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 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.
The Issue The issue is the consideration of the validity of proposed Rule 10-5.11(14), Florida Administrative Code.
The Issue The issues concern the question of the entitlement of Petitioner to the grant of a certificate of need (CON) to provide home health services in District III.
Findings Of Fact On December 15, 1986, Petitioner made application for a certificate of need (CON) to provide home health services in Citrus County, Florida. That application was denied by Respondent on December 14, 1987. The basis for denial as set out in Respondent's State Agency Action Report (SAAR) was to the effect that there was no demonstrated need when resort was made to the methodology suggested by the North Central Florida Health Planning Council in its 1986 District III Health Plan. (At that time Respondent did not have a methodology for determining need). It was felt that some advantage might be gained in serving the needs of underserved groups; however, there was limited information to demonstrate that existing home health agencies in the county could not meet the demands for service. Finally, it was stated that the referral agreement between Petitioner, as a source of clients from its hospital operation, and Intervenor as an existing home health care provider, to include use of Petitioner's employees in the provision of care, care which was as "hi-tech", as Petitioner could provide, was sufficient. Following the application denial, Petitioner filed a timely request for formal hearing under the authority set forth in Section 120.57(1), Florida Statutes. On February 17, 1988, Intervenor was allowed to intervene. Given that the Respondent did not have a rule methodology in place to consider this application when first filed or at the point in time where the case was referred to the Division of Administrative Hearings for consideration, on May 12, 1988, Respondent moved, unopposed, to have the case returned to the agency to await the promulgation of a new home health rule. The motion was granted. On September 12, 1988, the new rule became effective as Rule 10- 5.011(1)(d), Florida Administrative Code. Which provided as follows: (d) Medicare Certified Home Health Agencies. Definitions. Home Health Agency. A home health agency is defined as a Medicare certified home health agency in accordance with subsection 381.702(10), F.S. Home Health Services. Home Health Services are defined in accordance with subsection 400.462(3), F.S. Home Health Services Provider. For the purpose of this rule, a home health services provider is defined as the person or corporate entity to which the certificate of need or license is issued. District. District means a service district of the department as established in subsection 20.19(5), F.S. Service Area. A certificate of need for the establishment of a home health agency shall authorize a home health services provider to locate a home health agency and serve persons anywhere within the district for which the certificate of need is awarded. Planning Horizon. The planning horizon is the anticipated time frame within which the agency is expected to be licensed. The planning horizon for applications submitted between January 1 and June 30 of each year, shall be July of the following year; the planning horizon for applications submitted between July 1 and December 31 of each year shall be January of the year following the year subsequent to the application deadline. Approved Home Health Agency. For the purpose of this rule, an approved home health agency is defined as a new agency within the district which holds a valid certificate of need and has not been licensed by the department one moth prior to the publication date of the semi-annual fixed need pool. Persons or corporations who do not operate Medicare certified home health agency in the district and are the holder of one or more certificate of need approvals within the same district, shall only be counted as one approval. Persons or corporations who do operate a Medicare certified home health agency in the district and are also the holder of a certificate of need approval for the same district, shall not be counted in the inventory of approved agencies. Quality of Care. Home health agencies regulated under this rule shall meet the minimum of care standards contained in HRS rules 10D-68, F.A.C. Need Methodology. The establishment of a home health agency by a provider who does not currently operate a Medicare certified home health agency in a district, shall require a certificate of need for the operation of a Medicare certified home health agency in the district. Applications for home health agencies shall be reviewed against all applicable statutory and related rule criteria. Applications for home health agencies shall not normally be approved unless a need is indicated in accordance with the formula under paragraph 3. The establishment of additional Medicare certified home health agencies, additional offices, mail drops, or any other physical presence by a Medicare certified home health services provider within the same district is not subject to a certificate of need. The need for the establishment of a new home health agency within the HRS district shall be determined twice a year. The net need for new Medicare home health agencies in each HRS district is calculated as follows: HHNN = ((PHHV - AHHV)/CEAS) - AHH Where: HHNN equals the Medicare certified home health agency net need. PHHV equals the projected number of home health agency visits for the respective district and planning horizon. The projected number of home health agency visits is calculated by multiplying the number of home health visits per 1000 population 65 years and over provided by the Medicare certified agencies in the district for the most recent year for which data available, by the projected population 65 years and over for the respective district. The population projections shall be based on the population projects issued by the Executive Office of the Governor available to the department 1 month prior to the publication date of the semi- annual fixed pool. AHHV equals the actual number of home health agency visits provided by all Medicare certified home health agencies in the district based on cost report data obtained from Medicare Intermediaries for the most recent year available to the department 1 month prior to the publication date of the semi-annual fixed need pool as specified in Rule 10-5.008(2), F.A.C. CEAS is the cost efficient agency size in numbers of visits at which economy of scale is achieved according to the data available to the department. If the fraction (PHHV - AHHV)/CEAS is .5 or exceeds .5, the fraction shall be rounded upward to the nearest whole number. CEAS shall be updated by the department annually and shall be determined by the department according to the following methodology: Rank all agencies by visit size, excluding hospital-based agencies. calculate the average cost for all visits for each remaining agency. Calculate the mean visit cost for all agencies, excluding hospital-based agencies, and two standard deviations from the mean for the remaining agencies. Eliminate agencies with average visit costs at or exceeding two standard deviations above and below the mean visit cost from further calculations. Array remaining agencies by visit size from low to high, and sort agencies into 4 groupings by visit size containing an equal or similar number of agencies, and calculate the mean cost for each groupings. Calculate the percentage reduction, if any, in mean visit cost for each grouping as compared to the previous grouping. Identify the agency size groupings which have a mean visit cost reduction of 5 percent or more compared to the mean visit cost of the previous groupings. Select the agency size grouping for which the last 5 percent or more reduction in mean visit cost is achieved prior to a grouping for which a less than 5 percent reduction is achieved as compared to the previous grouping and determine the median agency size for this grouping rounded to the nearest thousand. This agency size is defined as CEAS. AHH equals the number of approved home health agencies in the district. Preference shall be given to applicants proposing to provide home health care services to indigent persons and Medicaid patients. Preference shall be given to applicants proposing a comprehensive range of home health services if it is determined by the department that certain types of services are unavailable or that there is a shortage of certain types of home health service. Preference shall be given to applicants proposing to provide home health services and establish a physical presence underserved areas of the district. Data Reporting Requirements. Home health agencies regulated under this rule shall provide the following information to the department or its designee. The information shall be provided for the same reporting period covered by the annual cost reports submitted to the Medicare Intermediaries, and shall be submitted to the department or its designee at the same time the annual cost report is submitted to the Medicare Intermediary. The total number of patients served less than 65 years of age and 65 years of age and over by county of residence. The total number of visits provided by type of service. The total number of patients served by payment source including Medicaid, Medicare, and uncompensated care. As can be seen, this rule considers the need question district-wide as opposed to a county-by-county analysis in effect at the time of application by Petitioner. District III, which contains Citrus County, has fifteen other counties. The rule in its text is not found to be applicable per se to this application, although its underlying concepts arguably have an influence on the case outcome. While the Petitioner and Respondent urge that the rule does-have retroactive effect and the Intervenor disagrees, all parties acknowledge the logistical awkwardness of trying to employ the rule's terms in a literal sense. In fact, the rule cannot be used as it is written, for reasons to be explained and in any event neither of the proponents have exercised its terms in exact detail. When Respondent reviewed the application using a modified version of the new rule in the interest of what Respondent believed to be an equitable treatment of pending home health applicants who had waited for the rule to be enacted, it changed its position from one of recommended denial to recommended grant of the CON. The case was returned to the Division of Administrative Hearings and upon motion by the Intervenor, as granted, the Petitioner updated its application on December 5, 1988. This lead to the hearing on the dates previously described The updated information was provided to the other parties in this case. It was not given to the local health council for further review by that organization. Petitioner is a public not-for-profit healthcare organization created by state law. The hospital is governed by a Board of Trustees appointed by the Governor of the State of Florida. The proposed home health agency would be owned and operated by Petitioner. It treats indigent and Medicaid patients and other medically underserved groups. The hospital's mission is to serve the residents of the community regardless of their ability to pay. This approach would be continued in home health care. Petitioner provides high quality patient care and this could be expected to continue if a CON for home health care was granted. The quality assurance plan and mechanisms in place at Petitioner's hospital would be used in its home health agency to help assure high quality patient care. Petitioner would also develop a utilization review plan similar to what is in effect at the hospital that would help insure proper utilization of the home health agency. Petitioner is JCAH accredited and licensed by the State of Florida, and is currently in compliance with all State of Florida licensure requirements. Petitioner's home health agency would be a hospital-based home health agency, as opposed to a free-standing home health agency. There are benefits to being a hospital-based home health agency. The home health agency employees have the advantage of being part of the hospital's employment benefit package; the home health agency has the ability to tap into the expertise of the hospital in such areas as accounting, data processing, and so forth; discharge planning is easy to coordinate; and, the home health agency has the potential ability to use trained hospital personnel who have high tech skills and expertise and can provide services to the home health agency in their area of expertise. However, the suggestion that employees would be involved in both roles of hospital care and home health care is suspect in that certain employees such as nursing staff are not expected to fulfil that dual role and other employees such as the dietician were unable to consistently aid the patient in the home and carry out the duties in the hospital under an arrangement by which the Intervenor per agreement with the Petitioner sought to have continuation of services from the hospital to the home. If this could not be done, given the demands on the dietician in the hospital duties at that time, then there is no reason to believe that it would be any easier to achieve if the hospital had a home health agency. None of the aforementioned benefits are significant improvements over existing conditions in Citrus County where home health care is provided by freestanding agencies. More specifically, Petitioner currently has physical therapists, respiratory therapists, dietitians, and social workers on its full-time paid staff that could conceivably be available to the home health agency. Since these persons are already full-time salaried employees of the hospital, it would not cost the home health agency any additional amount for these skilled persons to provide services to home health care patients, assuming the ability to meet the needs of hospital patients and home health care patients, again a real uncertainty. Petitioner's personnel would be available to assist in the development of policy and procedure manuals, quality assurance plan and utilization review plan for the home health agency. There are other possible economies in service that could be derived from Petitioner's operation of a hospital-based home health agency. These include: the hospital-based agency is easily accessible to physicians; discharge planning is facilitated due to the close cooperation of nursing, social worker, and home care provider while the patient is still in the hospital; services will be available 24-hours a day through the use of hospital switchboard and communications systems; and use of current medical records systems will mean a patient's entire medical history will be available to practitioners. Again, these arrangements do not afford a significant improvement over existing home health services. Petitioner has sufficient resources available to initiate and operate a hospital-based home health agency. Necessary staff can be employed to the extent they are not already working at the hospital. Petitioner is in sound financial condition. Petitioner would be able to hire a qualified administrator. Petitioner's projected payor mix of 88% Medicare, 3% Medicaid, 4% insurance and 5% indigent, is an admirable goal. However, there is some question about whether the projections of Medicare and indigent care levels of service will be achieved. Petitioner as a referral source from its hospital operations had not achieved those projected levels of referrals in the past. This is important because Petitioner expects to obtain its home health patients from the hospital referrals. Consequently to promote the grant of the CON premised solely upon the belief that underserved groups will be better off would not be warranted. The possibility exists that with greater awareness more underserved persons might be referred for home health care but nothing in this case points to any increased effort to publicize the availability of home health for the underserved to justify the optimistic levels the applicant predicts. In a home health agency, all of the patient services are provided in the patient home. Thus, the only space requirement is for office space for the administrative staff and working space for the employees to do their necessary paperwork. Petitioner Memorial Hospital has about 1,600 square feet of vacant space available in which to house the home health agency offices. This building is currently owned by Petitioner. There is no debt associated with this building, and the building has been fully depreciated. Contrary to the statement in its application, Petitioner has decided not to offer prescription delivery services. This is not a significant change. Intervenor is a licensed home health agency in Citrus County. It first became licensed by the State of Florida in February, 1986. Intervenor has been surveyed annually by Respondent since 1986. In each of these surveys, it received no deficiencies. Intervenor is a full-service home health agency. It offers a range of "hi-tech" home health services, including: skilled nursing services; physical therapy; occupational therapy; speech therapy; social services; home health aide services; dietary guidance; medical supplies; home IV therapy; parenteral nutrition; interostomal therapy; home phlebotomy and lab testing services; and respiratory care. It has offered these services since its inception. Intervenor provides some homemaker services during home health aide visits, such as cleaning, straightening, and laundry. Intervenor's personnel include registered nurses, certified