The Issue At issue in this proceeding is whether Respondent committed the offense set forth in the Administrative Complaint and, if so, what penalty should be imposed.
Findings Of Fact The parties Petitioner, Department of Health, Division of Medical Quality Assurance, Board of Medicine (Department), is a state agency charged with the duty and responsibility for regulating the practice of medicine pursuant to Section 20.43 and Chapters 455 and 458, Florida Statutes. Respondent, Pedro Rene Benitez, M.D., is, and was at all times material hereto, a licensed physician in the State of Florida, having been issued license number ME 53453. On or about November 12, 1997, a true bill was returned by a grand jury in the United States District Court, Southern District of Florida, Case Number 97-574-Cr-LENARD, which charged Respondent, as well as numerous co-defendants, with, inter alia, conspiracy to defraud the United States by making false claims to the United States Department of Health and Human Services in its administration of the Medicare program, contrary to the provisions of 18 U.S.C. § 371.1 Pertinent to this case, Count I of the Superseding Indictment charged Respondent, together with eighteen other persons or organizations, as follows: COUNT I (CONSPIRACY: 18 U.S.C. § 371) From in or about January 1991, the exact date being unknown to the Grand Jury, and continuing through in or about October 1993, in Dade County, in the Southern District of Florida and elsewhere, the defendants . . . did knowingly and willfully combine, conspire, confederate, agree, and reach a tacit understanding with each other and with persons known and unknown to the Grand Jury, to commit offenses against the United States, as follows: (a) to defraud the United States by impeding, impairing, obstructing, and defeating, through deceitful and dishonest means, the lawful government functions of the United States Department of Health and Human Services (HHS) in its administration of the Medicare program, in violation of Title 18, Unites States Code, Section 371. . . . GENERAL ALLEGATIONS At all times material to this Indictment: THE MEDICARE PART A PROGRAM AND REGULATIONS The Medicare program was a Federal program that helped pay for health care for the aged, blind and disabled. The Medicare program was administered by HHS, through its agency, the Health Care Financing Administration ("HCFA"). Medicare, through the Medicare "Part A" program, covered certain eligible home health care costs for medical services provided by "home health agencies", commonly referred to as "providers", to persons who qualified for Medicare and who required home health services because of an illness or disability that caused them to be homebound. . . . HCFA contracted with private insurance companies to administer the Medicare Part A program throughout the United States. In the State of Florida, HCFA contracted with Aetna Medicare Administration of Clearwater ("AETNA"). As administrator, AETNA was to receive, adjudicate and pay claims submitted by home health agencies and providers under the Part A program. * * * Under the Medicare Part A program, home health agencies possessing the required CON were reimbursed for reasonable costs and overhead expenses incurred for direct patient care. The Medicare Part A program reimbursed 100% of the allowable charges for participating agencies providing home health care services only if the patient: (a) was confined to the home; (b) was under the care of a physician who determined the need for home health care and set up a written home health plan, known as a Home Health Certification and Plan of Treatment; and (c) was in need of skilled nursing care on an intermittent basis, required physical or speech therapy, or had a continuing need for occupational therapy. Medicare Part A regulations further required home health agencies providing services to Medicare patients to maintain complete and accurate medical records reflecting the medical assessment and diagnoses of their patients, as well as records documenting actual treatment of the patients to whom services were provided and for whom claims for reimbursement were submitted by the home health agency. These medical records were required to be sufficiently complete to permit Medicare, through AETNA, to review the appropriateness of Medicare payments made to the home health agency under the Part A program. Among the written records necessary to document the appropriateness of home health care claims submitted under Part A of Medicare was a Home Health Certification and Plan of Treatment (HCFA Form 485) (hereinafter referred to as "POT"), signed by an attending physician certifying that the patient was confined to his or her home and was in need of the planned home health services. Moreover, any substantial changes to the POT, or the provision of any home health services beyond a two-month (62 days) period from the date of the original certification, required a re-certification by the attending physician of the need for these changed or additional home health services. Additionally, Medicare Part A regulations required home health agencies to maintain medical records of each visit made by a nurse or home health aide to a patient. The record of a nurse's visit was required to describe, among other things, any observed significant signs or symptoms, any treatment and drugs administered, any reactions by the patient, and any changes in the patient's physical or emotional condition. These written medical records generally were created and maintained in the form of "skilled nursing notes" and "home health aide observations." * * * HOME HEALTH AGENCIES INVOLVED Defendant MEDERI OF DADE COUNTY, INC. ("MEDERI DADE COUNTY") was a home health care provider, incorporated in the State of Florida ("Florida") and certified by the Florida Agency for Health Care Administration (AHCA). Defendant MEDERI DADE COUNTY was located in Coral Gables, Florida and possessed Medicare Provider Number 10-7087. Mederi of Miami Lakes, Inc. ("Mederi Miami Lakes") was a home health care provider, certified by the Florida Division of Health and Quality Assurance. Mederi Miami Lakes, which was a branch of defendant MEDERI DADE COUNTY, was located in the Miami Lakes area of Dade County, Florida and possessed Medicare Provider Number 10-7380. THE DEFENDANTS * * * * * * 43. Defendant PEDRO RENE BENITEZ was a resident of Dade County, Florida and a licensed physician. * * * PURPOSE OF THE CONSPIRACY 53. It was the purpose and object of the conspiracy for the defendants to enrich themselves by fraudulently inducing HHS to pay defendant MEDERI DADE COUNTY and Mederi Miami Lakes millions of dollars in Medicare Part A reimbursements for purportedly legitimate home health care claims and expenses, which claims and expenses the defendants knew to be false, fictitious, fraudulent and otherwise non-reimbursable in that, as the defendants well knew, the services were not actually provided or were provided to persons who the defendants knew were not qualified to receive Medicare home health care benefits. MANNER AND MEANS OF THE CONSPIRACY The manner and means by which the defendants sought to accomplish the purpose and object of the conspiracy included the following: * * * . . . defendants SUSAN REGUEIRO, LEOPOLDO PEREZ, JORGE PEREZ, MANUEL DIAZ, NORA COSTA, JESUS RODRIGUEZ, ERNESTO MONTANER, NILDA MIRANDA and RAUL CABRERA participated in the recruitment of licensed physicians, including defendants EDUARDO CUNI, PEDRO RENE BENITEZ, AGUSTIN GRANDA, JESUS OLIVA and JORGE MORENO, to sign fabricated and fictitious POT forms in exchange for cash and other financial benefits. In addition to directing the fabrication of POT forms, defendants SUSAN REGUEIRO and LEOPOLDO PEREZ, with the knowledge and concurrence of defendants JORGE PEREZ, MANUEL DIAZ, NORA COSTA, JESUS RODRIGUEZ, ERNESTO MONTANER, EDUARDO CUINI, PEDRO RENE BENITEZ, AGUSTIN GRANDA, JESUS OLIVA and JORGE MORENO, used employees of defendant MEDERI DADE COUNTY and Mederi Miami Lakes to generate the following fictitious supporting documentation, including: (a) records necessary to support the payments made to the nursing groups by defendant MEDERI DADE COUNTY and Mederi Miami Lakes for the claimed visits, including billing sheets, final matched itinerary/bill reports, and group batch worksheets; and (b) records necessary to support defendant MEDERI DADE COUNTY's and Mederi Miami Lakes' billing of those visits to Medicare. * * * 68. Defendants SUSAN REGUEIRO and LEOPOLDO PEREZ, with the knowledge and concurrence of defendants JORGE PEREZ, MANUEL DIAZ, NORA COSTA, JESUS RODRIGUEZ, ERNESTO MONTANER, EDUARDO CUNI, PEDRO RENE BENITEZ, AGUSTIN GRANDA, JESUS OLIVA, JORGE MORENO, JESUS PUNALES, ELISA GAVILLA, LYDIA GUADALUPE, JULIA GARCIA and NILDA MIRANDA, used employees of defendant MEDERI DADE COUNTY and Mederi Miami Lakes to process and submit to Medicare the false claims for home health visits originating from the nursing groups. * * * OVERT ACTS In furtherance of the conspiracy, and to accomplish its objects, at least one of the co-conspirators committed or caused to be committed, in the Southern District of Florida, and elsewhere, at least one of the following overt acts, among others: * * * CREATION OF FALSE DOCUMENTATION BY MEDERI EMPLOYEES * * * 48. On or about June 4, 1992, defendant PEDRO RENE BENITEZ caused his signature to be affixed on a POT form for a patient identified by the initials N.J. * * * On or about December 14, 1992, defendants SUSAN REGUEIRO, LEOPOLDO PEREZ, JESUS RODRIGUEZ and PEDRO RENE BENITEZ caused an employee of Mederi Miami Lakes to create a POT for a patient identified by the initials F.D. On or about December 14, 1992, defendants SUSAN REGUEIRO, LEOPOLDO PEREZ, JESUS RODRIGUEZ and PEDRO RENE BENITEZ, caused the signature of a licensed physician, defendant PEDRO RENE BENITEZ, to be affixed to a POT form for F.D. On or about December 14, 1992, defendants SUSAN REGUEIRO, LEOPOLDO PEREZ, JESUS RODRIGUEZ and PEDRO RENE BENITEZ caused employees of Mederi Miami Lakes to complete nineteen (19) false "skilled nursing notes" pertaining to F.D. * * * SUBMISSION OF FALSE CLAIMS * * * 93. On or about October 14, 1992, defendants SUSAN REGUEIRO, LEOPOLDO PEREZ, PEDRO RENE BENITEZ and LYDIA GUADALUPE caused an employee of Mederi Miami Lakes to submit a false home health claim in the amount of $2,700.00 to Medicare, through Aetna, pertaining to a patient identified by the initials M.G. (Emphasis added.) The false documentation Respondent made, presented and filed, or caused to be made, presented and filed, with the United States Department of Health and Human Services, through AETNA, for Medicare reimbursement for home health care visits resulted in a loss to the government with regard to patient N. J. of $500.00, with regard to patient F. D. of $4,600.00, and with regard to patient M. G. of $2,700.00, for a total loss of $7,800.00. For the creation of such false documentation, Respondent averred, at hearing, that he was paid "75.00 per beneficiary." (Transcript, page 22.) On April 27, 1998, consistent with a plea agreement Respondent had entered into