The Issue At issue in this proceeding is whether Respondent committed the offense set forth in the Administrative Complaint and, if so, what penalty should be imposed.
Findings Of Fact The parties Petitioner, Department of Health, Division of Medical Quality Assurance, Board of Medicine (Department), is a state agency charged with the duty and responsibility for regulating the practice of medicine pursuant to Section 20.43 and Chapters 455 and 458, Florida Statutes. Respondent, Pedro Rene Benitez, M.D., is, and was at all times material hereto, a licensed physician in the State of Florida, having been issued license number ME 53453. On or about November 12, 1997, a true bill was returned by a grand jury in the United States District Court, Southern District of Florida, Case Number 97-574-Cr-LENARD, which charged Respondent, as well as numerous co-defendants, with, inter alia, conspiracy to defraud the United States by making false claims to the United States Department of Health and Human Services in its administration of the Medicare program, contrary to the provisions of 18 U.S.C. § 371.1 Pertinent to this case, Count I of the Superseding Indictment charged Respondent, together with eighteen other persons or organizations, as follows: COUNT I (CONSPIRACY: 18 U.S.C. § 371) From in or about January 1991, the exact date being unknown to the Grand Jury, and continuing through in or about October 1993, in Dade County, in the Southern District of Florida and elsewhere, the defendants . . . did knowingly and willfully combine, conspire, confederate, agree, and reach a tacit understanding with each other and with persons known and unknown to the Grand Jury, to commit offenses against the United States, as follows: (a) to defraud the United States by impeding, impairing, obstructing, and defeating, through deceitful and dishonest means, the lawful government functions of the United States Department of Health and Human Services (HHS) in its administration of the Medicare program, in violation of Title 18, Unites States Code, Section 371. . . . GENERAL ALLEGATIONS At all times material to this Indictment: THE MEDICARE PART A PROGRAM AND REGULATIONS The Medicare program was a Federal program that helped pay for health care for the aged, blind and disabled. The Medicare program was administered by HHS, through its agency, the Health Care Financing Administration ("HCFA"). Medicare, through the Medicare "Part A" program, covered certain eligible home health care costs for medical services provided by "home health agencies", commonly referred to as "providers", to persons who qualified for Medicare and who required home health services because of an illness or disability that caused them to be homebound. . . . HCFA contracted with private insurance companies to administer the Medicare Part A program throughout the United States. In the State of Florida, HCFA contracted with Aetna Medicare Administration of Clearwater ("AETNA"). As administrator, AETNA was to receive, adjudicate and pay claims submitted by home health agencies and providers under the Part A program. * * * Under the Medicare Part A program, home health agencies possessing the required CON were reimbursed for reasonable costs and overhead expenses incurred for direct patient care. The Medicare Part A program reimbursed 100% of the allowable charges for participating agencies providing home health care services only if the patient: (a) was confined to the home; (b) was under the care of a physician who determined the need for home health care and set up a written home health plan, known as a Home Health Certification and Plan of Treatment; and (c) was in need of skilled nursing care on an intermittent basis, required physical or speech therapy, or had a continuing need for occupational therapy. Medicare Part A regulations further required home health agencies providing services to Medicare patients to maintain complete and accurate medical records reflecting the medical assessment and diagnoses of their patients, as well as records documenting actual treatment of the patients to whom services were provided and for whom claims for reimbursement were submitted by the home health agency. These medical records were required to be sufficiently complete to permit Medicare, through AETNA, to review the appropriateness of Medicare payments made to the home health agency under the Part A program. Among the written records necessary to document the appropriateness of home health care claims submitted under Part A of Medicare was a Home Health Certification and Plan of Treatment (HCFA Form 485) (hereinafter referred to as "POT"), signed by an attending physician certifying that the patient was confined to his or her home and was in need of the planned home health services. Moreover, any substantial changes to the POT, or the provision of any home health services beyond a two-month (62 days) period from the date of the original certification, required a re-certification by the attending physician of the need for these changed or additional home health services. Additionally, Medicare Part A regulations required home health agencies to maintain medical records of each visit made by a nurse or home health aide to a patient. The record of a nurse's visit was required to describe, among other things, any observed significant signs or symptoms, any treatment and drugs administered, any reactions by the patient, and any changes in the patient's physical or emotional condition. These written medical records generally were created and maintained in the form of "skilled nursing notes" and "home health aide observations." * * * HOME HEALTH AGENCIES INVOLVED Defendant MEDERI OF DADE COUNTY, INC. ("MEDERI DADE COUNTY") was a home health care provider, incorporated in the State of Florida ("Florida") and certified by the Florida Agency for Health Care Administration (AHCA). Defendant MEDERI DADE COUNTY was located in Coral Gables, Florida and possessed Medicare Provider Number 10-7087. Mederi of Miami Lakes, Inc. ("Mederi Miami Lakes") was a home health care provider, certified by the Florida Division of Health and Quality Assurance. Mederi Miami Lakes, which was a branch of defendant MEDERI DADE COUNTY, was located in the Miami Lakes area of Dade County, Florida and possessed Medicare Provider Number 10-7380. THE DEFENDANTS * * * * * * 43. Defendant PEDRO RENE BENITEZ was a resident of Dade County, Florida and a licensed physician. * * * PURPOSE OF THE CONSPIRACY 53. It was the purpose and object of the conspiracy for the defendants to enrich themselves by fraudulently inducing HHS to pay defendant MEDERI DADE COUNTY and Mederi Miami Lakes millions of dollars in Medicare Part A reimbursements for purportedly legitimate home health care claims and expenses, which claims and expenses the defendants knew to be false, fictitious, fraudulent and otherwise non-reimbursable in that, as the defendants well knew, the services were not actually provided or were provided to persons who the defendants knew were not qualified to receive Medicare home health care benefits. MANNER AND MEANS OF THE CONSPIRACY The manner and means by which the defendants sought to accomplish the purpose and object of the conspiracy included the following: * * * . . . defendants SUSAN REGUEIRO, LEOPOLDO PEREZ, JORGE PEREZ, MANUEL DIAZ, NORA COSTA, JESUS RODRIGUEZ, ERNESTO MONTANER, NILDA MIRANDA and RAUL CABRERA participated in the recruitment of licensed physicians, including defendants EDUARDO CUNI, PEDRO RENE BENITEZ, AGUSTIN GRANDA, JESUS OLIVA and JORGE MORENO, to sign fabricated and fictitious POT forms in exchange for cash and other financial benefits. In addition to directing the fabrication of POT forms, defendants SUSAN REGUEIRO and LEOPOLDO PEREZ, with the knowledge and concurrence of defendants JORGE PEREZ, MANUEL DIAZ, NORA COSTA, JESUS RODRIGUEZ, ERNESTO MONTANER, EDUARDO CUINI, PEDRO RENE BENITEZ, AGUSTIN GRANDA, JESUS OLIVA and JORGE MORENO, used employees of defendant MEDERI DADE COUNTY and Mederi Miami Lakes to generate the following fictitious supporting documentation, including: (a) records necessary to support the payments made to the nursing groups by defendant MEDERI DADE COUNTY and Mederi Miami Lakes for the claimed visits, including billing sheets, final matched itinerary/bill reports, and group batch worksheets; and (b) records necessary to support defendant MEDERI DADE COUNTY's and Mederi Miami Lakes' billing of those visits to Medicare. * * * 68. Defendants SUSAN REGUEIRO and LEOPOLDO PEREZ, with the knowledge and concurrence of defendants JORGE PEREZ, MANUEL DIAZ, NORA COSTA, JESUS RODRIGUEZ, ERNESTO MONTANER, EDUARDO CUNI, PEDRO RENE BENITEZ, AGUSTIN GRANDA, JESUS OLIVA, JORGE MORENO, JESUS PUNALES, ELISA GAVILLA, LYDIA GUADALUPE, JULIA GARCIA and NILDA MIRANDA, used employees of defendant MEDERI DADE COUNTY and Mederi Miami Lakes to process and submit to Medicare the false claims for home health visits originating from the nursing groups. * * * OVERT ACTS In furtherance of the conspiracy, and to accomplish its objects, at least one of the co-conspirators committed or caused to be committed, in the Southern District of Florida, and elsewhere, at least one of the following overt acts, among others: * * * CREATION OF FALSE DOCUMENTATION BY MEDERI EMPLOYEES * * * 48. On or about June 4, 1992, defendant PEDRO RENE BENITEZ caused his signature to be affixed on a POT form for a patient identified by the initials N.J. * * * On or about December 14, 1992, defendants SUSAN REGUEIRO, LEOPOLDO PEREZ, JESUS RODRIGUEZ and PEDRO RENE BENITEZ caused an employee of Mederi Miami Lakes to create a POT for a patient identified by the initials F.D. On or about December 14, 1992, defendants SUSAN REGUEIRO, LEOPOLDO PEREZ, JESUS RODRIGUEZ and PEDRO RENE BENITEZ, caused the signature of a licensed physician, defendant PEDRO RENE BENITEZ, to be affixed to a POT form for F.D. On or about December 14, 1992, defendants SUSAN REGUEIRO, LEOPOLDO PEREZ, JESUS RODRIGUEZ and PEDRO RENE BENITEZ caused employees of Mederi Miami Lakes to complete nineteen (19) false "skilled nursing notes" pertaining to F.D. * * * SUBMISSION OF FALSE CLAIMS * * * 93. On or about October 14, 1992, defendants SUSAN REGUEIRO, LEOPOLDO PEREZ, PEDRO RENE BENITEZ and LYDIA GUADALUPE caused an employee of Mederi Miami Lakes to submit a false home health claim in the amount of $2,700.00 to Medicare, through Aetna, pertaining to a patient identified by the initials M.G. (Emphasis added.) The false documentation Respondent made, presented and filed, or caused to be made, presented and filed, with the United States Department of Health and Human Services, through AETNA, for Medicare reimbursement for home health care visits resulted in a loss to the government with regard to patient N. J. of $500.00, with regard to patient F. D. of $4,600.00, and with regard to patient M. G. of $2,700.00, for a total loss of $7,800.00. For the creation of such false documentation, Respondent averred, at hearing, that he was paid "75.00 per beneficiary." (Transcript, page 22.) On April 27, 1998, consistent with a plea agreement Respondent had entered into with the United States Attorney for the Southern District of Florida (Petitioner's Exhibit 3), Respondent entered a plea of guilty to Count I of the Superseding Indictment ("Conspiracy to Defraud the United States, by making false claims to the [United States Department of] Health and Human Services in its administration of the Medicare program," contrary to 18 U.S.C. § 371), and on April 19, 1999, Respondent was adjudicated guilty of such offense. (Petitioner's Exhibit 4.) For such offense, given his cooperation with the United States attorney, discussed infra, Respondent was given a split sentence of 14 months, consisting of a term of imprisonment of 7 months, followed by 7 months of participation in the Home Detention Electronic Monitoring Program. Upon release from imprisonment, Respondent was to serve a term of 2 years on supervised release. Special conditions of supervision imposed by the judgement of conviction included the following: Effective immediately, the defendant shall surrender his medical license to the U.S. Probation Office. The U.S. Probation Office shall submit the license to the appropriate regulatory agency. The defendant shall not serve as a doctor or be employed or act in any capacity at any type of medical services, whether it be as a doctor, physician assistant or an administrator. The defendant shall not have any interest, directly or indirectly, in any medical businesses, whether it be medical services or medical supplies. The defendant shall notify the State Board of Medicine of his conviction and sentence in this case, and of the fact that his medical license has been taken by this Court. The defendant shall not participate in any Medicare/Medicaid billing procedures for any medical facility or program. Respondent was also ordered to pay, individually, restitution in the amount of $150,000.00 to the Palmetto Government Benefits Administration.2 The remaining charges (counts) against Respondent were dismissed (consistent with the plea agreement) on motion of the United States Attorney. On May 17, 1999, Respondent surrendered to the United States Marshal for the Southern District of Florida for commitment to the United States Bureau of Prisons to be imprisoned for a term of 7 months. Respondent apparently completed that term in or about December 1999, and as of the date of hearing (February 8, 2000) was serving his 7-month period of participation in the Home Detention Electronic Monitoring Program. According to Respondent, his term of supervised release (probation) is scheduled to end December 12, 2001. Circumstances related to aggravation or mitigation of any penalty Respondent has been actively engaged in the practice of medicine in the State of Florida from his initial licensure on June 22, 1988, until the Department suspended his license (on an emergency basis, as a consequence of the pending federal charges) on April 6, 1999.3 During such period, in addition to his active practice, Respondent volunteered his services (from 1998 until his license was suspended) two or three days a month to the Dade County Chapter of the American Red Cross; volunteered his services for 5 or 6 years as a member of the medical staff of "Camilla's House," an organization serving the homeless; and volunteered his services to the American Red Cross for treatment of the victims of Hurricane Andrew. Respondent has never previously been disciplined by the Board of Medicine, and notwithstanding his conviction, continues to enjoy the support of former patients and colleagues. With regard to the Mederi case, Respondent cooperated with the United States attorney and the Federal Bureau of Investigation, albeit not until investigators discovered (3 years after the events) his participation in the conspiracy, and confronted him with their findings; it appeared in his best interest to cooperate. Notwithstanding, consistent with the terms of his plea agreement, Respondent provided truthful information, testified on behalf of the government at trial, and proved to be a key witness in resolving the case favorably for the government. With regard to the strictures placed on his conduct under the terms of conviction, the proof demonstrates Respondent has complied with the Special Conditions of Supervision. Indeed, during the term of his imprisonment, Respondent was formally excluded from eligibility to participate in the Medicare, Medicaid, and all Federal health care programs; was barred from receiving payment, directly or indirectly, from the Federal Employees Health Benefit Program; and, surrendered his controlled substances privileges (Drug Enforcement Administration Certificate of Registration). As for restitution, there is no proof of record that Respondent has made any payment toward satisfaction of such obligation; however, it is also noted that Respondent was imprisoned from May 17, 1999, to on or about December 12, 1999, and, consequently, unemployed. As for his future plans, Respondent, given his training and experience, desires to resume the practice of medicine upon completion of his term of supervised release (December 12, 2001), provided the Department does not further restrict his licensure status.4 Such practice will, according to Respondent, allow him an opportunity to properly support his family,5 and it would also appear likely that such employment would accord Respondent an opportunity to satisfy, in whole or part, his obligation to pay restitution for his criminal offense.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be rendered adopting the foregoing Findings of Fact and Conclusions of Law, and which, for the violation found, imposes an administrative fine of $10,000.00; orders compliance with all terms of the judgment of conviction; and continues the suspension of Respondent's license for a term of 2 years following successful completion of his term of supervised release, followed by a 2-year period of probation on such terms and conditions as the Board may deem appropriate. DONE AND ENTERED this 25th day of May, 2000, in Tallahassee, Leon County, Florida. WILLIAM J. KENDRICK 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 25th day of May, 2000.
The Issue Whether applications for Certificates of Need filed by Medshares of Florida, Inc., and National Healthcare, L.P., for Medicare Certified Home Health Agencies in Health Planning District 8 for the July 1997 Planning Horizon, should be granted or denied by the Agency for Health Care Administration.
