The Issue The issues in this case are whether Respondent applied the proper reimbursement principles to Petitioners' initial Medicaid rate setting, and whether elements of detrimental reliance exist so as to require Respondent to establish a particular initial rate for Petitioners' facilities.
Findings Of Fact There are nine Petitioners in this case. Each of them is a long-term health care facility (nursing home) operated under independent and separate legal entities, but, generally, under the umbrella of a single owner, Tzvi "Steve" Bogomilsky. The issues in this case are essentially the same for all nine Petitioners, but the specific monetary impact on each Petitioner may differ. For purposes of addressing the issues at final hearing, only one of the Petitioners, Madison Pointe Rehabilitation and Health Center (Madison Pointe), was discussed, but the pertinent facts are relevant to each of the other Petitioners as well. Each of the Petitioners has standing in this case. The Amended Petition for Formal Administrative Hearing filed by each Petitioner was timely and satisfied minimum requirements. In September 2008, Bogomilsky caused to be filed with AHCA a Change of Licensed Operator ("CHOP") application for Madison Pointe.1 The purpose of that application was to allow a new entity owned by Bogomilsky to become the authorized licensee of that facility. Part and parcel of the CHOP application was a Form 1332, PFA. The PFA sets forth projected revenues, expenses, costs and charges anticipated for the facility in its first year of operation by the new operator. The PFA also contained projected (or budgeted) balance sheets and a projected Medicaid cost report for the facility. AHCA is the state agency responsible for licensing nursing homes in this state. AHCA also is responsible for managing the federal Medicaid program within this state. Further, AHCA monitors nursing homes within the state for compliance with state and federal regulations, both operating and financial in nature. The AHCA Division of Health Quality Assurance, Bureau of Long-Term Care Services, Long-Term Care Unit ("Long-Term Care Unit") is responsible for reviewing and approving CHOP applications and issuance of an operating license to the new licensee. The AHCA Division of Health Quality Assurance, Bureau of Health Facility Regulation, Financial Analysis Unit ("Financial Analysis Unit") is responsible for reviewing the PFA contained in the CHOP application and determining an applicant's financial ability to operate a facility in accordance with the applicable statutes and rules. Neither the Long-Term Care Unit nor the Financial Analysis Unit is a part of the Florida Medicaid Program. Madison Pointe also chose to submit a Medicaid provider application to the Medicaid program fiscal agent to enroll as a Medicaid provider and to be eligible for Medicaid reimbursement. (Participation by nursing homes in the Medicaid program is voluntary.) The Medicaid provider application was reviewed by the Medicaid Program Analysis Office (MPA) which, pursuant to its normal practices, reviewed the application and set an interim per diem rate for reimbursement. Interim rate-setting is dependent upon legislative direction provided in the General Appropriations Act and also in the Title XIX Long-Term Care Reimbursement Plan (the Plan). The Plan is created by the federal Centers for Medicare and Medicaid Services (CMS). CMS (formerly known as the Health Care Financing Administration) is a federal agency within the Department of Health and Human Services. CMS is responsible for administering the Medicare and Medicaid programs, utilizing state agencies for assistance when appropriate. In its PFA filed with the Financial Analysis Unit, Madison Pointe proposed an interim Medicaid rate of $203.50 per patient day (ppd) as part of its budgeted revenues. The projected interim rate was based on Madison Pointe's expected occupancy rate, projected expenses, and allowable costs. The projected rate was higher than the previous owner's actual rate in large part based on Madison Pointe's anticipation of pending legislative action concerning Medicaid reimbursement issues. That is, Madison Pointe projected higher spending and allowable costs based on expected increases proposed in the upcoming legislative session. Legislative Changes to the Medicaid Reimbursement System During the 2007 Florida Legislative Session, the Legislature addressed the status of Medicaid reimbursement for long-term care facilities. During that session, the Legislature enacted the 2007 Appropriations Act, Chapter 2007-72, Laws of Florida. The industry proposed, and the Legislature seemed to accept, that it was necessary to rebase nursing homes in the Medicaid program. Rebasing is a method employed by the Agency periodically to calibrate the target rate system and adjust Medicaid rates (pursuant to the amount of funds allowed by the Legislature) to reflect more realistic allowable expenditures by providers. Rebasing had previously occurred in 1992 and 2002. The rebasing would result in a "step-up" in the Medicaid rate for providers. In response to a stated need for rebasing, the 2007 Legislature earmarked funds to address Medicaid reimbursement. The Legislature passed Senate Bill 2800, which included provisions for modifying the Plan as follows: To establish a target rate class ceiling floor equal to 90 percent of the cost- based class ceiling. To establish an individual provider- specific target floor equal to 75 percent of the cost-based class ceiling. To modify the inflation multiplier to equal 2.0 times inflation for the individual provider-specific target. (The inflation multiplier for the target rate class ceiling shall remain at 1.4 times inflation.) To modify the calculation of the change of ownership target to equal the previous provider's operating and indirect patient care cost per diem (excluding incentives), plus 50 percent of the difference between the previous providers' per diem (excluding incentives) and the effect class ceiling and use an inflation multiplier of 2.0 times inflation. The Plan was modified in accordance with this legislation with an effective date of July 1, 2007. Four relevant sentences from the modified Plan are relevant to this proceeding, to wit: For a new provider with no cost history resulting from a change of ownership or operator, where the previous provider participated in the Medicaid program, the interim operating and patient care per diems shall be the lesser of: the class reimbursement ceiling based on Section V of this Plan, the budgeted per diems approved by AHCA based on Section III of this Plan, or the previous providers' operating and patient care cost per diem (excluding incentives), plus 50% of the difference between the previous providers' per diem (excluding incentives) and the class ceiling. The above new provider ceilings, based on the district average per diem or the previous providers' per diem, shall apply to all new providers with a Medicaid certification effective on or after July 1, 1991. The new provider reimbursement limitation above, based on the district average per diem or the previous providers' per diem, which affects providers already in the Medicaid program, shall not apply to these same providers beginning with the rate semester in which the target reimbursement provision in Section V.B.16. of this plan does not apply. This new provider reimbursement limitation shall apply to new providers entering the Medicaid program, even if the new provider enters the program during a rate semester in which Section V.B.16 of this plan does not apply. [The above cited sentences will be referred to herein as Plan Sentence 1, Plan Sentence 2, etc.] Madison Pointe's Projected Medicaid Rate Relying on the proposed legislation, including the proposed rebasing and step-up in rate, Madison Pointe projected an interim Medicaid rate of $203.50 ppd for its initial year of operation. Madison Pointe's new projected rate assumed a rebasing by the Legislature to eliminate existing targets, thereby, allowing more reimbursable costs. Although no legislation had been passed at that time, Madison Pointe's consultants made calculations and projections as to how the rebasing would likely affect Petitioners. Those projections were the basis for the $203.50 ppd interim rate. The projected rate with limitations applied (i.e., if Madison Pointe did not anticipate rebasing or believe the Plan revisions applied) would have been $194.26. The PFA portion of Madison Pointe's CHOP application was submitted to AHCA containing the $203.50 ppd interim rate. The Financial Analysis Unit, as stated, is responsible for, inter alia, reviewing PFAs submitted as part of a CHOP application. In the present case, Ryan Fitch was the person within the Financial Analysis Unit assigned responsibility for reviewing Madison Pointe's PFA. Fitch testified that the purpose of his review was to determine whether the applicant had projected sufficient monetary resources to successfully operate the facility. This would include a contingency fund (equal to one month's anticipated expenses) available to the applicant and reasonable projections of cost and expenses versus anticipated revenues.2 Upon his initial review of the Madison Pointe PFA, Fitch determined that the projected Medicaid interim rate was considerably higher than the previous operator's actual rate. This raised a red flag and prompted Fitch to question the propriety of the proposed rate. In his omissions letter to the applicant, Fitch wrote (as the fourth bullet point of the letter), "The projected Medicaid rate appears to be high relative to the current per diem rate and the rate realized in 2006 cost reports (which includes ancillaries and is net of contractual adjustments). Please explain or revise the projections." In response to the omissions letter, Laura Wilson, a health care accountant working for Madison Pointe, sent Fitch an email on June 27, 2008. The subject line of the email says, "FW: Omissions Letter for 11 CHOW applications."3 Then the email addressed several items from the omissions letter, including a response to the fourth bullet point which says: Item #4 - Effective July 1, 2007, it is anticipated that AHCA will be rebasing Medicaid rates (the money made available through elimination of some of Medicaid's participation in covering Medicare Part A bad debts). Based on discussions with AHCA and the two Associations (FHCA & FAHSA), there is absolute confidence that this rebasing will occur. The rebasing is expected to increase the Medicaid rates at all of the facilities based on the current operator's spending levels. As there is no definitive methodology yet developed, the rebased rates in the projections have been calculated based on the historical methodologies that were used in the 2 most recent rebasings (1992 and 2002). The rates also include the reestablishment of the 50% step-up that is also anticipated to begin again. The rebasing will serve to increase reimbursement and cover costs which were previously limited by ceilings. As noted in Note 6 of the financials, if something occurs which prevents the rebasing, Management will be reducing expenditures to align them with the available reimbursement. It is clear Madison Pointe's projected Medicaid rate was based upon proposed legislative actions which would result in changes to the Plan. It is also clear that should those changes not occur, Madison Pointe was going to be able to address the shortfall by way of reduced expenditures. Each of those facts was relevant to the financial viability of Madison Pointe's proposed operations. Madison Pointe's financial condition was approved by Fitch based upon his review of the PFA and the responses to his questions. Madison Pointe became the new licensed operator of the facility. That is, the Long-Term Care Unit deemed the application to have met all requirements, including financial ability to operate, and issued a license to the applicant. Subsequently, MPA provided to Madison Pointe its interim Medicaid rate. MPA advised Madison Pointe that its rate would be $194.55 ppd, some $8.95 ppd less than Madison Pointe had projected in its PFA (but slightly more than Madison Pointe would have projected with the 50 percent limitation from Plan Sentence 1 in effect, i.e., $194.26). The PFA projected 25,135 annual Medicaid patient days, which multiplied by $8.95, would equate to a reduction in revenues of approximately $225,000 for the first year of operation.4 MPA assigned Madison Pointe's interim Medicaid rate by applying the provisions of the Plan as it existed as of the date Madison Pointe's new operating license was issued, i.e., September 1, 2007. Specifically, MPA limited Madison Pointe's per diem to 50 percent of the difference between the previous provider's per diem and the applicable ceilings, as dictated by the changes to the Plan. (See Plan Sentence 1 set forth above.) Madison Pointe's projected Medicaid rate in the PFA had not taken any such limitations into account because of Madison Pointe's interpretation of the Plan provisions. Specifically, that Plan Sentence 3 applies to Madison Pointe and, therefore, exempts Madison Pointe from the new provider limitation set forth in Plan Sentences 1 and 2. However, Madison Pointe was not "already in the Medicaid program" as of July 1, 2007, as called for in Plan Sentence 3. Rather, Madison Pointe's commencement date in the Medicaid program was September 1, 2007. Plan Sentence 1 is applicable to a "new provider with no cost history resulting from a change of ownership or operator, where the previous operator participated in the Medicaid program." Madison Pointe falls within that definition. Thus, Madison Pointe's interim operating and patient care per diems would be the lesser of: (1) The class reimbursement ceiling based on Section V of the Plan; (2) The budgeted per diems approved by AHCA based on Section III of the Plan; or (3) The previous provider's