Ahca v. Custom Mobility, Inc.

• Decision Date: 04 September 2008
• Docket Number: No. 1D07-4608.,1D07-4608.
• Citation: 995 So.2d 984
• Parties: AGENCY FOR HEALTH CARE ADMINISTRATION, Appellant, v. CUSTOM MOBILITY, INC., Appellee.
• Court: Florida District Court of Appeals

995 So.2d 984

AGENCY FOR HEALTH CARE ADMINISTRATION, Appellant, v. CUSTOM MOBILITY, INC., Appellee.

No. 1D07-4608.

District Court of Appeal of Florida, First District.

September 4, 2008.

Justin M. Senior, Chief Appellate Counsel, Tallahassee, for Appellant.

Cathy M. Sellers and Maureen McCarthy Daughton, of Broad and Cassel, Tallahassee and Beverly A. Pohl and Lester J.

Perling, of Broad and Cassel, Ft. Lauderdale, for Appellee.

BROWNING, C.J.

The Agency for Health Care Administration (AHCA) appeals a final order of the Division of Administrative Hearings that held that a formula used by AHCA to calculate overpayments to Medicaid providers violated section 120.54(1)(a), Florida Statutes (2007). Because we find that the formula does not meet the statutory definition of a rule, we reverse the final order and remand the case for further proceedings consistent with this opinion.

AHCA is the state agency responsible for administering Florida's Medicaid program, for auditing Medicaid providers, and for recouping overpayments made to Medicaid providers. §§ 409.902, 409.913, Fla. Stat. (2007). Appellee, Custom Mobility, is a Medicaid provider. AHCA conducted an audit of the Medicaid claims submitted for payment by Custom Mobility between January 1, 2001, and December 31, 2003. In a Final Audit Report (FAR) dated December 19, 2005, AHCA advised Custom Mobility that it had determined that Custom Mobility was overpaid in the amount of $245,317.83. The overpayment calculation was performed using the statistical formula for cluster sampling that is at issue here. Custom Mobility was notified in the FAR that it had the right to request a formal or informal hearing with respect to that overpayment determination; Custom Mobility requested a formal hearing. Custom Mobility set forth evidence intended to show that it is substantially affected by the formula, in that the formula was used as the basis for calculating the amount that AHCA is seeking to recover from Custom Mobility as alleged Medicaid overpayments.

When AHCA audits a Medicaid provider, it "must use accepted and valid auditing, accounting, analytical, statistical, or peer-review methods, or combinations thereof. Appropriate statistical methods may include, but are not limited to, sampling and extension to the population, parametric and nonparametric statistics, tests of hypotheses, and other generally accepted statistical methods." § 409.913(20), Fla. Stat. (2007). Statistical sampling methodologies are used to permit the auditors to analyze a random sample from the population of Medicaid recipients and/or claims, determine the findings in the sample, and extend the sample findings to the population of recipients and/or claims.

In using the statistical sampling methodology of cluster sampling, the AHCA auditor draws a random sample of Medicaid recipients who have received goods or services from a particular Medicaid provider and evaluates the claims for each recipient who is included in the sample. The amount of overpayment is determined for each claim for each recipient, and the statistical formula for cluster sampling is used to extend the overpayment found in the sample to the entire population of Medicaid claims to determine the total overpayment. The formula at issue is the only statistical formula used by AHCA to calculate Medicaid overpayments when the statistical sampling methodology of cluster sampling is used.

In approximately 10% of the audits conducted between June 1, 2004, and May 31, 2007, AHCA used the cluster sampling methodology. The cluster sampling formula has been used by AHCA for approximately twenty years to calculate Medicaid overpayments. Counsel stipulated that the formula has not been adopted as a rule pursuant to the procedures set forth in Section 120.54, Florida Statutes (2007).

The administrative law judge issued a final order on August 23, 2007, holding that the cluster sampling formula violates Section 120.54(1)(a), Florida Statutes, and ordering AHCA to immediately discontinue all reliance on the statement or any substantially similar statement as a basis for agency action. AHCA timely filed a notice of appeal on September 7, 2007.

The legislature defines a rule as an "agency statement of general applicability that implements, interprets, or prescribes law or policy or describes the procedure or practice requirements of an agency. ..." § 120.52(15), Fla. Stat. (2007). Florida imposes rulemaking procedures only upon "those statements which are intended by their own effect to create rights, or to require compliance, or otherwise to have the direct and consistent effect of law." McDonald v. Dep't of Banking & Fin., 346 So.2d 569, 581 (Fla. 1st DCA 1977). The formula here does not by its own effect create rights, require compliance, or have the direct and consistent effect of law, because it is a mere formula and does not give the service provider any rights, or require compliance. The most the formula does is to calculate the amount of overpayment, and it is subject to discretionary application because AHCA has discretion to use or not use the corresponding methodology in any given audit.

Further, the cluster sampling formula is not an agency statement of general applicability. In Department of Revenue v. Vanjaria Enterprises, Inc., 675 So.2d 252, 255-56 (Fla. 5th DCA 1996), the court held that a tax assessment procedure was a statement of general applicability because it was the sole guide for auditors, it applied "for all audits performed" and was not applied on a case-by-case basis, as here, and the auditors had no discretion to act outside of the procedure. In Department of Commerce v. Matthews Corporation, 358 So.2d 256 (Fla. 1st DCA 1978), this Court...