06-001502 Comprehensive Medical Access, Inc. vs. Office Of Insurance Regulation Status: Closed Recommended Order on Wednesday, November 1, 2006.

Summary: Petitioner failed to prove by a preponderance of the evidence that its owner and chief executive officer was trustworthy and fit, and it therefore failed to prove that it met the statutory criteria for approval to offer a healthcare plan.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

COMPREHENSIVE MEDICAL ACCESS, )

INC., )

)

Petitioner, )

)

vs. ) Case No. 06 - 1502

)

OFFICE OF INSURANCE REGULATION, )

)

Respondent. )

_________________________________)

RECOMMENDED ORDER

Pursuant to notice, a formal hea ring was held in this case

on July 18, 2006, in Tallahassee, Florida, before Patricia M.

Hart, a duly - designated Administrative Law Judge of the Division

of Administrative Hearings.

APPEARANCES

For Petitioner: Joseph S. Rosenbaum, Esquire

Law Offices of Joseph S.

Rosenbaum, P.A.

2937 Southwest 27th Avenue, Suite 101

Miami, Florida 33133

For Respondent: Elenita Gomez, Esquire

S. Marc Herskovitz, Esquire

Kristopher C. Duer, Esquire

Office of Insurance Regulation

612 Larson Building

200 East Gaines Street

Tallahassee, Florida 3 2399 - 4106

STATEMENT OF THE ISSUE

Whether the Petitioner's application to offer a health flex

plan pursuant to Section 408.909, Florida Statutes, should be

granted or denied.

PRELIMINARY STATEMENT

On July 21, 2005, the Office of Insurance Regulation

("OI R") issued a Health Flex Entity letter of disapproval in

which it notified Com prehensive Medical Access, Inc.

("Comprehensive Medical Access") , that its application for

approval to participate in the "health flex entity program" was

denied. The OIR furthe r stated:

The denial is based on the following

reasons:

Dr. Jack J. Michel owns and manages

Comprehensive Medical Access. Dr. Michel,

along with his brother, Dr. George Michel,

have been named as defendants in a civil

suit brought by the United States

go vernment, Case NO. 04 - 21579 CIV -

Jordan/Brown filed on June 29, 2004, in the

United States District Court, Southern

District of Florida, United States of

America, Plaintiff, vs. Jacobo Michel, M.D.

etc. et al., Defendant. The allegations

involve two alle ged schemes to defraud the

United States Government by submitting false

and fraudulent claims to the Medicare and

Medicaid programs. The first scheme (which

allegedly took place between March 1997 -

December 1997) involved obtaining patient

referrals to Lar kin Community Hospital by

paying kickbacks and illegal remuneration to

physicians, and by entering into prohibited

financial relationships with physicians, to

induce such physicians to refer patients to

Larkin. The bulk of the referrals involved

alleged s ervices that were not medically

necessary.

The second alleged scheme, which took place

from January 1, 1998 (Dr. J. Michel

purchased the hospital from Dr. James

Desnick in April 1998), to at least

December 31, 1999, involved fraudulently

increasing the La rkin Community Hospital

patient census and Medicare and Medicaid

revenues by churning patients into Larkin

from a variety of skilled nursing facilities

and assisted living facilities (many of

which Dr. J. Michel has ownership interest)

for medically unnece ssary services.

Pursuant to Section 408.909(3)(b), the

Office shall disapprove any plan that cannot

demonstrate that the applicant and its

management are in compliance with the

standards required under s. 624.404(3).

Section 624.404(3), Florida Statutes,

provides that the Office shall not grant

authority to any insurer whose management,

officers or directors of which are found to

be incompetent and untrustworthy; and the

Office shall not grant authority to an

insurer which it has good reason to believe

is affiliated directly or indirectly through

ownership, control, or other insurance or

business relations, with any person or

persons whose business operations are or

have been marked, to the detriment of

policyholders or the public, by manipulation

of asset s, accounts, or by bad faith.

The plan has failed to demonstrate that the

applicant and its management are in

compliance with the standards required under

s. 624.404(3). The plan therefore is

disapproved.

The remainder of the letter consists of the Noti ce of Rights, in

which Comprehensive Medical Access was notified of its right to

request a proceeding under Sections 120.569 and 120.57, Florida

Statutes (2006). 1

Comprehensive Medical Access timely requested an

administrative hearing involving disputed is sues of material

fact, and the OIR transmitted the matter to the Division of

Administrative Hearings for assignment of an administrative law

judge. The matter was assigned DOAH Case No. 05 - 3963. The file

of the Division of Administrative Hearings was clo sed in an

order entered February 27, 2006, on the motion of Comprehensive

Medical Access to refer the matter back to the OIR because

Comprehensive Medical Access believed that the matter could be

resolved without the need for a final hearing. On April 11,

2006, Comprehensive Medical Access filed a motion requesting

that the Division of Administrative Hearings re - open the file in

this matter because the parties had been unable to reach

agreement on the terms of a settlement. The request was granted

in an o rder entered May 2, 2006, and the Division of

Administrative Hearings re - opened the matter and assigned it

DOAH Case No. 06 - 1502. Pursuant to notice, the final hearing

was held on July 18, 2006.

At the hearing, Joint Exhibits 1 through 3 were offered and

received into evidence, and official recognition was taken of

Sections 408.90 9 and 624.404, Florida Statutes. Joint Exhibit 1

is the application filed by Comprehensive Medical Access , and

Joint Exhibit 2 is a copy of the civil complaint filed by the

Unite d States against Dr. Jacobo Michel and others . In order to

expedite the proceedings, facilitate the orderly presentation of

evidence, and aid in narrowing the issues and because

Comprehensive Medical Access's application was in evidence and

was sufficient to establish its prima facie case , the OIR was

asked to present any evidence in addition to the civil complaint

admitted as Joint Exhibit 2 that it wishe d to offer in support

of its position that Comprehensive Medical Access's request for

approval to offe r a health flex plan first should be denied.

