06-005029MPI Agency For Health Care Administration vs. Polaris Pharmacy Corporation, D/B/A Lima`s Pharmacy Status: Closed Recommended Order on Wednesday, April 25, 2007.

Summary: Petitioner met its burden of proving that Respondent received $198,332.78 in Medicaid overpayments by presenting a Final Agency Audit Report and supporting audit work papers.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Petitioner, )

)

vs. ) Case No. 06 - 5029MPI

)

POLARIS PHARMACY CORPORATION )

d/b/a LIMA'S PHARMACY, )

)

Respondent. )

_________________________________)

RECOMMENDED ORDER

Pursuant to notice, a hearing was held in this case

pursuant to Sections 120.569 and 120.57(1), Florida Statutes, 1 on

March 27, 2007, in Tallahassee, Florida, before Stuart M.

Lerner, a duly - designated Administrative Law Judge of the

Division of Administrative Hearings.

APPEARANCES

For Petitioner: Tracie L. Wilk s, Esquire

Jeffries H. Duvall, Esquire

Agency for Health Care Administra tion

2727 Mahan Drive, M ail S top 3

Tallahassee, Florida 32308 - 5403

For Respondent: Lawrence R. Metsch, Esquire

The Metsch Law Firm, P.A.

20801 Biscayne Boulevard, Suite 307

Aventura, Florida 33180

STATEMENT OF THE ISSUES

1. Whether Medicaid overpayments were made to Respondent

and, if so, in what amount .

2. Whether Respondent should be fined $5,000.00 for

failing to document that it had available suffic ient quantities

of product to support its Medicaid billings .

PRELIMINARY STATEMENT

Respondent is a provider of pharmacy services to eligible

Medicaid recipients in Florida. By letter dated November 14,

2006 (Final Agency Audit Report), the Agency for Hea lth Care

Administration (AHCA) advised Respondent that, following a

"review of [Respondent's] claims for Medicaid reimbursement for

dates of service during the period April 1, 2005 through

March 31, 2006 " (Audit Period), it had determined that

Respondent h ad been "overpaid $ 198,509.55 for services that in

whole or in part [were] not covered by Medicaid , " and that ,

pursuant to Section 409.913, Florida Statutes, and Florida

Administrative Code Rule 59G - 9.070, in addition to seeking

recovery of this $198,509.5 5 in alleged overpayments, it was

imposing a fine of $5,000.00, making "[t]he total amount due . .

. $203,509.55. " A ccording the letter, AHCA was also "entitled

to re cov er all investigative, legal, an d expert witness costs"

pursuant to Section 409.913(23) (a), Florida Statutes. The last

page of the letter contained a "Notice of Administrative Hearing

and Mediation Rights."

Respondent filed a Petition for Formal Hearing . On

December 12, 2006 , AHCA referred the matter to the Division of

Administrative Heari ngs (DOAH), requesting the assignment of a

DOAH Administrative Law Judge to conduct a "formal

a dministrative hearing." The undersigned was subsequently

assigned the case, and he set the case for hearing.

On February 16, 2007, AHCA filed a Motion to Deem R equest

for Admissions Admitted. That same day, the undersigned issued

an order directing Respondent to file a written response to the

motion within seven days. On February 22, 2007, Respondent

filed a response in which it stated that it did "not object t o

the entry of an order deeming Petitioner's Request for

Admissions Admitted." On February 26, 2007, the undersigned

issued an order "find[ing] that Respondent ha[d] admitted the

[following] matters set forth in Petitioner's Request for

Admissions by oper ation of Florida Rule of Civil Procedure

1.370(1)":

I. RESPONDENT'S MEDICAID - RELATED

INFORMATION

1. Respondent was an authorized Medicaid

provider during the audit period.

2. During the audit period, Respondent had

been issued the fol lowing Medicaid p rovider

number : 0265314 00.

