The Issue Whether Respondent, Manor Care of Sarasota, Inc., d/b/a Manor Care Nursing Center, committed a Class II deficiency at the time of a survey conducted on August 10 through 12, 2004, so as to justify the issuance of a "conditional" license and the imposition of an administrative fine of $2,500.
Findings Of Fact Based upon the evidence presented at the final hearing, the following relevant findings of fact are made: At all times material hereto, AHCA is the state agency charged with licensing of nursing homes in Florida under Subsection 400.021(2), Florida Statutes (2004), and the assignment of a licensure status pursuant to Subsection 400.23(7), Florida Statutes (2004). AHCA is charged with evaluating nursing home facilities to determine their degree of compliance with established rules as a basis for making the required licensure assignment. AHCA is also responsible for conducting federally-mandated surveys of long-term care facilities receiving Medicare and Medicaid funds for compliance with federal statutory and rule requirements pursuant to Florida Administrative Code Rule 59A-4.1288. Pursuant to Subsection 400.23(8), Florida Statutes (2004), AHCA must classify deficiencies according to the nature and scope of the deficiency when the criteria established under Subsection 400.23(2), Florida Statutes (2004), are not met. The classification of any deficiencies discovered determines whether the licensure status of a nursing home is "standard" or "conditional" and the amount of the administrative fine that may be imposed, if any. Surveyors note their findings on a standard prescribed Center for Medicare and Medicaid Services (CMS) Form 2567 entitled, "Statement of Deficiencies and Plan of Correction," which is commonly referred to as a "Form 2567." During the survey of a facility, if violations of regulations are found, the violations are noted and referred to as "Tags." A tag identifies the applicable regulatory standard that the surveyors believe has been violated, provides a summary of the violation, and sets forth specific factual allegations that the surveyors believe support the violation. Manor Care is a 178-bed nursing home located at 5511 Swift Road, Sarasota, Florida. Manor Care is licensed as a skilled nursing facility. On August 10 through 12, 2004, AHCA's staff conducted a survey at Manor Care. The Form 2567 completed during this survey found the facility in violation of Tag F425. This alleged violation formed the basis of AHCA's Administrative Complaint. Tag F425 relates to pharmacy services. The federal regulation with which Manor Care allegedly failed to comply is 42 C.F.R. Section 483.60, which provides in relevant part: The facility must provide routine and emergency drugs and biologicals to its residents, or obtain them under an agreement described in Sec. 483.75(h) of this part. 42 C.F.R. Section 483.75 provides generally that a facility "must be administered in a manner that enables it to use its resources effectively and efficiently to attain or maintain the highest practicable physical, mental, psychosocial well-being of each resident." 42 C.F.R. Section 483.75(h) provides: (h) Use of outside resources. If the facility does not employ a qualified professional person to furnish a specific service to be provided by the facility, the facility must have that service furnished to residents by a person or agency outside the facility under an arrangement described in section 1861(w) of the Act[1/] or (with respect to services furnished to NF residents and dental services furnished to SNF residents) an agreement described in paragraph (h)(2) of this section. Arrangements as described in section 1861(w) of the Act or agreements pertaining to services furnished by outside resources must specify in writing that the facility assumes responsibility for-- Obtaining services that meet professional standards and principles that apply to professionals providing services in such a facility; and The timeliness of the services. Resident 10, a female who was 51 years old at the time of the survey, was initially admitted to Manor Care on December 19, 2003, with diagnoses that included diabetes mellitus, arteriosclerotic heart disease, peripheral vascular disease, depression, chronic obstructive pulmonary disease, and cerebral vascular accident with hemiparesis and intercerebral hemorrhage. Resident 10 was admitted to Sarasota Memorial Hospital for a surgical procedure on her leg, then re-admitted to Manor Care on August 2, 2004. The hospital's medical impression history and background included status post bilateral iliac angioplasty and stent, hypertension, a history of nicotine addiction, cigarette abuse, status post previous coronary stent, severe osteoarthritis, a history of lumbosacral disk disease with chronic pain syndrome, status post left thoracotomy, lower lobectomy for adenocarcinoma, a history of seizure disorder, and a history of moderate carotid stenosis on the right and left. Upon her re-admission to Manor Care on August 2, 2004, Resident 10 had an intravenous morphine pump at 25 mg per day for severe pain and a clonopin pump at 250 mg per day for back pain. She was also prescribed oxycodone (Percocet) "prn," or as needed, for breakthrough pain. Finally, she was prescribed fentanyl citrate (Actiq), a narcotic analgesic, in the form of a lozenge often referred to as a "lollipop," every three hours, as needed, for breakthrough pain. As a potent opiate, fentanyl is a Schedule II controlled substance that is subject to misuse, abuse, and addiction. The nurses' notes for August 2, 2004, indicated that Resident 10 was offered Percocet for her pain, but that she declined it. On August 3, 2004, the attending physician changed Resident 10's fentanyl prescription from "3 hr. prn" to "q. 2h," meaning from every three hours, as needed, to every two hours regardless of her expressed need. Manor Care's pharmaceuticals were provided by an outside pharmacy pursuant to a contract comporting with 42 C.F.R. Section 483.75(h). On August 7, 2004, Manor Care's staff faxed a refill order to the contract pharmacy requesting a refill of Resident 10's fentanyl. During the day shift on August 9, 2004, Diane Hinrichs, the LPN performing the narcotics count, noticed that the fentanyl count was low and that the pharmacy had not filled the August 7 refill order. She faxed a repeat refill order and phoned the pharmacy, which assured her that the fentanyl would be included in the pharmacy's 4:00 p.m. delivery to Manor Care. When the fentanyl was not delivered at 4:00 p.m., another Manor Care nurse phoned the pharmacy again. The pharmacy assured the nurse that the fentanyl would be included in the next scheduled delivery, at about 2:00 a.m. on August 10, 2004. Shortly before 2:00 a.m., Ms. Hinrichs was back on duty and phoned the pharmacy, asking whether she could obtain the fentanyl at Walgreens or some other alternate source. The pharmacist told her that she could not, but assured her that the fentanyl was "on its way." The fetanyl was not included in the 2:00 a.m. delivery. The duty nurse called the pharmacy immediately, then again at approximately 5:20 a.m., and was again told that the fentanyl was "on its way." The last dose of fentanyl in the facility was administered to Resident 10 at midnight on August 9, 2004. Resident 10 did not receive fentanyl, as ordered, at 2:00 a.m., 4:00 a.m., and 6:00 a.m. on August 10, 2004. She continued to receive the morphine and clonopin on the intravenous pump throughout the night. During the night, Resident 10 was offered Percocet as a substitute for the unavailable fentanyl. She declined the Percocet, stating that "it does not help at all." Manor Care's medication administration records indicated that Resident 10 had never taken Percocet. As noted above, Resident 10's physician had prescribed Percocet for breakthrough pain. The pharmacy delivered the fentanyl at approximately 7:40 a.m. on August 10, 2004, and the nursing staff administered the medication to Resident 10 at about 8:30 a.m. The pharmacy later investigated the situation and informed Manor Care that a pharmacy technician had miscalculated the amount of fentanyl that Manor Care was allowed to keep on hand and had placed the refill order in a "holding bin" for later delivery. The Manor Care nursing notes indicate that Resident 10's physician was notified of the unavailability of the fetanyl at some time on August 10, 2004. On August 11, 2004, the physician discontinued his order for Percocet and instead prescribed oral morphine (Roxanol) for Resident 10's breakthrough pain. The physician continued the prescription for fetanyl. One of Resident 10's diagnoses was a "history of nicotine addiction, cigarette abuse." Her night and early morning routine was sleep punctuated by frequent trips in her wheelchair to an outdoor gazebo designated by Manor Care as a smoking area. During the early morning hours of August 10, 2004, Resident 10 followed this routine. During the early morning hours of August 10, 2004, Resident 10 was observed by an experienced RN, Angela Miguel, and an experienced LPN, Diane Hinrichs, both of whom were familiar with Resident 10's condition, personality, and habits. Resident 10 did not complain to either nurse regarding pain caused by the missed doses of fentanyl. Neither nurse observed Resident 10 to exhibit any behavior indicative of pain. Resident 10 appeared to be going about her usual routine of sleeping, then going outside to smoke. Under the circumstances, neither nurse saw any reason or need to conduct a formal pain evaluation of Resident 10. Jane Sargent-Jefferson, the food service director, arrived at Manor Care at her usual time of 5:00 a.m. on August 10, 2004. She found Resident 10 asleep in her wheelchair outside in the smoking gazebo, which is adjacent to the Manor Care dining room. Ms. Sargent-Jefferson often found Resident 10 asleep in the gazebo during the early morning hours and would wake up Resident 10 and talk to her. She did so on the morning of August 10, 2004. Ms. Sargent-Jefferson testified that "the first thing out of [Resident 10's] mouth" was that "she was mad because her meds had been missed." Ms. Sargent-Jefferson stated that it was not unusual for Resident 10 to be angry and to complain when she was unhappy. Just the day before, Resident 10 had "stormed out" of the dining room when the chef's salad was not to her liking. Ms. Sargent-Jefferson had frequent conversations with Resident 10. On the morning of August 10, 2004, she spoke with Resident 10 on three separate occasions between 5:00 a.m. and noon. Resident 10 did not say that she had been in pain during the previous night. Ms. Sargent-Jefferson testified that Resident 10 "would tell you" if she was in pain. Ms. Sargent- Jefferson