Findings Of Fact This proceeding involves certificate of need (CON) application No. 4912 by Home Health Care of Bay to establish a Medicare-certified home health agency to serve Bay County Florida. Home Health Care of Bay's CON application was timely filed on December 15, 1986. Home Health Care of Bay's application was deemed complete on March 2, 1987. On April 30, 1987, DHRS preliminarily denied Home Health Care of Bay's CON application based on a determination that: There was no need demonstrated by Home Health Care of Bay for an additional home health agency in Bay County. Home Health Care of Bay is owned by Mark Ehrman, M.D. Dr. Ehrman is a board-certified internist, hematologist, and oncologist. Dr. Ehrman has been in private practice in Fort Walton Beach, Florida, since November, 1984. Prior to 1984, Dr. Ehrman was involved in the organization and delivery of medical services, the teaching of medicine, and the practice of medicine in Canada. Home Health Care of Bay will serve all patients regardless of race, income, sex, ethnic background, religion, or physical handicap. Home Health Care of Bay will provide 3 percent Medicaid and 3 percent indigent home health visits. Dr. Ehrman, both in his office and in his durable medical equipment (DME) company, goes to great lengths to ensure that indigent persons receive medical services. Dr. Ehrman, in his office practice, provides medical services to all persons regardless of their ability to pay. He is a participating physician in Medicare, Medicaid, and other insurance programs. Dr. Ehrman's participation in these programs and his determination not to screen patients financially has increase access to medically underserved patients. Dr. Ehrman's private practice includes approximately 5 percent Medicaid patients. In the past, home health agencies have tended to focus on acute medical problems. The traditional model for home health care has been to shorten an acute hospital stay for a discrete problem. Even chronically ill patients still came to the hospital when they had an acute episode. There has been little focus on avoiding hospitalization. There is now a shift in home health care which attempts to avoid hospitalization in appropriate cases. Dr. Ehrman, in treating patients at home, has become involved with sophisticated triage procedures, home pain management, and other procedures which maximize a patient's time outside the hospital. Such procedures allow patients to remain safely and comfortably in their homes. Procedures which can be safely done in the home include the starting of I/V morphine drips or I/V antibiotics. These procedures have traditionally not been done in the home. Nationally, and in Bay County, several factors are causing a shift to home health use. First, pressure is being applied in the form of reimbursement mechanisms to reduce the expense of institutional care. Patients are discharged from the hospital sooner and there is more pressure to use home health services. Second, an increased incidence of chronic illnesses, such as AIDS, will increase the use of home health services. The incidence of AIDS and AIDS related diseases will continue to increase and has obvious implications for increased home health usage. Home health care will make "hospital-like" care more available and less expensive for AIDS patients. Third, health consumers want to maintain the quality of their lives and remain at home as long as possible. HOME HEALTH CARE OF BAY'S PROPOSAL Home Health Care of Bay will provide medical personnel services in the disciplines of registered nursing, certified home health aides, occupational therapy, speech therapy, physical therapy, and medical/social work. These services will be provided to Medicare, private insurance, and indigent patients. Home Health Care of Bay will provide traditional home health services and many "high-tech" services which currently are not available at all or are not routinely done in Bay County. Such services include the transfusion of blood and blood products, professional pain management, the drawing of arterial blood gases, the care of Groshong and Hickman catheters, and the care of subcutaneous pumps and subcutaneous venous access devices. Home Health Care of Bay's proposed services will be utilized by many different types of patients, including renal patients, chronic pulmonary patients, chronic heart disease patients, and cancer patients. Home Health Care of Bay will provide health care services to AIDS patients. Petitioner's Exhibit 5 contains a complete list of services which Home Health Care of Bay will provide. Home Health Care of Bay's services will be available 24 hours a day, 7 days a week. This is an important commitment because home health care patients need services regardless of the time of day or day of the week. Even more important than the discrete list of services that Home Health Care of Bay will provide is the integration of all these services into one agency. In that way, patients are not shuttled from place to place; their care can be organized and integrated for maximum benefit. This integration will be accomplished by formulation of a plan of therapy which will include evaluation by a social worker and a physician in order to deal with the patient's total needs. Home Health Care of Bay's commitment to a total integration of patient services is evidenced by its plan to provide 4 percent of its visits in the medical/social work category. Such services are important in providing comprehensive care. The provision of medical/social work services will help patients and their families identify both medical and non- medical needs. Once such needs are identified, the patients and families can be channeled to the appropriate services, agencies and resources. Home Health Care of Bay will provide the physician with direct and timely communication about the patient. This will include daily delivery of complete medical records. Such a service is crucial in order to provide home care to patients with complicated problems. Home Health Care of Bay has a budget line item for marketing of $21,000 in the first year and $18,000 in the second year of operation. This money will be used to change the perception and pattern of home health use. Patients and doctors will be made aware of the availability of new home health services and the integration of those services with existing services. Home Health Care of Bay's marketing effort will overcome the reluctance of some physicians to utilize home health services. The demographics of the subdistrict of Bay County were analyzed and compared to the demographics of District II. The analysis shows that from 1986 to 1989, 3,076 persons 65 and over will be added to the population of Bay County. This represents a growth rate of 21.5 percent in Bay County compared to a district growth rate of 12.4 percent. Of the elderly growth in District II of 7,355, approximately 40 percent of such growth is occurring in Bay County. Forty percent (40 percent) is a high percentage in a 14 county district and indicates that the elderly population in Bay County is growing at a very rapid rate. Elderly persons are the most frequent users of home health services. Thus, rapid population growth is occurring in the segment of the population most in need of home health services. STATUTORY CRITERIA 1/ Consistency With State Health Plan Home Health Care of Bay`s proposal was reviewed for conformity with the State Health Plan and is consistent with that plan. The 1985-1987 Florida State Health Plan states: Home health agencies provide nursing, health aid, therapy and other kinds of services to patients in their homes. This allows individuals to remain at home rather than use more expensive institutional care to recover from acute illness or to manage chronic conditions. The State Health Plan further states: Home health services can be a cost effective form of long term care for the elderly and the infirm. The provision of home health services proposed by Home Health Care of Bay will provide residents of Bay County with a lower cost alternative to institutionalized long term care as referenced in the above State Health Plan excerpts. The State Health Plan also addresses the unwillingness of many providers to serve the medically needy: Medicare is the largest payor for home health care to the elderly, though some private insurers and Medicaid both cover home health services. Policy makers are increasingly concerned about providers' willingness to serve Medicaid recipients and medically indigent Floridians. Home Health Care of Bay has committed to provide at least 3 percent Medicaid and 3 percent indigent visits. Such a commitment will greatly increase access of medically underserved groups. Approval of a provider who accepts a significant portion of Medicaid patients will encourage current providers to accept such patients in order to retain their Medicare and private referrals. Physicians and discharge planners are much more willing to refer to an agency that will care for all their patients. The State Health Plan contains the following objective: OBJECTIVE 1.5.: To assure that the number of home health agencies in each service area promote the greatest extent of competition consistent with reasonable economies of scale by 1987. The methodology utilized by Home Health Care of Bay to project need maximizes competition consistent with economies of scale by allowing additional providers to enter the market while maintaining existing agencies at a size at which they can operate efficiently. Consistency With Local Health Plan Home Health Care of Bay's proposal was reviewed in relation to the 1986 District Two Health Plan and is consistent with that plan. The local health plan contains a section on long-term care services, including home health services. This section contains a numerical methodology to determine need. That methodology indicates a need for an additional agency in Bay County. The local health plan also contains priorities for home health services. Priority C states that: Priority will be given to home health services applications who have a history of providing, or will commit to provide, services to Medicare, Medicaid and medically indigent patients. Dr. Ehrman, the owner of Home Health Care of Bay, has a record in his practice of providing services to all payor groups. He has committed to continue to do so in his home health agency. Priority D of the Local Health Plan states: Priority will be given to home health services applicants who have a history of providing, or will commit to provide, a public marketing program for their services which includes pamphlets, public service announcement and various other community awareness activities. Home Health Care of Bay has budgeted for and committed to an extensive marketing program. A marketing priority is unusual in a local health plan and indicates an awareness of the need to educate the public about home health services. Determination Of Need DHRS currently has no rule governing the need for home health agencies. A historical summary of the regulation of home health agencies in Florida is described in a memorandum prepared by Ms. Marta V. Hardy. Ms. Hardy was the Deputy Assistant Secretary for Regulation and Health Facilities, DHRS, from September 1984 through June 1987. Ms. Hardy was responsible for all CON decisions and was the ultimate decision-maker in regard to the preliminary denial of Home Health Care of Bay's CON. In the fall of 1984, DHRS attempted to promulgate a rule to replace the invalidated Rule of 300. This proposed rule was based on a use rate methodology, but was invalidated in a rule challenged proceeding in 1985. After the invalidation of the proposed rule, DHRS implemented an interim policy which it used to review home health agencies. This interim policy is reflected in the "Bob Sharpe memo," dated May 15, 1986. The interim policy was applied to home health agency application beginning with the first batching cycle in 1986. The interim policy utilized a variation of the previously invalidated rule and attempted to correct the problems which caused the proposed rule to be found invalid. The interim policy is a use rate/population methodology which projects the number of Medicare enrollees using home health services in the future. This number is multiplied by the average number of visits per Medicare home health user. The total number of visits is divided by an agency size of 9,000 visits to yield the gross number of agencies needed. The total number of licensed and approved agencies is subtracted from the gross need number to yield the net number of agencies needs. The interim policy phased in the needed agencies over a three year period. DHRS defended the interim policy in circuit court when the Florida Association of Home Health Agencies (FAHHA) sought to stop DHRS from using the policy. DHRS defended the interim policy in December, 1986, before the First District Court of Appeal. Use of the interim policy resulted in the approval of 23 home health agencies. DHRS abandoned its interim policy sometime in the fall of 1986. No notice was given to the public or to interested parties that a change in DHRS policy had occurred. DHRS published no document rescinding the Sharpe memo. Only after applications were filed in the second batching cycle of 1986, were applicants informed that DHRS had changed its interim policy. Applicants in the December, 1986, batching cycle, including Home Health Care of Bay, were asked for an unlimited extension of time within which DHRS could render a decision. Applicants who refused to agree to an extension were evaluated on the basis of the "statutory need criteria." Applicants who did not agree to an extension were denied. In only one instance was a CON granted after abandonment of the interim policy. This occurred in Franklin County, where no home health agency existed at the time of that approval. DHRS' new "policy" was not developed by DHRS health planners. The "policy" put the burden of proof on the applicant to demonstrate an unmet need. Such a demonstration would be difficult to make. The Office of Community Medical Facilities, the office within DHRS responsible for preliminary CON review, reviewed Home Health Care of Bay's application using the "policy" based on "the thirteen statutory criteria." Such a review required Home Health Care of Bay to prove need by demonstrating an unmet need. However, as evidenced by the Office of Community Medical Facilities' review of Home Health Care of Bay's application, a policy requiring an applicant to meet a negative burden of proof is unreasonable. It imposes a standard which is virtually impossible for an applicant to meet. Ms. Joyce Farr was the DHRS employee responsible for the review of Home Health Care of Bay's application and for the development of the related State Agency Action Report (SAAR). The SAAR was the only work product Ms. Farr prepared in regard to Home Health Care of Bay's application. Ms. Farr has never been qualified as an expert witness in the home health area. Ms. Farr has no formal education in health planning and is unfamiliar with Medicare reimbursement. Ms. Farr does not consider herself to be an expert in financial feasibility projections, staffing, or quality of care. Ms. Farr is not in a policy-making position at DHRS. Ms. Farr was given no instructions by her superiors as to how to review Home Health Care of Bay's application. DHRS presented the testimony of Ms. Farr to attempt to explain how Home Health Care of Bay's application was reviewed. Ms. Farr was tendered and accepted, not as an expert health planner, but as an expert in "CON review." Ms. Farr articulated the standard she used to determine need: [I]f an applicant or residents of a county or community resources of a county or just about any organization basically says that there is an unmet need, meaning that there is no home health services available or there is an accessibility problem where certain groups are not being served -- certain services are not being offered -- I become aware of it by their simply documenting, "I cannot get home health services," like CAPS [Capitol Area Community Aging Agency] that said, "They aren't serving these people. We need somebody in here to serve these people." That would show that there was an unmet need. Unless an applicant, or community resource, could demonstrate an accessibility problem, no need existed according to Ms. Farr. Ms. Farr did not review the Medicare cost reports of current providers to determine the services they provided prior to recommending denial of Home Health Care of Bay's application. Ms. Farr reviewed utilization data of current providers for only one year. Ms. Farr did no analysis of the types of visits provided by existing providers. Ms. Farr looked only at the total number of visits. The only information Ms. Farr utilized in regard to the type of visits being provided was information given to her by existing providers. In determining that no need existed for medical/social work services, Ms. Farr relied on the list of social service agencies included in the local health plan, but did no analysis as to what services such agencies offered. Ms. Farr determined that no Medicaid access problem existed in Bay County based on information current providers gave her. She did not verify these representations with the Medicaid office. Ms. Farr did no charge comparison in her review. At the time of her review, Ms. Farr did not know when a new competitor last entered the market in Bay County. Ms. Farr did not address Objective 1.5 of the State Health Plan in her review. She was unaware of Objective 1.5 until it was pointed out to her in deposition. Ms. Farr utilized no planning horizon in determining need, though she admitted that one of the purposes of CON review is to plan for future health needs. Ms. Farr's review of Home Health Care of Bay's application was deficient for several reasons. First, Ms. Farr's review did not look at a projection of future need. It did not analyze demographics or utilize a planning horizon. It contains no elements of a needs analysis. A mere review of what currently exists misses the point of health planning. Second, in making a determination of no need, Ms. Farr relied solely on comments of existing providers who told her that there was no need for a competing agency. Dr. Deborah Kolb, vice-president of Jennings, Ryan, Federa & Co., participated in the preparation of Home Health Care of Bay's CON application. In preparing the needs assessment portion of the application, Dr. Kolb reviewed the State Health Plan, the Local Health Plan, utilization data, home health CON decisions, and services offered by current providers. The need methodology which appears in Home Health Care of Bay's application is contained in Dr. Kolb's expert report. The methodology appearing in her report and the application was the interim policy in use by DHRS at the time the application was filed. This was the methodology in the Bob Sharpe memo. Home Health Care of Bay will provide home health services to the residents of Bay County. Bay County is in DHRS Service District II. According to the 1986 District II Health Plan, District II is composed of 14 separate subdistricts. Each subdistrict is composed of one county. Bay County is a reasonable service area for Home Health Care of Bay. Dr. Kolb utilized a two-year planning horizon to project the need for home health agencies. This is a reasonable planning horizon. Table 3 of Dr. Kolb's report analyzes need on a district-wide basis. Two time frames, July, 1988, and January, 1989, are shown because Home Health Care of Bay's application was filed in December, 1986. Two years from that date would be December 1988. The official population projections from the Governor's Office focus on July and January of each year. Use of the two project dates straddles the December, 1988, planning horizon. The population numbers of District II for 65 and over are 62,546 for January, 1988, and 63,558 for January, 1989. The 1984 Medicare use rate, which is an estimate of the number of Medicare home health visits per elderly person in Florida for 1984, is multiplied by the projected elderly population to arrive at a projected number of visits. The number of projected visits in Table 3 of 118,565 in July, 1988, and 120,483 in January, 1989, is a result of multiplying the use rate by the projected population. To determine the number of agencies needed, the projected number of visits is divided by optimal agency size. This calculation yields a gross agency need of 13 agencies in the district in July, 1988, and January, 1989. The number of licensed and approved agencies, 12, is subtracted from gross need, 13, to yield net need of one (1) agency in July, 1988, and January, 1989. Dr. Kolb utilized 9,000 for the optimal agency size figure. This is consistent with the interim policy and with data which suggests that is where economies of scale occur. An optimal agency size of 9,000 appears in the Local Health Plan methodology. Table 4 of Dr. Kolb's report presents the same analysis as Table 3, described above, on a subdistrict basis to determine where the one agency found to be needed in District II should be located. Use of the same methodology results in a gross agency need of three. The two existing agencies are subtracted from the gross need of three to yield a net need for one agency in July, 1988, and January, 1989, in Bay County. The methodology described above is a reasonable one for determining need. The methodology utilizes a common health planning approach. It is the same methodology used by DHRS as an interim policy. It is the same type of methodology used by DHRS in planning for other types of health services. Beyond the numerical analysis discussed above, other factors indicate the need for an additional home health agency in Bay County. Bay County has a very low home health use rate and a very high nursing home use rate. The Bay County home health use rate is 1.5 visits per person 65 years and older. The Bay County use rate is significantly lower than the state use rate of 1.89. This disparity indicates a gap between real need and historical utilization. At the same time, Bay County has a nursing home use rate of 41 beds per thousand elderly compared to a state rate of 23 beds per thousand. Additionally, the occupied nursing home beds per thousand elderly is much greater in Bay County than in the state. In the state there are 21.3 occupied beds per thousand elderly. The utilization of Bay County's nursing home beds is approximately 75 percent greater than utilization in the state as a whole. These statistics suggest an inappropriate allocation of resources between home health care services and more expensive institutional nursing home services. Nursing home utilization would decrease with more sophisticated home health care. Many people are inappropriately institutionalized in nursing homes and could be cared for at home. From a medical perspective, Dr. Ehrman was of the opinion that an additional home health agency was needed. Availability, Quality Of Care, Efficiency, Appropriateness, Accessibility, Extent Of Utilization, And Adequacy Of Like And Existing Services There are currently two Medicare-certified home health care agencies serving Bay County. One way to evaluate agency performance is to analyze the mix of services and the number and types of visits being provided. Current providers have concentrated heavily on providing nursing and aide visits. Of approximately 18,000 visits provided each year, approximately 16,000 visits comprised the nursing and aide categories. Neither provider did any specifically medical/social work visits in 1985 or 1986. Additionally, the total number of visits delivered to the residents of Bay County has remained constant in 1985 and 1986. Bay County's constant use rate illustrates the need for more education in regard to home health services. While current providers do certain high tech procedures if directed to by a doctor, current providers are not committed to consistently doing high tech procedures. High tech services are not the most profitable. Their margins are often low and it is more economically beneficial for current providers to provide aide services. Transfusions, initiation of I/V antibiotics, continuous infusion of morphine, pain nursing, and catheter care are all services which existing agencies have rarely done or do with great difficulty. Without doing such procedures as a regular basis, competency is difficult to maintain. Bay Home Health Care Agency d/b/a Home Health of Panama City (Home Health of Panama City) is a free-standing home health agency and has been in business for 11 1/2 years. Home Health of Panama City does no Medicaid visits. Bay Medical Center Home Health receives referrals from Home Health of Panama City because Home Health of Panama City does not take Medicaid or indigent patients. Home Health of Panama City does no medical/social work visits. Home Health of Panama City has no money budgeted for marketing. Bay Medical Center Home Health is a hospital based home health agency. It functions as a department of Bay Medical Center, an acute care hospital located in Panama City, Florida. In the past two years, Bay Medical Center Home Health has provided no medical/social work visits though some of those services were provided by nurses during nursing visits or by other departments of Bay Medical Center. Bay Medical Center Home Health does not currently provide care of certain high tech devices such as the Denver pleuroperitoneal pump or the subclavian pump. Its staff would have to be trained to provide such care. Bay Medical Center Home Health has never given blood transfusions or cared for a Denver shunt. Bay Medical Center Home Health has a very low number of average visits per patient (6.8) when compared to the state average of 30 visits per patient. Bay Medical Center Home Health does a low percentage of Medicaid visits. In 1986, Bay Medical Center Home Health was reimbursed for 120 Medicaid visits out of a total of 3,280 Medicaid-reimbursed visits provided in District II. A comparison of reimbursed Medicaid visits provided by Bay Medical Center Home Health to District II as a whole demonstrates a Medicaid access problem. In 1986, Bay County had 25 percent of the district's population and 16 1/2 percent of the district's Medicaid eligible. Yet only 3.7 percent of the district's Medicaid-reimbursed home health visits were provided in Bay County. If services were Medicaid accessible, the number of Medicaid visits would be closer to the Medicaid percent of the population. Bay Medical Center Home Health Care's Medicaid visits represented only 1 percent of their total visits for 1986. When Home Health of Panama City's zero (0) Medicaid visits is considered, out of all home health visits provided in Bay County only 0.7 percent were Medicaid visits. Approximately 25 percent of Dr. Ehrman's patients