STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
HOME CARE ASSOCIATES OF NORTHWEST ) FLORIDA, INC., )
)
Petitioner, )
)
vs. ) CASE NO. 87-2150
)
DEPARTMENT OF HEALTH AND )
REHABILITATIVE SERVICES, )
)
Respondent, )
and )
) PANHANDLE HOME HEALTH, INC., ) d/b/a CHOCTAW VALLEY HOME HEALTH ) AGENCY and NORTHWEST FLORIDA ) HOME HEALTH AGENCY, INC., )
)
Intervenors. )
)
RECOMMENDED ORDER
A formal hearing in the above-styled case was held pursuant to notice on September 29 and 30 and October 20, 1987, in Tallahassee, Florida, and on October 1 and 2, 1987 in Crestview, Florida, by Stephen F. Dean, assigned Hearing Officer of the Division of Administrative Hearings. The Petitioner, Home Care Associates of Northwest Florida, Inc. (Home Care), timely requested a formal hearing on the denial of its application for a CON for a certified home health agency in Okaloosa and Walton Counties by the Department of Health and Rehabilitative Services (HRS). Panhandle Home Health, Inc., d/b/a Choctaw Valley Home Health Agency (Choctaw) and Northwest Florida Home Health Agency, Inc. (Northwest) intervened in the proceedings.
APPEARANCES
For Petitioner: Byron B. Mathews, Esquire
Vicky Gordon Kaufman, Esquire McDERMOTT, WILL & EMERY
101 North Monroe Street, Suite 1090 Tallahassee, Florida 32301
For Respondent: Theodore E. Mack, Esquire
Assistant General Counsel Department of Health and
Rehabilitative Services 1323 Winewood Boulevard
Tallahassee, Florida 32399-0700
For Intervenors: Robert P. Daniti, Esquire
1017 Thomasville Road, Suite C Tallahassee, Florida 32303
ISSUE
The ultimate issue is whether the application of Home Care Associates for a Certificate of Need to establish a Medicare-certified home health agency in Okaloosa and Walton Counties should be granted. The principal factual issue is whether there is a need for an additional agency and the principal legal issue is what criteria for need should be applied. The statutory criteria for determining need is Section 381.705, Florida Statutes.
In this proceeding, the Petitioner showed its entitlement to a CON using the statutory criteria set out in Section 381.705, Florida Statutes.
GENERAL STATEMENT
Proposed Findings of Fact were filed by the Petitioner and the Intervenors.
The Respondent adopted and incorporated the Intervenor's Proposed Findings of Fact adding to the Intervenor's findings its own proposed findings numbered 1 through 20. Proposed findings submitted by the parties are addressed in an Appendix hereto.
FINDINGS OF FACT
All home health care agencies in the State of Florida must be licensed and those home health care agencies which want to participate in the Medicare program must also obtain a Certificate of Need (CON).
Medicare is a federally funded health program for the elderly and certain disabled persons. Medicare provides reimbursement only for the following part-time and intermittent home care: skilled nursing, physical therapy, speech therapy, home health aide, and medical social services. Medicare does not reimburse for custodial care or 24-hour-a-day care (adult congregate living facilities or nursing homes) or acute care services (hospitals). In order for a provider of Medicare home services to be reimbursed, the provider must have a CON and serve Medicare-eligible persons who: (a) are referred by order of a physician, (b) are home bound, (c) require skilled care, and (d) require skilled services only on a part-time basis. The patient must have rehabilitative potential and need skilled home care for Medicare to reimburse for home care. The overall goal of Medicare home health services is to have the patient functioning at his/her optimum level using rehabilitative services and having registered nurses and other skilled professionals to instruct the family and patient in rendering patient care.
Medicaid 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 any other services. Medicaid has maximums or caps on reimbursement for services rendered under the program, and will pay for the services rendered up to the amount of the caps which are based upon allowable patient care costs. Medicaid reimburses only a fixed amount established by HRS for a specific service.
Respondent, HRS, is the state agency responsible for administering the State Health Planning Act pursuant to Sections 381.701 through 381.715, Florida Statutes.
The Petitioner, Home Care Associates of Northwest Florida, Inc. (Home Care), is a Florida corporation owned by Marck Ehrman, M.D., Warren A. Phillips, Dennis L. Sauls, Ronald O. White, and Steven P. Espy. Dr. Ehrman is a practicing hematologist/oncologist in Ft. Walton Beach, Florida.
Home Care filed a Letter of Intent on October 8, 1986 and on December 15, 1986, it actually filed a CON application for a Medicare-certified home health agency to be established in Okaloosa and Walton Counties in the State of Florida. These counties are in Subdistrict IB of HRS District I which is composed of four counties. This application was identified by HRS as CON Action No. 4911.
Okaloosa and Walton Counties are an appropriate service area for Home Care.
Home Care's application was placed in the December 15, 1986 batching cycle by HRS, which preliminarily denied the application. There were no other applications for a Medicare- certified home health agency in Okaloosa and Walton Counties filed in said batching cycle with which Home Care's application could be comparatively reviewed. HRS published notice of its denial in 13 FAW 1806 (May 8, 1987).
