The Issue Whether the application for certificate of need number 8391, filed by Shands Teaching Hospital and Clinics, Inc., to establish a Medicare certified home health agency in District 4 meets, 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 services and facilities in the state. Shands Teaching Hospital and Clinics, Inc. (Shands) is the applicant for CON 8391 to establish a Medicare - certified home health agency in AHCA District 4. AHCA health planning District 4 includes Duval, Nassau, Baker, Clay, St. Johns, Flagler and Volusia Counties. Shands operates a 576-bed statutory teaching hospital for the University of Florida Medical School in Gainesville, four other acute care hospitals, one rehabilitation hospital, a psychiatric facility, and out- patient clinics. Shands Home Care Division has 20 licensed home health care offices in 10 of the 11 AHCA districts in Florida. It is authorized to provide Medicare-certified services in 7 of the districts. In District 4, Shands currently operates a licensed home health agency, or what is called a “private duty” agency (Shands-Jacksonville) which is Medicaid-certified. A CON is a prerequisite to Medicare certification. Shands proposes to condition its CON on the provision of 5 percent Medicaid and 2 percent indigent care. The project costs are estimated to total $24,285, of which $11,000 in capital costs are intended to purchase additional computer equipment. AHCA preliminarily denied Shand’s application because it determined that an additional Medicare certified home health agency is not needed in District 4. At the hearing, AHCA maintained that Shand’s proposal will not increase the accessibility, quality of care, efficiency, appropriateness, or adequacy of services available to Medicare recipients in District 4. AHCA has also adopted guidelines which require applicants for home health agencies to demonstrate an access problem, a payor group not being served, limited availability, and linkages with health care providers. Shands concedes that it is unable to demonstrate an access problem, that any payor group is denied service, or that home health services are not available, however, Shands has substantial linkages with other health care providers. Home health services are provided by physical, occupational, respiratory, and speech therapists, registered nurses, licensed practical nurses, home health aides and homemakers. The cost of a home health visit to the patient’s residence differs greatly depending on whether a highly skilled nurse or therapist, or a less skilled aide or homemaker provides the service. There are thirty-seven licensed and three approved home health agencies in District 4. Unlike health care services delivered in health care facilities, there are no physical capacity limitations on expansion. As demand increases, agencies hire or contract for the services of additional staff. As a practical matter, however, to avoid the time and expense of driving, home health agencies tend to serve patients in relatively close proximity to their offices. The available information shows 11 agencies with offices in Duval, 7 in Volusia, 3 in St. Johns, and 1 each in Clay and Flagler, and none in Nassau County. The offices of Shands-Jacksonville are located in southeast Duval county, near Interstates 295 and 95, on Baymeadows Road. The location is close to Clay and St. Johns Counties. Numeric Need AHCA has no rule methodology to determine the need for Medicare-certified home health agencies. The prior methodology was invalidated in Principal Nursing v. AHCA, DOAH case no. 93-5711RX, reversed in part, 650 So.2d 1113 (Fla. 1st DCA 1995). In an attempt to establish need, Shands presented its own methodology for the July 1997 planning horizon. Shands examined hospital discharges to home health care agencies, from 1994-1995, in District 4. The methodology considers the projected growth in population over 65, actual hospital discharges to home health agencies, and the most cost effective size of home health agencies. Approximately 70 percent of the hospital discharges referred for home health care were patients age 65 or older. In District 4, approximately 15 percent of the population is 65 or over, as compared to 18.7 percent statewide. The population in District 4 and statewide will grow approximately 9 percent from 1996 to 2001. However, the 65 and over population of District 4 is projected to grow by 10.82 percent, as compared to statewide projected growth of 7.36 percent for the 65 and over population. By July 1997, the projected population of District 4 is 1,514,655, of which 234,404 will be over 65. Shands also analyzed the cost effective agency size (CEAS) of home health agencies, finding the home health agencies in a range between 30,000 to 95,000 visits a year are the most cost effective, which is consistent with the average size of 46,496 visits a year for District 4 agencies. Costs for each visit to a patient are greater for smaller home health agencies, until business increases to 25,000 to 30,000 visits. After that, economies of scale allow the additional costs for each additional visit to become negligible. In large part, the costs are higher because smaller agencies have disproportionately more skilled staff, particularly nurses. Within the range of the CEAS, the proportion of visits provided by nurses and home health aids is more balanced. When agencies become very large, over 125,000 visits, each visit begins to add costs, and home health agencies begin to increase the proportion of home health aide visits. Factors which tend to increase use rates for home health agencies include all of those which are resulting in lower lengths of hospital stays, including the use of Diagnostic Related Group (DRG) categories, increased managed care, and other financial disincentives to hospitalization. Advances in medical care also have expanded the types of procedures or treatments administered in the home rather than in a hospital. Medicare-certified home health agency use rates in District 4 have consistently increased from 1.65 in 1989, to 2.18 in 1990, to 2.61 in 1991, to 3.97 in 1992, to 5.46 in 1993, and 7.01 in 1994. Shands used a blended use rate rather than assuming that the historical trend in growth will continue and, from that, projected total visits of 1,969,666 in July 1997, as compared to 1,527,000 actual visits in 1994. When divided by the mean District 4 home health agency size of 46,496 visits, the result is a need for 43 agencies in the district. After subtracting the existing 37 licensed and 3 approved agencies, Shands' expert reasonably found a need, after rounding off 2.53, for up to 3 additional home health agencies in District 4. Of the over 400,000 projected additional visits from 1994 to 1997, Shands reasonably projects 11,000 visits in year one, and 16,000 in year two, when compared to the experiences of existing providers in the District. Subsection 408.035(1)(a) - the need for health care facilities and services and hospices being proposed in relation to the applicable district plan and state health plan. The 1993 State Health Plan (SHP) includes preferences for home health agency applicants proposing to (1) serve AIDS patients, (2) provide a full range of services, including high technology services, (3) provide a disproportionate share of Medicaid and indigent care, (4) serve underserved counties, (5) use surveys to measure patient satisfaction, and (6) become JCAHO-accredited. The district health plan (DHP) includes preferences for applicants which (1) economically meet acceptable quality standards, (2) will alleviate geographic access problems, (3) will treat HIV infected patients, (4) have adequate health manpower, (5) will serve rural county residents, (6) have letters of support from other health care providers, (7) will serve areas without CON-approved agencies, (8) will locate in counties with averages of less than 4,000 home health visits per 1,000 persons 65 years or older, and (9) commit to having personnel on-call during evenings and weekends. SHP(1) and DHP(3) - AIDS/HIV positive patient care Shands provided 191 discharges for 1,514 inpatient days of care to AIDS/HIV positive patients from October 1994 through September 1995. Shands is affiliated with the Northeast Florida AIDS Network and participates in the Medicaid AIDS waiver, having qualified separately for that program. Extensive out-patient services are provided by Shands to allow AIDS patients to avoid institutionalization. All Shands nurses and home health personnel receive orientation and in-service training in the care of AIDS/HIV positive persons. SHP (2) - a full range of services, including high technology services, is needed Shands offers ventilator, intravenous or infusion, wound care, and high technology drug therapies, as well as pediatric care, which usually involves extremely high technology services. The high technology services are provided by licensed practical nurses or registered nurses, as opposed to home health care aides or homemakers. Shands also operates pharmacies to provide the drugs or equipment needed for high technology services. SHP (5) - surveys for patient satisfaction; and DHP (6) - letters of support from other health care providers and agreements with hospitals, nursing homes and other providers. Because of its existing Medicare - certified home health agencies, Shands already uses and reports to the state the results of its surveys. Shands also has agreements with doctors, hospitals and managed care organizations. Shands' application also includes the required letters of support. Subsection 408.035(1)(b) - availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of like and existing health care services and hospices in the service district; SHP (4)- underserved counties, DHP(2) - to alleviate geographic access problems; DHP(5) - serve rural county residents; (7) - areas without other CON - approved agencies; and (8) - counties with less than 4,000 visits per 1,000 persons 65 and over. No geographic access data is available to determine whether or not any problem exists in District 4. There is no evidence that counties in the district are underserved, although portions of Clay and Flagler Counties are rural areas. There is no evidence that any counties in District 4 have had fewer than 4,000 home health visits per 1,000 persons 65 and over. The existing supply of comparable services in District 4 can theoretically and legally expand to provide the projected 1,969,666 visits in 1997. However, competition from new providers encourages quality improvements and maintains cost-efficient agency sizes. Most Medicare-certified agencies in Jacksonville take care of only Medicare patients. Some have related entities to care for private pay or commercial insurance patients. Visiting Nurses Association (VNA) and St. Vincents in Duval County are the Medicare - certified agencies to which Shands refers patients. In 1994, VNA and St. Vincents reported 194,691 and 46,300 total visits, respectively. Subsection 408.035(1)(c) - ability of the applicant to provide quality of care and the applicant's record of providing quality of care; and SHP (6) - JCAHO accreditation. Shands Home Care agencies have received JCAHO accreditation, beginning in 1991. Shands successfully operates Medicare - certified home health agencies in AHCA Districts 3, 5, 6, 7, 8, 9 and 10. Shands-Jacksonville, which started in 1995, is currently being surveyed for JCAHO accreditation. Shands operates other home health agencies which, like Shands-Jacksonville, are not Medicare-certified in AHCA Districts 1 and 11. Shands has an extensive quality assurance and quality improvement plan. Established standards of care apply to guide personnel in the procedures to follow in providing each kind of therapy or service that Shands offers. Subsection 408.035(1)(d) - availability, adequacy alternatives to facilities or services to be provided by the applicant. Home health care is the preferable, lower cost alternative to longer acute care stays or to re-admissions caused by a lack of adequate care following an acute care hospital stay. Existing Medicare-certified home health agencies range from a low of 2,058 visits for Olsten in St. Johns County to a high of over 370,000 visits by Careone in Volusia County. The realistic alternative to Shands’ proposal is for Shands to continue referrals to Medicare- certified home health agencies, one of which exceeded the CEAS by more than 70,000 visits in 1994. Subsections 408.035(1)(e) - probable economies and improvements in service that may be derived from operation of joint, cooperative, or shared health care resources; and Subsections 408.035(1)(f) - need in the service district of applicant for special equipment and services which are not reasonably and economically accessible in adjoining areas. The parties stipulated that the criteria in Subsections 408.035(1)(e) and (f) are not at issue or not in dispute in this case. Subsection 408.035(1)(g) - need for research and educational facilities including, but not limited to, institutional training programs and community training programs for health care practitioners and for doctors of osteopathy and medicine at the student, internship, and residency training levels. As one of the six state statutory teaching hospitals, Shands meets the need for research, educational and training programs. Subsection 408.035 (1) (h) - availability of resources; including manpower, management, personnel . . . effects on clinical needs of health professional training programs . . .; accessible to schools for health professionals . . . and the extent to which proposed services will be accessible to all residents of the district; DHP 1 - economically provide acceptable quality; DHP (4) - adequate health manpower and (9) - on- call personnel. Shands Home Care has 2700 employees statewide. Shands Hospital and Shands Home Care have extensive recruitment and human resource capabilities. Fringe benefits include choices of several medical plans, dental