Legal Update – Challenging the Agency for Health Care Administration’s Audit Methods

Recently my client, Largo, Fla.-based Custom Mobility, Inc., a retailer and manufacturer of sophisticated adaptive wheel chairs and accessories, received notice from the Agency for Health Care Administration (AHCA) that it was required to repay more than $200,000 in alleged Medicaid overpayments. The alleged overpayment was calculated through the use of statistical sampling. The firm was brought in to serve as counsel in disputing the charge.

Thanks to the team effort of my colleagues in Tallahassee, including Maureen McCarthy Daughton and Cathy Sellers, we were able to win a favorable decision by Administrative Judge Patricia M. Hart of the Division of Administrative Hearings in Tallahassee. We argued that the statistical formulas and methods used by the AHCA for the past 20 years to audit Medicaid providers and recoup overpayments had never been properly adopted as a rule according to procedures set forth in Florida Statutes.

According to the Florida Administrative Procedure Act (APA), an agency that uses such a practice routinely is required to promulgate that method as a formal rule using the process set forth in the APA. Formal notices, workshops and other administrative requirements are part of the rule process as well.

The judge ruled that the AHCA’s policy of statistical sampling “violates Section 120.54(1) (a), Florida Statutes, and the Agency for Health Care Administration shall immediately discontinue all reliance upon the statement or any substantially similar statement as a basis for agency action.” In addition, according to the ruling, Custom Mobility, Inc. “is entitled to an award of reasonable costs and reasonable attorneys’ fees …”.

This ruling has impacted every Medicaid audit and overpayment case utilizing any statistical sampling formula. It is my understanding that AHCA has frozen all activity in this area pending a complete legal review. AHCA has petitioned the First District of Appeal to review this case but a final decision should not be expected for at least one year. In the meantime, it remains to be seen how AHCA will approach its audits and whether it will utilize statistical sampling.