The Issue The issue in this proceeding is the amount payable to Respondent in satisfaction of Respondent's Medicaid lien from a settlement received by Petitioner from a third party, pursuant to section 409.910(17), Florida Statutes.
Findings Of Fact Petitioner is a 35-year-old female who currently resides in Homestead, Florida. Respondent is the state agency authorized to administer Florida's Medicaid program. § 409.902, Fla. Stat. On or about February 15, 2012, Petitioner was struck by a motor vehicle and severely injured while attempting to rescue her young son, who had run into a busy street in front of her home in Hollywood, Florida. Petitioner suffered a fractured skull and broken leg. She was hospitalized and received medical care for her injuries. Subsequently, she was treated by an orthopedic physician and a neurologist. She estimated that she last received care or treatment from these physicians in August 2013. The Florida Medicaid program paid $35,952.47 in medical assistance benefits on behalf of Petitioner. Petitioner filed a lawsuit against the owners of the vehicle that struck her. On January 11, 2013, Petitioner and the owners of the vehicle that struck Petitioner ("Releasees") entered into a "Release and Hold Harmless Agreement" ("Settlement") under which the Releasees agreed to pay Petitioner $150,000 to settle any and all claims Petitioner had against them. Attached to the Settlement was a document titled "Addendum to Release Signed 1/11/13" ("Addendum"), which allocated liability between Petitioner and the Releasees and provided a commensurate allocation of the Settlement proceeds for past and future medical expense claims. The Addendum stated in pertinent part: The parties agree that a fair assessment of liability is 90% on the Releasor, Mirta B. Agras, and 10% on the Releasees. Furthermore, the parties agree that based upon these injuries, and the serious nature of the injuries suffered by the Releasor, Mirta B. Agras, that $15,000.00 represents a fair allocation of the settlement proceeds for her claim for past and future medical expenses. Petitioner testified that she primarily was at fault in the accident. She acknowledged that the statement in the Addendum that she was 90% at fault for the accident and the Releasees were 10% at fault was an estimate that she formulated entirely on her own, without obtaining any legal or other informed opinion regarding the apportionment of respective fault. Petitioner is not a physician, registered nurse, or licensed practical nurse. There was no evidence presented establishing that she has any medical training or expertise. Thus, there is no professional basis for Petitioner's position that 10% of the Settlement proceeds represents a fair, accurate, or reasonable allocation for her medical expenses. Rather, her position appears to be based on the intent to maximize the Settlement proceeds that are allocated to non-medical expenses, so that she is able to retain a larger portion of the Settlement proceeds. Respondent did not participate in discussions regarding the Settlement or Addendum and was not a party to the Settlement. Petitioner acknowledged that she still receives medical bills related to the injuries she suffered as a result of the accident, and that she still owes money for ambulance transportation and physician treatment. She was unable to recall or estimate the amount she owes. No evidence was presented regarding the actual amount of Petitioner's medical expenses incurred due to her injury. Petitioner has not paid any of her own money for medical treatment, and no entities other than Medicaid have paid for her medical treatment. Since being injured, Petitioner continues to experience medical problems, including pain, dizziness, memory loss, difficulty in walking or standing for extended periods, inability to ride in vehicles for extended periods, balance problems, and difficulty watching television or staring at a computer screen for extended periods. Petitioner claims that, nonetheless, she has not been told that she would need additional medical care or treatment. On or about January 31, 2013, Respondent, through ACS, asserted a Medicaid claim pursuant to section 409.910(17), seeking reimbursement of the $35,952.47 in medical assistance benefits it paid on behalf of Petitioner. Petitioner instead sought to reimburse Respondent $15,000, the amount that Petitioner and Releasees agreed in the Addendum represented a fair allocation of the Settlement proceeds for Petitioner's claim for past and future medical expenses. When Petitioner and Respondent were unable to agree on the amount Petitioner owed Respondent in satisfaction of its Medicaid lien, Petitioner paid ACS the $35,952.47 alleged to be owed Respondent and filed the Petition initiating this proceeding.
Findings Of Fact The Respondent John Competiello currently holds Funeral Director's License No. 1468, and Embalmer's License No. 1656, both of which were issued by the Petitioner. Mr. Competiello is the licensed funeral director and embalmer in charge of the Respondent Home for Funerals, Inc. The Respondent Home for Funerals, Inc. holds Establishment Operating License No. 994 issued by the Petitioner. The Respondent Competiello has been a licensed funeral director for approximately eight years. Prior to his employment with the Respondent Home for Funerals, Inc., Competiello had never served as the general manager of a funeral home. Competiello was hired as the general manager of Home for Funerals, Inc., and he commenced work on August 8, 1976. Home for Funerals, Inc. was an operating funeral home and crematory when Competiello became general manager. Home for Funerals, Inc. had been properly licensed with the Petitioner as a crematory. Prior to September 1, 1976, the license of Home for Funerals, Inc. expired, and no application was made on behalf of Home for Funerals, Inc. for inspection and licensing of the crematory. From September 1, 1976 until approximately September 23, 1976, approximately 54 cremations were performed at Home for Funerals, Inc. by John Competiello. Competiello did not know that Home for Funerals, Inc. had not been properly inspected and licensed by the Petitioner, and as soon as he was advised of that fact he immediately ceased all cremation activities at Home for Funerals, Inc. Competiello was never formally advised by the Petitioner that Home for Funerals, Inc. was not properly licensed, but this fact was communicated to him orally by a representative of the Petitioner. Petitioner issued a permit for a crematory at Home for Funerals, Inc., on October 23, 1976. From the date that Competiello was advised of the licensing failure until the date that a new permit was issued, no cremations were performed at Home for Funerals, Inc. The permit for a crematory at Home for Funerals, Inc. was issued by the Petitioner with full knowledge that cremations had been performed at Home for Funerals, Inc. during a time when Home for Funerals, Inc. was not properly licensed with the Petitioner as a crematory. There was no evidence offered at the hearing from which it could be determined that any of the cremations performed at Home for Funerals, Inc. during the time that it was not properly licensed with the Petitioner were performed in other than a proper manner. During the time that Competiello has been the licensed funeral director in charge of Home for Funerals, Inc., Home for Funerals has had a business relationship with an entity known as the National Cremation Society, Inc. The National Cremation Society, Inc. is a membership organization. Members of the public pay a fee to become members of the society. The fee entitles members to certain services including cremation upon death at a set price which cannot be increased. National Cremation Society, Inc. utilized the services of Home for Funerals. If a member of the Society died within the service area of Home for Funerals, the member's family would first notify the National Cremation Society, which would in turn notify Home for Funerals. Home for Funerals would conduct the cremation. The National Cremation Society has been Home for Funerals' largest account. There was evidence offered at the hearing which would appear to indicate that Home for Funerals and the National Cremation Society have more than merely a close business relationship. For example, one employee of National Cremation Society was paid on checks from Home for Funerals. The evidence would not, however, support a finding that Home for Funerals and National Cremation Society were alter egos of one another, or were other than separately operating entities. The National Cremation Society maintains an office in Miami Beach, Florida. Ms. Martha Lewis is the office manager. Ms. Lewis is not a licensed funeral director nor an embalmer. Martha Lewis' duties with the National Cremation Society were generally as follows: (a) to receive incoming calls regarding the deaths of Society members or other persons who desired cremation services; (b) to contact a removal service to pick up the deceased's body; (c) to obtain information required for the death certificate from the deceased's family or friends, and to collect money owing to the National Cremation Society; (d) to obtain the necessary medical certification required for the death certificate; (e) to deliver the completed death certificate and burial transit permit application to the Bureau of Vital Statistics for filing and to obtain the necessary burial transit permit; and (f) after cremation, if desired by the deceased's family, to pick up the deceased's remains from the funeral home and to deliver them to the family. Prior to November 1, 1976 Martha Lewis obtained the information for death certificates, signed the certificates herself, and filed them with the Bureau of Vital Statistics in Miami. Subsequent to November 1, 1976, Ms. Lewis was advised by an employee of the Bureau of Vital Statistics that they would no longer accept death certificates that were signed by her, but rather that the death certificates would need to be signed by a licensed funeral director. During this period the National Cremation Society was utilizing the services of Slade Funeral Home in Dade County, Florida to conduct cremations of Society members. The director of the Slade Funeral Home did not wish to sign the death certificates. The National Cremation Society arranged with Mr. Competiello to sign the certificates. Ms. Lewis would prepare the certificates, and forward them by bus to Mr. Competiello. Mr. Competiello would pick up the certificates at the bus terminal, sign them, and return them, also by bus, to Ms. Lewis. This pattern was followed in connection with the deaths of Leonard Schmidt, Joseph Miller, Leonard Scott, Winifred Piepper, Lina Bracher, Elizabeth Spray, James Halpin, Gertrude Keller, and others. The deaths occurred in Dade County, and the cremations were performed at the Slade Funeral Home. Neither