The Issue Petitioner, Blue Cross and Blue Shield of Florida, Inc. (BCBS), has challenged the Agency for Health Care Administration's (AHCA) proposed award of contract pursuant to Request for Proposals No. SHP 95-002 to Unisys Corporation (Unisys). The ultimate issue in this proceeding is whether that proposed award is fraudulent, dishonest, arbitrary or illegal. In their pleadings and presentations the parties have framed these subsidiary issues: Whether the Unisys bid was responsive to and met the mandatory requirements of the RFP; Whether the allocation of scoring weights was arbitrary and capricious and likely to result in the state's expenditure of excessive funds for health care in favor of much smaller savings in administrative costs; Whether the scores assigned by the proposals' evaluators were unreliable and biased; Whether the evaluation of proposals illegally failed to apply "present- value methodology" required by section 287.0572, Florida Statutes; and Whether the award is illegal because AHCA is unconstitutionally structured in violation of Article IV, Section 6, Florida Constitution. Although all parties concede that determination of the constitutional issue is beyond the jurisdiction of the hearing officer, BCBS claims that the issue is "preserved" for judicial determination and AHCA and Unisys argue the issue has been waived.
Findings Of Fact The Parties The Agency for Health Care Administration (AHCA or agency), as provided in section 110.123(3)(b), Florida Statutes, is responsible for all aspects of the purchase of health care for state employees under the state group health insurance plan and the health maintenance organization plans. The responsibilities include the development of requests for proposals for state employee health services, the determination of benefits to be provided and negotiation of contracts for health care and health care administrative services. Blue Cross and Blue Shield of Florida, Inc. (BCBS) is a large managed care company providing a wide range of health care services including a full array of insured products, traditional indemnity products and preferred provider organization (PPO) products to large and small groups. It has provided health services to state employees since the 1940's. In 1978, when the state switched from offering a fully insured product to a self-insured product, BCBS became the administrator of the self-insured program and has remained the administrator since that time. Unisys Corporation (Unisys) is a publicly held corporation, incorporated in the State of Delaware. It has been actively engaged in the health information services and technology market since 1976, and its health information management group, headquartered in Reston, Virginia, has experience in all facets of health care claims processing. The Request for Proposals (RFP) The state group health insurance plan (plan) is self-insured, which means that payment for services rendered by health care providers to covered recipients is paid by the state from a trust fund established for this purpose. The plan currently covers approximately 235,000 persons, including employees and their dependents and retired persons. BCBS' contract to administer the plan expires on December 31, 1995. In July, 1994 AHCA began to develop an RFP for the new contract to run for four years, commencing January 1, 1996, with four one-year extensions, at the state's option. Previous RFP's for state employees' health services had been prepared by the Department of Management Services (DMS) or its predecessor agency, and this is the first time AHCA has had the responsibility. The principal authors of the RFP were Rick Lutz, AHCA's Director of the Division of State Health Purchasing, and Kate Morgan, Chief of the Bureau of State Employee Health Insurance. Ms. Morgan reports directly to Mr. Lutz. Both individuals had prior experience in the state's Medicaid program and both had supervised or directly developed RFP's for health services-related procurements. The RFP requested interested offerors to submit proposals to provide services in one or more of three categories of services: 1) third party administrative services (TPA); 2) use of a preferred provider organization network (PPO); and 3) utilization review and case management services (UR). A single offeror could submit a proposal in one, two or all three categories. A single offeror could also submit a proposal to provide services in all three categories, but utilizing subcontractors. The RFP was divided into sections as follows: Section 10 - introductory information. Section 20 - description of the RFP process. Section 30 - contract terms and conditions. Section 40 - State's obligations. Section 50 - specifications for third party administration (TPA) services, including claims examination and payment, participant relations, and coordination of benefits. Section 60 - questions and requests for information on the offeror's ability to perform TPA services. Section 70 - specifications for preferred provider organization (PPO) services, including recruiting and maintaining a network of qualified providers to perform health care services under pre-negotiated fee schedules. Section 80 - questions eliciting information on the offeror's ability to perform the PPO services. Section 90 - specifications for utilization review and care management (UR) services to determine the medical efficacy and necessity of requested services as a cost-saving and quality enhancing measure. Section 100 - questions eliciting information on the offeror's ability to perform the UR services. Section 110 - the cost proposal, or the amount the offeror would charge to provide the TPA, PPO and UR services. Section 120 - evaluation procedure. RFP Sections 50, 70 and 90 contained the specifications; Sections 60, 80 and 100 contained the scoring elements describing the offeror's capability and prospects for performance. The RFP sought administrative services only. It did not solicit offerors to provide direct medical services to participants, and the amounts to be paid to health care providers for medical services to participants were not determined or covered by the contract. The RFP directed offerors to submit their proposals in two parts. In the technical part, the offeror certified that it would comply with the specifications and responded to the questions to be scored. The cost part contained the offeror's price to perform the TPA, PPO and UR services for the contract term, calculated at present value according to a provided formula. Before proposals were submitted, potential offerors were informed that the cost proposal was assigned 4000 points, and the technical proposal was assigned 6000 points, consisting of 2400 points for TPA services, 2400 points for PPO network services, and 1200 points for UR services. Potential offerors also knew the individual scoring questions relating to TPA, PPO and UR services, but did not know the preassigned internal weights of these individual questions. These weights were ascribed in advance by the RFP administrators, Mr. Lutz and Ms. Morgan, but were sealed and locked away in order to assure that both offerors and scorers would deal diligently with every question and would not concentrate on heavily weighted questions. The RFP was issued on March 3, 1995. The RFP specifically provided that potential offerors could protest the contents of the RFP itself. On March 16, 1995, BCBS filed a protest challenging numerous provisions of the RFP. This protest was resolved by a settlement agreement on March 31, 1995, in which the agency modified some provisions and BCBS abandoned all other issues that were raised or might have been raised in the protest. The RFP provided potential offerors an extended opportunity to pose questions to clarify the specifications and evaluation criteria. BCBS posed numerous questions, including questions concerning how the agency would weight and score criteria concerning PPO networks. AHCA responded in a general manner without disclosing the weights that would be assigned to various questions. Other potential offerors also posed questions. All responses by AHCA were incorporated as addenda to the RFP. Four integrated proposals and two component proposals (less than all three categories) were submitted. Only integrated proposals were evaluated because the component proposals , considered together, failed to comprise a complete package of all three services. The Proposals and Their Scoring The four proposals were by Health Plan Services (later disqualified after the cost proposals were opened), by Humana, by Unisys and by BCBS. The technical proposals were opened on May 18, 1995. The BCBS proposal offered to provide all three components, TPA, PPO and UR. The Unisys proposal described Unisys as the prime contractor and TPA, with Beech Street, a separate company, providing the PPO component and Cost Care, another company, providing the UR component. Rick Lutz selected 24 staff personnel to score the technical merits of the responses to Sections 60, 80, and 100. They were selected based on their experience in areas involving finance and accounting, management information, claims processing, customer relations, reporting, network development, and utilization review. Half of the scorers were from offices supervised by Mr. Lutz, and half were from other offices within AHCA. In his twenty-five years of experience Mr. Lutz was familiar with the backgrounds and abilities of the individuals. He attempted to recruit other scorers from the Department of Management Services (DMS) but was informed that DMS' workload precluded such participation. The scorers were assigned questions to score in the same area as their functional backgrounds. They were also given a one-half day training session and a workbook containing specific guidance on factors to consider in scoring each assigned question. The scorers were directed to consider all relevant information contained in the proposal in scoring each question. They were allowed to ask written questions concerning the scoring, and written answers were provided. The RFP schedule provided one month scoring the proposals. The scorers were to score each assigned question on a 0-10 scale and to record (in the workbooks) their reasons for each score given. Three scorers were assigned to score each question; however, each scorer was instructed to form an independent judgement as to the appropriate score and to not discuss the score given with anyone else. The instructions provided for a debriefing session in which scorers whose scores were more than three points apart on a particular question could confer to ensure that each scorer had considered all information relevant to that question. Scorers were allowed to change their scores on the basis of information that they had previously overlooked or they were allowed to leave them unchanged. The three raw scores for each question were averaged, and the averaged score was multiplied by the predetermined weight to produce a raw score for each question. Scores were then added and adjusted to the 6000 point scale. Unisys received the best raw scores for the TPA and the UR components. BCBS received the best raw scores for the PPO component. However, BCBS' advantage in the PPO component was sufficient to place it ahead in the aggregate raw score for the technical proposal, so it was awarded the maximum raw score of 6000 points. On June 22, 1995, the agency opened and scored the cost proposals. Humana had the lowest cost proposal and was awarded the maximum cost score of 4000 points. The Unisys cost proposal was $86,618,919 present value, and received a prorated score of 3,458.65 points. The BCBS cost proposal was the highest, $102,200,263.22 present value, and received 2,931.35 points, the lowest prorated cost score. Scoring the cost proposals was a mechanical, non- subjective function. Unisys had the highest combined score for the technical and cost proposals under the framework described in the RFP, as summarized in the following chart: ============================================================== ELEMENT UNISYS RAW BCBS RAW SCORE SCORE UNISYS ADJUSTED SCORE BCBS ADJUSTED SCORE TPA 1624.97 1602.33 PPO 1274.63 1515.83 5744.97 6000.00 UR Cost 751.28 694.78 3458.65 2931.35 Total 9203.62 8931.35 ============================================================== The agency made a minor math error in its original calculation of the BCBS score for the technical proposal. When the BCBS score is corrected by adding 16 points, the effect narrows the gap, but does not materially affect the result. Based on the results of the overall scoring, Mr. Lutz prepared a brief report summarizing the evaluation process and sent it to a steering committee comprised of four senior managerial level employees: Ms. Morgan, Tom Wallace, the agency's second-in-command; Dr. James Howell, and Mildred Seay of DMS. The committee met with Mr. Lutz on June 26 for approximately two to three hours. There was general discussion regarding medical costs under a plan offered by BCBS, as opposed to Unisys' plan. The pricing analysis found in RFP section 80.10 was explained and discussed; and the committee discussed whether Unisys, through its subcontractor, Beech Street, could expand the provider network (PPO) to achieve utilization and prices comparable to those reported by BCBS. The committee unanimously approved the scorers' ranking and recommended the contract award to Unisys. The recommendation was forwarded to Douglas Cook, Executive Director of AHCA and William Lindner, Secretary of DMS, in a brief memorandum. Notice of intent to award the contract to Unisys was posted by the agency on June 27, 1995. Responsiveness of Unisys Proposal In creating a mandatory requirement checklist in Section 120.2 of the RFP, Mr. Lutz sought a simplified process that would assure that proposals were evaluated on their merits. The agency desired an open competition process that would score the proposals on the adequacy of the responses, rather than a process that would eliminate proposals from the evaluation. Mr. Lutz chose two AHCA employees who were not members of the evaluation team to check the proposals against the checklist and to verify whether the proposals contained a tabbed section corresponding to that item on the list. Mr. Lutz anticipated that if the response were wholly deficient, the evaluators would ascribe a zero score. None of the four proposals was rejected in this stage of the process. Subcontractors' Certificates of Compliance and Public Entity Crime Forms Were Not Required RFP Section 30.4 requires a Certificate of Compliance "from each offeror regardless of whether the offeror submits an integrated proposal or a component proposal." Section 30.42 requires a Public Entity Crime form to be submitted by "a[n] offeror submitting a proposal." Section 120.2 contains a checklist of requirements including the following: d. Did the offeror submit a signed certificate of compliance? * * * f. Is a completed Public Entity Crimes Statement included? (Joint Exhibit Number 1) These requirements are expressly directed to the "offeror," and do not refer to subcontractors. Unisys submitted an "integrated" proposal in which it was the sole offeror and prime contractor responsible for providing all services called for under the RFP. A Unisys representative signed the Certificate of Compliance and Public Entity Crime Form, which BCBS concedes was sufficient as to Unisys. The Unisys proposal specified that it would engage two subcontractors, Beech Street for the PPO component and Cost Care for the UR component. AHCA did not intend or expect subcontractors to submit the Certificate of Compliance and Public Entity Crime form. RFP Section 30.19 reserved the agency's right to approve subcontractors, while confirming that the prime contractor is responsible for all contract performance. The purpose of the Certificate of Compliance is to provide assurance similar to that in PUR 7033 that the offeror is bound to the specifications of the RFP. PUR 7033 is a form at the front of the RFP, a contractual services acknowledgment form required only from the "offeror" or prime contractor. The Certificate of Compliance expressly contemplates that subcontractors are included in the prime contractor's commitment. The Public Entity Crime form sought assurance that the offeror or "its officers, directors, executives, partners, shareholders, employees, members or agents who are active in the management of the entity" (emphasis added) were not disqualified to contract as a result of a conviction of certain procurement crimes. The form also sought assurances that "affiliates" of the offeror entity, meaning its predecessor or successor, or an entity controlled by a natural person who is not active in the management of the offeror entity, were not disqualified. BCBS admits that Unisys was qualified and its form was sufficient as to Unisys itself. (Transcript, p. 769-70) The form does not solicit any information with regard to subcontractors. None of the subcontractors identified in the Unisys proposal is active in the management of Unisys or is an affiliate of Unisys. Neither Unisys nor any of its subcontractors was on the published convicted vendors list established by section 287.133, Florida Statutes. There is no evidence to suggest that they are disqualified to contract. At the time the RFP was issued, the controlling statute required contractors to sign this form only at the time the contract is executed. Section 287.133(3)(a), Florida Statutes (Supp. 1994). Submitting the form with the proposal was not essential to protect the state's interests, but was a convenience. While the proposals were under review, this statutory provision was repealed to eliminate use of this form entirely. Chapter 95-196, Section 33, Laws of Florida, effective June 8, 1995. This issue arose, in part, out of confusion related to RFP Section 20.14, which described a situation in which two or more offerors combined as a partnership, and directed that such a partnership designate one partner to act as the "prime contractor"; in effect, treating that situation like the Unisys proposal, which involved a prime contractor and subcontractors. In responding to offerors' questions, AHCA initially directed that each partner in a partnered proposal would be required to submit the forms as multiple contractors. However, in Addendum 4 of the RFP, the agency later clarified that only one prime contractor in each proposal was responsible for contractual issues: This is to notify all potential offerors of a correction to an answer that was provided in Addendum Number 2. Specifically, the answer to Cost Care's first question is deleted... When an integrated proposal is submitted in response to this RFP, one of the partners in the bid shall be designated in the proposal as the prime contractor. The other partners in the integrated proposal shall be subcontractors and any contract that may result with the state shall be between the state and the prime contractor. The state shall hold the prime contractor responsible for all contractual issues... (Joint Exhibit Number 1) AHCA intended Addendum 4 to mean that only the prime contractor was required to submit the forms in question and did not consider the absence of separate forms for subcontractors to be a defect. Beech Street's Financial Statements Each technical scoring component of the RFP requested the offeror to furnish two years' audited financial statements. AHCA did not intend this request to create a precondition for evaluating the proposal, and did not include these statements as part of the mandatory specifications in Sections 50, 70 and 90. Rather, the agency designed the RFP to treat the presentation of audited