Florida Administrative Law Judge Sides With Hospital On Challenge To AHCA Audited Financials Rule

Monday, May 14, 2018
By George F. Indest III, J.D., M.P.A., LL.M., Board Certified by The Florida Bar in Health Law

On May 9, 2018, a Florida administrative law judge (ALJ) struck a state agency rule that required hospitals in Florida to provide audited financial statements when applying for certificates to build new facilities.  The ALJ sided with the hospital challenging the rule, finding that the Florida Administrative Code (F.A.C.) rule that had been adopted by the Florida Agency for Health Care Administration (AHCA) was actually an invalid exercise of delegated legislative authority.  This means that the ALJ found that AHCA had never been granted the authority by the Florida Legislature to make such a rule.

Interpretation of the Rule.

In the Final Administrative Hearing (trial) of the case, AHCA argued that its rule should be found to be valid since the rule had to be read together the underlying statutes.  AHCA also claimed that it did not require general hospital applicants to submit audited financials, but the Judge said the clear language of the rule actually read otherwise.

Judge Watkins disagreed with AHCA’s argument that its position actually agreed with petitioner Venice HMA Hospital (the party bringing the rule challenge). The Judge found that the fact that the hospital was challenging the rule proved otherwise.

Challenging the Rule.

A "rule challenge" is a legal (or administrative) proceeding authorized by the Florida Administrative Procedures Act, to challenge rules (or regulations) adopted by state agencies.  A successful challenge may be brought if the rule goes beyond what the laws passed by the Florida Legislature actually state.  This may be because the rules impose additional requirements that the laws did not include.  It may be because the state agency was never granted the authority to pass rules on a certain subject.  It may be because on the state legislature had the authority to make such laws and the agency is attempting to do so in a rule.

According to the decision of the ALJ, the rule challenge arose to dispute AHCA's preliminary approval of the certificate of need (CON) applications filed in 2016 by two hospitals.  After AHCA granted preliminary approval for both hospitals, several parties filed challenges.  Venice Regional Hospital also filed a motion with the ALJ to exclude consideration of testimony regarding the inadequacy of its certificate of need application as to its audited financial statements, according to the decision.  The hospital argued that the applicable statutes did not require general hospitals to submit such statements.

The Final Decision.

Judge Watkins found that the statutes clearly do not require that a general hospital include audited financial statement in its CON application.  Any rule that requires a general hospital to do so would be contrary to the legal requirements and invalid because it would exceed AHCA's delegated legislative authority, he stated.

Despite AHCA's arguments about how it interprets its rule, Judge Watkins pointed out that an existing rule challenge is directed to the facial validity of the challenged rule, and not to its validity as interpreted or applied in specific factual scenarios.

Click here to read the order in full in this case.

Rule Challenges Are Important to Protect Citizens' Rights from Illegal Authority Seized by Administrative Agencies.

The rule challenge proceeding is there to protect citizens against state agencies that exceed the limits of the law.  This may be an attempt by an administrative agency to impose far more severe restrictions than a law permits, to impose harsher punishments for infractions of agency rules and laws than the law permits, or just to adopt rules to govern matters where they have not been authorized to do so by the legislature.

The major advantages of the rule challenge mechanism are:

1.    They are filed directly with the Florida Division of Administrative Hearings (DOAH), so the state agency cannot "sit on" or suppress them;  and

2.    Someone who brings a rule challenge and wins it is automatically entitled to repayment of its attorney's fees and costs.

To learn more about how The Health Law Firm can assist you in matters like this, visit our Areas of Practice page.

The attorneys of The Health Law Firm won a rule challenge case in which a registered nurse challenged the authority of the Florida Board of Nursing to adopt a rule restricting the administration of medications by a registered nurse:

Consult With A Health Law Attorney Experienced in the Representation Health Care Professionals.

The attorneys of The Health Law Firm provide legal representation to physicians, nurses, nurse practitioners, CRNAs, dentists, pharmacists, psychologists and other health providers in academic disputes, contract negotiations, license applications, board certification applications, credential hearings and civil and administrative litigations and hearings. We also have experience in representation for health care investigations by the Agency for Healthcare Administration (AHCA), the Zone Program Integrity Contractors (ZPICs), the FBI, the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services (DHHS).

To contact The Health Law Firm, please call (407) 331-6620 or (850) 439-1001 and visit our website at www.TheHealthLawFirm.com.


Hale, Nathan. “Fla. Hospital Wins Challenge To Audited Financials Rule.” Law360. (May 9, 2018). Web.

About the Author: George F. Indest III, J.D., M.P.A., LL.M., is Board Certified by The Florida Bar in Health Law. He is the President and Managing Partner of The Health Law Firm, which has a national practice. Its main office is in the Orlando, Florida, area. www.TheHealthLawFirm.com The Health Law Firm, 1101 Douglas Ave., Altamonte Springs, FL 32714, Phone: (407) 331-6620.

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