00-004065 Mayhugh Drugs, Inc. vs. Agency For Health Care Administration Status: Closed Recommended Order on Tuesday, January 30, 2001.

Summary: Respondent entitled to collect Medicaid reimbursement overpayment due to Petitioner`s failure to keep appropriate records justifying claims.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

MAYHUGH DRUGS, INC., )

)

Petitioner, )

)

vs. ) Case No. 00-4065

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Respondent. )

______________________________)

RECOMMENDED ORDER

A formal hearing was conducted in this case on December 18,

2000, in Green Cove Springs, Florida, before the Division of

Administrative Hearings, by its Administrative Law Judge,

Suzanne F. Hood.

APPEARANCES

For Petitioner: Melvin H. Fletcher, R.Ph.

Corporate Representative

Mayhugh Drugs, Inc.

200 South Orange Avenue

Green Cove Springs, Florida 32043

For Respondent: L. William Porter, II, Esquire

Agency for Health Care Administration

2727 Mahan Drive

Building 3, Suite 3431

Tallahassee, Florida 32308

STATEMENT OF THE ISSUES

The issues are whether Petitioner is liable to Respondent

for Medicaid reimbursement overpayments, and if so, in what

amount.

PRELIMINARY STATEMENT

By letter dated August 16, 2000, Respondent Agency for

Health Care Administration (Respondent) advised Petitioner

Mayhugh Drugs, Inc. (Petitioner) that it had been overpaid

$13,798.70 in connection with claims submitted to Medicaid

during the December 25, 1998, through December 24, 1999, audit

period. Petitioner requested a formal hearing to contest

Respondent's decision relative to Medicaid reimbursement

overpayments.

Respondent referred this case to the Division of

Administrative Hearings on October 3, 2000. The parties filed a

Joint Response to Initial Order on October 11, 2000.

A Notice of Hearing dated October 13, 2000, scheduled the

hearing for December 18 through 19, 2000. The parties filed a

Pre-hearing Stipulation on December 11, 2000.

At the hearing, Respondent presented the testimony of three

witnesses and offered Respondent's Exhibits R2-R6, R10-R12, R14,

R16-R17, R19, and R21, which were accepted into evidence.

Petitioner presented the testimony of its corporate

representative, but offered no other exhibits.

Pursuant to the requests of the parties, the undersigned

hereby officially recognizes applicable sections of the

following: (a) Chapters 409 and 465, Florida Statutes (1997)

(Supp. 1998), and (1999); (b) Rules 59G-4, 64B16-27, and 64B16-

28, Florida Administrative Code; and (c) excerpts from

Prescribed Drug Services Coverage, Limitations, and

Reimbursement Handbook , 1997, 1998, and 1999 editions.

A Transcript of the proceeding was filed on January 2,

2001. Petitioner and Respondent filed their Proposed Findings

of Fact and Conclusions of Law on January 11, 2001, and

January 12, 2001, respectively.

FINDINGS OF FACT

1. Respondent is the agency charged with administration of

the Medicaid program in Florida pursuant to Section 409.907,

Florida Statutes.

2. Petitioner provides services to Medicaid beneficiaries

under provider No. 1000098-00 pursuant to a contract with

Respondent. Under the provider agreement dated March 31, 1997,

Petitioner agreed to comply with all local, state and federal

laws, rules, regulations, licensure laws, Medicaid bulletins,

manuals, handbooks, and statements of policy. The contract also

sets forth Petitioner's responsibilities to keep and maintain in

a systematic and orderly manner all medical and Medicaid-related

records, and to make them available for state and federal audits

for five years.

3. Heritage Information Systems, Inc. (Heritage) is and

has been a pharmacy audit company since 1980. In 1999,

Respondent contracted with Heritage to perform audits of

pharmacies enrolled in the Florida Medicaid program.

4. Respondent and Heritage subsequently created a list of

violations to be investigated during an audit. The list is

based upon provisions in the Florida Statutes and federal

Medicaid policies and regulations. The purpose of the list is

to guide Heritage in performing its duty during an audit.