from the Panama City area are Medicaid or indigent. This evidences a need for more Medicaid services. Bay Medical Center Home Health has no line item for marketing and advertising. Ability of the Applicant To Provide Quality of Care Dr. Ehrman is a highly trained and experienced physician. While in Canada, Dr. Ehrman established a hematology and oncology health care delivery system in Montreal. This system is still in existence and working well. Dr. Ehrman has been instrumental in improving the delivery of health care in his practice area. He has established tumor boards at local hospitals and provided many new procedures and devices in the home. Dr. Ehrman has raised the level of awareness on the part of other practitioners in his area as to a team approach to the delivery of services. This has increased the type of home services now available. Dr. Ehrman has responded to the needs of his patients for a multi- disciplinary approach to oncology by associating a clinical psychologist. This person deals with the psychological needs of the cancer patients seen by Dr. Ehrman. Dr. Ehrman has been instrumental in beginning many new and innovative practices in his office. For instance, he administers chemotherapy to Medicare patients in his office. He accomplished this by arranging with local pharmacists to mix and supply chemotherapy drugs. Dr. Ehrman will work with these same pharmacists in Home Health Care of Bay. Dr. Ehrman is involved in a durable medical equipment company. Many new devices and treatments were first used in the area by Dr. Ehrman's company. Dr. Ehrman has been a leader in the community in keeping up with new home health care developments. Home Health Care of Bay will have adequate staff on a full-time basis and add staff as utilization increases. Dr. Ehrman currently contracts with two nurses who are well trained and have over 1,000 hours of in-service training. Home Health Care of Bay is committed to keeping up with state-of-the- art home health care services and will add new services as they are developed. Availability and Adequacy of Alternatives There are no realistic alternatives to the establishment of a new home health agency. The alternative of nursing home care is not satisfactory. Most persons would prefer home care to nursing home care when at all possible. The alternative to home care which is currently being used is to shuttle the patient from the emergency room to the hospital to the doctor's office. Eventually the patient drops out of the system or settles for a lower level of services. Availability of Resources, Including Health Manpower, Management Personnel and Funds for Capital and Operating Expenditures . . . Extent to Which the Proposed Services Will Be Accessible to All Residents The staffing requirements for Home Health Care of Bay are shown on Table 11 of the application. That staffing plan is reasonable. Home Health Care of Bay will have a full-time administrator at a salary of $27,000. A capable administrator can be recruited at that salary. Home Health Care of Bay will employ a full-time nurse supervisor at a salary of $21,000. A nurse supervisor can be hired at that salary. Home Health Care of Bay will employ a full-time clerical person at an annual salary of $16,000. A clerical person can be hired at that salary. The above salaries and Home Health Care of Bay's ability to recruit such persons is reasonable based on Dr. Ehrman's experience employing similar personnel in his office. Home Health Care of Bay will hire contract staff to provide skilled nursing services, physical therapy services, speech therapy services, occupational therapy services, medical/social work services, and home health aide services. Such persons can be contracted with to provide the type of services Home Health Care of Bay proposes based on discussions with such persons. Dr. Ehrman currently contracts with two nurses in Ft. Walton Beach to provide nursing services similar to those proposed by Home Health Care of Bay. Such services are provided mainly to non-Medicare patients and the arrangement has worked very well. Funds for Capital and Operating Expenditures Project costs are depicted on Table 25 of the application. The costs are reasonable. Home Health Care of Bay can be started for $22,600. Immediate and Long-Term Financial Feasibility of the Proposal At hearing, DHRS admitted the short-term financial feasibility of Home Health Care of Bay's proposal. The statement of projected income and expense in Figure 7 of the application and on page 14 of Dr. Kolb's report was prepared under Dr. Kolb's supervision. The majority of assumptions on which the pro forma is based have been stipulated to by DHRS as reasonable assumptions on which to base a financial projection. The only assumptions not admitted by DHRS relate to utilization and payor mix. DHRS, however, introduced no evidence that refuted the reasonableness of these assumptions. The utilization projection used to calculate gross revenue in the pro forma was 3,800 visits in 1988 and 8,500 visits in 1989. The utilization projections are reasonable based on the agency's demographic base and Dr. Ehrman's commitment to education and marketing. The projection of costs and charges depicted on page 45 of the application is reasonable based on Dr. Ehrman's current office experience. The number of visits is multiplied by the charge per visit type to calculate gross revenue. This calculation yields a gross revenue of approximately $200,000 in year 1 and $462,000 in year 2. The payor mix for Home Health Care of Bay is found on Table 7 of the application. Home Health Care of Bay predicts 3 percent Medicaid visits, 80 percent Medicare visits, 14 percent private pay and insurance visits, and 3 percent indigent visits. The pay mix projections are reasonable based on the mix of patients Dr. Ehrman currently sees. Ms. Farr admitted that the projections were reasonable. The difference between Medicare and Medicaid reimbursement and full charges results in the contractual allowances figure. Bad debt and charity deductions were calculated based on 3 percent indigent and 3 percent Medicaid visits. Deductions from gross revenue, which are funds not received because of contractual allowances, bad debts, or charity, are subtracted to yield net revenue. Deductions from revenue are approximately $38,000 in year 1 and $135,000 in year 2. Net revenue is approximately $162,000 in year 1 and $327,000 in year 2. The second portion of the pro forma lists expenses. This list contains all the expenses expected for a new home health agency. All the expenses listed are reasonable. The pro forma shows a loss of $28,505 in the first year and a profit of $13,207 in the second year. Home Health Care of Bay has the equity to sustain a loss in the first year. In the second year of operation, based on the above assumptions, expenses are $314,000 and net revenue is $327,000 for a net income of $13,000. These projections indicate that the project is financially feasible in the long term. Table 26 on page 41 of the application presents the project timetable anticipated when the application was filed. Any delay in this timetable due to this litigation will not materially change the projections or commitments contained in the application. Impact of the Proposal on Costs of Providing Health Services, Including Effects of Competition and Improvements in Financing and Delivery of Health Services Which Foster Competition and Services To Promote Quality Assurance and Cost Effectiveness The introduction of a new home health agency into the Bay County market will stimulate competition. Such competition will stimulate growth in competitors and increase the overall level of services. Approval of a new competitor where there has been no new competition for nine to ten years will put pressure on providers to provide a wider range of services as well as higher quality services. Ms. Young, administrator of Bay Medical Center Home Health, admitted that if Home Health Care of Bay's CON is approved, her agency might begin educating physicians in regard to available services, rather than waiting for physicians to request a service. As the current providers testified, as agency visits go up or down, the number of staff required can be adjusted without incurring unreasonable costs. Current providers have control over their costs and staffing. Home Health Care of Bay's charges are competitive. In some areas, such as skilled nursing and home health aide, Home Health Care of Bay's charges are lower than current providers' charges. Price competition allows competition for private pay patients. Impact The addition of Home Health Care of Bay to the home health market will not significantly affect current providers. Studies have indicated that new entrants into the home health market do not significantly affect existing providers. The elderly population of Bay County is growing rapidly. When the 1984 home health use rate is applied to elderly population growth between 1986 and 1989, approximately 5,800 new visits are attributable to population growth alone. Home Health Care of Bay projects it will deliver 3,800 visits in its first year of operation and 8,500 visits in its second year. Thus, a large percentage of those visits are attributable to population growth alone. Home Health Care of Bay's marketing and education programs will raise the local use rate and generate more visits. Dr. Kolb analyzed the financial impact of Home Health Care of Bay's project on current providers. Her analysis considers a worst case scenario and assumes that current providers' visit levels will be affected by the introduction of a new provider. The analysis then calculates the financial impact on current provider. In order to do this, Table 11 calculates the average cost per visit from existing agencies' 1985 Medicare cost reports. Home Health Care of Panama City's average cost per visit is $37.18. Bay Medical Center Home Health's average cost per visit is $41.76. The Medicare program pays agencies the lower of Medicare cost caps or actual costs. The current providers in Bay County are well below the Medicare cost caps and so will be paid their actual costs. Table 11 calculates the difference between actual agency costs and Medicare cost caps. Home Health of Panama City was 18 percent below its cost caps. Bay Medical Center Home Health was 24 percent below its cost caps. Thus, Home Health Care of Bay could provide the number of visits it projects and even if all those visits came from existing providers, the current providers could still operate at a level of cost that would be Medicare reimbursable. The approval of Home Health Care of Bay's application will not have a significant adverse impact on existing providers.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Health and Rehabilitative Services enter a Final Order granting CON No. 4912 to Home Health Care of Bay County, Florida, Inc., to establish a Medicare-certified home health agency in Bay County, Florida. DONE AND ENTERED this 17th day of December, 1987, in Tallahassee, Florida. DIANE K. KIESLING 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 17th day of December, 1987. APPENDIX TO THE RECOMMENDED ORDER IN CASE NO. 87-2151 The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on the proposed findings of fact submitted by the parties in this case. Specific Rulings on Proposed Findings of Fact Submitted by Petitioner, Home Health Care of Bay County, Florida, Inc. Each of the following proposed findings of fact are adopted in substance as modified in the Recommended Order. The number in parentheses is the Finding of Fact which so adopts the proposed finding of fact: 1-3(1-3); 5(4); 7-10(5-8); 12-16(48- 52); 18(53); 19 & 20 (54); 21(55); 24-27(56-59); 28- 31(59-62); 37-52(9-24); 54-57(25-28); 58-77(28-47); 78-89(63-74); 91-102 (75- 86); 104-114(87-97); 116-129(97-110); 130(110); 131(111); 133-135(112); 136- 139(113); 140 & 141(114); 142-153(115-126); 154-163(126-135); 165-175(136-146); 179-182(147-150); 183(150); 184 & 185(151); 186(152); 187 & 188(153); 189- 191(154); 192 & 193(155); 194 & 195(156); 196(157); 197(158); 200-203(159-162); 207(163); 209(164); 210(165); 212-218(166-172); and 219-225(172-178). 2. Proposed findings of fact 17, 32-36, 53, 90, 103, 115, 132, 164, 176- 178, 198, 199, 204-206 and 211 are subordinate to the facts actually found in this Recommended Order. Proposed findings of fact 22, 23 and 208 are rejected as being unsupported by the competent, substantial evidence. Proposed findings of fact 4 and 11 are rejected as being unnecessary and/or irrelevant. Specific Rulings on Proposed Findings of Fact Submitted by Respondent, Department of Health and Rehabilitative Services Each of the following proposed findings of fact are adopted in substance as modified in the Recommended Order. The number in parentheses is the Finding of Fact which so adopts the proposed finding of fact: 1(1 & 2); 2(3); 6(Footnote 1); 7(148) and 13(4). Proposed findings of fact 3-5, 8-12, 14-40, 43-45 and 47-53 are subordinate to the facts actually found in this Recommended Order. Proposed finding of fact 42 is rejected as being unsupported by the competent, substantial evidence. Proposed findings of fact 4 and 46 are rejected as being unnecessary and/or irrelevant. COPIES FURNISHED: Byron B. Mathews, Jr., Esquire Vicki Gordon Kaufman, Esquire McDermott, Will and Emory 101 N. Monroe Street Tallahassee, Florida 32301 Theodore E. Mack, Esquire Assistant General Counsel Department of Health and Rehabilitative Services Regulation & Health Facilities Ft. Knox Executive Center 2727 Mahan Drive Tallahassee, Florida 32308 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 =================================================================
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: Petitioner filed an application with HRS for a Certificate of Need to establish and operate a new home health agency in Hillsborough, Manatee, Pasco and Pinellas Counties. HRS has given notice of its intent to deny the application on the grounds that the proposed project is not consistent with Rule 10-5.11(14)(a) and (b), Florida Administrative Code. That preliminary determination is the subject of a pending formal administrative proceeding filed pursuant to Section 120.57(1), Florida Statutes. The Florida Association of Home Health Agencies (FAHHA) is an organization formed in 1975 to represent the interests of home health care agencies in Florida. Its members consist of seventy (70) licensed home health care agencies in Florida. As of 1981, there were approximately 144 home health agencies licensed in Florida. The membership of the FAHHA fear that if the challenged rule were invalidated, there would be a proliferation of other new home health agencies into the markets served by association members. This, it is felt, would redistribute existing patient censuses and result in increased costs per patient. Gulf Coast Home Health Services, Inc. is a private, for-profit organization operating a home health care agency in Hillsborough County. It provides medical and other therapeutic services to patients in their homes as ordered by the patient's physician. Such services are provided under a variety of programs, including Medicare, Medicaid, private pay and third-party private insurance carriers. Its Administrator believes that the challenged rule helps to keep costs from escalating and that the rule's invalidation would have a negative economic impact upon his agency. Effective July 1, 1977, the Florida Statutes were amended to require a certificate of need as one of the prerequisites for licensure of a new home health agency. Emergency rules were promulgated by HRS to include proposed new home health agencies in the certificate of need program and to establish standards against which applications for certificate of need for new home health agencies could be judged. Emergency Rule 10-ER77-12 amended Rule 10-5.11(14), Florida Administrative Code, by setting forth a formula methodology for determining, on a county by county basis, the number of home health agencies necessary to meet the needs of the population. The Emergency Rule further stated that mitigating and extenuating circumstances could be considered in approving a certificate of need for a new home health agency even though the formula methodology of need determination did not clearly indicate need. Three examples of mitigating and extenuating circumstances were provided in the Emergency Rule, but they were not stated to be all-inclusive. In the summer of 1977, HRS began the process of developing a permanent rule containing criteria upon which certificate of need determinations for home health agencies would be based. There ensued exchanges of correspondence, discussions, meetings and a workshop among representatives of the Department of HRS, local health systems agencies, individual home health agencies and representatives of FAHHA to discuss what type of regulation would be most appropriate. One of the prime concerns at the workshop was the proliferation of home health agencies and the stabilization of the industry. As indicated by a majority vote or a show of hands of the attendees at the workshop, it was the consensus that the formula methodology for determining need, as set forth in the Emergency Rule, should be deleted and substituted with a "rule of 300." As finally adopted by HRS in 1977, Rule 10-5.11(14) provided that a certificate of need for a proposed new home health agency or subunit could not be issued until the daily census of the existing home health agencies or subunits providing services within the same service area reached an average of 300 patients, in the aggregate, for the immediate preceding calendar quarter unless need could be demonstrated by application of the three mitigating and extenuating circumstances listed in subparagraph (b) of the Rule. The three circumstances listed included documented population variances, documentation that the population of the proposed service area is being denied access to home health care services in that existing agencies are unable to provide services to all persons in need of home health care, and documentation that approval of the proposed agency would foster cost containment for all providers in the area. As to the numerical figure of 300, the rule, as originally adopted in 1977, meant that if the total average number of patients being serviced in a particular health service area by all existing home health agencies exceeded 300 patients on a daily basis, then a need was indicated for a new home health agency. For example, if there were three agencies in a given area with patient censuses of 401, 400 and 100, the average would exceed 300 and a need would be indicated. The "rule of 300" was suggested and proposed for adoption by representatives from the FAHHA. The number 300 was selected by the Association for the average "based upon the experience of various home health providers in the state. It's the consensus of the association's members that an agency operates with optimum administrative efficiency up to a patient level of approximately 300. As the census begins to climb to any significant degree beyond the 300 level, administrative efficiency declines. In conclusion, the association urges the adoption of the 300-average-patient-census rule. It is fair to the HSA's because it allows them to control unwarranted growth with a minimum of administrative difficulty. It is fair to the agencies because it assures them of the potential for an adequate patient census while maintaining their flexibility to have a larger or smaller census. 1/ The representatives from the FAHHA and private existing home health agencies felt that the rationale for the "rule of 300" was to afford the industry a chance to recover from rising costs resulting from the proliferation of new home health agencies. It was believed that traditional formula-based methodologies for need determinations would not work because of the ease of expansion of services and service areas and because the data base necessary for the formula methodology was not available. According to an FAHHA witness, the 1977 "rule of 300 came about due to a lack of successful alternatives." (TR. 329). The HRS representative in charge of drafting the 1977 rule admitted that, at that point in time, "no one could make a decision about whether or not the rule of 300 would be good, bad or indifferent. . ." (TR. 35). No empirical data, statistical analysis or studies were considered by HRS to illustrate that the "rule of 300" as adopted in 1977 was justified. Rule 10-5.11(14) was amended in 1979 to its present form, and this is the rule which is being challenged in this proceeding. No reason or rationale for the amendment was provided by witnesses for HRS or the intervenors or by any documentary evidence adduced at the hearing. Notice of intent to amend many portions of Chapter 10-5, Florida Administrative Code, was published in the Florida Administrative Weekly. The notice provided as follows: "PURPOSE AND EFFECT:" To amend Rule 10-5 for administration of the 'Health Facilities and Health Services Planning Act' in compliance with legislative intent and mandate, to eliminate references to the Section 1122 program which has been terminated in Florida, and to adopt health planning guidelines developed by HEW. "SUMMARY OF RULE:" These amendments will provide administrative rules under which the Certificate of Need program will be administered in compliance with state and federal requirements." No specific reference to Rule 10-5.11(14) or home health agencies was provided in the notice filed in the Florida Administrative Weekly. No specific reference to home health agencies or the "rule of 300" was provided in the HRS detailed statement of facts and circumstances justifying the proposed rules, the HRS statement of purpose or effect, the HRS summary of the rule or the HRS economic impact statement, as filed with the Joint Administrative Procedures Committee or the Secretary of State. Copies of the proposed amendment were sent to a representative of FAHHA and to existing home health care agencies. The 1979 amendment to Rule 10-5.11(14), Florida Administrative Code, made substantial changes to the manner in which new home health agencies' applications for a certificate of need were to be evaluated. The "rule of 300" was no longer to be applied as an average figure for all existing home health agencies or subunits, in the aggregate. Instead, the amendment required that a certificate of need shall not be issued until the daily census of each existing agency within the service area has reached an average of 300 patients for the immediate preceding calendar quarter, unless need could be demonstrated by application of the mitigating and extenuating circumstances listed in the amended rule. While the former 1977 rule listed three mitigating and extenuating circumstances which "may be considered" even though application of the 300 figure did not indicate need, the 1979 amendment provided only two circumstances which "must be met" before the Department could issue a certificate of need in the event that application of the "rule of 300" did not indicate need. In its entirety, the 1979 amendment to Rule 10-5.11(14) provides as follows: "(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 needs 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." Home health agencies in existence in 1977 were not required to meet the "rule of 300," but rather were grandfathered. No applicant for a certificate of need for a home health agency from the effective date of the 1977 "rule of 300" to the present has been able to satisfy the numerical component of the rule and no applicant has ever satisfied the mitigating or extenuating circumstance relating to the fostering of cost containment "for all providers in the health service area." Indeed, there was great confusion as to the meaning of "all providers" on the part of those responsible for enforcing and administering the certificate of need program within HRS. Between 1977 and 1979, four applicants were able to satisfy the other mitigating or extenuating circumstance regarding accessibility by demonstrating that the existing home health agencies were unwilling to service indigent or Medicaid patients, whom the applicants promised to serve. A survey of 100 home health agencies in Florida revealed that only six of the 100 had an average active census greater than 300 during the second quarter of 1980. A home health agency provides health and medical services and supplies to individuals in the individual's own home. Such services include part-time or intermittent nursing care, medical social services, nutritional guidance, physical, occupational or speech therapy and homemaker services. While an agency may not provide skilled nursing or medical services to a patient without a physician's order, the spectrum of services provided by any particular agency is a matter of choice. Inasmuch as patients are visited and treated in their own place of residence, the home health care business in not capital intensive. In terms of equipment and facilities, the initial capitalization of a home health care agency is not very high and the costs are variable and adjustable as compared with other health care facilities. Since there are low fixed costs involved in operating a home health agency, economies of scale are generally not expected. An agency may expand its services and its service area with relatively little expense. Rule 10-5.11(14), as amended, does not provide for a consideration of the level of care or the quality of care being offered by the existing facilities or by the applicant for a new facility. It does not measure the efficiency of existing agencies with respect to the size or level of services offered. Given the facts that the "rule of 300" does not purport to measure or quantify the number of patients needing home health care or the quality, size or scope of services offered by existing agencies, the rule does not even provide an effective measure of utilization of existing agencies. It does not require consideration of the financial feasibility of the applicant's proposal. The rule does not consider principles of cost containment for the public, as opposed to other providers in the area. While the rule does not prohibit a consideration of these factors if the 300 figure is met, it does, on its face, preclude the approval of a new home health agency when the 300 figure is not met, absent the two "mitigating or extenuating circumstances" relating to access and cost containment for other providers.
The Issue Whether the applications for certificates of need to establish Medicare-certified home health agencies filed by Aaction Home Health Care, Inc. (Aaction) and Nursing Unlimited 2000, Inc. (Nursing Unlimited), on balance, satisfy the applicable review criteria so as to entitle either or both to award of a certificate of need.
