Judge Agrees Agency for Health Care Administration Rule Goes Beyond Regulatory Powers
On July 23, 2010, Administrative Law Judge Eleanor M. Hunter entered a Final Order in the case of Las Mercedes Home Care Corp v. Agency for Health Care Administration. The Order declared invalid a rule requiring Medicaid providers of home health agencies to issue either W-2 or 1099 tax forms to individuals on their staffs.
Las Mercedes is a licensed home health agency in Florida and was an enrolled Medicaid provider of home health services from July 1, 2004 through June 30, 2006. The company works with patient physicians to determine the type and scope of home health services needed and arranges for such services to be provided through one of 22 companies with which it maintains staffing agreements.
The suit began in response to a September 30, 2008, Final Audit Report issued by ACHA which sought $878,843.93 in Medicaid overpayments and a fine of $1,000. Soon afterwards, Las Mercedes requested an administrative hearing and the case was referred to the Division of Administrative Hearings (DOAH) in November and set for hearing in February. Following numerous continuations, the AHCA Motion to Amend Final Audit Report was granted on June 24, 2009.
After additional discovery, Las Mercedes filed a Motion to Dismiss arguing that the AHCA rule requiring that Medicaid home health agencies issue W-2 or 1099 forms to individuals conflicted with Statutory authority. In response to an AHCA objection to consideration of the validity of the rule, Las Mercedes filed a rule challenge case; the two cases were then consolidated.
The challenged rule is a provision from the Florida Medicaid Home Health Services Coverage and Limitations Handbook, which has been incorporated by reference by Florida Administrative Code Rule 59G-4.130. The rule requires Home Health services to be provided by professionals who are directly employed by or under contract with a home health agency enrolled in Medicaid Home Health Services program and provides, “Employed or contracted means that the home health agency provides a W-2 of 1099 tax form for the individual.”
Attorney Andrew Ittleman of Fuerst Ittleman, on behalf of Las Mercedes, alleged that the Rule was an invalid exercise of AHCA authority because it (1) went beyond AHCAs powers, (2) contradicted the Florida Statute 400.463(9) definition of “employed by or under contract with” and (3) was arbitrary and capricious.
After determining that the DOAH had jurisdiction to determine the validity of Medicaid rules, the court found that none of the purported statutes authorized AHCA to regulate the business relationship between a home health agency and its employees or contractors. Accordingly, the Court held that the Rule goes beyond the scope of AHCA powers.
The court then found that the “direct employee” definition provided in Section 400.462(9), which includes, “an employee for whom a management company that has a contract to manage the home health agency on a day-today basis…” contradicted and precluded the AHCA definition of the same term. Further, there was no indication that the Legislature or federal government had intended for the AHCA to create its own more restrictive definition.
Finally, the court ruled that the additional requirement under the AHCA Rule was an irrational and illogical methodology for ensuring health, safety, and welfare, and curbing fraud, waste, and abuse. Thus, the court voided the rule established on page 1-8 of the Florida Medicaid Home Health Services Coverage and Limitations Handbook as an invalid exercise of delegated legislative authority.
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