The Issue Whether the applications for certificate of need numbers 8380, 8381, 8382 and 8383, filed by Petitioners RHA/Florida Operations, Inc., Care First, Inc., Home Health Integrated Health Services of Florida, Inc., ("IHS of Florida,") and Putnam Home Health Services, Inc., meet, on balance, the statutory and rule criteria required for approval?
Findings Of Fact Care First The Proposal Care First, the holder of a non-Medicare-certified home health agency license, was established in March of 1996. Owned by Mr. Freddie L. Franklin, Care First is the successor to another non-Medicare-certified home health agency also owned by Mr. Franklin: D. G. Anthony Home Health Agency ("D. G. Anthony"). Established in May of 1995, D. G. Anthony provided over 10,000 visits in its first 10 months of operation mostly in Leon and Wakulla Counties, pursuant to a contract with Calhoun-Liberty Hospital Association, Inc. Very few of the 10,000 patients were referred to D. G. Anthony by Calhoun-Liberty; they became D. G. Anthony's patients through community-based networks, including physicians, created through the efforts of Mr. Franklin and D. G. Anthony itself. D. G. Anthony was dissolved in 1996. Both its patient census and its staff of 45 were absorbed by Care First. D. G. Anthony's contract with Calhoun-Liberty was substantially assumed by Care First so that it provided service to Medicare patients as Calhoun-Liberty's subcontractor. From the point of view of the federal government, the Medicare patients served by Care First were Calhoun-Liberty's patients, even those who had not been referred to Care First by Calhoun Liberty and who had been referred from other community sources. Care First, therefore, was simply a sub- contractor providing the services on Calhoun-Liberty's behalf. The contract was terminated effective December 1, 1996. Calhoun-Liberty was free to terminate Care First with 30 days notice, a peril that motivated Mr. Franklin to seek the CON applied for in this proceeding. With the termination of the contract, Care First ceased serving Medicare patients, "because Mr. Franklin did not want to enter into another subcontractor arrangement because of all the issues and problems," (Tr. 934,) associated with such an arrangement. Mr. Franklin is involved with nursing homes as the administrator at Miracle Hill Nursing Home in Tallahassee. He is an owner of Wakulla Manor Nursing Home in Wakulla County, and he owns a 24 bed CLF, Greenlin Villa, also in Wakulla County. Miracle Hill has the highest Medicaid utilization of any nursing home in District 2. Both Miracle Hill and Wakulla Manor are superior rated facilities. On the strength of Mr. Franklin's extensive experience with community-based organizations and health care services, as well as Care First's succession to D. G. Anthony and other historical information and data. Care First decided to proceed with its application. In the application, Care First proposes to establish a home health agency that, at first, will serve primarily Franklin, Gadsden, Jefferson, Leon, Liberty and Wakulla Counties. It plans to expand into Madison and Taylor Counties in its second year of operation. Five of these eight counties have high levels of poverty; six of the eight are very rural, with the population spread widely throughout the county. Ninety-six percent of Care First's patients are over age Minority owned, approximately 65% of the patients are members of minorities. Many of the patients live in rural areas and are Medicaid recipients or are uninsured low income persons who do not qualify for Medicaid but cannot afford home health care. Since it will be serving the same patient base as a Medicare-certified agency, Care First has committed to the provision of 7% of its visits to Medicaid patients and 1% of its visits to patients requiring charity/uncompensated care. Care First projects 18,080 visits in its first year and 29,070 in its second year. Care First will promote efficiency through the use of a case management approach. Each patient will be assigned a case manager who will act as the patient advocate to provide care required and to identify and assist the patient with access to other "quality of life" enhancing services. Care First proposes an appropriate mix of services, including skilled nursing, physical therapy, speech and language therapy, occupational therapy, home health aide services and social services. Care First estimates its total project cost at $25,808. Of this amount, $2,000 is indicated as "start-up cost", with nothing allocated to salaries. Care First indicates no "capital projects" other than its proposal for the home health agency in District 2. Care First's proposal would be funded from a $60,000 bank line of credit. Projected Utilization Potential patients will be able to gain access to Care First through several avenues, including physician referral, hospital referral, nursing home discharge, assisted living referrals from community agencies and organizations such as Big Bend Hospice and through private referral. In addition, there are several natural linkages to the community for Care First. Wakulla Manor and Miracle nursing facilities offer Care First's services to discharged residents in need. Very often, residents and families choose Mr. Franklin's agency because they are familiar with him, staff or the quality of care provided. Residents of Greenlin Villa, owned by Mr. Franklin, frequently chose Care First when in need of home health agency services. Mr. Franklin's civic, church, and community involvement is impressive. He is president of the Florida Health Care Association, chairman of the board of the Tallahassee Urban League, superintendent of the Wakulla County Union Church Group, and serves on the advisory board for the Allied Health Department for Florida A&M University. In the past, he has served on the Board of Trustees of Tallahassee Community College. He was accepted as an expert in long-term care administration in this proceeding based in part on his service on the Governor's Long Term Care Commission. Miracle Hill has held a "Superior" licensure rating for the last ten consecutive years. It is the highest rating awarded by the AHCA licensure office and is intended to blazon the high quality of care provided by the facility. Although reported through Calhoun-Liberty, very few of D. Anthony's and Care First's past referrals have been generated through that affiliation. Rather, they have come through community contacts and getting the referrals from "talking with physicians," (Tr. 922), in Tallahassee and the surrounding areas, many of whom Mr. Franklin has gotten to know through his post as Administrator of Miracle Hill Nursing Home. By far, it is through physician referrals that Care First receives most of its patients. Care First's physician referral list includes 47 doctors who referred patients to D. G. Anthony since May, 1995. These doctors practice in urban areas and some have rural clinic offices which they staff on certain days of the week. Physicians are willing to refer patients to Care First because of the quality of care which has been provided by Care First, as well as the reputation of its owners. The Care First application included letters of support from eight physicians who have referred patients to Care First in the past and state that they will continue to support Care First with referrals in the future. Among the letters included are those from Dr. Earl Britt, a practitioner of internal medicine and cardiology in Tallahassee, and Dr. Joseph Webster, who practices internal medicine and gastroenterolgy in Tallahassee. Many of the patients of these two physicians are elderly. Dr. Britt's patients often have chronic hypertension or heart disease, are diabetic or suffer strokes. These two physicians provided over half the total number of patient referrals to D.B. Anthony and Care First. Dr. Britt and Dr. Webster established through testimony that Freddie Franklin and Care First have an excellent reputation for provision of quality of care and enjoy significant support among physicians within the service area. Moreover, Dr. Britt, although based in Tallahassee, stressed the importance of Care First's proven ability to provide home health services in the rural setting both from the standpoint of understanding the needs of the rural patient and from being able to travel over rural terrain in order to deliver services. (Tr. 1151, 1152, 1154). Approximately 11,500 visits were performed by D. G. Anthony staff from the period of May 1995, through April 1996, before they became the staff of Care First. Since the agency has established a presence in the district and has physician and other referral mechanisms in place, it is reasonable to project that Care First will continue to grow and will experience between 18,000 and 20,000 visits in its first year and 28,000 to 31,000 visits in year two as a Medicare-certified home health agency. These projections stem from the historical and very recent monthly growth of D. G. Anthony, as well as demand it is experiencing from Franklin and Jefferson Counties, two counties it does not serve regularly at present but plans to serve regularly in the future. The reasonableness of Care First's projections is bolstered by the conservative number of visits per patient the projections assume, 35, when typically Medicare-certified agencies average at least 35 visits and as many as 60 visits per patient. Care First's utilization projections are reasonable. It enjoys an excellent reputation for quality of care and ability to deliver services. Together with its predecessor, D. G. Anthony, it has a proven track record and has benefited from a referral network that remains in place. These factors, together with the conservative assumptions upon which its projected utilization is based demonstrate that its projected utilization is reasonable. Financial Feasibility of Care First The total project cost for the Care First agency is projected to be $25,808. The majority of the costs are reasonable for this type of health care project. The majority of the project development costs, the application fee and much of the cost of the consultant and legal fees, have already been paid by Care First. Care First's Schedule 2 was prepared in conformance with the requirements of the agency and accurately lists all anticipated capital projects of Care First. The necessary funding for the Care First project will come from Care First's existing $60,000 line of credit with Premier Bank, in Tallahassee. This method of funding the project is reasonable, appropriate, and adequate. Care First has demonstrated the short term financial feasibility of its project. Care First's schedule 6 presents the anticipated staffing requirements for its home health agency. The staffing projections are based upon the historical experience of D. G. Anthony and Care First, taking into consideration the projected start-up and utilization of the agency. The projected salaries are based upon current wages being paid to Care First employees, adjusted for future inflation. Care First's schedule 6 assumptions and projections are reasonable, and adequate for the provision of high quality care. The staffing proposed by Care First is sufficient to provide an RN or an LPN and an aide in each of the eight counties Care First proposes to serve in District 2. Care First's schedule 7 includes the payor mix assumptions and projected revenue for the first two years of operation. Medicare reimburses for home health agency services based upon the allowable cost for providing services, with certain caps. The Care First revenues by payor type were based upon the historical experience of D. G. Anthony and Care First, as well as the preparation of an actual Medicare cost report. The Care First payor mix assumptions and revenue assumptions are reasonable. Care First's projection of operating expenses in Schedule 8A is also based on the historical experience of D. G. Anthony and Care First, as modified for the mix of services to be offered and the projected staffing requirements. The use of historical data to project future expenses adds credibility to the projections. Care First's projected expenses for the project are reasonable. The Care First application presents a reasonable projection of the revenues and expenses likely to be experienced by the project. Care First has reasonably projected a profit of $8,315 for the first two year of operation. Care First's proposal is financially feasible in the long term. As the result of its community contacts, Care First has been offered the use of donated office space in Franklin, Jefferson, Wakulla, and Gadsden counties. The use of donated office space will decrease the cost of establishing a physical presence and providing services in those counties since Care First will not have a lease cost for a business office and a place to keep supplies. Quality of Care Through the experience of D. G. Anthony, Care First has identified the particular needs of the community it served. This experience has been carried over into Care First's provision of services. In the 9 months of Care First's existence at the time of hearing, it provided quality of care. Its predecessor, D. G. Anthony, also provided quality of care. While Care First's experience is relatively limited, there is no reason to expect, based on the experience of both Care First and its predecessor D. G. Anthony, that quality of care will not continue should its application be granted. IHS of Florida The Application IHS of Florida is a wholly-owned subsidiary of Integrated Health Services, Inc. ("IHS") formed for the specific purpose of filing CON applications. IHS operates other home health agencies under other subsidiary names. Pernille Ostberg is a senior vice president of the Eastern Home Care Division of Symphony Home Care Services, Integrated Health Services. In that capacity she oversees nearly 195 operations in six states, including Florida. Her operations include home health agencies, durable and medical equipment distributions, and infusion therapy offered by pharmacists. Under Ms. Ostberg's guidance, IHS has grown to its current roster of 195 agencies in only three years, from a beginning of only five agencies. IHS first acquired Central Park Lodges, primarily a nursing home company which also owned five home health agencies. Once these agencies became Medicare certified, IHS made a corporate decision to acquire additional Medicare certified home health agencies. Beginning approximately three years ago, IHS undertook a series of acquisitions which included Central Health Services, Care Team, ProCare/ProMed, and Partners Home Health. More recently, IHS has acquired the Signature Home Health and Century Home Health Companies. And, immediately prior to the final hearing in this matter, IHS acquired First American Home Health Care, making IHS the fourth largest provider of home health services in America. Of all the home health agencies overseen by IHS, 95% are Medicare certified, and 62-63 are located in Florida. IHS now has a presence in all districts except District 1 and 2. IHS personnel also have extensive experience in starting up new home health agencies. IHS personnel have opened over 40 locations across the United States. IHS employees have extensive experience bringing new home health agencies through successful surveys by the Joint Commission on the Accreditation of Hospital Organizations ("JCAHO") recommendations. Of 18 branches personally taken through initial survey by IHS's Pernille Ostberg, none were recommended to change their operations and none were cited for a deficiency. IHS has recently opened, licensed, and certified new home health agencies in AHCA Service District 5, 6, and 10. They have also received licensure in District 7, 8, and 11. Based on the extensive expensive of IHS personnel, a start up home health agency typically experiences 8,000 - 15,000 visits per first year. Opening a new program requires two months for licensure. It will require a registered nurse for three months to make certain all manuals are in place and that quality personnel are recruited. After achieving licensure, one must wait for a certification survey, which may take as long as six months. The three IHS home health agencies that became certified recently have experienced 200 visits in the first month, a good sign of growth. IHS' umbrella organization for home health organizations is Symphony. Most of their home health companies retained their original names. Other IHS home health companies include ProCare, Central Health Services, Partners Home Health, Nurse Registry, and First American. IHS of Florida has applied for applications in other districts. This applicant filed applications in District 7, 8 and 10 and each were approved. IHS of Florida's CON application number 8382 was prepared by Patti Greenberg with the significant input of IHS and IHS of Florida's operational experts. Ms. Greenberg has prepared 75-100 CON applications, 20-25 of which sought approval for Medicare Certified Home Health Agencies. Each of these prior applications had been approved or otherwise reached settlement before litigation. The Proposed Project Once the needs analysis was complete, IHS examined geographic issues within the 14 county district. IHS examined where the populations required home health agencies and what niche of the market IHS could expect to achieve. Projected visits were determined by examining month by month, how this agency would grow. This projected utilization was subdivided among sub-visit types. Existing IHS home health agencies visit mix (skilled nursing as opposed to home health aide or therapy visits) was used to estimate skill type of the projected total volume. The projected utilization was also subdivided by payor class. This payor class projection was derived specifically for District 2, its poverty levels and its managed care penetration. In the aggregate, IHS projects 7,650 visits in year one and 17,100 visits in year two. This projection is reasonable and achievable. Witnesses for the Agency agreed that IHS of Florida's projected number of visits was "definitely attainable". Past and Proposed Service to Medicaid Patients and for Medically Indigent The payor class analysis allowed IHS to conclude it should condition its approval of its application under the performance of 5% Medicaid and 1% charity care. The balance of the population served by an IHS Medicare Certified Home Health agency would be covered by Medicare. The condition is important as it is a requirement which, if not achieved, will subject IHS of Florida to fines and penalties by the agency. Improved Accessibility The applicant will improve the efficacy, appropriateness, accessibility, effectiveness and efficiency of home health services in District 2 if approved. IHS of Florida will provide good quality of care, should its application be granted. Quality of Care Through competitive forces, the applicant's approval will also improve the quality of care offered by home health agencies in District 2. The approval of IHS of Florida's application will also comply with the need evidenced by the extent of utilization of like and existing services in District 2. Economies from Joint Operations Certain economies derived from the operation of joint projects are achieved by IHS of Florida's proposal. IHS has a home office and corporate umbrella which oversees all of its operations for home health services. This master office offers economies of sale by sharing resources across a wide array of home health agencies in Florida and other states. Thus, the incremental expense for corporate overhead is reduced as compared to a free-standing home health agency. Additionally, this national oversight provides better economies to provide the most recent policies and procedures, billing systems, and other systems of business operation. Financial Feasibility IHS of Florida has the resources to accomplish the proposed project. As demonstrated on schedule 1, and schedule 3 of IHS exhibit 1, the budget for the project is only $144,000. This budget includes all appropriate equipment for both the initial and satellite offices. Budgeted amounts include all required lease expenses, equipment costs and even start-up costs such as salaries for the recruitment of training and staff prior to opening. In total, $52,000 of pre-opening expenses are projected, which is reasonable. IHS of Florida filed applications for other home health agency start-ups in three different districts. The applicant had more than $180,000 in cash on hand and an additional $226,000 assured from a commitment letter from IHS which was also contained in the application. A letter of commitment from Mark Levine, a director and executive vice president of IHS, indicated IHS will provide $250,000 in capital for this specific project. Additionally, IHS will provide up to $1 million in working capital loan to assure no cash flow problems ever arise. A similar letter of commitment appears in each of the CON applications which IHS of Florida has filed. IHS has committed to fund each of the CON applications applied for by IHS of Florida. Each of these letters of commitment for the various CON applications sought by this applicant are on file with the AHCA. In total, the applicant projects $600,000 in capital commitments assured. IHS' balance sheet, reveals access to $60 million in cash and cash equivalent. The record clearly demonstrates an ability of IHS to fund all capital contributions required by the applicant. The current assets of IHS approximate $240 million. In addition to having cash in the bank, IHS is a growing concern and is, in fact, a Fortune 500 company that is publicly traded on the New York Stock Exchange. IHS generates revenues which exceed its annual expenses. In the last year, IHS derived $30 million more than it experienced in expenses. The application is financially feasible in the short- term. IHS' application is also feasible in the long-term. IHS of Florida's utilization projections are reasonable. Budgeted staffing and salaries are reasonable. The cost limit calculation and reimbursement calculation by payor source, which is provided in great detail in Schedule 5 of IHS of Florida's application, is reasonable. Projected expenses associated with this project were reasonably calculated based on the actual experience of other IHS Home Health operations. The reasonableness of these costs are also demonstrated when compared with the cost per visit by existing agencies in District 2. In fact, IHS of Florida predicted it would be a lower cost provider than the expected cost of existing agencies at the time IHS of Florida's operations would begin. IHS of Florida's proposal will have a healthy, competitive effect on the cost of providing services by other providers. Putnam The Proposal Putnam proposes to establish a Medicare-certified home health agency with its primary office located in Bay County. Bay County was selected as the primary office based upon the locations of existing and approved agencies in District 2, the aggregate utilization of each, and the number of individuals aged 65 and over distributed among the existing District 2 counties and agencies. Mr. Alan Anderson is Putnam's sole stockholder, Director, and President. Under the ownership and administration of Alan Anderson, Putnam has provided Medicare-certified home health services in AHCA District 3 continuously since 1986. Mr. Anderson is also the sole owner, director, and president of Anderson Home Health, Inc., a Medicare-certified home health agency serving AHCA District 4 since 1992. Anderson Home Health's CON was obtained by Putnam through the same process undertaken by the prospective applicants in this proceeding. Putnam's District 3 agency has successfully served District 3 residents since 1986 at first through its Palatka office, then growing to its current size of four offices. In District 4, Anderson Home Health, Inc. has also experienced successful operations having grown from its principal office in Duval County to a total of four offices. Putnam's District 3 home health agency began with the original office located in Palatka, followed by offices opened in Gainesville, Ocala and Crystal River. Anderson Home Health, Inc.'s District 4 operation began with the original office located in Jacksonville; the second office was opened in Daytona Beach, followed by the opening of the third office in Orange Park; and the fourth office was opened in Macclenny. Putnam's District 3 agency is JCAHO accredited "with commendation." As part of CON application No. 8383, Putnam has agreed to certain conditions upon award. First, the proposed project will locate its primary office in Bay County. Putnam also conditions its approval with the provision that 0.25% of its admissions will be persons infected with the HIV virus. Four percent of its patients will be Medicaid or indigent patients. Finally, Putnam has conditioned its approval upon the provision of various special programs such as high tech home health services, a volunteer program, and the establishment of a rural health care clinic. History or Commitment to Provide Services to Medicaid and Indigent Patients For Medicare reimbursement purposes, Putnam proposes to maintain a Medicare-only agency and private sister agency which provides services to non-Medicare patients. The private sister agency will provide service to the Medicaid and indigent patients. The costs of providing services to these non-paying or partial paying patients will be absorbed by the agency as a contribution to the community. The establishment of a private sister agency to handle the non-Medicare patients is common in the home health industry. As a condition in the application, Putnam will accept up to 3.0% Medicaid patients. Although it stated in its application that it would accept between .5%-1.0% indigent patients, its conditioning of