09-001775 Agency For Health Care Administration vs. Life Care Centers Of America, Inc., D/B/A Life Care Center Of Ocala Status: Closed Recommended Order on Monday, March 15, 2010.

Summary: The Agency proved by clear and convincing evidence that each Respondent nursing home did not meet their Certificate of Need Medicaid-patient-days conditions for calendar year 2006, but Respondent justified a reduced fine in each case.

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Petitioner, )

)

vs. ) Case No. 09-1776

)

LIFE CARE CENTERS OF AMERICA, )

INC., d/b/a LIFE CARE CENTER OF )

ORLANDO, )

)

Respondent. )

_______________________________ )

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Petitioner, )

)

vs. ) Case No. 09-2146

)

LIFE CARE CENTERS OF AMERICA, )

INC., d/b/a LIFE CARE CENTER OF )

CITRUS COUNTY, )

)

Respondent. )

_______________________________ )

RECOMMENDED ORDER

Pursuant to notice, this cause was heard by Charles A.

Stampelos, the assigned Administrative Law Judge of the Division

of Administrative Hearings, on December 14 through 18, 2009, in

Tallahassee, Florida.

APPEARANCES

For Petitioner: Richard Joseph Saliba, Esquire

Agency for Health Care Administration

2727 Mahan Drive, Building 3

Tallahassee, Florida 32308

James H. Harris, Esquire

Agency for Health Care Administration

Sebring Building, Suite 330D

525 Mirror Lake Drive, North

St. Petersburg, Florida 33701

For Respondents: John E. Terrel, Esquire

John F. Gilroy, III, Esquire

John F. Gilroy, III, P. A.

1695 Metropolitan Circle, Suite 2

Tallahassee, Florida 32308

STATEMENT OF THE ISSUES

Whether Petitioner, the Agency for Health Care

Administration (AHCA or Agency), proved that Respondents, Life

Care Centers of America, Inc., d/b/a Life Care Center of Port

St. Lucie, and other Life Care facilities in Winter Haven,

Ocala, Orlando, and Citrus County, were not in compliance with

the Medicaid-patient-days condition stated on the face of the

Certificates of Need (CON) for each facility for calendar year

2006, and, if not in compliance, whether the Agency may impose

administrative fines in the amount sought in the first amended

administrative complaints.

PRELIMINARY STATEMENT

On or about April 28, 2008, the Agency filed six

administrative complaints against the five Respondents. (A

sixth nursing home facility (nursing home), Life Care Centers of

America, Inc., d/b/a Life Care Center of Jacksonville, was an

initial Respondent, but the matter was resolved.) The Agency

sought to impose fines against each nursing home for allegedly

not complying with the Medicaid-patient-day condition set forth

in each CON.

The Agency attached to the administrative complaints, the

formal reports submitted (in February 2008) to AHCA by counsel

for each Respondent, which provided, in part, information

regarding each nursing home's compliance or noncompliance with

the CON condition for calendar year 2006.

In each formal report except one, Respondents' counsel

concluded that each facility appeared to strictly not meet the

CON Medicaid-patient-days condition, but suggested that

additional documentation and discussion was provided to AHCA to

support a finding by AHCA that the facility was in substantial

compliance. (It was suggested that Life Care Center of Ocala

was in full compliance with the Medicaid-patient-days

condition.) AHCA does not dispute any of the facts and figures

set forth in the formal reports.

On or about May 19, 2008, Respondents timely filed

petitions followed by amended petitions (filed on or about

March 23, 2009) requesting that the cases be referred to the

Division of Administrative Hearings (DOAH or the Division).

(Respondents requested the Agency to hold the original petitions

rather than refer them to DOAH.)

On April 7, 2009, the cases were referred to DOAH, with one

case being referred on April 22, 2009. An administrative law

judge was assigned, the cases consolidated, and a final hearing

was scheduled for July 27 through 31, 2009, and subsequently

re-scheduled several times.

On or about July 20, 2009, Respondents were granted leave

to file, and filed, their second amended petitions.

On October 2, 2009, Respondents were granted leave to file

third amended petitions challenging the administrative

complaints issued by the Agency.

On October 27, 2009, the Agency was granted leave to file

amended administrative complaints to increase the amount of

fines sought, collectively, from $95,363 to $381,037, based

solely on Subsection 408.040(1)(e), Florida Statutes (2006). 1 On

October 28, 2009, the Agency filed first amended administrative

complaints to correct a scrivener's error. At the same time,

the Agency's motion to strike several allegations in the

Respondents' third amended petitions was granted, in part, as to

paragraph 10; the first sentence in paragraph 13 ending with

". . . good cause should be denied"; and paragraphs 16b and 16c

consistent with, in part, the Order of August 11, 2009, and in

recognition of the caveat mentioned in the last paragraph of

that Order. See Order, October 27, 2009, at 3. These

paragraphs pertain to allegations regarding previously filed

requests of the Agency to modify (for "good cause") Respondents'

CON Medicaid-patient-days conditions for calendar year 2006.

These requests were denied by the Agency and the challenges to

the Agency actions are consolidated for final hearing under Case

Nos. 09-6207CON through 09-6212CON. The Agency's motion to

strike Respondents' allegation pertaining to the Agency's

alleged use of statements as unadopted rules, see

Subsections 120.52(20) and 120.57(1)(e)1., Florida Statutes

(2009), was denied. See Order, October 27, 2009, at 3.

The consolidated cases proceeded under the Agency's first

amended administrative complaints and Respondents' third amended

petitions for formal hearing, as limited by order.

Respondents filed a motion for official recognition that

was granted by an Order dated November 13, 2009. Respondents

also filed a second motion for official recognition on

December 4, 2009, that was granted orally during the final

hearing.

On November 13, 2009, the Agency filed a notice stating

that the Agency filed a Notice of Development of Rulemaking in

the November 3, 2009, edition of the Florida Administrative

Weekly . The Agency proposed to amend Florida Administrative

Code Rule 59C-1.021(3)(a) by adding the following sentence:

"The degree of noncompliance means the result of the

mathematical calculation of the difference between the

conditioned level of compliance and the reported level of

compliance."

On December 16, 2009, during the final hearing, the Agency

filed a motion requesting an order granting an automatic stay.

The Agency withdrew the motion. See T 231-34; 493-94. On

December 23, 2009, an Order was entered confirming that the

Agency's motion for stay was withdrawn and that the published

Notice of Development of Rulemaking did not qualify for an

automatic stay.

On October 2, 2009, the parties filed a joint Pre-Hearing

Stipulation (JPHS). At the time, the final hearing was

scheduled to commence on October 5, 2009. After the parties

were granted leave to file amended pleadings (third amended

petitions and first amended administrative complaints), on

December 10, 2009, the Agency filed its pre-hearing statement

followed on the same date by Respondents' supplement to the

October 2, 2009, JPHS.

The final hearing was conducted on December 14 through 18,

2009.

