Conclusions THE PARTIES resolved all disputed issues and executed a Settlement Agreement. The parties are directed to comply with the terms of the attached settlement agreement. Based on the foregoing, this file is CLOSED. DONE and ORDERED on this the" day of le , 2013, in Tallahassee, Leon County, Florida. ‘LM, fo: ABETH DUDEK, SECRETA “Agency for Health Care Administration 1 Filed May 8, 2013 11:26 AM Division of Administrative Hearings A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO A JUDICIAL REVIEW WHICH SHALL BE INSTITUTED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF AHCA, AND A SECOND COPY ALONG WITH FILING FEE AS PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE AGENCY MAINTAINS ITS HEADQUARTERS OR WHERE A PARTY RESIDES. REVIEW PROCEEDINGS SHALL BE CONDUCTED IN ACCORDANCE WITH THE FLORIDA APPELLATE RULES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED. Copies furnished to: Mario Rub, M.D. Pediatric Pulmonologist 20776 W. Dixie Highway Aventura, Florida 33180 (Via U.S. Mail) Errol H. Powell Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 Willis F. Melvin Assistant General Counsel Agency for Health Care Administration Office of the General Counsel (Via Electronic Mail) Ken Yon, Acting Bureau Chief, Medicaid Program Integrity Finance and Accounting Health Quality Assurance (via email) DOH (via email) License number ME69331 CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of the foregoing has been furnished to the above named addressees by U.S. Mail, Laserfiche or electronic mail on this the 5 day of By » 2013. —) Richard Shoop, Esqu: Agency Clerk State of Florida Agency for Health Care Administration 2727 Mahan Drive, MS #3 Tallahassee, Florida 32308-5403 (850) 412-3630/FAX (850) 921-0158 ire STATE OF FLORIDA AGENCY FOR HEALTH CARE ADMINISTRATION STATE OF FLORIDA, AGENCY FOR HEALTH CARE ADMINISTRATION, Petitioner, vs. DOAH Case No.: 13-0129MPI AHCA CLI. No.: 12-1694-000 MARIO RUB, M.D., Respondent. / SETTLEMENT AGREEMENT STATE OF FLORIDA, AGENCY FOR HEALTH CARE ADMINISTRATION (“AHCA” or “the Agency”), and MARIO RUB, M.D. (“PROVIDER”), by and through the undersigned, hereby stipulates and agrees as follows: 1. This Agreement is entered into for the purpose of memorializing the final resolution of the matters set forth in this Agreement. 2. PROVIDER is a Medicaid provider (Medicaid Provider No. 256291000) and was a provider during the audit period, September 1, 2008 to February 28, 2011. 3. In its final audit report (FAR) dated November 13, 2012 for the case referenced as C.I. No. 12-1694-000, AHCA notified PROVIDER that review of Medicaid claims performed by Medicaid Program Integrity (MPI) indicated that, in its opinion, some claims in whole or in part had been inappropriately paid. The Agency sought recoupment of this overpayment in the amount of $14,039.92. In response to the FAR, PROVIDER filed a petition for a formal administrative hearing. It was assigned DOAH Case No. 13-0129MPI. 4. Subsequent to the original audit, and in preparation for trial, AHCA re-reviewed the PROVIDER’s claims and evaluated additional documentation submitted by the PROVIDER. As a result of the additional review, AHCA determined the overpayment should be adjusted to $5,752.06 plus $1,154.41 in fines and $1,659.66 in costs for a total due of $8,566.13. 5. In order to resolve this matter without further administrative proceedings, PROVIDER and the AHCA expressly agree as follows: (1) AHCA agrees to accept the payment set forth herein in settlement of the overpayment issues arising from the captioned audit. (2) The amount in dispute that is now being resolved is five thousand seven hundred fifty-two dollars and six cents ($5,752.06) on the indebtedness, one thousand one hundred fifty-four dollars and forty-one cents ($1,154.41) in fines, plus one thousand six hundred fifty-nine dollars and sixty-six cents ($1,659.66) in investigative costs for a total of eight thousand five hundred sixty-six dollars and thirteen cents ($8,566.13). PROVIDER will make an initial payment of one thousand seven hundred thirteen dollars and twenty-three cents ($1,713.23) followed by eleven (11) monthly payments of six hundred two dollars and forty- eight cents ($602.48) and one final payment of six hundred two dollars and forty- six cents ($602.46). The first payment will be due beginning thirty (30) days after the Final Order date. This amount due will be offset by any amount already received by the Agency in this matter. Furthermore, PROVIDER is advised that pursuant to Section 409.913, Florida Statutes, failure to pay in full, or enter into and abide by the terms of any repayment schedule set forth by the Agency may result in termination from the Medicaid program, withholding of future Medicaid payments, or other such remedies as provided by law. Any outstanding balance accrues at 10% interest per year. Full payment will fully and completely settle all claims in these proceedings before the Division of Administrative Hearings (DOAH Case No. 13-0129MPI). Should the provider’s enrollment with Medicaid be terminated, the full amount owed will be due within 30 days of termination. (3) In the event any interim payments are received or withheld, by whatever means, prior to the entry of the Final Order, Medicaid Accounts Receivable shall make the adjustment to credit such amounts, dollar for dollar, as quickly as is practicable. (4) Compliance with this repayment agreement fully and completely settles all claims in these proceedings before the Division of Administrative Hearings (DOAH Case No. 13-0129MPI). Should the provider’s enrollment with Medicaid be terminated, the full amount owed will be due within 30 days of termination. (5) PROVIDER and AHCA agree that full payment, as set forth above, resolves and settles this case completely. It will release both parties from any administrative or civil liabilities or claims arising from the findings in audit C.I. 12-1694-000. (6) PROVIDER agrees that it will not rebill the Medicaid Program in any manner for claims that were not covered by Medicaid, which are the subject of the audit in this case. 6. Questions regarding procedures for submitting payment should be directed to Medicaid Accounts Receivable, (850) 412-3901. The C.J. number listed on the first page of this agreement must be legibly entered on the check to assure proper credit. Please mail payment to: AGENCY FOR HEALTHCARE ADMINISTRATION Medicaid Accounts Receivable — MS # 14 2727 Mahan Drive, Bldg. 2, Suite 200 Tallahassee, Florida 32308 7. PROVIDER agrees that failure to pay any monies due and owing under the terms of this Agreement shall constitute PROVIDER’S authorization for the Agency, without further notice, to withhold the total remaining amount due under the terms of this agreement from any monies due and owing to PROVIDER for any Medicaid claims. 8. AHCA reserves the right to enforce this Agreement under the laws of the State of Florida, the Rules of the Medicaid Program, and all other applicable rules and regulations. 9. This settlement does not constitute an admission of wrongdoing or error by either party with respect to this case or any other matter. 10. Each party shall bear its own attorneys’ fees and costs, with the exception that the Respondent shall reimburse, as part of this settlement, $1,659.66 in Agency costs and $1,154.41 in fines. This amount is included in the calculations and demand of paragraph 5(2). 11. The signatories to this Agreement, acting in a representative capacity, represent that they are duly authorized to enter into this Agreement on behalf of the respective parties. 12. | This Agreement shall be construed in accordance with the provisions of the laws of Florida. Venue for any action arising from this Agreement shall be in Leon County, Florida. 13. This Agreement constitutes the entire agreement between PROVIDER and AHCA, including anyone acting for, associated with or employed by them, concerning all matters and supersedes any prior discussions, agreements or understandings; there are no promises, representations or agreements between PROVIDER and the AHCA other than as set forth herein. No modification or waiver of any provision shall be valid unless a written amendment to the Agreement is completed and properly executed by the parties. 14. This is an Agreement of settlement and compromise, made in recognition that the parties may have different or incorrect understandings, information and contentions, as to facts and law, and with each party compromising and settling any potential correctness or 4 incorrectness of its understandings, information and contentions as to facts and law, so that no misunderstanding or misinformation shall be a ground for rescission hereof. 15. PROVIDER expressly waives in this matter its right to any hearing pursuant to sections 120.569 or 120.57, Florida Statutes, the making of findings of fact and conclusions of law by the Agency, and all further and other proceedings to which it may be entitled by law or rules of the Agency regarding this proceeding and any and all issues raised herein. PROVIDER further agrees that it shall not challenge or contest any Final Order entered in this matter which is consistent with the terms of this settlement agreement in any forum now or in the future available to it, including the right to any administrative proceeding, circuit or federal court action or any appeal. 16. | This Agreement is and shall be deemed jointly drafted and written by all parties to it and shall not be construed or interpreted against the party originating or preparing it. 17. To the extent that any provision of this Agreement is prohibited by law for any reason, such provision shall be effective to the extent not so prohibited, and such prohibition shall not affect any other provision of this Agreement. 18. This Agreement shall inure to the benefit of and be binding on each party’s successors, assigns, heirs, administrators, representatives and trustees. 19. All times stated herein are of the essence of this Agreement. THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK MARIO RUB, M.D. Printed Representativé$ Name BY. Nacio buh, 305 0060381 DEA BR 4969664 20776 W. DDGE HWY. AVENTURA, FL 33180 (905) 931-1812 + FAX (305) 931-1632 FLORIDA AGENCY FOR HEALTH CARE ADMINISTRATION 2727 Mahan Drive, Mail Stop #3 Tallahassee, Florida 32308-5403 Wl « CC mMmActeR General Counsel Aoegack dll Chief Medicaid Counsel hy. Willis F. Melvin, Jr. Assistant General Counsel Dated: Dated: Dated: Dated: Dated: 2| \3 , 2013 S/3 ,2013 r// 2 ,2013 3 5 2013 Februany LF ,2013 RICK SCOTT FLORIDA AGENCY FOR HEALTH CARE ADMINISTRATION GOVERNOR Better Health Care for all Floridians CERTIFIED MAIL No.:7009 2820 0001 5671 9368 November 13, 2012 Provider No: 2562910-00 NPI No: 1790889996 License No.:ME69331 Mario Rub, M.D. 20776 West Dixie Highway North Miami Beach, Florida 33180 In Reply Refer to FINAL AUDIT REPORT C.L: No. 12-1694-000 Dear Provider: ELIZABETH DUDEK SECRETARY The Agency for Health Care Administration (Agency), Office of Inspector General, Bureau of Medicaid Program Integrity, has completed a review of claims for Medicaid reimbursement for dates of service during the period September 1, 2008, through February 28, 2011. A preliminary audit report dated July 16, 2012, was sent to you indicating that we had determined you were overpaid $279,132.60. Based upon a review of all documentation submitted, we have determined that you were overpaid $14,039.92 for services that in whole or in part are not covered by Medicaid. A fine of $2,807.98 has been applied. The cost assessed for this audit is $1,359.66. The total amount due is $18,207.56. Be advised of the following: (1) In accordance with Sections 409.913(15), (16), and (17), Florida Statutes (F.S.), and Rule 59G- 9.070, Florida Administrative Code (F.A.C.), the Agency shall apply sanctions for violations of federal and state laws, including Medicaid policy. This letter shall serve as notice of the following sanction(s): e A fine of $2,807.98 for violation(s) of Rule Section 59G-9.070(7) (e), F.A.C. (2) Pursuant to Section 409.913(23) (a), F.S., the Agency is entitled to recover all investigative, legal, and expert witness costs. 2727 Mahan Drive, MS# 6 Tallahassee, Florida 32308 Visit AHCA online at http://ahca.myflorida.com Mario Rub, M.D. Provider ID: 2562910-00 CI. No.:12-1694-000 Page 2 This review and the determination of overpayment were made in accordance with the provisions of Section 409.913, F.S. In determining the appropriateness of Medicaid payment pursuant to Medicaid policy, the Medicaid program utilizes procedure codes, descriptions, policies, limitations and requirements found in the Medicaid provider handbooks and Section 409.913, F.S. In applying for Medicaid reimbursement, providers are required to follow the guidelines set forth in the applicable rules and Medicaid fee schedules, as promulgated in the Medicaid policy handbooks, billing bulletins, and the Medicaid provider agreement. Medicaid cannot pay for services that do not meet these guidelines. Below is a discussion of the particular guidelines related to the review of your claims, and an explanation of why these claims do not meet Medicaid requirements. The audit work papers are attached, listing the claims that are affected by this determination. REVIEW DETERMINATION(S) Medicaid policy defines the varying levels of care and expertise required for the evaluation and management procedure codes for office visits. The documentation you provided supports a lower level of office visit than the one for which you billed and received payment. This determination was made by a peer consultant in accordance with Sections 409.913 and 409.9131, F.S. The difference between the amount you were paid and the correct payment for the appropriate level of service is considered an overpayment. Medicaid policy requires that services performed be medically necessary for the diagnosis and treatment ofan illness. You billed and received payments for services for which the medical records, when reviewed by a Medicaid physician consultant, were insufficient to justify billing for code indicated. The documentation failed to meet the Medicaid criteria for medical necessity. The claims were either disallowed or adjusted by the peer to reflect service documented. OVERPAYMENT CALCULATION A random sample of 35 recipients respecting whom you submitted 173 claims was reviewed. For those claims in the sample, which have dates of service from September 1, 2008, through February 28, 2011, an overpayment of $846.51 or $4.89312139 per claim, was found. Since you were paid for a total (population) of 3,994 claims for that period, the point estimate of the total overpayment is 3,994 x 4,89312139 = $19,543.13. There is a 50 percent probability that the overpayment to you is that amount or more. We used the following statistical formula for cluster sampling to calculate the amount due the Agency: E- oe) ses 4 - -YB,y Where: N N E = point estimate of overpayment = SA, > B | Mario Rub, M.D. Provider ID: 2562910-00 CI. No.:12-1694-000 Page 3 U F = number of claims in the population = s B is] A, = total overpayment in sample cluster B, = number of claims in sample cluster U =number of clusters in the population N = number of clusters in the random sample N N Y = mean overpayment per claim = > A, > B, i=] j= t = t value from the Distribution of ¢ Table All of the claims relating to a recipient represent a cluster. The values of overpayment and number of claims for each recipient in the sample are shown on the attachment entitled “Overpayment Calculation Using Cluster Sampling.” From this statistical formula, which is generally accepted for this purpose, we have calculated that the overpayment to you is $14,039.92, with a ninety-five percent (95%) probability that it is that amount or more. If you are currently involved in a bankruptcy, you should notify your attorney immediately and provide a copy of this letter for them. Please advise your attorney that we need the following information immediately: (1) the date of filing of the bankruptcy petition; (2) the case number; (3) the court name and the division in which the petition was filed (e.g., Northern District of Florida, Tallahassee Division); and, (4) the name, address, and telephone number of your attorney. If you are not in bankruptcy and you concur with our findings, remit by certified check in the amount of $18,207.56, which includes the overpayment amount as well as any fines imposed and assessed costs. The check must be payable to the Florida Agency for Health Care Administration. Questions regarding procedures for submitting payment should be directed to Medicaid Accounts Receivable, (850) 412-3901. To ensure proper credit, be certain you legibly record on your check your Medicaid provider number and the C.J. number listed on the first page of this audit report. Please mail payment to: Medicaid Accounts Receivable - MS # 14 Agency for Health Care Administration 2727 Mahan Drive Bldg. 2, Ste. 200 Tallahassee, FL 32308 Pursuant to section 409.913(25)(d), F.S., the Agency may collect money owed by all means allowable by law, including, but not limited to, exercising the option to collect money from Medicare that is payable to the provider. Pursuant to section 409.913(27), F.S., if within 30 days following this notice you have not either repaid the alleged overpayment amount or entered into a satisfactory repayment agreement with the Agency, your Medicaid reimbursements will be withheld; they will continue to be withheld, even during the pendency of an administrative hearing, until such time as the overpayment amount is satisfied. Pursuant to section 409.913(30), F.S., the Agency shall terminate your participation in the Medicaid program if you fail to repay an overpayment or enter into a satisfactory repayment agreement with the Agency, within 35 days after the date of a final order which is no longer subject to further appeal. Pursuant to sections 409.913(15)(q) and 409.913(25)(c), F.S., a provider that does not adhere to the terms of a repayment agreement is subject to termination from the Medicaid program. Mario Rub, M.D. Provider ID: 2562910-00 C.J. No.:12-1694-000 Page 4 Finally, failure to comply with all sanctions applied or due dates may result in additional sanctions being imposed. You have the right to request a formal or informal hearing pursuant to Section 120.569, F.S. Ifa request for a formal hearing is made, the petition must be made in compliance with Section 28-106.201, F.A.C. and mediation may be available. If a request for an informal hearing is made, the petition must be made in compliance with rule Section 28-106.301, F.A.C. Additionally, you are hereby informed that ifa request for a hearing is made, the petition must be received by the Agency within twenty-one (21) days of receipt of this letter. For more information regarding your hearing and mediation rights, please see the attached Notice of Administrative Hearing and Mediation