STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

ALLSTAR CARE, INC.; MEDICORP ) HOME HEALTH CARE SERVICE; and ) MEDSHARES OF FLORIDA, INC., )

)

Petitioners, )

)

vs. ) Case Nos. 96-4064

) 96-4065

AGENCY FOR HEALTH CARE ) 96-4066

ADMINISTRATION, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its designated Administrative Law Judge, David M. Maloney, held a formal hearing in the above-styled case on March 3-5 and April 7 and 8, 1997, in Tallahassee, Florida.

APPEARANCES

For Allstar Care: Robert J. Newell, Jr., Esquire

Newell & Stahl, P.A.

817 North Gadsden Street Tallahassee, Florida 32303

For Medicorp: Michael Manthei, Esquire Broad & Cassell

Suite 1130

Broward Financial Centre

500 East Broward Boulevard

Fort Lauderdale, Florida 33394

For Medshares; Alfred J. Clark, Esquire

117 South Gadsden Street, Suite 201 Tallahassee, Florida 32301

For Respondent: Richard Patterson, Esquire

Agency for Health Care Administration

Fort Knox Building 3, Suite 3431

2727 Mahan Drive

Tallahassee, Florida 32308-5403 STATEMENT OF THE ISSUES

Whether any or all of the applications for certificates of need to establish medicare-certified home health agencies in Broward County (AHCA District 10) by Petitioners Allstar Care, Inc.; Medicorp Home Health Care Services; and Medshares of Florida, Inc., should be approved by the Agency for Health Care Administration.

PRELIMINARY STATEMENT

On August 28, 1996, the Division of Administrative Hearings received a notice from the Agency Clerk for the Agency for Health Care Administration (“AHCA”) advising the division that AHCA had received a request for formal hearing from Allstar Care, Inc.

The notice requested the division to assign a hearing officer (administrative law judge) to conduct all proceedings necessary under law and to submit a recommended order to AHCA.

Attached to the notice was Allstar Care, Inc.'s Petition for Formal Administrative Hearing in which it contested AHCA's denial of its application for CON 8448, an application to establish a new Medicare-certified home health agency in AHCA District 10, Broward County.

In the company of AHCA's notice was a Notice of Related Petitions. The notice advised that two other petitions it had

forwarded to the division were related to Allstar's: those of Medicorp Home Health Care Services (application for CON 8418) and Medshares of Florida, Inc. (application for CON 8419). Indeed, the Agency had also forwarded to the division on the same date a notice requesting that a hearing officer be assigned to conduct proceedings in those two cases as well, both involving applications co-batched with Allstar's to establish Medicare- certified home health agencies in District 10, Broward County.

Beginning with Allstar's petition and followed by that of Medicorp and Medshares, the three petitions were assigned Case Nos. 96-4064, 96-4065 and 96-4066. After designation of the undersigned to conduct the proceedings, the three cases were consolidated pursuant to the notice that they were related and noticed for hearing the week of November 18, 1996.

Following a telephone conference call on a Motion for Continuance filed by the Agency, the case was continued and reset for the week of March 3, 1997. On March 4, 1997, an order was entered continuing Allstar's case until April 7, 1997. The other two cases proceeded forward the week of March 3. Following three days of hearing, March 3, 4, and 5, 1997, the continued hearing

was conducted on April 7, 1997, and finished April 8, 1997.

The parties entered into a Prehearing Stipulation in which it was agreed that these were the only disputed issues of material fact in the proceeding are:

• whether there is a need for any additional Medicare-certified home health agencies in District 10;

  
  

• whether there is a need, based on consideration of State and Local Health Plan elements, for any additional

  Medicare-certified home health agencies in District 10;

  
  

• whether existing Medicare-certified home health agencies are available, efficient, appropriate, accessible, providing quality of care, adequate, and being utilized;

  
  

• the short-term financial feasibility of Medicorp and Allstar, and to the extent it depends on need, the long-term financial feasibility of all applicants;

  
  

• whether Medicorp’s and Allstar's applications evidence an intent to rely solely on independent contractors for the provision of certain direct patient services and, if so, whether such reliance contravenes federal regulation and would compromise quality of care;

  
  

• the probable impact of the proposed projects on the cost of providing services, upon consideration of factors including, but not limited to, the effects of competition on the supply of services, and improvements or innovations in the financing and delivery of services, which foster competition and promote quality assurance and cost-effectiveness; and

  
  

• the applicants' past and proposed provision of services to Medicaid patients and the medically indigent.

