95-004140RU Glades Health Plan, Inc. vs. Agency For Health Care Administration Status: Closed DOAH Final Order on Monday, October 30, 1995.

Summary: Agency statement imposing moritorium on contract applications not rule. Evidence did not show Agency made statement re: licenses.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

GLADES HEALTH PLAN, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 95-4140RU

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Respondent. )

____________________________)

FINAL ORDER

Pursuant to notice, a hearing was held in the above-styled case before

Richard Hixson, a Hearing Officer assigned by the Division of Administrative

Hearings, on September 15, 1995, in Tallahassee, Florida.

APPEARANCES

For Petitioner: Theodore E. Mack, Esquire

131 North Gadsden Street

Tallahassee, Florida 32301

For Respondent: Heidi E. Garwood, Esquire

Agency for Health Care Administration

2727 Mahan Drive

Tallahassee, Florida 32309

STATEMENT OF THE ISSUES

The issues for determination in this case are whether the following agency

statements violate the provisions of Section 120.535, Florida Statutes:

1) No pending Medicaid Prepaid Health plan

contract applications will be reviewed

approved or denied.

2) Medicaid Prepaid Health Plan contracts are

not licenses as that term is defined in subsection

(9) of Section 120.52, Florida Statutes.

PRELIMINARY STATEMENT

On August 22, 1995, Petitioner, GLADES HEALTH PLAN, INC., filed a Petition

with the Division of Administrative Hearings alleging that certain statements

and policies of Respondent, AGENCY FOR HEALTH CARE ADMINISTRATION, violated the

provisions of Section 120.535, Florida Statutes, because such statements

constituted rules under Section 120.52(16), Florida Statutes, and should

accordingly have been promulgated as rules pursuant to Section 120.54, Florida

Statutes. The Petition specifically challenged the following statements alleged

to have been made by the agency:

1. No pending Medicaid prepaid health plan

contract applications will be reviewed approved

or denied.

2. Commercial HMO licensure is a condition

precedent to obtaining a Medicaid prepaid health

plan contract.

3. Medicaid prepaid health plan contracts are

not licenses as that term is defined in subsection

(9) of Section 120.52, Florida Statutes.

At hearing on September 15, 1995, Petitioner withdrew its challenge to the

second alleged agency statement, set forth above, that commercial HMO licensure

is a condition precedent to obtaining a Medicaid Prepaid Health Plan contract.

The hearing proceeded on the remaining issues.

Petitioner presented the testimony of James M. Barclay, vice-president of

GLADES HEALTH PLAN, INC., and two exhibits which were received into evidence.

Respondent presented the testimony of Tom Arnold, Chief of the Bureau of Managed

Care for the AGENCY FOR HEALTH CARE ADMINISTRATION, and one exhibit which was

received into evidence.

A transcript of the hearing held in this case was filed on September 19,

1995.

On October 16, 1995, Petitioner and Respondent each filed a proposed final

order. Rulings on the proposed findings of fact submitted by the parties are

set forth in the Appendix attached hereto.

FINDINGS OF FACT

1. Petitioner GLADES HEALTH PLAN, INC., (GLADES) is a for-profit

corporation with offices in Belle Glade, Florida. GLADES was formed for the

purpose of applying for and obtaining a contract with the State of Florida for a

Medicaid Prepaid Health Plan.

2. Respondent, AGENCY FOR HEALTH CARE ADMINISTRATION, (AHCA), is the

agency of the State of Florida statutorily responsible for the administration of

the Florida Medicaid prepaid health plan program.

3. On October 5, 1994, GLADES filed a Medicaid prepaid health plan

contract application with AHCA.

4. In December of 1994, a series of newspaper articles were published

which raised concerns regarding the quality of health care and service provided

by Medicaid prepaid health plans in Florida.

5. In response to these concerns, AHCA, beginning in the latter part of

December of 1994, implemented a number of administrative changes, and also

undertook a comprehensive review to assess the quality of health care and

service provided by existing Medicaid prepaid health plans.

