STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
A PROFESSIONAL NURSE, INC., A ) FLORIDA CORPORATION, )
)
Petitioner, )
)
vs. ) Case No. 85-1509
) STATE OF FLORIDA, DEPARTMENT OF ) HEALTH AND REHABILITATIVE )
SERVICES, )
)
Respondent. )
)
and )
) ST MARY'S HOSPITAL and BETHESDA ) MEMORIAL HOSPITAL, )
)
Intervenors. )
) ST LUCIE HOME HEALTH AGENCY, ) INC., )
)
Petitioner, )
)
vs. ) Case No. 85-1511
) STATE OF FLORIDA, DEPARTMENT OF ) HEALTH AND REHABILITATIVE ) SERVICES, and BUCKHEAD RIDGE ) NURSING SERVICE, )
)
Respondents. )
)
RECOMMENDED ORDER
Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, William J. Kendrick, held a public hearing in the above styled cases on October 28-30, 1985, in Lake Worth, Florida.
APPEARANCES
For A Professional Thomas H. Beason, Esquire Nurse, Inc.: MOYLE, FLANIGAN, KATZ,
FITZGERALD & SHEEHAN, P.A.
118 North Gadsden Street Suite 100
Tallahassee, Florida 32301
For St. Lucie James W. Linn, Esquire
Home Health John D. C. Newton, II, Esquire Agency, Inc.: CARSON & LINN, P.A.
Cambridge Center
253 East Virginia Street Tallahassee, Florida 32301
For Buckhead George N. Meros, Esquire Ridge Nursing CARLTON, FIELDS, WARD,
Services: EMMANUEL, SMITH & CUTLER, P.A.
401 First Florida Bank Building Tallahassee, Florida 32301
For Department of William L. Hyde, Esquire Health & CULPEPPER, PELHAM, TURNER &
Rehabilitative MANNHEIMER, P. A. Services: 300 East Park Avenue,
Tallahassee, Florida 32301
For St. Mary's Segundo Fernandez, Esquire Hospital and OERTEL & HOFFMAN. P. A. Bethesda 2700 Blair Stone Road
Memorial Suite C
Hospital: Tallahassee, Florida 32301 PRELIMINARY STATEMENT
By petition filed May 13, 1985, St. Lucie Home Health Agency, Inc., challenged the Department of Health and Rehabilitative Services' (Department's) proposed grant of Certificate of Need (CON) number 3482 to Buckhead Ridge Nursing Services (Buckhead) to establish a home health agency to service Okeechobee County (District IX). By petition filed May 13, 1985, A Professional Nurse, Inc., (APN) challenged the Department's denial of its application for CON number 3492 to establish a home health agency in Palm Beach, Martin, Okeechobee, St. Lucie and Indian River Counties (District IX). On July 9, 1985, these cases were consolidated.
Intervenors, St. Mary's Hospital and Bethesda Memorial Hospital (Intervenors) opposed the issuance of CON 3492 to APN, but did not oppose the issuance of CON 3482 to Buckhead.
At hearing APN called no witnesses and offered no exhibits. Buckhead called, as witnesses: Irene Satterley, accepted as an expert in nursing; Edward O. Holloway, accepted as an expert in health planning and the health care needs of persons in District IX; James C. Parmer, Jr., accepted as an expert in home health care operations, management and financial feasibility; Susan Skinner; Arnie Strickland-Spencer; Erna J. Barnes; Cedell Black; Daniel Delegall, J .; Terry Cooper; Dorothy Cox; Gene Nelson, accepted as an expert in health planning and certificate of need review; and, Muzzafar Husain, accepted as an expert in medicine. Buckhead Exhibits 1-7 were received into evidence.
St. Lucie called, as witnesses: Arthur H. Fuss; Francis M. Winston., accepted as an expert in home health nursing; Irene- Satterley; and Daniel J. Sullivan, accepted as an expert in health planning, financial feasibility and needs analysis. St.
Lucie Exhibits 2 and 4 were received into evidence.
The Department and Intervenors called Elizabeth Dudek, accepted as an expert in health care planning as applied to the CON review process, as a witness. Department Exhibits 1-5 were received into evidence.
The last volume of the transcript of hearing was filed February 10, 1986. The parties waived the requirement set forth in Rule 28-5.402, Florida Administrative Code, that a recommended order be entered within 30 days after the transcript is filed.
The Department, Buckhead, St. Lucie, and Intervenors have submitted proposed findings of fact, and they have been reviewed and considered. A ruling has been made on each proposed finding in the appendix to this Recommended Order.