At the final hearing, the Agency presented the testimony of

the following witnesses: James McLemore, unit supervisor for

the AHCA CON office and accepted as an expert in CON evaluation

and compliance; Jeffrey N. Gregg, supervisor of AHCA's Bureau of

Facilities and accepted as an expert in Florida health care

policy and regulation, CON planning and regulation; and Wendy

Smith, program administrator in AHCA's Medicaid services and

accepted as an expert in Medicaid reimbursement policy.

Agency Exhibits (PE) 1 through 10, 11 (as supplemented),

13, 15, 16, 18 through 22, 24 through 28, 30 through 33, 38, and

39 were admitted into evidence. Agency Exhibit 14 was admitted

into evidence as a joint exhibit, and Agency Exhibit 41 is a

page from Citrus County's third amended petition relating to

allegations of unadopted rule statements.

Respondents presented the testimony of the following

witnesses: Cathy M. Murray, chief operating officer for Life

Care; James Steven Ziegler, chief financial officer for Life

Care; Michael Zomchek, divisional vice-president and accepted as

an expert in nursing home administration and nursing; Janet E.

Sorel, regional vice-president of the Citrus region and accepted

as an expert in nursing home administration and nursing; Jeffrey

Thomas, regional vice-president of the Palmetto region and

accepted as an expert in nursing home administration; James S.

Weigard, president of Polaris Properties, Inc., and accepted as

an expert in health planning and financial feasibility; Cheslyn

Green, AHCA health services and facility consultant; and Ryan

Fitch, AHCA supervisor of the financial analysis unit.

Respondents' Exhibits (RE) 1, 3 through 7, 9 through 12,

12b, 13 through 15, 17 through 25, 26 (pages 1 through 6 and 9

through 12), 27, 28, 30 (pages 1 through 15), 31 through 34, 37,

38, 40 through 42, 44 through 48, 54, and 55 were admitted into

evidence. Ruling was reserved regarding Respondents' Exhibit 52

(JAPC letter), T 514. Respondents' Exhibit 52 is admitted into

evidence.

On January 13, 2010, an eight-volume Transcript (T) was

filed. On February 19, 2010, the parties filed proposed

recommended orders and memoranda of law. All post-hearing

submissions have been considered.

FINDINGS OF FACT

I. The Parties

1. The Agency for Health Care Administration is the state

agency responsible for licensing and regulating nursing home

facilities such as Respondents under Chapter 400, Part II,

Florida Statutes, and issuing CONs under Chapter 408, Florida

Statutes.

2. Respondents are community/skilled nursing home

facilities that have CONs issued pursuant to Chapter 408,

Florida Statutes. Each facility is located in the geographical

area indicated by its name, e.g. , Life Care Center of Port St.

Lucie is located in Port St. Lucie, Florida, and in an AHCA

health service planning district (District) and subdistrict.

3. Life Care Center of Port St. Lucie, a 123-bed facility,

is located in District 9, Subdistrict 5; Life Care Centers of

America, Inc., d/b/a Life Care Center of Winter Haven, a 177-bed

facility, is located in District 6, Subdistrict 5; Life Care

Centers of America, Inc., d/b/a Life Care Center of Ocala, a

120-bed facility, is located in District 3, Subdistrict 4; Life

Care Centers of America, Inc., d/b/a Life Care Center of

Orlando, a 120-bed facility, is located in District 7,

Subdistrict 2; and Life Care Centers of America, Inc., d/b/a

Life Care Center of Citrus County, a 120-bed facility, is

located in District 3, Subdistrict 5. § 408.032(5), Fla. Stat.;

Fla. Admin. Code R. 59C-2.200.

II. The CONs; Medicaid Conditions; Dual Eligibility

4. The starting point of this story begins with the CONs

that are effective for calendar year 2006 for each Respondent

and the Medicaid-patient-days condition stated on each CON. 2 The

Agency conditioned the issuance of the CONs based upon

statements of intent expressed by Respondents in the CON

applications. § 408.040(1)(a), Fla. Stat.

5. The primary purpose of requiring the CON Medicaid-

patient-days condition is to ensure access for Medicaid-eligible

or funded residents. T 499-500. 3

6. When the CONs were issued, either through a transfer or

as an initial CON, Respondents committed to provide a certain

level of Medicaid patient days. The required Medicaid

percentage of patient days for each Respondent is set forth in

the table under Finding of Fact 36.

7. Agency Exhibits 1 through 11 and 13 show how Life Care

Centers of America, Inc., characterized the agreed to

number/percentage of Medicaid patient days in various CON

application documents; verbalization of same; and the manner in

which its facilities would account on Schedule 7 or 10, e.g. , of

the CON application, for projected revenue by payor source,

including, but not limited to, Medicaid. See Fla. Admin. Code

R. 59C-1.008(1)(f) (adoption of Agency forms); T 161. (Payor

and payer are used throughout this record and in context have

the same meaning.)

8. Agency Exhibit 4 contains excerpts from a 120-bed new

freestanding nursing home in Marion County, Florida, submitted

in 1995 on behalf of Life Care Centers of America, Inc. T 49.

The conditions page states that the applicant agreed to provide

"66% of patient days to Medicaid clients." The following page

states in part: "Condition C2: A minimum percentage of

proposed project for Medicaid eligible patients at stabilized

occupancy." Under "Measurement and Conformance," it is stated:

"Actual payor mix experience following project licensure and

fill-up; annual reporting requirements." Id. at 3; T 49-50.

(Another excerpt states: "Condition C2: Percentage of patient

days for Medicaid beneficiaries." PE 13 at 4.) Schedule 10

provides projected operating revenue for year two ending

December 31, 1996. Medicaid patient days are stated (26,981) as

well as a percentage (66.0%) of patient days. Id. at 5. (In

other excerpts, similar material appears in Schedule 7.) The

Schedule 10 Notes and Assumptions pages devote a paragraph to

Medicaid. Id. at 7. See T 165-67.

9. None of the excerpts from Agency Exhibits 1 through 11

and 13 expressly refer to providing services to "dual eligible"

patients. The schedules do not have a specific line item for

entry of this information, although Schedule 7 has a category

"Other Revenue," PE 1 at 4, which the Agency suggests could have

been used to identify that revenue source. T 163.

10. The Agency considers Agency Exhibits 1 through 11 and

13 as proof that Respondents understood and agreed to provide a

minimum percentage of patient days to residents whose care was

paid for by Medicaid, a payor source. Thus, according to the

Agency, only patient days that are provided to patients when

Medicaid is the sole source of reimbursement are counted when

determining compliance with the Medicaid condition. (According

to the Agency, the statement "'Medicaid patient days' is

defined, for purposes of CON condition compliance, as the

'patient days reimbursed by Medicaid,'" see PE 41 at paragraph

15.b., and is derived from Respondents' Schedule 7 indicating

what the Respondents "expect their payers to be, and that is in

rule." T 931.)

11. Agency Exhibits 21, 22, and 24 through 26 are the CONs

at issue in this proceeding and, with some minor variations,

state: A minimum of [ ] percent of the [ ] bed facility's

total annual patient days shall be provided to Medicaid

patients.

