The Issue Whether the Department of Health and Rehabilitative Services improperly determined the Petitioners' rate of Medicaid reimbursement for the period January 1, 1990, through June 30, 1990?
Findings Of Fact The Emergency Rule and the Permanent Rule have been determined to be valid in a Final Order entered simultaneously with this Recommended Order. The Department's action in freezing the Medicaid reimbursement rate of the Petitioners in these cases was taken pursuant to the Emergency Rule and the Permanent Rule.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department enter a Final Order in these cases dismissing the Petitioners' amended petitions. DONE and ENTERED this 26 day of May, 1992, in Tallahassee, Florida. LARRY J. SARTIN 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 day of May, 1992. APPENDIX Case Numbers 91-4893, 91-4894, 91-4895, 91-4914, 91-4929, 91-5837 and 91-6191 The parties have submitted proposed findings of fact. It has been noted below which proposed findings of fact have been generally accepted and the paragraph number(s) in the Recommended Order where they have been accepted, if any. Those proposed findings of fact which have been rejected and the reason for their rejection have also been noted. The Petitioners' Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 1 and 4. 2 5-6. 3 13. 4 7. 5 3 and 13-14. 6 15. 7 17-19. 8 20. 9 21. 10 22. 11 23. 12 8. 13 12. 14 11. 15 24. 16 25-27. 17 28-29. 18 29. 19 30-32. 20 34-37. See 39. The last three sentences are not relevant. The determination of compliance with specific federal requirements for the Department's action was the responsibility of HCFA. HCFA presumably determined that the Department complied with all federal requirements since it approved the Department's plan amendment. 39. The last two sentences are not relevant. The determination of compliance with specific federal requirements for the Department's action was the responsibility of HCFA. HCFA presumably determined that the Department complied with all federal requirements since it approved the Department's plan amendment. 23 40-41. 24 43. 25 45. 26 46. 27 47. 28 48. The last two sentences are argument. 29 49. 30 42. 31 29 and 32. The weight of the evidence failed to prove the Department's motive for providing assurances to HCFA were anything other than to meet federal requirements. 32 28. 33 55. 34 34-35. See 59-60 and 63. The detailed findings of fact concerning the nature of the Department's inflationary analysis are not necessary. HCFA rejected this analysis and based its decision on other information provided by the Department. Additionally, the determination of compliance with specific federal requirements for the Department's action was the responsibility of HCFA. HCFA presumably determined that the Department complied with all federal requirements since it approved the Department's plan amendment. 35 See 60-63. 36 52-54. 37 54. 38 55 and hereby accepted. 39 59 and hereby accepted. 40 See 60-65. HCFA did not "reject" the Department's proposed plan amendment. 41 See 63. 42-43 See 60-66. 44-46, 50-54 Although the proposed findings of fact concerning what the Department told HCFA are generally correct, these proposed findings of fact are not relevant to this proceeding. As previously stated, the determination of compliance with specific federal requirements for the Department's action was the responsibility of HCFA. HCFA presumably determined that the Department complied with all federal requirements since it approved the Department's plan amendment. 47 Hereby accepted. 48-49 Hereby accepted except for the proposed findings that the Department "misled", "misrepresented" or provided "inaccurate and misleading information." The last sentence of proposed finding of fact 49 is not relevant. 55 67. 56 Hereby accepted. 57 Not relevant. 58 69. 59 70. 60 71. 61 50 and 73. The Department's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 1. 2 4. 3 5. 4 6. 5 3 and 13-14. 6 15. 7 17-19. 8 20. 9 21. 10 22. 11 23. 12 8. 13 11. 14 24. 15 25-26. 16 Hereby accepted. 17 27 and 29-32. 18 34-37. 19 39-41. 20 41. 21 43. 22 33. 23 42. 24 52-53 and 58. 25 54. 26 55. 27 56. 28 57. 29 60-65. 30 67. 31 68. 32 69. 33 70. 34 71. 35 50 and 73. 36 72. 37 73. 38 Hereby accepted. COPIES FURNISHED: Sam Power Agency Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 John Slye General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 Thomas C. Fox, Esquire Michael D. Smith, Esquire 1200 18th Street, N.W. Washington, D.C. 20036 Alfred W. Clark, Esquire Post Office Box 623 Tallahassee, Florida 32302 W. David Watkins, Esquire Post Office Box 6507 Tallahassee, Florida 32314-6507 David Pius Medicaid Counsel Department of Health and Rehabilitative Services 1317 Winewood Boulevard Building 6, Room 230 Tallahassee, Florida 32399-0700
The Issue The issues are whether proposed and existing Florida Administrative Code rules, both numbered 59G-6.030, are valid exercises of delegated legislative authority.
Findings Of Fact The Petitioners are 120 hospitals--some not-for-profit, some for-profit, and some governmental--that are licensed under chapter 395, Florida Statutes, provide both inpatient and outpatient services, and participate in the Medicaid program. AHCA is the state agency authorized to make payments for services rendered to Medicaid patients. Before 2013, all Medicaid outpatient services were provided and paid fee-for-service. Under the fee-for-service model, hospitals submit claims to AHCA, and AHCA reimburses the hospitals based on the established rate. For many years, AHCA has set prospective Medicaid fee- for-service reimbursement rates for outpatient hospital services, either semi-annually or annually, based on the most recent complete and accurate cost reports submitted by each hospital; has re-published the Florida Title XIX Hospital Outpatient Reimbursement Plan (Outpatient Plan) that explained how the rates were determined; and has adopted the current Outpatient Plan by reference in rule 59G-6.030. In 2005, the Florida Legislature’s General Appropriations Act (GAA) stated that the funds appropriated for Medicaid outpatient hospital services reflected a cost savings of $16,796,807 “as a result of modifying the reimbursement methodology for outpatient hospital rates.” It instructed AHCA to “implement a recurring methodology in the Title XIX Outpatient Hospital Reimbursement Plan that may include, but is not limited to, the inflation factor, variable cost target, county rate ceiling or county ceiling target rate to achieve the cost savings.” AHCA responded by amending the Outpatient Plan to provide: “Effective July 1, 2005, a recurring rate reduction shall be established until an aggregate total estimated savings of $16,796,807 is achieved each year. This reduction is the Medicaid Trend Adjustment.” The amended Outpatient Plan was then adopted by reference in rule 59G-6.030, effective July 1, 2005. AHCA collaborated with the hospitals to determine how to accomplish the legislatively mandated reduction in a manner that would be fair to all the hospitals. It was decided to take the hospitals’ unaudited cost reports from the most recent complete fiscal year and the number of Medicaid occasions of service from the monthly report of AHCA’s Medicaid fiscal agent that corresponded to the hospitals’ fiscal years, and use an Excel spreadsheet program with a function called Goal Seek to calculate proportionate rate adjustments for each hospital to achieve the legislatively mandated aggregate savings. The resulting rate adjustments were incorporated in the hospital reimbursement rates, effective July 1, 2005. In 2006, there was no further Medicaid Trend Adjustment (MTA) reduction. However, in accordance with the instructions in the 2005 GAA, the 2005 MTA reduction of $16,796,807 was treated as a recurring reduction and was applied again in the 2006 Outpatient Plan, which again stated: “Effective July 1, 2005, a recurring rate reduction shall be established until an aggregate total estimated savings of $16,796,807 is achieved each year. This reduction is the Medicaid Trend Adjustment.” The 2006 Outpatient Plan also stated: “This recurring reduction, called the Medicaid Trend Adjustment, shall be applied proportionally to all rates on an annual basis.” It also came to be known as the first cut or cut 1. It again was applied by taking the hospitals’ most current unaudited cost reports and the corresponding occasions of service from the appropriate monthly report of the fiscal agent, and using the Excel spreadsheets and the Goal Seek function to calculate rate adjustments for each hospital. The cut 1 rate adjustments were incorporated in the hospital reimbursement rates, effective July 1, 2006. In 2007, the GAA stated that the funds appropriated for Medicaid outpatient hospital services were reduced by $17,211,796 “as a result of modifying the reimbursement for outpatient hospital rates, effective July 1, 2008.” This has been referred to as the second cut or cut 2. It instructed AHCA to “implement a recurring methodology in the Title XIX Outpatient Hospital Reimbursement Plan to achieve this reduction.” The 2008 Outpatient Plan again applied the first cut as a recurring reduction and stated that it was to be “applied proportionally to all rates on an annual basis.” It then made the second cut, which was to be “applied to achieve a recurring annual reduction of $17,211,796.” These cuts were again applied by taking the hospitals’ most current unaudited cost reports and the corresponding occasions of service from the appropriate monthly report of the fiscal agent, and using the Excel spreadsheets and the Goal Seek function to calculate rate adjustments for each hospital. The resulting rate adjustments were incorporated in the hospital reimbursement rates, effective July 1, 2008. This process was repeated in subsequent years. The third cut (cut 3) was in 2008; it was a $36,403,451 reduction. The fourth cut (cut 4) was in 