the application on 4.0% Medicaid and indigent patients would necessitate that it accept at least 1.0% indigent (if not more, should the Medicaid patients fall below 3%) in order to meet the 4.0% Medicaid and indigent care condition. The percentages proposed by Putnam are consistent with the statewide average (approximately 95% Medicare) and the District average (approximately 92.1% Medicare). Bay County's average of Medicare patients is approximately 96.4% Medicare. To meet the 4.0% Medicaid and indigent condition, Putnam's average of Medicare patients might have to be less than the Bay County average but not by much. Certainly, meeting the condition is achievable. The agency's position is that Putnam's Medicaid/indigent commitment is not a ground for denial of the application. Quality of Care Putnam has continuously owned and operated a licensed Medicare-certified home health agency in District 3 since 1986 and has been JCAHO accredited with commendation status since 1994. In an effort to continuously provide quality care, Putnam has developed a comprehensive set of policies and procedures to guide its staff, its physicians, volunteers, patients, as well as patients families. No evidence was presented to suggest that Putnam does not have a history or ability to provide quality care. Availability of Resources, Including Health Manpower, Management Personnel and Funds for Capital and Operating Expenditures Putnam has provided Medicare-certified home health service to the residents of District 3 for ten years. Putnam will be able to share its existing personnel and operations expertise with the proposed District 2 agency. Administrative, Managerial, and Operational Personnel Putnam intends to utilize existing administrative personnel in the start up and overall operation of the proposed agency. These management personnel include the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Data Processing Director, Director of Volunteers, Personnel Director. These experienced personnel will be available to provide valuable management support to the proposed agency. The proposed agency will be operated by an administrator who will report directly to Putnam's CEO, Alan Anderson. The agency's administrator will be actively involved in budget preparation, physician relations, community education, and preparation for regulatory agency surveys. The proposed agency will rely upon the demonstrated experience of key personnel in its initiation. Ms. Nora Rowsey, experienced in the start-up phases of home health agencies, will personally supervise and implement the start up phase of the proposed District 2 agency. Putnam intends to hire individuals to work within the proposed agency who already have experience in the provision of the necessary services. Current employees of Putnam's as well as contract personnel of the District 3 agency have indicated a willingness to provide services in Bay County once the application is approve. Funding and Capital Resources Putnam projects the total costs of initiating the proposed agency to be approximately $70,000. Putnam has simultaneously applied for two other Medicare-certified home health agencies, in Districts 6 and 7. Each of these projects area also projected to cost approximately $70,000. Putnam, therefore, has projected costs associated with all three projects of approximately $210,000. Additionally, there is a $10,000 contingency cost related to the District 3 offices bringing the total expenditure for all capital projects of $220,000. Putnam's application includes two letters from First Union National Bank of Florida which substantiate that there are funds on hand to finance all of Putnam's capital expenditures, including the District 2 proposed agency. As of April 18, 1996, Putnam's bank account had a twelve month average balance of $245,949.02. As of April 18, 1996 the accounts of both Putnam and Anderson Home Care Inc., had a combined twelve month average balance of $676,656.93. The evidence established that these funds exist and are available for all proposed capital projects. In the two years prior to hearing, Putnam showed sound management, significant growth, and a strong financial position. It continues to do so. In an interoffice memorandum dated May 28, 1996, from Roger L. Bell to Richard Kelly, Health Services and Facilities Consultant, Putnams' financial position was described as follows: The current ratio of .62 indicates the current assets are not adequate to cover short term liabilities. The long term debt to equity and equity to assets ratios are very weak. This, along with the negative equity make a weak financial position. The profit margin at .1% is also very weak, and raises some concern with the applicant's ability to cover operating expenses . Putnam Ex. No. 4. This criticism was answered by Putnam. The agency may not have considered certain factors applicable to a predominantly Medicare-reimbursed home health agency. Putnam's current liabilities are payable in a longer term than the receivables are collectible. Furthermore, with provision of 98% Medicare services, which is solely cost reimbursed, there remains only two percent of the operation left to make a profit. A .1% profit from the small amount of insurance and private pay patients indicated financial health. Putnam, moreover, is a viable operation because of its historical success, its knowledge of the industry, its expansion to six locations, its growth in staff, and its growth in patient visits. Putnam has the resources available to provide the necessary administrative, managerial, and operational manpower needed by the proposed home health agency. AHCA's financial criticisms are unfounded; Putnam has on hand the capital necessary for the accomplishment of the proposed project. Putnam has the experience and know-how to make the proposed project work in District 2's rural areas. Financial Feasibility Putnam has the resources to implement this project if approved. Putnam has the same capability that existed when three offices were opened during the period from April 1992 through February 1993, and the same resources when four offices were opened in 1995. In every instance, the new offices were started up with cash on hand from operation. Mr. Anderson, Putnam's President and sole shareholder and director, testified that he spends much time in the financial area of the operations. As of November 29, 1996, after deducting all accounts payable, Putnam has a cash balance of approximately $390,000. Anderson Home Health, Inc. had a balance of approximately $425,000. Mr. Anderson testified that the First Union letters in the application at pages 231 and 232 were correct and that Putnam is in even better shape now than when the letters were written. Putnam is financially feasible in the short term. AHCA contends Putnam's project is not financially feasible in the long term because the projected visits stay the same in the second year and because it does not project a profit in year two of operation. This fails to take into account Putnam's performance over the past ten years which, as the agency conceded at hearing, is an important consideration . Mr. Anderson purchased Putnam in 1986. At that time the agency had a single office in Palatka doing 4,000 visits. Following Mr. Anderson's purchase of the agency it had grown to over 55,000 visits and close to a hundred employees. After the success experienced by Mr. Anderson in Palatka, Putnam filed a CON application for District 4, with a proposed principle site in Jacksonville. The District 4 CON was approved by the agency--without any concerns for financial feasibility nor with any concerns for Putnam's cash flows. Without having any experience or referral sources in Jacksonville, Putnam began doing approximately 7,000 visits. The number of visits jumped to 45,000 in the second fiscal year, 123,000 in the third fiscal year, and as of September 30, 1996 the Jacksonville office performed 158,000 visits. Aside from the extraordinary growth experienced in the Palatka and Jacksonville offices, already discussed, Putnam has opened rural offices also doing very well. The Macclenny office in rural Baker County had over 15,000 visits in the first twelve months and is currently averaging over 1800 visits. The Crystal River office in rural Citrus County made over 12,000 visits in its first year and is currently doing approximately 1400 visits a month. Every new office opened by Putnam or Anderson Home Health since 1991 has been break even or better. Putnam has a proven track record for the successful and profitable operation of new Medicare-certified home health agencies. Putnam's project is financially feasible in the long term. Utilization Projections The application sets forth reasonable utilization projections. Based on Putnam's utilization in the past, there is no reason to believe the projections set forth in the application are or unreasonable or will not be achieved. Impact on Costs Putnam is a high tech provider of home health services and will provide some services not currently available or available only in a limited number of agencies. The impact of approval of Putnam's application on costs in the District will be minimal due to the reimbursement issues associated with Medicare which is cost based. RHA A Not-for-Profit Corporation in District II RHA is not-for-profit corporation whose purpose is to provide a continuum of care to the community. All profits are returned to its nursing homes or agencies as a way of continuing to build the programs. RHA owns two nursing homes in AHCA District II; Riverchase Care Center in Gadsden County and Brynwood Center in Jefferson County. If approved, RHA is proposing to locate its Medicare certified home health agency in existing space within the Riverchase and Brynwood nursing facilities. Both of these facilities are managed and operated by HealthPrime, Inc., a company which operates approximately 40 facilities in 13 states. While RHA is technically the owner and therefore applicant for this CON, HealthPrime would operate the proposed Medicare certified home health agency within the nursing homes. RHA's home health agency would have two offices. The office located in the Riverchase facility would serve Gadsden, Liberty, Franklin, Gulf, Wakulla, Jackson, Calhoun, Washington, Holmes and Bay Counties. The office located in the Brynwood facility would serve Leon, Jefferson, Madison and Taylor Counties. Financial Feasibility The only questions raised by AHCA concerning RHA's financial feasibility went to the ability of RHA to fund this project in conjunction with other CON projects listed on Schedule 2 of its CON application. The largest project on Schedule 2 of RHA's application was a CON application for a 20 bed addition to Riverchase Care Center. At hearing it was determined that since the filing of the instant home health CON application, the 20 bed application had been withdrawn, was no longer viable, and was not being pursued by RHA. Once AHCA's financial expert learned that the 20 bed addition to the Riverchase Care Center had been administratively withdrawn and that its costs should therefore no longer appear on Schedule 2, questions about the financial feasibility of the project were resolved. RHA's project was shown to be financially feasible in the short term based upon the financing commitment of HealthPrime. RHA proved that its assumptions and projections made in its financial analysis are reasonable. These assumptions were based on actual experience in the operation of similar skilled nursing facility based home health agencies, as well as prior experience of other home health agencies in their first two years of operation. RHA's proposed project shows a net income in years one and two and is financially feasible in both the short and long term. Availability and Access of Services To the extent that the number of people needing home health care will increase in the future, there is need for new providers of home health services to provide such availability and access. RHA's willingness to condition its application on service to AIDS, indigent and Medicaid patients can only improve the availability and access to services in the district. In addition, RHA's approval to provide nursing home based home health services is unique to the provision of home health services in District II. Efficiency RHA's proposal, which would place its home health agency within its nursing homes, is unique among the applicants in this proceeding. Such an arrangement provides not only an efficient continuum of care to the patients, it also provides efficiencies and cost savings in the sharing of resources. RHA's proposed project is cost effective because it utilizes existing space and equipment in its nursing homes. Skilled nursing home based Medicare certified home health agencies are specifically recognized by the Federal Medicare program in their cost reports. Home health reports are filed as a part of the nursing home cost report and there is an allocation of the nursing home's cost to the home health agency. This benefits both the provider and the Medicare program through cost savings. RHA's cost per visit to the Medicare program of $48 will be substantially less than the District II average of $66 per visit projected for the time RHA will be operational under the applied- for CON. RHA's proposed project will have no impact on its costs of providing other health care services. Appropriateness and Adequacy RHA proposes to provide the entire range of home health services throughout the district. Given the project need in the planning horizon, RHA's proposal is more than adequate to meet the demand for such services. Quality of Care An applicant's ability to provide quality care is another important factor in statutory and rule criteria. RHA and HealthPrime have shown, through operation of their nursing homes in Florida, all of which have superior ratings, that they have the ability to provide quality health care. In addition, HealthPrime, which will actually operate the home health agency, has experience operating four other nursing home based home health agencies. HealthPrime will utilize its quality assurance programs already in place in its other home health agencies and will seek JCAHO accreditation of this proposed agency. By combining a home health agency with its existing nursing homes, RHA will improve the case management of its patients by providing vertical integration of its services in a continuum of care. Such continuum of care provides a stability in personnel and providers that are working with the patient. Economies and Improvements from Joint or Shared Services As previously discussed, RHA's unique proposal to operate a nursing home based home health agency not only offers a continuum of care for the patient, it also provides fiscal economies to the agency as well as the Medicare program. Resource Availability Based on RHA's experience of hiring personnel for its existing nursing homes in the district, there will be no problem in hiring sufficient personnel for RHA's agency. Fostering Competition The addition of other Medicare certified home health agencies in a district consisting of 10 counties and only 23 providers will promote increased competition and more options for patients. Findings Applicable to All Four Applicants No Fixed Need Pool The agency has no rule methodology to determine the need for Medicare-certified home health agencies. The agency's most recent home health need methodology was invalidated in Principal Nursing vs. Agency for Health Care Administration, DOAH Case No. 93-5711RX, reversed in part, 650 So.2d 1113 (Fla. 1st DCA 1995). There is, therefore, no numeric need determination, or "fixed need pool", established by the agency applicable in this proceeding. District 2 AHCA District 2 is composed of 14 counties. The applicants propose to concentrate their service in various, different parts of the district. Local and State Health Plan Preferences District 2 Health Plan Services to Medicaid and Medically Indigent The first preference under the District 2 Health Plan provides a preference to applicants with a history of providing services to Medicaid or medically indigent patients or commitment to provide such services in the future. Mr. Franklin of Care First has such a history. He is an owner of Wakulla Manor, which had a Medicaid occupancy rate of 88.09% for the period of July-December, and the administrator of Miracle Hill Nursing Home which had a Medicaid occupancy rate of 95.74% for the same period. In the face of such a record, Care First’s commitment of 7% Medicaid and 1% uncompensated/charity patients might seem to pale. But it is a significant commitment, given the nature of the home health agency business, and one upon which Care First agrees its application should be conditioned. IHS conditioned its application on 5% Medicaid and 1% charity care. Putnam conditioned its application on an “Indigent and Medicaid participation equal[ling] 4.0%.” Putnam Ex. No. 1, pg. 51. Putnam, moreover, proposes a Medicare-only agency. Establishment of a private sister agency, a practice common in the home health care industry, will allow Putnam to provide service to the Medicaid and indigent patients separate from its Medicare-only agency. RHA has provided a high percentage of Medicaid/charity days at its Riverchase facility (92.10%) and at its Brynwood facility (90.24%). In addition, RHA is willing to condition its CON on the provision of a minimum of 1% of annual visits to indigent care and 5% to Medicaid. Service to Unserved Counties. Preference 2 states that “[p]reference should be given to any home health services CON applicant seeking to provide home health care services in any county within the District which is not presently served by a home health agency.” There are no counties within District 2 that are not presently served by a home health agency. Service Through a County Public Health Unit Preference 3 states that “[p]reference should be given to a home health services CON applicant seeking to develop home health care services to be provided through a county public health unit in the district in order to more adequately serve the elderly and medically indigent patients who are isolated or unable to travel to permanent health care sites." Of the four applicants, only IHS of Florida’s application is conditioned on working with public health units. IHS has experience working with public health units, working with them currently in Martin County, Manatee County and Broward County. Nonetheless, IHS of Florida will not be providing its services “through” a public health unit. Public Marketing Program Preference 4 states, “[p]reference should be given to a home health services applicant who has a history of providing, or will commit to provide, a public marketing program for services which included pamphlets, public service announcements, and various other community awareness activities. These commitments should be included on the granted CON as a condition of that CON.” Care First currently markets its services to the community and commits to a public marketing program in the future as a condition of its CON. IHS of Florida committed to performing at least one community awareness activity per calendar quarter as a condition of its application. It also indicated, moreover, that it would work to develop public service announcements and marketing programs with the help of public health units or any other appropriate vehicle. The latter indication, however, was not made a condition of the application. Putnam provides educational services to the community, its employees, patients and patients’ families, including the provision of pamphlets, and presenting audio and video tapes as appropriate to the patient and their families. Putnam, however, did not condition its application on a commitment to a public marketing program or commit to such a program in any other way in its application. RHA stated it would accept a condition on its CON to provide a public marketing program for services, including pamphlets, public service announcements and other community awareness activities. It did not reflect such a condition on the “Conditions” page of the application, but, given its statement that it would accept such a condition, there is nothing to prevent the agency from imposing such a condition should it grant RHA’s application. Access Requirements Preference 5 is, “[p]reference should be given to a home health services CON applicant who agrees, as a condition of the CON, to meet the following access requirements for each county in which services are provided: 1) 24 hour local telephone call (or toll-free) contact. 2) 24 hour call/response capability. 3) Maximum on one (1) hour response time following call. Care First currently meets the requirements of Preference 5 in the counties in which it now provides services, and has committed to continue to meet these requirements as a Medicare certified home health agency in all counties in which it will provide services. Care First has made as conditions of its CON, provision for 24-hour accessibility by answering service and installation of a toll-free access line and maintenance of a log of calls during the hours the agency is closed, including documenting of response time to each call. IHS of Florida conditioned grant of its CON on a 30 minute response time, and 24-hour phone availability on a toll-free hot line. Putnam presently provides the services in this preference in its District 3 Medicare certified home health agency and agrees to meet this preference within 90 days of initiating services. It did not, however, make a commitment to meet this preference on the “conditions,” page of its application. There is nothing to prevent the agency from making Putnam’s CON, if granted, conditional upon compliance with this preference. RHA has agreed to have its CON conditioned to meet the access requirements of Preference 5. 2. State Health Plan Service to Patients with AIDS The first preference under the State Health Plan is that “[p]reference shall be given to an applicant proposing to serve AIDS patients.” All four applicants are committed to serving AIDS patients. Full Range of Services. Preference 2 of the State Health Plan is “[p]reference shall be given to an applicant proposing to provide a full range of services, including high technology services, unless these services are sufficiently available and accessible in the same service area." There are currently 11 hospital-based Medicare certified home health agencies in District 2. Several of them provide the high tech services which are sometimes needed by discharged hospital patients. Very few referrals for high tech care have been received by D. G. Anthony or Care First since May, 1995, and there is no indication such services are not available in District 2. Care First has identified, however, an unmet need for the pediatric and pre-hospice home health agency services and has conditioned its application on the provision of those services to the community. IHS of Florida proposes, among other high tech services, infusion therapies, pain management therapies and chemotherapy. There is no evidence, however, that these therapies are not available in District 2. The same is true of Putnam as to the high tech therapies it proposes to provide. There is no evidence that they are not available in District 2. Although RHA indicated in its application that it intended to provide the entire range of services that a home health agency can provide, again, there is not evidence that they are not available in District 2. Disproportionate Share Provider History Preference 3 is “[p]reference shall be given to an applicant with a history of serving a disproportionate share of Medicaid and indigent patients in comparison with other providers within the same AHCA service district and proposing to serve such patients within its market area." Care First, having been formed in March, 1996, did not have a history of providing Medicaid and indigent patients. Care First has committed to 7% of its visits to Medicaid patients, well above the average of existing District 2 agencies of 2-3% Medicaid. Care First has committed to 1% of its visits to charity/uncompensated care. IHS of Florida has committed to 5% Medicaid and 1% charity care. Like Care First, IHS of Florida, as a newly formed corporation, does not have a history of serving a disproportionate share of Medicaid/indigent care patients. Putnam’s commitment is 3% to Medicaid and 1% to charity care. This commitment will be met through its sister home health agency and not the Medicare-certified home health agency for which the CON is sought. RHA has committed to set aside 5% total annual visits to Medicaid patients and 1% of annual visits to indigent care. It has a history of providing a disproportionate share of services to Medicaid patients at its two skilled nursing facilities in District 2, Riverchase Care Center in Quincy and Brynwood Center in Monticello. Underserved Counties Preference 4 is [p]reference shall be given to an applicant proposing to serve counties which are underserved by existing home health agencies. The rural areas of District 2 are traditionally underserved. Putnam will serve Bay County, an underserved county; the three other applicants will serve rural areas of more than one county in District 2. Consumer Survey Data Preference 5 is "[p]reference shall be given to an applicant who makes a commitment to provide the department with consumer survey data measuring patient satisfaction." Care First has committed to providing such data to the agency. IHS of Florida will maintain a data base of results of patient satisfaction surveys and make them available to the agency, just as it already does. Putnam will make available to the agency the results of surveys similar to surveys measuring patient satisfaction Putnam has already developed. Putnam has