The Issue The issue is whether Petitioner violated Chapter 440, Florida Statutes, by not having workers’ compensation insurance coverage, and if so, what penalty should be imposed.
Findings Of Fact Petitioner operates a gas station and convenience store in Winter Garden. Mohammad Sultan is Petitioner’s owner and president. On November 2, 2006, Margaret Cavazos conducted an unannounced inspection of Petitioner’s store. Ms. Cavazos is a workers’ compensation compliance investigator employed by the Department. Petitioner had nine employees, including Mr. Sultan and his wife, on the date of Ms. Cavazos' inspection. Petitioner had more than four employees at all times over the three-year period preceding Ms. Cavazos' inspection. Petitioner did not have workers’ compensation insurance coverage at the time of Ms. Cavazos’ inspection, or at any point during the three years preceding the inspection. On November 2, 2006, the Department served a Stop-Work Order and Order of Penalty Assessment on Petitioner, and Ms. Cavazos requested payroll documents and other business records from Petitioner. On November 6, 2006, the Department served an Amended Order of Penalty Assessment,1 which imposed a penalty of $70,599.78 on Petitioner. The penalty was calculated by Ms. Cavazos, using the payroll information provided by Petitioner and the insurance premium rates published by the National Council on Compensation Insurance. The parties stipulated at the final hearing that the gross payroll attributed to Mr. Sultan for the period of January 1, 2006, through November 2, 2006, should have been $88,000, rather than the $104,000 reflected in the penalty worksheet prepared by Ms. Cavazos. The net effect of this $16,000 correction in the gross payroll attributed to Mr. Sultan is a reduction in the penalty to $68,922.18.2 On November 3, 2006, Mr. Sultan filed a notice election for exemption from the Workers’ Compensation Law. His wife did not file a similar election because she is not an officer of Petitioner. The election took effect on November 3, 2006. On November 6, 2006, Petitioner obtained workers’ compensation insurance coverage through American Home Insurance Company, and Petitioner also entered into a Payment Agreement Schedule for Periodic Payment of Penalty in which it agreed to pay the penalty imposed by the Department over a five-year period. On that same date, the Department issued an Order of Conditional Release from Stop-Work Order. Petitioner made the $7,954.30 “down payment” required by the Payment Agreement Schedule, and it has made all of the required monthly payments to date. The payments required by the Payment Agreement Schedule are $1,044.09 per month, which equates to approximately $12,500 per year. Petitioner was in compliance with the Workers’ Compensation Law at the time of the final hearing. Petitioner reported income of $54,358 on gross receipts in excess of $3.1 million in its 2005 tax return. Petitioner reported income of $41,728 in 2004, and a loss of $8,851 in 2003. Petitioner had total assets in excess of $750,000 (including $540,435 in cash) at the end of 2005, and even though Petitioner had a large line of credit with Amsouth Bank, its assets exceeded its liabilities by $99,041 at the end of 2005. Mr. Sultan has received significant compensation from Petitioner over the past four years, including 2003 when Petitioner reported a loss rather than a profit. He received a salary in excess of $104,000 in 2006, and he was paid $145,333 in 2005, $63,750 in 2004, and $66,833 in 2003. Mr. Sultan’s wife is also on Petitioner’s payroll. She was paid $23,333.40 in 2006, $25,000 in 2005, and $12,316.69 in 2004. Mr. Sultan characterized 2005 as an “exceptional year,” and he testified that his business has fallen off recently due to an increase in competition in the area. Todd Baldwin, Petitioner’s accountant, similarly testified that 2006 was not as good of a year as 2005, but no corroborating evidence on this issue (such as Petitioner’s 2006 tax return) was presented at the final hearing. Mr. Sultan testified that payment of the penalty imposed by the Department adversely affects his ability to run his business. The weight given to that testimony was significantly undercut by the tax returns and payroll documents that were received into evidence, which show Petitioner’s positive financial performance and the significant level of compensation paid to Mr. Sultan and his wife over the past several years. The effect of the workers’ compensation exemption elected by Mr. Sultan is that his salary will no longer be included in the calculation of the workers’ compensation insurance premiums paid by Petitioner. If his salary had not been included in Ms. Cavazos’ calculations, the penalty imposed on Petitioner would have been $40,671.36. Ms. Cavazos properly included Mr. Sultan’s salary in her penalty calculations because he was being paid by Petitioner and he did not file an election for exemption from the Workers' Compensation Law until after her inspection.
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department issue a final order imposing a penalty of $68,922.18 on Petitioner to be paid in accordance with a modified payment schedule reflecting the reduced penalty and the payments made through the date of the final order. DONE AND ENTERED this 22nd day of August, 2007, in Tallahassee, Leon County, Florida. S T. KENT WETHERELL, II Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 22nd day of August, 2007.
The Issue Whether the Petitioner is entitled to reimbursement for charges billed to a workers' compensation insurance carrier for medical services rendered to an injured employee/claimant, pursuant to Section 440.13, Florida Statutes (2007).2
Findings Of Fact Based on the oral and documentary evidence presented at the final hearing and on the entire record of this proceeding, including the pertinent portions of the stipulations of fact contained in Section VI of the Joint Pre-Hearing Stipulation, the following findings of fact are made: The Department is the state agency responsible for resolving reimbursement disputes involving health care providers and workers' compensation insurance carriers and employers ("employer/carrier"). See §§ 440.13(7) and (11)(c), Fla. Stat.4 The dispute resolution process is initiated when a health care provider files a petition with the Department contesting the decision of an employer/carrier to disallow or adjust payment to the health care provider for services provided to an injured worker/claimant. The petition must be accompanied by documentation supporting the allegations in the petition; if the documentation is not complete, the Department is to dismiss the petition. See § 440.13(7)(a), Fla. Stat. The employer/carrier is then required to submit a response to the petition to the Department, together with all documentation supporting its decision to disallow or adjust the health care provider's reimbursement requests. See § 440.13(7)(b), Fla. Stat. After review of the documentation submitted by the provider and the employer/carrier, the Department must determine whether the employer/carrier properly disallowed or adjusted payment to the health care provider, and it must provide a written determination setting out its decision. See § 440.13(7)(c), Fla. Stat. Procedure followed by the Department in resolving reimbursement dispute at issue in this proceeding The reimbursement dispute at issue herein arose after Sedgwick CMS, a workers' compensation insurance carrier, issued through its agent an Explanation of Bill Review and a First Notice of Disallowance dated April 16, 2008, notifying Dr. Merayo of its decision to disallow reimbursement for medical services he provided to the Claimant on April 11, 2007, August 21, 2007, September 18, 2007, October 16, 2007, December 11, 2007, and January 22, 2008, on the grounds that there had been over-utilization; specifically, Sedgwick CMS stated that it had based its decision with regard to those dates on its conclusion that that the treatment Dr. Merayo had provided the Claimant on those dates was excessive and/or not medically necessary. After receiving the First Notice of Disallowance from Sedgwick CMS, Dr. Merayo initiated the dispute resolution process when he timely filed with the Department a Petition for Resolution of Reimbursement Dispute ("Reimbursement Dispute Petition") dated May 16, 2008. Dr. Merayo requested in the Reimbursement Dispute Petition that the Department resolve the dispute between him and Sedgwick CMS regarding reimbursement for psychiatric services that he rendered to the Claimant on the dates identified in the First Notice of Disallowance. Dr. Merayo attached to the Reimbursement Dispute Petition documentation including medical records for the Claimant, and Sedgwick CMS timely submitted a response to the Reimbursement Dispute Petition, together with extensive medical and other records related to the Claimant. Among the records submitted to the Department by Sedgwick CMS were reports of two psychiatric independent medical examinations of the Claimant, both conducted in 1999, and peer review reports completed by three psychiatrists in December 2007, January 2008, and February 2008. Department personnel reviewed the documents submitted by Dr. Merayo and by Sedgwick CMS, including the two independent medical examination reports and the three peer review reports. After reviewing the documentation, Department personnel determined that, because there was no consensus among the physicians conducting the peer reviews regarding the frequency, duration, or intensity of services for the medical management of the Claimant's psychiatric needs, an EMA should review the documentation and provide guidance to Department personnel in resolving the reimbursement dispute. As authorized by Section 440.13(9)(f), Florida Statutes, the Department referred the matter to Dr. Guthrie, a psychiatrist certified by the Department as an EMA pursuant to Section 440.13(9)(a), Florida Statutes, and requested that he prepare a report regarding the medical necessity for the treatment Dr. Merayo provided the Claimant on the dates for which Sedgwick CMS had denied reimbursement. The Department indicated that all documents contained in its records would be provided to Dr. Guthrie and that, if he required additional documentation, he should immediately contact the Department. Dr. Guthrie submitted his report to the Department on November 3, 2008. The Department based its Determination that there was over-utilization of Dr. Merayo's medical services on April 11, 2007, August 21, 2007, October 16, 2007, December 11, 2007, and January 22, 2008, on a review of the documentation submitted, "specifically the carrier-obtained peer review report prepared by Dr. Sinakin [sic] and response from the Expert Medical Advisor." It based its decision that there was no over- utilization by Dr. Merayo on September 18, 2007, on Dr. Guthrie's EMA Report. Claimant's relevant medical history and independent medical examination reports prior to her treatment by Dr. Merayo5 The Claimant suffered injuries to her back as a result of an employment-related accident on December 29, 1997. Sedgwick CMS authorized psychiatric evaluation and treatment for the Claimant in April 1999, which she received from the Center for Occupational Psychiatry of Florida. The Claimant was diagnosed by Dr. Noel Delgadillo in 1999 as suffering from adjustment disorder and disorder of chronic pain, and he recommended treatment, with maximum medical improvement expected within six months. The Claimant received psychiatric medical services involving group and individual therapy and medication prescriptions and management from Dr. Delgadillo's associate, Dr. Angel Diaz, and employees of the Center for Occupational Psychiatry of Florida. Sedgwick CMS ordered a psychiatric independent medical examination of the Claimant, which was conducted on July 23, 1999, by Dr. Marilu Sabas. Dr. Sabas diagnosed the Claimant as suffering from "adjustment disorder," and she opined that the Claimant's symptoms were "the direct result of the accident . . . and the subsequent physical pain and emotional stress." On October 1, 1999, Dr. Diaz determined that the Claimant reached maximum medical improvement and assigned a permanent impairment rating of five percent. Sedgwick CMS ordered a second independent medical examination, which was conducted on October 20, 1999, by Dr. Anastasio Castiello. In Dr. Castiello's opinion, the Claimant "presented the clinical picture of an individual manifesting the exaggerated elements of a personality disorder and her actual representation is tailored to the circumstances of the litigation." Dr. Castiello concluded that, "under the circumstances, a recommendation for further psychiatric intervention is not clinically warranted." Sedgwick CMS continued to authorize Dr. Diaz to provide psychiatric evaluation and treatment in the form of group and individual psychotherapy, together with medication prescriptions and management until December 2004, when Sedgwick CMS authorized Dr. Merayo to provide psychiatric treatment to the Claimant. Dr. Merayo's treatment of the Claimant Dr. Merayo is a board-certified psychiatrist who has treated patients suffering from work-related injuries for more than 10 years. In December 2004, Dr. Merayo diagnosed the Claimant as suffering from major depressive disorder, recurrent and severe, without psychotic features, and he recommended continued group and individual psychotherapy, which was authorized by Sedgwick CMS and which she received from the Merayo Medical Arts Group. Dr. Merayo initiated an aggressive medication treatment regimen for the Claimant and conducted individual psychotherapy sessions. The Claimant also attended group therapy sessions led by members of Dr. Merayo's group. On August 23, 2005, Dr. Merayo opined that the Claimant had reached maximum medical improvement, and he assigned her a permanent impairment rating of 15 percent. Dr. Merayo also opined that the Claimant was unable to work due to her compensable injury. In 2006, Dr. Merayo conducted nine individual psychotherapy sessions, approximately one every six weeks, and the Claimant also participated in 30 group therapy sessions. At the end of 2006, Dr. Merayo was notified by Sedgwick CMS that it would not authorize further group therapy sessions, and, beginning in January 2007, the Claimant received only individual psychotherapy and medication management reviews from Dr. Merayo. Dr. Merayo conducted monthly individual psychotherapy sessions with the Claimant in 2007, for a total of 12 sessions, and in January, February, and March 2008. Sedgwick CMS paid Dr. Merayo for the individual psychotherapy sessions he conducted in January, February, March, May, June, July, and November 2007 and February 2008. Sedgwick CMS did, however, advise Dr. Merayo in the April 16, 2008, First Notice of Disallowance that it considered the services provided on July 18, 2007, November 13, 2007, and February 22, 2008, to