The Issue The issues for decision in these cases, based upon the relief sought by Petitioners1 in their Petitions for Formal Administrative Hearing, are: whether Petitioners are entitled to "full credit or refunds of Medical Assistance Trust Fund assessments" paid by Petitioners to Respondent, the Agency for Health Care Administration, and if so, the amount of the refund each Petitioner is entitled to; whether Respondent denied the requested credit or refunds by an unadopted rule which constitutes an "invalid exercise of delegated legislative authority"; and whether Petitioners are entitled to reasonable costs and attorneys' fees pursuant to Section 120.595, Florida Statutes (2004).
Findings Of Fact The Parties. Each of the Petitioners is a hospital licensed in the State of Florida. Petitioners have standing to participate in this proceeding. Respondent, the Agency for Health Care Administration (hereinafter referred to as the "Agency"), is the agency of the State of Florida charged with the responsibility for, among other things, management of the Public Medical Assistance Trust Fund (hereinafter referred to as the "PMATF"). The PMATF. Establishment and Purpose of the PMATF The PMATF, which was established by the Legislature in 1984, is provided for, and its purpose described in, Section 409.918, Florida Statutes (2004): It is declared that access to adequate health care is a right which should be available to all Floridians. However, rapidly increasing health care costs threaten to make such care unaffordable for many citizens. The Legislature finds that unreimbursed health care services provided to persons who are unable to pay for such services cause the cost of services to paying patients to increase in a manner unrelated to the actual cost of services delivered. Further, the Legislature finds that inequities between hospitals in the provision of unreimbursed services prevent hospitals that provide the bulk of such services from competing on an equitable economic basis with hospitals that provide relatively little care to indigent persons. Therefore, it is the intent of the Legislature to provide a method for funding the provision of health care services to indigent persons, the cost of which shall be borne by the state and by hospitals that are granted the privilege of operating in this state. All moneys collected pursuant to s. 395.701 shall be deposited into the Public Medical Assistance Trust Fund, which is hereby created. Moneys deposited into the Public Medical Assistance Trust Fund shall be used solely for the purposes specified by law. [Emphasis added]. Funding of the PMATF Funding of the PMATF is provided for, in relevant part, by Section 395.701(2), Florida Statutes (2004). Section 395.701(2), Florida Statutes (2004), provides that all hospitals, with a few exceptions not relevant to this matter, are responsible for the partial funding of the PMATF. The following definitions pertinent to assessments of PMATF funds from Florida hospitals are provided in Section 395.701(1), Florida Statutes (2004): For the purposes of this section, the term: "Agency" means the Agency for Health Care Administration. "Gross operating revenue" or "gross revenue" means the sum of daily hospital service charges, ambulatory service charges, ancillary service charges, and other operating revenue. "Hospital" means a health care institution as defined in s. 395.002(11), but does not include any hospital operated by the agency or the Department of Corrections. "Net operating revenue" or "net revenue" means gross revenue less deductions from revenue. "Total deductions from gross revenue" or "deductions from revenue" means reductions from gross revenue resulting from inability to collect payment of charges. Such reductions include bad debts; contractual adjustments; uncompensated care; administrative, courtesy, and policy discounts and adjustments; and other such revenue deductions, but also includes the offset of restricted donations and grants for indigent care. In addition to amounts paid into the PMATF by hospitals, funds, referred to as "matching" funds, are also paid into the PMATF by the Federal government. The Rate of, and Basis for, the PMATF Assessment In providing for the imposition of a PMATF assessment against hospitals, the Legislature has established a rate of assessment and designated what that rate is to be assessed against, or the hospital's assessable basis. Prior to the 2000 legislative amendment of Section 395.701(2), Florida Statutes, which is at issue in these cases, the rate of assessment established by the Legislature was 1.5 percent. The Legislature has also provided that the assessable basis is a hospital's "net operating revenue." The Legislature has defined "net operating revenue" for purposes of the PMATF assessment as a hospital's "gross revenue less deductions from revenue." § 395,701(1)(d), Fla. Stat. (2004). "Gross revenue" is defined as "the sum of daily hospital service charges, ambulatory service charges, ancillary service charges, and other operating revenue," more commonly referred to as inpatient services revenue, outpatient services revenue, and other operating revenue. § 395.701(1)(b), Fla. Stat. (2004). Prior to the amendment of Section 395.701(2), Florida Statutes, adopted during the 2000 legislative session at issue in these cases, the PMATF assessment was imposed on a hospital's "net operating revenue" at the same rate regardless of whether the revenue was derived from inpatient services, outpatient services, or other operating services.9 Hospital PMATF Reporting Requirements Hospitals in Florida are required to provide extensive financial information to the Agency utilizing the Florida Hospital Uniform Reporting System, Florida Administrative Code Chapter 59E-5 (hereinafter referred to as "FHURS"). In particular Florida Administrative Code Rule 59E-5.201, provides that "[e]ach hospital shall submit to the Agency, not more than 120 days subsequent to the end of its fiscal year, its prior year report for the fiscal year then ended." A hospital's FHURS report (hereinafter referred to as "Prior Year Report") is received and processed by the Agency's Financial Analysis section, which is contained in the Agency's Bureau of Health Facility Regulation. Once received, Financial Analysis is required to review the report and determine if the report is "accepted" or "not accepted." Fla. Admin. Code R. 59E- 5.204(3). Financial Analysis is required by Florida Administrative Code Rule 59E-5.204(3) to notify the submitting hospital as to whether its Prior Year Report has been accepted or not within 90 days after the report is received by the Agency. Prior Year Reports contain, in addition to numerous other items of financial information, the information required by the Agency to actually calculate the amount of a hospital's PMATF assessment. The Agency's Determination of the Amount of a Hospital's PMATF Assessment; Hospital Notification Once a hospital's fiscal year has ended and it has filed its Prior Year Report, Section 395.701(2), Florida Statutes (2004), charges the Agency with the responsibility for calculating and collecting the hospital's PMATF assessment. Pursuant to Florida Administrative Rule 