application of the formula set forth in section 409.910(11)(f), Florida Statutes, to Hunter’s settlement requires payment to AHCA of the full $157,983.63 Medicaid lien. Petitioner has deposited the full Medicaid lien amount in an interest-bearing account for the benefit of AHCA pending an administrative determination of AHCA’s rights, and this constitutes “final agency action” for purposes of chapter 120, Florida Statutes, pursuant to section 409.910(17). At the final hearing, Mr. Harwin, who represented Hunter and his family in the underlying medical malpractice action, testified, and was accepted, without objection, as an expert in the valuation of damages suffered by injured parties. Mr. Harwin is a member of several trial attorney associations, stays abreast of jury verdicts relative to birth injuries, and ascertains the value of damages suffered by injured parties as a routine part of his practice. Mr. Harwin was familiar with and explained Hunter’s catastrophic brain injury giving rise to Petitioner’s claim. He also explained that, as a result of Hunter’s injury, Hunter is blind, fed through a feeding tube, unable to control his arms, legs or head, and suffers between six to eight seizures per day. Mr. Harwin testified that Hunter’s injury has also had a devastating impact on Hunter’s mother, Ashley Lamendola. According Mr. Harwin, considering Hunter’s past medical expenses, a life care plan for Hunter’s care prepared by an economist, and the extent of non-economic damages, and in light of determinations of mock juries and a jury consultant in this case, as well as Mr. Harwin’s familiarity with jury verdicts reached in similar cases, Hunter and his mother’s damages have a value in excess of $35,000,000. Mr. Harwin’s testimony as to the value of Petitioner’s claim was credible and is accepted. Petitioner also presented the testimony of Mr. Barrett, who was accepted as an expert in the valuation of damages. Mr. Barrett has been accepted as an expert in valuation of damages in a number of other Medicaid lien cases before DOAH. Mr. Barrett has been a trial attorney for 41 years, with a primary focus on plaintiff personal injury cases, including medical malpractice, medical products liability, and pharmaceutical products liability. Mr. Barrett stays abreast of jury verdicts and often makes assessments concerning the value of damages suffered by injured parties. After familiarizing himself with Hunter’s injuries through review of pertinent medical records and Petitioner’s exhibits, Mr. Barrett offered his opinion, based upon his professional training and experience, as well as review of comparable jury verdicts, that a conservative value of the damages suffered would be “$35,000,000 to $50,000,000.” Mr. Barrett’s testimony as to the value of Petitioner’s claim was credible and is accepted. AHCA did not call any witnesses, present any evidence as to the value of Petitioner’s claim, or propose a differing valuation of the damages. Based upon the unrebutted evidence presented by Petitioner’s experts, it is found that a conservative value of Petitioner’s claim is $35,000,000. Attorney’s fees for the underlying medical malpractice case leading to Petitioner’s $10,000,000.00 settlement totaled $4,500,000.00, with costs of $490,486.33. While the formula under section 409.910(11)(f) determines amounts distributable to Medicaid after attorney’s fees and taxable costs, there is no language in section 409.910(17)(b) suggesting that attorney’s fees or costs should be subtracted from settlement proceeds in determining whether a lesser portion of the total recovery should be allocated to reimburse Medicaid. Costs and attorney’s fees are not an element of Petitioner’s damages and were not subtracted from the settlement proceeds in determining whether a lesser portion of the total recovery should be allocated to AHCA’s Medicaid lien. Considering the valuation of Petitioner’s claim at $35,000,000.00, Petitioner’s $10,000,000.00 settlement represents only a 10/35ths recovery of Petitioner’s damages. Multiplying that same 10/35 fraction to the $157,983.63 paid by AHCA through the Medicaid program for past medical expenses results in the proportional sum of $45,138.18 from the settlement proceeds available to satisfy AHCA’s Medicaid lien.
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
The Issue The issue to be determined is the amount to be reimbursed to Respondent, Agency for Health Care Administration (“AHCA”), for medical expenses paid on behalf of Ashley Nunez pursuant to section 409.910, Florida Statutes (2016),1/ from settlement proceeds received by Petitioners from third parties.