Although it objected to this order of presentation of evidence, 2

t he OIR offered Respondent's Exhibits 1 through 5, which were

received into evidence, but it did not offer the testimony of

any witnesses; Respon dent's Exhibit 1 is the transcript of an

"Investigative Hearing" conducted by the OIR prior to issuing

its notice of intent to deny Comprehensive Medical Access's

application. Comprehensive Medical Access offered the testimony

of Jack (Jacobo) Michel, M.D ., Comprehensive Medical Access's

owner and Chief Executive Officer ; Petitioner's Exhibits 10

through 14 were offered and received into evidence; Petitioner's

Exhibit 9 was offered into evidence but rejected. The parties

indicated during the hearing that they intended to offer written

proffers of evidence that had been excluded, and they agreed to

file the proffers with or prior to the filing of their proposed

findings of fact.

The one - volume transcript of the proceedings was filed with

the Division of Adm inistrative Hearings on July 26, 2006. The

parties filed a joint motion on August 4, 2006, in which they

requested an extension of time until September 13, 2006, for

filing their proposed findings of fact and conclusions of law

and their written proffers; the extension was granted in an

order entered August 7, 2006. Comprehensive Medical Access

timely filed its proposed findings of fact and conclusions of

law, which have been considered in the preparation of this

Recommended Order. The OIR timely filed a post - hearing

submittal which contained primarily argument relating to what it

considers procedural defects in the administrative hearing and

"Conclusions of Law." 3

Pro ffers

Both parties took issue with the exclusion of certain

evidence, and both submitte d written proffers.

Comprehensive Medical Access

During the hearing, Comprehensive Medical Access sought to

introduce evidence consisting of the results of a search of the

"Company Directory" database of the official website of the

Department of Financial Services showing that an insurance

company doing business as Blue Cross Blue Shield of Illinois had

been licensed as a life and health insurer in Florida in

June 2004, together with a listing of "Top False Claims Act

Cases" drawn from the internet, purpor ting to show that, in

July 1998, a company identified as " Blue Cross Blue Shield

Illinois " had been assessed a criminal penalty and paid

$140,000,000 .00 , apparently in settlement of a federal false

claims act case. The evidence was excluded on the ground that

it was not relevant to the issue of whether the OIR should grant

or deny Comprehensive Medical Access's application.

Upon review of Comprehensive Medical Access's proffered

exhibit and of the argument submitted in the written proffer

regarding its rel evancy to the question of whether Comprehensive

Medical Access's application should be granted, it is determined

that the proffered exhibit should not be received into evidence.

The proffered documents do not establish that the situation of

Comprehensive Medical Access is sufficiently similar to that of

Blue Cross Blue Shield of Illinois to render the comparison

relevant in determining whether Comprehensive Medical Access's

application should be granted or denied. Even accepting that

the information conta ined in the list of false claims act

settlement amounts is accurate, Blue Cross Blue Shield of

Illinois may have submitted sufficient information for the OIR

to conclude that, notwithstanding its payment of a settlement

and criminal penalty to the federal government, it was

trustworthy and fit to be licensed as an insurance company in

Florida. Even when determining the appropriate penalty to

assess for a particular statutory or rule violation, an area in

which an agency's authority is more circumscribed th an it is in

determining whether to grant or deny an application for a

license or permit, the cases offered for comparison must be

substantially similar in all material respects to be helpful in

determining the appropriate penalty to be imposed in the case

under consideration. See Miami - Dade County Sch. Bd. v. Steven

Newbold , DOAH Case No. 03 - 3217 , 78 - 79 ( Fla. Div. Adm. Hear ings,

Recommended Order, August 9, 2004 ) . See also D epartment of

Health, Board of Medicine v. Walter Inkyun Choung , M.D. , Case

No.05 - 3 156PL , 15 (Fla. Div. Adm. Hearings, Recommended Order,

January 20, 2006 )("[A] ccess to the final orders introduced at

hearing allows a comparison of punishment in prior cases, under

their facts, to the present record to establish appropriate

punishment here . ") .

OIR

The OIR called no witnesses to testify regarding the basis

for its proposed denial of Comprehensive Medical Access's

application. During cross - examination of Dr. Michel, however,

the OIR asked him questions about matters going to the truth or

fa lsity of the allegations contained in the civil complaint.

Comprehensive Medical Access's counsel objected t o these

questions on the ground that they exceeded the scope of direct

examination, pointing out that no questions were asked of

Dr. Michel regardi ng the truth or falsity of the allegations in

the civil complaint during Comprehensive Medical Access's direct

examination of Dr. Michel. Counsel for Comprehensive Medical

Access noted that it was Comprehensive Medical Access's position

that the filing of the civil complaint, the sole basis stated in

the denial letter for the OIR's preliminary decision to deny

Comprehensive Medical Access's application, is not evidence of

lack of fitness or trustworthiness and that the truth or falsity

of the allegations i n the civil complaint were irrelevant in

this proceeding . 4 Comprehensive Medical Access's objection to

these questions were sustained, and the OIR was given leave to

file a written proffer of the evidence it sought to elicit from

Dr. Michel. 5

Having consi dered the arguments set forth in the OIR's

written proffer and the subject matter of the proffered

questions, it is determined that the hearing should not be re -

opened for the purpose of allowing the OIR to examine Dr. Michel

with the questions included in the proffer. In support of its

proffer, the OIR stated that it

believes that the responses to these

questions would have shown that Petitioner

did in fact receive the payments alleged in

the Civil Complaint, that Petitioner and his

entitles were not in c ompliance with the

Stark Law . . . ; that he was in fact in a

position of responsibility and control when

the alleged schemes took place, and that all

of these things, coupled with the fact that

as of the date of disapproval, the Office

still did not have complete answers

regarding the application requirements or

the Civil Complaint, led the Office to

determine that Petitioner did not meet the

fitness and trustworthiness standards of the

statute.

