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 On December 18, 1978, the Petitioner, using the name "Upjohn Healthcare Services, Inc." filed its application for certificate of need with the Florida Panhandle Health Systems Agency, Inc. This application was deemed complete on April 20, 1979. The application as originally filed indicated that healthcare services were to be made available on a 24 hour a day basis, seven days a week, with an admission criteria based on the patient's need for home health care, his ability to make available financial resources and the Petitioner's ability to provide the services required. Services were to be provided from a central location in Pensacola, Florida, which is in Escambia County, Florida; to serve Escambia, Santa Rosa and Okaloosa Counties, Florida. The application was subsequently amended to indicate the willingness of the Petitioner to aid Medicare and Medicaid patients in the named counties. The Petitioner, hereinafter referred to as "Upjohn", operating as Upjohn Healthcare Services, Inc., is a subsidiary of the Upjohn company, having forty-Seven certified home health agencies in the United States. The organization has twenty-one offices in the State of Florida and one of those offices is located in Pensacola, Florida. The State of Florida, Department of Health and Rehabilitative Services, is an agency of the State of Florida charged with the duty to evaluate the applications for certificate of need and to issue such certificates as would be appropriate under the terms of Chapter 381, Florida Statutes, and Rule 10-5, Florida Administrative Cede. This application for certificate of need and that of the companion case of Personnel Pool of Pensacola, Inc., d/b/a Medical Personnel Pool, hereinafter referred to "Personnel Pool", are also considered in accordance with the Health Systems plan for the Florida Panhandle effective December 15, 1978. A copy of that document may be found as the Joint Exhibit No. 2 admitted into evidence. The project review committee of the Northwest Florida District recommended to the Northwest Florida Subdistrict Advisory Council that the certificate of need be granted and this action was taken on May 2, 1979. A public hearing was held on May 8, 1979, and on Nay, 17, 1979, the Northwest Florida Subdistrict recommended the disapproval of the project. This disapproval followed a staff report by the staff of the Florida Panhandle Health Systems Agency which suggested that the certificate of need be denied. The application was then presented to the Regional Council, Florida panhandle Health Systems Agency, Inc., and on May 25, 1979, the Regional Council recommended the approval of the certificate of need to serve Escambia, Santa Rosa and Okaloosa Counties, Florida, with the proviso that services be offered Medicare and Medicaid patients. On June 29, 1979, the Respondent in the person of Art Forehand, Administrator of the Office of Community Medical Facilities, attempted to apprise the Petitioner that the request for a certificate of need had been denied; however, this correspondence was misaddressed and it was not until July 9, 1979, that a letter was forwarded to an official of Petitioner's organization and received by that official. On July 31, 1979, the Petitioner appealed the decision of denial of the certificate of need and the case was later assigned to the Division of Administrative Hearings for consideration which resulted in the hearing which is the subject of this Recommended Order. (The details of the various items discussed in developing the chronology of this application may be found in the Joint Composite Exhibit No. 1 admitted into evidence.) In offering its proof to demonstrate the entitlement to a certificate of need, the Petitioner essentially attempted to refute the Department of Health and Rehabilitative Services', hereinafter referred to as "Department", letter of notification of denial. That letter gave five reasons for denying the certificate of need, those reasons being: The proposed project is inconsistent with the Florida Panhandle Health Systems Agency 1979 Health Systems Plan policy guide regarding physical location of a home health agency in the area it intends to serve. The proposal is not consistent with standards and criteria established in Chapter 10-5.11(14), Rules of the Department of Health and Rehabilitative Services. Extenuating and mitigating circumstances which may be considered in approving a certificate of need for a new home health agency have not been adequately demonstrated. There are other available and adequate home health care service providers in the proposed service area which could serve as an alternative to the proposed project and prevent unnecessary duplication of resources. Financial feasibility data do not clearly reflect the inclusion of Medicare and Medicaid resources. The initial reason for denial deals with the claim that the Health Systems Plan for the Florida Panhandle, adopted December 15, 1978, does not allow service of three counties from one central office in Pensacola, Florida. The disputed language in that document is found in Chapter IV at page 216, and it states: No home health agency may be issued a license to operate in a Florida county without having applied for and been granted a certificate of need. The Office of Community Medical Facilities of the Department of Health and Rehabilitative Services considers the recommendation of the Health Systems Agency and established criteria in determining need. Certificates are now issued for a single-county service area, but prior to legislation passed in 1977, an agency could obtain a certificate for several counties. This inconsistency has created considerable confusion in determining need. Although the comment in the document is reluctantly made, it does establish the necessity for the issuance of certificates of need for single-county service areas. This determination is reached, notwithstanding the Petitioner's argument that there is existing precedence for serving more than one county out of a single office. Although there are circumstances in Florida where this approach has been utilized, such service of a multi-county area from a single office would not be allowed on the occasion of the current application. The second reason for denying the certificate of need involves Rule 10- 5.11(14), Florida Administrative Code, which states: (14)(a) A Certificate of Need for a proposed new home health agency or subunit shall not be issued until the daily census of each of the existing home health agencies or subunits providing services within the health service area of the proposed new home health agency or subunit has reached an average of 300 patients for the immediate preceding calendar quarter unless the need for the proposed new home health agency or subunit can be demonstrated by application of the mitigating and extenuating circumstances in rule 10-5.11(14)(b) herein. (b) Mitigating and extenuating circumstances which must be met for the department to issue a certificate of need for a proposed new home health agency or subunit even though the previously described need determination procedure does not clearly indicate need are: Documentation that the population of the proposed service are is being denied access to home health care services in that existing home health agencies or subunits within the proposed service area are unable to provide service to all persons in need of home health care, or Documentation that approval of such proposed new home health agency or subunit would foster cost containment for all providers in the health service area. The Petitioner, in the course of this presentation, took issue with the survey method used by the employee who conducted the staff review of the application. Upjohn claimed that the data gathered on the question of the requirement for a 300 average daily patient census was incomplete and inaccurate. The Petitioner also questioned whether the rule as cited above could be followed in this hearing or should the prior rule which spoke in terms of the daily census of the aggregate of the existing home health agencies or subunits in determining the count of 300 patients be used. The current rule became effective on June 5, 1979, and that rule has application because it was effective at the time of this hearing. Turning again to the question of the formula in deriving the number of patients in the census of the proposed service area, even assuming incompleteness or inaccuracies in the staff evaluation performed by the Health System Agency, the proof offered by the Petitioner in the bearing does not show utilization in excess of the 300-patient census. There are two health agencies now delivering home health care in Escambia County. Northwest Florida Home Health Agency, Inc., is one of those agencies and in its last complete reporting quarter prior to the hearing, there is an indicated patient census for April, which was 71; for May it was 77; and for June it was 73, totaling 221 patients, thereby constituting an average census of 74. This statement of census was established through the testimony of Arthur Long, Executive Director of Northwest Florida Home Health Agency, Inc. (His organization serves only patients who are enrolled with his service group.) Ms. Marian Humphrey, a public health nursing supervisor for the Escambia County Health Department, established the census in Escambia County for that Health Department as serviced by the Visiting Nurses Association, Inc. Beginning in January, 1979, the census was 101 Medicare patients; 14 Medicaid patients; 2 CHAD-PUS patients; 9 private patients and 71 free patients, the latter category being patients who do not pay for services. In February, 1979, there were 164 Medicare patients; 16 Medicaid patients; 2 CHAMPUS patients; 7 private patients and 72 free patients. In March, 1979, there were 128 Medicare patients; 9 Medicaid patients; 2 CHAMPUS patients and 11 private patients. In April, 1979, there were 147 Medicare patients; 13 Medicaid patients; 2 CHAMPUS patients and 9 private patients. In May, 1979, there were 165 Medicare patients; 12 Medicaid patients; 3 CHAMPUS patients; 7 private patients and 88 free patients. In June, 1979, there were 148 Medicare patients; 10 Medicaid patients; 2 CHAMPUS patients; 10 private patients and 61 free patients. In July, 1979, there were 150 Medicare patients; 10 Medicaid patients; 2 CHAMPUS patients; 10 private patients and 77 free patients. In August, 1979, there were 134 Medicare patients; 11 Medicaid patients; 2 CHAMPUS patients; 14 private patients and 96 free patients. The above-cited statistics demonstrate that the two current servicing agencies in Escambia County, Florida, in the preceding full quarter of 1979 which would have been April, May and June, considered separately do not exceed the average of 300 patients for that calendar quarter, nor did the statistics show excess of 300 in other reported quarters. By its Exhibit No. 8, the Petitioner presented statistics on the patient census in Okaloosa County and Santa Rosa County. These statistics were gathered by Blue Cross of Florida. The statistics of the Blue Cross survey show the patient Census services rendered by the Okaloosa County Health Department. These statistics only deal with the years 1977 and 1978 and are, therefore, not current. The most recent quarter in the report on Okaloosa County Health Department shows that in the last quarter of 1978, in-October the patient census was 9; November, the patient census was 14, and in December the patient census was 21. There is a provision in the Blue Cross report which deals with the Northwest Florida Home Health Agency, Inc.; however, these findings of fact defer to the testimony of Mr. Long which showed that in 1979, there was a patient census in April of 36; in May, a patient census of 38 and in June, a patient census of 40, for an average census of 38. The Blue Cross report shows that Santa Rosa County Health Department is the only home health care provider in that county. The most recent census reflected in that report is for January, February and March of 1979. In January the patient census was 41, in February the patient census was 35, and in March the patient census was 33. Analyzing this statistical data provided dealing with Okaloosa and Santa Rosa Counties, although some of the information is not current, it does demonstrate that the census did not exceed the average of 300 patients for the quarters that were reported in either county. In closing out an examination of the discussion of point 2 of the reasons for denial, it is noted that the Blue Cross report deals with the patient census of the Escambia County Health Department but this report is not as current as the presentation by Ms. Humphrey and the Humphrey report is accepted in lieu of the Blue Cross report. Reason 3 for denying the certificate of need talks about the failure of the Petitioner to demonstrate extenuating and mitigating circum stances which would allow a certificate to be issued, notwithstanding the fact that the current service agencies do not exceed the average census of 300 patients for the calendar quarter. Again, that provision of Rule 10-5.11(14)(b), Florida Statutes, states: Mitigating and extenuating circumstances which must be met for the department to issue a certificate of need for a proposed new home health agency or subunit even though the previously described need determination procedure does not clearly indicate need are: Documentation that the population of the proposed service area is being denied access to home health care services in that existing home health agencies or subunits within the proposed service area are unable to provide service to all persons in need of home health care, or Documentation that approval of such proposed new home health agency or subunit would foster cost containment for all providers in the health service area. The first provision under that subsection deals with the inability of the existing health agency to provide services to persons in need of home health care. In examining the question of the ability of the current organizations to provide the necessary health care, Escambia County will be reviewed first. In Escambia County, the Northwest Florida Home Health Agency, Inc., requires that their patients be registered with the organization and their office is open Monday through Friday from 8:00 a.m. to 4:00 p.m. After 4:00 p.m. on weekdays and on the weekends, a registered nurse is on call through the utilization of a "beeper" system. These services only apply to Medicare patients enrolled with the organization. To be enrolled it is necessary for the enrollment to have been achieved through a request by a physician. The Escambia County Health Department is open from 8:00 a.m. to 4:30 p.m. Monday through Friday and serves all classes of patients. There are on- call nurses who work on weekends. The nurses are called by the utilization of the Nurses Directory for Escambia County. The exception to these statements is that two days a year the services of the Escambia County Health Department are not available due to holidays. At night during the week those persons who are patients of the Escambia County Health Department are instructed to arrange for emergency treatment in the Emergency Room or ambulatory care at West Florida Hospital, assuming those patients cannot wait until the following morning for attention. Northwest Florida Home Health Agency, Inc., services Okaloosa County from an office in Fort Walton Beach, Florida. The exact nature of those services is as set out in the discussion of the services provided to patients in Escambia County. The exact details of other current services offered in Okaloosa County and Santa Rosa County were not presented by the Petitioner. Consequently, it was not possible to determine whether those services are adequate. The only evidence that touched on the issue of adequacy of services was testimony offered by one Ruby Savage, who is a volunteer member of the Regional Board of the Northwest Florida Subdistrict Council and a participant in project reviews. She stated that in her opinion there was a need for 24-hour service in Santa Rosa County. This testimony standing alone was insufficient to identify the need for further home health care services. The Petitioner has asserted that the services spoken of in the preceding paragraphs are not sufficient and examples of the lack of available services, according to the Petitioner, are shown on pages 65 through 68 of the transcript of the hearing. Therein are cited several examples of persons unable to receive necessary care of the type which the Petitioner desires to deliver. These examples are accounts given by Ms. Krumel from information purportedly given to her on the subject of the lack of service. Ms. Krumel in the course of the hearing made further comments to the effect that the individuals involved in the project review felt that the services in the question area were insufficient. Those opinions, while they may be true, are not the quality of evidence needed to sustain the Petitioner's contention that there is a need for further health care service in the area in question. The Petitioner made no further presentation on the question of lack of service and on balance the Petitioner has failed to show lack of service. The Petitioner offered testimony on the possibility of the utilization of population increases in the area as a criterion for increasing home health care services. While this criterion formerly appeared in Rule 10-5.11(14)(b), Florida Administrative Code, under the provisions of extenuating and mitigating circumstances, it is not found in the current statement of that rule and may not be used as a criterion for gaining the certificate of need. In discussing the issue of cost containment as outlined in the above- cited rule, the Petitioner made a general comment that if further services are not provided, patients will be required to receive services at emergency rooms, thereby voiding the possibility of cost containment which could be offered by granting the certificate of need to this Petitioner, who is willing to provide 24-hour home health care services. This statement standing alone is insufficient to show that the granting of the certificate of need to the Petitioner will foster cost containment. Finally, the fifth reason for denying the certificate of need was premised upon the failure of the Petitioner to provide financial feasibility data reflecting the inclusion of Medicare and Medicaid resources. The requirement for such data is found in Rule 10-5.09(5), Florida Administrative Code, which states: (5) Documentation showing that the project is financially feasible and can be accommodated without unreasonable charges for services rendered to include a projection of income and expense on a pro forma basis for the first two years of operation after completion of the project. Petitioner claimed at the hearing that it has failed to include this data because the inclusion of Medicare and Medicaid patients in its proposed services was a last minute item and no one in the evaluation process told them that they had to comply with this provision. At the time of the hearing the data was yet to be provided. Upjohn and Personnel Pool were afforded an opportunity to offer their testimony to establish in what respects they might be superior to the other applicant for a certificate of need, assuming that only one certificate of need was to be granted. The two Petitioners did not wish to make any direct attack on the special qualifications of the collateral Petitioner. Both parties proceeded on the basis of offering their remarks to be available for comparison if the contingency were realized which required that only one certificate of need be issued. It is not necessary to detail the special qualifications of these Petitioners, because no certificate of need will be recommended for issuance in Escambia County, Florida, the location in which Upjohn and Personnel Pool are potential competitors for a sole certificate of need. Nonetheless, the facts offered in support of the special qualifications of Upjohn may be found in the transcript of record, pages 187 through 190. The testimony on Personnel Pool's special qualifications may be found in the transcript of the hearing on pages 228 and 251 through 256.