Findings Of Fact Facts Pertaining to the Underlying Personal Injury Litigation and the Medicaid Lien On February 13, 2010, Ashley Nunez (“Ashley”), who was three years old at the time, presented to a hospital emergency room with a fever. A chest X-ray indicated that Ashley had left lobe pneumonia. The hospital ordered no blood work or blood cultures and did not investigate the cause of Ashley’s pneumonia. The hospital discharged Ashley with a prescription for Azithromycin. By February 14, 2010, Ashley’s fever was 102.9 degrees, and Ashley’s mother took her to a pediatrician. Rather than attempting to discover the cause of the fever, the pediatrician instructed Ashley’s mother that the prescription needed time to work and instructed her to bring Ashley back if the fever persisted. On February 16, 2010, Ashley’s aunt returned her to the pediatrician because Ashley’s fever was persisting and she had developed abdominal pain. Due to a concern that Ashley was suffering from appendicitis, the pediatrician referred her to an emergency room. Later that day, Ashley’s mother returned her to the emergency room that had treated Ashley on February 13, 2010. A second chest x-ray revealed that Ashley’s pneumonia had gotten much worse, and the hospital admitted her. Ashley’s respiratory condition continued to deteriorate, and blood cultures confirmed that she had streptococcus pneumonia. Two days after her admission, the hospital decided to transfer Ashley to a hospital that could provide a higher level of care. On February 18, 2010, an ambulance transferred Ashley to a second hospital. Even though Ashley’s respiratory condition continued to deteriorate, the paramedics and hospital transport team did not intubate her. Upon her arrival at the second hospital, Ashley had suffered a cardiopulmonary arrest and had to be resuscitated with CPR and medication. The lack of oxygen to Ashley’s brain and other organs resulted in catastrophic harm leading Ashley to be intubated, placed on a ventilator, fed through a gastric feeding tube, and placed on dialysis. The second hospital discharged Ashley two and a half months later. While she no longer required a ventilator or dialysis, the hypoxic brain injury and cardiopulmonary arrest left Ashley in a severely compromised medical condition. Ashley was unable to perform any activities of daily living and was unable to stand, speak, walk, eat, or see. Following her discharge from the second hospital, Ashley required continuous care. She was under a nurse’s care for 12 hours a day, and Ashley’s mother (Anna Patricia Delgado) cared for her during the remaining 12 hours each day. On February 23, 2011, Ashley died due to complications resulting from the hypoxic brain injury. Ashley was survived by her parents, Ms. Delgado and John Nunez. Medicaid (through AHCA) paid $357,407.05 for the medical care related to Ashley’s injury. Ashley’s parents paid $5,805.00 for her funeral. As the Personal Representative of Ashley’s Estate, Ms. Delgado brought a wrongful death action against the first emergency room doctor who treated Ashley, the pediatrician, a pediatric critical care intensivist who treated Ashley after her admission to the first hospital, the two hospitals that treated Ashley, and the ambulance company that transported Ashley to the second hospital. AHCA received notice of the wrongful death action and asserted a Medicaid lien against Ashley’s Estate in order to recover the $357,407.05 paid for Ashley’s past medical expenses. See § 409.910(6)(b), Fla. Stat. (providing that “[b]y applying for or accepting medical assistance, an applicant, recipient, or legal representative automatically assigns to [AHCA] any right, title, and interest such person has to any third party benefit ”). Ms. Delgado ultimately settled the wrongful death action through a series of confidential settlements totaling $2,250,000. No portion of that settlement represents reimbursements for future medical expenses. AHCA has not moved to set aside, void, or otherwise dispute those settlements. Section 409.910(11)(f) sets forth a formula for calculating the amount that AHCA shall recover in the event that a Medicaid recipient or his or her personal representative initiates a tort action against a third party that results in a judgment, award, or settlement from a third party. Applying the formula in section 409.910(11)(f) to the $2,250,000 settlement, results in AHCA being owed $791,814.84 in order to satisfy its lien.2/ Because Ashley’s medical expenses of $357,407.05 were less than the amount produced by the section 409.910(11)(f) formula, AHCA is seeking to recover $357,407.05 in satisfaction of its Medicaid lien. See § 409.910(11)(f)4., Fla. Stat. (providing that “[n]otwithstanding any provision in this section to the contrary, [AHCA] shall be entitled to all medical coverage benefits up to the total amount of medical assistance provided by Medicaid.”). Valuation of the Personal Injury Claim Tomas Gamba represented Petitioners during their wrongful death action. Mr. Gamba has practiced law since 1976 and is a partner with Gamba, Lombana and Herrera-Mezzanine, P.A., in Coral Gables, Florida. Mr. Gamba has been Board Certified in Civil Trial Law by the Florida Bar since 1986. Since the mid-1990s, 90 percent of Mr. Gamba’s practice has been devoted to medical malpractice. Over the course of his career, Mr. Gamba has handled 60 to 70 jury trials as first chair, including catastrophic injury cases involving children. In 2015, the Florida Chapter of the American Board of Trial Advocates named Mr. Gamba its Trial Lawyer of the Year. Mr. Gamba is a member of several professional organizations, such