08-001699 Advanced Rehabilitation And Health Center vs. Agency For Health Care Administration Status: Closed Recommended Order on Monday, February 23, 2009.

Summary: Petitioners did not meet their burden of proof. The Agency`s actions were proper and correct. No estoppel applies to the facts of this case.

BAYSIDE REHABILITATION AND )

HEALTH CENTER, )

)

Petitioner, )

)

vs. ) Case No. 08-1695

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Respondent. )

)

SHORE ACRES REHABILITATION AND )

HEALTH CENTER, )

)

Petitioner, )

)

vs. ) Case No. 08-1697

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Respondent. )

)

PALMETTO REHABILITATION AND )

HEALTH CENTER, )

)

Petitioner, )

)

vs. ) Case No. 08-1698

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Respondent. )

)

ADVANCED REHABILITATION AND )

HEALTH CENTER, )

)

Petitioner, )

)

vs. ) Case No. 08-1699

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Respondent. )

)

WOODBRIDGE REHABILITATION AND )

HEALTH CENTER, )

)

Petitioner, )

)

vs. ) Case No. 08-1700

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Respondent. )

)

NORTH LAKE REHABILITATION AND )

HEALTH CENTER, )

)

Petitioner, )

)

vs. ) Case No. 08-3155

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a final hearing was conducted in this

case on November 19, 2008, in Tallahassee, Florida, before

Administrative Law Judge R. Bruce McKibben of the Division of

Administrative Hearings.

APPEARANCES

For Petitioners: Peter A. Lewis, Esquire

Law Offices of Peter A. Lewis, P.L.

2931 Kerry Forest Parkway, Suite 202

Tallahassee, Florida 32309-6883

For Respondent: Debora E. Fridie, Esquire

Agency for Health Care Administration

Fort Knox Building III, Mail Station 3

2727 Mahan Drive, Suite 3431

Tallahassee, Florida 32308

STATEMENT OF THE ISSUES

The issues in this case are whether Respondent applied the

proper reimbursement principles to Petitioners' initial Medicaid

rate setting, and whether elements of detrimental reliance exist

so as to require Respondent to establish a particular initial

rate for Petitioners' facilities.

PRELIMINARY STATEMENT

In September 2007, each of the Petitioners filed an

application with the Agency for Health Care Administration

("AHCA" or "the Agency") seeking a Change of Licensed Operator

for a long-term health care facility. Each of the Petitioners

also filed an application to be part of the Medicaid program in

order to receive Medicaid reimbursement for services provided to

its eligible residents. During the licensure application

process, each Petitioner submitted, as part of its application,

a Proof of Financial Ability ("PFA") document intending to prove

its ability to operate the subject facility. AHCA reviewed and

approved the PFA for each Petitioner, i.e., deeming each

applicant financially sound.

Each of the Petitioners' applications for inclusion in the

Medicaid program for reimbursement purposes was also approved.

Those applications resulted in the issuance of a Medicaid

provider number for each facility.

Subsequent to receiving its license to operate and its

Medicaid provider number, each Petitioner received from AHCA a

notice of the interim Medicaid rate assigned to the facility for

reimbursement purposes. The interim Medicaid rates were, in

each Petitioner's case, less than the Medicaid rate projected in

the PFA filed as part of the licensure application. Petitioners

believe the Medicaid rate set by AHCA was incorrect and contrary

to provisions of the Florida Title XIX Long-Term Care

Reimbursement Plan (the "Plan").

Petitioners also believe that AHCA had represented that a

higher interim Medicaid rate would be issued, that each

Petitioner relied upon that representation to its detriment, and

that AHCA should be estopped from subsequently assigning a

different interim Medicaid rate.

Petitioners timely filed Amended Requests for

Administrative Hearings with AHCA, which were then forwarded to

the Division of Administrative Hearings ("DOAH") on April 7,

2008, consolidated, and assigned to the undersigned. At the

final hearing, Petitioners called two witnesses: Stanley W.