The OIR maintained both in its July 21, 2005, preliminary de nial

letter and consistently throughout this proceeding that the sole

fact underlying its determination that Comprehensive Medical

Access's application should be denied was the filing of the

civil complaint by the United States Government , and, consistent

with its theory of the case, Comprehensive Medical Access did

not address the truth or falsity of the allegations during its

direct examination of Dr. Michel . Thus, the questions submitted

by the OIR were outside the scope of direct examination. In

addit ion, g iven that the denial letter referenced only the

filing of the civil complaint as the basis on which it

determine d that Dr. Michel was unfit and untrustworthy, the

proof that OIR sought to establish by the questions identified

in its proffer is irrele vant to its case in support of the basis

for its proposed denial of Comprehensive Medical Access's

application. 6

FINDINGS OF FACT

Based on the oral and documentary evidence presented at the

final hearing and on the entire record of this proceeding, the

f ollowing findings of fact are made:

1. The OIR and the Agency for Health Care Administration

each must "approve or disapprove health flex plans that provide

health care coverage for eligible participants." § 408.909(3),

Fla. Stat. The purpose of health flex plans is to provide basic

and preventive health care services "to low - income uninsured

state residents." § 408.909(1), Fla. Stat. 7

2 . On November 12, 2004, Comprehensive Medical Access

submitted an application to the OIR for approval to participate

in the health flex plan pilot program created by the Legislature

in Section 408.909, Florida Statutes. Comprehensive Medical

Access was formed in 2003 for the purpose of applying for

approval to offer a health flex plan .

3 . Jack J. Michel, M.D., wholly o wns Comprehens ive Medical

Access, and is its p resident and c hief e xecutive o fficer.

Dr. Michel specializes in the practice of internal medicine, and

has been licensed to practice medicine in Florida since 1993.

Dr. Michel owns ten healthcare - related comp anies.

4 . In 1998, Dr. Michel purchased Larkin Community

Hospital, which is located in South Miami, Florida, and he is

the chief executive officer of the hospital in charge of running

the hospital. Larkin Community Hospital is a general acute - care

hospit al that provides surgery facilities and an emergency room.

The hospital specializes in providing care to elderly patients,

and has an annual operating budget of $30 to $40 million a year,

with a monthly payroll of $1.4 million. Larkin is currently

approv ed as a Medicare and Medicaid provider, and it also

provides services under contract for federal and state

prisoners. In addition, Larkin Hospital and Dr. Michel have

been licensed by Florida and the federal government to provide

home health services unde r Medicaid and Medicare.

5 . Comprehensive Medical Access, under the management of

Dr. Michel, also operates several clinics to serve low - income,

elderly, and indigent patients. 8 These clinics are designated by

the Agency for Health Care Administration as "area of critical

need" facilities. This designation allows Comprehensive Medical

Access to employ physicians licensed to practice medicine in

states other than Florida, including Puerto Rico, who have been

issued limited licenses by the Florida Board of Medicine.

Comprehensive Medical Access pays these physicians less than it

pays those licensed to practice medicine in Florida, and it can,

therefore, serve more low - income, elderly, and indigent

patients.

6 . Currently, Comprehensive Medical Access clini cs serve

more than 50,000 low - income, elderly, and indigent patients.

Many of these patients would be eligible to participate in

Comprehensive Medical Access's health flex plan, were its

application to be approved.

7 . Under Comprehensive Medical Access's business plan for

operation as a n entity offering a health flex plan , the various

clinics it currently operates would provide general health care

services for those enrolled in Comprehensive Medical Access's

health flex plan, and Larkin Community Hospital would provide

hospital services. Under the plan, these services would be

provided to individuals participating in the health flex plan,

who would pay a monthly fee to Comprehensive Medical Access and

co - payments for some services when the services are pr ovided.

8 . In its application for approval to offer a health flex

plan , Comprehensive Medical Access disclosed that Dr. Michel and

his brother, George J. Michel, M.D., who is Comprehensive

Medical Access's vice - president and medical director, had been

nam ed as defendants in a civil lawsuit filed by the United

States of America in the United States District Court for the

Southern District of Florida. Numerous defendants were named in

the lawsuit, including Larkin Community Hospital and other

entities in wh ich Dr. Michel had ownership interests.

9 . The 58 - page complaint filed in the federal government's

civil lawsuit included eight counts relating to two alleged

schemes: The first scheme allegedly occurred in 1997 and

allegedly involved kickbacks paid by L arkin Community Hospital

and related corporations to Dr. Michel, Dr. Michel's practice

group, and Dr. George Michel in return for admitting patients to

that hospital; many of the patients were allegedly covered by

Medicare and many of the admissions were a llegedly medically

unnecessary. The second scheme allegedly occurred in 1998 - 1999,

after Dr. Michel purchased Larkin Community Hospital, and

allegedly involved the fraudulent increase of Medicaid and

Medicare revenues by "churning" patients into that hosp ital from

skilled nursing and assisted living facilities, some of which

were owned by Dr. Michel, among others; many of the patients

allegedly received medically unnecessary treatments while in

Larkin Community Hospital.

10 . Four counts of the civil compl aint charged Dr. Michel

and others with violations of the federal False Claims Act,

Title 31, Section 3729(1)(1), United States Code, with respect

to both the alleged 1997 scheme and the alleged 1998 - 1999

scheme; one count charged Dr. Michel and others wit h common law

fraud with respect to both alleged schemes; one count charged

entities owned by Dr. Michel and others with payment by mistake;

one count charged Dr. Michel and others with unjust enrichment;

and one count claimed that the government was entitl ed to

"disgorgement of illegally earned monies."

11 . The Florida Board of Medicine initiated disciplinary

proceedings against Dr. Michel on the basis of the allegations

in the civil complaint but dismissed the proceeding before

hearing.

12 . After the civ il complaint was filed, the Agency for

Health Care Administration (" AHCA ") notified Larkin Hospital

that it was suspending Medicaid payments as a result of the

allegations in the civil complaint. Comprehensive Medical

Access filed a lawsuit in circuit cou rt seeking to enjoin AHCA

from suspending Medicaid payments, and a temporary injunction

was granted.