observed nothing out of the ordinary in Resident 10's appearance or behavior on the morning of August 10, 2004. On the morning of August 10, 2004, AHCA surveyor Barbara Pescatore was in the smoking gazebo when she was approached by a resident subsequently identified as Resident 10, who complained that she had not received prescribed pain medication from midnight until 8:30 a.m. Ms. Pescatore transferred the inquiry to Anne Dolan, the RN who had been assigned to survey the care of Resident 10. Ms. Dolan reviewed the facility's records and interviewed the staff. She learned that Resident 10's fentanyl doses were missed at 2:00 a.m., 4:00 a.m., and 6:00 a.m. on August 10, 2004, and that the 8:00 a.m. dose on that date was administered at about 8:30. She further learned the circumstances surrounding the lack of fentanyl in the facility in the early morning hours of August 10, 2004. At the hearing, Ms. Dolan, an expert in long-term care nursing, opined that Manor Care and its nurses had an absolute responsibility to ensure that Resident 10 had her medication and had it on time. She testified that at 10:00 p.m. on August 9, 2004, the nursing staff knew that there was only one dose of fentanyl remaining to administer and that it was the staff's responsibility to do whatever was needed to ensure there would be more medication to give Resident 10 after the last dose at midnight. Ms. Dolan testified that missed doses of a routine pain medication can cause unnecessary pain and a delay in the medication's effect when the doses are resumed. Ms. Dolan testified that she could see Resident 10 grimacing and wincing when she would feel pain in her leg. She testified that Resident 10's pain was relieved immediately when she received the fetanyl "lollipop."2/ However, Ms. Dolan was not present on the night in question, and the record gives no indication whether Ms. Dolan or any other AHCA surveyor simply asked Resident 10 whether she experienced increased pain when she missed the doses of fentanyl. No direct evidence was presented that Resident 10 expressed pain or complained of pain or discomfort due to the missed doses of fentanyl, either at the time or later. Dr. Franklin May, a senior pharmacist for AHCA, offered expert testimony and testified that the nursing staff's actions during the night of August 9, 2004, evidenced a "very severe" failure to deliver pharmaceutical services. He based this opinion on the fact that the regulations require that medication be provided in a timely manner. Dr. May was not involved in the survey process and did not interview Resident 10. Based on the records he reviewed, Dr. May testified that he could not say whether Resident 10 "needed" the fentanyl for pain between midnight and 8:00 a.m. Dr. May opined that when the dose of fentanyl was missed due to its unavailability and Resident 10 refused to take the alternative drug Percocet, the staff nurses should have performed an immediate pain evaluation and contacted the resident's physician for instructions. If the attending physician had been unavailable, then the nurses should have contacted Manor Care's director of medicine for instruction. Dr. May emphasized that the staff nurses did not have the discretion to allow the resident to simply miss doses of prescribed medicine. The contracting pharmacy's policy and procedure manual set forth the following policy: "When medication orders are not received or unavailable, the licensed nurse will immediately initiate action in cooperation with the attending physician and the pharmacy provider. All medication orders unavailable to the customer will be managed with urgency." The manual sets forth the following process to implement the policy, in relevant part (emphasis in original): If a medication shortage is discovered during normal pharmacy hours: A licensed nurse calls the pharmacy and speaks to a registered pharmacist to determine the status of the order. If not ordered, place the order or re-order to be sent with the next scheduled delivery. If the next available delivery causes delay or missed dose in the customer's medication schedule, take the medication from the emergency stock supply to administer the dose. If medication is not available in the emergency stock supply, notify the pharmacist and arrange for an emergency delivery. If a medication shortage is discovered after normal pharmacy hours: A licensed nurse obtains the ordered medication from the emergency stock supply. If the ordered medication is not available in the emergency stock supply, a licensed nurse calls the pharmacy's emergency answering service and request to speak with the registered pharmacist on duty to manage the plan of action. Action may include: Emergency delivery. Use of emergency (back-up) pharmacy. If an emergency delivery is unavailable, a licensed nurse contacts the attending physician to obtain orders or directions which may include: Holding the dose/doses. Use of an alternative medication available from the emergency stock supply. Change in order (time of administration or medication). * * * When a missed dose is unavoidable: Document missed dose on the Medication Administration Record (MAR) or Treatment Administration Record (TAR): Initial and circle to indicate any missed dose. Document explanation for missed dose according to physicians order: e.g. "hold dose" on back of MAR/TAR and indicate "See nurses notes for explanation." Document explanation of missed dose in the Nurses Notes: Describe circumstance of medication shortage. Notification of pharmacy and response. Action(s) taken. Manor Care staff did not completely fulfill the requirements of the quoted procedures. The MAR for Resident 10 complied with the documentation requirement that missed doses be initialed and circled, but made no reference to explanatory nurses' notes. The records indicate that the nurses' notes regarding the missed doses were not made contemporaneously, but were completed later in the morning of August 10, 2004. As noted above, the nursing staff made several attempts to have the pharmacy deliver the fentanyl, but never proceeded to the next step of using a back-up pharmacy or contacting the attending physician because of the attending nurses' observations that Resident 10 was not in pain or discomfort. The federal CMS issues a "State Operations Manual" containing guidelines that are relied upon by surveyors when assessing compliance with regulatory requirements. The State Operations Manual provides, as follows regarding alleged violations of 42 C.F.R. Section 483.60: A drug, whether prescribed on a routine, emergency, or as needed basis, must be provided in a timely manner. If failure to provide a prescribed drug in a timely manner causes the resident discomfort or endangers his or her health and safety, then this requirement is not met. There was no allegation made nor evidence presented that Resident 10's health or safety was endangered by the missed doses of fentanyl. Thus, the issue, as framed by the Guidance to Surveyors documents, is whether Resident 10 experienced "discomfort." The evidence presented at hearing did not establish that Resident 10 experienced pain or more than minimal additional discomfort due to the missed medication. At most, the evidence proved that Resident 10 was upset by the fact that she missed doses of fentanyl. She did not tell anyone that she was in pain and displayed few, if any, outward behavioral indications of pain. Resident 10 went about her normal routine, including sleeping for a time and going outside to smoke cigarettes on the gazebo. Subsequently, in September 2004, Resident 10 was discharged from Manor Care and returned to her own residence. The alleged violation of C.F.R. Section 483.60 was classified by the surveyors as an isolated "Class II" deficiency. Subsection 400.23(8)(b), Florida Statutes (2004), provides, in relevant part: A class II deficiency is a deficiency that the agency determines has compromised the resident's ability to maintain or reach his or her highest practicable physical, mental, and psychosocial well-being, as defined by an accurate and comprehensive resident assessment, plan of care, and provision of services. A class II deficiency is subject to a civil penalty of $2,500 for an isolated deficiency . . . A fine shall be levied notwithstanding the correction of the deficiency. Subsection 400.23(7)(b), Florida Statutes (2004), provides that the presence of one or more Class II deficiencies requires AHCA to assign a conditional licensure status to the facility. Conditional licensure means that a facility "is not in substantial compliance at the time of the survey with criteria established under this part or with rules adopted by the agency." Subsection 400.23(8)(c), Florida Statutes (2004), defines a "Class III" deficiency as follows, in relevant part: A class III deficiency is a deficiency that the agency determines will result in no more than minimal physical, mental, or psychosocial discomfort to the resident or has the potential to compromise the resident's ability to maintain or reach his or her highest practical physical, mental, or psychosocial well-being, as defined by an accurate and comprehensive resident assessment, plan of care, and provision of services. A class III deficiency is subject to a civil penalty of $1,000 for an isolated deficiency . . . A citation for a class III deficiency must specify the time within which the deficiency is required to be corrected. If a class III deficiency is corrected within the time specified, no civil penalty shall be imposed. Under all the facts and circumstances set forth above, it is found that Manor Care did not provide Resident 10 with her prescribed fentanyl during the late night hours of August 10, 2004. It is further found that though Manor Care's nursing staff made repeated efforts to obtain the fentanyl through its contracted pharmacy and received repeated assurances that the medication was "on its way," Manor Care's nursing staff did not follow all of the procedures set forth in the pharmacy's policy and procedure manual to secure the medication on an urgent basis. However, the evidence did not establish that Resident 10's "ability to maintain or reach . . . her highest practicable physical, mental, and psychosocial well-being" was compromised by the missed doses of fentanyl. At most, Resident 10 suffered "minimal physical, mental, or psychosocial discomfort," and the alleged violation should have been classified as an isolated Class III deficiency.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law, it is RECOMMENDED that AHCA enter a final order dismissing the Administrative Complaint. DONE AND ENTERED this 26th day of August, 2005, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 26th day of August, 2005.
