13-003852MTR Harry Silnicki, By And Through His Guardian Debra Silnicki, And Debra Silnicki, Individually vs. Agency For Health Care Administration Status: Closed DOAH Final Order on Tuesday, July 15, 2014.

Summary: Petitioners did not prove that AHCA should recover less than the amount of its Medicaid lien claim.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

HARRY SILNICKI, BY AND THROUGH

HIS GUARDIAN DEBRA SILNICKI, AND

DEBRA SILNICKI, INDIVIDUALLY,

Petitioners,

vs. Case No. 13 - 3852MTR

AGENCY FOR HEALTH CARE

ADMINISTRATION,

Respondent.

________________________ _______/

FINAL ORDER

Pursuant to notice, a formal administrative hearing was

conducted on May 8, 2014, in Tallahassee, Florida, before

Administrative Law Judge (ALJ) Claude B. Arrington of the

Division of Administrative Heari ngs (DOAH).

APPEARANCES

For Petitioner s : Scott L. Henratty, Esquire

Malove Henratty, P.A.

14 Rose Drive

Fort Lauderdale, Florida 33316

Floyd B. Faglie, Esquire

Staunton and Faglie, PL

189 East Walnut Street

Monticello, Florida 32344

For Respondent: Adam James Stallard, Esquire

Xerox Recovery Services Group

Suite 300

2073 Summit Lake Drive

Tallahassee, Florida 32317

STATEMENT OF THE ISSUE

The issue is the amount of money, if any, that must be paid

to the Agency for Health Care Administration (AHCA) to satisfy

its Medicaid lien under section 409.910, Florida Statutes (2013).

PRELIMINARY STATEMENT

On October 2, 2013, Petitioners filed their " Petition to

Preclude, or, Alternatively, Determine the Amount of, Medicaid 's

Lien. " The matter was referred t o DOAH and assigned the case

number reflected above. On January 7, 2014, Petitioners filed

their " Amended Petition to Preclude, or, Alternatively, Determine

the Amount of, Medicaid 's Lien. "

Prior to the he aring , the parties filed a Joint Pre - hearing

Sti pulation, which contained certain stipulated facts. Those

stipulated facts have been incorporated into this Final Order to

the extent they are deemed relevant.

At the final hearing conducted May 8, 2014, Petitioners

called as their only witness attorney Scott Henratty, who

represented the Petitioners in the personal injury proceeding

discussed below. Petitioners offered seven pre - marked E xhibits,

each of which was admitted into evidence. Respondent offered no

witnesses and no exhibits.

The Transcript of the proceedings, consisting of one volume,

was filed June 3, 2014.

At the request of the Respondent, the deadline for the

filing of proposed final orders was extended. Thereafter, the

parties timely filed their proposed orders, which have been

du ly - considered by the undersigned in the preparation of this

Final Order.

At the request of both parties, official recognition was

taken of pertinent legal authorities.

All statutory references are to Florida Statutes (2013).

FINDINGS OF FACT

1. Harry S ilnicki, at age 52, suffered devastating brain

injuries when a ladder on which he was standing collapsed.

Mr. Silnicki, now age 59, has required , and will for the

remainder of his life require , constant custodial care as a

result of his injuries. He has been, and will be into the

indefinite future, a resident of the Florida Institute of

Neurological Rehabilitation (FINR) or a similar facility that

provides full nursing care.

2. Debra Silnicki is the wife and guardian of

Mr. S il nicki. Mr. Silnicki , th rough his guardian, brought a

personal injury lawsuit in Broward County, Florida, against

several defendants, including the manufacturer of the ladder, the

seller of the ladder, and two insurance companies (Defendants) ,

contending that Mr. Silnicki ' s injur ies were caused by a

defective design of the ladder. The lawsuit sought compensation

for all of Mr. Silnicki ' s damages as well as his wife ' s

individual claim for damages associated with Mr. Silnicki ' s

damages. When referring to the personal injury lawsui t, Mr. and

Mrs. Silnicki will be referred to as Plaintiffs.

3. During the course of the trial, before the jury reached

its verdict, the Plaintiffs entered into a High - Low Agreement

(HLA) with the Defendants by which the parties agreed that,

regardless o f the jury verdict, the Defendants would pay to the

Plaintiffs $3,000,000 if the Plaintiffs lost the case, but would

pay at most $9,000,000 if the Plaintiffs won the case.

4. After a lengthy trial, on March 27, 2013, the jury

returned a verdict finding no liability on the part of the

manufacturer or any other defendants. Consequently, the jury

awarded the Plaintiffs no damages.

