08-002084RP Florida Health Care Association, Inc., A Florida Corporation Not For Profit, And Florida Association Of Homes And Services For The Aging, Inc., A Florida Corporation Not For Profit vs. Agency For Health Care Administration Status: Closed DOAH Final Order on Monday, August 4, 2008.

Summary: The allegations are not appropriate in the context of a facial attack on the proposed rule. Notwithstanding, the rule is valid on its face.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FLORIDA HEALTH CARE )

ASSOCIATION, INC., A FLORIDA )

CORP. NOT FOR PROFIT; AND )

FLORIDA ASSOC. OF HOMES AND )

SERVICES FOR THE AGING, INC., )

A FLORIDA CORP., NOT FOR PROFIT, )

)

)

Petitioners, )

)

vs. ) ) Case No. 08-2084RP

)

AGENCY FOR HEALTH )

CARE ADMINISTRATION, )

)

)

Respondent.

)

FINAL ORDER

Pursuant to notice, a formal hearing was held in this case

on June 2, 2008, in Tallahassee, Florida, before the Division of

Administrative Hearings, by its designated Administrative Law

Judge, Barbara J. Staros.

APPEARANCES

For Petitioners: Donna Stinson, Esquire

Anna Small, Esquire

Broad & Cassel, P.A.

Post Office Drawer 11300

215 South Monroe Street, Suite 400

Tallahassee, Florida 32302

For Respondent: Kelly A. Bennett, Esquire

Willis F. Melvin, Jr., Esquire

Agency for Health Care Administration

Fort Knox Building

2727 Mahan Drive, MS 3

Tallahassee, Florida 32308

STATEMENT OF THE ISSUE

Whether proposed Rule 59G-6.0102 is an invalid exercise of

delegated legislative authority pursuant to Section 120.52(8),

Florida Statutes, 1/ for the reasons described by Petitioners in

their Petition.

PRELIMINARY STATEMENT

Prior to the commencement of the instant proceeding,

Petitioners herein filed a Petition for Determination of

Invalidity of Non-Rule Policy, which was assigned Division of

Administrative Hearings Case No. 08-0589RU. During the pendancy

of that proceeding, the Agency for Health Care Administration

(AHCA or the Agency) instituted rule-making procedures, and a

proposed rule was published on February 15, 2008. The

Administrative Law Judge assigned to Case. No. 08-0589RU granted

AHCA’s motion to dismiss and closed the file of the Division of

Administrative Hearings. Petitioners then filed the Petition in

the instant case.

Petitioners, Florida Healthcare Association, Inc., and

Florida Association of Homes and Services for the Aging, Inc.,

filed a Petition challenging proposed Rule 59G-6.010 with the

Division of Administrative Hearings on April 24, 2008. The case

was assigned to the undersigned on April 28, 2008.

Following a telephone scheduling conference, A Notice of

Hearing was issued on April 30, 2008, scheduling a formal hearing

for June 2, 2008. The parties filed a Joint Pre-Hearing

Stipulation on May 29, 2008.

At the commencement of the hearing, Respondent made an ore

tenus motion for summary final order, which was denied.

At hearing, Petitioners presented the testimony of Tony

Marshall and Erwin Bodo. Petitioners' Exhibits numbered 1, 5,

and 10 through 12 were admitted into evidence, which included the

deposition testimony of Ross Nobles, Wesley Hagler, and Phil

Williams.

Respondent presented the testimony of Phil Williams.

Respondent's Exhibits numbered 1 through 8 were admitted into

evidence.

Official recognition was taken of legislative proviso

language as well as Sections 409.908 and 409.919, Florida

Statutes.

A Transcript consisting of one volume was filed on June 23,

2008. The parties timely filed Proposed Final Orders which have

been considered in the preparation of this Final Order.

FINDINGS OF FACT

Stipulated Facts

1. The Agency is responsible for administering the Medicaid

program consistent with state and federal laws.