financial statements as a technical scoring issue. In response to the request for financial statements in Question 80.2.g, Unisys presented a narrative statement explaining that Beech Street was a privately held corporation that kept its financial statements confidential; but that Beech Street's auditors, Arthur Anderson & Co., had issued unqualified "clean options" for the two preceding fiscal years, and that the operations had been profitable in each year, resulting in year end cash reserves exceeding $4.2 million and $5.2 million, respectively. The statement further advised that current year operations indicated even greater revenue and profit growth. The proposal also showed Beech Street's longevity and client base and retention rate, consistent with a financially stable operation. Unisys provided full information available on its subcontractors, Beech Street and Cost Care. It was not requested to provide any information concerning Beech Street's subcontractors (who were sub-subcontractors of Unisys). Judy Hefren, one of the three scorers who graded Question 80.2.g, is a CPA with several years' accounting experience. Although she reviewed enough financial information to satisfy herself concerning Beech Street's ability to perform as a subcontractor, Ms. Hefren strictly interpreted Question 80.2.g and gave Unisys a zero for that question. Audited financial statement were not mandatory because other information could show capacity to perform. AHCA looks to the prime contractor to cover any deficiency in its subcontractors, and required the prime contractor to post a substantial performance and payment bond. The prime contractor's and surety's financial stability assures continuing performance of all obligations. The PPO subcontractor is never in possession of any state funds, but simply is paid an access or rental fee for the term in which its network is used. BCBS presented no evidence that significant adverse consequences to the state would ensue from a hypothetical subcontractor bankruptcy, and Mr. Lutz's and Ms. Hefren's characterization of such a hypothetical event as an "inconvenience" is accepted. Maternity Counseling Material Not Required RFP Section 90.5.a stated that "The contractor shall provide educational materials to all pregnant plan participants to include information about the program, basic prenatal care and reference to specialty physicians and facilities." The agency considered this specification to be part of the UR services that the offeror certified it will perform. RFP Question 100.7.b solicits information on how the offeror plans to meet this specification, including samples of educational materials to be furnished. Unisys responded that "Cost Care emphasizes direct communication with both mother and physician, in addition to the educational materials we provide." The response described direct contacts with the mother and physician. It offered to produce additional materials for plan participants generally for additional cost. The RFP treated this as a scoring issue. Although the scorers gave Unisys relatively low scores for this response (4, 4 and 3), AHCA was satisfied that there was nothing wrong with this response and that specification 90.5.a would be met. Whether the Agency's Allocation of Weights Among the Questions in the RFP Was Arbitrary and Illegal RFP Question 80.10 required offerors to perform two historical "pricing analyses" based on data from the period July 1, 1993 to June 30, 1994, or 1.5 to 2.5 years before the new contract was to commence. Part (a) of Question 80.10 required offerors to price physician costs for designated medical procedures in each of 19 counties. Offerors were permitted to report the price available from any physician with whom they had a negotiated fee schedule in that county; if the offeror had no negotiated fee with a physician serving that county, then it had to report a state average charge for that procedure. BCBS reported the lowest aggregate price for physician services, and was awarded the maximum score of 10 points for Question 80.10(a). Unisys was awarded 9.92 points, reflecting less than one percent difference in the aggregate reported prices for physician services. Part (b) of Question 80.10 required offerors to price 1,174 claims in 55 specified hospitals, as of specified dates in 1993-94. The hospitals selected were those that had provided the most services to state employees in fiscal year 1993-94. If an offeror had a contract with a specified hospital on the specified transaction date, then that offeror could report its negotiated fee with that hospital. If the offeror had no contract with that hospital on that date, then it had to report that hospital's full reported charge for services, even if a contract was subsequently negotiated. The question did not allow equivalent hospitals to be substituted. The question favored the incumbent. BCBS was able to report low prices for the hospitals chosen because almost all of these hospitals were already in its network in 1993-94. BCBS received the maximum score of 10 points on Question 80.10(b); Unisys received 3.01 points. Question 80.10 served a limited purpose to help illustrate previous network development. It was never intended to become a basis for measuring or comparing future medical costs per employee or medical cost savings to be realized from selection of a particular offeror, nor would it be accurate for this purpose. Provider networks are "dynamic," changing over time in response to evolving client needs. A PPO administrator cannot effectively recruit providers or achieve favorable prices until it establishes a market share in the provider's market area. It was intended that during the six-month transition period the successful offeror would use the increased market share resulting from the contract award to expand and tailor its network to serve state employees. Mr. Lutz commented on the agency's reasons for assigning limited weight to Question 80.10 as follows: We certainly did assume that other proposers would be able to come in, develop a network, and in the process achieve discounts that would have been greater than the discounts that they might have had a year ago. If we didn't believe that -- there is no sense in going through a competitive procurement to start with. If we wanted to start with the premise that the only entity that could establish a network and achieve discounts was the one that we had, then why bother? It seems to me that the conclusion is we don't want a competitive procurement, we simply want to issue a new contract. (Transcript, p. 133) All parties agreed that it is "very hard" or "impossible" to predict future network growth and its effect on health care prices. There is no specific formula available to compute the amount of future medical costs. RFP Question 80.9 asked offerors to predict percentage changes in health care prices over the eight year potential contract term, and to provide assurances that the prediction would be accurate. Unisys predicted a percentage change for the first four years; BCBS referenced various indices for the first four years. Neither Unisys nor BCBS predicted anything beyond four years or guaranteed its prediction by sharing substantial risk if health care prices were to exceed their predicted levels. These responses help confirm that future health care prices are volatile and unpredictable. Because the network development and other factors affecting the future cost of medical care are not easily quantified or predicted, the great majority of RFP questions concerned evaluations of the offeror's experience and expertise in developing and managing networks, its specific plans to implement the network contemplated by the RFP, and its provider credentialling, quality assurance and payment methodology, as well as performance of TPA and UR functions. All of these questions concern the offeror's capability to provide a satisfactory network and reflect its ability to control future medical costs. AHCA intended that the questions in Section 80 would collectively demonstrate the offeror's capability and prospects for developing a cost-effective PPO network. BCBS, through its State Business Director and expert witness, Sheffield Kenyon, asserted that the agency should have increased the weight assigned to Question 80.10 from 240 points (10 percent of the PPO component weight) to 1000 points. Mr. Kenyon viewed the historical price analysis as the "single best proxy" for a future health care price prediction, and was surprised that the agency had not given it greater weight. His opinion was not based on any mathematical formula; nor did he identify any industry standard concerning the weight to be given such historical analysis. His opinion, competent though it was, was based on exactly what Mr. Lutz and Ms. Morgan brought to the process of ascribing weights: a rich, full, varied background and years of experience. BCBS State Employee Market Director, Robert Nay, prepared medical cost projections which purported to show that the Unisys proposal could result in significantly larger expenditures by the state and its covered persons for medical care than would be the case with BCBS. He acknowledged that preparing projections was not a part of his normal work. His analysis was limited to two factors, network utilization rate and reported discount rate. Mr. Nay compared a projected savings for BCBS with three projected scenarios for Unisys/Beech Street. The first scenario assumes the network available to Unisys and Beech Street will remain static from 1993-94. However, the testimony was unrefuted that network development is driven by the client base. It is unrealistic to assume that there has been, and would be, no development prior to contract implementation in January 1996. Even Mr. Nay agreed this was not likely to occur. (Transcript, p. 417). Scenario 2 also assumes that Unisys would be unable to achieve a network utilization rate in Florida comparable to BCBS', and is likewise speculative and unsupported by the weight of the evidence. Scenarios 1 and 2 used Beech Street's 1994 national average discount rate as stated in Question 80.2 of the Unisys proposal, and scenario 3 assumed a slightly improved discount rate. However, there was no evidence to show that the 1994 national average discount rate would be applicable to the proposed Florida contract. The Unisys proposal in Section 80.2 reported that Beech Street's national savings averages may be understated, as most of its network hospitals are nonprofit hospitals which generally charge less than for-profit facilities. In Section 80.9, Unisys and BCBS provided information showing rate changes the state should expect to experience. Unisys reported an actual 9 percent decrease in inpatient hospital rates, and a 13 percent decrease in outpatient rates for 1995. The Unisys proposal also projected that the state should experience a 4 percent decline in inpatient and outpatient hospital rates for 1996 and 2 percent or greater decline in those rates for 1997, 1998 and 1999. BCBS projected increases in these rates for the years 1996-99. These projections were not included in Mr. Nay's analysis. Beech Street representatives, Doreen Corwin and Carol Lockwood, described successful efforts in adding provider groups to the Beech Street network. Beech Street has been received favorably in negotiations with providers. The final award of the contract should enable Beech Street to finalize its relationships with Unisys and with sub-subcontractors and providers. The current Beech Street Florida network includes approximately 1.1 million covered lives. The addition of the state plan's approximately 240,000 covered lives will significantly add to Beech Street's bargaining power to negotiate prices in markets where participants live. Although there is conflicting evidence of whether providers are more or less anxious now than in the past to negotiate discounted agreements with a PPO, it is reasonable to expect that most providers who currently have contracts with BCBS would be very likely to enter into similar arrangements with Beech Street to avoid losing patients. The plan encourages covered employees to utilize the less expensive network providers, so loss of network status would be detrimental to a provider who relies on that employee patient base. Utilization review services can substantially affect cost of health care. Cost Care representative, Sandra O'Toole, described its independent utilization review services for state governments in Mississippi, Alabama, and Georgia, as well as for other clients around the country, based on a clinical model using board-certified physicians to review cases. The Cost Care average number of inpatient admissions per thousand plan participants is approximately BCBS, which performs both PPO network and UR functions in-house, reports approximately 90 inpatient admissions per thousand in Florida, with a decrease from highs of approximately 109 in 1990 and 1991. (Joint Exhibit Number 5, exhibit to question Number 60.6.2.a, p. 15). Cost savings or impact on costs to the trust fund and individual employees are thus reflected throughout the RFP, and not simply in Section 80.10, giving additional credence to the weights ascribed by the RFP framers. BCBS speculates that the state and its plan participants will inevitably incur substantial extra health care expenses if AHCA's evaluation turns out to be wrong. However, even if the Unisys-Beech Street network fails to fully achieve comparable prices, there are safety net features in the contract. Participants can elect to use HMO's or private insurance in lieu of the plan, and the Legislature is considering additional options. The agency has reserved the right to carve out particular health care services for separate direct contracts with providers or to provide services through Community Health Purchasing Alliances (CHPA's) in lieu of the plan. The agency also has reserved the right to terminate the contract entirely for convenience, without obligation except to pay for services rendered. Finally, the agency will evaluate Unisys- Beech Street's implementation plan for expanding the PPO network to meet the plan's needs within 30 days after the contract award and can seek remedies for any deviation from that plan. The agency's weighting of the technical questions must be considered in light of all circumstances, including the known administrative costs reflected in the competing proposals. BCBS's evidence does not prove that the agency's weighting of the limited purpose historical price analysis in Question 80.10 produced an irrational evaluation of competing proposals, nor that any potential risk so clearly outweighs known administrative cost savings as to make the contract award to Unisys irrational. BCBS argued that additional weight should have been given to other questions of the RFP. However, BCBS presented no evidence that would indicate the subjective determinations of weighting calculated by BCBS are any better or worse than the determinations of weighting made by the agency. Reasonable persons can, and do (as in this case) differ. The evidence, as developed through the testimony of Mr. Lutz and Ms. Morgan, has shown that the agency's weighting scheme was a carefully designed, strict implementation of AHCA's goals and intent. Statistical Analysis of the Scores BCBS presented statistical analyses of the overall scoring through its expert, Dr. James T. McClave, along with charts and graphs prepared by Dr. McClave. The analyses prepared and presented by Dr. McClave included an analysis of inter-rater agreement, as well as several tests that Dr. McClave said showed a statistical bias in one of eight groups of evaluators. In order to test inter-rater agreement, Dr. McClave applied a statistical model called the Kappa method. With this method, Dr. McClave compared the scores given by three evaluators for each of approximately 235 scored questions on the score sheets generated for BCBS, Unisys and Humana. Dr. McClave compared the scores on the 0-10 category scale, as well as a series of "collapsed" scales (i.e. a five-category scale based on 0, 1-3, 4-6, 7-9, 10), with one of the scales using as few as two categories (i.e., 0-5, 6-10). In order to find an "agreement" between evaluators using the Kappa method for the 0-10 point scale, Dr. McClave defined agreement as "pure agreement," in other words, the scores had to be the same. To expect high agreement or exact agreement for the 0-10 scale was a tough standard from a statistical point of view and therefore he began to look at "collapsed" scales which, according to Dr. McClave, would be relatively easier to meet. For the other "collapsed" scales, the scores still needed to fall into the same category to be considered perfect agreement. All of the Kappa tests presented by Dr. McClave had percentages of perfect agreement of less than 40 percent, which, according to the scale picked from the statistics text used by Dr. McClave, represented "poor" agreement. Based upon the Kappa method that he employed and the scale set forth in the text, Dr. McClave concluded that the level of inter-rater reliability was poor, and that the evaluation cannot be trusted. He conceded that there was no precise way to identify the reasons why the reliability was so low, but conjectured that a lack of training or amount of time allowed for the scoring could have been a cause. Dr. McClave also described a statistical method which he referred to as the weighted Kappa. The weighted Kappa gives more weight to the level of agreement, for example, a four versus a three is higher than a one versus a four. The unweighted Kappa method employed by Dr. McClave assigned the same "zero" agreement value for a score of four versus three as it did to a score of one versus four. Dr. McClave did not use the weighted Kappa because in his "review of the literature the statistical theory behind the weighted Kappa has not been sufficiently developed to the point where one can use it in the case we have." (Transcript, p. 635) Weighted Kappa, in his view, compares two evaluators, one against the other. Dr. McClave admitted that unweighted Kappa was designed for nominal data, the most basic category of data. The scores in the evaluation were done in ordinal fashion and according to widely recognized authorities in the field, weighted Kappa is the appropriate statistical method for analyzing ordinal data. Dr. McClave has no expertise in any of the substantive areas of the technical proposal (TPA, PPO or UR), or in the development, weighting or scoring of RFP's in these substantive areas. He admitted that he had no reason to believe that any of the scorers was not conscientious and diligent, or that they used any improper scoring method or standard. BCBS did not offer a single incident to show scoring was improper, nor any basis to claim that scorers were not motivated to be conscientious and fair. Unisys presented Erwin Bodo, Ph.D., as its statistical expert witness. Dr. Bodo reviewed the circumstances in which the scoring was performed, i.e., use of 24 evaluators with diverse backgrounds and perspectives; use of questions involving the application of judgement and subjective standards; and use of the 0-10 scoring scale without any exact or true score for any questions. Under these circumstances, substantial disagreement is ordinarily expected. The difference between the highest and lowest scores was two points or less for 50 percent of the questions, and three points or less for 80 percent of the questions. This constitutes reasonably good agreement among scorers, according to Dr. Bodo. The question of whether or not scorers on a particular question were consistent is irrelevant to whether the