Findings Of Fact The District District 8 is composed of Sarasota, DeSoto, Charlotte, Lee, Glades, Hendry, and Collier Counties. Rule 59C-1.031(2)(e), Florida Administrative Code, Section 408.032(5), Florida Statutes. If granted, the requested certificates of need will enable Medshares and NHC to provide Medicare-certified home health services throughout the entire district. The parties disagreed as to the number of District 8 home health companies with Medicare-certified home health agency CONs. For purposes of the 1997 planning horizon, the district has thirty-five home health care companies (reporting and non- reporting) with certificates of need for Medicare-certified home health agencies. The Parties Medshares of Florida, Inc., (Medshares) was formed "pretty much immediately prior to the application [in this case]." AHCA No. 10, p.15. Although it recently received a CON to establish a Medicare-certified home health agency in District 9, there has not been enough time for Medshares to build a record in Florida. But Medshares is a member of a family of companies (the "Medshares Family") founded in Tennessee in 1985. The Medshares family has now expanded into 12 states. Through 2000 employees, it provides various home health services, including Medicare-certified home health services, private nursing services, management services for home health agencies, infusion services, and consulting services. In 1996, the Medshares Family provided approximately one million visits through its Medicare-certified home health agencies and approximately 1.7 million visits through its non- Medicare-certified and managed home health agencies. Recent growth in Medshares Family business is attributable to increased admissions, not to increased home health visits. It is Medshares Family policy for each of its home health agencies which have operated for three years to seek accreditation from the Joint Commission on the Accreditation of Healthcare Organizations (JCAHO). This policy, of course, is applicable to a Medshares District 8 agency should the Medshares application in this case be granted. In the nursing home business for over 26 years, National HealthCare, L.P., (NHC) is a national nursing home company and a southeastern regional home health care company. It has thirty- three home care offices in three states and did in excess of 750,000 home health visits in 1996. It owns or manages one hundred and five nursing homes throughout the United States. It owns eight nursing homes in Florida of which five have a superior rating. NHC manages thirty-two other centers in Florida. NHC currently has three nursing home facilities which it owns or manages in District 8. The facilities, in Collier, Sarasota, and Charlotte Counties, have a total of 420 beds. Because of this ownership of existing facilities in the district, NHC has developed significant community linkages, training programs, and community involvement in the district. Obtaining a certificate of need for a Medicare-certified home health agency in District 8 will enhance NHC's continuum of care in District 8. NHC has a well-developed corporate and regional management structure dedicated to providing high quality care to its patients. The management structure places a significant amount of decision making at the home health agency level. The corporate and regional structure's purpose is to support the local delivery of health care services. The Agency for Health Care Administration is designated by statute as the "single state agency to issue, revoke, or deny certificates of need . . . in accordance with the district plans, the statewide health plan and . . . federal and state statutes." Section 408.034(1), Florida Statutes. Need Projections Paragraph (a) of Section 408.035 AHCA's rule setting a home health agency need methodology was invalidated several years ago. See Principal Nursing v. Agency for Health Care Administration, 16 FALR 10465, reversed in part, 650 So. 2d 1113 (Fla. 1st DCA 1995). AHCA did not publish a fixed need pool for Medicare-certified home health agencies for the July 1997 planning horizon applicable to these applicants. AHCA did not propose any methodology in its initial, free-form review or testimony of the applications. Instead, AHCA left it to the applicants to develop and present need methodologies in support of their applications. Medshares' Need Methodologies and AHCA Criticism The Medshares application presented various need methodologies and estimates of need for additional Medicare- certified home health visits in District 8. The primary Medshares methodology is a clinical need model based upon data obtained from the National Center for Health Statistics. The model develops home health use rates by sex for four age groups, 0-64, 65-74, 75-84, and 85+, and by geographic region. Patient volume and visits projections are made by developing individual use rates for each diagnostic category collected in the data survey. Each use rate is the result of dividing the total number of visit characteristics for the specific age and sex combination by the matching age and sex population estimates. To project need for 1997, the developed use rates are applied to the projected 1997 District 8 population by diagnostic category. For the 1997 planning horizon for District 8, Medshares' clinical need model estimates total visits of 3,488,290, which is an increase of approximately 1.6 million visits over 1994 (the latest year for which data was available at the time of the application). The Agency criticized Medshares' clinical need model because it included population aged 64 and under. The criticism fails on two counts. First, Medicare-certified home health agencies are expected to provide home health services to persons under age 65. Second, inclusion of the population and use rates for those under age 65 does not have any significant impact on Medshares needs projections since only 3 per cent of the originally projected visits are attributable to population under 65. AHCA's major criticism of Medshares clinical need model is that it considers the model's total visits projection of 3.4 million in 1997 to be an unreasonable increase over the actual visits in 1996 shown in AHCA publications. (These publications were not available at the time of the filing of the applications and so were not used by Medshares.) AHCA's published actual visits for 1996 of 2.4 million, however, are, without doubt, not accurate. The figure assumes that 9 agencies which did not report in 1996 conducted the same number of visits in 1996 as they reported in 1995, that is, 900,000. Whether this assumption is to high or too low, there is little question that it is not correct. If, for example, an agency not reporting in 1996 did not do so because it did not conduct any visits (not an unreasonable assumption since the agencies are obligated by law to report) then the 1995 reported visits are much too high for that agency as a figure for 1996 visits. On the other hand, if the non-reporting agency simply failed to report in 1996, the number of 1995 visits is likely lower than the actual number of visits in 1996. Home health care visits have been on the increase in District 8, a trend mirroring the state-wide trend. Utilization of home health care agencies is increasing because of growth in elderly population and an increase in the number of visits per patient. Furthermore, the amount of time spent by patients in hospitals has been decreasing. The decrease translates into an increased need by the patients for home health care visits. The need for home health care will continue to increase because it is a cost-effective alternative to nursing home placement and hospital care. In sum, AHCA's criticism of the Medshares clinical need methodology is based on inaccurate assumptions. Perhaps AHCA is correct that Medshares' projected visits for 1997 is unreasonably high. But the projection squares with the direction that home health visits are going, both because of increase in population and increase in use rate as well as decrease in hospital's lengths of stay. In addition to the clinical need model, Medshares projected need by two other methodologies. Through the first of these two, the clinical need model was tested by comparing its results to projections based upon the average Medicare-certified home health use rate growth from 1991 to 1995. This methodology yielded an estimate of 3.6 million for the 65 and over population of District, thus supporting the need projected by the clinical need model. In the second of the two additional methodologies, Medshares estimated the number of home health visits based upon the number of hospital discharges of patients within a certain Major Diagnostic Category (MDC). This methodology yielded an estimated need for 2,704,910 visits in 1997. All three of Medshares' methodologies provided an estimate of need for at least two additional Medicare-certified home health agencies in District 8 in 1997. NHC's Need Methodologies One of NHC's methodologies computes the increase in the home health use rate from 1993 to 1994 and applies a reduced increase in use rates to the projected population for each year to the horizon year of 1997. The methodology yields projected visits of 2,403,630 visits in 1997, for an increase from 1994 of 550,950 visits. In contrast to AHCA's determination that the Medshares' methodologies were unreasonable, AHCA agreed that NHC's methodology was reasonable. AHCA found fault with the NHC opinion of need, however, because of the data NHC used in its calculation of need. The AHCA document relied on by NHC for its base year (1993) visits of 1,656,112 was later revised by AHCA to reflect 1,702,106 visits in 1993. As a result, AHCA contends, the initial use rate increase used by NHC (7.6 per cent from 1993 to 1994) is higher than the actual use rate increase (4.8 per cent), which means that NHC's projections are overstated. Other criticisms were leveled by AHCA at NHC methodologies used in the application. The Agency's criticisms do not hold sway. Overlooking for the moment that any error was caused by faulty data provided NHC by the Agency, given the undisputed increase in the use rate, the NHC forecast for 1997 visits compared to actual 1996 visits shows the 1997 forecast to be conservative. After taking all of the Agency's criticisms into account, there was competent substantial evidence to establish a need for five more home health agencies in the district. The inadequacy of the criticisms was underscored when NHC's health planning expert used a "median agency size" in his calculations, an approach now favored by AHCA as it attempts to develop a new rule methodology for ascertaining Medicare-certified home health agency numeric need. Employing such a method still yielded a need for at least two more Medicare-certified home health agencies in the district. State Health Plan Preferences The Florida State Health Plan establishes six preferences for applicants of certificates of need for Medicare- certified home health agencies. The State Health Plan provided for preference to an applicant proposing to serve AIDS patients, (Preference 1). Both Medshares and NHC meet Preference 1. Medshares will provide services to AIDS and HIV-positive patients. The Medshares family has a history of providing services needed by these patients and Medshares proposes to condition its certificate on provision of services to AIDS patients. NHC is actively involved and has seen patients for Bay Aids Services Information Coalition, Tallahassee AIDS Support Services and Big Bend - Comprehensive AIDS Residential Education Services. NHC provided extensive documentation in its application to demonstrate current provision of significant levels of AIDS care. It has the organizational capability to continue to do so. Preference is given by the State Health Plan to an applicant proposing to provide a full range of services, including high technology services, unless they are sufficiently available and accessible in the same service area, (Preference 2). NHC surveyed existing home health agencies in the district to reveal that 29 agencies do not provide dietary guidance, 28 do not provide homemaker services, 26 do not provide medical supplies, 21 do not provide respiratory services, six do not provide speech therapy and five do not provide social services. NHC will provide all of these. NHC meets Preference 2. Medshares provides a full range of skilled nursing, homemaker, and therapy services including cardiac care, continuous IV therapy, diabetes care, oncology services, pediatrics, rehabilitation services, pain therapy, total parenteral nutrition, speech, physical and occupational therapies, respiratory therapies, audiology therapy, and infusion therapy. Medshares meets Preference 2. The State Health Plan provides a preference to applicants with a history of serving a disproportionate share of Medicaid and indigent patients in comparison with other providers within the same AHCA service district and proposing to serve such patients within its market area (Preference 3). There is no definition of "disproportionate share" and no data available to determine the level of Medicaid and indigent care provided by home health providers in District 8. Nonetheless, it is fair to find that NHC meets this preference and Medshares, based on the experience of the Medshares family, meets the spirit of this preference. In addition, both have committed to continue to provide Medicaid and indigent care; in the case of NHC, 2 per cent of patient visits to Medicaid patients and 1.5 per cent of its visits to the indigent, in the case of Medshares, its application is conditioned on 1 per cent of its patients being Medicaid and another 1 per cent being indigent. The State Health Plan provides a preference to an applicant proposing to serve counties under served by existing home health agencies (Preference 4). No demonstration was made that any of the counties in District 8 were underserved by existing home health agencies. The fifth State Health Plan preference is for applicants which commit to provide the department with consumer survey data measuring consumer satisfaction. Both Medshares and NHC meet this preference. The final preference in the State Health Plan is for an applicant proposing a comprehensive quality assurance program and proposing to be accredited by the Joint Commission on Accreditation of Hospital Organizations. Both Medshares and NHC meet this preference with NHC conditioning its application on implementation of a quality assurance program and successfully obtaining JCAHO accreditation. The District 8 Health Plan The District 8 Health Plan contains two allocation preferences for applicants for Medicare-certified home health agencies. The first is for the applicant able to demonstrate community contacts and relationships with hospitals, nursing homes, hospices, psychiatric, substance abuse, mental health, and other outpatient facilities within the proposed service area. The second is for the applicant showing a commitment to, or a historical record of, service to the medically indigent or other healthcare underserved population groups. NHC has developed significant community linkages through its existing nursing home beds in the health planning district with the types of health care providers listed in the preference. Further, NHC has agreed to condition its CON on the satisfaction of this preference. Medshares does not have operations in the district currently. But its application contained evidence of contact with local District 8 health care providers. As discussed earlier, both NHC and Medshares meet the second preference of the local health care plan. Availability and Access Paragraph 408.035(1)(b) Access issues become much less important for applicants who have demonstrated a numeric need for their proposals. Nonetheless, the addition of both NHC and Medshares Medicare- certified home health agencies will enhance both availability and access to these health services. Competition and Cost Effectiveness Paragraph 408.035(1)(l) Competition among home health providers in District 8 is more restricted than the number of providers would indicate because the District 8 market is dominated by a few large providers. Four companies provide 75 per cent of home health visits. Seventeen of the agencies are hospital-based and 10 of these are owned by one hospital. Competition will be enhanced by approval of the Medshares and NHC proposals. Both Medshares and NHC have the ability to compete effectively with the large providers in District 8. Cost effectiveness should be enhanced as well. District 8 has the highest average cost per home health visit in Florida. The 1994 average was $71.48. Generally, hospital-based home health agencies have higher costs. Hence, it is not surprising that District 8, with its many hospital-based agencies, has the highest average cost per home health visit. The cost per visit projected by Medshares in its second year is $65.21. Approval of the Medshares and NHC applications should help to lower the district-wide average cost per visit. Past and Proposed Provision of Services to Medicaid Patients and the Medically Indigent Paragraph 408.035(1)(n) As discussed above, both Medshares and NHC meet this statutory criterion. Multi-level Health Care System Paragraph 408.035(1)(o) Home health services play a key role in the continuum of care in a multi-level health care system by providing a less restrictive and less costly setting for discharges of patients from hospitals and nursing homes to their homes or assisted living facilities. Medshares participates in programs which promote a continuum of care, including a pre-heart transplant and post-heart transplant program, a "Healthy Homecomings" program for high risk pregnancies and a program which enables physically challenged persons to remain employed. NHC proposes to provide home health care in a continuum of care in conjunction with NHC's own nursing home and assisted living facilities located throughout District 8. An award to NHC would expand the continuum of care already provided by NHC.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED: That the Agency for Health Care Administration enter its final order granting the applications of Medshares of Florida, Inc., and National HealthCare L.P. for CON Nos. 8412 and 8413, respectively. DONE AND ORDERED this 3rd day of February, 1998, in Tallahassee, Leon County, Florida. DAVID M. MALONEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 3rd day of February, 1998. COPIES FURNISHED: Mark Thomas, Esquire Agency for Health Care Administration 2727 Mahan Drive, Suite 3431 Fort Knox Building III Tallahassee, Florida 32308-5403 Alfred W. Clark, Esquire Post Office Box 623 Tallahassee, Florida 32301-0623 Gerald B. Sternstein, Esquire Frank P. Rainer, Esquire Sternstein, Rainer & Clarke, P.A. 314 North Calhoun Street Tallahassee, Florida 32301 Jerome W. Hoffman, General Counsel Agency for Health Care Administration Fort Knox Building 3 2727 Mahan Drive Tallahassee, Florida 32308-5403 Sam Power, Agency Clerk Agency for Health Care Administration Fort Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403
Findings Of Fact On March 12, 1979, Personnel Pool of Pensacola, Inc., d/b/a Medical Personnel Pool, filed its application for certificate of Need with the Florida Panhandle Health Systems Agency, Inc. This application was deemed complete on April 2, 1979. The application as originally filed sought to receive a certificate of need which would entitle the Petitioner to offer home health care on an intermittent basis in Escambia, Santa Rosa, Okaloosa, and Walton Counties, Florida. This application was subsequently amended by dropping the request for certificate related to Santa Rosa, Okaloosa and Walton Counties, leaving at issue only Escambia County, Florida. The Petitioner, hereinafter referred to as "Personnel Pool", is a solely owned corporation of Thomas S. Siler, 1800 North Palafox Street, Pensacola, Florida 32501. His corporation was established as a franchise issued by Personnel Pool of America, Inc., a subsidiary of H & R Block Company. The State of Florida, Department of Health and Rehabilitative Services, is an agency of the State of Florida, charged with the duty to evaluate the applications for certificate of need and to issue such certificates as would be appropriate under the terms of Chapter 381, Florida Statutes, and Rule 10-5, Florida Administrative Cede. This application for certificate of need and that of the companion case of Upjohn Healthcare Home Health Agency, hereinafter referred to as "Upjohn", are also considered in accordance with the Health Systems Plan of the Florida Panhandle, effective December 15, 1978. A copy of that document may be found as the Joint Exhibit No. 2 admitted into evidence. After receiving the application for certificate of need, that application was reviewed by the staff of the Florida Panhandle Health Systems Agency, Inc. That staff recommended disapproval of the certificate of need in a report issued on April 23, 1979. This report was supplemented by a further report of May 15, 1979, and this additional report of the staff continued to recommend disapproval of the application: On May 2, 1979, the project review committee of the Northwest Florida Sub-district recommended to the Northwest Florida Sub-district Advisory Council that the certificate of need be granted. A public hearing on the issue was held on May 8, 1979. The Northwest Florida Sub-district recommended disapproval of the project by action of May 17, 1979. When the application was presented to the Regional Council, Florida Panhandle Health Systems Agency, Inc., on May 31, 1977, that organization recommended the approval of the certificate of need to serve Escambia County, Florida, only. On June 29, 1979, after review by the Respondent, Art Forehand, the Administrator of the Office of Community Medical Facilities, wrote the Petitioner in the person of Mr. Siler and advised Mr. Siler that the application for certificate of need had been denied. On August 2, 1979, Mr. Siler appealed the decision of denial and the case was assigned to the Division of Administrative Hearings for consideration which resulted in the hearing which is the subject of this Recommended Order. (The details of the various items discussed in developing the chronology of this application may be found in the Joint Composite Exhibit No. 1 admitted into evidence.) In presenting its case, the Petitioner principally attempted to refute the Department of Health and Rehabilitative Services', hereinafter referred to as "Department", letter of June 29, 1979, which gave three reasons for denying the certificate of need. Those reasons were: The proposal is not consistent with standards and criteria established in Chapter 10-5.11(14), Rules of the Department of Health and Rehabili- tative Services. Extenuating and mitigating circumstances which may be considered in approving a Certificate of Need for a new home health agency have not been demonstrated. There are other available and adequate home health care service providers in the proposed service area which could serve as an alterative to the proposed project and prevent unnecessary duplication of resources. The first in the series of stated reasons for denying the certificate of need deals with Rule 10-5.11(14), Florida Administrative Code. The language of that provision being: (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 pro viding 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 hose 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 des cribed need determination procedure does not clearly indicate need are: Documentation that the population of of the proposed service area is being denied access to home health care services in that exist ing home health agencies or subunits within the proposed service area are unable to provide ser vice 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. What the Petitioner tried to do in the hearing was to attack the efficacy of the above-cited rule by claiming that the required 300 average daily patient census was not reasonable. In aid of this argument, it offered its Exhibit No. 3 and Composite Exhibit No. 4, both documents being authored by Herb Traxler. Petitioner also offered its Exhibit No. 7 prepared by Mr. Traxler, which is a draft proposal establishing the methodology for estimating the need for home health care in the State of Arkansas. In addition, the Petitioner offered into evidence a letter of May 30, 1979, from Arthur H. Long, the Executive Director of the Northwest Florida Home Health Agency, Inc., one of the current agencies holding a certificate of need to deliver similar services to those for which this Petitioner has made its request. Mr. Long's corporation holds a certificate for Escambia County, Florida. That letter, which is the Petitioner's Exhibit No. 6, sets out statistical data related to census for Northwest Florida Home Health Agency, Inc., and the Escambia County, Florida, Health Department, operating through-the Visiting Nurses Association, Inc. These latter organizations are also involved in the delivery of health care of the type for which the Petitioner seeks a certificate of need to administer. The true census for Northwest Florida Home Health Agency, Inc., in its last complete 1979 reporting quarter, shows that for Escambia County the patient census for April was 71; for Nay, 77; and for June, 73, totaling 221 patients with an average census of 74. This testimony was presented by Mr. Long. This organization serves only Medicare patients who are enrolled with the service group. Ms. Marian Humphrey, a public health nursing supervisor for the Escambia County Health Department, established the census in Escambia County for that Health Department as serviced by the Visiting Nurses Association, Inc. Beginning in January, 1979, the census was 101 Medicare patients; 14 Medicaid patients; 2 CHAMPUS patients; 9 private patients and 71 free patients, the latter category being patients who did not pay for services. In February, 1979, there were 164 Medicare patients; 16 Medicaid patients; 2 CHAMPUS patients; 7 private patients and 72 free patients. In March, 1979, there were 128 Medicare patients; 0 Medicaid patients; 2 CHAMPUS patients and 11 private patients. In April, 1979, there were 147 Medicare patients; 13 Medicaid patients, 2 CHAMPUS patients and 9 private patients. In May, 1979, there were 165 Medicare patients; 12 Medicaid patients; 3 CHAMPUS patients; 7 private patients and 88 free patients. In June, 1979, there were 148 Medicare patients; 10 Medicaid patients; 2 CHAMPUS patients; 10 private patients and 61 free patients. In July, 1979, there wore 150 Medicare patients; 10 Medicaid patients; 2 CHAMPUS patients; 10 private patients and 77 free patients. In August, 1979, there were 134 Medicare patients; 11 Medicaid patients; 2 CHAMPUS patients; 14 private patients and 96 free patients. These statistics indicate that the two current servicing agencies in the preceding full quarter of 1979 which would have been April, May and June, considered separately, did not exceed the average of 300 patients for that calendar quarter, nor did the statistics show an excess of 300 in other reported quarters. The second reason for denying the certificate of need, as stated in the June 29, 1979, correspondence of Mr. Forehand, dealt with the possible extenuating and mitigating circumstances which would allow for issuance of a certificate of need even where the census for the existing service organizations had not exceeded 300 for the prior calendar quarter. Again, that provision of Rule 10-5.11(14)(b) states: (b) Mitigating and extenuating circumstances which must be met for the department to issue a certificate of need for a proposed new home health agency or subunit even though the previously described need determination procedure does not clearly indicate need are: Documentation that the population of the proposed service 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 pro posed new home health agency or subunit would foster cost containment for all providers in the health service area. The first of the provisions under that sub-subsection of the rule deals with inability of the existing home health agency to provide service to persons in need of the home health care. Northwest Florida Home Health Agency, Inc., requires that their patients be registered with the organization and their office is open Monday through Friday from 8:00 a.m. to 4:00 p.m. After 4:00 p.m. on weekdays and on the entire weekend, a registered nurse is on call through the utilization of a "beeper" system. Again, this applies only to Medicare patients enrolled with the organization. To be enrolled, it is necessary for the enrollment to have been achieved through a request by a physician. The Escambia County Health Department is open from 8:00 a.m. to 4:30 p.m. Monday through Friday and serves all classes of patients. There are on- call nurses who work on weekends. The nurses are called by utilization of the Nurses Directory for Escambia County. The exception to this statement is that two days a year the services of the Escambia County Health Department are not available due to holidays. At night during the week those persons who are patients of the Escambia County Health Department are instructed to arrange for emergency treatment in the Emergency Room or ambulatory care at West Florida Hospital, assuming those patients cannot wait until the following morning for attention. Neither the Northwest Florida Home Health Agency, Inc., nor the Escambia County Health Department's representatives indicated any inability to provide service for those in need of health care, noting that Northwest Florida Home Health Agency, Inc., only serves Medicare patients. The Petitioner has asserted that the services spoken of in the preceding paragraph are not sufficient and examples of the lack of available services, according to the Petitioner, are as shown on pages 65 through 68 of the transcript of this hearing. Therein are cited several examples of persons unable to receive necessary care of the type which the Petitioner desires to deliver. These examples are taken from the presentation of Upjohn in their case, D.O.A.H. No. 79-1747, and are hearsay accounts made by the representative of Upjohn, Ms. Krumel, from information purportedly given to her on the subject of lack of service. This Petitioner made no further presentation on the question of lack of service. The Petitioner then attempted to establish that the granting of a certificate of need, to it and to Upjohn would foster cost containment for all providers in the health service area within the meaning of the above-cited rule. For this proposition, it offered its Exhibits 5 and 9. After analyzing this testimony and the documents, at best it could be said that there is no increase or decrease in the cost of the delivery of services by the expansion of the number of certificate holders, and the Petitioner's presentation is not convincing in that attempt. The only real evidence offered on the cost estimates are as found in the Joint Exhibit No. 1 which outlines the cost charges of the various existing home health agencies and the current applicants, i.e., this Petitioner and Upjohn. These statistics were available for review and they did not indicate that the granting of one or more new certificates of need would foster cost containment for all providers in the subject health service area. Personnel Pool and Upjohn were afforded an opportunity to offer their testimony to establish in what respects they might be superior to the other applicant for a certificate of need, assuming that only one certificate of need was to be granted. The two Petitioners did not wish to make any direct attack on the special qualifications of the collateral Petitioner. Both parties proceeded on the basis of offering their remarks to be available for comparison if the contingency were realized which required that only one certificate of need be issued. It is not necessary to detail the special qualifications of these Petitioners, because no certificate of need will be recommended for issuance in Escambia County, Florida, the location in which Personnel Pool and Upjohn are potential competitors for a sole certificate of need. Nonetheless, the facts offered in support of the special qualifications of Personnel Pool be found in the transcript of the hearing on pages 228 and 251 through 256. The testimony on Upjohn's special qualifications may be found in the transcript of record, pages 187 through 190.
