STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

PRINCIPAL NURSING SERVICES, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 93-4913

) STATE OF FLORIDA, AGENCY FOR ) HEALTH CARE ADMINISTRATION, )

)

Respondent. )

)

RECOMMENDED ORDER

This case was heard by Eleanor M. Hunter, the hearing officer designated by the Division of Administrative Hearings, on October 3, 4, 5, and 12, 1994, in Tallahassee, Florida.

APPEARANCES

For Petitioner, Steven M. Weinger, Attorney Principal Nursing Elaina Tetzell, Attorney Services, Inc.: Kurzban, Kurzban & Weinger, P.A.

2650 Southwest 27th Avenue, 2nd Floor Miami, Florida 33133

For Respondent, James H. Peterson, III, Attorney Agency For Health Heidi E. Garwood, Attorney

Care Administration: Agency for Health Care Administration

325 John Knox Road, Suite 301 Tallahassee, Florida 32303-4131

STATEMENT OF THE ISSUES

Whether Principal Nursing Services, Inc. meets the statutory and rule criteria for the issuance of a certificate of need to operate a home health agency in Dade County, Florida, Agency For Health Care Administration District 11.

PRELIMINARY STATEMENT

Principal Nursing Services, Inc. ("Principal") and two other entities filed applications in March 1993, seeking certificates of need ("CONs") to operate Medicare certified home health agencies in Dade County, which is in Agency For Health Care Administration ("AHCA") District 11. AHCA preliminarily approved the other two applicants' proposals and preliminarily denied that of Principal. Subsequently, Principal prevailed in a challenge to AHCA's numeric need methodology and the resulting under-estimation of need. Principal Nursing v.

AHCA, DOAH Case No. 93-5711RX (F.O. 1/26/94).

Prior to its successful challenge to the numeric need methodology, Principal's petition was filed to challenge AHCA's intent to issue CONs to two other competing applicants, Universal Home Health Services, Inc. ("Universal"), and Health Care and Friends, Inc. ("Health Care"), as well as to obtain approval of its own application. After Principal prevailed in challenging the numeric need methodology, and following a hearing establishing that the three applications were no longer mutually exclusive, at which hearing the parties stipulated that a numeric need exists for Principal's proposed services, the CONs of Universal and Health Care were severed and remanded for final agency action. Health Care and Friends, Inc. v. AHCA, etc., DOAH Cases Nos. 93-4911 and 93-4912 (R.O. 7/6/94).

The final hearing was held to determine whether Principal's application should also be approved. Principal Nursing presented the expert testimony of Elton Scott, Ph.D.; and Claire Balbo, and the testimony of Lazaro J. Ulloa, president of Principal. By depositions or portions of depositions, Principal also presented the testimony of Elizabeth Dudek, Alfonso Rodriguez, Aide Lopez- Cordero, Alberto Del Valle, Miquez Cruz-Peraza, Harry Figueroa, and Lynn Riley. Principal's exhibits 1 - 3, and 7-25 were also received in evidence.

Principal's exhibits 4 and 5, were not received as evidence. However, Principal was allowed to introduce relevant portions of the competing application from the same batch, in accordance with Central Florida Regional Hospital v. DHRS, 582 So.2d 1193 (Fla. 5th DCA 1991). Principal's exhibit 26, a letter of September 29, 1994, from a person identified as Mr. Lazaro Ulloas's father-in-law, offering to provide up to $50,000 in funds for the proposed project was not received in evidence, as an impermissible amendment to the original application.

AHCA presented the expert testimony of Elizabeth Dudek and Roger Bell.

AHCA's exhibit's 2 - 5, 7 and 14 were received in evidence. Ruling was reserved on the admissibility of AHCA's composite exhibit 12 and exhibit 16, pending legal arguments in the proposed recommended orders. The proffered testimony of Elizabeth Dudek and Roger Bell regarding the effect of an unresolved federal court case is not received in evidence, as speculative and hearsay. The depositions in composite exhibit 12 are received. Exhibit 16, the income tax returns, are not received, based on issues concerning their authenticity. See, Findings of Fact 12.

Prior to the final hearing, AHCA filed the Agency's Notice of Filing the Statutory And Rule Criteria At Issue In Pending Case, in which the following were listed:

1. Section 408.037(a), Florida Statutes (requirement of capital projects listing in application).

2. Section 408.035(1)(a), Florida Statutes (Whether need for proposed project is supported by the applicable district plan). The applicable district plan is the District XI 1992-1994 CON Factors Report, and the following preferences

   of that plan are at issue:

   1. Preference #1: Projects which fill a demonstrated unmet need for home health services to an identifiable subgroup of District XI's

      population, based on ethnicity, language, geographic location, or specialized medical needs including persons with AIDS.

   2. Preference #2: The applicants proposing

      to serve the largest percentage of Medicaid eligible and/or medically indigent.