Home Care timely requested an administrative hearing by petition filed with HRS on May 11, 1987. Choctaw filed a timely Petition to Intervene on August 14, 1987, and Northwest filed its Petition to Intervene on August 28, 1987. Both petitions were filed more than one month before the scheduled final hearing, and Choctaw was granted standing to intervene by Order of the Hearing Officer dated August 20, 1987, and Northwest was granted standing to intervene by Order of the Hearing Officer dated September 4, 1987. Both Intervenors were determined to be existing providers of Medicare home health services in the geographic area for which Petitioner had applied for a CON.
The basis for the denial of the Petitioner' application for Certificate of Need was based upon the Respondent's determination that:
There was no need demonstrated by Home Care Associates of Northwest Florida for an additional home health agency to serve the residents of Okaloosa and Walton Counties.
Marta V. Hardy was the Deputy Assistant Secretary for Regulation and Health Facilities, Department of Health and Rehabilitative Services, from September 1984 through June 1987. Ms. Hardy was responsible for home health agency policy and was the ultimate decision maker with regard to the preliminary denial of the instant Certificate of Need. (Petitioner's PFF paragraph 19) 1/
In the Fall of 1984, Respondent attempted to promulgate a proposed rule on home health care facilities to replace a rule on need which had been invalidated in an earlier rule challenge proceeding. This proposed rule was invalidated in 1985 because it was based on a use rate methodology which contained arbitrary criteria.
On May 15, 1986, in response to invalidation of the proposed rule, Bob Sharp, administrator of Comprehensive Health Plans for the Department of Health and Rehabilitative Services, published an interim policy by memorandum which was used to review applications for CON's for home health agencies. This interim
policy utilized a variation of the previously invalidated rule but attempted to correct criticisms which had resulted in the invalidation of the proposed rule. The Sharp memorandum was a public document and interested persons were aware of this memorandum and the policies expressed therein.
The interim policy promulgated by Sharp was applied to home health agency applications beginning with the first batching cycle in 1986. The interim policy used a use rate/population methodology which projected the number of Medicare enrollees using home health services. The projected number of users was multiplied by the average number of visits per Medicaid home health user.
Under the interim policy the total number of visits was divided by 9,000 to determine the gross number of agencies needed. Nine thousand visits was deemed by agency planners to constitute a large enough use base to sustain a home health agency based on the agency's assessment of the economies of scale of home health operations. The total number of licensed and approved agencies was subtracted from the gross number of agencies needed to yield the number of new agencies which could be approved. The interim policy provided that new agencies would be phased in over a three year period and resulted in the approval of 23 Certificates of Need between May 15, 1986 and December 1986. This interim policy was defended by the Respondent before the First District Court of Appeal in December 1986.
During the Summer 1986, representatives of the Florida Association of Home Health Agencies (FAHHA) complained to the Governor's Office about the interim policy, contending that the interim policy put too many home health agencies in the field. As a result of FAHHA's complaints, meetings were held between members of the Governor's staff and representatives of the Department of Health and Rehabilitative Services to include Marta V. Hardy. As a result of these meetings, the Department abandoned its interim policy. Ms. Hardy was instructed that additional applications for home health agencies would have to be approved by her superiors. Medical or financial factors did not change during this period, which would warrant a change in policy.
The Department changed its policy but did not publish any document rescinding Sharp's Memorandum. No notice was given to the public that the change in policy had occurred until after the second batching cycle of 1986, the one which contained the Petitioner's CON. Similarly, the Department did not notify the public that there was a need for additional services or agencies.
Marta Hardy had instructed her staff not to issue any more home health agency CON's until a new methodology had been developed.
The applicants were informed that the Department of Health and Rehabilitative Services had changed its interim policy and there was no numerical need methodology. Applicants were asked for an unlimited extension of time within which the Department could render a decision on their applications.
In the absence of a rule on need, the Department required the applicants who refused to agree to an extension of time to demonstrate an unmet need based upon the broad statutory criteria found in Chapter 381, Florida Statutes.
The Department of Health and Rehabilitative Services characterizes the procedure above as a free form action utilizing the statutory criteria found in Section 381.705, Florida Statutes.
Using the free form procedure, one home health agency CON was granted in a county in which no existing service was being provided.
The three existing Medicare-certified home health agencies in Subdistrict IB are: Northwest, Choctaw, and Okaloosa County Health Department (OCHD).
OCHD is the home health agency of last resort for chronically ill patients in Okaloosa County. It renders services to those patients who would not be treated otherwise. It conducts few Medicare visits: 363 in 1985-86 and
225 Medicare visits in 1986-87. OCHD's costs to provide a home visit are high and the number of visits per patient is low. While rendering all classes of home health care, its services are limited, slow, and not competitive with the private agency in the County. It lacks the ability to perform high tech home care. Its program, which is directed by the Department of Health and Rehabilitative Services, is placing its current emphasis on maternal-child health.
When OCHD is eliminated as a competitive element, Northwest is the only provider of Medicare-certified home health services in Okaloosa County and Choctaw is the only provider of medicare-certified home health care in Walton County.
The market share of Northwest in Okaloosa County is 92 percent. It has provided home health services in Okaloosa County for nine years.