2. Medicaid reimbursements to nursing homes are set by AHCA

as directed by the Florida Legislature pursuant to statute and

the appropriations act.

3. The State of Florida has approximately 675 nursing

homes.

4. Approximately 645 of those nursing homes have Medicaid

rates set.

5. AHCA establishes a payment methodology that is described

in a document called the Florida Title XIX Long Term Care

Reimbursement Plan (the Reimbursement Plan).

6. The Reimbursement Plan is incorporated by reference into

Florida Administrative Code Rule 59G-6.010.

7. AHCA has proposed a change to the Reimbursement Plan

relating to rate reductions, regarding implementation of the

appropriations act from the 2007 special session. That change is

the subject of this dispute.

8. The procedural aspects of the rulemaking process of

proposed rule 59G-6.010 are not at issue in this proceeding.

9. With respect to legislative appropriations for funding

of nursing home rates, there can be a distinction between the

appropriated amount of funds and actual expenditures based upon

nursing home cost reports.

10. The appropriated amount is typically based upon the

projected reimbursements for nursing homes by estimating the

anticipated per diem rates and the annual bed days or patient

days.

11. In the 2007 special session, AHCA was mandated by the

Florida Legislature to make a reduction as is set forth in the

2007 Special Session Appropriations Act at item 116. Specific

appropriation 116 reads as follows:

MEDICAID LONG TERM CARE

116 SPECIAL CATEGORIES

NURSING HOME CARE

FROM GENERAL REVENUE FUND -68,679,773

FROM MEDICAL CARE TRUST FUND -90,647,696

The reduced appropriation in Specific

Appropriation 116 includes reductions of

$16,198,032 from the General Revenue Fund and

$21,393,131 from the Medical Care Trust Fund

as a result of modifying the reimbursement

for nursing home rates, effective January 1,

2008. The agency shall modify the Medicaid

trend adjustment contained in the Title XIX

Nursing Home Reimbursement Plan to achieve

this recurring reduction.

The reduced appropriation in Specific

Appropriation 116 includes reductions of

$4,823,045 from the General Revenue Fund and

$6,369,912 from the Medical Care Trust Fund

as a result of expanding the Nursing Home

Diversion Program, effective January 1, 2008.

The reduced appropriation in Specific

Appropriation 116 includes reductions of

$47,658,696 from the General Revenue Fund and

$62,884,653 from the Medical Care Trust Fund

based on the revised Fiscal Year 2007-2008

nursing care expenditure estimate provided in

the September 14, 2007 Medicaid Impact 2/

Conference. (emphasis supplied)

12. In the Prehearing Stipulation, the parties describe the

nature of the controversy as follows:

The issue to be decided is whether

legislatively mandated nursing home

reimbursement reductions should be

effectuated using a methodology that employs

a cut directly from actual rates based upon

cost reports and projected from estimated bed

days or whether the methodology should employ

the cut from the appropriated amount

(requiring a rate reduction only to the

extent required to contain costs at the

appropriated amount less the amount of

mandated reduction).

13. The Joint Administrative Procedures Committee is

prepared to certify the rule amendment to the Bureau of

Administrative Code.

14. The Centers for Medicare and Medicaid Services, the

federal oversight agency for the Medicaid program, has approved

the changes to the Reimbursement Plan.

Facts Based Upon the Evidence of Record

Standing

15. Petitioner, Florida Health Care Association (FHCA), is

a trade association representing approximately 500 nursing homes

in the state of Florida. Most if not all of its members

participate in the Medicaid program.

16. Petitioner, Florida Association of Homes and Services

for the Aging (FAHSA) is a trade association representing

primarily not-for-profit facilities, including approximately 100

nursing home members, 90 to 95 of which participate in the

Medicaid program.

17. There are approximately 82,000 beds or spaces available

for residents of a nursing home, in licensed facilities in

Florida. Approximately 72,000 beds are typically occupied at any

point in time, approximately 43,000 of which are occupied by

Medicaid recipients.

