The Issue The issue is whether there was substantial justification under section 57.111, Florida Statutes (2013-2016),1/ for the Administrative Complaint filed by the Department of Health (DOH) against Joanna Nelson, A.R.N.P., who prevailed and petitioned for attorney’s fees and costs under that statute.
Findings Of Fact On August 12, 2013, DOH received a complaint from the Intervention Project for Nurses (IPN) that the Petitioner had been terminated from her IPN contract due to noncompliance with IPN monitoring requirements. DOH began to investigate and obtained the Petitioner’s IPN file. IPN is the impaired practitioner program for the Board of Nursing (Board). § 456.076, Fla. Stat. It monitors the evaluation, care, and treatment of impaired nurses. Id. It helps DOH and the Board to determine whether a licensee is impaired and unsafe to practice the profession. § 456.076(2)(c)1, Fla. Stat. The Petitioner’s IPN file indicated that on July 12, 2013, the Petitioner was required to submit a blood sample for a drug screen. On July 22, the Petitioner was notified that she tested positive for alcohol. She was told that she would have to refrain from practice, get evaluated, process the positive drug screen with her sponsor, therapist, and facilitator, and execute a voluntary withdrawal from practice agreement. The Petitioner was given until August 5 to do those things. The Petitioner believed and argued that the drug screen had produced a false positive. On July 23, the Petitioner’s counsel notified IPN that the Petitioner was revoking the authorizations previously given to IPN for the release of the Petitioner’s medical records. IPN informed the Petitioner that it could no longer work with her if she was revoking the medical releases. The Petitioner informed IPN that she no longer wished to be involved with IPN and would not be executing the voluntary withdrawal from practice. On August 6, IPN terminated its contract with the Petitioner for failure to comply with the conditions of her IPN monitoring agreement. In November 2013, DOH presented this information, along with its complete investigative file, which included IPN’s file on the Petitioner, to a probable cause panel for its review and consideration. DOH also presented the written arguments of counsel for the Petitioner that probable cause should not be found because the IPN file did not contain either the positive drug screen from July 22, or any documentation regarding its collection, handling, storage, packaging, transportation, preservation, or testing methodology. In addition, the Petitioner contended that the Phosphatidyl Ethanol (PEth) blood test administered to the Petitioner normally is used for chronic alcoholism and was not appropriate or reliable as used in the Petitioner’s case. The Petitioner also advised DOH that she was taking medication that contained alcohol, without objection from IPN. On November 25, 2013, DOH asked the probable cause panel to find probable cause that the Petitioner was in violation of section 456.072(1)(hh) for being terminated from the IPN program for failure to comply, without good cause, with the terms of her IPN monitoring or treatment contract, and for not successfully completing her drug or alcohol treatment program. The panel considered the DOH investigative file, arguments of counsel for DOH in favor of finding probable cause, and the Petitioner’s arguments against finding probable cause, including the argument that the evidence in the DOH investigative file would not be sufficient to prove the charge in an administrative hearing. The panel chair stated “even though the attorney’s explanations may be relevant, that does not—that does not do anything for the fact that she was terminated from IPN and that she was still in a contract with IPN.” The panel found probable cause, and DOH filed an Administrative Complaint. The Petitioner disputed the charges in the Administrative Complaint and continued to press her arguments regarding the insufficiency of the DOH investigative file. (Subsequent facts are irrelevant to the determination whether there was substantial justification for DOH’s filing of the Administrative Complaint.) See Conclusions of Law. In 2016, the charges were dismissed.
The Issue Whether the Department of Corrections? action to withdraw its Intent to Award and to reject all replies to ITN 12-DC-8396 is illegal, arbitrary, dishonest, or fraudulent, and if so, whether its Intent to Award is contrary to governing statutes, rules, policies, or the solicitation specifications.
Findings Of Fact The DOC is an agency of the State of Florida that is responsible for the supervisory and protective care, custody, and control of Florida?s inmate population. In carrying out this statutory responsibility, the Department provides access to inmate telephone services. On April 15, 2013, the DOC issued the ITN, entitled “Statewide Inmate Telephone Services, ITN 12-DC-8396,” seeking vendors to provide managed-access inmate telephone service to the DOC. Responses to the ITN were due to be opened on May 21, 2013. The DOC issued Addendum #1 to the ITN on April 23, 2013, revising one page of the ITN. The DOC issued Addendum #2 to the ITN on May 14, 2013, revising a number of pages of the ITN, and including answers to a number of vendor questions. EPSI, GTL, and Securus are providers of inmate telephone systems and services. Securus is the incumbent contractor, and has been providing the Department with services substantially similar to those solicited for over five years. No party filed a notice of protest to the terms, conditions, or specifications contained in the ITN or the Addenda within 72 hours of their posting or a formal written protest within 10 days thereafter. Replies to the ITN were received from EPSI, GTL, Securus, and Telmate, LLC. Telmate?s reply was determined to be not responsive to the ITN. Two-Part ITN As amended by Addendum #2, section 2.4 of the ITN, entitled “ITN Process,” provided that the Invitation to Negotiate process to select qualified vendors would consist of two distinct parts. In Part 1, an interested vendor was to submit a response that described certain Mandatory Responsiveness Requirement elements, as well as a Statement of Qualifications, Technical Response, and Financial Documentation. These responses would then be scored using established evaluation criteria and the scores would be combined with cost points assigned from submitted Cost Proposals. In Part 2, the Department was to select one or more qualified vendors for negotiations. After negotiations, the Department would request a Best and Final Offer from each vendor for final consideration prior to final award decision. The ITN provided that the Department could reject any and all responses at any time. High Commissions and Low Rates Section 2.5 of the ITN, entitled “Initial Cost Response,” provided in part: It is the Department?s intention, through the ITN process, to generate the highest percentage of revenue for the State, while ensuring a quality telephone service with reasonable and justifiable telephone call rate charges for inmate?s family and friends similar to those available to the public-at- large. Section 2.6 of the ITN, entitled “Revenue to be Paid to the Department,” provided in part that the Department intended to enter into a contract to provide inmate telephone service at no cost to the Department. It provided that, “[t]he successful Contractor shall pay to the Department a commission calculated as a percentage of gross revenues.”1/ The commission paid by a vendor is the single largest expense in the industry and is an important aspect of any bid. Contract Term Section 2.8 of the ITN was entitled “Contract Term” and provided: It is anticipated that the initial term of any Contract resulting from this ITN shall be for a five (5) year period. At its sole discretion, the Department may renew the Contract in accordance with Form PUR 1000 #26. The renewal shall be contingent, at a minimum, on satisfactory performance of the Contract by the Contractor as determined by the Department, and subject to the availability of funds. If the Department desires to renew the Contracts resulting from this ITN, it will provide written notice to the Contractor no later than thirty days prior to the Contract expiration date. Own Technology System Section 3.4 of the ITN provided in part: The successful Contractor is required to implement its own technology system to facilitate inmate telephone service. Due to the size and complexity of the anticipated system, the successful Contractor will be allowed a period of transition beginning on the date the contract is executed in which to install and implement the utilization of its own technology system. Transition, implementation and installation are limited to eighty (80) days. The Department realizes that some "down time" will occur during this transition, and Respondents shall propose an implementation plan that reduces this "down time" and allows for a smooth progression to the proposed ITS. GTL emphasizes the language stating that the successful contractor must implement “its own” technology system, and asserts that the technology system which EPSI offers to install is not owned by it, but by Inmate Calling Solutions, LLC (ICS), its subcontractor. However, EPSI demonstrated that while the inmate telephone platform, dubbed the “Enforcer System,” is owned by ICS now, that EPSI has a Master User Agreement with ICS and that an agreement has already been reached that before the contract would be entered into, a Statement of Work would be executed to create actual ownership in EPSI for purposes of the Florida contract. GTL alleges that in EPSI?s reply, EPSI relied upon the experience, qualifications, and resources of its affiliated entities in other areas as well. For example, GTL asserts that EPSI?s claim that it would be providing 83 percent of the manpower is false, since EPSI has acknowledged that EPSI is only a contracting subsidiary of CenturyLink, Inc., and that EPSI has no employees of its own. While it is clear that EPSI?s reply to the ITN relies upon the resources of its parent to carry out the terms of the contract with respect to experience, presence in the state, and personnel, EPSI demonstrated that this arrangement was common, and well understood by the Department. EPSI demonstrated that all required capabilities would be available to it through the resources of its parent and subcontractors at the time the contract was entered into, and that its reply was in conformance with the provisions of the ITN in all material respects. EPSI has the integrity and reliability to assure good faith performance of the contract. Call Recording Section 3.6 of the ITN, entitled “Inmate Telephone System Functionality (General),” provided in part: The system shall provide the capability to flag any individual telephone number in the inmate?s „Approved Number List? as „Do Not Record.? The default setting for each telephone number will be to record until flagged by Department personnel to the contrary. Securus alleges that section 3.6 of the ITN implements Department regulations2/ and that EPSI?s reply was non-responsive because it stated that recording of calls to specific telephone numbers would be deactivated regardless of who called that number. Securus alleges that this creates a security risk because other inmates calling the same number should still have their calls recorded. EPSI indicated in its reply to the ITN that it read, agreed, and would comply with section 3.6. While EPSI went on to say that this capability was not connected to an inmate?s PIN, the language of section 3.6 does not mention an inmate?s PIN either. Read literally, this section requires only the ability to “flag” any individual telephone number that appears in an inmate?s number list as “do not record” and requires that, by default, calls to a telephone number will be recorded until it is flagged. EPSI?s reply indicated it could meet this requirement. This provision says nothing about continuing to record calls to that same number from other inmates. Whether or not this creates a security risk or is what the Department actually desired are issues which might well be discussed as part of the negotiations, but this does not affect the responsiveness of EPSI?s reply to section 3.6. Furthermore, Mr. Cooper testified at hearing that EPSI does have the capability to mark a number as “do not record” only with respect to an individual inmate, at the option of the Department. EPSI?s reply conformed to the call-recording provisions of section 3.6 of the ITN in all material respects. Call Forwarding Section 3.6.8 of the ITN, entitled “System Restriction, Fraud Control and Notification Requirements,” provided that the provided inmate telephone services have the following security capability: Ability to immediately terminate a call if it detects that a called party?s telephone number is call forwarded to another telephone number. The system shall make a “notation” in the database on the inmate?s call. The system shall make this information available, in a report format, to designated department personnel. In response to an inquiry noting that, as worded, the ITN did not technically require a vendor to have the capability to detect call-forwarded calls in the first place, the Department responded that this functionality was required. Securus alleges that EPSI is unable to comply with this requirement, citing as evidence EPSI?s admission, made some months before in connection with an RFP being conducted by the Kansas Department of Corrections, that it did not yet have this capability. EPSI indicated in its reply to the ITN that it read, agreed, and would comply with this requirement. As for the Kansas solicitation, EPSI showed that it now possesses this capability, and has in fact installed it before. EPSI?s reply conformed to the call-forwarding provisions of section 3.6.8 of the ITN in all material respects. Keefe Commissary Network Section 5.2.1 of the ITN, entitled “Respondents? Business/Corporate Experience,” at paragraph e. directed each vendor to: [P]rovide and identify all entities of or related to the Respondent (including parent company and subsidiaries of the parent company; divisions or subdivisions of parent company or of Respondent), that have ever been convicted of fraud or of deceit or unlawful business dealings whether related to the services contemplated by this ITN or not, or entered into any type of settlement agreement concerning a business practice, including services contemplated by this ITN, in response to a civil or criminal action, or have been the subject of any complaint, action, investigation or suit involving any other type of dealings contrary to federal, state, or other regulatory agency regulations. The Respondent shall identify the amount of any payments made as part of any settlement agreement, consent order or conviction. Attachment 6 to the ITN, setting forth Evaluation Criteria, similarly provided guidance regarding the assessment of points for Business/Corporate Experience. Paragraph 1.