STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

A PROFESSIONAL NURSE, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 87-0451

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent. )

)

RECOMMENDED ORDER

This matter was heard by William R. Dorsey, Jr., the Hearing Officer designated by the Division of Administrative Hearings, in Tallahassee, Florida, on May 4, 1987. A transcript of the proceedings was filed and the parties have submitted proposed recommended orders. Rulings on the proposed findings of fact are made in the Appendix of this Recommended Order.

For A Professional Nurse, Inc., Donna H. Stinson, Esquire, Tallahassee, Florida

For Department of Health and Rehabilitative Services, John Rodriguez, Esquire, Tallahassee, Florida

During the hearing the following witnesses testified for A Professional Nurse, Inc.: Mimi Larkin and Eugene Nelson. The depositions of Robert Maryanski and Elton Scott were also received. Robert W. May testified far the Department.

ISSUE

The issue is whether the application of A Professional Nurse, Inc., (APN) for Certificate of Need No. 4636 to operate a home health agency in HRS District IX should be granted.

STIPULATION CONCERNING APPLICABLE STATUTES

In the prehearing stipulation, the parties agreed that the issues to be litigated are only those relating to the need for an additional home health agency in the HRS service district. The other criteria found in Section 381.494(6)(c), Florida Statutes, which the Department is required to take into consideration in granting certificates of need, are not in dispute. The only portions of the statute and rules which must be examined here are Section 381.494(6)(c)1., 2. and 12, Florida Statutes, and Rule 10.5.011(1)(b)1., Florida Administrative Code.

FINDINGS OF FACT

APN's Applications

1. This case arises from the application by APN for Certificate of Need No. 4636, filed in June, 1986. In 1983, APN had filed another application for a certificate of need when the Department had imposed an administrative moratorium on applications. HRS originally denied the application but during the pendency of formal proceedings, reconsidered and would have granted the application, but other parties intervened. APN failed to respond to certain discovery (it did not have an attorney) and at the final hearing therefore was not allowed to present evidence. As a result, APN's 1983 application was denied.

   
   

2. With respect to the current application, based upon its June, 1986, filing, under Rule 10.5.008, Florida Administrative Code, a decision would have been due in October of 1986.

   
   

3. On September 16, 1986, an employee of the Department requested an extension of time for the Department's decision until January, 1987, because the Department had no rule methodology for determining need for home health agencies, but hoped to have one by January, 1987. APN agreed to a three-week extension but did not agree to defer a decision until January, 1987.

   
   

4. In November, 1986, the Department issued a state agency action report proposing to deny the application. At no time during the application process was APN told how need for an additional home health agency would be determined during departmental review in the absence of any need methodology adopted by departmental rule.

   
   

5. There were no other applications in HRS District IX filed in the same batch as this application, and there have been no petitions to intervene in this proceeding.

   
   

   APN And Its Related Companies

   
   

6. APN is an existing, licensed home health agency which has operated in District IX for nine years. It has applied for a certificate of need in order to qualify as a Medicare and Medicaid provider. Without the certificate of need, it cannot receive Medicare or Medicaid reimbursement for its services.

   
   

7. Due to the recent opening of psychiatric hospitals in District IX and the need for follow-up care after such hospitalization, there is a need in District IX for psychiatric home health services. APN has particular expertise in psychiatric nursing.

   
   

8. The requirements APN met for licensure are nearly identical to those for certification. There is no capital expenditure necessary for the Medicare and Medicaid certification. APN also started a related company, Professional Staffing Services, which provides nurses for hospitals, nursing homes and other home health agencies. These clients have called upon Professional Staffing Services when they are short of staff.

   
   

9. APN currently receives referrals of persons who need home health services which come from hospitals, social service departments, hospital

   discharge planners. It also has a plan with hospitals for providing indigent care called "Patient Care Partnership Plan" under which it provides two hours of indigent care for each 40 hours of private duty care obtained through a hospital.

   
   

10. There are people who could benefit from home health services who are unaware that they qualify to be reimbursed by Medicare for home health services. There are even some physicians who are not familiar with the availability of home health services.

    
    

11. Because of the relatively low level of public awareness of the availability of home health services, patients are sometimes placed in nursing homes rather than deceiving health services at home, which would be less expensive and more cost-effective than nursing home care.

    
    

    Method For Determining Need For Home Health Services in District IX

    
    

12. Because there is no rule methodology for determining the need for home health services, the method for determining need used by the Department is subject to de novo review in this proceeding. Section 120.57(1), Florida Statutes (1985). The Department presented no evidence of the number of home health agencies it believes are needed in District IX. In the absence of a rule it has no way of quantifying need.

    
    

13. The Department has had difficulty in developing a methodology for determining need for home health agencies. Its first rule promulgated in 1977 was known as the Rule of Three Hundred. That rule is determined to be invalid. See Johnson and Johnson Home Health v. Department of Health and Rehabilitative Services, Final Order, DOAH Case 83-2170R, affirmed 447 So.2d 361 (Fla. 1st DCA 1984).