6. In order to accomplish this comprehensive review, AHCA redirected all

of the agency's managed care staff to conduct a survey of the assessment of the

quality of health care and services provided by the existing Medicaid prepaid

health plans.

7. Because AHCA's managed care staff was redirected to conduct this

comprehensive review of the existing Medicaid prepaid health plans, there were

insufficient staff available to review Medicaid prepaid health plan contract

applications. AHCA was also concerned with contracting with additional health

plans until the assessment of the existing plans was completed. AHCA

accordingly placed a temporary moratorium on the consideration of applications

for Medicaid prepaid health plan contracts until the completion of the

comprehensive review. The purpose of the agency's comprehensive review of

existing health plans and imposition of a temporary moratorium on pending

contract applications for new health plans was to assess the quality of care and

service of the existing Florida Medicaid prepaid health plan program, and to

develop in-house agency policies to address problems identified by agency staff

conducting the comprehensive review.

8. On December 30, 1994, James M. Barclay, vice-president of GLADES,

received a letter from AHCA relating to another organization with which he is

affiliated, Heartland Healthcare, Inc., which like GLADES, had filed a Medicaid

prepaid health plan contract application that was pending with AHCA.

9. The December 30, 1994 letter from AHCA to Barclay recited AHCA's

concern with the quality of health care and service provided by existing

Medicaid prepaid health plans. The letter further stated that due to the

implementation of administrative changes, and the need for agency staff to be

committed to the comprehensive review of existing Medicaid prepaid health plans,

AHCA had imposed a moratorium on the consideration of Medicaid Prepaid Health

Plan contract applications to last approximately sixty to ninety days.

10. GLADES did not receive a letter, or other communication from AHCA

notifying GLADES of AHCA's imposition of a temporary moratorium on the

consideration of its Medicaid prepaid health plan contract application, and no

action was taken by AHCA with regard to the GLADES' contract application during

this period.

11. Upon completion of the agency's comprehensive review of existing

Medicaid prepaid health plans, AHCA, in the spring of 1995, discontinued the

moratorium on consideration of Medicaid prepaid health plan contract

applications.

12. In processing Medicaid prepaid health plan contract applications

subsequent to the discontinuation of the moratorium, AHCA determined not to

contract with any prepaid health plan unless the plan was a public entity, or

commercially #licensed under the provisions of Chapter 641, Florida Statutes.

The basis for AHCA's decision in this regard was that the agency's comprehensive

review of Medicaid prepaid health plans indicated that the existing commercially

licensed Medicaid prepaid health plans provided a better quality of care to

Medicaid recipients than the health plans that were not commerically licensed.

13. On September 13, 1995, AHCA filed with the Department of State, Bureau

of Administrative Code, proposed rules amending Rule 59G-8.100, Florida

Administrative Code. The proposed rule amendments set out criteria for AHCA's

consideration of Medicaid prepaid health plan contract applications. The

criteria include commercial licensure under Chapter 641, Florida Statutes,

managed care accreditation, prior health care experience, and need for managed

care services. Under the proposed rule amendments, failure to meet such

criteria, including commercial licensure, is grounds for denial of a Medicaid

prepaid health plan contract application.

14. AHCA has not promulgated or instituted proceedings to promulgate rules

regarding the temporary moratorum imposed in this case.

15. GLADES is not commercially licensed under the provisions of Chapter

641, Florida Statutes.

16. Subsequent to the discontinuation of the moratorium, AHCA has taken no

action with regard to GLADES' Medicaid prepaid health plan contract application.

17. Because GLADES is not commercially licensed, AHCA presently considers

the GLADES' Medicaid prepaid health plan contract application inactive.

18. AHCA has not written, published or otherwise made a formal statement

of agency policy to the effect that Medicaid prepaid health plan contracts are

not licenses as that term is defined in Section 120.52(9), Florida Statutes.