59E-5.605(1), it is contemplated that the Agency's Bureau of Health Facility Regulation, through its Financial Analysis section, will make the calculation of the amount of a hospital's PMATF assessment and "certify" that amount to the Agency's Bureau of Finance and Accounting (hereinafter referred to as the "Bureau of F&A"). The financial information necessary to calculate a hospital's PMATF assessment is obtained from the hospital's Prior Year Report. This information may be obtained before Financial Analysis has decided whether a Prior Year Report will be accepted or not. Once informed by Financial Analysis of the PMATF assessment, the Bureau of F&A is then responsible for notifying the hospital of the amount of the assessment and then collecting the hospital's payment thereof. Florida Administrative Code Rule 59E- 5.605(3) provides that, once a hospital is notified of its assessment the hospital "[m]ay request a hearing pursuant to Section 120.57, F.S." The request for hearing is to be made "[w]ithin 21 days of receipt of notification of the assessment amount . . . ." Fla. Admin. Code R. 59E-5.605(3). Section 395.701(2), Florida Statutes (2004), provides that the Bureau of F&A is to certify the amount of a hospital's PMATF assessment "[w]ithin 6 months after the end of each hospital fiscal year . . ." and, therefore, it is contemplated that the calculation by the Agency of the PMATF assessment will be accomplished within the same period of time. Payment and Deposit of PMATF Assessments Section 395.701(2), Florida Statutes (2004), provides that, once the Agency has calculated a hospital's PMATF assessment and notified the hospital thereof, the hospital will pay the assessment to the Agency as follows: The assessment shall be payable to and collected by the agency in equal quarterly amounts, on or before the first day of each calendar quarter, beginning with the first full calendar quarter that occurs after the agency certifies the amount of the assessment for each hospital. § 395.701(2), Fla. Stat. (2004). All PMATF assessments received by the Agency are to be deposited into the PMATF. Id. Application of Section 395.701, Florida Statutes (1999), to a Hypothetical Hospital, Using the 1999 Rate of Assessment and Assessable Basis In an effort to demonstrate how Section 395.701, Florida Statutes, is intended to operate, the following hypothetical may be helpful. Assume a hospital has a fiscal year ending December 31, 1999, and, during that fiscal year, it had net operating revenue of $10,000,000.00. Applying the PMATF assessment rate prior to the 2000 amendment of Section 395.701(2), Florida Statutes (1999), at issue in these cases, which was 1.5 percent, the hypothetical hospital's PMATF assessment would be $150,000.00 and the assessment would be payable in equal quarterly amounts of $37,500.00. The hypothetical hospital would be subject to the following time-lines relevant to the assessment and payment of its PMATF1: Fiscal year end: December 31, 1999; 1999 Prior Year Report due: April 30, 2000; Agency notification to the hospital that the Prior Year Report is accepted or not accepted: July 29, 2000; and Certification of the PMATF assessment: June 30, 2000; Time to request an administrative hearing: July 21, 2000; Quarterly payments of the PMATF assessment due: July 1, 2000, October 1, 2000, January 1, 2001, and April 1, 2001. Application of Section 395.701(2), Florida Statutes, in Reality While the hypothetical application of Section 395.701(2), Florida Statutes (1999), supra, is consistent with the statute and applicable rules, in reality the times-lines noted in paragraph 23 are inconsistent with actual practices of hospitals and the Agency. These inconsistencies are relevant to the extent that they ultimately impact the actual payment and receipt of PMATF funds from hospitals, which in turn has some bearing on the resolution of these cases. First, a Prior Year Report for a December 31, 1999, fiscal year-end hospital would not likely have been filed on or before April 30, 2000.11 Even though Prior Year Reports are generally required to be filed within 120 days after the end of a hospital's fiscal year, hospitals often request and are granted extensions of time to file the reports. Secondly, the Agency would not have been likely to determine by July 29, 1999, whether a Prior Year Report for a December 31, 1999, fiscal year-end hospital was accepted or not accepted. Even after a hospital has filed its Prior Year Report, it is often determined that additional information is necessary before the Agency can proceed. Requesting and obtaining this additional information can delay the time when a Prior Year Report is actually "accepted" or "not accepted." Thirdly, as a result of the fact that the applicable statute and rules do not require that a hospital's Prior Year Report be accepted or not accepted prior to the certification of a PMATF assessment and due to delays in the filing of Prior Year Reports and the Agency's acceptance thereof, the Agency is not able to base its calculation of a PMATF assessment on an accepted Prior Year Report in the great majority of instances. Approximately 70 percent of Petitioners had their 2000 fiscal year Prior Year Reports used to calculate the amount of their PMATF assessments before those reports had been accepted or not accepted. The fact that Prior Year Reports have not been "accepted" or "not accepted" does not in practice, however, delay the Agency's calculation of the PMATF assessment. In practice, the Agency determines that the Prior Year Report is provisionally accepted and goes forward with the calculation of the PMATF assessment without regard to whether Financial Analysis has completed its review of the Prior Year Report. Fourthly, although it is contemplated that the Agency's Financial Analysis section is to calculate and certify the amount of a PMATF assessment to the Bureau of F&A, the Bureau of F&A actually makes the calculation. Fifthly, the Agency has abandoned the practice, required by Section 395.701(2), Florida Statutes, of "certifying" the amount of a hospital's PMATF assessment. Instead, the Agency simply sends an invoice to the hospital which informs the hospital of the amount of its quarterly assessment.12 The Agency does not notify the hospital in the invoice of any point of entry or time constraint on requesting an administrative hearing to challenge the invoice. Due to some of the foregoing described practices, in reality the actual payment of the assessment by a hospital of its PMATF assessment is likely to be significantly later than contemplated by the statute. For example, Petitioners' Exhibit numbered 8 is an example of the actual experience of one of Petitioners, Brandon Hospital. Despite the fact that this hospital's fiscal year ended December 31, 1995, the invoice for its PMATF assessment for that year was dated March 2, 1998, and its first quarterly payment was not due until April 3, 1998, more than two years after the end of its fiscal year. Summary Based upon the foregoing, it is clear that the Legislature, prior to its amendment of Section 395.701, Florida Statutes, during the 2000 session, and as implemented by relevant rules of the Agency, had established