Findings Of Fact Florida Life Care, Inc., d/b/a Beneva Nursing Pavilion (Beneva) and Florida Life Care, Inc., d/b/a Venice Nursing Pavilion North (Venice), the Petitioners in these cases, are both nursing homes that participate in the Florida Medicaid program and the Medicare program. T. 16. In order to receive reimbursement from Florida's Medicaid program, the Petitioners were required to submit to the Department of Health and Rehabilitative Services (HRS) a Medicaid cost report. T. 123. The Medicaid cost report is a report by the provider of its costs and other statistics and is the basis for calculation of the Medicaid reimbursement rate for that facility. Id. The provider is responsible for the correctness of its Medicaid cost report. T. 163. The Medicaid cost report is an accounting estimate. T. 169, 162. The Florida Title XIX Long-Term Care Reimbursement Plan is commonly called the Gainesville Plan, and was adopted on April 1, 1983. P. Ex. 14. The Gainesville Plan is incorporated by reference in rule 10C-7.0482, Florida Administrative Code, and establishes the manner in which Medicaid cost reports must be submitted and evaluated. P. Ex. 15. Beneva filed its first Medicaid cost report for the period covering September 7, 1982, through September 30, 1983. T. 24-25. Venice also filed its Medicaid cost report for the year ending September 30, 1983. T. 24. Both reports were filed by the Petitioners' accountants, Touche Ross & Co., on March 14, 1984, and were timely filed. P. Exs. 1 and 2; T. 24. Each of the Medicaid cost reports contained an adjustment for estimated Medicare costs. The adjustment appears in the Medicare Adjustment Schedule (MAS) of the Medicaid cost report. In so doing, the Petitioners were electing to use old cost reporting forms which allowed use of data from the Medicare cost report. Had they elected to use the new forms, there technically would have been no Medicare adjustment because the cost report calculates a Medicaid rate in a way that makes it unnecessary to delete Medicare costs. T. 143-144. The Medicare adjustment in the Medicaid cost report is designed to comply with the Gainesville Plan. T. 123. It is intended to prevent double reimbursement for the same costs. T. 124. The Medicare adjustment was taken directly from the Medicare cost report which each Petitioner had earlier submitted to Medicare. T. 25-26. The Medicare cost report is an accounting estimate, T. 169, and is the best and most reasonable estimate of costs associated with Medicare at the time that it is filed, but is subject to change after desk review, audit, or appeal. T. 12. There is no requirement imposed by HRS that changes occurring in the Medicare cost report be reported to HRS with respect to the Medicaid cost report. Venice reported a Medicare adjustment in its Medicaid cost report of $1,242,501. Beneva reported a Medicare adjustment in its Medicaid cost report of $1,798,107. T. 26. HRS audited the Medicaid cost reports of the Petitioners. HRS transmitted the audit of Venice by letter dated August 16, 1985, and transmitted the audit of Beneva by letter dated August 27, 1985. T. 29; P. Exs. 5 and 6. As a result of the audits, Venice had to reimburse HRS $43,637.57, and Beneva had to reimburse HRS $101,849.55. T. 36-37. Both letters of transmittal described in the last paragraph stated that the provider had 30 days in which to request a formal administrative hearing to contest any audit adjustment in dispute or disagreement. T. 29. Neither Petitioner requested a formal administrative hearing at that time because neither objected to the audit reports. T. 31. On August 25, 1985, the Medicare cost reports of both Beneva and Venice were substantially reduced (by hundreds of thousands of dollars) as a result of a federal audit. T. 32-35, 154. Petitioners did not know that these costs would be reduced in these amounts until the federal audit was completed. T. 35. The Medicare cost reductions are the subject of a pending appeal. T. The Medicare cost reductions may change again depending upon the result of the appeal. Id. Petitioners contend that if the numbers change again on appeal, they will have to again change their Medicaid cost report for the year ending September 30, 1983. T. 74. Accounting issues which arise with respect to the Medicaid cost report are resolved by reference first to the Gainesville Plan, then to the Medicare Health Insurance Manual (HIM) 15, and then to generally accepted accounting principles. T. 78. Section IV.E. of the Gainesville Plan provides: The prospectively determined individual nursing home's rate will be adjusted retroactively to the effective date of the affected rate . . . under the following circumstances: An error was made by HRS in the calculation of the provider's rate. A provider submits an amended cost report used to determine the rate in effect. An amended cost report may be submitted in the event of a change of one percent in the reimbursement rate. The amended cost report must be filed by the filing date of the subsequent cost report. Further desk or on-site audits of cost reports used in the establishment of the prospective rate disclose a change in allowable costs in those reports. HRS interprets subparagraph 1 above to be available to correct either mathematical errors or misstatements of fact that existed at that time. T. 129. It is the policy of HRS to use the best data available with respect to the Medicaid cost report, and thus it is the policy of HRS to use the Medicare cost report as a basis for estimating Medicare costs for the Medicaid cost report when it is the best information available. T. 138, 125. This policy is reasonable. HRS relied upon the Medicaid cost report as submitted by the Petitioners' accountants in establishing the Medicaid rates for the Petitioners. As discussed above, the Medicaid cost report contained estimates of Medicare costs which were the best estimates then available. These estimates were not in error at that time (that is, these estimates were not erroneous statements of fact) even though later changed by audit. T. 133. HRS did not commit any mathematical errors in the use of Petitioners' Medicare cost estimates. HRS did not commit any error in relying upon the data submitted to it by the Petitioners. T. 128. Petitioners did not, pursuant to subparagraph 2 of the Gainesville Plan set forth above, file an amended cost report by the filing date of the subsequent Medicaid cost report. In fact, they could not have availed themselves of this provision since the deadline for filing such an amended cost report was December 31, 1984, and the Medicare cost report audit adjustment did not occur until eight months later. T. 153-154. When the Gainesville Plan was implemented, HRS no longer used or relied upon Medicare desk or on-site audits. HRS interprets subparagraph 3 of the Gainesville Plan, set forth above, to apply only to changes in allowable costs disclosed in Medicaid desk or on-site audits. T. 131. Audited information is better information than an initial report which is not audited, and is preferable to unaudited information. T. 140. It, therefore, is the policy of HRS to use audited information if it is available. This policy is reasonable. It is a generally accepted accounting principle that a change in an accounting estimate is defined as the result of new information, changing conditions, more experience, or additional information that requires revision of previous estimates. T. 133; HRS Ex. 20. It is a generally accepted accounting principle that a change in an accounting estimate should not be accounted for by restating the prior year final statements, but should be