STATE OF FLORIDA DIVISION OF ADMINISTRATIVE HEARINGS

HOME CARE ASSOCIATES OF NORTHWEST ) FLORIDA, INC., )

)

Petitioner, )

)

vs. )

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

) CASE NO. 88-4763F

Respondent, )

and )

)

PANHANDLE HOME HEALTH, INC., ) d/b/a CHOCTAW VALLEY HOME HEALTH ) AGENCY, and NORTHWEST FLORIDA HOME ) HEALTH AGENCY, INC., )

)

Intervenors. )

)

FINAL ORDER

This matter was presented to Stephen F. Dean, Hearing Officer, Division of Administrative Hearings, on the petition for attorney's fees filed by Petitioner, Home Care Associates of Northwest Florida, Inc. (Home Care), and the stipulation of Home Care, the Respondent, Department of Health and Rehabilitative Services (DHRS), and the Intervenors, Panhandle Home Health, Inc. (Panhandle), and Northwest Florida Home Health Agency, Inc.

Intervenors Choctaw Valley Home Health Agency and Northwest Florida Home Health Agency have moved to be dismissed in this action for attorneys' fees and costs. The Proposed Findings were filed on November 28, 1988, in accordance with the agreement of the parties.

The parties stipulated to presentation of the case to the Hearing Officer on the record and transcript of DOAH Case No. 87-2150 and transcribed testimony of Sharon Gordon-Girvin and Joseph A. Mitchell.

APPEARANCES

For Petitioner: Byron B. Mathews, Esquire

Home Care Associates of McDermott, Wills & Emery Northwest Florida, Inc.

700 Brickell Avenue

Miami, Florida 33131

For Respondent: Ted Mack, Esquire

Department of Health and Rehabilitative Services 2727 Mahan Drive

Tallahassee, Florida 32301

For Intervenors Panhandle Robert P. Daniti, Esquire Agency and Home Health, Inc., d/b/a 1017-C Northwest FL Thomasville Road

Home Health Choctaw Valley Home Health Agency, Inc: Tallahassee, Florida 32303

ISSUES

Pursuant to the Stipulation, the factual issues to be determined are:

1. Whether DHRS' initial agency action in denying CON #4912 to Home Care was substantially justified;

   
   

2. Whether special circumstances existed which would make an award of fees and costs unjust.

   
   

3. Whether this action was initiated by a state agency within the meaning of Section 57.111(3)(b)3, Florida Statutes.

The ultimate issue for determination is whether Petitioner is entitled to attorney's fees and costs under Section 57.111, Florida Statutes, the Florida Equal Access to Justice Act (FEAJA), for fees and costs incurred in DOAH Case No. 87-2150.

FINDINGS OF FACT

Pursuant to a Stipulation entered into by the parties, filed on November 10, 1988, the parties have admitted and/or stipulated that:

1. DHRS' initial agency action was to deny CON #4911 to Home Care for the establishment of a Medicare home health agency to serve patients in Walton and Okaloosa Counties, Florida. After preliminarily denying Home Care's CON application, DHRS was required by statute or rule to provide Home Care with a clear point of entry to a formal administrative hearing pursuant to Section 120.57, Florida Statutes.

   
   

2. Home Care's Petition for Attorney's Fees was timely filed after Respondent, DHRS, filed a Final Order in this case on July 26, 1988, sustaining Home Care's position that it should be awarded CON #4911.

   
   

3. Home Care is a "small business party" within the meaning of Section 57.111(3)(d)1.b., Florida Statutes.

   
   

4. Home Care is a "prevailing party" within the meaning of section 57.111(3)(c)1., Florida Statutes.

   
   

5. Home Care incurred reasonable attorneys' fees and costs in Case No. 87- 2150, at least in the amount of $15,000.

   
   

   The following findings are based upon the record presented:

6. Home Care filed its timely petition in this fee case after Respondent, Department of Health and Rehabilitative Services ("DHRS") entered a final Order on July 26, 1988, in Case No. 87-2150 granting Home Care a certificate of need ("CON") to operate a home health agency.

   
   

7. DHRS' Final Order was a reversal of its original position on Home Care's application which was initially denied by DHRS.

   
   

8. A formal administrative hearing was held before the undersigned on the issue of whether Home Care was entitled to a CON. The pleadings, transcripts, and exhibits in that proceeding, Case No. 87-2150, have been duly considered in regard to whether DHRS' actions were substantially justified in initially denying Home Care's application. The parties have stipulated that those documents shall constitute part of the record in this proceeding. The following findings are based upon the record in Case 87-2150 and the findings made in the Recommended Order entered in that case and adopted by the agency's final order.

   
   

9. DHRS is the state agency responsible for administering the State Health Planning Act pursuant to Sections 381.701 through 381.715, Florida Statutes.

   
   

10. (a) At the time DHRS denied this application, it did not have any published rule or policy on the methodology for determining need.

