STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

HEALTHCARE SYSTEMS U.S.A., INC., )

)

Petitioner, )

)

vs. ) Case No. 96-4018

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

)

Respondent. )

) NATIONAL HEALTHCARE, L.P., )

)

Petitioner, )

)

vs. ) Case No. 96-4020

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

)

Respondent. )

) RHA/FLORIDA OPERATIONS, INC., )

)

Petitioner, )

)

vs. ) Case No. 96-4021

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

)

Respondent. )

)

RECOMMENDED ORDER

This case was heard by Eleanor M. Hunter, an Administrative Law Judge with the Division of Administrative Hearings, on

May 19-23, 1997, in Tallahassee, Florida.

APPEARANCES

For Petitioner, James C. Hauser, Esquire Healthcare System Skelding, Labasky, Corry U.S.A., Inc.: Eastman, Hauser & Jolly, P.A.

Post Office Box 669 Tallahassee, Florida 32302

For Petitioner, Gerald B. Sternstein, Esquire National Frank Rainer, Esquire Healthcare, L.P.: Ruden, Barnett, McClosky, Smith

Schuster & Russell, P.A. Post Office Box 10888 Tallahassee, Florida 32302

For Petitioner, Theodore E. Mack, Esquire RHA/Florida 803 North Calhoun Street Operations, Inc.: Tallahassee, Florida 32303

For Respondent, Paul A. Vazquez, Senior Attorney Agency For Health Agency for Health Care Administration Care Fort Knox Building 3

Administration: 2727 Mahan Drive, Suite 3431

Tallahassee, Florida 32308-5403 STATEMENT OF THE ISSUES

Whether there is a need for any additional home health care agencies in AHCA District 5 for Pinellas and Pasco Counties, and, whether the certificate of need applications filed in March 1996 to establish Medicare-certified home health agencies in District

5 meet, on balance, the statutory and rule criteria for approval. PRELIMINARY STATEMENT

Healthcare Systems, U.S.A., Inc. (Healthcare); National Healthcare, L.P. (NHC); and RHA/Florida Operations, Inc. (RHA) are certificate of need (CON) applicants to operate Medicare- certified home health agencies in Agency For Health Care Administration (AHCA) District 5 for Pinellas and Pasco Counties.

The applications at issue in this proceeding were filed in the first batching cycle of 1996.

At the final hearing, Healthcare presented the testimony of Daniel Sullivan, expert in health planning and health care finance, including financial feasibility; Muriel H. Scott, R.N., expert in quality of care and quality assurance for home health care; and Patricia DiBattista, R.N., expert in home health nursing, development, operations, and management. Healthcare's Exhibits 1-12 and 14-19 were received in evidence.

NHC presented the testimony of Joanne Mott Batey, expert in home health care administration and operations; Lisa Reed, R.N., expert in nursing administration and home health agency nursing; Judy Thomason, C.P.A., expert in health care finance and home health care financial feasibility; and Bruce Duncan, expert in health planning, gerontology, and Florida CON rules and regulations. NHC's Exhibits 1-8 were received in evidence.

RHA presented the testimony of Michael Foxworthy, expert in nursing home and home health management and operations; Ron Swartz, expert in health care accounting; and Jim White, expert in health planning and CON review. RHA's Exhibits 1-3 were received in evidence.

AHCA presented the testimony of Cheryl Clark, expert in CON application review and health planning as related to the analysis of proposed CON projects, and Mark H. Boehmer, expert in accounting, financial review of CON applications, and financial

feasibility of CON projects. AHCA's Exhibits 1, 5 and 6 were received in evidence.

The transcript of the final hearing was filed on May 19, 1997. After extensions of time, granted at the request of AHCA and NHC, proposed findings of fact and conclusions of law were filed on July 31 and August 1, 1997. On August 1, Healthcare also filed a Motion for Official Recognition of the Recommended Orders in Care First, Inc. v. AHCA, DOAH Case No. 96-4053 (Recommended Order issued June 9, 1997), and Home Health Care Services v. AHCA, DOAH Case No. 96-4058 (Recommended Order issued June 27, 1997). No responses in opposition having been received, the Motion is granted.