home health aides, physician therapists, licensed physical therapist assistants, speech therapists, occupational therapists, a medical social worker who holds a masters in social work, interstomal therapists, nutritionists, and respiratory therapists. Intervenor offers quality of care and ensures continuity of care in the delivery of home health services. Petitioner has never complained that a patient could not be discharged quickly enough due to Intervenor's shortcomings in taking on home health services for the discharged patient. Intervenor makes every effort to coordinate its operations with Petitioner to ensure quality and continuity of care related to patients referred by the hospital. The service area of Intervenor is Citrus County. Until late 1988, about 70% of Intervenor's referrals came directly from Petitioner. On average, Intervenor provides about 28.6 home health visits per patient. Intervenor provides home health services to all patients regardless of ability to pay. Intervenor provides home health services to the following payor classes: Medicare, Medicaid, VA, workmen's compensation, private insurance, and indigent. Its CON contemplates 2% Medicaid and 3% indigent patients. Since opening in 1989, Intervenor has treated 985 patients. Of these 985 patients, only ten (10) have been indigent and fifteen (15) have been Medicaid patients. This works out to one percent (1%) indigent care and one and one half percent (1.5%) Medicaid care. Community Care publishes a brochure that advertises its services to the community. Nowhere in this brochure does it indicate that Community Care serves indigent patients. The brochure stresses that services will be provided through reimbursed coverage, either Medicare, insurance, or other reimbursement sources. On the other hand it does not require any deposit or up-front payment from new home health patients and has never refused a patient due to an inability to pay. As stated until recently a very substantial portion of the Intervenor's referrals came from Petitioner and levels of service to the underserved, that is, Medicaid and indigent, have been low. This ties back to the observation that the 3% Medicaid and 5% indigent projection of service made by Petitioner may not be any easier to achieve and probably less so than the 2% Medicaid and 3% indigent which Intervenor is committed to. This is supported by the fact that on the first 11 months in 1988, Petitioner referred less than 2% Medicaid and 1% indigent. Moreover, the District III average for existing agencies of services to these underserved groups is .8% Medicaid and 1.3% indigent. As alluded to before, in December, 1985, Petitioner and Intervenor entered into an agreement. Per that agreement, Petitioner would refer all home health patients to Intervenor unless a patient or physician specifically requested otherwise. The agreement provided that Petitioner would provide certain services and personnel to Intervenor in exchange for compensation. It was a two-year agreement with an automatic one-year renewal. Petitioner chose to extend the contract for three years through the latter part of 1988. Since late 1988, Petitioner rotates its hospital referrals in the instance where the patient, patient's family or physician did not specify which home health agency was preferred. This means that as many as seven agencies could be involved in the rotation if Petitioner gained a CON, with Petitioner having no greater share than the rest. At present, there are four providers, two in the rotation are from the ABC home health group, the Intervenor and Upjohn another home health provider. Petitioner would make five. To make seven, VNA and Gulf Coast Home Health Services who have come into Citrus County would be added. VNA is another provider with a history of service to underserved patients. In this connection, Petitioner argues that its equal treatment of existing providers and itself, if granted a CON, minimizes the adverse impact of another competitor arriving on the scene and allows existing providers who are for profit agencies to remain financially viable. This together with trends toward early release in DRG for the hospital inpatient sector; provision of home health care through the Catastrophic Healthcare Act, and the general trend in increased home health visits in Citrus County make it possible for both the existing providers and the Petitioner to survive in the market place, if you accept the point of view of those who favor the grant of a CON to Petitioner. In fact, the DRG situation and the Catastrophic Healthcare Act, as events, are too speculative to say what their influence will be in promoting greater use of home health services. Otherwise, the trend toward increased visits that have been pointed out are now being met with an increased number of providers to deliver those visits. This dilutes market share. The Petitioner's rotation system further dilutes market share, especially as to the Intervenor. Thus, the question is raised on the matter of whether the historical trend toward increased visits is enough to sustain the existing providers with the advent of the Petitioner's presence and choice to rotate referrals. On the whole, the Petitioner's influence on competition is not positive and is not acceptable. The Petitioner's projections concerning its own market acceptance are unrealistic and unacceptable. The projections in the original application and in the December 5, 1988 update to that application as to skilled visits per patient far exceed the experience in the service area, Citrus County. The applicant speaks in terms of 53 visits when the historical experience in the county is approximately 30. Nothing in the record of the hearing tends to support the idea that Petitioner can deliver such an excessive increase in visits. Additionally, estimates of total home health visits in the first two years of operation are generally out of line. The estimate by Petitioner ranges as high as 42,000, plus visits. Some of the items in that count are not comparable to referrals made out of the hospital at present. Examples of this incomparability are homemaker services, DME and the category listed as general items. Again, prescription service is no longer proposed thereby reducing the numbers. Nonetheless, the estimate is still excessive. This is made the more apparent when taking in account that by annualizing available data 464 patients were referred by Petitioner in 1988. In examining what had been referred out in 1988 in number of patients, the number of visits on average by history and the idea of rotation of referrals, Petitioner cannot achieve the performance level it predicts. Moreover, projections for population in 1990 and 1991, the furtherest years out given by Petitioner in support of its application, don't change this impression because the increases in population will not justify the Petitioner's projections on market share as a function of number of visits. The estimates of visits at 1990 and 1991 based upon 50% retention of referrals projected from Petitioner's hospital for home health services is unrealistic in that retention could be as low as 15% to 20%. Therefore, visits would be much less than 5,693 and 7,950 in 1990 and 1991, respectively. (See Petitioner's Exhibit 22.) The failing in the estimate of performance level means that the revenue projections are inaccurate. Although Petitioner is a not for profit institution, its proposed home health operation is not seen to be financially feasible in the short term or long view. The fact that approximately 80% of costs in a home health operation are variable and that home health delivery is cost-based reimbursed does not relieve the Petitioner from giving a more realistic estimate of those costs, its performance and net financial position. The effect of this failing leaves the record unclear and the trier of fact unconvinced concerning the true facts about this project's financial feasibility. The pro formas as written do not identify employee benefits ranging in costs from 25% to 30%. Transportation costs are not reflected. If other facts were favorable to Petitioner, there would be very little additional costs associated with the start-up of its operation. Only minor "sprucing up" would be necessary before occupying existing space. Excess office furniture is currently available at the hospital. The addition of Petitioner as a provider of home health services will not significantly advance variety or quality of care sufficient to justify the issuance of a CON. At present, existing providers offer a wide variety of home health services and provide quality care. The fact that the Petitioner is a hospital based not for profit institution, does not alter these findings. The addition of Petitioner promotes no positive influence in competition in the market place. The risk is presented that overall cost in the health care system can be increased if the Petitioner is added and the market place becomes overburdened. Based upon past experience, the Intervenor needs to achieve around 8,700 visits a year to be financially viable, and to break even. Petitioner's proposal together with other competitors in the market, some recently arrived, Upjohn, VNA and Gulf Coast Home Health Services jeopardize the ability to remain financially viable. Nothing can be done about the other competitors, but the issue of Petitioner's presence can be dealt with and should be rejected as an outcome. At a minimum the addition of Petitioner does not foster cost containment in that it could cause the existing providers to up requests for reimbursement nearer the caps in the Medicare segment at public expense. While there is a need for homemaker services in Citrus County, that fact doesn't justify the grant of a CON to Petitioner because it is willing to provide them. In home health care delivery there is credible evidence that initial economies of scale occur between 6,000 to 9,000 visits per annum. There is a serious question about the Petitioner's ability to achieve that level of performance under the facts found previously. When initially reviewing the compliance of the application with the 1986 District III Health Plan, in addition to problems of compliance with the need methodology in that plan, Petitioner did not respond to the need for home health services in Hamilton County and expansion of the range of services in Columbia and Suwannee Counties. These counties are within District III. These latter items concerning the other counties do not hinder the Petitioner's attempt to gain a CON because at present the decision to grant or deny a CON is on a district-wide and not county-by-county basis. Therefore, in theory, the Petitioner could serve Hamilton, Columbia and Suwannee Counties. Admittedly, that is unlikely given the proximity of these counties to Citrus County. More importantly, there has been no showing that some other applicant entitled to comparative review with the Petitioner sought to serve the other three counties putting into effect the local planning guidelines on priorities for grant of a CON. Likewise the local planning council methodology is of no moment. It deals with a county-wide analysis, not a district-wide analysis of need. The district-wide concept applies in this case per the change in the method of assessment that was fostered by the agreement to wait for the Respondent to enact a rule methodology and with that delay the tacit acceptance of the idea that approved and licensed home health providers could expand their services throughout the district. By contrast the fact that the local council reported that 148% of need was being met in Citrus County is telling and works against Petitioner. Finally, the support of the application by the local council as advisor to the Respondent is noteworthy but cannot overturn the adverse facts in this hearing which cause the application to be rejected. Petitioner is basically in compliance with the Florida State Health Plan in effect at the time of application except for the question of whether the Petitioner can achieve the aforementioned economies of scale at 6,000 to 9,000 visits per annum and the possible adverse influence on existing providers in maintaining economies of scale. Rule 10-5.0111(1)(d), Florida Administrative Code, supra, is the product of a considerable effort by Respondent to establish a balanced method of measuring the need for additional home health care providers in the various districts throughout the state. Unfortunately, it has limited utility in trying to resolve this controversy. The proponents of the use of the rule point out that nothing in the rule states that it cannot be applied retroactively to the case facts. Intervenor reminds us that nothing says it can be applied in that way. As hinted before, the rule cannot be seen to apply retroactively as it is written to render a defensible projection of need at the theoretical planning horizon of January, 1988. First, the service area in December, 1986 through January, 1988 was in reality Citrus County, not the district. There is no way to postulate who might have taken advantage of the opportunity to serve the overall district and come into Citrus County from outlying counties within the district because that was not allowed as a matter of right back then as it is now in the terms of the rule. The present situation has shown that there is such interest in coming into Citrus County with the addition of Upjohn, VNA and Gulf Coast Home Health Services. Next, the idea of who would have been shown as approved as a home health agency taking into account the January, 1988 planning horizon cannot reasonably be ascertained. The annual fixed need pool publication did not occur such that one could see who had been approved, or held a CON, one month prior to that publication to serve the district. Although one could argue that the identification of the pool can be hypothetically set for the fall of 1986, problems with identifying the 1985 data to establish that pool based upon information that was available to the Respondent at the time to announce the pool or availability of a complete data set about 1985 at the point of hearing persist. Associated with this dilemma is the influence agency expansions into other counties would have on calculation of CEAS. In the area of CEAS the exact nature of that situation cannot be ascertained. It cannot because one doesn't know which existing providers might have determined to go out of the counties in which they had offered their services and into other counties to open new units. This would have some influence on the average agency size within the district, which in turn causes a possible different answer in deriving the number of needed providers by the use of the formula. All this makes the exercise of accurately setting the pool unlikely and it wasn't done in this hearing. In using the district-wide service analysis back in time to fit the Petitioner's situation, an application by VNA in District III, Alachua County, pending and denied in December, 1987, the same month as Petitioner's denial, was not comparatively reviewed with the Petitioner as the law would theoretically require. VNA was subsequently approved and is functioning now. Consequently, comparative review is no longer possible. On the topic of the 1985 data, which is mandated in exercising the rule, what data in this category was available in the fall of 1986 is uncertain. The data about 1985 presently held by the Respondent is incomplete. This incompleteness is in AHAV where visits in all categories cannot be shown for 1985. This tends to understate what the formula derives as an answer. The derived answer for needed agencies is .7, rounded up per terms in the rule is one agency if the other factors that were described are ignored. They should not be. Especially, compelling is the existence of VNA, Alachua County which could use up the net need of one agency. Concerning the applicants who waited for the Respondent to enact a rule who applied for a CON in the period June, 1985 through December, 1987, the Respondent modified the use of the rule. In its thinking to make certain that no applicant along that time continuum was treated unfairly, Respondent picked 1986 data and a July, 1988 planning horizon in deciding the question of need. The result in the Petitioner's case was to use inappropriate data and an inappropriate planning horizon, according to the rule. This produced an answer of 1.1 agencies rounded down to 1. This is the same answer as before and no purpose is served in criticizing the Respondent's choice to deviate from the terms of the rule. On balance the concept of this rule as opposed to the ability to use the rule per se may look appealing as an abstraction, but it is unappealing as a means to resolve the factual dispute. It superimposes a system of district review at a time of county level service. For that reason, it cannot answer the riddle of how many providers would have exercised the right to serve Citrus County from other counties in the district as they have begun to do when the rule took effect in September, 1988. Using the rule retroactively anticipates a planning horizon which is already past. In recognition of this anomaly the parties have spoken to the future in their proof through the years 1990 and 1991. This has been necessitated by the agreement to wait for the Respondent to enact a new home health rule. That future is not conducive to the grant of the CON on the facts in this case which are more instructive about the true need in the district than the exercise of the formula in some past period. Had the Petitioner chosen to reapply and fallen under the clear terms of the rule, the result might be different. It did not, and it must accept the results of that choice.
