The Issue Whether any or all of the applications for certificates of need to establish medicare-certified home health agencies in Broward County (AHCA District 10) by Petitioners Allstar Care, Inc.; Medicorp Home Health Care Services; and Medshares of Florida, Inc., should be approved by the Agency for Health Care Administration.
Findings Of Fact The Parties Allstar Allstar Care, Inc., with its offices in Miami, is a Florida corporation that operates a licensed Medicare-certified home health care agency in Dade County. It serves, principally, patients aged 65 and over who are Medicare- and Medicaid-eligible by providing them at home: skilled nursing; physical therapy; occupational therapy; speech therapy; and the services of home health aides, when provided physician's order to do so. It also serves at-home indigents with like services when provided appropriate physician's orders. In 1996, Allstar provided a total of 122,000 visits. Fifty percent of them were by home health aides providing assistance with the patients' daily living needs, such as bathing, oral care, dressing, and assistance with meals. Forty- five percent of the visits were by skilled nurses. In addition, licensed social workers employed by Allstar provided social and emotional support for the patient and the patient's family. From 1994 to date, Allstar has provided Medicare- certified home health services in Dade County. It is reasonable to expect that Allstar will provide the same range of services that are described in its application for Broward County that Allstar currently provides in Dade. Medicorp A sister home health agency to Medcorp Home Health Services, Medicorp Home Health Services is a home health agency that serves patients in Wilton Manors and Oakland Park in Broward County, Florida. Although not Medicare-certified, it is Medicaid-certified. Medicorp was founded primarily to bring services to unserved and underserved areas, particularly "the projects," (Tr. 13,) in Broward County, that is areas of low-income housing the building of which was financed by the federal government's Department of Housing and Urban Development. Commencing operations in 1991 with an initial investment of $8,000 and as its only employee, current owner and administrator Beverly Cardozo, LPN and certified respiratory therapist, Medicorp has experienced rapid growth. Last year it grossed $1.8 million. Medshares Medshares of Florida, Inc., is a member of the family of Medshares companies commonly referred to as "Medshares." Medshares provides various home health services, such as Medicare-certified home health services; private nursing services; management services for home health agencies; infusion services; and consulting services. Medshares began in Tennessee in 1985 and since that time has expanded to operation in nine states with 52 locations. In 1996, Medshares provided approximately one million visits through its Medicare-certified home health agencies and approximately 1.7 million visits through its non-Medicare-certified and managed home health agencies. Medshares' long-range plan includes development of Medicare-certified agencies through the southeast. Development of such an agency is a logical step for Medshares, since Medshares currently operates in several other southeastern states. Medshares experiences a low-employee turnover rate of approximately 50 percent, which is less than half of the national average for home health operations. Medshares attribute this low turnover rate to its participatory management style as well as its employee benefits packages. For example, Medshares offers educational packages to any of its employees who wish to further his or her education. For its nurses, Medshares funds the cost of nursing certification by the American Nurses Association. AHCA The Agency for Health Care Administration is the "single state agency [designated by statute] to issue, revoke or deny certificates of need . . . in accordance with the district plans, the statewide health plan, and present and future federal and state statutes." Section 408.034(1), Florida Statutes. Petitioners: Non-competitors The Petitioners each claimed in the hearing that there is sufficient need in the District to support the granting of all three applications. They do not, therefore, view each other as competitors in this proceeding. Filing of the Applications and Preliminary Action by AHCA All three petitioners, Allstar, Medicorp, and Medshares, submitted timely applications for certificates of need to establish Medicare-certified home health agencies in Broward County, AHCA District 10: CON 8448 (Allstar), CON 8418 (Medicorp), and CON 8419 (Medshares). The applications were deemed complete by AHCA. Following preliminary review, however, the agency denied the applications. The State Agency Action Report ("SAAR") sets forth AHCA's findings of fact and determinations upon which the decisions were based. Allstar, Medicorp, and Medshares each filed a timely petition for hearing. The District AHCA District 10 is composed of Broward County, alone and in its entirety. The service area for review of CON applications for Medicare-certified home health agencies is the district. In this case, therefore, the service area is Broward County. In Broward County, there are roughly 190 home health agencies. Of these, however, only 35 are licensed Medicare- certified home health agencies (34 providers hold the 35 licenses). Three are approved Medicare-certified home health agencies, and another three are exempt Medicare-certified home health agencies. Need for Additional Medicare-certified home health agencies in District 10 No AHCA Methodology AHCA did not publish a fixed need pool for Medicare certified home health agencies for the July 1997 planning horizon in Florida because, at the time the Letters of Intent were filed (and when the Formal Hearing was conducted, as well), AHCA did not have any methodology pursuant to rule for projecting need for additional Medicare-certified home health agencies. Reasonable Methodologies of the Petitioners In the absence of AHCA methodology, expert health planners for each of the three petitioners developed reasonable methodologies which, when applied to data relevant in time by demographics to the case, show a need for at least a number in excess of three. Changes in the Health Care Marketplace The methodologies developed by the petitioners recognize ongoing changes in the health care marketplace that began with the implementation of the Medicare prospective payment system. The changes have progressively encouraged the use of less intensive, less costly settings for the provision of health care services. The least intensive and least costly health care service is home health care service. The tremendous demand for non-Medicare and Medicare-certified home health services beyond what would be expected due to simple population growth is the result. Use rates, therefore, are escalating beyond escalation due to population growth alone. AHCA recognizes that there has been a significant trend toward increased use of home health services. Not surprisingly, therefore, AHCA did not criticize the use of compound rates of increase to compute use rates in the need methodologies developed by any of the three petitioners. Allstar's Methodology and Determination of Numeric Need Allstar's health planner determined a need for at least six additional Medicare-certified home health agencies in Broward County for the appropriate planning horizon. The methodology used by Allstar in its application was conceptually identical to that approved in the Recommended and Final Orders in Shands Teaching Hospital and Clinics, Inc. v. AHCA, DOAH Case No. 96-4075 (Recommended Order issued 3/20/97, Final Order 5/12/97). The source of the data used by Allstar to develop its need methodology was the Medicare cost reports that existing providers file with the Federal Health Care Financing Administration, ("HCFA"). Data from 1995 was not available in the spring of 1996 when Allstar's application was filed, so Allstar used a 1994 data base period. The 1994 base period used by Allstar is the last for which data on visits was available from AHCA before the deadline for filing applications in this case. Allstar selected 1997 as the planning horizon because it usually takes one year from the date the application is submitted to get a home health care service in place. The planning horizon selected by Allstar is reasonable. Allstar relied on population estimates published by AHCA in January 1996, the most currently available populations statistics when the application was filed. Allstar received February 1996 population data from AHCA after the application was filed, but before the omissions response was due. When Allstar's methodology is replicated using the February 1996 population data, it does not substantially alter the projected numeric need. Allstar calculated a 1994 District 10 use rate by dividing the total patient visits in 1994 by the 1994 District 10 population 65 years of age and older. Use of the 65-and-older cohort is reasonable since Medicare eligibility begins at age 65 and, historically, 98 percent of all Medicare-certified home health care visits are delivered to that age group. The calculation yields a historic use rate of 6.83 visits per capita. Most use rates developed by health care planners for acute care services are constant. They assume conditions that are found in the base period will remain unchanged. Constant use rates are inappropriate in the instance of Medicare-certified home health care agencies. District 10 historical data from Medicare cost reports for the period 1989 through 1994 show use rates, ranging from 2.82 per capita in 1989 to 6.83 per capita in 1994. This dramatic increase is consistent with the increase in use rates in other AHCA districts. The combination of managed care and Medicare's prospective pay system is producing care for patients in less costly non-institutional settings like the home of the patient. Hence, home health care use rates have increased. The historical use rate trend line developed by Allstar, when extrapolated to 1997, yields 10.47 visits per capita in 1997. Consistent with conservative planning, and in an attempt to avoid either overstating or understating the horizon year use rate, Allstar averaged the trended and constant use rates for 1997, yielding a use rate of 8.65. Since a use rate of 8.65 represents the result of averaging two numbers, the 1997 projected rate is both a median and a mean. It is also both conservative and reasonable. When AHCA's population projection for 1997 is multiplied by the 8.65 use rate, the result is a projection of 2,365,443 Medicare-certified visits in July 1997. The mean agency size in 1994, measured by number of visits, was 54,101. The median number of visits in 1994 was 54,803. Dividing the average agency size of 54,101 visits into the number of projected visits in 1997 yields a gross need for 44 Medicare-certified home health care agencies in 1997. Allstar then subtracted the number 35 (representing the licensed Medicare-certified home health agencies) and another 3 (representing the approved agencies) from 44, yielding the need for 6 new Medicare-certified home health agencies. AHCA criticized Allstar's methodology on two bases. First, Allstar used population estimates published in January 1996, instead of more recent population estimates for February 1996, estimates available to Allstar at the time it filed its omissions response. Second, Allstar calculated its average or mean number of visits by using the total number of licensed Medicare-certified home health agencies in District 10, as opposed to only those licensed agencies which actually reported visits. As to the first criticism, Allstar's health planner explained on rebuttal that the January 1996 population estimates were all that were available when it prepared the application. It is true that the February 1996 population estimates became available prior to the filing of the omissions response and although "there was no . . . formal notification," (Tr. 650), Allstar became aware of their availability before it filed the response. Allstar's health planning expert examined the February 1996 data and concluded that "while different, [the data] . . . weren't significantly different." (Tr. 651). In light of the lack of any significant difference, Allstar's expert summed up the company's analysis of the problem and its approach at that moment in time this way: We had already invested a lot of energy in running the need [with the January 1996 data] and simply made the decision not to go back and redo all of that work based on the February document. (Tr. 650-651.) Since there was no "significant difference," between the January and February data, it does not seem appropriate to require the effort needed to project need based on a calculation employing the more up-to-date data, an effort that would not alter the result of Allstar's projected numeric need. In point of fact, after filing the omissions response, Allstar's expert did the analysis with the more current data and determined that the February population estimates, "had no affect on the conclusion of how many net agencies were needed." (Tr. 652.) As for the second criticism, Allstar's health planner appreciated that there was a choice to be made in its methodology between visits as to total number of licensed Medicare-certified home health agencies in District 10 and the subset of that group consisting of only like agencies which reported visits. Allstar rejected the use of only those who reported visits. By doing so, it assumed that non-reporters did not provide any visits. To do otherwise, that is, to exclude non- reporters, results in the assumption, when using an average number of visits as a component in the methodology, that the non- reporting agencies, on average, had just as many visits as the reporting agencies. Such an assumption is much more likely to be incorrect than the assumption that Allstar made. The law requires Medicare-certified home health agencies to report. In all likelihood, therefore, the non-reporting agencies did not report precisely because, being new agencies, they had no visits to report. Allstar's approach is thus the more valid approach. In short, AHCA's criticism of Allstar's methodology in this regard does nothing to alter the conclusion that Allstar's methodology is reasonable. Medshares' Methodology and Determination Although Medshares used a somewhat different methodology to determine projected need, its methodology was also reasonable. Medshares’ methodology, too, yielded projected need in 1997 for Medicare-certified home health agencies in AHCA District 10 in a number greater than three, the number of applicants involved in this proceeding. Medicorp's Methodology Medicorp's application did not contain a need methodology. At hearing, over AHCA's objection, Medicorp's expert in health planning testified as to the reasonableness of its methodology which also yielded a numeric need in excess of three. The objection of AHCA was treated as a Motion to Strike, and the testimony was allowed. As explained in the Conclusions of Law, the objection is now moot since AHCA did not provide a methodology of its own when it presented its case in chief, and since reasonable methodologies yielding numeric need