Before the final hearing, the parties stipulated that the criteria in Subsections 408.035(1)(f), (g), (k), and (m) are not in dispute or not applicable to this proceeding. During a post- hearing conference, the parties also agreed that the criteria in Subsection 408.035(1)(c), related to the ability to provide quality of care, is met by the applicants and that Subsection 408.035(1)(j) for HMO applicants is inapplicable to this case.

FINDINGS OF FACTS

1. The Agency For Health Care Administration (AHCA) is the state agency authorized to administer the certificate of need (CON) program for health care facilities and services in Florida. Subsection 408.034(1), Florida Statutes.

2. AHCA preliminarily denied all CON applications filed in the first batching cycle of 1996, to establish Medicare-certified home health agencies in Florida, including those filed by Healthcare System U.S.A., Inc. (Healthcare), National Healthcare,

   L.P. (NHC), and RHA/Florida Operations, Inc. (RHA) to operate agencies in AHCA District 5. In the prior batching cycle, three additional home health agencies were approved for District 5.

3. Home health agencies typically hire or contract with nurses, and physical, occupational, and speech therapists to care for medical and rehabilitative needs of patients in their homes, frequently following discharge from acute care facilities. Agencies also hire personal care aides to assist patients with bathing and light housekeeping. A home health agency can be licensed to operate in Florida without a CON but must have a CON to receive reimbursements from Medicare, the largest payor source for home health care.

   The Applicants

   
   

4. Healthcare is the applicant for CON Number 8396 to establish a Medicare-certified home health agency in AHCA District 5 for Pinellas and Pasco Counties. Healthcare proposes to have its CON conditioned on the provision of 7.5% of total visits to Medicaid and 1.5% of total visits to charity patients.

5. The sole shareholder of the applicant, Healthcare, is also the sole shareholder of related companies which operate a total of 7 home health agencies. Healthcare-related company

   agencies are located in Ohio, Pennsylvania, Nevada, California, and in Districts 9, 10 and 11 in Florida. The existing Healthcare agencies are all accredited by the Joint Commission for Accreditation of Health Care Organizations (JCAHO). In the first batching cycle of 1996, Healthcare companies applied for CONs for District 5 and adjacent District 6. In a settlement agreement with Healthcare, AHCA approved the issuance of the CON for District 6. The identical local health plan applies to both Districts 5 and 6.

6. The sole shareholder of the applicant and the related home health agencies is also the sole shareholder of Healthcare Systems, Inc., a 35-employee management company. The management company provides clinical protocols and oversight, quality assurance, human resource, payroll, billing, and risk management services to the affiliated home health agencies. The management company also establishes referral networks and monitors regulatory and licensure requirements for the affiliated agencies.

7. The Healthcare agencies provide a full range of services. Nurses, home health aides, physical therapists, occupational therapists, and social workers are available to treat patients. In addition, Healthcare provides IV therapy, nutritional therapy, and psychiatric nursing. The administrator, who will be a registered nurse, and staff, other than the

   therapists, will be salaried. In Florida, therapists are customarily on contract to provide home health care.

8. Healthcare's total project cost is $32,913 for CON Number 8396. As of June 30, 1995, Healthcare's available cash was $257,788.

9. AHCA specifically criticized Healthcare for not having a history of providing home health care and for proposing to charge the same for physical therapist and skilled nursing visits. Although the legal entity which is the applicant has not provided home health care, related companies are home health care agencies with a history of complying with data reporting requests and appropriate quality of care standards. Expert testimony established the importance of costs rather than charges in the Medicare cost-based reimbursement system. Preliminarily, AHCA also determined that the Healthcare proposal was not financially feasible. At the final hearing, however, AHCA's expert certified public accountant acknowledged that Healthcare's CON application pro forma, which shows a net profit of $2,300 in the second year of operation, demonstrates that the project is financially feasible.

