The Issue The issue to be decided is the amount payable to Respondent in satisfaction of the Agency’s Medicaid lien from a settlement, judgment, or award received by Petitioner from a third-party under section 409.910(17), Florida Statutes.
Findings Of Fact On June 7, 2005, 14-year-old Michael Mobley attended a beach party. The party occurred on, near, or about the beach premises of a hotel. Michael became intoxicated through consumption of alcohol, and drowned in the Gulf of Mexico. He was revived but suffered brain damage, leaving him unable to communicate, ambulate, eat, toilet, or care for himself in any manner. Michael is now dependent on his father for all aspects of his daily life. As a result of this incident, Michael suffered both economic and noneconomic damages. These damages included, at least, physical and mental pain and suffering, past and future medical expenses, disability, impairment in earning capacity, and loss of quality and enjoyment of life. Michael’s parents also suffered damages. Michael’s father’s employer maintained a self-funded Employee Benefit Plan governed by the Employee Retirement Income Security Act (ERISA Plan). The Florida Statutes provide that Respondent, Agency for Health Care Administration (AHCA), is the Florida state agency authorized to administer Florida’s Medicaid program. § 409.902, Fla. Stat.1/ Michael’s past medical care related to his injury was provided through health benefits from the ERISA Plan administered through CIGNA HealthCare and Horizon Blue Cross Blue Shield of New Jersey, and the Florida Medicaid program. The health benefits extended to Michael through his father’s employer totaled $515,860.29. The Florida Medicaid program provided $111,943.89 in benefits. The combined amount of medical benefits Michael received as a result of his injury is $627,804.18. The ERISA Plan provided the employer (through its administrators CIGNA and Horizon Blue Cross Blue Shield), with subrogation and reimbursement rights which provided entitlement to reimbursement from any settlement of 100 percent of what the plan had paid. ACS Recovery Services represented CIGNA and Horizon Blue Cross Blue Shield, the administrators of the Employee Benefit Plan, and on behalf of these clients ACS Recovery Services asserted a $515,860.29 claim against any settlement Michael received. The Florida Statutes provide that Medicaid shall also be reimbursed for medical assistance that it has provided if resources of a liable third party become available. § 409.910(1), Fla. Stat. In 2006, Michael’s parents, David Mobley and Brenda Allerheiligen, brought a lawsuit in Okaloosa County Circuit Court to recover all of Michael’s damages. By letter dated May 24, 2011, Petitioner’s attorney sent AHCA a Letter of Representation requesting the amount of any Medicaid lien and the itemization of charges. The letter also invited AHCA to participate in litigation of the claim or in settlement negotiations. AHCA through ACS Recovery Services by letter of June 9, 2011, asserted a Medicaid lien against any settlement in the amount of $111,943.89. Testimony at hearing established that a conservative “pure value” of Michael’s economic damage claims in the case, before consideration of such factors as comparative fault, application of the alcohol statute, a defendant’s bankruptcy, and the novel theories of legal liability, was $15 million. A Joint Petition for Approval of Settlement was filed in the Circuit Court in and for Okaloosa County, Florida, on or about June 14, 2012. It stated that although the damages Michael received far exceeded the sum of $500,000, the parties had agreed to fully resolve the action for that amount in light of the parties’ respective assessments of the strengths and weaknesses of their cases. The Petition specifically alluded to pending bankruptcy proceedings, summary judgment dismissal of claims premised upon a duty to provide lifeguarding services, Plaintiff’s remaining theories of liability, available defenses, specifically including the statutory “alcohol defense” as interpreted by the Florida courts, and anticipated costs of trial and appeal. The Petition also stated: “Plaintiff’s claim for past medical expenses related to the incident total $627,804.18. This claim consists of $515,860.29 paid by a self-funded ERISA plan and $111,943.89 paid by Medicaid.” As an attached exhibit, the Petition incorporated a Distribution Sheet/Closing Statement which allocated the $500,000 total recovery among the categories of attorneys’ fees, costs, outside attorneys’ fees, lien/subrogation/medical expenses, and net proceeds to client. The Distribution Sheet allocated $140,717.54 to “lien/subrogation/medical expenses,” subdivided into $120,000.00 to Blue Cross Blue Shield of Florida/CIGNA and $20,717.54 to Medicaid Lien. The proposed settlement did not further describe the $331,365.65 amount identified as “net proceeds to client,” or allocate that amount among distinct claims or categories of damages, such as physical or mental pain and suffering, future medical costs discounted to present value, disability, impairment in earning capacity, or loss of quality and enjoyment of life. Under the Joint Petition for Approval of Settlement, most of the total recovery thus remains uncategorized as to the type of damages it represents. The Joint Petition for Approval of Settlement was submitted on behalf of the Defendants and Plaintiffs in the lawsuit, including Michael Mobley, Petitioner here. Respondent did not participate in settlement negotiations or join in the Release, and no one represented its interests in the negotiations. The Agency has not otherwise executed a release of the lien. A Release was signed by the Plaintiffs contingent upon court approval of the Petition for Approval of Settlement. The court approved the settlement, with the exception of the Medicaid lien, pending an administrative determination of the amount of the lien to be paid. This $500,000 settlement is the only settlement received and is the subject of AHCA’s claim lien. In regard to the $500,000 settlement: Michael’s parents, Brenda Allerheiligen and David Mobley waived any claim to the settlement funds in compensation for their individual claims associated with their son’s injuries; The law firm of Levin, Papantonio, Mitchell, Rafferty & Proctor, P.A., agreed to waive its fees associated with its representation of Michael and his parents; The law firm of Levin, Papantonio, Mitchell, Rafferty & Proctor, P.A., agreed to reduce its reimbursement of the $60,541.22 in costs it advanced in the litigation of the case by 75% and accept $15,135.31 in full payment of its advanced costs; and ACS Recovery Services on behalf of CIGNA and Horizon Blue Cross Blue Shield agreed to reduce its $515,860.29 ERISA reimbursement claim asserted against the settlement and accept $120,000 in satisfaction of its $515,860.29 claim. AHCA is seeking reimbursement of $111,943.89 from the $500,000 settlement in satisfaction of its $111,943.89 Medicaid lien. AHCA correctly computed the lien amount pursuant to statutory formula. Deducting 25 percent for attorney’s fees and $60,541.22 taxable costs from the $500,000.00 recovery leaves a sum of $314,458.78, half of which is $157,229.39. In this case, application of the formula therefore results in a statutory lien amount of $111.943.89, the amount actually paid. § 409.910(17), Fla. Stat. The settlement agreement allocated $120,000.00 to be paid to the ERISA plan in partial reimbursement of the $515,860.29 it had paid for medical expenses. This amount must be added to the amount of $20,717.54 allocated for other medical expenses paid by Medicaid, to reflect a total amount of $140,717.54 allocated for past medical expenses in the settlement. The $500,000 total recovery represents approximately 3.3 percent of the $15 million total economic damages. The $20,717.54 allocated to “Medicaid Lien” in the distribution sheet of the settlement represents approximately 3.3 percent of the $627,804.18 of total past medical expenses. The sum of $3,694.15 represents approximately 3.3 percent of the $111,943.89 in medical costs paid by Medicaid. The Petitioner has deposited the full Medicaid lien amount in an interest-bearing account for the benefit of AHCA pending an administrative determination of AHCA’S rights. The parties have stipulated that this constitutes “final agency action” for purposes of chapter 120, pursuant to section 409.910(17). Petitioner filed his Petition on December 13, 2013, within 21 days after the Medicaid lien amount was deposited in an interest-bearing account for the benefit of AHCA. While the evidence presented as to the settlement agreement was not sufficient to show the full amount allocated to medical expenses, the evidence does show that the total recovery includes at least $140,717.54 allocated as reimbursement for past medical expenses, which was to be divided unevenly between the ERISA plan and Medicaid. Petitioner failed to prove by clear and convincing evidence that the statutory lien amount of $111,943.89 exceeds the amount actually recovered in the settlement for medical expenses.