the following necessary components of the PMATF assessment: Who the PMATF assessment is imposed on: hospitals; The rate of the PMATF assessment: 1.5 percent; The assessable basis for the PMATF assessment: annual net operating revenue (inpatient, outpatient, and other incomes) actually experienced during the hospital's previous fiscal year; Who provides the information necessary to compute annual net operating revenue: hospitals; Who calculates the PMATF assessment: the Agency; How a hospital learns of its PMATF assessment: the Agency is supposed to "certify" the assessment, but in reality merely invoices the hospital; and When a PMATF assessment is payable: in quarterly installments beginning with the first full calendar quarter after the Agency "certifies" (invoices, in practice) the amount of the assessment. The one necessary component of the PMATF assessment which Section 395.701, Florida Statutes, both before or after its amendment in 2000, does not specifically state is the exact point in time that the PMATF assessment is to be imposed. In other words, while the statute specifically states that the rate of assessment is "1.5 percent," it does not specifically state that the assessment will be imposed "at one second after the end of the hospital's fiscal year" or other equivalent language. This lack of a specific "statement," however, does not mean that the determination of when a PMATF assessment is intended by the Legislature to be imposed, the dispositive issue in these cases, is not clear from the language of the statute.13 That intent, which is concluded to be unambiguous, will be discussed, infra. The 2000 Legislative Change to the PMATF; Chapter 2000- 256, Laws of Florida. The Relevant Changes in Section 395.701(2), Florida Statutes During the 2000 legislative session, Chapter 2000-256, Laws of Florida, the "Patient Protection Act of 2000" (hereinafter referred to as the "Act"), was passed. Relevant to this proceeding, the Act modified Section 395.701(2), Florida Statutes (1999), as follows: (2)(a) There is imposed upon each hospital an assessment in an amount equal to 1.5 percent of the annual net operating revenue for inpatient services for each hospital, such revenue to be determined by the agency, based on the actual experience of the hospital as reported to the agency. Within 6 months after the end of the each hospital fiscal year, the agency shall certify the amount of the assessment for each hospital. The assessment shall be payable to and collected by the agency in equal quarterly amounts, on or before the first day of each calendar quarter, beginning with the first full calendar quarter that occurs after the agency certifies the amount of the assessment for each hospital. All moneys collected pursuant to this subsection shall be deposited in the Public Medical Assistance Trust Fund. (b) There is imposed upon each hospital an assessment in an amount equal to 1 percent of the annual net operating revenue for outpatient services for each hospital, such revenue to be determined by the agency, based on the actual experience of the hospital as reported to the agency. Within 6 months after the end of the each hospital fiscal year, the agency shall certify the amount of the assessment for each hospital. The assessment shall be payable to and collected by the agency in equal quarterly amounts, on or before the first day of each calendar quarter, beginning with the first full calendar quarter that occurs after the agency certifies the amount of the assessment for each hospital. All moneys collected pursuant to this subsection shall be deposited in the Public Medical Assistance Trust Fund. [Emphasis in original; words and letters underlined denote additions to Section 395.701(2), Florida Statutes.]. Of significance to the resolution of these cases, the Legislature, in passing the Act, made the following changes in the PMATF, and no others: First, the 1.5 percent PMATF assessment rate was limited to net operating revenue from inpatient services; Secondly, the rate imposed on net operating revenue from outpatient services was reduced from 1.5 percent to 1.0 percent; and Finally, the imposition of the PMATF assessment on other operating revenue was eliminated. Also of significance to the resolution of these cases, is the fact that the Legislature, in passing the Act, did not make any change to the following necessary components of the PMATF assessment: Who the PMATF assessment is imposed on; Who provides the information necessary to compute net operating revenue; Who calculates the PMATF assessment; How a hospital learns of its PMATF assessment; and When a PMATF assessment is payable. Of greatest significance to the resolution of these cases, is the fact that the Legislature, in passing the Act, did not make any change or even discuss when it intended for a PMATF assessment to be imposed. The Effective Date of the Act Generally, and the Changes to the PMATF in Particular Section 64 of the Act provides that "except as otherwise provided herein, this Act shall take effect on July 1, 2000." Section 22 of the Act provides the following concerning the effective date of the relevant changes to the PMATF: The amendments to Sections 395.701 and 395.701(5), Florida Statutes, by this Act shall take effect only upon the Agency for Health Care Administration receiving written confirmation from the Federal Health Care Financing Administration that the change outlined in such amendments will not adversely affect the use of the remaining assessments as state match for the State's Medicaid Program. The effect of Section 22 of the Act was to require that the Agency, as a condition upon the imposition of the changes to the PMATF, seek and obtain assurances from the Federal Health Care Financing Administration (hereinafter referred to as "HCFA"), that the reduction in the rate of the PMATF assessment on outpatient revenues and the other PMATF changes would not have any adverse effect on the amount of "matching funds" which the Federal government would pay to Florida's Medicaid Program. On or about June 9, 2000, the Agency sought the required assurances contemplated by the Act from HCFA. Those assurances were received prior to July 1, 2000.14 Based upon the foregoing, there is not dispute in these cases that the effective date of the reduction in the rate of the PMATF assessment on revenue from outpatient services, the elimination of the PMATF on other operating revenue, and the other PMATF changes included in the Act was July 1, 2000. The $28.3 Million Appropriation of PMATF Funds When considering the adoption of the changes to the PMATF ultimately made by the Legislature during the 2000 legislative session, the Legislature realized that the reduction of the rate of the PMATF applicable to a hospital's net operating revenue from outpatient services, from 1.5 percent to 1.0 percent (hereinafter referred to as the "Reduced Rate") and the elimination of the PMATF assessment on other operating revenue would cause a significant reduction in the total payments made to the PMATF by hospitals and, consequently, the amount of matching funds from the Federal government. The Legislature also realized that the reduction would begin to occur