Recommendation This recommendation is being entered in view of the Facts and Conclusions of Law in this case and those Facts and Conclusions of Law in the companion case, D.O.A.H. No. 79-1748, Personnel Pool of Pensacola, Inc. d/b/a Medical Personnel Pool v. State of Florida, Department of Health and Rehabilitative Services. Upon consideration of the Facts herein and the Conclusions of Law, it is recommended that the Petitioner, Upjohn Healthcare Home Health Agency be denied its request for a certificate of need to serve Escambia, Okaloosa and Santa Rosa Counties, Florida. It is further recommended that the agency in entering its final order do so by a process of simultaneous review of this Recommended Order and the Recommended Order entered in D.O.A.H. Case No. 79- 1748, Personnel Pool of Pensacola, Inc. d/b/a Medical Personnel Pool v. State of Florida, Department of Health and Rehabilitative Services, and that final orders be entered on the same date with copies to be served on the representatives of each applicant in this case and in the companion case mentioned above. CHARLES C. ADAMS, Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: Vivian Krumel, R.N. Mr. Art Forchand, Administrator Service Director Office of Community Medical Facil. Upjohn Healthcare Services Department of Health and 15 West Strong Street Rehabilitative Services Old Townhouse Square 1323 Winewood Boulevard Pensacola, Florida 32501 Tallahassee, Florida 32301 Mr. John Owens Mr. Joe Dowless Zone Manager, West Florida Office of Licensure and Cert. Upjohn Health Care Services Department of Health and 3118 Gulf to Bay Blvd. Rehabilitative Services Clearwater, Florida 33519 Post Office Box 210 Jacksonville, Florida 32202 Charles T. Collette, Esquire Departnt of Health and Mr. Herbert E. Straughn Rehabilitative Services Office of Cozmunity Medical Facil. 1323 Winewood Boulevard Department of Health and Tallahassee, Florida 32301 Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301 Sherrill E. Phelps Governmental Affairs Representative Personnel Pool of America, Inc. 303 Southeast 17th Street Fort Lauderdale, Florida 33316 Mr. Thomas S. Siler Owner/Administrator Personnel Pool of Pensacola, Inc. 1800 North Palafox Street Pensacola, Florida 32501
The Issue Whether the applications for certificate of need numbers 8380, 8381, 8382 and 8383, filed by Petitioners RHA/Florida Operations, Inc., Care First, Inc., Home Health Integrated Health Services of Florida, Inc., ("IHS of Florida,") and Putnam Home Health Services, Inc., meet, on balance, the statutory and rule criteria required for approval?
Findings Of Fact Care First The Proposal Care First, the holder of a non-Medicare-certified home health agency license, was established in March of 1996. Owned by Mr. Freddie L. Franklin, Care First is the successor to another non-Medicare-certified home health agency also owned by Mr. Franklin: D. G. Anthony Home Health Agency ("D. G. Anthony"). Established in May of 1995, D. G. Anthony provided over 10,000 visits in its first 10 months of operation mostly in Leon and Wakulla Counties, pursuant to a contract with Calhoun-Liberty Hospital Association, Inc. Very few of the 10,000 patients were referred to D. G. Anthony by Calhoun-Liberty; they became D. G. Anthony's patients through community-based networks, including physicians, created through the efforts of Mr. Franklin and D. G. Anthony itself. D. G. Anthony was dissolved in 1996. Both its patient census and its staff of 45 were absorbed by Care First. D. G. Anthony's contract with Calhoun-Liberty was substantially assumed by Care First so that it provided service to Medicare patients as Calhoun-Liberty's subcontractor. From the point of view of the federal government, the Medicare patients served by Care First were Calhoun-Liberty's patients, even those who had not been referred to Care First by Calhoun Liberty and who had been referred from other community sources. Care First, therefore, was simply a sub- contractor providing the services on Calhoun-Liberty's behalf. The contract was terminated effective December 1, 1996. Calhoun-Liberty was free to terminate Care First with 30 days notice, a peril that motivated Mr. Franklin to seek the CON applied for in this proceeding. With the termination of the contract, Care First ceased serving Medicare patients, "because Mr. Franklin did not want to enter into another subcontractor arrangement because of all the issues and problems," (Tr. 934,) associated with such an arrangement. Mr. Franklin is involved with nursing homes as the administrator at Miracle Hill Nursing Home in Tallahassee. He is an owner of Wakulla Manor Nursing Home in Wakulla County, and he owns a 24 bed CLF, Greenlin Villa, also in Wakulla County. Miracle Hill has the highest Medicaid utilization of any nursing home in District 2. Both Miracle Hill and Wakulla Manor are superior rated facilities. On the strength of Mr. Franklin's extensive experience with community-based organizations and health care services, as well as Care First's succession to D. G. Anthony and other historical information and data. Care First decided to proceed with its application. In the application, Care First proposes to establish a home health agency that, at first, will serve primarily Franklin, Gadsden, Jefferson, Leon, Liberty and Wakulla Counties. It plans to expand into Madison and Taylor Counties in its second year of operation. Five of these eight counties have high levels of poverty; six of the eight are very rural, with the population spread widely throughout the county. Ninety-six percent of Care First's patients are over age Minority owned, approximately 65% of the patients are members of minorities. Many of the patients live in rural areas and are Medicaid recipients or are uninsured low income persons who do not qualify for Medicaid but cannot afford home health care. Since it will be serving the same patient base as a Medicare-certified agency, Care First has committed to the provision of 7% of its visits to Medicaid patients and 1% of its visits to patients requiring charity/uncompensated care. Care First projects 18,080 visits in its first year and 29,070 in its second year. Care First will promote efficiency through the use of a case management approach. Each patient will be assigned a case manager who will act as the patient advocate to provide care required and to identify and assist the patient with access to other "quality of life" enhancing services. Care First proposes an appropriate mix of services, including skilled nursing, physical therapy, speech and language therapy, occupational therapy, home health aide services and social services. Care First estimates its total project cost at $25,808. Of this amount, $2,000 is indicated as "start-up cost", with nothing allocated to salaries. Care First indicates no "capital projects" other than its proposal for the home health agency in District 2. Care First's proposal would be funded from a $60,000 bank line of credit. Projected Utilization Potential patients will be able to gain access to Care First through several avenues, including physician referral, hospital referral, nursing home discharge, assisted living referrals from community agencies and organizations such as Big Bend Hospice and through private referral. In addition, there are several natural linkages to the community for Care First. Wakulla Manor and Miracle nursing facilities offer Care First's services to discharged residents in need. Very often, residents and families choose Mr. Franklin's agency because they are familiar with him, staff or the quality of care provided. Residents of Greenlin Villa, owned by Mr. Franklin, frequently chose Care First when in need of home health agency services. Mr. Franklin's civic, church, and community involvement is impressive. He is president of the Florida Health Care Association, chairman of the board of the Tallahassee Urban League, superintendent of the Wakulla County Union Church Group, and serves on the advisory board for the Allied Health Department for Florida A&M University. In the past, he has served on the Board of Trustees of Tallahassee Community College. He was accepted as an expert in long-term care administration in this proceeding based in part on his service on the Governor's Long Term Care Commission. Miracle Hill has held a "Superior" licensure rating for the last ten consecutive years. It is the highest rating awarded by the AHCA licensure office and is intended to blazon the high quality of care provided by the facility. Although reported through Calhoun-Liberty, very few of D. Anthony's and Care First's past referrals have been generated through that affiliation. Rather, they have come through community contacts and getting the referrals from "talking with physicians," (Tr. 922), in Tallahassee and the surrounding areas, many of whom Mr. Franklin has gotten to know through his post as Administrator of Miracle Hill Nursing Home. By far, it is through physician referrals that Care First receives most of its patients. Care First's physician referral list includes 47 doctors who referred patients to D. G. Anthony since May, 1995. These doctors practice in urban areas and some have rural clinic offices which they staff on certain days of the week. Physicians are willing to refer patients to Care First because of the quality of care which has been provided by Care First, as well as the reputation of its owners. The Care First application included letters of support from eight physicians who have referred patients to Care First in the past and state that they will continue to support Care First with referrals in the future. Among the letters included are those from Dr. Earl Britt, a practitioner of internal medicine and cardiology in Tallahassee, and Dr. Joseph Webster, who practices internal medicine and gastroenterolgy in Tallahassee. Many of the patients of these two physicians are elderly. Dr. Britt's patients often have chronic hypertension or heart disease, are diabetic or suffer strokes. These two physicians provided over half the total number of patient referrals to D.B. Anthony and Care First. Dr. Britt and Dr. Webster established through testimony that Freddie Franklin and Care First have an excellent reputation for provision of quality of care and enjoy significant support among physicians within the service area. Moreover, Dr. Britt, although based in Tallahassee, stressed the importance of Care First's proven ability to provide home health services in the rural setting both from the standpoint of understanding the needs of the rural patient and from being able to travel over rural terrain in order to deliver services. (Tr. 1151, 1152, 1154). Approximately 11,500 visits were performed by D. G. Anthony staff from the period of May 1995, through April 1996, before they became the staff of Care First. Since the agency has established a presence in the district and has physician and other referral mechanisms in place, it is reasonable to project that Care First will continue to grow and will experience between 18,000 and 20,000 visits in its first year and 28,000 to 31,000 visits in year two as a Medicare-certified home health agency. These projections stem from the historical and very recent monthly growth of D. G. Anthony, as well as demand it is experiencing from Franklin and Jefferson Counties, two counties it does not serve regularly at present but plans to serve regularly in the future. The reasonableness of Care First's projections is bolstered by the conservative number of visits per patient the projections assume, 35, when typically Medicare-certified agencies average at least 35 visits and as many as 60 visits per patient. Care First's utilization projections are reasonable. It enjoys an excellent reputation for quality of care and ability to deliver services. Together with its predecessor, D. G. Anthony, it has a proven track record and has benefited from a referral network that remains in place. These factors, together with the conservative assumptions upon which its projected utilization is based demonstrate that its projected utilization is reasonable. Financial Feasibility of Care First The total project cost for the Care First agency is projected to be $25,808. The majority of the costs are reasonable for this type of health care project. The majority of the project development costs, the application fee and much of the cost of the consultant and legal fees, have already been paid by Care First. Care First's Schedule 2 was prepared in conformance with the requirements of the agency and accurately lists all anticipated capital projects of Care First. The necessary funding for the Care First project will come from Care First's existing $60,000 line of credit with Premier Bank, in Tallahassee. This method of funding the project is reasonable, appropriate, and adequate. Care First has demonstrated the short term financial feasibility of its project. Care First's schedule 6 presents the anticipated staffing requirements for its home health agency. The staffing projections are based upon the historical experience of D. G. Anthony and Care First, taking into consideration the projected start-up and utilization of the agency. The projected salaries are based upon current wages being paid to Care First employees, adjusted for future inflation. Care First's schedule 6 assumptions and projections are reasonable, and adequate for the provision of high quality care. The staffing proposed by Care First is sufficient to provide an RN or an LPN and an aide in each of the eight counties Care First proposes to serve in District 2. Care First's schedule 7 includes the payor mix assumptions and projected revenue for the first two years of operation. Medicare reimburses for home health agency services based upon the allowable cost for providing services, with certain caps. The Care First revenues by payor type were based upon the historical experience of D. G. Anthony and Care First, as well as the preparation of an actual Medicare cost report. The Care First payor mix assumptions and revenue assumptions are reasonable. Care First's projection of operating expenses in Schedule 8A is also based on the historical experience of D. G. Anthony and Care First, as modified for the mix of services to be offered and the projected staffing requirements. The use of historical data to project future expenses adds credibility to the projections. Care First's projected expenses for the project are reasonable. The Care First application presents a reasonable projection of the revenues and expenses likely to be experienced by the project. Care First has reasonably projected a profit of $8,315 for the first two year of operation. Care First's proposal is financially feasible in the long term. As the result of its community contacts, Care First has been offered the use of donated office space in Franklin, Jefferson, Wakulla, and Gadsden counties. The use of donated office space will decrease the cost of establishing a physical presence and providing services in those counties since Care First will not have a lease cost for a business office and a place to keep supplies. Quality of Care Through the experience of D. G. Anthony, Care First has identified the particular needs of the community it served. This experience has been carried over into Care First's provision of services. In the 9 months of Care First's existence at the time of hearing, it provided quality of care. Its predecessor, D. G. Anthony, also provided quality of care. While Care First's experience is relatively limited, there is no reason to expect, based on the experience of both Care First and its predecessor D. G. Anthony, that quality of care will not continue should its application be granted. IHS of Florida The Application IHS of Florida is a wholly-owned subsidiary of Integrated Health Services, Inc. ("IHS") formed for the specific purpose of filing CON applications. IHS operates other home health agencies under other subsidiary names. Pernille Ostberg is a senior vice president of the Eastern Home Care Division of Symphony Home Care Services, Integrated Health Services. In that capacity she oversees nearly 195 operations in six states, including Florida. Her operations include home health agencies, durable and medical equipment distributions, and infusion therapy offered by pharmacists. Under Ms. Ostberg's guidance, IHS has grown to its current roster of 195 agencies in only three years, from a beginning of only five agencies. IHS first acquired Central Park Lodges, primarily a nursing home company which also owned five home health agencies. Once these agencies became Medicare certified, IHS made a corporate decision to acquire additional Medicare certified home health agencies. Beginning approximately three years ago, IHS undertook a series of acquisitions which included Central Health Services, Care Team, ProCare/ProMed, and Partners Home Health. More recently, IHS has acquired the Signature Home Health and Century Home Health Companies. And, immediately prior to the final hearing in this matter, IHS acquired First American Home Health Care, making IHS the fourth largest provider of home health services in America. Of all the home health agencies overseen by IHS, 95% are Medicare certified, and 62-63 are located in Florida. IHS now has a presence in all districts except District 1 and 2. IHS personnel also have extensive experience in starting up new home health agencies. IHS personnel have opened over 40 locations across the United States. IHS employees have extensive experience bringing new home health agencies through successful surveys by the Joint Commission on the Accreditation of Hospital Organizations ("JCAHO") recommendations. Of 18 branches personally taken through initial survey by IHS's Pernille Ostberg, none were recommended to change their operations and none were cited for a deficiency. IHS has recently opened, licensed, and certified new home health agencies in AHCA Service District 5, 6, and 10. They have also received licensure in District 7, 8, and 11. Based on the extensive expensive of IHS personnel, a start up home health agency typically experiences 8,000 - 15,000 visits per first year. Opening a new program requires two months for licensure. It will require a registered nurse for three months to make certain all manuals are in place and that quality personnel are recruited. After achieving licensure, one must wait for a certification survey, which may take as long as six months. The three IHS home health agencies that became certified recently have experienced 200 visits in the first month, a good sign of growth. IHS' umbrella organization for home health organizations is Symphony. Most of their home health companies retained their original names. Other IHS home health companies include ProCare, Central Health Services, Partners Home Health, Nurse Registry, and First American. IHS of Florida has applied for applications in other districts. This applicant filed applications in District 7, 8 and 10 and each were approved. IHS of Florida's CON application number 8382 was prepared by Patti Greenberg with the significant input of IHS and IHS of Florida's operational experts. Ms. Greenberg has prepared 75-100 CON applications, 20-25 of which sought approval for Medicare Certified Home Health Agencies. Each of these prior applications had been approved or otherwise reached settlement before litigation. The Proposed Project Once the needs analysis was complete, IHS examined geographic issues within the 14 county district. IHS examined where the populations required home health agencies and what niche of the market IHS could expect to achieve. Projected visits were determined by examining month by month, how this agency would grow. This projected utilization was subdivided among sub-visit types. Existing IHS home health agencies visit mix (skilled nursing as opposed to home health aide or therapy visits) was used to estimate skill type of the projected total volume. The projected utilization was also subdivided by payor class. This payor class projection was derived specifically for District 2, its poverty levels and its managed care penetration. In the aggregate, IHS projects 7,650 visits in year one and 17,100 visits in year two. This projection is reasonable and achievable. Witnesses for the Agency agreed that IHS of Florida's projected number of visits was "definitely attainable". Past