(f) provided: “If any entities of, or related to, the Respondent were convicted of fraud or of deceit or unlawful business dealings, what were the circumstances that led to the conviction and how was it resolved by the Respondent?” Addendum #2. to the ITN, which included questions and answers, also contained the following: Question 57: In Attachment 6, Article 1.f. regarding respondents “convicted of fraud, deceit, or unlawful business dealing . . .” does this include associated subcontractors proposed in this ITN? Answer 57: Yes, any subcontractors you intend to utilize on this project, would be considered an entity of and related to your firm. As a proposed subcontractor, ICS is an entity of, or related to, EPSI. There is no evidence to indicate that ICS has ever been convicted of fraud or of deceit or unlawful business dealings. There is no evidence to indicate that ICS has entered into any type of settlement agreement concerning a business practice in response to a civil or criminal action. There is no evidence to indicate that ICS has been the subject of any complaint, action, investigation, or suit involving any other type of dealings contrary to federal, state, or other regulatory agency regulations. The only evidence at hearing as to convictions involved “two individuals from the Florida DOC” and “two individuals from a company called AIS, I think that?s American Institutional Services.” No evidence was presented that AIS was “an entity of or related to” EPSI. Conversely, there was no evidence that Keefe Commissary Network (KCN) or anyone employed by it was ever convicted of any crime. There was similarly no evidence that KCN entered into any type of settlement agreement concerning a business practice in response to civil or criminal action. It was shown that KCN “cooperated with the federal government in an investigation” that resulted in criminal convictions, and it is concluded that KCN was therefore itself a subject of an investigation involving any other type of dealings contrary to federal, state, or other regulatory agency regulations. However, KCN is not an entity of, or related to, EPSI. KCN is not a parent company of EPSI, it is not a division, subdivision, or subsidiary of EPSI, and it is not a division, subdivision, or subsidiary of EPSI?s parent company, CenturyLink, Inc. EPSI?s reply conformed to the disclosure requirements of section 5.2.1, Attachment 6, and Addendum #2 of the ITN in all material respects. Phases of the ITN Section 6 describes nine phases of the ITN: Phase 1 – Public Opening and Review of Mandatory Responsiveness Requirements Phase 2 – Review of References and Other Bid Requirements Phase 3 – Evaluations of Statement of Qualifications, Technical Responses, and Managed Access Solutions3/ Phase 4 – CPA Review of Financial Documentation Phase 5 – Review of Initial Cost Sheets Phase 6 – Determination of Final Scores Phase 7 – Negotiations Phase 8 – Best and Final Offers from Respondents Phase 9 – Notice of Intended Decision Evaluation Criteria in the ITN As amended by Addendum #2, the ITN established scoring criteria to evaluate replies in three main categories: Statement of Qualifications (500 points); Technical Response (400 points); and Initial Cost Sheets (100 points). It also provided specific guidance for consideration of the commissions and rates shown on the Initial Cost Sheet that made up the pricing category. Section 6.1.5 of the ITN, entitled “Phase 5 – Review of Initial Cost Sheet,” provided in part: The Initial Cost Proposal with the highest commission (percentage of gross revenue) to be paid to the Department will be awarded 50 points. The price submitted in Table 1 for the Original Contract Term, and the subsequent renewal price pages for Table 1 will be averaged to determine the highest commission submitted. All other commission percentages will receive points according to the following formula: (X/N) x 50 = Z Where: X = Respondents proposed Commission Percentage to be Paid. N = highest Commission Percentage to be Paid of all responses submitted. Z = points awarded. * * * The Initial Cost Proposal with the lowest telephone rate charge will be awarded 50 points. The price submitted in Table 1 for the Original Contract Term, and the subsequent renewal price pages for Table 1 will be averaged to determine the highest commission submitted. All other cost responses will receive points according to the following formula: (N/X) x 50 = Z Where: N = lowest verified telephone rate charge of all responses submitted. X = Respondent?s proposed lowest telephone rate charge. Z = points awarded. The ITN as amended by Addendum #2 provided instructions that initial costs should be submitted with the most favorable terms the Respondent could offer and that final percentages and rates would be determined through the negotiation process. It included the following chart:4/ COST PROPOSAL INITIAL Contract Term 5 years ONE Year Renewal TWO Year Renewal THREE Year Renewal FOUR Year Renewal FIVE Year Renewal Initial Department Commission % Rate Proposed Initial Blended Telephone Rate for All Calls* (inclusive of surcharges) The ITN, including its Addenda, did not specify selection criteria upon which the determination of best value to the state would be based. Allegation that EPSI Reply was Misleading On the Certification/Attestation Page, each vendor was required to certify that the information contained in its reply was true and sufficiently complete so as not to be misleading. While portions of its reply might have provided more detail, EPSI did not mislead the Department regarding its legal structure, affiliations, and subcontractors, or misrepresent what entity would be providing technology or services if EPSI was awarded the contract. EPSI?s reply explained that EPSI was a wholly owned corporate subsidiary of CenturyLink, Inc., and described many aspects of the contract that would be performed using resources of its parent, as well as aspects that would be performed through ICS as its subcontractor. Department Evaluation of Initial Replies The information on the Cost Proposal table was reviewed and scored by Ms. Hussey, who had been appointed as the procurement manager for the ITN. Attempting to follow the instructions provided in section 6.1.5, she added together the six numbers found in the boxes indicating commission percentages on the Cost Proposal sheets. One of these boxes contained the commission percentage for the original five-year contract term and each of the other five boxes contained the commission percentage for one of the five renewal years. She then divided this sum by six, the number of boxes in the computation chart (“divide by six”). In other words, she calculated the arithmetic mean of the six numbers provided in each proposal. The Department had not intended for the commission percentages to be averaged in this manner. Instead, they had intended that a weighted mean would be calculated. That is, they intended that five times the commission percentage shown for the initial contract term would be added to the commission percentages for the five renewal years, with that sum then being divided by ten, the total number of years (“divide by ten”). The Department did not clearly express this intent in section 6.1.5. Mr. Viefhaus testified that based upon the language, Securus believed that in Phase 5 the Department would compute the average commission rate the way that Ms. Hussey actually did it, taking the arithmetic mean of the six commission percentages provided by each vendor, and that therefore Securus prepared its submission with that calculation in mind.5/ Mr. Montanaro testified that based upon the language, GTL believed that in Phase 5 the Department would “divide by ten,” that is, compute the weighted mean covering the ten-year period of the contract, and that GTL filled out its Cost Proposal table based upon that understanding. The DOC posted a notice of its intent to negotiate with GTL, Securus, and EPSI on June 3, 2013. Telmate, LLC, was not chosen for negotiations.6/ Following the Notice of Intent to Negotiate was this statement in bold print: Failure to file a protest within the time prescribed in Section 120.57(3), Florida Statutes, or failure to post the bond or other security required by law within the time allowed for filing a bond shall constitute a waiver of proceedings under Chapter 120, Florida Statutes. On June 14, 2013, the DOC issued a Request for Best and Final Offers (RBAFO), directing that Best and Final Offers (BAFO) be provided to the DOC by June 18, 2013. Location-Based Services The RBAFO included location-based services of called cell phones as an additional negotiated service, requesting a narrative description of the service that could be provided. The capability to provide location-based services had not been part of the original ITN, but discussions took place as part of the negotiations. Securus contends that EPSI was not a responsible vendor because it misrepresented its ability to provide such location-based services through 3Cinteractive, Inc. (3Ci). EPSI demonstrated that it had indicated to the Department during negotiations that it did not have the capability at that time, but that the capability could easily be added. EPSI showed that due to an earlier call it received from 3Ci, it believed that 3Ci would be able to provide location- based services to it. EPSI was also talking at this time to another company, CTI, which could also provide it that capability. In its BAFO, EPSI indicated it could provide these services, explained that they would require payments to a third- party provider, and showed a corresponding financial change to their offer. No competent evidence showed whether or not 3Ci was actually able to provide that service on behalf of EPSI, either at the time the BAFO was submitted, or earlier. EPSI showed that it believed 3Ci was available to provide that service, however, and there is no basis to conclude that EPSI in any way misrepresented its ability to provide location-based services during negotiations or in its BAFO. Language of the RBAFO The RBAFO provided in part: This RBAFO contains Pricing, Additional Negotiated Services, and Value Added Services as discussed during negotiation and outlined below. The other specifications of the original ITN, unless modified in the RBAFO, remain in effect. Respondents are cautioned to clearly read the entire RBAFO for all revisions and changes to the original ITN and any addenda to specifications, which are incorporated herein and made a part of this RBAFO document. Unless otherwise modified in this Request for Best and Final Offer, the initial requirements as set forth in the Department?s Invitation to Negotiate document and any addenda issued thereto have not been revised and remain as previously indicated. Additionally, to the extent that portions of the ITN have not been revised or changed, the previous reply/initial reply provided to the Department will remain in effect. These two introductory paragraphs of the RBAFO were confusing. It was not clear on the face of the RBAFO whether “other specifications” excluded only the pricing information to be supplied or also the specifications indicating how that pricing information would be calculated or evaluated. It was not clear whether “other specifications” were the same thing as “initial requirements” which had not been revised. It was not clear whether scoring procedures constituted “specifications.” While it was clear that, to the extent not revised or changed by the RBAFO, initial replies that had been submitted -- including Statements of Qualifications, Technical Response, Financial Documentation, and Cost Proposals -- would “remain in effect,” it was not clear how, if at all, these would be considered in determining the best value to the State. In the RBAFO under the heading “PRICING,” vendors were instructed to provide their BAFO for rates on a provided Cost Proposal table which was virtually identical to the table that had been provided earlier in the ITN for the evaluation stage, including a single square within which to indicate a commission rate for the initial five-year contract term, and five squares within which to indicate commission rates for each of five renewal years. The RBAFO stated that the Department was seeking pricing that would provide the “best value to the state.” It included a list of 11 additional services that had been addressed in negotiations and stated that, “in order to provide the best value to the state,” the Department reserved the right to accept or reject any or all of these additional services. It provided that after BAFOs were received, the Negotiation Team would prepare a summary of the negotiations and make a recommendation as to which vendor would provide the “best value to the state.” The RBAFO did not specify selection criteria upon which the determination of best value to the State would be based. In considering commission percentages as part of their determination as to which vendor would receive the contract, the Negotiation Team decided not to consider commissions that had been listed by vendors for the renewal years, concluding that the original five-year contract term was all that was assured, since renewals might or might not occur. On June 25, 2013, the DOC