The Issue The issues in this case are whether Respondent applied the proper reimbursement principles to Petitioners' initial Medicaid rate setting, and whether elements of detrimental reliance exist so as to require Respondent to establish a particular initial rate for Petitioners' facilities.
Findings Of Fact There are nine Petitioners in this case. Each of them is a long-term health care facility (nursing home) operated under independent and separate legal entities, but, generally, under the umbrella of a single owner, Tzvi "Steve" Bogomilsky. The issues in this case are essentially the same for all nine Petitioners, but the specific monetary impact on each Petitioner may differ. For purposes of addressing the issues at final hearing, only one of the Petitioners, Madison Pointe Rehabilitation and Health Center (Madison Pointe), was discussed, but the pertinent facts are relevant to each of the other Petitioners as well. Each of the Petitioners has standing in this case. The Amended Petition for Formal Administrative Hearing filed by each Petitioner was timely and satisfied minimum requirements. In September 2008, Bogomilsky caused to be filed with AHCA a Change of Licensed Operator ("CHOP") application for Madison Pointe.1 The purpose of that application was to allow a new entity owned by Bogomilsky to become the authorized licensee of that facility. Part and parcel of the CHOP application was a Form 1332, PFA. The PFA sets forth projected revenues, expenses, costs and charges anticipated for the facility in its first year of operation by the new operator. The PFA also contained projected (or budgeted) balance sheets and a projected Medicaid cost report for the facility. AHCA is the state agency responsible for licensing nursing homes in this state. AHCA also is responsible for managing the federal Medicaid program within this state. Further, AHCA monitors nursing homes within the state for compliance with state and federal regulations, both operating and financial in nature. The AHCA Division of Health Quality Assurance, Bureau of Long-Term Care Services, Long-Term Care Unit ("Long-Term Care Unit") is responsible for reviewing and approving CHOP applications and issuance of an operating license to the new licensee. The AHCA Division of Health Quality Assurance, Bureau of Health Facility Regulation, Financial Analysis Unit ("Financial Analysis Unit") is responsible for reviewing the PFA contained in the CHOP application and determining an applicant's financial ability to operate a facility in accordance with the applicable statutes and rules. Neither the Long-Term Care Unit nor the Financial Analysis Unit is a part of the Florida Medicaid Program. Madison Pointe also chose to submit a Medicaid provider application to the Medicaid program fiscal agent to enroll as a Medicaid provider and to be eligible for Medicaid reimbursement. (Participation by nursing homes in the Medicaid program is voluntary.) The Medicaid provider application was reviewed by the Medicaid Program Analysis Office (MPA) which, pursuant to its normal practices, reviewed the application and set an interim per diem rate for reimbursement. Interim rate-setting is dependent upon legislative direction provided in the General Appropriations Act and also in the Title XIX Long-Term Care Reimbursement Plan (the Plan). The Plan is created by the federal Centers for Medicare and Medicaid Services (CMS). CMS (formerly known as the Health Care Financing Administration) is a federal agency within the Department of Health and Human Services. CMS is responsible for administering the Medicare and Medicaid programs, utilizing state agencies for assistance when appropriate. In its PFA filed with the Financial Analysis Unit, Madison Pointe proposed an interim Medicaid rate of $203.50 per patient day (ppd) as part of its budgeted revenues. The projected interim rate was based on Madison Pointe's expected occupancy rate, projected expenses, and allowable costs. The projected rate was higher than the previous owner's actual rate in large part based on Madison Pointe's anticipation of pending legislative action concerning Medicaid reimbursement issues. That is, Madison Pointe projected higher spending and allowable costs based on expected increases proposed in the upcoming legislative session. Legislative Changes to the Medicaid Reimbursement System During the 2007 Florida Legislative Session, the Legislature addressed the status of Medicaid reimbursement for long-term care facilities. During that session, the Legislature enacted the 2007 Appropriations Act, Chapter 2007-72, Laws of Florida. The industry proposed, and the Legislature seemed to accept, that it was necessary to rebase nursing homes in the Medicaid program. Rebasing is a method employed by the Agency periodically to calibrate the target rate system and adjust Medicaid rates (pursuant to the amount of funds allowed by the Legislature) to reflect more realistic allowable expenditures by providers. Rebasing had previously occurred in 1992 and 2002. The rebasing would result in a "step-up" in the Medicaid rate for providers. In response to a stated need for rebasing, the 2007 Legislature earmarked funds to address Medicaid reimbursement. The Legislature passed Senate Bill 2800, which included provisions for modifying the Plan as follows: To establish a target rate class ceiling floor equal to 90 percent of the cost- based class ceiling. To establish an individual provider- specific target floor equal to 75 percent of the cost-based class ceiling. To modify the inflation multiplier to equal 2.0 times inflation for the individual provider-specific target. (The inflation multiplier for the target rate class ceiling shall remain at 1.4 times inflation.) To modify the calculation of the change of ownership target to equal the previous provider's operating and indirect patient care cost per diem (excluding incentives), plus 50 percent of the difference between the previous providers' per diem (excluding incentives) and the effect class ceiling and use an inflation multiplier of 2.0 times inflation. The Plan was modified in accordance with this legislation with an effective date of July 1, 2007. Four relevant sentences from the modified Plan are relevant to this proceeding, to wit: For a new provider with no cost history resulting from a change of ownership or operator, where the previous provider participated in the Medicaid program, the interim operating and patient care per diems shall be the lesser of: the class reimbursement ceiling based on Section V of this Plan, the budgeted per diems approved by AHCA based on Section III of this Plan, or the previous providers' operating and