with the United States Attorney for the Southern District of Florida (Petitioner's Exhibit 3), Respondent entered a plea of guilty to Count I of the Superseding Indictment ("Conspiracy to Defraud the United States, by making false claims to the [United States Department of] Health and Human Services in its administration of the Medicare program," contrary to 18 U.S.C. § 371), and on April 19, 1999, Respondent was adjudicated guilty of such offense. (Petitioner's Exhibit 4.) For such offense, given his cooperation with the United States attorney, discussed infra, Respondent was given a split sentence of 14 months, consisting of a term of imprisonment of 7 months, followed by 7 months of participation in the Home Detention Electronic Monitoring Program. Upon release from imprisonment, Respondent was to serve a term of 2 years on supervised release. Special conditions of supervision imposed by the judgement of conviction included the following: Effective immediately, the defendant shall surrender his medical license to the U.S. Probation Office. The U.S. Probation Office shall submit the license to the appropriate regulatory agency. The defendant shall not serve as a doctor or be employed or act in any capacity at any type of medical services, whether it be as a doctor, physician assistant or an administrator. The defendant shall not have any interest, directly or indirectly, in any medical businesses, whether it be medical services or medical supplies. The defendant shall notify the State Board of Medicine of his conviction and sentence in this case, and of the fact that his medical license has been taken by this Court. The defendant shall not participate in any Medicare/Medicaid billing procedures for any medical facility or program. Respondent was also ordered to pay, individually, restitution in the amount of $150,000.00 to the Palmetto Government Benefits Administration.2 The remaining charges (counts) against Respondent were dismissed (consistent with the plea agreement) on motion of the United States Attorney. On May 17, 1999, Respondent surrendered to the United States Marshal for the Southern District of Florida for commitment to the United States Bureau of Prisons to be imprisoned for a term of 7 months. Respondent apparently completed that term in or about December 1999, and as of the date of hearing (February 8, 2000) was serving his 7-month period of participation in the Home Detention Electronic Monitoring Program. According to Respondent, his term of supervised release (probation) is scheduled to end December 12, 2001. Circumstances related to aggravation or mitigation of any penalty Respondent has been actively engaged in the practice of medicine in the State of Florida from his initial licensure on June 22, 1988, until the Department suspended his license (on an emergency basis, as a consequence of the pending federal charges) on April 6, 1999.3 During such period, in addition to his active practice, Respondent volunteered his services (from 1998 until his license was suspended) two or three days a month to the Dade County Chapter of the American Red Cross; volunteered his services for 5 or 6 years as a member of the medical staff of "Camilla's House," an organization serving the homeless; and volunteered his services to the American Red Cross for treatment of the victims of Hurricane Andrew. Respondent has never previously been disciplined by the Board of Medicine, and notwithstanding his conviction, continues to enjoy the support of former patients and colleagues. With regard to the Mederi case, Respondent cooperated with the United States attorney and the Federal Bureau of Investigation, albeit not until investigators discovered (3 years after the events) his participation in the conspiracy, and confronted him with their findings; it appeared in his best interest to cooperate. Notwithstanding, consistent with the terms of his plea agreement, Respondent provided truthful information, testified on behalf of the government at trial, and proved to be a key witness in resolving the case favorably for the government. With regard to the strictures placed on his conduct under the terms of conviction, the proof demonstrates Respondent has complied with the Special Conditions of Supervision. Indeed, during the term of his imprisonment, Respondent was formally excluded from eligibility to participate in the Medicare, Medicaid, and all Federal health care programs; was barred from receiving payment, directly or indirectly, from the Federal Employees Health Benefit Program; and, surrendered his controlled substances privileges (Drug Enforcement Administration Certificate of Registration). As for restitution, there is no proof of record that Respondent has made any payment toward satisfaction of such obligation; however, it is also noted that Respondent was imprisoned from May 17, 1999, to on or about December 12, 1999, and, consequently, unemployed. As for his future plans, Respondent, given his training and experience, desires to resume the practice of medicine upon completion of his term of supervised release (December 12, 2001), provided the Department does not further restrict his licensure status.4 Such practice will, according to Respondent, allow him an opportunity to properly support his family,5 and it would also appear likely that such employment would accord Respondent an opportunity to satisfy, in whole or part, his obligation to pay restitution for his criminal offense.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be rendered adopting the foregoing Findings of Fact and Conclusions of Law, and which, for the violation found, imposes an administrative fine of $10,000.00; orders compliance with all terms of the judgment of conviction; and continues the suspension of Respondent's license for a term of 2 years following successful completion of his term of supervised release, followed by a 2-year period of probation on such terms and conditions as the Board may deem appropriate. DONE AND ENTERED this 25th day of May, 2000, in Tallahassee, Leon County, Florida. WILLIAM J. KENDRICK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 25th day of May, 2000.
Findings Of Fact 1-3. Accepted as background information Accepted Accepted as background information 6-8. Accepted Adopted in Finding of Fact 23 Accepted but subordinated to Finding of Fact 41 11-12. Adopted in Finding of Fact 23 13. Adopted in Findings of Fact 14 and 30 14-15. Adopted in Finding of Fact 27 No such numbered Finding of Fact Subordinate to Finding of Fact 43 Accepted Adopted in Finding of Fact 24 20-24. Adopted in Finding of Fact 26 25. Subordinate to Finding of Fact 41 26-39. Accepted 40-42. Subordinate to ultimate issue 43-78. Subordinate to Finding of Fact 43 79. Accepted and adopted in Finding of Fact 41 80-101. Adopted in Finding of Fact 42 or subordinate thereto RULINGS ON PROPOSED FINDINGS OF FACT SUBMITTED BY PERSONNEL POOL OF ORANGE COUNTY, INC. Accepted as background information Subordinate to Findings of Fact 15-21 Adopted in Finding of Fact 31 Adopted in Finding of Fact 32 Accepted in Finding of Fact 31 Accepted in Finding of Fact 40 Accepted in Finding of Fact 32 Accepted in Finding of Fact 31 33 11. Accepted in Finding of Fact 34 12-13. Accepted in Finding of Fact 35 Accepted in Finding of Fact 36 Accepted in Finding of Fact 37 16-17. Subordinate to Findings of Fact 31-37 18-19. Accepted in Finding of Fact 40 20-23. Subordinate to Finding of Fact 43 24-26. Accepted in Finding s of Fact 38 and 39 27-29. Subordinate to Findings of Fact 31-37 30-42. Accepted as background 43-44. Subordinate to Finding of Fact 43 45-63. Rejected as immaterial in light of DOAH Case No. 85-1377R 64-77. Adopted in Findings of Fact 42-44
Recommendation In light of the forgoing Findings of Fact and Conclusions of Law, therefore, it is RECOMMENDED that Certificate of Need Number 3746 be issued to Winter Park Memorial Hospital Association, Inc. Certificate of Need Number 3474 be issued to Hospice of Central Florida, Inc. and Certificate of Need Number 3475 be issued to Personnel Pool of Orange County for operation of home health agencies in Orange and Seminole Counties, Florida. RECOMMENDED this 21st day of April, 1986, at Tallahassee, Florida. ARNOLD H. POLLOCK, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 21st day of April, 1986. COPIES FURNISHED: Thomas D. Watry, Esquire 1200 Carnegie Building 133 Carnegie Way Atlanta, Georgia 30303 Sydney H. McKenzie III, Esquire Martin J. Edenfield, Esquire 2700 Blair Stone Road, Suite C Post Office Box 6507 James M. Barclay, Esquire Jay Adams, Esquire Suite 200 215 East Virginia Street Tallahassee, Florida 32301 Harden King, Esquire Assistant General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301 William Page, Jr., Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301 APPENDIX The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this ease: RULINGS ON PROPOSED FINDINGS OF FACT SUBMITTED BY HOSPICE OF CENTRAL FLORIDA, INC. 1-3. Accepted as background information 4. Accepted in Finding of Fact 41 5-6. Rejected as immaterial in light of ruling in DOAH Case No. 85-1377 . Accepted in Finding of Fact 43 Subordinate to other Findings of Fact Accepted in Finding of Fact 41 No such proposed Finding of Fact Accepted in Finding of Fact 41 Rejected as immaterial in light of ruling in DOAH Case No. 85-1377. Accepted in Finding of Fact 43 Accepted in Finding of Fact 43 15-19. Subordinate to Finding of Fact 43 Accepted in Finding of Finding of Fact 15 Accepted in Finding of Fact 15 22-26. Accepted in Findings of Fact 15-21 Adopted in Findings of Fact 15-21 Subordinate to Finding of Fact 41
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
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 The issues presented in this case concern the entitlement of Vari-Care, Inc., d/b/a Hospitality Home Health, Inc.(Vari-Care) and A All Care Home Health Agency (A All Care) to be granted a certificate of need to provide home health services in HRS Service District IX. In this regard there are two basic issues. The first issue concerns the question of whether there is a need for the provision of additional home health services through the recognition of the contending applicants for certificate. The second issue concerns the matter of the comparative or competitive review of the credentials of the two applicants who vie for this recognition. These matters are considered in keeping with Section 381.494, Florida Statutes, and the related provisions of Section 10- 5.11, Florida Administrative Code. The recognition would be as envisioned in the definition of home health care agency as set forth in Section 400.462(2) Florida Statutes. EXHIBITS In furtherance of its presentation Petitioner, Vari-Care, presented twelve exhibits which were received. A All Care, as Petitioner, presented eight exhibits which were received. HRS offered one exhibit and it was received. Intervenor, Palm Beach Regional Visiting Nurse Association, Inc. (Visiting Nurse) offered five exhibits and they were received. Intervenor A Associated Home Health Agency, Inc. (A Associated), offered two exhibits and they were received.