PROCEDURAL MATTERS
At the commencement of hearing, the Hearing Officer considered the motion of Intervenors, St. Mary's Hospital and Bethesda Memorial Hospital (Intervenors) for the imposition of sanctions against Petitioner, A Professional Nurse, Inc., (APN), for its failure to comply with various discovery orders entered during the course of these proceedings. The motion for sanctions was granted and APN was prohibited from calling witnesses or offering exhibits. As discussed infra, the totality of the circumstances, combined with APN's inability to offer any viable alternative, necessitated the imposition of these sanctions.
These cases arose by virtue of the Department's decision to grant or deny certain applications for a CON to establish new home health agencies in District IX. Initially nine challenges were filed and consolidated for comparative review DOAH Case Nos. 85-1332, 85-1493, 85-1494, 85-i497, 85-1500, 85-1509, 85-
1511, 85-1649, and 85-1955. A final hearing date of October 28-
November 1, 1985, was established by order of July 24, 1985.
In light of the complexity involved in the comparative review of nine applications, a prehearing conference was held on August 8, 1985, to establish an effective prehearing schedule to promote efficient discovery and an orderly final hearing. By order of August 8, 1985, the following prehearing schedule was established:
All parties shall exchange preliminary witness lists, exhibit lists, and CON updates, not later than September 11, 1985.
All parties shall exchange final witness lists, exhibit lists, and CON updates, not later than September 30, 1985.
All discovery shall be commenced so that it is completed by October 11, 1985. No discovery shall be had subsequent to October 11, 1985, absent further order of the Hearing Officer.
The prehearing stipulation shall be filed not later than October 18, 1985.
With the exception of HRS, which is granted thirty (30) days within which to respond to discovery requests, all other parties shall respond to discovery requests within twenty-one (21) days.
On September 13, 1985, Intervenors propounded interrogatories and a request for production of documents to APN. As of October 16, 1985, no response had been filed, and APN had not submitted a preliminary of final witness and exhibit list as required by the prehearing order. Accordingly, Intervenors moved to compel discovery and compliance with the prehearing order. On October 18, 1985, the Hearing Officer entered an order directing APN to comply with the discovery requests within 5 days and denied the motion for entry of an order compelling compliance with the prehearing order. APN never fully complied with the
order of October 18, 1985, and did not submit timely witness and exhibit lists or a prehearing stipulation.
On October 15, 1985, Associated Home Health Agency, Inc., d/b/a Coastal Home Health Services (Coastal), Petitioner in Case No. 85-i555, filed a motion to dismiss APN's petition, or to bar it from presenting testimony or exhibits for its failure to comply with the prehearing order. Coastal averred that it had, because of APN's noncompliance, been precluded from undertaking any meaningful discovery of APN's competing application. On October 23, 1985, Intervenors joined in Coastal's motion. APN filed no response to the action to dismiss, and sough no relief from the deadlines established by the prehearing order. APN's witness list and exhibit list were filed finally on October 17, 1985, six days after the close of discovery.- That list named one witness and listed nine exhibits. On October 21, 1985, seven days before the scheduled final hearing, APN filed an "addendum" to its witness list, naming three more witnesses.
On Friday, October 25, 1985, a prehearing conference was held to review the prehearing stipulations, narrow the issues, dispose of pending motions, and otherwise provide for an orderly hearing. Although APN had been represented by Pamela Tomlinson Dunston, Esquire, from the commencement of these proceedings, and she still appeared as counsel of record, Thomas H. Beason, Esquire, entered an appearance on behalf of APN at the prehearing conference. During the course of the conference, it was disclosed that APN had not filed a prehearing stipulation as required by the prehearing order.
While it was APN s responsibility to prepare a prehearing stipulation, Intervenors prepared a joint prehearing stipulation and were assured by Ms. Dunston that it was acceptable and would be signed. Intervenors filed the stipulation on October 23, 1985, as required by the prehearing order, without Ms. Dunston's signature. At the prehearing conference, APN's new counsel rejected the stipulation, and the Hearing Officer deferred ruling on the motions for sanctions until hearing.
The goal of a prehearing order and the rules of discovery are "to eliminate surprise, to encourage settlement, and to assist in arriving at the truth". Spencer v. Beverly, 307 So. 2d 461, 462 (Fla. 4th DCA 1975), cert. denied, 314 So. 2d 590 (Fla. 1975). Accord, Binger v. King Pest Control, 401 So. 2d 1310 (Fla. 1981). APN's failure to comply with the prehearing discovery order, and its failure to respond to discovery, precluded the parties from conducting any meaningful discovery, jeopardized the fairness of the proceedings, and disrupted the orderly trial of the case. The premises considered, the imposition of sanctions prohibiting APN from calling witnesses or
offering any exhibits was necessary. See: Binger v. King Pest Control. supra; Section 120.58(1)(b), Florida Statutes, Rule 1.380, Florida Rules of Civil Procedure.