during the state's fiscal year beginning July 1, 2000, the effective date of the Act. It was also realized that the reduction in PMATF funds would be a recurring one. In recognition of the need to continue to fund the PMATF and to avoid the loss of Federal matching funds, the Legislature attempted to make up for the loss in PMATF funds by including the following in the Act: Section 20 - The Legislature shall appropriate each fiscal year from either the General Revenue Fund or the Agency for Health Care Administration Tobacco Settlement Trust Fund, an amount sufficient to replace the funds lost due to reduction by this Act of the assessment on other health care entities under Section 395.7015, Florida Statutes, and the reduction by this Act on the assessment on hospitals under Section 395.701, Florida Statutes, and to maintain federal approval of the reduced amount of funds deposited into the Public Medical Assistance Trust fund under Section 395.701, Florida Statutes, as state match for the state's Medicaid Program. Section 21 -There is hereby appropriated the sum of $28.3 million from the General Revenue Fund to the Agency for Health Care Administration to implement the provisions of this Act relating to the Public Medical Assistance Trust Fund, provided, however, that no portion of this appropriation shall be effective that duplicates a similar appropriation for the same purpose contained in other legislation from the 2000 Legislative Session that becomes law. Thus, the Legislature indicated its intention to replace the recurring loss of PMATF collections from hospitals caused by the Act and provided for the replacement of funds expected to be lost during the first fiscal year for which the changes were effective, the July 1, 2000 to June 30, 2001, fiscal year. The $28.3 million appropriation was arrived at by first estimating the total collections projected to be made during the state's fiscal year beginning July 1, 2000, of PMATF assessments without the modifications to the PMATF adopted in the Act, and then estimating the extent to which those collections would be reduced as a result of the modifications to the PMATF. Total PMATF collections projected for the fiscal year, without the modifications adopted in the Act, were estimated to be $84.9 million and it was estimated that approximately one-third of projected collections, or $28.3 million, would be lost as a result of the modifications to the PMATF.15 The Agency did not suggest to the Legislature that the $28.3 million appropriation was excessive and yet, when the amount of the appropriation approved by the Legislature is compared with the amount which the Agency has argued in these cases hospitals should receive in refunds, the amount of the appropriation is excessive. The Agency has made no effort to explain its apparent inconsistent positions.16 The Agency's Analysis of the Act On May 31, 2000, following the passage of the Act but before it became law, the Agency submitted a bill analysis and economic impact statement on the Act to the Office of the Governor, accompanied by a cover letter under the signature of the then Agency Secretary, Ruben King-Shaw, Jr. In the cover letter, Mr. King-Shaw recommended that the Governor sign the Act into law. In the Agency's analysis of the Act, the Agency describes the changes to the PMATF adopted in the Act, including the Reduced Rate, and suggests that the fiscal impact of the provisions of the Act related to the PMATF would be a $23.1 million17 reduction in PMATF assessment revenues during the state's fiscal year beginning July 1, 2000. Explaining the projected loss, the Agency stated the following: The reduction in the rate of assessments outlined above will mean that approximately $28.3 million in revenue will be lost to the Public Medical Assistance Trust Fund. Alternative state funding will be required. If the alternative state funding is not appropriated, the Medicaid Program will be required to reduce services by $65.2 million ($28.3 million state, and $36.9 million federal matching funds). The bill provides for an appropriation from the general revenue fund of $28.3 million to replace the funds lost due to the repeal of the assessments. Petitioners' Exhibit 2, Bate Stamp Page 2-19. The Agency's analysis of the Act also contains, beginning at Bate Stamp Page 2-32 of Petitioners' Exhibit 2, a "Fiscal Impact on State Agencies/Funds" section describing the projected financial impact of the Act. Among other things, this Fiscal Impact section notes that, during the state's fiscal year beginning on the effective date of the Act, the projected loss of just over $28.3 million in total PMATF assessment collections from hospitals expected during that fiscal year would be made up for by the $28.3 million appropriated by the Legislature in the Act. Again, the Agency's analysis is inconsistent with the position it was later to take and the position it now takes in this proceeding as to when the Reduced Rate should apply to PMATF assessments. The Agency's analysis is, however, consistent with the conclusion that the Reduced Rate was to have an immediate impact on PMATF assessment collections during the state's fiscal year beginning on the effective date of the Act. Again, the inconsistency in the Agency's position in these cases with the analysis provided to the Governor was not explained by the Agency during the hearing of these cases. The Agency's Changed Interpretation of the Act. Although the Agency's analysis of the Act's impact on the PMATF provided to the Office of the Governor suggests that it believed that the Reduced Rate would have an impact during the fiscal year beginning July 1, 2000, the Agency did not take any immediate steps to implement the Reduced Rate and ultimately changed its position on the issue before it could do so. When exactly the Agency decided to interpret the changes to the PMATF of the Act differently from the position it took during the legislative session and its analysis provided to the Office of the Governor has not been explained by the Agency. Nevertheless, at some point after its analysis was provided to the Office of the Governor, the Agency did indeed formulate an inconsistent interpretation. In an e-mail dated November 2, 2000, Lamon Lowe of the Agency's Medicaid office reported the following to Chris Augsburger, head of the Agency's Financial Analysis section: Dyke asked me to notify you about the Agency's position on the date that the reduction of assessments from 1.5% to 1.0% for the PMATF would go into effect. Dyke had a recent conversation with Secretary King-Shaw. Per Secretary King-Shaw, any revenue earned after July 1, 2000, would be assessed at the new rate of 1.0%. Petitioners' Exhibit 4, Bate Stamp Page 4-1. Based upon this e-mail, it appears that the Agency's position taken in this proceeding was formulated at some time immediately before the e-mail was sent by Mr. Lowe. Despite the fact that the position of the Agency reflected in Mr. Lowe's e-mail is inconsistent with the position taken by the Agency in its analysis of the Act, the Agency gave no explanation of the e-mail or its meaning at the hearing of these cases. Social Services Estimating Conference of November 9, 2000. On