Choctaw currently has a 100 percent market share in Walton County and has been the sole provider of home health services for over ten years. There are no alternative home health care providers in Walton County.
Choctaw and Northwest provide all basic home health care services in their respective service areas. Neither Choctaw nor Northwest had provided technically innovative home health care services until the last few months when they added certain basic types of high tech care, such as infusion pumps. To the extent there has been an increase in the availability of such services, it appears to be a competitive response to the pending application of the Petitioner.
The skills and services currently available in Walton and Okaloosa Counties in the area of home health are not state-of-the-art home health services which Home Care states it will provide.
Home health agencies first must develop the capacity to provide sophisticated patient evaluation and high tech services if physicians are going to depend on and use these services when planning out-patient care.
Petitioner is a durable medical equipment ("DME") company. This company has brought new technology to the Ft. Walton Beach area to include oxygen services, pulmonary rehabilitation, home dialysis, parenteral nutrition and hydration. A related company provides private duty nursing care to non- Medicare and non-Medicaid patients currently.
Dr. Ehrman is also involved in Home Care Professionals. Home Care Professionals, a non-Medicare provider of home health care services and durable medical equipment, was developed to meet the needs of home care patients whose needs were not being met by current providers.
Dr. Ehrman is already using computers to assist in the transmission of data from the patient's location to the doctor's location and to transmit and receive the results of lab tests. He plans and has allocated money to computerize Home Care. This will cut down on delays in transmitting and receiving information. Lab results and other patient information will be computerized.
Dr. Ehrman plans to rigorously select his staff and provide to them in-service training in new procedures and high tech home health care. Home Care's nurses will be better trained than current providers' nurses.
Home Care will assign a patient to one nurse.
The Petitioner, Home Care, will provide a new, competitive alternative to the existing agencies which will provide incentive for all the agencies to improve their services and the quality of their care.
Choctaw and Northwest staff their cases geographically east and west. Choctaw refers patients in the south end of Walton County to Northwest, and Northwest refers patients in the northern part of Okaloosa County to Choctaw. This practice, which is a technical violation of their DHRS licensing by county, is dictated by the geography of the service area and the natural and man-made obstacles, including Choctawhatchee Bay, I-10, and Eglin Air Force Base, which create geographical divisions which span both counties east and west while the counties run north and south.
The largest and most rapidly growing population areas are in the southern portions of both counties. This is where the major acute care hospitals are located. The remaining population in these counties tends to be along the I-10/U.S 90 corridor where smaller hospitals are located. Patients which cannot be treated in these smaller hospitals have been referred historically to facilities and physicians in Pensacola, although this is changing as more patients are being sent to facilities and physicians in Ft. Walton Beach.
Approval of this application is consistent with the boundaries of the subdistrict, will enhance competition encouraging the other providers to upgrade their services, and will tend to orient care along a north-south axis. The Petitioner would be he only provider licensed to serve both Walton and Okaloosa Counties which would be advantageous because it could legally staff on an east- west axis and avoid the problems created by the geographic division of Subdistrict IB.
In determining the need for home health agencies in Subdistrict IB, a two year planning horizon was used. A two year planning horizon is reasonable.
Two years from the Petitioner's filing date would be December 1988. Data for the periods ending July 1988 and January 1989 were used because the official population projections from the Governor's Office focus on July and January of each year. The two projected dates bracket December 1988, two years from the filing date.
The population of elderly (65 and over) for Subdistrict IB is projected to be 16,868 for January 1988 and 17,350 for January 1989.
The Medicare use rate the number of Medicare home health visits per elderly person in Florida for 1984 was multiplied by the projected elderly population to arrive at a projected number of visits.
The number of visits projected to occur in July 1988 was 31,976, and 32,889 visits were projected for January 1989. An average of the two projections was used to estimate the number of projected visits in December 1988.
Dr. Kolb, an expert in health planning, researched the optimal size of an agency. She determined that once an agency's visits reach the range of 6,000 to 9,000, economies of scale are achieved in which the fixed costs are spread sufficiently among all visits to make operations viable, and that once this scale of operations is reached, costs per visit become relatively static or are affected more by other factors. Her findings in this regard are consistent with the conclusions reached by HRS in adopting virtually the same criteria in the Sharp policy which it used to evaluate need in the first half of 1986. See Paragraph 15 above.
The optimum size for an agency is riot wholly dependent upon ratio of costs per visit, but it is that size which keeps costs low, fosters healthy competition, sustains the quality and availability of service, encourages innovation, and meets the other statutory objectives.
To determine the number of agencies needed, the projected number of visits was divided by 9,000, the optimal number of visits per agency, which showed a need for 3.6 agencies. Rounding up, this calculation shows a total need for four (4) agencies in the subdistrict in December 1988.
There are three licensed and approved home health care agencies in Subdistrict IB. Subtracted from the four agencies needed in December 1988, one additional agency could be added.
The addition of Home Care to the home health market will not significantly affect existing providers.
Home Care projects it will deliver 3,800 visits in its first year of operation and 7,000 visits in its second year. A large percentage of those visits are attributable to population growth alone.