and Proposed Service to Medicaid Patients and for Medically Indigent The payor class analysis allowed IHS to conclude it should condition its approval of its application under the performance of 5% Medicaid and 1% charity care. The balance of the population served by an IHS Medicare Certified Home Health agency would be covered by Medicare. The condition is important as it is a requirement which, if not achieved, will subject IHS of Florida to fines and penalties by the agency. Improved Accessibility The applicant will improve the efficacy, appropriateness, accessibility, effectiveness and efficiency of home health services in District 2 if approved. IHS of Florida will provide good quality of care, should its application be granted. Quality of Care Through competitive forces, the applicant's approval will also improve the quality of care offered by home health agencies in District 2. The approval of IHS of Florida's application will also comply with the need evidenced by the extent of utilization of like and existing services in District 2. Economies from Joint Operations Certain economies derived from the operation of joint projects are achieved by IHS of Florida's proposal. IHS has a home office and corporate umbrella which oversees all of its operations for home health services. This master office offers economies of sale by sharing resources across a wide array of home health agencies in Florida and other states. Thus, the incremental expense for corporate overhead is reduced as compared to a free-standing home health agency. Additionally, this national oversight provides better economies to provide the most recent policies and procedures, billing systems, and other systems of business operation. Financial Feasibility IHS of Florida has the resources to accomplish the proposed project. As demonstrated on schedule 1, and schedule 3 of IHS exhibit 1, the budget for the project is only $144,000. This budget includes all appropriate equipment for both the initial and satellite offices. Budgeted amounts include all required lease expenses, equipment costs and even start-up costs such as salaries for the recruitment of training and staff prior to opening. In total, $52,000 of pre-opening expenses are projected, which is reasonable. IHS of Florida filed applications for other home health agency start-ups in three different districts. The applicant had more than $180,000 in cash on hand and an additional $226,000 assured from a commitment letter from IHS which was also contained in the application. A letter of commitment from Mark Levine, a director and executive vice president of IHS, indicated IHS will provide $250,000 in capital for this specific project. Additionally, IHS will provide up to $1 million in working capital loan to assure no cash flow problems ever arise. A similar letter of commitment appears in each of the CON applications which IHS of Florida has filed. IHS has committed to fund each of the CON applications applied for by IHS of Florida. Each of these letters of commitment for the various CON applications sought by this applicant are on file with the AHCA. In total, the applicant projects $600,000 in capital commitments assured. IHS' balance sheet, reveals access to $60 million in cash and cash equivalent. The record clearly demonstrates an ability of IHS to fund all capital contributions required by the applicant. The current assets of IHS approximate $240 million. In addition to having cash in the bank, IHS is a growing concern and is, in fact, a Fortune 500 company that is publicly traded on the New York Stock Exchange. IHS generates revenues which exceed its annual expenses. In the last year, IHS derived $30 million more than it experienced in expenses. The application is financially feasible in the short- term. IHS' application is also feasible in the long-term. IHS of Florida's utilization projections are reasonable. Budgeted staffing and salaries are reasonable. The cost limit calculation and reimbursement calculation by payor source, which is provided in great detail in Schedule 5 of IHS of Florida's application, is reasonable. Projected expenses associated with this project were reasonably calculated based on the actual experience of other IHS Home Health operations. The reasonableness of these costs are also demonstrated when compared with the cost per visit by existing agencies in District 2. In fact, IHS of Florida predicted it would be a lower cost provider than the expected cost of existing agencies at the time IHS of Florida's operations would begin. IHS of Florida's proposal will have a healthy, competitive effect on the cost of providing services by other providers. Putnam The Proposal Putnam proposes to establish a Medicare-certified home health agency with its primary office located in Bay County. Bay County was selected as the primary office based upon the locations of existing and approved agencies in District 2, the aggregate utilization of each, and the number of individuals aged 65 and over distributed among the existing District 2 counties and agencies. Mr. Alan Anderson is Putnam's sole stockholder, Director, and President. Under the ownership and administration of Alan Anderson, Putnam has provided Medicare-certified home health services in AHCA District 3 continuously since 1986. Mr. Anderson is also the sole owner, director, and president of Anderson Home Health, Inc., a Medicare-certified home health agency serving AHCA District 4 since 1992. Anderson Home Health's CON was obtained by Putnam through the same process undertaken by the prospective applicants in this proceeding. Putnam's District 3 agency has successfully served District 3 residents since 1986 at first through its Palatka office, then growing to its current size of four offices. In District 4, Anderson Home Health, Inc. has also experienced successful operations having grown from its principal office in Duval County to a total of four offices. Putnam's District 3 home health agency began with the original office located in Palatka, followed by offices opened in Gainesville, Ocala and Crystal River. Anderson Home Health, Inc.'s District 4 operation began with the original office located in Jacksonville; the second office was opened in Daytona Beach, followed by the opening of the third office in Orange Park; and the fourth office was opened in Macclenny. Putnam's District 3 agency is JCAHO accredited "with commendation." As part of CON application No. 8383, Putnam has agreed to certain conditions upon award. First, the proposed project will locate its primary office in Bay County. Putnam also conditions its approval with the provision that 0.25% of its admissions will be persons infected with the HIV virus. Four percent of its patients will be Medicaid or indigent patients. Finally, Putnam has conditioned its approval upon the provision of various special programs such as high tech home health services, a volunteer program, and the establishment of a rural health care clinic. History or Commitment to Provide Services to Medicaid and Indigent Patients For Medicare reimbursement purposes, Putnam proposes to maintain a Medicare-only agency and private sister agency which provides services to non-Medicare patients. The private sister agency will provide service to the Medicaid and indigent patients. The costs of providing services to these non-paying or partial paying patients will be absorbed by the agency as a contribution to the community. The establishment of a private sister agency to handle the non-Medicare patients is common in the home health industry. As a condition in the application, Putnam will accept up to 3.0% Medicaid patients. Although it stated in its application that it would accept between .5%-1.0% indigent patients, its conditioning of the application on 4.0% Medicaid and indigent patients would necessitate that it accept at least 1.0% indigent (if not more, should the Medicaid patients fall below 3%) in order to meet the 4.0% Medicaid and indigent care condition. The percentages proposed by Putnam are consistent with the statewide average (approximately 95% Medicare) and the District average (approximately 92.1% Medicare). Bay County's average of Medicare patients is approximately 96.4% Medicare. To meet the 4.0% Medicaid and indigent condition, Putnam's average of Medicare patients might have to be less than the Bay County average but not by much. Certainly, meeting the condition is achievable. The agency's position is that Putnam's Medicaid/indigent commitment is not a ground for denial of the application. Quality of Care Putnam has continuously owned and operated a licensed Medicare-certified home health agency in District 3 since 1986 and has been JCAHO accredited with commendation status since 1994. In an effort to continuously provide quality care, Putnam has developed a comprehensive set of policies and procedures to guide its staff, its physicians, volunteers, patients, as well as patients families. No evidence was presented to suggest that Putnam does not have a history or ability to provide quality care. Availability of Resources, Including Health Manpower, Management Personnel and Funds for Capital and Operating Expenditures Putnam has provided Medicare-certified home health service to the residents of District 3 for ten years. Putnam will be able to share its existing personnel and operations expertise with the proposed District 2 agency. Administrative, Managerial, and Operational Personnel Putnam intends to utilize existing administrative personnel in the start up and overall operation of the proposed agency. These management personnel include the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Data Processing Director, Director of Volunteers, Personnel Director. These experienced personnel will be available to provide valuable management support to the proposed agency. The proposed agency will be operated by an administrator who will report directly to Putnam's CEO, Alan Anderson. The agency's administrator will be actively involved in budget preparation, physician relations, community education, and preparation for regulatory agency surveys. The proposed agency will rely upon the demonstrated experience of key personnel in its initiation. Ms. Nora Rowsey, experienced in the start-up phases of home health agencies, will personally supervise and implement the start up phase of the proposed District 2 agency. Putnam intends to hire individuals to work within the proposed agency who already have experience in the provision of the necessary services. Current employees of Putnam's as well as contract personnel of the District 3 agency have indicated a willingness to provide services in Bay County once the application is approve. Funding and Capital Resources Putnam projects the total costs of initiating the proposed agency to be approximately $70,000. Putnam has simultaneously applied for two other Medicare-certified home health agencies, in Districts 6 and 7. Each of these projects area also projected to cost approximately $70,000. Putnam, therefore, has projected costs associated with all three projects of approximately $210,000. Additionally, there is a $10,000 contingency cost related to the District 3 offices bringing the total expenditure for all capital projects of $220,000. Putnam's application includes two letters from First Union National Bank of Florida which substantiate that there are funds on hand to finance all of Putnam's capital expenditures, including the District 2 proposed agency. As of April 18, 1996, Putnam's bank account had a twelve month average balance of $245,949.02. As of April 18, 1996 the accounts of both Putnam and Anderson Home Care Inc., had a combined twelve month average balance of $676,656.93. The evidence established that these funds exist and are available for all proposed capital projects. In the two years prior to hearing, Putnam showed sound management, significant growth, and a strong financial position. It continues to do so. In an interoffice memorandum dated May 28, 1996, from Roger L. Bell to Richard Kelly, Health Services and Facilities Consultant, Putnams' financial position was described as follows: The current ratio of .62 indicates the current assets are not adequate to cover short term liabilities. The long term debt to equity and equity to assets ratios are very weak. This, along with the negative equity make a weak financial position. The profit margin at .1% is also very weak, and raises some concern with the applicant's ability to cover operating expenses . Putnam Ex. No. 4. This criticism was answered by Putnam. The agency may not have considered certain factors applicable to a predominantly Medicare-reimbursed home health agency. Putnam's current liabilities are payable in a longer term than the receivables are collectible. Furthermore, with provision of 98% Medicare services, which is solely cost reimbursed, there remains only two percent of the operation left to make a profit. A .1% profit from the small amount of insurance and private pay patients indicated financial health. Putnam, moreover, is a viable operation because of its historical success, its knowledge of the industry, its expansion to six locations, its growth in staff, and its growth in patient visits. Putnam has the resources available to provide the necessary administrative, managerial, and operational manpower needed by the proposed home health agency. AHCA's financial criticisms are unfounded; Putnam has on hand the capital necessary for the accomplishment of the proposed project. Putnam has the experience and know-how to make the proposed project work in District 2's rural areas. Financial Feasibility Putnam has the resources to implement this project if approved. Putnam has the same capability that existed when three offices were opened during the period from April 1992 through February 1993, and the same resources when four offices were opened in 1995. In every instance, the new offices were started up with cash on hand from operation. Mr. Anderson, Putnam's President and sole shareholder and director, testified that he spends much time in the financial area of the operations. As of November 29, 1996, after deducting all accounts payable, Putnam has a cash balance of approximately $390,000. Anderson Home Health, Inc. had a balance of approximately $425,000. Mr. Anderson testified that the First Union letters in the application at pages 231 and 232 were correct and that Putnam is in even better shape now than when the letters were written. Putnam is financially feasible in the short term. AHCA contends Putnam's project is not financially feasible in the long term because the projected visits stay the same in the second year and because it does not project a profit in year two of operation. This fails to take into account Putnam's performance over the past ten years which, as the agency conceded at hearing, is an important consideration . Mr. Anderson purchased Putnam in 1986. At that time the agency had a single office in Palatka doing 4,000 visits. Following Mr. Anderson's purchase of the agency it had grown to over 55,000 visits and close to a hundred employees. After the success experienced by Mr. Anderson in Palatka, Putnam filed a CON application for District 4, with a proposed principle site in Jacksonville. The District 4 CON was approved by the agency--without any concerns for financial feasibility nor with any concerns for Putnam's cash flows. Without having any experience or referral sources in Jacksonville, Putnam began doing approximately 7,000 visits. The number of visits jumped to 45,000 in the second fiscal year, 123,000 in the third fiscal year, and as of September 30, 1996 the Jacksonville office performed 158,000 visits. Aside from the extraordinary growth experienced in the Palatka and Jacksonville offices, already discussed, Putnam has opened rural offices also doing very well. The Macclenny office in rural Baker County had over 15,000 visits in the first twelve months and is currently averaging over 1800 visits. The Crystal River office in rural Citrus County made over 12,000 visits in its first year and is currently doing approximately 1400 visits a month. Every new office opened by Putnam or Anderson Home Health since 1991 has been break even or better. Putnam has a proven track record for the successful and profitable operation of new Medicare-certified home health agencies. Putnam's project is financially feasible in the long term. Utilization Projections The application sets forth reasonable utilization projections. Based on Putnam's utilization in the past, there is no reason to believe the projections set forth in the application are or unreasonable or will not be achieved. Impact on Costs Putnam is a high tech provider of home health services and will provide some services not currently available or available only in a limited number of agencies. The impact of approval of Putnam's application on costs in the District will be minimal due to the reimbursement issues associated with Medicare which is cost based. RHA A Not-for-Profit Corporation in District II RHA is not-for-profit corporation whose purpose is to provide a continuum of care to the community. All profits are returned to its nursing homes or agencies as a way of continuing to build the programs. RHA owns two nursing homes in AHCA District II; Riverchase Care Center in Gadsden County and Brynwood Center in Jefferson County. If approved, RHA is proposing to locate its Medicare certified home health agency in existing space within the Riverchase and Brynwood nursing facilities. Both of these facilities are managed and operated by HealthPrime, Inc., a company which operates approximately 40 facilities in 13 states. While RHA is technically the owner and therefore applicant for this CON, HealthPrime would operate the proposed Medicare certified home health agency within the nursing homes. RHA's home health agency would have two offices. The office located in the Riverchase facility would serve Gadsden, Liberty, Franklin, Gulf, Wakulla, Jackson, Calhoun, Washington, Holmes and Bay Counties. The office located in the Brynwood facility would serve Leon, Jefferson, Madison and Taylor Counties. Financial Feasibility The only questions raised by AHCA concerning RHA's financial feasibility went to the ability of RHA to fund this project in conjunction with other CON projects listed on Schedule 2 of its CON application. The largest project on Schedule 2 of RHA's application was a CON application for a 20 bed addition to Riverchase Care Center. At hearing it was determined that since the filing of the instant home health CON application, the 20 bed application had been withdrawn, was no longer viable, and was not being pursued by RHA. Once AHCA's financial expert learned that the 20 bed addition to the Riverchase Care Center had been administratively withdrawn and that its costs should therefore no longer appear on Schedule 2, questions about the financial feasibility of the project were resolved. RHA's project was shown to be financially feasible in the short term based upon the financing commitment of HealthPrime. RHA proved that its assumptions and projections made in its financial analysis are reasonable. These assumptions were based on actual experience in the operation of similar skilled nursing facility based home health agencies, as well as prior experience of other home health agencies in their first two years of operation. RHA's proposed project shows a net income in years one and two and is financially feasible in both the short and long term. Availability and Access of Services To the extent that the number of people needing home health care will increase in the future, there is need for new providers of home health services to provide such availability and access. RHA's willingness to condition its application on service to AIDS, indigent and Medicaid patients can only improve the availability and access to services in the district. In addition, RHA's approval to provide nursing home based home health services is unique to the provision of home health services in District II. Efficiency RHA's proposal, which would place its home health agency within its nursing homes, is unique among the applicants in this proceeding. Such an arrangement provides not only an efficient continuum of care to the patients, it also provides efficiencies and cost savings in the sharing of resources. RHA's proposed project