posted its Notice of Agency Decision stating its intent to award a contract to EPSI. Protests and the Decision to Reject All Replies Subsequent to timely filing notices of intent to protest the intended award, Securus and GTL filed Formal Written Protests with the DOC on July 5 and 8, 2013, respectively. The Department considered and compared the protests. It determined that language in the ITN directing that in Phase 5 the highest commission would be determined by averaging the price for the original contract term with the prices for the renewal years was ambiguous and flawed. It determined that use of a table with six squares as the initial cost sheet was a mistake. The Department determined that the language and structure of the RBAFO could be read one way to say that the Department would use the same methodology to evaluate the pricing in the negotiation stage as had been used to evaluate the Initial Cost sheets in Phase 5, or could be read another way to mean that BAFO pricing would not be evaluated that way. It determined that the inclusion in the RBAFO of a table virtually identical to the one used as the initial cost sheet was a mistake. The Department determined that the language and the structure of the RBAFO could be read one way to require further consideration of such factors as the Statement of Qualifications and Technical Response in determining best value to the State, or could be read another way to require no further consideration of these factors. The Department prepared some spreadsheets demonstrating the varying results that would be obtained using “divide by six” and “divide by ten” and also considered a spreadsheet that had been prepared by Securus. The Department considered that its own Contract Manager had interpreted the Phase 5 instructions to mean “divide by six,” while the Department had actually intended the instructions to mean “divide by ten.” The Department had intended that the Negotiation Team give some weight to the renewal-year pricing, and had included the pricing table in the RBAFO for that reason, not simply to comply with statutory requirements regarding renewal pricing. The Department determined that the way the RBAFO was written and the inclusion of the chart required at least some consideration of ten-year pricing, and that vendors had therefore been misled when the Negotiation Team gave no consideration to the commission percentages for the renewal years. Specifically, based upon the Securus protest, the Department determined that the RBAFO language had been interpreted by Securus to require that the Phase 5 calculation of average commission percentage be carried over to evaluation of the pricing in the BAFOs, which Securus had concluded meant “divide by six.” The Department further determined that based upon the GTL protest, the RBAFO language had been interpreted by GTL to require the Department to consider the renewal years in pricing, as well as such things as the Statement of Qualifications and Technical Response in the BAFO stage. The Department determined that had “divide by six” been used in evaluating the BAFOs, Securus would have a computed percentage of 70 percent, higher than any other vendor. The Department concluded that the wording and structure of the ITN and RBAFO did not create a level playing field to evaluate replies because they were confusing and ambiguous and were not understood by everyone in the same way. Vendors naturally had structured their replies to maximize their chances of being awarded the contract based upon their understanding of how the replies would be evaluated. The Department concluded that vendor pricing might have been different but for the misleading language and structure of the ITN and RBAFO. The Department did not compute what the final award would have been had it applied the scoring procedures for the initial cost sheets set forth in section 6.1.5 to the cost elements of the BAFOs. The Department did not compute what the final award would have been had it applied the scoring procedures for the Statement of Qualifications and Technical Response set forth in section 6.1.3 to the BAFOs. Ms. Bailey testified that while she had originally approved the ITN, she was unaware of any problems, and that it was only later, after the protests to the Notice of Intended Award had been filed and she had reviewed the specifications again, that she had come to the conclusion that the ITN and RBAFO were flawed. Following the protests of the intended award by GTL and Securus, on July 23, 2013, the DOC posted to the Vendor Bid System a Notice of Revised Agency Decision stating the DOC?s intent to reject all replies and reissue the ITN. On August 5, 2013, EPSI, GTL, and Securus filed formal written protests challenging DOC?s intended decision to reject all replies. Securus subsequently withdrew its protest to DOC?s rejection of all replies. As the vendor initially notified that it would receive the contract, EPSI?s substantial interests were affected by the Department's subsequent decision to reject all replies. GTL alleged the contract had wrongly been awarded to EPSI and that it should have received the award, and its substantial interests were affected by the Department's subsequent decision to reject all replies. The Department did not act arbitrarily in its decision to reject all replies. The Department did not act illegally, dishonestly, or fraudulently in its decision to reject all replies. EPSI would likely be harmed in any re-solicitation of bids relative to its position in the first ITN, because potential competitors would have detailed information about EPSI?s earlier reply that was unavailable to them during the first ITN. An ITN requires a great deal of work by the Department and creates a big demand on Department resources. The decision to reject all replies was not undertaken lightly. The State of Florida would likely benefit in any new competitive solicitation7/ because all vendors would be aware of the replies that had been submitted earlier in response to the ITN, and bidders would likely try to improve upon those proposals to improve their chances of being awarded the contract.
Recommendation Upon consideration of the above findings of fact and conclusions of law, it is RECOMMENDED: That the Department of Corrections issue a final order finding that the rejection of all replies submitted in response to ITN 12-DC-8396 was not illegal, arbitrary, dishonest, or fraudulent, and dismissing all four protests. DONE AND ENTERED this 1st day of November, 2013, in Tallahassee, Leon County, Florida. S F. SCOTT BOYD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 1st day of November, 2013.
The Issue The issue in this case is whether Respondent’s proposed contract award for the Medicaid Third Party Liability Program, AHCA ITN 0805, is contrary to Respondent’s governing statutes, Respondent’s rules or policies, or the solicitation specifications.
Findings Of Fact AHCA is the state agency responsible for administering the Medicaid Program in Florida. Medicaid is the state and federal partnership that provides health coverage for selected categories of people with low incomes. AHCA’s Division of Medicaid, TPL Unit, is responsible for identifying and recovering funds for claims paid by Medicaid for which a third party is liable. The TPL Program is intended to implement the federal mandate that Medicaid be the payor of last resort. In this regard, as the state agency responsible for administering the federal Medicaid program, AHCA must take all reasonable measures before paying for medical services to ascertain whether a third party is liable for such services and should pay instead of Medicaid. In cases where a liable third party is not found until after Medicaid has already paid, AHCA is required to seek reimbursement from the third party for the costs paid by Medicaid. The TPL vendor is responsible for identifying potential third-party payors and recouping from them the costs that have been paid by Medicaid. Third parties include private insurance carriers, the Medicare program, estates, liability insurers, third-party administrators, pharmacy benefits managers, and any other individual, entity, or program that “may be, could be, should be, or has been liable for all or part of the cost of medical services related to any medical assistance covered by Medicaid.” § 409.901(26), Fla. Stat. (2007).1 AHCA’s TPL functions are outsourced, and HMS is the incumbent vendor. On January 22, 2008, AHCA issued an invitation to negotiate (ITN) for the purpose of selecting a vendor to provide TPL program services. The scope of the services consists of eight components: (a) casualty recovery, (b) estate recovery, (3) trust and annuity recovery, (4) Medicare and other third- party payor recovery, (5) cost avoidance, (6) Medicaid Reform Opt Out Program, (7) Health Insurance Premium Payment Program, and (8) other recovery programs. The selected vendor would be paid a combination contingency fee and fixed fee based on rates offered by the vendor. The ITN established a two-step process for selecting a vendor with which to contract: the evaluation phase and the negotiation phase. In the evaluation phase, each vendor was required to submit a reply to the ITN containing its technical proposal and price proposal for the services identified in the ITN. A total of 980 points was available in a variety of categories. The vendor responses were to be evaluated and scored based on detailed criteria set forth in the ITN. The ITN includes the following statement: Each evaluator will calculate a total score for each response. The Issuing Officer will use the total point scores to rank the responses by evaluator (response with the highest number of points = 1, second highest = 2, etc.). The Chairman will then calculate an average rank for each response for evaluators. The Agency will negotiate with the three highest ranked vendors. The purpose of the scoring was to determine which vendors would participate in the negotiations. The scoring did not determine which vendor would be awarded the contract. The award of the contract would be based on the vendors’ presentations during the negotiation phase. The ITN did not set forth evaluation criteria that would be used in the negotiation phase. The criteria in Attachment E of the ITN pertained to the criteria that would be used to determine the responsive and responsible vendors with whom AHCA would negotiate, and, to that extent, the criteria in Attachment E were relevant to the negotiation phase of the procurement process. No vendor objected to the specifications contained in the ITN. The ITN provided a deadline for the vendors to submit questions regarding the ITN and stated: The Agency will receive all questions pertaining to this solicitation no later than the date and time specified for written inquiries in Section C.6, Solicitation Timeline. All inquiries must be made in writing to the Issuing Officer identified in Section C.5. Questions may be sent by US Mail, email, fax or hand delivered. (Email is preferred and encouraged.) No telephone calls will be accepted. No questions, written or otherwise, will be accepted except as indicated in Section C.6, Solicitation Timeline. The Agency’s response to questions received will be posted as an addendum to this solicitation as specified in Section C.6, Solicitation Timeline. (Emphasis in original) The timeline contained in the ITN set February 4, 2008, as the deadline for receipt of written inquiries from the vendors. The ITN set March 6, 2008, as the deadline for receiving responses to the ITN from the vendors. On February 12, 2008, a vendors’ conference was held to allow the vendors to ask questions concerning the ITN. Representatives from ACS, MAXIMUS, and HMS attended the conference. During the vendors’ conference, AHCA personnel stated that if the vendors had additional inquiries concerning the ITN that the inquiries should be directed to the procurement office. The ITN provided that AHCA would accept oral questions during the vendors’ conference and that AHCA would “make a reasonable effort to provide answers to oral questions” at the vendors’ conference. The ITN also provided: “[O]ral answers and discussions are not binding on the agency. Only those communications, which are in writing from the Agency, may be considered as duly authorized expressions on behalf of the State.” The ITN solicitation timeline indicated that the anticipated date for AHCA’s responses to the vendors’ written inquiries would be February 22, 2008. On February 13, 2008, Jeannine Zibilich from ACS sent an e-mail to Cathy McEachron with the following inquiry: Given the significant number of questions asked and the anticipated date for the responses, ACS respectfully requests that the proposal due date for ITN 0805, Florida Medicaid Third Party Liability Program, be extended to March 28, 2007 [sic]. We thank you for your prompt consideration of this request and look forward to an answer at your earliest convenience. Ms. McEachron forwarded the e-mail to Jennifer Barrett who is the AHCA administrator within the Division of Medicaid, TPL unit. Ms. McEachron and Ms. Barrett agreed that the March 28 date was too much of an extension, but agreed that the deadline for submitting the responses to the ITN could be extended to March 14, 2008. On February 14, 2008, AHCA provided written responses to the inquiries made by the vendors. The written responses were published as part of Addendum No. 1 of the ITN. The verbal directive allowing additional inquiries after February 4, 2008, which changed the timeline in the original ITN, was not published as an addendum to the ITN.2 Addendum No. 1 also changed the deadline for submitting responses to the ITN to March 14, 2008. HMS claims that ACS received a benefit from the extension of the time frame for submitting responses to the ITN and that HMS did not receive a benefit because it did not need additional time to submit a response. The extension of time to submit responses to the ITN benefited all vendors. Each vendor had additional time to prepare and submit a better response to the ITN. On February 26, 2008, Chuck Cliburn from ACS sent e-mails to Ms. McEachron