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rather than a single rule, the chapter currently contains 12 rules, with a history note of one additional rule that was repealed.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 issue is the amount payable to Respondent, Agency for Health Care Administration ("Respondent" or "ACHA"), in satisfaction of Respondent's Medicaid lien from a settlement received by Petitioner, Jonathan Velez ("Petitioner" or "Velez"), from a third party, pursuant to section 409.910, Florida Statutes (2015).
Findings Of Fact On September 3, 2008, Velez, then a 14-year-old adolescent child was injured while playing football in Clewiston, Florida. On the date of the accident, Petitioner had a helmet to helmet (face to face) collision with another football participant. The collision caused a hyper-extended injury and Velez immediately fell to the ground and lost consciousness. Velez suffered a C5 burst fracture, a spinal cord injury, anterior cord syndrome and subsequent injuries originating from this accident, initially rendering him paralyzed. As a result of the injuries, and subsequent ramifications from said injuries, Velez suffered extensive permanent injuries and required extensive medical treatment in Miami, Florida, from September 3, 2008, through October 28, 2013. Petitioner sued numerous defendants for his injuries, but because of waiver and release forms signed by his guardian, the parties settled the case to avoid the possibility of summary judgment against Petitioner. Petitioner recovered $430,000.00 from a settlement against defendants. The settlement's allocation included: attorney's fees (40 percent) in the amount of $172,000.00; costs in the amount of $4,789.72; past medicals in the amount of $60,000.00; and future medicals in the amount of $20,000.00.1/ ACHA, through the Medicaid program, paid $142,855.89 on behalf of Petitioner for medical benefits related to the injuries sustained by Petitioner. Xerox Recovery Services, Respondent's collection's contractor, notified Petitioner that he owed $142,855.89 to satisfy a Medicaid lien claim from the medical benefits paid to him from the proceeds received from the third-party settlement. Petitioner contested the lien amount. At the final hearing, Petitioner presented, without objection, the expert valuation of damages testimony of Donna Waters-Romero ("Waters-Romero"). Waters-Romero has 30 years' experience in both state and federal courts and has solely practiced in the area of personal injury defense, including cases with similar injuries specific to this type of case. Waters-Romero's experience also encompasses evaluation of personal injury cases based on the review of medical records, case law, and injuries. In preparation for her testimony, Waters-Romero reviewed the pleadings, depositions, answers to interrogatories, evaluations, medical records, and defendant's motion for summary judgment along with the attached documents. She also met with Petitioner's attorneys and reviewed the mediation summary, exhibits, case law on Medicaid liens, letter of discharge, and release and settlement agreement. Waters-Romero also specifically researched three circuit court orders that were entered regarding allocation regarding Medicaid liens. To determine how to value Petitioner's claim, Waters-Romero relied on Wos v. E.M.A., 133 S. Ct. 1391(2013), a United States Supreme Court case, and on the circuit court cases as guidance. She determined that every category of the settlement should be reduced based on the ultimate settlement. During her evaluation, Waters-Romero also acknowledged the litigation risk in Velez's case due to the issues with the liability and the waiver and release. Based on her review, Waters-Romero opined that the overall value of Petitioner's claim was valued conservatively at $2,000,000.00, which was unrebutted. Waters-Romero's testimony was credible, persuasive, and is accepted. The evidence was clear and convincing that the total value of the damages related to Petitioner's injury was $2,000,000.00 and that the settlement amount, $430,000.00 was 21.5 percent of the total value. The settlement does not fully compensate Petitioner for the total value of his damages. ACHA's position is that it should be reimbursed for its Medicaid expenditures pursuant to the statutory formula in section 409.910(11)(f). Under the statutory formula, the lien amount is computed by deducting 25 percent attorney's fee of $107,500.00 from the $430,000.00 recovery, which yields a sum of $322,500.00. In this matter, ACHA then deducted zero in taxable costs, which left a sum of $322,500.00, then divided that amount by two, which yields $161,250.00. Under the statute, Respondent is limited to recovery of the amount derived from the statutory formula or the amount of its lien, whichever is less. Petitioner's position is that reimbursement for past medical expenses should be limited to the same ratio as Petitioner's recovery amount to the total value of damages. Petitioner has established that the settlement amount of $430,000.00 is 21.5 percent of the total value ($2,000,000.00) of Petitioner's damages. Using the same calculation, Petitioner advances that 21.5 percent of $60,000.00 (Petitioner's amount allocated in the settlement for past medical expenses), $12,900.00, should be the portion of the Medicaid lien paid. Petitioner proved by clear and convincing evidence that Respondent should be reimbursed for its Medicaid lien in a lesser amount than the amount calculated by Respondent pursuant to the formula set forth in section 409.910(11)(f).