conditioned its application on providing these surveys to the agencies as well as surveys measuring physician satisfaction. RHA has cited on its “Conditions” page, “. . . (it) will provide the Agency for Health Care Administration with consumer survey data.” Quality Assurance Program and Accreditation The State Health Plan’s Sixth Preference is “[p]reference shall be given to an applicant proposing a comprehensive quality-assurance program and proposing to be accredited by either the National League for Nursing or the Joint Commission on Accreditation of Healthcare Organizations." Care First included in its application a copy of its Quality Assurance Program which has been in use since May, 1995. The program meets the state and federal licensure and certification requirement and the stringent requirements of JCAHO. Moreover, Care First has conditioned its application upon JCAHO accreditation. IHS of Florida submitted documentation regarding its Quality Assurance Program through initiatives such as Total Quality Management and Continuous Quality Improvement. It will seek accreditation from JCAHO within one year of receiving its CON. Putnam, an existing home health agency in District 3 since 1986, has over the years developed and refined a comprehensive quality assurance program which is above the industry standard. The District 3 agency, using its quality assurance program, has attained its JCAHO accreditation “with commendation,” a distinction received by less than 4% of all applicants. Putnam will seek accreditation from JCAHO for its District 2 operation within one year of receiving its CON. RHA is willing to condition its CON on the provision of a comprehensive quality assurance program and accreditation by the JCAHO. Need 1. Numeric Need Since there is no published fixed need pool applicable to this proceeding, the parties, other than the agency, developed their own methodologies for determining numeric need. Each of the methodologies employed by the parties was reasonable. After taking note of the statistics for actual patient visit growth in District 2 from 1991 to 1994, Michael Schwartz began with a conservative number of 60,000 new patient visits per year, a number half of the growth for the lowest growth year of that time period. Multiplying that number times the three horizon years of 1994-97 equals 180,000 new patient visits from 1994 which yields a need for 5.2 agencies. The reasonableness of numeric need in excess of four is supported by other factors. After the filing of the four applications at issue in this proceeding, there are two fewer Medicare-certified home health agencies with certificates of need in District 2. At the same time, home health care visits have been on the increase not only in the district as discussed, above, but in the state as well. Statewide, home health care visits grew from 18 million to 22 million between 1991 and 1994. The utilization of home health care agencies is increasing because of population growth and an increase in the number of visits per patient. The amount of time spent by patients in the hospital is decreasing. The decrease translates into increased need by patients for visits from home health agencies. The need for home health is going to continue to increase because it is a cost-effective alternative to nursing home placement and hospital care. From 1991 to 1994, the number of home health visits more than doubled: from 369,396 to 869,893. This trend continued in 1995. The recent significant growth in the utilization of home health agencies in District 2 is expected to continue. The growth is attributable not only to a population increase in the district but to increase in the use rate for home health agency services as well. The growth in use rates can be explained, in part, by the increase in the senior population (65 and older) and the pressure exerted by managed care for earlier hospital discharges and home health agency services as a viable alternative in some cases to inpatient treatment. The senior population in District 2 is reasonably expected to grow approximately 8% in the five years after 1996, with 15% growth expected reasonably in the 75 to 84 year old population and even higher growth, 25%, in the population over 84 years old. 2. Other Indications of Need Local physicians have experienced difficulty arranging for the existing home health agencies to provide services to patients located in remote areas of District 2. Specialized groups, such as AIDS patients, would, in all likelihood, benefit from additional home health agencies in District 2. Furthermore, a study conducted by IHS of Florida showed that the district has an unusually high rate of diabetes and in four counties has a diabetes death rate 100% greater than the statewide average. Well Springs home health agency is one of the two Medicare-certified home health agencies to cease providing Medicare-certified home health services after the four applicants in this proceeding filed the applications at issue here. Well Springs was licensed in all 14 counties of District 2 and had physical locations in Franklin, Gadsden, Bay, Leon, Liberty, Taylor and Madison Counties. It had a significant share of the District 2 Medicare certified home health agency market with 13.1% of the 1994 visits, the second highest in the District. With Well Springs discontinuing Medicare-certified home health agency services, a void was left for such services in District 2, particularly in those counties in which Well Springs had a physical presence.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED: That the Agency for Health Care Administration enter its final order granting CON Nos. 8380, 8381, 8382 and 8384 to RHA/Florida Operations, Inc., Care First, Inc., Home Health Integrated Health Services of Florida, Inc., and Putnam Home Health Services, Inc., respectively. DONE AND ENTERED this 9th day of June, 1997, in Tallahassee, Florida. DAVID M. MALONEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 9th day of June, 1997. COPIES FURNISHED: Sam Power, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Suite 3431 Fort Knox Building III Tallahassee, Florida 32308-5408 Jerome W. Hoffman, General Counsel Agency for Health Care Administration 2727 Mahan Drive, Suite 3431 Fort Knox Building III Tallahassee, Florida 32308-5403 Richard Ellis, Esquire Agency for Health Care Administration 2727 Mahan Drive, Suite 3431 Fort Knox Building III Tallahassee, Florida 32308-5408 W. David Watkins, Esquire Watkins, Tomasello & Caleen, P.A. 1315 East Lafayette Street, Suite B Tallahassee, Florida 32301 Mark Emanuel, Esquire Panza, Maurer, Maynard & Neel NationsBank Building, Third Floor 3600 North Federal Highway Fort Lauderdale, Florida 33308 Paul Amundsen, Esquire Amundsen & Moore 502 East Park Avenue Tallahassee, Florida 32301 Theodore E. Mack, Esquire Cobb Cole & Bell 131 North Gadsden Street Tallahassee, Florida 32301
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: The letter of intent and authorizing board resolution to establish a new Medicare certified home health agency filed by ABC for District Four for the September, 1989 batching cycle was timely filed with HRS and the Health Planning Council for Northeast Florida, Inc., and met all statutory and rule requirements for filing. The CON application to establish a new Medicare certified home health agency filed by ABC for District Four for the September, 1989 batching cycle was timely filed with HRS and the Health Planning Council for Northeast Florida, Inc. The CON application to establish a new Medicare certified home health agency for District Four for the September, 1989 batching cycle was deemed complete and accepted for review by HRS, effective November 13, 1989. There is a numeric need for one additional Medicare certified home health agency in District Four as determined by HRS and published pursuant to Rule 10-5.011(1)(d), Florida Administrative Code. Local Health Plan The 1989-90 CON Allocation Factors Report for HRS District Four (Health Plan) is the applicable health plan with regards to this proceeding. In its application ABC addressed the recommendations found in the Health Plan. The Health Plan recognizes that under the new methodology for determining numeric need, a licensed home health agency within an HRS district could serve any and all counties within the district. However, the Health Plan contains recommendations for allocating home health agencies. The Health Plan makes the following recommendations: Geographic Preference Home health agencies should be allocated to counties on the following basis: Preference should go to applicants who will establish their program in a county which does not have any CON approved agencies or subunits based in the county. Consideration should be given to counties with a low number of Medicare visits per 1,000 persons 65 years and older. Competing Applications In the case of competing applications for the same or similar geographic area, preference should be given to those applicants which demonstrate: They will meet identified needs in the most cost-effective manner. They are addressing a current or potential geographic access problem in the district. They will serve the widest spectrum of the population, including the medically indigent. They have written agreements with a broad spectrum of local hospitals, nursing homes, mental health resources and/or other service providers in order to help ensure continuity of care. They demonstrate in their CON application how they will comply with any conditions placed on the CONs. They will serve AIDS patients. ABC proposes to locate its agency office in Duval County because it contains medical centers, hospitals with discharge planners and physician staff for referrals, and because of enhanced recruiting and retaining of appropriate staff. However, it proposes to serve all patients referred to it in all counties located throughout District Four, including Baker County. Baker County has no CON approved home health agency based within the county. However, it is presently being served by home health agencies based in Duval County. Because of its small population, with a relatively low percentage of the population being 65 years old or older, its distance from hospitals and the recruiting and staffing problems it would engender, it is doubtful that Baker County could support a main office for a home health care agency. In fact, the 1988 Local Health Plan indicated that Baker County should probably not have a home health agency physically located within the county. Baker County has the lowest number of citizens 65 years of age or older and the lowest usage rate for home health agencies. There is no data or documentation to show why the usage of home health services in Baker County is low. However, HRS makes the assumption from the usage rate only that Baker County is underserved. Duval County is not considered as being underserved in terms of Medicare units. By locating in Duval County, ABC does not specifically comply with preference 1A or 1B. However, ABC has proposed to serve all patients within District Four referred to it regardless of where the patient is located, and regardless of the patient's payor class. (Medicare, Medicaid, private pay or indigent) While 1A and 1B of the Health Plan's recommendation is concerned with geographic preferences, 2A through 2F of the Health Plan's recommendations are preferences that relate mainly to situations involving competing applications in the same batch. ABC meets a majority of those preferences, including: 1A. ABC will be among the lowest in cost of the existing providers in District Four. 1B. ABC goes to the patient and has stated it will serve all of the patients within District Four referred to it. 1C. ABC proposed to serve all patients referred to it, including the medically indigent and medicaid. Because of the situation with Medicaid patients, ABC did not project any Medicaid patients. However, ABC proposed to serve all patients on which it has referrals including Medicaid patients. 1D. ABC did not have written referrals with hospital, nursing homes and other resources for patient referrals. However, ABC stated that this was its standard operating procedure and if granted a CON they would establish written referrals. 1E. ABC does not specifically address how they would comply with any condition placed on the CON. 1F. Again, ABC proposed to serve all patients within District Four referred to it, including AIDS and HIV patients. Since ABC has no control over which patients are referred to it, then its payor mix is just a projection. Whether an AIDS or HIV patient is on Medicare, Medicaid, private pay or medically indigent ABC has proposed to served them. In fact, it has a corporate policy to train and educate its employees in this area of service. ABC has shown that it intends to serve AIDS and HIV patients on which it has referrals. State Health Plan The 1989 Florida State Health Plan is the applicable health plan in this proceeding. The State Health Plan is a comprehensive three-volume document which describes Florida's health system and the services available to Florida residents. Specifically, the State Health Plan addresses certain preferences which HRS uses in reviewing home health CON applicants. They are as follows: Preference shall be given to an applicant proposing to serve AIDS patients. Preference shall be given to an applicant proposing to provide a full range of services, including high technology services, unless these services are sufficiently available and accessible in the same service area. Preference shall be given to an applicant with a history of serving a disproportionate share of Medicaid and indigent patients in comparison with other providers within the same HRS service district and proposing to serve such patients within its market area. Preference shall be given to an applicant proposing to serve counties which are underserved by existing home health agencies. Preference shall be given to an applicant who makes a commitment to provide the department with consumer survey data measuring patient satisfaction. Preference shall be given to an applicant proposing a comprehensive quality assurance program and proposing to be accredited by the Joint Commission on Accreditation of Healthcare Organizations. As to 16A, ABC has proposed to serve all patients in District Four that are referred to it by referring agencies, including AIDS and HIV patients regardless of their of payor class. ABC has a stated commitment to serving AIDS and HIV patients. The evidence establishes that of all AIDS cases reported in District Four, Duval County has approximately 69 percent. District-wide 52 percent of all reported AIDS cases have ended in death whereas in Duval County the percentage is 56. Very few AIDS patients are medicare eligible. A higher percentage of AIDS patients in Duval County are served as indigents or under Medicaid, notwithstanding HRS' Medicaid Project AIDS Care. As to 16B, ABC proposes to provide the full range of services, including high technology services. ABC included in it application excerpts from its high tech policy manual. There was no data available from local health council on what high tech services are available from existing providers. As to 16C, while ABC's payor mix does not indicate that they would be serving a disproportionate share of Medicaid and indigent patients there is no data indicating what access problem, if any, exists for Medicaid and indigent case patients needing home health care services. ABC proposes service to all patients within District Four that are referred to it be referring agencies. As to 16D, while there is no data available that any county within District Four is in fact underserved, ABC has stated that it will serve all counties in District Four and there is no evidence to show that ABC will not serve all counties in District Four. As to 16E, ABC has indicated it will comply with this requirement and there is no evidence to show that ABC will not furnish the data in terms of consumer survey response. As to 16F, ABC has a quality assurance program in place and HRS agreed that ABC could provide quality of care to its patients. Statutory Criteria Section 381.705(1)(a), Florida Statutes - Availability and Access to Services District Four has 20 Medicare certified home health agencies, with five located in Duval County and, one approved but not yet established Medicare certified home health agency. However, as stated in the State Agency Action Report (SAAR) there is a market for another home health agency in District Four as determined by the fixed need pool. ABC's stated commitment to serve all counties in District Four and to serve all patients in those counties referred to it by referring agencies regardless of whether the patient's payor class should enhance the convenience and accessibility to patients. Section 381.705(1)(b), Florida Statutes - Quality of Care, Efficiency and Adequacy of Existing Area Providers There is no specific data available from HRS concerning the quality of care, efficiency and adequacy of services being provided by existing care providers in District Four. ABC did not conduct a survey to assess the existence of quality care problems in District Four. However, the existence of quality care problems in District Four would be difficult to gauge since the in- home provision of services makes them largely beyond public or professional scrutiny. In fact, generally, with few exceptions, application for home health agencies do not address this criterion. The parties stipulated that the provisions of Section 381.705(1)(c) through (g), Florida Statutes were deemed to have been met or otherwise not applicable. Section 381.705(1)(h), Florida Statutes - Availability of Resources and Funds and Accessibility of Service to all Residents of Service District The evidence establishes that ABC has sufficient resources and funds to accomplish what it proposes. HRS has no data suggesting significant access problems for Medicaid patients to home health care nor was there sufficient evidence that AIDS or HIV patients suffer an access problem for home health care. However, due to improvements in terms of Medicaid reimbursement any access problem that may exist should be reduced. ABC has a stated commitment to serving all patients in District Four regardless of the patient's payor class. This commitment should improve the accessibility of home health care to underserved patients if, in fact, there is an access problem for the Medicaid, AIDS, HIV or indigent patients. Section 389.705(1)(i), Florida Statutes - Financial Feasibility ABC projects it will do 12,000 home visits in year one and 14,000 home visits in year two. These projections are based on ABC's experiences in other districts, particularly District Three. These projections also represent approximately 25 and 29 percent of the new visit pool market for each year, respectively. However, ABC clients would not necessarily all come from the new visit pool. ABC's projected home care visits are reasonable based on its experience in other Florida districts and its experience in other states, notwithstanding its lack of an established referral network in District Four and being a new entrant into the District Four market. ABC's financials displayed in its application are reasonable and consistent with its Florida experience. ABC's payor mix and visit each correlate to its actual Florida experience. ABC's pro forma expenses for year one and year two are reasonable. ABC projects a first year profit of $3,914 and a second year profit of $5,010 and after the second year, ABC should continue to show a profit. ABC's proposed project will benefit ABC by allowing it to meet its long term goals. ABC's existing Florida agencies are operating in financially sound manner and there is no reason to believe that ABC's proposed agency will not operate in the same manner. ABC's liquidity ratio is 0.7 to one which means that ABC has excess current liabilities over current assets and is one factor used for determining the general health of a company. ABC has an accumulated deficit of $651,836. From all of the above, ABC's proposed agency is feasible in both the short term and the long term. It was stipulated that Section 381.705(1)(j) and (k), Florida Statutes were deemed to have been met or otherwise inapplicable. Section 381.705(1)(l), Florida Statute - Impact on Competition Since ABC has a stated commitment to serve all patients in all counties in District Four referred to it regardless of the payor class and is offering a full range of services, including high tech, its proposal should only serve to enhance competition within District Four, notwithstanding that the proposal is primarily a Medicare home health care provider which would not provide any financial competition. The parties stipulated that Section 381.705(1)(m), Florida Statutes was deemed to have been met or otherwise inapplicable. Section 381.705(1)(n), Florida Statutes - Medicaid and Indigent Care Very few medicaid and indigent patients are served by the existing agencies in District Four. Most of these patients are served by the Visiting Nurses Association (VNA) which is subsidized by United Way, local governments and other sources. There is no data or documentation that Medicaid patients do not in fact have a significant access problem. Medicare is the predominant payor source in Florida and is ABC's primary payor source even though ABC has a stated commitment to serve all patients regardless of payor class. A high percentage of Florida's Medicaid budget for home health services is used for co-insurance for medicare. Therefore, Medicaid patients that are "dually eligible" are receiving home health care under Medicare. Florida's Medicaid program does not reimburse for physical therapy, speech therapy or occupational therapy for adults. In a Medicare certificate home health agency there is only a certain pool of profit available to serve Medicaid and indigent patients. Therefore, if the percentages of Medicaid service goes up then indigent or charity cases must suffer or the agency cannot operate in the "black". While HRS usually places a condition on the CON concerning Medicaid services, a majority of the recently issued CONs for home health care had no such condition placed on them. The parties stipulated that Section 381.705(2) and (3), Florida Statutes were deemed to have been met or otherwise inapplicable. State Agency Action Report (SAAR) HRS up to and including, the home health care agency batching cycle immediately preceding the instant September 1989 batch, used not applicable (N/A) on those criteria that were not typically addressed by applicants or were not considered to be applicable to an applicant. HRS now enters a "no" in those situations but a "no" in this situation has no adverse or negative impact on HRS' decision. Typically, approved applicants do not meet all the statutory criteria. Some of the criteria may be only partially met and some may not be met at all.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED: That a final order be entered granting ABC's application for a certificate of need (CON No. 6015). DONE and ENTERED this 26th day of October, 1990, in Tallahassee, Florida. WILLIAM R. CAVE Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 26th day of October, 1990. APPENDIX TO THE RECOMMENDED ORDER The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on the proposed findings of fact submitted by the parties in this case. Specific Rulings on Proposed Findings of Fact Submitted by Petitioner, ABC 1. Each of the following proposed findings of fact are adopted in substance as modified in the Recommended Order. The number in parentheses is the finding of fact which so adopts the proposed finding of fact: 6(2,3); 7(8); 8(7,8,11); 9(8,10); 11(7,14); 15(4); 16(16,17,18,19); 17(16,18); 18(16,21); 19(16,22); 20- 21(23,24); 23(25); 25(4,25); 28-29(25-27); 31-38(29); 40-42(29); 45(32); 48- 52(33,34,35,36); 54-58(32,37,38,41); 61-64(43); 68-70(45,46,47); 72- 77(47,48,49); 79-81(47,49,50); 83(51); 85-87(53); 89(53); 90(54). 2. Proposed findings of fact 1-5, 10, 12-14, 22, 24, 26, 27, 30, 39, 43, 44, 46, 47, 53, 59, 60, 65-67, 71, 78, 82, 84, 88, 91 and 92 are unnecessary. Specific Rulings of Proposed Findings of Fact Submitted by Respondent, HRS Each of the following proposed findings of fact are adopted in substance as modified in the Recommended Order. The number in parentheses is the Finding of Fact which so adopts the proposed finding of fact: 3-9(5,6,7,9,12,13,14); 12- 26(14,18,19); 28-29(15,16); 44-46(32) 48-51(39,40). Findings of fact 1 and 2 are covered in the preliminary statement. Proposed findings of fact 10, 11 as to the last 2 sentences, 27, 30, 31, 32 other than last sentence, 33, 35, 36 other than last sentence, 37, 38, 39, 41, 42, 47 and 52 are not supported by substantial competent evidence in the record. The last two sentences of finding of fact 34 are adopted in finding of fact 25, otherwise not supported by substantial competent evidence in the record. Proposed finding of fact 43 is unnecessary. The first two sentences of proposed finding of fact 53 are adopted in finding of fact 36, otherwise not supported by substantial competent evidence in the record. Copies furnished to: R. Terry Rigsby, Esq. F. Philip Bank, P.A. 204-B South Monroe Street Tallahassee, FL 32301 Edward Labrador, Esq. Assistant General Counsel 2727 Mahan Drive, Suite 103 Tallahassee, FL 32308 Sam Power, Agency Clerk Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, FL 32399-0700 Linda Harris, General Counsel Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, FL 32399-0700
The Issue Whether there is need for any new Medicare certified home health agencies in AHCA District III, and if so, whether the applications filed with the Agency by the two petitioners in this case meet criteria for the award of a certificate of need?