Recommendation Based upon a consideration of facts found in the conclusions of law reached, it is, RECOMMENDED: That a final order be entered which denies the request for Certificate of Need as applied for by Petitioner. DONE AND ENTERED this 29th day of June, 1989, in Tallahassee, Leon County, Florida. COPIES FURNISHED: Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, FL 32399-0700 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, FL 32399-0700 Stephen K. Boone, Esquire Boone, Boone, Klingbell Boone & Roberts, P.A. 1001 Avenida Del Circo P. O. Box 1596 Venice, Florida 34284 Stephen M. Presnell, Esquire Macfarlane, Ferguson, Allison & Kelly Post Office Box 82 Tallahassee, Florida 32302 James C. Hauser, Esquire Joy Heath Thomas, Esquire Messer, Vickers, Caparello, French & Madsen, P.A. O. Box 1876 Tallahassee, Florida 32302 CHARLES C. ADAMS 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 29th day of June, 1989. APPENDIX TO THE RECOMMENDED ORDER IN CASE NO. 88-0386 The following discussion is given concerning the proposed facts of the parties. Petitioner's Proposed Finding of Facts The first paragraph and the first sentence to the second paragraph are subordinate to facts found. The remaining sentences within paragraph 2 are not necessary to the resolution of dispute. Paragraph 3 is contrary to facts found. Paragraphs 4-7 are subordinate to facts found with exception the last sentence in paragraph 7 which is contrary to facts found. Paragraph 8 is subordinate to facts found. Paragraph 9 may express the statement of policy by the Respondent, but it is not an acceptable outcome in this instance. Paragraphs 10-12 are subordinate to facts found. Paragraph 13 is an accurate portrayal of the facts as far as its goes; however, it does not account for the problems of imposing the new home health rule over the time period associated with the filing date in this application. Paragraphs 14-16 are subordinate to facts found. Paragraph 17 is contrary to facts found. Paragraph 18 is subordinate to facts found. Paragraph 19 is not necessary to resolution of dispute. Paragraph 20 in all sentences except the latter is subordinate to facts found. The latter sentence is not necessary to the resolution of dispute. Paragraph 21 is subordinate to facts found. Paragraph 22 is contrary to facts found. Paragraph 23 is subordinate to facts found. Paragraph 24 is contrary to facts found. Paragraph 25 is true in that at the time the local health council examined the application there was an indicated need for home health for Medicare and indigent patients. That need is being met at present to the extent that those classes of patients have been made aware of the existence of the home health services. Paragraph 26 is subordinate to facts found. Paragraphs 27 and 28 are contrary to facts found. Suggestions in Paragraph 29 do not comport with the situation in Citrus County at present. Paragraph 30 is subordinate to facts found. Paragraph 31 is contrary to facts found. Paragraphs 32-36 are subordinate to facts found. Paragraphs 37 and 38 are not necessary to the resolution of dispute. Paragraphs 39-43 are subordinate to facts found. Paragraph 44 is not necessary to the resolution of dispute. Paragraphs 45-51 are subordinate to facts found. Paragraph 52 is not necessary to the resolution of dispute. Paragraph 53 is subordinate to facts found. Paragraphs 54-56 are contrary to facts found. Paragraph 57 is subordinate to facts found. As to Paragraph 58 it is uncertain whether the staff levels are adequate given the failure to accurately portray the volume of visits. In a related sense, Paragraph 59 as to salary level made to depicts the cost of those salaries, but it fails to include the benefits. Paragraph 60 is to general in its contention. It does not answer the failure to identify the more reasonable statement of staffing levels. Paragraph 61 is subordinate to facts found. The pro formas were not clear and the complementary proof offered at hearing did not confirm the assertion set out in paragraph 62. Paragraphs 63-65 are contrary to facts found. Paragraph 66 is subordinate to facts found. Paragraph 67 is contrary to facts found. Paragraph 68 is not necessary to the-resolution of dispute. Paragraph 69 depicts a situation that is to speculative to have relevance in this case. Paragraphs 70 and 71 are contrary to facts found. While the Paragraphs 72-74 accurately states the circumstance related to the intervenor in its initial involvement in the market. This situation has changed since that time and if Petitioner were to gain entry into the market the probability is that the intervenor's business would be seriously impacted. Paragraph 75 is contrary to facts found. Paragraphs 76 and 77 are subordinate to facts found. Paragraph 78 is not necessary to the resolution of dispute. Paragraphs 79-82 with exception of the last sentence in 82 are subordinate to facts found. The last sentence in paragraph 82 is not accepted. Paragraph 83 is subordinate to facts found. Paragraphs 84 and 85 are contrary to facts found. Paragraph 86 is true if one fails to take into account the advent of services by the intervenor and additional providers who has come into the market who are willing to undertake service to those patients. Paragraphs 87 and 88 are contrary to facts found. Paragraph 89 is subordinate to facts found. Paragraphs 90 and 91 are contrary to facts found. Paragraph 92 is subordinate to facts found. In Paragraph 93, while it is true that Petitioner has an excellent record of service to the Medicaid population in Citrus County, it is unclear why Medicaid patients are not receiving sufficient home health services, compared to what one would expect the demand to be. Respondent's Proposed Findings of Fact Paragraphs 1-3 are subordinate to facts found. Paragraphs 4-6 are contrary to facts found. Suggestion in Paragraph 7 is not a certainty and is not accepted in the fashion presented in these proposed facts. Paragraphs 8-10 are contrary to facts found. Paragraph 11 is subordinate to facts found. Paragraph 12 is contrary to facts found. Paragraphs 13 and 14 is subordinate to facts found. Paragraph 15 is a true statement if other factors which have been discussed in the recommended order are not taken into account. Paragraph 16 is subordinate to facts found. Paragraph 17-19 are not sufficiently relevant to this case to be reported as facts. Paragraph 20 is contrary to facts found. Paragraph 21 is subordinate to facts found. Paragraphs 22 and 23 may be basically an accurate statement of the Respondent's policies; however, this arrangement is not satisfactory on this occasion. Paragraph 24 is subordinate to facts found. Paragraph 25 is contrary to facts found. Paragraph 26 is subordinate to facts found. Paragraphs 27 and 28 are not necessary to the resolution of dispute. Paragraph 29 is subordinate to facts found. Paragraph 30 is true if the rule was found to be applicable. Paragraph 31 and 32 are not necessary to resolution of dispute. Paragraph 33 may be true in terms of the prospective use of the rule but is not influential in this case. Paragraph 34 is not necessary to the resolution of dispute. Paragraph 35 is speculative and has little relevance absent a showing that the expansion into the other areas within the district offset new providers coming into Citrus County, to include the Petitioner. Paragraphs 36 and 37 are subordinate to facts found. The suggestion in paragraph 38 is a statement of limited value in that there are no other competitors in District III from other batches. Paragraphs 39-43 are subordinate to facts found. The first sentence to paragraph 44 is subordinate to facts found. The remaining sentence is contrary to facts found. Paragraphs 45 and 46 are subordinate to facts found. Paragraph 47 is contrary to facts found. Paragraph 48 is accurate as for as it goes; however, it fails to take into account the fact that the Intervenor began to provide home health care to indigent and Medicaid patients. Paragraph 49 is contrary to facts found. Paragraph 50 is subordinate to facts found. Paragraph 51-53 are contrary to facts found. Paragraph 54 is subordinate to facts found. 35 The suggestion in the first sentence of paragraph 55 is true. Again it fails to take into account the change in circumstances with the advent of the Intervenor's services. The second sentence is subordinate to facts found. Paragraph 56 is not in meaningful contribution to the fact finding in the context of the overall facts reported in the recommended order. Paragraphs 57 and 58 are subordinate to facts found. Intervenor's Proposed Findings of Facts Paragraph 1 is subordinate to facts found. Paragraph 2 is not necessary to the resolution of the dispute. Paragraphs 3-5 are subordinate to facts found. Paragraph 6 is not necessary to the resolution of the dispute. Paragraph 7 is subordinate to facts found. Paragraph 8 is; not necessary to the resolution of the dispute. Paragraphs 9 through the first sentence in paragraph 16 are subordinate to facts found. The remaining sentences in paragraph 16 are not necessary to the resolution in dispute nor is the first and last sentences within paragraph 17. The other sentence within paragraph 17 is subordinate to facts found. The first sentence in paragraph 18 is subordinate to facts found. The remaining sentences are not necessary to the resolution of the dispute. Paragraphs 19 through the first sentence of paragraph 23 are subordinate to facts found. The second sentence in paragraph 23 is not necessary to the resolution of the dispute nor is paragraph 24. Paragraph 25 in all sentences save the last is subordinate to facts found. The last sentence is not necessary to resolution of dispute. Paragraph 26 through all sentences in paragraph 30 except the last sentence are subordinate to facts found. The last sentence is not necessary to the resolution of the dispute. The first sentence of paragraph 31 is subordinate to facts found. The remaining sentence is not necessary to the resolution of dispute. Paragraph 32 and the first sentence to paragraph 33 are subordinate to facts found. The remaining sentence in paragraph 33 is not necessary to the resolution of dispute. Paragraph 34 and the first sentence of paragraph 35 subordinate to facts found. The last sentence in paragraph 35 is not necessary to the resolution of the dispute. Paragraph 36 through the first sentence of paragraph 38 are subordinate to facts found. The remaining sentence in paragraph 38 is not necessary to the resolution of dispute. Paragraph 39 cannot be utilized in that the rule in question was not provided to the Hearing Officer under official recognition and is unavailable to confirm the assertion set out in that paragraph. Paragraphs 40 through 43 are subordinate to facts found. The suggestions in paragraphs 44 through 45 are contrary to the impression of the Hearing Officer. Paragraphs 46 through 48 are subordinate to facts found. Paragraphs 49 and 50 are not necessary to the resolution of dispute. Paragraphs 51 and 52 are subordinate to facts found. Paragraphs 53 through 55 as an approach to resolving factual disputes are rejected. Paragraph 56 is subordinate to facts found. Paragraph 57 is contrary to facts found. Paragraph 58 is not in keeping with the analysis of this case and the facts found in the recommended order nor is paragraph 59. Paragraphs 60 through 65 are subordinate to facts found. Paragraph 66 is not necessary to the resolution of dispute. Paragraph 67 and the first two sentences within paragraph 68 are subordinate to facts found. Remaining sentences within paragraph 68 are not in keeping with the analysis performed in the fact finding within the recommended order. Paragraph 69 is subordinate to facts found. Paragraph 70 is subordinate to facts found. Paragraph 71 is not necessary to the resolution of dispute. Paragraphs 72 through 76 are subordinate to facts found. Paragraph 77 is not necessary to the resolution of dispute. Paragraphs 78 and 79 are subordinate to facts found. Paragraph 80 is not necessary to the resolution of dispute. Paragraphs 81-86 are subordinate to facts found. Paragraph 87 is not necessary to the resolution of dispute. Paragraph 88 is subordinate to facts found. Paragraphs 89-91 are not necessary to the resolution of dispute. Paragraphs 92 through 94 are subordinate to facts found. Paragraph 95 is not necessary to the resolution of dispute. Paragraphs 96 through 101 in the first sentence to that paragraph are subordinate to facts found. The remaining sentences in paragraph 101 are not necessary to the resolution of dispute. Paragraph 102 is subordinate to facts found. Paragraph 103 is not necessary to the resolution of dispute. Paragraphs 104 and 105 are subordinate to facts found. Paragraph 106 is contrary to facts found. Paragraph 107 is not necessary to the resolution of dispute. Paragraphs 108 through 116 are subordinate to facts found. Paragraphs 117 and 118 are not necessary to the resolution of dispute. Paragraphs 119 through 122 are subordinate to facts found. Paragraph 123 is not necessary to the resolution of dispute. Paragraphs 124-126 are subordinate to facts found. Suggestion in paragraph 127 that the rotation system will not be employed is rejected. The remaining contents within that paragraph are subordinate to facts found. Paragraph 128 is not necessary to the resolution of dispute. Paragraphs 129 through 133 are subordinate to facts found. Paragraph 134 is contrary to the facts found. Paragraph 135 is contrary to the facts found. Paragraph 136 is not necessary to the resolution of dispute.