The Issue Did the Department of Children and Family Services (Department) improperly deny the in-home subsidy of $400.00 per month to Petitioner?
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant findings of fact are made: The Department is the agency of the State of Florida charged with the responsibility of administering the Medicaid Developmental Disabilities Home and Community-Based Services Waiver Program (Medicaid Waiver Program), the Family Care Program, and the provisions of in-home subsidies. Petitioner is a 30-year-old severely developmentally disabled woman who suffers from cerebral palsy and is totally blind. Petitioner is confined to a wheelchair, cannot care for herself, and is totally dependent on others for her care 24 hours a day. Petitioner lives with her mother and legal guardian, Jo Anne Weaver, and her stepfather, in the Weaver's home, which was purchased by the Weavers in March 2001, with a mortgage, after renting the home for three years. The Weavers have made modifications to the home to accommodate Petitioner's needs, including a ceiling lift that takes Petitioner from her bed, through the hall, and into her bathroom. Mr. Weaver is school teacher who works two nights a week in addition to daytime employment. Jo Anne Weaver sells advertising for the Jewish Press and earns $170.00 per week, plus $50.00 per week for expenses. In addition to the in-home subsidy, Petitioner receives assistance through the Department under the Medicaid Waiver Program, which allocates funds to provide Petitioner with in- home caregivers and other in-home services, such as companion services, personal care assistance, respite care, and consumable medical supplies. The funds under the Medicaid Waiver Program are paid directly to the caregivers and service providers and not to Petitioner or her guardian. The Medicaid Waiver Program, through a cost plan established and approved each year for Petitioner, allocates funds to provide a maximum of ten hours per day of caregiver services to Petitioner. Petitioner's family, primarily her mother and stepfather, provide uncompensated care to Petitioner the remaining 14 hours of each day. Petitioner's mother gets up several times each night to diaper Petitioner and to reposition her in the bed. Due to a number of factors, Medicaid Waiver Program services that have been approved under a support plan may not ultimately be received by the disabled person. Petitioner has never used all the funding allocated under her support plan. Although the Medicaid Waiver Program authorizes the provisions of funds for caregivers for 10 hours each day, Petitioner's mother has been unable to arrange consistently for caregivers to come to the home for the full 70 hours each week because it is very difficult to find, secure, and keep caregivers who will provide services under the terms of the Medicaid Waiver Program. In addition to the services authorized under the Medicaid Waiver Program, Petitioner has been, since 1995, receiving a monthly in-home subsidy of $400.00 per month in accordance with Section 393.0695, Florida Statutes. The in-home subsidy is paid from general revenue funds and is not part of Medicaid program, and is the only payment that Petitioner or the Weavers receive directly from the Department. However, Petitioner receives $74.00 per month Supplemental Security Income and $478.00 per month court-ordered support payment from her father. Additionally, Petitioner's father pays for her Blue Cross/Blue Shield health insurance coverage. The Weavers pay for Petitioner's out-of-pocket medical and dental expenses. Petitioner's Proposed Developmental Services Cost Plan (Support Plan) with a development date of December 15, 2000, shows a proposed cost of $87,518.96. This amount included a $400.00 per month ($4,800.00 per year) in-home subsidy for basic living necessities as set forth in Subsection 393.0695(2), Florida Statutes. At the time the proposed support plan was submitted, the average cost for institutional placement was $71,424.44. On August 27, 1999, the Department issued the Developmental Services Home and Community-Based Services, WAIVER CLARIFICATION P.D.#99-05 REV02, Waiver Cost Review Policy with an effective date of October 1, 1999 (Policy Directive), which stated in pertinent part as follows: Effective October 1, 1999, individuals with an annual average cost in excess of Intermediate Care Facilities for persons with Developmental Disabilities (ICF/DD) shall only be enrolled into the waiver if the Secretary of the Department approves an exception. . . If the total costs to support an individual in the community exceed the ICF/DD cost, the plan must be submitted for review and approval or denial before the individual is added to the waiver. . . . On December 29, 2000, in accordance with the above Policy Directive, Petitioner's Proposed Support Plan was submitted to the Department's Tallahassee office for review. On January 19, 2001, Susan Dickerson, Chief concurred in the recommendation to approve the Proposed Support Plan with the following exceptions: Other Adaptive Equipment and stroller repairs and adaptations should be determined as medically necessary before approval. Physical therapy approved only for the amount in excess of