Findings Of Fact The Parties Home Health Care Services d/b/a SouthMed Health Care, if operational, will be part of the HHCS Health Group. The group includes a number of interrelated medical corporations under the HHCS umbrella. Among them are these: the Cystic Fibrosis Pharmacy, Inc.; the HHCS Pharmacy; the Special Pulmonary Care Center; the HHCS Research Institute, Inc.; and the Center for Environmental and Industrial Medicine, Inc. HHCS also operates home health care agencies in Melbourne, Rockledge, Tampa, Port Charlotte, and Sarasota. Lake City Nursing Homes, Inc., is the owner and licensee of Lake City Extended Care Center, a 60-bed nursing facility in Columbia County, Florida. It is a provider currently of home health care for Medicaid recipients and private payors though its licensed home health agency located adjacent to the nursing home. By the CON application at issue in this proceeding, Lake City proposes to provide skilled nursing home based Medicare certified home health agency services as well. The Agency for Health Care Administration is the "single state agency [designated by statute] to issue . . . or deny certificates of need . . . in accordance with the district plans, the statewide health plan and present and future federal and state statutes." Section 408.034(1), Florida Statutes. Service Planning Area and Existing Providers AHCA District III consists of sixteen counties: Hamilton, Suwannee, Lafayette, Dixie, Columbia, Gilchrist, Levy, Union, Bradford, Putnam, Alachua, Marion, Citrus, Hernando, Sumter, and Lake. At the time of the submission of the applications at issue in this proceeding, there were twenty-nine existing Medicare certified home health agencies in District III. HHCS proposes to target a group of patients none of the other existing providers presently target. In another approach, Lake City proposes a nursing-home based, Medicare certified home health agency. Other than Lake City's existing non-Medicare certified agency, none of the existing providers are nursing-home based. In relation to the existing providers, therefore, Lake City and HHCS propose unique opportunities for home health care services in District III. HHCS' Application HHCS' application is targeted to a group of patients in District III not presently receiving services which rise to the level of their need. The group consists of post-transplant patients and patients with cystic fibrosis, chronic obstructive pulmonary disease ("COPD"), and diabetes. Targeting this group does not diminish HHCS' intent to provide home health care to others in District III in need. HHCS has agreed to condition the granting of the CON on providing 8 percent Medicaid and 2 percent charity care with no limit on the number of Medicaid patients it will serve. HHCS offers to provide services not commonly provided by other home health agencies. Among them are blood transfusions, home x-ray, on-line EKG communication with physician, organ transplantation support and care, Picasso system telecommunications with physician, and high-tech pharmacy service such as intravenous/infusion services, aerosolized pentamidine therapy, and complete HIV home care. In providing these sophisticated services, HHCS will use an integrated team approach to home health care involving various professionals in health care and health management. Lake City's Application If Lake City's application were granted, it would make Lake City the fourth home health agency in Lake County and the only home health agency in District III to be nursing-home based. By combining a Medicare certified home health agency with its existing nursing home, Lake City will improve the case management of its patients because such an arrangement offers vertical integration within a continuum of care. Vertical integration within a continuum of care promotes stability of personnel and providers who work with the patients. In turn, this organizational method provides potential for improving recovery from illness and higher quality of management of the patient and the patient's illness. Need Projections The Agency's methodology for determining need for home health agencies was declared invalid in 1993. At present, there is no Agency rule containing a home health agency need methodology. In the absence of a need methodology by rule, the applicants took different approaches to projecting need. HHCS projected need based upon previous studies of efficient agency size. HHCS identified four groups of Medicare patients (AIDS, COPD, cystic fibrosis, and diabetes) who, either because of age or disability, are chronic or long-term users of home health care services. HHCS looked at hospital discharges for those four categories to determine post-hospital placement. About an equal number of patients were referred to long-term facilities as were being referred to home health agencies. HHCS' application is geared to steering patients out of more expensive long-term care facilities and into care at home. Lake County has a use rate for home health higher than that of all of District III. Its use rate is also higher than the State's as a whole. Over a three-year period, home health visits in District III grew by 16 percent, whereas visits statewide grew by only 4 percent. Lake County uses home health services and continues to use them at a very high rate. Additional services are needed in order to sustain and meet the demand within the county and the District as a whole. Previous studies, moreover, have shown that all economies of scale are realized at around 30,000 visits per year. HHCS used 30,000 visits per year as an appropriate agency size to yield a need in the District for at least five new agencies. With the modification of a lower growth rate to make it more conservative, Lake City, on the other hand, utilized a need methodology put to use by a successful Medicare certified home health agency applicant for five Medicare certified home health agency CONs in the prior batching cycle. The Lake City methodolgy took the population of seniors (age 65 and over) in the district and projected that population forward through 1998 based on state population data. It then calculated the percentage of increase in population of seniors and the total number of visits provided in the district and projected the percent of increase in visits from 1991 through 1994 forward on through 1998. Lake City projected its increase in total visits utilizing an 11.5 percent growth rate in the number of visits which is conservative considering that the average growth rate per year from 1991 to 1994 was 31.7 percent. Lake City also identified a yearly increase of more than 20 percent in the rate of use of home health services due to the emphasis on managed care and less costly health care services. Inflating a conservative increase in the use rate of 20 percent forward, Lake City projected the number of visits that would be provided by existing agencies and subtracted that number from the total number of projected visits, leaving a total number of unserved visits. Dividing the number of unserved visits by the average agency size in District III, Lake City came up with a net need of 9.62 agencies in the horizon year of 1997. The methodologies of both HHCS and Lake City are fair and reasonable health planning methodologies. Lacking a need methodology, the Agency set forth eight criteria it suggested should be addressed in applications for Medicare certified home health agency CONs. These policies relate generally to access and require the showing of some type of access problem. Normally, however, need should not be determined on the basis of access problems alone. Both applicants demonstrated District III's need in the planning horizon year for more than two agencies, the number of applicants in this proceeding. There is, therefore, a need for at least two more Medicare certified home health agencies in District III. State and Local Health Plans The HHCS proposal is supported by the preferences in the District Health Plan. HHCS is an exemplary provider of care for persons with AIDS and it has committed to Medicaid and indigent care in excess of that suggested by the plan. HHCS will provide more than the full range of services suggested by the plan. For the same reasons it meets the preferences in the local plan, HHCS' application is supported by the preferences in the State Health Plan. In addition to those reasons, the application complies with the State Health Plan preferences for an applicant that proposes to serve counties presently underserved by home health care agencies; will provide consumer satisfaction data to the Agency; and has a comprehensive quality assurance program and is proposing to be accredited by the Joint Commission on Accreditation of Healthcare Organizations ("JCAHO"). Lake City's application is also supported by preferences in the District Health Plan. It has a history of providing a high percentage of Medicaid patient days at its nursing facility. This history backs up its commitment to provide a minimum of 1 percent annual visits to indigent care and 5 percent of annual visits to care of Medicaid patients, a commitment evidenced by its willingness to condition the grant of its CON on the percentages of annual visits it promises to indigent and Medicaid patients. Likewise, Lake City 's application is supported by preferences in the State Health Plan. It has agreed to condition its CON on providing care to AIDS patients. It will provide the entire range of services usually provided by a home health care agency. It is willing to condition its CON on cooperation with data collection efforts. Finally, it is willing to condition the grant of its CON on the provision of a comprehensive quality assurance program as well accreditation by the JCAHO. Availability, Access, Appropriateness and Adequacy of Like and Existing Health Care Services HHCS' application complies with the statutory requirements of Section 408.035(1)(b), Florida Statutes, in that it increases the availability and access to home health care in the District. HHCS will offer programs and services which presently are not readily available in District III. This will increase the availability of these services to the patients of the District and, in particular, to the patients of Lake County. Thus, geographic access is enhanced. HHCS' application also enhances access for those without means to gain access to home health care through its commitment to indigent care. It improves, too, the adequacy of services in the District through its targeting of a group presently underserved in the District. HHCS' proposal meets the requirements of the health care access criteria contained in Rule 59C-1.030(2)(a)(b) and (d), Florida Administrative Code. It provides services to all those who need care and participates in the Medicare and Medicaid programs. HHCS does not discriminate on the basis of race, ethnicity, or gender. Because Lake City is not targeting an underserved group in the manner of HHCS, its application addresses the issues of "availability and access" somewhat differently. To the extent there is a need for new providers of home health care, granting Lake City's CON will provide better availability and access to those in need of home health services. Likewise, Lake City's willingness to condition its application on service to AIDS, indigent and Medicaid patients will only improve availability and access to home health care services in the district Quality of Care HHCS conducts mock accreditation surveys to determine whether it is meeting the appropriate standards for quality of care. HHCS has an outside advisory board that does performance improvement and quality assurance review. There is also a utilization review committee and each office has full time quality assurance staff, quality management meetings, and quarterly reports to the Board of Directors. HHCS' team approach will enhance the quality of care as well as being cost effective. Its approach to treatment of HIV patients won for HHCS a contract with the Orange County Public Health Unit to provide complete HIV service to its patients. HHCS also measures patient satisfaction with services. Every patient is notified 48 hours after admission to the agency to make sure they were informed of precisely what to expect from the agency. Patients are contacted 30 days after admission and given an evaluation form. Survey forms are also sent out upon discharge and three months after discharge. The other home health agencies operated by HHCS are accredited with commendation by JCAHO and HHCS intends to seek JCAHO accreditation if granted a CON. The Lake City facility is managed by HealthPrime, a long term care management company which manages facilities for itself and others and which has been successful in improving distressed facilities. Since the commencement of its management of the Lake City facility, the facility has been recommended for a superior rating. HealthPrime has shown through its operation of the Lake City facility and other nursing homes in Florida, all of which have superior ratings, that it has the ability to provide quality of care. In addition, HealthPrime, which will actually operate the home health agency, has experience operating three other nursing home based, home health agencies. HealthPrime will use its quality assurance programs already in place in its other home health agencies and will seek JCAHO accreditation of the Lake City agency, if the CON is granted. To show its commitment to assuring quality of care, Lake City is willing to condition its CON on the understanding that it will not contract with other non-Medicare certified home health agencies to provide any of its services. Availability and Adequacy of Alternatives There is no adequate alternative to the HHCS proposal because of the applicant's targeting of the management of certain chronic illnesses. HHCS sees some of the targeted clients for management of cystic fibrosis already, but it is limited in its ability to serve these patients effectively without a physical presence in the District. For these patients to receive the full complement of home health care services HHCS is capable of rendering, there is no alternative save approval of its application. Economies and Improvements from Joint or Shared Services There are nine related companies within the HHCS Health Group. They include pharmacies which can deliver medications directly to the patient and can provide consultation with a doctor of pharmacy. This ensures compliance and dramatically increases therapeutic outcomes. Joint companies typically provide for economies and efficiencies and lead to the most cost-effective service. Lake City's proposal to operate a nursing home based, home health agency not only offers a continuum of care for the patient but also provides fiscal economies to the agency as well as the Medicare program. By providing skilled, nursing-facility based Medicare- certified, home health care, the Lake City facility can broaden its community base and provide cost-efficient services to the community. Under the arrangement proposed by Lake City, the home health agency, in practice, becomes a department of the nursing facility, providing a continuum of care and individual case management for the patient. Through case management, Lake City can help an individual through the various levels of care available. Case management helps the individual gain access to health care, making the process easier and less stressful. Case management poses potentials for containing cost and providing the best quality of care at the least cost. Financial Feasibility Short Term HHCS has projected the cost of its project at $92,392. The projection is based on historical information and actual vendors used by HHCS. Some of the expenditures, such as consultants and attorney's fees, have already been spent. HHCS intends to fund the $92,000 projected costs of the project through cash from operations and does not intend to seek any bank financing. If there is a need for financing, it is available as evidenced by the letter from the bank contained in the application. The letter is typical of letters banks issue when projects are merely proposed. The Agency has approved projects with similar letters of interest to support the capital requirements of a project. HHCS also has a line of credit for $600,000 and an equipment loan of $196,000, of which only $66,000 has been used. The line of credit was reduced by funds from operations from $125,000 on December 31, 1994, to $12,000 on April 25, 1995. Schedule 2 in the HHCS application lists other planned projects which require capital expenditures. These projects would be funded by a line of credit, assistance from the bank, and internal operations. HHCS' proposal is financially feasible in the short term. HHCS has the ability to secure funds necessary to capitalize the project and to secure any necessary working capital during the first year of operation. HHCS has demonstrated its ability to fund this project and all the projects on Schedule 2 in its pro forma sheet. Schedule 8A shows what would happen if all the projects listed on Schedule 2 actually occurred and what would be the financial impact on HHCS. Even if all the projects were completed, the cash available from operations is sufficient to fund the project. As for Lake City, AHCA raised questions about its weak financial status as a developmental stage corporation. But at hearing, AHCA acknowledged that Lake City would be financially feasible in the short term. While Lake City is a developmental stage company with limited cash investment, it is a heavy Medicaid provider. There are disincentives for such providers to keep large amounts of cash in equity. Lack of equity causes AHCA legitimate concerns. The concerns are dispelled by the personal guarantee by the owners of the company of the company's debt since the owners have sufficient assets to support their guarantees. In analyzing the financial strength of a nursing home that provides a high percentage of Medicaid-reimbursed care, it is necessary to determine whether the facility's fixed costs are covered by Medicaid payments and whether the facility has an adequate patient census. In the case of Lake City, both of these factors are positive. In addition, HealthPrime has made available a $200,000 loan to Lake City for this project. The loan commitment, by itself, is more than sufficient to cover the $77,014 start up cost of the Lake City proposed project. ii. Long Term HHCS' proposal demonstrated long term financial feasibility. The applicant's projections are conservative and the volume projections are easily achievable given the historical experience of HHCS and District III. The projected revenues contained on HHCS' Schedule 7 and the volume projections utilized in Schedule 5 are reasonable. AHCA found the volume projections to be achievable. The projected expenses for the proposed project are contained on HHCS' Schedule 8B. While AHCA criticized the format of this schedule, it concedes that it was not unauthorized. Direct patient care expense and other expenses can be determined to allow for a review as to reasonableness. Schedule 8B is based upon historical expense information; it contains all of the necessary expense items and is reasonable. AHCA similarly found that since HHCS' projections were reasonable for a new home health agency, the conclusion of financial feasibility in the long-term is reasonable. Lake City's assumptions in its financial projections were based on actual experience in the operation of similar skilled nursing facility based home health agencies, as well as experience of other home health agencies in their first two years of operation. The reasonableness of Lake City's financial and operational projections were undisputed at hearing and AHCA's financial expert acknowledged that the proposed project would be financially feasible in the long term Resource Availability Neither HHCS nor Lake City will have any problem in hiring sufficient personnel for their agencies. Efficiency HHCS' specialty team approach to home health results in fewer total visits and better outcomes at lower cost. HHCS operates a highly effective, cost efficient agency. As for the efficiency of Lake City's proposal, skilled nursing home-based Medicare certified home health agencies are specifically recognized by the Federal Medicare program in their cost reports. Home health costs 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. A joint nursing home/home health agency operation benefits both the provider and the Medicare program through cost savings. In fact, HealthPrime has found the efficiencies of a skilled nursing home-based Medicare certified home health agency to be great enough to allow the home health agency to operate under the Medicare reimbursement cap. Projects Impact on Costs The approval of additional home health agencies in District III will foster competition among existing providers. HHCS is cost effective with a projected cost per visit of $67.55. Utilization of its related companies will not only promote a continuum of care but will also lead to cost effectiveness. Lake City's projected Medicare rate for 1997 will be substantially less than the District III average 1994 rates of existing home health agencies. This provides a cost savings to the state since it helps reduce Medicaid costs as well.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is recommended that the Agency for Health Care Administration grant CON applications 8387 and 8386 filed by Home Health Care Services d/b/a SouthMed Health Care and Lake City Nursing Homes, Inc., respectively. DONE AND ENTERED this 27th day of June, 1997, in Tallahassee, Leon County, Florida. DAVID M. MALONEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 27th day of June, 1997. COPIES FURNISHED: Cynthia S. Tunnicliff, Esquire Pennington Culpepper Moore Wilkinson Dunbar and Dunbar PA Post Office Box 10095 Tallahassee, Florida 32303-2095 Theodore E. Mack, Esquire Cobb Cole and Bell 131 North Gadsden Street Tallahassee, Florida 32301 Richard Patterson, Esquire Agency for Health Care Administration Fort Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403 Jerome W. Hoffman, General Counsel Agency for Health Care Administration Fort Knox Building 3 2727 Mahan Drive Tallahassee, Florida 32308-5403 Sam Power, Agency Clerk Agency for Health Care Administration Fort Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403
Conclusions Having reviewed the Notice of Intent to Impose Fine dated March 3, 2009, attached hereto and incorporated herein (Ex. 1), and all other matters of record, the Agency for Health Care Administration ("the Agency") has entered into a Settlement Agreement (Ex. 2) with the Respondent and being otherwise well-advised in the premises, finds and concludes as follows: ORDERED: The attached Settlement Agreement is approved and adopted as part of this Final Order, and the parties are directed to comply with the terms of the Settlement Agreement. Each party shall bear its own costs and attorney's fees. The Respondent shall remit to the Agency, within ninety (90) days of this Final Order, the sum of Two Thousand Dollars ($2,000.00). A check should be made payable to the "Agency for Health Care 1 Filed November 9, 2009 11:58 AM Division of Administrative Hearings. Administration." The check, along with a reference to this case number, should be sent directly to: Agency for Health Care Administration Office of Finance and Accounting Revenue Management Unit 2727 Mahan Drive, MS # 14 Tallahassee, Florida 32308 Unpaid amounts will be subject to statutory interest and may be collected by all methods legally available. The above-styled case is hereby closed. DONE and ORDERED this s3 day o tJ-?t?<: ,2009, in Tallahassee, Leon County, Florida. Care Administrat1 A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO JUDICIAL REVIEW WHICH SHALL BE INSTITUTED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF AHCA, AND A SECOND COPY, ALONG WITH FILING FEE AS PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE AGENCY MAINTAINS ITS HEADQUARTERS OR WHERE A PARTY RESIDES. REVIEW OF PROCEEDINGS SHALL BE CONDUCTED IN ACCORDANCE WITH THE FLORIDA APPELLATE RULES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED. Copies furnished to: Ann Lisenby Parmer Lisenby Home Care, Inc. 412 North Cove Blvd. Panama City, Florida 32401 (U. S. Mail) Shaddrick A. Haston Assistant General Counsel Agency for Health Care Administration 2727 Mahan Drive, Bldg #3, MS #3 Tallahassee, Florida 32308 (Interoffice Mail) Jan Mills Agency for Health Care Administration 2727 Mahan Drive, Bldg #3, MS #3 Tallahassee, Florida 32308 (Interoffice Mail) Finance & Accounting Agency for Health Care Administration 2727 Mahan Drive, Bldg #2 Mail Stop Code #14 Tallahassee, Florida 32308 (Interoffice Mail) CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of this Final Order was served on the above-named person(s) and entities by U.S. Mail, or the method designated, on this _6ay of /}6 , 2009. Richard Shoop, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Building #3 Tallahassee, Florida 32308-5403 (850) 922-5873 Ce1t1f1ecl Article Number SENDERS RECORD CHARLIE CRIST GOVERNOR March 3, 2009 ANN LISENBY PARMER LISENBY HOME CARE, INC. 412 N COVE BLVD PANAMA CITY, FL 32401 JFlORl AAGENCY F,OR HIcAl.lCH CARE AOMAINISlllATION Better Health Care for all Floridians oqJ521 CASE #: 2009002407 NOTICE OF INTENT TO IMPOSE FINE Pursuant to Section 400.474 (6) (f), Florida Statutes (F.S.), a fine of $5,000 is hereby imposed for failure to submit the home health agency quarterly report within 15 days after the quarter ending September 30. As required in section 400.474(6) (f), F.S., the agency shall impose a fine of$ 5,000. TO PAY NOW, PAYMENT SHOULD BE MADE WITHIN 21 DAYS AND MAil.ED WITH A COPY OF THIS NOTICE OF INTENT TO: Agency for Health Care Administration Finance and Accounting, Revenue Section OMCManager 2727 Mahan Drive, MS #14 Tallahassee, FL 32308 Include License Number: 20651096 and Case Number: 2009002407 in check memo field. EXPLANATION OF RIGHTS Pursuant to Section 120.569, F.S., you have the right to request an administrative hearing. In order to obtain a formal proceeding before the Division of Administrative Hearings under Section 120.57(1), F.S., your request for an administrative hearing must conform to the requirements in Section 28-106.201, Florida Administrative Code (F.A.C), and must state the material facts you dispute. SEE ATTACHED ELECTION OF RIGHTS FORM. Agency for Health Care Administration By: Anne Menard, Manager Home Care Unit cc: Agency Clerk, Mail Stop 3 Legal Intake Unit, Mail Stop 3 2727 Mahan Drive,MS#34 Tallahassee. Florida 32308 Visit AHCA online at http://ahca.myfl · • I EXHIBIT I No Theme Page 1 ofl HOME HEALTH AGENCY QUARTERLY REPORT For the Quarter July 1 to September 30, 2008 Send an e-mail with this information to home.ti_ alth@ahca.myflorida.com by 5 p.m. on Wednesday, October 15, 2008 to avoid a $5,000 fme. NAME OF HOME HEALTH AGENCY Lisenby home Care, Inc LICENSE# 20651096 STREET ADDRESS & CITY: 412 N. Cove Blvd, Panama City, Fl 32401 On September 30, 2008, there were _3_ insulin-dependent diabetic patients receiving insulin injection services from my home health agency. On September 30, 2008 there were _36_ patients receiving home health services from my home health agency AND licensed hospice services. On September 30, 2008, there were a total of_77_ patients receiving home health services from my home health agency. The following professional nurses (RNs or LPNs), whose primary job responsibility is to provide home health services to patients, received remuneration from my home health agency in excess of $25,000 between July 1, 2008 and September 30, 2008. NONE Name Florida License Number Insert additional names and license numbers if necessary. http://webmail.att.net/wm/en-US/toolbar/advnotheme.html 10/2/2008 psPS - Track & Confirm Page 1 of 1 • !:fQ!DtltltlJllSlgn.J.n Track & Confirm Search Results Label/Receipt Number: 7160 3901984813801355 Status: Delivered Your item was delivered at 9:48 AM on March 19, 2009 in PANAMA CITY, FL 32401. Track &Confirm Enter Label/Receipt Number. N..-o---t-i--f-i-·c-··d·-·o·-·n- - -Q. rn·t·i01J$------- ---- Track & Confirm by email Get current event information or updates for your item sent to you or others by email. (Bo>) Return Receipt (Electronic) Verify who signed for your item by email. ( tJo>) Copyright© 1999-2007 USPS. All Rights Reserved. No FEAR Act EEO Data FOIA '\:,_· J-i t;.-,pe ; :;•,· • l.\!!.'-'l·/•. ;- t' ip!;,,; http://trkcnfrm1.smi.usps.com/PTSinternetWeb/InterLabellnquiry.do 03/24/2009 STATE OF FLORIDA