If the state home health use rate of 1.9 is applied to the 4,588 population growth expected by 1990, an additional 8,717 home health visits will be generated. That growth alone will meet the volume of visits projected by Home Care.
Home Care will do new procedures and will educate existing providers and physicians to the availability and desirability of using new services provided by Home Care. This will cause an increase in the local use rate. Approval of Home Care's application will increase the overall market for home health services.
Dr. Ehrman is a highly trained and experienced physician. Dr. Ehrman has been instrumental in improving the nature and delivery of health care in his medical specialty and community. He has improved the way blood smears are done at the hospital lab and improved the administration of blood bank at the local hospital. He has organized and taught nurses about chemotherapy and developed a tumor board. He helped get radiological procedures improved. Dr. Ehrman has
developed new and innovative practices in his office and has assisted patients in obtaining appropriate Medicare reimbursement for services and drugs.
Northwest adduced evidence that it operates very close to its Medicare cost caps; however, Northwest pays out much of its revenue to related organizations in the form of management, consulting, and computer fees. For example, in the 1986 cost reporting period, Northwest paid $17,783 to related organizations. In 1985-86, Northwest provided 2,818 home health aide visits at a cost of $19.29 pea visit. In 1986-87, Northwest paid $76,849 to related organizations with shared members of their boards. Northwest provided 3,406 home health aide visits in 1986-87 at a cost of $28.95 per visit. These related organizations are for-profit entities.
Open-ended management and administrative contracts with related organizations allow management to add expenses in order to reach the cost caps each year. If management and administrative fees were backed out of Northwest's "costs," it would be well below its cost caps.
As Northwest's visits have increased, administrative, general, and other expenses also have increased (1985-86: $91,708; 1986-87: $198,635). However, the direct costs associated with providing the nursing care for those visits have decreased (1985-86: $89,281; 1986-87: $81,71). Thus, the increase in visits did not result in any overall cost- efficiencies or savings, but in an increase in money paid out as administrative expenses.
There is no relationship between number of visits and cost per visit once an agency is beyond the volume needed to cover its minimal operating costs. An increase in number of visits does not necessarily result in lower costs per visit.
An analysis of hospital utilization by Medicare reveals that the rate of use in District I is higher than both the Florida and national average.
Analysis of the local nursing home use rate reveals it is 68 percent higher than the statewide nursing home use rate. This is in spite of the fact that Walton and Okaloosa Counties have more nursing home beds than other areas of the State and the beds in these counties are at 95 percent occupancy.
Analysis of the home health use rate for Walton and Okaloosa Counties reveals that it is approximately 40 percent lower than the statewide use rate. Many nursing home placements and hospital admissions could be avoided if appropriate home health care were available and utilized. For example, a home health service could start antibiotics in the nursing home for patients who had received the medication before, rather than admit the patient to the hospital to start the treatment as is currently done.
The proposed agency will not decrease the number of visits by existing agencies because of (1) the increase in population, (2) the shifts to home health care from acute care facilities and nursing homes, and (3) the increase in the types of home health care available.
The application contains Home Care's projection of income and expenses for the first two years of operation. See Figure 7, Page 22 of the application. Evaluation of costs for a two year period shows that they are reasonable.
The assumptions about payor mix, utilization projections, gross charges per visit type, salaries, inflation, depreciation, marketing,
advertising, administrative expenses, bad debts/charity, travel expenses, depreciation, costs of medical supplies, and gross revenues made in the feasibility study were reasonable.
The projections of revenue from visits and from medical supplies are reasonable and their sum constitutes gross revenue. Deductions for contractual allowances and bad debt/charity are reasonable and when deducted from gross revenue they determine net revenue.
Dr. Kolb, an expert in health planning, supervised the preparation of the financial feasibility projections contained in the application. The methodology used by Dr. Kolb was reasonable, appropriate, and supported by the facts.
Dr. Kolb conservatively estimated reimbursement to arrive at contractual allowances. Subsequent to her preparation of the pro forma and the filing of the application, the Legislature increased by 100 percent the amount Medicaid reimburses for home health services. Medicare has also subsequently increased its cost services. This increases the range of reimbursement available to the Petitioner and makes Dr. Kolb's predictions of financial success more viable.
The amount of $22,600 is reasonable for the cost of this project.
Equipment costs of $7,600 include office equipment and the lease- purchase of a computer terminal. The computer will be used for billing and for tracking patient problems.
The depreciation expense is derived from an assumption of five years' depreciation on $7,600 worth of office equipment,
When deductions from revenue are subtracted from gross revenue, net revenue is approximately $284,700 in the second year.
Home Care has the capital to fund this project.
Individual expenses on the expense column on the pro forma include salaries, contract services, administrative expenses, transportation, marketing and advertising, medical supplies, and depreciation.
Administrative salaries and benefits are based on the assumption that in the first year there will be three administrative full time equivalents ("FTE"): an administrator, a nurse supervisor, and a clerical person. In the second year, this will increase to three and a half FTE's.
The salaries for these positions in year two are $28,350 for the administrator, $22,050 for the nurse supervisor, and $28,800 for one and a half clerical personnel. In addition, an 18 percent fringe benefit figure is computed.
