17-000472RP Sacred Heart Health System, Inc., D/B/A Sacred Heart Hospital Of Pensacola, Sacred Heart Health System, Inc., D/B/A Sacred Heart Hospital, Et Al vs. Agency For Health Care Administration Status: Closed DOAH Final Order on Tuesday, April 18, 2017.

Summary: Rule and proposed rule incorporating methodology for determining Medicaid outpatient hospital reimbursement rates were not invalid. Petitions denied.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

IN RE: MEDICAID REIMBURSEMENT Case Nos. 17 - 0467RP

RATE PROPOSED AND EXISTING RULE through 17 - 0474RP,

CHALLENGES 17 - 0496RP,

_______________________________/ 17 - 0558RP thr ough

17 - 0560RP

FINAL ORDER

On February 23, 2017, a final hearing was held in these

cases in Tallahassee before J. Lawrence Johnston, Administrative

Law Judge, Division of Administrative Hearings (DOAH).

APPEARANCES

For Petitioners: Mich ael J. Glazer, Esquire

Ausley McMullen

123 South Calhoun Street

Tallahassee, Florida 32302

Stephen A. Ecenia, Esquire

Rutledge, Ecenia, & Purnel l, P.A.

Suite 202

119 South Monroe Street

Tallahassee, Florida 32302 - 0551

Seann M. Frazier, Esquire

118 North Gadsden Street

Tallahassee, Florida 32302

Joanne Barbara Erde, Esquire

Duane Morris LLP

Suite 3400

200 South Biscayne Boulevard

Miami, Florida 33131

Christopher Charles Kokoruda, Esquire

Miami - Dade County

West Wing, Suite 109

1611 Northwest 12th Avenue

Miami, Florida 33136

Kyle L. Kemper, Esquire

Sundstrom & Mindlin, LLP

2548 Blairstone Pines Drive

Tallahassee, Florida 32301

For Respondent: Joseph M. Goldstein, Esquire

Shutts & Bowen LL P

Suite 2100

200 East Broward Boulevard

Fort Lauderdale, Florida 33301

STATEMENT OF THE ISSUE S

The issues are whether proposed and existing Florida

Administrative Code rules, both numb ered 59G - 6.030, are valid

exercises of delegated legislative authority.

PRELIMINARY STATEMENT

In November 2016, numerous Florida hospitals filed petitions

challenging the methodology used to determine the Medicaid

outpatient reimbursement rate changes for state fiscal year 2016 -

2017 as a rule that was not adopted as required, and challenging

the validity of existing rule 59G - 6.030, which included the

methodology used to determine the rates for fiscal year 2015 -

2016. Those petitions became DOAH cases 16 - 63 98RX through

16 - 6414RX, which were consolidated. The final hearing scheduled

for December 5 was continued, and the unadopted rule challenges

were stayed when the Agency for Health Care Administration (AHCA)

gave notice that it was proposing to amend rule 59G - 6.030 to

incorporate the methodology used to determine the reimbursement

rates for fiscal year 2016 - 2017.

In January 2017 , the hospitals filed petitions challenging

proposed and existing rule 59G - 6.030. Those petitions became

DOAH cases 17 - 0467RP thro ugh 17 - 0474RP, 17 - 0496RP, and 17 - 0558RP

through 17 - 0560RP, which were consolidated and scheduled for

final hearing on February 23 and 24. The final hearing in the

existing rule challenges in cases 16 - 6398RX through 16 - 6414RX was

rescheduled to coincide on February 23 and 24. The stay of the

unadopted rule challenges in those ÐRXÑ cases remained in effect.

On February 22, the parties filed their final joint pre -

hearing stipulation, which focused the issues and established

many of the pertinent facts. The final hearing was completed in

one day, on February 23.

Joint Exhibits 1 through 34 were received in evidence. The

Petitioners called three witnesses: John Owens, a healthcare

consultant focusing on hospital reimbursement; Tom Wallace, who

is AHCAÓs b ur eau c hief for Medicaid program finance; and Jennifer

Hinson, an attorney who works for Wellcare Health Plans, a

managed care organization (MCO) that contracts with numerous

hospitals to provide Medicaid plans for a large number of

Medicaid patients. Petit ionersÓ Exhibits 1, 2, 5, 6, 7, 9, 10,

16 through 24, 26, 27 , and 28 were received in evidence. Ruling

was reserved on relevance and hearsay objections to PetitionerÓs

Exhibits 14 and 15. Those objections are overruled, and the

e xhibits are received. Finally, RespondentÓs Exhibits 3, 4,

and 6 were received in evidence.

