CASE NO. L.T. No. 1D AGENCY FOR HEALTH CARE ADMINISTRATION, CUSTOM MOBILITY, INC., PETITIONER S BRIEF ON JURISDICTION

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1 IN THE SUPREME COURT OF FLORIDA CASE NO. L.T. No. 1D AGENCY FOR HEALTH CARE ADMINISTRATION, vs. Petitioner, CUSTOM MOBILITY, INC., Respondent. On Discretionary Conflict Review of a Decision of the First District Court of Appeal PETITIONER S BRIEF ON JURISDICTION CATHY M. SELLERS MAUREEN MCCARTHY DAUGHTON BROAD AND CASSEL Sun Trust Bank Bldg., Suite South Monroe Street Tallahassee, FL (850) BEVERLY A. POHL LESTER J. PERLING BROAD AND CASSEL One Financial Plaza, Suite S.E. Third Avenue Fort Lauderdale, Florida (954) Counsel for Petitioner

2 TABLE OF CONTENTS Page TABLE OF AUTHORITIES... ii STATEMENT OF THE CASE AND FACTS... 1 SUMMARY OF ARGUMENT... 4 ARGUMENT... 6 THE DECISION BELOW CONFLICTS WITH THE FIFTH DISTRICT ON THE MEANING OF AGENCY STATEMENT OF GENERAL APPLICABILITY IN THE DEFINITION OF A RULE IN SECTION (16), FLA. STAT. (2008) CONCLUSION... 9 CERTIFICATE OF SERVICE CERTIFICATE OF COMPLIANCE APPENDIX i

3 TABLE OF AUTHORITIES CASES Page Dep t of Revenue v. Vanjaria Enterprises, Inc., 675 So. 2d 252 (Fla. 5th DCA 1996) CONSTITUTIONAL PROVISION Art. V, 3(b)(3), Fla. Const.... 4, 7 STATUTES AND RULES (16), Fla. Stat.... 1, (1)(a), Fla. Stat.... 3, 4, , Fla. Stat , Fla. Stat Rule 9.030(a)(2)(A)(iv), Fla.R.App.P.... 4, 7 Rule 9.210, Fla.R.App.P ii

4 STATEMENT OF THE CASE AND FACTS An Administrative Law Judge found a statistical formula utilized by the Agency for Health Care Administration (AHCA) in its administration of the Medicaid program to be an unpromulgated rule, and therefore unenforceable. AHCA appealed, and the First District Court of Appeal reversed. (attached as Appendix). Petitioner Custom Mobility contends that the First District has placed a unwarranted judicial gloss on the definition of a rule, which is inconsistent with the statutory definition in section (16), Florida Statutes (2008). 1 A decision of the Fifth District Court of Appeal, discussed infra, construes the statutory definition more faithfully, we contend, and provides jurisdiction in this Court to resolve the conflict. Petitioner Custom Mobility, Inc. is a provider of wheelchairs used by Medicaid recipients. The Medicaid program is administered in Florida by the 1 The statutory definition of a rule provides, in relevant part: (16) Rule means each agency statement of general applicability that implements, interprets, or prescribes law or policy or describes the procedure or practice requirements of an agency and includes any form which imposes any requirement or solicits any information not specifically required by statute or by an existing rule , Fla. Stat. (2008) (emphasis supplied). The court below cited section (15), Fla. Stat. (2007), but we note that section defining rule was re-numbered as section 16 in the 2008 statutes. 1

5 Respondent, Agency for Health Care Administration (AHCA). AHCA routinely audits providers claims, for the purpose of recouping overpayments. See , , Fla. Stat. (2007). A subset of Custom Mobility claims was identified, using the cluster sampling method, and an audit was performed using the sampled claims. 2 To compute the overpayment, AHCA applied the statistical formula that it consistently uses in every audit in which cluster sampling of the claims is used. See Appendix, p. 3 ( 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 ). 3 The Final Audit Report indicated that Custom Mobility had received a $245, overpayment. Custom Mobility requested a formal hearing to challenge the overpayment determination, and in that proceeding before the Administrative Law Judge, challenged the statistical formula as an unpromulgated rule. A Final Order was issued, holding that the cluster 2 Cluster sampling is an accepted sampling method, and statistical sampling is permitted by statute. This case challenges only the formula that is applied to the sample to extrapolate the overpayment amount. 3 In a survey of audits conducted from , cluster sampling was utilized in approximately 10% of all audits. AHCA has used the same extrapolation formula the challenged statement in this case for twenty years, without subjecting it to the public scrutiny of rulemaking procedures. (Appendix, pp. 3-4). 2