Findings Of Fact The Applicants Nursing Unlimited 2000, Inc., was formed for the purpose of obtaining a certificate of need for a Medicare certified home health agency, and to serve as the entity into which would be merged certain existing licensed non-Medicare certified home health agencies in Dade County. Aida Salazar-Rebull is a co- founder, director, officer, and shareholder of Nursing Unlimited, and she currently owns, operates, and serves as the administrator of LTC Professional Consultants, Inc. (LTC), a licensed non- Medicare certified home health agency in Dade County. Ms. Salazar will serve as Nursing Unlimited’s administrator, and after CON approval will merge LTC into Nursing Unlimited and continue its current operations. Elia Murias is also a co- founder, director, and shareholder of Nursing Unlimited, and she currently owns and operates Nursing Love & Care, a licensed non- Medicare certified home health agency in Dade County. Upon CON approval, Ms. Murias, a registered nurse, will serve as Nursing Unlimited’s director of nursing, and will merge the operations of Nursing Love & Care into Nursing Unlimited. For the past 12 years LTC has provided home health care services directly to Medicaid and private pay patients, and to Medicare patients through contracts with Medicare certified agencies. LTC is accredited by the Joint Commission on Accreditation of Health Care Organizations (JCAHO), which accreditation will be transferred to Nursing Unlimited. Since its inception, the number of patients served by LTC has increased every year. LTC enjoys an excellent reputation among local health care providers and patients. LTC’s continual growth over the past ten years, coupled with the letters of support in the application, demonstrate a record of providing high quality care to underserved communities and population subgroups. LTC currently provides home health services in northwest, west central, central, and east central Dade County, and as Nursing Unlimited will serve the same geographic area. LTC places particular emphasis on its service to underserved population subgroups such as Hispanics, Haitians, Blacks, low-income clients, and HIV-positive patients. Nursing Unlimited will continue to serve those population subgroups. Although approximately 53 percent of the Dade County population is Latin, only two of the over 30 existing Medicare certified home health agencies are Latin owned and operated. LTC and Nursing Love & Care are Latin owned and operated, as would be Nursing Unlimited. The entire staff of LTC is bilingual, and some staff are multi-lingual, as would be the staff of Nursing Unlimited. Approval of Nursing Unlimited's application would enhance the availability and accessibility of services to the Latin community. Aaction Home Health Care, Inc. (Aaction), is an existing home health care agency providing services in Dade County since approximately 1988. Like Nursing Unlimited, Aaction's target population is the Hispanic community of Miami and Hialeah. The geographical area which Aaction now serves and will continue to serve at an enhanced level, if approved, is a low- income, high crime and low education area. Aaction's success in those difficult areas is based on its ability to recruit and retain indigenous staff who know the problems. Over 30 letters of recommendation and support, mostly from Hispanic physicians, are attached to Aactions's application and attest to the agency's past and anticipated future service in the community. Aaction has applied for JCAHO accreditation. Need Analysis The review of CON applications must be in context with the criteria set forth in Section 408.035(1), Florida Statutes. Pursuant to the parties’ prehearing stipulation, both applicants satisfy all of the applicable review criteria, except this: The availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of like and existing home health care services in District 11. Section 408.035(1)(b), Florida Statutes. Aaction and Nursing Unlimited both contend there is a need in District 11 for at least two new or additional Medicare certified home health agencies. Each asserts that both CON applications can and should be approved; their respective applications are not mutually exclusive, and accordingly, they need not be comparatively reviewed with one another. The focus of the sole remaining criterion at issue, Subsection 408.035(1)(b), is on existing home health care providers. As acknowledged by AHCA in its State Agency Action Report (SAAR), in pure numbers the instant CON application proposals would increase availability and access in District 11. There is no AHCA rule formula or methodology to determine a numeric need, nor is there a fixed need pool applicable to this proceeding. In the absence of an Agency numeric need rule, the applicants each proposed reasonable need methodologies within their applications. AHCA did not propose any need methodology at hearing. AHCA's former home health agency numeric need methodology rule was invalidated because it was anti-competitive, understated potential actual need, and failed to consider health care economics, efficiency and cost containment. Principal Nursing v. AHCA, DOAH No. 93-5711RX (Final Order January 26, 1994); AHCA v. Principal Nursing Services, Inc., 650 So. 2d 1113 (Fla. 1st DCA 1995) (Affirmed the Final Order as to the need methodology, but reversed as to other portions of the rule unrelated to the issues here). Nursing Unlimited, through Michael Schwartz, applied the invalidated need methodology to demonstrate that even under that excessively conservative approach, at least 2 additional home health agencies are needed in District 11. When the applications were filed the most current home health visit utilization data was for calendar year 1994. The number of visits in 1994 was divided by the age 65+ population to determine a use rate, i.e., the number of home health visits per 100,000 population. The 1994 use rate was applied to the projected age 65+ population growth for the three horizon years of 1995-1997, a projection of 102,039 more patient visits in 1997 than there were in 1994, based on population growth alone. Next, Mr. Schwartz determined a cost-efficient agency size (CEAS) by determining from a review of District 11 existing home health agencies the point at which the average cost per home health visit was less than the statewide average cost per visit. In this case, the result was a CEAS of 34,973, which was divided into the number of projected new visits in the horizon year 1997 resulting from population growth alone, which calculation shows a numeric need for three new home health agencies in District 11. At the time the CON application was filed there was one approved, but not yet licensed home health agency, which was subtracted by the applicant from the net need figure, thus resulting in a net need for two new agencies. The recent historical data shows that home health care visits have been on the increase, both in terms of visits per 100,000 population and in terms of visits per patient. The amount of time spent by patients in the hospital is decreasing, which translates into increased need by patients for visits from home health agencies. The need for home health will continue to increase because it is a cost-effective alternative to nursing home placement and hospital care. Home health care services are less costly than care received in hospitals, in nursing homes, or on an outpatient basis. Thus, allowing greater access to home health services should reduce the overall cost of health care to payors, including Medicare. To address this trend Michael Schwartz offered a realistic, yet still conservative, numeric need projection which assumes an increased use rate beyond that which is based on population increase alone. Mr. Schwartz considered the cumulative increase in visits that occurred over the three-year period 1991-1994 and projected this forward to the horizon year of 1997. Although federal Health Care Finance Agency (HCFA) data suggests that visits will grow nationally at seven percent per year. Mr. Schwartz assumed only a seven percent increase over three years, which resulted in a growth of approximately 180,124 visits by 1997, and which divided by the CEAS yields a need for 5.2 new agencies. In hindsight, the conservative nature of this projection is apparent from a review of utilization data which has become available since the filing of the CON application. For example, rather than a growth in visits of 180,000 over the period 1995-1997, there was an actual increase of over 410,000 visits in 1995 and 1996 alone. Utilization data for 1997 is not yet available. Aaction presented three separate need methodologies in its application prepared by Mark Richardson. The first two methodologies applied a static use rate based on visits in 1994 to the projected population to determine total visits at the planning horizon. Recognizing that cost efficiencies maximize at an approximate range between 30,000 and 90,000 visits per year, Aaction divided the total projected visits by a conservative CEAS of 50,000. These methodologies yielded a need in District 11 for two additional home health agencies at the planning horizon. Using a CEAS of 30,000 visits would yield a need for three agencies instead of two. AHCA has recently determined that static use rates are inappropriate. (Allstar Care, Inc., etc. vs. AHCA, DOAH No. 96-4064, Final Order November 4, 1997). Nonetheless, application of over-conservative methodologies in this case can help counter the agency's unsubstantiated assertion that many visits are fraudulent or unnecessary. In its third methodology, Aaction assumed more realistically that home health use rates would continue to increase as suggested by historic data. In order not to overstate the potential growth rate, Aaction used a rate equal to one-half of the 1993-94 actual growth rate. Utilizing a 50,000 visit CEAS, this methodology yields a need of 7 to 9 new home health agencies in District 11 at the planning horizon. Using a 30,000 visit CEAS yields a net need for over 15 new home health agencies. Recalculating the need formulas by application of the now available 1995 and 1996 data, using a growth rate at 50 percent of the actual rate, and a CEAS of 50,000 visits, results in a need for 7 to 8 new agencies. If the static use rate were applied, the need would be 5 to 6 new agencies. Application of Aaction’s initial need methodologies with a static use rate based on 1996 utilization data yields a need for over 5 new agencies when a 50,000 visit CEAS is used. If a 30,000 visit CEAS is utilized, these methodologies yield a net need for 9 new home health agencies. Applying Aaction’s third methodology (i.e., utilization projected to increase at 50 percent of the actual increase between 1995 and 1996) yields a net need for over 7 or over 12 new agencies, depending on whether a 50,000 visit or 30,000 visit CEAS is applied. There are other indications of need for additional home health agencies in District 11. For example, a review of 1996 utilization data reveals that District 11 has only 1.7 home health agencies per 100,000 population, which is the lowest ratio of any district in the state. The average of all districts is 2.4 home health agencies per 100,000 population. Both applicants proposed fair and reasonable need methodologies which demonstrate a need in District 11 for at least 2 additional home health agencies, and potentially more. There is, therefore, a need for at least 2 more Medicare- certified home health agencies in District 11. Approval of both applications will increase the availability and accessibility of home health services in the proposed service areas within Dade County. Home health services are typically delivered in close proximity to the location of the agency and providers. Nursing Unlimited’s agency location is in the center of a large Latin and Haitian population, with the nearest Medicare certified home health agency approximately 15 miles away. Aaction's commitment is to a population that is difficult to serve. Local population accessibility to the proposed home health services would be increased by approval of both applications. Medicare-certified agencies apply their own admission criteria and decide whether to accept patients, leaving some patients in need and without access to services in the applicants' service area. An informal survey directed by Michael Schwartz suggests there are existing agencies which refuse to treat AIDS patients, that do not provide services at night and on weekends, and that refuse to treat people in poverty areas. The targeted Medicare-eligible population would enjoy enhanced accessibility and availability of home health services by both applicants, if approved. The addition to the district of a Medicare-certified home health agency (Nursing Unlimited) which utilizes a JCAHO- approved centralized case management system would also tend to enhance the availability, accessibility, and adequacy of services provided in the district. When non-Medicare-certified agencies receive a request to care for Medicare patients, the request must be forwarded to a Medicare-certified entity, which in turn will contact the patient. The non-Medicare agency may then be authorized under subcontract to contact and serve the patient and to bill the Medicare-certified agency for its services. In turn, the Medicare-certified agency will add on its overhead and forward a higher bill to Medicare. This process also results in delays in patient treatment. Approval of these applications would likely result in better patient care, without delays, and at lower costs. AHCA has determined that eliminating such subcontract arrangements will eliminate an unnecessary level of administrative costs. AHCA also discourages subcontract arrangements which remove direct control of patient care from the Medicare certified entity. See Allstar Care, supra. District 11 home health visits increased by 410,000 visits in 1995 and 1996. A projection of 600,000 new visits during 1995 through 1997 is reasonable. Nursing Unlimited and Aaction each project approximately 25,000 visits during their second year of operation. Approval of these applicants would not adversely impact the utilization of existing home health providers in the district. Both applicants here will specifically enhance access by the needy Hispanic population. AHCA offered no competent evidence to contradict the conclusions of the applicants' experts, nor did it effectively challenge the accuracy, validity, or reliability of the methodologies they employed. AHCA's expert and sole witness, James McLemore, is an application review specialist who candidly admitted he has no experience in the development of need methodologies but relies instead on the expertise of health care planners such as Mr. Schwartz or Mr. Richardson. Mr. McLemore's anecdotal testimony regarding fraudulent or phantom visits, and AHCA's concern that both state and federal agencies are investigating fraud in the home health care business, raise compelling licensing issues but are insufficient to defeat otherwise convincing evidence in favor of these certificates of need.
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 No. 8428 to Nursing Unlimited 2000, Inc. and CON No. 8432 to Aaction Home Health Care, Inc. DONE AND ORDERED this 22nd day of December, 1997, in Tallahassee, Leon County, Florida. MARY CLARK 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 22nd day of December, 1997. COPIES FURNISHED: Michael Manthei Broad and Cassel 1130 Broward Financial Center 500 East Broward Boulevard Fort Lauderdale, Florida 33394 Moses E. Williams Office of the General Counsel Agency for Health Care Administration Fort Knox Building 3, Suite 3400 2727 Mahan Drive Tallahassee, Florida 32308-5403 R. David Prescott Ruthledge Ecenia Underwood Purnell and Hoffman, P.A. Post Office Box 551 Tallahassee, Florida 32302-0551 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
The Issue Whether the applications for certificate of need numbers 8380, 8381, 8382 and 8383, filed by Petitioners RHA/Florida Operations, Inc., Care First, Inc., Home Health Integrated Health Services of Florida, Inc., ("IHS of Florida,") and Putnam Home Health Services, Inc., meet, on balance, the statutory and rule criteria required for approval?
Findings Of Fact Care First The Proposal Care First, the holder of a non-Medicare-certified home health agency license, was established in March of 1996. Owned by Mr. Freddie L. Franklin, Care First is the successor to another non-Medicare-certified home health agency also owned by Mr. Franklin: D. G. Anthony Home Health Agency ("D. G. Anthony"). Established in May of 1995, D. G. Anthony provided over 10,000 visits in its first 10 months of operation mostly in Leon and Wakulla Counties, pursuant to a contract with Calhoun-Liberty Hospital Association, Inc. Very few of the 10,000 patients were referred to D. G. Anthony by Calhoun-Liberty; they became D. G. Anthony's patients through community-based networks, including physicians, created through the efforts of Mr. Franklin and D. G. Anthony itself. D. G. Anthony was dissolved in 1996. Both its patient census and its staff of 45 were absorbed by Care First. D. G. Anthony's contract with Calhoun-Liberty was substantially assumed by Care First so that it provided service to Medicare patients as Calhoun-Liberty's subcontractor. From the point of view of the federal government, the Medicare patients served by Care First were Calhoun-Liberty's patients, even those who had not been referred to Care First by Calhoun Liberty and who had been referred from other community sources. Care First, therefore, was simply a sub- contractor providing the services on Calhoun-Liberty's behalf. The contract was terminated effective December 1, 1996. Calhoun-Liberty was free to terminate Care First with 30 days notice, a peril that motivated Mr. Franklin to seek the CON applied for in this proceeding. With the termination of the contract, Care First ceased serving Medicare patients, "because Mr. Franklin did not want to enter into another subcontractor arrangement because of all the issues and problems," (Tr. 934,) associated with such an arrangement. Mr. Franklin is involved with nursing homes as the administrator at Miracle Hill Nursing Home in Tallahassee. He is an owner of Wakulla Manor Nursing Home in Wakulla County, and he owns a 24 bed CLF, Greenlin Villa, also in Wakulla County. Miracle Hill has the highest Medicaid utilization of any nursing home in District 2. Both Miracle Hill and Wakulla Manor are superior rated facilities. On the strength of Mr. Franklin's extensive experience with community-based organizations and health care services, as well as Care First's succession to D. G. Anthony and other historical information and data. Care First decided to proceed with its application. In the application, Care First proposes to establish a home health agency that, at first, will serve primarily Franklin, Gadsden, Jefferson, Leon, Liberty and Wakulla Counties. It plans to expand into Madison and Taylor Counties in its second year of operation. Five of these eight counties have high levels of poverty; six of the eight are very rural, with the population spread widely throughout the county. Ninety-six percent of Care First's patients are over age Minority owned, approximately 65% of the patients are members of minorities. Many of the patients live in rural areas and are Medicaid recipients or are uninsured low income persons who do not qualify for Medicaid but cannot afford home health care. Since it will be serving the same patient base as a Medicare-certified agency, Care First has committed to the provision of 7% of its visits to Medicaid patients and 1% of its visits to patients requiring charity/uncompensated care. Care First projects 18,080 visits in its first year and 29,070 in its second year. Care First will promote efficiency through the use of a case management approach. Each patient will be assigned a case manager who will act as the patient advocate to provide care required and to identify and assist the patient with access to other "quality of life" enhancing services. Care First proposes an appropriate mix of services, including skilled nursing, physical therapy, speech and language therapy, occupational therapy, home health aide services and social services. Care First estimates its total project cost at $25,808. Of this amount, $2,000 is indicated as "start-up cost", with nothing allocated to salaries. Care First indicates no "capital projects" other than its proposal for the home health agency in District 2. Care First's proposal would be funded from a $60,000 bank line of credit. Projected Utilization Potential patients will be able to gain access to Care First through several avenues, including physician referral, hospital referral, nursing home discharge, assisted living referrals from community agencies and organizations such as Big Bend Hospice and through private referral. In addition, there are several natural linkages to the community for Care First. Wakulla Manor and Miracle nursing facilities offer Care First's services to discharged residents in need. Very often, residents and families choose Mr. Franklin's agency because they are familiar with him, staff or the quality of care provided. Residents of Greenlin Villa, owned by Mr. Franklin, frequently chose Care First when in need of home health agency services. Mr. Franklin's civic, church, and community involvement is impressive. He is president of the Florida Health Care Association, chairman of the board of the Tallahassee Urban League, superintendent of the Wakulla County Union Church Group, and serves on the advisory board for the Allied Health Department for Florida A&M University. In the past, he has served on the Board of Trustees of Tallahassee Community College. He was accepted as an expert in long-term care administration in this proceeding based in part on his service on the Governor's Long Term Care Commission. Miracle Hill has held a "Superior" licensure rating for the last ten consecutive years. It is the highest rating awarded by the AHCA licensure office and is intended to blazon the high quality of care provided by the facility. Although reported through Calhoun-Liberty, very few of D. Anthony's and Care First's past referrals have been generated through that affiliation. Rather, they have come through community contacts and getting the referrals from "talking with physicians," (Tr. 922), in Tallahassee and the surrounding areas, many of whom Mr. Franklin has gotten to know through his post as Administrator of Miracle Hill Nursing Home. By far, it is through physician referrals that Care First receives most of its patients. Care First's physician referral list includes 47 doctors who referred patients to D. G. Anthony since May, 1995. These doctors practice in urban areas and some have rural clinic offices which they staff on certain days of the week. Physicians are willing to refer patients to Care First because of the quality of care which has been provided by Care First, as well as the reputation of its owners. The Care First application included letters of support from eight physicians who have referred patients to Care First in the past and state that they will continue to support Care First with referrals in the future. Among the letters included are those from Dr. Earl Britt, a practitioner of internal medicine and cardiology in Tallahassee, and Dr. Joseph Webster, who practices internal medicine and gastroenterolgy in Tallahassee. Many of the patients of these two physicians are elderly. Dr. Britt's patients often have chronic hypertension or heart disease, are diabetic or suffer strokes. These two physicians provided over half the total number of patient referrals to D.B. Anthony and Care First. Dr. Britt and Dr. Webster established through testimony that Freddie Franklin and Care First have an excellent reputation for provision of quality of care and enjoy significant support among physicians within the service area. Moreover, Dr. Britt, although based in Tallahassee, stressed the importance of Care First's proven ability to provide home health services in the rural setting both from the standpoint of understanding the needs of the rural patient and from being able to travel over rural terrain in order to deliver services. (Tr. 1151, 1152, 1154). Approximately 11,500 visits were performed by D. G. Anthony staff from the period of May 1995, through April 1996, before they became the staff of Care First. Since the agency has established a presence in the district and has physician and other referral mechanisms in place, it is reasonable to project that Care First will continue to grow and will experience between 18,000 and 20,000 visits in its first year and 28,000 to 31,000 visits in year two as a Medicare-certified home health agency. These projections stem from the historical and very recent monthly growth of D. G. Anthony, as well as demand it is experiencing from Franklin and Jefferson Counties, two counties it does not serve regularly at present but plans to serve regularly in the future. The reasonableness of Care First's projections is bolstered by the conservative number of visits per patient the projections assume, 35, when typically Medicare-certified agencies average at least 35 visits and as many as 60 visits per patient. Care First's utilization projections are reasonable. It enjoys an excellent reputation for quality of care and ability to deliver services. Together with its predecessor, D. G. Anthony, it has a proven track record and has benefited from a referral network that remains in place. These factors, together with the conservative assumptions upon which its projected utilization is based demonstrate that its projected utilization is reasonable. Financial Feasibility of Care First The total project cost for the Care First agency is projected to be $25,808. The majority of the costs are reasonable for this type of health care project. The majority of the project development costs, the application fee and much of the cost of the consultant and legal fees, have already been paid by Care First. Care First's Schedule 2 was prepared in conformance with the requirements of the agency and accurately lists all anticipated capital projects of Care First. The necessary funding for the Care First project will come from Care First's existing $60,000 line of credit with Premier Bank, in Tallahassee. This method of funding the project is reasonable, appropriate, and adequate. Care First has demonstrated the short term financial feasibility of its project. Care First's schedule 6 presents the anticipated staffing requirements for its home health agency. The staffing projections are based upon the historical experience of D. G. Anthony and Care First, taking into consideration the projected start-up and utilization of the agency. The projected salaries are based upon current wages being paid to Care First employees, adjusted for future inflation. Care First's schedule 6 assumptions and projections are reasonable, and adequate for the provision of high quality care. The staffing proposed by Care First is sufficient to provide an RN or an LPN and an aide in each of the eight counties Care First proposes to serve in District 2. Care First's schedule 7 includes the payor mix assumptions and projected revenue for the first two years of operation. Medicare reimburses for home health agency services based upon the allowable cost for providing services, with certain caps. The Care First revenues by payor type were based upon the historical experience of D. G. Anthony and Care First, as well as the preparation of an actual Medicare cost report. The Care First payor mix assumptions and revenue assumptions are reasonable. Care First's projection of operating expenses in Schedule 8A is also based on the historical experience of D. G. Anthony and Care First, as modified for the mix of services to be offered and the projected staffing requirements. The use of historical data to project future expenses adds credibility to the projections. Care First's projected expenses for the project are reasonable. The Care First application presents a reasonable projection of the revenues and expenses likely to be experienced by the project. Care First has reasonably projected a profit of $8,315 for the first two year of operation. Care First's proposal is financially feasible in the long term. As the result of its community contacts, Care First has been offered the use of donated office space in Franklin, Jefferson, Wakulla, and Gadsden counties. The use of donated office space will decrease the cost of establishing a physical presence and providing services in those counties since Care First will not have a lease cost for a business office and a place to keep supplies. Quality of Care Through the experience of D. G. Anthony, Care First has identified the particular needs of the community it served. This experience has been carried over into Care First's provision of services. In the 9 months of Care First's existence at the time of hearing, it provided quality of care. Its predecessor, D. G. Anthony, also provided quality of care. While Care First's experience is relatively limited, there is no reason to expect, based on the experience of both Care First and its predecessor D. G. Anthony, that quality of care will not continue should its application be granted. IHS of Florida The Application IHS of Florida is a wholly-owned subsidiary of Integrated Health Services, Inc. ("IHS") formed for the specific purpose of filing CON applications. IHS operates other home health agencies under other subsidiary names. Pernille Ostberg is a senior vice president of the Eastern Home Care Division of Symphony Home Care Services, Integrated Health Services. In that capacity she oversees nearly 195 operations in six states, including Florida. Her operations include home health agencies, durable and medical equipment distributions, and infusion therapy offered by pharmacists. Under Ms. Ostberg's guidance, IHS has grown to its current roster of 195 agencies in only three years, from a beginning of only five agencies. IHS first acquired Central Park Lodges, primarily a nursing home company which also owned five home health agencies. Once these agencies became Medicare certified, IHS made a corporate decision to acquire additional Medicare certified home health agencies. Beginning approximately three years ago, IHS undertook a series of acquisitions which included Central Health Services, Care Team, ProCare/ProMed, and Partners Home Health. More recently, IHS has acquired the Signature Home Health and Century Home Health Companies. And, immediately prior to the final hearing in this matter, IHS acquired First American Home Health Care, making IHS the fourth largest provider of home health services in America. Of all the home health agencies overseen by IHS, 95% are Medicare certified, and 62-63 are located in Florida. IHS now has a presence in all districts except District 1 and 2. IHS personnel also have extensive experience in starting up new home health agencies. IHS personnel have opened over 40 locations across the United States. IHS employees have extensive experience bringing new home health agencies through