in excess of the number of petitioners were proven by both Allstar and Medshares. Aside from numeric need, in the case of Medicorp, there is a special need. Special Need for Medicorp Medicorp presented evidence in its application showing the need for an agency, like Medicorp, located among and willing to focus on serving the needs of the District's underserved and, in some cases, unserved, minority and low-income residents. Medicorp's primary service area includes zip code 33311, a federally-designated area of restricted health care. As one might expect from this designation, residents of this zip code have the lowest income per capita, the highest rate of unemployment, and highest rate of Medicaid eligibility in Broward County. A large proportion of the residents of zip code 33311 live in HUD housing. And, the zip code has the highest concentration of HIV/AIDS sufferers in the county. Medicorp's Administrator, Beverly Cardozo, testified that her existing, non-certified agency, Medicorp Home Health Services, currently is providing substantially free care to up to 400 Medicare-eligible patients living in government-subsidized housing within Medicorp's primary service area. Ms. Cardozo and Medicorp have been providing this care since approximately 1994, when Medicorp instituted its "Slice of Life" program consisting of the establishment of health fairs at these housing projects. Since 1994, Ms. Cardozo has been attempting to make arrangements with a Medicare-certified agency to provide the necessary care to Medicare-eligible residents in the projects to provide care, in some cases, desperately necessary. Only one agency agreed to go into the projects. Eventually, it ceased conducting business, leaving Medicorp to provide free health care. In addition to providing this care, Ms. Cardozo has recruited other local providers and business people to donate time and goods for the care of these Medicare-eligible patients. She also has arranged for the provision of care by a wound specialist. Ms. Cardozo's testimony, together with Medicorp's Exhibits 3 and 4, show that a significant portion of the District 10 Medicare-eligible population is underserved. In particular, many of the low-income residents of Wilton Manor and Oakland Park, areas targeted for care by Medicorp's application, are not receiving much-needed care. This care would be made available on a continuous basis by Medicorp's trained and dedicated staff. Notwithstanding numeric need, therefore, there is a special need in District 10 for the Medicorp proposal. Local Health Plan "The District 10, August 1994 CON Allocation Factors Report [used by AHCA in the SAAR for these three applicants] provides [six] . . . preferences in the review of applications pertaining to Medicare certified home health agencies." AHCA No. 5, p. 5. The First Preference AHCA maintains that "Medicorp-[sic] and Medshares do not meet preference one of the [local plan] due to their lack of demonstration that there are identifiable subgroups who are Medicare-eligible and are currently being denied access to Medicare-certified home health agency services." AHCA PRO, p. 5. There is, however, no requirement expressed in the preference that denial of access be shown in order to meet the preference. With regard to Allstar, AHCA makes the same argument related to access denial in relationship to the Hispanic population identified by Allstar as an identifiable subgroup of the District's population to which it will provide service. Again, the preference does not expressly require a showing of denial of access. Allstar demonstrated that Broward County is 8.26 percent Hispanic; that Allstar has bilingual, indeed, multilingual capabilities in Dade County available for use in Broward should the CON be granted; and that it will locate its offices close to south central Broward near the largest Hispanic population. Allstar meets the express requirements of the preference. As explained above, Medicorp proposes to provide care concentrated in the most severely depressed area of District 10, geographically centered in zip codes 33311 and 33312. The proposed agency will provide care to the subgroup of predominantly black residents of the inner city HUD housing projects. It is true that this area may have "the highest concentration and number of Medicaid eligibles as well as the highest percentage of HIV and AIDS cases in the District . . .," and that "this population [is] . . . predominantly 'Medicaid eligibles,' and finally, that these patients could be served through a non-Medicare certified home health agency," AHCA No. 5, p. 6, (e.s.). But these factors do nothing to defeat Medicorp's satisfaction of the preference. Medicorp has demonstrated that it will provide service to an identifiable subgroup of District 10 Medicare-eligible patients based on "ethnicity" and "geographic location." It clearly meets the preference. Medshares meets the priority as well. Based upon geographic analyses contained in its application, Medshares identified lower-income Hispanics and African-Americans, including lower-income females, and persons afflicted with HIV/AIDS as groups in District 10 that it would serve. Medshares’ patient material will be provided in both English and Spanish. It plans to provide a full range of home health care services to these groups with special emphasis on low-income females who typically receive little or no prenatal care, and low-income families in need of pediatric services. And, it will locate in Fort Lauderdale, the urban area in Broward County with the highest number of AIDS cases. Medshares meets the preference. Preference Two All three of the applicants have committed to serve Medicaid and indigents, promoted by Preference Two, as follows: Allstar: 1 percent Medicaid, 0.5 percent indigent; Medicorp 10 percent Medicaid, 2 percent indigent; and Medshares 1.4 percent Medicaid, 2 percent indigent. Preference Three All three of the applicants state they will provide for the provision of maintenance services, as called for by Preference Three of the Local Plan, to Medicaid and indigent patients. Preference Four AHCA agrees that Medicorp and Medshares meet preference four which gives priority to those applications that show reasonable expectations for reaching a patient load of at least 21,000 visits by the end of the first year of operation. As to Allstar, it reasonably projected only 13,265 visits in its first operational year. Allstar's projection, however, includes a rate of 2,000 visits per month by the end of the first year, a monthly rate that leads to 21,000 per year when annualized. None of the Medicare-certified home health agencies opening in Broward County since 1992 have met the 21,000 "priority" threshold. In light of this reality and the reasonableness, in Allstar's view, of interpreting the preference as requiring only a demonstration of capacity to reach 21,000 visits rather than a projection that it actually reach 21,000, Allstar argues that it meets Preference Four of the Local Plan. There may be some room in the wording of the preference to interpret it as allowing a demonstration of capacity by the end of the first year to have achieved 21,000 visits rather than actually reaching the 21,000 visits, but there was no evidence that AHCA has ever made such an interpretation. For its part, AHCA flatly asserts, "Allstar does not meet this preference." AHCA PRO, p. 6. In the absence of an authoritative interpretation in Allstar's favor, Allstar must be considered as not meeting the preference. Preference Five There is no question that all three applicants meet Preference Five. The application of each demonstrates the development of patient transfer and referral services with other health provider agencies as a means of ensuring continuity of care. Preference Six The applications of Medicorp and Medshares demonstrate that they will participate in the data collection activities of the local health council. Allstar has agreed to report data to the regional health planning council but not to the local health council. Medicorp and Medshares meet preference six; Allstar does not. State Health Plan Preference Just as the District 10 Health Plan, the Florida State Health Plan establishes certain preferences for applicants for Medicare-certified home health services certificates of need. The State Health Plan, too, contains six preferences. Preference One Among the three applicants, only Medicorp demonstrated a willingness to commit a specific percentage of total annual visits to AIDS/HIV patients. The State Health Plan in its first allocation factor, however, does not contain a "percentage" requirement in order for preference to be given. All that is required is that the applicant "propos[e] to serve AIDS patients." AHCA Exhibit 10. Consistent with this requirement, all three applicants propose to serve AIDS patients; Medshares proposes to condition its application on such service and Medicorp, additionally, has in place policies and procedures for quality assurance and safety precautions in caring for the HIV/AIDS patient. All three applicants, therefore, meet the preference. Preference Two Although there does not appear to be a universally accepted definition of what "high technology services" means in the home health arena, and although AHCA does not define them, all three applicants have reasonably identified them in their application and have proved sufficient intent to provide them. For example, Medshares proposes to provide a full range of nursing and therapy services, including cardiac care; continuous IV therapy; diabetes care; oncology services; pediatrics; rehabilitation; pain therapy; total parenteral nutrition; speech therapy; physical therapy; occupational therapy; enterostomal therapy; respiratory therapy; audiology therapy; and infusion therapy. Several of these services are unquestionably "high tech." AHCA answers that none of the three showed that the full range of services, including those that are "high tech," were not sufficiently available and accessible in the same service area. Neither, of course, did AHCA. In the context of a litigated case, the wording of the preference is awkward for achievement of the result AHCA seeks: Preference shall be given to an applicant proposing to provide a full range of ser- vices, including high technology services, unless these services are sufficiently avail- able and accessible in the same service area. AHCA No. 5, p., 10. All three applicants receive preference under this part of the State Health Plan. Preference Three There is no definition of "disproportionate share" of Medicaid and indigent patients in AHCA. Nor was there any evidence of such a definition provided in this proceeding by AHCA by way of testimony or in any other way. The term, as used in acute services, contemplates and necessitates the use of Medicaid utilization data of the type that AHCA has never collected for Medicare-certified home health agencies. Nonetheless, both Medicorp and Medshares are entitled to the benefit of this preference. Medicorp's principals have demonstrated a commitment to serving what would constitute a disproportionate share of Medicaid and indigent patients by any common understanding of the term "disproportionate share." Medicorp, as a new entity, is entitled to the benefit that flows from the history of service of its principals and predecessors. Medshares, too, has a history of providing home health services to Medicaid eligible persons and indigents, and Medshares plans to serve all patients in need regardless of ability to pay. Allstar is excused from complying with this preference given the absence of a meaningful definition. Preference Four The preference is not applicable in this case, since it can only apply to multi-county districts. It is worth noting, however, that home health care has been cited as an area of critical need in Broward County by the Broward Regional Health Planning Council. It is also worth re-iterating that several zip code areas within Medicorp's primary service area have been designated by the Federal government as currently and historically medically underserved. Medicorp can fill the needs of the underserved in the Broward County HUD housing projects as a Medicare-certified home health agency should its application be granted. Preference Five Medshares has made an unqualified commitment to provide consumer survey data measuring patient satisfaction to AHCA. Without doubt, it fully meets the preference. Allstar currently collects patient satisfaction data, as well as family and physician satisfaction data. Allstar further stated in its application that, "though there is currently no systematic effort by the department to collect such data, [Allstar] will make this data available to the department, or its designated representative, upon development and implementation of an appropriate data collection and reporting system." AHCA No. 5, p. 13. Likewise, Medicorp indicated willingness to participate in an HRS consumer satisfaction data collection effort "upon the State's development and implementation of an appropriate system." Id., at 12, (e.s.) Medicorp, moreover, is willing to make survey results available to the AHCA, HCFA, the District 10 local planning council, and the Office of Comprehensive Health Planning. Allstar and Medicorp, at least, are entitled to partial credit under this preference. Preference Six Each of the three applicants is entitled to this preference; each proposes a quality-assurance program and JCAHO accreditation. Increase in Availability and Access; Improvement in Quality of Care, Efficiency, Appropriateness, and Adequacy of the Service Assuming existing providers are available, efficient, appropriate, accessible, giving quality care, and are adequately utilized, adding three new Medicare-certified home health agencies is still justified when cost-effective agency size is taken into consideration. The cost-effective size of an agency can be determined using Medicare cost reports. In Florida, the cost-effective size of an Medicare-certified home health agency ranges from 30,000 visits to 95,000 visits annually. Allstar's regression analysis of a cost-effective Medicare-certified home health agency size, measured in terms of visits, took into consideration the type of visits performed, AHCA's geographic price index, and the affects of population density on costs. Adding new Medicare-certified home health agencies is appropriate when the mix of services is taken into account, and when as in this case, adding three such agencies into the marketplace will not reduce the cost-effective size of existing agencies below 30,000 annual visits. Medicorp, moreover, has proven the restricted access to services experienced by Medicare patients residing in inner city HUD housing projects in North Broward County and has established that all payer groups in these areas, including Medicare and Medicaid, are underserved. It was established by Medicorp that the predominantly minority residents of Fort Lauderdale's public housing and surrounding areas of Wilton Manors and Oakland Park are woefully underserved. The already-established role of Medicorp as the accepted and known provider in these areas demonstrates how access to these home health services will improve by Medicorp entering areas that other providers will not serve. Financial Feasibility Short