Findings Of Fact The parties have stipulated that the only statutory criteria at issue are those related to need and long term financial feasibility as it relates to need, specifically Subsections 381 494(6)(c~ 1,2,9, and 12, Florida Statutes and Rule 10-5.011(1 (b)l. and 3. Florida Administrative Code. Nurse World, Inc. is an existing non-Medicare home health care agency and is a provider of temporary nursing services in District VII. The five biggest home health agencies in District VII are Nurse World, Visiting Nurse Association (VNA), Upjohn, PRN (no full name ever given), and Norrell. Nurse World is the largest of these as far as active staff, but is the only one of these that is not Medicare-certified. HRS is the agency responsible for certification and licensure of home health agencies. A home health agency in Florida must obtain a CON from HRS before it can be licensed and become eligible to receive Medicare reimbursement. Medicare is a federally funded health program for the elderly and certain disabled persons. Medicare reimbursement is limited to reimbursement for skilled nursing, physical therapy, speech therapy, occupational therapy, home health aid services, and medical social services. The Medicare program reimburses home health agencies on a cost reimbursement basis with a cap for each discipline. Home health agency costs in excess of Medicare caps must be absorbed by the agency. Consequently, traditional concepts of price competition have no applicability to home health agencies providing Medicare reimbursable services. Individuals become Medicare eligible for home health agencies' services in two ways. First, age makes an individual eligible when a person is over 65 and has paid a sufficient number of quarters to social security. Another way is for an individual under 65 to be declared disabled. The 1985 State Health Plan is the most current plan. The only portion of the 1985 State Health Plan which is applicable to home health agency applications is that access to home health services should be improved, specifically access for Medicaid and indigent patients. Nurse World's application satisfies this requirement. Only certain portions of the District VII local health plan are applicable to Nurse World's application. The methodology employed in the local plan was derived from a rule which was declared invalid. See infra on the inapplicability of these portions of the plans. The portions of the local plan which are applicable are the priorities that a home health agency provide a full range of service, improve access for underserved groups, and have interrelationships with the existing health care facilities and community. Since Nurse World, Inc.'s inception in August of 1981, it has grown from a staff of approximately 50-75 nurses to a current staff of close to 700 active field employees including registered nurses (R.N.s), licensed practical nurses (LPNs), nurse aides, and ancillary personnel. Nurse World's growth is due in part to quality patient care and effective and efficient employee management. A background check is done on personnel prior to hiring. Some of Nurse World's employees are screened by competency examinations. Ninety percent of its staff is made up of LPNs, Emergency Medical Technicians (EMTs) or Physician Aides (PAs). All receive additional training by Nurse World. Other home health agencies in District VII often call Nurse World to obtain nurses to fill out their shifts whereas Nurse World has never had that problem. In line with HRS' position that applicants must demonstrate that existing agencies cannot meet existing need, Nurse World submitted considerable reputation-type testimony. Upon proper predicate and under certain circumstances, evidence of character reputation and evidence of modus operandi, are admissible. "Character is distinct from reputation; reputation is evidence of character," Ehrhardt, Florida Evidence, Subsection 405.1 (2d Ed. 1984). See same text, Subsection 404.11 on modus operandi. Indeed, CON applicants traditionally try much of a contested case upon evidence of their own professional reputations, and the reputation of their competitors, privy to the case or not. This entire line of inquiry was prompted by HRS' negative burden of proof concept and upon authority of Balsam v. Department of Health and Rehabilitative Services, 486 So. 2d (Fla. 1st DCA 1986). In these contexts, reputation evidence, a hearsay exception, was admitted in evidence. Nurse World's reputation as reported from all sources in the community (District VII) is excellent, particularly for quality of care, reliability, and speed of response. This type of reputation evidence was also supplemented by opinion evidence from various witnesses' personal on-going experience. Nurse World also presented testimony that Upjohn does not have a good reputation, that VNA has an unfavorable attitude towards indigent patients, and that UpJohn and VNA nurses will contact a doctor less appropriately than Norrell or Nurse World when there is a change in the patient's condition. There was a modicum of evidence that a better nurse knows when to call a doctor and when not to. Nurse World is a continuing education unit (CEU) provider, offering seminars covering state of the art nursing skills twice monthly. This service naturally increases the proficiency and quality of Nurse World's own employees who attend, but additionally, its continuing medical education seminars serve the community as a whole, since every two years LPNs and R.N.s, must each complete 24 hours of additional training so as to be eligible to renew their professional licenses. Nurse World is the only home health agency in Central Florida that has a CEU provider number. Unlike most hospital CEUs in the area, its continuing medical education services are free of charge and it maintains a suggestion box for topics to be addressed. Its use of video tape instruction both in-house and for seminars is an advanced technique. Nurse World has the exclusive contract to provide nursing services to Hospice of Central Florida. Hospice of Central Florida is a Medicare-certified home health agency, which has no nursing staff of its own. It has only support staff. Nurse World provides all its nurses. After switching to VNA, Hospice switched back to Nurse World. Nurse World has guaranteed in its application that if the CON is issued, it will provide 3 percent of its patient visits to indigents and 3 percent of its patient visits to Medicaid-eligible patients. It is satisfied for any CON grant to be conditioned on such a requirement. Nurse World's proposal to devote 6 percent of its patient visits to the traditionally medically underserved is relatively high for a home health agency. Nurse World presently provides $8,000 in indigent care through its Hospice contract and provides one free patient visit for every five patient visits at Brookwood AMI Hospital. It also has an indigent volunteer services program which provides basic nursing skills training to families so that they can care for their loved ones at home. Nurse World is a "full service" agency. It is considered "high-tech", providing in the home C-pap, IV therapy, respirator, feeding through a chest tube catheter, hyperalimentation, passive motion and other services previously available only in hospitals. This element of its services is particularly significant because of Nurse World's availability to handle difficult cases such as AIDS victims, infants, and multiply-afflicted elderly patients on a 24 hour a day, 7 days a week basis. Nurse World proposes to offer and does offer a full range of services. No other home health agency in District VII provides the full range of services to the degree and over the 24 hour a day period as Nurse World does. These types of difficult cases appear to be underserved in District VII. Nurse World is the only home health agency in the District that effectively staffs its office seven days a week, 24 hours a day. Nurse World has done so ever since it took its first critical care patient and entered into high tech nursing. This relates directly to quality of care and being responsive to patients' needs with no endangering delay as discussed below in relation to high tech protocols. Among health care providers generally and among home health care agencies particularly, Nurse World has a unique approach to insure immediate access and responsiveness to its patients: it mans its telephones with live dispatchers with immediate access to professionals on call. No other Central Florida home health agency does this. At all times there is at least a registered nurse available by phone when a patient reaches Nurse World. There is always a second professional backup behind the professional on the phone, often the Director Ms. Denner, herself. Nurse World has adopted this approach because it feels there is not enough time for turnaround response with other systems when a critical care high tech patient or confused elderly patient gets in trouble or has an emergency. Answering services hold calls; beepers require the professional on call to find a phone and return a call to the answering service, receive the emergency message, and then, finally, call the patient. Nurse World's method allows for the professional who receives the call at any hour of the day or night, even on a weekend, to respond to most situations immediately over the phone, and if necessary to contact the 911 emergency number and the patient's own regular nurse within minutes. Nurse World was the first nursing service in the Central Florida area to render home health services to an AIDS patient, includes AIDS nursing in its continuing medical education efforts, and now gets referrals for Medicare on that basis. No other home health agency is dealing with AIDS patients to the extent that Nurse World is. Nurse World also has an agreement with Centaur, the AIDS support group for Central Florida, through which Nurse World will provide nurses at cost or at its "break even indigent rate". Nurse World has provided health care services to AIDS patients for a very minimal charge since this area of home health care-has been identified and has accelerated numerically. There are approximately 80-100 identifiable AIDS cases in the area. Nurse World has provided the bulk of care for these approximately 80- 100 diagnosed AIDS cases. Other agencies are reluctant to provide this care. Bona fide AIDS patients are eligible for Medicare. The Medicare bureaucracy is processing AIDS case applicants quickly, in 3 to 6 months, basically because there is that necessity. Dr. Robbins, a physician practicing in the Brevard, Seminole, and Orange County area in infectious diseases and internal medicine specializes in the treatment of AIDS. He sees a need for Nurse World to become Medicare certified to render services to the Medicare eligible AIDS patients, because in his experience, Nurse orld renders the best services qualitatively to these types of patients. Any number of AIDS patients (either on or off Medicare) above the number actually served by Nurse World or treated by Dr. Robbins has not been statistically demonstrated, but all testimony on the subject supports the 80-100 existing case figure and the concept that the AIDS numbers are escalating in both Medicare-certified and uncertified categories. One problem situation arising with increasing AIDS patients qualifying for Medicare is basically the same problem for all patients so qualifying. Once qualified, patients naturally must utilize one of the Medicare-certified home health agencies. The continuity of care of a patient is interrupted when Nurse World can no longer render nursing services to a former patient due to that patient becoming Medicare eligible. A break in the continuity of care unfavorably affects the quality of care rendered any patient. The patient and staff often develop a rapport and a break in care can emotionally depress the patient, leading to medical (physical) setbacks. Quality of care is likewise negatively impacted by switches in car givers because the more often a nurse sees a given patient over a period of time, the more that nurse is able to monitor the quality and progress of that patient. There is modest evidence that Nurse World is proficient in scheduling the right nurse for the right patient. Nurse World is the only home health agency that actually video tapes some cases and then trains specific nurses before ever sending them into the patient's home. There is presently a tendency to get people out of hospitals sooner than before due to the new diagnostic related grouping (DRG) regulations. Physicians then routinely refer these patients for home health care visits. As a result, in the last few years, there has been a quantifiable increase in the number of home health care visits requested in District VII. As a result of the increased demand and the inability of the Medicare-certified home health agencies to answer that demand (need), patients referred for Medicare home health services frequently will be seen only once or twice a week rather than three weekly visits as requested by their physicians. This is a significant deficiency in appropriate care for high tech critical care cases, including but not limited to the multiply- afflicted elderly. Also, nursing homes in the area are now experiencing sicker patients due to individuals getting out of the hospitals earlier through DRGs. The scope of nursing home care has increased. The patients released from hospitals cannot go directly home if their case is too complicated. Thus, many patients first go into nursing homes before going to their own homes. Nurse World provides temporary staff relief for the Americana Health Care Center, a skilled nursing home facility in-Winter Park, Florida. According to the testimony of Jill Miller, R.N., Director of Nurses for Americana, Nurse World's staff meets the high standards set at Americana whereas the other home health care agencies she has sometimes used have not. Nurse World personnel, however, are unable to follow the Medicare eligible patients home after release from Americana because Nurse World has no Medicare certificate. This breaks the continuity of care for Americana Medicare patients and can result in all the unfavorable physical and emotional setbacks set out above. Although the break in this continuity of Nurse World care is pronounced and more easily demonstrated using the Americana facility, and although it may be inferred that continuity of care is extremely important especially for the predominantly elderly population that uses Medicare regardless of which nursing home they exit, the continuity of exclusive care by Nurse World personnel specifically, falls short of representing a "special need" as that phrase has come to be understood in CON practice. This is also true for newly qualifying AIDS patients and hospital releases. Nurse World has provided high-tech in-service training at Americana free of charge. Nurse World is the only home health agency that staffs hospitals, nursing homes, and private duty visits. This sharpens the nurses' skills, especially their critical skills. Generally the existing Medicare-certified home health agencies still do not take home high-tech patients. It is advantageous to professional health care providers, the individual patients, and the community at large to encourage home care for high-tech patients. Caring for high- tech patients at home rather than in the hospital results in a cost savings to the community and for the individual patients as it is obviously much cheaper to care for patients at home. Also, the patients tend to get better quicker in their home environment. Examples of Nurse World's expertise in this area are that Nurse World was the first agency in the southeast United States to take home a baby on C-pap, a very sophisticated involved respirator. Nurse World is still the only agency located in District VII to have provided the C-pap at home. There is still no C-pap patient within District VII. Nurse World took home the first critical care, high tech patient in the Central Florida area four years ago. It is also the only agency that provides continuous passive motion care at home. Continuous passive motion care is a "state of the art" physical therapy device that provides continuous physical therapy. Nurse World has averaged three to four of these patients a week over the last year. Caring for high-tech critical care patients at home even when a "mini-intensive care unit" is necessary, costs the community much less than hospital care which can total $716 per day for a non-critical patient. Nurse World employs the largest number of critical care nurses in the area of any provider. Nurse World was the first agency that did blood gases on a patient at home, the first to take home a patient on a ventillator, the first to do home hyperalimentation, and the first to do a home I.V. patient. Two other agencies in the Orlando area now render high-tech services but not to the extent that Nurse World does. They began these services on a limited basis about a year after Nurse World began. Nurse World's "firsts" in these areas are significant because being in the vanguard of opening up these areas of practice has caused it to establish its own written in-home high tech policy and procedure (protocols) which the industry may voluntarily adopt since there is no HRS rule covering the subject matter. Most important about the protocols as developed and maintained by Nurse World are fail-safe techniques for dealing with malfunction of high tech machinery, power failure, isolation techniques for AIDS patients (sometimes considered "high tech"), and direct and immediate telephone contact with professional staff in any emergency. HRS does not presently have any methodology pursuant to rule or policy for projecting need for a home health agency. The methodology that HRS employed in reviewing the Nurse World application was contained in the District VII local health plan. That plan had adopted an HRS proposed rule which was subsequently declared invalid in Home Health Services v. Department of Health and Rehabilitative Services, 8 FALR 1510 (March 12, 1986). Sharon Gordon-Girvin, an expert in health planning, testified on behalf of Nurse World. She presented two methodologies for projecting the need for a home health agency in District VII. After the proposed rule was declared invalid, HRS developed a policy for determining the need for additional home health agencies, reflected in Petitioner's Exhibit 78, which was employed between March and August of 1986. That policy was actually used in reviewing home health agency applications, and in making decisions. HRS issued certificates of need for home health agencies based on that policy. Applying that HRS policy, which Gordon-Girvin considers "reasonable," there is a need for 35.3 home health agencies in District VII in 1986. 1986 is the planning horizon year applicable to the Nurse World application. There are 16 existing Medicare home health agencies in District VII. Direct, competent and substantial evidence supports the 16 figure which includes newly certified Profile Medical Services. HRS documentation confirms this. Uncorroborated hearsay evidence of an additional home health agency in District VII was struck. Therefore, the net need is for 19.3 home health agencies in District VII in 1986. HRS, when using this methodology, had a policy of giving out only one/third of the net need in each of three consecutive years. Gordon-Girvin would not term this latter policy nreasonable" and no one offered any acceptable justification for it. No reasonableness of this "award only 1/3 of need" policy was demonstrated and it has since been abandoned, but even by such a system, the net need in 1986 would be for 6.4 additional home health agencies in District VII in 1986. The gross need and the net need continue to increase through 1989. The methodology reflected in Exhibit 7B basically has two constants, the home health use rate and the optimal size visits. They act as constants. The increase in the number of agencies needed is attributable to the growth of the population. Ms. Gordon-Girvin also employed a methodology employed by District III as a point of comparison to see how the number of agencies needed in District VII could be affected by using a very conservative methodology. District III's methodology was selected as a conservative comparison to the former state health policy. Also, no other local health council has a need methodology. Employing the methodology reflected in Petitioner's Exhibit 7A, there is a need for 17 home health agencies in District VII or a net need for 1 additional home health agency. (Gross need minus 16 existing certified agencies). This is a very conservative methodology because it changes very slowly over time. In fact, the net need remains at 1 through 1989. Ms. Gordon-Girvin opined that this methodology employed in Petitioner's Exhibit 7A, is also a reasonable methodology but is very conservative and relies on hospital discharge rates in contrast to the discredited and abandoned HRS policy which is a use-based methodology. There are no other methodologies being employed by planners in Florida and no other methodologies were put forth by either party. Presently, HRS has no rule or policy designating a numeric methodology to determine the need for new medicare home health agencies in any given district. HRS review of CON applications for home health agencies is based solely on statutory criteria, the merits of the proposal, and the district need for the agency as demonstrated by the individual applicant. 80th need methodologies employed by Ms. Gordon Girvin contemplate the need for home heath agencies at the District level. That is, agencies operating in all four of District VII's counties. In reality, the existing home health agencies operate in only one or two mounties. For example, Profile Medical Services, the only successful applicant in the current batch, was recently issued a certificate of need under the HRS policy since discredited and abandoned, but its CON is limited so that it can operate only in 8revard county, so that actually only one-fourth the district need is being met. At the time the Nurse World application was reviewed, there were 11 licensed and approved CON home health agencies in District VII. Six of these agencies only operate in one county and five operate in only two counties. HRS is not aware of any Medicare-certified home health agency that operates in all four counties in District VII under a single certificate of need. Because HRS' policy has been invalidated as a rule and since it has been subsequently abandoned by HRS, it would be invalid to employ it in these proceedings. Even if the District III methodology determined a net need of one is reasonable, it would be unreasonable and unjustified to apply it as modified by HRS' uncodified award only 1/3 of need per year" policy, apparently also abandoned prior to hearing. Therefore, by the only reasonable need methodology presented (that of District III) there is room for one home health agency, not limited by county and not limited by the "award only 1/3 of need per year" policy. The 1/3 limitation should not apply in any case because it has no current application by HRS and because its effect varies the horizon year. Since HRS had no need methodology or policy in place at date of hearing, it took the-position that an applicant must demonstrate need by finding people who are not getting the service. Ms. Gordon-Girvin, Petitioner's expert who had been employed at HRS in health planning for 11 years, opined that there is no adequate quantifiable technique available as a health planning methodology that will allow a health planner to make use of a negative demonstration of need. She suggested use of responses to a newspaper advertisement and then demolished that method of proof as "impractical". Another difficulty with this type of negative demonstration approach is that existing agencies can deal with increased need demands by simply continuing to add staff. Gordon-Girvin knew of no applicant that had acquired a CON by proving lack of access. Additionally, a similar agency position (the Rule of 300) has been struck down by the courts. This negative burden of proof concept has been given short shrift by the courts and is rejected here as well. See Department of Health and Rehabilitative Services v. Johnson and Johnson Home Health Care, Inc., 447 So. 2d 361 (Fla. 1st DCA 1984). Richard Gramming, an expert in health planning, testified on behalf of Nurse World. He presented Petitioner's Exhibit 6 which demonstrated that there is a capacity for other agencies in District VII and that if one of those agencies were to be Nurse World, the impact would not be very significant on the available number of visits. The multiplication of the Medicare home health use rate by the 65+ population for District VII produces the potential number of Medicare home health visits for District VII which for 1986 is 317,304. The total number of home health agency visits, Medicare and non-Medicare, for 1984 in District VII was 309,920. Of these visits, 266,531 were Medicare visits. When the actual number of Medicare visits is subtracted from the potential number of Medicare visits, there are 50,773 Medicare visits available for current and existing providers. When Nurse World's projected number of visits from year two (5,625) are subtracted there are still 45,148 Medicare visits available for current providers. Nurse World's approval should have no serious impact on the short or long term financial positions of the existing Medicare providers with the possible exception of Hospice, which may have to hire its nurses elsewhere. An interest such as Hospice's is not one which Chapter 381 is designed to protect. Mr. Gramming's projections are very conservative and the untapped market is probably larger, since the Medicare eligible due to disability were not factored into his formulas and the use rate in the formula was kept constant, whereas it has been increasing over time. A review of Nurse World's past growth rate and conservatively projected growth rate reveals that Nurse World is financially secure for a long-term position. In light of the potential market as demonstrated by the foregoing findings of fact, a long-term financial feasibility of Nurse World will be assured. Home health agencies are labor intensive rather than capital intensive, with few fixed costs. The entry of Nurse World into the market will tend to keep costs as they are or perhaps lower costs through increased competition. Medicare costs caps are more effective in preventing cost inflation. Nurse World has met its minimal burden of proof to establish there will be no significant adverse impact on cost if the Nurse World application is approved; HRS has not gone forward to demonstrate there will be any adverse impact on costs if the application is approved. Nurse World has demonstrated that access to health care by the underserved population will be improved and that the opportunity for specialization within the existing market place will be enhanced by their entry into the market. Nurse World's actual growth rate from 1984 to 1985 and from 1985 to 1986 has been 20 percent per year in gross revenues. Twenty percent growth is logically anticipated for the current year despite a more conservative 12 percent calculation.
Recommendation Upon consideration of the foregoing findings of fact and conclusions of law, it is, RECOMMENDED that a Final Order be entered granting Petitioner Nurse World a CON to establish and operate a home health agency in District VII (Orange, Osceola, Brevard, and Seminole counties), conditioned upon its providing 3 percent indigent and 3 percent Medicaid qualified services. DONE and RECOMMENDED this 20th day of May, 1987, at Tallahassee, Florida. ELLA JANE P. DAVIS, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 20th day of May, 1987. COPIES FURNISHED: Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Eric J. Haugdahl, Esquire 1363 East Lafayette Street Suite C Tallahassee, Florida 32302 John Rodriguez, Esquire Department of Health and 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 APPENDIX The following constitute rulings pursuant to Section 120.59(2), Florida Statutes, upon the parties proposed findings of fact (FOF): Petitioners proposed findings of fact: 1-4 To the extent not covered under "Background and Procedure," these are subordinate and unnecessary. Covered in FOF 2. Covered in FOF 8. Covered in FOF 9. Covered in FOF 3 & 10. Covered in FOF 3. Covered in FOF 10. Covered in FOF 10. Covered in FOF 12. 13-15 Covered in FOF 13. 16 Covered in FOF 16. 17-20 Covered in FOF 7. Covered in FOF 14. Covered in FOF 16-17. Rejected as a conclusion of law; see FOF 13 and conclusions of law. Accepted but subordinate to the facts as found. 25-26 Accepted but subordinate to the facts as found, cumulative FOF 7. 27-28 Rejected as unnecessary, as mere "puffing" and as subordinate to the facts as found. See FOF 10 and 18 on proposal 28. 29. Rejected as unnecessary and subordinate to the facts as found. See FOF 25.l 30-34 To the extent supported by the admissible direct competent substantial record evidence, these are covered in FOF 16; otherwise rejected. 35. Covered in FOF 6.l 36-37 To the extent supported by the record, covered in FOF 16, otherwise rejected. 38 Covered in FOF 10 and 15. 39-40 To the extent supported by the record and to the extent necessary to a determination of this cause, covered in FOF 17- 21, otherwise rejected. 41-42 Covered in FOF 19. 43-44 Covered in FOF 20-21. Covered in FOF 22. To the extent not covered in FOF 8 and 11 rejected as cumulative. Unnecessary, as mere "puffing", and as subordinate to the facts as found in FOF 14 and 25. Covered in FOF 23. Covered in FOF 24. Covered in FOF 14-16, and 25. Covered in FOF 25. Covered in FOF 25 but cumulative. Accepted as true, but rejected as subordinate and unnecessary. Except as covered as to capability of Nurse World in FOF 14 and 25, it is also largely immaterial to these proceedings in that Mrs. WiIdermuth's child is not eligible for Medicare, cannot become eligible for Medicare and resides outside District VII in Volusia County. 54-56 Covered in FOF 25. 57 Covered in FOF 3 and 8. 58-50 Covered in FOF 25. 61-62 Subordinate to the facts as found. See FOF 39 and 42. Cumulative, see FOF 23. Covered in FOF 15. 65-73 and 75-78 Except as covered in FOF 11 and 16 these proposals are rejected as subordinate, unnecessary or cumulative to the facts as found. 74 Covered in FOF 11 and 18. Covered in FOF 27-34. Rejected as a conclusion of law. 81-89 Covered in FOF 26-35 and conclusions of law. 90 Accepted for the reasons set out in the transcript reference, but as a FOF it is subordinate and unnecessary. 91-95 Covered in FOF 26-35. 96 Rejected as irrelevant since no such out of state methodology was offered. See FOF 28. 97-105 Covered in FOF 30-35. Rejected as a conclusion of law. Covered in FOF 36. Covered in FOF 37. 109-110 Accepted but unnecessary. 111-119 Covered in FOF 36-42. 120 Accepted but rejected as unnecessary. Respondent's proposed findings of fact: 1 Covered in background and procedure. 2 Covered in FOF 2, 8, 14 and 15. 3 Covered in FOF 13. 4 Covered in FOF 11. 5 Covered in FOF 10. 6 Covered in FOF 14 and 25. 7 Covered in FOF 8 and 23 (among others). 8 Covered in FOF 4. 9 Covered in FOF 5. 10 Covered in FOF 6. 11-12 Covered in FOF 26-35.