    
    

14. Thereafter, the Department used a nonrule policy requiring an applicant to prove that people were not being served in order to justify a certificate of need for a new home health agency. That policy was applied by the Department at the time of the hearing in Upjohn v. Department of Health and Rehabilitative Services, 496 So.2d 147 (Fla. 1st DCA 1986) and was criticized by the court.

    
    

15. The Department's current policy of requiring applicants to show that people are not being served is unreasonable. Existing home health agencies have the ability to expand their staff as demand increases. This would preclude the entry of any new competitor into the market if the rule for determining need for additional agencies is that there must be current potential users who are unserved. The Department's assertion that additional need can be shown by surveys of doctors or hospital discharge planners which indicate an inability to obtain home health services places an unreasonable, unattainable burden on an applicant. The expert retained by the Department to help it develop a rule methodology attempted to survey discharge planners and received only a 25 percent response rate, which is unreliable. The Department's assertion that the applicant could show a waiting list as an indication of need is also unreasonable. Those in need of home health services who cannot obtain them do not wait, they obtain alternate services, by such means as entering a nursing home. Finally, to the extent that patients or even physicians are unaware of the availability of home health services, it is not possible to structure any survey to quantify that pool of unmet need.

    APN's Need Methodology

    
    

16. The testimony of the health planning expert presented by APN, Eugene Nelson, was generally persuasive. He advocated an assessment of need based upon a use rate formula.

    
    

17. Nelson found that the patients used home health services at varying rates throughout the state, with greater use in the southeast, less use in the mid-portion of the state, and lower use in north Florida. He therefore suggested the use of different use rates in north, central and south Florida. District IX is in the southern area.

    
    

18. The data on the use of home health services by patients is not reported to the Department or to local health councils, and is therefore not readily available. It can be obtained, however, from Medicare financial intermediaries based on reimbursement reports those intermediaries process on behalf of the federal government. Only the Department can obtain this data. Intermediaries will not supply it to CON applicants on request.

    
    

19. The most recent data which is complete is 1984 data. When this use rate is applied to the population over age 65, one can derive the expected number of Medicare home health visits for 1987. An HRS service district is the appropriate planning unit. By multiplying the use rate in south Florida times the District IX population over 65 (2.4446 x 268,056) the total expected visits for 1987 are 655,290. Even using the lower, and therefore more conservative, statewide average use rate yields 508,154 visits (1.8957 x 268,056).

    
    

20. Nelson then converted the number of visits to a reasonable number of agencies based upon the number of visits each agency ought to be able to perform. There is little economy of scale in home health agencies and it is therefore difficult to determine an optimum agency size. Nelson discussed data showing reasonable agency size ranges from 9,000 to 15,000 visits per year. This range of agency size is accepted as reasonable.

    
    

21. Using 15,000 visits as the appropriate agency size (which is conservative), there would be a need for 44 agencies in District IX if the south Florida use rate is applied, and 34 agencies needed if the statewide use rate is applied to the appropriate population.

    
    

22. There are currently 25 existing home health agencies which have certificates of need in District IX. This methodology shows a net need for between nine and 19 new home health agencies.

    
    

23. APN's use rate formula for determining the number of home health agencies is consistent with the goals and priorities found in the State Health Plan and the Local Health Plan. In this case, one of the significant objectives of the State Health Plan is Objective 1.5 which is

    
    

    To assure that the number of home health agencies in each service area promote

    the greatest extent of competition consistent with reasonable economies of scale by 1987.

    RECOMMENDED ACTION:

    1.5a: Develop a need methodology based on historic cost data

    for Florida Home Health Agencies.

    
    

24. Because it currently has no rule methodology for determining need for home health agencies, the Department has contracted with Dr. Elton Scott to draft a formula for determining need. The preliminary report of Dr. Scott recommends a methodology based on the historical Medicare use rate and is generally similar to one presented by APN.

    
    

25. Until it adopts a new methodology by rule, the current policy of the Department is to request extensions of time for CON review from applicants rather than process the applications. This results in a de facto moratorium. No applications have been approved under the current policy of requiring the applicant to prove unmet need.

    
    

26. In the record of this case the Department has failed to present any qualified health care expert to give any opinion about appropriate health care planning for home health agencies or to justify its current policy of requiring applicants to present evidence of need on an anecdotal basis. The policy is unreasonable for reasons stated in Finding of Fact 15.

    
    

    CONCLUSIONS OF LAW

    
    

27. The Division of Administrative Hearings has jurisdiction over the matter under Section 120.57(1), Florida Statutes (1987).

    
    

28. The Department of Health and Rehabilitative Services is statutorily designated as "the single state agency to issue, revoke, or deny certificates of need" and is required to "promulgate rules and minimum standards for the issuance of certificates of need." See Section 381.494(8)(b), Florida Statutes. HRS' current policy requiring the applicant to demonstrate need in the absence of a rule methodology places an unreasonable burden on the applicant and amounts to an administrative moratorium, which the courts have made clear HRS cannot impose. Balsam v. Department of Health and Rehabilitative Services, 452 So.2d 976 (Fla. 1st DCA 1984).