successful surveys by the Joint Commission on the Accreditation of Hospital Organizations ("JCAHO") recommendations. Of 18 branches personally taken through initial survey by IHS's Pernille Ostberg, none were recommended to change their operations and none were cited for a deficiency. IHS has recently opened, licensed, and certified new home health agencies in AHCA Service District 5, 6, and 10. They have also received licensure in District 7, 8, and 11. Based on the extensive expensive of IHS personnel, a start up home health agency typically experiences 8,000 - 15,000 visits per first year. Opening a new program requires two months for licensure. It will require a registered nurse for three months to make certain all manuals are in place and that quality personnel are recruited. After achieving licensure, one must wait for a certification survey, which may take as long as six months. The three IHS home health agencies that became certified recently have experienced 200 visits in the first month, a good sign of growth. IHS' umbrella organization for home health organizations is Symphony. Most of their home health companies retained their original names. Other IHS home health companies include ProCare, Central Health Services, Partners Home Health, Nurse Registry, and First American. IHS of Florida has applied for applications in other districts. This applicant filed applications in District 7, 8 and 10 and each were approved. IHS of Florida's CON application number 8382 was prepared by Patti Greenberg with the significant input of IHS and IHS of Florida's operational experts. Ms. Greenberg has prepared 75-100 CON applications, 20-25 of which sought approval for Medicare Certified Home Health Agencies. Each of these prior applications had been approved or otherwise reached settlement before litigation. The Proposed Project Once the needs analysis was complete, IHS examined geographic issues within the 14 county district. IHS examined where the populations required home health agencies and what niche of the market IHS could expect to achieve. Projected visits were determined by examining month by month, how this agency would grow. This projected utilization was subdivided among sub-visit types. Existing IHS home health agencies visit mix (skilled nursing as opposed to home health aide or therapy visits) was used to estimate skill type of the projected total volume. The projected utilization was also subdivided by payor class. This payor class projection was derived specifically for District 2, its poverty levels and its managed care penetration. In the aggregate, IHS projects 7,650 visits in year one and 17,100 visits in year two. This projection is reasonable and achievable. Witnesses for the Agency agreed that IHS of Florida's projected number of visits was "definitely attainable". Past and Proposed Service to Medicaid Patients and for Medically Indigent The payor class analysis allowed IHS to conclude it should condition its approval of its application under the performance of 5% Medicaid and 1% charity care. The balance of the population served by an IHS Medicare Certified Home Health agency would be covered by Medicare. The condition is important as it is a requirement which, if not achieved, will subject IHS of Florida to fines and penalties by the agency. Improved Accessibility The applicant will improve the efficacy, appropriateness, accessibility, effectiveness and efficiency of home health services in District 2 if approved. IHS of Florida will provide good quality of care, should its application be granted. Quality of Care Through competitive forces, the applicant's approval will also improve the quality of care offered by home health agencies in District 2. The approval of IHS of Florida's application will also comply with the need evidenced by the extent of utilization of like and existing services in District 2. Economies from Joint Operations Certain economies derived from the operation of joint projects are achieved by IHS of Florida's proposal. IHS has a home office and corporate umbrella which oversees all of its operations for home health services. This master office offers economies of sale by sharing resources across a wide array of home health agencies in Florida and other states. Thus, the incremental expense for corporate overhead is reduced as compared to a free-standing home health agency. Additionally, this national oversight provides better economies to provide the most recent policies and procedures, billing systems, and other systems of business operation. Financial Feasibility IHS of Florida has the resources to accomplish the proposed project. As demonstrated on schedule 1, and schedule 3 of IHS exhibit 1, the budget for the project is only $144,000. This budget includes all appropriate equipment for both the initial and satellite offices. Budgeted amounts include all required lease expenses, equipment costs and even start-up costs such as salaries for the recruitment of training and staff prior to opening. In total, $52,000 of pre-opening expenses are projected, which is reasonable. IHS of Florida filed applications for other home health agency start-ups in three different districts. The applicant had more than $180,000 in cash on hand and an additional $226,000 assured from a commitment letter from IHS which was also contained in the application. A letter of commitment from Mark Levine, a director and executive vice president of IHS, indicated IHS will provide $250,000 in capital for this specific project. Additionally, IHS will provide up to $1 million in working capital loan to assure no cash flow problems ever arise. A similar letter of commitment appears in each of the CON applications which IHS of Florida has filed. IHS has committed to fund each of the CON applications applied for by IHS of Florida. Each of these letters of commitment for the various CON applications sought by this applicant are on file with the AHCA. In total, the applicant projects $600,000 in capital commitments assured. IHS' balance sheet, reveals access to $60 million in cash and cash equivalent. The record clearly demonstrates an ability of IHS to fund all capital contributions required by the applicant. The current assets of IHS approximate $240 million. In addition to having cash in the bank, IHS is a growing concern and is, in fact, a Fortune 500 company that is publicly traded on the New York Stock Exchange. IHS generates revenues which exceed its annual expenses. In the last year, IHS derived $30 million more than it experienced in expenses. The application is financially feasible in the short- term. IHS' application is also feasible in the long-term. IHS of Florida's utilization projections are reasonable. Budgeted staffing and salaries are reasonable. The cost limit calculation and reimbursement calculation by payor source, which is provided in great detail in Schedule 5 of IHS of Florida's application, is reasonable. Projected expenses associated with this project were reasonably calculated based on the actual experience of other IHS Home Health operations. The reasonableness of these costs are also demonstrated when compared with the cost per visit by existing agencies in District 2. In fact, IHS of Florida predicted it would be a lower cost provider than the expected cost of existing agencies at the time IHS of Florida's operations would begin. IHS of Florida's proposal will have a healthy, competitive effect on the cost of providing services by other providers. Putnam The Proposal Putnam proposes to establish a Medicare-certified home health agency with its primary office located in Bay County. Bay County was selected as the primary office based upon the locations of existing and approved agencies in District 2, the aggregate utilization of each, and the number of individuals aged 65 and over distributed among the existing District 2 counties and agencies. Mr. Alan Anderson is Putnam's sole stockholder, Director, and President. Under the ownership and administration of Alan Anderson, Putnam has provided Medicare-certified home health services in AHCA District 3 continuously since 1986. Mr. Anderson is also the sole owner, director, and president of Anderson Home Health, Inc., a Medicare-certified home health agency serving AHCA District 4 since 1992. Anderson Home Health's CON was obtained by Putnam through the same process undertaken by the prospective applicants in this proceeding. Putnam's District 3 agency has successfully served District 3 residents since 1986 at first through its Palatka office, then growing to its current size of four offices. In District 4, Anderson Home Health, Inc. has also experienced successful operations having grown from its principal office in Duval County to a total of four offices. Putnam's District 3 home health agency began with the original office located in Palatka, followed by offices opened in Gainesville, Ocala and Crystal River. Anderson Home Health, Inc.'s District 4 operation began with the original office located in Jacksonville; the second office was opened in Daytona Beach, followed by the opening of the third office in Orange Park; and the fourth office was opened in Macclenny. Putnam's District 3 agency is JCAHO accredited "with commendation." As part of CON application No. 8383, Putnam has agreed to certain conditions upon award. First, the proposed project will locate its primary office in Bay County. Putnam also conditions its approval with the provision that 0.25% of its admissions will be persons infected with the HIV virus. Four percent of its patients will be Medicaid or indigent patients. Finally, Putnam has conditioned its approval upon the provision of various special programs such as high tech home health services, a volunteer program, and the establishment of a rural health care clinic. History or Commitment to Provide Services to Medicaid and Indigent Patients For Medicare reimbursement purposes, Putnam proposes to maintain a Medicare-only agency and private sister agency which provides services to non-Medicare patients. The private sister agency will provide service to the Medicaid and indigent patients. The costs of providing services to these non-paying or partial paying patients will be absorbed by the agency as a contribution to the community. The establishment of a private sister agency to handle the non-Medicare patients is common in the home health industry. As a condition in the application, Putnam will accept up to 3.0% Medicaid patients. Although it stated in its application that it would accept between .5%-1.0% indigent patients, its conditioning of the application on 4.0% Medicaid and indigent patients would necessitate that it accept at least 1.0% indigent (if not more, should the Medicaid patients fall below 3%) in order to meet the 4.0% Medicaid and indigent care condition. The percentages proposed by Putnam are consistent with the statewide average (approximately 95% Medicare) and the District average (approximately 92.1% Medicare). Bay County's average of Medicare patients is approximately 96.4% Medicare. To meet the 4.0% Medicaid and indigent condition, Putnam's average of Medicare patients might have to be less than the Bay County average but not by much. Certainly, meeting the condition is achievable. The agency's position is that Putnam's Medicaid/indigent commitment is not a ground for denial of the application. Quality of Care Putnam has continuously owned and operated a licensed Medicare-certified home health agency in District 3 since 1986 and has been JCAHO accredited with commendation status since 1994. In an effort to continuously provide quality care, Putnam has developed a comprehensive set of policies and procedures to guide its staff, its physicians, volunteers, patients, as well as patients families. No evidence was presented to suggest that Putnam does not have a history or ability to provide quality care. Availability of Resources, Including Health Manpower, Management Personnel and Funds for Capital and Operating Expenditures Putnam has provided Medicare-certified home health service to the residents of District 3 for ten years. Putnam will be able to share its existing personnel and operations expertise with the proposed District 2 agency. Administrative, Managerial, and Operational Personnel Putnam intends to utilize existing administrative personnel in the start up and overall operation of the proposed agency. These management personnel include the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Data Processing Director, Director of Volunteers, Personnel Director. These experienced personnel will be available to provide valuable management support to the proposed agency. The proposed agency will be operated by an administrator who will report directly to Putnam's CEO, Alan Anderson. The agency's administrator will be actively involved in budget preparation, physician relations, community education, and preparation for regulatory agency surveys. The proposed agency will rely upon the demonstrated experience of key personnel in its initiation. Ms. Nora Rowsey, experienced in the start-up phases of home health agencies, will personally supervise and implement the start up phase of the proposed District 2 agency. Putnam intends to hire individuals to work within the proposed agency who already have experience in the provision of the necessary services. Current employees of Putnam's as well as contract personnel of the District 3 agency have indicated a willingness to provide services in Bay County once the application is approve. Funding and Capital Resources Putnam projects the total costs of initiating the proposed agency to be approximately $70,000. Putnam has simultaneously applied for two other Medicare-certified home health agencies, in Districts 6 and 7. Each of these projects area also projected to cost approximately $70,000. Putnam, therefore, has projected costs associated with all three projects of approximately $210,000. Additionally, there is a $10,000 contingency cost related to the District 3 offices bringing the total expenditure for all capital projects of $220,000. Putnam's application includes two letters from First Union National Bank of Florida which substantiate that there are funds on hand to finance all of Putnam's capital expenditures, including the District 2 proposed agency. As of April 18, 1996, Putnam's bank account had a twelve month average balance of $245,949.02. As of April 18, 1996 the accounts of both Putnam and Anderson Home Care Inc., had a combined twelve month average balance of $676,656.93. The evidence established that these funds exist and are available for all proposed capital projects. In the two years prior to hearing, Putnam showed sound management, significant growth, and a strong financial position. It continues to do so. In an interoffice memorandum dated May 28, 1996, from Roger L. Bell to Richard Kelly, Health Services and Facilities Consultant, Putnams' financial position was described as follows: The current ratio of .62 indicates the current assets are not adequate to cover short term liabilities. The long term debt to equity and equity to assets ratios are very weak. This, along with the negative equity make a weak financial position. The profit margin at .1% is also very weak, and raises some concern with the applicant's ability to cover operating expenses . Putnam Ex. No. 4. This criticism was answered by Putnam. The agency may not have considered certain factors applicable to a predominantly Medicare-reimbursed home health agency. Putnam's current liabilities are payable in a longer term than the receivables are collectible. Furthermore, with provision of 98% Medicare services, which is solely cost reimbursed, there remains only two percent of the operation left to make a profit. A .1% profit from the small amount of insurance and private pay patients indicated financial health. Putnam, moreover, is a viable operation because of its historical success, its knowledge of the industry, its expansion to six locations, its growth in staff, and its growth in patient visits. Putnam has the resources available to provide the necessary administrative, managerial, and operational manpower needed by the proposed home health agency. AHCA's financial criticisms are unfounded; Putnam has on hand the capital necessary for the accomplishment of the proposed project. Putnam has the experience and know-how to make the proposed project work in District 2's rural areas. Financial Feasibility Putnam has the resources to implement this project if approved. Putnam has the same capability that existed when three offices were opened during the period from April 1992 through February 1993, and the same resources when four offices were opened in 1995. In every instance, the new offices were started up with cash on hand from operation. Mr. Anderson, Putnam's President and sole shareholder and director, testified that he spends much time in the financial area of the operations. As of November 29, 1996, after deducting all accounts payable, Putnam has a cash balance of approximately $390,000. Anderson Home Health, Inc. had a balance of approximately $425,000. Mr. Anderson testified that the First Union letters in the application at pages 231 and 232 were correct and that Putnam is in even better shape now than when the letters were written. Putnam is financially feasible in the short term. AHCA contends Putnam's project is not financially feasible in the long term because the projected visits stay the same in the second year and because it does not project a profit in year two of operation. This fails to take into account Putnam's performance over the past ten years which, as the agency conceded at hearing, is an important consideration . Mr. Anderson purchased Putnam in 1986. At that time the agency had a single office in Palatka doing 4,000 visits. Following Mr. Anderson's purchase of the agency it had grown to over 55,000 visits and close to a hundred employees. After the success experienced by Mr. Anderson in Palatka, Putnam filed a CON application for District 4, with a proposed principle site in Jacksonville. The District 4 CON was approved by the agency--without any concerns for financial feasibility nor with any concerns for Putnam's cash flows. Without having any experience or referral sources in Jacksonville, Putnam began doing approximately 7,000 visits. The number of visits jumped to 45,000 in the second fiscal year, 123,000 in the third fiscal year, and as of September 30, 1996 the Jacksonville office performed 158,000 visits. Aside from the extraordinary growth experienced in the Palatka and Jacksonville offices, already discussed, Putnam has opened rural offices also doing very well. The Macclenny office in rural Baker County had over 15,000 visits in the first twelve months and is currently averaging over 1800 visits. The Crystal River office in rural Citrus County made over 12,000 visits in its first year and is currently doing approximately 1400 visits a month. Every new office opened by Putnam or Anderson Home Health since 1991 has been break even or better. Putnam has a proven track record for the successful and profitable operation of new Medicare-certified home health agencies. Putnam's project is financially feasible in the long term. Utilization Projections The application sets forth reasonable utilization projections. Based on Putnam's utilization in the past, there is no reason to believe the projections set forth in the application are or unreasonable or will not be achieved. Impact on Costs Putnam is a high tech provider of home health services and will provide some services not currently available or available only in a limited number of agencies. The impact of approval of Putnam's application on costs in the District will be minimal due to the reimbursement issues associated with Medicare which is cost based. RHA A Not-for-Profit Corporation in District II RHA is not-for-profit corporation whose purpose is to provide a continuum of care to the community. All profits are returned to its nursing homes or agencies as a way of continuing to build the programs. RHA owns two nursing homes in AHCA District II; Riverchase Care Center in Gadsden County and Brynwood Center in Jefferson County. If approved, RHA is proposing to locate its Medicare certified home health agency in existing space within the Riverchase and Brynwood nursing facilities. Both of these facilities are managed and operated by HealthPrime, Inc., a company which operates approximately 40 facilities in 13 states. While RHA is technically the owner and therefore applicant for this CON, HealthPrime would operate the proposed Medicare certified home health agency within the nursing homes. RHA's home health agency would have two offices. The office located in the Riverchase facility would serve Gadsden, Liberty, Franklin, Gulf, Wakulla, Jackson, Calhoun, Washington, Holmes and Bay Counties. The office located in the Brynwood facility would serve Leon, Jefferson, Madison and Taylor Counties. Financial Feasibility The only questions raised by AHCA concerning RHA's financial feasibility went to the ability of RHA to fund this project in conjunction with other CON projects listed on Schedule 2 of its CON application. The largest project on Schedule 2 of RHA's application was a CON application for a 20 bed addition to Riverchase Care Center. At hearing it was determined that since the filing of the instant home health CON application, the 20 bed application had been withdrawn, was no longer viable, and was not being pursued by RHA. Once AHCA's financial expert learned that the 20 bed addition to the Riverchase Care Center had been administratively withdrawn and that its costs should therefore no longer appear on Schedule 2, questions about the financial feasibility of the project were resolved. RHA's project was shown to be financially feasible in the short term based upon the financing commitment of HealthPrime. RHA proved that its assumptions and projections made in its financial analysis are reasonable. These assumptions were based on actual experience in the operation of similar skilled nursing facility based home health agencies, as well as prior experience of other home health agencies in their first two years of operation. RHA's proposed project shows a net income in years one and two and is financially feasible in both the short and long term. Availability and Access of Services To the extent that the number of people needing home health care will increase in the future, there is need for new providers of home health services to provide such availability and access. RHA's willingness to condition its application on service to AIDS, indigent and Medicaid patients can only improve the availability and access to services in the district. In addition, RHA's approval to provide nursing home based home health services is unique to the provision of home health services in District II. Efficiency RHA's proposal, which would place its home health agency within its nursing homes, is unique among the applicants in this proceeding. Such an arrangement provides not only an efficient continuum of care to the patients, it also provides efficiencies and cost savings in the sharing of resources. RHA's proposed project is cost effective because it utilizes existing space and equipment in its nursing homes. Skilled nursing home based Medicare certified home health agencies are specifically recognized by the Federal Medicare program in their cost reports. Home health reports are filed as a part of the nursing home cost report and there is an allocation of the nursing home's cost to the home health agency. This benefits both the provider and the Medicare program through cost savings. RHA's cost per visit to the Medicare program of $48 will be substantially less than the District II average of $66 per visit projected for the time RHA will be operational under the applied- for CON. RHA's proposed project will have no impact on its costs of providing other health care services. Appropriateness and Adequacy RHA proposes to provide the entire range of home health services throughout the district. Given the project need in the planning horizon, RHA's proposal is more than adequate to meet the demand for such services. Quality of Care An applicant's ability to provide quality care is another important factor in statutory and rule criteria. RHA and HealthPrime have shown, through operation of their nursing homes in Florida, all of which have superior ratings, that they have the ability to provide quality health care. In addition, HealthPrime, which will actually operate the home health agency, has experience operating four other nursing home based home health agencies. HealthPrime will utilize its quality assurance programs already in place in its other home health agencies and will seek JCAHO accreditation of this proposed agency. By combining a home health agency with its existing nursing homes, RHA will improve the case management of its patients by providing vertical integration of its services in a continuum of care. Such continuum of care provides a stability in personnel and providers that are working with the patient. Economies and Improvements from Joint or Shared Services As previously discussed, RHA's unique proposal to operate a nursing home based home health agency not only offers a continuum of care for the patient, it also provides fiscal economies to the agency as well as the Medicare program. Resource Availability Based on RHA's experience of hiring personnel for its existing nursing homes in the district, there will be no problem in hiring sufficient personnel for RHA's agency. Fostering Competition The addition of other Medicare certified home health agencies in a district consisting of 10 counties and only 23 providers will promote increased competition and more options for patients. Findings Applicable to All Four Applicants No Fixed Need Pool The agency has no rule methodology to determine the need for Medicare-certified home health agencies. The agency's most recent home health need methodology was invalidated in Principal Nursing vs. Agency for Health Care Administration, DOAH Case No. 93-5711RX, reversed in part, 650 So.2d 1113 (Fla. 1st DCA 1995). There is, therefore, no numeric need determination, or "fixed need pool", established by the agency applicable in this proceeding. District 2 AHCA District 2 is composed of 14 counties. The applicants propose to concentrate their service in various, different parts of the district. Local and State Health Plan Preferences District 2 Health Plan Services to Medicaid and Medically Indigent The first preference under the District 2 Health Plan provides a preference to applicants with a history of providing services to Medicaid or medically indigent patients or commitment to provide such services in the future. Mr. Franklin of Care First has such a history. He is an owner of Wakulla Manor, which had a Medicaid occupancy rate of 88.09% for the period of July-December, and the administrator of Miracle Hill Nursing Home which had a Medicaid occupancy rate of 95.74% for the same period. In the face of such a record, Care First’s commitment of 7% Medicaid and 1% uncompensated/charity patients might seem to pale. But it is a significant commitment, given the nature of the home health agency business, and one upon which Care First agrees its application should be conditioned. IHS conditioned its application on 5% Medicaid and 1% charity care. Putnam conditioned its application on an “Indigent and Medicaid participation equal[ling] 4.0%.” Putnam Ex. No. 1, pg. 51. Putnam, moreover, proposes a Medicare-only agency. Establishment of a private sister agency, a practice common in the home health care industry, will allow Putnam to provide service to the Medicaid and indigent patients separate from its Medicare-only agency. RHA has provided a high percentage of Medicaid/charity days at its Riverchase facility (92.10%) and at its Brynwood facility (90.24%). In addition, RHA is willing to condition its CON on the provision of a minimum of 1% of annual visits to indigent care and 5% to Medicaid. Service to Unserved Counties. Preference 2 states that “[p]reference should be given to any home health services CON applicant seeking to provide home health care services in any county within the District which is not presently served by a home health agency.” There are no counties within District 2 that are not presently served by a home health agency. Service Through a County Public Health Unit Preference 3 states that “[p]reference should be given to a home health services CON applicant seeking to develop home health care services to be provided through a county public health unit in the district in order to more adequately serve the elderly and medically indigent patients who are isolated or unable to travel to permanent health care sites." Of the four applicants, only IHS of Florida’s application is conditioned on working with public health units. IHS has experience working with public health units, working with them currently in Martin County, Manatee County and Broward County. Nonetheless, IHS of Florida will not be providing its services “through” a public health unit. Public Marketing Program Preference 4 states, “[p]reference should be given to a home health services applicant who has a history of providing, or will commit to provide, a public marketing program for services which included pamphlets, public service announcements, and various other community awareness activities. These commitments should be included on the granted CON as a condition of that CON.” Care First currently markets its services to the community and commits to a public marketing program in the future as a condition of its CON. IHS of Florida committed to performing at least one community awareness activity per calendar quarter as a condition of its application. It also indicated, moreover, that it would work to develop public service announcements and marketing programs with the help of public health units or any other appropriate vehicle. The latter indication, however, was not made a condition of the application. Putnam provides educational services to the community, its employees, patients and patients’ families, including the provision of pamphlets, and presenting audio and video tapes as appropriate to the patient and their families. Putnam, however, did not condition its application on a commitment to a public marketing program or commit to such a program in any other way in its application. RHA stated it would accept a condition on its CON to provide a public marketing program for services, including pamphlets, public service announcements and other community awareness activities. It did not reflect such a condition on the “Conditions” page of the application, but, given its statement that it would accept such a condition, there is nothing to prevent the agency from imposing such a condition should it grant RHA’s application. Access Requirements Preference 5 is, “[p]reference should be given to a home health services CON applicant who agrees, as a condition of the CON, to meet the following access requirements for each county in which services are provided: 1) 24 hour local telephone call (or toll-free) contact. 2) 24 hour call/response capability. 