coverage by Medicaid state plan. Family subsidy for $400.00 of general revenue funds monthly is not approved. WSC should explore other less costly options for providing services including attending a day program. (Emphasis furnished) On January 23, 2001, a reconsideration of Susan Dickerson's decision was requested, and on February 15, 2001, Kathleen A. Kearney, Secretary, concurred in the earlier recommendation, which included the same exceptions. By a Notice of Denial of Requested Service Funded Through General Revenue dated March 8, 2001, the Department advised Petitioner that her request for in-house subsidy had been denied because "Medical necessity for this service had not been demonstrated as defined in Chapter 59G-1.010(166), Florida Administrative Code." (Emphasis furnished). There was no other reason offered, including the unavailability of funds for this service under existing appropriations, given by the Department for denying Petitioner's request for the in-house subsidy. The Department has not alleged that funds were unavailable to provide the in-house subsidy to Petitioner. The final cost approved for the support plan was $82,718.96. The Petitioner has demonstrated a need for the in-home subsidy in the amount requested.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department enter a final order approving Petitioner's request for in-home subsidy in the amount of $400.00 per month. DONE AND ENTERED this 4th day of February, 2002, in Tallahassee, Leon County, Florida. WILLIAM R. CAVE 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 4th day of February, 2002. COPIES FURNISHED: Susan Haubenstock-Greenburg, Esquire Post Office Box 1588 Tampa, Florida 33601-1588 Frank H. Nagatani, Esquire Department of Children and Family Services 11351 Ulmerton Road, Suite 100 Largo, Florida 33778-1630 Peggy Sanford, Agency Clerk Department of Children and Family Services 1317 Winewood Boulevard Building 2, Room 204B Tallahassee, Florida 32399-0700 Josie Tomayo, General Counsel Department of Children And Family Services 1317 Winewood Boulevard Building 2, Room 204 Tallahassee, Florida 32399-0700
The Issue The issue in this case is whether the Agency for Health Care Administration (AHCA) should enroll the Petitioner, Oscar Sansoni, as a Medicaid provider of support coordination services.
Findings Of Fact In 1990, the former Department of Health and Rehabilitative Services (HRS) preliminarily confirmed a report of abuse or neglect against the Petitioner, Oscar Sansoni (report No. 90-045389). The Petitioner asked that the report be expunged and asked for formal administrative proceedings when HRS denied his request (DOAH Case 90-4332C). Upon commencement of the hearing in DOAH Case 90-4332C, the Petitioner withdrew his request for expunction "upon condition that such withdrawal would not prejudice his right to request, at a later date, further proceeding on the issue of an exemption from disqualification for employment." A Recommended Order of Dismissal was entered in the case on October 26, 1990, on the basis of the Petitioner's withdrawal of his expunction request. On August 6, 1991, a Final Order was entered on the basis of the Recommended Order of Dismissal; it denied the expunction request and confirmed the report. The Petitioner was initially certified by HRS to provide support coordination services under Florida's Medicaid waiver program in November 1993. He provided those services in District 6 and in District 14, but not without some problems in both districts. The first survey of the Petitioner conducted in District 14 on September 21, 1994, revealed five major areas of concern: support plans did not authorize services; (2) cost plans (plans of care) did not authorize purchase of services; (3) case notes did not substantiate billing; (4) case notes were not in sufficient detail; and (5) planning prior to changing client support was inadequate. As a result, District 14 withdrew the Petitioner's ability to process billings for 90 days. The first survey of the Petitioner conducted in District 6 on October 21, 1994, revealed most of the same concerns as in District 14. (The exception was that the Petitioner was not criticized for inadequate planning.) To the Petitioner's credit, he improved following the initial surveys. A follow-up survey conducted in District 14 on January 24, 1995, revealed that the Petitioner was in full compliance. A follow-up survey in District 6 also revealed progress, but the Petitioner was not considered to be providing better than adequate services there. On December 29, 1994, the Petitioner signed a verification that he had obtained or would soon be obtaining a background screening, as required of all HRS Developmental Services Medicaid waiver support coordinators. During a routine review on or about May 24, 1995, HRS discovered that the Petitioner had not yet obtained or even applied for a background screening. HRS conducted a background screening of the Petitioner which revealed the confirmed report of abuse or neglect, report No. 90-045389. As a result, HRS took action to revoke the Petitioner's Medicaid waiver certification. The outcome of the revocation proceeding is not clear from the record, but it appears from the evidence that the