Term It was stipulated that Medshares’ application is financially feasible in the short term, that is, able to obtain the capital for start-up (including any construction costs, if necessary) as well as sufficient working capital to sustain a business until it becomes self-sufficient. While Medicorp's financial feasibility remained an issue going into hearing, it appears from AHCA's proposed recommended order that it continues to challenge only Allstar's short-term financial feasibility. See AHCA PRO, p. 8. In any event, Medicorp proved that adequate funding is available from outside sources to fund the start-up costs and early operations. Its project is therefore financially feasible in the short term. The total project costs for Allstar's proposed project is $102,903, based on reasonable historical data typical of the start-up equipment and expenses for similar Medicare-certified home health agencies in the same geographic area. Allstar's projected start-up costs of $24,956 are reasonable. To fund the proposed project, Allstar has established and maintains an escrow account with Republic Bank in the amount of $150,000 (almost $50,000 more that the projected total project cost). Allstar has adequately demonstrated its ability to fund the project; the project is financially feasible in the short term. b. Long term AHCA maintains that none of the applicants demonstrated long-term financial feasibility for one reason alone: lack of need for the proposals. Contrary to this assertion, there will remain need in Broward County for Medicare-certified home health agencies even if these three applicants receive the applied-for CONs. The projects of all three applicants are financially feasible in the long term. Allstar's and Medicorp's Reliance Solely on Independent Contractors AHCA contends the HCFA interpretation of the federal condition of participation found in 42 CFR s.484.14(a) requires full-time salaried employees to staff at least one qualifying service. Even if the interpretation is correct, it is no impediment to either the Allstar or the Medicorp application. Medical social work is a qualifying service under the federal regulation. Allstar presently staffs its medical social worker in its Dade County office exclusively with a full-time salaried employee for whom an Internal Revenue Service W-2 form must be maintained. Allstar intends to staff its Broward County office in the same manner. (Even if the social medical worker position were staffed with a part-time employee, Allstar would comply with the federal regulation so long as the part-time employee were salaried and received a W-2 form.) Up until hearing, AHCA legitimately maintained that Medicorp violates the federal regulation because of Assumption 11 to the pro forma in its application which stated that, "[i]t is assumed that all caregiving nurses are independent contractors." At hearing, however, Medicorp witnesses testified that nursing staff and CNA staff will be employed. Ms. Cardozo testified that she currently employs these staff and, if awarded a CON, would continue to do so. Similarly, the application repeatedly refers to Medicorp's staff consisting of the same employees working for Medicorp's sister agency, Medcorp. Any inconsistency between the testimony elicited by Medicorp at hearing and the assumption in its pro forma is of no moment in this case. With regard to financial feasibility, the assumption, even if incorrect in part, is not necessarily fatal to the application. (AHCA's finding of financial infeasibility, in the case of Medicorp was not based on the incorrectness of Assumption 11. Moreover, while one would usually expect full- time employees to cost more than less-than full-time independent contractors as to total cost, the direct hourly rate cost of independent contractors is usually higher than the direct hourly rate cost of employees.) Probable Impact on the Cost of Services Only Medshares demonstrated that it would foster competition which would promote quality assurance and cost effectiveness. In the case of Medicorp, eliminating the subcontract arrangements through which it, Medicorp, now provides services to Medicare patients will eliminate an unnecessary level of administrative costs. Other benefits flow from eliminating the need for Medicorp to subcontract with an authorized entity. For example, AHCA discourages such arrangements because removal of direct control of patient care from the authorized entity raises not just quality assurance issues but also the potential for fraud. In any event, granting all three applications should not reduce the cost effectiveness of any providers of Medicare- certified home health care services in Broward County in the future. Past and Proposed Provision of Services to Medicaid and Indigent Patients As detailed above, Allstar is committed to provide home health care services to Medicaid eligible and indigent patients. This commitment, in the absence of any data to the contrary, is an adequate one. That Allstar will make good on this commitment is supported by indicia aside from the express commitment contained in the application. Allstar has a relationship with Jackson Memorial to increase the number of indigent patients Allstar serves. Its brochures and business cards state that it accepts Medicaid patients. This acceptance is confirmed by Allstar at its public presentations and in conversations with referring physicians. Finally, the majority of Allstar's staff is bilingual, and it has nurses who speak as many as five languages. It has the capacity and intent to make a multilingual staff available in Broward County. Medicorp clearly has a history of providing health services to Medicaid patients and the medically indigent. This commitment has been demonstrated through operation of Medicorp's sister agency by Medicorp's principals. If anything, as discussed above, Medicorp's principals have shown a singular dedication to the medically indigent population through operation of health fairs and other charities. Consistent with this dedication, Medicorp has conditioned its application on provision of at least 10 percent of its total visits to Medicaid patients and at least 2 percent of its visits to the medically indigent. Medshares, too, has a history of providing services to Medicaid patients and the medically indigent. In 1995, it provided over $650,000 in uncompensated care. It participates in Medicaid waiver programs in two states which have them. Its application describes its indigent care plan. The pro forma projections of revenue and expense in the application describe the levels of indigent and Medicaid eligible persons that Medshares expects to serve. Medshares offers a CON condition that 1.4 percent of total patients will be Medicaid patients and 2 percent of total patients will be indigent patients.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED: That the Agency for Health Care Administration enter a final order granting CON Nos. 8418, 8419, and 8448 to Medicorp Home Health Care Services, Medshares of Florida, Inc., and Allstar Care, Inc., respectively. DONE AND ENTERED this 3rd day of September, 1997, in Tallahassee, Leon County, Florida. DAVID M. MALONEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 3rd day of September, 1997. COPIES FURNISHED: Robert J. Newell, Jr., Esquire Newell & Stahl, P.A. 817 North Gadsden Street Tallahassee, Florida 32303 Michael Manthei, Esquire Broad & Cassell Broward Financial Centre, Suite 1130 500 East Broward Boulevard Fort Lauderdale, Florida 33394 Alfred J. Clark, Esquire Suite 201 117 South Gadsden Street Tallahassee, Florida 32301 Richard Patterson, Esquire Agency for Health Care Administration Fort Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403 Jerome W. Hoffman, General Counsel Agency for Health Care Administration Fort Knox Building 3 2727 Mahan Drive Tallahassee, Florida 32308-5403 Sam Power, Agency Clerk Agency for Health Care Administration Fort Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403
Findings Of Fact On December 18, 1978, the Petitioner, using the name "Upjohn Healthcare Services, Inc." filed its application for certificate of need with the Florida Panhandle Health Systems Agency, Inc. This application was deemed complete on April 20, 1979. The application as originally filed indicated that healthcare services were to be made available on a 24 hour a day basis, seven days a week, with an admission criteria based on the patient's need for home health care, his ability to make available financial resources and the Petitioner's ability to provide the services required. Services were to be provided from a central location in Pensacola, Florida, which is in Escambia County, Florida; to serve Escambia, Santa Rosa and Okaloosa Counties, Florida. The application was subsequently amended to indicate the willingness of the Petitioner to aid Medicare and Medicaid patients in the named counties. The Petitioner, hereinafter referred to as "Upjohn", operating as Upjohn Healthcare Services, Inc., is a subsidiary of the Upjohn company, having forty-Seven certified home health agencies in the United States. The organization has twenty-one offices in the State of Florida and one of those offices is located in Pensacola, Florida. The State of Florida, Department of Health and Rehabilitative Services, is an agency of the State of Florida charged with the duty to evaluate the applications for certificate of need and to issue such certificates as would be appropriate under the terms of Chapter 381, Florida Statutes, and Rule 10-5, Florida Administrative Cede. This application for certificate of need and that of the companion case of Personnel Pool of Pensacola, Inc., d/b/a Medical Personnel Pool, hereinafter referred to "Personnel Pool", are also considered in accordance with the Health Systems plan for the Florida Panhandle effective December 15, 1978. A copy of that document may be found as the Joint Exhibit No. 2 admitted into evidence. The project review committee of the Northwest Florida District recommended to the Northwest Florida Subdistrict Advisory Council that the certificate of need be granted and this action was taken on May 2, 1979. A public hearing was held on May 8, 1979, and on Nay, 17, 1979, the Northwest Florida Subdistrict recommended the disapproval of the project. This disapproval followed a staff report by the staff of the Florida Panhandle Health Systems Agency which suggested that the certificate of need be denied. The application was then presented to the Regional Council, Florida panhandle Health Systems Agency, Inc., and on May 25, 1979, the Regional Council recommended the approval of the certificate of need to serve Escambia, Santa Rosa and Okaloosa Counties, Florida, with the proviso that services be offered Medicare and Medicaid patients. On June 29, 1979, the Respondent in the person of Art Forehand, Administrator of the Office of Community Medical Facilities, attempted to apprise the Petitioner that the request for a certificate of need had been denied; however, this correspondence was misaddressed and it was not until July 9, 1979, that a letter was forwarded to an official of Petitioner's organization and received by that official. On July 31, 1979, the Petitioner appealed the decision of denial of the certificate of need and the case was later assigned to the Division of Administrative Hearings for consideration which resulted in the hearing which is the subject of this Recommended Order. (The details of the various items discussed in developing the chronology of this application may be found in the Joint Composite Exhibit No. 1 admitted into evidence.) In offering its proof to demonstrate the entitlement to a certificate of need, the Petitioner essentially attempted to refute the Department of Health and Rehabilitative Services', hereinafter referred to as "Department", letter of notification of denial. That letter gave five reasons for denying the certificate of need, those reasons being: The proposed project is inconsistent with the Florida Panhandle Health Systems Agency 1979 Health Systems Plan policy guide regarding physical location of a home health agency in the area it intends to serve. The proposal is not consistent with standards and criteria established in Chapter 10-5.11(14), Rules of the Department of Health and Rehabilitative Services. Extenuating and mitigating circumstances which may be considered in approving a certificate of need for a new home health agency have not been adequately demonstrated. There are other available and adequate home health care service providers in the proposed service area which could serve as an alternative to the proposed project and prevent unnecessary duplication of resources. Financial feasibility data do not clearly reflect the inclusion of Medicare and Medicaid resources. The initial reason for denial deals with the claim that the Health Systems Plan for the Florida Panhandle, adopted December 15, 1978, does not allow service of three counties from one central office in Pensacola, Florida. The disputed language in that document is found in Chapter IV at page 216, and it states: No home health agency may be issued a license to operate in a Florida county without having applied for and been granted a certificate of need. The Office of Community Medical Facilities of the Department of Health and Rehabilitative Services considers the recommendation of the Health Systems Agency and established criteria in determining need. Certificates are now issued for a single-county service area, but prior to legislation passed in 1977, an agency could obtain a certificate for several counties. This inconsistency has created considerable confusion in determining need. Although the comment in the document is reluctantly made, it does establish the necessity for the issuance of certificates of need for single-county service areas. This determination is reached, notwithstanding the Petitioner's argument that there is existing precedence for serving more than one county out of a single office. Although there are circumstances in Florida where this approach has been utilized, such service of a multi-county area from a single office would not be allowed on the occasion of the current application. The second reason for denying the certificate of need involves Rule 10- 5.11(14), Florida Administrative Code, which states: (14)(a) A Certificate of Need for a proposed new home health agency or subunit shall not be issued until the daily census of each of the existing home health agencies or subunits providing services within the health service area of the proposed new home health agency or subunit has reached an average of 300 patients for the immediate preceding calendar quarter unless the need for the proposed new home health agency or subunit can be demonstrated by application of the mitigating and extenuating circumstances in rule 10-5.11(14)(b) herein. (b) Mitigating and extenuating circumstances which must be met for the department to issue a certificate of need for a proposed new home health agency or subunit even though the previously described need determination procedure does not clearly indicate need are: Documentation that the population of the proposed service are is being denied access to home health care services in that existing home health agencies or subunits within the proposed service area are unable