accounted for in the period in which the change occurs. T. 132. See also P. Ex. 20, p. 125. Petitioners' accounting firm, Touche Ross & Co., prepared the original Medicaid cost report, but have not returned to that report as a result of the change in Medicare cost to file a restatement of the Medicaid cost report. T. 78. Pursuant to the principles and policies described above in findings of fact 21 through 23, it is the policy of HRS to recognize material changes to the Medicare adjustment which results from an audit of the Medicare cost report; HRS recognizes such changes by recognizing a change in the Medicaid cost report, but only in the current period. T. 126, 139, 142. If the change in Medicare costs for Beneva and Venice from the year ending September 30, 1983, are accounted for in the current period (1986), the effect on current allowable reimbursement rates will be negligible because most of the effect would be to cause the reimbursement rates to exceed the reimbursement ceilings established by HRS. T. 70-71. If a provider's reimbursement rate is already at the ceiling, there is no benefit from an adjustment that would otherwise have increased the rate. T. 144. Petitioners are already at that ceiling. T. 146. If the change in Medicare costs were accounted for by revision of the 1983 costs reports, Beneva and Venice would be entitled to substantial amounts of reimbursement. T. 94-95. The parties have stipulated that the exact amounts of reimbursement are not at issue in this formal administrative proceeding, but would be determined informally should the Petitioners prevail on the legal issues presented. T. 92-93. The Petitioners applied to HRS for a retroactive revision of its 1983 Medicaid cost reports. P. Ex. 16 and 17. By letter dated February 28, 1986, HRS denied the request for retroactive revision of the 1983 Medicaid cost reports. P. Ex. 18. The letter of denial did not inform the Petitioners of their right to request a formal administrative hearing regarding the denial, and did not specify the time in which such a request could be made. Id. Within 30 days of the date of the letter denying the request for retroactive revision of the 1983 Medicaid cost reports, the Petitioners in writing requested formal administrative hearings concerning the denials as to that issue. P. Ex. 19. HRS has never allowed a retroactive amendment of a closed cost report in the circumstances presented in this case. T. 127, 191-92. Were it to do so, it would turn the Medicaid reimbursement plan into a retroactive reimbursement plan because cost reports would continue to be changed retrospectively as changes in the underlying data occur. T. 127, 171. A second issue in this case is whether HRS has correctly applied the low occupancy provision of the Gainesville Plan to Beneva. On October 30, 1985, some eight days after being notified by HRS that HRS intended to make a low occupancy adjustment to Beneva, Beneva wrote to HRS asserting that it had incorrectly applied a low occupancy adjustment to Beneva. T. 46; P. Ex. 14. Prior to this time, HRS had not informed Beneva of a right to request a formal administrative hearing as to this issue, or the time limits for making such a request. There then ensued several conferences between HRS and the Petitioners concerning the low occupancy adjustment and the Medicare adjustment. T. 54, 90- On February 7 and 21, 1986, Petitioners wrote to HRS concerning the dispute over the Medicare adjustment. P. Exs. 16 and 17. No mention is made in these letters of the low occupancy issue. As discussed in finding of fact 27, by letter dated February 28, 1986, HRS denied the Petitioners' requests with respect to the Medicare adjustment. The denial does not mention the low occupancy adjustment, and only refers to the letters of February 7 and 28, 1986. P. Ex. 18. On March 26, 1986, the Petitioners requested a formal administrative hearing only with respect to the Medicare issue. P. Ex. 19. However, on June 5, 1986, Beneva filed a petition for formal administrative hearing (actually a first amended petition), and paragraph 7 of that petition raises the issue of the low occupancy adjustment. Prior to June 5, 1986, HRS had not informed Beneva of its right to request a formal administrative hearing as to this issue or the time limits for making such a request. Section V.B.7.e. of the Gainesville Plan calculates an adjusted per diem by multiplying each of the per diem components by a fraction that has as its numerator the individual facility occupancy level." P. Ex. 15, p. 33. Thus, the lower the individual facility occupancy level, the smaller the fraction, resulting in lower per diem allowance. Section V.B.7.f.2. of the Gainesville Plan provides that the occupancy adjustment in subparagraph e above "will not apply to . . . facilities with 18 or fewer months of operating experience." P. Ex. 15, p. 33. Beneva commenced operation as a nursing home on September 7, 1982. T. 25. On the day that it opened, the occupancy of Beneva was very low. It increased during the first year, and had an average occupancy of about 57 percent in the first 13 months. T. 43. The average annual occupancy of Beneva in 1984 was 83 percent. In 1985 it was 95 percent. T. 47; P. Ex. 14. HRS could have obtained these statistics from Beneva if it had wanted to. T. 201. HRS applied the low occupancy adjustment to the per diem rates at Beneva for the months beginning April 1, 1984, to June 30, 1985. T. 43, 50, 63. April 1984, was the nineteenth month from the commencement of operations at Beneva. T. 194. HRS used the occupancy rate for the first 13 months of operation (57 percent) in this low occupancy adjustment. T. 43. The reason for using the occupancy rate for the first 13 months is that HRS uses the occupancy rate for the last cost report (in this case, the first cost report for the period ending September 30, 1983) to set rates for the prospective period. T. 200. HRS reasons that the same cost report used to set the prospective rates should be used for all purposes, including ascertainment of the "individual facility occupancy level," the numerator in the occupancy adjustment fraction in section V.B.7.e. of the Gainesville Plan. T. 202. It further reasons that this is required in order that the Medicaid reimbursement program be a prospective plan (based upon a fixed historical operation period, including all statistics associated with that cast) rather than upon current data. T. 212, 222-224. A new facility is expected to have low occupancy during its initial months of operation. T. 195. However, since some patient care costs are relatively fixed, a lower occupancy results in a higher per diem because the per diem cost is simply costs divided by patient days. T. 195-96. In this sense, start-up per diem cost rates are temporarily high due to the temporarily low occupancy. Id. The low occupancy adjustment has the effect of containing health care costs by adjusting this temporarily and unusually high per diem downward. T. 196-197, 192. It serves to partially preclude the receipt of an unwarranted high per diem cost reimbursement in a period when occupancy is relatively high. Id. HRS's interpretation of the method for applying the occupancy adjustment in the Gainesville Plan is an unwritten HRS policy. T. 202-203. HRS has applied this interpretation in the same manner to other Medicaid providers. T. 195, 214. As a result of application of the low occupancy adjustment, Beneva had its per diem reimbursement reduced by $15 to $18. T. 45, 233. If HRS had used the occupancy rate for 1984 (83 percent), there would have been very little impact upon Beneva's per diem rates. T. 207.
