10-000632 Dolphin Diagnostics, Llc vs. Agency For Health Care Administration Status: Closed Recommended Order on Monday, August 9, 2010.

Summary: Financial instability warrants denial of renewal application for lab.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DOLPHIN DIAGNOSTICS, LLC, )

)

Petitioner, )

)

vs. ) Case No. 10-0632

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Respondent. )

)

RECOMMENDED ORDER

On April 14 and 15, 2010, an administrative hearing in this

case was conducted by William F. Quattlebaum, Administrative Law

Judge, Division of Administrative Hearings.

APPEARANCES

For Petitioner: Walter R. Carfora, Esquire

Walter R. Carfora, P.A.

111 Second Avenue, Northeast, Suite 917

St. Petersburg, Florida 33701

For Respondent: James H. Harris, Esquire Agency for Health Care Administration

Sebring Building, Suite 330D

525 Mirror Lake Drive, North

St. Petersburg, Florida 33701

STATEMENT OF THE ISSUE

The issue in the case is whether a license renewal

application filed by Dolphin Diagnostics, LLC (Petitioner),

should be approved.

PRELIMINARY STATEMENT

On January 4, 2010, the Agency for Health Care

Administration (Respondent) issued a Notice of Intent to Deny

(Notice) a license renewal application filed by the Petitioner.

As stated in the Notice, the basis for the denial was the

alleged failure of the Petitioner to provide adequate proof of

financial ability and the Respondent's related determination

that the Petitioner was "financially unstable." Additionally,

the Notice stated that the Petitioner failed to comply with

documentation requirements related to adverse incident reporting

and to identification of data entry personnel responsible for

patient accounts and billing records.

The Petitioner requested an administrative hearing. On

February 15, 2010, the Respondent forwarded the request to the

Division of Administrative Hearings, which scheduled and

conducted the hearing.

On April 7, 2010, the parties filed a Pre-hearing

Stipulation, including a statement of agreed facts that have

been adopted and incorporated herein as necessary.

At the hearing, the Petitioner presented the testimony of

two witnesses and had Exhibits numbered 1 through 6 admitted

into evidence. The Respondent presented the testimony

of 13 witnesses and had Exhibits numbered 1 through 10 and 12

admitted into evidence.

The Transcript of the hearing was filed on May 11, 2010.

Pursuant to the schedule adopted at the conclusion of the

hearing, proposed recommended orders were due on June 30, 2010,

and the Respondent filed a Proposed Recommended Order on that

date. By letter filed on July 2, 2010, the Petitioner advised

that it would not file a proposed order.

FINDINGS OF FACT

1. At all times material to this case, the Petitioner has

been licensed by the State of Florida as a health care clinic.

2. The Petitioner provided diagnostic ultrasound services

in the offices of various medical professionals with whom the

Petitioner contracted, using the Petitioner's imaging equipment

and technicians.

3. In August 2007, the Petitioner (identified at the time

as "Dolphin Ultrasound, LLC") was acquired by Pauline Craig and

Dean Hankinson from the previous owner, Sandi Shaffer.

4. Ms. Craig and Mr. Hankinson operated other corporate

entities ("Dolphin DX," "Dolphin III Diagnostics, Inc.," and

"Dolphin Diagnostic Holdings, Inc.,") that were essentially

involved in the same business.

5. Ms. Craig and Mr. Hankinson also created Integrated

Medical Testing and Rehab Consultants, Inc. ("Integrated").

which, as of January 2007, was responsible for day-to-day

management for the Petitioner, at least through August 31, 2007.

6. Ms. Shaffer testified that, for approximately seven

years prior to the sale, the Petitioner operated profitably.

7. Ms. Shaffer testified that the Petitioner's

profitability began to decline during the period when Integrated

managed the Petitioner.

8. Ms. Shaffer agreed to sell the Petitioner to Ms. Craig

and Mr. Hankinson for $360,000. At the time of the closing,

various credits essentially reduced the balance owed to Ms.

Shaffer to approximately $260,000. Ms. Shaffer received a

payment of $10,000 and accepted promissory notes for the

remaining balance.

9. In March 2008, an employee of the Respondent conducted

a routine survey and determined that the Petitioner was

financially unstable. The Petitioner submitted a plan of

correction to address the financial instability, and the

Respondent took no further action at that time.