Findings Of Fact On December 18, 1978, the Petitioner, using the name "Upjohn Healthcare Services, Inc." filed its application for certificate of need with the Florida Panhandle Health Systems Agency, Inc. This application was deemed complete on April 20, 1979. The application as originally filed indicated that healthcare services were to be made available on a 24 hour a day basis, seven days a week, with an admission criteria based on the patient's need for home health care, his ability to make available financial resources and the Petitioner's ability to provide the services required. Services were to be provided from a central location in Pensacola, Florida, which is in Escambia County, Florida; to serve Escambia, Santa Rosa and Okaloosa Counties, Florida. The application was subsequently amended to indicate the willingness of the Petitioner to aid Medicare and Medicaid patients in the named counties. The Petitioner, hereinafter referred to as "Upjohn", operating as Upjohn Healthcare Services, Inc., is a subsidiary of the Upjohn company, having forty-Seven certified home health agencies in the United States. The organization has twenty-one offices in the State of Florida and one of those offices is located in Pensacola, Florida. The State of Florida, Department of Health and Rehabilitative Services, is an agency of the State of Florida charged with the duty to evaluate the applications for certificate of need and to issue such certificates as would be appropriate under the terms of Chapter 381, Florida Statutes, and Rule 10-5, Florida Administrative Cede. This application for certificate of need and that of the companion case of Personnel Pool of Pensacola, Inc., d/b/a Medical Personnel Pool, hereinafter referred to "Personnel Pool", are also considered in accordance with the Health Systems plan for the Florida Panhandle effective December 15, 1978. A copy of that document may be found as the Joint Exhibit No. 2 admitted into evidence. The project review committee of the Northwest Florida District recommended to the Northwest Florida Subdistrict Advisory Council that the certificate of need be granted and this action was taken on May 2, 1979. A public hearing was held on May 8, 1979, and on Nay, 17, 1979, the Northwest Florida Subdistrict recommended the disapproval of the project. This disapproval followed a staff report by the staff of the Florida Panhandle Health Systems Agency which suggested that the certificate of need be denied. The application was then presented to the Regional Council, Florida panhandle Health Systems Agency, Inc., and on May 25, 1979, the Regional Council recommended the approval of the certificate of need to serve Escambia, Santa Rosa and Okaloosa Counties, Florida, with the proviso that services be offered Medicare and Medicaid patients. On June 29, 1979, the Respondent in the person of Art Forehand, Administrator of the Office of Community Medical Facilities, attempted to apprise the Petitioner that the request for a certificate of need had been denied; however, this correspondence was misaddressed and it was not until July 9, 1979, that a letter was forwarded to an official of Petitioner's organization and received by that official. On July 31, 1979, the Petitioner appealed the decision of denial of the certificate of need and the case was later assigned to the Division of Administrative Hearings for consideration which resulted in the hearing which is the subject of this Recommended Order. (The details of the various items discussed in developing the chronology of this application may be found in the Joint Composite Exhibit No. 1 admitted into evidence.) In offering its proof to demonstrate the entitlement to a certificate of need, the Petitioner essentially attempted to refute the Department of Health and Rehabilitative Services', hereinafter referred to as "Department", letter of notification of denial. That letter gave five reasons for denying the certificate of need, those reasons being: The proposed project is inconsistent with the Florida Panhandle Health Systems Agency 1979 Health Systems Plan policy guide regarding physical location of a home health agency in the area it intends to serve. The proposal is not consistent with standards and criteria established in Chapter 10-5.11(14), Rules of the Department of Health and Rehabilitative Services. Extenuating and mitigating circumstances which may be considered in approving a certificate of need for a new home health agency have not been adequately demonstrated. There are other available and adequate home health care service providers in the proposed service area which could serve as an alternative to the proposed project and prevent unnecessary duplication of resources. Financial feasibility data do not clearly reflect the inclusion of Medicare and Medicaid resources. The initial reason for denial deals with the claim that the Health Systems Plan for the Florida Panhandle, adopted December 15, 1978, does not allow service of three counties from one central office in Pensacola, Florida. The disputed language in that document is found in Chapter IV at page 216, and it states: No home health agency may be issued a license to operate in a Florida county without having applied for and been granted a certificate of need. The Office of Community Medical Facilities of the Department of Health and Rehabilitative Services considers the recommendation of the Health Systems Agency and established criteria in determining need. Certificates are now issued for a single-county service area, but prior to legislation passed in 1977, an agency could obtain a certificate for several counties. This inconsistency has created considerable confusion in determining need. Although the comment in the document is reluctantly made, it does establish the necessity for the issuance of certificates of need for single-county service areas. This determination is reached, notwithstanding the Petitioner's argument that there is existing precedence for serving more than one county out of a single office. Although there are circumstances in Florida where this approach has been utilized, such service of a multi-county area from a single office would not be allowed on the occasion of the current application. The second reason for denying the certificate of need involves Rule 10- 5.11(14), Florida Administrative Code, which states: (14)(a) A Certificate of Need for a proposed new home health agency or subunit shall not be issued until the daily census of each of the existing home health agencies or subunits providing services within the health service area of the proposed new home health agency or subunit has reached an average of 300 patients for the immediate preceding calendar quarter unless the need for the proposed new home health agency or subunit can be demonstrated by application of the mitigating and extenuating circumstances in rule 10-5.11(14)(b) herein. (b) Mitigating and extenuating circumstances which must be met for the department to issue a certificate of need for a proposed new home health agency or subunit even though the previously described need determination procedure does not clearly indicate need are: Documentation that the population of the proposed service are is being denied access to home health care services in that existing home health agencies or subunits within the proposed service area are unable to provide service to all persons in need of home health care, or Documentation that approval of such proposed new home health agency or subunit would foster cost containment for all providers in the health service area. The Petitioner, in the course of this presentation, took issue with the survey method used by the employee who conducted the staff review of the application. Upjohn claimed that the data gathered on the question of the requirement for a 300 average daily patient census was incomplete and inaccurate. The Petitioner also questioned whether the rule as cited above could be followed in this hearing or should the prior rule which spoke in terms of the daily census of the aggregate of the existing home health agencies or subunits in determining the count of 300 patients be used. The current rule became effective on June 5, 1979, and that rule has application because it was effective at the time of this hearing. Turning again to the question of the formula in deriving the number of patients in the census of the proposed service area, even assuming incompleteness or inaccuracies in the staff evaluation performed by the Health System Agency, the proof offered by the Petitioner in the bearing does not show utilization in excess of the 300-patient census. There are two health agencies now delivering home health care in Escambia County. Northwest Florida Home Health Agency, Inc., is one of those agencies and in its last complete reporting quarter prior to the hearing, there is an indicated patient census for April, which was 71; for May it was 77; and for June it was 73, totaling 221 patients, thereby constituting an average census of 74. This statement of census was established through the testimony of Arthur Long, Executive Director of Northwest Florida Home Health Agency, Inc. (His organization serves only patients who are enrolled with his service group.) Ms. Marian Humphrey, a public health nursing supervisor for the Escambia County Health Department, established the census in Escambia County for that Health Department as serviced by the Visiting Nurses Association, Inc. Beginning in January, 1979, the census was 101 Medicare patients; 14 Medicaid patients; 2 CHAD-PUS patients; 9 private patients and 71 free patients, the latter category being patients who do not pay for services. In February, 1979, there were 164 Medicare patients; 16 Medicaid patients; 2 CHAMPUS patients; 7 private patients and 72 free patients. In March, 1979, there were 128 Medicare patients; 9 Medicaid patients; 2 CHAMPUS patients and 11 private patients. In April, 1979, there were 147 Medicare patients; 13 Medicaid patients; 2 CHAMPUS patients and 9 private patients. In May, 1979, there were 165 Medicare patients; 12 Medicaid patients; 3 CHAMPUS patients; 7 private patients and 88 free patients. In June, 1979, there were 148 Medicare patients; 10 Medicaid patients; 2 CHAMPUS patients; 10 private patients and 61 free patients. In July, 1979, there were 150 Medicare patients; 10 Medicaid patients; 2 CHAMPUS patients; 10 private patients and 77 free patients. In August, 1979, there were 134 Medicare patients; 11 Medicaid patients; 2 CHAMPUS patients; 14 private patients and 96 free patients. The above-cited statistics demonstrate that the two current servicing agencies in Escambia County, Florida, in the preceding full quarter of 1979 which would have been April, May and June, considered separately do not exceed the average of 300 patients for that calendar quarter, nor did the statistics show excess of 300 in other reported quarters. By its Exhibit No. 8, the Petitioner presented statistics on the patient census in Okaloosa County and Santa Rosa County. These statistics were gathered by Blue Cross of Florida. The statistics of the Blue Cross survey show the patient Census services rendered by the Okaloosa County Health Department. These statistics only deal with the years 1977 and 1978 and are, therefore, not current. The most recent quarter in the report on Okaloosa County Health Department shows that in the last quarter of 1978, in-October the patient census was 9; November, the patient census was 14, and in December the patient census was 21. There is a provision in the Blue Cross report which deals with the Northwest Florida Home Health Agency, Inc.; however, these findings of fact defer to the testimony of Mr. Long which showed that in 1979, there was a patient census in April of 36; in May, a patient census of 38 and in June, a patient census of 40, for an average census of 38. The Blue Cross report shows that Santa Rosa County Health Department is the only home health care provider in that county. The most recent census reflected in that report is for January, February and March of 1979. In January the patient census was 41, in February the patient census was 35, and in March the patient census was 33. Analyzing this statistical data provided dealing with Okaloosa and Santa Rosa Counties, although some of the information is not current, it does demonstrate that the census did not exceed the average of 300 patients for the quarters that were reported in either county. In closing out an examination of the discussion of point 2 of the reasons for denial, it is noted that the Blue Cross report deals with the patient census of the Escambia County Health Department but this report is not as current as the presentation by Ms. Humphrey and the Humphrey report is accepted in lieu of the Blue Cross report. Reason 3 for denying the certificate of need talks about the failure of the Petitioner to demonstrate extenuating and mitigating circum stances which would allow a certificate to be issued, notwithstanding the fact that the current service agencies do not exceed the average census of 300 patients for the calendar quarter. Again, that provision of Rule 10-5.11(14)(b), Florida Statutes, states: Mitigating and extenuating circumstances which must be met for the department to issue a certificate of need for a proposed new home health agency or subunit even though the previously described need determination procedure does not clearly indicate need are: Documentation that the population of the proposed service area is being denied access to home health care services in that existing home health agencies or subunits within the proposed service area are unable to provide service to all persons in need of home health care, or Documentation that approval of such proposed new home health agency or subunit would foster cost containment for all providers in the health service area. The first provision under that subsection deals with the inability of the existing health agency to provide services to persons in need of home health care. In examining the question of the ability of the current organizations to provide the necessary health care, Escambia County will be reviewed first. In Escambia County, the Northwest Florida Home Health Agency, Inc., requires that their patients be registered with the organization and their office is open Monday through Friday from 8:00 a.m. to 4:00 p.m. After 4:00 p.m. on weekdays and on the weekends, a registered nurse is on call through the utilization of a "beeper" system. These services only apply to Medicare patients enrolled with the organization. To be enrolled it is necessary for the enrollment to have been achieved through a request by a physician. The Escambia County Health Department is open from 8:00 a.m. to 4:30 p.m. Monday through Friday and serves all classes of patients. There are on- call nurses who work on weekends. The nurses are called by the utilization of the Nurses Directory for Escambia County. The exception to these statements is that two days a year the services of the Escambia County Health Department are not available due to holidays. At night during the week those persons who are patients of the Escambia County Health Department are instructed to arrange for emergency treatment in the Emergency Room or ambulatory care at West Florida Hospital, assuming those patients cannot wait until the following morning for attention. Northwest Florida Home Health Agency, Inc., services Okaloosa County from an office in Fort Walton Beach, Florida. The exact nature of those services is as set out in the discussion of the services provided to patients in Escambia County. The exact details of other current services offered in Okaloosa County and Santa Rosa County were not presented by the Petitioner. Consequently, it was not possible to determine whether those services are adequate. The only evidence that touched on the issue of adequacy of services was testimony offered by one Ruby Savage, who is a volunteer member of the Regional Board of the Northwest Florida Subdistrict Council and a participant in project reviews. She stated that in her opinion there was a need for 24-hour service in Santa Rosa County. This testimony standing alone was insufficient to identify the need for further home health care services. The Petitioner has asserted that the services spoken of in the preceding paragraphs are not sufficient and examples of the lack of available services, according to the Petitioner, are shown on pages 65 through 68 of the transcript of the hearing. Therein are cited several examples of persons unable to receive necessary care of the type which the Petitioner desires to deliver. These examples are accounts given by Ms. Krumel from information purportedly given to her on the subject of the lack of service. Ms. Krumel in the course of the hearing made further comments to the effect that the individuals involved in the project review felt that the services in the question area were insufficient. Those opinions, while they may be true, are not the quality of evidence needed to sustain the Petitioner's contention that there is a need for further health care service in the area in question. The Petitioner made no further presentation on the question of lack of service and on balance the Petitioner has failed to show lack of service. The Petitioner offered testimony on the possibility of the utilization of population increases in the area as a criterion for increasing home health care services. While this criterion formerly appeared in Rule 10-5.11(14)(b), Florida Administrative Code, under the provisions of extenuating and mitigating circumstances, it is not found in the current statement of that rule and may not be used as a criterion for gaining the certificate of need. In discussing the issue of cost containment as outlined in the above- cited rule, the Petitioner made a general comment that if further services are not provided, patients will be required to receive services at emergency rooms, thereby voiding the possibility of cost containment which could be offered by granting the certificate of need to this Petitioner, who is willing to provide 24-hour home health care services. This statement standing alone is insufficient to show that the granting of the certificate of need to the Petitioner will foster cost containment. Finally, the fifth reason for denying the certificate of need was premised upon the failure of the Petitioner to provide financial feasibility data reflecting the inclusion of Medicare and Medicaid resources. The requirement for such data is found in Rule 10-5.09(5), Florida Administrative Code, which states: (5) Documentation showing that the project is financially feasible and can be accommodated without unreasonable charges for services rendered to include a projection of income and expense on a pro forma basis for the first two years of operation after completion of the project. Petitioner claimed at the hearing that it has failed to include this data because the inclusion of Medicare and Medicaid patients in its proposed services was a last minute item and no one in the evaluation process told them that they had to comply with this provision. At the time of the hearing the data was yet to be provided. Upjohn and Personnel Pool were afforded an opportunity to offer their testimony to establish in what respects they might be superior to the other applicant for a certificate of need, assuming that only one certificate of need was to be granted. The two Petitioners did not wish to make any direct attack on the special qualifications of the collateral Petitioner. Both parties proceeded on the basis of offering their remarks to be available for comparison if the contingency were realized which required that only one certificate of need be issued. It is not necessary to detail the special qualifications of these Petitioners, because no certificate of need will be recommended for issuance in Escambia County, Florida, the location in which Upjohn and Personnel Pool are potential competitors for a sole certificate of need. Nonetheless, the facts offered in support of the special qualifications of Upjohn may be found in the transcript of record, pages 187 through 190. The testimony on Personnel Pool's special qualifications may be found in the transcript of the hearing on pages 228 and 251 through 256.
Recommendation This recommendation is being entered in view of the Facts and Conclusions of Law in this case and those Facts and Conclusions of Law in the companion case, D.O.A.H. No. 79-1748, Personnel Pool of Pensacola, Inc. d/b/a Medical Personnel Pool v. State of Florida, Department of Health and Rehabilitative Services. Upon consideration of the Facts herein and the Conclusions of Law, it is recommended that the Petitioner, Upjohn Healthcare Home Health Agency be denied its request for a certificate of need to serve Escambia, Okaloosa and Santa Rosa Counties, Florida. It is further recommended that the agency in entering its final order do so by a process of simultaneous review of this Recommended Order and the Recommended Order entered in D.O.A.H. Case No. 79- 1748, Personnel Pool of Pensacola, Inc. d/b/a Medical Personnel Pool v. State of Florida, Department of Health and Rehabilitative Services, and that final orders be entered on the same date with copies to be served on the representatives of each applicant in this case and in the companion case mentioned above. CHARLES C. ADAMS, Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: Vivian Krumel, R.N. Mr. Art Forchand, Administrator Service Director Office of Community Medical Facil. Upjohn Healthcare Services Department of Health and 15 West Strong Street Rehabilitative Services Old Townhouse Square 1323 Winewood Boulevard Pensacola, Florida 32501 Tallahassee, Florida 32301 Mr. John Owens Mr. Joe Dowless Zone Manager, West Florida Office of Licensure and Cert. Upjohn Health Care Services Department of Health and 3118 Gulf to Bay Blvd. Rehabilitative Services Clearwater, Florida 33519 Post Office Box 210 Jacksonville, Florida 32202 Charles T. Collette, Esquire Departnt of Health and Mr. Herbert E. Straughn Rehabilitative Services Office of Cozmunity Medical Facil. 1323 Winewood Boulevard Department of Health and Tallahassee, Florida 32301 Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301 Sherrill E. Phelps Governmental Affairs Representative Personnel Pool of America, Inc. 303 Southeast 17th Street Fort Lauderdale, Florida 33316 Mr. Thomas S. Siler Owner/Administrator Personnel Pool of Pensacola, Inc. 1800 North Palafox Street Pensacola, Florida 32501
Findings Of Fact CHS is an existing provider of home health care services in Pasco and Pinellas Counties, HRS District V, and has provided such services since 1981. CHS offers a wide range of nursing services including nurses specializing in I.V. therapy, oncology, geriatrics, obstetrics, pediatrics, and orthopedics; licensed practical nursing services; nursing assistants; home health care aides; and respiratory therapy services n the home. These services are offered solely to private payors. Only home health care providers who have been issued certificates of need are licensed and eligible to serve Medicare and Medicaid patients whose care is paid for under whose programs. CHS is applying for a certificate of need in order to be eligible to provide home health care which is paid for pursuant to Medicare and Medicaid procedures. At the time CHS' application was first considered Respondent found the application not to meet the requirements of a need methodology rule which was subsequently declared invalid. The present denial is alleged to be bared solely on statutory criteria. CHS presented one expert witness who calculated need for additional home health care services using a formula suggested by he U.S. Department of Human Services but which was never adopted as a rule by any agency. Pursuant to this formula, which takes into consideration the projected population of the service area, the age cohorts of the population, the population's historical and projected utilization of home health and related services, he service area's hospital discharge rate, and nursing home utilization data, an unmet need for services for 62,541 potential home bed health care patients in 1985, with 13,960 in Pasco and 49,581 in Pinellas Counties, was found. Based on the historical utilization of home health area services by patients in District V, the existing licensed home health agencies, of which there are 12, are projected to serve 25,424 patients in 1985 Exhibit 3). This would leave a potential unmet need for some 28,000 patients in District V. However, serious questions were raised as to the efficacy of the assumption in the formula since this methodology was never adopted by the U.S. Department of Health and Human Services, has not been tested by empirical verification, and the definition of home health services used in this formula is not limited to part-time or intermittent services. Home health care providers differ from other medical care providers principally in the fact that the capital outlay in establishing home health care is minimal. This is so because such care is personal service oriented with little tangible property required. As an example, CHS employs some four or five full-time employees and maintains a list of approximately 350 nurses and aides that can be called to provide the home health care services needed. Accordingly, there is no large fixed payroll to meet when work is slack and services can be increased by any home health care provider simply by employing nurses as the jobs arrive and stop their pay when the care is no longer needed. There is no large overhead to be concerned with in this type operation. CHS is financially capable and has the personnel resources to provide the proposed service. CHS has a line of credit with a commercial bank of $100,000, has the organizational ability to operate as a home health care provider, and has personnel available to provide all services needed. CHS proposes to serve all Medicaid patients who apply for services and to provide services throughout District V as needed. No evidence was presented that patients needing home health care are unable to get such care from existing providers. CHS presently serves private pay patients and holds itself out as able to provide all home health care required within District V. No evidence was presented that those 12 licensed home health care providers in District V are unable to provide all authorized Medicare and Medicaid home health care needed. Since any of them can increase the availability of services simply by employing additional personnel to provide such services as needed actual need for additional certificate of need holders will be difficult to prove. CHS presented evidence that when its private pay patients who are Medicare eligible are hospitalized and subsequently discharged from the hospital needing home health care, the hospital usually refers these patients to a licensed home health care provider who can be compensated by Medicare. This results in CHS losing these patients. Home health care providers get approximately one-half of their patients referred to them by a doctor and one-half referred by a hospital. This ratio is accurate for Petitioner and for the licensed home health care providers The advent of diagnostic relate groupings (DRGs) could impact on home health care providers, but no evidence was presented (if available) of the actual impact DRGs will have on nursing homes or on home health care providers.