19. AHCA has not promulgated or instituted proceedings to promulgate rules

to the effect that Medicaid prepaid health plan contracts are not licenses.

CONCLUSIONS OF LAW

20. The Division of Administrative Hearings has jurisdiction of the

parties to and the subject matter of this proceeding. Section 120.535, Florida

Statutes.

21. The initial burden of proof in this proceeding is on the Petitioner to

prove the allegations of the Petition and establish by a preponderance of the

evidence that the agency statements violate the provisions of Section

120.535(1), Florida Statutes. Section 120.535(2)(b), Florida Statutes. See

Agrico Chemical Co. v. State Department of Environmental Regulation, 365 So. 2d

759, 762 (Fla. 1st DCA 1978); Dravo Basic Material Co., Inc. v. State

Department of Transportation, 602 So. 2d 632 (Fla. 2d DCA 1992).

22. Section 120.535(1), Florida Statutes provides:

(1) Rulemaking is not a matter of agency

discretion. Each agency statement defined

as a rule under s. 120.52(16) shall be adopted

by the rulemaking procedure provided by s.

120.54 as soon as feasible and practicable.

Rulemaking shall be presumed feasible and

practicable to the extent provided by this

subsection unless one of the factors provided

by this subsection is applicable.

(a) Rulemaking shall be presumed feasible

unless the agency proves that:

1. The agency has not had sufficient time

to acquire the knowledge and experience

reasonably necessary to address a statement

by rulemaking; or

2. Related matters are not sufficiently

resolved to enable the agency to address a

statement by rulemaking; or

3. The agency is currently using the

rulemaking procedure expeditiously and in

good faith to adopt rules which address the

statement.

(b) Rulemaking shall be presumed practicable

to the extent necessary to provide fair notice

to affected persons of relevant agency procedures

and applicable principles, criteria, or standards

for agency decisions unless the agency proves that:

1. Detail or precision in the establishment

or principles, criteria, or standards for agency

decisions is not reasonable under the circumstances;

or

2. The particular questions addressed are of

such a narrow scope that more specific resolution

of the matter is impractical outside of an

adjudication to determine the substantial interests

of a party based on individual circumstances.

23. Section 120.52(16), Florida Statutes, in pertinent part, defines

"rule" as follows:

(16) "Rule" means each agency statement of

general applicability that implements, interprets,

or prescribes law or policy or describes the

organization, procedure, or practice requirements

of an agency and includes any form which imposes

any requirement or solicits any information not

specifically required by statute or by an existing

rule. The term also includes the amendment or

repeal of a rule.

24. To determine whether AHCA's imposition of a temporary moratorium on

the consideration of Medicaid prepaid health plan contract applications is a

rule depends in part on the effect of the moratorium. State Board of Trustees

of the Internal Improvement Trust Fund v. Lost Tree Village Corporation, 600 So.

2d 1240, 1244 (Fla. 1st DCA 1992); Balsam v. Department of Health and

Rehabilitative Services, 452 So. 2d 976 Fla. 1st DCA 1977).

25. In this case, the initial effect of the temporary moratorium delayed

AHCA's consideration of the GLADES' contract application until completion of the

comprehensive review of existing health plans. Subsequent to the completion of

the agency's comprehensive review, and as a result of the information obtained

by the agency from the comprehensive review, AHCA determined that commercial

licensure should be a precedent to the consideration of Medicaid prepaid health

plan contract applications. This change in the agency's policy as reflected by

the proposed amendments to Rule 59G-8.100, Florida Administrative Code, has had

the further effect of placing the GLADES' Medicaid prepaid health plan contract

application on inactive status with the agency.