FINDINGS OF FACT
On September 17, 1984, Buckhead Ridge Nursing Service (Buckhead) applied with the Department of Health and Rehabilitative Services (Department) for a certificate of need (CON) to establish a Medicare-certified home health agency in Okeechobee County (a part of District IX). Buckhead's application, identified as CON Action No. 3482, was approved by the Department on February 15, 1985. St. Lucie Home Health Agency, Inc. (St. Lucie), filed a timely petition for a formal administrative hearing to challenge the proposed grant of CON 3482 to Buckhead.
Buckhead is a partnership composed of Courtland and Irene Satterley. It was acquired in 1981, and is licensed to provide private duty nursing services in Okeechobee County.
St. Lucie is an existing home health provider in District IX, and is licensed to serve Martin, St. Lucie, Indian River, and Okeechobee Counties. St. Lucie has been Medicare certified since 1976, and has been a Medicaid provider since 1978. With the exception of St. Lucie, no other home health agency is currently Medicare certified in Okeechobee County.
Medicare/Medicaid Considerations
Medicare is a federally-funded health insurance program for the elderly and certain disabled persons. Medicare provides reimbursement for skilled nursing, physical therapy, speech therapy, home health aide, and medical social services. To qualify for reimbursement a provider must serve Medicare eligibles who: (a) are referred by order of a physician; (b) are homebound; (c) require skilled care; and (d) require skilled services only on a part-time, intermediate basis. Medicare does not reimburse for custodial care (such as provided by a nursing home or adult congregate living facility) or for acute care services.
Medicare presently reimburses home health agencies on a cost reimbursement basis, subject o an aggregate cost limitation or cap. A cap is calculated for each service; i.e.: skilled nursing, home health aide, or physical therapy. As long as the Medicare home health agency does not exceed the cap, it is paid for all of its costs for allowable expenditures. If it exceeds the cap, its reimbursement is limited to the established cap.
In contrast to Medicare, the Medicaid program provides reimbursement to providers only for skilled nursing services and home health aide services to patients who meet strict income and asset limitations. No reimbursement is provided for physical therapy, medical supplies or ancillary costs of providing reimbursable services. Instead of the cap system used by Medicare, only a fixed fee determined in advance is provided for Medicaid services. Currently, Medicaid reimburses at a fixed rate of $16.00 per visit by a registered nurse and $9.00 per visit by home health aides.
The Buckhead Proposal.
Buckhead Ridge proposes to provide skilled nursing care, physical therapy, speech therapy, medical social services, home health aide services, I.V. therapy, chemotherapy, pharmaceutical and nutritional guidance, medical supplies and durable goods, to residents of Okeechobee County. Specialized services for patients will be provided under an agreement between Buckhead and
H. H. Raulerson, Jr. Memorial Hospital of Okeechobee. Should Buckhead receive a CON it will contract with the hospital to provide personnel for physical therapy, speech therapy, respiratory therapy, laboratory services, medical supplies, durable medical equipment, pharmaceutical and nutritional guidance, counseling and "high tech" services such as infusion pumps and intravenous solutions. Under the agreement, Buckhead will be obligated to pay the hospital for such services, regardless of whether Buckhead is ultimately paid or not, on a cost-plus basis.
Buckhead projects that it will make 3,096 visits in its first year of operation. Of those visits, 2,631 were projected to be Medicare visits (85%), 325 were projected to be Medicaid visits (10.5%), and 140 visits were identified as "other"-- insurance, private pay and indigent (4.5%). Buckhead proposes a uniform charge of S50 per visit, and expects to be reimbursed for costs for Medicare-related visits and on a fixed, fee basis for Medicaid visits.
Financial feasibility:
Buckhead's balance sheet, as of September 7, 1984, lists total assets of S78,065, and total liabilities of S37,214. Its assets include current assets of S21,019 (cash on hand of S15, 000 and accounts receivable of S5,019) and fixed assets (automobile and office equipment) of S8,046. Buckhead's remaining asset, agency goodwill, was valued at $50,000.
As a general rule, goodwill is booked at its historic value, the difference between what was paid for a business and
the value of its assets, and amortized over time. In this ease, contrary to accepted accounting principles, Buckhead valued its goodwill at $50,000 based on the total purchase price of S42, 000 paid to acquire the business, plus S8, 000 to account for "inflation" since its acquisition. Buckhead's treatment of goodwill in this fashion resulted in an inflated picture of its fiscal integrity. Excluding goodwill as an asset, Buckhead's liabilities exceed it assets by a minimum $9,152.