   3. Preference #3: Applicants who propose plans for provision of high technology home health services, and who show a plan and capability for providing a full range of services, including physical, occupational and speech therapies, and medical

      social work, as well as skilled nursing and home health aid services.

   4. Preference #6: Applicants who have working arrangements with hospitals, physicians, nursing homes and community services agencies.

3. Section 408.035(1)(a), Florida Statutes, and Rule 59C-1.030(2)(c), Florida Administrative Code (Is the need for the project proposed supported by the applicable State Health Plan?). The applicable

   plan is the 1989 State Health Plan, and the following preferences of that plan are at issue:

   1. Preference #1: Preference shall be given to an applicant proposing to serve AIDS patients.

   2. Preference #2: Preference shall be given to an applicant proposing to provide a full range of services, including high technology services, unless these services are sufficiently available and accessible in the same service area.

   3. Preference #3: Preference shall be given to an applicant with a history of serving a disproportionate share of Medicaid and indigent patients in comparison with other providers within the same HRS service district and proposing to serve such patients within its market area.

   4. Preference #4: Preference shall be given to an applicant proposing to serve counties which are underserved by existing home health agencies.

   5. Preference #6: Preference shall be given to an applicant proposing a comprehensive quality assurance program and proposing to be accredited by the Joint Commission on Accreditation of Healthcare Organizations.

4. Section 408.035(1)(b). Florida Statutes, and Rule 59C-1.030(2), Florida Administrative Code (Does the proposed project increase availability and access and improve the quality of care, efficiency, appropriateness and adequacy of the service to be provided in the service area?).

5. Section 408.035(1)(c), Florida Statutes (Does the applicant have a history of providing quality of care and has the applicant demonstrated the ability of providing quality care?).

6. Section 408.035(1)(d), Florida Statutes (Did the applicant show that there are no available nor adequate alternatives to the proposed project).

7. Section 408.035(1)(h), Florida Statutes (Does the applicant have resources, including health manpower, management personnel and funds for capital and operating expenditures?).

8. Section 408.035(1)(h) & (i), Florida Statutes (Is the project financially feasible in the immediate

and long-term? Is this the best use of the applicant's resources?).

1. Section 408.035(1)(l), Florida Statutes (Will the proposed project foster competition to promote quality assurance and cost-effectiveness?).

2. Section 408.035(1)(n), Florida Statutes (Does the applicant have a history of and propose the provision of health services to Medicaid patients and the medically indigent?).

At the beginning of the final hearing, AHCA's motion for official recognition of court documents from a pending federal lawsuit was denied. The documents included a complaint, a complaint for temporary restraining order, a motion for summary judgment, and temporary restraining order. Ruling was reserved, pending a showing of relevance, on the admissibility of an affidavit of Zenaida Ulloa filed in the same proceeding. The affidavit of Zenaida Ulloa is received in evidence, although hearsay, as corroborating the testimony of Lazaro Ulloa. See, Findings of Fact 7 and 30.

The transcript of the final hearing was received on January 17, 1995.

Pursuant to an Order granting a Joint Motion For Extension of Time, proposed recommended orders were filed on February 21, 1995.

FINDINGS OF FACT

1. Principal Nursing Services, Inc. ("Principal") applied to the Agency For Health Care Administration ("AHCA") for a certificate of need ("CON") number 7285 to establish a Medicare certified home health agency in Dade County, AHCA District 11. Principal operated a home health agency in Dade County from 1991 through 1994, which became Medicaid certified in 1992.

   
   

2. AHCA is the state agency authorized to administer CON laws for health care facilities and services in Florida.

   
   

3. The parties agree that there is a numeric need for the services proposed by Principal, if its application satisfies the other criteria in statutes and rules which AHCA listed as being at issue.

   
   

4. Elizabeth Dudek, AHCA's representative, testified that AHCA believes that Principal failed to meet preferences regarding AIDS patients and the Hispanic speaking population, by failing to show the absence of such services currently or any percentages of such individuals who would be served by Principal. AHCA regarded Principal's 3 percent indigent commitment, without more, as an inadequate indicator of meeting unmet needs. AHCA also determined that Principal's application failed to document availability, access, appropriateness, or efficiency of existing agencies, and the financial feasibility of its proposed. On this basis, AHCA maintains that Principal's application should be denied.

   
   

5. By proffer, Ms. Dudek also expressed concern that Principal's Medicaid reimbursements have been suspended because some its claims had been questioned. Within the proffer, Ms. Dudek testified that AHCA has become aware of a federal court case against Principal related to alleged Medicaid fraud, and is in the process of drafting rules to permit the denial of CONs under such circumstances. Ms. Dukek cited section 408.034, Florida Statutes, the general authority to

   issue, deny or revoke CONs, and quality of care criterion as the authority for AHCA to deny a CON to an applicant charged with Medicaid fraud. She compared the situation to one in which AHCA denied a CON to a nursing home after a moratorium was imposed on further admissions based on patient care issues.