Petitioner was required to relinquish 34 District 6 case files for handling by other support coordinators. Review of those files revealed that 15 of the 34 had no support plans or overdue support plans. Most of the case files had no case notes. The Petitioner asked for an extension of time until June 5, 1995, to submit missing case notes and support plans. On June 9, 1995, he submitted some but not all of the missing case notes and support plans. More missing case notes and support plans were submitted on July 27, 1995, along with billings for support services. Still more missing case notes and support plans with additional billings for support services were submitted on January 12, 1996. The Petitioner let it be known that he was spacing the submission of these documents to optimally serve his cash-flow needs. District 6 reviewed the Petitioner's case notes and support plans after January 12, 1996, and found them to be extremely unprofessional, contrary to state statute and rule relative to confidentiality, and lacking in substance relative to the implementation of goals on the support plan. Many support plans were late. The Petitioner failed to comply with many of the assurances required of Medicaid waiver support coordinators. At a later date, the Petitioner applied for Medicaid waiver certification on behalf of Dare to Dream, Inc. HRS denied the application, and the Petitioner requested formal administrative proceedings. The case was referred to DOAH, where it was given Case No. 96-3199. Case No. 96-3199 was set for final hearing on September 20, 1996, but HRS filed a Motion for Suggestion of Mootness on September 17, 1996. In the motion, HRS conceded that the Petitioner met all of the certification criteria set out in Florida Administrative Code Rule 59G-8.200(12)(b)20 and that there was no valid, legal ground for denying certification. It gave assurance that HRS would issue the Medicaid waiver certification letter "within the next week." The Petitioner initially opposed the motion "out of frustration" but withdrew his opposition at a telephone hearing held on the motion on September 18, 1996, and an Order Dismissing Proceeding, Relinquishing Jurisdiction, and Closing File was entered on September 19, 1996, returning jurisdiction to HRS for issuance of the Medicaid waiver certification. HRS issued a one- year Medicaid waiver certification to Dare to Dream, Inc., on September 18, 1996. The letter transmitting the one-year certification to Petitioner explained that, effective January 1, 1995, all providers of Developmental Services/Home and Community Based Services of Support Coordination were required to have a Medicaid provider number. HRS agreed to forward the Petitioner's completed application for a provider number to the Agency for Health Care Administration (AHCA). When HRS forwarded the Petitioner's application for enrollment as a Medicaid provider, HRS included its evaluation of the Petitioner's previous performance and a strong recommendation that the application be denied. AHCA received the Petitioner's application on October 31, 1996. On January 9, 1997, AHCA advised the Petitioner that it intended to deny the application: (1) because, contrary to representations in the application, the Petitioner's Medicaid waiver certification had been revoked, not suspended, by HRS in May 1995; (2) because the Medicaid waiver certification had not been restored; (3) because the Petitioner had on his record a confirmed report of abuse or neglect; and (4) because, for the foregoing reasons, as well as the Petitioner's performance history as a provider of support coordination services for HRS, AHCA concurred with HRS' recommendation that the application be denied. The Petitioner, in his rebuttal, explained: (1) that he understood his Medicaid waiver certification to have been suspended, not revoked; and (2) that, besides, it was restored by the time of his application. He also had admitted in evidence documentation relating to DOAH Case Nos. 90-4332C and 96-3199 (which provide some of the support for Findings 1 and 10-13, supra.) However, the Petitioner put on no evidence contrary to the other grounds for HRS' recommendation that the application be denied.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration enter a final order denying the Petitioner's application for enrollment as a Medicaid provider. RECOMMENDED this 15th day of January, 1998, at Tallahassee, Leon County, Florida. J. LAWRENCE JOHNSTON 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 Filed with the Clerk of the Division of Administrative Hearings this 15th day of January, 1998. COPIES FURNISHED: Jack B. Pugh, Esquire Suite 1080 1645 Palm Beach Lakes Boulevard West Palm Beach, Florida 33401 Gordon Scott, Esquire Agency for Health Care Administration Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308 Sam Power, Agency Clerk Agency for Health Care Administration Fort Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308 Jerome W. Hoffman, General Counsel Agency for Health Care Administration 2727 Mahan Drive Tallahassee, Florida 32308
The Issue Whether the Respondent has sufficient general revenue funds to provide the Petitioner with services under the Respondent's Developmental Disabilities Program.
