STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

UPJOHN HEALTHCARE SERVICES, INC. )

)

Petitioner, )

)

vs. ) CASE NO. 83-3059

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent. )

) DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Petitioner, )

)

vs. ) CASE NO. 83-3248

) UPJOHN HEALTHCARE SERVICES, INC. )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, an administrative hearing was held before Diane D. Tremor, Hearing Officer with the Division of Administrative Hearings, on May 10 and 11, 1984, in Tallahassee, Florida. These cases were consolidated for hearing purposes with the case of Upjohn Healthcare Services, Inc. v. Department of Health and Rehabilitative Services, DOAH Case Number 83-3335R, which is the subject of a separate Final Order.

The issue for determination in Case Number 83-3059 is whether Upjohn Healthcare Services, Inc. (Upjohn) is entitled to add to its Marion County license to operate a home health care agency the adjoining counties of Sumter, Citrus and Lake. The issue for determination in Case No. 83-3248 is whether Upjohn's Marion County license should be revoked or otherwise disciplined for the reason that Upjohn is extending the provision of home health services from its Marion County home health agency to Citrus and/or Lake Counties without a license for those counties.

APPEARANCES

For Petitioner: James D. Wing, Esquire

Barbara R. Pankau, Esquire Carlton, Fields, Ward, Emmanuel,

Smith and Cutler Post Office Box 3239 Tampa, Florida 33601

For Respondent: Robert P. Daniti, Esquire

(Former) Assistant General Counsel 1323 Winewood Boulevard

Tallahassee, Florida 32301 INTRODUCTION

The three cases which were consolidated for hearing purposes involve a rule-challenge (Case No. 83-3335R), a license denial (Case No. 83-3059) and an Administrative Complaint (Case No. 83-3248). As noted ahove, the rule-challenge proceeding is the subject of a separate Final Order.

In support of its position in each of the three cases, Upjohn offered the testimony of Dr. Frank A. Sloan, accepted as an expert in the field of economics as applied to home health care agencies; Wilford "Bill" Madsen, a Regional Manager for Upjohn; and P. Warren Dacus, accepted as an expert in the area of health planning. The depositions of Ray Chambis, Gary Clarke, Thomas F. Porter, Nat Ward and Marjorie Turnbull, taken in connection with another proceeding, were received into evidence, as were the depositions of Ms. Turnbull and Jay Kassack taken for the purposes of these proceedings. Upjohn's Exhibits 1 through 53, 55, 57, 58, 64 through 73 and 85 through 88 were received into evidence.

Testifying on behalf of HRS were Eugene Nelson, the Administrator of HRS's Office of Community Medical Facilities, who was accepted as an expert in health planning; Carol Gormley, the Executive Director of the North Central Florida Health Planning Council; and John Adams, a License Supervisor with HRS's Office of Licensure and Certification. Testifying by way of deposition were Phyllis Jean Beiro and Kathleen J. Maher. The deposition of Thomas J. Konrad, taken in another proceeding, was also received into evidence, as were HRS's Exhibits 1 through 11.

Subsequent to the hearing, the parties submitted proposed findings of fact and proposed conclusions of law. To the extent that the parties' proposed findings are not contained herein, they are rejected as being either not supported by competent substantial evidence, irrelevant or immaterial to the issues in dispute or as constituting legal conclusions as opposed to factual findings.

FINDINGS OF FACT

1. Upon consideration of the oral and documentary evidence adduced at the hearing, as well as the parties' stipulated facts, the following facts relevant to these proceedings are found:

   
   

2. Upjohn operates a number of home health agencies throughout the State of Florida, as well as in other states.

   
   

3. Prior to 1975, a patient served by a proprietary home health agency could not obtain reimbursement under the Medicare program. Such agencies were not able to obtain a Medicare "provider number" unless they were licensed under State law. In 1975, the Legislature enacted the Home Health Services Act, Chapter 400, Part III, Florida Statutes, providing for the licensure of proprietary home health agencies. On July 1, 1977, the "establishment of a new home health agency" became one of the projects subject to Certificate of Need review. HRS's rules pertaining to Certificate of Need review were amended in October of 1977, to include the "establishment of a new home health agency or a

   new subunit of any agency" as projects subject to review". During the rule adoption process, HRS specifically considered the suggestion that expansions of service areas by existing home health agencies without new facilities be subject to Certificate of Need review. This suggestion was rejected on the belief that such a requirement was not statutorily authorized.