November 9, 2000, the Agency, through Tony Swinson, Senior Management Analyst Supervisor for the Agency, attended a meeting known as the Social Services Estimating Conference18 (hereinafter referred to as the "SSE Conference"). The purpose of the SSE Conference held on November 9, 2000, was to compare the state's fiscal year 2000-2001 projected expenditures to appropriations and to estimate and project Medicaid fund needs for the state's fiscal year 2001-2002. At the time of the SSE Conference held on November 9, 2000, the Agency projected a $519 million deficit in Medicaid services to individuals and a $640 million deficit in all Medicaid services for the state's fiscal year beginning July 1, 2000. These projections are contained in the report, Respondent's Exhibit 22, prepared by the SSE Conference. These findings suggest a motive for the change in the Agency's position: the need to deal with what was projected to be a significant deficit in funds available to meet Medicaid expenditures. The change in Agency position allowed the use of the $28.3 million appropriation to the PMATF, the continued collection of PMATF funds from hospitals during the fiscal year beginning July 1, 2000, and federal matching funds on both amounts. At some time after issuance of the SSE Conference's report of its November 9, 2000, meeting, the Agency, through Mr. Swinson, added the following footnote to the report on what has been marked as page 3 of Respondent's Exhibit 22: The estimated expenditures for FY 2000-2001 assume the $28.3 million in General Revenue appropriated to replace the revenue lost from reductions in assessments deposited into the Public Medical Assistance Trust Fund will be available for use even though the implementation of the reduction in assessment will be based on provider net operating revenues earned after June 30, 2000. Revenue to the PMATF will not be impacted until FY 2001-2002 if the reduced assessment rate is implemented for revenues earned after June 30, 2000. A similarly worded footnote was added to the SSE Conference's report on what has been marked as page 9 of Respondent's Exhibit 22: The Agency has implemented the reduction in the rate of the assessment on net operating revenues for hospital outpatient services and for other health care facilities authorized by HB 2339 by interpreting that the reduced rates apply to net operating revenues earned after June 30, 2000. Because of the timing of the receipt of provider financial reports by the Agency and the certification of the revenues, the projection above assumes that PMATF revenues will not be impacted until FY 2001- 2002. While the footnotes, although stated with what appears to be some doubt as to their accuracy, are consistent with the Agency's position in these cases, the Agency gave no explanation as to why they were added after the SSE Conference had ended and its report had been prepared. In light of the fact that the footnotes were added not too long after the first evidence of the formulation of the Agency's current position was reported in Mr. Lowe's November 2, 2000, e-mail to Mr. Augsburger, it is inferred that the Agency added the footnotes in an effort to bolster its changing position on the issue of how to implement the changes to the PMATF adopted in the Act. The Agency's Implementation of the Act. Despite the fact that the Agency suggested in its analysis of the Act that the loss of PMATF revenues would be experienced during the state's fiscal year beginning July 1, 2000, and did not apparently change its position until the fall of that year, the Agency continued to calculate, bill, and collect hospital PMATF assessments after July 1, 2000, at the 1.5 percent rate of assessment (hereinafter referred to as the "Old Rate"). In fact, the Agency continued to calculate, bill, and collect PMATF assessments from hospitals at the Old Rate and, imposed the Old Rate on the hospital's total net operating revenue, through December 31, 2002. The Agency did so even though the Agency now takes the position that hospitals' should have begun to benefit from the Reduced Rate beginning with April 1, 2001, invoices. In the early fall of 2002 a meeting was held between the Agency and hospital representatives to discuss the fact that the Agency had not yet implemented the Reduced Rate. The issue for resolution in these cases was not discussed in the meeting. The only matter discussed was the fact that the Agency had taken no steps to apply the Reduced Rate. Subsequent to the Agency's meeting with hospital representatives, a memorandum dated November 25, 2002, was sent to "all hospital PMATF facilities" with quarterly PMATF invoices due January 1, 2003. The memorandum evidenced the Agency's first effort to apply the Reduced Rate, but even then, only partially.19 Even though the Agency realized at the time it sent the memorandum that hospitals were entitled to the full benefit of the Reduced Rate and the other changes to the PMATF adopted in the Act, the Agency, because of the lack of available PMATF funds, simply authorized some hospitals, although not all,20 to take a partial credit against their PMATF payments beginning with the January 1, 2003, quarterly payment. Hospital Refund Requests and the Agency's Denial Thereof. Beginning in September 2002 Petitioners filed requests with the Agency seeking a refund of alleged PMATF overpayments made by them since July 1, 2000. Those refund requests were calculated consistent with the position of Petitioners taken in these cases concerning the proper implementation of the PMATF modifications of the Act. The refund requests filed by Petitioners in these cases were filed pursuant to Section 215.26, Florida Statutes, and utilized a form previously accepted by the Agency for requests for refunds of overpayments. The Agency responded21 to the refund requests of Petitioners by letter (hereinafter referred to as the "Refund Denial Letter"). The Refund Denial Letter sent to each Petitioner was substantially identical to Petitioners' Exhibit 8D. The Refund Denial Letter included the following: No refunds will be made for assessments on net operating revenues for outpatient services earned prior to July 1, 2000. All revenue earned in this period was correctly assessed at 1.5%. . . . . This constitutes AHCA’s final determination as to the impact of the effective date of Laws of Florida, Chapter 2000-256, §16, and the period subject to the reduced rate of assessment on net operating revenue for outpatient services. This is not a final determination as to the availability or amount of a refund for a particular hospital. Those whose substantial interests are affected by the Agency’s final determination may request a hearing pursuant to §120.569, Florida Statutes. Only AHCA’s final determination about the impact of the effective date of the statute is subject to administrative challenge at this time. A petition for administrative hearing must comply with the requirements of Florida Administrative Code, Rule 28-106.201. The petition must be received at the address specified below no later than twenty-one (21) days from receipt of this letter. Failure to timely file a petition shall constitute a waiver of the right to a hearing. . . . [Emphasis