The Transcript of the final hearing was filed on March 15.

The partiesÓ proposed final orders have been considered.

All statutory references are to the 2016 codification of the

Florida Statutes, unless otherwise indicated.

FINDING S OF FACT

1. The Petitioners are 120 hospitals -- some not - for - profit,

some for - profit, and some governmental -- that are licensed under

c hapter 395, Florida Statutes, provide both inpatient and

outpatient servic es , and participate in the Medicaid program.

AHCA is the state agency authorized to make payments for services

rendered to Medicaid patients.

2. Before 2013, all Medicaid outpatient services were

provided and paid fee - for - service. Under the fee - for - serv ice

model, hospitals submit claims to AHCA, and AHCA reimburses the

hospitals based on the established rate.

3. For many years, AHCA has set prospective Medicaid fee -

for - service reimbursement rates f or outpatient hospital services,

either semi - annually or annually, based on the most recent

complete and accurate cost report s submitted by each hospital;

has re - published the Florida Title XIX Hospital Outpatient

Reimbursement Plan (Outpatient Plan) that explained how the rates

were determined; and has adopt ed the current Outpatient Plan by

reference in rule 59G - 6.030 .

4. In 2005, the Florida LegislatureÓs General

Appropriations Act (GAA) stated that the funds appropriated for

Medicaid outpatient hospital services reflected a cost savings of

$16,796,807 Ðas a result of modifying the reimbursement

methodology for outpatient hospital rates.Ñ It instructed AHCA

to Ðimplement a recurring methodology in the Title XIX Outpatient

Hospital Reimbursement Plan that may include, but is not limited

to, the inflation fac tor, variable cost target, county rate

ceiling or county ceiling target rate to achieve the cost

savings.Ñ

5. AHCA responded by amending the Outpatient Plan to

provide: ÐEffective July 1, 2005, a recurring rate reduction

shall be established until an agg regate total estimated savings

of $16,796,807 is achieved each year. This reduction is the

Medicaid Trend Adjustment.Ñ The amended Outpatient Plan was then

adopted by reference in rule 59G - 6.030, effective July 1, 2005.

6. AHCA collaborated with the hos pitals to determine how to

accomplish the legislatively mandated reduction in a manner that

would be fair to all the hospitals. It was decided to take the

hospitalsÓ unaudited cost reports from the most recent complete

fiscal year and the number of Medica id occasions of service from

the monthly report of AHCAÓs Medicaid fiscal agent that

corresponded to the hospitalsÓ fiscal years, and use an Excel

spreadsheet program with a function called Goal Seek to calculate

proportionate rate adjustments for each hos pital to achieve the

legislatively mandated aggregate savings . The resulting rate

adjustments were incorporated in the hospital reimbursement

rates, effective July 1, 2005.

7. In 2006, there was no further Medicaid Trend Adjustment

( MTA ) reduction. Ho wever, in accordance with the instructions in

the 2005 GAA, the 2005 MTA reduction of $16,796,807 was treated

as a recurring reduction and was applied again in the 2006

Outpatient Plan, which again stated: ÐEffective July 1, 2005, a

recurring rate reducti on shall be established until an aggregate

total estimated savings of $16,796,807 is achieved each year.

This reduction is the Medicaid Trend Adjustment.Ñ The 2006

Outpatient Plan also stated: ÐThis recurring reduction, called

the Medicaid Trend Adjustm ent, shall be applied proportionally to

all rates on an annual basis.Ñ It also came to be known as the

first cut or cut 1 . It again was applied by taking the

hospitalsÓ most current unaudited cost reports and the

corresponding occasions of service from t he appropriate monthly

report of the fiscal agent, and using the Excel spreadsheets and

the Goal Seek function to calculate rate adjustments for each

hospital. The cut 1 rate adjustments were incorporated in the

hospital reimbursement rates, effective Jul y 1, 2006.