5. Heritage conducts its audits based on a standard

methodology and protocol. During the course of an audit,

Heritage examines a provider's records to determine whether a

pharmacy is compliant with all rules and regulations that apply

to the pharmacy.

6. Heritage uses an established set of neutral criteria to

select pharmacies for participation in an audit. Using these

criteria, Heritage selected Petitioner as a candidate for audit.

7. By letter dated January 17, 2000, Heritage advised

Petitioner that it would be audited on January 26, 2000. The

letter stated as follows in relevant part:

The auditor(s) will require access to

original hard-copy prescription records,

third party signature logs, and, in some

cases, pharmacy computer screens relating to

a sample of prescription claims billed by

your pharmacy between 12/25/1998 and

12/24/1999 . Please note that the sample

claim may actually be a refill of a

prescription originally dispensed prior to

the audit period. Because of this, we

recommend that you also have the prior

twelve months of prescription records

available the day of the audit.

For your reference, the audit terms are

defined in your participating provider

agreement and the prescribed drug services

handbook. If you have any additional

questions prior to the audit, please call

Heritage Information Systems, Inc. . . .

8. Between December 25, 1998, and December 24, 1999,

Petitioner submitted claims and received payments from the

Medicaid program for 7,065 claims. Using an industry standard

software application, Heritage selected a random sample of 101

of Petitioner's claims to be analyzed during the audit.

9. In performing the audit, Heritage utilized a

methodology similar to that used by auditing agencies who

examined Medicaid providers in previous years.

10. During the audit, Heritage identified four areas of

noncompliance for Petitioner. First, Heritage requested

Petitioner's staff to produce hard-copy prescription records for

the 101 sampled claims. Hard-copy prescriptions include those

ordered and signed by a physician on a handwritten form and the

records created by the pharmacists immediately after receiving

verbal authorization from a physician by telephone. In this

case, Petitioner could not produce hard-copy prescriptions for

five claims.

11. The second area of noncompliance involved unauthorized

refills. In seven instances, Petitioner refilled prescriptions

more times than the number authorized on the documented

prescription. There were no notations on the hard-copy

prescriptions or in the pharmacy computer to indicate that the

doctors or someone from their office called to increase the

number of authorized refills.

12. The third area of noncompliance involved one instance

in which Petitioner claimed payment for a "days supply value"

that was inconsistent with the quantity and directions on the

prescription. The prescription at issue was for sixty tablets

with directions for the patient to take the drug once a day,

constituting a sixty-day supply of medicine. Petitioner filled

this prescription as a thirty-day supply and claimed Medicaid

payment accordingly. Respondent did not include this violation

in the calculation of overpayment.

13. The fourth area of noncompliance involved a

prescription that was refilled 30 days earlier than appropriate

with respect to the quantity and directions for use that

appeared on the prescription. This was the same prescription

referenced above in paragraph twelve.

14. After completing the audit, Heritage completed a final

audit report. Said report documents the following: (a) 7,310

claims submitted by Petitioner; (b) $350,639.95 paid by

Respondent for all claims; (c) 101 claims in total random

sample; (d) $3,839.33 paid by Respondent for claims in total

random sample; (e) 13 discrepant claims in random sample;

(f) $778.09 paid by Respondent for discrepant claims;

(g) 13 documented sanctions in random sample; (h) $724.91 paid

by Respondent for documented sanctions in random sample;

(i) $52,466.25 as the total calculated overpayment; and

(j) $13,798.70 as the amount of the overpayment based on a 95

percent one-sided lower confidence limit. The final audit

report also contained a listing of the violations discovered

during the audit.

15. The final audit report contained the following

comments/notes in relevant part:

Five prescriptions could not be found by

auditors and could not be found by

pharmacist Geiger and technician Daniels

either. Many unauthorized refills were

noticed. Pharmacy staff stated some

information may be on the old computer

system that was not functioning because of

Y2K problems. Any authorization or

documentation that was found on the computer

system was accepted.

16. Under cover of a letter dated March 2, 2000,

Petitioner furnished Respondent with statements relative to the

discrepant claims/documented sanctions signed by several

physicians. All of the statements included the following:

(a) statements that the doctors had prescribed the medication(s)

for their patients; (b) the patient name; (c) the prescription

number; (d) a print-out of a computer screen; and (e) opinions

that Petitioner would not fill or refill prescriptions without

authority and approval. None of these physicians testified at

the hearing.