insurance, legal insurance, and competitive vacation policies. The existing Shands-Jacksonville operates from a 1500 square foot office, with a staff of 15 employees. Up to 185 contingent staff people are available to Shands - Jacksonville. The number of hours that the contingent staff works can be adjusted to meet the demands of the agency. Shands will increase full time staff to 18 people. Shands can provide approximately $25,000 to fund the total project cost, without affecting the costs of other services provided by Shands. In 1995, Shands’ net cash flow from operations exceeded $68 million. Shands already meets and, if CON approved, can continue to meet the requirement of having personnel on-call to provide services evenings and weekends. Subsection 408.035 (1)(i) - immediate and long term financial feasibility of the proposal. The parties stipulated that the long - term financial feasibility of Shands’ proposal is not in dispute and not at issue in this proceeding. Subsection 408.035 (1)(j) - special needs and circumstances of health maintenance organizations (HMOs). Shands maintains contractual relationships with 22 HMOs statewide, 5 of which include home health care. Shands claims that its application will meet the special needs of HMO patients. Shands does not have an HMO within its organization and is not an HMO. As AHCA has interpreted the criterion, the applicant must be an HMO to quality. Subsection 408.035(1)(k) - needs and circumstances of entities which provide a substantial portion of their services or resources, or both, to individuals not residing in the service district in which the entities are located or in adjacent service districts. The parties stipulated that the criterion is not in dispute or not at issue. Subsection 408.035 (1)(l) - probable impact of the proposed project on the costs of providing health services proposed by the applicant, upon consideration of factors including, but not limited to, the effects of competition on the supply of health services being proposed and the improvements or innovations in financing and delivery of health services which foster competition and service to promote quality assurance and cost-effectiveness. Medicare reimbursement is the same for all providers of home health services, so that the approval of an additional home health agency is not expected to affect costs. AHCA takes the position that an additional provider in District 4 will shift the market shares to the new provider to the detriment of the existing home health agencies. The available evidence indicates that only Shands, VNA, and St. Lukes serve pediatric patients. In that market, Shands competes with VNA which had 194,691 visits in 1994, the largest number in Duval County. If certified for Medicare reimbursement, Shands will also primarily compete with VNA, and additionally, St. Vincents. The methodology previously used by AHCA to determine the numeric need for home health agencies was an invalid rule because it was anti-competitive and failed to consider cost efficiency. The methodology used by Shands takes those factors into consideration, and demonstrates that an additional home health agency will foster competition and cost-efficiency in District 4. Subsection 408.035 (1)(m) - costs and methods of proposed construction including costs and methods of energy provision and the availability of alternative, less costly, or more effective methods of construction. The parties stipulated that the criterion is not in dispute or not at issue in this proceeding. 408.035(1)(n) - proposed provision of health care services to Medicaid patients and medically indigent; and SHP (3) - disproportionate share Medicaid and indigent care. Shands is a disproportionate share Medicaid provider and proposes a commitment to provide 5 percent Medicaid and 2 percent indigent care. In 1994 and 1995, Shands provided approximately $27 million and $28 million, respectively, in charity care. Shands Home Care provided approximately 20 percent Medicaid in 1994, 27 percent in 1995, and 27 percent through March of 1996. 408.035(1)(o) - applicants past and proposed provision of services which promote a continuum of care in a multilevel health care system, which may include, but is not limited to, acute care, skilled nursing care, home health care, and assisted living facilities. Shands is a multi-level provider, with a range of services from virtually every tertiary service, such as open heart surgery, bone marrow, and organ transplantations to out-patient clinics. In addition to the Gainesville teaching hospital, Shands also operates 422-bed Alachua General Hospital, 83-bed Upreach Rehabilitation Hospital, and 40-bed Vista Pavilion in Gainesville, and 54-bed Bradford Hospital in Starke, 128-bed Lake Shore Hospital in Lake City, and 30-bed Suwannee Hospital in Live Oak. The continuum of care is enhanced by the use of “clinical pathways” which direct the plan of care through an illness from inpatient to rehabilitative to home care. It provides an effective communications tool for the health care providers in each setting. Shands resources include a large statutory teaching hospital, acute care community hospitals, psychiatric and rehabilitation facilities. The continuum of care is enhanced by allowing Medicare patients discharged from the hospitals to District 4 agencies to receive follow- up home health care within the same system. Shands- Jacksonville has an integrated system for health care personnel to care for Medicaid, HMO, or private pay patients. That same group will care for Medicare patients while maintaining its Medicaid and indigent commitment. Subsections 408.035(2) and (3) - construction of new inpatient facilities and CONs prior to 1984 Based on the parties' stipulation, Subsections 408.035 (2) and (3) are not applicable or not in dispute in this proceeding. Agency consistency and rule-making In the preceding batching cycle, AHCA recommended approval of two additional home health agencies in District AHCA rated both of those as completely or partially complying with fewer review criteria, and as not complying with more review criteria than the Shands application in this cycle. The guidelines established by AHCA which require an applicant to demonstrate existing problems with access to and a lack of available home health services are given no independent weight in evaluating the application, having not been adopted by rule. The issues are considered to the extent that accessibility and availability are included in the applicable statutory review criteria. On balance, Shands meets the criteria for approval of its CON to provide home health care to Medicare recipients in District 4.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is Recommended that the Agency For Health Care Administration enter a Final Order issuing CON 8391 to Shands Teaching Hospital and Clinics, Inc., to establish a Medicare-certified home health agency in AHCA District 4 conditioned on providing 5 percent of total annual gross revenues by payor to Medicaid patients and 2 percent to indigent care. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 20th day of March, 1997. 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 20th day of March, 1997. COPIES FURNISHED: Moses E. Williams, Esquire Agency For Health Care Administration Office of the General Counsel 2727 Mahan Drive Tallahassee, Florida 32308 James M. Barclay, Esquire Cobb, Cole and Bell 131 North Gadsden Street Tallahassee, Florida 32301 Sam Power, Agency Clerk Agency For Health Care Administration 2727 Mahan Drive Fort Knox Building 3, Suite 3431 Tallahassee, Florida 32308 Jerome W. Hoffman, General Counsel Agency For Health Care Administration 2727 Mahan Drive Tallahassee, Florida 32308
Findings Of Fact Background Respondent published a fixed need pool for Medicare- certified home health agencies for the certificate-of-need (CON) review cycle commencing in March, 1992, and determined that Service District XI did not need any additional home health agencies. On February 17, 1992, Petitioner timely notified Respondent that the fixed need pool calculation was in error. On March 6, 1992, Petitioner timely filed a petition challenging the fixed need pool determination, thereby commencing DOAH Case No. 92-2289. On February 24, 1992, Petitioner filed a letter of intent to submit a CON application for the development of a Medicare-certified home health agency in District XI. On March 24, 1992, Petitioner timely submitted an application for CON 6951 to establish a home health agency in Service District XI. On July 17, 1992, Respondent notified Petitioner of the intent to deny the application. Petitioner timely filed a petition challenging the intent to deny, thereby commencing DOAH Case No. 92-4795. Petitioner is adversely and substantially affected by Respondent's decisions concerning the fixed need pool and intent to deny Petitioner's CON application. Need for Proposed Health Care Facilities and Services in Relation to Applicable District Plan and State Health Plan Fixed Need Bed Pool Respondent calculated the fixed need bed pool based on Rule 59C-1.031, which is set forth in the Conclusions of Law. The purpose of the rule is to determine the required number of home health agencies by finding the cost efficient agency size (CEAS) "in number of visits at which economy of scale is achieved." Once the optimal number of visits is thereby determined, Respondent can calculate how many home health agencies are required in a specific service district. Pursuant to the rule, Respondent divided 181 nonexcluded home health agencies into four equal groups of equal numbers of agencies. These groups were divided by median numbers of visits and arrayed, as required by the rule, into groups from the lowest to the highest number of visits. Respondent then calculated for each group the median number of visits and mean cost per agency. The results of these calculations are as follows: Group Median # of Visits Average Cost Per Visit 1 5,000 $42.14 2 15,000 $45.88 3 31,000 $46.93 4 64,000 $45.95 Pursuant to Rule 59C-1.031, Respondent determined the percentage reductions, comparing "each grouping to the previous grouping." Respondent next checked for a cost reduction of at least 5 percentage points between two groups, as required by the rule. Between groups 1 and 2, there was no reduction of cost, but rather an increase of 8.88 percent. Between groups 2 and 3, there was no reduction, but an increase of 2.29 percent. Between groups 3 and 4, there was a reduction, but only of 2.09 percent. Under the rule, the only role of the first group, and its average cost per visit, is to serve as a standard against which the second group can be measured. Thus, Respondent did not calculate the percentage reduction between the average cost of the first group, which has the lowest average cost, and the average cost of any other group. Petitioner contends that the rule requires or permits a rolling comparison of group 4 with group 1. If so, the reduction between groups 4 and 1 would be 8.29 percent. There are no mean visit cost reductions of at least 5 percent between groups 1 and 2, 2 and 3, or 3 and 4. Under the rule, Respondent is required to choose the median number of visits of the grouping for which the average cost per visit was at least 5 percent less than the average cost per visit of the "previous grouping." If two or all three of the comparisons yield at least 5 percent reductions, then, rather than take the grouping corresponding to the greatest reduction or the lowest average cost per visit, the rule identifies the last of the qualifying reductions as the CEAS. As noted above, the CEAS is used to calculate the fixed need pool. In the absence of any 5 percent reduction between groups 1 and 2, 2 and 3, or 3 and 4, Respondent identified two alternatives. First, it could find that there was no fixed need pool. As Respondent's Health Services and Facilities Consultant Supervisor testified, Respondent could have declined to publish a fixed need pool because it could not apply the rule. "And at that point, the certificate of need reviewer would have to rely on other criteria other than fixed need-pool in determining whether there was a need." Tr., p. 87. In the second alternative identified by Respondent, it could select group 4 as the CEAS because the comparison between it and group 3 resulted in the only positive reduction in average costs per visit, unless group 1 was compared with some other group. An unfortunate concomitant of this alternative is that group 4 represents the second highest cost per visit. Despite this fact, Respondent chose the second alternative and proceeded to calculate the fixed need pool for home health agencies accordingly. The effect of Respondent's selection of group 4 was to calculate the fixed need bed pool based upon a relatively high number of visits per facility. The CEAS in this case was 64,000 visits. Thus, roughly 1/13th of the agencies would be needed under Respondent's fixed need pool than would have been needed if the CEAS had been set at 5000 visits, which corresponds to the least expensive group--group 1. The practical effect of Respondent's selection of group 4 was that the fixed need pool for Service District XI was zero. If group 1 had been selected, the fixed need pool would have been 14. The interpretation given the rule by Respondent lacks reason, as does the interpretation for which Petitioner contends. The correct interpretation requires the adoption of the first alternative in which Respondent acknowledges the inapplicability of the rule and leaves parties free to litigate the issue of need without regard to any published fixed need pool. Both rejected interpretations ignore the plain language of the rule. Respondent's argument falters by setting up group 1 as a "previous group" to group 4. The rule leaves no doubt that the groups are to be arrayed in ascending order of size. Given the rule's obvious reliance upon the principle of economies of scale, there is no reasonable basis for inferring