26. In Lost Tree Village, supra, the Court held that the Board of Trustees

of the Internal Improvement Trust Fund's imposition of a temporary moratorium on

the consideration of applications to conduct activities on state owned submerged

lands was not a rule as defined in Section 120.52(16), Florida Statutes. In its

prior decision in Balsam, supra, the Court had, however, held that a temporary

moratorium imposed by the Department of Health and Rehabilitative Services on

the consideration of certificate of need applications met the definition of a

rule. The Court in Lost Tree Village, distinguished the prior decision in

Balsam "...because a statute and a rule expressly required HRS to review

applications on a timely basis, whereas here the Board is not subject to such a

time requirement and, in fact, is not required to even accept applications."

Supra, 600 So. 2d at 1244.

27. In this case, Sections 409.912(2)(3) and (4), Florida Statutes

provide:

(2) The department may contract with health

maintenance organizations certified pursuant to

part 1 of chapter 641 for the provision of services

to recipients.

(3) The department may contract with county

public health units and other entities authorized

by chapter 154 to provide health care services on

a prepaid or fixed-sum basis to recipients, which

entities may provide such prepaid services either

directly or through arrangements with other providers.

Such prepaid health care services are exempt from

the provision of part 1 of chapter 641.

(4) The department may contract with any public

or private entity on a prepaid or fixed-sum basis

for the provision of health care services to

recipients.

(a) Any entity may provide prepaid services

to recipients, either directly or through arrange-

ments with other entities, if each entity involved

in providing services:

1. Is organized primarily for the purpose of

providing health care or other services of the

type regularly offered to Medicaid recipients;

2. Ensures that services meet the standards set

by the department for quality, appropriateness,

and timeliness;

3. Makes provisions satisfactory to the depart-

ment for insolvency protection and ensures that

neither enrolled Medicaid recipients nor the

department will be liable for the debts of the entity;

4. Submits to the department, if a private entity,

a financial plan that the department finds to be

fiscally sound and that provides for working capital

in the form of cash or equivalent liquid assets

excluding revenues from Medicaid premium payments

equal to at least the first 3 months of operating

expenses of $200,000 whichever is greater;

5. Furnishes evidence satisfactory to the

department of adequate liability insurance coverage

or an adequate plan of self-insurance to respond to

claims for injuries arising out of the furnishing

of health care;

6. Provides, through contract or otherwise, for

periodic review of its medical facilities and

services, as required by the department; and

7. Provides organizational, operational,

financial, and other information required by

the department.

28. As in Lost Tree Village, there is no express statutory requirement for

AHCA to review Medicaid prepaid health plan contract applications on a timely

basis. Additionally, as in Lost Tree Village the statutes does not specifically

require the agency to even accept such contract applications.

29. Rules 59G-8.100(4), and (5), Florida Administrative Code set forth the

contract application procedure and approval process, and provide:

(4) Application for a Prepaid Plan. Before an

eligible contractor may enter into a contract

with the agency to provide services under a

prepaid plan, it shall submit an application.

The application shall be in a form which the agency

has determined contains sufficient information to

allow the agency to assess the applicant's legal,

financial and organizational capability to provide

services under a prepaid plan. The application

shall contain at least the following information.

(a) A list of the names, addresses and official

capacities of the officers and directors with the

applicant.

(b) A list of the names, addresses and official

capacities of the managing employee and other persons

who are to be responsible for the conduct of the

affairs of the prepaid plan.

(c) A description of the prepaid plan and its

organizational relationship to the applicant, its

operations, and the manner in which services will

be regularly available.

(d) Proposed procedures and policies relating

to Medicaid service delivery and administration,

including but not limited to:

1. Marketing

2. Enrollment and disenrollment

3. Quality assurance

4. Grievances

5. Provision for insolvency protection

6. Insurance and bonding

7. Subcontracts

(e) The nature, extent and disposition of

civil or criminal actions against the applicant

and any predecessor organization and any person

with ownership or controlling interest of the

applicant or who is an agent managing employee

of the applicant.

(f) The name and address of each person with

a 5 percent or more ownership or control interest

in the applicant or in any subcontractor or supplier

in which the applicant has direct or indirect

ownership of 5 percent of more. Identify if any

of the persons named are related to another named

person as spouse, parent, child, or sibling.