requesting additional information concerning claims paid, the number of members for managed care and fee for service, and the total benefits paid for the current casualty cases. Ms. McEachron forwarded the e-mail to Ms. Barrett with the following notation: Hey. We’ve received one more question on the TPL solicitation. Since it is after the question and answer period, technically, we don’t have to answer it. Keep in mind, however, the more information the vendors have, the better their responses will be. If we have this info readily available, I’d recommend providing it. If you decide to, I will post it to VBS as addendum number 2. Ms. Barrett advised Ms. McEachron that the information was not readily available, but that some information could be accessed on a website, and provided Ms. McEachron the website link. Ms. McEachron issued Addendum No. 2 on March 3, 2008, providing the website link to the vendors. The information requested by ACS was provided to all vendors. HMS claims that it did not have the advantage of being able to ask questions after the ITN deadline. The only question identified by HMS that it would have asked after the deadline was answered at the vendors’ conference. The ITN required that contact with the procurement officer by the vendors was to be done in writing. Ms. McEachron lifted the restriction on written responses by allowing the vendors to make telephone calls with general inquiries such as asking whether their proposals had been received or complaining that the AHCA website was unavailable. The use of telephone calls for general inquiries applied to all vendors. AHCA Deputy Secretary Carlton Dyke Snipes appointed three evaluators to independently score most aspects of the responses. An additional individual was appointed to evaluate financial stability. Another individual was asked to award points for past performance. Points for the cost element of the responses were awarded by the ITN’s issuing officer. Three vendors submitted responses to the ITN: HMS, ACS, and MAXIMUS. AHCA determined that MAXIMUS’ response was not responsive to the ITN. Both ACS and HMS are wholly-owned subsidiaries. The parent company for ACS is Affiliated Computer Services, and the parent company for HMS is HMS Holdings Corp. The ITN provides that the vendors were to submit their most recent financial information with their response. The information could be submitted as either the most recent financial statement or the most recent audit. Both ACS and HMS submitted the annual reports on the Form 10-K for their parent companies. AHCA customarily accepts the financial information for the parent company for evaluation of vendor responses. The Form 10-K submitted by HMS contained a note that provided financial information directly related to HMS. The Form 10-K submitted by ACS did not contain specific financial information about ACS. Affiliated Computer Services is a larger company than HMS Holdings Corp.3 Because Affiliated Computer Services is such a large company, the financial information for ACS would not be reported separately as was the information relating to HMS. Both ACS and HMS were evaluated based on their parent companies' financial capability. ACS received a score of five in the evaluation of the financial information it submitted. A score of five meant that ACS was considered to have excellent financial capabilities. HMS received a score of four on its financial information. A score of four meant that ACS had above average financial capability. The ITN required the vendors to list the subcontractors that they intended to use. If a vendor was going to use a sister corporation as subcontractor, AHCA did not require that the sister corporation be listed and so advised the vendors during the vendors’ conference. ACS Recovery Services, Inc., and ACS Commercial Solutions, Inc., operate within ACS Commercial Solutions Group, which is a line of business of Affiliated Computer Services, Inc. ACS; ACS Commercial Solutions, Inc.; and ACS Recovery Services, Inc., are considered by ACS to be sister corporations, but are separate corporate entities. ACS intends to use its sister corporations to perform many of the services offered in ACS’s reply to the ITN. The reply states that the services will be provided by the sister corporations, but does not list the sister corporations as subcontractors. ACS will not actually enter into a subcontract with its sister corporations. The responses submitted by HMS and ACS were evaluated, and HMS received the highest number of points and, thus, was ranked number one. On March 25, 2008, AHCA sent letters to both ACS and HMS advising them that they had been selected as candidates for negotiations and providing dates that were available for the negotiation sessions. Each letter stated: “The negotiation and selection process will consider each company’s ability to meet or exceed the business, technical, and financial requirements of the Agency.” The ACS negotiation was scheduled for April 7, 2008, and the HMS negotiation was scheduled for April 8, 2008. On April 3, 2008, confirmation letters were sent to ACS and HMS, confirming the scheduled negotiation dates and times. The letters directed each vendor to “plan to provide handout materials for four (4) AHCA team members.” Each letter also included a “list of topics to be discussed.” The topics were based on the information provided in each vendor’s response to the ITN. ACS provided AHCA with copies of their written responses to topics listed in its confirmation letter prior to the commencement of the negotiation session. Ms. Barrett received a copy of the written responses on the morning of the negotiation session with ACS and had time to quickly read the materials prior to the negotiation session. HMS did not provide advance copies of their written responses, and the negotiators received HMS’s materials at the negotiation session. Neither ACS nor HMS was advised, prior to the negotiations, whether it was permissible to provide AHCA with advance copies of the written responses or other handout materials. Ms. Barrett reviewed both vendors’ written responses after the negotiation sessions. Each negotiation session was conducted by Ms. McEachron, the director of AHCA’s Procurement Office and the issuing officer for the ITN. David Suhrweir and Daniel Roy, two of the three evaluators, were also designated as negotiators. Ms. Barrett, the AHCA TPL contract manager, was also a negotiator. Ms. Barrett had been listed as client reference by HMS because Ms. Barrett was the contract manager for the current contract with HMS for TPL services. With the exception of Ms. McEachron, at the time of the negotiations, the negotiators were unaware of the total scores received by HMS and ACS during the evaluation of their responses. Ms. McEachron did not inform the other negotiators of the evaluation scores prior to negotiations to prevent any bias towards the vendors based on the scores they received during the evaluation phase. The negotiation sessions were transcribed by a court reporter. Each negotiation session was scheduled to last for two hours and ACHA’s decision to award a contract was to be based on the information that was provided during the negotiation sessions. At the beginning of each negotiation session, the vendors were informed that any topic was open for discussion during the negotiation. HMS had submitted a lower cost proposal than ACS. Prior to the commencement of the negotiations, Ms. Barrett sent an e-mail to Ms. McEachron inquiring whether price could be negotiated during the negotiation sessions. Ms. McEachron advised Ms. Barrett that price was open for discussion. Ms. Barrett wanted to negotiate price with ACS to see if AHCA could get a lower price. Because HMS had the lower prices, she did not intend to bring up the subject of price with HMS, but felt that HMS was not precluded from negotiating a lower price. During the negotiation with ACS, Ms. Barrett asked ACS whether it would lower its prices and stated: I will ask the all important question . . . In reference to the cost proposal, is there any chance that ACS would be willing to reduce some of their costs they are proposing? . . . It’s mainly in the area of the cost avoidance per policy. And then the opt out, there is a wide difference in the amount that was proposed in costs in those three areas. Ms. McEachron gave ACS until the end of the week to come up with a best and final offer for prices. The end of the week would have been April 11. The negotiators were more impressed with the presentation by ACS than the presentation by HMS. ACS was more organized and well-prepared than HMS. To the negotiators, HMS appeared to be disjointed, flustered, and confused. A 2006 United States Supreme Court decision, Arkansas Dept. of Health and Human Services v. Ahlborn, 547 U.S. 268 (2006), limited Medicaid liens to the medical portion of recoveries in casualty cases, and ACS proposed to address the impact of the decision by taking a proactive approach and work with the attorneys on the cases prior to the cases going to trial or settlement. HMS claims that ACS misrepresented its success in dealing with the Ahlborn decision by stating that ACS had successfully argued the Ahlborn issue in Florida courts. During the negotiations, Melissa Lively, an attorney for ACS, indicated that ACS had success in working with the attorneys for the Medicaid clients by discussing the Ahlborn decision during the early stages of litigation. As a result of ACS’s proactive approach, ACS had been successful in its recoveries. Following each of the negotiation sessions, the negotiators spoke together briefly to share their general impressions and thoughts of the negotiation. Later in the afternoon following the last negotiation, Ms. Barrett, Mr. Roy, and Mr. Suhrweir again met to further discuss their impressions of the two vendors based on the negotiation sessions. The three negotiators jointly and unanimously agreed to recommend to AHCA’s senior management that ACS be awarded the contract. Ms. Barrett drafted a memorandum recommending that the contract be awarded to ACS and, on April 9, 2008, provided the memorandum to Mr. Roy and Mr. Suhrweir for their review and comments. The memorandum listed the following as “items [that] are representative of issues ACS presented to the Agency during the negotiations that provides a justification for this recommendation”: Case Tracking System – The case tracking system for casualty, estate, trusts, and annuities demonstrated by ACS currently has the capability to automatically relate and unrelate claims based upon injuries. This feature will eliminate some of the manual processes in identifying claims that are related to a Medicaid recipient’s accident or incident. The system also automatically generates letters with an electronic signature that go directly to ACS’s mail operations. Ahlborn Supreme Court decision – ACS indicated it will take a proactive approach and become involved with attorneys in the beginning of a case to ensure the Medicaid lien amount is included in the total settlement amount, thus preventing a hearing. ACS advised it would conduct outreach regarding the Ahlborn decision in order to educate attorneys on Medicaid’s rights to recovery. Quality control – ACS proposes using the Report Card process for quality control. ACS has identified a full-time quality staff person as required by the ITN. ACS demonstrated a clear understanding of the importance of quality control in all areas of the contract. Cost Avoidance – ACS has presented an innovative approach to cost avoidance data. Through its Smart TPL and MEVSNET systems, real time cost avoidance is provided thereby potentially increasing cost avoidance and carrier billing collections. Innovation – ACS has presented innovative approaches to increasing recoveries. For example, ACS will review the dates of death of Medicaid recipients and file a Caveat by Creditor in the deceased recipient’s county of residency. The clerk of the Court will then be required to provide a Notice of Summary Administration and ACS would file an estate claim on behalf of the Agency. By e-mail dated April 10, 2008, ACS notified Ms. McEachron that ACS would revise its pricing. In its original pricing ACS’s proposed prices were higher than HMS’s prices in three of the four categories. ACS’s revised prices were higher than HMS’s prices in two of the four categories. The negotiators had made a decision to recommend the contract award to ACS prior to receiving the revised pricing, and the revised pricing was not determinative of the recommendation to award to ACS. The negotiators’ recommendation was presented to management of AHCA’s Division of Medicaid. The deputy secretary for Medicaid considered the recommendation and directed the award of the contract to ACS. On April 28, 2008, AHCA posted a notice listing the scores and rankings for both HMS and ACS. The notice announced the agency’s intent to award the contract to ACS. Prior to the award of a contract, the procurement office maintains a solicitation file, which contains the documents relating to the solicitation process. After the award of a contract, the procurement office will create a contract file, which contains certain information required by Subsection 287.057(3)(b), Florida Statutes. In the instant case, the contract award has not been made, and, therefore, the contract file has not been created.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered dismissing HMS’s formal written protest and awarding the contract to ACS. DONE AND ENTERED this 15th day of August, 2008, in Tallahassee, Leon County, Florida. S SUSAN B. HARRELL 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 15th day of August, 2008.
The Issue The issue is whether the guidelines set forth in the Specialty Product Administration Field Examination Policy Procedures (SPA Field Exam Policy), Viatical Settlement Provider Examination Manual (VSP Manual), Viatical Settlement Provider Examination Procedures (VSP Exam Procedures), and notice-of- examination letters constitute agency statements defined as rules but not adopted as such, in violation of Section 120.54, Florida Statutes.