evaluation was valid. As long as each particular scorer was internally consistent, the overall scoring would be fair. The Kappa analysis proves nothing relative to the fairness or validity of the scoring, but simply reflects that the scorers saw the merits differently. Dr. McClave's second statistical analysis separated the 24 scorers based on the offices in which they worked. He found that the aggregate mean scores of five scorers from the Bureau of State Employees Insurance (BSI) were more favorable to Unisys or less favorable to BCBS in a statistically significant degree from the aggregate mean scores from each of the other seven offices. Dr. McClave used the term "statistical bias" to describe the differences between the five BSI scorers' aggregate scores and the other 19 scorers' aggregate scores, grouped by their respective offices. However, this analysis does not prove actual prejudice or unfairness because the statistical tests will not demonstrate such matters. Dr. McClave acknowledged that the disagreement could be related to differences in scorers' backgrounds and perspectives. He had no knowledge of the scorers' backgrounds beyond what offices they worked in. He acknowledged that the questions were subjective, that the scorers applied the scale in different ways, and that there was no perfect answer because human judgement was involved. Dr. McClave did not know which scores were right and which were wrong, and could not say that disagreement among scorers made either score wrong. He did not analyze individual questions to determine whether they were properly scored. He had no basis to assume that any BSI scorers were unfair. He nevertheless proposed disqualifying all BSI scorers and eliminating their scores, giving BCBS enough additional technical points to win the contract. Dr. McClave's proposed disqualification would effectively eliminate ten questions that were scored by BSI scorers only. He admitted this was a problem. It would also reduce the scoring of other questions to one or two scorers, violating the RFP requirement that at least three persons score each question. There were numerous questions in which BSI scorers gave BCBS a higher score than non-BSI scorers, or in which BSI scorers gave Unisys a lower score than non-BSI scorers. This evidence supports a finding that there was no systematic prejudice exhibited by the BSI scorers. Give the subjective nature of the technical proposal, the use of scorers with diverse backgrounds and perspectives enhanced the fairness of the process. RFP Sections 120.3, 120.3.1 and 120.6 described how the scoring process would be conducted, resulting in the ranking of proposals by the total of scores awarded. There was no requirement for any supermajority or any particular statistical level of agreement among the scorers beyond that which results in a majority of the points, and BCBS did not challenge the absence of such a requirement when it challenged the RPP. SUMMARY OF FINDINGS The disputed issues in this case arise from the differing opinions of competent and articulate experts rather than from the underlying facts, which facts are generally uncontroverted. Drawing on the experience of its staff and borrowing some guidance from its predecessor agency, AHCA developed its first RFP for state employee health services. The process was designed to enhance competition and the prospective offerors had ample opportunity for input. The questions they asked and answers provided by the agency were incorporated into the RFP document. The agency's preparation of the RFP, its interpretation of the document and its scoring of the parties' responses were careful, well-intended and fair. Competent experts differ on the agency's interpretation of the RFP as applied to items not included in the Unisys responses; they differ on the weights assigned to segments of the RFP. But the agency's interpretation and weighting were not proven arbitrary or illegal. Competent experts disagreed on whether the scores were statistically reliable or biased. Their evidence was informative, and even entertaining, but in the end had little practical application. None suggested that the scorers colluded, conspired or falsified their scores. Any explanation for near-random results (assuming that Dr. McClave's methodology was appropriate) is based on conjecture and not on any real evidence. The scorers were experienced, were trained and were afforded the time to accomplish their assignments. Statistical bias by one group is irrelevant in the absence of actual prejudice. The statistical bias, like the suggested inter-rater unreliability, can be made to appear or to vanish with simple manipulation of methodology or realignment of the groups under scrutiny. Such evidence is too tenuous to establish the agency's misprision. The agency's intended award is appropriate and fair, and not arbitrary or illegal.
Recommendation Based on the foregoing, it is hereby, RECOMMENDED: That the Agency for Health Care Administration issue its final order awarding the contract to Unisys, as intended. DONE and ORDERED this 27th day of September, 1995, in Tallahassee, Florida. MARY W. CLARK, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 27th day of September, 1995. APPENDIX The following constitute specific rulings on the findings of fact proposed by the Petitioner. The findings proposed by the agency and Intervenor have been substantially adopted. Petitioner's Proposed Findings 1. Adopted in paragraph 1. 2 & 3. Adopted in paragraph 4. 4 & 5. Adopted in substance in paragraph 2. Rejected as unnecessary. Adopted in paragraphs 4 and 12. Adopted in paragraph 5. Adopted in paragraph 6. 10 and 11. Adopted in substance in paragraph 7. Rejected as unnecessary. Adopted in paragraph 5. Adopted in paragraph 10. Adopted in part in paragraph 16. The characterization of the Unisys proposal as a "Unisys/Beech Street/Cost Care proposal" is rejected as misleading. Adopted in paragraph 15. Adopted in paragraph 29. Adopted in substance in paragraph 30. 19 & 20. Rejected as unnecessary. 21. Adopted in substance in paragraph 30. 22. Rejected as a conclusion contrary to the evidence. One proposal was disqualified in the second phase. 23. Adopted in substance in paragraph 17. 24. Adopted in substance in paragraph 8. 25. Adopted in part in paragraph 18. The lack of "formal training" or interviews is rejected as immaterial and misleading. The staff were trained and were amply instructed. 26. Adopted in summary in paragraph 19. 27. Adopted in paragraphs 11 and 21. 28. Adopted in paragraphs 9 and 23. 29. Adopted in substance in paragraph 23. 30. Adopted in paragraph 24. 31 & 32. Adopted in substance in paragraphs 26 and 27. 33. Adopted in paragraph 28. 34. Addressed in Preliminary Statement. 35. Rejected as contrary to the evidence (the conclusion of "arbitrary and capricious"). 36. Rejected as misleading as the experience of both was found to be appropriate to the task. 37. Adopted in substance in paragraphs 50 - 52. 38. Adopted in part in paragraph 52; otherwise rejected as misleading argument. 39. Rejected as unnecessary. 40 - 42. Rejected as unnecessary and argument that is not supported by the weight of evidence. 43 & 44. Adopted in summary in paragraphs 51 and 53. 45 - 61. Rejected as irrelevant or argument that is not supported by the greater weight of evidence, which evidence did support the agency's contention that section 80.10 is only a piece of the financial outlook picture. 62 - 64. Rejected as unnecessary. The contract is not for direct medical services and the cost of those services over the term is incalculable. 65 - 66. Adopted in summary in paragraph 31. 67 - 77. Rejected as unnecessary or argument that is unsupported by the weight of evidence, which evidence supports the interpretation by the agency that the forms were not required from contractors, and Beech Street and Cost Care were subcontractors rather than "offerors". 78. Adopted in substance in paragraph 42. 79 - 82. Rejected as unnecessary. The evaluators did review the financial statements, but not as a mandatory item, and scored the responses based on the review. Although it is accepted that the audited financial statements are important, so also are other indicia of financial viability and stability. 83. Adopted in paragraph 47. 84. Adopted in paragraph 48. 85. Adopted in paragraph 71. 86. Adopted in paragraph 72. 87 - 91. Adopted in summary in paragraphs 72 through 76. 92 & 93. Adopted in part in paragraph 74, as to the results of Dr. McClave's statistical analysis; rejected as to the conclusions that the agency's evaluation was unreliable or arbitrary and capricious, as the statistical analysis does not support that conclusion. 94. Adopted in paragraph 80. 95 - 98. Adopted in part in paragraphs 80 through 82; otherwise rejected as irrelevant. 99 - 103. Rejected as irrelevant. See Conclusion of Law Number 92. COPIES FURNISHED: Michael J. Glazer, Esquire Stephen C. Emmanuel, Esquire Steven P. Seymoe, Esquire MACFARLANE, AUSLEY, FERGUSON & MCMULLEN Post Office Box 391 227 South Calhoun Street Tallahassee, Florida 32302 Paul Martin, Assistant Attorney General Office of the Attorney General PL-01, The Capitol Tallahassee, Florida 32399-1050 James H. Peterson, III Steven Grigas Agency for Health Care Administration 2727 Mahan Drive, Suite 3400 Tallahassee, Florida 32308 Stephen Turner, P.A. David K. Miller, P.A. BROAD & CASSEL 215 South Monroe Street, Suite 400 Post Office Box 11300 Tallahassee, Florida 32302 Jerome W. Hoffman General Counsel Agency for Health Care Administration 2727 Mahan Drive Tallahassee, Florida 32309 Mr. Sam Power, Agency Clerk Agency for Health Care Administration Building 3, Room 3431 2727 Mahan Drive Tallahassee, Florida 32308
The Issue The issue is whether Petitioner is eligible for services under the Home Care for Disabled Adults Program.
Findings Of Fact Based upon the testimony and evidence received at the hearing, the following findings are made: Parties Petitioner is a 41-year-old retired State of Florida employee. She retired on disability in August 2002 as a result of "extreme" and "terminal" medical problems, the precise nature of which is not reflected in the record. At the time of her retirement, Petitioner was working for the Department. She had worked for the Department and its predecessor, the Department of Health and Rehabilitative Services, for slightly more than ten years and she was a member of the Florida Retirement System (FRS). The Department is the state agency responsible for administering the Home Care for Disabled Adults Program ("HC/DA Program"). HC/DA Program The HC/DA Program is a state-funded program related to the federal supplemental security income (SSI) program. As such, the HC/DA Program is referred to as an "SSI-related program." The HC/DA Program is intended to provide an alternative to institutional or nursing home care for disabled adults. It does so by providing monthly support and maintenance payments for the care of eligible disabled adults in family-type living arrangements in private homes. The income threshold for the HC/DA Program is 300 percent of the SSI federal benefit rate, which is currently $552.00 per month. Accordingly, the income threshold for the HC/DA Program is $1,656.00 per month. An individual who has income in excess of $1,656.00 per month is ineligible for services under the HC/DA Program, no matter how significant his or her needs are. It is undisputed that Petitioner meets all of the other eligibility requirements for the HC/DA Program except the income threshold. Petitioner's Income and the Health Insurance Subsidy Petitioner does not receive SSI benefits. Her only sources of income are a disability benefit she receives from the federal Social Security Administration (SSA) and a pension benefit she receives from the FRS. Petitioner's SSA disability benefit is $983.00 per month. Petitioner's gross FRS pension benefit is $701.00 per month. Her net benefit is only $410.00 per month as a result of health insurance premiums which are paid to Blue Cross and Blue Shield of Florida (BC/BS) by Petitioner through "payroll deductions." Included in Petitioner's gross FRS pension benefit is a health insurance subsidy of $50.40 per month. The subsidy amount is based upon the number of years of creditable service that Petitioner had with the State. It is calculated at a rate of $5.00 for each year of service. The subsidy may only be used by Petitioner to purchase health insurance. The subsidy does not cover the entire cost of Petitioner's health insurance. Even with the subsidy, Petitioner pays approximately $240.00 per month to BC/BS for health insurance. The subsidy is "optional" in the sense that Petitioner was required to separately apply for it under the FRS. However, upon application, the subsidy is legally owed to Petitioner as a result of her ten years of service to the State. The subsidy is paid directly to Petitioner, although Petitioner never actually receives the money since she has chosen to have it (and the remainder of her insurance premium) transferred to BC/BS through a “payroll deduction” from her monthly FRS check. Petitioner's total income is $1,684.00 per month if the health insurance subsidy is included, and it is $1,633.60 per month if the subsidy is excluded. Department's Review of Petitioner's HC/DA Application and Determination of Ineligibility On March 5, 2003, Petitioner met with Tracy Seymour, an adult services counselor with the Department, to determine whether she might be eligible for services under the HC/DA Program. Ms. Seymour helped Petitioner complete the application for the HC/DA Program, and gathered general income information from Petitioner. Petitioner's application was then forwarded to the Department's economic self-sufficiency unit for review. That unit is responsible for determining income eligibility where, as here, the applicant is not receiving SSI benefits. To determine income eligibility, the economic self- sufficiency caseworker verifies the income and resource information provided by the applicant on the application. Pamela Bolen was the caseworker responsible for reviewing Petitioner's application. Ms. Bolen contacted the SSA and obtained a print-out detailing Petitioner's disability benefit. That print-out confirmed that Petitioner received an SSA benefit in the amount of $983.00 per month. Ms. Bolen next called the Division of Retirement (DOR) to obtain information related to Petitioner's FRS pension benefit. Ms. Bolen was told that Petitioner's benefit was $650.60 per month with an additional $50.40 per month being paid towards Petitioner’s health insurance by the State. Later, Ms. Bolen received a print-out from DOR which reflected Petitioner's gross FRS pension benefit as being $701.00. That figure is the sum of $650.60 and $50.40. Because Ms. Bolen had not previously done an income eligibility determination for the HC/DA Program, she was unsure as to whether the $50.40 insurance subsidy was to be included or excluded when determining Petitioner's income. As a result, she contacted the economic self-sufficiency "help desk" for guidance. Roger Menotti, an administrator with 18 years of experience in the economic self-sufficiency unit, responded to Ms Bolen's inquiry. Mr. Menotti researched those portions of the Department's policy manual that relate to the HC/DA Program. The policy manual is not adopted by rule, nor is it incorporated by reference in any Department rule. However, the policy manual is consistent with the Department rules governing the HC/DA Program as well as the federal SSI rules. Section 2640.0115.02 of the policy manual provides that "gross income is used to determine eligibility" for the HC/DA Program. Section 1840.0102 of the policy manual provides that "[s]ome deductions withheld from gross income must be included as income" and that section specifically lists health insurance premiums as an example of such a deduction. Section 1840.0118 of the policy manual provides: A vendor payment is a money payment made for SFU [sic] expenses by an individual or organization outside of the SFU [sic] from funds not legally owed to the SFU [sic]. Vendor payments are excluded as income. . . . * * * Direct payments to a creditor or vendor on behalf of an individual are vendor payments and are excluded as available income to the individual with exception. When a vendor payment results in the individual directly receiving income, the income is included. . . . (Emphasis supplied.) Section 1440.1400 of the policy manual provides that: Individuals must apply for and diligently pursue to conclusion an application for all other benefits for which they may be eligible as a condition of eligibility [for the HC/DA Program]. Need cannot be established nor eligibility determined upon failure to do so. Section 1440.1400 specifically identifies retirement benefits and health insurance payments as examples of the other benefits for which the applicant must apply. Based upon his review of the policy manual, and particularly the sections quoted above, Mr. Menotti concluded that the health insurance subsidy is not a "vendor payment" and that it must be included in Petitioner’s gross income. Mr. Menotti conveyed this conclusion to Ms. Bolen. Thereafter, Ms. Bolen updated her calculations to reflect Petitioner's total monthly income as $1,684.00, which exceeds the income threshold for the HC/DA Program. Ms. Bolen then returned the application to Ms. Seymour. Based upon the economic self-sufficiency unit's determination that Petitioner's income exceeded the threshold for the HC/DA Program, Ms. Seymour notified Petitioner in writing on March 20, 2003, that she was "financially ineligible" to receive home care services. Ms. Bolen knew Petitioner when she was a Department employee. She and Ms. Seymour are continuing to work with Petitioner to identify Department programs for which Petitioner may be eligible. As of the date of the hearing, those efforts had resulted in Petitioner being found eligible for the Department's Medical Needy Program. Upon learning that her income exceeded the threshold for the HC/DA Program, Petitioner considered giving up the health insurance subsidy in order to reduce her income below the threshold. Ms. Bolen advised her not to do so. Ms. Bolen's advice was based upon Section 1440.1400 of the policy manual which does not allow an applicant for services under the HC/DA program to turn down other benefits or assistance that they may be eligible for. Had Ms. Bolen not given Petitioner this advice, Petitioner would have given up the health insurance subsidy for no reason. In a final effort to determine whether there was any means by which Petitioner could be found eligible for services under the HC/DA Program, Petitioner’s case was referred to Lynn Raichelson, an adult services policy specialist with the Department's Tallahassee office, for review. Ms. Raichelson contacted DOR to obtain information regarding the operation of the health insurance subsidy. She also contacted the Atlanta office of the SSA, which is the federal agency responsible for administration of the SSI program. Based upon information that she received from those sources, Mr. Raichelson concluded that the subsidy must be included as income in determining eligibility for services under the HC/DA Program.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Children and Family Services issue a final order denying Petitioner's application for services under the Home Care for Disabled Adults Program because her income level exceeds the threshold for the program. DONE AND ENTERED this 30th day of July, 2003, in Tallahassee, Leon County, Florida. S T. KENT WETHERELL, II Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 30th day of July, 2003.