Directed toward these disputed issues, at final hearing Allstar called as witnesses Joyce Wilson, expert in Medicare- certified home health agency management and operations; W. Eugene Nelson, expert in health care planning; and Robert A. Beiseigel,

expert in health care financial analysis and health care financial feasibility. Allstar introduced its Exhibits 1, 2, 3,

5, 7-10, 11, 14 and 15, all of which were admitted into evidence. Medicorp presented the testimony of Mark Richardson, expert in health planning and need analysis; Beverly Cardozo, expert in home health care agency administration; Pansy Edwards, expert in nursing, home health nursing, and high-tech nursing; William Tushinski, expert in health care planning and health care financial analysis; and William Cravey Robinson, expert in accounting. It introduced Exhibits 1, 2, 3a, and 3b, 4-9, and 11, all of which were admitted into evidence. Medshares presented the testimony of Glenna McAllister, expert in nursing, clinical services, and home health care operations; Donald P. Simmons, Jr., expert in home health financial feasibility and Medicare reimbursement; and Newell D. Yarborough, Jr., expert in health planning and home health operations. Medshares introduced its Exhibits 1, 2, and 3-all which were admitted into evidence.

Respondent AHCA offered the testimony of Laura Maclafferty, expert in CON review, and introduced Exhibits 1-7, all of which were admitted into evidence.

The final volume of the transcript of the hearing was filed May 2, 1997. All of the parties submitted proposed recommended orders, the last of which was received on July 3, 1997.

FINDINGS OF FACT

The Parties

1. Allstar

   
   

   1. Allstar Care, Inc., with its offices in Miami, is a Florida corporation that operates a licensed Medicare-certified home health care agency in Dade County. It serves, principally, patients aged 65 and over who are Medicare- and Medicaid-eligible by providing them at home: skilled nursing; physical therapy; occupational therapy; speech therapy; and the services of home health aides, when provided physician's order to do so. It also serves at-home indigents with like services when provided appropriate physician's orders.

   2. In 1996, Allstar provided a total of 122,000 visits. Fifty percent of them were by home health aides providing assistance with the patients' daily living needs, such as bathing, oral care, dressing, and assistance with meals. Forty- five percent of the visits were by skilled nurses. In addition, licensed social workers employed by Allstar provided social and emotional support for the patient and the patient's family.

   3. From 1994 to date, Allstar has provided Medicare- certified home health services in Dade County. It is reasonable to expect that Allstar will provide the same range of services that are described in its application for Broward County that Allstar currently provides in Dade.

2. Medicorp

   
   

   1. A sister home health agency to Medcorp Home Health Services, Medicorp Home Health Services is a home health agency that serves patients in Wilton Manors and Oakland Park in Broward County, Florida. Although not Medicare-certified, it is

      Medicaid-certified.

      
      

   2. Medicorp was founded primarily to bring services to unserved and underserved areas, particularly "the projects," (Tr. 13,) in Broward County, that is areas of low-income housing the building of which was financed by the federal government's Department of Housing and Urban Development.

   3. Commencing operations in 1991 with an initial investment of $8,000 and as its only employee, current owner and administrator Beverly Cardozo, LPN and certified respiratory therapist, Medicorp has experienced rapid growth. Last year it grossed $1.8 million.

3. Medshares

   
   

   1. Medshares of Florida, Inc., is a member of the family of Medshares companies commonly referred to as "Medshares." Medshares provides various home health services, such as Medicare-certified home health services; private nursing services; management services for home health agencies; infusion services; and consulting services.

   2. Medshares began in Tennessee in 1985 and since that time has expanded to operation in nine states with 52 locations. In

      1996, Medshares provided approximately one million visits through its Medicare-certified home health agencies and approximately 1.7 million visits through its non-Medicare-certified and managed home health agencies.

   3. Medshares' long-range plan includes development of Medicare-certified agencies through the southeast. Development of such an agency is a logical step for Medshares, since Medshares currently operates in several other southeastern states.

   4. Medshares experiences a low-employee turnover rate of approximately 50 percent, which is less than half of the national average for home health operations. Medshares attribute this low turnover rate to its participatory management style as well as its employee benefits packages. For example, Medshares offers educational packages to any of its employees who wish to further his or her education. For its nurses, Medshares funds the cost of nursing certification by the American Nurses Association.

4. AHCA

1. The Agency for Health Care Administration is the "single state agency [designated by statute] to issue, revoke or deny certificates of need . . . in accordance with the district plans, the statewide health plan, and present and future federal and state statutes." Section 408.034(1), Florida Statutes.

   Petitioners: Non-competitors

   
   

2. The Petitioners each claimed in the hearing that there is sufficient need in the District to support the granting of all three applications. They do not, therefore, view each other as competitors in this proceeding.

   Filing of the Applications and Preliminary Action by AHCA

   
   

3. All three petitioners, Allstar, Medicorp, and Medshares, submitted timely applications for certificates of need to establish Medicare-certified home health agencies in Broward County, AHCA District 10: CON 8448 (Allstar), CON 8418 (Medicorp), and CON 8419 (Medshares). The applications were deemed complete by AHCA. Following preliminary review, however, the agency denied the applications. The State Agency Action Report ("SAAR") sets forth AHCA's findings of fact and determinations upon which the decisions were based. Allstar, Medicorp, and Medshares each filed a timely petition for hearing.