The Issue The issue in this case is whether notice was accorded the patient, as contemplated by section 766.316, Florida Statutes (2012).
Findings Of Fact Ashley Lamendola first presented to Gulf Coast OB/GYN on the morning of December 16, 2011, for a prenatal visit. This visit constituted the beginning of her professional relationship with the physicians who were part of the Gulf Coast OB/GYN group, which included Dr. Calderon and Dr. Shamas.1/ Violet Lamendola, Ms. Lamendola’s mother, accompanied Ms. Lamendola to that visit. When she arrived at Gulf Coast OB/GYN, Ms. Lamendola was given information and forms to fill out by the receptionist. According to both Ms. Lamendola and her mother, the materials included a NICA brochure in Spanish and an acknowledgment of receipt of the NICA form. While reviewing the materials, Ms. Lamendola, who does not speak Spanish, noted that the NICA brochure given to her was in Spanish. She asked her mother to take the brochure back to the receptionist. When Ms. Lamendola’s mother asked the receptionist about the Spanish brochure, the receptionist told her that the office had run out of NICA brochures printed in English, but that she would obtain one from another office and give it to Ms. Lamendola at the end of her appointment. Ms. Lamendola was instructed to sign and did sign the acknowledgment form so that she could see the physician. The acknowledgment form advised that all physicians in the Gulf Coast OB/GYN, P.A., were participating physicians in the NICA program. Ms. Lamendola received a black-and-white facsimile copy of the NICA brochure on her way out of the office along with other materials relating to prenatal and infant care. The brochure, received by Ms. Lamendola from Gulf Coast OB/GYN, bears a facsimile transmission header dated December 16, 2011, at 9:47 a.m. The brochure prepared by NICA is a color brochure which contains the following text in white letters on a light-to-medium green background on the back of the brochure: Section 766.301-766.316, Florida Statutes, (“NICA Law”) provides rights and remedies for certain birth-related neurological injuries and is an exclusive remedy. This brochure is prepared in accordance with the mandate of Section 766.316, Florida Statutes. A copy of the complete statute is available free of charge to completely inform patients of their rights and limitations under the application provision of Florida law. Since 1989, numerous court cases have interpreted the NICA law, clarifying legislative intent. The above-quoted language is absent from the facsimile copy of the brochure that Ms. Lamendola received from Gulf Coast OB/GYN. Apparently because the letters in the original brochure were white, the letters did not transmit. It is noted that on the front of the brochure, white lettering that appears on the green background of the color brochure did not transmit on the copy that Ms. Lamendola received. The majority of the information contained in Ms. Lamendola’s facsimile copy of the brochure is contained in the color copy of the brochure. The facsimile copy informed Ms. Lamendola that the statutes provide an exclusive remedy and a copy of the statutes may be obtained from NICA. The facsimile outlined the rights and limitations provided in the statutes. The only things that are not contained in the original brochure are that a copy of the statutes is available free of charge, the preparation of the brochure was mandated by section 766.316, and court cases have interpreted the statutes. St. Petersburg General Hospital offers a tour of its obstetrical department to expectant mothers and their families. Ms. Lamendola’s mother called St. Petersburg General Hospital to register for a tour. The hospital employee who was scheduling the tour asked to speak to Ms. Lamendola to obtain pertinent biographical information. Ms. Lamendola provided the information to the hospital employee. The tour is an informational tour and attendance at the tour does not constitute pre-registration at St. Petersburg General Hospital for the delivery of a baby. Ms. Lamendola and her mother, along with 12 other couples, attended the tour on March 22, 2012. During the tour, Ms. Lamendola received a tour packet, which contained a document titled Preadmission and Financial Information. This document instructed Ms. Lamendola to fill out the pre-admission form and return it to the hospital. Ms. Lamendola filled out the pre- admission form, but did not return it to St. Petersburg General Hospital. Ms. Lamendola did not pre-register for admission to the hospital. On April 3, 2012, Ms. Lamendola presented to St. Petersburg General Hospital with complaints of vaginal bleeding. Ms. Lamendola was told by a hospital employee that she was already in the system and that additional information would not be necessary. Ms. Lamendola signed a “Consent to Treat” form and was treated in the labor and delivery unit of the hospital. A short time later, she was given informational materials relating to prenatal and infant care and released. She was not given a NICA brochure during the visit on April 3, 2012. It was the hospital’s policy to give a NICA brochure to a patient only when the patient was being admitted as an inpatient for delivery of her baby. Ms. Lamendola’s professional relationship with St. Petersburg General Hospital relating to her pregnancy began with her visit on April 3, 2012. At 20:19 on June 26, 2012, Ms. Lamendola presented to St. Petersburg General Hospital. She had been experiencing contractions for six hours prior to her arrival at the hospital. She had been placed on bed rest for gestational hypertension five days prior to coming to the hospital. When she arrived at the hospital, she had hypertension. Normally when a patient is 37 to 39 weeks gestation, her physician will bring the prenatal records to the hospital or the physician’s office will send the records to the hospital by facsimile transmission. When Ms. Lamendola arrived at St. Petersburg General Hospital, her prenatal records from her physicians’ office were not on file. Megan Muse, R.N., was on duty when Ms. Lamendola presented at St. Petersburg General Hospital. Because Ms. Lamendola’s records were not on file, Ms. Muse requested that Bayfront Hospital send Ms. Lamendola’s records to St. Petersburg General Hospital. The evidence did not establish how Ms. Muse knew that the prenatal records were at Bayfront Hospital. Ms. Lamendola’s prenatal records, consisting of 11 pages, were sent by facsimile transmission to St. Petersburg General Hospital beginning at 21:35 on June 26, 2012. Ms. Muse recorded in her notes that Ms. Lamendola’s prenatal records were received from Bayfront Hospital at 21:45 on June 26, 2012. Although Ms. Lamendola’s prenatal records may have been sent to Bayfront Hospital, it was never Ms. Lamendola’s intention to deliver her baby at Bayfront Hospital. She took the informational tour offered by St. Petersburg General Hospital and went to St. Petersburg General Hospital in April 2012 when she had a problem related to her pregnancy. At 20:33, Dr. Javate admitted Ms. Lamendola to St. Petersburg General Hospital for the delivery of her infant. Ms. Lamendola was examined by Emanuel Javate, M.D., at approximately 21:35. At 22:02, Ms. Lamendola signed the hospital’s Condition of Admission form. At 22:10 the hospital gave Ms. Lamendola the brochure prepared by NICA, and Ms. Lamendola signed the acknowledgment form, acknowledging that she had received the brochure. Ms. Lamendola gave birth to Hunter Lamendola (Hunter) on June 27, 2012, at St. Petersburg General Hospital, which is a licensed Florida Hospital. At birth, Hunter weighed in excess of 2,500 grams and was a single gestation. Ashley Lamendola received obstetrical care from Guillermo Calderon, M.D. Dr. Calderon was a “participating physician” as defined in section 766.302(7). Christina Shamas, M.D., provided obstetrical services in the course of labor, delivery, and resuscitation in the immediate post-delivery period. Dr. Shamas was a “participating physician” as defined in section 766.302(7).
