Conclusions THE PARTIES resolved all disputed issues and executed a Settlement Agreement. The parties are directed to comply with the terms of the attached settlement agreement, attached hereto and incorporated herein as Exhibit “1.” Based on the foregoing, this file is CLOSED. DONE and ORDERED on this the Wray of SJ tembos 2014, in Tallahassee, Florida. LI [for ELIZABETH{BUDEK, SECRETARY Agency for Health Care Administration Final Order Invoice No. NH16766 Page 1 of 3 Filed October 3, 2014 11:45 AM Division of Administrative Hearings A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO A JUDICIAL REVIEW WHICH SHALL BE INSTITUTED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF AHCA, AND A SECOND COPY ALONG WITH FILING FEE AS PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE AGENCY MAINTAINS ITS HEADQUARTERS OR WHERE A PARTY RESIDES. REVIEW PROCEEDINGS SHALL BE CONDUCTED IN ACCORDANCE WITH THE FLORIDA APPELLATE RULES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED. ‘ " Peter A. Lewis, Esquire Peter A Lewis, P.L. 3023 North Shannon Lakes Drive Suite 101 Tallahassee, Florida 32309 palewis@petelewislaw.com (Via Electronic Mail) _ Bureau of Health Quality Assurance Agency for Health Care Administration (Interoffice Mail) Stuart Williams, General Counsel Agency for Health Care Administration (Interoffice Mail) Shena Grantham, Chief Medicaid FFS Counsel (Interoffice Mail} Agency for Health Care Administration Bureau of Finance and Accounting (Interoffice Mail) Jeffries Duvall, Esquire Assistant General Counsel Agency for Health Care Administration (Interoffice Mail) Zainab Day, Medicaid Audit Services Agency for Health Care Administration (Interoffice Mail) State of Florida, Division of Administrative Hearings The Desoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (Via U.S. Mail) Final Order Invoice No, NH16766 Page 2 of 3 CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of the foregoing has been furnished to the above named addressees by the designated method of delivery on this the / day of ( Niles , 2014. Richard J. Shoop, Esquire Agency Clerk State of Florida Agency for Health Care Administration 2727 Mahan Drive, Building #3 Tallahassee, Florida 32308-5403 (850) 412-3671 Final Order Invoice No. NH16766 Page 3 of 3 STATE OF FLORIDA AGENCY FOR HEALTH CARE ADMINISTRATION SUNBELT HEALTH AND REHAB CENTER, INC, Petitioner, PROVIDER NO.: 032041200 vs. INVOICE NO.: NH16766 STATE OF FLORIDA, AGENCY FOR HEALTH CARE ADMINISTRATION, Respondent. / ETTLE: ENT The Respondent, Agency for Health Care Administration (“AHCA” or “Agency"}, and the Petitioner, Sunbelt Health and Rehab Center, Inc., (“PROVIDER”), stipulate and agree as follows: 1. This Agreement is entered into between the parties to resolve disputed issues arising from a collection matter assigned case number NH16766. 2. The PROVIDER is a Medicaid provider, Provider Number 032041200, in the State of Florida operating a nursing home facility. 3. On July 15, 2013, the Agency notified the PROVIDER of its determination that PROVIDER was responsible to the Agency for an overpayment in the amount of $95,610.99. 4. The PROVIDER timely filed an appeal regarding this determination challenging the Agency’s application of the interest rate in the FRVS property component that had been used to set the Medicaid per diem rate generating the overpayment. 5. Subsequent to the filing of the petition for administrative hearing, AHCA and the PROVIDER exchanged documents and discussed the adjustment to the interest rate used to determine the FRVS component of the Medicaid per diem. As a result of the aforementioned exchanges, the parties agree that AHCA will revise the PROVIDER’s January 1, 2014 per diem rates to reflect a fixed FRVS interest rate of 5.65%. The 5.65% fixed interest rate shall be used to establish the FRVS component of PROVIDER’s Medicaid per diem rate for all subsequent rate semesters unless the interest rate is required to be Sunbelt Health & Rehab Center, Inc. Settlement Agreement Page 1of5 Exhibst | revised in accordance with the provisions of the Florida, Title XIX, Long-Term Care Reimbursement Plan. 6. In order to resolve this matter without further administrative proceedings, the PROVIDER and AHCA expressly agree to the adjustment resolutions, as set forth in paragraph 5 above, completely resolve and settle this case and this agreement constitutes the PROVIDER'S withdrawal of its petition for administrative hearing, with prejudice. 7. The PROVIDER and AHCA further agree that the Agency shall recalculate the per diem rates for the above-stated period and issue a notice of the recalculation. Where the PROVIDER was overpaid, the PROVIDER will reimburse the Agency the full amount of the overpayment within thirty (30) days of such notice. Where the PROVIDER was underpaid, AHCA will pay the PROVIDER the full amount of the underpayment within forty- five (45) days of such notice. Payment shall be made to: AGENCY FOR HEALTH CARE ADMINISTRATION Medicaid Accounts Receivable—Mail Stop 14 2727 Mahan Drive, Building 2, Suite 200 Tallahassee, Florida 32308 Notices to the PROVIDER shall be made to: Peter A. Lewis, Esquire Peter A. Lewis, P.L. 3023 North Shannon Lakes Drive, Suite 101 Tallahassee, Florida 32309 Payment shall clearly indicate it is pursuant to a settlement agreement and shall reference the case number and the Medicaid provider number. 8. PROVIDER agrees that failure to pay any monies due and owing under the terms of this Agreement shall constitute the PROVIDER'S authorization for the Agency, without further notice, to withhold the total remaining amount due under the terms of this agreement from any monies due and owing to the PROVIDER for any Medicaid claims. 9. Either party is entitled to enforce this Agreement under the laws of the State of Florida; the Rules of the Medicaid Program; and all other applicable federal and state Sunbelt Health & Rehab Center, Inc. Settlement Agreement Page 2 of 5 laws, rules, and regulations, 10. This settlement does not constitute an admission of wrongdoing or error by the parties with respect to this case or any other matter. 11. Each party shall bear their respective attorney's fees and costs, if any. 12. The signatories to this Agreement, acting in their respective representative capacities, are duly authorized to enter into this Agreement on behalf of the party represented, 13. The parties further agree that a facsimile or photocopy reproduction of this Agreement shail be sufficient for the parties to enforce the Agreement. The PROVIDER agrees, however, to forward a copy of this Agreement to AHCA with original signatures, and understands that a Final Order may not be issued until said original Agreement is received by AHCA. 14. This Agreement shall be construed in accordance with the provisions of the laws of Florida. Venue for any action arising from this Agreement shall be in Leon County, Florida. 15. This Agreement constitutes the entire agreement between the PROVIDER and AHCA, including anyone acting for, associated with, or employed by them, respectively, concerning all matters and supersedes any prior discussions, agreements, or understandings: There are no promises, representations, or agreements between the PROVIDER and AHCA other than as set forth herein. No modifications or waiver of any provision shall be valid unless a written amendment to the Agreement is completed and properly executed by the parties. 16. This is an Agreement of settlement and compromise, recognizing the parties may have different or incorrect understandings, information and contentions, as to facts and law, and with each party compromising and settling any potential correctness or incorrectness of its understandings, information, and contentions as to facts and law, so that no misunderstanding or misinformation shall be a ground for rescission hereof. 17. The PROVIDER expressly waives in this matter their right to any hearing pursuant to §§120.569 or 120.57, Florida Statutes, the making of findings of fact and conclusions of law by the Agency, and all further and other proceedings to which it may be Sunbelt Health & Rehab Center, Inc. Settlement Agreement Page 3 of 5 entitled by law or rules of the Agency regarding these proceedings and any and all issues raised herein, other than enforcement of this Agreement. The PROVIDER further agrees the Agency shall issue a Final Order which adopts this Agreement. 18. This Agreement is and shall be deemed jointly drafted and written by all parties to it and shall not be construed or interpreted against the party originating or preparing it. 19. To the extent any provision of this Agreement is prohibited by law for any reason, such provision shall be effective to the extent not so prohibited, and such prohibition shall not affect any other provision of this Agreement. 20. This Agreement shall inure to the benefit of and be binding on each party’s successors, assigns, heirs, administrators, representatives, and trustees. SUNBELT HEALTH AND REHAB CENTER, INC. Dated: Spt 2014 Seen Dated: Printed Title of Providers’ OCF Dated: 4-9- Providers’ Representative ——_____, 2014 > 2014 Legal Counsel for Provider Sunbelt Health & Rehab Center, Inc. Settlement Agreement Page 40fS FLORIDA AGENCY FOR HEALTH CARE | ADMINISTRATION 2727 Mahan Drive, Mail Stop #3 Tallahassee, Florida 32308-5403 | 4 Lh : Dated: G/26 2014 Justin Senio Deputy Secretary, Medicaid .S AGI pated: Z//F 2014 Stuart Williams General Counsel Dated: ) | 19 , 2014 Sh¢ya Gran Medicaid FFS Sunbelt Health & Rehab Center, Inc. Settlement Agreement Page 5 of 5 FLORIDA AGENCY FOR HEATH CARE ASMINISTRATION, pecan Better Heaith Care for aif Floridians cS ETARY EK CERTIFIED MAIL RECEIPT REQUESTED: Of 7108 2433 3937 6307 1806 July 15, 2013 Nursing Home Administrator Sunbelt Health & Rehab Center 305 East Oak Street Apopka, FL 327@2 Dear Administrator: You have been notified by the Office of Medicaid Cost Reimbursement Analysis of adjustments to your Medicaid reimbursement rates on the remittance voucher run dated: 7/13/13. The adjustments resulted from changes in your cost reports. This action has resulted in a balance due to the Agency in the amount of $95,610.99 for provider number 03204 1200/ invoice number NH 16766. If payment is not received, or arranged for, within 30 days of receipt of this letter, the Agency shall withhold Medicaid payments in accordance with the provisions of Chapter 409.913(27), F.S. Furthermore, pursuant to Sections 409.913(25) and 409.913(15), F.S., failure to pay in full, or enter into and abide by the terms of any repayment schedule set forth by the Agency may result in termination from the Medicaid Program. Likewise, failure to comply with all sanctions applied or due dates may result in additional sanctions being imposed. If the overpayment cannot be recouped by this office, Florida law authorizes referral of your account to the Department of Health and to a collection agency. All costs incurred by the Agency resulting from collection efforts will be added to your balance. Additionally, be advised that this referral does not relieve you of your obligation to make payment in full or contact this office to arrange mutually agreeable repayment terms. In addition, amounts due to the Agency shall bear interest at ten percent (10%) per annum from the date of this letter on the unpaid balance until the account is paid in full. The interest accrual will not be assessed if payment is received by the Agency within 30 days. You have the right to request a formal or informal hearing pursuant to Section 120.569, F.S. Ifa request for a formal hearing is made, the petition must be made in compliance with Section 28- 106.201, F.A.C. and mediation may be available. If a request for an informal hearing is made, the petition must be made in compliance with rule Section 28-106.301, F.A.C. Additionally, you are hereby informed that if a request for a hearing is made, the petition must be received by the Agency within twenty-one (21) days of receipt of this letter. For more information regarding your hearing and mediation rights, please see the attached Notice of Administrative Hearing and Mediation Rights. 2727 Mahan Drive, MS#14 Visit AHCA online at Tallahassee, Florida 32308 http://ahca.myflorida.com Please include a copy of the enclosed remittance advice to assure Proper posting of payments to your provider account. Should you have any questions regarding the Medicaid provider account balance information contained in this notice, please contact Julie Chasar (850) 412-4877. Questions regarding the reimbursement rate changes should be directed to Thomas Parker, Office of Medicaid Cost Reimbursement, at (850) 412-4110, Sincerely, Julie Chasar Medicaid Accounts Receivable JFC - July 15, 2013 PLEASE INCLUDE THIS REMITTANCE ADVICE WITH YOUR PAYMENT — eR EES REIS ANCE ADVICE WITH YOUR PAYMENT Remit Payment to: Agency for Health Care Administration Medicaid Accounts Receivable MS# 14 2727 Mahan Drive Bldg. 2 Ste. 200 Tallahassee, FL 32308 Attn: Sharon Dixon FROM: Sunbelt Health & Rehab Center 305 East Oak Street Apopka, FL 32703 Provider No. 032041200 Invoice No. NH16766 STATEMENT OF ACCOUNT CERTIFIED MAIL: 91 7108 2133 3937 6307 1800 VOUCHER RUN DATE: 7/13/13 BALANCE DUE: — $05.610.96 PAYMENT IS DUE WITHIN 30 DAYS FROM THE DATE OF THIS LETTER. Amount Enclosed: $ NOTICE OF ADMINISTRATIVE HEARING AND MEDIATION RIGHTS RE SE ARING AND MEDIATION RIGHTS The written request for an administrative hearing must conform to the requirements of either Rule 28-1 06.201(2) or Rule 28-} 06.301 (2), Florida Administrative Code, and must be received by the Agency for Health Care Administration, by 5:00 P.M. no later than 21 days after you received the SBR. The address for filing the written request for an administrative hearing is: Richard J. Shoop, Esquire Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Mail Stop #3 Tallahassee, Florida 32308 Fax: (850) 921-0158 The request must be legible, on 8 % by 11-inch white paper, and contain: 1. Your name, address, telephone number, any Agency identifying number on the SBR, if known, and name, address, and telephone number of your representative, if any; 2. An explanation of how your substantial interests will be affected by the action described in the SBR; 3. A statement of when and how you received the SBR; 4. Fora request for formal hearing, a statement of al] disputed issues of material fact; 5. Fora request for formal hearing, a concise statement of the ultimate facts alleged, as well as the rules and statutes which entitle you to relief: 6. For a request for formal hearing, whether you request mediation, if it is available; 7. Fora request for informal hearing, what bases Support an adjustment to the amount owed to the Agency; and 8. A demand for relief. A formal mediation may be available in conjunction with a formal hearing. Mediation is a way to use a f you and the Agency agree to mediation, it does not mean that you give up the right to a hearing. Rather, you and the Agency will try to settle your case first with mediation, If a written request for an administrative hearing is not timely received you will have waived your right to have the intended action reviewed pursuant to Chapter 120, Florida Statutes, and the action set forth in the SBR shall be conclusive and final.