Recommendation For these reasons, it is recommended that the Department of Health and Rehabilitative Services enter its final order or orders denying retrospective adjustment to the fiscal year 1983 Medicaid cost reports of the Petitioners, and denying the requested alteration to the occupancy adjustment as applied to the Petitioner, Florida Living Care, Inc., d/b/a Beneva Nursing Pavilion. DONE and RECOMMENDED this 1st of June 1987, in Tallahassee, Florida. WILLIAM C. SHERRILL, JR. Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 1st day of June 1987. Appendix to Recommended Order in DOAH Case Numbers 86-2418 and 86-2419 The following is an explanation of the reasons for rejection of findings of fact proposed by the parties. The numbers correspond to the numbers used by the parties. Proposed findings of fact not discussed in this appendix have been adopted as findings of fact in this Recommended Order. Findings of fact proposed by the Petitioners: 13. In the last sentence, the verb "would" is rejected as a matter of law in this Recommended Order. The sentence has, however, been adopted as the contention of the Petitioners. 15. This proposed finding has been adopted with the addition of the finding that the recalculation is to be done only in the current period. 27. While the occupancy rates for 1983, 1984, and 1985 are provided by the evidence, there does not appear to be any evidence as to the occupancy rate on April 1, 1984. 31, 33, 37, 38, 40, 42, 44, 45, and 47. These proposed findings of fact are subordinate to findings of fact adopted in the Recommended Order, and are not necessary. The only portion of this proposed finding that is marginally relevant is the matter of efficiency of operation. Moreover, HRS had adequately explained its policy for interpretation of the low occupancy adjustment, and did not have to have specific evidence as to the efficiency of Beneva. If Beneva thought that that evidence would be useful, it could have presented it. The remainder of the proposed finding concerns whether HRS had evidence that Beneva was receiving a reimbursement rate higher than similar providers, or was receiving reimbursement in excess of its allowable cost on April 1, 1984. Again, HRS adequately explained its incipient policy in general terms, and did not need to present specific evidence concerning Beneva. But more important, the issue is whether the per diem costs of Beneva as reported to HRS for the year ending September 30, 1983, were normal, or unusually high as assumed by HRS in its interpretation of the Gainesville Plan. The reimbursement rate of Beneva is not relevant. There is no testimony at the record cited that Beneva was operating efficiently. The witness did not respond to the question and give any evidence concerning efficiency of operation. With respect to the remainder of the proposed finding of fact, whether or not Beneva was operating at a reimbursement rate under the caps on April 1, 1984, sheds little light on whether Beneva's Medicaid costs for the period ending September 30, 1983, as reported in the Medicaid cost report at issue in this case were normal, or unusually high as assumed by HRS in its interpretation of the Gainesville Plan. See the discussion with respect to proposed finding of fact 35. 46. Rejected for the reasons discussed in finding of fact 18. Moreover, it would have been error for HRS to have allowed the revisions requested by Mr. Fox because it would have been incorrect to revise previous accounting estimates. A change in an accounting estimate is to be made in the current period. Finding of fact 22. 50. This proposed finding of fact is not relevant because double reimbursement is not an issue raised by any party. Findings of fact proposed by the Respondent: 4. Whether the August 1985, audit reports gave the Petitioners a "point of entry" is a question of law. It is true that these were points of entry, but not with respect to the issues raised in these cases. Thus, the proposed finding is irrelevant as well. 12. The record does not support the proposed finding that FLC "did not wish to incorporate the change in the Medicare adjustment in its later cost reports." There is no evidence of what FLC wished to do. A finding has been made that it would not have benefited FLC to have sought such a revision. 19. This proposed finding is a conclusion of law. COPIES FURNISHED: Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 John Miller, Esquire Acting General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Suite 407 Tallahassee, Florida 32399-0700 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Suite 407 Tallahassee, Florida 32399-0700 Theodore E. Mack, Esquire Assistant General Counsel Department of Health and Rehabilitative Services 1323 Winewood Blvd. Building One, Room 407 Tallahassee, Florida 32399-0700 Michael J. Bittman, Esquire R. Bruce McKibben, Esquire Jonathan S. Grout, Esquire DEMPSEY & GOLDSMITH P. O. Box 10651 Tallahassee, Florida 32302
The Issue Whether Petitioner's Medicaid provider number should be cancelled for the reason stated in Respondent's October 1, 1995, letter to Petitioner?