   
   

4. Confusion existed within the various offices of HRS as to whether additional licensure and/or Certificate of Need review as required when an existing home health agency desired to extend the provision of services to other counties without opening a new subunit or other physical facility in the new county. Prior to 1982, officials within the Office of Community Medical Facilities the office responsible for the Certificate of Need program, generally took the position that the mere geographical expansion of services by an existing certificated and licensed home health agency did not require further Certificate of Need review as long as additional physical facilities were not contemplated. For example, in September of 1981, Upjohn was informed by the OCMF that a Certificate of Need was not required for the provision of home health services from its Jacksonville, Duval County, office to patients residing in Nassau, Baker or St. Johns Counties, as long as subunits or other physical facilities were not opened in those counties. The above four counties were all located within the same health service area. On the other hand, the Office of Licensure and Certification generally took the position that each county served must appear on the home health agency license. On occasion, the OLC required home health agencies to build new offices if it was found that an agency was geographically overextending itself in terms of appropriate supervision or quality of care concerns. It appears to have been the policy of the OLC, on most occasions, to defer to the OCMF the determination of whether additional Certificate of Need review was required prior to the issuance of a license listing additional counties or service areas. However, in January of 1980, the Director of the OLC took the position that petitioner's licensed Marion County home health agency could not provide services to Citrus County residents without applying for and obtaining a Certificate of Need, and thereafter having its license extended to operate in Citrus County. The record in the instant proceedings does not reflect that the OCMF was requested, either by the OLC or by Upjohn, to render a specific opinion as to whether additional Certificate of Need review was required for the extension of home health services from Marion County to Citrus County.

   
   

5. In October of 1981, Upjohn requested advice from the OLC as to whether it could provide services from its Broward County office to patients in Palm Beach County. Noting that it was the understanding of the OLC that a Certificate of Need would be required to authorize any expansion of home health services, the OLC referred Upjohn's request to the OCMF. The matter was thereafter referred to the HRS legal staff. James M. Barclay, an attorney with the Office of Health Planning and Development, issued Legal Opinion 82-2 on the issue of whether a Certificate of Need was required before a home health agency, licensed to operate in certain counties within a health service area, could provide services to additional counties within the same health service area. It was Mr. Barclay's opinion that a licensed home health agency could provide services to additional counties within the same health service area without an additional Certificate of Need. The rationale for this opinion as that when the original Certificate of Need review occurred, the review criteria were applied to the entire health service area and thus the original Certificate was evidence of a need within the entire health service area. Based on this opinion, the OLC informed Upjohn that it could not expand its Broward County services to Palm Beach County without Certificate of Need review since the two counties were located in separate health service areas.

6. The Deputy Assistant Secretary for Health Planning and Development, Gary J. Clarke, disseminated the Barclay opinion to the Directors of the Health Systems Agencies. In his cover letter, dated April 7, 1982, Mr. Clarke noted that "the memorandum clarifies existing law; namely, that a home health agency in one county may offer services in an adjoining county without obtaining a CON." Based upon the Barclay opinion and the Clarke cover letter, Upjohn informer its various Florida office managers that its existing home health agencies, though licensed only for a particular county, could deliver services in additional counties within the health service area without the need for further Certificate of Need review.

   
   

7. Subsequent to the Barclay opinion and the Clarke distribution letter, there were changes in the Certificate of Need law, as well as leadership changes within HRS. The former Health Systems Agencies were abolished and replaced with District Councils, local involvement with the Certificate of Need process was virtually eliminated and the "health service areas" were changed to "districts," some with different boundaries. These changes prompted the Director of the OLC, Jay Kassack, to request of the new Deputy Assistant Secretary a clarification of the policy regarding Certificate of Need review for expansion of home health agency service areas.

   
   

8. In order to be consistent with regard to home health agencies and to make clearer to HRS officials, applicants and the public how HRS would be applying the statutes and rules, HRS developed a "home health agency review matrix." Basically, the, review matrix limited geographical expansion of services (without Certificate of need review) to those counties in which the applicant could demonstrate that the criteria for review had been applied by the appropriate reviewing bodies, either the OCMF or the former local Health Systems Agencies. The former OCMF policy, as expressed in the Barclay/Clarke documents, of allowing carte blanche expansion within the health service area once a Certificate of Need had been obtained had thus changed to allowing expansion only when the applicant could demonstrate that the review criteria had been previously and actually applied to the specific county in which expansion was desired. The matrix was developed in February or March of 1983, and was distributed internally within HRS.

   
   

9. Upjohn had several license applications for geographical expansion of services in early 1983. While advised in late March that a "revised ruling" was going into effect, Upjohn had no knowledge of the development of the review matrix. By letter dated April 8, 1983, Upjohn was advised that its license application to expand services from its Pinellas County office to the Counties of Hillsborough, Manatee and Pasco was denied for failure to obtain a Certificate of Need or exemption from review.