10. NHC, with headquarters in Murphreesboro, Tennessee, operates 98 nursing homes in 9 states, and 33 Medicare certified home health agencies. In 1995, NHC exceeded 700,000 home health visits from 28 agencies in 3 states. In Florida, NHC operates 4,912 nursing home beds and 13 home health agency offices. In

    District 5, NHC operates seven nursing homes with a total of 859 licensed beds. NHC is the applicant for CON Number 8395 to establish a Medicare-certified home health agency in the District. NHC proposes, as conditions for approval, that it will provide a minimum of 2% of total visits to Medicaid and 1.5% to indigent patients and that it will serve patients throughout District 5.

11. NHC also proposes a condition to provide a full range of routine and high technology services, including ventilator, infusion, chemotherapy, antibiotic, obstetric, and pediatric nursing care. The condition includes services for AIDS patients, for whom NHC expects to provide experimental treatments, participation in the Medicaid waiver program, and highly skilled pain management for the terminally ill.

12. At the corporate level, NHC employs directors of clinical, quality improvement, social, dietary, nutritional, and therapeutic services. Computer software, written and designed by NHC staff for home health operations, is provided to the home health agencies. Regional offices offer billing, accounting, and payroll support. Two regional nurses in Florida provide in- service education and monitor the needs of the individual offices. NHC has a wide array of employee benefits, with an established career ladder, enhanced by internal training and tuition reimbursement programs.

13. NHC's estimated total project cost is $87,115, of which approximately $65,000 is attributable to computer, furniture, telephones, and other office equipment. In 1995, NHC's cash, cash equivalents, and marketable securities exceeded $6.3 million. NHC projects profits of $776 in year one and $25,000 in year two from the operations of a home health agency in District 5.

14. RHA, a private not-for-profit corporation, owns Glen Oaks Health Care Center (Glen Oaks), a 76-bed nursing home, in Clearwater, Pinellas County. RHA is the applicant for CON Number 8394 to establish a Medicare-certified home health agency in AHCA District 5. RHA will accept conditions requiring 2.5% of total visits to Medicaid and 1% to charity care. RHA also commits to serve AIDS patients, to provide a full complement of home health services, to provide consumer survey data to AHCA, to become JCAHO-accredited, to serve payor groups as listed in the pro forma, to implement quality assurance procedures described in the CON application, to offer twenty-four hour local or toll-free telephone call and response capability, and not to sub-contract with non-Medicare agencies.

15. HealthPrime, Inc., is the company which operates Glen Oaks Health Care Center and will, if CON number 8394 is approved, operate the home health agency as a nursing home-based service. The agency will use available office and meeting room spaces within the Glen Oaks building. HealthPrime manages approximately

    40 nursing homes in 12 states, including the 3 Florida nursing homes owned by RHA, and operates 5 home health agencies in Florida, Indiana, Kansas, Colorado, and Virginia, all of which are Medicare-certified except one in Lake City, Florida. In Florida, RHA owns and HealthPrime manages Riverchase Care Center in Quincy and Brynwood Center in Monticello. Glen Oaks and Riverchase have superior ratings, while Brynwood is rated standard. HealthPrime receives a fee of 6% of gross patient revenues for its management services.

16. RHA's total project cost is $51,233. HealthPrime, with the unanimous consent of its Board of Directors, has authorized a

    $300,000 line of credit to RHA to finance home health agencies. The time for using the line of credit was extended to cover the delay caused by the preliminary agency action and subsequent administrative litigation.

17. NHC and AHCA criticized RHA and HealthPrime for lacking home health experience because RHA does not operate home health agencies. At the time the CON application was filed, HealthPrime operated one agency in Indiana but currently operates 5. AHCA also criticized the proposal for projected understaffing and underestimating costs, by proposing .5 full-time equivalent (FTE) staff for an administrator. The RHA proposal was also criticized as financially infeasible due to high management fees, lease expenses, and an accumulated fund deficit of approximately

    $1.5 million.