the authority for a final comparison of group 4 to group 1. On the other hand, Petitioner's interpretation disregards the requirement that a substantial reduction of 5 percent triggers the identification of the CEAS group. Petitioner's argument that this interpretation most closely follows the intent of the rule is erroneous. In fact, two contradictory intentions emerge from close study of the rule. The more evident is that the rule intends to restrict market access without substantial regard to the principle of cost containment. In the absence of a rule challenge, the rule must be applied without regard to this feature. But Respondent's unchallenged disregard of the critical principle of cost- containment does not militate strongly in favor of allowing Respondent to extend the reach of this dubious aspect of the rule by engrafting upon it layers of nonrule policy to cover contingencies, which, incidentally, Respondent should have easily foreseen. The rule reflects a bias toward restricting market entry by home health agencies without regard to cost efficiency. As noted above, the rule precludes the possibility that the group with the lowest number of visits (and thus generating the largest fixed need pool) could ever be selected as the CEAS. Also as noted above, the rule's preference for later reductions of at least 5 percent, without regard to comparing average costs or even percentage reductions, again encourages the selection as the CEAS of the group with the larger number of visits (thus generating the smallest fixed need pool). Third, as Respondent contends, in no way can Rule 59C-1.031 be interpreted to require Respondent to select the CEAS based on the group with the lowest average cost per visit. As Respondent's Health Services and Facilities Consultant Supervisor testified, "the only reason why we regulate home health agencies under the certificate of need program and why we restrict market entry is based on the argument that larger size agencies are more cost-effective." The Supervisor added: "If that assumption were no longer true generally, then there would be actually no reason for us to control market entry for home health agencies." Tr., p. 81. In fact, Respondent has detected a decreasing correspondence between the size of a home health agency in number of visits and its average cost per visit, as agencies' costs migrate toward applicable cost ceilings. This was easily predictable and means that many more cases can be anticipated in which no CEAS will emerge from the rule's formula because no later group represents a 5 percent reduction in cost from a previous group. Implicitly acknowledging this practical problem with the rule, as well as hopefully the counterproductive effect of the rule upon the attainment of cost-containment, Respondent has also proposed the deregulation of home health agencies in terms of the issuance of CON's. The other source of the intent of the rule is derived from the definition of the CEAS, which is the objective of the rule's calculations. The CEAS is the "cost efficient agency size . . . at which economy of scale is achieved." "Economy of scale" is defined in the following statement: The behavior pattern of costs recognizes that gains in operating efficiencies act to reduce costs per unit to a certain point (economies of scale) and that[,] as the level of production continues to increase[,] operating inefficiencies take effect (diminishing returns). Respondent's interpretation of the rule, which stresses the intention to restrict market access without substantial regard for the principle of cost containment, fails to account adequately for the fact that diminishing returns or diseconomies of scale may actually have already begun before the second group is considered. The intent of the rule is to find the cost efficient agency size at which economies of scale are achieved. If, as here, the economies of scale are only encountered within the first group (i.e., the group with the agencies with the smallest number of visits), then it is impossible to justify Respondent's interpretive nonrule policy that exacerbates the tendency of the rule to restrict market access without substantial regard to the principle of cost containment. Thus, Respondent's claim that its interpretation of the rule is most consistent with the intent of the rule is flawed. In fact, the rule contains contradictory intentions, and Respondent, at best, has adopted the interpretation most consistent with the more dubious intent inferable from the rule. Petitioner's interpretation is most consistent with the better intent inferable from the rule--i.e., the CEAS is the "cost efficient agency size . . . at which economy of scale is achieved." However, Petitioner's interpretation fails to take into account the intent of the rule favoring larger providers. Petitioner's deemphasis of this aspect of the rule commendably pursues the critical principle of cost containment. But Petitioner's contrivance of the rolling comparison in which group 4 is compared to group 1 suffers from a disregard of the language of the rule regarding the arraying of the groups in ascending order and the comparison of each of the three largest groups with its previous group. There is no other reasonable conclusion than that the rule could not produce a fixed need pool, Respondent's determination of a fixed need pool of zero is incorrect, and the parties should have been allowed to litigate the question of need without regard to Respondent's incorrect determination of a fixed need pool of zero and without a showing of not-normal circumstances. Need in General The absence of the fixed need pool does not mean that the inputs to the formula are without value. To the contrary, the above-described calculations under the rule clearly justify determining need on the basis of the finding that the most cost efficient agency size is the agency in which the median number of visits is 5000. To achieve this most cost-efficient agency size, the number of home health agencies in District XI could be expanded by 14. Thus, Petitioner has proved the need for another home health agency. The applicable district and state health plans fail to identify any groups with a quantifiable lack of services or special need for home health care services. Plan language regarding preferences implies a comparative evaluation process, which is, at most, not readily applicable to the present situation involving a single applicant. In any event, it appears that Petitioner would serve a variety of subgroups of District XI that are specified in the district plan as medically underserved, even though the plan does not indicate that any of these groups currently has unmet needs in terms of home health agency services. It also appears that Petitioner would serve a greater percentage of Medicaid-eligible and medically indigent patients that is typical for existing home health agencies in District XI. Based on the findings of the preceding paragraph, Petitioner was entitled to full compliance with the corresponding preferences of the district plan, rather than the noncompliance and partial compliance that it was given for these preferences in the State Agency Action Report (SAAR). Respondent should have given Petitioner full compliance on the remaining preferences under the district plan, although several of them appear to have little to do with need. Petitioner has a working arrangement with the prime referral source, physicians. Also, by virtue of its acquisition of an existing home health agency, Petitioner will also have working arrangements with various health care providers in the area. The deficiency with the district plan cited in the SAAR concerning working arrangement with AIDS referral networks is of little importance as the AIDS referral networks, which have their own home health agencies, will be competitors of Petitioner. The SAAR likewise incorrectly gives Petitioner partial or no compliance with preferences in the State plan with respect to AIDS patients, which Petitioner clearly proposes to serve; counties underserved by existing home health agencies, which includes Dade County based on the above-described calculations concerning the most cost efficient agency size; and the proposal of a comprehensive quality assurance program and the seeking of accreditation by the Joint Commission on Accreditation of Healthcare Organizations, both of which Petitioner proposes to do. Based on the foregoing, Petitioner has clearly demonstrated a need for the proposed project without regard to not-normal circumstances and despite the absence of a valid fixed need pool for home health agencies in the subject batching cycle. Availability, Quality of Care, Efficiency, Appropriateness, Accessibility, Extent of Utilization, and Adequacy of Like and Existing Health Care Services According to the SAAR, there are sufficient home health agencies in District XI. However, Petitioner has proved that the proposed project will increase the availability or access of home health agency services based on the above-described calculations concerning the most cost efficient agency size. Ability of Applicant to Provide Quality of Care The parties have stipulated that this criterion is either not applicable to Petitioner's application or that the application has adequately addressed the criterion. Availability and Adequacy of Other Health Care Facilities and Services According to the SAAR, there are sufficient home health agencies in District XI. However, Petitioner has proved that existing home health agencies are not adequate or sufficiently available based on the above-described calculations concerning the most cost efficient agency size. Probable Economies and Improvements in Service that May Be Derived from Operation of Joint, Cooperative, or Shared Health Care Resources The parties have stipulated that this criterion is either not applicable to Petitioner's application or that the application has adequately addressed the criterion. Need for Special Equipment and Services Not Reasonably and Economically Accessible in Adjoining Areas The parties have stipulated that this criterion is either not applicable to Petitioner's application or that the application has adequately addressed the criterion. Need for Research and Educational Facilities The parties have stipulated that this criterion is either not applicable to Petitioner's application or that the application has adequately addressed the criterion. Availability of Resources for Project Accomplishment and Operation, Effects of Project on Clinical Needs of Health Professional Training Programs, Extent to which Services Will Be Accessible to Schools for Health Professions, Availability of Alternative Uses of Such Resources for the Provision of Other Health Services, and Extent to which the Proposed Services Will Be Accessible to All Residents of the Service District The parties have stipulated that these criteria are either not applicable to Petitioner's application or that the application has adequately addressed the criteria. The sole exception concerns the extent to which the proposed services will be accessible to all residents of the service district. Petitioner has proved that the proposed services would be accessible to all residents of the service district. Immediate and Long-Term Financial Feasibility of Project The parties have stipulated that these criteria are either not applicable to Petitioner's application or that the application has adequately addressed the criteria. The sole exception concerns the extent to which the long-term financial feasibility of the project is a function of Petitioner's utilization assumptions. The SAAR predicates its assignment of only partial compliance with this criterion upon Petitioner's failure to demonstrate access problems and justify the projected patient volume. However, to the extent that these criticisms reflect an incorrect need determination, Petitioner has proved that the proposed project satisfies the criterion of long-term financial feasibility based on the above-described calculations concerning the most cost efficient agency size. Special Needs and Circumstances of Health Maintenance Organizations The parties have stipulated that this criterion is either not applicable to Petitioner's application or that the application has adequately addressed the criterion. Needs and Circumstances of Entities Providing a Substantial Portion of Their Services or Resources to Individuals Not Residing in the Service District in which the Entities Are Located or in Adjacent Service Districts The parties have stipulated that this criterion is either not applicable to Petitioner's application or that the application has adequately addressed the criterion. Probable Impact of Proposed Project on Costs of Providing Health Services Proposed by Applicant Based on Effects of Competition on Supply of Health Services Being Proposed and Improvement or Innovations in the Financing and Delivery of Health Services which Foster Competition and Service to Promote Quality Assurance and Cost-Effectiveness The parties have stipulated that this criterion is either not applicable to Petitioner's application or that the application has adequately addressed the criterion. Costs and Methods of Proposed Construction The parties have stipulated that this criterion is either not applicable to Petitioner's application or that the application has adequately addressed the criterion. Applicant's Past and Proposed Provision of Health Care Services to Medicaid Patients and the Medically Indigent The parties have stipulated that this criterion is either not applicable to Petitioner's application or that the application has adequately addressed the criterion.
Recommendation Based on the foregoing, it is hereby RECOMMENDED that the Agency for Health Care Administration issue a final order approving the application for CON 6951. ENTERED on September 8, 1993, in Tallahassee, Florida. ROBERT E. MEALE Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 8th day of September, 1993.