The Issue Did Compassionate Care demonstrate not normal or special circumstances exist to justify approval of its Certificate of Need (CON) application to establish a new hospice program in Service District (Service Area) 11 in the absence of published numeric need? If Compassionate Care demonstrated not normal or special circumstances to justify approval, does Compassionate Care's CON application satisfy the requirements of Florida Administrative Code Rule 59C-1.0355, and section 408.035, Florida Statutes (2010)?1/
Findings Of Fact The Parties AHCA AHCA is the single state agency responsible for the administration of Florida's CON Program. § 408.031, Fla. Stat. (2010). AHCA is designated both "as the state health planning agency for purposes of federal law . . . [and as] the single state agency to issue, revoke, or deny certificates of need . . . in accordance with present and future federal and state statutes." § 408.034(1), Fla. Stat. Compassionate Care Compassionate Care exists for the sole purpose of providing hospice services in Florida, particularly Miami-Dade and Monroe Counties. It is a wholly owned subsidiary of Compassionate Care Hospice Group, Ltd., which is privately owned by its founder Milton Heching, an ordained Rabbi with an interest in end-of-life care. Compassionate Care's parent company, Compassionate Care Hospice Group, Ltd., provides hospice services in 21 states through 48 licensed programs. Compassionate Care Hospice Group, Ltd., has strong success and experience as a hospice provider working in culturally diverse urban markets, including the Bronx in New York City, Newark, New Jersey, and Philadelphia, Pennsylvania. It also operates hospice programs in the southeast including Atlanta, Savannah, and Macon, Georgia. Compassionate Care Hospice Group, Ltd.'s history of and ability to provide high quality care is undisputed. All of its hospices are accredited by the Community Health Accreditation Program (CHAP). The hospice proposed here would also be CHAP accredited. Compassionate Care Hospice Group, Ltd., has a strong record of success in hospice start-up operations. All of its programs began as start-ups, as opposed to acquisitions. Compassionate Care Hospice Group, Ltd., attributes its success to a decentralized model of care. While the company provides resources and support, the company philosophy is to let each program develop autonomously according to local needs, rather than seeking to impose a national model or plan on the locality. In Florida, Compassionate Care Hospice Group, Ltd., companies are licensed to provide hospice services in Service Area 6B, consisting of Polk, Highlands, and Hardee Counties. Service Area 11 and "Need" Projections Service Area 11 consists of Miami-Dade and Monroe counties. It is the most highly populated service area in the state of Florida, with more than 1.5 million residents. It also has the greatest number of resident deaths annually, 18,635 in 2008. Service Area 11 has far more hospice admissions than any other service area in the state. But it has traditionally and consistently experienced a lower hospice use rate than the other service areas. In each year from 2008-2011, Service Area 11 had the lowest hospice use rate among Florida's 27 service areas. In determining whether there is a need for a new hospice program in a service area, the Hospice Rule (Rule 59C- 1.0355) uses a "Numeric Need" formula that considers the state- wide hospice use rate in four categories of projected patient deaths. They are: (1) cancer age 65 and over, (2) cancer under age 65, (3) non-cancer age 65 and over, and (4) non-cancer under age 65. The hospice use rate in Service Area 11 has consistently been less than the state average for all four categories. Predictably, this regularly results in the number of projected hospice patients projected for Service Area 11 by AHCA's rule exceeding the number of hospice patients served each year. The difference for Service Area 11 between projected hospice patients and those served is higher than any other service area in Florida, by more than double. For the planning year that applies in this proceeding, the number is 3,113, over six times the 350 that is the rule's threshold for approving a new program. The rule applies the state-wide use rate to the projected number of deaths in a service area for each of the four categories to project the number of possible hospice patients. Although the participants call the number a "need," that is not accurate. It is a projection of the number of people who could use hospice services. In the case of Service Area 11, it has for many years been an inaccurate projection of the number of people who will use hospice services. AHCA's rule uses the projection to then determine "need" for a new hospice. If the projected number of people who could use hospice services exceeds 350, the rule projects a need for one new hospice in the service area. But the rule defaults to zero if the service area includes an approved hospice that has not yet been licensed or a hospice that has been licensed for less than two years. As testified to by Jeffrey Greg, who is AHCA's director of the Florida Center for Health Information and Policy Analysis and overseer of the CON program, the purpose of this default to zero provision is to allow "new hospices a period to start up and get going without the threat of additional competition." Presently eight hospices serve Service Area 11. HCR Manor Care Services of Florida II, Inc. (a/k/a Heartland Hospice Services), is the most recent hospice to obtain CON approval and licensure in Service Area 11. AHCA licensed HCR Manor Care Services of Florida II in March of 2011. Because HCR Manor Care Services of Florida II was not yet licensed at the time AHCA issued the SAAR, AHCA applied its rule to determine that Service Area 11 did not "need" a new hospice. It continues to maintain that there is no need because HCR Manor Care Services of Florida II has not been licensed for more than two years.3/ The market for hospice services in Service Area 11 is substantial. Adding another provider to the market would not have a material adverse effect on the existing providers or the quality of hospice care in the service area. HCR Manor Care Services of Florida III (a/k/a HospiceCare of Southeast Florida) Effective October 2011, the parent company of HCR Manor Care Services of Florida II, acquired an existing provider, HospiceCare of Southeast Florida, through another subsidiary named HCR Manor Care Services III, Inc.4/ The result of the transaction is that the same company owns and controls HCR Manor Care Services of Florida II, Inc., and HCR Manor Care Services of Florida III, Inc. HospiceCare of Southeast Florida (HCR Manor Care Services of Florida III) has been licensed to provide hospice services in Service Area 11 for 12 years. In every meaningful way, as established in paragraphs 36 and 38, the two entities are effectively, operationally, and functionally the same although they officially hold separate licenses. In addition, they both have authority to serve all of Service Area 11. Due to the acquisition, HCR Manor Care Services of Florida II, Inc. (a/k/a Heartland Hospice Services), is not, as a factual matter, a newly-licensed hospice. It is part of a hospice, HCR Manor Care Services of Florida III a/k/a HospiceCare of Southeast Florida), that has been licensed far more than two years. Because of the acquisition, HCR Manor Care Services of Florida II, Inc. (a/k/a Heartland Hospice Services) is not in a start-up period or subject to the vulnerabilities of a newly- licensed hospice. The acquisition in this case is unique in the history of Florida's CON regulation of hospices. AHCA has never before faced a situation in which a newly-approved hospice acquires an existing licensed hospice provider before the newly approved hospice has been licensed for two years. AHCA has issued no final orders on the subject and does not have a rule addressing it. AHCA did not present a credible, persuasive, or rational basis for ignoring the factual situation created by the acquisition. Its witness just dismissed the facts resulting from the acquisition as "an incidental factor." He said there is no "relationship between the CON program and future changes in ownership that may occur." But this case involves an actual and material change, not a "future change." Hispanic Utilization of Hospice Services Miami-Dade County is unique in Florida in that the majority of the population is Hispanic. As would be expected, Hispanic deaths constitute a majority of the deaths in the Service Area. Hispanic deaths as a percentage of overall deaths in Service Area 11 have increased from 47.2 percent of all deaths in calendar year 2000 to 59.9 percent in 2010. Hispanics constituted 49.5 percent of overall deaths in calendar year 2000, among over age 65, population age cohort. In 2012, they made up 64 percent of overall deaths age 65 and over. Hispanics are a minority of hospice patients in Service Area 11. Hispanics represented 59.9 percent of the service area deaths in 2010. But only 28.3 percent of the service area hospice admissions that year were Hispanic. However, the use of hospice services by Hispanics has been increasing at