    
    

    1. Its original rule was successfully challenged and in 1984 DHRS attempted to promulgate a new rule. This proposed rule was invalidated in 1985 because it was based upon a use rate methodology and contained arbitrary criteria. Subsequently, DHRS published an interim policy which it used to assess home health care CON applications.

       
       

    2. The interim policy was applied to the first batch of applications in 1986 and used a rate population methodology which projected the number of Medicare enrollees using home health care services. The projected number of users was multiplied by the average number of visits per medicare home health care user. See Paragraph 15 of Recommended Order, Case No. 88-4763F. This interim policy was defended by DHRS in the First DCA in December 1986.

       
       

    3. In the summer of 1986, representatives of the Florida Association of Home Heath Agencies complained to the governor's office about the interim policy. After meetings between the staff of DHRS and the Governor's office, the Department abandoned the interim policy. No change occurred in the medical or financial factors which would warrant a change in policy.

       
       

    4. Additional applications had to be approved by Ms. Hardy's superiors.

       
       

11. Home Care filed a Letter of Intent on October 8, 1986, and a CON application for a Medicare-certified home health agency in Okaloosa and Walton Counties on December 15, 1986. This was application CON Action No. 4911.

    
    

12. DHRS published its notice of denial of CON Action No. 4911 in a letter to counsel for Home Care dated April 30, 1987. No specifics were given regarding the grounds for denial.

    
    

13. Applicants at that time had been asked to give DHRS an unlimited extension of time within which to render a decision on their applications. Those who refused had their applications denied and were required, similar to

    Home Care, to demonstrate an unmet need based upon the broad statutory criteria found in Chapter 381, Florida Statutes.

    
    

14. DHRS characterizes the procedure above as a free form action utilizing the statutory criteria found in Section 381.705, Florida Statutes.

    
    

15. DHRS argued in Case No. 87-2150 that its incipient policy looks at the actual need by applying the 13 statutory criteria and bases its conclusion upon information collected from local home health service providers and the local health council. The denial of Home Care's application by DHRS does not state how DHRS applied the statutes to Home Care's application in order that Home Care or others could ascertain a developing standard.

    
    

16. DHRS admitted that it did not have any rule upon which to adjudicate the application and DHRS did not present any credible evidence in support of its denial in Case No. 87-2150.

    
    

17. DHRS did not adduce evidence supporting its denial because it was DHRS' policy to place the burden of proving both the facts and the methodology on the applicant.

    
    

18. The deposition of Joseph Mitchell was introduced and made a part of this record. Mitchell's testimony is clear that, although there is a possibility Home Care could recoup some portion of the costs of litigation in medicare reimbursement as a cost of organizing and establishing the business, it is not certain that Home Care would be compensated because there is a cap on all reimbursable costs above which Medicare will not reimburse a provider and such legal expenses might not be allowed. See Deposition of Mitchell, page 76-78.

    
    

19. Intervenors Choctaw Valley Home Health Agency and Northwest Florida Home Health Agency submitted a proposed order in this action seeking a dismissal of Home Care's petition for attorneys' fee and costs as to any relief from the Intervenors.

    
    

    CONCLUSIONS OF LAW

    
    

20. The Division of Administrative Hearings has jurisdiction over the parties to, and the subject matter of these proceeding.

    
    

21. Section 57.111, Florida Statutes, provides for an award of attorneys' fees and costs not to exceed $5,000 in certain circumstances. To be entitled to an award under this section, the petitioner must prove that:

    
    

    1. it is a "prevailing small business party" [Section 57.111(c), Florida Statutes], and

    2. it is an action "initiated by a state agency" [Section 57.111(3)(b)3., Florida Statutes].

    
    

22. A prevailing small business party may recover "unless the actions of the state were substantially justified or special circumstances exist which would make the award unjustified." [Section 57.111(4)(a), Florida Statutes].

23. It has been stipulated or found that Home Care is a prevailing small business party, filed its petition in a timely fashion, and incurred at least

    $15,000 in reasonable attorney fees. The remaining issues are:

    
    

    1. Whether the action was initiated by the state,

    2. Whether the action by the state was substantially justified, and

    3. Whether special circumstances exist which would make an award of fees and costs unjustified.

    
    

    THE ACTION WAS INITIATED BY THE STATE

    
    

24. Section 57.111(3)(b)3, Florida Statutes, states that an action is initiated by state agency when the agency:

    
    

    was required by law or rule to advise a small business party of a clear point of entry after some recognizable event in the investigatory or other free-form proceeding of the agency.

    
    

25. By stipulation, DHRS admits it was required by statute or rule to provide Home Care with a clear point of entry to a formal hearing pursuant Section 120.57, Florida Statutes, after denying its application for a CON. The Recommended Order in Case 87-250 found that DHRS characterizes the CON application procedure as a free-form action utilizing the statutory criteria found in Section 381.705, Florida Statutes. DHRS adopted and incorporated this finding in its Final Order without modification.