   
   

10. By "OPLC Policy Letter No. 33-83" dated April 8, 1983,

    addressed to "All Home Health Agencies" and "Home Health Agency Association," the Director of the OLC, Jay Kassack, gave notice of the OLC position with regard to expansion of services in counties other than those noted on a home health agency license. The addressees were advised that "it is illegal to provide services in any area not covered under your current license." This policy letter was written in direct response to the review matrix.

    
    

11. It was not until May, 1983, that Upjohn became aware of the existence of the review matrix. By letter dated May 5, 1983, the Medical Facilities Consultant Supervisor, Nathaniel Ward, advises counsel for Upjohn that, "we have

    a matrix which we must apply (Exhibit 1) when determining whether a Certificate of Need is required for expansion into the service area."

    
    

12. Upjohn's Marion County home health agency obtained a "statement of need" (the statutory predecessor of the present Certificate of Need) in 1977, and received a license for that agency in 1978 which it has renewed on an annual basis. From and after August, 1982, and in reliance upon the Barclay opinion and the Clarke memorandum, Upjohn extended the provision of home health services, without adding new physical facilities, from its Marion County office into Citrus, Lake and Sumter Counties. These three counties are located within the same "health service area" and "district" as Marion County, but have not been specifically named in either a statement of need, certificate of need or license issued to Upjohn.

    
    

13. Under protest and pursuant to the Kassack policy letter referred to in paragraph (10) above, Upjohn filed an application with the OLC to renew its Marion County home health agency license and to add to said license the counties of Citrus, Lake and Sumter. The OLC issued and renewed the Marion County license from August 1983 to August 1984, but denied Upjohn's request to list Citrus, Lake and Sumter Counties on the face of the license. As the sole ground for denial of the request, the OLC stated that Upjohn had failed to obtain a Certificate of Need or exemption from review for those counties pursuant to the Certificate of Need statutes and rules.

    
    

14. In spite of the OLC's demands that Upjohn cease providing home health services in Citrus, Lake and Sumter Counties, Upjohn continued to provide such services. 0n August 30, 1983, HRS issued an Administrative Complaint seeking to revoke Upjohn's Marion County license, or impose other penalties, on the ground that the Marion County home health agency had been providing home health services in Citrus and/or Lake Counties without a license that lists those counties on its face.

    
    

15. The review criteria of the Certificate of Need law is necessarily geographic intensive in measuring the needs, feasibility, accessibility and availability of alternative services of a particular area. HRS and the local health planning agencies utilize counties and service districts as the geographic unit by which to measure need for health services and facilities. One of the reasons counties are chosen is because population and other demographic data and statistics are readily available and obtainable for such geographical units.

    
    

    CONCLUSIONS OF LAW

    
    

16. Two issues are presented for determination in these consolidated proceedings. First, is Upjohn entitled to obtain licensure to provide home health services in Citrus, Lake and Sumter Counties from its Marion County home health agency? Second, should Upjohn's Marion County home health agency license be revoked or otherwise disciplined because that agency, has been providing services to counties not listed on its license?

    
    

17. Upjohn contends that the extension of home health services from a certificated and licensed agency into an adjoining county within the same health service area or district is not subject to Certificate of Need review as long as new physical facilities are not contemplated. Thus, it is urged that a license to serve such additional counties, if one is required at all, should be issued. Upjohn contends that any contrary policy of HRS is both procedurally and

    substantively invalid and cannot form the basis for either a license denial or an administrative complaint.

    
    

18. HRS contends that its actions in denying the license to Upjohn and in issuing an administrative complaint constitute permissible and correct interpretations of its statutes and rules. The fact that its current policy on what activity is subject to licensure or Certificate of Need review has not been promulgated as a rule does not, HRS urges, constitute a bar to either the license denial or the issuance of a Complaint.

    
    

19. A related rule-challenge proceeding instituted by Upjohn resulted in a Final Order declaring that the Barclay opinion and Clarke memorandum, the review matrix and the Kassack policy letter constituted "rules" within the meaning of Chapter 120, and were invalid because they were not promulgated in accordance with the Administrative Procedure Act. Upjohn Healthcare Services, Inc. v. Department of Health and Rehabilitative Services, DOAH Case No. 83-3335R (October 25, 1984). As indicated in that Order and the cases cited therein, that declaration of invalidity does not, in and of itself, automatically invalidate the agency action which is the subject of these proceedings.