operating and patient care cost per diem (excluding incentives), plus 50 percent of the difference between the previous provider's per diem and the class ceiling. Based upon the language of Plan Sentence 1, MPA approved an interim operating and patient care per diem of $194.55 for Madison Pointe. Plan Sentence 2 is applicable to Madison Pointe, because it applies to all new providers with a Medicaid certification effective after July 1, 1991. Madison Pointe's certification was effective September 1, 2007. Plan Sentence 3 is the primary point of contention between the parties. AHCA correctly contends that Plan Sentence 3 is not applicable to Petitioner, because it addresses rebasing that occurred on July 1, 2007, i.e., prior to Madison Pointe coming into the Medicaid system. The language of Plan Sentence 3 is clear and unambiguous that it applies to "providers already in the Medicaid program." Plan Sentence 4 is applicable to Madison Pointe, which entered the system during a rate semester, in which no other provider had a new provider limitation because of the rebasing. Again, the language is unambiguous that "[t]his new provider reimbursement limitation shall apply to new providers entering the Medicaid program. . . ." Madison Pointe is a new provider entering the program. Detrimental Reliance and Estoppel Madison Pointe submitted its CHOP application to the Long-Term Care Unit of AHCA for approval. That office has the clear responsibility for reviewing and approving (or denying) CHOP applications for nursing homes. The Long-Term Care Unit requires, as part of the CHOP application, submission of the PFA which sets forth certain financial information used to determine whether the applicant has the financial resources to operate the nursing home for which it is applying. The Long-Term Care Unit has another office within AHCA, the Financial Analysis Unit, to review the PFA. The Financial Analysis Unit is found within the Bureau of Health Facility Regulation. That Bureau is responsible for certificates of need and other issues, but has no authority concerning the issuance, or not, of a nursing home license. Nor does the Financial Analysis Unit have any authority to set an interim Medicaid rate. Rather, the Financial Analysis Unit employs certain individuals who have the skills and training necessary to review financial documents and determine an applicant's financial ability to operate. A nursing home licensee must obtain Medicaid certification if it wishes to participate in the program. Madison Pointe applied for Medicaid certification, filing its application with a Medicaid intermediary which works for CMS. The issuance of a Medicaid certification is separate and distinct from the issuance of a license to operate. When Madison Pointe submitted its PFA for review, it was aware that an office other than the Long-Term Care Unit would be reviewing the PFA. Madison Pointe believed the two offices within AHCA would communicate with one another, however. But even if the offices communicated with one another, there is no evidence that the Financial Analysis Unit has authority to approve or disapprove a CHOP application. That unit's sole purpose is to review the PFA and make a finding regarding financial ability to operate. Likewise, MPA--which determines the interim Medicaid rate for a newly licensed operator--operates independently of the Long-Term Care Unit or the Financial Analysis Unit. While contained within the umbrella of AHCA, each office has separate and distinct duties and responsibilities. There is no competent evidence that an applicant for a nursing home license can rely upon its budgeted interim rate--as proposed by the applicant and approved as reasonable by MPA--as the ultimate interim rate set by the Medicaid Program Analysis Office. At no point in time did Fitch tell Madison Pointe that a rate of $203.50 ppd would be assigned. Rather, he said that the rate seemed high; Madison Pointe responded that it could "eliminate expenditures to align them with the available reimbursement." The interim rate proposed by the applicant is an estimate made upon its own determination of possible facts and anticipated operating experience. The interim rate assigned by MPA is calculated based on the applicant's projections as affected by provisions in the Plan. Furthermore, it is clear that Madison Pointe was on notice that its proposed interim rate seemed excessive. In response to that notice, Madison Pointe did not reduce the projected rate, but agreed that spending would be curtailed if a lower interim rate was assigned. There was, in short, no reliance by Madison Pointe on Fitch's approval of the PFA as a de facto approval of the proposed interim rate. MPA never made a representation to Madison Pointe as to the interim rate it would receive until after the license was approved. There was, therefore, no subsequent representation made to Madison Pointe that was contrary to a previous statement. The Financial Analysis Unit's approval of the PFA was done with a clear and unequivocal concern about the propriety of the rate as stated. The approval was finalized only after a representation by Madison Pointe that it would reduce expenditures if a lower rate was imposed. Thus, Madison Pointe did not change its position based on any representation made by AHCA.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by Respondent, Agency for Health Care Administration, approving the Medicaid interim per diem rates established by AHCA and dismissing each of the Amended Petitions for Formal Administrative Hearing. DONE AND ENTERED this 23rd day of February, 2009, in Tallahassee, Leon County, Florida. R. BRUCE MCKIBBEN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 23rd day of February, 2009.
The Issue The issue for determination is whether Respondent is liable to Petitioner for the principal sum of $94,675.83, which equals the amount that the Florida Medicaid Program paid Respondent for the "professional component" of claims for radiologic services rendered to Respondent's patients between July 1, 2001 and December 31, 2005.
Findings Of Fact Petitioner Agency for Health Care Administration ("AHCA" or the "Agency") is the state agency responsible for administering the Florida Medicaid Program ("Medicaid"). Respondent Harold L. Murray, M.D. ("Murray") was, at all relevant times, a Medicaid provider authorized to receive reimbursement for covered services rendered to Medicaid beneficiaries. Exercising its statutory authority to oversee the integrity of Medicaid, the Agency sent investigators to Murray's office on November 22, 2005. The purpose of this visit was to verify that claims paid by Medicaid had not exceeded authorized amounts. To this end, the investigators inspected Murray's facilities and reviewed his medical records. What the investigators saw gave them reasons to believe that Medicaid had been overpaying Murray for radiologic services. They focused on the period from July 1, 2001 to December 31, 2005 (the "Audit Period"). During the Audit Period, Murray had submitted approximately 2,000 claims seeking the "maximum fee" for radiologic services, which Medicaid had paid. The maximum fee includes compensation for "professional component" services. (Medicaid uses the term "professional component" to describe the physician's services of interpreting a radiologic study and reporting his or her findings. These services are distinguished from those comprising the "technical component," which are routinely performed by technicians. These latter services include operating the radiologic equipment (e.g. an X-ray or sonographic machine) and performing the exam.) It appeared to the investigators that Murray had not, in fact, been performing the professional component. Using information in its database, the Agency determined that, during the Audit Period, Murray had received Medicaid payments totaling $94,675.83 for professional component services. The Agency repeatedly requested that Murray supply additional information that might substantiate his prior claims for fees relating to the professional component. Murray failed, refused, or was unable to comply with the Agency's requests. Murray did testify at hearing, however, providing a reasonably clear picture of what had occurred. On direct examination, Murray explained that he had performed the "first preliminary" review of each radiologic examination in question before sending the study to a radiologist, whom he paid "out of [his own] pocket" to interpret the exam and make a report. According to Murray, Medicaid paid only for his (Murray's) professional component services——not the radiologist's. Murray argues that he is entitled to compensation for the professional component services that he personally performed, notwithstanding that another doctor performed the same services. Analysis of the Facts Although Murray's position might have some superficial appeal, it does not withstand scrutiny as a matter of fact, the undersigned has determined. To explain why this is so requires an analysis of Murray's testimony that entails neither legal conclusions nor findings of historical fact. The undersigned's rationale, being essentially fact-based, is explicated here in the interests of organizational coherence and readability. Assume first, for the sake of argument, that Murray's "first preliminary" review constituted an authoritative interpretation of the radiologic study. Because it is reasonable to infer (and the undersigned finds) that the radiologist's subsequent interpretation of the study was authoritative——Murray's routine practice of ordering and personally paying for the "second opinion" would have been inexplicable, and indeed irrational, if the radiologist's interpretation were of dubious value——the inevitable conclusion, assuming Murray's findings were authoritative, is that the "second opinion" was nearly always duplicative, excessive, and unnecessary.i Murray's responses to that conclusion doubtless would be: (1) Medicaid did not pay for the second opinion, so whether it was excessive and unnecessary is irrelevant; and (2) there is no statute, rule, or Medicaid policy that forbids a provider from procuring, at his own expense, a second opinion——even an unnecessary one. It is not accurate to say, however, that Medicaid did not pay for the second opinion; this, ultimately, is the fatal flaw in Murray's reasoning. To the contrary, Murray's testimony shows clearly that Medicaid did pay for some or all of the expense of the second opinion, albeit indirectly, when it paid Murray for the same work. As his own account reveals, Murray was, in effect, merely a conduit for the Medicaid money, which passed through his hands on its way to the radiologist. Murray contends, of course, that the Medicaid payments for the professional component were "his," that he had earned them by performing the "first preliminary" read, and that he was free to spend his income however he chose. If our initial assumption were true, namely that Murray's preliminary interpretation were authoritative, then his claim to the Medicaid payments at issue might have merit. But, on reflection, this assumption is difficult, if not impossible, to square with the fact that Murray found it necessary always to pay another doctor to perform the very same professional component services. Indeed, having a second opinion was so important to Murray that he was willing to perform his purported preliminary read at a substantially discounted rate, at least, if not for free——or even, maybe, at a financial loss: in every instance, one of these was necessarily the net economic result of his actions.ii If, as we have assumed, Murray were performing a valuable professional service each time he interpreted a radiologic exam, then——the question naturally arises——why would he effectively have given away his expert opinions? Murray testified that he did so for "the safety of [his] patient" and because the radiologist is "educated for that." But these "answers," far from being persuasive, actually undermine the assumption that spawns the question of motive. Indeed, Murray's testimony confirms a reasonable inference contrary to our initial assumption, which inference is that Murray lacked sufficient confidence in his so-called "preliminary" interpretations ever to rely on them alone. This inference, which the undersigned accepts as a finding, arises from the basic undisputed fact that Murray routinely sought "second opinions" for every patient. It is ultimately determined, therefore, that whatever Murray's "first preliminary" reviews comprised, they did not constitute authoritative interpretations of the radiologic studies at hand. That being the case, it is determined that Murray's preliminary opinions added little or no actual value to the subject medical transactions. Offering some sort of provisional opinion that holds only until the "real" opinion can be obtained from the radiologist is not tantamount to performing the professional component.iii Based on the evidence presented, it is determined that the radiologist performed the professional component of the radiologic studies at issue, not Murray. As a result of improperly claiming that he had performed professional component services when in fact he had not, Murray received from Medicaid a total of $94,675.83 in payments that were not authorized to be paid. This grand total of $94,675.83 constitutes an overpayment that Murray must return to the Agency.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency enter a final order requiring Murray to repay the Agency the principal amount of $94,675.83, together with an administrative fine of $1,000. DONE AND ENTERED this 10th day of July, 2007, in Tallahassee, Leon County, Florida. S JOHN G. VAN LANINGHAM Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 10th day of July, 2007.
The Issue Whether Medicaid overpayments were made to Petitioner and, if so, what is the total amount of these overpayments.