Findings Of Fact As a result of an audit report submitted December 13, 1976 for the Shore Acres Nursing and Convalescent Center for the fiscal year ending December 31, 1975, an adjustment in the Cost of Operations totaling $119,387 was made which resulted in an overpayment to Respondent of $6,109 (Exhibit 1). A similar audit for the period ending December 31, 1976 produced adjustments resulting in an overpayment of $3,419. Petitioner contends that the laws and regulations pertaining to Medicaid payments require an adjustment be made for certain costs paid by Medicare. It is this Medicare adjustment that is in dispute. Medicare will pay for certain costs which will not be paid by Medicaid, such as drugs and physical therapy. Medicare has a coinsurance requirement which can be paid by the individual, his insurance carrier, or Medicaid. Medicaid is a full coverage program but all services, e.g. drugs, physical therapy and speech therapy, are not covered by Medicaid. It is the Medicaid payments that are here involved and which Petitioner contends are computed after deductions in operating costs are made for those costs associated with Medicare. Some of these costs involve services that are not part of the covered services of the Medicaid program. Indirect costs associated with the direct costs for services associated with Medicare are also deducted. Using the figures supplied by Respondent, the auditor deducted indirect costs due to depreciation, operation and maintenance of plant of $1,432; other indirect various general services costs of $2,309; ancillary costs of $16,772 for physical therapy; drugs costs of $15,732; speech therapy of $2,983; outpatient costs of $4,515; the distinct part of room and board charge of $164,621 less $65,475 for non-Medicaid per diem costs; and less adjustment for return on equity for inpatient days and outpatient days. After these adjustments are made, the audit resulted in overpayments as noted above. Respondent contends, and Petitioner concurs, that when the first audits were made (and the 1975 audit here involved was the first), none of the nursing homes were deducting the Medicare adjustment in submitting their claim for payments to HRS. Respondent contends that making the adjustments here involved resulted in removing costs which affect the average cost per patient day. It is also contended that the majority of those deductions come from the full-care patients which have the highest per diem costs and this results in lower payments to the providers.
The Issue The issue to be determined is the amount to be reimbursed to Respondent, Agency for Health Care Administration (“AHCA”), for medical expenses paid on behalf of Ashley Nunez pursuant to section 409.910, Florida Statutes (2016),1/ from settlement proceeds received by Petitioners from third parties.
Findings Of Fact Facts Pertaining to the Underlying Personal Injury Litigation and the Medicaid Lien On February 13, 2010, Ashley Nunez (“Ashley”), who was three years old at the time, presented to a hospital emergency room with a fever. A chest X-ray indicated that Ashley had left lobe pneumonia. The hospital ordered no blood work or blood cultures and did not investigate the cause of Ashley’s pneumonia. The hospital discharged Ashley with a prescription for Azithromycin. By February 14, 2010, Ashley’s fever was 102.9 degrees, and Ashley’s mother took her to a pediatrician. Rather than attempting to discover the cause of the fever, the pediatrician instructed Ashley’s mother that the prescription needed time to work and instructed her to bring Ashley back if the fever persisted. On February 16, 2010, Ashley’s aunt returned her to the pediatrician because Ashley’s fever was persisting and she had developed abdominal pain. Due to a concern that Ashley was suffering from appendicitis, the pediatrician referred her to an emergency room. Later that day, Ashley’s mother returned her to the emergency room that had treated Ashley on February 13, 2010. A second chest x-ray revealed that Ashley’s pneumonia had gotten much worse, and the hospital admitted her. Ashley’s respiratory condition continued to deteriorate, and blood cultures confirmed that she had streptococcus pneumonia. Two days after her admission, the hospital decided to transfer Ashley to a hospital that could provide a higher level of care. On February 18, 2010, an ambulance transferred Ashley to a second hospital. Even though Ashley’s respiratory condition continued to deteriorate, the paramedics and hospital transport team did not intubate her. Upon her arrival at the second hospital, Ashley had suffered a cardiopulmonary arrest and had to be resuscitated with CPR and medication. The lack of oxygen to Ashley’s brain and other organs resulted in catastrophic harm leading Ashley to be intubated, placed on a ventilator, fed through a gastric feeding tube, and placed on dialysis. The second hospital discharged Ashley two and a half months later. While she no longer required a ventilator or dialysis, the hypoxic brain injury and cardiopulmonary arrest left Ashley in a severely compromised medical condition. Ashley was unable to perform any activities of daily living and was unable to stand, speak, walk, eat, or see. Following her discharge from the second hospital, Ashley required continuous care. She was under a nurse’s care for 12 hours a day, and Ashley’s mother (Anna Patricia Delgado) cared for her during the remaining 12 hours each day. On February 23, 2011, Ashley died due to complications resulting from the hypoxic brain injury. Ashley was survived by her parents, Ms. Delgado and John Nunez. Medicaid (through AHCA) paid $357,407.05 for the medical care related to Ashley’s injury. Ashley’s parents paid $5,805.00 for her funeral. As the Personal Representative of Ashley’s Estate, Ms. Delgado brought a wrongful death action against the first emergency room doctor who treated Ashley, the pediatrician, a pediatric critical care intensivist who treated Ashley after her admission to the first hospital, the two hospitals that treated Ashley, and the ambulance company that transported Ashley to the second hospital. AHCA received notice of the wrongful death action and asserted a Medicaid lien against Ashley’s Estate in order to recover the $357,407.05 paid for Ashley’s past medical expenses. See § 409.910(6)(b), Fla. Stat. (providing that “[b]y applying for or accepting medical assistance, an applicant, recipient, or legal representative automatically assigns to [AHCA] any right, title, and interest such person has to any third party benefit ”). Ms. Delgado ultimately settled the wrongful death action through a series of confidential settlements totaling $2,250,000. No portion of that settlement represents reimbursements for future medical expenses. AHCA has not moved to set aside, void, or otherwise dispute those settlements. Section 409.910(11)(f) sets forth a formula for calculating the amount that AHCA shall recover in the event that a Medicaid recipient or his or her personal representative initiates a tort action against a third party that results in a judgment, award, or settlement from a third party. Applying the formula in section 409.910(11)(f) to the $2,250,000 settlement, results in AHCA being owed $791,814.84 in order to satisfy its lien.2/ Because Ashley’s medical expenses of $357,407.05 were less than the amount produced by the section 409.910(11)(f) formula, AHCA is seeking to recover $357,407.05 in satisfaction of its Medicaid lien. See § 409.910(11)(f)4., Fla. Stat. (providing that “[n]otwithstanding any provision in this section to the contrary, [AHCA] shall be entitled to all medical coverage benefits up to the total amount of medical assistance provided by Medicaid.”). Valuation of the Personal Injury Claim Tomas Gamba represented Petitioners during their wrongful death action. Mr. Gamba has practiced law since 1976 and is a partner with Gamba, Lombana and Herrera-Mezzanine, P.A., in Coral Gables, Florida. Mr. Gamba has been Board Certified in Civil Trial Law by the Florida Bar since 1986. Since the mid-1990s, 90 percent of Mr. Gamba’s practice has been devoted to medical malpractice. Over the course of his career, Mr. Gamba has handled 60 to 70 jury trials as first chair, including catastrophic injury cases involving children. In 2015, the Florida Chapter of the American Board of Trial Advocates named Mr. Gamba its Trial Lawyer of the Year. Mr. Gamba is a member of several professional organizations, such as the American Board of Trial Advocates, the American Association for Justice, the Florida Board of Trial Advocates, the Florida Justice Association, and the Miami-Dade County Justice Association. Mr. Gamba was accepted in this proceeding as an expert regarding the valuation of damages suffered by injured parties. Mr. Gamba testified that Petitioners elected against proceeding to a