Findings Of Fact Based on the oral and documentary evidence presented at the final hearing and on the entire record of this proceeding, the following findings of fact are made: The Department is the state agency charged with administering and determining eligibility for services to developmentally disabled individuals pursuant to Florida's Developmental Disabilities Prevention and Community Services Act, Chapter 393, Florida Statutes. Section 393.065, Florida Statutes. The program developed by the Department is known as the Developmental Disabilities Program. Jake is a resident of Miami, Florida, and is four and one-half years of age, having been born October 6, 1997. On October 24, 2000, Jake's parents submitted on his behalf an application requesting that the Department enroll him in its Developmental Disabilities Program and provide him with physical, occupational, and speech therapy services as a developmentally disabled individual.2 The parties stipulated to the following facts: Jake has a rare genetic disorder called "Williams Syndrome," which causes significant developmental delays. Jake also has a significant hearing impairment, which exasperates his developmental delays. Among other developmental delays, Jake cannot walk on his own, is unable to talk, and is unable to respond to verbal requests. Jake requires regular and frequent physical, occupational, and speech therapies, and Jake is eligible to receive these services under the Department's Developmental Disabilities Program. A social worker employed by the Department advised Jake's mother on October 25, 2000, that Jake was eligible for the requested services. The social worker developed a family support plan, which Jake's mother signed on January 12, 2001. Pursuant to the Department's policies, the Department considered Jake a "client" of the Department and eligible for services on the date the family support plan was signed. According to the Department's witness, the funding category at issue in this case is state general revenue funds appropriated by the Florida Legislature and not federal funds. Upon receiving Jake's application for services under the Department's Developmental Disabilities Program, the Department reviewed the request and implemented a prioritization schedule set forth in a Department memorandum dated June 1, 2001. The subject matter of the memorandum is identified as "State Fiscal Year 2001-2002 Spending Plan Implementation Instructions ("Spending Plan")."3 The Spending Plan was developed in accordance with the following directive of the Legislature, which is found in the Conference Report on SB 2000: General Appropriations for 2001-02, May 1, 2001 ("Conference Report"): Funds in Specific Appropriations 374 and 377 are intended to provide Home and Community- Based Services Waiver Services in accordance with a spending plan developed by the Department of Children and Family Services and submitted to the Executive Office of the Governor for approval by November 1, 2001. Such plan shall include a financially feasible timeframe for providing services to persons who are on waiting lists for fiscal years 1999-2000 and 2000-2001 and those eligible persons who apply for services during fiscal year 2001-2002. Such persons shall be enrolled in the waiver in accordance with the department's policy for serving persons on the waiting list. The Spending Plan relates to the distribution of funds to persons served through the Home and Community-Based Waiver Services program ("Waiver Program"), which is co-funded by the federal government as part of the Medicaid program.4 The Spending Plan establishes five "priority" categories for providing services through the Waiver Program: Persons who were clients as of July 1, 1999; members of the class in the case of Cramer v. Bush; persons not on the original waiting list who are in crisis (an estimated ten new clients monthly, statewide); persons discharged from the Mentally Retarded Defendant Program; and "[p]ersons who have become clients since July 1, 1999, in date order (new waiting list) -- projected to be approximately 6,284 persons remaining to be phased in between March 2002 and June 2002, subject to vacancies on the Waiver and available funding." The Spending Plan further provides that "[i]n order to serve the estimated additional 6,774 individuals who are projected to want and need Waiver services during FY 01-02, enrollment on the Waiver will be phased in as described above." According to the procedure specified in the Spending Plan, a waiting list for Waiver Program services is maintained by the Department's Central Office of the Developmental Disabilities Program, and that office advises the various districts when they may begin providing services to a person on the list. According to the Spending Plan, services are to be provided to individuals on the waiting list "subject to vacancies on the Waiver and available funding." Upon review of his application for services, the Department classified Jake in the fifth category of the Spending Plan as a person who become a client after July 1, 1999, and his name was placed on the waiting list to receive services provided through Waiver Program funding. Although no evidence was presented on this point, it is apparent from the text of the Spending Plan that, in addition to the Waiver Program funding for services to the developmentally disabled, there is a second source of funding for services to these individuals, Individual and Family Supports ("IFS") funding.5 The Department did not provide any indication in its denial letter and it did not present any evidence at the final hearing to establish that the "general revenue funds" at issue were IFS funds. It has been necessary to infer from the record that such is the case.6 Although the Department presented no evidence with respect to Jake's eligibility for services from IFS funds or with respect to the availability of IFS funds to provide Jake with the services for which he is eligible, the Spending Plan provides: "The use of non-Waiver funds (Individual and Family Supports (IFS) budget category) to fund services for additional persons who are awaiting enrollment on the Waiver is prohibited." The only possible inference from the evidence presented by the Department and from the record as a whole is that, notwithstanding the reasons stated in the Department's denial letter in this case, Jake was denied services from IFS funds because he was placed on the Medicaid Waiver Program waiting list.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Children and Family Services enter a final order finding that Jake Cheskin shall remain on the waiting list for Home and Community-Based Waiver Services under the Developmental Disabilities Program and ordering that Jake Cheskin shall be provided with the physical, occupational, and speech therapy services for which he is eligible as soon as a vacancy occurs or additional funding is available under the Department's Developmental Disabilities Program.8 DONE AND ENTERED this 31st day of July, 2002, in Tallahassee, Leon County, Florida. PATRICIA HART MALONO 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 31st day of July, 2002.