in original]. Petitioners filed Petitions for Formal Administrative Hearing in response to the Agency's refund denial letters. The Central Legal Issue: How to Apply the Reduced Rate. The Central Legal Issue: There is no dispute that on July 1, 2000, and thereafter, the rate of the PMATF assessment applicable to a hospital's net operating revenue from outpatient services was reduced from 1.5 percent, the Old Rate, to 1.0 percent, the Reduced Rate. The first issue for decision in these cases, which was first addressed in the Preliminary Order, is how exactly the Reduced Rate is to be implemented in practice. To the extent that other changes to the PMATF included in the Act impact the amount of the refunds sought by Petitioners, the conclusions concerning the application of the Reduced Rate reached in this Recommended Order apply equally. Petitioners' Position in These Cases It is the position of the Petitioners' that the Reduced Rate should apply to all PMATF assessment quarterly payments made by a hospital on or after July 1, 2000, regardless of when the hospital's fiscal year ended or when the hospital's net operating revenue was actually earned. Petitioners' position has been referred to throughout this proceeding as the "Invoice" method. In support of their position, Petitioners argue that the focus of the analysis required in these cases (the determination of legislative intent) should be the Act and, in particular, the Legislature's decision to appropriate $28.3 million to make up with what was believed would be the fiscal impact of the Act. In Petitioners' Additional Written Argument, Petitioners argue the following: The clearest statement regarding what the Legislature intended when it amended [Section] 395.701(2) is the language of Section 21 of Chapter 2000-256, Laws of Florida. The Legislature specifically appropriated those funds necessary to offset the anticipated reduction in PMATF collections in the fiscal year that began on the day the new law was effective, July 1, 2000. The estimate of a $28.3 [million] impact, as demonstrated at Hearing, was based upon the work of the PMATF Task Force. (Pet. Ex. 15, 16). The agency itself expected, when it recommended that the Act be signed by the Governor, that the effect of the rate reduction would be a $28.3 million reduction in PMATF collections from providers for the state fiscal year beginning July 1, 2000. (Pet. Ex. 2). Petitioners also suggest that the change in the Agency's position as evidenced in Mr. Lowe's e-mail, the footnotes to the SSE Conference report, and the Agency's implementation of the Act, all suggest that the Agency's position is incorrect. Finally, Petitioners have relied upon a number of extrinsic facts which they argue support their interpretation of how the Reduced Rate should be applied. Those extrinsic facts, which have been discussed in detail in Petitioners' Joint Proposed Findings of Fact, Conclusions of Law and Preliminary Recommended Order of Petitioners, include the following general subjects: The Agency's treatment of PMATF assessments for hospitals that closed before making all of their quarterly payments; The Agency's treatment of a hospital's legal liabilities for purposes of the PMATF; The Agency's application of the PMATF to new hospitals; and The types of Prior Year Reports accepted by the Agency in the past. The Agency's Position in These Cases It is the Agency's position that the Reduced Rate should apply to all PMATF assessments on net operating revenue from outpatient services earned on or after July 1, 2000, regardless of when a hospital's fiscal year ends or when the hospital actually makes a quarterly payment. In essence, the Agency's position assumes that the PMATF "accrues" continuously during a hospital's fiscal year and that it does so at the rate then in effect. Pursuant to this argument, which was referred to throughout this proceeding as the "Earned" method, every dollar of revenue from outpatient services earned by a hospital on or before June 30, 2000, is subject to the PMATF at the Old Rate and, every dollar of revenue from outpatient services earned by the same hospital on or after July 1, 2000, is subject to the PMATF at the Reduced Rate. In addition to arguing that the language of the statute and the Act clearly support its position, the Agency has argued that its position is supported by "agency expertise" and a general accounting principle, described as "the 'matching principle' under accrual accounting, in which the revenue and expense effects of an economic event are realized and recorded contemporaneously." To explain the "matching principle" under accrual accounting, the Agency presented the testimony of Mr. Thurston, who opined that the PMATF liability attaches as dollars are earned, although the final calculation of the assessment does not occur until the end of the hospital's fiscal year. Mr. Thurston opined, as an expert in public accounting, that when an economic event occurs in business, the financial implications of that event should be recorded both from the revenue and expense side, an idea he characterized as a basic "matching" concept, when the economic event occurs. Applying this theory to Section 395.701(2), Florida Statutes, Mr. Thurston suggested that the PMATF constitutes an expense against revenues as they are earned and, therefore, the expense should be matched contemporaneously with the revenue. Resolution of the Central Legal Issue: How the Legislature Intended the Reduced Rate to be Applied or the Proper Application of Section 395.701(2), Florida Statutes (2000). Where to Look To Determine Legislative Intent Ultimately, the resolution of in these cases depends upon a determination of legislative intent. That determination first requires a decision on where to look for the Legislature's intent: the Act; the language of Section 395.701, Florida Statutes, as amended; the history of the PMATF; the Agency's implementation of the PMATF, including the matters described in Finding of Fact 73; accounting principles; or some combination of these sources and/or others. Petitioners argue that it is the Act, or more precisely, the $28.3 million appropriation which the Legislature provided for which should be reviewed to determine legislative intent. While Petitioners' position was rejected in the Preliminary Order and is rejected in this Recommended Order, if Petitioners' are correct, that it is the Act and the history surrounding its adoption that controls the determination of legislative intent in this proceeding, then Petitioners are entitled to the refunds, calculated pursuant to the Invoice method, which they seek. The $28.3 million appropriation is essentially the same as the total amount of the reduction in PMATF assessments which hospitals should have seen during the fiscal year 2000-2001 if the Legislature intended that the Reduced Rate was to be applied consistent with the Invoice method. This fact is undisputed. This fact, coupled with the fact that the Agency did nothing to discourage the Legislature from making the appropriation, the fact that the Agency supported the notion that the reduction in assessments would be $28.3 million when it supported the Act with the Office