Rights. Any questions you may have about this matter should be directed to: : Jennifer Ellingsen, Investigator, Agency for Health Care Administration, Office of Inspector General, Medicaid Program Integrity, 2727 Mahan Drive, Mail Stop #6, Tallahassee, Florida 32308-5403, telephone (850) 412- 4600, facsimile (850) 410-1972. Sincerely, Se Be Fred Becknell AHCA Administrator Office of Inspector General Medicaid Program Integrity FB/jse Enclosure(s) Copies furnished to: Finance & Accounting (Interoffice mail) Health Quality Assurance (E-mail) Department of Health (E-mail) Mario Rub, M.D. Provider ID: 2562910-00 C.J. No.:12-1694-000 Page 5 NOTICE OF ADMINISTRATIVE HEARING AND MEDIATION RIGHTS You have the right to request an administrative hearing pursuant to Sections 120.569 and 120.57, Florida Statutes. If you disagree with the facts stated in the foregoing Final Audit Report (hereinafter FAR), you may request a formal administrative hearing pursuant to Section 120.57(1), Florida Statutes. If you do not dispute the facts stated in the FAR, but believe there are additional reasons to grant the relief you seek, you may request an informal administrative hearing pursuant to Section 120.57(2), Florida Statutes. Additionally, pursuant to Section 120.573, Florida Statutes, mediation may be available if you have chosen a formal administrative hearing, as discussed more fully below. The written request for an administrative hearing must conform to the requirements of either Rule 28- 106.201(2) or Rule 28-106.301(2), Florida Administrative Code, and must be received by the Agency for Health Care Administration, by 5:00 P.M. no later than 21 days after you received the FAR. The address for filing the written request for an administrative hearing is: Richard J. Shoop, Esquire Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Mail Stop #3 Tallahassee, Florida 32308 Fax: (850) 921-0158 Phone: (850) 412-3630 The request must be legible, on 8 % by 11-inch white paper, and contain: 1. Your name, address, telephone number, any Agency identifying number on the FAR, if known, and name, address, and telephone number of your representative, if any; 2. An explanation of how your substantial interests will be affected by the action described in the FAR; 3. A statement of when and how you received the FAR; 4. Fora request for formal hearing, a statement of all disputed issues of material fact; 5. Fora request for formal hearing, a concise statement of the ultimate facts alleged, as well as the rules and statutes which entitle you to relief; 6. Fora request for formal hearing, whether you request mediation, if it is available; 7. For a request for informal hearing, what bases support an adjustment to the amount owed to the Agency; and 8. A demand for relief. A formal hearing will be held if there are disputed issues of material fact. Additionally, mediation may be available in conjunction with a formal hearing. Mediation is a way to use a neutral third party to assist the parties in a legal or administrative proceeding to reach a settlement of their case. If you and the Agency agree to mediation, it does not mean that you give up the right to a hearing. Rather, you and the Agency will try to settle your case first with mediation. If you request mediation, and the Agency agrees to it, you will be contacted by the Agency to set up a time for the mediation and to enter into a mediation agreement. If a mediation agreement is not reached within 10 days following the request for mediation, the matter will proceed without mediation. The mediation must be concluded within 60 days of having entered into the agreement, unless you and the Agency agree to a different time period. The mediation agreement between you and the Agency will include provisions for selecting the mediator, the allocation of costs and fees associated with the mediation, and the confidentiality of discussions and documents involved in the mediation. Mediators charge hourly fees that must be shared equally by you and the Agency. If a written request for an administrative hearing is not timely received you will have waived your right to have the intended action reviewed pursuant to Chapter 120, Florida Statutes, and the action set forth in the FAR shall be conclusive and final. FLORIDA AGENCY FOR HEALTH CARE ADMINISTRATION Provider: 256291000 - MARIO RUB Overpayment Calculation Using Cluster Sampling by Recip Name Dates Of Service: 9/1/2008 through 2/28/2011 Number of recipients in population: Number of recipients in sample: Total payments in population: No. of claims in population: Totals: Using Overpayment per claim method Overpayment per sample claim: Point estimate of the overpayment: Variance of the overpayment: Standard error of the overpayment: Half confidence interval: Overpayment at the 95 % Confidence level: Overpayment run on 11/9/2012 COON ADH RWHNA 600 35 $1,083,860.97 3,994 $4.89312139 $19,543.13 $10,592,145.98 $3,254.56 $5,503.21 $14,039.92 33 FP NN FB HOMER ANNA aNWaAn = =a nN 173 Case ID: Confidence level: t value: $228.96 $145.15 $281.20 $121.92 $153.25 $68.64 $747.83 $228.96 $121.92 $168.96 $28,469.80 $76.70 $87.60 $236.70 $2,803.99 $229.95 $297.69 $171.41 $87.60 $129.39 $259.20 $3,257.45 $234.17 $87.60 $251.87 $75.97 $57.55 $34.32 $693.77 $87.60 $173.92 $87.60 $20,625.31 $121.92 $75.97 $60,981.84 Page 4 of 4 NPI: 1790889996 12-1694-000 95 % 1.690924 $0.00 $0.00 $117.70 $0.00 $0.00 $52.55 $194.73 $0.00 $0.00 $0.00 $126.76 $19.16 $0.00 $38.32 $0.00 $0.00 $38.30 $0.00 $0.00 $41.79 $54.28 $0.00 $68.75 $0.00 $0.00 $0.00 $0.00 $0.00 $94.17 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $846.51 Page 1 of 1) ( | SENDER: COMPLETE THIS SECTION ® Complete Items 1, 2, and 3. Also complete Htam 4 If Reatricted Delivery Is desired, @ Print your name and address on the reverse 80 that we can return the card to you. ® Attach this card to the back of the malipisce, ot aathn dront. Ihsvares. rete pew ™ Attach this card to the back of the mallplece, or on the front If space permits, 1. Article Addressed to: &. Hecwived by ( Printed Name) D. Is delivary address different from item 17 1 Yes IC YES, enter delivery address below: = No Mario Rub, M.D. '" 20776 West Dixie Highwa: . 'y 3. Service Type North Miami Beach, Florida 33180 Centtied Mat ©) Express Mail Cl. # 12+1694-000 JE-re Ci Regletered —-C) Return Recelpt for Merchandlee - D Insured Mall = 6.0.0, 4, Restricted Delivery? 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The Issue The issue in these cases is whether Petitioners are entitled to the Medicaid payments which they received or whether the claims filed by Petitioners were improper. At hearing Petitioners presented the testimony of Gary Allen Kitos; Joseph Namey, D.O.: Herbert Moselli; Robert Grenitz, M.D.; Mary Bone; Herbert Topol, D.O.; Sylvan Goldin, D.O.; and Mildred Martin. Topol Exhibits 1-3 and 5 were admitted in evidence. Goldin Exhibits 1-4, 6 and 7 were admitted in evidence. Topol-Goldin General Practice (GP) Exhibits 1-7 and 35-37 were admitted in evidence. The Department of Health and Rehabilitative Services (HRS) presented the testimony of Jules J. Cohen, D.O.; Morton T. Smith, D.O.; and Mildred Martin. HRS also presented the testimony by deposition of Lawrence E. Stivers and Michael W. Forsthoefel, M.D. HRS Exhibits 1-23 were admitted in evidence. Joint Exhibits 1-4 were also admitted, which include three inventory lists and four separate large boxes of patient records. The parties filed proposed findings of fact and conclusions of law. All proposed findings of fact and conclusions of law have been considered. A ruling has been made on each proposed finding of fact in the Appendix hereto and made a part hereof.
Findings Of Fact During 1932, Petitioners Goldin, Topol, and the Topol- Goldin General Practice Clinic were all operating out of the same facility but each billed Medicaid under a separate physician provider number. Medicaid is a joint state and federal program that is completely voluntary. In entering into a provider agreement with Medicaid, Topol, Goldin and the General Practice Clinic agreed to abide by the provisions of the Florida Administrative Rules, Florida Statutes, policies, procedures, manuals of the Florida Medicaid Program and federal laws and regulations. Under the Medicaid Program, a state may limit the services provided for under federal regulations. As part of the requirements for participation in Medicaid, the State of Florida has a peer review process to monitor all providers. Peer review is a recognized process utilized by third party payors (such as Medicaid, Medicare and insurance companies) to assure that they are getting the services for which they are paying. Florida's Medicaid peer review process is modeled after the federal Medicare Program's process. In Florida approximately 7,000 physicians are enrolled in the Medicaid program at any one time. In order to monitor all of these physicians' practices, the Medicaid Program reviews those physicians whose practice exceeds the parameters of the average Medicaid physician's practice. Reviews of physicians' practices number between 60 to 85 physicians per year. Approximately 40-50% of those physicians reviewed are referred for peer review. The Medicaid review for physicians consists of a Level I review of the physician's activity in the program compared to the physician's peers. If the physician exceeds the upper limits in the Level I review, a desk review is done by medical consultants who review a "claims detail" of all claims for payment made by the provider. If further review is needed, a disproportionate stratified random sample (DSRS) of the physician's claims is obtained and the physician's patient records for those claims are obtained. The physician's records are first reviewed by a Medicaid physician consultant who determines if peer review is necessary. After a peer review is done, an in-house consultant does a line-by-line evaluation based on the peer review findings and medical necessity and makes a recommendation for denial of claims. Those claims denied are then converted into an amount of money for disallowance. The Medicaid program does not review physicians just because of the amount of money they make in the program. In September of 1981 the Medicaid Investigative Section requested updates on providers who had previously been investigated in 1977. Goldin, Topol, and the General Practice Clinic were among those providers. Cases for review were then opened for Goldin, Topol, and the General Practice-Clinic in 1982. A preliminary cursory review of the practices of Goldin, Topol, and the General Practice Clinic was prepared by a nursing consultant who recommended that the investigation go forward. During the same time period that the review of Goldin, Topol, and the General Practice Clinic was beginning, a separate review of a Medicaid recipient raised questions of pingponging (going from one doctor to another) between Drs. Topol and Goldin that would justify a further review of their practice. In February and March of 1983, Level II Review reports (desk analysis) were issued on Goldin, Topol, and the General Practice Clinic. These reports contained the Level I Reviews, documentation of the provider's 1982 Medicaid practice, complaints, conclusions, and recommendations. The Level I Review reports included in the Level II Review indicated those areas where the providers exceeded the upper limits of their peers. For example, Dr. Goldin averaged 1,998 Medicaid office visits per quarter compared to an average of 86 for other Medicaid physicians. Dr. Goldin's average exceeded two standard deviations above the average for his peers. The Level II Reviews concluded that the allegations of overutilization for Goldin, Topol, and the General Practice Clinic had been substantiated and it was recommended that they be referred to Peer Review. In March of 1983, a meeting was held to discuss these cases because of their complicated nature. At that meeting, Mildred Martin was instructed to proceed with Peer Review In preparing for Peer Review, disproportionate stratified random samples (DHRS) for Goldin, Topol, and the General Practice Clinic were obtained. A DSRS is the tabulation of the provider's activities or the amounts paid to him for each recipient during a specific period of time. It lists the recipients in ascending order of amounts paid to the provider. Total amounts of the payments made during the period are divided into five strata of the same or close to the same amounts of money. A DSRS is used to give an overall view of the physician's practice. On each DSRS the computer randomly picked 30 patients for a detailed review of their patient records. Because of the volume of practice of Goldin, Topol, and the General Practice Clinic, it would not have been fair to evaluate their entire practice using only 30 records. Therefore, HRS decided to review 7% of records of Topol and Goldin. The General Practice Clinic records were reviewed as randomly selected by the computer. In order to enlarge the sample to 7%, Ms. Martin utilized a random selection process employed by Medicare, which entailed selecting every third patient beginning from the bottom of each strata and working up until a 7% sample was achieved. This does mean that patients in the 7% samples represent the patients in each strata for whom the highest claims were made. When the same patient record appeared in two different samples, the next patient on the list was used to avoid duplication and disallowance of two of the providers for the same patient. The records selected for review were selected randomly and selected utilizing generally accepted statistical techniques. In June of 1983, Goldin, Topol, and the General Practice Clinic were requested to submit the records of those claims selected from the DSRS and the 7% sample process. When it was obvious that the records received were not complete, Ms. Martin contacted the offices of Goldin, Topol and the General Practice Clinic, requesting the missing records. Those records received from Goldin, Topol, and the General Practice Clinic were referred to the Florida Osteopathic Medical Association's (FOMA) Peer Review Committee along with information indicating the areas of concern and a letter of explanation from Dr. Goldin. The FOMA Peer Review Committee is an independent organization made up of approximately ten osteopathic physicians from various parts of the State of Florida. The FOMA contracts with third party carriers (Medicaid) to review peers. The cases supplied to the FOMA Peer Review Committee are reviewed and discussed and the committee issues its opinion on overutilization. The FOMA Peer Review Committee's findings are either no overutilization, minimal overutilization (5-20%) overutilization), moderate overutilization (20-50%) or excessive overutilization (over 50%). Upon receipt of the referral from HRS, the FOMA Peer Review Committee set up a meeting and invited Drs. Topol and Goldin. At that meeting held April 28, 1984, eight (8) physicians of the Peer Review Committee reviewed the charts and interviewed Drs. Topol and Goldin. The Peer Review Committee looked for a trend in the physicians' overall practice. The Peer Review Committee found that the records were poorly documented and difficult to read. The Peer Review Committee found that the patients were being seen more than medically necessary. It was a consensus of the members of the FOMA Peer Review Committee that there was moderate overutilization. By letters dated May 9, 1984, the FOMA Peer Review Committee notified Drs. Topol and Goldin and HRS of their findings. The medical records of Topo1 and Goldin were then sent to Dr. Michael Forsthoefel, M.D., for a line-by-line disallowance of services based upon the Medicaid rules and regulations and the Peer Review Committee's findings. Dr. Forsthoefel disallowed an amount of claims in the range of 30-35% which fell within the level of moderate overutilization (20-50%) determined by the Peer Review Committee, however, since Dr. Forsthoefel was an M.D. and not a D.O., HRS decided that in all fairness the determinations should be made by a D.O. who was a peer of the doctors being reviewed. The medical records of Topol and Goldin under review were-then sent to Dr. Morton T. Smith, D.O., for the line-by- line determination. In order to assure further fairness of the review, Dr. Smith was instructed not to review and disallow any claims by a physician that appeared on a record of the other physician being reviewed. As a result of the new review by Dr. Smith and the instructions given him, the total amount disallowed dropped to 16 or 17%. (The Transcript, p. 635, says 60-70%, but that is a typographical error and should read 16-17%). It is found that the peer review and the disallowances by Dr. Smith were reasonable and accurate. It was then necessary to apply the amount disallowed in the 7% sample to the overall Medicaid claims of Topol and Goldin. HRS performed this calculation by determining the average overpayment for the recipients in each strata sample and multiplying that average by the total number of recipients in each strata. However, because the samples were selected from those recipients in each strata with the highest claims (See Finding of Fact 32), the "average overpayment per recipient" method of extending the overpayments in each sample to the total population of claims is arbitrarily skewed. The result is that Topol and Goldin were exposed to liability greatly in excess of the total amount claimed. The more reasonable method for extending the overpayments in each sample to the total population of claims would be to determine the percentage of disallowed claims in each strata sample and to apply that percentage to the total paid in each strata. For example for Dr. Goldin in Strata I a total of $922 was paid and $30 was disallowed, or a 3.25% disallowance. Applied to the total paid in that strata of $21,600.28, a total overpayment for Strata I is shown to be $702.01. Using this method of calculation, it is determined that Dr. Goldin has been overpaid as follows: Strata I $702.01 (30/922 X 21,600.28) Strata II $2,957.64 (204/1490.92 X 21,620.18) Strata III $2,238.49 (274.24/2378.94 X 21,627.92) Strata IV $3,506.92 (617.95/3805.88 X 21,594.33) Strata V $5,886.05 (1841.36/6729.80 X 21,513.33) Total $15,291.11 Using this method of calculation, it is determined that Dr. Topol has been overpaid as follows: Strata I $1,417.87 (60.98/728.16 X 16,939.88) Strata II $2,263.31 (160.00/1199.63 X 16,966.34) Strata III $2,099.45 (225.74/1823.52 X 16,958.37) Strata IV $2,335.17 (402.96/2935.57 X 17,007.75) Strata V $4,195.75 (1358.14/5443.97 X 16,816.65) Total $12,311.55 The General Practice Clinic was treated differently because it was operated differently. The provider number issued to the General Practice Clinic was applied for and granted to Drs. Topol and Goldin as authorized agents. General Practice Clinic was actually operated and run by Mary Petruff Bone. At the General