be excessive, not reasonable, and medically unnecessary. The treatment Dr. Merayo provided the Claimant on the dates at issue herein was no different from the treatment provided on the dates for which Dr. Merayo received reimbursement. On the dates at issue herein, Dr. Merayo documented his individual psychotherapy sessions with the Claimant on a form entitled "Progress Notes," which consisted primarily of a checklist of items that he completed during the sessions, including observations on such things as appearance, behavior, attitude toward examiner, speech, mood, affect, perceptions, thought process, thought content, orientation, and the type of therapy provided. The form had blank spaces for Dr. Merayo to enter the Claimant's subjective complaints, stressors, and functioning, testing done, side effects of medication, and referrals and interventions. Dr. Merayo's notes of the Claimant's individual psychotherapy sessions on the dates at issue indicate that the Claimant consistently complained of chronic pain in her back and legs, of anxiety, and of difficulty sleeping.6 The Claimant's diagnosis of major depression, recurrent and severe, remained the same throughout the time period at issue, and, at each psychotherapy session, Dr. Merayo prescribed medications for insomnia, depression, and anxiety. Specifically, Dr. Merayo prescribed Restoril, Wellbutrin, Effexor, and Klonopin at the Claimant's psychotherapy sessions on April 11, 2007, and on August 12, 2007. As discussed in more detail below, Dr. Merayo substituted Ambien and Vistaril for the Restoril on October 16, 2007,7 and he prescribed these two new medications, together with Wellbutrin, Effexor, and Klonopin, in December 2007 and January 2008.8 On December 11, 2007, Dr. Merayo increased the dosage of Wellbutrin, an antidepressant, from 150 milligrams to 300 milligrams because the Claimant was exhibiting increasing depression. In Dr. Merayo's opinion, prescribing only a month's supply of medications at each monthly visit was the safest procedure for the Claimant. If a patient is taking only one antidepressant and is otherwise doing well, it is appropriate to conduct a medication review for that patient every three months. The Claimant's case was complex, however, because she was taking four or five medications at any given time, including two benzodiazepines and two antidepressants. In Dr. Merayo's medical judgment, even though there was no indication that the Claimant misused the medications or had any side effects, it was necessary that he conduct medication management reviews for the Claimant every month and prescribe only a 30-day supply of medications because of the number and nature of the medications. Dr. Merayo noted in his Progress Notes on the dates at issue that the Claimant's ego defenses were weak and that her recent memory was not very sharp. Dr. Merayo was particularly concerned about the Claimant because her weak ego defenses indicated possible regression. At the Claimant's psychotherapy session on October 16, 2007, Dr. Merayo decided to substitute Ambien and Vistaril for Restoril because he was concerned about the possible addictive effects of Restoril and because of his concern that Restoril was related to the Claimant's declining recent memory. Dr. Merayo also noted in his Progress Notes for the October 16, 2007, psychotherapy session that the Claimant complained of pain all over her body and expressed frustration that she was not getting any better. The Claimant's treatment plan, consisting of cognitive behavior therapy, supportive therapy, coping skills, and anxiety control, remained unchanged on the dates at issue, and Dr. Merayo indicated in the Progress Notes for each of the psychotherapy sessions that the Claimant's condition was the same. On all of the dates at issue except for October 16, 2007, Dr. Merayo checked the box on the Progress Notes specifying that the Claimant's progress toward the treatment goals was between 30 percent and 40 percent; on October 16, 2007, Dr. Merayo checked the box on the Progress Notes specifying that the Claimant's progress toward the treatment goals was between 20 percent and 30 percent. There are, however, no treatment goals stated in any of the Progress Notes. Additionally, the observations Dr. Merayo recorded on the Progress Notes for almost all of the dates at issue indicated that the Claimant's appearance was casual9; her behavior was quiet and needy; her eye contact was fair; her attitude toward Dr. Merayo was cooperative; her speech was spontaneous; her mood was depressed and anxious; her affect was labile; her thought process was goal oriented; her thought content was logical10; she was not suicidal; her orientation was "OK"; her consciousness was alert; her sleep was "OK"; her appetite was "OK"; her libido was low; her concentration was poor; her attention was good; her judgment was fair; and her coping skills were fair. In Dr. Merayo's opinion, the appropriate treatment for the Claimant, or any patient with her diagnosis, is medication management and psychotherapy. Dr. Merayo described the Claimant as a person who is in need of psychotherapy because of her diagnosis and explained that she needed the 45 minutes allotted for each of her monthly psychotherapy sessions on the dates at issue. In Dr. Merayo's opinion, the Claimant was regressing during the time period covering the dates at issue and required psychotherapeutic intervention for chronic mental illness to avoid moving from major depression to exhibiting psychotic features. In his years of medical practice, Dr. Merayo has observed that patients having the Claimant's diagnosis and amount of medication often end up in the hospital if they go for too long a period without being seen. Dr. Merayo acknowledged, however, that many patients probably do not need the level of service he provided to the Claimant after reaching maximum medical improvement and that most patients could be adequately treated with 25-minute psychotherapy sessions conducted less frequently than those he conducted with the Claimant. In Dr. Merayo's opinion as a board-certified psychiatrist, the quality, quantity, and duration of medical care that he provided to the Claimant on each of the dates at issue were medically reasonable and necessary in order to prevent the Claimant from regressing and to provide her with psychotherapy that she needed and that provided her relief. He was aware of no guidelines setting forth the frequency and intensity of psychiatric services to be provided to a claimant after a declaration of maximum medical improvement except the sound medical judgment of the health care provider. Notwithstanding the reimbursement dispute at issue herein, Dr. Merayo was authorized by Sedgwick CMS to provide psychiatric treatment to the Claimant at the time of the final hearing. EMA Report Dr. Guthrie was appointed by the Department as an expert medical advisor to render an opinion as to the medical necessity/over-utilization issues presented in the reimbursement dispute between Sedgwick CMS and Dr. Merayo. In its Order Referring Matter for Expert Medical Advisor Review, the Department requested that Dr. Guthrie assist in resolving the reimbursement dispute by specifically answering the following question: Whether the type, intensity and duration of the evaluation and treatment provided on April 11, 2007, August 21, 2007, September 18, 2007, October 16, 2007, December 11, 2007, and January 22, 2008, are consistent with the medically necessary standard of care for the clinical problem(s) documented by the Petitioner in the medical record of the Injured Employee? Please identify the standard(s) of care that support the opinion provided. Dr. Guthrie submitted his EMA Report on November 3, 2008, and he listed the documents he reviewed in an appendix to the report. The documents listed by Dr. Guthrie were all those submitted to the Department by Sedgwick CMS and by Dr. Merayo regarding the medical services provided to the Claimant since the date of her injury in 1997. Dr. Guthrie did not examine the Claimant in the course of preparing his EMA Report. In his report, Dr. Guthrie opined "within a reasonable degree of medical certainty" that reimbursement for the psychotherapy sessions conducted by Dr. Merayo with the Claimant on April 11, 2007, August 21, 2007, September 18, 2007, October 16, 2007, December 11, 2007, and January 22, 2008, should be disallowed by Sedgwick CMS because these psychotherapy sessions "would not be expected to be necessary."11 Dr. Guthrie noted, however, that, in his opinion, Sedgwick CMS should reimburse Dr. Merayo for the psychotherapy session conducted September 18, 2007, because "if all three of those visits [August, September, and October] are disallowed, then there would be a four month gap from July to November without adequate follow-up."12 Dr. Guthrie stated the basis for his opinion in pertinent part as follows: Typically, following a declaration of maximum medical improvement, it is anticipated that the frequency and to some degree, the intensity of therapeutic treatments would gradually decrease with the ultimate expectation that therapeutic follow-ups (which might include simply medication management or at times, might necessarily include medication management plus individual therapy of a supportive nature) would be necessary on an every two to three month basis, requiring at most, four to six such appointments per year. * * * Given what would be considered a more typical need to treatment following a declaration of maximum medical improvement, it would be anticipated that during the year 2007, there would typically need to be four follow-up appointments unless some extraordinary situation developed. No such extraordinary situation is discernable from Dr. Merayo's records. Dr. Guthrie summarized his opinion as follows: Therefore, given the expectation of follow- up care requiring four to at most six appointments per year subsequent to an [sic] maximum medical improvement declaration, it is my opinion, within a reasonable degree of medical certainty, that Dr. Merayo's continued monthly appointments of forty-five minutes duration suggest a pattern of over- utilization of services, [13] Dr. Guthrie also observed: From the clinical status of the claimant/patient indicated in Dr. Merayo's notes, it is clear that she has continued to struggle emotionally and with chronic pain despite aggressive treatment provided by Dr. Merayo. It is quite possible that his pattern of over-utilization has been in an attempt to assist an ill patient; however, given his declaration of maximum medical improvement on August 23, 2005, we are left with no other conclusion than a pattern of over-utilization. Summary The evidence presented by Dr. Merayo is sufficient to establish with the requisite degree of certainty that he should be reimbursed for medical services he provided the Claimant on April 11, 2007; August 21, 2007; October 16, 2007; December 11, 2007; and January 22, 2008. For reasons discussed in more detail below in the Conclusions of Law, the opinions of Dr. Merayo and Dr. Guthrie are the only evidence presented on which a determination of the medical necessity of the Claimant's monthly psychotherapy and medical management sessions with Dr. Merayo can be based. After consideration of all of the creditable evidence, Dr. Merayo's opinion is accepted as more persuasive and more grounded in the medical needs of the Claimant than the opinion of Dr. Guthrie. Dr. Guthrie's opinion was not based on an articulated "medically necessary standard of care for the clinical problem(s) documented by the Petitioner in the medical record of the Injured Employee," as required by the Department when it referred the reimbursement dispute to Dr. Guthrie,14 nor did Dr. Guthrie identify an established standard of care for psychiatric treatment of a patient with problems similar to the Claimant's. Rather, Dr. Guthrie's opinion was based on the "expectation" that, after a patient is found to have reached maximum medical improvement, the number of psychotherapy and medication management sessions would decrease to a maximum of four to six sessions per year, at a frequency of once every two to three months. In reaching his opinion regarding the frequency of psychotherapy and medication management review sessions that Dr. Merayo should have provided the Claimant, Dr. Guthrie imposed a standard that reflected "a more typical need" for treatment after maximum medical improvement of four sessions annually, but he never refers to the source of this standard of "typical need." In addition, there is only one reference to the medical necessity of monthly treatments for the Claimant, given her clinical problems and the complexity of her medications, in the Conclusion and Opinion section of Dr. Guthrie's EMA report. In that reference, Dr. Guthrie acknowledged that the Claimant continued to struggle with emotional issues and chronic pain and that the frequency of Dr. Merayo's psychotherapy sessions with the Claimant may have been "in an attempt to assist an ill patient."15 Nonetheless, because of the "expectation" regarding the frequency of treatment after a declaration of maximum medical improvement to which he referred in his report, Dr. Guthrie found that, regardless of the Claimant's need for treatment, he "is left with no other conclusion than a pattern of over-utilization" based solely on Dr. Merayo's having declared that the Claimant attained maximum medical improvement in August 2005.16 In the absence of reference by Dr. Guthrie to an established practice parameter, a protocol of treatment, or a standard of care for a psychiatrist treating a patient with a diagnosis, symptoms, and medications similar to those of the Claimant to support the opinion expressed in his EMA report, the opinion expressed in Dr. Guthrie's EMA Report is rejected. Dr. Merayo's testimony that the frequency and duration of his psychotherapy and medication management review sessions with the Claimant were, in his medical judgment, medically necessary to avoid deterioration of the Claimant's mental state and her possible lapse into psychotic features is accepted.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services enter a final order requiring Sedgwick CMS to remit payment to Huberto Merayo, M.D., for medical services he provided the Claimant on April 11, 2007; August 21, 2007; September 18, 200726; October 16, 2007, December 11, 2007; and January 22, 2008, in accordance with the rates established in the applicable Health Care Provider Reimbursement Manual. DONE AND ENTERED this 17th day of June, 2009, in Tallahassee, Leon County, Florida. PATRICIA M. HART 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 17th day of June, 2009.
The Issue The issues in this case are: (1) whether Respondent, PFR Services Corp., failed to secure the payment of workers' compensation coverage for its employees in violation of chapter 440, Florida Statutes (2017)2/; and (2) if so, the penalty that should be imposed.