patient care cost per diem (excluding incentives), plus 50% of the difference between the previous providers' per diem (excluding incentives) and the class ceiling. The above new provider ceilings, based on the district average per diem or the previous providers' per diem, shall apply to all new providers with a Medicaid certification effective on or after July 1, 1991. The new provider reimbursement limitation above, based on the district average per diem or the previous providers' per diem, which affects providers already in the Medicaid program, shall not apply to these same providers beginning with the rate semester in which the target reimbursement provision in Section V.B.16. of this plan does not apply. This new provider reimbursement limitation shall apply to new providers entering the Medicaid program, even if the new provider enters the program during a rate semester in which Section V.B.16 of this plan does not apply. [The above cited sentences will be referred to herein as Plan Sentence 1, Plan Sentence 2, etc.] Madison Pointe's Projected Medicaid Rate Relying on the proposed legislation, including the proposed rebasing and step-up in rate, Madison Pointe projected an interim Medicaid rate of $203.50 ppd for its initial year of operation. Madison Pointe's new projected rate assumed a rebasing by the Legislature to eliminate existing targets, thereby, allowing more reimbursable costs. Although no legislation had been passed at that time, Madison Pointe's consultants made calculations and projections as to how the rebasing would likely affect Petitioners. Those projections were the basis for the $203.50 ppd interim rate. The projected rate with limitations applied (i.e., if Madison Pointe did not anticipate rebasing or believe the Plan revisions applied) would have been $194.26. The PFA portion of Madison Pointe's CHOP application was submitted to AHCA containing the $203.50 ppd interim rate. The Financial Analysis Unit, as stated, is responsible for, inter alia, reviewing PFAs submitted as part of a CHOP application. In the present case, Ryan Fitch was the person within the Financial Analysis Unit assigned responsibility for reviewing Madison Pointe's PFA. Fitch testified that the purpose of his review was to determine whether the applicant had projected sufficient monetary resources to successfully operate the facility. This would include a contingency fund (equal to one month's anticipated expenses) available to the applicant and reasonable projections of cost and expenses versus anticipated revenues.2 Upon his initial review of the Madison Pointe PFA, Fitch determined that the projected Medicaid interim rate was considerably higher than the previous operator's actual rate. This raised a red flag and prompted Fitch to question the propriety of the proposed rate. In his omissions letter to the applicant, Fitch wrote (as the fourth bullet point of the letter), "The projected Medicaid rate appears to be high relative to the current per diem rate and the rate realized in 2006 cost reports (which includes ancillaries and is net of contractual adjustments). Please explain or revise the projections." In response to the omissions letter, Laura Wilson, a health care accountant working for Madison Pointe, sent Fitch an email on June 27, 2008. The subject line of the email says, "FW: Omissions Letter for 11 CHOW applications."3 Then the email addressed several items from the omissions letter, including a response to the fourth bullet point which says: Item #4 - Effective July 1, 2007, it is anticipated that AHCA will be rebasing Medicaid rates (the money made available through elimination of some of Medicaid's participation in covering Medicare Part A bad debts). Based on discussions with AHCA and the two Associations (FHCA & FAHSA), there is absolute confidence that this rebasing will occur. The rebasing is expected to increase the Medicaid rates at all of the facilities based on the current operator's spending levels. As there is no definitive methodology yet developed, the rebased rates in the projections have been calculated based on the historical methodologies that were used in the 2 most recent rebasings (1992 and 2002). The rates also include the reestablishment of the 50% step-up that is also anticipated to begin again. The rebasing will serve to increase reimbursement and cover costs which were previously limited by ceilings. As noted in Note 6 of the financials, if something occurs which prevents the rebasing, Management will be reducing expenditures to align them with the available reimbursement. It is clear Madison Pointe's projected Medicaid rate was based upon proposed legislative actions which would result in changes to the Plan. It is also clear that should those changes not occur, Madison Pointe was going to be able to address the shortfall by way of reduced expenditures. Each of those facts was relevant to the financial viability of Madison Pointe's proposed operations. Madison Pointe's financial condition was approved by Fitch based upon his review of the PFA and the responses to his questions. Madison Pointe became the new licensed operator of the facility. That is, the Long-Term Care Unit deemed the application to have met all requirements, including financial ability to operate, and issued a license to the applicant. Subsequently, MPA provided to Madison Pointe its interim Medicaid rate. MPA advised Madison Pointe that its rate would be $194.55 ppd, some $8.95 ppd less than Madison Pointe had projected in its PFA (but slightly more than Madison Pointe would have projected with the 50 percent limitation from Plan Sentence 1 in effect, i.e., $194.26). The PFA projected 25,135 annual Medicaid patient days, which multiplied by $8.95, would equate to a reduction in revenues of approximately $225,000 for the first year of operation.4 MPA assigned Madison Pointe's interim Medicaid rate by applying the provisions of the Plan as it existed as of the date Madison Pointe's new operating license was issued, i.e., September 1, 2007. Specifically, MPA limited Madison Pointe's per diem to 50 percent of the difference between the previous provider's per diem and the applicable ceilings, as dictated by the changes to the Plan. (See Plan Sentence 1 set forth above.) Madison Pointe's projected Medicaid rate in the PFA had not taken any such limitations into account because of Madison Pointe's interpretation of the Plan provisions. Specifically, that Plan Sentence 3 applies to Madison Pointe and, therefore, exempts Madison Pointe from the new provider limitation set forth in Plan Sentences 1 and 2. However, Madison Pointe was not "already in the Medicaid program" as of July 1, 2007, as