14-000010RX Laboratory Corporation Of America vs. Agency For Health Care Administration Status: Closed DOAH Final Order on Friday, March 28, 2014.

Summary: Pursuant to joint motion of the parties, Consent Final Order holds that Respondent's "Lowest Charge Rule" is an invalid exercise of delegated legislative authority because it contravenes the specific provisions of law implemented.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

LABORATORY CORPORATION OF

AMERICA,

Petitioner,

and

QUEST DIAGNOSTICS INCORPORATED,

QUEST DIAGNOSTICS NICHOLS

INSTITUTE, AND QUEST DIAGNOSTICS

CLINICAL LABORATORIES, INC.,

Intervenors,

v s. Case No. 14 - 0010RX

AGENCY FOR HEALTH CARE

ADMINISTRATION,

Respondent.

_______________________________/

CONSENT FINAL ORDER

Pursuant to the PartiesÓ Joint Motion for Summary Final

Order, a telephonic hearing was held on Ma rch 26, 2014 , before

Lawrence P. Stevenson, a designated Administrative Law Judge of

the Division of Administrative Hearings.

APPEARANCES

For Petitioner: J. Michael Huey, Esquire

D. Ty Jackson, Esquire

Gray Robinson , P.A.

301 South Bronough Street, Suite 600

Tallahassee, F lorida 32301

B. Kurt Copper, Esquire

Jones Day

325 John H. McConnell Boulevard

Suite 600

Columbus, Ohio 43215

For Respondent: Albert J. Bowden, Esquire

Office of the Attorney General

The Capitol, Plaza Level 01

Tallahassee, Florida 32399 - 1050

Tracie L. Hardin, Esquire

Douglas J. Lomonico, Esquire

Agency for Health Care Administration

2727 Mahan Drive, Mail Stop 3

Tallahasse e, Florida 32308

For Intervenors: Kelly Overstreet Johnson, Esquire

Broad and Cassel

Post Office Drawer 11300

Tallahassee, Florida 32302

Richard D. Raskin, Esq uire

Sidley Austin, LLP

One South Dearborn Street

Chicago, Illinois 60603

S. Craig Holden, Esquire

Ober | Kaler

100 Light Street

Baltimore, Maryland 21202

STATEMENT OF THE ISSUE

The issue is whether the AgencyÓs Lowest Charge Rule as

identified in the p etition filed in this matter is an invalid

exercise of delegated legislative authority because it

con travenes the specific provisions of law implemented as

prohibited by section 120.52(8)(c) , Florida Statutes (2013).

PRELIMINARY STATEMENT

On January 3, 2014, Petitioner, Laboratory Corporation of

America (ÐLabCorpÑ), filed a Petition for the Administrati ve

Determination of the Invalidity of an Existing Rule (the

ÐPetitionÑ) pursuant to section 120.56, Florida Statutes (the

ÐRule ChallengeÑ). The Petition challenges the validity of the

Agency for Health Care AdministrationÓs (ÐAHCAÑ) rule set forth

in Flo rida Administrative Code R ule 59G - 5.110(2), (hereinafter

referred to as the ÐLowest Charge RuleÑ), and restated in part in

the Florida Medicaid Provider General Handbook at page 1 - 4. The

Florida Medicaid Provider General Handbook has been adopted

pursuant to Florida Administrative Code R ule 59G - 5.020 . In the

Petition, LabCorp alleges that the Lowest Charge Rule is an

invalid exercise of delegated legislative authority pursuant to

section 120.52(8)(b), (c), (d), and (e).

On January 9, 2014, Quest Diagnos tics Incorporated, Quest

Diagnostics Nichols Institute, and Quest Diagnostics Clinical

Laboratories, Inc. (collectively, ÐQuestÑ), filed a Petition to

Intervene, adopting in full the allegations in the Petition filed

by LabCorp. QuestÓs Petition to Interv ene was granted on

January 14, 2014.

On March 19, 2014, LabCorp, AHCA and Quest (collectively,

the ÐPartiesÑ) filed their Joint Motion for Summary Final Order

(the ÐJoint MotionÑ). In the Joint Motion, the Parties stated

that they agreed that the Lowest C harge Rule contravenes the

specific provisions of law implemented, which is inconsistent

with section 120.52(8)(c). With the Joint Motion, the Parties

filed a Proposed Summary Final Order, the substance of which has

been adopted in this Consent Final Orde r.

FINDING S OF FACT

1. Respondent , AHCA , is the Florida agency responsible for

the administration of the Medicaid program in Florida and is the

agency responsible for the adoption, implementation and

enforcement of the Lowest Charge Rule at issue in this

proceeding.

2. Petitioner, LabCorp, provides medical testing and

clinical diagnostic services used by hospitals, physicians, and

other medical providers to diagnose and treat patients in Florida

and nationwide.

