05-000087RP Florida Association Of Rehabilitation Facilities, Inc., Spectrum Community Services, Ltd., And The Arc Of St. Lucie County, Inc. vs. Agency For Health Care Administration Status: Closed DOAH Final Order on Thursday, April 7, 2005.

Summary: The failure to provide a point of entry to Petitioners demonstrates a substantial departure from the law and warrants the invalidation of the rule.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FLORIDA ASSOCIATION OF )

REHABILITATION FACILITIES, )

INC.; SPECTRUM COMMUNITY )

SERVICES, LTD.; AND THE ARC OF )

ST. LUCIE COUNTY, INC., )

)

Petitioners, )

)

vs. ) Case No. 05 - 0087RP

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Respondent. )

_________________________________)

FINAL ORDER OF DISMISSAL

Pursuant to notice a formal hearing was scheduled in this

matter for March 3, 2005, in Tallahassee, Florida, before J.

D. Parrish, a design ated Administrative Law Judge of the

Division of Administrative Hearings.

APPEARANCES

For Petitioners: Frank P. Rainer, Esquire

Gary J. Clarke, Esquire

Sternstein, Rainer & Clarke, P.A.

411 East College Avenue

Tallahassee, Florida 32301

For Respondent: Stephanie A. Daniel, Esquire

M. Catherine Lannon, Esquire

Chesterfield Smith, Jr., Esquire

Tom Barnhart, Esquire, Esquire

Phillip P. Quaschnick, Esquire

Administrative Law Section

The Capitol, Suite Plaza Level 01

Tallahassee, Florida 32399 - 1050

and

Grant P. Dearborn, Esquire

Karen Varn Haber, Esquire

Donna Riselli, Esquire

Agency for Health Care Administration

Fort Knox Building III, Suite 3431

272 7 Mahan Drive

Tallahassee, Florida 32308

STATEMENT OF THE ISSUE

Whether the undisputed facts of this case support a Final

Order of Dismissal against the Respondent, Agency for Health

Care Administration.

PRELIMINARY STATEMENT

This case is the progeny of a related matter before the

Division of Administrative Hearings (Division or DOAH). In

the related case, DOAH Case No. 04 - 0217RU, the Petitioners

challenged an unpromulgated statement of Agency policy and

maintained the matter sho uld have been adopted by Agency rule.

At the heart of the issue are the statewide rates for the

Medicaid Developmental Disabilities Home and Community Based

Services Waiver. In essence, the Petitioners maintained that

the rates must be adopted by rule.

At the conclusion of the Petitioners’ case in the related

matter, the Respondent, Agency for Health Care Administration

(Respondent or AHCA), announced its intention to proceed with

rulemaking. Then DOAH Case No. 04 - 0217RU went into abeyance.

The instant case evolved from the rulemaking process. The

instant case was filed with the Division of Administrative

Hearings on January 11, 2005.

When an agency announces its intention to engage in

rulemaking, as herein, there are two guidelines set forth by

law: that the agency will take action within 30 days to engage

in the rulemaking, and that the agency will within 180 days

adopt a rule addressing the subject matter. When the agency

then proceeds expeditiously and in good faith to adopt a rule,

the statute gov erning the underlying unpromulgated rule

challenge affords considerable leeway. In fact, the adoption

of the rule renders the underlying matter (in this case DOAH

Case No. 04 - 0217RU) moot. Presumably, when the agency acts

expeditiously and in good faith to proceed with rulemaking,

the public’s interest is protected.

In this case, AHCA timely proceeded to rulemaking but did

not, as a matter of law, afford the Petitioners with a point

of entry to challenge the proposed rule. Accordingly, the

rule that AHC A now deems to be an “existing rule,” must be set

aside.

This case was first noticed for hearing on February 7,

2005. A flurry of motions preceded the commencement of that

hearing with both parties confounded as to the procedural

status of the case. As will be more specifically addressed

below, the Petitioners thought they filed a challenge to the

proposed rule. The Respondent argued that the rule was an

“existing rule” as a matter of law. Neither side correctly

outlined the issues of the matter until the case was

rescheduled and argued on March 3, 2005. At that time the

parties were advised of the instant ruling. This Final Order

of Dismissal is rendered to more fully outline the legal

conclusions reached. The parties do not dispute the facts

that follow.