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: Petitioner J & J seeks a Certificate of Need to establish a new home health agency in the Tampa Bay area to serve the residents of Hillsborough, Pinellas, Pasco, and Manatee Counties for an estimated project cost of $85,000. All necessary funding for the project is to be supplied by petitioner's parent, Johnson and Johnson. It is the expressed intent of J & J to provide only specialized patient services in the home to those patients who are acutely ill and in need of intensive or intermediate level clinical services in lieu of hospitalization. J & J intends to serve early hospital discharge patients who require more than single follow-up or maintenance care after discharge. It does not seek to provide maintenance-level care to patients, and would refer such patients to another home health agency. J & J does not intend to become a part of hospital rotation lists utilized to refer the less acutely ill homebound patient to a home health agency. J & J proposes to hire full-time clinical specialty certified registered nurses to provide services to ten general categories of patients. The specific diagnoses or treatment modalities which J & J expects to provide include cerebrovascular accident (CVA or stroke) with and without paralysis, oncology and chemotherapy, hyperalimentation, enteral therapy, respiratory therapy, intravenous antibiotics, other nutritional services and neuro-ortho. These proposed services are intended to be a replacement for more expensive in- hospital health care. J & J intends to accept only those patients within the above classifications who are sick enough to require home health care in lieu of hospitalization, and not those who can be treated strictly on an outpatient basis. The key factor for acceptance of a patient by J & J is not the diagnosis of the patient, but is the patient's acuity level. J & J has an ongoing research program to develop additional clinical specialty home health services based upon physician input, technical developments end patient needs. One of its reasons for establishing a home health agency in the Tampa Bay area is because J & J's national corporate headquarters are to be located in Tampa and this proximity would facilitate its research and development efforts. J & J has staffed its existing home health agencies in Texas and California, and proposes to staff its Tampa agency, with full-time nurses with acute care experience. Orientation continuing education programs for nurses are planned. The nurses are to be either certified as clinical specialists or develop their clinical expertise through J & J's own internal privileging program. The proposed new agency, as do the existing Texas and California agencies, will have its own pharmacist, therapists, dieticians, social workers and certified home health aides. It will also operate its own pharmacy and will provide and deliver durable medical equipment and supplies. Nurses will be on duty and/or on call 24 hours a day, seven days a week. As noted above,' J & J seeks to serve those patients who require special expertise in their care. Planning for discharge will begin during the patient's hospitalization and there will be a patient screening process before a patient is accepted. An assessment of the patient's home and family life will be made to determine that conditions are suitable for treatment and recovery at home. A registered nurse is to be assigned as the "primary nurse" to coordinate the patient's plan of care with the clinical specialist, therapists and physician. The patient's physician is to be given a weekly report of the patient's progress. An elaborate charting and recordkeeping system is anticipated and is provided at J & J's existing home health agencies. A prospective, con current and retrospective quality assurance program is to be instituted which involves a quarterly internal review and a utilization review by physicians. Based upon statistics which illustrate that 26,800 patients for every one million population group are discharged annually in the ten classifications which J & J seeks to serve, J & J predicts it can treat 1,430 patients per year in the four- county area. These figures are based on nationwide statistics and are not site-specific to the four-county area. J & J presently owns and operates three existing agencies in Texas and California. Certificates of need for home health agencies are not required in those states. The Dallas/Ft. Worth center opened on April 4, 1983, and had, as of the time of the hearing in this matter, a daily patient census of 70. The Houston center opened on April 11, 1983, and had a daily patient census of 60. The daily patient census at the Los Angeles center, which opened on July 6, 1983, was 60. These existing agencies also accept only specialty care patients who can receive services in lieu of hospitalization. The Texas centers have rejected as many as 47 percent of their referrals because the patients either did not meet the medical criteria for the J & J system, because of their home situation or, in some instances, because of financial reasons. In California, the charge for a visit by a registered nurse is $75.00, while the charge for a therapist visit is $65.00. The charges in both Texas centers are, and the proposed Florida center will be, $65.00 for a registered nurse's visit and $55.00 for a therapist's visit. All these charges are higher than the current cap or limit for Medicare reimbursement. The Petitioner's projected cost for an R.N. visit is $52.40. This cost is higher than the current Medicare cost cap for skilled nursing services. After the Florida four-county agency becomes fully operational, J & J projects that only 23 percent of the patients it serves will be Medicare patients. It is anticipated that the remaining patients will be primarily private pay, privately insured or self-insured patients who will be attracted to the J & J program because of its cost-savings potential. The existing operations in Texas and California serve 60 to 70 percent Medicare patients. These percentages are expected to decline due to J & J's efforts to educate and convince private reimbursers to use J & J's services in lieu of hospitalization. A large public relations firm has been retained by J & J to communicate with insurers end the medical community regarding the benefits of clinical, specialized home health care, especially as a replacement for hospital care. The patient mix of most of the existing licensed home health agencies in the four-county area is in excess of 95 percent Medicare. A license and certificate of need are only required under Florida law for home health agencies which serve Medicare patients. At least some of the existing agencies have accordingly severed their operations into those which serve and those which do not serve the Medicare patient. J & J does not believe it would be feasible to open its four-county agency as an unlicensed and uncertificated agency to serve only private pay patients because it believes that licensure will be helpful in convincing private insurers to use its agency. Also, a patient may begin his treatment as a non-Medicare patient, but bay later qualify for such benefits, and J & J desires to provide a continuity of treatment. Although J & J's proposed charges and costs are higher then the Medicare reimbursement system currently allows, J & J will attempt to obtain a waiver of the Medicare cap by demonstrating the highly specialized nature of the services it provides and by illustrating that J & J's home health care is in lieu of more expensive hospital care. Although J & J does not plan to serve all patients regardless of their ability to pay, it has and will continue to provide care to indigent and medically indigent patients. Approximately 20 such patients have been served in the existing agencies in Texas and California. There are approximately thirteen licensed home health agencies in Hillsborough, Pinellas, Pasco end Manatee Counties. Eleven of these agencies are members of FAHHA, a voluntary association whose membership is comprised of home health agencies licensed by the State of Florida. Though some of the existing agencies have expanded their operations by the opening of new submits in other areas, there have been no Certificates of Need issued to any new home health agency in the four-county area since 1978. The intervenor Gulf Coast provides home health services in Pinellas, Pasco and Hillsborough Counties, as well as Hernando County, through six different offices. In addition to providing maintenance and homemaker services to its patients, Gulf Coast provides most, if not all, the same specialty services proposed by J & J. Their patients include CVA patients with and without paralysis, oncology patients of which two are receiving I.V. chemotherapy at home and several hyperalimentation patients. Gulf Coast provides enteral and respiratory therapy, as well as I.V. antibiotic services. Its staff, which includes approximately 90 professionals, 140 ancillary staff and 50 contract personnel, includes socialists in the areas of pulmonary nursing, enterostomal therapy, oncology and psychiatric nursing. Gulf Coast has recently started an I.V. certification program for its nurses. Approximately one-third of the nurses have bad a year or more of prior experience in critical care units. A registered nurse is on-call 24 hours a day. Quality control assurances include monthly utilization review, both in-house and by a physician. Gulf Coast makes arrangements with local vendors and suppliers for all durable medical equipment and pharmaceutical supplies needed by its patients. It has experienced an annual growth in its average daily census of between 15 and 20 percent, and its administrators feel that it has the capacity to expand its services, even with its present staff, in the event of greater demand for the more specialty-type services proposed by J & J. Gulf Coast's current Medicare cost cap for registered nursing services is approximately $48 to $50 per visit. Its actual costs for such services, for which it is reimbursed, are approximately $37 or $38 per visit. The Intervenor Manasota is one of six licensed home health agencies in Manatee County. All its patients are Medicare patients, and some 70 percent of its referrals are hospital referrals from the two existing hospitals in Manatee County-- Manatee Memorial Hospital and Blake Hospital. In addition to maintenance level and homemaker services, Manasota has provided more specialized services to patients including nasogastric, gastrostomy, stomal, enterostomal and I.V. antibiotic therapy. It has the staff and capacity to provide chemotherapy and hyperalimentation, but has not bed any physician request for those services for their patients. Manasota has experienced a significant decline in the number of new patients it has admitted end in its average daily census. This appears to be related to the reduction in the number of discharges from Manatee Memorial Hospital and the fact that Blake Hospital owns its own home health agency. The decrease in patient census et Manasota has resulted in an increase in its cost per visit from $32.50 to $41.00 per visit. The Medicare cost cap for Manasota is approximately $44.30. Manasota has the capacity to expand to serve an increased number of Medicare patients. Blake Home Health is affiliated with Blake Hospital in Manatee County, and receives 75 percent of its referrals therefrom. It is the policy of Blake Hospital to refer all discharged hospital patients who require home health care to Blake Home Health unless the attending physician has specifically designated a different agency. Blake is available to serve its patients 24 hours a day end has access to the hospital pharmacy. It presently renders services in the areas of enteral, stomal end parenteral therapy and handles cerebrovescular cases. While nurses are available to Blake Home Health to perform I.V. antibiotic therapy and chemotherapy, Blake has never been requested to perform such services. Independent Home Health is an existing licensed home health agency located in Clearwater, and was recently purchased by Morton Plant Hospital. Independent presently provides and has performed all the specialized, home health services proposed by J & J. It operates 24 hours a day, with a nurse on call after 5:00 p.m. Its quality assurance program involves a monthly nursing audit and quarterly utilization review by a physician. Its charge for nursing services is $40 per visit. Independent has the ability to expand to provide further services. Global Home Health Services, Inc. has five offices in the four-county area, with a total average daily