is cost effective because it utilizes existing space and equipment in its nursing homes. Skilled nursing home based Medicare certified home health agencies are specifically recognized by the Federal Medicare program in their cost reports. Home health reports are filed as a part of the nursing home cost report and there is an allocation of the nursing home's cost to the home health agency. This benefits both the provider and the Medicare program through cost savings. RHA's cost per visit to the Medicare program of $48 will be substantially less than the District II average of $66 per visit projected for the time RHA will be operational under the applied- for CON. RHA's proposed project will have no impact on its costs of providing other health care services. Appropriateness and Adequacy RHA proposes to provide the entire range of home health services throughout the district. Given the project need in the planning horizon, RHA's proposal is more than adequate to meet the demand for such services. Quality of Care An applicant's ability to provide quality care is another important factor in statutory and rule criteria. RHA and HealthPrime have shown, through operation of their nursing homes in Florida, all of which have superior ratings, that they have the ability to provide quality health care. In addition, HealthPrime, which will actually operate the home health agency, has experience operating four other nursing home based home health agencies. HealthPrime will utilize its quality assurance programs already in place in its other home health agencies and will seek JCAHO accreditation of this proposed agency. By combining a home health agency with its existing nursing homes, RHA will improve the case management of its patients by providing vertical integration of its services in a continuum of care. Such continuum of care provides a stability in personnel and providers that are working with the patient. Economies and Improvements from Joint or Shared Services As previously discussed, RHA's unique proposal to operate a nursing home based home health agency not only offers a continuum of care for the patient, it also provides fiscal economies to the agency as well as the Medicare program. Resource Availability Based on RHA's experience of hiring personnel for its existing nursing homes in the district, there will be no problem in hiring sufficient personnel for RHA's agency. Fostering Competition The addition of other Medicare certified home health agencies in a district consisting of 10 counties and only 23 providers will promote increased competition and more options for patients. Findings Applicable to All Four Applicants No Fixed Need Pool The agency has no rule methodology to determine the need for Medicare-certified home health agencies. The agency's most recent home health need methodology was invalidated in Principal Nursing vs. Agency for Health Care Administration, DOAH Case No. 93-5711RX, reversed in part, 650 So.2d 1113 (Fla. 1st DCA 1995). There is, therefore, no numeric need determination, or "fixed need pool", established by the agency applicable in this proceeding. District 2 AHCA District 2 is composed of 14 counties. The applicants propose to concentrate their service in various, different parts of the district. Local and State Health Plan Preferences District 2 Health Plan Services to Medicaid and Medically Indigent The first preference under the District 2 Health Plan provides a preference to applicants with a history of providing services to Medicaid or medically indigent patients or commitment to provide such services in the future. Mr. Franklin of Care First has such a history. He is an owner of Wakulla Manor, which had a Medicaid occupancy rate of 88.09% for the period of July-December, and the administrator of Miracle Hill Nursing Home which had a Medicaid occupancy rate of 95.74% for the same period. In the face of such a record, Care First’s commitment of 7% Medicaid and 1% uncompensated/charity patients might seem to pale. But it is a significant commitment, given the nature of the home health agency business, and one upon which Care First agrees its application should be conditioned. IHS conditioned its application on 5% Medicaid and 1% charity care. Putnam conditioned its application on an “Indigent and Medicaid participation equal[ling] 4.0%.” Putnam Ex. No. 1, pg. 51. Putnam, moreover, proposes a Medicare-only agency. Establishment of a private sister agency, a practice common in the home health care industry, will allow Putnam to provide service to the Medicaid and indigent patients separate from its Medicare-only agency. RHA has provided a high percentage of Medicaid/charity days at its Riverchase facility (92.10%) and at its Brynwood facility (90.24%). In addition, RHA is willing to condition its CON on the provision of a minimum of 1% of annual visits to indigent care and 5% to Medicaid. Service to Unserved Counties. Preference 2 states that “[p]reference should be given to any home health services CON applicant seeking to provide home health care services in any county within the District which is not presently served by a home health agency.” There are no counties within District 2 that are not presently served by a home health agency. Service Through a County Public Health Unit Preference 3 states that “[p]reference should be given to a home health services CON applicant seeking to develop home health care services to be provided through a county public health unit in the district in order to more adequately serve the elderly and medically indigent patients who are isolated or unable to travel to permanent health care sites." Of the four applicants, only IHS of Florida’s application is conditioned on working with public health units. IHS has experience working with public health units, working with them currently in Martin County, Manatee County and Broward County. Nonetheless, IHS of Florida will not be providing its services “through” a public health unit. Public Marketing Program Preference 4 states, “[p]reference should be given to a home health services applicant who has a history of providing, or will commit to provide, a public marketing program for services which included pamphlets, public service announcements, and various other community awareness activities. These commitments should be included on the granted CON as a condition of that CON.” Care First currently markets its services to the community and commits to a public marketing program in the future as a condition of its CON. IHS of Florida committed to performing at least one community awareness activity per calendar quarter as a condition of its application. It also indicated, moreover, that it would work to develop public service announcements and marketing programs with the help of public health units or any other appropriate vehicle. The latter indication, however, was not made a condition of the application. Putnam provides educational services to the community, its employees, patients and patients’ families, including the provision of pamphlets, and presenting audio and video tapes as appropriate to the patient and their families. Putnam, however, did not condition its application on a commitment to a public marketing program or commit to such a program in any other way in its application. RHA stated it would accept a condition on its CON to provide a public marketing program for services, including pamphlets, public service announcements and other community awareness activities. It did not reflect such a condition on the “Conditions” page of the application, but, given its statement that it would accept such a condition, there is nothing to prevent the agency from imposing such a condition should it grant RHA’s application. Access Requirements Preference 5 is, “[p]reference should be given to a home health services CON applicant who agrees, as a condition of the CON, to meet the following access requirements for each county in which services are provided: 1) 24 hour local telephone call (or toll-free) contact. 2) 24 hour call/response capability. 3) Maximum on one (1) hour response time following call. Care First currently meets the requirements of Preference 5 in the counties in which it now provides services, and has committed to continue to meet these requirements as a Medicare certified home health agency in all counties in which it will provide services. Care First has made as conditions of its CON, provision for 24-hour accessibility by answering service and installation of a toll-free access line and maintenance of a log of calls during the hours the agency is closed, including documenting of response time to each call. IHS of Florida conditioned grant of its CON on a 30 minute response time, and 24-hour phone availability on a toll-free hot line. Putnam presently provides the services in this preference in its District 3 Medicare certified home health agency and agrees to meet this preference within 90 days of initiating services. It did not, however, make a commitment to meet this preference on the “conditions,” page of its application. There is nothing to prevent the agency from making Putnam’s CON, if granted, conditional upon compliance with this preference. RHA has agreed to have its CON conditioned to meet the access requirements of Preference 5. 2. State Health Plan Service to Patients with AIDS The first preference under the State Health Plan is that “[p]reference shall be given to an applicant proposing to serve AIDS patients.” All four applicants are committed to serving AIDS patients. Full Range of Services. Preference 2 of the State Health Plan is “[p]reference shall be given to an applicant proposing to provide a full range of services, including high technology services, unless these services are sufficiently available and accessible in the same service area." There are currently 11 hospital-based Medicare certified home health agencies in District 2. Several of them provide the high tech services which are sometimes needed by discharged hospital patients. Very few referrals for high tech care have been received by D. G. Anthony or Care First since May, 1995, and there is no indication such services are not available in District 2. Care First has identified, however, an unmet need for the pediatric and pre-hospice home health agency services and has conditioned its application on the provision of those services to the community. IHS of Florida proposes, among other high tech services, infusion therapies, pain management therapies and chemotherapy. There is no evidence, however, that these therapies are not available in District 2. The same is true of Putnam as to the high tech therapies it proposes to provide. There is no evidence that they are not available in District 2. Although RHA indicated in its application that it intended to provide the entire range of services that a home health agency can provide, again, there is not evidence that they are not available in District 2. Disproportionate Share Provider History Preference 3 is “[p]reference shall be given to an applicant with a history of serving a disproportionate share of Medicaid and indigent patients in comparison with other providers within the same AHCA service district and proposing to serve such patients within its market area." Care First, having been formed in March, 1996, did not have a history of providing Medicaid and indigent patients. Care First has committed to 7% of its visits to Medicaid patients, well above the average of existing District 2 agencies of 2-3% Medicaid. Care First has committed to 1% of its visits to charity/uncompensated care. IHS of Florida has committed to 5% Medicaid and 1% charity care. Like Care First, IHS of Florida, as a newly formed corporation, does not have a history of serving a disproportionate share of Medicaid/indigent care patients. Putnam’s commitment is 3% to Medicaid and 1% to charity care. This commitment will be met through its sister home health agency and not the Medicare-certified home health agency for which the CON is sought. RHA has committed to set aside 5% total annual visits to Medicaid patients and 1% of annual visits to indigent care. It has a history of providing a disproportionate share of services to Medicaid patients at its two skilled nursing facilities in District 2, Riverchase Care Center in Quincy and Brynwood Center in Monticello. Underserved Counties Preference 4 is [p]reference shall be given to an applicant proposing to serve counties which are underserved by existing home health agencies. The rural areas of District 2 are traditionally underserved. Putnam will serve Bay County, an underserved county; the three other applicants will serve rural areas of more than one county in District 2. Consumer Survey Data Preference 5 is "[p]reference shall be given to an applicant who makes a commitment to provide the department with consumer survey data measuring patient satisfaction." Care First has committed to providing such data to the agency. IHS of Florida will maintain a data base of results of patient satisfaction surveys and make them available to the agency, just as it already does. Putnam will make available to the agency the results of surveys similar to surveys measuring patient satisfaction Putnam has already developed. Putnam has conditioned its application on providing these surveys to the agencies as well as surveys measuring physician satisfaction. RHA has cited on its “Conditions” page, “. . . (it) will provide the Agency for Health Care Administration with consumer survey data.” Quality Assurance Program and Accreditation The State Health Plan’s Sixth Preference is “[p]reference shall be given to an applicant proposing a comprehensive quality-assurance program and proposing to be accredited by either the National League for Nursing or the Joint Commission on Accreditation of Healthcare Organizations." Care First included in its application a copy of its Quality Assurance Program which has been in use since May, 1995. The program meets the state and federal licensure and certification requirement and the stringent requirements of JCAHO. Moreover, Care First has conditioned its application upon JCAHO accreditation. IHS of Florida submitted documentation regarding its Quality Assurance Program through initiatives such as Total Quality Management and Continuous Quality Improvement. It will seek accreditation from JCAHO within one year of receiving its CON. Putnam, an existing home health agency in District 3 since 1986, has over the years developed and refined a comprehensive quality assurance program which is above the industry standard. The District 3 agency, using its quality assurance program, has attained its JCAHO accreditation “with commendation,” a distinction received by less than 4% of all applicants. Putnam will seek accreditation from JCAHO for its District 2 operation within one year of receiving its CON. RHA is willing to condition its CON on the provision of a comprehensive quality assurance program and accreditation by the JCAHO. Need 1. Numeric Need Since there is no published fixed need pool applicable to this proceeding, the parties, other than the agency, developed their own methodologies for determining numeric need. Each of the methodologies employed by the parties was reasonable. After taking note of the statistics for actual patient visit growth in District 2 from 1991 to 1994, Michael Schwartz began with a conservative number of 60,000 new patient visits per year, a number half of the growth for the lowest growth year of that time period. Multiplying that number times the three horizon years of 1994-97 equals 180,000 new patient visits from 1994 which yields a need for 5.2 agencies. The reasonableness of numeric need in excess of four is supported by other factors. After the filing of the four applications at issue in this proceeding, there are two fewer Medicare-certified home health agencies with certificates of need in District 2. At the same time, home health care visits have been on the increase not only in the district as discussed, above, but in the state as well. Statewide, home health care visits grew from 18 million to 22 million between 1991 and 1994. The utilization of home health care agencies is increasing because of population growth and an increase in the number of visits per patient. The amount of time spent by patients in the hospital is decreasing. The decrease translates into increased need by patients for visits from home health agencies. The need for home health is going to continue to increase because it is a cost-effective alternative to nursing home placement and hospital care. From 1991 to 1994, the number of home health visits more than doubled: from 369,396 to 869,893. This trend continued in 1995. The recent significant growth in the utilization of home health agencies in District 2 is expected to continue. The growth is attributable not only to a population increase in the district but to increase in the use rate for home health agency services as well. The growth in use rates can be explained, in part, by the increase in the senior population (65 and older) and the pressure exerted by managed care for earlier hospital discharges and home health agency services as a viable alternative in some cases to inpatient treatment. The senior population in District 2 is reasonably expected to grow approximately 8% in the five years after 1996, with 15% growth expected reasonably in the 75 to 84 year old population and even higher growth, 25%, in the population over 84 years old. 2. Other Indications of Need Local physicians have experienced difficulty arranging for the existing home health agencies to provide services to patients located in remote areas of District 2. Specialized groups, such as AIDS patients, would, in all likelihood, benefit from additional home health agencies in District 2. Furthermore, a study conducted by IHS of Florida showed that the district has an unusually high rate of diabetes and in four counties has a diabetes death rate 100% greater than the statewide average. Well Springs home health agency is one of the two Medicare-certified home health agencies to cease providing Medicare-certified home health services after the four applicants in this proceeding filed the applications at issue here. Well Springs was licensed in all 14 counties of District 2 and had physical locations in Franklin, Gadsden, Bay, Leon, Liberty, Taylor and Madison Counties. It had a significant share of the District 2 Medicare certified home health agency market with 13.1% of the 1994 visits, the second highest in the District. With Well Springs discontinuing Medicare-certified home health agency services, a void was left for such services in District 2, particularly in those counties in which Well Springs had a physical presence.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED: That the Agency for Health Care Administration enter its final order granting CON Nos. 8380, 8381, 8382 and 8384 to RHA/Florida Operations, Inc., Care First, Inc., Home Health Integrated Health Services of Florida, Inc., and Putnam Home Health Services, Inc., respectively. DONE AND ENTERED this 9th day of June, 1997, in Tallahassee, Florida. DAVID M. MALONEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 9th day of June, 1997. COPIES FURNISHED: Sam Power, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Suite 3431 Fort Knox Building III Tallahassee, Florida 32308-5408 Jerome W. Hoffman, General Counsel Agency for Health Care Administration 2727 Mahan Drive, Suite 3431 Fort Knox Building III Tallahassee, Florida 32308-5403 Richard Ellis, Esquire Agency for Health Care Administration 2727 Mahan Drive, Suite 3431 Fort Knox Building III Tallahassee, Florida 32308-5408 W. David Watkins, Esquire Watkins, Tomasello & Caleen, P.A. 1315 East Lafayette Street, Suite B Tallahassee, Florida 32301 Mark Emanuel, Esquire Panza, Maurer, Maynard & Neel NationsBank Building, Third Floor 3600 North Federal Highway Fort Lauderdale, Florida 33308 Paul Amundsen, Esquire Amundsen & Moore 502 East Park Avenue Tallahassee, Florida 32301 Theodore E. Mack, Esquire Cobb Cole & Bell 131 North Gadsden Street Tallahassee, Florida 32301
The Issue Whether there is need for any new Medicare certified home health agencies in AHCA District III, and if so, whether the applications filed with the Agency by the two petitioners in this case meet criteria for the award of a certificate of need?