3. During the Audit Period, Respondent had

a valid Medicaid Provider agreement(s) with

AHCA.

II. APPLICABLE LAWS, RULES, AND REGULATIONS

4. For the subject Audit Period, Respondent

was subject to all of the duly enacted

Me dicaid statutes, la ws, rules and policy

guidelines that governed Medicaid providers

of its type.

5. For the subject Audit Period, Respondent

was required to follow all of the Medicaid

Coverage and Limitation[s] Handbooks for its

type of provider.

6. Fo r the subject Audit Period, Respondent

was required to follow all of the Medicaid

Reimbursement Handbooks for its type of

provider.

7. For the subject Audit Period, the

applicable Medicaid statutes, laws, rules

and policy guidelines in effect required

Re spondent to maintain all "Medicaid - related

Records" and information that supported any

and all Medicaid invoices or claims made by

Respondent during the Audit Period.

8. For the subject Audit Period, the

applicable Medicaid statutes, laws, rules

and poli cy guidelines in effect required

Respondent, at AHCA's request, to provide

AHCA (or AHCA's representatives), all

Medicaid - related Records and other

information which supported all the

Medicaid - related invoices or claims that

Respondent made during the Audi t Period.

III. MISCELLANEOUS

9. This Respondent filed a claim with

Florida Medicaid for payment for the

services and goods which are the subject of

this audit.

10. This Respondent was paid by AHCA for

the services/goods which are the subject of

this audit.

11. The Medicaid provider agreement between

Respondent and AHCA requires that the

provider agree that only records made at the

time the goods and services were provided

will be admissible in evidence in any

proceeding relating to the Medicaid prog ram.

On February 21 , 2007, the parties filed a Joint Prehearing

Stipulation, which provided, in pertinent part, as follows:

A. STATEMENT OF THE NATURE OF THE CASE

The Respondent, Polaris Pharmacy

Corporation, d/b/a Lima's Pharmacy, at all

times material hereto, was a health care

provider in the State of Florida, and was

enrolled as a Medicaid provider.

1. The Respondent was notified by the

Agency by a Provisional Agency Audit Report

dated October 16, 2006 , of a determination

of an overpayment to the Re spondent for

goods and services provided to Medicaid

recipients covering the period April 1, 2005

through March 31, 2006 (Audit Period ). This

letter indicated that the Respondent had

submitted claims and had been overpaid in

the amount of $ 202,847.33 . Th is

determination was b ased on an "invoice

review." An "invoice review" is one in

which the records of purchases of drugs and

supplies of the provider pharmacy are

compared with the goods and services claimed

to have been dispensed during the same

period. If the provider is unable to

demonstrate that it had an inventory or had

purchase d drugs or supplies f r o m qualified

retailers or wholesalers in a quantity

sufficient to equal the amount dispensed

during the audit period, the difference is

considered an ov erpayment.

2. Following receipt of the Provisional

Agency Audit Report, the Respondent was

given the opportunity to submit additional

information which could result in a

reduction in the provisional determination

of overpayment. Additional information w as

furnished by the provider which reduced the

overpayment determination.

3. On November 14, 2006, the Respondent was

notified by a Final Agency Audit Report of a

determination of overpayment to Respondent

for services provided to Medicaid recipients

cov ering the Audit Period. This letter

indicated that the Respondent had submitted

claims and had been overpaid in the amount

of $198,509.55 for services that, in who l e

or in part, were not covered by Medicaid.

4. The Respondent has appealed the agency

act ion of November 14, 2006 and sought an

administrative hearing pursuant to Section

120.569 and Subsection 120.57(1), Florida

Statutes.

* * *

D. STATEMENT OF ADMITTED FACTS .

1. Respondent has operated as an authorized

Medicaid provider at all times during the

Audit Period and has been issued the

Medicaid provider number 0265314 00 .

2. During the Audit Period, the Respondent

had a valid Medicaid provider agreement with

the Agency.