to provide service to all persons in need of home health care, or Documentation that approval of such proposed new home health agency or subunit would foster cost containment for all providers in the health service area. The Petitioner, in the course of this presentation, took issue with the survey method used by the employee who conducted the staff review of the application. Upjohn claimed that the data gathered on the question of the requirement for a 300 average daily patient census was incomplete and inaccurate. The Petitioner also questioned whether the rule as cited above could be followed in this hearing or should the prior rule which spoke in terms of the daily census of the aggregate of the existing home health agencies or subunits in determining the count of 300 patients be used. The current rule became effective on June 5, 1979, and that rule has application because it was effective at the time of this hearing. Turning again to the question of the formula in deriving the number of patients in the census of the proposed service area, even assuming incompleteness or inaccuracies in the staff evaluation performed by the Health System Agency, the proof offered by the Petitioner in the bearing does not show utilization in excess of the 300-patient census. There are two health agencies now delivering home health care in Escambia County. Northwest Florida Home Health Agency, Inc., is one of those agencies and in its last complete reporting quarter prior to the hearing, there is an indicated patient census for April, which was 71; for May it was 77; and for June it was 73, totaling 221 patients, thereby constituting an average census of 74. This statement of census was established through the testimony of Arthur Long, Executive Director of Northwest Florida Home Health Agency, Inc. (His organization serves only patients who are enrolled with his service group.) Ms. Marian Humphrey, a public health nursing supervisor for the Escambia County Health Department, established the census in Escambia County for that Health Department as serviced by the Visiting Nurses Association, Inc. Beginning in January, 1979, the census was 101 Medicare patients; 14 Medicaid patients; 2 CHAD-PUS patients; 9 private patients and 71 free patients, the latter category being patients who do not pay for services. In February, 1979, there were 164 Medicare patients; 16 Medicaid patients; 2 CHAMPUS patients; 7 private patients and 72 free patients. In March, 1979, there were 128 Medicare patients; 9 Medicaid patients; 2 CHAMPUS patients and 11 private patients. In April, 1979, there were 147 Medicare patients; 13 Medicaid patients; 2 CHAMPUS patients and 9 private patients. In May, 1979, there were 165 Medicare patients; 12 Medicaid patients; 3 CHAMPUS patients; 7 private patients and 88 free patients. In June, 1979, there were 148 Medicare patients; 10 Medicaid patients; 2 CHAMPUS patients; 10 private patients and 61 free patients. In July, 1979, there were 150 Medicare patients; 10 Medicaid patients; 2 CHAMPUS patients; 10 private patients and 77 free patients. In August, 1979, there were 134 Medicare patients; 11 Medicaid patients; 2 CHAMPUS patients; 14 private patients and 96 free patients. The above-cited statistics demonstrate that the two current servicing agencies in Escambia County, Florida, in the preceding full quarter of 1979 which would have been April, May and June, considered separately do not exceed the average of 300 patients for that calendar quarter, nor did the statistics show excess of 300 in other reported quarters. By its Exhibit No. 8, the Petitioner presented statistics on the patient census in Okaloosa County and Santa Rosa County. These statistics were gathered by Blue Cross of Florida. The statistics of the Blue Cross survey show the patient Census services rendered by the Okaloosa County Health Department. These statistics only deal with the years 1977 and 1978 and are, therefore, not current. The most recent quarter in the report on Okaloosa County Health Department shows that in the last quarter of 1978, in-October the patient census was 9; November, the patient census was 14, and in December the patient census was 21. There is a provision in the Blue Cross report which deals with the Northwest Florida Home Health Agency, Inc.; however, these findings of fact defer to the testimony of Mr. Long which showed that in 1979, there was a patient census in April of 36; in May, a patient census of 38 and in June, a patient census of 40, for an average census of 38. The Blue Cross report shows that Santa Rosa County Health Department is the only home health care provider in that county. The most recent census reflected in that report is for January, February and March of 1979. In January the patient census was 41, in February the patient census was 35, and in March the patient census was 33. Analyzing this statistical data provided dealing with Okaloosa and Santa Rosa Counties, although some of the information is not current, it does demonstrate that the census did not exceed the average of 300 patients for the quarters that were reported in either county. In closing out an examination of the discussion of point 2 of the reasons for denial, it is noted that the Blue Cross report deals with the patient census of the Escambia County Health Department but this report is not as current as the presentation by Ms. Humphrey and the Humphrey report is accepted in lieu of the Blue Cross report. Reason 3 for denying the certificate of need talks about the failure of the Petitioner to demonstrate extenuating and mitigating circum stances which would allow a certificate to be issued, notwithstanding the fact that the current service agencies do not exceed the average census of 300 patients for the calendar quarter. Again, that provision of Rule 10-5.11(14)(b), Florida Statutes, states: Mitigating and extenuating circumstances which must be met for the department to issue a certificate of need for a proposed new home health agency or subunit even though the previously described need determination procedure does not clearly indicate need are: Documentation that the population of the proposed service area is being denied access to home health care services in that existing home health agencies or subunits within the proposed service area are unable to provide service to all persons in need of home health care, or Documentation that approval of such proposed new home health agency or subunit would foster cost containment for all providers in the health service area. The first provision under that subsection deals with the inability of the existing health agency to provide services to persons in need of home health care. In examining the question of the ability of the current organizations to provide the necessary health care, Escambia County will be reviewed first. In Escambia County, the Northwest Florida Home Health Agency, Inc., requires that their patients be registered with the organization and their office is open Monday through Friday from 8:00 a.m. to 4:00 p.m. After 4:00 p.m. on weekdays and on the weekends, a registered nurse is on call through the utilization of a "beeper" system. These services only apply to Medicare patients enrolled with the organization. To be enrolled it is necessary for the enrollment to have been achieved through a request by a physician. The Escambia County Health Department is open from 8:00 a.m. to 4:30 p.m. Monday through Friday and serves all classes of patients. There are on- call nurses who work on weekends. The nurses are called by the utilization of the Nurses Directory for Escambia County. The exception to these statements is that two days a year the services of the Escambia County Health Department are not available due to holidays. At night during the week those persons who are patients of the Escambia County Health Department are instructed to arrange for emergency treatment in the Emergency Room or ambulatory care at West Florida Hospital, assuming those patients cannot wait until the following morning for attention. Northwest Florida Home Health Agency, Inc., services Okaloosa County from an office in Fort Walton Beach, Florida. The exact nature of those services is as set out in the discussion of the services provided to patients in Escambia County. The exact details of other current services offered in Okaloosa County and Santa Rosa County were not presented by the Petitioner. Consequently, it was not possible to determine whether those services are adequate. The only evidence that touched on the issue of adequacy of services was testimony offered by one Ruby Savage, who is a volunteer member of the Regional Board of the Northwest Florida Subdistrict Council and a participant in project reviews. She stated that in her opinion there was a need for 24-hour service in Santa Rosa County. This testimony standing alone was insufficient to identify the need for further home health care services. The Petitioner has asserted that the services spoken of in the preceding paragraphs are not sufficient and examples of the lack of available services, according to the Petitioner, are shown on pages 65 through 68 of the transcript of the hearing. Therein are cited several examples of persons unable to receive necessary care of the type which the Petitioner desires to deliver. These examples are accounts given by Ms. Krumel from information purportedly given to her on the subject of the lack of service. Ms. Krumel in the course of the hearing made further comments to the effect that the individuals involved in the project review felt that the services in the question area were insufficient. Those opinions, while they may be true, are not the quality of evidence needed to sustain the Petitioner's contention that there is a need for further health care service in the area in question. The Petitioner made no further presentation on the question of lack of service and on balance the Petitioner has failed to show lack of service. The Petitioner offered testimony on the possibility of the utilization of population increases in the area as a criterion for increasing home health care services. While this criterion formerly appeared in Rule 10-5.11(14)(b), Florida Administrative Code, under the provisions of extenuating and mitigating circumstances, it is not found in the current statement of that rule and may not be used as a criterion for gaining the certificate of need. In discussing the issue of cost containment as outlined in the above- cited rule, the Petitioner made a general comment that if further services are not provided, patients will be required to receive services at emergency rooms, thereby voiding the possibility of cost containment which could be offered by granting the certificate of need to this Petitioner, who is willing to provide 24-hour home health care services. This statement standing alone is insufficient to show that the granting of the certificate of need to the Petitioner will foster cost containment. Finally, the fifth reason for denying the certificate of need was premised upon the failure of the Petitioner to provide financial feasibility data reflecting the inclusion of Medicare and Medicaid resources. The requirement for such data is found in Rule 10-5.09(5), Florida Administrative Code, which states: (5) Documentation showing that the project is financially feasible and can be accommodated without unreasonable charges for services rendered to include a projection of income and expense on a pro forma basis for the first two years of operation after completion of the project. Petitioner claimed at the hearing that it has failed to include this data because the inclusion of Medicare and Medicaid patients in its proposed services was a last minute item and no one in the evaluation process told them that they had to comply with this provision. At the time of the hearing the data was yet to be provided. Upjohn and Personnel Pool were afforded an opportunity to offer their testimony to establish in what respects they might be superior to the other applicant for a certificate of need, assuming that only one certificate of need was to be granted. The two Petitioners did not wish to make any direct attack on the special qualifications of the collateral Petitioner. Both parties proceeded on the basis of offering their remarks to be available for comparison if the contingency were realized which required that only one certificate of need be issued. It is not necessary to detail the special qualifications of these Petitioners, because no certificate of need will be recommended for issuance in Escambia County, Florida, the location in which Upjohn and Personnel Pool are potential competitors for a sole certificate of need. Nonetheless, the facts offered in support of the special qualifications of Upjohn may be found in the transcript of record, pages 187 through 190. The testimony on Personnel Pool's special qualifications may be found in the transcript of the hearing on pages 228 and 251 through 256.
Recommendation This recommendation is being entered in view of the Facts and Conclusions of Law in this case and those Facts and Conclusions of Law in the companion case, D.O.A.H. No. 79-1748, Personnel Pool of Pensacola, Inc. d/b/a Medical Personnel Pool v. State of Florida, Department of Health and Rehabilitative Services. Upon consideration of the Facts herein and the Conclusions of Law, it is recommended that the Petitioner, Upjohn Healthcare Home Health Agency be denied its request for a certificate of need to serve Escambia, Okaloosa and Santa Rosa Counties, Florida. It is further recommended that the agency in entering its final order do so by a process of simultaneous review of this Recommended Order and the Recommended Order entered in D.O.A.H. Case No. 79- 1748, Personnel Pool of Pensacola, Inc. d/b/a Medical Personnel Pool v. State of Florida, Department of Health and Rehabilitative Services, and that final orders be entered on the same date with copies to be served on the representatives of each applicant in this case and in the companion case mentioned above. CHARLES C. ADAMS, Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: Vivian Krumel, R.N. Mr. Art Forchand, Administrator Service Director Office of Community Medical Facil. Upjohn Healthcare Services Department of Health and 15 West Strong Street Rehabilitative Services Old Townhouse Square 1323 Winewood Boulevard Pensacola, Florida 32501 Tallahassee, Florida 32301 Mr. John Owens Mr. Joe Dowless Zone Manager, West Florida Office of Licensure and Cert. Upjohn Health Care Services Department of Health and 3118 Gulf to Bay Blvd. Rehabilitative Services Clearwater, Florida 33519 Post Office Box 210 Jacksonville, Florida 32202 Charles T. Collette, Esquire Departnt of Health and Mr. Herbert E. Straughn Rehabilitative Services Office of Cozmunity Medical Facil. 1323 Winewood Boulevard Department of Health and Tallahassee, Florida 32301 Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301 Sherrill E. Phelps Governmental Affairs Representative Personnel Pool of America, Inc. 303 Southeast 17th Street Fort Lauderdale, Florida 33316 Mr. Thomas S. Siler Owner/Administrator Personnel Pool of Pensacola, Inc. 1800 North Palafox Street Pensacola, Florida 32501
The Issue Whether the Respondent's rejection of the Petitioner's Application for Licensure dated August 8, 1986, was proper?