FINDINGS OF FACT

1. On or about May 3, 2004, after the commencement of

the hearing in DOAH Case No. 04 - 0217RU, AHCA announced it

intended to engage in rulemaking for the subject matter

addressed by the rule challenge (the statewide rates described

above).

2. DOAH Case No. 04 - 0217RU went into abeyance pending

the results of the agency’s rulemaking effort.

3. The Respondent scheduled a “rule development

workshop” for June 8, 2004.

4. On or about October 8, 2004, AHCA published a notice

in the Florida Administrative Weekly that scheduled the public

hearing in the cause, proposed a rate table, and gave persons

interested in participating in the matter who wished to

provide information regarding the “statement of estimated

regulatory costs” to file suc h information within 21 days.

The Petitioners timely responded to the notice.

5. The Petitioners did, in fact, submit information

regarding the statement of estimated regulatory costs.

Whether or not AHCA was “required” to respond to the

information provided by Petitioners is unknown. The

Respondent did not notify the Petitioners that it was not

“required” to consider the information.

6. The parties participated in a public hearing on the

subject matter of the rule on November 2, 2004. The

Responden t did not notify the Petitioners at the public

hearing that it would not respond to the information regarding

the statement of estimated regulatory costs.

7. In fact, AHCA elected to review the information and

did prepare a response to the Petitioners. On December 23,

2004, AHCA issued the response to the information provided by

the Petitioners regarding the statement of estimated

regulatory costs. Whether or not the response was “adequate”

under the law is not known. For purposes of this matter, it

is undisputed that the Respondent tendered the response.

8. On December 27, 2004, AHCA filed the proposed rule

(designated in this record as Rule 59G - 8.200) with the

Secretary of State.

9. The notice of the filing of the instant rule with the

Secretary of State was published in the Florida Administrative

Weekly on January 14, 2005.

10. The subject rule became “effective” on January 16,

2005.

11. The Petitioners first challenged the “proposed rule”

on January 11, 2005. At that time the publication of fili ng

of the rule was not publicly available.

12. There was no published notice prior to January 11,

2005, to indicate that the proposed rule had been filed with

the Secretary of State.

13. After the petition challenging the “proposed” rule

was filed with the Division, the case was set for hearing for

February 7, 2005. At that time the Respondent filed a series

of motions seeking to continue the hearing, limit the

Petitioners to specified issues, and to require a more

definite statement. Essentially, the R espondent has

maintained that the Petitioners did not timely file the

proposed rule challenge and that the petition to challenge the

existing rule is inadequate.

14. The Petitioners intended to challenge the proposed

rule and were unaware that the rule had been filed until

January 14, 2005.

15. The Petitioners sought to amend their petition

challenging the proposed rule.

16. At the hearing commenced on February 7, 2005, the

procedural issues of the matter became more fully evident to

all parties.

17. At one point during the proceedings, the undersigned

asked counsel for the Respondent when the Petitioners were

afforded a point of entry to challenge the proposed rule.

While the Respondent maintained the Petitioners had not

adequately alleged the factual basis for their challenge, the

procedural issue of whether the rule at issue was a “proposed”

rule verses an “existing” rule had not been fully deciphered.

The Respondent’s legal position, as noted by counsel,

continued to be that the rule was an existing rule, that the

Petitioners had not fleshed - out their claims sufficiently to

meet a due process burden, and that the Petitioners bear the

burden of proof in this case.

18. The Petitioners entered an ore tenus motion for

summary final order that was later reduced to writing and

filed with the Division on February 22, 2005.

19. The Respondent was granted leave to respond to the

motion and did so.

20. When the hearing was reconvened on March 3, 2005,

both sides had fully addressed the issues of the case. B oth

sides were afforded additional argument on the matter.