18. A "per diem rate" is the amount of money that Medicaid

pays a nursing home for each recipient on a daily basis.

19. Medicaid reimbursements are made to nursing homes based

upon cost reports submitted by the nursing homes reflecting their

costs over time. The cost reports are submitted and adjusted

twice a year, in January and July. Each nursing home provider

has its own specific rate. The Agency establishes the rate at

which each provider is reimbursed based upon cost components, the

largest of which is the direct patient care component.

20. The resulting rate is then adjusted, by rate-setting

calculations.

21. Petitioners and their members will be substantially

affected by the proposed rule.

The Proposed Rule

22. The text of the proposed rule reads as follows:

59G-6.010 –Payment Methodology for Nursing

Home Services.--

Reimbursement to participating nursing homes

for services provided shall be in accordance

with the Florida Title XIX Long-Term Care

Reimbursement Plan, Version XXXIII, Effective

Date January 1, 2008 and incorporated herein

by reference. A copy of the Plan as revised

may be obtained by writing to the Deputy

Secretary for Medicaid, 2727 Mahan Drive,

Mail Stop 8, Tallahassee, Florida 32308.

The Plan Incorporates Provider Reimbursement

Manual (CMS Pub. 15-1).

23. The Florida Title XIX Long-Term Care Reimbursement

Plan, Version XXXIII reads in pertinent part as follows:

21. Effective July 1, 2004, through June 30,

2005, each component of a nursing home rate,

except for the direct care component, shall

be reduced proportionately until an aggregate

total estimated savings of $66,689,094 is

achieved.

22. Effective July 1, 2005, a proportional

reimbursement rate reduction shall be

established until an annual aggregate total

estimated savings of $132,096,875 is achieved

for the period ending June 30, 2006. The

weighted average per diem rates as of July 1,

2005, and January 1, 2006, shall be the bases

for the determination of these savings, and

shall be compared to the weighted average per

diem as of June 30, 2005, with a .5%

increase. The full savings will be assumed

realized if the weighted average rate for the

period July 1, 2005, through June 30, 2006,

does not exceed the weighted average rate of

June 30, 2005, with a .5% increase.

Effective July 1, 2006, the annual aggregate

amount the rates were reduced during the

period July 1, 2005 through July 30, 2006,

shall become a recurring annual reduction.

This recurring reduction, called the Medicaid

Trend Adjustment, shall be applied

proportionally to all rates on an annual

basis.

23. Effective January 1, 2008, an additional

Medicaid Trend Adjustment shall be applied to

achieve a recurring annual reduction of

$75,182,236. (emphasis indicating new

language)

History of the Rule

24. In Florida, the Legislative appropriations process

regarding Medicaid recipients includes an estimating conference

that estimates the projected caseload, or actual occupancy, and

expenditures for nursing homes.

25. The Agency’s Division of Medicaid provides estimates of

caseload and expenditures to the Social Services Estimating

Conference.

26. The Social Services Estimating Conference (Estimating

Conference) meets several times a year. At these meetings, the

Medicaid caseloads and Medicaid expenditures are estimated, which

forms the underlying basis on which most of the Medicaid budget

is crafted.

27. Representatives of both Petitioners and the Agency had

input in the information provided to the Estimating Conference

held prior to the 2007 Special Session.

28. The term “Medicaid Trend Adjustment,” referenced in

appropriations act language quoted above, was first used in 2005.

The term was used in the Long-Term Care Reimbursement Plan to

describe the means to implement reductions to nursing home rates

based upon a weighted average of Medicaid patient days. The

Medicaid Trend Adjustment reduced the rates in the amount

necessary to meet the reduction in appropriations as a percentage

reduction from each facility’s rate.

29. The Medicaid Trend Adjustment is applied proportionally

to individual facilities’ reimbursement rates until the aggregate

of the targeted trend adjustment is achieved.