census of approximately 400. Global performs almost all of the specialized services proposed by J & J and has never had a request for services in those categories that it was unable to fulfill. The number of patients receiving home chemotherapy and hyperalimentation is very few, due to lack of demand for such services. It is open seven days a week, 24 hours a day. Global charges $47.00 per nursing visit, and makes all arrangements for the ordering and delivery of supplies, durable medical equipment and pharmaceuticals. Global has the ability, even with its present staff to serve 20 or 305 more patients and to expand the range of services it presently provides. The Visiting Nurses Association of Hillsborough County (VNA) is a public non-profit home health agency that serves any patient regardless of age, race or ability to pay. It provides all the services which J & J proposes to offer, although only about 3 percent of its total patients receive these specialized services. The VNA has its own continuing education programs and also conducts training programs for other home health agencies, specifically in the areas of I.V. chemotherapy and I.V. antibiotics. VNA offers 24-hour services, and has the ability and capacity to expand to meet any increased need or demand for home health services. Its cost per nursing visit is about $29, and it charges $35 per visit. Its average patient census 1as increased from 212 in 1980 to 720 in 1983. The existing agencies rely heavily on referrals from hospital rotation lists. None of the existing agencies about which evidence was adduced at the hearing have their own pharmacy or durable medical equipment or supply services. Many agencies, if not most, use some independent contractor, therapists on an as-needed basis. While each of the existing agencies experienced a growth in their average daily census in the Veers between 1980 and 1983, some agencies experienced a slight decrease in the number of patients and visits during the six months immediately prior to the hearing. Increased home health utilization in the future is suggested due to the new Medicare reimbursement system for hospitals. This system is based upon diagnostic-related groups (DRG's) and the amount of reimbursement is based upon the average length of stay for a given diagnosis, regardless of the patient's actual length of stay. The former system reimbursed hospitals for their actual costs of treating a patient. The DRG system will provide hospitals with the financial incentive to discharge patients at the earliest possible point. It can be expected that demand for home health care services for more acutely ill early discharge patients will increase. Officials responsible for discharging patients from Tampa General Hospital and St. Joseph's Hospital in Tampa were of the opinion that the existing home health agencies in Hillsborough County were doing a fine job in providing follow-up care of both chronically ill patients end those patients who are acutely ill with a good prognosis. While these persons were in favor of the adequate provision of more advanced and intensive home health care, they believe that their current needs are being met by the existing agencies.
The Issue The issue for determination is whether Petitioner must reimburse Respondent for payments totaling $29,701.19 that Petitioner admittedly received from the Medicaid Program between May 1, 1996, and March 31, 1998, in compensation for the provision of home health services. Respondent contends that Petitioner is not entitled to retain the payments in question, primarily on the allegations that the compensated services were not medically necessary, were improperly documented, or both.
Findings Of Fact The evidence presented at final hearing established the facts that follow. The Agency is responsible for administering the Florida Medicaid Program. As one of its duties, the Agency must recover "overpayments . . . as appropriate," the term "overpayment" being statutorily defined to mean "any amount that is not authorized to be paid by the Medicaid program whether paid as a result of inaccurate or improper cost reporting, improper claiming, unacceptable practices, fraud, abuse, or mistake." See Section 409.913(1)(d), Florida Statutes. This case arises out of the Agency's attempt to recover alleged overpayments from Monef, a Florida-licensed home health agency. As an enrolled Medicaid provider, Monef is authorized, under a Medicaid Provider Agreement with the Agency, to provide home health services to Medicaid recipients. Under the Medicaid Provider Agreement, Monef assented to comply with “all local, state and federal laws, rules, regulations, licensure laws, Medicaid bulletins, manuals, handbooks and Statements of Policy as they may be amended from time to time.” The home health services at issue consisted of skilled nursing care rendered either by a registered nurse (“RN”) or a licensed practical nurse (“LPN”), as the needs of the recipient required, together with personal care provided by a home health aide. The "audit period" that is the subject of the Agency's recoupment effort is May 1, 1996 to March 31, 1998. During this audit period, the Medicaid Program reimbursed Monef for all of the skilled nursing and home health aide services that are the subject of this dispute. Largely (though not entirely) on the allegation that the home health services in question were not medically necessary, the Agency contends that Monef collected overpayments totaling $29,701.19 in compensation for services rendered to nine separate patients. The following table summarizes the Agency's allegations. PATIENT NAME GROUND(S) FOR DENIAL ALLEGED OVERPAYMENT Louisiana S. No medical necessity $8,498.17 Robert M. No medical necessity $3,615.54 Mario P. No medical necessity $2,403.33 Angel S. No medical necessity $2,089.12 Ana G. No medical necessity $2,015.94 Joann N. No medical necessity $1,705.12 C. Watson No medical necessity $1,268.76 Yvette F. Service refused $122.16 Rosa P. Multiple $7,983.05 Medical Necessity The proof was in conflict concerning the medical necessity of the challenged home health services that Monef provided to the foregoing patients. There were three categories of expert opinion evidence on this issue, described below. The attending physicians' opinions. To be Medicaid compensable, home health services must be provided pursuant to a written treatment plan that is prepared individually for each recipient and approved by his or her attending physician. The treatment plan——called a "plan of care" or "plan of treatment"—— must be reviewed and updated periodically (about every two months) and also as the patient's condition changes. A required component of all plans of care is the attending physician's certification that the services specified in the plan are medically necessary.1 The fact that a treating doctor, by prescribing, recommending, or approving a medical service, has attested to its medical necessity is not sufficient, in itself, to support a finding that the resulting care was medically necessary. See Rule 59G-1.010(166)(c), Florida Administrative Code. Nevertheless, the attending physician's opinion regarding medical necessity is relevant evidence, even if it is not inherently dispositive. In this case, all of the services that the Agency contends were not medically necessary had been determined to be medically necessary by the respective patients' treating physicians. The peer-review organizations' opinions. During the audit period, the Medicaid Program would not reimburse a home health agency for any home visits in excess of 60 visits per recipient per fiscal year unless the provider had obtained authorization to provide such care, in advance, from the Agency or its designee. Such "prior authorization" was required to be based on medical necessity. At times during the audit period the Agency was under contract with a company called Keystone Peer Review Organization ("KePRO"), which acted as the Agency's designee in regard to pre-approving services above the 60-visit limit. At other times this function was performed by Florida Medical Quality Assurance, Inc. ("FMQAI"). In a couple of instances, the Agency itself gave Monef prior authorization to perform services that it now contends were not medically necessary. By statute, a peer-review organization's written findings are admissible in an administrative proceeding as evidence of medical necessity or lack thereof. See Section 409.913(5), Florida Statutes. Monef had obtained prior authorization based on medical necessity for most of the services that the Agency has challenged as medically unnecessary. The opinions of the Agency's designees, KePRO and FMQAI, are relevant evidence of medical necessity. Dr. Sullenburger's opinion. Dr. John Sullenburger is the Agency's Medicaid physician. He would have testified at the final hearing as an expert witness for the Agency, but the parties stipulated that Dr. Sullenburger's ultimate opinion, based on the medical records, was that each of the claims that the Agency alleges was not medically necessary was, in fact, unnecessary. By entering into this stipulation, Monef effectively waived its right to cross-examine Dr. Sullenburger and thereby expose the particular facts upon which his opinion was based. For its part, the Agency relinquished the opportunity to have the doctor explain the reasons why he had concluded that the patients' attending physicians——and also, in many instances, the Agency's designated peer-review organizations——had erred in making their respective determinations that the subject services were medically necessary. As a result of the parties' stipulation concerning Dr. Sullenburger's testimony, the factfinder was left with a naked expert opinion that merely instructed him to decide the ultimate factual issue of medical necessity in the Agency's favor. In making findings regarding medical necessity, the factfinder settled on the following rules of thumb. Greatest weight was accorded the opinions of KePRO and FMQAI. These were deemed to have the highest probative value because the peer- review organizations' determinations of medical necessity were made before the services in question were provided, and neither of the Agency's designees had any discernable motive to stretch the truth one way or the other. Certainly, the peer-review organizations more closely resemble a disinterested, neutral decision-maker than either the patient’s treating physician or the Agency's expert witness (whose opinions were formed after the services had been rendered and the claims paid); indeed, if anything, KePRO and FMQAI might be expected to tilt in the Agency's direction (although there was no evidence of such bias in this case).2 The hearsay opinions of the treating physicians, on the one hand, and Dr. Sullenburger, on the other, were considered to be about equally persuasive——and none was particularly compelling.3 It should be stated that the attending physicians' certifications of medical necessity, each of which lacked analysis that might have connected the facts concerning a patient's medical condition with the need for services, were as conclusory as Dr. Sullenburger's ultimate opinion. Consequently, in those instances where a peer-review organization gave Monef a mandatory prior authorization to render services that the attending physician had certified as being medically necessary, it has been found that, more likely than not, the services in question were medically necessary. In contrast, a closer question arose in those instances where there was no evidence of prior authorization when such was required. The expert opinions——the attending physician's on one side, Dr. Sullenburger's on the other—— essentially canceled each other out. While ordinarily in an evidential tie the party without the burden of proof (here, Monef) would get the nod, in this case the Agency had the slightest edge, on the strength of Rule 59G-1.010(166)(c), Florida Administrative Code. Under this Rule, an attending physician's approval of a service is not, "in itself," sufficient to support a finding of medical necessity.4 Because of the Rule, Monef needed to introduce some additional, persuasive evidence (e.g. the attending doctor's testimony regarding the need for the service) to overcome Dr. Sullenburger's opinion.5 Louisiana S. At the time that the services in question were provided, from May 7, 1997, until December 20, 1997, this patient, an obese woman in her late 60s, was being treated for diabetes, hypertension, and coronary artery disease. She was not able to self-administer the insulin shots that were needed to prevent complications from diabetes. For the period from May 5, 1997, through June 30, 1997, KePRO gave prior authorization to 53 skilled nursing visits and 23 home health aide visits.6 Monef was reimbursed for 42 skilled nursing visits and 23 home health aide visits conducted in this period. From July 1, 1997, until September 1, 1997, Monef provided a total of 66 combined skilled nursing and home health aide visits to Louisiana S. The Medicaid Program paid for 60 of them. Because these were the first 60 visits of the