Competiello nor Home for Funerals ever had any connection with the deceased persons other than through Competiello's signing of the death certificates. Neither Home for Funerals nor Competiello ever had custody of the bodies. Competiello did not gather any of the information that was set out on the death certificates and he made no examination as to the accuracy of the information. Competiello performed this service as a favor to Home for Funerals' largest account in order to facilitate the filing of death certificates by the National Cremation Society. Neither Competiello nor Home for Funerals had any formal relationship with Slade Funeral Home. Mr. Competiello testified that Slade Funeral Home acted as the agent for Home for Funerals in performing the cremations; however, insufficient evidence was offered to establish that Slade Funeral Home was in fact the agent for Home for Funerals for these purposes. In fact, Slade Funeral Home did not consider itself Home for Funerals' agent. Barbara Reynolds was employed by the National Cremation Society from October 12, 1976 through March 30, 1977 at its Sarasota office. Barbara Reynolds' duties with National Cremation Society were essentially as follows: the secretary or office manager would advise her that a death had occurred, and she would contact Home for Funerals to make arrangements to remove the body; she would contact the deceased's relatives, and obtain information for the death certificate which was not already in National Cremation Society's files, and fill out the death certificate; (c) obtain the required medical certification for the death certificates (d) file the completed death certificates and the burial transit permit applications and receive the burial transit permit; (e) at the request of the deceaseds family, she would pick up the deceased's remains at Home for Funerals, and deliver them to the family; (f) at the deceased's family's request she would place newspaper obituary notices; (g) she would handle paper work for application for the deceased's Social Security benefits or Veterans Administration benefits. Death certificate forms utilized were signed by Mr. Competiello. Mr. Competiello signed the forms in blank and provided them to National Cremation Society. Ms. Reynolds would file the completed death certificate when she obtained all of the information. Since the certificates had already been signed by Mr. Competiello, she would not need to obtain any further signature from him. Mr. Competiello did not gather any of the information for the death certificates and he made no independent examination of the facts set out on the certificates. In fact, Mr. Competiello never saw the death certificates after he signed them in blank. Mr. Competiello provided National Cremation Society a supply of signed blank burial transit permit applications in the same manner. There was no evidence offered at the hearing from which it could be concluded that either Home for Funerals, Inc. or John Competiello received any direct compensation from the National Cremation Society in connection with cremations of Society members conducted by the Slade Funeral Home in Dade County. It does not appear from the evidence that any of the cremations were performed in other than a proper manner, or that any member of the public was directly injured by the activities of Competiello and Home for Funerals, Inc. It does appear that the office of the Bureau of Vital Statistics in Dade County was uncertain as to the necessity for having death certificates signed by a licensed funeral director. Prior to November 1, 1976, the office accepted death certificates for filing which were not signed by a licensed funeral director. At no time did the Bureau of Vital Statistics either in Dade County or any place else complain to Competiello about his practices in connection with the signing of death certificates or burial transit permit applications.
Recommendation That a final order be entered adjudicating the Respondent John Competiello guilty of performing cremations at Home for Funerals, Inc., at a time when Home for Funerals, Inc. was not properly registered as a crematory; and reprimanding him for such conduct. That a final order be entered adjudicating the Respondent Home for Funerals, Inc. guilty of performing cremations at a time when it was not properly registered as a crematory, and reprimanding it for such conduct. That a final order be entered adjudicating the Respondent John Competiello guilty of violations of Section 382.081 Florida Statutes (1975), and Section 470.1D(6), Florida Statutes (1976 Supp.) as set out in Paragraphs 4 and 5 of the Conclusions of Law above, and suspending the licenses of John Competiello to practice as an embalmer and as a funeral director for a period of one year. That a final order be entered adjudicating the Respondent Home for Funerals, Inc. in violation of Chapter 470.12 (4)(a), Florida Statutes (1976 Supp.) and suspending the license of Home for Funerals, Inc. as a funeral establishment for a period of one year. RECOMMENDED this 2nd day of November, 1977, in Tallahassee, Florida. G. STEVEN PFEIFFER, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Michael J. Dewberry, Esquire 1300 Florida Title Building Jacksonville, Florida 32202 James A. Devito, Esquire Devito and Colen 5362 Central Avenue St. Petersburg, Florida 337D7
The Issue The issue is whether, for the 2001-02 cost-reporting year, Respondent is entitled to recoupment of Medicaid reimbursements that it paid to Petitioner, in connection with its operation of numerous intermediate care facilities for the developmentally disabled (ICF/DD) and, if so, what is the amount of the overpayments.
Findings Of Fact The Audit For over 40 years, Petitioner has operated as a not- for-profit provider of ICF/DD services. These cases involve a compliance audit of ten of Petitioner's 2001-02 cost reports. During 2001-02, Petitioner operated over 300 ICF/DDs-- both owned and leased--in eight states and earned an annual revenue of over $90 million. A typical facility is a group home serving 24 developmentally disabled residents, although some of Petitioner's facilities serve much larger numbers of residents. Respondent outsourced the compliance audit of Petitioner's 2001-02 cost reports, as well as a similar audit of Petitioner's 2002-03 cost reports, which are not involved in these cases. Prior to completing the audit, the outside auditor withdrew from the engagement because it had concluded that it would be required to issue a disclaimer of opinion--an auditing nonopinion, as described below. In late 2005, two and one-half years after the outside auditor had commenced its work, Respondent's staff auditors assumed responsibility for the compliance audit. After examining the outside auditor's workpapers, Respondent's staff auditors found it necessary to re-perform at least some of the field work. By letter dated January 3, 2006, Respondent advised Petitioner of this development and, among other things, requested information about 16 identified motor vehicles and a statement concerning the 1981 Piper airplane noted in the May 29, 2002 Insurance sub-committee minutes. What was the plane used for and in what cost centers and accounts are the costs recorded? Possible costs would include fuel, insurance, depreciation, maintenance, and any salaries. Petitioner responded by a letter dated March 3, 2006, but this letter is not part of the record. Evidently, not much audit activity took place for the next couple of years. By letter dated January 25, 2008, Respondent advised Petitioner of several potential audit adjustments and noted that Petitioner had not provided the "detail general ledger" and information on aircraft and vehicles that Respondent had sought in its January 3, 2006 letter. In March 2008, Respondent's staff auditor visited Petitioner's main office in Miami and audited Petitioner's records for three days. He confirmed the existence of a 1981 Piper aircraft and a second aircraft, which he was unable to identify. Respondent's staff auditor determined that he still lacked information necessary to determine if Petitioner's aircraft expenses were reasonable when compared to common- carrier expenses. By letter dated May 12, 2008, Respondent informed Petitioner that, after the March 2008 onsite visit, several issues remained. Among the issues listed were the costs of two private aircraft, for which Respondent requested access to all flight and maintenance logs and detailed documentation of business purpose of trips, identification of aircraft bearing two cited tail numbers, the names of pilots on Petitioner's payroll, and any other cost information justifying the cost of the aircraft compared to common-carrier costs. By letter dated June 13, 2008, Petitioner responded to the May 12, 2008 letter. This letter states that the 1981 Piper was sold at an undisclosed time, and the maintenance logs had been delivered with the plane. The letter supplies registration documentation for the two tail numbers, a personnel file checklist for the pilot, and justification for the cost of operating an aircraft compared to the cost of using common carriers. On December 4, 2008, Respondent's staff auditor conducted an exit conference by telephone with Petitioner's principals and its independent auditor. Respondent's staff auditor proposed audit adjustments of various cost items that the auditor had guessed involved the aircraft. Petitioner did not agree with these proposed audit adjustments or various others that Respondent's staff auditor proposed. For the next 17 months, neither side contacted the other, until, on May 12, 2010, Respondent issued examination reports for the 2001-02 cost-reporting period. It had taken Respondent over seven years to issue examination reports based on cost reports that Petitioner had filed on February 3, 2003, for a cost-reporting year that had ended almost two years earlier. Cost Items in Dispute On January 28, 2011, Respondent filed a Notice of Filing of a spreadsheet that lists all of the adjustments that have been in dispute. During the hearing, the parties announced the settlement of other cost items. As noted by the Administrative Law Judge, these adjustments are shown on the judge's copy of this filing, which is marked as Administrative Law Judge Exhibit 1 among the original exhibits. Most of the items in dispute are Home Office costs, which are allocated to each of Petitioner's audited facilities. With the reason for disallowance, as indicated in the examination reports, as well as the Schedule of Proposed Auditing Adjustment (SOPAA) number, the Home Office costs in dispute are: Other consultants. "To disallow out of period costs." $7,000. SOPAA #19. Professional fees--other. "To disallow out of period costs." $1,500. SOPAA #20. Administrative Travel. "To disallow out of period costs." $1,038. SOPAA #21. Transportation--repairs. "To remove airplane costs not documented