CONCLUSIONS OF LAW

21. The Division of Administrative Hearings has

jurisdiction over the parties to, and the subject matter of,

these proceedings. § 120.56, Fla. Stat. (2004).

22. As the movant, the Petitioners have been charged

with the burden of proof as it relates to the Motion for

Summary Final Order. As there are no genuine issues of

material fact to be resolved by a formal hearing, this Final

Order is entered as a matter of law.

23. S ection 120.56, Florida Statutes (2004), outlines

the procedures for challenging the validity of a rule or a

proposed rule. Subsection (2) of the statute addresses

challenges to proposed rules and provides:

(a) Any substantially affected person may

seek an administrative determination of the

invalidity of any proposed rule by filing a

petition seeking such a determination with

the division within 21 days after the date

of publication of the notice required by s.

120.54 (3)(a), within 10 days after the

final public hearing is held on the

proposed rule as provided by s.

120.54 (3)(c), within 20 days after the

preparation of a statement of estimated

regulatory costs required pursuant to s.

120.541 , if applicable, or within 20 days

after the date of publication of the notice

required by s. 120.54 ( 3)(d). The petition

shall state with particularity the

objections to the proposed rule and the

reasons that the proposed rule is an

invalid exercise of delegated legislative

authority. The petitioner has the burden

of g oing forward. The agency then has the

burden to prove by a preponderance of the

evidence that the proposed rule is not an

invalid exercise of delegated legislative

authority as to the objections raised. Any

person who is substantially affected by a

change in the proposed rule may seek a

determination of the validity of such

change. Any person not substantially

affected by the proposed rule as initially

noticed, but who is substantially affected

by the rule as a result of a change, may

challenge any provi sion of the rule and is

not limited to challenging the change to

the proposed rule. [Emphasis added.]

24. Section 120.56(3), Florida Statutes (2004),

provides:

(a) A substantially affected person may

seek an administrative determination of the

invalidity of an existing rule at any time

during the existence of the rule. The

petitioner has a burden of proving by a

preponderance of the evidence that the

existing rule is an invalid exercise of

delegated legislative authority as to the

objections raised.

(b) The administrative law judge may

declare all or part of a rule invalid. The

rule or part thereof declared invalid shall

become void when the time for filing an

appeal expires. The agency whose rule has

been declared invalid in whole or part

shall give notice of the decision in the

Florida Administrative Weekly in the first

available issue after the rule has become

void. [Emphasis added.]

25. In a nutshell, the challenger to the “existing rule”

bears the burden of proof and must show the rule is an invalid

exercise of delegated legislative authority. If the challenge

precedes the filing (and transformation of the rule from

“proposed” to “existing”), the agency has the burden to prove

by a preponderance of the evidence that the proposed rule is

not an invalid exercise of delegated legislative authority as

to the objections raised. This shift in burden of proof is a

material consequence as a matter of law.

26. Section 120.56(1)(c), Florida Statutes (2004),

provides, in part:

...The failure of an age ncy to follow the

applicable rulemaking procedures or

requirements set forth in this chapter

shall be presumed to be material; however,

the agency may rebut this presumption by

showing that the substantial interests of

the petitioner and the fairness of the

proceedings have not been impaired.

27. Section 120.541, Florida Statutes (2004), provides,

in pertinent part:

(1) (a) A substantially affected person,

within 21 days after publication of the

notice provided under s. 120.54 (3)(a), may

submit to an ag ency a good faith written

proposal for a lower cost regulatory

alternative to a proposed rule which

substantially accomplishes the objectives

of the law being implemented. The proposal

may include the alternative of not adopting

any rule, so long as the proposal explains

how the lower costs and objectives of the

law will be achieved by not adopting any

rule. If such a proposal is submitted, the

90 - day period for filing the rule is

extended 21 days.

(b) Upon the submission of the lower

cost regulatory al ternative, the agency

shall prepare a statement of estimated

regulatory costs as provided in subsection

(2), or shall revise its prior statement of

estimated regulatory costs, and either

adopt the alternative or give a statement

of the reasons for rejecting the

alternative in favor of the proposed rule.