5. The Defendants have paid to the Plaintiffs the sum of

$3,000,000 pursuant to the HLA (the HLA funds). The HLA

constitutes a settlement of the claims the Plaintiffs had against

the Defendants. 1 /

6. As shown in their Closing Statement (Petitioner s'

E xhibit 7), dated September 23, 2013, the Silnickis ' attorneys

have disbursed $1,100,000 of the HLA funds as attorney ' s fees and

$588,167.40 as costs. The sum of $1,011,832.60 2 / was paid under

the heading " Medical Liens/Bills to be Paid/Waived/Reduced by

Agreement Pending Court Approval. " Included in that sum were

payments to Memorial Regional Hospital in the amount of

$406,464.4 9 and a payment to FINR in the amount of $600,000.00.

Also included was the sum of $245,648.57, which was to be

deposited in an interest - bearing account. Subject to court

approval, the Closing Statement earmarked, among other payments,

$100,000 for a spe cial needs trust for Mr. Silnicki and a

$100,000 payment to M r s. Silnicki for her loss of consortium

claim.

7. AHCA has provided $245,648.57 in Medicaid benefits to

Mr. Silnicki. AHCA has asserted a Medicaid lien against the HLA

funds in the amount of $2 45,648.57. As required by section

409.910 (17)(a), t he amount of the Medicaid lien has bee n placed

in an interest - bearing account . The Closing Statement reflects

that should Petitioners prevail in this proceeding by reducing or

precluding the Medicaid lie n, any amounts returned to Petitioners

will be split 50% to FINR, 25% to attorney ' s fees, and 25% to the

Petitioners.

8. Section 409.910(11)(f) provides as follows:

(f) Notwithstanding any provision in this

section to the contrary, in the event of an

a ction in tort against a third party in which

the recipient or his or her legal

representative is a party which results in a

judgment, award, or settlement from a third

party, the amount recovered shall be

distributed as follows:

1. After attorney ' s fees and taxable costs

as defined by the Florida Rules of Civil

Procedure, one - half of the remaining recovery

shall be paid to the agency up to the total

amount of medical assistance provided by

Medicaid.

2. The remaining amount of the recovery

shall be pai d to the recipient.

3. For purposes of calculating the agency ' s

recovery of medical assistance benefits paid,

the fee for services of an attorney retained

by the recipient or his or her legal

representative shall be calculated at 25

percent of the judgme nt, award, or

settlement.

9. The parties stipulated that the amount of Petitioners '

" taxable costs as defined by the Florida Rules of Civil

Procedure " is $347,747.05. The parties have also stipulated that

if the section 409.910(11)(f) formula is applied to the

$3,000,000 settlement funds received by Mr. and Mrs. Silnicki,

the resulting product would be greater than the amount of AHCA ' s

Medicaid lien of $245,648.57. That amount is calculated by

deducting 25% of the $3,000,000 for attorneys ' fees, which l eaves

$2,250,000. Deducting taxable costs in the amount of $347,747.05

from $2,250,000 leaves $1,902,352.95. Half of $1,902,352.95

equals $951,176.48 (the net amount). The net amount exceeds the

amount of the Medicaid lien.

10. Section 409.910(17)( b) provides the method by which a

recipient can challenge the amount of a Medicaid lien as follows:

(b) A recipient may contest the amount

designated as recovered medical expense

damages payable to the agency pursuant to the

formula specified in paragraph (11)(f) by

filing a petition under chapter 120 within 21

days after the date of payment of funds to

the agency or after the date of placing the

full amount of the third - party benefits in

the trust account for the benefit of the

agency pursuant to paragrap h (a). The

petition shall be filed with the Division of

Administrative Hearings. For purposes of

chapter 120, the payment of funds to the

agency or the placement of the full amount of

the third - party benefits in the trust account

for the benefit of the a gency constitutes

final agency action and notice thereof.

Final order authority for the proceedings

specified in this subsection rests with the

Division of Administrative Hearings. This

procedure is the exclusive method for

challenging the amount of thir d - party

benefits payable to the agency. In order to

successfully challenge the amount payable to

the agency, the recipient must prove, by

clear and convincing evidence, that a lesser

portion of the total recovery should be

allocated as reimbursement for p ast and

future medical expenses than the amount

calculated by the agency pursuant to the

formula set forth in paragraph (11)(f) or

that Medicaid provided a lesser amount of

medical assistance than that asserted by the

agency.