6 sampling extrapolation formula violates section (1)(a), Florida Statutes, and ordering AHCA to discontinue its use. The First District reversed, refusing to find that the challenged statement (formula) was an unpromulgated rule, under both the statutory definition of rule (n. 1, supra) and case law discussing the term. The court found that [t]he 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. (Appendix, p. 4) (emphasis supplied). Pertinent to the conflict question before this Court, the First District concluded that the formula is not an agency statement of general applicability (a statutory term, see n. 1, supra) since it applies only to some of the service providers being audited, and thus does not have the consistent effect of law. (Appendix, pp. 5-6). The court imposed a stringent non-statutory standard for what is a rule : [N]either the formula nor the audit statistical methodology sets forth a categoric requirement of specific criteria or a mandatory action with which to comply. Accordingly, by this measure also, the formula is not a rule. Appendix, p. 8 (emphasis supplied). As discussed below, the First District applied the wrong measure, in conflict with the Fifth District s construction of section (16). 3

7 SUMMARY OF ARGUMENT The decision below reversed a Final Order of the Administrative Law Judge, which had found AHCA s mathematical formula used to compute certain Medicaid overpayments to be an unenforceable unpromulgated rule. The First District s construction of the term agency statement of general applicability in section (16), Fla. Stat. (2008) (defining rule ), conflicts with Department of Revenue v. Vanjaria Enterprises, Inc., 675 So. 2d 252 (Fla. 5th DCA 1996), on the same question of law, i.e., how broadly to interpret the term agency statement of general applicability. Thus, this Court has jurisdiction. See art. V, 3(b)(3), Fla. Const.; FLA.R.APP.P (a)(2)(A)(iv). The First District applied a too-narrow construction to the term agency statement of general applicablility, effectively requiring a challenged statement to have universal applicability before it can be considered a rule. That approach excused AHCA from having to subject the challenged statement to rulemaking procedures, which are mandatory for any rule as defined in section (16). See (1)(a), Fla. Stat. In contrast, in Vanjaria Enterprises the Fifth District found a tax assessment procedure to be a statement of general applicability, and thus an unpromulgated rule, because it was used 100% of the time in assessing 4

8 taxes on multiple-use properties, albeit not all properties. Vanjaria s more liberal construction of general applicability is more consistent with the broad definition of rule in section , and with the legislative policy that unpromulgated rules are not to be tolerated. See (1)(a), Fla. Stat. This case, involving a challenged statement that is always used to compute Medicaid overpayments for a substantial subset of providers (all those whose audits are conducted by the cluster sampling method), and which affects the public fisc as a result, is of sufficient importance that the Court should accept jurisdiction. Because administrative rulemaking is not a matter of agency discretion and is mandatory for agency statements meeting the statutory definition of a rule, the question of how courts are to construe agency statement of general applicability in the definition of rule should be answered consistently, and the conflict should be resolved by this Court. The First District s view that general applicability requires universal applicability is too narrow a reading of the statute, and inconsistent with the intent of the Administrative Procedure Act. Review should be granted to resolve the conflict and to clarify that the statute, rather than a judicial gloss, governs what is a rule subject to mandatory rulemaking. 5

