97-003791 Maz Pharmaceuticals, Inc., D/B/A Maz Pharmacy vs. Agency For Health Care Administration Status: Closed Recommended Order on Friday, March 20, 1998.

Summary: Agency proved overpayment to Medicaid provider which was unable to produce documentation to show it had sufficient quantities of medication to justify its billings to the Medicaid program.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

MAZ PHARMACEUTICALS, INC., )

d/b/a MAZ PHARMACY, )

)

Petitioner, )

)

vs. ) Case No. 97-3791

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Respondent. )

_________________________________)

RECOMMENDED ORDER

Pursuant to Notice, this cause was heard by Linda M. Rigot,

the assigned Administrative Law Judge of the Division of

Administrative Hearings, on January 8, 1998, in Tallahassee,

Florida.

APPEARANCES

For Petitioner: William M. Furlow, Esquire

Katz, Kutter, Haigler, Alderman,

Marks, Bryant & Yon, P.A.

Highpoint Center, Suite 1200

106 East College Avenue

Tallahassee, Florida 32301

For Respondent: Thomas Falkinburg, Esquire

Mark Thomas, Esquire

Agency for Health Care Administration

2727 Mahan Drive, Suite 3431

Fort Knox Building III

Tallahassee, Florida 32308-5403

STATEMENT OF THE ISSUE

The issues presented are whether Petitioner is responsible

for reimbursing the Agency for Health Care Administration for an

overpayment for Medicaid services and, if so, whether

administrative sanctions should be applied.

PRELIMINARY STATEMENT

By correspondence dated June 25, 1997, the Agency for

Health Care Administration forwarded to Petitioner its final

agency audit report and advised Petitioner that the Agency sought

reimbursement for an overpayment, an administrative fine, and

termination of Petitioner's participation in the Medicaid

program. Petitioner timely requested an evidentiary hearing

regarding the Agency's preliminary determination. This cause was

subsequently transferred to the Division of Administrative

Hearings to conduct the evidentiary proceeding.

The Agency presented the testimony of Kathryn Holland and

Kenneth Yon. Additionally, the Agency's Exhibits numbered 1-21

were admitted in evidence.

Both parties submitted post hearing proposed recommended

orders. Those documents have been considered in the entry of

this Recommended Order.

FINDINGS OF FACT

1. From April 19, 1995, through October 30, 1996,

Petitioner was a pharmacy licensed to do business in the State of

Florida. From April 15, 1995, through October 30, 1996,

Petitioner was a Medicaid provider in good standing, pursuant to

a Medicaid contract with the Agency.

2. In 1996 Kathryn Holland, an agency employee, conducted

an audit of Petitioner's records, using a method which the Agency

calls an aggregate analysis. This analysis focuses on the

inventory of a Medicaid provider and analyzes invoices and other

documentation to determine if the provider had available during

the audit period sufficient quantities of goods or products to

support the quantity of goods or products billed to Medicaid.

3. Holland analyzed the Agency's re cords to ascertain the

claims filed by Petitioner and the amounts paid to Petitioner.

She compiled a list of those drugs most frequently billed to the

Agency's Medicaid program by Petitioner and selected 23

medications. She selected April 1, 1995, through October 30,

1996, as the audit period.

4. She contacted Petitioner and requested records showing

Petitioner's purchases of the medications on that list. She also

contacted Mason Distributors, Inc., and H. I. Moore, Inc., two of

Petitioner's primary suppliers, and requested copies of their

invoices for medications purchased by Petitioner between May 1,

1995, and October 28, 1996. She prepared charts of the invoices

and other documents received as a result of her requests. She

reduced the number of audited drugs to 20 based upon adequate

documentation provided to her for three of the listed

medications.

5. She prepared a preliminary report, which she sent to

Petitioner with a request that Petitioner supply her with any

additional records to show that additional supplies of the listed

medication were available to Petitioner during the audit period.

6. Petitioner responded to that request by providing

additional documentation. Holland did not credit Petitioner with

additional supplies based upon the additional documentation

because the invoices appeared to be for a different pharmacy or

appeared to reflect purchases outside the audit period. Further,

the cancelled checks were payable to cash, had no notation as to

the purpose of the checks, had a notation reflecting only a

"business expense," had a notation for medication not on

Holland's list, or reflected purchases outside the audit period.

7. Petitioner was unable to document sufficient inventory

during the audit period to justify the amount of medication

billed to, and paid for by, the Agency.