Recommendation This Recommendation is being entered in view of the Facts and Conclusions of Law in this case and those Facts and Conclusions of Law in the companion case, D.O.A.H. No. 79-1747, Upjohn Healthcare Home Health Agency v. State of Florida, Department of Health and Rehabilitative Services. Upon consideration of the Facts herein and the Conclusions of Law, it is recommended that the Petitioner, Personnel Pool of Pensacola, Inc. d/b/a Medical Personnel Pool, be denied its request for a certificate of need to serve Escambia County, Florida. It is further recommended that the agency in entering its final order do so by a process of simultaneous review of this Recommended Order and the Recommended Order entered in D.O.A.H. Case No. 79-1747, Upjohn Healthcare Home Health Agency v. State of Florida, Department of Health and Rehabilitative Services, and that final orders be entered on the same date with copies to be served on the representatives of each applicant in this case and in the companion case mentioned above. DONE AND ENTERED this 5th day of November, 1979, in Tallahassee, Florida. CHARLES C. ADAMS Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: Vivian Krumel, R.N. Mr. Art Forehand, Administrator Service Director, Office of Community Medical Healthcare Facilities Department of Health and 15 West Strong Street Rehabilitative Services Old Townhouse Square 1323 Winewood Boulevard Pensacola, Florida 32501 Tallahassee, Florida 32301 Mr. John Owens Mr. Joe Dowlesss Zone Manager, West Florida Office of Licensure and Upjohn Health Care Services Certification 3118 Gulf to Bay Blvd., Department of Health and Suite 300 Rehabilitative Services Clearwater, Florida 33519 Post Office Box 210 Jacksonville, Florida 32202 Charles T. Collette, Esquire Department of Health and Mr. Herbert E. Straughn Rehabilitative Services Office of Community Medical 1324 Winewood Blvd. Facilities Tallahassee, Florida 32301 Department of Health and Rehabilitative Services Sherrell E. Pheps 1323 Winewood Boulevard Governmental Affairs Tallahassee, Florida 32301 Representative Personnel Pool of America, Inc. Mr. Thomas S. Siler 303 Southeast 17th Street Owner/Administrator Fort Lauderdale, Florida 33316 Personnel Pool of Pensacola, Inc. 1800 North Palafox Street Pensacola, Florida 32501
The Issue Whether the applications for certificate of need numbers 8380, 8381, 8382 and 8383, filed by Petitioners RHA/Florida Operations, Inc., Care First, Inc., Home Health Integrated Health Services of Florida, Inc., ("IHS of Florida,") and Putnam Home Health Services, Inc., meet, on balance, the statutory and rule criteria required for approval?
Findings Of Fact Care First The Proposal Care First, the holder of a non-Medicare-certified home health agency license, was established in March of 1996. Owned by Mr. Freddie L. Franklin, Care First is the successor to another non-Medicare-certified home health agency also owned by Mr. Franklin: D. G. Anthony Home Health Agency ("D. G. Anthony"). Established in May of 1995, D. G. Anthony provided over 10,000 visits in its first 10 months of operation mostly in Leon and Wakulla Counties, pursuant to a contract with Calhoun-Liberty Hospital Association, Inc. Very few of the 10,000 patients were referred to D. G. Anthony by Calhoun-Liberty; they became D. G. Anthony's patients through community-based networks, including physicians, created through the efforts of Mr. Franklin and D. G. Anthony itself. D. G. Anthony was dissolved in 1996. Both its patient census and its staff of 45 were absorbed by Care First. D. G. Anthony's contract with Calhoun-Liberty was substantially assumed by Care First so that it provided service to Medicare patients as Calhoun-Liberty's subcontractor. From the point of view of the federal government, the Medicare patients served by Care First were Calhoun-Liberty's patients, even those who had not been referred to Care First by Calhoun Liberty and who had been referred from other community sources. Care First, therefore, was simply a sub- contractor providing the services on Calhoun-Liberty's behalf. The contract was terminated effective December 1, 1996. Calhoun-Liberty was free to terminate Care First with 30 days notice, a peril that motivated Mr. Franklin to seek the CON applied for in this proceeding. With the termination of the contract, Care First ceased serving Medicare patients, "because Mr. Franklin did not want to enter into another subcontractor arrangement because of all the issues and problems," (Tr. 934,) associated with such an arrangement. Mr. Franklin is involved with nursing homes as the administrator at Miracle Hill Nursing Home in Tallahassee. He is an owner of Wakulla Manor Nursing Home in Wakulla County, and he owns a 24 bed CLF, Greenlin Villa, also in Wakulla County. Miracle Hill has the highest Medicaid utilization of any nursing home in District 2. Both Miracle Hill and Wakulla Manor are superior rated facilities. On the strength of Mr. Franklin's extensive experience with community-based organizations and health care services, as well as Care First's succession to D. G. Anthony and other historical information and data. Care First decided to proceed with its application. In the application, Care First proposes to establish a home health agency that, at first, will serve primarily Franklin, Gadsden, Jefferson, Leon, Liberty and Wakulla Counties. It plans to expand into Madison and Taylor Counties in its second year of operation. Five of these eight counties have high levels of poverty; six of the eight are very rural, with the population spread widely throughout the county. Ninety-six percent of Care First's patients are over age Minority owned, approximately 65% of the patients are members of minorities. Many of the patients live in rural areas and are Medicaid recipients or are uninsured low income persons who do not qualify for Medicaid but cannot afford home health care. Since it will be serving the same patient base as a Medicare-certified agency, Care First has committed to the provision of 7% of its visits to Medicaid patients and 1% of its visits to patients requiring charity/uncompensated care. Care First projects 18,080 visits in its first year and 29,070 in its second year. Care First will promote efficiency through the use of a case management approach. Each patient will be assigned a case manager who will act as the patient advocate to provide care required and to identify and assist the patient with access to other "quality of life" enhancing services. Care First proposes an appropriate mix of services, including skilled nursing, physical therapy, speech and language therapy, occupational therapy, home health aide services and social services. Care First estimates its total project cost at $25,808. Of this amount, $2,000 is indicated as "start-up cost", with nothing allocated to salaries. Care First indicates no "capital projects" other than its proposal for the home health agency in District 2. Care First's proposal would be funded from a $60,000 bank line of credit. Projected Utilization Potential patients will be able to gain access to Care First through several avenues, including physician referral, hospital referral, nursing home discharge, assisted living referrals from community agencies and organizations such as Big Bend Hospice and through private referral. In addition, there are several natural linkages to the community for Care First. Wakulla Manor and Miracle nursing facilities offer Care First's services to discharged residents in need. Very often, residents and families choose Mr. Franklin's agency because they are familiar with him, staff or the quality of care provided. Residents of Greenlin Villa, owned by Mr. Franklin, frequently chose Care First when in need of home health agency services. Mr. Franklin's civic, church, and community involvement is impressive. He is president of the Florida Health Care Association, chairman of the board of the Tallahassee Urban League, superintendent of the Wakulla County Union Church Group, and serves on the advisory board for the Allied Health Department for Florida A&M University. In the past, he has served on the Board of Trustees of Tallahassee Community College. He was accepted as an expert in long-term care administration in this proceeding based in part on his service on the Governor's Long Term Care Commission. Miracle Hill has held a "Superior" licensure rating for the last ten consecutive years. It is the highest rating awarded by the AHCA licensure office and is intended to blazon the high quality of care provided by the facility. Although reported through Calhoun-Liberty, very few of D. Anthony's and Care First's past referrals have been generated through that affiliation. Rather, they have come through community contacts and getting the referrals from "talking with physicians," (Tr. 922), in Tallahassee and the surrounding areas, many of whom Mr. Franklin has gotten to know through his post as Administrator of Miracle Hill Nursing Home. By far, it is through physician referrals that Care First receives most of its patients. Care First's physician referral list includes 47 doctors who referred patients to D. G. Anthony since May, 1995. These doctors practice in urban areas and some have rural clinic offices which they staff on certain days of the week. Physicians are willing to refer patients to Care First because of the quality of care which has been provided by Care First, as well as the reputation of its owners. The Care First application included letters of support from eight physicians who have referred patients to Care First in the past and state that they will continue to support Care First with referrals in the future. Among the letters included are those from Dr. Earl Britt, a practitioner of internal medicine and cardiology in Tallahassee, and Dr. Joseph Webster, who practices internal medicine and gastroenterolgy in Tallahassee. Many of the patients of these two physicians are elderly. Dr. Britt's patients often have chronic hypertension or heart disease, are diabetic or suffer strokes. These two physicians provided over half the total number of patient referrals to D.B. Anthony and Care First. Dr. Britt and Dr. Webster established through testimony that Freddie Franklin and Care First have an excellent reputation for provision of quality of care and enjoy significant support among physicians within the service area. Moreover, Dr. Britt, although based in Tallahassee, stressed the importance of Care First's proven ability to provide home health services in the rural setting both from the standpoint of understanding the needs of the rural patient and from being able to travel over rural terrain in order to deliver services. (Tr. 1151, 1152, 1154). Approximately 11,500 visits were performed by D. G. Anthony staff from the period of May 1995, through April 1996, before they became the staff of Care First. Since the agency has established a presence in the district and has physician and other referral mechanisms in place, it is reasonable to project that Care First will continue to grow and will experience between 18,000 and 20,000 visits in its first year and 28,000 to 31,000 visits in year two as a Medicare-certified home health agency. These projections stem from the historical and very recent monthly growth of D. G. Anthony, as well as demand it is experiencing from Franklin and Jefferson Counties, two counties it does not serve regularly at present but plans to serve regularly in the future. The reasonableness of Care First's projections is bolstered by the conservative number of visits per patient the projections assume, 35, when typically Medicare-certified agencies average at least 35 visits and as many as 60 visits per patient. Care First's utilization projections are reasonable. It enjoys an excellent reputation for quality of care and ability to deliver services. Together with its predecessor, D. G. Anthony, it has a proven track record and has benefited from a referral network that remains in place. These factors, together with the conservative assumptions upon which its projected utilization is based demonstrate that its projected utilization is reasonable. Financial Feasibility of Care First The total project cost for the Care First agency is projected to be $25,808. The majority of the costs are reasonable for this type of health care project. The majority of the project development costs, the application fee and much of the cost of the consultant and legal fees, have already been paid by Care First. Care First's Schedule 2 was prepared in conformance with the requirements of the agency and accurately lists all anticipated capital projects of Care First. The necessary funding for the Care First project will come from Care First's existing $60,000 line of credit with Premier Bank, in Tallahassee. This method of funding the project is reasonable, appropriate, and adequate. Care First has demonstrated the short term financial feasibility of its project. Care First's schedule 6 presents the anticipated staffing requirements for its home health agency. The staffing projections are based upon the historical experience of D. G. Anthony and Care First, taking into consideration the projected start-up and utilization of the agency. The projected salaries are based upon current wages being paid to Care First employees, adjusted for future inflation. Care First's schedule 6 assumptions and projections are reasonable, and adequate for the provision of high quality care. The staffing proposed by Care First is sufficient to provide an RN or an LPN and an aide in each of the eight counties Care First proposes to serve in District 2. Care First's schedule 7 includes the payor mix assumptions and projected revenue for the first two years of operation. Medicare reimburses for home health agency services based upon the allowable cost for providing services, with certain caps. The Care First revenues by payor type were based upon the historical experience of D. G. Anthony and Care First, as well as the preparation of an actual Medicare cost report. The Care First payor mix assumptions and revenue assumptions are reasonable. Care First's projection of operating expenses in Schedule 8A is also based on the historical experience of D. G. Anthony and Care First, as modified for the mix of services to be offered and the projected staffing requirements. The use of historical data to project future expenses adds credibility to the projections. Care First's projected expenses for the project are reasonable. The Care First application presents a reasonable projection of the revenues and expenses likely to be experienced by the project. Care First has reasonably projected a profit of $8,315 for the first two year of operation. Care First's proposal is financially feasible in the long term. As the result of its community contacts, Care First has been offered the use of donated office space in Franklin, Jefferson, Wakulla, and Gadsden counties. The use of donated office space will decrease the cost of establishing a physical presence and providing services in those counties since Care First will not have a lease cost for a business office and a place to keep supplies. Quality of Care Through the experience of D. G. Anthony, Care First has identified the particular needs of the community it served. This experience has been carried over into Care First's provision of services. In the 9 months of Care First's existence at the time of hearing, it provided quality of care. Its predecessor, D. G. Anthony, also provided quality of care. While Care First's experience is relatively limited, there is no reason to expect, based on the experience of both Care First and its predecessor D. G. Anthony, that quality of care will not continue should its application be granted. IHS of Florida The Application IHS of Florida is a wholly-owned subsidiary of Integrated Health Services, Inc. ("IHS") formed for the specific purpose of filing CON applications. IHS operates other home health agencies under other subsidiary names. Pernille Ostberg is a senior vice president of the Eastern Home Care Division of Symphony Home Care Services, Integrated Health Services. In that capacity she oversees nearly 195 operations in six states, including Florida. Her operations include home health agencies, durable and medical equipment distributions, and infusion therapy offered by pharmacists. Under Ms. Ostberg's guidance, IHS has grown to its current roster of 195 agencies in only three years, from a beginning of only five agencies. IHS first acquired Central Park Lodges, primarily a nursing home company which also owned five home health agencies. Once these agencies became Medicare certified, IHS made a corporate decision to acquire additional Medicare certified home health agencies. Beginning approximately three years ago, IHS undertook a series of acquisitions which included Central Health Services, Care Team, ProCare/ProMed, and Partners Home Health. More recently, IHS has acquired the Signature Home Health and Century Home Health Companies. And, immediately prior to the final hearing in this matter, IHS acquired First American Home Health Care, making IHS the fourth largest provider of home health services in America. Of all the home health agencies overseen by IHS, 95% are Medicare certified, and 62-63 are located in Florida. IHS now has a presence in all districts except District 1 and 2. IHS personnel also have extensive experience in starting up new home health agencies. IHS personnel have opened over 40 locations across the United States. IHS employees have extensive experience bringing new home health agencies through successful surveys by the Joint Commission on the Accreditation of Hospital Organizations ("JCAHO") recommendations. Of 18 branches personally taken through initial survey by IHS's Pernille Ostberg, none were recommended to change their operations and none were cited for a deficiency. IHS has recently opened, licensed, and certified new home health agencies in AHCA Service District 5, 6, and 10. They have also received licensure in District 7, 8, and 11. Based on the extensive expensive of IHS personnel, a start up home health agency typically experiences 8,000 - 15,000 visits per first year. Opening a new program requires two months for licensure. It will require a registered nurse for three months to make certain all manuals are in place and that quality personnel are recruited. After achieving licensure, one must wait for a certification survey, which may take as long as six months. The three IHS home health agencies that became certified recently have experienced 200 visits in the first month, a good sign of growth. IHS' umbrella organization for home health organizations is Symphony. Most of their home health companies retained their original names. Other IHS home health companies include ProCare, Central Health Services, Partners Home Health, Nurse Registry, and First American. IHS of Florida has applied for applications in other districts. This applicant filed applications in District 7, 8 and 10 and each were approved. IHS of Florida's CON application number 8382 was prepared by Patti Greenberg with the significant input of IHS and IHS of Florida's operational experts. Ms. Greenberg has prepared 75-100 CON applications, 20-25 of which sought approval for Medicare Certified Home Health Agencies. Each of these prior applications had been approved or otherwise reached settlement before litigation. The Proposed Project Once the needs analysis was complete, IHS examined geographic issues within the 14 county district. IHS examined where the populations required home health agencies and what niche of the market IHS could expect to achieve. Projected visits were determined by examining month by month, how this agency would grow. This projected utilization was subdivided among sub-visit types. Existing IHS home health agencies visit mix (skilled nursing as opposed to home health aide or therapy visits) was used to estimate skill type of the projected total volume. The projected utilization was also subdivided by payor class. This payor class projection was derived specifically for District 2, its poverty levels and its managed care penetration. In the aggregate, IHS projects 7,650 visits in year one and 17,100 visits in year two. This projection is reasonable and achievable. Witnesses for the Agency agreed that IHS of Florida's projected number of visits was "definitely attainable". Past and Proposed Service to Medicaid Patients and for Medically Indigent The payor class analysis allowed IHS to conclude it should condition its approval of its application under the performance of 5% Medicaid and 1% charity care. The balance of the population served by an IHS Medicare Certified Home Health agency would be covered by Medicare. The condition is important as it is a requirement which, if not achieved, will subject IHS of Florida to fines and penalties by the agency. Improved Accessibility The applicant will improve the efficacy, appropriateness, accessibility, effectiveness and efficiency of home health services in District 2 if approved. IHS of Florida will provide good quality of care, should its application be granted. Quality of Care Through competitive forces, the applicant's approval will also improve the quality of care offered by home health agencies in District 2. The approval of IHS of Florida's application will also comply with the need evidenced by the extent of utilization of like and existing services in District 2. Economies from Joint Operations Certain economies derived from the operation of joint projects are achieved