The Issue Whether the applications for certificate of need numbers 8380, 8381, 8382 and 8383, filed by Petitioners RHA/Florida Operations, Inc., Care First, Inc., Home Health Integrated Health Services of Florida, Inc., ("IHS of Florida,") and Putnam Home Health Services, Inc., meet, on balance, the statutory and rule criteria required for approval?
Findings Of Fact Care First The Proposal Care First, the holder of a non-Medicare-certified home health agency license, was established in March of 1996. Owned by Mr. Freddie L. Franklin, Care First is the successor to another non-Medicare-certified home health agency also owned by Mr. Franklin: D. G. Anthony Home Health Agency ("D. G. Anthony"). Established in May of 1995, D. G. Anthony provided over 10,000 visits in its first 10 months of operation mostly in Leon and Wakulla Counties, pursuant to a contract with Calhoun-Liberty Hospital Association, Inc. Very few of the 10,000 patients were referred to D. G. Anthony by Calhoun-Liberty; they became D. G. Anthony's patients through community-based networks, including physicians, created through the efforts of Mr. Franklin and D. G. Anthony itself. D. G. Anthony was dissolved in 1996. Both its patient census and its staff of 45 were absorbed by Care First. D. G. Anthony's contract with Calhoun-Liberty was substantially assumed by Care First so that it provided service to Medicare patients as Calhoun-Liberty's subcontractor. From the point of view of the federal government, the Medicare patients served by Care First were Calhoun-Liberty's patients, even those who had not been referred to Care First by Calhoun Liberty and who had been referred from other community sources. Care First, therefore, was simply a sub- contractor providing the services on Calhoun-Liberty's behalf. The contract was terminated effective December 1, 1996. Calhoun-Liberty was free to terminate Care First with 30 days notice, a peril that motivated Mr. Franklin to seek the CON applied for in this proceeding. With the termination of the contract, Care First ceased serving Medicare patients, "because Mr. Franklin did not want to enter into another subcontractor arrangement because of all the issues and problems," (Tr. 934,) associated with such an arrangement. Mr. Franklin is involved with nursing homes as the administrator at Miracle Hill Nursing Home in Tallahassee. He is an owner of Wakulla Manor Nursing Home in Wakulla County, and he owns a 24 bed CLF, Greenlin Villa, also in Wakulla County. Miracle Hill has the highest Medicaid utilization of any nursing home in District 2. Both Miracle Hill and Wakulla Manor are superior rated facilities. On the strength of Mr. Franklin's extensive experience with community-based organizations and health care services, as well as Care First's succession to D. G. Anthony and other historical information and data. Care First decided to proceed with its application. In the application, Care First proposes to establish a home health agency that, at first, will serve primarily Franklin, Gadsden, Jefferson, Leon, Liberty and Wakulla Counties. It plans to expand into Madison and Taylor Counties in its second year of operation. Five of these eight counties have high levels of poverty; six of the eight are very rural, with the population spread widely throughout the county. Ninety-six percent of Care First's patients are over age Minority owned, approximately 65% of the patients are members of minorities. Many of the patients live in rural areas and are Medicaid recipients or are uninsured low income persons who do not qualify for Medicaid but cannot afford home health care. Since it will be serving the same patient base as a Medicare-certified agency, Care First has committed to the provision of 7% of its visits to Medicaid patients and 1% of its visits to patients requiring charity/uncompensated care. Care First projects 18,080 visits in its first year and 29,070 in its second year. Care First will promote efficiency through the use of a case management approach. Each patient will be assigned a case manager who will act as the patient advocate to provide care required and to identify and assist the patient with access to other "quality of life" enhancing services. Care First proposes an appropriate mix of services, including skilled nursing, physical therapy, speech and language therapy, occupational therapy, home health aide services and social services. Care First estimates its total project cost at $25,808. Of this amount, $2,000 is indicated as "start-up cost", with nothing allocated to salaries. Care First indicates no "capital projects" other than its proposal for the home health agency in District 2. Care First's proposal would be funded from a $60,000 bank line of credit. Projected Utilization Potential patients will be able to gain access to Care First through several avenues, including physician referral, hospital referral, nursing home discharge, assisted living referrals from community agencies and organizations such as Big Bend Hospice and through private referral. In addition, there are several natural linkages to the community for Care First. Wakulla Manor and Miracle nursing facilities offer Care First's services to discharged residents in need. Very often, residents and families choose Mr. Franklin's agency because they are familiar with him, staff or the quality of care provided. Residents of Greenlin Villa, owned by Mr. Franklin, frequently chose Care First when in need of home health agency services. Mr. Franklin's civic, church, and community involvement is impressive. He is president of the Florida Health Care Association, chairman of the board of the Tallahassee Urban League, superintendent of the Wakulla County Union Church Group, and serves on the advisory board for the Allied Health Department for Florida A&M University. In the past, he has served on the Board of Trustees of Tallahassee Community College. He was accepted as an expert in long-term care administration in this proceeding based in part on his service on the Governor's Long Term Care Commission. Miracle Hill has held a "Superior" licensure rating for the last ten consecutive years. It is the highest rating awarded by the AHCA licensure office and is intended to blazon the high quality of care provided by the facility. Although reported through Calhoun-Liberty, very few of D. Anthony's and Care First's past referrals have been generated through that affiliation. Rather, they have come through community contacts and getting the referrals from "talking with physicians," (Tr. 922), in Tallahassee and the surrounding areas, many of whom Mr. Franklin has gotten to know through his post as Administrator of Miracle Hill Nursing Home. By far, it is through physician referrals that Care First receives most of its patients. Care First's physician referral list includes 47 doctors who referred patients to D. G. Anthony since May, 1995. These doctors practice in urban areas and some have rural clinic offices which they staff on certain days of the week. Physicians are willing to refer patients to Care First because of the quality of care which has been provided by Care First, as well as the reputation of its owners. The Care First application included letters of support from eight physicians who have referred patients to Care First in the past and state that they will continue to support Care First with referrals in the future. Among the letters included are those from Dr. Earl Britt, a practitioner of internal medicine and cardiology in Tallahassee, and Dr. Joseph Webster, who practices internal medicine and gastroenterolgy in Tallahassee. Many of the patients of these two physicians are elderly. Dr. Britt's patients often have chronic hypertension or heart disease, are diabetic or suffer strokes. These two physicians provided over half the total number of patient referrals to D.B. Anthony and Care First. Dr. Britt and Dr. Webster established through testimony that Freddie Franklin and Care First have an excellent reputation for provision of quality of care and enjoy significant support among physicians within the service area. Moreover, Dr. Britt, although based in Tallahassee, stressed the importance of Care First's proven ability to provide home health services in the rural setting both from the standpoint of understanding the needs of the rural patient and from being able to travel over rural terrain in order to deliver services. (Tr. 1151, 1152, 1154). Approximately 11,500 visits were performed by D. G. Anthony staff from the period of May 1995, through April 1996, before they became the staff of Care First. Since the agency has established a presence in the district and has physician and other referral mechanisms in place, it is reasonable to project that Care First will continue to grow and will experience between 18,000 and 20,000 visits in its first year and 28,000 to 31,000 visits in year two as a Medicare-certified home health agency. These projections stem from the historical and very recent monthly growth of D. G. Anthony, as well as demand it is experiencing from Franklin and Jefferson Counties, two counties it does not serve regularly at present but plans to serve regularly in the future. The reasonableness of Care First's projections is bolstered by the conservative number of visits per patient the projections assume, 35, when typically Medicare-certified agencies average at least 35 visits and as many as 60 visits per patient. Care First's utilization projections are reasonable. It enjoys an excellent reputation for quality of care and ability to deliver services. Together with its predecessor, D. G. Anthony, it has a proven track record and has benefited from a referral network that remains in place. These factors, together with the conservative assumptions upon which its projected utilization is based demonstrate that its projected utilization is reasonable. Financial Feasibility of Care First The total project cost for the Care First agency is projected to be $25,808. The majority of the costs are reasonable for this type of health care project. The majority of the project development costs, the application fee and much of the cost of the consultant and legal fees, have already been paid by Care First. Care First's Schedule 2 was prepared in conformance with the requirements of the agency and accurately lists all anticipated capital projects of Care First. The necessary funding for the Care First project will come from Care First's existing $60,000 line of credit with Premier Bank, in Tallahassee. This method of funding the project is reasonable, appropriate, and adequate. Care First has demonstrated the short term financial feasibility of its project. Care First's schedule 6 presents the anticipated staffing requirements for its home health agency. The staffing projections are based upon the historical experience of D. G. Anthony and Care First, taking into consideration the projected start-up and utilization of the agency. The projected salaries are based upon current wages being paid to Care First employees, adjusted for future inflation. Care First's schedule 6 assumptions and projections are reasonable, and adequate for the provision of high quality care. The staffing proposed by Care First is sufficient to provide an RN or an LPN and an aide in each of the eight counties Care First proposes to serve in District 2. Care First's schedule 7 includes the payor mix assumptions and projected revenue for the first two years of operation. Medicare reimburses for home health agency services based upon the allowable cost for providing services, with certain caps. The Care First revenues by payor type were based upon the historical experience of D. G. Anthony and Care First, as well as the preparation of an actual Medicare cost report. The Care First payor mix assumptions and revenue assumptions are reasonable. Care First's projection of operating expenses in Schedule 8A is also based on the historical experience of D. G. Anthony and Care First, as modified for the mix of services to be offered and the projected staffing requirements. The use of historical data to project future expenses adds credibility to the projections. Care First's projected expenses for the project are reasonable. The Care First application presents a reasonable projection of the revenues and expenses likely to be experienced by the project. Care First has reasonably projected a profit of $8,315 for the first two year of operation. Care First's proposal is financially feasible in the long term. As the result of its community contacts, Care First has been offered the use of donated office space in Franklin, Jefferson, Wakulla, and Gadsden counties. The use of donated office space will decrease the cost of establishing a physical presence and providing services in those counties since Care First will not have a lease cost for a business office and a place to keep supplies. Quality of Care Through the experience of D. G. Anthony, Care First has identified the particular needs of the community it served. This experience has been carried over into Care First's provision of services. In the 9 months of Care First's existence at the time of hearing, it provided quality of care. Its predecessor, D. G. Anthony, also provided quality of care. While Care First's experience is relatively limited, there is no reason to expect, based on the experience of both Care First and its predecessor D. G. Anthony, that quality of care will not continue should its application be granted. IHS of Florida The Application IHS of Florida is a wholly-owned subsidiary of Integrated Health Services, Inc. ("IHS") formed for the specific purpose of filing CON applications. IHS operates other home health agencies under other subsidiary names. Pernille Ostberg is a senior vice president of the Eastern Home Care Division of Symphony Home Care Services, Integrated Health Services. In that capacity she oversees nearly 195 operations in six states, including Florida. Her operations include home health agencies, durable and medical equipment distributions, and infusion therapy offered by pharmacists. Under Ms. Ostberg's guidance, IHS has grown to its current roster of 195 agencies in only three years, from a beginning of only five agencies. IHS first acquired Central Park Lodges, primarily a nursing home company which also owned five home health agencies. Once these agencies became Medicare certified, IHS made a corporate decision to acquire additional Medicare certified home health agencies. Beginning approximately three years ago, IHS undertook a series of acquisitions which included Central Health Services, Care Team, ProCare/ProMed, and Partners Home Health. More recently, IHS has acquired the Signature Home Health and Century Home Health