Findings Of Fact Based upon the evidence adduced at hearing, and the record as a whole, the following findings of fact are made to supplement and clarify the stipulations of fact set forth in the parties' March 5, 2002, Joint Prehearing Stipulation: Petitioner Petitioner was incorporated in 1989 by Mr. Taylor. It operated Choice Pharmacy, a pharmacy located at 9920 Northwest 27th Avenue in Miami, Florida, from around the time of its incorporation until approximately 1999. The Provider Agreement During the period from September 10, 1997, through August 31, 1998, Petitioner was authorized to provide pharmacy services and goods to eligible Medicaid recipients in Florida. Petitioner provided such services and goods pursuant to a Medicaid Provider Agreement Mr. Taylor had signed, on behalf of Petitioner, on February 21, 1997. The Provider Agreement contained the following provisions, among others: The Provider agrees to participate in the Florida Medicaid program under the following terms and conditions: * * * Quality of Service. . . . The services or goods must have been actually provided to eligible Medicaid recipients by the provider prior to submitting the claim. Compliance. The provider agrees to comply with all local, state and federal laws, rules, regulations, licensure laws, Medicaid bulletins, manuals, handbooks and Statements or Policy as they may be amended from time to time. Term and signatures. The parties agree that this is a voluntary agreement between the Agency and the provider, in which the provider agrees to furnish services or goods to Medicaid recipients. This provider agreement shall become effective the date the provider's Florida Medicaid Enrollment Application is received by the state or its fiscal agent. It shall remain in effect until July 1, 1999, unless otherwise terminated. . . . Provider Responsibilities. The Medicaid provider shall: * * * (b) Keep and maintain in a systematic and orderly manner all medical and Medicaid related records as the Agency may require and as it determines necessary; make available for state and federal audits for five years, complete and accurate medical, business, and fiscal records that fully justify and disclose the extent of the goods and services rendered and billings made under the Medicaid. The provider agrees that only records made at the time the goods and services were provided will be admissible in evidence in any proceeding relating to the Medicaid program. * * * (d) Except as provided by law, the provider agrees to provide immediate access to authorized persons (included but not limited to state and federal employees, auditors and investigators) to all Medicaid-related information, which may be in the form of records, logs, documents, or computer files, and all other information pertaining to services or goods billed to the Medicaid program. This shall include access to all patient records and other provider information if the provider cannot easily separate records for Medicaid patients from other records. . . . Prescribed Drug Services Coverage, Limitations and Reimbursement Handbook, and the Medicaid Provider Reimbursement Handbook The Prescribed Drug Services Coverage, Limitations and Reimbursement Handbook (referenced in the "Facts Not in Dispute" section of the parties' Joint Prehearing Stipulation) at all times material to the instant case contained the following "record keeping " provisions, among others: The provider must retain all medical, fiscal, professional and business records on all services provided to a Medicaid recipient. Records may be kept on paper, magnetic material, film, or other media. In order to qualify as a basis for reimbursement, the records must be signed and dated at the time of service, or otherwise attested to as appropriate to the media. Rubber stamp signatures must be initialed. The records must be accessible, legible and comprehensible. Records must be retained for a period of at least five years from the date of service. The following types of records, as appropriate for the type of service provided, must be retained (the list is not all inclusive): . . . . Business records, such as accounting ledgers, financial statements, purchase/acquisition records, invoices, inventory records, check registers, canceled checks, sales records, etc.; Tax records, including purchase documentation; . . . . Providers who are not in compliance with the Medicaid documentation and record retention policies described in this chapter may be subject to administrative sanctions and recoupment of Medicaid payments. Medicaid payments for services that lack required documentation or appropriate signatures will be recouped. . . . The Medicaid Provider Reimbursement Handbook (referenced in the "Facts Not in Dispute" section of the parties' Joint Prehearing Stipulation) at all times material to the instant case contained similar provisions. The Prescribed Drug Services Coverage, Limitations and Reimbursement Handbook (referenced in the "Facts Not in Dispute" section of the parties' Joint Prehearing Stipulation) at all times material to the instant case further provided that "[r]eimbursement for prescribed drug services is based on the cost of the drug to the pharmacy plus a dispensing fee." The Audit and Aftermath In July of 1998, AHCA's Medicaid fiscal agent contractor (Unysis Corporation) conducted a "desk audit" of Medicaid claims submitted by Petitioner. Following the completion of the "desk audit," the matter was referred to AHCA's Office of Medicaid Program Integrity to conduct "a more in depth" audit (involving an examination of invoices and other documentation to determine whether Petitioner had available during the period under review sufficient quantities of goods to support its billings to the Medicaid program). The audit, which covered the period from September 10, 1997, through August 31, 1998 (Audit Period), was conducted by Kathryn Holland, with the assistance of an accounting firm retained by AHCA, Krause, Humphress, Pace & Wadsworth, CPA (Krause). Ms. Holland is a Florida-registered pharmacist who has been a senior pharmacist with AHCA for the past 12 years. She has no formal education or training in accounting, but does have 12 years of experience "doing the kind of audits" she conducted in the instant case. In an effort to obtain information needed for the audit, Krause requested that Petitioner fill out and return a Questionnaire for Medicaid Providers. The questionnaire was filled out and returned by Mr. Taylor, on behalf of Petitioner, on or about October 30, 1998. Mr. Taylor indicated on the questionnaire that, during the Audit Period, the "percentage of [Petitioner's] prescription business that [was] Medicaid" was approximately 90 percent. He further indicated on the questionnaire that Petitioner's "total dollar sales volume of prescription drugs" during the Audit Period was $5,732,028.84; Petitioner's "cost of prescription drugs sold during [the] Audit Period" was $5,220,200.27; Petitioner's "prescription drug inventory at cost, [at the] beginning of [the Audit] Period" was $180,721.00; and Petitioner's "prescription drug inventory at cost, [at the] end of [the Audit] Period" was $306,081.00. The questionnaire requested the name(s) of Petitioner's "major drug suppliers during the review period." All suppliers that "provided more than 10% of [Petitioner's] drug purchases" were to be listed. Mr. Taylor listed on the questionnaire the following "major drug suppliers": "McKesson Inc.," "Quality Medical," "Pharma Plus Wholesale Inc.," and "Quest Medical Supply." IV Pharmaceutical Wholesalers, Inc., was not among the "major drug suppliers" named by Mr. Taylor. According to the information provided on the questionnaire by Mr. Taylor, the purchases made by Petitioner from "McKesson Inc.," "Quality Medical," "Pharma Plus Wholesale Inc.," and "Quest Medical Supply" represented approximately 20 percent, 20 percent, 40 percent, and 10 percent, respectively, of Petitioner's "total [drug] purchases" during the Audit Period. By letter dated November 9, 1998, Krause requested Pharma Plus Wholesale, Inc. (Pharma Plus) to provide it "with a download of all transactions (all accounts) for the period September 1, 1997 through August 31, 1998," between Pharma Plus and Choice Pharmacy. Pharma Plus, in a letter dated January 18, 1999, provided the following response to Krause's request: [A]s per our conversation I am submitting this document to formally inform you and your office that Pharma Plus Wholesale, Inc. has never done any business with Choice Pharmacy (Legal Name: OKAN, Inc) 9920 N.W. 27th Avenue Miami, FL 33147.) By letter dated January 20, 1999, Ms. Holland requested McKesson Drug Company (McKesson) to provide her "with a download of all transactions for the period July 1, 1997, through August 31, 1998" between McKesson and Choice Pharmacy. On February 16, 1999, McKesson provided Ms. Holland with a "paper printout" containing the requested information. The material submitted by McKesson revealed that there were a considerable number of transactions between McKesson and Choice Pharmacy during the period in question. On April 2, 1999, Ms. Holland sent a letter to Mr. Taylor, which read, in part, as follows:: On or around July 16, 1998, an auditor from Unisys Corporation, the fiscal agent contractor for the Florida Medicaid program, conducted an audit of your pharmacy department. The audit is being reviewed by Medicaid Program Integrity. In order for us to complete our review, we are requesting and must receive the following: Documentation that identifies all purchases/acquisitions by Choice Pharmacy for the products listed on "Attachment A" for the period from July 1, 1997, through August 31, 1998. Documentation that identifies all credits/returns for the period stated above for the products listed on "Attachment A." . . . You have 30 days from the receipt of this letter to submit the requested information. . . . The "products" listed on "Attachment A" did not include "every single drug Petitioner had billed to Medicaid. Only the 50 "highest paid" drugs were listed on "Attachment A." Mr. Taylor responded to Ms. Holland's letter by providing her with, on May 13, 1999, a three-inch stack of documents reflecting transactions between Petitioner and "quite a few different [drug] wholesalers." Ms. Holland attempted (successfully in some instances and unsuccessfully in others) to contact wholesalers whose names appeared on the documentation provided by Mr. Taylor to obtain from them documentation regarding their transactions with Petitioner. After analyzing the documentation with which she had been provided by Petitioner and by the drug wholesalers she had been able to contact, and examining AHCA's records of the claims filed by Petitioner during the Audit Period, Ms. Holland determined that there was insufficient documentation to demonstrate that, during the Audit Period, Petitioner had available sufficient inventory to support $4,248,262.37 of its billings to the Medicaid program. By letter dated July 28, 1999, Ms. Holland advised Mr. Taylor of this "provisional finding." The letter read, in part, as follows: Medicaid Program Integrity has reviewed your paid Medicaid claims with dates of service from September 10, 1997, through August 31, 1998. We have also reviewed your product purchase/acquisition documentation received on May 13, 1999. Some of the purchase/acquisition documents that you furnished could not be substantiated by the distributor/wholesaler and were therefore not included in the review. You have failed to provide adequate documentation to the effect that the available quantity of certain drugs of given strength was as great as the quantity of those drugs billed to and reimbursed by Medicaid. Based on this review, we have made a provisional determination that you were overpaid $4,248,262.37 for claims that in whole or in part are not covered by Medicaid. The amount due for the overpayment is $4,248,262.37. This is, however, a provisional finding and we encourage you to submit any additional information or documentation that you may have that you feel may serve to change the overpayment. * * * Based on the above, we have reason to believe that you have been overpaid by the Medicaid program. The overpayment identified in the summary sheet attachment is with regard only to the 45 drugs listed and comprehends only the period audited, namely September 10, 1997, through August 31, 1998. A printout identifying all relevant claims involved in the overpayment and a copy of the drug purchase/acquisitions are attached. The overpayment calculation is based upon the assumption that all stock demonstrated as available during the audit period was exclusively dispensed to Medicaid recipients; this is undoubtedly not the case and the assumption serves to reduce the amount of the overpayment. Medicaid payments that have been substantiated by documented inventory are assumed to be valid; and payments in excess of that amount are regarded to be invalid. Accordingly, as shown in the summary sheet attachment, we have determined at this time that you have been overpaid by the Medicaid program in the amount of $4,248,262.37. If additional overpayments are found subsequently, you will be notified. * * * If you have any additional invoices or other relevant documentation that you wish to submit that you feel would alter these findings, please submit your written explanation and legible copies of the documentation to us immediately. . . . If you have not submitted documentation or made payment within 30 days, we will send you notice regarding the agency's final determination, taking into consideration any information or documentation that you submit within this time period. On August 16, 1999, Mr. Diamond, on behalf of Petitioner, telephonically requested a 21-day extension of time to submit additional documentation for Ms. Holland's consideration. By letter dated August 17, 1999, Ms. Holland advised Mr. Diamond that the requested extension of time had been granted. Mr. Diamond, on behalf of Petitioner, on September 14, 1999, provided Ms. Holland with an "additional package of documentation." Ms. Holland reviewed these documents. "Most everything in this package was a duplicate" of documents that Ms. Holland had already been provided by Mr. Taylor. The following day, Ms. Holland, by facsimile transmission, requested Mr. Diamond to provide her with cancelled checks evidencing Petitioner's payment of eight, specified invoices included in the "additional package of documentation" she had received from Mr. Diamond. Mr. Diamond provided Ms. Holland with five cancelled checks on October 8, 1999. Ms. Holland determined, in light of the additional documentation she had received following her "provisional finding" that Petitioner had been overpaid $4,248,262.37 by the Medicaid program, that the amount of that overpayment should be reduced by $764.67. She advised Mr. Taylor of this "final agency audit" determination, by letter dated October 27, 1999, which read, in part, as follows: Medicaid Program Integrity has completed a review of your paid Medicaid claims with dates of service from September 10, 1997, through August 31, 1998. We have also reviewed your product purchase/acquisition documentation received on May 13, 1999, September 14, 1999, and October 8, 1999. You have failed to provide adequate documentation to the effect that the available quantity of certain drugs of given strength was as great as the quantity of those drugs billed to and reimbursed by Medicaid. You are hereby notified that Okan, Inc. d/b/a Choice Pharmacy was overpaid $4,247,497.70 for claims that in whole or in part are not covered by Medicaid. The total amount due for the overpayment is $4,247,497.70. The above action and your right or appeal are discussed below. * * * We have required that you submit invoices from your suppliers to substantiate the availability of drugs that you billed to Medicaid. You have not fully substantiated such availability. Section 409.913(10), F.S., states in part that the Agency may require repayment for inappropriate, medically unnecessary, or excessive goods or services. Section 409.913(14)(n), F.S., states that "The agency may seek any remedy provided by law, including but not limited to, the remedies provided in subsection (12) and (15) and s. 812.035, if: * * * (n) The