fiscal year, which began on July 1, 1997, prior authorization was neither needed nor obtained. During the period between September 1, 1997, and November 1, 1997, Monef made 96 skilled nursing visits, out of 124 that KePRO had pre-approved, and 20 of 27 authorized home health aide visits. KePRO gave prior authorization for 124 skilled nursing and 27 home health aide visits for the period from November 1, 1997 to January 1, 1998, of which 54 and 18, respectively, were made. Based on the levels of service that KePRO had approved before July 1, 1997, and then after September 1, 1997, it is reasonable to infer, and so found, that the first 60 combined visits to this patient in fiscal year 1997-98 would have been pre-approved had Monef been required to obtain prior authorization. The home health care services that Monef provided to Louisiana S. between May 9, 1997, and December 30, 1997, for which the Medicaid Program paid $8,498.17, were medically necessary. Robert M. Robert M., a man in his mid-40s who received home health care from Monef from November 26, 1997, through March 27, 1998, suffered from arteriosclerosis, hypertension, acute bronchitis, and schizophrenia. His residence was an assisted living facility ("ALF").7 FMQAI gave prior authorization for 61 skilled nursing and 61 home health aide visits to occur between November 26, 1997, and January 26, 1998. Monef provided 55 nursing and 59 home health aide visits during this period. Monef requested prior approval for 25 skilled nursing and 63 home health aide visits for the period from January 26, 1998, and March 26, 1998. Although prior authorization was needed for these services, which exceeded the limit for fiscal year 1997-98, there is no evidence in the record that FMQAI granted Monef's request for approval. FMQAI authorized 23 skilled nursing visits and 30 home health aide visits for the period from March 26, 1998, to May 28, 1998. However, Monef provided just one skilled nursing visit during this time, on March 27, 1998. The home health care services that Monef provided to Robert M. between November 26, 1997, and January 26, 1998, and on March 27, 1998, were medically necessary. Lack of medical necessity was established, however, for the services provided between January 26, 1998, and March 26, 1998. The Medicaid Program paid the following claims, totaling $1,442.49, for this period: One RN visit, $34.04; 21 LPN visits, $549.99; and 51 home health aide visits (35 at $17.46 apiece and 16 at $15.46 each), $858.46. Mario P. From November 25, 1997, through March 28, 1998, Mario P., a septuagenarian who was being treated for acute gastritis, an enlarged prostate, and mental illness, received home health visits at the ALF where he lived, the services provided by Monef. FMQAI approved 43 skilled nursing and 61 home health aide visits for the period from November 26, 1997, through January 26, 1998; 11 skilled nursing and 62 home health aide visits for January 26, 1998, until March 26, 1998; and 25 skilled nursing visits for March 1, 1998, through May 1, 1998 (overlapping the immediately preceding period by about three- and-a-half weeks). The actual number of skilled nursing and home health aide visits for which the Medicaid Program reimbursed Monef was within the pre-approved service levels for each period. The home health care services that Monef provided to Mario P. between November 26, 1997, and March 28, 1998, for which the Medicaid Program paid $2,403.33, were medically necessary. Angel S. Angel S. was a man in his middle 50s who had been diagnosed with gastroduodenitis (an inflammation of the stomach and duodenum) and mental illness. Monef obtained prior authorization from KePRO to provide Angel S. with 34 skilled nursing and 62 home health aide visits between November 25, 1997, and January 25, 1998. During this time, the Medicaid Program reimbursed Monef for 32 skilled nursing and 44 home health aide visits. FMQAI pre-approved 26 skilled nursing and 27 home health aid visits for January 25, 1998, through March 25, 1998. Monef was reimbursed for 20 and 21 such visits, respectively. The home health care services that Monef provided to Angel S. between November 25, 1997, and March 25, 1998, for which the Medicaid Program paid $2,089.12, were medically necessary. Ana G. When she was a client of Monef, Ana G., a woman in her 60s, was suffering from acute gastritis and major depression. She lived in an ALF. FMQAI pre-approved 50 skilled nursing visits and 40 home health aide visits for the period from November 25, 1997, through January 25, 1998. In that time, Monef rendered 28 skilled nursing visits and 42 home health aide visits for which it received compensation from the Medicaid Program. For the period from January 25, 1998, through March 25, 1998, FMQAI gave prior authorization for 9 skilled nursing and no home health aide visits. During this time, Monef provided 15 skilled nursing visits and 15 home health aide visits for which Medicaid paid. The services that Monef rendered to patient A. Garcia between November 25, 1997, and March 23, 1998, were medically necessary except for 17 home health aide visits (at $17.46 apiece) and 6 skilled nursing visits (at $24.19 each), making a total of $441.96 in overpayments. Joann N. In her late 30s at the time of the services in question, Joann N.'s principal diagnosis was major depression. She also suffered from hypertension and a type of diabetes. Because Joann N.'s primary diagnosis was a mental illness, the home health services provided to her may not have been Medicaid-compensable due to an exclusion that bars coverage for mental health and psychiatric services.8 The Agency, however, did not disallow Monef's claims on this basis, relying instead exclusively on the allegation that the services were not medically necessary. None of the skilled nursing and home health aide visits that Monef provide Joann N. between February 16, 1997, and September 1, 1997, was pre-approved. There is evidence that Monef sought KePRO's prior authorization of 26 skilled nursing and ten or 12 home health aide visits for the period from April 16, 1997, to June 16, 1997, but no proof was adduced showing that approval was granted. Based on the number of combined visits that Monef provided both before and after July 1, 1997 (the start of fiscal year 1997-98), it does not appear that prior authorization was required. There are no grounds in the record, however, from which to infer that prior authorization(s) would have been given if needed. Accordingly, lack of medical necessity was established for all of the home health services that Monef provided Joann N, for which the Medicaid Program paid a total of $1,705.12. C. Watson C. Watson was a teenager with cerebral palsy and quadriplegia who received care in her home between May 12, 1997, and March 31, 1998. The Agency alleges that all of the skilled nursing services that Monef provide C. Watson were medically unnecessary but acknowledges that the home health aide visits were appropriate and covered. The Agency itself pre-approved the home health care visits that Monef had requested for the period from May 12, 1997, through June 30, 1997, namely, 24 skilled nursing and 40 home health aide visits. The Medicaid Program reimbursed Monef for 12 skilled nursing and 38 home health aide visits made during this period. The Agency gave prior authorization for home health care to be provided between July 1, 1997, and September 1, 1997. FMQAI also pre-approved the following services for the same period: five skilled nursing visits and 43 home health aide visits. Monef was reimbursed for 17 skilled nursing visits made during this time. For the periods of September 1, 1997 to November 1, 1997; November 1, 1997 until January 1, 1998; and January 1, 1998 through March 1, 1998, KePRO pre-approved levels of skilled nursing services (nine, four, and nine visits, respectively) that were not exceeded by Medicaid-paid claims for these services rendered by Monef during the subject timeframes. FMQAI gave prior authorization for four skilled nursing visits to occur between March 1, 1998 and May 1, 1998, but Monef did not submit any claims for such services rendered during this period. Lack of medical necessity was established for 12 skilled nursing visits made during the period from July 1, 1997 through September 1, 1997. The Medicaid Program paid a total of $319.13 for these visits (One RN visit at $31.04 and 11 LPN visits at $26.19), and this sum constitutes an overpayment subject to recoupment. The rest of the skilled nursing visits that Monef furnished to C. Watson were medically necessary. Yvette F. Yvette F. was a patient in her 30s suffering from complications relating to HIV infection. On Christmas Day, 1997, Yvette F. refused most of the skilled nursing services that had been scheduled, to spend time with her family. The Agency has sought to recoup the $122.16 that the Medicaid Program paid for an RN's visit to Yvette F.'s home on December 25, 1997. This sum reflects four hours of service. The medical records in evidence establish that the patient's refusal of treatment occurred after the RN had arrived at her residence, and that, despite the patient's refusal of service, the RN did perform an assessment on Yvette F. that day. The Agency failed to establish that, under these circumstances, Monef is entitled to no reimbursement. Yet, common sense instructs that the covered claim should not encompass four hours of services when clearly that much time was not spent on this particular visit. Unfortunately, nothing in the record, including the parties' legal arguments, provides guidance for resolving this particular problem. In the absence both of controlling authority and evidence of the actual time spent, the factfinder has determined that the claim should be equitably apportioned to do rough justice, with Monef being compensated for one hour of service and the balance returned to the Medicaid Program. On this basis, then, lack of medical necessity has been shown for three hours of skilled nursing services, making an overpayment of $91.62. Rosa P. Rosa P. was a woman in her late 30s with multiple health problems, including uncontrolled diabetes, recurring infections, renal failure, respiratory insufficiency, and mental illness. Monef rendered home health care to Rosa P. from November 22, 1996, until February 1, 1998, for which the Medicaid Program paid $24,543.27 on 1,012 separate claims. The Agency seeks to recoup a little more than one- third of the amount previously paid to Monef for this patient's home health care, alleging a number of grounds to disallow a number of claims. The following table summarizes the Agency's contentions regarding the challenged claims. ("Doc." is an abbreviation for "documentation." "PC" is an acronym for plan of care. The alphanumeric claim identifiers in the left-hand column were assigned by the Administrative Law Judge for ease of reference.) CLAIM ID DATE(S) SERVICE(S) GROUND(S) FOR DENIAL ALLEGED OVERPAYMENT RP-1 11-22-96 Nursing No doc. $29.04 RP-2 12-9-96, 12- 10-96, 12- 14-96 Aide No doc./POT not followed (x3) $52.38 RP-3 12-25-96 to 1-5-97 Aide No PC rendered (x11) $192.06 RP-4 1-6-97, 1-7- 97, 1-9-97, 1-10-97, 1- 11-97, 1-12- 97 Aide POT not followed (x6) $104.76 RP-5 1-22-97 to 3-22-97 All POT not signed by MD or RN $4,009.37 RP-6 3-24-97 to 5-2-97 Aide No PC rendered (x40) $698.40 RP-7 5-2-97 Nursing No doc. $29.04 RP-8 5-3-97 to 7- 4-97 Aide No PC rendered (x62) $1,032.52 RP-9 7-21-97 to 7-26-97 Aide POT not followed (x6) $87.309 RP-10 8-4-97 to 8- 10-97 Aide PC not rendered (x7) $122.22 RP-11 10-29-97 Nursing Documented only 1 of 2 billed visits $31.04 RP-12 11-3-97 Aide No doc. $17.46 RP-13 11-4-97 Aide No doc. $17.46 RP-14 11-14-97 Aide No doc. $17.46 RP-15 11-15-97 Aide No doc. $17.46 RP-16 11-16-97 Aide No doc. $17.46 RP-17 11-22-97 to 11-26-97 Aide No doc. (x10) (2 billed visits per day) $52.3810 RP-18 12-1-97 Aide No doc. $17.46 RP-19 12-2-97 Aide No doc. $17.4611 RP-20 12-3-97 Aide No doc. $17.46 RP-21 12-28-97 to 2-28-98 Nursing POT not signed by MD or RN $1,724.37 The total of these alleged overpayments, without adjustment for the several minor arithmetic or typographical errors in the Agency’s papers, see endnotes 9 - 11, is $7,983.05. Each claim or claim set will be addressed in turn below. RP-1. The medical records contain a "Time Record Nursing Progress Note" dated November 22, 1997, that documents a skilled nursing visit to the patient on that day. Therefore, the Agency failed to prove its allegation of overpayment regarding RP-1. RP-2. Included in the patient's records is a "Weekly Activity Report and Time Slip" for the week beginning Monday, December 9, 1996, that was filled out by the home health aide who cared for Rosa P. during that seven-day period. To keep track of tasks performed, the form instructed the aide to check boxes in a table that cross-referenced particular duties (e.g. oral hygiene, change linens, turn & position), which are described in the left-hand column, with the days of the week, which are listed, Monday through Sunday, in the top row. For the days in question (December 9, 10, and 14, 