The Issue The issues in this case are: (1) whether the Agency for Health Care Administration (Agency) properly determined that Petitioners should reimburse South Bay Hospital 60 percent of the amount charged for the outpatient surgery performed on a workers' compensation claimant; (2) whether the charges were undocumented, excessive, erroneous, incorrect, and/or duplicative; (3) whether the Agency complied with applicable rules in making its decision; (4) whether the employee who made the determination for the Agency had been delegated the authority to do so; and (5) whether the Agency has adopted guidelines and procedures for its employees to follow in making decisions in reimbursement disputes decided under Section 440.13, Florida Statutes (2003).1
Findings Of Fact Based on the testimony of the witnesses, the evidence received at the final hearing, the parties' stipulations, the testimony and evidence from the post-hearing proceeding, and the record in this case, the following findings of fact are made: Petitioner, Mednet Connect, Inc. (Mednet), is a professional review service, which does business as Medical Review and Analysis Service (MAARS). As a professional review service, it contracts with insurance carriers, employers, and health care providers, including hospitals, to conduct specialized reviews of medical bills. Mednet's activities include auditing hospital bills and reviewing procedural codes and charges on hospital bills. Petitioner, Aspen Administrators (Carrier), is a subdivision of the workers' compensation carrier and is a carrier within the meaning of Subsection 440.02(4), Florida Statutes (2003). Petitioner, Florida Gold Citrus, Inc. (Employer or Florida Gold Citrus), is the employer of the injured workers' compensation patient, R.G. South Bay Hospital is a health care provider and is owned by Hospital Corporation of America (HCA). South Bay Hospital is located in Sun City Center, Florida, which is in the Tampa Bay area. The Agency is charged with the review and resolution of disputes regarding the payment of providers by carriers for medical services rendered to individuals receiving Workers' Compensation benefits. Pursuant to Subsection 440.13(11)(c), Florida Statutes (2003), the Agency has exclusive jurisdiction over reimbursement disputes and over utilization disputes. At all times relevant to this proceeding, the Agency included the Division of Health Quality Assurance (Division). Within the Division was the Bureau of Managed Health Care (Bureau) and within the Bureau was the Workers' Compensation Section or Unit. The foregoing units are identified in the Agency's organizational chart and comport with the requirements of Subsection 20.04(3), Florida Statutes (2003). At all times relevant to this proceeding and at the time of the hearing, Mr. Willis was employed by the Agency as an administrator. As an Agency administrator, Mr. Willis is the unit manager for the Workers' Compensation Unit of the Agency. The Workers' Compensation Unit is specifically designated to review and determine disputes brought pursuant to Subsection 440.13(7), Florida Statutes (2003). As unit manager, Mr. Willis is required to report directly to the bureau chief. Mr. Willis is responsible for administering the provisions of Section 440.13, Florida Statutes (2003), related to provider reimbursement disputes and utilization review programs. As unit manager, Mr. Willis supervises a team of professionals in the Workers' Compensation Unit of the Bureau, including the registered nurse consultants and the registered nurse specialists, who are charged with reviewing utilization and reimbursement disputes. These registered nurse consultants or registered nurse specialists are responsible for reviewing utilization and reimbursement disputes and writing determination letters based on their reviews. There are no written internal procedures or guidelines for registered nurse consultants to perform this task. However, the registered nurse consultants are required to "utiliz[e] [the] standards and policies" in the applicable Workers' Compensation laws and rules. This case involves a workers' compensation utilization and reimbursement dispute and a review of the same, conducted pursuant to Subsection 440.13(7), Florida Statutes (2003). The dispute arose out of what the Carrier perceived to be excessive and incorrect medical bills submitted to the Employer and the Carrier by South Bay Hospital, the health care provider that treated R.G., an injured workers' compensation employee. On January 5, 2004, an employee of Florida Gold Citrus, "R.G.," sustained a work-related injury while working. Following the accident, R.G. was taken to South Bay Hospital where she was diagnosed with a fractured humerus and dislocated elbow. R.G. was also determined to have "other and unspecified injury to her elbow, forearm, and wrist." R.G. received emergency treatment at South Bay Hospital, for which HCA billed the Carrier $3,370.19. South Bay Hospital's charges for the emergency treatment on January 5, 2004, were initially at issue, and information concerning those changes will be addressed only as they relate to the later hospital charges. However, all issues surrounding the hospital charges for the January 5, 2004, services have been resolved and are no longer in dispute. As a result of her work-related injury, R.G. was scheduled for outpatient surgery at South Bay Hospital on January 23, 2004. On that date, she had a scheduled outpatient surgery at the hospital, an open reduction, internal fixation (ORIF) performed to repair the fractured arm. On or about April 26, 2004, the hospital submitted to the Employer and the Carrier a bill of $24,013.93 for this outpatient surgery. Petitioners are statutorily required to review all bills, invoices, and other claims for payment submitted by health care providers to identify over-utilization and billing errors. Upon initial receipt and review of the bills for each date of service, the Carrier noted several discrepancies and irregularities, including charges that were in excess of what it deemed to be usual, reasonable, and usual and customary; duplicate charges; charges for undocumented services; charge explosion; and charge unbundling. Therefore, the Carrier forwarded the bills to Mednet for analysis. The term "bundling" means or refers to an all- inclusive charge for a particular procedure. Under the health industry standard, all items and services needed to accomplish a procedure are included in one charge. The term "unbundling" means that a charge included in the "packaged bundling," is also separately billed. When this occurs, it is considered a duplicate charge. According to the Complete Global Service Data for Orthopedic Surgery, Volume 1, 2004, if services are "bundled," they are billed as part of the total package, and it is inappropriate to then bill separately for those services. This publication was published by the American Academy of Orthopedic Surgeons and is included as a reference document in Florida Administrative Code Rule 69L-7.020, which adopts and incorporates by reference the Florida Workers' Compensation Health Care Provider Reimbursement Manual (Health Care Provider Reimbursement Manual). The Health Care Provider Reimbursement Manual is listed as a resource document in the Reimbursement Manual for Hospitals. Ms. Reynolds is familiar with the Complete Global Service Data, 2004 Edition, and has used it in her role as a registered nurse consultant. In the instant case, however, she did not use this as a reference document. The term "charge explosion" means a procedure by which a hospital's billing department automatically includes a certain list of medications, supplies, and equipment on a patient's hospital bill for a certain procedure, whether those items are actually used or not. In such instances, no credit is given if any of the listed supplies, medications, and/or equipment are not used. Mednet received the bill for the January 23, 2004, date of service on May 6, 2004. Upon analysis of the bill, Mednet specifically identified what it perceived to be numerous billing irregularities associated with each date of service. Mednet uses a third party computer software to assist it in analyzing hospital bills. This computer software is the industry standard and uses industry benchmarks or reference data to assist in determining the usual and customary charge for a procedure, treatment, or service. Based on its initial review of the hospital bill, Mednet concluded that the hospital bill included billing for multiple and duplicate charges for the same items and services; charges for treatment, supplies, and services that were not documented by medical records as having been delivered or used in the treatment of the patient; "charge explosion"; incorrect charges; and inflated, excessive, and unreasonable charges, when compared with those of other similar hospitals in the area for the procedure. On May 12, 2004, Mednet forwarded an Explanation of Review (Explanation of Review or EOR) to HCA in relation to the January 23, 2004, date of service. The Explanation of Review reflected an adjusted reimbursement amount of $4,316. The Explanation of Bill Review, otherwise referred to as the Explanation of Review, is defined as the "codes and written explanation of an insurer's reimbursement decision sent to the health care provider." On the Explanation of Review related to the January 23, 2004, date of service, and submitted to South Bay Hospital, Mednet adjusted or disallowed the amount billed for most, if not all, of the procedures, supplies, and equipment listed on the health care providers' itemized bill. On the Explanation of Review, next to each billed amount, Mednet listed one or more codes, which indicated the reason that amount was either disallowed or reduced. The three codes used on the Explanation of Review were 017, S01, and S04. The EOR indicated the meanings of the various codes as follows: 017 Review based on guidelines set forth per the applicable State Workers' Compensation Fee Schedule S01 The fee was reviewed to a standard or reasonableness based on comparisons to industry benchmarks of charges and reimbursement for comparable services in the providers' area S04 This item is packaged or bundled into another basic service or surgical procedure fee performed on the date of service and, therefore, additional reimbursement is disallowed. As a result of its analysis of the provider's bill, Mednet advised the Carrier to pay the amount that Mednet determined to be the usual and customary charge for this particular procedure performed on January 23, 2004, by similar hospitals in the Tampa Bay area, $4,316.00. Based on Mednet's analysis and advice, the Carrier reimbursed HCA $4,316.00 on or about May 20, 2004. Upon completion of its analysis, Mednet, acting for the Carrier, also notified HCA, of its determination that the Carrier should pay HCA only $4,316.00, and not sixty percent of the charges billed, $24,013.93. On or about May 24, 2004, HCA forwarded a request for reconsideration to Mednet in regard to the adjusted reimbursement for both the January 5, 2004, and the January 23, 2004, services. Soon after receiving the request, Mednet began the reconsideration. As part of that process, on or about June 3, 2004, Mednet requested that the hospital provide Mednet with the "medical records and other documentation" to support its charges and billing, but did not receive it until months after the Petition was filed. The medical record would have assisted the Carrier in connection with its review of the hospital's billed charges. Without the medical records or other supporting documents related to the services rendered to the claimant on January 23, 2004, Mednet had no way of verifying if the bill from South Bay Hospital and/or HCA contained billing errors, excessive charges, or duplicate charges. On or about June 1, 2004, only a few days after requesting that the Carrier reconsider the adjusted reimbursement, HCA filed a Petition with the Agency. The Petition requested that the Agency resolve the reimbursement dispute related to both the January 5 and 23, 2004, charges. When the Petition was filed with the Agency, Mednet was still in the process of completing its reconsideration of the charges related to the January 5, 2004, and January 23, 2004, dates of service. The Petition related to the January 23, 2004, date of service, stated in relevant part the following: Per a review of this claim we have found it was paid incorrectly pursuant to the Florida's Workers' Compensation Reimbursement Manual for Hospitals, 2004 edition which refers to a facility/Hospital in ([R]ule 38F-7.501). P.8 Section 10: Reimbursement C. Outpatient Charges (1) All medically necessary charges related to scheduled outpatient surgeries shall be reimbursed at 60 percent of the hospital's charges. Total charges for this claim are $24,013.93. We expected 60% of the billed charges ($14,408.35)[.] We received payment of $4,316.00. This claim is underpaid $10,092.35. In addition to the foregoing, the Petition stated that the claim was billed on February 12, 2004, but the initial payment was not made until May 25, 2004. According to the Petition, this delay in payment violated Subsection 440.20(2)(b), Florida Statutes (2003), which requires the carrier to pay, disallow, or deny all medical, dental, pharmacy, and hospital bills submitted to the carrier no later than 45 calendar days after the carrier's receipt of the bill. Attached to the Petition that was submitted to the Agency were the following documents related to the January 23, 2004, date of service: (1) South Bay Hospital/HCA's completed UB-92, the form on which charges must be submitted; (2) South Bay Hospital's itemized bill; (3) the Explanation of Review, which had been previously submitted to the provider by Mednet, on behalf of the Carrier; and (4) the Explanation of Benefits, prepared by the Carrier and previously submitted to the provider. The UB-92 included the date and description of the services provided, the Current Procedural Terminology (CPT) Codes, and the charges for the services. Also, there was a notation on the UB-92 that the itemized bill and the medical records were attached. As noted on the UB-92, the itemized bill for the January 23, 2004, date of service was attached to the Petition. However, the medical records were not attached to the UB-92 nor was it provided to the Agency prior to its resolution of the reimbursement dispute. The Petition related to the January 23, 2004, date of service, was assigned to Ms. Reynolds, a registered nurse consultant, employed by the Agency and assigned to its Bureau of Rehabilitation and Medical Services. Ms. Reynolds is a registered nurse, who has a bachelor's degree in nursing and a master's degree in surgical nursing. As a registered nurse consultant, Ms. Reynolds' official job responsibilities include reviewing and making determinations regarding disputes under Subsection 440.13(7), Florida Statutes (2003). In carrying out her job responsibilities, relative to assigned disputes, Ms. Reynolds first reviews