2009, during a special session; it was a $19,384,437 reduction; however, per the GAA that made the fourth cut, it was not applied to the rates of certain children’s specialty hospitals, which were excluded from the reduction. In addition, using language similar to what AHCA had been using in the Outpatient Plans, the 2009 GAA stated: “The agency shall reduce individual hospital rates proportionately until the required savings are achieved.” The Legislature enacted cut 5 and cut 6 in 2009 and 2010. However, the GAAs stated that AHCA should not take these cuts if the unit costs before the cuts were equal to or less than the unit costs used in establishing the budget. AHCA determined that cuts 5 and 6 should not be taken. However, cuts 1 through 4 continued to be applied as recurring reductions, and rates were adjusted for cuts 1 through 4 in 2009 and 2010 in the same manner as before. In 2011, the GAA enacted cut 7; it was for $99,045,233 and was added to the previous cuts for all but certain children’s specialty and rural hospitals, which were excluded from the additional reduction. In setting the individual hospitals’ reimbursement rates, AHCA first applied cut 7 in the same manner as cuts 1 through 4. The result was a 16.5 percent rate adjustment for cut 7, which was much higher than for previous cuts. Some of the hospitals pointed this out to AHCA and to the Legislature and its staff. There was lots of discussion, and it was determined that the rate adjustment from cut 7 would be more like what the Legislature was expecting (about 12 percent), if budgeted occasions of service were used, instead of the number from the fiscal agent’s monthly report that corresponded to the most recent cost reports. AHCA agreed to change to budgeted fee-for- service occasions of service for cut 7, with the concurrence of the hospitals and the Legislature and its staff. The year 2011 was also the year the Legislature instituted what became known as the “unit cost cap.” In that year, the Legislature amended section 409.908, Florida Statutes, to provide: “The agency shall establish rates at a level that ensures no increase in statewide expenditures resulting from a change in unit costs effective July 1, 2011. Reimbursement rates shall be as provided in the General Appropriations Act.” § 409.908(23)(a), Fla. Stat. (2011). This part of the statute has not changed. The GAA that year elaborated: In establishing rates through the normal process, prior to including this reduction [cut 7], if the unit cost is equal to or less than the unit cost used in establishing the budget, then no additional reduction in rates is necessary. In establishing rates through the normal process, if the unit cost is greater than the unit cost used in establishing the budget, then rates shall be reduced by an amount required to achieve this reduction, but shall not be reduced below the unit cost used in establishing the budget. “Unit cost” was not defined by statute or GAA. To calculate what it was in 2011, AHCA divided the total dollar amount of Medicaid payments made to hospitals by AHCA by the number of Medicaid occasions of service for all hospitals. The result was $141.51. Since 2011, AHCA has applied the unit cost cap with reference to the 2011 unit cost of $141.51. Since then, AHCA has compared the 2011 unit cost to the current cost, calculated by dividing the total dollar amount of Medicaid payments made to all hospitals by AHCA by the number of Medicaid occasions of service for all hospitals, except in children’s and rural hospitals, to determine whether the unit cost cap would require a further rate reduction, after applying the MTA cuts. Using this comparison, the unit cost cap never has been exceeded, and no further rate adjustments ever have been required. It is not clear why AHCA excluded Medicaid occasions of service for children’s and rural hospitals from the unit cost calculations made after 2011. It could have been because those hospitals were excluded from cut 7 and cut 8. Cut 8 was enacted in 2012; it was for $49,078,485 and was added to the previous cuts for all but certain children’s specialty and rural hospitals, which were excluded from the additional reduction. In 2012, the Legislature specified in the GAA that budgeted occasions of service should be used in calculating the MTA reduction for inpatient hospitals. AHCA always treated inpatient and outpatient MTAs the same, and it viewed the specific legislative direction for the inpatient MTA as guidance and indicative of legislative intent that it should continue to use budgeted occasions of service for the outpatient cut 7 and should also use them for the outpatient cut 8. Again, the hospitals did not object since the result was a higher reimbursement rate. In 2014, the Florida Medicaid program began to transition Medicaid recipients from a fee-for-service model to a managed care model. Under the managed care model, AHCA pays a managed care organization (MCO) a capitation rate per patient. The MCOs negotiate contracts with hospitals to provide outpatient care at an agreed reimbursement rate per occasion of service. Since August 2014, the majority of Medicaid recipients has been receiving services through MCOs, rather than through fee-for-service. Currently, about 75 to 80 percent of Medicaid outpatient hospital occasions of service are provided through managed care In recognition of the shift to MCOs, the Legislature began to divide the Medicaid outpatient hospital reimbursement appropriation in the GAA between what AHCA reimburses directly to hospitals under the fee-for-service model and what it pays MCOs to provide those services under the MCO delivery system. This allocation of the budgets between fee-for-service and managed care necessarily accomplished a corresponding division of the recurring MTA reductions between the two delivery systems. The Legislature did not enact any statutes or GAAs requiring AHCA to change how it applies MTA reductions to determine fee-for-service outpatient reimbursement rate adjustments, or make any other changes in response to the transition to MCOs. There were no additional MTA reductions in 2015. The 2015 Outpatient Plan, which is incorporated in existing rule 59G- 6.030, applied the previous cuts as recurring reductions. The evidence was confusing as to whether cuts 7 and 8 were applied using the occasions of service in the fiscal agent’s monthly report corresponding to the hospitals’ most current unaudited cost reports, or using budgeted occasions of service. If the former, the numbers did not yet reflect much of the shift to the managed care model because of a time lag in producing cost reports, and the evidence suggested that the numbers were approximately the same as the budgeted occasions of service used previously. Whichever numbers were used, the resulting rate adjustments were incorporated in the hospitals’ reimbursement rates, effective July 1, 2015. Leading up to the 2016 legislative session, there was a legislative proposal to determine prospective Medicaid outpatient reimbursement rates using a completely new method called Enhanced Ambulatory Patient Groups (EAPGs). EAPGs would eliminate the need to depend on hospital cost reports and complicated calculations to determine the effects of MTA reductions on prospective hospital outpatient reimbursement rates, effective July 1, following the end of the legislative session each year. Hospitals, including some if not all of the Petitioners, asked the Legislature not to proceed with the proposed EAPG legislation until they had an opportunity to study it and provide input, and EAPGs were not enacted in 2016. However, section 409.905(6)(b) was amended, effective July 1, 2017, to require the switch to EAPGs. See note to § 409.905, Fla. Stat.; and ch. 2016-65, § 9, Laws of Fla. (2016). When it became apparent that EAPGs would not be in use for prospective reimbursement rates for fiscal year 2016/2017, AHCA basically repeated the 2015/2016 process, but adjusted the occasions of service used for calculating the hospitals’ rate reductions for cuts 7 and 8 by adding 14,000 occasions of service. At the end of July, AHCA published new rates effective July 1, 2016. When the new rates were published, they were challenged by some of the Petitioners under section 120.57(1), Florida Statutes. Citing section 409.908(1)(f)1., AHCA took the position that there was no jurisdiction and dismissed the petitions. That decision is on appeal to the First District Court of Appeal. The Petitioners also challenged the methodology used to calculate the new prospective reimbursement rates as a rule that was not adopted as required, and challenged the validity of existing rule 59G-6.030, which incorporated the 2015 Outpatient Plan by reference. These challenges became DOAH cases 16-6398RX through 16-6414RX. In response to DOAH cases 16-6398RX through 16-6414RX, AHCA adopted the 2016 Outpatient Plan by reference in proposed rule 59G-6.030. The 2016 Outpatient Plan provides more detail than the 2015 version. AHCA’s position is that the additional detail was provided to clarify the 2015 version. However, it changed the occasions of service used for calculating the hospitals’ rate reductions for cuts 7 and 8, as indicated in Finding 22, as well as some other substantive changes. The 2015 Outpatient Plan addressed the unit cost cap by stating: “Effective July 1, 2011, AHCA shall establish rates at a level that ensures no increase in statewide expenditures resulting from a change in unit costs.” The 2016 Outpatient Plan elaborates and specifies the calculation AHCA has been using, as stated in Finding 14. The 2015 Outpatient Plan provided that an individual hospital’s prospective reimbursement rate may be adjusted under certain circumstances, such as when AHCA makes an error in the calculation of the hospital’s unaudited rate. It also stated: “Any rate adjustment or denial of a rate adjustment by AHCA may be appealed by the provider in accordance with Rule 