Findings Of Fact Vari-Care and A All Care made application to the Department of Health and Rehabilitative Services (HRS) for the grant of certificates of need to establish home health care agencies in Palm Beach County, Florida, to serve residents in that locale. Following review of these applications, the department noticed the applicants of the intent to deny the applications. In the face of this rejection, the applicants made timely request for an administrative hearing to resolve the question of their entitlement to the grant of certificates of need. In view of the fact that the applications had been reviewed and considered by the department in the same "batch", the hearing had as its purpose the question of the need for additional home health care delivery through the efforts of these applicants and the matter of comparison of Petitioners' relative merits as would-be home health care providers. Several entities requested intervention, among them Florida Association of Home Health Agencies. That agency was denied intervention. Intervention was afforded to Palm Beach Regional Visiting Nurse Association Inc., and A Associated Home Health Agency, Inc., both of whom are holders of certificates to provide home health care services in Palm Beach County, Florida. In furtherance of its request, Vari-Care has established a separate corporation in the state of Florida to operate its intended home health agency. This corporation is known as Vari-Care, Inc., d/b/a Hospitality Home Health. At present Vari-Care offers health care through three nursing homes in the state of Florida, all of which are located in Palm Beach County. In addition, Vari-Care is a home health care provider in Alabama and Arizona. If recognized to provide home health care services through the certification process, Vari-Care proposes to offer services primarily for the benefit of those patients who are being discharged from its three nursing homes located in Palm Beach County. The nursing homes in question carry a superior rating. At the point of hearing, five to ten patients a week were discharged from the several nursing homes operated by Vari-Care. Those patients are presently receiving home health care services from other home health care providers and the administration of Vari- Care has not experienced difficulty in arranging for the delivery of that care for the benefit of the patients discharged from the Vari-Care facilities. Vari- Care contends that if it were allowed to follow-up the care of the patients discharged from the nursing homes it would promote a "continuum of care" tending to improve the quality of care and relieve patient anxiety. In this regard Vari-Care would hope to use some of the professional staff in the nursing homes to offer to deal with the needs of the patient who was homebound following discharge. The testimony tended to establish that this facet of continuity of care is tenuous at best. It is more likely that separate health care professionals would be involved with the patient in the nursing home and home setting. It would appear that the idea of "continuum of care" will only transpire to the extent of the affiliation between the nursing homes and the home health care arm of Vari-Care. Initially Vari-Care had indicated that it would have its base of operation in the nursing home facility. That position was amended and at the point of hearing the Vari-Care application contemplated the establishment of a separate operating facility for the benefit of the home health care business. Out of that facility Vari-Care would provide skilled nursing, physical therapy, occupational therapy, social services, meals on wheels and transportation services. Finally, Vari-Care in its operation does not preclude the possibility of attracting other patients who are not being discharged from its nursing homes, in marketing its home health care delivery. A All Care is a corporation in which Julie Monahann is the sole stockholder. At present Ms. Monahann is sole stockholder of A All Care Nursing, of Boynton Beach, Florida, which operates a private-duty nurse registry in the southern part of Palm Beach County. That registry has available approximately 200 nurses. Ms. Monahann contemplates the establishment of a certified home health care operation as an outgrowth of her present business. Not being the holder of a certificate of need, Ms. Monahann has been unable to serve patients who are the recipients of Medicare and wishes to have that opportunity. Provision of this care would be through some of the same nurses who are listed in the registry for Ms. Monahann's private duty nursing business. In pursuing the application of certificate of need, Monahann has been influenced by the erroneous perception that no other certified home health care provider was directing its efforts to serving homebound patients in south Palm Beach County. As stated, presently there are a number of licensed and certified home health care providers operating in Palm Beach County. Those agencies offer a comprehensive range of home health services. Visiting Nurse operates throughout Palm Beach County with its parent office in West Palm Beach and satellite offices in Jupiter, Boynton Beach and Belle Glade. In addition to serving Medicare and Medicaid patients, this home health care provider offers services to the indigent. It is the intention of the Visiting Nurse to move their Boynton Beach operation to Boca Raton. Should either of the applicants be recognized by the grant of a certificate of need, Visiting Nurse would be substantially affected. In the recent past, Visiting Nurse has experienced the introduction of additional home health care service by other home health care providers operating in Palm Beach County and it has tended to decrease the number of patient visits provided by Visiting Nurse and to negatively impact cost, by requiring an increase in cost of the provision of a home health care visit. The effect of a drop in the number of home visits and increase in cost impacts the quality control of Visiting Nurse in such matters as the ability to provide in-service education and provide the services of home care coordinators. Home care coordinators assist in the provision of continuity of care between the referring sources and the patient in the home. Finally, a diminution in home visits and increase in cost would adversely affect the treatment of indigent patients in the home, in that Visiting Nurse is a significant provider of indigent care to those patients in that category and pressures upon the financial standing of the provider would decrease the care available to indigent patients. A Associated, intervenor, serves Palm Beach County from two offices, one in Jupiter and the other in Lake Worth. This organization utilizes employee teams who live in a particular area of Palm Beach County where the patients are found. This would include the area of Boca Raton and Delray Beach which is found in south Palm Beach County, areas where both petitioners would place emphasis. With the advent of a new home health care agency in 1983, which is known as Coastal, A Associated experienced a decrease in patient referrals and an increase in the cost per visit, due to the need to fund the same amount of overhead in the face of a lesser number of visits. Given the previous experience with Coastal, the introduction of the two applicants into the marketplace in south Palm Beach County would substantially affect the rights and opportunities of A Associated and as a consequence patient rights. All told, there are nine licensed home health agencies serving Palm Beach County and approximately thirteen licensed home health agencies operating within District IX, which includes Palm Beach County and counties adjacent to Palm Beach County. Some agencies in Palm Beach County maintain multiple offices to facilitate the delivery of the health care. Those agencies include Visiting Nurse with its four offices, A Associated with its two offices, Community Home Health with two offices, A Visiting Redi Nurse with three offices, and Home Care of the Palm Beaches with two offices. Mederi Home Health Services has one office in Palm Beach County. A recent addition, Salhaven Home Health Care, licensed to operate as a home health agency will operate in the Jupiter area of Palm Beach County. Its services were to be provided within a month of the date of final hearing in this cause. Gold Coast Home Health Services provides home health service in south Palm Beach County from its Broward county office which is near the Broward County/Palm Beach County line and has operated in Palm Beach county since 1970. Coastal Home Health Services also referred to as Associated Home Health Services is presently operating in Palm Beach County, though it has its office in Broward County. Of these agencies, only Salhaven and Gold Coast decline to operate in the entire Palm Beach County area. Gold Coast operates from the southern boundary of the County to a central area. The aforementioned home health agencies are duly licensed and certified to provide home health care to Medicare recipients and as such, present alternatives to the services which the applicants would offer to Medicare patients within the Palm Beach county community. The home health care providers who service HRS District IX and in particular Palm Beach County, have the capacity to meet need for home health services in the questioned service area. In addition, those home health care agencies are capable of meeting foreseeable increases in the need for additional home health services either within their present resources or through expansion of resources. Neither adjustment would reduce their effectiveness or negatively impact cost considerations and quality of care. A number of patient referral agencies, i.e., nursing homes and hospitals, in the person of officials, provided testimony in the course of the hearing and did not indicate that placement of Medicare patients in need of home health care presented a problem in Palm Beach County. There is an ongoing liaison between the placement agencies such as hospitals and nursing homes and the several home health care providers serving Palm Peach County who offer assistance to homebound Medicare patients. In that context, there is a vigorous competition between the home health care providers to serve Medicare patients in need of home health care delivery. The vigor of the competition is evidenced by the experience of MederiInc., which has operated out of its Delray Beach office since September 1983, and has been disappointed in the number of patient referrals. This is attributable to the active competition between the home health care providers. As a consequence, Mederi has a high percentage of unused capacity without increasing administrative overhead, approaching the ability to accommodate fifty percent more patients. In fact, Mederi could provide twenty percent more home health care visits without increasing its direct patient care staff. The proposal for the applicants related to patient costs are not advantageous when compared to those costs related to the present home health care providers. The present Medicare home health providers in Palm Beach County are well within the "cost caps" established by the Medicare program. On the subject of patient cost for Medicare patients, there is a wide variety of cost per visit depending upon the given home health care provider; however, none of those costs are as high as those proposed by the applicants in this case. The Medicare reimbursement program is required to reimburse the home health care provider who holds a certificate of need and license on the basis of reasonable operating costs, provided those reasonable operating costs are less than the charges made by the agency for the services and provided the Medicare reimbursement cost implementations, "cost caps", are not exceeded. Vari-Care by its proposal would exceed the present "cost caps" and adversely affect the medicare program by the imposition of such costs. The applicants do not afford any unique services in the home health care setting. In fact, the applicants' provision of care does not rival the level of sophistication of some of the ongoing providers. Presently Community Home Health is receiving patient referrals from the three nursing homes of Vari-Care and is providing the Medicare home visits to those patients at a cost per visit much less than contemplated by Vari-Care. Actually, those costs per visit by Community are the lowest rates mentioned by any provider of home health care for Medicare patients in Palm Beach County. In the course of the hearing, one of the attempts to measure the question of the need for additional home health care delivery for Medicare patients was described in the terms of "unmet need". There being no established methodology by the department to measure the entitlement of the applicants to the grant of a certificate of need, the concept of "unmet need" provides a valuable insight in deciding the application question on this occasion. Using this measurement, no indication has been given which would tend to identify patients within Palm Beach County or in the overall HRS District IX, who are not receiving needed home health care services. Moreover, there is sufficient capacity within the present home health care providers to meet the need for home health care delivery for Medicare patients within the planning horizon contemplated by the applications under consideration. In a related vein, there