Practice Clinic, Ms. Bone prescribed and mixed antigens for allergy patients, determined what testings were to be done, and handled other medical problems of patients. Neither Dr. Topol nor Dr. Goldin had any expertise in the field of allergy treatment. The records of the General Practice Clinic were the responsibility and the product of Ms. Bone. At all times material hereto, Ms. Bone was a certified physician's assistant competent to provide services to allergy patients. A physician's assistant is not a physician. At all times material hereto, physicians' assistants could not receive a provider number from Medicaid under which they could bill the Medicaid Program. Ms. Bone billed Medicaid for her services under the General-Practice Clinic's physician provider number. Medicaid was billed for physician's services by the General Practice Clinic even though a physician did not see the patient. It is not usual and customary practice for physicians to bill for their services when they do not see the patients. The State of Florida's Medicaid Program does not authorize payment for services to a physician's assistant under the supervision of a physician. The Medicaid program paid $75,654.73 to the General Practice Clinic in 1982 under its physician provider number. Medicaid did not learn that the General Practice Clinic's billings were for non-physician's services until the Peer Review Committee met with Petitioners on April 28, 1984. For the General Practice Clinic, Dr. Goldin admitted that $40,642.85 should have been disallowed due to improper billing procedures. The $40,642.85 calculated by Dr. Goldin did not take into account any possible double billing or the fact that the clinic's services were performed by a physician's assistant. The records for the General Practice Clinic were not referred to a physician consultant because the payment denials were due strictly to noncompliance with Medicaid rules and regulations, not the overutilization findings of the Peer Review Committee. Medicaid claims for the General Practice Clinic were denied for four basic reasons: 1) No records provided to substantiate the claim; 2) improper billing for B-12 injections; 3) duplicate billing where the General Practice Clinic and Topo or Goldin billed on the same day; and 4) office visits not rendered by a physician. Antigen injections and allergy testing were not disallowed in the claims submitted by the General Practice Clinic because those services are commonly reimbursable when done by someone other than a physician under a physician's supervision. The amounts disallowed for the sample of claims for the General Practice Clinic was then applied to the overall clinic practice in the same manner that the Topol and Goldin amounts were applied to their practice in order to obtain an amount owed the HRS Medicaid Program for the disallowed services. However, again the method used by HRS to extend the overpayment amount determined from the sample to the total population of claims is unreasonable because it does not accurately project the total amount overpaid. For example, in Strata I for the General Practice Clinic, a total of $15,177.73 in Medicaid benefits were paid in 1982. Yet, using the HRS method, a total overpayment of $22,201.44 is determined for that strata, or $7,023.71 more than was ever paid in that strata. Such a result must be unreasonable. If instead the percentage method applied above is used, it is determined that the General Practice Clinic has been overpaid as follows: Strata I $12,659.76 (362/434 X 15,177.73) Strata II $12,784.78 (1447/1719 X 15,188.00) Strata III $12,578.68 (3284/4001 X 15,325.00) Strata IV $13,102.67 (4244/4969 X 15,341.00) Strata V $12,215.79 (5369/6427 X 14,623.00) Total S63,341.68 Some disallowances were made on all three provider numbers because no documentation was provided, even after Ms. Martin asked a second time. These disallowances are proper and correct because Medicaid will not pay for services where there is no documentation justifying the services. The fact that Petitioners now claim to have that documentation is irrelevant to the correctness of the disallowances.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Health and Rehabilitative Services enter a Final Order which provides: That Dr. Herbert Topol, D.O., reimburse the Medicaid Program for $12,311.55 in Medicaid overpayments for 1982. That Dr. Sylvan Goldin, D.O., reimburse the Medicaid Program for $15,291.11 in Medicaid overpayments for 1982. That the Topol-Goldin General Practice reimburse the Medicaid Program for $63,341.68 in Medicaid overpayments for 1982. DONE and ORDERED this 23rd day of September, 1986, in Tallahassee, Florida. DIANE K. KIESLING, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 23rd day of September, 1986. COPIES FURNISHED: Herbert Topol, D.O. 1111 W. Broward Boulevard Ft. Lauderdale, Florida 33312 Sylvan Goldin, D.O. 1111 W. Broward Boulevard Ft. Lauderdale, Florida 33312 Theodore E. Mack, Esquire 1323 Winewood Boulevard Building One, Suite 407 Tallahassee, Florida 32301 William Page, Jr., Secretary Dept. of HRS 1323 Winewood Blvd. Tallahassee, Florida 32301 APPENDIX The following constitute my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all proposed findings of fact submitted by the parties to this case. Rulings on Petitioners' proposed Findings of Fact Proposed Finding of Fact 3 is adopted in substance as modified in Finding of Fact 32. Proposed Finding of Fact 6 is adopted in substance as modified in Finding of Fact 76. Proposed Finding of Fact 8 is adopted in substance as modified in Finding of Fact 77. Proposed Finding of Fact 39 is adopted in substance as modified in Finding of Fact 70. Proposed Finding of Fact 52 is adopted in substance as modified in Finding of Fact 55. . 6. Proposed Findings of Fact 1, 5, 9, 11, 12, 13, 14, 25, 26, 27, 29, 31, 32, 37, 38, 40, 41, 43, 47 and 48 are rejected as constituting argument and as being conclusory. 7. Proposed Findings of Fact 2, 4, 16, 22, 23, 24, 30, 33, 35, 36, 40, 46, 49 and 50 are subordinate to the fact actually found. 8. Proposed Findings of Fact 7, 10, 17, 18, 19, 20, 21, 34, 38, 40, 42, 44, 45 and 46 are irrelevant and/or unnecessary. 9. Proposed Findings of Fact 17, 25, 28, 32, 43 and 51 are not supported by the competent, substantiated evidence. Additionally, Proposed Findings of Fact 25, 28 and 32 are based on and refer to exhibits which were not admitted in evidence. The exhibits are attached to the proposed order and are rejected as an inappropriate attempt to supplement the record. Rulings on Respondent's proposed Findings of Fact. Each of the following proposed Findings of Fact are adopted in substance or as modified in the Recommended Order. The number in parentheses is the Finding of Fact which so adopts the pro- posed Findings of Fact: 1(1); 2(58); 3(59); 4(60); 5(S1); 6(62); 7(63); 8(64); 9(65); 10(66); 11(67); 12(68); 13(69), 14(70) 15(71); 16(72); 17(60); 18(2); 19(3); 20(4); 21(5); 22(6); 24(7) 25(8); 26(9); 27(10); 28(11); 29(12); 30(13); 31(14); 32(15), 33(16); 34(17); 35(18); 36(19); 37(20); 38(21); 39(22); 40(23). 41(24); 42(25); 43(26); 44(27); 45(28); 46(29); 47(30); 48(31), 49(32); 50(33); 51(34); 52(35); 53(36) 54(37); 55(38); 56(39). 57(40); 58(41); 59(42); 60(43); 61(44); 62(45); 64(46); 65(47) 66(48). 67(49); 68(50); 69(51); 70(53); 74(73); 75(74); 76(76); 79(75); 81(78). Proposed Findings of Fact 23, 63, and 80 are irrelevant. Proposed Findings of Fact 71, 72, 73, 77 and 78 are subordinate to the facts found.
The Issue Among the many issues in Case No. 00-3900BID, there are three main issues: whether it was proper for the Division of State Group Insurance ("DSGI" or the "agency") to reject and return unopened the response of Petitioner MedImpact Healthcare Systems, Inc., to DSGI's Invitation to Negotiate (the "ITN") for pharmacy benefits management services? If not, and the response should have been accepted and opened, whether DSGI's selection of an ITN as the method for soliciting suppliers eligible to provide pharmacy benefits management services for DSGI is an issue properly in the case? Finally, whether Merck-Medco Managed Care L.L.C. ("MMMC") has standing to intervene in this proceeding?
Findings Of Fact The State Group Insurance Program The State Group Insurance Program (the "Program") is established in Section 110.123, Florida Statutes. Its purpose is the provision of a comprehensive package of health care benefits to state employees. Responsibility for management, administration, and procurement for the Program is assigned to the Division of State Group Insurance ("DSGI") in the Department of Management Services ("DMS"). Program members include active state employees, retired state workers, surviving spouses of employees or retirees, persons eligible for COBRA, and eligible dependents. It is the intention of DSGI that the Program's benefits be offered to members in a cost-efficient and prudent manner and that members be given a choice of benefits that best meets their individual needs. The Division of State Group Insurance, therefore, offers two options to members. One of the options is a preferred provider organization (the "PPO Plan"). The PPO Plan is "a self-insured plan offering health care benefits administered by Blue Cross and Blue Shield of Florida (BCBSF) and prescription drug care benefits administered [at the time the procurement commenced in this proceeding] by Eckerd Health Services (EHS)." (Joint Exhibit 2, p. 1, Section 1.0, OVERVIEW, Subsection 1.1). With regard to pharmacy benefits management under the Plan, the State's objective, inter alia, is "to ensure that PPO Plan participants have access to high quality pharmacy benefits that are provided in a cost-efficient manner." (Joint Exhibit 2, p. 1, Section 1.2). With that objective in mind, DGSI, on April 3, 2000, sought proposals from pharmacy benefits management organizations licensed to do business in the State of Florida. The procurement method by which the proposals were sought was an Invitation to Negotiate (an "ITN"), one of the solicitation methods used by the state of Florida when procurement is competitive. Competitive Procurement Solicitations When a state agency wants to procure commodities or contractual services subject to competition, there are three main methods of solicitation: Invitations to Bid ("ITB"), Requests for Proposals ("RFP") and Invitations to Negotiate ("ITN"). The first two, ITBs and RFPs, enjoy the status of specific recognition in statute: (11) "Invitation to bid" means a written solicitation for competitive sealed bids with the title, date, and hour of the public bid opening designated and specifically defining the commodity, group of commodities, or services for which bids are sought. It includes instructions prescribing all conditions for bidding and shall be distributed to all prospective bidders simultaneously. The invitation to bid is used when the agency is capable of specifically defining the scope of work for which a contractual service is required or when the agency is capable of establishing precise specifications defining the actual commodity or group of commodities required. * * * (15) "Request for proposals" means a written solicitation for competitive sealed proposals with the title, date, and hour of the public opening designated. The request for proposals is used when the agency is incapable of specifically defining the scope of work for which the commodity, group of commodities, or contractual service is required and when the agency is requesting that a qualified offeror propose a commodity, group of commodities, or contractual service to meet the specifications of the solicitation document. A request for proposals includes, but is not limited to, general information, applicable laws and rules, functional or general specifications, statement of work, proposal instructions, and evaluation criteria. Requests for proposals shall state the relative importance of price and any other evaluation criteria. Section 287.012, Florida Statutes. A bid that conforms in all material respects to the invitation to bid and is submitted by a qualified bidder is a "[r]esponsive bid." Section 287.012(16), Florida Statutes. Similarly, a proposal that conforms in all material respects to a request for proposals submitted by a qualified proposer is a "responsive proposal." Id. Invitations to negotiate do not enjoy the status of specific statutory recognition. The term "invitation to negotiate" is currently defined by a DMS rule that was amended effective January 2, 2000, three months or so before the ITN in this case was issued. The current rule provides both a definition of "invitation to negotiate" and requirements to be met when such an invitation is selected as the solicitation document for procurement: (2) Invitation to Negotiate - Competitive solicitation used when an Invitation to Bid or Request for Proposal[s] is not practicable. Agency shall document file as to conditions and circumstances resulting in this decision. Rule 60A-1.001(2), Florida Administrative Code. This definitional section contains the only criteria expressed in agency rules "for the selection of an invitation to negotiate as the chosen method for procurement." (Petitioner's Exhibit 16, Barker Deposition, pgs. 13-14.) A submission in response to an ITN is referred-to by DMS in its ITN Acknowledgement Form as a "negotiation." (See Joint Exhibit 2a). If a submission pursuant to an ITN is not unresponsive, it is denominated a "responsive negotiation." As testified to by Mr. Barker, the concept of an "invitation to negotiate" grew out "of a very large contract the state entered into some years back [when] . . . it became apparent that the invitation to negotiate would give agencies latitude, particularly in very complex, difficult procurements, an opportunity to at least structure how they were going to go out and negotiate and lend to them general conditions to be considered in this negotiation process." (Id., at 15-16.) Indeed, an "invitation to negotiate" provides greater flexibility than the other two competitive solicitation methods just as an RFP provides more flexibility over an ITB. This flexibility is advantageous not just for the State but for the vendors and suppliers as well. For example, one of the main advantages of the ITN over an RFP is that when the highest ranked negotiator and the state cannot reach a contract, the next ranked negotiator can be considered. By way of comparison, when the highest ranked proposer to an RFP cannot reach a contract with the agency, the procurement process must begin anew. Beginning anew will often greatly delay ultimate procurement for commodities or services needed by the state and can be extremely frustrating for the proposer next-in-line who has submitted a responsive proposal. Hence, when appropriate for use, a state agency may very well choose an ITN as its solicitation method. Vendors of commodities and suppliers of services, moreover, may be reluctant to contest the agency's selection of an ITN because they know that if they are next-in- line after a higher-ranked vendor or supplier is unable to reach a contract, then they have a chance at a contract much sooner than if the procurement process begins anew. Non-rule Requirements for ITNs prior to the existing rule Although ITNs are not specifically recognized in statute, the state has authority in statute to negotiate in competitive procurement. In order for invitations to negotiate to "happen without a rule [the Bureau of Procurement and Contract Management in DMS] put in place a memorandum that instructed agencies . . . to ask for authority to negotiate." (Id., at 16). The memorandum was prepared and drafted by H.P. Barker, Jr., Chief of the Bureau of Procurement and Contract Management, the bureau in DMS "responsible for contracting for personal property that's used by the state in large volume." (Petitioner's Exhibit No. 16, Deposition of H.P. Barker, Jr., 3). Ultimately, the memorandum was published June 15, 1998, by George C. Banks, CPPO, Director of State Purchasing. DMS Memorandum No. 21-(97-98), in pertinent part, reads: The purpose of this memorandum is to clarify the current procedure for an agency to use an Invitation to Negotiate as an alternative process to Invitation to Bid or Request for Proposal. Until a revision is made to our current rules, agencies cannot proceed with an Invitation to Negotiate without prior approval from this office. However, an agency head may make a one-time request for this authority. Upon approval, the attached procedures are to be utilized in this process and agencies may proceed in the same manner they do when selecting an invitation to bid or request for proposal. (Petitioner's Exhibit No. 3, emphasis supplied.) Selection of ITNs by DSGI in the Midst of Changing Rules - DSGI's Chief of the Bureau for Policy and Development: Dr. Phillips After a career beginning in 1981 as an agricultural economist followed by work as a health care economist and consultant doing research in the health care field, Susan Phillips, Ph.D., came to work for DSGI in July of 1998. She remains today in the position for which she was hired: Chief of the Bureau for Policy and Development. Her duties include the procurement of insurance and related products. At the time Dr. Phillips commenced employment with it, DSGI, was in the Executive Office of the Governor. Its statutory duties and staff soon thereafter were transferred to DMS by an act of the legislature. The transfer was effective July 1, 1999. See Section 110.123, Florida Statutes. - The January 1999 ITN In January of 1999, Dr. Phillips was appointed by Charles Slavin, Director of DSGI, as the Issuing Officer for the procurement of a health insurance management information system and related services. To the best of Dr. Phillips' recollection, she recommended to Director Slavin that the solicitation be by ITN and "he agreed." (Petitioner's Exhibit 15, p. 38). The recommendation and the approval by the director were not written but communicated in oral conversation, most likely in Director Slavin's office. The conversations were not memorialized. Following the approval, Director Slavin sent a letter to the Director of State Purchasing, Mr. Banks. The letter, drafted by Bill Dahlem and reviewed and approved by Dr. Phillips, is dated January 4, 1999. About the choice of an ITN for solicitation, the letter states: We are seeking authority because we have determined that the Request for Proposal process is not the most appropriate means for securing the commodities and services desired. We believe the Invitation to Negotiate method is more appropriate because the commodities and services we are seeking can be provided in several different ways. Also, the contractor's qualifications and the quality of the commodities and services provided are at least as important as the contract price. (Petitioner's Exhibit No. 4, emphasis supplied). Dr. Phillips' intent with regard to the letter "was to comply with all