    Instead, the Order in that case serves primarily to dictate the amount and the sufficiency of the proof necessary to justify HRS's actions and policy choices in these individual cases, and perhaps to set the scale upon which fairness and equity may be balanced.

    
    

20. Ordinarily, it is the burden of an applicant to prove that it meets all the statutory and regulatory criteria for licensure. Ordinarily, it is the burden of the regulatory agency to prove that the entity regulated has violated the applicable statutes or regulations prior to the imposition of disciplinary action. When an agency has an applicable, properly promulgated rule on the subject and has acted in accordance with that rule, its action will be clothed with a presumption of correctness which it need not further explicate and defend. On the other hand, when the agency chooses to implement its policy and statutory interpretations on a case-by-case, adjudicatory basis, it is incumbent upon the agency to fully present evidence as to every factual premise and the rationality of each policy choice. When the agency acts in non-rule fashion, there is no presumption of correctness to the action taken, and the evidence presented in support of the agency action is subject to countervailing evidence and argument which is entitled to equal weight. McDonald v. Department of Banking and Finance, 346 So.2d 569 (Fla. 1st DCA 1977); Florida Cities Water Company v. Florida Public Service Commission, 384 So.2d 1280 (Fla. 1980); Anheuser-Busch, Inc. v. Department of Business Regulation, 393 So.2d 1177 (Fla. 1st DCA 1981); Barker v. Board of Medical Examiners, 428 So.2d 729 (Fla. 1st n- CA 1983); City of Tallahassee v. Florida public Service Commission, 433 So.2d

    505 (Fla. 1983); Florida Public Service Commission v. Indiantown Telephone Systems, Inc., A35 So.2d 892 (Fla. 1st DCA 1983); and City of Delray Beach v. Department of Transportation and Palm Beach County, 9FLW 1961, September 17, 1984 (Fla. 1st DCA 1984)

    
    

21. The statutory bases for the actions taken by HRS in these consolidated proceedings are found in the "Health Facilities and Health Services Planning Act" and in the "Home Health Services Act." A Certificate of Need is required for "the establishment of a new home health agency. Section 381.494(1)(f), Florida Statutes. Any agency providing home health services must additionally obtain a license, and a license may not be issued to a home health agency which has not received a Certificate of Need. Sections 400.467 and 400.471, Florida Statutes. From these statutory provisions, it can be seen that the Legislature has clearly mandated that a new home health agency needs both a Certificate of

    Need and a license, and that a license cannot be obtained without a Certificate of Need. What is not clear from a review of the statutory language is whether an existing certificated and licensed home health agency, without adding new physical facilities, may geographically extend the services it provides in the absence of an additional Certificate of Need and/or an additional or amended license.

    
    

22. It is the current practice of HRS to require Certificate of Need review for geographical expansions of services by home health agencies, even in the absence of new physical facilities, when the specific area into which expansion is sought has not been subject to previous review on the part of an applicant. The rationale behind this practice finds support in the record of these proceedings and thus justifies the action of HRS in denying Upjohn's license to add additional counties to its Marion County home health agency license.

    
    

23. It is incumbent upon an applicant for a Certificate of Need to specify in its application the geographical territory it desires to serve. The applicable criteria are then applied to that desired service area and the application is either granted or denied. In this case, Upjohn originally requested and was granted permission to serve Marion County in 1977. A license to operate a home health agency in Marion County was thus issued. Upjohn's position that it should now be entitled to serve new areas, never the subject of previous review, is untenable in light of the stated purposes of the Certificate of Need laws. The legislative intent in requiring Certificate of Need review was to provide for the development of "a planning process to define service needs in specific geographic areas," to eliminate "unnecessary duplication of health services" and to provide "services which are not currently available or Which are insufficiently provided within the community." Section 381.493(2), Florida Statutes. (Emphasis supplied). To permit a provider, once it has received a Certificate of Need to provide services in a specified area, to later serve any other area it desires would frustrate the very purposes and intent of the regulatory scheme. It would allow home health agencies licensed in one county in this state to expand, without new facilities or subunits, into any other county without having to be reviewed against the criteria of seed for such services. It would also make little sense to require a "new" provider to undergo the Certificate of Need review process, as clearly mandated by the Legislature, when existing agencies could expand their service territories absent the review process. The need criteria must he measured with reference to a geographical area and "with reference to existing services in that area. The present HRS policy of requiring additional Certificate of Need review when a provider seeks to extend its services into areas never before reviewed finds support in both logic and law. It is thus concluded that Upjohn is not entitled to licensure to provide home health services in Citrus, Lake and Sumter Counties without further Certificate of Need review and approval for those counties.