8. The Agency overpaid Petitioner in the amount of

$12,529.11 for the 20 listed medications during the audit period

and is entitled to reimbursement by Petitioner in that amount.

CONCLUSIONS OF LAW

9. The Division of Administrative Hearings has

jurisdiction over the parties hereto and the subject matter

hereof. Sections 120.569 and 120.57(1), Florida Statutes.

10. The Agency has the burden of proof in this proceeding.

Southpointe Pharmacy v. Dept. of Health and Rehabilitative

Services , 596 So. 2d 106 (Fla. 1st Dist. 1992).

11. Section 409.913(8), Florida Statutes, requires a

Medicaid provider to retain financial and business records

pertaining to goods furnished to a Medicaid recipient and billed

to Medicaid for a period of five years after the goods were

furnished. Section 409.913(14)(n) provides that the Agency may

seek remedies against a provider which fails to demonstrate that

it had sufficient quantities of goods during the audit period to

support its billings to the Medicaid program. Petitioner failed

to provide sufficient documentation to show that it had

sufficient quantities of 20 medications billed to the program.

12. Section 409.913(19), Florida Statutes, authorizes the

Agency to use appropriate analytical methods to determine

variances between the quantities of products a provider had

available during the review period and the quantities of the same

products paid for by the Medicaid program for the same period.

Further, the Agency has promulgated Rule 59G-9.030(4)(c), Florida

Administrative Code, which authorizes the aggregate analysis

method it used in this cause, and Petitioner has not challenged

that Rule.

13. Petitioner argues that the Agency has primarily relied

upon hearsay evidence and that the Agency, therefore, has failed

to meet its burden of proof by presenting sufficient evidence

upon which findings of fact can be made. Section 120.57(1)(c),

Florida Statutes. Petitioner is correct in that the Agency's

evidence is replete with hearsay and was based primarily on other

hearsay. Indeed, the Agency did not attempt to qualify any of

its exhibits as an exception to the hearsay rule.

14. However, Section 409.913(21), Florida Statutes,

provides, in part, that: "The audit report, supported by agency

work papers, showing an overpayment to a provider constitutes

evidence of the overpayment." Petitioner argues that this

provision means the documents relied on for all of the agency's

testimony may be admitted in evidence but then must be ignored.

Such a construction would render meaningless the language

contained in Section 409.913(21) and would be contrary to the

normal rules of statutory construction. Since the Legislature

determined that the audit report and work papers constitute

evidence which must be considered, the Agency presented a prima

facie case, which Petitioner chose not to rebut. The agency has,

accordingly, proven the overpayment.

15. The Agency also recommends that Petitioner should be

assessed an administrative fine in the amount of $2,000 and

should be terminated from the Medicaid program for a period of

two years. The sanctions matrix used by the Agency to compute

the appropriate sanction was admitted in evidence. The matrix

carries a notation of the rule upon which it was based. That

rule had been repealed. However, the Agency's auditor testified

as to the basis for her recommendation. Petitioner offered no

evidence to explain its failure to have records to support the

claims it submitted to the Agency, and offered no evidence in

mitigation of the penalty sought by the Agency.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of

Law, it is

RECOMMENDED that a final order be entered determining that

Petitioner is responsible to repay the Agency in the amount of

$12,529.11 by a date certain, imposing an administrative fine in

the amount of $2,000, and terminating Petitioner from the

Medicaid program for a period of two years.

DONE AND ENTERED this 20th day of March, 1998, in

Tallahassee, Leon County, Florida.

___________________________________

LINDA M. RIGOT

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32 399-3060

[phone] SUNCOM 278-9675

Fax Filing [phone]

Filed with the Clerk of the

Division of Administrative Hearings

this 20th day of March, 1998.

COPIES FURNISHED:

Thomas Falkinburg, Esquire

Mark Thomas, Esquire

Agency for Health Care Administration

2727 Mahan Drive, Suite 3431

Fort Knox Building III

Tallahassee, Florida 32308

William M. Furlow, Esquire

Katz, Kutter, Haigler, Alderman,

Marks, Bryant & Yon, P.A.

Highpoint Center, Suite 1200

106 East College Avenue

Tallahassee, Florida 32301

Paul J. Martin, General Counsel

Agency for Health Care Administration

2727 Mahan Drive, Suite 3431

Fort Knox Building III

Tallahassee, Florida 32308

Sam Power, Agency Clerk

Agency for Health Care Administration

2727 Mahan Drive, Suite 3431

Fort Knox Building III

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.