3. For services provided during the Audit

Pe riod, the Respondent received in excess of

$ 198,509.55 in payments for services to

Medicaid recipients.

* * *

F. STATEMENT OF AGREED ISSUES OF LAW .

1. The Division of Administrative Hearings

has jurisdiction over the parties and

subject matter of this proceeding pursuant

to § 120.57(1), Florida Statutes.

2. Venue for this proceeding is in Leon

County, Florida, or such other place as

designated by the Administrative Law Judge .

3. The Agency for Health Care

Administration i s an executive agency

created by Sections 20.42 and 23.21, Florida

Statutes.

4. The Agency for Health Care

Administration has the responsibility for

overseeing and administering the Medicaid

Program for the State of Florida.

5. The Agency has the burde n of proof in

this proceeding and must show by a

preponderance of the evidence that ther e

exists an overpayment to the Respondent .

6. All pleadings were timely and

appropriately filed in this matter.

* * *

Prior to the final h earing, AHCA reviewed additional

documentation from Respondent and, based on its review,

determined that the amount that Respondent had been overpaid was

$198, 332.78 , not $198,509.55 as previously determined. AHCA

created a document (found at page 189 of Petitioner's Exhibit 9 ,

hereinafter referred to as the "Overpayment Reduction Document" )

reflecting this reduction in the alleged overpayment amount.

As noted above, the final hearing was held on March 27 ,

2007. 2 AHCA 's case consisted exclu sively of docu mentary evidence

in the form of 16 exhibits ( Petitioner's Exhibits 1 through 16 ) ,

which were received into evidence without objection. These

exhibits included the Final Agency Audit Report , supporting

audit work papers , and the Overpayment Reduction Docum ent

( collectively constituting Petitioner's Exhibit 9). Respondent

presented no evidence.

At the close of the evidentiary portion of the hearing on

March 27 , 2007, the undersigned set the deadline for the filing

of proposed recommended orders at 1 0 da ys from the date of the

filing of the hearing transcript with DOAH .

The hearing T ranscript (consisting of one volume) was filed

with the D OAH on April 11 , 2007. AHCA filed its Proposed

Recommended Order on April 12, 2007. To date, Respondent has

not fi led any post - hearing submittal.

FINDINGS OF FACT

Based upon the evidence adduced at hearing, and the record

as a whole, the following findings s of fact are made to

supplement the facts (set forth above) established by admission

and stipulation :

1. Respon dent's records fail to demonstrate that it had

available during the Audit Period sufficient quantities of drugs

to support its Audit Period billings to the Medicaid program .

2. For these Audit Period billings, Respondent was

overpaid $198,332.78, as est ablished by th e Final Audit Report,

as revised by the Overpayment Reduction Document, and the

supporting audit work papers, which were received into evidence

at hearing and went unchallenged.

CONCLUSIONS OF LAW

3. AHCA is statutorily charged with the resp onsibility of

"operat[ing] a program to oversee the activities of Florida

Medicaid recipients, and providers and their representatives, to

ensure that fraudulent and abusive behavior and neglect of

recipients occur to the minimum extent possible, and to re cover

overpayments[ 3 ] and impose sanctions as appropriate."

§ 409.913(1), Fla. Stat.

4. "Overpayment," as that term is used in Section 409.913,

Florida Statutes, "includes any amount that is not authorized to

be paid by the Medicaid program whether pa id as a result of

inaccurate or improper cost reporting, improper claiming,

unacceptable practices, fraud, abuse, or mistake."

§ 409.913(1)(e), Fla. Stat. " [T]he plain meaning of the statute

dictates that it is within the AHCA's power to demand repaymen t"

of such monies, regardless of the circumstances that produced

the unauthorized payment, provided the overpayment is not

" attributable to error of [AHCA] in the determination of

eligibility of a recipient. " Colonnade Medical Center, Inc. v.