as the American Board of Trial Advocates, the American Association for Justice, the Florida Board of Trial Advocates, the Florida Justice Association, and the Miami-Dade County Justice Association. Mr. Gamba was accepted in this proceeding as an expert regarding the valuation of damages suffered by injured parties. Mr. Gamba testified that Petitioners elected against proceeding to a jury trial (in part) because of the family’s need for closure and the stress associated with a trial that could last up to three weeks. Mr. Gamba also noted that the two hospitals that treated Ashley had sovereign immunity, and (at the time pertinent to the instant case) their damages were capped at $200,000 each. In order to collect any damages above the statutory cap, Petitioners would have had to file a claims bill with the Florida Legislature, and Mr. Gamba testified that “the legislature would be very difficult.” As for the three treating physicians who were defendants in the suit, Mr. Gamba testified that Petitioners achieved a favorable settlement by agreeing to accept $2 million when the physicians’ combined insurance coverage was only $3 million. The decision to settle was also influenced by the fact that Ashley had a pre-existing condition known as hemolytic uremic syndrome, a blood disorder. During discovery, Mr. Gamba learned that the defense was prepared to present expert testimony that the aforementioned condition made it impossible for the defendants to save Ashley. Finally, Mr. Gamba testified that 75 percent of medical malpractice cases heard by juries result in defense verdicts. As for whether the $2,250,000 settlement fully compensated Ashley’s estate and her parents for the full value of their damages, Mr. Gamba was adamant that the aforementioned sum was “a small percentage of what we call the full measure of damages in this particular case.” Mr. Gamba opined that $8,857,407.05 was the total value of the damages that Ashley’s parents and her Estate could have reasonably expected to recover if the wrongful death action had proceeded to a jury trial. Mr. Gamba explained that Florida’s Wrongful Death Act enabled Ashley’s parents to recover for the death of their child and for the pain and suffering they incurred from the date of Ashley’s injury. According to Mr. Gamba, $4,250,000 represented a “conservative” estimate of each parent’s individual claim, and the sum of their claims would be $8,500,000. Mr. Gamba further explained that Ashley’s Estate’s claim would consist of the $357,407.05 in medical expenses paid by Medicaid, resulting in an estimate for total damages of $8,857,407.05. Mr. Gamba’s opinion regarding the value of Petitioners’ damages was based on “roundtable” discussions with members of his firm and discussions with several attorneys outside his firm who practice in the personal injury field. Mr. Gamba’s opinion was also based on 10 reported cases contained in Petitioners’ Exhibit 9. According to Mr. Gamba, each of those reported cases involve fact patterns similar to that of the instant case. Therefore, Gamba testified that the jury verdicts in those cases are instructive for formulating an expectation as to what a jury would have awarded if Ashley’s case had proceeded to trial. In sum, Mr. Gamba testified that the $2,250,000 settlement represents a 25.4 percent recovery of the $8,857.407.05 of damages that Ashley’s parents and Ashley’s Estate actually incurred. Therefore, only 25.4 percent (i.e, $90,781.30) of the $357,407.05 in Medicaid payments for Ashley’s care was recovered. Mr. Gamba opined that allocating $90,781.39 of the total settlement to compensate Medicaid for past medical expenses would be reasonable and rational. In doing so, he stated that, “And I think both – if the parents are not getting their full measure of damages, I don’t think the health care provider, in this case Medicaid, that made the payment should get, you know, every cent that they paid out, when mother and father are getting but a small percentage of the value of their claim.” Petitioners also presented the testimony of Herman J. Russomanno. Mr. Russomanno has practiced law since 1976 and is a senior partner with the Miami law firm of Russomanno and Borrello, P.A. Mr. Russomanno has been Board Certified in Civil Trial Law by the Florida Bar since 1986, and he has served as the Chairman of the Florida Bar’s Civil Trial Certification Committee. Mr. Russomanno is also certified in Civil Trial Practice by the National Board of Trial Advocates and has taught trial advocacy and ethics for 33 years as an adjunct professor at the St. Thomas University School of Law. Mr. Russomanno is a past president of the Florida Bar and belongs to several professional organizations, such as the Florida Board of Trial Advocates, the American Board of Trial Advocates, the Dade County Bar Association, and the Miami-Dade County Trial Lawyers Association. Since 1980, Mr. Russomanno’s practice has been focused on medical malpractice, and he has represented hundreds of children who suffered catastrophic injuries. Mr. Russomanno was accepted in the instant case as an expert in the evaluation of damages suffered by injured parties. Prior to his testimony at the final hearing, Mr. Russomanno reviewed Ashley’s medical records, the hospital discharge summaries, and the Joint Pre-hearing Stipulation filed in this proceeding. He also discussed Ashley’s case with Mr. Gamba and reviewed Mr. Gamba’s file from the wrongful death action. Mr. Russomanno also viewed videos of Ashley taken before and after her injury so he could gain an understanding of the severity of Ashley’s injury and the suffering experienced by