the petition and validates that it is a workers' compensation claim. Ms. Reynolds also reviews applicable workers' compensation laws and rules, including Section 440.13, Florida Statutes (2003) and Florida Administrative Code Rule 69L-7.501. As part of Ms. Reynolds' review, she refers to American Medical Association's CPT Code to make sure that the CPT Code listed on the UB-92 is correct for the procedure described. If Ms. Reynolds determines that it is necessary in a given case, she may also refer to medical textbooks. Ms. Reynolds developed a checklist that she utilizes in the review process. On the checklist, Ms. Reynolds records relevant dates and various components to ensure compliance with the required statutory and rule provisions. Pursuant to Subsection 440.13(7)(b), Florida Statutes (2003), within ten days after receipt of the Petition and all documents, the Carrier must submit to the Agency all documentation substantiating the Carrier's disallowance. On or about June 10, 2004, Mednet provided HCA and the Agency with a detailed response regarding the January 5, 2004, date of service. This was within ten days of the Carrier's receiving the Petition related to the January 5, 2004, charges. With regard to the Petition related to the January 23, 2004, date of service, Mednet and/or the Carrier submitted no documentation to substantiate the Carrier's disallowances to the Agency within ten days of receipt of the Petition. Petitioners do not dispute that they failed to provide documentation to substantiate the Carrier's disallowance within ten days of receiving the Petition. However, Petitioners believed that because HCA's Petition did not include the medical records referred to on the UB-92, HCA had not, in fact, filed the Petition and "all documentation." Thus, in Petitioners' view, the ten-day period had not started to run. Despite this opinion, neither Mednet nor the Carrier corresponded or otherwise communicated with the Agency to advise that they had requested and were waiting to receive the medical records from South Bay Hospital. Mednet provided HCA and the Agency with a detailed response regarding the Petition related to the January 23, 2004, date of service, on or about June 29, 2004, more than two weeks after the Agency made its determination. Mednet did not have or rely on the hospital record for this response. When the Agency received the response, it had already made its determination. Ms. Reynolds reviewed the Petition related to the January 23, 2004, date of service and validated that it was a Workers' Compensation claim. Based on that review, Ms. Reynolds believed this was a reimbursement dispute. She then reviewed the Explanation of Benefits prepared by the Carrier and the Explanation of Review prepared by Mednet, that were submitted with the Petition. Both the Explanation of Benefits and the Explanation of Review noted the Carrier's reasons for the disallowance and/or reduction of the charges. However, because the Carrier failed to submit documents to substantiate its disallowance and/or adjustment, Ms. Reynolds apparently concluded that there was no basis for the Carrier's doing so. Having failed to receive any documentation from the Carrier, Ms. Reynolds did not consider or independently investigate the validity of the disallowance and/or adjustment. Furthermore, Ms. Reynolds made no determination as to whether the charges of South Bay Hospital were reasonable. Prior to issuing the determination letter, Ms. Reynolds believed that she had all the information she needed. Therefore, she did not request additional information from the health care provider such as the medical records or use documents which were in the Agency's possession and accessible to her. Moreover, Ms. Reynolds did not refer to the CPT Code Manual because she believed that the procedures performed, as reflected on the UB-92 Form, appeared to be consistent with the diagnosis that was presented. The UB-92 for the January 23, 2004, date of service, indicated that the outpatient surgical procedure was CPT Code 24665, which indicated "repair radius fracture." At some point after the Agency issued the determination letter, Mednet expressed concern that this code appeared to be a discrepancy with the apparent diagnosis and treatment rendered on January 5, 2004, which indicated treatment related to the humerus. Given that the humerus is the only bone in the upper arm and the radius is one of two bones in the lower arm or forearm,13 Mednet's concern was reasonable and could perhaps have been definitively cleared up by reviewing the medical record of R.G. However, Mednet never raised this concern in its Explanation of Review. In making the decision relative to the Petition, Ms. Reynolds appropriately relied on Section 440.13, Florida Statutes (2003), and the Florida Workers' Compensation Reimbursement Manual for Hospitals (Reimbursement Manual for Hospitals), 2004 Edition, which is incorporated by reference into Florida Administrative Code Rule 69L-7.501. Subsection 440.13(12), Florida Statutes (2003), provides in pertinent part: . . . All compensable charges for hospital outpatient care shall be reimbursed at 75 percent usual and customary charges. . . . It is the intent of the Legislature to increase the schedule of maximum reimbursement allowances for selected physicians effective January 1, 2004, and to pay for the increases through reductions in payments to hospitals. Revisions developed pursuant to this subsection are limited to the following: * * * 3. Outpatient reimbursement for scheduled surgeries shall be reduced from 75 percent of charges to 60 percent of charges. The Reimbursement Manual for Hospitals provides the guidelines for the maximum reimbursement allowance, including the reimbursement for outpatient services. Section 10, C. of the Reimbursement Manual for Hospitals, states: Section 10: Reimbursement. C. Outpatient Charges All compensable charges for hospital outpatient care shall be reimbursed at 75 percent of the hospital's charges with the following exceptions: 1. All medically necessary charges related to scheduled outpatient surgeries shall be reimbursed at 60 percent of the hospital's charges. The Reimbursement Manual for Hospitals defines the term "charge" as "the dollar amount billed." The Reimbursement Manual for Hospitals defines "charge master" as a comprehensive-coded list "developed by a hospital or an ambulatory surgical center representing the usual charges for specific services." Such document is required to be developed and maintained by the healthcare providers in accordance with Subsection 440.13(12)(d), which provides that "each health care provider . . . receiving workers' compensation payments shall maintain records verifying their usual charges." Ms. Reynolds interpreted the above-quoted provisions of the Reimbursement Manual for Hospitals and Subsection 440.13(12), Florida Statutes (2003), to require the carrier to reimburse the provider 60 percent of charges billed by the hospital, irrespective of whether the charges were the hospital's usual charges or were reasonable. Consistent with the foregoing interpretation, Ms. Reynolds multiplied the hospital's total charges, as reflected on its bill, by 60 percent and determined that the Employer and the Carrier must pay the hospital 60 percent of $24,013.93 or $14,408.36. Based on the payment of $4,316 that the Carrier made on May 24, 2004, Ms. Reynolds determined that the outstanding balance due was $10,092.36. Ms. Reynolds' interpretation of applicable Workers' Compensation statutory provisions and the Reimbursement Manual for Hospitals is inconsistent with the Agency's interpretation of those provisions. The Agency has interpreted the "charges" referred to in Subsection 440.13(12)(b)3., Florida Statutes (2003), and the Reimbursement Manual for Hospitals to mean the hospital's "usual charges," and not "any" charges or the "usual and customary" charges. The Agency's analysis and resolution of a disputed reimbursement requires a determination, at a minimum, of what the hospital's usual charges are for the services or procedures and whether the billed charges are reasonable. The hospital's usual charges can be verified by looking at its charge master. In this case, the Agency had the charge master for South Bay Hospital and that charge master was accessible to Ms. Reynolds. However, Ms. Reynolds did not review the charge master for South Bay Hospital to determine its "usual charges" for the services and procedures it billed for the January 23, 2004, date of service. The determination letter dated June 11, 2004, signed by Ms. Reynolds, stated that the reimbursement for the services rendered on June 23, 2004, "has not been paid correctly and finds an improper disallowance/improper adjustment of payment to provider has been made." The determination letter also refers to the statutory and rule requirement that carriers must pay, disallow, or deny bills within 45 days. The Agency's determination appears primarily based upon Ms. Reynolds' perception that the Carrier violated this requirement. However, this reason was abandoned by the Agency at hearing and through the testimony of its expert witness. Petitioners contend that the Agency's secretary is designated to make final agency decisions, and, in order for a Agency employee to issue a determination letter in a reimbursement dispute, the Agency's secretary must delegate such authority to that employee. Petitioners claim that in absence of such letter or other specific delegation, the decision made by Ms. Reynolds cannot be properly attributed to the Agency. Despite this assertion, Petitioners presented no evidence to support their position. Notwithstanding any error she made, Ms. Reynolds' review of the reimbursement dispute and issuance of the determination letter were within the scope and consistent with her assigned duties as a registered nurse consultant in the Workers' Compensation Unit. In performing those duties, Ms. Reynolds was properly acting on behalf of the Agency, and her actions with regard to the Petition appeared to be ratified by the Agency.14 Mednet's analysis determined what the services rendered at South Bay Hospital on January 23, 2004, would have cost if they had been performed in a different setting (i.e. inpatient surgery versus same day outpatient surgery). Mednet's analysis concluded that if this same surgery had been performed on an inpatient basis instead of an outpatient basis, the hospital would have been limited to a maximum reimbursement allowance of about $3,400, under the Workers' Compensation laws of most states, including those of Florida. In its analysis, Mednet considered whether the charges billed by South Bay Hospital were the "usual and customary" charges for the services rendered. The term "usual and customary charges" is a term used in the health care industry and refers to the average price for a particular service or procedure charged by similar healthcare providers in the same geographic area. The usual and customary charge for this procedure in the area where South Bay Hospital is located, the metropolitan statistical area of Tampa-St. Petersburg-Sarasota, is $4,574.08.15 In this particular case, by comparison South Bay Hospital's charge for the surgical procedure alone to those of other hospitals in the area, appears to be unreasonable and excessive. South Bay Hospital charged $12,548.00 for CPT Code 24665, alone, and $24,013.93 for the entire one-day outpatient visit. Mednet has access to data banks and reports of hospitals' costs, which come from mandatory reports which both the state and federal governments require them to file annually. Mednet performed an analysis of this data and determined that South Bay Hospital's costs for performing this procedure is approximately $3,518.01. Mednet's analysis determined that based on South Bay Hospital's own departmental cost to charge ratios, the Non Fee Schedule procedures should have been billed at $14,771.60 and that the fee schedule items that are paid per the Florida Fee Schedule total $161.00. Accordingly, the health care provider's charges should have been $14,771.60. Sixty percent of this amount would be $8,863. The data upon which Mednet based its analysis is reliable and valid. However, Mednet's analysis made no determination of South Bay Hospital's usual charge for the services performed on June 23, 2004. The Reconsideration Process In its initial response to the Agency regarding the Petition, the Carrier indicated that the health care provider had requested reconsideration of the disallowance or adjustment of certain charges. Because the request was made pursuant to Florida Administrative Code Rule 59A-31.001(5), the Carrier believed that the parties should have been allowed to attempt to resolve the matter prior to the Agency undertaking the dispute resolution process. Florida Administrative Code Rule 59A-31.001 prescribed a procedure whereby health care providers and carriers may attempt to resolve reimbursement issues prior to submitting requests for utilization or reimbursement disputes to the Agency. The rule provides that a provider may request the carrier to reconsider charges that are reduced or disallowed and that this reconsideration process must be sought by the healthcare provider prior to sending a request for resolution to the Agency. Mednet contends that the "reconsideration process" provides the carrier with an opportunity to resolve most concerns without the intervention of the Agency. By reviewing and acting on the Petition prior to completion of the reconsideration process, Petitioners assert that the Agency shortcut the system outlined in Florida Administrative Code Rule 59A-31.001(5) and deprived the Carrier of an opportunity to reconsider its disallowance and adjustments. The June 11, 2004, determination letter indicated there was no need for the Agency to delay resolving the reimbursement dispute pending the outcome of the reconsideration process. According to the letter, the Carrier's reliance on Florida Administrative Code Rule 59A-31.001 was misplaced because "the rule is currently being rescinded from the Florida Administrative Code as it is without statutory support." Contrary to Petitioners' view that the Agency should have complied with Florida Administrative Code Rule 59A- 31.001(5), for the reasons discussed in the Conclusions of Law, at the time the Petition was filed, the rule had been repealed and was no longer in effect.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration enter a final order which: Finds that South Bay Hospital's charge for the January 23, 2004, date of service, was $14,771.60; Finds that the Carrier, Aspen Administrators, is required to pay 60 percent of South Bay Hospital's charge, or $8,863.00; Gives the Carrier, Aspen Administrators, credit for the $4,316.00, it has already paid; and Requires the Carrier to pay the remaining balance of $4,547.00. DONE AND ENTERED this 9th day of August, 2006, in Tallahassee, Leon County, Florida. S CAROLYN S. HOLIFIELD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 9th day of August, 2006.