3. LabCorp is a Florida Me dicaid provider.

4. Quest operates commercial reference laboratories in

Florida and nationwide, providing a range of clinical laboratory

services to assist health care providers in diagnosing and

treating disease and other health conditions.

5. Quest is a Florida Medicaid provider.

6. As Florida Medicaid providers, LabCorp and Quest are

subject to the rules adopted by AHCA to administer the Medicaid

program in Florida, including the Lowest Charge Rule.

7. The Lowest Charge Rule s ubstantially affects the amounts

LabCorp and Quest are entitled to charge and are paid for

Medicaid services under chapter 409, Florida Statutes, and the

applicable Florida regulations and handbooks.

8. LabCorp and Quest are substantially affected by the

Lowest Charge Rule and therefore have standing to seek an

administrative determination of its invalidity.

9. This action challenges the validity of the Lowest Charge

Rule, which is included in both the first sentence of r ule 59G -

5.110(2), and in the Provider General Handbook at page 1 - 4.

10. Rule 59G - 5.110(2), states:

Charges for services or goods billed to the

Medicaid program shall not exceed the

providerÓs lowest charge to any other third

party payment source for the same or

equivalen t medical and allied care, goods, or

services provided to person [ sic ] who are not

Medicaid recipients. Any services or goods

customarily provided free of charge to

patients may not be billed to Medicaid when

provided to Medicaid recipients. Any payment

made by Medicaid for services or goods not

furnished in accordance with these provisions

is subject to recoupment and the agency may,

in such instances, initiate other appropriate

administrative or legal action.

11. The Provider General Handbook, ad opted pursuant to r ule

59G - 5.020, repeats the Lowest Charge Rule at page 1 - 4:

What the Provider May Charge for Services

The providerÓs charges for services billed to

Medicaid must not exceed the providerÓs

lowest charge to any other third party source

for the same or equivalent medical and allied

care, goods, or services provided to

individuals who are not Medicaid recipients.

CONCLUSIONS OF LAW

12. DOAH has jurisdiction over the parties to and subject

matter of this proceeding pursuant to section 120.56(1) and (3),

Florida Statutes.

13. Section 120.56(1)(a), provides that Ð[a]ny person

substantially affected by a rule . . . may seek an administrative

determination of the invalidity of the rule on the ground that

the rule is an invalid exercis e of delegated legislative

authority.Ñ

14. To demonstrate that a person is Ðsubstantially

affectedÑ by an agency rule, a person must establish Ð(1) a real

and sufficiently immediate injury in fact; and (2) that the

alleged interest is arguably with in the zone of interest to be

protected or regulated.Ñ Lanoue v. Fla. Dep't of Law Enf. , 751

So. 2d 94, 96 (Fla. 1st DCA 1999) (quoting Ward v. Bd. of Trs. of

the Int. Impust Fund , 651 So. 2d 1236, 1237 (Fla. 4th DCA

1995) ) .

15. LabCorp and Ques t are substantially affected parties

and have standing to bring this proceeding.

16. An Ðinvalid exercise of delegated legislative

authorityÑ is an Ðaction that goes beyond the powers, functions,

and duties delegated by the Legislature.Ñ £ 120.52( 8), Fla.

Stat. A rule is an Ðinvalid exercise of delegated legislative

authorityÑ if any one of the following applies:

(a) The agency has materially failed to

follow the applicable rulemaking procedures

or requirements set forth in this chapter;

(b) Th e agency has exceeded its grant of

rulemaking authority, citation to which is

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

(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.;

(d) The rule is vague, fails to establish

adequate standards for agency decisions, or

vests unbridled discretion in the agency;

(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; or

(f) The rule imposes regulatory costs on the

regulated person, county, or city which could

be reduced by the adoption of less costly

alternatives that substantially accomplish

the statutory objectives.

§ 120.52(8), Fla. Stat.

17. Furthermore, section 120.52(8) provides that:

A grant of rulemaking authority is necessary

but not sufficient to allow an agency to

adopt a rule; a specific law to be

implemented is also requi red. An agency may

adopt only rules that implement or interpret

the specific powers and duties granted by the

enabling statute. No agency shall have

authority to adopt a rule only because it is

reasonably related to the purpose of the

enabling legislatio n and is not arbitrary and

capricious or is within the agencyÓs class of

powers and duties, nor shall an agency have

the authority to implement statutory

provisions setting forth general legislative

intent or policy. Statutory language

granting rulemaking authority or generally

describing the powers and functions of an

agency shall be construed to extend no

further than implementing or interpreting the

specific powers and duties conferred by the

enabling statute.

18. R ule 59G - 5.110(2), which include s the Lowest Charge

Rule, cites to sections 409.902, 409.907, and 409.908, Florida

Statutes, and 42 C.F.R. § 447.25 as law implemented. Rule 59G -

5.020, adopting the Provider General Handbook in which the Lowest

Charge Rule is restated, cites to sections 4 09.902, 409.905,

409.906, 409.907, 409.908, 409.912, and 409.913 as law

implemented (collectively referred to as the Ðimplementing

authoritiesÑ).