    
    

29. APN has met its burden to prove the need for an additional home health agency by use of a methodology that was fully explicated and justified at the final hearing. The Department has failed to promulgate a need methodology for home health agencies. The Department's current non-rule approach is unrealistic, and therefore the Department must accept, in this case, the methodology proposed by the applicant. The need shown by the applicant's methodology is large, i.e. there is a need in District IX for between nine and

    19 additional home health agencies.

    
    

30. To the extent there was evidence that the Department considered written submissions from current holders of certificates of need after the date for the public hearing (which preceded the State Agency Action Report), the Department erred. According to the Department's Rule 10-5.010(6), Florida Administrative Code, after the date of the public hearing communications concerning the merits of the application between those opposing the project and those in the Department exercising responsibility to review the proposed project are permitted only where the applicant receives copies of those communications. APN was not copied with those submissions. The error is harmless, however,

    because no one from the currently certificated home health agencies which opposed APN's application testified at the final hearing. Those submissions are hearsay which could not appropriately form the basis for any fact-finding under Section 120.58(1)(a), Florida Statutes (1985).

    
    

31. The applicant has demonstrated the need for an additional home health agency in District IX. The applicant's proposal is consistent with the State Health Plan and the district plan. An additional provider will increase the availability of and enhance accessibility to home health services, and will have no adverse affect on competition among those supplying home health services in District IX. The criteria of Section 381.494(6)(c)1., 2. and 12., Florida Statutes, have been met.

    
    

32. The application of A Professional Nurse, Inc., for Certificate of Need No. 4636 for a home health agency in District IX should be approved.

DONE AND ORDERED this 22nd day of December, 1987, at Tallahassee, Florida.

WILLIAM R. DORSEY, JR.

Hearing Officer

Division of Administrative Hearings Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32399-1550 904/488-9675

Filed with the Clerk of the Division of Administrative Hearings this 22nd day of December, 1987.

APPENDIX

The following are my rulings on the proposed findings of fact submitted by the parties pursuant to Section 120.59(2), Florida Statutes (1985).

Rulings on Petitioner's Proposed Findings:

1. Covered in findings of fact 1, 3 and 12.

2. Covered in finding of fact 3.

3. Covered in finding of fact 4.

4. Covered in finding of fact 4.

5. Covered in finding of fact 1.

6. Covered in finding of fact 5.

7. Rejected as unnecessary.

8. Covered in findings of fact 6 and 8.

1. Covered in finding of fact 20.

2. Covered in finding of fact 21.

3. Covered in finding of fact 22.

4. Rejected as unnecessary.

5. Rejected as unnecessary.

6. Covered in finding of fact 12.

7. To the extent relevant, covered in finding of fact 13.

8. Covered in finding of fact 14.

9. First sentence rejected as irrelevant; remainder covered in conclusions of law.

10. Rejected as unnecessary.

11. Rejected as unnecessary.

12. Covered in finding of fact 25.

13. Covered in finding of fact 25.

14. Covered in finding of fact 26.

15. Covered in finding of fact 15.

16. Covered in finding of fact 23.

17. Rejected as unnecessary.

Rulings on Proposals Made By Department of Health and Rehabilitative Services in its Second Recommended Order:

1. To the extent appropriate, covered in finding of fact 8.

2 Covered in finding of fact 9.

1. Covered in finding of fact 23.

2. Rejected as unnecessary.

3. Rejected because I have accepted the optimum agency size in the testimony of Mr. Nelson. In order to balance the need for competition against the anti-competitive effect of the elasticity of

   current home health agencies, an applicant need not prove that it will provide service at a lower cost than existing agencies in order to qualify

   for a certificate of need.

4. Rejected because no citation of the source

   is given in contravention of Rule 22I-6.031(3), Florida Administrative Code.

5. Rejected for the reasons given for rejecting proposal No. 5.

6. Generally rejected because there is no significant evidence regarding the needs or capabilities of health maintenance organizations, especially on the population over age 65, which is the main population to be served by home health agencies.

7. To the extent relevant, covered in finding of fact 22.

8. Covered in findings of fact 16 through 21.

9. Covered in findings of fact 16 through 21.

10. Rejected as argument.

11. Rejected because the use rates are not frozen at 1984, but rather the most recent complete data set available is for 1984.

12. Utilization rate provided by Nelson is appropriate and has been accepted.

13. Rejected because I have accepted the testimony of Eugene Nelson, see finding of fact 21. The selection of 15,000 visits as an optimal size

    may be judgmental but it is not arbitrary.

14. Rejected for the reasons given for rejecting the previous finding of fact.

COPIES FURNISHED:

Donna H. Stinson, Esquire The Perkins House, Suite 100

118 North Gadsden Street Tallahassee, Florida 32301

John Rodriguez, Esquire Department of Health and

Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407

Tallahassee, Florida 32399-0700

Gregory L. Coler, Secretary Department of Health and

Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32399-0700

Sam Power, Clerk Department of Health and

Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407

Tallahassee, Florida 32399-0700

Docket for Case No: 87-000451

Orders for Case No: 87-000451