   The District

   
   

4. AHCA District 10 is composed of Broward County, alone and in its entirety. The service area for review of CON applications for Medicare-certified home health agencies is the district. In this case, therefore, the service area is Broward County. In Broward County, there are roughly 190 home health agencies. Of these, however, only 35 are licensed Medicare- certified home health agencies (34 providers hold the 35 licenses). Three are approved Medicare-certified home health

   agencies, and another three are exempt Medicare-certified home health agencies.

   Need for Additional Medicare-certified home health agencies in District 10

   
   

   1. No AHCA Methodology

      
      

5. AHCA did not publish a fixed need pool for Medicare certified home health agencies for the July 1997 planning horizon in Florida because, at the time the Letters of Intent were filed (and when the Formal Hearing was conducted, as well), AHCA did not have any methodology pursuant to rule for projecting need for additional Medicare-certified home health agencies.

   1. Reasonable Methodologies of the Petitioners

      
      

6. In the absence of AHCA methodology, expert health planners for each of the three petitioners developed reasonable methodologies which, when applied to data relevant in time by demographics to the case, show a need for at least a number in excess of three.

   1. Changes in the Health Care Marketplace

      
      

7. The methodologies developed by the petitioners recognize ongoing changes in the health care marketplace that began with the implementation of the Medicare prospective payment system. The changes have progressively encouraged the use of less intensive, less costly settings for the provision of health care services. The least intensive and least costly health care service is home health care service. The tremendous demand for non-Medicare and Medicare-certified home health services beyond

   what would be expected due to simple population growth is the result. Use rates, therefore, are escalating beyond escalation due to population growth alone.

8. AHCA recognizes that there has been a significant trend toward increased use of home health services. Not surprisingly, therefore, AHCA did not criticize the use of compound rates of increase to compute use rates in the need methodologies developed by any of the three petitioners.

   1. Allstar's Methodology and Determination of Numeric Need

      
      

9. Allstar's health planner determined a need for at least six additional Medicare-certified home health agencies in Broward County for the appropriate planning horizon. The methodology used by Allstar in its application was conceptually identical to that approved in the Recommended and Final Orders in Shands Teaching Hospital and Clinics, Inc. v. AHCA, DOAH Case

   No. 96-4075 (Recommended Order issued 3/20/97, Final Order 5/12/97).

10. The source of the data used by Allstar to develop its need methodology was the Medicare cost reports that existing providers file with the Federal Health Care Financing Administration, ("HCFA"). Data from 1995 was not available in the spring of 1996 when Allstar's application was filed, so Allstar used a 1994 data base period. The 1994 base period used by Allstar is the last for which data on visits was available

    from AHCA before the deadline for filing applications in this case.

11. Allstar selected 1997 as the planning horizon because it usually takes one year from the date the application is submitted to get a home health care service in place. The planning horizon selected by Allstar is reasonable.

12. Allstar relied on population estimates published by AHCA in January 1996, the most currently available populations statistics when the application was filed. Allstar received February 1996 population data from AHCA after the application was filed, but before the omissions response was due. When Allstar's methodology is replicated using the February 1996 population data, it does not substantially alter the projected numeric need.

13. Allstar calculated a 1994 District 10 use rate by dividing the total patient visits in 1994 by the 1994 District 10 population 65 years of age and older. Use of the 65-and-older cohort is reasonable since Medicare eligibility begins at age 65 and, historically, 98 percent of all Medicare-certified home health care visits are delivered to that age group. The calculation yields a historic use rate of 6.83 visits per capita.

14. Most use rates developed by health care planners for acute care services are constant. They assume conditions that are found in the base period will remain unchanged. Constant use rates are inappropriate in the instance of Medicare-certified home health care agencies. District 10 historical data from

    Medicare cost reports for the period 1989 through 1994 show use rates, ranging from 2.82 per capita in 1989 to 6.83 per capita in 1994. This dramatic increase is consistent with the increase in use rates in other AHCA districts. The combination of managed care and Medicare's prospective pay system is producing care for patients in less costly non-institutional settings like the home of the patient. Hence, home health care use rates have increased.

15. The historical use rate trend line developed by Allstar, when extrapolated to 1997, yields 10.47 visits per capita in 1997. Consistent with conservative planning, and in an attempt to avoid either overstating or understating the horizon year use rate, Allstar averaged the trended and constant use rates for 1997, yielding a use rate of 8.65.

16. Since a use rate of 8.65 represents the result of averaging two numbers, the 1997 projected rate is both a median and a mean. It is also both conservative and reasonable.

17. When AHCA's population projection for 1997 is multiplied by the 8.65 use rate, the result is a projection of 2,365,443 Medicare-certified visits in July 1997.

18. The mean agency size in 1994, measured by number of visits, was 54,101. The median number of visits in 1994 was 54,803.

19. Dividing the average agency size of 54,101 visits into the number of projected visits in 1997 yields a gross need for 44 Medicare-certified home health care agencies in 1997.

20. Allstar then subtracted the number 35 (representing the licensed Medicare-certified home health agencies) and another 3 (representing the approved agencies) from 44, yielding the need for 6 new Medicare-certified home health agencies.