17. By letter dated August 16, 2000, Respondent notified

Petitioner of the determination of a Medicaid overpayment in the

amount of $13,798.70. The greater weight of the evidence

indicates that Petitioner received an overpayment in that amount

or more.

CONCLUSIONS OF LAW

18. The Division of Administrative Hearings has

jurisdiction over this subject matter and the parties to this

action pursuant to Sections 120.569 and 120.57(1), Florida

Statutes.

19. Respondent has the burden of proving by a

preponderance of the evidence that Petitioner has been overpaid

for Medicaid services. South Medical Services, Inc. v. Agency

for Health Care Administration , 653 So. 2d 440 (Fla. 3rd DCA

1995).

20. The statutes, rules, regula tions and Prescribed Drug

Services, Coverage, Limitation, and Reimbursements Handbook

(Handbook) in effect during the period for which the services

were provided govern the outcome of the dispute. Toma v. Agency

for Health Care Administration , Case No. 95-2419 (Div. Of Admin.

Hearings, 1996). The 1998 Florida Statutes are cited here

because there are no material changes in the applicable law

between 1998 and the present.

21. Respondent is required to oversee the Florida Medicaid

program and recover any overpayments of Medicaid funds. Section

409.913, Florida Statutes (Supp. 1998), states as follows in

pertinent part:

409.913 Oversight of the integrity of the

Medicaid program.--The agency shall operate

a program to oversee the activities of

Florida Medicaid recipients, and providers

and their representatives, to ensure that

fraudulent and abusive behavior and neglect

of recipients occur to the minimum extent

possible, and to recover overpayments and

impose sanctions as appropriate.

(1) For the purposes of this section, the

term:

* * *

(d) "Overpayment" includes any amount that

is not authorized to be paid by the Medicaid

program whether paid as a result of

inaccurate or improper cost reporting,

improper claiming, unacceptable practices,

fraud, abuse, or mistake.

* * *

(7) When presenting a claim for payment

under the Medicaid program, a provider has

an affirmative duty to supervise the

provision of, and be responsible for, goods

and services claimed to have been provided,

to supervise and be responsible for

preparation and submission of the claim, and

to present a claim that is true and accurate

and that is for goods and services that:

* * *

(b) Are Medicaid-covered goods or services

that are medically necessary.

* * *

(e) Are provided in accord with applicable

provisions of all Medicaid rules,

regulations, handbooks, and policies and in

accordance with federal, state, and local

law.

(f) Are documented by records made at the

time the goods or services were provided,

demonstrating the medical necessity for the

goods or services rendered. Medicaid goods

or services are excessive or not medically

necessary unless both the medical basis and

the specific need for them are fully and

properly documented in the recipient's

medical record.

(8) A Medicaid provider shall retain

medical, professional, financial, and

business records pertaining to services and

goods furnished to a Medicaid recipient and

billed to Medicaid for a period of 5 years

after the date of furnishing such services

or goods. . . .

* * *

(10) The agency may require repayment for

inappropriate, medically unnecessary, or

excessive goods or services from the person

furnishing them, the person under whose

supervision they were furnished, or the

person causing them to be furnished.

* * *

(14) The agency may seek any remedy

provided by law, including, but not limited

to, the remedies provided in subsections

(12) and (15) and s. 812.035, if:

* * *

(d) The provider has failed to maintain

medical records made at the time of service,

or prior to service if prior authorization

is required, demonstrating the necessity and

appropriateness of the goods or services

rendered;

(e) The provider is not in compliance with

provisions of Medicaid provider publications

that have been adopted by reference as rules

in the Florida Administrative Code; with

provisions of state or federal laws, rules,

or regulations; with provisions of the

provider agreement between the agency and

the provider; or with certifications found

on claim forms or on transmittal forms for

electronically submitted claims that are

submitted by the provider or authorized

representative, as such provisions apply to

the Medicaid program;

* * *

(19) In making a determination of

overpayment to a provider, the agency must

use accepted and valid auditing, accounting,

analytical, statistical, or peer-review

methods, or combinations thereof.