10. Mr. Hankinson died in June 2009, and Ms. Craig became

the sole owner. At the time of the hearing, the Petitioner was

owned by Ms. Craig.

11. In December 2009, the same agency employee conducted

another survey and again determined that the Petitioner was

financially unstable because the 2008 plan of correction had not

been implemented.

12. At the time of the hearing, there were unsatisfied

legal judgments against the Petitioner and/or Ms. Craig,

totaling into the tens of thousands of dollars. The judgments

were the result of litigation initiated by former business

associates and employees of the Petitioner for unpaid

professional fees, wages, and rent.

13. At the hearing, Ms. Craig's testimony suggested that

the legal disputes resulting in the unsatisfied judgments were

the result of disgruntled associates and employees. Whatever

the reason for the litigation, the evidence clearly establishes

that the litigation was resolved in favor of the supposedly

disgruntled litigants and against the Petitioner. There was no

credible evidence that the Petitioner has the financial ability

to meet the obligations imposed by the judgments.

14. In addition to the judgments, Ms. Shaffer has never

received any of the funds owed pursuant to the promissory notes

executed at the time she sold the Petitioner to Ms. Craig and

Mr. Hankinson.

15. Ms. Craig suggested that her failure to meet her

obligation under the promissory notes was related to the

cancellation of the Petitioner's Medicaid number, but there was

no evidence that the obligation related to the promissory notes

had been legally discharged.

16. Upon the surveyor's request for prior year tax

returns, the Petitioner provided returns for tax years 2007 and

2008 that were marked "draft," apparently because final returns

had not been filed and were not available. It is reasonable to

infer that any taxes due for the cited years were not paid, and

it is so found.

17. Finally, the Petitioner's check for payment of the

renewal application fee was rejected by the financial

institution upon which it was drawn due to insufficient funds in

the account.

18. The surveyor was unable to identify any active revenue

source for the Petitioner. Ms. Craig admitted to the surveyor

that the Petitioner had not provided or billed for services for

the period from May 5, 2009, to December 17, 2009.

19. Although the Petitioner generated some revenue in

February and March 2010, there was no credible evidence that the

revenue would continue or be sufficient to meet operating

expenses.

20. At the hearing, Ms. Craig attributed the Petitioner's

financial difficulties to the litigation referenced herein and

to the cancellation of a Medicaid provider number. The evidence

established that the Petitioner's financial difficulties

existed, and were apparent, prior to the sale, during the time

when the Petitioner held a valid Medicaid number, and Integrated

was responsible for management of the Petitioner.

21. The Petitioner's accountant prepared and submitted

financial projections to the Respondent to establish that the

Petitioner was financially stable and could generate sufficient

revenue to operate profitably. The projections are not

supported by any credible data.

22. In preparing the projections, the accountant relied

entirely on representations made by Ms. Craig as to future

revenue sources.

23. At the hearing, Ms. Craig produced a number of

contracts executed shortly before the hearing and asserted that

such contracts would result in substantial future revenue to the

company.

24. There was no credible evidence that any of the

contracts produced by Ms. Craig, none of which guarantee minimum

revenue and all of which were cancellable upon short notice,

would provide any revenue to the Petitioner.

25. Another contract offered at the hearing as a source of

potential revenue had been in existence for several years and

had been cited as an anticipated revenue source in the 2008 plan

of correction. There was no evidence that any substantial

revenue had resulted from the contract.

26. No credible evidence was presented at the hearing that

the Petitioner can achieve the revenue levels upon which the

financial projections were based. Accordingly, the financial

projections have been rejected.

27. In addition to the issue of financial stability, the

2009 survey determined that the Petitioner had no documentation

establishing compliance with adverse incident reporting

requirements. The Petitioner offered no credible evidence to

refute the determination by the surveyor.

28. The survey also determined that the Petitioner had no

documentation of compliance with identification requirements for

persons with data entry responsibility for patient records and

billing. The Petitioner offered no credible evidence to refute

the determination by the surveyor.

CONCLUSIONS OF LAW

29. The Division of Administrative Hearings has

jurisdiction over the parties to and subject matter of this

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

30. The Petitioner has the burden of establishing by a

preponderance of the evidence entitlement to the licensure

sought. § 120.57(1)(j), Fla. Stat. (2009); Balino v. Department

of Health and Rehabilitative Services , 348 So. 2d 349 (1st DCA

1977). In this case, the Petitioner has failed to meet the

burden of proof.