21. AHCA criticized Allstar's methodology on two bases. First, Allstar used population estimates published in January 1996, instead of more recent population estimates for February 1996, estimates available to Allstar at the time it filed its omissions response. Second, Allstar calculated its average or mean number of visits by using the total number of licensed Medicare-certified home health agencies in District 10, as opposed to only those licensed agencies which actually reported visits.

22. As to the first criticism, Allstar's health planner explained on rebuttal that the January 1996 population estimates were all that were available when it prepared the application. It is true that the February 1996 population estimates became available prior to the filing of the omissions response and although "there was no . . . formal notification," (Tr. 650),

    Allstar became aware of their availability before it filed the response. Allstar's health planning expert examined the February 1996 data and concluded that "while different, [the data] . . .

    weren't significantly different." (Tr. 651). In light of the lack of any significant difference, Allstar's expert summed up the company's analysis of the problem and its approach at that moment in time this way:

    We had already invested a lot of energy in running the need [with the January 1996 data] and simply made the decision not to go back and redo all of that work based on the February document.

    
    

    (Tr. 650-651.)

    
    

    Since there was no "significant difference," between the January and February data, it does not seem appropriate to require the effort needed to project need based on a calculation employing the more up-to-date data, an effort that would not alter the result of Allstar's projected numeric need.

23. In point of fact, after filing the omissions response, Allstar's expert did the analysis with the more current data and determined that the February population estimates, "had no affect on the conclusion of how many net agencies were needed." (Tr. 652.)

24. As for the second criticism, Allstar's health planner appreciated that there was a choice to be made in its methodology between visits as to total number of licensed Medicare-certified home health agencies in District 10 and the subset of that group consisting of only like agencies which reported visits.

25. Allstar rejected the use of only those who reported visits. By doing so, it assumed that non-reporters did not

    provide any visits. To do otherwise, that is, to exclude non- reporters, results in the assumption, when using an average number of visits as a component in the methodology, that the non- reporting agencies, on average, had just as many visits as the reporting agencies. Such an assumption is much more likely to be incorrect than the assumption that Allstar made. The law requires Medicare-certified home health agencies to report. In all likelihood, therefore, the non-reporting agencies did not report precisely because, being new agencies, they had no visits to report. Allstar's approach is thus the more valid approach.

    In short, AHCA's criticism of Allstar's methodology in this regard does nothing to alter the conclusion that Allstar's methodology is reasonable.

    1. Medshares' Methodology and Determination

       
       

26. Although Medshares used a somewhat different methodology to determine projected need, its methodology was also reasonable. Medshares’ methodology, too, yielded projected need in 1997 for Medicare-certified home health agencies in AHCA District 10 in a number greater than three, the number of applicants involved in this proceeding.

    1. Medicorp's Methodology

       
       

27. Medicorp's application did not contain a need methodology. At hearing, over AHCA's objection, Medicorp's expert in health planning testified as to the reasonableness of its methodology which also yielded a numeric need in excess of

    three. The objection of AHCA was treated as a Motion to Strike, and the testimony was allowed. As explained in the Conclusions of Law, the objection is now moot since AHCA did not provide a methodology of its own when it presented its case in chief, and since reasonable methodologies yielding numeric need in excess of the number of petitioners were proven by both Allstar and Medshares.

28. Aside from numeric need, in the case of Medicorp, there is a special need.

    1. Special Need for Medicorp

       
       

29. Medicorp presented evidence in its application showing the need for an agency, like Medicorp, located among and willing to focus on serving the needs of the District's underserved and, in some cases, unserved, minority and low-income residents.

30. Medicorp's primary service area includes zip code 33311, a federally-designated area of restricted health care.

31. As one might expect from this designation, residents of this zip code have the lowest income per capita, the highest rate of unemployment, and highest rate of Medicaid eligibility in Broward County. A large proportion of the residents of zip code 33311 live in HUD housing. And, the zip code has the highest concentration of HIV/AIDS sufferers in the county.

32. Medicorp's Administrator, Beverly Cardozo, testified that her existing, non-certified agency, Medicorp Home Health Services, currently is providing substantially free care to up to

    400 Medicare-eligible patients living in government-subsidized housing within Medicorp's primary service area. Ms. Cardozo and Medicorp have been providing this care since approximately 1994, when Medicorp instituted its "Slice of Life" program consisting of the establishment of health fairs at these housing projects.

33. Since 1994, Ms. Cardozo has been attempting to make arrangements with a Medicare-certified agency to provide the necessary care to Medicare-eligible residents in the projects to provide care, in some cases, desperately necessary. Only one agency agreed to go into the projects. Eventually, it ceased conducting business, leaving Medicorp to provide free health care. In addition to providing this care, Ms. Cardozo has recruited other local providers and business people to donate time and goods for the care of these Medicare-eligible patients. She also has arranged for the provision of care by a wound specialist.