13 . Dr. Michel testified during the evidentiary hearing

conducted by the OIR on June 9, 2005 9 :

a. T he allegations in the federal civil complaint arose

fr om testimony given by an associate of the doctor from whom

Dr. Michel purchased Larkin Hospital who had been convicted of

participation in a kickback scheme in Illinois and who had

received a sentence reduction for his testimony regarding Larkin

Hospital;

b. T he allegations regarding kickbacks were based on

misunderstanding s about the actual expenses incurred by his

practice group relating to the provision of emergency r oom

services at Larkin Hospital under a c ontract that was never

executed , about the rea sons for the large number of patient

referrals to Larkin Hospital by Dr. Michel and members of his

practice group , and about the expenses incurred under the

contract between Larkin Hospital and Dr. Michel's practice group

for the provision of radiology ser vices to the hospital ;

c. The allegations in the civil complaint that Dr. Michel

and entities he owned, operated, or controlled billed Medicaid

and Medicare for services that were not medically unnecessary

were based on audits that disallowed payment for excessive days

of hospitalization, but, as a result of appeals, the total

number of days disallowed was substantially decreased; and

d . Dr. Michel also testified in June 2005, that the

parties in the civil lawsuit had reached a settlement in

principal tha t he expected to be finalized within 60 days , with

Larkin Hospital paying $10 million of the total proposed

$15 million settlement amount. Dr. Michel categorized the

decision to settle the case as a business decision on the part

of all parties because it would be difficult to prove or

disprove the allegations in the complaint. A settlement had

not, however, been finalized at the time of the final

administrative hearing in this case.

Ultimate finding of fact

14 . The filing and pendency in federal court o f the civil

complaint containing allegations of wrongdoing , including

payment of kickbacks and fraud, on the part of Dr. Michel and

healthcare - related e ntities he own ed or operated or with which

he was associated , are sufficient to raise the issue of

Dr. M ichel's fitness and trustworthiness as the owner and chief

executive officer of Comprehensive Medical Access to operate

Comprehensive Medical Access as a n entity offering a health flex

plan . Dr. Michel did not present any evidence during the

hearing relat ing to the substance of the allegations contained

in the civil complaint , but he did establish by credible and

persuasive evidence that he is competent to own and operate an

entity providing a health flex plan due to his experience in

managing entities pro viding healthcare services , including

clinics which primarily service low - income, elderly, an d

destitute patients; his knowledge about the healthcare services

needed by these groups of individuals; and his familiarity with

the health flex plan program enac ted by the legislature in

Section 408.909, Florida Statutes , and how such a plan could be

put into operation . In addition, Dr. Michel appears to have in

place the facilities and personnel to provide healthcare

services under a health flex plan.

15 . Nonet heless, the evidence presented by Dr. Michel is

not sufficient to overcome the serious concerns regarding

Dr . Michel' s trustworthiness and fitness to own and operate

Comprehensive Medical Access as a n entity offering a health flex

plan arising as a result of the pendency of the civil complaint

filed by the federal government. The explanations provided by

Dr. Michel during the investigatory hearing before the OIR are

insufficiently persuasive to overcome these reasonable concerns,

as is the fact that the se ttlement pending in June 2005 has yet

to be finalized. Comprehensive Medical Access has, therefore,

failed to establish with the requisite degree of certainty that

Dr. Michel is trustworthy and has not engaged in business

operations in bad faith.

CONCLUSI ONS OF LAW

16 . The Division of Administrative Hearings has

jurisdiction over the subject matter of this proceeding and of

the parties thereto pursuant to Sections 120.569 and 120.57(1),

Florid a Statutes . 10

17 . Because Comprehensive Medical Access has app lied for

approval to offer a health flex plan , it has the burden of

proving by a preponderance of the evidence that it meets all the

requirements for receiving such approval. See Department of

Banking & Fin. v. Osborne Stern , 670 So. 2d 932, 934 (Fla.

199 6)("[W]hile the burden of producing evidence may shift

between the parties in an application dispute proceeding, the

burden of persuasion remains upon the applicant to prove her

entitlement to the license .") . 11

18 . Comprehensive Medical Access's burden in this case is

the preponderance of the evidence. § 120.57(1)(j), Fla. Stat.

("Findings of fact shall be based upon a preponderance of the

evidence, except in penal or licensure disciplinary proceedings

or except as otherwise provided by statute . . . ."). The

preponderance of the evidence standard requires proof by "the

greater weight of the evidence," Black's Law Dictionary 1201

(7th ed. 1999), or evidence that "more likely than not" tends to

prove a certain proposition. See Gross v. Lyons , 763 So. 2d

27 6, 289 n.1 (Fla. 2000)(relying on American Tobacco Co. v.

State , 697 So. 2d 1249, 1254 (Fla. 4th DCA 1997) quoting

Bourjaily v. United States , 483 U.S. 171, 175 (1987)).

19 . Section 408.909, Florida Statutes , authorizes the

approval of health flex plans a nd includes the criteria for

approval of health flex plans, as well as certain requirements

for eligibility to enroll in a health flex plan.

Section 408.909 provides in pertinent part:

(3) PROGRAM. -- The agency [Agency for Health

Care Administration] and the office [Office

of Insurance Regulation] shall each approve

or disapprove health flex plans that provide

health care coverage for eligible

participants. . . .

* * *

(b) The office shall develop guidelines for

the review of health flex plan applicati ons

and provide regulatory oversight of health

flex plan advertisement and marketing

procedures. The office shall disapprove or

shall w ithdraw approval of plans that:

* * *

4. Cannot demonstrate that the applicant

and its management are in compliance w ith

the standards required under s. 624.404 (3).

(c) The agency and the Financial Services

Commission may adopt rules as needed to

administer this secti on. [ 12 ]

20 . Section 624.404(3) (a) , Florida Statutes, provides:

The office shall not grant or continue

authority to transact insurance in this

state as to any insurer the management,

officers, or directors of which are found by

it to be incompetent or untrustworthy; or so

lacking in insurance company managerial

experience as to make the proposed operation

h azardous to the insurance - buying public; or

so lacking in insurance experience, ability,

and standing as to jeopardize the reasonable

promise of successful operation; or which it

has good reason to believe are affiliated

directly or indirectly through owne rship,

control, reinsurance transactions, or other

insurance or business relations, with any

person or persons whose business operations

are or have been marked, to the detriment of

policyholders or stockholders or investors

or creditors or of the public, by

manipulation of assets, accounts, or

reinsurance or by bad faith.