her parents. Mr. Russomanno credibly testified that the damages incurred by Ashley’s parents were between $4,250,000 and $7,500,000 for each parent. Mr. Russomanno echoed Mr. Gamba’s testimony by stating that the $2,250,000 settlement did not fully compensate Ashley’s parents and her Estate for their damages. AHCA presented the testimony of James H.K. Bruner. Mr. Bruner has practiced law since 1983 and is licensed to practice law in Florida, New York, Maine, and Massachusetts. Mr. Bruner is a member of professional organizations such as the American Health Lawyers Association and the Trial Lawyers Sections of the Florida Bar. Between 2003 and 2005, Mr. Bruner served as the Department of Children and Families’ risk attorney. That position required him to evaluate personal injury actions filed against the Department and assess the Department’s exposure to liability. Based on his experience in evaluating approximately 200 cases for the Department, Mr. Bruner authored the Department’s manual on risk management and provided training to Department employees on risk management issues. Mr. Bruner has served as the Director of AHCA’s Bureau of Strategy and Compliance. In that position, he dealt specifically with third-party liability collections and Medicaid liens. Beginning in 2008, Mr. Bruner worked for ACS (now known as Xerox Recovery Services) and was engaged in attempting to recover Medicaid liens from personal injury settlements. Over the last several years, Mr. Bruner has spoken at seminars about Medicaid lien resolution and authored publications on that topic. Since April of 2013, Mr. Bruner has been in private legal practice as a solo practitioner. He describes himself as a “jack of all trades” who engages in a “general practice.” Over the last 20 years, Mr. Bruner has not handled a jury trial involving personal injury; and, over the last four years, he has not negotiated a personal injury settlement. The undersigned accepted Mr. Bruner as an expert witness for evaluating the cases contained in Petitioners’ Exhibit 9 and pointing out distinctions between those cases and the instant case. Mr. Bruner did not offer testimony regarding the specific value of the damages suffered by Petitioners. Findings Regarding the Testimony Presented at the Final Hearing Regardless of whether the reported cases in Petitioners’ Exhibit 9 are analogous to or distinguishable from the instant case, the undersigned finds that the testimony from Mr. Gamba and Mr. Russomanno was compelling and persuasive. While attaching a value to the damages that a plaintiff could reasonably expect to receive from a jury is not an exact science, Mr. Gamba and Russomanno’s substantial credentials and their decades of experience with litigating personal injury lawsuits make them very compelling witnesses regarding the valuation of damages suffered by injured parties such as Petitioners. Accordingly, the undersigned finds that Petitioners proved by clear and convincing evidence that $90,781.39 constitutes a fair and reasonable recovery for past medical expenses actually paid by Medicaid. However, and as discussed below, AHCA (as a matter of law) is entitled to recover $357,407.05 in satisfaction of its Medicaid lien.3/
The Issue The issue for consideration in this case is whether the Agency for Health Care Administration is required by law and rule of the Agency to include the gain or loss on the sale of depreciable assets as the result of a sale or disposal, in the calculation of Medicaid allowable costs.
Findings Of Fact Prior to the hearing, the parties submitted a Joint Stipulation which is incorporated in part herein as follows: Petitioner purchased Orlando General Hospital ("OGH"), Medicaid provider number 120065, on December 31, 1990. Upon its sale, OGH merged into and became part of Adventist Health System/Sunbelt, Inc., wherein after it was known as Adventist Health System/Sunbelt, Inc., d/b/a Florida Hospital East ("Florida Hospital East"). Adventist Health System/Sunbelt, Inc., d/b/a Florida Hospital East is a wholly owned subsidiary of Adventist Health System Sunbelt Healthcare Corporation. Florida Hospital East assumed all of the assets and liabilities of OGH. OGH filed a terminating cost report for the fiscal period ending December 31, 1990. On December 31, 1990, the date of sale of OGH to Petitioner, OGH incurred a loss on the sale of the hospital, a depreciable asset. The loss on the sale of OGH was included on both OGH's Medicaid and Medicare terminating cost reports. A loss on the sale of a depreciable asset is the amount that the net book value of the asset sold exceeds the purchase price. A gain or loss on the sale of a depreciable asset is a capital cost. Due to the mechanism of the cost report, a loss on the sale of a depreciable asset is divided into "periods" based upon the time period to which the loss relates. The portion of the loss related to the fiscal year in which the asset is sold is referred to as a "current period" loss. The portion of the loss that relates to all fiscal years prior to the year in which the asset is sold is referred to as a "prior period" loss. Gains and losses related to the current period are included on Worksheet A of the Medicare and Medicaid cost report. Current period capital costs flow to Worksheet B-II Part and B Part III [sic] of the Medicaid cost report. Gains and losses related to the prior period are included on Worksheet E of the Medicare and Medicaid cost reports. OGH's current period is the fiscal year ending 12/31/90. OGH's prior periods in which it participated in the Medicaid Program are 10/24/84 through 12/31/89. OGH's audited Medicaid cost report