09-005214 Apollo Health And Rehabilitation Center vs. Agency For Health Care Administration Status: Closed Recommended Order on Wednesday, May 5, 2010.

Summary: Correct identification of nursing home beds requires amendment to reimbursement rate.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

APOLLO HEALTH AND )

REHABILITATION CENTER, )

)

Petitioner, )

)

vs. ) Case No. 09-5214

)

AGENCY FOR HEALTH CARE ADMINISTRATION, )

)

)

Respondent. )

)

RECOMMENDED ORDER

On March 22, 2010, an administrative hearing in this case

was held in Tallahassee, Florida, before William F. Quattlebaum,

Administrative Law Judge, Division of Administrative Hearings.

APPEARANCES

For Petitioner: Peter A. Lewis, Esquire

Law Offices of Peter A. Lewis, P.L.

3023 North Shannon Lakes Drive, Suite 101

Tallahassee, Florida 32309

For Respondent: Kelly Ann Bennett, Esquire

Sheryl Rosen, Legal Intern

Agency for Health Care Administration

Fort Knox Building

2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

STATEMENT OF THE ISSUE

The issue in the case is whether the Agency for Health Care

Administration (Respondent) used the correct nursing home bed

capacity in calculating the Medicaid per diem rate for Apollo

Health and Rehabilitation Center (Petitioner) for the rate

period beginning July 1, 2009.

PRELIMINARY STATEMENT

By notice dated August 19, 2009, the Respondent advised the

Petitioner that the previously-determined Medicaid per diem rate

effective on July 1, 2008, was being revised and reduced. The

basis for the revision was a "correction" by the Respondent of

the Petitioner's reported number of nursing home beds.

On September 9, 2009, the Petitioner filed a Petition for

Formal Administrative Hearing with the Respondent. On

September 22, 2009, the Respondent forwarded the request to the

Division of Administrative Hearings, which scheduled the formal

hearing. The hearing was rescheduled upon the filing of an

Unopposed Motion for Continuance and was thereafter conducted on

March 22, 2010.

At the hearing, the Petitioner presented the testimony of

two witnesses. The Respondent presented the testimony of one

witness. Joint Exhibits numbered 1 through 19 were admitted

into evidence. Stipulated facts set forth in the Respondent's

Second Unilateral Pre-hearing Statement have been incorporated

herein as necessary.

The Transcript of the hearing was filed on April 5, 2010.

Both parties filed Proposed Recommended Orders that have been

considered in the preparation of this Recommended Order.

FINDINGS OF FACT

1. The Respondent is the state agency responsible for

administering the Florida Medicaid (Medicaid) program.

2. The Petitioner operates a Florida-licensed nursing home

and participates as an institutional provider in the Medicaid

program.

3. The Medicaid program pays nursing home operators based

on a prospective per diem rate which is calculated using cost

reports submitted to the Respondent by the nursing home

providers.

4. The cost reports are filed pursuant to the "Florida

Title XIX Long-Term Care Reimbursement Plan" (the Plan), which

the Respondent has adopted by rule.

5. The Plan incorporates guidelines and policies regarding

reimbursement and accounting principles set forth by the federal

Centers for Medicare and Medicaid Services (CMS) in

"CMS Publication 15-1."

6. The Plan establishes the manner in which cost reports

are submitted to the Respondent, provides an explanation of

allowable costs, and sets forth the methodology by which cost

reports are used to establish nursing home per diem rates. The

rates are effective for a period of time referred to as the

"rate semester."

7. The Respondent's Division of Health Quality Assurance

(HQA) is responsible for Certificate of Need (CON) programs,

related regulations and procedures, licensure determinations,

and identification of licensed bed capacity.

8. Bed capacity is one of the factors used to determine

per diem rates. The calculation of the per diem rate is

affected by various cost limitations, including a ceiling based,

in part, on the classification of the facility by bed capacity.

9. Neither the Plan nor the cost report instructions

identify how to calculate the quantity of nursing home beds to

be stated in a cost report.

10. The Respondent has historically utilized the number of

beds listed on a Medicaid provider's license at the start and

the close of the cost reporting period to establish the bed

count applicable to calculation of the per diem reimbursement

rates.

11. The cost reporting period relevant to this proceeding

was calendar year 2008.