21 . "[A]n agency has particularly broad discretion in

determining the fitness of applicants who seek to engage in an

occupation the conduct of which is a privilege rather than a

right." Osborne Stern & Co. v. Department of Banking & Fin. ,

647 So. 2d 245, 250 (Fla. 1st DCA 1994)(Booth, J., dissenting).

The OIR has no discretion under Sections 408.909(3)(b)3. and

624.404(3)(a) to grant an entity the authority to offer a health

flex plan if the OIR finds or "has good reason to believe" that

the applicant's principals are incompetent, untrustworthy, or

have engaged in business practices marked by bad faith. T he

authorization to offer a health flex plan to low income,

elderly, and destitute individuals is clearly not a matter of

right but is, rather, a privilege granted only to those entities

that demonstrate to the OIR that, among other things, their

principals are competent and trustworthy and have not engaged in

business practices marked by bad faith.

22 . The evidence presented by the OIR in this case,

consisting exclusively of the civil complaint filed against

Dr. Michel and entities he owns, operates, or i n which he has an

interest, does not establish that Dr. Michel or these entities

c ommitted the acts alleged in the complaint because, as

Comprehensive Medical Access argues, the allegations in

themselves are not evidence of wrongdoing. If an agency were

seeking to impose disciplinary action on Comprehensive Medical

Access or Dr. Michel or to suspen d Comprehensive Medical

Access's participat ion in state programs or payment for Medicaid

or Medicare claims , the mere pendency of the civil complaint

would not constitute evidence sufficient to sustain the penal

action . But th e pendency of th e civil complaint is sufficient

to give rise to reasonable and serious concerns regarding

Dr. Michel's fitness and trustworthiness to own and operate an

entity offering a health flex plan , especially in light of the

potential harm that could be suffered by low income and elderly

individuals participating in the plan.

23 . The evidence presented by Comprehensive Medical Access

is simply insufficient to meet the burden imposed by

Section 408.909(3)(b)3., Florida Statutes , and b ased on the

findings of fact her ein, Comprehensive Medical Access has failed

to meet its burden of proving by a preponderance of the evidence

that that it has complied with the standards in

Section 624.404(3)(a), Florida Statutes .

RECOMMENDATION

Based on the foregoing Findings of Fact a nd Conclusions of

Law, it is RECOMMENDED that the Office of Insurance Regulation

enter a final order denying the application of Comprehensive

Medical Access, Inc., to offer a health flex plan .

DONE AND ENTERED this 1st day of November , 200 6 , in

Tallahassee , Leon County, Florida.

S

___________________________________

PATRICIA M. HART

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675 SUNCOM 278 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 1 st day of November , 200 6 .

ENDNOTES

1 / All references to the Florida Statutes herein are to the 2 006

edition unless otherwise indicated.

2 / See discussion infra in endnote 11.

3 / The OIR stated in its "Proposed Recommended Order" that "the

procedural aspects of the hearing were so fatally flawed that

for the Office to proceed with submitting a tra ditional Proposed

Recommended Order would serve no useful purpose as the Office

was not permitted to make a record from which facts could be

found." Respondent's "Proposed Recommended Order" at 4. In its

proposed "Conclusions of Law," the OIR stated that the OIR has

the authority to make decisions regarding trustworthiness and

fitness for licensure pursuant to statute; that it had decided,

on the basis of an investigatory evidentiary hearing it had

conducted, that Dr. Michel, Comprehensive Medical Access' s

principal, was not fit or trustworthy; that its judgment that

Comprehensive Medical Access's application should be denied was

entitled to great weight in this administrative proceeding; and

that the OIR's denial should be "affirmed": "Under Natelson an

agency can make a determination that a civil action brought by a

federal agency and the lack of proper responses, as demonstrated

by the evidentiary hearing transcript in this matter

[Respondent's Exhibit 1], is sufficient to find an applicant

unfit and un trustworthy under the statute." Respondent's

"Proposed Recommended Order" at 7 and 9.

These statements of the OIR's legal position in this case

exhibit a misunderstanding of the nature of a de novo

administrative hearing and the mistaken legal posit ion that the

determination of the trustworthiness of an applicant for

licensure is a question of law within the exclusive jurisdiction

of the OIR. As discussed infra in endnote 11, the purpose of

the administrative hearing in this case was to "'formulate final

agency action, not to review action taken earlier and

preliminarily.'" Department of Transportation v. J.W.C., Co. ,

396 So. 2d 778, 787 (Fla. 1st DCA 1981)(citation omitted). And,

as discussed infra in endnote 10, the issue of whether an

applicant for licensure is trustworthy and competent and fit to

be issued a license or permit is a question of ultimate fact and

not of law.

4 / Comprehensive Medical Access maintained in its request for an

administrative hearing, and throughout this proceeding, th at the

civil complaint did not constitute evidence of wrongdoing and

was an insufficient factual basis on which to base a finding

that Comprehensive Medical Access did not meet the statutory

criteria for approval as a health flex entity.

5 / The OIR prote sted at the hearing, in its "Proposed

Recommended Order," and in its proffer, the undersigned's ruling

denying its request that it be allowed to ask Dr. Michel

questions and to receive answers "on the record" for its proffer

and requiring instead that it s ubmit a written proffer. The

form of a proffer is, however, discretionary with the judge.

See Porro v. State , 656 So. 2d 587, n. 1 (Fla. 3d DCA 1995).

6 / This is not to say, however, that such evidence would be

irrelevant to Comprehensive Medical Acces s's case, which

required affirmative proof that Dr. Michel was competent, fit,

and trustworthy and that Comprehensive Medical Access's

application should be approved. With the line of questioning

proposed in its proffer, the OIR would essentially have bee n

taking up the burden of proving that Dr. Michel was unfit and

untrustworthy, a burden that was Comprehensive Medical Access's

to satisfy. See discussion infra in endnote 11.

7 / Section 408.909, Florida Statutes, sets forth the purpose of

health flex p lans as follows:

(1) INTENT. -- The Legislature finds that a

significant proportion of the residents of

this state are unable to obtain affordable

health insurance coverage. Therefore, it is

the intent of the Legislature to expand the

availability of heal th care options for low -

income uninsured state residents by

encouraging health insurers, health

maintenance organizations, health - care -

provider - sponsored organizations, local

governments, health care districts, or other

public or private community - based

or ganizations to develop alternative

approaches to traditional health insurance

which emphasize coverage for basic and

preventive health care services. To the

maximum extent possible, these options

should be coordinated with existing

governmental or communi ty - based health

services programs in a manner that is

consistent with the objectives and

requirements of such programs.