30. On October 30, 2007, shortly after the 2007 Special

Session, representatives of both Petitioners and the Agency met

to discuss the methodology for implementing the reduction in

appropriation.

31. At that meeting, only one methodology was discussed as

to how to implement the reduced appropriation. That is,

consistent with Petitioners’ position, that of employing a cut

from the appropriated amount. Representatives of the Petitioners

believed that this was how the appropriations act language would

be implemented, and that the Medicaid Trend Adjustment would be

modified only as necessary to stay within the reduced

appropriation.

32. Sometime after that meeting, AHCA proceeded with their

normal rate setting process for January 1, 2008 rates. AHCA

staff consulted with legislative staff as to rates and the

methodology they intended to use to meet the reduced

appropriation.

33. Phil Williams is the acting Assistant Deputy Secretary

for Medicaid Finance with AHCA. Mr. Williams participated in the

October 2007 meeting and was involved in the process described

above regarding Medicaid reimbursement to providers.

Mr. Williams received a phone call on December 20, 2007, from

legislative staff during which he received direction to make the

reductions from the actual rates as of January 1, 2008.

34. Petitioners’ representatives, who had participated in

the October 2007 meeting, and who generally participated in the

Legislative process regarding Medicaid reimbursements, then

received phone calls from AHCA in which they were informed that

the methodology they discussed at the October 2007 meeting would

not be utilized. Instead, as of January 1, 2008, the Agency

would reduce actual rates for the period January 1 through June

30, 2008.

35. Imposing the reductions from the projected rates has a

larger negative impact on the nursing home industry than a

reduction from the appropriated amount.

CONCLUSIONS OF LAW

36. The Division of Administrative Hearings has

jurisdiction over the parties and subject matter of this

proceeding pursuant to Section 120.56(1) and (2), Florida

Statutes.

37. Petitioners have standing to challenge the proposed

rule which is the subject of this dispute.

38. The Agency is the single state agency responsible for

administering state and federal law governing the Medicaid

program in Florida.

39. In a challenge to a proposed rule, the party attacking

the proposed rule has the burden of going 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. The proposed

(c), Fla. Stat.

Analysis

40. Paragraph 18 of the Petition challenging proposed rule

59G-6.010 alleges that the proposed rule “as implemented”

constitutes an invalid exercise of delegated authority. Further,

Petitioners allege in paragraph 16 that “because AHCA has already

notified facilities of rate changes, Petitioners are aware of how

this provision is being interpreted, and the interpretation is

contrary to legislative intent.”

41. As to any allegation that the proposed rule is invalid

as implemented, that argument will not be addressed in this order

as that is beyond the scope of this proceeding. See generally

Beverly Health and Rehabilitative Services, Inc., v. Agency for

Health Care Administration , 708 So. 2d 616 (Fla. 1st DCA 1998);

Hasper v. Department of Administration , 459 So. 2d 398 (Fla. 1st

DCA 1984).

42. Moreover, the parties’ own statement as to the nature

of the controversy is problematic. That is, the parties are

arguing about which is the appropriate methodology to use.

Whether there is an alternative method or even a better method

than that chosen by the Agency does not matter in a facial

challenge to the validity of the rule. State Department of

Health and Rehabilitative Services v. Framat Realty , 407 So. 2d

238 (Fla. 1st DCA 1981). The appropriate analysis in a Section

120.56(2) proceeding is of a facial attack on a proposed rule.

43. Despite the true nature of the controversy, the parties

address the substantive allegations of a rule challenge which

will be discussed here.

Rule Challenge Discussion

44. Petitioners assert that the proposed rule enlarges,

modifies, or contravenes the specific provisions of law

implemented, and is arbitrary and capricious. 3/ See Subsections

(c), and (e) of Section 120.52(8), Florida Statutes.