jury trial (in part) because of the family’s need for closure and the stress associated with a trial that could last up to three weeks. Mr. Gamba also noted that the two hospitals that treated Ashley had sovereign immunity, and (at the time pertinent to the instant case) their damages were capped at $200,000 each. In order to collect any damages above the statutory cap, Petitioners would have had to file a claims bill with the Florida Legislature, and Mr. Gamba testified that “the legislature would be very difficult.” As for the three treating physicians who were defendants in the suit, Mr. Gamba testified that Petitioners achieved a favorable settlement by agreeing to accept $2 million when the physicians’ combined insurance coverage was only $3 million. The decision to settle was also influenced by the fact that Ashley had a pre-existing condition known as hemolytic uremic syndrome, a blood disorder. During discovery, Mr. Gamba learned that the defense was prepared to present expert testimony that the aforementioned condition made it impossible for the defendants to save Ashley. Finally, Mr. Gamba testified that 75 percent of medical malpractice cases heard by juries result in defense verdicts. As for whether the $2,250,000 settlement fully compensated Ashley’s estate and her parents for the full value of their damages, Mr. Gamba was adamant that the aforementioned sum was “a small percentage of what we call the full measure of damages in this particular case.” Mr. Gamba opined that $8,857,407.05 was the total value of the damages that Ashley’s parents and her Estate could have reasonably expected to recover if the wrongful death action had proceeded to a jury trial. Mr. Gamba explained that Florida’s Wrongful Death Act enabled Ashley’s parents to recover for the death of their child and for the pain and suffering they incurred from the date of Ashley’s injury. According to Mr. Gamba, $4,250,000 represented a “conservative” estimate of each parent’s individual claim, and the sum of their claims would be $8,500,000. Mr. Gamba further explained that Ashley’s Estate’s claim would consist of the $357,407.05 in medical expenses paid by Medicaid, resulting in an estimate for total damages of $8,857,407.05. Mr. Gamba’s opinion regarding the value of Petitioners’ damages was based on “roundtable” discussions with members of his firm and discussions with several attorneys outside his firm who practice in the personal injury field. Mr. Gamba’s opinion was also based on 10 reported cases contained in Petitioners’ Exhibit 9. According to Mr. Gamba, each of those reported cases involve fact patterns similar to that of the instant case. Therefore, Gamba testified that the jury verdicts in those cases are instructive for formulating an expectation as to what a jury would have awarded if Ashley’s case had proceeded to trial. In sum, Mr. Gamba testified that the $2,250,000 settlement represents a 25.4 percent recovery of the $8,857.407.05 of damages that Ashley’s parents and Ashley’s Estate actually incurred. Therefore, only 25.4 percent (i.e, $90,781.30) of the $357,407.05 in Medicaid payments for Ashley’s care was recovered. Mr. Gamba opined that allocating $90,781.39 of the total settlement to compensate Medicaid for past medical expenses would be reasonable and rational. In doing so, he stated that, “And I think both – if the parents are not getting their full measure of damages, I don’t think the health care provider, in this case Medicaid, that made the payment should get, you know, every cent that they paid out, when mother and father are getting but a small percentage of the value of their claim.” Petitioners also presented the testimony of Herman J. Russomanno. Mr. Russomanno has practiced law since 1976 and is a senior partner with the Miami law firm of Russomanno and Borrello, P.A. Mr. Russomanno has been Board Certified in Civil Trial Law by the Florida Bar since 1986, and he has served as the Chairman of the Florida Bar’s Civil Trial Certification Committee. Mr. Russomanno is also certified in Civil Trial Practice by the National Board of Trial Advocates and has taught trial advocacy and ethics for 33 years as an adjunct professor at the St. Thomas University School of Law. Mr. Russomanno is a past president of the Florida Bar and belongs to several professional organizations, such as the Florida Board of Trial Advocates, the American Board of Trial Advocates, the Dade County Bar Association, and the Miami-Dade County Trial Lawyers Association. Since 1980, Mr. Russomanno’s practice has been focused on medical malpractice, and he has represented hundreds of children who suffered catastrophic injuries. Mr. Russomanno was accepted in the instant case as an expert in the evaluation of damages suffered by injured parties. Prior to his testimony at the final hearing, Mr. Russomanno reviewed Ashley’s medical records, the hospital discharge summaries, and the Joint Pre-hearing Stipulation filed in this proceeding. He also discussed Ashley’s case with Mr. Gamba and reviewed Mr. Gamba’s file from the wrongful death action. Mr. Russomanno also viewed videos of Ashley taken before and after her injury so he could gain an understanding of the severity of Ashley’s injury and the suffering experienced by her parents. Mr. Russomanno credibly testified that the damages incurred by Ashley’s parents were between $4,250,000 and $7,500,000 for each parent. Mr. Russomanno echoed Mr. Gamba’s testimony by stating that the $2,250,000 settlement did not fully compensate Ashley’s parents and her Estate for their damages. AHCA presented the testimony of James H.K. Bruner. Mr. Bruner has practiced law since 1983 and is licensed to practice law in Florida, New York, Maine, and Massachusetts. Mr. Bruner is a member of professional organizations such as the American Health Lawyers Association and the Trial Lawyers Sections of the Florida Bar. Between 2003 and 2005, Mr. Bruner served as the Department of Children and Families’ risk attorney. That position required him to evaluate personal injury actions filed against the Department and assess the Department’s exposure to liability. Based on his experience in evaluating approximately 200 cases for the Department, Mr. Bruner authored the Department’s manual on risk management and provided training to Department employees on risk management issues. Mr. Bruner has served as the Director of AHCA’s Bureau of Strategy and Compliance. In that position, he dealt specifically with third-party liability collections and Medicaid liens. Beginning in 2008, Mr. Bruner worked for ACS (now known as Xerox Recovery Services) and was engaged in attempting to recover Medicaid liens from personal injury settlements. Over the last several years, Mr. Bruner has spoken at seminars about Medicaid lien resolution and authored publications on that topic. Since April of 2013, Mr. Bruner has been in private legal practice as a solo practitioner. He describes himself as a “jack of all trades” who engages in a “general practice.” Over the last 20 years, Mr. Bruner has not handled a jury trial involving personal injury; and, over the last four years, he has not negotiated a personal injury settlement. The undersigned accepted Mr. Bruner as an expert witness for evaluating the cases contained in Petitioners’ Exhibit 9 and pointing out distinctions between those cases and the instant case. Mr. Bruner did not offer testimony regarding the specific value of the damages suffered by Petitioners. Findings Regarding the Testimony Presented at the Final Hearing Regardless of whether the reported cases in Petitioners’ Exhibit 9 are analogous to or distinguishable from the instant case, the undersigned finds that the testimony from Mr. Gamba and Mr. Russomanno was compelling and persuasive. While attaching a value to the damages that a plaintiff could reasonably expect to receive from a jury is not an exact science, Mr. Gamba and Russomanno’s substantial credentials and their decades of experience with litigating personal injury lawsuits make them very compelling witnesses regarding the valuation of damages suffered by injured parties such as Petitioners. Accordingly, the undersigned finds that Petitioners proved by clear and convincing evidence that $90,781.39 constitutes a fair and reasonable recovery for past medical expenses actually paid by Medicaid. However, and as discussed below, AHCA (as a matter of law) is entitled to recover $357,407.05 in satisfaction of its Medicaid lien.3/
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.
The Issue The issue for the undersigned to determine is the amount payable to Respondent, Agency for Health Care Administration (AHCA or Respondent), as reimbursement for medical expenses paid on behalf of Petitioner pursuant to section 409.910, Florida Statutes (2020),1 from settlement proceeds he received from third parties.