Findings Of Fact The Petitioner was issued a license dated July 1, 1985 (hereinafter referred to as the "License"), to operate a home health agency in Franklin County, Florida. On the face of the License it was indicated that the "Expiration Date" of the License was June 30, 1986. By letter dated April 2, 1986, the Respondent notified the Petitioner that its License would expire on June 30, 1986. The Petitioner was also informed that if an application for renewal of the License was not filed on or before May 2, 1986, the Petitioner would be subject to an administrative fine. An application to be used to renew the License was also sent with the letter. In April or May of 1986, the Petitioner filed for Chapter 11 bankruptcy. On May 8, 1986, the United States District Court for the Northern District of Florida, Tallahassee Division, entered an order pursuant to 11 U.S.C. s. 362, which, among other things, stayed the commencement or continuation of any legal proceedings against the Petitioner. The Petitioner began discussions with Charles Hecht, Jim Palmer and a group called the Well Springs group about the possibility of selling the Petitioner. The Well Springs group was represented by John Branch and Ann Morgan. On June 16, 1986, Marilyn Nevado of the Respondent's Jacksonville Office of Licensure and Certification called the Petitioner's office. Ms. Nevado talked with Denise Putnal, the secretary and bookkeeper of the Petitioner. Ms. Nevado called to remind the Petitioner that its License was going to expire on June 30, 1986, and to ask why no application to renew the License had been filed. Ms. Putnal explained to Ms. Nevado that the Petitioner was involved in a bankruptcy proceeding. Virginia Schorger, the Administrator of the Petitioner, asked Ms. Putnal to call the Respondent on June 16, 1987, and find out what the Petitioner should do about its License. Ms. Putnal called the Respondent's Jacksonville office. She spoke with a woman, whose name she could not recall, and was told by the woman that she would have someone who could answer Ms. Putnal's questions call Ms. Putnal. Later that day, Arthur Harberts called the Petitioner and spoke with Ms. Putnal. According to a memorandum from Mrs. Putnal dated July 23, 1986, Ms. Putnal told Mr. Harberts the following: I explained in detail to the man that our agency had filed bankruptcy and was in the process of being sold to either of two bidders with this decision being made by the Federal Bankruptcy Court. Mr. Harberts told Ms. Putnal the following: He told me that FCVNA [the Petitioner] should not renew the license in that name. He said to have the agency write a letter to Mr. John Adams' office detailing all of what I had explained to him via telephone. With this letter he requested the agency send a copy of our current license. He also explained that the new owner would have to obtain a license in the new agency name. . . . Mr. Harberts had been told that the sale of the Petitioner was to take place before June 30, 1986. Ms. Putnal reported her conversation with Mr. Harberts to Ms. Schorger and made a copy of the License. The Petitioner did not send a letter with a copy of the License to the Respondent as suggested by Mr. Harberts. As of July 1, 1986, no application to renew the License was filed by the Petitioner. On June 30, 1986, the Petitioner's License expired by operation of law. On July 17, 1986, a sale of the Petitioner to the Well Springs group was approved by the bankruptcy court. On July 23, 1986, Ms. Schorger was informed by Ms. Morgan that she had been told that the License had expired. Upon learning that the License had expired, Ms. Schorger sent a letter dated July 23, 1986 to Amy Jones, Director of the Office of Licensure and Certification of the Respondent. In part, Ms. Schorger indicated the following in her letter: Early in June our Secretary/Bookkeeper called your office to inform you of our bankruptcy with reorganization plans and to ask about renewing the license. She was told that as soon as the court decided who the new owner would be to send a copy of the present license and the name of the new owner. Ms. Schorger also had Ms. Putnal write a memorandum memorializing her telephone conversation of June 16, 1986, with Mr. Harberts. Ms. Putnal completed the memorandum on July 23, 1986. A copy of this memorandum was sent with the July 23, 1986 letter. A check for $500.00 was also included with the July 23, 1986, letter. After July 23, 1986, Ms. Schorger had several telephone conversations with Ms. Jones. In a letter dated August 5, 1986, Ms. Jones recommended that the "new owner" of the Petitioner apply for a new license as an "uncertified" home health agency. This action was suggested so that the Petitioner could continue to operate. Ms. Jones told the Petitioner that the Petitioner would not, however, be entitled to bill Medicaid/Medicare and, therefore, it was also recommended that the new owner apply for a certificate of need. Once the certificate of need was approved, it was recommended that an application be filed for a license as a "certified" home health agency. In the interim, Ms. Jones recommended that the Petitioner contact other certified home health agencies "in an effort to see if you can solicit their assistance in serving the Medicaid/Medicare clients in your area." On or about August 8, 1986, Ms. Schorger filed an Application for Licensure as a home health agency. Under Section I.D. of the application Ms. Schorger indicated that the application was for a license as a "certified agency" and not a "non-certified agency" as Mr. Jones had suggested. The check for $500.00 previously sent to the Respondent on July 23, 1986 and subsequently returned to the Petitioner was also included with the application. By letter dated September 2, 1966, the Respondent informed the Petitioner that the Application for Licensure submitted on August 8, 1986, for a license as a certified agency was denied. The Petitioner was aware that its License would expire on June 30, 1986. The evidence failed to prove that the Petitioner was told that the expiration date of the Petitioner's License would be extended or waived, that failure to file an application for renewal of the License would be excused or that the date for filing an application for renewal would be extended. The Petitioner did not hold a certificate of need for a home health agency at the time its Application for Licensure was filed on August 8, 1986.
Findings Of Fact CHS is an existing provider of home health care services in Pasco and Pinellas Counties, HRS District V, and has provided such services since 1981. CHS offers a wide range of nursing services including nurses specializing in I.V. therapy, oncology, geriatrics, obstetrics, pediatrics, and orthopedics; licensed practical nursing services; nursing assistants; home health care aides; and respiratory therapy services n the home. These services are offered solely to private payors. Only home health care providers who have been issued certificates of need are licensed and eligible to serve Medicare and Medicaid patients whose care is paid for under whose programs. CHS is applying for a certificate of need in order to be eligible to provide home health care which is paid for pursuant to Medicare and Medicaid procedures. At the time CHS' application was first considered Respondent found the application not to meet the requirements of a need methodology rule which was subsequently declared invalid. The present denial is alleged to be bared solely on statutory criteria. CHS presented one expert witness who calculated need for additional home health care services using a formula suggested by he U.S. Department of Human Services but which was never adopted as a rule by any agency. Pursuant to this formula, which takes into consideration the projected population of the service area, the age cohorts of the population, the population's historical and projected utilization of home health and related services, he service area's hospital discharge rate, and nursing home utilization data, an unmet need for services for 62,541 potential home bed health care patients in 1985, with 13,960 in Pasco and 49,581 in Pinellas Counties, was found. Based on the historical utilization of home health area services by patients in District V, the existing licensed home health agencies, of which there are 12, are projected to serve 25,424 patients in 1985 Exhibit 3). This would leave a potential unmet need for some 28,000 patients in District V. However, serious questions were raised as to the efficacy of the assumption in the formula since this methodology was never adopted by the U.S. Department of Health and Human Services, has not been tested by empirical verification, and the definition of home health services used in this formula is not limited to part-time or intermittent services. Home health care providers differ from other medical care providers principally in the fact that the capital outlay in establishing home health care is minimal. This is so because such care is personal service oriented with little tangible property required. As an example, CHS employs some four or five full-time employees and maintains a list of approximately 350 nurses and aides that can be called to provide the home health care services needed. Accordingly, there is no large fixed payroll to meet when work is slack and services can be increased by any home health care provider simply by employing nurses as the jobs arrive and stop their pay when the care is no longer needed. There is no large overhead to be concerned with in this type operation. CHS is financially capable and has the personnel resources to provide the proposed service. CHS has a line of credit with a commercial bank of $100,000, has the organizational ability to operate as a home health care provider, and has personnel available to provide all services needed. CHS proposes to serve all Medicaid patients who apply for services and to provide services throughout District V as needed. No evidence was presented that patients needing home health care are unable to get such care from existing providers. CHS presently serves private pay patients and holds itself out as able to provide all home health care required within District V. No evidence was presented that those 12 licensed home health care providers in District V are unable to provide all authorized Medicare and Medicaid home health care needed. Since any of them can increase the availability of services simply by employing additional personnel to provide such services as needed actual need for additional certificate of need holders will be difficult to prove. CHS presented evidence that when its private pay patients who are Medicare eligible are hospitalized and subsequently discharged from the hospital needing home health care, the hospital usually refers these patients to a licensed home health care provider who can be compensated by Medicare. This results in CHS losing these patients. Home health care providers get approximately one-half of their patients referred to them by a doctor and one-half referred by a hospital. This ratio is accurate for Petitioner and for the licensed home health care providers The advent of diagnostic relate groupings (DRGs) could impact on home health care providers, but no evidence was presented (if available) of the actual impact DRGs will have on nursing homes or on home health care providers.