Findings Of Fact Based upon the evidence adduced at hearing, and the record as a whole, the following Findings of Fact are made: Petitioner is a provider of community mental health services. It provides these services to residents of Palm Beach County and the surrounding areas. Some of the services it provides are unique to the area it serves. Petitioner provides services to Medicaid recipients pursuant to a Medicaid provider agreement dated September 6, 1994, paragraphs 8 and 9 of which provide as follows: 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. The agreement may be terminated upon thirty days written notice by either party. The Depart- ment may terminate this agreement in accordance with Chapter 120, Florida Statutes. Petitioner has attempted to enter into a contract with the Department of Health and Rehabilitative Services' Alcohol, Drug Abuse and Mental Health office (hereinafter referred to as "ADM"), but to date has been unable to do so because ADM has not had the money to fund such a contract.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered terminating Petitioner's provider agreement and cancelling its provider number on the grounds that it "does not have a contract with the [Department of Health and Rehabilitative Services] ADM [Alcohol, Drug Abuse and Mental Health] office." DONE and ENTERED this 26th day of February, 1996, at Tallahassee, Leon County, Florida. STUART M. LERNER, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 SC 278-9675 Filed with the Clerk of the Division of Administrative Hearings this 26th day of February, 1996. COPIES FURNISHED: Darlene Silvernail, Esquire Forest Hill Counseling Center 2624 Forest Hill Boulevard West Palm Beach, Florida 33406 Gordon B. Scott, Esquire Agency for Health Care Administration 2727 Mahan Drive, Fort Knox Number 3 Tallahassee, Florida 32308-5403 Jerome W. Hoffman, General Counsel Agency for Health Care Administration 2727 Mahan Drive, Fort Knox Number 3 Tallahassee, Florida 32308-5403 Sam Power, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Fort Knox Number 3 Tallahassee, Florida 32308-5403
The Issue Is proposed rule 59G-3.010(4)(b)2.c. an invalid exercise of delegated legislative authority, for reasons described in the respective petitions that formed the basis of this dispute? See Section 120.56(2), Florida Statutes.
Findings Of Fact The party Florida Medical Association, Inc., a not for profit corporation is organized and maintained for the benefit of approximately 17,000 licensed physicians who are its members. It represents the common interests of those members. Some of its members provide services under the terms contemplated by proposed rule 59G-3.010(4)(b)2.c. Likewise, Robert Anthony Savona, D.O.; John F. Hull, D.O.; and Robert Kagan, M.D., as licensed physicians, provide services contemplated by a proposed rule 59G- 3.010(4)(b)2.c. Respondent is the agency responsible for administering the state Medicaid Program under Title XIX of the Social Security Act, 42 U.S.C. Section 1396 et seq. and Section 409.901, et seq. Florida Statutes. This responsibility includes reimbursement of Medicaid providers. Respondent offered the proposed rule for adoption. The services contemplated by proposed rule 59G- 3.010(4)(b)2.c., in which the rule describes a payment mechanism, are in association with patients who are Medicare and Medicaid eligible. The arrangement contemplated by the proposed rule is in relation to Medicaid reimbursable services which complement Medicare. Under the proposed rule, Medicare Supplemental Insurance (Part B) is paid for the deductible and coinsurance for the Medicare and Medicaid eligible recipients by the Medicaid fiscal agent, in accordance with a rate identified in the proposed rule. The recipients of the services from physicians under the proposed rule, eligible for both Medicare and Medicaid benefits, are also referred to as Qualified Medicare Beneficiaries (QMBs). QMBs are described as poor, elderly and disabled persons. In pertinent part the proposed rule states: 59G-3.010 Medicaid Services Complementing Medicare. * * * (4) Medicaid Reimbursable Services which Complement Medicare. * * * (b) Medicare Supplemental Insurance (Part B). * * * 2. The Medicare Part B deductible and coinsurance is paid for the Medicare and Medicaid eligible recipient by the Medicaid fiscal agent at the following rates: * * * c. Physician services, including doctors of medicine, doctors of osteopathy, and providers of chiropractic and podiatric services are reimbursed 100 percent of the deductible and 100 percent of the coinsurance only to the extent that the total payment received does not exceed the Medicaid fee for the service provided. If there is no comparable Medicaid fee for the service, the Medicaid fee is calculated to be 50 percent of the Medicare approved charge for the service provided. In these situations, whether the physician did or did not receive a payment from Medicaid, by billing Medicaid he is bound to the Medicaid payment schedule as payment in full. Other parts of proposed rule 59G-3.010(4)(b)2. at a., b., d., and e. address Medicare Part B deductibles and coinsurance for other providers as follows: Part B patient hospital services are reimbursed 100 percent of the deductible and coinsurance. Rural health centers, federally qualified health centers and county health departments are reimbursed their encounter rate minus the amount of Medicare's payment. * * * Pharmacy providers are reimbursed 100 percent of the deductible and 100 percent of the coinsurance only to the extent that the total payment does not exceed the Medicaid fee for the service provided. Other Part B suppliers are reimbursed 100 percent of the coinsurance and 100 percent of deductible. Under Medicare Part B, 80 percent of reasonable costs or charges for the delivery of health care to Medicare eligible patient is paid through the Medicare program as a premium. That program is administered by the federal government under Title XVIII of the Social Security Act, 42 U.S.C., Section 1395 et seq. That payment is a form of insurance. The remaining 20 percent is anticipated to be paid by the patient as copayments or coinsurance, in addition to an annual deductible. The proposed rule in relation to physician services addresses the manner in which some portion of the 20 percent is "crossed-over" to be paid for potential payment through the Medicaid program administered by Respondent using federal and state funding, pursuant to Title XIX of the Social Security Act, 42 U.S.C., Section 1396 et seq. and Section 409.901 et seq., Florida Statutes. Payment to the physicians for their services in relation to the deductible and coinsurance depends upon the application of the formula in the proposed rule. The formula contemplates reimbursement to the physicians at less than 100 percent of the deductible and 100 percent of the coinsurance because the Medicaid fee schedule is generally lower than the federal Medicare fee schedule for the same services. In fact, in most cases the physicians will receive no payment for the deductible or coinsurance above the 80 percent payment under the Medicare fee structure in relation to the basic Medicare premium. By comparison to other health care and service providers discussed in the proposed rule, some other individuals and entities are reimbursed at 100 percent of the deductible and coinsurance and others are not guaranteed reimbursement at 100 percent. The formulas for reimbursement for services provided under the