Findings Of Fact AHCA is the state agency charged with administering the Florida Medicaid program, pursuant to chapter 409. On September 6, 2019, Mr. St. Surin was severely injured when his motorcycle struck a car. In this accident, Mr. St. Surin suffered severe and permanent injury to his back, neck, scapula, ribs, and knee. 1 All references to Florida Statutes are to the 2020 codification, unless otherwise indicated. Mr. St. Surin’s medical care related to the injury was paid by Medicaid. Medicaid, through AHCA, provided $28,482.15 in benefits. In addition, Medicaid, through a Medicaid managed care organization known as WellCare of Florida, paid $7,278.25 in benefits. The combined total amount of these benefits, $35,760.40, constitutes Mr. St. Surin’s entire claim for past medical expenses. Mr. St. Surin pursued a personal injury claim against the owner and driver of the car who caused the accident (collectively the “Tortfeasors”) to recover all of his damages. The Tortfeasors’ insurance policy limits were $100,000, and the Tortfeasors had no other collectable assets. Mr. St. Surin’s personal injury claim was settled for the insurance policy limits of $100,000. During the pendency of Mr. St. Surin’s personal injury claim, AHCA was notified of the claim and AHCA asserted a Medicaid lien in the amount of $28,482.15 against Mr. St. Surin’s cause of action and the settlement proceeds. AHCA did not commence a civil action to enforce its rights under section 409.910, or intervene or join in Mr. St. Surin’s action against the Tortfeasors. AHCA was notified of Mr. St. Surin’s settlement by letter. AHCA has not filed a motion to set aside, void, or otherwise dispute Mr. St. Surin’s settlement. Application of the formula found in section 409.910(11)(f) would require payment to AHCA of the full $28,482.15 Medicaid lien given the $100,000 settlement. Petitioner has deposited the Medicaid lien amount in an interest- bearing account for the benefit of AHCA pending a final administrative determination of AHCA’s rights. Petitioner presented testimony from Scott Kimmel, Esquire. Mr. Kimmel represented Mr. St. Surin in his personal injury claim against the Tortfeasors. Mr. Kimmel is a personal injury attorney and has practiced law for 30 years. Mr. Kimmel testified that he placed a conservative value of $1 million on Mr. St. Surin’s personal injury claim, but that the personal injury claim was settled for policy limits of $100,000 because the Tortfeasors had no other collectable assets. Using the pro rata allocation methodology, Mr. Kimmel testified that $3,576 of the $100,000 settlement proceeds should be allocated to past medical expenses because the personal injury claim was settled for ten percent of its conservative value. Mr. Kimmel’s testimony was credible, persuasive, and uncontradicted. AHCA did not challenge Mr. Kimmel’s valuation of the personal injury claim, or his use of the pro rata allocation methodology to determine the amount of settlement proceeds that should be allocated to past medical expenses, nor did AHCA offer any evidence from which the undersigned could arrive at a different valuation or allocation. There is no reasonable basis to reject Mr. Kimmel’s testimony, and it is accepted here in its entirety. The undersigned finds that the value of Mr. St. Surin’s personal injury claim is $1 million, and that $3,576.04 of the $100,000 settlement proceeds should be allocated to past medical expenses.
The Issue The issue to be determined is the amount to be reimbursed to Respondent, Agency for Health Care Administration (Respondent or AHCA), for medical expenses paid on behalf of Petitioners, Devyn Jeffries (Devyn) and Makayla Jeffries (Makayla), minors, by and through their parents and natural guardians, Theresa Jeffries and Christopher Jeffries, (collectively Petitioners), from settlement proceeds received by Petitioners from third parties.
Findings Of Fact On January 24, 2010, Devyn and Makayla were born via emergency C-Section at 27 weeks gestation. During the birthing process, both children suffered severe and permanent brain damage. As a result, Devyn suffers from Cerebral Palsy with spastic paralysis and cognitive developmental disabilities, and Makayla suffers from Cerebral Palsy, failure to thrive, feeding difficulties, and cognitive deficits. Devyn and Makayla’s medical care related to their birth injuries was paid by Medicaid in the following amounts: 1 Respondent’s Proposed Final Order was served by email and received by DOAH at 9:50 p.m. on October 21, 2020. It was, therefore, “filed” at 8:00 a.m. on October 22, 2020, in accordance with Florida Administrative Code Rule 28-106.104(3). However, it is accepted and considered as though timely filed. In regard to Devyn, Medicaid, through AHCA, provided $108,068.58 in benefits and Medicaid, through a Medicaid Managed Care Plan known as Simply Healthcare, provided $25,087.08 in benefits. The sum of these Medicaid benefits, $133,155.66, constituted Devyn’s entire claim for past medical expenses. In regard to Makayla, Medicaid, through AHCA, provided $107,912.33 in benefits and Medicaid, through a Medicaid Managed Care Plan known as Simply Healthcare, provided $13,915.84 in benefits. The sum of these Medicaid benefits, $121,828.17, constituted Makayla’s entire claim for past medical expenses. Devyn and Makayla’s parents and natural guardians, Theresa and Christopher Jeffries, pursued a medical malpractice lawsuit against the medical providers responsible for Devyn and Makayla’s care (“Defendants”) to recover all of Devyn and Makayla’s damages, as well as their own individual damages associated with their children’s injuries. The medical malpractice action settled through a series of confidential settlements, which were approved by the court on February 21, 2020. During the pendency of the medical malpractice action, AHCA was notified of the action and AHCA asserted a $108,068.58 Medicaid lien associated with Devyn’s cause of action and settlement of that action and a $107,912.33 Medicaid lien associated with Makayla’s cause of action and settlement of that action. AHCA did not commence a civil action to enforce its rights under section 409.910, nor did it intervene or join in the medical malpractice action against the Defendants. By letter, AHCA was notified of the settlement. AHCA has not filed a motion to set aside, void, or otherwise dispute the settlement. The Medicaid program through AHCA spent $108,068.58 on behalf of Devyn and $107,912.33 on behalf of Makayla, all of which represents expenditures paid for past medical expenses. No portion of the $215,980.91 paid by AHCA through the Medicaid program on behalf of Petitioners represented expenditures for future medical expenses. The $215,980.91 combined total in Medicaid funds paid towards the care of Devyn and Makayla by AHCA is the maximum amount that may be recovered by AHCA. In addition to the foregoing, Simply Health spent $39,002.92 on Petitioners’ medical expenses. Thus, the total amount of past medical expenses incurred by Petitioners is $254,983.83. The taxable costs incurred in securing the settlement totaled $109,701.62. Application of the formula at section 409.910(11)(f) to the settlement requires payment to AHCA of the full $108,068.58 Medicaid lien associated with Devyn and the full $107,912.33 Medicaid lien associated with Makayla. Petitioners have deposited the full Medicaid lien amounts in interest- bearing accounts for the benefit of AHCA pending an administrative determination of AHCA’s rights, and this constitutes “final agency action” for purposes of chapter 120, Florida Statutes, pursuant to section 409.910(17). This case is somewhat unique in that it involves two petitioners, with separate injuries and separate Medicaid expenditures. However, the incident causing the injuries was singular, and resulted in a total settlement of all claims asserted by Devyn, Makayla, and their parents of $2,650,000. Therefore, for purpose of determining the appropriate amount of reimbursement for the Medicaid lien, it is reasonable and appropriate to aggregate the amounts paid in past medical expenses on behalf of Devyn and Makayla, and the economic and non-economic damages suffered by them. There was no suggestion that the monetary figure agreed upon by the parties represented anything other than a reasonable settlement. The evidence firmly established that the total of Devyn’s and Makayla’s economic damages, consisting of lost future earnings, past medical expenses, and future medical expenses were, at the conservative low end, roughly $4,400,000 for Devyn and $2,400,000 for Makayla, for a sum of $6,800,000 in economic damages.2 Based on the experience of the testifying experts, and taking into account jury verdicts in comparable cases, Petitioners established that non- economic damages would reasonably be in the range of $10,000,000 to $15,000,000 for each of the children. Based on the forgoing, it is found that $15,000,000, as a full measure of Petitioners’ combined damages, is very conservative, and is a fair and appropriate figure against which to calculate any lesser portion of the total recovery that should be allocated as reimbursement for the Medicaid lien for past medical expenses. The $2,650,000 settlement is 17.67 percent of the $15,000,000 conservative value of the claim.3
The Issue The issue to be decided in this proceeding is the amount to be paid to Respondent, Agency for Health Care Administration (“AHCA” or the “Agency”), from the proceeds of a personal injury settlement received by Petitioner, Amanda Soto (referred to herein as either “Petitioner” or “Soto”), to reimburse Medicaid for expenditures made on her behalf.