rules and regulations." (Petitioner's Exhibit No. 15, p. 53). The rule in effect at the time of the selection of the January 1999 ITN and governing such selection was Rule 60A-1.018, Florida Administrative Code. In pertinent part, it states: 60A-1.018 Procedures for Negotiation of Contracts for Purchases of Commodities/Contractual Services. * * * Negotiation of Contracts Without First Seeking Competitive Sealed Bid/Proposals Exceeding the Threshold for Category Two -- When determined to be in the best interests of the State, the Division may contract by negotiation or may delegate to any agency the authority to contract by negotiation. When contracting by negotiation, the following procedures shall be followed: An agency seeking delegated authority to negotiate a contract shall submit a request in writing to the Division, detailing the necessity to contract by negotiation, the proposed steps to be followed by the agency in negotiating the contract, and the proposed vendors that will be used in the negotiations. The Division's intended decision to contract by negotiation or to delegate to an agency the authority to contract by negotiation shall be posted in the office of the Division. Any person adversely affected by the Division's intended decision may protest in accordance with Rule 60A-1.006(3), F.A.C. (Rule 60A-1.018 was repealed prior to the selection of the ITN with which this case is concerned.) The Invitation to Negotiate (the "January 1999 ITN") was duly issued. When the January 1999 ITN was issued it was accompanied by "PUR Form 7006." The form included a "notice of protest rights" (Petitioner's Exhibit No. 15, p. 51). The notice provided a "point of entry" into administrative proceedings for parties who might choose to contest the selection of the January 1999 ITN as the solicitation method for the procurement. - Selection of the ITN in this case In March of 2000, Dr. Phillips was named as the Issuing Officer for the procurement of the pharmacy benefits management services in conjunction with the PPO Plan. The decision to solicit suppliers of the services by ITN was made around the time she was named the Issuing Officer. The decision to use an ITN came about through a multi- step process. Just as in the case of the January 1999 ITN, Dr. Phillips recommended to the Director of the Division, Charles Slavin, that an ITN be used. He concurred and authorized its use. Both the recommendation from Dr. Phillips and the authorization by Director Slavin were done in oral conversation rather than in writing. As before, in the case of the January 1999 ITN, the conversation was not memorialized as to either the recommendation or the approval. Unlike in the case of the January 1999 ITN, however, no request was made by DSGI or any other DMS personnel in writing to the Division of State Purchasing, as had been done through Mr. Banks' letter on January 4, 1999, for the January 1999 ITN. It was the understanding of Dr. Phillips in the spring of 2000 that a written request and written approval from the Division of State Purchasing were not required. Ms. Phillips' understanding was based in part on another conversation held the year before when she received approval for the January 1999 ITN. This conversation was between Dr. Phillips and H.P. Barker, Jr., Chief of the Bureau of Procurement and Contract Management for DMS. It took place in January of 1999. During this conversation, Dr. Phillips requested and was granted approval in writing to use an ITN for the procurement of the health insurance management information system and related services. Following the conversation with Mr. Barker, Dr. Phillips was left with the impression that approval by DMS was not necessary every time the bureau selected an ITN as a procurement method for commodities or services needed by DSGI. Dr. Phillips' impression that Mr. Barker had so told her, however, was mistaken. Mr. Barker did not tell her that an ITN could be selected as the procurement solicitation method without seeking further approval. It is easy, nonetheless, to comprehend why Dr. Phillips might have had a such a misimpression. Dr. Phillips had received written approval to use the January 1999 ITN. That coupled with the statement in DMS Memorandum No. 21-(97-98) [the memorandum referred-to in Finding of Fact No. 15, above] that an agency could make a one-time request for authority to use invitations to negotiate for solicitation of vendors and suppliers in a competitive procurement explains why Dr. Phillips believed she no longer needed prior approval. As it turned out, Dr. Phillips was right that she no longer needed prior approval but not because of impressions she took from conversation with Mr. Barker. Moreover, miscommunication occurred between Dr. Phillips and Mr. Barker about prior approval, proved immaterial. It was unnecessary, actually, for Dr. Phillips to obtain approval of the use of the ITN because of a change in DMS rules governing ITNs. - DMS Rules Change On July 16, 1998, through publication in the Florida Administrative Weekly, the Division of Purchasing had commenced rule development by proposing a number of amendments to the General Regulations of the Division's rules. Two months prior to Dr. Phillips' appointment as the Issuing Officer for the pharmacy benefits management service procurement at least one of the proposed amendments became effective. It provided a new definition of "Invitation to Negotiate" and set out substantive requirements for the circumstances under which an ITN could be selected. The amended rule, effective January 2, 2000, that freed DSGI from obtaining prior approval for the ITN is Rule 60A- 1.001(2), Florida Administrative Code. It rendered any conversation with Mr. Barker or anyone else in the Agency that might be contrary to its requirements and DMS Memorandum No. 21- (97-98) obsolete. - Rule 60A-1.001(2), the ITN Rule Rule 60A-1.001(2), Florida Administrative Code (the "ITN Rule"), is clear and brief. However curt, it is comprehensive in attempt. It provides a definition of an ITN. It states when an ITN may be used in favor of other solicitations. And it succinctly sets out what an agency must do when an ITN is selected as the solicitation method for competitive procurement: 60A-1.001 Definitions. * * * (2) Invitation to Negotiate - Competitive solicitation used when an Invitation to Bid or Request for Proposal is not practicable. Agency shall document file as to conditions and circumstances resulting in this decision. Unfortunately, Dr. Phillips did not know at the time of her appointment as Issuing Officer in March of 2000, that Rule 60A-1.001, Florida Administrative Code, had been amended effective two months or so earlier. Dr. Phillips' testimony that she did not know of the existence of the ITN Rule as amended January 2, 2000, is consistent with other testimony that she offered in the proceeding. For example, she testified that she did not the know the rule change was underway. She was not asked for any input into the Rule's development. Nor did she know that the Rule change had taken place even after rule-making had concluded and the rule had taken effect. (Petitioner Exhibit No. 15, p. 50). As odd as Dr. Phillips' unawareness of the Rule may seem to some, particularly since DSGI and the Bureau for Policy and Development are within DMS, the promulgator of the ITN Rule, her testimony about being out of the rule-making loop went unrefuted in the proceeding. - Decision to Use an ITN In any event, the ITN was selected as the solicitation method. Dr. Phillips, as the Issuing Officer, determined that an ITN was the "most appropriate" solicitation method and that it was a method "more appropriate" than either an ITB or an RFP. Most critically, because she was unaware of the Rule, Dr. Phillips did ensure that the selection complied with Rule 60A-1.001(2), Florida Administrative Code, the new rule governing ITNs. A decision was not made that an ITB or an RFP "is not practicable." A decision was made only that it was more "appropriate" to use an ITN than an RFP. The terms "appropriate" and "practicable" have meanings that are at the very least slightly different. "Appropriate" means "suitable or fitting for a particular purpose, occasion, person, etc." The Random House College Dictionary, Revised 1988. On the other hand, Practicable is that which may be done, practiced, or accomplished; that which is performable, feasible, possible; (Petitioner's Exhibit 13, Black's Law Dictionary: 1979). There is, then, an obvious difference between the two words in the context of cases involving selections of procurement solicitations. It might be suitable to use an ITN in a given case. But if it is also practicable to use an ITB or an RFP then no matter how suitable an ITN is, its use is not allowed under the ITN Rule. There was no evidence in this case that a decision was made that an ITB or an RFP was not practical. Not only is there no evidence of such a decision but the "conditions and circumstances resulting in [any such] decision [if made]" were not documented and placed in the file. In short, the decision to use an ITN in this case did not conform to the rules of DMS, the agency within which DSGI is housed. - No Objection or Protest to Use of the ITN MedImpact received a copy of the ITN, albeit later than it should have. See paragraphs 65 to 71, below. Representatives of MedImpact did not at any time after receiving notice of the selection of the ITN contact DSGI for the purpose of discussing the use of an ITN. Nor did representatives of MedImpact raise any objection to its use prior to the rejection of its late-submitted negotiation. The lack of discussion about the use of an ITN and the failure to object to its use prior to the rejection were not for lack of opportunity. Representatives of MedImpact not only contacted DMS personnel about the pharmacy benefits management services procurement but also attended the proposer's conference on April 28, 2000. MedImpact, moreover, despite the opportunity provided by the ITN, did not submit to DSGI any written questions or comments of objections regarding the use of an ITN as they were allowed to do under the terms of the ITN. Even in this proceeding, despite its position that the parties should return to the "status quo ante" the selection of the ITN, MedImpact has not asserted any manner in which the use of an ITN prejudiced or affected them in the procurement process at issue. - Selection of a Third ITN After selection of the ITN in this case, DSGI selected an ITN for a third competitive procurement, this one described by DSGI as the "Long-term Care Insurance" ITN. Again, Dr. Phillips was the Issuing Officer. Consistent with what she had done with regard to the January 1999 ITN and the ITN in this case and consistent with someone unaware of the amendments to Rule 60A- 1.001(12) that govern ITNs, Dr. Phillips determined that an ITN was more "appropriate" than an RFP. "The Long-term Care Insurance Invitation to Negotiate (ITN Number DSGI 00-002) was issued on August 15, 2000." (Petitioner's Exhibit No. 12.) On August 29, 2000, a memorandum was issued by Dr. Phillips to the Long-term Care Insurance Invitation to Negotiate File. The subject of the memorandum is "Justification to use Invitation to Negotiate." The memorandum, in part, states: On August 29, 2000 it was learned that the Division must document to the file the justification for using an ITN instead of an Invitation to Bid (ITB) or a Request for Proposal (RFP). The purpose of this memorandum is to comply with Rule 60A- 1.001(2). The Division believes that the ITN method is more appropriate than the ITB or RFP because the product and services we are seeking can be provided in different ways. Also, vendor qualifications and the quality of products and services provided are at least as important as price. . . . (Id.) The memorandum demonstrates that, in late August, Dr. Phillips had become aware of the ITN Rule. Nonetheless, she continued to fail to comply with it. While the memorandum documents the file as to conditions and circumstances resulting in the decision to use an ITN, as required by the ITN Rule, it does not document the decision to choose an ITN over an ITB or RFP because the latter two "are not practicable." For the second time this year, but this time with professed awareness of the ITN Rule, DSGI failed to comply with the rules of the agency in which it is housed, DMS. In other words, for the second time this year, DSGI failed to follow its own rules. The ITN, itself Among the many provisions in the ITN are the following: Section 2.0 INVITATION TO NEGOTIATE PROCESS AND PROCEDURES General Information It is entirely the proposer's responsibility to examine this Invitation to Negotiate, to ensure that its requirements are clearly understood, and to submit its proposal in a timely, complete, and procedurally correct manner. (Joint Exhibit 2, p. 6, emphasis supplied). Section 2.2, entitled "ITN Calendar of Events" contains a chart with columns that sets out a "[d]eadline for receipt of proposals from proposers" (Joint Exhibit 2, p. 7) of 5:00 PM EDT, May 12, 2000. The same calendar provides a location for the receipt by DSGI at its Tallahassee address. Section 2.13 of the ITN denominated "Deviations from ITN Specifications" (Id. at p. 10) states "[t]he Division reserves the right to reject any proposal not prepared according to the requirements set forth in this ITN. Section 2.18, entitled "Minor Irregularities and Clarification" (Id. at p. 11) states: The Division, by means of this ITN, has established certain proposal requirements and reserves the right, in its sole discretion, to waive minor irregularities in proposals . . . . If the Division determines that a proposal contains a minor irregularity . . . the proposer will be notified of the irregularity . . . . This provision will not . . . provide one proposer any advantage over any other proposer. Furthermore, this provision applies only to the submission and evaluation of the written proposal . . . . (Id., at page 11). Section 2.19, entitled "Rejection of Proposals" provides in pertinent part: The Division will reject proposals that do not conform or that are not in substantial accord with the requirements of this ITN. Proposals may be rejected for reasons that include, but are not limited, to the following: The proposal is received after the submission deadline; * * * g. The proposal is incomplete, or contains irregularities which make the proposal indefinite or ambiguous and which cannot be waived in accordance with Section 2.19, Minor Irregularities and Clarification; (Id., at p. 12) Section 3.0 governs the "organization and submisson of proposals." Section 3.1, entitled "Proposal Submission Requirements", provides in pertinent part, * * * The original and duplicate copies of the proposal must be received by the issuing officer at the address provided in Section 1.6, Issuing Officer, no later than the time and date specified in Section 2.2, ITN Calendar of Events. (Id. at page 14) The section ends with the following statement in bold: PROPOSALS RECEIVED AFTER THE SPECIFIED TIME AND DATE WILL BE RETURNED UNOPENED." (Id.). Section 4.0 of the ITN governs "proposal evaluation." Subsection 4.2 is denominated "Mandatory Requirements." It states, in pertinent part: Determining compliance with the mandatory requirements will occur at the proposal opening. The Issuing Officer will observe the proposal opening and verify compliance with the mandatory requirements Only those proposals meeting the mandatory requirements will continue in the evaluation process. The mandatory requirements include: The Division received the proposal no later than the deadline specified in Section 2.2, ITN Calendar of Events. * * * (Id., at page 17.) There is no statement anywhere within the body of the ITN as to why an ITN was selected as the procurement method instead of an RFP or an ITB. Nor is there any statement in the ITN, itself, that provides a point of entry to parties who would choose to contest the decision to select the ITN. There is, however, such a point of entry provided in the "Acknowledgement" mailed to those who were selected by the agency to receive the ITN or parties who, like MedImpact, as discussed below, requested the agency to send them an ITN. The "Acknowledgement" is on a purchasing form used by the agency, "PUR 7105." PUR 7105 Revised as of June 1, 1998, PUR 7105 was sent to every company that received an ITN. In the General Conditions section of the form, potential responders to the ITN are informed as to what to do if they intend to accept the invitation to negotiate. (See Joint Exhibit 2a [renumbered after the final hearing], General Conditions, 1. NEGOTIATION). On the other hand, if a party who receives the invitation decides not to submit a response, the party is asked to return the "acknowledgement form, marking it "NO RESPONSE" and explain the reason . . ." (Joint Exhibit 2a, General Condition, 3., NO RESPONSE). Failure to respond to the procurement solicitation without giving reasonable justification is cause for removal of the supplier's name from the Agency's supplier list. PUR 7105 also contained "point of entry" language as follows: Any person who is adversely affected by an Agency decision or intended decision concerning a procurement solicitation or contract award and who wants to protest such decision or intended decisions shall file a protest in compliance with Chapter 28-110, Florida Administrative Code. Failure to file a protest within the time prescribed in Section 120.57(3), F.S. or failure to post the bond or other security required by law within the time allowed for filing a bond shall constitute a waiver of proceedings under Chapter 120 F.S. (Joint Exhibit. 