3) Maximum on one (1) hour response time following call. Care First currently meets the requirements of Preference 5 in the counties in which it now provides services, and has committed to continue to meet these requirements as a Medicare certified home health agency in all counties in which it will provide services. Care First has made as conditions of its CON, provision for 24-hour accessibility by answering service and installation of a toll-free access line and maintenance of a log of calls during the hours the agency is closed, including documenting of response time to each call. IHS of Florida conditioned grant of its CON on a 30 minute response time, and 24-hour phone availability on a toll-free hot line. Putnam presently provides the services in this preference in its District 3 Medicare certified home health agency and agrees to meet this preference within 90 days of initiating services. It did not, however, make a commitment to meet this preference on the “conditions,” page of its application. There is nothing to prevent the agency from making Putnam’s CON, if granted, conditional upon compliance with this preference. RHA has agreed to have its CON conditioned to meet the access requirements of Preference 5. 2. State Health Plan Service to Patients with AIDS The first preference under the State Health Plan is that “[p]reference shall be given to an applicant proposing to serve AIDS patients.” All four applicants are committed to serving AIDS patients. Full Range of Services. Preference 2 of the State Health Plan is “[p]reference shall be given to an applicant proposing to provide a full range of services, including high technology services, unless these services are sufficiently available and accessible in the same service area." There are currently 11 hospital-based Medicare certified home health agencies in District 2. Several of them provide the high tech services which are sometimes needed by discharged hospital patients. Very few referrals for high tech care have been received by D. G. Anthony or Care First since May, 1995, and there is no indication such services are not available in District 2. Care First has identified, however, an unmet need for the pediatric and pre-hospice home health agency services and has conditioned its application on the provision of those services to the community. IHS of Florida proposes, among other high tech services, infusion therapies, pain management therapies and chemotherapy. There is no evidence, however, that these therapies are not available in District 2. The same is true of Putnam as to the high tech therapies it proposes to provide. There is no evidence that they are not available in District 2. Although RHA indicated in its application that it intended to provide the entire range of services that a home health agency can provide, again, there is not evidence that they are not available in District 2. Disproportionate Share Provider History Preference 3 is “[p]reference shall be given to an applicant with a history of serving a disproportionate share of Medicaid and indigent patients in comparison with other providers within the same AHCA service district and proposing to serve such patients within its market area." Care First, having been formed in March, 1996, did not have a history of providing Medicaid and indigent patients. Care First has committed to 7% of its visits to Medicaid patients, well above the average of existing District 2 agencies of 2-3% Medicaid. Care First has committed to 1% of its visits to charity/uncompensated care. IHS of Florida has committed to 5% Medicaid and 1% charity care. Like Care First, IHS of Florida, as a newly formed corporation, does not have a history of serving a disproportionate share of Medicaid/indigent care patients. Putnam’s commitment is 3% to Medicaid and 1% to charity care. This commitment will be met through its sister home health agency and not the Medicare-certified home health agency for which the CON is sought. RHA has committed to set aside 5% total annual visits to Medicaid patients and 1% of annual visits to indigent care. It has a history of providing a disproportionate share of services to Medicaid patients at its two skilled nursing facilities in District 2, Riverchase Care Center in Quincy and Brynwood Center in Monticello. Underserved Counties Preference 4 is [p]reference shall be given to an applicant proposing to serve counties which are underserved by existing home health agencies. The rural areas of District 2 are traditionally underserved. Putnam will serve Bay County, an underserved county; the three other applicants will serve rural areas of more than one county in District 2. Consumer Survey Data Preference 5 is "[p]reference shall be given to an applicant who makes a commitment to provide the department with consumer survey data measuring patient satisfaction." Care First has committed to providing such data to the agency. IHS of Florida will maintain a data base of results of patient satisfaction surveys and make them available to the agency, just as it already does. Putnam will make available to the agency the results of surveys similar to surveys measuring patient satisfaction Putnam has already developed. Putnam has conditioned its application on providing these surveys to the agencies as well as surveys measuring physician satisfaction. RHA has cited on its “Conditions” page, “. . . (it) will provide the Agency for Health Care Administration with consumer survey data.” Quality Assurance Program and Accreditation The State Health Plan’s Sixth Preference is “[p]reference shall be given to an applicant proposing a comprehensive quality-assurance program and proposing to be accredited by either the National League for Nursing or the Joint Commission on Accreditation of Healthcare Organizations." Care First included in its application a copy of its Quality Assurance Program which has been in use since May, 1995. The program meets the state and federal licensure and certification requirement and the stringent requirements of JCAHO. Moreover, Care First has conditioned its application upon JCAHO accreditation. IHS of Florida submitted documentation regarding its Quality Assurance Program through initiatives such as Total Quality Management and Continuous Quality Improvement. It will seek accreditation from JCAHO within one year of receiving its CON. Putnam, an existing home health agency in District 3 since 1986, has over the years developed and refined a comprehensive quality assurance program which is above the industry standard. The District 3 agency, using its quality assurance program, has attained its JCAHO accreditation “with commendation,” a distinction received by less than 4% of all applicants. Putnam will seek accreditation from JCAHO for its District 2 operation within one year of receiving its CON. RHA is willing to condition its CON on the provision of a comprehensive quality assurance program and accreditation by the JCAHO. Need 1. Numeric Need Since there is no published fixed need pool applicable to this proceeding, the parties, other than the agency, developed their own methodologies for determining numeric need. Each of the methodologies employed by the parties was reasonable. After taking note of the statistics for actual patient visit growth in District 2 from 1991 to 1994, Michael Schwartz began with a conservative number of 60,000 new patient visits per year, a number half of the growth for the lowest growth year of that time period. Multiplying that number times the three horizon years of 1994-97 equals 180,000 new patient visits from 1994 which yields a need for 5.2 agencies. The reasonableness of numeric need in excess of four is supported by other factors. After the filing of the four applications at issue in this proceeding, there are two fewer Medicare-certified home health agencies with certificates of need in District 2. At the same time, home health care visits have been on the increase not only in the district as discussed, above, but in the state as well. Statewide, home health care visits grew from 18 million to 22 million between 1991 and 1994. The utilization of home health care agencies is increasing because of population growth and an increase in the number of visits per patient. The amount of time spent by patients in the hospital is decreasing. The decrease translates into increased need by patients for visits from home health agencies. The need for home health is going to continue to increase because it is a cost-effective alternative to nursing home placement and hospital care. From 1991 to 1994, the number of home health visits more than doubled: from 369,396 to 869,893. This trend continued in 1995. The recent significant growth in the utilization of home health agencies in District 2 is expected to continue. The growth is attributable not only to a population increase in the district but to increase in the use rate for home health agency services as well. The growth in use rates can be explained, in part, by the increase in the senior population (65 and older) and the pressure exerted by managed care for earlier hospital discharges and home health agency services as a viable alternative in some cases to inpatient treatment. The senior population in District 2 is reasonably expected to grow approximately 8% in the five years after 1996, with 15% growth expected reasonably in the 75 to 84 year old population and even higher growth, 25%, in the population over 84 years old. 2. Other Indications of Need Local physicians have experienced difficulty arranging for the existing home health agencies to provide services to patients located in remote areas of District 2. Specialized groups, such as AIDS patients, would, in all likelihood, benefit from additional home health agencies in District 2. Furthermore, a study conducted by IHS of Florida showed that the district has an unusually high rate of diabetes and in four counties has a diabetes death rate 100% greater than the statewide average. Well Springs home health agency is one of the two Medicare-certified home health agencies to cease providing Medicare-certified home health services after the four applicants in this proceeding filed the applications at issue here. Well Springs was licensed in all 14 counties of District 2 and had physical locations in Franklin, Gadsden, Bay, Leon, Liberty, Taylor and Madison Counties. It had a significant share of the District 2 Medicare certified home health agency market with 13.1% of the 1994 visits, the second highest in the District. With Well Springs discontinuing Medicare-certified home health agency services, a void was left for such services in District 2, particularly in those counties in which Well Springs had a physical presence.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED: That the Agency for Health Care Administration enter its final order granting CON Nos. 8380, 8381, 8382 and 8384 to RHA/Florida Operations, Inc., Care First, Inc., Home Health Integrated Health Services of Florida, Inc., and Putnam Home Health Services, Inc., respectively. DONE AND ENTERED this 9th day of June, 1997, in Tallahassee, Florida. DAVID M. MALONEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 9th day of June, 1997. COPIES FURNISHED: Sam Power, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Suite 3431 Fort Knox Building III Tallahassee, Florida 32308-5408 Jerome W. Hoffman, General Counsel Agency for Health Care Administration 2727 Mahan Drive, Suite 3431 Fort Knox Building III Tallahassee, Florida 32308-5403 Richard Ellis, Esquire Agency for Health Care Administration 2727 Mahan Drive, Suite 3431 Fort Knox Building III Tallahassee, Florida 32308-5408 W. David Watkins, Esquire Watkins, Tomasello & Caleen, P.A. 1315 East Lafayette Street, Suite B Tallahassee, Florida 32301 Mark Emanuel, Esquire Panza, Maurer, Maynard & Neel NationsBank Building, Third Floor 3600 North Federal Highway Fort Lauderdale, Florida 33308 Paul Amundsen, Esquire Amundsen & Moore 502 East Park Avenue Tallahassee, Florida 32301 Theodore E. Mack, Esquire Cobb Cole & Bell 131 North Gadsden Street Tallahassee, Florida 32301
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: The letter of intent and authorizing board resolution to establish a new Medicare certified home health agency filed by ABC for District Four for the September, 1989 batching cycle was timely filed with HRS and the Health Planning Council for Northeast Florida, Inc., and met all statutory and rule requirements for filing. The CON application to establish a new Medicare certified home health agency filed by ABC for District Four for the September, 1989 batching cycle was timely filed with HRS and the Health Planning Council for Northeast Florida, Inc. The CON application to establish a new Medicare certified home health agency for District Four for the September, 1989 batching cycle was deemed complete and accepted for review by HRS, effective November 13, 1989. There is a numeric need for one additional Medicare certified home health agency in District Four as determined by HRS and published pursuant to Rule 10-5.011(1)(d), Florida Administrative Code. Local Health Plan The 1989-90 CON Allocation Factors Report for HRS District Four (Health Plan) is the applicable health plan with regards to this proceeding. In its application ABC addressed the recommendations found in the Health Plan. The Health Plan recognizes that under the new methodology for determining numeric need, a licensed home health agency within an HRS district could serve any and all counties within the district. However, the Health Plan contains recommendations for allocating home health agencies. The Health Plan makes the following recommendations: Geographic Preference Home health agencies should be allocated to counties on the following basis: Preference should go to applicants who will establish their program in a county which does not have any CON approved agencies or subunits based in the county. Consideration should be given to counties with a low number of Medicare visits per 1,000 persons 65 years and older. Competing Applications In the case of competing applications for the same or similar geographic area, preference should be given to those applicants which demonstrate: They will meet identified needs in the most cost-effective manner. They are addressing a current or potential geographic access problem in the district. They will serve the widest spectrum of the population, including the medically indigent. They have written agreements with a broad spectrum of local hospitals, nursing homes, mental health resources and/or other service providers in order to help ensure continuity of care. They demonstrate in their CON application how they will comply with any conditions placed on the CONs. They will serve AIDS patients. ABC proposes to locate its agency office in Duval County because it contains medical centers, hospitals with discharge planners and physician staff for referrals, and because of enhanced recruiting and retaining of appropriate staff. However, it proposes to serve all patients referred to it in all counties located throughout District Four, including Baker County. Baker County has no CON approved home health agency based within the county. However, it is presently being served by home health agencies based in Duval County. Because of its small population, with a relatively low percentage of the population being 65 years old or older, its distance from hospitals and the recruiting and staffing problems it would engender, it is doubtful that Baker County could support a main office for a home health care agency. In fact, the 1988 Local Health Plan indicated that Baker County should probably not have a home health agency physically located within the county. Baker County has the lowest number of citizens 65 years of age or older and the lowest usage rate for home health agencies. There is no data or documentation to show why the usage of home health services in Baker County is low. However, HRS makes the assumption from the usage rate only that Baker County is underserved. Duval County is not considered as being underserved in terms of Medicare units. By locating in Duval County, ABC does not specifically comply with preference 1A or 1B. However, ABC has proposed to serve all patients within District Four referred to it regardless of where the patient is located, and regardless of the patient's payor class. (Medicare, Medicaid, private pay or indigent) While 1A and 1B of the Health Plan's recommendation is concerned with geographic preferences, 2A through 2F of the Health Plan's recommendations are preferences that relate mainly to situations involving competing applications in the same batch. ABC meets a majority of those preferences, including: 1A. ABC will be among the lowest in cost of the existing providers in District Four. 1B. ABC goes to the patient and has stated it will serve all of the patients within District Four referred to it. 1C. ABC proposed to serve all patients referred to it, including the medically indigent and medicaid. Because of the situation with Medicaid patients, ABC did not project any Medicaid patients. However, ABC proposed to serve all patients on which it has referrals including Medicaid patients. 1D. ABC did not have written referrals with hospital, nursing homes and other resources for patient referrals. However, ABC stated that this was its standard operating procedure and if granted a CON they would establish written referrals. 1E. ABC does not specifically address how they would comply with any condition placed on the CON. 1F. Again, ABC proposed to serve all patients within District Four referred to it, including AIDS and HIV patients. Since ABC has no control over which patients are referred to it, then its payor mix is just a projection. Whether an AIDS or HIV patient is on Medicare, Medicaid, private pay or medically indigent ABC has proposed to served them. In fact, it has a corporate policy to train and educate its employees in this area of service. ABC has shown that it intends to serve AIDS and HIV patients on which it has referrals. State Health Plan The 1989 Florida State Health Plan is the applicable health plan in this proceeding. The State Health Plan is a comprehensive three-volume document which describes Florida's health system and the services available to Florida residents. Specifically, the State Health Plan addresses certain preferences which HRS uses in reviewing home health CON applicants. They are as follows: Preference shall be given to an applicant proposing to serve AIDS patients. Preference shall be given to an applicant proposing to provide a full range of services, including high technology services, unless these services are sufficiently available and accessible in the same service area. Preference shall be given to an applicant with a history of serving a disproportionate share of Medicaid and indigent patients in comparison with other providers within the same HRS service district and proposing to serve such patients within its market area. Preference shall be given to an applicant proposing to serve counties which are underserved by existing home health agencies. Preference shall be given to an applicant who makes a commitment to provide the department with consumer survey data measuring patient satisfaction. Preference shall be given to an applicant proposing a comprehensive quality assurance program and proposing to be accredited by the Joint Commission on Accreditation of Healthcare Organizations. As to 16A, ABC has proposed to serve all patients in District Four that are referred to it by referring agencies, including AIDS and HIV patients regardless of their of payor class. ABC has a stated commitment to serving AIDS and HIV patients. The evidence establishes that of all AIDS cases reported in District Four, Duval County has approximately 69 percent. District-wide 52 percent of all reported AIDS cases have ended in death whereas in Duval County the percentage is 56. Very few AIDS patients are medicare eligible. A higher percentage of AIDS patients in Duval County are served as indigents or under Medicaid, notwithstanding HRS' Medicaid Project AIDS Care. As to 16B, ABC proposes to provide the full range of services, including high technology services. ABC included in it application excerpts from its high tech policy manual. There was no data available from local health council on what high tech services are available from existing providers. As to 16C, while ABC's payor mix does not indicate that they would be serving a disproportionate share of Medicaid and indigent patients there is no data indicating what access problem, if any, exists for Medicaid and indigent case patients needing home health care services. ABC proposes service to all patients within District Four that are referred to it be referring agencies. As to 16D, while there is no data available that any county within District Four is in fact underserved, ABC has stated that it will serve all counties in District Four and there is no evidence to show that ABC will not serve all counties in District Four. As to 16E, ABC has indicated it will comply with this requirement and there is no evidence to show that ABC will not furnish the data in terms of consumer survey response. As to 16F, ABC has a quality assurance program in place and HRS agreed that ABC could provide quality of care to its patients. Statutory Criteria Section 381.705(1)(a), Florida Statutes - Availability and Access to Services District Four has 20 Medicare certified home health agencies, with five located in Duval County and, one approved but not yet established Medicare certified home health agency. However, as stated in the State Agency Action Report (SAAR) there is a market for another home health agency in District Four as determined by the fixed need pool. ABC's stated commitment to serve all counties in District Four and to serve all patients in those counties referred to it by referring agencies regardless of whether the patient's payor class should enhance the convenience and accessibility to patients. Section 381.705(1)(b), Florida Statutes - Quality of Care, Efficiency and Adequacy of Existing Area Providers There is no specific data available from HRS concerning the quality of care, efficiency and adequacy of services being provided by existing care providers in District Four. ABC did not conduct a survey to assess the existence of quality care problems in District Four. However, the existence of quality care problems in District Four would be difficult to gauge since the in- home provision of services makes them largely beyond public or professional scrutiny. In fact, generally, with few exceptions, application for home health agencies do not address this criterion. The parties stipulated that the provisions of Section 381.705(1)(c) through (g), Florida Statutes were deemed to have been met or otherwise not applicable. Section 381.705(1)(h), Florida Statutes - Availability of Resources and Funds and Accessibility of Service to all Residents of Service District The evidence establishes that ABC has sufficient resources and funds to accomplish what it proposes. HRS has no data suggesting significant access problems for Medicaid patients to home health care nor was there sufficient evidence that AIDS or HIV patients suffer an access problem for home health care. However, due to improvements in terms of Medicaid reimbursement any access problem that may exist should be reduced. ABC has a stated commitment to serving all patients in District Four regardless of the patient's payor class. This commitment should improve the accessibility of home health care to underserved patients if, in fact, there is an access problem for the Medicaid, AIDS, HIV or indigent patients. Section 389.705(1)(i), Florida Statutes - Financial Feasibility ABC projects it will do 12,000 home visits in year one and 14,000 home visits in year two. These projections are based on ABC's experiences in other districts, particularly District Three. These projections also represent approximately 25 and 29 percent of the new visit pool market for each year, respectively. However, ABC clients would not necessarily all come from the new visit pool. ABC's projected home care visits are reasonable based on its experience in other Florida districts and its experience in other states, notwithstanding its lack of an established referral network in District Four and being a new entrant into the District Four market. ABC's financials displayed in its application are reasonable and consistent with its Florida experience. ABC's payor mix and visit each correlate to its actual Florida experience. ABC's pro forma expenses for year one and year two are reasonable. ABC projects a first year profit of $3,914 and a second year profit of $5,010 and after the second year, ABC should continue to show a profit. ABC's proposed project will benefit ABC by allowing it to meet its long term goals. ABC's existing Florida agencies are operating in financially sound manner and there is no reason to believe that ABC's proposed agency will not operate in the same manner. ABC's liquidity ratio is 0.7 to one which means that ABC has excess current liabilities over current assets and is one factor used for determining the general health of a company. ABC has an accumulated deficit of $651,836. From all of the above, ABC's proposed agency is feasible in both the short term and the long term. It was stipulated that Section 381.705(1)(j) and (k), Florida Statutes were deemed to have been met or otherwise inapplicable. Section 381.705(1)(l), Florida Statute - Impact on Competition Since ABC has a stated commitment to serve all patients in all counties in District Four referred to it regardless of the payor class and is offering a full range of services, including high tech, its proposal should only serve to enhance competition within District Four, notwithstanding that the proposal is primarily a Medicare home health care provider which would not provide any financial competition. The parties stipulated that Section 381.705(1)(m), Florida Statutes was deemed to have been met or otherwise inapplicable. Section 381.705(1)(n), Florida Statutes - Medicaid and Indigent Care Very few medicaid and indigent patients are served by the existing agencies in District Four. Most of these patients are served by the Visiting Nurses Association (VNA) which is subsidized by United Way, local governments and other sources. There is no data or documentation that Medicaid patients do not in fact have a significant access problem. Medicare is the predominant payor source in Florida and is ABC's primary payor source even though ABC has a stated commitment to serve all patients regardless of payor class. A high percentage of Florida's Medicaid budget for home health services is used for co-insurance for medicare. Therefore, Medicaid patients that are "dually eligible" are receiving home health care under Medicare. Florida's Medicaid program does not reimburse for physical therapy, speech therapy or occupational therapy for adults. In a Medicare certificate home health agency there is only a certain pool of profit available to serve Medicaid and indigent patients. Therefore, if the percentages of Medicaid service goes up then indigent or charity cases must suffer or the agency cannot operate in the "black". While HRS usually places a condition on the CON concerning Medicaid services, a majority of the recently issued CONs for home health care had no such condition placed on them. The parties stipulated that Section 381.705(2) and (3), Florida Statutes were deemed to have been met or otherwise inapplicable. State Agency Action Report (SAAR) HRS up to and including, the home health care agency batching cycle immediately preceding the instant September 1989 batch, used not applicable (N/A) on those criteria that were not typically addressed by applicants or were not considered to be applicable to an applicant. HRS now enters a "no" in those situations but a "no" in this situation has no adverse or negative impact on HRS' decision. Typically, approved applicants do not meet all the statutory criteria. Some of the criteria may be only partially met and some may not be met at all.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED: That a final order be entered granting ABC's application for a certificate of need (CON No. 6015). DONE and ENTERED this 26th day of October, 1990, in Tallahassee, Florida. WILLIAM R. CAVE Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 26th day of October, 1990. APPENDIX TO THE RECOMMENDED ORDER The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on the proposed findings of fact submitted by the parties in this case. Specific Rulings on Proposed Findings of Fact Submitted by Petitioner, ABC 1. Each of the following proposed findings of fact are adopted in substance as modified in the Recommended Order. The number in parentheses is the finding of fact which so adopts the proposed finding of fact: 6(2,3); 7(8); 8(7,8,11); 9(8,10); 11(7,14); 15(4); 16(16,17,18,19); 17(16,18); 18(16,21); 19(16,22); 20- 21(23,24); 23(25); 25(4,25); 28-29(25-27); 31-38(29); 40-42(29); 45(32); 48- 52(33,34,35,36); 54-58(32,37,38,41); 61-64(43); 68-70(45,46,47); 72- 77(47,48,49); 79-81(47,49,50); 83(51); 85-87(53); 89(53); 90(54). 2. Proposed findings of fact 1-5, 10, 12-14, 22, 24, 26, 27, 30, 39, 43, 44, 46, 47, 53, 59, 60, 65-67, 71, 78, 82, 84, 88, 91 and 92 are unnecessary. Specific Rulings of Proposed Findings of Fact Submitted by Respondent, HRS Each of the following proposed findings of fact are adopted in substance as modified in the Recommended Order. The number in parentheses is the Finding of Fact which so adopts the proposed finding of fact: 3-9(5,6,7,9,12,13,14); 12- 26(14,18,19); 28-29(15,16); 44-46(32) 48-51(39,40). Findings of fact 1 and 2 are covered in the preliminary statement. Proposed findings of fact 10, 11 as to the last 2 sentences, 27, 30, 31, 32 other than last sentence, 33, 35, 36 other than last sentence, 37, 38, 39, 41, 42, 47 and 52 are not supported by substantial competent evidence in the record. The last two sentences of finding of fact 34 are adopted in finding of fact 25, otherwise not supported by substantial competent evidence in the record. Proposed finding of fact 43 is unnecessary. The first two sentences of proposed finding of fact 53 are adopted in finding of fact 36, otherwise not supported by substantial competent evidence in the record. Copies furnished to: R. Terry Rigsby, Esq. F. Philip Bank, P.A. 204-B South Monroe Street Tallahassee, FL 32301 Edward Labrador, Esq. Assistant General Counsel 2727 Mahan Drive, Suite 103 Tallahassee, FL 32308 Sam Power, Agency Clerk Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, FL 32399-0700 Linda Harris, General Counsel Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, FL 32399-0700
The Issue The issue for determination is whether Petitioner must reimburse Respondent for payments totaling $29,701.19 that Petitioner admittedly received from the Medicaid Program between May 1, 1996, and March 31, 1998, in compensation for the provision of home health services. Respondent contends that Petitioner is not entitled to retain the payments in question, primarily on the allegations that the compensated services were not medically necessary, were improperly documented, or both.