8. In 2007, the GAA stated that the funds appropriated for

Medicaid outpatient hospital services were reduced by $17,211,796

Ðas a result of modifying the reimbursement for outpatient

hospital rates, effective July 1, 2008.Ñ This has been refe rred

to as the second cut or cut 2 . It instructed AHCA to Ðimplement

a recurring methodology in the Title XIX Outpatient Hospital

Reimbursement Plan to achieve this reduction.Ñ The 2008

Outpatient Plan again applied the first cut as a recurring

reduction and stated that it was to be Ðapplied proportionally to

all rates on an annual basis.Ñ It then made the second cut,

which was to be Ðapplied to achieve a recurring annual reduction

of $17,211,796.Ñ These cuts were again applied by taking the

hospitalsÓ most current unaudited cost reports and the

corresponding occasions of service from the appropriate monthly

report of the fiscal agent, and using the Excel spreadsheets and

the Goal Seek function to calculate rate adjustments for each

hospital. The result ing rate adjustments were incorporated in

the hospital reimbursement rates, effective July 1, 2008.

9. This process was repeated in subsequent years. The

third cut (cut 3) was in 2008; it was a $36,403,451 reduction.

The fourth cut (cut 4) was in 2009, during a special session; it

was a $19,384,437 reduction; however, per the GAA that made the

fourth cut, it was not applied to the rates of certain childrenÓs

specialty hospitals, which were excluded from the reduction. In

addition, using language similar to what AHCA had been using in

the Outpatient Plans, the 2009 GAA stated: ÐThe agency shall

reduce individual hospital rates proportionately until the

required savings are achieved.Ñ The Legislature enacted cut 5

and cut 6 in 2009 and 2010. Howeve r, th e GAAs stated that AHCA

should not take these cuts if the unit costs before the cuts were

equal to or less than the unit costs used in establishing the

budget. AHCA determined that cut s 5 and 6 should not be taken.

However, cuts 1 through 4 continued to be applied as recurring

reductions , and rates were adjusted f or cut s 1 through 4 in 2009

and 2010 in the same manner as before .

10. In 2011, the GAA enacted cut 7; it was for $99,045,233

and was added to the previous cuts for all but certain childrenÓs

sp ecialty and rural hospitals, which were excluded from the

additional reduction.

11. In setting the individual hospitalsÓ reimbursement

rates, AHCA first applied cut 7 in the same manner as cuts 1

through 4. The result was a 16.5 percent rate adjustment f or

cut 7 , which was much higher than for previous cuts . Some of the

hospitals pointed this out to AHCA and to the Legislature and its

staff. There was lots of discussion, and it was determined that

the rate adjustment from cut 7 would be more like what the

Legislature was expecting (about 12 percent ) , if budgeted

occasions of service were used , instead of the number from the

fiscal agentÓs monthly report that corresponded to the most

recent cost reports . AHCA agreed to change to budgeted fee - for -

service occasions of service for cut 7, w ith the concurrence of

the hospitals an d the Legislature and its staff .

12. The year 2011 was also the year the Legislature

instituted what became known as the Ðunit cost cap.Ñ In that

year, the Legislature amended sec tion 409.908 , Florida Statutes,

to provide: ÐThe agency shall establish rates at a level that

ensures no increase in statewide expenditures resulting from a

change in unit costs effective July 1, 2011. Reimbursement rates

shall be as provided in the Gene ral Appropriations Act.Ñ

§ 409.908(23)(a), Fla. Stat. (2011). This part of the statute

has not changed. The GAA that year elaborated:

In establishing rates through the normal

process, prior to including this reduction

[cut 7], if the unit cost is equ al to or less

than the unit cost used in establishing the

budget, then no additional reduction in rates

is necessary. In establishing rates through

the normal process, if the unit cost is

greater than the unit cost used in

establishing the budget, then ra tes shall be

reduced by an amount required to achieve this

reduction, but shall not be reduced below the

unit cost used in establishing the budget.

13. ÐUnit costÑ was not defined by statute or GAA. To

calculate what it was in 2011, AHCA divided the to tal dollar

amount of Medicaid payments made to hospitals by AHCA by the

number of Medicaid occasions of service for all hospitals. The

result was $141.51.

14. Since 2011, AHCA has applied the unit cost cap with

reference to the 2011 unit cost of $141. 51. Since then, AHCA has

compared the 2011 unit cost to the current cost, calculated by

dividing the total dollar amount of Medicaid payments made to all

hospitals by AHCA by the number of Medicaid occasions of service

for all hospitals, except in childre nÓs and rural hospitals , to

determine whether the unit cost cap would require a further rate

reduct ion, after applying the MTA cuts . Using this comparison,

the unit cost cap never has been exceeded, and no further rate

adjustments ever have been required.