called for in Plan Sentence 3. Rather, Madison Pointe's commencement date in the Medicaid program was September 1, 2007. Plan Sentence 1 is applicable to a "new provider with no cost history resulting from a change of ownership or operator, where the previous operator participated in the Medicaid program." Madison Pointe falls within that definition. Thus, Madison Pointe's interim operating and patient care per diems would be the lesser of: (1) The class reimbursement ceiling based on Section V of the Plan; (2) The budgeted per diems approved by AHCA based on Section III of the Plan; or (3) The previous provider's operating and patient care cost per diem (excluding incentives), plus 50 percent of the difference between the previous provider's per diem and the class ceiling. Based upon the language of Plan Sentence 1, MPA approved an interim operating and patient care per diem of $194.55 for Madison Pointe. Plan Sentence 2 is applicable to Madison Pointe, because it applies to all new providers with a Medicaid certification effective after July 1, 1991. Madison Pointe's certification was effective September 1, 2007. Plan Sentence 3 is the primary point of contention between the parties. AHCA correctly contends that Plan Sentence 3 is not applicable to Petitioner, because it addresses rebasing that occurred on July 1, 2007, i.e., prior to Madison Pointe coming into the Medicaid system. The language of Plan Sentence 3 is clear and unambiguous that it applies to "providers already in the Medicaid program." Plan Sentence 4 is applicable to Madison Pointe, which entered the system during a rate semester, in which no other provider had a new provider limitation because of the rebasing. Again, the language is unambiguous that "[t]his new provider reimbursement limitation shall apply to new providers entering the Medicaid program. . . ." Madison Pointe is a new provider entering the program. Detrimental Reliance and Estoppel Madison Pointe submitted its CHOP application to the Long-Term Care Unit of AHCA for approval. That office has the clear responsibility for reviewing and approving (or denying) CHOP applications for nursing homes. The Long-Term Care Unit requires, as part of the CHOP application, submission of the PFA which sets forth certain financial information used to determine whether the applicant has the financial resources to operate the nursing home for which it is applying. The Long-Term Care Unit has another office within AHCA, the Financial Analysis Unit, to review the PFA. The Financial Analysis Unit is found within the Bureau of Health Facility Regulation. That Bureau is responsible for certificates of need and other issues, but has no authority concerning the issuance, or not, of a nursing home license. Nor does the Financial Analysis Unit have any authority to set an interim Medicaid rate. Rather, the Financial Analysis Unit employs certain individuals who have the skills and training necessary to review financial documents and determine an applicant's financial ability to operate. A nursing home licensee must obtain Medicaid certification if it wishes to participate in the program. Madison Pointe applied for Medicaid certification, filing its application with a Medicaid intermediary which works for CMS. The issuance of a Medicaid certification is separate and distinct from the issuance of a license to operate. When Madison Pointe submitted its PFA for review, it was aware that an office other than the Long-Term Care Unit would be reviewing the PFA. Madison Pointe believed the two offices within AHCA would communicate with one another, however. But even if the offices communicated with one another, there is no evidence that the Financial Analysis Unit has authority to approve or disapprove a CHOP application. That unit's sole purpose is to review the PFA and make a finding regarding financial ability to operate. Likewise, MPA--which determines the interim Medicaid rate for a newly licensed operator--operates independently of the Long-Term Care Unit or the Financial Analysis Unit. While contained within the umbrella of AHCA, each office has separate and distinct duties and responsibilities. There is no competent evidence that an applicant for a nursing home license can rely upon its budgeted interim rate--as proposed by the applicant and approved as reasonable by MPA--as the ultimate interim rate set by the Medicaid Program Analysis Office. At no point in time did Fitch tell Madison Pointe that a rate of $203.50 ppd would be assigned. Rather, he said that the rate seemed high; Madison Pointe responded that it could "eliminate expenditures to align them with the available reimbursement." The interim rate proposed by the applicant is an estimate made upon its own determination of possible facts and anticipated operating experience. The interim rate assigned by MPA is calculated based on the applicant's projections as affected by provisions in the Plan. Furthermore, it is clear that Madison Pointe was on notice that its proposed interim rate seemed excessive. In response to that notice, Madison Pointe did not reduce the projected rate, but agreed that spending would be curtailed if a lower interim rate was assigned. There was, in short, no reliance by Madison Pointe on Fitch's approval of the PFA as a de facto approval of the proposed interim rate. MPA never made a representation to Madison Pointe as to the interim rate it would receive until after the license was approved. There was, therefore, no subsequent representation made to Madison Pointe that was contrary to a previous statement. The Financial Analysis Unit's approval of the PFA was done with a clear and unequivocal concern about the propriety of the rate as stated. The approval was finalized only after a representation by Madison Pointe that it would reduce expenditures if a lower rate was imposed. Thus, Madison Pointe did not change its position based on any representation made by AHCA.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by Respondent, Agency for Health Care Administration, approving the Medicaid interim per diem rates established by AHCA and dismissing each of the Amended Petitions for Formal Administrative Hearing. DONE AND ENTERED this 23rd day of February, 2009, in Tallahassee, Leon County, Florida. R. BRUCE MCKIBBEN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 23rd day of February, 2009.
The Issue Whether Petitioner correctly imposed sanctions on Respondent for violation of applicable statutory, rule, and compliance criteria and standards as set forth in Chapter 641, Florida Statutes, Chapter 59A-12, Florida Administrative Code, and the 1994-1995 Medicaid Prepaid Health Plan Contract.