28-106, F.A.C., and section 120.57(1), F.S.” The 2016 Outpatient Plan deleted the appeal rights language from the existing rule. The effect of the existing and proposed rules on the Petitioners through their effect on managed care contract rates is debatable. Those rates do not have to be the same as the fee- for-service outpatient reimbursement rates, although they are influenced by the fee-for-service rates, and it is not uncommon for them to be stated as a percentage of the fee-for-service rates. By law, managed care contract rates cannot exceed 120 percent of the fee-for-service rates unless the MCO gets permission from AHCA, as provided in section 409.975(6). Currently, rates paid by MCOs for Medicaid hospital outpatient services average about 105 percent of the fee-for-service reimbursement rates. AHCA has indicated that it would not expect or like to see the contract rates much higher than that. It is not clear whether that still is AHCA’s position. If higher rates were negotiated, the impact of fee-for-services rate adjustments on managed care rates could be reduced or even eliminated. The effect of the existing and proposed rules on the Petitioners through their effect on how fee-for-service reimbursement rates are calculated is not disputed. With the transition to managed care, the effect is greater and clearly substantial. The recurring MTA reductions enacted by the Legislature through 2014, which total $224,015,229 (after taking into account $10,656,238 that was reinstated, and $4,068,064 that was added in consideration of trauma centers), are being spread over fewer fee-for-service occasions of service, especially for cuts 7 and 8, which significantly lowers the fee-for-service outpatient reimbursement rates calculated under the proposed rule. The Petitioners’ objections to the validity of the proposed and existing rules can be summarized as follows: a lack of legislative authority for recurring (i.e., cumulative) MTA reductions; a failure to adopt a fixed methodology to calculate individual hospital outpatient reimbursement rate adjustments resulting from MTA reductions; specifically, a failure to derive the number of fee-for-service occasions of service used in calculating individual hospital outpatient reimbursement rate adjustments in the same manner every year; conversely, a failure to increase the occasions of service used to calculate individual hospital outpatient reimbursement rate adjustments resulting from cuts 1 through 4; a failure of the unit cost cap in the existing rule to specify how it is applied; a failure of the unit cost cap in the proposed rule to compare the 2011 unit cost to the current cost, calculated by dividing the total dollar amount of Medicaid payments made to all hospitals by AHCA by the number of Medicaid occasions of service for all hospitals, including in children’s and rural hospitals; and proposed rule’s deletion of the language in the existing rule stating that a rate adjustment or denial can be appealed in accordance with Florida Administrative Code Rule 28-106 and section 120.57.
The Issue Whether Medicaid overpayments were made to Petitioner and, if so, what is the total amount of these overpayments.
Findings Of Fact Petitioner Petitioner is a family practice physician licensed to practice in Florida. His office is located in Carol City, Florida. The Provider Agreement During the period from July 11, 1994, through July 11, 1995 (hereinafter also referred to as the "audit period"), Petitioner was authorized to provide physician services to eligible Medicaid patients. Petitioner provided such services pursuant to a Non- Institutional Professional and Technical Medicaid Provider Agreement (Provider Agreement) he had entered into with the Department of Health and Rehabilitative Services, AHCA's predecessor. 3/ The Provider Agreement contained the following provisions, among others: The provider agrees to keep for 5 years complete and accurate medical and fiscal records that fully justify and disclose the extent of the services rendered and billings made under the Medicaid program and agrees to furnish the State Agency and Medicaid Fraud Control Unit upon request such information regarding payments claimed for providing these services. Access to the pertinent patient records and facilities by authorized Medicaid representatives will be held confidential as provided under 42 CFR 431.305 and 306. The provider agrees that services or goods billed to the Medicaid program must be medically necessary, Medicaid compensable and of a quality comparable to those furnished by the provider's peers, and the services or goods must have been actually provided to eligible Medicaid recipients by the provider prior to submitting a claim. The provider agrees to submit Medicaid claims in accordance with program policies and that payment by the program for services rendered will be based on the payment methodology in the applicable Florida Administrative Rule. The provider in executing this agreement acknowledges that he understands that payment of Florida Medicaid claims is made from Federal and State funds, and that any falsification or concealment of a material fact, may be prosecuted under Federal and State laws. . . . 6. The Department agrees to notify the provider of any major changes in Federal or State rules and regulations relating to Medicaid. . . . 8. The provider and the Department agree to abide by the Florida Administrative Code, Florida Statutes, policies, procedures, manuals of the Florida Medicaid Program and Federal laws and regulations. Handbook Provisions Among the "manuals of the Florida Medicaid Program" referenced in paragraph 8 of the provider agreement in effect during the audit period were the Medicaid Provider Reimbursement Handbook, HFCA-1500 (MPR Handbook) and the Medicaid Physician Provider Handbook (MPP Handbook). Copies of these "manuals" were provided to Petitioner. Accordingly, he should have been aware of their contents. MPR Handbook: "Medically Necessary" Defined The term "medically necessary" was defined in Appendix D of the MPR Handbook, in pertinent part, as follows: Medically Necessary or Medical Necessity Means that the medical or allied care, goods, or services furnished or ordered must: (a) Meet the following conditions: Be necessary to protect life, to prevent significant illness or significant disability, or to alleviate severe pain; Be individualized specific, and consistent with symptoms or confirmed diagnosis of the illness or injury under treatment, and not in excess of the patient's needs; Be consistent with generally accepted professional medical standards as determined by the Medicaid program, and not experimental or investigational; Be reflective of the level of service that can be safely furnished, and for which no equally effective and more conservative or less costly treatment is available statewide; and Be furnished in a manner not primarily intended for the convenience of the recipient, the recipient's caretaker, or the provider. . . . MPP Handbook: Chapter 10 Chapter 10 of the MPP Handbook addressed the subject of "provider participation." Section 10.9 of this chapter provided as follows Record Keeping You must retain physician records on services provided to each Medicaid recipient. You must also keep financial records. Keep the records for five (5) years from the date of service. Examples of the types of Medicaid records that must be retained are: Medicaid claim forms and any documents that are attached, treatment plans, prior authorization information, any third party claim information, x-rays, fiscal records, and copies of sterilization and hysterectomy consents. Medical records must contain the extent of services provided. The following is a list of minimum requirements: history, physical examination, chief complaint on each visit, diagnostic tests and results, diagnosis, a dated, signed physician order for each service rendered, treatment plan, including prescriptions for medications, supplies, scheduling frequency for follow-up or other services, signature of physician on each visit, date of service, anesthesia records, surgery records, copies of hospital and/or emergency records that fully disclose services, and referrals to other services. If time is a part of the procedure code description being billed, then duration of visit shown by begin time and end time must be included in the record. Authorized state and federal staff or their authorized representatives may audit your Medicaid records. You may convert your paper records to microfilm or microfiche. However, your microfilm or microfiche must be legible when printed and viewed. MPP Handbook: Chapter 11 Chapter 11 of the MPP Handbook addressed the subject of "covered services and limitations." Section 11.1 contained an "introduction," which read as follows: The physician services program pays for services performed by a licensed physician or osteopath within the scope of the practice of medicine or osteopathy as defined by state law. It also applies to all doctors of dental medicine or dental surgery if the services provided are services that if furnished by a physician, would be considered a physician's service. The services of this program must be performed for medical necessity for diagnosis and treatment of an illness on an eligible Medicaid recipient. Delivery of the services in this handbook must be done by or under the personal supervision of a physician, osteopath or oral and maxillofacial surgeon at any place of service. Personal supervision is defined as the physician being in the building when the services are rendered and signing and dating the medical record either on the date of service or within 24 hours. Each service type listed has special policy requirements that apply specifically to it. These must be adhered to for payment. This "introduction" was followed by a discussion of "HCPCS Codes and ICD-9-CM Codes": Procedure codes listed in Chapter 12 are HCPCS (Health Care Financing