12. At all times during calendar year 2008, the

Petitioner's licensed bed capacity was 120 beds.

13. In May 2008, Lexington Health and Rehabilitation

Center (Lexington), an existing nursing home operator affiliated

with the Petitioner, applied through the CON process to expand

its facility by 21 beds, from 134 beds to 155 beds. Lexington

is not a party to this proceeding.

14. A statutorily-adopted moratorium in effect at all

times material to this case prohibited the licensure of new

nursing home beds.

15. Because of the moratorium on new beds, Lexington was

required to procure the transfer of 21 licensed beds from an

existing nursing home operator in order to proceed with the

proposed expansion.

16. The Petitioner agreed to transfer 21 beds to

Lexington.

17. The Lexington CON application was approved on

August 22, 2008. The approval was unchallenged and became final

on September 26, 2008.

18. On September 20, 2008, the Respondent issued a renewal

license to the Petitioner for a 120-bed facility, valid through

September 19, 2010.

19. Based on the approval of the Lexington CON

application, the Petitioner began to reduce capacity by removing

beds from service. The beds that were removed from service were

no longer ready for immediate occupancy and could not be made so

within a 48-hour period.

20. The Petitioner initiated alterations to the physical

plant to reflect the reduced number of beds, and such

alterations precluded meeting minimum space requirements for the

21 beds. The Petitioner's patient census began to decline as

the beds were decommissioned to that which would be anticipated

given the reduction in available beds.

21. As included in the CON application, the Lexington

plans were "approved for construction" by letter dated

October 23, 2008, from the Respondent's Office of Plans and

Construction (OPC).

22. The OPC had the responsibility to review, and approve

or deny, construction plans. The OPC also had final authority

to determine, post-construction, whether the facility met

applicable requirements and was ready for occupancy.

23. The OPC's October 23, 2008, letter required that all

local permits and approvals be obtained prior to commencement of

construction and stated that the project would be considered

abandoned and the approval terminated if construction had not

commenced within one year.

24. On October 27, 2008, both the Petitioner and Lexington

applied to amend their respective licenses to the post-transfer

bed capacities, 155 beds at Lexington and 99 beds at the

Petitioner.

25. Both applications identified the effective date of the

amendments as "[u]pon final approval by Plans and Construction,"

referencing the Respondent's OPC.

26. The Respondent's "approval for construction" on

October 23, 2008, of the plans included in the Lexington CON was

not sufficient to constitute the "final approval by Plans and

Construction" referenced in the applications filed October 27,

2008.

27. Through the removal of beds from service, the

Petitioner's actual nursing home bed capacity on December 31,

2008, was 99 beds.

28. According to a Licensed Bed Service Memorandum ("Bed

Memo") dated January 22, 2009, the Lexington project was

essentially complete and ready for occupancy on that date.

29. On February 10, 2009, the Respondent issued an amended

license to the Petitioner to decrease the bed capacity to

99 beds and an amended license to Lexington to increase the bed

capacity to 155 beds.

30. By letter dated February 24, 2009, the Respondent

advised Lexington that based on the January 22, 2009,

inspection, the Lexington project was "approved for its intended

purpose."

31. On August 17, 2009, the Petitioner filed an amended

cost report for the year ending December 31, 2008, wherein the

Petitioner stated a "Total Bed Capacity" of 120 beds at the

beginning of the period and 99 beds at the end of the period.

32. The Respondent initially calculated the per diem rate

based on the Petitioner's representation of a 99-bed capacity;

however, on August 19, 2009, the Respondent issued an amended

notice of per diem rates, indicating that the Petitioner's

reimbursement rate had been calculated to reflect a capacity of

120 licensed beds at the end of the 2008 calendar year.

33. The impact of reducing the Petitioner's licensed bed

capacity from 120 to 99 beds is to reduce the prospective per

diem reimbursement rate by $4.34 due to the impact of a cost

limitation based on capacity.

CONCLUSIONS OF LAW

34. The Division of Administrative Hearings has

jurisdiction over the parties to and the subject matter of this

proceeding. §§ 120.569 and 120.57, Fla. Stat. (2009).

35. The Respondent is the state agency responsible for

administering the Medicaid program in Florida.