does not appear to be a body of Medicare recipients whom the home health care providers have neglected, based upon a belief that the patients were inaccessible to the home health care professionals who deliver the services. The present home health care providers have located their central and satellite offices to cover Palm Beach County completely and in particular south Palm Beach County where the two applicants would establish their offices. The hours of operation of the present home health care providers are satisfactory and the applicants would not offer hours of operation which are significantly different. In addition, there is no indication that there is a lack of awareness on the part of the patients on the topic of availability of home health care services, quite the contrary, an intricate mechanism is in place which promotes the necessary referrals of those patients to home health care providers to assist the patient in the home setting. An example of this mechanism is seen in the broad-based referral arrangements between a number of hospitals and the home health providers in Palm Beach county or in some instances specific agreements between hospitals and a given provider. This is based upon the information presented at the hearing as to arrangements between Delray Community Hospital, St. Mary's, Humanna, Good Samaritan, Belle Glade Community, and Bethesda Hospitals, and the various providers. On the associated question of quality of care, as in the instance of availability of care there is no indication that the quality of care received by the patients in the home setting is lacking. If this problem existed, one would expect a hue and cry by the public or agencies charged with the function of monitoring quality of care. Such an upheaval has not been shown to exist in Palm Beach County related to the delivery of home health care to the Medicare patients. The only actual research in this regard was done by Delray Community Hospital and its informal survey did not indicate displeasure with the quality of home health care being received by its patients who were Medicare recipients. All home health care providers operating in Palm Beach County seem to have an awareness of the need to deliver quality care and have involved themselves in programs related to in-service training and quality assurance. Vari-Care in its nursing home experience in referring patients for home health care delivery has not experienced complaints from its patients related to the quality of home health care. The present home health care providers are mindful of the need for fiscal restraint given the breadth of competition and have instituted policies to promote efficiency, to include the utilization of contract professionals who are not full time employees of those providers. In carrying out the administration of its operations, the home health care providers in Palm Beach County are aware of the "cost caps" established by Medicare and do not exceed them. Neither has there been any indication that those providers have run afoul of other regulatory provisions of the Medicare program in efforts to deliver the Medicare services in the home. By contrast, the present applicants do not seem well apprised of the requirements of Medicare. At present, there are a number of demonstration projects by health maintenance organizations operating in Palm Beach County. Those projects include the delivery of home health care. It has been shown that patients within the health maintenance organization receive home health services, who ordinarily would be entitled to Medicare reimbursement. The effect of this arrangement is to decrease home visits by the home health care providers in Palm Beach County. On the other hand, some of the health care agencies have experienced problems where services were delivered to patients who were members of health maintenance organizations and the health maintenance organization refused to reimburse the home health agency for services rendered to members of the health maintenance organization. It is not certain what the future holds for delivery of home health care through health maintenance organizations, but at present the development tends to diminish the patient pool from which the home health care providers draw their clientele. While both applicants have sufficient financial ability to begin operation as a home health care provider, the short and long-term financial feasibility of the projects is not sound. Vari-Care has overestimated the amount of reimbursement that it hopes to receive from Medicaid by projecting a return of $55 per visit when it would only be entitled to $16, promoting a deficit of some $40,000. It also projects a charge for Medicare visits at $55 when the Medicare "cost cap" is $50 to $52, promoting a deficiency of at least $3 per visit and a total deficiency of some $24,000. A All Care has no established referral base such as the nursing homes referrals contemplated by Vari-Care, and its financial feasibility is questionable given that circumstance. Finally, both applicants face a competitive environment in which their survival and that of the on-going home health care providers, is jeopardized should the applicants be recognized by the issuance of certificates of need. Dr. Donald Davis, an expert in health care planning, testified in behalf of A All Care. He correctly identifies the fact that home health care services are labor intensive as opposed to an undertaking which requires extensive capital expenditure. Consequently, from his point of view, when competition is great in the home health care setting, patient cost will be lower and a more efficient system will evolve forming a basis for the recognition of additional home health agencies. Dr. Davis was also impressed with the fact that a lower number of home health care providers per capita were found in Palm Beach County as contrasted with Dade and Broward counties, in Florida, when the number of home health care providers are compared to the overall population in those counties, which by his observation might be an indication of the need for additional home health care providers. Here he did not contend that there is some optimum number of patients or visits which can be offered by a given home health care provider. Davis had misunderstood the number of home health agencies serving Palm Beach County in advancing his remarks. His belief was to the effect that only six Medicare home health agencies operated in Palm Beach County, instead of the nine that wore actually there. By comparison, Daniel Sullivan, who testified as a health planning expert, called as a witness by Visiting Nurse, felt that in the present environment, increased competition would result in increased costs to patients. He believes that the present providers can serve additional patients at a lower cost than the applicants could with the advent of the recognition of the two applicants. Sullivan stated that if the number of visits to patients were sufficiently reduced, as would occur when the applicants were recognized, the cost per visit would increase. Having considered the opinions of Davis and Sullivan, Sullivan is found to be the more compelling witness arid his opinions as set forth are accepted. In summary, if the applicants introduced their operations into the Palm Beach County and HRS District IX service area, health care costs would escalate and the quality of delivery of health care services through the present home health care providers would be adversely affected. Vari-Care presented the testimony of the health planning expert Mary Ellen Early. She presented a methodology for ascertaining the need for additional home health care service, there being no established methodology by rule. Early looked at the increase in population within Palm Beach County between 1970 and 1980, which is in the neighborhood of 65.3% compared to 43.5% in Florida. She noted that Palm Beach County had increased in population since 1983 on the order of 13.1% and was the fifth most populated county in the state. Of the five most populated counties, Palm Beach County has experienced the largest percentage of growth in the decade 1970 through 1980. She noted that Palm Beach County ranks third nationally in the percentage of elderly and that the percentage of elderly sixty five and older doubled between the years 1970 and 1980. She noted that 13,220 individuals fall into the age categories of seventy five years and older, a high risk population. Statistics by the local health planning agency, as discovered by Early, indicated a continuing increase in the sixty five and older population, projected to be 29.3% by 1990. With this background, in her needs formula Early used three variables. Her formula assumes that 6% of medical/surgical hospital discharges, 8% of individuals sixty five and older, and 50% of nursing home discharges would need home health care services showing a demand of 18,129 people that could require home health service. The calculations were made based upon 1982 statistics about the sixty five and older age group. Ms. Early was not mindful of, nor has any other party to this cause, indicated the exact number of individuals presently receiving home health services in Palm Beach County. Without that knowledge the projection is not useful because it can not be shown that additional services need to be provided. From the projection of the number of persons who would demand home health care and adding to that methodology the idea, in Early's mind, that the effect of discharges from hospitals and nursing homes as it pertains to diagnostic-related groupings, and the high occupancy rates in nursing homes in Palm Beach county, and the increase in Medicaid patient days and Medicare patient days in the period 1980 through 1983, together with the limited number of home health agencies within Palm Beach County compared to the other six most populace counties in Florida, a need exists for recognition of Vari-Care's application to serve homebound patients. In analyzing her remarks, the information provided in the course of the hearing does not tend to be firm enough to conclude that the referrals from hospitals and nursing homes, as a result of diagnostic related groupings, will significantly increase the number of home health care visits. Therefore, that element of the opinion of Early is discarded. Also, the needs methodology used by Early, overstates that need for Medicare home health care services in that it includes in its definition home health services not reimbursed by Medicare. It includes duplication of numbers of persons in need of home health care services by counting 65 year old and older persons discharged from the hospitals and then recounting those persons in a calculation related to the fact that 8% of individuals sixty five and older would need the home health care delivery. This was further brought to question in that contrary to the 8% estimate of sixty five population and over needing Medicare home health services, effective 1983, 5 1/2% of that age cohort population was in need of those services. Returning to the topic of the formula selected by Ms. Early, it can also be assumed that some of the patients being discharged from the nursing homes into the home health setting, will be sixty five years and older and the risk of double counting exists in that calculation. As with the circumstance of observations by Dr. Davis, there has been no showing of the ultimate number of services that may be provided by home health care provider. Therefore the ratio of the number of home health care providers to population in Palm Beach County, as one of the six most populated counties in contrasting this ratio with the counties with the high population groups, is meaningless. The evidence tends to reveal that the real question is whether all patients who wish to be afforded the home health care delivery, are being provided quality care at a reasonable cost, and this is occurring at present in Palm Beach County and throughout District IX. On balance, the needs formula and the other projections by Ms. Early as to the need for additional home health care services provided by Vari-Care are not accepted. Vari-Care places emphasis on the fact that it would offer services to Medicaid patients, who are primarily being served at present by Visiting Nurse. The inquiry in this cause has to do with services for the benefit of Medicare recipients. To the extent that the Medicaid recipients are involved in any way in this question, there is a suspicion that Vari-Care would not be willing to go forward with the provision of the amount of Medicaid service that it has proposed in its application given its misunderstanding of the reimbursement entitlement, the difference between the $16 allowed and the $55 which Vari-Care feels it is entitled to. Even if those costs were reduced and Medicaid services were provided at the level contemplated by Vari-Care, this would not be sufficient reason to afford a certificate of need to Vari-Care. The introduction of Vari-Care into the market place would also have an adverse impact on Visiting Nurse and as described would be brought to bear on the Medicaid patients who receive services from that organization. In view of the fact that no proof has been established tending to show the need for the recognition of either applicant for certificate of need, it is not necessary to comment on the relative qualifications of the applicants, beyond whet has already been established in these facts.