"Sandy" Swindling, shareholder with Moore Stephens Lovelace,

P.A., a healthcare accounting firm; and Laura Wilson,

shareholder with Moore Stephens Lovelace, P.A. Petitioners

offered one independent exhibit which was accepted into

evidence; Petitioners also adopted each of Respondent's 31 pre-

marked exhibits as joint exhibits, all of which were accepted

into evidence. Respondent presented the testimony of four

witnesses: Ryan Fitch, regulatory analyst supervisor for AHCA's

Financial Analysis Unit, Bureau of Health Facility Regulation;

J. Ross Nobles, Medicaid cost reimbursement planning

administrator at AHCA's Medicaid Program Analysis Office; Wesley

Hagler, regulatory analyst supervisor for AHCA's Medicaid

Program Analysis Office; and Tzvi Bogomilsky, representative of

Petitioners' long-term care facilities. Respondent's 31

pre-marked exhibits were adopted by Petitioners as joint

exhibits and admitted into evidence.

The undersigned granted an unopposed Motion for Official

Recognition on September 12, 2008, as to the following:

and (f); 1396r(a); 42 C.F.R. Sections 447.250 through 447.280

and 431.108; Chapter 2007-72, Laws of Florida; Sections 409.901,

409.902, and 409.908 and Subsection 409.905(8), Florida Statutes

(2007); Florida Administrative Code Rules 59G-4.200 and 6.010;

Florida Medicaid Nursing Facility Services, Coverage and

Limitations Handbook; Florida Title XIX Long-Term Care

Reimbursement Plan, Version XXXII; and the Provider

Reimbursement Manual, CMS Publication 15-1.

The parties advised the undersigned that a transcript of

the final hearing would be ordered. Parties were given ten days

from the date the transcript was filed at DOAH to submit

proposed recommended orders. The Transcript was filed at DOAH

on December 5, 2008. Subsequently, the parties filed a joint

motion seeking additional time to file their proposed

recommended orders and requesting that the 40-page limit for

proposed recommended orders be waived. An Order was entered

giving the parties until January 16, 2009, to file their

proposed recommended orders; the page limit for the orders was

extended to not more than 50 pages. Each party timely submitted

a proposed recommended order, and they were given due

consideration in the preparation of this Recommended Order.

FINDINGS OF FACT

1. There are nine Petitioners in this case. Each of them

is a long-term health care facility (nursing home) operated

under independent and separate legal entities, but, generally,

under the umbrella of a single owner, Tzvi "Steve" Bogomilsky.

The issues in this case are essentially the same for all nine

Petitioners, but the specific monetary impact on each Petitioner

may differ. For purposes of addressing the issues at final

hearing, only one of the Petitioners, Madison Pointe

Rehabilitation and Health Center (Madison Pointe), was

discussed, but the pertinent facts are relevant to each of the

other Petitioners as well.

2. Each of the Petitioners has standing in this case. The

Amended Petition for Formal Administrative Hearing filed by each

Petitioner was timely and satisfied minimum requirements.

3. In September 2008, Bogomilsky caused to be filed with

AHCA a Change of Licensed Operator ("CHOP") application for

Madison Pointe. 1 The purpose of that application was to allow a

new entity owned by Bogomilsky to become the authorized licensee

of that facility. Part and parcel of the CHOP application was a

Form 1332, PFA. The PFA sets forth projected revenues,

expenses, costs and charges anticipated for the facility in its

first year of operation by the new operator. The PFA also

contained projected (or budgeted) balance sheets and a projected

Medicaid cost report for the facility.

4. AHCA is the state agency responsible for licensing

nursing homes in this state. AHCA also is responsible for

managing the federal Medicaid program within this state.

Further, AHCA monitors nursing homes within the state for

compliance with state and federal regulations, both operating

and financial in nature.

5. The AHCA Division of Health Quality Assurance, Bureau

of Long-Term Care Services, Long-Term Care Unit ("Long-Term Care

Unit") is responsible for reviewing and approving CHOP

applications and issuance of an operating license to the new

licensee. The AHCA Division of Health Quality Assurance, Bureau

of Health Facility Regulation, Financial Analysis Unit

("Financial Analysis Unit") is responsible for reviewing the PFA

contained in the CHOP application and determining an applicant's

financial ability to operate a facility in accordance with the

applicable statutes and rules. Neither the Long-Term Care Unit

nor the Financial Analysis Unit is a part of the Florida

Medicaid Program.