19. None of the implementing authorities allows AHCA to

limit Medicaid reimbursement to, or require prov iders to charge

Medicaid, the lowest charge that they charge to any other third

party payment source for the same or equivalent medical and

allied care, goods, or services provided to persons who are not

Medicaid recipients. For example, s ection 409.907(5 )(a) states

that a providerÓs Medicaid claim form Ðshall require

certification that the services or good have been completely

furnished to the recipient and that . . . the amount billed does

not exceed the providerÓs usual and customary charge for the same

services or good.Ñ Moreover, s ection 409.908(11) , the primary

statute governing Medicaid payments to independent laboratories,

states that the laboratory Ðshall be reimbursed on the basis of

competitive bidding or for the least of the amount billed by th e

provider, the providerÓs usual and customary charge, or the

Medicaid maximum allowable fee established by the agency.Ñ

20. The word ÐcontraveneÑ means to contradict. Because the

Lowest Charge Rule contradicts its implementing authorities,

which do not require providers to charge Medicaid the lowest

charge that they charge to any other third - party payment source

for the same or equivalent medical and allied care, goods, or

services, it does not implement them, and, as such, it

contravenes the spec ific laws implemented. For that reason, the

Lowest Charge Rule is an invalid exercise of delegated

legislative authority under section 120.52(8)(c) . 1/

ORDER

Based on the foregoing Findings of Fact and Conclusions of Law,

it is ORDERED that:

1. The following portion of Florida Administrative Code

R ule 59G - 5.110(2), is an invalid exercise of delegated

legislative authority pursuant to section 120.52(8)(c),

Florida Statutes, because it contravenes the specific

provisions of law implemented:

Charges for services or goods

billed to the Medicaid program

shall not exceed the providerÓs

lowest charge to any other third

party payment source for the same

or equivalent medical and allied

care, goods, or services provided

to person [sic] who are not

Medicaid recipients.

2. The following portion of the Florida Medicaid Provider

General Handbook, at page 1 - 4, which is adopted

pursuant to Florida Administrative Code Rule 59G - 5.020,

is an invalid exercise of delegated legislative

authority pursuant to section 120.52(8)(c), F lorida

Statutes, because it contravenes the specific

provisions of law implemented:

What the Provider May Charge for Services

The providerÓs charges for services

billed to Medicaid must not exceed the

providerÓs lowest charge to any other

third party so urce for the same or

equivalent medical and allied care,

goods, or services provided to

individuals who are not Medicaid

recipients.

DONE AND ORDERED this 2 8 th day of March , 2014 , in

Tallahassee, Leon County, Florida.

S

LAWRENCE P. STEVENSON

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

Divisi on of Administrative Hearings

this 2 8 th day of March , 2014 .

ENDNOTE

1/ This Order addresses only the issue of whether the Lowest

Charge Rule is inconsistent with section 120.52(8)(c), Florida

Statutes, because of the stipulations made by the parties in

their Joint Motion.

COPIES FURNISHED:

J. Michael Huey, Esquire

GrayRobinson, P.A.

301 South Bronough Street, Suite 600

Post Office Box 11189

Tallahassee, Florida 32302 - 3189

R. Christopher Cook, Esquire

Jones Day

51 Louisiana Avenue , Northwest

Washing ton, DC 20001

B. Kurt Copper, Esquire

Jones Day

Suite 600

325 John H. McConnell Boulevard

Columbus, Ohio 43215

Douglas James Lomonico, Esquire

Agency for Health Care Administration

Mail Stop 3

2727 Mahan Drive

Tallahassee, Florida 32308

Kelly Overstr eet Johnson, Esquire

Broad and Cassel

Post Office Drawer 11300

Tallahassee, Florida 32302

Albert J. Bowden, Esquire

Office of the Attorney General

The Capitol, Plaza Level 01

Tallahassee, Florida 32399 - 1050

Richard D. Raskin, Esquire

Sidley Austin, LLP

One South Dearborn Street

Chicago, Illinois 60603

Scott D. Stein, Esquire

Sidley Austin, LLP

One South Dearborn Street

Chicago, Illinois 60603

S. Craig Holden, Esquire

Ober | Kaler

100 Light Street

Baltimore, Maryland 21202

Kelly J. Davidson, Esquire

Ober | Kaler

100 Light Street

Baltimore, Maryland 21202

Richard J. Shoop, Agency Clerk

Agency for Health Care Administration

2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

Stuart Williams, Gen eral Co unsel

Agency for Health Care Administrati on

2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

Elizabeth Dudek, Secretary

Agency for Health Care Administration

2727 Mahan Drive, Mail Stop 1

Tallahassee, Florida 32308

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affecte d 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 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 District Court of Appeal in the appellate district where

the agency maintains its headquarters or where a party resides or

as otherwise provided by law.