Companies. And, immediately prior to the final hearing in this matter, IHS acquired First American Home Health Care, making IHS the fourth largest provider of home health services in America. Of all the home health agencies overseen by IHS, 95% are Medicare certified, and 62-63 are located in Florida. IHS now has a presence in all districts except District 1 and 2. IHS personnel also have extensive experience in starting up new home health agencies. IHS personnel have opened over 40 locations across the United States. IHS employees have extensive experience bringing new home health agencies through successful surveys by the Joint Commission on the Accreditation of Hospital Organizations ("JCAHO") recommendations. Of 18 branches personally taken through initial survey by IHS's Pernille Ostberg, none were recommended to change their operations and none were cited for a deficiency. IHS has recently opened, licensed, and certified new home health agencies in AHCA Service District 5, 6, and 10. They have also received licensure in District 7, 8, and 11. Based on the extensive expensive of IHS personnel, a start up home health agency typically experiences 8,000 - 15,000 visits per first year. Opening a new program requires two months for licensure. It will require a registered nurse for three months to make certain all manuals are in place and that quality personnel are recruited. After achieving licensure, one must wait for a certification survey, which may take as long as six months. The three IHS home health agencies that became certified recently have experienced 200 visits in the first month, a good sign of growth. IHS' umbrella organization for home health organizations is Symphony. Most of their home health companies retained their original names. Other IHS home health companies include ProCare, Central Health Services, Partners Home Health, Nurse Registry, and First American. IHS of Florida has applied for applications in other districts. This applicant filed applications in District 7, 8 and 10 and each were approved. IHS of Florida's CON application number 8382 was prepared by Patti Greenberg with the significant input of IHS and IHS of Florida's operational experts. Ms. Greenberg has prepared 75-100 CON applications, 20-25 of which sought approval for Medicare Certified Home Health Agencies. Each of these prior applications had been approved or otherwise reached settlement before litigation. The Proposed Project Once the needs analysis was complete, IHS examined geographic issues within the 14 county district. IHS examined where the populations required home health agencies and what niche of the market IHS could expect to achieve. Projected visits were determined by examining month by month, how this agency would grow. This projected utilization was subdivided among sub-visit types. Existing IHS home health agencies visit mix (skilled nursing as opposed to home health aide or therapy visits) was used to estimate skill type of the projected total volume. The projected utilization was also subdivided by payor class. This payor class projection was derived specifically for District 2, its poverty levels and its managed care penetration. In the aggregate, IHS projects 7,650 visits in year one and 17,100 visits in year two. This projection is reasonable and achievable. Witnesses for the Agency agreed that IHS of Florida's projected number of visits was "definitely attainable". Past and Proposed Service to Medicaid Patients and for Medically Indigent The payor class analysis allowed IHS to conclude it should condition its approval of its application under the performance of 5% Medicaid and 1% charity care. The balance of the population served by an IHS Medicare Certified Home Health agency would be covered by Medicare. The condition is important as it is a requirement which, if not achieved, will subject IHS of Florida to fines and penalties by the agency. Improved Accessibility The applicant will improve the efficacy, appropriateness, accessibility, effectiveness and efficiency of home health services in District 2 if approved. IHS of Florida will provide good quality of care, should its application be granted. Quality of Care Through competitive forces, the applicant's approval will also improve the quality of care offered by home health agencies in District 2. The approval of IHS of Florida's application will also comply with the need evidenced by the extent of utilization of like and existing services in District 2. Economies from Joint Operations Certain economies derived from the operation of joint projects are achieved by IHS of Florida's proposal. IHS has a home office and corporate umbrella which oversees all of its operations for home health services. This master office offers economies of sale by sharing resources across a wide array of home health agencies in Florida and other states. Thus, the incremental expense for corporate overhead is reduced as compared to a free-standing home health agency. Additionally, this national oversight provides better economies to provide the most recent policies and procedures, billing systems, and other systems of business operation. Financial Feasibility IHS of Florida has the resources to accomplish the proposed project. As demonstrated on schedule 1, and schedule 3 of IHS exhibit 1, the budget for the project is only $144,000. This budget includes all appropriate equipment for both the initial and satellite offices. Budgeted amounts include all required lease expenses, equipment costs and even start-up costs such as salaries for the recruitment of training and staff prior to opening. In total, $52,000 of pre-opening expenses are projected, which is reasonable. IHS of Florida filed applications for other home health agency start-ups in three different districts. The applicant had more than $180,000 in cash on hand and an additional $226,000 assured from a commitment letter from IHS which was also contained in the application. A letter of commitment from Mark Levine, a director and executive vice president of IHS, indicated IHS will provide $250,000 in capital for this specific project. Additionally, IHS will provide up to $1 million in working capital loan to assure no cash flow problems ever arise. A similar letter of commitment appears in each of the CON applications which IHS of Florida has filed. IHS has committed to fund each of the CON applications applied for by IHS of Florida. Each of these letters of commitment for the various CON applications sought by this applicant are on file with the AHCA. In total, the applicant projects $600,000 in capital commitments assured. IHS' balance sheet, reveals access to $60 million in cash and cash equivalent. The record clearly demonstrates an ability of IHS to fund all capital contributions required by the applicant. The current assets of IHS approximate $240 million. In addition to having cash in the bank, IHS is a growing concern and is, in fact, a Fortune 500 company that is publicly traded on the New York Stock Exchange. IHS generates revenues which exceed its annual expenses. In the last year, IHS derived $30 million more than it experienced in expenses. The application is financially feasible in the short- term. IHS' application is also feasible in the long-term. IHS of Florida's utilization projections are reasonable. Budgeted staffing and salaries are reasonable. The cost limit calculation and reimbursement calculation by payor source, which is provided in great detail in Schedule 5 of IHS of Florida's application, is reasonable. Projected expenses associated with this project were reasonably calculated based on the actual experience of other IHS Home Health operations. The reasonableness of these costs are also demonstrated when compared with the cost per visit by existing agencies in District 2. In fact, IHS of Florida predicted it would be a lower cost provider than the expected cost of existing agencies at the time IHS of Florida's operations would begin. IHS of Florida's proposal will have a healthy, competitive effect on the cost of providing services by other providers. Putnam The Proposal Putnam proposes to establish a Medicare-certified home health agency with its primary office located in Bay County. Bay County was selected as the primary office based upon the locations of existing and approved agencies in District 2, the aggregate utilization of each, and the number of individuals aged 65 and over distributed among the existing District 2 counties and agencies. Mr. Alan Anderson is Putnam's sole stockholder, Director, and President. Under the ownership and administration of Alan Anderson, Putnam has provided Medicare-certified home health services in AHCA District 3 continuously since 1986. Mr. Anderson is also the sole owner, director, and president of Anderson Home Health, Inc., a Medicare-certified home health agency serving AHCA District 4 since 1992. Anderson Home Health's CON was obtained by Putnam through the same process undertaken by the prospective applicants in this proceeding. Putnam's District 3 agency has successfully served District 3 residents since 1986 at first through its Palatka office, then growing to its current size of four offices. In District 4, Anderson Home Health, Inc. has also experienced successful operations having grown from its principal office in Duval County to a total of four offices. Putnam's District 3 home health agency began with the original office located in Palatka, followed by offices opened in Gainesville, Ocala and Crystal River. Anderson Home Health, Inc.'s District 4 operation began with the original office located in Jacksonville; the second office was opened in Daytona Beach, followed by the opening of the third office in Orange Park; and the fourth office was opened in Macclenny. Putnam's District 3 agency is JCAHO accredited "with commendation." As part of CON application No. 8383, Putnam has agreed to certain conditions upon award. First, the proposed project will locate its primary office in Bay County. Putnam also conditions its approval with the provision that 0.25% of its admissions will be persons infected with the HIV virus. Four percent of its patients will be Medicaid or indigent patients. Finally, Putnam has conditioned its approval upon the provision of various special programs such as high tech home health services, a volunteer program, and the establishment of a rural health care clinic. History or Commitment to Provide Services to Medicaid and Indigent Patients For Medicare reimbursement purposes, Putnam proposes to maintain a Medicare-only agency and private sister agency which provides services to non-Medicare patients. The private sister agency will provide service to the Medicaid and indigent patients. The costs of providing services to these non-paying or partial paying patients will be absorbed by the agency as a contribution to the community. The establishment of a private sister agency to handle the non-Medicare patients is common in the home health industry. As a condition in the application, Putnam will accept up to 3.0% Medicaid patients. Although it stated in its application that it would accept between .5%-1.0% indigent patients, its conditioning of the application on 4.0% Medicaid and indigent patients would necessitate that it accept at least 1.0% indigent (if not more, should the Medicaid patients fall below 3%) in order to meet the 4.0% Medicaid and indigent care condition. The percentages proposed by Putnam are consistent with the statewide average (approximately 95% Medicare) and the District average (approximately 92.1% Medicare). Bay County's average of Medicare patients is approximately 96.4% Medicare. To meet the 4.0% Medicaid and indigent condition, Putnam's average of Medicare patients might have to be less than the Bay County average but not by much. Certainly, meeting the condition is achievable. The agency's position is that Putnam's Medicaid/indigent commitment is not a ground for denial of the application. Quality of Care Putnam has continuously owned and operated a licensed Medicare-certified home health agency in District 3 since 1986 and has been JCAHO accredited with commendation status since 1994. In an effort to continuously provide quality care, Putnam has developed a comprehensive set of policies and procedures to guide its staff, its physicians, volunteers, patients, as well as patients families. No evidence was presented to suggest that Putnam does not have a history or ability to provide quality care. Availability of Resources, Including Health Manpower, Management Personnel and Funds for Capital and Operating Expenditures Putnam has provided Medicare-certified home health service to the residents of District 3 for ten years. Putnam will be able to share its existing personnel and operations expertise with the proposed District 2 agency. Administrative, Managerial, and Operational Personnel Putnam intends to utilize existing administrative personnel in the start up and overall operation of the proposed agency. These management personnel include the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Data Processing Director, Director of Volunteers, Personnel Director. These experienced personnel will be available to provide valuable management support to the proposed agency. The proposed agency will be operated by an administrator who will report directly to Putnam's CEO, Alan Anderson. The agency's administrator will be actively involved in budget preparation, physician relations, community education, and preparation for regulatory agency surveys. The proposed agency will rely upon the demonstrated experience of key personnel in its initiation. Ms. Nora Rowsey, experienced in the start-up phases of home health agencies, will personally supervise and implement the start up phase of the proposed District 2 agency. Putnam intends to hire individuals to work within the proposed agency who already have experience in the provision of the necessary services. Current employees of Putnam's as well as contract personnel of the District 3 agency have indicated a willingness to provide services in Bay County once the application is approve. Funding and Capital Resources Putnam projects the total costs of initiating the proposed agency to be approximately $70,000. Putnam has simultaneously applied for two other Medicare-certified home health agencies, in Districts 6 and 7. Each of these projects area also projected to cost approximately $70,000. Putnam, therefore, has projected costs associated with all three projects of approximately $210,000. Additionally, there is a $10,000 contingency cost related to the District 3 offices bringing the total expenditure for all capital projects of $220,000. Putnam's application includes two letters from First Union National Bank of Florida which