Findings Of Fact The parties have stipulated that the only statutory criteria at issue are those related to need and long term financial feasibility as it relates to need, specifically Subsections 381 494(6)(c~ 1,2,9, and 12, Florida Statutes and Rule 10-5.011(1 (b)l. and 3. Florida Administrative Code. Nurse World, Inc. is an existing non-Medicare home health care agency and is a provider of temporary nursing services in District VII. The five biggest home health agencies in District VII are Nurse World, Visiting Nurse Association (VNA), Upjohn, PRN (no full name ever given), and Norrell. Nurse World is the largest of these as far as active staff, but is the only one of these that is not Medicare-certified. HRS is the agency responsible for certification and licensure of home health agencies. A home health agency in Florida must obtain a CON from HRS before it can be licensed and become eligible to receive Medicare reimbursement. Medicare is a federally funded health program for the elderly and certain disabled persons. Medicare reimbursement is limited to reimbursement for skilled nursing, physical therapy, speech therapy, occupational therapy, home health aid services, and medical social services. The Medicare program reimburses home health agencies on a cost reimbursement basis with a cap for each discipline. Home health agency costs in excess of Medicare caps must be absorbed by the agency. Consequently, traditional concepts of price competition have no applicability to home health agencies providing Medicare reimbursable services. Individuals become Medicare eligible for home health agencies' services in two ways. First, age makes an individual eligible when a person is over 65 and has paid a sufficient number of quarters to social security. Another way is for an individual under 65 to be declared disabled. The 1985 State Health Plan is the most current plan. The only portion of the 1985 State Health Plan which is applicable to home health agency applications is that access to home health services should be improved, specifically access for Medicaid and indigent patients. Nurse World's application satisfies this requirement. Only certain portions of the District VII local health plan are applicable to Nurse World's application. The methodology employed in the local plan was derived from a rule which was declared invalid. See infra on the inapplicability of these portions of the plans. The portions of the local plan which are applicable are the priorities that a home health agency provide a full range of service, improve access for underserved groups, and have interrelationships with the existing health care facilities and community. Since Nurse World, Inc.'s inception in August of 1981, it has grown from a staff of approximately 50-75 nurses to a current staff of close to 700 active field employees including registered nurses (R.N.s), licensed practical nurses (LPNs), nurse aides, and ancillary personnel. Nurse World's growth is due in part to quality patient care and effective and efficient employee management. A background check is done on personnel prior to hiring. Some of Nurse World's employees are screened by competency examinations. Ninety percent of its staff is made up of LPNs, Emergency Medical Technicians (EMTs) or Physician Aides (PAs). All receive additional training by Nurse World. Other home health agencies in District VII often call Nurse World to obtain nurses to fill out their shifts whereas Nurse World has never had that problem. In line with HRS' position that applicants must demonstrate that existing agencies cannot meet existing need, Nurse World submitted considerable reputation-type testimony. Upon proper predicate and under certain circumstances, evidence of character reputation and evidence of modus operandi, are admissible. "Character is distinct from reputation; reputation is evidence of character," Ehrhardt, Florida Evidence, Subsection 405.1 (2d Ed. 1984). See same text, Subsection 404.11 on modus operandi. Indeed, CON applicants traditionally try much of a contested case upon evidence of their own professional reputations, and the reputation of their competitors, privy to the case or not. This entire line of inquiry was prompted by HRS' negative burden of proof concept and upon authority of Balsam v. Department of Health and Rehabilitative Services, 486 So. 2d (Fla. 1st DCA 1986). In these contexts, reputation evidence, a hearsay exception, was admitted in evidence. Nurse World's reputation as reported from all sources in the community (District VII) is excellent, particularly for quality of care, reliability, and speed of response. This type of reputation evidence was also supplemented by opinion evidence from various witnesses' personal on-going experience. Nurse World also presented testimony that Upjohn does not have a good reputation, that VNA has an unfavorable attitude towards indigent patients, and that UpJohn and VNA nurses will contact a doctor less appropriately than Norrell or Nurse World when there is a change in the patient's condition. There was a modicum of evidence that a better nurse knows when to call a doctor and when not to. Nurse World is a continuing education unit (CEU) provider, offering seminars covering state of the art nursing skills twice monthly. This service naturally increases the proficiency and quality of Nurse World's own employees who attend, but additionally, its continuing medical education seminars serve the community as a whole, since every two years LPNs and R.N.s, must each complete 24 hours of additional training so as to be eligible to renew their professional licenses. Nurse World is the only home health agency in Central Florida that has a CEU provider number. Unlike most hospital CEUs in the area, its continuing medical education services are free of charge and it maintains a suggestion box for topics to be addressed. Its use of video tape instruction both in-house and for seminars is an advanced technique. Nurse World has the exclusive contract to provide nursing services to Hospice of Central Florida. Hospice of Central Florida is a Medicare-certified home health agency, which has no nursing staff of its own. It has only support staff. Nurse World provides all its nurses. After switching to VNA, Hospice switched back to Nurse World. Nurse World has guaranteed in its application that if the CON is issued, it will provide 3 percent of its patient visits to indigents and 3 percent of its patient visits to Medicaid-eligible patients. It is satisfied for any CON grant to be conditioned on such a requirement. Nurse World's proposal to devote 6 percent of its patient visits to the traditionally medically underserved is relatively high for a home health agency. Nurse World presently provides $8,000 in indigent care through its Hospice contract and provides one free patient visit for every five patient visits at Brookwood AMI Hospital. It also has an indigent volunteer services program which provides basic nursing skills training to families so that they can care for their loved ones at home. Nurse World is a "full service" agency. It is considered "high-tech", providing in the home C-pap, IV therapy, respirator, feeding through a chest tube catheter, hyperalimentation, passive motion and other services previously available only in hospitals. This element of its services is particularly significant because of Nurse World's availability to handle difficult cases such as AIDS victims, infants, and multiply-afflicted elderly patients on a 24 hour a day, 7 days a week basis. Nurse World proposes to offer and does offer a full range of services. No other home health agency in District VII provides the full range of services to the degree and over the 24 hour a day period as Nurse World does. These types of difficult cases appear to be underserved in District VII. Nurse World is the only home health agency in the District that effectively staffs its office seven days a week, 24 hours a day. Nurse World has done so ever since it took its first critical care patient and entered into high tech nursing. This relates directly to quality of care and being responsive to patients' needs with no endangering delay as discussed below in relation to high tech protocols. Among health care providers generally and among home health care agencies particularly, Nurse World has a unique approach to insure immediate access and responsiveness to its patients: it mans its telephones with live dispatchers with immediate access to professionals on call. No other Central Florida home health agency does this. At all times there is at least a registered nurse available by phone when a patient reaches Nurse World. There is always a second professional backup behind the professional on the phone, often the Director Ms. Denner, herself. Nurse World has adopted this approach because it feels there is not enough time for turnaround response with other systems when a critical care high tech patient or confused elderly patient gets in trouble or has an emergency. Answering services hold calls; beepers require the professional on call to find a phone and return a call to the answering service, receive the emergency message, and then, finally, call the patient. Nurse World's method allows for the professional who receives the call at any hour of the day or night, even on a weekend, to respond to most situations immediately over the phone, and if necessary to contact the 911 emergency number and the patient's own regular nurse within minutes. Nurse World was the first nursing service in the Central Florida area to render home health services to an AIDS patient, includes AIDS nursing in its continuing medical education efforts, and now gets referrals for Medicare on that basis. No other home health agency is dealing with AIDS patients to the extent that Nurse World is. Nurse World also has an agreement with Centaur, the AIDS support group for Central Florida, through which Nurse World will provide nurses at cost or at its "break even indigent rate". Nurse World has provided health care services to AIDS patients for a very minimal charge since this area of home health care-has been identified and has accelerated numerically. There are approximately 80-100 identifiable AIDS cases in the area. Nurse World has provided the bulk of care for these approximately 80- 100 diagnosed AIDS cases. Other agencies are reluctant to provide this care. Bona fide AIDS patients are eligible for Medicare. The Medicare bureaucracy is processing AIDS case applicants quickly, in 3 to 6 months, basically because there is that necessity. Dr. Robbins, a physician practicing in the Brevard, Seminole, and Orange County area in infectious diseases and internal medicine specializes in the treatment of AIDS. He sees a need for Nurse World to become Medicare certified to render services to the Medicare eligible AIDS patients, because in his experience, Nurse orld renders the best services qualitatively to these types of patients. Any number of AIDS patients (either on or off Medicare) above the number actually served by Nurse World or treated by Dr. Robbins has not been statistically demonstrated, but all testimony on the subject supports the 80-100 existing case figure and the concept that the AIDS numbers are escalating in both Medicare-certified and uncertified categories. One problem situation arising with increasing AIDS patients qualifying for Medicare is basically the same problem for all patients so qualifying. Once qualified, patients naturally must utilize one of the Medicare-certified home health agencies. The continuity of care of a patient is interrupted when Nurse World can no longer render nursing services to a former patient due to that patient becoming Medicare eligible. A break in the continuity of care unfavorably affects the quality of care rendered any patient. The patient and staff often develop a rapport and a break in care can emotionally depress the patient, leading to medical (physical) setbacks. Quality of care is likewise negatively impacted by switches in car givers because the more often a nurse sees a given patient over a period of time, the more that nurse is able to monitor the quality and progress of that patient. There is modest evidence that Nurse World is proficient in scheduling the right nurse for the right patient. Nurse World is the only home health agency that actually video tapes some cases and then trains specific nurses before ever sending them into the patient's home. There is presently a tendency to get people out of hospitals sooner than before due to the new diagnostic related grouping (DRG) regulations. Physicians then routinely refer these patients for home health care visits. As a result, in the last few years, there has been a quantifiable increase in the number of home health care visits requested in District VII. As a result of the increased demand and the inability of the Medicare-certified home health agencies to answer that demand (need), patients referred for Medicare home health services frequently will be seen only once or twice a week rather than three weekly visits as requested by their physicians. This is a significant deficiency in appropriate care for high tech critical care cases, including but not limited to the multiply- afflicted elderly. Also, nursing homes in the area are now experiencing sicker patients due to individuals getting out of the hospitals earlier through DRGs. The scope of nursing home care has increased. The patients released from hospitals cannot go directly home if their case is too complicated. Thus, many patients first go into nursing homes before going to their own homes. Nurse World provides temporary staff relief for the Americana Health Care Center, a skilled nursing home facility in-Winter Park, Florida. According to the testimony of Jill Miller, R.N., Director of Nurses for Americana, Nurse World's staff meets the high standards set at Americana whereas the other home health care agencies she has sometimes used have not. Nurse World personnel, however, are unable to follow the Medicare eligible patients home after release from Americana because Nurse World has no Medicare certificate. This breaks the continuity of care for Americana Medicare patients and can result in all the unfavorable physical and emotional setbacks set out above. Although the break in this continuity of Nurse World care is pronounced and more easily demonstrated using the Americana facility, and although it may be inferred that continuity of care is extremely important especially for the predominantly elderly population that uses Medicare regardless of which nursing home they exit, the continuity of exclusive care by Nurse World personnel specifically, falls short of representing a "special need" as that phrase has come to be understood in CON practice. This is also true for newly qualifying AIDS patients and hospital releases. Nurse World has provided high-tech in-service training at Americana free of charge. Nurse World is the only home health agency that staffs hospitals, nursing homes, and private duty visits. This sharpens the nurses' skills, especially their critical skills. Generally the existing Medicare-certified home health agencies still do not take home high-tech patients. It is advantageous to professional health care providers, the individual patients, and the community at large to encourage home care for high-tech patients. Caring for high- tech patients at home rather than in the hospital results in a cost savings to the community and for the individual patients as it is obviously much cheaper to care for patients at home. Also, the patients tend to get better quicker in their home environment. Examples of Nurse World's expertise in this area are that Nurse World was the first agency