Findings Of Fact The Parties Petitioner is the state agency responsible for enforcing the requirement that employers in the State of Florida secure the payment of workers' compensation insurance covering their employees, pursuant to chapter 440. Respondent is a Florida corporation. At all times relevant to this proceeding, its business address was 8040 Northwest 95th Street, Hialeah, Florida. The evidence establishes that Respondent was actively engaged in business during the two-year audit period, from October 17, 2015, through October 16, 2017, pertinent to this proceeding.3/ The Compliance Investigation On October 16, 2017, Petitioner's compliance investigator, Cesar Tolentino, conducted a workers' compensation compliance investigation at a business located at 8040 Northwest 95th Street, Hialeah, Florida. The business was being operated as a restaurant, to which National Council on Compensation Insurance ("NCCI") class code 9082 applies. Tolentino observed Maria Morales, Gabriela Nava, and Geraldine Rodriquez performing waitressing job duties and Rafael Briceno performing chef job duties. The evidence established that these four persons were employed by Respondent. Additionally, the evidence established that corporate officers Rosanna Gutierrez and Mary Pineda were employed by Respondent.4/ The evidence established that neither had elected to be exempt from the workers' compensation coverage requirement. In sum, the evidence established that Respondent employed six employees, none of whom were independent contractors, and none of whom were exempt from the workers' compensation coverage requirement. Tolentino conducted a search of Petitioner's Coverage and Compensation Compliance Automated System, which consists of a database of workers' compensation insurance coverage policies issued for businesses in Florida, and all elections of exemptions filed by corporate officers of businesses in Florida. Tolentino's search revealed that Respondent had never purchased workers' compensation coverage for its employees; that its corporate officers had not elected to be exempt from the workers' compensation coverage requirement; and that Respondent did not lease employees from an employee leasing company. Gutierrez acknowledged that Respondent had not purchased workers' compensation coverage for its employees, and told Tolentino that she did not know it was required. Based on Tolentino's investigation, on October 16, 2017, Petitioner served Stop-Work Order No. 17-384 ("Stop-Work Order") on Respondent. At the time Tolentino served the Stop-Work Order, he informed Gutierrez that if Respondent obtained a workers' compensation policy and provided Petitioner a receipt of the amount paid to activate the policy within 28 days of issuance of the Stop-Work Order, Respondent's penalty would be reduced by the amount paid to activate the policy. On October 16, 2017, Petitioner, through Tolentino, also served on Respondent a Request for Production of Business Records for Penalty Assessment Calculation ("Business Records Request"), requesting Respondent provide several categories of business records covering the two-year audit period from October 16, 2015, to October 16, 2017. Specifically, Petitioner requested that Respondent provide its payroll documents consisting of time sheets, time cards, attendance records, earnings records, check stubs, check images, and payroll summaries, as applicable. Petitioner also requested that Respondent provide, as applicable, its federal income tax documents; account documents, including business check journals and statements and cleared checks for all open or closed business accounts; cash and check disbursements records; workers' compensation coverage records; and independent contractor records. At the time Tolentino served the Business Records Request, he informed Gutierrez that if Respondent obtained a workers' compensation policy and provided Petitioner the complete business records requested within ten business days, Respondent's penalty would be reduced by 25 percent. The evidence establishes that Respondent did not provide any business records within that time period, so is not entitled to receive that penalty reduction. On November 16, 2017, Petitioner issued an Amended Order of Penalty Assessment, assessing a total penalty of $35,262.32 against Respondent for having failed to secure workers' compensation coverage for its employees during the audit period. On December 14, 2017, Gutierrez met with Tolentino and, at that time, provided documentation to Petitioner showing that Respondent had acquired workers' compensation coverage for its employees, effective October 28, 2017, and had paid $3,966.00 for the policy. At the December 14, 2017, meeting, Gutierrez presented an envelope postmarked October 30, 2017, showing that Respondent had mailed Petitioner proof of having obtained the workers' compensation coverage within 28 days of the date the Stop-Work Order was issued; however, this mail was returned, so Petitioner did not receive such proof within 28 days. The evidence established that this mail was returned to Respondent on December 4, 2017——several days after the 28-day period had expired, and too late for Respondent to take additional steps to deliver to Petitioner the proof of its having purchased the workers' compensation policy.5/ Because Petitioner did not receive Respondent's proof of having purchased a workers' compensation policy within 28 days of issuance of the Stop-Work Order, it did not reduce the penalty imposed on Respondent by the amount that Respondent had paid for the premium. The evidence also establishes that at the December 14, 2017, meeting, Respondent tendered to Petitioner a cashier's check in the amount of $1,000.00. As a result of having received proof of workers' compensation coverage for Respondent's employees, Petitioner issued an Agreed Order of Conditional Release from Stop-Work Order ("Order of Conditional Release") on December 14, 2017, releasing Respondent from the Stop-Work Order. The Order of Conditional Release expressly recognized that Respondent "paid $1,000.00 as a down payment for a penalty calculated pursuant to F.S. 440.107(7)(d)1." Additionally, page 1 of 3 of the Penalty Calculation Worksheet attached to the Amended Order of Penalty Assessment admitted into evidence at the final hearing reflects that Respondent paid $1,000.00 toward the assessed penalty of $35,262.32. This document shows $34,262.32 as the "Balance Due." Calculation of Penalty to be Assessed Petitioner penalizes employers based on the amount of workers' compensation insurance premiums the employer has avoided paying. The amount of the evaded premium is determined by reviewing the employer's business records. In the Business Records Request served on October 16, 2017, Petitioner specifically requested that Respondent provide its payroll documents, federal income tax documents, disbursements records, workers' compensation coverage records, and other specified documents. When Gutierrez met with Tolentino on December 14, 2017, she provided some, but not all, of the business records that Petitioner had requested. Respondent subsequently provided additional business records to Petitioner, on the eve of the final hearing. Petitioner reviewed all of the business records that Respondent provided. However, these business records were incomplete because they did not include check images, as specifically required to be maintained and provided to Petitioner pursuant to Florida Administrative Code Rule 69L-6.015(6). Check images are required under Florida Administrative Code Rule 69L-6.015(6) because such images reveal the payees, which can help Petitioner identify the employees on the employer's payroll at any given time. This information is vital to determining whether the employer complied with the requirement to have workers' compensation coverage for all of its employees. Because Respondent did not provide the required check images, the records were insufficient to enable Petitioner to calculate Respondent's payroll for the audit period. Under section 440.107(7)(e), business records provided by the employer are insufficient to enable Petitioner to calculate the employer's payroll for the period for which the records are requested, Petitioner is authorized to impute the weekly payroll for each employee as constituting the statewide average weekly wage multiplied by 1.5. To calculate the amount of the penalty due using the imputed method, Petitioner imputes the gross payroll for each employee for each period during which that employee was not covered by required workers' compensation insurance. To facilitate calculation, Petitioner divides the gross payroll amount for each employee for the specific non-compliance period by 100.6/ Petitioner then multiplies this amount by the approved NCCI Scopes Manual rate——here, 2.34, which applies to restaurants——to determine the amount of the avoided premium for each employee for each non-compliance period. This premium amount is then multiplied by two to determine the penalty amount to be assessed for each employee not covered by required workers' compensation insurance for each specific period of non- compliance. Performing these calculations, Petitioner determined that a penalty in the amount of $35,262.32 should be assessed against Respondent for failing to provide workers' compensation insurance for its employees, as required by chapter 440, for the period from October 17, 2015, through October 16, 2017. As discussed above, on December 14, 2017, Respondent paid a down payment of $1,000.00 toward the penalty, and this was expressly recognized in the Stop-Work Order that was issued that same day. Thus, the amount of the penalty to be assessed against Respondent should be reduced by $1,000.00, to $34,262.32. As previously noted, this amount is identified on page 1 of 3 of the Amended Order of Penalty Assessment as the "Balance Due." As discussed in paragraphs 17 and 18, above, the evidence establishes that Respondent purchased a workers' compensation policy to cover its employees within 11 days of issuance of the Stop-Work Order, and mailed to Petitioner proof of having purchased such policy on October 30, 2017——well within the 28-day period for providing such proof. However, as discussed above, this mail was returned to Respondent on December 4, 2017——too late for Respondent to take additional steps to provide such proof to Petitioner within the 28-day period. There is no evidence in the record showing that failure of the mailed proof to be received by Petitioner was due to any fault on Respondent's part. Respondent's Defenses On behalf of Respondent, Gutierrez testified that Respondent did everything that Tolentino had told them to do. Respondent purchased workers' compensation insurance and provided proof to Petitioner that its employees were covered.7/ Gutierrez also testified that although Respondent's business was created in May 2013, it did not begin operating and, therefore, did not have any employees, until January 2016.8/ However, as previously noted, the persuasive evidence does not support this assertion.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that: The Department of Financial Services, Division of Workers' Compensation, enter a final order determining that PFR Services Corp. violated the requirement in chapter 440, Florida Statutes, to secure workers' compensation coverage for its employees during the audit period, and imposing a penalty of $30,296.32. DONE AND ENTERED this 14th day of January, 2019, in Tallahassee, Leon County, Florida. S CATHY M. SELLERS 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 14th day of January, 2019.
The Issue The issue to be determined is whether Respondent, Wilby’s Home Repairs, LLC, failed to secure the payment of workers’ compensation coverage for its employees, and if so, what penalty is owed.
Findings Of Fact The Department of Financial Services, Division of Workers’ Compensation, is the state agency charged with the enforcement of the requirement in chapter 440, Florida Statutes, that employers in Florida secure workers’ compensation coverage for their employees as required by section 440.107(3). At all times relevant to this case, Respondent was a company engaged in the construction industry. Its principal office was located at 2641 University Boulevard North, H115, Jacksonville, Florida 32211. On or about October 2, 2014, Ann Johnson, a compliance investigator for the Division, observed two people doing patch/repair work using a ladder on the outside of a home at 2322 Myra Street in Jacksonville, Florida. She approached and spoke to both men, who identified themselves as Michael Wilbur and Robert Nelson and stated that they worked for Wilby’s Home Repairs. When Ms. Johnson asked for proof of workers’ compensation coverage, Mr. Wilbur could not provide it but thought both gentlemen had exemptions. Mr. Wilbur thought that his accountant who had prepared the paperwork for filing with the Division of Corporations for his company had also completed the applications for exemptions for workers’ compensation coverage. However, no applications for exemptions had been filed. Investigator Johnson consulted the Division of Corporations website to determine the identity of Respondent’s corporate officers and found that Mr. Wilbur and Mr. Nelson were the listed officers. She then consulted the Division’s Coverage and Compliance Automated System (“CCAS”) for proof of workers’ compensation coverage and for any exemptions associated with Respondent. Investigator Johnson’s research revealed that Respondent did not have a workers’ compensation policy or an employee-leasing policy, and further, there were no exemptions for its corporate officers on file. Based on this information, Investigator Johnson consulted with her supervisor, who provided authorization for the issuance of a Stop-Work Order. She then issued a Stop-Work Order and personally served it on Mr. Wilbur on October 2, 2014. At the same time, she issued and served a Request for Production of Business Records for Penalty Assessment Calculation (BRR). The requested documents were for the purpose of determining Respondent’s payroll from May 16, 2014 (the date the company was formed according to the Division of Corporations website) to October 2, 2014 (the date of the random inspection). They consisted of payroll documents, such as time sheets or cards, attendance records, check stubs, and payroll summaries; account documents, such as check journals and statements; disbursements records; workers’ compensation coverage documents, such as copies of policies, declaration pages, and certificates of workers’ compensation; documents related to any exemptions held; documents reflecting the identity of each subcontractor and the relationship thereto, including any and all payments to subcontractors; and documentation of subcontractors’ workers’ compensation coverage. On October 3, 2014, Mr. Wilbur came into the Division office in Jacksonville and filled out the applications for exemptions, and those were processed. Mr. Wilbur submitted a cashier’s check for $1,000 and Respondent was released from the Stop-Work Order. He also brought in some records in response to the BRR. Those records consisted of letters, notations, and copies of checks made out to Robert Nelson or Mike Wilbur from Grant-Dooley Rental. The records were scanned and provided to the penalty auditing team to calculate an appropriate penalty according to the statutory formula. Penalty audit supervisor Anita Proano reviewed the business records provided by Respondent, but could not, from those records, properly identify the amount of gross payroll paid to Respondent’s employees on which workers’ compensation premiums had not been paid. Ms. Proano determined that Respondent had not been in compliance with coverage requirements from May 16, 2014, to October 2, 2014. The business records provided by Respondent were not sufficient for the Department to calculate a penalty for Respondent’s period of noncompliance with the coverage requirements of chapter 440. The auditor assigned to the case then calculated a penalty based upon imputed payroll pursuant to the procedures required by section 440.107(7)(e) and Florida Administrative Code Rule 69L-6.208. Had the documents submitted by Respondent been adequate, then the Division would have used those documents to calculate Respondent’s payroll. The checks provided by Respondent to the Division consisted of checks made out to Robert Nelson and Michael Wilbur, individually, spanning from approximately May 9, 2014, through October 2014, from Grant- Dooley Rental. Mr. Wilbur testified that the only job Respondent handled during this period was the family home on Myra Street, and he and Mr. Nelson were paid directly by the homeowner rather than having payments made to Wilby’s Home Repair as an entity. Unfortunately, these direct payments are not the type of records contemplated by the Division’s rules regarding appropriate documentation of payroll. On October 17, 2014, the Division issued an Amended Order of Penalty Assessment to Respondent, which was served on Respondent on October 20, 2014. The penalty assessed for noncompliance was $21,583.48. The penalty assessment calculation is based upon the classification codes listed in the Scopes® Manual, which have been adopted through the rulemaking process through rules 68L- 6.021 and 69L-6.031. Classification codes are codes assigned to different occupations by the National Council on Compensation Insurance, Inc. (NCCI), to assist in the calculation of workers’ compensation insurance premiums. Auditor Proano used classification code 5645 (carpentry) for both employees. Code 5645 is the correct code for the type of work observed by Ms. Johnson during her inspection. Using this classification code, Ms. Proano used the corresponding approved manual rates for that classification and the period of non-compliance. The average weekly wage as established by the Department of Economic Opportunity for the relevant period is $827.08. Ms. Proano used that amount and multiplied it by 2 for the number of days of noncompliance. Based on that calculation, she came up with a gross payroll amount of $66,166.40, which she divided by 100. Ms. Proano then multiplied that amount by the manual approved rate ($16.31), times two to reach the amount of penalty to be imposed. All of the penalty calculations are in accordance with the Division’s Penalty Calculation Worksheet. The Department has demonstrated by clear and convincing evidence that Respondent employed Robert Nelson and Michael Wilbur on October 2, 2014, and that Respondent was engaged in the construction business for the period of May 16, 2014, through October 2, 2014, without proper workers’ compensation coverage for that period. The Department also demonstrated by clear and convincing evidence that the documents submitted by Respondent, which may indeed be all of the documentation Respondent possessed, were not sufficient to establish Respondent’s payroll, thus necessitating imputation of payroll. Finally, the Department proved by clear and convincing evidence that the required penalty for the period of noncompliance is $21,583.48.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers’ Compensation enter a final order finding that Wilby’s Home Repairs, LLC, failed to secure the payment of workers’ compensation insurance coverage for its employees with respect to Robert Nelson and Michael Wilbur, in violation of section 440.107, Florida Statutes, and imposing a penalty of $21,583.48. DONE AND ENTERED this 10th day of June, 2015, in Tallahassee, Leon County, Florida. S LISA SHEARER NELSON 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 10th day of June, 2015. COPIES FURNISHED: Trevor S. Suter, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-4229 (eServed) Mike Wilbur 5376 Shirley Avenue Jacksonville, Florida 32210 Julie Jones, CP, FRP, Agency Clerk Division of Legal Services Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0390 (eServed)
The Issue The issue in this case is whether Respondent failed to provide workers' compensation insurance coverage for employees, and, if so, what penalty should be assessed.