6. Madison Pointe also chose to submit a Medicaid provider

application to the Medicaid program fiscal agent to enroll as a

Medicaid provider and to be eligible for Medicaid reimbursement.

(Participation by nursing homes in the Medicaid program is

voluntary.) The Medicaid provider application was reviewed by

the Medicaid Program Analysis Office (MPA) which, pursuant to

its normal practices, reviewed the application and set an

interim per diem rate for reimbursement. Interim rate-setting

is dependent upon legislative direction provided in the General

Appropriations Act and also in the Title XIX Long-Term Care

Reimbursement Plan (the Plan). The Plan is created by the

federal Centers for Medicare and Medicaid Services (CMS). CMS

(formerly known as the Health Care Financing Administration) is

a federal agency within the Department of Health and Human

Services. CMS is responsible for administering the Medicare and

Medicaid programs, utilizing state agencies for assistance when

appropriate.

7. In its PFA filed with the Financial Analysis Unit,

Madison Pointe proposed an interim Medicaid rate of $203.50 per

patient day (ppd) as part of its budgeted revenues. The

projected interim rate was based on Madison Pointe's expected

occupancy rate, projected expenses, and allowable costs. The

projected rate was higher than the previous owner's actual rate

in large part based on Madison Pointe's anticipation of pending

legislative action concerning Medicaid reimbursement issues.

That is, Madison Pointe projected higher spending and allowable

costs based on expected increases proposed in the upcoming

legislative session.

Legislative Changes to the Medicaid Reimbursement System

8. During the 2007 Florida Legislative Session, the

Legislature addressed the status of Medicaid reimbursement for

long-term care facilities. During that session, the Legislature

enacted the 2007 Appropriations Act, Chapter 2007-72, Laws of

Florida.

9. The industry proposed, and the Legislature seemed to

accept, that it was necessary to rebase nursing homes in the

Medicaid program. Rebasing is a method employed by the Agency

periodically to calibrate the target rate system and adjust

Medicaid rates (pursuant to the amount of funds allowed by the

Legislature) to reflect more realistic allowable expenditures by

providers. Rebasing had previously occurred in 1992 and 2002.

The rebasing would result in a "step-up" in the Medicaid rate

for providers.

10. In response to a stated need for rebasing, the 2007

Legislature earmarked funds to address Medicaid reimbursement.

The Legislature passed Senate Bill 2800, which included

provisions for modifying the Plan as follows:

• To establish a target rate class ceiling

floor equal to 90 percent of the cost-

based class ceiling.

• To establish an individual provider-

specific target floor equal to 75

percent of the cost-based class ceiling.

• To modify the inflation multiplier to

equal 2.0 times inflation for the

individual provider-specific target.

(The inflation multiplier for the target

rate class ceiling shall remain at 1.4

times inflation.)

• To modify the calculation of the change

of ownership target to equal the

previous provider's operating and

indirect patient care cost per diem

(excluding incentives), plus 50 percent

of the difference between the previous

providers' per diem (excluding

incentives) and the effect class ceiling

and use an inflation multiplier of 2.0

times inflation.

11. The Plan was modified in accordance with this

legislation with an effective date of July 1, 2007. Four

relevant sentences from the modified Plan are relevant to this

proceeding, to wit:

[1] For a new provider with no cost history

resulting from a change of ownership or

operator, where the previous provider

participated in the Medicaid program, the

interim operating and patient care per diems

shall be the lesser of: the class

reimbursement ceiling based on Section V of

this Plan, the budgeted per diems approved

by AHCA based on Section III of this Plan,

or the previous providers' operating and

patient care cost per diem (excluding

incentives), plus 50% of the difference

between the previous providers' per diem

(excluding incentives) and the class

ceiling.

[2] The above new provider ceilings, based

on the district average per diem or the

previous providers' per diem, shall apply to

all new providers with a Medicaid

certification effective on or after July 1,

1991.

[3] The new provider reimbursement

limitation above, based on the district

average per diem or the previous providers'

per diem, which affects providers already in

the Medicaid program, shall not apply to

these same providers beginning with the rate

semester in which the target reimbursement

provision in Section V.B.16. of this plan

does not apply.