Findings Of Fact The Parties Home Health Care Services d/b/a SouthMed Health Care, if operational, will be part of the HHCS Health Group. The group includes a number of interrelated medical corporations under the HHCS umbrella. Among them are these: the Cystic Fibrosis Pharmacy, Inc.; the HHCS Pharmacy; the Special Pulmonary Care Center; the HHCS Research Institute, Inc.; and the Center for Environmental and Industrial Medicine, Inc. HHCS also operates home health care agencies in Melbourne, Rockledge, Tampa, Port Charlotte, and Sarasota. Lake City Nursing Homes, Inc., is the owner and licensee of Lake City Extended Care Center, a 60-bed nursing facility in Columbia County, Florida. It is a provider currently of home health care for Medicaid recipients and private payors though its licensed home health agency located adjacent to the nursing home. By the CON application at issue in this proceeding, Lake City proposes to provide skilled nursing home based Medicare certified home health agency services as well. The Agency for Health Care Administration is the "single state agency [designated by statute] to issue . . . or deny certificates of need . . . in accordance with the district plans, the statewide health plan and present and future federal and state statutes." Section 408.034(1), Florida Statutes. Service Planning Area and Existing Providers AHCA District III consists of sixteen counties: Hamilton, Suwannee, Lafayette, Dixie, Columbia, Gilchrist, Levy, Union, Bradford, Putnam, Alachua, Marion, Citrus, Hernando, Sumter, and Lake. At the time of the submission of the applications at issue in this proceeding, there were twenty-nine existing Medicare certified home health agencies in District III. HHCS proposes to target a group of patients none of the other existing providers presently target. In another approach, Lake City proposes a nursing-home based, Medicare certified home health agency. Other than Lake City's existing non-Medicare certified agency, none of the existing providers are nursing-home based. In relation to the existing providers, therefore, Lake City and HHCS propose unique opportunities for home health care services in District III. HHCS' Application HHCS' application is targeted to a group of patients in District III not presently receiving services which rise to the level of their need. The group consists of post-transplant patients and patients with cystic fibrosis, chronic obstructive pulmonary disease ("COPD"), and diabetes. Targeting this group does not diminish HHCS' intent to provide home health care to others in District III in need. HHCS has agreed to condition the granting of the CON on providing 8 percent Medicaid and 2 percent charity care with no limit on the number of Medicaid patients it will serve. HHCS offers to provide services not commonly provided by other home health agencies. Among them are blood transfusions, home x-ray, on-line EKG communication with physician, organ transplantation support and care, Picasso system telecommunications with physician, and high-tech pharmacy service such as intravenous/infusion services, aerosolized pentamidine therapy, and complete HIV home care. In providing these sophisticated services, HHCS will use an integrated team approach to home health care involving various professionals in health care and health management. Lake City's Application If Lake City's application were granted, it would make Lake City the fourth home health agency in Lake County and the only home health agency in District III to be nursing-home based. By combining a Medicare certified home health agency with its existing nursing home, Lake City will improve the case management of its patients because such an arrangement offers vertical integration within a continuum of care. Vertical integration within a continuum of care promotes stability of personnel and providers who work with the patients. In turn, this organizational method provides potential for improving recovery from illness and higher quality of management of the patient and the patient's illness. Need Projections The Agency's methodology for determining need for home health agencies was declared invalid in 1993. At present, there is no Agency rule containing a home health agency need methodology. In the absence of a need methodology by rule, the applicants took different approaches to projecting need. HHCS projected need based upon previous studies of efficient agency size. HHCS identified four groups of Medicare patients (AIDS, COPD, cystic fibrosis, and diabetes) who, either because of age or disability, are chronic or long-term users of home health care services. HHCS looked at hospital discharges for those four categories to determine post-hospital placement. About an equal number of patients were referred to long-term facilities as were being referred to home health agencies. HHCS' application is geared to steering patients out of more expensive long-term care facilities and into care at home. Lake County has a use rate for home health higher than that of all of District III. Its use rate is also higher than the State's as a whole. Over a three-year period, home health visits in District III grew by 16 percent, whereas visits statewide grew by only 4 percent. Lake County uses home health services and continues to use them at a very high rate. Additional services are needed in order to sustain and meet the demand within the county and the District as a whole. Previous studies, moreover, have shown that all economies of scale are realized at around 30,000 visits per year. HHCS used 30,000 visits per year as an appropriate agency size to yield a need in the District for at least five new agencies. With the modification of a lower growth rate to make it more conservative, Lake City, on the other hand, utilized a need methodology put to use by a successful Medicare certified home health agency applicant for five Medicare certified home health agency CONs in the prior batching cycle. The Lake City methodolgy took the population of seniors (age 65 and over) in the district and projected that population forward through 1998 based on state population data. It then calculated the percentage of increase in population of seniors and the total number of visits provided in the district and projected the percent of increase in visits from 1991 through 1994 forward on through 1998. Lake City projected its increase in total visits utilizing an 11.5 percent growth rate in the number of visits which is conservative considering that the average growth rate per year from 1991 to 1994 was 31.7 percent. Lake City also identified a yearly increase of more than 20 percent in the rate of use of home health services due to the emphasis on managed care and less costly health care services. Inflating a conservative increase in the use rate of 20 percent forward, Lake City projected the number of visits that would be provided by existing agencies and subtracted that number from the total number of projected visits, leaving a total number of unserved visits. Dividing the number of unserved visits by the average agency size in District III, Lake City came up with a net need of 9.62 agencies in the horizon year of 1997. The methodologies of both HHCS and Lake City are fair and reasonable health planning methodologies. Lacking a need methodology, the Agency set forth eight criteria it suggested should be addressed in applications for Medicare certified home health agency CONs. These policies relate generally to access and require the showing of some type of access problem. Normally, however, need should not be determined on the basis of access problems alone. Both applicants demonstrated District III's need in the planning horizon year for more than two agencies, the number of applicants in this proceeding. There is, therefore, a need for at least two more Medicare certified home health agencies in District III. State and Local Health Plans The HHCS proposal is supported by the preferences in the District Health Plan. HHCS is an exemplary provider of care for persons with AIDS and it has committed to Medicaid and indigent care in excess of that suggested by the plan. HHCS will provide more than the full range of services suggested by the plan. For the same reasons it meets the preferences in the local plan, HHCS' application is supported by the preferences in the State Health Plan. In addition to those reasons, the application complies with the State Health Plan preferences for an applicant that proposes to serve counties presently underserved by home health care agencies; will provide consumer satisfaction data to the Agency; and has a comprehensive quality assurance program and is proposing to be accredited by the Joint Commission on Accreditation of Healthcare Organizations ("JCAHO"). Lake City's application is also supported by preferences in the District Health Plan. It has a history of providing a high percentage of Medicaid patient days at its nursing facility. This history backs up its commitment to provide a minimum of 1 percent annual visits to indigent care and 5 percent of annual visits to care of Medicaid patients, a commitment evidenced by its willingness to condition the grant of its CON on the percentages of annual visits it promises to indigent and Medicaid patients. Likewise, Lake City 's application is supported by preferences in the State Health Plan. It has agreed to condition its CON on providing care to AIDS patients. It will provide the entire range of services usually provided by a home health care agency. It is willing to condition its CON on cooperation with data collection efforts. Finally, it is willing to condition the grant of its CON on the provision of a comprehensive quality assurance program as well accreditation by the JCAHO. Availability, Access, Appropriateness and Adequacy of Like and Existing Health Care Services HHCS' application complies with the statutory requirements of Section 408.035(1)(b), Florida Statutes, in that it increases the availability and access to home health care in the District. HHCS will offer programs and services which presently are not readily available in District III. This will increase the availability of these services to the patients of the District and, in particular, to the patients of Lake County. Thus, geographic access is enhanced. HHCS' application also enhances access for those without means to gain access to home health care through its commitment to indigent care. It improves, too, the adequacy of services in the District through its targeting of a group presently underserved in the District. HHCS' proposal meets the requirements of the health care access criteria contained in Rule 59C-1.030(2)(a)(b) and (d), Florida Administrative Code. It provides services to all those who need care and participates in the Medicare and Medicaid programs. HHCS does not discriminate on the basis of race, ethnicity, or gender. Because Lake City is not targeting an underserved group in the manner of HHCS, its application addresses the issues of "availability and access" somewhat differently. To the extent there is a need for new providers of home health care, granting Lake City's CON will provide better availability and access to those in need of home health services. Likewise, Lake City's willingness to condition its application on service to AIDS, indigent and Medicaid patients will only improve availability and access to home health care services in the district Quality of Care HHCS conducts mock accreditation surveys to determine whether it is meeting the appropriate standards for quality of care. HHCS has an outside advisory board that does performance improvement and quality assurance review. There is also a utilization review committee and each office has full time quality assurance staff, quality management meetings, and quarterly reports to the Board of Directors. HHCS' team approach will enhance the quality of care as well as being cost effective. Its approach to treatment of HIV patients won for HHCS a contract with the Orange County Public Health Unit to provide complete HIV service to its patients. HHCS also measures patient satisfaction with services. Every patient is notified 48 hours after admission to the agency to make sure they were informed of precisely what to expect from the agency. Patients are contacted 30 days after admission and given an evaluation form. Survey forms are also sent out upon discharge and three months after discharge. The other home health agencies operated by HHCS are accredited with commendation by JCAHO and HHCS intends to seek JCAHO accreditation if granted a CON. The Lake City facility is managed by HealthPrime, a long term care management company which manages facilities for itself and others and which has been successful in improving distressed facilities. Since the commencement of its management of the Lake City facility, the facility has been recommended for a superior rating. HealthPrime has shown through its operation of the Lake City facility and other nursing homes in Florida, all of which have superior ratings, that it has the ability to provide quality of care. In addition, HealthPrime, which will actually operate the home health agency, has experience operating three other nursing home based, home health agencies. HealthPrime will use its quality assurance programs already in place in its other home health agencies and will seek JCAHO accreditation of the Lake City agency, if the CON is granted. To show its commitment to assuring quality of care, Lake City is willing to condition its CON on the understanding that it will not contract with other non-Medicare certified home health agencies to provide any of its services. Availability and Adequacy of Alternatives There is no adequate alternative to the HHCS proposal because of the applicant's targeting of the management of certain chronic illnesses. HHCS sees some of the targeted clients for management of cystic fibrosis already, but it is limited in its ability to serve these patients effectively without a physical presence in the District. For these patients to receive the full complement of home health care services HHCS is capable of rendering, there is no alternative save approval of its application. Economies and Improvements from Joint or Shared Services There are nine related companies within the HHCS Health Group. They include pharmacies which can deliver medications directly to the patient and can provide consultation with a doctor of pharmacy. This ensures compliance and dramatically increases therapeutic outcomes. Joint companies typically provide for economies and efficiencies and lead to the most cost-effective service. Lake City's proposal to operate a nursing home based, home health agency not only offers a continuum of care for the patient but also provides fiscal economies to the agency as well as the Medicare program. By providing skilled, nursing-facility based Medicare- certified, home health care, the Lake City facility can broaden its community base and provide cost-efficient services to the community. Under the arrangement proposed by Lake City, the home health agency, in practice, becomes a department of the nursing facility, providing a continuum of care and individual case management for the patient. Through case management, Lake City can help an individual through the various levels of care available. Case management helps the individual gain access to health care, making the process easier and less stressful. Case management poses potentials for containing cost and providing the best quality of care at the least cost. Financial Feasibility Short Term HHCS has projected the cost of its project at $92,392. The projection is based on historical information and actual vendors used by HHCS. Some of the expenditures, such as consultants and attorney's fees, have already been spent. HHCS intends to fund the $92,000 projected costs of the project through cash from operations and does not intend to seek any bank financing. If there is a need for financing, it is available as evidenced by the letter from the bank contained in the application. The letter is typical of letters banks issue when projects are merely proposed. The Agency has approved projects with similar letters of interest to support the capital requirements of a project. HHCS also has a line of credit for $600,000 and an equipment loan of $196,000, of which only $66,000 has been used. The line of credit was reduced by funds from operations from $125,000 on December 31, 1994, to $12,000 on April 25, 1995. Schedule 2 in the HHCS application lists other planned projects which require capital expenditures. These projects would be funded by a line of credit, assistance from the bank, and internal operations. HHCS' proposal is financially feasible in the short term. HHCS has the ability to secure funds necessary to capitalize the project and to secure any necessary working capital during the first year of operation. HHCS has demonstrated its ability to fund this project and all the projects on Schedule 2 in its pro forma sheet. Schedule 8A shows what would happen if all the projects listed on Schedule 2 actually occurred and what would be the financial impact on HHCS. Even if all the projects were completed, the cash available from operations is sufficient to fund the project. As for Lake City, AHCA raised questions about its weak financial status as a developmental stage corporation. But at hearing, AHCA acknowledged that Lake City would be financially feasible in the short term. While Lake City is a developmental stage company with limited cash investment, it is a heavy Medicaid provider. There are disincentives for such providers to keep large amounts of cash in equity. Lack of equity causes AHCA legitimate concerns. The concerns are dispelled by the personal guarantee by the owners of the company of the company's debt since the owners have sufficient assets to support their guarantees. In analyzing the financial strength of a nursing home that provides a high percentage of Medicaid-reimbursed care, it is necessary to determine whether the facility's fixed costs are covered by Medicaid payments and whether the facility has an adequate patient census. In the case of Lake City, both of these factors are positive. In addition, HealthPrime has made available a $200,000 loan to Lake City for this project. The loan commitment, by itself, is more than sufficient to cover the $77,014 start up cost of the Lake City proposed project. ii. Long Term HHCS' proposal demonstrated long term financial feasibility. The applicant's projections are conservative and the volume projections are easily achievable given the historical experience of HHCS and District III. The projected revenues contained on HHCS' Schedule 7 and the volume projections utilized in Schedule 5 are reasonable. AHCA found the volume projections to be achievable. The projected expenses for the proposed project are contained on HHCS' Schedule 8B. While AHCA criticized the format of this schedule, it concedes that it was not unauthorized. Direct patient care expense and other expenses can be determined to allow for a review as to reasonableness. Schedule 8B is based upon historical expense information; it contains all of the necessary expense items and is reasonable. AHCA similarly found that since HHCS' projections were reasonable for a new home health agency, the conclusion of financial feasibility in the long-term is reasonable. Lake City's assumptions in its financial projections were based on actual experience in the operation of similar skilled nursing facility based home health agencies, as well as experience of other home health agencies in their first two years of operation. The reasonableness of Lake City's financial and operational projections were undisputed at hearing and AHCA's financial expert acknowledged that the proposed project would be financially feasible in the long term Resource Availability Neither HHCS nor Lake City will have any problem in hiring sufficient personnel for their agencies. Efficiency HHCS' specialty team approach to home health results in fewer total visits and better outcomes at lower cost. HHCS operates a highly effective, cost efficient agency. As for the efficiency of Lake City's proposal, skilled nursing home-based Medicare certified home health agencies are specifically recognized by the Federal Medicare program in their cost reports. Home health costs are filed as a part of the nursing home cost report and there is an allocation of the nursing home's cost to the home health agency. A joint nursing home/home health agency operation benefits both the provider and the Medicare program through cost savings. In fact, HealthPrime has found the efficiencies of a skilled nursing home-based Medicare certified home health agency to be great enough to allow the home health agency to operate under the Medicare reimbursement cap. Projects Impact on Costs The approval of additional home health agencies in District III will foster competition among existing providers. HHCS is cost effective with a projected cost per visit of $67.55. Utilization of its related companies will not only promote a continuum of care but will also lead to cost effectiveness. Lake City's projected Medicare rate for 1997 will be substantially less than the District III average 1994 rates of existing home health agencies. This provides a cost savings to the state since it helps reduce Medicaid costs as well.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is recommended that the Agency for Health Care Administration grant CON applications 8387 and 8386 filed by Home Health Care Services d/b/a SouthMed Health Care and Lake City Nursing Homes, Inc., respectively. DONE AND ENTERED this 27th day of June, 1997, in Tallahassee, Leon County, Florida. DAVID M. MALONEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 27th day of June, 1997. COPIES FURNISHED: Cynthia S. Tunnicliff, Esquire Pennington Culpepper Moore Wilkinson Dunbar and Dunbar PA Post Office Box 10095 Tallahassee, Florida 32303-2095 Theodore E. Mack, Esquire Cobb Cole and Bell 131 North Gadsden Street Tallahassee, Florida 32301 Richard Patterson, Esquire Agency for Health Care Administration Fort Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403 Jerome W. Hoffman, General Counsel Agency for Health Care Administration Fort Knox Building 3 2727 Mahan Drive Tallahassee, Florida 32308-5403 Sam Power, Agency Clerk Agency for Health Care Administration Fort Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403
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.
The Issue Whether Petitioner Hospice of Palm Beach County, Inc. (Hospice) is entitled to a certificate of need (CON) from the Department of Health and Rehabilitative Services, Respondent, (HRS) in CON Action No. 3702 for a home health agency in Palm Beach County and the District IX service area?