2a, General Conditions, 5. INTERPRETATIONS/DISPUTES). The Acknowledgement Form also under the heading of "General Conditions" contains a paragraph entitled "NOTICE OF NEGOTIATION PROTEST BONDING REQUIREMENT." The paragraph details the requirements for posting a bond (or cashier's check or money order) with the state whenever a party files a protest pursuant to Section 120.57(3), Florida Statutes. The paragraph concludes, "FAILURE TO FILE THE PROPER BOND AT THE REQUIRED TIME WILL RESULT IN A DENIAL OF THE PROTEST." (Joint Exhibit 2a). EHS and Mr. Francis EHS is a joint venture between Eckerd Corporation and the petitioner in this case, MedImpact. In 1996, it won the contract for pharmacy benefits management in conjunction with the PPO Plan after it had made a proposal in response to an RFP. EHS' proposal was submitted by William Francis, an employee of Eckerd Corporation. At Eckerd, Mr. Francis' main duties were related to pharmacy benefits management. In fact, he had been "brought down to start [Eckerd Corporation's] PBM ["pharmacy benefits management"] . . ." (Tr. 131). EHS was the highest-ranked proposer, and EHS and the state were able to reach an agreement memorialized by a written contract. The contract was signed by Roger Davis, the vice president of Eckerd Corporation of Florida, Inc., as one of the general partners of the joint venture that together with MedImpact comprised EHS. It was also signed by the Deputy Secretary of the DMS on behalf of the state of Florida. In August of 1998, Mr. Francis left Eckerd Corporation to become an employee of MedImpact Healthcare Systems in California (the other venturer in the joint venture that with Eckerd Corporation comprised EHS). Today, he is the manager of business development for MedImpact. It is his job to "network in the managed care community, to develop relationships there, to get [the company] on vendors' bidders lists and so forth with different public sector entities . . ." (Tr. 130). His duties extend to many public sector entities. Among them is the state of Florida and with regard to the state, consistent with his experience, he is responsible in particular in the arena of pharmacy benefits management. Dissatisfaction with EHS The contract entered into by DMS with EHS in 1996 allowed for renewal after a term of four years. The decision not to renew but to enter a new procurement process was explained in testimony by Dr. Phillips: Q . . . What were the reasons that you chose to initiate this procurement if there was a renewal on the EHS contract? A We chose to initiate a new procurement because we were not completely satisfied with the services being delivered under the current contract and, because PBM services had evolved very quickly over a number of years, we believed that we could get better service, better clinical programs for a better price. Q And can you give me an idea of what kind of changes you had noted in the pharmacy management services area? A One of the biggest areas would be clinical management, specifically disease management. Q Does the current contract meet those needs and those changing needs of the State? A We do not believe so, no. (Tr. 159, 160). Events Between the Issuance of the ITN and MedImpact's Rejection From the time he left Eckerd Corporation, Mr. Francis remained cognizant of the EHS pharmacy benefits management contract with DMS. He knew that the contract was set to expire and that a new contract would be "going up for bid this year." (Tr. 134). Mr. Francis was very interested in submitting on behalf of MedImpact a negotiation pursuant to the ITN. He made his interest known in several ways, ways that could not have been overlooked by personnel at DMS. He attended the proposer's conference on April 28, 2000. As the representative of MedImpact, an active partner in the incumbent provider, everyone at the conference, including DSGI, had to have been aware that MedImipact intended to submit a "negotiation" package in response to the ITN. When an ITN had not been received in the time in which Mr. Francis expected it, he called Mike McCaskill, his "contact person with the state" (Tr. 134) to inquire "where the RFP process was . . ." (Id.) In the conversation, Mr. McCaskill corrected him. An RFP was not being issued; rather the procurement method selected by the state was an ITN. Mr. McCaskill further informed Mr. Francis that the ITN had been issued "the day before." Mr. Francis' response was "that's great, we should expect it soon." (Id.). But the ITN was not delivered to MedImpact. Mr. Francis inquired of Mr. McCaskill again. In the follow-up conversation, Mr. Francis learned that MedImpact was "not on the [supplier's] list to receive an invitation." No explanation for this omission was offered at hearing by way of document or testimony except by Mr. Francis. The following colloquy occurred after counsel asked Mr. Francis the question of whether he had learned how the suppliers' list was generated: A Yes, he said that his [Mike McCaskill's] management team had made the decision to inquire with a company called Pharmacy Benefit Management Institute out of Scottsdale, Arizona, and get a listing from them of the top five PBMs in the country. Q And was MedImpact included among the top five PBMs in the list? A It depends on really where -- you know, on where you look for your resources. Sometimes we're listed fifth, sometimes sixth. Q And would MedImpact be listed in any position on the list generated by that company? A No. Q Why not? A We don't subscribe to their research services. (Tr. 134, 135). In response to the follow-up conversation, however, Mr. McCaskill promised to send the ITN to MedImpact. In fact, Mr. Francis testified, Mr. McCaskill "very promptly Fed Ex'd it to us. I think we received it toward the end of the week." Exactly what week Mr. Francis was referring to between the early part of April when the ITN was issued and May 12, 2000, when the response was due, is not disclosed by the record. Nor is it clear from the record in this case precisely when Mr. Francis' conversations took place with Mr. McCaskill. It may be that they took place prior to the April 28 conference. When is immaterial aside from the fact that the conversations took place after the ITN was actually issued and mailed to suppliers other than MedImpact. The point is that Mr. Francis made it abundantly clear to the agency that MedImpact was very interested in submitting a negotiation in response to the ITN. For MedImpact, and presumably for the others who responded to the ITN in this case, it is a time-consuming and costly process to prepare and submit a response. Once the ITN was received, it took MedImpact at least 150 man hours among its upper level professional to prepare its response to the ITN. The delay caused by the Agency in getting the ITN to MedImpact must have been at least a contributing factor if not the determinative factor in the preparation of MedImpact's "negotiation" not being finished until Thursday, May 11, 2000. Since there was only one day left in which to make delivery in Tallahassee, MedImpact took the response to the Fed Ex office in San Diego. Indeed, the FedEx Airbill, with a FedEx tracking number of 8116 8522 0322 and dated "5/11" shows that a package was sent by "Bill Francis" of MedImpact in San Diego, California, to Susan Phillips, "State of Florida, Department of Management, Bureau of Policy Development" at the DMS address in Tallahassee by "FedEx Priority Overnight" for delivery "next business morning." (Petitioner's Exhibit 7). Instructions given by MedImpact to FedEx were that "the box was to be delivered by 10:30 the following morning in Tallahassee" (Tr. 138), the following morning, of course, being the morning of Friday, May 12, 2000. The package containing the response was not delivered on Friday, May 12, 2000, as FedEx had promised. The delivery was delayed in air transit by "one of the worst thunderstorms of the year" (Joint Exhibit 4) over Memphis, Tennessee, a critical hub in FedEx's delivery and sorting system. Delivery of MedImpact's negotiation occurred at 1:33 p.m. the afternoon of Monday, May 15, 2000. The moment of delivery was approximately three and one-half hours after the Agency commenced opening six negotiations submitted in response to the ITN. By the time MedImpact's submission was received, all six had been opened. The six parties whose negotiation packages were opened were: Caremark, Eckerd Health Services, Merck-Medco, PCS Health System, Advance Paradigm and Express Scripts. The Rejection Dr. Phillips, as the Issuing Officer of the ITN, was responsible for making the decision as to whether to accept or reject MedImpact's late negotiation package. Despite the clarity with which portions of the ITN describe the consequences of failure to deliver a negotiation on time to DSGI, Dr. Phillips believed on May 15 that she had discretion to accept or reject the proposal. Dr. Phillips continued to maintain that she had such discretion throughout this proceeding. No witness from DMS or produced by any party disputed that such discretion exists. As Dr. Phillips testified in her deposition read, in part, into the record at hearing, "I had the authority to determine if the proposal were going to be accepted or rejected." (Tr. 95). There are several sources from which Dr. Phillips' authority to exercise discretion in the decision might be derived. One is the ITN, itself. In the "Minor Irregularities and Clarification" subsection (Subsection 2.18), DSGI reserved the right, in its sole discretion, to waive minor irregularities. These irregularities expressly include irregularities in both "the submission and the evaluation of the written proposal." (Joint Exhibit 2, p. 11). There is also a "Minor Irregularity" Rule of the DMS. The Minor Irregularity Rule Rule 60A-1.002(10), Florida Administrative Code, states: (10) Right to Waive Minor Irregularities for Commodities or Contractual Services -- The agency shall reserve the right to waive any minor irregularities in an otherwise valid bid or proposal or offer to negotiate. Variations which are not minor can be waived. (See Joint Exhibit 1, DMS Rule Chapter 60A, F.A.C. [as amended from 1996 to present, V. 17, p. 55, R.1/00]). The term "minor irregularity" is defined in Rule 60A- 1.001(17), Florida Administrative Code: (17) Minor irregularity -- A variation from the invitation to bid or invitation to negotiate or request for proposal terms and conditions which does not affect the price of the commodities or services, or give the bidder or offeror an advantage or benefit not enjoyed by other bidders or offerors, and does not adversely impact the interests of the agency. In considering how to exercise the Agency's discretion, Dr. Phillips wisely sought the advice of counsel first. Counsel advised her that she was free to reject the submission. Dr. Phillips then decided that MedImpact's late negotiation should be rejected. At hearing, Dr. Phillips explained some of the circumstances to be taken into consideration in the discretionary decision-making process in situations of late-filed bids, proposals, and negotiations. In every case, Dr. Phillips would seek the advice of counsel before making a decision. She would be more comfortable in accepting a late-filed submission in a case in which there was an Act of God (as in this case) but in which many submitters were late (unlike this case). From her testimony, it is apparent, as is to be expected in decision calling for the exercise of discretion, that there is not a bright line as to when a late-filed submission should be accepted and when not. Dr. Phillips explained further, however, her decision in this case. Critical to her decision were two facts: 1) there was only one late-filed submission, and 2) there were six timely submissions. In light of ample timely competitive submissions, the purpose of competitive procurement was served by going forward, in her view, without MedImpact's submission being in the mix. Dr. Phillips reasoned that the interest of the state and the public was protected by the number of accepted submissions. In light of this protection and in light of the clear language of the ITN requiring submission on time, Dr. Phillips rejected the submission of MedImpact. Application of the Minor Irregularity Rule or the "minor irregularity" portion of the ITN in light of the definition of minor irregularity in Rule 60A-1.001(17), Florida Administrative Code, should have led to a different result. The late submission of MedImpact's negotiation constituted a variation from the ITN. The variation did not affect the price of the services. It did not give MedImpact an advantage not enjoyed by the other negotiators since the negotiation left MedImpact's control once handed over to FedEx and remains unopened to this day. It did not adversely affect the interests of the Agency save the possibility of exposing it to a protest from one of the other negotiators, a possibility that could not be more adverse to the Agency than what has ensued in the wake of its decision to reject, namely this case and Case No. 00-3553RU. Events Post-Rejection DSGI returned MedImpact's response unopened under cover of a letter from Dr. Phillips to Mr. Francis dated May 17, 2000. Dr. Phillips wrote: Thank you for your response to our Invitation to Negotiate for Pharmacy Benefits Management Services. Unfortunately, the Department received your proposal at 1:33 p.m. on Monday, May 15, 2000. The deadline for submission of your proposal was 5:00 p.m., Friday, May 12, 2000 as outlined in Section , Calendar of Events. Therefore, in accordance with Section 2.19, Rejection of Proposals, paragraph a, your proposal has been rejected. We are returning your unopened proposal via Federal Express. (Joint Exhibit 3). Shortly thereafter, FedEx described the cause of the late delivery as a FedEx error. In a letter dated May 18, 2000, to Ms. Julie Smith of MedImpact, Theresa E. Ledbetter of FedEx's Customer Relations Department wrote: According to our records, the above referenced priority package was tendered to us for carriage with delivery scheduled by 10:30 AM on Friday, May 12. Unfortunately, due to our error, your package was delayed in our sorting network and did not arrive in our Tallahassee FedEx office until Monday, May 15. I note final delivery was completed on Monday at 1:33 p.m. Petitioner's Exhibit 9. The letter from FedEx did not sway DSGI from its rejection of MedImpact's negotiation. Challenge to the Rejection, Posting, a Contract and Referral On June 30, 2000, MedImpact filed a petition for formal administrative hearing. The case was treated by DMS as one without disputed issues of fact and so it kept jurisdiction of the case and assigned it to Hearing Officer Strickland for informal hearing. On July 17, 2000, the results of the evaluation of the submitted negotiations and the scoring of the submissions were posted. Express Scripts received a "TOTAL Weighted Score" of 70; Advance Paradigm, 72; PCS Health System, 73; MMMC and EHS tied at 75; and, Caremark received a total weighted score of 77. On August 25, 2000, MedImpact filed an amended petition by which it hoped to convince the hearing officer that the case contained disputed issues of material fact. While the informal proceeding pended at DMS, Caremark and DSGI conducted negotiations. They were successful. Caremark and DMS entered a contract on August 28, 2000. Three weeks later, on September 20, 2000, when Hearing Officer Strickland found that there were indeed disputed issues of material fact (born out abundantly by the record in this case) he referred the case to DOAH. In his letter of referral he called the case a "bid protest." DOAH Proceedings During the pendency of the "bid protest" at DMS, MedImpact discovered two statements by DSGI it believed constituted unpromulgated rules. MedImpact filed a proceeding challenging the two statements pursuant to Section 120.56(4), Florida Statutes. Its petition was assigned Case No. 00-3553RU. When the challenge to the rejection reached the Division of Administrative Hearings via Hearing Officer Strickland's order, the two cases were consolidated. Bond or a Substitute As of the day of hearing, MedImpact had not filed any bond or substitute therefor with DSGI. Intervention by MMMC At hearing, Connie Martin, MMMC's Vice President for National and Special Accounts testified that if MedImpact's negotiation is ultimately accepted by DMS and scored higher than MMMC's, she would recommend that MMMC file a protest. (See Tr. 57). Jurisdiction
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that: The Department of Management Services give MedImpact a reasonable amount of time to post a bond or provide a substitute for a bond as required by Section 120.57(3), Florida Statutes, in order to continue to pursue this protest related to competitive procurement; The Division of State Group Insurance accept MedImpact's negotiation, open it, and subject it to its process for evaluation applicable to negotiations under ITN Number DSGI 00- 001; and, Post the results of the evaluation of all the negotiations submitted to the ITN; and Provide the seven negotiators to the ITN rights to protest the results of the posting that have not been waived when the results of the posting in July 2000 were not protested. DONE AND ENTERED this 21st day of November, 2000, in Tallahassee, Leon County, Florida. DAVID M. MALONEY 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 21st day of November, 2000. COPIES FURNISHED: Thomas D. McGurk, Secretary Department of Management Services 4050 Esplanade Way, Suite 260 Tallahassee, Florida 32399-0950 Bruce Hoffmann, General Counsel Department of Management Services 4050 Esplanade Way, Suite 260 Tallahassee, Florida 32399-0950 Julia P. Forrester, Esquire Department of Management Services 4050 Esplanade Way, Suite 260 Tallahassee, Florida 32399-0950 Robert P. Smith, Esquire Timothy G. Schoenwalder, Esquire Hopping, Green, Sams & Smith, P.A. 123 South Calhoun Street Post Office Box 6526 Tallahassee, Florida 32302-6526 Fred McCormack, Esquire Landers & Parson, P.A. 310 West College Avenue Tallahassee, Florida 32301 Thomas J. Maida, Esquire Austin B. Neal, Esquire Foley & Lardner 300 East Park Avenue Tallahassee, Florida 32301 Donna H. Stinson, Esquire Broad & Cassel 215 South Monroe Street, Suite 400 Tallahassee, Florida 32301
The Issue Whether Respondent's proposed amendment of Rule 59G-6.040, Florida Administrative Code, and Respondent's proposed new Rule 59G-6.045, Florida Administrative Code, would be invalid exercises of delegated legislative authority, within the meaning of Chapter 120, Florida Statutes, for the reasons asserted by Petitioner.