18. In April 1996, HealthPrime established a home health agency at a nursing home in a suburb of Indianapolis, Indiana, a non-CON state. That agency currently averages 1300 to 1400 visits a month, despite competition from over 100 agencies in metropolitan Indianapolis. The nursing home administrator is also the home health agency administrator. To begin home health operations, HealthPrime also hired an administrative assistant and a nursing supervisor. An additional employee was hired after the agency reached almost 1200 visits a month. No deficiencies were found in the annual survey of the Indianapolis agency and the pre-opening survey of another HealthPrime agency in Lynchburg, Virginia.

19. When the applications were filed and reviewed, AHCA had no rule methodology to calculate the numeric need for Medicare- certified home health agencies and no published fixed need pool for home health agencies. Healthcare, NHC, and RHA also assert that AHCA had no specific planning horizon for that batching cycle.

20. Without any numeric need methodology of its own or criticism in the State Agency Action Report (SAAR) of those used by applicants, AHCA determined preliminarily that no need exists for additional home health agencies in District 5. In addition to the issues concerning financial feasibility, the decision was based, in large part, on the applicants' failure to document problems in the accessibility, quality of care, efficiency,

    appropriateness, or adequacy of existing home health agencies. The applicants assert that, given the theoretically unlimited capacity of approximately 38 existing home health agencies in District 5, it is impossible to demonstrate that an access problem exists. Once an agency has a CON, the agency is authorized to open offices in some or all of the counties in the District.

    Subsection 401.035(1)(a) - need in relation to state and district health plans

    
    

21. The applicable district plan preferences favor applicants who demonstrate an intent (1) to serve HIV positive patients; (2) to provide at least 10% of gross revenues for uncompensated care: (3) to offer a full range of services, twenty-four hours a day, seven days a week; (4) to continue to cooperate with state and local data collection efforts; and (5) to develop linkages with hospitals, government agencies, and physicians. See also Subsections 408.035(1)(n), (h), (e), and (o), Florida Statutes.

22. Healthcare does not meet the preference for providing 10% of gross revenues to uncompensated care, proposing instead 7.5% Medicaid and 1.5% charity care. As a new provider of home health care, according to AHCA's CON expert, Healthcare cannot document a history of, or that it will cooperate with data collection efforts. Although the legal entity which is the applicant is a new provider, it is affiliated with 3 existing home health agencies and a management company which do cooperate

    in data collection efforts. Healthcare meets district health plan preferences 1, 3, 4, and 5.

23. NHC and RHA also meet all of the district plan preferences, except the preference for proposing to provide 10% of gross revenues for uncompensated care. NHC's proposal, 2% Medicaid and 1.5% charity, and RHA's proposal, 2.5% Medicaid and 1% charity, are significantly less than that of Healthcare. In 1994, the District 5 home health agencies provided 5% Medicaid and charity care. AHCA's expert testified that, in this context, providers exceeding the district norm are disproportionate share providers. NHC and RHA will enhance the continuum of care and benefit from existing community linkages as a result of operating nursing homes in the district. RHA's location within a nursing home with shared staff, offers the most desirable shared services possibilities.

24. The state health plan includes the following six preferences for proposals: (1) to serve AIDS patients; (2) to provide a full range, including high technology services unless sufficiently available and accessible; (3) to provide, and with a history of providing, a disproportionate share of Medicaid and indigent patients as compared to other providers; (4) to serve underserved counties; (5) to measure patient satisfaction with consumer survey data; and (6) to establish a comprehensive quality assurance program and become JCAHO-accredited.

25. All of the applicants will serve AIDS patients, offer a full range of services, survey to measure patient satisfaction, and establish quality assurance programs leading to JCAHO- accreditation. The counties in District 5 are not underserved.

26. AHCA's expert acknowledged that all of the applicants meet the preferences regarding AIDS/HIV positive service, by proposing a quantitative condition, by projecting the level of service, or by stating that they will serve patients with AIDS/HIV positive.