included in allowable Medicaid costs a loss on the sale of OGH related to the current period. OGH's audited Medicaid cost report did not include in allowable Medicaid costs a loss on the sale of OGH related to the prior periods. The loss on the sale of OGH related to the current period was included in Worksheet A of OGH's audited Medicaid cost report. These costs, including the loss on the sale of OGH, flowed to Worksheet B Part II. OGH's audited Medicare cost report included as allowable Medicare costs the loss on the sale of OGH related to both the current and prior periods in the amount of $9,874,047. The loss from the sale of OGH related to the current period was included on Worksheet A of OGH's audited Medicare cost report. The costs from Worksheet A of OGH's audited Medicare cost report flowed to Worksheet B Part II of OGH's audited Medicare cost report. The loss related to the prior period was included on Worksheet E Part B of OGH's audited Medicaid cost report. The Agency utilizes costs included on Worksheet A of the Medicaid cost report to calculate Medicaid allowable costs. The Agency utilizes the capital costs included on Worksheet B Part II and/or B Part III to calculate allowable Medicaid fixed costs. The Agency does not utilize costs included on Worksheet E Part III to calculate Medicaid allowable costs. The Agency reimburses providers based upon Medicaid allowable costs. aa. The Agency did not include the portion of the loss on the sale of OGH related to the prior periods in the calculation of the OGH's Medicaid allowable costs. bb. Blue Cross and Blue Shield of Florida, Inc. (Intermediary), contracted with the Agency to perform all audits of Medicaid cost reports. Agency reimbursement to Medicaid providers is governed by Florida's Title XIX Inpatient Hospital Reimbursement Plan (Plan), which has been incorporated in Rule 59G-6.020, Florida Administrative Code. The Plan provides that Medicaid reimbursement for inpatient services shall be based upon a prospectively determined per diem. The payment is based upon the facility's allowable Medicaid costs which include both variable costs and fixed costs. Fixed costs include capital costs and allowable depreciation costs. The per diem payment is calculated by the Agency based upon each facility's allowable Medicaid costs which must be taken by the agency from the facility's cost report. Capital costs, such as depreciation, are found on Worksheet B, Part II and Part III. The Plan requires all facilities participating in the Medicaid program to submit an annual cost report to the Agency. The report is to be in detail, listing their "costs for their entire reporting year making appropriate adjustment as required by the plan for the determination of allowable costs." The cost report must be prepared in accordance with the Medicare method of reimbursement and cost finding, except as modified by the Plan. The cost reports relied upon by the Agency to set rates are audited by Blue Cross/Blue Shield of Florida, Inc. which has been directed by the Agency to follow Medicare principles of reimbursement in its audit of cost reports. Prior to January 11, 1995, the Plan did not expressly state whether capital gains or losses relating to a change of facility ownership were allowable costs. The 1995 amendment to the Plan contained language expressly providing "[f]or the purposes of this plan, gains or losses resulting from a change of ownership will not be included in the determination of allowable cost for Medicaid reimbursement." No change was made by the amendment to the Medicare principles of reimbursement regarding the treatment of gains and losses on the sale of depreciable assets. The Medicare principles of reimbursement provides that gains and losses from the disposition of depreciable assets are includable in computing allowable costs. The Provider Reimbursement Manual (HIM-15)(PRM), identifies the methods of disposal for assets that are recognized. They include a bona fide sale of depreciable assets, but do not mention a change of ownership. PRM Section 132 treats a loss on a sale of a depreciable asset as an adjustment to depreciation for both the current and periods. Depreciable assets with an expected life of more than two years may not be expensed in the year in which they are put into service. They must be capitalized and a proportionate share of the cost expensed as depreciation over the life of the property. To do so, the provider must estimate the useful life of the property based upon the guidelines of the American Hospital Association, and divide the cost by the number of years of estimated life. It is this yearly depreciation figure which is claimed on the cost report and which is reimbursed. When a depreciable asset is sold for less than book value (net undepreciated value), the provider suffers a loss. Petitioner claims that Medicare holds that in such a case it must be concluded that the estimated depreciation was erroneous and the provider did not receive adequate reimbursement during the years the asset was in service. Medicare accounting procedures do not distinguish between the treatment of a loss on the sale of depreciable assets as related to current and prior periods. PIM Section 132 requires that Medicare recognize the entire loss as an allowable cost for both the current and prior periods, and Medicare treated Petitioner's loss from the sale of its facility as an allowable cost for Medicare reimbursement under both current and prior periods. With the adoption of the January 1995 amendment, however, the wording of the state plan was changed to specifically prohibit gains or losses from a change of