15. It is not clear why AHCA excluded Medicaid occasions of

service for childrenÓs and rural hospitals from the unit cost

calculations made after 2011. It could have been because those

hospitals were excluded from cut 7 and cut 8.

16 . Cut 8 was ena cted in 2012; it was for $49,078,485 and

was added to the previous cuts for all but certain childrenÓs

specialty and rural hospitals, which were excluded from the

additional reduction. In 2012, the Legislature specified in the

GAA that budgeted occasions of service should be used in

calculating the MTA reduction for inpatient hospitals. AHCA

always treated inpatient and outpatient MTAs the same, and it

viewed the specific legislative direction for the inpatient MTA

as guidance and indicative of legislativ e intent that it should

continue to use budgeted occasions of service for the outpatient

cut 7 and should also use them for the outpatient cut 8. Again,

the hospitals did not object since the result was a higher

reimbursement rate.

17 . In 2014, the Flor ida Medicaid program began to

transition Medicaid recipients from a fee - for - service model to a

managed care model. Under the managed care model, AHCA pays a

managed care organization (MCO) a capitation rate per patient.

The MCOs negotiate contract s with hospitals to provide outpatient

care at an agreed reimbursement rate per occasion of service.

18 . Since August 2014, the majority of Medicaid recipients

has been receiving services through MCOs , rather than through

fee - for - service. Currently, about 75 t o 80 percent of Medicaid

outpatient hospital occasions of service are provided through

managed care

19 . In recognition of the shift to MCOs, the Legislature

began to divide the Medicaid outpatient hospital reimbursement

appropriation in the GAA between w hat AHCA reimburses directly to

hospitals under the fee - for - service model and what it pays MCOs

to provide those services under the MCO delivery system. This

allocation of the budgets between fee - for - service and managed

care necessarily accomplished a cor responding division of the

recurring MTA reductions between the two delivery systems. The

Legislature did not enact any statutes or GAAs requir ing AHCA to

change how it applies MTA reductions to determine fee - for - service

outpatient reimbursement rate adj ustments , or make any other

changes in respo nse to the transition to MCOs .

20 . There were no additional MTA reductions in 2015. The

2015 Outpatient Plan, which is incorporated in existing rule 59G -

6.030, applied the previous cuts as recurring reductio ns. The

evidence was confusing as to whether cuts 7 and 8 were applied

using the occasions of service in the fiscal agentÓs monthly

report corresponding to the hospitalsÓ most current unaudited

cost reports , or using budgeted occasions of service. If the

former, the numbers did not yet reflect much of the shift to the

managed care model because of a time lag in producing cost

reports , and the evidence suggested that the numbers were

approximately the same as the budgeted occasions of service used

previous ly . Whichever numbers were used, the resulting rate

adjustments were incorporated in the hospitalsÓ reimbursement

rates, effective July 1, 2015.

21 . Leading up to the 2016 legislative session, there was a

legislative proposal to determine prospective Medicaid outpatient

reimbursement rates using a completely new method called Enhanced

Ambulatory Patient Groups (EAPGs). EAPGs would eliminate the

need to depend on hospital cost reports and complicated

calculations to determine the effects of MTA reducti ons on

prospective hospital outpatient reimburseme nt rates, effective

July 1 , following the end of the legislative session each year.

Hospitals, including some if not all of the Petitioners, asked

the Legislature not to proceed with the proposed EAPG legi slation

until they had an opportunity to study it and provide input , and

EA PGs were not enacted in 2016. However, section 409.905(6)(b)

was amended, effective July 1, 2017, to require t he switch to

EAPGs. See note to § 409.905, Fla. Stat.; and ch. 2016 - 6 5,

§ 9 , Laws of Fl a. (2016 ) .

22 . When it became apparent that EAPGs would not be in use

for prospective reimbursement rates for fiscal year 2016/2017,

AHCA basically repeated the 2015/2016 process, but adjusted the

occasions of service used for calculat ing the hospitalsÓ rate

reductions for cuts 7 and 8 by adding 14,000 occasions of

service . At the end of July, AHCA published new rates effective

July 1, 2016.

23 . When the new rates were published, they were challenged

by some of the Petitioners under section 120.57(1) , Florida

Statutes . Citing section 409.908(1)(f)1., AHCA took the position

that there was no jurisdiction and dismissed the petitions. That

decision is on appeal to the First District Court of Appeal.