as being reasonably patient care related." $36,496. SOPAA #22. Transportation--fuel and oil. "To remove airplane costs not documented as being reasonably patient care related." $78,336. SOPAA #22. Insurance. "To remove airplane costs not documented as being reasonably patient care related." $24,000. SOPAA #22. Transportation--Depreciation. "To remove airplane costs not documented as being reasonably patient care related." $106,079. SOPAA #22. Transportation--Interest. "To remove airplane costs not documented as being reasonably patient care related." $57,714. SOPAA #22. Staff Development Supplies. "To remove unreasonable cash awards." SOPAA #26. At the conclusion of the hearing, the Administrative Law Judge encouraged the parties to try to settle as many of the issues as they could and, as to the aircraft issues, consider entering into a post-hearing stipulation due to the lack of facts in the record concerning this important issue. The parties produced no post-hearing stipulation and have not advised the Administrative Law Judge of any settled issues. The Administrative Law Judge has identified the remaining issues based on the issues addressed in the parties' Proposed Recommended Orders. With two exceptions, the remaining issues are all addressed in each Proposed Recommended Order. One exception is the Country Meadows return-on-equity issue, which neither party addressed. There is a small discrepancy between the amount of this adjustment on Administrative Law Judge Exhibit 1 and elsewhere in the record, so this issue may have been settled. If so, Respondent may ignore the portions of the Recommended Order addressing it. Also, Respondent failed to address the $123,848 in transportation salaries and benefits. Based on the services corresponding to these expenses and the motivation of Respondent's staff auditor in citing these reimbursements as overpayments, as discussed below, the decision of Respondent's counsel not to mention these items is understandable. The remaining issues are thus: Burial costs of $4,535 at the Ambrose Center. Return on equity adjustment of $3,418 at the Country Meadows facility. Legal fees of $4,225 for the Bayshore Cluster as out-of-period costs. Inclusion of state overhead of $9,529 at Mahan Cluster, $9,529 at Dorchester Cluster, and $9,529 at Bayshore Cluster. Transportation Salaries and Benefits of $123,848 at Main Office. Individual Cost Items Burial Costs After the death of an indigent resident at Petitioner's Ambrose Center, the family contacted Petitioner and informed it that they desired a burial, not a cremation, but could not afford to pay for any services. Petitioner's staff contacted several vendors about the cost of a simple burial service and, after negotiating a discount due to the unfortunate circumstances, selected a vendor. The vendor duly performed the burial service, which was attended by survivors of the deceased's group home, and Petitioner paid the vendor $4,535 for the service. For a burial service, the amount paid was reasonable. Petitioner's staff determined that the burial would have therapeutic value to the surviving residents of the deceased's group home. The quality of life of the residents is enhanced to the extent that they identify with each other as family. Petitioner's staff justifiably determined that a burial service would help sustain these familial relationships by bringing to the survivors a sense of closure, rather than subjecting them to the jarring experience of an unmarked departure of their fellow resident from their lives. However, routine counseling or therapy could have achieved the same results at less cost than a burial service. Out-of-Period Costs The so-called out-of-period costs are $1,038 of rental-car fees, $1,500 of computer consultation fees, $4,225 of legal fees, and $7,000 of "duplicated" insurance broker services. "Out-of-period" means that the expenses were incurred, and should properly be reported, outside of the cost- reporting year ending June 30, 2002. Generally accepted auditing standards (GAAS) and generally accepted accounting principles (GAAP) incorporate the principle of materiality. At least for the purpose of determining the cost-reporting year in which to account for an expense, the materiality threshold for Petitioner is tens of thousands of dollars. The out-of-period issue, which involves the integrity of the cost-reporting year, is different from the other issues, which involve the allowability of specific costs. The cost items under the out-of-period issue are all allowable; the question is in which cost-reporting year they should be included. The test of materiality is thus whether the movement of these cost items from one cost-reporting year to an adjoining cost-reporting year will distort the results and, thus, Petitioner's Medicaid reimbursements. Given Petitioner's revenues, distortion would clearly not result from the movement of the subject cost items, even if considered cumulatively. In theory, Petitioner could be required to amend the cost report for the year in which any of these expenses were incurred, if they were not incurred in the subject cost- reporting year. Unfortunately, by the time Respondent had generated the SOPAAs, the time for amending the cost reports for the adjoining cost-reporting years had long since passed, so a solution of amending another cost report means the loss of the otherwise-allowable cost. This result has little appeal due to Respondent's role in not performing the audit in a timely, efficient manner, but each out-of-period cost is allowable for different reasons. The car-rental expense arises out of an employee's rental of a car for business purposes in June 2001. The submittal and approval of the travel voucher, which are parts of the internal-control process, did not take place until after June 30, 2001. Although Petitioner's liability to the rental-car company probably attached at the time of the rental, the contingency of reimbursement for an improper rental was not removed until the internal-control process was completed, so it is likely that this is not an out-of-period expense. The legal expenses included services provided over the three months preceding the start of the subject cost-reporting year. The attorney submitted the invoice to Petitioner's insurer. After determining that Petitioner had not satisfied its applicable deductible, after June 30, 2001, the insurer forwarded the bill to Petitioner for payment. Absent evidence of the retainer agreement, it is not possible to determine if Petitioner were liable to the law firm prior to the insurer's determination that the payment was less than the deductible, so it is unclear whether this is an out-of-period expense. The computer-consulting work occurred about three months before the end of the preceding cost-reporting year, but the vendor did not bill Petitioner until one year later. This is an out-of-period expense. To the extent that these three items may have been out-of-period expenses, it is not reasonable to expect Petitioner to estimate these liabilities and include them in the preceding cost-reporting year. This is partly due to the lack of materiality explained above. For the car-rental and computer expenses, it is also unreasonable to assume that Petitioner's employees responsible for the preparation of the cost reports would have any knowledge of these two liabilities or to require them to implement procedures to assure timely disclosure of liabilities as modest as these. The last cost item is $7,000 for insurance broker services. This is not an out-of-period expense. In its audit, Respondent determined that this amount represents a sum that was essentially a duplicate payment for services over the same period of time to two different insurance brokers. This is a payment for services over the same period of time to two different insurance brokers for nonduplicated services reasonably required by Petitioner. Given the size and the nature of its operations, Petitioner has relatively large risk exposures that are managed through general liability, automobile liability, director and officer liability, property, and workers' compensation insurance. Paying premiums of $4-5 million annually for these coverages, which exclude health insurance, Petitioner retains insurance brokers to negotiate the best deals in terms of premiums, collateral postings, and other matters. Petitioner experienced considerable difficulty in securing the necessary insurance in mid-2001. At this time, Petitioner was transitioning its insurance broker services from Palmer and Kay to Gallagher Bassett. Difficulties in securing workers' compensation insurance necessitated an extension of the existing policy to July 15, 2001--evidently from its original termination date of June 30, 2001. Due to these market conditions, Petitioner had to pay broker fees to Palmer and Kay after June 30, 2001, even though, starting July 1, 2001, Petitioner began to pay broker fees to Gallagher Bassett. There was no overlap in insurance coverages, and each broker earned its fee, even for the short period in which both brokers earned fees. Employee Cash Awards Petitioner paid $8,500 in employee cash awards in the 2001-02 cost-reporting year as part of a new policy to provide relatively modest cash awards to employees with relatively long terms of service. For employees with at least 20 years of service, Petitioner paid $100 per year of service. The legitimate business purpose of these longevity awards was to provide an incentive for employees to remain with Petitioner, as longer-tenured employees are valuable employees due to their experience and lack of need for expensive training, among other things. The disallowance arose from the application of a nonrule policy that has developed among Respondent's staff auditors: employee compensation is not an allowable cost unless it is includible in the employee's gross income. The evident purpose of the nonrule policy is to exclude from allowable costs payments to employees who, due to their prominence in the ranks of the provider, are able to cause the provider to structure the payments so as to avoid their inclusion in the recipient's gross income (and possibly deprive a for-profit provider of an offsetting deduction for the payments). For the 2001-02 cost-reporting year, only three employees qualified for these payments. Two had 30 years of service, so each of them received $3,000, and one had 25 years of service, so he or she received $2,500. The total of the payments at issue is thus $8,500. The record contains ample support for the finding that the addition of $3,000 to the annual compensation paid to any of Petitioner's employees would not result in excessive compensation. Return on Equity During the cost-reporting year, Petitioner maintained $128,000 in a bank account dedicated for the use of the Country Meadows facility. This sum represented about three months' working capital for Country