    
    

24. The fact that HRS previously had a different policy with regard to the expansion of home health services within the same health service area or district is not a bar to a change in that policy resulting in the denial of a license. An applicant is always subject to an agency's interpretation and application of the governing statutes and rules when rendering a determination as to whether a license should be granted in any particular factual situation. An agency is entitled to continually develop and refine its policy through orders and the adjudicatory process. However, the effect of utilizing non-rule proceedings to develop and crystallize agency policy and requirements should be closely reviewed when it appears that the fairness of the proceeding or the correctness of the action may be impaired. Anheuser-Busch, Inc. v. Department

    of Business Regulation, supra. Thus, while it may not be unfair or incorrect for a health care provider to be denied a license on the basis of a new agency policy choice, it may be patently unfair and erroneous to impose against a licensee a penalty on the basis of such a changed policy choice, particularly where the licensee relied upon prior policy statements when engaging in the activities which form the basis for the disciplinary action.

    
    

25. The action sought to be taken by an agency is important in determining when the adjudicatory process, as opposed to the rule making process, is appropriate. Likewise, the type of agency process employed is important in determining whether a penalty should be imposed for conduct alleged to be violative of the agency's statutes, standards or rules.

    
    

26. Here, HRS is seeking, under the purported authority of Section 400.474, Florida Statutes, to revoke or take other disciplinary action against Upjohn's Marion County license for providing home health services in other counties not listed on that license. That Upjohn engaged in such conduct is not in dispute.

27 Section 400.474, Florida Statutes, authorizes HRS to deny, revoke, or suspend a license or impose an administrative fine for

"violation of the provision of this act or of any minimum standards or rules promulgated hereunder."

Nowhere in the statutes or promulgated rules is there a requirement that a home health agency have a license listing each county in which it operates. Thus, there has been no violation of any statute or promulgated standard or rule upon which' to impose the disciplinary action authorized by Section 400.474, Florida Statutes.

1. Licensing laws are penal in nature and are to be strictly construed against the agency. This principle of law is further embodied in Section 775.021, Florida Statutes. HRS is attempting to act, not under the authority of Section 381.495, Florida Statutes, but under the authority of Section 400.474, Florida Statutes. As such, it may not utilize as the basis for prosecution actions prohibited only by non-rule policy. This result is particularly mandated by a later statutory provision found in Chapter 400, Part III. Section 400.504, Florida Statutes, provides that home health agencies in operation at the time of promulgation of any applicable rules or standards may be given a reasonable period of time, not to exceed one year from the date of publication, within which to comply with such rules and standards and obtain a license.

   
   

2. To hold differently would be particularly unfair under the facts established on this record. The agency's tolerance of the conduct with which Upjohn is charged has ranged from allowance, to confusion and inconsistent positions, back to allowance, again to confusion when the statutory law changed and now to disallowance absent an affirmative demonstration of prior Certificate of Need review of the area sought to be served. All such agency shifts in policy have been without the benefit of rule-making procedures or legislative direction. Between 1977 and 1983, Upjohn made numerous attempts to learn of the agency's position and practice regarding the issue of geographical extensions of services without additional physical facilities, and received inconsistent answers throughout the years. Between 1977 and 1983, HRS failed to subject it various positions and policy choices to the scrutiny and rigors of the rule- making process. Instead, it chose to dispose of the issue on a piecemeal,

individual basis while attempting, at the same time, to develop and enforce an industry-wide and agency solution to the problem. To expect the individual providers to ascertain with certainty what would constitute a violation of the licensing or Certificate of Need laws would be to impose a higher standard upon the governed than the agency chose to impose upon itself.

RECOMMENDATION

Based upon the findings of fact and conclusions of law recited herein, it is RECOMMENDED that

1. Upjohn's application to add Citrus, Lake and Sumter Counties to its Marion County license to operate a home health agency be DENIED until such time as a Certificate of Need is obtained for such services (Case No. 83-3059), and

   
   

2. The Administrative Complaint dated August 30, 1983, be DISMISSED (Case No. 83-3248).

Respectfully submitted and entered this 25th day of October, 1984, in Tallahassee, Florida.

DIANE D. TREMOR

Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 25th day of October, 1984.

COPIES FURNISHED:

James D. Wing, Esquire Barbara R. Pankau, Esquire

P.O. Box 3239 Tampa, FL 33601

Robert P. Daniti, Esquire

(Former) Assistant General Counsel 1323 Winewood Blvd.

Tallahassee, FL 32301

David Pingree Secretary

Department of Health and Rehabilitative Services

1323 Winewood Blvd.

Tallahassee, FL 32301

Docket for Case No: 83-003059

Orders for Case No: 83-003059