Findings Of Fact MPP presently provides home health services to residents of Hillsborough and Polk Counties from its offices located in Tampa and Lakeland. Without these certificates of need herein requested MPP is not authorized to provide home health services to Medicare and Medicaid eligible persons. MPP is qualified to provide the proposed services. Walker is a non-profit 122-bed acute care community hospital located in Avon Park, Highlands County, Florida. Walker has provided health care services to residents of Highlands County since 1947. Although Walker does not currently provide home health services in Highlands County, it is fully qualified to provide the proposed services. Home health agencies (HHA) differ significantly from other health care providers chiefly in the fact that they are labor intensive and not capital intensive services. Most home health agencies contract with nurses, therapists, and other personnel to provide the services on an as-needed basis. Once an office is established with the necessary communications and accounting facilities, expansion of the agency is accomplished merely by signing up as many nurses, therapists, etc., as is needed to provide home health services as required. Theoretically, one home health agency could provide all of the services required in a district, subject only to the travel time needed for the in-home provider to reach the patient and the accessibility of the agency office to the hospital or doctor prescribed in the home health treatment. A proposed rule prevents this from occurring by the rule formula which limits the divisor in the formula (number of expected medical care visits per agency per year) to 21,000 expected visits per agency, which is then multiplied by a constant. Thus, if there were only one home health agency in a district and it was providing 65,000 home Medicare visits per year, use of the proposed rule methodology would show a need for additional HHAs. Although both Petitioners challenged DHRS' non-rule policy in determining the need for HHAs in District VI, all of the need calculations they submitted are predicated upon the need methodology as contained in proposed Rule 10-5.11(14), F.A.C., modified by the Petitioners using 1983 use rates and disregarding the "crossover" agencies. No need calculations based on any other methodology were presented. The methodology in the proposed rule provides [N]eed equals the [G]ross number of HHAs to be allocated in the district less the number of [L]icensed and approved HHAs in the district, or N = G - L. "G" is itself expressed by the formula MV x (A+B)/S where: MV = The 1982 statewide mean number of visits per Medicare home health care service user across age groups (31.5) A = The projected district population of persons 65 years or older times the Medicare home health services utilization rate standard for that population group [POPA x .0506]; B = The projected district population of persons less than 65 years of age who are estimated to be disabled times the Florida home health services utilization rate standard for disabled medical beneficiaries [POPB x .01755 x .0297]; S = The number of expected Medicare visits per agency per year. This number is obtained by adding to the base agency size of 9,000 visits per year an additional number of visits equal to the total number of Medicare visits in the projected year, divided by the base agency size, multiplied by a factor denoted as C. C is a standard which is set at 270 for applications timely filed in calendar years 1984 and 1985; 225 for applications timely filed in calendar years 1986 and 1987 and 180 for applications timely filed in calendar year 1988 or beyond. However, if the result of the calculation of S exceeds 21,000 visits projected, S shall be assigned a value of 21,000. The methodology employed in need calculation is based on a number of factors. MV (31.5) is a standard which is based on information obtained from the Health Care Finance Administration (HCFA) for Florida in 1982. If this standard is recomputed using 1983 HCFA data, MV is 33.3. The second, the Medicare home health care utilization rate standard (.0506), is also based on information reported by HCFA for Florida for 1982. The estimate for the proportion of the Florida population which is disabled (.01755) was also derived from the 1982 data for Florida, as was the factor which specifies the home health services utilization standard for disabled Medicare beneficiaries (.0297). The base agency size (9,000 visits annually), which is used in determining "S", the number of expected Medicare visits per agency per year, was developed by the HRS Office of Comprehensive Health Planning, based on a statistical analysis of data related to agency size, relative efficiency in terms of cost, and economies of scale. That analysis revealed that, in the range of about 9,000 visits, the first reasonable economies of scale begin to accrue in the operation of a home health agency. Therefore, this level of service provision was selected as the agency standard. The maximum level "S" can reach (21,000 visits annually) was found to be the point at which the major economies of scale appear to have been achieved. Thus, this level was selected as the maximum for the agency standard. The values as selected for "C" represent 3.0 percent, 2.5 percent, and 2.0 percent of the base agency size standard (9,000 visits annually). This factor is used to adjust "S" over time, its effect is that of increasing the number of home health agencies, which are projected as needed, gradually over a three-year period. It was selected as a standard based upon HRS' policy to encourage the development of health care markets in an orderly manner and to avoid the disruptive impact of a flood of new service providers immediately. The "C" factor changes over a time, which means that "S" will grow smaller and thus the gross number of agencies will increase. Thus, even MPP's expert witness agrees that the rule is not frozen. Rather, it is dynamic, though conservative, in effect. In fact, the result of the calculations of "G" (gross number of agencies) approximates the current, existing inventory of home health care agencies in Florida. The Local Health Plan for District VI makes no provision for establishing subdivisions within the district. Accordingly, an HHA located in any county in District VI can serve the entire district subject only to geographical limitations. There are 16 HHAs domiciled in District VI and six HHAs domiciled in adjacent districts but licensed to serve a contiguous county in District VI. These so-called crossover agencies presently serve or are licensed to serve Medicare patients in District VI. Counting these crossover agencies and the number of existing agencies, there are 22 licensed and approved HHAs in District VI. Using the proposed rule methodology and applying the estimated population for 1987 (two years from date of hearing) gives a calculated gross need of 19. Under the proposed rule methodology, there is presently a surplus of three HHAs in District VI. Under the proposed rule, these crossover agencies would have to apply for expedited review of an application to establish an office in the county in which they are licensed but not domiciled. Exactly what this review will consist of is subject to some dispute. However, until the proposed rule goes into effect, there is no occasion for these crossover agencies to seek a certificate to do that for which they are currently licensed. If the 1983 data from HCFA, which was the latest usage data available at the time of the hearing, is substituted for the 1982 data prescribed by the proposed methodology, and the overall district need is recomputed, an overall need of 21.63 is arrived at for District VI in 1987. This rounds off to 22 and is the same as the present number of licensed and approved HHAs in District VI. Both Petitioners contend that the six crossover agencies should not be counted in the total number of licensed and approved HHAs in District VI because there is no guarantee they now serve or will ever serve patients in District VI. If these agencies are excluded, there is a clear need under the proposed rule methodology for the three HHAs here being applied for. Under the proposed rule, each of these crossover agencies must apply within a time certain (60 days) following the effective date of the proposed rule for certificates of need to open an office in the county for which they are licensed. These crossover agencies may have grandfather rights to serve Medicare patients in those counties in which they are licensed and, if so, these rights cannot arbitrarily be abrogated. Petitioners especially contest counting the three Gulf Coast Home Health Services corporations as three crossover agencies because each of them is licensed to serve only Hillsborough County in District VI; because they have the same directors, corporate officers and owners; and because all of them would be unlikely to open additional offices in Hillsborough County. Nevertheless, each is a separate and distinct entity with its own corporate identity. As such, each has the same right to serve Medicare patients in Hillsborough County as does Total Professional Care, Inc., another crossover agency so licensed. The services provided by these crossover agencies, insofar as they provided services to Medicare patients in the counties in District VI in which they are licensed, are included in the usage data obtained from HCFA. This usage data, mean number of visits (MV), is a principal factor in the numerator of the methodology formula above discussed. Thus, the district usage includes those services provided by these crossover agencies. No evidence was presented regarding the actual number of visits provided to District VI patients by these crossover agencies. Accordingly, it is inconsistent to accept the proposed rule methodology and exclude the crossover agencies in the count of existing agencies to determine the gross number of HHAs needed. Respondent's contention that these crossover agencies are akin to health care providers who have been issued a CON but are not yet licensed and in operation is not fully concurred with. Those providers issued a CON are counted in the number of authorized and licensed beds before their facilities commence operations those facilities are usually capital intensive rather than labor intensive as are HHAs and a longer delay in commencing operations is required for those types of facilities than for an HHA due simply to the time needed to construct those facilities. In other respects, those approved but not yet licensed facilities are similar to these crossover agencies in that some of these crossover agencies may have grandfather rights to open an office in the county in District VI in which they are presently licensed. In this respect they are like the applicant who has been issued a CON to operate a nursing home but subsequently decides to forego construction because of unexpected costs or other reasons. Each would lose its right to operate the health care facility by reason of failure to timely comply with rule requirements. However, until such time as those rights are forfeited they should be counted in determining the number of beds or other health care facilities that are needed in, the district in the year those facilities are programmed to be in operation. Changes in Medicare reimbursement to health care providers, principally hospitals, by the advent of the DRG (Diagnostic Related Group) has led to an increase in demand for the services provided by home health agencies. This is especially true for surgery patients who can be released from a hospital sooner if dressing changes and nursing care can be provided at the patient's home. Under the DRG method of reimbursement, the hospital is paid a Flat fee for Medicare patients for a specific diagnosis and treatment. The sooner the patient can be released from the hospital, the less will be the cost to the hospital for providing treatment. If, for example, the cost for a hospital bed is $400 per day and the DRG for the patient's ailment is $2,000, if the patient is kept in the hospital for five days, the total payment received will exactly cover the cost of the room. If the patient is kept in the hospital more than five days the hospital will lose money, while if he is discharged before the five days the hospital will make a profit Walker's primary contention is that it should be allowed to operate an HHA so it can discharge surgical patients sooner and provide the needed care at the patient's home by persons supervised by the hospital doctors. This would allow Walker to make more profit and thereby have more funds available to take care of indigent patients. Walker presented several witnesses who averred that a hospital-associated HHA provides better care than does a free- standing HHA. All these witnesses are employees of Walker and this self-serving testimony is given little weight. Both the hospital-run HHA and the free-standing HHA will employ part-time workers to provide the home health care prescribed. There is no logical reason to assume the hospital-affiliated HHA will employ better qualified nurses, etc. to provide the home health services needed than will the free-standing HHA. Medicare reimburses hospital-based home health agencies at a higher level than free- standing HHAs. This is an add-on of approximately 13 percent over the reimbursement received by free-standing HHAs. This is based on the cost of providing services which is generally higher for hospital-based HHAs. Walker also raised the issue of availability of occupational therapy, respiratory therapy, and medical-social workers. One of the two agencies operating in Highlands County, Highlands County HHA, does not provide these services. The other, Upjohn, is newly authorized to provide home health services in Highlands County. In other counties in Florida in which Upjohn is authorized to provide home health services it provides a broad range of services to home health patients including occupational therapy, respiratory therapy, and medical, social workers. Respondent's expert witness opined that such services were now available in Highlands County. This opinion was based in part on hearsay evidence that the witness received from an Upjohn representative that such services are provided. No direct testimony was presented that Upjohn did, or did not, provide the services not presently provided by Highlands County HHA. Accordingly, there was no credible evidence to rebut the opinion of HRS witnesses that these services are available in Highlands County. MPP's offices are currently available on a 24-hour per day basis and this will continue if the application is granted. Walker is also available 24 hours per day and access to home health personnel will also be available. MPP has committed to allocate 2 percent of its gross annual visits from each office to Medicare patients. In addition, one totally uncompensated visit will be provided to an indigent for every 20 Medicare visits. MMP presented no evidence that it is currently providing uncompensated services. Walker, which is a church owned and backed non-profit hospital, projects that 7.5 percent of its home health agency visits will be to indigent persons. This mirrors the current hospital-provided services to Medicaid patients. Walker's primary contention, that because hospital- based HHAs provide better care or better supervised care doctors will be more willing to release patients sooner than they.: otherwise would if there is no hospital-based HHA available, is not supported by credible evidence. It is simply not credible that a nurse employed by a hospital-based HHA is more competent, trustworthy, or capable than is the same nurse when employed by free-standing HHA. The chance of losing hospital records when a patient is transferred to a free-standing HHA would appear no greater than when the patient is transferred to a hospital-based released from the hospital whether home health services is thereafter provided or not. In view of the confidentiality of patient records, it would be expected that these records be retained in the hospital files. Absent a rule or policy to provide a methodology to determine need for additional HHAs, new applicants for certificates have a nearly impossible task of proving need if there are existing HHAs which oppose the application. This is so because of the nature of HHAs that they can expand to cover all needs simply by engaging more part-time personnel to provide the home health services needed in the community, county, or even district.
The Issue Whether the license of Santos Home Health Care Agency to operate as a home health agency should be revoked on the basis of deficiencies cited during an annual survey conducted March 8, 1993, and on subsequent follow-up surveys.