34. Ms. Cardozo's testimony, together with Medicorp's Exhibits 3 and 4, show that a significant portion of the District

    10 Medicare-eligible population is underserved. In particular, many of the low-income residents of Wilton Manor and Oakland Park, areas targeted for care by Medicorp's application, are not receiving much-needed care. This care would be made available on a continuous basis by Medicorp's trained and dedicated staff.

35. Notwithstanding numeric need, therefore, there is a special need in District 10 for the Medicorp proposal.

    Local Health Plan

    
    

36. "The District 10, August 1994 CON Allocation Factors Report [used by AHCA in the SAAR for these three applicants] provides [six] . . . preferences in the review of applications pertaining to Medicare certified home health agencies." AHCA No. 5, p. 5.

    1. The First Preference

       
       

37. AHCA maintains that "Medicorp-[sic] and Medshares do not meet preference one of the [local plan] due to their lack of demonstration that there are identifiable subgroups who are Medicare-eligible and are currently being denied access to Medicare-certified home health agency services." AHCA PRO, p. 5. There is, however, no requirement expressed in the preference that denial of access be shown in order to meet the preference.

38. With regard to Allstar, AHCA makes the same argument related to access denial in relationship to the Hispanic population identified by Allstar as an identifiable subgroup of the District's population to which it will provide service. Again, the preference does not expressly require a showing of denial of access. Allstar demonstrated that Broward County is

    8.26 percent Hispanic; that Allstar has bilingual, indeed, multilingual capabilities in Dade County available for use in Broward should the CON be granted; and that it will locate its offices close to south central Broward near the largest Hispanic

    population. Allstar meets the express requirements of the preference.

39. As explained above, Medicorp proposes to provide care concentrated in the most severely depressed area of District 10, geographically centered in zip codes 33311 and 33312. The proposed agency will provide care to the subgroup of predominantly black residents of the inner city HUD housing projects. It is true that this area may have "the highest concentration and number of Medicaid eligibles as well as the highest percentage of HIV and AIDS cases in the District . . .," and that "this population [is] . . . predominantly 'Medicaid eligibles,' and finally, that these patients could be served through a non-Medicare certified home health agency," AHCA No. 5, p. 6, (e.s.). But these factors do nothing to defeat Medicorp's satisfaction of the preference. Medicorp has demonstrated that it will provide service to an identifiable subgroup of District 10 Medicare-eligible patients based on "ethnicity" and "geographic location." It clearly meets the preference.

40. Medshares meets the priority as well. Based upon geographic analyses contained in its application, Medshares identified lower-income Hispanics and African-Americans, including lower-income females, and persons afflicted with HIV/AIDS as groups in District 10 that it would serve. Medshares’ patient material will be provided in both English and

    Spanish. It plans to provide a full range of home health care services to these groups with special emphasis on low-income females who typically receive little or no prenatal care, and low-income families in need of pediatric services. And, it will locate in Fort Lauderdale, the urban area in Broward County with the highest number of AIDS cases. Medshares meets the preference.

    1. Preference Two

       
       

41. All three of the applicants have committed to serve Medicaid and indigents, promoted by Preference Two, as follows: Allstar: 1 percent Medicaid, 0.5 percent indigent; Medicorp 10 percent Medicaid, 2 percent indigent; and Medshares 1.4 percent Medicaid, 2 percent indigent.

    1. Preference Three

       
       

42. All three of the applicants state they will provide for the provision of maintenance services, as called for by Preference Three of the Local Plan, to Medicaid and indigent patients.

    1. Preference Four

       
       

43. AHCA agrees that Medicorp and Medshares meet preference four which gives priority to those applications that show reasonable expectations for reaching a patient load of at least 21,000 visits by the end of the first year of operation.

44. As to Allstar, it reasonably projected only 13,265 visits in its first operational year. Allstar's projection,

    however, includes a rate of 2,000 visits per month by the end of the first year, a monthly rate that leads to 21,000 per year when annualized.

45. None of the Medicare-certified home health agencies opening in Broward County since 1992 have met the 21,000 "priority" threshold. In light of this reality and the reasonableness, in Allstar's view, of interpreting the preference as requiring only a demonstration of capacity to reach 21,000 visits rather than a projection that it actually reach 21,000, Allstar argues that it meets Preference Four of the Local Plan.

46. There may be some room in the wording of the preference to interpret it as allowing a demonstration of capacity by the end of the first year to have achieved 21,000 visits rather than actually reaching the 21,000 visits, but there was no evidence that AHCA has ever made such an interpretation. For its part, AHCA flatly asserts, "Allstar does not meet this preference." AHCA PRO, p. 6. In the absence of an authoritative interpretation in Allstar's favor, Allstar must be considered as not meeting the preference.

    1. Preference Five

       
       

47. There is no question that all three applicants meet Preference Five. The application of each demonstrates the development of patient transfer and referral services with other health provider agencies as a means of ensuring continuity of care.

    1. Preference Six

    
    

48. The applications of Medicorp and Medshares demonstrate that they will participate in the data collection activities of the local health council. Allstar has agreed to report data to the regional health planning council but not to the local health council. Medicorp and Medshares meet preference six; Allstar does not.