   
   

6. On the issue of financial feasibility, Roger Bell, AHCA's accountant, testified that Principal failed to list any capital projects or to affirmatively state that it had none. Absent either, AHCA takes the position that an applicant's financial feasibility cannot be determined. AHCA uses an applicant's capital projects list of expenditures proposed, pending, and underway to determine if the applicant also has the resources to undertake the project proposed in its CON application. In this case, AHCA failed to notify the applicant of any deficiency in the capital projects list in a request for omissions responses.

   
   

7. Mr. Bell also noted that Zenaida Ulloa was listed as Principal's treasurer in the application. A letter offering funding for the project also referred to a joint financial statement of Zenaida Ulloa and others, while subsequent information indicates that Zenaida Ulloa was not involved with the corporation. Zenaida Ulloa is the wife of Principal's president, Lazaro Ulloa. See, Findings of Fact 30.

   
   

8. Examining Principal's monthly financial statements, Mr. Bell found a drastic reduction in revenues, expenses of $35,000 in February 1994, and expenses of $20,000 in March 1994, of which subcontractors were paid $230. On this basis, he determined that the corporation ceased operations in February, while subsequently eliminating expenses and paying down debts from $4,000 in expenses in May to $12 in bank charges in July. Principal's cash overdraft, at the time of hearing, was over $7,000.

   
   

9. Mr. Bell also testified concerning errors in the original audited financial statements submitted with Principal's application, including the failure to follow the format and words prescribed by Generally Accepted Accounting Principles ("GAAP"). Specific examples were the absence of a date on the first page, failure to double underline totals, and the word principles misspelled as "principals." The forms used for the "Statement of Income and Retained Earnings" uses the term "sales," as if for a retail establishment, rather than "revenue from patient care" which is more typical for a health care business. While admitting that any one of these errors is in and of itself meaningless, Mr. Bell found more serious discrepancies. Accrued liabilities for 1992 are listed as $10,000 and the additional paid in capital as $500, yet the total at the bottom of the column, in which these are the only two items, is

   $54,429. Accrued liabilities are listed on the page labeled "Liabilities and Stockholder's Equity" as $10,000 in 1991 and $10,000 in 1992, however, the 1992 over 1991 increase in accrued liabilities on the page labeled "Statement of Cash Flow" is listed as $10,000 rather than zero. Although liabilities are disclosed, there is no interest expense. GAAP requires notes on fixed assets and depreciation, and on stock ownership and transactions, which are missing from Principal's audited financial statements.

   
   

10. Mr. Bell compared the audited financial statements to the pro forma of projected income and expenses from operations. Although the audited financial statements show revenues of $89,000 in year one and $145,000 in year two, the pro forma projected a one thousand percent increase in revenues over those reported in 1992. The pro forma is discredited because the normal situation is that a pro forma will project reasonable growth and inflation over current operations, according to Mr. Bell. Projected charges for home health visits

    were the same for the first and second years, in contrast to any normally anticipated inflation. Charges were also virtually the same for each type of visit, despite variations in the costs of nursing, therapy, and home health aids.

    
    

11. Mr. Bell's testimony on the financial feasibility of Principal's proposal was inconsistent with AHCA's findings in the state agency action report ("SAAR") issued after the initial review of the applications submitted in this batching cycle. At least one inconsistency, a 5 percent profit in the pro forma in contrast to 14.3 percent profit from actual 1992 operations, shows that the pro forma is a more conservative projection of revenue.

    
    

12. Ruling was reserved, after objections and motions by Principal's counsel, on whether to consider or strike from the record Mr. Bell's testimony about comparisons he made between Principal's audited financial statements and its income tax returns. Ruling was also reserved on the admissibility of the income tax returns to allow counsel to make legal arguments in their proposed recommended orders. Principal's counsel objected to the authenticity of the tax returns, claiming not to know whether or not he produced the documents in response to AHCA's discovery request. On this basis, the tax returns are not received in evidence, and the testimony related to the tax returns is stricken.

    
    

    Subsection 408.035(1)(a) - State and Local Health Plans and Rule 59C-1.030, Florida Administrative Code

    
    

13. Principal's application meets the first preference of the state and district health plans by proposing services to identifiable sub-groups with unmet needs, including AIDS patients. Services are also provided to Spanish and Creole speakers. Principal has had a Medicaid waiver to allow reimbursed care for AIDS patients since October 1992. Principal also served areas of Dade County which some home health agencies refuse to serve, including Liberty City, Overtown, and Little Haiti. In the SAAR, AHCA found that Principal only partially met the first preference.