ownership from being included in allowable costs for Medicaid reimbursement. This was the first time the state plan addressed gains and losses on the disposal of depreciable assets resulting from a change of ownership. The Agency contends, however, that it has never reimbursed for losses on disposal of property due to a change of ownership, and that the inclusion of the new language was to clarify a pre-existing policy which was being followed at the time of the 1995 amendment, and which goes back to the late 1970s. It would appear, however, that the policy was never written down; was never conveyed to Blue Cross/Blue shield; was never formally conveyed to Medicaid providers; and was never conveyed to the community at large. When pressed, the Agency could not identify any specific case where the policy was followed by the Agency. While admitting that it is Agency practice not to treat losses from the sale of depreciable assets in prior periods as an allowable cost, Petitioner contends that it has been the Agency's practice to treat the loss on the sale of depreciable assets relating to the current period as an allowable cost, and cited several instances where this appears to have been done. The Agency contends that any current period losses paid were paid without knowledge of the Agency, in error, and in violation of the plan. On October 25, 1996, the Agency entered a Final Order in a case involving Florida Hospital/Waterman, Inc., as Petitioner, and the Agency as Respondent. This case was filed by the Petitioner to challenge the Agency's treatment of the loss on the sale of Waterman Medical Center, Inc., another of Adventist Health Systems/Sunbelt Healthcare Corporation, and the Final Order in issue incorporated a stipulation into which the parties had entered and which addressed the issue in question here. The stipulation included certain position statements including: A loss on the sale of depreciable assets is an allowable cost under the Medicare Principles of Reimbursement. The State Plan does not specify that the loss on the sale of a depreciable asset is to be treated in a manner different than under the Medicare Principles of Reimbursement. Thus the loss on the sale of a depreciable asset is an allowable cost under the State Plan. The Agency agrees, in accordance with the Medicare Principles of Reimbursement, that under the terms of the State Plan, prior period losses for Waterman will be allocated to prior periods and included in the calculation of the per diem and per visit rates. According to William G. Nutt, Petitioner's director of reimbursement, the only difference between the facts of the Waterman case and the instant case is that they relate to the sale of different facilities. The treatment of loss on the sale of depreciable assets as outlined in the Waterman stipulation is in conflict with the amended Plan and with the unwritten and unuttered Agency policy as urged by the Agency in this case. The Agency agreed in one case to a treatment of loss which it now rejects in the instant case. Petitioner urges that subsequent to the settlement of the Waterman case, but before the instant case was set for hearing, the parties engaged in settlement negotiations during which, according to counsel for the Agency, they made "significant" progress toward applying the settlement in the Waterman case to the current case. In a motion filed to delay the setting of this case for hearing, counsel for the Agency indicated the parties were "finalizing" settlement to resolve the case without resorting to a final hearing, and in a follow-up agreed motion for continuance, advised that the "parties [had] finalized a settlement document [which they were] in the process of executing. The settlement agreement reached by the parties was signed by a representative of the Petitioner and then forwarded to the Agency for signature. The document was not signed by the Agency, and when Petitioner sought enforcement of the "settlement" by an Administrative Law Judge of the Division of Administrative Hearings, the request was denied as being outside the jurisdiction of the judge, and the matter was set for hearing.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Agency for Health Care Administration enter a Final Order including the loss on the sale of Orlando General Hospital as an allowable cost for determining Petitioner's entitlement to Medicaid reimbursement for both current and prior years. DONE AND ENTERED this 30th day of June, 1999, in Tallahassee, Leon County, Florida. ARNOLD H. POLLOCK 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) 921-6947 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 30th day of June, 1999. COPIES FURNISHED: Joanne B. Erde, Esquire Broad and Cassel Miami Center Suite 3000 201 South Biscayne Boulevard Miami, Florida 33131 Jonathan E. Sjostrom, Esquire Steel Hector & Davis LLP 215 South Monroe Street Suite 601 Tallahassee, Florida 32301-1804 Mark S. Thomas, Esquire Madeline McGuckin, Esquire Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building 3, Suite 3431 Tallahassee, Florida 32308 Sam Power, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building 3, Suite 3431 Tallahassee, Florida 32308 Julie Gallagher General Counsel Agency for Health Care Administration 2727 Mahan Drive Building 3 Tallahassee, Florida 32308
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that Petitioner's 1978 medicaid Cost report be modified in accordance with the foregoing adjustments. DONE and ENTERED this 10th day of November, 1982, in Tallahassee, Florida. DONALD R. ALEXANDER Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 10th day of November, 1982.