1996), the aide checked boxes showing that, among other things, she had given the patient a shower and assisted her in a wheelchair, both of which are Medicaid-covered services. See Paragraphs 133, 137, infra. Handwritten notes inscribed on the Agency's work papers next to each of the three dates at issue state: "only p/c [personal care] [is a] shower —— not following POT [plan of treatment]." The first of these points is incorrect: assistance with a wheelchair, like showering a patient, is a covered home health aide service. The plan of care that covered the subject dates disproves the second assertion. The written treatment plan explains that the home health aide will "provide personal care, asst [assist] [with] ADL's [activities of daily living] including bath, skin/foot care." The aide was following this course of action on December 9, 10, and 14, 1996. The Agency did not prove an overpayment in connection with RP-2. RP-3. The Agency seeks to recoup payments of $17.46 apiece for 11 home health aide visits made between December 25, 1996 and January 5, 1997, on the ground that the aide did not perform any covered personal services. Although a dozen such visits were made during this particular period, the Agency's work papers reveal that the claim for services rendered on December 29, 1996, was approved. The aide's time sheets for the relevant period substantiate the Agency's allegation, with one exception. The aide's entry on December 26, 1996, is identical to that of December 29, 1996, the latter which the Agency correctly deemed sufficient to make Medicaid financially responsible. On both days, the aide helped the patient with a tub bath and shampoo, which are covered personal services. For the other ten days, review of the aide's time sheets reveals that many services were rendered in the category of "light housekeeping" and "meal preparation." These fall within the exclusion for "housekeeping, homemaker, and chore services, including shopping" and hence are not covered services. Handbook, at p. 2-6; see also Rule 59G-4.130(8)(a)2., Florida Administrative Code (1996).12 (Curiously, the Agency did not specifically rely upon this exclusion.) In its Proposed Recommended Order, Monef points out that the aide made a written notation each day concerning the patient's voiding of bowel and bladder. Because the non- exclusive list of covered home health aide services included "toileting and elimination," see Rule 59G-4.130(5)(b)3.b., Florida Administrative Code (1996), it is possible that the aide was providing a compensable service during the period in question. The trouble is, it cannot be determined from the evidence whether the aide actually assisted the patient——or whether the aide merely wrote down on the time sheet what had been observed regarding the patient's use of the bathroom facilities. Although the question is close, it is determined that simply observing and commenting daily about the patient's elimination of bodily wastes is not enough, without more, to constitute a Medicaid-compensable home health aide service.13 Being unable on the present record to find that the aide did more than watch and write, it is determined that covered services in the area of "toileting and elimination" were not persuasively shown to have occurred. Consequently, lack of medical necessity has been established as to 10 home health aide visits. The total overpayment on RP-3 is $174.60. RP-4. For the week from Monday, January 6 through Sunday, January 12, 1997, the Agency alleges that six home health aide visits are not covered because the aide failed to follow the plan of treatment. Notations on the Agency's work papers suggest another basis: "only shower - incomplete," meaning, presumably, that the only covered personal care provided was assistance in the shower. See discussion regarding RP-2, supra. The aide's time sheet for the relevant period contradicts the Agency's contention. First, bathing assistance was not the only covered personal care rendered on the days in question. The aide also helped the patient with her wheelchair, which is a service covered under the rubric of "transfer and ambulation." Rule 59G-4.130(5)(b)3.e., Florida Administrative Code (1996). Second, the aide's entry for January 8, 1997——for which claim the Agency is not seeking to recover——is substantially the same as those for the challenged days. The only material difference is that on January 8 the aide checked the box indicating that she had shampooed the patient's hair. Nothing in the Rule or the Handbook, however, provides that a shower with shampoo is covered but a shower without shampoo is excluded from coverage, and the Agency failed to prove a factual basis, or advance a logical one, for drawing such distinction. Consequently, the Agency did not establish an overpayment with regard to RP-4. RP-5. The medical records in evidence contain a "Home Health Certification and Plan of Care" for Rosa P. that was signed and dated, on January 22, 1997, by the RN and by the patient's attending physician, Dr. John Prior. This plan of care covers the period from January 22, 1997 through March 22, 1997. The Agency did not present any evidence that either the doctor's or the nurse's signature appearing on this form are inauthentic or that either or both failed to sign on January 22, 1997, as recorded. Therefore, the Agency's allegation that the plan of treatment for the period in question is invalid was not proved. RP-6. This claim set encompasses five full weeks plus five days of home health aide service, or 40 visits in all. The Agency alleges that no covered personal care was provided during these visits. The time sheets demonstrate that the aide provided a covered service, namely assistance in the shower, on all days between March 24, 1997 and April 6, 1997, and also on the five days from April 28 through May 2, 1997. The Agency therefore failed to prove its allegation as to these 19 visits. The Agency made its case, however, in connection with the remaining 21 visits from April 7 to April 27, 1997, inclusive. The time sheets for these dates do not adequately document the provision of a covered service.14 Accordingly, lack of medical necessity was established for 21 home health aide visits at $17.46 each, making a total overpayment on RP-6 of $366.66. RP-7. The Agency has sought to recover payment of $29.04 for an RN visit to the patient on May 2, 1997, alleging lack of documentation. The medical records show that on this particular date, an LPN treated the patient from 8:00 a.m. to 8:45 a.m. Later that same day, at 5:00 p.m., an RN arrived to provide care, which she did, afterwards leaving the patient’s residence at 5:45 p.m. These two visits are documented in separate "Time Record Nursing Progress Note" forms. The Agency did not establish that the nursing notes are inauthentic or incredible.15 Thus, the allegation regarding RP-7 was not proved. RP-8. The Agency contends that 62 home health aide visits between May 3, 1997, and July 4, 1997, were not compensable because no covered personal care was provided. The aide's time sheets establish that a covered personal care (assistance in the shower) was given on May 3 through May 17, inclusive (15 visits at $17.46 apiece), and also on June 20 through 22, 1997 (three visits at $17.46 each). Shower assistance was also provided on May 26 through June 1, 1997 (seven visits at $15.46 each). Skin care, a covered service, was provided on June 7, 1997 (one visit, $15.46). And ambulation assistance, a covered personal care service, was rendered on seven visits from June 9, 1997, through June 15, 1997, at $15.46 per visit. For the remaining 29 visits, however, the aide's time sheets fail adequately to document the provision of a covered service. Ten of these visits were billed at $15.46, the others at $17.46 apiece. Thus, with respect to RP-8, the Agency established an overpayment of $486.34. RP-9. This claim set involves six home health aide visits on the dates of July 21 through July 26, 1997, inclusive, during which, the Agency alleges, the plan of treatment was not obeyed. (The Agency did not seek to recoup the payment made for aide services rendered on Sunday, July 27, 1997, even though that date’s visit is included within the same time sheet as the Monday through Saturday visits, and the services rendered on July 27 were identical to those performed earlier in the week.) According to the pertinent time sheet, covered personal care services (bathing and assistance with ambulation) were provided in connection with the challenged claims. Further, the plan of treatment in effect at that time stated that the aide would "assist with personal care, ambulation, prepare meals, grocery shop, wash clothes, [and] straighten bedside unit." The time sheet establishes that the aide complied with these instructions. Accordingly, the Agency failed to prove its allegation regarding RP-9. RP-10. The Agency alleges that none of the home health aide visits from August 4 through August 10, 1997, entailed covered personal care services. The aide's time sheet for that week, however, documents that bathing care, specifically showering, was provided. Because showering the patient is clearly a covered item, the Agency failed to carry its burden of proof in respect of RP-10. The patient's medical records contain two "Time Record Nursing Progress Note" forms dated October 29, 1997, which document separate RN visits on that date, one lasting from 4:30 p.m. to 5:15 p.m., the other from 6:00 p.m. until 7:40 p.m. The Agency therefore did not establish, by a preponderance of evidence, its allegation that Monef had provided documentary support for only of one of two nursing visits on October 29, 1997. RP-12, -13, -14, -15, and -16. The Agency alleges that these five home health aide visits, occurring over a two- week period from November 3, 1997 to November 16, 1997, are not adequately documented. The visits of Monday, November 3, and Tuesday, November 4, 1997, which the Agency challenges, are reported on the same time sheet as those of November 5 through 9, 1997, which the Agency accepts. The duties performed on each of these days, both challenged and unchallenged, were identical, except that on November 4 and 8 the aide shampooed the patient. Numerous covered personal care services were rendered each day during the week, including bathing, oral hygiene, skin care, and assistance with ambulation. The duty descriptions on the aide's time sheet for the week beginning Monday, November 10, 1997——a week that included three challenged visits (November 14 through 16)——are substantially similar to one another (though the Agency accepted claims for November 10 through 13) and nearly identical to those given for the preceding week. Once again, covered personal care services rendered consistently throughout the week of November 10 to 16, 1997, included bathing, oral hygiene, skin care, and ambulation assistance. The evidence, therefore, does not support the Agency's allegation that the services in question were not adequately documented. RP-17. The Agency alleges that home health aide visits made from November 22 through November 26, 1997, were not documented. The medical records demonstrate that one such visit per day was provided, for a total of five. The records show further, however, that Monef was reimbursed for two visits for each of the days in question, receiving double the amount to which it was entitled based on the documented number of visits. The Agency, therefore, has proved an overpayment of $87.30 (five visits at $17.46 apiece). RP-18, -19, and -20. The Agency contends that there is insufficient documentation for home health visits on December 1 through 3, 1997. But the aide's time sheet for the week beginning Monday, December 1, 1997, adequately establishes that such visits actually occurred——and that covered personal care services (bathing, oral hygiene, skin care, and ambulation assistance) were provided during each of them. However, as with RP-17, the records show that Monef was reimbursed for two visits for each of the days in question, receiving double the amount to which it was entitled based on the documented number of visits. The Agency, therefore, has proved an overpayment of $50.38 (two visits at $17.45 apiece and one billed at $15.46) with regard to RP-18, RP-19, and RP-20. RP-21. The Agency seeks to recover payments for all nursing services rendered from December 28, 1997 through February 28, 1998, on the ground that the plan of treatment for the subject period was not signed and dated by the attending physician, as required. In fact, the pertinent treatment plan was signed by a Dr. Roxana Lopez, and by the RN. Neither signature, however, was dated. Thus, the Agency is correct in its assertion that the plan of treatment is deficient. But, the record also contains a letter from KePRO dated December 29, 1997, which grants prior authorization for 124 skilled nursing and 61 home health aide visits for the period from December 28, 1997 through February 28, 1998. According to this letter, Monef's request for pre-approval was made on December 22, 1997. One of the items that must be submitted to the