Findings Of Fact Based upon the evidence adduced at hearing and the record as a whole, the following findings of fact are made: Petitioner Petitioner is a nonprofit Florida corporation. It operates as a charity providing services to individuals (both children and adults) with developmental disabilities in Florida and elsewhere. It provides services to Florida residents in various Intermediate Care Facilities for the Developmentally Disabled (ICF/DDs6) that it owns and/or operates, including state-owned "cluster" facilities each consisting of three eight-bed buildings sharing a common campus. These "cluster" facilities were created by the state as an alternative to the large state-owned and operated institutions.7 Petitioner renders services in these "cluster" facilities pursuant to contracts it has entered into with the state. All of the facilities that Petitioner operates in the state, regardless of size, are located in residential neighborhoods. The residents of these facilities suffer from mental retardation and various other disabilities, including cerebral palsy, autism, spina bifida and epilepsy. Many require constant supervision, attention, and care, as well as aggressive intervention and treatment. The services that Petitioner provides are designed to assist these individuals in reaching their full potential. All of the residents of Petitioner's ICF/DDs in Florida are Medicaid-eligible.8 Petitioner receives Medicaid payments for providing services to these residents. These Medicaid payments have been insufficient to cover Petitioner's costs. (Other private ICF/DD providers9 in Florida have experienced similar funding shortfalls.10 From 1991 to 1996, private ICF/DD providers in Florida, as a group, received $4,652,312.00 less in Medicaid payments than they spent to provide services.) Petitioner has engaged in fund-raising activities to supplement the Medicaid payments it receives. While these fund-raising activities have generated additional monies, Petitioner, nonetheless, to the detriment of residents, has had to make reductions in the amount it spends for their treatment and care. Recently, Petitioner experienced significant difficulty meeting its payroll, and was forced to obtain a bank loan to pay its employees the monies it owed them. Current Medicaid Reimbursement Methodology Petitioner and all other ICF/DD providers, including the state, are currently reimbursed for providing Medicaid- covered services at their facilities in accordance with the methodology set forth in "Florida Title XIX Intermediate Care Facility for the Mentally Retarded and Developmentally Disabled Reimbursement Plan, Version VI, November 15, 1994" (Version VI of the Plan). Version VI of the Plan is incorporated by reference in Rule 59G-6.040, Florida Administrative Code,11 which provides as follows: 59G-6.040 Payment Methodology for ICF/MR-DD Services. Reimbursement to participating ICF/MR-DD facilities for services provided shall be in accord with the Florida Title XIX ICF/MR-DD Reimbursement Plan Version VI, November 15, 1994, and incorporated herein by reference. A copy of the Plan as revised may be obtained by writing to the Office of the Medicaid Director, P.O. Box 13000, Tallahassee, Florida 32399-0700. Specific Authority 409.919 FS. Law Implemented 409.908 FS. History--New 7-1-85, Amended 2-25-86, Formerly 10C-7.491, Amended 11-19-89, 8-14- 90, 12-26-90, 9-17-91, 1-27-94, Formerly 10C- 7.0491, Amended 11-15-94. Pursuant to Version VI of the Plan, "[r]eimbursement rates [are] established prospectively for each individual provider based on the most historic costs, but historic costs [are] limited to allowable percentage increases from period to period." "Reimbursement rates [are] calculated separately for two classes . . . based on the four levels of ICF/MR-DD care," Developmental Residential, Developmental Institutional, Developmental Non-ambulatory, and Developmental Medical, with the former two (Developmental Residential and Developmental Institutional) constituting one class and the latter two (Developmental Non-ambulatory and Developmental Medical) constituting the other class. "The four components [of a provider's reimbursement rate] are operating costs, resident care costs, property costs, and return on equity costs or use allowance, if applicable. Inflation allowances used in the rate setting process [are] applied to the operating and resident care cost components independently for the two reimbursement classes." Section V.M. of Version VI of the Plan, which provides as follows, describes the "target rate of inflation" feature of the reimbursement methodology, which is a cost containment feature designed to promote economy and efficiency: The use of a target rate of inflation for cost increases shall be used as a measure of efficient operation for purposes of this reimbursement plan. The target rate of inflation principle is that a provider's operating and resident care per diems by reimbursement class should not increase from one fiscal period, that is, year, to the next by a percentage amount with exceeds 1.786 times the average percentage of increase in the Florida ICF/MR-DD Cost Inflation Index for the same period. If a provider's per diem costs for either reimbursement class for operation or resident care exceeds the target rate of inflation, then the allowable per diem costs of the period in which the excessive costs occurred shall be limited to a level equal to the prior period's allowable per diem costs inflated by the target rate percentage. Only allowable per diem cost shall be used for prospective rate setting purposes and for future target rate comparisons. Notwithstanding its name, the "Florida ICF/MR-DD Cost Inflation Index" is based upon a national (rather than a Florida- specific) market basket index.12 Section IV.K. of Version VI of the Plan provides for "incentive payments" to be made to providers who are not "out of compliance with any Condition of Participation" and "whose annual rates of cost increase for operating cost or resident care costs from one cost reporting period to the next are less than 1.786 times the average cost increase for the applicable period documented by the ICF/MR-DD Cost Inflation Index." According to the language contained in this section, its provisions are designed to "encourage high quality care while containing costs." Version VI of the Plan also has a "rebasing" feature, which operates to increase reimbursement rates periodically (no less than once every five years). This "rebasing" feature is described in Section V.B.9 as follows: Rebasing of the operating and resident care component per diems shall occur every five (5) years or whenever fifty percent (50%) of private providers are reimbursed less than reported, allowable costs (whichever occurs first). In detail, rebasing will occur in the rate semester in which fifty percent (50%) or more of the private providers' operating and resident care per diem rate (combined) are less than the operating and resident care inflated costs (combined)(inflated at 1xNational DRI as Florida weighted) based upon eligible cost reports, or each five (5) years counting from October 1, 1991 (1.e, the first rebasing occurring on October 1, 1996) whichever occurs first. The rebasing calculation methodology shall be identical to that used for the October 1, 1989 rate semester rebasing (Section V.A.1.5.) except that rebasing shall occur only for providers whose inflated combined operating and resident care rate does not cover one hundred (100%) of their combined operating and resident care inflated costs. Individual providers which would qualify for rebasing based on April 1, 1991 rates shall be rebased effective July 1, 1991. Version VI of the Plan also provides for "interim changes in component reimbursement rates, other than through the routine semi-annual rate setting process . . ., as well as changes in a provider's allowable cost basis." These provisions promote quality of care inasmuch as they authorize reimbursement for certain costs "necessary to meet existing state or federal requirements," notwithstanding the cost containment features contained elsewhere in the Plan. They are found in Section through 6, which provide as follows: Requests for rate adjustments for increases in property-related costs due to capital additions, expansion, replacements, or repairs shall not be considered in the interim between cost report submissions, except for the addition of new beds or if the cost of the specific expansion, addition, repair, or replacement would cause a change of 1 percent or more in the provider's total per diem reimbursement rate. Requests for interim rate changes reflecting increased costs occurring as a result of resident care or administration changes or capital replacement other than that specified in (1) above shall be considered only if such changes were made to comply with existing state or federal rules, laws, or standards, and if the change in cost to the provider is at least $5000 and would cause a change of 1.0 percent or more in the provider's current total per diem rate. The provider must submit documentation showing that the changes were necessary to meet existing state or federal requirements. In the event that new state or federal laws, rules regulations, or licensure and certification requirements require all affected providers to make changes that result in increased or decreased resident care, operating, or capital cost, request for component interim rate shall be considered for each provider based on the budget submitted by the provider. All affected providers' budgets submitted shall be reviewed by the agency and shall be the basis for establishing reasonable cost parameters. Interim rate requests resulting from (1), (2), and (3) above must be submitted within 60 days after costs are incurred, and must be accompanied by a 12-month budget which reflects changes in services and costs. An interim reimbursement rate, if approved, shall be established for estimated additional costs retroactive to the time of the change in services or the time the costs are incurred, but not to exceed 60 days before the date AHCA receives the interim rate request. The interim per diem rate shall reflect only the estimated additional costs, and the total reimbursement rate paid to the provider shall be the sum of the previously established prospective rates plus the interim rate. A discontinued service would offset the appropriate components of the prospective per diem rates currently in effect for the provider. Upon receipt of a valid interim rate request subsequent to June 30, 1984, the AHCA Office of Medicaid must determine whether additional information is needed from the provider and request such information within 30 days. Upon receipt of the complete, legible additional information as requested, the AHCA Office of Medicaid must approve or disapprove the interim rate within 60 days. If the Office of Medicaid does not make such determination within the 60 days, the interim rate shall be deemed approved. Interim Rate Settlement. Overpayment as a result of the difference between the approved budgeted interim rate and the actual costs of the budgeted item shall be refunded to AHCA. Under-payment as a result of the difference between the budgeted interim rate and actual allowable costs shall be refunded to the provider. After the interim rate is settled, a provider's cost basis shall be restricted to the same limits as those of a new provider . . . . The right to request interim rates shall not be granted for fiscal periods that have ended. Sections VI. and VII. of Version VI of the Plan are entitled "Payment Assurance" and "Provider Participation," respectively, and provide as follows: Payment Assurance The state shall pay each provider for services provided in accordance with the requirements of the Florida Title XIX state plan and applicable state or federal rules and regulations. The payment amount shall be determined for each provider according to the standards and methods set forth in the Florida Title XIX ICF/MR-DD Reimbursement Plan. Provider Participation The plan is designed to assure adequate participation of ICF/MR-DD providers in the Medicaid Program, the availability of high- quality services for recipients, and for services which are comparable to those available to the general public. ICF/DD Reimbursement Prior to 1989 Originally, ICF/DD providers in Florida were reimbursed for providing services to the Medicaid beneficiaries in their facilities pursuant to the same methodology used to reimburse nursing home operators. It subsequently was determined, however, that, because of the differences between ICF/DDs and nursing homes and their respective populations,13 a separate methodology for ICF/DDs was warranted in order to ensure that reimbursement rates for ICF/DD providers were adequate. Such a separate methodology for ICF/DDs (ICF/DD Methodology) was created in 1984. The new ICF/DD Methodology did not include a rebasing provision, and its implementation did not result in an elimination of ICF/DD underfunding. In fact, from 1984 to 1989, most ICF/DD providers, including the state, suffered "tremendous losses." In 1989, a rebasing provision was added to the ICF/DD Methodology. In less than 24 months after the addition of this provision, however, more than half of the ICF/DD providers were spending more on providing ICF/DD services than they were being reimbursed. United States District Court for the Southern District Court of Florida Case No. 89-0984 Petitioner is now, and has been at all times material to the instant case, a member of the Florida Association of Rehabilitation Facilities, Inc. (FARF), a trade association representing non-profit corporations that own and/or operate intermediate care facilities for the developmentally disabled. In 1989, FARF and its members (Plaintiffs), including Petitioner, filed suit in the United States District Court for the Southern District Court of Florida (Case No. 89-0984) challenging the manner in which Florida reimbursed FARF members for the provision of Medicaid-covered services. In May of 1991, Respondent's predecessor, in an effort to address the issues raised in the FARF lawsuit, announced that it was making revisions in the ICF/DD Methodology. These revisions took effect July 1, 1991. On September 11, 1991, United States District Court Judge Lenore C. Nesbitt, acting upon the Plaintiffs' motion, issued an Order Granting Preliminary Injunction in Case No 89- 0984. Judge Nesbitt's order contained the following "findings of facts": Plaintiffs are a group of non-profit corporations providing health care services to mentally retarded individuals in intermediate care facilities ("ICF/MR"), and a trade association representing that group. Defendants are the Florida Department of Health and Rehabilitative Services ("HRS") and two of its officials. At the request of the State of Florida, Plaintiffs provide treatment for mentally retarded individuals, 99%-100% of whom are Medicaid-eligible, in numerous facilities in the state. Certain Plaintiffs both own and operate the ICF/MRs. Others only operate the facilities, which are on land owned by the State. This latter group of facilities are known as "cluster facilities." Because the State of Florida has chosen to receive federal funds by participating in the Medicaid program, it must comply with the requirements of the federal act. One requirement is that the State develop a reimbursement plan for providers of ICF/MR services. As described below, the state need not reimburse all actual costs of the providers; it must only pay rates which are "reasonable and adequate" for an efficient provider to provide care in compliance with applicable state and federal laws and quality and safety standards. HRS reimburses Plaintiffs in the following manner: Operators of cluster facilities are paid pursuant to a fixed-rate contract, not pursuant to any reimbursement plan. Also, HRS' obligations under the contract are expressly made conditional on sufficient appropriations by the state legislature. Operators of non-cluster facilities are reimbursed pursuant to a plan formulated by the state. As is true with most state plans, and is permitted by the Medicaid Act, HRS' plan determines cost on a prospective basis. That is Plaintiffs are paid based on what their services should cost not on what they have actually spent. See Wilder v. Virginia Hosp. Assn., 110 S.Ct 2510, 2516 n.7 (1990). The plan reimburses non-cluster providers as follows: Providers get either last year's actual costs or last year's "target limit cost" (i.e. the previous year's costs plus allowed inflation plus 1.5%), whichever is lower, plus one times the "Modified DRI Nationwide Nursing Home Costs Index." By contrast, operators of "skilled nursing facilities" were provided an inflation increase equivalent to two times the DRI Index. Significantly, there is no periodic readjustment of the target limit. As a result, efficient providers whose necessary costs are consistently greater than their target limit will continue to be under- reimbursed. Further, providers who keep their costs below the target limit are rewarded with a penalty: their target limit for the following year is reduced.14 Plaintiffs assert three challenges to Florida's medicaid reimbursement system. In count I, the substantive challenge to the state's plan, Plaintiffs allege that HRS' plan does not meet the substantive requirement of the Boren Amendment to the Medicaid Act. That is, it does not provide for rates which are "adequate and reasonable" to meet those costs which must be incurred by efficient providers of services in conformity with applicable federal and state laws, regulations, and quality and safety standards. In support of this count, Plaintiffs have submitted several affidavits stating that they and every other provider in the state, except one, continually operate at a large loss because their costs substantially exceed the amounts reimbursed under the plan.15 Neither is it genuinely disputed that the current situation impacts on quality of care.16 Count II, the equal protection claim, alleges that the state's decision to reimburse "skilled nursing facilities" at two times the DRI inflation rate while reimbursing ICF/MR providers at just one times the DRI rate is arbitrary, without justification, and hence violative of the Constitution. Count III alleges and it is undisputed that HRS payment to cluster providers via a fixed- rate contract instead of pursuant to a plan, while at the same time receiving federal funds under the Medicaid Act, violates federal law. Further, Plaintiffs challenge HRS' refusal, prior to the filing of the pending motion, to amend the cluster contracts to cover unexpected and unavoidable interim cost increases, such as increases in worker's compensation insurance rates. As a result of these refusals, Plaintiffs have suffered financially relative to those reimbursed pursuant to a plan. Plaintiffs' evidence also indicates that, because of these consistent and substantial unreimbursed costs, operators of cluster facilities may be unable to continue providing care in the future.17 Defendants' evidence consists of allegations that Plaintiffs' financial difficulties have resulted from past poor management decisions, specifically from their past failure to devote sufficient resources to the wages of their direct care staff. Defendants' evidence also raises a factual dispute as to the financial loss to cluster providers as a result of being paid pursuant to a fixed-rate contract. Otherwise, Defendants do not seriously dispute most of the facts set forth in Plaintiffs' affidavits. Instead, Defendants' submissions consist primarily of argument: they comment on Plaintiffs' evidence and ask the Court to draw the conclusion that (1) their plan reasonably and adequately reimburses the truly efficient provider, and that (2) Plaintiffs' problems are the result of inefficiencies and management mistakes unrelated to deficiencies in the plan. After setting forth these "findings of fact," Judge Nesbitt, in her order, engaged in a discussion explaining why it appeared that Plaintiffs were entitled to a preliminary injunction as to Counts I and III of their complaint. In "conclusion," Judge Nesbitt stated the following: For these reasons, Plaintiffs' Motion for Preliminary Injunction is GRANTED as to Counts I and III. Accordingly, effective September 4, 1991, Defendants are hereby ENJOINED from inadequately reimbursing providers of care in the ICF/MR program. Defendants are further