    
    

14. AHCA, in the SAAR, gave full credit for Principal's proposal to serve

    85.7 percent Medicaid in year one and 84.9 percent Medicaid in year two, as meeting both the district health plan preference number 2 and state health plan preference number 3. Principal was already serving Medicaid patients and its commitment was the largest proposed by any of the applicants in this batch. Initially, Principal projected 9,730 Medicare visits for 6.4 percent of revenue in year one, and 17,518 visits for 10.3 percent revenue in year two. However, Principal's witnesses testified that, if necessary, Principal would substitute Medicare visits for Medicaid visits to be financially feasible. On the basis of the evidence presented at hearing, Principal is not committed to meeting the preference. The preference is, however, of questionable value. Before any doubt about the Medicaid level had been raised, AHCA used the preference against the applicant, questioning its commitment to serve as a Medicare-certified agency, due to the sizable Medicaid commitment. The SAAR includes a statement that "An overview of the application does not reflect an overwhelming desire to provide services to Medicare eligible clients." In an apparent contradiction, Principal received only partial credit for service to Medicaid patients. Principal is also entitled to at least partial credit for meeting the criterion of subsection 40.035(1)(n), for its past, but not proposed, service to Medicaid and the medically indigent.

15. Principal meets the third local and the second state preferences by providing or proposing to provide ventilator and intravenous therapies, as a part of a full range of high technology services. Dr. Elton Scott, an expert testifying for Principle, demonstrated that AHCA erroneously overlooked Principal's plans to offer intravenous chemotherapy and other IV therapies, as outlined in its application, and gave Principal only partial credit for the services proposed.

    
    

16. The fourth state preference, for meeting the needs of a county under- served by home health agencies, is inapplicable. According to Dr. Scott, no determination has been made that either District 11 county, Dade or Monroe, is an under-served county.

    
    

17. AHCA's representative conceded at hearing that Principal meets the sixth state preference requirement for quality assurance methods, including programs to ensure that its personnel are well trained. Principal committed to obtaining accreditation from either the National League for Nursing, or the Joint Commission on Accreditation of Health Care Organizations, also in compliance with preference six of the state health plan.

    
    

18. District health plan preference six requires working arrangements with hospitals, physicians, nursing homes and community service agencies. Dr. Scott noted that the preference requires working arrangements, not written contracts, and that AHCA gave another applicant in this same batch credit for listing entities "with which it had undertaken steps to establish relationships." The depositions of other applicants' representatives confirm that there were no commitments to enter into the arrangements required, prior to AHCA's issuance of their CONs. Mr. Ulloa confirmed that Principal has had and could reestablish such working arrangements. Principal meets the requirements of the preference.

    
    

    Subsection 408.035(1)(b) - availability, access, utilization and efficiency of existing services

    
    

19. Consistent with the position taken earlier in the SAAR, AHCA noted, at hearing, that Principal failed to provide any inventory or analysis of existing Medicare certified home health care agencies.

    
    

    Subsection 408.035(1)(c) - quality of care and 408.035(1)(l) - effects of competition

    
    

20. Principal established that it has provided services of unquestioned quality, having been licensed, surveyed and relicensed by AHCA. In addition, the quality of its proposed services was established, in part by Principals' compliance with state health plan preferences two and six. Dr. Scott also explained how Principal's proposal will foster competition to provide a higher quality of care. Although Principal's projected Medicare costs are among the lowest in the batch, other charges may not be affected directly. According to Dr. Scott, Medicare cost-based reimbursement results in a lack of concern with charges by providers or the clients. Competitors use non-cost factors to

    attract clients, such as quality of services, which is therefore, enhanced when new providers enter the market. See, Findings of Fact 15 and 17.

    
    

    Subsection 408.035(1)(d) - alternative types of services in the district

    
    

21. AHCA found documentation submitted by all of the applicants in the batch inadequate in addressing alternative types of services which could also meet the needs of Medicare home health agency clients. AHCA's application of the criterion was not inconsistent.

    
    

22. In general, as AHCA noted, Principal and the other applicants in the batch relied on the published fixed need to respond to the statutory criteria related to need, availability, access, and alternatives.

    
    

    Section 408.037(2)(a) - capital projects list

    
    

23. Lazaro Ulloa, Principal's president, testified that Principal has no other capital projects. AHCA, in the SAAR, reached the same conclusion, after having made no omissions request for capital projects information. For this batch, AHCA treated the absence of a capital projects list as equivalent to a statement that none existed.

    
    

    Sections 408.035(1)(h) and 408.035(1)(i) - Resources and Financial Feasibility

    
    

24. Mr. Ulloa testified that he has the resources and funds necessary to establish the project proposed, including the ability to provide $43,500 in capital costs. He also claimed that Principal is entitled to approximately

    $160,000 billed and another $300,000 to $400,000 in unbilled Medicaid claims, for which less than $100,000 in costs, if any, are due to sub-contractors.

    After, Medicaid payments stopped, officers of the corporation paid Principal's salaries, wages, rent, legal fees, and loan payments, including interest, for computers and two vehicles. These payments have been made by Mr. Ulloa or his parents. Mr. Ulloa was unable to explain why, on financial statements loans to stockholders were not reduced or stockholders equity increased to reflect those payments. The testimony tends to support Mr. Bell's criticism of the preparation of Principal's financial statements and pro forma. See, Findings of Fact 9 and 10.