Findings Of Fact Petitioner, AGENCY FOR HEALTH CARE ADMINISTRATION (AHCA), is the agency of the State of Florida charged with the duty and responsibility of administering the provisions of the Florida Medicaid program pursuant to Chapter 641, Florida Statutes, relating to health care services. In 1992 statutory authority to regulate health maintenance organizations (HMO's) was transferred from the Florida Department of Health and Rehabilitative Services to AHCA. Respondent, UNIVERSAL HEALTH PLAN OF FLORIDA, INC. (UNIVERSAL), is a commercially licensed health maintenance organization under Chapter 641, Florida Statutes, with offices located in Dade County, Florida. In July of 1994, UNIVERSAL entered into a valid, enforceable, one-year Medicaid Prepaid Health Plan Contract (1994-1995 Contract) with AHCA. UNIVERSAL had specific knowledge of, and agreed to each of the requirements of the 1994- 1995 Contract. The 1994-1995 Contract required UNIVERSAL to provide Medicaid managed health care services to Florida Medicaid recipients in accordance with specified minimum standards, including standards for quality care assurance. The 1994- 1995 Contract also provided for an annual medical audit, and provided for the imposition of penalties for failure to comply with the contract. In December of 1994, as a result of negative press accounts, AHCA initiated a comprehensive review of each of the 29 Florida prepaid health plans to determine whether such plans were in compliance with their contractual requirements. By letter dated December 20, 1994, AHCA notified UNIVERSAL of the agency's intention to undertake a comprehensive review of UNIVERSAL. In accordance with the notification of December 20, 1994, AHCA, by letter dated January 10, 1995, informed UNIVERSAL that a comprehensive survey of UNIVERSAL's compliance with the conditions of the 1994-1995 Contract would begin on January 24, 1995. The January 10, 1995 letter specified the manner in which the survey would be conducted and itemized the information required of UNIVERSAL. AHCA also informed UNIVERSAL that the survey would review only those items required by the 1994-1995 Contract. The survey instrument developed by AHCA contained 145 specific program requirements which were derived directly from the 1994-1995 Contract. Seventy of the requirements pertained to quality of care review, and included such requirements as the providing of early periodic screening diagnosis and treatment (EPSDT); establishing an accurate and comprehensive medical records system; ensuring peer review of medical facilities and services; verification and examination of the credentials of health care providers; coordination of the overall health care of each member; and assuring that services provided to members through referral sources were reported to the HMO or a designated health care provider. In January of 1995, at the time of the AHCA survey, UNIVERSAL was undergoing major administrative changes including the replacement of its Chief Executive Officer. These changes were made in response to problems previously identified by UNIVERSAL which related to the operation of the plan, including problems relating to compliance with certain requirements of the 1994-1995 Contract. The AHCA survey of UNIVERSAL was conducted from January 24-26, 1995. The survey team was composed of five staff members including medical personnel, a Medicaid monitor, a staff member from the Bureau of Managed Care, and a manager or supervisor from the agency. In order to ensure consistency in the application of the survey standards, all team members participating in the comprehensive review of the 29 Florida prepaid Medicaid health plans were trained by AHCA prior to conducting the survey. The AHCA team members who conducted the comprehensive review of UNIVERSAL received such training. At the conclusion of the on-site survey, the AHCA survey team did not make representations to UNIVERSAL which indicated that the team had found UNIVERSAL to be in such substantial noncompliance with the 1994-1995 Contract that sanctions would be imposed. After all on-site surveys were completed, each AHCA review team compiled a detailed deficiency report for each plan listing those contract requirements with which the team had determined the plan was out of compliance. The deficiency report which the AHCA survey team completed for UNIVERSAL determined that UNIVERSAL complied with only 68 percent of the quality of care standards required by the 1994-1995 Contract, and with only 76 percent of the overall standards required by the 1994-1995 Contract. UNIVERSAL did not contest the contract deficiencies as determined by the AHCA survey team. AHCA sent each health plan, including UNIVERSAL, a copy of the deficiency report for their plan, and requested each health plan to develop and submit to AHCA a corrective action proposal for the deficiencies cited by the report. UNIVERSAL acknowledged the deficiencies cited in the AHCA report, and developed a corrective action proposal addressing these deficiencies. AHCA accepted and approved UNIVERSAL's corrective action proposal on April 8, 1995. As a result of the contract deficiencies determined during the comprehensive review of the prepaid Medicaid health plans, AHCA imposed sanctions against those plans which AHCA determined were not in substantial compliance with the requirements of the 1994-1995 Contract. For commercially licensed health plans, including UNIVERSAL, AHCA developed a graduated schedule of quality of care fines which were imposed based on each plan's performance as related to the seventy quality of care standards reviewed during the comprehensive survey. The fines imposed by AHCA ranged from $20,000 to $100,000, depending on the number of quality of care deficiencies cited for each plan. Commercial plans with contractual compliance rates above 90 percent were found to be in substantial compliance and no fines were imposed. Commercial plans with contractual compliance rates between 80 percent and 89 percent were fined $20,000. Those commercial plans between 70 percent and 79 percent were