Appropriate statistical methods may include,

but are not limited to, sampling and

extension to the population, parametric and

nonparametric statistics, tests of

hypotheses, and other generally accepted

statistical methods. . . .

(20) When making a determination that an

overpayment has occurred, the agency shall

prepare and issue an audit report to the

provider showing the calculation of

overpayments.

(21) The audit report, supported by agency

work papers, showing an overpayment to a

provider constitutes evidence of the

overpayment. . . .

22. The Medicaid Provider Agreement signed by Petitioner

in March 1997 specifically states as follows in relevant part:

(3) Compliance . The provider agrees to

comply with all local, state, and federal

laws, rules, regulations, licensure laws,

Medicaid bulletins, manuals, handbooks and

Statements of Policy as they may be amended

from time to time.

* * *

(5) Provider Responsibilities . The

Medicaid provider shall:

* * *

(b) Keep and maintain in a systematic and

orderly manner all medical and Medicaid

related records as the Agency may require

and as it determines necessary; make

available for state and federal audits for

five years, complete and accurate medical,

business, and fiscal records that fully

justify and disclose the extent of the goods

and services rendered and billings made

under the Medicaid [program]. The provider

agrees that only records made at the time

the goods and services were provided will be

admissible in evidence in any proceeding

relating to the Medicaid program.

23. Section 409.907, Florida Statutes (Supp. 1998), states

as follows in relevant part:

(1) Each provider agreement shall require

the provider to comply fully with all state

and federal laws pertaining to the Medicaid

program, as well as all federal, state, and

local laws pertaining to licensure, if

required, and the practice of any of the

healing arts, and shall require the provider

to provide services or goods of not less

than the scope and quality it provides to

the general public.

* * *

(3) The provider agreement developed by the

agency, in addition to the requirements

specified in subsections (1) and (2), shall

require the provider to:

* * *

(b) Maintain in a systematic and orderly

manner all medical and Medicaid-related

records that the agency requires and

determines are relevant to the services or

goods being provided.

(c) Retain all medical and Medicaid-related

records for a period of 5 years to satisfy

all necessary inquiries by the agency.

24. Section 465.015(2), Florida Statutes (Supp. 1998),

states as follows in pertinent part:

(2) It is unlawful for any person:

* * *

(c) To sell or dispense drugs as defined in

s. 465.003(7) without first being furnished

with a prescription.

25. Section 465.016(1), Florida Statutes (Supp. 1998),

states as follows in relevant part:

(1) The following acts shall be grounds for

disciplinary action set forth in this

section:

* * *

(i) Compounding, dispensing, or

distributing a legend drug, including any

controlled substance, other than in the

course of the professional practice of

pharmacy. For purposes of the paragraph, it

shall be legally presumed that the

compounding, dispensing, or distributing of

legend drugs in the excessive or

inappropriate quantities is not in the best

interest of the patient and is not in the

course of the professional practice of

pharmacy.

26. Section 465.003(13), Florida Statutes (Supp. 1998 ),

states as follows:

(13) "Prescription" includes any order for

drugs or medicinal supplies written or

transmitted by any means of communication by

a duly licensed practitioner authorized by

the laws of the state to prescribe such

drugs or medicinal supplies and intended to

be dispensed by a pharmacist. The term also

includes an orally transmitted order by the

lawfully designated agent of such

practitioner. The term also includes an

order written or transmitted by a

practitioner licensed to practice in a

jurisdiction other than this state, but only

if the pharmacist called upon to dispense

such order determines, in the exercise of

her or his professional judgment, that the

order is valid and necessary for the

treatment of a chronic or recurrent illness.

The term "prescription" also includes a

pharmacist's order for a product selected

from the formulary created pursuant to s.

465.186. Prescriptions may be retained in

written form or the pharmacist may cause it

to be recorded in a data processing system,

provided that such order can be produced in

printed form upon lawful request.

27. Rules 64B16-27.103 and 64B16-27.810, Florida

Administrative Code, provide as follows in relevant part:

64B16.27.103 Oral Prescriptions and Copies.