by IHS of Florida's proposal. IHS has a home office and corporate umbrella which oversees all of its operations for home health services. This master office offers economies of sale by sharing resources across a wide array of home health agencies in Florida and other states. Thus, the incremental expense for corporate overhead is reduced as compared to a free-standing home health agency. Additionally, this national oversight provides better economies to provide the most recent policies and procedures, billing systems, and other systems of business operation. Financial Feasibility IHS of Florida has the resources to accomplish the proposed project. As demonstrated on schedule 1, and schedule 3 of IHS exhibit 1, the budget for the project is only $144,000. This budget includes all appropriate equipment for both the initial and satellite offices. Budgeted amounts include all required lease expenses, equipment costs and even start-up costs such as salaries for the recruitment of training and staff prior to opening. In total, $52,000 of pre-opening expenses are projected, which is reasonable. IHS of Florida filed applications for other home health agency start-ups in three different districts. The applicant had more than $180,000 in cash on hand and an additional $226,000 assured from a commitment letter from IHS which was also contained in the application. A letter of commitment from Mark Levine, a director and executive vice president of IHS, indicated IHS will provide $250,000 in capital for this specific project. Additionally, IHS will provide up to $1 million in working capital loan to assure no cash flow problems ever arise. A similar letter of commitment appears in each of the CON applications which IHS of Florida has filed. IHS has committed to fund each of the CON applications applied for by IHS of Florida. Each of these letters of commitment for the various CON applications sought by this applicant are on file with the AHCA. In total, the applicant projects $600,000 in capital commitments assured. IHS' balance sheet, reveals access to $60 million in cash and cash equivalent. The record clearly demonstrates an ability of IHS to fund all capital contributions required by the applicant. The current assets of IHS approximate $240 million. In addition to having cash in the bank, IHS is a growing concern and is, in fact, a Fortune 500 company that is publicly traded on the New York Stock Exchange. IHS generates revenues which exceed its annual expenses. In the last year, IHS derived $30 million more than it experienced in expenses. The application is financially feasible in the short- term. IHS' application is also feasible in the long-term. IHS of Florida's utilization projections are reasonable. Budgeted staffing and salaries are reasonable. The cost limit calculation and reimbursement calculation by payor source, which is provided in great detail in Schedule 5 of IHS of Florida's application, is reasonable. Projected expenses associated with this project were reasonably calculated based on the actual experience of other IHS Home Health operations. The reasonableness of these costs are also demonstrated when compared with the cost per visit by existing agencies in District 2. In fact, IHS of Florida predicted it would be a lower cost provider than the expected cost of existing agencies at the time IHS of Florida's operations would begin. IHS of Florida's proposal will have a healthy, competitive effect on the cost of providing services by other providers. Putnam The Proposal Putnam proposes to establish a Medicare-certified home health agency with its primary office located in Bay County. Bay County was selected as the primary office based upon the locations of existing and approved agencies in District 2, the aggregate utilization of each, and the number of individuals aged 65 and over distributed among the existing District 2 counties and agencies. Mr. Alan Anderson is Putnam's sole stockholder, Director, and President. Under the ownership and administration of Alan Anderson, Putnam has provided Medicare-certified home health services in AHCA District 3 continuously since 1986. Mr. Anderson is also the sole owner, director, and president of Anderson Home Health, Inc., a Medicare-certified home health agency serving AHCA District 4 since 1992. Anderson Home Health's CON was obtained by Putnam through the same process undertaken by the prospective applicants in this proceeding. Putnam's District 3 agency has successfully served District 3 residents since 1986 at first through its Palatka office, then growing to its current size of four offices. In District 4, Anderson Home Health, Inc. has also experienced successful operations having grown from its principal office in Duval County to a total of four offices. Putnam's District 3 home health agency began with the original office located in Palatka, followed by offices opened in Gainesville, Ocala and Crystal River. Anderson Home Health, Inc.'s District 4 operation began with the original office located in Jacksonville; the second office was opened in Daytona Beach, followed by the opening of the third office in Orange Park; and the fourth office was opened in Macclenny. Putnam's District 3 agency is JCAHO accredited "with commendation." As part of CON application No. 8383, Putnam has agreed to certain conditions upon award. First, the proposed project will locate its primary office in Bay County. Putnam also conditions its approval with the provision that 0.25% of its admissions will be persons infected with the HIV virus. Four percent of its patients will be Medicaid or indigent patients. Finally, Putnam has conditioned its approval upon the provision of various special programs such as high tech home health services, a volunteer program, and the establishment of a rural health care clinic. History or Commitment to Provide Services to Medicaid and Indigent Patients For Medicare reimbursement purposes, Putnam proposes to maintain a Medicare-only agency and private sister agency which provides services to non-Medicare patients. The private sister agency will provide service to the Medicaid and indigent patients. The costs of providing services to these non-paying or partial paying patients will be absorbed by the agency as a contribution to the community. The establishment of a private sister agency to handle the non-Medicare patients is common in the home health industry. As a condition in the application, Putnam will accept up to 3.0% Medicaid patients. Although it stated in its application that it would accept between .5%-1.0% indigent patients, its conditioning of the application on 4.0% Medicaid and indigent patients would necessitate that it accept at least 1.0% indigent (if not more, should the Medicaid patients fall below 3%) in order to meet the 4.0% Medicaid and indigent care condition. The percentages proposed by Putnam are consistent with the statewide average (approximately 95% Medicare) and the District average (approximately 92.1% Medicare). Bay County's average of Medicare patients is approximately 96.4% Medicare. To meet the 4.0% Medicaid and indigent condition, Putnam's average of Medicare patients might have to be less than the Bay County average but not by much. Certainly, meeting the condition is achievable. The agency's position is that Putnam's Medicaid/indigent commitment is not a ground for denial of the application. Quality of Care Putnam has continuously owned and operated a licensed Medicare-certified home health agency in District 3 since 1986 and has been JCAHO accredited with commendation status since 1994. In an effort to continuously provide quality care, Putnam has developed a comprehensive set of policies and procedures to guide its staff, its physicians, volunteers, patients, as well as patients families. No evidence was presented to suggest that Putnam does not have a history or ability to provide quality care. Availability of Resources, Including Health Manpower, Management Personnel and Funds for Capital and Operating Expenditures Putnam has provided Medicare-certified home health service to the residents of District 3 for ten years. Putnam will be able to share its existing personnel and operations expertise with the proposed District 2 agency. Administrative, Managerial, and Operational Personnel Putnam intends to utilize existing administrative personnel in the start up and overall operation of the proposed agency. These management personnel include the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Data Processing Director, Director of Volunteers, Personnel Director. These experienced personnel will be available to provide valuable management support to the proposed agency. The proposed agency will be operated by an administrator who will report directly to Putnam's CEO, Alan Anderson. The agency's administrator will be actively involved in budget preparation, physician relations, community education, and preparation for regulatory agency surveys. The proposed agency will rely upon the demonstrated experience of key personnel in its initiation. Ms. Nora Rowsey, experienced in the start-up phases of home health agencies, will personally supervise and implement the start up phase of the proposed District 2 agency. Putnam intends to hire individuals to work within the proposed agency who already have experience in the provision of the necessary services. Current employees of Putnam's as well as contract personnel of the District 3 agency have indicated a willingness to provide services in Bay County once the application is approve. Funding and Capital Resources Putnam projects the total costs of initiating the proposed agency to be approximately $70,000. Putnam has simultaneously applied for two other Medicare-certified home health agencies, in Districts 6 and 7. Each of these projects area also projected to cost approximately $70,000. Putnam, therefore, has projected costs associated with all three projects of approximately $210,000. Additionally, there is a $10,000 contingency cost related to the District 3 offices bringing the total expenditure for all capital projects of $220,000. Putnam's application includes two letters from First Union National Bank of Florida which substantiate that there are funds on hand to finance all of Putnam's capital expenditures, including the District 2 proposed agency. As of April 18, 1996, Putnam's bank account had a twelve month average balance of $245,949.02. As of April 18, 1996 the accounts of both Putnam and Anderson Home Care Inc., had a combined twelve month average balance of $676,656.93. The evidence established that these funds exist and are available for all proposed capital projects. In the two years prior to hearing, Putnam showed sound management, significant growth, and a strong financial position. It continues to do so. In an interoffice memorandum dated May 28, 1996, from Roger L. Bell to Richard Kelly, Health Services and Facilities Consultant, Putnams' financial position was described as follows: The current ratio of .62 indicates the current assets are not adequate to cover short term liabilities. The long term debt to equity and equity to assets ratios are very weak. This, along with the negative equity make a weak financial position. The profit margin at .1% is also very weak, and raises some concern with the applicant's ability to cover operating expenses . Putnam Ex. No. 4. This criticism was answered by Putnam. The agency may not have considered certain factors applicable to a predominantly Medicare-reimbursed home health agency. Putnam's current liabilities are payable in a longer term than the receivables are collectible. Furthermore, with provision of 98% Medicare services, which is solely cost reimbursed, there remains only two percent of the operation left to make a profit. A .1% profit from the small amount of insurance and private pay patients indicated financial health. Putnam, moreover, is a viable operation because of its historical success, its knowledge of the industry, its expansion to six locations, its growth in staff, and its growth in patient visits. Putnam has the resources available to provide the necessary administrative, managerial, and operational manpower needed by the proposed home health agency. AHCA's financial criticisms are unfounded; Putnam has on hand the capital necessary for the accomplishment of the proposed project. Putnam has the experience and know-how to make the proposed project work in District 2's rural areas. Financial Feasibility Putnam has the resources to implement this project if approved. Putnam has the same capability that existed when three offices were opened during the period from April 1992 through February 1993, and the same resources when four offices were opened in 1995. In every instance, the new offices were started up with cash on hand from operation. Mr. Anderson, Putnam's President and sole shareholder and director, testified that he spends much time in the financial area of the operations. As of November 29, 1996, after deducting all accounts payable, Putnam has a cash balance of approximately $390,000. Anderson Home Health, Inc. had a balance of approximately $425,000. Mr. Anderson testified that the First Union letters in the application at pages 231 and 232 were correct and that Putnam is in even better shape now than when the letters were written. Putnam is financially feasible in the short term. AHCA contends Putnam's project is not financially feasible in the long term because the projected visits stay the same in the second year and because it does not project a profit in year two of operation. This fails to take into account Putnam's performance over the past ten years which, as the agency conceded at hearing, is an important consideration . Mr. Anderson purchased Putnam in 1986. At that time the agency had a single office in Palatka doing 4,000 visits. Following Mr. Anderson's purchase of the agency it had grown to over 55,000 visits and close to a hundred employees. After the success experienced by Mr. Anderson in Palatka, Putnam filed a CON application for District 4, with a proposed principle site in Jacksonville. The District 4 CON was approved by the agency--without any concerns for financial feasibility nor with any concerns for Putnam's cash flows. Without having any experience or referral sources in Jacksonville, Putnam began doing approximately 7,000 visits. The number of visits jumped to 45,000 in the second fiscal year, 123,000 in the third fiscal year, and as of September 30, 1996 the Jacksonville office performed 158,000 visits. Aside from the extraordinary growth experienced in the Palatka and Jacksonville offices, already discussed, Putnam has opened rural offices also doing very well. The Macclenny office in rural Baker County had over 15,000 visits in the first twelve months and is currently averaging over 1800 visits. The Crystal River office in rural Citrus County made over 12,000 visits in its first year and is currently doing approximately 1400 visits a month. Every new office opened by Putnam or Anderson Home Health since 1991 has been break even or better. Putnam has a proven track record for the successful and profitable operation of new Medicare-certified home health agencies. Putnam's project is financially feasible in the long term. Utilization Projections The application sets forth reasonable utilization projections. Based on Putnam's utilization in the past, there is no reason to believe the projections set forth in the application are or unreasonable or will not be achieved. Impact on Costs Putnam is a high tech provider of home health services and will provide some services not currently available or available only in a limited number of agencies. The impact of approval of Putnam's application on costs in the District will be minimal due to the reimbursement issues associated with Medicare which is cost based. RHA A Not-for-Profit Corporation in District II RHA is not-for-profit corporation whose purpose is to provide a continuum of care to the community. All profits are returned to its nursing homes or agencies as a way of continuing to build the programs. RHA owns two nursing homes in AHCA District II; Riverchase Care Center in Gadsden County and Brynwood Center in Jefferson County. If approved, RHA is proposing to locate its Medicare certified home health agency in existing space within the Riverchase and Brynwood nursing facilities. Both of these facilities are managed and operated by HealthPrime, Inc., a company which operates approximately 40 facilities in 13 states. While RHA is technically the owner and therefore applicant for this CON, HealthPrime would operate the proposed Medicare certified home health agency within the nursing homes. RHA's home health agency would have two offices. The office located in the Riverchase facility would serve Gadsden, Liberty, Franklin, Gulf, Wakulla, Jackson, Calhoun, Washington, Holmes and Bay Counties. The office located in the Brynwood facility would serve Leon, Jefferson, Madison and Taylor Counties. Financial Feasibility The only questions raised by AHCA concerning RHA's financial feasibility went to the ability of RHA to fund this project in conjunction with other CON projects listed on Schedule 2 of its CON application. The largest project on Schedule 2 of RHA's application was a CON application for a 20 bed addition to Riverchase Care Center. At hearing it was determined that since the filing of the instant home health CON application, the 20 bed application had been withdrawn, was no longer viable, and was not being pursued by RHA. Once AHCA's financial expert learned that the 20 bed addition to the Riverchase Care Center had been administratively withdrawn and that its costs should therefore no longer appear on Schedule 2, questions about the financial feasibility of the project were resolved. RHA's project was shown to be financially feasible in the short term based upon the financing commitment of HealthPrime. RHA proved that its assumptions and projections made in its financial analysis are reasonable. These assumptions were based on actual experience in the operation of similar skilled nursing facility based home health agencies, as well as prior experience of other home health agencies in their first two years of operation. RHA's proposed project shows a net income in years one and two and is financially feasible in both the short and long term. Availability and Access of Services To the extent that the number of people needing home health care will increase in the future, there is need for new providers of home health services to provide such availability and access. RHA's willingness to condition its application on service to AIDS, indigent and Medicaid patients can only improve the availability and access to services in the district. In addition, RHA's approval to provide nursing home based home health services is unique to the provision of home health services in District II. Efficiency RHA's proposal, which would place its home health agency within its nursing homes, is unique among the applicants in this proceeding. Such an arrangement provides not only an efficient continuum of care to the patients, it also provides efficiencies and cost savings in the sharing of resources. RHA's proposed project is cost effective because it utilizes existing space and equipment in its nursing homes. Skilled nursing home based Medicare certified home health agencies are specifically recognized by the Federal Medicare program in their cost reports. Home health reports are filed as a part of the nursing home cost report and there is an allocation of the nursing home's cost to the home health agency. This benefits both the provider and the Medicare program through cost savings. RHA's cost per visit to the Medicare program of $48 will be substantially less than the District II average of $66 per visit projected for the time RHA will be operational under the applied- for CON. RHA's proposed project will have no impact on its costs of providing other health care services. Appropriateness and Adequacy RHA proposes to provide the entire range of home health services throughout the district. Given the project need in the planning horizon, RHA's proposal is more than adequate to meet the demand for such services. Quality of Care An applicant's ability to provide quality care is another important factor in statutory and rule criteria. RHA and HealthPrime have shown, through operation of their nursing homes in Florida, all of which have superior ratings, that they have the ability to provide quality health care. In addition, HealthPrime, which will actually operate the home health agency, has experience operating four other nursing home based home health agencies. HealthPrime will utilize its quality assurance programs already in place in its other home health agencies and will seek JCAHO accreditation of this proposed agency. By combining a home health agency with its existing nursing homes, RHA will improve the case management of its patients by providing vertical integration of its services in a continuum of care. Such continuum of care provides a stability in personnel and providers that are working with the patient. Economies and Improvements from Joint or Shared Services As previously discussed, RHA's unique proposal to operate a nursing home based home health agency not only offers a continuum of care for the patient, it also provides fiscal economies to the agency as well as the Medicare program. Resource Availability Based on RHA's experience of hiring personnel for its existing nursing homes in the district, there will be no problem in