The Issue The issue for consideration in this hearing was whether Petitioner was entitled to insurance coverage reimbursement for items claimed as a result of his son's hospitalization at a specialty hospital in April, 1989.
Findings Of Fact At all times pertinent to the issues herein, Petitioner, Claud E. Leiby, was employed by the State of Florida and was a member of the State Group Health Self Insurance Plan. The State of Florida, Department of Administration, Division of State Employees' Insurance, is the state agency responsible for administering the Group Health Self Insurance Plan in Florida. On April 5, 1989, Petitioner's son, Floyd (Chris), attempted to take his own life. Chris is hearing impaired. He is a 22 year old who was, at the time, six months away from earning his Bachelor of Science degree in Computer Engineering Technology at Tampa Technical Institute. Prior to this suicide attempt in April, 1989, Chris had been seen by a psychologist who referred him to a psychiatrist. Chris had previously been seen by a psychiatrist for a drug abuse problem several years before. Approximately two years ago, Chris was admitted to Palms Hospital in Sarasota, an institution covered by the insurance plan in issue. At that time, the hospital represented it would provide an interpreter for the deaf and those other specialized personnel necessary for appropriate treatment of a hearing impaired individual. However, after several days of treatment which were singularly non-beneficial because of the fact that no interpreter was provided and Chris could not lip read, the treatment was terminated and Chris was discharged. The Leibys felt, based on that experience, that appropriate service could or would not be provided at a facility covered by the plan, and as a result, when Chris attempted to take his life on April 5, 1989, did not even attempt to hospitalize him in either of the covered facilities in Sarasota County, Sarasota Palms Hospital or Sarasota Memorial Hospital. Instead, they had him admitted to Horizon Hospital in Sarasota, a psychiatric specialty hospital which is the only hospital in the area providing a program for the psychiatric treatment of the hearing impaired even though they had been advised such treatment would not be covered. Their conclusion as to the lack of availability of other qualified treatment may not have been accurate, however. Dr. Curran, director of mental health services at Memorial indicated that facility could and would provide adequate treatment for the hearing impaired. This is inconsistent with the Petitioner's prior experience. The Leibys felt that due to the suicidal attempt, the situation constituted an immediate crisis. However, after several days of Chris' hospitalization at Horizon, they were advised that their coverage under the state plan would not cover the incurred expenses at that facility. The Plan administrator indicated the Petitioners were not covered because of the terms of the plan which exclude services and supplies provided by a specialty institution. Further, the Division took the position that since Chris attempted to take his own life, and since the plan excludes coverage for services and supplies resulting from an intentional self-inflicted injury, it was "unlikely" reimbursement would be made even if Chris had been admitted to one of the eligible hospitals. Petitioner claims that the Division's interpretation of the rule and the plan provisions constitutes a form of discrimination against the handicapped which is prohibited by federal and state law. After Chris was discharged from Horizon Hospital, he had another episode while at work and was taken to a medical facility in St. Petersburg. After four days, he was released and taken to see Dr. Douglas R. Elliott, a psychiatrist, who was unable to treat him successfully without the services of an interpreter. Dr. Elliott indicated that Ms. Leiby, who acted as an interpreter on the first session, could not continue to act in that capacity, considering the issues that needed to be addressed. In the doctor's opinion, the treatment Chris received at Horizon was both necessary and beneficial. The Plan brochure provided to state employees contains numerous provisions pertinent to this hearing. On Page 3, the definition of a hospital specifically includes a "specialty institution" and at page 9, the section on Limitations (on coverage) indicates, "Payment for inpatient services rendered by a hospital and/or specialty institution while confined for alcoholism or drug addiction, and/or rendered by a hospital while confined for alcohol or drug addiction or mental or nervous conditions, shall be made for not more than thirty-one (31) days of confinement during a calendar year. Specialty institutions are, in the Summary of Benefits section found on Page 6, identified as being permitted for alcohol/drug impaired employees only. In the Exclusions portion, found on pages 11 and 12, services and supplies provided by a specialty institution or residential facility (with the exception of the alcohol/drug treatment for employees) are excluded as are services and supplies provided by a skilled nursing facility for the treatment of an insured for alcoholism, drug addiction, (other than for employees), or mental or nervous conditions. The Plan Benefit Document itself, which was not previously provided to Petitioner, at page 24, defines a "specialty institution" as a "licensed facility providing an inpatient rehabilitation program for the treatment of persons suffering from alcohol or drug abuse or mental or nervous conditions." At Section VII L, dealing with Exclusions, "...services and supplies provided by a specialty institution, except as provided under Section II G, (treatment relating to alcoholism or drug addiction for the employee only), are excluded from coverage." The Division has defined these terms as meaning, in substance, that a specialty institution is specifically excluded except when a covered employee asks approval for entry into such an institution for alcohol or drug addiction. Otherwise, they have been excluded since implementation of the plan in 1972, because of cost. If these institutions were to be included, the additional costs would, according to Mr. Seaton, mean premium rates to the participants would have to be increased. The benefit document, as it exists, was constructed with the assistance of Blue Cross/Blue Shield and other consultants. It was the intent of the Department to provide services that a majority of the employees and their families need. To change the benefit document requires legislative approval. The plan is not intended to deny coverage to the handicapped. An "appropriate" service was available to Chris at the time of his admission to Horizon Hospital in April, 1989 under the state plan. Further, in Mr. Seaton's opinion, since the injury was self-inflicted, even if Chris had been admitted to an eligible hospital, coverage would not have been available. This latter position is unsupportable as an improper interpretation of the relevant provision. To insure cost reimbursement, Petitioner would have had to have a physician admit Chris to an acute care hospital such as Palms or Memorial, and in that case, according to Seaton, the state would have allowed up to 31 days of inpatient service. Seaton indicates that Section 504 of The Rehabilitation Act of 1973, was not considered in determining benefits to be covered. In his opinion, the "majority of employee needs" were covered and handicapped employees are covered to the same degree as non-handicapped employees. Family coverage for an employee does not include provisions to cover special needs of family members. Since treatment for handicapped is covered as a matter of course, no need was seen to make specific provision for handicapped individuals. The limitations, exclusions, or benefits provided are the same for all members and are provided to the handicapped to the same extent as to the non-handicapped. When asked if the patient had been initially admitted to a general hospital and thereafter referred to a specialty hospital as a matter of appropriate medical treatment by a covered provider, would that specialty admission be covered, Mr. Seaton replied, "absolutely not."
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that the Petition for reimbursement for Chris' hospitalization at Horizon Hospital be denied. RECOMMENDED this 24th day of October, 1989, in Tallahassee, Florida. ARNOLD H. POLLOCK, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 24th day of October, 1989. APPENDIX TO RECOMMENDED ORDER, CASE NO. 89-4186 The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes on all of the Proposed Findings of Fact submitted by the parties to this case. None submitted by Petitioner: For the Respondent: 1.-5. Accepted and incorporated herein. 6.-7. Accepted and incorporated herein. Accepted. Accepted. Petitioner submitted the hospital bill subsequent to the hearing and after both parties had rested. Respondent moved to strike this evidence but the motion was denied. The amount of the hospital bill is now known, but in light of the Findings and Conclusions is not relevant. Accepted and incorporated herein. Accepted and incorporated herein. Accepted except for last sentence. Petitioner's opinion is based on prior experience. Accepted. This is opinion only. Not a Finding of Fact but a restatement of testimony. The substance of the testimony is accepted, however. Accepted and incorporated herein. 16.-18. Accepted and incorporated herein. 19. Accepted as to lack of discrimination. COPIES FURNISHED: Claude E. Leiby 321 East Lake Drive Sarasota, Florida 34232 Augustus D. Aikens, Jr., Esquire Department of Administration 435 Carlton Building Tallahassee, Florida 32399-1550 A. J. McMullian, III Interim Secretary Department of Administration 435 Carlton Building Tallahassee, Florida 32399-1550
The Issue Whether Petitioner is entitled to receive retroactive retiree health subsidy payments from the Florida Retirement System in addition to those already received.