Findings Of Fact Petitioner is the state agency responsible for, inter alia, monitoring businesses within the state to ensure that such businesses are providing the requisite workers' compensation insurance coverage for all employees. The Division's headquarters are located in Tallahassee, Florida, but its investigators are spread throughout the state in order to more effectively monitor businesses. Respondent is a construction company that has been operating in excess of 30 years. It is a small company and usually only has a few employees at any given time. The company is located in Charlotte Harbor, Florida. Workers' compensation coverage is required if a business entity has one or more employees and is engaged in the construction industry in Florida. Workers' compensation coverage may be secured via three non-mutually exclusive methods: 1) The purchase of a workers' compensation insurance policy; 2) Arranging for the payment of wages and workers' compensation coverage through an employee leasing company; or 3) Applying for and receiving a certificate of exemption from workers' compensation coverage, if certain statutorily-mandated criteria are met. On January 8, 2009, Ira Bender, investigator for the Division, was doing on-site inspections in Port Charlotte, Florida. Bender stopped at the site on Edgewater Drive where new construction was underway at a YMCA. Bender observed a man (later identified as Thomas Woodall) sweeping the floor. Bender questioned Woodall and was told that Woodall worked for Respondent. When asked about his workers' compensation insurance coverage, Woodall advised that his insurance was maintained through Frank Crum Leasing Company ("Crum"). Bender called Crum and found that although Woodall had been carried as an employee of Respondent in the past, he had been released from coverage. The reason for his release was that his employment had been terminated for lack of business. Bender called Respondent to inquire about workers' compensation coverage. He was told that Respondent did not realize Woodall had been dropped from the Crum insurance coverage and that he would be reinstated immediately. In fact, coverage was restarted on that same day. Based on his finding that an employee had been working without coverage, Bender called his supervisor and provided his findings. The supervisor authorized issuance of a SWO based on the findings. The SWO was served on Respondent via hand- delivery at 11:45 a.m., on January 8, 2009. The SWO was also posted at the work site. The Division then requested business records from Respondent in order to determine whether there were any violations. If there were violations, then the Division would ascertain the amount of penalty to assess. Respondent cooperated and submitted the business records, as requested. After review of the business records, the Division issued its first Amended Order of Penalty Assessment ("Order") on January 14, 2009. The process employed by the Division was to locate all uncovered employees, i.e., those working without workers' compensation insurance for any period of time. The employees were then assigned a class code from the National Council on Compensation Insurance (NCCI) publication. Each trade or type of employment is assigned a code which sets the rate to be applied to an individual depending on the type of work he/she is performing. The Division assigned codes to the employees, determined how much the employee had been paid during the period of non-coverage, assigned the rate to the gross pay, and calculated the insurance premium needed to cover the worker for the time in question. A penalty of 1.5 times the premium was then assigned. The Order assessed a total penalty of $21,165.98 against Respondent. Respondent objected to the amount and refused to sign it due to errors contained in the Penalty Worksheet attached to the Order. Signing the Order would have allowed Respondent to return to work, but he refused to sign because he knew it was not correct. Pursuant to discussions between the parties and "additional records received," the Division issued a second Order on January 16, 2009, assessing a penalty of $6,501.27. Respondent believed that the Division was still in error and provided yet additional information--some verbal--to the Division. A third Order was issued on January 21, 2009, reducing the penalty to $3,309.56. However, Respondent still believed the penalty worksheet contained errors. Again, Respondent refused to sign and provided additional information to the Division. The Division issued a fourth Order on January 28, 2009, assessing a penalty of $2,822.24. That Order had an error concerning the spelling of an employee's name, but the penalty amount was correct. Respondent would not sign the fourth Order, because he did not believe he had intentionally violated any statute or rule concerning workers' compensation coverage for his employees. A corrected (fifth amended) Order was ultimately issued on May 19, 2009.1 The fifth Order asserts the amount of penalty now in dispute, which is the same amount appearing in the fourth amended Order. Respondent signed the fifth Order and entered into a payment plan for payment of the penalty, paying a down payment of $1,000 and monthly payments of $30 until paid in full. Respondent takes great offense to the fact that the penalty assessments were not faxed to him more quickly. He maintains that he had every intention to resolve this matter as quickly as possible, but the Division delayed and dragged out the process. The penalty worksheet attached to the fifth Order listed nine "Employee Names" that are subject to the penalty assessment. Each will be discussed below. The first "employee" is listed as "Cash" and is assigned Class Code 5403. This "employee" represents checks found in Respondent's records with the payee listed as "cash- casual labor" totaling $2,178.00 in gross payroll. Code 5403 was assigned because that is the code used by Crum for Respondent's general business. The manual rate for Code 5403 is $24.74. A penalty of $808.26 was assessed for that employee. The second employee is Jacob Prewitt. Prewitt was assigned Class Code 5221, due to the word "driveway" appearing on a check issued to him. Driveway work falls under a lower approved manual rate ($10.37) than general construction. The gross payroll amount was $1,960, and the penalty assigned to Prewitt was $304.88. The third employee is Woodall, assigned a Class Code of 5606, with a manual rate of $3.84. That code is used for supervisors and is, again, not as dangerous an occupation as general construction. The gross payroll for this entry was $1,008, and the penalty assessed for Woodall was $58.07. Cash is the fourth employee and has been covered in the discussion in paragraph 16, above. Barry Lawrence is the fifth employee; he is assigned Class Code 5437 as a cabinet maker/installer with a manual rate of $13.01. Lawrence had a Verification Letter issued by the Division indicating he was exempt from workers' compensation coverage. However, that exemption was limited to cabinet- making. By installing the cabinets, Lawrence performed work outside his exemption status. The gross payroll for his work was $6,200, and the penalty assessed for Lawrence was $1,209.33. Respondent was completely unaware that the exemption letter did not cover installation and had, in fact, always allowed cabinet- makers to install the cabinets as well. Brunderman Builders is listed as the sixth employee. It is assigned Class Code 5403 with a manual rate of $14.39. The gross payroll for this entry was $550, resulting in a penalty assessment of $118.73. The seventh employee is Jorge Gonzolas, assigned Class Code 5403, the general contracting code. Gonzolas was the employee of a contractor who was subcontracting with Respondent. The contractor died unexpectedly, and Gonzolas was left without payment for the work he had performed. Respondent generously decided to pay Gonzolas for his work, thereby, effectively making Gonzolas a de facto employee. The amount paid Gonzolas was $599.00; the penalty assessed for Gonzolas was $129.30. Woodall is again listed as employee number eight, this time with Class Code 5610, reflecting casual labor he did on one date that his insurance was not in place. The payroll amount for this work was $37.50. The penalty assessed for Woodall was $4.02. The ninth employee was Julio Garcia, assigned Class Code 8742 for outside sales, with a manual rate of $.64. The payroll amount for Garcia was $1,300. His penalty assessment amount was $12.48. Garcia was another one of the deceased subcontractor's employees that Respondent volunteered to pay for work Garcia had performed. The total payroll at issue for Respondent was $14,477.50. The total premium for that amount of payroll would have been $1,881.48, and the penalty assessed was $2,822.84. This is a fairly insignificant portion of Respondent's $5.5 million annual payroll. Respondent did not intentionally attempt to avoid the payment of workers' compensation insurance for its employees. There is no pattern of avoidance or indication that non-payment was Respondent's goal. Rather, there are plausible and reasonable explanations about the unpaid premiums. For Woodall, Respondent believed he was still covered through the Crum policy. For Gonzolas and Garcia, Respondent was simply attempting to be a nice guy. For Prewitt, the employee's exemption had unknowingly lapsed. For Lawrence, Respondent relied upon a Verification Letter from the state, but misinterpreted its scope. The Division, on the other hand, only pursued Respondent based on an actual finding of non-coverage. But for Woodall's presence at a work site doing manual labor (sweeping the floor), the Division would not have looked at Respondent's records. There is no indication the Division acted other than in strict accordance to its governing rules.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by Petitioner, Department of Financial Services, Division of Workers' Compensation, upholding the assessment of a penalty of $2,822.24 against Respondent, Brunderman Building Company, Inc. DONE AND ENTERED this 9th day of October, 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 9th day of October, 2009.
The Issue The issues are: (1) Whether Respondent, Bravo Construction, Inc. ("Respondent"), was in violation of the workers’ compensation requirements of Chapter 440.107, Florida Statutes (2003),1/ by failing to secure workers’ compensation coverage for its workers; (2) Whether such individuals possessed current valid workers’ compensation exemptions; and (3) Whether Respondent paid its workers remuneration outside of Respondent’s employee leasing company.
Findings Of Fact The Department is the state agency responsible for enforcing the requirement of Section 440.107, Florida Statutes, which requires that employers secure the payment of workers’ compensation coverage for their employees. Respondent is a company engaged in the construction industry. Specifically, Respondent's business is framing houses. At all time relevant to this proceeding, Elias Bravo was president of the company. On May 26, 2004, the Department’s investigators, Carol Porter and Kelley Dunning, conducted a random visit of a work site in Grassy Point, a gated community in Port Charlotte, Florida, and discovered Mr. Bravo and his workers on site as the house-framers. When the investigators arrived at the site, they spoke with Mr. Bravo, who advised the investigators that Respondent utilized a personnel leasing company, Time Management, which was actually a brokerage firm for Southeast Personnel Leasing, Inc. ("SEPL"), to secure workers’ compensation coverage. On May 26, 2005, Mr. Bravo was the only person in his crew who had coverage with SEPL. At the time of the site visit, the other men were not listed with SEPL because Mr. Bravo still had their applications in his car. After Respondent was unable to provide proof that the men had workers' compensation coverage pursuant to Subsections 440.107(3) and (7)(a), Florida Statutes, the investigators issued a Stop Work Order to Respondent while at the work site on May 26, 2004. On the same day that the Stop Work Order was issued, Investigator Dunning served Mr. Bravo with a Request for Production of Business Records for Penalty Assessment Calculation ("Request for Production of Business Records"). The Department requested copies of Respondent's business records in order to determine whether Respondent had secured workers' compensation coverage; whether Mr. Bravo or Respondent's employees had workers' compensation exemptions; and, if not, to determine the penalty assessment. In response to the Request for Production of Business Records, Mr. Bravo provided certificates of insurance, Respondent's check stubs written to various entities or individuals on behalf of Respondent, payroll records, and Form 1099s for the year ending 2003. Many of the documents provided by Mr. Bravo indicated that Respondent made payments directly to the entities and individuals. The Department maintains records regarding the workers' compensation coverage of individuals and entities in a statewide database called Compliance and Coverage Automated System ("CCAS"). The CCAS database is utilized by the Department to verify if an individual or entity has workers' compensation coverage or a valid exemption from coverage. As part of the Department's investigation, Investigator Porter conducted a CCAS search for Respondent's workers’ compensation insurance coverage records. This search verified that Mr. Bravo had workers' compensation coverage. However, many of the workers or entities to whom Respondent made direct payments did not have workers’ compensation coverage or current valid workers’ compensation exemptions. Based on a review of the payroll records, check stubs, and the Form 1099s that Respondent provided to the Department, Investigator Porter determined that Respondent was an "employer" as that term is defined in Subsection 440.02(16), Florida Statutes. Subsequently, the Department reassessed the original penalty and issued the Amended Order with the attached penalty worksheet which detailed the basis of the penalty assessment. In determining the amended penalty assessment, Investigator Porter disregarded and did not include Respondent's payments to any individual or entity that had workers’ compensation coverage or an exemption from such coverage. The Amended Order, which reflected a penalty assessment of $97,416.68, was issued to Respondent on May 28, 2004.2/ Respondent paid remuneration to the individuals listed on the penalty worksheet of the Amended Order for work they performed. Nonetheless, during the period covered by the penalty assessment, Respondent did not secure workers' compensation coverage for the individuals listed on the penalty worksheet, and none of them had workers' compensation coverage or exemptions from such coverage. The individuals listed on the penalty worksheet of the Amended Order were Respondent's employees during the relevant period, in that they were paid by Respondent, a construction contractor, and did not have workers’ compensation coverage or an exemption from such coverage. Mr. Bravo had workers' compensation coverage through SEPL. However, none of the employees listed on the Amended Order had workers' compensation coverage through SEPL, because they were paid directly by Respondent. A personnel leasing company provides workers' compensation coverage and payroll services to its clients, then leases those employees back to the clients for a fee. Respondent was a client of SEPL, and based on that relationship, Mr. Bravo believed that he and his workers received workers' compensation coverage through that personnel leasing company. However, the workers' compensation coverage provided by SEPL applied only to those employees SEPL leased to Respondent. In the case of leased employees, Respondent would have to make payments to the leasing company and not directly to his workers. The leasing company would then, in turn, pay the leased employees. When, as in this case, the construction company makes direct payments to individuals performing construction work, those workers are not leased employees and, thus, are not secured by the workers’ compensation coverage provided by the personnel leasing company. See § 468.520, Fla. Stat. Some of the individuals listed on the penalty worksheet may have been "dually employed"; that is, sometimes they were employed by Respondent and at other times, they were employees of SEPL and were leased to Respondent. However, during the periods in which individuals worked for Respondent and were paid by Respondent, and were not paid by SEPL, they were without workers’ compensation coverage unless Respondent provided such coverage. With regard to the individuals listed on the penalty worksheet, Respondent provided no such coverage. Respondent, through Mr. Bravo, paid its employees directly, thus, circumventing SEPL and losing the coverage that the employees may have had through it. The Department assessed the penalty against Respondent based on the remuneration Respondent gave directly to the employees outside of SEPL, the class code assigned to each employee utilizing the SCOPES Manual adopted by the Department in Florida Administrative Code Rule 69L-6.021, and the guidelines in Subsection 440.107(7)(d), Florida Statutes.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers’ Compensation, enter a final order that affirms the Stop Work Order and the Amended Order of Penalty Assessment, which imposes a penalty of $97,416.68. DONE AND ENTERED this 10th day of May, 2005, in Tallahassee, Leon County, Florida. S CAROLYN S. HOLIFIELD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 10th day of May, 2005.
The Issue Whether Respondent, John H. Woods, d/b/a Woods Construction, conducted operations in the State of Florida without obtaining workers’ compensation coverage which meets the requirements of Chapter 440, Florida Statutes (2008)1, in violation of Subsection 440.107(2), Florida Statutes, as alleged in the Amended Stop-Work Order and Order of Penalty Assessment and Second Amended Order of Penalty Assessment. If so, what penalty should be assessed by Petitioner, Department of Financial Services, Division of Workers’ Compensation, pursuant to Section 440.107, Florida Statutes.