The Issue Whether Respondent's proposed amendment of Rule 59G-6.040, Florida Administrative Code, and Respondent's proposed new Rule 59G-6.045, Florida Administrative Code, would be invalid exercises of delegated legislative authority, within the meaning of Chapter 120, Florida Statutes, for the reasons asserted by Petitioner.
Findings Of Fact Based upon the evidence adduced at hearing and the record as a whole, the following findings of fact are made: Petitioner Petitioner is a nonprofit Florida corporation. It operates as a charity providing services to individuals (both children and adults) with developmental disabilities in Florida and elsewhere. It provides services to Florida residents in various Intermediate Care Facilities for the Developmentally Disabled (ICF/DDs6) that it owns and/or operates, including state-owned "cluster" facilities each consisting of three eight-bed buildings sharing a common campus. These "cluster" facilities were created by the state as an alternative to the large state-owned and operated institutions.7 Petitioner renders services in these "cluster" facilities pursuant to contracts it has entered into with the state. All of the facilities that Petitioner operates in the state, regardless of size, are located in residential neighborhoods. The residents of these facilities suffer from mental retardation and various other disabilities, including cerebral palsy, autism, spina bifida and epilepsy. Many require constant supervision, attention, and care, as well as aggressive intervention and treatment. The services that Petitioner provides are designed to assist these individuals in reaching their full potential. All of the residents of Petitioner's ICF/DDs in Florida are Medicaid-eligible.8 Petitioner receives Medicaid payments for providing services to these residents. These Medicaid payments have been insufficient to cover Petitioner's costs. (Other private ICF/DD providers9 in Florida have experienced similar funding shortfalls.10 From 1991 to 1996, private ICF/DD providers in Florida, as a group, received $4,652,312.00 less in Medicaid payments than they spent to provide services.) Petitioner has engaged in fund-raising activities to supplement the Medicaid payments it receives. While these fund-raising activities have generated additional monies, Petitioner, nonetheless, to the detriment of residents, has had to make reductions in the amount it spends for their treatment and care. Recently, Petitioner experienced significant difficulty meeting its payroll, and was forced to obtain a bank loan to pay its employees the monies it owed them. Current Medicaid Reimbursement Methodology Petitioner and all other ICF/DD providers, including the state, are currently reimbursed for providing Medicaid- covered services at their facilities in accordance with the methodology set forth in "Florida Title XIX Intermediate Care Facility for the Mentally Retarded and Developmentally Disabled Reimbursement Plan, Version VI, November 15, 1994" (Version VI of the Plan). Version VI of the Plan is incorporated by reference in Rule 59G-6.040, Florida Administrative Code,11 which provides as follows: 59G-6.040 Payment Methodology for ICF/MR-DD Services. Reimbursement to participating ICF/MR-DD facilities for services provided shall be in accord with the Florida Title XIX ICF/MR-DD Reimbursement Plan Version VI, November 15, 1994, and incorporated herein by reference. A copy of the Plan as revised may be obtained by writing to the Office of the Medicaid Director, P.O. Box 13000, Tallahassee, Florida 32399-0700. Specific Authority 409.919 FS. Law Implemented 409.908 FS. History--New 7-1-85, Amended 2-25-86, Formerly 10C-7.491, Amended 11-19-89, 8-14- 90, 12-26-90, 9-17-91, 1-27-94, Formerly 10C- 7.0491, Amended 11-15-94. Pursuant to Version VI of the Plan, "[r]eimbursement rates [are] established prospectively for each individual provider based on the most historic costs, but historic costs [are] limited to allowable percentage increases from period to period." "Reimbursement rates [are] calculated separately for two classes . . . based on the four levels of ICF/MR-DD care," Developmental Residential, Developmental Institutional, Developmental Non-ambulatory, and Developmental Medical, with the former two (Developmental Residential and Developmental Institutional) constituting one class and the latter two (Developmental Non-ambulatory and Developmental Medical) constituting the other class. "The four components [of a provider's reimbursement rate] are operating costs, resident care costs, property costs, and return on equity costs or use allowance, if applicable. Inflation allowances used in the rate setting process [are] applied to the operating and resident care cost components independently for the two reimbursement classes." Section V.M. of Version VI of the Plan, which provides as follows, describes the "target rate of inflation" feature of the reimbursement methodology, which is a cost containment feature designed to promote economy and efficiency: The use of a target rate of inflation for cost increases shall be used as a measure of efficient operation for purposes of this reimbursement plan. The target rate of inflation principle is that a provider's operating and resident care per diems by reimbursement class should not increase from one fiscal period, that is, year, to the next by a percentage amount with exceeds 1.786 times the average percentage of increase in the Florida ICF/MR-DD Cost Inflation Index for the same period. If a provider's per diem costs for either reimbursement class for operation or resident care exceeds the target rate of inflation, then the allowable per diem costs of the period in which the excessive costs occurred shall be limited to a level equal to the prior period's allowable per diem costs inflated by the target rate percentage. Only allowable per diem cost shall be used for prospective rate setting purposes and for future target rate comparisons. Notwithstanding its name, the "Florida ICF/MR-DD Cost Inflation Index" is based upon a national (rather than a Florida- specific) market basket index.12 Section IV.K. of Version VI of the Plan provides for "incentive payments" to be made to providers who are not "out of compliance with any Condition of Participation" and "whose annual rates of cost increase for operating cost or resident care costs from one cost reporting period to the next are less than 1.786 times the average cost increase for the applicable period documented by the ICF/MR-DD Cost Inflation Index." According to the language contained in this section, its provisions are designed to "encourage high quality care while containing costs." Version VI of the Plan also has a "rebasing" feature, which operates to increase reimbursement rates periodically (no less than once every five years). This "rebasing" feature is described in Section V.B.9 as follows: Rebasing of the operating and resident care component per diems shall occur every five (5) years or whenever fifty percent (50%) of private providers are reimbursed less than reported, allowable costs (whichever occurs first). In detail, rebasing will occur in the rate semester in which fifty percent (50%) or more of the private providers' operating and resident care per diem rate (combined) are less than the operating and resident care inflated costs (combined)(inflated at 1xNational DRI as Florida weighted) based upon eligible cost reports, or each five (5) years counting from October 1, 1991 (1.e, the first rebasing occurring on October 1, 1996) whichever occurs first. The rebasing calculation methodology shall be identical to that used for the October 1, 1989 rate semester rebasing (Section V.A.1.5.) except that rebasing shall occur only for providers whose inflated combined operating and resident care rate does not cover one hundred (100%) of their combined operating and resident care inflated costs. Individual providers which would qualify for rebasing based on April 1, 1991 rates shall be rebased effective July 1, 1991. Version VI of the Plan also provides for "interim changes in component reimbursement rates, other than through the routine semi-annual rate setting process . . ., as well as changes in a provider's allowable cost basis." These provisions promote quality of care inasmuch as they authorize reimbursement for certain costs "necessary to meet existing state or federal requirements," notwithstanding the cost containment features contained elsewhere in the Plan. They are found in Section through 6, which provide as follows: Requests for rate adjustments for increases in property-related costs due to capital additions, expansion, replacements, or repairs shall not be considered in the interim between cost report submissions, except for the addition of new beds or if the cost of the specific expansion, addition, repair, or replacement would cause a change of 1 percent or more in the provider's total per diem reimbursement rate. Requests for interim rate changes reflecting increased costs occurring as a result of resident care or administration changes or capital replacement other than that specified in (1) above shall be considered only if such changes were made to comply with existing state or federal rules, laws, or standards, and if the change in cost to the provider is at least $5000 and would cause a change of 1.0 percent or more in the provider's current total per diem rate. The provider must submit documentation showing that the changes were necessary to meet existing state or federal requirements. In the event that new state or federal laws, rules regulations, or licensure and certification requirements require all affected providers to make changes that result in increased or decreased resident care, operating, or capital cost, request for component interim rate shall be considered for each provider based on the budget submitted by the provider. All affected providers' budgets submitted shall be reviewed by the agency and shall be the basis for establishing reasonable cost parameters. Interim rate requests resulting from (1), (2), and (3) above must be submitted within 60 days after costs are incurred, and must be accompanied by a 12-month budget which reflects changes in services and costs. An interim reimbursement rate, if approved, shall be established for estimated additional costs retroactive to the time of the change in services or the time the costs are incurred, but not to exceed 60 days before the date AHCA receives the interim rate request. The interim per diem rate shall reflect only the estimated additional costs, and the total reimbursement rate paid to the provider shall be the sum of the previously established prospective rates plus the interim rate. A discontinued service would offset the appropriate components of the prospective per diem rates currently in effect for the provider. Upon receipt of a valid interim rate request subsequent to June 30, 1984, the AHCA Office of Medicaid must determine whether additional information is needed from the provider and request such information within 30 days. Upon receipt of the complete, legible additional information as requested, the AHCA Office of Medicaid must approve or disapprove the interim rate within 60 days. If the Office of Medicaid does not make such determination within the 60 days, the interim rate shall be deemed approved. Interim Rate Settlement. Overpayment as a result of the difference between the approved budgeted interim rate and the actual costs of the budgeted item shall be refunded to AHCA. Under-payment as a result of the difference between the budgeted interim rate and actual allowable costs shall be refunded to the provider. After the interim rate is settled, a provider's cost basis shall be restricted to the same limits as those of a new provider . . . . The right to request interim rates shall not be granted for fiscal periods that have ended. Sections VI. and VII. of Version VI of the Plan are entitled "Payment Assurance" and "Provider Participation," respectively, and provide as follows: Payment Assurance The state shall pay each provider for services provided in accordance with the requirements of the Florida Title XIX state plan and applicable state or federal rules and regulations. The payment amount shall be determined for each provider according to the standards and methods set forth in the Florida Title XIX ICF/MR-DD Reimbursement Plan. Provider Participation The plan is designed to assure adequate participation of ICF/MR-DD providers in the Medicaid Program, the availability of high- quality services for recipients, and for services which are comparable to those available to the general public. ICF/DD Reimbursement Prior to 1989 Originally, ICF/DD providers in Florida were reimbursed for providing services to the Medicaid beneficiaries in their facilities pursuant to the same methodology used to reimburse nursing home operators. It subsequently was determined, however, that, because of the differences between ICF/DDs and nursing homes and their respective populations,13 a separate methodology for ICF/DDs was warranted in order to ensure that reimbursement rates for ICF/DD providers were adequate. Such a separate methodology for ICF/DDs (ICF/DD Methodology) was created in 1984. The new ICF/DD Methodology did not include a rebasing provision, and its implementation did not result in an elimination of ICF/DD underfunding. In fact, from 1984 to 1989, most ICF/DD providers, including the state, suffered "tremendous losses." In 1989, a rebasing provision was added to the ICF/DD Methodology. In less than 24 months after the addition of this provision, however, more than half of the ICF/DD providers were spending more on providing ICF/DD services than they were being reimbursed. United States District Court for the Southern District Court of Florida Case No. 89-0984 Petitioner is now, and has been at all times material to the instant case, a member of the Florida Association of Rehabilitation Facilities, Inc. (FARF), a trade association representing non-profit corporations that own and/or operate intermediate care facilities for the developmentally disabled. In 1989, FARF and its members (Plaintiffs), including Petitioner, filed suit in the United States District Court for the Southern District Court of Florida (Case No. 89-0984) challenging the manner in which Florida reimbursed FARF members for the provision of Medicaid-covered services. In May of 1991, Respondent's predecessor, in an effort to address the issues raised in the FARF lawsuit, announced that it was making revisions in the ICF/DD Methodology. These revisions took effect July 1, 1991. On September 11, 1991, United States District Court Judge Lenore C. Nesbitt, acting upon the Plaintiffs' motion, issued an Order Granting Preliminary Injunction in Case No 89- 0984. Judge Nesbitt's order contained the following "findings of facts": Plaintiffs