substantiate that there are funds on hand to finance all of Putnam's capital expenditures, including the District 2 proposed agency. As of April 18, 1996, Putnam's bank account had a twelve month average balance of $245,949.02. As of April 18, 1996 the accounts of both Putnam and Anderson Home Care Inc., had a combined twelve month average balance of $676,656.93. The evidence established that these funds exist and are available for all proposed capital projects. In the two years prior to hearing, Putnam showed sound management, significant growth, and a strong financial position. It continues to do so. In an interoffice memorandum dated May 28, 1996, from Roger L. Bell to Richard Kelly, Health Services and Facilities Consultant, Putnams' financial position was described as follows: The current ratio of .62 indicates the current assets are not adequate to cover short term liabilities. The long term debt to equity and equity to assets ratios are very weak. This, along with the negative equity make a weak financial position. The profit margin at .1% is also very weak, and raises some concern with the applicant's ability to cover operating expenses . Putnam Ex. No. 4. This criticism was answered by Putnam. The agency may not have considered certain factors applicable to a predominantly Medicare-reimbursed home health agency. Putnam's current liabilities are payable in a longer term than the receivables are collectible. Furthermore, with provision of 98% Medicare services, which is solely cost reimbursed, there remains only two percent of the operation left to make a profit. A .1% profit from the small amount of insurance and private pay patients indicated financial health. Putnam, moreover, is a viable operation because of its historical success, its knowledge of the industry, its expansion to six locations, its growth in staff, and its growth in patient visits. Putnam has the resources available to provide the necessary administrative, managerial, and operational manpower needed by the proposed home health agency. AHCA's financial criticisms are unfounded; Putnam has on hand the capital necessary for the accomplishment of the proposed project. Putnam has the experience and know-how to make the proposed project work in District 2's rural areas. Financial Feasibility Putnam has the resources to implement this project if approved. Putnam has the same capability that existed when three offices were opened during the period from April 1992 through February 1993, and the same resources when four offices were opened in 1995. In every instance, the new offices were started up with cash on hand from operation. Mr. Anderson, Putnam's President and sole shareholder and director, testified that he spends much time in the financial area of the operations. As of November 29, 1996, after deducting all accounts payable, Putnam has a cash balance of approximately $390,000. Anderson Home Health, Inc. had a balance of approximately $425,000. Mr. Anderson testified that the First Union letters in the application at pages 231 and 232 were correct and that Putnam is in even better shape now than when the letters were written. Putnam is financially feasible in the short term. AHCA contends Putnam's project is not financially feasible in the long term because the projected visits stay the same in the second year and because it does not project a profit in year two of operation. This fails to take into account Putnam's performance over the past ten years which, as the agency conceded at hearing, is an important consideration . Mr. Anderson purchased Putnam in 1986. At that time the agency had a single office in Palatka doing 4,000 visits. Following Mr. Anderson's purchase of the agency it had grown to over 55,000 visits and close to a hundred employees. After the success experienced by Mr. Anderson in Palatka, Putnam filed a CON application for District 4, with a proposed principle site in Jacksonville. The District 4 CON was approved by the agency--without any concerns for financial feasibility nor with any concerns for Putnam's cash flows. Without having any experience or referral sources in Jacksonville, Putnam began doing approximately 7,000 visits. The number of visits jumped to 45,000 in the second fiscal year, 123,000 in the third fiscal year, and as of September 30, 1996 the Jacksonville office performed 158,000 visits. Aside from the extraordinary growth experienced in the Palatka and Jacksonville offices, already discussed, Putnam has opened rural offices also doing very well. The Macclenny office in rural Baker County had over 15,000 visits in the first twelve months and is currently averaging over 1800 visits. The Crystal River office in rural Citrus County made over 12,000 visits in its first year and is currently doing approximately 1400 visits a month. Every new office opened by Putnam or Anderson Home Health since 1991 has been break even or better. Putnam has a proven track record for the successful and profitable operation of new Medicare-certified home health agencies. Putnam's project is financially feasible in the long term. Utilization Projections The application sets forth reasonable utilization projections. Based on Putnam's utilization in the past, there is no reason to believe the projections set forth in the application are or unreasonable or will not be achieved. Impact on Costs Putnam is a high tech provider of home health services and will provide some services not currently available or available only in a limited number of agencies. The impact of approval of Putnam's application on costs in the District will be minimal due to the reimbursement issues associated with Medicare which is cost based. RHA A Not-for-Profit Corporation in District II RHA is not-for-profit corporation whose purpose is to provide a continuum of care to the community. All profits are returned to its nursing homes or agencies as a way of continuing to build the programs. RHA owns two nursing homes in AHCA District II; Riverchase Care Center in Gadsden County and Brynwood Center in Jefferson County. If approved, RHA is proposing to locate its Medicare certified home health agency in existing space within the Riverchase and Brynwood nursing facilities. Both of these facilities are managed and operated by HealthPrime, Inc., a company which operates approximately 40 facilities in 13 states. While RHA is technically the owner and therefore applicant for this CON, HealthPrime would operate the proposed Medicare certified home health agency within the nursing homes. RHA's home health agency would have two offices. The office located in the Riverchase facility would serve Gadsden, Liberty, Franklin, Gulf, Wakulla, Jackson, Calhoun, Washington, Holmes and Bay Counties. The office located in the Brynwood facility would serve Leon, Jefferson, Madison and Taylor Counties. Financial Feasibility The only questions raised by AHCA concerning RHA's financial feasibility went to the ability of RHA to fund this project in conjunction with other CON projects listed on Schedule 2 of its CON application. The largest project on Schedule 2 of RHA's application was a CON application for a 20 bed addition to Riverchase Care Center. At hearing it was determined that since the filing of the instant home health CON application, the 20 bed application had been withdrawn, was no longer viable, and was not being pursued by RHA. Once AHCA's financial expert learned that the 20 bed addition to the Riverchase Care Center had been administratively withdrawn and that its costs should therefore no longer appear on Schedule 2, questions about the financial feasibility of the project were resolved. RHA's project was shown to be financially feasible in the short term based upon the financing commitment of HealthPrime. RHA proved that its assumptions and projections made in its financial analysis are reasonable. These assumptions were based on actual experience in the operation of similar skilled nursing facility based home health agencies, as well as prior experience of other home health agencies in their first two years of operation. RHA's proposed project shows a net income in years one and two and is financially feasible in both the short and long term. Availability and Access of Services To the extent that the number of people needing home health care will increase in the future, there is need for new providers of home health services to provide such availability and access. RHA's willingness to condition its application on service to AIDS, indigent and Medicaid patients can only improve the availability and access to services in the district. In addition, RHA's approval to provide nursing home based home health services is unique to the provision of home health services in District II. Efficiency RHA's proposal, which would place its home health agency within its nursing homes, is unique among the applicants in this proceeding. Such an arrangement provides not only an efficient continuum of care to the patients, it also provides efficiencies and cost savings in the sharing of resources. RHA's proposed project is cost effective because it utilizes existing space and equipment in its nursing homes. Skilled nursing home based Medicare certified home health agencies are specifically recognized by the Federal Medicare program in their cost reports. Home health reports are filed as a part of the nursing home cost report and there is an allocation of the nursing home's cost to the home health agency. This benefits both the provider and the Medicare program through cost savings. RHA's cost per visit to the Medicare program of $48 will be substantially less than the District II average of $66 per visit projected for the time RHA will be operational under the applied- for CON. RHA's proposed project will have no impact on its costs of providing other health care services. Appropriateness and Adequacy RHA proposes to provide the entire range of home health services throughout the district. Given the project need in the planning horizon, RHA's proposal is more than adequate to meet the demand for such services. Quality of Care An applicant's ability to provide quality care is another important factor in statutory and rule criteria. RHA and HealthPrime have shown, through operation of their nursing homes in Florida, all of which have superior ratings, that they have the ability to provide quality health care. In addition, HealthPrime, which will actually operate the home health agency, has experience operating four other nursing home based home health agencies. HealthPrime will utilize its quality assurance programs already in place in its other home health agencies and will seek JCAHO accreditation of this proposed agency. By combining a home health agency with its existing nursing homes, RHA will improve the case management of its patients by providing vertical integration of its services in a continuum of care. Such continuum of care provides a stability in personnel and providers that are working with the patient. Economies and Improvements from Joint or Shared Services As previously discussed, RHA's unique proposal to operate a nursing home based home health agency not only offers a continuum of care for the patient, it also provides fiscal economies to the agency as well as the Medicare program. Resource Availability Based on RHA's experience of hiring personnel for its existing nursing homes in the district, there will be no problem in hiring sufficient personnel for RHA's agency. Fostering Competition The addition of other Medicare certified home health agencies in a district consisting of 10 counties and only 23 providers will promote increased competition and more options for patients. Findings Applicable to All Four Applicants No Fixed Need Pool The agency has no rule methodology to determine the need for Medicare-certified home health agencies. The agency's most recent home health need methodology was invalidated in Principal Nursing vs. Agency for Health Care Administration, DOAH Case No. 93-5711RX, reversed in part, 650 So.2d 1113 (Fla. 1st DCA 1995). There is, therefore, no numeric need determination, or "fixed need pool", established by the agency applicable in this proceeding. District 2 AHCA District 2 is composed of 14 counties. The applicants propose to concentrate their service in various, different parts of the district. Local and State Health Plan Preferences District 2 Health Plan Services to Medicaid and Medically Indigent The first preference under the District 2 Health Plan provides a preference to applicants with a history of providing services to Medicaid or medically indigent patients or commitment to provide such services in the future. Mr. Franklin of Care First has such a history. He is an owner of Wakulla Manor, which had a Medicaid occupancy rate of 88.09% for the period of July-December, and the administrator of Miracle Hill Nursing Home which had a Medicaid occupancy rate of 95.74% for the same period. In the face of such a record, Care First’s commitment of 7% Medicaid and 1% uncompensated/charity patients might seem to pale. But it is a significant commitment, given the nature of the home health agency business, and one upon which Care First agrees its application should be conditioned. IHS conditioned its application on 5% Medicaid and 1% charity care. Putnam conditioned its application on an “Indigent and Medicaid participation equal[ling] 4.0%.” Putnam Ex. No. 1, pg. 51. Putnam, moreover, proposes a Medicare-only agency. Establishment of a private sister agency, a practice common in the home health care industry, will allow Putnam to provide service to the Medicaid and indigent patients separate from its Medicare-only agency. RHA has provided a high percentage of Medicaid/charity days at its Riverchase facility (92.10%) and at its Brynwood facility (90.24%). In addition, RHA is willing to condition its CON on the provision of a minimum of 1% of annual visits to indigent care and 5% to Medicaid. Service to Unserved Counties. Preference 2 states that “[p]reference should be given to any home health services CON applicant seeking to provide home health care services in any county within the District which is not presently served by a home health agency.” There are no counties within District 2 that are not presently served by a home health agency. Service Through a County Public Health Unit Preference 3 states that “[p]reference should be given to a home health services CON applicant seeking to develop home health care services to be provided through a county public health unit in the district in order to more adequately serve the elderly and medically indigent patients who are isolated or unable to travel to permanent health care sites." Of the four applicants, only IHS of Florida’s application is conditioned