fined $60,000, and those commercial plans below 70 percent were fined $100,000. In developing its graduated schedule for quality of care fines, AHCA weighed each quality of care deficiency equally. UNIVERSAL was the only commercially licensed plan with a quality of care contractual compliance rate below 70 percent. The contractual quality of care requirements with which UNIVERSAL failed to comply included: 1) failure to provide EPSDT or to arrange for health risk and prevention measures; 2) failure to ensure a readily accessible, accurate and comprehensive medical records system; 3) failure to ensure peer review of its medical facilities and services; 4) failure to verify and examine the credentials of each of its providers; 5) failure to coordinate the overall health care of each member; and 6) failure to assure that services provided members through referral sources were reported to the HMO or a designated health care professional. By letter dated March 30, 1995, AHCA notified UNIVERSAL that because of the deficiencies found during the comprehensive review, UNIVERSAL was not in substantial compliance with the quality of care requirements of the 1994-1995 Contract. In accordance with the graduated schedule set forth above, AHCA assessed a fine against UNIVERSAL in the amount of $100,000. AHCA further notified UNIVERSAL that it was out of compliance with the overall requirements of the contract and imposed a moratorium on expansion and enrollment on UNIVERSAL. AHCA conducted a follow-up survey of UNIVERSAL from July 18-20, 1995. At that time AHCA determined that the corrective action plan submitted by UNIVERSAL had not been met, and contractual deficiencies remained. As a result of the follow-up survey, AHCA by letter dated August 15, 1995, notified UNIVERSAL that AHCA would be terminating UNIVERSAL's Medicaid Prepaid Health Contract, and revoking UNIVERSAL's certificate of authority effective October 1, 1995. On September 15, 1995, a separate administrative action was instituted by UNIVERSAL with the Division of Administrative Hearings, (Case No. 95-4569), relating to AHCA's termination of its contract and revocation of its certificate.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that: The sanctions imposed by AHCA on UNIVERSAL be UPHELD. RECOMMENDED in Tallahassee, Leon County, Florida, this 17th day of October, 1995. RICHARD HIXSON 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 17th day of October, 1995. APPENDIX As to Petitioner AHCA's proposed findings. 1 - 8. Accepted and incorporated. Rejected as irrelevant. Accepted and incorporated. Rejected in part as a conclusion of law. Accepted and incorporated. 13-14. Rejected in part as a conclusion of law. Accepted and incorporated. Rejected as irrelevant. 17 - 18. Accepted and incorporated. 19 - 28. Accepted and incorporated. 29. Rejected as irrelevant. 30 - 32. Accepted and incorporated. As to Respondent UNIVERSAL's proposed findings. 1- 10. Accepted and incorporated. 11 - 12. Rejected. 13. Accepted and incorporated. 14 - 16. Rejected as irrelevant. Accepted and incorporated. Rejected as irrelevant. Accepted and incorporated. 20 - 23. Accepted and incorporated. 24 - 31. Rejected as irrelevant. 32. Accepted and incorporated. COPIES FURNISHED: Heidi Garwood, Esquire Agency for Health Care Administration 2727 Mahan Drive Fort Knox - Building 1 Tallahassee, Florida 32308 Ellen Leibovitch, Esquire Lori Lovgren, Esquire ADORNO & ZEDER, P.A. 2255 Glades Road, Suite 342W Boca Raton, Florida 33431 Sam Power, Agency Clerk Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303 Jerome Hoffman, General Counsel Agency for Health Care Administration 2727 Mahan Drive Fort Knox - Building 1 Tallahassee, Florida 32308
Findings Of Fact Petitioner, Greynolds Park Manor, Inc. (Greynolds), operates a skilled nursing home facility at 17400 West Dixie Highway, North Miami Beach, Florida. The facility was constructed in 1968 and has been certified in the Medicaid Program since 1971. It is licensed by Respondent, Department of Health and Rehabilitative Services (HRS), to operate 324 beds. However, its average patient census in 1979 through 1981 was between 220 and 225 patients. It is the largest nursing home in Dade and Broward Counties. HRS is the state agency designated to administer Florida's Medical Assistance (Medicaid) Program pursuant to Section 409.266, et seq., Fla. Stat. HRS and Greynolds have entered into a written agreement, "Agreement for Participation in Florida's Medical Assistance Program," for each fiscal year that Greynolds has participated in the program. Greynolds' fiscal year runs from June 1 through May 31. Effective October 1, 1977, HRS adopted the "Florida Title XIX Long Term Care Reimbursement Plan" (Plan). The Plan is a prospective reimbursement plan, designed to aid the State in containing health care costs for Medicaid recipients. The prospective reimbursement rate for a provider is based on the actual allowable costs of a provider for the previous fiscal year, to which an inflationary factor is added. The mechanics utilized to establish the prospective reimbursement rate under the Plan are clear. The provider is required to submit a uniform cost report within 90 days after the conclusion of its fiscal year. HRS audits the uniform cost report, determines allowable costs, adds an inflationary factor, and thereby sets the provider's prospective reimbursement rate. This rate is effective the first day of the month following receipt of the uniform cost report by HRS, and remains in effect until a new cost report is filed by the provider. Under the provisions of the Plan, all cost reports are desk reviewed within six months after their submission to HRS. HRS, under the terms of the Plan, may perform an audit on the cost report. An on-site audit is a more extensive review of the cost report than desk review. During an on-site audit the financial and statistical records of the provider are examined to ensure that only allowable costs were included in the cost report. The audit findings prevail over those made at desk review. Greynolds submitted its cost report for fiscal year 1979 on September 27, 1979. Previously, by letter dated September 10, 1979, Greynolds had been advised by HRS that an on-site audit was to be done of its ficsal year 1979 cost report, and that Greynolds' Medicare cost report would be a subject of inquiry. The cost report Greynolds submitted to HRS on September 27, 1979, did not make a Medicare cost adjustment, and none was made at desk review. 