Findings Of Fact The Division of Retirement (Division) is, and was at the times material to this case, the state agency charged with the responsibility of administering the Florida Retirement System (FRS). Petitioner, Olga Magnusen, was employed by Florida International University (FIU) from February 18, 1974, until her retirement. FIU is an FRS-participating employer. Thus, by reason of her employment, Petitioner was enrolled in the FRS. Mrs. Magnusen requested an estimate of her retirement benefits in September 2003. In response to this request, the Division audited Petitioner’s account and sent her an "Estimate of Retirement Benefit" for purposes of the Deferred Retirement Option Program (DROP). The benefit estimate was mailed to Petitioner’s address of record which was 11441 SW 83rd Terr, Miami, Florida 33173-3617 (Miami address). Enclosed with Petitioner’s benefit estimate was an option selection document and an informational booklet or brochure entitled "Preparing to Retire," which reads in pertinent part as follows: THE RETIREE PACKET After your name is placed on the retired payroll to begin receiving monthly benefits, we will mail you a Retiree Packet. You should receive this packet around the same time you receive your first benefit payment. If you are a DROP participant, your name will not be placed on the retired payroll until your DROP participation ends and the Division receives a properly completed DROP Termination Notification, Form DP-TERM. Retiree Packets contain the following items: -An information letter This letter summarizes your retirement information and lists the contents of your Retiree Packet. It also highlights issues of importance to you as a new retiree. * * * Health Insurance Subsidy Certification, Form HIS-1. This form is used to apply for additional payment to assist you with some of the cost of maintaining health insurance. Please refer to the 'Health Insurance Subsidy' section on page 17 for eligibility information. * * * An After You Retire Booklet This booklet contains helpful information and answer [sic] questions you might have as a new retiree. You should review and retain this booklet. If you have questions related to your FRS benefit that are not addressed by this booklet, please contact the Division. * * * HEALTH INSURANCE SUBSIDY (HIS) The HIS is additional money available to eligible FRS retirees to help offset some of the cost of maintaining health insurance coverage. DROP participants are not eligible to receive HIS payments until after their DROP participation ends. . . . * * * The current subsidy is $5 per month for each year of creditable service at retirement. The minimum HIS payment is $30 per month and the maximum is $150 per month. A Health Insurance Subsidy Certification, Form HIS-1, will be included in the Retiree Packet mailed so you may apply for the HIS benefit. You will receive your packet around the time you receive your first monthly benefit payment. You must return a completed Form HIS-1 to the Division of Retirement within six months after your monthly retirement benefits start in order for the subsidy to be paid retroactive to your retirement date or, in the case of DROP retirees, to the month following your DROP termination date. If you do not return the form within this six month period, retroactive subsidy payments will be limited to a maximum of six months. You are responsible for obtaining certification of your health insurance coverage and applying for the HIS. The HIS benefit is included in your monthly FRS retirement benefit. (emphasis in original) A copy of the booklet and forms sent to Petitioner are not reflected in Petitioner’s file, as the Division does not place copies of forms or booklets sent automatically. Mrs. Magnusen completed the necessary forms to enter the DROP program and entered DROP on or about March 1, 2004. By letter dated April 14, 2004, the Division sent another letter to Mrs. Magnusen advising her of the completion of the final calculation of her monthly FRS DROP accrual for the retirement benefit option she selected. The letter provided in pertinent part: At the end of the DROP, your name will be placed on the regular retired payroll. You will receive information about withholding federal taxes from your retirement benefits, an application for the Health Insurance Subsidy and an application for the direct deposit of your monthly retirement benefit payment with the bank or financial institution of your choice. The above-referenced letter was again sent to Petitioner’s Miami address referenced in paragraph 3 above. By letter dated September 29, 2005, Petitioner notified FIU of her intention to terminate her employment effective on or about December 29, 2005. By letter dated October 20, 2005, FIU provided the Division with a copy of Petitioner’s resignation letter and requested that the Division begin processing Petitioner’s DROP termination. On October 24, 2005, the Division sent a letter with certain forms and informational material relevant to her DROP termination to Petitioner at the Miami address. The letter read in pertinent part as follows: When your name is added to the retired payroll, you will receive a 'retiree packet' that contains an information letter, 'After you Retire' booklet, W-4P 'Witholding Certificate for Pension Payments', Health Insurance Subsidy application, and Direct Deposit Authorization. The retiree packet is mailed approximately one week before you receive your first monthly benefit. By letter dated December 9, 2005, the Division acknowledged receipt of Petitioner’s DROP payout form in a letter mailed to Petitioner’s Miami address. The letter read in pertinent part as follows: After your name is added to the retired payroll, you will receive a ‘retiree packet’ that contains an information letter, 'After you Retire' booklet, W-4P 'Witholding Certificate for Pension Payments', Health Insurance Subsidy application, and Direct Deposit Authorization. The retiree packet is mailed approximately one week before you receive your first monthly benefit. In late December 2005, Mrs. Magnusen and her husband moved from Miami to 2044 Darlington Drive, The Villages, 32162 (The Villages address.) While Petitioner did not expressly testify that she notified the Division of her change of address, Mrs. Magnusen and her husband "notified people and organizations about our address change and made provisions with the Post Office to forward our mail from the old to the new address." A state warrant dated January 6, 2006, in the amount of $51,483.36, Petitioner’s net lump sum DROP payment amount, was issued and mailed to Petitioner at the Miami address. The warrant was endorsed by Petitioner for deposit on or about January 18, 2006. It is presumed, therefore, that the warrant was forwarded to The Villages address. It is the Division’s practice to send each retiree added to the system a 'retiree packet' that includes, among other things, an application for the HIS and an explanation of the subsidy, as well as a booklet containing an explanation of all of the benefits available to retirees and beneficiaries under the FRS. The process of sending out retiree packets is automated, so that a packet is sent to every retiree and beneficiary when he or she are first entered into the system. Pursuant to this automated regular practice, Petitioner's retiree packet would have been sent in late January 2006. Included in the retiree packet was an informational letter which included the following: YOUR RETIREMENT PACKET INCLUDES: 'After You Retire' Brochure-PLEASE READ FOR ADDITIONAL INFORMATION * * * Health Insurance Subsidy Certification (Form HIS-1) * * * HEALTH INSURANCE SUBSIDY (HIS): It is your responsibility to obtain certification of health insurance coverage and apply for the HIS. The HIS is money added to your retirement benefit to help pay the cost of health insurance. The member or other payee who is the spouse or financial dependent of the member may be eligible if he/she has health insurance, Medicare, or CHAMPUS. Please read the instructions on Form HIS-1. If the HIS-1 form is not received by the Division within six months, retroactive subsidy payments will be limited to a maximum of six months. (Emphasis supplied in original) Also included in the retiree packet was an informational booklet entitled "After You Retire" which reiterated that it is the retiree’s responsibility to obtain health insurance coverage and apply for this benefit, and that a retiree will not automatically receive the HIS. Ms. Shirley Beauford is a Benefits Administrator in the retired payroll section of the Division. She has worked at the Division for approximately 19 and one-half years. According to Ms. Beauford, a report is generated each month when the payroll is approved, which indicates which retirees have not participated in the HIS. Ms. Beauford reviewed the "hardcopy documentation" of the June 2006 list of retirees not receiving the HIS and saw Petitioner’s name on the list. The Division automatically sends a reminder letter about five months after the beginning of a person’s retirement benefits to those retirees who have not applied for the HIS. Because Petitioner’s name appears on the June 2006 list, Ms. Beauford is confident that Petitioner was sent the reminder, as it is the standard practice of the Division to do so. There is no evidence that the Division deviated from its standard practice. The reminder would have been sent to Petitioner’s address of record in June 2006. The record is not clear whether Petitioner’s address of record was the Miami address or The Villages address at that time. Mrs. Magnusen does not recall receiving the packet and acknowledges that the nine-month period from the summer of 2005 to March 2006 was a tumultuous time for her and her husband. They moved, were affected by two hurricanes, and were confronted with some health problems. Mrs. Magnusen also recalls making numerous phone calls during that time regarding her husband’s health insurance coverage and premiums because of some confusion regarding his coverage. Mrs. Magnusen believes these calls were made to both FIU and the Division. However, the Division does not administer health insurance coverage for retirees. Twice a year, the Division automatically distributes a newsletter to all FRS retirees and beneficiaries. The HIS was specifically referenced in articles in the July 2007, January 2008, and July 2008 newsletters, including a reminder to retirees and beneficiaries to look under the summary of benefits and deductions on their statements for a "Health Ins. Subsidy" listing. Respondent mails retired members a Statement of Benefit Payments at the end of January and July each year, and any other time the retiree’s benefit changes. The Division sent statements to Petitioner’s address of record in February 2006, June 2006, July 2006, January 2007, April 2007, July 2007, December 2007, and January 2008. None of the statements has a Health Insurance Subsidy listing under the summary of benefits and deductions section. Additionally, the Division mails retired members an annual statement in January each year. These annual statements contain a category entitled "Health Ins. Subsidy." The amount of $0.00 is reflected on Petitioner’s 2006, 2007, and 2008 annual statements under the category "Health Ins. Subsidy." In contrast, the summaries reflect specific amounts under the category "Retirement Benefit." There is no evidence of record to indicate that any of the statements or mailings of any kind from the Division to Petitioner were returned. Mrs. Magnusen called the Division on or about January 5, 2009, to inquire about changing banks for the direct deposit of her FRS payments. During this telephone conversation, the Division’s representative reminded Petitioner that she was not receiving the HIS benefit. As Petitioner’s insurance premiums were already being deducted, Petitioner’s HIS application was taken over the phone. Petitioner began receiving the $150 per month HIS benefit effective January 30, 2009 and a six-month retroactive HIS benefit of $900. On January 10, 2009, Mrs. Magnusen sent a letter to the Division requesting three years of retroactive HIS benefits retroactive to her DROP termination date. By letter dated January 16, 2009, the Division’s Director informed Petitioner that retroactive HIS benefits are limited by law to six months, citing Section 112.363(9), Florida Statutes, as authority. Petitioner sent another letter in response requesting further consideration of her request for a full retroactive HIS payment. By letter dated February 23, 2009, the Division informed Petitioner that a detailed review had been completed of her retirement account, again informed that the retroactive payments are limited to six months, and provided Petitioner with a point of entry into the administrative hearing process.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law set forth herein, it is RECOMMENDED: That Respondent enter a final order denying Mrs. Magnusen’s request for additional HIS benefits retroactive to the date of her termination of DROP. DONE AND ENTERED this 30th day of July, 2009, in Tallahassee, Leon County, Florida. S BARBARA J. STAROS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 30th day of July, 2009.
The Issue Whether Petitioner's claim for medical expenses from August 6, 1982 through February 27, 1983 should be approved, pursuant to the State of Florida Employees Group Health Self Insurance Plan. Petitioner appeared at the hearing accompanied by legal counsel. The Hearing Officer thereupon explained his rights and procedures to be followed in the administrative hearing. Petitioner acknowledged that he understood his rights and elected to represent himself. Petitioner testified in his own behalf at the hearing and the parties stipulated to the introduction of Respondent's Exhibits 1 and 2. A late filed exhibit, Respondent's Exhibit 3, was also admitted in evidence. Respondent presented the testimony of one witness, William R. Seaton, Benefit Analyst for the Respondent's Bureau of Insurance.
Findings Of Fact Petitioner Thomas J. Appleyard, III, is a former state employee who retired with disability in 1976 as a result of cardiac disease. At the time Petitioner retired, he maintained coverage in the state Employees Group Health Self Insurance Plan under which the Blue Cross/Blue Shield of Florida, Inc. serves as the administrator of the plan for the state. Petitioner also receives disability benefits under the Medicare program for medical expenses. (Testimony of Petitioner) The State Group Health Self Insurance Plan provides in Section X, COORDINATION OF BENEFITS, that if an insured has coverage under Medicare, the benefits payable under the state plan will be coordinated with similar benefits paid under the other coverage to the extent that the combination of benefits will not exceed 100 percent of the costs of services and supplies to the insured. Paragraph D of Section X provides that the state plan will be the secondary coverage in such situations and will pay benefits only to the extent that an insured's existing insurance coverage does not entitle him to receive benefits equal to 100 percent of the allowable covered expenses. This provision applies when the claim is on any insured person covered by Medicare. (Testimony of Seaton, Respondent's Exhibit 3) Petitioner was hospitalized at the Tallahassee Memorial Regional Medical Center on three occasions in 1982-33. His Medicare coverage paid all but $261.75 of the hospital expenses. In February 1983, Petitioner also incurred medical expenses to his cardiologist, Dr. J. Galt Allee, in the amount of $248.33. Petitioner was originally denied his remaining hospital expenses by the administrator of the state plan under the erroneous belief that he was receiving regular Medicare benefits for persons over the age of 65. In addition, Dr. Allee's bill was only partially paid by Medicare, subject to the receipt of additional information from the physician. Payment under the state plan was limited to an amount sufficient to reimburse petitioner 100 percent of the amount originally allowed by Medicare. (Testimony of Seaton, petitioner, Respondent's Exhibit 1, 3) Respondent does not receive information on claims filed under the state plan until contacted by an employee. In February 1984, Petitioner requested assistance from William R. Seaton, Benefit Analyst, of Respondent's Bureau of Insurance, regarding his difficulties in receiving proper claims payments. Seaton investigated the matter with the Insurance administrator for the state, Blue Cross/Blue Shield of Florida, and discovered that the latter had not coordinated the hospital expense balance with Medicare. They thereafter did so and as of the date of hearing, there was no longer a balance due to Tallahassee Memorial Regional Medical Center. Seaton also gave written instructions to Blue Cross to review all of Petitioner's claims and make sure that they were paid properly, and to install controls on his and his wife's records. (Testimony of Petitioner, Seaton, Respondent's Exhibit 1-2) The full claim of Dr. Allee had not been paid by Medicare since it had been awaiting requested additional in formation from the physician. Such information was provided after a personal visit had been made to Dr. Allee by Seaton and Medicare then recognized additional eligible expenses. However, a balance of $36.00 is still owed to the physician due to the fact that Blue Cross/Blue Shield had not received the necessary payment information from Medicare as of the day before the hearing. (Testimony of Seaton, Respondent's Exhibit 1) Section XVII of the state's Group Health Self Insurance Plan benefit document provides that an employee who wishes to contest decisions of the state administrator considering the employee's coverage under the plan may submit a petition for a hearing for consideration by the Secretary of Administration. (Respondent's Exhibit 3)