on working with public health units. IHS has experience working with public health units, working with them currently in Martin County, Manatee County and Broward County. Nonetheless, IHS of Florida will not be providing its services “through” a public health unit. Public Marketing Program Preference 4 states, “[p]reference should be given to a home health services applicant who has a history of providing, or will commit to provide, a public marketing program for services which included pamphlets, public service announcements, and various other community awareness activities. These commitments should be included on the granted CON as a condition of that CON.” Care First currently markets its services to the community and commits to a public marketing program in the future as a condition of its CON. IHS of Florida committed to performing at least one community awareness activity per calendar quarter as a condition of its application. It also indicated, moreover, that it would work to develop public service announcements and marketing programs with the help of public health units or any other appropriate vehicle. The latter indication, however, was not made a condition of the application. Putnam provides educational services to the community, its employees, patients and patients’ families, including the provision of pamphlets, and presenting audio and video tapes as appropriate to the patient and their families. Putnam, however, did not condition its application on a commitment to a public marketing program or commit to such a program in any other way in its application. RHA stated it would accept a condition on its CON to provide a public marketing program for services, including pamphlets, public service announcements and other community awareness activities. It did not reflect such a condition on the “Conditions” page of the application, but, given its statement that it would accept such a condition, there is nothing to prevent the agency from imposing such a condition should it grant RHA’s application. Access Requirements Preference 5 is, “[p]reference should be given to a home health services CON applicant who agrees, as a condition of the CON, to meet the following access requirements for each county in which services are provided: 1) 24 hour local telephone call (or toll-free) contact. 2) 24 hour call/response capability. 3) Maximum on one (1) hour response time following call. Care First currently meets the requirements of Preference 5 in the counties in which it now provides services, and has committed to continue to meet these requirements as a Medicare certified home health agency in all counties in which it will provide services. Care First has made as conditions of its CON, provision for 24-hour accessibility by answering service and installation of a toll-free access line and maintenance of a log of calls during the hours the agency is closed, including documenting of response time to each call. IHS of Florida conditioned grant of its CON on a 30 minute response time, and 24-hour phone availability on a toll-free hot line. Putnam presently provides the services in this preference in its District 3 Medicare certified home health agency and agrees to meet this preference within 90 days of initiating services. It did not, however, make a commitment to meet this preference on the “conditions,” page of its application. There is nothing to prevent the agency from making Putnam’s CON, if granted, conditional upon compliance with this preference. RHA has agreed to have its CON conditioned to meet the access requirements of Preference 5. 2. State Health Plan Service to Patients with AIDS The first preference under the State Health Plan is that “[p]reference shall be given to an applicant proposing to serve AIDS patients.” All four applicants are committed to serving AIDS patients. Full Range of Services. Preference 2 of the State Health Plan is “[p]reference 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." There are currently 11 hospital-based Medicare certified home health agencies in District 2. Several of them provide the high tech services which are sometimes needed by discharged hospital patients. Very few referrals for high tech care have been received by D. G. Anthony or Care First since May, 1995, and there is no indication such services are not available in District 2. Care First has identified, however, an unmet need for the pediatric and pre-hospice home health agency services and has conditioned its application on the provision of those services to the community. IHS of Florida proposes, among other high tech services, infusion therapies, pain management therapies and chemotherapy. There is no evidence, however, that these therapies are not available in District 2. The same is true of Putnam as to the high tech therapies it proposes to provide. There is no evidence that they are not available in District 2. Although RHA indicated in its application that it intended to provide the entire range of services that a home health agency can provide, again, there is not evidence that they are not available in District 2. Disproportionate Share Provider History Preference 3 is “[p]reference 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 AHCA service district and proposing to serve such patients within its market area." Care First, having been formed in March, 1996, did not have a history of providing Medicaid and indigent patients. Care First has committed to 7% of its visits to Medicaid patients, well above the average of existing District 2 agencies of 2-3% Medicaid. Care First has committed to 1% of its visits to charity/uncompensated care. IHS of Florida has committed to 5% Medicaid and 1% charity care. Like Care First, IHS of Florida, as a newly formed corporation, does not have a history of serving a disproportionate share of Medicaid/indigent care patients. Putnam’s commitment is 3% to Medicaid and 1% to charity care. This commitment will be met through its sister home health agency and not the Medicare-certified home health agency for which the CON is sought. RHA has committed to set aside 5% total annual visits to Medicaid patients and 1% of annual visits to indigent care. It has a history of providing a disproportionate share of services to Medicaid patients at its two skilled nursing facilities in District 2, Riverchase Care Center in Quincy and Brynwood Center in Monticello. Underserved Counties Preference 4 is [p]reference shall be given to an applicant proposing to serve counties which are underserved by existing home health agencies. The rural areas of District 2 are traditionally underserved. Putnam will serve Bay County, an underserved county; the three other applicants will serve rural areas of more than one county in District 2. Consumer Survey Data Preference 5 is "[p]reference shall be given to an applicant who makes a commitment to provide the department with consumer survey data measuring patient satisfaction." Care First has committed to providing such data to the agency. IHS of Florida will maintain a data base of results of patient satisfaction surveys and make them available to the agency, just as it already does. Putnam will make available to the agency the results of surveys similar to surveys measuring patient satisfaction Putnam has already developed. Putnam has conditioned its application on providing these surveys to the agencies as well as surveys measuring physician satisfaction. RHA has cited on its “Conditions” page, “. . . (it) will provide the Agency for Health Care Administration with consumer survey data.” Quality Assurance Program and Accreditation The State Health Plan’s Sixth Preference is “[p]reference shall be given to an applicant proposing a comprehensive quality-assurance program and proposing to be accredited by either the National League for Nursing or the Joint Commission on Accreditation of Healthcare Organizations." Care First included in its application a copy of its Quality Assurance Program which has been in use since May, 1995. The program meets the state and federal licensure and certification requirement and the stringent requirements of JCAHO. Moreover, Care First has conditioned its application upon JCAHO accreditation. IHS of Florida submitted documentation regarding its Quality Assurance Program through initiatives such as Total Quality Management and Continuous Quality Improvement. It will seek accreditation from JCAHO within one year of receiving its CON. Putnam, an existing home health agency in District 3 since 1986, has over the years developed and refined a comprehensive quality assurance program which is above the industry standard. The District 3 agency, using its quality assurance program, has attained its JCAHO accreditation “with commendation,” a distinction received by less than 4% of all applicants. Putnam will seek accreditation from JCAHO for its District 2 operation within one year of receiving its CON. RHA is willing to condition its CON on the provision of a comprehensive quality assurance program and accreditation by the JCAHO. Need 1. Numeric Need Since there is no published fixed need pool applicable to this proceeding, the parties, other than the agency, developed their own methodologies for determining numeric need. Each of the methodologies employed by the parties was reasonable. After taking note of the statistics for actual patient visit growth in District 2 from 1991 to 1994, Michael Schwartz began with a conservative number of 60,000 new patient visits per year, a number half of the growth for the lowest growth year of that time period. Multiplying that number times the three horizon years of 1994-97 equals 180,000 new patient visits from 1994 which yields a need for 5.2 agencies. The reasonableness of numeric need in excess of four is supported by other factors. After the filing of the four applications at issue in this proceeding, there are two fewer Medicare-certified home health agencies with certificates of need in District 2. At the same time, home health care visits have been on the increase not only in the district as discussed, above, but in the state as well. Statewide, home health care visits grew from 18 million to 22 million between 1991 and 1994. The utilization of home health care agencies is increasing because of population growth and an increase in the number of visits per patient. The amount of time spent by patients in the hospital is decreasing. The decrease translates into increased need by patients for visits from home health agencies. The need for home health is going to continue to increase because it is a cost-effective alternative to nursing home placement and hospital care. From 1991 to 1994, the number of home health visits more than doubled: from 369,396 to 869,893. This trend continued in 1995. The recent significant growth in the utilization of home health agencies in District 2 is expected to continue. The growth is attributable not only to a population increase in the district but to increase in the use rate for home health agency services as well. The growth in use rates can be explained, in part, by the increase in the senior population (65 and older) and the pressure exerted by managed care for earlier hospital discharges and home health agency services as a viable alternative in some cases to inpatient treatment. The senior population in District 2 is reasonably expected to grow approximately 8% in the five years after 1996, with 15% growth expected reasonably in the 75 to 84 year old population and even higher growth, 25%, in the population over 84 years old. 2. Other Indications of Need Local physicians have experienced difficulty arranging for the existing home health agencies to provide services to patients located in remote areas of District 2. Specialized groups, such as AIDS patients, would, in all likelihood, benefit from additional home health agencies in District 2. Furthermore, a study conducted by IHS of Florida showed that the district has an unusually high rate of diabetes and in four counties has a diabetes death rate 100% greater than the statewide average. Well Springs home health agency is one of the two Medicare-certified home health agencies to cease providing Medicare-certified home health services after the four applicants in this proceeding filed the applications at issue here. Well Springs was licensed in all 14 counties of District 2 and had physical locations in Franklin, Gadsden, Bay, Leon, Liberty, Taylor and Madison Counties. It had a significant share of the District 2 Medicare certified home health agency market with 13.1% of the 1994 visits, the second highest in the District. With Well Springs discontinuing Medicare-certified home health agency services, a void was left for such services in District 2, particularly in those counties in which Well Springs had a physical presence.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED: That the Agency for Health Care Administration enter its final order granting CON Nos. 8380, 8381, 8382 and 8384 to RHA/Florida Operations, Inc., Care First, Inc., Home Health Integrated Health Services of Florida, Inc., and Putnam Home Health Services, Inc., respectively. DONE AND ENTERED this 9th day of June, 1997, in Tallahassee, 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 9th day of June, 1997. COPIES FURNISHED: Sam Power, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Suite 3431 Fort Knox Building III Tallahassee, Florida 32308-5408 Jerome W. Hoffman, General Counsel Agency for Health Care Administration 2727 Mahan Drive, Suite 3431 Fort Knox Building III Tallahassee, Florida 32308-5403 Richard Ellis, Esquire Agency for Health Care Administration 2727 Mahan Drive, Suite 3431 Fort Knox Building III Tallahassee, Florida 32308-5408 W. David Watkins, Esquire Watkins, Tomasello & Caleen, P.A. 1315 East Lafayette Street, Suite B Tallahassee, Florida 32301 Mark Emanuel, Esquire Panza, Maurer, Maynard & Neel NationsBank Building, Third Floor 3600 North Federal Highway Fort Lauderdale, Florida 33308 Paul Amundsen, Esquire Amundsen & Moore 502 East Park Avenue Tallahassee, Florida 32301 Theodore E. Mack, Esquire Cobb Cole & Bell 131 North Gadsden Street Tallahassee, Florida 32301