Findings Of Fact OIR has the statutory duty to enforce the provisions of the Florida Insurance Code, to investigate any violation of the Florida Insurance Code, and to regulate insurance activity in Florida, including the licensure, examination, and monitoring of insurers and other risk-bearing entities such as VSPs. See § 624.307, Fla. Stat. Petitioner is a foreign corporation, licensed to do business in Florida as a VSP. See § 626.9911(12), Fla. Stat. Therefore, it is subject to OIR's regulation. Section 626.9911(10), Florida Statutes, defines a viatical settlement contract as follows in pertinent part: (10) "Viatical settlement contract" means a written agreement entered into between a viatical settlement provider, or its related provider trust, and a viator. The viatical settlement contract includes an agreement to transfer ownership or change the beneficiary designation of a life insurance policy at a later date, regardless of the date that compensation is paid to the viator. The agreement must establish the terms under which the viatical settlement provider will pay compensation or anything of value, which compensation or value is less than the expected death benefit of the insurance policy or certificate, in return for the viator's assignment, transfer, sale, devise, or bequest of the death benefit or ownership of all or a portion of the insurance policy or certificate of insurance to the viatical settlement provider. Section 626.9922, Florida Statutes, provides OIR explicit authority to examine any books and records, without limitation to Florida-only files, of Florida-licensed VSPs. Section 626.9922, Florida Statutes, states as follows in pertinent part: The office or department may examine the business and affairs of any of its respective licensees or applicants for a license. The office or department may order any such licensee or applicant to produce any records, books, files, advertising and solicitation materials, or other information and may take statements under oath to determine whether the licensee or applicant is in violation of the law or is acting contrary to the public interest. The expenses incurred in conducting any examination or investigation must be paid by the licensee or applicant. Examination and investigations must be conducted as provided in chapter 624, and licensees are subject to all applicable provisions of the insurance code. Section 626.9925, Florida Statutes, states as follows: Rules.--The commission may adopt rules to administer this act, including rules establishing standards for evaluating advertising by licensees; rules providing for the collection of data, for disclosures to viators, for the registration of life expectancy providers; and rules defining terms used in this act and prescribing recordkeeping requirements relating to executed viatical settlement contracts. Florida law specifically addresses viatical settlement contracts entered into between a VSP domiciled in Florida and a non-Florida resident in Section 626.99245, Florida Statutes, as follows: A viatical settlement provider who from this state enters into a viatical settlement contract with a viator who is a resident of another state that has enacted statutes or adopted regulations governing viatical settlement contracts shall be governed in the effectuation of the viatical settlement contract by the statutes and regulations of the viator's state of residence. If the state in which the viator is a resident has not enacted statutes or regulations governing viatical settlement agreements, the provider shall give the viator notice that neither Florida nor his or her state regulates the transaction upon which he or she is entering. For transactions in those states, however, the viatical settlement provider is to maintain all records required as if the transactions were executed in Florida. The forms used in those states need not be approved by the office. There is no similar statute that specifically requires a non- domestic VSP, such as Petitioner, to produce records for OIR's review on transactions with viators who are not Florida residents. Nevertheless, OIR reviews out-of-state transactions of licensed VSPs, domestic and non-domestic, to verify compliance with Section 626.99275(1)(d), Florida Statutes, which states as follows: It is unlawful for any person: * * * (d) To knowingly or intentionally facilitate the change of state of residency of a viator to avoid the provisions of this chapter. Except as provided in Section 626.99275(1)(d), Florida Statutes, OIR does not apply Florida law to a foreign VSP's non-Florida transactions. OIR's examiners spend significantly less time reviewing non-Florida transactions, than Florida transactions. The examiners only review non-Florida transactions to determine whether the non-Florida transaction is actually a Florida transaction. Florida transactions, on the other hand, are put through a rigorous review process to ensure compliance with Florida law. There have been instances during an examination of a VSP whereby OIR has discovered a file represented as a Florida file that was actually a non-Florida file. OIR also has discovered instances whereby a file represented to be from another state was later revealed to be a Florida transaction. Alan Buerger, Petitioner's founder, Chief Executive Officer, and Treasurer, provided testimony during deposition and final hearing. During deposition, Mr. Buerger testified there have been instances where Petitioner has misplaced or mislabeled a viator’s state of residence. Section 624.316(1)(c), Florida Statutes, governing examination of insurers, gives the Commission discretion to adopt a specified rule as follows: (c) The office shall examine each insurer according to the accounting procedures designed to fulfill the requirements of generally accepted insurance accounting principles and practices and good internal control and in keeping with generally accepted accounting forms, accounts, records, methods, and practices relating to insurers. To facilitate uniformity in examination, the commission may adopt, by rule, the Market Conduct Examiners Handbook and the Financial Condition Examiners Handbook of the National Association of Insurance Commissioners, 2002, and may adopt subsequent amendments thereto, if the examination methodology remains substantially consistent. The Commission has not exercised its discretion to adopt the NAIC Market Conduct Examiner's Handbook (currently known as the "Market Regulation Handbook") or any other rule relating to procedures or methodologies for market conduct examinations carried out pursuant to Chapter 624, Florida Statutes. Petitioner alleges that the following documents contain statements that should be adopted by a rule: (1) SPA Field Exam Policy, (2) VSP Manual, and (3) VSP Exam Procedures. OIR's examiners receive these documents from their supervisors as guidelines to use in the examination of VSPs. The SPA Field Exam Policy is an internal management memorandum that is a flexible guide used to train examiners. The document does not directly or indirectly require a VSP to comply with any statement contained therein or take any action, and it is not a procedure that is important to the public. It is only directed to OIR's field examiners. The SPA Field Exam Policy includes the following policy statement: "Statement of Policy: Field examination shall be conducted in a professional manner in accordance with statutes governing Specialty Insurers." The SPA Field Exam Policy also states as follows: "Purpose or Objective: To establish policies and procedures governing the travel and conduct of the examinations and the review, issuance and distribution of reports of examinations." Its overall objective "is to verify compliance with the specific statutory requirements governing the type of entity under examination." OIR gives the SPA Field Exam Policy to new and existing examiners to tell them how to conduct an examination. The SPA Field Exam Policy includes the following procedures: (a) scheduling of examination; (b) scope and objective of examination; (c) conduct of examination; (d) working paper standards; (e) draft reports of examination; (f) exit conferences; (g) review and issuance of reports of examination; (h) corrective action plans; and (i) travel and administrative matters. According to the SPA Field Exam Policy, an examiner is required to perform an examination using the standard audit program in effect at the start of the examination unless instructed otherwise. The policy states that the scope of the examination is to correspond to that contained in the engagement letter. The VSP Manual is an internal management memorandum that is directed to OIR's examiners. It is a training tool and guideline for examiners that are conducting examinations of VSPs. The manual includes an outline of items to look for during the examinations. The outline tracks the language in the statute. One purpose of the VSP Manual is to ensure that examiners go through all sections of the statute that relate to VSPs and to make sure they test OIR's issues of concern. The VSP Manual states that "[i]n conducting examinations of VSPs, the examiner will use the current audit program (see Attachment A) and follow the guidance offered in this manual." According to the VSP Manual, examiners should review a list of all in-force policies and select a sample of completed settlement contracts. The sample of in-force contract includes Florida and non-Florida contracts. The VSP Manual directs examiners to review the selected policies to verify compliance with twelve bullet points. The twelve bullet points apply only to Florida policies. Out-of- state policies are reviewed only to determine whether there is a violation of Section 626.99275, Florida Statutes. The examiner may deviate from the guidelines in the VSP Manual without receiving approval from management. The VSP Manual does not confer any requirements upon a VSP. It does not establish a procedure that could be used to impose a penalty on a licensed VSP. The VSP Exam Procedures is an internal management memoranda used as a flexible guide to the examiners on how to conduct an examination in accordance with the statutes. It assists the examiners in determining what steps to perform while doing an examination. However, the examiners are allowed to deviate from the document. The information in the document tracks the language of the statutes. OIR's VSP Exam Procedures is the "current audit program" referenced in the SPA Field Exam Policy and the VSP Manual. The first page of the VSP Exam Procedures sets forth the following objectives: Ensure examinations are conducted in accordance with established policies and procedures (examination procedure step 1), Gain an understanding of the company's operations (steps 2,3 and 5), Verify the viatical settlement provider ("VSP") is complying with the provisions of Chapter 626, Part X, Florida Statutes, and in accordance with the terms of its viatical settlement agreements (steps 4 and 6 through 12), Ensure the company is keeping the Office informed of developments that are of interest to it (steps 4 and 6), and Prepare a Report of Examination available to the public (step 15). In step 8, examiners are instructed to select and review a sample of in-force policies for compliance with twelve bullet points. The twelve-point review would apply only to Florida policies. The VSP Exam Procedures does not direct Petitioner or any other VSP to take any sort of action. It is directed exclusively to OIR's examiners. It does not establish a procedure that could be used to impose a penalty on a VSP. During deposition and final hearing, Mr. Buerger was asked how Petitioner was substantially affected by the OIR’s internal management memoranda. Mr. Buerger testified that the requirement to prepare documents and data on a nationwide—rather than Florida-only basis—had a substantial affect on Petitioner. However, Mr. Buerger could not identify any of Petitioner's private interests that are affected by the SPA Field Exam Policy, the VSP Manual, and the VSP Exam Procedures. Mr. Buerger had not read any of the three documents that Petitioner claims constitute unpromulgated rules. OIR provides courtesy letters to VSPs prior to examinations. OIR uses the engagement letters to advise VSPs about upcoming triennial or market conduct/target examinations and to notify them that an examiner will expect to review all of the company's books and records. Notification of upcoming examinations is not required by statute. The engagement letters do not place any requirements upon VSPs. As early as March 15, 2004, engagement letters have contained requests for certain records. However, requests for information in letters may vary on a case-by-case basis depending on a VSP’s licensure history and business practices. Currently, OIR's financial examiner/analyst supervisor, Janice Davis, drafts the letters. Ms. Davis has prepared the letters using the same format since 2007, but an insurance examiner could draft a letter without supervisory approval. The drafter of the courtesy letters can change the letters at any time without approval from upper management and without internal ramifications from the Office. Ms. Davis's letters request VSPs to have the following records available: Copy of latest audited financial statement, if any. Copy of most recent unaudited financial statements. Chart of accounts. Bank statements along with receipt and disbursement journals for all bank accounts for the past 24 months. Documentation supporting ownership interest in the company, together with the complete corporate record book, minutes, corporate resolutions or similar documentation of organizational meeting and resolutions. Copies of all licenses obtained by the company and status of any pending applications for licensure. Copies of all approved forms, disclosures, and contracts, as well as advertising, sales and investment literature. Copies of all contracts or agreement between the company and all persons (including other entities and investors) related to the conduct of business. Listing of all broker and agent commissions paid during exam scope. All contracts with viators, in which the company participated, in primary or secondary market, whether as provider, broker, originator, agent or purchaser. Database of all policies reviewed or considered for purchase. Insured tracking records and files. Premium payment records and files. All viator files, including but not limited to: applications, offers, contracts or agreements, insurance policies, medical records, etc. All complaint and litigation files (and any resolutions thereto. Because VSPs must pay all expenses associated with examinations, advance listing of the specific records that need to be available facilitates examinations. The letters do not require VSPs to provide documentation in a database or spreadsheet in Excel format. It is an option provided to the company. Ms. Davis' letter to Petitioner dated August 14, 2008, states as follows in relevant part: Additionally, to facilitate an expeditious review of the files, please provide the examiner with a database or spreadsheet file in Excel format including, but not limited to, the following documentation . . . . Please provide the following information on all policies purchased, to date: contract identifier viator name viator State of residence insured name insured State of residence settlement amount original viatical settlement provider broker(s) broker commission(s) date of contract date of closing insurer name policy number policy issue date type of coverage (individual, group, term, whole life, etc.) death benefit life expectancy projected maturity date original premium escrow and current escrow balance current status (active vs. matured, sole vs. available) date of death (if applicable) date death claim filed (if applicable (Emphasis in original). If the licensee is responsible for the payment of premiums, please provide a listing (include: unique viator identifier, insurer, policy number, policy face value, frequency of payment, next payment due date and amount due) for all policies purchased since inception for which premiums are due during the next 12 months. The engagement letters make it clear that OIR expects VSPs to provide information as required by Section 626.9922, Florida Statutes. In giving OIR authority to examine all books and records, the statute does not differentiate between in-state and out-of-state records. If a VSP does not produce documents as requested in the courtesy letters, OIR could take disciplinary action against its license. To date, OIR has not taken any such action against a company for not providing the requested documentation. If the company does not provide a database or Excel spreadsheet, OIR will create a database for the documentation by going though paper files at the VSP's expense. During deposition, Mr. Buerger, Petitioner's corporate representative, was asked if Petitioner preferred not to have a letter that provided notice of an upcoming examination and whether Petitioner would prefer an examiner show up to conduct an examination without prior notice. Mr. Buerger responded: “If we are going to have an exam, we’d like to know when somebody’s coming.” OIR has a pending examination of Petitioner's books and records. OIR expects Petitioner to produce documentation and information listed in the engagement letter, including information relating to out-of-state settlement transactions. In the course of an examination that took place in 2005, OIR advised Petitioner that its license would be suspended summarily under an emergency order if it failed to provide out-of-state information. The requirement to produce in-state and out-of-state records creates a financial burden for Petitioner because the majority of Petitioner's records involve out-of-state transactions. For example, in 2005, Petitioner had approximately 1,760 policies nationwide in the three-year period covered by the examination. Only 13 percent of these policies involved Florida residents. OIR billed Petitioner approximately $33,000 for the examination. Petitioner incurred other expenses associated with the 2005 examination such as the following: (a) legal expenses; internal costs for software engineering, accounting and contract services to prepare the database; and (c) substantial time for staff to coordinate information from various departments to prepare the nationwide information. Petitioner's staff spent six to seven hours of time for each of the approximately 517 hours that OIR billed for the 2005 examination. Finally, the request for out-of-state documents required Petitioner to spend a substantial amount of time and resources to ensure the security of personal financial and health information of viators. OIR currently has issued a second notice of triennial examination to Petitioner. The August 14, 2008, engagement letter requires Petitioner to provide documents and information for its policies on a nationwide basis. For the period covered by the second triennial examination, Petitioner has approximately 4,500 to 4,600 policies. Thus, Petitioner expects a substantial increase in the cost of complying with OIR's document review and data requests from the costs it incurred in 2005.