Findings Of Fact The following findings of fact are derived from the exhibits and oral testimony at final hearing, as well as the stipulated facts between the parties. When Soto was 11-years old, she suffered extensive physical harm as a result of negligent medical care. She has bi-lateral, no-light blindness, a severe seizure disorder, hemiparesis/right-side weakness, and significant loss of cognitive abilities. Now 19-years old, Soto requires daily one- on-one care at home and school. She will never regain her sight and suffers from depression because of her physical condition. This tragedy commenced when Soto, a normally developing adolescent, suffered a blow to her eye while swimming. She was taken to a hospital emergency room where she was diagnosed with sinusitis and prescribed oral antibiotics. Despite complying with her doctors’ orders, Soto continued to experience ever- progressing problems. About nine weeks after her first visit, Soto was again taken to the emergency room for treatment. Her condition was so severe at that time that she was transported to a specialty hospital for further evaluation and treatment. It was ultimately determined that two large abscesses had formed in Soto’s brain, which caused her to experience a stroke-like episode. Actions were then taken by her physicians in an attempt to drain the abscesses. The additional medical treatment failed to alleviate Soto’s problems, and her condition today is as described above. Soto sued several healthcare providers for her injuries. Her mother also joined in the lawsuit, seeking loss of consortium. Ultimately, negotiations between Soto’s attorneys and the defendants resulted in two settlements. One occurred while Soto was still a minor and had to be approved by the Court; the second occurred after Soto reached the age of majority. The value of Soto’s economic damages was established at $12,738,125, exclusive of pain and suffering. Her damages for pain and suffering was estimated at more than $20 million. After extensive litigation, Soto eventually settled with the defendants for $2,650,000. After deduction of attorneys’ fees in the sum of $1,060,000 and costs of litigation totaling $215,864.37, Soto received a lump sum settlement in the amount of $1,374,135.63 (the “Net Settlement Amount”). There was no allocation of the Net Settlement Amount between Soto’s injuries and her mother’s loss of consortium claim. The Net Settlement Amount constituted approximately 11.5 percent of the estimated value of Soto’s claims. Meanwhile, AHCA’s Medicaid program expended $231,666.01 towards Soto’s medical treatments. ACHA asserted a Medicaid lien for the amount it had expended for Soto’s care and treatment. The lien was in the amount of $231,666.01 (the “Lien Amount”). By law, Medicaid is allowed to recover the full amount it expends for care that could be paid by another source, whether the source is insurance coverage, litigation settlements, or other funds. Persons against whom AHCA asserts a Medicaid lien have the right to challenge the amount of the lien. Soto took advantage of that right, resulting in the instant proceeding. In accordance with prescribed laws and rules, Soto placed an amount equal to the Lien Amount into an interest-bearing account before she filed her challenge. Soto asserts that as she received only 11.5 percent of the value of her claim, she only needs to pay AHCA 11.5 percent of the Lien Amount, i.e., $26,641.59 ($231,666.01 times 11.5 percent). By the terms of her settlement agreement with the various defendants, Soto is not able to recover any additional money for her injuries. The statute of limitations has passed even if Soto wished to pursue other potential defendants. Thus, the Net Settlement Amount is all that she can ever expect to receive for her injuries. There is no dispute as to the severity or permanent nature of Soto’s injuries. A life care plan was created to identify and help deal with the various services that would be necessary to sustain Soto for the rest of her life.
The Issue The issue in this matter concerns the amount of the money to be reimbursed to the Agency for Health Care Administration for medical expenses paid on behalf of Malk S. Sunwabeh, a Medicaid recipient, following a settlement recovered from a third party by the Personal Representative of the Mr. Sunwabeh’s estate.
Findings Of Fact This proceeding determines the amount the Agency should be paid to satisfy a Medicaid lien following Petitioner’s recovery of a $275,000 settlement from a third party. The Agency asserts that it is entitled to recover the full amount of its $85,279.65 lien. Malk S. Sunwabeh, the person who received the benefit of the Agency’s Medicaid payments, died as a result of a hit-and-run accident. Petitioner is the duly appointed Personal Representative of Mr. Sunwabeh’s estate and is authorized to bring this action on his behalf. The accident that gave rise to this matter occurred on October 29, 2013. Early that morning, in pre-dawn darkness, Mr. Sunwabeh left his residence to walk to his high school. The well-worn path he followed led him to a divided roadway that ran in front of his school. With no crosswalk or intersection nearby, Mr. Sunwabeh walked straight across the road. Just after Mr. Sunwabeh stepped into the road, he was struck from behind by a car driven by another student. As he lay sprawled on the pavement, a second vehicle (a gas truck) ran over his body. After the accident, Mr. Sunwabeh was transported by ambulance to Shands Hospital in Jacksonville. He immediately underwent surgery. Tragically, Mr. Sunwabeh died during surgery. He was 16 years old. The Agency, through the Medicaid program, paid Shands Hospital a total of $85,279.65 for Mr. Sunwabeh’s medical care, which was the full amount of his medical expenses following the accident.3/ All of the expenditures Medicaid spent on Mr. Sunwabeh’s behalf are attributed to past medical expenses. No portion of the $85,279.65 Medicaid lien represents future medical expenses. Mr. Sunwabeh’s aunt, Kapitola Morgan (Petitioner), was appointed Personal Representative of Mr. Sunwabeh’s estate. Petitioner brought a wrongful death action to recover both the damages of Mr. Sunwabeh’s estate, as well as the individual statutory damages of Mr. Sunwabeh’s mother, against both drivers who hit Mr. Sunwabeh. Johnny Pineyro, Esquire, represented Petitioner in the wrongful death lawsuit. On June 10, 2015, Mr. Pineyro negotiated a $275,000 settlement for Petitioner with the second driver. Under section 409.910, the Agency is to be repaid for its Medicaid expenditures out of any recovery from liable third parties. Accordingly, when the Agency was notified of the wrongful death settlement, it asserted a Medicaid lien against the amount Petitioner recovered. The Agency claims that, pursuant to the formula set forth in section 409.910(11)(f), it should collect the full amount of the medical costs it paid on Mr. Sunwabeh’s behalf ($85,279.65). The Agency maintains that it should receive the full amount of its lien regardless of the fact that Petitioner settled for less than what Petitioner represents is the full value of the damages. (As discussed below, the formula in section 409.910(11)(f) allows the Agency to collect the full Medicaid lien.) Petitioner, on the other hand, asserts that, pursuant to section 409.910(17)(b), the Agency should be reimbursed a lesser portion of the settlement than the amount it calculated using the section 409.910(11)(f) formula. Petitioner specifically argues that the Agency’s Medicaid lien should be reduced proportionately, taking into account the “true” value of Petitioner’s damages. Otherwise, the application of the default statutory formula would permit the Agency to collect more than that portion of the settlement that fairly represents compensation for past medical expenses. Petitioner insists that such reimbursement violates the federal Medicaid law’s anti-lien provision (42 U.S.C. § 1396p(a)(1)) and Florida common law. Therefore, Petitioner requests that the Agency’s allocation from Petitioner’s recovery be reduced to the amount of $9,065.23. To establish the value of Petitioner’s damages, Petitioner presented the testimony of Mr. Pineyro. Mr. Pineyro heads the Florida Injury Law Firm in Celebration, Florida. He has practiced law for over 20 years and