Administration Common Procedure Coding System) codes. These are based on the Physicians' Current Procedural Terminology, Fourth Edition. Determine which procedure describes the service rendered and enter that code on your claim form. HCPCS codes described as "unlisted" are used when there is no procedure among those listed that describes the service rendered. Physicians' Current Procedural Terminology, Fourth Edition, Copyright 1993 by the American Medical Association (CPT-4) is a listing of descriptive terms and numeric identifying codes and modifiers for reporting medical services and procedures performed by physicians. The Health Care Financing Administration Common Procedure Coding System (HCPCS) includes CPT-4 descriptive terms and numeric identifying codes and modifiers for reporting medical services and procedures and other materials contained in CPT-4 which are copyrighted by the American Medical Association. The Diagnosis Codes to be used are found in the International Classification of Diseases, 9th edition, Clinical Modifications (ICD-9-CM). A diagnosis code is required on all physician claims in field 24E. Use the most specific code available. Fourth and fifth digits are required when available. The American Medical Association, in cooperation with many other groups, replaced the old "visit" codes with new "Evaluation and Management" (E/M) service codes in the 1992 CPT. This is the result of the Physician Payment Reform which requires the standardization of policies and billing practices nationwide to ensure equitable payment for all services. The new E/M codes are a totally new concept for identifying services in comparison to the old visit codes. They are more detailed and specific to the amount of work involved The process involved in selecting "the [c]orrect E/M [c]ode" was then described: Terms Used to Select the Correct E/M Code The levels of E/M codes are defined by seven components: Extent of History There are four types of history which are recognized: -Problem Focused- chief complaint; brief history of present illness or problem. -Expanded Problem Focused- chief complaint; brief history of present illness; problem pertinent system review. -Detailed- chief complaint; extended history of present illness; extended system review; pertinent past, family and/or social history. -Comprehensive- chief complaint; extended history of present illness; complete system review; complete past, family and social history. Extent of Examination There are four types of examinations which are recognized: -Problem Focused- an examination that is limited to the affected body area or organ system. -Expanded Problem Focused- an examination of the affected body area or organ system and other symptomatic or related organ systems. -Detailed- an extended examination of the affected body area(s) and other symptomatic or related organ system(s). -Comprehensive- a complete single system specialty examination or a complete multi- system examination. Complexity of Medical Decision-Making Medical decision-making refers to the complexity of establishing a diagnosis and/or selecting a management option as measured by the following factors: -The number of possible diagnoses and/or the number of management options that must be considered. -The amount and/or complexity of medical records, diagnostic tests, and/or other information that must be obtained, reviewed and analyzed. -The risk of significant complications, morbidity and/or mortality, as well as comorbidities, associated with the patient's presenting problem(s), the diagnostic procedure(s) and/or the possible management options. There are four types of medical decision- making which are recognized: Straightforward, Low complexity, Moderate complexity, and High complexity. To qualify for a given type of decision- making, two of the three factors previously outlined must be met or exceeded as shown in the following table: Type of decision making: Straightforward; Number of diagnosis or management options: minimal; Amount and/or complexity of data to be reviewed: minimal or none; Risk of complications and/or morbidity or mortality: minimal Type of decision making: Low complexity; Number of diagnosis or management options: limited; Amount and/or complexity of data to be reviewed: limited; Risk of complications and/or morbidity or mortality: low Type of decision making: Moderate complexity; Number of diagnosis or management options: multiple; Amount and/or complexity of data to be reviewed: moderate; Risk of complications and/or morbidity or mortality: moderate Type of decision making: High complexity; Number of diagnosis or management options: extensive; Amount and/or complexity of data to be reviewed: extensive; Risk of complications and/or morbidity or mortality: high Counseling is a discussion with a patient and/or family concerning one or more of the following areas: -Diagnostic results, impressions and/or recommended diagnostic studies; -Prognosis; -Risks and benefits of management (treatment) options; -Instructions for management (treatment) and/or follow-up; -Importance of compliance with chosen management (treatment) options; -Risk factor reduction; and -Patient and family education. Coordination of Care Coordination of care is coordination with other providers or agencies which is consistent with the nature of the problem(s) and the patient's and/or the family's needs. Nature of Presenting Problem A presenting problem is a disease, condition, illness, injury, symptom, sign, finding, complaint or other reason for encounter, with a diagnosis being established at the time of the encounter. There are five types of presenting problems: -Minimal- A problem that may not require the presence of a physician, but the service must be provided under the physician's personal supervision. -Self-limited or Minor- A problem that runs a definite and prescribed course, is transient in nature and not likely to permanently alter health status or has a good prognosis with management/compliance. -Low Severity- A problem where the risk of morbidity without treatment is low; there is little to no risk of mortality without treatment; full recovery without functional impairment is expected. -Moderate Severity- A problem where the risk of morbidity without treatment is moderate; there is a moderate risk of mortality without treatment; uncertain prognosis or increased probability of prolonged functional impairment. -High Severity- A problem where the risk of morbidity without treatment is high to extreme; there is moderate to high risk of mortality without treatment or high probability of severe, prolonged functional impairment. Time The inclusion of time in the old visit codes has been implicit in prior editions of CPT. Beginning in 1992, the inclusion of time as an explicit factor is done to assist physicians in selecting the most appropriate codes to report their services. However, the times indicated in each specific E/M code are average amounts of time a physician may spent with a patient. Thus, the actual content of the service should be used in determining the most appropriate code except in cases where the counseling and/or coordination of care dominates the patient encounter (more than 50%). The extent of counseling and/or coordination of care must be documented in the patient's records. Time is not a factor for emergency department levels of service because emergency department services are typically provided on a variable intensity basis, often involving multiple encounters over a period of time; therefore, making it difficult to provide accurate estimates of time spent with a particular patient. There are two types of time defined by CPT: "face-to-face" time for office and other outpatient visits and "unit/floor" time for hospital and other inpatient visits. This distinction is necessary because most of the work of typical office visits takes place during the face-to-face time with the patient, while most of the work of typical hospital visits takes place during the time spent on the patient's floor or unit. How to Select the Correct Evaluation and Management Code The following steps should be used to select the appropriate E/M code: Select the proper category (e.g., office, hospital, observation, consultation, etc.). Select the proper subcategory, if applicable (e.g., initial, subsequent, established patient, etc.). Select the code that best describes the level of E/M service within the category/subcategory as described below: Step 1: If more than 50% of the physician face-to-face time with the patient is spent on counseling/coordination of care, select the level based solely on the amount of time spent. Step 2. If time is not the controlling factor in selecting the level of E/M service, the following process should be used: Determine the extent of HISTORY obtained during the E/M service (i.e, problem focused, expanded problem focused, detailed or comprehensive). Determine the extent of the EXAMINATION performed during the E/M service (i.e., problem focused, expanded problem focused, detailed or comprehensive). Determine the complexity of the MEDICAL DECISION-MAKING associated with the E/M service (i.e., straightforward, low complexity, moderate complexity or high complexity). Step 3. Use the determinations made in Step 2 to select the level of E/M service performed. ALL three of the key components described in Step 2 must be met or exceeded when selecting from the following levels of E/M service. Code Description 992901-99205 Office, new patient . . . . If only two of the three key components described in Step 2 were performed (e.g., no history was performed for an established patient), then you must select from the following levels of E/M service: Code Description 99211-99215 Office, established patient . . . . The Physicians' Current Procedural Terminology At all times material to the instant case, the American Medical Association's Physicians' Current Procedural Terminology (or "CPT") referred to in the MPP Handbook contained the following codes and code descriptions for "E/M" office services: 4/ New Patient 99201 Office or other outpatient visit for the evaluation and management of a new patient, which requires these three key components: -a problem focused history; -a problem focused examination; and -straightforward medical decision making. Counseling and/or coordination of care with other providers or agencies are provided consistent with the nature of the problem(s) and the patient's and/or family's needs. Usually, the presenting problems are self- limited or minor. Physicians typically spend 10 minutes face-to-face with the patient and/or family. 