of the Governor, and the fact that the Agency failed to explain at hearing why it took the various positions it did or why it changed those positions, further supports the position of Petitioners. As discussed more fully, infra, it has been concluded, however, that it is not the Act or the Legislature's actions while adopting it that should be the central focus of the determination of legislative intent in these cases. Instead, it has been concluded that the main focus of the determination of legislative intent should be the language of Section 395.701, Florida Statutes (2000). The fact that this focus will likely result in a significant inconsistency between the fiscal impact of the methodology recognized in this Recommended Order, the Imposition Method, and the $28.3 million appropriation may be disconcerting, but, if the correct focus for the determination of legislative intent is the language of Section 395.701, Florida Statutes (2000), that inconsistency simply cannot be avoided. Legislative Intent, Based Upon Section 395.701, Florida Statutes (2000). The ultimate resolution of these cases turns on the determination of one significant necessary component of the PMATF assessment which is not as specifically stated by the Legislature in Section 395.701(2), Florida Statutes, as the other necessary components of the PMATF such as, for example, who the assessment is imposed upon (hospitals).22 That component of the PMATF assessment is the moment when the Legislature intended that a PMATF assessment is deemed to actually be imposed. The exact point in time when the Legislature intended for the assessment to be imposed is significant, because, until the PMATF assessment is actually imposed, the rate of the PMATF assessment and the revenues or assessable basis upon which the rate is to apply, have little bearing. It simply does not matter under the law, what the rate of assessment or the assessable basis of a PMATF assessment is until it is time for the PMATF assessment to be imposed. While the Legislature has not specifically stated that the assessment is to be imposed at "X" point in time, it does not mean that legislative intent is not clear. Based upon the language of Section 395.701, Florida Statutes (2000), read as a whole, it is clear that the Legislature intended that the PMATF assessment is to be imposed, and, indeed, can only finally and accurately be imposed, when the condition or conditions established by the Legislature for the imposition of the assessment have all occurred. Although described as two conditions in the Preliminary Order, there is actually only one condition that has been established by the Legislature for the imposition of the PMATF assessment: the hospital must have an "annual net operating revenue" which in turn must be based upon the "actual experience of the hospital . . . " from its just completed fiscal year. This condition can occur only at the end of the hospital's fiscal year. The condition will not occur during the year as the hospital earns a dollar of revenue or when the hospital actually pays its PMATF assessment. The PMATF was not intended, therefore, to be "imposed" during a hospital's fiscal year as argued by the Agency. Nor did the Legislature intend that the imposition of the assessment must wait until a hospital is required to actually make its quarterly payment, as argued by Petitioners. The precise time when the condition for imposition of the PMATF assessment has been met and, thus, when the PMATF assessment is intended by the Legislature to be imposed, takes place immediately after the end of the hospital's fiscal year for which the PMATF assessment is made. It is only at that time that a hospital has an "annual net operating revenue" which can be "based on the actual experience of the hospital . . . ." Thus, if a hospital's fiscal year ends on June 30, 2000, the PMATF assessment for that hospital's 1999-2000 fiscal year may only be assessed immediately after its fiscal year ends at midnight, or as July 1 begins. The Invoice Method is Inconsistent with the Imposition Method In order to accept the Invoice Method, it would be necessary to find that the Legislature intended that a PMATF assessment is considered imposed when a hospital makes each payment. Any PMATF payment made by a hospital on or after July 1, 2000, would be subject to the Reduced Rate and any payment made by the same hospital before July 1, 2000, would be subject to the Old Rate. Accepting this position defies logic. Regardless of when a PMATF payment is made, all events contemplated by Section 395.701(2), Florida Statutes (1999 and 2000), for imposition of the assessment have occurred. When information necessary to actually compute the amount of the assessment is provided to the Agency by a hospital, when the Agency actually computes the assessment and informs the hospital of the amount of the assessment, and when the hospital actually makes the payments are not events contemplated or required by Section 395.701(2), Florida Statutes (2000), for the assessment to be considered imposed. The Earned Method is Inconsistent with the Imposition Method In order to accept the Earned Method, it would be necessary to find that the Legislature intended that a PMATF assessment is imposed at the time a hospital earns a dollar of applicable revenue in order to accept the Agency's position concerning how to apply the Reduced Rate. Any dollar of revenue for outpatient services earned by a hospital on or after July 1, 2000, would be subject to the Reduced Rate and any dollar of revenue for outpatient services earned by the same hospital before July 1, 2000, would be subject to the Old Rate. Neither of these findings is reasonable or supported by the language of Section 395.701, Florida Statutes. Mr. Thurston's testimony was also not persuasive. Mr. Thurston simply explained the accrual method of accounting, a method routinely followed by accountants and bookkeepers in reflecting the economic operations of individuals, businesses, and other entities. Mr. Thurston failed to explain, however, what the Agency relies on to support a conclusion that the Legislature intended for the PMATF to be applied consistent with that accounting method. Additional "Conditions" for Imposition Suggested by Petitioners. In Petitioners' Additional Argument, it has been argued that, if the Legislature truly intended that the Reduced Rate is to be applied when the PMATF assessment is imposed and that imposition of the assessment may only occur when all the conditions for imposition have been met, there are other conditions which must be met in order for the assessment to be imposed which the undersigned did not consider. In particular, Petitioners have suggested that two other conditions must be met before the PMATF assessment may be imposed: The hospital's actual experience based upon its completed fiscal year must be 'reported to the agency;' and Within six months after the end of the hospital fiscal year, the Agency shall certify the amount of the assessment for each hospital. [Footnote omitted]. The additional "conditions" suggested by Petitioners, while conditions for the actual payment or collection of a PMATF assessment, are not conditions which