12. Medicare is a program of health insurance and benefits

authorized and administered under Title XX of the Social

Security Act. Medicaid is a program of health insurance and

benefits authorized and administered under Title XIX of the

Social Security Act.

13. "Nursing facilities may obtain reimbursement for

services provided to recipients privately or through long term

care insurance. There are also specific situations when

Medicare will be the payer. Medicaid is always the payer of

last resort." RE 46 at 2-2.

14. A person who is eligible for care under Medicare is

not necessarily Medicaid-eligible. The person must meet

eligibility factors to qualify. However, a person may be

qualified as Medicare and Medicaid-eligible.

15. A Medicaid-eligible patient may stay at a nursing home

one day or more. Not infrequently, such a patient is more or

less permanent resident.

16. Generally, if a nursing home patient achieves the

status of a Medicaid patient on day one of the stay, the

patient's status as a Medicaid patient continues throughout the

stay at the nursing home, unless the patient loses that status

either through an ineligibility determination or for some other

reason. See T 393. 4

17. Stated otherwise, Medicaid-eligible nursing home

patients do not lose their status as Medicaid-eligible patients

when the nursing home is reimbursed in whole or in part by

Medicare.

18. According to the Florida Medicaid Nursing Facility

Services Coverage and Limitations Handbook (Handbook), published

by the Agency, a "recipient" "is used to describe an individual

who is eligible for Medicaid." RE 46 at ii.

19. "If Medicare Part A covers the recipient, Medicare

will reimburse the facility for the entire cost of the care

provided for the first twenty (20) days the resident is in the

facility following an acute care hospitalization. During the

period of time between the twenty-first and one-hundredth days,

the resident will incur a charge for coinsurance." RE 46

at 2-2. "Medicaid will cover the amount of the coinsurance if

the recipient is eligible for Medicaid" under certain

circumstances. Id.

20. "When a recipient is Medicare and Medicaid-eligible

and is in the Medicare coinsurance period (21 through 100 days

of Medicare coverage), Medicaid pays the Medicare coinsurance

amount for the recipient. The amount paid by Medicaid is the

lesser of the Medicare rate or the Medicaid per diem rate minus

the patient responsibility. Medicaid does not pay for a

Medicare HMO recipient during the coinsurance period." RE 46 at

3-2. See also id. at "Qualified Medicare Beneficiary."

21. If the Medicaid patient either enters the nursing home

after a three-day or longer hospitalization stay or is a

resident of the nursing home and then is hospitalized for this

length of time, the resident's care will be reimbursed by

Medicare (assuming he or she is enrolled in the program) for up

to 20 days upon returning to the nursing home. Medicare may

continue to reimburse, typically 80%, (subject to Medicaid's

payment of any coinsurance, typically 20%) the nursing home for

the patient's care thereafter up to a maximum of 80 additional

days, depending on the patient's continuing qualification to

receive services paid by Medicare. See generally T 549-54,

663-65, 835-36.

22. In 2006, Medicare was the primary payer and Medicaid

covered co-pays and deductibles only. Medicaid could have

potentially paid for co-insurance or cross-over. Cross-over

means if the patient has Medicare, then Medicaid would be

potentially the secondary payer of the cross-over or

co-insurance. Generally days 21 through 100 are the cross-over

days. See generally T 387-93, 551, 663-65.

23. Subsection 408.040(1)(b), Florida Statutes, states:

(b) The agency may consider, in addition to

the other criteria specified in s. 408.035,

a statement of intent by the applicant that

a specified percentage of the annual patient

days at the facility will be utilized by

patients eligible for care under Title XIX

of the Social Security Act . Any certificate

of need issued to a nursing home in reliance

upon an applicant's statements that a

specified percentage of annual patient days

will be utilized by residents eligible for

care under Title XIX of the Social Security

Act must include a statement that such

certification is a condition of issuance of

the certificate of need. The certificate-

of-need program shall notify the Medicaid

program office and the Department of Elderly

Affairs when it imposes conditions as

authorized in this paragraph in an area in

which a community diversion pilot project is

implemented.

(emphasis added).

24. Subsection 408.040(1)(d), Florida Statutes, states:

(d) If a nursing home is located in a

county in which a long-term care community

diversion pilot project has been implemented

under s. 403.705 or in a county in which an

integrated, fixed-payment delivery system

[program] for Medicaid recipients who are 60

years of age or older [or dually eligible

for Medicare and Medicaid] has been

implemented under s. 409.912(5), the nursing

home may request a reduction in the

percentage of annual patient days used by

residents who are eligible for care under

Title XIX of the Social Security Act , which

is a condition of the nursing home's

certificate of need. The agency shall

automatically grant the nursing home's

request if the reduction is not more than 15

percent of the nursing home's annual

Medicaid-patient-days condition. A nursing

home may submit only one request every 2

years for an automatic reduction. A

requesting nursing home must notify the

agency in writing at least 60 days in

advance of its intent to reduce its annual

Medicaid-patient-days condition by not more

than 15 percent. The agency must

acknowledge the request in writing and must

change its records to reflect the revised

certificate-of-need condition. This

paragraph expires June 30, 2011.

(emphasis added). The language in brackets was inserted in

2007. "[P]rogram" was inserted for "system" and the remaining

language in brackets was new. Ch. 2007-82, § 2 at 1051, Laws of

Fla. The amendments to Subsection 408.040(1)(d) were made at

the same time that amendments were made to Section 408.912,

adding, in part, "program" and deleting "system," and adding "or

dually eligible for Medicare and Medicaid" to Subsection

408.912(5). Id. , § 1 at 1048.

25. The Agency interprets "utilized by patients eligible

for care under Title XIX of the Social Security Act" to mean

residents whose care is paid for solely by Medicaid. If the

nursing home is reimbursed in whole or in part by Medicare for

services to a resident Medicaid patient, e.g. , during the one to

100-day period referred to above, the Agency does not count any

days of treatment as a Medicaid patient day for the purpose of

satisfying the Medicaid-patient-days condition.

26. Conversely, Respondents count all residents who are

eligible for Medicaid, regardless of who pays for the resident's

care. 5

27. The Agency conditions the approval of a CON based on

the applicant's commitment to provide services to the medically

indigent, here Medicaid patients. There is no indication that

the patients referred to as "dual eligible" by Respondents were

not, in fact, Medicaid patients during calendar year 2006,

notwithstanding the nature of the facilities reimbursement.

28. Respondents supplied the Agency with data counting

traditional Medicaid days, hospice Medicaid days, and the days

for "dual eligible" residents, separately stated.

29. The Agency does not take issue with Respondents'

reported number of "dual eligible," Medicaid-eligible patient

days, only that they should not be counted toward meeting the

CON condition.

30. Based upon the persuasive evidence, it is determined

that the Agency's interpretation to exclude the reported "dual

eligible" Medicaid patient days from consideration for meeting

the CON condition is not reasonable.

III. The Annual Compliance Reports; Reporting of Patient Data

to the Agency

31. Respondents are required to provide annual compliance

reports to the Agency that contain required information,

including but not limited to "[i]f applicable, the reason or

reasons, with supporting data, why the [CON] holder was unable

to meet the conditions set forth on the face of the [CON]."

Fla. Admin. Code R. 59C-1.013(4)(a)7.

32. All nursing homes report occupancy data to the local

health councils (LHC), with some data reported to the Agency.

See PE 14. The LHCs supply the Agency with data concerning the

total occupancy of each facility in patient days as well as the

number of days reimbursed by Medicaid. Id.

33. This data is compiled into the Florida Nursing Home

Utilization by District and Subdistrict Guide (NH Guide). PE 14

(calendar year 2006).

34. If data received from the LHC indicates that a

facility is not in compliance with the CON Medicaid-patient-days

condition, the Agency will send a letter to the facility

requesting additional information. The Agency sent each

Respondent a letter requesting additional information for

calendar year 2006. See , e.g. , RE 1.

35. Consistent with this reporting requirement, on

February 25, 2008, counsel filed a formal report for each

Respondent. Four of the Respondents, except Life Care Center of

Ocala, submitted a detailed booklet setting forth the reason why

it was unable to meet the CON Medicaid-patient-days condition.

In each formal report except one (Ocala), Respondents' counsel

concluded that each facility appeared to strictly not meet the

CON Medicaid-patient-days condition, but additional

documentation and discussion was provided to the Agency to

support a finding by the Agency that the facility was in

substantial compliance with these conditions. (With respect to

Life Care Center of Ocala, it was suggested that this facility

was in full compliance with the Medicaid-patient-days

condition.)

36. Except as otherwise stated herein, 6 the parties agree

( see , e.g. , T 155, PHS at 20) with the following data:

A B B C B C

A A

Life Care Total Medicaid % " D u a l % C O N

Patient Patient Eligible" Minimum

Days Days Cond.

Port St. 4 2 , 1 6 2 1 6 , 9 7 8 40.27% 1 , 4 2 9 4 3 . 6 6 % 4 7 . 0 0 %

Lucie

Winter 6 0 , 8 1 7 2 9 , 5 8 0 48.64% 5 , 9 1 4 5 8 . 3 6 % 6 0 . 6 0 %

Haven

4 0 , 8 8 8 1 0 , 7 2 5 26.23% 5 , 3 8 7 3 9 . 4 1 % 3 3 . 0 0 %

Ocala

4 0 , 4 6 8 9 , 0 9 3 22.47% 2 , 7 8 1 2 9 . 3 4 % 3 1 . 1 9 %

Orlando

4 0 , 8 4 6 1 4 , 5 5 9 35.64% 3 , 0 6 4 4 3 . 1 4 % 4 5 . 6 4 %

Citrus Cty

37. Without consideration of "dual eligible" patient days,

five facilities are allegedly non-compliant as follows: Port

St. Lucie -- 6.73 %; Winter Haven -- 11.96%; Ocala -- 6.77%;

Orlando -- 8.72%; and Citrus County -- 10.00%. RE 41; JPHS at

5-6; Agency's Pre-Hearing Statement at 7.

38. If "dual eligible" patient days are considered, four

out of five facilities remain allegedly non-compliant, but to a

lesser degree: Port St. Lucie -- 3.34%; Winter Haven -- 2.24%;

Orlando -- 1.85%; and Citrus County -- 2.50%. Ocala is

compliant by 6.41%. See RE 3, 41; T 817; Agency's Pre-Hearing

Statement at 8.

IV. The Administrative Complaints

39. This proceeding initially involved consideration of

six (now five) separate administrative complaints alleging that

each Respondent did not comply with the Medicaid-patient-days

condition set forth in each CON for calendar year 2006.

40. Each administrative complaint is based on the

information contained in and the Agency's analysis of the formal

reports submitted on behalf of each Respondent. 7

41. The Agency does not dispute the facts and figures set

forth in the formal reports, although it disagrees with

Respondents' contention of compliance with the Medicaid-patient-

days condition and whether "dual-eligible" patients may be

considered for compliance purposes.

42. Each administrative complaint states, in part, that

"[t]his is an action to impose administrative fines in the

amount of . . . against Respondent, pursuant to Section 408.040,

Florida Statutes, and Florida Administrative Code Rules 59C-

1.013 and 59C-1.021." The Agency has the statutory authority to

impose fines up to $1,000 per day for noncompliance, taking into

account as mitigation the degree of noncompliance. 8

43. Prior to filing its first amended administrative

complaints on October 28, 2009, when a CON holder was determined

to be in noncompliance, the Agency made an individualized

determination as to whether and how much to fine the CON holder.

RE 44 at 3; T 115-16.

44. The Agency created a chart that is completed as an

analytical tool. Next, the Agency considered the individual

situation of the CON holder, "including but not limited to" a

number of factors, such as the "degree of noncompliance,

absolutely and in comparison to others within the sub-district";

whether the "[f]acility is not at 85% occupancy"; whether the

"[f]acility has not been operational for at least 18 months or

first reached 85% occupancy during the reporting year"; whether

the "[f]acility can demonstrate operational losses through

financial statements and or audit"; whether the "[f]acility has

a sister facility (facility owned by the same entity) in the

same sub-district that either has no Medicaid condition or has

met its Medicaid condition and has additional Medicaid Total

Annual Patient-Days to donate to its sister facility";

"[p]rovision of patient care to Hospice Medicaid patients";

"[p]rovision of care to Charity/Indigent patients (days or

cash)"; whether the "[f]acility is within 1% or less of its

condition"; whether "[p]rovision of Medicaid for facility

exceeds that of the sub-district"; and "[a]ny other factors that

a CON holder may present that could impact against fines are

considered." RE 44.

45. These are a common list of factors that have been

considered (not in isolation) by Agency management, if brought

to their attention by the facility in assessing whether a fine

should be imposed. RE 44; T 206-213, 215-216, 221, 279-80, 352-

56, 373, 483, 927-30, 947-49. See also Fla. Admin. Code R. 59C-

1.013(4)(a)7; Findings of Fact 73 through 83. "All things

[were] considered prior to determining the fine, including [the

Agency] gave [nursing homes] the 75 percent [for diversion

programs] off." T 365. On a rare occasion, the Agency did not

fine a noncompliant nursing home because the nursing home was

closed during a portion of the year. T 267-68. 9

46. With the filing of the third amended administrative

complaints, none of these factors is considered in determining

the fine. T 931, 949.

47. The Agency proposed to fine each Respondent as

follows: Port St. Lucie -- $13,085; Winter Haven -- $18,022;

Ocala -- $18,724; Orlando -- $25,540; and Citrus County --

$19,992.

48. The Agency explained how these fines were calculated,

including the mitigation factors considered regarding the degree

of noncompliance. RE 26; T 225-30. Respondents' Exhibit 26

consists of the forms (Excel spreadsheets) used by the Agency to

determine noncompliance matters in calendar year 2006. The

Agency started applying the Excel spreadsheets in approximately

2004 or 2005 in condition compliance cases. T 223, 250-51.

49. For example, for Port St. Lucie, the maximum fine

under the statutory framework is $365,000 ($1,000 per day times

365 days). The "applicable fine" was calculated to be $52,341,

which is the maximum fine times the percent difference or

$365,000 times 14.34%. Then the applicable fine was reduced by

75% to $13,085 ($52,341 times 25%), which is the fine sought in

the administrative complaint. RE 26 at 5; see also

T 252, 292-97. The 25% factor was applied in each case to

reflect consideration of pilot diversion programs in each county

where the Respondents are located. T 268, 295. Each Respondent

was treated the same. See RE 26. 10

50. Since approximately 2006 and 2007 and prior to the

filing of the Agency's third amended administrative complaints

in October of 2009, the Agency routinely applied the 25%

diversion factor (a 75% deduction). T 294, 338-39.

51. With the filing of the third amended administrative

complaints, prior to calculating the fine, the Agency still

considers the circumstances of each nursing home and the reasons

why they were unable to meet the Medicaid-patient-days

condition. "But in terms of the degree [the nursing home is]

out of compliance, [the Agency is] using the statute based on

the days that [the nursing home is] out of compliance and" the

penalty is based on that calculation. T 366-68, 374. See also

T 349-50, 357, 363-65.

V. The Third Amended Petitions for Formal Administrative

Hearing and the First Amended Administrative Complaints

52. On October 2, 2009, Respondents filed a motion and

revised motion to amend their second amended petitions and also

filed their third amended petitions challenging the

administrative complaints filed by the Agency. (The revised

motion was granted over the Agency's objection.)

53. Respondents dispute that they failed to meet the

respective Medicaid-patient-days conditions; dispute that the

Agency appropriately considered the degree of alleged

noncompliance; dispute how the Agency determined the number of

residents eligible pursuant to Title XIX of the Social Security

Act and Section 408.040, Florida Statutes, claiming that "dual

eligible" residents should be counted for purposes of

compliance; and further claim that the Agency is improperly

relying on six alleged statements as unadopted rules. See PE

41.

54. On October 14, 2009, the Agency filed a motion

requesting leave to amend its administrative complaints. (The

motion was granted over Respondents' objection.) In its motion,

the Agency voiced its disagreement with Respondents' challenge

to the alleged statements as unadopted rules and stated: "While

the Agency disagrees that the alleged statements are rules, the

Agency has determined that in the present proceeding, it will

explicitly not rely on the alleged statements, but will

explicitly only rely on the Agency's statutory authority

conferred by" Subsection 408.040(1)(e), Florida Statutes, and

that "the Agency has amended the administrative complaints as to

each respondent based on the admissions by each respondent and

based upon the authority and language of" Subsection

408.040(1)(e). The Agency incorporated by reference the

exhibits (including, but not limited to, the formal reports

submitted by Respondents) attached to the original

administrative complaints. 11

55. On October 28, 2009, the Agency filed first amended

administrative complaints against each Respondent. Most

notably, the Agency deleted reference to Florida Administrative

Code Rules 59C-1.013 and 59C-1.021, cited in the administrative

complaints, and proceeded, consistent with the Agency motion

requesting leave to amend, to rely solely on Subsection

408.040(1)(e), as authority to impose the fines requested.

56. The proposed fines are based solely on the Agency's

determination that each Respondent is not in compliance with the

applicable Medicaid-patient-days condition and based on its view

that the degree of noncompliance means the result of the

mathematical calculation of the difference between the

conditioned level of compliance and the reported level of

compliance. No consideration was given to any other factors

such as the prior proposed reduction in fines (in the original

administrative complaints) in light of the pilot diversion

programs (the 25% factor).

57. Stated otherwise, the Agency applied the new proposed

rule, see Finding of Fact 63, as the sole criterion for

determining as mitigation the degree of noncompliance. T 219,

492. The Agency will no longer consider the mitigating factors

considered by the Agency in the past. This led the Agency to

proceed to rule development. T 494-95.

58. The Agency explained how it calculated the amended

fines. Agency Exhibits 27 and 28 and 30 through 32 are the

calculation sheets used by the Agency to determine the fines for

the first amended administrative complaints. T 151, 274-79.

59. Based on each Respondents' formal report of compliance

(without regard to "dual eligible" Medicaid patient days),

except for "dual eligible" Medicaid patient days reported by a

Respondent, the Agency considered all traditional Medicaid

patient days, including Medicaid hospice days 12 and charity days.

T 152, 201-03. The Agency imposed a fine of $1,000 per day for

each day in which Respondents were not in compliance.

T 150-57, 272-79.

60. The degree of noncompliance per month in calendar year

2006 was taken into consideration by calculating the percentage

of noncompliance. For January 2006, Port St. Lucie was required

to provide 1,688 Medicaid patient days (47% times 3,592) and

actually provided 1,506 traditional Medicaid patient days, which

was then divided by the required number of Medicaid patient days

(1,506/1,688) to equal 89.22% of the 31 days in January that

were met or 27.66 days or 3.34 unmet days. The resulting fine

for January was $3,342 or $1,000 per day times 3.34. These

calculations were performed for each month with the actual fine

requested in the first amended administrative complaint at

$52,024 , T 152-153, PE 27, which is the fine for the number of

days out of compliance. T 279, 494. (Mr. McLemore thought the

Agency would not fine a nursing home out of compliance for two

days. T 278.)

61. The new formula is based on statutory-based days out

of compliance, resulting in higher fines rather than taking 75%

off the top reflected in the administrative complaints.

T 274, 297.

62. The Agency performed the same calculations for each

Respondent. PE 27-28 and 30-32. T 156-57.

63. The Agency has attempted to codify its decision to

change the manner in which the fines are calculated in the first

amended administrative complaints by publishing a Notice of

Development of Rulemaking and proposing to amend Rule 56C-

1.021(3)(a), Certificate of Need Penalties, as follows:

"Facilities failing to comply with any conditions . . . will be

assessed a fine, not to exceed $1,000 per failure day. In

assessing the penalty the agency shall take into account the

degree of noncompliance. The degree of noncompliance means the

result of the mathematical calculation of the difference between

the conditioned level of compliance and the reported level of

compliance. " (emphasis in original). Aside from this notice,

there is no evidence that the Agency has proceeded further to

adopt the proposed rule.

64. According to the Agency, it would be "completely

impractical" to promulgate a rule listing all the conditions

that would mitigate noncompliance. T 924-26, 940.

65. The proposed fines were increased above the fines

requested in the administrative complaints as follows: Port St.

Lucie -- $13,085 to $52,024; Winter Haven -- $18,022 to $71,642;

Ocala -- $18,724 to $74,830; Orlando -- $25,540 to $103,132; and

Citrus County -- $19,992 to $79,409.

VI. The Amount of the Fine Using the Agency's Methodology

66. It is determined that the fines should be calculated

for each Respondent by including the stipulated number of "dual

eligible" Medicaid patient days, arriving at a dollar figure and

then subtracting 75%. 13

67. The Agency used a methodology to calculate the fines

in the original administrative complaints. That methodology is

applied herein. See RE 26.

A. Port St. Lucie

68. The difference between the minimum CON condition

percentage (47%) and the actual Medicaid percentage (43.66%) is

3.34%, which is then divided by 47% and yields 0.0710638 times

$365,000, which yields $25,938. Twenty-five percent of $25,938

yields a total fine of $6,485 (25% fine for pilot diversion

program or 75% fine reduction), without consideration of any

other factors discussed below. Compare with RE 26 at 5.

B. Winter Haven

69. The difference between the minimum CON condition

percentage (60.60%) and the actual Medicaid percentage (58.36%)

is 2.24%, which is then divided by 60.60% and yields 0.0369636

times $365,000, which yields $13,492. Twenty-five percent of

$13,492 yields a total fine of $3,373 (25% fine for pilot

diversion program or 75% fine reduction), without consideration

of any other factors discussed below. Compare with RE 26 at 11.

C. Orlando

70. The difference between the minimum CON condition

percentage (31.19%) and the actual Medicaid percentage (29.34%)

is 1.85%, which is then divided by 31.19% and yields 0.0593

times $365,000, which yields $21,645. Twenty-five percent of

$21,645 yields a total fine of $5,411 (25% fine for pilot

diversion program or 75% fine reduction), without consideration

of any other factors discussed below. Compare with RE 26 at 9.

D. Citrus County

71. The difference between the minimum CON condition

percentage (45.64%) and the actual Medicaid percentage (43.14%)

is 2.50%, which is then divided by 45.64% and yields 0.0547765

times $365,000, which yields $19,993. Twenty-five percent of

$19,993 yields a total fine of $4,998 (25% fine for pilot

diversion program or 75% fine reduction), without consideration

of any other factors discussed below. Compare with RE 26 at 3.

E. Ocala

72. No fines should be imposed on the Ocala facility as it

exceeded the Medicaid condition for calendar year 2006.

VII. Consideration of Reasons Why Respondent Nursing Homes Were

Unable to Meet CON Medicaid-Patient-Days Conditions and the

Amount of the Fine Considering Other Factors

73. Prior to filing its first amended administrative

complaints and its Notice of Development of Rulemaking, the

Agency considered several factors when deciding whether a

nursing home complied or was unable to comply with a Medicaid

condition, and whether a fine was appropriate under the

circumstances for noncompliance. See generally Finding of

Fact 44 for some of the compliance factors.

74. Respondents offered testimony that they used their

best efforts to meet the Medicaid-patient-days conditions,

including the relative demand levels for Medicaid services in

the areas served of Respondents, income levels of seniors, and

other reasons. See generally T 547-48, 557, 826, 829, 852, and

876; RE 4-7.

75. Respondents suggested that the existence of various

State diversion and transition programs in the counties where

they are located should also be considered in mitigation. See

generally T 694-95.

76. The nursing home diversion program operated in 26

counties in Florida in 2006, and Respondents are located in five

of those counties. (Potential nursing home patients are

diverted to other health care settings under this and other

similar programs.)

77. Generally, these diversion programs have been

successful in diverting Medicaid-eligible residents from nursing

homes. To some extent, these diversion programs have impacted

Respondent nursing homes. T 534.

78. Respondents also provided other factors in support of

noncompliance with the Medicaid-patient-days conditions such as

Medicaid utilization, which may be affected by the moratorium

(with some exceptions) on new CONs for nursing homes, the

existence of other community-based facilities, the effects of

various diversion programs, the income level of various

population centers where some of the Respondents are located,

high Medicare admissions, declining Medicaid demand, and the

relative age of Respondent facilities. Respondents also

provided evidence of their marketing efforts. See PE 15-16, 18-

20; RE 4-7; T 535-36, 540-44, 556-57, 560-61, 570-71, 627-30,

638, 671-72, 711-23, 728-32, 846-47, 849, 858-60, 875-77. See

also PE 39 at 3-4, regarding reported impacts of the moratorium.

But see endnote 7.

79. The Agency considered a nursing home's occupancy when

it considered mitigation. T 266-67, 484-85. 14

80. Respondents also suggest that the Agency has applied

other factors either to forgo action against a nursing home

facility by waiving a fine or by reducing a fine contrary to the

Agency's treatment of Respondents. See , e g. , Respondents'

Proposed Recommended Order at 36-44. For example, in the past,

the Agency has reduced or eliminated a calculated fine for a

nursing home if it was less than one percent out of compliance.

See RE 44 and 45; T 206. There have been instances when the

Agency has not taken action against a nursing home that had

missed the Medicaid condition by five percent or less. RE 24 at

19-28; RE 45 at 61-66. (Here, after calculating the fines using

the Agency's pre-first amended administrative complaint

methodology and including consideration of "dual eligible"

patients, see Findings of Fact 68 through 72, none of the

Respondents missed their Medicaid-patient-days conditions by

more than four percent.)

81. Conversely, the Agency provided evidence that each

Respondent provided Medicaid patient days on a percentage basis

below the average for other nursing homes in their respective

subdistricts. However, the Agency has not used the comparison

to impose a fine on a nursing home. T 259-65; see also RE 26

at 2, middle calculations. None of the Respondents is located

in the same subdistrict with another Life Care facility which

exceeds its Medicaid-patient-days condition. None of the

Respondents (except Ocala that exceeded its Medicaid-patient-

days condition) was within one percent of the Medicaid-patient-

days conditions, even considering the "dual eligible" patient

days. None of the Respondents reported experiencing an

operational loss. (According to the Agency, these factors were

not always applied in every noncompliance case. T 927-39.)

82. The Agency also offered evidence that nursing home

facilities within a five-mile radius of, e.g. , the Respondent

Ocala facility in Marion County, had a higher percentage of

their days provided to Medicaid patients than the Ocala

facility, T 910-11. See also T 908-15. The Agency also offered

evidence that the percentage of Medicaid patient days/census

provided by Respondents has reduced between 2000 and 2006.

T 891-908.

83. Based in part on the foregoing, Respondents suggest

that no fines should be imposed, whereas the Agency suggests

that fines should be imposed.

84. No party has cited to any Medicaid condition fine case

that was resolved after an evidentiary hearing and the entry of

a recommended order and a final order. Rather, the examples of

alleged inconsistent Agency action appear to have been resolved

by settlements.

85. It is difficult to apply the factors considered in

this subsection of the Recommended Order in an objective fashion

so as to determine, with any reliability and predictability,

whether and to what extent Respondents should be further

relieved of meeting the Medicaid-patient-days conditions. 15

86. On a final note, the Agency abruptly (toward the end

of the discovery portion of this proceeding) changed its policy

regarding, in part, the method of determining the fines for

noncompliance. The Agency did not adopt a rule codifying the

change in policy despite opportunities to do so in the past and

did not persuasively explain the reasons for departing from its

policy, which pre-dated the filing of the first amended

administrative complaints.

CONCLUSIONS OF LAW

87. The Division of Administrative Hearings has

jurisdiction over the subject matter of and the parties to this

proceeding. §§ 120.569 and 120.57(1), Fla. Stat.

88. In this penal proceeding, the Agency has the burden to

prove the allegations against each Respondent by clear and

convincing evidence. Dep't of Banking & Fin. v. Osborne Stern &

Co. , 679 So. 2d 932 (Fla. 1996).

89. Notwithstanding the Agency's affirmative duty to take

into account as mitigation the degree of noncompliance

(Subsection 408.040(1)(e), Florida Statutes), Respondents have

the ultimate burden of proving any mitigation if noncompliance

is demonstrated. Balino v. Dep't of Health & Rehabilitative

Servs. , 348 So. 2d 349 (Fla. 1st DCA 1977).

90. "If the holder of a [CON] . . . fails to comply with a

condition upon which the issuance of the [CON] . . . was

predicated, the agency may assess an administrative fine against

the certificateholder . . . in an amount not to exceed $1,000

per failure per day . . . In assessing the penalty, the agency

shall take into account as mitigation the degree of

Fla. Admin. Code R. 59C-1.013(5). See also Fla. Admin. Code R.

59C-1.021(1) and (3)(a).

91. When a statute or rule does not specifically define

words of common usage, courts must construe such words according

to their plain and ordinary meaning. Fla. East Coast

Industries, Inc. v. Dep't of Cmty. Affairs , 677 So. 2d 357, 362

(Fla. 1st DCA 1996); State v. Hoyt , 609 So. 2d 744, 747 (Fla.

1st DCA 1992).

92. A court "must also consider whether the words have a

definite meaning to the class of persons within the purview of

the statutes," or rules. State v. Hoyt , 609 So. 2d at 747.

93. Also, "[w]hen an agency committed with authority to

implement a statute construes a statute in a permissible way,

that interpretation must be sustained even though another

interpretation may be possible or even, in the view of some,

preferable." Humhosco, Inc. v. Dep't of Health & Rehabilitative

Servs. , 476 So. 2d 258, 261 (Fla. 1st DCA 1985) (citation

omitted).

94. Stated otherwise, an agency is accorded broad

discretion and deference in the interpretation of the statutes

which it administers, and an agency's interpretation should be

upheld when it is within a range of permissible interpretations

and unless it is clearly erroneous. Pan Am. World Airways, Inc.

v. Fla. Pub. Serv. Comm'n , 427 So. 2d 716 (Fla. 1983); see also

Bd. of Podiatric Med. v. Fla. Med. Ass'n , 779 So. 2d 659, 660

(Fla. 1st DCA 2001). The same principle has been applied "to

rules which have been in effect over an extended period and to

the meaning assigned to them by officials charged with their

administration." Pan Am. World Airways, Inc. , 427 So. 2d at 719

(italics in original).

95. "On the other hand, 'judicial adherence to the

agency's view is not demanded when it is contrary to the

statute's plain meaning.'" Sullivan v. Dep't of Envtl. Prot. ,

890 So. 2d 417, 420 (Fla. 1st DCA 2004) (citations omitted).

96. "Without question, an agency must follow its own

rules . . ., but if the rule, as it plainly reads, should prove

impractical in operation, the rule can be amended pursuant to

established rulemaking procedures. However, 'absent such

amendment, expedience cannot be permitted to dictate its terms.'

. . . That is, while an administrative agency 'is not

necessarily bound of its initial construction of a statute

evidence by the adoption of a rule,' the agency may implement

its changed interpretation only by 'validly adopting subsequent

rule changes.'" Cleveland Clinic Fla. Hosp. v. Agency for

Health Care Admin. , 679 So. 2d 1237, 1242 (Fla. 1st DCA 1996)

(citations omitted).

97. It has been established that "if an agency changes a

non-rule-based policy, it must either explain its reasons for

its discretionary action based upon expert testimony,

documentary opinions, or other appropriate evidence . . . or it

must implement its changed policy or interpretation by formal

rule making." Courts v. Agency for Health Care Admin. , 965 So.

2d 154, 159 (Fla. 1st DCA 2007) (citations omitted).

98. The terms "utilized" and "eligible" used in

Subsection 408.040(1)(b), Florida Statutes, and "eligible" in

Subsection 408.040(1)(d) are not defined by statute or rule.

Also, the sentence, "[i]n assessing the penalty, the agency

shall take into account as mitigation the degree of

noncompliance," in Subsection 408.040(1)(e), Florida Statutes,

is not expressly defined by rule.

99. In the administrative complaints, the Agency proposed

to fine each Respondent because they did not provide the

percentage of Medicaid patient days required in the CON for

calendar year 2006. In each case, the Agency accepted the

actual Medicaid patient day percentage, without giving any

facility credit for "dual eligible" Medicaid patient days, and

calculated the applicable fine (maximum fine times the percent

difference). See , e.g. , RE 26 at 5 for the Port St. Lucie

facility. Then, the Agency reduced the applicable fine in each

case by 75%, which reflects a 25% fine in light of the pilot

diversion programs existing in each county. The Agency's

application of the 75% reduction is consistent with other prior

Agency action in fine cases involving Medicaid-patient-days

condition cases and nursing homes.

100. In response to the third amended administrative

complaints filed by Respondents and the allegations regarding

the Agency's alleged use of statements as unadopted rules, the

Agency filed the first amended administrative complaints

advising that it intended to impose fines based solely on

Subsection 408.040(1)(e), Florida Statutes. The Agency

interpreted the terms "the agency shall take into consideration

as mitigation the degree of noncompliance" to mean that the fine

would be calculated by giving each facility credit for the

specific Medicaid patient days provided, thus resorting to

approximately the original "applicable fine" without

consideration of any other factors in mitigation, including but

not limited to a 75% reduction for the pilot diversion programs.

For example, for Port St. Lucie, the proposed fine was increased

from $13,085 in the administrative complaint to $52,024 in the

first amended administrative complaint. See PE 27 for the

calculation of the fine for Port St. Lucie.

101. It has been persuasively demonstrated that "dual

eligible" Medicaid patients should be counted for the purpose of

determining Respondents' compliance with each CON Medicaid-

patient-days condition. The Agency's interpretation of

Subsections 408.040(1)(b) and (d), Florida Statutes, and the

terms "utilized" and "eligible" has been carefully considered.

It is ultimately concluded that the Agency's interpretation in

light of the persuasive evidence is not reasonable.

102. Further, the Agency did not persuasively explain its

changed policy of not considering several factors to determine

as mitigation the degree of noncompliance. The Agency's abrupt

change is inconsistent with established Agency administrative

policies and is rejected. See generally Brookwood-Walton County

Convalescent Ctr. v. Agency for Health Care Admin. , 845 So. 2d

223, 228-29 (Fla. 1st DCA 2003).

103. Respondents allege that the Agency is relying on

several statements as unadopted rules in this proceeding to the

detriment of Respondents. See , e.g. , Port St. Lucie's Third

Amended Petition for Formal Administrative Proceeding at 6-7,

¶ 15. a.-f. Some of these statements if applied to Respondent

would inure to Respondents' benefit. Id. at ¶ 15. a., c., d.,

and e. Respondents are not substantially affected by the

Agency's past consideration of these statements. The remaining

statements, id. at ¶ 15. b. and f., are the Agency's

interpretation of Section 408.040, Florida Statutes, although

not controlling. See generally Envtlust v. State, Dep't of

Envtl. Prot. , 714 So. 2d 493, 498 (Fla. 1st DCA 1998) ("An

agency statement explaining how an existing rule will be applied

in a particular set of facts is not itself a rule.") As a

result, Respondents' challenge to several Agency statements as

unadopted rule statements is rejected.

104. Finally, Respondents' request for attorney's fees and

costs pursuant to Sections 120.57 and 120.595, Florida Statutes,

is denied.

RECOMMENDATION

Based upon the foregoing, it is recommended that the Agency

enter a final order imposing the following fines: Port St.

Lucie -- $6,485; Winter Haven -- $3,373; Orlando -- $5,411; and

Citrus County -- $4,998. No fines should be imposed on the

Ocala facility as it exceeded the Medicaid-patient-days

condition.

DONE AND ENTERED this 15th day of March, 2010, in

Tallahassee, Leon County, Florida.

S

CHARLES A. STAMPELOS

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 15th day of March, 2010.

ENDNOTES

1 / All references to statutes in this Recommended Order are to

the 2006 version unless otherwise stated. T 185.

2 / For the reporting year 2006, the Agency determined that

approximately 24 nursing home facilities did not meet their CON

Medicaid conditions. The Agency filed seven administrative

complaints, with six filed against the Life Care facilities and

one against the Lady Lake facility. T 301, 311; RE 54. (The

case against Life Care's Jacksonville facility was resolved

during the pendency of these proceedings.)

3 / According to the Agency, every effort should be made to

preserve access to nursing home care for Medicaid-eligible

recipients. T 474-75. On this record, there is no persuasive

evidence that there are Medicaid-eligible persons unable to

access a nursing home in the subdistricts where a Respondent

facility is located. See , e.g. , T 544. It appears that there

is no Agency database used to determine whether there is an

access problem for Medicaid beneficiaries. T 497; see also

T 919-20.

4 / Subject to stated exceptions and other requirements, the

Agency's Handbook also discusses "bed-hold reservations" and

provides in part that "Medicaid pays to reserve a bed for a

maximum of eight days for each hospital stay. Days may also be

reserved for therapeutic days." RE 46 at 2-2; see also T 568-

69.

5 / According to Ms. Smith, in the context of Medicaid provider

reimbursements, a "dually eligible individual, generally, means

an individual who has both Medicare and Medicaid coverage."

T 385. For Ms. Sorel "[a] dual-eligible resident is a resident

that [has both] Medicaid and Medicare as payer sources." T 549.

See also T 665, 674-75.

6 / The Agency's calculation formula sheet used to determine the

fines for the initial administrative complaints listed the Ocala

facility's CON Medicaid-patient-days condition as a modified

condition of 28.05%. See RE 26 at 2. Based on the ultimate

determination made herein, it is irrelevant whether the

condition is 33% or 28.05%. On the other hand, there is some

evidence that the Agency took action in 2008 to reduce the

Medicaid-patient-days conditions for three Life Care Center

nursing homes and applied those new conditions (percentages) to

reporting year 2006 and apparently were determined to have met

their conditions. RE 26 and 30; T 252-53. Whether Respondents'

CON Medicaid-patient-days conditions for calendar year 2006

should be modified is not the subject of this proceeding.

Notwithstanding, Respondents submitted formal reports to the

Agency, which set forth what Respondents believed to be the

applicable Medicaid-patient-days condition percentage for each

facility and those representations are adopted herein and

reflected in the Table, Finding of Fact 36. PE 15-16 and 18-21;

PE 21-22, and 24-26.

7 / At the time the administrative complaints were filed, the

Agency determined to fine each Respondent because they were not

in compliance and because the mitigating factors provided,

according to the Agency, were not convincing that Respondents

had made appropriate efforts to meet their conditions, including

but not limited to marketing efforts. T 479-80, 518-19.

8 / Rule 59C-1.013 provides for monitoring procedures and

includes subparagraph (4)(a)1.-7. requiring the CON holder to

provide information in the annual compliance report. Rule 59C-

1.021 provides for CON penalties.

9 / When this proceeding began with the filing of the

administrative complaints, the Agency considered (in order to

determine compliance) whether any of the Respondents had been

above or below the subdistrict average. T 929-30. But, the

Agency noted that the Respondents generally provided the lowest

level of Medicaid as a percentage of their total patient days,

while their occupancy was generally higher. T 115-18, 368, 929.

10 / The Agency reduced the fine by 75% if the facility was

located in a county with a NH diversion project.

11 / "[T]he Agency amended its administrative complaints to

explicitly utilize only § 408.040(1)(e), Fla. Stat., thereby

seemingly responding to Life Care's allegations. The

coincidental result was to increase the requested fines."

Agency's Proposed Recommended Order at 17, ¶ 19.g.

12 / Medicaid hospice days are paid by the hospice program

directly to the nursing home. Charity days are counted

notwithstanding that the nursing home certifies that it does not

receive reimbursement for a patient. T 201-03.

13 / The Agency does not maintain an index of fines or orders

imposing fines when determining the type of fine to impose.

T 510.

14 / Given its annual occupancy for 2006, using the Agency's

total number of patient days, Ocala had vacant beds to serve

Medicaid patients if clinical requirements were met. RE 41-42;

T 547-48, 820-24. See also T 920-23. Given their occupancy

levels, the other Respondent facilities would have had to turn

away, each day, residents with other payor sources in the

expectation of finding traditional Medicaid patients. Id.

Having empty beds does not inure to the benefit of the

Respondent facilities. A nursing home does not necessarily lose

money by serving a traditional Medicaid patient, although they

may be more profitable serving, e.g. , private pay patients. The

Agency considers a facilities occupancy rate in light of the

Medicaid patient days provided. T 268-71.

15 / In reaching settlements with some nursing homes, the Agency

has settled for less than the calculated fines in this

proceeding. T 294, 307-08, 521. In the post-rule development

period and consistent with the action taken by the Agency in the

third amended administrative complaints, the Agency will propose

a fine of $1,000 a day for those days that the nursing home is

not in compliance, thereby giving the facility credit for days

of compliance. No other mitigation is considered. T 525-26.

COPIES FURNISHED :

Thomas W. Arnold, Secretary

Agency for Health Care Administration

2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308-5403

Richard J. Shoop, Agency Clerk

Agency for Health Care Administration

2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

Justin Senior, General Counsel

Agency for Health Care Administration

2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

James H. Harris, Esquire

Agency for Health Care Administration

Sebring Building, Suite 330D

525 Mirror Lake Drive, North

St. Petersburg, Florida 33701

Richard Joseph Saliba, Esquire

Agency for Health Care Administration

2727 Mahan Drive, Building 3

Tallahassee, Florida 32308

John E. Terrel, Esquire

John F. Gilroy, III, Esquire

John F. Gilroy, III, P. A.

1695 Metropolitan Circle, Suite 2

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.