Findings Of Fact 1-3. Accepted as background information Accepted Accepted as background information 6-8. Accepted Adopted in Finding of Fact 23 Accepted but subordinated to Finding of Fact 41 11-12. Adopted in Finding of Fact 23 13. Adopted in Findings of Fact 14 and 30 14-15. Adopted in Finding of Fact 27 No such numbered Finding of Fact Subordinate to Finding of Fact 43 Accepted Adopted in Finding of Fact 24 20-24. Adopted in Finding of Fact 26 25. Subordinate to Finding of Fact 41 26-39. Accepted 40-42. Subordinate to ultimate issue 43-78. Subordinate to Finding of Fact 43 79. Accepted and adopted in Finding of Fact 41 80-101. Adopted in Finding of Fact 42 or subordinate thereto RULINGS ON PROPOSED FINDINGS OF FACT SUBMITTED BY PERSONNEL POOL OF ORANGE COUNTY, INC. Accepted as background information Subordinate to Findings of Fact 15-21 Adopted in Finding of Fact 31 Adopted in Finding of Fact 32 Accepted in Finding of Fact 31 Accepted in Finding of Fact 40 Accepted in Finding of Fact 32 Accepted in Finding of Fact 31 33 11. Accepted in Finding of Fact 34 12-13. Accepted in Finding of Fact 35 Accepted in Finding of Fact 36 Accepted in Finding of Fact 37 16-17. Subordinate to Findings of Fact 31-37 18-19. Accepted in Finding of Fact 40 20-23. Subordinate to Finding of Fact 43 24-26. Accepted in Finding s of Fact 38 and 39 27-29. Subordinate to Findings of Fact 31-37 30-42. Accepted as background 43-44. Subordinate to Finding of Fact 43 45-63. Rejected as immaterial in light of DOAH Case No. 85-1377R 64-77. Adopted in Findings of Fact 42-44
Recommendation In light of the forgoing Findings of Fact and Conclusions of Law, therefore, it is RECOMMENDED that Certificate of Need Number 3746 be issued to Winter Park Memorial Hospital Association, Inc. Certificate of Need Number 3474 be issued to Hospice of Central Florida, Inc. and Certificate of Need Number 3475 be issued to Personnel Pool of Orange County for operation of home health agencies in Orange and Seminole Counties, Florida. RECOMMENDED this 21st day of April, 1986, at Tallahassee, Florida. ARNOLD H. POLLOCK, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 21st day of April, 1986. COPIES FURNISHED: Thomas D. Watry, Esquire 1200 Carnegie Building 133 Carnegie Way Atlanta, Georgia 30303 Sydney H. McKenzie III, Esquire Martin J. Edenfield, Esquire 2700 Blair Stone Road, Suite C Post Office Box 6507 James M. Barclay, Esquire Jay Adams, Esquire Suite 200 215 East Virginia Street Tallahassee, Florida 32301 Harden King, Esquire Assistant General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301 William Page, Jr., Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301 APPENDIX The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this ease: RULINGS ON PROPOSED FINDINGS OF FACT SUBMITTED BY HOSPICE OF CENTRAL FLORIDA, INC. 1-3. Accepted as background information 4. Accepted in Finding of Fact 41 5-6. Rejected as immaterial in light of ruling in DOAH Case No. 85-1377 . Accepted in Finding of Fact 43 Subordinate to other Findings of Fact Accepted in Finding of Fact 41 No such proposed Finding of Fact Accepted in Finding of Fact 41 Rejected as immaterial in light of ruling in DOAH Case No. 85-1377. Accepted in Finding of Fact 43 Accepted in Finding of Fact 43 15-19. Subordinate to Finding of Fact 43 Accepted in Finding of Finding of Fact 15 Accepted in Finding of Fact 15 22-26. Accepted in Findings of Fact 15-21 Adopted in Findings of Fact 15-21 Subordinate to Finding of Fact 41
The Issue Whether HRS should grant Upjohn's application for certificate of need to establish a home health agency in Escambia County? Whether, in light of the recommended disposition of Upjohn's application, HRS should grant Baptist's application for a certificate of need to establish a home health agency to serve Escambia and Santa Rosa Counties? Whether an applicant for certificate of need and HRS can by stipulation divest the Division of Administrative Hearings of jurisdiction over the application and defeat the right of an existing provider to proceedings pursuant to Section 120.57(1), Florida Statutes (1984 Supp.)?
Findings Of Fact Since June 4, 1978, Upjohn has operated a home health service from its Pensacola office, one of 22 such offices in Florida, 16 of which are licensed as home health agencies. For more than three years, Upjohn has performed various services under contract to HRS from its Pensacola office. In Escambia, Santa Rosa, Okaloosa, Walton and Bay Counties, Upjohn now provides home nursing care, homemaking services, live-in companions and nurses' aides. Medicaid and medicare would pay for some, but not all, of the services Upjohn already provides in Escambia County, if Upjohn's Pensacola office were licensed as a home health agency. The certificate of need Upjohn seeks here is a prerequisite to such licensure. Upjohn provides services which are not offered by either of the home health agencies now licensed to serve Escambia County. Some people receiving these services must turn elsewhere for related services in order to obtain reimbursement from medicaid or medicare for the related services. This can create coordination problems such as the one mentioned at hearing: If employees from both agencies arrived at the same time, one might have to wait while the other "performed services", e.g., administered an injection. Like Upjohn, Baptist is already in the home health care business and provides services not offered by either of the licensed home health agencies serving Escambia County (one of which also serves Santa Rosa County.) Since October 2, 1983, Baptist has operated in Escambia and Santa Rosa Counties, albeit without the benefits of licensure as a home health agency. In 1984, to the time of final hearing, Baptist had seen 163 patients, ten to twelve of whom it had referred to NWFHHA because they were eligible for medicare benefits, but only if they received services from a licensed provider. Like Upjohn, Baptist provides various technical nursing services, such as hyperalimentation and intraveneous administration of antibiotics. Baptist also provides oxygen therapy and chemotherapy, once a physician has administered an initial dose. In addition, Baptist deals in durable medical equipment including bedside commodes, walkers, and the like. Baptist intends to offer physical, occupational and speech therapy if it receives a certificate of need, although it does not now offer these services. Durable medical equipment expenses and physical therapy fees are reimbursable by medicare Part B without regard to the provider's licensure. All of the services which the applicants provide and for which they are now reimbursed by medicare are available in Escambia and Santa Rosa Counties from providers who are licensed and eligible for reimbursement. COMPETITORS LICENSED Already licensed to provide services in Escambia and Santa Rosa Counties as a home health agency is Northwest Florida Home Health Agency, a nonprofit corporation that opened for business in 1975. The number of visits NWFHHA makes monthly has risen from 629 in 1980 to 1709 in 1984. Of the 902 patients NWFHHA served in the fiscal year ending March 31, 1984, only twelve were not eligible for medicare benefits. NWFHHA has headquarters in Gulf Breeze and is the only licensed home health agency serving Santa Rosa County. Nothing prevents NWFHHA staff from providing nursing services gratis on their own time, but there was no evidence that this occurs. NWFHHA offers only services that medicare reimburses, viz., skilled nursing, physical, occupational and speech therapy, and medical social worker and home health aide visits. NWFHHA's office hours are from eight o'clock in the morning until four o'clock in the afternoon Monday through Friday. After hours, nights and weekends a telephone answering service, "the doctors and nurses registry," answers calls placed to NWFHHA's office telephone, and relays messages to a nurse. A nurse is always on call, and registry personnel either telephone the FWFHHA nurse on call or contact her with a beeper pager system. The only other licensed home health agency serving Escambia County is the oldest, the Visiting Nurses' Association (VNA) which has been "absorbed" into the Escambia County Health Department. In the fiscal year ending June 30, 1983, the VNA served 465 medicare patients and 303 others, including patients unable to pay, those who could and did, and those whose insurance companies paid for services. The VNA does not sell or rent durable medical equipment but enjoys good relationships with suppliers and has never been unable to obtain equipment needed by its clients. The VNA provides skilled nursing services, including enteral therapy, post-colostomy and other stomal care, nutritional counseling, home health aides and, through another branch of HRS, social services. The VNA has never turned away a medicare or a medicaid patient in need of its services. VNA's office hours are from eight o'clock in the morning till half past four o'clock in the afternoon Monday through Friday. Between same hours on Saturdays, Sundays and holidays, VNA has "a weekend nurse" who can be reached through the doctors and nurses registry. (T.369) VNA's services are generally unavailable before eight o'clock mornings and after four-thirty evenings, and VNA cannot be reached by telephone during those hours, unless, like Judy Gygi, the director of the social work department at West Florida Hospital, a person has the VNA "call-back number." NEED In comparison to hospitals, home health agencies can open shop relatively quickly, once the decision to do so is made. A "planning horizon" of one year for home health agencies is more appropriate than the five-year horizon used for hospitals. This is particularly true here where both applicants are already engaged in offering the services for which certificates of need are sought. The need for home health services may be seen as a function of the age and size of a population. In 1985, Escambia County is projected to have a population of 254,100 persons of whom 23.04 percent would be younger than 15 and 10.1 percent would be 65 or older. The 1985 population of Santa Rosa County is projected at 62,600 of whom 24.63 percent would be under 15 and 7.9 percent would be 65 or over. For District 1 as a whole, comprising Escambia, Santa Rosa, Okaloosa and Walton Counties, the 1985 population is projected at 464,300, including 23.39 percent under 15 and 9.35 percent 65 or over. An expert retained by Upjohn predicted a need in 1985 for up to 27 home health agencies in District I, and for at least two and up to 18 home health agencies in Escambia County alone. Upjohn's expert invoked four methodologies. Common to each was the assumption that the average patient can be expected to receive 31.5 home visits, a number HRS generated to reflect statewide experience. Changes in medicare reimbursement for hospital care seem to have decreased the average length of stay in Escambia County hospitals by nearly a full day over the last two years or so. This is thought to have created additional home health clients who need significantly fewer visits than historical averages might suggest. VNA's recent experience has been on the order of 14 visits per patient as compared to NWFHHA'S recent average of approximately 36 visits per patient. At least two of the four methodologies generated predictions for 1985 of home health care visits in Escambia and Santa Rosa Counties, without regard to whether their cost was reimbursable by medicare. Nationally about 18 percent of Upjohn's services are reimbursed by medicare. A rough rule of thumb is that the "medicare need" is one fifth of the total need. Using a method he denominated "U.S. DHHS", Upjohn's expert predicted that there would be 5,836 home health referrals in Escambia County in 1985 as compared to 8,692 for the whole of District I, in 1985, so that the number for Escambia County would exceed two-thirds of the district total. Even assuming the "U.S. DHHS" methodology is a good one, something is amiss with the calculations, because the 1985 population of Escambia County is projected to amount to only 54.73 percent of the district total; and Escambia County is not projected to have as much as two thirds of any age cohort in District I in 1985. According to Upjohn's Exhibit No. 3, the "U.S. DHHS" method projects only medicare referrals, but this is an apparent error. According to the same exhibit, the "U.S. DHHS" predicts more than four times the number of medicare referrals for 1985 in Escambia and Santa Rosa counties than the only other medicare method, "DHRS Option 2," predicts. On the 20 percent medicare assumption, the "U.S. DHHS" calculations predict a level of home health care referrals in Escambia County ten times higher than the "District I Draft HSP" method predicts. The two "total referral" methods predicted 2,881 and 3,637 home health referrals for Escambia County and 696 and 878 for Santa Rosa County for 1985. Neither of these methodologies has been validated because, as Upjohn's Dr. Dacus explained, "there is just no reliable, verifiable data base, which reflects the total volume of home health care services." (T. 136). The final method, "DHRS Option 2", predicts 1,359 home health medicare referrals for Escambia County in 1985 and 267 such referrals for Santa Rosa County in 1985, a two-county total of 1626. Annualizing from Intervenors' Exhibits 2 and 5, the VNA can expect to make 5102 visits [2976 (12 divided by 7] in 1984 for which medicare Part A will reimburse; and NWFHHA can expect to make 20,388 visits (April, May and June home health aide, nurse, and paramedic visits quadrupled), for almost all of which it will seek reimbursement from medicare, if past experience is an indication. Dividing 5102 by 14 and 20388 by 36 yields a total of 931 medicare referrals for Escambia and Santa Rosa Counties for 1984, which suggests that the 1626 prediction for 1985 is a substantial overprediction. Area specific utilization rates suggest, on the generous assumption of a five percent increase in 1985 over 1984, and on the twenty percent medicare assumption, 4888 home health referrals for Escambia and Santa Rosa Counties in 1985. Assuming medicare visits increase in Escambia and Santa Rosa Counties by ten percent in 1985 over 1984 levels, 28,0389 visits can be expected. Upjohn's own policy is to form a subunit only "once you get up to around 15 or 20 thousand visits." (T.119) The national average is on the order of 7,000 visits per year per agency. NO NEED SHOWN TO BE UNMET But no net need was shown on this record because of the incomplete evidence as to what existing home health services already provide. The evidence did not show the total number of home health care visits now being made in Escambia and Santa Rosa Counties or either of them. Nor was it clear from the evidence whether the applicants and the licensed agencies are the only providers of home health services in the area. There has never been a waiting list for home health services in Escambia County and neither of the two Escambia county medicare providers had added staff in the twelve months preceding the final hearing. Specifically, there was no showing that medicare reimbursed services would be in any way lacking in 1985. The evidence affirmatively established that they would be readily available, unless