31. The basis for the denial of the application was the

Petitioner's financial instability and the failure to comply

with various documentation requirements.

32. Section 400.991, Florida Statutes (2009), provides, in

relevant part, as follows:

(1)(a) The requirements of part II of

chapter 408 apply to the provision of

services that require licensure pursuant to

this part and part II of chapter 408 and to

entities licensed by or applying for such

licensure from the agency pursuant to this

part. A license issued by the agency is

required in order to operate a clinic in

this state. Each clinic location shall be

licensed separately regardless of whether

the clinic is operated under the same

business name or management as another

clinic.

(b) Each mobile clinic must obtain a

separate health care clinic license and must

provide to the agency, at least quarterly,

its projected street location to enable the

agency to locate and inspect such clinic. A

portable equipment provider must obtain a

health care clinic license for a single

administrative office and is not required to

submit quarterly projected street locations.

* * *

(4) In addition to the requirements of part

II of chapter 408, the applicant must file

with the application satisfactory proof that

the clinic is in compliance with this part

and applicable rules, including:

* * *

(c) Proof of financial ability to operate

as required under s. 408.810(8). As an

alternative to submitting proof of financial

ability to operate as required under

s. 408.810(8), the applicant may file a

surety bond of at least $500,000 which

guarantees that the clinic will act in full

conformity with all legal requirements for

operating a clinic, payable to the agency.

The agency may adopt rules to specify

related requirements for such surety bond.

(Emphasis supplied)

33. Subsection 408.810(8), Florida Statutes (2009),

provides, in relevant part, as follows:

408.810 Minimum licensure requirements.--In

addition to the licensure requirements

specified in this part, authorizing

statutes, and applicable rules, each

applicant and licensee must comply with the

requirements of this section in order to

obtain and maintain a license .

* * *

(8) Upon application for initial licensure

or change of ownership licensure, the

applicant shall furnish satisfactory proof

of the applicant's financial ability to

operate in accordance with the requirements

of this part, authorizing statutes, and

applicable rules. The agency shall

establish standards for this purpose,

including information concerning the

applicant's controlling interests. The

agency shall also establish documentation

requirements, to be completed by each

applicant, that show anticipated provider

revenues and expenditures, the basis for

financing the anticipated cash-flow

requirements of the provider, and an

applicant's access to contingency financing.

A current certificate of authority, pursuant

to chapter 651, may be provided as proof of

financial ability to operate. The agency

may require a licensee to provide proof of

financial ability to operate at any time if

there is evidence of financial instability,

including, but not limited to, unpaid

expenses necessary for the basic operations

of the provider. (Emphasis supplied)

34. Florida Administrative Code Rule 59A-33.004 provides,

in relevant part, as follows:

59A-33.004 Renewal License Applications.

(1) At least 90 days prior to the

expiration of the license, all licensed

health care clinics must submit a complete

renewal application on AHCA Form 3110-0013,

Application for Health Care Clinic Licensure

July 2006, in accordance with the

Instructions for Completing the Application

for Health Care Clinic Licensure in the same

form and check the renewal box. This form

is adopted by reference. All information

required by the form and instructions must

be submitted. All forms and these rules may

be obtained by contacting the Agency in

accordance with Rule 59A-33.007, F.A.C.

(2) Special Provisions. Submission of the

renewal application must be in accordance

with Rule 59A-33.002, F.A.C. Proof of

financial ability to operate shall not be

required for a renewal application unless

the Agency determines that there is evidence

of financial instability. If the Agency

notifies the health care clinic in writing

of such evidence of instability, the clinic

will be required to demonstrate proof of

financial ability to operate in order to

meet the licensure requirements of the Act.

(See Rule 59A-33.009, F.A.C., relating to

financial instability).

(3) An unannounced onsite inspection and

survey will be conducted by the Agency prior

to license expiration. All requirements for

licensure under these rules and the Act must

be met during the survey. (Emphasis

supplied)

35. Florida Administrative Code Rule 59A-33.009 provides,

in relevant part, as follows:

59A-33.009 Financial Instability.

When evidence of financial instability of a

health care clinic is substantiated, the

Agency will notify the health care clinic in

writing that satisfactory proof of financial

ability to comply with Part X, Chapter 400,

F.S., must be provided.