Findings Of Fact Hospice provides special interdisciplinary services, including medical, psychological, spiritual, counseling and volunteer services, for persons in the terminal stages of illness. Hospice is licensed by HRS as a hospice under Chapter 400, Part V, Florida Statutes. Hospice has been qualified by the United States Health Care Financing Administration for participation in the Medicare hospice program. See Part 418, 42 Code of Federal Regulations. Hospice was the first hospice program in Florida to be accredited by the Joint Commission on the Accreditation of Hospitals (JCAH) as a hospice. JCAH accreditation includes approval of the home care component of Hospice's service. HRS has approved issuance of a certificate of need (CON No. 3693) for the establishment by Hospice of its own 24-bed freestanding inpatient facility. Hospice's inpatient facility will be the first free- standing hospice facility in Florida. Hospice's present service area is within Palm Beach County. Hospice's service area reaches from the southern border of Boynton Beach in Palm Beach County north to the Martin County line. Hospice's service area also extends west within the County to include service to Belle Glade, a multi-ethnic rural community. Approximately 25 percent of Hospice's patients are medically indigent, with little or no ability to pay for care. Over 28 percent of Hospice's patients in fiscal 1985 were members of ethnic minorities. Hospice was one of five applicants in its "batching" cycle seeking a certificate of need to establish a home health agency within local health District IX. The others were Palm Beach Gardens Home Health Agency (CON #3699), MEA (CON #3700), Coastal Health Corporation (CON #3701) and Medical Personnel Pool of Treasure Coast, Inc. (CON #3706). (A sixth applicant, Medical Personnel Pool of Palm Beach, Inc., CON #3698, was granted a certificate in an earlier cycle and not considered by HRS in this batch.) By letter dated June 14, 1985, HRS indicated that it had determined to deny Hospice a certificate of need to establish a home health agency in Palm Beach County. Hospice's substantial interests are affected by HRS' determination of denial. Section 400.601(3), Florida Statutes (1985), requires Hospice to provide care to terminally ill patients regardless of ability to pay, and to make such care available 24 hours a day, 7 days a week. Unless Hospice receives a certificate of need to establish a home health agency, it is ineligible for licensing by HRS under Chapter 400, Part III, as a home health agency and corresponding certification as a Medicare home health service provider. See § 400.462(2), Fla. Stat. (1985). Without a certificate of need for home health care, Hospice's financial ability to serve its hospice patients is not as great as it might be if it held such a CON. Without certification as a home health agency, Hospice cannot presently collect any reimbursement for home health care of medically indigent Medicaid patients. Hospice often experiences difficulty in collecting even private insurance payments for home health care of patients with such insurance. Hospice will suffer injury in fact as a result of HRS' determination and its interests are among those regulated by this action. Hospice filed a timely petition for a Section 120.57 administrative proceeding concerning HRS' decision on CON Action 3702. Prior to the decision in Department of Health and Rehabilitative Services v. Johnson and Johnson Home Health Care, 447 So.2d 361 (Fla. 1st DCA 1984), HRS followed a rule generally precluding the issuance of a certificate of need for a new home health agency until the average daily census of each existing home health agency within the same service area had reached 300 patients. This rule was known as the "Rule of 300." In Johnson and Johnson, supra, the First District Court of Appeal struck the "Rule of 300" as arbitrary and inconsistent with Section 381.494(6)(c), Florida Statutes, which lists numerous criteria for evaluation of CON applications. In particular, the Court noted, the "Rule of 300" did not allow new agencies "where existing agencies are able but unwilling to provide services of a particular type or for a particular class of patients." 447 So.2d at 362. After the "Rule of 300" was struck, a statewide task force was created to develop new criteria to evaluate CON applications for new home health agencies. The statewide association of hospices, Florida Hospices, Inc., attempted to participate in the development of new criteria, but did not participate in this process. On April 5, 1985, HRS proposed new rule criteria for home health agency evaluations, which were the subject of a proposed rule challenge in September 1985 before the Division of Administrative Hearings. This proposed rule was struck down as invalid on March 12, 1986. These new criteria were proposed for use in addition to other relevant statutory and applicable rule criteria." In acting on the five CON applications in Hospice's "batch," HRS applied its invalidated proposed rule criteria and determined that within District IX as a whole (which includes Indian River, Martin, Okeechobee, St. Lucie and Palm Beach Counties), no new home health agencies were needed. However, in its analysis of the five applications in this batching cycle, HRS also stated that the District IX Local Health Council had indicated that Palm Beach County should be considered a separate subdistrict for home health agency evaluation. Although it found no need for new home health agencies in District IX as a whole in its analysis of this batching cycle, HRS, using its own newly proposed rules, found an existing need for two new home health agencies in Palm Beach County. HRS stated in its June 14, 1985, letter that Hospice's application was denied for the following reason: Use of the methodology developed by the special statewide work group to determine the need for home health agencies in District IX shows no numeric need for additional agencies in this district. HRS has determined for purposes of this proceeding that the following need exists in District IX for home health agencies, indicating a net need of five new agencies in District IX and a net need in Palm Beach County for five new agencies: Application Submittal Date: 12/84 Planning Horizon: 7/86 District 9 1986 (July) population: 65+ = 257,346 District 9 1986 (July) population: <65 = 809,845 1. 257,346 x .0578 = 14,875 Projected use for 65+ population 2. 809,845 x .00058 = 470 Projected use for <65 population 3. (14,875 + 470) x 33.3 = 510,989 Projected visits 7/86 4. 9,000 + (510,989 x 270) - 24,330 5. 410,989 9,000 ? 21,000 = 24 Agencies needed in District 9 for 7/86 24 Agencies - 19 licensed and approved = 5 Agencies needed in District 9 Subdistrict Allocation: Need: Indian River Projected 2 Existing 1 Net 1 Martin 2 2 0 Okeechobee 0 1 (1) Palm Beach 18 13 5 St. Lucie 2 2 0 This need is related solely to the planning horizon of July 1, 1986 established by HRS for Hospice's CON batch and other home health applications filed before the end of 1984. This need is not related to the later planning horizons applicable to District IX home health agency CON applications filed after 1984. Therefore, applicants in batches following Hospice's, which was the last batch submitted in 1984, are not substantially affected by this determination of need. For the purposes of this hearing, there are only two (2) denials by HRS of certificates of need for home health agencies in District IX and proposing service in Palm Beach County in CON batches prior to Hospice's (Joseph Morse Geriatric Center, CON Action No. 3621; A Professional Nurse, CON Action No. 3492) that have been challenged in administrative proceedings and are still pending without Final Order in those proceedings. Thus, Hospice's CON application as a home health agency is, in the worst case, third in line for licensure as a home health agency in District IX, without regard to the special circumstances of Hospice's case and assuming these denials by HRS are reversed in final agency action. Since there is a need for more than 3 new home health agencies in District IX and Palm Beach County based on the planning horizon applicable to Hospice's batch and no other valid request is pending in Hospice's batch, there is a numeric need for granting a CON to Hospice as a home health agency. There is a special need for access within Hospice's actual service area in Palm Beach County to home health services for the terminally ill, which services are provided by a hospice as opposed to existing or other proposed traditional home health agencies. There is additional need for access by the medically indigent to home health services within Hospice's service area in Palm Beach County, and within Palm Beach County in general. The 1985 District IX Hospice Services Plan provides that hospices generally should be licensed as a special type of home health agency. Of all pending applicants in this and the immediately prior batching cycles since 1984 seeking a certificate of need to provide home health services in Palm Beach County, Hospice is committed to providing the greatest percentage of its services for Medicaid and other medically indigent patients, in accordance with the State Health Plan. Hospice, due to its existing and proposed provision of home health services to the medically indigent, its service in Belle Glade, and its service to AIDS patients, as well as its services to the elderly, serves the need for care of low-income persons, medically underserved groups and the elderly. Hospice can provide higher quality of home health care to the terminally ill in its service area than any other existing home health provider or current applicant for a certificate of need to provide home health services in Palm Beach County. Hospice offers a new type of home health service within its service area for terminally ill patients and their families, including a special pediatric program for children with irreversible diseases. This type of service is an alternative to inpatient care, nursing home and traditional home health services. The applicant home health agencies affiliated with hospitals in District IX in Hospice's batching cycle have not shown that they can achieve greater economies or improvements of service than Hospice. Hospice provides the following research and health educational facilities: a) rotational internships for fourth- year medical students at the University of Miami Medical School; training for R. N. candidates at Florida Atlantic University; research support service to the Tropical Disease Center and Palm Beach County Public Health Department through Hospice's care for AIDS patients in the Belle Glade area; d) training for graduate students in psychology at Florida Atlantic University; e) training for seminary students at St. Vincent's Seminary in Boynton Beach; f) training for candidates for master's degrees in social work from Florida State University; and g) designation as second research and training site by the International Hospice Institute, an international research and professional education accrediting institution. No other home health agency in Palm Beach County provides or has proposed to provide the research or educational facilities referenced in the preceding paragraph. Hospice proposes to control its home health agency rather than to allow the home health agency to control its hospice functions. Hospice will have a positive effect on the clinical needs of health professional training in hospice care and related services in District IX and will make such training available to health professional schools. Hospice's proposal, which is based on a conservative growth projection of its historical patient service care needs, demonstrates the immediate and long-term financial feasibility of Hospice's non-profit project goals. Hospice's provision of home health services under a certificate of need will have a positive effect on the costs of and charges for home health services for the terminally ill and their families. Due to its inpatient hospital capability, Hospice is a regional resource and teaching center for the care of the terminally ill. Hospice has a positive impact on competition among providers of care to the terminally ill. Hospice has a positive impact on promotion of quality assurance due to its accreditation by the Joint Commission on Accreditation of Hospitals. No other home health agency in District IX is accredited by that national joint commission for provision of home health services. According to HRS' own determination, the District IX health plan calls for evaluation of home health services needs within the subdistrict of Palm Beach County. Under HRS' determination, that county subdistrict needs five additional home health agencies without regard to the special needs of the terminally ill. In addition, the 1985 District IX plan for hospice health services provides that hospices should be licensed as special home health agencies. Nothing in the 1985 District IX Health Plan suggests that "surplus" home health agencies in other District IX counties can provide access to service needed by the terminally ill and their families within Palm Beach County. According to HRS' determination, the provision of the State Health Plan addressing home health services deals with access of Medicaid and medically indigent patients to home health services. Hospice's proposal meets this goal of the State Health Plan because Hospice will provide 25% of its care to the medically indigent, even if Medicare reimbursement is available as a result of CON approval and home health agency licensure. On a percentage basis, Hospice proposes to provide 3 times more home health care services to the medically indigent than any other District IX applicant in its batching cycle and even a greater incidence than any District IX home health agency applicant in the immediately preceding batching cycle. Hospice's proposal also satisfies other goals and priorities of the State Health Plan not considered by HRS, including but not limited to the continued fostering of the hospice care alternative, potential increased provider participation in the Medicaid home health services program, and creation of funding mechanisms for hospice care of the medically indigent. Hospice is the only hospice program located within Palm Beach County providing and proposing to provide home health care to terminally ill patients and their families in its service area. Hospice can provide a higher quality of home care for the terminally ill than any other existing home health care provider in Palm Beach County due to its accreditation by JCAH and qualification for the Medicare hospice program including home health services. Hospice's home health care, due to provision of additional hospice services, and continuity of home health personnel serving each patient and patient family, is also more appropriate for the terminally ill than other traditional home health services. Hospice's on-call home health personnel must, by Hospice policy, reside no farther than 30 minutes from patients to be served on a round-the-clock basis. The 1985 District IX Health Plan endorses the 30-minute travel maximum for provision of hospice care at home. Even prior to Hospice's provision of service in Belle Glade, nearly one-third of Hospice's patients were members of ethnic minorities. The Belle Glade area served by Hospice is populated by ethnic minorities in need of home health care service. Hospice's development of a special program to serve AIDS patients in Belle Glade and throughout Palm Beach County will make needed home health care available to this underserved group. Other home health agencies recognize the special type of home health care provided by Hospice through their referrals to it. The existence of the Gold Coast Home Health Agency serving Broward County was the basis for HRS' determination that of all five applicants, only Hospice did not meet the criterion in Section 381.494(6)(c)6, Florida Statutes, evaluating the need for special services in adjoining areas. Both traditional and hospice-based home health agencies exist in adjoining District IX areas. Hospice has at present a paid staff of 33 and approximately 270 volunteers. As shown in its financial statements submitted with its application, Hospice has a broad base of community support sufficient to achieve its goals with the aid of the Medicare reimbursement mechanism. Since home health care is a vital component of hospice care, the operation of a home health agency by a hospice is both logically and philosophically a natural outgrowth of the developing hospice movement in the United States. Hospice has excellent prospects for the immediate and long-term financial feasibility of its project, especially if the regular Medicare reimbursement mechanism is made available. Hospice served more than 565 patients in fiscal 1985 and currently serves approximately 110-20 patients per month. Its estimated patient census used to calculate its 1985 and 1986 operating income and expenses in its CON application, therefore, is based on historical data and is conservative. Since Hospice has received approval for the first free- standing inpatient facility for the terminally ill in Florida, it will serve as a regional resource and training center for care of complex cases. Hospice, unlike any other applicant, will offer services complementary to home health care not available in adjacent service districts. Hospice's market entry as a licensed home health agency should stimulate other hospices to seek to meet the rigorous JCAH standards. Hospice provides many services not offered by traditional home health agencies at per visit charges that are competitive with those presently charged by those agencies. Hospice's market presence encourages competition among all home health agencies serving Palm Beach County, particularly for care of patients who are terminally ill or in the near-final stages of a catastrophic illness.
Findings Of Fact On September 13, 1984, Santa Fe Healthcare Systems, Inc. (Santa Fe), d/b/a Alachua General Hospital, applied for a certificate of need (CON) to establish a Medicare-certified home health agency in Alachua, Levy and Bradford Counties. This application was identified by HRS as CON Action No. 3452. On March 29, 1985, Upjohn Healthcare Services, Inc. (UHCS), timely petitioned for a formal administrative hearing to challenge the granting of any portion of the CON application of Santa Fe to establish home health agencies in Alachua, Levy and Bradford Counties. Petitioner, Personnel Pool of North Central Florida, Inc. (Personnel Pool), was initially a party to this proceeding. Personnel Pool applied for a CON to establish a Medicare certified home health agency to serve Lake, Alachua, Citrus, Levy, Marion, and Sumter Counties in District III. Personnel Pool's application was identified by HRS as CON Action No. 3450, and was reviewed in the same batching cycle as Santa Fe's application. That proceeding was designated DOAH Case No. 85-1455 and consolidated with these cases. On October 23, 1985, however, Personnel Pool filed a Notice of Voluntary Dismissal by which it voluntarily dismissed its petition in DOAH Case No. 85- 1455. APPLICATION Santa Fe Healthcare Systems is a parent corporation with three divisions. The first division, called Genesis Hospital System, operates four affiliated hospitals: Leach General Hospital (AGH), Bradford Hospital (BH), Williston Memorial Hospital (WMH), and Calhoun Hospital (CH). The second division, Santa Fe Management Services, provides a variety of services, including financial, design and construction, risk management, and other related services to affiliates. The third division is called Wellness, Inc., operating a variety of properties including a personnel registry, urgent care centers, physicians' office buildings, and Shared Services, Inc., a for profit corporation, which comprises a pharmacy, a collection service bureau, a delicatessen, a laundry, a microfilming service, and several other support services. Santa Fe proposes to receive Medicare certification for its existing operational hospital-based home health delivery system, which is not now certified to receive Medicare reimbursements. This home health delivery system has one office which is located on campus at AGH in Gainesville. Santa Fe proposes to provide all types of home health services on a 24- hour a day, 7 days a week basis. If the home health agency obtains Medicare certification, it will become a department of AGH for Medicare cost reporting purposes. Santa Fe intends to staff its home health agency with dedicated employees of its affiliated hospitals and, as necessary, by part-time employees of the hospitals who are under- utilized as hospital staff, under principles of "variable staffing." Santa Fe proposes to serve the following mix of patients by payor class: 80%-Medicare 6%-Medicaid; 6% -Indigent and Bad Debt and 8%-Private Pay. Santa Fe proposes to serve patients regardless of their ability to pay for home health services. Santa Fe intends to subsidize the provision of home health services to indigent patients through the reimbursements it receives from providing home health services to Medicare patients, and through a transfer of funds from its affiliated hospitals to Santa Fe's home health agency. See paragraphs 17 through 21 below. At the present time, Santa Fe is providing home health care to patients eligible for Medicare reimbursement free of charge without seeking reimbursement from Medicare. There was no evidence of the losses incurred by Santa Fe in this endeavor. Santa Fe does not anticipate that it will be able to bill or get later reimbursement for the care provided to these Medicare eligible patients, even if it becomes Medicare certified. MEDICARE/MEDICAID REIMBURSABLE HOME HEALTH Medicare is a federally-funded health program for the elderly and for certain disabled persons only. In order for a provider of Medicare home health services to be reimbursed, the provider must serve Medicare eligibles who: (a) are referred by order of a physician (b) are