[4] This new provider reimbursement

limitation shall apply to new providers

entering the Medicaid program, even if the

new provider enters the program during a

rate semester in which Section V.B.16 of

this plan does not apply.

[The above cited sentences will be referred

to herein as Plan Sentence 1, Plan

Sentence 2, etc.]

Madison Pointe's Projected Medicaid Rate

12. Relying on the proposed legislation, including the

proposed rebasing and step-up in rate, Madison Pointe projected

an interim Medicaid rate of $203.50 ppd for its initial year of

operation. Madison Pointe's new projected rate assumed a

rebasing by the Legislature to eliminate existing targets,

thereby, allowing more reimbursable costs. Although no

legislation had been passed at that time, Madison Pointe's

consultants made calculations and projections as to how the

rebasing would likely affect Petitioners. Those projections

were the basis for the $203.50 ppd interim rate. The projected

rate with limitations applied (i.e., if Madison Pointe did not

anticipate rebasing or believe the Plan revisions applied) would

have been $194.26.

13. The PFA portion of Madison Pointe's CHOP application

was submitted to AHCA containing the $203.50 ppd interim rate.

14. The Financial Analysis Unit, as stated, is responsible

for, inter alia, reviewing PFAs submitted as part of a CHOP

application. In the present case, Ryan Fitch was the person

within the Financial Analysis Unit assigned responsibility for

reviewing Madison Pointe's PFA. Fitch testified that the

purpose of his review was to determine whether the applicant had

projected sufficient monetary resources to successfully operate

the facility. This would include a contingency fund (equal to

one month's anticipated expenses) available to the applicant and

reasonable projections of cost and expenses versus anticipated

revenues. 2

15. Upon his initial review of the Madison Pointe PFA,

Fitch determined that the projected Medicaid interim rate was

considerably higher than the previous operator's actual rate.

This raised a red flag and prompted Fitch to question the

propriety of the proposed rate. In his omissions letter to the

applicant, Fitch wrote (as the fourth bullet point of the

letter), "The projected Medicaid rate appears to be high

relative to the current per diem rate and the rate realized in

2006 cost reports (which includes ancillaries and is net of

contractual adjustments). Please explain or revise the

projections."

16. In response to the omissions letter, Laura Wilson, a

health care accountant working for Madison Pointe, sent Fitch an

email on June 27, 2008. The subject line of the email says,

"FW: Omissions Letter for 11 CHOW applications." 3 Then the email

addressed several items from the omissions letter, including a

response to the fourth bullet point which says:

Item #4 - Effective July 1, 2007, it is

anticipated that AHCA will be rebasing

Medicaid rates (the money made available

through elimination of some of Medicaid's

participation in covering Medicare Part A

bad debts). Based on discussions with AHCA

and the two Associations (FHCA & FAHSA),

there is absolute confidence that this

rebasing will occur. The rebasing is

expected to increase the Medicaid rates at

all of the facilities based on the current

operator's spending levels. As there is no

definitive methodology yet developed, the

rebased rates in the projections have been

calculated based on the historical

methodologies that were used in the 2 most

recent rebasings (1992 and 2002). The rates

also include the reestablishment of the 50%

step-up that is also anticipated to begin

again. The rebasing will serve to increase

reimbursement and cover costs which were

previously limited by ceilings. As noted in

Note 6 of the financials, if something

occurs which prevents the rebasing,

Management will be reducing expenditures to

align them with the available reimbursement.

17. It is clear Madison Pointe's projected Medicaid rate

was based upon proposed legislative actions which would result

in changes to the Plan. It is also clear that should those

changes not occur, Madison Pointe was going to be able to

address the shortfall by way of reduced expenditures. Each of

those facts was relevant to the financial viability of Madison

Pointe's proposed operations.

18. Madison Pointe's financial condition was approved by

Fitch based upon his review of the PFA and the responses to his

questions. Madison Pointe became the new licensed operator of

the facility. That is, the Long-Term Care Unit deemed the

application to have met all requirements, including financial

ability to operate, and issued a license to the applicant.

