Golfcrest Nursing Home v. State, Agency for Health Care Admin., 94-4077

• Decision Date: 14 November 1995
• Docket Number: No. 94-4077,94-4077
• Citation: 662 So.2d 1330
• Parties: 20 Fla. L. Weekly D2585 GOLFCREST NURSING HOME, Appellant, v. STATE of Florida, AGENCY FOR HEALTH CARE ADMINISTRATION, Appellee.
• Court: Florida District Court of Appeals

Page 1330

662 So.2d 1330

20 Fla. L. Weekly D2585

GOLFCREST NURSING HOME, Appellant, v. STATE of Florida, AGENCY FOR HEALTH CARE ADMINISTRATION, Appellee.

No. 94-4077.

District Court of Appeal of Florida First District.

Nov. 14, 1995.

Alfred W. Clark, Tallahassee, for Appellant.

Karel Baarslag, Senior Attorney, Agency for Health Care Administration, Tallahassee, for Appellee.

SMITH, Senior Judge.

Golfcrest appeals an order of the State of Florida Agency for Health Care Administration ("AHCA") denying an interim Medicaid reimbursement rate increase. We reverse.

Golfcrest Nursing Home (Golfcrest) filed an application for interim rate increase based upon costs incurred to correct deficiencies noted during licensure surveys conducted by AHCA in 1990 and 1991. The AHCA denied the interim rate increase based upon its interpretation of the Florida Title XIX Long-Term Care Reimbursement Plan Medicaid (the Plan).

First, with respect to claimed capital costs, the AHCA interpreted the Plan to require utilization of the chronologically-most-recent cost report in calculating the threshold one (1%) per cent comparison formula for determining whether such capital costs warranted an interim rate increase. The most recent cost report was, in this case, different from the cost report from which the base rate was derived.

Second, with respect to patient costs, the AHCA interpreted the Plan to require the applicant to prove, as part of its prima facie case, that its claimed costs were consistent with what a reasonable and prudent buyer would pay. Because AHCA determined that Golfcrest failed to meet its burden of proof in this regard, the requested rate increase was denied.

Golfcrest is a properly licensed nursing home located in Broward County, Florida. Golfcrest participates in the Florida Medicaid Program and provides inpatient nursing home services to Medicaid-eligible persons. Pursuant to the program, Golfcrest is entitled to reimbursement in accordance with the Florida Title XIX Long-Term Care Reimbursement Plan (the "Plan"), which has been adopted and incorporated by reference in Rule 10C-7.0482, Florida Administrative Code. The Appellee, AHCA, is the state agency responsible for administration and implementation of the Florida Medicaid Program.

In May of 1990 and July of 1991, the Department of Health and Rehabilitative Services (now AHCA) conducted its annual licensure surveys at Golfcrest. During those surveys, AHCA identified several licensure deficiencies, which it ordered Golfcrest to correct. Failure to correct the deficiencies would have resulted in sanctions against Golfcrest's nursing home license, including administrative fines, a reduction in licensure rating, other civil penalties, and a reduction in Medicaid reimbursement.

Thereafter, Golfcrest incurred certain property costs and costs due to patient care and operating changes which it attributes to correction of the licensure deficiencies. Accordingly, by letter dated 6 January 1992, Golfcrest submitted to AHCA a request for an interim rate increase for patient care costs, operating costs, and property costs incurred or to be incurred to comply with existing state regulations and to correct identified licensure deficiencies. ¹ After an exchange of correspondence, AHCA denied Golfcrest's interim rate request by letter dated 15 June 1992, as revised by letter dated 1 July 1992.

Golfcrest challenged the proposed agency action by filing its Petition for Formal Administrative Hearing on 28 February 1993. The matter was referred to the Division of Administrative Hearings, and a formal hearing was held on 22 February 1994. On 3 August 1994, the Hearing Officer entered her Recommended Order, recommending partial approval of the interim Medicaid reimbursement request.

In its final order, the AHCA adopted in substantial part the Hearing Officer's recommendations. First, it disapproved an interim rate increase related to property costs, on the ground that such costs did not meet the threshold test of equalling at least one (1%) percent of Golfcrest's total applicable reimbursement rate.

On this point, the parties agree that, if the cost of renovations which Golfcrest incurred to correct licensure deficiencies caused a change of 1% or more in Golfcrest's existing total per diem reimbursement rate, Golfcrest would be entitled to an interim per diem rate increase. The parties also agree that, at the time of submission and review of Golfcrest's interim rate request, Golfcrest's existing total per diem reimbursement rate was $71,2565. That was derived by dividing costs by the number of patient days from the applicable cost report period, which was, at that time, the July 31, 1990 Medicaid Cost Report. ² During that cost report period, Golfcrest experienced 22,676 patient days.

The AHCA further determined, and Golfcrest agrees, that Golfcrest was entitled to $16,356 in interim property costs for building improvement depreciation. The next step required by the interim rate regulations is to determine whether $16,356, calculated on a per diem basis, will increase Golfcrest's existing total reimbursement rate of $71.2565 by at least 1% (or .7126). If one divides $16,356 by 22,676 patient days, the result is $.7213 (or greater than 1%).

However, the AHCA interpreted the Plan to require it to divide the costs incurred by the number of patient days set forth in the 1991 Plan, or 23,010 patient days. The AHCA based its selection of 23,010 patient days on its interpretation of Section V.B. of the Plan, which provides, in pertinent part, that per diems are to be calculated "by dividing ... costs ... by patient days from the latest cost report." Using 23,010 patient days, the property costs incurred by Golfcrest equal $.7108 (or less than the threshold one (1%) per cent).

The AHCA erred in relying on the phrase "patient days from the latest cost report" to the exclusion of other relevant language in the Plan, most notably, the introductory paragraph to the interim rate-setting section (Section IV. J.) of the Plan. Section IV. J. provides, in pertinent part, that "[r]equests for rate adjustments to account for increases in property related costs due to capital additions, expansion, replacement, or repairs or for allowable lease cost increases shall not be considered in the interim between cost report submission, except for the addition of new beds or if the cost of the specified expansion, addition, replacement, allowable lease cost increase or repair would cause a change of 1 percent or more in the provider's total per diem reimbursement rate." (Emphasis added).

From this language, it appears that the "latest cost report" would, under normal circumstances, be the basis for determining the applicable total reimbursement rate which is being sought to be revised "in the interim between cost report submission." In other words, under normal circumstances, the "latest cost...