are a group of non-profit corporations providing health care services to mentally retarded individuals in intermediate care facilities ("ICF/MR"), and a trade association representing that group. Defendants are the Florida Department of Health and Rehabilitative Services ("HRS") and two of its officials. At the request of the State of Florida, Plaintiffs provide treatment for mentally retarded individuals, 99%-100% of whom are Medicaid-eligible, in numerous facilities in the state. Certain Plaintiffs both own and operate the ICF/MRs. Others only operate the facilities, which are on land owned by the State. This latter group of facilities are known as "cluster facilities." Because the State of Florida has chosen to receive federal funds by participating in the Medicaid program, it must comply with the requirements of the federal act. One requirement is that the State develop a reimbursement plan for providers of ICF/MR services. As described below, the state need not reimburse all actual costs of the providers; it must only pay rates which are "reasonable and adequate" for an efficient provider to provide care in compliance with applicable state and federal laws and quality and safety standards. HRS reimburses Plaintiffs in the following manner: Operators of cluster facilities are paid pursuant to a fixed-rate contract, not pursuant to any reimbursement plan. Also, HRS' obligations under the contract are expressly made conditional on sufficient appropriations by the state legislature. Operators of non-cluster facilities are reimbursed pursuant to a plan formulated by the state. As is true with most state plans, and is permitted by the Medicaid Act, HRS' plan determines cost on a prospective basis. That is Plaintiffs are paid based on what their services should cost not on what they have actually spent. See Wilder v. Virginia Hosp. Assn., 110 S.Ct 2510, 2516 n.7 (1990). The plan reimburses non-cluster providers as follows: Providers get either last year's actual costs or last year's "target limit cost" (i.e. the previous year's costs plus allowed inflation plus 1.5%), whichever is lower, plus one times the "Modified DRI Nationwide Nursing Home Costs Index." By contrast, operators of "skilled nursing facilities" were provided an inflation increase equivalent to two times the DRI Index. Significantly, there is no periodic readjustment of the target limit. As a result, efficient providers whose necessary costs are consistently greater than their target limit will continue to be under- reimbursed. Further, providers who keep their costs below the target limit are rewarded with a penalty: their target limit for the following year is reduced.14 Plaintiffs assert three challenges to Florida's medicaid reimbursement system. In count I, the substantive challenge to the state's plan, Plaintiffs allege that HRS' plan does not meet the substantive requirement of the Boren Amendment to the Medicaid Act. That is, it does not provide for rates which are "adequate and reasonable" to meet those costs which must be incurred by efficient providers of services in conformity with applicable federal and state laws, regulations, and quality and safety standards. In support of this count, Plaintiffs have submitted several affidavits stating that they and every other provider in the state, except one, continually operate at a large loss because their costs substantially exceed the amounts reimbursed under the plan.15 Neither is it genuinely disputed that the current situation impacts on quality of care.16 Count II, the equal protection claim, alleges that the state's decision to reimburse "skilled nursing facilities" at two times the DRI inflation rate while reimbursing ICF/MR providers at just one times the DRI rate is arbitrary, without justification, and hence violative of the Constitution. Count III alleges and it is undisputed that HRS payment to cluster providers via a fixed- rate contract instead of pursuant to a plan, while at the same time receiving federal funds under the Medicaid Act, violates federal law. Further, Plaintiffs challenge HRS' refusal, prior to the filing of the pending motion, to amend the cluster contracts to cover unexpected and unavoidable interim cost increases, such as increases in worker's compensation insurance rates. As a result of these refusals, Plaintiffs have suffered financially relative to those reimbursed pursuant to a plan. Plaintiffs' evidence also indicates that, because of these consistent and substantial unreimbursed costs, operators of cluster facilities may be unable to continue providing care in the future.17 Defendants' evidence consists of allegations that Plaintiffs' financial difficulties have resulted from past poor management decisions, specifically from their past failure to devote sufficient resources to the wages of their direct care staff. Defendants' evidence also raises a factual dispute as to the financial loss to cluster providers as a result of being paid pursuant to a fixed-rate contract. Otherwise, Defendants do not seriously dispute most of the facts set forth in Plaintiffs' affidavits. Instead, Defendants' submissions consist primarily of argument: they comment on Plaintiffs' evidence and ask the Court to draw the conclusion that (1) their plan reasonably and adequately reimburses the truly efficient provider, and that (2) Plaintiffs' problems are the result of inefficiencies and management mistakes unrelated to deficiencies in the plan. After setting forth these "findings of fact," Judge Nesbitt, in her order, engaged in a discussion explaining why it appeared that Plaintiffs were entitled to a preliminary injunction as to Counts I and III of their complaint. In "conclusion," Judge Nesbitt stated the following: For these reasons, Plaintiffs' Motion for Preliminary Injunction is GRANTED as to Counts I and III. Accordingly, effective September 4, 1991, Defendants are hereby ENJOINED from inadequately reimbursing providers of care in the ICF/MR program. Defendants are further ENJOINED from paying providers for services at ICF/MR cluster facilities in a manner other than as provided for in a rate plan, and shall commence paying each provider of ICF/MR services at cluster facilities the full Medicaid rate for that facility, and shall afford each provider at cluster facilities all rights and protections accompanying a rate plan governing ICF/MR facilities. Though the Court may make interim modifications to the state's current plan, . . . the Court shall not do so at this time. In the spirit of the Boren Amendment's goal of permitting states maximum flexibility in formulating plans for reimbursement, Defendant shall be permitted to file, on or before October 4, 1991, a plan which complies with the substantive requirements of 42 U.S.C. Section 1396a(a)(13). See Wilder v. Virginia Hosp. Assn., 110 S.Ct. 2510, 2517 & 2525 (1990). The rates of reimbursement established under the plan ultimately approved by the Court shall be retroactive to September 4, 1991. The parties are directed to cooperate in formulating an acceptable plan to be presented to this court.18 The Order Granting Preliminary Injunction entered by Judge Nesbitt has not been vacated, rescinded, set aside or modified. On November 14, 1991, Judge Nesbitt issued an Order on Motion for Civil Contempt and Sanctions in Case No. 89-0984, which provided as follows: THIS CAUSE came on before the Court on Plaintiffs' Motion for Civil Contempt and Sanctions and after agreement of counsel for the respective parties before Magistrate Judge Turnoff and submission by all parties of the attached joint proposal, IT IS ORDERED AND ADJUDGED that the attached document is adopted and approved by the Court as its Order on Motion for Civil Contempt and Sanctions and the parties and their agents and successors are hereby ordered to comply with the terms hereof commencing on November 1, 1991. The "attached joint proposal" which Judge Nesbitt "adopted and approved" provided as follows: BASIS FOR AGREEMENT TO DISMISS MOTION FOR CONTEMPT Interim rates for Sunrise OK (Weeks attachment) Depreciation and Maintenance HRS agrees to pay the full Medicaid rate in the current Medicaid rate plan to cluster operators. Cluster operators agree to use amounts in the full rate devoted to depreciation for repair of the facility and replacement (if necessary) of the equipment of facility. HRS and clusters shall agree on said repairs and replacements and shall prioritize any licensure deficiencies for replacement or repair. To the extent there is no necessity for repair of the facility or replacement of equipment, all funds shall revert to HRS/Developmental Services. The amount of depreciation in any given year shall be as computed in the cost report and in accordance with the rate Plan. HRS agrees to retain all liability for repair of the facility and replacement equipment (if any) in excess of those items handled under section 2. Cluster operators and HRS agree that maintenance funds in the full rate, which are attributable to HRS costs incurred in the facility, shall be sent to HRS for continuation of maintenance, or may be retained by cluster and HRS relieved of responsibility for maintenance. Cluster operators are not obligated to assume duties and obligations/ responsibilities in their contracts with HRS district offices that are in excess of those required of an ordinary ICF/MR provider. Pay 6+% retroactive to July 1 by November 30. Agree to pay minimum of May 17 agreement or full rate, whichever is higher, for 1 year, ending June 30, 1992. Agree to pay minimum of May 17 agreement or full rate, whichever is higher, for 1 year, ending June 30, 1992. Agree to pay minimum of May 17 or full rate, whichever is higher, for an additional 4 year period, ending June 30, 1996 subject to legislative appropriation each year. Absent legislative approval, cluster entitled to full rate without depreciation and expense deduction or restrictions contained herein. HRS agrees to seek legislative appropriations, for additional funds, if necessary, in excess of total Medicaid rate, to fund those additional revenues, required per #5 for each year until 1996. These term[s] supplement and do not abrogate May 17 except annual renewal replaced with 5 year contract. Each subsequent contract shall be for 5 years. Defendants shall be entitled in that year to renegotiate the contract or bid-out the contract. Under 2B. Right to Renewal of the Stipulation of Settlement lines 8 through 12 beginning with "Cluster" and ending with "Stipulation" shall be stricken. In additions lines 6 through 19 on Page 7 shall be stricken beginning with "Defendants" and ending with "1991." See attached. (Sic. #8 now included in running text.) If depreciation of funds are available after expenditures have been made for necessary repairs and replacement, HRS and cluster operator shall agree to deposit such funds into a reserve fund, to be held by the operator, to fund necessary repairs and replacement in future years, particularly long term repairs unlikely to appear on a regular basis. Funds held in reserve by the operator for long term repair or replacement which are not expended by the end on the 5 year contract period shall revert to the Department, unless the Department renews the contract with the same operator, or funds are transferred to new provider. At the end of each 5 year contract with cluster, the contract may be renewed with the current cluster operator, or bid out. When contracts are renewed or bid out, the terms shall be for the full Medicaid rates. Funds appropriated in F.Y, 1991-92 for repairs and replacement shall be promptly disbursed. (Note: The numbering system on my original copy reflects changes made after copying had taken place, but before signature. Thus the copy shows an 8. and 9., which have been deleted on the original signed agreement. Also the copy shows number 10.-14 which have been renumbered on the original 8.-12.) (Weeks Attachment) 1. The interim rate request filed for the McCauley, Mahan, Dorchester, Bayshore, Green Tree Court and St. Petersburg on June 17, 1991 will be approved for all six clusters. Reimbursement for the interim rate increase shall be paid to Sunrise beginning 60 days prior to the date of filing and the interim shall be settled based on the June 30, 1991 cost reports for each of these clusters. The level of interim rate increase shall be per data and calculations provided the Department with Sunrise's July 31, 1991 letter to Ms. Joyce Barrington. Procedure used for this interim shall be in compliance with the current Florida Title XIX ICF/MR-DD Reimbursement Plan and current procedures for interim rates to include inflation on the interim rate component effective 7/1/91 through 3/30/92. Case No. 89-0984 is still pending (but before Judge Michael Moore). Doe v. Chiles In March of 1992, FARF became involved in another federal lawsuit against the state, when it, along with United Cerebral Palsy, Inc., and various Florida residents who had been placed on waiting lists for entry into an ICF/DD, filed a 1983 action in the United States Court for the Southern District of Florida (styled Doe v. Chiles) claiming that the state was causing unreasonable delays in the provision of ICF/DD services. In December of 1992, FARF and United Cerebral Palsy, Inc., were dismissed as plaintiffs. On July 22, 1996, Judge Wilkie D. Ferguson, Jr., granted the remaining plaintiffs' motion for summary judgment, holding: Section 1396a(a)(8) of the Medicaid (A)ct, specifically the reasonable promptness clause, is enforceable under 42 U.S.C. Section 1983. "Medical assistance under the plan" has been defined as medical services. The (S)tate is obliged to furnish medical services, however, only to the extent that such placements are offered in the Federal Health Care Financing Agency ("HCFA") approved State plan. Once a state elects to provide a service, that service becomes part of the state Medicaid plan and is subject to the requirements of Federal law. At oral argument on this issue, Defendants conceded that Florida's [HCFA] State approved plan does provide for placement in ICF/MR facilities. Further, Defendants have not disputed the facts alleging the [S]tate's failure to conform with the provisions set forth in that statute, which the Court construes as an admission of unreasonable delays in placing developmentally disabled persons into ICF/MR facilities. On August 26, 1996, a magistrate judge signed a report recommending that Judge Ferguson grant the plaintiffs' motion to certify as a class "all those developmentally disabled persons who have not received prompt [ICF/DD] placement." After conducting a hearing on August 28, 1996, Judge Ferguson entered a final judgment, ordering that the state "shall, within 60 days of the date of this Order, establish within the State's Medicaid Plan a reasonable waiting list time period, not to exceed ninety days, for individuals who are