Findings Of Fact On August 23, 1995, the undersigned entered a Recommended Order in DOAH Case 94-1365. The Petitioner in that proceeding was Billy Beeks, M.D., and the Respondent was the Agency for Health Care Administration (AHCA). At issue in that proceeding was whether Dr. Beeks had been overpaid by the Medicaid program. The Recommended Order contained extensive findings of fact, including findings as to the appropriate levels at which certain services should have been billed to the Medicaid program by Dr. Beeks. It was concluded that because certain of his services were billed at levels higher than justified by Medicaid protocol, Dr. Beeks had been overpaid by the Medicaid program. Because the calculation of such overpayments are done by computer, it was recommended that the overpayment be recalculated based on the findings of fact contained in the Recommended Order. On October 19, 1995, Douglas M. Cook, Director of AHCA, entered a Final Order in DOAH Case 94-1365. That Final Order adopted the findings of fact and conclusions of law contained in the Recommended Order and provided, in pertinent part, as follows: The dollar amount of the overpayment liability shall be calculated based on the findings and conclusions made by the hearing officer. The amount of the overpayment claimed by AHCA at the beginning of the hearing in DOAH Case 94-1365 was $50,852.56. An overpayment to Medicaid is calculated by computer using a statistical analysis of a sampling of the provider's billings to Medicaid. AHCA asserted that the level at which Dr. Beeks had billed Medicaid for certain of these services in the sample was excessive. It was found in that underlying proceeding that while Dr. Beeks had billed certain of his services at excessive levels as asserted by AHCA, some of the challenged billings were not excessive and others were not as excessive as asserted by AHCA. Logically, one would expect that the recalculation of overpayment would result in a smaller figure than that claimed prior to the hearing. Following the entry of the Final Order, Vickie Givens, an employee of AHCA, made a detailed analysis of the evidence presented at the formal hearing, including the deposition of Joni Leterman, M.D.. Ms. Givens compared her analysis with the findings of fact contained in the Recommended Order and discovered certain billings by Dr. Beeks that she believed should have been included in the Recommended Order as being excessive. 1/ These billings were not included in the Recommended Order and, consequently, were not incorporated by reference into the Final Order. Thereafter the overpayment was recalculated by an appropriately trained AHCA employee. As instructed, this employee included in the recalculation of the overpayment the additional billings for the services identified by Ms. Givens, but not included in the Recommended Order. AHCA staff recalculated the amount of the overpayment to Dr. Beeks to be $51,745.13, which is slightly higher than the amount claimed prior to the hearing in DOAH Case NO. 94-1365. The figure that resulted from this recalculation was higher than it would have been had these additional billings not been included.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency enter a final order that adopts the findings of fact and conclusions of law contained herein and that the Agency recalculate the total amount of the overpayment during the audit period based solely on the findings of fact contained in the Recommended Order in DOAH Case 94-1365. DONE AND ENTERED this 8th day of July, 1996, in Tallahassee, Leon County, Florida. CLAUDE B. ARRINGTON, 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 8th day of July, 1996.
Findings Of Fact The Provider received the Final Audit Report that gave notice of Provider's right to an administrative hearing regarding the audit adjustments. The Provider filed a petition requesting an administrative hearing, and then caused· that petition to be Pagel of 4 Filed January 13, 2010 10:00 AM Division of Administrative Hearings. dismissed and the administrative hearing case to be closed. Provider chose not to dispute the facts set forth in the Final Audit Report; they are hereby deemed admitted and adopted by the Agency.
Conclusions THIS CAUSE came before me for issuance of a Final Order on a Final Audit Report dated October 13, 2006 (Audit Period/Engagement No.: July 31, 2001/NH05- 125C). By the Final Audit Report, the Agency for Health Care Administration ("AHCA" or "Agency"), informed the Petitioner, EGRET COVE CENTER ("Provider") that Medicaid reimbursement principles required adjustment of the cost allocations stated in the Provider's cost report. The Agency notified the Provider of the adjustments ARCA was making to the cost report. In response to AHCA's Audit Report, the Provider filed a timely petition for administrative hearing. Subsequent to the petition for administrative hearing, the Provider filed a voluntary dismissal of the hearing request. As such, the Audit Report, and the cost report adjustments as set forth in Audit Report are final.
The Issue The issue for determination is whether Respondent is liable to Petitioner for the principal sum of $94,675.83, which equals the amount that the Florida Medicaid Program paid Respondent for the "professional component" of claims for radiologic services rendered to Respondent's patients between July 1, 2001 and December 31, 2005.