19. Subsequently, MPA provided to Madison Pointe its

interim Medicaid rate. MPA advised Madison Pointe that its rate

would be $194.55 ppd, some $8.95 ppd less than Madison Pointe

had projected in its PFA (but slightly more than Madison Pointe

would have projected with the 50 percent limitation from Plan

Sentence 1 in effect, i.e., $194.26). The PFA projected 25,135

annual Medicaid patient days, which multiplied by $8.95, would

equate to a reduction in revenues of approximately $225,000 for

the first year of operation. 4

20. MPA assigned Madison Pointe's interim Medicaid rate by

applying the provisions of the Plan as it existed as of the date

Madison Pointe's new operating license was issued, i.e.,

September 1, 2007. Specifically, MPA limited Madison Pointe's

per diem to 50 percent of the difference between the previous

provider's per diem and the applicable ceilings, as dictated by

the changes to the Plan. ( See Plan Sentence 1 set forth above.)

21. Madison Pointe's projected Medicaid rate in the PFA

had not taken any such limitations into account because of

Madison Pointe's interpretation of the Plan provisions.

Specifically, that Plan Sentence 3 applies to Madison Pointe

and, therefore, exempts Madison Pointe from the new provider

limitation set forth in Plan Sentences 1 and 2. However,

Madison Pointe was not "already in the Medicaid program" as of

July 1, 2007, as called for in Plan Sentence 3. Rather, Madison

Pointe's commencement date in the Medicaid program was

September 1, 2007.

22. Plan Sentence 1 is applicable to a "new provider with

no cost history resulting from a change of ownership or

operator, where the previous operator participated in the

Medicaid program." Madison Pointe falls within that definition.

Thus, Madison Pointe's interim operating and patient care per

diems would be the lesser of: (1) The class reimbursement

ceiling based on Section V of the Plan; (2) The budgeted per

diems approved by AHCA based on Section III of the Plan; or

(3) The previous provider's operating and patient care cost per

diem (excluding incentives), plus 50 percent of the difference

between the previous provider's per diem and the class ceiling.

23. Based upon the language of Plan Sentence 1, MPA

approved an interim operating and patient care per diem of

$194.55 for Madison Pointe.

24. Plan Sentence 2 is applicable to Madison Pointe,

because it applies to all new providers with a Medicaid

certification effective after July 1, 1991. Madison Pointe's

certification was effective September 1, 2007.

25. Plan Sentence 3 is the primary point of contention

between the parties. AHCA correctly contends that Plan

Sentence 3 is not applicable to Petitioner, because it addresses

rebasing that occurred on July 1, 2007, i.e., prior to Madison

Pointe coming into the Medicaid system. The language of Plan

Sentence 3 is clear and unambiguous that it applies to

"providers already in the Medicaid program."

26. Plan Sentence 4 is applicable to Madison Pointe, which

entered the system during a rate semester, in which no other

provider had a new provider limitation because of the rebasing.

Again, the language is unambiguous that "[t]his new provider

reimbursement limitation shall apply to new providers entering

the Medicaid program. . . ." Madison Pointe is a new provider

entering the program.

Detrimental Reliance and Estoppel

27. Madison Pointe submitted its CHOP application to the

Long-Term Care Unit of AHCA for approval. That office has the

clear responsibility for reviewing and approving (or denying)

CHOP applications for nursing homes.

28. The Long-Term Care Unit requires, as part of the CHOP

application, submission of the PFA which sets forth certain

financial information used to determine whether the applicant

has the financial resources to operate the nursing home for

which it is applying. The Long-Term Care Unit has another

office within AHCA, the Financial Analysis Unit, to review

the PFA.

29. The Financial Analysis Unit is found within the Bureau

of Health Facility Regulation. That Bureau is responsible for

certificates of need and other issues, but has no authority

concerning the issuance, or not, of a nursing home license. Nor

does the Financial Analysis Unit have any authority to set an

interim Medicaid rate. Rather, the Financial Analysis Unit

employs certain individuals who have the skills and training

necessary to review financial documents and determine an

applicant's financial ability to operate.

30. A nursing home licensee must obtain Medicaid

certification if it wishes to participate in the program.

Madison Pointe applied for Medicaid certification, filing its

application with a Medicaid intermediary which works for CMS.