    
    

25. The company reported $37,615 as its total corporate assets, which also represented its total liability at the time, in the form of stockholder equity. Principal's project will have capital costs of $43,500. Mr. and Mrs. Ulloa committed to provide the funds for the project, if necessary. Although Principal has ceased operations, it does have some former salaried and contract staff willing to return if the CON is granted. Principal, according to Dr. Scott, is in no worse position than a start-up company which was approved by AHCA. It is Dr. Scott's opinion that the project is still financially feasible even if Medicare replaces all projected Medicaid visits. Any indigent care provided would have to be offset by private pay patients, because those costs cannot be passed on to Medicare. See, Findings of Fact 14.

    
    

26. AHCA contends that Principal's proposal is not financially feasible or cannot be found financially feasible for the reasons given by Elizabeth Dudek and Roger Bell.

27. In response, Principal's accountant, Alfonso Rodriguez, testified, by deposition, that the audited financial statements were prepared according to GAAP, and that it is his opinion that Lazaro Ulloa can provide that $43,500 in capital costs for the project.

    
    

28. Mr. Rodriguez, in deposition, responded to certain comments regarding the audited financial statements as follows:

    
    

    QUESTION: You have seen, have you not, a copy of this document called State Agency Action Report?

    ANSWER: Yes.

    QUESTION: And you looked at that pursuant to my request, is that correct?

    ANSWER: Right.

    QUESTION: Let me ask you to look at page 64 of that document, please.

    ANSWER: OKAY.

    QUESTION: Page 64 has a reference to Principal Nursing Services and they made some comments that I believe about the financial statements that you prepared that were attached to Principal's application, is that your understanding?

    ANSWER: Right.

    QUESTION: Would you read -- would you read and have you reviewed those comments?

    ANSWER: Yes, I read them over once.

    QUESTION: Have you compared those comments to the documents that you prepared for Principal Nursing Services.

    ANSWER: Yes

    QUESTION: Let me read the first comment into the record and ask you if you have a response to it? The first sentence says: During the course of the review, it was noted that the applicant's CPA had not accounted for shareholder's equity in the proper category.

    ANSWER: I believe that was - yeah, I don't know exactly what they mean, but it already has been cleared, it was cleared on that one we discussed.

    QUESTION: Do you believe that statement was correct? ANSWER: No. When I read it I didn't understand it.

    But with all the financial statement it was clear. I don't know what they mean when accounted for stockholder's equity in the proper category.

    QUESTION: Do you believe that you accounted for stockholder's equity in the proper category in accordance with how you prepared the financial statements?

    ANSWER: Yes.

    QUESTION: I want you to look at the second sentence. Quote, it was also noted under the category of net sales as a category of subcontract

    services that is not explained in the note; do you understand that statement?

    ANSWER: No. Because the reason I don't understand it is subcontract services is a cost, it's not in any way related in net sales.

    QUESTION: It's reflected in Principal's audited statement?

    ANSWER: It was a separate category, separate category as a cost of sales.

    QUESTION: Cost of sales being monies owed -- that Principal may have owed to subcontractors of Principal?

    ANSWER: Right. Then finally, Page 38, Line 18:

    QUESTION: All right. But if the financial statement reflects the notation "See attached schedule" it would be considered incomplete if that schedule's not attached, correct?

    ANSWER: What I'm saying is I have the schedule in my work papers.

    
    

    That completes our reading from the deposition of Alfonso Rodriguez.

    
    

    Transcript, Pages 466-469.

    
    

29. The testimony of Mr. Ulloa and the deposition of Mr. Rodriguez, submitted into evidence by Principal, fail to explain the discrepancies in the audited financials and pro forma, which were noted by AHCA's accountant. See, Findings of Fact 9 and 10.

    
    

    Rule 59C-1.008, Florida Administrative Code - Corporate Officers and Owners

    
    

30. Mr. Ulloa testified, and his wife's affidavit confirmed, that she briefly worked at Principal in February and March 1993. During that time, plans were made, but never finalized, for Mrs. Ulloa to join the corporate board and comptroller/Treasurer. Another applicant in the same batching cycle had a change in directors and submitted a subsequent resolution. The Principal proposal does not rely on the experience, knowledge or expertise of Mrs. Ulloa and, on that basis, Mr. Ulloa asserts that the error in listing Mrs. Ulloa was not material.

    
    

31. Based on the failure to establish the financial feasibility of Principal's pro forma, primarily due to unexplained and apparently inconsistent entries on its audited financial statement, Principal's CON application should be denied.

    
    

    CONCLUSIONS OF LAW

    
    

32. The Division of Administrative Hearings has jurisdiction over the subject matter and the parties to this proceeding, pursuant to Subsection 120.57(1) and 408.039(5), Florida Statutes.