1/ A rather anomalous situation existed in 1979 through 1980 which lent itself to potential abuse. The Medicare cost adjustment was never made at desk review. It was only made if there was an audit. Yet only one in three providers were designated for audit each year, and even if designated the audit could be terminated at any time. Consequently, if no audit were made, or if terminated prematurely, the provider would not be required to make a Medicare adjustment and would reap a substantial windfall. Greynolds was fully aware of HRS' practice. In 1981 HRS altered its practice and began to make the Medicare adjustment at desk review. The audit of Greynolds' cost report for fiscal year 1979 was actually begun in October 1979 by the Fort Lauderdale Office of HRS. At the same time, the desk review of the cost report was undertaken by HRS' Jacksonville Office and was ultimately finalized on February 29, 1980. The desk review findings contained adjustments to expenditures totaling $46,592, but made no Medicare adjustment, consistent with HRS policy at that time. Based upon these adjustments, HRS' desk review established prospective reimbursement rates effective October 1, 1979. However, HRS advised Greynolds that these rates were "subject to change by any on-site audit." Greynolds used these rates for the period October 1, 1979 through August 31, 1980. In June 1980, HRS' Supervisor of Audit Services requested additional information before the field audit of the 1979 cost report could be completed. Greynolds presumably furnished this information because the field work was completed in September 1980. On June 24, 1981, Greynolds was notified by letter that the audit had been completed and was pending final review. The letter further advised Greynolds that "since this audit will supersede the desk review, the adjustments we made in our desk review letter of February 29, 1980, must stand until the on- site audit results are released." On June 9, 1982, HRS' Fort Lauderdale Office advised Greynolds that its on-site audit of the 1979 cost report had been completed. The audit adjustments to the cost report had been increased from $46,592 to $803,592. Most of this was due to a Medicare adjustment in the amount of $654,282. An exit conference was held by HRS' field representatives and Greynolds on June 21, 1982. None of the adjustments were changed as a result of this meeting. At that time, Greynolds first requested that it be allowed to file an interim rate change. Greynolds was advised, however, that the Office of Audit Services had no authority to approve such a request. On September 23, 1982, the final audit report of Greynolds' 1979 cost report was issued. The audit concluded that the reported allowable expenses of Greynolds would be reduced by $725,953, resulting in an overpayment of $288,024. Most of this was, again, the result of the Medicare adjustment of $654,282. The report further advised Greynolds of the right to request that any audit adjustment in dispute be addressed in a hearing pursuant to Section 120.57, Fla. Stat. Greynolds duly petitioned for a Section 120.57 hearing on the audit adjustments of September 23, 1982. This matter was forwarded to the Division of Administrative Hearings and docketed as Case No. 82-3208. At the outset of the hearing in that case, Greynolds withdrew its challenge to the Medicare adjustment of $654,282. Following receipt of the final audit report of September 23, 1982, Greynolds requested, by letter dated November 2, 1982, an interim rate change for its fiscal year 1980, "in accordance with the Florida Title XIX Long Term Care Reimbursement Plan IVA-10." The reasons assigned by Greynolds for making the request were: A substantial decrease in Medicare patient days in the fiscal year ended May 31, 1980 and the corresponding decrease in the Medicare adjustment; and A change in the percentage of skilled and intermediate Medicaid patients. The request was denied by HRS on January 12, 1983, on the ground that "interim rates will not be granted for a closed cost reporting period." HRS' denial failed, however, to inform Greynolds of its right to request a hearing. On June 7, 1983, Greynolds renewed its request for an interim rate change for its fiscal year ended May 31, 1980. This request was denied October 12, 1983, on the ground that: To grant an interim rate for a closed cost reporting period would be the same as making a retroactive payment to a nursing home whose costs exceed annual payment. Retroactive payments such as this are specifically prohibited by Section 10C-7.48(6)(1), Florida Administrative Code, which was in effect during the cost reporting period in question. Greynolds filed a timely request for a Section 120.57(1), Fla. Stat., hearing. The circumstances relied on by Greynolds to justify an interim rate request were primarily the result of a substantial decline in its Medicare patient census resulting from a staphytococcus bacterial infection among its patients. The bacterial infection arose in February 1979 and continued through May 31, 1980 (the end of Greynolds' 1980 fiscal year). Greynolds is a dual provider facility, treating both Medicare and Medicaid eligible patients. The bacterial infection, which was contained within the Medicare section of the facility, resulted in a 45 percent decline in Medicare admissions during the period. Under the Medicare and Medicaid reimbursement systems, a provider is required to first request payment from Medicare if the patient is Medicare eligible. Medicare reimburses at a higher rate than does Medicaid. Consequently, a substantial decrease in the number of Medicare patient days would result in a substantial decrease in