Findings Of Fact The evidence presented at final hearing established the facts that follow. The Agency is responsible for administering the Florida Medicaid Program. As one of its duties, the Agency must recover "overpayments . . . as appropriate," the term "overpayment" being statutorily defined to mean "any amount that is not authorized to be paid by the Medicaid program whether paid as a result of inaccurate or improper cost reporting, improper claiming, unacceptable practices, fraud, abuse, or mistake." See Section 409.913(1)(d), Florida Statutes. This case arises out of the Agency's attempt to recover alleged overpayments from Monef, a Florida-licensed home health agency. As an enrolled Medicaid provider, Monef is authorized, under a Medicaid Provider Agreement with the Agency, to provide home health services to Medicaid recipients. Under the Medicaid Provider Agreement, Monef assented to comply with “all local, state and federal laws, rules, regulations, licensure laws, Medicaid bulletins, manuals, handbooks and Statements of Policy as they may be amended from time to time.” The home health services at issue consisted of skilled nursing care rendered either by a registered nurse (“RN”) or a licensed practical nurse (“LPN”), as the needs of the recipient required, together with personal care provided by a home health aide. The "audit period" that is the subject of the Agency's recoupment effort is May 1, 1996 to March 31, 1998. During this audit period, the Medicaid Program reimbursed Monef for all of the skilled nursing and home health aide services that are the subject of this dispute. Largely (though not entirely) on the allegation that the home health services in question were not medically necessary, the Agency contends that Monef collected overpayments totaling $29,701.19 in compensation for services rendered to nine separate patients. The following table summarizes the Agency's allegations. PATIENT NAME GROUND(S) FOR DENIAL ALLEGED OVERPAYMENT Louisiana S. No medical necessity $8,498.17 Robert M. No medical necessity $3,615.54 Mario P. No medical necessity $2,403.33 Angel S. No medical necessity $2,089.12 Ana G. No medical necessity $2,015.94 Joann N. No medical necessity $1,705.12 C. Watson No medical necessity $1,268.76 Yvette F. Service refused $122.16 Rosa P. Multiple $7,983.05 Medical Necessity The proof was in conflict concerning the medical necessity of the challenged home health services that Monef provided to the foregoing patients. There were three categories of expert opinion evidence on this issue, described below. The attending physicians' opinions. To be Medicaid compensable, home health services must be provided pursuant to a written treatment plan that is prepared individually for each recipient and approved by his or her attending physician. The treatment plan——called a "plan of care" or "plan of treatment"—— must be reviewed and updated periodically (about every two months) and also as the patient's condition changes. A required component of all plans of care is the attending physician's certification that the services specified in the plan are medically necessary.1 The fact that a treating doctor, by prescribing, recommending, or approving a medical service, has attested to its medical necessity is not sufficient, in itself, to support a finding that the resulting care was medically necessary. See Rule 59G-1.010(166)(c), Florida Administrative Code. Nevertheless, the attending physician's opinion regarding medical necessity is relevant evidence, even if it is not inherently dispositive. In this case, all of the services that the Agency contends were not medically necessary had been determined to be medically necessary by the respective patients' treating physicians. The peer-review organizations' opinions. During the audit period, the Medicaid Program would not reimburse a home health agency for any home visits in excess of 60 visits per recipient per fiscal year unless the provider had obtained authorization to provide such care, in advance, from the Agency or its designee. Such "prior authorization" was required to be based on medical necessity. At times during the audit period the Agency was under contract with a company called Keystone Peer Review Organization ("KePRO"), which acted as the Agency's designee in regard to pre-approving services above the 60-visit limit. At other times this function was performed by Florida Medical Quality Assurance, Inc. ("FMQAI"). In a couple of instances, the Agency itself gave Monef prior authorization to perform services that it now contends were not medically necessary. By statute, a peer-review organization's written findings are admissible in an administrative proceeding as evidence of medical necessity or lack thereof. See Section 409.913(5), Florida Statutes. Monef had obtained prior authorization based on medical necessity for most of the services that the Agency has challenged as medically unnecessary. The opinions of the Agency's designees, KePRO and FMQAI, are relevant evidence of medical necessity. Dr. Sullenburger's opinion. Dr. John Sullenburger is the Agency's Medicaid physician. He would have testified at the final hearing as an expert witness for the Agency, but the parties stipulated that Dr. Sullenburger's ultimate opinion, based on the medical records, was that each of the claims that the Agency alleges was not medically necessary was, in fact, unnecessary. By entering into this stipulation, Monef effectively waived its right to cross-examine Dr. Sullenburger and thereby expose the particular facts upon which his opinion was based. For its part, the Agency relinquished the opportunity to have the doctor explain the reasons why he had concluded that the patients' attending physicians——and also, in many instances, the Agency's designated peer-review organizations——had erred in making their respective determinations that the subject services were medically necessary. As a result of the parties' stipulation concerning Dr. Sullenburger's testimony, the factfinder was left with a naked expert opinion that merely instructed him to decide the ultimate factual issue of medical necessity in the Agency's favor. In making findings regarding medical necessity, the factfinder settled on the following rules of thumb. Greatest weight was accorded the opinions of KePRO and FMQAI. These were deemed to have the highest probative value because the peer- review organizations' determinations of medical necessity were made before the services in question were provided, and neither of the Agency's designees had any discernable motive to stretch the truth one way or the other. Certainly, the peer-review organizations more closely resemble a disinterested, neutral decision-maker than either the patient’s treating physician or the Agency's expert witness (whose opinions were formed after the services had been rendered and the claims paid); indeed, if anything, KePRO and FMQAI might be expected to tilt in the Agency's direction (although there was no evidence of such bias in this case).2 The hearsay opinions of the treating physicians, on the one hand, and Dr. Sullenburger, on the other, were considered to be about equally persuasive——and none was particularly compelling.3 It should be stated that the attending physicians' certifications of medical necessity, each of which lacked analysis that might have connected the facts concerning a patient's medical condition with the need for services, were as conclusory as Dr. Sullenburger's ultimate opinion. Consequently, in those instances where a peer-review organization gave Monef a mandatory prior authorization to render services that the attending physician had certified as being medically necessary, it has been found that, more likely than not, the services in question were medically necessary. In contrast, a closer question arose in those instances where there was no evidence of prior authorization when such was required. The expert opinions——the attending physician's on one side, Dr. Sullenburger's on the other—— essentially canceled each other out. While ordinarily in an evidential tie the party without the burden of proof (here, Monef) would get the nod, in this case the Agency had the slightest edge, on the strength of Rule 59G-1.010(166)(c), Florida Administrative Code. Under this Rule, an attending physician's approval of a service is not, "in itself," sufficient to support a finding of medical necessity.4 Because of the Rule, Monef needed to introduce some additional, persuasive evidence (e.g. the attending doctor's testimony regarding the need for the service) to overcome Dr. Sullenburger's opinion.5 Louisiana S. At the time that the services in question were provided, from May 7, 1997, until December 20, 1997, this patient, an obese woman in her late 60s, was being treated for diabetes, hypertension, and coronary artery disease. She was not able to self-administer the insulin shots that were needed to prevent complications from diabetes. For the period from May 5, 1997, through June 30, 1997, KePRO gave prior authorization to 53 skilled nursing visits and 23 home health aide visits.6 Monef was reimbursed for 42 skilled nursing visits and 23 home health aide visits conducted in this period. From July 1, 1997, until September 1, 1997, Monef provided a total of 66 combined skilled nursing and home health aide visits to Louisiana S. The Medicaid Program paid for 60 of them. Because these were the first 60 visits of the fiscal year, which began on July 1, 1997, prior authorization was neither needed nor obtained. During the period between September 1, 1997, and November 1, 1997, Monef made 96 skilled nursing visits, out of 124 that KePRO had pre-approved, and 20 of 27 authorized home health aide visits. KePRO gave prior authorization for 124 skilled nursing and 27 home health aide visits for the period from November 1, 1997 to January 1, 1998, of which 54 and 18, respectively, were made. Based on the levels of service that KePRO had approved before July 1, 1997, and then after September 1, 1997, it is reasonable to infer, and so found, that the first 60 combined visits to this patient in fiscal year 1997-98 would have been pre-approved had Monef been required to obtain prior authorization. The home health care services that Monef provided to Louisiana S. between May 9, 1997, and December 30, 1997, for which the Medicaid Program paid $8,498.17, were medically necessary. Robert M. Robert M., a man in his mid-40s who received home health care from Monef from November 26, 1997, through March 27, 1998, suffered from arteriosclerosis, hypertension, acute bronchitis, and schizophrenia. His residence was an assisted living facility ("ALF").7 FMQAI gave prior authorization for 61 skilled nursing and 61 home health aide visits to occur between November 26, 1997, and January 26, 1998. Monef provided 55 nursing and 59 home health aide visits during this period. Monef requested prior approval for 25 skilled nursing and 63 home health aide visits for the period from January 26, 1998, and March 26, 1998. Although prior authorization was needed for these services, which exceeded the limit for fiscal year 1997-98, there is no evidence in the record that FMQAI granted Monef's request for approval. FMQAI authorized 23 skilled nursing visits and 30 home health aide visits for the period from March 26, 1998, to May 28, 1998. However, Monef provided just one skilled nursing visit during this time, on March 27, 1998. The home health care services that Monef provided to Robert M. between November 26, 1997, and January 26, 1998, and on March 27, 1998, were medically necessary. Lack of medical necessity was established, however, for the services provided between January 26, 1998, and March 26, 1998. The Medicaid Program paid the following claims, totaling $1,442.49, for this period: One RN visit, $34.04; 21 LPN visits, $549.99; and 51 home health aide visits (35 at $17.46 apiece and 16 at $15.46 each), $858.46. Mario P. From November 25, 1997, through March 28, 1998, Mario P., a septuagenarian who was being treated for acute gastritis, an enlarged prostate, and mental illness, received home health visits at the ALF where he lived, the services provided by Monef. FMQAI approved 43 skilled nursing and 61 home health aide visits for the period from November 26, 1997, through January 26, 1998; 11 skilled nursing and 62 home health aide visits for January 26, 1998, until March 26, 1998; and 25 skilled nursing visits for March 1, 1998, through May 1, 1998 (overlapping the immediately preceding period by about three- and-a-half weeks). The actual number of skilled nursing and home health aide visits for which the Medicaid Program reimbursed Monef was within the pre-approved service levels for each period. The home health care services that Monef provided to Mario P. between November 26, 1997, and March 28, 1998, for which the Medicaid Program paid $2,403.33, were medically necessary. Angel S. Angel S. was a man in his middle 50s who had been diagnosed with gastroduodenitis (an inflammation of the stomach and duodenum) and mental illness. Monef obtained prior authorization from KePRO to provide Angel S. with 34 skilled nursing and 62 home health aide visits between November 25, 1997, and January 25, 1998. During this time, the Medicaid Program reimbursed Monef for 32 skilled nursing and 44 home health aide visits. FMQAI pre-approved 26 skilled nursing and 27 home health aid visits for January 25, 1998, through March 25, 1998. Monef was reimbursed for 20 and 21 such visits, respectively. The home health care services that Monef provided to Angel S. between November 25, 1997, and March 25, 1998, for which the Medicaid Program paid $2,089.12, were medically necessary. Ana G. When she was a client of Monef, Ana G., a woman in her 60s, was suffering from acute gastritis and major depression. She lived in an ALF. FMQAI pre-approved 50 skilled nursing visits and 40 home health aide visits for the period from November 25, 1997, through January 25, 1998. In that time, Monef rendered 28 skilled nursing visits and 42 home health aide visits for which it received compensation from the Medicaid Program. For the period from January 25, 1998, through March 25, 1998, FMQAI gave prior authorization for 9 skilled nursing and no home health aide visits. During this time, Monef provided 15 skilled nursing visits and 15 home health aide visits for which Medicaid paid. The services that Monef rendered to patient A. Garcia between November 25, 1997, and March 23, 1998, were medically necessary except for 17 home health aide visits (at $17.46 apiece) and 6 skilled nursing visits (at $24.19 each), making a total of $441.96 in overpayments. Joann N. In her late 30s at the time of the services in question, Joann N.'s principal diagnosis was major depression. She also suffered from hypertension and a type of diabetes. Because Joann N.'s primary diagnosis was a mental illness, the home health services provided to her may not have been Medicaid-compensable due to an exclusion that bars coverage for mental health and psychiatric services.8 The Agency, however, did not disallow Monef's claims on this basis, relying instead exclusively on the allegation that the services were not medically necessary. None of the skilled nursing and home health aide visits that Monef provide Joann N. between February 16, 1997, and September 1, 1997, was pre-approved. There is evidence that Monef sought KePRO's prior authorization of 26 skilled nursing and ten or 12 home health aide visits for the period from April 16, 1997, to June 16, 1997, but no proof was adduced showing that approval was granted. Based on the number of combined visits that Monef provided both before and after July 1, 1997 (the start of fiscal year 1997-98), it does not appear that prior authorization was required. There are no grounds in the record, however, from which to infer that prior authorization(s) would have been given if needed. Accordingly, lack of medical necessity was established for all of the home health services that Monef provided Joann N, for which the Medicaid Program paid a total of $1,705.12. C. Watson C. Watson was a teenager with cerebral palsy and quadriplegia who received care in her home between May 12, 1997, and March 31, 1998. The Agency alleges that all of the skilled nursing services that Monef provide C. Watson were medically unnecessary but acknowledges that the home health aide visits were appropriate and covered. The Agency itself pre-approved the home health care visits that Monef had requested for the period from May 12, 1997, through June 30, 1997, namely, 24 skilled nursing and 40 home health aide visits. The Medicaid Program reimbursed Monef for 12 skilled nursing and 38 home health aide visits made during this period. The Agency gave prior authorization for home health care to be provided between July 1, 1997, and September 1, 1997. FMQAI also pre-approved the following services for the same period: five skilled nursing visits and 43 home health aide visits. Monef was reimbursed for 17 skilled nursing visits made during this time. For the periods of September 1, 1997 to November 1, 1997; November 1, 1997 until January 1, 1998; and January 1, 1998 through March 1, 1998, KePRO pre-approved levels of skilled nursing services (nine, four, and nine visits, respectively) that were not exceeded by Medicaid-paid claims for these services rendered by Monef during the subject timeframes. FMQAI gave prior authorization for four skilled nursing visits to occur between March 1, 1998 and May 1, 1998, but Monef did not submit any claims for such services rendered during this period. Lack of medical necessity was established for 12 skilled nursing visits made during the period from July 1, 1997 through September 1, 1997. The Medicaid Program paid a total of $319.13 for these visits (One RN visit at $31.04 and 11 LPN visits at $26.19), and this sum constitutes an overpayment subject to recoupment. The rest of the skilled nursing visits that Monef furnished to C. Watson were medically necessary. Yvette F. Yvette F. was a patient in her 30s suffering from complications relating to HIV infection. On Christmas Day, 1997, Yvette F. refused most of the skilled nursing services that had been scheduled, to spend time with her family. The Agency has sought to recoup the $122.16 that the Medicaid Program paid for an RN's visit to Yvette F.'s home on December 25, 1997. This sum reflects four hours of service. The medical records in evidence establish that the patient's refusal of treatment occurred after the RN had arrived at her residence, and that, despite the patient's refusal of service, the RN did perform an assessment on Yvette F. that day. The Agency failed to establish that, under these circumstances, Monef is entitled to no reimbursement. Yet, common sense instructs that the covered claim should not encompass four hours of services when clearly that much time was not spent on this particular visit. Unfortunately, nothing in the record, including the parties' legal arguments, provides guidance for resolving this particular problem. In the absence both of controlling authority and evidence of the actual time spent, the factfinder has determined that the claim should be equitably apportioned to do rough justice, with Monef being compensated for one hour of service and the balance returned to the Medicaid Program. On this basis, then, lack of medical necessity has been shown for three hours of skilled nursing services, making an overpayment of $91.62. Rosa P. Rosa P. was a woman in her late 30s with multiple health problems, including uncontrolled diabetes, recurring infections, renal failure, respiratory insufficiency, and mental illness. Monef rendered home health care to Rosa P. from November 22, 1996, until February 1, 1998, for which the Medicaid Program paid $24,543.27 on 1,012 separate claims. The Agency seeks to recoup a little more than one- third of the amount previously paid to Monef for this patient's home health care, alleging a number of grounds to disallow a number of claims. The following table summarizes the Agency's contentions regarding the challenged claims. ("Doc." is an abbreviation for "documentation." "PC" is