proposed rule related to Medicare Part B deductible and coinsurance are influenced by the results of quarterly estimating conferences held between legislative and executive branch staff. Those estimators, within respective categories of services, examine the performance of the various categories of services concerning fiscal impact through a comparison of available revenues against expenditures. This assists in the preparation of future budgets upon the recommendation of the governor to be passed by the legislature. Respondent assists in preparation of budget requests, to include recommendation for policy changes related to the amount of expenditures for the various services performed for the benefit of Medicare and Medicaid eligible recipients, QMBs, who are entitled to the payment of their deductible and coinsurance under Medicare Part B. However, the impetus for the reimbursement formula for physician services described in the proposed rule has a more precise origin, for reasons now explained. A prior version of Rule 59G-3.010(4), Florida Administrative Code in effect on April 8, 1996, was challenged in an administrative proceeding before the Division of Administrative Hearings. That version limited the amount of reimbursement for physician services associated with Medicare Part B deductible and coinsurance in a different manner than the proposed rule. In the decision of Reynolds v. Agency for Health Care Administration, 18 F.A.L.R. 3474 (Fla. DOAH 1996) the rule was held invalid. Among the cases cited for this decision was Pennsylvania Medical Society v. Snider, 29 F.3d 886 (3d Cir. 1994) and Haynes Ambulance Service, Inc. v. State of Alabama, 36 F.3d 1974 (11th Cir. 1994). The federal court cases refer to the recipients of cost reimbursement for deductibles and coinsurance as QMBs. Essentially, they are the same persons who are described in the proposed rule as Medicare and Medicaid eligible. Although the rule had been declared invalid, Respondent continued to exercise the policy of denying payment of Medicare deductibles and coinsurance on physician crossover claims at 100 percent of the deductible and 100 percent of the coinsurance as contemplated by the federal court cases. Following Respondent's return to the policy of not paying the deductible and coinsurance at 100 percent for physician services, Petitioner's Savona, Hull, and Kagan brought a lawsuit in federal count to compel payment for physician services to QMBs at the Medicare rate. On March 3, 1997, the United States District Court for the Northern District of Florida granted a final injunction that required Respondents to pay the physician class in the lawsuit at the Medicare rate for services provided to QMBs. See Savona v. Cook, Case No. 4:96CV14-WS (N.D. Fla. 1997). After the decision in Savona, Respondent pursued a policy of paying the deductible and coinsurance at 100 percent of the Medicare rate. This policy lasted from March 3, 1997 until October 1, 1997. To facilitate the payment for physician services at 100 percent of the Medicare rate for the crossover claims related to the deductible and coinsurance, Respondent amended its state Medicaid plan, with the federal Health Care Financing Administration (HCFA). In addition, Respondent sought an appropriation through the legislature to fund the increase in copayments to assure that physician services were reimbursed at 100 percent of the Medicare rate for the deductible and coinsurance. This led to the passage of Chapter 97-152, Laws of Florida, Item 248, the 1997-98 General Appropriations Act, which set aside monies from the General Revenue Fund and from the Medical Care Trust Fund, totaling $87 million for Medicare Part B copayment for reimbursement of physician services for the dually eligible recipients. This refers to recipients eligible for services under Medicare and Medicaid. The 1997-98 fiscal year for that appropriation began July 1, 1997, and continues until June 30, 1998. The amount appropriated has proven more than adequate to meet the copayment for physician services at the 100 percent Medicare rate. Another document, prepared by persons unknown, was associated with the appropriations process for 1997-98. That document is referred to as Respondent's Ex No. 1 and is entitled 1997-98 General Appropriations and Summary Statement of Intent. It sets out the exact language in Chapter 97-152, Laws of Florida, Item 248, related to the $87 million for full Medicare Part B copayment for physician services. It also sets out a summary statement of intent that is not found within the General Appropriations Act. The language in that summary statement of intent is as follows: It is the intent of the Legislature that the funds in Specific Appropriation 248 which are provided to pay the full Medicare part B co- payment for physician services to clients who are dually eligible for Medicare and Medicaid, be expended only to the extent currently required by federal law. In the event that changes in federal law relating to reimbursement for these services occurs, the Agency for Health Care Administration shall directly submit to the federal Health Care Financing Administration any amendments to the state Medicaid Plan which are necessary to realize cost savings options permitted by and in compliance with federal law. As anticipated by the summary statement of intent, federal law relating to reimbursement for physician services did change in August of 1997 when Congress enacted the Congressional Balanced Budget Act of 1997, Section 4714. In pertinent part it stated: * * * (2) In carrying out paragraph (1), a State is not required to provide any payment for any expenses incurred relating to payment for deductibles, coinsurance or copayments for medicare cost-sharing to extent that payment under title XVIII for the service would exceed the payment amount that otherwise would be made under the State plan under this title for such service if provided to an eligible recipient other than a medicare beneficiary. That law became effective October 1, 1997. By its terms it created the option for states to reduce payments on crossover claims to the state Medicaid rate, although it did not mandate that outcome. The payment option created by the congressional enactment had application to all categories of providers. In view of the Congressional Balanced Budget Act of 1997, Respondent decided to change its payment policy to disallow payment for physician services at the 100 percent Medicare rate in all instances for physician services related to the deductible and coinsurance for dually eligible recipients. The effective date of the change in policy was October 1, 1997, coinciding with the effective date of the Congressional Budget Act. Respondent implemented its policy change without the benefit of rule adoption. The failure to implement the payment policy by rule adoption was challenged in the case of Savona v. Agency for Health Care Administration, DOAH Case No. 97-5909RU (Fla. DOAH 1998). On January 16, 1998, Respondent gave notice of rule development, to include the preliminary text of the rule. For this reason, the February 12, 1998, order entered in DOAH Case No. 97-5909RU denied the petition for determination of invalidity of the non-rule policy brought in accordance with Section 120.56(4), Florida Statutes. Consistent with its notice of rule development, Respondent published notice of proposed rulemaking pertaining to the rule under challenge here. That publication was made on February 13, 1998, through the