Findings Of Fact This proceeding involves certificate of need (CON) application No. 4912 by Home Health Care of Bay to establish a Medicare-certified home health agency to serve Bay County Florida. Home Health Care of Bay's CON application was timely filed on December 15, 1986. Home Health Care of Bay's application was deemed complete on March 2, 1987. On April 30, 1987, DHRS preliminarily denied Home Health Care of Bay's CON application based on a determination that: There was no need demonstrated by Home Health Care of Bay for an additional home health agency in Bay County. Home Health Care of Bay is owned by Mark Ehrman, M.D. Dr. Ehrman is a board-certified internist, hematologist, and oncologist. Dr. Ehrman has been in private practice in Fort Walton Beach, Florida, since November, 1984. Prior to 1984, Dr. Ehrman was involved in the organization and delivery of medical services, the teaching of medicine, and the practice of medicine in Canada. Home Health Care of Bay will serve all patients regardless of race, income, sex, ethnic background, religion, or physical handicap. Home Health Care of Bay will provide 3 percent Medicaid and 3 percent indigent home health visits. Dr. Ehrman, both in his office and in his durable medical equipment (DME) company, goes to great lengths to ensure that indigent persons receive medical services. Dr. Ehrman, in his office practice, provides medical services to all persons regardless of their ability to pay. He is a participating physician in Medicare, Medicaid, and other insurance programs. Dr. Ehrman's participation in these programs and his determination not to screen patients financially has increase access to medically underserved patients. Dr. Ehrman's private practice includes approximately 5 percent Medicaid patients. In the past, home health agencies have tended to focus on acute medical problems. The traditional model for home health care has been to shorten an acute hospital stay for a discrete problem. Even chronically ill patients still came to the hospital when they had an acute episode. There has been little focus on avoiding hospitalization. There is now a shift in home health care which attempts to avoid hospitalization in appropriate cases. Dr. Ehrman, in treating patients at home, has become involved with sophisticated triage procedures, home pain management, and other procedures which maximize a patient's time outside the hospital. Such procedures allow patients to remain safely and comfortably in their homes. Procedures which can be safely done in the home include the starting of I/V morphine drips or I/V antibiotics. These procedures have traditionally not been done in the home. Nationally, and in Bay County, several factors are causing a shift to home health use. First, pressure is being applied in the form of reimbursement mechanisms to reduce the expense of institutional care. Patients are discharged from the hospital sooner and there is more pressure to use home health services. Second, an increased incidence of chronic illnesses, such as AIDS, will increase the use of home health services. The incidence of AIDS and AIDS related diseases will continue to increase and has obvious implications for increased home health usage. Home health care will make "hospital-like" care more available and less expensive for AIDS patients. Third, health consumers want to maintain the quality of their lives and remain at home as long as possible. HOME HEALTH CARE OF BAY'S PROPOSAL Home Health Care of Bay will provide medical personnel services in the disciplines of registered nursing, certified home health aides, occupational therapy, speech therapy, physical therapy, and medical/social work. These services will be provided to Medicare, private insurance, and indigent patients. Home Health Care of Bay will provide traditional home health services and many "high-tech" services which currently are not available at all or are not routinely done in Bay County. Such services include the transfusion of blood and blood products, professional pain management, the drawing of arterial blood gases, the care of Groshong and Hickman catheters, and the care of subcutaneous pumps and subcutaneous venous access devices. Home Health Care of Bay's proposed services will be utilized by many different types of patients, including renal patients, chronic pulmonary patients, chronic heart disease patients, and cancer patients. Home Health Care of Bay will provide health care services to AIDS patients. Petitioner's Exhibit 5 contains a complete list of services which Home Health Care of Bay will provide. Home Health Care of Bay's services will be available 24 hours a day, 7 days a week. This is an important commitment because home health care patients need services regardless of the time of day or day of the week. Even more important than the discrete list of services that Home Health Care of Bay will provide is the integration of all these services into one agency. In that way, patients are not shuttled from place to place; their care can be organized and integrated for maximum benefit. This integration will be accomplished by formulation of a plan of therapy which will include evaluation by a social worker and a physician in order to deal with the patient's total needs. Home Health Care of Bay's commitment to a total integration of patient services is evidenced by its plan to provide 4 percent of its visits in the medical/social work category. Such services are important in providing comprehensive care. The provision of medical/social work services will help patients and their families identify both medical and non- medical needs. Once such needs are identified, the patients and families can be channeled to the appropriate services, agencies and resources. Home Health Care of Bay will provide the physician with direct and timely communication about the patient. This will include daily delivery of complete medical records. Such a service is crucial in order to provide home care to patients with complicated problems. Home Health Care of Bay has a budget line item for marketing of $21,000 in the first year and $18,000 in the second year of operation. This money will be used to change the perception and pattern of home health use. Patients and doctors will be made aware of the availability of new home health services and the integration of those services with existing services. Home Health Care of Bay's marketing effort will overcome the reluctance of some physicians to utilize home health services. The demographics of the subdistrict of Bay County were analyzed and compared to the demographics of District II. The analysis shows that from 1986 to 1989, 3,076 persons 65 and over will be added to the population of Bay County. This represents a growth rate of 21.5 percent in Bay County compared to a district growth rate of 12.4 percent. Of the elderly growth in District II of 7,355, approximately 40 percent of such growth is occurring in Bay County. Forty percent (40 percent) is a high percentage in a 14 county district and indicates that the elderly population in Bay County is growing at a very rapid rate. Elderly persons are the most frequent users of home health services. Thus, rapid population growth is occurring in the segment of the population most in need of home health services. STATUTORY CRITERIA 1/ Consistency With State Health Plan Home Health Care of Bay`s proposal was reviewed for conformity with the State Health Plan and is consistent with that plan. The 1985-1987 Florida State Health Plan states: Home health agencies provide nursing, health aid, therapy and other kinds of services to patients in their homes. This allows individuals to remain at home rather than use more expensive institutional care to recover from acute illness or to manage chronic conditions. The State Health Plan further states: Home health services can be a cost effective form of long term care for the elderly and the infirm. The provision of home health services proposed by Home Health Care of Bay will provide residents of Bay County with a lower cost alternative to institutionalized long term care as referenced in the above State Health Plan excerpts. The State Health Plan also addresses the unwillingness of many providers to serve the medically needy: Medicare is the largest payor for home health care to the elderly, though some private insurers and Medicaid both cover home health services. Policy makers are increasingly concerned about providers' willingness to serve Medicaid recipients and medically indigent Floridians. Home Health Care of Bay has committed to provide at least 3 percent Medicaid and 3 percent indigent visits. Such a commitment will greatly increase access of medically underserved groups. Approval of a provider who accepts a significant portion of Medicaid patients will encourage current providers to accept such patients in order to retain their Medicare and private referrals. Physicians and discharge planners are much more willing to refer to an agency that will care for all their patients. The State Health Plan contains the following objective: OBJECTIVE 1.5.: To assure that the number of home health agencies in each service area promote the greatest extent of competition consistent with reasonable economies of scale by 1987. The methodology utilized by Home Health Care of Bay to project need maximizes competition consistent with economies of scale by allowing additional providers to enter the market while maintaining existing agencies at a size at which they can operate efficiently. Consistency With Local Health Plan Home Health Care of Bay's proposal was reviewed in relation to the 1986 District Two Health Plan and is consistent with that plan. The local health plan contains a section on long-term care services, including home health services. This section contains a numerical methodology to determine need. That methodology indicates a need for an additional agency in Bay County. The local health plan also contains priorities for home health services. Priority C states that: Priority will be given to home health services applications who have a history of providing, or will commit to provide, services to Medicare, Medicaid and medically indigent patients. Dr. Ehrman, the owner of Home Health Care of Bay, has a record in his practice of providing services to all payor groups. He has committed to continue to do so in his home health agency. Priority D of the Local Health Plan states: Priority will be given to home health services applicants who have a history of providing, or will commit to provide, a public marketing program for their services which includes pamphlets, public service announcement and various other community awareness activities. Home Health Care of Bay has budgeted for and committed to an extensive marketing program. A marketing priority is unusual in a local health plan and indicates an awareness of the need to educate the public about home health services. Determination Of Need DHRS currently has no rule governing the need for home health agencies. A historical summary of the regulation of home health agencies in Florida is described in a memorandum prepared by Ms. Marta V. Hardy. Ms. Hardy was the Deputy Assistant Secretary for Regulation and Health Facilities, DHRS, from September 1984 through June 1987. Ms. Hardy was responsible for all CON decisions and was the ultimate decision-maker in regard to the preliminary denial of Home Health Care of Bay's CON. In the fall of 1984, DHRS attempted to promulgate a rule to replace the invalidated Rule of 300. This proposed rule was based on a use rate methodology, but was invalidated in a rule challenged proceeding in 1985. After the invalidation of the proposed rule, DHRS implemented an interim policy which it used to review home health agencies. This interim policy is reflected in the "Bob Sharpe memo," dated May 15, 1986. The interim policy was applied to home health agency application beginning with the first batching cycle in 1986. The interim policy utilized a variation of the previously invalidated rule and attempted to correct the problems which caused the proposed rule to be found invalid. The interim