The Florida Senate

408.072  Review of hospital budgets.--

(1)  At least 90 days prior to the beginning of its fiscal year, each hospital requesting a rate of increase in gross revenue per adjusted admission in excess of the maximum allowable rate of increase for the hospital's next fiscal year, or each hospital utilizing banked percentage points pursuant to paragraph (3)(b), paragraph (3)(c), or paragraph (3)(d) and requesting a rate of increase in excess of the maximum allowable rate of increase plus the available banked percentage points, shall be subject to detailed budget review and shall file with the board, on forms adopted by the board and based on the uniform system of financial reporting:

(a)  Its budget for the next fiscal year, including projected expenditures, projected revenues, and statistical measures necessary for the board to evaluate these projections. Any hospital, the final budget of which requires public review and approval, may submit its budget prior to public review and approval and shall subsequently file any amendments adopted during the public review process at least 45 days prior to the beginning of the fiscal year of the hospital.

(b)  Its actual experience for the first 6 months of its current fiscal year, including actual expenditures, actual revenues, and statistical measures necessary for the board to evaluate the actual experience.

(c)  Its estimated experience for the last 6 months of its current fiscal year, including estimated expenditures, estimated revenues, and statistical measures necessary for the board to evaluate these estimates.

(d)  Information necessary for the board to evaluate the effectiveness of current services and the justification of the hospital for increased costs to continue current services, improve existing services, and provide new services.

(e)  Its schedule of projected rates which will be implemented to generate projected revenues.

(2)  The projected budget shall be deemed approved unless it is disapproved by the board within 90 days after filing, except that where the hospital requests a hearing, the 90 days shall be tolled until 20 days after the board's receipt of the recommended order from the Division of Administrative Hearings of the Department of Management Services. Upon agreement by the board and the hospital, the 90-day period may be waived or extended. As part of the review process conducted by the board, the board may approve, disapprove, or disapprove in part the projected budget. Once submitted and reviewed by the board, a detailed budget or budget amendment shall not be withdrawn by a hospital unless the increase approved by the board is greater than the maximum allowable rate of increase, the gross revenue per adjusted admission, or the net revenue per adjusted admission.

(3)

(a)  Except for hospitals filing a budget pursuant to subsection (1), each hospital, at least 90 days prior to the commencement of its next fiscal year, shall file with the board a certified statement, hereafter known as the "budget letter," acknowledging its applicable maximum allowable rate of increase (MARI) in gross and net revenue per adjusted admission. Calculations shall be performed by the hospital using the methodology specified in s. 408.07. Through the budget letter, the hospital shall affirm that the hospital shall not exceed its applicable maximum allowable rate of increase in gross and net revenue per adjusted admission. However, the board shall have 90 days from receipt of the budget letter to determine if the applicable maximum allowable rates of increase submitted by the hospital are within the levels calculated pursuant to this section. If the board determines that the maximum allowable rates of increase submitted by the hospital are not within the levels calculated by the board, then the budget letter shall be rejected.

(b)  If a hospital's gross revenues per adjusted admission, as determined by its audited actual experience in any one year, increase at a percentage rate less than the maximum allowable rate of increase or board-approved rate of increase, whichever is lower, the hospital may carry forward the difference and earn up to a cumulative maximum for gross revenues of 3 "banked" percentage points which may be banked to be used in the future. In no case shall a hospital that exceeds its maximum gross revenue per adjusted admission earn banked points.

(c)  If a hospital's net revenue per adjusted admission, as determined by its audited actual experience in any one year, increases at a percentage rate less than the market basket index or the board-approved rate of change, whichever is lower, the hospital may carry forward the difference and earn up to a cumulative maximum for net revenues of 3 "banked" percentage points which may be banked to be used in the future.

(d)  Earned banked percentage points may be added to the hospital's maximum allowable rate of increase. Such points may be used in the current fiscal year if a budget amendment would have been required to keep the hospital out of a penalty situation. A hospital shall be required to use gross revenue banked percentage points before submitting a budget for detailed review or before submitting a request for a budget amendment. Banked points shall not be transferable from one facility to another and shall only be used by a hospital which earns them as a separately licensed facility. Banked points utilized in budget letters, budget amendments, and detailed budget reviews in the current fiscal year to keep a hospital out of a penalty situation shall not be available for mitigation of penalties pursuant to s. 408.08. The board shall adopt rules which specify procedures for hospitals to bank and use any percentage points as authorized under this section.