hiring sufficient personnel for RHA's agency. Fostering Competition The addition of other Medicare certified home health agencies in a district consisting of 10 counties and only 23 providers will promote increased competition and more options for patients. Findings Applicable to All Four Applicants No Fixed Need Pool The agency has no rule methodology to determine the need for Medicare-certified home health agencies. The agency's most recent home health need methodology was invalidated in Principal Nursing vs. Agency for Health Care Administration, DOAH Case No. 93-5711RX, reversed in part, 650 So.2d 1113 (Fla. 1st DCA 1995). There is, therefore, no numeric need determination, or "fixed need pool", established by the agency applicable in this proceeding. District 2 AHCA District 2 is composed of 14 counties. The applicants propose to concentrate their service in various, different parts of the district. Local and State Health Plan Preferences District 2 Health Plan Services to Medicaid and Medically Indigent The first preference under the District 2 Health Plan provides a preference to applicants with a history of providing services to Medicaid or medically indigent patients or commitment to provide such services in the future. Mr. Franklin of Care First has such a history. He is an owner of Wakulla Manor, which had a Medicaid occupancy rate of 88.09% for the period of July-December, and the administrator of Miracle Hill Nursing Home which had a Medicaid occupancy rate of 95.74% for the same period. In the face of such a record, Care First’s commitment of 7% Medicaid and 1% uncompensated/charity patients might seem to pale. But it is a significant commitment, given the nature of the home health agency business, and one upon which Care First agrees its application should be conditioned. IHS conditioned its application on 5% Medicaid and 1% charity care. Putnam conditioned its application on an “Indigent and Medicaid participation equal[ling] 4.0%.” Putnam Ex. No. 1, pg. 51. Putnam, moreover, proposes a Medicare-only agency. Establishment of a private sister agency, a practice common in the home health care industry, will allow Putnam to provide service to the Medicaid and indigent patients separate from its Medicare-only agency. RHA has provided a high percentage of Medicaid/charity days at its Riverchase facility (92.10%) and at its Brynwood facility (90.24%). In addition, RHA is willing to condition its CON on the provision of a minimum of 1% of annual visits to indigent care and 5% to Medicaid. Service to Unserved Counties. Preference 2 states that “[p]reference should be given to any home health services CON applicant seeking to provide home health care services in any county within the District which is not presently served by a home health agency.” There are no counties within District 2 that are not presently served by a home health agency. Service Through a County Public Health Unit Preference 3 states that “[p]reference should be given to a home health services CON applicant seeking to develop home health care services to be provided through a county public health unit in the district in order to more adequately serve the elderly and medically indigent patients who are isolated or unable to travel to permanent health care sites." Of the four applicants, only IHS of Florida’s application is conditioned on working with public health units. IHS has experience working with public health units, working with them currently in Martin County, Manatee County and Broward County. Nonetheless, IHS of Florida will not be providing its services “through” a public health unit. Public Marketing Program Preference 4 states, “[p]reference should be given to a home health services applicant who has a history of providing, or will commit to provide, a public marketing program for services which included pamphlets, public service announcements, and various other community awareness activities. These commitments should be included on the granted CON as a condition of that CON.” Care First currently markets its services to the community and commits to a public marketing program in the future as a condition of its CON. IHS of Florida committed to performing at least one community awareness activity per calendar quarter as a condition of its application. It also indicated, moreover, that it would work to develop public service announcements and marketing programs with the help of public health units or any other appropriate vehicle. The latter indication, however, was not made a condition of the application. Putnam provides educational services to the community, its employees, patients and patients’ families, including the provision of pamphlets, and presenting audio and video tapes as appropriate to the patient and their families. Putnam, however, did not condition its application on a commitment to a public marketing program or commit to such a program in any other way in its application. RHA stated it would accept a condition on its CON to provide a public marketing program for services, including pamphlets, public service announcements and other community awareness activities. It did not reflect such a condition on the “Conditions” page of the application, but, given its statement that it would accept such a condition, there is nothing to prevent the agency from imposing such a condition should it grant RHA’s application. Access Requirements Preference 5 is, “[p]reference should be given to a home health services CON applicant who agrees, as a condition of the CON, to meet the following access requirements for each county in which services are provided: 1) 24 hour local telephone call (or toll-free) contact. 2) 24 hour call/response capability. 3) Maximum on one (1) hour response time following call. Care First currently meets the requirements of Preference 5 in the counties in which it now provides services, and has committed to continue to meet these requirements as a Medicare certified home health agency in all counties in which it will provide services. Care First has made as conditions of its CON, provision for 24-hour accessibility by answering service and installation of a toll-free access line and maintenance of a log of calls during the hours the agency is closed, including documenting of response time to each call. IHS of Florida conditioned grant of its CON on a 30 minute response time, and 24-hour phone availability on a toll-free hot line. Putnam presently provides the services in this preference in its District 3 Medicare certified home health agency and agrees to meet this preference within 90 days of initiating services. It did not, however, make a commitment to meet this preference on the “conditions,” page of its application. There is nothing to prevent the agency from making Putnam’s CON, if granted, conditional upon compliance with this preference. RHA has agreed to have its CON conditioned to meet the access requirements of Preference 5. 2. State Health Plan Service to Patients with AIDS The first preference under the State Health Plan is that “[p]reference shall be given to an applicant proposing to serve AIDS patients.” All four applicants are committed to serving AIDS patients. Full Range of Services. Preference 2 of the State Health Plan is “[p]reference shall be given to an applicant proposing to provide a full range of services, including high technology services, unless these services are sufficiently available and accessible in the same service area." There are currently 11 hospital-based Medicare certified home health agencies in District 2. Several of them provide the high tech services which are sometimes needed by discharged hospital patients. Very few referrals for high tech care have been received by D. G. Anthony or Care First since May, 1995, and there is no indication such services are not available in District 2. Care First has identified, however, an unmet need for the pediatric and pre-hospice home health agency services and has conditioned its application on the provision of those services to the community. IHS of Florida proposes, among other high tech services, infusion therapies, pain management therapies and chemotherapy. There is no evidence, however, that these therapies are not available in District 2. The same is true of Putnam as to the high tech therapies it proposes to provide. There is no evidence that they are not available in District 2. Although RHA indicated in its application that it intended to provide the entire range of services that a home health agency can provide, again, there is not evidence that they are not available in District 2. Disproportionate Share Provider History Preference 3 is “[p]reference shall be given to an applicant with a history of serving a disproportionate share of Medicaid and indigent patients in comparison with other providers within the same AHCA service district and proposing to serve such patients within its market area." Care First, having been formed in March, 1996, did not have a history of providing Medicaid and indigent patients. Care First has committed to 7% of its visits to Medicaid patients, well above the average of existing District 2 agencies of 2-3% Medicaid. Care First has committed to 1% of its visits to charity/uncompensated care. IHS of Florida has committed to 5% Medicaid and 1% charity care. Like Care First, IHS of Florida, as a newly formed corporation, does not have a history of serving a disproportionate share of Medicaid/indigent care patients. Putnam’s commitment is 3% to Medicaid and 1% to charity care. This commitment will be met through its sister home health agency and not the Medicare-certified home health agency for which the CON is sought. RHA has committed to set aside 5% total annual visits to Medicaid patients and 1% of annual visits to indigent care. It has a history of providing a disproportionate share of services to Medicaid patients at its two skilled nursing facilities in District 2, Riverchase Care Center in Quincy and Brynwood Center in Monticello. Underserved Counties Preference 4 is [p]reference shall be given to an applicant proposing to serve counties which are underserved by existing home health agencies. The rural areas of District 2 are traditionally underserved. Putnam will serve Bay County, an underserved county; the three other applicants will serve rural areas of more than one county in District 2. Consumer Survey Data Preference 5 is "[p]reference shall be given to an applicant who makes a commitment to provide the department with consumer survey data measuring patient satisfaction." Care First has committed to providing such data to the agency. IHS of Florida will maintain a data base of results of patient satisfaction surveys and make them available to the agency, just as it already does. Putnam will make available to the agency the results of surveys similar to surveys measuring patient satisfaction Putnam has already developed. Putnam has conditioned its application on providing these surveys to the agencies as well as surveys measuring physician satisfaction. RHA has cited on its “Conditions” page, “. . . (it) will provide the Agency for Health Care Administration with consumer survey data.” Quality Assurance Program and Accreditation The State Health Plan’s Sixth Preference is “[p]reference shall be given to an applicant proposing a comprehensive quality-assurance program and proposing to be accredited by either the National League for Nursing or the Joint Commission on Accreditation of Healthcare Organizations." Care First included in its application a copy of its Quality Assurance Program which has been in use since May, 1995. The program meets the state and federal licensure and certification requirement and the stringent requirements of JCAHO. Moreover, Care First has conditioned its application upon JCAHO accreditation. IHS of Florida submitted documentation regarding its Quality Assurance Program through initiatives such as Total Quality Management and Continuous Quality Improvement. It will seek accreditation from JCAHO within one year of receiving its CON. Putnam, an existing home health agency in District 3 since 1986, has over the years developed and refined a comprehensive quality assurance program which is above the industry standard. The District 3 agency, using its quality assurance program, has attained its JCAHO accreditation “with commendation,” a distinction received by less than 4% of all applicants. Putnam will seek accreditation from JCAHO for its District 2 operation within one year of receiving its CON. RHA is willing to condition its CON on the provision of a comprehensive quality assurance program and accreditation by the JCAHO. Need 1. Numeric Need Since there is no published fixed need pool applicable to this proceeding, the parties, other than the agency, developed their own methodologies for determining numeric need. Each of the methodologies employed by the parties was reasonable. After taking note of the statistics for actual patient visit growth in District 2 from 1991 to 1994, Michael Schwartz began with a conservative number of 60,000 new patient visits per year, a number half of the growth for the lowest growth year of that time period. Multiplying that number times the three horizon years of 1994-97 equals 180,000 new patient visits from 1994 which yields a need for 5.2 agencies. The reasonableness of numeric need in excess of four is supported by other factors. After the filing of the four applications at issue in this proceeding, there are two fewer Medicare-certified home health agencies with certificates of need in District 2. At the same time, home health care visits have been on the increase not only in the district as discussed, above, but in the state as well. Statewide, home health care visits grew from 18 million to 22 million between 1991 and 1994. The utilization of home health care agencies is increasing because of population growth and an increase in the number of visits per patient. The amount of time spent by patients in the hospital is decreasing. The decrease translates into increased need by patients for visits from home health agencies. The need for home health is going to continue to increase because it is a cost-effective alternative to nursing home placement and hospital care. From 1991 to 1994, the number of home health visits more than doubled: from 369,396 to 869,893. This trend continued in 1995. The recent significant growth in the utilization of home health agencies in District 2 is expected to continue. The growth is attributable not only to a population increase in the district but to increase in the use rate for home health agency services as well. The growth in use rates can be explained, in part, by the increase in the senior population (65 and older) and the pressure exerted by managed care for earlier hospital discharges and home health agency services as a viable alternative in some cases to inpatient treatment. The senior population in District 2 is reasonably expected to grow approximately 8% in the five years after 1996, with 15% growth expected reasonably in the 75 to 84 year old population and even higher growth, 25%, in the population over 84 years old. 2. Other Indications of Need Local physicians have experienced difficulty arranging for the existing home health agencies to provide services to patients located in remote areas of District 2. Specialized groups, such as AIDS patients, would, in all likelihood, benefit from additional home health agencies in District 2. Furthermore, a study conducted by IHS of Florida showed that the district has an unusually high rate of diabetes and in four counties has a diabetes death rate 100% greater than the statewide average. Well Springs home health agency is one of the two Medicare-certified home health agencies to cease providing Medicare-certified home health services after the four applicants in this proceeding filed the applications at issue here. Well Springs was licensed in all 14 counties of District 2 and had physical locations in Franklin, Gadsden, Bay, Leon, Liberty, Taylor and Madison Counties. It had a significant share of the District 2 Medicare certified home health agency market with 13.1% of the 1994 visits, the second highest in the District. With Well Springs discontinuing Medicare-certified home health agency services, a void was left for such services in District 2, particularly in those counties in which Well Springs had a physical presence.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED: That the Agency for Health Care Administration enter its final order granting CON Nos. 8380, 8381, 8382 and 8384 to RHA/Florida Operations, Inc., Care First, Inc., Home Health Integrated Health Services of Florida, Inc., and Putnam Home Health Services, Inc., respectively. DONE AND ENTERED this 9th day of June, 1997, in Tallahassee, Florida. DAVID M. MALONEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 9th day of June, 1997. COPIES FURNISHED: Sam Power, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Suite 3431 Fort Knox Building III Tallahassee, Florida 32308-5408 Jerome W. Hoffman, General Counsel Agency for Health Care Administration 2727 Mahan Drive, Suite 3431 Fort Knox Building III Tallahassee, Florida 32308-5403 Richard Ellis, Esquire Agency for Health Care Administration 2727 Mahan Drive, Suite 3431 Fort Knox Building III Tallahassee, Florida 32308-5408 W. David Watkins, Esquire Watkins, Tomasello & Caleen, P.A. 1315 East Lafayette Street, Suite B Tallahassee, Florida 32301 Mark Emanuel, Esquire Panza, Maurer, Maynard & Neel NationsBank Building, Third Floor 3600 North Federal Highway Fort Lauderdale, Florida 33308 Paul Amundsen, Esquire Amundsen & Moore 502 East Park Avenue Tallahassee, Florida 32301 Theodore E. Mack, Esquire Cobb Cole & Bell 131 North Gadsden Street Tallahassee, Florida 32301
Findings Of Fact 1. The Agency issued a Notice of Intent to Deem Application Incomplete and Withdrawn from Further Review on the Petitioner, Global Services Home Care Corp., an applicant for a home health agency license. 2. The Petitioner requested a formal hearing, but failed to pursue its litigation. 3. The Division of Administrative Hearings (‘DOAH”) issued an Order to Show Cause on the Petitioner, and when the Petitioner failed to respond to the Order, the DOAH issued an Order Closing Case (Ex. 2). ; 1 Filed May 10, 2010 4:23 PM Division of Administrative Hearings. Based on the foregoing findings of fact and conclusions of law, it is ORDERED: 1. The Petitioner’s application for home health agency licensure is deemed incomplete and withdrawn from further review. 2. The Petition for Formal Hearing is dismissed. 3. The above-styled case is hereby closed. DONE and ORDERED this / day of Lhag , 2010, in Tallahassee, Leon County, Florida. Thomas W. Arnold, Secretary EEL t— Agency for Health Care Administration A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO JUDICIAL REVIEW WHICH SHALL BE INSTITUTED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY-CLERK OF AHCA, AND A SECOND COPY, ALONG WITH FILING FEE AS PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE AGENCY MAINTAINS ITS HEADQUARTERS OR WHERE A PARTY RESIDES. REVIEW OF PROCEEDINGS SHALL BE CONDUCTED IN ACCORDANCE WITH THE FLORIDA APPELLATE RULES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED. Copies furnished to: Harrison Becerra, President Carlton Enfinger, Esq. Global Services Home Care Corp. Office of the General Counsel 9510 Ormsby Station Road Agency for Health Care Admin. 1790 West 49" Street, Suite 305-10 | (Interoffice Mail) Hialeah, Florida 33012 (U.S. Mail) Anne Menard, Unit Manager Jan Mills Home Care Unit Facilities Intake Unit Agency for Health Care Admin. Agency for Health Care Admin. (Interoffice Mail) (Interoffice Mail) CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of this Final Order was served on the above-named person(s) and entities by U.S. Mail, or the ZS method designated, on this the Z day of LEY , 2010. Richard Shoop, Agency Cler Agency for Health Care Administration 2727 Mahan Drive, Building #3 Tallahassee, Florida 32308-5403 (850) 412-3630
Conclusions Having reviewed the Notice of Intent to deem application incomplete and withdrawn from further review dated October 4, 2009, attached hereto and incorporated herein (Ex. 1), and all other matters of record, the Agency for Health Care Administration (“Agency”) finds and concludes as follows:
Findings Of Fact On September 13, 1984, Santa Fe Healthcare Systems, Inc. (Santa Fe), d/b/a Alachua General Hospital, applied for a certificate of need (CON) to establish a Medicare-certified home health agency in Alachua, Levy and Bradford Counties. This application was identified by HRS as CON Action No. 3452. On March 29, 1985, Upjohn Healthcare Services, Inc. (UHCS), timely petitioned for a formal administrative hearing to challenge the granting of any portion of the CON application of Santa Fe to establish home health agencies in Alachua, Levy and Bradford Counties. Petitioner, Personnel Pool of North Central Florida, Inc. (Personnel Pool), was initially a party to this proceeding. Personnel Pool applied for a CON to establish a Medicare certified home health agency to serve Lake, Alachua, Citrus, Levy, Marion, and Sumter Counties in District III. Personnel Pool's application was identified by HRS as CON Action No. 3450, and was reviewed in the same batching cycle as Santa Fe's application. That proceeding was designated DOAH Case No. 85-1455 and consolidated with these cases. On October 23, 1985, however, Personnel Pool filed a Notice of Voluntary Dismissal by which it voluntarily dismissed its petition in DOAH Case No. 85- 1455. APPLICATION Santa Fe Healthcare Systems is a parent corporation with three divisions. The first division, called Genesis Hospital System, operates four affiliated hospitals: Leach General Hospital (AGH), Bradford Hospital (BH), Williston Memorial Hospital (WMH), and Calhoun Hospital (CH). The second division, Santa Fe Management Services, provides a variety of services, including financial, design and construction, risk management, and other related services to affiliates. The third division is called Wellness, Inc., operating a variety of properties including a personnel registry, urgent care centers, physicians' office buildings, and Shared Services, Inc., a for profit corporation, which comprises a pharmacy, a collection service bureau, a delicatessen, a laundry, a microfilming service, and several other support services. Santa Fe proposes to receive Medicare certification for its existing operational hospital-based home health delivery system, which is not now certified to receive Medicare reimbursements. This home health delivery system has one office which is located on campus at AGH in Gainesville. Santa Fe proposes to provide all types of home health services on a 24- hour a day, 7 days a week basis. If the home health agency obtains Medicare certification, it will become a department of AGH for Medicare cost reporting purposes. Santa Fe intends to staff its home health agency with dedicated employees of its affiliated hospitals and, as necessary, by part-time employees of the hospitals who are under- utilized as hospital staff, under principles of "variable staffing." Santa Fe proposes to serve the following mix of patients by payor class: 80%-Medicare 6%-Medicaid; 6% -Indigent and Bad Debt and 8%-Private Pay. Santa Fe proposes to serve patients regardless of their ability to pay for home health services. Santa Fe intends to subsidize the provision of home health services to indigent patients through the reimbursements it receives from providing home health services to Medicare patients, and through a transfer of funds from its affiliated hospitals to Santa Fe's home health agency. See paragraphs 17 through 21 below. At the present time, Santa Fe is providing home health care to patients eligible for Medicare reimbursement free of charge without seeking reimbursement from Medicare. There was no evidence of the losses incurred by Santa Fe in this endeavor. Santa Fe does not anticipate that it will be able to bill or get later reimbursement for the care provided to these Medicare eligible patients, even if it becomes Medicare certified. MEDICARE/MEDICAID REIMBURSABLE HOME HEALTH Medicare is a federally-funded health program for the elderly and for certain disabled persons only. In order for a provider of Medicare home health services to be reimbursed, the provider must serve Medicare eligibles who: (a) are referred by order of a physician (b) are home bound (c) require skilled care (skilled nursing, physical therapy, occupational therapy, and speech therapy) and (d) require skilled services only on a part- time, intermittent basis. Medicare does not reimburse for custodial care (such as provided by a nursing home or adult congregate living facility) or for acute care services (such as services to the acutely ill usually provided by a hospital). Medicare provides reimbursement only for skilled nursing, physical therapy, speech therapy, home health aide, and medical social services. Medicare presently reimburses home health agencies, whether hospital-based or free-standing, on a cost reimbursement basis, subject to an aggregate cost reimbursement limitation or cap. As long as the Medicare home health agency does not exceed the cap it gets paid all of its costs for allowable expenditures. If it exceeds the cap, then it only gets paid at the cap. A cap is figured for each service (skilled nursing, home health aide, physical therapy, speech therapy, occupational therapy, and medical social services). Previously, all of the costs incurred for providing these services were added together and compared against an aggregate reimbursement limit or cap. If aggregated costs were below the aggregate cap, the provider was paid its costs, and was only penalized for the amount by which it exceeded the aggregate cap. However, starting with fiscal years beginning after July 1, 1985, the Medicare program has eliminated the aggregate cap and will apply only the cap for each type of home health services. If a provider's cost exceeds the cap for each service the provider will only receive the cap for such service. The Medicare program recognizes that the cost of providing home health services through a hospital-based home health agency generally is higher because overhead of the hospital is allocated to the home health agency. (In fact, AGH's allocation of overhead to Santa Fe's home health delivery system will he less than the allocation of overhead from UHCS' national and regional offices to its home health agencies in Alachua, Bradford, and Levy Counties.) Medicare thus could reimburse Santa Fe's home health agency at a ten percent increment above the cost caps established for non-hospital home health providers. In contrast to Medicare, the Medicaid program provides reimbursement to providers only for skilled nursing services and home health aide services to patients who meet strict income and asset limitations. No reimbursement is provided for physical therapy, medical supplies or ancillary costs of providing reimbursable services. Instead of the cap system applicable to Medicare reimbursement, only a fixed fee determined in advance is provided for Medicaid services. Accordingly, a provider can expend costs in excess of reimbursement to serve Medicaid eligible patients. Recent changes in the Medicare reimbursement for hospital care have resulted in a prospective payment system. This system is commonly referred to as the diagnostic related grouping system (DRG). Under that system a hospital is not reimbursed for its costs. Rather the hospital receives for in- patients a predetermined reimbursement covering all costs related to providing patient care for the diagnosis of the patient, based on the historical costs for serving such a patient in the geographic area where the hospital is located. If the length of stay of the patient is such that the cost of providing care exceeds the Medicare reimbursement provided under the applicable DRG system, the hospital experiences a loss for its service to that patient. If the patient's stay is shorter than the average duration for that DRG, however, the hospital's costs usually are less than the Medicare reimbursement for the patient, and the hospital experiences a windfall gain. DRG reimbursements are fixed amounts regardless of length of stay. COST CONSIDERATIONS Santa Fe's home health delivery system operates as a cost and revenue center within the Santa Fe system separate from the centers mentioned in paragraph 3 above. If certified under the Medicare program, it will be a separate revenue center for Medicare reimbursements. In its amended application, Santa Fe projects a loss in its first twelve months of operation amounting to $20,267. Santa Fe projects a loss of $30,409 for the second twelve months of operation. However, these losses will be more than offset by savings to the affiliated hospitals from discharging its Medicaid and indigent patients from the hospitals at an earlier date because home health services can be provided at a lower cost. In any event, with more than $7 million of earnings from its combined operations for the year ending September 30, 1985, Santa Fe can easily cover any reasonable losses that the proposed home health agency might incur during the first two years of operation. In addition, Santa Fe will shift a portion of its administration, supervisory, dietary, maintenance, and housekeeping costs from AGH to the new home health agency. These items are commonly identified overhead expenses. Santa Fe will shift some of the existing costs of AGH's administrator and assistant administrator's salary and fringe benefits to the home health agency. Santa Fe will also shift some of the costs of salaries for supervisory health care personnel to the home health agency to the extent that these supervisors provide guidance to the staff of the home health agency. AGH will hire additional staff to handle home health billing. This cost will also be borne by the home health agency. Approximately 95% of the overhead of AGH which Santa Fe intends to shift to its Medicare home health agency does not represent new or additional costs. Rather, that portion will represent costs which Santa Fe is presently incurring in the operation of AGH. In the first twelve months of operation AGH will allocate approximately $150,000 of its existing overhead to the home health agency. In the second twelve months of operation AGH will allocate $175,000 of its existing overhead to the Santa Fe home health agency. Santa Fe's hospitals will have to subsidize the Santa Fe home health agency between $75,000 and $90,000 for provision of services to indigents and for additional costs associated with treating Medicaid patients. Santa Fe will ask Medicare to reimburse the overhead allocated from AGH to the Santa Fe home health agency up to the cap. See paragraph 12 above. Because of the reimbursement of the portion of the overhead allocation from the affiliated hospitals to the proposed home health agency, approval of any portion of Santa Fe's proposal probably will increase the cost to Medicare for Medicare reimbursable home health services in Alachua, Bradford and Levy Counties. NEED CONSIDERATIONS UHCS is the only existing provider of home health services licensed by HRS to provide Medicare home health services in Alachua, Bradford and Levy Counties within HRS District III. UHCS is also licensed to provide home health services in Dixie, Gilchrist, Marion, Lafayette, Putnam, Union and Suwannee Counties in District III. UHCS operates a parent agency office located in Alachua County (Gainesville), with licensed subunit offices in Bradford (Starke), Levy (Chiefland), and Putnam (Palatka) Counties. UHCS operates a separate licensed and Medicare certified parent home health agency in Marion County. UHCS operates a private-sector home health business without a CON, which is separate from its licensed home health agencies and subunits. UHCS provides skilled nursing, physical therapy, speech therapy, occupational therapy, home health aide and medical social services to patients in their homes. UHCS also provides intermittent skilled care to private pay patients through its licensed home health agency; and provides homemaker, live-in companions, and one-time RN visits through a separate private sector business. UHCS provides services twenty-four hours a day, seven days a week. Its offices are open from 7:30 a.m. to 6:00 p.m. It provides an answering service whenever the office is closed. The administrator, director of professional services, and supervisors are always on call. UHCS provides quality assurance programs to exceed the Medicare, Medicaid and licensure standards for home health care. These programs include: quarterly utilization review of medical records corporate quarterly quality assurance: ongoing client record audit supervisory visits employee evaluations; and consultations from UHCS' advisory council. UHCS has a field staff of seven registered nurses at its Gainesville office to provide skilled nursing visits in the homes of patients who reside in Alachua County. The staff presently contains two fewer RN's than it contained twelve months prior to the final hearing. As of September 1, 1985, UHCS also had eliminated one occupational therapist from its direct patient care staff. UHCS has not replaced the two RN's or occupational therapist because UHCS has experienced a decline in the number of visits and patients served during the twelve month period preceding the final hearing. Without increasing its present RN field staff and direct-patient care staff, UHCS could increase its delivery of home health services in Alachua County by between twenty and twenty-five percent. By adding one additional clinical supervisor UHCS could increase its delivery of home health services in Alachua by an additional fifty percent, over and above the twenty to twenty-five percent excess capacity mentioned above. UHCS actively seeks to find patients in need of the types of home health services which it delivers. UHCS utilizes patient coordinators, all of whom are RN's, to make its services known in Alachua, Bradford and Levy Counties. The coordinators visit each of the hospitals in these counties to distribute Medicare home health guidelines and to ascertain whether there will be discharges from these hospitals who will need home health services. UHCS receives referrals from hospitals, physicians and other health care providers. Approximately thirty-five percent of its referrals from Alachua County come from hospitals. Alachua General Hospital provides nineteen percent of those referrals. The number of referrals to UHCS for home health services for patients residing in Alachua County has decreased during the past twelve months prior to the final hearing. The quality of home health services delivered by UHCS in Alachua, Bradford and Levy Counties was not questioned in this proceeding. In terms of quality of care, Santa Fe and AGH readily refer patients who are eligible for Medicaid and Medicare home health services to UHCS. UHCS has the same access to information about patients referred to it by AGH as Santa Fe's home health delivery system, to the extent that AGH permits UHCS access. UHCS takes advantage of the access provided by AGH in preparing patients referred to it for home care. At all times relevant to this proceeding, no patients residing in Alachua, Bradford and Levy Counties who were qualified to receive Medicare or Medicaid reimbursable home health services have been unable to receive services from UHCS. AGH's social services department (which performs discharge planning functions for the hospital) has had no problem placing patients in need of Medicare and Medicaid reimbursable home health services. Santa Fe hospitals having been able to obtain these services from UHCS for all patients residing in Alachua, Bradford and Levy Counties. Santa Fe does not propose to meet any need for Medicare and Medicaid reimbursable home health services which is not already being met by UHCS in Alachua, Bradford or Levy Counties. Santa Fe only proposes to serve patients of physicians that are members of the medical staff of its hospitals (AGH, BH and WMH). Since April 5, 1985, HRS has employed a uniform methodology contained in proposed Rule 10-5.11(14), Florida Administrative Code, for determining the need for additional home health agencies in Florida. Although that rule has been challenged in another proceeding, HRS has adopted the need methodology as a matter of department policy. HRS now utilizes that need methodology as its policy without exception in reviewing all applications for certificates of need to establish home health agencies in Florida. The methodology in the HRS proposed rule projects a need for sixteen home health agencies in HRS District III for the relevant planning horizon (1987). Because of dated factors in the methodology, the need projected under the methodology is incorrect and actually should be 17. Although HRS listed in its State Agency Action Report only sixteen licensed home health agencies and one CON approved home health agency for District III, the following agencies are also licensed to provide Medicare home health services in District III: (a) UHCS is licensed to operate a subunit in Palatka, Putnam County, District III (b) UHCS is licensed to operate a subunit in Starke, Bradford County, District III; and (c) Central Florida Home Health Services, Inc. Volusia/Seminole/Lake is licensed to provide home health services in Lake County, District III. The Leon County subunit was added in early 1984 the Putnam County subunit in November 1984 and the Bradford County subunit in March 1985. The evidence was not clear whether these three subunits apparently underwent certificate of need review. UHCS opened at least the most recent of these three subunits in a conscious effort to keep out competition. The subunits added a clinical supervisor and a clerical person to staff the new subunit offices the same nurses and home health aides previously based in Levy, Bradford and Putnam Counties continued to work there but out of the subunit offices. Under present uniform policy of HRS, each of these offices sensibly is counted against the gross need for additional Medicare licensed home health agencies in District III in order to determine if there is a net need or surplus. As defined in Rule lOD-68.02(19), Florida Administrative Code, a subunit of a home health agency is a semi-autonomous agency. It is incapable of sharing administration, supervision and services on a daily basis with the parent home health agency. Rule lOD-68.04(2), Florida Administrative Code, requires that subunits be separately licensed whenever the subunits "are operated outside of the county of the parent agency or operate as autonomous subdivisions." Since 1977 HRS has required that subunits of home health agencies must receive a CON before they can be separately licensed. Rule 10-5.04(7), Florida Administrative Code, provides that a CON must be obtained, not only for the establishment of a new home health agency, but also for the establishment of a new subunit of an agency. It was not proved that any of the subunits in District III are not meeting the need in the counties where they are located to the contrary, the evidence suggests that the subunits are meeting the existing need with excess capacity to spare. Accordingly, the inventory of licensed and CON approved Medicare home health agencies in HRS District III exceeds the need projected for licensed home health agencies in that district for 1987, the relevant planning horizon, by four agencies. Although the HRS' uniform need policy and the need methodology employed by the Local Health Council for District III project approximately the same number of persons in need of home health services, these methodologies differ as to how they would allocate agencies to meet the projected need. The HRS' home health methodology does not permit a subdistrict determination of need, while the District III methodology defines each county within District III as a subdistrict for home health services, and then assesses a need for one agency for each multiple of 800 persons in need, up to a maximum of four agencies. In comparison with the HRS methodology, the District III methodology allows more Medicare home health agencies to serve the same number of patients identified as needing Medicare home health services. The District III methodology would assess the need for an additional agency in Alachua County but no need for additional agencies in Bradford or Levy County. The HRS methodology assumes that agencies will it compete across county lines and that a methodology like the District III methodology can and will result in "false competition." The rationality of this aspect of the HRS methodology as a general rule was not persuasively established in this case. As a general rule, it would seem more rational to foster some type of competition at some level of activity in order to help depress Medicare costs (especially under the new reimbursement system described in paragraphs 15 and 16 above) and improve quality of services rather than allow certain providers to gain a monopolistic-type hold on parts or all of the service area. Such an approach seems even more appealing in light of the evidence in this case that UHCS recently placed at least one subunit in the service district in a conscious effort to keep out competition. But Santa Fe did not prove on the facts of this case that it is time to place a new agency in Alachua to compete with UHCS despite the HRS methodology and the facts in evidence that UHCS can more than adequately meet the need for home health services in Alachua County within the relevant planning horizon. ACCESS CONSIDERATIONS Through UHCS' parent agency and subunit offices the residents of Alachua, Bradford, and Levy Counties have geographic access to all Medicare and Medicaid reimbursable home health agencies. The Local Health Council for District III determined that, in those cases where the area for proposed service is one where residents do not have access to home health care due to financial barriers, the council would recommend approval of an additional home health agency if its need methodology shows no need for an additional Medicare agency. The Local Health Council for District III also recommended that county government assume responsibility for paying for home health services for indigent clients. In addition, the council recommended that volunteer organizations provide funding for home health services to medically indigent patients. The council established that home health agencies should provide an amount of uncompensated charitable home health care equivalent to at least one percent of the preceding fiscal years' gross revenue for any given home health agency. UHCS does not accept patients who cannot pay all of their bills for home health services either in cash, by Medicare or by a combination of cash and Medicaid (or, presumably, Medicare if applicable.) Therefore, no Medicare certified home health agency serves the medically indigent in Alachua, Levy or Bradford County.
