109 F.3d 693 (11th Cir. 1997), 96-2227, Tallahassee Memorial Regional Medical Center v. Cook

Docket Nº:96-2227.
Citation:109 F.3d 693
Party Name:TALLAHASSEE MEMORIAL REGIONAL MEDICAL CENTER, Florida Hospital Medical Center, Plaintiffs-Appellees, v. Douglas COOK, as Director of the Agency for Health Care Administration, Defendant-Appellant, Keystone Peer Review Organization, Inc., a foreign corporation licensed to do business in Florida, H. James Towey, Secretary, The Department of Health an
Case Date:April 08, 1997
Court:United States Courts of Appeals, Court of Appeals for the Eleventh Circuit

Page 693

109 F.3d 693 (11th Cir. 1997)


Hospital Medical Center, Plaintiffs-Appellees,


Douglas COOK, as Director of the Agency for Health Care

Administration, Defendant-Appellant,

Keystone Peer Review Organization, Inc., a foreign

corporation licensed to do business in Florida, H.

James Towey, Secretary, The Department

of Health and Rehabilitation

Services, Defendants.

No. 96-2227.

United States Court of Appeals, Eleventh Circuit

April 8, 1997

Page 694

Roger R. Maas, Jerome W. Hoffman, Tallahassee, FL, for Defendant-Appellant.

John D. Buchanan, Jr., Henry, Buchanan, Hudson, Suber & Williams, P.A., Tallahassee, FL, Cynthia S. Tunnicliff, Pennington, Culpepper, Moore, Wilkinson, Dubar & Dunlap, William E. Whitney, Tallahassee, FL, for Plaintiffs-Appellees.

Appeal from the United States District Court for the Northern District of Florida.

Before DUBINA and BLACK, Circuit Judges, and COHILL [*], Senior District Judge.


This is a Boren Amendment challenge under 42 U.S.C. § 1396a(a)(13)(A). We affirm on the basis of the well-reasoned district court order published in the Medicare & Medicaid Guide at page 44,212, and attached as Appendix A, with the following exceptions.

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We vacate paragraph four of the "Ordered and Adjudged" section, which reads as follows:

Defendant AHCA, through the Florida Legislature, is directed to amend Florida's Medicaid plan in such a way as to be non-violative of the Boren Amendment--namely, Florida's Medicaid must be amended to include reimbursement for inappropriate level of care services.

See U.S. Const. amend. XI. We also vacate the language of the opinion that reads as follows: "As such, the Florida Legislature must amend its Medicaid plan to include reimbursement for medically necessary inappropriate level of care services, to bring the Medicaid into compliance with federal law." Id.

We vacate the language of the opinion that reads "pending the adoption of such reimbursement provision by the Florida Legislature." Id.

We further vacate the language of the opinion that reads as follows: "The interim rates shall remain in effect until such time as the Florida Legislature adopts a permanent inappropriate level of care reimbursement provision." Id.

AFFIRMED in part and VACATED in part.












CASE NO. TCA 93-40463-MMP



This is a Boren Amendment challenge under 42 U.S.C. § 1396a(a)(13)(A). Plaintiffs in this action are two hospitals, Tallahassee Memorial Regional Medical Center, Inc. ("TMRMC"), located in Tallahassee, Florida and Florida Hospital Medical Center ("FHMC"), located in Orlando, Florida, which are fully qualified to provide in-patient psychiatric care for adults and adolescents under Florida's Medicaid program. Defendant Douglas Cook is the Director of the Florida Agency for Health Care Administration, the single designated agency responsible for the operation of Florida's Medicaid program. See 1993 Fla.Laws ch. 93-129, § 58; Fla.Admin.Code Ann. r. 59G-4.150(1)(b), r. 59G-4.160(1)(c) (1994). Plaintiff also named as defendants H. James Towey, Secretary of the Florida Department of Health and Rehabilitative Services ("HRS"), and Keystone Peer Review Organization ("KEPRO"), a non-profit corporation under contract by AHCA to review Medicaid claims for adolescent psychiatric patients. These defendants were dismissed in the Court's January 12, 1995 order (Doc. 67).

A two day bench trial was concluded in this matter on August 15, 1995. The Court now sets out its findings of fact and conclusions of law based upon all admissible evidence presented at trial, or otherwise contained in the record.