a greater rate than hospice utilization in general. The percentage of Hispanic hospice discharges in Service Area 11 increased from 45.8 percent in 2008 to 53.5 percent in 2010. This was more than double the increase in the state-wide utilization rate from 61.4 percent to 64.8 percent. Compassionate Care relies heavily upon its argument that it will serve Hispanic residents to justify approving its certificate of need application despite the absence of a published need. But, given the opportunity in Schedule C of the CON application to condition its certificate of need upon a measurable enforceable commitment to serve a "[p]ercent of a particular population subgroup," Compassionate Care did not offer to accept the condition. Although Compassionate Care checked the box indicating it would accept a condition, and said that the requested population subgroup and percentage would be supplied in an attachment, the attachment did not provide either. This is not an oversight. The text of the CON application on page 41, discussing conditions, also does not include a commitment to serve a certain number or percentage of Hispanic patients. This omission results in the conclusion that either Compassionate Care is not certain or confident enough that it can deliver what it promises or that it is not sincere. In either case, this is another reason that Compassionate Care has not proven that it will serve more Hispanic patients than the existing providers. There is no persuasive evidence of the reasons for the difference between hospice utilization by Hispanics and overall hospice utilization. Compassionate Care relied on the theory that making sure half of its workforce was bilingual and focusing its marketing on the Hispanic population would increase utilization. But it offered no evidence that existing providers were not providing bilingual employees or were not marketing to the very numerous potential client pool of Hispanic patients in Service Area 11. Compassionate Care relied upon vague hearsay statements, conclusions of its expert witness, Ms. Greenberg, drawn from Hispanic utilization statistics, and scant else. Ms. Greenberg, in turn, relied upon unsupported comparisons of national utilization data and utilization data from other states, without a credible explanation of why the data, which came from different types of sources than the Florida data, could rationally be compared to Florida's. In addition, Ms. Greenberg was not a persuasive witness. She testified more as an advocate than an analytical expert. For example, on page 95, counsel asked her: "[D]o you have an opinion as to whether this Hispanic Outreach plan as described in the application would be effective in enhancing access to hospice services for Hispanics in Service Area 11?" She responded: "It absolutely will." The evidence did not support such an eager, extreme, and adamant opinion. Ms. Greenberg's characterization of a generic letter of support from Borinquen Health Care Center, Inc., is another example of positions that undermine her persuasiveness and credibility. She relied on the letter as a significant example of how Compassionate Care could increase Hispanic utilization. The letter writer states: "I am pleased to provide this letter of support and urge you to approve Compassionate Care Hospice's CON Application." He goes on to say: "We would welcome the opportunity to coordinate with Compassionate Care Hospice for the care of terminally ill patients should they be approved for a CON. Given their experience in other areas of the County with large urban populations, and large numbers of Hispanic patients, they should be a good fit in our community. We look forward to working with Compassionate Care Hospice upon their approval for a CON." The majority of the letter describes the center and its services. Ms. Greenberg, on page 91 of the transcript, inaccurately describes the letter as saying that "[I]t would partner with Compassionate Care in meeting the hospice need of its client [sic]." In contrast the Hispanic Outreach Plan" of the CON application says only, and more accurately, Compassionate Care "will also seek to partner with Borinquen Health Care Center. One final example of the statements making the witness unpersuasive is this one, on page 93 of the transcript: "[T]hey've [Compassionate Care] already made inroads that others haven't in this community, clearly the problem is fixable and should not be just blown off that this is the way it is and life goes on." But there is no evidence of what others have or have not done. The testimony is offered in a case where the record contains no evidence of what existing providers have done to reach out to the Hispanic community. There is no credible, persuasive evidence of barriers to access by Hispanic individuals to hospice services in Service Area 11. Assisted Living Facilities As of March 2012, Service Area 11 contained 1,017 Assisted Living Facilities (ALFs). Of those, 710 have less than ten beds. The number of ALFs per 100,000 population aged 65 and older is more than double that of any other service area in the state. Compassionate Care theorized that the lower hospice utilization rate in Service Area 11 was due to residents and managers of ALFs not being aware of the availability and benefits of hospice. Compassionate Care did not prove its theory with credible and persuasive evidence. Such evidence as it presented was broad, vague, and hearsay amplified by speculation. Compassionate Care did not present specific non-hearsay evidence to support its theory. For instance, it presented no evidence tending to prove the ALF marketing practices of existing hospices. It did not present testimony from a single ALF operator or resident to support its theory. The record does not establish what proportion, if any, of ALF residents are likely to be appropriate candidates for hospice services. The record contains no information about admissions to hospices from ALFs or evidence indicating that a progression from ALF services to hospice is a normal pattern. There is no survey of ALF operators or residents about access to hospice services. The testimony of Compassionate Care witness, Mr. Martin, about availability of hospice services to ALF residents was not persuasive. Mr. Martin is a consultant who advises ALFs about compliance with statutes and rules. He has no expertise or experience in health planning or marketing. In his own words: "[M]y business is consulting on issues that have to do with statute and rule, and anything else is for someone else to handle." Mr. Martin's testimony consisted mostly of hearsay and unsubstantiated opinion. Mr. Martin could not describe a single specific example of an ALF resident not having access to or knowing about hospice services. He had no knowledge of the practices of existing hospice providers. He did not conduct any surveys or studies of ALF resident and operator knowledge of or access to hospice services. He did not know what efforts existing hospices were making to market to Hispanics or ALF residents. There is no credible or persuasive evidence of barriers to access by ALF residents to hospice services in Service Area 11.
Recommendation Accordingly, based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Agency for Health Care Administration issue a Final Order granting Compassionate Care Hospice of Florida, Inc.'s Certificate of Need Application Number 10091. DONE AND ENTERED this 23rd day of August, 2012, in Tallahassee, Leon County, Florida. S JOHN D. C. NEWTON, II Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 23rd day of August, 2012.
Conclusions THIS CAUSE comes before the AGENCY FOR HEALTH CARE ADMINISTRATION (the "Agency"”) concerning co-batched Certificate of Need ("CON") Application Nos. 10069 - 10072 seeking to establish a new hospice program in Orange County, District 7/B. ODYSSEY HEALTHCARE OF COLLIER COUNTY, INC. d/b/a ODYSSEY HEALTHCARE OF CENTRAL FLORIDA (hereinafter “Odyssey Healthcare”) filed CON Application No. 10071 in the Second Batching Cycle of 2009. The application was denied. Thereafter, Odyssey Healthcare timely filed a Petition for Formal Administrative Hearing with respect to its denial. The Petition was Filed August 27, 2010 3:01 PM Division of Administrative Hearings. forwarded by the Agency Clerk to the Division of Administrative Hearing (“DOAH"). On June 8, 2010, Odyssey Healthcare filed its voluntary dismissal of the DOAH Case No. 10-1681CON (Ex. 1). On June 9, 2010, an Order Severing DOAH Case No. 10-1681CON (Ex. 2) and an Order Closing file (Ex. 3) were issued by DOAH as a result of Odyssey Healthcare’s voluntary dismissal. It is therefore ORDERED and ADJUDGED: 1. The voluntary dismissal by Odyssey Healthcare is hereby acknowledged and accepted. 2. CON Application No. 10071 is hereby denied. 3. The above-styled case is hereby closed. DONE and ORDERED this 2) day of August, 2010, in Tallahassee, _y W. ARNOLD, Secretary AGENCY FOR HEALTH CARE ADMINISTRATION Florida. ae eeeneeeeeaeneneneenmmnenneneeennnaaneneieemnenenamemenenneE mat a
The Issue Whether Florida Convalescent Centers, Inc., (FCC) and National Health Corporation, LP (NHC) are "related parties" by either ownership or control for the purposes of Medicaid reimbursement.