in the southeast United States to take home a baby on C-pap, a very sophisticated involved respirator. Nurse World is still the only agency located in District VII to have provided the C-pap at home. There is still no C-pap patient within District VII. Nurse World took home the first critical care, high tech patient in the Central Florida area four years ago. It is also the only agency that provides continuous passive motion care at home. Continuous passive motion care is a "state of the art" physical therapy device that provides continuous physical therapy. Nurse World has averaged three to four of these patients a week over the last year. Caring for high-tech critical care patients at home even when a "mini-intensive care unit" is necessary, costs the community much less than hospital care which can total $716 per day for a non-critical patient. Nurse World employs the largest number of critical care nurses in the area of any provider. Nurse World was the first agency that did blood gases on a patient at home, the first to take home a patient on a ventillator, the first to do home hyperalimentation, and the first to do a home I.V. patient. Two other agencies in the Orlando area now render high-tech services but not to the extent that Nurse World does. They began these services on a limited basis about a year after Nurse World began. Nurse World's "firsts" in these areas are significant because being in the vanguard of opening up these areas of practice has caused it to establish its own written in-home high tech policy and procedure (protocols) which the industry may voluntarily adopt since there is no HRS rule covering the subject matter. Most important about the protocols as developed and maintained by Nurse World are fail-safe techniques for dealing with malfunction of high tech machinery, power failure, isolation techniques for AIDS patients (sometimes considered "high tech"), and direct and immediate telephone contact with professional staff in any emergency. HRS does not presently have any methodology pursuant to rule or policy for projecting need for a home health agency. The methodology that HRS employed in reviewing the Nurse World application was contained in the District VII local health plan. That plan had adopted an HRS proposed rule which was subsequently declared invalid in Home Health Services v. Department of Health and Rehabilitative Services, 8 FALR 1510 (March 12, 1986). Sharon Gordon-Girvin, an expert in health planning, testified on behalf of Nurse World. She presented two methodologies for projecting the need for a home health agency in District VII. After the proposed rule was declared invalid, HRS developed a policy for determining the need for additional home health agencies, reflected in Petitioner's Exhibit 78, which was employed between March and August of 1986. That policy was actually used in reviewing home health agency applications, and in making decisions. HRS issued certificates of need for home health agencies based on that policy. Applying that HRS policy, which Gordon-Girvin considers "reasonable," there is a need for 35.3 home health agencies in District VII in 1986. 1986 is the planning horizon year applicable to the Nurse World application. There are 16 existing Medicare home health agencies in District VII. Direct, competent and substantial evidence supports the 16 figure which includes newly certified Profile Medical Services. HRS documentation confirms this. Uncorroborated hearsay evidence of an additional home health agency in District VII was struck. Therefore, the net need is for 19.3 home health agencies in District VII in 1986. HRS, when using this methodology, had a policy of giving out only one/third of the net need in each of three consecutive years. Gordon-Girvin would not term this latter policy nreasonable" and no one offered any acceptable justification for it. No reasonableness of this "award only 1/3 of need" policy was demonstrated and it has since been abandoned, but even by such a system, the net need in 1986 would be for 6.4 additional home health agencies in District VII in 1986. The gross need and the net need continue to increase through 1989. The methodology reflected in Exhibit 7B basically has two constants, the home health use rate and the optimal size visits. They act as constants. The increase in the number of agencies needed is attributable to the growth of the population. Ms. Gordon-Girvin also employed a methodology employed by District III as a point of comparison to see how the number of agencies needed in District VII could be affected by using a very conservative methodology. District III's methodology was selected as a conservative comparison to the former state health policy. Also, no other local health council has a need methodology. Employing the methodology reflected in Petitioner's Exhibit 7A, there is a need for 17 home health agencies in District VII or a net need for 1 additional home health agency. (Gross need minus 16 existing certified agencies). This is a very conservative methodology because it changes very slowly over time. In fact, the net need remains at 1 through 1989. Ms. Gordon-Girvin opined that this methodology employed in Petitioner's Exhibit 7A, is also a reasonable methodology but is very conservative and relies on hospital discharge rates in contrast to the discredited and abandoned HRS policy which is a use-based methodology. There are no other methodologies being employed by planners in Florida and no other methodologies were put forth by either party. Presently, HRS has no rule or policy designating a numeric methodology to determine the need for new medicare home health agencies in any given district. HRS review of CON applications for home health agencies is based solely on statutory criteria, the merits of the proposal, and the district need for the agency as demonstrated by the individual applicant. 80th need methodologies employed by Ms. Gordon Girvin contemplate the need for home heath agencies at the District level. That is, agencies operating in all four of District VII's counties. In reality, the existing home health agencies operate in only one or two mounties. For example, Profile Medical Services, the only successful applicant in the current batch, was recently issued a certificate of need under the HRS policy since discredited and abandoned, but its CON is limited so that it can operate only in 8revard county, so that actually only one-fourth the district need is being met. At the time the Nurse World application was reviewed, there were 11 licensed and approved CON home health agencies in District VII. Six of these agencies only operate in one county and five operate in only two counties. HRS is not aware of any Medicare-certified home health agency that operates in all four counties in District VII under a single certificate of need. Because HRS' policy has been invalidated as a rule and since it has been subsequently abandoned by HRS, it would be invalid to employ it in these proceedings. Even if the District III methodology determined a net need of one is reasonable, it would be unreasonable and unjustified to apply it as modified by HRS' uncodified award only 1/3 of need per year" policy, apparently also abandoned prior to hearing. Therefore, by the only reasonable need methodology presented (that of District III) there is room for one home health agency, not limited by county and not limited by the "award only 1/3 of need per year" policy. The 1/3 limitation should not apply in any case because it has no current application by HRS and because its effect varies the horizon year. Since HRS had no need methodology or policy in place at date of hearing, it took the-position that an applicant must demonstrate need by finding people who are not getting the service. Ms. Gordon-Girvin, Petitioner's expert who had been employed at HRS in health planning for 11 years, opined that there is no adequate quantifiable technique available as a health planning methodology that will allow a health planner to make use of a negative demonstration of need. She suggested use of responses to a newspaper advertisement and then demolished that method of proof as "impractical". Another difficulty with this type of negative demonstration approach is that existing agencies can deal with increased need demands by simply continuing to add staff. Gordon-Girvin knew of no applicant that had acquired a CON by proving lack of access. Additionally, a similar agency position (the Rule of 300) has been struck down by the courts. This negative burden of proof concept has been given short shrift by the courts and is rejected here as well. See Department of Health and Rehabilitative Services v. Johnson and Johnson Home Health Care, Inc., 447 So. 2d 361 (Fla. 1st DCA 1984). Richard Gramming, an expert in health planning, testified on behalf of Nurse World. He presented Petitioner's Exhibit 6 which demonstrated that there is a capacity for other agencies in District VII and that if one of those agencies were to be Nurse World, the impact would not be very significant on the available number of visits. The multiplication of the Medicare home health use rate by the 65+ population for District VII produces the potential number of Medicare home health visits for District VII which for 1986 is 317,304. The total number of home health agency visits, Medicare and non-Medicare, for 1984 in District VII was 309,920. Of these visits, 266,531 were Medicare visits. When the actual number of Medicare visits is subtracted from the potential number of Medicare visits, there are 50,773 Medicare visits available for current and existing providers. When Nurse World's projected number of visits from year two (5,625) are subtracted there are still 45,148 Medicare visits available for current providers. Nurse World's approval should have no serious impact on the short or long term financial positions of the existing Medicare providers with the possible exception of Hospice, which may have to hire its nurses elsewhere. An interest such as Hospice's is not one which Chapter 381 is designed to protect. Mr. Gramming's projections are very conservative and the untapped market is probably larger, since the Medicare eligible due to disability were not factored into his formulas and the use rate in the formula was kept constant, whereas it has been increasing over time. A review of Nurse World's past growth rate and conservatively projected growth rate reveals that Nurse World is financially secure for a long-term position. In light of the potential market as demonstrated by the foregoing findings of fact, a long-term financial feasibility of Nurse World will be assured. Home health agencies are labor intensive rather than capital intensive, with few fixed costs. The entry of Nurse World into the market will tend to keep costs as they are or perhaps lower costs through increased competition. Medicare costs caps are more effective in preventing cost inflation. Nurse World has met its minimal burden of proof to establish there will be no significant adverse impact on cost if the Nurse World application is approved; HRS has not gone forward to demonstrate there will be any adverse impact on costs if the application is approved. Nurse World has demonstrated that access to health care by the underserved population will be improved and that the opportunity for specialization within the existing market place will be enhanced by their entry into the market. Nurse World's actual growth rate from 1984 to 1985 and from 1985 to 1986 has been 20 percent per year in gross revenues. Twenty percent growth is logically anticipated for the current year despite a more conservative 12 percent calculation.
Recommendation Upon consideration of the foregoing findings of fact and conclusions of law, it is, RECOMMENDED that a Final Order be entered granting Petitioner Nurse World a CON to establish and operate a home health agency in District VII (Orange, Osceola, Brevard, and Seminole counties), conditioned upon its providing 3 percent indigent and 3 percent Medicaid qualified services. DONE and RECOMMENDED this 20th day of May, 1987, at Tallahassee, Florida. ELLA JANE P. DAVIS, 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 20th day of May, 1987. COPIES FURNISHED: Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Eric J. Haugdahl, Esquire 1363 East Lafayette Street Suite C Tallahassee, Florida 32302 John Rodriguez, Esquire Department of Health and 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 APPENDIX The following constitute rulings pursuant to Section 120.59(2), Florida Statutes, upon the parties proposed findings of fact (FOF): Petitioners proposed findings of fact: 1-4 To the extent not covered under "Background and Procedure," these are subordinate and unnecessary. Covered in FOF 2. Covered in FOF 8. Covered in FOF 9. Covered in FOF 3 & 10. Covered in FOF 3. Covered in FOF 10. Covered in FOF 10. Covered in FOF 12. 13-15 Covered in FOF 13. 16 Covered in FOF 16. 17-20 Covered in FOF 7. Covered in FOF 14. Covered in FOF 16-17. Rejected as a conclusion of law; see FOF 13 and conclusions of law. Accepted but subordinate to the facts as found. 25-26 Accepted but subordinate to the facts as found, cumulative FOF 7. 27-28 Rejected as unnecessary, as mere "puffing" and as subordinate to the facts as found. See FOF 10 and 18 on proposal 28. 29. Rejected as unnecessary and subordinate to the facts as found. See FOF 25.l 30-34 To the extent supported by the admissible direct competent substantial record evidence, these are covered in FOF 16; otherwise rejected. 35. Covered in FOF 6.l 36-37 To the extent supported by the record, covered in FOF 16, otherwise rejected. 38 Covered in FOF 10 and 15. 39-40 To the extent supported by the record and to the extent necessary to a determination of this cause, covered in FOF 17- 21, otherwise rejected. 41-42 Covered in FOF 19. 43-44 Covered in FOF 20-21. Covered in FOF 22. To the extent not covered in FOF 8 and 11 rejected as cumulative. Unnecessary, as mere "puffing", and as subordinate to the facts as found in FOF 14 and 25. Covered in FOF 23. Covered in FOF 24. Covered in FOF 14-16, and 25. Covered in FOF 25. Covered in FOF 25 but cumulative. Accepted as true, but rejected as subordinate and unnecessary. Except as covered as to capability of Nurse World in FOF 14 and 25, it is also largely immaterial to these proceedings in that Mrs. WiIdermuth's child is not eligible for Medicare, cannot become eligible for Medicare and resides outside District VII in Volusia County. 54-56 Covered in FOF 25. 57 Covered in FOF 3 and 8. 58-50 Covered in FOF 25. 61-62 Subordinate to the facts as found. See FOF 39 and 42. Cumulative, see FOF 23. Covered in FOF 15. 65-73 and 75-78 Except as covered in FOF 11 and 16 these proposals are rejected as subordinate, unnecessary or cumulative to the facts as found. 74 Covered in FOF 11 and 18. Covered in FOF 27-34. Rejected as a conclusion of law. 81-89 Covered in FOF 26-35 and conclusions of law. 90 Accepted for the reasons set out in the transcript reference, but as a FOF it is subordinate and unnecessary. 91-95 Covered in FOF 26-35. 96 Rejected as irrelevant since no such out of state methodology was offered. See FOF 28. 97-105 Covered in FOF 30-35. Rejected as a conclusion of law. Covered in FOF 36. Covered in FOF 37. 109-110 Accepted but unnecessary. 111-119 Covered in FOF 36-42. 120 Accepted but rejected as unnecessary. Respondent's proposed findings of fact: 1 Covered in background and procedure. 2 Covered in FOF 2, 8, 14 and 15. 3 Covered in FOF 13. 4 Covered in FOF 11. 5 Covered in FOF 10. 6 Covered in FOF 14 and 25. 7 Covered in FOF 8 and 23 (among others). 8 Covered in FOF 4. 9 Covered in FOF 5. 10 Covered in FOF 6. 11-12 Covered in FOF 26-35.