policy is a use rate/population methodology which projects the number of Medicare enrollees using home health services in the future. This number is multiplied by the average number of visits per Medicare home health user. The total number of visits is divided by an agency size of 9,000 visits to yield the gross number of agencies needed. The total number of licensed and approved agencies is subtracted from the gross need number to yield the net number of agencies needs. The interim policy phased in the needed agencies over a three year period. DHRS defended the interim policy in circuit court when the Florida Association of Home Health Agencies (FAHHA) sought to stop DHRS from using the policy. DHRS defended the interim policy in December, 1986, before the First District Court of Appeal. Use of the interim policy resulted in the approval of 23 home health agencies. DHRS abandoned its interim policy sometime in the fall of 1986. No notice was given to the public or to interested parties that a change in DHRS policy had occurred. DHRS published no document rescinding the Sharpe memo. Only after applications were filed in the second batching cycle of 1986, were applicants informed that DHRS had changed its interim policy. Applicants in the December, 1986, batching cycle, including Home Health Care of Bay, were asked for an unlimited extension of time within which DHRS could render a decision. Applicants who refused to agree to an extension were evaluated on the basis of the "statutory need criteria." Applicants who did not agree to an extension were denied. In only one instance was a CON granted after abandonment of the interim policy. This occurred in Franklin County, where no home health agency existed at the time of that approval. DHRS' new "policy" was not developed by DHRS health planners. The "policy" put the burden of proof on the applicant to demonstrate an unmet need. Such a demonstration would be difficult to make. The Office of Community Medical Facilities, the office within DHRS responsible for preliminary CON review, reviewed Home Health Care of Bay's application using the "policy" based on "the thirteen statutory criteria." Such a review required Home Health Care of Bay to prove need by demonstrating an unmet need. However, as evidenced by the Office of Community Medical Facilities' review of Home Health Care of Bay's application, a policy requiring an applicant to meet a negative burden of proof is unreasonable. It imposes a standard which is virtually impossible for an applicant to meet. Ms. Joyce Farr was the DHRS employee responsible for the review of Home Health Care of Bay's application and for the development of the related State Agency Action Report (SAAR). The SAAR was the only work product Ms. Farr prepared in regard to Home Health Care of Bay's application. Ms. Farr has never been qualified as an expert witness in the home health area. Ms. Farr has no formal education in health planning and is unfamiliar with Medicare reimbursement. Ms. Farr does not consider herself to be an expert in financial feasibility projections, staffing, or quality of care. Ms. Farr is not in a policy-making position at DHRS. Ms. Farr was given no instructions by her superiors as to how to review Home Health Care of Bay's application. DHRS presented the testimony of Ms. Farr to attempt to explain how Home Health Care of Bay's application was reviewed. Ms. Farr was tendered and accepted, not as an expert health planner, but as an expert in "CON review." Ms. Farr articulated the standard she used to determine need: [I]f an applicant or residents of a county or community resources of a county or just about any organization basically says that there is an unmet need, meaning that there is no home health services available or there is an accessibility problem where certain groups are not being served -- certain services are not being offered -- I become aware of it by their simply documenting, "I cannot get home health services," like CAPS [Capitol Area Community Aging Agency] that said, "They aren't serving these people. We need somebody in here to serve these people." That would show that there was an unmet need. Unless an applicant, or community resource, could demonstrate an accessibility problem, no need existed according to Ms. Farr. Ms. Farr did not review the Medicare cost reports of current providers to determine the services they provided prior to recommending denial of Home Health Care of Bay's application. Ms. Farr reviewed utilization data of current providers for only one year. Ms. Farr did no analysis of the types of visits provided by existing providers. Ms. Farr looked only at the total number of visits. The only information Ms. Farr utilized in regard to the type of visits being provided was information given to her by existing providers. In determining that no need existed for medical/social work services, Ms. Farr relied on the list of social service agencies included in the local health plan, but did no analysis as to what services such agencies offered. Ms. Farr determined that no Medicaid access problem existed in Bay County based on information current providers gave her. She did not verify these representations with the Medicaid office. Ms. Farr did no charge comparison in her review. At the time of her review, Ms. Farr did not know when a new competitor last entered the market in Bay County. Ms. Farr did not address Objective 1.5 of the State Health Plan in her review. She was unaware of Objective 1.5 until it was pointed out to her in deposition. Ms. Farr utilized no planning horizon in determining need, though she admitted that one of the purposes of CON review is to plan for future health needs. Ms. Farr's review of Home Health Care of Bay's application was deficient for several reasons. First, Ms. Farr's review did not look at a projection of future need. It did not analyze demographics or utilize a planning horizon. It contains no elements of a needs analysis. A mere review of what currently exists misses the point of health planning. Second, in making a determination of no need, Ms. Farr relied solely on comments of existing providers who told her that there was no need for a competing agency. Dr. Deborah Kolb, vice-president of Jennings, Ryan, Federa & Co., participated in the preparation of Home Health Care of Bay's CON application. In preparing the needs assessment portion of the application, Dr. Kolb reviewed the State Health Plan, the Local Health Plan, utilization data, home health CON decisions, and services offered by current providers. The need methodology which appears in Home Health Care of Bay's application is contained in Dr. Kolb's expert report. The methodology appearing in her report and the application was the interim policy in use by DHRS at the time the application was filed. This was the methodology in the Bob Sharpe memo. Home Health Care of Bay will provide home health services to the residents of Bay County. Bay County is in DHRS Service District II. According to the 1986 District II Health Plan, District II is composed of 14 separate subdistricts. Each subdistrict is composed of one county. Bay County is a reasonable service area for Home Health Care of Bay. Dr. Kolb utilized a two-year planning horizon to project the need for home health agencies. This is a reasonable planning horizon. Table 3 of Dr. Kolb's report analyzes need on a district-wide basis. Two time frames, July, 1988, and January, 1989, are shown because Home Health Care of Bay's application was filed in December, 1986. Two years from that date would be December 1988. The official population projections from the Governor's Office focus on July and January of each year. Use of the two project dates straddles the December, 1988, planning horizon. The population numbers of District II for 65 and over are 62,546 for January, 1988, and 63,558 for January, 1989. The 1984 Medicare use rate, which is an estimate of the number of Medicare home health visits per elderly person in Florida for 1984, is multiplied by the projected elderly population to arrive at a projected number of visits. The number of projected visits in Table 3 of 118,565 in July, 1988, and 120,483 in January, 1989, is a result of multiplying the use rate by the projected population. To determine the number of agencies needed, the projected number of visits is divided by optimal agency size. This calculation yields a gross agency need of 13 agencies in the district in July, 1988, and January, 1989. The number of licensed and approved agencies, 12, is subtracted from gross need, 13, to yield net need of one (1) agency in July, 1988, and January, 1989. Dr. Kolb utilized 9,000 for the optimal agency size figure. This is consistent with the interim policy and with data which suggests that is where economies of scale occur. An optimal agency size of 9,000 appears in the Local Health Plan methodology. Table 4 of Dr. Kolb's report presents the same analysis as Table 3, described above, on a subdistrict basis to determine where the one agency found to be needed in District II should be located. Use of the same methodology results in a gross agency need of three. The two existing agencies are subtracted from the gross need of three to yield a net need for one agency in July, 1988, and January, 1989, in Bay County. The methodology described above is a reasonable one for determining need. The methodology utilizes a common health planning approach. It is the same methodology used by DHRS as an interim policy. It is the same type of methodology used by DHRS in planning for other types of health services. Beyond the numerical analysis discussed above, other factors indicate the need for an additional home health agency in Bay County. Bay County has a very low home health use rate and a very high nursing home use rate. The Bay County home health use rate is 1.5 visits per person 65 years and older. The Bay County use rate is significantly lower than the state use rate of 1.89. This disparity indicates a gap between real need and historical utilization. At the same time, Bay County has a nursing home use rate of 41 beds per thousand elderly compared to a state rate of 23 beds per thousand. Additionally, the occupied nursing home beds per thousand elderly is much greater in Bay County than in the state. In the state there are 21.3 occupied beds per thousand elderly. The utilization of Bay County's nursing home beds is approximately 75 percent greater than utilization in the state as a whole. These statistics suggest an inappropriate allocation of resources between home health care services and more expensive institutional nursing home services. Nursing home utilization would decrease with more sophisticated home health care. Many people are inappropriately institutionalized in nursing homes and could be cared for at home. From a medical perspective, Dr. Ehrman was of the opinion that an additional home health agency was needed. Availability, Quality Of Care, Efficiency, Appropriateness, Accessibility, Extent Of Utilization, And Adequacy Of Like And Existing Services There are currently two Medicare-certified home health care agencies serving Bay County. One way to evaluate agency performance is to analyze the mix of services and the number and types of visits being provided. Current providers have concentrated heavily on providing nursing and aide visits. Of approximately 18,000 visits provided each year, approximately 16,000 visits comprised the nursing and aide categories. Neither provider did any specifically medical/social work visits in 1985 or 1986. Additionally, the total number of visits delivered to the residents of Bay County has remained constant in 1985 and 1986. Bay County's constant use rate illustrates the need for more education in regard to home health services. While current providers do certain high tech procedures if directed to by a doctor, current providers are not committed to consistently doing high tech procedures. High tech services are not the most profitable. Their margins are often low and it is more economically beneficial for current providers to provide aide services. Transfusions, initiation of I/V