State, Agenc y for Health Care Administration , 847 So. 2d 540,

541 - 42 (Fla. 4th DCA 2003); § 409.907(5)(b), Fla. Stat. ; and

§ 409. 913(11), Fla. Stat.

5. In the instant case, AHCA is seeking to recover

$ 198,332.78 in Medicaid overpayments allegedly made to

Respondent for pharmacy services Respondent claimed it rendered

during the Audit Period.

6. Pursuant to Section 409.913 (21), Florida Statutes,

"[w]hen making a determination that an overpayment has occurred,

[AHCA must] prepare and issue an audit report to the provi der

showing the calculation of overpayments."

7. A provider who is the subject of an audit report that

reveals overpayments is entitled to an administrative hearing

pursuant to Chapter 120, Florida Statutes, before AHCA takes

final agency action ordering repayment.

8. At any such hearing, AHCA has the burden of

establishing, by a preponderance of the evidence, that Medicaid

overpayments in the amount it is seeking to recoup were made to

the provider. See South Medical Services, Inc. v. Agency for

Health Care Administration , 653 So. 2d 440, 441 (Fla. 3d DCA

1995); Southpointe Pharmacy v. Department of Health and

Rehabilitative Services , 596 So. 2d 106, 109 (Fla. 1st DCA

1992); Florida Department of Transportation v. J. W. C. Co.,

Inc. , 396 So. 2d 778, 788 (Fla. 1st DCA 1981); Florida

Department of Health and Rehabilitative Services, Division of

Health v. Career Service Commission , 289 So. 2d 412, 415 (Fla.

4th DCA 1974); and Full Health Care, Inc. v. Agency for Health

Care Administration , No. 00 - 4441, slip op at 18 (Fla. DOAH

June 25, 2001)(Recommended Order).

9. Section 409.913(22), Florida Statutes, provides that

"[t] he audit report, supported by agency work papers, showing an

overpayment to a provider constitutes evidence of the

overpayment. " It has bee n said that this language enables AHCA

to "make a prima facie case without doing any heavy lifting: it

need only proffer a properly - supported audit report, which must

be received in evidence." Full Health Care , slip op at 19.

"[O] nce [AHCA] has put on a prima facie case of overpayment ----

which may involve no more than moving a properly - supported audit

report into evidence ---- the provider is obligated to come

forward with written proof to rebut, impeach, or otherwise

undermine [AHCA's] statutorily - authori zed evidence; it cannot

simply present witnesses to say that [AHCA] lacks evidence or is

mistaken." 4 Id . at 19 - 20.

10. As is reflected in the Findings of Fact set forth

above, at the administrative hearing that Respondent requested

and was granted in th e instant case, AHCA met its burden of

proving, by a preponderance of the evidence, that Respondent

received Medicaid overpayments in the amount AHCA is seeking to

recover from Respondent ( $198,332.78 ).

11. AHCA did so through its presentation of the Fi nal

Agency Audit Report, as revised by the Overpayment Reduction

Document , and the supporting audit work papers . This

documentary evidence (pursuant to Section 409.913(22), Florida

Statutes ) established a prima facie case of overpayment

(totaling $198,332 .78 ) that Respondent made no attempt (through

the presentation of evidence of its own) to overcome.

12. Respondent 's not having overcome AHCA's prima facie

showing of overpayment , AHCA should enter a final order finding

that Respondent was overpaid a tota l of $198,332.78 for Audit

Period Medicaid claims. Were AHCA to do otherwise it would be

acting in derogation of its statutory responsibility, under

Section 409.913, Florida Statutes, to exercise oversight of the

integrity of the Florida's Medicaid progra m.

13. Upon entering such an order, AHCA will be "entitled to

recover all investigative, legal, and expert witness costs"

pursuant to Section 409.913(23 ) , Florida Statutes, which

provides as follows:

(a) In an audit or investigation of a

violation comm itted by a provider which is

conducted pursuant to this section, the

agency is entitled to recover all

investigative, legal, and expert witness

costs if the agency's findings were not

contested by the provider or, if contested,

the agency ultimately prevai led.