A. Plaintiffs' Claims:

The State pays the Plaintiffs an established per diem rate for the days in which medically necessary, in-patient psychiatric care is provided to adolescent patients. Plaintiffs do not dispute the adequacy of these rates per se, as they directly coincide with the number of medically necessary days for each patient. However, when the medical necessity for in-patient services ends, the patients medically require a discharge into an alternative setting facility--not to their homes or elsewhere. AHCA does not dispute

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the need for these patients to be thus placed, and it compensates the alternative facilities with Medicaid dollars. However, due to insufficient funding by the State for these alternative settings and bureaucratic admission hurdles, patients often have to wait weeks or even months for an opening in such a facility. In the meantime, the hospitals cannot discharge the patients, even though in-patient care is no longer medically necessary. KEPRO, and ultimately, AHCA, denies any reimbursement for these "grace days."

Plaintiffs concede that AHCA cannot be required to build additional facilities. However, Plaintiffs assert that it is AHCA's responsibility to provide for a scheme of reimbursement under the state Medicaid plan so that patient retention by the hospitals is compensated at an appropriate rate when medical necessity for in-patient care ceases to exist, yet the patients--through no fault of the hospitals--cannot be discharged as an outpatient or to the home, but have no alternative facility available. Plaintiffs argue that the state's inefficiencies in its plan--and the fiscal impact of those inefficiencies--have been transferred from the state to the hospitals. According to Plaintiffs, since July 1992, the fiscal impact of the recoupment or anticipated recoupment required by KEPRO's denial of reimbursement for adolescent psychiatric "grace days" is $836,896.13 for TMRMC, and $389,754.00 for FHMC. Plaintiffs conclude that the resulting impact on hospital daily per diem rates violates the Boren Amendment requirements.

Plaintiffs contend that the State's Medicaid plan fails to comport with the requirements of the Boren Amendment in two respects: First, Plaintiffs maintain that the Florida plan does not reimburse hospitals for "administrative" or "grace days" 1 contrary to the mandatory language of 42 U.S.C. § 1396a(a)(13)(A), which specifies that "in the case of hospital patients receiving services at an inappropriate level of care" a State plan must provide "for lower reimbursement rates reflecting the level of care actually received." Second, Plaintiffs assert that because of flaws in the State plan which result in the unavailability of alternative setting care for adolescent psychiatric patients upon discharge from the hospital, the hospitals are required to retain such patients within their facilities beyond the point of medical necessity. The State then disallows any reimbursement for the "grace days" between the time medical necessity ends and the day that discharge to an alternative setting is possible, because there is no medical necessity for in-patient services during this waiting period. Thus, under the guise of disallowing compensation for lack of medical necessity, the State effectively shifts the fiscal impact of its flawed Medicaid program to the hospitals, resulting in hospital per diem reimbursement rates which are diluted to such an extent that they are not "reasonable and adequate to meet the costs ... of efficiently and economically operated facilities," contrary to the Boren Amendment requirements. 2

Plaintiffs therefore seek an injunction pursuant to the Boren Amendment to Title XIX, 42 U.S.C. § 1396a(a)(13)(A), and 42 U.S.C. § 1983, against the continued operation by the State of this portion of its Medicaid plan and further seek a declaratory judgment holding that the State must reimburse Plaintiffs for adolescent psychiatric patient "grace days," at a rate reflective of the level of care received by the patients during the grace period.

B. Defendant AHCA's Case:

AHCA first asserts that there is no case or controversy. Defendant contends it has not recouped any money previously paid to Plaintiffs for in-patient adolescent psychiatric care provided to Medicaid recipients, but later determined by KEPRO to be not "medically necessary"--in other words, recoupment for "administrative" or "grace days." According

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to Defendant, it has not yet determined whether to recoup funds from Plaintiff TMRMC. Furthermore, Defendant points out that Plaintiff FHMC has a pending request for a formal administrative hearing to contest Defendant's determination that FHMC was overpaid for rendering services to eight (8) Medicaid recipients 3. As a result, Defendant concludes that Plaintiffs have not suffered any monetary damage, any prospective damages to or suffered by Plaintiffs are too speculative, and Plaintiffs have not exhausted their administrative remedies pursuant to Florida Statutes Chapter 120. Consequently, Defendant would have the Court hold that there has been no actual dilution in either Plaintiff's Medicaid per diem rates and, therefore, there is no violation of the Boren Amendment.

Second, AHCA maintains that HRS, not it, is the proper defendant in this action. Defendant asserts that HRS delays placement of Plaintiffs' adolescent psychiatric patients in outpatient facilities, either because of administrative delays by HRS or the failure of HRS to provide an adequate number of such facilities 4. Furthermore, Defendant contends that: (1) a substantial number of the adolescent patients in question are in the...

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