Findings Of Fact Background Petitioner, United Health, Inc. (United), is the owner and operator of approximately one hundred and twenty-three nursing homes in thirteen states. In the State of Florida, it owns and operates sixteen nursing homes and one intermediate care facility for the mentally retarded that are licensed by respondent, Department of Health and Rehabilitative Services (HRS). At issue in this proceeding are the cost reports and supplemental schedules filed by thirteen nursing home facilities.1 In accordance with Medicaid guidelines, petitioner was required to annually submit cost reports to HRS reflecting its allowable costs in providing Medicaid services to its patients. HRS is designated as the state agency responsible for the administration of Medicaid funds under Title XIX of the Social Security Act. In order to be reimbursed for said costs, the facility was required to show that the costs were in conformity with Federal and State Medicaid reimbursement principles. Those principles are embodied in the Long Term Care Reimbursement Plan (Plan) adopted by the State.2 This document contains the reimbursement methodology to be used for nursing homes who provide Medicaid services. In addition, providers must comply with Health Insurance Manual 15 (HIM-15), a compendium of federal cost reimbursement guidelines utilized by HRS, and generally accepted accounting principles. By letter dated September 9, 1985 petitioner requested that HRS adjust its July 1, 1985 reimbursement rates for the thirteen facilities to reflect certain annualized costs incurred during the preceding fiscal year ending December 31, 1984. According to the letter, the adjustment was appropriate under Section V.B.I.b. of the September 1, 1984 Plan. On October 21, 1985, an HRS Medicaid cost reimbursement analyst issued a letter denying the request on the following grounds: Our review of the information submitted with the fiscal year end 12/31/84 cost reports revealed that the annualized operating and patient care costs were not documented to be new and expanded services or related to licensure and certification requirements. The annualized property cost appeared to be 1 2 various purchases, repairs and maintenance and was not documented to be capital improvements. The denial prompted the instant proceeding. B. Reimbursement Principles In General Under the Medicaid reimbursement plan adopted for use in Florida, nursing homes are reimbursed by HRS on a prospective basis for their allowable costs incurred in providing Medicaid services. This method is commonly referred to as the prospective plan, and has been in use since 1977. Under this concept, a nursing home files with HRS, within ninety days after the close of its fiscal year, a cost report reflecting its actual costs for the immediate preceding fiscal year. Within the next ninety days, the nursing home is given a per diem reimbursement rate (or ceiling) to be used during the following twelve months.3 For example, if a provider's fiscal year ended December 31, 1984, its cost report would be due by March 31, 1985. HRS would then provide estimated reimbursement rates to be used during the period from July 1, 1985 through June 30, 1986. As can be seen, there is a time lag between the end of a cost reporting year and the provider's receiving the new rate. The new reimbursement rate is based upon the provider's actual costs in the preceding fiscal year (reporting period) adjusted upward by an inflation factor that is intended to compensate the provider for cost increases caused by inflation. The prospective plan enables a provider to know in advance what rates it will be paid for Medicaid services during that year rather than being repaid on a retroactive basis. If a provider operates efficiently at a level below the ceiling, it is "rewarded" being allowed to keep a portion of the difference. Conversely, if it exceeds the caps, it is penalized to the extent that it receives only the rates previously authorized by HRS, and must absorb the shortfall. At the same time, it should be noted that the reimbursement rate is not intended to cover all costs incurred by a provider, but only those that are reasonable and necessary in an efficiently operated facility. These unreimbursed costs are covered through other provider resources, or by a future cut in services. When the events herein occurred, there were two types of adjustments allowed under the prospective plan. The first adjustment is the inflation factor, and as noted above, it 3 authorizes the provider to adjust certain reported costs by the projected rate of inflation to offset anticipated cost increases due to inflation. However, because the prospective plan (and the inflation factor) ignores other cost increases that occur during the given year, HRS devised a second type of adjustment for providers to use. This adjustment is known as the gross-up provision, and allows the annualization of certain costs incurred by a provider during a portion of the reporting period. The concept itself .s embodied in subparagraph B.1.b. of Part V of the September 1, 1984 Plan. Its use may be illustrated with the following example. A provider constructs an addition to its facility with an in-service date at the end of the sixth month of the reporting period. By reflecting only the depreciation associated with the addition during the last six months of the reporting period, the facility understates its actual costs, and is reimbursed for only one-half of the facility's depreciation during the following year. Under the gross-up provision the provider grosses up, or annualizes, the reported cost to give it a full year's effect, thereby ensuring that the next year's rates will be more realistic. Although the provision has application to this proceeding, over objection by the nursing home industry it was eliminated from the Plan on October 1, 1985 and is no longer available to providers. At hearing HRS contended the provision should have been