provider fails to demonstrate that it had available during a specific audit or review period sufficient quantities of goods, or sufficient time in the case of services, to support the provider's billings to the Medicaid program." Billing Medicaid for drugs that have not been demonstrated as available for dispensing is a violation of Medicaid laws and regulations and has resulted in the finding that you been overpaid by the Medicaid program. The overpayment identified in the summary sheet attachment is with regard only to the 45 drugs listed and comprehends only the period audited, namely September 10, 1997, through August 31, 1998. A printout identifying all relevant claims involved in the overpayment and a copy of the drug purchase/acquisition review are attached. The overpayment calculation is based upon the assumption that all stock demonstrated as available during the audit period was exclusively dispensed to Medicaid recipients; this is undoubtedly not the case and the assumption serves to reduce the amount of the calculated overpayment. All Medicaid payments sufficient to cover documented inventory have been assumed to be valid, and payments in excess of that amount are regarded to be invalid. Accordingly, as shown in the summary sheet attachment, we have determined at this time that you have been overpaid by the Medicaid program in the amount of $4,247,497.70. If additional overpayments are found subsequently, you will be notified. * * * If you accept or concur with these finding, please send your check in the amount of $4,247,497.70, made payable to the Florida Agency for Health Care Administration, to: . . . . You have the right to request a formal or informal hearing pursuant to section 120.569, F.S. . . . [I]f a request for a hearing is made, the request or petition must be received within twenty-one (21) days of receipt of this letter. Failure to timely request a hearing shall be deemed a waiver of your right to a hearing. . . . Mr. Diamond, on behalf of Petitioner, filed with AHCA a Petition for Formal Hearing on December 7, 1999. The Petition for Formal Hearing was accompanied by 50 "invoices" purporting to reflect sales of prescription drugs (totaling approximately $4 million dollars) made by IV Pharmaceutical Wholesalers, Inc., to Choice Pharmacy during the Audit Period, as well as the following cover letter from Mr. Diamond to Ms. Holland: Consistent with our prior discussions regarding our above referenced client, you will find enclosed the final documentation from [IV] Pharmaceutical Wholesalers, Inc. As I indicated in our prior discussions it would appear at this time that our independent audit has concluded. Our accounting reveals, based on all invoices provided, our above referenced client has correctly accounted for all medications billed through Medicaid. I also enclose consistent with our prior discussion a copy of our request for a formal hearing in the event that you are not in agreement with our conclusions. In the event that you are satisfied with the conclusions, please advise Mr. John A. Owens, Chief, Medicaid Program Integrity, that we will withdraw our request for formal hearing. Prior to the submission of these "invoices," AHCA had not received any information (in the form of documentation or otherwise) indicating that Petitioner had purchased or otherwise acquired drugs from IV Pharmaceutical Wholesalers, Inc. Ms. Holland examined the "invoices." "They did not look like forms [she had] seen from this wholesaler before, and . . . after years of looking at invoices they just appeared not right" to her. On January 28, 2000, Ms. Holland sent the following letter to Mr. Diamond: Thank you for the documents received on December 7, 1999. As they were received after the Final Agency Action, the Agency will consider them as possible evidence for trial or hearing. Once the hearing date and discovery schedule are set, we will propound interrogatories and take depositions in conjunction with these documents. If you have any question, please contact Mr. L. William Porter, II, senior attorney . . . . Ms. Holland's suspicions regarding the genuineness of the IV Pharmaceutical Wholesalers, Inc., "invoices" submitted by Petitioner were correct. Petitioner had never purchased or otherwise acquired any drugs from IV Pharmaceutical Wholesalers, Inc. The "invoices" were fabricated. They were created by Mr. Pinkoff, for a fee ($800,000.18, which he was paid, in two installments, in November of 1999), at the request of Mr. Taylor and a Betty Bills. 13/ Mr. Pinkoff was told that the "invoices" were needed for an audit to "substantiate the purchases of [certain] product[s]." 14/ Mr. Pinkoff was subsequently charged with criminal wrongdoing for his participation in this fraudulent scheme and "voluntarily surrendered" to the authorities. 15/ The charges were filed after Mr. Pinkoff's place of business had been searched by law enforcement authorities on December 1, 1999, pursuant to a search warrant obtained by the Florida Attorney General's Medicaid Fraud Control Unit, which was conducting a criminal investigation of another matter unrelated to Choice Pharmacy. 16/ The computer that Mr. Pinkoff used to create the falsified "invoices" for Petitioner was seized during the search. Mr. Pinkoff entered into a Plea Agreement with the State of Florida in his criminal case. The Plea Agreement was filed in Leon County Circuit Court (Case No. 2000-4310) on November 8, 2000. Section II of the Plea Agreement contained the "Factual Predicate for this Plea Agreement." It provided as follows: The Defendant and the State agree that the following is the factual basis for the entry of plea in this matter, (hereafter "SUBJECT MATTER"): In June of 1999, the Defendant was approached by Louis A. Petrillo ("Petrillo"),[17/] who told the Defendant that Choice Pharmacy (Okan, Inc. d/b/a Choice Pharmacy ("Choice") and "Betty," an owner, needed certain invoices. Specifically, Choice and Betty needed to demonstrate that Choice had purchased a number of prescription drugs with a value of $4,000,000 dollars dating back to the period of 1997 through 1998. Choice was owned and operated by Raufu ("Ralph") Taylor and Betty (Last Name Unknown). The Defendant owned a 1/2 interest in IV Pharmaceuticals, Inc., a Florida corporation that was a licensed prescription drug wholesale company. IV Pharmaceuticals had not sold any prescription drugs to Choice in 1997 or at any other time. Petrillo knew this fact but asked the Defendant if he could produce invoices for a specific list of drugs; the understanding was that the invoices would be false. The Defendant told Petrillo, Betty and Ralph that he could create or otherwise produce invoices from IV Pharmaceutical[s] to give to Choice for prescription drugs that IV Pharmaceutical[s], Inc. had previously purchased from manufacturers or other licensed wholesalers. This was necessary in case IV Pharmaceutical[s] was asked to produce its records to substantiate the invoices from IV Pharmaceutical[s] to Choice. All of the drugs Betty and Ralph requested invoices for were oncology or HIV prescription drugs, largely Neup[o]g[e]n and Procrit. IV Pharmaceutical[s] had invoices to substantiate its own purchases of those drugs. A meeting was arranged by Petrillo. In attendance were the Defendant, Petrillo, Betty, and Ralph. After making introductions, Petrillo left the meeting.[18/] Before leaving, Petrillo told the Defendant that it was up to him whether or not to create the invoices. The Defendant discussed with Betty and Ralph what specific prescription drug invoices were required. Betty and Ralph provided the Defendant with a list of drugs, including dates of purchase and quantities. The Defendant believed that the invoices were to be used for some unlawful purpose, presumably involving AHCA, since the Defendant was familiar with the AHCA audit process and knew that AHCA required such invoices when conducting an audit. Betty and Ralph told the Defendant that the invoices were needed for drugs they had actually purchased but had no invoices for. The Defendant had at least one conversation with Petrillo related to the production following the meeting. Six months after the meeting, the Defendant drafted invoices under the IV Parmaceutical[s] name based upon the list provided by Betty and Ralph. The Defendant gave the invoices to Petrillo to give to Betty and Ralph. Each false invoice produced by Defendant was submitted to AHCA. The foregoing assertions of fact made in this section of the Plea Agreement are true and accurate. Section III of the Plea Agreement indicated that Pinkoff understood that "pursuant to this plea agreement his minimum potential exposure under the Sentencing Guidelines [was] 55.5 months of imprisonment" and "[h]is maximum potential exposure under the Sentencing Guidelines [was] the statutory maximum of thirty-five years in State Prison and a $25,000.00 fine." Section IV of the Plea Agreement set forth the "Defendant's Obligations." It read as follows: The Defendant agrees to plead Guilty to the following charges contained in the information filed in the above-styled criminal case: one count of "Racketeering activity" in violation of Florida Statutes, Section 895.03(3), a first degree felony; and one count of Medicaid Provider Fraud in violation of Florida Statutes, Section 409.920(2)(a), a third degree felony. The Defendant agrees to make himself accessible upon notice to receive and testify truthfully pursuant to any subpoena lawfully issued compelling such testimony pursuant to §914.04, Florida Statutes, However, by this AGREEMENT Defendant does not and shall not waive his Fifth Amendment privilege as to any statement or testimony except and only as to the specific facts set forth as the SUBJECT MATTER of this AGREEMENT; Defendant shall maintain his Fifth Amendment rights as to all other allegations of facts, including those facts related to the charges alleged in the Information not included in the factual predicate herein. The Defendant understands that if lawfully compelled to provide testimony, any perjury committed by him would constitute a violation of the ordinary terms and conditions of Defendant's community control and probation even if related to the charges alleged in the Information. Section V of the Pleas Agreement contained the "sentence the State will recommend," which was as follows: Seven (7) years of probation with the following special conditions: Defendant with will serve 24 months of community control under the terms and conditions set by the Department of Corrections. . . . Defendant shall pay a total of $3,475,000 to the State of Florida as compensation to the State of Florida for its losses, both known and unknown. Such reimbursement shall not be deemed or otherwise construed as a fine or similar penalty. . . . At the entry of this plea, Defendant agrees to provide the State of Florida with sufficient security to guarantee the payment of one million dollars ($1,000,000.00). This security shall be in the form of two Notes secured by two mortgages to be held by the State of two properties. The first property is located at 5721 Oakview Terrace, Hollywood, Florida. The Note on this property shall be in the amount of $400,000.00. The second property secured by a Note is located at 6001 North Ocean Drive, PHS, Hollywood, Florida [and the note on this property] shall be in the amount of $600,000.00.[19/] . . . Defendant shall pay a fine in the amount of $25,000.00 which is the Statutory maximum; Defendant shall be Adjudicated Guilty on all counts; Defendant shall be precluded from working or having a business interest in or receiving remuneration or payment of any kind from any health care related facility that receives any funds or participates in any way with the Medicare and/or Medicaid programs under Titles XVIII and XIX of the United States Code. However, this does not preclude the Defendant from receiving proceeds from the divestment of his interests or assets through the sale or transfer of said assets or interest to an entity that receives any funds or participates in any way with the Medicare and/or Medicaid programs of the United States. Defendant shall pay court costs; The monetary obligation under the AGREEMENT shall be paid over the course of probation and community control. However, the STATE and the Defendant agree that there is a value to the STATE in terms of economics and deterrence to receive swift and complete payment and the commitment of the Defendant to attempt to do so reflects his willingness to accept responsibility for his acts. Therefore, in the event that the Defendant pays $3,000,000.00 within 15 months of sentencing and has satisfied all other terms and conditions of community control and probation, the State agrees to the following: the community control portion of the defendant's sentence shall be reduced to 15 months; the term of probation shall be reduced to five (5) years; The STATE agrees to return to court for an Order reducing the total obligation by $500,000.00. Thus, the Defendant's total obligation under this Agreement would become Three Million dollars ($3,000,000.00). . . . The State has no objection to the entry of any Order by the court to permit travel outside of the United States for business purposes upon at least 2 weeks notice to the probation department and the permission of the defendant's probation officer. The Defendant understands that he may not travel outside the United States during the course of the community control portion of his sentence. Section VI was entitled "Withdrawal of Guilty Plea and Vacation of Sentence." It read as follows: In the event that the State files additional charges against the Defendant for matters currently under investigation, but not charged in the Information described in this AGREEMENT, the Defendant shall have the right and full entitlement to vacate the sentence imposed pursuant to this AGREEMENT and to withdraw his plea of guilty. The only condition to the Defendant's right and entitlement to vacate (as just described) shall be that the Defendant must not have breached this AGREEMENT prior to the additional charges being filed. If the Defendant does vacate and withdraw, all monies paid pursuant to this AGREEMENT shall be returned to the Defendant. The Plea Agreement also contained a "Waiver of Rights," which provided, in pertinent part, as follows: My entering into the AGREEMENT is not the result of force, threats, assurances or promises other than the promises contained in the attached agreement. I agree to the provision of this agreement as a voluntary act on my part, rather than at the discretion of or because of the recommendation of any other person, and I agree to be bound by its provisions. I agree that this written plea agreement contains all the terms and conditions of my plea and that promises made by anyone that are not contained within this written agreement are without force and effect and are null and void. . . . The Plea Agreement was signed by Mr. Pinkoff (on September 26, 2001), his attorneys (on September 26, 2001 and November 8, 2000), and the Special Counsel of Health Care Fraud Prosecution (on September 26, 2000). Mr. Pinkoff is currently under "house arrest" at his residence (which he owns) located at 5721 Oakview Terrace in Hollywood, Florida; however, he is allowed to leave his home to work at his office (which is also located in Florida). Mr. Pinkoff is still in the "pharmaceutical wholesaling" business. His business is licensed "out of Georgia." Mr. Pinkoff has paid approximately $200,000.00 of the amount that he owes the State of Florida pursuant to the terms of his Plea Agreement. He sold the 6001 North Ocean Drive property referenced in the Plea Agreement for $1.2 million. The state received approximately $192,000.00 of the proceeds from the sale Mr. Pinkoff is presently paying the state $1,000.00 a month.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that AHCA enter a final order finding that Petitioner received $4,247,497.70 in Medicaid overpayments for claims covering the period from September 10, 1997, through August 31, 1998, and requiring Petitioner to repay this amount to AHCA. DONE AND ENTERED this 3rd day of October, 2002, in Tallahassee, Leon County, Florida. STUART M. LERNER 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 3rd day of October, 2002.