    State Health Plan Preference

    
    

49. Just as the District 10 Health Plan, the Florida State Health Plan establishes certain preferences for applicants for Medicare-certified home health services certificates of need. The State Health Plan, too, contains six preferences.

    1. Preference One

       
       

50. Among the three applicants, only Medicorp demonstrated a willingness to commit a specific percentage of total annual visits to AIDS/HIV patients. The State Health Plan in its first allocation factor, however, does not contain a "percentage" requirement in order for preference to be given. All that is required is that the applicant "propos[e] to serve AIDS patients." AHCA Exhibit 10. Consistent with this requirement, all three applicants propose to serve AIDS patients; Medshares proposes to condition its application on such service and Medicorp, additionally, has in place policies and procedures for quality assurance and safety precautions in caring for the

    HIV/AIDS patient. All three applicants, therefore, meet the preference.

    1. Preference Two

       
       

51. Although there does not appear to be a universally accepted definition of what "high technology services" means in the home health arena, and although AHCA does not define them, all three applicants have reasonably identified them in their application and have proved sufficient intent to provide them. For example, Medshares proposes to provide a full range of nursing and therapy services, including cardiac care; continuous IV therapy; diabetes care; oncology services; pediatrics; rehabilitation; pain therapy; total parenteral nutrition; speech therapy; physical therapy; occupational therapy; enterostomal therapy; respiratory therapy; audiology therapy; and infusion therapy. Several of these services are unquestionably "high tech."

52. AHCA answers that none of the three showed that the full range of services, including those that are "high tech," were not sufficiently available and accessible in the same service area. Neither, of course, did AHCA. In the context of a litigated case, the wording of the preference is awkward for achievement of the result AHCA seeks:

    Preference shall be given to an applicant proposing to provide a full range of ser- vices, including high technology services, unless these services are sufficiently avail- able and accessible in the same service area.

    AHCA No. 5, p., 10.

    
    

    All three applicants receive preference under this part of the State Health Plan.

    1. Preference Three

       
       

53. There is no definition of "disproportionate share" of Medicaid and indigent patients in AHCA. Nor was there any evidence of such a definition provided in this proceeding by AHCA by way of testimony or in any other way. The term, as used in acute services, contemplates and necessitates the use of Medicaid utilization data of the type that AHCA has never collected for Medicare-certified home health agencies.

54. Nonetheless, both Medicorp and Medshares are entitled to the benefit of this preference. Medicorp's principals have demonstrated a commitment to serving what would constitute a disproportionate share of Medicaid and indigent patients by any common understanding of the term "disproportionate share." Medicorp, as a new entity, is entitled to the benefit that flows from the history of service of its principals and predecessors. Medshares, too, has a history of providing home health services to Medicaid eligible persons and indigents, and Medshares plans to serve all patients in need regardless of ability to pay. Allstar is excused from complying with this preference given the absence of a meaningful definition.

    1. Preference Four

       
       

55. The preference is not applicable in this case, since it can only apply to multi-county districts. It is worth noting, however, that home health care has been cited as an area of critical need in Broward County by the Broward Regional Health Planning Council. It is also worth re-iterating that several zip code areas within Medicorp's primary service area have been designated by the Federal government as currently and historically medically underserved. Medicorp can fill the needs of the underserved in the Broward County HUD housing projects as a Medicare-certified home health agency should its application be granted.

    1. Preference Five

       
       

56. Medshares has made an unqualified commitment to provide consumer survey data measuring patient satisfaction to AHCA. Without doubt, it fully meets the preference.

57. Allstar currently collects patient satisfaction data, as well as family and physician satisfaction data. Allstar further stated in its application that, "though there is currently no systematic effort by the department to collect such data, [Allstar] will make this data available to the department, or its designated representative, upon development and implementation of an appropriate data collection and reporting system." AHCA No. 5, p. 13. Likewise, Medicorp indicated willingness to participate in an HRS consumer satisfaction data

    collection effort "upon the State's development and implementation of an appropriate system." Id., at 12, (e.s.) Medicorp, moreover, is willing to make survey results available to the AHCA, HCFA, the District 10 local planning council, and the Office of Comprehensive Health Planning. Allstar and Medicorp, at least, are entitled to partial credit under this preference.

    1. Preference Six

    
    

58. Each of the three applicants is entitled to this preference; each proposes a quality-assurance program and JCAHO accreditation.

    Increase in Availability and Access; Improvement in Quality of Care,

    Efficiency, Appropriateness, and Adequacy of the Service

    
    

59. Assuming existing providers are available, efficient, appropriate, accessible, giving quality care, and are adequately utilized, adding three new Medicare-certified home health agencies is still justified when cost-effective agency size is taken into consideration.