(4)  For purposes of budget review and comparison and to assist in making determinations pursuant to subsection (8), the board shall:

(a)  Establish groupings of hospitals according to characteristics, including, but not limited to, a measure of the nature and range of services provided, teaching hospital status, number of medical specialties represented on the hospital staff, percentage of Medicare inpatient days, average daily census, geographical differences, and case mix. The rule shall provide for the establishment of not more than 15 general groups and for the establishment of additional specialty groups as needed. However, no group shall contain fewer than five hospitals.

(b)  Establish statistical indicators per adjusted admission to serve as measures of comparison based on the most recent audited actual experience filed pursuant to s. 408.061(4)(a) for the hospitals in each group. The statistical indicators shall include, but not be limited to, gross revenue, net revenue, and operating expenditures.

(c)  For each budget filed pursuant to subsection (1) and amendments filed pursuant to subsection (6), the hospital's most recent audited actual report shall be used as the base for review and comparison purposes.

(5)  The board shall review each budget filed pursuant to subsection (1) and amendments filed pursuant to subsection (6) to determine whether the gross revenue per adjusted admission or the net revenue per adjusted admission contained in the budget or amendment is just, reasonable, and not excessive. In making such determination, the board shall consider, and the hospital may use, the following criteria in the following priority, with paragraph (a) the highest priority and paragraph (i) the lowest priority.

(a)  The ability of the hospital to earn a reasonable rate of return based on reasonable and justifiable costs.

(b)  The impact of patient days attributable to the medically indigent.

(c)  The impact of patient days reimbursed by Medicaid.

(d)  The impact of patient days reimbursed by Medicare.

(e)  The research and educational services provided by the hospital if it is a teaching hospital.

(f)  The cost and efficiency of providing the current and proposed services. The cost of proposed services may not be included until these services or facilities have been approved by the designated state agency.

(g)  The change in hospital costs as measured by changes in the severity of illness, including changes in the case mix. For psychiatric and other hospitals that would not be reimbursed under a prospective payment system by the Federal Government, the impact on hospital costs associated with changes in the average length of stay of patients or, when available, case mix shall be considered.

(h)  The accuracy of previous budget submissions compared to the actual experience of the hospital.

(i)  For psychiatric hospitals, the impact on hospital gross revenues associated with changes in the average length of stay of patients, changes in admissions to hospital units, and changes in admissions to specific services or, when available, case mix.

(6)  After a hospital budget is approved, approved as amended, or disapproved for a given fiscal year, no amendment to such budget shall be made except in accordance with the following procedures:

(a)  A request by a hospital to amend its budget shall be filed in writing with supporting documents no later than 90 days before the end of the hospital's fiscal year. The budget amendment shall be deemed approved unless it is disapproved or disapproved in part by the board within 90 days after the filing, except that where the hospital requests a hearing, the 90 days shall be tolled until 20 days after the board's receipt of the recommended order from the Division of Administrative Hearings of the Department of Management Services. Upon agreement by the board and the hospital, the 90-day period may be waived or extended.

(b)  If approved by the board as part of a budget amendment, the following items shall be applied retroactively for the entire budget year of the hospital:

1.  Changes in cost due to changes in case mix, including changes in the severity of illness.

2.  Unforeseen and unforeseeable changes in malpractice insurance premiums, prior year Medicare cost report settlements, and retroactive changes in Medicare reimbursement methodology.

(7)  The board shall disapprove any budget or amendment or part thereof as excessive that contains a gross revenue per adjusted admission which is not necessary to maintain total hospital costs at a level reasonably related to total services provided and which is not necessary to maintain a prudently managed hospital.

(8)  The board shall disapprove, in its entirety or in part, any budget or any budget amendment that contains a rate of increase, a gross revenue per adjusted admission, or a net revenue per adjusted admission which the board finds, pursuant to subsection (3), subsection (5), or subsection (7), to be unjust, unreasonable, or excessive.