focuses on personal injury, wrongful death, and aviation law. Mr. Pineyro handles jury trials and cases involving catastrophic injury. In his practice, he regularly reviews accident reports, expert reports, and medical records. Mr. Pineyro stays abreast of jury verdicts. He also discusses jury results with members of his firm and other personal injury attorneys. Mr. Pineyro testified that as a routine part of his practice, he ascertains the value of damages suffered by injured parties, and he explained his process for making these determinations. Mr. Pineyro was accepted as an expert in the valuation of damages suffered by injured (and deceased) parties. Mr. Pineyro opined that the conservative value of Mr. Sunwabeh’s damages, as well as his mother’s claim for pain, suffering, and loss of her son’s companionship under the Florida Wrongful Death Act, at between $2,500,000 and $5,000,000.4/ In deriving this figure, Mr. Pineyro considered the accident and homicide reports, the medical examiner’s report, and Petitioner’s medical records. Regarding Mr. Sunwabeh’s mother’s damages, Mr. Pineyro described comparable jury verdicts which involved the death of a child. Mr. Pineyro also testified regarding the significant obstacles Petitioner faced to recovering the full amount of damages in the wrongful death lawsuit based on the disputed facts and circumstances of the accident, as well as insurance policy limits. As part of his representation of Petitioner, Mr. Pineyro deposed several fact and expert witnesses and visited the accident scene. Mr. Pineyro conveyed that the first driver who hit Mr. Sunwabeh was not covered by bodily injury insurance, nor did she possess recoverable assets. Therefore, collecting a full damages award against her would prove challenging. Furthermore, Mr. Pineyro expressed that Petitioner did not have a strong liability case against the second driver based on causation and comparative negligence issues. (Mr. Sunwabeh was wearing all black clothes which concealed his fallen body on the road in the early morning gloom.) Mr. Pineyro was prepared to argue a negligence theory asserting that the second driver failed to use reasonable caution and react in time to avoid driving over Mr. Sunwabeh. However, during his testimony, Mr. Pineyro conceded that a defense verdict in favor of the second driver was a real possibility. Consequently, Mr. Pineyro believed that it was in Petitioner’s best interests to settle the lawsuit. Based on Mr. Pineyro’s testimony that the $275,000 settlement did not fully compensate Ms. Sunwabeh’s estate or his mother for their damages, Petitioner argues that a lesser portion of the settlement should be allocated to reimburse Medicaid instead of the full amount of the lien. Petitioner proposes that a ratio should be applied based on the “true” value of Petitioner’s damage claim ($2,585,279) compared to the amount that was actually recovered ($275,000). Using these numbers, the settlement represents a 10.63 percent recovery of the total value of Petitioner’s damages. In like manner, the amount of the Medicaid lien should also be reduced to 10.63 percent or approximately $9,065.23. Therefore, Petitioner asserts that $9,065.23 is the portion of the third-party settlement that represents the fair and reasonable reimbursement of the amount Medicaid paid for Mr. Sunwabeh’s medical care. The Agency was not a party to the wrongful death lawsuit or Petitioner’s settlement. Petitioner was aware of the Medicaid lien and past medical expense damages at the time she settled the lawsuit. No portion of the $275,000 settlement represents reimbursement for future medical expenses. The undersigned finds that Petitioner did not meet her burden of proving that the “true” value of Petitioner’s damages from this accident equaled $2,585,279.65. Further, based on the evidence in the record, Petitioner failed to prove, by a preponderance of the evidence, that a lesser portion of Petitioner’s total recovery should be allocated as reimbursement for medical expenses than the amount the Agency calculated pursuant to the formula set forth in section 409.910(11)(f). Accordingly, the Agency is entitled to recover $85,279.65 from Petitioner’s recovery of $275,000 from a third party to satisfy its Medicaid lien.
The Issue The issue for the undersigned to determine is the amount payable to Respondent, Agency for Health Care Administration (AHCA), as reimbursement for medical expenses paid on behalf of Petitioner Kanesha Harley (Ms. Harley), pursuant to section 409.910, Florida Statutes (2019), from settlement proceeds Petitioner received from third parties.
Findings Of Fact AHCA is the state agency charged with administering the Florida Medicaid program, pursuant to chapter 409. In October 2013, Ms. Harley, then 19 years old, was struck by a bullet while on the property of liable third parties (the Underlying Defendants). Ms. Harley testified that the shooting occurred when she was at a restaurant, which was connected to another business, with friends. While outside the restaurant to retrieve her wallet, two persons unknown to Ms. Harley began shooting at each other in the parking lot area. Ms. Harley initially avoided these shots, but after an employee of the restaurant announced that it was ok to go back outside, she was struck by a bullet. Ms. Harley received medical care as a result of her injuries, which included a diagnosis of being an incomplete paraplegic (meaning, among other things, that Ms. Harley is unable to walk and cannot feel the bottom of her legs). Ms. Harley underwent a prolonged hospitalization, is currently unable to work, and expects a lifetime of partial paralysis. Prior to her injury, Ms. Harley had completed the tenth grade, and had a part-time job earning minimum wage. Since her injury, Ms. Harley has been unable to work. She is partially paralyzed from the waist down, and relies on friends and family members for assistance. Ms. Harley’s medical care related to her injury was paid by Medicaid, and AHCA through the Medicaid program provided $123,931.54. Another Medicaid entity, Equian, paid Ms. Harley $15,648.50 on her behalf as well. The undersigned finds that Ms. Harley’s past medical expenses total $139,580.04 (and notes that this figure is more than the lien amount claimed in the Petition). Petitioner filed a lawsuit against the Underlying Defendants, alleging negligent security and premises liability. During the pendency of Petitioner’s lawsuit, AHCA’s authorized agent, in a letter dated January 26, 2020, stated that “our office calculated Medicaid’s current and final lien in the amount of $123,931.54. Accordingly, payment of $123,931.54 will satisfy our lien.” More than seven years after Ms. Harley’s injury, Petitioner and the Underlying Defendants settled the lawsuit for a total of $370,000.00.1 A “Letter of Understanding” authored by Petitioner’s counsel, that he provided to the Underlying Defendants, states, in pertinent part: A[s] you know, we represent KANESHA HARLEY, in regards to the above referenced accident and this letter of understanding is to outline that the Plaintiff has allocated 5% of the total settlement of $370,000 or $18,500 of the total settlement amount for Kanesha Harley’s past medical bills, for any and all purposes, including Florida Medicaid liens and other liens. The basis for this reduction is simple equity. Ms. Harley, then 19, was diagnosed as an incomplete paraplegic after the subject incident in October of 2013. The Plaintiff filed suit against [the Underlying Defendants] and was able to obtain a total settlement of $370,000.00, which took into account the serious liability issues under Florida premises liability, negligent security standards. These facts, along with difficulty in prosecuting the case under COVID-19, other technical difficulties, the fact that the case is almost 8 years old, and the unknown affect [sic] COVID-19 may have on a jury is potentially fatal to Plaintiff’s cause of action, made this a fair and reasonable settlement, and makes this allocation necessary. In addition to the “Letter of Understanding,” Petitioner introduced two documents entitled draft closing statements, that reflect the total amount of the settlement, the amount of attorney’s fees ($148,000) and costs 1 Petitioner’s settlement with the Underlying Defendants requires