The Issue Pursuant to the Stipulation, the factual issues to be determined are: Whether DHRS' initial agency action in denying CON #4912 to Home Care was substantially justified; Whether special circumstances existed which would make an award of fees and costs unjust. Whether this action was initiated by a state agency within the meaning of Section 57.111(3)(b)3, Florida Statutes. The ultimate issue for determination is whether Petitioner is entitled to attorney's fees and costs under Section 57.111, Florida Statutes, the Florida Equal Access to Justice Act (FEAJA), for fees and costs incurred in DOAH Case No. 87-2150.
Findings Of Fact Pursuant to a Stipulation entered into by the parties, filed on November 10, 1988, the parties have admitted and/or stipulated that: DHRS' initial agency action was to deny CON #4911 to Home Care for the establishment of a Medicare home health agency to serve patients in Walton and Okaloosa Counties, Florida. After preliminarily denying Home Care's CON application, DHRS was required by statute or rule to provide Home Care with a clear point of entry to a formal administrative hearing pursuant to Section 120.57, Florida Statutes. Home Care's Petition for Attorney's Fees was timely filed after Respondent, DHRS, filed a Final Order in this case on July 26, 1988, sustaining Home Care's position that it should be awarded CON #4911. Home Care is a "small business party" within the meaning of Section 57.111(3)(d)1.b., Florida Statutes. Home Care is a "prevailing party" within the meaning of section 57.111(3)(c)1., Florida Statutes. Home Care incurred reasonable attorneys' fees and costs in Case No. 87- 2150, at least in the amount of $15,000. The following findings are based upon the record presented: Home Care filed its timely petition in this fee case after Respondent, Department of Health and Rehabilitative Services ("DHRS") entered a final Order on July 26, 1988, in Case No. 87-2150 granting Home Care a certificate of need ("CON") to operate a home health agency. DHRS' Final Order was a reversal of its original position on Home Care's application which was initially denied by DHRS. A formal administrative hearing was held before the undersigned on the issue of whether Home Care was entitled to a CON. The pleadings, transcripts, and exhibits in that proceeding, Case No. 87-2150, have been duly considered in regard to whether DHRS' actions were substantially justified in initially denying Home Care's application. The parties have stipulated that those documents shall constitute part of the record in this proceeding. The following findings are based upon the record in Case 87-2150 and the findings made in the Recommended Order entered in that case and adopted by the agency's final order. DHRS is the state agency responsible for administering the State Health Planning Act pursuant to Sections 381.701 through 381.715, Florida Statutes. (a) At the time DHRS denied this application, it did not have any published rule or policy on the methodology for determining need. Its original rule was successfully challenged and in 1984 DHRS attempted to promulgate a new rule. This proposed rule was invalidated in 1985 because it was based upon a use rate methodology and contained arbitrary criteria. Subsequently, DHRS published an interim policy which it used to assess home health care CON applications. The interim policy was applied to the first batch of applications in 1986 and used a rate population methodology which projected the number of Medicare enrollees using home health care services. The projected number of users was multiplied by the average number of visits per medicare home health care user. See Paragraph 15 of Recommended Order, Case No. 88-4763F. This interim policy was defended by DHRS in the First DCA in December 1986. In the summer of 1986, representatives of the Florida Association of Home Heath Agencies complained to the governor's office about the interim policy. After meetings between the staff of DHRS and the Governor's office, the Department abandoned the interim policy. No change occurred in the medical or financial factors which would warrant a change in policy. Additional applications had to be approved by Ms. Hardy's superiors. Home Care filed a Letter of Intent on October 8, 1986, and a CON application for a Medicare-certified home health agency in Okaloosa and Walton Counties on December 15, 1986. This was application CON Action No. 4911. DHRS published its notice of denial of CON Action No. 4911 in a letter to counsel for Home Care dated April 30, 1987. No specifics were given regarding the grounds for denial. Applicants at that time had been asked to give DHRS an unlimited extension of time within which to render a decision on their applications. Those who refused had their applications denied and were required, similar to Home Care, to demonstrate an unmet need based upon the broad statutory criteria found in Chapter 381, Florida Statutes. DHRS characterizes the procedure above as a free form action utilizing the statutory criteria found in Section 381.705, Florida Statutes. DHRS argued in Case No. 87-2150 that its incipient policy looks at the actual need by applying the 13 statutory criteria and bases its conclusion upon information collected from local home health service providers and the local health council. The denial of Home Care's application by DHRS does not state how DHRS applied the statutes to Home Care's application in order that Home Care or others could ascertain a developing standard. DHRS admitted that it did not have any rule upon which to adjudicate the application and DHRS did not present any credible evidence in support of its denial in Case No. 87-2150. DHRS did not adduce evidence supporting its denial because it was DHRS' policy to place the burden of proving both the facts and the methodology on the applicant. The deposition of Joseph Mitchell was introduced and made a part of this record. Mitchell's testimony is clear that, although there is a possibility Home Care could recoup some portion of the costs of litigation in medicare reimbursement as a cost of organizing and establishing the business, it is not certain that Home Care would be compensated because there is a cap on all reimbursable costs above which Medicare will not reimburse a provider and such legal expenses might not be allowed. See Deposition of Mitchell, page 76-78. Intervenors Choctaw Valley Home Health Agency and Northwest Florida Home Health Agency submitted a proposed order in this action seeking a dismissal of Home Care's petition for attorneys' fee and costs as to any relief from the Intervenors.
The Issue Whether the applications for certificates of need to establish Medicare-certified home health agencies filed by Aaction Home Health Care, Inc. (Aaction) and Nursing Unlimited 2000, Inc. (Nursing Unlimited), on balance, satisfy the applicable review criteria so as to entitle either or both to award of a certificate of need.
Findings Of Fact The Applicants Nursing Unlimited 2000, Inc., was formed for the purpose of obtaining a certificate of need for a Medicare certified home health agency, and to serve as the entity into which would be merged certain existing licensed non-Medicare certified home health agencies in Dade County. Aida Salazar-Rebull is a co- founder, director, officer, and shareholder of Nursing Unlimited, and she currently owns, operates, and serves as the administrator of LTC Professional Consultants, Inc. (LTC), a licensed non- Medicare certified home health agency in Dade County. Ms. Salazar will serve as Nursing Unlimited’s administrator, and after CON approval will merge LTC into Nursing Unlimited and continue its current operations. Elia Murias is also a co- founder, director, and shareholder of Nursing Unlimited, and she currently owns and operates Nursing Love & Care, a licensed non- Medicare certified home health agency in Dade County. Upon CON approval, Ms. Murias, a registered nurse, will serve as Nursing Unlimited’s director of nursing, and will merge the operations of Nursing Love & Care into Nursing Unlimited. For the past 12 years LTC has provided home health care services directly to Medicaid and private pay patients, and to Medicare patients through contracts with Medicare certified agencies. LTC is accredited by the Joint Commission on Accreditation of Health Care Organizations (JCAHO), which accreditation will be transferred to Nursing Unlimited. Since its inception, the number of patients served by LTC has increased every year. LTC enjoys an excellent reputation among local health care providers and patients. LTC’s continual growth over the past ten years, coupled with the letters of support in the application, demonstrate a record of providing high quality care to underserved communities and population subgroups. LTC currently provides home health services in northwest, west central, central, and east central Dade County, and as Nursing Unlimited will serve the same geographic area. LTC places particular emphasis on its service to underserved population subgroups such as Hispanics, Haitians, Blacks, low-income clients, and HIV-positive patients. Nursing Unlimited will continue to serve those population subgroups. Although approximately 53 percent of the Dade County population is Latin, only two of the over 30 existing Medicare certified home health agencies are Latin owned and operated. LTC and Nursing Love & Care are Latin owned and operated, as would be Nursing Unlimited. The entire staff of LTC is bilingual, and some staff are multi-lingual, as would be the staff of Nursing Unlimited. Approval of Nursing Unlimited's application would enhance the availability and accessibility of services to the Latin community. Aaction Home Health Care, Inc. (Aaction), is an existing home health care agency providing services in Dade County since approximately 1988. Like Nursing Unlimited, Aaction's target population is the Hispanic community of Miami and Hialeah. The geographical area which Aaction now serves and will continue to serve at an enhanced level, if approved, is a low- income, high crime and low education area. Aaction's success in those difficult areas is based on its ability to recruit and retain indigenous staff who know the problems. Over 30 letters of recommendation and support, mostly from Hispanic physicians, are attached to Aactions's application and attest to the agency's past and anticipated future service in the community. Aaction has applied for JCAHO accreditation. Need Analysis The review of CON applications must be in context with the criteria set forth in Section 408.035(1), Florida Statutes. Pursuant to the parties’ prehearing stipulation, both applicants satisfy all of the applicable review criteria, except this: The availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of like and existing home health care services in District 11. Section 408.035(1)(b), Florida Statutes. Aaction and Nursing Unlimited both contend there is a need in District 11 for at least two new or additional Medicare certified home health agencies. Each asserts that both CON applications can and should be approved; their respective applications are not mutually exclusive, and accordingly, they need not be comparatively reviewed with one another. The focus of the sole remaining criterion at issue, Subsection 408.035(1)(b), is on existing home health care providers. As acknowledged by AHCA in its State Agency Action Report (SAAR), in pure numbers the instant CON application proposals would increase availability and access in District 11. There is no AHCA rule formula or methodology to determine a numeric need, nor is there a fixed need pool applicable to this proceeding. In the absence of an Agency numeric need rule, the applicants each proposed reasonable need methodologies within their applications. AHCA did not propose any need methodology at hearing. AHCA's former home health agency numeric need methodology rule was invalidated because it was anti-competitive, understated potential actual need, and failed to consider health care economics, efficiency and cost containment. Principal Nursing v. AHCA, DOAH No. 93-5711RX (Final Order January 26, 1994); AHCA v. Principal Nursing Services, Inc., 650 So. 2d 1113 (Fla. 1st DCA 1995) (Affirmed the Final Order as to the need methodology, but reversed as to other portions of the rule unrelated to the issues here). Nursing Unlimited, through Michael Schwartz, applied the invalidated need methodology to demonstrate that even under that excessively conservative approach, at least 2 additional home health agencies are needed in District 11. When the applications were filed the most current home health visit utilization data was for calendar year 1994. The number of visits in 1994 was divided by the age 65+ population to determine a use rate, i.e., the number of home health visits per 100,000 population. The 1994 use rate was applied to the projected age 65+ population growth for the three horizon years of 1995-1997, a projection of 102,039 more patient visits in 1997 than there were in 1994, based on population growth alone. Next, Mr. Schwartz determined a cost-efficient agency size (CEAS) by determining from a review of District 11 existing home health agencies the point at which the average cost per home health visit was less than the statewide average cost per visit. In this case, the result was a CEAS of 34,973, which was divided into the number of projected new visits in the horizon year 1997 resulting from population growth alone, which calculation shows a numeric need for three new home health agencies in District 11. At the time the CON application was filed there was one approved, but not yet licensed home health agency, which was subtracted by the applicant from the net need figure, thus resulting in a net need for two new agencies. The recent historical data shows that home health care visits have been on the increase, both in terms of visits per 100,000 population and in terms of visits per patient. The amount of time spent by patients in the hospital is decreasing, which translates into increased need by patients for visits from home health agencies. The need for home health will continue to increase because it is a cost-effective alternative to nursing home placement and hospital care. Home health care services are less costly than care received in hospitals, in nursing homes, or on an outpatient basis. Thus, allowing greater access to home health services should reduce the overall cost of health care to payors, including Medicare. To address this trend Michael Schwartz offered a realistic, yet still conservative, numeric need projection which assumes an increased use rate beyond that which is based on population increase alone. Mr. Schwartz considered the cumulative increase in visits that occurred over the three-year period 1991-1994 and projected this forward to the horizon year of 1997. Although federal Health Care Finance Agency (HCFA) data suggests that visits will grow nationally at seven percent per year. Mr. Schwartz assumed only a seven percent increase over three years, which resulted in a growth of approximately 180,124 visits by 1997, and which divided by the CEAS yields a need for 5.2 new agencies. In hindsight, the conservative nature of this projection is apparent from a review of utilization data which has become available since the filing of the CON application. For example, rather than a growth in visits of 180,000 over the period 1995-1997, there was an actual increase of over 410,000 visits in 1995 and 1996 alone. Utilization data for 1997 is not yet available. Aaction presented three separate need methodologies in its application prepared by Mark Richardson. The first two methodologies applied a static use rate based on visits in 1994 to the projected population to determine total visits at the planning horizon. Recognizing that cost efficiencies maximize at an approximate range between 30,000 and 90,000 visits per year, Aaction divided the total projected visits by a conservative CEAS of 50,000. These methodologies yielded a need in District 11 for two additional home health agencies at the planning horizon. Using a CEAS of 30,000 visits would yield a need for three agencies instead of two. AHCA has recently determined that static use rates are inappropriate. (Allstar Care, Inc., etc. vs. AHCA, DOAH No. 96-4064, Final Order November 4, 1997). Nonetheless, application of over-conservative methodologies in this case can help counter the agency's unsubstantiated assertion that many visits are fraudulent or unnecessary. In its third methodology, Aaction assumed more realistically that home health use rates would continue to increase as suggested by historic data. In order not to overstate the potential growth rate, Aaction used a rate equal to one-half of the 1993-94 actual growth rate. Utilizing a 50,000 visit CEAS, this methodology yields a need of 7 to 9 new home health agencies in District 11 at the planning horizon. Using a 30,000 visit CEAS yields a net need for over 15 new home health agencies. Recalculating the need formulas by application of the now available 1995 and 1996 data, using a growth rate at 50 percent of the actual rate, and a CEAS of 50,000 visits, results in a need for 7 to 8 new agencies. If the static use rate were applied, the need would be 5 to 6 new agencies. Application of Aaction’s initial need methodologies with a static use rate based on 1996 utilization data yields a need for over 5 new agencies when a 50,000 visit CEAS is used. If a 30,000 visit CEAS is utilized, these methodologies yield a net need for 9 new home health agencies. Applying Aaction’s third methodology (i.e., utilization projected to increase at 50 percent of the actual increase between 1995 and 1996) yields a net need for over 7 or over 12 new agencies, depending on whether a 50,000 visit or 30,000 visit CEAS is applied. There are other indications of need for additional home health agencies in District 11. For example, a review of 1996 utilization data reveals that District 11 has only 1.7 home health agencies per 100,000 population, which is the lowest ratio of any district in the state. The average of all districts is 2.4 home health agencies per 100,000 population. Both applicants proposed fair and reasonable need methodologies which demonstrate a need in District 11 for at least 2 additional home health agencies, and potentially more. There is, therefore, a need for at least 2 more Medicare- certified home health agencies in District 11. Approval of both applications will increase the availability and accessibility of home health services in the proposed service areas within Dade County. Home health services are typically delivered in close proximity to the location of the agency and providers. Nursing Unlimited’s agency location is in the center of a large Latin and Haitian population, with the nearest Medicare certified home health agency approximately 15 miles away. Aaction's commitment is to a population that is difficult to serve. Local population accessibility to the proposed home health services would be increased by approval of both applications. Medicare-certified agencies apply their own admission criteria and decide whether to accept patients, leaving some patients in need and without access to services in the applicants' service area. An informal survey directed by Michael Schwartz suggests there are existing agencies which refuse to treat AIDS patients, that do not provide services at night and on weekends, and that refuse to treat people in poverty areas. The targeted Medicare-eligible population would enjoy enhanced accessibility and availability of home health services by both applicants, if approved. The addition to the district of a Medicare-certified home health agency (Nursing Unlimited) which utilizes a JCAHO- approved centralized case management system would also tend to enhance the availability, accessibility, and adequacy of services provided in the district. When non-Medicare-certified agencies receive a request to care for Medicare patients, the request must be forwarded to a Medicare-certified entity, which in turn will contact the patient. The non-Medicare agency may then be authorized under subcontract to contact and serve the patient and to bill the Medicare-certified agency for its services. In turn, the Medicare-certified agency will add on its overhead and forward a higher bill to Medicare. This process also results in delays in patient treatment. Approval of these applications would likely result in better patient care, without delays, and at lower costs. AHCA has determined that eliminating such subcontract arrangements will eliminate an unnecessary level of administrative costs. AHCA also discourages subcontract arrangements which remove direct control of patient care from the Medicare certified entity. See Allstar Care, supra. District 11 home health visits increased by 410,000 visits in 1995 and 1996. A projection of 600,000 new visits during 1995 through 1997 is reasonable. Nursing Unlimited and Aaction each project approximately 25,000 visits during their second year of operation. Approval of these applicants would not adversely impact the utilization of existing home health providers in the district. Both applicants here will specifically enhance access by the needy Hispanic population. AHCA offered no competent evidence to contradict the conclusions of the applicants' experts, nor did it effectively challenge the accuracy, validity, or reliability of the methodologies they employed. AHCA's expert and sole witness, James McLemore, is an application review specialist who candidly admitted he has no experience in the development of need methodologies but relies instead on the expertise of health care planners such as Mr. Schwartz or Mr. Richardson. Mr. McLemore's anecdotal testimony regarding fraudulent or phantom visits, and AHCA's concern that both state and federal agencies are investigating fraud in the home health care business, raise compelling licensing issues but are insufficient to defeat otherwise convincing evidence in favor of these certificates of need.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED: That the Agency for Health Care Administration enter its final order granting CON No. 8428 to Nursing Unlimited 2000, Inc. and CON No. 8432 to Aaction Home Health Care, Inc. DONE AND ORDERED this 22nd day of December, 1997, in Tallahassee, Leon County, Florida. MARY CLARK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 22nd day of December, 1997. COPIES FURNISHED: Michael Manthei Broad and Cassel 1130 Broward Financial Center 500 East Broward Boulevard Fort Lauderdale, Florida 33394 Moses E. Williams Office of the General Counsel Agency for Health Care Administration Fort Knox Building 3, Suite 3400 2727 Mahan Drive Tallahassee, Florida 32308-5403 R. David Prescott Ruthledge Ecenia Underwood Purnell and Hoffman, P.A. Post Office Box 551 Tallahassee, Florida 32302-0551 Jerome W. Hoffman, General Counsel Agency for Health Care Administration Fort Knox Building 3 2727 Mahan Drive Tallahassee, Florida 32308-5403 Sam Power, Agency Clerk Agency for Health Care Administration Fort Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403
The Issue Whether there is a need for any additional home health care agencies in AHCA District 5 for Pinellas and Pasco Counties, and, whether the certificate of need applications filed in March 1996 to establish Medicare-certified home health agencies in District 5 meet, on balance, the statutory and rule criteria for approval.