Conclusions Having reviewed the Notice of Intent to Impose Fine dated March 3, 2009, attached hereto and incorporated herein (Ex. 1), and all other matters of record, the Agency for Health Care Administration ("the Agency") has entered into a Settlement Agreement (Ex. 2) with the Respondent and being otherwise well-advised in the premises, finds and concludes as follows: ORDERED: The attached Settlement Agreement is approved and adopted as part of this Final Order, and the parties are directed to comply with the terms of the Settlement Agreement. Each party shall bear its own costs and attorney's fees. The Respondent shall remit to the Agency, within ninety (90) days of this Final Order, the sum of Two Thousand Dollars ($2,000.00). A check should be made payable to the "Agency for Health Care 1 Filed November 9, 2009 11:58 AM Division of Administrative Hearings. Administration." The check, along with a reference to this case number, should be sent directly to: Agency for Health Care Administration Office of Finance and Accounting Revenue Management Unit 2727 Mahan Drive, MS # 14 Tallahassee, Florida 32308 Unpaid amounts will be subject to statutory interest and may be collected by all methods legally available. The above-styled case is hereby closed. DONE and ORDERED this s3 day o tJ-?t?<: ,2009, in Tallahassee, Leon County, Florida. Care Administrat1 A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO 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. Copies furnished to: Ann Lisenby Parmer Lisenby Home Care, Inc. 412 North Cove Blvd. Panama City, Florida 32401 (U. S. Mail) Shaddrick A. Haston Assistant General Counsel Agency for Health Care Administration 2727 Mahan Drive, Bldg #3, MS #3 Tallahassee, Florida 32308 (Interoffice Mail) Jan Mills Agency for Health Care Administration 2727 Mahan Drive, Bldg #3, MS #3 Tallahassee, Florida 32308 (Interoffice Mail) Finance & Accounting Agency for Health Care Administration 2727 Mahan Drive, Bldg #2 Mail Stop Code #14 Tallahassee, Florida 32308 (Interoffice Mail) CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of this Final Order was served on the above-named person(s) and entities by U.S. Mail, or the method designated, on this _6ay of /}6 , 2009. Richard Shoop, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Building #3 Tallahassee, Florida 32308-5403 (850) 922-5873 Ce1t1f1ecl Article Number SENDERS RECORD CHARLIE CRIST GOVERNOR March 3, 2009 ANN LISENBY PARMER LISENBY HOME CARE, INC. 412 N COVE BLVD PANAMA CITY, FL 32401 JFlORl AAGENCY F,OR HIcAl.lCH CARE AOMAINISlllATION Better Health Care for all Floridians oqJ521 CASE #: 2009002407 NOTICE OF INTENT TO IMPOSE FINE Pursuant to Section 400.474 (6) (f), Florida Statutes (F.S.), a fine of $5,000 is hereby imposed for failure to submit the home health agency quarterly report within 15 days after the quarter ending September 30. As required in section 400.474(6) (f), F.S., the agency shall impose a fine of$ 5,000. TO PAY NOW, PAYMENT SHOULD BE MADE WITHIN 21 DAYS AND MAil.ED WITH A COPY OF THIS NOTICE OF INTENT TO: Agency for Health Care Administration Finance and Accounting, Revenue Section OMCManager 2727 Mahan Drive, MS #14 Tallahassee, FL 32308 Include License Number: 20651096 and Case Number: 2009002407 in check memo field. EXPLANATION OF RIGHTS Pursuant to Section 120.569, F.S., you have the right to request an administrative hearing. In order to obtain a formal proceeding before the Division of Administrative Hearings under Section 120.57(1), F.S., your request for an administrative hearing must conform to the requirements in Section 28-106.201, Florida Administrative Code (F.A.C), and must state the material facts you dispute. SEE ATTACHED ELECTION OF RIGHTS FORM. Agency for Health Care Administration By: Anne Menard, Manager Home Care Unit cc: Agency Clerk, Mail Stop 3 Legal Intake Unit, Mail Stop 3 2727 Mahan Drive,MS#34 Tallahassee. Florida 32308 Visit AHCA online at http://ahca.myfl · • I EXHIBIT I No Theme Page 1 ofl HOME HEALTH AGENCY QUARTERLY REPORT For the Quarter July 1 to September 30, 2008 Send an e-mail with this information to home.ti_ alth@ahca.myflorida.com by 5 p.m. on Wednesday, October 15, 2008 to avoid a $5,000 fme. NAME OF HOME HEALTH AGENCY Lisenby home Care, Inc LICENSE# 20651096 STREET ADDRESS & CITY: 412 N. Cove Blvd, Panama City, Fl 32401 On September 30, 2008, there were _3_ insulin-dependent diabetic patients receiving insulin injection services from my home health agency. On September 30, 2008 there were _36_ patients receiving home health services from my home health agency AND licensed hospice services. On September 30, 2008, there were a total of_77_ patients receiving home health services from my home health agency. The following professional nurses (RNs or LPNs), whose primary job responsibility is to provide home health services to patients, received remuneration from my home health agency in excess of $25,000 between July 1, 2008 and September 30, 2008. NONE Name Florida License Number Insert additional names and license numbers if necessary. http://webmail.att.net/wm/en-US/toolbar/advnotheme.html 10/2/2008 psPS - Track & Confirm Page 1 of 1 • !:fQ!DtltltlJllSlgn.J.n Track & Confirm Search Results Label/Receipt Number: 7160 3901984813801355 Status: Delivered Your item was delivered at 9:48 AM on March 19, 2009 in PANAMA CITY, FL 32401. Track &Confirm Enter Label/Receipt Number. N..-o---t-i--f-i-·c-··d·-·o·-·n- - -Q. rn·t·i01J$------- ---- Track & Confirm by email Get current event information or updates for your item sent to you or others by email. (Bo>) Return Receipt (Electronic) Verify who signed for your item by email. ( tJo>) Copyright© 1999-2007 USPS. All Rights Reserved. No FEAR Act EEO Data FOIA '\:,_· J-i t;.-,pe ; :;•,· • l.\!!.'-'l·/•. ;- t' ip!;,,; http://trkcnfrm1.smi.usps.com/PTSinternetWeb/InterLabellnquiry.do 03/24/2009 STATE OF FLORIDA
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 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
The Issue Whether applications for Certificates of Need filed by Medshares of Florida, Inc., and National Healthcare, L.P., for Medicare Certified Home Health Agencies in Health Planning District 8 for the July 1997 Planning Horizon, should be granted or denied by the Agency for Health Care Administration.
Findings Of Fact The District District 8 is composed of Sarasota, DeSoto, Charlotte, Lee, Glades, Hendry, and Collier Counties. Rule 59C-1.031(2)(e), Florida Administrative Code, Section 408.032(5), Florida Statutes. If granted, the requested certificates of need will enable Medshares and NHC to provide Medicare-certified home health services throughout the entire district. The parties disagreed as to the number of District 8 home health companies with Medicare-certified home health agency CONs. For purposes of the 1997 planning horizon, the district has thirty-five home health care companies (reporting and non- reporting) with certificates of need for Medicare-certified home health agencies. The Parties Medshares of Florida, Inc., (Medshares) was formed "pretty much immediately prior to the application [in this case]." AHCA No. 10, p.15. Although it recently received a CON to establish a Medicare-certified home health agency in District 9, there has not been enough time for Medshares to build a record in Florida. But Medshares is a member of a family of companies (the "Medshares Family") founded in Tennessee in 1985. The Medshares family has now expanded into 12 states. Through 2000 employees, it provides various home health services, including Medicare-certified home health services, private nursing services, management services for home health agencies, infusion services, and consulting services. In 1996, the Medshares Family provided approximately one million visits through its Medicare-certified home health agencies and approximately 1.7 million visits through its non- Medicare-certified and managed home health agencies. Recent growth in Medshares Family business is attributable to increased admissions, not to increased home health visits. It is Medshares Family policy for each of its home health agencies which have operated for three years to seek accreditation from the Joint Commission on the Accreditation of Healthcare Organizations (JCAHO). This policy, of course, is applicable to a Medshares District 8 agency should the Medshares application in this case be granted. In the nursing home business for over 26 years, National HealthCare, L.P., (NHC) is a national nursing home company and a southeastern regional home health care company. It has thirty- three home care offices in three states and did in excess of 750,000 home health visits in 1996. It owns or manages one hundred and five nursing homes throughout the United States. It owns eight nursing homes in Florida of which five have a superior rating. NHC manages thirty-two other centers in Florida. NHC currently has three nursing home facilities which it owns or manages in District 8. The facilities, in Collier, Sarasota, and Charlotte Counties, have a total of 420 beds. Because of this ownership of existing facilities in the district, NHC has developed significant community linkages, training programs, and community involvement in the district. Obtaining a certificate of need for a Medicare-certified home health agency in District 8 will enhance NHC's continuum of care in District 8. NHC has a well-developed corporate and regional management structure dedicated to providing high quality care to its patients. The management structure places a significant amount of decision making at the home health agency level. The corporate and regional structure's purpose is to support the local delivery of health care services. The Agency for Health Care Administration is designated by statute as the "single state agency to issue, revoke, or deny certificates of need . . . in accordance with the district plans, the statewide health plan and . . . federal and state statutes." Section 408.034(1), Florida Statutes. Need Projections Paragraph (a) of Section 408.035 AHCA's rule setting a home health agency need methodology was invalidated several years ago. See Principal Nursing v. Agency for Health Care Administration, 16 FALR 10465, reversed in part, 650 So. 2d 1113 (Fla. 1st DCA 1995). AHCA did not publish a fixed need pool for Medicare-certified home health agencies for the July 1997 planning horizon applicable to these applicants. AHCA did not propose any methodology in its initial, free-form review or testimony of the applications. Instead, AHCA left it to the applicants to develop and present need methodologies in support of their applications. Medshares' Need Methodologies and AHCA Criticism The Medshares application presented various need methodologies and estimates of need for additional Medicare- certified home health visits in District 8. The primary Medshares methodology is a clinical need model based upon data obtained from the National Center for Health Statistics. The model develops home health use rates by sex for four age groups, 0-64, 65-74, 75-84, and 85+, and by geographic region. Patient volume and visits projections are made by developing individual use rates for each diagnostic category collected in the data survey. Each use rate is the result of dividing the total number of visit characteristics for the specific age and sex combination by the matching age and sex population estimates. To project need for 1997, the developed use rates are applied to the projected 1997 District 8 population by diagnostic category. For the 1997 planning horizon for District 8, Medshares' clinical need model estimates total visits of 3,488,290, which is an increase of approximately 1.6 million visits over 1994 (the latest year for which data was available at the time of the application). The Agency criticized Medshares' clinical need model because it included population aged 64 and under. The criticism fails on two counts. First, Medicare-certified home health agencies are expected to provide home health services to persons under age 65. Second, inclusion of the population and use rates for those under age 65 does not have any significant impact on Medshares needs projections since only 3 per cent of the originally projected visits are attributable to population under 65. AHCA's major criticism of Medshares clinical need model is that it considers the model's total visits projection of 3.4 million in 1997 to be an unreasonable increase over the actual visits in 1996 shown in AHCA publications. (These publications were not available at the time of the filing of the applications and so were not used by Medshares.) AHCA's published actual visits for 1996 of 2.4 million, however, are, without doubt, not accurate. The figure assumes that 9 agencies which did not report in 1996 conducted the same number of visits in 1996 as they reported in 1995, that is, 900,000. Whether this assumption is to high or too low, there is little question that it is not correct. If, for example, an agency not reporting in 1996 did not do so because it did not conduct any visits (not an unreasonable assumption since the agencies are obligated by law to report) then the 1995 reported visits are much too high for that agency as a figure for 1996 visits. On the other hand, if the non-reporting agency simply failed to report in 1996, the number of 1995 visits is likely lower than the actual number of visits in 1996. Home health care visits have been on the increase in District 8, a trend mirroring the state-wide trend. Utilization of home health care agencies is increasing because of growth in elderly population and an increase in the number of visits per patient. Furthermore, the amount of time spent by patients in hospitals has been decreasing. The decrease translates into an increased need by the patients for home health care visits. The need for home health care will continue to increase because it is a cost-effective alternative to nursing home placement and hospital care. In sum, AHCA's criticism of the Medshares clinical need methodology is based on inaccurate assumptions. Perhaps AHCA is correct that Medshares' projected visits for 1997 is unreasonably high. But the projection squares with the direction that home health visits are going, both because of increase in population and increase in use rate as well as decrease in hospital's lengths of stay. In addition to the clinical need model, Medshares projected need by two other methodologies. Through the first of these two, the clinical need model was tested by comparing its results to projections based upon the average Medicare-certified home health use rate growth from 1991 to 1995. This methodology yielded an estimate of 3.6 million for the 65 and over population of District, thus supporting the need projected by the clinical need model. In the second of the two additional methodologies, Medshares estimated the number of home health visits based upon the number of hospital discharges of patients within a certain Major Diagnostic Category (MDC). This methodology yielded an estimated need for 2,704,910 visits in 1997. All three of Medshares' methodologies provided an estimate of need for at least two additional Medicare-certified home health agencies in District 8 in 1997. NHC's Need Methodologies One of NHC's methodologies computes the increase in the home health use rate from 1993 to 1994 and applies a reduced increase in use rates to the projected population for each year to the horizon year of 1997. The methodology yields projected visits of 2,403,630 visits in 1997, for an increase from 1994 of 550,950 visits. In contrast to AHCA's determination that the Medshares' methodologies were unreasonable, AHCA agreed that NHC's methodology was reasonable. AHCA found fault with the NHC opinion of need, however, because of the data NHC used in its calculation of need. The AHCA document relied on by NHC for its base year (1993) visits of 1,656,112 was later revised by