(1) Evidence of financial instability of a

health care clinic shall, without

limitation, include issuance of checks and

drafts for which there are insufficient

funds, delinquent bills for such items as

personnel salaries, drugs, lease, mortgage,

utilities or other operational costs,

appointment of a receiver, a voluntary or

involuntary petition for bankruptcy, a

voluntary arrangement with creditors, health

care clinic closure, discontinuance of

health care clinic business for more than 60

consecutive days or insolvency.

(2) The licensee shall submit to the Agency

a written plan of correction to resolve

specific financial problems that the Agency

has identified as evidence of financial

instability. Should the financial

instability not be resolved within 90 days

of the original notice, the licensee shall

be subject to disciplinary action, fine,

suspension or revocation of the license.

36. As set forth herein, the evidence fails to establish

that the Petitioner is financially stable. There was no

credible evidence presented that the Petitioner has current or

projected revenue sufficient to meet operating expenses, much

less to meet obligations related to the unpaid promissory notes

and the unsatisfied judgments.

37. There was no credible evidence presented that the

Petitioner can achieve the financial projections supplied by the

Petitioner's accountant to the Respondent.

38. Section 400.9935, Florida Statutes (2009), provides,

in relevant part, as follows:

400.9935 Clinic responsibilities.—

(1) Each clinic shall appoint a medical

director or clinic director who shall agree

in writing to accept legal responsibility

for the following activities on behalf of

the clinic. The medical director or the

clinic director shall:

* * *

(f) Ensure compliance with the

recordkeeping, office surgery, and adverse

incident reporting requirements of chapter

456, the respective practice acts, and rules

adopted under this part and part II of

chapter 408.

39. Florida Administrative Code Rule 59A-33.012(5)

provides, in relevant part, as follows:

59A-33.012 Survey Requirements and Process.

(5) To facilitate a licensure survey, the

health care clinic shall have the following

materials readily available for review at

the time of the survey:

* * *

(g) Any policies, procedures, guidelines,

checklists that demonstrate compliance with

adverse incident reporting requirements and

injury disclosure.

(h) Personnel files.

* * *

(q) An all-inclusive and up to date listing

of original signatures and initials of all

persons entering information on billing and

patient records, the printed name and

medical designation, if any, such as PA, RN,

MD, etc. The log shall be kept and

concurrently maintained at the health care

clinic. Information required by this rule

shall be stored and maintained by the health

care clinic for a period of 5 years.

* * *

(s) Documentation for the past two years or

from the date of licensure, whichever is

earlier, demonstrating in writing

compliance, when, and what action was taken

by the medical or clinic director to perform

the functions, duties and clinic

responsibilities under Sections

400.9935(1)(a)-(g), F.S. Such documentation

shall be made available to authorized agency

personnel upon request.

40. The surveyor determined that the Petitioner did not

have written materials documenting compliance with adverse

incident reporting requirements and other requirements related

to identification of data entry personnel with patient record

and billing responsibilities. Although the Petitioner asserted

that the materials were present and available to the surveyor at

the time of the survey, they were not provided to the surveyor,

and the Petitioner offered no credible evidence at the hearing

to counter the surveyor's finding. The materials were not

offered at the hearing. There was no credible evidence that the

Petitioner complied with the requirements set forth in Florida

Administrative Code Rule 59A-33.012(5).

41. At the hearing, the Petitioner asserted that the

Respondent had failed to provide an opportunity for the

Petitioner to correct the deficiencies cited in the survey

conducted in December 2009. However, the primary determination

in that survey was that the Petitioner was financially unstable,

which was the primary determination in the previous survey

conducted in March 2008. The Petitioner's plan of correction,

submitted in response to the 2008 survey, failed, and the

deficiency remained uncorrected 21 months later.

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 denying the license renewal

application filed by the Petitioner.

DONE AND ENTERED this 9th day of August, 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 9th day of August, 2010.

COPIES FURNISHED :

Walter R. Carfora, Esquire

Walter R. Carfora, P.A.

111 Second Avenue, Northeast, Suite 917

St. Petersburg, Florida 33701

James H. Harris, Esquire

Agency for Health Care Administration

Sebring Building, Suite 330D

525 Mirror Lake Drive, North

St. Petersburg, Florida 33701

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.