24 . The Petitioners also challenge d the methodology used to

calculate the new prospective reimbursement rates as a rule that

was not adopted as required, and challenged the validity of

existing rule 59G - 6.030, which incorporated the 2015 Outpatient

Plan by reference. These challenges beca me DOAH cases 16 - 6398RX

through 16 - 6414RX.

25 . In response to DOAH cases 16 - 6398RX through 16 - 6414RX,

AHCA adopted the 2016 Outpatient Plan by reference in proposed

rule 59G - 6.030.

26 . The 2016 Outpatient Plan provides more detail than the

2015 version . AHCAÓs position is that the additional detail was

provided to clarify the 2015 version. However, it changed the

occasions of service used for calculating the hospitalsÓ rate

reductions for cuts 7 a nd 8, as indicated in Finding 22 , as well

as some other substantive changes.

27 . The 2015 Outpatient Plan addressed the unit cost cap by

stating: ÐEffective July 1, 2011, AHCA shall establish rates at

a level that ensures no increase in statewide expenditures

resulting from a change in unit costs.Ñ The 201 6 Outpatient Plan

elaborates and specifies the calculation AHCA has been using, as

stated in Finding 14.

28. The 2015 Outpatient Plan provided that an individual

hospitalÓs prospective reimbursement rate may be adjusted under

certain circumstances, such as when AHCA makes an error in the

calculation of the hospitalÓs unaudited rate. It also stated:

ÐAny rate adjustment or denial of a rate adjustment by AHCA may

be appealed by the provider in accordance with Rule 28 - 106,

F.A.C., and section 120.57(1), F. S.Ñ The 2016 Outpatient Plan

deleted the appeal rights language from the existing rule.

29. The effect of the existing and proposed rules on the

Petitioners through their effect on managed care contract rates

is debatable. Those rates do not have to b e the same as the fee -

for - service outpatient reimbursement rates, although they are

influenced by the fee - for - service rates, and it is not uncommon

for them to be stated as a percentage of the fee - for - service

rates. By law, managed care contract rates can not exceed 120

percent of the fee - for - service rates unless the MCO gets

permission from AHCA, as provided in section 409.975(6).

Currently , rates paid by MCOs for Medicaid hospital outpatient

services average about 105 percent of the fee - for - service

reimb ursement rates. AHCA has indicated that it would not expect

or like to see the contract rates much higher than that. It is

not clear whether that still is AHCAÓs position. If higher rates

were negotiated, the impact of fee - for - services rate adjustments

on managed care rates could be reduced or even eliminated.

30. The effect of the existing and proposed rules on the

Petitioners through their effect on how fee - for - service

reimbursement rates are calculated is not disputed. With the

transition to manage d care, the effect is greater and clearly

substantial. The recurring MTA reductions enacted by the

Legislature through 2014, which total $224,015,229 (after taking

into account $10,656,238 that was reinstated, and $4,068,064 that

was added in consideratio n of trauma centers), are being spread

over fewer fee - for - service occasions of service, especially for

cuts 7 and 8, which significantly lowers the fee - for - service

outpatient reimbursement rates calculated under the proposed

rule.

31. The Petitioners Ó ob jections to the validity of the

proposed and existing rules can be summarized as follows : a lack

of legislative authority for r ecurring (i.e., cumulative) MTA

reductions ; a failure to adopt a fixed methodology to calculate

individual hospital outpati ent r eimbursement rate adjustments

resulting from MTA reductions; specifically, a failure to derive

the number of fee - for - service occasions of service used in

calculating individual hospital outpatient reimbursement rate

adjustments in the same manner every yea r; conversely, a failure

to increase the occasions of service used to calculate individual

hospital outpatient reimbursement rate adjustments resulting from

cuts 1 through 4 ; a failure of the unit cost cap in the existing

rule to specify how it is applied; a failure of the unit cost cap

in the proposed rule to compare the 2011 unit cost to the current

cost, calculated by dividing the total dollar amount of Medicaid

payments made to all hospitals by AHCA by the number of Medicaid

occasions of service for all hospitals, including in childrenÓs

and rural hospitals ; and proposed rule Ós deletion of the language

in the e xisting rule stating that a rate adjustment or denial can

be appealed in accordance with Florida Administrative Code R ule

28 - 106 and section 120. 57.

CONCLUSIONS OF LAW

32. Any person who is substantially affected by a rule or

proposed rule can petition DOAH for a final order that the rule

or proposed rule is an invalid exercise of delegated legislative

authority. § 120.56(1)(a), Fla. Stat. The Petitioners are

substantially affected and have standing.