8 / These clinics were previously operated by an entity known as

the Project Access Foundation, and it was this entity that

submitted t he original application for approval to participate

in the health flex plan pilot program. Comprehensive Medical

Access was created at the request of the OIR, and a second

subsequent application, which is the subject of this proceeding,

was filed with the OIR by Comprehensive Medical Access.

9 / Comprehensive Medical Access chose not to submit evidence

related to the truth or falsity of the allegations contained in

the civil complaint but, rather, relied on its theory of the

case that the allegations in t he civil complaint were not

evidence of wrongdoing and, in fact, had no evidentiary value

whatsoever. Therefore, the only evidence presented in this case

relating to the allegations in the civil complaint was the

testimony given by Dr. Michel at the inves tigatory hearing

conducted by the OIR. The transcript of this hearing was

presented by the OIR in Respondent's Exhibit 1. The substance

of Dr. Michel's testimony has been considered in this proceeding

under Section 90.803(18), Florida Statutes, which pro vides an

exception to the hearsay rule for admissions of a party offered

against that party, but the evidence has been considered for the

purpose of presenting Dr. Michel's explanation of his position

on the allegations in the civil complaint.

10 / On July 12, 2006, the OIR filed a Motion to Relinquish

Jurisdiction and Close File, asserting that, based on the

July 21, 2005, letter of denial and on the Petitioner's Pre -

Hearing Stipulation, there were no disputed issues of material

fact to be resolved in an e videntiary hearing and that the only

issues to be resolved were legal issues. The "disputed issues

of fact" to which the OIR referred in its motion were stated in

the Petitioner's Pre - Hearing Stipulation as: "1. Whether the

applicant and its management have demonstrated compliance with

the standards required under Section 624.404(3)"; and

"2. Whether the Department [sic] of Insurance Regulation can

deny a license to Petitioner based upon the fact that the

Department of Justice has filed a civil law suit (still pending)

for alleged misconduct between March, 1997 and December, 1999."

Comprehensive Medical Access filed a response in opposition

to the Motion to Relinquish Jurisdiction, in which it argued

that the question of whether Comprehensive Medic al Access had

complied with the requirements of Section 624.404(3), Florida

Statutes, was a disputed issue of material fact. In the

response, Comprehensive Medical Access stated that it

anticipated that the OIR would offer the existence of a civil

complai nt as its only evidence that Comprehensive Medical Access

was not in compliance with the requirements of

Section 624.404(3), Florida Statutes. The OIR filed a reply to

Comprehensive Medical Access's response, in which it re - asserted

its contention that th ere were no disputed issues of fact to be

litigated in a proceeding conducted pursuant to

Section 120.57(1), Florida Statutes: "There is no dispute that

a Civil Complaint was filed by the U.S. Attorney against

Petitioner and others. The matter at hand he re regards only

legal issues," specifically, whether Dr. Michel meets the

criteria in Section 624.404(3), Florida Statutes. The OIR's

motion was denied in an order entered July 14, 2006, in which

Langston v. Jamerson , 653 So. 2d 489, 491 (Fla. 1st DCA 199 5),

was cited for the well - established rule that "the question of

whether an applicant for licensure has met statutory standards,

such as trustworthiness or competence, is a question of fact."

Shortly after the final hearing convened, the OIR renewed

its motion to relinquish jurisdiction and again argued that

there were no disputed issues of material fact and that the

matter should be returned to the OIR for an informal hearing

pursuant to Section 120.57(2), Florida Statutes. Counsel for

the OIR argu ed in pertinent part:

If and when you review the Petitioner's

memorandum of law filed yesterday,* you will

see that the parties agreed that there was a

civil complaint that was filed by the U.S.

Department of Justice against Dr. Jack

Michel as one of the defendants.

You will see that the [OIR] reviewed

the application that was submitted by

Dr. Michel through Comprehensive Medical

Access, Inc. for approval as a health flex

plan.

You will also see that said application

was disapproved pursuan t to sections

408.909, and 624.404 of the Florida

Statutes.

It was disapproved because the [OIR]

concluded that Dr. Michel was not

trustworthy or competent to grant the

licensure that he was applying for.

There are no disputed issues of

materia l fact. When there are no issues,

the proper venue is before the Agency

pursuant to Section 120.57(2), Florida

Statutes.

Transcript at page 19. *(Note: On the day before the hearing,

Comprehensive Medical Access filed Petitioner's Memorandum of

Law in Support of Vacating the Office of Insurance Regulation's

Denial and Ordering the Office of Insurance Regulation to

Approve Petitioner's Application for Participation in the Health

Flex Program, in which it argued that the basis for the OIR's

denial of Com prehensive Medical Access's application was

insufficient to establish that Comprehensive Medical Access was

not in compliance with the statutory requirements for approval

to participate in the health flex plan pilot program. Among

other arguments, Compreh ensive Medical Access contended in its

memorandum that the allegations contained in the civil complaint

were not evidence of any wrongdoing and could not form the basis

for OIR's denial of its application.)

At the hearing, the OIR supplemented the ar gument made in

its written motion to relinquish jurisdiction with citation to

Natelson v. Department of Insurance , 454 So. 2d 31 (Fla. 1st DCA

1984), to support its contention that the only issue for

determination in this proceeding, whether the filing of a civil

complaint against Dr. Michel is sufficient to establish that he

is not "trustworthy or competent," is not a factual issue but a

legal issue properly resolved by the OIR. The OIR relied on the

specific holding in Natelson that it would defer to "th e

department's construction of the term 'lack of fitness or

trustworthiness to engage in business of insurance' as including

the conviction of criminal conspiracy to traffic in illicit

drugs" because that construction "is well within the range of

possible constructions." Id. at 32. Counsel for Comprehensive

Medical Access argued in opposition to the motion that the

question of whether "a mere civil complaint that is pending is

enough for denial of the health flex license" is a question of

factanscrip t at page 22 - 23.

At the OIR's request, ruling on the renewed motion was

reserved until the conclusion of the evidence. The OIR

reiterated at the conclusion of the evidence its contention that

there was no dispute regarding the fact that the civil co mplaint

had been filed against Dr. Michel and that the issue of whether

Dr. Michel was competent and trustworthy was an issue of law

that is within the purview of the OIR. The renewed motion to

relinquish was again denied.