Findings Of Fact Respondent Agency for Health Care Administration (AHCA) is the successor agency to the Department of Health and Rehabilitative Services and the agency responsible for administration and implementation of the Medicaid Program. The Florida Title XIX Long-Term Care Reimbursement Plan ("the Plan"), which was adopted and incorporated by reference in Rule 10C-7.0482, Florida Administrative Code, (now Rule 59G-0.010, F.A.C.), is the overall guide for Medicaid reimbursement in the State of Florida. According to the Plan, nursing homes participating in the Medicaid Program are required to submit cost reports to determine reimbursement and ensure that the costs which are reported are allowable under Medicaid. Florida Convalescent Centers, Inc. (FCC), is a Florida corporation which owns 16 nursing homes located throughout the State of Florida. The audits of the cost reports for 1989, 1990 and 1991 for twelve of the facilities are involved in this proceeding. The sole shareholders of FCC are James McCarver and his wife, Pat McCarver. The president of FCC is James McCarver (McCarver). FCC's secretary/treasurer and Senior Vice President is Pat McCarver. Its Vice President and assistant secretary is John Robenalt. FCC's chief financial officer is Charles Wysocki. The directors of the corporation are James and Pat McCarver and John Robenalt. National Health Corp., L.P. (NHC) is a long-term health care company that operates health care centers. NHC was founded in 1971 and became a publicly held corporation in 1983. In 1986, it was converted to a limited partnership and is traded on the American Stock Exchange. None of the corporate officers or directors of FCC have ever been corporate officers, directors, agents or employees of NHC, and none of the corporate officers of NHC have ever been corporate officers, directors, agents or employees of FCC. NHC cannot elect to remove any officers, directors or personnel of FCC. All of the employees at each nursing home are employed by FCC and salaries are paid by FCC from FCC payroll accounts, except for the nursing home administrator. McCarver, either individually or with his wife, has always owned 100 percent of the stock in FCC, and the McCarvers have never owned any stock in NHC. As president/owner of FCC, McCarver runs the company and specifically performs the following functions, among others: review and approval of operating budgets, review and approval of all capital budgets, approval of all expenditures exceeding $5,000, long range planning for the corporation, deciding when and where to file for certificates of need, and determining the corporate philosophy and mission. As a corporation with a sole, owner/manager shareholder, the McCarvers have focused the corporate philosophy toward providing a higher level of patient care than is found in the average nursing home. Such dedication to patient care is reflected in the superior licensure rating which all sixteen of the FCC nursing homes have achieved and maintained and room sizes in the facilities which exceed industry standards. The home office for FCC is located in Sarasota, Florida. Charles Wysocki, the chief financial officer of FCC, operates out of an office located in the NHC offices in Murfreesboro, Tennessee; FCC does not pay rent for use of the office space provided by NHC. FCC was chartered in 1983. The initial and sole owner of FCC was James McCarver. McCarver is educated as an attorney and certified public accountant. He provided the initial capitalization for FCC. He had extensive experience in the formation, building, development and ownership of nursing homes prior to the formation of FCC. Subsequent to its organization, James McCarver transferred a portion of his shares in FCC to his wife, Pat McCarver. The corporation was chartered by McCarver for the purpose of securing certificates of need in the State of Florida, and for the building, developing and owning those nursing homes in the State of Florida. McCarver's prior experience with nursing homes was as a part owner of over 20 nursing homes in the States of Texas and Missouri. Dissatisfied with the limitations which ownership with partners entailed, McCarver began to explore other states in which he could develop nursing homes so that he would be the sole owner. After reviewing the available demographic information and conducting extensive market analyses, McCarver determined that the nursing home market was underserved in Florida and identified several geographic locations in the State of Florida for which nursing homes would be feasible. The demographic and market analysis was conducted by a staff assembled and directly employed by McCarver. He also assembled and directly employed the architectural, construction management and development staff to prepare certificate of need applications for the State of Florida. With the assistance of his staff he filed 66 applications for certificates of need in the State of Florida, which were all initially denied. However, after considerable certificate of need litigation, McCarver was awarded 20 certificates of need (CONs) in 1985. Having been successful in obtaining 20 CONs at one time, McCarver was faced with the large task of building, financing, staffing and operating twenty brand new nursing homes. CONs expire one year from the date when issued, unless construction of the facility is commenced. Thus, McCarver had the immediate task of assembling significant financial, construction, and managerial resources to develop 20 CONs in time to avoid losing them. While McCarver had significant independent financial resources and employed managerial personnel, he did not possess sufficient resources to accomplish the task of building all 20 nursing homes in a one year time period. McCarver sought to find assistance with respect to the financial and managerial resources he needed. As to the actual development/construction and opening of the facilities, McCarver was faced with the prospect of either expanding his current staff and then laying off the new hires afterwards, or finding a national development company which had sufficient development volume of its own to justify retaining a staff of the magnitude required and from whom he could purchase the services for this burst of development activity. McCarver decided to seek the services of a large nursing home company to purchase the necessary services. He and/or his corporate counsel, John Robenalt, contacted and visited several companies, including: Arbor, Beverly, HCR, Hillhaven, Manor Care, Waverly Group, U.S. Care Corporation, Mediplex, NHC, Life Care Corporation, Care Age and Forum. The purpose of contacting so many companies was to obtain the most competitive pricing and terms for the services to be purchased. While he was not necessarily seeking a package of services from any one company, McCarver recognized that financing and management services usually were sold together. All of the companies contacted insisted on an ownership component as part of their offer to do business with McCarver. McCarver rejected these offers because he wanted to maintain complete ownership of the nursing homes. During the search for assistance, McCarver came into contact with NHC in June 1985 through the efforts of John Robenalt. Prior to June 1985, the parties were unknown to each other and did not have any business relations. Intensive negotiations and discussions were held between McCarver and Robenalt on behalf of FCC, and Ted LaRoche on behalf of NHC. The specific concerns of FCC in the negotiations with NHC were as follows: (1) desire to retain ownership of the facilities and certificates of need; (2) desire to assure itself that NHC would not mismanage the facilities, cause a default and then obtain ownership by foreclosure; (3) quality of care and quality of construction of the facilities; (4) control of capital expenditures; and (5) insistence that all employees of the facilities be employees of FCC and not NHC. NHC's concern during the negotiations was to avoid mistakes that it had made as a guarantor on previous transactions with other third parties. NHC wished 1) to provide default and foreclosure remedies, should NHC be required to make payments on its guaranty; 2) to prevent owners from stripping the cash flow and value from the facility by syndication; 3) to ensure that the contractor was bonded; and 4) to make sure the site had the proper zoning. During the time of the negotiations, the parties recognized the related party limitations, as contained in the Medicare and Medicaid regulations, and considered such in structuring their arrangement. The intent of the parties was to insure that FCC retained ownership and control of all monetary and policy-making decisions. The negotiations were at arm's length and competitively priced. As a result of the negotiations, FCC and NHC entered into a master Agreement, dated June 14, 1985, (hereinafter the "Development Agreement"), in which FCC purchased from NHC the following services: development services for 13 nursing homes, including three in California, credit enhancement and guaranty backing for financing the facilities, working capital financing and management services. Subsequent to the initial development and pursuant to the Development Agreement, FCC added and dropped facilities from the Agreement and negotiated amendments. The 16 facilities now owned by FCC were developed pursuant to the terms of the Development Agreement, with some modifications for each individual facility. The development services purchased by FCC from NHC were to assist McCarver's existing staff of two architects, construction supervisor and interior designer in co-developing ten of the facilities for which certificates of need had been awarded. In addition, NHC obtained and provided recommendations of qualified, bonded contractors for FCC to choose from to construct the various facilities. FCC had final say as to which contractor and sites were acceptable; NHC's role was to prevent FCC from making a mistake during the contracting and site selection phase. FCC also negotiated a provision to obtain reimbursement of part of its up-front investment in architectural, interior design and some certificate of need procurement expenses as part of the construction contracts. The sum reimbursed was $400,000 per facility. However, in subsequent projects, these expenditures were not reimbursed to FCC. The financing services purchased from NHC were credit enhancement and guaranty assistance, and are set forth fully in an Agreement to Guarantee attached as Exhibit "B" to the Development Agreement. Credit enhancement is essentially purchasing the financial strength of a well capitalized company by getting that company to guaranty debts. The primary benefit of purchasing credit enhancement is that