Buckhead has identified Courtland and Irene Satterley as the sole source of funding for this project. The Satterley's net worth statement lists current assets of $70,848 (cash in bank, $15,000; IRA, S14,000; and "Networth-Buckhead, "$41,848), and current liabilities of $10,000. The Conclusion of "Networth- Buckhead" (agency goodwill) as a current asset does not conform with generally accepted accounting principles. The Satterley's net current assets are $19,000.
In addition to current assets, the Satterley's net worth statement lists fixed assets totaling $94, 000 (boat,
$21,000; truck, $11,000; and, home $62,00), and long term liabilities of $37,800 (boat loan, &7,000; truck loan, $2,000; and mortgage, $28,800). Combining the Satterley's net fixed asset value of $56,200 with their net current asset value, results in a net worth of $75,200. The liquidity of the Satterley's fixed assets, as a source of funding for the project, was not shown, however.
To commence operations, excluding staffing costs, Buckhead estimates it will require $5, 000. The evidence establishes, however, that start-up costs of $15-18,000 may be reasonably expected.
While underestimating its start-up costs, Buckhead over estimated the profitability of its proposal. Buckhead projected a net profit of $7,067 for its first year of operation, and
$14,347 for its second year. This net profit was based, however, on the assumption that each non-Medicare visit (including Medicaid and indigent care) would generate S50.00 in revenue.
Buckhead's assumption's without rational basis, is contrary to the evidence, and is rejected.
Buckhead's patient mix for the first year of operations was projected to be 85% Medicare, 10.5% Medicaid, and 4.5% other (private pay, insurance, indigent). Based on this patient mix the total contractual allowance, including Medicaid, would be
$42,157 in year one and $82,187 in year two. On this basis, Buckhead would experience a net less of $6,753 in its, first year of operation and $11,215 in its second year, without consideration of uncompensated visits to indigents or bad debts
To improve the financial profile of its project, Buckhead offered the testimony of its expert, James C. Parmer, Jr., that certain expense items appearing on its proforma statement of revenue and expenses could be reduced or deleted to make the venture profitable. Mr. Parmer opined that since Buckhead had been able to secure a lease for $250 per month, the line item for rent should be reduced by $6,000 per annum. He further testified that it was his "understanding" that Ms. Satterley would omit either the nurse's position or the executive director's position, and thereby reduce first year salary expenses by either $18,720 or $24,000. Mr. Parmer's "understanding" is uncorroborated hearsay, contrary to Ms. Satterley's testimony, and must be rejected. Reducing Buckhead's expenses by $6,000 per annum still leaves it with a net loss for the first two years of operation.
Buckhead's statement of revenue and expenses also seriously underestimated its non-salaried expenses. For contract services Buckhead estimated $8,400; a more realistic figure would be $11,640. Buckhead omitted malpractice and personal liability insurance, as well as fire and general property insurance. Malpractice insurance alone would run between $5,000 to $10,000 per year. Buckhead made no allowance for workers' compensation or unemployment insurance, and underestimated the cost of its medical supplies by at least S1,200. Had Buckhead given consideration to these cost items, its net loss for the first two years of operation would have significantly exceeded the loss which is reflected from its statement of revenue and expenses. Buckhead's project was not shown to be financially feasible on either an immediate or long term basis.
Need Considerations.
At the hearing in this matter both the Department and Buckhead presented numeric need methodologies which they maintained demonstrated a need for the proposed project. The Department used a variant of its proposed Rule 10-5.11(14)(a), which was found to constitute am invalid exercise of delegated legislative authority by Hearing Officer Adams on March 12, 1986. Home Health Services and Staffing Association, et al. v. State of Florida, Department of Health and Rehabilitative Services, DOAH Case No. 85-1377R.
The Department's methodology has three basic components. First, a figure representing the population theoretically in need of future Medicare home health agency services is derived by multiplying projected population figures for potential Medicare home health patients in a district (those over the age of 65 and disabled persons) by constants based upon
"historic use rates" for Medicare home health services statewide. The Department has selected the 1982 Medicare use rate figures as a standard to project the population in need of the service. The use of the l982 Medicare use rate figures was found to be arbitrary and capricious by Hearing Officer Adams, and the Department has done nothing in this proceeding to exculpate its use of those figures.
The second component of the Department's methodology involves the calculation of the number of future Medicare home health visits for a given district. The projected population in need of Medicare home health visits, as previously determined, is multiplied by a figure which is supposed to represent the average number of visits to be delivered per patient. The Department's methodology employs the figure 31.5 as the average number of visits per patient; however, the Department failed to enunciate a rational basis for its selection of the figure 31.5..