Meadows. At the time, Respondent encouraged providers to maintain cash reserves of at least two months' working capital, so this sum was responsive to Respondent's preferred working capital levels. Consistent with its purpose as working capital, funds in this account were regularly withdrawn as needed to pay for the operation of Country Meadows. The record does not indicate whether the bank paid interest on this account. Also, the concept of return on equity does not apply to a not-for-profit corporation such as Petitioner, which, lacking shareholders, lacks equity on which a return might be calculated or anticipated. State Overhead at Three Clusters This item involves three ICF/DD clusters that, at the time, were owned by, and licensed to, the State of Florida. Petitioner operated the facilities during the cost-reporting year pursuant to a lease and operating agreement. As in prior cost-reporting years, Respondent did not disallow the depreciation included in the subject cost reports for these three clusters. The record does not reveal whether Petitioner or the State of Florida bore the economic loss of these capital assets over time. But the treatment of depreciation costs is not determinative of the treatment of operating or direct care costs. During the subject cost-reporting year, for these three clusters, the State of Florida retained various operational responsibilities, including admissions. However, the costs at issue arise from the expenditures of the State of Florida, not the provider. The costs include the compensation paid to several, state-employed Qualified Mental Retardation Professionals, who performed various operational oversight duties at the three clusters, and possibly other state employees performing services beneficial to these three clusters. Petitioner never reimbursed the State of Florida for these costs. There is no dispute concerning the reasonableness of the compensation paid these employees by the State of Florida, nor the necessity of these services. The issue here is whether Petitioner is entitled to "reimbursement" for these costs, which amount to $5,139 per cluster, when the costs were incurred by the State of Florida, not Petitioner. Disallowed Transportation Costs and Airplane Costs The $123,848 in disallowed Main Office Transportation salary and benefits represents the salary and benefits of eight Main Office van drivers, who earn about $15,000 per year in pay and benefits. At least 40 residents of the Main Office are not ambulatory, but, like all of the other residents, need to be transported for medical, recreational, and other purposes. There probably remains no dispute concerning these expenses. They are reasonable and necessary. The explanation for why these costs were disallowed starts with the inability of Respondent's staff auditor to find the aircraft expenses in the financial records of Petitioner. It is not possible to determine why the audit failed to identify these expenses prior to the issuance of the examination report. On this record, the only plausible scenario is that Respondent's outside auditor was off-the-mark on a number of items while conducting the audit, Petitioner's representatives lost patience and became defensive, and, when the outside auditor withdrew from the engagement, Respondent's staff auditors, already fully engaged in other work, may not have had the time to add this substantial responsibility to their workload. It is clear, though, that, after the departure of Respondent's outside auditor, the audit failed due to a combination of the lack of Petitioner's cooperation and Respondent's lack of diligence. Unable to identify the aircraft expenses after years of auditing left Respondent with options. It could have continued the audit process with renewed diligence until it found the aircraft expenses. Or it could have declared as noncompliant the cost report, the underlying financial records, or Petitioner itself. Instead, Respondent converted the examination report from what it is supposed to be--the product of an informed analysis of Petitioner's financial records--to a demand to pay up or identify these expenses and, if related to aircraft, justify them. The problem with Respondent's choice is that, as noted in the Conclusions of Law, an audit requires Respondent to proceed, on an informed basis, to identify the expenses, analyze them, and, if appropriate, determine that they are not allowable--before including them as overpayments in an examination report. Proceeding instead to cite overpayments on the basis of educated guesses, Respondent entirely mischaracterized the $123,848 in transportation salaries and benefits, which did not involve any aircraft expenses. Respondent's educated guesses were much better as to the remaining items, which are $36,496 in transportation repairs, $78,336 in transportation fuel and oil, $24,000 in insurance, $106,079 in transportation depreciation, and $57,714 in transportation interest. But the process still seems hit-or-miss. Thinking that he had found the pilot's salary in the item for the van drivers' salaries, Respondent's staff auditor missed the pilot's salary, which was $30,000 to $40,000, as it was contained in an account containing $1.3 million of administrative salaries. Respondent's staff auditor also missed the hanger expense, which Petitioner's independent auditor could not find either. On the other hand, Respondent's staff auditor hit the mark with the $78,336 of fuel and oil, $106,079 of depreciation, and $36,496 in repairs--all of which were exclusively for Petitioner's aircraft. Respondent's staff auditor was pretty close with the transportation interest, which was actually $60,168. It is difficult to assess the effort of Respondent's staff auditor on insurance; he picked a rounded number from a larger liability insurance account, which includes aircraft insurance, but other types of insurance, as well. Respondent correctly notes in its Proposed Recommended Order that the auditing of aircraft expenses requires, in order, their identification, analysis, and characterization as allowable or nonallowable. As Respondent argues, the analysis must compare the aircraft expenses to other means of transportation or communication to determine the reasonableness of the aircraft expenses. As Respondent notes elsewhere in its Proposed Recommended Order, the analysis also must ensure that a multijurisdictional provider, such as Petitioner, has fairly allocated its allowable costs among the jurisdictions in which it operates. Although Respondent's staff auditor found a number of aircraft expenses, he did not try to compare these expenses with other means of travel or communication, so as to determine the reasonableness of these aircraft expenses, or determine if Petitioner had allocated these costs, as between Florida and other jurisdictions, in an appropriate manner. The failure of the examination report, in its treatment of the expenses covered in this section, starts with the failure to secure the necessary information to identify the expenses themselves, but continues through the absence of any informed analysis of these expenses. Respondent's staff auditor used the examination report's treatment of the items covered in this section as a means to force Petitioner both to identify and explain these costs. The fact that Respondent's staff auditor guessed right on many of the aircraft expenses does not mean that he had an informed basis for these guesses. At one point during his testimony, Respondent's staff auditor seemed pleasantly surprised that he had been as accurate as he was in finding these expenses. But, regardless of the basis that he had for the identification of these expenses, Respondent's staff auditor never made any effort to analyze the expenses that he had chosen to include in the examination report as aircraft expenses. Nor is the record insufficient to permit such analysis now. Among the missing data is the number of planes that Petitioner owned at one time during the subject cost-reporting year. It is now clear that, for awhile, the number was two, probably at the end of the cost-reporting year, but this was unknown at the time of the issuance of the examination report. It is unclear, even now, for how long Petitioner owned two planes, or whether it operated both planes during the same timeframe. Cost comparisons are impossible without the knowledge that the cost-comparison exercise is for one or two private aircraft. Likewise, Respondent lacked basic information about the aircraft, such as the planes' capacities and costs of operation, per hour or per passenger mile. Again, this information remains unknown, so it is still impossible to establish a framework for comparison to the costs of common carriers. The record includes a three-page log provided during the audit process by Petitioner to Respondent, which appears never to have analyzed it, probably due to its determination that it had not identified the aircraft expenses adequately. The log shows 118 trips for purposes other than maintenance or engineering during the subject cost-reporting year. The log shows the cities visited and a very brief description of the purpose of the trip. Not the detailed description requested by Respondent, the proffered description is often not more than the mention of a facility or meeting. The log does not show the duration of the trip, but often notes the number of persons on the plane. If the aircraft costs identified above, including the unassessed pilot salary, are divided by the number of trips, the per trip cost is about $2,600. Some trips list several persons, as many as seven. Some trips list only one or two persons. Some trips list "staff," so it is impossible to tell how many persons traveled. And some trips provide no information about the number of travelers. It is a close question, but these findings alone do not establish that the use of the aircraft was unreasonable when compared to common carriers. Also, Respondent lacked any information about the purpose of the trips, so as to be able to determine if they were necessary or whether they could have been accomplished by videoconference or telephone. And the hearing did not provide this information. Respondent's staff auditor also never considered allocation methods, which is understandable because this analysis would necessarily have followed the identification process, in which he justifiably lacked confidence, and the cost-comparison analysis, which he had never undertaken. At the hearing, Respondent's staff auditor briefly mentioned other allocation methods, but never criticized the approved allocation method used by Petitioner. Although an approved allocation method might not offset disproportionate travel expenses to West Virginia and Connecticut, the record is insufficient to determine that the chosen allocation method was inappropriate or transferred excessive expenses to Florida for Medicaid reimbursement.