1 1 . Scott Henratty and his f irm represented the Plaintiffs

in the underlying personal injury case. Mr. Henratty is an

experienced personal injury attorney. Mr. Henratty testified

that the Plaintiffs asked the jury for a verdict in the amount of

$50,000,000 for Mr. Silnicki for his total damages, not including

his wife ' s consortium claim. Mr. Henratty valued the claim at

between $30,000,000 and $50,000,000. There was no clear and

convincing evidence that the total value of Mr. Silnicki ' s claim

exceeded $30,000,000.

1 2 . Mr. Henratt y testified that Plaintiffs presented

evidence to the jury that Mr. Silnicki ' s past medical expenses

equaled $3,366,267, and his future medical expenses, reduced to

present value, equaled $8,906,114, for a total of $12,272,381.

Those two elements of damag es equal approximately 40.9% of the

total value of the claim if $30,000,000 is accepted as the total

value of the claim. 3 /

13. The Closing Statement reflects that more than the

amount of the claimed Medicaid lien was to be used to pay past

medical expense s.

14. Petitioners assert in their Petition and Amended

Petition three alternatives to determine what should be paid in

satisfaction of the Medicaid lien in the event it is determined

that the HLA funds are subject to the lien. All three

alternatives a re premised on the total value of Mr. Silnicki ' s

recovery being $30,000,000 (total value) and compare that to the

recovery under the HLA of $3,000,000, which is one - tenth of the

total value. All three methods arrive at the figure of

$24,564.86 a s being th e most that can be recovered by the

Medicaid lien, which is one - tenth of the Medicaid lien. Future

medical expenses is not a component in these calculations .

15. The portion of the HLA funds that should be allocated

to past and future medical expenses is, at a minimum, 30% of the

recovery. 4 /

CONCLUSIONS OF LAW

16. DOAH has jurisdiction over the subject matter of and

the parties to this proceeding pursuant to sections 120.569,

120.57(1), and 409.910(17) , Florida Statutes .

17. As a condition for receipt of federal Medicaid funds,

states are required to seek reimbursement for medical expenses

incurred on behalf of Medicaid recipients (recipients) who later

recover from third - party tortfeasors. See Ark. Dep ' t of Health

and Hum. Srvs. v . Ahlborn , 547 U.S. 268 (2006).

18. Florida has enacted section 409.910, which is known as

the " Medicaid Third - Party Liability Act. " Section 409.910(1)

expresses the following legislative intent:

It is the intent of the Legislature that

Medicaid be the payor of last resort for

medically necessary goods and services

furnished to Medicaid recipients. All other

sources of payment for medical care are

primary to medical assistance provided by

Medicaid. If benefits of a liable third

party are discovered or become available

afte r medical assistance has been provided by

Medicaid, it is the intent of the Legislature

that Medicaid be repaid in full and prior to

any other person, program, or entity.

Medicaid is to be repaid in full from, and to

the extent of, any third - party benefit s,

regardless of whether a recipient is made

whole or other creditors paid. Principles of

common law and equity as to assignment, lien,

and subrogation are abrogated to the extent

necessary to ensure full recovery by Medicaid

from third - party resources. It is intended

that if the resources of a liable third party

become available at any time, the public

treasury should not bear the burden of

medical assistance to the extent of such

resources.

19. Section 409.910(6)(c) affords AHCA with an automatic

lie n " for the full amount of medical assistance provided by

Medicaid to or on behalf of the recipient for medical care

furnished as a result of any covered injury or illness for which

a third party is or may be liable, upon the collateral, as

defined in s. 40 9.901. "

20. Section 409.901(7) defines " collateral " as follows:

(7) " Collateral " means:

(a) Any and all causes of action, suits,

claims, counterclaims, and demands that

accrue to the recipient or to the recipient ' s

legal representative, related to any covered

injury, illness, or necessary medical care,

goods, or servic es that necessitated that

Medicaid provide medical assistance.

(b) All judgments, settlements, and

settlement agreements rendered or entered

into and related to such causes of action,

suits, claims, counterclaims, demands, or

judgments.

(c) Proceeds, a s defined in this section.

21. In this proceeding, the application of the formula in

section 409.910(11)(f) yields a result that exceeds the amount

Medicaid has paid. Consequently, Petitioners are required to pay

to Medicaid the amount of its lien (the sum of $245,648.57)

unless they can prove, pursuant to section 409.910(17)(b), that a

lesser amount of the HLA funds should be allocated for the

payment of medical expenses.