must be met in order for the assessment to be imposed on or owed by a hospital. Once a hospital realizes an “annual net operating revenue” no conditions for the imposition of the PMATF remain. The Amount of Petitioners' Refunds. Subsequent to the entry of the Preliminary Order on December 23, 2003, and the filing of the February 3, 2005, Stipulation, the parties were able to come to agreement as to the amount of refund which is due to each Petitioner based upon the three rate reduction application methodologies addressed in this Recommended Order: the Imposition Method; the Invoice Method; and the Earned Method. Those amounts are contained in the Refund Calculation Notebooks, Joint Composite Joint Exhibit 1. Contained within the Refund Calculation Notebooks is a folder for each remaining Petitioner containing supporting data and the calculation of refunds based upon all three methodologies. The folders for each hospital include all source data required to calculate refunds as Exhibits 1 through 7, a list of all PMATF payments as Exhibit 8, a summary of the foregoing data as Exhibit 9, the application of the Earned Method as Exhibit 10, a calculation of the refund due each Petitioner based upon Attachment B of each Petitioner's Refund Request as Exhibit 11, the application of the Invoice Method as Exhibit 12, and the application of the Imposition Method as Exhibits 13 and 14. The application of the Imposition Method contained on Exhibits 13 and 14 is the same except for hospitals with fiscal year-ends of May 31, June 30, and July 31. For those hospitals, the parties disagreed as to how the Imposition Method should be applied. Petitioners assert that those hospitals are entitled to refunds for their fiscal years ending in 2000 based upon the reduced rate while the Agency asserts that they are not. Exhibit 13 for those hospitals reflects the amount of refund based upon the Imposition Method with no refund due for their fiscal year ending in 2000. Exhibit 14 for those hospitals reflects the amount of refund based upon the Imposition Method if they are entitled to any refund for their fiscal year ending in 2000. Based upon the conclusions reached in this Recommended Order, the amount of refund due to Petitioners with fiscal year- ends of April 30 and May 31, 2000, is reflected in Exhibit 13. All events necessary for imposition of the PMATF assessment for these Petitioners for their fiscal year ending in 2000 occurred before the effective date of the Act. For Petitioners with June 30, 2000, September 30, 2000, and December 31, 2000, fiscal year-ends, the amount of refund due to them is reflected in Exhibit 14. The Agency's Alleged Unadopted Rule. The Agency's Refund Denial Letter provides, in part, the following statement which Petitioners have argued in their proposed order constitutes an unadopted rule: No refunds will be made for assessments on net operating revenues for outpatient services earned prior to July 1, 2000. All revenue earned in this period was correctly assessed at 1.5%. . . . . This constitutes AHCA’s final determination as to the impact of the effective date of Laws of Florida, Chapter 2000-256, §16, and the period subject to the reduced rate of assessment on net operating revenue for outpatient services. The foregoing statement, while ultimately based upon the Agency's interpretation of Section 395.701(2), Florida Statutes (2000), does not express that interpretation. That interpretation is not explained in the quoted portion of the Refund Denial Letter or any other document offered by Petitioners. The statement quoted by Petitioners merely informs the entity to which it was sent that its requested refund was being denied. The Refund Denial Letter then goes on to inform the entity that the denial is "not a final determination as to the availability or amount of a refund for a particular hospital [but rather is preliminary agency action]" and that the Agency's proposed decision could be challenged administratively. The fact that the Agency was required to develop an interpretation of the applicable law when it made its preliminary decision to deny refund requests filed by Petitioners does not make the complained of "statement" of the Agency a rule. Nor does the fact that the Agency explicated that interpretation in its defense of its preliminary decision during these proceedings make is notice that it was denying Petitioners' request for refunds a rule. Petitioners have failed to prove any actual "statement" of the Agency of the interpretation of Section 395.701(2), Florida Statutes (2000), advanced in these proceedings, was published by the Agency. The Refund Denial Letter does not contain an "agency statement" of "general applicability" which implements, interprets, and prescribes law. It merely announces proposed agency action. The Agency's Refund Denial Letter is not a "rule," as that term is defined in Section 120.52(15), Florida Statutes (2004). Leesburg Regional Medical Center. Leesburg Regional Medical Center (hereinafter referred to as "Leesburg"), Petitioner in DOAH Case No. 04-1882, uses a July 1 to June 30 fiscal year for purposes of the PMATF. Invoices sent to Leesburg by the Agency for PMATF assessments for quarterly payments due July 2000 through October 2002 were based upon a rate of 1.5% for inpatient and outpatient net operating revenue and other operating revenue. Leesburg paid these assessments. Leesburg received the November 25, 2002, Memorandum described in paragraph 62, supra, on or about December 2, 2002. That Memorandum was the Agency's first attempt to apply, at least in part, the Reduced Rate. In December 2003 Leesburg filed a refund request for what it believed were overpayments of its PMATF assessments due on and after July 1, 2000. The amount of the refund being sought by Leesburg was identified in a supplement to its refund request filed with the Agency in February 2004. Leesburg refund request for payments attributable to the first two quarters (ending September 30 and December 31) of its fiscal year 2000-2001 (hereinafter referred to as the "Disputed Quarters") totaled $31,116.00. While Leesburg Exhibit 8 of the Refund Calculation Notebooks indicates the total amount of Leesburg's PMATF assessments for the Disputed Quarters and the fact that those assessments were paid, the exhibit does not indicate when the payments were made. Nor was any other evidence presented to prove when the payments were actually made.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Agency: Concluding that the Legislature intended that the changes adopted in the Act are to be applied to Petitioners consistent with the Imposition Method described in this Recommended Order; Providing that Petitioners, other than those with a June 30, 2000, fiscal year-end, are entitled to refunds of PMATF payments calculated on Exhibit 14 of the Refund Calculation Notebooks; Providing that Petitioners with a June 30, 2000, fiscal year-end are entitled to refunds of PMATF payments calculated on Exhibit 14 of the Refund Calculation Notebooks. DONE AND ENTERED this 23rd day of May, 2005, in Tallahassee, Leon County, Florida. S LARRY J. SARTIN 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 23rd day of May, 2005.