99202 Office or other outpatient visit for the evaluation and management of a new patient which requires these three key components: -an expanded problem focused history; -an expanded problem focused examination; and -straightforward medical decision making. Counseling and/or coordination of care with other providers or agencies are provided consistent with the nature of the problem(s) and the patient's and/or family's needs. Usually, the presenting problems are of low to moderate severity. Physicians typically spend 20 minutes face-to-face with the patient and/or family. 99203 Office or other outpatient visit for the evaluation and management of a new patient which requires these three key components: -a detailed history; -a detailed examination; and -medical decision making of low complexity. Counseling and/or coordination of care with other providers or agencies are provided consistent with the nature of the problem(s) and the patient's and/or family's needs. Usually, the presenting problems are of moderate severity. Physicians typically spend 30 minutes face-to-face with the patient and/or family. 99204 Office or other outpatient visit for the evaluation and management of a new patient which requires these three key components: -a comprehensive history; -a comprehensive examination; and -medical decision making of moderate complexity. Counseling and/or coordination of care with other providers or agencies are provided consistent with the nature of the problem(s) and the patient's and/or family's needs. Usually, the presenting problems are of moderate to high severity. Physicians typically spend 45 minutes face-to-face with the patient and/or family. 99205 Office or other outpatient visit for the evaluation and management of a new patient which requires these three key components: -a comprehensive history; -a comprehensive examination; and -medical decision making of high complexity. Counseling and/or coordination of care with other providers or agencies are provided consistent with the nature of the problem(s) and the patient's and/or family's needs. Usually, the presenting problems are of moderate to high severity. Physicians typically spend 60 minutes face-to-face with the patient and/or family. Established Patient 99211 Office or other outpatient visit for the evaluation and management of an established patient that may or may not require the presence of a physician. Usually, the presenting problem(s) are minimal. Typically, 5 minutes are spent performing or supervising these services. 99212 Office or other outpatient visit for the evaluation and management of an established patient, which requires at least two of these three key components: -a problem focused history; -a problem focused examination; -straightforward medical decision making. Counseling and/or coordination of care with other providers or agencies are provided consistent with the nature of the problem(s) and the patient's and/or family's needs. Usually, the presenting problem(s) are self- limited or minor. Physicians typically spend 10 minutes face-to-face with the patient and/or family. 99213 Office or other outpatient visit for the evaluation and management of an established patient, which requires at least two of these three key components: -an expanded problem focused history; -an expanded problem focused examination; -medical decision making of low complexity. Counseling and/or coordination of care with other providers or agencies are provided consistent with the nature of the problem(s) and the patient's and/or family's needs. Usually, the presenting problem(s) are of low to moderate severity. Physicians typically spend 15 minutes face-to-face with the patient and/or family. 99214 Office or other outpatient visit for the evaluation and management of an established patient, which requires at least two of these three key components: -a detailed history; -a detailed examination; -medical decision making of moderate complexity. Counseling and/or coordination of care with other providers or agencies are provided consistent with the nature of the problem(s) and the patient's and/or family's needs. Usually, the presenting problem(s) are of moderate to high severity. Physicians typically spend 25 minutes face-to-face with the patient and/or family. 99215 Office or other outpatient visit for the evaluation and management of an established patient, which requires at least two of these three key components: -a comprehensive history; -a comprehensive examination; -medical decision making of high complexity. Counseling and/or coordination of care with other providers or agencies are provided consistent with the nature of the problem(s) and the patient's and/or family's needs. Usually, the presenting problem(s) are of moderate to high severity. Physicians typically spend 40 minutes face-to-face with the patient and/or family. It is a rarity for a family practice physician to provide office services at the 99205 or 99215 "E/M" code level. Office services at the 99203 and 99213 "E/M" code levels are the most common types of office services that family practice physicians provide. The Audit and Aftermath Commencing in 1995, AHCA conducted an audit of Medicaid claims submitted by Petitioner for services rendered from July 11, 1994, through July 11, 1995. Petitioner had submitted 9,235 Medicaid claims for services rendered during the audit period to 826 patients, for which he had received payments totaling $294,554.57. From the 826 Medicaid patients to whom Petitioner had provided services during the audit period, AHCA randomly selected a "cluster sample" of 48, and asked Petitioner to produce the medical records he had on file for these 48 patients. According to the expert testimony of AHCA's statistician, Robert Pierce, which the undersigned has credited, a sample size of 30 or more is "uniformly and universally considered to be adequate for a sample of this type" (that is, a "cluster sample"). Petitioner had submitted a total of 577 claims for services rendered to the 48 patients in the "cluster sample" during the audit period. Each of these claims was reviewed by AHCA to determine whether it was supported by information contained in the medical records produced by Petitioner in response to AHCA's request. Based upon a preliminary review conducted by a Registered Nurse consultant (Stella Steinberg, R.N.) and physician consultant (John Sullenberger, M.D.), AHCA determined that Petitioner had been overpaid a total $183,283.94 for the Medicaid claims he had submitted for services rendered during the audit period. After having been advised of this preliminary determination, Petitioner sent additional documentation to AHCA. The additional documentation was reviewed by Dr. Sullenberger. Following Dr. Sullengerger's review, the overpayment was recalculated and determined to be $179,782.73. By letter dated May 25, 1999, Petitioner was notified of this recalculation and advised of his right to request an administrative hearing on the matter. Petitioner requested such a hearing. Thereafter, AHCA retained the services of Timothy Walker, M.D., a Board-certified family practice physician who is a faculty member of Tallahassee Memorial Hospital's Family Practice Residency Program. At AHCA's request, Dr. Walker reviewed the records that Petitioner had provided regarding the 48 patients in the "cluster sample" to determine whether there was documentation to support the Medicaid claims relating to these patients that Petitioner had submitted for services rendered during the audit period. Dr. Walker's review revealed "upcoding" on claims submitted for office services (that is, billing for a higher level of service than the patients' records revealed had actually been provided), 5/ billing for unnecessary medical services (in the form of aerosol treatments), and no documentation whatsoever relating to other claims. 6/ Based upon these findings of Dr. Walker, which the undersigned has accepted as accurate in the absence of any evidence to the contrary, AHCA determined, correctly, that Petitioner had been overpaid a total of $11,740.64, or $20.34772903 per claim, for the 577 claims he had submitted for services rendered during the audit period to the 48 patients in the "cluster sample." Using a generally accepted, appropriate, and valid statistical formula that "appears in many, many elementary statistical text books," AHCA extended these results to the total "population" of 9,235 Medicaid claims that Petitioner had submitted for services rendered during the audit period, and it correctly calculated that Petitioner had been overpaid a total of $175,992.84. 7/ Simple Mistake or Fraud? There has been no allegation made, nor proof submitted, that any of the overbillings referenced above were the product of anything other than simple mistake or inadvertence on Petitioner's part.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that AHCA enter a final order finding that Petitioner received $175,992.84 in Medicaid overpayments for services rendered to his Medicaid patients from July 11, 1994, through July 11, 1995, and requiring him to repay this amount to the agency. DONE AND ENTERED this 23rd day of August, 2001, in Tallahassee, Leon County, Florida. STUART M. LERNER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 23rd day of August, 2001.