Findings Of Fact Petitioner, Westchester General Hospital (WGH), is an osteopathic hospital located at 2500 S.W. 75th Avenue, Miami, Florida. It holds a license from respondent, Department of Health and Rehabilitative Services (HRS), and serves in an area of Dade County settled mostly by Cuban Refugees. On March 5, 1973, a participation agreement was executed by WGH and HRS wherein WGH agreed to provide certain hospital services to Medicaid patients in return for payment of reasonable costs incurred by such patients. Under that agreement, reimbursement was made on the basis of an interim payment plan in the form of a per diem cost rate. These rates were established by HRS based upon cost reports submitted by WGH. For the years 1979 and 1980, which are the pertinent years in this controversy, the Medicaid per diem reimbursement rates for WGH were as follows: 1-1-79 through 5-20-79 $175.71 per day 5-21-79 through 5-15-80 $166.55 per day 5-16-80 through 12-31-80 $203.52 per day In 1979 and 1980, a large number of Cuban refugees settled in the Dade County area and WGH provided Medicaid services to these refugees under its participation agreement. By virtue of a special ace of Congress, the refugees were also eligible for Medicare Part B coverage which paid various hospital charges, including radiology, laboratory, EKG, EEG and nuclear medicine. Consequently, the patients were eligible for both Medicaid and Medicare, and WGH received reimbursement under both programs for the same patients. The hospital's problems began when it first received preliminary or interim payments from the Federal government based upon charges for providing Medicare services to these indigents. Because charges are generally higher than costs in a hospital setting, the payments were later adjusted downward by the government at year-end when WGH's Medicare cost report was prepared. Nonetheless, under the then effective Rule 10C-7.36, Florida Administrative Code, WGH was required to submit its Medicaid claims for payment within forty- five days after services were rendered or the patient discharged. Therefore, WGH submitted its requests for payment to HRS before the true-up at year-end was performed by the Federal government. These claims reflected that WGH had been reimbursed by Medicare at the interim payment level rather than the year-end adjusted amount since the latter amounts were not yet known. As discussed in greater detail hereinafter, the interim payments were used as an offset to the Medicaid payments due from the state. In 1979, after being gently nudged by the Federal government, HRS discovered that a number of patients on the State Medicaid eligibility file also were eligible for Medicare coverage and that Medicare, rather than Medicaid, was responsible for at least a part of their bills. This was determined by comparing the State's Medicaid file with Medicare computer tapes obtained from the Federal government. As a result of this discovery, HRS advised WGH on November 16, 1979, by letter that WGH must bill Medicare for hospital charges incurred by Medicaid patients with Medicare Part B coverage. The letter pointed out that Medicaid is the payer of last resort, and pays only after other third parties, including Medicare, pay their applicable portion of the medical bills. This was consistent with federal regulations which obligated HRS to identify third-party resources of Medicaid recipients, and to seek reimbursement from such third-party resources within 30 days after the end of the month in which it first determined a third party was responsible for the claim. Had it not pursued these third party resources, HRS risked the loss of federal funds. However, the same regulations also required HRS to "take reasonable measures to determine the legal liability of third parties to pay for services under the plan." Other than relying upon the interim payment amounts reflected on WGH's Medicaid claims, HRS made no effort to determine the actual legal liability of Medicare. Indeed, it was not until after May, 1980 that HRS had the capability to take reasonable measures to determine a third party's liability. On that date, it formed, at the insistence of the Federal government, a special "unit" for that specific purpose. Prior to that time, it was unable to comply with Federal regulations. In compliance with the letter, WGH reflected the interim Medicare payments on its Medicaid payment claims filed with HRS. However, to its consternation, it later learned that HRS did not take into account the interim nature of the payments, and used those amounts vis a vis adjusted amounts to calculate the amount of WGH's Medicaid reimbursement. The net result was the filing of Medicaid payment claims by WGH in 1979 and 1980 which reflected Medicare reimbursement at a much higher level than it actually received after year-end adjustments were made, and a concomitant reduction in Medicaid receipts from the State. WGH recognized its dilemma in early 1981. Accordingly, on March 10, 1981, its treasurer wrote HRS's Medicaid Third Party Reimbursement Manager complaining that it had been under-reimbursed for Medicaid patients with Medicare Part B Coverage for periods beginning in 1978. He stated that the ancillary services covered by Medicare Part B were reimbursable only at 80 percent cost, and resulted in a substantial amount of the reimbursement being refunded back to the Federal program. This in turn had caused a shortfall on the hospital's part, and payment less than its Medicaid per diem rate. It accordingly requested that Medicaid return the funds necessary to bring its "reimbursement back to the level not less than the established Medicaid per diem rate of the given period." The request was authorized by Rule 10C-7.36(3), Florida Administrative Code, which allowed providers such as WGH to demonstrate "undue hardships" on the part of the provider if it submitted its Medicaid claim for payment in accordance with the forty-five day time schedule prescribed by rule, and by Florida law which authorized HRS to "make appropriate settlements" in determining third party liability in the Medicaid program. HRS did not respond to this letter. Although it did not respond to WGH's request, HRS was nevertheless fully aware of the problem by that time for it already had rule amendments in the mill which would cure the problem. Effective March 18, 1981, HRS amended its Rule 10C-7.36 to provide that providers who had claims that were crossed over to Medicaid from Medicare due to recipient eligibility in both programs were relieved from the time constraints for filing claims imposed by the rule. But because the rule operated on a prospective basis only, it did not apply to the 1979 and 1980 fiscal years. The parties have stipulated that if WGH owes HRS for excess Medicaid funds paid to WGH during January 1, 1978 through June 30, 1981, the proper amount is $4,779.90. In support of its claim against HRS, WGH produced worksheets reflecting under-reimbursement from HRS in the amounts of $41,905 and $100,542 for fiscal years 1979 and 1980, respectively, under the Medicaid program. They are derived from a log prepared by Blue Cross, the fiscal intermediary retained by HRS to conduct audits on Medicaid providers in the state. The deficiencies were caused by HRS applying full credit to the interim payments that WGH received from Medicare even though a portion of the same were subsequently returned to Medicare by WGH after the year-end audit was completed. In preparing the revenue deficiencies, WGH applied a cost-to-charge ratio which was based on the average of the five ancillary services included under Medicare Part B rather than reviewing each patient's actual billing records to determine the percentage of patients receiving a particular ancillary service. However, it was impossible to perform the latter analysis in 1979 since a "combination method" was used for the various cost centers, and the principle of consistency required that the 1980 log be prepared in the same manner as 1979.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Health and Rehabilitative Services repay Westchester General Hospital $142,447 less $4,779.90 by virtue of it having been under-reimbursed under the Medicaid program for fiscal years 1979 and 1980. DONE and ORDERED this 28th day of September, 1984, in Tallahassee, Florida. DONALD R. ALEXANDER Hearing Officer Division of Administrative Hearings 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 28th day of September, 1984.
The Issue The issue for determination is whether Petitioner must reimburse Respondent an amount up to $1,676,390.45, which sum Petitioner received from the Florida Medicaid Program in payment of claims arising from Petitioner's dispensing of pharmaceuticals between July 3, 2000 and March 28, 2002. Respondent alleges that the amount in controversy represents an overpayment related to Petitioner's failure to demonstrate the availability of sufficient quantities of drugs to support its billings to the Medicaid program.
Findings Of Fact Respondent Agency for Health Care Administration ("AHCA" or the "Agency") is the state agency responsible for administering the Florida Medicaid Program ("Medicaid"). Petitioner Disney Medical Equipment, Inc., d/b/a Disney Pharmacy Discount ("Disney Pharmacy"), was, at all relevant times, a Medicaid provider authorized, pursuant to contracts it had entered into with the Agency known as Provider Agreements, to receive reimbursement for covered services rendered to Medicaid beneficiaries. Exercising its statutory authority to oversee the integrity of Medicaid, the Agency directed its agent, Heritage Information Systems, Inc. ("Heritage"), to conduct an audit of Disney Pharmacy's records to verify that claims paid by Medicaid during the period from July 3, 2000 to March 28, 2002 (the "Audit Period") had not exceeded authorized amounts. Over the course of four days in May 2002, three of Heritage's auditors reviewed records on-site at Disney Pharmacy's drugstore in Hialeah, Florida; they also interviewed some of the store's personnel. Thereafter, Heritage analyzed the data it had collected using several different approaches. Each approach pointed to the conclusion that Medicaid had paid too much on claims submitted by Disney Pharmacy during the Audit Period. The total amount of the alleged overpayment differed substantially, however, depending on the analytical approach taken. The approach that yielded the largest apparent overpayment was the "prorated purchase invoice" analysis. Generally speaking, under this approach, the volume of pharmaceuticals that the provider maintained in its inventory during the Audit Period is compared to the provider's contemporaneous Medicaid claims to determine whether the provider possessed enough of the relevant pharmaceuticals to support the Medicaid claims presented. If the total amount purportedly dispensed, according to the claims made in connection with a particular drug, exceeds the amount of that drug available at the time for dispensing, then an inference of impropriety arises with regard to those claims for which product was apparently unavailable; the Agency considers amounts paid on such claims to be overpayments. To determine the quantities of certain drugs that Disney Pharmacy had kept on hand during the Audit Period, Heritage tallied up the total number of "units" of selected drugs that Disney Pharmacy had acquired, using as a database the invoices reflecting Disney Pharmacy's purchases of the drugs under review. Heritage then ascertained——again using Disney Pharmacy's records——the utilization rate of Medicaid beneficiaries for each of the pharmaceuticals under consideration. In other words, Heritage determined, for each drug at issue, the relative demand——expressed as a percentage of the total number of units of that drug dispensed to all customers during the Audit Period——attributable to Medicaid beneficiaries. Heritage found, for example, that Medicaid recipients accounted for 55.13% of Disney Pharmacy's total sales of the drug Acetylcysteine-10% solution ("Acetylcysteine") during the Audit Period. Having calculated the total amount of each drug at issue that Disney Pharmacy had acquired during the Audit Period, and having further determined for each such drug the Medicaid utilization rate, Heritage multiplied the total number of available units of each drug by the applicable utilization rate, prorating the entire supply of each drug to reflect the approximate number of units available for dispensing to Medicaid recipients specifically. For example, Disney Pharmacy's records showed that it had purchased a total of 121,440 units of Acetylcysteine during the Audit Period. Disney Pharmacy's records showed, additionally, that this drug was dispensed to Medicaid beneficiaries 55.13% of the time. Thus, the prorated quantity of Acetylcysteine available for Medicaid recipients was approximately 66,950 units (121,440 x 0.5513). The prorated number of available units of each subject drug was compared to the total number of units for which Medicaid had reimbursed Disney Pharmacy during the Audit Period. For Acetylcysteine, these figures were 66,950 and 1,076,070, respectively. If the total number of units for which Medicaid had paid on claims for a particular drug were found to exceed the amount of that drug which Disney Pharmacy apparently had on hand——as it did for Acetylcysteine——then the inventory shortfall——1,009,120 units in the case of Acetylcysteine——was multiplied by the drug's average per-unit cost to Medicaid, producing a drug-specific apparent overcharge. Thus, for example, because the average cost of Acetylcysteine was $0.65 per unit, the apparent overcharge with respect to this drug was $655,928.00. Using the foregoing approach, Heritage identified apparent overcharges in connection with 13 drugs. The sum of these drug-specific overcharges is $1,676,390.45. Two drugs—— Acetylcysteine and Ipratropium Solution ("Ipratropium")——account for nearly 93% of this grand total. Two other drugs——Albuterol- 0.83% ("Albuterol") and Metaproterenol-0.4% ("Metaproterenol")—— account for another 7.0% of the total alleged overcharge. These four drugs——whose individual overcharges, taken together, comprise approximately 99.8% of the total alleged overcharge of $1,676,390.45——are used for treating breathing disorders and typically are inhaled by the patients who use them.i There is no genuine dispute regarding the reason why Disney Pharmacy was