Recommendation Based on the foregoing, it is RECOMMENDED that the Agency for Health Care Administration enter a Final Order determining that, for the 2001-02 cost- reporting year, Petitioner has been overpaid $23,370 (including $3,418 for return on equity, if not already settled), for which recoupment and a recalculation of Petitioner's per-diem reimbursement rate are required. DONE AND ENTERED this 25th day of April, 2011, in Tallahassee, Leon County, Florida. S ROBERT E. MEALE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 25th day of April, 2011. COPIES FURNISHED: Daniel Lake, Esquire Agency for Health Care Administration 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32308 Steven M. Weinger, Esquire Kurzban Kurzban Weinger Tetzeli & Pratt, P.A. 2650 Soutwest 27th Avenue Miami, Florida 33133 Richard J. Shoop, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32308 Justin Senior, General Counsel Agency for Health Care Administration 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32308 Elizabeth Dudek, Secretary Agency for Health Care Administration 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32308
The Issue The issue in this proceeding is how much of Petitioner’s settlement proceeds should be reimbursed to Respondent, Agency for Health Care Administration (“AHCA”), to satisfy AHCA's Medicaid lien under section 409.910, Florida Statutes, from settlement proceeds he received from a third party.
Findings Of Fact The following findings are based on testimony, exhibits accepted into evidence, and admitted facts stated in the Joint Pre-Hearing Stipulation. Facts Concerning Underlying Personal Injury Matter and Giving Rise to Medicaid Lien On January 6, 2012, Arnie Solheim, a then 15-year-old boy, ran away from his group home and was struck by a vehicle while walking up an interstate ramp. Mr. Solheim had a history of running away from his group home residence. As a result of the incident, Mr. Solheim suffered permanent and severe injuries including brain damage, blindness in one eye, and paralysis. Due to his injuries, Mr. Solheim will require 24 hours-a-day supervision for the remainder of his life. Mr. Solheim’s medical care related to the injury was paid by Medicaid, and Medicaid through AHCA provided $187,302.46 in benefits. Accordingly, $187,302.46 constituted Mr. Solheim’s full claim for past medical expenses. Mr. Solheim’s mother, Rosepatrice Solheim, was appointed Mr. Solheim’s Plenary Guardian. Rosepatrice Solheim, as Mr. Solheim’s Guardian, filed a personal injury action against the parties allegedly liable for Mr. Solheim’s injuries (“Defendants”) to recover all of Mr. Solheim’s damages, as well as her and her husband’s individual damages associated with their son’s injuries. Mr. Solheim’s personal injury action was settled through a series of confidential settlements in a lump-sum unallocated amount. This settlement was approved by the circuit court. During the pendency of Mr. Solheim’s personal injury action, AHCA was notified of the action and AHCA asserted a Medicaid lien of $187,302.46 against Mr. Solheim’s cause of action and settlement of that action. AHCA did not commence a civil action to enforce its rights under section 409.910 or intervene or join in Mr. Solheim’s action against the Defendants. By letter dated October 9, 2019, AHCA was notified of Mr. Solheim’s settlement. To date, AHCA has not filed a motion to set-aside, void, or otherwise dispute Mr. Solheim’s settlement. The Medicaid program through AHCA spent $187,302.46 on behalf of Mr. Solheim, all of which represents expenditures paid for Mr. Solheim’s past medical expenses. Mr. Solheim’s taxable costs incurred in securing the settlement totaled $76,229.38. Application of the formula at section 409.910(11)(f) to Mr. Solheim’s settlement requires payment to AHCA of the full $187,302.46 Medicaid lien. Expert Testimony Petitioner called two experts to testify on his behalf pertaining to valuation of Petitioner’s damages, Richard Filson and Karen Gievers. Mr. Filson, an attorney practicing law at Filson and Fenge law firm in Sarasota, Florida, has been practicing law for 36 years. He represented Mr. Solheim in the underlying case. In addition to Petitioner’s case, he has represented clients in personal injury matters representing children and childrens’ rights cases, including cases involving brain injury and paralysis. Mr. Filson evaluated Petitioner’s case and opined that $10 million was a conservative valuation of the case. The valuation of the case encompasses past medical expenses, future medical expenses, economic damages, and pain and suffering. Mr. Filson pursued the action against three defendants. He testified that there would be no admission of liability. The group home was alleged to have failed to appropriately evaluate the risk and placement of Mr. Solheim, including placing Mr. Solheim in a locked unit to maintain his safety. However, there were issues with recovering from the facility. There was a dispute regarding the director’s degree of responsibility for Mr. Solheim’s elopement. As a result, Mr. Filson opined that Petitioner settled the case for a lower amount because of liability and collectability issues with the group home. Mr. Filson opined that Mr. Solheim’s $1,150,00.00 settlement represented 11.5 percent of the full $10 million value of his claim, including past medical expenses. He relied upon the comprehensive plan and the extent of Mr. Solheim’s catastrophic injuries to assess the value of the case. Mr. Filson opined that the allocation formula is 11.5 percent. The past medical expenses totaled $187,302.46. That figure multiplied by 11.5 percent would result in recovery of $21,539.78 of the settlement proceeds allocated to past medical expenses. Karen Gievers also testified as an expert regarding valuation of Mr. Solheim’s claim. Ms. Gievers, a licensed attorney for 42 years and a former circuit court judge, focuses her practice on civil litigation. In her practice as an attorney, she has handled personal injury cases involving catastrophic injuries similar to Mr. Solheim’s injuries. Like Mr. Filson, she has also represented children in her practice. Ms. Gievers opined that the value of Mr. Solheim’s case was conservatively estimated at $10 million. She opined that Mr. Solheim’s settlement amount of $1,150,000.00 resulted in a recovery of 11.5 percent of the full value of his claim. She opined that applying the 11.5 percent to each damage category is the appropriate way to allocate the amount of damages across all categories. Thus, applying the allocation formula of 11.5 percent to the $187,302.46 claim for past medical expenses would be $21,539.78. Ms. Gievers looked at Mr. Solheim’s economic and noneconomic damages in her valuation of the case. She reviewed the comprehensive care plan and noted that all costs were not included, which would add to the value of the case being greater than Mr. Solheim’s actual recovery. Petitioner asserted that the $1,150,000.00 settlement is far less than the actual value of Petitioner’s injuries and does not adequately compensate Mr. Solheim for his full value of damages. Therefore, a lesser portion of the settlement should be allocated to reimburse AHCA, instead of the full amount of the lien. Ultimate Findings of Fact Mr. Filson and Ms. Gievers credibly opined that a ratio should be applied based on the full value of Petitioner’s damages, $10,000,000.00, compared to the amount that Petitioner actually recovered, $1,150,000.00. Based on this formula, Petitioner’s settlement represents an 11.5 percent recovery of Petitioner’s full value of damages. Similarly, the AHCA lien should be reduced and the amount of reimbursement to AHCA should be 11.5 percent of the Medicaid lien. Therefore, $21,539.78 is the portion of the third- party settlement that represents the amount AHCA should recover for its payments for Mr. Solheim’s past medical care. The expert witnesses’ testimony was supported by their extensive experience in valuing damages and their knowledge of Mr. Solheim’s injuries. AHCA, on the other hand, did not offer any witnesses or documentary evidence to question the credentials or opinions of either Mr. Filson or Ms. Gievers. AHCA did not offer testimony or documentary evidence to rebut the testimony of Mr. Filson or Ms. Gievers as to valuation or the reduction ratio. AHCA did not offer alternative opinions on the damage valuation method suggested by either Mr. Filson or Ms. Gievers. Based on the record, the testimony of Petitioner's two experts regarding the total value of damages was credible, unimpeached, and unrebutted. Based on the evidence in the record, the undersigned finds that, Petitioner proved by a preponderance of the evidence that a lesser portion of Mr. Solheim’s settlement should be allocated as reimbursement for past medical expenses than the amount AHCA calculated. Accordingly, AHCA is entitled to recover $21,539.78 from Petitioner’s recovery of $1,150,000.00 to satisfy the Medicaid lien.