the existing providers cease offering these services. The most interesting effort to show that there might be a problem was proof that a judgment for $105,000 against NWFHHA had not been paid. This amount exceeded the amount of NWFHHA's assets and no doubt presents serious legal problems for this nonprofit corporation. But this evidence 1/ falls short of establishing by a preponderance that NWFHHA will cease to provide home health services in 1985. Upjohn's expert witness testified that the only capital costs for home health agencies was "so low...just the cost of the office, having the office there. (T.114) Even if NWFHHA is stripped of its assets in order to satisfy the outstanding judgment or to obtain discharge in bankruptcy, its viability as an ongoing enterprise would persist. Office rent would be its chief working capital requirement and revenues would readily cover that. Both the VNA and NWFHHA can provide significantly more home health services without adding additional staff. To the extent Upjohn and Baptist serve non-medicare patients that VNA would otherwise have served, VNA's ability to deliver home health services to medicare-eligible patients is enhanced. Nothing in the evidence established that any medicare-eligible patient in Escambia or Santa Rosa Counties has encountered difficulty in obtaining home health services in the past or will in the foreseeable future. FINANCES Home health agencies differ from hospitals and other similar health care providers in that their fixed costs only amount to one or two percent of total costs. In order to serve more patients, they need only add staff. Patients' homes are the principal workplace, and capital expenditures entailed in expanding are minimal. The record is replete with theories about economies and diseconomies of scale, but these offer little practical guidance. "If you try [to] plot a curve of home health care average charge per visit [versus the number of visits] you cannot get a defined line. You get a very steady [flat] line with a lot of random variances across it." (T.115) The mix of services offered is more significant than the volume of services, although there is some correlation between volume and mix. (T.117, 118) "[G]oing further and further away...[to see] patients...increase(s) travel costs...[s]o you get an expanding component of travel expense" (T.119) if the geographical area being served expands. The medicare program reimburses costs of home health services up to a cap, which is $50.26 per visit for the current fiscal year. The rate of reimbursement for services to medicaid patients is much lower ($16 per visit). The average cost per NWFHHA medicare visit during the 1983-1984 fiscal year was $23.26, and the average cost per VNA medicare visit was $29.62 during the 1982- 1983 fiscal year. Because of differences in the mix of services, the applicants' average cost figures are not strictly comparable, but there was no proof that the cost of providing medicare services would go down if these applications are granted. 2/ Neither applicant showed projected costs at less than what the existing providers are experiencing. NWFHHA's costs are the lowest in Florida and there is nothing in the evidence to suggest that Baptist or Upjohn will be able to provide medicare services for as little as the existing providers. As a result, the medicare program and so the tax payers would be paying more for the same services, as far as the evidence shows, if either application is granted.
The Issue 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.
Findings Of Fact 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. 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. 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 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. 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. 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. 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. Healthcare's total project cost is $32,913 for CON Number 8396. As of June 30, 1995, Healthcare's available cash was $257,788. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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 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. 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. 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. 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. 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. 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. 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 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: Clearly demonstrate that there is an access problem; Clearly demonstrate that a particular payor group is not being served; Show where these individuals are currently. (being denied) What plan does the applicant have to assure these individuals will be served? How will the proposed agency operate differently to assure continued service this payor group? 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; Clearly present linkage with doctors, hospitals and nursing facilities; Does this proposed agency plan services not currently being provided in the district? Clearly identify and describe these services; Does this proposed agency present its own need methodology? Validate the reasonableness of the need methodology presented. If the need methodology is presented on a national model, validate its reasonableness based on what is existing in the district. 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 Does the proposed application have committed referral arrangements currently within the district? 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. 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. RHA attempted to respond to each of the 8 interim policy criteria but was unable to document a systemic access problem. 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 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. 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. 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. 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. 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. 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. 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). 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. 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. 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. 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). 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. 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.
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
Findings Of Fact On September 13, 1984, Santa Fe Healthcare Systems, Inc. (Santa Fe), d/b/a Alachua General Hospital, applied for a certificate of need (CON) to establish a Medicare-certified home health agency in Alachua, Levy and Bradford Counties. This application was identified by HRS as CON Action No. 3452. On March 29, 1985, Upjohn Healthcare Services, Inc. (UHCS), timely petitioned for a formal administrative hearing to challenge the granting of any portion of the CON application of Santa Fe to establish home health agencies in Alachua, Levy and Bradford Counties. Petitioner, Personnel Pool of North Central Florida, Inc. (Personnel Pool), was initially a party to this proceeding. Personnel Pool applied for a CON to establish a Medicare certified home health agency to serve Lake, Alachua, Citrus, Levy, Marion, and Sumter Counties in District III. Personnel Pool's application was identified by HRS as CON Action No. 3450, and was reviewed in the same batching cycle as Santa Fe's application. That proceeding was designated DOAH Case No. 85-1455 and consolidated with these cases. On October 23, 1985, however, Personnel Pool filed a Notice of Voluntary Dismissal by which it voluntarily dismissed its petition in DOAH Case No. 85- 1455. APPLICATION Santa Fe Healthcare Systems is a parent corporation with three divisions. The first division, called Genesis Hospital System, operates four affiliated hospitals: Leach General Hospital (AGH), Bradford Hospital (BH), Williston Memorial Hospital (WMH), and Calhoun Hospital (CH). The second division, Santa Fe Management Services, provides a variety of services, including financial, design and construction, risk management, and other related services to affiliates. The third division is called Wellness, Inc., operating a variety of properties including a personnel registry, urgent care centers, physicians' office buildings, and Shared Services, Inc., a for profit corporation, which comprises a pharmacy, a collection service bureau, a delicatessen, a laundry, a microfilming service, and several other support services. Santa Fe proposes to receive Medicare certification for its existing operational hospital-based home health delivery system, which is not now certified to receive Medicare reimbursements. This home health delivery system has one office which is located on campus at AGH in Gainesville. Santa Fe proposes to provide all types of home health services on a 24- hour a day, 7 days a week basis. If the home health agency obtains Medicare certification, it will become a department of AGH for Medicare cost reporting purposes. Santa Fe intends to staff its home health agency with dedicated employees of its affiliated hospitals and, as necessary, by part-time employees of the hospitals who are under- utilized as hospital staff, under principles of "variable staffing." Santa Fe proposes to serve the following mix of patients by payor class: 80%-Medicare 6%-Medicaid; 6% -Indigent and Bad Debt and 8%-Private Pay. Santa Fe proposes to serve patients regardless of their ability to pay for home health services. Santa Fe intends to subsidize the provision of home health services to indigent patients through the reimbursements it receives from providing home health services to Medicare patients, and through a transfer of funds from its affiliated hospitals to Santa Fe's home health agency. See paragraphs 17 through 21 below. At the present time, Santa Fe is providing home health care to patients eligible for Medicare reimbursement free of charge without seeking reimbursement from Medicare. There was no evidence of the losses incurred by Santa Fe in this endeavor. Santa Fe does not anticipate that it will be able to bill or get later reimbursement for the care provided to these Medicare eligible patients, even if it becomes Medicare certified. MEDICARE/MEDICAID REIMBURSABLE HOME HEALTH Medicare is a federally-funded health program for the elderly and for certain disabled persons only. In order for a provider of Medicare home health services to be reimbursed, the provider must serve Medicare eligibles who: (a) are referred by order of a physician (b) are home bound (c) require skilled care (skilled nursing, physical therapy, occupational therapy, and speech therapy) and (d) require skilled services only on a part- time, intermittent basis. Medicare does not reimburse for custodial care (such as provided by a nursing home or adult congregate living facility) or for acute care services (such as services to the acutely ill usually provided by a hospital). Medicare provides reimbursement only for skilled nursing, physical therapy, speech therapy, home health aide, and medical social services. Medicare presently reimburses home health agencies, whether hospital-based or free-standing, on a cost reimbursement basis, subject to an aggregate cost reimbursement limitation or cap. As long as the Medicare home health agency does not exceed the cap it gets paid all of its costs for allowable expenditures. If it exceeds the cap, then it only gets paid at the cap. A cap is figured for each service (skilled nursing, home health aide, physical therapy, speech therapy, occupational therapy, and medical social services). Previously, all of the costs incurred for providing these services were added together and compared against an aggregate reimbursement limit or cap. If aggregated costs were below the aggregate cap, the provider was paid its costs, and was only penalized for the amount by which it exceeded the aggregate cap. However, starting with fiscal years beginning after July 1, 1985, the Medicare program has eliminated the aggregate cap and will apply only the cap for each type of home health services. If a provider's cost exceeds the cap for each service the provider will only receive the cap for such service. The Medicare program recognizes that the cost of providing home health services through a hospital-based home health agency generally is higher because overhead of the hospital is allocated to the home health agency. (In fact, AGH's allocation of overhead to Santa Fe's home health delivery system will he less than the allocation of overhead from UHCS' national and regional offices to its home health agencies in Alachua, Bradford, and Levy Counties.) Medicare thus could reimburse Santa Fe's home health agency at a ten percent increment above the cost caps established for non-hospital home health providers. In contrast to Medicare, the Medicaid program provides reimbursement to providers only for skilled nursing services and home health aide services to patients who meet strict income and asset limitations. No reimbursement is provided for physical therapy, medical supplies or ancillary costs of providing reimbursable services. Instead of the cap system applicable to Medicare reimbursement, only a fixed fee determined in advance is provided for Medicaid services. Accordingly, a provider can expend costs in excess of reimbursement to serve Medicaid eligible patients. Recent changes in the Medicare reimbursement for hospital care have resulted in a prospective payment system. This system is commonly referred to as the diagnostic related grouping system (DRG). Under that system a hospital is not reimbursed for its costs. Rather the hospital receives for in- patients a predetermined reimbursement covering all costs related to providing patient care for the diagnosis of the patient, based on the historical costs for serving such a patient in the geographic area where the hospital is located. If the length of stay of the patient is such that the cost of providing care exceeds the Medicare reimbursement provided under the applicable DRG system, the hospital experiences a loss for its service to that patient. If the patient's stay is shorter than the average duration for that DRG, however, the hospital's costs usually are less than the Medicare reimbursement for the patient, and the hospital experiences a windfall gain. DRG reimbursements are fixed amounts regardless of length of stay. COST CONSIDERATIONS Santa Fe's home health delivery system operates as a cost and