22. Section 409.910(17)(b) establishes the evidentiary

burden that must be estab lished by a challenger to the statutory

formula:

In order to successfully challenge the amount

payable to the agency, the recipient must

prove, by clear and convincing evidence, that

a lesser portion of the total recovery should

be allocated as reimburseme nt for past and

future medical expenses than the amount

calculated by the agency pursuant to the

formula set forth in paragraph (11)(f) or

that Medicaid provided a lesser amount of

medical assistance than that asserted by the

agency.

23. Clear and convin cing evidence " requires more proof than

a ' preponderance of the evidence ' but less than ' beyond and to

the exclusion of a reasonable doubt. '" In re Graziano , 696 So. 2d

744, 753 (Fla. 1997).

24. As stated by the Florida Supreme Court, the standard:

en tails both a qualitative and quantitative

standard. The evidence must be credible; the

memories of the witnesses must be clear and

without confusion; and the sum total of the

evidence must be of sufficient weight to

convince the trier of fact without hesi tancy.

Clear and convincing evidence requires that

the evidence must be found to be credible;

the facts to which the witnesses testify must

be distinctly remembered; the testimony must

be precise and lacking in confusion as to the

facts in issue. The ev idence must be of such

a weight that it produces in the mind of the

trier of fact a firm belief or conviction,

without hesitancy, as to the truth of the

allegations sought to be established.

In re Davey , 645 So. 2d 398, 404 (Fla. 1994)( quoting , with

appr oval , Slomowitz v. Walker , 429 So. 2d 797, 800 (Fla. 4th DCA

1983)); see also In re Henson , 913 So. 2d 579, 590 (Fla. 2005).

" Although this standard of proof may be met where the evidence is

in conflict, it seems to preclude evidence that is ambiguous. "

Westinghouse Elec. Corp. v. Shuler Bros. , 590 So. 2d 986, 988

(Fla. 1st DCA 1991).

25. The federal anti - lien statute at 42 U.S.C.

§ 1396p(a)(1) states " [n]o lien may be imposed against the

property of any individual prior to his death on account of

medic al assistance paid, " and the federal anti - recovery statute

at § 1396p(b)(1) states " [n]o adjustment or recovery of any

medical assistance correctly paid on behalf of an individual

under the State plan may be made. " Pursuant to these federal

directives, Fl orida enacted the " Medicaid Third - Party Liability

Act. " See § 409.910 , Fla. Stat.

26. In Wos v. E.M.A. , 133 S. Ct. 1391, 1394 (2013), the

Court observed as follows:

A federal statute prohibits States from

attaching a lien on the property of a

Medicaid be neficiary to recover benefits paid

by the State on the beneficiary ' s behalf. 42

U.S.C. §1396(a)(1). The anti - lien provision

pre - empts a State ' s effort to take any

portion of a Medicaid beneficiary ' s tort

judgment or settlement " not designated as

payments for medical care. " Arkansas Dept.

of Health and Human Services v. Ahlborn , 547

U.S. 268, 284, 126 S. Ct. 1752, 164 L. Ed.

459 (2006).

27. For a settlement or jury verdict that does not

distinguish between different categories of damages, Wos requires

that an allocation be made of the portion of the settlement or

verdict that is reasonably attributable to medical expenses. 5 /

28. Effective July 1, 2013, section 409.910(17) (b) was

enacted to provide a recipient the right to rebut the

presumptively vali d allocation created by section 409.910(11)( f).

That provision clearly contemplates the allocation of medical

expenses required by Wos to include past and future medical

expenses.

29. If the language of a statute " is clear and unambiguous

and conveys a clear and definite meaning, the statute should be

given its plain meaning. " Fla. Hosp. v. Ag. f or Health Care

Admin. , 823 So. 2d 844, 848 (Fla. 1 st DCA 2002).

30. Here, a plain reading of " past and future medical

expenses " cannot, as Petitioners argue, l imit the term to " past

medical expenses. " See Savasuk v. Ag. f or Health Care Admin. ,

Case No. 13 - 4130MTR (Fla. DOAH Jan. 29, 2014) and Holland v. Ag.

For Health Care Admin. , Case No. 13 - 4951MTR (Fla. DOAH May 2,

2014). Petitioners ' strained construction of the applicable

statutes is rejected.

31. There has been no ruling by a court of competent

jurisdiction that the provision in section 409.910 (17)(b) that

includes future medical expenses in the calculation of medical

expenses violates the anti - lien pr ovision found at 42 U.S.C.