unable to document its acquisition of Acetylcysteine, Ipratropium, Albuterol, and Metaproterenol (collectively the "Inhalation Therapy Drugs") in quantities sufficient to support its claims to Medicaid for these pharmaceuticals. During the Audit Period, Disney Pharmacy generally filled prescriptions for the Inhalation Therapy Drugs by "compounding" the prescribed medications. (Compounding is a process whereby the pharmacist mixes or combines ingredients to fashion a tailor-made medication for the patient.) Thus, Disney Pharmacy (for the most part) did not purchase the commercially available versions of the Inhalation Therapy Drugs; rather, it created its own "generic copies" of these medications, purchasing only the raw materials needed to make finished products. Medicaid reimburses for compound drugs under certain conditions, which will be spelled out below. But first: it is undisputed that Disney Pharmacy did not submit claims for compound drugs. Instead, in presenting claims to Medicaid for the Inhalation Therapy Drugs, Disney Pharmacy billed the medications under their respective National Drug Code ("NDC") numbers, as though commercially manufactured drug products had been dispensed. (An NDC is an 11-digit number, unique to each commercially available pharmaceutical, which identifies the manufacturer, product, and package size.) As a result, Medicaid paid Disney Pharmacy for mass produced products when, in fact, the pharmacy actually had dispensed its own homemade copies thereof. According to the Prescribed Drug Coverage, Limitations and Reimbursement Handbook ("Medicaid Handbook"), which authoritatively sets forth the terms and conditions under which Medicaid reimburses providers for dispensing pharmaceuticals, Medicaid may pay for a compound drug if the following criteria are met: At least one pharmaceutical is a reimbursable legend drug; The finished product is not otherwise commercially available; and The finished product is being prepared to treat a specific recipient's condition. Medicaid Handbook at 9-16.ii To present a claim for a compound drug, the provider must adhere to the following instructions: Compound drug codes must be submitted on paper Pharmacy 061 claim forms, because they are reviewed and manually priced by Medicaid. When billing for a compound drug, enter one of the following compound drug codes. More than one code is available so that more than one compound can be dispensed to a recipient on the same day without using the same number. Id. 55555-5555-55 66666-6666-66 77777-7777-77 88888-8888-88 Disney Pharmacy attempts to defend its failure to follow the unambiguous instructions for billing compound drugs by explaining that, before commencing the practice of compounding, the provider's owner, Sara Padron, made a telephone call to AHCA to ask for guidance on submitting claims for drugs created on-site. Ms. Padron testified at hearing that the AHCA employee with whom she spoke had told her to present claims for compound drugs by billing for the manufactured products that they most resembled, using the manufactured products' NDC numbers. Ms. Padron could not identify the person who purportedly gave her this plainly incorrect advice. Ms. Padron's testimony in this regard was not contradicted——although in fairness to the Agency hers was the kind of testimony that resists direct evidential challenge, forcing an opponent to stress the implausibility of the claim as a means of discrediting it. Ms. Padron's account cannot simply be dismissed as incredible, for an AHCA employee undoubtedly could give an incorrect answer to a provider's question. But even assuming that Ms. Padron reached a person whom one reasonably could suppose to be knowledgeable about Medicaid billing procedures, and further assuming Ms. Padron asked a clear question which fairly and accurately described the situation, neither of which was proved or should be taken for granted, the undersigned remains skeptical that Ms. Padron was instructed to bill for compound drugs as if billing for their commercially available counterparts: the advice is just too obviously wrong. It is not necessary, however, to accept or reject Ms. Padron's testimony concerning the "official" answer she says she received because even if Ms. Padron were told to bill for compound drugs as though manufactured products had been dispensed, no reasonable provider could have relied upon such a dubious oral representation. The statement, for starters, is an invitation to commit fraud. Common sense should inform any reasonable provider that a claim for something other than what was actually delivered will, if discovered, almost certainly be viewed as deceptive (or worse) by the payor. Additionally, the alleged statement attributed to AHCA's employee contradicts the plain instructions in the Medicaid Handbook on that very subject. No provider can reasonably rely upon verbal advice, given anonymously (or functionally so, since the advisor's name, if given, was evidently easily forgotten) over the telephone, which contravenes the clear language of the Medicaid Handbook. Disney Pharmacy's other defenses are likewise unpersuasive. Disney Pharmacy maintains that compounding the drugs in question substantially benefited the patients who received them, which is probably true——but certainly beside the point. The problem here is not with the practice of compounding per se; the problem is that Disney Pharmacy sought and received reimbursement from Medicaid for mass produced, commercially available drugs that had not actually been dispensed. For the same reason, it is irrelevant, even if likely true, that the Board of Pharmacy, which periodically inspects Disney Pharmacy, never objected to the compounding that was occurring at the premises. Again, to be clear, the problem is not that the compounding was improper, but that the Medicaid billing was improper.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency enter a final order requiring Disney Pharmacy to repay the Agency the principal amount of $1,676,390.45. DONE AND ENTERED this 11th day of April, 2006, in Tallahassee, Leon County, Florida. S JOHN G. VAN LANINGHAM Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 11th day of April, 2006.
Findings Of Fact The Parties The Petitioner is the state agency that administers the Florida Medicaid program, which includes pharmacies that participate in the program. The Petitioner's Office of Program Integrity is responsible for insuring that the goods and services billed to the Medicaid program are those that are actually provided to Medicaid recipients. Medicaid is a joint program, funded by the federal government and by the State of Florida, and is administered pursuant to both state and federal statutes and rules. All services or goods billed to the program must be necessary, Medicaid compensable, and must also have actually been provided to eligible recipients by providers prior to submitting claims. Any payment made by the Medicaid program for goods or services not actually provided to an eligible recipient is subject to recoupment by the Petitioner, and the provider is also subject to the imposition of administrative fines and exclusion from the program for a specified period of time. The Respondent is a community pharmacy located in a hispanic section of Miami, Florida, which has been owned and operated for the past six years by Frances Larin, a licensed pharmacist, who makes all drug purchases and does all Medicaid billings at the pharmacy herself. Most of Respondent's customers have limited financial resources and are Medicaid recipients. The Respondent has participated in the Medicaid program for approximately eight years, and has not previously been charged with overbilling the Medicaid program. The Respondent has cooperated fully with the Petitioner throughout these proceedings. Prior Review From February to April 1988, the Petitioner's Office of Program Integrity had a review performed of the Respondent's billings to Medicaid from March 1, 1987 to December 31, 1987. This review was conducted for the Petitioner by the Foundation for Health Care, Inc. (Foundation), contract auditors, and resulted in the determination that the Respondent had overbilled the Medicaid program for prescription drugs dispensed to program recipients during the review period. In performing this review, the Foundation used an across-the-board Medicaid percentage of 54% in determining the available units of the various drugs on hand for dispensing to Medicaid recipients. Based upon the Foundation's review, the Petitioner sought recoupment for overpayments in the amount of $28,649.99 by letter to the Respondent dated July 20, 1988, as well as an administrative fine of $7,162.49, and a three month suspension from the program. The Respondent timely sought a formal administrative hearing in which it disputed the results of the Foundation review. However, after the matter was referred to the Division of Administrative Hearings, the Petitioner withdrew its notice of overpayment and imposition of administrative sanctions, and thus, without a determination on the merits, the Division of Administrative Hearings file was closed and jurisdiction was relinquished to the Petitioner. Subsequently, the Petitioner entered a Final Order which provided that the Respondent would be re-audited. The Respondent timely sought judicial review of this Final Order in which it challenged that Petitioner's right to conduct a further review of the period March 1, 1987 to December 31, 1987. However, the District Court of Appeal of Florida, Third District, dismissed the Respondent's appeal, and the Petitioner proceeded with a further review. The KPMG Review (a) For purposes of its further review, the Petitioner employed the public accounting and management consulting firm of KPMG Peat Marwick which designed a statistically valid sampling methodology to determine the Respondent's Medicaid percentage for each drug, and also to perform a management review of the Respondent. It was established by competent substantial evidence in the record, and in particular by the expert testimony in statistics from Dr. Robert Ladner and Robert Peirce, that the KPMG methodology was statistically valid. The KPMG review was conducted during the latter half of 1989, and included developing a Medicaid percentage for individual drugs based upon an analysis of prescriptions for all drugs in question to determine the portion of each drug's total sales that went to Medicaid recipients, calculating the total units claimed for each drug for which the Respondent sought reimbursement during the audit period, and calculating the total units purchased by the Respondent for each drug claimed for reimbursement during the audit period. The Medicaid percentage of each drug was then applied to total purchases for each specific drug to determine the amount of each drug that was on hand at the Respondent's pharmacy for dispensing to Medicaid recipients. This number of available units was then compared with the total units claimed for reimbursement. Where the units claimed exceeded the units available for dispensing, a positive variance was noted, and this number of excess units claimed was then multiplied by the per unit reimbursement amount for that particular drug in order to obtain the amount of the apparent overbilling for that particular drug. Where the total units available for dispensing exceeded the total units claimed for a particular drug, a negative variance was noted. It was stipulated by the parties that negative variances did not indicate underpayments, and the evidence, including specifically the testimony and report of Dr. Victor Pestien, an expert in statistics, does not establish that such negative variances should be offset against the positive variances or that they in any way reduce the positive variances. This is the first instance in which this methodology has been utilized by the Petitioner in seeking a recoupment of an alleged Medicaid overpayment from a pharmacy, and this methodology was not set forth in any rule or regulation of the Petitioner that had been adopted at any time material hereto. Previous audits used an overall Medicaid percentage to calculate the portion of a pharmacy's business that was comprised of Medicaid recipients, and the quantity of drugs that were available to them. Using a drug specific Medicaid percentage, however, is a more accurate and conservative approach to determining overpayments than using a fixed percentage. Based upon the consideration of all evidence in the record, it is specifically found that the greater weight of evidence establishes that the methodology used by KPMG in this review for calculating Medicaid percentages was sound and reasonable, and in no way precluded the Respondent from presenting additional competent substantial evidence to the Petitioner, or at hearing, which would have established different Medicaid percentages for particular drugs. (a) The type of review conducted by KPMG is known as an aggregate analysis, a generally accepted type of statistical analysis, in which drugs that have been billed to and paid for by the Medicaid program are reviewed to determine whether the pharmacy under review purchased or otherwise acquired a sufficient quantity of drugs to justify its billings to Medicaid. Interchangeable brand-name drugs and generic equivalents were grouped together so that in conducting this review, whole equivalent groups of drugs were considered as one type of drug, regardless of differences in individual product names. To obtain a statistically random sample, prescriptions were put in numerical order and every fourth prescription for the review period was examined, and since prescriptions may be refilled for up to a year after they are originally filled, reviewers also examined every prescription for the year prior to the review period. Competent substantial evidence establishes that KPMG performed an appropriate and valid statistical analysis, and that they used an acceptable sampling methodology which produced a truly random result. The underlying assumption of this analysis is that before a drug can be claimed to have been dispensed and billed to Medicaid, the pharmacy under review must have that drug in its possession. (b) The approach taken by KPMG and the Petitioner was to be as conservative as possible in resolving all uncertainties and questions which arose during the course of this review in favor of the Respondent. KPMG did not conduct