Salary assumptions are based on area wage levels. Both the salary assumptions and the number of FTE's and salaries are reasonable.
A breakdown of total per visit costs is depicted on HCA X-26. The expenses for contract visits represent the cost per visit in each of the listed categories.
The contract rates in year one are: home health aide - $8.25; speech pathologist - $30.00; medical/social worker - $25.00; occupational therapist -
$30.00; skilled nurse - $13.75; and physical therapist - $30.00.
Medical supplies are assumed to be $1.00 per visit in the rest year and are inflated by 5 percent in the second year. This assumption is reasonable.
Although not required, Petitioner has allocated funds for advertising and marketing which are not allowable expenses in computing reimbursable expenses; however, this will help in informing the public and medical professionals about the availability of home health services.
The transportation expense is based on $.21 per mile which is reimbursed to employees. This is a reasonable assumption.
Administrative expenses include rent ($12,000), telephone ($4,800), insurance ($5,000), postage ($2,000), office supplies ($3,000), legal and accounting fees ($4,000), dues ($500) , and licenses ($500).
Most expense items are inflated 5 percent for the second year. The expense and inflation assumptions are reasonable.
In order to test the reasonableness of the assumptions contained in the pro forma, Dr. Kolb compared the projected costs in the second year to Medicare cost limitations. Home Care's projections are 28 percent below the Medicare cost limits for 1987. Home Care could have $78,000 more in expense and still be below its Medicare cost limits.
In both his private office practice and in his DME company, Dr. Ehrman tries to ensure that underserved groups receive medical services. Although there is a large medically indigent population in the area Dr. Ehrman serves, he does no financial screening in his office.
Dr. Ehrman is a participating provider in Medicare. This means that he has agreed in advance to accept Medicare assignment for his services.
Dr. Ehrman is also a Medicaid provider. Three to five percent of his patients are Medicaid.
The assumption that Home Care will have the same financial policies which are reflected in Dr. Ehrman's practice is reasonable. The assumption that Home Care will provide three percent Medicaid and three percent indigent home health visits is reasonable.
Home Care's project is financially feasible on both an immediate and long term basis.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties and the subject matter of this proceeding pursuant to Section 120.57(1), Florida Statutes (1987).
The Intervenors have standing because they hold CON's for home health care in the service area in which the Petitioner seeks a CON.
Section 400.461(2), Florida Statutes (1987), provides for the licensure of home health service providers who have or seek certification as a Medicare provider by HRS. Section 381.704(1), Florida Statutes, provides that HRS is the sole agency to issue, revoke or deny Certificates of Need. Section 381.704(2), Florida Statutes (1987), provides:
"(3) The department (HRS) shall establish, by rule, uniform need
methodologies for health services and health facilities. In developing uniform need methodologies, the department shall, at a minimum, consider the demographic characteristics of the population, the health status of the population, service
use patterns, standards and trends, and market economics."
The Department had adopted a rule on need which was declared invalid in an administrative proceeding in 1984, and had attempted to promulgate a replacement rule which was also invalidated in 1985. In 1986 the Department adopted a policy concerning need which was used to analyze and approve several CON's early in that year. In Summer 1986, FAHHA complained about aspects of that policy, which eventually caused the Department to adopt yet another policy which was used to assess the instant application for a CON.
The Department's current policy is to utilize the statutory criteria to assess need pending the successful adoption of a rule on need. Under this criteria, the Department requires she applicant to show that there are persons within the service area who are not receiving home health services. The legal issue is whether the Department can assess applications under the statutory criteria alone when it has tried and failed to promulgate a rule due to a successful challenge to a proposed rule.
The Intervenors argue that the agency must promulgate a rule before Petitioner's application can be assessed, and that in the absence of a rule, HRS should return the Petitioner's application to the Petitioner for being incomplete in order to compel HRS to develop a uniform methodology. Rejection of applications by an agency will never compel that agency to adopt an acceptable rule. Intervenor's suggested solution would create a hiatus in granting CON's which works to the definite benefit of those already holding CON's (Intervenors) and works to the detriment of applicants and the public which may be deprived of adequate home health care services.
It is well settled that an agency may refine policy through the adjudication of individual cases. McDonald v. Department of Banking and Finance, 346 So.2d 569 (Fla. 1st DCA 1977). The situation existing with CON's for home health services is precisely the type of situation which is appropriate to development of policy through adjudication. The hearings heretofore held on this type of CON show that significantly different factors are involved in determining need as opposed to CON's which involve health care facilities and equipment which require significant capital investment. See Nurse World, Inc. v. Department of Health and Rehabilitative Services, 9 FALR 4258 (Final Order July 23, 1987); Gulf Coast Home Health Services of Florida, Inc. v. Department of Health and Rehabilitative Services, 10 FALR 168 (Final Order Dec. 16, 1987); and Home Health Care of Bay County, Florida, Inc. v. Department of Health and Rehabilitative Services, 10 FALR 1357 (Final Order Feb. 15, 1988).
If the agency attempts to rely on non-rule policy, it must be prepared to defend its policy choices, State, Department of Administration Division of Personnel v. Harvey, 356 So.2d 322 (Fla. 1st DCA 1978). Where the agency's "policy" is to apply the pure statute, its defense is clearly the presumptive validity of the statute.