Florida Administrative Weekly, Volume 24, No. 7. The specific authority for rule promulgation was Section 409.919, Florida Statutes, and the law to be implemented was Section 409.908, Florida Statutes. No mention was made of the summary statement of intent associated with the 1997-98 General Appropriations Act in Florida and the Congressional Balanced Budget Act of 1997. The testimony of Richard T. Lutz, Director of the Division of State Health Purchasing, Agency for Health Care Administration, at hearing established his reliance upon those latter two items as authority for promulgating the proposed rule in relation to the copayment for physician services under Medicare Part B, for the deductible and coinsurance. Mr. Lutz was principally responsible for the promulgation of the rule as policymaker for the Respondent. In addressing the difference in the reimbursement policies for physician services, contrasted with other services detailed in the proposed rule, Mr. Lutz indicated that changes in relation to reimbursement policies, other than for physicians, would be the product of an estimating conference showing the financial impact of the changes, followed by a budget item to effect the changes. In the absence of that impetus, Mr. Lutz described that he had been instructed that the methodologies that were in place for various services under Medicare Part B utilizing established methodologies for the reimbursement practices would remain in effect. Unlike the circumstances existing in the proposed rule, for classes of providers other than physicians, Mr. Lutz in behalf of Respondent took the initiative in dealing with reimbursement for physicians care under Medicare Part B when promulgating the proposed rule. He concluded that the terms of the federal court order in Savona were subject to the language in the summary statement of intent, and with the advent of the Congressional Balanced Budget Act of 1997 Respondent was at liberty to change its reimbursement scheme for physician services effective October 1, 1997. In making the policy choice to promulgate the proposed rule, Mr. Lutz recognized the option which Florida had to either limit copayments or continue copayments at the Medicare rate for physician services under Medicare Part B. In promulgating the proposed rule Mr. Lutz identified that the Agency did not consider language in Section 409.908(13), Florida Statutes. He did indicate in his testimony the belief that the preamble to Section 409.908, Florida Statutes, creates authority for promulgation of the proposed rule in its comment about the Respondent's ability to make payments in accordance with methodologies that are set forth in its rules, manuals, and handbooks, consistent with limitations placed in the General Appropriations Act and any statement of legislative intent. Mr. Lutz in promulgating the proposed rule recognized that the physician services under Medicare Part B copayment for deductible and coinsurance would eventuate in no payment beyond the 80 percent premium in many instances. Although Mr. Lutz expresses the opinion that the proposed rule for payment of physician services under Medicare Part B has retroactive application to October 1, 1997, he acknowledges that the language in the proposed rule makes no reference to its retroactivity to that date.
Findings Of Fact Introduction Petitioner, New Riviera Health Resort, Inc. (New Riviera or petitioner), operates a fifty-two bed nursing home at 6901 Yumuri Street, Coral Gables, Florida. The facility is licensed by respondent, Department of Health and Rehabilitative Services (HRS). At all times relevant hereto, New Riviera was a participant in the Florida Medicaid Program. Respondent is designated as the state agency responsible for the administration of Medicaid funds under Title XIX of the Social Security Act. In this regard, HRS requires providers such as New Riviera to follow cost reimbursement principles adopted by the federal government. These principles, rules and regulations are codified in publications known as HIM-15 and the Cost Provider Reimbursement Manual. Pursuant to Rule 10C-7.48(4)(a)5.a., Florida Administrative Code, petitioner filed a cost report for its fiscal year ending November 30, 1983, reflecting what it perceived to be its reimburseable costs for providing Medicaid services during the fiscal year. The cost report was audited by HRS field auditors in 1984. Thereafter, on March 20, 1985, HRS issued a Schedule of Audit Adjustments, Statement of Costs, and Statement of Cost and Statistics. As is pertinent here, the Schedule of Audit Adjustments recommended that reimburseable costs be reduced by $71,561.00 in order to bring the cost report in conformity with Federal and State Medicaid reimbursement principles.1 These adjustments relate to the owner's salary and fringe benefits ($50,246), certain roof repairs ($11,613.00), a pension plan contribution ($6,000), and the write-off of certain assets ($3,772). Prior to the preparation of the above reports, an exit conference was held by HRS representatives and petitioner to discuss the proposed adjustments. When no resolution was reached, the reports were issued. That precipitated the instant proceeding. Owner's Salary & Benefits ($50,246.00) Petitioner's facility is owned by Shirley El. St. Clair. Using an HRS formula, New Riviera allocated $30,934.00 of her total salary during the fiscal year to the cost report for reimbursement. It also sought to be reimbursed for $2,312.00 in related payroll taxes, and $17,000.00 for pension plan contributions. All were disallowed by HRS on the ground the costs were "unnecessary" under applicable federal regulations. Specifically, Section 902.2 of HIM-15 provides in part that compensation paid to an owner may be included in allowable provider cost "only to the extent that it represents reasonable renumeration for managerial, administrative, professional, and other services related to the operation of the facility and rendered in connection with patient care." The regulation goes on to provide that "services rendered in connection with patient care include both direct and indirect activities in the provision and supervision of patient care." The same section prohibits reimbursement where services rendered are not related to either direct or indirect patient care but are, for example, rendered "for the purpose of managing or improving the owner's financial investment." The agency takes the position that Ms. St. Clair's efforts are focused in the direction of managing and improving her investment, and that her salary and benefits should be accordingly disallowed. It also contends that the facility had three licensed administrators during fiscal year 1983, and that New Riviera does not need that number to adequately operate a 52- bed facility, which is small by industry standards. St. Clair has been owner-president-administrator of the facility since its inception some thirty two years ago. In response to an audit inquiry, St. Clair gave the following description of her duties: . . . in general terms. I am the Chief Executive Officer of the Corporation and Trustee of the New Riviera Pension Trust. Though I no longer keep regular business hours in the traditional sense, I generally work a 30-50 hour week depending on circumstances, frequently on weekends. Much of my time is spent managing the financial aspect of New Riviera and the Pension Plan. I do most of the banking and a great deal of the grocery and "odds and ends" shopping for New Riviera. At