Findings Of Fact Respondent was issued Embalmer's license No. EM645 in 1945, and Funeral Director's License No. FD504 in 1947. He was also issued a dual license No. FE64 in 1947. By Amended Final Order, dated March 27, 1980, Petitioner suspended Respondent's funeral director's and embalmer's licenses for a period of one year. Following the one year suspension, which concluded on March 26, 1981, Respondent was placed on three years license probation. The complaining witness, Samuel C. Rogers, employed Respondent between June 1980, and March, 1982, essentially to operate one of two funeral homes he owned 1/. His employment arrangements with Respondent were not clear (discussed below), but Rogers generally intended to capitalize on Respondent's ability to attract funeral business. Rogers was aware that Respondent could not embalm under the terms of his probation. He believed initially that Respondent could perform funeral directing duties and assigned him such responsibilities. However, Rogers continued to permit Respondent to perform funeral directing tasks even after he learned that this was improper under the terms of his probation. The funerals of Queenie M. Edwards, in December, 1980, and Jacob L. Maxwell, in late February or early March, 1981, were arranged and conducted by Respondent. Thus, during the period of his license suspension, Respondent held himself out to the public as a funeral director and did perform in this capacity. Respondent typically made all funeral arrangements with the family of the deceased, including caskets, flowers, limousines, drivers, and cemetery lots. He prepared itemized statements for services provided and collected direct payments as well as insurance assignments. He sometimes cashed client checks and retained the proceeds to pay funeral service expenses, purchase advertising materials and make funeral home improvements He also kept some of these funds for his own use and admits he owes Rogers up to $500. In other instances, Respondent brought cash to Rogers' office where he turned it over to the secretary-bookkeeper or Rogers himself. Respondent kept no records and Rogers' records were incomplete and therefore inconclusive. No specific funds or payments were identified which Respondent was proven to have diverted wrongfully. Rogers claims that Respondent misappropriated at least $30,000. Petitioner's evidence indicates that some $8,000 came into Respondent's hands for which there are no records to establish receipt by Rogers. However, the testimony of Respondent and two other former employees of Rogers established that Respondent did turn over cash funds to Rogers or his secretary-bookkeeper on various occasions and that an immediate record of such receipts was not always made. Further, Rogers has also accused his former secretary-bookkeeper of misappropriation and is apparently pursuing this claim in another forum. The employment arrangements between Rogers and Respondent were not supported by written agreement. Rogers claims he employed Respondent on a $300 per week salary and did not authorize him to collect funeral service payments. However, he did not discipline Respondent when be became aware of his collection practices. Rather, it was not until he personally attempted to collect on various accounts which customers had already settled with Respondent that he discharged him. Respondent contends he was in partnership with Rogers and was given latitude to make all funeral arrangements, including collections and expenditures for services, building maintenance and advertising. He further viewed his retention of certain funds as due him for his services to the business. Rogers' former secretary-bookkeeper understood that Rogers had employed Respondent on a commission basis. Therefore, no income tax or social security contributions were made on his behalf. In view of such conflicting testimony, there can be no finding that Respondent's employment arrangements precluded his collection of customer payments or required that all such funds be turned over to Rogers.
Recommendation Based on the foregoing, it is RECOMMENDED: That Respondent be found guilty of violating Subsection 470.036(1)(i), F.S., as charged in Count III of the Administrative Complaint. That all other charges contained in the Administrative Complaint be dismissed. That Respondent's funeral director's license and dual license be revoked. DONE and ENTERED this 12th day of April, 1983, in Tallahassee, Florida. R. T. CARPENTER, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 12th day of April, 1983.
The Issue What is the amount to be reimbursed to Respondent, Agency for Health Care Administration (AHCA), for medical expenses paid on behalf of Petitioner Bryant (Petitioner) pursuant to section 409.910, Florida Statutes, from a personal injury settlement received by Petitioner from a third party?
Findings Of Fact Factual Allegations that Served As a Basis for the Underlying Personal Injury Litigation On March 11, 2009, Petitioner, then 21 years old, suffered catastrophic physical injury and brain damage when her bicycle was struck by a car near the Oakland Park I-95 overpass in Broward County. Petitioner was taken to the North Broward Hospital, where she was intubated with mechanical ventilation. Imaging revealed a right subdural hematoma, and Petitioner showed signs of increased intracranial pressure. On March 12, 2009, Petitioner underwent bilateral frontoparietal craniotomies through separate incisions with evacuation of a left parietooccipital epidural hematoma and right frontal temporoparietal subdural hematoma; bilateral duraplasty to accommodate brain swelling; and repair of a left occipital laceration. On that same date, a CT scan revealed that Petitioner had numerous pelvic and hip fractures. Petitioner underwent an upper gastrointestinal endoscopy with a PEG tube placement. Eventually, her medical condition stabilized and she was discharged to rehabilitation. Petitioner is now unable to move the left side of her body. She receives her nutrition through a g-tube and is bowel and bladder incontinent. She suffers from cognitive deficits. Petitioner is cognizant of her condition and her surroundings, but has extreme difficulty with communication. Petitioner is severely disabled and unable to ambulate or care for herself in any manner. Prior to the accident, Petitioner was a healthy 21-year-old. It is anticipated that Petitioner's life span will be approximately another 60 years, her condition is permanent, and she will always need full-time medical care. The Personal Injury Litigation Due to Petitioner's incapacity, Freda Bryant (Bryant) was appointed the guardian of the person and property of Petitioner. As Petitioner's guardian, Bryant brought a personal injury action to recover all of Petitioner's damages against the company responsible for maintaining the lights on the highway where Petitioner's accident occurred ("Defendant"). Freda Bryant retained the Krupnick, Campbell, Malone, et al., law firm of Fort Lauderdale, a firm concentrating in the areas of catastrophic personal injury, wrongful death, and products liability. The Medicaid Lien Petitioner is a Medicaid recipient and her medical care was paid for by Medicaid. AHCA, through the Medicaid program, paid $404,399.68 on behalf of Petitioner for medical benefits related to the injuries sustained by Petitioner. This $404,399.68 paid by Medicaid represented Petitioner's entire claim for past medical expenses up until the time of settlement. During the pendency of Petitioner's personal injury action, AHCA was notified of the action and AHCA, through its collections contractor Xerox Recovery Services, asserted a $404,399.68 Medicaid lien against Petitioner's cause of action and settlement of that action. Valuation of the Personal Injury Claim Joseph Slama (Slama), the attorney representing Petitioner in her personal injury action, prepared an evaluation of her claim in preparation for trial and/or settlement negotiations. Slama has extensive experience representing parties in catastrophic personal injury, wrongful death, and product liability cases since 1982. Slama has practiced in this field for 33 years, is a board-certified civil trial attorney, first certified in 1987, who has litigated hundreds of these types of cases. Slama is a member of the American Board of Trial Advocates (ABOTA), the Florida chapter of ABOTA (FLABOTA), Attorneys Information Exchange Group, Florida Justice Association, Broward Justice Association, and the Florida Bar. Slama was offered and accepted, without objection, as an expert in the valuation of damages in catastrophic injury cases. In making the determination regarding the valuation of Petitioner's personal injury claim, Slama reviewed Petitioner's medical records, accident report, prepared fact and expert witnesses for trial, and personally interacted with Petitioner on multiple occasions. Slama is