After a projected figure for Medicare home health visits for a given district is obtained, the third component comes into play. This involves deriving the number of agencies; "needed" by dividing the total number of projected visits by what the Department's methodology calls the "S" factor, or the "number of expected Medicare visits per year, per agency." "S" consists of the arbitrary figure of 9,000, denominated "base agency size", plus an additive factor consisting of the projected total district visits divided by 9,000, plus a factor denominated as "C". "C" is pegged by the Department's methodology at 270 for applications filed in 1984. Under the Department's methodology, "S" cannot exceed 21,000. For District IX the assigned "S" total is 21,000, due to the large number of visits delivered in the district.
The Department failed to establish any factual basis for its conclusion that a base agency size of 9,000 visits and a maximum agency size of 21,000 visits was reasonably related to cost efficiency and effectiveness. Accordingly, the Department failed to enunciate a rational basis to support its "S" factor. The Department further failed to enunciate a rational basis to support its "C" factor.
Buckhead outlined a different variant of the methodology contained in the proposed rule to create a mathematical "need" for a new Medicare-certified home health agency in Okeechobee County. Buckhead utilized a 1983 use rate for Medicare services and, rather than applying the methodology
14 to the district as a whole, applied the methodology to each individual county in the district. In this process, "S" factors were calculated for each county rather than the district.
In its initial step, Buckhead's methodology resulted in a total need greater than the number derived when the methodology was applied to the district as a whole. These inflated county "need" figures were then compared with the larger district need (which under Buckhead's methodology was the sum of the county "needs") to arrive at a county's percentage of the district need. Following this, each county's percentage of the inflated district need was factored to the smaller district need obtained by applying the methodology to the district as a whole. Through these manipulations, Buckhead was able to demonstrate, mathematically, a gross need for .64 Medicare home health agencies in Okeechobee County.
Both the Department's and Buckhead's methodologies suffer the same deficiencies. While each methodology can be manipulated to demonstrate a mathematical need, the formulas are based on invalid assumptions and do not consider the number of visits provided by existing agencies.
While the methodologies employed by the Department and Buckhead do not establish a legitimate numeric need, the evidence does establish a need for 6,000 Medicare visits in Okeechobee County in two years. The evidence establishes, however, that St. Lucie is well able to satisfy this demand.
Availability and Adequacy of Like and Existing Health Services.
St. Lucie is the existing provider of Medicare home health services in Okeechobee County. St. Lucie has an office in Okeechobee which is open from 8:30 a.m. to 5:00 p.m. The office is currently staffed with one full-time registered nurse, one licensed practical nurse, and one full-time health aide. These personnel serve the Okeechobee County area exclusively; however, all clerical support and billing for the Okeechobee office is performed through St. Lucie's main office in Port St. Lucie.
In addition to its staff in Okeechobee County, St. Lucie's main office staff also perform services in Okeechobee County. These personnel include registered nurses, licensed practical nurses, speech therapists, physical therapists, certified nurses aides, and medical social workers. St. Lucie also provides a wide range of "high-tech" nursing services including I.V. therapy and direct stomach feeding.
Buckhead asserts, however, that the quality of care offered by St. Lucie, as well as the availability of its services to residents of Okeechobee County, is lacking. While there is evidence of an availability problem, the evidence fails to support the conclusion that the home health services delivered by St. Lucie in Okeechobee County are deficient.
30 With respect to availability, the evidence establishes that St. Lucie does not provide services during the evenings or on weekends, or during holidays. This gap in services has caused problems for some residents of Okeechobee County and has resulted in rehospitalizations that might not otherwise have occurred.
St. Lucie's inaccessibility has also caused the related problem of forcing some longer hospital stays. To solve this accessibility problem, Buckhead averred that it, as a locally based home health agency, would provide services 24 hours a day, seven days a week, to residents of Okeechobee County.
Buckhead also suggests that St. Lucie's failure to offer custodial care causes a fragmentation of services which would be ameliorated if Buckhead were certified. Presently, if a homebound person requires both Medicare-eligible care and custodial care, those services are fragmented between St. Lucie and another nursing service. This fragmentation impedes the continuity of patient care.
Although the evidence does show an availability problem in Okeechobee County because of St. Lucie's business hours, and a fragmentation between Medicare-eligible care and custodial care, the significance of these problems was not shown to be so acute as to warrant the certification of Buckhead's proposal in the face of a finding of no need and lack of financial feasibility.
Finally, Buckhead suggests that the peculiar nature of Okeechobee County, and the fact that St. Lucie's parent office is located some 40 miles from Okeechobee, lends additional support to its application. While Okeechobee County is a rural and isolated county, the record shows that St. Lucie has, on balance, successfully met its needs.