60. The cost-effective size of an agency can be determined using Medicare cost reports. In Florida, the cost-effective size of an Medicare-certified home health agency ranges from 30,000 visits to 95,000 visits annually. Allstar's regression analysis of a cost-effective Medicare-certified home health agency size, measured in terms of visits, took into consideration the type of

    visits performed, AHCA's geographic price index, and the affects of population density on costs.

61. Adding new Medicare-certified home health agencies is appropriate when the mix of services is taken into account, and when as in this case, adding three such agencies into the marketplace will not reduce the cost-effective size of existing agencies below 30,000 annual visits.

62. Medicorp, moreover, has proven the restricted access to services experienced by Medicare patients residing in inner city HUD housing projects in North Broward County and has established that all payer groups in these areas, including Medicare and Medicaid, are underserved. It was established by Medicorp that the predominantly minority residents of Fort Lauderdale's public housing and surrounding areas of Wilton Manors and Oakland Park are woefully underserved. The already-established role of Medicorp as the accepted and known provider in these areas demonstrates how access to these home health services will improve by Medicorp entering areas that other providers will not serve.

    Financial Feasibility

    
    

    1. Short Term

       
       

63. It was stipulated that Medshares’ application is financially feasible in the short term, that is, able to obtain the capital for start-up (including any construction costs, if

    necessary) as well as sufficient working capital to sustain a business until it becomes self-sufficient.

64. While Medicorp's financial feasibility remained an issue going into hearing, it appears from AHCA's proposed recommended order that it continues to challenge only Allstar's short-term financial feasibility. See AHCA PRO, p. 8. In any event, Medicorp proved that adequate funding is available from outside sources to fund the start-up costs and early operations. Its project is therefore financially feasible in the short term.

65. The total project costs for Allstar's proposed project is $102,903, based on reasonable historical data typical of the start-up equipment and expenses for similar Medicare-certified home health agencies in the same geographic area.

66. Allstar's projected start-up costs of $24,956 are reasonable.

67. To fund the proposed project, Allstar has established and maintains an escrow account with Republic Bank in the amount of $150,000 (almost $50,000 more that the projected total project cost). Allstar has adequately demonstrated its ability to fund the project; the project is financially feasible in the short term.

    b. Long term

    
    

68. AHCA maintains that none of the applicants demonstrated long-term financial feasibility for one reason alone: lack of need for the proposals. Contrary to this assertion, there will

    remain need in Broward County for Medicare-certified home health agencies even if these three applicants receive the applied-for CONs. The projects of all three applicants are financially feasible in the long term.

    Allstar's and Medicorp's Reliance Solely on Independent Contractors

    
    

69. AHCA contends the HCFA interpretation of the federal condition of participation found in 42 CFR s.484.14(a) requires full-time salaried employees to staff at least one qualifying service. Even if the interpretation is correct, it is no impediment to either the Allstar or the Medicorp application.

70. Medical social work is a qualifying service under the federal regulation. Allstar presently staffs its medical social worker in its Dade County office exclusively with a full-time salaried employee for whom an Internal Revenue Service W-2 form must be maintained. Allstar intends to staff its Broward County office in the same manner. (Even if the social medical worker position were staffed with a part-time employee, Allstar would comply with the federal regulation so long as the part-time employee were salaried and received a W-2 form.)

71. Up until hearing, AHCA legitimately maintained that Medicorp violates the federal regulation because of Assumption 11 to the pro forma in its application which stated that, "[i]t is assumed that all caregiving nurses are independent contractors."

72. At hearing, however, Medicorp witnesses testified that nursing staff and CNA staff will be employed. Ms. Cardozo

    testified that she currently employs these staff and, if awarded a CON, would continue to do so. Similarly, the application repeatedly refers to Medicorp's staff consisting of the same employees working for Medicorp's sister agency, Medcorp.

73. Any inconsistency between the testimony elicited by Medicorp at hearing and the assumption in its pro forma is of no moment in this case. With regard to financial feasibility, the assumption, even if incorrect in part, is not necessarily fatal to the application. (AHCA's finding of financial infeasibility, in the case of Medicorp was not based on the incorrectness of Assumption 11. Moreover, while one would usually expect full- time employees to cost more than less-than full-time independent contractors as to total cost, the direct hourly rate cost of independent contractors is usually higher than the direct hourly rate cost of employees.)

    Probable Impact on the Cost of Services

    
    

74. Only Medshares demonstrated that it would foster competition which would promote quality assurance and cost effectiveness.

75. In the case of Medicorp, eliminating the subcontract arrangements through which it, Medicorp, now provides services to Medicare patients will eliminate an unnecessary level of administrative costs. Other benefits flow from eliminating the need for Medicorp to subcontract with an authorized entity. For example, AHCA discourages such arrangements because removal of

    direct control of patient care from the authorized entity raises not just quality assurance issues but also the potential for fraud.

76. In any event, granting all three applications should not reduce the cost effectiveness of any providers of Medicare- certified home health care services in Broward County in the future.

    Past and Proposed Provision of Services to Medicaid and Indigent Patients

    
    

77. As detailed above, Allstar is committed to provide home health care services to Medicaid eligible and indigent patients. This commitment, in the absence of any data to the contrary, is an adequate one.