Subsequent to the hearing, the undersigned has had the

opportunity to review the Natelson case and to conduct

additional research on the issue presented by the OIR in its

motion to relinquish jurisdiction. The court in Natelson did

not address the issue of whether a determination of lack of

fitness or trustworthiness or competence is a question of law to

be resolved by the OIR or a question of fact to be resolved by

an administrative law judge. Rather, the court in Natelson

simply assumed that the issue presented involved statutor y

interpretation and relied for its holding on the well -

established rule requiring appellate courts, on review of final

agency action, to defer to an agency's interpretation of a

statute: "Agencies are afforded wide discretion in the

interpretation of a s tatute which it administers and will not be

overturned on appeal unless clearly erroneous. (Citations

omitted.) The reviewing court will defer to any interpretation

within the range of possible interpretation." 454 So. 2d at 32

(emphasis in original). The court's specific holding in

Natelson has been followed in only one case, Paisley v.

Department of Insurance , 526 So. 2d 167 (Fla. 1st DCA 1988),

another case in which the court did not address the issue of

whether the determination of "lack of fitness or

trustworthiness" was a matter of law or fact.

There is an equally well - established rule, followed in

Langston , " that the issue of whether an individual violated a

statute or deviated from a standard of conduct is generally an

issue of fact to be d etermined by the administrative law judge

based on the evidence and testimony." Gross v. Department of

Health , 819 So. 2d 997, 1003 (Fla. 5th DCA 2002). S ee , e.g. ,

Palamara v. Department of Bus. & Prof 'l Reg ulation , 855 So. 2d

706 (Fla. 4th DCA 2003)(whe ther applicant was of good moral

character is a factual issue); Gross (whether physician breached

standard of care is a factual issue) and cases cited therein;

Goin v. Commission on Ethics , 658 So. 2d 1131 (Fla. 1st DCA

1995)(whether facts constitute viola tion of statute or rule is

question of ultimate fact); Nest v. Department of Prof'l

Regulation, Bd. of Med. Exam'rs , 490 So. 2d 987 (Fla. 1st DCA

1986)(whether physician could practice medicine with reasonable

skill and safety is a question of ultimate fac t). This rule

derives from the principal of law that matters "susceptible of

ordinary methods of proof, such as determining the credibility

of witnesses or the weight to be given particular evidence . . .

should be determined by the hearing officer." Pil lsbury v.

Department of Health & Rehabilitative Serv. , 744 So. 2d 1040,

1042 (Fla. 2d DCA 1999). Significantly, the court in Langston

rejected an argument of the Education Practices Commission that

is virtually identical to the argument accepted by the co urt in

Natelson :

The EPC takes the position that it was not

bound by the hearing officer's findings that

no students were harmed, embarrassed or felt

disparaged because the members of the EPC

were entitled to decide that the events

which took place in Mr. Langston's classroom

had the potential to cause harm,

embarrassment or a sense of disparagement,

and that the hearing officer therefore

misconstrued the application of these two

rules. . . . [T]his argument by the EPC must

be rejected because the question whether a

particular action constituted a violation of

one of these two rules is a factual question

to be decided in the context of the alleged

violation. (Citation omitted.) The

question whether the facts, as found in the

recommended order and adopted by the EPC,

constituted violations of these rules, was a

question of ultimate fact which the agency

erred in rejecting without adequate

explanation. See Holmes v. Turlington , 480

So. 2d 150, 153 (Fla. 1st DCA 1985)(whether

there was a deviation from the r equired

standard of conduct is not a conclusion of

law, it is an ultimate finding of fact

within the fact - finding discretion of the

hearing officer.

653 So. 2d at 491.

Having again considered the arguments of the OIR in support

of its motion to r elinquish jurisdiction, and having carefully

reviewed the Natelson case and conducted additional research on

the issue presented by the OIR, the undersigned has not been

persuaded to alter the rulings denying the OIR's motions to

relinquish jurisdiction. The issue of whether Dr. Michel, the

principal of Comprehensive Medical Access, meets the criteria of

Section 624.404(3), Florida Statutes, is a question of fact.

Comprehensive Medical Access is entitled to an evidentiary

hearing at which it can present e vidence to establish that

Dr. Michel is competent and trustworthy and has not acted in bad

faith in his business operations, even though there is no

dispute that that the United States has filed a civil complaint

against Dr. Michel and entities that he who lly or partially

owns. Cf. Shapiro v. Department of Bus. & Prof'l Regulation ,

623 So. 2d 1235, 1236 (Fla. 4th DCA 1993)(applicant not entitled

to formal hearing when no dispute that he was reprimanded in

another state where applicable statute authorized b oard to deny

license to applicant whose license had been "acted against" by

another state).

11 / After submission into evidence, as joint exhibits, of

Comprehensive Medical Access's application for approval to offer

a health flex plan, together with the su pporting documentation,

and of the civil complaint filed by the federal government

against Dr. Michel and others, the undersigned asked the OIR to

present any additional evidence it might have to support its

proposed denial of Comprehensive Medical Access' s application.

The OIR objected to this request, arguing that, if it were

required to present its evidence first, prior to Comprehensive

Medical Access's presentation of evidence related to

Dr. Michel's fitness and trustworthiness, it was, in essence,

bei ng required to carry the burden of proof in the case.

Despite being repeatedly assured that Comprehensive Medical

Access had the burden of proving entitlement to offer a health

flex plan and that the OIR was being asked only to present any

evidence it mig ht have supporting its preliminary denial of the

application, counsel for the OIR made "numerous objections" to

presenting its case "first." After extensive discussion of the

issue, the OIR was directly ordered to present its case.

Respondent's "Proposed Recommended Order" at 4,5; Transcript at

26 through 29 and 36 through 41.

Counsel for the OIR raised the objection again in its post -

hearing submission, asserting that the undersigned had committed

"clear procedural error that prejudiced the Office in the

presentation of its case" and that "[f]rom the commencement of

the proceeding and the erroneous requirement that in a license

denial case the agency was required to put its case on first,

this proceeding is fatally flawed." Respondent's "Proposed

R ecommended Order" at 4, 5. The OIR's position on this issue

reveals a fundamental misunderstanding of the nature of a de

novo hearing involving the denial of an application for a

license or permit and of the distinction between the burden of

proof and the shifting burden of producing evidence in a license

application proceeding.