Recommendation Based on the foregoing Findings Of Fact and Conclusions of Law, it is recommended that the Department of Health and Rehabilitative Services enter a final order denying in its entirety the application of Petitioner in Case No. 85-1501, Santa Fe Healthcare Systems, Inc., for a certificate of need for a home health agency to serve Alachua, Levy and Bradford Counties, CON Action No. 3452. RECOMMENDED this 23rd day of January, 1986, in Tallahassee, Florida. J. Lawrence Johnston Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 23rd day of January, 1986. APPENDIX Rulings on UHCS' Proposed Findings of Fact. Accepted in part rejected in part as unnecessary. See Finding 1. Accepted. See Finding 1. Rejected as conclusion of law. Accepted in part; rejected in part as unnecessary. See Finding 2. 5 and 6. Rejected as unnecessary. Accepted. See Finding 3. Accepted, except the existing home health delivery system is not a home health agency as defined by statute. See Conclusions of Law. See Finding 4. Covered by Finding 5. Covered by Finding 6. Covered by Finding 6. 12-38. Covered by Findings 7-33, respectively. 39. Rejected as contrary to the greater weight of the evidence. 40-42. Covered by Findings 34-36. 43-46. Rejected in part as cumulative and in part as subordinate. 47-51. Covered by Findings 37-41. Covered by Finding 42. Covered by Finding 43. Rejected as contrary to the greater weight of the evidence. 55-56. Covered by Finding 44 and 45. 57. Rejected in part as immaterial (HRS can condition the CON by its Final Order in this case), in part as being legally incorrect (HRS can enjoin violations of representations upon which a CON is granted) and in part as unnecessary and cumulative (that Santa Fe is now operating a hospital based home health delivery system). 58-59. Rejected as immaterial and unnecessary. HRS determinations to date are preliminary and subject to change based on the evidence. 60-62. Rejected in part as cumulative and in part as conclusions of law. Petitioner's Proposed Findings of Fact. (Petitioner's proposed findings of fact are unnumbered. For purposes of these rulings, they have been assigned consecutive numbers for each paragraph). The first sentence is rejected as unsupported by the evidence; the balance is covered by Finding 3. Covered by Findings 4 and 6. Covered by Finding 17. Covered by Finding 17. Covered by Findings 24 and 46. Covered by Findings 4 and 6 (partly cumulative). Rejected as cumulative. Covered by Findings 3738. Covered by Finding 39. (Rejected in part as contrary to the greater weight of the evidence.) Rejected as cumulative. Covered by Finding 44. HRS' Proposed Findings of Fact. There were none. COPIES FURNISHED: William C. Andrews, Esquire, Scruggs & Carmichael P. O. Drawer C One Southeast First Avenue Gainesville, Florida 32601 Robert P. Daniti, Esquire Carson & Linn, P.A. 253 East Virginia Street Tallahassee, Florida 32301 Harden King, Esquire Assistant General Counsel Department of Health and. Rehabilitative Services 1317 Winewood Boulevard Tallahassee, Florida 32301 David Pingree, Secretary Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32301
Findings Of Fact Petitioner, a nonprofit corporation, was established in January of 1971 for the express purpose of rendering home health services within the State of Florida. It was approved by the Florida Department of Health and Rehabilitative Services and the then U.S. Department of Health, Education and Welfare (hereinafter "HEW") as a Medicare provider in the spring of 1971. In 1974, Petitioner created a subunit located in Bradenton to provide services in Manatee and Sarasota Counties. In 1975, a subunit was created in Warm Mineral Springs to serve lower Sarasota and Charlotte Counties. Both subunits were duly certified as home health providers by the Department and HEW. Petitioner's Medicare application was accepted as retroactive to October 1, 1975, reflecting the service area of the Warm Mineral Springs subunit to be lower Sarasota and Charlotte Counties. Petitioner has continuously provided home health services to Charlotte County on an ever-increasing basis since 1975, which predates both state licensing authority over home health services and the applicability of the Certificate of Need law to home health agencies. Since the Department has obtained licensure authority over home health services, Petitioner's Warm Mineral Springs subunit is and has been licensed to serve both Sarasota and Charlotte Counties. On September 26, 1979, Petitioner advised the Department that it intended to open an office in Charlotte County out of which it would serve its Charlotte County patients, setting forth the reasons therefor, and requesting the Department's approval far the opening of an office in Punta Gorda, which would be coordinated with Petitioner's subunit in Fort Myers. Subsequent correspondence between the petitioner and the Department revealed that Petitioner's operational costs would most likely be reduced by the opening of the office in Charlotte County and that no change in services provided would occur. Petitioner further indicated that the only change being sought was an organizational change within the geographic areas being served and also indicated that the proposed office in Charlotte County would not be a branch office of any of Petitioner's subunits, but rather would be a full, separate subunit. On December 26, 1979, the Department advised Petitioner that although Petitioner would remain licensed to provide services to both Sarasota and Charlotte Counties from its Warm Mineral Springs subunit, the establishment of a subunit in Charlotte County would not only require a separate license in Charlotte County, but would also require Certificate of Need review. In that same letter, the Department further advised Petitioner that its determination constituted final agency action. To preserve its rights, Petitioner requested a hearing pursuant to Section 120.57, Florida Statutes. Thereafter, Petitioner submitted a letter of intent to the South Central Florida Health Systems Council, the health systems agency geographically responsible for processing Certificate of Need applications. Petitioner requested that agency's assistance in completing a Certificate of Need application, but was advised that that agency would be unable to assist in processing Petitioner's Certificate of Need application, since Petitioner was already providing services in the area for which the need would necessarily be determined. Petitioner accordingly contacted the Department to advise it that the health systems agency was unable to review the need for services when the services were being provided, and the Department advised Petitioner to go back to the health systems agency for a determination of need. Between the time that the Certificate of Need law first became applicable to home health agencies and the time that Petitioner communicated to the Department its intent to open an office in Charlotte County, the Department has approved the applications of several home health agencies to establish a subunit without obtaining a Certificate of Need, since the Department considered those agencies to be "grandfathered." The Department authorized Sun Coast Home Health Care to open a subunit in Venice in 1978 without requiring a Certificate of Need, as it permitted Central Florida Home Health Services to open subunits in Putnam County and in Lake County in 1978 without the necessity for obtaining a Certificate of Need prior to licensure. Further, the Department authorized Gulf Coast Home Health Services to open a subunit in Hernando County in 1978 without the necessity of obtaining a Certificate of Need for the reason that services were being provided by that agency to patients in Hernando County prior to May 1, 1976, although that subunit was not opened until 1979. The "grandfather" concept was again applied in a similar situation in the Department's Final Order in Global Home Health Services, Inc. v. Department of Health and Rehabilitative Services, DOAH Case No. 78-1013. No evidence was presented by the Department herein in support of its argument that these agencies had all expressed an intent to open a subunit prior to the effective date of the Certificate of Need law applicable to home health agencies.
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED THAT: A Final Order be entered authorizing petitioner to open a subunit office for home health services in Charlotte County, Florida, and issuing to Petitioner a separate license for that office if one be required. RECOMMENDED this day of October, 1980, in Tallahassee, Florida. LINDA M. RIGOT, Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: Charles T. Collette, Esquire Assistant General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard, Suite 486 Tallahassee, Florida 32301 Richard I. Manas, Esquire Manas and Marcus 804 Greater Miami Federal Building 200 Southeast First Street Miami, Florida 33131 Herbert E. Straughn, Esquire Office of Community Medical Facilities Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building Two, Room 220 Tallahassee, Florida 32301 Ed Houck, Ph.D. Executive Director South Central Florida Health Systems Agency, Inc. 3801 Bee Ridge Road Sarasota, Florida 33582 Mr. Alvin J. Taylor, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32381 ================================================================= AGENCY FINAL ORDER ================================================================= STATE OF FLORIDA DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES FLORIDA HOME HEALTH SERVICES, INC., and FLORIDA HOME HEALTH SERVICES-WEST, Petitioners, DOAH CASE NO. 80-206 DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES, /
The Issue Whether HRS should grant Upjohn's application for certificate of need to establish a home health agency in Escambia County? Whether, in light of the recommended disposition of Upjohn's application, HRS should grant Baptist's application for a certificate of need to establish a home health agency to serve Escambia and Santa Rosa Counties? Whether an applicant for certificate of need and HRS can by stipulation divest the Division of Administrative Hearings of jurisdiction over the application and defeat the right of an existing provider to proceedings pursuant to Section 120.57(1), Florida Statutes (1984 Supp.)?
Findings Of Fact Since June 4, 1978, Upjohn has operated a home health service from its Pensacola office, one of 22 such offices in Florida, 16 of which are licensed as home health agencies. For more than three years, Upjohn has performed various services under contract to HRS from its Pensacola office. In Escambia, Santa Rosa, Okaloosa, Walton and Bay Counties, Upjohn now provides home nursing care, homemaking services, live-in companions and nurses' aides. Medicaid and medicare would pay for some, but not all, of the services Upjohn already provides in Escambia County, if Upjohn's Pensacola office were licensed as a home health agency. The certificate of need Upjohn seeks here is a prerequisite to such licensure. Upjohn provides services which are not offered by either of the home health agencies now licensed to serve Escambia County. Some people receiving these services must turn elsewhere for related services in order to obtain reimbursement from medicaid or medicare for the related services. This can create coordination problems such as the one mentioned at hearing: If employees from both agencies arrived at the same time, one might have to wait while the other "performed services", e.g., administered an injection. Like Upjohn, Baptist is already in the home health care business and provides services not offered by either of the licensed home health agencies serving Escambia County (one of which also serves Santa Rosa County.) Since October 2, 1983, Baptist has operated in Escambia and Santa Rosa Counties, albeit without the benefits of licensure as a home health agency. In 1984, to the time of final hearing, Baptist had seen 163 patients, ten to twelve of whom it had referred to NWFHHA because they were eligible for medicare benefits, but only if they received services from a licensed provider. Like Upjohn, Baptist provides various technical nursing services, such as hyperalimentation and intraveneous administration of antibiotics. Baptist also provides oxygen therapy and chemotherapy, once a physician has administered an initial dose. In addition, Baptist deals in durable medical equipment including bedside commodes, walkers, and the like. Baptist intends to offer physical, occupational and speech therapy if it receives a certificate of need, although it does not now offer these services. Durable medical equipment expenses and physical therapy fees are reimbursable by medicare Part B without regard to the provider's licensure. All of the services which the applicants provide and for which they are now reimbursed by medicare are available in Escambia and Santa Rosa Counties from providers who are licensed and eligible for reimbursement. COMPETITORS LICENSED Already licensed to provide services in Escambia and Santa Rosa Counties as a home health agency is Northwest Florida Home Health Agency, a nonprofit corporation that opened for business in 1975. The number of visits NWFHHA makes monthly has risen from 629 in 1980 to 1709 in 1984. Of the 902 patients NWFHHA served in the fiscal year ending March 31, 1984, only twelve were not eligible for medicare benefits. NWFHHA has headquarters in Gulf Breeze and is the only licensed home health agency serving Santa Rosa County. Nothing prevents NWFHHA staff from providing nursing services gratis on their own time, but there was no evidence that this occurs. NWFHHA offers only services that medicare reimburses, viz., skilled nursing, physical, occupational and speech therapy, and medical social worker and home health aide visits. NWFHHA's office hours are from eight o'clock in the morning until four o'clock in the afternoon Monday through Friday. After hours, nights and weekends a telephone answering service, "the doctors and nurses registry," answers calls placed to NWFHHA's office telephone, and relays messages to a nurse. A nurse is always on call, and registry personnel either telephone the FWFHHA nurse on call or contact her with a beeper pager system. The only other licensed home health agency serving Escambia County is the oldest, the Visiting Nurses' Association (VNA) which has been "absorbed" into the Escambia County Health Department. In the fiscal year ending June 30, 1983, the VNA served 465 medicare patients and 303 others, including patients unable to pay, those who could and did, and those whose insurance companies paid for services. The VNA does not sell or rent durable medical equipment but enjoys good relationships with suppliers and has never been unable to obtain equipment needed by its clients. The VNA provides skilled nursing services, including enteral therapy, post-colostomy and other stomal care, nutritional counseling, home health aides and, through another branch of HRS, social services. The VNA has never turned away a medicare or a medicaid patient in need of its services. VNA's office hours are from eight o'clock in the morning till half past four o'clock in the afternoon Monday through Friday. Between same hours on Saturdays, Sundays and holidays, VNA has "a weekend nurse" who can be reached through the doctors and nurses registry. (T.369) VNA's services are generally unavailable before eight o'clock mornings and after four-thirty evenings, and VNA cannot be reached by telephone during those hours, unless, like Judy Gygi, the director of the social work department at West Florida Hospital, a person has the VNA "call-back number." NEED In comparison to hospitals, home health agencies can open shop relatively quickly, once the decision to do so is made. A "planning horizon" of one year for home health agencies is more appropriate than the five-year horizon used for hospitals. This is particularly true here where both applicants are already engaged in offering the services for which certificates of need are sought. The need for home health services may be seen as a function of the age and size of a population. In 1985, Escambia County is projected to have a population of 254,100 persons of whom 23.04 percent would be younger than 15 and 10.1 percent would be 65 or older. The 1985 population of Santa Rosa County is projected at 62,600 of whom 24.63 percent would be under 15 and 7.9 percent would be 65 or over. For District 1 as a whole, comprising Escambia, Santa Rosa, Okaloosa and Walton Counties, the 1985 population is projected at 464,300, including 23.39 percent under 15 and 9.35 percent 65 or over. An expert retained by Upjohn predicted a need in 1985 for up to 27 home health agencies in District I, and for at least two and up to 18 home health agencies in Escambia County alone. Upjohn's expert invoked four methodologies. Common to each was the assumption that the average patient can be expected to receive 31.5 home visits, a number HRS generated to reflect statewide experience. Changes in medicare reimbursement for hospital care seem to have decreased the average length of stay in Escambia County hospitals by nearly a full day over the last two years or so. This is thought to have created additional home health clients who need significantly fewer visits than historical averages might suggest. VNA's recent experience has been on the order of 14 visits per patient as compared to NWFHHA'S recent average of approximately 36 visits per patient. At least two of the four methodologies generated predictions for 1985 of home health care visits in Escambia and Santa Rosa Counties, without regard to whether their cost was reimbursable by medicare. Nationally about 18 percent of Upjohn's services are reimbursed by medicare. A rough rule of thumb is that the "medicare need" is one fifth of the total need. Using a method he denominated "U.S. DHHS", Upjohn's expert predicted that there would be 5,836 home health referrals in Escambia County in 1985 as compared to 8,692 for the whole of District I, in 1985, so that the number for Escambia County would exceed two-thirds of the district total. Even assuming the "U.S. DHHS" methodology is a good one, something is amiss with the calculations, because the 1985 population of Escambia County is projected to amount to only 54.73 percent of the district total; and Escambia County is not projected to have as much as two thirds of any age cohort in District I in 1985. According to Upjohn's Exhibit No. 3, the "U.S. DHHS" method projects only medicare referrals, but this is an apparent error. According to the same exhibit, the "U.S. DHHS" predicts more than four times the number of medicare referrals for 1985 in Escambia and Santa Rosa counties than the only other medicare method, "DHRS Option 2," predicts. On the 20 percent medicare assumption, the "U.S. DHHS" calculations predict a level of home health care referrals in Escambia County ten times higher than the "District I Draft HSP" method predicts. The two "total referral" methods predicted 2,881 and 3,637 home health referrals for Escambia County and 696 and 878 for Santa Rosa County for 1985. Neither of these methodologies has been validated because, as Upjohn's Dr. Dacus explained, "there is just no reliable, verifiable data base, which reflects the total volume of home health care services." (T. 136). The final method, "DHRS Option 2", predicts 1,359 home health medicare referrals for Escambia County in 1985 and 267 such referrals for Santa Rosa County in 1985, a two-county total of 1626. Annualizing from Intervenors' Exhibits 2 and 5, the VNA can expect to make 5102 visits [2976 (12 divided by 7] in 1984 for which medicare Part A will reimburse; and NWFHHA can expect to make 20,388 visits (April, May and June home health aide, nurse, and paramedic visits quadrupled), for almost all of which it will seek reimbursement from medicare, if past experience is an indication. Dividing 5102 by 14 and 20388 by 36 yields a total of 931 medicare referrals for Escambia and Santa Rosa Counties for 1984, which suggests that the 1626 prediction for 1985 is a substantial overprediction. Area specific utilization rates suggest, on the generous assumption of a five percent increase in 1985 over 1984, and on the twenty percent medicare assumption, 4888 home health referrals for Escambia and Santa Rosa Counties in 1985. Assuming medicare visits increase in Escambia and Santa Rosa Counties by ten percent in 1985 over 1984 levels, 28,0389 visits can be expected. Upjohn's own policy is to form a subunit only "once you get up to around 15 or 20 thousand visits." (T.119) The national average is on the order of 7,000 visits per year per agency. NO NEED SHOWN TO BE UNMET But no net need was shown on this record because of the incomplete evidence as to what existing home health services already provide. The evidence did not show the total number of home health care visits now being made in Escambia and Santa Rosa Counties or either of them. Nor was it clear from the evidence whether the applicants and the licensed agencies are the only providers of home health services in the area. There has never been a waiting list for home health services in Escambia County and neither of the two Escambia county medicare providers had added staff in the twelve months preceding the final hearing. Specifically, there was no showing that medicare reimbursed services would be in any way lacking in 1985. The evidence affirmatively established that they would be readily available, unless the existing providers cease offering these services. The most interesting effort to show that there might be a problem was proof that a judgment for $105,000 against NWFHHA had not been paid. This amount exceeded the amount of NWFHHA's assets and no doubt presents serious legal problems for this nonprofit corporation. But this evidence 1/ falls short of establishing by a preponderance that NWFHHA will cease to provide home health services in 1985. Upjohn's expert witness testified that the only capital costs for home health agencies was "so low...just the cost of the office, having the office there. (T.114) Even if NWFHHA is stripped of its assets in order to satisfy the outstanding judgment or to obtain discharge in bankruptcy, its viability as an ongoing enterprise would persist. Office rent would be its chief working capital requirement and revenues would readily cover that. Both the VNA and NWFHHA can provide significantly more home health services without adding additional staff. To the extent Upjohn and Baptist serve non-medicare patients that VNA would otherwise have served, VNA's ability to deliver home health services to medicare-eligible patients is enhanced. Nothing in the evidence established that any medicare-eligible patient in Escambia or Santa Rosa Counties has encountered difficulty in obtaining home health services in the past or will in the foreseeable future. FINANCES Home health agencies differ from hospitals and other similar health care providers in that their fixed costs only amount to one or two percent of total costs. In order to serve more patients, they need only add staff. Patients' homes are the principal workplace, and capital expenditures entailed in expanding are minimal. The record is replete with theories about economies and diseconomies of scale, but these offer little practical guidance. "If you try [to] plot a curve of home health care average charge per visit [versus the number of visits] you cannot get a defined line. You get a very steady [flat] line with a lot of random variances across it." (T.115) The mix of services offered is more significant than the volume of services, although there is some correlation between volume and mix. (T.117, 118) "[G]oing further and further away...[to see] patients...increase(s) travel costs...[s]o you get an expanding component of travel expense" (T.119) if the geographical area being served expands. The medicare program reimburses costs of home health services up to a cap, which is $50.26 per visit for the current fiscal year. The rate of reimbursement for services to medicaid patients is much lower ($16 per visit). The average cost per NWFHHA medicare visit during the 1983-1984 fiscal year was $23.26, and the average cost per VNA medicare visit was $29.62 during the 1982- 1983 fiscal year. Because of differences in the mix of services, the applicants' average cost figures are not strictly comparable, but there was no proof that the cost of providing medicare services would go down if these applications are granted. 2/ Neither applicant showed projected costs at less than what the existing providers are experiencing. NWFHHA's costs are the lowest in Florida and there is nothing in the evidence to suggest that Baptist or Upjohn will be able to provide medicare services for as little as the existing providers. As a result, the medicare program and so the tax payers would be paying more for the same services, as far as the evidence shows, if either application is granted.