    
    

33. An applicant bears the burden of providing its entitlement to a CON. Boca Raton Artificial Kidney Center, Inc. v. Department of Health and Rehabilitative Services, 475 So.2d 360 (Fla. 1st DCA 1985); Florida Department of Transportation v. J.W.C., Inc., 396 So.2d 778 (Fla. 1st DCA 1981).

34. AHCA claims that Principal failed to comply with the requirement of subsection 408.037(2), Florida Statutes, that an application contain:

    
    

    1. complete listing of all capital projects, including new health facility development projects and health facility acquisitions applied for, pending, approved, or underway in any state at the time of application. . . . This listing shall include the applicant's actual or proposed financial commitment to those projects and an assessment of their impact on the applicant's ability to provide the proposed project.

       
       

       AHCA's claim is rejected. Principal's application meets the minimum content requirements. Principal's failure to list any capital projects is consistent with the fact that there were none, and that was understood and described that way by AHCA in the SAAR.

       
       

35. Principal demonstrated compliance with a majority of the applicable preferences in the district and state health plans, as required in subsection 408.035(1)(a), Florida Statutes.

    
    

36. Principal, like the other applicants in the batch, failed to provide the level of detail necessary to satisfy statutory criteria related to a survey of existing services or alternative types of care, as required by subsections 408.035(1)(b) and (1)(d), Florida Statutes.

    
    

37. Principal demonstrated that it was and is able to provide good quality care, and that approval of another home health agency is an incentive for existing providers to compete by enhancing their quality of care. See, subsections 408.035(1)(c) and (1)(l), Florida Statutes.

    
    

38. Having already successfully operated a home health agency, Principal demonstrated its ability to hire or contract with the necessary staff, in partial compliance with subsection 408.035(1)(h), Florida Statutes.

    
    

39. Because of Principal's inconsistencies and references to omitted notes or unattached schedules, the expert opinion that the audited financial statements do not meet generally accepted accounting principles must be accepted. These inconsistencies and omissions render the audited financial statements unreliable, as is the pro forma. Principal failed to establish financial feasibility, as required by subsection 408.035(1)(i), Florida Statutes. For this reason, CON application must be denied.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Agency For Health Care Administration enter a final order

denying Certificate of Need 7285 to Principal Nursing Services, Inc.

DONE AND ENTERED this 27th day of March, 1995, in Tallahassee, Leon County, Florida.

ELEANOR M. HUNTER

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 27th day of March, 1995.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 93-4913

To comply with the requirements of Section 120.59(2), Florida Statutes (1993), the following rulings are made on the parties' proposed findings of fact:

Petitioner, Principal Nursing Services, Inc.'s Proposed Findings of Fact.

1. Accepted in Findings of Fact 3.

2. Accepted in or subordinate to preliminary statement and Findings of Fact 1.

3. Subordinate to Findings of Fact 15.

4. Accepted as correct, on balance, in Findings of Fact 13-23.

5. Rejected in relevant part in Findings of Fact 22.

6. Accepted in Findings of Fact 23.

7. Accepted in or subordinate to Findings of Fact 13-18.

8. Accepted in part and rejected in part in Findings of Fact 13-31.

9-23. Accepted in relevant part or subordinate to Findings of Fact 3,4,5 and 22.

24-27. Accepted in general in Findings of Fact 20.

1. Conclusion rejected in Findings of Fact 29 and 31.

2. Accepted in or subordinate to Findings of Fact 30.

3. Accepted in or subordinate to Findings of Fact 25.

4. Accepted in or subordinate to Findings of Fact 5.

32-33. Accepted in or subordinate to Findings of Fact 20.

34. Accepted in Findings of Fact 14.

35-36. Accepted in or subordinate to Findings of Fact 25.

1. Accepted in or subordinate to Findings of Fact 20.

2. Accepted in Findings of Fact 25 and 29.

3. Accepted facts in preliminary statement and Finding of Fact 22.

4. Accepted in Findings of Fact 23.

5. Accepted in Findings of Fact 30.

6. Accepted in or subordinate to Findings of Fact 30.

7. Accepted in Findings of Fact 15.

8. Accepted in Findings of Fact 17.

9. Accepted in relevant part in Findings of Fact 13-30.

46-47. Accepted in relevant part or subordinate to Findings of Fact 6 and

23.

1. Accepted in or subordinate to Findings of Fact 24.

2. Accepted in Findings of Fact 13 and 22.

3. Accepted in Findings of Fact 15.

4. Accepted in Findings of Fact 17.

5. Accepted in Findings of Fact 18.

6. Accepted in Findings of Fact 13.

7. Accepted in Findings of Fact 25.

8. Rejected as subordinate to Findings of Fact 13 and 22.

9. Issue not established in Findings of Fact 8 and 24.

10. Accepted in Findings of Fact 5.

58-59. Accepted in Findings of Fact 6 and 23.

60-61. Rejected conclusions in Findings of Fact 8-10, and 24-29.

Respondent, AHCA's Proposed Findings of Fact.