final hearing she described her working hours in 1983 as being "irregular"; but still totaling 30 to 50 hours per week. Her duties included "a bit of everything," including keeping the books, admitting patients, performing marketing and banking activities, and relieving other personnel on weekends. There is no dispute that St. Clair has a voice in all business decisions of the nursing home. Because there are no secretaries or receptionists employed by the facility, she also performed various secretarial tasks. During the fiscal year in question, St. Clair also had two other licensed and full-time individuals performing administrative duties. One was a Mrs. Campbell whose primary duty was to keep the books while the other was her son, Michael, who acted as assistant administrator. According to St. Clair, Michael has a masters -degree in health care administration, supervised the maintenance of the facility, and was there "just to learn the business" in anticipation of her retirement. He recently left New Riviera in September, 1985 and had not been replaced as of the time of final hearing. Mrs. Campbell still remains on the payroll. HRS has allowed Campbell's and Michael's salary and fringe benefits but has proposed to disallow all salary and fringe benefits of Mrs. St. Clair. In this regard, there is no credible evidence that a 52-bed facility requires three licensed administrators. Indeed, a 52-bed facility is unique in terms of size, and is roughly one-half the size of a typical nursing facility. Mrs. St. Clair did perform numerous administrative duties during the fiscal year in question, and without contradiction, it was established she devoted some 30 to 50 hours per week at the facility. On the other hand, her son was simply "learning the trade," and his sole function was described as "supervising the maintenance." Under these circumstances, it is found that Shirley St. Clair's salary and fringes are related to "services rendered in connection with patient care" and should be reimbursed. Conversely, the son's salary and fringe benefits were not necessary, were duplicative in nature, and should be disallowed. This finding is substantiated by the fact that the son has not been replaced since leaving the facility. Reimburseable expenses should be accordingly adjusted. Roof Repairs ($11,613.00) During the fiscal year, repairs costing $11,613.00 were made to a part of the roof structure due to leaks. The facility's accountant recorded these repairs as an expense on the cost report. This accounting treatment was made, according to the provider, on the theory the repairs did not extend the useful life of the building, and were necessary for continued operation of the facility. Section 108.2 of HIM-15 in controlling and provides in part as follows: Betterments and improvements extend the life or increase the productivity of an asset as opposed to repairs and maintenance which either restore the asset to, or maintain it at, its normal or expected service life. Repair and maintenance costs are always allowed in the current accounting period. The more credible and persuasive evidence of witness Donaldson supports a finding that the roof expenditure was a "betterment and improvement" that extended the life of the roof (asset). In view of this, it is found that the cost of the repair should have been capitalized, rather than expensed, and that reimburseable costs should be reduced by $11,613 as proposed by the agency. Pension Plan Contribution ($6,000.00) Petitioner reflected $51,000.00 on its cost report for contributions to its employee pension plan during the fiscal year. This included separate payments of $10,000.00, $35,000.00 and $6,000.00 made in April and May, 1983 and January, 1984, respectively. This information is contained on Schedule B of the firm's Form 5500-R filed with the Internal Revenue Service on September 7, 1984. During the course of its audit, HRS requested the pension plan consultant to furnish information concerning minimum funding standards and retirement benefits for the participants. This was required to verify the charges on the cost report. In a letter dated July 3, 1984, the consultant advised in pertinent part: Based on salary and financial information provided by New Riviera, a $45,000.00 contribution to the pension plan met the minimum funding standards and was deductible. Relying upon this information, HRS disallowed $6,000.00 of the $51,000.00 in total costs allocated for the plan during the year ended November 30, 1983. On January 19, 1984, New Riviera issued a check in the amount of $26,000.00 payable to Shearson American Express for a pension plan contribution. Of that total, $6,000.00 was a contribution to 1983 costs. According to New Riviera's accountant, the additional $6,000.00 was required by the plan's actuary. However, this was not confirmed by any documentation or testimony from the actuary. When the audit was being conducted by HRS in the summer of 1984, the check written to Shearson American Express was in its business records, but was not produced for the auditors' inspection. Further, it was not produced at the exit conference held at a later date. In this regard, it was petitioner's responsibility to furnish that information during the course of the audit and exit conference rather than assuming that the auditors would discover the document while reviewing the auditee's books and records. This is particularly true since petitioner was placed on notice that the $6,000.00 was in dispute and subject to being disallowed by the agency.2 Even if the check had been disclosed to the auditors, it does not change the character of the $6,000 payment. The check was issued during the fiscal year ending November 30, 1984 and was therefore outside the scope of the audit year in question. If it is an appropriate expenditure, it is reimburseable on the 1984 cost report rather than the cost report for the year ending November 30, 1983. Therefore, 1983 reimburseable costs should be reduced by $6,000, as proposed by the agency. Write-off of Certain Assets ($3,772.00) During fiscal year 1983 petitioner wrote off $3,722.00 in remaining balances related to certain equipment.3 This amount related to the remaining or salvage value of certain assets whose useful lives had expired according to depreciation guidelines, but which assets were still in service. Even though the assets had not been retired or sold, petitioner wrote off the undepreciated balances remaining on the books. The undepreciated balances arose by virtue of petitioner using the declining balance method of depreciation. Under Medicaid guidelines, assets acquired after 1966 must be depreciated by the straight line method. Therefore, petitioner was in error in using a declining balance method. Even so, according to generally accepted accounting procedures, it was incorrect to write-off a remaining balance related to certain assets before the assets were actually sold or retired. At hearing petitioner agreed that its accounting treatment was contrary to HRS requirements, and accordingly these costs ($3,772.00) should be disallowed.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that petitioner's cost report for fiscal year ending November 30, 1983 be adjusted in accordance with paragraphs 4 through 7 of the Conclusions of Law portion of this Recommended Order. DONE and ORDERED this 13th day of January, 1986, in Tallahassee, Florida. DONALD R. ALEXANDER, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 13th day of January, 1986.