The issuance of a Medicaid certification is separate and

distinct from the issuance of a license to operate.

31. When Madison Pointe submitted its PFA for review, it

was aware that an office other than the Long-Term Care Unit

would be reviewing the PFA. Madison Pointe believed the two

offices within AHCA would communicate with one another, however.

But even if the offices communicated with one another, there is

no evidence that the Financial Analysis Unit has authority to

approve or disapprove a CHOP application. That unit's sole

purpose is to review the PFA and make a finding regarding

financial ability to operate.

32. Likewise, MPA--which determines the interim Medicaid

rate for a newly licensed operator--operates independently of

the Long-Term Care Unit or the Financial Analysis Unit. While

contained within the umbrella of AHCA, each office has separate

and distinct duties and responsibilities.

33. There is no competent evidence that an applicant for a

nursing home license can rely upon its budgeted interim rate--as

proposed by the applicant and approved as reasonable by MPA--as

the ultimate interim rate set by the Medicaid Program Analysis

Office. At no point in time did Fitch tell Madison Pointe that

a rate of $203.50 ppd would be assigned. Rather, he said that

the rate seemed high; Madison Pointe responded that it could

"eliminate expenditures to align them with the available

reimbursement."

34. The interim rate proposed by the applicant is an

estimate made upon its own determination of possible facts and

anticipated operating experience. The interim rate assigned by

MPA is calculated based on the applicant's projections as

affected by provisions in the Plan.

35. Furthermore, it is clear that Madison Pointe was on

notice that its proposed interim rate seemed excessive. In

response to that notice, Madison Pointe did not reduce the

projected rate, but agreed that spending would be curtailed if a

lower interim rate was assigned. There was, in short, no

reliance by Madison Pointe on Fitch's approval of the PFA as a

de facto approval of the proposed interim rate.

36. MPA never made a representation to Madison Pointe as

to the interim rate it would receive until after the license was

approved. There was, therefore, no subsequent representation

made to Madison Pointe that was contrary to a previous

statement.

37. The Financial Analysis Unit's approval of the PFA was

done with a clear and unequivocal concern about the propriety of

the rate as stated. The approval was finalized only after a

representation by Madison Pointe that it would reduce

expenditures if a lower rate was imposed. Thus, Madison Pointe

did not change its position based on any representation made by

AHCA.

CONCLUSIONS OF LAW

38. The Division of Administrative Hearings has

jurisdiction over the parties to and the subject matter of this

proceeding pursuant to Section 120.569 and Subsection 120.57(1),

Florida Statutes (2008). Unless otherwise stated herein, all

references to Florida Statutes shall be to the 2007 version.

39. The burden of proof in this case is on Petitioners, as

they are the parties asserting the affirmative of the issue.

Department of Banking and Finance, Division of Securities and

Investor Protection v. Osbourne Stern & Co. , 670 So. 2d 932, 934

(Fla. 1996); see also Young v. Department of Community Affairs ,

625 So. 2d 831 (Fla. 1993). Further, the parties in this case

have stipulated that Petitioners bear the burden of proof.

40. Chapter 408, Part II (Sections 408.801 through

408.832), Florida Statutes, the "Health Care Licensing

Procedures Act," applies to all providers required to be

licensed by AHCA, including "nursing homes, as provided under

part II of chapter 400."

41. AHCA is the agency which regulates nursing homes in

this state. §§ 400.021(2) and 408.803(1), Fla. Stat. It is

unlawful to operate a nursing home without applying to AHCA for

This also applies when a nursing home has a new owner or

operator as a result of a change of ownership. §§ 408.806 and

408.807, Fla. Stat.

42. Section 408.806, Florida Statutes, sets forth the

nursing home license application process, including a 60-day

deadline for AHCA to receive a nursing home licensure

application from an applicant in a change of ownership.

§§ 408.806(2)(b) and 408.807(2), Fla. Stat. See also

Subsections 408.807(1), Florida Statutes, requiring the

transferor to notify the Agency in writing at least 60 days in

advance of a nursing home change of ownership. Petitioners

timely and properly filed their CHOP applications.