Access of Indigent and Medicaid-Eligible Persons to Existing Home Health Services.
Okeechobee is one of the most impoverished areas in Florida. In 1985, Okeechobee ranked 56th out of 67 counties in per capita income, 57th in medium effective buying income per household, 35th in families living below the poverty level, and 61st in its unemployment rate. An immediate and substantial need exists for additional home health services to indigent and Medicaid-eligible residents in Okeechobee County.
St. Lucie currently provides 1% to 2% of its services to indigents. The records of the Florida Medicaid Office establish that for the preceding year, St. Lucie performed only
$1, 672 in Medicaid services in its four-county area.
Juxtaposed with St. Lucie's service to the indigent and Medicaid-eligible population, the evidence establishes that Buckhead has traditionally derived the bulk of its income from serving this class of patient. The primary source of Buckhead's income is derived from a contract with the Okeechobee County Council on Aging (Council). Under the terms of that agreement Buckhead receives $7.00 per unit of service (one hour visit). As of October 17, 1985, Buckhead had received $41,235.90 for the calendar year 1985, under its agreement with the Council. The balance of Buckhead's income is derived from private pay, insurance, and through Ms. Satterley Medicaid.
Ms. Satterley, the principal operator of Buckhead, is licensed as an individual Medicaid provider. 18 As such, Ms. Satterley is reimbursed $16.00 per visit for providing skilled nursing services to Medicaid eligible persons. During the preceding year, Ms. Satterley performed $22,624 of Medicaid work, the seventh highest in Florida.
Since Ms. Satterley is an individual Medicaid provider, Medicaid will not reimburse her, or Buckhead, for services performed by home health aides or licensed practical nurses. Should Buckhead receive its Medicare certification, however, it would qualify for Medicaid licensure and, if granted, be eligible for reimbursement for services rendered by home health aides and licensed practical nurses. The grant of the subject CON to Buckhead would, therefore, permit it to receive reimbursement for treating Medicare eligible persons and, ostensibly, increase the availability of services to Medicaid eligible persons.
While Buckhead relied heavily on the fact that the bulk of its current income was derived from its contract with the Council on Aging and Medicaid to support its "committment" to serve the impoverished, the evidence establishes that, if licensed, the nature of Buckhead's practice will dramatically change.
Buckhead projects that it will make 3,096 visits in its first year of operation. Of those visits, 2,631 were projected to be Medicare visits (85%), 325 were projected to be Medicaid visits (10.5%), and 140 visits were identified as "other insurance, private pay and indigent (4.5%). At hearing, Buckhead agreed that its CON be conditioned on its agreement to provide 10% of its services to Medicaid eligible persons and indigents, an insignificant change from its initial proposal. Accordingly, if certified, Buckhead's service to the Council on Aging will be eliminated or severely curtailed and its service to Medicaid- eligible persons will decrease from 1,414 visits to a maximum of
310 visits; hardly evidence of a "commitment" to serve the impoverished.
Buckhead also asserts that its record of service to the indigent population of Okeechobee County should be considered in evaluating its application; however, apart from relating a few instances of indigent care, it offered no evidence of the magnitude of its indigent services, nor did it agree to perform any established rate of service to the indigent population. Rather, Buckhead agreed to dedicate 10% of its visits to
Medicaid-eligible persons and indigents. Such assurance is not a guarantee of indigent care.
Other Considerations
Buckhead personnel made 24-25 visits to Medicare eligible persons in each of the last two years. Buckhead projects 2631 Medicare visits in its first year of operation and 4,530 Medicare visits in its second year. There is no substantial evidence in the record that the pool of Medicare eligible patients in Okeechobee County is significantly underserved. Therefore, if Buckhead is certified it will need to attract patients away from St. Lucie to reach its projections. This will have an adverse financial impact on St. Lucie.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties to, and the subject matter of, these proceedings.
APN's Application.
As the applicant, it was APN's burden to establish its entitlement to licensure. Florida Department of Transportation
v. J.W.C. Co., 396 So. 2d 778 (Fla. 1st DCA 1981). As no evidence was offered to support APN's application, APN has failed to sustain its burden of proof, and its entitlement to licensure.
Buckhead's Application.
St. Lucie has standing as a party to challenge the proposed grant of CON 3482 to Buckhead. St. Lucie is an existing Medicare home health agency providing like and existing health care services in the same geographic service area which Buckhead seeks to serve, and its continued financial feasibility could have been impacted by Buckhead's proposal. Collier Medical Center, Inc., v. Department of Health and Rehabilitative Services, 462 So. 2d 83 (Fla. 1st DCA 1985).