33. The Petitioners have the burden to prove by a

preponderance of the evidence that the existing rule is invalid ,

in whole or in part, as to the objections raised in the

petitions . § 120.56(3) , Fla. Stat. AHCA has the burden to prove

by a preponderance of the evidence that the proposed rule is not

invalid , in whole or in part, as to the objections raised in the

petitions; the proposed rule is not presumed to be valid or

invalid. § 120.56(2), Fl a. Stat.

34. The Petitioners contend that the existing and proposed

rule s are invalid exercises of delegated legislative authority

because: they exceed the legislative grant of rulemaking

authority; they enlarge, modify, or contravene the specific

provi sions of law implemented; they are vague; they fail to

establish adequate standards for agency decisions, or vest

unbridled discretion in the agency; and they are arbitrary (i.e.,

not supported by logic or the necessary facts) or capricious

(i.e., adopted without thought or reason, or is irrational).

§ 120.52(8)(b) through (e), Fla. Stat.

35. As for the first ground for alleged invalidity, it is

clear that n either existing nor proposed rule 59G - 6.030 exceeds

the grant of legislative authority. Section 4 09.919 authorizes

AHCA to Ðadopt any rules necessary to comply with or administerÑ

sections 409.901 through 409.920 Ðand all rules necessary to

comply with federal requirements.Ñ Sections 409.905(6)(b),

409.908 (1)(f)1., and 409.908 are statutes implemente d by existing

and proposed rule 59G - 6.030 that specifically address the

establishment of Medicaid hospital outpatient reimbursement

rates. I t is clear from the statutes that Medicaid hospital

outpatient reimbursement is subject to limitations and directio ns

in the GAA s . See §§ 409.902(1), 409.905(6)(b) , and

4 09.908 (2)(b) , Fla. Stat.

MTA Reductions

36 . As for the other grounds for alleged invalidity , with

respect to the MTA reductions, the Petitioners seem to contend,

on the one hand, that the implemen ting statutes and GAAs required

AHCA to adopt a detailed, fixed methodology that would determine

how it would apply each MTA reduction to individual hospital

rates going forward. Specifically, t hey cr iticize AHCA for

making change s in the way individual hospital reimbursement rates

were reduced in response to c uts 7 and 8 .

37 . S ection 409.905(6)(b) require s AHCA to Ðimplement a

methodology for establishing base reimbursement rates for

outpatient services for each hospital based on allowable costs,

as d efined by the agency.Ñ Section 409.908 requires AHCA to

reimburse Medicaid providers Ðaccording to methodologies set

forth in the rules of the agency and in policy manuals and

handbooks incorporated by reference therein.Ñ As reflected in

the Findings of Fact, the GAAs directed AHCA to Ðimplement a

recurring methodologyÑ and to Ðreduce individual hospital rates

proportionatelyÑ until the required savings were achieved.

38. It is clear that the MTA reductions imposed by the GAAs

were recurring in the sens e that they were cumulative , but AHCA

did not interpret the language in the statutes and GAAs to mean

that AHCA was required to adopt a detailed, fixed methodology

that could never change . T he versions of rule 59G - 6.030 adopted

up to and including the exi sting rule did little more than

restate language in the statutes and GAAs. The details

incorporated in proposed rule 59G - 6.030 apparently were

introduced in an effort to address some of the objections raised

in the petitions in DOAH cases 16 - 6398RX throug h 16 - 6414RX . The

changes made in the calculation s applied to cuts 7 and 8 to

determine the individual hospital Ós reimbursement rate

adjustments from those cuts were done, without objection from the

hospitals, to comply with legislative intent. E ach versi on of

rule 59G - 6.030, with its incorporated Outpatient Plan , has been

accepted and essentially ratified by the Legislature as being

consistent with the legislative intent . Deference is given to an

agencyÓs long - standing statutory interpretations, especial ly

those accepted and ratified by the Legislature year after year.

See Jax Liquors v. Div. of Alcoholic Bev erages & Tobacco , 388

So. 1306, 1308 (Fla. 1st DCA 1980); Austin v. Austin , 350 So. 2d

102, 104 (Fla. 1st DCA 1977), cert. den. , 357 So. 2d 184 (Fla .

1978).