revenue center within the Santa Fe system separate from the centers mentioned in paragraph 3 above. If certified under the Medicare program, it will be a separate revenue center for Medicare reimbursements. In its amended application, Santa Fe projects a loss in its first twelve months of operation amounting to $20,267. Santa Fe projects a loss of $30,409 for the second twelve months of operation. However, these losses will be more than offset by savings to the affiliated hospitals from discharging its Medicaid and indigent patients from the hospitals at an earlier date because home health services can be provided at a lower cost. In any event, with more than $7 million of earnings from its combined operations for the year ending September 30, 1985, Santa Fe can easily cover any reasonable losses that the proposed home health agency might incur during the first two years of operation. In addition, Santa Fe will shift a portion of its administration, supervisory, dietary, maintenance, and housekeeping costs from AGH to the new home health agency. These items are commonly identified overhead expenses. Santa Fe will shift some of the existing costs of AGH's administrator and assistant administrator's salary and fringe benefits to the home health agency. Santa Fe will also shift some of the costs of salaries for supervisory health care personnel to the home health agency to the extent that these supervisors provide guidance to the staff of the home health agency. AGH will hire additional staff to handle home health billing. This cost will also be borne by the home health agency. Approximately 95% of the overhead of AGH which Santa Fe intends to shift to its Medicare home health agency does not represent new or additional costs. Rather, that portion will represent costs which Santa Fe is presently incurring in the operation of AGH. In the first twelve months of operation AGH will allocate approximately $150,000 of its existing overhead to the home health agency. In the second twelve months of operation AGH will allocate $175,000 of its existing overhead to the Santa Fe home health agency. Santa Fe's hospitals will have to subsidize the Santa Fe home health agency between $75,000 and $90,000 for provision of services to indigents and for additional costs associated with treating Medicaid patients. Santa Fe will ask Medicare to reimburse the overhead allocated from AGH to the Santa Fe home health agency up to the cap. See paragraph 12 above. Because of the reimbursement of the portion of the overhead allocation from the affiliated hospitals to the proposed home health agency, approval of any portion of Santa Fe's proposal probably will increase the cost to Medicare for Medicare reimbursable home health services in Alachua, Bradford and Levy Counties. NEED CONSIDERATIONS UHCS is the only existing provider of home health services licensed by HRS to provide Medicare home health services in Alachua, Bradford and Levy Counties within HRS District III. UHCS is also licensed to provide home health services in Dixie, Gilchrist, Marion, Lafayette, Putnam, Union and Suwannee Counties in District III. UHCS operates a parent agency office located in Alachua County (Gainesville), with licensed subunit offices in Bradford (Starke), Levy (Chiefland), and Putnam (Palatka) Counties. UHCS operates a separate licensed and Medicare certified parent home health agency in Marion County. UHCS operates a private-sector home health business without a CON, which is separate from its licensed home health agencies and subunits. UHCS provides skilled nursing, physical therapy, speech therapy, occupational therapy, home health aide and medical social services to patients in their homes. UHCS also provides intermittent skilled care to private pay patients through its licensed home health agency; and provides homemaker, live-in companions, and one-time RN visits through a separate private sector business. UHCS provides services twenty-four hours a day, seven days a week. Its offices are open from 7:30 a.m. to 6:00 p.m. It provides an answering service whenever the office is closed. The administrator, director of professional services, and supervisors are always on call. UHCS provides quality assurance programs to exceed the Medicare, Medicaid and licensure standards for home health care. These programs include: quarterly utilization review of medical records corporate quarterly quality assurance: ongoing client record audit supervisory visits employee evaluations; and consultations from UHCS' advisory council. UHCS has a field staff of seven registered nurses at its Gainesville office to provide skilled nursing visits in the homes of patients who reside in Alachua County. The staff presently contains two fewer RN's than it contained twelve months prior to the final hearing. As of September 1, 1985, UHCS also had eliminated one occupational therapist from its direct patient care staff. UHCS has not replaced the two RN's or occupational therapist because UHCS has experienced a decline in the number of visits and patients served during the twelve month period preceding the final hearing. Without increasing its present RN field staff and direct-patient care staff, UHCS could increase its delivery of home health services in Alachua County by between twenty and twenty-five percent. By adding one additional clinical supervisor UHCS could increase its delivery of home health services in Alachua by an additional fifty percent, over and above the twenty to twenty-five percent excess capacity mentioned above. UHCS actively seeks to find patients in need of the types of home health services which it delivers. UHCS utilizes patient coordinators, all of whom are RN's, to make its services known in Alachua, Bradford and Levy Counties. The coordinators visit each of the hospitals in these counties to distribute Medicare home health guidelines and to ascertain whether there will be discharges from these hospitals who will need home health services. UHCS receives referrals from hospitals, physicians and other health care providers. Approximately thirty-five percent of its referrals from Alachua County come from hospitals. Alachua General Hospital provides nineteen percent of those referrals. The number of referrals to UHCS for home health services for patients residing in Alachua County has decreased during the past twelve months prior to the final hearing. The quality of home health services delivered by UHCS in Alachua, Bradford and Levy Counties was not questioned in this proceeding. In terms of quality of care, Santa Fe and AGH readily refer patients who are eligible for Medicaid and Medicare home health services to UHCS. UHCS has the same access to information about patients referred to it by AGH as Santa Fe's home health delivery system, to the extent that AGH permits UHCS access. UHCS takes advantage of the access provided by AGH in preparing patients referred to it for home care. At all times relevant to this proceeding, no patients residing in Alachua, Bradford and Levy Counties who were qualified to receive Medicare or Medicaid reimbursable home health services have been unable to receive services from UHCS. AGH's social services department (which performs discharge planning functions for the hospital) has had no problem placing patients in need of Medicare and Medicaid reimbursable home health services. Santa Fe hospitals having been able to obtain these services from UHCS for all patients residing in Alachua, Bradford and Levy Counties. Santa Fe does not propose to meet any need for Medicare and Medicaid reimbursable home health services which is not already being met by UHCS in Alachua, Bradford or Levy Counties. Santa Fe only proposes to serve patients of physicians that are members of the medical staff of its hospitals (AGH, BH and WMH). Since April 5, 1985, HRS has employed a uniform methodology contained in proposed Rule 10-5.11(14), Florida Administrative Code, for determining the need for additional home health agencies in Florida. Although that rule has been challenged in another proceeding, HRS has adopted the need methodology as a matter of department policy. HRS now utilizes that need methodology as its policy without exception in reviewing all applications for certificates of need to establish home health agencies in Florida. The methodology in the HRS proposed rule projects a need for sixteen home health agencies in HRS District III for the relevant planning horizon (1987). Because of dated factors in the methodology, the need projected under the methodology is incorrect and actually should be 17. Although HRS listed in its State Agency Action Report only sixteen licensed home health agencies and one CON approved home health agency for District III, the following agencies are also licensed to provide Medicare home health services in District III: (a) UHCS is licensed to operate a subunit in Palatka, Putnam County, District III (b) UHCS is licensed to operate a subunit in Starke, Bradford County, District III; and (c) Central Florida Home Health Services, Inc. Volusia/Seminole/Lake is licensed to provide home health services in Lake County, District III. The Leon County subunit was added in early 1984 the Putnam County subunit in November 1984 and the Bradford County subunit in March 1985. The evidence was not clear whether these three subunits apparently underwent certificate of need review. UHCS opened at least the most recent of these three subunits in a conscious effort to keep out competition. The subunits added a clinical supervisor and a clerical person to staff the new subunit offices the same nurses and home health aides previously based in Levy, Bradford and Putnam Counties continued to work there but out of the subunit offices. Under present uniform policy of HRS, each of these offices sensibly is counted against the gross need for additional Medicare licensed home health agencies in District III in order to determine if there is a net need or surplus. As defined in Rule lOD-68.02(19), Florida Administrative Code, a subunit of a home health agency is a semi-autonomous agency. It is incapable of sharing administration, supervision and services on a daily basis with the parent home health agency. Rule lOD-68.04(2), Florida Administrative Code, requires that subunits be separately licensed whenever the subunits "are operated outside of the county of the parent agency or operate as autonomous subdivisions." Since 1977 HRS has required that subunits of home health agencies must receive a CON before they can be separately licensed. Rule 10-5.04(7), Florida Administrative Code, provides that a CON must be obtained, not only for the establishment of a new home health agency, but also for the establishment of a new subunit of an agency. It was not proved that any of the subunits in District III are not meeting the need in the counties where they are located to the contrary, the evidence suggests that the subunits are meeting the existing need with excess capacity to spare. Accordingly, the inventory of licensed and CON approved Medicare home health agencies in HRS District III exceeds the need projected for licensed home health agencies in that district for 1987, the relevant planning horizon, by four agencies. Although the HRS' uniform need policy and the need methodology employed by the Local Health Council for District III project approximately the same number of persons in need of home health services, these methodologies differ as to how they would allocate agencies to meet the projected need. The HRS' home health methodology does not permit a subdistrict determination of need, while the District III methodology defines each county within District III as a subdistrict for home health services, and then assesses a need for one agency for each multiple of 800 persons in need, up to a maximum of four agencies. In comparison with the HRS methodology, the District III methodology allows more Medicare home health agencies to serve the same number of patients identified as needing Medicare home health services. The District III methodology would assess the need for an additional agency in Alachua County but no need for additional agencies in Bradford or Levy County. The HRS methodology assumes that agencies will it compete across county lines and that a methodology like the District III methodology can and will result in "false competition." The rationality of this aspect of the HRS methodology as a general rule was not persuasively established in this case. As a general rule, it would seem more rational to foster some type of competition at some level of activity in order to help depress Medicare costs (especially under the new reimbursement system described in paragraphs 15 and 16 above) and improve quality of services rather than allow certain providers to gain a monopolistic-type hold on parts or all of the service area. Such an approach seems even more appealing in light of the evidence in this case that UHCS recently placed at least one subunit in the service district in a conscious effort to keep out competition. But Santa Fe did not prove on the facts of this case that it is time to place a new agency in Alachua to compete with UHCS despite the HRS methodology and the facts in evidence that UHCS can more than adequately meet the need for home health services in Alachua County within the relevant planning horizon. ACCESS CONSIDERATIONS Through UHCS' parent agency and subunit offices the residents of Alachua, Bradford, and Levy Counties have geographic access to all Medicare and Medicaid reimbursable home health agencies. The Local Health Council for District III determined that, in those cases where the area for proposed service is one where residents do not have access to home health care due to financial barriers, the council would recommend approval of an additional home health agency if its need methodology shows no need for an additional Medicare agency. The Local Health Council for District III also recommended that county government assume responsibility for paying for home health services for indigent clients. In addition, the council recommended that volunteer organizations provide funding for home health services to medically indigent patients. The council established that home health agencies should provide an amount of uncompensated charitable home health care equivalent to at least one percent of the preceding fiscal years' gross revenue for any given home health agency. UHCS does not accept patients who cannot pay all of their bills for home health services either in cash, by Medicare or by a combination of cash and Medicaid (or, presumably, Medicare if applicable.) Therefore, no Medicare certified home health agency serves the medically indigent in Alachua, Levy or Bradford County.