very familiar with the injuries suffered by Petitioner and her need for constant care. Slama was present during the filming of Petitioner's "Day in the Life" video which was intended to be shown to the jury if Petitioner's case went to trial. Slama also reviewed Petitioner's economic damages report prepared by an economist1/ and is familiar with the mental pain and suffering Petitioner experiences as a result of her ability to understand the change in her life from a normal functioning individual to someone requiring total care for the rest of her life. To properly determine the value of Petitioner's claim, Slama researched Florida jury verdicts in personal injury cases with catastrophic brain injuries for young people requiring total care. Slama reviewed five comparable cases with verdicts for the plaintiff. The average jury award per plaintiff in these five cases was $51,474,346.00, and the average pain and suffering component of that award was $28,735,850.00. The case most closely comparable to that of Petitioner was the 2014 case of Mosley v. Lloyd, Case No. CACE09-025532, 2014 WL 7910512, a Broward County Circuit Court trial in which the jury awarded $75,543,527.00, of which $39,500,000.00 represented damages for past and future pain and suffering. Another similar case was that of Lymans v. Bynum Transportation, Case No. 2007CA-007728, 2009 WL 9051959, decided by a Pasco County jury. According to Slama, Pasco County juries are generally considered very conservative. In the Lymans case, a 21-year-old sustained a catastrophic brain injury resulting in her requiring 24/7 total care, much like the Petitioner. The jury awarded $65,000,000.00, of which $41,000,000.00 represented damages for pain and suffering. Based upon the five verdicts, including the Mosley and Lymans jury verdicts, review of the medical records, extensive personal interaction with Petitioner, and his personal experience and knowledge in valuing catastrophic personal injury cases from decades of practice in this field, Slama conservatively valued the damages for mental pain and suffering to be $15 million or greater. Slama acknowledged litigation risk issues with this personal injury action, which included a reduction or elimination of liability based on the defense of contributory negligence and a statutory restriction on liability for a utility company unless there was prior written notice to the utility company of deficient lighting. Slama consulted Allen McConnaughhay, Esquire, an attorney with the Tallahassee law firm of Fonvielle, Lewis, Foote & Messer, for an independent assessment of Petitioner's claim. McConnaughhay has practiced in the field of catastrophic personal injury cases for 15 years. He was offered and accepted, without objection, as an expert in the field of valuation of catastrophic injury cases. McConnaughhay explained that his firm, like that of Slama, relies on the expertise of its partners, a review of the injured party's medical records, research of jury verdicts in comparable cases, and it conducts a roundtable discussion to determine the value of a catastrophic personal injury claim. McConnaughhay and his partners engaged in such review of Petitioner's claim and found that a figure in excess of $50 million was a proper value for her pain-and-suffering damages. McConnaughhay opined that the $15 million figure ascertained by Slama was extremely conservative. The Settlement Allocation On May 18, 2015, Bryant settled Petitioner's personal injury lawsuit for $1,164,000. Given the facts of this case, the figure agreed upon was supported by the competent professional judgment of the trial attorneys in the interests of their clients. There is no evidence that the monetary figure agreed upon by the parties represented anything other than a reasonable settlement, taking into account all of the strengths and weaknesses of their positions. There was no evidence of any manipulation or collusion by the parties to minimize the share of the settlement proceeds attributable to the payment of costs expended for Petitioner's medical care by AHCA. The General Release with the settling Defendants stated, inter alia: Although it is acknowledged that this settlement does not fully compensate Petitioner Bryant for all of the damages she has allegedly suffered, this settlement shall operate as a full and complete Release as to Released Parties without regard to this settlement only compensating Petitioner Bryant for a fraction of the total monetary value of her alleged damages. The parties agree that Petitioner Bryant's alleged damages have a value in excess of $15,000,000, of which $404,399.68 represents Petitioner Bryant's claim for past medical expenses. Given the facts, circumstances, and nature of Petitioner Bryant's injuries and this settlement, the parties have agreed to allocate $31,381.42 of this settlement to Petitioner Bryant's claim for past medical expenses and allocate the remainder of the settlement towards the satisfaction of claims other than past medical expenses. This allocation is a reasonable and proportionate allocation based on the same ratio this settlement bears to the total monetary value of all Petitioner Bryant's damages. Further, the parties acknowledge that Petitioner Bryant may need future medical care related to her injuries, and some portion of this settlement may represent compensation for future medical expenses Petitioner Bryant will incur in the future. However, the parties acknowledge that Petitioner Bryant, or others on her behalf, have not made payments in the past or in advance for Petitioner Bryant's future medical care and Petitioner Bryant has not made a claim for reimbursement, repayment, restitution, indemnification, or to be made whole for payments made in the past or in advance for future medical care. Accordingly, no portion of this settlement represents reimbursement for future medical expenses. Because Petitioner was incapacitated, court approval of the settlement was required. Accordingly, on June 4, 2015, the Honorable Circuit Court Judge Cynthia Imperato approved the settlement by entering an Order Approving Settlement. By letter of May 26, 2015, Petitioner's personal injury attorney notified AHCA of the settlement and provided AHCA with a copy of the executed Release, Order Approving Settlement, and itemization of Petitioner's $75,852.90 in litigation costs. This letter explained that Petitioner's damages had a value in excess of $15,000,000, and the settlement represented only a 7.76 percent recovery of Petitioner's $404,399.68 claim for past medical expenses. This letter requested AHCA to advise as to the amount AHCA would accept in satisfaction of the $404,399.68 Medicaid lien. AHCA responded to Petitioner's attorney's letter by letter of June 25, 2015, and demanded a "check made payable to 'Agency for Health Care Administration' in the amount of $404,399.68." AHCA has not filed an action to set aside, void, or otherwise dispute Petitioner's settlement. AHCA has not commenced a civil action to enforce its rights under Section 409.910, Florida Statutes. No portion of the $404,399.68 paid by AHCA through the Medicaid program on behalf of Petitioner represents expenditures for future medical expenses, and AHCA did not make payments in advance for medical care. AHCA has determined that of Petitioner's $75,852.90 in litigation costs, $63,375.06 are taxable costs for purposes of the section 409.910(11)(f) formula calculation. Based on $63,375.06 in taxable costs, the section 409.910(11)(f) formula applied to Petitioner's $1,164,000 settlement, results in $404,812.47 payable to AHCA in satisfaction of its $404,399.68 Medicaid lien. Because $404,399.68 is less than the $404,812.47 amount derived from the formula in section 409.910(11)(f), AHCA is seeking reimbursement of $404,399.68 from Petitioner's settlement in satisfaction of its Medicaid lien. Petitioner has deposited the full Medicaid lien amount in an interest bearing account for the benefit of AHCA pending an administrative determination of AHCA's rights, which constitutes "final agency action" for purposes of chapter 120, Florida Statutes, pursuant to section 409.910(17). Petitioner proved by clear and convincing evidence that the $15 million total value of the claim was a reasonable and realistic value. Furthermore, Petitioner proved by clear and convincing evidence, based on the relative strengths and weaknesses of each party's case, and on a competent and professional assessment of the likelihood that Petitioner would have prevailed on the claims at trial and the amount she reasonably could have expected to receive on her claim if successful, that the amount agreed upon in settlement of Petitioner's claims constitutes a fair, just, and reasoned settlement, including $31,381.42, the amount attributable to the Medicaid lien for medical expenses as its 7.76 percent proportionate share of the total settlement.