Applicable statutory criteria for the evaluation of Buckhead's CON application are contained in Section
381.494(6)(c), Florida Statutes. The parties have stipulated that, with the exception of the provisions of Sections 381.494(6)(c) 1, 2, 8, 9, and 12, Florida Statutes, Buckhead's application meets all applicable statutory criteria.
Buckhead has failed to establish that there is any unmet need for Medicare reimbursable home health services in Okeechobee County, or that the availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization or adequacy of St. Lucie's existing health care services warrant the issuance of an additional CON. Section 38l.494(6)c)1 and 2, Florida Statutes.
Buckhead further failed to establish that it had sufficient liquid assets available, or access to subsidies, to fund both the start-up costs and the losses which are projected for its first two years of operation. The project was not shown to be financially feasible on either an immediate or long-term basis. Section 381.494(6)(c)8 and 9, Florida Statutes.
While Buckhead did establish that it could provide some expanded health services to residents of Okeechobee County, such benefit fails to outweigh a lack of need and a lack of financial feasibility. On balance, Buckhead has failed to establish its entitlement to licensure.
Based on the foregoing Findings of Fact and Conclusions of, Law, it is
RECOMMENDED that the applications of A Professional Nurse, Inc., and Buckhead Ridge Nursing Service be DENIED.
DONE AND ENTERED this 25th day of June, 1986, at Tallahassee, Florida.
WILLIAM J. KENDRICK, Hearing Officer Division of Administrative Hearings The Oakland Building
2009 Apalachee Parkway
Tallahassee, Florida 32399
(904) 488-9675
Filed with the Clerk of the Division of Administrative Hearings this 25th day June, 1986.
ENDNOTES
1/ In all nine challenges were filed and consolidated for comparative review. The transcript of hearing bears Case No. 85- 1511, and consists of Volumes I, II, III, V and VI, and a partial transcript of the proceedings of October 30, 1985.
2/ Buckhead's Exhibit 5, it's certificate of need application, was admitted over St. Lucie's hearsay objection. To the extent the application contains material which corroborates other evidence it may be considered; however, to the extent the materials were uncorroborated by other evidence, it may not form the basis of any finding of fact. Section 120.58(1)(a), Florida Statutes.
3/ Department Exhibit 1, the application of APN for CON #3492, was admitted over Intervenors hearsay objection for the limited purpose of establishing that APN had filed an application, and not for its truth. Department Exhibit #3 was admitted for the limited purpose of demonstrating what action the Department proposed to take on the various applications, and not for the truth of the matters which formed the predicate for its proposed action.
4/ During the course of these proceedings Case Nos. 85-1493, 85- 1494, and 85-1955, settled or were voluntarily dismissed. At the commencement of final hearing, Case Nos. 85-1332, 85-1497, 85- 1500, and 85-1649, settled or were voluntarily dismissed. The only cases remaining in dispute at final hearing were Case Nos.
85-1509 and 85-1511.
5/ By order of September 11, 1985, the deadline was extended to September 13, 1985.
6/ By order of October 18, 1985, the deadline for ,filing the prehearing stipulation was extended to October 23, 1985.
7/ Under the prehearing order APN was bound to submit preliminary and final witness and exhibit lists to promote an efficient discovery process which was to be concluded by October 11, 1985. To order APN to do what it had already been ordered to do, especially since the time for compliance had passed, was superfluous. If any party were prejudiced by APN's non- compliance, relief could be accorded upon proper motion. It is worthy of note that API; never requested an extension of time or other relief from the prehearing order. See, e. g: Rule 1.090, Florida Rules of Civil Procedure.
8/ Ms. Dunston did not appear at hearing. APN advised that Ms. Dunston, the daughter-in-law of APN's principals, left the week
before hearing to vacation in France. APN made no request for relief associated with Ms. Dunston's absence or her conduct.
9/ Medicare provides reimbursement for costs, including office rental, electricity, salaries, and other business expenses, associated with providing services to eligible patients. It does not provide reimbursement for costs associated with providing services to other patients such as Medicaid and indigents.
10/ The record is devoid of proof regarding the "cost-plus" basis that Buckhead will be charged. James Parmer, Buckhead's expert, testified only that most arrangements he had worked out elsewhere provided for cost plus 10%.
11/ Buckhead offered no evidence of what portion of the purchase price represented goodwill.
12/ Buckhead presented evidence that its September 7, 1984, balance sheet had not significantly changed as of the date of hearing; however, Buckhead's financial records for calendar year 1985 reflect that the Satterleys made personal loans to Buckhead in September-October 1985 of over $4,400. This represents an 11% increase in the agency's liabilities, and would reflect a negative net worth of S13, 552.