home bound (c) require skilled care (skilled nursing, physical therapy, occupational therapy, and speech therapy) and (d) require skilled services only on a part- time, intermittent basis. Medicare does not reimburse for custodial care (such as provided by a nursing home or adult congregate living facility) or for acute care services (such as services to the acutely ill usually provided by a hospital). Medicare provides reimbursement only for skilled nursing, physical therapy, speech therapy, home health aide, and medical social services. Medicare presently reimburses home health agencies, whether hospital-based or free-standing, on a cost reimbursement basis, subject to an aggregate cost reimbursement limitation or cap. As long as the Medicare home health agency does not exceed the cap it gets paid all of its costs for allowable expenditures. If it exceeds the cap, then it only gets paid at the cap. A cap is figured for each service (skilled nursing, home health aide, physical therapy, speech therapy, occupational therapy, and medical social services). Previously, all of the costs incurred for providing these services were added together and compared against an aggregate reimbursement limit or cap. If aggregated costs were below the aggregate cap, the provider was paid its costs, and was only penalized for the amount by which it exceeded the aggregate cap. However, starting with fiscal years beginning after July 1, 1985, the Medicare program has eliminated the aggregate cap and will apply only the cap for each type of home health services. If a provider's cost exceeds the cap for each service the provider will only receive the cap for such service. The Medicare program recognizes that the cost of providing home health services through a hospital-based home health agency generally is higher because overhead of the hospital is allocated to the home health agency. (In fact, AGH's allocation of overhead to Santa Fe's home health delivery system will he less than the allocation of overhead from UHCS' national and regional offices to its home health agencies in Alachua, Bradford, and Levy Counties.) Medicare thus could reimburse Santa Fe's home health agency at a ten percent increment above the cost caps established for non-hospital home health providers. In contrast to Medicare, the Medicaid program provides reimbursement to providers only for skilled nursing services and home health aide services to patients who meet strict income and asset limitations. No reimbursement is provided for physical therapy, medical supplies or ancillary costs of providing reimbursable services. Instead of the cap system applicable to Medicare reimbursement, only a fixed fee determined in advance is provided for Medicaid services. Accordingly, a provider can expend costs in excess of reimbursement to serve Medicaid eligible patients. Recent changes in the Medicare reimbursement for hospital care have resulted in a prospective payment system. This system is commonly referred to as the diagnostic related grouping system (DRG). Under that system a hospital is not reimbursed for its costs. Rather the hospital receives for in- patients a predetermined reimbursement covering all costs related to providing patient care for the diagnosis of the patient, based on the historical costs for serving such a patient in the geographic area where the hospital is located. If the length of stay of the patient is such that the cost of providing care exceeds the Medicare reimbursement provided under the applicable DRG system, the hospital experiences a loss for its service to that patient. If the patient's stay is shorter than the average duration for that DRG, however, the hospital's costs usually are less than the Medicare reimbursement for the patient, and the hospital experiences a windfall gain. DRG reimbursements are fixed amounts regardless of length of stay. COST CONSIDERATIONS Santa Fe's home health delivery system operates as a cost and revenue center within the Santa Fe system separate from the centers mentioned in paragraph 3 above. If certified under the Medicare program, it will be a separate revenue center for Medicare reimbursements. In its amended application, Santa Fe projects a loss in its first twelve months of operation amounting to $20,267. Santa Fe projects a loss of $30,409 for the second twelve months of operation. However, these losses will be more than offset by savings to the affiliated hospitals from discharging its Medicaid and indigent patients from the hospitals at an earlier date because home health services can be provided at a lower cost. In any event, with more than $7 million of earnings from its combined operations for the year ending September 30, 1985, Santa Fe can easily cover any reasonable losses that the proposed home health agency might incur during the first two years of operation. In addition, Santa Fe will shift a portion of its administration, supervisory, dietary, maintenance, and housekeeping costs from AGH to the new home health agency. These items are commonly identified overhead expenses. Santa Fe will shift some of the existing costs of AGH's administrator and assistant administrator's salary and fringe benefits to the home health agency. Santa Fe will also shift some of the costs of salaries for supervisory health care personnel to the home health agency to the extent that these supervisors provide guidance to the staff of the home health agency. AGH will hire additional staff to handle home health billing. This cost will also be borne by the home health agency. Approximately 95% of the overhead of AGH which Santa Fe intends to shift to its Medicare home health agency does not represent new or additional costs. Rather, that portion will represent costs which Santa Fe is presently incurring in the operation of AGH. In the first twelve months of operation AGH will allocate approximately $150,000 of its existing overhead to the home health agency. In the second twelve months of operation AGH will allocate $175,000 of its existing overhead to the Santa Fe home health agency. Santa Fe's hospitals will have to subsidize the Santa Fe home health agency between $75,000 and $90,000 for provision of services to indigents and for additional costs associated with treating Medicaid patients. Santa Fe will ask Medicare to reimburse the overhead allocated from AGH to the Santa Fe home health agency up to the cap. See paragraph 12 above. Because of the reimbursement of the portion of the overhead allocation from the affiliated hospitals to the proposed home health agency, approval of any portion of Santa Fe's proposal probably will increase the cost to Medicare for Medicare reimbursable home health services in Alachua, Bradford and Levy Counties. NEED CONSIDERATIONS UHCS is the only existing provider of home health services licensed by HRS to provide Medicare home health services in Alachua, Bradford and Levy Counties within HRS District III. UHCS is also licensed to provide home health services in Dixie, Gilchrist, Marion, Lafayette, Putnam, Union and Suwannee Counties in District III. UHCS operates a parent agency office located in Alachua County (Gainesville), with licensed subunit offices in Bradford (Starke), Levy (Chiefland), and Putnam (Palatka) Counties. UHCS operates a separate licensed and Medicare certified parent home health agency in Marion County. UHCS operates a private-sector home health business without a CON, which is separate from its licensed home health agencies and subunits. UHCS provides skilled nursing, physical therapy, speech therapy, occupational therapy, home health aide and medical social services to patients in their homes. UHCS also provides intermittent skilled care to private pay patients through its licensed home health agency; and provides homemaker, live-in companions, and one-time RN visits through a separate private sector business. UHCS provides services twenty-four hours a day, seven days a week. Its offices are open from 7:30 a.m. to 6:00 p.m. It provides an answering service whenever the office is closed. The administrator, director of professional services, and supervisors are always on call. UHCS provides quality assurance programs to exceed the Medicare, Medicaid and licensure standards for home health care. These programs include: quarterly utilization review of medical records corporate quarterly quality assurance: ongoing client record audit supervisory visits employee evaluations; and consultations from UHCS' advisory council. UHCS has a field staff of seven registered nurses at its Gainesville office to provide skilled nursing visits in the homes of patients who reside in Alachua County. The staff presently contains two fewer RN's than it contained twelve months prior to the final hearing. As of September 1, 1985, UHCS also had eliminated one occupational therapist from its direct patient care staff. UHCS has not replaced the two RN's or occupational therapist because UHCS has experienced a decline in the number of visits and patients served during the twelve month period preceding the final hearing. Without increasing its present RN field staff and direct-patient care staff, UHCS could increase its delivery of home health services in Alachua County by between twenty and twenty-five percent. By adding one additional clinical supervisor UHCS could increase its delivery of home health services in Alachua by an additional fifty percent, over and above the twenty to twenty-five percent excess capacity mentioned above. UHCS actively seeks to find patients in need of the types of home health services which it delivers. UHCS utilizes patient coordinators, all of whom are RN's, to make its services known in Alachua, Bradford and Levy Counties. The coordinators visit each of the hospitals in these counties to distribute Medicare home health guidelines and to ascertain whether there will be discharges from these hospitals who will need home health services. UHCS receives referrals from hospitals, physicians and other health care providers. Approximately thirty-five percent of its referrals from Alachua County come from hospitals. Alachua General Hospital provides nineteen percent of those referrals. The number of referrals to UHCS for home health services for patients residing in Alachua County has decreased during the past twelve months prior to the final hearing. The quality of home health services delivered by UHCS in Alachua, Bradford and Levy Counties was not questioned in this proceeding. In terms of quality of care, Santa Fe and AGH readily refer patients who are eligible for Medicaid and Medicare home health services to UHCS. UHCS has the same access to information about patients referred to it by AGH as Santa Fe's home health delivery system, to the extent that AGH permits UHCS access. UHCS takes advantage of the access provided by AGH in preparing patients referred to it for home care. At all times relevant to this proceeding, no patients residing in Alachua, Bradford and Levy Counties who were qualified to receive Medicare or Medicaid reimbursable home health services have been unable to receive services from UHCS. AGH's social services department (which performs discharge planning functions for the hospital) has had no problem placing patients in need of Medicare and Medicaid reimbursable home health services. Santa Fe hospitals having been able to obtain these services from UHCS for all patients residing in Alachua, Bradford and Levy Counties. Santa Fe does not propose to meet any need for Medicare and Medicaid reimbursable home health services which is not already being met by UHCS in Alachua, Bradford or Levy Counties. Santa Fe only proposes to serve patients of physicians that are members of the medical staff of its hospitals (AGH, BH and WMH). Since April 5, 1985, HRS has employed a uniform methodology contained in proposed Rule 10-5.11(14), Florida Administrative Code, for determining the need for additional home health agencies in Florida. Although that rule has been challenged in another proceeding, HRS has adopted the need methodology as a matter of department policy. HRS now utilizes that need methodology as its policy without exception in reviewing all applications for certificates of need to establish home health agencies in Florida. The methodology in the HRS proposed rule projects a need for sixteen home health agencies in HRS District III for the relevant planning horizon (1987). Because of dated factors in the methodology, the need projected under the methodology is incorrect and actually should be 17. Although HRS listed in its State Agency Action Report only sixteen licensed home health agencies and one CON approved home health agency for District III, the following agencies are also licensed to provide Medicare home health services in District III: (a) UHCS is licensed to operate a subunit in Palatka, Putnam County, District III (b) UHCS is licensed to operate a subunit in Starke, Bradford County, District III; and (c) Central Florida Home Health Services, Inc. Volusia/Seminole/Lake is licensed to provide home health services in Lake County, District III. The Leon County subunit was added in early 1984 the Putnam County subunit in November 1984 and the Bradford County subunit in March 1985. The evidence was not clear whether these three subunits apparently underwent certificate of need review. UHCS opened at least the most recent of these three subunits in a conscious effort to keep out competition. The subunits added a clinical supervisor and a clerical person to staff the new subunit offices the same nurses and home health aides previously based in Levy, Bradford and Putnam Counties continued to work there but out of the subunit offices. Under present uniform policy of HRS, each of these offices sensibly is counted against the gross need for additional Medicare licensed home health agencies in District III in order to determine if there is a net need or surplus. As defined in Rule lOD-68.02(19), Florida Administrative Code, a subunit of a home health agency is a semi-autonomous agency. It is incapable of sharing administration, supervision and services on a daily basis with the parent home health agency. Rule lOD-68.04(2), Florida Administrative Code, requires that subunits be separately licensed whenever the subunits "are operated outside of the county of the parent agency or operate as autonomous subdivisions." Since 1977 HRS has required that subunits of home health agencies must receive a CON before they can be separately licensed. Rule 10-5.04(7), Florida Administrative Code, provides that a CON must be obtained, not only for the establishment of a new home health agency, but also for the establishment of a new subunit of an agency. It was not proved that any of the subunits in District III are not meeting the need in the counties where they are located to the contrary, the evidence suggests that the subunits are meeting the existing need with excess capacity to spare. Accordingly, the inventory of licensed and CON approved Medicare home health agencies in HRS District III exceeds the need projected for licensed home health agencies in that district for 1987, the relevant planning horizon, by four agencies. Although the HRS' uniform need policy and the need methodology employed by the Local Health Council for District III project approximately the same number of persons in need of home health services, these methodologies differ as to how they would allocate agencies to meet the projected need. The HRS' home health methodology does not permit a subdistrict determination of need, while the District III methodology defines each county within District III as a subdistrict for home health services, and then assesses a need for one agency for each multiple of 800 persons in need, up to a maximum of four agencies. In comparison with the HRS methodology, the District III methodology allows more Medicare home health agencies to serve the same number of patients identified as needing Medicare home health services. The District III methodology would assess the need for an additional agency in Alachua County but no need for additional agencies in Bradford or Levy County. The HRS methodology assumes that agencies will it compete across county lines and that a methodology like the District III methodology can and will result in "false competition." The rationality of this aspect of the HRS methodology as a general rule was not persuasively established in this case. As a general rule, it would seem more rational to foster some type of competition at some level of activity in order to help depress Medicare costs (especially under the new reimbursement system described in paragraphs 15 and 16 above) and improve quality of services rather than allow certain providers to gain a monopolistic-type hold on parts or all of the service area. Such an approach seems even more appealing in light of the evidence in this case that UHCS recently placed at least one subunit in the service district in a conscious effort to keep out competition. But Santa Fe did not prove on the facts of this case that it is time to place a new agency in Alachua to compete with UHCS despite the HRS methodology and the facts in evidence that UHCS can more than adequately meet the need for home health services in Alachua County within the relevant planning horizon. ACCESS CONSIDERATIONS Through UHCS' parent agency and subunit offices the residents of Alachua, Bradford, and Levy Counties have geographic access to all Medicare and Medicaid reimbursable home health agencies. The Local Health Council for District III determined that, in those cases where the area for proposed service is one where residents do not have access to home health care due to financial barriers, the council would recommend approval of an additional home health agency if its need methodology shows no need for an additional Medicare agency. The Local Health Council for District III also recommended that county government assume responsibility for paying for home health services for indigent clients. In addition, the council recommended that volunteer organizations provide funding for home health services to medically indigent patients. The council established that home health agencies should provide an amount of uncompensated charitable home health care equivalent to at least one percent of the preceding fiscal years' gross revenue for any given home health agency. UHCS does not accept patients who cannot pay all of their bills for home health services either in cash, by Medicare or by a combination of cash and Medicaid (or, presumably, Medicare if applicable.) Therefore, no Medicare certified home health agency serves the medically indigent in Alachua, Levy or Bradford County.
Recommendation Based on the foregoing Findings Of Fact and Conclusions of Law, it is recommended that the Department of Health and Rehabilitative Services enter a final order denying in its entirety the application of Petitioner in Case No. 85-1501, Santa Fe Healthcare Systems, Inc., for a certificate of need for a home health agency to serve Alachua, Levy and Bradford Counties, CON Action No. 3452. RECOMMENDED this 23rd day of January, 1986, in Tallahassee, Florida. J. Lawrence Johnston Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 23rd day of January, 1986. APPENDIX Rulings on UHCS' Proposed Findings of Fact. Accepted in part rejected in part as unnecessary. See Finding 1. Accepted. See Finding 1. Rejected as conclusion of law. Accepted in part; rejected in part as unnecessary. See Finding 2. 5 and 6. Rejected as unnecessary. Accepted. See Finding 3. Accepted, except the existing home health delivery system is not a home health agency as defined by statute. See Conclusions of Law. See Finding 4. Covered by Finding 5. Covered by Finding 6. Covered by Finding 6. 12-38. Covered by Findings 7-33, respectively. 39. Rejected as contrary to the greater weight of the evidence. 40-42. Covered by Findings 34-36. 43-46. Rejected in part as cumulative and in part as subordinate. 47-51. Covered by Findings 37-41. Covered by Finding 42. Covered by Finding 43. Rejected as contrary to the greater weight of the evidence. 55-56. Covered by Finding 44 and 45. 57. Rejected in part as immaterial (HRS can condition the CON by its Final Order in this case), in part as being legally incorrect (HRS can enjoin violations of representations upon which a CON is granted) and in part as unnecessary and cumulative (that Santa Fe is now operating a hospital based home health delivery system). 58-59. Rejected as immaterial and unnecessary. HRS determinations to date are preliminary and subject to change based on the evidence. 60-62. Rejected in part as cumulative and in part as conclusions of law. Petitioner's Proposed Findings of Fact. (Petitioner's proposed findings of fact are unnumbered. For purposes of these rulings, they have been assigned consecutive numbers for each paragraph). The first sentence is rejected as unsupported by the evidence; the balance is covered by Finding 3. Covered by Findings 4 and 6. Covered by Finding 17. Covered by Finding 17. Covered by Findings 24 and 46. Covered by Findings 4 and 6 (partly cumulative). Rejected as cumulative. Covered by Findings 3738. Covered by Finding 39. (Rejected in part as contrary to the greater weight of the evidence.) Rejected as cumulative. Covered by Finding 44. HRS' Proposed Findings of Fact. There were none. COPIES FURNISHED: William C. Andrews, Esquire, Scruggs & Carmichael P. O. Drawer C One Southeast First Avenue Gainesville, Florida 32601 Robert P. Daniti, Esquire Carson & Linn, P.A. 253 East Virginia Street Tallahassee, Florida 32301 Harden King, Esquire Assistant General Counsel Department of Health and. Rehabilitative Services 1317 Winewood Boulevard Tallahassee, Florida 32301 David Pingree, Secretary Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32301