Findings Of Fact Petitioner is the state agency charged with the responsibility of enforcing the requirement of Section 440.107, Florida Statutes, that employers in Florida secure the payment of workers’ compensation coverage for their employees. § 440.107(3), Fla. Stat. Workers’ compensation coverage is required if a business entity is engaged in the construction industry in Florida. Securing the payment of workers’ compensation coverage can be achieved via three different methods: purchase a workers’ compensation insurance policy; ensure that workers are paid and workers’ compensation coverage is provided by a third party entity called a Professional Employment Organization (PEO); or apply for a Certificate of Exemption from Workers’ Compensation Coverage (Exemption Certificate) assuming certain statutorily mandated criteria are met. These methods are not mutually exclusive of each other. On August 14, 2008, a workers’ compensation compliance investigator employed by Petitioner, visited a construction site in Lee County, Florida. On the site, she observed several groups of men conducting various construction activities including the laying of a sidewalk along Lexington Street in Fort Myers. The work performed involved construction activities as contemplated under the applicable agency rule. Fla. Admin. Code R. 69L-6.021. By a preponderance of evidence, it is determined that among the entities on the worksite was a group of three laborers who worked for Woods Construction. There was no proof of coverage for workers’ compensation for the Woods Construction Company, neither an insurance policy, nor any exemption certificate for the individuals encountered on the worksite. Woods Construction assumed that the three laborers were covered by Able Body Labor, a PEO. The evidence confirmed that two of the three laborers were covered. However, the third laborer, Filberto Castro, was unable to be included on the work roster due to his lack of corresponding documentation necessary for employment in the United States. Therefore, Castro was working without coverage. An SWO was issued and a Request for Production of Business Records for Penalty Calculation (BRR) was served on J. Woods Construction, Corp. [sic] on August 14, 2008. The SWO was later amended to conform to the correct name of the company, which is not a corporation. The amended SWO was served on John H. Woods on August 22, 2008, via certified mail. Pursuant to the BRR, Respondent provided business records to Petitioner. Petitioner’s Penalty Calculator’s duties are to receive records from the employer, and organize, identify, and audit those records which indicate payroll activities, while delineating other business activities, which may be related to the non-payroll activities of the business such as purchasing supplies, maintaining a place of business, etc. The characterization of the voluminous records received from Respondent were categorized into three distinct categories: reliable, somewhat reliable, and unreliable records. The records were characterized as “reliable” if they were records from an independent third party or the bank with whom Respondent conducted business, and were thus extremely difficult to alter without a high level of expertise. They are considered “source documentation.” The bank records capture the transactions as they occurred, to whom money was paid, and for what amount. The next category of records deemed “somewhat reliable” were those records which, on their face appear to be legitimate records, such as copies of the checks with corresponding amounts and dates to those in the “reliable” category. However, certain inconsistencies in these records demonstrated that they were less than reliable. These records were only used in select instances when there was corresponding source documentation supporting their veracity. A prime example, among many, is check number 1078 for $100.00 indicating a payment for a credit card; the corresponding checkstub indicates that the payment went to “Whitney,” a grand-child of John H. Woods. In toto, the documents illustrated that Respondent failed to follow generally accepted accounting principles by mislabeling or mischaracterizing funds on a regular basis. The third category of records were records which were considered “unreliable” as these records lacked any corresponding source documentation and they could not be considered in assessing the payroll activities of the firm. In the construction industry, there are instruments called “draw requests.” The draw request is an item that a subcontractor or builder will utilize to show partial completion of a project and concurrently request more funds (the draw) to complete the remaining portion of the project. The draw requests are often utilized at pre-measured stages of the project, e.g.: 25 percent completion, 50 percent completion, etc. The draw requests would have attached source documentation such as receipts from suppliers, servicers, and other miscellanea to show that the project is worked upon as opposed to the funds being siphoned off elsewhere. Nowhere, in the box full of records produced, was a proper draw request found with attached receipts. Therefore, none of the records produced could be considered as reliable documents. Many irregularities in Respondent’s methodology of accounting were also noted; as an example, there were numerous times that company checks from Respondent were deposited by an entity known as “Hendry Contracting,” without explanation. Respondent personally held the license as a General Contractor, and would utilize Hendry Contracting as a subcontractor. Hendry Contracting did not have any license whatsoever. It utilized Respondent’s license while performing construction activities. Brad Hendry, the principal of Hendry Contracting, is married to Janice Hendry, the daughter of John H. Woods, the owner of Respondent, Woods Construction. Janice Hendry administered Respondent’s company account and the company account of Hendry Contracting. The evidence is clear that no separation of duties was attempted. Furthermore, Hendry admitted that she did not exercise any sense of separation between the two different accounts (Woods Construction and/or Hendry Contracting). The two businesses were “commingled,” and the ability to retain any form of standard accounting requirement of checks and balances has been nullified. Numerous irregularities that defied “generally accepted accounting principles” appeared, including personal loans to family members, wholesale transfers of monies from Respondent to Hendry Contracting without explanation, and checks drafted to Brad Hendry (personally). Further, Woods testified that he exercised little or no control over his company in the last ten years. Hendry also confirmed the haphazard method of managing the two firms’ different accounts by writing checks from one firm to another, when the other firm’s account was running low. Hendry’s testimony regarding the financial cooperation of Respondent and Hendry Contracting is indicative of the commingling of accounts, as well. Hendry testified that each entity would draw on each other’s accounts depending on the cash levels within each respective account. Hendry also testified that Hendry Contracting was utilized for obtaining bank loans and utilizing Hendry’s name to purchase materials when the other accounts were depleted. By utilizing only the bank records, a general ledger for Respondent was constructed which derived the amounts that came into the business and the amounts paid out for labor. The fact that Respondent had no general ledger meant that some items would never be accounted for, such as building supply costs. Based on that caveat, Florida Administrative Code Rule 69L- 6.035(i) was applied to the total payroll derived from the bank records. This had the effect of reducing total payroll by twenty percent to account for building supplies (which were never accounted for due to the non-existent business ledger of Respondent). The amount of money flowing and commingling between the two firms (Respondent and Hendry Contracting) and among family members, numbered in the hundreds of thousands of dollars. The commingled money was utilized for all manners of payments: loans (not expected to be paid back) to family members, inflated wages to family members for de minimis services, or payment for services/goods for family members’ personal residences. A proposed penalty in the amount of $365,876.82 was originally assessed, as reflected in the AOPA, and served on Respondent on August 26, 2008. Based on further records produced and the understanding that Respondent was a construction firm but was unable to show any receipts of building supplies, the proposed penalty, utilizing Florida Administrative Code Rule 69L- 6.035(i), decreased the payroll by 20 percent to account for building supplies that were not documented. After consideration of the documents provided and application of the rule, a Second AOPA was prepared showing an assessment in the amount of $306,876.82. With Hendry as the sole financial officer of Respondent, approximately $351,632.43 of payroll was allocated to various family members. There was unambiguous testimony from Woods and Hendry that family members were employed in various roles, most notably the grand-daughters who were earning wages while conducting secretarial duties. A further $472,292.94 was paid to Hendry Contracting during the three-year audit time- period. Hendry Contracting never had any discernible workers’ compensation coverage for this amount of payroll, rendering Respondent liable for failure to secure workers’ compensation coverage for the monies paid. The remainder of the unsecured payroll assessed to Respondent was for various non-family workers for whom no proof of workers’ compensation coverage could be ascertained. The Second AOPA was computed by calculating Respondent’s payroll for the past three years using the business records Respondent provided. The payroll was then divided for each year by 100 and that figure was multiplied by an approved manual rate assigned to the classification codes (class codes) found in the National Council on Compensation Insurance’s Scope of Trade Manual (Scopes Manual). Class codes were assigned to the individuals listed on the penalty worksheet according to their historical duties. The grand-daughters and other female employees of Respondent were listed as clerical employees (classification code 8810), while the remaining names were listed as general carpentry workers (classification code 5645). Next, the product of the approved manual rate and the payroll for each year divided by 100 was then multiplied by 1.5, pursuant to statute, to derive the penalty for each year or part of a year. The penalties for each employee and year or part of a year were then added together to come up with a total penalty of $306,213.78. Based on the assessment of the financial records in conjunction with the documents admitted into evidence, the grand total of $306,213.78 is a true and correct penalty amount for Respondent.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Chief Financial Officer of the Department of Financial Services, Division of Workers’ Compensation, enter a final order: Finding that Respondent failed to secure the payment of workers’ compensation insurance coverage for its employees in violation of Subsections 440.10(1)(a) and 440.38(1), Florida Statutes; and Assessing a penalty against Respondent in the amount of $306,213.78, which is equal to 1.5 times the evaded premium based on the payroll records provided by Respondent and on the applicable approved manual rates and classification codes for the period extending from August 15, 2005, through August 14, 2008, as provided in Subsection 440.107(7), Florida Statutes. DONE AND ENTERED this 17th day of July, 2009, in Tallahassee, Leon County, Florida. S DANIEL M. KILBRIDE 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 17th day of July, 2009.
The Issue The issues to be determined are: whether Petitioners have standing; whether the petition of Automated HealthCare Solutions, Inc. (AHCS), was timely filed1/; and whether Respondent’s proposed rules 69L-31.005(2)(d), 69L-31.016(1), and 69L-31.016(2) are invalid exercises of delegated legislative authority on the grounds raised by Petitioners.
Findings Of Fact The Challenged Proposed Rules At issue in the proposed rule challenge proceeding are three provisions that are part of an overall rulemaking exercise by Respondent Department of Financial Services, Division of Workers’ Compensation (Respondent, Department, or Division), to amend Florida Administrative Code Chapter 69L-31. That rule chapter bears the misnomer “Utilization and Reimbursement Dispute Rule”--a misnomer because, rather than a single rule, the chapter currently contains 12 rules, with a history note of one additional rule that was repealed. The existing 12 rules in chapter 69L-31, in effect without amendment since November 2006, carry out the Department’s statutory authority to receive, review, and resolve reimbursement disputes between workers’ compensation insurance carriers (carriers) and providers of health care services, medication, and supplies to injured workers. See § 440.13(7), Fla. Stat. A “reimbursement dispute” is “any disagreement” between a provider and carrier “concerning payment for medical treatment.” § 440.13(1)(q), Fla. Stat. The proposed amendments to chapter 69L-31 include revisions to existing rules, the repeal of one existing rule, and the addition of two new rules. The challenges at issue here are directed to both paragraphs of a newly proposed rule which would become rule 69L-31.016, if adopted. One challenge is also directed to an amendment of an existing rule. Proposed rule 69L-31.016, entitled “Reimbursement Disputes Involving a Contract or Workers’ Compensation Managed Care Arrangement or Involving Compensability or Medical Necessity,” would provide as follows, if adopted: When either the health care provider or carrier asserts that a contract between them establishes the amount of reimbursement to the health care provider, or where the carrier provided health care services to the injured worker through a workers’ compensation managed care arrangement pursuant to Section 440.134, F.S., the Department will not issue a finding that there has been any improper disallowance or adjustment. Instead, the determination will only indicate the reimbursement amount for the treatment established by the appropriate reimbursement schedules, practice parameters, and protocols of treatment in Chapter 440, F.S., to assist the health care provider and carrier in their independent application of the provisions of the contract or workers’ compensation managed care arrangement to resolve the dispute. When the carrier asserts the treatment is not compensable or medically necessary and as a result does not reimburse, the determination will only address line items not related to compensability or medical necessity. If the petitioner has submitted documentation demonstrating the carrier authorized the treatment, the Department will issue a finding of improper disallowance or adjustment. Although these rules were not proposed for adoption until December 2016, Respondent has been implementing an unadopted policy that is consistent with paragraph (1) since August 2015. Respondent also has been implementing an unadopted policy that is similar to paragraph (2) since November 2015. The other object of challenge is the proposed deletion of rule 69L-31.005(2)(d), which currently provides: If the answer to question 5 on the Petition for Resolution of Reimbursement Dispute Form [asking if reimbursement is pursuant to a contract or rate agreement] is yes, [submit] a copy of all applicable provision(s) of the reimbursement contract. Although the evidence was less than clear, it does not appear that Respondent is already implementing this proposed change. The Parties Petitioners and Intervenors all are regular participants (or, in the case of FSASC, an association whose members are regular participants) in provider-carrier reimbursement disputes pursuant to section 440.13(7), Florida Statutes, before the Division. Petitioners represent the provider side of these reimbursement disputes, while Intervenors represent the carrier side of the reimbursement disputes. Petitioner Oak Hill is a private, for-profit hospital that cares for thousands of Florida patients each year, including injured workers. Petitioner Parallon provides revenue cycle services for HCA-affiliated Florida hospitals, including Oak Hill. Among other things, Parallon acts on behalf of the HCA-affiliated hospitals in workers’ compensation claim disputes. Parallon acts on the hospitals’ behalf to resolve reimbursement disputes with carriers, including: acting for the hospitals to resolve reimbursement disputes under chapter 69L-31; coordinating any resultant administrative litigation before DOAH; and taking steps necessary to collect amounts owed following receipt of the Division’s determination. Parallon is expressly authorized to participate in reimbursement disputes as a “petitioner,” as defined in proposed rule 69L-31.003, on behalf of Oak Hill and other HCA-affiliated hospitals. Oak Hill and Parallon are regulated by, and must comply, with the requirements of chapter 69L-31 (which will include the proposed rules, if adopted) in reimbursement disputes with carriers. Petitioner FSASC is the primary organization of ambulatory surgical centers (ASCs) in Florida. Among the purposes of the FSASC is to advance the ASC industry, and its member centers’ interests, through governmental advocacy. To that extent, the FSASC maintains close contact with state agencies to monitor and provide input into legislation and regulations that govern or affect ASC operations. In furtherance of this role, the FSASC has been an active participant in all phases of Respondent’s rulemaking efforts with regard to the proposed rules. Another purpose of the FSASC is to promote, assist, and enhance its members’ ability to provide ambulatory surgical services to injured workers efficiently and cost effectively throughout Florida and, in so doing, promote and protect the interests of the public, patients, and FSASC members. FSASC’s participation in this proceeding is consistent with its purposes, and the relief sought--invalidation of the challenged proposed rules (with possible attorney’s fees incurred in connection with this proceeding)--is appropriate for an organization to pursue in a representative capacity. A substantial number of FSASC’s members provide health care services to patients who are injured workers in Florida and who receive workers’ compensation benefits in accordance with chapter 440. These health care services are reimbursable by the patients’ employers’ carriers. FSASC’s members are participants in reimbursement disputes with carriers and are regulated by, and must comply with, the requirements of chapter 69L-31 (which will include the proposed rules, if adopted). Petitioner AHCS