(g) Financial information sufficient to determine

the financial soundness of the applicant and the

applicant's ability to insure the risk association

with operating a prepaid health plan. An HMO with

a current operating certificate may submit the

latest annual and quarterly reports required under

applicable provisions of part II of chapter 641,

Florida Statutes.

(h) A description of the geographic area or areas

to be served by the prepaid health plan.

(5) Approval process.

(a) Approval of the application shall be based

on the criteria established in federal regulations

and state statutes and rules.

* * *

(c) Agency approval of the final procedures,

policies, materials and forms relating to the

delivery and administration of Medicaid services,

including but not limited to those listed in

subsection 4(d), is required to plan implementation.

30. As in Lost Tree Village, supra, there is no express requirement

contained in Rules 59G-8100(4) and(5), Florida Administrative Code, that AHCA

must review Medicaid prepaid health plan contract applications on a timely

basis.

31. Under these circumstances, absent a showing that AHCA acted in an

arbitrary or capricious manner which is not demonstrated by the evidence in this

case, AHCA's statement regarding the imposition of a temporary moratorium on the

consideration of Medicaid prepaid health plan contract applications does not

constitute a rule as that term is defined in Section 120.52(16), Florida

Statutes. Moreover, as the Court noted in Lost Tree Village, the purpose of the

temporary moratorium in this case was to review the existing agency program and

to develop in-house agency policies to address problems identified with the

program.

32. Furthermore, even if AHCA's statement regarding the temporary

moratorium imposed in this case were to be considered a rule, the statement is

no longer applied. Under these circumstances, to require the agency to

institute rulemaking procedures regarding the discontinued temporary moratorium

would have no actual effect at this time and the allegations of the Petition in

this respect are moot. Montgomery v. Department of Health and Rehabilitative

Services, 468 So. 2d 1014, 1016 (Fla. 1st DCA 1985).

33. In this case, AHCA has discontinued the moratorium on consideration of

Medicaid prepaid health plan contract applications, and has instituted

rulemaking procedures which specify the agency's clear statement of policy

regarding the requirements for consideration of a Medicaid prepaid health plan

contract. The preponderance of the evidence in this case does not support a

finding here that AHCA's statement imposing a temporary moratorium violated the

provisions of Section 120.535(1), Florida Statutes.

34. The preponderance of the evidence also fails to establish that AHCA

has written, published, or otherwise made a formal statement of agency policy to

the effect that Medicaid prepaid health plan contracts are not licenses as that

term is defined in Section 120.52(9), Florida Statutes.

FINAL ORDER

Based on the foregoing findings of fact and conclusions of law, it is

ORDERED that the Petition for Determination that Agency Statements Violate

Section 120.535, Florida Statutes be DISMISSED.

DONE and ENTERED this 30th day of October, 1995, in Tallahassee, Leon

County, Florida.

___________________________________

RICHARD HIXSON

Hearing Officer

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

[phone]

Filed with the Clerk of the

Division of Administrative Hearings

this 30th day of October, 1995.

APPENDIX

As to Petitioner's proposed findings:

1.-8. Accepted and incorporated.

9.-12. Accepted, but subordinate and unnecessary.

13.-15. Accepted and incorporated.

As to Respondent's proposed findings:

1.-12. Accepted and incorporated.

COPIES FURNISHED:

Theodore E. Mack, Esquire

131 North Gadsden Street

Tallahassee, Florida 32301

Heidi E. Garwood, Esquire

Agency for Health Care

Administration

2727 Mahan Drive

Tallahassee, Florida 32309

Douglas M. Cook, Director

Agency for Health Care

Administration

2727 Mahan Drive

Tallahassee, Florida 32308

Jerome W. Hoffman, General Counsel

Agency for Health Care

Administration

2727 Mahan Drive

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 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 Appeal must be filed within 30 days of rendition of the

order to be reviewed.