When an agency denies an application because it fails to meet a generally stated statutory requirement, the agency must state with specificity why or how it failed to meet the requirement. The general ground for denial that the applicant failed to prove need is insufficient to put the applicant and the public on notice regarding the standards for measuring need. It is the articulation of such standards in orders which is the basis for determining policy through adjudication. If the agency does not state with specificity the standard for denial, it relinquishes the development and proof of the standard to the applicant.
Under such circumstances, the applicant may present any evidence which is probative of the matters addressed in the statute. The applicant is free to present its own standard and evidence to buttress its approach. The applicant has the burden to prove that it meets the statutory criteria under the standard which it espouses. The agency may present evidence showing why the applicant's approach does not comport with the statutory criteria, and may rebut the applicant's facts presented in support of its standard. After pleading it appropriately, the agency or Intervenor may use the proceedings to present evidence in support of a different standard, which the applicant then may use to prove its case. Having concluded that the agency can proceed under the statute in the absence of a rule, the next legal question is what criteria should be applied.
The proposed Conclusions of Law submitted by the parties reflect agreement that Section 381.705(1), Florida Statutes, sets forth with specificity the criteria for determining need. The pertinent subsections of Section 381.705(1), supra, are as follows:
The need for the health care facilities and services and hospices being proposed in relation to the applicable district plan and state health plan, except in emergency circumstances which pose a threat to the public health.
The availability, quality of care, efficiency, appropriateness, accessi- bility, extent of utilization, and adequacy of like and existing health care services and hospices in the service district of the applicant.
The ability of the applicant to provide quality of care and the applicant's record of providing quality of care.
The availability and adequacy of other care facilities and services and hospices in the service district of the applicant, such as outpatient care and ambulatory or home care services, which
may serve as alternatives for the health care facilities and services to be provided by the applicant.
* * *
The availability of resources, including health manpower, management personnel, and funds for capital and operating expenditures, for project accomplishment and operation; the effects the project will have on clinical needs of health professional training programs in the service district; the extent to which the services will be accessible to schools for health professions in the service district for training purposes if such services are available in a limited number of facilities; the availability of alternative uses of such resources for the provision of other health services; and the extent to which the proposed services will be accessible to all residents of the service district.
The immediate and long-term financial feasibility of the proposal.
* * *
The probable impact of the proposed project on the costs of providing health services proposed by the applicant, upon consideration of factors including, but not limited to, the effects of competition on the supply of health services being proposed and the improvements or innovations in the financing and delivery of health services which foster competition and service to promote quality assurance and cost-effectiveness.
* * *
(n) The applicant's past and proposed provision of health care services to Medicaid patients and the medically indigent.
At this point in its argument, HRS states that its incipient policy looks at the actual need in applying the 13 statutory criteria, and concludes from information collected from local home health service providers and the local health council that there is no need based upon the ability of already existing providers to provide future services. This is not a correct statement of the law or application of the procedures.
When the agency does not publish rules, it cannot use its interpretation of the statutory criteria without explaining its interpretation in a published order. Agencies must publish their "interpretation" as rules or develop them as incipient policy in orders. HRS must (1) adopt a rule, (2) deny Petitioner's application for a CON with specific grounds, or (3) deny the application generally and permit the applicant to develop a standard for
assessing need. Because HRS has no need rule, the burden is on the applicant to go forward and prove need and the standard to assess need. HRS must use the applicant's method or show why applicant's method is not reasonable. The determination by HRS that the applicant had not proven need begs the question of what standard HRS used to assess need. Clearly, HRS did not articulate a standard and therefore, permitted Petitioner to develop and prove a standard for assessing need. Petitioner did demonstrate that its method was reasonable and implemented the statutory criteria. Petitioner proved an existing need using its methodology. HRS not only failed to show how Petitioner's method was not reasonable, but HRS did not introduce any credible evidence in support of its own "methodology."
The methodology used by the applicant to demonstrate a need for home health services was reasonable and supported by expert opinion. This methodology was used by DHRS itself to approve approximately 23 CON's and is consistent with and implements the statutory criteria stated above.
The evidence adduced in this hearing shows that:
Two years is a reasonable planning horizon and that Okaloosa and Walton Counties are a reasonable service area.
The home health care services being currently provided by the existing holders of CON's are not state-of-the-art. The underutilization of home health care services is manifested by the high hospital and nursing home use rates and low home health care rates when compared with general state use rates. This underutilization is the result of unavailability of state-of-the- art care which results from the lack of competition. Lack of competition has led to stagnation of services and stagnation of services has led to a reduction of visits.
Underutilization of home health services is inconsistent with the State Health Plan to provide health care services in the most inexpensive manner. Approving the application would be consistent with the state plan in many respects, to include meeting need with the lowest level of cost.
Based upon its current operations and the background and skill of Dr. Ehrman, the applicant will provide quality care to a mix of patients including those who are underserved. The applicant represents it will serve three percent indigent and three percent Medicaid. To the extent that Petitioner takes more indigent cases in Okaloosa County, this will relieve OCHD from treating these cases as it now must, thereby saving it money.