the revenue received by the provider. Greynolds was fully aware of the change in the patient mix, as it occurred, during fiscal year 1980. Greynolds opined that it did not apply for an interim rate request at that time because the prospective reimbursement rate which had been set October 1, 1980, based on its cost report for fiscal year 1979, was "adequate" until the Medicare adjustment was finally made. The facts, however, reveal a different motivation. Under the Plan, whether on desk review or on audit, a Medicare adjustment is made to a provider's uniform cost report when developing a prospective reimbursement rate. The Medicare adjustment is made by excluding the Medicare patient days and Medicare costs from the provider's cost report, since these items are reimbursed by Medicare. The reimbursement rate is then established by adding an inflationary factor to the remaining patient days and costs. This reimbursement rate remains in effect until the provider files its next cost report. If the provider maintains its costs under the reimbursement rate, it may retain the difference; if the provider's costs exceed the reimbursement rate, it will not be reimbursed for its inefficiency. The Plan is predicated on a cost containment methodology. It is designed to encourage efficient administration by nursing home providers when providing services to Medicaid recipients. The Plan does, however, permit an adjustment to a provider's prospective reimbursement rate ("an interim rate") when unforeseen events during that fiscal year occur which were not contemplated in setting the provider's prospective reimbursement rate predicated on the previous year's costs. Greynolds was aware of the change, as it occurred, in its 1980 patient mix. Therefore, it could have applied for an interim rate adjustment at that time. To have done so, however, would have required it to make the Medicare cost adjustment to its 1979 cost report since its justification for an increase was the substantial decrease in Medicare patients and the corresponding decrease in the Medicare adjustment it was currently experiencing. To raise the Medicare adjustment issue was not, however, to its financial advantage. If it "escaped" the Medicare adjustment to its 1979 cost report, it would profit by the amount of that adjustment ($288,024). Greynolds' request for an increase in its reimbursement rate for 1980, after the 1980 cost reporting period was closed, also raises the disquieting specter that Greynolds will be reimbursed for the same costs twice. Since each year's reimbursement rate is based on the previous year's cost report, to retrospectively pick one reimbursement period from the series of years is disruptive of all the rates which were subsequently established. Under the Plan, if a provider experiences a substantial decrease in Medicare patient days and costs for a cost reporting period, the Medicaid reimbursement rate for the next period, based on that cost report, would substantially increase. Accordingly, Greynolds' 1981 reimbursement rate would be reflective of the loss of Medicare patient days in 1980. To now ignore the effect 1980 costs had in establishing 1981 reimbursement rates, and to reimburse Greynolds for 1980 without regard to the reimbursement rate for the subsequent year, ignores reality. Greynolds has on one other occasion availed itself of an interim rate request. On June 17, 1981, Greynolds applied for an interim rate for its fiscal year 1981. Greynolds' request was based on the fact that it had negotiated a union contract effective April 1, 1981, which resulted in a substantial increase in salaries for its employees. Since this factor was not reflected in its cost report for fiscal year 1980, upon which its current reimbursement rate was predicated, HRS, by letter dated July 29, 1981, granted Greynolds' request. Greynolds asserts that the granting of its 1981 interim rate request occurred after the close of its 1981 cost reporting period and is, therefore, evidence that the denial by HRS of its interim rate request in this case is inconsistent and improper. HRS asserts that the granting of Greynolds' interim rate request in 1981 was proper, and that it was not granted outside a closed cost reporting period. HRS interprets "cost reporting period" to be that period within which the provider must file its cost report for the previous fiscal year ("the cost report period"). Rule 10C-7.48(5)(c), F.A.C., in effect at the time, provided A cost report will be submitted as prescribed by the Department to cover the facility's fiscal year, along with the facility's usual and customary charges to private patients receiving comparable medicaid service, within 90 days after the end of the cost report period. According to HRS, the "cost reporting period" would be closed when the provider submits its cost report, which could be as much as 90 days after the "cost report period" had ended. HRS' interpretation is certainly reasonable, within the range of possible interpretations, and is therefore adopted. The interim rate request, granted Greynolds in 1981, was not granted after a closed cost reporting period. The reimbursement rate in effect on June 17, 1981, had commenced September 1, 1980. This rate remained in effect until the interim rate was granted, which interim rate remained in effect until Greynolds submitted its cost report for fiscal year 1981. Greynolds' 1981 cost report was submitted August 31, 1981, and its new reimbursement rate was therefore effective September 1, 1981. Accordingly, the grant of Greynolds' 1981 interim rate request was not inconsistent with the position it has adopted in this case. Had Greynolds "timely filed" its interim rate request in this case, HRS concedes the circumstances which gave rise to the request would have entitled the request to consideration under the provisions of Florida Title XIX Long Term Care Reimbursement Plan, paragraph IVA-10. However, since HRS rejected Greynolds' interim rate request as untimely, it never addressed, by review or audit, the accuracy or prospective impact of Greynolds' request.