27. Historically, RHA has provided over 90% Medicaid in nursing homes outside District 5 and over 70% Medicaid care at Glen Oaks. NHC has provided from 30 to 50% Medicaid care in its Pinellas County Nursing Homes, as compared to an average of 55% in the District.

    Subsection 408.035(1)(b) - availability, quality care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of existing services

    
    

    AHCA's Interim Policies

    
    

28. AHCA notified each applicant of the interim policy criteria it would use to determine need, in the absence of a numeric need methodology. The notification was as follows:

    Pursuant to the Final Order of January 26, 1994, (Case No. 93-5711RX), the rule establishing criteria for need and the review of Medicare certified home health agencies (59C-1.031, Florida Administrative Code) was invalidated. The agency appealed the Final Order. However, the agency is not appealing the invalidation of the need methodology.

    Therefore, for the review of applications which propose to establish a Medicare

    certified home health agency, it is incumbent upon the applicant to demonstrate need in its application. The following criteria should be addressed:

    
    

    1. Clearly demonstrate that there is an access problem;

       
       

    2. Clearly demonstrate that a particular payor group is not being served;

       
       

       1. Show where these individuals are currently. (being denied)

          
          

       2. What plan does the applicant have to assure these individuals will be served?

          
          

       3. How will the proposed agency operate differently to assure continued service this payor group?

          
          

    3. Clearly demonstrate that existing home health services are limited and not available to the residents in the district.

       Familiarity with similar programs and services in the area is essential;

       
       

    4. Clearly present linkage with doctors, hospitals and nursing facilities;

       
       

    5. Does this proposed agency plan services not currently being provided in the district? Clearly identify and describe these services;

       
       

    6. Does this proposed agency present its own need methodology?

       
       

       1. Validate the reasonableness of the need methodology presented.

          
          

       2. If the need methodology is presented on a national model, validate its reasonableness based on what is existing in the district.

          
          

    7. If a specific methodology is not addressed, but rather an analysis or studies were performed to demonstrate that an

       appropriate number of persons will utilize the service, please provide; and

       
       

    8. Does the proposed application have committed referral arrangements currently within the district?

       
       

29. AHCA's interim policy was criticized by Healthcare's expert as imposing virtually impossible burdens on applicants regarding the access issues. Unlike hospitals or other health care facilities which have some fixed limit on capacity,

    Mr. Daniel Sullivan noted, existing home health agencies have an unlimited capacity to expand. He also noted that the need methodologies used by AHCA rely on the adequacy of the demand for service, not the inadequacy of access. In addition, new entrants to a market can create beneficial competition in the quality and types of services, since costs are not a competitive factor with Medicare reimbursements. See also Subsection 408.035(1)(l), Florida Statutes.

30. NHC attempted to inventory the services provided by 29 existing home health agencies. Based on the inventory, reported in the application on AHCA Form 1459, NHC demonstrated that 24 of the agencies were not providing homemaker services and 13 did not offer respiratory services. NHC's expert also found one agency which did not offer medical supplies and 2 with no dietary guidance. There is no measure or indicator of the need or demand for these services. Form 1459 also indicates that all of these services were planned by 3 additional CON-approved, but not then operational agencies.

31. RHA attempted to respond to each of the 8 interim policy criteria but was unable to document a systemic access problem.

32. AHCA's expert examined the 1994 utilization data for 26 reporting agencies but performed no numeric need calculations or any critique of those presented by the applicants. She acknowledged the difficulty of evaluating existing providers to determine if they are over-utilized, noting that the agencies can respond to increasing demand by increasing visits. AHCA has no regulatory control over the number of offices or subunits operated by a provider under a CON and a single Medicare provider number. In addition, the data are suspect and unreliable. For example, one agency, Community Homes Health Care in Pasco County, reported approximately 200,000 visits in 1993, but none in 1994 and 1995.