antibiotics, continuous infusion of morphine, pain nursing, and catheter care are all services which existing agencies have rarely done or do with great difficulty. Without doing such procedures as a regular basis, competency is difficult to maintain. Bay Home Health Care Agency d/b/a Home Health of Panama City (Home Health of Panama City) is a free-standing home health agency and has been in business for 11 1/2 years. Home Health of Panama City does no Medicaid visits. Bay Medical Center Home Health receives referrals from Home Health of Panama City because Home Health of Panama City does not take Medicaid or indigent patients. Home Health of Panama City does no medical/social work visits. Home Health of Panama City has no money budgeted for marketing. Bay Medical Center Home Health is a hospital based home health agency. It functions as a department of Bay Medical Center, an acute care hospital located in Panama City, Florida. In the past two years, Bay Medical Center Home Health has provided no medical/social work visits though some of those services were provided by nurses during nursing visits or by other departments of Bay Medical Center. Bay Medical Center Home Health does not currently provide care of certain high tech devices such as the Denver pleuroperitoneal pump or the subclavian pump. Its staff would have to be trained to provide such care. Bay Medical Center Home Health has never given blood transfusions or cared for a Denver shunt. Bay Medical Center Home Health has a very low number of average visits per patient (6.8) when compared to the state average of 30 visits per patient. Bay Medical Center Home Health does a low percentage of Medicaid visits. In 1986, Bay Medical Center Home Health was reimbursed for 120 Medicaid visits out of a total of 3,280 Medicaid-reimbursed visits provided in District II. A comparison of reimbursed Medicaid visits provided by Bay Medical Center Home Health to District II as a whole demonstrates a Medicaid access problem. In 1986, Bay County had 25 percent of the district's population and 16 1/2 percent of the district's Medicaid eligible. Yet only 3.7 percent of the district's Medicaid-reimbursed home health visits were provided in Bay County. If services were Medicaid accessible, the number of Medicaid visits would be closer to the Medicaid percent of the population. Bay Medical Center Home Health Care's Medicaid visits represented only 1 percent of their total visits for 1986. When Home Health of Panama City's zero (0) Medicaid visits is considered, out of all home health visits provided in Bay County only 0.7 percent were Medicaid visits. Approximately 25 percent of Dr. Ehrman's patients from the Panama City area are Medicaid or indigent. This evidences a need for more Medicaid services. Bay Medical Center Home Health has no line item for marketing and advertising. Ability of the Applicant To Provide Quality of Care Dr. Ehrman is a highly trained and experienced physician. While in Canada, Dr. Ehrman established a hematology and oncology health care delivery system in Montreal. This system is still in existence and working well. Dr. Ehrman has been instrumental in improving the delivery of health care in his practice area. He has established tumor boards at local hospitals and provided many new procedures and devices in the home. Dr. Ehrman has raised the level of awareness on the part of other practitioners in his area as to a team approach to the delivery of services. This has increased the type of home services now available. Dr. Ehrman has responded to the needs of his patients for a multi- disciplinary approach to oncology by associating a clinical psychologist. This person deals with the psychological needs of the cancer patients seen by Dr. Ehrman. Dr. Ehrman has been instrumental in beginning many new and innovative practices in his office. For instance, he administers chemotherapy to Medicare patients in his office. He accomplished this by arranging with local pharmacists to mix and supply chemotherapy drugs. Dr. Ehrman will work with these same pharmacists in Home Health Care of Bay. Dr. Ehrman is involved in a durable medical equipment company. Many new devices and treatments were first used in the area by Dr. Ehrman's company. Dr. Ehrman has been a leader in the community in keeping up with new home health care developments. Home Health Care of Bay will have adequate staff on a full-time basis and add staff as utilization increases. Dr. Ehrman currently contracts with two nurses who are well trained and have over 1,000 hours of in-service training. Home Health Care of Bay is committed to keeping up with state-of-the- art home health care services and will add new services as they are developed. Availability and Adequacy of Alternatives There are no realistic alternatives to the establishment of a new home health agency. The alternative of nursing home care is not satisfactory. Most persons would prefer home care to nursing home care when at all possible. The alternative to home care which is currently being used is to shuttle the patient from the emergency room to the hospital to the doctor's office. Eventually the patient drops out of the system or settles for a lower level of services. Availability of Resources, Including Health Manpower, Management Personnel and Funds for Capital and Operating Expenditures . . . Extent to Which the Proposed Services Will Be Accessible to All Residents The staffing requirements for Home Health Care of Bay are shown on Table 11 of the application. That staffing plan is reasonable. Home Health Care of Bay will have a full-time administrator at a salary of $27,000. A capable administrator can be recruited at that salary. Home Health Care of Bay will employ a full-time nurse supervisor at a salary of $21,000. A nurse supervisor can be hired at that salary. Home Health Care of Bay will employ a full-time clerical person at an annual salary of $16,000. A clerical person can be hired at that salary. The above salaries and Home Health Care of Bay's ability to recruit such persons is reasonable based on Dr. Ehrman's experience employing similar personnel in his office. Home Health Care of Bay will hire contract staff to provide skilled nursing services, physical therapy services, speech therapy services, occupational therapy services, medical/social work services, and home health aide services. Such persons can be contracted with to provide the type of services Home Health Care of Bay proposes based on discussions with such persons. Dr. Ehrman currently contracts with two nurses in Ft. Walton Beach to provide nursing services similar to those proposed by Home Health Care of Bay. Such services are provided mainly to non-Medicare patients and the arrangement has worked very well. Funds for Capital and Operating Expenditures Project costs are depicted on Table 25 of the application. The costs are reasonable. Home Health Care of Bay can be started for $22,600. Immediate and Long-Term Financial Feasibility of the Proposal At hearing, DHRS admitted the short-term financial feasibility of Home Health Care of Bay's proposal. The statement of projected income and expense in Figure 7 of the application and on page 14 of Dr. Kolb's report was prepared under Dr. Kolb's supervision. The majority of assumptions on which the pro forma is based have been stipulated to by DHRS as reasonable assumptions on which to base a financial projection. The only assumptions not admitted by DHRS relate to utilization and payor mix. DHRS, however, introduced no evidence that refuted the reasonableness of these assumptions. The utilization projection used to calculate gross revenue in the pro forma was 3,800 visits in 1988 and 8,500 visits in 1989. The utilization projections are reasonable based on the agency's demographic base and Dr. Ehrman's commitment to education and marketing. The projection of costs and charges depicted on page 45 of the application is reasonable based on Dr. Ehrman's current office experience. The number of visits is multiplied by the charge per visit type to calculate gross revenue. This calculation yields a gross revenue of approximately $200,000 in year 1 and $462,000 in year 2. The payor mix for Home Health Care of Bay is found on Table 7 of the application. Home Health Care of Bay predicts 3 percent Medicaid visits, 80 percent Medicare visits, 14 percent private pay and insurance visits, and 3 percent indigent visits. The pay mix projections are reasonable based on the mix of patients Dr. Ehrman currently sees. Ms. Farr admitted that the projections were reasonable. The difference between Medicare and Medicaid reimbursement and full charges results in the contractual allowances figure. Bad debt and charity deductions were calculated based on 3 percent indigent and 3 percent Medicaid visits. Deductions from gross revenue, which are funds not received because of contractual allowances, bad debts, or charity, are subtracted to yield net revenue. Deductions from revenue are approximately $38,000 in year 1 and $135,000 in year 2. Net revenue is approximately $162,000 in year 1 and $327,000 in year 2. The second portion of the pro forma lists expenses. This list contains all the expenses expected for a new home health agency. All the expenses listed are reasonable. The pro forma shows a loss of $28,505 in the first year and a profit of $13,207 in the second year. Home Health Care of Bay has the equity to sustain a loss in the first year. In the second year of operation, based on the above assumptions, expenses are $314,000 and net revenue is $327,000 for a net income of $13,000. These projections indicate that the project is financially feasible in the long term. Table 26 on page 41 of the application presents the project timetable anticipated when the application was filed. Any delay in this timetable due to this litigation will not materially change the projections or commitments contained in the application. Impact of the Proposal on Costs of Providing Health Services, Including Effects of Competition and Improvements in Financing and Delivery of Health Services Which Foster Competition and Services To Promote Quality Assurance and Cost Effectiveness The introduction of a new home health agency into the Bay County market will stimulate competition. Such competition will stimulate growth in competitors and increase the overall level of services. Approval of a new competitor where there has been no new competition for nine to ten years will put pressure on providers to provide a wider range of services as well as higher quality services. Ms. Young, administrator of Bay Medical Center Home Health, admitted that if Home Health Care of Bay's CON is approved, her agency might begin educating physicians in regard to available services, rather than waiting for physicians to request a service. As the current providers testified, as agency visits go up or down, the number of staff required can be adjusted without incurring unreasonable costs. Current providers have control over their costs and staffing. Home Health Care of Bay's charges are competitive. In some areas, such as skilled nursing and home health aide, Home Health Care of Bay's charges are lower than current providers' charges. Price competition allows competition for private pay patients. Impact The addition of Home Health Care of Bay to the home health market will not significantly affect current providers. Studies have indicated that new entrants into the home health market do not significantly affect existing providers. The elderly population of Bay County is growing rapidly. When the 1984 home health use rate is applied to elderly population growth between 1986 and 1989, approximately 5,800 new visits are attributable to population growth alone. Home Health Care of Bay projects it will deliver 3,800 visits in its first year of operation and 8,500 visits in its second year. Thus, a large percentage of those visits are attributable to population growth alone. Home Health Care of Bay's marketing and education programs will raise the local use rate and generate more visits. Dr. Kolb analyzed the financial impact of Home Health Care of Bay's project on current providers. Her analysis considers a worst case scenario and assumes that current providers' visit levels will be affected by the introduction of a new provider. The analysis then calculates the financial impact on current provider. In order to do this, Table 11 calculates the average cost per visit from existing agencies' 1985 Medicare cost reports. Home Health Care of Panama City's average cost per visit is $37.18. Bay Medical Center Home Health's average cost per visit is $41.76. The Medicare program pays agencies the lower of Medicare cost caps or actual costs. The current providers in Bay County are well below the Medicare cost caps and so will be paid their actual costs. Table 11 calculates the difference between actual agency costs and Medicare cost caps. Home Health of Panama City was 18 percent below its cost caps. Bay Medical Center Home Health was 24 percent below its cost caps. Thus, Home Health Care of Bay could provide the number of visits it projects and even if all those visits came from existing providers, the current providers could still operate at a level of cost that would be Medicare reimbursable. The approval of Home Health Care of Bay's application will not have a significant adverse impact on existing providers.