that the identities of the Underlying Defendants remain confidential. Accordingly, the undersigned has not revealed their identities in this Final Order, and notes that Exhibits P1, P5, P6a, P6b, and P7—all of which reference the identities of the Underlying Defendants—shall remain confidential. ($21,434.33) incurred by Petitioner, the amount of a litigation loan incurred by Petitioner, and the amount of the Medicaid lien (in one copy, it contains the reduced amount requested by Petitioner, in the other, it contains no reduction of the lien). Other than these documents, Petitioner introduced no evidence as to how the parties allocated the settlement of the litigation with the Underlying Defendants. AHCA did not commence a civil action to enforce its rights under section 409.910 or intervene in Petitioner’s lawsuit against the Underlying Defendants. Application of the formula set forth in section 409.910(11)(f) to Petitioner’s $370,000.00 settlement authorizes payment to AHCA of $128,032.84. The undersigned arrives at this calculation as follows: Settlement Amount $370,000.00 Attorneys’ Fees (capped at 25% pursuant to section 409.910(11)(f)3. $92,500.00 Taxable Costs $21,434.44 Remaining Recovery $256,065.67 Amount Recoverable (pursuant to section 409.910(11)(f)1., “one-half of the remaining recovery shall be paid to [AHCA] up to the total amount of medical assistance provided by Medicaid.”) $128.032.84 (this amount is one-half of the remaining recovery, which is lower than the Medicaid lien or total past medical expenses) Expert Witness Testimony of Mr. Holland Petitioner presented the testimony of Mr. Holland, a trial attorney who has handled in excess of 1,000 personal injury cases in the county, circuit, and federal courts of Florida. Mr. Holland has conducted numerous jury trials and has also resolved cases in mediation and arbitration. Petitioner moved, and the undersigned accepted, Mr. Holland as an expert in personal injury litigation. AHCA did not oppose Mr. Holland’s designation as an expert. Mr. Holland testified that he is familiar with the type of injury that Ms. Harley suffered. He is also familiar with the legal standards for premises liability and negligent security, and stated that he was familiar with judgments that include monetary awards “due to the actions of others.” Mr. Holland stated that there were various liability issues in Petitioner’s lawsuit. He testified that it is difficult to prove that a landowner knew of a dangerous condition, or that a landowner could anticipate a shooting, which is an intentional act. Mr. Holland opined that Petitioner had numerous challenges in holding either of the Underlying Defendants liable because it would be difficult to convince a jury that the cause of her injury was foreseeable. Mr. Holland opined, based on his experience, that an estimate of the overall value of the damages to Petitioner was in the $15 to $20 million range. Neither Petitioner nor Mr. Holland offered any evidence of similar jury verdicts or settlements to substantiate this opinion; rather, Mr. Holland’s opinion was based on his experience to arrive at this estimate. Mr. Holland further opined that allocating 5% of the settlement— which is $18,500.00—to Petitioner’s past medical expenses was a “reasonable allocation.” Mr. Holland’s opinion on the allocation of 5% of the settlement of Petitioner’s lawsuit to her past medical expenses was not based on the typical calculation of comparing the value of the damages in the lawsuit (which are often based on comparison to actual, similar verdicts or settlements) to the actual recovery in the settlement, and deriving a ratio or percentage from that calculation that could be used to reduce the amount of the Medicaid lien (the pro rata allocation methodology).2 In fact, Petitioner’s request to reduce the Medicaid lien, which Mr. Holland supported, is not based on the pro rata allocation methodology, but rather, based on Petitioner’s “Letter of Understanding,” which designated 2 See, e.g., Eady v. Ag. for Health Care Admin., 279 So. 3d 1249 (Fla. 1st DCA 2019) (explaining the pro rata allocation methodology). 5% of the entire settlement proceeds as an appropriate amount to satisfy the Medicaid lien, based on “simple equity.” On cross-examination, Mr. Holland stated that his opinion of $15 to $20 million in damages was not broken down by any specific category, but stated that Petitioner’s loss of wages over the course of her life, given her relatively long-life expectancy, as well as pain and suffering, loss of enjoyment of life, and possible loss of consortium claims, led him to his opinion. He further stated that based on his experience with this type of lawsuit, but where liability is clear, he would not recommend that a client accept less than $10 million in settlement. When asked on cross-examination specifically concerning the allocation of 5% of the settlement of Petitioner’s lawsuit to her past medical expenses, Mr. Holland stated that he had no personal knowledge of the parties’ decision to designate this percentage, but relied on the “Letter of Understanding” authored by Petitioner’s counsel, which he admitted relied on “equity.” However, Mr. Holland additionally opined that he was comfortable allocating 95% of the settlement to Petitioner’s noneconomic damages, as well as her work life expectancy earning minimum wage, although he admitted that he had not computed any of these figures. Ultimate Findings of Fact The undersigned finds that the opinion of Mr. Holland concerning the value of Petitioner’s lawsuit, which, after cross-examination, he admitted was $10 million, was not based upon sufficient facts or data, such as a comparison to actual similar verdicts or settlements of these types of lawsuit, but rather his personal estimate based on his experience. See § 90.702(1), Fla. Stat. (requiring that an expert, inter alia, base his or her opinion “upon sufficient facts or data.”). Further, Mr. Holland did not break down the basis for his valuation of the lawsuit into specific categories of damages and expenses (i.e., future medical expenses, pain and suffering, lost earning capacity, etc.), but opined that he considered many of these categories in arriving at his valuation of Petitioner’s lawsuit. Although Mr. Holland credibly testified concerning his considerable experience as a personal injury attorney, the undersigned cannot credit his opinion concerning the valuation of Petitioner’s damages. However, Mr. Holland’s opinion concerning the value of Petitioner’s lawsuit appears irrelevant to Petitioner’s theory of recovery. The undersigned finds that Petitioner did not, in any way, attempt to establish that the undersigned should reduce her Medicaid lien pursuant to the pro rata allocation methodology, which has been approved in numerous proceedings before the Division of Administrative Hearings (DOAH), as well as Florida’s appellate courts, as a reasonable, fair, and accurate methodology that is consistent with Arkansas Department of Health and Human Services v. Ahlborn, 547 U.S. 268 (2006), for allocating the settlement proceeds when the underlying third-party action is settled for less than the full value of the case. Rather, Petitioner asks the undersigned to approve a 5% allocation of her entire settlement proceeds to satisfy her Medicaid lien, based on a “Letter of Understanding” between Petitioner and the Underlying Defendants, that states “[t]he basis for this reduction is simple equity[,]” and Mr. Holland’s testimony that relied on this “Letter of Understanding,” as well as his unsupported calculation that he would allocate 95% of the settlement proceeds to Petitioner’s noneconomic damages and lost earning capacity. Section 409.910(1) explicitly abrogates the application of principles of equity in this proceeding; further, DOAH is not a “court of equity.” The undersigned finds no basis, in fact or law, for such a reduction. The undersigned finds that Petitioner failed to establish, by either clear and convincing evidence, or a preponderance of the evidence, support for Petitioner’s allocation of 5% of the settlement proceeds ($18,500.00) to Petitioner’s past medical expenses as a basis for reducing the Medicaid lien. Accordingly, AHCA is entitled to payment of $128.032.84, pursuant to the formula set forth in section 409.910(11)(f).