AHCA to reflect 1,702,106 visits in 1993. As a result, AHCA contends, the initial use rate increase used by NHC (7.6 per cent from 1993 to 1994) is higher than the actual use rate increase (4.8 per cent), which means that NHC's projections are overstated. Other criticisms were leveled by AHCA at NHC methodologies used in the application. The Agency's criticisms do not hold sway. Overlooking for the moment that any error was caused by faulty data provided NHC by the Agency, given the undisputed increase in the use rate, the NHC forecast for 1997 visits compared to actual 1996 visits shows the 1997 forecast to be conservative. After taking all of the Agency's criticisms into account, there was competent substantial evidence to establish a need for five more home health agencies in the district. The inadequacy of the criticisms was underscored when NHC's health planning expert used a "median agency size" in his calculations, an approach now favored by AHCA as it attempts to develop a new rule methodology for ascertaining Medicare-certified home health agency numeric need. Employing such a method still yielded a need for at least two more Medicare-certified home health agencies in the district. State Health Plan Preferences The Florida State Health Plan establishes six preferences for applicants of certificates of need for Medicare- certified home health agencies. The State Health Plan provided for preference to an applicant proposing to serve AIDS patients, (Preference 1). Both Medshares and NHC meet Preference 1. Medshares will provide services to AIDS and HIV-positive patients. The Medshares family has a history of providing services needed by these patients and Medshares proposes to condition its certificate on provision of services to AIDS patients. NHC is actively involved and has seen patients for Bay Aids Services Information Coalition, Tallahassee AIDS Support Services and Big Bend - Comprehensive AIDS Residential Education Services. NHC provided extensive documentation in its application to demonstrate current provision of significant levels of AIDS care. It has the organizational capability to continue to do so. Preference is given by the State Health Plan to an applicant proposing to provide a full range of services, including high technology services, unless they are sufficiently available and accessible in the same service area, (Preference 2). NHC surveyed existing home health agencies in the district to reveal that 29 agencies do not provide dietary guidance, 28 do not provide homemaker services, 26 do not provide medical supplies, 21 do not provide respiratory services, six do not provide speech therapy and five do not provide social services. NHC will provide all of these. NHC meets Preference 2. Medshares provides a full range of skilled nursing, homemaker, and therapy services including cardiac care, continuous IV therapy, diabetes care, oncology services, pediatrics, rehabilitation services, pain therapy, total parenteral nutrition, speech, physical and occupational therapies, respiratory therapies, audiology therapy, and infusion therapy. Medshares meets Preference 2. The State Health Plan provides a preference to applicants 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 (Preference 3). There is no definition of "disproportionate share" and no data available to determine the level of Medicaid and indigent care provided by home health providers in District 8. Nonetheless, it is fair to find that NHC meets this preference and Medshares, based on the experience of the Medshares family, meets the spirit of this preference. In addition, both have committed to continue to provide Medicaid and indigent care; in the case of NHC, 2 per cent of patient visits to Medicaid patients and 1.5 per cent of its visits to the indigent, in the case of Medshares, its application is conditioned on 1 per cent of its patients being Medicaid and another 1 per cent being indigent. The State Health Plan provides a preference to an applicant proposing to serve counties under served by existing home health agencies (Preference 4). No demonstration was made that any of the counties in District 8 were underserved by existing home health agencies. The fifth State Health Plan preference is for applicants which commit to provide the department with consumer survey data measuring consumer satisfaction. Both Medshares and NHC meet this preference. The final preference in the State Health Plan is for an applicant proposing a comprehensive quality assurance program and proposing to be accredited by the Joint Commission on Accreditation of Hospital Organizations. Both Medshares and NHC meet this preference with NHC conditioning its application on implementation of a quality assurance program and successfully obtaining JCAHO accreditation. The District 8 Health Plan The District 8 Health Plan contains two allocation preferences for applicants for Medicare-certified home health agencies. The first is for the applicant able to demonstrate community contacts and relationships with hospitals, nursing homes, hospices, psychiatric, substance abuse, mental health, and other outpatient facilities within the proposed service area. The second is for the applicant showing a commitment to, or a historical record of, service to the medically indigent or other healthcare underserved population groups. NHC has developed significant community linkages through its existing nursing home beds in the health planning district with the types of health care providers listed in the preference. Further, NHC has agreed to condition its CON on the satisfaction of this preference. Medshares does not have operations in the district currently. But its application contained evidence of contact with local District 8 health care providers. As discussed earlier, both NHC and Medshares meet the second preference of the local health care plan. Availability and Access Paragraph 408.035(1)(b) Access issues become much less important for applicants who have demonstrated a numeric need for their proposals. Nonetheless, the addition of both NHC and Medshares Medicare- certified home health agencies will enhance both availability and access to these health services. Competition and Cost Effectiveness Paragraph 408.035(1)(l) Competition among home health providers in District 8 is more restricted than the number of providers would indicate because the District 8 market is dominated by a few large providers. Four companies provide 75 per cent of home health visits. Seventeen of the agencies are hospital-based and 10 of these are owned by one hospital. Competition will be enhanced by approval of the Medshares and NHC proposals. Both Medshares and NHC have the ability to compete effectively with the large providers in District 8. Cost effectiveness should be enhanced as well. District 8 has the highest average cost per home health visit in Florida. The 1994 average was $71.48. Generally, hospital-based home health agencies have higher costs. Hence, it is not surprising that District 8, with its many hospital-based agencies, has the highest average cost per home health visit. The cost per visit projected by Medshares in its second year is $65.21. Approval of the Medshares and NHC applications should help to lower the district-wide average cost per visit. Past and Proposed Provision of Services to Medicaid Patients and the Medically Indigent Paragraph 408.035(1)(n) As discussed above, both Medshares and NHC meet this statutory criterion. Multi-level Health Care System Paragraph 408.035(1)(o) Home health services play a key role in the continuum of care in a multi-level health care system by providing a less restrictive and less costly setting for discharges of patients from hospitals and nursing homes to their homes or assisted living facilities. Medshares participates in programs which promote a continuum of care, including a pre-heart transplant and post-heart transplant program, a "Healthy Homecomings" program for high risk pregnancies and a program which enables physically challenged persons to remain employed. NHC proposes to provide home health care in a continuum of care in conjunction with NHC's own nursing home and assisted living facilities located throughout District 8. An award to NHC would expand the continuum of care already provided by NHC.
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 the applications of Medshares of Florida, Inc., and National HealthCare L.P. for CON Nos. 8412 and 8413, respectively. DONE AND ORDERED this 3rd day of February, 1998, in Tallahassee, Leon County, Florida. DAVID M. MALONEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 3rd day of February, 1998. COPIES FURNISHED: Mark Thomas, Esquire Agency for Health Care Administration 2727 Mahan Drive, Suite 3431 Fort Knox Building III Tallahassee, Florida 32308-5403 Alfred W. Clark, Esquire Post Office Box 623 Tallahassee, Florida 32301-0623 Gerald B. Sternstein, Esquire Frank P. Rainer, Esquire Sternstein, Rainer & Clarke, P.A. 314 North Calhoun Street Tallahassee, Florida 32301 Jerome W. Hoffman, General Counsel Agency for Health Care Administration Fort Knox Building 3 2727 Mahan Drive Tallahassee, Florida 32308-5403 Sam Power, Agency Clerk Agency for Health Care Administration Fort Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403
Findings Of Fact On December 18, 1978, the Petitioner, using the name "Upjohn Healthcare Services, Inc." filed its application for certificate of need with the Florida Panhandle Health Systems Agency, Inc. This application was deemed complete on April 20, 1979. The application as originally filed indicated that healthcare services were to be made available on a 24 hour a day basis, seven days a week, with an admission criteria based on the patient's need for home health care, his ability to make available financial resources and the Petitioner's ability to provide the services required. Services were to be provided from a central location in Pensacola, Florida, which is in Escambia County, Florida; to serve Escambia, Santa Rosa and Okaloosa Counties, Florida. The application was subsequently amended to indicate the willingness of the Petitioner to aid Medicare and Medicaid patients in the named counties. The Petitioner, hereinafter referred to as "Upjohn", operating as Upjohn Healthcare Services, Inc., is a subsidiary of the Upjohn company, having forty-Seven certified home health agencies in the United States. The organization has twenty-one offices in the State of Florida and one of those offices is located in Pensacola, Florida. The State of Florida, Department of Health and Rehabilitative Services, is an agency of the State of Florida charged with the duty to evaluate the applications for certificate of need and to issue such certificates as would be appropriate under the terms of Chapter 381, Florida Statutes, and Rule 10-5, Florida Administrative Cede. This application for certificate of need and that of the companion case of Personnel Pool of Pensacola, Inc., d/b/a Medical Personnel Pool, hereinafter referred to "Personnel Pool", are also considered in accordance with the Health Systems plan for the Florida Panhandle effective December 15, 1978. A copy of that document may be found as the Joint Exhibit No. 2 admitted into evidence. The project review committee of the Northwest Florida District recommended to the Northwest Florida Subdistrict Advisory Council that the certificate of need be granted and this action was taken on May 2, 1979. A public hearing was held on May 8, 1979, and on Nay, 17, 1979, the Northwest Florida Subdistrict recommended the disapproval of the project. This disapproval followed a staff report by the staff of the Florida Panhandle Health Systems Agency which suggested that the certificate of need be denied. The application was then presented to the Regional Council, Florida panhandle Health Systems Agency, Inc., and on May 25, 1979, the Regional Council recommended the approval of the certificate of need to serve Escambia, Santa Rosa and Okaloosa Counties, Florida, with the proviso that services be offered Medicare and Medicaid patients. On June 29, 1979, the Respondent in the person of Art Forehand, Administrator of the Office of Community Medical Facilities, attempted to apprise the Petitioner that the request for a certificate of need had been denied; however, this correspondence was misaddressed and it was not until July 9, 1979, that a letter was forwarded to an official of Petitioner's organization and received by that official. On July 31, 1979, the Petitioner appealed the decision of denial of the certificate of need and the case was later assigned to the Division of Administrative Hearings for consideration which resulted in the hearing which is the subject of this Recommended Order. (The details of the various items discussed in developing the chronology of this application may be found in the Joint Composite Exhibit No. 1 admitted into evidence.) In offering its proof to demonstrate the entitlement to a certificate of need, the Petitioner essentially attempted to refute the Department of Health and Rehabilitative Services', hereinafter referred to as "Department", letter of notification of denial. That letter gave five reasons for denying the certificate of need, those reasons being: The proposed project is inconsistent with the Florida Panhandle Health Systems Agency 1979 Health Systems Plan policy guide regarding physical location of a home health agency in the area it intends to serve. The proposal is not consistent with standards and criteria established in Chapter 10-5.11(14), Rules of the Department of Health and Rehabilitative Services. Extenuating and mitigating circumstances which may be considered in approving a certificate of need for a new home health agency have not been adequately demonstrated. There are other available and adequate home health care service providers in the proposed service area which could serve as an alternative to the proposed project and prevent unnecessary duplication of resources. Financial feasibility data do not clearly reflect the inclusion of Medicare and Medicaid resources. The initial reason for denial deals with the claim that the Health Systems Plan for the Florida Panhandle, adopted December 15, 1978, does not allow service of three counties from one central office in Pensacola, Florida. The disputed language in that document is found in Chapter IV at page 216, and it states: No home health agency may be issued a license to operate in a Florida county without having applied for and been granted a certificate of need. The Office of Community Medical Facilities of the Department of Health and Rehabilitative Services considers the recommendation of the Health Systems Agency and established criteria in determining need. Certificates are now issued for a single-county service area, but prior to legislation passed in 1977, an agency could obtain a certificate for several counties. This inconsistency has created considerable confusion in determining need. Although the comment in the document is reluctantly made, it does establish the necessity for the issuance of certificates of need for single-county service areas. This determination is reached, notwithstanding the Petitioner's argument that there is existing precedence for serving more than one county out of a single office. Although there are circumstances in Florida where this approach has been utilized, such service of a multi-county area from a single office would not be allowed on the occasion of the current application. The second reason for denying the certificate of need involves Rule 10- 5.11(14), Florida Administrative Code, which states: (14)(a) A Certificate of Need for a proposed new home health agency or subunit shall not be issued until the daily census of each of the existing home health agencies or subunits providing services within the health service area of the proposed new home health agency or subunit has reached an average