78. That Allstar will make good on this commitment is supported by indicia aside from the express commitment contained in the application. Allstar has a relationship with Jackson Memorial to increase the number of indigent patients Allstar serves. Its brochures and business cards state that it accepts Medicaid patients. This acceptance is confirmed by Allstar at its public presentations and in conversations with referring physicians. Finally, the majority of Allstar's staff is bilingual, and it has nurses who speak as many as five languages. It has the capacity and intent to make a multilingual staff available in Broward County.

79. Medicorp clearly has a history of providing health services to Medicaid patients and the medically indigent. This

    commitment has been demonstrated through operation of Medicorp's sister agency by Medicorp's principals. If anything, as discussed above, Medicorp's principals have shown a singular dedication to the medically indigent population through operation of health fairs and other charities. Consistent with this dedication, Medicorp has conditioned its application on provision of at least 10 percent of its total visits to Medicaid patients and at least 2 percent of its visits to the medically indigent.

80. Medshares, too, has a history of providing services to Medicaid patients and the medically indigent. In 1995, it provided over $650,000 in uncompensated care. It participates in Medicaid waiver programs in two states which have them. Its application describes its indigent care plan. The pro forma projections of revenue and expense in the application describe the levels of indigent and Medicaid eligible persons that Medshares expects to serve. Medshares offers a CON condition that 1.4 percent of total patients will be Medicaid patients and

    2 percent of total patients will be indigent patients.

    
    

    CONCLUSIONS OF LAW

    
    

81. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter of this case pursuant to Sections 120.57 and 408.039(5), Florida Statutes.

82. The three applicants in this case, Allstar, Medicorp and Medshares, have the burden of demonstrating that their applications should be granted. Boca Raton Artificial Kidney

    Center v. Department of Health and Rehabilitative Services, 475 So. 2d 250 (Fla. 1st DCA 1985). The award of a Certificate of Need must be based on a balanced consideration of statutory and rule criteria. Department of Health and Rehabilitative Services v. Johnson and Johnson Home Health Care, Inc., 447 So. 2d 361 (Fla. 1st DCA 1984); Balsam v. Department of Health and Rehabilitative Services, 486 So. 2d 1341 (Fla. 1st DCA 1988).

    The weight to be given each criterion is not fixed but varies depending on the facts of each case.

83. AHCA argues that the applicants failed to establish need for any additional Medicare-certified home health agencies in AHCA District 10. To the contrary, both Allstar and Medshares clearly proved need for more than the number of Medicare- certified home health agency CONs applied for in this case. In light of this proof, it is immaterial that Medicorp's application contained no-need methodology. AHCA's motion to strike the testimony as to need methodology presented by Medshares and its expert, moreover, is rendered moot by the proof presented by both Allstar and Medshares.

84. In light of the cases made by both Allstar and Medshares that at least three more additional Medicare-certified home health agencies are needed in Broward County, whether the review in this case should be comparative or not is also a point that need not be reached. Once need has been established for the number of applicants still seeking certificates of need, the only

    issues remaining are whether each individual applicant meets the applicable relevant non-numeric need criteria to enable their individual applications to be granted.

85. Each of the applicants has demonstrated that its application, on balance, is consistent with State and Local Health Plans and federal considerations of participation, that it meets applicable statutory and rule criteria and is otherwise entitled to the certificate of need for which it has applied.

86. Based on a balanced consideration of the relevant criteria, all three applications should be granted and Medicare- certified home health agency certificates of need should be awarded to Allstar, Medicorp, and Medshares.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED:

That the Agency for Health Care Administration enter a final order granting CON Nos. 8418, 8419, and 8448 to Medicorp Home Health Care Services, Medshares of Florida, Inc., and Allstar Care, Inc., respectively.

DONE AND ENTERED this 3rd day of September, 1997, in Tallahassee, Leon County, Florida.

DAVID M. MALONEY

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 3rd day of September, 1997.

COPIES FURNISHED:

Robert J. Newell, Jr., Esquire Newell & Stahl, P.A.

817 North Gadsden Street Tallahassee, Florida 32303

Michael Manthei, Esquire Broad & Cassell

Broward Financial Centre, Suite 1130

500 East Broward Boulevard

Fort Lauderdale, Florida 33394

Alfred J. Clark, Esquire Suite 201

117 South Gadsden Street Tallahassee, Florida 32301

Richard Patterson, Esquire

Agency for Health Care Administration Fort Knox Building 3, Suite 3431

2727 Mahan Drive

Tallahassee, Florida 32308-5403

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

2727 Mahan Drive

Tallahassee, Florida 32308-5403

Sam Power, Agency Clerk

Agency for Health Care Administration Fort Knox Building 3, Suite 3431

2727 Mahan Drive

Tallahassee, Florida 32308-5403

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 must be filed with the agency that will issue the Final Order in this case.

Docket for Case No: 96-004064CON

Orders for Case No: 96-004064CON