43. Florida Administrative Code Rule 59A-4.103 sets forth

the administrative rule requirements for an initial, renewal, or

change of ownership license to operate a nursing home facility

and incorporates by reference into rule nursing home licensure

forms. Petitioners complied with these rule requirements.

44. Pursuant to Subsection 408.810(8), Florida Statutes,

an applicant for a nursing home license based on a change of

ownership must furnish "satisfactory proof of the applicant's

financial ability to operate." That statutory subsection also

requires the Agency to establish standards and documentation

requirements in determining the financial ability of nursing

home applicants to operate.

45. AHCA, therefore, has by rule mandated that an

applicant for change of ownership must provide a projected

balance sheet, projected statement of monthly revenues and

expenses (including projected occupancy), projected statement of

monthly cash flows, a summary of significant projection

assumptions, transaction costs, sources of funds and a projected

Medicaid cost report for the first year of operation.

Petitioners submitted all required information for the

applications at issue.

46. Petitioners also submitted applications to enter the

Medicaid program. The Medicaid program is the federal-state

medical assistance program authorized by Title XIX of the

Federal Social Security Act, pursuant to which the State of

Florida provides medical goods and services to eligible indigent

recipients. 42 U.S.C. § 1396a, et. seq. ; 42 C.F.R. Parts 400

and 430 through 447; and § 409.901(14), Fla. Stat. AHCA is the

single state agency that administers the Medicaid program.

§§ 409.901(2), (14), and (15); and 409.902, Fla. Stat.

47. The statutory authority for the Florida Medicaid

Program is found in Sections 409.901 through 409.920, Florida

Statutes. Florida Administrative Code Chapter 59G contains the

applicable administrative rules regulating the Florida Medicaid

Program.

48. AHCA may make payments for covered Medicaid goods and

services only to an individual or entity with a Medicaid

provider agreement in effect with AHCA. § 409.907, Fla. Stat.

Each of the Petitioners obtained the requisite Medicaid provider

agreement.

49. Because the Agency reimburses licensed Medicaid

nursing homes by a prospective payment methodology, each

Petitioner had to submit a proposed or projected Medicaid rate

based on its overall financial projections. The proposed rates

were included in Petitioners' PFA submissions to AHCA. The

rates were higher than AHCA would have anticipated for

Petitioners.

50. Pursuant to Subsection 409.908(2)(b), Florida

Statutes, "[s]ubject to any limitations or directions provided

for in the General Appropriations Act, the agency shall

establish and implement a Florida Title XIX Long-Term Care

Reimbursement Plan (Medicaid) for nursing home care. . . ."

Using the terms and provisions of that Plan, AHCA projected

Medicaid rates for Petitioners that included limitations.

AHCA's projections were based on its interpretation of the Plan.

51. It has been a maxim of Florida law that an agency's

interpretation of its own statutes, rules, and policies is given

great deference. "[A] reviewing court must defer to an agency's

interpretation of an operable statute as long as that

interpretation is consistent with legislative intent and is

supported by substantial, competent evidence." Floridian

Community Bank, Inc. v. Office of Financial Regulation, Division

of Financial Institutions , 989 So. 2d 1231, 1233 (Fla. 4th DCA

2008). "An agency's interpretation of the statute that it is

charged with enforcing is entitled to great deference." Verizon

Florida, Inc. v. Jacobs , 810 So. 2d 906, 908 (Fla. 2002). See

also Creative Choice XXV, Ltd. v. Florida Housing Finance Corp. ,

991 So. 2d 899, 901 (Fla. 1st DCA 2008); and Floridian Community

Bank , 989 So. 2d at 1233.

52. See also Brown v. Florida Commission on Ethics , 969

So. 2d 553, 557 (Fla. 1st DCA 2007), which holds in pertinent

part:

A more specific principle in the case law

requires the appellate courts to show

greater deference to an administrative

agency if the agency has interpreted a

statute within its jurisdiction. In such a

case, the interpretation may have been based

on a history that is best known by the

agency or special expertise the agency has

in applying the statute. To account for

these factors, the courts have held that an

agency decision construing a statute within

its substantive jurisdiction should not be

reversed unless it is clearly erroneous

(citations omitted).