    
    

26. DHRS was required by law and did advise Home Care of its right to a hearing after it denied Home Care's application in what has been determined to have been a free form proceedings. DHRS initiated the action.

    
    

    THE ACTIONS OF DHRS WERE NOT SUBSTANTIALLY JUSTIFIED

    
    

27. Section 57.111(4)(a), Florida Statutes, provides that an award of attorneys' fees and coats shall be made to a prevailing small business party:

    
    

    [U]nless the actions of the agency were substantially justified or special circumstances exist which would make the award unjust.

    
    

28. The Section 57.111(3)(3), Florida Statutes, provides that the term "substantially justified" means that the agency position had "[A] reasonable basis in law and fact at the time it was initiated by a state agency." (Emphasis supplied). Thus, the test to be applied is one of "reasonableness." S & H Riggers and Erectors, Inc. v. Occupational Safety and Health Review Commission, 672 F.2d 426 (5th Cir. 1982)

    
    

29. Once DHRS decided to proceed free form, it could have:

    
    

    1. granted the application and established the criteria in the application as a developing standard for issuance of a CON thereby providing the public with an opportunity to intervene to challenge the application and the standard, or

    2. denied the application with specificity thereby setting forth its standards and permitting the applicant and public to challenge denial of the application and the developing standard.

    
    

30. In either case, the applicant and the public would have been apprised of the Department's decision and its developing standard. Substantially affected individuals would have been able to make a reasoned choice whether to administratively challenge the Department's decision on granting the CON or the methodology the Department was developing.

    
    

31. The Department opted for a third choice, i.e., to deny the application of any applicant who would not agree to an unlimited extension of time merely stating that the applicant had failed to demonstrate unmet need. DHRS forced the applicant to prove both need and its methodology in an administrative hearing, and forced those substantially affected by the application or having an interest in any methodology that might emerge from the proceeding to request an administrative hearing or waive their rights. DHRS argued that it assessed the application based upon the statutory criteria; however, DHRS failed to explain how it assessed need or lack thereof. Its action was taken without regard to the law and, therefore, had no basis in law, was unreasonable, and was not substantially justified.

    
    

    SPECIAL CIRCUMSTANCES DO NOT EXIST

    
    

32. DHRS raises as a defense to the petition for attorney's fees that special circumstances exist, which would make Petitioner's recovery unjust. DHRS argues that Home Care may recoup its attorneys fees and costs by including them in its cost figures of organization upon which Health Care Financing Administration bases its Medicare reimbursement.

    
    

33. Joseph Mitchell's testimony is that it is not certain that Home Care would be compensated because there is a cap on all reimbursable costs and such legal expenses might not be allowed. See Deposition of Mitchell, page 76-78.

    In addition, any award under FEAJA would offset the costs of organizing the business, lowering any possible recovery by the amount of the award. Lastly, at least one court has indicated that FEAJA was intended to be an additional means for small business to recover its costs and attorney's fees. See City of Naples Airport Authority v. Collier, 515 So 2d 1058 (Fla. 2nd DCA 1987). There are no special circumstances which would make award of the attorney's fees unjust.

    
    

    DISMISSAL OF INTERVENORS

    
    

34. Chapter 57, Florida Statutes, makes no provision for the recovery from a party other than the state. The Intervenors have moved to be dismissed.

Based on the foregoing, it is, hereby ORDERED:

That Intervenor's Motion to Dismiss is GRANTED.

That the Department of Health and Rehabilitative Services pay to Home Care Associates of Northwest, Florida, Inc., the amount of $15,000 in attorney fees.

DONE this 21st day of December 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 21st day of December 1988.

COPIES FURNISHED:

Byron B. Mathews, Esquire McDermott, Wills & Emery 700 Brickell Avenue

Miami, Florida 33131

Ted Mack, Esquire Department of Health and Rehabilitative Services 2727 Mahan Drive

Tallahassee, Florida 32301

Robert P. Daniti, Esquire 1017-C Thomasville Road Tallahassee, Florida 32303

Gregory Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32399-0700

John Miller General Counsel

Department of Health and Rehabilitative Services

1323 Winewood Boulevard Building One, Suite 407 Tallahassee, Florida 32399-0700

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this final order is entitled to judicial review pursuant to Section 120.68, Florida Statutes. Review proceedings are governed by the Florida Rules Of Appellate Procedure. Such proceedings are commenced by filing one copy of a notice of appeal with the Agency Clerk Of The Division Of Administrative Hearings and a second copy, accompanied by filing fees prescribed by law, with the District Court Of Appeal, First District, or

with the District Court Of Appeal in the appellate district where the party resides. The notice of appeal must be filed within 30 days of rendition of the order to be reviewed.

Docket for Case No: 88-004763F

Orders for Case No: 88-004763F