The Issue The issue to be decided is the amount to be paid by Petitioner to Respondent, Agency for Health Care Administration ("AHCA"), out of her settlement proceeds, as reimbursement for past Medicaid expenditures pursuant to section 409.910, Florida Statutes.
Findings Of Fact On or about September 17, 2007, Alicia M. Fallon ("Alicia"), then 17 years old, drove to the mall to meet friends and became involved in an impromptu street race. Alicia lost control of the vehicle she was driving, crossed the median into oncoming traffic, and was involved in a motor vehicle crash. Her injuries consisted of traumatic brain injury ("TBI") with moderate hydrocephalus, right subdural hemorrhage, left pubic ramus fracture, pulmonary contusions (bilateral), and a clavicle fracture. Since the time of her accident, she has undergone various surgical procedures including the insertion of a gastrostomy tube, bilateral frontoparietal craniotomies, insertion of a ventriculoperitoneal shunt, and bifrontal cranioplasties. As a result of the accident, in addition to the physical injuries described above, Alicia suffered major depressive disorder, and Post-Traumatic Stress Disorder injuries. She is confined to a wheelchair for mobility, has no bowel or bladder control, and suffers from cognitive dysfunction. Alicia is totally dependent on others for activities of daily living and must be supervised 24 hours a day, every day of the week. A lawsuit was brought against the driver of the other car in the race, as well as the driver's mother, the owner of the vehicle. It could not be established that the tortfeasor driver hit Alicia's car in the race, or that he cut her off. The theory of liability was only that because Alicia and the other driver in the race were racing together, that the tortfeasor was at least partially responsible for what happened. It was viewed that there was no liability on the part of the driver of the third vehicle. The tortfeasor only had $100,000 in insurance policy limits, but the insurance company did not timely offer payment. The tortfeasor had no pursuable assets. The lawsuit was bifurcated and the issue of liability alone was tried. The jury determined that the tortfeasor driver was 40 percent liable for Alicia's damages. Because of the risk of a bad faith judgment, the insurance company for the tortfeasor settled for the gross sum of $2.5 million. AHCA, through its Medicaid program, provided medical assistance to Ms. Fallon in the amount of $608,795.49. AHCA was properly notified of the lawsuit against the tortfeasors, and after settlement, asserted a lien for the full amount it paid, $608,795.49, against the settlement proceeds. AHCA did not "institute, intervene in, or join in" the medical malpractice action to enforce its rights as provided in section 409.910(11), or participate in any aspect of Alicia's claim against the tortfeasors or their insurance company. Application of the formula at section 409.910(11)(f), to the settlement amount requires payment to AHCA in the amount of $608,795.49. Another provider, Optum, provided $592,554.18 in past medical expense benefits on behalf of Ms. Fallon. However, that amount was reduced through negotiation to a lien in the amount of $22,220.78.1/ Petitioner deposited the full Medicaid lien amount in an interest bearing account for the benefit of AHCA pending an administrative determination of AHCA's rights, and this constitutes "final agency action" for purposes of chapter 120, Florida Statutes, pursuant to section 409.910(17). Petitioner, Donna Fallon, the mother of Alicia, testified regarding the care that was and is continuing to be provided to Alicia after the accident. She is a single parent, and with only the assistance of an aide during the day, she is responsible for Alicia's care. Alicia must be fed, changed, bathed, and turned every few hours to avoid bed sores. Alicia can communicate minimally by using an electronic device and by making noises that are usually only discernable by her mother. Although she needs ongoing physical therapy and rehabilitation services, the family cannot afford this level of care. Petitioner presented the testimony of Sean Domnick, Esquire, a Florida attorney with 30 years' experience in personal injury law, including catastrophic injury and death cases, medical malpractice, and brain injury cases. Mr. Domnick is board certified in Civil Trial by the Florida Bar. He represented Alicia and her mother in the litigation against the tortfeasors and their insurance company. As a routine part of his practice, he makes assessments concerning the value of damages suffered by injured clients. He was accepted, without objection, as an expert in valuation of damages. Mr. Domnick testified that Alicia's injuries are as catastrophic as he has handled. Alicia has no strength, suffers contractions and spasms, and is in constant pain. Alicia has impaired speech, limited gross and fine motor skills, is unable to transfer, walk, or use a wheelchair independently. Alicia is unable to self-feed. All of her food must be cooked and cut up for her. Alicia is unable to perform self-hygiene and has no ability to help herself in an emergency and therefore requires constant monitoring. As part of his work-up of the case, Mr. Domnick had a life care plan prepared by Mary Salerno, a rehabilitation expert, which exceeded $15 million on the low side, and $18 million on the high side, in future medical expenses alone for Alicia's care. Mr. Domnick testified that the conservative full value of Alicia's damages was $45 million. That figure included $30 million for Alicia's pain and suffering, mental anguish and loss of quality of life, disability, and disfigurement, extrapolated for her life expectancy, plus the low end of economic damages of $15 million. Petitioner also presented the testimony of James Nosich, Esquire, a lawyer who has practiced primarily personal injury defense for 29 years. Mr. Nosich and his firm specialize in defending serious and catastrophic personal injury/medical malpractice cases throughout Florida. As part of his practice, Mr. Nosich has reviewed more than 1,000 cases of personal injury/medical malpractice cases and formally reported the potential verdict and full value to insurance companies that retained him to defend their insureds. Mr. Nosich has worked closely with economists and life care planners to identify the relevant damages of those catastrophically injured in his representation of his clients. Mr. Nosich has also tried over 30 cases in Broward County in which a plaintiff suffered catastrophic injuries similar to those of Alicia. Mr. Nosich was tendered and accepted, without objection, as an expert in the evaluation of damages in catastrophic injury cases. In formulating his expert opinion with regard to this case, Mr. Nosich reviewed: Alicia's medical records and expenses; her life care plan prepared by Ms. Salerno; and the economist's report. He took into consideration the reputation of Alicia's lawyer (Mr. Domnick); and the venue in which the case would be tried. Mr. Nosich opined that Broward County is known for liberal juries who tend to award high amounts in catastrophic cases. He also testified that Mr. Domnick is known as a lawyer with extreme capability and who has an excellent rapport with juries and the ability to get higher dollar verdicts. Mr. Nosich agreed with Mr. Domnick that the estimated $45 million figure for the total value of Alicia's case was conservative. He agreed with Ms. Salerno's estimated economic damages of $15 million and a doubling of that amount ($30 million) for Alicia's noneconomic damages. Mr. Nosich credibly explained that the $45 million total value was very conservative in his opinion based on Alicia's very high past medical bills and the fact that she will never be able to work. The testimony of Petitioner's two experts regarding the total value of damages was credible, unimpeached, and unrebutted. Petitioner proved that the settlement of $2.5 million does not fully compensate Alicia for the full value of her damages. As testified to by Mr. Domnick, Alicia's recovery represents only 5.55 percent of the total value of her claim. However, in applying a ratio to reduce the Medicaid lien amount owed to AHCA, both experts erroneously subtracted attorney's fees and costs of $1.1 million from Alicia's $2.5 million settlement to come up with a ratio of 3 percent to be applied to reduce AHCA's lien.2/ Further, in determining the past medical expenses recovered, Petitioner's experts also failed to include the Optum past medical expenses in the amount of $592,554.18. AHCA did not call any witnesses, present any evidence as to the value of damages, or propose a different valuation of the damages. In short, Petitioner's evidence was unrebutted. However, through cross-examination, AHCA properly contested the methodology used to calculate the allocation to past medical expenses. Accordingly, the undersigned finds that Petitioner has proven by a preponderance of the evidence that 5.55 percent is the appropriate pro rata share of Alicia's past medical expenses to be applied to determine the amount recoverable by AHCA in satisfaction of its Medicaid lien. Total past medical expenses is the sum of AHCA's lien in the amount of $608,795.49, plus the Optum past medicals in the amount of $592,554.18, which equals $1,201,349.67. Applying the 5.55 percent pro rata ratio to this total equals $66,674.91, which is the portion of the settlement representing reimbursement for past medical expenses and the amount recoverable by AHCA for its lien.