    Numeric Need Analyses

    
    

33. Healthcare's expert in health planning described the reimbursement system designed to reduce acute care hospital lengths of stay and to encourage less expensive alternatives, including home health care. He also examined trends in home health use rates in District 5 and Florida. From 1990 to 1995, use rates increased an average of 18% annually in District 5 and 26.3% in Florida, while population increased only .8% and 1.8% in District 5 and Florida, respectively. From 1992 to 1995, home health use rates increased an average of 9.66% annually, as

    compared to a 2.2% average annual increase in the population 65 and over. The size of home health agencies in District 5 has also increased from an average of 80,819 visits an agency in 1994 to 82,347 visits an agency in 1995. By comparison, the average size of home health agencies statewide is 72,000 visits. The significant growth of home health agency visits, as contrasted to much lower levels of population growth, demonstrates the prevailing shift from other levels of care to home health care.

34. Healthcare's expert used the actual District 5 use rate of 6.86%, inflated forward by the statewide annual rate of change from 1992 to 1995, or 9.66%, applied to the projected population in 1998, 1999, and 2000 to project total visits for those years. Assuming that each home health agency in District 5 will continue to average 82,347 annual visits, Healthcare demonstrated a need for an additional 4.74 home health agencies in the District in 1998, 8.37 in 1999, and 12.89 in 2000. Using the lower, actual 1994 to 1995 change in the use rate for District 5, or 8.36%, as a conservative check on projections, Healthcare's expert demonstrated a need for 3.49 additional home health agencies in the District in 1998, 6.54 in 1999, and 10.35 in 2000. However, the results derived from 3-year trends are, in general, more reliable than a 1-year experience. In his calculations, Healthcare's expert used 31, rather than the actual existing number of 38 home health agencies in District 5. Using 31 home health agencies which reported utilization to the state is

    appropriate, since the corresponding utilization rates were unavailable for the non-reporting agencies. The methodology demonstrated no need for an additional home health agency to accommodate the projected additional visits in 1997.

35. Healthcare expected that 1996 approvals would result in operational home health agencies in 1998. After the resulting delays due to the preliminary denials and administrative proceedings, Healthcare asserts that 1999 is the appropriate planning horizon. Other more reasonable estimates are that a home health agency approved in 1997 can be operational in 6 months, or in 1998.

36. In its analysis of need, NHC used historical utilization rates and population growth within the District from 1993 and 1994. NHC's methodology resulted in a projection of 2,257,904 home health visits for 1995 in which actual visits were 2,223,369. NHC used 38 agencies (37 existing and approved and assumed approval of its own) in contrast to Healthcare's use of

    31 agencies (those reporting to AHCA and approved in 1995). NHC also assumed an increasing agency size rather than holding agency size constant at the 1995 average, as Healthcare did. NHC and Healthcare, despite the differences in methodologies, have very similar results. NHC projects 2,958,454 visits in 1998, while Healthcare projects 2,943,465 visits in 1998.

37. NHC makes nursing home referrals to home health agencies in District 5. The NHC nursing home in Hudson

    discharged 531 clients to the community or to assisted living facilities in 1995, 343 of whom received follow-up home health agency services.

38. The numeric need methodology used by RHA is the same as that used by another company, Mariner, in the October 1995 batching cycle in which five Mariner applications for Medicare home health agencies were approved. RHA's expert inflated total 1995 home health agency visits by 12%, and assumed a 5% increase in visits by 38 existing agencies. The result was a need for no new agencies in 1996, for 2.48 in 1997, and for 5.31 in 1998. Revising the analysis with 37 existing agencies, RHA's health planning expert projected a need for 2.82 additional agencies in 1996, 5.48 in 1997, and 8.31 in 1998. RHA's expert also revised the analysis by Healthcare's expert to reflect 37, rather than 31 existing and approved agencies, which resulted in a need for 5.6 additional home health agencies in 1998, 9.9 in 1999, and 15.38 in 2000.