an acronym for plan of care. The alphanumeric claim identifiers in the left-hand column were assigned by the Administrative Law Judge for ease of reference.) CLAIM ID DATE(S) SERVICE(S) GROUND(S) FOR DENIAL ALLEGED OVERPAYMENT RP-1 11-22-96 Nursing No doc. $29.04 RP-2 12-9-96, 12- 10-96, 12- 14-96 Aide No doc./POT not followed (x3) $52.38 RP-3 12-25-96 to 1-5-97 Aide No PC rendered (x11) $192.06 RP-4 1-6-97, 1-7- 97, 1-9-97, 1-10-97, 1- 11-97, 1-12- 97 Aide POT not followed (x6) $104.76 RP-5 1-22-97 to 3-22-97 All POT not signed by MD or RN $4,009.37 RP-6 3-24-97 to 5-2-97 Aide No PC rendered (x40) $698.40 RP-7 5-2-97 Nursing No doc. $29.04 RP-8 5-3-97 to 7- 4-97 Aide No PC rendered (x62) $1,032.52 RP-9 7-21-97 to 7-26-97 Aide POT not followed (x6) $87.309 RP-10 8-4-97 to 8- 10-97 Aide PC not rendered (x7) $122.22 RP-11 10-29-97 Nursing Documented only 1 of 2 billed visits $31.04 RP-12 11-3-97 Aide No doc. $17.46 RP-13 11-4-97 Aide No doc. $17.46 RP-14 11-14-97 Aide No doc. $17.46 RP-15 11-15-97 Aide No doc. $17.46 RP-16 11-16-97 Aide No doc. $17.46 RP-17 11-22-97 to 11-26-97 Aide No doc. (x10) (2 billed visits per day) $52.3810 RP-18 12-1-97 Aide No doc. $17.46 RP-19 12-2-97 Aide No doc. $17.4611 RP-20 12-3-97 Aide No doc. $17.46 RP-21 12-28-97 to 2-28-98 Nursing POT not signed by MD or RN $1,724.37 The total of these alleged overpayments, without adjustment for the several minor arithmetic or typographical errors in the Agency’s papers, see endnotes 9 - 11, is $7,983.05. Each claim or claim set will be addressed in turn below. RP-1. The medical records contain a "Time Record Nursing Progress Note" dated November 22, 1997, that documents a skilled nursing visit to the patient on that day. Therefore, the Agency failed to prove its allegation of overpayment regarding RP-1. RP-2. Included in the patient's records is a "Weekly Activity Report and Time Slip" for the week beginning Monday, December 9, 1996, that was filled out by the home health aide who cared for Rosa P. during that seven-day period. To keep track of tasks performed, the form instructed the aide to check boxes in a table that cross-referenced particular duties (e.g. oral hygiene, change linens, turn & position), which are described in the left-hand column, with the days of the week, which are listed, Monday through Sunday, in the top row. For the days in question (December 9, 10, and 14, 1996), the aide checked boxes showing that, among other things, she had given the patient a shower and assisted her in a wheelchair, both of which are Medicaid-covered services. See Paragraphs 133, 137, infra. Handwritten notes inscribed on the Agency's work papers next to each of the three dates at issue state: "only p/c [personal care] [is a] shower —— not following POT [plan of treatment]." The first of these points is incorrect: assistance with a wheelchair, like showering a patient, is a covered home health aide service. The plan of care that covered the subject dates disproves the second assertion. The written treatment plan explains that the home health aide will "provide personal care, asst [assist] [with] ADL's [activities of daily living] including bath, skin/foot care." The aide was following this course of action on December 9, 10, and 14, 1996. The Agency did not prove an overpayment in connection with RP-2. RP-3. The Agency seeks to recoup payments of $17.46 apiece for 11 home health aide visits made between December 25, 1996 and January 5, 1997, on the ground that the aide did not perform any covered personal services. Although a dozen such visits were made during this particular period, the Agency's work papers reveal that the claim for services rendered on December 29, 1996, was approved. The aide's time sheets for the relevant period substantiate the Agency's allegation, with one exception. The aide's entry on December 26, 1996, is identical to that of December 29, 1996, the latter which the Agency correctly deemed sufficient to make Medicaid financially responsible. On both days, the aide helped the patient with a tub bath and shampoo, which are covered personal services. For the other ten days, review of the aide's time sheets reveals that many services were rendered in the category of "light housekeeping" and "meal preparation." These fall within the exclusion for "housekeeping, homemaker, and chore services, including shopping" and hence are not covered services. Handbook, at p. 2-6; see also Rule 59G-4.130(8)(a)2., Florida Administrative Code (1996).12 (Curiously, the Agency did not specifically rely upon this exclusion.) In its Proposed Recommended Order, Monef points out that the aide made a written notation each day concerning the patient's voiding of bowel and bladder. Because the non- exclusive list of covered home health aide services included "toileting and elimination," see Rule 59G-4.130(5)(b)3.b., Florida Administrative Code (1996), it is possible that the aide was providing a compensable service during the period in question. The trouble is, it cannot be determined from the evidence whether the aide actually assisted the patient——or whether the aide merely wrote down on the time sheet what had been observed regarding the patient's use of the bathroom facilities. Although the question is close, it is determined that simply observing and commenting daily about the patient's elimination of bodily wastes is not enough, without more, to constitute a Medicaid-compensable home health aide service.13 Being unable on the present record to find that the aide did more than watch and write, it is determined that covered services in the area of "toileting and elimination" were not persuasively shown to have occurred. Consequently, lack of medical necessity has been established as to 10 home health aide visits. The total overpayment on RP-3 is $174.60. RP-4. For the week from Monday, January 6 through Sunday, January 12, 1997, the Agency alleges that six home health aide visits are not covered because the aide failed to follow the plan of treatment. Notations on the Agency's work papers suggest another basis: "only shower - incomplete," meaning, presumably, that the only covered personal care provided was assistance in the shower. See discussion regarding RP-2, supra. The aide's time sheet for the relevant period contradicts the Agency's contention. First, bathing assistance was not the only covered personal care rendered on the days in question. The aide also helped the patient with her wheelchair, which is a service covered under the rubric of "transfer and ambulation." Rule 59G-4.130(5)(b)3.e., Florida Administrative Code (1996). Second, the aide's entry for January 8, 1997——for which claim the Agency is not seeking to recover——is substantially the same as those for the challenged days. The only material difference is that on January 8 the aide checked the box indicating that she had shampooed the patient's hair. Nothing in the Rule or the Handbook, however, provides that a shower with shampoo is covered but a shower without shampoo is excluded from coverage, and the Agency failed to prove a factual basis, or advance a logical one, for drawing such distinction. Consequently, the Agency did not establish an overpayment with regard to RP-4. RP-5. The medical records in evidence contain a "Home Health Certification and Plan of Care" for Rosa P. that was signed and dated, on January 22, 1997, by the RN and by the patient's attending physician, Dr. John Prior. This plan of care covers the period from January 22, 1997 through March 22, 1997. The Agency did not present any evidence that either the doctor's or the nurse's signature appearing on this form are inauthentic or that either or both failed to sign on January 22, 1997, as recorded. Therefore, the Agency's allegation that the plan of treatment for the period in question is invalid was not proved. RP-6. This claim set encompasses five full weeks plus five days of home health aide service, or 40 visits in all. The Agency alleges that no covered personal care was provided during these visits. The time sheets demonstrate that the aide provided a covered service, namely assistance in the shower, on all days between March 24, 1997 and April 6, 1997, and also on the five days from April 28 through May 2, 1997. The Agency therefore failed to prove its allegation as to these 19 visits. The Agency made its case, however, in connection with the remaining 21 visits from April 7 to April 27, 1997, inclusive. The time sheets for these dates do not adequately document the provision of a covered service.14 Accordingly, lack of medical necessity was established for 21 home health aide visits at $17.46 each, making a total overpayment on RP-6 of $366.66. RP-7. The Agency has sought to recover payment of $29.04 for an RN visit to the patient on May 2, 1997, alleging lack of documentation. The medical records show that on this particular date, an LPN treated the patient from 8:00 a.m. to 8:45 a.m. Later that same day, at 5:00 p.m., an RN arrived to provide care, which she did, afterwards leaving the patient’s residence at 5:45 p.m. These two visits are documented in separate "Time Record Nursing Progress Note" forms. The Agency did not establish that the nursing notes are inauthentic or incredible.15 Thus, the allegation regarding RP-7 was not proved. RP-8. The Agency contends that 62 home health aide visits between May 3, 1997, and July 4, 1997, were not compensable because no covered personal care was provided. The aide's time sheets establish that a covered personal care (assistance in the shower) was given on May 3 through May 17, inclusive (15 visits at $17.46 apiece), and also on June 20 through 22, 1997 (three visits at $17.46 each). Shower assistance was also provided on May 26 through June 1, 1997 (seven visits at $15.46 each). Skin care, a covered service, was provided on June 7, 1997 (one visit, $15.46). And ambulation assistance, a covered personal care service, was rendered on seven visits from June 9, 1997, through June 15, 1997, at $15.46 per visit. For the remaining 29 visits, however, the aide's time sheets fail adequately to document the provision of a covered service. Ten of these visits were billed at $15.46, the others at $17.46 apiece. Thus, with respect to RP-8, the Agency established an overpayment of $486.34. RP-9. This claim set involves six home health aide visits on the dates of July 21 through July 26, 1997, inclusive, during which, the Agency alleges, the plan of treatment was not obeyed. (The Agency did not seek to recoup the payment made for aide services rendered on Sunday, July 27, 1997, even though that date’s visit is included within the same time sheet as the Monday through Saturday visits, and the services rendered on July 27 were identical to those performed earlier in the week.) According to the pertinent time sheet, covered personal care services (bathing and assistance with ambulation) were provided in connection with the challenged claims. Further, the plan of treatment in effect at that time stated that the aide would "assist with personal care, ambulation, prepare meals, grocery shop, wash clothes, [and] straighten bedside unit." The time sheet establishes that the aide complied with these instructions. Accordingly, the Agency failed to prove its allegation regarding RP-9. RP-10. The Agency alleges that none of the home health aide visits from August 4 through August 10, 1997, entailed covered personal care services. The aide's time sheet for that week, however, documents that bathing care, specifically showering, was provided. Because showering the patient is clearly a covered item, the Agency failed to carry its burden of proof in respect of RP-10. The patient's medical records contain two "Time Record Nursing Progress Note" forms dated October 29, 1997, which document separate RN visits on that date, one lasting from 4:30 p.m. to 5:15 p.m., the other from 6:00 p.m. until 7:40 p.m. The Agency therefore did not establish, by a preponderance of evidence, its allegation that Monef had provided documentary support for only of one of two nursing visits on October 29, 1997. RP-12, -13, -14, -15, and -16. The Agency alleges that these five home health aide visits, occurring over a two- week period from November 3, 1997 to November 16, 1997, are not adequately documented. The visits of Monday, November 3, and Tuesday, November 4, 1997, which the Agency challenges, are reported on the same time sheet as those of November 5 through 9, 1997, which the Agency accepts. The duties performed on each of these days, both challenged and unchallenged, were identical, except that on November 4 and 8 the aide shampooed the patient. Numerous covered personal care services were rendered each day during the week, including bathing, oral hygiene, skin care, and assistance with ambulation. The duty descriptions on the aide's time sheet for the week beginning Monday, November 10, 1997——a week that included three challenged visits (November 14 through 16)——are substantially similar to one another (though the Agency accepted claims for November 10 through 13) and nearly identical to those given for the preceding week. Once again, covered personal care services rendered consistently throughout the week of November 10 to 16, 1997, included bathing, oral hygiene, skin care, and ambulation assistance. The evidence, therefore, does not support the Agency's allegation that the services in question were not adequately documented. RP-17. The Agency alleges that home health aide visits made from November 22 through November 26, 1997, were not documented. The medical records demonstrate that one such visit per day was provided, for a total of five. The records show further, however, that Monef was reimbursed for two visits for each of the days in question, receiving double the amount to which it was entitled based on the documented number of visits. The Agency, therefore, has proved an overpayment of $87.30 (five visits at $17.46 apiece). RP-18, -19, and -20. The Agency contends that there is insufficient documentation for home health visits on December 1 through 3, 1997. But the aide's time sheet for the week beginning Monday, December 1, 1997, adequately establishes that such visits actually occurred——and that covered personal care services (bathing, oral hygiene, skin care, and ambulation assistance) were provided during each of them. However, as with RP-17, the records show that Monef was reimbursed for two visits for each of the days in question, receiving double the amount to which it was entitled based on the documented number of visits. The Agency, therefore, has proved an overpayment of $50.38 (two visits at $17.45 apiece and one billed at $15.46) with regard to RP-18, RP-19, and RP-20. RP-21. The Agency seeks to recover payments for all nursing services rendered from December 28, 1997 through February 28, 1998, on the ground that the plan of treatment for the subject period was not signed and dated by the attending physician, as required. In fact, the pertinent treatment plan was signed by a Dr. Roxana Lopez, and by the RN. Neither signature, however, was dated. Thus, the Agency is correct in its assertion that the plan of treatment is deficient. But, the record also contains a letter from KePRO dated December 29, 1997, which grants prior authorization for 124 skilled nursing and 61 home health aide visits for the period from December 28, 1997 through February 28, 1998. According to this letter, Monef's request for pre-approval was made on December 22, 1997. One of the items that must be submitted to the peer- review organization with a request for prior authorization is the written plan of treatment. Thus, it is reasonable to infer, and so found, that KePRO had in its possession the deficient plan of treatment and, in granting prior authorization, overlooked the fact that the doctor had not dated her signature. Monef did not urge that KePRO's pre-approval of the services in question effected a waiver of the Agency's right to disallow the ensuing claims based on what is, in these circumstances, clearly a technicality,16 or that the Agency should be estopped from raising this particular objection, although little imagination is required to perceive the potential merit in either argument. It is not necessary to reach waiver or estoppel issues, however, for KePRO's approval letter establishes persuasively that the doctor and the nurse signed the plan of treatment before December 29, 1997——and hence at or before the start of care and services thereunder. Plainly, in other words, the attending physician timely approved the plan of treatment, even though she failed to date her signature. Under the particular facts of this case, therefore, where the treatment plan is in substantial compliance with the requirements, and neither the Medicaid Program nor the patient suffered any conceivable prejudice as a result of a demonstrably harmless (on these facts) and unintentional deficiency, it is determined that the Agency has failed to prove a sufficient basis to recoup payments totaling $1,724.37 for pre-approved, medically necessary services that were actually provided to an eligible patient. The following table summarizes the foregoing findings relating to claims for services to Rosa P. CLAIM ID DATE(S) SERVICE(S) GROUND(S) FOR DENIAL ACTUAL OVERPAYMENT RP-1 11-22-96 Nursing No doc. $0 RP-2 12-9-96, 12- 10-96, 12- 14-96 Aide No doc./POT not followed (x3) $0 RP-3 12-25-96 to 1-5-97 Aide No PC rendered (x11) $174.60 RP-4 1-6-97, 1-7- 97, 1-9-97, 1-10-97, 1- 11-97, 1-12- 97 Aide POT not followed (x6) $0 RP-5 1-22-97 to 3-22-97 All POT not signed by MD or RN $0 RP-6 3-24-97 to 5-2-97 Aide No PC rendered (x40) $366.66 RP-7 5-2-97 Nursing No doc. $0 RP-8 5-3-97 to 7- 4-97 Aide No PC rendered (x62) $486.34 RP-9 7-21-97 to 7-26-97 Aide POT not followed (x6) $0 RP-10 8-4-97 to 8- 10-97 Aide PC not rendered (x7) $0 RP-11 10-29-97 Nursing Documented only 1 of 2 billed visits $0 RP-12 11-3-97 Aide No doc. $0 RP-13 11-4-97 Aide No doc. $0 RP-14 11-14-97 Aide No doc. $0 RP-15 11-15-97 Aide No doc. $0 RP-16 11-16-97 Aide No doc. $0 RP-17 11-22-97 to 11-26-97 Aide No doc. (x10) (2 billed visits per day) $87.30 RP-18 12-1-97 Aide No doc. $17.46 RP-19 12-2-97 Aide No doc. $15.46 RP-20 12-3-97 Aide No doc. $17.46 RP-21 12-28-97 to 2-28-98 Nursing POT not signed by MD or RN $0 The Agency, in sum, proved overpayments totaling $1,165.28 in relation to Rosa P. The Bottom Line The Agency established that Monef received overpayments in connection with six patients. The following table summarizes these overpayments. PATIENT NAME GROUND(S) FOR DENIAL OVERPAYMENT Robert M. No medical necessity $1,442.49 Ana G. No medical necessity $441.96 Joann N. No medical necessity $1,705.12 C. Watson No medical necessity $319.13 Yvette F. Service refused $91.62 Rosa P. Multiple $1,165.28 Accordingly, the Agency is entitled to recover from Monef the principal sum of $5,165.60.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency enter a final order requiring Monef to repay the Agency the principal amount of $5,165.60. DONE AND ENTERED this 14th day of November, 2001, in Tallahassee, Leon County, Florida. JOHN G. VAN LANINGHAM 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 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 14th day of November, 2001.
The Issue The ultimate issue is whether the application of Home Care Associates for a Certificate of Need to establish a Medicare-certified home health agency in Okaloosa and Walton Counties should be granted. The principal factual issue is whether there is a need for an additional agency and the principal legal issue is what criteria for need should be applied. The statutory criteria for determining need is Section 381.705, Florida Statutes. In this proceeding, the Petitioner showed its entitlement to a CON using the statutory criteria set out in Section 381.705, Florida Statutes. GENERAL STATEMENT Proposed Findings of Fact were filed by the Petitioner and the Intervenors. The Respondent adopted and incorporated the Intervenor's Proposed Findings of Fact adding to the Intervenor's findings its own proposed findings numbered 1 through 20. Proposed findings submitted by the parties are addressed in an Appendix hereto.