The failure of the agency to prepare or

revise the statement of estimated

regulatory costs as provided in this

paragraph is a material failure to follow

the applicable rulemaking procedures or

requirements set forth in this chapter . An

agency required to prepare or revise a

statement of estimated regulatory costs as

provided in this paragraph shall make it

available to the person who submits the

lower cost regulatory alternative and to

the public prior to filing the rule for

adoption. (Emphasis added.)

28. It is undisputed the Petitioners filed information

that sought to demonstrate to the Respondent an alternative to

the statement of estimated regulatory costs. It is undisputed

the Respondent did not no tify the Petitioners that it did not

deem such information “required” a response on their part.

The statute specifies that the agency “shall” take certain

action. Implicit in the process is the requirement that the

agency will consider information, make a determination of some

kind, and report to the party (and presumably the public)

submitting the alternative. Nevertheless, the Respondent

provided a response to the Petitioners and then, without

waiting 21 days, filed the proposed rule with the Secretary of

State. The chronological procession of the Respondent’s

inappropriate activity was sufficiently set forth in the

Petitioners’ pleadings in this cause to provide notice to the

Respondent of the legal issue at hand. Moreover, to suggest

that the Petitioners were less than forthcoming in the

allegations (and thereby sought to blindside AHCA) is somewhat

disconcerting given the Respondent’s blatant lack of notice

regarding a point of entry to the Petitioners. Had the

Respondent felt it was not “required” to respond to the

statement of estimated regulatory costs, a simple notice of

that decision would have cured all issues in this cause.

29. Because the rule was filed prematurely and with the

Respondent’s certification to the Secretary of State that all

time limitations prescribed by the statute had been complied

with, that all statutory rulemaking requirements had been met,

and that there were no administrative determinations pending

on the rule, the matter was processed and became an “existing”

rule with out affording the Petitioners a point of entry to

challenge the proposed rule. Accordingly, the Respondent

failed to proceed with rulemaking in fairness and failed to

consider the substantial interests of the Petitioners. The

failure to follow applicable rulemaking procedures is a

material violation of law.

ORDER

Based on the foregoing Findings of Fact and Conclusions

of Law, it is ORDERED that the rule in this cause, 59G - 8.200,

Florida Administrative Code, is invalid. The rule is declared

invalid and sh all become void when the time for filing an

appeal expires.

D ONE AND ORDERED this 7th day of April, 2005, in

Tallahassee, Leon County, Florida.

S

_________________________________

J. D. PARRISH

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675 SUMCOM 278 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 7th day of April, 2005.

COPIE S FURNISHED:

Alan Levine, Secretary

Agency for Health Care Administration

Fort Knox Building, Suite 3116

2727 Mahan Drive

Tallahassee, Florida 32308

Valda Clark Christian, General Counsel

Agency for Health Care Administration

Fort Knox Building, Suite 3431

2727 Mahan Drive

Tallahassee, Florida 32308

Scott Boyd, Executive Director/General Counsel

Joint Administrative Procedures Committee

120 Holland Building

Tallahassee, Florida 32399 - 1300

Liz Cloud, Chief

Bureau of Administrative Code

The Elliott Bui lding, Room 201

Tallahassee, Florida 32399 - 0250

Frank P. Rainer, Esquire

Sternstein, Rainer & Clarke, P.A.

411 East College Avenue

Tallahassee, Florida 32304

Grant P. Dearborn, Esquire

Agency for Health Care Administration

Fort Knox Building III, Suite 3431

2727 Mahan Drive

Tallahassee, Florida 32308

Stephanie A. Daniel, Esquire

Office of the Attorney General

The Capitol, Suite Plaza Level 01

Tallahassee, Florida 32399 - 1050

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 the original Notice of Appeal with the

agency clerk of the Division of Administrative Hearings and a

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 notic e of appeal must be filed within 30 days of

rendition of the order to be reviewed.