Findings Of Fact Respondent, Herbert Goloff, D.C., is a chiropractor licensed to practice in the State of Florida. From March 10, 1988, through September 3, 1991, Dr. Goloff treated Ruth Waddle, a Workers' Compensation patient, for lumbar myofascitis. Lumbar myofascitis is an inflammation of the muscle and the fascia in the lumbar spine. Lumbar myofascitis is indicated by the following objective findings: recurrent spasms, limitation of motion, tender nodules, trigger point tenderness in the muscles, and taut or sensitive skin. On June 14, 1988, the Respondent placed Ruth Waddle at maximum medical improvement (MMI). The Respondent treated Ruth Waddle 14 times before placing her at MMI. The Respondent treated Ruth Waddle a total of 171 times after MMI. The Respondent is required to maintain documentation substantiating the treatment and services he rendered to Ruth Waddle in order to receive reimbursement for those services. The Respondent is required to perform an initial history, make a diagnosis, and develop a plan of care and document his subjective and objective findings in his records. The Respondent is also required to keep notes reflecting his subjective and objective findings, his appraisal or assessment and his plan of action (SOAP notes) for the patient Ruth Waddle, in order to substantiate and justify that the medical treatment and services he renders are medically necessary. If a health care provider cannot document that this treatment and services are medically necessary, he is not entitled to receive reimbursement for his services. The Respondent's records indicate that there was unscheduled ongoing care of the patient after June 14, 1988. Whenever the patient was in pain she would come in to the Respondent's Office and ask for a treatment. Respondent was not practicing full time in 1988. The patient seldom scheduled an appointment. She frequently came in on a Tuesday, a day she knew that Respondent had office hours. The patient would describe her symptoms to Respondent and he would perform various therapies, including mild adjustments. Respondent would make minimum entries in the patient's progress notes. Respondent's treatment of the patient Ruth Waddle, after reaching MMI, for the temporary relief of pain was palliative care. The Respondent's records indicate that there was inadequate testing of the patient Ruth Waddle to substantiate the medical necessity of treatment after June 14, 1988. The Respondent's records do not contain a plan of care or treatment for Ruth Waddle. The Respondents records do not contain an initial history for Ruth Waddle. The Respondents records do not contain an evaluation of Ruth Waddle's physical condition at the time of MMI relative to muscle spasms and range of motion, as well as other neurological and orthopedic tests. Respondent failed to maintain SOAP notes for the patient Ruth Waddle. The Respondent's records do not contain objective medical findings to substantiate the medical necessity of services rendered to Ruth Waddle after June 14, 1988. The Respondent's records do not substantiate the medical necessity of the frequency and duration of the treatment provided to Ruth Waddle after June 14, 1988.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that: Respondent be determined to have failed to substantiate the treatment of Ruth Waddle after June 14, 1988. The Respondent be ordered to return the sum of $7,354.68 to the American States Insurance Company for the fees that the Respondent collected in treating Ruth Waddle after June 14, 1988, when the patient reached MMI. DONE and ENTERED this 30th day of March, 1994, in Tallahassee, Leon County, Florida. DANIEL M. KILBRIDE Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 30th day of March, 1994. APPENDIX TO RECOMMENDED ORDER, CASE NO. 93-4546 The following constitutes my specific rulings, in accordance with section 120.59, Florida Statutes, on findings of fact submitted by the parties. Petitioner's proposed findings of fact. Accepted in substance: paragraphs 1-14. Respondent's proposed findings of fact. Accepted in substance: paragraphs 2, 5(a), 5(b) (in part). Rejected as against the greater weight of the evidence: paragraph 4, 5(b) (in part), 5(c). COPIES FURNISHED: Michael G. Moore, Esquire Department of Labor and Employment Security Suite 307 Hartman Building 2012 Capital Circle, S.E. Tallahassee, Florida 32399-2189 William J. McCabe, Esquire Shepherd, McCabe & Cooley 1450 West S.R. 434, Suite 200 Longwood, Florida 32750 Shirley Gooding, Secretary Department of Labor and Employment Security Suite 303 Hartman Building 2012 Capital Circle, S.E. Tallahassee, Florida 32399-2152 Cecilia Renn, Esquire Chief Legal Counsel Department of Labor and Employment Security Suite 307 Hartman Building 2012 Capital Circle, S.E. Tallahassee, Florida 32399-2152
Findings Of Fact Based on the testimony and documentary evidence presented at hearing, the demeanor and credibility of the witnesses, and on the entire record of this proceeding, the following findings of fact are made: Respondent is the state agency charged with the responsibility of administering the FRS, including the HIS benefit. The HIS benefit is a program authorized by Florida law. The HIS benefit is calculated at five dollars times the number of years of creditable state service at the time of retirement. Only those members of the FRS who receive monthly retirement benefits are eligible to apply for the HIS. Petitioner worked for the Duval County School Board and earned creditable state service in the FRS. In July 2004, Petitioner began his participation in the FRS Deferred Retirement Option Program (DROP). Petitioner's anticipated DROP termination date was June 30, 2009. In September 2004, Respondent mailed Petitioner an acknowledgement of receipt of his DROP application to his address of record on file with Respondent. Along with the acknowledgement of DROP application, Respondent provided Petitioner an estimate of his pension benefit and enclosed the "Preparing to Retire" brochure referenced in the estimate. The "Preparing to Retire" brochure discussed the HIS benefit and stated, in pertinent part, that: Around the time you receive your first monthly benefit payment after termination, an application for HIS, Form HIS-1, will be mailed to you. You must return a completed HIS application to the Division of Retirement within 6 months after your retirement benefit starts in order to be paid retroactive to your retirement date. If you fail to return the form within the 6- month period, retroactive subsidy payments will be limited to a maximum of 6 months. You are responsible for obtaining certification of your health insurance coverage and applying for the HIS. (Emphasis provided in the original.) In March 2009, Respondent mailed Petitioner forms, brochures and informational material relevant to his upcoming DROP termination to the address of record on file with Respondent. The cover letter advised Petitioner that: After your name is added to the retired payroll, you will receive a retiree packet that contains an information letter, After You Retire booklet, Tax Withholding Certificate for Pension Payments (Form W -4P), Health Insurance Subsidy application (Form HIS-1) and Direct Deposit Authorization form. The retiree packet is mailed approximately one week before you receive your first monthly benefit. (Emphasis provided in the original.) On or about June 9, 2009, Petitioner completed his DROP termination form and the form was received by Respondent. In July 2009, Respondent added Petitioner to the retired payroll for him to begin receiving his monthly pension benefit. In July 2009, Respondent also mailed Petitioner's retiree packet to his address of record on file with Respondent. The retiree packet contained a cover letter, an information brochure titled "After You Retire," a direct deposit authorization form, a tax withholding form, and an HIS application. The cover letter of the retiree packet included the following: YOUR RETIREMENT PACKET INCLUDES: - "After You Retire" Brochure - PLEASE READ FOR ADDITIONAL INFORMATION * * * -Health Insurance Subsidy Certification (Form HIS-1) and Instructions Page * * * HEALTH INSURANCE SUBSIDY (HIS): The HIS is extra money that is added to the monthly retirement benefit of eligible payees to help with the cost of health insurance. The member, or other payee who is the spouse or other financial dependent, may be eligible if he/she has health insurance, Medicare, or Tricare. If you are eligible to apply for the HIS, Form HIS-1 has been enclosed. It is your responsibility to obtain certification of your health insurance coverage and submit the enclosed Form HIS-1 to the Division. Please note that if Form HIS-1 is NOT received by the Division within six months of your first benefit payment, retroactive HIS benefits will be limited to a maximum of six months as long as your health insurance certification covers all six months. (Emphasis provided in the original.) The "After You Retire" brochure, included in the retiree packet, dedicates several pages to explaining the HIS benefit. It reiterates that it is the retiree's responsibility to obtain health insurance coverage, and to apply for the benefit by completing the HIS application included in the retiree packet. It is the Respondent's practice to comply with the requirements of Florida Administrative Code Rule 608-4.020, by mailing the retiree packet, which includes the HIS application, to retirees when they are placed on the retired payroll. In a separate mailing in July 2009, Respondent sent Petitioner's first monthly pension benefit check to his address of record. Petitioner has continued to receive his monthly pension benefit check from Respondent by mail uninterrupted to the date of the hearing. Within the first five months of a retiree’s being placed on the retired payroll, Respondent runs an HIS reminder listing to notify it of retirees who have not submitted their HIS applications. Respondent's practice is to send an HIS reminder letter to retirees on the HIS reminder listing to notify them that their HIS applications have not been received, encouraging them to file for the HIS benefit, and enclosing an HIS application. Petitioner was listed on Respondent's December 2009, HIS reminder listing. In January 2010, Respondent mailed Petitioner an HIS reminder letter to his address of record. The HIS reminder letter included yet another HIS application. Each January and July, Respondent mails a newsletter to retirees (FRS Retiree Newsletter). The HIS benefit is specifically referenced in articles in the July 2009, January 2010, July 2010, July 2011, and January 2012, FRS Retiree Newsletters. The articles range in substance and include information regarding a retiree's responsibility to apply for the HIS benefit; an explanation that the HIS benefit is not guaranteed; notification that the Florida Legislature can reduce or eliminate it; information about the tax consequences of the HIS benefit; notice that retirees can see whether they are receiving the HIS benefit by reviewing their annual statement; and that if they have questions they can consult their "After Your Retire" brochure, go online, or call the Retired Payroll Section. In January of each year, Respondent mails retirees who have received retirement benefits during the prior year information to assist them in preparing their tax returns. Included in the January mailing is the IRS Form 1099-R, an annual statement detailing the income payment types received (Retiree Annual Statement), and the January FRS Retiree Newsletter. The Retiree Annual Statement identifies two different types of income payments made to retirees: (1) the monthly retirement benefit, and (2) the monthly HIS benefit. The amount of HIS benefit reflected on Petitioner's 2009, 2010 and 2011 Retiree Annual Statement is $0.00. Petitioner disputes whether he received Respondent's various mailings regarding the HIS benefit. However, Petitioner does not dispute that he has received his monthly pension benefit check by mail from Respondent each month from July 2009, to present. Petitioner receives "a lot of junk mail," but he keeps a close eye out for his monthly pension benefit check. Respondent's records reflect, and Petitioner does not dispute, that his address at the time he retired was 1923 Durkee Drive West. Respondent's records reflect that Petitioner's address changed to 10836 Peaceful Harbor Drive, effective May 3, 2010. These two addresses are the only addresses where Petitioner has lived since he retired. It is incumbent upon a retiree to keep Respondent notified of any change of address. Respondent's records reflect that its mailings to Petitioner, including his monthly pension benefit check, have not been returned as undeliverable to Respondent. At some point in 2012, Petitioner called Respondent to inquire about changing his tax deduction status. During the course of that conversation, Respondent reminded Petitioner that he had not applied for and was not receiving the HIS benefit. Petitioner then submitted his HIS application to Respondent in December 2012. Petitioner began receiving his HIS benefit effective December 2012. Based on the date of receipt of Petitioner's HIS application, Petitioner was eligible for six months of retroactive HIS benefit, effective June 2012. Petitioner argues that Respondent should have communicated the requirement for him to apply for the HIS benefit by certified mail, by an active telephone call, or by notification in the envelope he receives his monthly pension benefit check. Petitioner asserts no statutory, regulatory, or other authority for this proposition. Petitioner also alleges that Respondent ultimately sent the HIS application to him by certified mail, and that it was the only certified mail he has received from Respondent. However, the record reflects that the certified mail Petitioner is referring to is Respondent's January 25, 2013, final agency action letter sent to Petitioner. Petitioner further asserts that the HIS benefit is an earned right, an entitlement, not subject to arbitrary forfeiture, and is unclaimed property under chapter 717, Florida Statutes. Again, Petitioner provides no authority for this argument.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Management Services, Division of Retirement, enter a final order denying Petitioner’s request for additional HIS benefits retroactive to his retirement date. DONE AND ENTERED this 22nd day of November, 2013, in Tallahassee, Leon County, Florida. S W. DAVID WATKINS 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 22nd day of November, 2013.
Conclusions Having reviewed the Administrative Complaints dated June 17, 2010 and September 9, 2010, attached hereto and incorporated herein (Comp. Exhibit 1) , and all other matters of record, the Agency for Health Care Administration (“Agency”) has entered into a Settlement Agreement (Exhibit 2) with the parties to these proceedings, and being otherwise well-advised in the premises, finds and concludes as follows: ORDERED: 1. The attached Settlement Agreement is approved and adopted as part of this Final Order, and the parties are directed to comply with the terms of the Settlement Agreement. 2. Respondent shall pay, within thirty (30) days of the date of 1 Filed January 14, 2011 3:07 PM Division of Administrative Hearings rendition of this Order, an administrative fine in the sum of three thousand two hundred fifty dollars ($3,250.00) and survey fees in the sum of one thousand dollars ($1,000.00) for total assessments of four thousand two hundred fifty dollars ($4,250.00). 3. Checks should be made payable to the “Agency for Health Care Administration.” The check, along with a reference to this case number, should be sent directly to: Agency for Health Care Administration Office of Finance and Accounting Revenue Management Unit 2727 Mahan Drive, MS #14 Tallahassee, Florida 32308 4. Unpaid amounts pursuant to this Order will bé subject to statutory interest and may be collected by all methods legally available. 5. The Respondent’s requests for Administrative proceedings are hereby withdrawn. 6. Each party shall bear its own costs and attorney’s fees. 7. The above-styled cases are hereby closed. DONE and ORDERED this _|2 day of yeep F 20l/, in Tallahassee, Leon County, Florida. rim Secretary Agency for Health Care Administration A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO JUDICIAL REVIEW WHICH SHALL BE INSTITUTED BY. FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF AHCA, AND A SECOND COPY, ALONG WITH FILING FEE AS PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE AGENCY MAINTAINS ITS HEADQUARTERS OR WHERE A PARTY RESIDES. REVIEW OF PROCEEDINGS SHALL BE CONDUCTED IN ACCORDANCE WITH THE FLORIDA APPELLATE RULES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED. Copies furnished to: Richard M. Sebek, Esq. Banker Lopez Gassler P.A. Counsel for Respondent 501 East Kennedy Bivd., Suite 1500 Tampa, FL 33602 (U.S. Mail) Thomas J. Walsh II, Senior Attorney Agency for Health Care Admin. 525 Mirror Lake Drive N. #330H St. Petersburg, Florida 33701 (Interoffice Mail) Jan Mills Agency for Health Care Admin. 2727 Mahan Drive, Bldg #3, MS #3 Tallahassee, Florida 32308 (Interoffice Mail) Hon. J. D. Parrish Administrative Law Judge Division of Administrative Hearings 1230 Appalachee Parkway Tallahassee, Florida 32399-3060 (Interoffice Mail) Agency for Health Care Admin. Office of Finance and Accounting Revenue Management Unit 2727 Mahan Drive, MS #14 Tallahassee, Florida 32308 Interoffice Mail) Hon.William F. Quattlebaum Administrative Law Judge Division of Administrative Hearings 1230 Appalachee Parkway Tallahassee, Florida 32399-3060 (Interoffice Mail) CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of this Final Order was served on the above-named person(s) and entities by U.S. Mail, or the Richard Shoop, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Building #3 Tallahassee, Florida 32308-5403 (850) 412-3630