The Issue The issue in this case is whether Respondent has failed to comply with the personnel policy established by Emerald Coast Utilities Authority.
Findings Of Fact ECUA was created in 1981 pursuant to chapter 81-376, Laws of Florida. By law, it provides utility services throughout Escambia County, Florida. In 1995, Respondent was hired by Petitioner as a utility service technician II. The position involved skilled work of average to considerable difficulty in the installation, maintenance, and repair of water and waste service lines. The job also required a significantly strong person with sufficient strength, fitness and mobility to work in a field environment involving all types of weather and temperature conditions and with slippery, uneven or rough surfaces and terrain. Additionally, the job required a person who could walk, stand, and sit for prolonged periods of time; frequently stoop, bend, kneel, crouch, crawl, climb, reach, twist, grasp, and make repetitive hand movements; and lift, carry, push, and/or pull moderate to heavy amounts of weight, which could exceed 50 pounds. Finally, the job required a person to be able to drive commercial vehicles and maintain a commercial driver's license. Around June 28, 2012, Respondent was given a copy of the ECUA’s revised Human Resources Manual and Employee Handbook. The manual is a publication containing all of Petitioner's human resource policies, including discipline and termination of employees. The manual states, in pertinent part, as follows: B-13(10) - Failure to maintain job qualifications: Failure to maintain required licenses, certifications, or other similar requirements such that an employee is no longer qualified for a position or can no longer perform assigned duties. * * * B-13(33) – Violation of ECUA rules or guidelines or state or federal law. The failure to abide by ECUA rules, guidelines, directive, or state or federal statutes. * * * D-16 A.2. - Leave * * * Employees will return to work anytime they are medically able, up to six (6) months from the date of injury. At that point, if unable to return to work the employee must retire, resign, or be terminated. The department head, after consultation with the Human Resources Director, may extend this time based on evaluation of the employee's ability to return to work. On December 18, 2013, while repairing an ECUA line, something snapped in Respondent’s right arm which caused him severe pain in that arm to the extent he could not lift it or perform his job duties. That same day, Respondent reported the injury to ECUA and saw Dr. Bruce Albrecht, M.D., at Sacred Heart Medical Group. Dr. Albrecht initially diagnosed Respondent with a strain of the right shoulder and released Respondent to return to work with light duty conditions, including no lifting, pushing or pulling over 15 pounds with both arms (5 pounds with the right arm), no stooping, kneeling, climbing or crawling, and no commercial driving. Such conditions prevented Respondent from performing the essential requirements of his job. As a result of the injury, Respondent took authorized leave beginning December 19, 2013, and continued to be followed by medical staff over the next several months. He also received physical therapy for his shoulder and arm. Around January 23, 2014, Dr. Albrecht recommended that Respondent be seen by an orthopedic specialist. By that time, Respondent’s diagnosis included rupture of the right biceps tendon. Ultimately, after evaluation by an orthopedic specialist and some unspecified delay due to the approval process used by ECUA’s workers’ compensation coordinator, Respondent was referred to an orthopedic surgeon and scheduled for surgery on March 14, 2014. The surgery was to reconstruct Mr. Billups’s shoulder by performing a biceps tenodesis and revision acromioplasty, as well as debriding a torn labrum (cartilage rim of the shoulder socket). Biceps tenodesis is a procedure that removes part of the biceps tendon and cuts the normal attachment of the biceps tendon on the labrum of the shoulder socket. After detachment, the biceps tendon is reattached to the arm bone, thereby removing the pressure of the biceps attachment off of the shoulder socket labrum. Revision acromioplasty is a surgical reshaping of the acromion, the bone which forms the point of the shoulder blade that covers the shoulder joint. As indicated, Respondent’s surgery was scheduled for March 14, 2014. However, that surgery was delayed due to cardiovascular concerns over Respondent’s ability to undergo surgery. Ultimately, Respondent had surgery on his right shoulder and bicep on April 16, 2014. After the surgery, Respondent’s physician, Dr. Kirby Turnage, M.D., prescribed physical therapy to build up strength and increase range of motion in his shoulder and arm. Additionally, Respondent was not released by his doctor to return to work even at a sedentary level. By May 27, 2014, slightly more than five months after Respondent went on leave, he was released to work but only at a sedentary or light duty level. Respondent’s physician indicated that it would be at least six (6) weeks before Respondent could possibly return to work without restrictions. At the time, ECUA did not have any light duty jobs that Respondent could perform and it was unlikely that such jobs would be available in the future given the nature of the work performed by ECUA and the department in which Respondent was employed. During Respondent’s leave, the Pensacola area experienced a 100-year rain event which placed significant pressure on ECUA’s wastewater system creating a backlog of repairs and wastewater compliance requirements placed on ECUA by the Florida Department of Environmental Protection. At some point, temporary employees were assigned to help in the work Respondent’s section had to perform. However, the temporary employees were insufficient to meet the work loads of that section and a fully trained utility service technician was needed in the department. Due to the utility service department’s needs, Respondent’s supervisor determined that Respondent’s position needed to be filled by a person who could physically perform all of the duties the position required. On June 3, 2014, Respondent’s supervisor advised Respondent that, if he could not return to work by June 18, 2014, six months from the date of his injury, he would be terminated under sections B-13(10), B-13(33) and D-16 of ECUA’s employee handbook. The letter also scheduled a predetermination hearing for June 19, 2014, to provide Respondent the opportunity to demonstrate that he was released for work or demonstrate circumstances for extending Respondent’s inactive work status beyond the six months permitted in the employee handbook. The predetermination hearing was held on June 19, with Respondent in attendance. Up to that date, ECUA had not received a medical clearance for Respondent to return to full duty. Respondent indicated that his physical therapy was proceeding well and he felt that he would be cleared to return to work very soon. In light of Respondent’s representation, he was given until June 20, 2014, to provide medical clearance for work to ECUA. On June 20, Respondent provided a letter from Sacred Heart Occupational Health Strategies, his physical therapy provider. The letter stated that Respondent’s shoulder was improving and that the physical therapist anticipated Respondent could possibly return to work without restrictions following completion of such therapy. However, the physical therapist further stated that a medical release to full duty from Dr. Turnage was required before such return to work. However, his next appointment with Dr. Turnage was not scheduled until July 8, 2014, more than seven months after the date of Respondent’s injury. Further, the evidence did not demonstrate that Respondent was medically cleared by Dr. Turnage to perform full work duties without restriction at the July appointment. Notably, the evidence showed that Respondent was not discharged from physical therapy until August 13, 2014, almost eight months after his injury. These facts demonstrate that Respondent could not perform the essential requirements of his job after six months of inactive status. Additionally, the evidence did not demonstrate a reasonable basis to extend Respondent’s inactive work status beyond the six months already provided. Such inability to perform his work duties caused Respondent not to comply with sections B-13(10), B-13(33) and D-16.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Executive Director of the Emerald Coast Utilities Authority find that Respondent could not return to work within six months from the date of his injury, did not comply with ECUA’s human resources policy B-13(10), B-13(33) and D-16, and impose such action as determined appropriate under the provisions of the Human Resources Manual and Employee Handbook. DONE AND ENTERED this 27th day of October, 2014, in Tallahassee, Leon County, Florida. S DIANE CLEAVINGER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 27th day of October, 2014. COPIES FURNISHED: Roderick E. Billups 6613 Black Oak Place Pensacola, Florida 32526 Cynthia S. Sutherland Emerald Coast Utilities Authority 9255 Sturdevant Street Post Office Box 15311 Pensacola, Florida 32514-0311 John Edmund Griffin, Esquire Carson and Adkins 2930 Wellington Circle, North, Suite 201 Tallahassee, Florida 32309 (eServed) Joseph L. Hammons, Esquire The Hammons Law Firm, P.A. 17 West Cervantes Street Pensacola, Florida 32501-3125 (eServed) Steve Sorrell, Executive Director Emerald Coast Utilities Authority 9255 Sturdevant Street Post Office Box 15311 Pensacola, Florida 32514-0311
The Issue Whether proposed rules 25-4.300 ("Scope and Definition"); 25-4.301 ("Applicability of Fresh Look"); and 25-4.302, ("Termination of Local Exchange Contracts"), Florida Administrative Code, known as "The Fresh Look Provision," constitute an "invalid exercise of delegated legislative authority".