§ 1396p(a)(1). 6 / A determination that a provision in a statute is

void or unenforceable should be left to a court of competent

jurisdiction. " The Administrative Procedure Act does not purport

to confer authority on administrati ve law judges or other

executive branch officers to invalidate statutes on

constitutional or any other grounds. " Comm c'n Workers v.

Gainesville , 697 So . 2d 167, 170 (Fla. 1 st DCA 1997).

32. The statutory scheme requires that Petitioners prove,

by clear a nd convincing evidence, that an allocation of the

amount of the HLA funds for past and future medical expenses

results in an amount that is less than the Medicaid lien, which

would dictate that the Medicaid lien be reduced.

33. The three alternative cal culations argued by

Petitioners do not factor in future medical expenses when

allocating the portion of the HLA funds attributable to medical

expenses. Consequently, those alternatives are rejected.

34. The portion of the HLA funds that should be alloc ated

to past and future medical expenses is a minimum of 30% of the

recovery. Applying 30 % to the net amount of $951,176. 48 produces

a figure ($285,352 .94) that exceeds the amount of the Medicaid

lien ($245,648.57).

35. Petitioners failed to prove by cle ar and convincing

evidence that the Medicaid lien should be reduced.

DISPOSITION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is DETERMINED that the amount of AHCA ' s Medicaid lien

payable from Petitioners ' High - Low Agreement funds i s

$245,648.57, as claimed by AHCA.

DONE AND ORDERED this 15th day of July , 2014 , in

Tallahassee, Leon County, Florida.

S

CLAUDE B. ARRINGTON

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 15th day of July , 2014 .

ENDNOTE S

1 / Petitioners argue that the HLA funds are not subject to the

Medicaid lien because the jury found the defendants not liable in

the underlying personal injury action. That argument is rejected.

The defendants became liable parties by the HLA.

2 / This amount is slightly more than 30% of the HLA fund.

3 / In addition to arguing that the HLA funds are not subject to

the Medicaid lien , Petitioners make three arguments as to the

appropriate allocation of the HLA funds. All arguments are based

on an assumed total value of the claim i n the amount of

$30,000,000.

4 / This minimum percentage is based on the portion of the HLA

funds paid for medical expenses (approximately 30%), the evidence

of past and future medical expenses presented to the jury in the

personal injury case brought b y the Silnickis (approximately

40.9%), and on the evidence presented by Petitioners as to a

plaintiff with damages similar to Mr. Silnicki ' s. Petitioners

introduced as their exhibit 15 the verdict form from Milien v.

Whitney , another personal injury case tried by Mr. Henratty.

Mr. Henratty testified that the damages suffered by Mr. Milien and

the damages suffered by Mr. Silnicki were similar. The jury

awarded Mr. Milien a total verdict of $33,100,000. Of that award

$1,200,000 was awarded for past medica l expenses and $14,400,000

was awarded for future medical damages for a total medical expense

award of $15,600,000. The percentage of past and future medical

expenses in Milien approximated 47% of the total award.

5 / In their proposed order, Petition ers argue that because the

jury returned a verdict of no liability, " it is impossible and

inappropriate to undertake an analysis of what a jury would have

awarded ' had the matter proceeded to trial ' as required by Wos .

The undersigned disagrees. The HLA funds should not be treated as

a windfall to Petitioners that is exempt from the Medicaid lien.

The HLA funds are properly treated as the results of the

settlement of an action in tort and should be treated as any other

settlement.

6 / The undersigned has not overlooked the final order in Gibbons

v AHCA , Case No. 13 - 4720MTR (Fla. DOAH Mar. 5, 2014).

COPIES FURNISHED:

Scott L. Henratty, Esquire

Malove Henratty, P.A.

14 Rose Drive

Fort Lauderdale, Florida 33316

Adam James Stallard, Esquire

Xerox Rec overy Services Group

Suite 300

2073 Summit Lake Drive

Tallahassee, Florida 32317

Elizabeth Dudek, Secretary

Agency for Health Care Administration

2727 Mahan Drive, Mail Stop 1

Tallahassee, Florida 32308

Stuart Williams, General Counsel

Agency for Healt h Care Administration

2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

Richard J. Shoop, Agency Clerk

Agency for Health Care Administration

2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party w ho 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

n otice of administrative appeal with the agency clerk of the

Division of Administrative Hearings within 30 days of rendition

of the order to be reviewed, and a copy of the notice,

accompanied by any filing fees prescribed by law, with the clerk

of the Distr ict Court of Appeal in the appellate district where

the agency maintains its headquarters or where a party resides or

as otherwise provided by law.