45. Section 120.52(8), Florida Statutes, reads in pertinent

part as follows:

(8) 'Invalid exercise of delegated

legislative authority' means action which

goes beyond the powers, functions, and duties

delegated by the Legislature. A proposed or

existing rule is an invalid exercise of

delegated legislative authority if any one of

the following applies:

* * *

(c) The rule enlarges, modifies, or

contravenes the specific provisions of law

implemented, citation to which is required by

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

* * *

(e) The rule is arbitrary or capricious. A

rule is arbitrary if it is not supported by

logic or the necessary facts; a rule is

capricious if it is adopted without thought

or reason or is irrational . . . .

46. "The authority to adopt an administrative rule must be

based on an explicit power or duty identified in the enabling

statute . . . [T]he authority for an administrative rule is not

a matter of degree. The question is whether the statute contains

a specific grant of legislative authority for the rule, not

whether the grant of authority is specific enough ." (Emphasis in

original) Florida Board of Medicine v. Fla. Academy of Cosmetic

Surgery , 808 So. 2d 243, 253, quoting Southwest Florida Water

Management District v. Save the Manatee Club, Inc. , 773 So. 2d

594, 599 (Fla. 1st DCA 2000).

47. In this instance, the Agency's general grant of

rulemaking authority is found in Section 409.919, Florida

Statutes, which reads as follows:

409.919 Rules.--

The agency shall adopt any rules necessary to

comply with or administer ss. 409.901-409.920

and all rules necessary to comply with

federal requirements. In addition, the

Department of Children and Family Services

shall adopt and accept transfer of any rules

necessary to carry out its responsibilities

for receiving and processing Medicaid

applications and determining Medicaid

eligibility, and for assuring compliance with

and administering ss. 409.901-409.906, as

they relate to these responsibilities for the

determination of Medicaid eligibility.

48. The Agency is authorized to operate the Florida

Medicaid Program, including the functions related to

reimbursement methodologies to Medicaid providers. Section

409.908, Florida Statutes, which is the law cited by the Agency

as the “law implemented”, provides in pertinent part as follows:

Subject to specific appropriations , the

agency shall reimburse Medicaid providers, in

accordance with state and federal law,

according to methodologies set forth in the

rules of the agency and in policy manuals and

handbooks incorporated by reference therein.

. . . Payment for Medicaid compensable

services made on behalf of Medicaid eligible

persons is subject to the availability of

moneys and any limitations or directions

provided for in the General Appropriations

Act or chapter 216 . Further, nothing in this

section shall be construed to prevent or

limit the agency from adjusting fees,

reimbursement rates, lengths of stay, number

of visits, or number of services, or making

any other adjustments necessary to comply

with the availability of moneys and any

limitations or directions provided in the

General Appropriations Act, provided the

adjustment is consistent with legislative

intent.

* * *

(2)(a)1. Reimbursement to nursing homes

licensed under part II of chapter 400 and

state-owned-and-operated intermediate care

facilities for the developmentally disabled

licensed under part VIII of chapter 400 must

be made prospectively.

* * *

(b) Subject to any limitations or directions

provided for in the General Appropriations

Act, the agency shall establish and implement

a Florida Title XIX Long-Term Card

Reimbursement Plan (Medicaid) for nursing

home care in order to provide care and

services in conformance with the applicable

state and federal laws. . .

* * *

It is the intent of the Legislature that the

reimbursement plan achieve the goal of

providing access to health care for nursing

home residents who require large amounts of

care while encouraging diversion services as

an alternative to nursing home care for

residents who can be served within the

community. The agency shall base the

establishment of any maximum rate of payment,

whether overall or component, on the

available moneys as provided for in the

General Appropriations Act. The agency may

base the maximum rate of payment on the

results of scientifically valid analysis and

conclusions derived from objective

statistical data pertinent to the particular

maximum rate of payment. (emphasis supplied)

49. Petitioners argue in their proposed final order that

the proposed rule is inconsistent with legislative intent and,

therefore, enlarges, modifies, or contravenes the specific

provisions of law implemented. 4/ However, as discussed above,

Petitioners’ argument in this regard is focused on the

implementation of the proposed rule, not its facial validity.