39. Whether there is need for additional home health agencies and the magnitude of that need depends, in this case, on the appropriate date for the planning horizon. In Agency For Health Care Administration v. Principal Nursing Services, Inc., DOAH Case No. 93-5711RX, reversed in part, 650 So. 2d 1113 (Fla. 1st DCA 1995), the court upheld the invalidation of Rule 59C- 1.031(3)(a)-(c), but found no sufficient basis in the record for the invalidation of subsections (1),(2), and (3)(d)-(g).

40. In the 1994 version of the Rule, the planning horizon was defined in Rule 59C-1.031(1)(f), Florida Administrative Code, as follows:

    (f) Planning Horizon. The planning horizon is the anticipated timeframe within which the agency is expected to be licensed. The planning horizon for applications submitted between January 1 and June 30 of each year, shall be July of the following year; the planning horizon for applications submitted between July 1 and December 31 of each year shall be January of the year following the year subsequent to the application deadline.

    Currently, the planning horizon for home health agencies is described in Rule 59C-1.031(2)(i), which states:

    (i) "Planning Horizon." The date by which a proposed new Medicare certified home health agency is expected to be certified. For purposes of this rule, the planning horizon for applications submitted between January 1 and June 30 is July 1 of the year 1 year subsequent to the year the application is submitted; the planning horizon for applications submitted between July 1 and December 31, is January 1 of the year 2 years subsequent to the year the application is submitted.

41. AHCA's expert witness' testimony on the issue of the appropriate planning horizon is imprecise and inconsistent. On page 611, beginning at line 9 of the transcript, the testimony is as follows:

    Q. Did you have in rule form a planning horizon for these applications the specific year planning horizon in rule form? Do you understand what I'm asking?

    
    

    A. Yes, I understand what you're asking. In rule form, yes.

    Q. Where?

    
    

    A. We were basing our planning horizon -- even though we did not have a numeric need, we were still basing the applications on a planning horizon for, I believe it is in here, let's see. It is the 1997 planning horizon I believe.

    
    

    Q. Which page are you referring to?

    
    

    A. I was doing it in my head. There's not anything on the SAAR that says that.

    
    

    Q. The SAAR does not indicate that the Agency was looking for a particular planning horizon to assess need; is that correct?

    
    

    A. Correct.

    Q. Now, was there a rule in place at the time the applications were filed, or for that matter when the decision was made, which clearly indicated what the need planning horizon was for these applications?

    
    

    A. No.

    
    

42. Although the applicants' experts testified that the planning horizon is the time when the projects are anticipated to be operational, that opinion gives no meaning to the second sentence in Rule 59C-1.031(2)(i). According to the rule, the appropriate planning horizon for these applications, submitted between January and June 1996, is July 1, 1997.

43. Healthcare's exhibit 9, Shands Teaching Hospital and Clinics, Inc. v. State, Agency For Health Care Administration, DOAH Case No. 96-4075, includes in finding of fact 9, a reference to the July 1997 planning horizon. See also finding of fact 197 in Care First, Inc. v. Agency for Health Care Administration, DOAH Case No. 95-4053 (Recommended Order issued June 9, 1997), and finding of fact 20 in Home Health Care Services, d/b/a SouthMed Health Care v. Agency for Health Care Administration, DOAH Case No. 96-4058 (Recommended Order issued June 27, 1997).

44. The projection of zero numeric need in District 5 as of July 1997, is supported by competent substantial evidence presented by Healthcare, which is accepted over that presented by RHA, because Healthcare's methodology and findings were verified by NHC.

45. Assuming, therefore, that the applicants are qualified and capable health care providers, their applications should be denied because they failed to show numeric or other need for their services in the District as of the appropriate planning horizon. The applicants also failed to demonstrate any not normal circumstances, or that existing home health services are lacking in availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, or adequacy.