Findings Of Fact Background At all times material to this proceeding, Redi-Care was a corporation doing business as a home health care agency in Florida and was duly licensed in that capacity by the Department. Prior to May 4, 1989, Redi-Care was not certified to receive payment for services provided to Medicaid recipients under the Florida Medicaid Program. At times, however, Redi-Care did provide services to Medicaid recipients under a waiver program involving "Home and Community Based Services." This program receives funding from a separate appropriation than the one administered by the Department for the Florida Medicaid Program. Since the sale of some of the corporate assets on July 31, 1990, Ms. Ingeborg G. Mausch, Ph.D., has been authorized by the corporation to proceed with the collection of the accounts receivable that remained with the corporation. This proceeding involves Redi-Care's request for payment from the Department for medical services provided to two Medicaid eligible recipients, Richard Mow and Claire Jester. The Florida Medicaid Program is jointly funded by the federal and state governments. The Department is the state agency responsible for the administration of Medicaid funds from both funding sources. To the extent monies are appropriated, the Department is authorized to provide payment for medical services given to Medicaid eligible recipients through certified home health care agencies. Consultec was awarded the contract to replace EDS as the provider of fiscal agent services and the Medicaid agent for the Florida Medicaid Program in 1988. Pursuant to the agreement, Consultec was to become responsible for the enrollment of new providers and the processing of claims on December 15, 1988. Prior to the assumption of the fiscal agent duties, Consultec was responsible for the re-enrollment of all existing Florida Medicaid Providers into the Florida Medicaid Management System as it had been redesigned by Consultec. Current enrollees were given new provider numbers to be used on all submissions made on or after the December 15, 1988 date. Any claims submitted prior to December 15, 1988 would be processed by Electronic Data Systems Corporation (EDS) under the provider numbers previously issued by that entity. As part of the re-enrollment program, Consultec also created vendor numbers for those home health care agencies involved in the waiver program. These vendor numbers are used within the Department's Developmental Services and Aging Adult Services operations. In the past, home health care providers have not had access to these numbers. Consultec sent Vendor Information Sheets to all providers within the HRS Developmental Services and Aging Adult Services Waiver Program for "Home and Community Based Services" on October 7, 1988. Redi-Care was listed as a provider with the waiver program at the time the vendor re-enrollment occurred. Upon receipt of the Vendor Information Sheet, Redi-Care certified that the information on the sheet prepared by Consultec was correct. The document was returned to Consultec, as requested on the form, on October 19, 1988. Unbeknownst to those providers who completed the form, Consultec was planning on issuing them vendor numbers. Although each of the providers had such vendor numbers in the past, these numbers were never specifically issued to them because the Department undertook the responsibility to complete that portion of the waiver program's documentation. Application Process Originally, Redi-Care applied for enrollment as a "Medicaid Provider" in 1987. This original application was abandoned by Redi-Care when it learned that a provider had to be Medicare eligible as well. Instead, Redi-Care became a provider of "Medicaid Home and Community Based Services" in the waiver program. In July of 1988, "Medicaid Providers" were no longer required to be Medicare eligible. Based upon this policy change, Redi-Care reapplied to the Department for enrollment as a "Medicaid Provider" who provides medical services to recipients of the Florida Medicaid Program. The enrollment application, known as a "Request for Certification," was completed by Redi-Care on September 7, 1988. Assurance of Compliance with Title VI of the Civil Rights Act of 1964 was attached to the application. The Ownership and Control of Interest Statement was completed by Redi-Care, but the evidence presented reveals that it may not have been included in the application documents sent to the Department's Office of Licensure and Certification on September 7, 1988, or shortly thereafter. Pursuant to the agreement still in effect between the Department and EDS on the date of the submission of the application, EDS was the Medicaid Agent responsible for the review and processing of Redi-Care's application to become a Florida "Medicaid Provider" once it was received by EDS from the Department's Office of Licensure and Certification. Because Redi-Care was already licensed as a home health agency, the Department's Office of Licensure and Certification was not required to grant a license prior to the transfer of this enrollment application to EDS. All that was required was a certification survey from this branch of the Department and a copy of Redi-Care's active license. When the Office of Licensure and Certification went to complete the survey, the representative of the Department confused this Redi-Care entity with an entity next door known as Redi-Care, Inc. Consequently, the Redi-Care corporation seeking certification as a "Medicaid Provider" was not surveyed as it had requested via all of the proper channels. As the Office of Licensure and Certification was unaware of its mistake regarding the Redi-Care entities, this Redi-Care application package was sent on to EDS for review and processing of the application without the documentation required from the Department. After a few weeks, because Redi-Care was generally familiar with the application process from its prior experience, the Department was contacted and the follow-up package was requested. Redi-Care was sent a copy of the Medicaid Provider Agreement, which was signed and returned to the Office of Licensure and Certification on or about November 18, 1988. Within a day or two after Redi-Care mailed the Medicaid Provider Agreement, a letter was received from Consultec which referred to Redi-Care as a "Medicaid Provider." Redi-Care was thanked for re-enrolling in the program and was issued a Florida Medicaid Provider number for Home and Community Based Services. In actuality, the letter from Consultec was providing Redi-Care with the vendor number described previously in these Findings of Fact for use in the waiver program. Redi-Care was unaware that such a number was to be issued because it had not received such a number in the past, nor was it advised that one was forthcoming. When Ms. Mausch read the letter on behalf of Redi-Care, she assumed it related to the recent reapplication for Medicaid certification submitted in September 1988. The first sentence of the letter thanking Redi- Care for "re-enrollment" was interpreted as an acknowledgement of the first application for enrollment which had been abandoned, and an appreciation of the facility's current decision to assist in the provision of home health care to Medicaid recipients. Because the body of the letter appeared to be tailor made to Redi-Care's recent decision to participate as a "Medicaid Provider", Redi- Care believed its pending application for enrollment had been approved. When the letter was read and interpreted by Ms. Mausch, she failed to notice that the letter was issued four days prior to Redi-Care's submission of the Medicaid Provider Agreement, and specifically referred to "Home and Community Based Services." This mistake does not dissuade the Hearing Officer from finding Redi-Care's interpretation of the document was reasonable in light of all of the surrounding circumstances under which it was read. The references to Redi-Care as a "Medicaid Provider" in this letter issued by Consultec was ambiguous. The technical term "Medicaid Provider" was misused in a generic sense. Although the more casual use of the term might not have been misleading to most providers in the waiver program, it was very misleading to Redi-Care, who was awaiting the issuance of a "Medicaid Provider" number from the Medicaid Program. At the time the Consultec letter of November 14, 1988 was issued, EDS was the Department's Medicaid agent responsible for the review and processing of Florida's "Medicaid Provider" applications. On December 5, 1988, EDS acknowledged its receipt of Redi-Care's application to become a Florida "Medicaid Provider." The application packet was returned to Redi-Care, who was advised that additional items needed to be available with the application for processing to occur. Redi-Care was required to submit a copy of the Ownership and Control of Interest Statement. The Office of Licensure and Certification was required to complete its certification survey and submit this, along with a copy of Redi-Care's active license. The requests made by EDS were questioned by Redi-Care for the following reasons: Consultec's letter of November 11, 1988, appeared to have already approved the Medicaid enrollment, and the Office of Licensure and Certification had already been notified by Redi-Care two months earlier, and should have sent a copy of the license and survey to EDS. Instead of calling EDS, Ms. Mausch contacted Consultec, who had recently issued the "Medicaid Provider" number. During the conversation with "Deborah" of Consultec, who represented she was able to speak to Ms. Mausch's concerns, Redi-Care was advised that it need not complete the directions issued by EDS because a "Medicaid Provider" number had already been assigned by Consultec. It is unknown what exactly was said by Ms. Mausch to "Deborah" which resulted in this reply. However, the advice from "Deborah" was accepted and relied upon by Redi-Care because it was very compatible with what Redi-Care was willing to do under the known circumstances and what it reasonably believed the facts to be. Neither Redi-Care nor EDS were advised of the Department's failure to conduct the certification survey. It is also unknown whether the Department was aware of its confusion of the two Redi-Care entities at this point in time. Shortly after the re-application was returned to Redi-Care by EDS, this Department agent was relieved of its responsibility to review and process Florida "Medicaid Provider" applications. This responsibility was transferred to Consultec, the new Medicaid agent. At the time of the transfer, Consultec interpreted the return of Redi-Care's application for further attachments as a rejection of the application by EDS. Therefore, no further action was taken by Consultec on the application because it was considered to be a resolved matter. It should be noted however, that Redi-Care had not been advised that its application had been rejected, nor was any completion deadline given before rejection would occur. Redi-Care heard nothing more about the application after the discussion with "Deborah", so it continued to rely upon the representation that the new Florida "Medicaid Provider" number had been properly issued by the new Medicaid agent, and that nothing more was currently required of Redi-Care prior to its acceptance of Medicaid eligible recipients. The Acceptance and Care of Medicaid Eligible Recipients Once Redi-Care began to hold itself out as a home health agency who could accept Medicaid eligible recipients under the Medicaid Program, Richard Mow and Claire Jester were referred by their physicians and accepted as clients. There is no dispute in these proceedings about the Medicaid eligibility of either Richard Mow or Claire Jester. Further, there is no dispute regarding the quality of medical care, the dates of services, the necessity for the services and the reasonableness of the amount of the bills submitted for claims review and processing under the Medicaid Program. Richard Mow and Claire Jester were accepted as clients and services were performed based upon Redi-Care's reliance upon the representation that Redi-Care had a valid "Medicaid Provider" number that would allow it to receive payment from Medicaid appropriations for the medical care of these two clients. The Department was aware of the acceptance of these two Medicaid eligible recipients as clients by Redi-Care. The Department was also aware that they were being provided medical services for which Redi-Care expected to be reimbursed by the Medicaid Program. The two clients also relied upon this method of payment for the medical services provided by Redi-Care as third-party beneficiaries to the purported agreement between Redi-Care and the Medicaid Program. The amount of the claim submitted for services provided to Richard Mow from February 8, 1989 through April 16, 1989 was $7,411.45. The amount of the claim submitted for services provided to Claire Jester from February 12, 1989 through April 30, 1989 was $753.83. The Submission of Claims and Claims Denial Redi-Care first submitted billings and notes for the claims involving Richard Mow and Claire Jester to Consultec on March 29, 1989. On April 11, 1989, Redi-Care contacted Elizabeth Campbell, a Human Services Program Specialist with the HRS Medicaid Program Office in Fort Myers, Florida. At the time Ms. Campbell was contacted, her job duties included claims resolution for providers in the home health and nursing home areas. The purpose of the phone call from Redi-Care was to ask Ms. Campbell to find out why it had not received word on its claim submission to Consultec for Richard Mow and Claire Jester. After Ms. Campbell researched the issue, she discovered that Redi-Care was not listed as a "Medicaid Provider" on the rolls maintained by Consultec. Redi-Care was ineligible for payment through Medicaid. Payment could be received only as a provider of "Home and Community Based Services" under the waiver program. When Redi-Care was advised that it did not have a "Medicaid Provider" number on April 11, 1989, the Department was told about the information given to Ms. Mausch by Consultec's letter and her follow-up conversation with "Deborah". Ms. Campbell, as a representative of the Department, assured Redi-Care that the matter would be pursued further. In the meantime, through its employees, the Department allowed Redi-Care to continue to rely on the representation that it would be paid at the Medicaid rates for the continuing care provided to Richard Mow and Claire Jester. On April 12, 1989, Ms. Campbell recorded in her field notes that she did not make any assurances to Redi-Care that it would be paid for providing services for the two clients. However, there is no evidence to show that she affirmatively advised Redi-Care that they might not get paid for past or continuing services. Redi-Care was allowed to continue to care for the clients under the the assumption that Medicaid would provide payment. On April 18, 1989, it was clear to Department employees involved in this factual scenario that the Office of Licensure and Certification had confused this Redi-Care entity with Redi-Care, Inc. when the survey and certification was scheduled to occur in November 1988. This mistake had never been corrected. On April 26, 1989, Consultec completed its review of the claims submitted by Redi-Care and denied the claims because Redi-Care did not have a "Medicaid Provider" number. Attempts to Cure Certification Issue The Office of Licensure and Certification completed its survey on May 4, 1989. Redi-Care's enrollment application was complete, and contained all of the required information on this date. Although no deficiencies were noted during the survey, the Department did not send a copy of the letter stating Redi-Care met its requirements until June 27, 1989. On that date, the letter was sent to Redi-Care, who was required to forward it to Consultec, along with the application Redi-Care had previously submitted with the attachments requested in December 1988 by EDS. Once Redi-Care received the letter in early July 1989, the information was immediately forwarded to Consultec. Consultec reviewed the application and issued Redi-Care a "Medicaid Provider" number on August 6, 1989. When Redi-Care received its "Medicaid Provider" number, it was advised by Consultec that it could use this number to submit billings to the Medicaid Program for eligible services provided since September 1988. Apparently, Consultect relied on the date EDS acknowledged receipt of the application and related the eligibility date to the 90 day period prior to the application receipt. On September 19, 1989, the Department issued a letter through the Program Administrator, Medicaid Program Office, advising Redi-Care that the Medicaid billings for Richard Mow and Claire Jester would not be paid by the Medicaid Program, even though these services were provided after the effective date of eligibility given to Redi-Care by Consultec in its letter of August 6, 1989. The Department's letter advising Redi-Care of the Medicaid Program's decision to deny payment for the services provided to the two Medicaid eligible recipients also told Redi-Care that its "Medicaid Provider" number could be used only for services rendered on or after May 4, 1989.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is recommended: Redi-Care's application for enrollment as a "Medicaid Provider" be deemed complete on May 4, 1989. Redi-Care's eligibility period to submit claims as a "Medicaid Provider" should be listed as February 4, 1989, based upon the eligibility period set forth in the "Medicaid Provider Handbook, Home Health Care Services" in effect on the date the application was completed. The Department waive time limits for claims received beyond the usual 12 month period, as allowed in Rule 10C-7.030(6), Florida Administrative Code, based upon the unusual circumstances of this case because the circumstances pose an undue hardship on the provider or recipients. That the claims for services provided to Richard Mow and Claire Jester be re-submitted to Consultec for claims processing once the 12-month deadline is waived by the Department. That the amount of the reimbursement allowed to Redi-Care should be provided at the rates in effect at the time the services were rendered. RECOMMENDED this 11th day of June, 1991, in Tallahassee, Leon County, Florida. VERONICA E. DONNELLY Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904)488-9675 Filed with the Clerk of the Division of Administrative Hearings this 11th day of June, 1991. APPENDIX TO RECOMMENDED ORDER, CASE NO. 89-6923 Redi-Care's proposed findings of fact are addressed as follows: Accepted. See HO number 4. Accepted. See HO number 5. Accepted. Accepted. Accepted. Accepted. See HO number 15. Accepted. Accepted. Accepted. Accepted. Accepted. See HO number 40. Accepted. Accepted. See HO number 42. Accepted. See HO number 14 - number 27. Accepted. Accepted. Accepted. Accepted. Accepted. See HO number 45. Accepted. See HO number 29. Accepted. See HO number 38. Accepted. See HO number 35. Rejected. Contrary to fact. See HO number 5 - number 7 and number 16. Rejected. Contrary to fact and Redi-Care Exh. number 9. Rejected. See HO number 35 - number 38. Accepted. See HO number 39. Accepted. Rejected. Contrary to fact. Accepted. Rejected. Improper conclusion of law. Accepted. See HO number 32. Accepted. See HO number 33. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. See HO number 8. Accepted. Accepted. See HO number 8. Accepted. See HO number 9. Reject due to use of technical term "Medicaid Provider." See HO number 18. Otherwise, accepted. See HO number 15. Accepted. Accepted. See HO number 28. Accepted. See HO number 30 - number 31. Accepted. See HO number 34. Accepted. Accepted. Accepted. Accepted. Accepted. See HO number 5. Accepted. Accepted. Accepted. Accepted. See HO number 2. Accepted. See HO number 2. The Department's proposed findings of fact are addressed as follows: Accepted. See HO number 2. Accepted. See HO number 3. Rejected. Contrary to fact. See HO number 5. Accepted. See HO number 1. Accepted. See HO number 1. Accepted. See HO number 5, number 15 and number 16. Accepted. See HO number 6 and number 7. Accepted. See HO number 7. Accepted. Accepted. See HO number 15 and number 16. Accepted. See HO number 45. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Rejected. Irrelevant. Rejected. Conclusion of Law, not fact. Accepted. Accepted. Rejected. Contrary to fact. Accepted. See HO number 5. Accepted. Accepted. Accepted. Accepted. Accepted. See HO number 9. Accepted. See HO number 40. Accepted. Accepted. See HO number 43 - number 45. Rejected. Improper conclusion. Accepted. Accepted. See HO number 20. Accepted. See HO number 22 - number 24. Rejected. Contrary to fact. See HO number 27. Rejected. Irrelevant to this proceeding. Consultec's proposed findings of fact are addressed as follows: Accepted. See HO number 1 - number 2. Accepted. See HO number 3. Accepted. See HO number 3. Generally accepted, except for the dates of enrollment and claims processing. See HO number 4 and number 5. Accepted. See HO number 5 - number 7. Rejected. Conclusionary and contrary to fact. See HO number 15 - number 17. Accepted. See HO number 15 - number 17. Accepted. Rejected. Contrary to fact. See HO number 20. Accepted, except for the conclusion that this was a rejection letter. See HO number 20 and number 26. Reject the classification as rejection letter. Improper conclusion. See HO number 20. The rest of the paragraph is factually correct. See HO number 22 - number 24. Rejected. Irrelevant. Rejected. Improper definition of hearsay. Accepted. Accepted. See HO number 45. Accepted. See HO number 40. Accepted. See HO number 40. Rejected. Contrary to fact. See HO number 16, number 17 and number 27. COPIES FURNISHED: Karel Baarslag, Esquire Senior Attorney Department of Health and Rehabilitative Services 1317 Winewood Boulevard Building Six, Room 233 Tallahassee, Florida 32399-0700 Barry Roth, Esquire COHEN AND ROTH, P.A. 1375 Jackson Street, Number 201 Post Office Drawer 2650 Fort Myers, Florida 33902-2650 Ken Syler CONSULTEC, INC. 2002 A1 Old St. Augustine Road Post Office Box 5497 Tallahassee, Florida 32314-5497 R. S. Power, Agency Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Linda K. Harris, Esquire General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700