a financial audit of the Respondent, but did prepare a management report based upon its review of Respondent's operations during the audit period. Data used by KPMG in its methodology in calculating the amount paid by Medicaid to the Respondent, the unit price of drugs dispensed, and the quantity claimed by Respondent for payment by Medicaid, was derived from computer based information provided by the Petitioner's fiscal agent. During the period of time being reviewed in this case, Electronic Data Systems (EDS) was the Petitioner's fiscal agent, while Consultec was the Petitioner's fiscal agent during the period when the KPMG review was actually being performed. When Consultec was selected as the Petitioner's fiscal agent and replaced EDS on January 1, 1989, EDS turned over its computer records to the new agent by copying all of its magnetic, computer files, along with supporting microfiche documentation, which it then provided to Consultec under the supervision of the Petitioner. Upon receipt of these magnetic tapes, Consultec placed them in a controlled environment vault, and then later converted the information on these tapes to a new format used by Consultec. It was established by competent substantial evidence that in this process, no data was added, deleted or changed in any manner. The "units claimed" data was subsequently provided by computer download from the Consultec claims data base directly to the Petitioner's Office of Program Integrity. It was established by competent substantial evidence that data regarding claims which originated with EDS passed through Consultec to the Petitioner's Office of Program Integrity unchanged. Specific information regarding Respondent, including the claimed quantity of drugs dispensed and amounts paid, was accessed by staff in the Office of Program Integrity, randomly verified, and then made available to KPMG. Both Consultec and EDS are nationally recognized data processing and management companies. Competent substantial evidence established that the claims processing function utilized by the Petitioner in the Medicaid program during the period at issue was subject to several quality control checks to insure that claims were properly processed and appropriate payments were made. On occasion claim adjustments were made, but these were reasonable and for good cause, such as a substantiated underpayment. The computer hardware utilized in this process was reliable and properly maintained. In order to verify the data used by KPMG concerning the dollar amount of claims paid and the quantity of units of medication claimed, an "audit trail" was performed using 140 randomly selected sample claims by tracing each claim from its claim reference number to its associated remittance voucher and cancelled checks, where available. This audit trail verified that the data used as the basis for quantity claimed and total dollars paid was valid and reliable. The KPMG review was not limited to the top 100 drugs, by volume claimed, during the audit period, but included each drug dispensed by the Respondent to Medicaid recipients during the audit period. In its report dated November 20, 1989, KPMG calculated a total Medicaid overpayment to Respondent of $30,452.59, and based thereon, the Petitioner notified the Respondent that it was seeking recoupment of this amount, as well as an administrative fine of $2,000 and termination from the Medicaid program for at least two years. Subsequently, however, the Petitioner and KPMG reviewed and considered additional invoices documenting additional purchases of drugs in question by the Respondent during the audit period, and prepared a revised report dated August 30, 1990. Based upon this revised report, the Petitioner sought recoupment of a revised, reduced overpayment calculated to be $21,939.93, as well as a $2,000 administrative fine and a minimum two year termination from the program, and it was on this basis that this matter proceeded to final hearing. The Top 100 Drugs Subsequent to the final hearing, the Petitioner issued an amended recoupment letter dated October 17, 1990, which limited the recoupment it is seeking in this matter to the top 100 drugs, by dollar volume of claims, plus their generic equivalents. This resulted in the elimination of many individual drugs with relatively small overpayments from the list of overpayments, and left only five instances among these top 100 drugs where the difference between the quantity available, adjusted for standard error, and the quantity claimed is less than 100 units. In many instances the difference is well in excess of 1,000 units. The sanctions being sought in this amended recoupment letter further reduced the recoupment being sought to $12,643.11, reduced the administrative fine to $1,400, and reduced the period of exclusion from the program that is being sought to 16 months. However, due to an error in calculating the top 100 drugs and equivalents, the Petitioner issued a second amended recoupment letter dated October 26, 1990, further reducing the administrative fine sought to $1,200 and reducing the period of exclusion to 14 months. Inventory Analysis In performing its review, KPMG obtained information concerning the quantities of drugs purchased during the review period by the Respondent directly from the pharmacy's wholesalers and from a review of invoices retained by the Respondent for a period that included one month prior to the review period through one month after the review period (February 1, 1987, to January 31, 1988). The effect of seasonal variations in pharmacy sales and ordering patterns was also taken into account, and balanced, by extending this period to a full twelve months. All documentation concerning drug acquisitions was requested from Respondent, and the information received and considered by KPMG and the Petitioner was checked for reasonableness by a consultant pharmacist and cross validated by two reviewers. It was stipulated by the parties that the Respondent's main wholesaler, Gulf Distribution, Inc., had and maintained accurate information and records regarding its sales to the Respondent, and that it properly transferred that information to computer disks which were provided to KPMG. Subsequent thereto, additional invoices were discovered and were also made available to KPMG. The Petitioner stipulated that these additional invoices from Gulf did not reduce the number of drug units purchased by, and invoiced to, Respondent. Pharmacies in Florida which choose to participate in the Medicaid program are required to maintain complete and accurate patient and fiscal records which fully substantiate the extent of services rendered and billings made for a period of five years from the date of billing or service, and are also required to retain all invoices from wholesalers, or from the transfer or receipt of drugs through barter or exchange, for a period of five years. (a) Actual beginning and ending inventories of the top 100 drugs reviewed by KPMG for which the Petitioner now seeks recoupment in the amount of $12,643.11 were not determined. Rather, an estimate of inventory on hand was derived by counting invoices of all drug acquisitions through purchase, transfer or exchange made by the Respondent during the review period, as well as invoices of acquisitions made one month prior to and one month after the review period. Additionally, all documentation provided by the Respondent of bulk, or large, acquisitions made during or prior to the review period was also considered and included in the Petitioner's estimate of inventory. It was established by competent substantial evidence that pharmacies generally keep a drug inventory consisting of a two to two-and-a-half week supply on hand, and acquire drugs in anticipation of future sales rather than as a replacement of inventory depletion from past sales. Therefore, a basic assumption of the KPMG methodology, relied upon and accepted by the Petitioner, that Respondent had only those drugs available for dispensing which were obtained by invoiced purchase from wholesalers, or through transfer or exchange, between February 1, 1987 and January 31, 1988, as well as documented invoiced bulk purchases prior to this time period, is reasonable. At hearing, the Respondent established that a significant quantity of nine specific drugs were purchased during the review period from suppliers other than Gulf that were not considered by KPMG. These drugs include Xanax (.5 mg.), Inderal (10 mg.), Tagamet (300 mg.), Nitrostat (.4 mg.), Trental (400 mg.), Motrin (400 mg.), Motrin (600 mg.), Quinamm (260 mg.), and Quinidine Sulfate (200 mg.). It is, therefore, found that the overpayment of $2,902.19 calculated by KPMG and relied upon by the Petitioner for these particular drugs has not been supported by competent substantial evidence. Frances Larin, Respondent's owner and operator, testified that she did not follow the generally accepted practice of retaining only a two to two-and-a- half week supply of drugs on hand. Rather, she testified that for a significant number of the top 100 drugs at issue in this proceeding, she would purchase large quantites in bulk, and was thus able to draw down on these inventories without making additional purchases of particular drugs for over a year. The Respondent sought to establish that due to very large beginning inventories of particular drugs at issue, it was able to legitimately dispense more units during the review period than it purchased during the same time. However, the Respondent did not produce evidence in support of its position, such as invoices for bulk purchases which KPMG or the Petitioner did not consider, or complete records of bartering or transfers which had not been considered, and which would have supported its claim of a significantly larger beginning inventory for these particular drugs than would be the generally accepted practice. To the contrary, competent substantial evidence in the record, as well as the demeanor of Larin while testifying, establishes that Respondent's claim is unreasonable and lacks credibility. The deposition testimony of JoAnn Padell is outweighed by the testimony of Deborah Launer, Susan McCleod, and Robert Peirce. A review of the Respondent's purchasing patterns clearly shows that Respondent generally and routinely kept low inventories of drugs on hand, placing daily orders with Gulf to obtain drugs on an as-needed basis. Recoupment Based upon the foregoing, it is found that competent substantial evidence establishes that the Respondent overbilled the Medicaid program during the review period at issue in this case in the amount of $9,740.92 ($12,643.11 claimed in the second amended recoupment letter minus the $2,902.19 claim associated with the nine specific drugs for which significant purchases were omitted from the KPMG review, as found above at Finding 13). Petitioner is authorized to recoup the established overpayment of $9,740.92 from the Respondent. Sanctions (a) In determining the sanctions stated in the second amended recoupment letter which Petitioner seeks to impose upon the Respondent, the Petitioner considered the provisions of Section 409.266(13), Florida Statutes, as well as the impact which sanctioning this Medicaid provider would have upon Medicaid recipients. Competent substantial evidence establishes that there are eight pharmacies which accept Medicaid within a one mile radius from the Respondent's location, and twenty-six such pharmacies within a two mile radius. Medicaid recipients are issued new cards each month and may transfer pharmacies at the beginning of each month. Therefore, it is found that Medicaid recipients would not be substantially affected by the imposition of sanctions upon the Respondent. The parties stipulated that the sanction matrix set forth in Rule10C- 7.063, Florida Administrative Code, was not applied by the Petitioner against the Respondent in this case because it was not in effect at the time of this review. The sanctions which the Petitioner seeks to impose against the Respondent, therefore, are based upon non-rule policy which must be explicated in this proceeding. In seeking to explicate its non-rule policy upon which the sanctions set forth in the second amended recoupment letter are based, the Petitioner established that it was concerned that sanctions imposed in prior cases, as well as in the original recoupment letter which had been sent to the Respondent in this case, had been too lenient in view of the seriousness of Medicaid violations. The Petitioner developed its non-rule sanctions policy after the KPMG review had been completed, and based its proposal upon the maximum sanctions set forth in state and federal statutes and rules. Specifically, Section 409.266(12), Florida Statutes, provides for a maximum fine of $10,000; the maximum exclusion period applied in previous cases by the Office of Program Integrity is ten years, and the minimum exclusionary period imposed by the federal government has been five years for the failure to supply payment information. At hearing, the Petitioner explained that it first determined the percent of Respondent's total Medicaid payments that the overpayment represented, and then applied that percentage to these maximum sanctions allowed under law and existing policy. The overpayment of $12,643.11 claimed by the Petitioner in its second amended letter of recoupment is 12% of the total payment of $100,397.88 made by the Petitioner to Respondent for the review period, and 12% of the maximum fine and exclusion period is $1,200 and 14 months, respectively. While the Petitioner explained the manner by which this exclusionary period and fine were calculated, it did not explicate its non-rule policy by establishing a reasonable, rational basis for applying the percentage of Medicaid overbillings to the maximum fine and exclusionary period. Certainly, the arithmetic calculation used to arrive at these proposed sanctions is clear, but there was no explication through competent substantial evidence which would establish that there is a basis in fact or logic for this calculation. Therefore, it is found that the Petitioner's non-rule policy used to propose these sanctions is arbitrary and capricious. Due to the lack of any evidentiary basis in the record which would support the imposition of the sanctions of an administrative fine or a period of exclusion from the Medicaid program, the Petitioner is not authorized to impose sanctions on the Respondent.