Only a Florida Registered pharmacist or

registered pharmacy intern acting under the

direct personal supervision of a Florida

registered pharmacist may, in the State of

Florida, accept an oral prescription of any

nature. Upon so accepting such oral

prescription it must immediately be reduced

to writing. . . .

* * *

64B16-27.810 Prospective Drug Use Review.

(1) A pharmacist shall review the patient

record and each new refill prescription

presented for dispensing in order to promote

therapeutic appropriateness by identifying:

(a) over-utilization or under utilization;

(b) therapeutic duplication;

(c) drug-disease contraindications;

(d) drug-drug interactions;

(e) incorrect drug dosage or duration of

drug treatment;

(f) drug-allergy interactions;

(g) clinical abuse/misuse.

(2) Upon recognizing any of the above, the

pharmacist shall take appropriate steps to

avoid or resolve the potential problems

which shall, if necessary, include

consultation with the prescriber.

28. Rule 64B16-28.140, Florida Administrative Code, st ates

as follows in relevant part:

(1) Requirements for records maintained in

a data processing system.

* * *

(d) Original prescriptions, including

prescriptions received as provided for in

Section 64B16-28.130, F.A.C., Transmission

of Prescription Orders, shall be reduced to

writing if not received in written form.

All original prescriptions shall be retained

for a period of not less than two years from

date of last filing. To the extent

authorized by 21 C.F.R. Section 1304.4, a

pharmacy may, in lieu of retaining the

actual original prescriptions, use an

electronic imaging record keeping system,

provided such system is capable of

capturing, storing, and reproducing the

exact image of the prescription, including

the reverse side of the prescription if

necessary, and that such image be retained

for a period of no less than two years from

the date of last filing.

(e) Original prescriptions shall be

maintained in a two or three file system as

specified in 21 C.F.R. 1304.04(h).

* * *

(3) Records of dispensing.

(a) Each time a prescription drug order is

filled or refilled, a record of such

dispensing shall be entered into the data

processing system.

(b) The data processing system shall have

the capacity to produce a daily hard-copy

printout of all original prescriptions

dispensed and refilled. This hard copy

printout shall contain the following

information:

1. Unique identification number of the

prescription;

2. Date of dispensing;

3. Patient name;

4. Prescribing practitioner's name;

5. Name and strength of the drug product

actually dispensed, if generic name, the

brand name or manufacturer of drug

dispensed;

6. Quantity dispensed;

7. Initials or an identification code of

the dispensing pharmacist;

8. If not immediately retrievable via CRT

display, the following shall also be

included on the hard-copy printout;

a. Patient's address;

b. Prescribing practitioner's address;

c. Practitioner's DEA registration number,

if the prescription drug order is for a

controlled substance;

d. Quantity prescribed, if different from

the quantity dispensed;

e. Date of issuance of the prescription

drug order, if different from the date of

dispensing; and

f. Total number of refills dispensed to

date for that prescription drug order.

* * *

(5) Authorization of additional refills.

Practitioner authorization for additional

refills of a prescription drug order shall

be noted as follows:

(a) On the daily hard-copy printout; or

(b) Via the CRT display.

29. Respondent routinely amends Rule 59G-4.250, Florida

Administrative Code, to incorporate by reference the most

current version of the Handbook. The 1997, 1998, and 1999

versions of the Handbook require pharmacies to maintain

prescription records on all services provided to a Medicaid

recipient. The Handbook states as follows in relevant part:

Records may be kept on paper, magnetic

material, film, or other media. In order to

qualify as a basis for reimbursement, the

records must be signed and dated at the time

of service, or otherwise attested to as

appropriate to the media. . . . (July 1999,

page 2-17; August 1998, page 2-14; November

1997, page 2-13.)

* * *

Providers who are not in compliance with the

Medicaid documentation and record retention

policies described in this chapter may be

subject to administrative sanctions and

recoupment of Medicaid payments.

Medicaid payment for services that lack

required documentation or appropriate

signatures will be recouped. . . . (July,

1999, page 2-20; August 1998, page 2-16;

November 1997, page 2-15.)