(b) The agency has the burden of

documenting the costs, which include

salaries and employee benefits and out - of -

pocket expenses. The amount of costs that

may be recovered must be reasonable in

relation to the seriousness of the violation

and must be set taking into consideration

the financial resources, earning ability,

and needs of the provider, who has the

burden of demonstrating such factors.

(c) The provider may pay the costs over a

period to be determined by the agency if the

agency determi nes that an extreme hardship

would result to the provider from immediate

full payment. Any default in payment of

costs may be collected by any means

authorized by law.

Should there arise a dispute of a factual nature regarding the

amount of costs that c an be recovered , Respondent may timely

request an administrative hearing on the matter . S hould AHCA

determine that the petition requesting the hearing is sufficient

and raises disputed issues of material fact, AHCA may then refer

the matter to DOAH for th e assignment of an administrative law

judge to conduct the requested hearing and issue a recommended

order. See Agency for Health Care Administration v. Brown

Pharmacy , No. 05 - 3366MPI, 2006 Fla. Div. Adm. Hear. LEXIS 515

*59 (Fla. DOAH November 3, 2006)(R ecommended Order)("[A]ny claim

for costs may be raised once it is determined that the

Petitioner has prevailed in this case, whereupon, if it should

attempt to assess them against the Respondent, the Respondent

would have the opportunity, by separate proce eding, to contest

the matter before the Division of Administrative Hearings.");

Lepley v. Agency for Health Care Administration , No. 04 - 3025MPI,

2004 Fla. Div. Adm. Hear. LEXIS 2528 *30 (Fla. DOAH December 14,

2004)(Recommended Order)("Respondent, once it has 'ultimately

prevailed' in this case, may then determine the amount of its

costs and assess them against Petitioner. Should Petitioner

dispute Respondent's determination and raise disputed issues of

material fact, the matter may then be referred by Res pondent to

the Division of Administrative Hearings."); and Meji, Inc. v.

Agency for Health Care Administration , No. 03 - 1195MPI, slip op.

at 10 (Fla. DOAH July 15, 2003)(Recommended Order)("[T]he

Agency, once it has 'ultimately prevailed' in this case, may

then determine the amount of its costs associated with this

matter and assess those costs against Meji. Should Meji dispute

the Agency's determination and raise disputed issues of material

fact, the matter may then be referred by the Agency to the

Divisio n for hearing.").

14. Not only is AHCA seeking to recover the $198,332.78 in

overpayments Respondent received , as well as the "investigative,

legal, and expert witness costs" it has incurred , it also seeks

to impose a "sanction" on Respondent in the form of a fine of

$5,000.00 pursuant to Section 409.913(15)(n), Florida Statutes,

and Florida Administrative Code 59G - 9.070 (7)(n) , which provide

as follows:

Section 409.913(15)(n), Florida Statutes

The agency may seek any remedy provided by

law, including, bu t not limited to, the

remedies provided in subsections (13) and

(16) and s. 812.035, if:

The provider fails to demonstrate that it

had available during a specific audit or

review period sufficient quantities of

goods, or sufficient time in the case of

ser vices, to support the provider's b illings

to the Medicaid program.

Florida Administrative Code 59G - 9.070(7)(n)

SANCTIONS: Except when the Secretary of the

Agency determines not to impose a sanction,

pursuant to Section 409.913(16)(j), F.S.,

sanctions sh all be imposed for the

following:

During a specific audit or review period,

failure to demonstrate sufficient quantities

of goods, or sufficient time in the case of

services, that support the corresponding

billings or claims made to the Medicaid

program. [Section 409.913(15)(n), F.S.].