Findings Of Fact National Benefit is a foreign corporation incorporated under the laws of the District of Columbia, organized for profit, and doing business in several states, including the State of Florida. National Benefit is authorized to write insurance in the State of Florida. Insurance Marketing Corporation (INC) operates as the marketing arm for Associated Direct Marketing Services (ADMS), which in turn is an affiliate of National Benefit and functions as the marketing company for National Benefit. INC prepares all of National Benefit's direct response marketing, including the advertisement at issue in this case. National Benefit is fully responsible for advertisements prepared by INC. National Benefit has advertised and is currently advertising insurance products, through the television medium, which are received by residents of the State of Florida. One such product is known as "Security Life TM." The television advertising at issue in this case is referred to as IMC- 103 and is a television commercial featuring Dick Van Dyke as the compensated spokesperson. Van Dyke states: "that National Benefit Life has found a way for you to get the protection you need . . . at a price you really can afford. Just $3.95 a month . . . ." At this point in the advertisement, superimposed on the screen are the words: "$3.95 a month (per unit)" At no time during this advertisement is there either an explanation of the use of units in which a common premium is specified or a description of varying benefit amounts according to age. During the advertisement, Van Dyke states that a forty-five (45) year old male consumer can obtain forty thousand dollars ($40,000.00) of coverage for just sixty-five cents ($.65) a day. However, the implication is that such coverage can be obtained for a monthly premium of three dollars and ninety-five cents ($3.95) because this figure is prominently displayed twice on the screen and Van Dyke mentions this figure twice within a 120-second period. In reality, the consumer must purchase five (5) units of insurance at a monthly premium of nineteen dollars and seventy-five cents ($19.75) to be eligible for the forty thousand dollars ($40,000) benefit advertised. At the advertised premium of three dollars and ninety-five cents ($3.95)(one unit) per month, a forty-five (45) year old male consumer would receive benefits of only six hundred ($600.00) in Term Life benefits if he dies a natural death at age seventy (70) while having paid in seven hundred eleven dollars ($711.00). A forty-five year old consumer purchasing five (5) units would obtain a forty thousand dollar ($40,000.00) benefit only if the consumer's death was caused by a covered accidental bodily injury and only after the first two years of coverage. The amount of coverage decreases as the policyholder's age increases. Death benefits are limited to premiums paid during the first two (2) years of coverage if death is caused by other than accidental bodily injury. The advertisement contains a 14-word superimposed summary of limitations on benefits which appear on the screen for approximately two (2) seconds. At the same time that the summary of limitations appears on the screen, Van Dyke is discussing something unrelated to the summary of limitations. There is no other explanation of these terms. A person of average education or intelligence cannot be expected to read or comprehend the afore-mentioned summary within the two (2) second period in which the summary appears on the screen. In fact, the undersigned was able to read only the first five words when the advertisment was shown. Van Dyke also states during the afore-mentioned advertisement, "Big Dollar Benefits." Using Van Dyke's example given in the advertisement, i.e., forty thousand dollars ($40,000.00) of coverage, a forty-five (45) year old male would have to purchase five (5) units of insurance, keep the policy in force, die before age forty-ninety (49), and die as a result of accidental bodily injury, directly and independently from all other causes, within ninety (90) days of the accident. None of these factors are mentioned in the advertisement. Likewise, a forty-five (45) year old male could purchase five (5) units of insurance, keep the policy in force until his natural death at age sixty (60), and have paid National Benefit a total premium of three thousand five hundred fifty-five dollars ($3,555.00), yet the policy would pay, because of decreasing benefits, a total benefit of only three thousand dollars ($3,000.00). The advertisement indicates "guaranteed acceptance" by superimposition and spoken text without explaining the limitations on benefits in a manner contiguous to and as prominent as the term. Taken as a whole, IMC-103 is deceptive and misleading advertising and has the capacity or tendency to mislead or deceive either by fact or implication. After the Notice and Order to Show Cause was received by National Benefit in November, 1987; it continued to run the subject advertisement on local television stations until February, 1988. The advertisement, when cancelled, was cancelled for poor response. National Benefit re-entered the spot market in Florida with this advertisement subsequent to its cancellations. National Benefit continues to show a commercial almost identical to INC-103 available for viewing in Florida by Cable T.V. National Benefit had actual notice of and access to the rules of the Department of Insurance regarding advertising, Chapter 4-35, Florida Administrative Code. National Benefit has a "compliance manual," but does not always follow the requirements set out in that manual. Repeated references to age and health emphasize the aspects of the policy which pay for death by natural causes over death by accident. The advertisement neglects objective information and obfuscates elements of cost. Taken as a whole, there is both direct and circumstantial evidence of a knowing intent to make a distorted presentation and to present less than a full, fair and accurate explanation of the policy through this televised advertisement. The advertisement involves a compensated person and includes identification of various toll-free telephone numbers which Florida residents are encouraged to use in order to receive additional information concerning the advertised insurance product. As a result of receiving a telephone inquiry from Florida residents, National Benefit also solicits its insurance products via U.S. Mail by sending consumers information packets called fulfillment kits containing various written material concerning its advertised product. At the time a consumer views the television advertisement, the consumer does not have the fulfillment kit available. The television advertisement is a separate advertisement and may in itself be deceptive and misleading. The television ad contains an "800" number that viewers can call to receive a fulfillment kit. The fulfillment kit contains an application for insurance. Once consumers receive a fuflment kit, if they wish to purchase insurance, they fill out the application and send it to the company. Because the next item received following the viewing of the T.V. commercial contains an application form, it is possible to purchase the insurance solely on the basis of Van Dyke's representations as to premiums and benefits. The statements of Van Dyke went beyond the parameters authorized in Rule 4-35.008, Florida Administrative Code, and constituted solicitation. Explanation of policy provisions including quotation of premiums and benefits are acts performed by a licensed agent and constitute solicitation. Van Dyke described coverages, benefits and premiums, and in doing so is acting as an insurance agent for National Benefit. Van Dyke is not licensed as an insurance agent in the State of Florida. No action has been brought by the Department against Van Dyke and Van Dyke is not a party to this action. Joe Plante, Vice-President of Direct Response Advertising Compliance for IMC, keeps up with the current rules and regulations of state insurance departments as they occur. In order to carry out this responsibility, Mr. Plante has a set of ACLI manuals relating to group insurance which are updated on a daily basis. He receives updates to the National Law Services Manual, and he attends regular NAIC meetings and ad hoc NAIC meetings, including the Delaware Valley Ad Hoc Committee. NAIC is an acronym for National Association of Insurance Commissioners. It meets three times per year for a day or two days for the purpose of discussing compliance issues. Mr. Plante also determines where advertising can be viewed and aired. In carrying out this responsibility he often requires that advertising materials be modified to comply with state regulations and he has taken advertising to the Florida Department of Insurance to be reviewed prior to use since 1981, even though such a review is not required by the Department. When a company submits an advertisement for review by the Department, if the analysts do not find any apparent violations, their usual procedure is to stamp the advertisement "Filed" and return a copy to the company. The same procedure may or may not be followed after apparent violations noted by the analysts have been corrected by the company. After a company has made all changes in its advertising requested by the Department, the Department's file is closed. Closing the file means that the advertising appears to be in compliance with applicable statutes and rules. A file may be reopened at any time. On November 25, 1986, Plante met with Department personnel regarding a television advertising script identified as IMC-115 and a fulfillment kit which the company planned to mail to viewers responding to the advertisement. Mr. Plante did not supply the Department with a videotape of the ad. The Department personnel took the advertising material to review and agreed to meet with Mr. Plante later that same day to offer their comments. The supervisor of the analyst who reviewed INC-115 told the analyst, in front of Mr. Plante, that he should review the T.V. script and solicitation letter only. The fulfillment kit and videotapes were not reviewed at that time. At the second meeting on November 25, 1986, Department personnel suggested various changes be made to the television advertising material which had been submitted. Mr. Plante returned to his office in Pennsylvania and directed that the changes suggested by the Department be incorporated in the television advertisements, with one exception. The Department's request that the compensated endorser's statement that "no agent will come to your home" be eliminated was not complied with because this would have entailed refilming the advertisements. On January 30, 1987, Mr. Plante submitted a videotape of a television advertisement identified as IMC-103 to the Department with a cover letter indicating that the requested changes had been made. IMC-103 is very similar to IMC-115, but not identical. No script was provided for IMC-103. On February 20, 1987, Department personnel sent a letter to Mr. Plante which states in part: "Once we have resolved this matter, the material appears to be in compliance with Florida advertising rules and regulations." Department personnel had not reviewed the videotape of IMC-103 prior to sending the letter. The television advertising identified as IMC-103 contains the words "Big dollar benefits," which were not contained in the script presented to the Department for review on November 25, 1986, and identified as INC-ll5. The Department closed its file on March 23, 1987. The compliance manual developed in September, 1986, by Mr. Plante for IMC states that Florida prohibits use of the term "No agent will call" and "No medical exam." However, the term "no agent will come to your home" was included in both IMC-115 and IMC-103. The manual contained these admonitions at the time IMC-115 was submitted to the Department for review. IMC began broadcasting IMC-103 in March, 1987, without further changes and spent in excess of $350,000.00 in broadcasting IMC-103 over the next year. In September, 1987, the Department began a review of medicare supplement and life and health insurance advertising. Department personnel were directed to obtain copies of the scripts and videotapes of insurance television advertisements, to review them, and to send the analysts' reviews to the legal office. In conjunction with this departmental review, Plante supplied the materials related to IMC-103. This action is a result of the September, 1987, investigation. Between March, 1987, when the Department closed its file on IMC-103 and November, 1987, when this action was brought, the Department clearly changed its policy regarding what statements by compensated endorsers constitute solicitation and what statements constitute an invitation to inquire. The Department has initiated rulemaking to reflect the Department's current policy in its rules. There is no definition of what constitutes deceptive or misleading advertising in the department's rules. In this case, both parties offered expert testimony of what the appropriate definition is. National benefit's expert, Phillip E. Downs, acknowledged that there are different definitions of deceptive advertising. The definition he supports is that advertising is considered to be deceptive if it includes untruthful claims that create belief levels in individuals that result in some purchase behavior that would result in some harm or damage to the consumer. Essentially, Downs' definition contains three elements: 1) requires that the advertisement contains statements which are untrue, and 2) which are believed by the consumer, 3) resulting in damage to the consumer. This definition is rejected as it does not conform to the statutory framework which recognizes that an advertisement can be either untrue, deceptive or misleading. Additionally, there is no statutory prerequisite involving the need to show damage to the consumer. Instead, the definition used and applied by the Department's expert, Richard W. Mizerski, is accepted and credited and it has been applied herein. That definition requires that the viewer be lead to believe things that are not true and it involved four factors: the probability of deception, the characteristics of the targeted audience, the materiality of the information, and the way the information is presented. An advertisement is deceptive if individuals have the capacity of taking away an understanding this is not based on reality or if they come away with a perception that is not realistic, given what the real situation is. It includes deception by omission. There is no necessity that actual injury occurs, but there must be a possibility of injury.
Recommendation Based upon the foregoing Findings of Fact and Conclusion of Laws, it is RECOMMENDED that the Department of Insurance, through the Insurance Commissioner, enter a Final Order and therein: Find National Benefit Life Insurance Company guilty of violating Sections 626.9521 and 626.9541 and Rules 4-35.004, 4-35.005, and 4-35.006(1)(a) and (f) and (2)(a). Dismiss the charges that National Benefit Life Insurance Company violated Sections 626.051 and 626.112. Impose an administrative penalty of $10,000.00 against National Benefit Life Insurance Company for the above mentioned violations. Find that the compensated spokesperson in IMC-103 does solicit insurance. Order National Benefit Life Insurance Company to cease and desist from using IMC-103 in Florida. DONE AND ENTERED this 12th day of August, 1988 in Tallahassee, Leon County, Florida. DIANE K. KIESLING Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division Administrative Hearings this 12th day of August, 1988. APPENDIX TO THE RECOMMENDED ORDER IN CASE NO. 87-5436 The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on the proposed findings of fact submitted by the parties in this case. Specific Rulings on Proposed Findings of Fact Submitted by Petitioner, Department of Insurance and Treasurer Each of the following proposed findings of fact are adopted in substance as modified in the Recommended Order. The number in parentheses is the Finding of Fact which so adopts the proposed finding of fact: 1(1); 2(2); 3(5); 4-19(4-19); 20(21); 21-39(47-65); 40-43(67-71); 46-51(22-27); 52(8); 53(9); 54(15); 55(20); 57(15); 58-62(28-32); 65 and 66(39); 67(38); 68(41); 69(42); 71(40); and 72-76(33-37) Proposed findings of fact 44, 56, 63, 64, and 70 are subordinate to the facts actually found in this Recommended Order. Proposed finding of fact 45 is irrelevant. Specific Rulings on Proposed Findings of Fact Submitted by Respondent, National Benefit Life Insurance Company Each of the following proposed findings of fact are adopted in substance as modified in the Recommended Order. The number in parentheses is the Finding of Fact which so adopts the proposed finding of fact: 1(1 and 2); 2(3); 12(31 and 35); 17-19(44-46); 29(63); 30(66); 34(69); and 38(70). Proposed findings of fact 3, 4, and 6-8 are unnecessary. 3. Proposed findings of fact 5, 9-11, 14-16, 22, 26-28, 31, 32, 35, 37, 39-46, 48, 49, 53, 55, 58-60, and 62-65 are subordinate to the facts actually found in this Recommended Order. 4. Proposed findings of fact 13, 33, 51, and 52 are rejected as being unsupported by the competent, substantial evidence. 5. Proposed findings of fact 20, 21, 23-25, 36, 47, 50, 54, 56, 57, and 61 are irrelevant. COPIES FURNISHED: Gabriel Mazzeo, Attorney at Law Susan F. Stafford, Attorney at Law Richard W. Thornberg, Attorney at Law Office of Legal Services 413-B Larson Building Tallahassee, Florida 32399-0300 Douglas A. Mang, Attorney at Law Charles T. Collette, Attorney at Law Edward W. Dougherty, Jr., Attorney at Law P. O. Box 11127 Tallahassee, Florida 32302 Stephen R. Herbert, Attorney at Law 900 Third Avenue New York, New York 10022 Honorable William Gunter State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300
The Issue Whether Respondent, Department of Financial Services, Division of Workers’ Compensation, Medical Services (the Department), correctly determined the amount of reimbursement Petitioner, Zenith Insurance Company (Zenith), owes to Lawnwood Regional Medical Center (Lawnwood) for medical services, pursuant to section 440.13(7), Florida Statutes (2018).1/ More specifically, the issues raised in this case are: whether Zenith properly adjusted or disallowed payment by paying what it believed were “reasonable” charges for the Workers’ Compensation medical services provided; whether the Department’s consideration of a “Stop-Loss” percentage-based methodology, as opposed to a per diem rate, may serve as a basis for reimbursement; and what, if any, is the additional amount Zenith owes to Lawnwood for reimbursement in this case.