eligible for placement in [an ICF/DD]." The state appealed the final judgment. On February 26, 1998, the Eleventh Circuit, in an opinion reported at 136 F.2d 709 (11th Cir. 1998), affirmed the judgment. Chapter 96-417, Laws of Florida In 1996, the Florida Legislature passed House Bill No. 1621 (Chapter 96-417, Laws of Florida), Sections 4, 6, 11, 12, 13, 14, 15, 16 and 17 of which provided, in pertinent part, as follows: Section 4. Subsections (8) and (14) of section 409.906, Florida Statutes, are amended to read: 409.906 Optional Medicaid services. --- Subject to specific appropriations, the agency may make payments for services which are optional to the state under Title XIX of the Social Security Act and are furnished by Medicaid providers to recipients who are determined to be eligible on the dates on which the services were provided. Any optional service that is provided shall be provided only when medically necessary and in accordance with state and federal law. Nothing in this section shall be construed to prevent or limit the agency from adjusting fees, reimbursement rates, lengths of stay, number of visits, or number of services, or making any other adjustments necessary to comply with the availability of moneys and any limitations or directions provided for in the General Appropriations Act or chapter 216. Optional services may include: . . . (14) INTERMEDIATE CARE FACILITY FOR THE DEVELOPMENTALLY DISABLED MENTALLY RETARDED SERVICES. For the purposes of Medicaid reimbursement, "intermediate care facility for the developmentally disabled services" means services provided by a facility which is owned and operated by the state and to which the agency may pay for health-related care and services provided on a 24-hour-a-day basis, for a recipient who needs such care because of a developmental disability or related condition. The agency may pay for health related care and services provided on a 24-hour a day basis by a facility licensed under chapter 393, to a recipient who needs such care because of his mental or physical condition.19 . . . Section 6. Section 409.908, Florida Statutes is amended to read: 409.908 Reimbursement of Medicaid providers. Subject to specific appropriations, the agency shall reimburse Medicaid providers, in accordance with state and federal law, according to methodologies set forth in the rules of the agency and in policy manuals and handbooks incorporated by reference therein. These methodologies may include fee schedules, reimbursement methods based on cost reporting, negotiated fees, competitive bidding pursuant to s. 287.057, and other mechanisms the agency considers efficient and effective for purchasing services or goods on behalf of recipients. Payment for Medicaid compensable services made on behalf of Medicaid eligible persons is subject to the availability of moneys and any limitations or directions provided for in the General Appropriations Act or chapter 216. Further, nothing in this section shall be construed to prevent or limit the agency from adjusting fees, reimbursement rates, lengths of stay, number of visits, or number of services, or making any other adjustments necessary to comply with the availability of moneys and any limitations or directions provided for in the General Appropriations Act, provided the adjustment is consistent with legislative intent. (2)(a)1. Reimbursement to nursing homes licensed under part II of chapter 400 and state-owned-and-operated intermediate care facilities for the developmentally disabled mentally retarded licensed under chapter 393 must be made prospectively. . . . Section 11. (1) The Legislature finds: That noninstitutional home and community-based services are a cost-effective and appropriate alternative to institutional care for many individuals who would otherwise be served in institutional settings; That the Intermediate Care Facility for the Developmentally Disabled program is an optional institutional service authorized by Title XIX of the Social Security Act and that this act encourages states to develop and utilize alternatives to optional institutional services for Medicaid clients through authorization of waivers that allow for federal financial participation in the provision of services in noninstitutional settings for clients who are eligible for Medicaid-reimbursed institutional services; That utilization of noninstitutional funding mechanisms for individuals residing outside of state-owned-and-operated institutions allows individuals to be appropriately served at less cost than is possible through the Intermediate Care Facility for the Developmentally Disabled program; That federal regulations diminish the ability of the state to manage resources currently used to reimburse privately owned or operated intermediate care facilities for the developmentally disabled to enable the most cost-effective utilization of resources appropriated to programs that serve individuals with developmental disabilities; That there are fundamental differences in the respective roles of private and public facilities that serve individuals with developmental disabilities and that these differences justify funding private and public facilities through different funding mechanisms; That there is a critical state need to continue financing institutional services provided in state-owned-and-operated facilities for the developmentally disabled through the Intermediate Care Facility for the Developmentally Disabled program to provide for the adequate care of the clients who reside in these facilities; and That the most appropriate and cost- effective care for state-supported clients who reside in privately owned or operated residential facilities for individuals with developmental disabilities is provided through community-based, noninstitutional service delivery models that are financed through noninstitutional financing mechanisms. (2) In accordance with the findings in subsection (1), it is the intent of the Legislature that, in order to both reduce the cost of serving individuals with developmental disabilities and provide appropriate alternative services to institutional care, privately owned or operated facilities authorized to receive reimbursement through the Medicaid Intermediate Care Facility for the Developmentally Disabled program on June 30, 1996, shall no longer be reimbursed through that program but may continue to serve clients through noninstitutional service arrangements that are financed through noninstitutional funding mechanisms. It is further the intent of the Legislature that individuals who reside in state-owned-and- operated intermediate care facilities for the developmentally disabled shall continue to receive services financed through the Medicaid Intermediate Care Facility for the Developmentally Disabled program. Section 12. The Agency for Health Care Administration shall issue a license as a home for special services to each facility desiring such licensure, if the facility was eligible to receive reimbursement through the Intermediate Care Facility for the Developmentally Disabled program on June 30, 1996. Individuals with developmental disabilities who reside in homes for special services licensed pursuant to this section may receive services reimbursed through the home and community-based services waiver, provided all other Medicaid eligibility criteria are satisfied. A license granted pursuant to this section shall be valid until the expiration of the facility's Intermediate Care Facility for the Developmentally Disabled license. The Agency for Health Care Administration shall develop standards for facilities licensed pursuant to this section which shall include appropriate sanctions for noncompliance with the standards and shall specify the terms for renewal of licenses. Any license granted pursuant to this section shall be contingent upon the facility allowing access to the Agency for Health Care Administration to conduct inspections to ensure compliance with standards. Section 13. Subsection (29) of section 393.063, Florida Statutes, is amended to read: 393.063 Definitions.- For purposes of this chapter: (29) "Intermediate care facility for the developmentally disabled" or "ICF/DD" means a state-owned-and-operated residential facility licensed in accordance with state law, and certified by the Federal Government pursuant to the Social Security Act, as a provider of Medicaid services to persons who are mentally retarded or who have related conditions. The capacity of such a facility shall not be more than 120 clients. Section 14. Section 393.067, Florida Statutes, is amended to read: 393.067 Licensure of residential facilities and comprehensive educational programs.- In addition to the requirements in subsection (4), the initial license application for an intermediate care facility for the developmentally disabled of six beds or less shall also include: The provider's proposal, on forms provided by the department, including a pro forma budget which shall also serve as the basis for establishing an initial interim Medicaid reimbursement rate. Approval and selection of the provider's proposal by the district and the Developmental Services Program in accordance with paragraph (20)(c). The initial license application shall be valid while the provider develops the facility in compliance with the conditions of the approved proposal. The department shall only accept proposals for intermediate care facilities for the developmentally disabled of six beds or less in response to the publication of projected bed need. Projected bed need shall be published by the department and shall identify: The district in which the beds are to be located. The maximum per diem cost which shall be in accordance with the Florida Title XIX ICF/MR Reimbursement Plan. The maximum size of the facility. The level of care of clients to be served, including demographic and programmatic characteristics of the client population. Projected bed need shall be directed towards clients who have severe disabilities, who have extensive service needs, who require extensive active treatment services, and who can only be adequately served in a cost-effective manner in an intermediate care facility for the developmentally disabled. Projected bed need shall be determined by the department on the basis of client need for extensive active treatment services that can only be delivered in a cost-effective manner in an intermediate care facility for the developmentally disabled. The department shall approve and select from provider proposals that respond to published projected bed need, based on the following weighted criteria in order of importance: Adequacy and quality of services that address the published bed need projections, especially the client demographic and programmatic characteristics. Completeness of the proposal and adherence to timeframes. Demonstration of financial ability to operate the facility in relation to published bed need projections. Appropriateness of per diem cost to provide quality services. Any license granted for intermediate care facilities for the developmentally disabled under the provisions of subsections (18) and (20) shall be valid only while the provider operates the facility in compliance with the conditions in the proposal that were approved by the department, as well as with all other applicable laws, rules, and regulations related to the operation of such facilities. Section 15. (1) Section 393.16, Florida Statutes, is hereby repealed.20 (2) Any cash balance remaining in the Intermediate Care Facilities Trust Fund shall be transferred to the Community Resources Development Trust Fund. Section 16. Notwithstanding any other provision of law, or this act to the contrary, the Agency for Health Care Administration may continue to reimburse private intermediate care facilities for the developmentally disabled through the Intermediate Care Facility for the Developmentally Disabled program through August 30, 1996, if requested by the Secretary of Health and Rehabilitative Services to ensure the safety and well-being of clients. Section 17. This act shall take effect July 1, 1996, or upon becoming a law, whichever is later; however, if this act becomes a law after July 1, 1996, it shall operate retroactively to July 1, 1996. Chapter 96-417, Law of Florida, became a law without the Governor's approval on June 7, 1996. Cramer v. Chiles Chapter 96-417, Florida Statutes, was challenged in the United States District Court for the Southern District of Florida in the case of Cramer v. Chiles, Case No 96-6619, which was assigned to Judge Ferguson. On August 28, 1996, Judge Ferguson issued an Order on Motion for Preliminary Injunction in Case No. 96-6619, which provided as follows: THIS CAUSE came before the Court for oral argument August 28, 1996 on Plaintiffs' Emergency Motion for Preliminary Injunction. Plaintiffs request the Court stay the effective date of Chapter 96-417, Public Laws, which is scheduled to go into effect August 30, 1996. The enactment would eliminate all private intermediate care facilities for the developmentally disabled21 ("ICF/DDs") in Florida, reducing the number of ICF/DD placements available by nearly 2,200. This Court previously determined in Doe v. Chiles, Case No. 92-589-CIV-Ferguson, that the State of Florida is obligated to provide placement of eligible individuals in ICF/DDs. Accordingly, in the absence of a transitional plan and showing that the State's proposed revised plan, under the new legislation, will adequately provide ICF/DD placements for eligible persons in Florida, there is a likelihood that Plaintiffs will succeed on the merits. To allow the substantial change scheduled for August 30, 1996, prior to the submission to, and approval by, the Federal Health Care Financing Agency ("HCFA") of an alternative plan which satisfies the State's obligations to beneficiaries under the existing plan, would cause irreparable harm to individuals currently provided care in those facilities. There must be a period and a plan for transition which will insure that services to the entitled recipients are not substantially impaired. The Plaintiffs have made a sufficient showing that there is no adequate legal remedy. Accordingly, it is ORDERED AND ADJUDGED that the Plaintiffs' motion for preliminary injunction is GRANTED, and the State shall continue to provide the current funding for 100% of cost reimbursements to private ICF/DD facilities until such time as a revised plan is presented and approved by HCFA. The new plan, for fairness considerations, shall disclose criteria to be used by the State in its reassessments for continued institutional care eligibility. Time is of the essence, as budgetary constraints dictate that a plan must be approved well before the end of the fiscal year, June 30, 1997. It is thus incumbent on all parties to move expeditiously. On October 13, 1998, Judge Ferguson issued an Order on Defendants' Ore Tenus Agreed Motion to Revive Statutory Scheme, which provided as follows: THIS MATTER came before the Court upon Defendants' Ore Tenus Agreed Motion to Revive Statutory language in Chapters 393 and 409, FLORIDA STATUTES (1995), as they existed prior to the enactment of Chapter 96-417, LAWS OF FLORIDA, and the Court being fully advised in the premises and having considered the entire record of the case, for good cause shown, it is hereby ORDERED AND ADJUDGED the Motion is Granted nunc pro tunc to the date of the entry of oral Order on Summary Judgment on January 9, 1998. Chapter 97-260, Florida Statutes Following the initiation of the challenge to Chapter 96-417, Laws of Florida, the Florida Legislature further addressed the "transition from funding through the Intermediate Care Facility for Developmentally Disabled Program to noninstitutional funding" by enacting Chapter 97-260, Laws of Florida, section 4 of which provided as follows: Report required; department to notify Legislature and develop plan if judicial decisions result in spending requirements in excess of appropriations.