is a technology and prescription medication claims processing company. Many physicians who dispense medication from their offices to injured workers assign their rights, title, and interest to the prescription medication claims to AHCS. Prescription Partners, LLC, is wholly-owned and operated by AHCS and is the billing entity of AHCS. In some instances, AHCS contracts with physicians, while Prescription Partners, LLC, pursues the billing and reimbursement disputes on behalf of the physicians under the contract of assignment. AHCS is authorized to participate in reimbursement disputes as a “petitioner,” as defined in proposed rule 69L-31.003. As a participant in reimbursement disputes, AHCS is regulated by, and must comply with, the requirements of chapter 69L-31 (which will include the proposed rules, if adopted). Respondent is the state agency tasked with administering chapter 440 in a way that promotes “an efficient and self-executing” workers’ compensation system “which is not an economic or administrative burden” and ensures “a prompt and cost-effective delivery of payments.” § 440.015, Fla. Stat. The Division’s medical services section administers the provider-carrier reimbursement dispute process and issues the required determinations pursuant to section 440.13(7). The determinations are made in accordance with chapter 440 and the applicable reimbursement manuals, which are codified as rules. Intervenor Zenith is a foreign, for-profit corporation licensed by the Department to provide workers’ compensation insurance to employers throughout Florida. As a carrier, and in the normal course of its workers’ compensation claim-handling responsibilities, Zenith regularly authorizes, adjusts, and pays for medical benefits for injured workers for causally-related and medically necessary treatment, including treatment rendered by physicians, hospitals, ASCs, pharmacies and prescription drug vendors, physical therapists, and other licensed health care providers, such as Petitioners. As a carrier, Zenith is regulated by chapter 440 and the related rules of the Division, including chapter 69L-31 (which will include the proposed rules, if adopted). All parties stipulated that the challenged proposed rules directly and immediately affect the rights and obligations of Zenith, and directly impact the financial obligations of Zenith in medical bill payment, as well as in any statutory reimbursement dispute between a health care provider and Zenith under section 440.13(7). The proposed rules dictate which processes will govern reimbursement disputes involving Zenith, and whether Zenith may rely fully on the provisions of reimbursement contracts. Intervenors, the Summit Companies, are Florida- licensed monoline workers’ compensation insurance companies that are managed by a managing general agent, Summit Consulting LLC, and regulated by the Department. Pursuant to their workers’ compensation insurance policies, the Summit Companies pay workers’ compensation claims for injured workers, including payment of medical benefits for care provided to injured workers by health care providers who have filed petitions for reimbursement dispute resolution under chapter 69L-31. Also, the Summit Companies have a workers’ compensation managed care arrangement authorized by the Agency for Health Care Administration (AHCA) pursuant to section 440.134. Their delegated managed care entity, Heritage Summit HealthCare, LLC, has its own proprietary PPO network. The Summit Companies, either corporately or through their delegated managed care entity, regularly authorize, adjust, and pay medical benefits for injured workers for causally- related and medically necessary treatment, including payment for treatment rendered by physicians, hospitals, ASCs, pharmacies and prescription drug vendors, physical therapists, and other licensed health care providers, such as Petitioners. All parties stipulated that the challenged proposed rules directly and immediately affect the rights and obligations of the Summit Companies, and directly impact their financial obligations in medical bill payment, as well as in reimbursement disputes under section 440.13(7) and chapter 69L-31. The proposed rules dictate which processes will govern reimbursement disputes involving the Summit Companies, including whether the Summit Companies may rely on their managed care arrangements and contracts regulated under the authority of AHCA. To the same extent that all Intervenors are directly and immediately impacted by the challenged proposed rules, Petitioners Oak Hill, Parallon, and AHCS, as well as the members of Petitioner FSASC, are also directly and immediately impacted by the proposed challenged rules, which govern reimbursement disputes under section 440.13(7). Just as the challenged proposed rules directly and immediately impact Intervenors’ financial obligations in medical bill payment to providers, such as Petitioners, the challenged proposed rules also directly and immediately impact Petitioners’ financial rights in having medical bills paid by carriers, such as Intervenors. The challenged proposed rules dictate what processes will be available in reimbursement disputes, not only for Intervenors, but for Petitioners. The challenged proposed rules dictate when the cost-efficient reimbursement dispute process will be, and will not be, fully available to Petitioners and FSASC’s members, and when the prompt delivery of payment envisioned as the end result of the reimbursement dispute process will, or will not be, available to them. The parties also stipulated that the Division’s challenged proposed rules immediately and substantially affect Intervenors because prior authorization, the managed care defense, provider contract disputes, and medical necessity all have been raised as issues in prior chapter 69L-31 provider disputes with these carriers. It stands to reason that the providers who are on the other side of these disputes with carriers are just as immediately and substantially impacted by the proposed rules in this regard. Reason aside, Respondent readily stipulated to the direct, immediate, and substantial impacts to Intervenors, but steadfastly disputed that Petitioners (or the members of Petitioner FSASC) must necessarily be impacted to the same degree. Yet they are, after all, the other side of the reimbursement dispute coin. It is difficult to understand how one side of a dispute could be directly, immediately, and substantially impacted by proposed rules regulating the dispute process, while the other side of the dispute would not be equally impacted. At hearing, the undersigned raised this seeming incongruity, and suggested that Respondent would need to explain its different positions with regard to the factual predicates for standing for Intervenors and for Petitioners, besides the obvious difference that Intervenors were supporting Respondent’s proposed rules while Petitioners were challenging them. Respondent offered no explanation for its incongruous positions, either at hearing or in its PFO. Respondent’s agreement that Intervenors are immediately, directly, and substantially affected by the challenged proposed rules serves as an admission that Petitioners (or Petitioner FSASC’s members) are also immediately, directly, and substantially affected by the challenged proposed rules. Specific examples were offered in evidence of the Division’s refusal to resolve reimbursement disputes because contracts and managed care arrangements were involved, or because payment was adjusted or disallowed due to compensability or medical necessity issues. FSASC provided a concrete example of the application of the unadopted policies to one of its members, resulting in immediate injury when the Division refused to resolve a reimbursement dispute because a contract was involved. Petitioner Oak Hill identified a single reimbursement dispute over a $49,000 underpayment that remained unresolved because of the Division’s refusal to resolve the dispute because either a contract or managed care arrangement was involved. Petitioner Parallon’s income is based, in part, on paid claims by carriers, so it loses income when these reimbursement disputes are not resolved and the carriers are not ordered to promptly pay an amount. Petitioner AHCS offered examples of reimbursement disputes that the Division refused to resolve because the carrier disallowed or adjusted payment due to compensability or medical necessity issues. AHCS also noted that the incidence of carrier disallowances and adjustments of payment for compensability and medical necessity reasons has increased since the Division stopped making determinations to resolve reimbursement disputes on those issues. At the very least, Petitioners have already been harmed in these ways: by the delay in resolving reimbursement disputes, which includes lost cash flow and the time value of the money that carriers are not ordered to pay; by the increased personnel costs necessary to try some other way to pursue these claims; and by the prospect of court filing fees and attorney’s fees to try to litigate their right to payment when deprived of the statutory mechanism for cost-efficient resolution of reimbursement disputes. Conceivably, providers will not have recourse in court to contest disallowance or adjustment of payment, given Respondent’s exclusive jurisdiction to decide any matters concerning reimbursement. § 440.13(11)(c), Fla. Stat. Meanwhile, carriers immediately benefit from delay, by not being ordered to promptly pay claims. In an annual report addressing reimbursement dispute determinations for the fiscal year from July 1, 2015, through June 30, 2016, the Division reported that in 85.5 percent of its reimbursement dispute determinations, it determined that the health care providers had been underpaid. Overview of Workers’ Compensation Reimbursement Dispute Process Under Florida’s statutory workers’ compensation system, injured workers report their injury to the employer and/or the carrier. With an exception for emergency care, a health care provider must receive authorization for treatment from the carrier prior to providing treatment. After providing treatment, health care providers, including hospitals and physicians, must submit their bills to employers’ carriers; they are prohibited from billing the injured employees who received the treatment. These bills typically have multiple line items, such as for pharmaceutical prescriptions, diagnostic tests, and other services rendered. Carriers are required to review all bills submitted by health care providers to identify overutilization and billing errors, and to determine whether the providers have complied with practice parameters and protocols of treatment established in accordance with chapter 440. § 440.13(6), Fla. Stat. Mr. Sabolic explained that the “protocols of treatment” are the standards of care in section 440.13(15). These include criteria for “[r]easonable necessary medical care of injured employees.” § 440.13(15)(c), Fla. Stat. The carrier review of provider bills must culminate in a determination of whether the bill reflects overutilization of medical services, whether there are billing errors, and whether the bill reflects any violations of the practice parameters and protocols of treatment (standards of care). If a carrier finds any of these to be the case, the carrier is required by statute to disallow or adjust payment accordingly. The carrier is expressly authorized to make this determination “without order of a judge of compensation claims or the department,” if the carrier makes its determination in compliance with section 440.13 and Department rules. § 440.13(6), Fla. Stat. The Department’s rules require carriers to communicate to providers the carriers’ decisions under section 440.13(6) to pay or to deny, disallow, or adjust payment, with reasons for their decisions, in an “explanation of bill review” (EOBR).5/ If a carrier contests or disputes certain line items on a medical bill, the EOBR must identify the line items disputed and the reasons for the dispute, using EOBR codes and code descriptor. The EOBR code list, with 98 codes and descriptors, is set forth in Florida Administrative Code Rule 69L-7.740(13)(b). All but two of the codes describe reasons for disallowing or adjusting payment. EOBR Code 10 means payment denial of the entire bill, when the injury or illness is not compensable. EOBR Code 11 is used for partial denial of payment, where, although there is a compensable injury or illness, a diagnosis or procedure code for a particular line item service is determined by the carrier to be unrelated to the compensable condition. The EOBR coding rule provides that up to three codes can be assigned to each line item to “describe the basis for the claim administrator’s reimbursement decision in descending order of importance[.]” In addition, there is a “free-form” box in which additional notes of explanation may be given. The carrier’s determination to disallow or adjust payment of a health care provider’s bill, made pursuant to section 440.13(6), and explained to the health care provider by means of an EOBR, is the action that sets up a potential reimbursement dispute pursuant to section 440.13(7). “Any health care provider who elects to contest the disallowance or adjustment of payment by a carrier under subsection (6) must, within 45 days after receipt of notice of disallowance or adjustment of payment, petition the department to resolve the dispute.” § 440.13(7)(a), Fla. Stat. (emphasis added). The petition must be accompanied by “all documents and records that support the allegations in the petition.” Id. The carrier whose EOBR is disputed “must” then submit to the Department within 30 days of receipt of the petition all documentation substantiating the carrier’s disallowance or adjustment. § 440.13(7)(b), Fla. Stat. Section 440.13(7)(c) and (d) provide for the culmination of the reimbursement dispute process, as follows: Within 120 days after receipt of all documentation, the department must provide to the petitioner, the carrier, and the affected parties a written determination of whether the carrier properly adjusted or disallowed payment. The department must be guided by standards and policies set forth in this chapter, including all applicable reimbursement schedules, practice parameters, and protocols of treatment, in rendering its determination. If the department finds an improper disallowance or improper adjustment of payment by an insurer, the insurer shall reimburse the health care provider, facility, insurer, or employer within 30 days, subject to the penalties provided in this subsection. (emphasis added). Section 440.13(7)(e) provides that the Department “shall adopt rules to carry out this subsection,” i.e., the reimbursement dispute process. As noted, the Department did so in 2006, in promulgating chapter 69L-31. The rules were transferred from AHCA, which was the state agency vested with the statutory authority to determine reimbursement disputes between providers and carriers until the Department took over those functions in 2005.6/ Evolution of the Policies in the Challenged Proposed Rules Reimbursement Pursuant to a Provider-Carrier Contract or Managed Care Arrangement For approximately a decade, the Division accepted petitions to resolve reimbursement disputes when the reimbursement amount was determined by a contract between the provider and carrier. The Division resolved these disputes by issuing written determinations of whether the carrier properly adjusted or disallowed payment, and if the Division determined the carrier improperly adjusted or disallowed payment, the Division would specify the contract reimbursement amount that the carrier was required to pay within 30 days. That is because section 440.13(12) expressly recognizes that reimbursement to providers shall be either an amount set as the maximum reimbursement allowance (MRA) in fee schedules (or other amount set by a statutory formula), or the agreed-upon contract price.7/ Health care network reimbursement contracts typically do not (but may) include prices stated in dollar amounts. Instead, they frequently establish the price for reimbursement as a percentage of the MRA, or a percentage of allowable charges for services rendered. The Division’s reimbursement manuals in effect today, adopted as rules, recognize in a variety of contexts that the amount a provider is to be reimbursed is the contract amount, when there is a contract between the provider and carrier. The Workers’ Compensation Health Care Provider Reimbursement Manual currently in effect provides this introductory statement: Reimbursement will be made to a Florida health care provider after applying the appropriate reimbursement policies contained in this Manual. A carrier will reimburse a health care provider either the MRA in the appropriate reimbursement schedule or a mutually agreed upon contract price. (emphasis added). Florida Workers’ Compensation Health Care Provider Reimbursement Manual (2016 edition) at 15, adopted and incorporated by reference in rule 69L-7.020, effective July 1, 2017. The manual has dozens of references to reimbursing at the contract price, such as this example for reimbursement for multiple surgeries: Reimbursement for the primary surgical procedure will be the MRA listed in Chapter 3, Part B of this Manual or the agreed upon contract price. Reimbursement for additional surgical procedure(s) will be fifty percent (50%) of the listed MRA in Chapter 3, Part B of this Manual or the agreed upon contract price. * * * Note: If there is an agreed upon contract between the health care provider and the carrier, the contract establishes the reimbursement at a specified contract price. (emphasis added). Id. at 63. Similarly, the ASC reimbursement manual in effect has multiple references to reimbursement at the contract price or contract amount, such as this example for surgical services: For each billed CPT® code listed in Chapter 6 of this Manual, the ASC shall be reimbursed either: The MRA if listed in Chapter 6 of this Manual; or The agreed upon contract price. For each billed CPT® code not listed in Chapter 6 of this Manual, the ASC shall be reimbursed: Sixty percent (60%) of the ASC’s billed charge; or The agreed upon contract price. * * * Note: If there is an agreed upon contract between the ASC and the carrier, the contract establishes the reimbursement at the specified contract price. (emphasis added). Florida Workers’ Compensation Ambulatory Surgical Center Reimbursement Manual (2015 edition) at 17, incorporated by reference in rule 69L-7.020, effective January 1, 2016. See also ASC Manual App. A at 1 (surgical implant MRA is “50% above acquisition cost; amount certified or contract amount.”). The reimbursement manual for hospitals has similar references, including this directive for inpatient services: Except as otherwise provided in this Manual, charges for hospital inpatient services shall be reimbursed according to the Per Diem Fee Schedule provided in this Chapter or according to a