1. Accepted in Findings of Fact 1.

2. Accepted in Findings of Fact 7.

3. Accepted in or subordinate to Findings of Fact 1.

4. Accepted in Findings of Fact 6.

5. Accepted in or subordinate to Findings of Fact 1 and 23.

6. Accepted in or subordinate to preliminary statement.

7-11. Accepted in or subordinate to Findings of Fact 7 and 30. 12-15. Accepted in or subordinate to Findings of Fact 6.

16-20. Accepted in Findings of Fact 13.

21. Rejected in Findings of Fact 13.

22-24. Accepted in or subordinate to Findings of Fact 14. 25-28. Accepted in or subordinate to Findings of Fact 15. 29-30. Accepted in or subordinate to Findings of Fact 18.

31. Accepted in or subordinate to Findings of Fact 18 and 24.

32-35. Accepted in or subordinate to Findings of Fact 13 and 21.

1. Rejected in Findings of Fact 13.

2. Accepted in or subordinate to Findings of Fact 15. 38-39. Rejected in Findings of Fact 15.

1. Accepted in or subordinate to Findings of Fact 14.

2. Rejected in Findings of Fact 13.

3. Accepted in or subordinate to Findings of Fact 24.

4. Accepted in Findings of Fact 14.

44-45. Accepted in Findings of Fact 16.

46-48. Accepted in or subordinate to Findings of Fact 17. 49-51. Accepted in or subordinate to Findings of Fact 19.

52. Rejected in Findings of Fact 14.

53-54. Accepted in or subordinate to Findings of Fact 19. 55-56. Accepted in or subordinate to Findings of Fact 24.

1. Rejected in part in Findings of Fact 20 and accepted in part in Findings of Fact 14.

2. Accepted in Findings of Fact 20.

59-70. Accepted in or subordinate to Findings of Fact 20. 71-72. Accepted in Findings of Fact 8 and 24.

73-76. Accepted in Findings of Fact 21.

77-87. Accepted in or subordinate to Findings of Fact 8 or 24.

88. Accepted in or subordinate to preliminary statement.

1. Rejected in part in Findings of Fact 11.

2. Issue not reached.

92-93. Rejected in Findings of Fact 23 and 30.

94-104. Accepted in Findings of Fact 8-11, and 24-29. 105-107. Issue not reached, See, Findings of Fact 12.

108-109. Accepted in or subordinate to Findings of Fact 10 and 11.

110-113. Accepted in or subordinate to Findings of Fact 8-11 and 24-29, except first sentence of footnote in Findings of Fact 8.

114-116. Accepted in or subordinate to Findings of Fact 20.

1. Rejected in Findings of Fact 20.

2. Subordinate to Finding of Fact 20.

119-120. Accepted in relevant part or subordinate to Findings of Fact 14.

121. Accepted in part in Findings of Fact 29.

COPIES FURNISHED:

James H. Peterson, III, Attorney Agency for Health Care Administration

325 John Knox Road, Suite 301 Tallahassee, Florida 32303-4131

Heidi Garwood, Attorney 1317 Winewood Boulevard Building B, Room 234

Tallahassee, Florida 32399-0700

Steven M. Weinger, Attorney Elaine Tetzell, Attorney Kurzban, Kurzban & Weinger, P.A.

2650 Southwest 27th Avenue, 2nd Floor Miami, Florida 33133

R. S. Power, Agency Clerk

Agency for Health Care Administration Atrium Building, Suite 301

325 John Knox Road Tallahassee, Florida 32303

Harold D. Lewis, Esquire The Atrium, Suite 301

325 John Knox Road Tallahassee, Florida 32303

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions to this recommended order. All agencies allow each party at least ten days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should contact the agency that will issue the final order in this case concerning agency rules on the deadline for filing exceptions to this recommended order. Any exceptions to this recommended order should be filed with the agency that will issue the final order in this case.

================================================================= AGENCY FINAL ORDER

=================================================================

STATE OF FLORIDA

AGENCY FOR HEALTH CARE ADMINISTRATION

PRINCIPAL NURSING SERVICES, INC.,

Petitioner, CASE NO.: 93-4913 CON NO.: 7285

vs. RENDITION NO.: AHCA-95-728-FOF CON STATE OF FLORIDA, AGENCY

FOR HEALTH CARE ADMINISTRATION,

Respondent.

/

FINAL ORDER

This cause came on before me for the purpose of issuing a final agency order. The Hearing Officer assigned by the Division of Administrative Hearings (DOAH) in the above-styled case submitted a Recommended Order to the Agency for Health Care Administration (AHCA). The Recommended Order entered March 27, 1995, by Hearing Officer Eleanor M. Hunter is incorporated by reference.

RULING ON EXCEPTIONS FILED BY AHCA

Principal seeks a CON to establish a Medicare certified home health agency in Dade County. The agency's initial decision was to deny the application. The hearing officer recommends denial based on Principal's failure to establish the financial feasibility of its proposal.