ENJOINED from paying providers for services at ICF/MR cluster facilities in a manner other than as provided for in a rate plan, and shall commence paying each provider of ICF/MR services at cluster facilities the full Medicaid rate for that facility, and shall afford each provider at cluster facilities all rights and protections accompanying a rate plan governing ICF/MR facilities. Though the Court may make interim modifications to the state's current plan, . . . the Court shall not do so at this time. In the spirit of the Boren Amendment's goal of permitting states maximum flexibility in formulating plans for reimbursement, Defendant shall be permitted to file, on or before October 4, 1991, a plan which complies with the substantive requirements of 42 U.S.C. Section 1396a(a)(13). See Wilder v. Virginia Hosp. Assn., 110 S.Ct. 2510, 2517 & 2525 (1990). The rates of reimbursement established under the plan ultimately approved by the Court shall be retroactive to September 4, 1991. The parties are directed to cooperate in formulating an acceptable plan to be presented to this court.18 The Order Granting Preliminary Injunction entered by Judge Nesbitt has not been vacated, rescinded, set aside or modified. On November 14, 1991, Judge Nesbitt issued an Order on Motion for Civil Contempt and Sanctions in Case No. 89-0984, which provided as follows: THIS CAUSE came on before the Court on Plaintiffs' Motion for Civil Contempt and Sanctions and after agreement of counsel for the respective parties before Magistrate Judge Turnoff and submission by all parties of the attached joint proposal, IT IS ORDERED AND ADJUDGED that the attached document is adopted and approved by the Court as its Order on Motion for Civil Contempt and Sanctions and the parties and their agents and successors are hereby ordered to comply with the terms hereof commencing on November 1, 1991. The "attached joint proposal" which Judge Nesbitt "adopted and approved" provided as follows: BASIS FOR AGREEMENT TO DISMISS MOTION FOR CONTEMPT Interim rates for Sunrise OK (Weeks attachment) Depreciation and Maintenance HRS agrees to pay the full Medicaid rate in the current Medicaid rate plan to cluster operators. Cluster operators agree to use amounts in the full rate devoted to depreciation for repair of the facility and replacement (if necessary) of the equipment of facility. HRS and clusters shall agree on said repairs and replacements and shall prioritize any licensure deficiencies for replacement or repair. To the extent there is no necessity for repair of the facility or replacement of equipment, all funds shall revert to HRS/Developmental Services. The amount of depreciation in any given year shall be as computed in the cost report and in accordance with the rate Plan. HRS agrees to retain all liability for repair of the facility and replacement equipment (if any) in excess of those items handled under section 2. Cluster operators and HRS agree that maintenance funds in the full rate, which are attributable to HRS costs incurred in the facility, shall be sent to HRS for continuation of maintenance, or may be retained by cluster and HRS relieved of responsibility for maintenance. Cluster operators are not obligated to assume duties and obligations/ responsibilities in their contracts with HRS district offices that are in excess of those required of an ordinary ICF/MR provider. Pay 6+% retroactive to July 1 by November 30. Agree to pay minimum of May 17 agreement or full rate, whichever is higher, for 1 year, ending June 30, 1992. Agree to pay minimum of May 17 agreement or full rate, whichever is higher, for 1 year, ending June 30, 1992. Agree to pay minimum of May 17 or full rate, whichever is higher, for an additional 4 year period, ending June 30, 1996 subject to legislative appropriation each year. Absent legislative approval, cluster entitled to full rate without depreciation and expense deduction or restrictions contained herein. HRS agrees to seek legislative appropriations, for additional funds, if necessary, in excess of total Medicaid rate, to fund those additional revenues, required per #5 for each year until 1996. These term[s] supplement and do not abrogate May 17 except annual renewal replaced with 5 year contract. Each subsequent contract shall be for 5 years. Defendants shall be entitled in that year to renegotiate the contract or bid-out the contract. Under 2B. Right to Renewal of the Stipulation of Settlement lines 8 through 12 beginning with "Cluster" and ending with "Stipulation" shall be stricken. In additions lines 6 through 19 on Page 7 shall be stricken beginning with "Defendants" and ending with "1991." See attached. (Sic. #8 now included in running text.) If depreciation of funds are available after expenditures have been made for necessary repairs and replacement, HRS and cluster operator shall agree to deposit such funds into a reserve fund, to be held by the operator, to fund necessary repairs and replacement in future years, particularly long term repairs unlikely to appear on a regular basis. Funds held in reserve by the operator for long term repair or replacement which are not expended by the end on the 5 year contract period shall revert to the Department, unless the Department renews the contract with the same operator, or funds are transferred to new provider. At the end of each 5 year contract with cluster, the contract may be renewed with the current cluster operator, or bid out. When contracts are renewed or bid out, the terms shall be for the full Medicaid rates. Funds appropriated in F.Y, 1991-92 for repairs and replacement shall be promptly disbursed. (Note: The numbering system on my original copy reflects changes made after copying had taken place, but before signature. Thus the copy shows an 8. and 9., which have been deleted on the original signed agreement. Also the copy shows number 10.-14 which have been renumbered on the original 8.-12.) (Weeks Attachment) 1. The interim rate request filed for the McCauley, Mahan, Dorchester, Bayshore, Green Tree Court and St. Petersburg on June 17, 1991 will be approved for all six clusters. Reimbursement for the interim rate increase shall be paid to Sunrise beginning 60 days prior to the date of filing and the interim shall be settled based on the June 30, 1991 cost reports for each of these clusters. The level of interim rate increase shall be per data and calculations provided the Department with Sunrise's July 31, 1991 letter to Ms. Joyce Barrington. Procedure used for this interim shall be in compliance with the current Florida Title XIX ICF/MR-DD Reimbursement Plan and current procedures for interim rates to include inflation on the interim rate component effective 7/1/91 through 3/30/92. Case No. 89-0984 is still pending (but before Judge Michael Moore). Doe v. Chiles In March of 1992, FARF became involved in another federal lawsuit against the state, when it, along with United Cerebral Palsy, Inc., and various Florida residents who had been placed on waiting lists for entry into an ICF/DD, filed a 1983 action in the United States Court for the Southern District of Florida (styled Doe v. Chiles) claiming that the state was causing unreasonable delays in the provision of ICF/DD services. In December of 1992, FARF and United Cerebral Palsy, Inc., were dismissed as plaintiffs. On July 22, 1996, Judge Wilkie D. Ferguson, Jr., granted the remaining plaintiffs' motion for summary judgment, holding: Section 1396a(a)(8) of the Medicaid (A)ct, specifically the reasonable promptness clause, is enforceable under 42 U.S.C. Section 1983. "Medical assistance under the plan" has been defined as medical services. The (S)tate is obliged to furnish medical services, however, only to the extent that such placements are offered in the Federal Health Care Financing Agency ("HCFA") approved State plan. Once a state elects to provide a service, that service becomes part of the state Medicaid plan and is subject to the requirements of Federal law. At oral argument on this issue, Defendants conceded that Florida's [HCFA] State approved plan does provide for placement in ICF/MR facilities. Further, Defendants have not disputed the facts alleging the [S]tate's failure to conform with the provisions set forth in that statute, which the Court construes as an admission of unreasonable delays in placing developmentally disabled persons into ICF/MR facilities. On August 26, 1996, a magistrate judge signed a report recommending that Judge Ferguson grant the plaintiffs' motion to certify as a class "all those developmentally disabled persons who have not received prompt [ICF/DD] placement." After conducting a hearing on August 28, 1996, Judge Ferguson entered a final judgment, ordering that the state "shall, within 60 days of the date of this Order, establish within the State's Medicaid Plan a reasonable waiting list time period, not to exceed ninety days, for individuals who are eligible for placement in [an ICF/DD]." The state appealed the final judgment. On February 26, 1998, the Eleventh Circuit, in an opinion reported at 136 F.2d 709 (11th Cir. 1998), affirmed the judgment. Chapter 96-417, Laws of Florida In 1996, the Florida Legislature passed House Bill No. 1621 (Chapter 96-417, Laws of Florida), Sections 4, 6, 11, 12, 13, 14, 15, 16 and 17 of which provided, in pertinent part, as follows: Section 4. Subsections (8) and (14) of section 409.906, Florida Statutes, are amended to read: 409.906 Optional Medicaid services. --- Subject to specific appropriations, the agency may make payments for services which are optional to the state under Title XIX of the Social Security Act and are furnished by Medicaid providers to recipients who are determined to be eligible on the dates on which the services were provided. Any optional service that is provided shall be provided only when medically necessary and in accordance with state and federal law. Nothing in this section shall be construed to prevent or limit the agency from adjusting fees, reimbursement rates, lengths of stay, number of visits, or number of services, or making any other adjustments necessary to comply with the availability of moneys and any limitations or directions provided for in the General Appropriations Act or chapter 216. Optional services may include: . . . (14) INTERMEDIATE CARE FACILITY FOR THE DEVELOPMENTALLY DISABLED MENTALLY RETARDED SERVICES. For the purposes of Medicaid reimbursement, "intermediate care facility for the developmentally disabled services" means services provided by a facility which is owned and operated by the state and to which the agency may pay for health-related care and services provided on a 24-hour-a-day basis, for a recipient who needs such care because of a developmental disability or related condition. The agency may pay for health related care and services provided on a 24-hour a day basis by a facility licensed under chapter 393, to a recipient who needs such care because of his mental or physical condition.19 . . . Section 6. Section 409.908, Florida Statutes is amended to read: 409.908 Reimbursement of Medicaid providers. Subject to specific appropriations, the agency shall reimburse Medicaid providers, in accordance with state and federal law, according to methodologies set forth in the rules of the agency and in policy manuals and handbooks incorporated by reference therein. These methodologies may include fee schedules, reimbursement methods based on cost reporting, negotiated fees, competitive bidding pursuant to s. 287.057, and other mechanisms the agency considers efficient and effective for purchasing services or goods on behalf of recipients. Payment for Medicaid compensable services made on behalf of Medicaid eligible persons is subject to the availability of moneys and any limitations or directions provided for in the General Appropriations Act or chapter 216. Further, nothing in this section shall be construed to prevent or limit the agency from adjusting fees, reimbursement rates, lengths of stay, number of visits, or number of services, or making any other adjustments necessary to comply with the availability of moneys and any limitations or directions provided for in the General Appropriations Act, provided the adjustment is consistent with legislative intent. (2)(a)1. Reimbursement to nursing homes licensed under part II of chapter 400 and state-owned-and-operated intermediate care facilities for the developmentally disabled mentally retarded licensed under chapter 393 must be made prospectively. . . . Section 11. (1) The Legislature finds: That noninstitutional home and community-based services are a cost-effective and appropriate alternative to institutional care for many individuals who would otherwise be served in institutional settings; That the Intermediate Care Facility for the Developmentally Disabled program is an optional institutional service authorized by Title XIX of the Social Security Act and that this act encourages states to develop and utilize alternatives to optional institutional services for Medicaid clients through authorization of waivers that allow for federal financial participation in the provision of services in noninstitutional settings for clients who are eligible for Medicaid-reimbursed institutional services; That utilization of noninstitutional funding mechanisms for individuals residing outside of state-owned-and-operated institutions allows individuals to be appropriately served at less cost than is possible through the Intermediate Care Facility for the Developmentally Disabled program; That federal regulations diminish the ability of the state to manage resources currently used to reimburse privately owned or operated intermediate care facilities for the developmentally disabled to enable the most cost-effective utilization of resources appropriated to programs that serve individuals with developmental disabilities; That there are fundamental differences in the respective roles of private and public facilities that serve individuals with developmental disabilities and that these differences justify funding private and public facilities through different funding mechanisms; That there is a critical state need to continue financing institutional services provided in state-owned-and-operated facilities for the developmentally disabled through the Intermediate Care Facility for the Developmentally Disabled program to provide for the adequate care of the clients who reside in these facilities; and That the most appropriate and cost- effective care for state-supported clients who reside in privately owned or operated residential facilities for individuals with developmental disabilities is provided through community-based, noninstitutional service delivery models that are financed through noninstitutional financing mechanisms. (2) In accordance with the findings in subsection (1), it is the intent of the Legislature that, in order to both reduce the cost of serving individuals with developmental disabilities and provide appropriate alternative services to institutional care, privately owned or operated facilities authorized to receive reimbursement through the Medicaid Intermediate Care Facility for the Developmentally Disabled program on June 30, 1996, shall no longer be reimbursed through that program but may continue to serve clients through noninstitutional service arrangements that are financed through noninstitutional funding mechanisms. It is further the intent of the Legislature that individuals who reside in state-owned-and- operated intermediate care facilities for the developmentally disabled shall continue to receive services financed through the Medicaid Intermediate Care Facility for the Developmentally Disabled program. Section 12. The Agency for Health Care Administration shall issue a license as a home for special services to each facility desiring such licensure, if the facility was eligible to receive reimbursement through the Intermediate Care Facility for the Developmentally Disabled program on June 30, 1996. Individuals with developmental disabilities who reside in homes for special services licensed pursuant to this section may receive services reimbursed through the home and community-based services waiver, provided all other Medicaid eligibility criteria are satisfied. A license granted pursuant to this section shall be valid until the expiration of the facility's Intermediate Care Facility for the Developmentally Disabled license. The Agency for Health Care Administration shall develop standards for facilities licensed pursuant to this section which shall include appropriate sanctions for noncompliance with the standards and shall specify the terms for renewal of licenses. Any license granted pursuant to this section shall be contingent upon the facility allowing access to the Agency for Health Care Administration to conduct inspections to ensure compliance with standards. Section 13. Subsection (29) of section 393.063, Florida Statutes, is amended to read: 393.063 Definitions.- For purposes of this chapter: (29) "Intermediate care facility for the developmentally disabled" or "ICF/DD" means a state-owned-and-operated residential facility licensed in accordance with state law, and certified by the Federal Government pursuant to the Social Security Act, as a provider of Medicaid services to persons who are mentally retarded or who have related conditions. The capacity of such a facility shall not be more than 120 clients. Section 14. Section 393.067, Florida Statutes, is amended to read: 393.067 Licensure of residential facilities and comprehensive educational programs.