Findings Of Fact Petitioner is the agency of the State of Florida with the responsibility to license and regulate home health care agencies. At all times pertinent to this proceeding, Respondent was licensed by Petitioner as a home health agency in the State of Florida. Sections 400.461 - 400.515, Florida Statutes, constitute the "Home Health Services Act." Section 400.462(4), Florida Statutes, defines a home health agency as being ". . . an organization that provides home health services and staffing services for health care facilities." Section 400.464(1), Florida Statutes, requires that home health agencies be licensed by the Agency for Health Care Administration. This licensure expires one year after its issuance and the home health agency is required to renew its licensure on an annual basis. Home health agencies are subject to federal and state regulation. Petitioner has adopted many of the federal regulations as its own rules. Pursuant to the provisions of Section 400.474, Petitioner has the authority to deny, revoke, or suspend a home health care license if the licensee violates any provision of the Home Health Services Act or any applicable rule. On March 8, 1993, Annette Cassuto conducted a licensure and certification survey of the Respondent's operations. Ms. Cassuto is a registered nurse specialist and is employed by Petitioner as a health care and facilities consultant. This was a routine, annual survey conducted to ensure that the licensee was in compliance with the myriad of state and federal rules. Ms. Cassuto found that Respondent was not in compliance with over one hundred federal regulations. Each of these federal regulations has also been adopted as a state regulation. Ms. Cassuto thereafter compiled a report that detailed each of these deficiencies. Respondent was provided a copy of this report and was given a period of thirty days within which to come into compliance by correcting the cited deficiencies. A copy of Ms. Cassuto's report is included as part of Petitioner's Composite Exhibit 1. Ms. Cassuto's report accurately reflects her findings on March 8, 1993. On April 27, 1993, a follow-up inspection was conducted to determine whether the violations cited in Ms. Cassuto's report had been corrected. This inspection was conducted by Mary Anne Usher, who did not testify at the formal hearing. Following her inspection, Ms. Usher prepared a detailed report that found that Respondent had not corrected any of the deficiencies that had been noted by Ms. Cassuto following her inspection on March 8, 1993. There was no evidence that contradicted the findings contained in Ms. Usher's report. On August 8, 1994, another licensure and certification survey was conducted by Pauline Agostinelli, a registered nurse specialist who has conducted hundreds of licensure and certification surveys for Petitioner. Following this survey, Ms. Agostinelli found that Respondent was not in compliance with rules pertaining to record keeping, treatment plans, and quality assurance. Ms. Agostinelli thereafter compiled a report that detailed each of these deficiencies. A copy of Ms. Agostinelli's report is included as part of Petitioner's Composite Exhibit 3. Respondent was provided a copy of this report and was given a period of thirty days within which to come into compliance by correcting the cited deficiencies. Many of the deficiencies were cited by the reports filed by Ms. Cassuto and Ms. Usher. On September 12, 1994, Ms. Agostinelli returned for a follow-up survey and determined that Respondent had only corrected one minor deficiency and that it remained out of compliance with rules pertaining to record keeping, treatment plans, and quality assurance. Petitioner established that Respondent is not in compliance with pertinent rules pertaining to record keeping, treatment plans, and quality assurance.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a final order that adopts the findings of fact and conclusions of law contained herein and that revokes the home health agency license of Santos Home Health Care Agency. DONE AND ENTERED this 24th day of January, 1995, in Tallahassee, Leon County, Florida. CLAUDE B. ARRINGTON 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 24th day of January, 1995. COPIES FURNISHED: Fredericka Sands, Esquire Agency for Health Care Administration 401 Northwest 2nd Avenue, N-526 Miami, Florida 33128 Esmin Santos Santos Home Health Care Agency 221 South State Road 7 Plantation, Florida 33317 Sam Power, Agency Clerk Agency for Health Care Administration 325 John Knox Road, Suite 301 Tallahassee, Florida 32303-4131 Harold D. Lewis, General Counsel Agency for Health Care Administration 325 John Knox Road, Suite 301 Tallahassee, Florida 32303-4131
The Issue Whether Respondent committed the violation alleged in the administrative complaint; and, if so, what penalty should be imposed.
Findings Of Fact The Petitioner is the state agency charged with the responsibility of regulating home health care agencies. At all times material to this case, Respondent has been licensed as a home health care agency. On March 26, 1996, a registered nurse specialist went to the Respondent’s place of business to perform an annual survey. Such survey allows an agency to verify compliance with applicable rules and statutes of the Petitioner. In this instance, the surveyor requested the files of the Respondent’s active patients. Since there were no active files on the date in question, Respondent was unable to produce same. The surveyor did not review the Respondent’s files for the preceding six months to determine if the agency had had an active patient within that time frame. Nor did the surveyor request the files for any active patients for the last six months. In fact, Respondent provided direct nursing services to a patient between November 11, 1995, and November 24, 1995. At all times material to the allegations of this case, Respondent provided nursing and home health aide services to another agency, but also provided direct nursing services to at least one of its own patients every six months.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration enter a final order dismissing the administrative complaint against this Respondent.DONE AND ENTERED this 11th day of April, 1997, in Tallahassee, Florida. J. D. PARRISH 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 COPIES FURNISHED: Sam Power, Agency Clerk Filed with the Clerk of the Division of Administrative Hearings this 11th day of April, 1997. Agency for Health Care Administration 2727 Mahan Drive, Suite 3431 Fort Knox Building III Tallahassee, Florida 32308 Jerome W. Hoffman, General Counsel Agency for Health Care Administration 2727 Mahan Drive, Suite 3431 Fort Knox Building III Tallahassee, Florida 32308 Jean Claude Dugue, Esquire Agency for Health Care Administration 8355 Northwest 53rd Street Miami, Florida 33166 Edward M. Lerner, Esquire Agency for Health Care Administration 3810 Inverrary Boulevard, Suite 405-408 Lauderhill, Florida 33319 William M. Furlow Katz, Kutter, Haigler, Alderman, Marks, Bryant & Yon, P.A. Post Office Box 1877 Tallahassee, Florida 32302-1877
The Issue Whether the Petitioner should be subject to an administrative fine for failing to submit a timely renewal of its application within the required time frames to the Agency, and if so, in what amount?
Findings Of Fact At all times pertinent to this case, AHCA was the state agency responsible for the licensing and regulation of home health agencies. John Knox Village of Central Florida, Inc., operates a certified home health agency in Orange City, Florida. AHCA's consultant, Ms. Jackie Clawson, was called as a witness and testified on behalf of AHCA. Ms. Jackie Clawson testified that she was familiar with the facility at John Knox Village of Central Florida, Inc. Ms. Jackie Clawson identified Respondent's Composite Exhibit 1 as a letter that AHCA sends out advising the Petitioner that they needed to renew their license. Ms. Jackie Clawson, also testified that AHCA should have received John Knox's renewal application on or before May 3, 1999. (The actual renewal date fell on a weekend, and, therefore, the next business day was Monday, May 3, 1999.) Ms. Jackie Clawson identified Respondent's Composite Exhibit 2 as a copy of the renewal application for licensure that was received by AHCA with a stamp-date of May 10, 1999. Ms. Jackie Clawson identified Respondent's Composite Exhibit 3 as a copy of Petitioner's prior license with an expiration date of June 30, 1999. Ms. Jackie Clawson identified Respondent's Composite Exhibit 4 as a fine and omission letter that is sent to the facility stating the items that are missing from the original application packet and the fine regarding the late submission of the application. Ms. Jackie Clawson identified Respondent's Composite Exhibit 7 as a copy of a letter from Petitioner requesting a formal administrative hearing. Deanna Terrell, Administrator of John Knox Village admitted the license renewal was submitted late.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law set forth herein, it is RECOMMENDED: That the Agency for Health Care Administration enter a final order finding Petitioner John Knox Village of Central Florida, Inc., submitted an untimely application and levy a fine in the amount of $700 against Petitioner. DONE AND ENTERED this 22nd day of November, 1999, in Tallahassee, Leon County, Florida. STEPHEN F. DEAN 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 22nd day of November, 1999. COPIES FURNISHED: Deanna Ferrell, Administrator John Knox Village of Central Florida, Inc. 101 Northlake Drive Orange City, Florida 32763 Michael O. Mathis, Esquire Agency for Health Care Administration Building 3, Suite 3231 2727 Mahan Drive Tallahassee, Florida 32308 Sam Power, Agency Clerk Agency for Health Care Administration Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308 Julie Gallagher, General Counsel Agency for Health Care Administration Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308 Ruben J. King-Shaw, Jr., Director Agency for Health Care Administration Building 3, Suite 3116 2727 Mahan Drive Tallahassee, Florida 32308
Findings Of Fact The Applicants And Their Applications Petitioner, Medical Personnel Pool of Southwest Florida, Inc. (Medical Personnel Pool), is a wholly-owned subsidiary of Medical Personnel Pool, Inc., an operating division of Personnel Pool of America, Inc., a wholly-owned subsidiary of H & R Block, Inc. Personnel Pool of America, Inc., operates 215 home health agency offices in 42 states and in Canada, 145 of which are Medicare-certified. In Florida, Medical Personnel Pool, Inc., operates 27 offices, 5 of which are Medicare-certified. Medical Personnel Pool's corporate headquarters are in Fort Lauderdale, Florida. Medical Personnel Pool has applied for a Certificate of Need for Medicare-certified home health services in Lee, Collier and Charlotte counties in HRS District VIII. The services are proposed to be provided out of Personnel Pool's existing Fort Myers office which has been in operation over ten years. Medical Personnel Pool's existing operations out of Fort Myers are not Medicare-certified and do not serve Medicare patients. Medical Personnel Pool has represented in its application that it will commit 2% of its total visits to Medicaid patients and one hour of uncompensated visits to indigent patients for every 20 hours of visits to Medicare patients for which it is reimbursed. The indigent commitment would be recorded and accumulated until the commitment reaches the approximately 10 to 20 visits necessary to start and finish a case for an indigent patient. Medical Personnel Pool also represents that it will operate all of its home health services out of the same corporate entity out of which it operates Medicare-certified home health services. In this way, Medical Personnel Pool is committing to charge its Medicare-certified patients no more than it charges its private pay patients. Petitioner, DeSoto Memorial Hospital (DeSoto Memorial), is a private, not-for-profit acute care community hospital located in HRS District VIII in Arcadia, DeSoto County, Florida. DeSoto Memorial has provided health care services to DeSoto County since 1968. It is the only acute care general hospital located in DeSoto County. It provides services to patients regardless of ability to pay and commits in its application to provide 10% of its home health services to Medicaid patients and 8% to indigent patients. DeSoto Memorial has applied for a Certificate of Need to provide home health services in DeSoto County. Its proposed home health agency would be located at the existing hospital facility. Criterion Section 381.494(6)(c)1. (The need for the health care facilities and services and hospices being proposed in relation to the applicable district plan and state health plan adopted pursuant to Title XV of the Public Health Service Act, except in emergency circumstances which pose a threat to the public health.) 1985-87 State Health Plan. The 1985-87 State Health Plan states in part: "Policy makers are increasingly concerned about providers' willingness to serve Medicaid recipients and medically indigent Floridians." The State Health Plan references efforts by the Medicaid program since 1981 to increase Medicaid reimbursement for home health services and to increase medically indigent access to home health services. However, the State Health Plan concludes: "Rather than attempt to establish unrealistic performance expectations for private providers, the Legislature will either have to increase resources available to reimburse those providers for home health services to the indigent or provide support to the county health units." The State Health Plan also cites as an objective: "To assure that the number of home health agencies in each service area promote the greatest extent of competition consistent with reasonable economies of scale by 1987." It recommends: "Develop a need methodology based on historic cost data for Florida home health agencies." However, the evidence in this case was that additional Medicare-certified home health agencies will not significantly contribute to price competition. To the contrary, the evidence was that additional Medicare-certified home health agencies actually will cause a relatively small increase in the cost of Medicare-certified home health services. This cost increase will be small because home health services are not capital intensive, and duplication of services and under-utilization of home health services will not require as much of a price increase to cover costs as would duplication of services and under-utilization of capital intensive hospital services.