Counsel excepts to the wording of paragraph 16 where the hearing officer considered whether Principal's proposal is consistent with the State Health Plan. /1 The State Health Plan provides for preference ". . . to an applicant proposing to serve counties which are underserved by existing home health agencies." The hearing officer cited testimony that there had been no determination that the counties making up District 11 (Dade and Monroe) were underserved and concluded that the preference was inapplicable. Implicit in the hearing officer's conclusion is the conclusion that Principal is not entitled to this preference for its proposal to establish a Medicare certified home health agency in Dade County. See also paragraphs 19 and 36 where the hearing officer noted the failure of Principal to provide any analysis of the extent to which existing agencies meet need in Dade County.

Counsel excepts to the hearing officer's rejection of the proffered testimony of Roger Bell, a staff accountant with AHCA, regarding the effect of pending federal litigation in which treble damages and penalties are sought from Principal on the basis of false or fraudulent Medicaid claims. Mr. Bell's opinion on the impact of this litigation on financial viability of Principal is

clearly relevant and admissible. Likewise, counsel excepts to the rejection of Mr. Bell's testimony concerning Principal's 1992 tax return and the copy of the tax return. This evidence is also relevant and admissible on the issue of Principal's financial condition. Section 120.58(1)(a), Florida Statutes. On the basis of other evidence, the hearing officer concluded that Principal failed to establish the financial feasibility of its proposal; therefore, the excluded testimony and tax return is merely cumulative and remand to the hearing officer to reweigh the evidence is not required. See Friends of Children vs. Department of Health and Rehabilitative Services, 504 So2d 1345 (Fla. 1st DCA 1987)

Counsel excepts to the hearing officer's finding that Principal has provided quality services. See paragraphs 20 and 37. There is conflicting evidence on this issue; therefore, the exception is denied.

RULING ON EXCEPTIONS FILED BY PRINCIPAL

Principal challenges the hearing officer's conclusion that it failed to establish that its proposal is financially feasible. / 2 Principal maintains that the conclusion is unsupported by the record. At this level of review I have no authority to reweigh the evidence. Heifetz vs. Department of Business Regulation, 475 So2d 1277, 1281 (Fla. 1st DCA 1985). The hearing officer's conclusion is clearly supported by competent, substantial evidence; therefore, the exceptions are denied.

FINDINGS OF FACT

The agency hereby adopts and incorporates by reference the findings of fact set forth in the Recommended Order.

The agency hereby adopts and incorporates by reference the conclusions of law set forth in the Recommended Order except for the rulings on the admissibility of evidence set forth above.

Based upon the foregoing, it is

ADJUDGED, that the application of Principal Nursing Services, Incorporated, for CON 7285 be DENIED.

DONE and ORDERED this 15th day of May, 1995, in Tallahassee, Florida.

Douglas M. Cook, Director Agency for Health Care

Administration

ENDNOTES

1/ one of the statutory review criteria is whether there is need for a proposal service or facility "... in relation to ... the state health plan..." Section 408.035(1)(a), Florida Statutes.

2/ Suburban Medical Hospital vs. Department of Health and Rehabilitative Services, 600 So2d 1195, 1196 - 97 (Fla. 3rd DCA 1992)(Failure to demonstrate financial feasibility was dispositive); Lake Hospital vs. Department of Health and Rehabilitative Services, 12 FALR 3438, 3440 (HRS of 7/25/90)(same) affirmed at 589 So2d 310 (Fla. 1st DCA 1991)

A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER 15 ENTITLED TO A JUDICIAL REVIEW WHICH SHALL BE INSTITUTED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF AHCA, AND A SECOND COPY ALONG WITH FILING FEE AS PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE AGENCY MAINTAINS ITS HEADQUARTERS OR WHERE A PARTY RESIDES. REVIEW PROCEEDINGS SHALL BE CONDUCTED IN ACCORDANCE WITH THE FLORIDA APPELLATE RULES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED.

COPIES FURNISHED:

Eleanor M. Hunter Hearing Officer

The DeSoto Building 1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

James H. Peterson, Esquire Senior Attorney, Agency for Health Care Administration

325 John Knox Road

Atrium Building, Suite 301 Tallahassee, Florida 32303-4131

Steven M. Weinger, Esquire Elaina Tetzell, Esquire

KURZBAN, KURZBAN & WEINGER, P.A.

2650 Southwest 27th Avenue Miami, Florida 33131

Elizabeth Dudek (AHCA/CON) Alberta Granger (AHCA/CON) Elfie Starnm (AHCA/CON)

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a true and correct copy of the foregoing has been furnished to the above named addresses by U.S. Mail this 16th day of May, 1995.

R. S. Power, Agency Clerk State of Florida, Agency for Health Care Administration

325 John Knox Road

The Atrium Building, Suite 301 Tallahassee, Florida 32303

(904)922-3808

Docket for Case No: 93-004913CON

Orders for Case No: 93-004913CON