Findings Of Fact Hattie Bertrand was a patient at Sunshine Convalarium from December 1, 1976 until January 22, 1977 when she was returned to Pennsylvania by her daughter. Subsequent thereto the nursing home submitted the application of Hattie Bertrand for retroactive Medicaid payments but the application failed to include the age of the patient or her annual income. Efforts by the HRS Social Worker to whom the application was assigned were unsuccessful. Request for birth information submitted to the Social Security Administration was forwarded from the local office to Baltimore but no response was received from Baltimore. Correspondence addressed to Hattie Bertrand was not answered, and the information lacking on the application for payment was never supplied to Respondent.
The Issue The issue is whether Petitioner, Utopia Home Care, Inc. (Utopia or Petitioner), is entitled to payment of $38,432.71 for the services it provided to Medicaid recipients during the period of January 1, 2000, through December 31, 2000.
Findings Of Fact At all times relevant to this proceeding, Utopia was an authorized Medicaid provider in the State of Florida. Pursuant to a valid Medicaid provider agreement, Utopia was authorized to provide home and community-based services to Medicaid recipients. The Agency is charged with the administration and oversight of the Medicaid Program and funds throughout the State of Florida. One of the Agency's responsibilities is to monitor the provision of Medicaid services and make payments to providers for services which have been appropriately provided and for which claims have been correctly processed. During the period of January 1, 2000, through December 31, 2000 (the audit period), Utopia rendered services to Medicaid recipients who receive home care services through the Medicaid Program. The cost of these services, for which Utopia has not received payment, is $38,432.71. There is no dispute that these services were authorized and provided by Utopia. Robert Fritz is vice president of Utopia and works in Utopia's St. Petersburg, Florida, office. In or about February 2002, while Mr. Fritz was participating in an accounts receivable project, he discovered that Utopia had not been paid for some of the services it had provided to Medicaid recipients during the audit period. Mr. Fritz contacted the Agency soon after he discovered that Utopia had not received payment for the services it rendered during the audit period. Over a period of several months, Utopia, through Mr. Fritz, provided the Agency with documentation that the services were authorized and had been invoiced at or near the time the services were provided. Additionally, at the request of the Agency, Utopia completed numerous 081 Forms, Request for Payment Forms for the Florida Medicaid Program, to establish a baseline as to what claims were unpaid. Utopia completed the 081 Forms for the services which were provided during the audit period and for which it had not received payment in or about February 2002. In addition to the completed 081 Forms, dated February 2002, Utopia also provided to the Agency documentation generated from Utopia's computer system in Florida. The documents, created by the computer system on a weekly basis, included payroll checks for employees and invoices for services rendered. As part of Utopia's contractual requirements with the lead agency, which oversees the Medicaid Program at the local level, a monthly Medicaid Expenditure Tracking Report (Expenditure Tracking Report) is created by Utopia's St. Petersburg, Florida, office. The Expenditure Tracking Report lists anticipated expenditures from the Medicaid system to Utopia for services rendered in a particular month. Many of these documents were provided to the Agency in seeking to establish that the services had been provided during the audit period and to obtain payment for the services. The documents created by Utopia's computer system and discussed in paragraph 6 above were created at or near the time services were rendered. Due to the documentation provided by Utopia, the Agency stipulated that Utopia provided authorized services to Medicaid recipients and that the cost of these services was $38,432.71. Nonetheless, the Agency has refused to pay Utopia for the services because the claims were not filed in accordance with Medicaid procedures, as established in the Medicaid Provider Reimbursement Handbook, Non-Institutional 081 (Reimbursement Handbook). Based on the Agency's review of its records, it determined that Utopia had not filed the claims within 12 months of the services being rendered. The procedures for filing claims for Medicaid payments are outlined in the Reimbursement Handbook, which is referenced and incorporated by reference in Florida Administrative Code Rule 59G-8.200(6). Also, for purposes of this case, the Reimbursement Handbook sets forth the applicable Medicaid requirements for processing claims. The Reimbursement Handbook, pages 6-2 and 6-3, provides in relevant part the following: Medicaid providers should submit claims timely so that any problems with a claim can be corrected and the claim resubmitted before the filing deadline. * * * A clean claim for services rendered must be received by the agency or its fiscal agent no later than 12 months from the date of service. * * * The date electronically coded on the provider's electronic transmission by the Medicaid fiscal agent is the recorded date of receipt for an electronic claim. At all times relevant to this proceeding, Consultec was the company responsible for receiving claims from and paying those claims to Medicaid providers in the State of Florida. The Reimbursement Handbook indicates that the processing time for claims "under normal circumstances" is within 10 to 30 days after the claim is filed. The Reimbursement Handbook also provides that a "remittance voucher" is mailed each week if Consultec processed any claims or put any claims in "Suspend" status. With regard to the remittance voucher, the Reimbursement Handbook, page 8-4, states in relevant part the following: The remittance voucher plays an important role in communications between the provider and Medicaid. It tells what happened to the claims submitted for payment--whether they were paid, suspended, or denied. It provides a record of transactions and assists the provider in resolving errors so that denied claims can be resubmitted. The provider must reconcile the remittance voucher with the claim in order to determine if correct payment was received. Utopia filed all its claims electronically. Therefore, to determine whether Utopia was entitled to payment for services rendered during the audit period, the Agency searched its data warehouse. The data warehouse allows the Agency to review claims that have been electronically filed and the status of those claims. Based on the Agency's review, which compared claims filed by Utopia in February 2002 for services rendered during the audit period, the Agency found that 36 claims had been submitted by Utopia and paid and 108 claims had not been paid. With regard to the 108 claims that were not paid, the Agency found no evidence that the claims had ever been filed. Utopia's St. Petersburg, Florida, office provided the services in question. Staff members in that office generate and enter data into the computer system that creates the documents described in paragraph 6 above and provide billing information to the local lead agency. Utopia provides this information to the local lead agency, Neighborly Senior Services (Neighborly), pursuant to a contractual arrangement which authorizes Utopia to provide services to Medicaid recipients. Utopia's staff at the St. Petersburg, Florida, office prepares and compiles billing information regarding the services it has provided and electronically transmits the information to Utopia's corporate office in Kingsburg, New York. The practice of Utopia is that the corporate office in New York then finalizes the billing information and transmits the claims to the entity designated by the Agency to process and pay claims. At all times relevant to this proceeding, that entity was Consultec. Once the St. Petersburg, Florida, office transmits the billing information to the corporate headquarters in New York, it has no further responsibility or control over the billing information sent to Medicaid. Utopia's St. Petersburg, Florida, office also has no responsibility to reconcile the services actually billed to Medicaid by the corporate office with the services provided in Florida. At this proceeding, no evidence was presented to establish that Utopia's corporate office in New York ever filed claims for the services during the audit period for which no payment has been made. Likewise, Utopia never provided the Agency with documentation or evidence that claims for the services provided during the audit period were ever filed within 12 months of the services being provided. Similarly, no such evidence was ever produced at this proceeding. The Reimbursement Handbook provides for exceptions to the 12-month time limit if the claim meets one or more of the following conditions: (1) original payment voided, (2) court or hearing decision, (3) delay in recipient eligibility determination, (4) agency delay in updating eligibility file, (5) court ordered or statutory action, and (6) system error on a claim that was originally filed within 12 months from the date of service. Upon consideration of the applicable provisions of the Reimbursement Handbook, the Agency properly determined that Utopia did not file the claims within 12 months from the date of the service and that none of the conditions were present which warranted granting an exception.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Agency enter a final order finding that the disputed claims were not filed within the required 12-month period and denying reimbursement of those services. DONE AND ENTERED this 29th day of December, 2003, in Tallahassee, Leon County, Florida. S CAROLYN S. HOLIFIELD 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 29th day of December, 2003. COPIES FURNISHED: Jeffries H. Duvall, Esquire Agency for Health Care Administration Fort Knox Building III, Mail Station 3 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32308-5403 Robert C. Fritz Utopia Home Care, Inc. 215 Second Avenue, North St. Petersburg, Florida 33701 Lealand McCharen, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Mail Station 3 Tallahassee, Florida 32308 Valda Clark Christian, General Counsel Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building, Suite 3431 Tallahassee, Florida 32308