* * *

The pharmacy must maintain a patient record

for each recipient for whom new or refill

prescriptions are dispensed. The record may

be electronic or hard copy. The pharmacy's

patient record system must provide for the

immediate retrieval of the information

necessary for the pharmacist to identify

previously dispensed drugs when dispensing a

new or refill prescription. . . .(August

1998, page 2-15; November 1997, page 2-14.)

* * *

Incomplete records are records that lack

documentation that all requirements or

conditions for service provision have been

met. Medicaid may recoup payment for

services or goods when the provider has

incomplete records or cannot locate the

records. (July 1999, 5-7; November 1997,

page 5-7.)

* * *

Enter the estimated number of days that the

prescription will last if it is consumed at

the prescribed rate, based on the

pharmacist's professional judgment and the

prescription date.

If the directions for use are "PRN," the

pharmacist must still enter an estimated

number of days the prescription will last

based on reasonable judgment. (July 1999,

page 6-24; November 1997, page 6-22.)

* * *

Medicaid reimburses for services that are

determined medically necessary, [and] do not

duplicate another provider's service. . . .

(July 1999, page 9-2); November 1997, page

9-2.)

EOB Codes and Corrective Actions . . .

Refill Too Early

This edit occurred because the recipient has

another prescription claim for the same drug

dispensed by the same provider and the

existing supply of the drug has not been

exhausted. . . . (July 1999, page A-27;

November 1997, Page A-22.)

Prescribed Drug Services Coverage and Limitations Handbook , July

1999, August 1998, and November 1997.

30. In this case, Heritage correctly determined that

Petitioner violated Medicaid's record-keeping requirements

fourteen times in 101 claims. First, Petitioner did not have

hard-copy prescriptions on file for five of its claims. Seeking

written verification from physicians after an audit is complete,

is insufficient to meet the requirement of a physician's hand-

written prescription or a pharmacist's immediate documentation

of a verbal order.

31. In seven instances, Petitioner refilled prescriptions

more times than originally authorized without documenting the

prescriber's additional authorizations. It is insufficient for

a pharmacist to pull up original prescriptions that have been

documented on a computer screen and change the number of refills

originally authorized. Petitioner should have made more

detailed notations on the computer regarding the additional

refills.

32. In one instance, Petitioner filled a prescription in

which the "days supply" value was not consistent with the

quantity and directions of the original prescription.

Respondent did not include this violation in calculating

Petitioner's overpayment.

33. Finally, Petitioner filled one prescription sooner

than appropriate with respect to quantity and directions for use

on the original prescription. When prescriptions are refilled

too early, patients receive medicine that is medically

unnecessary.

RECOMMENDATION

Based upon the findings of fact and conclusions of law, it

is

RECOMMENDED:

That Respondent enter a final order finding that Petitioner

must timely pay Respondent $13,798.70 for Medicaid reimbursement

overpayments from December 25, 1998, through December 24, 1999.

DONE AND ENTERED this 30th day of January, 2001, in

Tallahassee, Leon County, Florida.

___________________________________

SUZANNE F. HOOD

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone] SUNCOM 278-9675

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 30th day of January , 2001.

COPIES FURNISHED:

Melvin H. Fletcher, R.Ph.

Corporate Representative

Mayhugh Drugs, Inc.

200 South Orange Avenue

Green Cove Springs, Florida 32043

L. William Porter, II, Esquire

Agency for Health Care Administration

2727 Mahan Drive

Building 3, Suite 3431

Tallahassee, Florida 32308

Sam Power, Agency Clerk

Agency for Health Care Administration

2727 Mahan Drive

Building 3, Suite 3431

Tallahassee, Florida 32308

Julie Gallagher, General Counsel

Agency for Health Care Administration

2727 Mahan Drive

Building 3, Suite 3431

Tallahassee, Florida 32308

Ruben J. King-Shaw, Jr., Director

Agency for Health Care Administration

2727 Mahan Drive

Building 3, Suite 3116

Tallahassee, Florida 32308

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of this Recommended Order. Any exceptions

to this Recommended Order should be filed with the agency that

will issue the Final Order in this case.