Findings Of Fact All home health care agencies in the State of Florida must be licensed and those home health care agencies which want to participate in the Medicare program must also obtain a Certificate of Need (CON). Medicare is a federally funded health program for the elderly and certain disabled persons. Medicare provides reimbursement only for the following part-time and intermittent home care: skilled nursing, physical therapy, speech therapy, home health aide, and medical social services. Medicare does not reimburse for custodial care or 24-hour-a-day care (adult congregate living facilities or nursing homes) or acute care services (hospitals). In order for a provider of Medicare home services to be reimbursed, the provider must have a CON and serve Medicare-eligible persons who: (a) are referred by order of a physician, (b) are home bound, (c) require skilled care, and (d) require skilled services only on a part-time basis. The patient must have rehabilitative potential and need skilled home care for Medicare to reimburse for home care. The overall goal of Medicare home health services is to have the patient functioning at his/her optimum level using rehabilitative services and having registered nurses and other skilled professionals to instruct the family and patient in rendering patient care. Medicaid provides reimbursement to providers only for skilled nursing services and home health aide services to patients who meet strict income and asset limitations. No reimbursement is provided for any other services. Medicaid has maximums or caps on reimbursement for services rendered under the program, and will pay for the services rendered up to the amount of the caps which are based upon allowable patient care costs. Medicaid reimburses only a fixed amount established by HRS for a specific service. Respondent, HRS, is the state agency responsible for administering the State Health Planning Act pursuant to Sections 381.701 through 381.715, Florida Statutes. The Petitioner, Home Care Associates of Northwest Florida, Inc. (Home Care), is a Florida corporation owned by Marck Ehrman, M.D., Warren A. Phillips, Dennis L. Sauls, Ronald O. White, and Steven P. Espy. Dr. Ehrman is a practicing hematologist/oncologist in Ft. Walton Beach, Florida. Home Care filed a Letter of Intent on October 8, 1986 and on December 15, 1986, it actually filed a CON application for a Medicare-certified home health agency to be established in Okaloosa and Walton Counties in the State of Florida. These counties are in Subdistrict IB of HRS District I which is composed of four counties. This application was identified by HRS as CON Action No. 4911. Okaloosa and Walton Counties are an appropriate service area for Home Care. Home Care's application was placed in the December 15, 1986 batching cycle by HRS, which preliminarily denied the application. There were no other applications for a Medicare- certified home health agency in Okaloosa and Walton Counties filed in said batching cycle with which Home Care's application could be comparatively reviewed. HRS published notice of its denial in 13 FAW 1806 (May 8, 1987). Home Care timely requested an administrative hearing by petition filed with HRS on May 11, 1987. Choctaw filed a timely Petition to Intervene on August 14, 1987, and Northwest filed its Petition to Intervene on August 28, 1987. Both petitions were filed more than one month before the scheduled final hearing, and Choctaw was granted standing to intervene by Order of the Hearing Officer dated August 20, 1987, and Northwest was granted standing to intervene by Order of the Hearing Officer dated September 4, 1987. Both Intervenors were determined to be existing providers of Medicare home health services in the geographic area for which Petitioner had applied for a CON. The basis for the denial of the Petitioner' application for Certificate of Need was based upon the Respondent's determination that: There was no need demonstrated by Home Care Associates of Northwest Florida for an additional home health agency to serve the residents of Okaloosa and Walton Counties. Marta V. Hardy was the Deputy Assistant Secretary for Regulation and Health Facilities, Department of Health and Rehabilitative Services, from September 1984 through June 1987. Ms. Hardy was responsible for home health agency policy and was the ultimate decision maker with regard to the preliminary denial of the instant Certificate of Need. (Petitioner's PFF paragraph 19) 1/ In the Fall of 1984, Respondent attempted to promulgate a proposed rule on home health care facilities to replace a rule on need which had been invalidated in an earlier rule challenge proceeding. This proposed rule was invalidated in 1985 because it was based on a use rate methodology which contained arbitrary criteria. On May 15, 1986, in response to invalidation of the proposed rule, Bob Sharp, administrator of Comprehensive Health Plans for the Department of Health and Rehabilitative Services, published an interim policy by memorandum which was used to review applications for CON's for home health agencies. This interim policy utilized a variation of the previously invalidated rule but attempted to correct criticisms which had resulted in the invalidation of the proposed rule. The Sharp memorandum was a public document and interested persons were aware of this memorandum and the policies expressed therein. The interim policy promulgated by Sharp was applied to home health agency applications beginning with the first batching cycle in 1986. The interim policy used a use rate/population methodology which projected the number of Medicare enrollees using home health services. The projected number of users was multiplied by the average number of visits per Medicaid home health user. Under the interim policy the total number of visits was divided by 9,000 to determine the gross number of agencies needed. Nine thousand visits was deemed by agency planners to constitute a large enough use base to sustain a home health agency based on the agency's assessment of the economies of scale of home health operations. The total number of licensed and approved agencies was subtracted from the gross number of agencies needed to yield the number of new agencies which could be approved. The interim policy provided that new agencies would be phased in over a three year period and resulted in the approval of 23 Certificates of Need between May 15, 1986 and December 1986. This interim policy was defended by the Respondent before the First District Court of Appeal in December 1986. During the Summer 1986, representatives of the Florida Association of Home Health Agencies (FAHHA) complained to the Governor's Office about the interim policy, contending that the interim policy put too many home health agencies in the field. As a result of FAHHA's complaints, meetings were held between members of the Governor's staff and representatives of the Department of Health and Rehabilitative Services to include Marta V. Hardy. As a result of these meetings, the Department abandoned its interim policy. Ms. Hardy was instructed that additional applications for home health agencies would have to be approved by her superiors. Medical or financial factors did not change during this period, which would warrant a change in policy. The Department changed its policy but did not publish any document rescinding Sharp's Memorandum. No notice was given to the public that the change in policy had occurred until after the second batching cycle of 1986, the one which contained the Petitioner's CON. Similarly, the Department did not notify the public that there was a need for additional services or agencies. Marta Hardy had instructed her staff not to issue any more home health agency CON's until a new methodology had been developed. The applicants were informed that the Department of Health and Rehabilitative Services had changed its interim policy and there was no numerical need methodology. Applicants were asked for an unlimited extension of time within which the Department could render a decision on their applications. In the absence of a rule on need, the Department required the applicants who refused to agree to an extension of time to demonstrate an unmet need based upon the broad statutory criteria found in Chapter 381, Florida Statutes. The Department of Health and Rehabilitative Services characterizes the procedure above as a free form action utilizing the statutory criteria found in Section 381.705, Florida Statutes. Using the free form procedure, one home health agency CON was granted in a county in which no existing service was being provided. The three existing Medicare-certified home health agencies in Subdistrict IB are: Northwest, Choctaw, and Okaloosa County Health Department (OCHD). OCHD is the home health agency of last resort for chronically ill patients in Okaloosa County. It renders services to those patients who would not be treated otherwise. It conducts few Medicare visits: 363 in 1985-86 and 225 Medicare visits in 1986-87. OCHD's costs to provide a home visit are high and the number of visits per patient is low. While rendering all classes of home health care, its services are limited, slow, and not competitive with the private agency in the County. It lacks the ability to perform high tech home care. Its program, which is directed by the Department of Health and Rehabilitative Services, is placing its current emphasis on maternal-child health. When OCHD is eliminated as a competitive element, Northwest is the only provider of Medicare-certified home health services in Okaloosa County and Choctaw is the only provider of medicare-certified home health care in Walton County. The market share of Northwest in Okaloosa County is 92 percent. It has provided home health services in Okaloosa County for nine years. Choctaw currently has a 100 percent market share in Walton County and has been the sole provider of home health services for over ten years. There are no alternative home health care providers in Walton County. Choctaw and Northwest provide all basic home health care services in their respective service areas. Neither Choctaw nor Northwest had provided technically innovative home health care services until the last few months when they added certain basic types of high tech care, such as infusion pumps. To the extent there has been an increase in the availability of such services, it appears to be a competitive response to the pending application of the Petitioner. The skills and services currently available in Walton and Okaloosa Counties in the area of home health are not state-of-the-art home health services which Home Care states it will provide. Home health agencies first must develop the capacity to provide sophisticated patient evaluation and high tech services if physicians are going to depend on and use these services when planning out-patient care. Petitioner is a durable medical equipment ("DME") company. This company has brought new technology to the Ft. Walton Beach area to include oxygen services, pulmonary rehabilitation, home dialysis, parenteral nutrition and hydration. A related company provides private duty nursing care to non- Medicare and non-Medicaid patients currently. Dr. Ehrman is also involved in Home Care Professionals. Home Care Professionals, a non-Medicare provider of home health care services and durable medical equipment, was developed to meet the needs of home care patients whose needs were not being met by current providers. Dr. Ehrman is already using computers to assist in the transmission of data from the patient's location to the doctor's location and to transmit and receive the results of lab tests. He plans and has allocated money to computerize Home Care. This will cut down on delays in transmitting and receiving information. Lab results and other patient information will be computerized. Dr. Ehrman plans to rigorously select his staff and provide to them in-service training in new procedures and high tech home health care. Home Care's nurses will be better trained than current providers' nurses. Home Care will assign a patient to one nurse. The Petitioner, Home Care, will provide a new, competitive alternative to the existing agencies which will provide incentive for all the agencies to improve their services and the quality of their care. Choctaw and Northwest staff their cases geographically east and west. Choctaw refers patients in the south end of Walton County to Northwest, and Northwest refers patients in the northern part of Okaloosa County to Choctaw. This practice, which is a technical violation of their DHRS licensing by county, is dictated by the geography of the service area and the natural and man-made obstacles, including Choctawhatchee Bay, I-10, and Eglin Air Force Base, which create geographical divisions which span both counties east and west while the counties run north and south. The largest and most rapidly growing population areas are in the southern portions of both counties. This is where the major acute care hospitals are located. The remaining population in these counties tends to be along the I-10/U.S 90 corridor where smaller hospitals are located. Patients which cannot be treated in these smaller hospitals have been referred historically to facilities and physicians in Pensacola, although this is changing as more patients are being sent to facilities and physicians in Ft. Walton Beach. Approval of this application is consistent with the boundaries of the subdistrict, will enhance competition encouraging the other providers to upgrade their services, and will tend to orient care along a north-south axis. The Petitioner would be he only provider licensed to serve both Walton and Okaloosa Counties which would be advantageous because it could legally staff on an east- west axis and avoid the problems created by the geographic division of Subdistrict IB. In determining the need for home health agencies in Subdistrict IB, a two year planning horizon was used. A two year planning horizon is reasonable. Two years from the Petitioner's filing date would be December 1988. Data for the periods ending July 1988 and January 1989 were used because the official population projections from the Governor's Office focus on July and January of each year. The two projected dates bracket December 1988, two years from the filing date. The population of elderly (65 and over) for Subdistrict IB is projected to be 16,868 for January 1988 and 17,350 for January 1989. The Medicare use rate the number of Medicare home health visits per elderly person in Florida for 1984 was multiplied by the projected elderly population to arrive at a projected number of visits. The number of visits projected to occur in July 1988 was 31,976, and 32,889 visits were projected for January 1989. An average of the two projections was used to estimate the number of projected visits in December 1988. Dr. Kolb, an expert in health planning, researched the optimal size of an agency. She determined that once an agency's visits reach the range of 6,000 to 9,000, economies of scale are achieved in which the fixed costs are spread sufficiently among all visits to make operations viable, and that once this scale of operations is reached, costs per visit become relatively static or are affected more by other factors. Her findings in this regard are consistent with the conclusions reached by HRS in adopting virtually the same criteria in the Sharp policy which it used to evaluate need in the first half of 1986. See Paragraph 15 above. The optimum size for an agency is riot wholly dependent upon ratio of costs per visit, but it is that size which keeps costs low, fosters healthy competition, sustains the quality and availability of service, encourages innovation, and meets the other statutory objectives. To determine the number of agencies needed, the projected number of visits was divided by 9,000, the optimal number of visits per agency, which showed a need for 3.6 agencies. Rounding up, this calculation shows a total need for four (4) agencies in the subdistrict in December 1988. There are three licensed and approved home health care agencies in Subdistrict IB. Subtracted from the four agencies needed in December 1988, one additional agency could be added. The addition of Home Care to the home health market will not significantly affect existing providers. Home Care projects it will deliver 3,800 visits in its first year of operation and 7,000 visits in its second year. A large percentage of those visits are attributable to population growth alone. If the state home health use rate of 1.9 is applied to the 4,588 population growth expected by 1990, an additional 8,717 home health visits will be generated. That growth alone will meet the volume of visits projected by Home Care. Home Care will do new procedures and will educate existing providers and physicians to the availability and desirability of using new services provided by Home Care. This will cause an increase in the local use rate. Approval of Home Care's application will increase the overall market for home health services. Dr. Ehrman is a highly trained and experienced physician. Dr. Ehrman has been instrumental in improving the nature and delivery of health care in his medical specialty and community. He has improved the way blood smears are done at the hospital lab and improved the administration of blood bank at the local hospital. He has organized and taught nurses about chemotherapy and developed a tumor board. He helped get radiological procedures improved. Dr. Ehrman has developed new and innovative practices in his office and has assisted patients in obtaining appropriate Medicare reimbursement for services and drugs. Northwest adduced evidence that it operates very close to its Medicare cost caps; however, Northwest pays out much of its revenue to related organizations in the form of management, consulting, and computer fees. For example, in the 1986 cost reporting period, Northwest paid $17,783 to related organizations. In 1985-86, Northwest provided 2,818 home health aide visits at a cost of $19.29 pea visit. In 1986-87, Northwest paid $76,849 to related organizations with shared members of their boards. Northwest provided 3,406 home health aide visits in 1986-87 at a cost of $28.95 per visit. These related organizations are for-profit entities. Open-ended management and administrative contracts with related organizations allow management to add expenses in order to reach the cost caps each year. If management and administrative fees were backed out of Northwest's "costs," it would be well below its cost caps. As Northwest's visits have increased, administrative, general, and other expenses also have increased (1985-86: $91,708; 1986-87: $198,635). However, the direct costs associated with providing the nursing care for those visits have decreased (1985-86: $89,281; 1986-87: $81,71). Thus, the increase in visits did not result in any overall cost- efficiencies or savings, but in an increase in money paid out as administrative expenses. There is no relationship between number of visits and cost per visit once an agency is beyond the volume needed to cover its minimal operating costs. An increase in number of visits does not necessarily result in lower costs per visit. An analysis of hospital utilization by Medicare reveals that the rate of use in District I is higher than both the Florida and national average. Analysis of the local nursing home use rate reveals it is 68 percent higher than the statewide nursing home use rate. This is in spite of the fact that Walton and Okaloosa Counties have more nursing home beds than other areas of the State and the beds in these counties are at 95 percent occupancy. Analysis of the home health use rate for Walton and Okaloosa Counties reveals that it is approximately 40 percent lower than the statewide use rate. Many nursing home placements and hospital admissions could be avoided if appropriate home health care were available and utilized. For example, a home health service could start antibiotics in the nursing home for patients who had received the medication before, rather than admit the patient to the hospital to start the treatment as is currently done. The proposed agency will not decrease the number of visits by existing agencies because of (1) the increase in population, (2) the shifts to home health care from acute care facilities and nursing homes, and (3) the increase in the types of home health care available. The application contains Home Care's projection of income and expenses for the first two years of operation. See Figure 7, Page 22 of the application. Evaluation of costs for a two year period shows that they are reasonable. The assumptions about payor mix, utilization projections, gross charges per visit type, salaries, inflation, depreciation, marketing, advertising, administrative expenses, bad debts/charity, travel expenses, depreciation, costs of medical supplies, and gross revenues made in the feasibility study were reasonable. The projections of revenue from visits and from medical supplies are reasonable and their sum constitutes gross revenue. Deductions for contractual allowances and bad debt/charity are reasonable and when deducted from gross revenue they determine net revenue. Dr. Kolb, an expert in health planning, supervised the preparation of the financial feasibility projections contained in the application. The methodology used by Dr. Kolb was reasonable, appropriate, and supported by the facts. Dr. Kolb conservatively estimated reimbursement to arrive at contractual allowances. Subsequent to her preparation of the pro forma and the filing of the application, the Legislature increased by 100 percent the amount Medicaid reimburses for home health services. Medicare has also subsequently increased its cost services. This increases the range of reimbursement available to the Petitioner and makes Dr. Kolb's predictions of financial success more viable. The amount of $22,600 is reasonable for the cost of this project. Equipment costs of $7,600 include office equipment and the lease- purchase of a computer terminal. The computer will be used for billing and for tracking patient problems. The depreciation expense is derived from an assumption of five years' depreciation on $7,600 worth of office equipment, When deductions from revenue are subtracted from gross revenue, net revenue is approximately $284,700 in the second year. Home Care has the capital to fund this project. Individual expenses on the expense column on the pro forma include salaries, contract services, administrative expenses, transportation, marketing and advertising, medical supplies, and depreciation. Administrative salaries and benefits are based on the assumption that in the first year there will be three administrative full time equivalents ("FTE"): an administrator, a nurse supervisor, and a clerical person. In the second year, this will increase to three and a half FTE's. The salaries for these positions in year two are $28,350 for the administrator, $22,050 for the nurse supervisor, and $28,800 for one and a half clerical personnel. In addition, an 18 percent fringe benefit figure is computed. Salary assumptions are based on area wage levels. Both the salary assumptions and the number of FTE's and salaries are reasonable. A breakdown of total per visit costs is depicted on HCA X-26. The expenses for contract visits represent the cost per visit in each of the listed categories. The contract rates in year one are: home health aide - $8.25; speech pathologist - $30.00; medical/social worker - $25.00; occupational therapist - $30.00; skilled nurse - $13.75; and physical therapist - $30.00. Medical supplies are assumed to be $1.00 per visit in the rest year and are inflated by 5 percent in the second year. This assumption is reasonable. Although not required, Petitioner has allocated funds for advertising and marketing which are not allowable expenses in computing reimbursable expenses; however, this will help in informing the public and medical professionals about the availability of home health services. The transportation expense is based on $.21 per mile which is reimbursed to employees. This is a reasonable assumption. Administrative expenses include rent ($12,000), telephone ($4,800), insurance ($5,000), postage ($2,000), office supplies ($3,000), legal and accounting fees ($4,000), dues ($500) , and licenses ($500). Most expense items are inflated 5 percent for the second year. The expense and inflation assumptions are reasonable. In order to test the reasonableness of the assumptions contained in the pro forma, Dr. Kolb compared the projected costs in the second year to Medicare cost limitations. Home Care's projections are 28 percent below the Medicare cost limits for 1987. Home Care could have $78,000 more in expense and still be below its Medicare cost limits. In both his private office practice and in his DME company, Dr. Ehrman tries to ensure that underserved groups receive medical services. Although there is a large medically indigent population in the area Dr. Ehrman serves, he does no financial screening in his office. Dr. Ehrman is a participating provider in Medicare. This means that he has agreed in advance to accept Medicare assignment for his services. Dr. Ehrman is also a Medicaid provider. Three to five percent of his patients are Medicaid. The assumption that Home Care will have the same financial policies which are reflected in Dr. Ehrman's practice is reasonable. The assumption that Home Care will provide three percent Medicaid and three percent indigent home health visits is reasonable. Home Care's project is financially feasible on both an immediate and long term basis.
Recommendation Having determined, based upon the facts adduced at hearing, that there is a need for another home health care agency and that the applicant meets the statutory criteria, it is RECOMMENDED that the Department of Health and Rehabilitative Services approve Certificate of Need Number 4911. DONE and ORDERED this 1st day of July, 1988, in Tallahassee, Florida. STEPHEN F. DEAN 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 1st day of July, 1988.
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: Gulf Coast Home Health Service of Florida, Inc. is an existing licensed provider of Medicare-certified home health services in Pinellas County. The parties have stipulated that Gulf Coast has standing to participate as a party in this proceeding. Metro Home Health Care, Inc. is a proprietary agency owned by Ann Durham, Robert Carver and John Timp, a Certified Public Accountant. Metro was incorporated in November of 1984 and has been operating as a home health agency since June of 1985. It currently provides facility staffing with nurses, nurses' aides and mental health workers, and also takes private duty calls from hospitals. Due to the fact that so many patients who are in need of home health care are elderly and eligible for Medicare, referring hospitals and physicians attempt to utilize those home health agencies which are Medicare-certified. Metro proposes to expand its services to provide treatment to Medicare patients, and thus filed an application for a Certificate of Need in December of 1985. A home health agency in Florida must obtain a Certificate of Need from HRS before it can be licensed and become eligible to receive Medicare reimbursement. As the agency is already operational, there is no cost associated with this project. Metro realizes that there is a lag time between the provision of services to Medicare patients and Medicare reimbursement for such services. In order to avoid interest costs, Metro proposes to utilize the profits from its current staffing services to support its home health care program, in lieu of using a commercial line-of credit. Metro believes, however, that lines of credit with banking institutions can be acquired if operational funds are needed in the future. Metro has encouraged and supported the training and continuous education of its staff by providing information and funds for courses offered in the community. It intends to continue this practice. Metro proposes to provide skilled nursing services, physical therapy services, occupational therapy services, speech therapy services, IV therapy, rehabilitative services, social services and home health aid services. Some of these services will be obtained on a contractual basis, as opposed to in-house staffing, depending upon the need for and utilization of such services. Metro proposes to provide two percent of its services to Medicaid patients and two percent of its services to indigent patients during the first year after obtaining a Certificate of Need. During its first year as a Medicare-certified provider, it is anticipated that Metro will provide approximately 75 percent of its services to Medicare patients, 10.5 percent to private pay patients, 10.5 percent to third-party payor patients and 4 percent to Medicaid and indigent patients. In its second year, Metro proposes an aggregate of five percent of its services to be offered to Medicaid and indigent patients. By the end of its first decade, the intent is to have incrementally increased the level of service to indigent and Medicaid patients to ten percent. Metro's current charges for skilled nursing care are in the median range of charges by other home health agencies in the area. Charges for this service range between $40.00 and $60.00, and Metro charges $47.00 per visit. While Metro's Director, a registered nurse, did not have intimate knowledge of the bookkeeping, interim payment reports, cost reports, record keeping or computerization required by Medicare, one of the owners of Metro is a Certified Public Accountant. Since the filing of the Certificate of Need application, the owners of Metro have met with an assigned intermediary for the Medicare program, and they have discussed the completion of forms, patient claims and annual reports, as well as the Medicare reimbursement system. The Medicare program reimburses providers at a rate which represents the lowest of either costs, charges or the Medicare cap for the service provided. Thus, there is little or no profit element in the provision of Medicare services. However, Metro will realize a positive net income through the provision of services to Medicare, private, third party payor, Medicaid and indigent mix of patients proposed for the first year of operation. This is true even with a tripling of the amount of calculated contractual allowances set forth in Metro's application. The figures and projections contained in the pro forma statement of revenues and expenses included in Metro's Certificate of Need application are outdated and some of the utilization estimates may be exaggerated. However, Metro is of the opinion that its existing profits which have greatly increased since the date of its application, will enable it to operate in a financially feasible manner on both an immediate and long-term basis. Metro desires to offer Medicare services so that it will be competitive with other agencies which do so and can receive a fair share of referrals. Hopefully, more referrals will include more private pay and insurance covered patients, which will produce greater profits. The reimbursement rate for services to Medicaid patients is even lower than for Medicare patients, though it has recently been raised. The per visit reimbursement rate for Medicare purposes can be negatively affected by increasing the number of Medicaid and indigent patients served. It would not be financially feasible for a home health agency which served only Medicare patients to provide Medicaid and indigent services. When HRS initially reviewed Metro's application, it utilized an invalid methodology to determine the need for additional home health services in Pinellas County. HRS no longer utilizes this methodology and did not attempt to do so during the final administrative hearing. HRS does not presently have any methodology pursuant to rule or policy for projecting numeric need for new home health agencies. Instead, it looks at the general statutory criteria applicable to Certificate of Need review for all health care services. There were no numeric need methodologies for home health care services offered at the final hearing. While neither the State Health Plan nor the local District Health Plan specifically address or identify the need for home health agencies, both plans emphasize the improvement of access to the medically underserved. There are approximately 29 licensed and approved Medicare-certifed home health agencies in District 5, which includes Pinellas County.
Recommendation Based upon the findings of fact and conclusions of law recited herein, it is RECOMMENDED THAT Metro Home Health Care, Inc. be GRANTED a Certificate of Need to operate a home health agency in Pinellas County, with the condition that a minimum of two percent of total visits be provided to Medicaid patients and two percent of total visits be provided to indigent patients. Respectfully submitted and entered this 5th day of November, 1987, in Tallahassee, Florida. DIANE D. TREMOR 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 5th day of November, 1987. APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-3556 The proposed findings of fact submitted by the parties have been accepted and/or incorporated in this Recommended Order, except as noted below: Petitioner Gulf Coast: 9. Rejected as contrary to the evidence. 10, 11. Rejected as irrelevant and immaterial. 13-15. Rejected as irrelevant and immaterial. 17. Rejected as irrelevant and immaterial. 22. Rejected as hearsay. 23-27. Rejected as irrelevant and immaterial. 29-30. Rejected as irrelevant and immaterial. 31. Partially rejected. It must be assumed that goals in the State and District Plans reflect need. 36. Rejected as contrary to the evidence. Last sentence accepted. 38. Rejected as contrary to the evidence. 39 & 41. Rejected as too broad a conclusion to be drawn from the evidence. 45. Second sentence rejected as hearsay. 50, 51, & 53. Rejected, not supported by sufficient evidence. Last sentence accepted only if private pay or insurance-covered patients are not considered. Last sentence accepted only if private pay or insurance-covered patients are not considered. 60. Accepted only-if it is assumed that the percentage of care rendered to private pay or insurance-covered patients decreases. 62 & 63. These factual findings are accepted, but are incomplete in that they fail to recognize the importance of becoming a Medicare-certified provider in order to also obtain referrals of non-Medicare patients. 64-73. These "findings of fact" are addressed in the Conclusions of Law. Respondent HRS: p. 3, last full sentence Accepted only if it is assumed the agency serves only Medicare patients. p. 4, last sentence of first full paragraph Rejected as not supported by competent evidence. Respondent Metro: The "proposed recommended order" submitted on Metro's behalf does not contain proposed findings of fact, and is more in the nature of closing argument. Consequently, it is not possible to render specific rulings upon Metro's proposed findings of fact. COPIES FURNISHED: Leonard A. Carson, Esquire Carson & Linn, P.A. 1711-D Mahan Drive Tallahassee, Florida 32308 John Rodriguez, Esquire Assistant General Counsel 1323 Winewood Boulevard Building One, Suite 407 Tallahassee, Florida 32399-0700 Ann Durham, Director Metro Home Health Care, Inc. 10707 66th Street North Pinellas Park, Florida 33565 R. S. Powers, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700