Findings Of Fact Petitioner, Indigo Manor, is a Florida licensed nursing home and Medicaid provider. Petitioner is a long term provider, and the successor in interest in the facility originally built by Health Care and Retirement Corporation of America (HCRC). Petitioner's address is 595 Williamson Boulevard, Daytona Beach, Florida. Respondent is the single state agency responsible for administering the Florida Medicaid program pursuant to Section 409.913, Florida Statutes, and rules promulgated thereunder. Reimbursement to nursing homes is governed by the Florida Title XIX Long-Term Care Reimbursement Plan (the Plan). The Plan is adopted by reference by Rule 10C-7.0482, Florida Administrative Code. Under the Plan, long-term care providers are reimbursed under a prospective reimbursement methodology. Rates are projected for a rate semester based on historical cost data. The provider is either reimbursed for depreciation and interest or is reimbursed under the Fair Rental Value System ("FRVS") for the property cost component of the provider's rate. Under FRVS, reimbursement is based on the acquisition costs of a capital asset. These acquisition costs are indexed forward based on a portion of the rate of increase in the Dodge Construction Index. (See Long-Term Care Reimbursement Plan at Section V.E.I.a.) Nursing homes participating in the Medicaid program on October 1, 1985, when the FRVS was implemented, were allowed to base their reimbursement on depreciation of actual property and interest costs. Most facilities entering the program after October 1, 1985, were put on FRVS. To prevent any facility from receiving lower reimbursement under the FRVS method as opposed to the depreciation plus interest method, there was a transition period during which some facilities continued to be paid depreciation plus interest payments until the FRVS payments exceeded the depreciation and interest payments as specified in Section V.E.1.h. of the Plan. At that time, a facility would receive reimbursement under the FRVS method. (See Long-Term Care Reimbursement Plan at Section IV.D.) Frank D. Hughes, an expert in Medicaid reimbursement to nursing homes, testified in behalf of the Department. He identified a chart, Respondent's Exhibit 1, which shows that costs reimbursement to a provider may start at a higher reimbursement per diem than FRVS, but that component of the provider's total reimbursement rate will decline over time; and FRVS will start a provider at a lower initial rate, but the property component of the total reimbursement rate will increase over time. Section IV.D. of the Department's Plan limits applicability of the hold harmless/payback clause to facilities entering the Medicaid program after October 1, 1985, which had committed to construction or purchase loans prior to October 1, 1985. The Department's witness clarified that the Department interpreted the language "committed to construction or purchase loans" in the disjunctive, i.e., "committed to construction" or "committed to purchase loans" prior to October 1, 1985. Further, the witness clarified that the Department interpreted the language "committed to construction" to be limited to providers who were subject to legally enforceable agreements for construction or financing. The Department's rationale was that only those providers who were subject to legally enforceable agreements would be adversely effected by the Plan's new method, and needed that protection of the hold harmless/payback clause. Mr. Hughes clarified that, if enforceable commitments had been made for loans, the Department would consider the entity to have met the "commitment" requirement. Mr. Hughes also clarified that, if a provider was able to finance a construction project without loans and accomplish the construction itself, the Department would consider the provider "committed" to construction at the point it entered into subcontracts for the project, or alternatively, at the point actual construction of the facility was begun. A stated intent to build a nursing home or nonbinding preparation prior to October 1, 1985 was insufficient to establish a commitment to construction. In September through November 1985, Health Care and Retirement Corporation of America (HCRC) began the permitting process to construct the subject nursing home on property it owned in Daytona Beach, Volusia County, Florida. The Department conceded that HCRC, the predecessor of Indigo Manor, had taken certain actions towards constructing the facility to include purchasing the property, architectural and engineering drawings and plans, obtaining building permits, and obtaining a Certificate of Need. In November 1985, construction on the project actually began. On November 25, 1985, HCRC entered into a construction contract with a subsidiary of HCRC to construct the nursing home. Funds for construction were obtained through internal transfers at HCRC via lines of credit available to HCRC. It was conceded by Petitioner that there were no loans obtained for the construction of the facility. The facility was completed and enrolled in the Medicaid program in July 1987. At that time, it was placed on the FRVS for its property costs. Subsequently, in December of 1987, the facility was transferred to the cost reimbursement system, effective retroactively to its date of entry in July. There is no documentation in the Department's files to indicate the reason the change was made, and no documentation to indicate additional or revised information was submitted to the Department to justify the change. The facility remained on the cost basis until February 1992, when the Department reviewed the audits in the facility's reimbursement file and determined the facility should not have been changed to cost, but instead should have remained on FRVS. Revised rate sheets dated February 20, 1992, covering all rate setting periods since July 22, 1987, were provided to the Petitioner that advised Petitioner would have its rate recalculated using the FRVS method and indicated the amended rates. On June 1, 1992, Petitioner's accounting firm sent a letter to the Department's Medicaid Cost reimbursement Administrator stating the facility believed the Department made a mistake by recalculating the rates. The letter asked that the matter be reviewed and the "error" corrected. On June 22, 1992, Petitioner was advised that the Department had determined the amount of overpayment received by Indigo Manor based upon the recalculated rates. Petitioner was directed to repay $250,935.46 which represented the difference between the actual rate paid which used the cost reimbursement method, and the rate that should have been paid using the correct FRVS method. By letter dated June 23, 1992, Mr. Hughes explained that, based on the Florida Title XIX Long-Term Care Reimbursement Plan, facilities entering the Medicaid program after October 1, 1985, would have their property costs recognized under the FRVS method. The letter pointed out that the Plan held harmless only those new facilities that had committed to facility construction or purchase loans prior to October 1, 1985. The letter, Petitioner Exhibit 1-B, also stated: The Department has consistently interpreted "committed" to mean enforceable agreements regarding facility construction or purchase loans specific to the facility in question, e.g. a contract for construction or an agreement for purchase loans specific to the facility in question. Based on the Department's June 23, 1992 letter, Petitioner filed a request for formal proceedings pursuant to Section 120.57(1), Florida Statutes, to challenge the Department's determination it should be on FRVS. Subsequent to the filing of that petition, Indigo Manor filed the instant petition alleging the Department is relying on non-rule policy. As of the date of the hearing, the Department had not initiated rulemaking regarding its challenged statement of policy, and the Department offered no evidence showing that rulemaking was not feasible or practicable. Petitioner conceded the phrase "committed to construction or purchase loans" is found within 109C-7.0482, Section IV, D., Florida Administrative Code. Petitioner does not allege that 10C-7.0482, Florida Administrative Code, is not a validly promulgated rule. Petitioner further concedes that contracts were not executed for construction of the facility, and actual construction was not begun until after October 1, 1985. At the formal hearing, the Department did not dispute that Petitioner was substantially affected by the Department's action. The Department did argue, however, that Petitioner did not have standing to bring the instant action as it did not actually own the property or facility at issue, nor did it have a contract in effect with the owner, Health Care and Retirement Corporation (HCRC), prior to October 1, 1985. While the Petitioner did not own the facility, the Department recognizes that Petitioner is the successor in interest to HCRC and is the entity impacted by the Department's rule and Department's policy of construing the term "committed to construction" to be limited to enforceable contracts for construction or purchase loans. HCRC has no present interest in the facility, and the Department's action.