Findings Of Fact Parties and Participants The Department is the state agency responsible for administration of the Florida’s Workers’ Compensation process set forth in chapter 440. As such, it has exclusive jurisdiction to decide any matters concerning reimbursement for medical services under this process. See § 440.13, Fla. Stat. Zenith is a carrier as defined by section 440.13(1)(c). Lawnwood, a non-party, is a health care facility as defined by section 440.13(1)(g). Lawnwood is part of a network known as East Florida Division, Inc. (East Florida), a division of HCA Inc. Parallon, a non-party, manages the billing, revenue cycle management, and reimbursement dispute process for certain hospitals, including Lawnwood. (Jt. Stip. Facts, ¶¶ 33 and 34). Parallon filed the Petition for Resolution of Reimbursement Dispute in this case on behalf of Lawnwood. Coventry Health Care Workers Compensation, Inc., and/or Coventry Life and Health Insurance Company on behalf of First Health Group Corp. (Coventry), serves as a “middleman” between insurance carriers and health care providers. As explained by Carol Brodie, Coventry offers carriers, such as Zenith, access to special rates it has negotiated with health care facilities and providers. Essentially, Zenith is a third-party beneficiary of the rates negotiated between East Florida and Coventry. Medical Services at Issue Lawnwood provided health services to a workers’ compensation patient (patient) from January 21 through 25, 2016. The patient was to be treated for a routine outpatient surgical procedure to release an extensor tendon of his index finger. According to the unrefuted testimony of Linda Joy (a Zenith employee), the surgeon inadvertently cut the patient’s digital nerve, artery, and vein. This resulted in more extensive treatment than originally contemplated. The patient was ultimately admitted to the hospital for inpatient care, and released four days later. Payment Dispute Lawnwood issued a bill to Zenith for $163,697.30 (Lawnwood bill) for the services and treatment it provided to patient. Zenith regularly audits bills it receives from health care providers and makes adjustments if necessary. These adjustments are provided to the health care provider along with the payment in the form of an Explanation of Bill Review (EOBR). The EOBR goes through each itemized line in a bill and explains to the provider what was reduced and why. In this case, Zenith sent the Lawnwood bill to Ms. Joy for review. She reviewed the patient’s relevant medical records, as well as billing documentation, and a coding summary sheet (containing codes for procedures, medications, and other services utilized by the health care and insurance industry) from Lawnwood. Ms. Joy opined the Lawnwood bill was very high for the services provided. Both of the Department’s witnesses also felt the amount billed by Lawnwood was unexpected. Andrew Sabolic (an assistant director at the Department) was surprised at Lawnwood’s bill, stating: “it was an amount that I didn’t anticipate a hospital would charge for those types of services.” Similarly, Lynne Metz (a Department employee) testified: “The charges were high compared to what I would expect.” The Department has not made any determination or review of whether the bills or charges submitted by the hospital are reasonable for the services provided. (Jt. Stip. Fact, ¶ 28). Ms. Joy and other Zenith staff compared the charges and the information on the coding summary sheet with payments of other similar providers through a medical revenue and billing database program, known as “OPTUM 360 Revenue Cycle Program” (OPTUM360). In making the comparison, Zenith also utilized databases and benchmarks that are accepted in the industry, including Medicare, the MediSpan Drug Database, Health Care Blue Book, Health Engine, other state’s workers’ compensation reimbursement formulas, usual and customary charges, and other hospitals’ charges in the same zip code as Lawnwood. Based on the OPTUM360 results and its own analysis, Zenith calculated the total reimbursement amount acceptable to other health care providers under Medicare for the same treatment and services would be $11,173.81. As a result, Zenith issued an EOBR that adjusted the Lawnwood bill and indicated, “THIS BILL HAS BEEN PRICED IN ACCORDANCE WITH THE TERMS OF YOUR CONTRACT WITH COVENTRY NATIONAL.” Along with the EOBR, Zenith provided benchmark data to Lawnwood to support its repricing, editing or adjustment of the bills at issue. (Jt. Stip. Facts, ¶¶ 36 and 37). In the EOBR, Zenith used four explanation codes: “47,” “81,” “92,” and “93,” as authorized by Florida Administrative Code Rule 69L-7.740(13)(a) and (b), to explain why payment was disallowed or adjusted. Code “47” (Payment disallowed: insufficient documentation: invoice or certification not submitted for implant) was used for the disallowance on a line item for an implant. Id. The parties agree that was appropriate. Code “81” (Payment adjusted: billing errors: payment modified pursuant to charge audit) was used for the line items other than the disallowed implant charge, based on Zenith’s review of the entire bill, line by line, and resulting adjustment. Id. Code “92” (Paid: no modification to information provided on the medical bill: payment made pursuant to workers’ compensation reimbursement manual for hospitals) was used because it is generally on all hospital bills. Id. Code “93” (Paid: no modification to information provided on the medical bill: payment made pursuant to written contractual arrangement) was used because Zenith had a contract with Coventry, and Coventry had an agreement with East Florida and Lawnwood. The Department has not adopted a rule establishing an EOBR code (or similar descriptive explanation) to be used by a carrier when the carrier identifies a bill or charge from a hospital that the carrier deems to be so excessively high so as to be an unreasonable basis for reimbursement under the Florida Worker’s Compensation Law. (Jt. Stip. Fact, ¶ 8). In other words, there is no code in rule 69L-7.740 for disputing a line item as being “unreasonable” or “too high.” Based on the repriced and adjusted bill, Zenith reimbursed Lawnwood $31,844.70 for the medical services provided. (Jt. Stip. Fact, ¶ 40). This amount was approximately three times the OPTUM360 amount of $11,173.81. When asked how Zenith made the decision to give three times the OPTUM360 amount, Ms. Brodie explained: We didn’t take the [OPTUM360] Medicare payment or even 120 or 140 percent of Medicare, which we thought was more than fair. . . . So because Florida -- I don't want to say they're problematic, but Florida bills, we're seeing such an increase in the amount of billed charges and we're seeing a lot of disputes when we don't pay to the penny of what the expected amount is, that we were trying to go above and beyond and try to make our payment more palatable, I guess, to the provider. So we wanted to be more than generous, so we came up with three times Medicare. Catherine Trotter (a Parallon employee) Parallon filed a request for reconsideration of the EOBR with Zenith after Lawnwood had reviewed it and determined $31,844.70 was insufficient. On April 18, 2016, Parallon, on behalf of Lawnwood, filed a Petition for Resolution of Reimbursement dispute with the Department challenging the EOBR and demanding additional payment. Based on Ms. Joy’s testimony, Zenith did not contest the medical necessity of the services provided by Lawnwood, nor was there evidence Zenith claimed overutilization (the appropriateness of the level and quality of health care provided to the patient). Rather, Zenith claimed, and still claims in these proceedings, it did not pay the billed amount because the individual charges were unreasonable. Contract Provisions Zenith and Parallon, on behalf of Lawnwood, agree that a reimbursement contract applies to this dispute. (Jt. Stip. Fact, ¶ 35). The Department also based the Third Determination on the contract provisions. The parties disagree, however, as to what contract provisions apply and how they should be applied. At the hearing, the parties also disputed whether the Department was provided with the applicable contractual provisions during the petition process. The undersigned need not determine who sent what to whom, because this is a de novo proceeding; and what matters is the evidence admitted at the hearing. See 120.57(1)(k), Fla. Stat.; Haines v. Dep’t of Child. & Fams., 983 So. 2d 602, 606 (Fla. 5th DCA 2008). No contract directly between Zenith and Lawnwood was presented at the hearing. The following documents, however, establish the agreement between Coventry and Lawnwood: (1) Amendment to Model Facility Agreement executed January 20, 2015 (MFA Amendment); Appendix A, “Payment Rate” (Appendix A); and Attachment 1, “Participating Facility List (Attachment 1); and (4) Amendment to Model Facility Agreement between Lawnwood and Coventry (also known as First Health), effective October 1, 2006 (Lawnwood Amendment). Parallon’s legal manager testified the MFA Amendment, Appendix A, Attachment 1, and the Lawnwood Amendment were the only contract provisions relevant to the reimbursement determination. These documents set the rates for Coventry (and its network clients such as Zenith), but do not provide definitions or terms that may have been included in the original “Model Facility Agreement.” Nonetheless, the Lawnwood Amendment defines the “Workers’ Compensation Contract Rate” as follows: “the amount payable under the terms of this Contract shall be the lesser of the Contract rate or a 5% discount from the amount payable under hospital guidelines established under any state law or regulations pertaining to health care services rendered to occupationally ill/injured employees.” Therefore, to make a determination of how much is owed, findings must be made as to what is the “Contact rate,” and what is the amount payable under “any state law or regulations” governing workplace injuries (State rate). Relevant to determining the “Contract rate,” Paragraph 3 of the MFA Amendment provides the following under “Rates”: The current rate reflected on Appendix A to the Agreement shall be increased by 3% for inpatient dates of admission and/or outpatient dates of service occurring on and after October 1, 2014. Appendix A contains a table depicting inpatient rates for Lawnwood as “35% Discount from Hospital’s Total Billed Charges.” (emphasis added). Because the services were provided after October 2014, the 35 percent discount reduced by the three percent discount results in Lawnwood’s expected contractual reimbursement rate to be 68 percent of the “Hospital’s Total Billed Charges,” from any of Coventry’s clients, including Zenith. Thus, the applicable Contract rate is 68 percent of the total bill submitted by Lawnwood. Zenith disputes the meaning of “Hospital’s Total Billed Charges” and argues for application of a “reasonableness” standard to this term. In support of this assertion, Zenith offers the following documents which relate to the agreement between Zenith and Coventry: (1) the Workers’ Compensation Network Services Agreement effective November 1, 2008, (Network Agreement); (2) Supplement A to the Network Agreement, titled “Network Access” (Supplement A); and (3) the Sixth Amendment to the Network Agreement executed November 24, 2015 (6th Amendment). The Network Agreement, Supplement A, and 6th Amendment are heavily redacted. Regardless, it is clear these documents classify Zenith as a “client,” who pays Coventry for access to a discounted rate for medical services with a “Contract Provider.” The Contract Provider and Coventry have a separate “provider agreement” setting this discounted rate. Although, the terms “contract rates,” “fee,” and “provider fee schedule,” are all defined in the Network Agreement Coventry has with Zenith, the definitions or explanation of these terms are redacted. Thus, there is no evidence these terms apply to the Lawnwood bill or the rate established between Coventry and Lawnwood. Similarly, Supplement A defines “Bill” but is also redacted. Regardless, based on the inclusion of these sections in the Network Agreement and attachments, Zenith and Coventry knew how to define special terms. If they intended to give a special meaning to the term “Hospital’s Total Billed Charges,” they could have done so. Section 2.2 of the 6th Amendment states, “[Zenith] agrees that the Contract Rate shall be applied to bills received from [Lawnwood] and further agrees that no other rates . . . shall be applied to such bills.” (emphasis added). Again, without any evidence to the contrary, “bills received” applies to the Lawnwood bill. Although Zenith argues the remaining language in section 2.2 allows it to “modify, edit or otherwise dispute any bill,” this modification must be done pursuant to the contract and workers’ compensation laws and regulations. As stated before, the EOBR regulations do not contemplate adjustments to be based on the reasonableness or fairness of prices or charges. More importantly, there is no basis in the contract provisions or state law and regulations allowing Zenith to reimburse Lawnwood in the amount of three times the OPTUM360 amount. As explained in the Conclusions of Law, the undersigned also cannot infer this as a basis for modification of the reimbursement amount. Zenith also cites to section 2.6 of Supplement A to justify its repricing based on the OPTUM360 results and other industry-used benchmark comparison data. That section, titled “Benchmarking Database,” states, “In the event [Zenith] . . . performs a bill review or repricing function on [Lawnwood’s] bills, Zenith shall . . . update at least twice annually and utilize a nationally accepted charge-benchmarking database to determine the proper percentile of charges in the applicable zip code as approved by Coventry and Client.” Granted this section contemplates that benchmark databases can be used by Zenith in repricing bills, but it speaks to the proper percentile of charges, not the reasonableness of the underlying prices or charges. There was no evidence Coventry approved a “proper percentile of charges” as required. The undersigned finds there is no language in the redacted versions of the Network Agreement, Supplement A, or 6th Amendment that changes Zenith’s requirement (as Coventry’s client) to pay the lesser of (1) 68 percent of the “Hospital’s Total Billed Charges” or (2) 5 percent less than the rate provided pursuant to applicable state laws and regulations. Finally, Zenith argues that the definition provided in a Coventry contract with an undisclosed health care provider, titled “Workers’ Compensation Product Addendum,” should be used to determine the meaning of the term “Hospital’s Total Billed Charges.” See Zenith’s PRO, p. 22-23 (“By implication, these are all in the same network and use the same contractual provisions.”). This document (Zenith’s Exhibit 39) provides definitions, if applicable, that could have been helpful in addressing Zenith’s arguments. For example, this document ties the amount owed by a Coventry client to an “allowable amount” and “eligible bill charges.” There is no evidence, however, that Zenith’s Exhibit 39 was executed by Lawnwood (or East Florida), or that the provisions in this document were part of any agreement between Coventry and Lawnwood, or Coventry and Zenith. As such, the undersigned finds it is not applicable to these proceedings. Applying the Contract rate--68 percent of the “Hospital’s Total Billed Charges” indicated in the Network Agreement and attachments--to the Lawnwood bill would require Zenith to provide a total amount of $110,859.24, or an additional amount of $79,014.54. The Workers’ Compensation System The analysis does not stop there. The next step is to determine how much would be owed at “a 5% discount from the amount payable under hospital guidelines established under any state law or regulation pertaining to health care services rendered to occupationally ill/injured employees.” The undersigned finds this provision refers to the laws and regulations under Florida’s workers’ compensation system set forth in chapter 440 and the Department’s rules. In making the determination decisions in this case, the Department used the Florida Workers’ Compensation Reimbursement Manual for Hospitals, 2014 Edition, and incorporated by reference in rule 69L-7.501 (HRM). The HRM generally provides for reimbursement based on either a per diem fee or the amount agreed upon by contract between the carrier and medical services provider. Under the section titled “Reported Charges,” the HRM provides: “charges for hospital inpatient services shall be reimbursed according to the Per Diem Fee Schedule provided in this chapter or according to a mutually agreed upon contract reimbursement agreement between the hospital and the insurer.” HRM at 15. “Per Diem” is defined as “a reimbursement allowance based on a fixed rate per calendar day which is inclusive of all services rather than on a charge by charge basis.” HRM at 35. In certain circumstances when provider bills are in excess of $59,891.34, a per diem rate is not used. Rather, the HRM provides that the reimbursement amount is calculated using a percentage methodology of 75 percent of the billed charges. This “Stop-Loss Reimbursement” is defined as “a reimbursement methodology based on billed charges once reaching a specified amount that is used in place of, and not in addition to, per diem reimbursement for an inpatient admission to an acute care hospital or a trauma center.” HRM at 17 and 35 (emphasis added). As explained below, the Stop-Loss methodology conflicts with section 440.13(12)(a), which specifically provides for establishment of a maximum reimbursement amount (MRA) based on a per diem rate for inpatient hospital care.5/ Applying the State rate--the per diem rate set forth in the HRM--Lawnwood would receive $3,850.33 per day, except for the day of discharge, which equals $11,550.99. HRM at 16. Applying the five percent discount, as set forth in the Lawnwood Amendment, to the $11,550.99 amount, the total amount payable by Zenith to Lawnwood equals $10,973.44. Because the State rate is less than the amount calculated using the Contract rate, the undersigned finds Zenith owed Lawnwood a total reimbursement amount of $10,973.44, which is less than the $31,844.70 already paid by Zenith.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers' Compensation, enter a final order dismissing the petition of Lawnwood Regional Medical Center for resolution of a reimbursement dispute. DONE AND ENTERED this 8th day of May, 2019, in Tallahassee, Leon County, Florida. S HETAL DESAI 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 8th day of May, 2019.