The court in Department of Transportation v. J.W.C. Co.,

Inc. , 396 So. 2d 778 (Fla. 1st DCA 1981), addressed a number of

basic rules governing administrative proceedings unde r

Section 120.57(1), Florida Statutes, which are particularly

pertinent to the issues raised by the OIR in its objections.

First, the court in J.W.C. explained that an agency's letter of

intent to deny an application for a license or permit is

"proposed a gency action" that becomes final only if a hearing is

not requested to challenge the proposed denial and that,

consequently, a "request for a hearing commence[s] a de novo

proceeding, which . . . is intended to 'formulate final agency

action, not to review action taken earlier and preliminarily.'"

Id. at 786 - 87.

The court in J.W.C. also discussed the requirement that an

applicant present a prima facie case in a proceeding involving

the proposed denial of a license or permit:

As a practical matter, w here a notice of

intent has been issued, we can conceive of

no more orderly way for a formal hearing to

be conducted than to have the applicant (who

has the ultimate burden of persuasion) first

present a "prima facie case." . . . At the

very minimum, this preliminary showing

should include the application, and the

accompanying documentation and information

relied upon by the agency as a basis for the

issuance of its notice of intent. To what

extent it would be advisable or necessary

for this preliminary pr esentation by the

applicant to be further expanded would

depend, to a large extent, on the nature of

the objections raised by the petitioners

requesting a hearing.

396 So. 2d at 788.

Finally, the court in J.W.C. explained that it is

fundamental tha t an applicant for a license

or permit carries the 'ultimate burden of

persuasion' of entitlement through all

proceedings, of whatever nature, until such

time as final action has been taken by the

agency. This burden is not subject to any

'shifting' by th e hearing officer, although

it is entirely possible that a shifting of

the burden of going forward with the

evidence may occur during the course of the

. . . proceeding.

Id. at 787. The court in Department of Banking & Fin. v.

Osborne Stern & Co. , 670 So . 2d 932, 934 (Fla. 1996), f urther

explicated this principle :

[W]e agree with the analysis of Judge Booth

explaining that in license application

proceedings:

[T]he majority is correct in its

observation that appellants

[applicants] had the burden of

pres enting evidence of their

fitness for registration. The

majority is also correct in

holding that the Department had

the burden of presenting evidence

that appellants had violated

certain statutes and were thus

unfit for registration. . . . [A]n

applicant f or licensure bears the

burden of ultimate persuasion at

each and every step of the

licensure proceedings, regardless

of which party bears the burden of

presenting certain evidence. . . .

Osborne [Stern & Co. v. Department of

Banking & Fin. , ] 647 So. 2d [ 2 45 ] at

250(Booth, J., concurring and

dissenting)(citations omitted).

Although J.W.C. concerned a proceeding initiated by

property owners challenging the Department of Environmental

Regulation's proposed approval of a permit for the Department of

Tran sportation to construct a highway, the principles

established in the case apply in the instant case.

Comprehensive Medical Access was required, first, to establish a

prima facie case so that there was "on record a basic foundation

of evidence pertainin g to the application so that the issues can

be understood." J.W.C. , 396 So. 2d at 788. Under the

circumstances of this case, a prima facie case of entitlement to

approval was established when the OIR and Comprehensive Medical

Access jointly introduced in to evidence Comprehensive Medical

Access's application and the supporting documentation. It was

not necessary for Comprehensive Medical Access to go further in

its prima facie case and prove the truth or completeness of any

element of its application beca use nothing in the application

was controverted by the OIR. The OIR did not base its proposed

decision to deny Comprehensive Medical Access's application on

the contents of Comprehensive Medical Access's application but,

rather, on matters extraneous to t he application itself.

Therefore, once the application and documentation was in

evidence, it was the burden of the OIR "to go forward with

evidence" to establish the basis for its proposed denial. I d.

at 789.

Comprehensive Medical Access, as the ap plicant, had the

ultimate burden of proving by a preponderance of the evidence

that its application should be approved. The OIR, as the agency

proposing to deny the application, had the burden of presenting

evidence establishing its objection to granting Comprehensive

Medical Access's application, which, in this case, consisted of

the undisputed fact that a civil complaint had been filed by the

federal government against Dr. Michel and others alleging fraud,

false claims, and a kickback scheme and of whate ver other

evidence the OIR wished to present to establish that, because of

this civil complaint, Comprehensive Medical Access did not meet

the statutory criteria required for approval to offer a health

flex plan.

The OIR was not "put in the posture of proving Petitioners

[sic] lack of fitness and trustworthiness and bad faith" in this

proceeding. Respondent's "Proposed Recommended Order" at 5. It

was merely required to present evidence as to the basis for its

preliminary decision to deny Comprehensiv e Medical Access's

application in order to narrow the issues that Comprehensive

Medical Access was required to address. Comprehensive Medical

Access retained throughout this proceeding the burden of proving

by a preponderance of the evidence that it met t he statutory

criteria for approval of its application to offer a health flex

plan, that is, as narrowed by the OIR, that Dr. Michel, as

Comprehensive Medical Access's principal, was fit and

trustworthy and competent.

12 / Neither Comprehensive Medical Acce ss nor the OIR included

reference to any rules enacted under this authority.

COPIES FURNISHED:

Joseph S. Rosenbaum, Esquire

Law Offices of Joseph S.

Rosenbaum, P.A.

2937 Southwest 27th Avenue, Suite 101

Miami, Florida 33133

Elenita Gomez, Esquire

S. Marc Herskovitz, Esquire

Kristopher C. D uer, Esquire

Office of Insurance Regulation

612 Larson Building

200 East Gaines Street

Tallahassee, Florida 32399 - 4106

Kevin M. McCarty, Commissioner

Office of Insurance Regulation

612 Larson Building

200 East Gaines Street

Tallahassee, Florida 32399 - 03 05

Steve Parton, General Counsel

Office of Insurance Regulation

612 Larson Building

200 East Gaines Street

Tallahassee, Florida 32399 - 0305

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from t he 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.