The Issue The issue for determination in this case is whether Respondent’s application of a fair rental value system of property cost reimbursement to Petitioner under the Florida Title XIX Long-Term Care Medicaid Reimbursement Plan is appropriate.
Findings Of Fact Petitioner, CONSULTING MANAGEMENT AND EDUCATION, INC., d/b/a GULF COAST NURSING AND REHABILITATION CENTER (CME), is the licensed operator of a 103-bed nursing home in Clearwater, Florida, which is presently known as GULF COAST NURSING AND REHABILITATION CENTER (GULF COAST). CME participates in the Florida Medicaid Program as an enrolled provider. Respondent, AGENCY FOR HEALTH CARE ADMINISTRATION (AHCA), is the agency of the State of Florida authorized to implement and administer the Florida Medicaid Program, and is the successor agency to the former Department of Health and Rehabilitative Services, pursuant to Chapter 93-129, Laws of Florida. Stipulated Facts Prior to 1993, the GULF COAST nursing home facility was known as COUNTRY PLACE OF CLEARWATER (COUNTRY PLACE), and was owned and operated by the Clearwater Limited Partnership, a limited partnership which is not related to CME. In 1993 CME agreed to purchase, and did in fact purchase, COUNTRY PLACE from the Clearwater Limited Partnership. Simultaneous with the purchase of COUNTRY PLACE, CME entered into a Sale/Leaseback Agreement with LTC Properties, Inc., a Maryland real estate investment trust which engages in the financing of nursing homes. The Purchase and Sale Agreement between Clearwater Limited Partnership and CME was contingent upon the Sale/Leaseback Agreement and the proposed Lease between CME and LTC Properties, Inc. On September 1, 1993, CME simultaneously as a part of the same transaction purchased COUNTRY PLACE, conveyed the facility to LTC Properties, Inc., and leased the facility back from LTC Properties, Inc. As required, CME had notified AHCA of the proposed transaction. AHCA determined that the transaction included a change of ownership and, by lease, a change of provider. CME complied with AHCA's requirements and became the licensed operator and Medicaid provider for COUNTRY PLACE. Thereafter, CME changed the name of the facility to GULF COAST. After CME acquired the facility and became the licensed operator and Medicaid provider, AHCA continued to reimburse CME the same per diem reimbursement which had been paid to the previous provider (plus certain inflation factors) until CME filed its initial cost report, as required for new rate setting. In the normal course of business, CME in 1995 filed its initial Medicaid cost report after an initial period of actual operation by CME. Upon review of the cost report, AHCA contended that the cost report was inaccurate and engaged in certain "cost settlement" adjustments. During this review, AHCA took the position that CME's property reimbursement should be based on FRVS methodologies rather than "cost" due to the lease. In November of 1995, CME received from AHCA various documents which recalculated all components of Petitioner's Medicaid reimbursement rates for all periods subsequent to CME's acquisition of the facility. In effect, AHCA placed CME on FRVS property reimbursement. The practical effect of AHCA's action was to reduce CME's property reimbursement both retroactively and prospectively. The retroactive application would result in a liability of CME to AHCA, due to a claimed overpayment by AHCA. The prospective application would (and has) resulted in a reduction of revenues. CME is substantially affected by AHCA's proposed action and by Sections I.B., III.G.2.d.(1), V.E.1.h., and V.E.4. of the Florida Medicaid Plan. Additional Findings of Fact The Florida Medicaid Plan establishes methodologies for reimbursement of a nursing home's operating costs and patient care costs, as well as property costs. The dispute in this matter relates only to reimbursement of property costs. CME as the operator of the GULF COAST nursing home facility is entitled to reimbursement of property costs in accordance with the Florida Medicaid Plan. CME as the operator of the GULF COAST facility entered into a Florida Medicaid Program Provider Agreement, agreeing to abide by the provisions of the Florida Medicaid Plan. The Sale/Leaseback Agreement entered into by CME and LTC Properties Inc. (LTC) specifically provides for a distinct sale of the nursing home facility to LTC. LTC holds record fee title to GULF COAST. LTC, a Maryland corporation, is not related to CME, a Colorado corporation. The Florida Medicaid Plan is intended to provide reimbursement for reasonable costs incurred by economically and efficiently operated facilities. The Florida Medicaid Plan pays a single per diem rate for all levels of nursing care. After a nursing home facility's first year of operation, a cost settling process is conducted with AHCA which results in a final cost report. The final cost report serves as a baseline for reimbursement over the following years. Subsequent to the first year of operation, a facility files its cost report annually. AHCA normally adjusts a facility's reimbursement rate twice a year based upon the factors provided for in the Florida Medicaid Plan. The rate-setting process takes a provider through Section II of the Plan relating to cost finding and audits resulting in cost adjustments. CME submitted the appropriate cost reports after its first year of operation of the GULF COAST facility. Section III of the Florida Medicaid Plan specifies the areas of allowable costs. Under the Allowable Costs Section III.G.2.d.(1) in the Florida Title XIX Plan, a facility with a lease executed on or after October 1, 1985, shall be reimbursed for lease costs and other property costs under the Fair Rental Value System (FRVS). AHCA has treated all leases the same under FRVS since that time. AHCA does not distinguish between types of leases under the FRVS method. The method for the FRVS calculation is provided in Section V.E.1.a-g of the Florida Medicaid Plan. A “hold harmless” exception to application of the FRVS method is provided for at Section V.E.1.h of the Florida Medicaid Plan, and Section V.E.4 of the Plan provides that new owners shall receive the prior owner’s cost-based method when the prior owner was not on FRVS under the hold harmless provision. As a lessee and not the holder of record fee title to the facility, neither of those provisions apply to CME. At the time CME acquired the facility, there was an indication that the Sale/Leaseback transaction with LTC was between related parties, so that until the 1995 cost settlement, CME was receiving the prior owner’s cost-based property method of reimbursement. When AHCA determined that the Sale/Leaseback transaction between CME and LTC was not between related parties, AHCA set CME’s property reimbursement component under FRVS as a lessee. Property reimbursement based on the FRVS methodology does not depend on actual period property costs. Under the FRVS methodology, all leases after October 1985 are treated the same. For purposes of reimbursement, AHCA does not recognize any distinction between various types of leases. For accounting reporting purposes, the Sale/Leaseback transaction between CME and LTD is treated as a capital lease, or “virtual purchase” of the facility. This accounting treatment, however, is limited to a reporting function, with the underlying theory being merely that of providing a financing mechanism. Record fee ownership remains with LTC. CME, as the lease holder, may not encumber title. The Florida Medicaid Plan does not distinguish between a sale/leaseback transaction and other types of lease arrangements. Sections IV.D., V.E.1.h., and V.E.4., the “hold harmless” and “change of ownership” provisions which allow a new owner to receive the prior owner’s method of reimbursement if FRVS would produce a loss for the new owner, are limited within the Plan’s organizational context, and within the context of the Plan, to owner/operators of facilities, and grandfathered lessee/operators. These provisions do not apply to leases executed after October 1, 1985. Capital leases are an accounting construct for reporting purposes, which is inapplicable when the Florida Medicaid Plan specifically addresses this issue. The Florida Medicaid Plan specifically addresses the treatment of leases entered into after October 1985 and provides that reimbursement will be made pursuant to the FRVS method.