The Issue The issue is the amount of Petitioner’s personal injury settlement proceeds that should be paid to Respondent, Agency for Health Care Administration (AHCA), to satisfy its Medicaid lien under section 409.910, Florida Statutes (2016).1/
Findings Of Fact AHCA is the state agency authorized to administer Florida’s Medicaid program. See § 409.902, Fla Stat. On July 6, 2011, Petitioner suffered a catastrophic injury to his spinal cord as a passenger in a car involved in a single-car accident. Petitioner was permanently rendered an incomplete quadriplegic unable to walk (for more than 10 to 15 steps), stand, ambulate, eat or toilet without assistance. Prior to the accident, Petitioner was a senior at the University of South Florida, who intended to become a physical therapist. Additionally, he was heavily involved in mixed martial arts and won amateur of the year in 2010. Petitioner’s medical care related to the car accident was paid by Medicaid. Medicaid provided $177,747.91 in benefits associated with Petitioner’s car accident. This amount, $177,747.91, represents the past medical expenses paid on behalf of Petitioner, and for which AHCA seeks reimbursement. There is no dispute that Medicaid paid $177,747.91 for Petitioner’s past medical expenses. Petitioner brought a PI action against the driver of the car, the owner of the car and the insurance carrier providing uninsured/underinsured motorist insurance covering the accident. This PI action sought to recover all of Petitioner’s damages associated with his injuries. During the pendency of Petitioner’s PI action, AHCA was notified of the action. On April 25, 2014, AHCA notified Petitioner’s then counsel (Gene Odom, Esquire) that a preliminary lien of $177,747.91 was in place, and that an itemized accounting would be provided. It was unknown if the defendants, in the PI case, knew of the Medicaid lien during the negotiations. There was no evidence presented that AHCA participated in the PI action, any settlement negotiations, agreed to any settlement(s), or executed the actual settlements. The PI lawsuit was settled in 2017 through a series of confidential settlement(s) totaling $1,000,000.3/ The total settlement was comprised of $100,000 in uninsured/underinsured motorist coverage, $100,000 in bodily injury coverage, $500,000 in coverage from the leased vehicle, and $300,000 in settlement of a bad faith claim. Petitioner’s condition and his need for continuing care are not in dispute. A life-care plan (Petitioner’s Exhibit 2) identifying the “medical basis for life-care planning” for Petitioner was prepared by John L. Merritt, M.D. Dr. Merritt did not testify at hearing. Application of the formula in section 409.910(11)(f) to Petitioner’s settlement requires payment to AHCA of the full $177,747.91 Medicaid lien. Petitioner deposited the full Medicaid lien amount in an interest bearing account for the benefit of AHCA pending an administrative determination of AHCA’s rights, and this constituted “final agency action” for purposes of chapter 120, Florida Statutes, pursuant to section 409.910(17). The Medicaid program spent $177,747.91 towards Petitioner’s past medical expenses. There was no testimony that any portion of this amount was paid for Mr. Eady’s future medical expenses. No testimony was received as to any taxable costs associated with the action at law. The parties did not stipulate to the amount of any attorneys’ fees related to the settlement(s). The parties did not divulge an amount (if any) designated in the settlement(s) to pay for Petitioner’s past medical expenses. Mr. Guito is a PI attorney and Petitioner’s step- father. Mr. Guito is employed by McIntyre, Thanasides, Bringgold, Elliott, Grimaldi and Guito. He has practiced law for 29 years and, in addition to the PI work, handles cases involving civil litigation, medical malpractice, and catastrophic injury. Mr. Guito has tried numerous jury trials and represented individuals who have suffered spinal cord injuries. Mr. Guito stays abreast of jury verdicts as it is important to understand what types of damages juries are awarding, whether they are more conservative or liberal in damages, and how the juries view evidence. As a routine part of his practice, Mr. Guito evaluates the damages suffered by injured people. He has experience in dealing with life-care planners, vocational rehabilitative experts, economists, and other lawyers involved with claims for significant injuries and damages. Mr. Guito assisted attorneys in prosecuting Mr. Eady’s case in order to maximize his recovery.4/ Mr. Guito reviewed the accident report, various engineering expert reports, Mr. Eady’s medical records and his life-care plan. Mr. Guito opined that Mr. Eady’s damages are in excess of $15,000,000. Mr. Barrett is a PI attorney with experience in medical malpractice, medical products and pharmaceutical products liability, and catastrophic injury cases. Mr. Barrett is a seasoned trial attorney. However, “as of a couple of months ago,” he is “in-between law firms” deciding whether to form a new firm or “quit it [the practice of law] all together.” In response to a question about reviewing medical records and life-care plans, Mr. Barrett testified that because these types of cases are handled on a contingency fee basis, he has to evaluate each case to determine whether the contingent fee is enough to “pay a staff of -- in my case, 20 or so employees. Pay a lease, pay for a building, pay for all the things, all the overhead, [and] pay a salary.” Mr. Barrett did not “honestly . . . remember how the tender was stated” when asked if he was tendered specifically as an expert in the allocation of settlements in a Division hearing. When asked if it mattered how damages are allocated in a settlement, Mr. Barrett provided there might be tax consequences because in punitive damages “you don’t get the same percentages,” which “could have an affect [sic] on lien recoveries.” He further qualified his answer by stating “you’ve already . . . won the case because you’ve got an allocation in the jury verdict.” This case is based on confidential settlements, not a jury verdict. Mr. Barrett explained Mr. Eady’s damages: [Mr. Eady] was a passenger in a Jaguar, which, I took from the complaint, was a new car or a car that belonged to an agency. And it was driven by an employee, or Bailee, or something of that agency. Who took too tight a turn and rolled the car. And, apparently, there was some intrusion from the top of the car, from the ceiling of the car. And from the nature of the damage, it’s almost certain that he hit his head on the top of the car and broke, or dislocated several vertebrae in his neck. Such that his fourth cervical vertebrae was – well, I would call it a crush or a burst fracture, down to where it intruded on the fifth cervical vertebrae. And there was extreme, not total, damage to his spinal cord, in the area of the fourth and fifth cervical vertebrae, such that he became what’s called a partial quadriplegic. By “partial,” we can firmly define and say that he had, initially, no feeling or use at all in his lower extremities, with a lot of pain and some partial movement of his upper extremities. *** [H]e was very motivated to recover. . . . [H]e was still striving to get better. And he had made some progress, he was able to -- some use of his arms. Mr. Barrett “paid most attention to . . . [Mr. Eady’s] life care plan,” which Mr. Barrett thought was a “preliminary” plan. Mr. Barrett acknowledged the $1,000,000 settlement, but opined that the settlement did “not in any way” fully compensate Mr. Eady for the full amount of his damages. Mr. Barrett suggested that Petitioner’s damages were in the range of $25,000,000 to $35,000,000. There was no suggestion that the settlement was forced upon Petitioner. Mr. Guito and Mr. Barrett spoke in generalities, speculations, and reasonableness as to the settlement in relation to the Medicaid lien. Each suggested what they thought a jury would do, if presented with the facts in this case. Their testimony suggested that a lesser amount of the total recovery should be allocated for Mr. Eady’s past medical expenses in this instance. Mr. Barrett accepted Mr. Guito’s suggestion that $15,000,000 was a conservative damage estimate. They postulated that because Petitioner only received $1,000,000 in settlement of what should have been at least a $15,000,000 award (or 6.66 percent of the $1,000,000 settlement), then Medicaid should only recover 6.66 percent from the settlement. The witnesses asserted that AHCA’s reimbursement for Petitioner’s past medical expenses should only be $11,838.01, or 6.66 percent of the $1,000,000 settlement amount. This is often referred to as the “proportionality test” or “pro-rata test.” For the reasons set forth below, the undersigned does not agree with Petitioner’s position. Application of the formula contained in section 409.910(11)(f) to Petitioner’s $1,000,000 settlements would require payment to ACHA in the amount of $177,747.91, the actual amount of the funds expended by Medicaid.