The Issue Whether Petitioner utilized the correct Medicaid per diem rates at its facility for the 18-month audit period identified in the November 7, 2011, Medicaid Examination Report.
Findings Of Fact By letter dated May 8, 2012, which included the Medicaid Audit Report that is the subject of this proceeding, Respondent gave Petitioner notice of its Medicaid reimbursement rate errors, subject to Petitioner’s right to contest the determinations of error and to demonstrate that its rates were correct in an administrative hearing. A timely Petition for Formal Administrative Hearing involving disputed issues of material fact was filed on behalf of Petitioner. After filing the hearing request, Petitioner took no further action to contest Respondent’s audit results. Despite having knowledge of these proceedings through its registered agent, Petitioner failed to comply with the Initial Order or the Order of Pre-Hearing Instructions, and failed to appear at the final hearing. Based on Petitioner’s failure to appear and offer evidence, there is no evidentiary basis on which findings can be made regarding the Medicaid Audit Report, other than it was provided to Petitioner with a notice of rights.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration enter a final order dismissing the Petition for Formal Administrative Hearing and adopting the Medicaid Audit Report as final agency action in this proceeding. DONE AND ENTERED this 11th day of March, 2015, in Tallahassee, Leon County, Florida. S E. GARY EARLY 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 11th day of March, 2015. COPIES FURNISHED: John F. Gilroy, III, Esquire John F. Gilroy III, P.A. 1695 Metropolitan Circle, Suite 2 Tallahassee, Florida 32308 (eServed) Steven Lee Perry, Esquire Office of Attorney General The Capitol, Plaza Level 01 Tallahassee, Florida 32399 (eServed) Richard J. Shoop, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3 Tallahassee, Florida 32308 (eServed) Stuart Williams, General Counsel Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3 Tallahassee, Florida 32308 (eServed) Elizabeth Dudek, Secretary Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 1 Tallahassee, Florida 32308 (eServed)
Findings Of Fact On August 23, 1995, the undersigned entered a Recommended Order in DOAH Case 94-1365. The Petitioner in that proceeding was Billy Beeks, M.D., and the Respondent was the Agency for Health Care Administration (AHCA). At issue in that proceeding was whether Dr. Beeks had been overpaid by the Medicaid program. The Recommended Order contained extensive findings of fact, including findings as to the appropriate levels at which certain services should have been billed to the Medicaid program by Dr. Beeks. It was concluded that because certain of his services were billed at levels higher than justified by Medicaid protocol, Dr. Beeks had been overpaid by the Medicaid program. Because the calculation of such overpayments are done by computer, it was recommended that the overpayment be recalculated based on the findings of fact contained in the Recommended Order. On October 19, 1995, Douglas M. Cook, Director of AHCA, entered a Final Order in DOAH Case 94-1365. That Final Order adopted the findings of fact and conclusions of law contained in the Recommended Order and provided, in pertinent part, as follows: The dollar amount of the overpayment liability shall be calculated based on the findings and conclusions made by the hearing officer. The amount of the overpayment claimed by AHCA at the beginning of the hearing in DOAH Case 94-1365 was $50,852.56. An overpayment to Medicaid is calculated by computer using a statistical analysis of a sampling of the provider's billings to Medicaid. AHCA asserted that the level at which Dr. Beeks had billed Medicaid for certain of these services in the sample was excessive. It was found in that underlying proceeding that while Dr. Beeks had billed certain of his services at excessive levels as asserted by AHCA, some of the challenged billings were not excessive and others were not as excessive as asserted by AHCA. Logically, one would expect that the recalculation of overpayment would result in a smaller figure than that claimed prior to the hearing. Following the entry of the Final Order, Vickie Givens, an employee of AHCA, made a detailed analysis of the evidence presented at the formal hearing, including the deposition of Joni Leterman, M.D.. Ms. Givens compared her analysis with the findings of fact contained in the Recommended Order and discovered certain billings by Dr. Beeks that she believed should have been included in the Recommended Order as being excessive. 1/ These billings were not included in the Recommended Order and, consequently, were not incorporated by reference into the Final Order. Thereafter the overpayment was recalculated by an appropriately trained AHCA employee. As instructed, this employee included in the recalculation of the overpayment the additional billings for the services identified by Ms. Givens, but not included in the Recommended Order. AHCA staff recalculated the amount of the overpayment to Dr. Beeks to be $51,745.13, which is slightly higher than the amount claimed prior to the hearing in DOAH Case NO. 94-1365. The figure that resulted from this recalculation was higher than it would have been had these additional billings not been included.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency enter a final order that adopts the findings of fact and conclusions of law contained herein and that the Agency recalculate the total amount of the overpayment during the audit period based solely on the findings of fact contained in the Recommended Order in DOAH Case 94-1365. DONE AND ENTERED this 8th day of July, 1996, in Tallahassee, Leon County, Florida. CLAUDE B. ARRINGTON, 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 8th day of July, 1996.