36. The Petitioner has the burden of establishing

entitlement to the relief sought by a preponderance of the

evidence. Florida Department of Transportation v. J. W. C.

Company, Inc. , 396 So. 2d 778 (Fla. 1st DCA 1981). The evidence

in this case establishes that the Petitioner's actual nursing

home bed capacity on December 31, 2008, was 99 beds.

37. Subsection 400.021(11), Florida Statutes (2008),

defines a nursing home bed as follows:

"Nursing home bed" means an accommodation

which is ready for immediate occupancy, or

is capable of being made ready for occupancy

within 48 hours, excluding provision of

staffing; and which conforms to minimum

space requirements, including the

availability of appropriate equipment and

furnishings within the 48 hours, as

specified by rule of the agency, for the

provision of services specified in this part

to a single resident.

38. In this case, the evidence establishes that on

December 31, 2008 (the only date upon which the bed count is

relevant in this case), the Petitioner had a total capacity of

99 nursing home beds.

39. Upon final approval of the Lexington CON, the

Petitioner began to decommission the 21 beds committed for

transfer to Lexington. Alterations of the Petitioner's physical

plant that commenced after the Lexington CON approval precluded

the utilization of the 21 beds by the end of calendar year 2008.

The Petitioner's patient census declined to that which would be

anticipated in a 99-bed facility.

40. The Petitioner has asserted that by operation of

Subsection 408.806(3)(c), Florida Statutes (2008), the

Petitioner's application to amend the licensed number of beds

was approved on December 26, 2008. The statute provides a

period of 30 days during which the agency may request additional

information and states that, "[w]ithin 60 days after the receipt

of a complete application, the agency shall approve or deny the

application." There is no evidence that the Respondent

requested any additional information. However, the application

was contingent on the final approval by the Respondent's OPC,

and, accordingly, the application was not complete until the

final approval occurred on January 22, 2009, as documented by

the Bed Memo of that date.

41. The Petitioner has also suggested that the application

to reduce licensed bed capacity by 21 beds could have been

approved separately from the Lexington application; however, the

unmistakable purpose of both applications was to transfer the

21 beds from the Petitioner to Lexington, a process that could

not have occurred prior to the final approval of the project by

the Respondent's OPC on January 22, 2009.

42. In any event, it is unnecessary to resolve the issue

of whether the license amendment application should have been

approved prior to the close of calendar year 2008, because there

is no apparent requirement that the number of beds stated on the

cost report be consistent with the facility's license.

43. The Respondent has historically relied on the licensed

bed capacity to calculate per diem reimbursement rates and has

asserted that such reliance was reasonable and entitled to

deference. However, in the absence of specific instructions

within the rule or related guidelines as to how to quantify bed

capacity, it is likewise reasonable to consider evidence that

the license does not correctly reflect actual bed capacity. In

the instant case, the evidence establishes that the Petitioner's

licensed bed capacity did not reflect the actual number of

nursing home beds in the facility.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that the Agency for Health Care

Administration enter a final order identifying the Petitioner's

nursing home bed capacity on December 31, 2008, as 99 beds and

making the appropriate adjustment to the per diem rate

calculations for the relevant rate semester.

DONE AND ENTERED this 5th day of May, 2010, in Tallahassee,

Leon County, Florida.

S

WILLIAM F. QUATTLEBAUM

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone]

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 5th day of May, 2010.

COPIES FURNISHED :

Kelly Ann Bennett, Esquire

Sheryl Rosen, Legal Intern

Agency for Health Care Administration

Fort Knox Building

2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

Peter A. Lewis, Esquire

Law Offices of Peter A. Lewis, P.L.

3023 North Shannon Lakes Drive, Suite 101

Tallahassee, Florida 32309

Richard J. Shoop, Agency Clerk

Agency for Health Care Administration

2727 Mahan Drive, Mail Station 3

Tallahassee, Florida 32308

Justin Senior, General Counsel

Agency for Health Care Administration

Fort Knox Building, Suite 3431

2727 Mahan Drive, Mail Station 3

Tallahassee, Florida 32308

Thomas W. Arnold, Secretary

Agency for Health Care Administration

Fort Knox Building, Suite 3116

2727 Mahan Drive

Tallahassee, Florida 32308

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the 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.