– The Department of Children and Family Services shall develop individual support plans for the approximately 2,176 persons directly affected by the transition from funding through the Intermediate Care Facility for Developmentally Disabled Program to noninstitutional funding. The individual plans shall provide for appropriate services to each affected individual in the most cost- effective manner possible. The department shall report the projected aggregate cost of providing services by fund source through the individual plans to the Office of Planning and Budgeting, the Senate Ways and Means Committee, and the House Health and Human Services Appropriations Committee by September 30, 1997. The aggregate costs reported shall be based on typical industry rates and shall not include special adjustments for property costs or other additional costs unique to any individual provider or type of provider. The department may, however, report any such costs separately. The report must further provide detailed information on department efforts to maximize Medicare and other funding available outside the Developmental Services Program and the use of generic community resources along with a calculation of the value of such resources. The report must also include a summary of the department's progress in recruiting alternative providers in the event that any current providers decide to discontinue services to clients or cannot provide quality services within the anticipated rate structure. If judicial decisions are continued or rendered that the Department of Children and Family Services feels will require spending in excess of the amounts budgeted for Developmental Services, the department shall immediately notify the Chairs of the Senate Ways and Means Committee, the House Fiscal Responsibility Council, and the House Health and Human Services Appropriations Committee. Within 1 week after providing notification pursuant to this subsection, the department shall submit a spending plan that addresses the projected deficit. This section is repealed July 1, 1999. Boren Amendment Repeal In the Balanced Budget Amendment of 1997 (more specifically, Section 4711(a)(1) thereof), the United States Congress repealed the Boren Amendment to the Medicaid Act, which Judge Nesbitt had referred to in her Order Granting Preliminary Injunction in United State District Court for the Southern District of Florida Case No. 89-0984. The Boren Amendment required, in pertinent part, that a state plan for medical assistance22 provide for "payment of . . . the hospital services, nursing facility services, and services in an intermediate care facility for the mentally retarded provided under the plan through the use of rates . . . which the State finds, and makes assurances to the Secretary, are reasonable and adequate to meet the costs which must be incurred by efficiently and economically operated facilities in order to provide care and services in conformity with applicable State and Federal laws, regulations, and quality and safety standards." Section 4711(a)(1) of the Balanced Budget Amendment of 1997 eliminated this requirement (which was codified in 42 U.S.C. 1396a(a)(13)) and replaced it with the requirement that a state plan: (13) provide-- for a public process for determination of rates of payment under the plan for hospital services, nursing facility services, and services of intermediate care facilities for the mentally retarded under which-- proposed rates, the methodologies underlying the establishment of such rates, and justifications for the proposed rates are published, providers, beneficiaries and their representatives, and other concerned State residents are given a reasonable opportunity for review and comment on the proposed rates, methodologies, and justifications, final rates, the methodologies underlying the establishment of such rates, and justifications for such final rates are published, and in the case of hospitals, such rates take into account (in a manner consistent with section 1923) the situation of hospitals which serve a disproportionate number of low- income patients with special needs. Subsection (b) of Section 4711 of the Balanced Budget Amendment of 1997 provided as follows: STUDY.--The Secretary of Health and Human Services shall study the effect on access to, and the quality of, services provided to beneficiaries of the rate-setting methods used by States pursuant to section 1902(a)(13)(A) of the Social Security Act (42 U.S.C. 1396a(a)(13)(A)), as amended by subsection (a). REPORT.--Not later than 4 years after the date of the enactment of this Act, the Secretary of Health and Human Services shall submit a report to the appropriate committees of Congress on the conclusions of the study conducted under paragraph (1), together with any recommendations for legislation as a result of such conclusions. Subsection (d) of Section 4711 of the Balanced Budget Amendment of 1997 provided as follows:: EFFECTIVE DATE.--This section shall take effect on the date of the enactment of this Act and the amendments made by subsections (a) and (c) shall apply to payment for items and services furnished on or after October 1, 1997. Following the passage of the Balanced Budget Act of 1997, the Health Care Finance Agency (HCFA), a federal agency which assists in the administration of the federal Medicaid program,23 sent the following letter, dated December 10, 1997, to state Medicaid directors concerning the repeal of the Boren Amendment: This letter is one of a series that provides guidance on the implementation of the Balanced Budget Act of 1997 (BBA). Section 4711 of BBA repeals Sections 1902(a)(13)(A), (B), and (C) of the Social Security Act (the Act), requires states to implement a public process when changes in payment rates or payment methodologies are proposed, and applies to payments for items and services furnished on or after October 1, 1997. (See Enclosure 1 for background on Section 4711.) Section 4711 of BBA replaced the Boren requirements with a new section 1902(a)(13)(A) of the Act, which requires states to (a) use a public process for determining rates, (b) publish proposed and final rates, the methodologies underlying the rates, and justifications for the rates, and (c) give interested parties a reasonable opportunity for review and comment on the proposed rates, methodologies, and justifications. In the case of hospitals, such rates must take into account the situation of hospitals which serve disproportionate number of low-income patients with special needs. The intent of Section 4711 is to provide states with maximum flexibility, as well as to minimize HCFA's role in reviewing inpatient and long-term care state plan amendments involving payment rate changes. HCFA would consider the state to be in compliance with this provision if it elected to use a general administrative process similar to the Federal Administrative Procedures Act that satisfies the requirements for a public process in developing and inviting comment in Section 4711. This will allow states the flexibility to follow current state procedures. If a state's public process is not currently being applied to rate setting, or does not currently include a comment period, then the state would need to modify the process. (See Enclosure 2 for public process options.) The repeal of the Boren amendment cannot be interpreted to be retroactively effective; the Boren amendment still applies to payment for items and services furnished before October 1, 1997. Thus, inpatient hospital and long-term state plan amendments that are currently pending approval by HCFA, including those where Boren requirement questions are the only outstanding issues, need to have these issues resolved before amendment can be approved. However, we recognize that the intent in repealing the Boren amendment was to reduce HCFA's role in the institutional payment rate setting process and to increase state latitude in this area. In light of the less restrictive requirements now in place, HCFA is committed to working with states to expedite resolution of outstanding Boren issues in existing pending amendments. States that are not proposing changes in their payment methods and standards, or changes in rates for items and services furnished on or after October 1, 1997, need not immediately implement a BBA public process. States need only publish proposed rates, methodologies, and justification prior to the proposed effective date of any changes in payment rates or payment methodologies. In other words, states are not required to subject their existing rates to a public process to the extent that those existing rates were validly determined in accordance with legal standards in effect prior to October 1, 1997. In the event changes are already underway, states are to submit the preprint page (or comparable language inserted elsewhere in the hospital and long- term care payment sections of the plan) with the next proposed amendment. (See Enclosures 3 and 4 for preprint pages.) We envision a streamlined Federal review process due to the fact that state plan amendments previously submitted under the Boren requirements were subjected to more rigorous statutory standard both in terms of Federal review of their substance and the review of the process itself. Chapter 98-46, Laws of Florida. The 1998 Florida Legislature passed legislation directing Respondent to make changes to the ICF/DD Methodology. The directive was contained in Chapter 98-46, Laws of Florida, Sections 13 and 40 of which provided as follows: Section 13. In order to implement Specific Appropriation 243 of the 1998-1999 General Appropriations Act, subsection (22) is added to section 409.908, Florida Statutes, to read: 409.908 Reimbursement of Medicaid providers.- Subject to specific appropriations, the agency shall reimburse Medicaid providers, in accordance with state and federal law, according to methodologies set forth in the rules of the agency and in policy manuals and handbooks incorporated by reference therein. These methodologies may include fee schedules, reimbursement methods based on cost reporting, negotiated fees, competitive bidding pursuant to s. 287.057, and other mechanisms the agency considers efficient and effective for purchasing services or goods on behalf of recipients. Payment for Medicaid compensable services made on behalf of Medicaid eligible persons is subject to the availability of moneys and any limitations or directions provided for in the General Appropriations Act or chapter 216. Further, nothing in this section shall be construed to prevent or limit the agency from adjusting fees, reimbursement rates, lengths of stay, number of visits, or number of services, or making any other adjustments necessary to comply with the availability of moneys and any limitations or directions provided for in the General Appropriations Act, provided the adjustment is consistent with legislative intent. (22) The agency is directed to implement changes in the Medicaid reimbursement methodology, as soon as feasible, to contain the growth in expenditures in facilities formerly known as ICF/DD facilities.24 In light of the repeal of the federal Boren Amendment, the agency shall consider, but is not limited to, the following changes in methodology: Reduction in the target rate of inflation. Reduction in the calculation of incentive payments. Ceiling limitations by component of reimbursement. Elimination of rebase provisions. Elimination of component interim rate provisions. Separate reimbursement plans for facilities that are government operated versus facilities that are privately owned. The agency may contract with an independent consultant in considering any changes to the reimbursement methodology for these facilities. This subsection is repealed on July 1, 1999. Section 40. This act shall take effect July 1, 1998, or in the event this act fails to become a law until after that date, it shall operate retroactively thereto. Chapter 98-46, Laws of Florida, became a law without the Governor's approval on April 30, 1998. Respondent's Response to Chapter 98-46, Laws of Florida Becoming a Law The task of taking the necessary steps to comply with the legislative directive contained in Chapter 98-46, Laws of Florida, was the responsibility of John Owens, a Regulatory Analyst Supervisor with Respondent, whose job duties include "overseeing the various reimbursement plans for Medicaid and their application." Mr. Owens' training is primarily in accounting and finance, not health care. Mr. Owens acted in consultation with his immediate supervisor, Carlton Snipes, as well as the Director of Respondent's Division of Health Purchasing and agency counsel. He did not employ any independent consultants to assist him. After formulating revisions to the ICF/DD Methodology that he preliminarily determined should be made in light of legislative mandate in Section 13 of Chapter 98-46, Laws of Florida, Mr. Owens had published in the August 14, 1998, edition of the Florida Administrative Weekly the following notices of proposed rule development:
Findings Of Fact The PROVIDER received the Final Audit Report that gave notice of PROVIDER'S right to an administrative hearing regarding the alleged Medicaid overpayment. The PROVIDER filed a petition requesting an administrative hearing, and then caused that petition to be WITHDRAWN and the administrative hearing case to be CLOSED. PROVIDER chose not to dispute the facts set forth in the Final Audit Report dated August 15, 2013. The facts alleged in the FAR are hereby deemed admitted, including the total amount of $14,569.69, which includes a fine sanction of $2,419.26. The Agency hereby adopts the facts as set forth in the FAR including the amount of $14,569.69 which is now due and owing, from PROVIDER to the Agency.