peer- review organization with a request for prior authorization is the written plan of treatment. Thus, it is reasonable to infer, and so found, that KePRO had in its possession the deficient plan of treatment and, in granting prior authorization, overlooked the fact that the doctor had not dated her signature. Monef did not urge that KePRO's pre-approval of the services in question effected a waiver of the Agency's right to disallow the ensuing claims based on what is, in these circumstances, clearly a technicality,16 or that the Agency should be estopped from raising this particular objection, although little imagination is required to perceive the potential merit in either argument. It is not necessary to reach waiver or estoppel issues, however, for KePRO's approval letter establishes persuasively that the doctor and the nurse signed the plan of treatment before December 29, 1997——and hence at or before the start of care and services thereunder. Plainly, in other words, the attending physician timely approved the plan of treatment, even though she failed to date her signature. Under the particular facts of this case, therefore, where the treatment plan is in substantial compliance with the requirements, and neither the Medicaid Program nor the patient suffered any conceivable prejudice as a result of a demonstrably harmless (on these facts) and unintentional deficiency, it is determined that the Agency has failed to prove a sufficient basis to recoup payments totaling $1,724.37 for pre-approved, medically necessary services that were actually provided to an eligible patient. The following table summarizes the foregoing findings relating to claims for services to Rosa P. CLAIM ID DATE(S) SERVICE(S) GROUND(S) FOR DENIAL ACTUAL OVERPAYMENT RP-1 11-22-96 Nursing No doc. $0 RP-2 12-9-96, 12- 10-96, 12- 14-96 Aide No doc./POT not followed (x3) $0 RP-3 12-25-96 to 1-5-97 Aide No PC rendered (x11) $174.60 RP-4 1-6-97, 1-7- 97, 1-9-97, 1-10-97, 1- 11-97, 1-12- 97 Aide POT not followed (x6) $0 RP-5 1-22-97 to 3-22-97 All POT not signed by MD or RN $0 RP-6 3-24-97 to 5-2-97 Aide No PC rendered (x40) $366.66 RP-7 5-2-97 Nursing No doc. $0 RP-8 5-3-97 to 7- 4-97 Aide No PC rendered (x62) $486.34 RP-9 7-21-97 to 7-26-97 Aide POT not followed (x6) $0 RP-10 8-4-97 to 8- 10-97 Aide PC not rendered (x7) $0 RP-11 10-29-97 Nursing Documented only 1 of 2 billed visits $0 RP-12 11-3-97 Aide No doc. $0 RP-13 11-4-97 Aide No doc. $0 RP-14 11-14-97 Aide No doc. $0 RP-15 11-15-97 Aide No doc. $0 RP-16 11-16-97 Aide No doc. $0 RP-17 11-22-97 to 11-26-97 Aide No doc. (x10) (2 billed visits per day) $87.30 RP-18 12-1-97 Aide No doc. $17.46 RP-19 12-2-97 Aide No doc. $15.46 RP-20 12-3-97 Aide No doc. $17.46 RP-21 12-28-97 to 2-28-98 Nursing POT not signed by MD or RN $0 The Agency, in sum, proved overpayments totaling $1,165.28 in relation to Rosa P. The Bottom Line The Agency established that Monef received overpayments in connection with six patients. The following table summarizes these overpayments. PATIENT NAME GROUND(S) FOR DENIAL OVERPAYMENT Robert M. No medical necessity $1,442.49 Ana G. No medical necessity $441.96 Joann N. No medical necessity $1,705.12 C. Watson No medical necessity $319.13 Yvette F. Service refused $91.62 Rosa P. Multiple $1,165.28 Accordingly, the Agency is entitled to recover from Monef the principal sum of $5,165.60.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency enter a final order requiring Monef to repay the Agency the principal amount of $5,165.60. DONE AND ENTERED this 14th day of November, 2001, in Tallahassee, Leon County, Florida. JOHN G. VAN LANINGHAM Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 14th day of November, 2001.
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: Gulf Coast Home Health Service of Florida, Inc. is an existing licensed provider of Medicare-certified home health services in Pinellas County. The parties have stipulated that Gulf Coast has standing to participate as a party in this proceeding. Metro Home Health Care, Inc. is a proprietary agency owned by Ann Durham, Robert Carver and John Timp, a Certified Public Accountant. Metro was incorporated in November of 1984 and has been operating as a home health agency since June of 1985. It currently provides facility staffing with nurses, nurses' aides and mental health workers, and also takes private duty calls from hospitals. Due to the fact that so many patients who are in need of home health care are elderly and eligible for Medicare, referring hospitals and physicians attempt to utilize those home health agencies which are Medicare-certified. Metro proposes to expand its services to provide treatment to Medicare patients, and thus filed an application for a Certificate of Need in December of 1985. A home health agency in Florida must obtain a Certificate of Need from HRS before it can be licensed and become eligible to receive Medicare reimbursement. As the agency is already operational, there is no cost associated with this project. Metro realizes that there is a lag time between the provision of services to Medicare patients and Medicare reimbursement for such services. In order to avoid interest costs, Metro proposes to utilize the profits from its current staffing services to support its home health care program, in lieu of using a commercial line-of credit. Metro believes, however, that lines of credit with banking institutions can be acquired if operational funds are needed in the future. Metro has encouraged and supported the training and continuous education of its staff by providing information and funds for courses offered in the community. It intends to continue this practice. Metro proposes to provide skilled nursing services, physical therapy services, occupational therapy services, speech therapy services, IV therapy, rehabilitative services, social services and home health aid services. Some of these services will be obtained on a contractual basis, as opposed to in-house staffing, depending upon the need for and utilization of such services. Metro proposes to provide two percent of its services to Medicaid patients and two percent of its services to indigent patients during the first year after obtaining a Certificate of Need. During its first year as a Medicare-certified provider, it is anticipated that Metro will provide approximately 75 percent of its services to Medicare patients, 10.5 percent to private pay patients, 10.5 percent to third-party payor patients and 4 percent to Medicaid and indigent patients. In its second year, Metro proposes an aggregate of five percent of its services to be offered to Medicaid and indigent patients. By the end of its first decade, the intent is to have incrementally increased the level of service to indigent and Medicaid patients to ten percent. Metro's current charges for skilled nursing care are in the median range of charges by other home health agencies in the area. Charges for this service range between $40.00 and $60.00, and Metro charges $47.00 per visit. While Metro's Director, a registered nurse, did not have intimate knowledge of the bookkeeping, interim payment reports, cost reports, record keeping or computerization required by Medicare, one of the owners of Metro is a Certified Public Accountant. Since the filing of the Certificate of Need application, the owners of Metro have met with an assigned intermediary for the Medicare program, and they have discussed the completion of forms, patient claims and annual reports, as well as the Medicare reimbursement system. The Medicare program reimburses providers at a rate which represents the lowest of either costs, charges or the Medicare cap for the service provided. Thus, there is little or no profit element in the provision of Medicare services. However, Metro will realize a positive net income through the provision of services to Medicare, private, third party payor, Medicaid and indigent mix of patients proposed for the first year of operation. This is true even with a tripling of the amount of calculated contractual allowances set forth in Metro's application. The figures and projections contained in the pro forma statement of revenues and expenses included in Metro's Certificate of Need application are outdated and some of the utilization estimates may be exaggerated. However, Metro is of the opinion that its existing profits which have greatly increased since the date of its application, will enable it to operate in a financially feasible manner on both an immediate and long-term basis. Metro desires to offer Medicare services so that it will be competitive with other agencies which do so and can receive a fair share of referrals. Hopefully, more referrals will include more private pay and insurance covered patients, which will produce greater profits. The reimbursement rate for services to Medicaid patients is even lower than for Medicare patients, though it has recently been raised. The per visit reimbursement rate for Medicare purposes can be negatively affected by increasing the number of Medicaid and indigent patients served. It would not be financially feasible for a home health agency which served only Medicare patients to provide Medicaid and indigent services. When HRS initially reviewed Metro's application, it utilized an invalid methodology to determine the need for additional home health services in Pinellas County. HRS no longer utilizes this methodology and did not attempt to do so during the final administrative hearing. HRS does not presently have any methodology pursuant to rule or policy for projecting numeric need for new home health agencies. Instead, it looks at the general statutory criteria applicable to Certificate of Need review for all health care services. There were no numeric need methodologies for home health care services offered at the final hearing. While neither the State Health Plan nor the local District Health Plan specifically address or identify the need for home health agencies, both plans emphasize the improvement of access to the medically underserved. There are approximately 29 licensed and approved Medicare-certifed home health agencies in District 5, which includes Pinellas County.
Recommendation Based upon the findings of fact and conclusions of law recited herein, it is RECOMMENDED THAT Metro Home Health Care, Inc. be GRANTED a Certificate of Need to operate a home health agency in Pinellas County, with the condition that a minimum of two percent of total visits be provided to Medicaid patients and two percent of total visits be provided to indigent patients. Respectfully submitted and entered this 5th day of November, 1987, in Tallahassee, Florida. DIANE D. TREMOR 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 5th day of November, 1987. APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-3556 The proposed findings of fact submitted by the parties have been accepted and/or incorporated in this Recommended Order, except as noted below: Petitioner Gulf Coast: 9. Rejected as contrary to the evidence. 10, 11. Rejected as irrelevant and immaterial. 13-15. Rejected as irrelevant and immaterial. 17. Rejected as irrelevant and immaterial. 22. Rejected as hearsay. 23-27. Rejected as irrelevant and immaterial. 29-30. Rejected as irrelevant and immaterial. 31. Partially rejected. It must be assumed that goals in the State and District Plans reflect need. 36. Rejected as contrary to the evidence. Last sentence accepted. 38. Rejected as contrary to the evidence. 39 & 41. Rejected as too broad a conclusion to be drawn from the evidence. 45. Second sentence rejected as hearsay. 50, 51, & 53. Rejected, not supported by sufficient evidence. Last sentence accepted only if private pay or insurance-covered patients are not considered. Last sentence accepted only if private pay or insurance-covered patients are not considered. 60. Accepted only-if it is assumed that the percentage of care rendered to private pay or insurance-covered patients decreases. 62 & 63. These factual findings are accepted, but are incomplete in that they fail to recognize the importance of becoming a Medicare-certified provider in order to also obtain referrals of non-Medicare patients. 64-73. These "findings of fact" are addressed in the Conclusions of Law. Respondent HRS: p. 3, last full sentence Accepted only if it is assumed the agency serves only Medicare patients. p. 4, last sentence of first full paragraph Rejected as not supported by competent evidence. Respondent Metro: The "proposed recommended order" submitted on Metro's behalf does not contain proposed findings of fact, and is more in the nature of closing argument. Consequently, it is not possible to render specific rulings upon Metro's proposed findings of fact. COPIES FURNISHED: Leonard A. Carson, Esquire Carson & Linn, P.A. 1711-D Mahan Drive Tallahassee, Florida 32308 John Rodriguez, Esquire Assistant General Counsel 1323 Winewood Boulevard Building One, Suite 407 Tallahassee, Florida 32399-0700 Ann Durham, Director Metro Home Health Care, Inc. 10707 66th Street North Pinellas Park, Florida 33565 R. S. Powers, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700