of 300 patients for the immediate preceding calendar quarter unless the need for the proposed new home health agency or subunit can be demonstrated by application of the mitigating and extenuating circumstances in rule 10-5.11(14)(b) herein. (b) Mitigating and extenuating circumstances which must be met for the department to issue a certificate of need for a proposed new home health agency or subunit even though the previously described need determination procedure does not clearly indicate need are: Documentation that the population of the proposed service are is being denied access to home health care services in that existing home health agencies or subunits within the proposed service area are unable to provide service to all persons in need of home health care, or Documentation that approval of such proposed new home health agency or subunit would foster cost containment for all providers in the health service area. The Petitioner, in the course of this presentation, took issue with the survey method used by the employee who conducted the staff review of the application. Upjohn claimed that the data gathered on the question of the requirement for a 300 average daily patient census was incomplete and inaccurate. The Petitioner also questioned whether the rule as cited above could be followed in this hearing or should the prior rule which spoke in terms of the daily census of the aggregate of the existing home health agencies or subunits in determining the count of 300 patients be used. The current rule became effective on June 5, 1979, and that rule has application because it was effective at the time of this hearing. Turning again to the question of the formula in deriving the number of patients in the census of the proposed service area, even assuming incompleteness or inaccuracies in the staff evaluation performed by the Health System Agency, the proof offered by the Petitioner in the bearing does not show utilization in excess of the 300-patient census. There are two health agencies now delivering home health care in Escambia County. Northwest Florida Home Health Agency, Inc., is one of those agencies and in its last complete reporting quarter prior to the hearing, there is an indicated patient census for April, which was 71; for May it was 77; and for June it was 73, totaling 221 patients, thereby constituting an average census of 74. This statement of census was established through the testimony of Arthur Long, Executive Director of Northwest Florida Home Health Agency, Inc. (His organization serves only patients who are enrolled with his service group.) Ms. Marian Humphrey, a public health nursing supervisor for the Escambia County Health Department, established the census in Escambia County for that Health Department as serviced by the Visiting Nurses Association, Inc. Beginning in January, 1979, the census was 101 Medicare patients; 14 Medicaid patients; 2 CHAD-PUS patients; 9 private patients and 71 free patients, the latter category being patients who do not pay for services. In February, 1979, there were 164 Medicare patients; 16 Medicaid patients; 2 CHAMPUS patients; 7 private patients and 72 free patients. In March, 1979, there were 128 Medicare patients; 9 Medicaid patients; 2 CHAMPUS patients and 11 private patients. In April, 1979, there were 147 Medicare patients; 13 Medicaid patients; 2 CHAMPUS patients and 9 private patients. In May, 1979, there were 165 Medicare patients; 12 Medicaid patients; 3 CHAMPUS patients; 7 private patients and 88 free patients. In June, 1979, there were 148 Medicare patients; 10 Medicaid patients; 2 CHAMPUS patients; 10 private patients and 61 free patients. In July, 1979, there were 150 Medicare patients; 10 Medicaid patients; 2 CHAMPUS patients; 10 private patients and 77 free patients. In August, 1979, there were 134 Medicare patients; 11 Medicaid patients; 2 CHAMPUS patients; 14 private patients and 96 free patients. The above-cited statistics demonstrate that the two current servicing agencies in Escambia County, Florida, in the preceding full quarter of 1979 which would have been April, May and June, considered separately do not exceed the average of 300 patients for that calendar quarter, nor did the statistics show excess of 300 in other reported quarters. By its Exhibit No. 8, the Petitioner presented statistics on the patient census in Okaloosa County and Santa Rosa County. These statistics were gathered by Blue Cross of Florida. The statistics of the Blue Cross survey show the patient Census services rendered by the Okaloosa County Health Department. These statistics only deal with the years 1977 and 1978 and are, therefore, not current. The most recent quarter in the report on Okaloosa County Health Department shows that in the last quarter of 1978, in-October the patient census was 9; November, the patient census was 14, and in December the patient census was 21. There is a provision in the Blue Cross report which deals with the Northwest Florida Home Health Agency, Inc.; however, these findings of fact defer to the testimony of Mr. Long which showed that in 1979, there was a patient census in April of 36; in May, a patient census of 38 and in June, a patient census of 40, for an average census of 38. The Blue Cross report shows that Santa Rosa County Health Department is the only home health care provider in that county. The most recent census reflected in that report is for January, February and March of 1979. In January the patient census was 41, in February the patient census was 35, and in March the patient census was 33. Analyzing this statistical data provided dealing with Okaloosa and Santa Rosa Counties, although some of the information is not current, it does demonstrate that the census did not exceed the average of 300 patients for the quarters that were reported in either county. In closing out an examination of the discussion of point 2 of the reasons for denial, it is noted that the Blue Cross report deals with the patient census of the Escambia County Health Department but this report is not as current as the presentation by Ms. Humphrey and the Humphrey report is accepted in lieu of the Blue Cross report. Reason 3 for denying the certificate of need talks about the failure of the Petitioner to demonstrate extenuating and mitigating circum stances which would allow a certificate to be issued, notwithstanding the fact that the current service agencies do not exceed the average census of 300 patients for the calendar quarter. Again, that provision of Rule 10-5.11(14)(b), Florida Statutes, states: Mitigating and extenuating circumstances which must be met for the department to issue a certificate of need for a proposed new home health agency or subunit even though the previously described need determination procedure does not clearly indicate need are: Documentation that the population of the proposed service area is being denied access to home health care services in that existing home health agencies or subunits within the proposed service area are unable to provide service to all persons in need of home health care, or Documentation that approval of such proposed new home health agency or subunit would foster cost containment for all providers in the health service area. The first provision under that subsection deals with the inability of the existing health agency to provide services to persons in need of home health care. In examining the question of the ability of the current organizations to provide the necessary health care, Escambia County will be reviewed first. In Escambia County, the Northwest Florida Home Health Agency, Inc., requires that their patients be registered with the organization and their office is open Monday through Friday from 8:00 a.m. to 4:00 p.m. After 4:00 p.m. on weekdays and on the weekends, a registered nurse is on call through the utilization of a "beeper" system. These services only apply to Medicare patients enrolled with the organization. To be enrolled it is necessary for the enrollment to have been achieved through a request by a physician. The Escambia County Health Department is open from 8:00 a.m. to 4:30 p.m. Monday through Friday and serves all classes of patients. There are on- call nurses who work on weekends. The nurses are called by the utilization of the Nurses Directory for Escambia County. The exception to these statements is that two days a year the services of the Escambia County Health Department are not available due to holidays. At night during the week those persons who are patients of the Escambia County Health Department are instructed to arrange for emergency treatment in the Emergency Room or ambulatory care at West Florida Hospital, assuming those patients cannot wait until the following morning for attention. Northwest Florida Home Health Agency, Inc., services Okaloosa County from an office in Fort Walton Beach, Florida. The exact nature of those services is as set out in the discussion of the services provided to patients in Escambia County. The exact details of other current services offered in Okaloosa County and Santa Rosa County were not presented by the Petitioner. Consequently, it was not possible to determine whether those services are adequate. The only evidence that touched on the issue of adequacy of services was testimony offered by one Ruby Savage, who is a volunteer member of the Regional Board of the Northwest Florida Subdistrict Council and a participant in project reviews. She stated that in her opinion there was a need for 24-hour service in Santa Rosa County. This testimony standing alone was insufficient to identify the need for further home health care services. The Petitioner has asserted that the services spoken of in the preceding paragraphs are not sufficient and examples of the lack of available services, according to the Petitioner, are shown on pages 65 through 68 of the transcript of the hearing. Therein are cited several examples of persons unable to receive necessary care of the type which the Petitioner desires to deliver. These examples are accounts given by Ms. Krumel from information purportedly given to her on the subject of the lack of service. Ms. Krumel in the course of the hearing made further comments to the effect that the individuals involved in the project review felt that the services in the question area were insufficient. Those opinions, while they may be true, are not the quality of evidence needed to sustain the Petitioner's contention that there is a need for further health care service in the area in question. The Petitioner made no further presentation on the question of lack of service and on balance the Petitioner has failed to show lack of service. The Petitioner offered testimony on the possibility of the utilization of population increases in the area as a criterion for increasing home health care services. While this criterion formerly appeared in Rule 10-5.11(14)(b), Florida Administrative Code, under the provisions of extenuating and mitigating circumstances, it is not found in the current statement of that rule and may not be used as a criterion for gaining the certificate of need. In discussing the issue of cost containment as outlined in the above- cited rule, the Petitioner made a general comment that if further services are not provided, patients will be required to receive services at emergency rooms, thereby voiding the possibility of cost containment which could be offered by granting the certificate of need to this Petitioner, who is willing to provide 24-hour home health care services. This statement standing alone is insufficient to show that the granting of the certificate of need to the Petitioner will foster cost containment. Finally, the fifth reason for denying the certificate of need was premised upon the failure of the Petitioner to provide financial feasibility data reflecting the inclusion of Medicare and Medicaid resources. The requirement for such data is found in Rule 10-5.09(5), Florida Administrative Code, which states: (5) Documentation showing that the project is financially feasible and can be accommodated without unreasonable charges for services rendered to include a projection of income and expense on a pro forma basis for the first two years of operation after completion of the project. Petitioner claimed at the hearing that it has failed to include this data because the inclusion of Medicare and Medicaid patients in its proposed services was a last minute item and no one in the evaluation process told them that they had to comply with this provision. At the time of the hearing the data was yet to be provided. Upjohn and Personnel Pool were afforded an opportunity to offer their testimony to establish in what respects they might be superior to the other applicant for a certificate of need, assuming that only one certificate of need was to be granted. The two Petitioners did not wish to make any direct attack on the special qualifications of the collateral Petitioner. Both parties proceeded on the basis of offering their remarks to be available for comparison if the contingency were realized which required that only one certificate of need be issued. It is not necessary to detail the special qualifications of these Petitioners, because no certificate of need will be recommended for issuance in Escambia County, Florida, the location in which Upjohn and Personnel Pool are potential competitors for a sole certificate of need. Nonetheless, the facts offered in support of the special qualifications of Upjohn may be found in the transcript of record, pages 187 through 190. The testimony on Personnel Pool's special qualifications may be found in the transcript of the hearing on pages 228 and 251 through 256.
Recommendation This recommendation is being entered in view of the Facts and Conclusions of Law in this case and those Facts and Conclusions of Law in the companion case, D.O.A.H. No. 79-1748, Personnel Pool of Pensacola, Inc. d/b/a Medical Personnel Pool v. State of Florida, Department of Health and Rehabilitative Services. Upon consideration of the Facts herein and the Conclusions of Law, it is recommended that the Petitioner, Upjohn Healthcare Home Health Agency be denied its request for a certificate of need to serve Escambia, Okaloosa and Santa Rosa Counties, Florida. It is further recommended that the agency in entering its final order do so by a process of simultaneous review of this Recommended Order and the Recommended Order entered in D.O.A.H. Case No. 79- 1748, Personnel Pool of Pensacola, Inc. d/b/a Medical Personnel Pool v. State of Florida, Department of Health and Rehabilitative Services, and that final orders be entered on the same date with copies to be served on the representatives of each applicant in this case and in the companion case mentioned above. CHARLES C. ADAMS, Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: Vivian Krumel, R.N. Mr. Art Forchand, Administrator Service Director Office of Community Medical Facil. Upjohn Healthcare Services Department of Health and 15 West Strong Street Rehabilitative Services Old Townhouse Square 1323 Winewood Boulevard Pensacola, Florida 32501 Tallahassee, Florida 32301 Mr. John Owens Mr. Joe Dowless Zone Manager, West Florida Office of Licensure and Cert. Upjohn Health Care Services Department of Health and 3118 Gulf to Bay Blvd. Rehabilitative Services Clearwater, Florida 33519 Post Office Box 210 Jacksonville, Florida 32202 Charles T. Collette, Esquire Departnt of Health and Mr. Herbert E. Straughn Rehabilitative Services Office of Cozmunity Medical Facil. 1323 Winewood Boulevard Department of Health and Tallahassee, Florida 32301 Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301 Sherrill E. Phelps Governmental Affairs Representative Personnel Pool of America, Inc. 303 Southeast 17th Street Fort Lauderdale, Florida 33316 Mr. Thomas S. Siler Owner/Administrator Personnel Pool of Pensacola, Inc. 1800 North Palafox Street Pensacola, Florida 32501