50. In its publication of the proposed rule, the Agency

cited Section 409.908, Florida Statutes, as the law implemented.

That statute gives broad authority to the Agency to reimburse

Medicaid providers according to rules of the Agency and in policy

manuals and handbooks incorporated by reference therein. Thus,

the proposed rule, which references the Reimbursement Plan

incorporated by reference therein, does not enlarge, modify, or

contravene the specific provisions of law implemented. Moreover,

in accordance with Section 409.908, the proposed rule, and the

Reimbursement Plan incorporated therein, address reductions or

limitations as directed in the Appropriations Act.

51. Based upon the statutory authority outlined above, the

challenged proposed rule does not enlarge, modify, or contravene

the specific provisions of law implemented as contemplated by

Subsection 120.52(8)(c), Florida Statutes.

52. Finally, the Petition alleges that the proposed rule is

arbitrary and capricious.

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

the necessary facts. A rule is capricious if it is adopted

Stat. As written, the proposed rule, and the corresponding

amended language in the Reimbursement Plan, is not arbitrary or

capricious.

54. Based upon the evidence presented and the statutory

authority outlined above, the proposed rule does not enlarge,

modify, or contravene the specific provisions of law implemented;

and the proposed rule is not arbitrary or capricious.

ORDER

Based upon the foregoing Findings of Fact and Conclusions of

Law, it is

ORDERED:

The Petition challenging proposed rule 59G-6.010 is

dismissed.

DONE AND ORDERED this 4th day of August, 2008, in

Tallahassee, Leon County, Florida.

S

___________________________________

BARBARA J. STAROS

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone] SUNCOM 278-9675

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 4th day of August, 2008.

ENDNOTES

1/ All references to Fla. Stat. will be to Florida Statutes

2007, unless otherwise indicated.

2/ The 2007 Special Session Appropriations Act listed negative

numbers as amounts to be reduced from amounts previously

appropriated in the Regular Session, rather than the appropriated

amounts.

3/ While alleged in the Petition, Petitioners also alleged in

the Petition that the proposed rule violates Section

120.52(8)(d), Florida Statutes. However, Petitioners omit that

argument in their Proposed Final Order.

4/ There was considerable debate as to the Legislative intent of

the pertinent language of the 2007 special session appropriations

act. The expert testimony of Petitioners’ witnesses provided

valuable technical and historical facts, but was not relied upon

in any way in considerations of legislative intent. See , T.R.J.

Holding Co., Inc., v. Alachua County , 617 So. 2d 798 (Fla. 1st

DCA 1993). Similarly, while the Agency’s consultation with

legislative staff may have given it confidence that it was

applying the correct methodology, such after-the-fact

communication from legislative staff is not competent indicia of

legislative intent for purposes of any analysis here. Compare ,

American Home Assurance Co., v. Plaza Materials Corporation ,

908 So. 2d 360 (Fla. 2005) (Court looked to Legislative history

and legislative staff analyses to discern legislative intent.)

COPIES FURNISHED :

Donna Holshouser Stinson, Esquire

Broad & Cassel

Post Office Drawer 11300

Tallahassee, Florida 32308

Kelly Bennett, Esquire

Agency for Health Care Administration

Fort Knox Building

2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

Craig H. Smith, General Counsel

Agency for Health Care Administration

Fort Knox Building, Suite 3431

2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

Liz Cloud, Chief

Bureau of Administrative Code

Department of State

The Elliott Building, Room 201

Tallahassee, Florida 32399

Scott Boyd, Acting Executive Director

and General Counsel

Administrative Procedures Committee

Holland Building, Room 120

Tallahassee, Florida 32399-1300

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 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 notice of appeal must be filed within 30 days

of rendition of the order to be reviewed.