There are sufficient funds available for the project, the management is capable, and there are sufficient nurses and skilled professionals available to serve all of the providers in Okaloosa and Walton Counties.
The financial studies indicate that this venture is financially viable in both the long- and short-term. Neither of the two existing private providers will be jeopardized by issuance of this CON. It is possible that issuance of this CON may greatly improve the financial situation of OCHD by taking cases away from OCHD which the private providers can handle more effectively and cheaply. The private providers will continue to improve with the passage of time and expected increases in population.
The approval of this CON will provide real competition for home health services in two counties which have been underserved. The filing of this
application has caused the previous private providers to expand the variety of their services. The nature of the care which the applicant desires to provide will increase the overall use of home health care as an alternative to hospitalization and placement in a nursing home.
Home health care services deliver health care in the most cost effective manner. There are no health care alternatives to home health care because it is the minimal level of professional health care intervention. Approval of this CON is consistent with the objectives of the State Health Plan.
In summary, the applicant presented credible evidence showing that there is an unmet need in the service area and that it met the statutory criteria for issuance of a CON to provide home health care services in the counties of Okaloosa and Walton, the proposed service area, by showing the feasibility of approving its CON application.
Having determined, based upon the facts adduced at hearing, that there is a need for another home health care agency and that the applicant meets the statutory criteria, it is
RECOMMENDED that the Department of Health and Rehabilitative Services approve Certificate of Need Number 4911.
DONE and ORDERED this 1st day of July, 1988, in Tallahassee, Florida.
STEPHEN F. DEAN
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 1st day of July, 1988.
ENDNOTE
1/ The findings of paragraph 11 through 22 relate to the history and status of the Respondent's rules and policy concerning need.
APPENDIX TO RECOMMENDED ORDER, CASE NO. 87-2150
The following paragraphs in the Recommended Order adopted facts as indicated from the proposed findings:
R.O. Paragraph Number Pet's.PFF Paragraph Number 1 11
2 | 16, 17, | 18 |
3 | 26, 27, | 28 |
4 | 11 | |
5 | 4, 5 & | 164 |
7 | 91 | |
8 | 2 | |
9 | 3-5 | |
10 | 2 | |
11 | 19 | |
12 | 20 | |
13 | 21 | |
14 | 22 & 23 | |
15 | 24 & 25 | |
16 | 26-28 & | 30 |
17 | 30 & 31 | |
18 | 31 | |
19 | 32 | |
20 | 35 | |
22 | 19-35 | |
23 | 124 |
24 130, 132, 134-
136, 138, 213
& 214
25 | 212 |
26 | 219 |
27 | 215 |
28 | 217 |
29 | 130, 139-149 & |
158-163 | |
30 | 163 |
31 | 168 |
32 | 169 |
33 | 170 |
34 | 172 |
35 | 171 |
36 | 173 |
39 | 154-159 |
40 | 92 |
41 | 93 |
42 | 94 |
43 | 95 |
44 | 96 - |
47 | 99A, 97-A & |
97-B | |
48 | 98 |
49 | 221 |
50 | 222 |
51 | 224 |
52 | 225 |
53 | 165-167 |
54 | 227-229 | |
55 | 230 | |
56 | 232 | |
57 | 99B & 105-B | |
58 | 113 | |
59 | 119 & 120 | |
60 | 122 & 123 | |
62 | 18 | |
63 | 184, 186-188, | |
& 196-198 | ||
64 | 190 | & 191 |
65 | 182 | |
66 | 192 | |
67 | 179 | |
68 | 180 | |
69 | 202 | |
70 | 194 | |
71 | 181 | |
72 | 195 | |
73 | 196 | |
74 | 197 | |
75 | 198 | |
76 | 199 | |
77 | 200 | |
78 | 203 | |
80 | 205 | |
81 | 206 | |
82 | 207 | |
83 | 208 | & 209 |
84 | 234 | |
85 | 235 | |
86 | 236 | |
87 | 233 | & 237 |
88 | 210 | |
R.O. Paragraph Number Resp's.PFF Paragraph Number 21 1,2
R.O. Paragraph Number Int's.PFF Paragraph Number
10 2
28 61, 63 & 72
Department of Health and Rehabilitative Services' PFF's:
1 & 2. Adopted.
3. Contrary to more credible evidence. 4-7. Adopted.
Overbroad. OCPHU is Medicare-certified home health agency and the render care to indigents. Basic assertions adopted.
Overbroad--of the classes of home health which are reimbursed by Medicare, OCPHU could provide all of them. Some of their services were very basic and some of their services were very slow.
OCPHU nurses are RNs. Most are not trained to do high tech home health care but in public health nursing
True but not relevant.
Not true. The OCPHU budget would have to be supplemented if they lost Medicare funding. However, there is no credible evidence that this would occur.
General statement of specific findings which were made.
OCPHU has or could hire enough nurses to provide care to additional patients as needed as can any provider.
15 & 16. True but irrelevant.
True, but most doctors take some indigent patients whose only source of home care is OCPHU.
True. He does not consider them qualified and finds them too slow on lab work to the extent that Dr. Ehrman elects to have lab work done at regular lab and absorb the loss.