eliminated in 1984, but through oversight remained in effect until 1985. However this contention is rejected as not being credible, and is contrary to the greater weight of evidence. Finally, neither party could recall if a request under this provision had ever been filed. They do acknowledge that HRS has never approved such a request during the more than two years when the provision was operative. In addition to the gross-up and inflation provisions, there exists an alternative means for additional rate reimbursement through what is known as the interim rate provision. Under this provision, a provider can request an interim rate increase from HRS during the period when its prospective rates are in effect to cover major unexpected costs. Assuming a request is valid and substantiated, a provider is eligible for immediate cash relief dating back to the date of the actual expense. However, because of HRS' concern that this provision was being "abused", only those costs which exceed $5,000 and cause a change of 1% or more in the total prospective per diem rate are now eligible for reimbursement. These monetary thresholds on interim rate requests became effective September 1, 1984. When these higher thresholds were imposed, HRS made representations to the nursing home industry that a provider could still utilize the gross-up provision to cover other unexpected costs. Finally, it is noted that unlike the prospective rate, an interim rate is cost settled. This means the provider's cost reports are later audited, and excess reimbursements must be repaid to HRS. This differs from the prospective plan where any "overpayments" are not subject to recoupment by HRS. Even so, a provider is limited by the reasonableness and prudent buyer concepts which serve as a check on potential abuse by a provider. The Gross-Up Feature In its relevant form, the gross-up provision was first adopted for use by HRS in its April 1, 1983 Plan.4 It required HRS to: Review and adjust each provider's cost report referred to in A. (1.) as follows: * * * b. to compensate for new and expanded or discontinued services, licensure and certification requirements, and capital improvements which occurred during the reporting year but were not included or totally accounted for in the cost report. This language was incorporated with only minor changes into the September 1, 1984 Plan and is applicable to the cost reports in issue. In its 1984 form, the provision required HRS to review and adjust each provider's cost report as follows: b. To compensate for new and expanded or discontinued services, licensure and certification requirements, and capital improvements not included or totally accounted for in the reporting year. For additional costs to be provided, the provider must furnish adequate supporting documentation. 4 Accordingly, if a cost fits within one of the three categories, HRS is required to adjust a provider's report to compensate it for the expenditure. The April 1, 1983 Plan was negotiated by the nursing home industry and HRS representatives at a meeting in Gainesville, Florida. For this reason, it is commonly referred to as the Gainesville Plan. Through testimony of negotiators who participated at the meeting, it was established that the Plan had three objectives: to give proper payment to nursing homes; to meet state and federal regulations; and to help upgrade care in the nursing homes. At the same time, the negotiators recognized that a prospective plan based on inFla.ion alone overlooked other cost increases that occurred during a given year. Therefore, the gross-up provision was added to the Plan to ensure that providers could estimate (and recoup) their future costs in as accurate a manner as possible, and to bring the plan into compliance with federal guidelines. It was also designed to ensure that a provider did not have to wait an extraordinarily long time for expenses to be recognized. In addition, HRS was hopeful that the gross-up provision would minimize the providers' reliance upon the interim rate feature (which was intended to cover only major items) thereby reducing the agency's overall workload. Indeed, the interim and gross-up features were intended to complement each other, in that one provided immediate relief on major unexpected items while the other provided a means to adjust partial year costs incurred during the reporting period. The implementation of thresholds on the interim rate provision in September, 1984 increased the importance of the gross-up provision to handle smaller items. Therefore, HRS' contention that the interim and gross-up provisions are in conflict is hereby rejected. In order for a cost to be eligible for annualization, it must fall within one of three categories: new or expanded service, a capital improvement, or a cost to meet HRS' licensure and certification requirements. The parties have stipulated that HRS' denial of United's request was based solely upon HRS' perception that the costs did not fall within any of the three categories. The three types of costs within the feature are not defined in the Plan. Testimony from the Plan's negotiators established that the language in the gross-up feature was meant to be construed broadly and to encompass many costs. For this reason, no limitations were written into the Plan. Even so, the provision was not intended to give carte blanche authority to the providers to annualize every partial cost. There is conflicting testimony regarding the meaning of the term "capital improvement" and what expenditures are included within this category. However, Sections 108.1 and 108.2 of HIM-15, of which the undersigned has taken official notice, define a capital item as follows: If a depreciable asset has, at the time of its acquisition, an estimated useful life of at least 2 years and a historical cost of at least $500, its cost must be capitalized, and written off ratably over the estimated useful life of the asset. . . * * * Betterments and improvements