Recommendation Based on the foregoing Findings Of Fact and Conclusions of Law, it is recommended that the Department of Health and Rehabilitative Services enter a final order denying in its entirety the application of Petitioner in Case No. 85-1501, Santa Fe Healthcare Systems, Inc., for a certificate of need for a home health agency to serve Alachua, Levy and Bradford Counties, CON Action No. 3452. RECOMMENDED this 23rd day of January, 1986, in Tallahassee, Florida. J. Lawrence Johnston Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 23rd day of January, 1986. APPENDIX Rulings on UHCS' Proposed Findings of Fact. Accepted in part rejected in part as unnecessary. See Finding 1. Accepted. See Finding 1. Rejected as conclusion of law. Accepted in part; rejected in part as unnecessary. See Finding 2. 5 and 6. Rejected as unnecessary. Accepted. See Finding 3. Accepted, except the existing home health delivery system is not a home health agency as defined by statute. See Conclusions of Law. See Finding 4. Covered by Finding 5. Covered by Finding 6. Covered by Finding 6. 12-38. Covered by Findings 7-33, respectively. 39. Rejected as contrary to the greater weight of the evidence. 40-42. Covered by Findings 34-36. 43-46. Rejected in part as cumulative and in part as subordinate. 47-51. Covered by Findings 37-41. Covered by Finding 42. Covered by Finding 43. Rejected as contrary to the greater weight of the evidence. 55-56. Covered by Finding 44 and 45. 57. Rejected in part as immaterial (HRS can condition the CON by its Final Order in this case), in part as being legally incorrect (HRS can enjoin violations of representations upon which a CON is granted) and in part as unnecessary and cumulative (that Santa Fe is now operating a hospital based home health delivery system). 58-59. Rejected as immaterial and unnecessary. HRS determinations to date are preliminary and subject to change based on the evidence. 60-62. Rejected in part as cumulative and in part as conclusions of law. Petitioner's Proposed Findings of Fact. (Petitioner's proposed findings of fact are unnumbered. For purposes of these rulings, they have been assigned consecutive numbers for each paragraph). The first sentence is rejected as unsupported by the evidence; the balance is covered by Finding 3. Covered by Findings 4 and 6. Covered by Finding 17. Covered by Finding 17. Covered by Findings 24 and 46. Covered by Findings 4 and 6 (partly cumulative). Rejected as cumulative. Covered by Findings 3738. Covered by Finding 39. (Rejected in part as contrary to the greater weight of the evidence.) Rejected as cumulative. Covered by Finding 44. HRS' Proposed Findings of Fact. There were none. COPIES FURNISHED: William C. Andrews, Esquire, Scruggs & Carmichael P. O. Drawer C One Southeast First Avenue Gainesville, Florida 32601 Robert P. Daniti, Esquire Carson & Linn, P.A. 253 East Virginia Street Tallahassee, Florida 32301 Harden King, Esquire Assistant General Counsel Department of Health and. Rehabilitative Services 1317 Winewood Boulevard Tallahassee, Florida 32301 David Pingree, Secretary Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32301
Conclusions THIS CAUSE came on for consideration before the Agency for Health Care Administration (“the Agency”), which finds and concludes as follows: 1, The Agency issued the Petitioner (“the Applicant”) the attached Notice of Intent to Deny (Exhibit 1). The parties entered into the attached Settlement Agreement (Exhibit 2), which is adopted and incorporated by reference. 2. The parties shall comply with the terms of the Settlement Agreement. If the Agency has not already completed its review of the application, it shall resume its review of the application. 3. Any requests for an administrative hearing are withdrawn. The parties shall bear their own costs and attorney’s fees. This matter is closed. DONE and ORDERED in Tallahassee, Florida, on this TA day of Leggs? 2010.
Other Judicial Opinions A party that is adversely affected by this Final Order is entitled to seek 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 of 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. CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of this Final Order was served on the below- named persons/entities by the method designated on this /4* day of Alagus C_, 2010. Copies furnished to: Richard Shoop, Agency Clerk ~*~’ Agency for Health Care Administration 2727 Mahan Drive, Mail Stop #3 Tallahassee, Florida 32308-5403 Telephone (850) 412-3630 . Jan Mills Agency for Health Care Administration 2727 Mahan Drive, Bldg #3, MS #3 Tallahassee, Florida 32308 (Interoffice Mail) Anne Menard, Manager Home Care Unit Agency for Health Care Administration (Interoffice Mail) Lourdes A. Naranjo, Esq. Office of the General Counsel Agency for Health Care Administration (Interoffice Mail) Manuel R. Lopez, Esq. Counsel for Petitioner 770 Ponce de Leon Boulevard Penthouse Suite Coral Gables, Florida 33134 (U.S. Mail) Patricia M. Hart Administrative Law Judge Division of Administrative Hearings 1230 Apalachee Parkway Tallahassee, Florida 32399 (U.S. Mail)
Findings Of Fact In the latter part of 1976, Petitioner, chartered in Florida as a corporation on October 23, 1975, applied for licensure as a home health agency to the Office of Licensure and Certification, HRS, under the 1975 edition of Florida Statutes. Petitioner's application, which referred only to lake and Sumter Counties, was referred to the North Central Florida Planning Council (NCFPC), which, at that time, had the responsibility to evaluate the application and issue, if appropriate, a statement of need. Both the Project Review Committee and the Executive Committee of NCFPC reviewed Petitioner's application and recommended a positive statement of need for this project to be established in Lake and Sumter Counties. As a result of those findings and recommendations, and after a public hearing on the matter was held by NCFPC on December 28, 1976, HRS issued License No. 51 to Petitioner on February 14, 1977, to operate a home health agency in Lake and Sumter Counties. The license to operate in Lake and Sumter Counties was renewed annually up to and including the issuance of License No. 1291 by HRS on January 6, 1981, for the period February 1, 1983, through January 31, 1984. On October 29, 1982 Petitioner submitted an application for licensure to operate a home health care program in Citrus and Marion Counties in addition to Lake and Sumter Counties. This change would entail the expansion of geographical area serviced by Petitioner's employees, but would not result in a major increase in either employed personnel or equipment. Only one additional nurse and one additional vehicle would need to be added to Petitioner's operation to serve the expanded area. However, no new office space or equipment would be needed, as Petitioner would continue to operate existing office in Leesburg. The current director of Petitioner's operations, before submitting the expanded license application, spoke with a representative of HRS's Office of Licensure and Certification, Mr. John Adams, and was advised that all that was required was the submission of the application and the fee. Both were submitted, but the application was denied because there was no Certificate of Need issued for the establishment of a new subunit, as required, in the opinion of Respondent, by currently existing rules and statutes. The application submitted, at paragraph 10, listed four "subunits." The term "subunit" is contained only in the printed language of the form, as was the term "parent agency," and neither was used by Petitioner in its description of its operation. Petitioner is a privately owned corporation with a board of directors and corporate officers. It gets referrals from doctors and hospitals in the area for all four counties, but, because of the limitations on its license, can operate only in Lake and Sumter counties. It provides home nursing and various other therapies in several disciplines to individuals in their own residence. According to several physicians in the area, the service rendered by Petitioner is a necessary and, at times, critical portion of their patients' total care and treatment. It is reliable and efficient. At present, all nurses and other personnel report to the Petitioner's office in Leesburg each morning to receive patient assignments before going out to make their visits at the patients' homes. They return to the office in Leesburg at the close of the day, if necessary. The same procedure would be followed if the service were to be expanded into the two additional counties. No new office would be created, nor would anything change except the Petitioner's nurses, and other personnel would have farther to travel from their one office and base of operations. Under the circumstances, and as stipulated to by the parties, Petitioner's proposal does not constitute the establishment of either an autonomous or semiautonomous subunit, nor is the geographic expansion of service a substantial change in health services as defined by Florida Statutes. In a position paper dated February 28, 1983, the NCFPC recognized the existence of a problem in that while an existing home health agency can add new counties to its area of service with a Certificate of Need (CON) if it does not establish a new agency or subunits of the parent agency, and while physical subunits cannot be established without a CON, each of these rules fails to be consistent with the overall goals of planning and regulating health services and facilities, and together they constitute a contradiction and unreasonable set of rules for the home health industry. The agency's recommendations were: (1) A CON should be required prior to the addition of new counties to the service area of any licensed home health agency; (2) CONS should not be required for activities which do not involve substantial changes of services, increased service, or major capital expenditure and (3) CON's should be required for autonomous subunits. On March 9, 1982, James Barclay, an attorney with HRS, issued a written opinion for the agency (HRS) that a CON is not required before a Florida home health agency already licensed to operate within certain counties in a health service area may provide home health services to additional counties within the same health service area. Citrus and Marion Counties, into which Petitioner intends to go, are within the same health service area as Lake and Sumter Counties. Approximately one month after Mr. Barclay's opinion was issued, Mr. Gary J. Clarke, Deputy Assistant Secretary for Health Planning and Development for HRS, in a letter to all Health Service Area Directors, affirmed the position that an agency could provide services in counties when it was not previously providing services in the same health service area so long as there were no establishment of subunits or capital expenditures.
Recommendation Based on the foregoing, it is RECOMMENDED The Petitioner, Home Health Professional Services, Inc., be issued a license to operate in Marion and Citrus Counties. RECOMMENDED this 25th day of January, 1984, in Tallahassee, Florida. ARNOLD H. POLLOCK, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 25th day of January, 1984. COPIES FURNISHED: Thomas K. Riden, Esquire Robert Johnson, Esquire 5656 Central Avenue St. Petersburg, Florida 33707 Jonathan S. Grout, Esquire Department of Health and Rehabilitative Services Post Office Box 210 Jacksonville, Florida 32231 Mr. David Pingree, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32201 =================================================================
The Issue Whether the Respondent's decision to deny the Petitioner's application for a renewal license for a home health agency on the basis of Section 400.471(10), Florida Statutes (2009),1 constitutes an agency statement of general applicability that has not been adopted as a rule pursuant to Section 120.54, Florida Statutes, and, therefore, violates Section 120.54(1)(a), Florida Statutes.
Findings Of Fact Based on the entire record of this proceeding, the following facts are undisputed and found to be true: My Friend Home Care submitted its application to renew its home health license on or about November 7, 2009. On January 11, 2010, AHCA issued a Notice of Intent to Deny My Friend Home Care's application for a renewal license pursuant to Section 400.471(10)(d), Florida Statutes, which became effective on July 1, 2009. Section 400.471(10), Florida Statutes, provides in pertinent part: The agency may not issue a renewal license for a home health agency in any county having at least one licensed home health agency and that has more than one home health agency per 5,000 persons, as indicated by the most recent population estimates published by the Legislature's Office of Economic and Demographic Research, if the applicant or any controlling interest has been administratively sanctioned by the agency during the 2 years prior to the submission of the licensure renewal application for one or more of the following acts: * * * (d) Failing to provide at least one service directly to a patient for a period of 60 days. On May 13, 2009, a Final Order was entered by AHCA finding that My Friend Home Care failed ensure that at least one service was directly provided to a patient in a 60-day period. An administrative fine of $1,000.00 was assessed against My Friend Home Care, which paid the fine. My Friend Home Care operates a home health agency in Miami, Florida, and is subject to the provisions of Section 400.471, Florida Statutes.