Findings Of Fact There is no genuine issue as to any of the following material facts: The Petitioner is 78 years old and, since at least 1995, has been eligible for Medicare based on her age. The Petitioner's monthly income is $594, and she has no assets or resources. Since at least 1995, she has been eligible for Medicaid based on her income and assets. F.A.C. Rule 59G-3.010(4) provides: (b) Medicare Supplemental Insurance (Part B) The monthly Medicare insurance premium is paid by the Agency directly to the Depart- ment of Health and Human Services for the Medicare and Medicaid eligible recipient. The deductible and co-insurance under Part B, Medicare, are paid for the Medicare and Medicaid eligible recipient by the Medi- caid fiscal agent. For physician services, Medicaid will cover the deductible and co- insurance only to the extent that the total payment received by the physician will not exceed the recognized Medicaid payment or, if there is no comparable Medicaid payment, 100 percent of the deductible and 75 percent of the co-insurance. In these situations, whether the physician did nor did not receive a payment from Medicaid, by billing Medicaid he is bound to the Medicaid payment schedule as payment in full. F.A.C. Rule 59G-3.230(6)(e) provides: Payment Methodology for Covered Services. * * * (e) Services provided to individuals who are covered by both Medicare and Medicaid must be billed to Medicare first. Medicaid will consider payment of the deductible and coinsurance, but in no case shall the combined Medicare and Medicaid payments exceed the maximum allowable Medicaid amount for the procedure. Pages 4-1, 4-2, 4-4, 4-5 and 4-6 and Appendix A-34-35 of The Florida Medicaid Provider Reimbursement Handbook, HCFA-1500, Nov. 1994, incorporated by reference in F.A.C. Rule 59G-3.230(8), contain language that essentially implements F.A.C. Rules 59G-3.010(4) and 59G-3.230(6)(e). When rules on this subject initially were adopted on January 1, 1977, they did not include the challenged provisions. The challenged provisions were added by amendment adopted January 6, 1978. The preamble to the adopting rule's description of the impact of the challenged rules states that the rule "could . . . decrease . . . the number of physicians [and] result in Medicaid eligible individuals paying their own deductible and co-insurance, . . . changing physicians, or maintaining the same physician with the physician accepting a loss in income." (Fla. Admin. Weekly, Vol. 4, No. 1, Jan. 6, 1978, at 224-25.) Some Florida physicians who accept other patients, including patients eligible for Medicare based on age but not eligible for Medicaid, do not accept "dual eligible" patients like the Petitioner (i.e., patients eligible for both Medicare and Medicaid) because the physician makes less money providing services for "dual eligible" patients under the terms of F.A.C. Rules 59G-3.010(4) and 59G-3.230(6)(e) and The Florida Medicaid Provider Reimbursement Handbook than the physician can make providing services for other patients, including patients eligible for Medicare based on age but not eligible for Medicaid. In 1995, the Petitioner's physician required her to pay him fees for service in addition to the reimbursement he received from the Respondent under the terms of F.A.C. Rules 59G-3.010(4) and 59G-3.230(6)(e) and The Florida Medicaid Provider Reimbursement Handbook although those provisions as well as his agreement with the Respondent prohibit him from doing so. The Intervenor asserts that other Florida physicians participating the Medicaid program, likewise in violation of F.A.C. Rules 59G-3.010(4) and 59G-3.230(6)(e) and The Florida Medicaid Provider Reimbursement Handbook as well as their agreements with the Respondent, also "attempt to collect Medicare coinsurance and deductibles from patients who are indigent."
The Issue The issue for determination in this case is whether the agency's interpretation of its Title XIX, ICF/MR Reimbursement Plan is a rule, and if so, whether it is an invalid rule.
Findings Of Fact Friendly Village of Brevard, Inc. d/b/a Washington Square (herein, Washington Square) is an intermediate care facility for the mentally retarded (ICF/MR), located at 2055 North U.S. 1, in Titusville, Florida. Friendly Village of Orange, Inc., d/b/a Lake View Court (herein, Lake View Court), is also an ICF/MR located at 920 W. Kennedy Boulevard, in Eatonville, Florida. Both facilities are operated by Developmental Services, Inc. Both are certified ICF/MR's participating in the Florida Medicaid Program. The Department of Health and Rehabilitative Services (HRS) is the state agency responsible for overseeing the ICF/MR Medicaid Program. Representatives of HRS and Florida's ICF/MR industry began negotiations on a new state Medicaid reimbursement plan in 1982 and 1983. The participants in the negotiations sought to remove certain cost limitations and to insure that individual facilities would receive fair reimbursement of their allowable costs. The negotiations resulted in the Title XIX ICF/MR Reimbursement Plan dated July 1, 1984 (the 1984 Plan). The 1984 Plan provides, in part, for the establishment of reimbursement rates for new ICF/MR's entering the Florida Medicaid program after January 1, 1983. Under the plan, a provider is required, prior to beginning operations, to prepare a budgeted costs report projecting what it expects to spend in allowable costs during the next year for care to its residents. HRS reviews these budgets and establishes a per diem rate, using the budgeted costs and the number of patients, arriving at a per patient, per day rate. Each month, as services are provided, the ICF/MR bills the state Medicaid program for the number of patient days times the per diem. During the period in question, cost settlement occurred at the conclusion of the budgeted period. The provider filed his cost report detailing what was actually spent in allowable costs, HRS compared that amount with the amount budgeted and settled with the provider. Washington Square entered the Florida Medicaid program on January 19, 1983; Lake View Court entered the program in February 1983. Both facilities filed cost reports for periods ending on February 29, 1984. Sometimes cost settlements occur quickly through a desk review. Other times, as here, audits are performed and settlement may occur much later. The audits of Washington Square and Lake View Court were conducted in 1985 for their initial cost reports ending February 1984. The audits were issued in April and May 1988. Those audits state that prior to July 1, 1984, the Florida Medicaid Program recognized only those interim rate settlements resulting in an overpayment. This is an interpretation of the 1984 Plan which Petitioners dispute and which, in this case, Petitioners contend is an invalid rule. ICF/MR Reimbursement plans prior to July 1, 1984, had one-way cost settlement, which meant that if the provider as overpaid, the funds had to be returned to HRS; if the facility as underpaid, it did not receive additional reimbursement. The 1984 ICF/MR Plan was changed to allow two-way cost settlement, thus allowing an underpaid provider to recover its approved costs. Petitioners claim that a proper interpretation of the 1984 Plan, especially when read with the 1985 Plan, is that two-way cost settlement is retroactive to January 1983, for new providers entering the program after January 1, 1983. HRS disagrees with that interpretation and this issue is the subject of the consolidated case, #88-2938. HRS' interpretation means that Petitioners will not be reimbursed for underpayments received during their first reporting period. The 1984 Plan was adopted as a rule by incorporation, in Rule 10C- 7.49(4)(a)2. Florida Administrative Code.