Conclusions THIS CAUSE came before me for issuance of a Final Order on a Final Audit Report (“FAR”) dated August 15, 2013 (C.1. No. 13-1386-000). By the Final Audit Report, the Agency for Health Care Administration (“AHCA” or “Agency”), informed the Respondent, Amwill Assisted Living, Inc., (hereinafter “PROVIDER’), that the Agency was seeking to recover Medicaid overpayments in the amount of $12,096.28, and impose a fine sanction of $2,419.26 pursuant to Sections 409.913(15), (16), and (17), Florida Statutes, and Rule 59G- 9.070(7)(e), Florida Administrative Code, and costs of $54.15 for a total amount of $14,569.69. The Final Audit Report provided full disclosure and notice to the PROVIDER of procedures for requesting an administrative hearing to contest the alleged overpayment. The PROVIDER filed a petition with the Agency requesting a formal administrative hearing on or about September 5, 2013. The Agency forwarded PROVIDER'S hearing request to the Division of Administrative Hearings (Division) for a formal administrative hearing. The Division scheduled a formal hearing for November 22, 2013. On November 12, 2013, the PROVIDER filed a Motion with the Administrative Law Judge, requesting AHCA vs. Amwill Assisted Living, Inc. (AHCA C.I, No.: 13-1386-000) Final Order Page 1 of 4 Filed January 2, 2014 10:59 AM Division of Administrative Hearings withdrawal of their Petition for Formal Hearing, and the Administrative Law Judge issued an Order Closing File on November 12, 2013, relinquishing jurisdiction of the case to the Agency.
Findings Of Fact The Home The Miami Jewish Home and Hospital for the Aged is a multi-faceted operation located on an entire city block in Miami. It provides a variety of services including an adult congregate living facility, an auditorium, a nursing home and a 32-bed hospital. Residents may come to the Home bringing with them their cash, and property and other possessions, to be sold. An account is opened for the resident from which charges made by the Home may be deducted. This fund is the Resident Asset Fund. Earings on the Resident Asset Fund are applied to reduce the Home's operating deficit. The Home provides Medicare and Medicaid services. Medicaid provides for long-term care for the indigent. About 60% of the Home's patient days were devoted to Medicaid patients in 1985. By participating in the Medicaid program, the Home is required to file cost reports each year to determine its allowable costs under Medicaid rules. The fiscal year for the nursing home runs from July 1 to June 30. The Medicaid Program Medicaid costs are shared between the federal government and the State of Florida. The Medicaid program is administered at the federal level by the Department of Health and Human Services (HHS), and at the state level by the Department of Health and Rehabilitative Services (HRS). The Health Care Financing Administration (HCFA) of HHS establishes the Medicaid costs the federal government will pay for. HCFA's Provider Reimbursement Manual, also referred to as HIM-15, contains reimbursement guidelines. Medicaid reimbursement is calculated as a rate per Medicaid patient per day. Reimbursement is provided prospctively and is based on prior cost reports, inflated forward to the period of reimbursement. The Home's unaudited cost report data is used for that purpose. In order to insure the accuracy of the Medicaid cost reports, HRS performs either test reviews or full field audits of the reports. Full audits are done either by HRS auditors or by outside auditors on contract with HRS. Here the Home's cost report was audited for HRS by Peat Marwick Mitchell & Co. HRS reviews the preliminary audit reports of its contract auditors, which can result in changes before the final audit report is issued. The 1985 Medicaid Cost Report A Medicaid cost report for the fiscal year ending June 30, 985 was filed by the Home in mid-October 1985. David Farkas, the Director of Financial Operations for the nursing home prepared that Medicaid cost report; he also had it reviewed by the accounting firm of Deloitte Haskins & Sells before it was submitted to the Department. In the Medicaid cost report, a nursing home's costs are broken down into four components: (a) those from operations; (b) those from patient care, (c) return on equity and (d) property. Costs within each of those four categories are determined and then divided by the number of patient days at the nursing home to determine a cost per patient day. The cost per patient day for the categories of operating costs and patient care are compared to a ceiling or cap that is generated through surveys performed by the Department of Health and Rehabilitative Services. Caps are adjusted for the geographical location and size of the facility. Assuming that the nursing home is at or below the cap for operations and patient care determined from the survey, the cost per patient day in each of the four components are added to form a composite reimbursement rate. Costs incurred in excess of the caps for operations and patient care are not reimbursed. An inflation factor is then added to a provider's costs because the State of Florida operates on prospective reimbursement system. Patient Trust Fund A nursing home which holds residents' funds is required by Section 400.162, Florida Statutes (1987) to provide a bond equal to twice the average monthly balance of the funds it held during the preceding year in order to ensure that the funds will be available to residents. The nursing home also has the option, in lieu of a bond, to provide a self-insurance fund protecting the monies it holds in trust. By letter dated May 31, 1985, the nursing home received approval from the Department to establish a self-insurance fund under Section 400.162 Florida Statutes. Its account was opened with Sun Bank of Miami. When the account was established the Home was required to deposit in it twice the average monthly balance of its Resident Asset Fund for the preceding year. As of June 30, 1985, the Patient Trust Fund contained $2,750,000, representing twice the $1,375,000 in resident assets held in the Resident Asset Fund. The money the Home placed in the Patient Trust Fund came from donations and from the building fund for the Home. Those funds are held in the form of treasury notes and certificates of deposit. The nursing home treated the Patient Trust Fund as part of the building fund in its 1985 Medicaid cost report. When the funds which comprise the Patient Trust Fund are placed with a trustee, they are restricted. The trustee holds the securities, and the State has the right to draw against those securities when a default occurs in the nursing home's handling of residents' funds. Only the principal amount of the Home's self-insurance fund is restricted, however. The Home itself receives the benefit of interest or dividends which accrue on the monies deposited in the self-insurance fund. Those earnings accrue to the benefit of the Home's building fund. The premium for a surety bond of the type required by Section 400.162(5)(b)1. Florida Statutes in 1985 would have cost the Home 2 percent of the amount bonded; based on 2 percent of $2,750,000, the premium would have been $55,000. This bond premium would have been treated as an allowable operating cost. The Home's operating costs exceeded the cap, however, so it actually would have received no additional reimbursement for the $55,000 bond premium if a bond had been purchased. The Audit After the nursing home submitted its 1985 Medicaid cost report, Barry Scutillo of Peat Marwick contacted the Home on behalf of HRS to audit the Home's records supporting its 1985 report. The audit resulted in a number of adjustments which were discussed with representatives of the nursing home at an exit conference. The issue of the proper treatment of the nursing home's funds deposited in the Patient Trust Fund at Sun Bank was discussed during the audit. The auditor for Peat Marwick, Mr. Scutillo, thought that the Home had accounted for the use of those funds correctly by seeking a return on equity from Medicaid for the securities in the Patient Trust Fund. The Audit Report Ultimately, Mr. Scutillo's field work was reviewed by more senior members of Peat Marwick and by HRS. An audit report was issued by Peat Marwick Mitchell & Company dated November 18, 1986 which did propose adjustments to the Home's cost report arising from the treatment of the funds which had been deposited in the Patient Trust Fund in Sun Bank. The audit report proposed to reduce nursing home's equity by $2,734,270 and to adjust the return on equity before apportionment by $108,515. The other adjustments proposed are of no consequence, because the nursing home is already at or exceeds the Medicaid cost caps, and federal regulations would prevent the Home from receiving additional reimbursement on the other adjustments even if they were made in the nursing home's favor. After the nursing home filed a request for an administrative hearing on the adjustments made in the Peat Marwick audit, representatives of the nursing home and HRS met to discuss the issues, and agreed to present a joint position paper to HCFA for a non-binding determination on the issue whether the Home was entitled to a return on equity for the funds in the Patient Trust Fund at Sun Bank. The parties agreed that each would prepare a position paper which would be forwarded to the appropriate federal officials for review. The Home's position paper was submitted to HRS but HRS failed to submit it to the federal government. Instead, HRS submitted only its own position paper. After the Home discovered this, it sent its position paper directly to the HCFA. HCFA's Response The HCFA responded, after reviewing the position of both parties, that the self-insurance fund should be excludedfrom the Home's equity capital. 1/ The HCFA believed that the fund was segregated and not used to provide patient care. 2/ The manual which HCFA relied upon, (HIM-15), contains in Section 1202.1 a definition of equity capital which includes the health care provider's investment in property, plant and equipment related to patient care, and that working capital necessary for the proper operation of patient care activities. A proprietary provider is entitled to a rate of return on its equity capital which is "a percentage equal to 1 and 1/2 times the average of the rates of interest on special issues of public debt obligations issued to the Federal Hospital Insurance Trust Fund for each of the months during the provider's reporting period." (HIM-15, Section 1206). The manual also describes items which are to be excluded from the computation of equity capital, and in Section 1218.9 states: Where a provider maintains a self- insurance program in lieu of purchasing conventional insurance, the funds in the self-insurance reserve fund must be set aside in a segregated account to cover possible losses and not used to provide patient care. Therefore, the amount deposited in the fund and the earnings on the self-insurance reserve remaining in the fund are not included in equity capital. The nursing home argues that Section 1218.9 focuses on self-insurance funds which a health care provider maintains to protect itself, and that the section is inapplicable here, because the funds deposited with Sun Bank were deposited for the protection of patients, not of the nursing home. This is unpersuasive. The nursing home itself is responsible for any defalcations in the handling of residents' assets placed with it as trustee. The Patient Trust Fund which serves as self-insurance for claims against the Home for mismanagement of the Resident Trust Funds is similar to conventional insurance.