mutually agreed upon contract reimbursement agreement between the hospital and the insurer. (emphasis added). Florida Workers’ Compensation Reimbursement Manual for Hospitals (2014 edition) at 15, adopted and incorporated by reference in rule 69L-7.501, effective January 1, 2015. In 2013, the Division submitted a legislative proposal for the Department to consider including in its proposed bill. The Division requested an amendment to section 440.13 to “[r]emove contracted reimbursement from [reimbursement dispute] resolution authority of [the] department.” Jt. Ex. 51 at 1. That proposal did not lead to a statutory change. An example of how the Division resolved reimbursement disputes involving contracts before its recent policy is shown in Exhibit FS1, a “Resolution of Reimbursement Dispute Determination.” According to the document, at issue was a reimbursement dispute regarding a bill for one service, for which the carrier issued an EOBR disallowing payment. The Division’s finding regarding reimbursement was that the contract at issue “provides for reimbursement at the lesser of 90% of billed charges or 90% of the fee schedule.” The Division calculated the contract price and determined that the “total correct reimbursement amount” per the contract was $2,334.60. The determination, issued June 30, 2015, was: The Department of Financial Services, Division of Workers’ Compensation has determined that the petitioner substantiated entitlement to additional reimbursement of disputed services based upon the documentation in evidence and in accordance with the provisions of the Florida Workers’ Compensation Reimbursement Manual [for ASCs], 2011 Edition, Chapter 3, page 26. The respondent shall remit the petitioner the amount of $2,334.60 and provide the Division proof of reimbursement to the petitioner within thirty (30) days of receipt of this notice[.] Ex. FS1 at 2. The evolution was a little different for reimbursement disputes involving workers’ compensation managed care arrangements. Rule 69L-31.015, adopted by the Department in 2006, provided as follows: A health care provider may not elect to contest under Section 440.13(7), F.S., disallowance or adjustment of payment by a carrier for services rendered pursuant to a managed care arrangement. Mr. Sabolic explained that while this rule was in effect, the Division would dismiss petitions that disclosed managed care arrangements. But the rule was repealed in response to a challenge to the rule’s validity. As Mr. Sabolic recalled it, the challenger was Parallon or an individual HCA-affiliated hospital. According to Mr. Sabolic, the Division agreed that it did not have the authority to simply dismiss petitions. The rule history note states that the rule repeal was effective May 22, 2014.8/ For the 15-month period from late May 2014 through late August 2015, the Division accepted reimbursement dispute petitions and resolved the reimbursement disputes, even though a workers’ compensation managed care arrangement was involved, just as it had been doing for years for reimbursement disputes involving contracts. On or about August 24, 2015, the Division changed its policy on issuing determinations when a contract (including a managed care arrangement) was alleged in the petition. In all determinations of reimbursement disputes issued after August 24, 2015, if a contract or managed care arrangement was alleged, the Division stopped making findings regarding the contracted-for reimbursement amount. Instead, the Division started reciting the fee schedule/MRA amount or applicable statutory formula amount, making no determination regarding whether the carrier properly adjusted or disallowed payment, or, if an improper adjustment or disallowance, how much the reimbursement should have been under the contract and how much the carrier was required to reimburse the provider within 30 days. The Division changed the name of the form it used from “Resolution of Reimbursement Dispute Determination” to just “Reimbursement Dispute Determination,” signaling that the Division would no longer be resolving reimbursement disputes involving contracts. Instead, the following language appeared in each such determination: The amount listed above does not apply to any contractual arrangement. If a contractual arrangement exists between the parties, reimbursement should be made pursuant to such contractual arrangement. Exhibit FS3 is an example showing a Division “determination” applying its new policy to a reimbursement dispute petition filed by an ASC member of FSASC. Part IV of the form, “Reimbursement Dispute Policies and Guidelines,” reflects (as did prior determinations) that the reimbursement manual for ASCs, adopted by rule, “sets the policies and reimbursement amounts for medical bills.” As previously noted, the reimbursement manuals set reimbursement amounts at either the MRA/statutory formula or the agreed-upon contract price, consistent with the policy in section 440.13(12)(a). Nonetheless, the Division added a note to the end of part IV: NOTE: This reimbursement determination is limited in scope to standards and policies set forth in chapter 440, Florida Statutes, including all applicable reimbursement schedules, practice parameters, and protocols of treatment. It does not interpret, apply or otherwise take into account any contractual arrangement between the parties governing reimbursement for services provided by health care providers, including any workers’ compensation managed care arrangement under section 440.134, Florida Statutes. Ex. FS3 at 2. Accordingly, even though the determination form reflects that the ASC petitioner met its filing requirements for a reimbursement dispute over a bill for services in the amount of $5,188.00, none of which was paid according to the EOBR, and even though the carrier failed to file a response to the petition, the Division did not make a determination that the carrier improperly disallowed payment or that the petitioner had substantiated entitlement to additional reimbursement in the amount of the agreed-upon contract price, as it had in previous determinations. Instead, the Division set forth the “correct reimbursement” amount that would apply if the MRA applied, while noting that amount would not apply if there was a contractual arrangement providing a different amount. The carrier was not ordered to remit any amount within 30 days. Reimbursement Disputes Involving Issues of Compensability or Medical Necessity Prior to November 2015, the Division resolved reimbursement disputes by determining the issues as framed by the carrier’s actions under section 440.13(6), to disallow or adjust payment of a bill or specific line items in a bill for reasons (codes) in the EOBR, which were contested by the provider in a timely-filed petition under section 440.13(7)(a). The EOBR code list contains one code (code 10) for denial of payment of an entire claim based on non-compensability of an injury or illness. One other code (code 11) is for partial denial of payment, where there is a compensable injury, but a specific line item indicates treatment unrelated to the compensable injury. Five additional codes (codes 21 through 26) apply to disallowed payments for various medical necessity reasons. Fla. Admin. Code R. 69L-7.740(13)(b). Prior to November 2015, the Division resolved reimbursement disputes when the provider timely petitioned to contest the disallowance or adjustment of payment by a carrier, as set forth in the EOBR, including when the EOBR cited compensability and/or medical necessity code(s) as the reason(s) for disallowing or adjusting payment of a provider’s bill. On or about November 2, 2015, the Division changed its policy and no longer addressed in its reimbursement dispute determinations whether a carrier properly or improperly disallowed or adjusted payment for reasons of medical necessity or compensability. Exhibit AH6 is an example of a Division written determination that makes no determination of whether a carrier properly or improperly disallowed payment of a line item based on a medical necessity issue (EOBR Code 24). Instead, the “determination” included this note: Note: The Department will not address any disallowance or adjustment of payment where the basis for the disallowance or adjustment or payment by the carrier involves denial of compensability of the claim or assertion that the specific services provided are not medically necessary. Ex. AH6 at 2. This note has been included in all determinations issued after November 2015, where payment was disallowed or adjusted based on medical necessity or compensability. Rulemaking Process The Division began rule development to incorporate its policy changes in amendments to chapter 69L-31. A Notice of Development of Proposed Rules was published on December 16, 2015. The notice set forth the preliminary text of proposed amendments, including new proposed rule 69L-31.016, entitled “Reimbursement Disputes Involving a Contract or Workers’ Compensation Managed Care Arrangement.” The notice stated that the purpose and effect of proposed rule 69L-31.016 was “to limit the scope of dispute resolutions to compliance with standards under Chapter 440, F.S. and exclude issues of contract interpretation.” The exclusion of disallowed or adjusted payments based on issues of compensability and medical necessity, not mentioned in the statement of purpose and effect, was initially put in rule 69L-31.005, in a paragraph stating that the Department will only address specific EOBR line items where the carrier adjusted or disallowed payment and are disputed by the provider, but then stating that the Department will not address specific EOBR adjustment or disallowance items involving compensability or medical necessity, even if disputed. A rule development workshop was held on January 12, 2016. The Department published a second Notice of Development of Proposed Rules, revising the proposed changes to chapter 69L-31, including both the contract/managed care exclusion and the compensability/medical necessity exclusion. On June 10, 2016, the Division held a second rule development workshop addressing the proposed rule revisions. On December 7, 2016, the Division published a Notice of Proposed Rules, formally initiating rulemaking to revise chapter 69L-31. The notice set forth a revised proposed rule 69L-31.016. Its new title was “Reimbursement Disputes Involving a Contract or Workers’ Compensation Managed Care Arrangement or Involving Compensability or Medical Necessity,” joining in one rule all of the new exceptions, for which the Division would not be making determinations of whether carriers properly or improperly adjusted or disallowed payments. As proposed, the rule provided: When either the health care provider or carrier asserts that a contract between them establishes the amount of reimbursement to the health care provider, or where the carrier provided health care services to the injured worker through a workers’ compensation managed care arrangement pursuant to Section 440.134, F.S., the Department will not issue a finding that there has been any improper disallowance or adjustment. Instead, the determination will only indicate the reimbursement amount for the treatment established by the appropriate reimbursement schedules, practice parameters, and protocols of treatment under Chapter 440, F.S., to assist the health care provider and carrier in their independent application of the provisions of the contract or workers’ compensation managed care arrangement to resolve the dispute. When the carrier asserts the treatment is not compensable or medically necessary and as a result does not reimburse, the Department will not issue a finding that there has been any improper disallowance or adjustment. Instead, the determination will only indicate the reimbursement amount for the treatment established by the appropriate reimbursement schedules, practice parameters, and protocols of treatment under Chapter 440, F.S., should compensability or medical necessity be later established. The stated purpose of proposed rule 69L-31.016 was to specify “that the scope of Department determinations involving reimbursement disputes is limited to findings relating to reimbursement schedules, practice parameters, and protocols of treatment, and [to clarify] that the Department will issue no findings regarding an improper disallowance or adjustment in reimbursement involving managed care contracts or when the carrier asserts that medical treatment was either not compensable or not medically necessary[.]” Jt. Ex. 3. As published in December 2016, proposed rule 69L- 31.016 cited sections 440.13(7)(e) and 440.591 as the “rulemaking authority,” and sections 440.13(7) and (12)(a) and 440.134(15) as the “laws implemented.” The Division’s notice stated that, based on its determinations as to adverse impact and regulatory costs: “A SERC has not been prepared by the Agency.” Jt. Ex. 3. By letter dated December 28, 2016, Parallon proposed a LCRA to the proposed rule 69L-31.016(1) (and to other proposed rules not at issue in this proceeding). The LCRA explained that Parallon was already experiencing increased costs because of the Division’s unadopted policy, and Parallon proposed that the most appropriate lower cost alternative to accomplish the statutory objectives was not to adopt proposed rule 69L-31.016(1). On January 5, 2017, the Division held a public hearing on the proposed rules. Petitioners (through counsel) offered comments in opposition to the proposed rules. Parallon’s counsel also submitted the LCRA letter into the record. On May 2, 2017, the Division published a Notice of Correction. The notice stated that, contrary to the statement in the Notice of Proposed Rules, SERCs had been prepared for the proposed rules, and that the SERC for proposed rule 69L-31.016 now had been revised to address the LCRA. The impression given by the various documents identified as a SERC or revised SERC, half of which are entitled “Department of Financial Services Analysis to Determine if a [SERC] is Required,” all of which are similar or identical in content, and none of which bear a date, is that, prior to the LCRA, Respondent did not prepare a SERC for proposed rule 69L- 31.016; it prepared a document by which it determined that no SERC was required. After the LCRA was filed, Respondent added a reference to the LCRA, but otherwise did not change the content of its non-SERC. In the Notice of Correction, the Division stated: “The [SERC] for each of the above-referenced proposed rules is available by accessing the Department’s website at http://www.myfloridacfo.com/Division/WC/noticesRules.htm.” The document titled “Department of Financial Services Analysis to Determine if Statement of Estimated Regulatory Costs Is Required,” referred to by the Division as the SERC, was not available on the DFS website on May 2, 2017, as the Notice of Correction indicated. Instead, it was available at the referenced website location on or after May 3, 2017. Upon request by counsel for Parallon on May 3, 2017, the document referred to as a SERC was also provided to Parallon. Mr. Sabolic testified that the document referred to as the SERC was actually available at the Division on May 2, 2017, and would have been made available to someone if it was requested on that day. However, the noticed means by which the document would be “made available” was at a specific website location that was not functional until May 3, 2017. The so-called SERC document for proposed rule 69L- 31.016 suffers from several obvious deficiencies. As to the Division’s “economic analysis,” the document states: “N/A.” That is because the Division did no economic analysis.9/ In response to two separate prompts, for the Division to set forth a “good faith estimate of the number of individuals and entities likely to be required to comply with the rule,” and separately, to give a “general description of the types of individuals likely to be affected by the rule,” the Division gave the identical response: “This Rule changes how the Medical Services Section review Petitions for Resolution of Reimbursement Disputes. Only the Medical Services Section will be required to comply.” In addition, the document indicates (with no explanation or analysis) that there will be no transactional costs to persons required to comply with the new rule, and no adverse impact at all on small businesses. In contrast to the so-called SERC document indicating that only the medical services section will be required to comply with, or be impacted by, the proposed rule, in the Division’s 2013 legislative proposal seeking to remove its statutory authority to determine reimbursement disputes involving contracts, the Division was able to identify persons who would be affected by the proposal, acknowledging as follows: “Workers’ compensation carriers, including self- insurers (DFS Div. of Risk Mgmt), third party administrators, and health care providers, including facilities, are affected.” And, of course, the Division was well aware by May 2017 of the variety of providers and carriers expressing their interests and concerns during the rule development that had been ongoing for 17 months by then. To say that the Division gave the SERC task short shrift would be generous. The Division did not take this task seriously. The so-called SERC document also identified the Parallon LCRA. In response to the requirement to describe the LCRA and provide either a statement adopting it or a statement “of the reasons for rejecting the alternative in favor of the proposed rule,” the Division stated: Parallon’s lower cost regulatory alternative consisted of a cost-based argument against the adoption of the proposed rule on the basis that the existing rule provides a lower cost alternative. The Division rejected the regulatory alternative and intends to move forward with adoption on the proposed rule, but will revise the proposed rule to read as follows[.] Jt. Ex. 12, at bates-stamp p. 48. The reference to a revision to the proposed rule does not belong in the statement of reasons for rejecting the LCRA. Its placement there was misleading, as if the revision to the proposed rule helped to explain why the Division rejected the LCRA. But no revision was made to the rule to which the LCRA was directed--proposed rule 69L-31.016(1). The revision was to proposed rule 69L- 31.016(2), not addressed by the LCRA. At hearing, Mr. Sabolic attempted to provide the statement of reasons for rejecting the LCRA, missing in the so- called SERC document. He said that the cost-based argument was considered speculative and lacked data (but that explanation was not in the so-called SERC document). Although he thought that the SERC document stated that the LCRA was rejected because it was based on a “faulty” cost-based argument, the word “faulty” was not in the SERC. On its face, the SERC offers no reason why the “cost-based argument” was rejected— just that it was rejected. The amendment to proposed rule 69L-31.016(2) mentioned in the SERC document was also published on May 2, 2017, in a