Irrelevant. So do all RN's in home health care. It is a requirement.
This was the testimony; however, they have refused to perform tasks/procedures ordered by Doctors. The question is who is deciding whether its medically necessary--the doctor or OCPHU's RN? It was clear that OCPHU probably adhered to rules more than the private companies and refused to perform unreimburseable task.
Intervenor's PFF's: 1-8. Adopted
Last sentence adopted, remainder irrelevant.
Rejected.
11-13. Adopted.
14. First sentence rejected; contrary to evidence. Second sentence adopted.
15-18. Adopted.
True but irrelevant.
Adopted first half, second half, true but irrelevant.
True but irrelevant.
22-24. Adopted in different form.
25. True but irrelevant.
26-28. Adopted in different form.
Rejected; contrary to more credible evidence.
Rejected, HRS has a policy but no rule.
Adopted.
32-36. Adopted in different form.
37. Rejected; conclusion of law and argument.
38 A. Rejected; use rate of home health care is impacted by lack of available service, which would skew local rates.
Rejected; contrary to the most credible evidence.
Adopted in different form.
39-42. Rejected; contrary to the most credible evidence.
43. Irrelevant.
44-45. Adopted in different form. 46-47. Irrelevant but true.
48-49. Rejected, contrary to the most credible evidence.
50. True but irrelevant.
51-59. Rejected.
Adopted in part; last part irrelevant.
NWF provides or can provide 24 hour care. I do not find NWF is "capable" or "incapable."
61-63. Adopted.
Adopted.
Irrelevant.
True based upon NWF's own internal productivity measures; however, these are optimistic and the whole matter is irrelevant.
True, but the issue is the limitations on the types of service delivered and not the quality of the service offered.
OCPHU is the only other licensed/certified provider in the county and it is not unusual that NWF is frequently used.
Irrelevant.
70-71. Adopted.
Adopted that it provides all types of service in Walton County; however, no finding is made on the competency of its staff which is not relevant.
See comments 72.
Irrelevant.
75-76. True it irrelevant. 77-81. Adopted.
Contrary to facts.
Adopted.
True but irrelevant. 85-86. Irrelevant.
Irrelevant; neither existing agency has provided any medical social work.
True; explains why there are few medical social work visits, but irrelevant.
89-90. True but irrelevant.
91-92. Intervenors attempted to suggest that high acute care and nursing home rates and low HHC rates were the result of low income and social conditions. This evidence was not credible. It is more likely that patients are placed in hospitals and nursing homes because services they need are not available.
Irrelevant.
Irrelevant; they know about services but do they know what procedures can be provided or are available?
Irrelevant.
Rejected; contrary to the most credible evidence.
Irrelevant; beyond showing how antiquated the local health network and council are.
Rejected; contrary to most credible evidence.
True but irrelevant.
Shows antiquated thinking of local health care systems, but is subordinate.
True but subordinate to general findings on statistics.
Contrary to credible evidence. 103-105. True but irrelevant.
106-107. Irrelevant.
108-109. Adopted.
True but irrelevant.
True but irrelevant.
112-116. | Irrelevant. |
117. | True. |
118-119. | True but irrelevant. |
120. | True but subordinate. |
121-124. | True. |
125-126. | Adopted in part regarding standing to intervene. |
127. | Contrary to facts. |
128. | Irrelevant; subordinate. |
129. | Irrelevant. |
130-132. | Contrary to credible evidence. |
133. | Partially true; partially irrelevant. |
134. | See R.O. paragraphs 2 & 3 which contain the necessary |
basic facts. | |
135. | Not proven. |
136. | Conjectural; not credible. |
137. | Conclusion of law. |
138. | Contrary to credible evidence. |
139. | The downside risk to financial stability is small while |
she benefits to public from competitive supply of | |
services is great. | |
140-142. | Contrary to credible evidence. |
COPIES FURNISHED:
Byron B. Mathews, Esquire Vicky Gordon Kaufman, Esquire McDERMOTT, WILL & EMERY
Suite 1090
101 North Monroe Street Tallahassee, Florida 32301
Theodore E. Mack, Esquire Assistant General Counsel Department of Health and
Rehabilitative Services 1323 Winewood Boulevard
Tallahassee, Florida 32399-0700
Robert P. Daniti, Esquire Suite C
1017 Thomasville Road
Tallahassee, Florida 32303
Sam Power, Esquire Agency Clerk
Department of Health and Rehabilitative Services
1323 Winewood Boulevard
Tallahassee, Florida 32399-0700
Gregory L. Coler, Secretary Department of Health and
Rehabilitative Services 1323 Winewood Boulevard
Tallahassee, Florida 32399-0700
| Issue Date | Proceedings |
|---|---|
| Jul. 01, 1988 | Recommended Order (hearing held , 2013). CASE CLOSED. |
| Issue Date | Document | Summary |
|---|---|---|
| Jul. 20, 1988 | Agency Final Order | |
| Jul. 01, 1988 | Recommended Order | HRS used statutory criteria to adjudicate home health care need on case by case basis, if agency's denial is too general then appl. can show facts |