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Health and Rehabilitative Services enter a Final Order granting CON No. 4912 to Home Health Care of Bay County, Florida, Inc., to establish a Medicare-certified home health agency in Bay County, Florida. DONE AND ENTERED this 17th day of December, 1987, in Tallahassee, Florida. DIANE K. KIESLING Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904)488-9675 Filed with the Clerk of the Division of Administrative Hearings this 17th day of December, 1987. APPENDIX TO THE RECOMMENDED ORDER IN CASE NO. 87-2151 The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on the proposed findings of fact submitted by the parties in this case. Specific Rulings on Proposed Findings of Fact Submitted by Petitioner, Home Health Care of Bay County, Florida, Inc. Each of the following proposed findings of fact are adopted in substance as modified in the Recommended Order. The number in parentheses is the Finding of Fact which so adopts the proposed finding of fact: 1-3(1-3); 5(4); 7-10(5-8); 12-16(48- 52); 18(53); 19 & 20 (54); 21(55); 24-27(56-59); 28- 31(59-62); 37-52(9-24); 54-57(25-28); 58-77(28-47); 78-89(63-74); 91-102 (75- 86); 104-114(87-97); 116-129(97-110); 130(110); 131(111); 133-135(112); 136- 139(113); 140 & 141(114); 142-153(115-126); 154-163(126-135); 165-175(136-146); 179-182(147-150); 183(150); 184 & 185(151); 186(152); 187 & 188(153); 189- 191(154); 192 & 193(155); 194 & 195(156); 196(157); 197(158); 200-203(159-162); 207(163); 209(164); 210(165); 212-218(166-172); and 219-225(172-178). 2. Proposed findings of fact 17, 32-36, 53, 90, 103, 115, 132, 164, 176- 178, 198, 199, 204-206 and 211 are subordinate to the facts actually found in this Recommended Order. Proposed findings of fact 22, 23 and 208 are rejected as being unsupported by the competent, substantial evidence. Proposed findings of fact 4 and 11 are rejected as being unnecessary and/or irrelevant. Specific Rulings on Proposed Findings of Fact Submitted by Respondent, Department of Health and Rehabilitative Services Each of the following proposed findings of fact are adopted in substance as modified in the Recommended Order. The number in parentheses is the Finding of Fact which so adopts the proposed finding of fact: 1(1 & 2); 2(3); 6(Footnote 1); 7(148) and 13(4). Proposed findings of fact 3-5, 8-12, 14-40, 43-45 and 47-53 are subordinate to the facts actually found in this Recommended Order. Proposed finding of fact 42 is rejected as being unsupported by the competent, substantial evidence. Proposed findings of fact 4 and 46 are rejected as being unnecessary and/or irrelevant. COPIES FURNISHED: Byron B. Mathews, Jr., Esquire Vicki Gordon Kaufman, Esquire McDermott, Will and Emory 101 N. Monroe Street Tallahassee, Florida 32301 Theodore E. Mack, Esquire Assistant General Counsel Department of Health and Rehabilitative Services Regulation & Health Facilities Ft. Knox Executive Center 2727 Mahan Drive Tallahassee, Florida 32308 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 =================================================================
Findings Of Fact Petitioner, Palm Beach-Martin County Medical Center, Inc. (PBMCMC), owns and operates Salhaven Home Health Agency (Salhaven), a home health agency in Palm Beach County, Florida. Salhaven is licensed by respondent, Department of Health and Rehabilitative Services (HRS), to provide home health services in Palm Beach County. This authority was obtained in 1984. At the same time it obtained Medicare provider number 10-7203 effective August 10, 1984 from the United States Department of Health and Human Services (HHS). According to applicable statutory definitions, a home health agency is an agency or organization which provides home health services." Home health services in turn are defined as "health and medical services and medical supplies furnished to an individual by a home health agency, on a visiting basis, in a place of residence used as an individual's home." PBMCMC owns and operates Jupiter Hospital (JH), a 156-bed acute care facility in Jupiter, Florida. That municipality lies in Palm Beach County just south of the Palm Beach-Martin County line. A significant number of JH's patients reside in Martin County. The stipulated record suggests, but does not specifically state, that Salhaven provides home health services to JH's Medicare patients. Due to a limitation imposed on its service area, Salhaven cannot now provide home health services to Medicare patients who receive inpatient treatment at JH, but reside in Martin County. The proposed removal of this limitation is the subject of this proceeding. On December 15, 1986 PBMCMC's director of finance filed with HRS a request to expand without certificate of need (CON) review, Salhaven's service area to include Martin County, Florida. On April 15, 1987 HRS issued proposed agency action denying PBMCMC's request on the following grounds: Review of the department's files regarding Salhaven indicate Salhaven was a medicare provider in Palm Beach County prior to 1971. The records in HCFA indicate Salhaven withdrew from the medicare program after 1971 and did not reenter the program until 1984 when it sought and was approved for grandfathering into Palm Beach County. The agency approved the grandfathering of your client's home health agency in Palm Beach County based on the 1968-71 data which you produced in your July 1984 letter. However, there is no supporting information in your January 1987 letter which indicates your client served patients in Martin County during the 1968-71 period of time. The patient they served in 1975 was served during the period of time when Salhaven was not a medicare provider and was not licensed by the state. Based on this information the department cannot approve your client's request for expansion of its service region. If your client can prove they served clients in Martin County during the 1968-71 period of time when they held a provider number we will be willing to readdress this decision. The denial of the request precipitated this proceeding. Beginning in 1970, Salhaven was a home health agency providing home health services in the State of Florida. In August of that year, it was also certified by the United States Department of Health, Education and Welfare (HEW), which is HHS' predecessor, to provide Medicare services under provider number 10-7072. William Leone was Salhaven's assistant administrator from July 1968 through calendar year 1973, and its administrator from 1974 through 1983. According to his affidavit stipulated into evidence as exhibit B, Salhaven obtained a Medicare provider number from HEW in 1969 or 1970, and until Leone's retirement in 1983, Salhaven "took (no) action to withdraw... from the Medicare program, or to surrender its provider number." Leone added that had such action been taken, he would have been aware of the same. In addition, Leone filed required annual Medicare audit reports with the appropriate federal agency each year from 1970 through 1983, and utilized provider number 10-7072 on each such report. Finally, Leone did not receive a notice at any time from HEW, HHS or Blue Cross/Blue Shield advising that Salhaven's Medicare provider number had been terminated. In the affidavit of Margery Harp, stipulated into evidence as exhibit D, Harp established that during 1972, Salhaven was an active provider of home health services to Medicare recipients. However, the affidavit does not disclose in which counties (including Martin) such services were provided. The parties have stipulated, however, that Salhaven provided home health services to residents of Martin County in the months of February and November, 1975. HRS' decision to preliminarily deny PBMCMC's application is predicated upon its acquisition of a document identified as exhibit C, and which is stipulated to be a copy of a page taken from the logbook of the Health Care Financing Administration (HCFA), presumably an arm of the HHS, but whose statutory duties for and relationship to Medicare certified home health agencies is not of record. The parties have also agreed the logbook has a handwritten entry reflecting that Salhaven voluntarily withdrew from the Medicare program on November 1, 1972. Relying solely upon that information, HRS determined that Salhaven was not a Medicare participant after November 1, 1972, and therefore could not qualify for licensure. According to the admitted facts, which are drawn in part from an interview with an HCFA employee, exhibit C is a true and correct copy of a document taken from HCFA's home health agency files, and represents the manner in which records for home health agencies were maintained by HCFA in 1972. Indeed, it was the practice of HCFA to make a handwritten notation in the file when a provider was voluntarily terminated from the Medicare program. However, HCFA acknowledges that it does not know who made the handwritten entry pertaining to Salhaven, and has no correspondence or other documentation from Salhaven evidencing Salhaven's intention to withdraw from the program. The document is the only one in HCFA's possession which relates to Salhaven's participation in the Medicare program during the years 1970-1976. There is no evidence as to whether HCFA required formal or informal notice from a provider before it terminated a number, or did so on its own volition, or after receiving advice from another governmental agency. Neither is there any indication as to what office or section within HCFA had the responsibility to maintain and make entries in the logbook. There is also no evidence as to whether HCFA was the official custodian of Medicare certified home health agency records, or had the authority to issue and cancel provider numbers on its own behalf or acting as surrogate for HHS or HEW. HRS conceded its personnel have no personal knowledge, or indeed documentary evidence in its own files, to confirm that Salhaven voluntarily withdrew from the Medicare program on November 1, 1972. It also has no files pertaining to Salhaven that predate 1983. It is HRS' understanding and belief that HCFA would have terminated a provider number in 1972 if the provider had demonstrated no Medicare service activity for an extended period of time. However, this "understanding" was not corroborated by any other evidence. There is no evidence of record as to any HRS policy concerning its interpretation of the grandfather provisions of Section 400.504, Florida Statutes (1985).
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the request of Palm Beach-Martin County Medical Center for authority to expand the service area of Salhaven Home Health Agency into Martin County, Florida without certificate of need review be GRANTED. DONE AND ORDERED this 23rd day of November, 1987, in Tallahassee, Leon County, Florida. DONALD R. ALEXANDER Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 23rd day of November, 1987.