a start-up company such as FCC on its own would have to pay a substantially higher interest rate to a lender, but could obtain a much lower rate with a credit enhancement. FCC used the financing assistance of NHC to obtain tax-exempt industrial revenue bond financing or loans from private banks to construct the nursing home facilities. While NHC contributed its knowledge and expertise in locating acceptable lenders, much of the financing was located by FCC's officers, and all of the financing is a direct debt of FCC. As a result of NHC's credit enhancements, FCC was able to obtain interest rates of eight percent when the interest rate at that time, without the NHC credit support, would have been 13 1/2 percent. In return for providing such credit enhancements, NHC receives annually a guarantee fee of one percent of the outstanding indebtedness which is guaranteed by NHC. Also, NHC for assuming the initial risk involved in the start-up and development of the nursing home facilities, receives the following deferred, contingent guaranty fees: For facilities financed by non-tax-exempt financing, a right to 25 percent of the net proceeds in the event the facility is sold. No right exists to force the sale of any facility; and, as long as FCC does not sell the facility, no right to such contingent fee accrues; furthermore, no fee accrues upon the transfer of stock which occurs because of testamentary disposition to family members of McCarver. This contingent guaranty fee is speculative since it assumes, first, the facility will be sold and, second, that it will sell for more than the debt. For facilities financed with tax-exempt financing, based on bond counsel advice, NHC is to receive a fee accruing at 3 percent a year on the outstanding principal balance guaranteed by NHC, the payment of which fee is deferred until the year 1997. Payment of contingent guarantee/credit enhancement fees is common and accepted in the nursing home industry as additional compensation for the risk taken by the guarantor in connection with a new venture. FCC is not obligated to purchase credit enhancement assistance from NHC. Nothing contained in the Development Agreement prohibits or prevents FCC from obtaining financing without the NHC credit enhancements, and if such credit enhancements are not used, then the applicable annual fees do not have to be paid. FCC has actively sought to refinance its projects when interest rates were declining. The contingent guarantee fees are not an equity or ownership interest in FCC nor a control interest in FCC. To secure its loan guarantees NHC required that FCC grant subordinated mortgages on its facilities. In the event FCC defaults on debt payments guaranteed by NHC, and NHC is required to make the payments, FCC has a 120-day grace period, after notice, to repay NHC before NHC can declare FCC in default and exercise its foreclosure remedies. NHC also provided working capital loans to finance the start-up operation of the facilities; however such loans are capped at a maximum dollar amount. FCC is not limited to obtaining the working capital loans only from NHC and can seek other lenders. FCC has actively canvassed the market for cheaper working capital financing, if available. After the working capital loan from NHC is exhausted, FCC is required to provide all additional working capital needs for the individual nursing homes. The working capital loans with NHC had an original maturity of five years. Each were renewed for an additional five years. None of the working capital loans are demand loans. The working capital interest rate is 2-1/2 percent over the prime rate. An interest rate for working capital loans at two and one half percent over the prime rate is a competitive rate. The working capital interest rate does not exceed the price of comparable services that could be purchased elsewhere, and is in line with the charge for such services in the open market. The management services purchased from NHC are described in a Management Agreement, attached as Exhibit "C" to the Development Agreement, and include the following, among others: NHC recruits and recommends the administrator for each facility. Final selection of the administrator is made by McCarver. NHC conducts all collections for services provided at the facilities and manages the various banking accounts for the facilities. The bank accounts for each facility are FCC accounts owned by FCC. Checks on such accounts are written by the bookkeeper at each facility, who is an FCC employee, and are signed by the facility's administrator. While such accounts are the source for payment of NHC's management and guarantee fees, pursuant to the Management Agreement, NHC must first submit an invoice to the facility to initiate payment. NHC is prohibited from commingling such funds and handles such funds as a fiduciary. The management fee is six percent of gross revenue. A 6 percent fee is a competitive rate, and does not exceed the price of comparable services that could be purchased elsewhere. It is in line with the charge for such service in the open market. In addition, as further consideration for the services provided by the Development Agreement, NHC requires the following: The personal guaranty of McCarver A right of first refusal upon the sale of any facility to a third party. Covenants, contained in paragraph 5(a), (b) and (c), page 3 of the Agreement to Guarantee, that failure to pay the guaranty fee would result in a default and that such default would entitle NHC to commence foreclosure of subordinated mortgages recorded to secure its guaranty position. Covenant, contained in paragraph 6(a), page 3 of the Agreement to Guarantee, prohibiting the owner from incurring additional debt on the facility or conducting an equity offering, without retaining the monies raised for use in the facility. This provision is included to prevent the owner from stripping all the cash from the facility. Covenant contained in paragraph 14(b), page 12 of the Management Agreement, which would require any purchaser of the facility to assume the Management Agreement in the event of a sale while the debt guaranteed by NHC is still outstanding. Covenant contained in paragraph 4(c), page 8 of the Management Agreement, requiring the owner to maintain a reasonable operating reserve, which at a minimum will be three months operating costs. Extensive monitoring and evaluation of NHC's performance under the Management Agreement is performed by FCC's employees; McCarver on an ongoing basis monitors the patient care performance of NHC at the facilities by site visits and patient and family interviews. Wysocki extensively monitors NHC's financial performance, management of FCC's banking accounts, verifying the accuracy of any charges invoiced by NHC for guarantee, management and any other fees, and all other financial matters. Wysocki is located at NHC's offices in order to have ready access to financial data and to be FCC's watchdog over NHC's contract performance. FCC has delegated only the day-to-day operations of the facilities to NHC under the management agreement. FCC retains the power to direct the actions or policies of the facilities and corporation through the following provisions in the Management Agreement, among others: (1) review and approval of the selection of the administrator; (2) review and approval of all operating and capital expenditure requests above $5,000; (3) review and approval of all annual operating and capital expenditures budgets; (4) decision making on pursuit of certificate of need and other facility expansion decisions; and (5) setting of corporate philosophy and corporate mission. FCC does not lease any facilities from NHC, nor is FCC subject to any non-competition clause with NHC. The contractual agreements with FCC are not a substantial part of the business activity of NHC. The FCC beds managed by NHC totaled 1,578 beds in 15 facilities. In 1991, NHC owned or managed a total of 10,204 nursing home beds in 82 facilities; owned 17 home care programs and three retirement apartment complexes with 235 units, and NHC managed a total of 38 facilities for third parties. NHC's gross revenues were $184,612,000 and its gross revenues from FCC were approximately $4,000,000 plus the guarantee fee of 1 percent on the outstanding principal balance which equals at least $500,000 annually. NHI, a real estate investment trust (REIT) which is affiliated with NHC, in 1991 purchased by assignment the taxable financing on five of the FCC facilities representing about $14,000,000 of debt. NHI has outstanding 183 different loans and over $500,000,000 of assets. Therefore, the outstanding indebtedness of FCC represents approximately 2.5 percent of NHI's assets and loans. Within the nursing home industry there have developed expertise and economies of scale for construction and development services. It is possible for owners to purchase development services to take advantage of such expertise and economies of scale. It is not uncommon for the nursing home owner, to the extent he has incurred fees for architectural services and other up-front development costs, to receive reimbursement of such development fees from the project's financing. There are significant numbers of suppliers of management services in the nursing home industry and pricing is competitive and open among the suppliers. It is a common practice in the nursing home industry for owners to engage management companies to provide day-to-day operating services. Management companies are utilized by owners to access special expertise and economies of scale in management skills and talent, medical staff recruitment and retention, purchasing, quality control, regulatory compliance and reimbursement practices. It is a common contractual term in the industry for management companies to provide the administrator for the facility. It is a common contractual term in the industry for management companies, as part of their services to manage the operating accounts of the facilities. It is a common contractual term in the industry for companies that perform the management of a facility to require a right of first refusal upon the sale of the facility to third parties. It is a common contractual term in the industry for management agreements to require that the owner maintain operating account reserves. The Management Agreement entered into between FCC and NHC is not out of line with the standard in the industry. A typical ancillary service provided as part of the management services is working capital loans. The terms of the working capital loans between FCC and NHC are common provisions required by lenders of working capital funds. The purchase of credit enhancement services is a standard and common practice in the industry. When credit enhancement