Notice of Change. The change was shown as follows: When the carrier asserts the treatment is not compensable or medically necessary and as a result does not reimburse, the Department will not issue a finding that there has been any improper disallowance or adjustment. Instead, the determination will only address line items not related to indicate the reimbursement amount for the treatment established by the appropriate reimbursement schedules, practice parameters, and protocols of treatment under Chapter 440, F.S., should compensability or medical necessity be later established. If the petitioner has submitted documentation demonstrating the carrier authorized the treatment, the Department will issue a finding of improper disallowance or adjustment. The Notice of Change did not change either of the other challenged provisions—proposed rule 69L-31.016(1) and the proposed deletion of rule 69L-31.005(2)(d). The Notice of Change deleted the prior citation to section 440.13(12)(a) as one of the laws implemented by proposed rule 69L-31.016, leaving only sections 440.13(7) and 440.134(15) as the laws implemented. Division’s Justifications for the Challenged Proposed Rules Mr. Sabolic was Respondent’s hearing representative and sole witness to explain and support the challenged rules. Mr. Sabolic testified that when a contract dictates the reimbursement amount, the Division does not believe it has statutory authority to interpret or enforce contract terms. Yet he acknowledged that the Division’s reimbursement determinations were required to be based on policies set forth in chapter 440, and that the Division was required to apply its reimbursement manuals that are promulgated as rules. Both chapter 440 and the reimbursement manuals expressly require reimbursement at the agreed-upon contract price, as detailed above. The Division recognized this for a decade, during which it applied chapter 440 and its reimbursement manuals to determine the agreed-upon contract price, resolve reimbursement disputes, and order carriers to pay the amount required by their contracts. The Division’s rationale stands in stark contrast to the Division’s 2013 request for a legislative amendment to remove its statutory authority to determine reimbursement disputes when reimbursement is dictated by contracts. The Division’s request constitutes an admission that it believes it has the statutory authority it now says it lacks. Apart from statutory authority, Mr. Sabolic indicated that in the decade during which the Division did resolve reimbursement disputes involving contracts, it was sometimes difficult to determine whether there was a contract in effect between the parties. There was a variety of contracts, and sometimes they were complex. With regard to managed care arrangements, Mr. Sabolic said that, similar to contracts, the Division does not think it has the power to interpret or enforce managed care arrangements, because that power lies within AHCA under section 440.134. He said that section 440.134(15) was cited as a law implemented by proposed rule 69L-31.016 because the statute addresses grievance or complaint procedures under a managed care arrangement. Intervenors Summit Companies attempted to prove that providers are required to resolve reimbursement disputes involving workers’ compensation managed care arrangements by using the grievance process described in section 440.134(15). The evidence failed to support that contention. The evidence showed that the grievance form used by the Summit Companies’ managed care arrangement, approved by AHCA, describes the grievance process as encompassing “dissatisfaction with medical care issues provided by or on behalf of a workers’ compensation managed care arrangement.” Tr. 323. As confirmed by the definitions of “complaint” and “grievance” in the workers’ compensation managed care law, the grievance process is used to resolve an injured worker’s dissatisfaction with an insurer’s managed care arrangement, including a refusal to provide medical care or the care provided. See § 440.134(1)(b) and (d), Fla. Stat. Although under AHCA’s rules and the Summit Companies’ form, providers may initiate the grievance process, they would be doing so essentially on behalf of the injured worker or in tandem with the injured worker to resolve the injured worker’s dissatisfaction with medical care issues. When the issue is the insurer’s refusal to provide medical care, the grievance process is an administrative remedy for the injured worker that has to be exhausted before an injured worker can file a petition for benefits pursuant to section 440.192. Not surprisingly, providers have not attempted to file grievances to raise reimbursement disputes with insurers, as nothing in section 440.134(15), the rules, or the Summit Companies’ approved form contemplate use of the process for that purpose, much less mandate it. Strangely, Mr. Sabolic attempted to justify the proposed rule’s carve-outs from the reimbursement dispute process by reference to section 440.13(11)(c), which gives the Department “exclusive jurisdiction to decide any matters concerning reimbursement[.]” As he put it: I think that the statute indicates we can decide any matter relating to reimbursement under 440.13(11)(c), and that’s how we’re deciding to deal with those situations when a managed care arrangement or a contract is involved. That’s our decision. Our decision is that that determination’s going to reflect the amount that is in the applicable reimbursement manual for that service date. Tr. 232. It must be noted that section 440.13(11)(c) was not cited as one of the laws implemented by the proposed rules, even if the premise could be accepted that a grant of exclusive jurisdiction to decide any matter concerning reimbursement includes authority to decide never to decide certain matters concerning reimbursement. Mr. Sabolic admitted that under proposed rule 69L-31.016(1), the Division does not and will not issue a written determination of whether the carrier properly adjusted or disallowed payment when a contract or managed care arrangement is involved. Mr. Sabolic testified that the proposed deletion of rule 69L-31.005(2)(d) (requiring a copy of the contract or managed care arrangement addressing reimbursement) is tied to proposed rule 69L-31.016(1) that gets the Division out of the business of looking at contracts. The Division will not require any proof that a contract or managed care arrangement governs reimbursement so as to trigger the no-decision decision. Instead, if either a provider indicates in its petition or a carrier indicates in its response that reimbursement is pursuant to a contract or managed care arrangement, that ends the inquiry, and the Division will not determine whether the carrier properly adjusted or disallowed payment. Mr. Sabolic said that he was not concerned with the potential for abuse, because in the decade when the Division was in the business of interpreting and applying reimbursement provisions in contracts, it was very rare that the parties disagreed on whether a contract was in effect between them that governed reimbursement. Mr. Sabolic offered no justification for carving out from reimbursement disputes carrier adjustments or disallowances of payment based on compensability or medical necessity issues. He just reported the Division’s decision that if a carrier disallows or adjusts payment for line items on bills and cites reasons (EOBR codes) involving compensability or medical necessity, “we will indicate that we’re not going to issue a determination on those line items and [we will] only issue a determination on those line items which don’t reflect the carrier’s disallowance related to compensability or medical necessity.” But if the petitioner gives “proof that the carrier authorized treatment,” the Division “will proceed with rendering a determination related to those line items.” Tr. 197. The Division’s determinations under proposed rules 69L-31.016(1) (when a contract or managed care arrangement is alleged) and 69L-31.016(2) (when payment is disallowed or adjusted for compensability or medical necessity reasons) are characterized by the Division as “neutral determinations” in which there is no winner and no loser. A more fitting characterization is “non-determination.”
The Issue The issues in this matter are whether Countrywide Siding and Windows, Inc., failed to secure workers compensation that meets the requirements of Chapter 440, Florida Statutes, and, if so was correctly assessed a penalty for violating, the workers’ compensation laws of Florida.
Findings Of Fact Petitioner is the state agency responsible for enforcing the statutory requirement that employers secure workers’ compensation for the benefit of their employees. § 440.107, Fla. Stat. (2009). Respondent is a corporation domiciled in Florida and engaged in the construction industry. On February 13, 2009, Petitioner’s investigator, Carl Woodall, stopped to spot check a house in the Cabrille Lane area of Panama City, Florida, where he saw workers installing siding. Petitioner’s investigator is the only employee for Petitioner who investigated and developed the substantive evidence in this case. Other employees, who have no direct knowledge of the underlying facts, calculated the amounts of the proposed penalties. Mr. Woodall inquired of the workers and ascertained that they worked for Respondent. The investigator then contacted the Respondent to determine whether Respondent had secured or obtained workers’ compensation insurance under Florida’s workers’ compensation law. Respondent’s representative indicated that it maintained workers’ compensation insurance through Employee Leasing Service (ELS), an employee-leasing company. There is no dispute that in February 2009, Respondent leased its workers from ELS and that under the lease agreement, ELS provided workers’ compensation coverage to Respondent and its leased workers. Other evidence suggested that in past years, Respondent had leased its workers from other employee-leasing companies. The evidence was not specific as to who those companies were. The evidence, while not specific, also suggested that Respondent paid its leased employees bonuses and sometimes loaned them money.1/ In general, employee-leasing agreements provide clerical duties to client companies including tax deduction and workers’ compensation, in exchange for a fee. Client companies’ workers who are registered with the leasing company are employees of the leasing company, not the client company. In this case, the specific contract between ELS and Respondent was not introduced into evidence. Likewise, neither the contract nor the proof of coverage between ELS and its workers’ compensation insurer was introduced into evidence and it is unknown who the actual workers’ compensation insurer was or is. Therefore, there is no credible evidence regarding the specific terms of the contract between ELS, Respondent or the workers’ compensation insurer. Importantly, there is no evidence regarding any fee arrangement between ELS and Respondent showing that workers’ compensation coverage was provided based on payroll or that direct payments to Respondent’s workers constituted payroll under the terms of the lease contract for which workers’ compensation had not been secured. Petitioner’s investigator telephoned ELS and learned from some person (purportedly Ellen Clark) that it did have an employee-leasing contract with Respondent and did maintain workers’ compensation on Respondent’s workers. The investigator was also told that ELS intended to or had cancelled its employee-leasing contract with Respondent effective either February 14 or 15, 2009. No one from ELS testified at the hearing and the substance of the above conversation, as with all the testimony about purported ELS statements, constitutes hearsay that was not corroborated by other credible evidence in the record. As such, the substance of these conversations is not found as facts, other than to establish that Petitioner’s investigator had a conversation with a person purporting to Represent ELS. However, on February 14, 2010, the investigator did not take any action against Respondent since he felt Respondent was in compliance with Florida’s workers’ compensation law. On February 17, 2009, Mr. Woodall again returned to the Cabrille Lane area and observed Respondent’s workers installing siding on a house. One of the workers, Mike Moore, revealed to Mr. Woodall that he was a subcontractor of Respondent, but that the other worker, Ryan Grantham, was Respondent’s employee. The subcontractor was in compliance with Florida’s workers’ compensation laws. In order to find out if the other worker was covered by workers’ compensation insurance, Mr. Woodall met with Ronnie Creed, Respondent’s owner and officer, who was exempt under Florida’s workers’ compensation law. Mr. Creed was unaware of Respondent’s workers’ compensation status but put Mr. Woodall in contact with his wife, India Creed, who was also exempt from Florida’s workers’ compensation law. Ms. Creed told Mr. Woodall that Respondent had received a letter from ELS that day, purportedly notifying it that ELS intended to cancel or had cancelled its employee-leasing contract with Respondent. The letter was not introduced into evidence and it is unclear whether the letter discussed the workers’ compensation insurance coverage ELS maintained on its employees that it leased to Respondent. Again, no one from ELS or its workers’ compensation insurer testified at the hearing regarding its lease or which workers were covered under the lease. The record is devoid of any evidence that these employees were no longer employed by ELS and, more importantly, not covered by ELS’s workers’ compensation coverage on February 17, 2009.2/ Mr. Woodall also checked the Department’s Coverage and Compliance Automated System (CCAS) database. CCAS is a database that maintains information on business entities in Florida and whether they have secured workers’ compensation and /or whether exemptions from workers’ compensation have been granted to eligible company officers. CCAS did not reflect that Respondent had a workers’ compensation insurance policy in place. However, the investigator did not check to see if ELS or another employee-leasing company had such a policy. Similarly, the investigator did not investigate the terms of those contracts and whether those contracts considered any bonuses or loans paid by Petitioner to its employees to be payroll, and if it was, whether any workers’ compensation coverage was dependent on such payments being reported to these companies. As such, the information in that system is hearsay which may or may not indicate a need to investigate further. Moreover, CCAS is simply a database of information reported by others and maintained by the Petitioner. Its reliability is questionable in this case given the multiple contractual entities involved in the provision of workers’ compensation to Respondent and the lack of any direct evidence from those contractual entities. Therefore, the fact that CCAS did not reflect that Respondent had workers’ compensation insurance is not given weight in this Order and is neither clear nor convincing evidence demonstrating that Respondent failed to secure workers’ compensation insurance on February 17, 2009, or for prior years. Based on his belief that Respondent had not secured workers’ compensation on its workers, Mr. Woodall issued a Stop- Work Order and Order of Penalty Assessment and a Request for Production of Business Records for Penalty Assessment Calculation to Respondent (Request) asking for Respondent’s business and financial records related to Respondent’s business and employee leasing for the last 3 years. The records were requested to construct Respondent’s alleged payroll and determine the employees of Respondent. There was no evidence that there was any inquiry into past employment leasing companies that Petitioner contracted with or the terms of those contracts. As with the contract with ELS, there was no inquiry into whether loans or bonuses or any other money paid by Respondent to its workers was considered payroll, required to be reported, or had any impact on workers’ compensation coverage that the leasing companies provided on the employees they leased to Respondent. Respondent complied with the Request and provided the requested business records to Petitioner. Mr. Woodall forwarded the financial records to Petitioner’s penalty calculator, Monica Moye. Beyond checking CCAS, Ms. Moye was not responsible for factually determining whether Respondent had properly secured workers’ compensation insurance during the period under review. Using Respondent’s financial records, Ms. Moye calculated a penalty to be assessed to Respondent based on class code 5645 for siding installation as established by the National Council on Compensation Insurance in the Scopes Manual. She also separated Respondent’s periods of alleged noncompliance based on periodically changing approved manual rates. Approved manual rates are set by the National Council on Compensation Insurance and represent the amounts employers would pay in workers’ compensation premiums for tasks performed by their employees. On March 13, 2009, Petitioner issued an Amended Order of Penalty Assessment, assessing a penalty of $159,002.46 to Respondent. Based on additional records submitted by Respondent, Petitioner recalculated the previously-assessed penalty and issued a 2nd Amended Order of Penalty Assessment to Respondent on June 9, 2009, reducing the assessed penalty to $130,914.99. Additionally, following the hearing, the Department revised the assessed penalty and issued a 3rd Amended Order of Penalty Assessment (3rd Amended Order) reducing the assessed penalty to $130,135.03.3/ The list of employees attached to the 3rd Amended Order of Penalty Assessment contains several incidents of imputed employment listed as “cash,” “unknown” or “Star H.” There is nothing in the record that supports a finding that these amounts were paid for employment purposes. However, the evidence did not establish that Petitioner did not secure workers’ compensation coverage and the issues regarding the correctness of the amount of penalty assessed against Respondent is not addressed in this Recommended Order. Since the evidence did not establish that Respondent failed to secure workers’ compensation, the Stop-work order should be cancelled and the 3rd Amended Order of Penalty Assessment dismissed.
Recommendation Based on the findings of fact and conclusions of law, it is RECOMMENDED that the Department of Financial Services enter a Final Order that Petitioner failed to establish by clear and convincing evidence that Petitioner failed to secure workers’ compensation to its employees and canceling the Stop Work Order and dismissing the 3rd Amended Order of Penalty Assessment. DONE AND ENTERED this 2nd day of April, 2010, in Tallahassee, Leon County, Florida. S DIANE CLEAVINGER 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 2nd day of April, 2010.