Findings Of Fact The Agency For Health Care Administration (AHCA) is the state agency authorized to administer the certificate of need (CON) program for health care facilities and services in Florida. Subsection 408.034(1), Florida Statutes. AHCA preliminarily denied all CON applications filed in the first batching cycle of 1996, to establish Medicare-certified home health agencies in Florida, including those filed by Healthcare System U.S.A., Inc. (Healthcare), National Healthcare, L.P. (NHC), and RHA/Florida Operations, Inc. (RHA) to operate agencies in AHCA District 5. In the prior batching cycle, three additional home health agencies were approved for District 5. Home health agencies typically hire or contract with nurses, and physical, occupational, and speech therapists to care for medical and rehabilitative needs of patients in their homes, frequently following discharge from acute care facilities. Agencies also hire personal care aides to assist patients with bathing and light housekeeping. A home health agency can be licensed to operate in Florida without a CON but must have a CON to receive reimbursements from Medicare, the largest payor source for home health care. The Applicants Healthcare is the applicant for CON Number 8396 to establish a Medicare-certified home health agency in AHCA District 5 for Pinellas and Pasco Counties. Healthcare proposes to have its CON conditioned on the provision of 7.5% of total visits to Medicaid and 1.5% of total visits to charity patients. The sole shareholder of the applicant, Healthcare, is also the sole shareholder of related companies which operate a total of 7 home health agencies. Healthcare-related company agencies are located in Ohio, Pennsylvania, Nevada, California, and in Districts 9, 10 and 11 in Florida. The existing Healthcare agencies are all accredited by the Joint Commission for Accreditation of Health Care Organizations (JCAHO). In the first batching cycle of 1996, Healthcare companies applied for CONs for District 5 and adjacent District 6. In a settlement agreement with Healthcare, AHCA approved the issuance of the CON for District 6. The identical local health plan applies to both Districts 5 and 6. The sole shareholder of the applicant and the related home health agencies is also the sole shareholder of Healthcare Systems, Inc., a 35-employee management company. The management company provides clinical protocols and oversight, quality assurance, human resource, payroll, billing, and risk management services to the affiliated home health agencies. The management company also establishes referral networks and monitors regulatory and licensure requirements for the affiliated agencies. The Healthcare agencies provide a full range of services. Nurses, home health aides, physical therapists, occupational therapists, and social workers are available to treat patients. In addition, Healthcare provides IV therapy, nutritional therapy, and psychiatric nursing. The administrator, who will be a registered nurse, and staff, other than the therapists, will be salaried. In Florida, therapists are customarily on contract to provide home health care. Healthcare's total project cost is $32,913 for CON Number 8396. As of June 30, 1995, Healthcare's available cash was $257,788. AHCA specifically criticized Healthcare for not having a history of providing home health care and for proposing to charge the same for physical therapist and skilled nursing visits. Although the legal entity which is the applicant has not provided home health care, related companies are home health care agencies with a history of complying with data reporting requests and appropriate quality of care standards. Expert testimony established the importance of costs rather than charges in the Medicare cost-based reimbursement system. Preliminarily, AHCA also determined that the Healthcare proposal was not financially feasible. At the final hearing, however, AHCA's expert certified public accountant acknowledged that Healthcare's CON application pro forma, which shows a net profit of $2,300 in the second year of operation, demonstrates that the project is financially feasible. NHC, with headquarters in Murphreesboro, Tennessee, operates 98 nursing homes in 9 states, and 33 Medicare certified home health agencies. In 1995, NHC exceeded 700,000 home health visits from 28 agencies in 3 states. In Florida, NHC operates 4,912 nursing home beds and 13 home health agency offices. In District 5, NHC operates seven nursing homes with a total of 859 licensed beds. NHC is the applicant for CON Number 8395 to establish a Medicare-certified home health agency in the District. NHC proposes, as conditions for approval, that it will provide a minimum of 2% of total visits to Medicaid and 1.5% to indigent patients and that it will serve patients throughout District 5. NHC also proposes a condition to provide a full range of routine and high technology services, including ventilator, infusion, chemotherapy, antibiotic, obstetric, and pediatric nursing care. The condition includes services for AIDS patients, for whom NHC expects to provide experimental treatments, participation in the Medicaid waiver program, and highly skilled pain management for the terminally ill. At the corporate level, NHC employs directors of clinical, quality improvement, social, dietary, nutritional, and therapeutic services. Computer software, written and designed by NHC staff for home health operations, is provided to the home health agencies. Regional offices offer billing, accounting, and payroll support. Two regional nurses in Florida provide in- service education and monitor the needs of the individual offices. NHC has a wide array of employee benefits, with an established career ladder, enhanced by internal training and tuition reimbursement programs. NHC's estimated total project cost is $87,115, of which approximately $65,000 is attributable to computer, furniture, telephones, and other office equipment. In 1995, NHC's cash, cash equivalents, and marketable securities exceeded $6.3 million. NHC projects profits of $776 in year one and $25,000 in year two from the operations of a home health agency in District 5. RHA, a private not-for-profit corporation, owns Glen Oaks Health Care Center (Glen Oaks), a 76-bed nursing home, in Clearwater, Pinellas County. RHA is the applicant for CON Number 8394 to establish a Medicare-certified home health agency in AHCA District 5. RHA will accept conditions requiring 2.5% of total visits to Medicaid and 1% to charity care. RHA also commits to serve AIDS patients, to provide a full complement of home health services, to provide consumer survey data to AHCA, to become JCAHO-accredited, to serve payor groups as listed in the pro forma, to implement quality assurance procedures described in the CON application, to offer twenty-four hour local or toll-free telephone call and response capability, and not to sub-contract with non-Medicare agencies. HealthPrime, Inc., is the company which operates Glen Oaks Health Care Center and will, if CON number 8394 is approved, operate the home health agency as a nursing home-based service. The agency will use available office and meeting room spaces within the Glen Oaks building. HealthPrime manages approximately 40 nursing homes in 12 states, including the 3 Florida nursing homes owned by RHA, and operates 5 home health agencies in Florida, Indiana, Kansas, Colorado, and Virginia, all of which are Medicare-certified except one in Lake City, Florida. In Florida, RHA owns and HealthPrime manages Riverchase Care Center in Quincy and Brynwood Center in Monticello. Glen Oaks and Riverchase have superior ratings, while Brynwood is rated standard. HealthPrime receives a fee of 6% of gross patient revenues for its management services. RHA's total project cost is $51,233. HealthPrime, with the unanimous consent of its Board of Directors, has authorized a $300,000 line of credit to RHA to finance home health agencies. The time for using the line of credit was extended to cover the delay caused by the preliminary agency action and subsequent administrative litigation. NHC and AHCA criticized RHA and HealthPrime for lacking home health experience because RHA does not operate home health agencies. At the time the CON application was filed, HealthPrime operated one agency in Indiana but currently operates 5. AHCA also criticized the proposal for projected understaffing and underestimating costs, by proposing .5 full-time equivalent (FTE) staff for an administrator. The RHA proposal was also criticized as financially infeasible due to high management fees, lease expenses, and an accumulated fund deficit of approximately $1.5 million. In April 1996, HealthPrime established a home health agency at a nursing home in a suburb of Indianapolis, Indiana, a non-CON state. That agency currently averages 1300 to 1400 visits a month, despite competition from over 100 agencies in metropolitan Indianapolis. The nursing home administrator is also the home health agency administrator. To begin home health operations, HealthPrime also hired an administrative assistant and a nursing supervisor. An additional employee was hired after the agency reached almost 1200 visits a month. No deficiencies were found in the annual survey of the Indianapolis agency and the pre-opening survey of another HealthPrime agency in Lynchburg, Virginia. When the applications were filed and reviewed, AHCA had no rule methodology to calculate the numeric need for Medicare- certified home health agencies and no published fixed need pool for home health agencies. Healthcare, NHC, and RHA also assert that AHCA had no specific planning horizon for that batching cycle. Without any numeric need methodology of its own or criticism in the State Agency Action Report (SAAR) of those used by applicants, AHCA determined preliminarily that no need exists for additional home health agencies in District 5. In addition to the issues concerning financial feasibility, the decision was based, in large part, on the applicants' failure to document problems in the accessibility, quality of care, efficiency, appropriateness, or adequacy of existing home health agencies. The applicants assert that, given the theoretically unlimited capacity of approximately 38 existing home health agencies in District 5, it is impossible to demonstrate that an access problem exists. Once an agency has a CON, the agency is authorized to open offices in some or all of the counties in the District. Subsection 401.035(1)(a) - need in relation to state and district health plans The applicable district plan preferences favor applicants who demonstrate an intent (1) to serve HIV positive patients; (2) to provide at least 10% of gross revenues for uncompensated care: (3) to offer a full range of services, twenty-four hours a day, seven days a week; (4) to continue to cooperate with state and local data collection efforts; and (5) to develop linkages with hospitals, government agencies, and physicians. See also Subsections 408.035(1)(n), (h), (e), and (o), Florida Statutes. Healthcare does not meet the preference for providing 10% of gross revenues to uncompensated care, proposing instead 7.5% Medicaid and 1.5% charity care. As a new provider of home health care, according to AHCA's CON expert, Healthcare cannot document a history of, or that it will cooperate with data collection efforts. Although the legal entity which is the applicant is a new provider, it is affiliated with 3 existing home health agencies and a management company which do cooperate in data collection efforts. Healthcare meets district health plan preferences 1, 3, 4, and 5. NHC and RHA also meet all of the district plan preferences, except the preference for proposing to provide 10% of gross revenues for uncompensated care. NHC's proposal, 2% Medicaid and 1.5% charity, and RHA's proposal, 2.5% Medicaid and 1% charity, are significantly less than that of Healthcare. In 1994, the District 5 home health agencies provided 5% Medicaid and charity care. AHCA's expert testified that, in this context, providers exceeding the district norm are disproportionate share providers. NHC and RHA will enhance the continuum of care and benefit from existing community linkages as a result of operating nursing homes in the district. RHA's location within a nursing home with shared staff, offers the most desirable shared services possibilities. The state health plan includes the following six preferences for proposals: (1) to serve AIDS patients; (2) to provide a full range, including high technology services unless sufficiently available and accessible; (3) to provide, and with a history of providing, a disproportionate share of Medicaid and indigent patients as compared to other providers; (4) to serve underserved counties; (5) to measure patient satisfaction with consumer survey data; and (6) to establish a comprehensive quality assurance program and become JCAHO-accredited. All of the applicants will serve AIDS patients, offer a full range of services, survey to measure patient satisfaction, and establish quality assurance programs leading to JCAHO- accreditation. The counties in District 5 are not underserved. AHCA's expert acknowledged that all of the applicants meet the preferences regarding AIDS/HIV positive service, by proposing a quantitative condition, by projecting the level of service, or by stating that they will serve patients with AIDS/HIV positive. Historically, RHA has provided over 90% Medicaid in nursing homes outside District 5 and over 70% Medicaid care at Glen Oaks. NHC has provided from 30 to 50% Medicaid care in its Pinellas County Nursing Homes, as compared to an average of 55% in the District. Subsection 408.035(1)(b) - availability, quality care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of existing services AHCA's Interim Policies AHCA notified each applicant of the interim policy criteria it would use to determine need, in the absence of a numeric need methodology. The notification was as follows: Pursuant to the Final Order of January 26, 1994, (Case No. 93-5711RX), the rule establishing criteria for need and the review of Medicare certified home health agencies (59C-1.031, Florida Administrative Code) was invalidated. The agency appealed the Final Order. However, the agency is not appealing the invalidation of the need methodology. Therefore, for the review of applications which propose to establish a Medicare certified home health agency, it is incumbent upon the applicant to demonstrate need in its application. The following criteria should be addressed: Clearly demonstrate that there is an access problem; Clearly demonstrate that a particular payor group is not being served; Show where these individuals are currently. (being denied) What plan does the applicant have to assure these individuals will be served? How will the proposed agency operate differently to assure continued service this payor group? Clearly demonstrate that existing home health services are limited and not available to the residents in the district. Familiarity with similar programs and services in the area is essential; Clearly present linkage with doctors, hospitals and nursing facilities; Does this proposed agency plan services not currently being provided in the district? Clearly identify and describe these services; Does this proposed agency present its own need methodology? Validate the reasonableness of the need methodology presented. If the need methodology is presented on a national model, validate its reasonableness based on what is existing in the district. If a specific methodology is not addressed, but rather an analysis or studies were performed to demonstrate that an appropriate number of persons will utilize the service, please provide; and Does the proposed application have committed referral arrangements currently within the district? AHCA's interim policy was criticized by Healthcare's expert as imposing virtually impossible burdens on applicants regarding the access issues. Unlike hospitals or other health care facilities which have some fixed limit on capacity, Mr. Daniel Sullivan noted, existing home health agencies have an unlimited capacity to expand. He also noted that the need methodologies used by AHCA rely on the adequacy of the demand for service, not the inadequacy of access. In addition, new entrants to a market can create beneficial competition in the quality and types of services, since costs are not a competitive factor with Medicare reimbursements. See also Subsection 408.035(1)(l), Florida Statutes. NHC attempted to inventory the services provided by 29 existing home health agencies. Based on the inventory, reported in the application on AHCA Form 1459, NHC demonstrated that 24 of the agencies were not providing homemaker services and 13 did not offer respiratory services. NHC's expert also found one agency which did not offer medical supplies and 2 with no dietary guidance. There is no measure or indicator of the need or demand for these services. Form 1459 also indicates that all of these services were planned by 3 additional CON-approved, but not then operational agencies. RHA attempted to respond to each of the 8 interim policy criteria but was unable to document a systemic access problem. AHCA's expert examined the 1994 utilization data for 26 reporting agencies but performed no numeric need calculations or any critique of those presented by the applicants. She acknowledged the difficulty of evaluating existing providers to determine if they are over-utilized, noting that the agencies can respond to increasing demand by increasing visits. AHCA has no regulatory control over the number of offices or subunits operated by a provider under a CON and a single Medicare provider number. In addition, the data are suspect and unreliable. For example, one agency, Community Homes Health Care in Pasco County, reported approximately 200,000 visits in 1993, but none in 1994 and 1995. Numeric Need Analyses Healthcare's expert in health planning described the reimbursement system designed to reduce acute care hospital lengths of stay and to encourage less expensive alternatives, including home health care. He also examined trends in home health use rates in District 5 and Florida. From 1990 to 1995, use rates increased an average of 18% annually in District 5 and 26.3% in Florida, while population increased only .8% and 1.8% in District 5 and Florida, respectively. From 1992 to 1995, home health use rates increased an average of 9.66% annually, as compared to a 2.2% average annual increase in the population 65 and over. The size of home health agencies in District 5 has also increased from an average of 80,819 visits an agency in 1994 to 82,347 visits an agency in 1995. By comparison, the average size of home health agencies statewide is 72,000 visits. The significant growth of home health agency visits, as contrasted to much lower levels of population growth, demonstrates the prevailing shift from other levels of care to home health care. Healthcare's expert used the actual District 5 use rate of 6.86%, inflated forward by the statewide annual rate of change from 1992 to 1995, or 9.66%, applied to the projected population in 1998, 1999, and 2000 to project total visits for those years. Assuming that each home health agency in District 5 will continue to average 82,347 annual visits, Healthcare demonstrated a need for an additional 4.74 home health agencies in the District in 1998, 8.37 in 1999, and 12.89 in 2000. Using the lower, actual 1994 to 1995 change in the use rate for District 5, or 8.36%, as a conservative check on projections, Healthcare's expert demonstrated a need for 3.49 additional home health agencies in the District in 1998, 6.54 in 1999, and 10.35 in 2000. However, the results derived from 3-year trends are, in general, more reliable than a 1-year experience. In his calculations, Healthcare's expert used 31, rather than the actual existing number of 38 home health agencies in District 5. Using 31 home health agencies which reported utilization to the state is appropriate, since the corresponding utilization rates were unavailable for the non-reporting agencies. The methodology demonstrated no need for an additional home health agency to accommodate the projected additional visits in 1997. Healthcare expected that 1996 approvals would result in operational home health agencies in 1998. After the resulting delays due to the preliminary denials and administrative proceedings, Healthcare asserts that 1999 is the appropriate planning horizon. Other more reasonable estimates are that a home health agency approved in 1997 can be operational in 6 months, or in 1998. In its analysis of need, NHC used historical utilization rates and population growth within the District from 1993 and 1994. NHC's methodology resulted in a projection of 2,257,904 home health visits for 1995 in which actual visits were 2,223,369. NHC used 38 agencies (37 existing and approved and assumed approval of its own) in contrast to Healthcare's use of 31 agencies (those reporting to AHCA and approved in 1995). NHC also assumed an increasing agency size rather than holding agency size constant at the 1995 average, as Healthcare did. NHC and Healthcare, despite the differences in methodologies, have very similar results. NHC projects 2,958,454 visits in 1998, while Healthcare projects 2,943,465 visits in 1998. NHC makes nursing home referrals to home health agencies in District 5. The NHC nursing home in Hudson discharged 531 clients to the community or to assisted living facilities in 1995, 343 of whom received follow-up home health agency services. The numeric need methodology used by RHA is the same as that used by another company, Mariner, in the October 1995 batching cycle in which five Mariner applications for Medicare home health agencies were approved. RHA's expert inflated total 1995 home health agency visits by 12%, and assumed a 5% increase in visits by 38 existing agencies. The result was a need for no new agencies in 1996, for 2.48 in 1997, and for 5.31 in 1998. Revising the analysis with 37 existing agencies, RHA's health planning expert projected a need for 2.82 additional agencies in 1996, 5.48 in 1997, and 8.31 in 1998. RHA's expert also revised the analysis by Healthcare's expert to reflect 37, rather than 31 existing and approved agencies, which resulted in a need for 5.6 additional home health agencies in 1998, 9.9 in 1999, and 15.38 in 2000. Whether there is need for additional home health agencies and the magnitude of that need depends, in this case, on the appropriate date for the planning horizon. In Agency For Health Care Administration v. Principal Nursing Services, Inc., DOAH Case No. 93-5711RX, reversed in part, 650 So. 2d 1113 (Fla. 1st DCA 1995), the court upheld the invalidation of Rule 59C- 1.031(3)(a)-(c), but found no sufficient basis in the record for the invalidation of subsections (1),(2), and (3)(d)-(g). In the 1994 version of the Rule, the planning horizon was defined in Rule 59C-1.031(1)(f), Florida Administrative Code, as follows: (f) Planning Horizon. The planning horizon is the anticipated timeframe within which the agency is expected to be licensed. The planning horizon for applications submitted between January 1 and June 30 of each year, shall be July of the following year; the planning horizon for applications submitted between July 1 and December 31 of each year shall be January of the year following the year subsequent to the application deadline. Currently, the planning horizon for home health agencies is described in Rule 59C-1.031(2)(i), which states: (i) "Planning Horizon." The date by which a proposed new Medicare certified home health agency is expected to be certified. For purposes of this rule, the planning horizon for applications submitted between January 1 and June 30 is July 1 of the year 1 year subsequent to the year the application is submitted; the planning horizon for applications submitted between July 1 and December 31, is January 1 of the year 2 years subsequent to the year the application is submitted. AHCA's expert witness' testimony on the issue of the appropriate planning horizon is imprecise and inconsistent. On page 611, beginning at line 9 of the transcript, the testimony is as follows: Q. Did you have in rule form a planning horizon for these applications the specific year planning horizon in rule form? Do you understand what I'm asking? A. Yes, I understand what you're asking. In rule form, yes. Q. Where? A. We were basing our planning horizon -- even though we did not have a numeric need, we were still basing the applications on a planning horizon for, I believe it is in here, let's see. It is the 1997 planning horizon I believe. Q. Which page are you referring to? A. I was doing it in my head. There's not anything on the SAAR that says that. Q. The SAAR does not indicate that the Agency was looking for a particular planning horizon to assess need; is that correct? A. Correct. Q. Now, was there a rule in place at the time the applications were filed, or for that matter when the decision was made, which clearly indicated what the need planning horizon was for these applications? A. No. Although the applicants' experts testified that the planning horizon is the time when the projects are anticipated to be operational, that opinion gives no meaning to the second sentence in Rule 59C-1.031(2)(i). According to the rule, the appropriate planning horizon for these applications, submitted between January and June 1996, is July 1, 1997. Healthcare's exhibit 9, Shands Teaching Hospital and Clinics, Inc. v. State, Agency For Health Care Administration, DOAH Case No. 96-4075, includes in finding of fact 9, a reference to the July 1997 planning horizon. See also finding of fact 197 in Care First, Inc. v. Agency for Health Care Administration, DOAH Case No. 95-4053 (Recommended Order issued June 9, 1997), and finding of fact 20 in Home Health Care Services, d/b/a SouthMed Health Care v. Agency for Health Care Administration, DOAH Case No. 96-4058 (Recommended Order issued June 27, 1997). The projection of zero numeric need in District 5 as of July 1997, is supported by competent substantial evidence presented by Healthcare, which is accepted over that presented by RHA, because Healthcare's methodology and findings were verified by NHC. Assuming, therefore, that the applicants are qualified and capable health care providers, their applications should be denied because they failed to show numeric or other need for their services in the District as of the appropriate planning horizon. The applicants also failed to demonstrate any not normal circumstances, or that existing home health services are lacking in availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, or adequacy.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the applications of Healthcare for CON No. 8396, of NHC for CON No. 8395, and RHA for CON No. 8394 be denied. DONE AND ENTERED this 8th day of September, 1997, in Tallahassee, Leon County, Florida. ELEANOR M. HUNTER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 8th day of September, 1997. COPIES FURNISHED: Sam Power, Agency Clerk Agency for Health Care Administration Fort Knox Building 3 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32399-5403 Jerome W. Hoffman, General Counsel Agency for Health Care Administration Fort Knox Building 3 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32399-5403 Paul A. Vazquez, Senior Attorney Agency for Health Care Administration Fort Knox Building 3 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32308-5403 Gerald B. Sternstein, Esquire Ruden, Barnett, McClosky, Smith Schuster & Russell, P.A. Post Office Box 10888 Tallahassee, Florida 32302 Cynthia S. Tunnicliff, Esquire Pennington, Culpepper, Moore, Wilkinson, Dunbar & Dunlap, P.A. Post Office Box 10095 Tallahassee, Florida 32303-2095 Theodore E. Mack, Esquire 803 North Calhoun Street Tallahassee, Florida 32303 James C. Hauser, Esquire Skelding, Labasky, Corry Eastman, Hauser & Jolly, P.A. Post Office Box 669 Tallahassee, Florida 32302