(9)

(a)  The staff of the board shall review the budget or the amendment to the budget, and the executive director or executive staff members designated by the executive director shall make preliminary findings and recommendations in writing as to whether the budget should be approved, disapproved, or disapproved in part. The staff shall send the preliminary findings by certified mail to the hospital. The hospital shall have 14 days from the receipt of the preliminary findings and recommendations to file written objections and request a hearing with the board, if a hearing is desired, or to file written objections if a hearing is not requested by the hospital.

(b)  If a hearing is requested, it shall be conducted by the board or, at the election of the board, by an administrative law judge of the Division of Administrative Hearings of the Department of Management Services, pursuant to the provisions of ss. 120.569 and 120.57. Hearings shall be held within 30 days of filing the request unless waived by the board and the hospital. All hearings shall be held in Tallahassee unless the board determines otherwise.

(c)  Recommended orders shall be issued within 30 days from the close of the hearing unless waived by all parties.

(d)  The failure of a hospital to request a hearing within 14 days of the receipt of the preliminary findings of the staff constitutes a waiver of the right of the hospital to contest the final decision of the board, and the board shall enter a final order consistent with the staff's preliminary findings without further proceedings.

(e)  During the pendency of any hearing or an appeal of a final order of the board, no hospital shall exceed its current maximum budget level in effect.

(10)  The board may publish its findings in connection with any review conducted under this section in the newspaper of the largest circulation in the county in which the hospital is located.

(11)  Notwithstanding any other provisions of this chapter:

(a)  Any hospital operated by the ¹Department of Health and Rehabilitative Services or the Department of Corrections; any rural hospital as defined in s. 408.07; and any intensive residential treatment program for children and adolescents as defined in s. 395.002(16) which received a certificate of need on or before January 1, 1991, and is licensed under chapter 395 for less than 33 beds, which is not part of a multifacility organization and which is part of a community mental health system, shall be exempt from filing a budget, and shall be exempt from budget review and approval for exceeding the maximum allowable rate of increase and from any penalties arising therefrom. However, each such hospital shall be required to submit to the board its audited actual experience, as required by s. 408.061(4)(a).

(b)  In addition, the board shall exempt any hospital from filing a budget, from budget review and approval for exceeding the maximum allowable rate of increase, and from any penalties arising therefrom, upon a finding of the board that the hospital, during the hospital's most recent audited actual experience, had a prospective payment arrangement, as defined in s. 408.07, which contained all of the elements set forth in s. 408.50(2)(a)-(e) for at least 90 percent of the hospital's admissions exclusive of Medicare, Medicaid, and any other patients which meet the board's definition for charity care. Such exemption shall be on a year-to-year basis upon a finding by the board that the hospital has met the requirements of this subsection each year. Each hospital exempted from budget review pursuant to this paragraph shall submit to the board its audited actual experience, as required by s. 408.061(4)(a). This paragraph is repealed, and shall be subject to review by the Legislature, upon a finding by the board that at least 25 percent of hospitals which would have otherwise been subject to budget review are excluded from budget review pursuant to this paragraph. Such repeal shall take effect on July 1 following the date on which the board makes a finding that the 25-percent level, as set forth in this paragraph, has been reached.

(12)  The review and approval of hospital budgets and budget amendments, and the imposition of fines and penalties, pursuant to this chapter shall apply to hospital budgets for fiscal years which end in calendar year 1994. Notwithstanding any other provision in this chapter to the contrary, any budget for fiscal years ending prior to 1994 shall be filed and reviewed pursuant to chapter 88-394, Laws of Florida, and rules adopted by the board pursuant thereto.

(13)  For hospitals in detailed review, in addition to any gross or net revenues for a budget or budget amendment approved pursuant to subsection (5), the board shall also approve gross and net revenues which are necessary to fund any documented direct costs to hospitals arising from assistance provided to expand or supplement the curriculum of a community college, university, or vocational training school for the purpose of training nurses and other health professionals, not including physicians. Assistance would include, but not be limited to, the direct cost of faculty salaries and expenses, books, equipment, recruiting efforts, tuition, hospital internships, and in-kind contributions. It shall be the responsibility of the hospital to document any such increases in costs.

History.--s. 72, ch. 92-33; s. 76, ch. 92-289; s. 15, ch. 93-129; s. 191, ch. 96-410.

¹Note.--The Department of Health and Rehabilitative Services was redesignated as the Department of Children and Family Services by s. 5, ch. 96-403, and the Department of Health was created by s. 8, ch. 96-403.