Findings Of Fact Telecommunications carriers/providers may "wear different hats," dependent upon what function they are performing at a given time. Local exchange carriers are abbreviated "LECs" in the proposed rules. For purposes of this case only, Time Warner is an Alternative Local Exchange Carrier ("ALEC") and GTE and BST are Incumbent Local Exchange Carriers ("ILECs"). Both types of companies provide local telephone service over the public switch network. On February 17, 1998, Time Warner filed a Petition to Initiate Rulemaking. Time Warner's Petition requested that the Commission adopt what it described as a "Fresh Look" rule, under which a customer a/k/a "patron" a/k/a "end user" of an ILEC who had agreed to a long-term, discounted contract would have an opportunity to abrogate that ILEC contract without incurring the liability to the ILEC which the customer had agreed to, so that the customer could then enter a new contract with an ALEC. On at least one prior occasion, the Commission had elected to reach a similar result by a Final Order, rather than by enacting a rule. This time, the Commission granted Time Warner's Petition, and the Commission began the rulemaking process. Other states have adopted "Fresh Look" rules or statutes with varying degrees of success. The legislative, administrative, or litigation histories of these extraterritorial matters are immaterial to the rule validity issues herein, which are governed by Chapter 120, Florida Statutes. Those histories are likewise non-binding on this forum. The Commission has no way of identifying, let alone notifying, ILEC contract customers as a separate class of the public or as a separate class of potentially interested parties. However, the public, including customers and carriers, received the required statutory notice(s) at each stage of the rulemaking process, and only the following dates and occurrences have significance within the rulemaking process for purposes of the issues herein. A Notice of Rulemaking Development was published in the Florida Administrative Weekly on April 3, 1998. Commission staff held a Rule Development Workshop on April 22, 1998. Based on information received from carriers in response to staff data requests, the rules as proposed April 3, 1998, were revised by staff. On March 4, 1999, staff recommended that the revised rules be adopted by the Commission. At its Agenda Conference on March 19, 1999, the Commission set the rulemaking for hearing. On March 24, 1999, the Commission issued a Notice of Rulemaking, which included further revisions to the proposed rules. The Commission received a letter from JAPC dated April 28, 1999 ("the JAPC letter") which stated, in pertinent part: Article 1, Section 10 of the Florida Constitution prohibits the passage of laws impairing the obligation of contracts. Inasmuch as the rules effectively amend the terms of existing contracts, please reconcile the rules with the Constitution. The JAPC letter was not placed into the rulemaking record, responded-to by the Commission, or specifically addressed on its merits by any interested parties. Interested parties did not find out about it until many months later. A rulemaking hearing on the proposed rules was held before the Commission on May 12, 1999. Interested persons submitted written and oral testimony and comments at the hearing. No customer with a contract that would be affected by these rules participated in the rulemaking proceedings, including the hearing, before the Commission. At no time did anyone formally submit a lower cost regulatory alternative, but it was clear throughout the rulemaking process that Petitioners herein opposed the adoption of the proposed rules. Two Statements of Estimated Regulatory Cost ("SERCs") were prepared by Commission staff. The proposed rules were further revised after the May 12, 1999, hearing. On November 4, 1999, Commission staff issued a recommendation that the Commission adopt the latest rules draft, in part on the basis that the proposed rules will implement the "regulatory mandates" of Section 364.01, Florida Statutes, that the Commission should "promote competition by encouraging new entrants" and "encourage competition through flexible regulatory treatment among providers of telecommunication services." Attached to this recommendation was a revised SERC, dated September 13, 1999. The September 13, 1999, SERC addressed the alternative of not adopting the proposed rules, and found such an alternative was not viable because it would not foster competition. In preparing both SERCs, Commission staff relied solely on market share data for analyzing competition and did not fully account for revenues to which ILECs were contractually entitled, but which potentially could be unilaterally cancelled by the ILEC customer as a result of the proposed rules. Staff did not ask for such data for estimating cost of the proposed rules to the ILECs. At its November 16, 1999, Agenda Conference, the participation of interested parties was limited to addressing the new SERC. During this Agenda Conference, the Commission revised the rules further, limiting the contracts affected by them to contracts entered into before July 1, 1999, and voted to approve the proposed rules as revised. The exact language of the proposed rules under challenge, as published in the December 3, 1999, Florida Administrative Weekly, pursuant to Section 120.54(3)(d), Florida Statutes, is as follows: PART XII - FRESH LOOK: 25-4.300 Scope and Definitions. Scope. For the purposes of this Part, all contracts that include local telecommunications services offered over the public switched network, between LECs and end users, which were entered into prior to June 30, 1999, that are in effect as of the effective date of this rule, and are scheduled to remain in effect for a least one year after the effective date of this rule will be contracts eligible for Fresh Look. Local telecommunications services offered over the public switched network are defined as those services which include provision of dial tone and flat-rated or message-rated usage. If an end user exercises an option to renew or a provision for automatic renewal, this constitutes a new contract for purposes of this Part, unless penalties apply if the end user elects not to exercise such option or provision. This Part does not apply to LECs which had fewer than 100,000 access lines as of July 1, 1995, and have not elected price-cap regulation. Eligible contracts include, but are not limited to, Contract Service Arrangements (CSAs) and tariffed term plans in which the rate varies according to the end user's term commitment. The end user may exercise this provision solely for the purpose of obtaining a new contract. For the purposes of this Part, the definitions to the following terms apply: "Fresh Look Window" - The period of time during which LEC end users may terminate eligible contracts under the limited liability provision specified in Rule 25- 4.302(3). "Notice of Intent to Terminate" - The written notice by an end user of the end user's intent to terminate an eligible contract pursuant to this rule. "Notice of Termination" - The written notice by an end user to terminate an eligible contract pursuant to this rule. "Statement of Termination Liability" - The written statement by a LEC detailing the liability pursuant to 25-4.302(3), if any, for an end user to terminate an eligible contract. 25-4.301 Applicability of Fresh Look. The Fresh Look Window shall apply to all eligible contracts. The Fresh Look Window shall begin 60 days after the effective date of this rule. The Fresh Look Window shall remain open for one year from the starting date of the Fresh Look Window. An end user may only issue one Notice of Intent to Terminate during the Fresh Look Window for each eligible contract. 25-4.302 Termination of LEC Contracts. Each LEC shall respond to all Fresh Look inquiries and shall designate a contact within its company to which all Fresh Look inquiries and requests should be directed. An end user may provide a written Notice of Intent to Terminate an eligible contract to the LEC during the Fresh Look Window. Within ten business days of receiving the Notice of Intent to Terminate, the LEC shall provide a written Statement of Termination Liability. The termination liability shall be limited to any unrecovered, contract specific nonrecurring costs, in an amount not to exceed the termination liability specified in the terms of the contract. The termination liability shall be calculated as follows: For tariffed term plans, the payments shall be recalculated based on the amount that would have been paid under a tariffed term plan that corresponds to the actual time the service has been subscribed to. For CSAs, the termination liability shall be limited to any unrecovered, contract specific nonrecurring costs, in an amount not to exceed the termination liability specified in the terms of the contract. The termination liability shall be calculated from the information contained in the contract or the workpapers supporting the contract. If a discrepancy arises between the contract and the workpapers, the contract shall be controlling. In the Statement of Termination Liability, the LEC shall specify if and how the termination liability will vary depending on the date services are disconnected pursuant to subsections (4) and (6). From the date the end user receives the Statement of Termination Liability from the LEC, the end user shall have 30 days to provide a Notice of Termination. If the end user does not provide a Notice of Termination within 30 days, the eligible contract shall remain in effect. If the end user provides the Notice of Termination, the end user will pay any termination liability in a one-time payment. The LEC shall have 30 days to terminate the subject services from the date the LEC receives the Notice of Termination. (Emphasis provided only to facilitate the following discussion of "timed" provisions) "Tariff term plans" or "tariffed term plans" are telecommunication service plans in which the rate the customer pays depends on the length of the service commitment. The longer the service commitment the customer makes with the company, the lower the monthly rate will be. Ninety-eight percent of the contracts affected by the proposed rules are tariff term plans filed with the Commission. Contract service arrangements (CSAs) have many functions. By tariff term plans and CSAs, carriers and their customers formalize a negotiation whereby the customer signs-on for service for an extended period, in exchange for lower rates than he would get if he committed to shorter periods or under the regular tariff. Both tariff term plans and CSAs are subject to the Commission's regulatory oversight. No reason was given for use of the "included but not limited to" language added in the rules' current draft. The Commission has published that the "specific authority" for the proposed rules is Sections 350.127(2) and 364.19, Florida Statutes. The Commission has published that the "law implemented" by the proposed rules is Sections 364.19 and 364.01, Florida Statutes. The proposed rules would allow customers of ILECs, including Petitioners GTE and BST, to terminate their contracts and tariffed term plans for local exchange services without paying the termination liability stated in those contracts and tariffs. Instead, customers would only be required to pay the ILEC "any unrecovered, contract specific nonrecurring costs" associated with the contracts. (Proposed rule 25-4.302(3)(b)). For tariffed term plans (but not contracts), termination liability would be recalculated as the difference, if any, between the amount the customer paid and the amount he would have paid under a plan corresponding to the period during which he actually subscribed to the service. (Proposed rule 25- 4.302(3)(a)). The "Fresh Look" rule applies to agreements entered into before June 30, 1999, and that remain in effect for at least one year after the date the rule takes effect. (Proposed rule 25-4.300(1)). The window for contract termination starts 60 days after the rules' effective date and lasts for one year thereafter. (Proposed rule 25-4.301). In the case of ILEC customers who may exercise the "opt-out early" (termination) provisions of the proposed rules, the proposed rules would provide the ILECs with the compensation they would have received if the contracts had been made for a shorter period than for the period of time for which the parties had actually negotiated. The proposed rules clearly modify existing contracts. Indeed, they retroactively impair existing contracts. It may reasonably be inferred that the retroactive elimination of the respective durations of the existing contracts would work to the detriment of any ILECs which have waived "start up costs" on individual contracts or which planned or invested in any technological upgrades or committed to any other business components (labor, training, material, development, expansion, etc.) in anticipation of fulfilling the contracts and profiting over the longer contract terms legally entered-into prior to the proposed rules. The purpose of the proposed rules, as reflected in the Commission's rulemaking notices, is to "enable ALECs to compete for existing ILEC customer contracts covering local exchange telecommunications services offered over the public switched network, which were entered into prior to switch-based substitutes for local exchange telecommunications services." However, the Commission now concedes that switch-based substitutes for the ILECs' local exchange services were widely available to consumers prior to June 30, 1999, the date provided in the proposed rule. At hearing, the Commission asserted that it is also the purpose of the proposed rules to actively encourage competition, and that by proposing these rules, the Commission deemed competition to be meaningful or sufficient enough to warrant a "fresh look" at the ILECs' contracts, but not so widespread that the rules would not be necessary. In effect, the Commission made a "judgment call" concerning the existence of "meaningful or sufficient" competition, but has not defined "sufficient" or "meaningful" competition for purposes of the proposed rules. The Commission's selection of June 30, 1999, as the cut-off date for contract eligibility was motivated primarily by a concept that using that date would render approximately 40 percent of existing ILEC contracts eligible for termination. The rulemaking process revealed that the terms of so- called "long-term" agreements range from six months to four years in duration. The Commission selected a one-year term for eligible contracts subject to the proposed rules as a compromise based on this spread of actual contract durations. The one-year window of opportunity in which a customer will be permitted to terminate a contract was selected by the Commission as a compromise among presenters' views expressed during the rulemaking process. The one-year window is to be implemented 60 days after the effective date of the rule to avoid the type of problems incurred when a "fresh look" was previously accomplished by a Commission Order and to allow the ILECs and ALECs time to prepare. Tariffed term plans were developed as a response to competition and have been used at least since 1973. As early as 1984, the Commission had, by Order, given ILECs authority to use CSAs for certain services, upon the condition that there was a competitive alternative available. The Commission has long been aware of the ILECs' use of termination liability provisions in CSAs and tariff term plans, including provisions for customer premises equipment (CPE), and has not affirmatively determined that their use is anticompetitive, discriminatory, or otherwise impermissible. Private branch exchanges (PBXs), which are switches, competed with the ILECs' Centrex systems for medium- to large- size business customers and key telephone systems for smaller businesses, from the early 1980's, as recognized by a Commission Order in 1994. Commission Order No. PSC-94-0285-FOF-TP, dated March 3, 1994, in Docket No. 921074-TP, permitted a "fresh look" for customers of LEC private line and special access services with terms equal to, or greater than, three years. Customers were permitted a limited time to terminate their existing contracts with LECs to take advantage of emerging competitive alternatives, such as alternative access vendors' (AAVs') ability to interconnect with LECs' facilities. Termination liability of the customer to the ILEC was limited to the amount the customer would have paid for the services actually used. Prior to 1996, only ILECs could offer dial tone service, which enables end users to communicate with anyone else who has a telephone. Chapter 364, Florida Statutes, Florida's telecommunication statute, was amended effective January 1, 1996, to allow ALECs to operate in Florida. ILECs had offered tariffed term plans and CSAs for certain services before the 1996 revision of Chapter 364, Florida Statutes, but effective 1996, substantial amendments allowed the entry of ALECs into ILECs' markets. The new amendments codified and expanded the ILECs' ability to use CSAs and term and volume discount contracts in exchange for ILECs losing their exclusive local franchises and deleted statutory language requiring the Commission to determine that there was effective competition for a particular service before an ILEC could be granted pricing flexibility for that service. Tariff filings before the amendments had required Commission approval. The federal Telecommunications Act of 1996 also opened the ILECs' local exchange markets to full competition and imposed upon the ILECs a number of obligations designed to encourage competitive entry by ALECs into the market, including allowing ALECs to interconnect their networks with those of ILECs; "unbundling" ILEC networks to sell the unbundled elements to competitors; and reselling ILEC telecommunications services to ALECs at a wholesale discount. See 47 U.S.C. Section 51 et seq. "Resale" means taking an existing service provided by a LEC and repackaging or remarketing it. The requirement that ILECs resell their services, including contracts and tariffed term plans, to competitors at a wholesale discount, has been very effective in stimulating resale competition, but to resell or not is purely an internal business decision of each ALEC. For instance, Time Warner has elected not to be involved in "resales," and is entirely "facility based." Since 1996, competing carriers could and do sell additional (other) services to customers already committed to long-term ILEC contracts. They may also purchase ILEC CSAs wholesale at discount and resell such agreements to customers. Market share data demonstrates that there has been greater ALEC competition in Florida since the 1996 amendments, but typically, ALECs target big cities with denser populations and denser business concentrations. There is no persuasive evidence that any of the affected ILEC contracts (those post-June 30, 1999) were entered into by customers who did not have competing alternatives from which to choose. In fact, testimony by Commission staff supports a finding that since LECs' CSAs are subject to Commission review and their service tariffs are filed with the Commission, the Commission has not authorized CSAs unless there was an "uneconomic bypass" or competition. "Uneconomic bypass" occurs where a competitor can offer service at a price below the LEC's tariffed rate but above the LEC's cost. The Commission presented an ILEC customer, Mr. Eric Larsen of Tallahassee, who testified that he had had the benefit of competition, not necessarily from an ALEC, when he had entertained a bid from a carrier different from his then-current ILEC in 1999. However, at that time, he renegotiated an expiring contract with his then-current ILEC instead of with the competitor. This renewal contract with an ILEC would not be affected by the proposed rules. Business customers, such as Mr. Larsen, may reasonably perceive business trends. They could reasonably be expected to have factored into their negotiations with competing carriers at the time the contracts were formed that a potential for greater choices would occur in the future, even within the life of their long-term contracts with an ILEC. As of 1999, 80 ALECs were serving Florida customers, 100 more had expressed their intention of serving Florida before the end of the year 2000, and ALECs had obtained some share of the business lines in many exchanges. While this does not mean that every area of Florida has every service, it is indicative of a spread of competition. Petitioner GTE is anchored in the Tampa Bay area. By June 30, 1999, the date expressed in the proposed rules, nine facilities-based competitors were in the same geographic area. One ALEC (MCI) was serving 10,000 lines. Competitors operated 20 switches and 83 percent of the buildings in GTE's franchise area were within 18,000 feet of a competitor's switch. However, in most cases, GTE's CSA or tariff term agreements had been successful against specific competing bids for the respective services. Market share data showed that by June 30, 1999, Petitioner GTE had executed 101 agreements allowing ALECs to provide service by inter-connecting their networks with GTE's networks, reselling GTE's services, and/or taking "unbundled" parts of GTE's network. While market share data is not conclusive, in the absence of any better economic analysis by the Commission or other evidence of existing ALEC presence or of a different prognosis for ALEC penetration, market share is at least one indicator of the state of competition when the contracts addressed by the proposed rules were entered into. The Commission has no data about how many customers currently opt-out of their ILEC contracts prior to natural expiration and pay the termination liability to which those ILEC agreements bind them in order to accept a competing offer from another carrier, but clearly, some do. This evidences current competition. Competing carriers can and do sell to ILEC customers at the natural expiration of their long-term agreements. This evidences current competition. The Commission has no data predicting how many more customers would opt-out if the proposed rules are validated. Therefore, the presumption that "if we publish a rule they will come" is speculative. Likewise the Commission's presumption that customers regard termination liability provisions in ILEC contracts as a barrier to their choices and a bar to competition was not proven. Some of the factors that went into that presumption were speculative because the Commission has not reviewed the termination liability provisions of Petitioners' contracts and has offered no evidence of formal complaints to the Commission by customers who want to opt-out of ILEC contracts. "Informal communication" with Commission staff by customers was undocumented and unquantified. The Commission did present the testimony of Mr. Larsen who explained that because he needs to keep the same business telephone number, he feels that it is not economically feasible for him to opt-out of his several overlapping ILEC contracts unless he can synchronize all his existing contract termination dates and that the proposed "fresh look" rules would permit him to do that. However, his testimony provided no valid predictor that even if the termination of all his existing ILEC contracts were enabled by the proposed rules he would, in fact, be able to find a competitor in his area whose contract(s) were more to his liking. The proposed rules, with their arbitrary date of June 30, 1999, would not allow Mr. Larsen to terminate, without liability, the one ILEC contract he entered into after that date. (See Finding of Fact No. 47). Based on his sincere but unfocused testimony, it remains speculation to presume that Mr. Larsen would be willing to incur contractual liability by early termination of his single non-qualifying ILEC contract just because the proposed rules would let him "opt-out" of the several qualifying ILEC contracts. It is indicative of the proposed rules' possible effect on future competition that Mr. Larsen speculated that if he could terminate all his qualifying ILEC contracts simultaneously under the proposed rules, he might be able to persuade a competitor, perhaps an ALEC, to pay his termination costs on his single non- qualifying ILEC contract if he renegotiated all his business away from his ILEC and to that competitor. The introduction of the proposed rules into the market place could create a "competitive edge" not anticipated by the Commission. Other carriers, including ALECs competing with ILECs, can and do enter into contracts with their customers which, like the contracts which would be affected by the proposed rules, are long-term contracts subject to termination liability, but the long-term contracts of carriers other than ILECs would not be affected by the proposed rules. The proposed rules pertain only to ILECs and their business customers. In effect, the proposed rules apply predominantly to ILECs' large business customers. Under the proposed rules, competitors which had originally bid against the ILECs for an affected contract at the time it was entered-into could get "a second bite at the apple" occasioned solely by the application of the proposed rules.
Conclusions Having reviewed the Administrative Complaint, and all other matters of record, the Agency for Health Care Administration finds and concludes as follows: 1. The Agency has jurisdiction over the above-named Respondent pursuant to Chapter 408, Part II, Florida Statutes, and the applicable authorizing statutes and administrative code provisions. 2. The Agency issued the attached Administrative Complaint and Election of Rights form to the Respondent. (Ex. 1) The Election of Rights form advised of the right to an administrative hearing. 3. The parties have since entered into the attached Settlement Agreement. (Ex. 2) Based upon the foregoing, it is ORDERED: 1, The Settlement Agreement is adopted and incorporated by reference into this Final Order. The parties shall comply with the terms of the Settlement Agreement. 2. The Respondent’s assisted living facility license is voluntarily relinquished to the Agency effective January 3, 2012. The administrative fine of $41,000.00 and survey fee of $355.00 are suspended as to the Respondent and no payment need be made unless the Respondent or a controlling interest of the Respondent applies for any licensure with the Agency. In such instance, the total fine and survey fee shall be due and immediately payable. ORDERED at Tallahassee, Florida, on this K day of Blokes, , 2012. bbb Dwuctel. Elizabeth Dudek, Secretary Agency for Ith Care Administration 1 Filed February 9, 2012 3:29 PM Division of Administrative Hearings
Other Judicial Opinions A party who is adversely affected by this Final Order is entitled to 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 of 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. CERTIFICATE OF SERVICE I CERTIFY that a true and correct_copy of this Final Order was served on the below-named persons by the method designated on this POmtay of ox , 2012. Agency for Health Care Administration 2727 Mahan Drive, Bldg. #3, Mail Stop #3 Tallahassee, Florida 32308-5403 Telephone: (850) 412-3630 Copies Furnished to: Jan Mills Shaddrick Haston, Unit Manager Facilities Intake Unit Licensure Unit Agency for Health Care Administration Agency for Health Care Administration (Electronic Mail) (Electronic Mail) Katrina Derico-Harris Medicaid Accounts Receivable Agency for Health Care Administration (Electronic Mail) Harold Williams, Field Office Manager Local Field Office Agency for Health Care Administration Clectronic Mail) Shawn McCauley Medicaid Contract Management Agency for Health Care Administration (Electronic Mail) Mary Daley Jacobs Office of the General Counsel Agency for Health Care Administration (Electronic Mail) Linzie F. Bogan Administrative Law Judge Division of Administrative Hearings (Electronic Mail) Theodore E. Mack Powell & Mack 803 N. Calhoun Street Tallahassee, Florida 32303 (U.S. Mail) NOTICE OF FLORIDA LAW 408.804 License required; display.-- (1) It is unlawful to provide services that require licensure, or operate or maintain a provider that offers or provides services that require licensure, without first obtaining from the agency a license authorizing the provision of such services or the operation or maintenance of such provider. (2) A license must be displayed in a conspicuous place readily visible to clients who enter at the address that appears on the license and is valid only in the hands of the licensee to whom it is issued and may not be sold, assigned, or otherwise transferred, voluntarily or involuntarily. The license is valid only for the licensee, provider, and location for which the license is issued. 408.812 Unlicensed activity. -- (1) A person or entity may not offer or advertise services that require licensure as defined by this part, authorizing statutes, or applicable rules to the public without obtaining a valid license from the agency. A licenseholder may not advertise or hold out to the public that he or she holds a license for other than that for which he or she actually holds the license. (2) The operation or maintenance of an unlicensed provider or the performance of any services that require licensure without proper licensure is a violation of this part and authorizing statutes. Unlicensed activity constitutes harm that materially affects the health, safety, and welfare of clients. The agency or any state attorney may, in addition to other remedies provided in this part, bring an action for an injunction to restrain such violation, or to enjoin the future operation or maintenance of the unlicensed provider or the performance of any services in violation of this part and authorizing statutes, until compliance with this part, authorizing statutes, and agency rules has been demonstrated to the satisfaction of the agency. (3) It is unlawful for any person or entity to own, operate, or maintain an unlicensed provider. If after receiving notification from the agency, such person or entity fails to cease operation and apply for a license under this part and authorizing statutes, the person or entity shall be subject to penalties as prescribed by authorizing statutes and applicable rules. Each day of continued operation is a separate offense. (4) Any person or entity that fails to cease operation after agency notification may be fined $1,000 for each day of noncompliance. (5) When a controlling interest or licensee has an interest in more than one provider and fails to license a provider rendering services that require licensure, the agency may revoke all licenses and impose actions under s. 408.814 and a fine of $1,000 per day, unless otherwise specified by authorizing statutes, against each licensee until such time as the appropriate license is obtained for the unlicensed operation. (6) In addition to granting injunctive relief pursuant to subsection (2), if the agency determines that a person or entity is operating or maintaining a provider without obtaining a license and determines that a condition exists that poses a threat to the health, safety, or welfare of a client of the provider, the person or entity is subject to the same actions and fines imposed against a licensee as specified in this part, authorizing statutes, and agency rules. (7) Any person aware of the operation of an unlicensed provider must report that provider to the agency.