39 . T he Petitioners also contend, inconsistently, that the

existing and proposed rules are invalid with respect to the MTA

reductions because AHCA has not changed the calculations it

always has applied to cuts 1 through 4 to determine the

indivi dual hospitalsÓ reimbursement rate adjustments from those

cuts . They contend that the provision of Medicaid outpatient

services through MCOs has reduced fee - for - service reimbursement

rates more than intended by the Legislature because the recurring

and cu mulative MTA reductions , especially in cuts 1 through 4 ,

are being spread over fewer fee - for - service occasions of service.

40 . In contrast to cuts 7 and 8, there has been no apparent

legislative intent for AHCA to change the calculations it always

has a pplied to cuts 1 through 4 to determine the individual

hospitalsÓ reimbursement rate adjustments from those cuts. To

the contrary, the actions of the Legislature in the 2016 session

support and ratify the agencyÓs interpretation of the legislative

intent . Id.

41 . Even if the legislative intent were less clear, and

would allow for the interpretation of the statutes and GAAs

proposed by the Petitioners, AHCAÓs interpretation is reasonable.

Neither existing nor proposed rule 59G - 6.030 enlarges, modifies,

or contravenes the specific provisions of law implemented ; n or is

the existing or proposed rule arbitrary or capricious.

42 . As for the other grounds for invalid ity with respect to

the MTA reductions, proposed rule 59G - 6.030 clearly is not vague;

does not fail to establish adequate standards for agency

decisions; and does not vest unbridled discretion in the agency.

See State Dep't of Fin. S er vs. v. Peter R. Brown Const r ., Inc. ,

108 So. 3d 723, 728 (Fla. 1st DCA 2013) (a rule is vague, fails

to establi sh adequate standards for agency decisions, or vests

unbridled discretion in the agency if it forbids or requires the

performance of an act in terms that are so vague that persons of

common intelligence must guess at its meaning and differ as to

its applic ation). Existing rule 59G - 6.030 has less detail,

making it more vulnerable to the PetitionersÓ arguments, but it

essentially uses the language of the statutes and GAAs, and has

been accepted and ratified by the Legislature, which preserves

its validity as to the s e objection s .

Unit Cost Cap

43 . In the existing rule, the unit cost cap language

reiterates the language of the st atutes and GAA verbatim. It

does not enlarge, modify, or contravene the specific provisions

of section 409.908 and the GAAs bei ng implemented .

44 . In the proposed rule, the unit cost cap language

specifies how AHCA has been applying the unit cost cap since

2011 . It is not clear from the evidence why AHCA made this

choice, but it may have been done because the GAAs excluded

ch ildrenÓs and rural hospitals from the MTA reduction of cuts 7

and 8. There is no evidence to suggest that the Legislature

disagreed with how AHCA has been interpreting the unit cost cap.

To the contrary, the actions of the Legislature during the 2016

ses sion support and ratify the agencyÓs interpretation.

45. Deference is given to AHCAÓs interpretation of the unit

cost cap . See Jax Liquors v. Div. of Alcoholic Bev erages &

Tobacco , supra ; Austin v. Austin , supra . The unit cost cap

language in the prop osed rule does not enlarge, modify, or

contravene the specific provisions of section 409.908 and the

GAAs being implemented ; and it is not arbitrary or capricious.

46 . As for the other grounds for invalidity with respect to

the unit cost cap , proposed rule 59G - 6.030 clearly is not vague;

does not fail to establish adequate standards for agency

decisions; and does not vest unbridled discretion in the agency.

See State Dep't of Fin. S er vs. v. Peter R. Brown Const r ., Inc. ,

supra . Existing rule 59G - 6.030 has less detail, making it more

vulnerable to the PetitionersÓ arguments, but it uses the

language of the statutes and GAAs, and has been accepted and

ratified by the Legislature, which preserves its validity as to

these objections.

Appeal Rights

4 7 . Pr oposed rule 59G - 6.030 deletes the language in

e xisting rule 59G - 6.030 stating that a rate adjustment or denial

can be appealed in accordance with rule chapter 28 - 106 and

section 120.57. Regardless whether the appeal rights language is

in the proposed rule , the available appeal rights will be

determined based on the correct interpretation of rule chapter

28 - 106, chapter 120 , and section 409.908(1)(f)1. That issue is

now on appeal to the First District Court of Appeal. The

deletion of the appeal rights lan guage does not render the

proposed rule invalid.

DISPOSITION

Based on the foregoing Findings of Fact and Conclusions of

Law, the petitions are denied.