53. "Furthermore, it is a well-established maxim that an

agency's interpretation of its own rules and regulations is

entitled to considerable deference." Colonnade Medical Center

v. AHCA , 847 So. 2d 540, 542 (Fla. 4th DCA 2003).

54. AHCA has provided competent and substantial evidence

in this matter to support its interpretation of the Plan and its

rules incorporating the plan. That interpretation is given

great deference. There is no basis in law or in the record to

reject the Agency's interpretation as applied to the facts of

this case.

55. Further, Petitioners have not established any

competent support for the proposition that approval of a PFA for

licensure purposes (which includes a projected Medicaid per diem

rate) establishes a final Medicaid reimbursement rate for

Medicaid purposes. Although there is some overlap,

determination of financial ability for purposes of a CHOP

application is not tantamount to establishing a Medicaid rate

under the terms and provisions of the Plan.

56. The elements of equitable estoppel are: (1) A

representation as to a material fact that is contrary to a later

asserted position; (2) Reliance on that representation; and

(3) A change in position detrimental to the party claiming

estoppel, caused by the representation and reliance thereon.

Council Brothers, Inc. v. City of Tallahassee, 634 So. 2d 264

(Fla. 1st DCA 1994). Equitable estoppel will apply against a

governmental entity only in rare instances and under exceptional

circumstances. Id.

57. It is clear that in the instant case, Petitioners

submitted a PFA as part of their CHOP applications which

included a projected Medicaid reimbursement rate. However, the

projected rate was not acceptable to the Financial Analysis Unit

as stated. It was only when Petitioners agreed that the

projected rate was indeed higher than expected and that they

would reduce expenditures if the final rate was lower, did AHCA

approve the PFA. There was, therefore, no "representation" on

the part of AHCA that the projected rate was acceptable.

58. When, thereafter, MPA calculated a rate that was lower

than Petitioners had projected, the assignment of that rate was

not contrary to any prior representation by MPA. In fact, the

lower rate assigned by MPA confirmed the concerns of the

Financial Analysis Unit stated in its omissions letter to

Petitioners.

59. There being no change in position by AHCA, there is no

basis for Petitioners' claim of detrimental reliance.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is

RECOMMENDED that a final order be entered by Respondent,

Agency for Health Care Administration, approving the Medicaid

interim per diem rates established by AHCA and dismissing each

of the Amended Petitions for Formal Administrative Hearing.

DONE AND ENTERED this 23rd day of February, 2009, in

Tallahassee, Leon County, Florida.

R. BRUCE MCKIBBEN

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone]

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 23rd day of February, 2009.

ENDNOTES

1/ As set forth above, an application was filed for each of the

nine facilities, but only Madison Pointe's application will be

discussed.

2/ Where, as in the current case, there are a group of related

facilities reviewed at one time, Fitch will ascertain whether

the group as a whole is financially viable rather than just any

one of the facilities. For purposes of this case, Madison

Pointe's financial ability is addressed individually as

representative of the group.

3/ "CHOW" is an acronym for Change of Ownership and is used to

describe both changes of owners and changes of operators. It is

synonymous to CHOP.

4/ The actual loss per year for each of the Petitioners

facilities would obviously be different, but each expected a

significant negative impact.

COPIES FURNISHED :

Holly Benson, Secretary

Agency for Health Care Administration

Fort Knox Building III

2727 Mahan Drive, Suite 3116

Tallahassee, Florida 32308

Justin Senior, Acting General Counsel

Agency for Health Care Administration

Fort Knox Building III, Mail Stop 3

2727 Mahan Drive, Suite 3431

Tallahassee, Florida 32308

Richard J. Shoop, Agency Clerk

Agency for Health Care Administration

Fort Knox Building III

2727 Mahan Drive, Mail Station 3

Tallahassee, Florida 32308

Debora E. Fridie, Esquire

Agency for Health Care Administration

Fort Knox Building III, Mail Station 3

2727 Mahan Drive, Suite 3431

Tallahassee, Florida 32308

Peter A. Lewis, Esquire

Law Offices of Peter A. Lewis, P.L.

2931 Kerry Forest Parkway, Suite 202

Tallahassee, Florida 32309-6883

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.