- In addition to the requirements in subsection (4), the initial license application for an intermediate care facility for the developmentally disabled of six beds or less shall also include: The provider's proposal, on forms provided by the department, including a pro forma budget which shall also serve as the basis for establishing an initial interim Medicaid reimbursement rate. Approval and selection of the provider's proposal by the district and the Developmental Services Program in accordance with paragraph (20)(c). The initial license application shall be valid while the provider develops the facility in compliance with the conditions of the approved proposal. The department shall only accept proposals for intermediate care facilities for the developmentally disabled of six beds or less in response to the publication of projected bed need. Projected bed need shall be published by the department and shall identify: The district in which the beds are to be located. The maximum per diem cost which shall be in accordance with the Florida Title XIX ICF/MR Reimbursement Plan. The maximum size of the facility. The level of care of clients to be served, including demographic and programmatic characteristics of the client population. Projected bed need shall be directed towards clients who have severe disabilities, who have extensive service needs, who require extensive active treatment services, and who can only be adequately served in a cost-effective manner in an intermediate care facility for the developmentally disabled. Projected bed need shall be determined by the department on the basis of client need for extensive active treatment services that can only be delivered in a cost-effective manner in an intermediate care facility for the developmentally disabled. The department shall approve and select from provider proposals that respond to published projected bed need, based on the following weighted criteria in order of importance: Adequacy and quality of services that address the published bed need projections, especially the client demographic and programmatic characteristics. Completeness of the proposal and adherence to timeframes. Demonstration of financial ability to operate the facility in relation to published bed need projections. Appropriateness of per diem cost to provide quality services. Any license granted for intermediate care facilities for the developmentally disabled under the provisions of subsections (18) and (20) shall be valid only while the provider operates the facility in compliance with the conditions in the proposal that were approved by the department, as well as with all other applicable laws, rules, and regulations related to the operation of such facilities. Section 15. (1) Section 393.16, Florida Statutes, is hereby repealed.20 (2) Any cash balance remaining in the Intermediate Care Facilities Trust Fund shall be transferred to the Community Resources Development Trust Fund. Section 16. Notwithstanding any other provision of law, or this act to the contrary, the Agency for Health Care Administration may continue to reimburse private intermediate care facilities for the developmentally disabled through the Intermediate Care Facility for the Developmentally Disabled program through August 30, 1996, if requested by the Secretary of Health and Rehabilitative Services to ensure the safety and well-being of clients. Section 17. This act shall take effect July 1, 1996, or upon becoming a law, whichever is later; however, if this act becomes a law after July 1, 1996, it shall operate retroactively to July 1, 1996. Chapter 96-417, Law of Florida, became a law without the Governor's approval on June 7, 1996. Cramer v. Chiles Chapter 96-417, Florida Statutes, was challenged in the United States District Court for the Southern District of Florida in the case of Cramer v. Chiles, Case No 96-6619, which was assigned to Judge Ferguson. On August 28, 1996, Judge Ferguson issued an Order on Motion for Preliminary Injunction in Case No. 96-6619, which provided as follows: THIS CAUSE came before the Court for oral argument August 28, 1996 on Plaintiffs' Emergency Motion for Preliminary Injunction. Plaintiffs request the Court stay the effective date of Chapter 96-417, Public Laws, which is scheduled to go into effect August 30, 1996. The enactment would eliminate all private intermediate care facilities for the developmentally disabled21 ("ICF/DDs") in Florida, reducing the number of ICF/DD placements available by nearly 2,200. This Court previously determined in Doe v. Chiles, Case No. 92-589-CIV-Ferguson, that the State of Florida is obligated to provide placement of eligible individuals in ICF/DDs. Accordingly, in the absence of a transitional plan and showing that the State's proposed revised plan, under the new legislation, will adequately provide ICF/DD placements for eligible persons in Florida, there is a likelihood that Plaintiffs will succeed on the merits. To allow the substantial change scheduled for August 30, 1996, prior to the submission to, and approval by, the Federal Health Care Financing Agency ("HCFA") of an alternative plan which satisfies the State's obligations to beneficiaries under the existing plan, would cause irreparable harm to individuals currently provided care in those facilities. There must be a period and a plan for transition which will insure that services to the entitled recipients are not substantially impaired. The Plaintiffs have made a sufficient showing that there is no adequate legal remedy. Accordingly, it is ORDERED AND ADJUDGED that the Plaintiffs' motion for preliminary injunction is GRANTED, and the State shall continue to provide the current funding for 100% of cost reimbursements to private ICF/DD facilities until such time as a revised plan is presented and approved by HCFA. The new plan, for fairness considerations, shall disclose criteria to be used by the State in its reassessments for continued institutional care eligibility. Time is of the essence, as budgetary constraints dictate that a plan must be approved well before the end of the fiscal year, June 30, 1997. It is thus incumbent on all parties to move expeditiously. On October 13, 1998, Judge Ferguson issued an Order on Defendants' Ore Tenus Agreed Motion to Revive Statutory Scheme, which provided as follows: THIS MATTER came before the Court upon Defendants' Ore Tenus Agreed Motion to Revive Statutory language in Chapters 393 and 409, FLORIDA STATUTES (1995), as they existed prior to the enactment of Chapter 96-417, LAWS OF FLORIDA, and the Court being fully advised in the premises and having considered the entire record of the case, for good cause shown, it is hereby ORDERED AND ADJUDGED the Motion is Granted nunc pro tunc to the date of the entry of oral Order on Summary Judgment on January 9, 1998. Chapter 97-260, Florida Statutes Following the initiation of the challenge to Chapter 96-417, Laws of Florida, the Florida Legislature further addressed the "transition from funding through the Intermediate Care Facility for Developmentally Disabled Program to noninstitutional funding" by enacting Chapter 97-260, Laws of Florida, section 4 of which provided as follows: Report required; department to notify Legislature and develop plan if judicial decisions result in spending requirements in excess of appropriations.– The Department of Children and Family Services shall develop individual support plans for the approximately 2,176 persons directly affected by the transition from funding through the Intermediate Care Facility for Developmentally Disabled Program to noninstitutional funding. The individual plans shall provide for appropriate services to each affected individual in the most cost- effective manner possible. The department shall report the projected aggregate cost of providing services by fund source through the individual plans to the Office of Planning and Budgeting, the Senate Ways and Means Committee, and the House Health and Human Services Appropriations Committee by September 30, 1997. The aggregate costs reported shall be based on typical industry rates and shall not include special adjustments for property costs or other additional costs unique to any individual provider or type of provider. The department may, however, report any such costs separately. The report must further provide detailed information on department efforts to maximize Medicare and other funding available outside the Developmental Services Program and the use of generic community resources along with a calculation of the value of such resources. The report must also include a summary of the department's progress in recruiting alternative providers in the event that any current providers decide to discontinue services to clients or cannot provide quality services within the anticipated rate structure. If judicial decisions are continued or rendered that the Department of Children and Family Services feels will require spending in excess of the amounts budgeted for Developmental Services, the department shall immediately notify the Chairs of the Senate Ways and Means Committee, the House Fiscal Responsibility Council, and the House Health and Human Services Appropriations Committee. Within 1 week after providing notification pursuant to this subsection, the department shall submit a spending plan that addresses the projected deficit. This section is repealed July 1, 1999. Boren Amendment Repeal In the Balanced Budget Amendment of 1997 (more specifically, Section 4711(a)(1) thereof), the United States Congress repealed the Boren Amendment to the Medicaid Act, which Judge Nesbitt had referred to in her Order Granting Preliminary Injunction in United State District Court for the Southern District of Florida Case No. 89-0984. The Boren Amendment required, in pertinent part, that a state plan for medical assistance22 provide for "payment of . . . the hospital services, nursing facility services, and services in an intermediate care facility for the mentally retarded provided under the plan through the use of rates . . . which the State finds, and makes assurances to the Secretary, are reasonable and adequate to meet the costs which must be incurred by efficiently and economically operated facilities in order to provide care and services in conformity with applicable State and Federal laws, regulations, and quality and safety standards." Section 4711(a)(1) of the Balanced Budget Amendment of 1997 eliminated this requirement (which was codified in 42 U.S.C. 1396a(a)(13)) and replaced it with the requirement that a state plan: (13) provide-- for a public process for determination of rates of payment under the plan for hospital services, nursing facility services, and services of intermediate care facilities for the mentally retarded under which-- proposed rates, the methodologies underlying the establishment of such rates, and justifications for the proposed rates are published, providers, beneficiaries and their representatives, and other concerned State residents are given a reasonable opportunity for review and comment on the proposed rates, methodologies, and justifications, final rates, the methodologies underlying the establishment of such rates, and justifications for such final rates are published, and in the case of hospitals, such rates take into account (in a manner consistent with section 1923) the situation of hospitals which serve a disproportionate number of low- income patients with special needs. Subsection (b) of Section 4711 of the Balanced Budget Amendment of 1997 provided as follows: STUDY.--The Secretary of Health and Human Services shall study the effect on access to, and the quality of, services provided to beneficiaries of the rate-setting methods used by States pursuant to section 1902(a)(13)(A) of the Social Security Act (42 U.S.C. 1396a(a)(13)(A)), as amended by subsection (a). REPORT.--Not later than 4 years after the date of the enactment of this Act, the Secretary of Health and Human Services shall submit a report to the appropriate committees of Congress on the conclusions of the study conducted under paragraph (1), together with any recommendations for legislation as a result of such conclusions. Subsection (d) of Section 4711 of the Balanced Budget Amendment of 1997 provided as follows:: EFFECTIVE DATE.--This section shall take effect on the date of the enactment of this Act and the amendments made by subsections (a) and (c) shall apply to payment for items and services furnished on or after October 1, 1997. Following the passage of the Balanced Budget Act of 1997, the Health Care Finance Agency (HCFA), a federal agency which assists in the administration of the federal Medicaid program,23 sent the following letter, dated December 10, 1997, to state Medicaid directors concerning the repeal of the Boren Amendment: This letter is one of a series that provides guidance on the implementation of the Balanced Budget Act of 1997 (BBA). Section 4711 of BBA repeals Sections 1902(a)(13)(A), (B), and (C) of the Social Security Act (the Act), requires states to implement a public process when changes in payment rates or payment methodologies are proposed, and applies to payments for items and services furnished on or after October 1, 1997. (See Enclosure 1 for background on Section 4711.) Section 4711 of BBA replaced the Boren requirements with a new section 1902(a)(13)(A) of the Act, which requires states to (a) use a public process for determining rates, (b) publish proposed and final rates, the methodologies underlying the rates, and justifications for the rates, and (c) give interested parties a reasonable opportunity for review and comment on the proposed rates, methodologies, and justifications. In the case of hospitals, such rates must take into account the situation of hospitals which serve disproportionate number of low-income patients with special needs. The intent of Section 4711 is to provide states with maximum flexibility, as well as to minimize HCFA's role in reviewing inpatient and long-term care state plan amendments involving payment rate changes. HCFA would consider the state to be in compliance with this provision if it elected to use a general administrative process similar to the Federal Administrative Procedures Act that satisfies the requirements for a public process in developing and inviting comment in Section 4711. This will allow states the flexibility to follow current state procedures. If a state's public process is not currently being applied to rate setting, or does not currently include a comment period, then the state would need to modify the process. (See Enclosure 2 for public process options.) The repeal of the Boren amendment cannot be interpreted to be retroactively effective; the Boren amendment still applies to payment for items and services furnished before October 1, 1997. Thus, inpatient hospital and long-term state plan amendments that are currently pending approval by HCFA, including those where Boren requirement questions are the only outstanding issues, need to have these issues resolved before amendment can be approved. However, we recognize that the intent in repealing the Boren amendment was to reduce HCFA's role in the institutional payment rate setting process and to increase state latitude in this area. In light of the less restrictive requirements now in place, HCFA is committed to working with states to expedite resolution of outstanding Boren issues in existing pending amendments. States that are not proposing changes in their payment methods and standards, or changes in rates for items and services furnished on or after October 1, 1997, need not immediately implement a BBA public process. States need only publish proposed rates, methodologies, and justification prior to the proposed effective date of any changes in payment rates or payment methodologies. In other words, states are not required to subject their existing rates to a public process to the extent that those existing rates were validly determined in accordance with legal standards in effect prior to October 1, 1997. In the event changes are already underway, states are to submit the preprint page (or comparable language inserted elsewhere in the hospital and long- term care payment sections of the plan) with the next proposed amendment. (See Enclosures 3 and 4 for preprint pages.) We envision a streamlined Federal review process due to the fact that state plan amendments previously submitted under the Boren requirements were subjected to more rigorous statutory standard both in terms of Federal review of their substance and the review of the process itself. Chapter 98-46, Laws of Florida. The 1998 Florida Legislature passed legislation directing Respondent to make changes to the ICF/DD Methodology. The directive was contained in Chapter 98-46, Laws of Florida, Sections 13 and 40 of which provided as follows: Section 13. In order to implement Specific Appropriation 243 of the 1998-1999 General Appropriations Act, subsection (22) is added to section 409.908, Florida Statutes, to read: 409.908 Reimbursement of Medicaid providers.- Subject to specific appropriations, the agency shall reimburse Medicaid providers, in accordance with state and federal law, according to methodologies set forth in the rules of the agency and in policy manuals and handbooks incorporated by reference therein. These methodologies may include fee schedules, reimbursement methods based on cost reporting, negotiated fees, competitive bidding pursuant to s. 287.057, and other mechanisms the agency considers efficient and effective for purchasing services or goods on behalf of recipients. Payment for Medicaid compensable services made on behalf of Medicaid eligible persons is subject to the availability of moneys and any limitations or directions provided for in the General Appropriations Act or chapter 216. Further, nothing in this section shall be construed to prevent or limit the agency from adjusting fees, reimbursement rates, lengths of stay, number of visits, or number of services, or making any other adjustments necessary to comply with the availability of moneys and any limitations or directions provided for in the General Appropriations Act, provided the adjustment is consistent with legislative intent. (22) The agency is directed to implement changes in the Medicaid reimbursement methodology, as soon as feasible, to contain the growth in expenditures in facilities formerly known as ICF/DD facilities.24 In light of the repeal of the federal Boren Amendment, the agency shall consider, but is not limited to, the following changes in methodology: Reduction in the target rate of inflation. Reduction in the calculation of incentive payments. Ceiling limitations by component of reimbursement. Elimination of rebase provisions. Elimination of component interim rate provisions. Separate reimbursement plans for facilities that are government operated versus facilities that are privately owned. The agency may contract with an independent consultant in considering any changes to the reimbursement methodology for these facilities. This subsection is repealed on July 1, 1999. Section 40. This act shall take effect July 1, 1998, or in the event this act fails to become a law until after that date, it shall operate retroactively thereto. Chapter 98-46, Laws of Florida, became a law without the Governor's approval on April 30, 1998. Respondent's Response to Chapter 98-46, Laws of Florida Becoming a Law The task of taking the necessary steps to comply with the legislative directive contained in Chapter 98-46, Laws of Florida, was the responsibility of John Owens, a Regulatory Analyst Supervisor with Respondent, whose job duties include "overseeing the various reimbursement plans for Medicaid and their application." Mr. Owens' training is primarily in accounting and finance, not health care. Mr. Owens acted in consultation with his immediate supervisor, Carlton Snipes, as well as the Director of Respondent's Division of Health Purchasing and agency counsel. He did not employ any independent consultants to assist him. After formulating revisions to the ICF/DD Methodology that he preliminarily determined should be made in light of legislative mandate in Section 13 of Chapter 98-46, Laws of Florida, Mr. Owens had published in the August 14, 1998, edition of the Florida Administrative Weekly the following notices of proposed rule development:
