10-000860RX Las Mercedes Home Care Corp. vs. Agency For Health Care Administration Status: Closed DOAH Final Order on Friday, July 23, 2010.

Summary: Existing rule limiting Medicaid home health staff to individuals who get W-2s or 1099s from the home health agency is invalid. DOAH has jurisdiction to review Medicaid rules.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

LAS MERCEDES HOME CARE CORP., )

)

Petitioner, )

)

vs. ) Case No 10-0860RX

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Respondent. )

)

FINAL ORDER

Administrative Law Judge Elea nor M. Hunter held a final

hearing in this case on May 19, 2010, by video teleconference

between sites in Tal lahassee and Miami, Florida.

APPEARANCES

For Petitioner: An drew S. Ittleman, Esquire

Fuerst, Humphrey, Ittleman, P.L.

1001 Brickell Bay Drice, Suite 2002

Miami, Florida 33131

For Respondent: Andrew T. Sheeran, Esquire

L. William Porter, Esquire

Agency for Health Care Administration

2727 Mahan Drive, Mail Station 3

Tallahassee, Florida 32308

STATEMENT OF THE ISSUE

The issue is whether a rule which requires th at staff be

directly employed by or under contract with a Medicaid home health

agency, and that s uch agencies issue eit her W-2 or 1099 tax forms to

individuals on their s taffs, constit utes an inval id exercise of

delegated legisl ative authority.

PRELIMINARY STATEMENT

On September 30, 2008 , the Respondent Agency for Health Care

Administration ("Respondent" or "AHCA") issued a Final Audit

Report seeking to reco ver from Petitioner La s Mercedes Home Care

Corporation ("Pe titioner" or "Las Mercedes") Medica id overpayments

of $878,843.93 an d assessing a fine of $1,000. Pe titioner timely

requested an administra tive hearing, and the case was referred to

the Division of Administrative Hearings (DOAH) on No vember 12,

2008, and assigned DOAH Case No. 08-5653MPI ("the MPI case").

That case was in itially set for he aring on Februa ry 17 and 18,

2009, but was co ntinued on joint motion of the parties and

rescheduled for Ma y 4 and 5, 2009. On Ma rch 23, 2009, AHCA filed

an Opposed Motion to Amend Final Audi t Report and Las Mercedes

requested and wa s granted additi onal time to respond to the

Motion. On agre ed motions for co ntinuance, the fi nal hearing was

continued three mo re times to permit hearin gs on and co nsideration

of potentially disp ositive motions.

An evidentiary hearing on the Opposed Motion to Amend Final

Audit was held on June 8, 2009. Follow ing the filing of post-

hearing submis sions and the Tran script, the Motion to Amend was

granted on June 24, 20 09. After cond ucting addition al discovery,

on November 30, 2009, AHCA filed an Opposed Motion to Relinquish

Jurisdiction and, on the same day, Las Merc edes filed a Motion for

Recommended Orde r and/or Motion to Dismiss. The Motion to Dismiss

was premised, in part, on Las Mercedes's claim that AHCA was

applying a rule that co nflicted with its statutory au thority. At

a motion hearing on January 11, 2010, AHCA objected to

consideration of the validity of a rule in the MPI case, a case

that was filed pursua nt to Sectio n 120.57, Flor ida Statutes

(2009). Las Mercedes , on February 17, 20 10, filed this rule

challenge case, wh ich was assigned DOAH Case No. 10 -0860RX and, at

the request of the parties, co nsolidated with the MPI case.

At the final hearing, held on May 19, 20 10, the part ies chose

to present argu ments and eviden ce related only to the rule

challenge case. As a result, the cases have been unconsolidated

and this Order ap plies only to th e rule challenge.

At the hearing, over Las Mercedes's object ion that the issues

are solely legal, AHCA presented the testimony of two witnesses:

James K. Hampton, AHCA statew ide fraud and ab use liaison for

Medicaid; and Ann Menard, AHCA supervisor of the Health Care Unit

in the Bureau of Health Facility Regulation. AHCA 's Exhibits 1,

Page 1-8 of the Handbo ok dated July 2008; an d 2, Sectio n 400.462,

Florida Statut es (2009), were received in evidence. The one-

volume final hearing Tr anscript was filed on June 10, 2010. The

parties waived the 30-d ay deadline for the issuance of a final

order so that they coul d file Proposed Final Orders, as they did,

on July 2, 2010. Un less otherwise specifie d, all references to

Florida Statutes are to the 20 09, publication.

FINDINGS OF FACT

The Parties

1. Petitioner Las Me rcedes is a li censed home health agency.

From July 1, 2004, th rough June 30, 2006 (" the audit pe riod"), Las

Mercedes was also an enrolled Medicaid prov ider of home health

care services. Servic es were provided thro ugh so-calle d "staffing

agreements" wi th twenty-two companies. Las Mercedes , together

with the patient's phys ician, determined the scope, duration, and

plan of care, an d it controlled, coordinated, and evaluated the

services provided. Las Mercedes establis hed the poli cies and

procedures for submitti ng progress and clinic al notes, scheduling

visits, period ic patient evaluati on, and the paymen t for services.

( See Stipulation of Facts filed Octo ber 6, 2009, in DOAH Case No.

08-5653MPI.)

2. Respondent AHCA is the state agen cy responsible for

administering th e joint federa l-state Medica id Program in Florida.

It is responsibl e for, among othe r things, reimbu rsing providers

for services to Medicaid recipients. In an Amended Fi nal Audit,

AHCA determined that Las Mercedes was over paid $878,843.93 in

Medicaid funds betwee n July 1, 2004, and June 30, 2006. The

allegation was based on the undisputed fact that Las Mercedes did

not issue W-2s or 1099 tax forms to the individuals wh o provided

home health care, bu t instead issued 1099s to the twenty-two

staffing companies. As a result, AHCA conc luded that the staff

was not employed by or under co ntract with La s Mercedes as

required by Rule.

The Rule Challenge

4 . The challenged Rule is a provis ion from the Florida

Medicaid Home Health Services Co verage and Limitat ions Handbook,

w h i c h i s incorporated by referenc e by Florida Administrative Code

Rule 59G-4.130. On page 1-8 of th e Florida Medicaid Home Hea lth

Services Coverage and Limitations Ha ndbook, July 2008 edition, the

Rule is as follows:

Home heal th servic es are pr ovided by qualifie d

health ca re profes sionals w ho are directly

employed by or under cont ract with a home health

agency that is e n r olled in the Medicaid Home

Health Services Program.

E m ployed or contracted me ans that the home

health agency provides a W-2 or 1099 tax form

for the individual.

The home health agency m ust ensure that all

staff (employed or contracted) w h o p r o v i d e

home health s ervices are qu alified and

licensed.

5. By contrast, Su bsection 400.462(9) , in establishing

licensure requ irements for home health agencies has the following

definition of a direct employee:

"Direct employee " means an empl oyee for whom

one of the followin g entities pays

withholding taxe s: a home health agency; a

management company that has a contract to

manage the home health agency on a day-to-day

basis; or an employee leasing co mpany that

has a contract wi th the home heal th agency to

handle the payroll and payroll taxe s for the

home health agency.

6. AHCA agrees th at the Medicaid Rule excludes employee

staffing agreements th at are permitte d by the licens ure statute.

7. Las Mercedes asserts that the Rule is an invali d exercise

o f AH CA 's d e l e g a t e d legislative authority because: (1) it is

ultra vires ; (2) the definition of "empl oyed by or under contract

with" is in irreconcilable conflict with the definition of

"direct e m p l o y e e " i n S u b s e c t i o n 4 0 0 . 4 6 2 ( 9 ) , F l o r i d a S t a t u t e s ; a n d

( 3 ) i t i s a r b i t r a r y a n d c a p r i c i o u s and, therefo re, unenforceable.

8. Las Mercedes also claims that the Rule exceeds the

authority granted to AHCA by federal law. It interprets the law

as requiring that the licensure standard apply equally to the

Medicaid and non-Medicaid providers. That view is based on the

language in 42 U.S.C. § 1396(a)(33)(B), which is, in relevant

part, as follows:

[A state plan for medical assistance must

provide] that, except as provided in section

1919(g) [ 42 USCS § 1396r(g) ], the State or

local agency utilized by the Secretary for

the purpose specified in the first sentence

of section 1864(a) [ 42 USCS § 1395aa(a) ] ,

or, if such agency is not the State agency

which is responsible for licensing health

institutions, the State agency responsible

for such licensing, will perform for the

State agency administering or supervising

the administration of the plan approved

under this title [42 USCS §§ 1396 et seq.]

the function of determining whether

institutions and agencies meet the

requirements for participation in the

program .

9. The "agency utilized by the Secretary, as provided in

42 U.S.C. § 1395aa(a)" refers to the following:

(a) Use of State agencies to determine

compliance by providers of services with

conditions of participation. The Secretary

shall make an agreement with any State which

is able and willing to do so under which the

services of the State health agency or other

appropriate State agency (or the appropriate

local agencies) will be utilized by him for

the purpose of determining whether an

institution therein is a hospital or skilled

nursing facility, or whether an agency

therein is a home health agency .

(Emphasis added.)

10. In Las Mercedes' view of the federal law, the

qualifications for being licensed and being a Medicaid provider

are expected to be the same. It appears that nothing prohibits

that from being the case. Las Mercedes also asserts that the

Rule conflicts with 42 C.F.R. § 447.204, which states:

The agency's payments must be sufficient to

enlist enough providers so that services

under the plan are available to recipients

at least to the extent that those services

are available to the general population.

11. In this record, however, Las Mercedes presented no

evidence regarding payments or, as Las Mercedes implies, the

extent to which Medicaid services may or may not be adequate

without the use of the staffing arrangements permitted under

Subsection 400.462(9), Florida Statutes.

12. Las Mercedes also argues that the Rule is arbitrary

and capricious. AHCA, it says, cannot articulate a valid reason

why licensed home health personnel must receive a tax form

directly from a Medicaid provider. Further, Las Mercedes

asserts, the Rule is not logically related to the stated

purposes of ensuring health, welfare, and safety, and avoiding

waste, fraud, and abuse.

The Agency's Explanation for the Rule

13. AHCA is responsible for the licensure of h o m e health

agencies pursuant to Part III of Chapter 400, Florida Statutes,

more specifically Sections 400.461 through 400.5185, known as the

"Home Health Services Act." Florida Administrative Code Rules in

Chapter 59A-8 implement the provisions of the Home Health Services

Act by setting minimum standards for licensure.

14. To be enrolled as a Medicaid provider, a h o m e he al th

a g e n c y m u s t n o t o n l y b e l i c e n s e d , b u t a l s o m u s t have entered into

a Medicaid provider agreement, a voluntary contract between AHCA

and the agency. See § 409.907, Fla. St at. The provisions

related to Medicaid ar e found in Sections 40 9.901 throug h 409.920,

F l o r i d a S t a t u t e s . F l o r i d a A d m i n i s t r a t i v e C o d e R u l e 59G-4.130,

including the language that is challenged, cites as enabling

statutes Sections 409.905, 409.908, and 409.9081, Florida Statutes,

not the licensure provisions in Chapter 400.

15. AHCA contends that challenged R ule is a logical,

rational imposition of h igher standards than the minimum standards

for licensure on those home health agencies that are also Medicaid

providers. Its purpose is to ensure health, safety, and welfare of

Medicaid recipients, and to curb waste, fraud and abuse. To that

end, AHCA maintains that the Rul e allows it to exercise greater

oversight over the Medicaid program.

16. AHCA concedes that a violat ion of the challenged Rule

would not in and of itself result in any action to deny or revoke a

license, although exclusion from the Medicaid program would result

in revocation or denial of a license.

CONCLUSIONS OF LAW

17. Las Mercedes has standing , and it has the burden of

proving the invalidity of the challenged exi sting rule by a

preponderance of the evi dence. § 120.56 (3)(a), Fla. Stat.; and

Greynolds Park Manor, Inc. v. Department of Health and

Rehabilitative Services , 491 So. 2d 1157 (Fla. 1st DCA 1986).

DOAH Jurisdiction in Medicaid Rule Challenge Cases

18. AHCA maintains that DOAH has no jurisdiction to

invalidate a Medicaid rule because federal law prohibits DOAH

from reviewing Medicaid rules.

19. Medicaid was established by Congress in Title XIX of

the Social Security Act, which authorizes federal grants to States

for the Medicaid Program. 42 U.S.C. § 1396 et seq . The Medicaid

Program is financed by the federal and state governments, but

each state is requir ed to designate a s i ngle state agency to

administer or to supervise the administration of Medicaid. 42

U.S.C. § 1396a(a)(5). In accordance with 42 C.F.R. Section

431.10(e), " [ t ] h e a u thority of the [designated Me dicaid state]

a gen cy must not be imp aired if any of its rules, regulations, or

decisions are subject to review, cl ear anc e, or si mil ar ac tio n by

other offices or agencies of the Sta te." 42 C.F.R. §

431.10(e)(2). Therefore, AHCA i nterprets federal law as

prohibiting DOAH review of Medicaid rules.

20. In support of its argument, AHCA cited Orthopaedic Hosp.

v . Kizer, 1992 U.S. Dist. LEXIS 21123 (C.D. Ca l. Oct. 5, 1992);

and Vogel v. Perales , 1983 U.S. Dist. LEXIS 17032 (S.D.N.Y. May 11,

1983).

21. In Orthopaedic Hosp. v. Kizer , the Court explained that

the agency could not use a statute as an excuse for inadequate

rulemaking, as follows:

In the Court's view, however, Section

1418.4.11--like all of the statutory

enactments at issue in this case, in fact--

gave the Department fairly wide discretion

in implementing the basic changes outlined

in the statute. Thus the Department was not

relieved from obligations it otherwise would

have had merely by virtue of the role played

by the state legislature in new rates

set[ting].

* * *

At the very least, the fact that the

legislature may have considered "efficiency,

economy, and quality of care" in making the

basic determination that cesarean and non-

cesarean delivery rates should be equalized

does not relieve the Department of the

obligation to further consider "efficiency,

economy and quality of care" in exercising

what discretion it had in implementing the

legislature's general mandate. There is no

evidence that the Department did consider

the relevant factors in this limited sense.

And in any event, nor is there adequate

evidence in the record demonstrating that

the state legislature at any time considered

"efficiency, economy, and quality of care"

in connection with the equalization of rates

for cesarean add non-cesarean deliveries.

1992 U.S. Dist. LEXIS 21123 at p. 24.

22. In Vogel v. Perales , supra , the State Depart ment of Social

Services ("DSS") was the design ated Medicaid agen cy, but the

Department of Heal th ("DOH") establi shed the list of drugs approved

for Medicaid reimburse ment. The Court desc ribed the c oncerns as

follows:

Two problems are apparent. First, 42 C.F.R.

§ 431.10(e) states that the State Medicaid

agency's authority "must not be impaired if

any of its rules, regulations, or decisions

are subject to review, clearance, or similar

action by other offices or agencies of the

State." . . .. DSS has divested itself of

authority to reimburse for non-listed drugs.

Second, the hearing requirement established

by the federal regulations is nullified by

this scheme. A hearing is required, inter

alia, when a recipient "requests it because

he believes the agency has taken an action

erroneously." 42 C.F.R. § 431.220(a)(2) .

By abdicating authority over drug

reimbursement to DOH, however, DSS is unable

to grant any relief through its hearing

procedure.

1983 U.S. Dis t. LEXIS 17032.

23. More applicable here is Greynolds Park Manor, Inc. v.

Department of Health and Rehabilitative Services , 491 So. 2d

1157 (Fla. 1st DCA 1986), holding that a party who was

substantially affected by a rule determining Medicaid

overpayments could challenge the rule at DOAH.

24. DOAH has, in the past, exercised its jurisdiction to

determine the validity of Medicaid rules. See , e.g. , Home

Delivery Incontinent Supplies Co., Inc., vs. Agency for Health

Care Admin. , 2008 Fla.Div.Adm.Hear.LEXIS 205, Case No. 07-4167RX

(DOAH F.O. April 18, 2008)(holding that a rule disqualifying

out-of-state providers of durable medical equipment was invalid

as not supported by enabling statutes); Manor Pines Convalescent

Center v. Agency for Health Care Admin. , DOAH Case No. 06-3489

(F.O. April 25, 2007)(invalidating low occupancy reimbursement

rate reduction rule as arbitrary, capricious, and not supported

by and contravening statutory authority); Consult Care, Inc. v.

Agency for Health Care Admin. , DOAH Case No. 99-2497RX, per

curiam aff'd 793 So. 2d 938 (Fla. 1st DCA 2001)(invalidating, as

without authority, arbitrary and capricious limitations on

Medicaid reimbursement of certain services when provided in

mobile units); and Bell v. Agency for Health Care Admin. , DOAH

Case. No. 99-2060RX, rev. and remanded at 768 So. 2d 1203 (Fla.

1st DCA 2000)(invalidating a rule that created a disparity in

coverage for Medicaid recipients based on age as arbitrarily and

unreasonably excluding coverage of benefits that may be

medically necessary).

Framework for the Rule Challenge Analysis

24. The term "invalid exercise of delegated legislative

authority is defined in Section 120.52(8), Florida Statutes.

The following provisions are relevant to this case:

"Invalid exercise of delegated legislative

authority" means action that goes beyond the

powers, functions, and duties delegated by

the Legislature. A proposed or existing

rule is an invalid exercise of delegated

legislative authority if any one of the

following applies:

* * *

(b) The agency has exceeded its grant of

rulemaking authority, citation to which is

required by s. 120.54 (3)(a)1.;

(c) The rule enlarges, modifies, or

contravenes the specific provisions of law

implemented, citation to which is required

by s. 120.54 (3)(a)1.;

* * *

(e) The rule is arbitrary or capricious. A

rule is arbitrary if it is not supported by

logic or the necessary facts; a rule is

capricious if it is adopted without thought

or reason or is irrational; or

* * *

A grant of rulemaking authority is necessary

but not sufficient to allow an agency to

adopt a rule; a specific law to be

implemented is also required. An agency may

adopt only rules that implement or interpret

the specific powers and duties granted by

the enabling statute. No agency shall have

authority to adopt a rule only because it is

reasonably related to the purpose of the

enabling legislation and is not arbitrary

and capricious or is within the agency's

class of powers and duties, nor shall an

agency have the authority to implement

statutory provisions setting forth general

legislative intent or policy. Statutory

language granting rulemaking authority or

generally describing the powers and

functions of an agency shall be construed to

extend no further than implementing or

interpreting the specific powers and duties

conferred by the enabling statute.

(Emphasis added.)

Analysis for 120.52(8)(b) and (c)

25. The parties agree t hat an appropriate analytical

framework for Subsections 120.52 (8)(b) and (c) is that set forth in

Home Delivery Incontinent Supplies Co. v. Agency for Health Care

Administration , 2008 Fla.Div.Adm.Hear.Lexis 205, Case No. 07-4167RX

(DOAH F.O. April 18, 2008), alth ough AHCA takes the position that

the case was wrongly decided.

26. In the Home Delivery analysis, Judge Van Laningham raised

four questions: (1) whether the agency has been delegated the power

to make rules; (2) what is the specific power or duty the agency is

exercising in implementing the Rule; (3) whether that power is

among the powers that the legislature has granted to the agency;

and (4) whether the rule actuall y implements or interprets the

powers granted.

27. The parties agree that AHCA has been granted rulemaking

authority by Section 409.919, Florida Statutes, as follows:

The agency shall adopt a ny rules necessary to

comply with or administe r ss 409.904-409.920

and all rules necessary to comply with federal

requirements.

28. The parties disagree what specific power or duty AHCA is

exercising. Las Mercedes framed it as an attempt to "define how a

home health agency pays its employees." AHCA says it is regulating

"who may and who may not provide home health services to Medicaid

recipients." Neither seems to state precisely what is happening in

this case. If, as described by Judge Van Laningham, one "zooms in"

then the focus might be on the issue of pay. If one "zooms out"

then perhaps the issue is who pr ovides the services. In between

the two and in its most basic terms in this case, AHCA is defining

the business relationship of Med icaid-enrolled home health agencies

and their employees or contract staff using the nature of the tax

form it issues as determinative.

29. To decide " whether the specific power or duty, as

defined, is among the specific powers or duties delegated to the

[AHCA] by the legislature," it is necessary to refer to the

enabling statutes.

30. As noted, the chall enged Rule is fo und on page 1-8 of

the Handbook, dated July 2008, which is incorporated by r e f e r e n c e

in Florida Administ rative Code Rule 59G-4.13 0. In Rule 59G-4.130,

t h e c i t e d a u t h o r i t i e s a r e Sections 409.905 (entitled mandatory

Medicaid services), 409.908 (concerning reimbursement of Medicaid

providers), and 409.9081 (on copayments), Florida Statutes. The

question, then, is whether these statutes delegate to AHCA the

authority to define the business relationships between its staff

and a Medicaid-enrolled home health agency when h o m e h e a l t h

services are being provided to Medicaid recipients.

31. In general, with regard to mandator y Medicaid services,

Section 409.905, which provid es, in part, as follows:

The agency may make payments for the

following services, which are required of

the state by Title XIX of the Social

Security Act, furnished by Medicaid

providers to recipients who are determined

to be eligible on the dates on which the

services were provided. Any service under

this section shall be provided only when

medically necessary and in accordance with

state and federal law. Mandatory services

rendered by providers in mobile units to

Medicaid recipients may be restricted by the

agency. Nothing in this section shall be

construed to prevent or limit the agency

from adjusting fees, reimbursement rates,

lengths of stay, number of visits, number of

services, or any other adjustments necessary

to comply with the availability of moneys

and any limitations or directions provided

for in the General Appropriations Act or

chapter 216.

(Emphasis added.)

32. AHCA points specifically to Subsection 409.905(4),

Florida Statutes, which states:

The agency shall pay for nursing and home

health aide services , supplies, appliances, and

durable medical equipment, necessary to assist

a recipient living at home. An entity that

provides services pursuant to this s u b s e c t i o n

shall be licensed unde r part III of chapter

400. T h e s e s e r v i c e s , e q u i p m e n t , a n d supplies,

or reimbursement therefore, may be limited as

provided in the General Appropriations Act and

do not include services, equipment, or

supplies provided to a person residing in a

hospital or nursing facility.

(a) In providing home health care services,

the agency may require prior authorization

of care based on diagnosis, utilization

rates, or billing rates. The agency shall

require prior authorization for visits for

home health services that are not associated

with a skilled nursing visit when the home

health agency billing rates exceed the state

average by 50 percent or more. The home

health agency must submit the recipient's

plan of care and documentation that supports

the recipient's diagnosis to the agency when

requesting prior authorization.

(b) The agency shall implement a

comprehensive utilization management program

that requires prior authorization of all

private duty nursing services, an

individualized treatment plan that includes

information about medication and treatment

orders, treatment goals, methods of care to

be used, and plans for care coordination by

nurses and other health professionals. The

utilization management program shall also

include a process for periodically reviewing

the ongoing use of private duty nursing

services. The assessment of need shall be

based on a child's condition, family support

and care supplements, a family's ability to

provide care, and a family's and child's

schedule regarding work, school, sleep, and

care for other family dependents. When

implemented, the private duty nursing

utilization management program shall replace

the current authorization program used by

the Agency for Health Care Administration

and the Children's Medical Services program

of the Department of Health. The agency may

competitively bid on a contract to select a

qualified organization to provide

utilization management of private duty

nursing services. The agency is authorized

to seek federal waivers to implement this

initiative.

(c) The agency may not pay for home health

services unless the services are medically

necessary and:

1. The services are ordered by a physician.

2. The written prescription for the

services is signed and dated by the

recipient's physician before the development

of a plan of care and before any request

requiring prior authorization.

3. The physician ordering the services is

not employed, under contract with, or

otherwise affiliated with the home health

agency rendering the services. However,

this subparagraph does not apply to a home

health agency affiliated with a retirement

community, of which the parent corporation

or a related legal entity owns a rural

health clinic certified under 42 C.F.R. part

491, subpart A, ss. 1-11, a nursing home

licensed under part II of chapter 400, or an

apartment or single-family home for

independent living. For purposes of this

subparagraph, the agency may, on a case-by-

case basis, provide an exception for

medically fragile children who are younger

than 21 years of age.

4. The physician ordering the services has

examined the recipient within the 30 days

preceding the initial request for the

services and biannually thereafter.

5. The written prescription for the

services includes the recipient's acute or

chronic medical condition or diagnosis, the

home health service required, and, for

skilled nursing services, the frequency and

duration of the services.

6. The national provider identifier,

Medicaid identification number, or medical

practitioner license number of the physician

ordering the services is listed on the

written prescription for the services, the

claim for home health reimbursement, and the

prior authorization request.

(Emphasis added.)

33. The only requirement for a Medicaid-enrolled home

health agency that is expressed in Subsection 409.905(4),

Florida Statutes, is licensure pursuant to Chapter 400. The

only business relationship that it requires regulating is that

between the physician and the home health agency.

34. Section 409.908, concerning reimbursement of Medicaid

providers begins as follows:

Subject to specific appropriations, the

agency shall reimburse Medicaid providers,

in accordance with state and federal law,

according to methodologies set forth in the

rules of the agency and in policy manuals

and handbooks incorporated by reference

therein. These methodologies may include

fee schedules, reimbursement methods based

on cost reporting, negotiated fees,

competitive bidding pursuant to s. 287.057,

and other mechanisms the agency considers

efficient and effective for purchasing

services or goods on behalf of recipients.

If a provider is reimbursed based on cost

reporting and submits a cost report late and

that cost report would have been used to set

a lower reimbursement rate for a rate

semester, then the provider's rate for that

semester shall be retroactively calculated

using the new cost report, and full payment

at the recalculated rate shall be effected

retroactively. Medicare-granted extensions

for filing cost reports, if applicable,

shall also apply to Medicaid cost reports.

Payment for Medicaid compensable services

made on behalf of Medicaid eligible persons

is subject to the availability of moneys and

any limitations or directions provided for

in the General Appropriations Act or chapter

216. Further, nothing in this section shall

be construed to prevent or limit the agency

from adjusting fees, reimbursement rates,

lengths of stay, number of visits, or number

of services, or making any other adjustments

necessary to comply with the availability of

moneys and any limitations or directions

provided for in the General Appropriations

Act, provided the adjustment is consistent

with legislative intent.

35. More specifically, in connection with the

reimbursement of home health agencies, Subsection 409.908(9),

Florida Statutes, provides that:

A provider of home health care services or

of medical supplies and appliances shall be

reimbursed on the basis of competitive

bidding or for the lesser of the amount

billed by the provider or the agency's

established maximum allowable amount, except

that, in the case of the rental of durable

medical equipment, the total rental payments

may not exceed the purchase price of the

equipment over its expected useful life or

the agency's established maximum allowable

amount, whichever amount is less.

36. No express or implied authorization to regulate the

business relationship between a home health agency and its

employees or contractors is found in Section 409.908, Florida

Statutes.

37. The final enabling statute cited as authority for the

Rule is Section 409.9081, Florida Statutes, concerning

copayments and providing that:

(1) The agency shall require, subject to

federal regulations and limitations, each

Medicaid recipient to pay at the time of

service a nominal copayment for the

following Medicaid services:

(a) Hospital outpatient services: up to $3

for each hospital outpatient visit.

(b) Physician services: up to $ 2 copayment

for each visit with a physician licensed

under chapter 458, chapter 459, chapter 460,

chapter 461, or chapter 463.

(c) Hospital emergency department visits

for nonemergency care: 5 percent of up to

the first $300 of the Medicaid payment for

emergency room services, not to exceed $ 15.

(d) Prescription drugs: a coinsurance equal

to 2.5 percent of the Medicaid cost of the

prescription drug at the time of purchase.

The maximum coinsurance shall be $ 7.50 per

prescription drug purchased.

(2) The agency shall, subject to federal

regulations and any directions or

limitations provided for in the General

Appropriations Act, require copayments for

the following additional services: hospital

inpatient, laboratory and X-ray services,

transportation services, home health care

services , community mental health services,

rural health services, federally qualified

health clinic services, and nurse

practitioner services. The agency may only

establish copayments for prescribed drugs or

for any other federally authorized service

if such copayment is specifically provided

for in the General Appropriations Act or

other law.

(3) In accordance with federal regulations,

the agency shall not require copayments of

the following Medicaid recipients:

(a) Children under age 21.

(b) Pregnant women when the services relate

to the pregnancy or to any other medical

condition which may complicate the pregnancy

up to 6 weeks after delivery.

(c) Any individual who is an inpatient in a

hospital, long-term care facility, or other

medical institution if, as a condition of

receiving services in the institution, that

individual is required to spend all but a

minimal amount of her or his income required

for personal needs for medical care costs.

(d) Any individual who requires emergency

services after the sudden onset of a medical

condition which, left untreated, would place

the individual's health in serious jeopardy.

(e) Any individual when the services or

supplies relate to family planning.

(f) Any individual who is enrolled in a

Medicaid prepaid health plan or health

maintenance organization.

(4) No provider shall impose more than one

copayment for any encounter upon a Medicaid

recipient.

(5) The agency shall develop a mechanism by

which participating providers are able to

identify those Medicaid recipients from whom

they shall not collect copayments.

(6) [As created by s. 5, ch. 96-280.] This

section does not require a provider to bill

or collect a copayment required or

authorized under this section from the

Medicaid recipient. If the provider chooses

not to bill or collect a copayment from a

Medicaid recipient, the agency must still

deduct the amount of the copayment from the

Medicaid reimbursement made to the provider.

(6) [As created by s. 5, ch. 96-387.] This

section does not require a provider to bill

or collect from the Medicaid recipient any

copayment authorized by subsection (1).

Regardless of whether the provider bills or

collects the copayment, the agency shall

deduct the amount of the copayment from the

Medicaid reimbursement to the provider.

3 8 . N o t h i n g i n Section 409.9081, Florida Statutes,

authorizes the challenged Rule.

Conflict with Subs ection 400.462(9)

39. Subse c t i o n 400.462(9), Florida St atutes, defines a

direct employee of a home health agency as follows:

"Direct employee" means an employee for whom

one of the following entities pays withholding

taxes: a home health agency; a management

company that has a contract to man age the home

health agency on a day-t o-day basis; or an

employee leasing compan y that has a contract

wi th t h e ho me h e a l t h agency to handl e the

payroll a nd payrol l taxes f or the ho me health

agency.

40. AHCA concedes that the definition in the Rule of

" e m p l o y e d o r contracted" meaning " the home health agency provides a

W-2 or 1099 tax form for the indiv idual" is more res trictive than the

definition of "direct employee" in Su bsection 400.46 2(9), Florida

Statutes.

41. AHCA asserts that the different definitions have

different purposes and that the Rule promulgated under Chapter

409.901-920, Florida Sta tutes, relating to the Medicaid home health

agencies is intentionally more restrictive that the rules

promulgated under Subsection 400.462(9) relating to Chapter 400,

Florida S tatutes, on minimu m licensu re standa rds.

42. There is, however, no indication that the Legislature

contemplated or the federal government requires the difference. To

the contrary, the federal provisions quoted above in Findings of

Fact 6 and 7, and the reference in Subsection 409.905(4) t o the

Part III of Chapter 400, Florida Statutes, suggest that the use of

the same definition is, in fact, not only acceptable but is as

restrictive as the federal government requires and the State

Legislature authorized.

43. Given the existence of the definition in S u b s e c t i o n

4 0 0 . 4 6 2 ( 9 ) , F l o r i d a Statutes, ther e is also no im plied necessity

for another definition.

Rule Challenge Analysis for 120.52(8)(e)

44. AHCA gave as the ju stification for the more restrictive

definition ensuring the health, safety, and welfare of Medicaid

recipients, and avoiding waste, fraud, a nd abuse. Las Mercedes

claims the Rule is arbitrary and caprici ous and is, therefore,

unenforceable.

45. "A rule is arbitrary if it is not supported by logic or

the necessary facts; a rule i s capricious if it is adopted without

thought or reason or is irrational." § 120.52(8)(e), Fla.

Statutes.

46. The analysis for whether a rule is arbitrary and

capricious is (1) w h e t h e r t h e r u l e i s s u p p o r t e d b y l o g i c o r t h e

ne ce ss ar y fa ct s; a n d ( 2 ) w h e t h e r t h e r u l e wa s adopted without

thought or is irrational. § 120.52(8)(e), Fla. Stat.

47. Las Mercedes presented no evidence concerning the

thought or any lack of thought that went into the challenged

Rule at the time of its adoption.

48. AHCA presented evidence, through the testimony of its

witnesses, that the challenged Rule is intended to protect "the

health, safety and welfare of our vulnerable recipient

population [by] hav[ing] adequate safeguards in place, such as

background screenings to ensure that individuals that may

present with a prope nsity or indication of impropriety are not

offering service s to our Medicaid re cipients." The Rule is,

acco rdi n g to AH C A, a me a ns " . . . to counter f r a ud, waste, and

abuse."

49. AHCA's Medicaid fraud and abuse liaison also testified

that the requirements for enrollment in the Medicaid program are set

forth in Section 409.907, Florida Statutes. That Section provides,

in relevant part, the following:

The agency may make payments for medical

assistance and related services rendered to

Medicaid recipients only to an individual or

entity who has a provider agreement in effect

with the agency, who is performing services or

supplying goods in accor dance with federal,

state, and local law, an d who agrees that no

person shall, on the grounds of handicap, race,

color, or national origin, or for any other

reason, be subjected to discrimination under

any program or activity for which the provider

receives payment from the agency.

(1) Each provider agreement shall require the

provider to comply fully with all state and

federal laws pertaining to the Medicaid

program, as well as all federal, state, and

local laws pertaining to licensure , if

required, and the practice of any of the

healing arts . . .

(2) Each provider agreement shall be a

voluntary contract between the agency and the

provider, in which the provider agrees to

comply with all laws and rules pertaining to

the Medicaid program whe n furnishing a service

or goods to a Medicaid recipient . . .

(3) The provider agreem ent developed by the

agency, in addition to the requirements

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

require the provider to:

(a) Have in its possession at the time of

signing the provider agr eement, and maintain in

good standing throughout the period of the

agreement's effectiveness, a valid professional

or facility license pertinent to the services

or goods being provided, as required by the

state or locality in which the provider is

located . . .

* * *

(i) At the option of the agency, provide proof

of liability insurance and maintain such

insurance in effect for any period during which

services or goods are furnished to Medicaid

recipients.

* * *

(7) The agency may requ ire, as a condition of

participating in the Med icaid program and

before entering into the provider agreement,

that the provider submit information, in an

initial and any required renewal applications,

concerning the professional, business, and

personal background of the provider and permit

an onsite inspection of the provider's service

location . . .. The agency is not required to

perform an onsite inspection of a provider or

program that is licensed by the agency . . ..

[t]he agency may also require that Medicaid

providers reimbursed on a fee-for-services

basis or fee schedule ba sis which is not cost-

based, post a surety bond . . ..

[Background information must include:

(a) Proof of holding a valid license or

operating certificate, as applicable, if

required by the state or local jurisdiction in

which the provider is lo cated or if required by

the Federal Government.

(b) Information concerning any prior

violation, fine, suspens ion, termination, or

other administrative act ion taken under the

Medicaid laws, rules, or regulations of this

state or of any other st ate or the Federal

Government . . ..

(c) Full and accurate disclosure of any

financial or ownership interest . . . in any

other Medicaid provider or health care related

entity . . ..

(d) If a group provider , identification of all

members of the group and attestation that all

members of the group are enrolled in or have

applied to enroll in the Medicaid program.

(8)(a) Each provider, or each principal of the

provider if the provider is a corporation,

partnership, association, or other entity,

seeking to participate in the Medicaid program

must submit a complete set of his or her

fingerprints to the agency for the purpose of

conducting a criminal hi story record check [by]

the Department of Law Enforcement [and] the

Federal Bureau of Investigation .

* * *

(d) Proof of compliance with the requirements

of level 2 screening und er s. 435.04 [and]

level 1 screening under s. 435.03 conducted

within 12 months prior to the date that the

Medicaid provider application is submitted to

the agency shall meet th e requirement that the

Department of Law Enforc ement conduct a state

criminal history record check.

(9) Upon receipt of a completed, signed, and

dated application, and c ompletion of any

necessary background inv estigation and criminal

history record check, the agency must either:

(a) Enroll the applicant as a Medicaid

provider upon approval of the provider

application . . . or

(b) Deny the application if the agency finds

that it is in the best interest of the Medicaid

program to do so. The agency may consider the

factors listed in subsection (10), as well as

any other factor that could affect the

effective and efficient administration of the

program, including, but not limited to, the

applicant's demonstrated ability to provide

services, conduct business, and operate a

financially viable concern; the current

availability of medical care, services, or

supplies to recipients, taking into account

geographic location and reasonable travel time;

the number of providers of the same type

already enrolled in the same geographic area;

and the credentials, exp erience, success, and

patient outcomes of the provider for the

services that it is making application to

provide in the Medicaid program . . .

(a) . . . made a false representation . . .;

(b) Been or is currently excluded, suspended,

terminated from, or has involuntarily withdrawn

from participation in, Florida's Medicaid

program or any other sta te's Medicaid program

. . .;

(c) Been convicted of a criminal offense

relating to the delivery of any goods or

services under Medicaid or Medicare . . .;

(d) Been convicted under federal or state law

of a criminal offense re lated to the neglect or

abuse of a patient in connection with the

delivery of any health c are goods or services;

. . ..

(e) Been convicted under federal or state law

of a criminal offense relating to the unlawful

manufacture, distribution, prescription, or

dispensing of a controlled substance ;

(f) Been convicted of any criminal offense

relating to fraud, theft, embezzlement, breach

of fiduciary responsibil ity, or other financial

misconduct ;

(g) Been convicted under federal or state law

of a crime punishable by imprisonment of a year

or more which involves moral turpitude ;

(h) Been convicted in connection with the

interference or obstruction of any

investigation into any criminal offense listed

in this subsection ;

(i) Been found to have violated federal or

state laws, rules, or regulations governing

Florida's Medicaid program or any other state's

Medicaid program, the Medicare program . . .;

(j) Been previously found by a licensing,

certifying, or professional standards board or

agency to have violated the standards or

conditions relating to licensure or

certification or the quality of services

provided,

(k) Failed to pay any fine or overpayment

properly assessed under the Medicaid program

. . .

(12) Licensed, certified, or otherwise

qualified providers are not entitled to

enrollment in a Medicaid provider network.

(Emphasis added.)

50. The requirements for enroll ment in Medicaid, as set forth,

are extensive. The provisions of Section 409.907, not the

challenged Rule, provide the safeguards to protect Medicaid

recipients and to ensure the int egrity of the Medicaid program.

51. It is illogical and irratio nal to suggest that health,

safety, and welfare are further ensured, and fraud, waste, and abuse

more curbed by the additional re quirement that a home health agency

only provide Medicaid services through personnel that are directly

employed by or under contract wi th the home health agency, as

evinced by the issuance of W-2s or 1099s.

52. The challenged Rule is an invalid exercise of delegated

legislative authority because it exceeds and contravenes the law

implemented, and is arbitrary and capricious. B ased upon the

foregoing Findings of Fact and Conclusions of Law, it is

ORDERED that page 1-8 of the Florida Medicaid Home Health

Services Coverage and Limitations Handbook of July 2008, adopted

by reference in Florida Administrative Code Rule 54G-4.130,

constitutes an invalid exercise of delegated legislative

authority within the meaning of Sections 120.52(8)(b), (c), and

(e), Florida Statutes.

DONE AND ORDERED this 23rd day of July, 2010, in

Tallahassee, Leon County, Florida.

S

ELEANOR M. HUNTER

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 July, 2010.

COPIES FURNISHED :

Andrew T. Sheeran, Esquire

L. William Porter, Esquire

Agency for Health Care Administration

2727 Mahan Drive, Mail Station 3

Tallahassee, Florida 32308

Andrew S. Ittleman, Esquire

Fuerst, Humphrey, Ittleman, P.L.

1001 Brickell Bay Drive, Suite 2002

Miami, Florida 33131

Scott Boyd, Executive Director/General Counsel

Joint Administrative Procedures Committee

120 Holland Building

Tallahassee, Florida 32399-1300

Justin Senior, General Counsel

Agency for Health Care Administration

2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

Thomas W. Arnold, Secretary

Agency for Health Care Administration

2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308-5403

Richard Shoop, Agency Clerk

Agency for Health Care Administration

2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this Final Order is

entitled to judicial review pursuant to Section 120.68, Florida

Statutes. Review proceedings are governed by the Florida Rules

of Appellate Procedure. Such proceedings are commenced by

filing one copy of a Notice of Administrative Appeal with the

agency clerk of the Division of Administrative Hearings and a

second copy, accompanied by filing fees prescribed by law, with

the District Court of Appeal, First District, or with the

District Court of Appeal in the appellate district where the

party resides. The Notice of Administrative Appeal must be

filed within 30 days of rendition of the order to be reviewed.