Findings Of Fact Background Respondent published a fixed need pool for Medicare- certified home health agencies for the certificate-of-need (CON) review cycle commencing in March, 1992, and determined that Service District XI did not need any additional home health agencies. On February 17, 1992, Petitioner timely notified Respondent that the fixed need pool calculation was in error. On March 6, 1992, Petitioner timely filed a petition challenging the fixed need pool determination, thereby commencing DOAH Case No. 92-2289. On February 24, 1992, Petitioner filed a letter of intent to submit a CON application for the development of a Medicare-certified home health agency in District XI. On March 24, 1992, Petitioner timely submitted an application for CON 6951 to establish a home health agency in Service District XI. On July 17, 1992, Respondent notified Petitioner of the intent to deny the application. Petitioner timely filed a petition challenging the intent to deny, thereby commencing DOAH Case No. 92-4795. Petitioner is adversely and substantially affected by Respondent's decisions concerning the fixed need pool and intent to deny Petitioner's CON application. Need for Proposed Health Care Facilities and Services in Relation to Applicable District Plan and State Health Plan Fixed Need Bed Pool Respondent calculated the fixed need bed pool based on Rule 59C-1.031, which is set forth in the Conclusions of Law. The purpose of the rule is to determine the required number of home health agencies by finding the cost efficient agency size (CEAS) "in number of visits at which economy of scale is achieved." Once the optimal number of visits is thereby determined, Respondent can calculate how many home health agencies are required in a specific service district. Pursuant to the rule, Respondent divided 181 nonexcluded home health agencies into four equal groups of equal numbers of agencies. These groups were divided by median numbers of visits and arrayed, as required by the rule, into groups from the lowest to the highest number of visits. Respondent then calculated for each group the median number of visits and mean cost per agency. The results of these calculations are as follows: Group Median # of Visits Average Cost Per Visit 1 5,000 $42.14 2 15,000 $45.88 3 31,000 $46.93 4 64,000 $45.95 Pursuant to Rule 59C-1.031, Respondent determined the percentage reductions, comparing "each grouping to the previous grouping." Respondent next checked for a cost reduction of at least 5 percentage points between two groups, as required by the rule. Between groups 1 and 2, there was no reduction of cost, but rather an increase of 8.88 percent. Between groups 2 and 3, there was no reduction, but an increase of 2.29 percent. Between groups 3 and 4, there was a reduction, but only of 2.09 percent. Under the rule, the only role of the first group, and its average cost per visit, is to serve as a standard against which the second group can be measured. Thus, Respondent did not calculate the percentage reduction between the average cost of the first group, which has the lowest average cost, and the average cost of any other group. Petitioner contends that the rule requires or permits a rolling comparison of group 4 with group 1. If so, the reduction between groups 4 and 1 would be 8.29 percent. There are no mean visit cost reductions of at least 5 percent between groups 1 and 2, 2 and 3, or 3 and 4. Under the rule, Respondent is required to choose the median number of visits of the grouping for which the average cost per visit was at least 5 percent less than the average cost per visit of the "previous grouping." If two or all three of the comparisons yield at least 5 percent reductions, then, rather than take the grouping corresponding to the greatest reduction or the lowest average cost per visit, the rule identifies the last of the qualifying reductions as the CEAS. As noted above, the CEAS is used to calculate the fixed need pool. In the absence of any 5 percent reduction between groups 1 and 2, 2 and 3, or 3 and 4, Respondent identified two alternatives. First, it could find that there was no fixed need pool. As Respondent's Health Services and Facilities Consultant Supervisor testified, Respondent could have declined to publish a fixed need pool because it could not apply the rule. "And at that point, the certificate of need reviewer would have to rely on other criteria other than fixed need-pool in determining whether there was a need." Tr., p. 87. In the second alternative identified by Respondent, it could select group 4 as the CEAS because the comparison between it and group 3 resulted in the only positive reduction in average costs per visit, unless group 1 was compared with some other group. An unfortunate concomitant of this alternative is that group 4 represents the second highest cost per visit. Despite this fact, Respondent chose the second alternative and proceeded to calculate the fixed need pool for home health agencies accordingly. The effect of Respondent's selection of group 4 was to calculate the fixed need bed pool based upon a relatively high number of visits per facility. The CEAS in this case was 64,000 visits. Thus, roughly 1/13th of the agencies would be needed under Respondent's fixed need pool than would have been needed if the CEAS had been set at 5000 visits, which corresponds to the least expensive group--group 1. The practical effect of Respondent's selection of group 4 was that the fixed need pool for Service District XI was zero. If group 1 had been selected, the fixed need pool would have been 14. The interpretation given the rule by Respondent lacks reason, as does the interpretation for which Petitioner contends. The correct interpretation requires the adoption of the first alternative in which Respondent acknowledges the inapplicability of the rule and leaves parties free to litigate the issue of need without regard to any published fixed need pool. Both rejected interpretations ignore the plain language of the rule. Respondent's argument falters by setting up group 1 as a "previous group" to group 4. The rule leaves no doubt that the groups are to be arrayed in ascending order of size. Given the rule's obvious reliance upon the principle of economies of scale, there is no reasonable basis for inferring the authority for a final comparison of group 4 to group 1. On the other hand, Petitioner's interpretation disregards the requirement that a substantial reduction of 5 percent triggers the identification of the CEAS group. Petitioner's argument that this interpretation most closely follows the intent of the rule is erroneous. In fact, two contradictory intentions emerge from close study of the rule. The more evident is that the rule intends to restrict market access without substantial regard to the principle of cost containment. In the absence of a rule challenge, the rule must be applied without regard to this feature. But Respondent's unchallenged disregard of the critical principle of cost- containment does not militate strongly in favor of allowing Respondent to extend the reach of this dubious aspect of the rule by engrafting upon it layers of nonrule policy to cover contingencies, which, incidentally, Respondent should have easily foreseen. The rule reflects a bias toward restricting market entry by home health agencies without regard to cost efficiency. As noted above, the rule precludes the possibility that the group with the lowest number of visits (and thus generating the largest fixed need pool) could ever be selected as the CEAS. Also as noted above, the rule's preference for later reductions of at least 5 percent, without regard to comparing average costs or even percentage reductions, again encourages the selection as the CEAS of the group with the larger number of visits (thus generating the smallest fixed need pool). Third, as Respondent contends, in no way can Rule 59C-1.031 be interpreted to require Respondent to select the CEAS based on the group with the lowest average cost per visit. As Respondent's Health Services and Facilities Consultant Supervisor testified, "the only reason why we regulate home health agencies under the certificate of need program and why we restrict market entry is based on the argument that larger size agencies are more cost-effective." The Supervisor added: "If that assumption were no longer true generally, then there would be actually no reason for us to control market entry for home health agencies." Tr., p. 81. In fact, Respondent has detected a decreasing correspondence between the size of a home health agency in number of visits and its average cost per visit, as agencies' costs migrate toward applicable cost ceilings. This was easily predictable and means that many more cases can be anticipated in which no CEAS will emerge from the rule's formula because no later group represents a 5 percent reduction in cost from a previous group. Implicitly acknowledging this practical problem with the rule, as well as hopefully the counterproductive effect of the rule upon the attainment of cost-containment, Respondent has also proposed the deregulation of home health agencies in terms of the issuance of CON's. The other source of the intent of the rule is derived from the definition of the CEAS, which is the objective of the rule's calculations. The CEAS is the "cost efficient agency size . . . at which economy of scale is achieved." "Economy of scale" is defined in the following statement: The behavior pattern of costs recognizes that gains in operating efficiencies act to reduce costs per unit to a certain point (economies of scale) and that[,] as the level of production continues to increase[,] operating inefficiencies take effect (diminishing returns). Respondent's interpretation of the rule, which stresses the intention to restrict market access without substantial regard for the principle of cost containment, fails to account adequately for the fact that diminishing returns or diseconomies of scale may actually have already begun before the second group is considered. The intent of the rule is to find the cost efficient agency size at which economies of scale are achieved. If, as here, the economies of scale are only encountered within the first group (i.e., the group with the agencies with the smallest number of visits), then it is impossible to justify Respondent's interpretive nonrule policy that exacerbates the tendency of the rule to restrict market access without substantial regard to the principle of cost containment. Thus, Respondent's claim that its interpretation of the rule is most consistent with the intent of the rule is flawed. In fact, the rule contains contradictory intentions, and Respondent, at best, has adopted the interpretation most consistent with the more dubious intent inferable from the rule. Petitioner's interpretation is most consistent with the better intent inferable from the rule--i.e., the CEAS is the "cost efficient agency size . . . at which economy of scale is achieved." However, Petitioner's interpretation fails to take into account the intent of the rule favoring larger providers. Petitioner's deemphasis of this aspect of the rule commendably pursues the critical principle of cost containment. But Petitioner's contrivance of the rolling comparison in which group 4 is compared to group 1 suffers from a disregard of the language of the rule regarding the arraying of the groups in ascending order and the comparison of each of the three largest groups with its previous group. There is no other reasonable conclusion than that the rule could not produce a fixed need pool, Respondent's determination of a fixed need pool of zero is incorrect, and the parties should have been allowed to litigate the question of need without regard to Respondent's incorrect determination of a fixed need pool of zero and without a showing of not-normal circumstances. Need in General The absence of the fixed need pool does not mean that the inputs to the formula are without value. To the contrary, the above-described calculations under the rule clearly justify determining need on the basis of the finding that the most cost efficient agency size is the agency in which the median number of visits is 5000. To achieve this most cost-efficient agency size, the number of home health agencies in District XI could be expanded by 14. Thus, Petitioner has proved the need for another home health agency. The applicable district and state health plans fail to identify any groups with a quantifiable lack of services or special need for home health care services. Plan language regarding preferences implies a comparative evaluation process, which is, at most, not readily applicable to the present situation involving a single applicant. In any event, it appears that Petitioner would serve a variety of subgroups of District XI that are specified in the district plan as medically underserved, even though the plan does not indicate that any of these groups currently has unmet needs in terms of home health agency services. It also appears that Petitioner would serve a greater percentage of Medicaid-eligible and medically indigent patients that is typical for existing home health agencies in District XI. Based on the findings of the preceding paragraph, Petitioner was entitled to full compliance with the corresponding preferences of the district plan, rather than the noncompliance and partial compliance that it was given for these preferences in the State Agency Action Report (SAAR). Respondent should have given Petitioner full compliance on the remaining preferences under the district plan, although several of them appear to have little to do with need. Petitioner has a working arrangement with the prime referral source, physicians. Also, by virtue of its acquisition of an existing home health agency, Petitioner will also have working arrangements with various health care providers in the area. The deficiency with the district plan cited in the SAAR concerning working arrangement with AIDS referral networks is of little importance as the AIDS referral networks, which have their own home health agencies, will be competitors of Petitioner. The SAAR likewise incorrectly gives Petitioner partial or no compliance with preferences in the State plan with respect to AIDS patients, which Petitioner clearly proposes to serve; counties underserved by existing home health agencies, which includes Dade County based on the above-described calculations concerning the most cost efficient agency size; and the proposal of a comprehensive quality assurance program and the seeking of accreditation by the Joint Commission on Accreditation of Healthcare Organizations, both of which Petitioner proposes to do. Based on the foregoing, Petitioner has clearly demonstrated a need for the proposed project without regard to not-normal circumstances and despite the absence of a valid fixed need pool for home health agencies in the subject batching cycle. Availability, Quality of Care, Efficiency, Appropriateness, Accessibility, Extent of Utilization, and Adequacy of Like and Existing Health Care Services According to the SAAR, there are sufficient home health agencies in District XI. However, Petitioner has proved that the proposed project will increase the availability or access of home health agency services based on the above-described calculations concerning the most cost efficient agency size. Ability of Applicant to Provide Quality of Care The parties have stipulated that this criterion is either not applicable to Petitioner's application or that the application has adequately addressed the criterion. Availability and Adequacy of Other Health Care Facilities and Services According to the SAAR, there are sufficient home health agencies in District XI. However, Petitioner has proved that existing home health agencies are not adequate or sufficiently available based on the above-described calculations concerning the most cost efficient agency size. Probable Economies and Improvements in Service that May Be Derived from Operation of Joint, Cooperative, or Shared Health Care Resources The parties have stipulated that this criterion is either not applicable to Petitioner's application or that the application has adequately addressed the criterion. Need for Special Equipment and Services Not Reasonably and Economically Accessible in Adjoining Areas The parties have stipulated that this criterion is either not applicable to Petitioner's application or that the application has adequately addressed the criterion. Need for Research and Educational Facilities The parties have stipulated that this criterion is either not applicable to Petitioner's application or that the application has adequately addressed the criterion. Availability of Resources for Project Accomplishment and Operation, Effects of Project on Clinical Needs of Health Professional Training Programs, Extent to which Services Will Be Accessible to Schools for Health Professions, Availability of Alternative Uses of Such Resources for the Provision of Other Health Services, and Extent to which the Proposed Services Will Be Accessible to All Residents of the Service District The parties have stipulated that these criteria are either not applicable to Petitioner's application or that the application has adequately addressed the criteria. The sole exception concerns the extent to which the proposed services will be accessible to all residents of the service district. Petitioner has proved that the proposed services would be accessible to all residents of the service district. Immediate and Long-Term Financial Feasibility of Project The parties have stipulated that these criteria are either not applicable to Petitioner's application or that the application has adequately addressed the criteria. The sole exception concerns the extent to which the long-term financial feasibility of the project is a function of Petitioner's utilization assumptions. The SAAR predicates its assignment of only partial compliance with this criterion upon Petitioner's failure to demonstrate access problems and justify the projected patient volume. However, to the extent that these criticisms reflect an incorrect need determination, Petitioner has proved that the proposed project satisfies the criterion of long-term financial feasibility based on the above-described calculations concerning the most cost efficient agency size. Special Needs and Circumstances of Health Maintenance Organizations The parties have stipulated that this criterion is either not applicable to Petitioner's application or that the application has adequately addressed the criterion. Needs and Circumstances of Entities Providing a Substantial Portion of Their Services or Resources to Individuals Not Residing in the Service District in which the Entities Are Located or in Adjacent Service Districts The parties have stipulated that this criterion is either not applicable to Petitioner's application or that the application has adequately addressed the criterion. Probable Impact of Proposed Project on Costs of Providing Health Services Proposed by Applicant Based on Effects of Competition on Supply of Health Services Being Proposed and Improvement or Innovations in the Financing and Delivery of Health Services which Foster Competition and Service to Promote Quality Assurance and Cost-Effectiveness The parties have stipulated that this criterion is either not applicable to Petitioner's application or that the application has adequately addressed the criterion. Costs and Methods of Proposed Construction The parties have stipulated that this criterion is either not applicable to Petitioner's application or that the application has adequately addressed the criterion. Applicant's Past and Proposed Provision of Health Care Services to Medicaid Patients and the Medically Indigent The parties have stipulated that this criterion is either not applicable to Petitioner's application or that the application has adequately addressed the criterion.
Recommendation Based on the foregoing, it is hereby RECOMMENDED that the Agency for Health Care Administration issue a final order approving the application for CON 6951. ENTERED on September 8, 1993, in Tallahassee, Florida. ROBERT E. MEALE Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 8th day of September, 1993.