extend the life or increase the productivity of an asset as opposed to repairs and maintenance which either restore the asset to, or maintain it at, its normal or expected service life. Repairs and maintenance costs are always allowed in the current accounting period. With respect to the costs of betterments and improvements, the guidelines established in Section 108.1 must be followed, i.e., if the cost of a betterment or improvement to an asset is $500 or more and the estimated useful life of the asset is extended beyond its original estimated life by at least 2 years, or if the productivity of the asset is increased significantly over its original productivity, then the cost must be capitalized. The above guidelines are more credible and persuasive than the limited definition of capital item enunciated at final hearing by HRS personnel. Therefore, it is found that the HIM-15 definition is applicable to the gross-up feature and will be used to determine the validity of petitioner's claim to gross up certain expenditures. There is also conflicting testimony as to what the term "new and expanded or discontinued services" includes. Petitioner construes this item to include any costs that increase the volume of services to a resident. Therefore, petitioner posits that an increase in staffing which likewise increases services to residents is subject to annualization. Conversely, HRS construes the term to cover any costs for new or expanded services that enable a facility to provide patients with services not previously provided or to expand an existing service to more patients in the facility. The latter definition is more credible and persuasive and will be used by the undersigned in evaluating petitioner's request. Finally, petitioner interprets the term "licensure and certification requirements" to cover any costs incurred to meet staffing requirements that are required by HRS rules. According to petitioner, the category would include expenditures that are made for so-called preventive maintenance purposes and to avoid HRS sanctions. On the other hand, HRS construes the language to cover costs incurred by a provider to either meet a new licensure and certification requirement, or to correct a cited deficiency. It also points out that salary increases were intended to be covered by the inflation factor rather than through this feature of the plan. This construction of the term is more reasonable, and is hereby accepted as being the more credible and persuasive. Petitioner's Request Petitioner's fiscal year ends on December 31. According to HRS requirements its cost reports must be filed by the following March 31. In accordance with that requirement petitioner timely filed its December 31, 1984 cost reports for the thirteen facilities on or before March 31, 1985. The reports have been received into evidence as petitioner's composite exhibit 3. Attached to the reports were schedules supporting a request for gross-up of certain capital items, additions and deletions of various personnel, and union salary increases that exceeded the inflation rate. The parties have not identified the actual dollar value of the items since only the concepts are in issue. In preparing the supporting schedules, United's assistant director of research reviewed all so-called capital items purchased by the thirteen facilities during the fiscal year, and determined which were purchased after the beginning of the year.5 He then calculated the depreciation on those 5 expenditures made after the beginning of the year and has included those amounts on the supporting schedules to be annualized. Consistent with the definition contained in Sections 108.1 and 108.2 of HIM-15, those items that are in excess of $500 (after annualization), that extend the useful life of the asset for two years or more, or that increase or extend the productivity of the asset are subject to annualization. It should be noted that repairs and maintenance items, as defined in Sections 108.1 and 108.2, are excluded from this category. Petitioner next seeks to adjust its rates by grossing up the net increase in costs associated with additions and deletions of various staff during the reporting period. Any net staffing additions that provide patients with services not previously provided or that expand an existing service to more patients in a given facility are properly subject to the gross- up provision. All others should be denied. Petitioner also contends that these costs should be considered as a licensure and certification requirement since they satisfy staffing requirements under HRS rules. To the extent the filling of old positions occurred, such expenditures are appropriately covered by the gross-up provision. The remainder do not fall within the purview of the provision. Finally, petitioner seeks to adjust its rates to cover all salary increases over and above the inflation factor that were awarded to union employees pursuant to its union contract. Under petitioner's theory, if such costs were not paid, United stood to lose staff through a strike which in turn could result in licensure and certification problems. But these concerns are speculative in nature, and such an interpretation would result in automatic approval of any salary increase called for by a union contract, no matter how unreasonable it might be. Since the expenditures do not meet the previously cited criteria, they must be denied.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED: That petitioner's request to have its July 1, 1985 reimbursement rates adjusted for thirteen facilities to reflect annualized costs as submitted on supplemental schedules with its 1984 cost reports be approved in part, as set forth in the conclusions of law portion of this order. The remaining part of its request should be DENIED. DONE AND ORDERED this 31st day of October, 1986, in Tallahassee, Florida. DONALD R. ALEXANDER, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 31st day of October, 1986.