9 ARGUMENT THE DECISION BELOW CONFLICTS WITH THE FIFTH DISTRICT ON THE MEANING OF AGENCY STATEMENT OF GENERAL APPLICABILITY IN THE DEFINITION OF A RULE IN SECTION (16), FLA. STAT. (2008) A key statutory term in the definition of a rule is whether a challenged statement is an agency statement of general applicability (16), Fla. Stat. The First District found the formula in this case not to be generally applicable, because it was a mere rule and applies only to some of the service providers being audited, and thus does not have the consistent effect of law. (Appendix at 5-6). 4 The court acknowledged that 10% of Medicaid audits are performed using the cluster sampling method, and that within that subgroup the challenged statement formula is used 100% of the time to extrapolate the total overpayment amount, but concluded that even such a widespread use, for twenty years, failed to meet the generally applicable standard. In contrast, in Department of Revenue v. Vanjaria Enterprises, Inc., 675 So. 2d 252 (Fla. 5th DCA 1996), the Fifth District held that the Department of Revenue s tax assessment formula for multi-use property was a rule, even though it applied only to assessments of multiple-use properties 4 We note that the Florida Administrative Code includes many rules that are formulas. So being a mere rule is not a disqualifier. 6

10 and not to all properties. Vanjaria found the tax assessment formula to have general applicability, and therefore to be an illicit unpromulgated rule, because it was contained in the DOR Training Manual, was the sole guide for auditors in their assessment of multiple-use properties, auditors strictly complied with it, and DOR auditors are not afforded any discretion to take action outside the scope of the Training Manual. 675 So. 2d at 255. The Vanjaria analysis cannot be squared with the First District s more demanding view of what constitutes an agency statement of general applicability. 5 As in Vanjaria, the challenged statement formula in this case was part of AHCA s internal procedures, was strictly complied with, and no discretion was afforded when the cluster sampling auditing method was used: in such audits, the challenged statement was the only formula applied (and has been for twenty years). Thus, express and direct conflict exists, and this Court has jurisdiction. See art. V, 3(b)(3), Fla. Const.; FLA.R.APP.P (a)(2)(A)(iv). The Court should exercise its discretion to grant review and address this conflict question, because the correct interpretation of rule under the 5 The decision below attempted to distinguish Vanjaria (Slip op. at 5), but failed to note that the challenged tax assessment formula in that case applied only to all audits on multiple-use properties, not to all audits generally. Thus, Vanjaria conflicts with, and is not supportive of, the decision in this case. 7

11 statute has extraordinarily widespread impact, even beyond the Medicaid context. Although here we have identified a conflict, because the First District Court of Appeal hears the majority of administrative cases, any misinterpretation of the Administrative Procedure Act by that court might otherwise be impervious to review, because the requisite inter-district conflict would so rarely arise. Here the Court has an opportunity to resolve a conflict and provide important direction to lower courts and administrative agencies on what the legislature meant in its statutory definition of a rule. And, if courts have added an unwarranted judicial gloss to the meaning of the term, this case provides an opportunity to ensure that case law does not improperly change legislative intent in the area of administrative rulemaking. 8

12 CONCLUSION For the foregoing reasons demonstrated express and direct interdistrict conflict and an important question of statutory construction the Court should accept jurisdiction to review the decision of the First District Court of Appeal. Respectfully submitted, CATHY M. SELLERS Florida Bar No MAUREEN MCCARTHY DAUGHTON Florida Bar No BROAD AND CASSEL Sun Trust Bank Bldg., Suite South Monroe Street Tallahassee, FL Ph: (850) Fax: (850) s/ Beverly A. Pohl BEVERLY A. POHL Florida Bar No LESTER J. PERLING Florida Bar No BROAD AND CASSEL One Financial Plaza 100 S.E. Third Ave., Ste Fort Lauderdale, Florida Ph: (954) Fax: (954) Counsel for Petitioner 9

13 CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of the foregoing Brief on Jurisdiction has been furnished to the counsel listed below, by FedEx this 20th day of November, 2008: JUSTIN M. SENIOR Chief Appellate Counsel Agency for Health Care Administration 2727 Mahan Drive, MS #3 Tallahassee, FL Ph: (850) Fax: (850) CERTIFICATE OF COMPLIANCE I HEREBY CERTIFY that this Brief on Jurisdiction complies with FLA.R.APP.P and is prepared in Times New Roman 14-point font. s/ Beverly A. Pohl BEVERLY A. POHL FTL1\HEALTH\ /0004 BAP 10

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