15. Subsection (16)(c) of Section 409.913, Florida

Statu t es, authorizes AHCA to impose "a fine of up to $5,000 for

each violation." AHCA may impose such a fine " in addition to

[its] authority to recover a determined over payment ." Fla.

Admin. Code R. 59G - 9.070 (10)(a). It may do so, however, only if

the violation is proven by clear and convincing evidence. See

Department of Banking and Finance, Division of Securities and

Investor Protection v. Osborne Stern and Co. , 670 So. 2d 932,

935 (Fla. 1996).

16. Inasmuch as AHCA, through unrebutted evidence, clea rly

and convincingly established that Respondent's records fail to

demonstrate that it had available during the Audit Period

sufficient quantities of drugs to support its Audit Period

billings to the Medicaid program , the imposition of a $5,000.00

fine against Respondent is within AHCA's power.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions

of Law, it is hereby

RECOMMENDED that AHCA enter a final order finding that

Respondent received $198,332.78 in Medicaid overpayments for

paid claims covering the period from April 1, 2005, through

March 31, 2006; directing Respondent to repay this amount 5 ; and

fining Respondent $5,000.00 for failing to demonstra te that it

had available during the Audit Period sufficient quantities of

drugs to support its Audit Period billings.

DONE AND ENTERED this 2 5 th day of April, 2007 , in

Tallahassee, Leon County, Florida.

S

___________________________________

STUART M. LERNER

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 2 5 th day of April, 2007 .

ENDNOTES

1 All references to Florida Statutes in this Recommended Order

are to Florida Statutes (200 6).

2 The final hearing was originally scheduled for March 6, 2007,

but was continued at Respondent's request.

3 "The Medicaid program provides reimbursement to service

providers on a 'pay - and - chase' basis. In other words, claims

are paid initially su bjec t to preliminary review. [AHCA] or its

agent may later subject these claims to closer scrutiny during

periodic audits. If overpayments are found, [AHCA] obtains

reimbursement from the service provider." Agency for Health

Care Administration v. Cabre ra , No. 92 - 1898, 1994 Fla. Div. Adm.

Hear. LEXIS 5127 *3 (Fla. DOAH January 24, 1994)(Recommended

Order).

4 " [O]bligat[ing] [a provider] to come forward with written

proof to rebut, impeach, or otherwise undermine [AHCA's]

statutorily - authorized evidence " of overpayment is not an

unreasonable burden to place on the provider. See Illinois

Physicians Union v. Miller , 675 F.2d 151, 158 (7th Cir.

1982)("We see nothing arbitrary or capricious about requiring

physicians who are benefiting from the [Medicaid] p rogram to

bear this burden, particularly when the state has already borne

the cost of the initial audit and the evidence to rebut that

initial determination is uniquely within the physician's

control.").

5 Section 409.913(25)(c), Florida Statutes, provid es tha t

"[o]verpayments owed to [AHCA] bear interest at the rate of 10

percent per year from the date of determination of the

overpayment by the agency, and payment arrangements must be made

at the conclusion of legal proceedings."

COPIES FURNISHED :

Tracie L. Wilks, Esquire

Jeffries H. Duvall, Esquire

Agency for Health Care Administration

2 727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308 - 5403

Lawrence R. Metsch, Esquire

The Metsch Law Firm, P.A.

20801 Biscayne Boulevard, Suite 307

Aventura, Florida 33180

Craig H. Smith, General Counsel

Agency for Health Care Administration

Fort K nox Building, Suite 3431

2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

Andrew C. Agwunobi, Secretary

Agency for Health Care Administration

Fort Knox Building, Suite 3116

2727 Mahan Drive

Tallahassee, Florida 32308

Richard J. Shoop , Agency Cl erk

Agency for Health Care Administration

2727 Mahan Drive, Mail Station 3

Tallahassee, Florida 32308

N OTICE OF RIGHT TO SU BMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of this Recommended Orde r. Any exceptions

to this Recommended Order should be filed with the agency that

will issue the Final Order in this case.