services are purchased, it is standard business practice for the lender to require the corporate shareholder to guaranty the financing. When credit enhancement services are obtained, it is normal business practice for the lender to secure the funds or credit advanced by default provisions, lien rights and foreclosure remedies, and standard grace periods for default are 5 days. When credit enhancement services are obtained, it is a normal contractual term to limit the ability of the purchaser to conduct additional financing by syndication or otherwise, which could result in the owner "cashing out" from the property, leaving the guarantor with a financially bankrupt asset. The Agreement to Guarantee between FCC and NHC is typical and contains terms and provisions common to comparable business transactions, as required by the open market for such services. The sale of financing and management services as a package is a standard industry offering. The documentation and terms for management and credit enhancement services have become standardized in the nursing home industry. The terms and pricing of the Development Agreement, Agreement to Guarantee, and Management Agreement are not excessive within the industry and do not exceed the price or terms of comparable services that could be purchased elsewhere. They are in line with the terms and charges for such services in the open market, and are not in excess of what is available to other organizations under circumstances comparable to FCC's. NHC is charging FCC the same or less for the services it is providing, pursuant to the Development Agreement and Agreement to Guarantee, as is provided to other comparable organizations it supplies such services. The services being obtained pursuant to the Development Agreement, Agreement to Guarantee and Management Agreement are not a basic element of patient care ordinarily furnished directly to patients by such institutions; delivery of patient care services is made only by FCC employees. All default provisions in the Development Agreement, Agreement to Guarantee, and Management Agreement are triggered by objective criteria by which default is to be determined. These provisions do not give NHC the ability to use the threat of default to coerce FCC into paying greater compensation or otherwise control the business decisions of FCC, or influence or direct the actions or policies of FCC, as would be the case if the loans and guarantees were in the form of demand notes. The Development Agreement and its Exhibits are within the standard in the nursing home industry. The Development Agreement and its Exhibits do not give NHC an ownership interest in FCC. The Development Agreement and its Exhibits do not give NHC control over FCC. Medicaid is a federal social welfare program, created as "Title XIX of the Social Security Act." It is administered by the states, and the method of reimbursement is generally set forth by each state. However, the states to a large extent utilize the regulations promulgated for the Medicare program for determining provider reimbursement issues. Florida has elected to participate in the Medicaid Program and has passed appropriate authorization statutes and regulations to promulgate the state plan required by the federal statutes. One component of the state plan established and implements a Florida Title XIX Long-Term Care Reimbursement Plan. The Plan for nursing houses has been adopted as Rule 59G-6.010, Florida Administrative Code. In the Plan, Florida does not have a separate "related party" rule for its Medicaid program, but relies upon the Medicare rule contained in 42 C.F.R. Section 413.17 and Chapter 10 of the Provider Reimbursement Manual (HIM-15). The applicable Medicare reviewing entities, applying the Medicare related party rules, have not found a related party relationship between FCC and NHC. FCC has submitted annually cost reports to the fiscal intermediary for the federal Medicare program. The fiscal intermediary questioned the nature of the relationship between FCC and NHC as to whether related parties exist. The fiscal intermediary requested all of the underlying documentation and explored the nature of the relationship between the parties, and repeatedly has found that a related party relationship does not exist. AHCA seeks to use generally accepted accounting principles (GAAP) to support its decision that FCC and NHC are related parties. The regulatory objective of 42 C.F.R. Section 413.17 is to assure that the government program pays no more than a provider's reasonable costs for services rendered. It achieves that by collapsing or combining the business operations of related parties to prevent such related parties from collaborating to increase the costs to the Medicare and Medicaid programs by internal transactions in which a related party's charges become the provider's costs for such services, facilities or supplies. HIM-15 recognizes and permits providers to purchase a bundle of services, including but not limited to, working capital loans and management services, without creating a related party transaction. HIM-15 permits providers, in lieu of employing in-house staff, to purchase management services, and authorizes reimbursement for a: full service management contract in which the management contractor provides a complete package of services, has overall day-to-day management responsibility for the operation of the provider, and is accountable only to the governing board (or delegated representative) of the provider. In order for the bundle of services between FCC and NHC to be considered as a control relationship, HIM-15 requires each of the following: (1) the management agreement would replace several of the key employees of FCC, (2) the working capital loans would be evidenced by demand notes, and (3) NHC would own and lease the nursing home facilities to FCC, with NHC having the sole right to cancel the lease. In this case, although NHC does provide, subject to FCC's approval, the nursing facility administrator, the working capital loans provided by NHC are not demand notes that afford control by economic coercion but, rather, are term loans having default provisions based on objective criteria with a 120-day period for cure. Similarly, the facilities are not owned by NHC and leased to FCC with a sole right of termination in NHC. Here, the converse is true, FCC owns the facilities and has the right to terminate NHC's management contracts. 42 C.F.R. Sections 455.100 and 455.101 are regulatory requirements relating to disclosure by providers and do not provide standards as to whether a related party relationship exists for reimbursement purposes. The "evil" which the related party regulations are designed to prevent is not occurring in the business relationship between FCC and NHC. FCC and NHC are not related parties pursuant to the applicable Medicaid statutes and rules.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED as follows: AHCA issue a final order finding that FCC and NHC are not related parties for the purposes of reimbursement under the Medicaid program. AHCA issue a final order rescinding its previous notices to FCC that it reimburse the Medicaid Program as a result of previous overpayments by the Medicaid Program. AHCA issue a final order rescinding the audit report which was issued for the years and facilities at issue, and re-audit those years based on the recommendation herein. DONE and ENTERED this 31st day of August, 1994, in Tallahassee, Florida. DANIEL M. KILBRIDE Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904)488-9675 Filed with the Clerk of the Division of Administrative Hearings this 31st day of August, 1994. APPENDIX The following constitutes my specific rulings, in accordance with section 120.59, Florida Statutes, on proposed findings of fact submitted by the parties. Proposed findings of fact submitted by Petitioner. Accepted in substance: paragraphs 1 (in part), 3 (in part), 8, 9, 10 through 57, 59-87, 88 (in part), 89-95. Rejected as subsumed, irrelevant or immaterial or argument: paragraphs 1 (in part), 2, 3 (in part), 4, 5, 6, 7, 58, 88 (in part). Proposed findings of fact submitted by Respondent. Accepted in substance: paragraphs 1, 3, 4 (in part), 5, 6, 7, 8, 9. Rejected as a conclusion of law: paragraph 2. Rejected as subsumed, irrelevant, immaterial or argument: paragraphs 10, 11. Rejected as against the greater weight of evidence: paragraphs 4 (in part). COPIES FURNISHED: Harold D. Lewis, Esquire Agency for Health Care Administration 325 John Knox Road Tallahassee, Florida 32303 Sam Power, Agency Clerk Agency for Health Care Adminsitration The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303 Gerald B. Sternstein, Esquire Frank P. Ranier, Esquire RUDEN, BARNETT, MCCLOSKEY, SMITH, SCHUSTER & RUSSELL, P.A. 215 South Monroe Street, Suite 815 Tallahassee, Florida 32301 Harold M. Knowles, Esquire KNOWLES & RANDOLPH 528 East Park Avenue Tallahassee, Florida 32347
Findings Of Fact 1. On or about April 25, 2006, Heartland Services of Florida, Inc. withdrew its CON application No. 9846 and then filed a Notice of Voluntary Dismissal of its Petition at DOAH, attached hereto as Ex. A. 8. On or about May 01, 2006, Hospice of the Palm Coast, Inc. withdrew its CON application No. 9844 and then filed a Notice of Voluntary Dismissal of its Petition at DOAH, attached hereto as Ex. B. 3. On or about June 1, 2006, North Central Hospice, Inc. (“NCFH”), and Hospice of Citrus County, Inc. (“HOCC”), filed a Joint Motion for Remand, based upon serious settlement negotiation, attached hereto as Ex. C. 4, On or about April 28, 2006, the Administrative Law Judge assigned to the case issued an Order Closing File based on the Notice of Voluntary Dismissal (Heartland Services of Florida, Inc.), attached hereto as Ex. D. 5. On May 03, 2006, the Administrative Law Judge assigned to the case issued an Order Closing File based on the Notice of Voluntary Dismissal (Hospice of the Palm Coast, . Inc.), attached hereto as Ex. E. 6. On June 08, 2006, the Administrative Law Judge assigned to the case issued an Order Remanding without Prejudice based on North Central Hospice, Inc.’s (“NCFH”), and Hospice of Citrus County, Inc.’s (“HOCC”), Joint Motion for Remand, attached hereto as Ex. F. 7. On or about December 29, 2006, North Central Hospice, Inc. (“NCFH”), and . Hospice of Citrus County, Inc. (“HOCC”), withdrew their Petitions with respect to CON application No. 9843 and then filed a Notice of Voluntary Dismissal of its Petition at DOAH, attached hereto as Ex. G. 8. The Agency hereby adopts and incorporates by reference the attached Notices of: Voluntary Dismissals; Order Closing Files, Joint Motion for Remand, and Order Remanding Without Prejudice. 9. There are no remaining disputed issues of fact or law.