    CONCLUSIONS OF LAW

    
    

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

47. The applicants have the burden of proving that their CON applications should be approved based on a balanced consideration of the criteria. Boca Raton Artificial Kidney Center v. Department of Health and Rehabilitative Services; Balsam v. Department of Health and Rehabilitative Services, 447 So. 2d 361 (Fla. 1st DCA 1994).

48. Rule 59C-1.031(2)(i) established July 1997 as the planning horizon to determine the need for the home health CON applications filed between January and July 1996. That conclusion is compelled by the rules of statutory and rule construction and by the concept of comparative review batching cycles. University Medical Center, Inc. v. Department of Health

    and Rehabilitative Services, 483 So. 2d 712 (Fla. 1st DCA 1985) and Gulf Court Nursing Center v. Department of Health and Rehabilitative Services, 483 So. 2d 700 (Fla. 1st DCA 1985).

49. As explained in Gulf Court, the notion that need can be demonstrated for a more distant future date than the planning horizon is an attempt to achieve unwarranted priority over subsequently filed applicants. That, in turn, as also noted in Gulf Court, destroys the batching concept and defeats the purpose of an orderly comparative review process. See Gulf Court, supra at 708. In Meridian, Inc. v. Department of Health and Rehabilitative Services, 548 So. 2d 1169 (Fla. 1st DCA 1989), the Court upheld the Department's interpretation of its rules to determine need at the fixed planning horizon, based on the time of the initial application. Establishing need based on more recent estimates of population, such as those available at the time of hearing, provides no basis for ever fixing need, and perpetuates the evils of the system addressed in Gulf Coast. 548 So. 2d at 1171. In light of these decisions, the notion that the planning horizon is a moving target, based in part on the date of the administrative hearing, is rejected.

50. On balance, the applications meet the criteria of Subsection 408.035(1)(a), Florida Statutes, and the statutory provisions which correspond to the health plan preferences.

51. The applications do not meet the criteria of Subsection 408.035(1)(b), Florida Statutes.

52. Balancing and weighing the applicable criteria, no need existed for an additional home health agency in District 5 for the July 1997 planning horizon and the applications should be denied. See Department of Health and Rehabilitative Services v. Johnson and Johnson, 447 So. 2d 361 (Fla. 1st DCA 1984).

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is

RECOMMENDED that the applications of Healthcare for CON No. 8396, of NHC for CON No. 8395, and RHA for CON No. 8394 be denied.

DONE AND ENTERED this 8th day of September, 1997, in Tallahassee, Leon County, Florida.

ELEANOR M. HUNTER

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(904) 488-9675 SUNCOM 278-9675

Fax Filing (904) 921-6847

Filed with the Clerk of the Division of Administrative Hearings this 8th day of September, 1997.

COPIES FURNISHED:

Sam Power, Agency Clerk

Agency for Health Care Administration Fort Knox Building 3

2727 Mahan Drive, Suite 3431

Tallahassee, Florida 32399-5403

Jerome W. Hoffman, General Counsel Agency for Health Care Administration Fort Knox Building 3

2727 Mahan Drive, Suite 3431

Tallahassee, Florida 32399-5403

Paul A. Vazquez, Senior Attorney Agency for Health Care Administration Fort Knox Building 3

2727 Mahan Drive, Suite 3431

Tallahassee, Florida 32308-5403

Gerald B. Sternstein, Esquire Ruden, Barnett, McClosky, Smith

Schuster & Russell, P.A. Post Office Box 10888 Tallahassee, Florida 32302

Cynthia S. Tunnicliff, Esquire Pennington, Culpepper, Moore, Wilkinson,

Dunbar & Dunlap, P.A. Post Office Box 10095

Tallahassee, Florida 32303-2095

Theodore E. Mack, Esquire 803 North Calhoun Street Tallahassee, Florida 32303

James C. Hauser, Esquire Skelding, Labasky, Corry

Eastman, Hauser & Jolly, P.A. Post Office Box 669 Tallahassee, Florida 32302

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within 15 days from the date of this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the Final Order in this case.

Docket for Case No: 96-004018CON

Orders for Case No: 96-004018CON