Findings Of Fact Petitioner Agency for Health Care Administration ("AHCA" or the "Agency") is the state agency responsible for administering the Florida Medicaid Program ("Medicaid"). Respondent Harold L. Murray, M.D. ("Murray") was, at all relevant times, a Medicaid provider authorized to receive reimbursement for covered services rendered to Medicaid beneficiaries. Exercising its statutory authority to oversee the integrity of Medicaid, the Agency sent investigators to Murray's office on November 22, 2005. The purpose of this visit was to verify that claims paid by Medicaid had not exceeded authorized amounts. To this end, the investigators inspected Murray's facilities and reviewed his medical records. What the investigators saw gave them reasons to believe that Medicaid had been overpaying Murray for radiologic services. They focused on the period from July 1, 2001 to December 31, 2005 (the "Audit Period"). During the Audit Period, Murray had submitted approximately 2,000 claims seeking the "maximum fee" for radiologic services, which Medicaid had paid. The maximum fee includes compensation for "professional component" services. (Medicaid uses the term "professional component" to describe the physician's services of interpreting a radiologic study and reporting his or her findings. These services are distinguished from those comprising the "technical component," which are routinely performed by technicians. These latter services include operating the radiologic equipment (e.g. an X-ray or sonographic machine) and performing the exam.) It appeared to the investigators that Murray had not, in fact, been performing the professional component. Using information in its database, the Agency determined that, during the Audit Period, Murray had received Medicaid payments totaling $94,675.83 for professional component services. The Agency repeatedly requested that Murray supply additional information that might substantiate his prior claims for fees relating to the professional component. Murray failed, refused, or was unable to comply with the Agency's requests. Murray did testify at hearing, however, providing a reasonably clear picture of what had occurred. On direct examination, Murray explained that he had performed the "first preliminary" review of each radiologic examination in question before sending the study to a radiologist, whom he paid "out of [his own] pocket" to interpret the exam and make a report. According to Murray, Medicaid paid only for his (Murray's) professional component services——not the radiologist's. Murray argues that he is entitled to compensation for the professional component services that he personally performed, notwithstanding that another doctor performed the same services. Analysis of the Facts Although Murray's position might have some superficial appeal, it does not withstand scrutiny as a matter of fact, the undersigned has determined. To explain why this is so requires an analysis of Murray's testimony that entails neither legal conclusions nor findings of historical fact. The undersigned's rationale, being essentially fact-based, is explicated here in the interests of organizational coherence and readability. Assume first, for the sake of argument, that Murray's "first preliminary" review constituted an authoritative interpretation of the radiologic study. Because it is reasonable to infer (and the undersigned finds) that the radiologist's subsequent interpretation of the study was authoritative——Murray's routine practice of ordering and personally paying for the "second opinion" would have been inexplicable, and indeed irrational, if the radiologist's interpretation were of dubious value——the inevitable conclusion, assuming Murray's findings were authoritative, is that the "second opinion" was nearly always duplicative, excessive, and unnecessary.i Murray's responses to that conclusion doubtless would be: (1) Medicaid did not pay for the second opinion, so whether it was excessive and unnecessary is irrelevant; and (2) there is no statute, rule, or Medicaid policy that forbids a provider from procuring, at his own expense, a second opinion——even an unnecessary one. It is not accurate to say, however, that Medicaid did not pay for the second opinion; this, ultimately, is the fatal flaw in Murray's reasoning. To the contrary, Murray's testimony shows clearly that Medicaid did pay for some or all of the expense of the second opinion, albeit indirectly, when it paid Murray for the same work. As his own account reveals, Murray was, in effect, merely a conduit for the Medicaid money, which passed through his hands on its way to the radiologist. Murray contends, of course, that the Medicaid payments for the professional component were "his," that he had earned them by performing the "first preliminary" read, and that he was free to spend his income however he chose. If our initial assumption were true, namely that Murray's preliminary interpretation were authoritative, then his claim to the Medicaid payments at issue might have merit. But, on reflection, this assumption is difficult, if not impossible, to square with the fact that Murray found it necessary always to pay another doctor to perform the very same professional component services. Indeed, having a second opinion was so important to Murray that he was willing to perform his purported preliminary read at a substantially discounted rate, at least, if not for free——or even, maybe, at a financial loss: in every instance, one of these was necessarily the net economic result of his actions.ii If, as we have assumed, Murray were performing a valuable professional service each time he interpreted a radiologic exam, then——the question naturally arises——why would he effectively have given away his expert opinions? Murray testified that he did so for "the safety of [his] patient" and because the radiologist is "educated for that." But these "answers," far from being persuasive, actually undermine the assumption that spawns the question of motive. Indeed, Murray's testimony confirms a reasonable inference contrary to our initial assumption, which inference is that Murray lacked sufficient confidence in his so-called "preliminary" interpretations ever to rely on them alone. This inference, which the undersigned accepts as a finding, arises from the basic undisputed fact that Murray routinely sought "second opinions" for every patient. It is ultimately determined, therefore, that whatever Murray's "first preliminary" reviews comprised, they did not constitute authoritative interpretations of the radiologic studies at hand. That being the case, it is determined that Murray's preliminary opinions added little or no actual value to the subject medical transactions. Offering some sort of provisional opinion that holds only until the "real" opinion can be obtained from the radiologist is not tantamount to performing the professional component.iii Based on the evidence presented, it is determined that the radiologist performed the professional component of the radiologic studies at issue, not Murray. As a result of improperly claiming that he had performed professional component services when in fact he had not, Murray received from Medicaid a total of $94,675.83 in payments that were not authorized to be paid. This grand total of $94,675.83 constitutes an overpayment that Murray must return to the Agency.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency enter a final order requiring Murray to repay the Agency the principal amount of $94,675.83, together with an administrative fine of $1,000. DONE AND ENTERED this 10th day of July, 2007, in Tallahassee, Leon County, Florida. S JOHN G. VAN LANINGHAM Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 10th day of July, 2007.