Recommendation Based upon the foregoing, it is recommended that Petitioner enter a Final Order which requires that Respondent to repay the Petitioner for Medicaid overbillings in the amount of $9,704.92, but which does not impose sanctions consisting of either an administrative fine or period of exclusion. DONE AND ENTERED this 18th day of January, 1991 in Tallahassee, Florida. DONALD D. CONN Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 Filed with the Clerk of the Division of Administrative Hearings this 18th day of January, 1991. APPENDIX TO RECOMMENDED ORDER Rulings on the Petitioner's Proposed Findings of Fact: Adopted in Finding 1. Adopted in Finding 2. Adopted in Finding 3. Adopted in Finding 1. Adopted in Finding 4. Adopted in Findings 4 and 5. 7-10. Adopted in Findings 6 and 7, but otherwise Rejected as unnecessary. 11-17. Rejected as unnecessary. 18-20. Adopted in Findings 6 and 7. 21-24. Adopted in Finding 12. 25. Adopted in Finding 2. 26-28. This is a conclusion of law and not a proposed finding. 29-30. Adopted in Finding 8. 31-32. Adopted in Findings 7 and 10. Adopted in Finding 6. Rejected as unnecessary. 35-39. Adopted in Finding 7. 40-47. Adopted in Finding 7, but otherwise Rejected as unnecessary. 48. Rejected as unnecessary and immaterial 49-51. Adopted in Finding 7, but otherwise Rejected as unnecessary. 52-53. Rejected as unnecessary. 54-63. Adopted in Finding 12, but otherwise Rejected as unnecessary. Adopted in Finding 8. Adopted in Finding 9. 66-67. Adopted in Finding 8, but otherwise Rejected as unnecessary. 68-69. Adopted in Finding 9. 70-78. Adopted in Finding 8, but otherwise Rejected as unnecessary. 79-82. Adopted in Finding 8. 83-85. Rejected as unnecessary. 86-93. Adopted in Finding 13, but otherwise Rejected as unnecessary. 94-97. Adopted in Finding 14, but otherwise Rejected as unnecessary. 98-103. Adopted in Finding 14. 104-105 Rejected as unnecessary and immaterial. 106-107 Adopted in Finding 12. 108. Adopted in Findings 12 and 13. 109-112 Rejected as unnecessary and immaterial. 113-115 Adopted in Finding 13, but otherwise Rejected as immaterial. This is a conclusion of law and not a proposed finding. Adopted in Finding 11. 118-119 Rejected as unnecessary and immaterial 120-122 Adopted in Finding 11. Rejected as unnecessary. Adopted in Finding 6. 125-128 Rejected as unnecessary. 129. Adopted in Finding 6. 130-132 Adopted in Finding 9. Adopted in Finding 11. This is a conclusion of law and not a proposed finding. 135-147 Adopted in Finding 16, but otherwise Rejected as unnecessary and immaterial. 148. Adopted in Finding 11. 149-150 Adopted in Finding 16, but otherwise Rejected as unnecessary. 151-152 Rejected as unnecessary. 153. Rejected as unnecessary and cumulative. Rulings on the Respondent's Proposed Findings of Fact: 1. Adopted in Finding 4. 2-3. Adopted in Finding 5, but otherwise Rejected as unnecessary and not based on competent substantial evidence. 4-5. Adopted in Findings 3, 6 and 7. 6-7. Adopted in Finding 10, but otherwise Rejected as unnecessary. 8-9. Adopted in Finding 11. 10-11. Adopted in Finding 3, but otherwise Rejected as unnecessary. Adopted in Finding 6. Rejected as immaterial and unnecessary. 14-15. Rejected as argument on the evidence rather than a proposed finding, and otherwise as not based on competent substantial evidence. Adopted in Finding 7, but otherwise Rejected as argument on the evidence rather than a proposed finding. Rejected as repetitive and otherwise as immaterial. Adopted in Finding 13, but Rejected in Finding 14 and otherwise as argument on the evidence rather than a proposed finding and as not based on competent substantial evidence. Rejected in Finding 14, as immaterial, speculative, and as not based on competent substantial evidence. 20-21. Rejected in Finding 6, as immaterial, and as not based on competent substantial evidence. 22-23. Rejected in Findings 13 and 14, and otherwise as immaterial and not based on competent substantial evidence. Rejected as repetitive and otherwise as argument on the evidence rather than a proposed finding. Rejected in Findings 13 and 14. 26-30. Rejected as a statement of the Respondent's position and not a proposed finding, as speculative and contrary to competent substantial evidence, and as totally without citation to authority in the record as required by Rule 22I-6.031(3), Florida Administrative Code. 31-35. Rejected in Finding 6, and as not based on competent substantial evidence and as unnecessary. 36-38. Adopted in Findings 12 and 13. 39-41. Adopted in Finding 8. 42. Rejected as immaterial. 43-44. Rejected in Finding 9. 45. Rejected as simply a summation of testimony and not a proposed finding. 46-48. Rejected in Finding 9, and otherwise as immaterial and not based on competent substantial evidence. 49-50. Rejected as unnecessary and immaterial. 51. Adopted in Finding 16, but otherwise Rejected as immaterial. 52-53. Rejected as unnecessary and immaterial. Rejected as not based on competent substantial evidence. Adopted and Rejected in part in Finding 16. 56-57. Adopted in Finding 16. 58-61. Rejected as immaterial and irrelevant. 62. Adopted and Rejected in part in Finding 15. COPIES FURNISHED: David G. Pius, Esquire Building Six, Room 233 1317 Winewood Boulevard Tallahassee, FL 32399-0700 James J. Breen, Esquire Michael P. Scian, Esquire 900 Sun Bank Building 777 Brickell Avenue Miami, FL 33131 R. S. Power, Agency Clerk 1323 Winewood Boulevard Tallahassee, FL 32399-0700 Linda Harris, Acting General Counsel 1323 Winewood Boulevard Tallahassee, FL 32399-0700 Robert B. Williams, Acting Secretary 1323 Winewood Boulevard Tallahassee, FL 32399-0700
The Issue Whether Petitioner received Medicaid overpayments and, if so, the total amount of the overpayments.
Findings Of Fact AHCA is charged with administration of the Medicaid program in Florida pursuant to Section 409.907, Florida Statutes. Petitioner is a durable medical equipment provider that provided Medicaid services to Medicaid beneficiaries pursuant to a valid Medicaid Provider Agreement with AHCA under provider number 9512721 00. Petitioner was an authorized Medicaid provider during the period of October 1, 1999, through September 30, 2001, which is the audit period at issue here. AHCA conducted an audit of paid Medicaid claims for services claimed to have been performed by Petitioner from October 1, 1000, through September 30, 2001. On October 16, 2002, AHCA issued a Final Agency Audit Report ("FAAR") requesting Petitioner to reimburse AHCA in the amount of $28,407.90, for Medicaid claims submitted by and paid to Petitioner, for services allegedly rendered during the audit period. When the FAAR was issued, AHCA's claims for overpayment were based upon audit findings that paid Medicaid claims for certain services performed by Petitioner did not meet Medicaid requirements. The deficiencies in the subject Medicaid claims included a lack of documentation of required medication for nebulizer equipment, payments in excess of allowable total amounts for rent-to-purchase equipment, and payments for portable oxygen with a lack of documentation that the attending practitioner has ordered a program of exercise or an activity program for therapeutic purposes, that the recommended activities cannot be accomplished by the use of stationary oxygen service, and that the use of a portable oxygen system during exercise or activity results in improvement in the individual's ability to perform the exercises or activities. During the subject audit period, the applicable statutes, rules, and Medicaid handbooks required Petitioner to retain all medical, fiscal, professional, and business records on all services provided to a Medicaid recipient. Petitioner had to retain these records for at least five years from the dates of service. Petitioner had a duty to make sure that each claim was true and accurate and was for goods and services that were provided in accordance with the requirements of Medicaid rules, handbooks, and policies, and in accordance with federal and state law. Medicaid providers who do not comply with the Medicaid documentation and record retention policies may be subject to administrative sanctions and/or recoupment of Medicaid payments. Medicaid payments for services that lack required documentation and/or appropriate signatures will be recouped. Claire Cohen, AHCA's analyst, generated a random list of 30 Medicaid recipients (cluster sample) who had received services by Petitioner during the audit period. In addition, AHCA generated work papers revealing the following: the total number of Medicaid recipients during the audit period; the total claims of Petitioner, with dates of services; the total amount of money paid to the Petitioner during the audit period; and worksheets representing the analyst's review of each recipient's claims for the audit period. After Ms. Cohen reviewed the medical records and documentation provided by Petitioner, she reviewed the Medicaid handbook requirements, and arrived at a figure of $7,572.13 as the total overpayment for all cluster sample claims. Using the Agency's formula for calculating the extrapolated overpayment, Ms. Cohen determined that the overpayment in this case amounted to $29,703.63. Ms. Cohen then prepared the June 20, 2002, Preliminary Agency Audit Report (PAAR) and mailed it to Petitioner. At that point, the case was reassigned to Ellen Williams, a program analyst/investigator. Ms. Williams reviewed additional documentation submitted by Petitioner, and on October 16, 2002, issued on behalf of AHCA, the FAAR, which reduced the alleged overpayment to $28,407.90. Part of this reduction resulted from Petitioner's paying $369.97 to satisfy the issue concerning payments in excess of allowable totals for rent-to-purchase equipment. At the hearing, Ms. Williams testified that the adjusted overpayment amount was $27,473.27. The formula used by AHCA is a valid statistical formula, the random sample used by the Agency was statistically significant, the cluster sample was random, and the algebraic formula and the statistical formula used by AHCA are valid formulas. The DME/Medical Supply Services Coverage and Limitations Handbook provides, in part: Medicaid reimburses for portable oxygen when a practitioner prescribes activities requiring portable oxygen. The oxygen provider must document the following information in the recipient's record: the recipient qualifies for oxygen service; the attending practitioner has ordered a program of exercise or an activity program for therapeutic purposes; the recommended exercises or activities cannot be accomplished by the use of stationary oxygen services; and the use of a portable oxygen system during the activity or exercise results in an improvement in the individual's ability to perform the activities and exercises. The DME/Medical Supply Services Coverage and Limitations Handbook also provides, in part: Medicaid may reimburse for a nebulizer if the recipient's ability to breathe is severely impaired. The documentation of medial necessity must include required medications. The following payments are claimed by AHCA to be overpayments for failure to provide documentation of medical necessity and required medications: Recipient Date of Service Procedure Overpayment 4 7/19/00 E0570 $106.70 9 6/30/00 E0570 $106.70 10 10/24/00 E0570 $106.70 14 02/15/00 E0570 $106.70 16 05/08/00 E0570 $106.70 23 06/09/00 E0570 $106.70 26 06/14/00 E0570 $106.70 The remaining overpayments claimed by AHCA concern the failure to document that the attending practitioner had ordered a program of exercise or an activity program for therapeutic purposes that required the use of a portable oxygen system. The Medicaid Provider Reimbursement Handbook provides, in part, that "Records must be retained for a period of at least five years from the date of service." The types of records that must be retained include "patient treatment plans" and "prescription records." The handbook goes on to provide in pertinent part: Medical records must state the necessity for and the extent of services provided. The following minimum requirements may vary according to the services rendered: * * * Treatment plan, including prescriptions; Medications, supplies, scheduling frequency for follow-up or other services; Progress reports, treatment rendered; * * * Note: See the service-specific Coverage and Limitations Handbook for record keeping requirements that are specific to a particular service. Providers who are not in compliance with the Medicaid documentation and record retention policies described in this chapter may be subject to administrative sanctions and recoupment of Medicaid Payments. Medicaid payments for services that lack required documentation or appropriate signatures will be recouped. Note: See Chapter 5 in this handbook for information on administrative sanctions and Medicaid payment recoupment. Petitioner, through its owners and operators, is of the view that it does not need to have the documentation on file, and it does not ask physicians for details about their prescriptions, "because that's something private from doctors and patient." Petitioner, by signing a Medicaid Provider agreement, agreed that all submissions for payment of claims for services will constitute a certification that the services were provided in accordance with local, state, and federal laws, as well as rules and regulations applicable to the Medicaid program, including the Medical Provider Handbooks issued by AHCA. Petitioner routinely obtained from Medicaid beneficiaries to whom it provides goods or services a written statement authorizing other healthcare provides to furnish any information needed to determine benefits.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency issue a final order requiring Petitioner to reimburse the Agency for Medicaid overpayments in the total amount of $27,473.27, plus such interest as may statutorily accrue. DONE AND ENTERED this 22nd day of September, 2003, in Tallahassee, Leon County, Florida. S MICHAEL M. PARRISH Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 22nd day of September, 2003. COPIES FURNISHED: Tom Barnhart, Esquire Agency for Health Care Administration 2727 Mahan Drive, Mail Station 3 Tallahassee, Florida 32308 Lawrence R. Metsch, Esquire Metsch & Metsch, P.A. 1455 Northwest 14th Street Miami, Florida 33125 Lealand McCharen, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Mail Station 3 Tallahassee, Florida 32308 Valda Clark Christian, General Counsel Agency for Health Care Administration Fort Knox Building, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308 Rhonda M. Medows, M.D., Secretary Agency for Health Care Administration Fort Knox Building, Suite 3116 2727 Mahan Drive Tallahassee, Florida 32308