DONE AND ORDERED this 1 8 th day of April , 2017 , in

Tallahassee, Leon County, Florida.

S

J. LAWRENCE JOHNSTON

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 C lerk of the

Division of Administrative Hearings

this 1 8 th day of April , 2017 .

COPIES FURNISHED:

Kyle L. Kemper, Esquire

Sundstrom & Mindlin, LLP

2548 Blairstone Pines Drive

Tallahassee, Florida 32301

(eServed)

Stuart Fraser Williams, General Counsel

A gency for Health Care Administration

Mail Stop 3

2727 Mahan Drive

Tallahassee, Florida 32308

(eServed)

Shena L. Grantham, Esquire

Agency for Health Care Administration

Mail Stop 3

2727 Mahan Drive

Tallahassee, Florida 32308

(eServed)

Thomas M. Hoele r, Esquire

Agency for Health Care Administration

Mail Stop 3

2727 Mahan Drive

Tallahassee, Florida 32308

(eServed)

Michael J. Glazer, Esquire

Ausley McMullen

123 South Calhoun Street

Tallahassee, Florida 32302

(eServed)

Eugene Dylan Rivers, Esquire

Aus ley & McMullen, P.A.

123 South Calhoun Street

Post Office Box 391

Tallahassee, Florida 32302

(eServed)

Daniel Elden Nordby, Esquire

Shutts & Bowen LLP

215 South Monroe Street , Suite 804

Tallahassee, Florida 32301

(eServed)

Joseph M. Goldstein, Esquire

Shutts & Bowen LLP

Suite 2100

200 East Broward Boulevard

Fort Lauderdale, Florida 33301

(eServed)

Dan Daley, Esquire

Shutts & Bowen LLP

Suite 2100

200 East Broward Boulevard

Fort Lauderdale, Florida 33301

(eServed)

Christopher Charles Kokoruda, Esquire

Miami - Dade County

West Wing, Suite 109

1611 Northwest 12th Avenue

Miami, Florida 33136

(eServed)

Seann M. Frazier, Esquire

118 North Gadsden Street

Tallahassee, Florida 32302

(eServed)

Laura E. Wade, Esquire

Miami - Dade County

West Wing, Suite 109

1161 Northwest 12th Avenue

Miami, Florida 33136 - 100

(eServed)

Stephen A. Ecenia, Esquire

Rutledge, Ecenia, & Purnell, P.A.

Suite 202

119 South Monroe Street

Tallahassee, Florida 32302 - 0551

(eServed)

Joanne Barbara Erde, Esquire

Duane Morris LLP

Suite 3400

200 South Biscayne Boulevard

Miami, Florida 33131

(eServed)

Jonathan L. Rue, Esquire

Parker, Hudson, Rainer

and Dobbs, LLC

Suite 3600

303 Peachtree Street Northeast

Atlanta, Georgia 30308

(eServed)

J. Stephen Menton, Esquire

Rutledge Ecenia, P.A.

119 South Monroe Street, Suite 202

Post Office Box 551 (32302)

Tallahassee, Florida 32301

(eServed)

Gabriel F.V. Warren, Esquire

Rutledge, Ecenia, & Purnell, P.A.

119 South Monroe Street, Suite 202

Post Office Box 551

Tallahassee, Florida 32301

(eServed)

M arc Ito, Esquire

Parker Hudson Rainer & Dobbs, LLP

Suite 750

215 South Monroe Street

Tallahassee, Florida 32301

(eServed)

Justin Senior, Secretary

Agency for Health Care Administration

Mail Stop 1

2727 M ahan D rive

Tallahassee, Florida 32308

(eServed)

Ken Plante, Coordinator

Joint Administrative Procedures Committee

Room 680, Pepper Building

111 West Madison Street

Tallahassee, Florida 32399 - 1400

(eServed)

Ernest Reddick, Chief

Department of State

R.A. Gray Building

500 South Bronough Street

Tallahasse e, Florida 32399 - 0250

(eServed)

Anya Grosenbaugh

Department of State

R.A. Gray Building

500 South Bronough Street

Tallahassee, Florida 32399 - 0250

(eServed)

Kim Kellum, Esquire

Chief Medicaid Counsel

Agency for Health Care Administration

Mail Stop 3

272 7 Mahan Drive

Tallahassee, Florida 32308

(eServed)

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 administrative appeal with the agency clerk of the

Division of Administrative Hearings within 30 days of rendition

of the order to be reviewed, a nd 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.