13/ If the loans the Satterleys made to Buckhead in September- October 1985 are included in their net-worth, it would increase to $79,600.
14/ In addition to basic start up costs, Buckhead would also have to carry operating expenses until it could receive reimbursement. Buckhead's statement of revenue and expenses projects first year expenses of $129,396 of that sum, $74,952 will be salaries and the remaining $54,444 will be non-salary expenses (rent, telephone, etc.). In its second year of operation, Buckland projects its salaries would increase to
$138,720 and non-salary expenses to $90,000.
15/ For a home health agency, a 3%-4% allowance for bad debts is reasonable.
16/ Buckhead also did not consider the cost of Mr. Palmer's services or of its legal counsel. Mr. Palmer's testimony that these fees would no" adversely affect the financial feasibility of the project, because he would not permit his fees to jeopardize its financial feasibility and it was his "understanding" the legal fees would not be immediately due, but rather a "mutually satisfactory" payment arrangement would be worked out, is not credited.
17/ The number of visits performed by St. Lucie in Okeechobee County in the past year has varied from an average of 140 per week in December 1984, to a low of 30 per week in May 1985. At the time of the hearing, visits were averaging 70+ per week.
Based on the ratio of Medicare-reimbursable visits to total visits (which varies from 90% to 96%), St. Lucie has demonstrated its ability to meet a need for 6,000 Medicare visits in Okeechobee County.
18/ Ms. Satterley was licensed as an individual Medicaid provider after Medicaid determined there was no entity willing to perform Medicaid services in the area. Ms. Satterley holds the only individual Medicaid license in the State of Florida.
COPIES FURNISHED:
William Page, Jr., Secretary Department of Health and
Rehabilitative Services 1323 Winewood Boulevard
Tallahassee, Florida 32301
Steven W. Huss, Esquire General Counsel Department of Health and
Rehabilitative Services 1323 Winewood Boulevard
Tallahassee, Florida 32301
Thomas H. Beason, Esquire MOYLE, FLANIGAN, KATZ,
FITZGERALD & SHEEHAN, P.A.
118 North Gadsden Street Suite 100
Tallahassee, Florida 32301
James W. Linn, Esquire
John D. C. Newton, II, Esquire CARSON & LINN, P.A.
Cambridge Center
253 East Virginia Street Tallahassee, Florida 32301
George N. Meros, Esquire CARLTON, FIELDS, WARD, EMMANUEL,
SMITH & CUTLER, P.A.
401 First, Florida Bank Building Tallahassee, Florida 32301
William L. Hyde, Esquire CULPEPPER, PELHAM, TURNER &
MANNHEIMER, P.A.
300 East Park Avenue Tallahassee, Florida 32301
Segundo Fernandez, Esquire OERTEL & HOFFMAN, P.A.
2700 Blair Stone Road, Suite C Tallahassee, Florida 32301
APPENDIX
The Department's and Buckhead's proposed findings are addressed as follows:
Addressed in paragraph 1.
Addressed in paragraph 2.
Addressed in paragraphs 30 and 36.
Addressed in paragraphs 2, 10, and 37.
Addressed in paragraphs 37 and 38
6-11. To the extent relevant to these proceedings, addressed in paragraphs 3, 27-33, and 42.
12-19. Addressed in paragraphs 27-3.
20-30. Addressed in paragraph 34-41.
31-33. Addressed in paragraphs 29-41.
34-46. Addressed in paragraphs 18-26.
47-59. Addressed in paragraphs 9-17.
Not necessary to the result reached.
Addressed in paragraphs 9-17.
St. Lucie's proposed findings are addressed as follows:
1. | Addressed | in | paragraph | 2. |
2. | Addressed | in | paragraph | 3. |
3-5. | Addressed | in | paragraph | 1. |
5-11. | Addressed | in | paragraph | 7. |
12-14. Addressed in paragraphs 36-37.
15-17. Addressed in paragraph 8.
18-24. Addressed in paragraphs 4-6.
25-57. Addressed in paragraphs 18-26.
58-70. Addressed in paragraphs 9-17.
71-74. Addressed in paragraph 42.
Intervenors' proposed findings are addressed under Procedural Matters and paragraph 2 of the Conclusions of Law.
| Issue Date | Proceedings |
|---|---|
| Jun. 25, 1986 | Recommended Order (hearing held , 2013). CASE CLOSED. |
| Issue Date | Document | Summary |
|---|---|---|
| Sep. 30, 1986 | Agency Final Order | |
| Jun. 25, 1986 | Recommended Order | Application to establish home health agency was denied. Applicant was barred for offering proof where failed to comply with terms of pre-hearing order. |