(Only 2% of a home health agency's costs are capital costs while 15 to 20% of a hospital's costs are capital costs.) In addition, the price for Medicare- certified home health services is subject to a cap which most home health services already are close to. Additional numbers of home health agencies would foster competition in the quality of services and responsiveness of services to the needs and wants of the patients in an area. Additional Medicare-certified home health agencies that serve a significant percentage of Medicaid recipients and medically-indigent patients would have a competitive advantage in getting referrals over Medicare-certified home health agencies that do not serve Medicaid recipients and the medically-indigent. To compete, existing Medicare-certified home health agencies probably would initiate comparable service for Medicaid and medically-indigent patients. This desirable effect of competition would help alleviate the policy makers' concerns referred to in Finding Of Fact 7 above. But see Conclusion Of Law 1 below. (ii.) District VIII Local Health Council Health Plan. The 1985 District VIII Local Health Council Health Plan adopted August 21, 1985 states: "Home health care services are generally available to all residents within District Eight." However, this conclusion drawn by the local health council is based upon an application of HRS proposed rule 10-5.11(14), Florida Administrative Code. This rule has been held invalid. See, Final Order, Home Health Services and Staffing Association, et al. v. Department of Health and Rehabilitative Services, Case No. 85-1377R, March 12, 1986. In addition, based upon the evidence in this case, the proposed rule does not accurately assess the need for the home health agencies proposed by Medical Personnel Pool and DeSoto Memorial. See Findings Of Fact 27 through 70 below. The District Health Plan also establishes sub- districts. Pertinent to this case, Charlotte County, Collier County, DeSoto County and Lee County are established as separate sub-districts. Sarasota County also is established as a separate sub-district. Glades and Hendry counties are combined as the last sub-district. The District Health Plan's sub-district designations were established on the basis that they: (1) have a geographic size which meets reasonable travel distances and travel times; (2) have a population size adequate to support at least one agency; (3) are geo-politically consistent; and (4) have available population, socio-economic and health statistics to document use rates and projections. The District Health Plan also recommends: "Sub- districts without a home health agency office in one or more of its principle [sic] communities should be identified as a priority area for the expansion or new establishment of a home health agency." In addition, the District Health Plan establishes the policy: "Continuity of patient care should be assured through the establishment of formal coordination arrangements between home health agencies, and physicians, hospitals, nursing homes, and community social service agencies and organizations." Finally, as another policy, the District Health Plan states: "Home health care should be accessible to all persons in need, regardless of ability to pay or source of payment." But see Conclusions Of Law 1 below. Criterion Section 381.494(6)(c)2. (The availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of like and existing health care services and hospices in the service district of the applicant.) There are 19 existing licensed Medicare-certified home health agencies (sometimes referred to simply as home health agencies) with home offices in District VIII. This number excludes Home Care Services of Hendry County which ceased operations as of March 22, 1985. In addition, one home health agency in District VIII has been approved, but is not yet licensed and operating. (Homecare of Glades and Hendry Counties, approved in a later batching cycle is now on administrative appeal in Division of Administrative Hearings Case No. 85-4308, should not be counted as available for purposes of assessing the need for the Medical Personnel Pool or DeSoto Memorial proposals.) In addition, three home health agencies with home offices outside District VIII in Manatee County hold licenses enabling them to operate within District VIII. But one of them Visiting Nurses Association of Hardee County ceased operations in District VIII (DeSoto County) approximately six months before the final hearing in this case. These home health agencies are referred to in HRS proposed rule 10-5.11(14) as multi-district agencies. They also are commonly referred to as cross-over agencies. The total number of available home health agencies in District VIII is 22. This total excludes Home Care Services of Hendry County, Visiting Nurses Association of Hardee County and Home Care of Glades and Hendry Counties. Medical Personnel Pool and DeSoto Memorial did not prove that any other of the licensed and approved home health agencies in District VIII should be excluded from the total number of available home health agencies. Five of the 22 available home health agencies are in Lee County. Four of the available home health agencies are in Charlotte County. Three additional home health agencies have home offices in other counties, but are licensed to operate in Charlotte County. Three of the 22 available home health agencies have home offices in Collier County. In addition, three have home offices in other counties, but are licensed to operate in Collier County. One of the 22 available home health agencies has a home office in Arcadia in DeSoto County. In addition, another home health agency is licensed to operate in DeSoto County, but has its home office in another county. Neither Medical Personnel Pool nor DeSoto Memorial proved or disproved the quality of care, efficiency, appropriateness or extent of utilization of the 22 available home health agencies in District VIII. The accessibility and adequacy of the 22 available home health agencies in District VIII actually is addressed by an analysis of the need for the Medical Personnel Pool and DeSoto Memorial proposals. See Findings Of Fact 27 through 70 below. Analysis of Need for the Proposed Home Health Agencies. (i) HRS proposed Rule 10-5.11(14), Florida Administrative Code. The basic approach of the invalid HRS proposed Rule 10- 5.11(14) was to apply historical use rates for specific age cohorts of the population to the projected population within those age cohorts in a given district in a future year, or "planning horizon." This widely-accepted type of approach to projecting need is referred to by health planners as a "utilization-based methodology." There were five steps included in the methodology of the proposed rule. The first step was to project the number of elderly Medicare recipients who would utilize home health services. This number is denoted by the letter "A". To calculate "A", one multiplied the projected population aged 65 and over in the district by a constant which was intended to represent a percentage of the elderly who have historically used home health services. The proposed rule included a number, or a constant, to be used for this purpose. The value of the constant presented in the proposed rule, .0496, purportedly represented the percentage of elderly Medicare enrollees who actually used home health services in Florida in 1982. This percentage for'.. 1982 was misstated in the proposed rule and should have been 5.06% (.0506), rather than 4.96% (.0496). HRS has now acknowledged this error and agrees that .0506 (5.06%) was the appropriate 1982 age 65-and-over utilization rate. According to the proposed rule, then, to calculate the number of elderly people projected to need home health services, the population aged 65 years-and-over two years in the future was to be multiplied by the 1982 use rate for this group, .0506 (5.06%). The second step in the methodology of the proposed rule was to project the number of disabled under-65 Medicare recipients ("B") who will utilize home health services. To calculate "B", one first multiplied the projected district population two years in the future under the age of 65 by the percentage of that population estimated to be disabled. In the proposed rule, HRS used constants for both the proportion of the population under 65 years of age which was projected to be disabled (.01755), and the portion of those disabled persons who would be expected to use home health services (.0297). As in the first step, these values were taken from 1982 Medicare utilization data for Florida. Thus, in the second step of the formula under the proposed rule, the number of under-65 disabled persons who were projected to need Medicare home health services equaled the number of persons in the district under the age of 65 two years in the future, multiplied by .017555, the result of which was then multiplied by .0297. The third step of the proposed rule's formula projected the number of Medicare home health visits (as opposed to persons) needed in the district two years in the future, by multiplying the total projected number of people needing Medicare home health services by the historical number of average visits per person for Florida in 1982. The average number of visits per person in 1982 was 31.5, also derived from 1982 Medicare data. The total number of home health visits was projected as being equal to "A" plus "B", or the sum of the first two steps, multiplied by 31.5. The fourth step of the formula of the proposed rule calculated the number of needed Medicare home health agencies, given the number of projected Medicare visits calculated in the third step. The gross number of Medicare agencies projected as needed in the planning horizon ("G") was calculated by dividing the number of projected total Medicare visits per agency per year ("S"). "S" was determined through another calculation, and varied, depending upon the total number of projected Medicare visits in the district and the calendar year in which a CON application was filed. "S" was obtained by adding to a presumed base agency size of 9,000 Medicare visits per year, an additional adjusted number of visits (the so-called "additive factor"). This adjusted number of visits equaled the total projected number of Medicare visits divided by 9,000, then multiplied by what was called the "C" factor. The "C" factor varied with the calendar year in which an application was filed. For applications which were filed in 1984 and 1985, "C" was equal to 270. For applications to be filed in 1986 and 1987, "C" was equal to 225. For applications to be filed in 1988 or later, "C" was equal to 180. If the calculation of "S" resulted in a number which was larger than 21,000, then "S" was to be assigned a value equal to 21,000. This meant that the divisor "S", or the number of visits an agency was expected to provide, would range from 9,000 visits to 21,000 visits. Thus, districts would have different values for "S", and even within a district, the value of "S" would vary from year to year. The fifth and last step of the formula was to calculate the net number of Medicare-certified home health agencies needed ("N"). "N" was calculated by subtracting the number of "licensed and approved" agencies currently located in a district from the gross number of agencies projected as needed in the planning horizon, "G". The number of "licensed and approved" agencies, denoted as "L" in the proposed rule, included a count of all licensed agencies located within a district and all approved agencies that are not yet licensed. As of the date of the final hearing in this case, HRS was applying proposed Rule 10-5.11(14) to its review of home health agency CON applications, as though the rule were in full force and effect, with several significant modifications to the express language of the proposed rule. First, as noted above, HRS had agreed that its use of the value .0496 in Factor "A" of the published proposed rule was the result of an erroneous reading of the published 1982 Health Care Financing Administration ("HCFA") home health utilization rates for over-65 persons in Florida, and that the correct 1982 value was .0506. Second, HRS had abandoned the requirement of the published version of the proposed rule that decimal values of "G" always be rounded down to the next lower whole number and had modified its application of the proposed rule to conventional rounding of value "G", i.e., decimal values of .5 or greater were rounded up to the next larger whole number, and decimal values less than .5 were rounded down to the next lower whole number. In applying proposed Rule 10-5.11(14) in its review of Medical Personnel Pool's CON application, HRS included in the inventory of licensed and approved agencies ("L") three (3) agencies located in other districts, which although licensed to serve individual counties in District VIII, were not licensed to serve any of the counties in Medical Personnel Pool's proposed service area, and which had not yet applied for nor been approved to set up new agencies or sub-units in District XI under the now defunct paragraph (e) of the former proposed rule. The "additive factor" is the term which has been used to refer to everything appearing to the right of the first appearance of the figure 9,000 in the definition of the divisor, factor "S," of the methodology found in paragraph (a) of the former proposed rule. As previously discussed, the purpose of the divisor in the formula of paragraph (a) of the former proposed rule was to convert the expected number of Medicare visits needed in the appropriate planning horizon to a gross number of Medicare home health agencies needed. In order to accomplish this, an agency size of some sort had to be used, defined by number of visits, for the denominator in the formula. One intent of the value in the denominator in the methodology of the former proposed rule was to represent an optimal minimum efficient economic operating size. The premise for this concept of optimal minimum efficient economic operating size was a health planning concept that below a certain minimum range of agency size in number of visits, fixed start-up costs result in a relatively high cost per visit ratio for new small agencies. All of the available data indicates that there is a range of "economies of scale" in costs per visit for new start-up home health agencies, breaking somewhere between 6,000 and 9,000 or 10,000 visits. Once this breaking point is reached, the relatively small level of fixed costs in home health level off, and the data do not show any further significant points of economies of scale. Specifically, a distinction must be drawn between the theoretical economies of scale argument and what the actual available reported data show to be the experience of the home health industry in Florida. Using a sample of over 85% of the home health agencies in Florida (all of the agencies cost reporting through the State's Medicare fiscal intermediary), and plotting their actual reported 1984 number of visits and cost per visit, it is clearly seen that there is no predictable relationship between actual reported agency size in visits and actual reported cost per visit. A statistical regression analysis performed on this same data for three years experience, i.e., 1982, 1983 and 1984, confirms this absolute lack of any significant relationship between reported agency size and reported agency cost per visit in Florida's existing Medicare home health agencies. For example, in the most recent reporting year, the largest agency in Hillsborough County also reported the highest cost per visit in Hillsborough County. Further, whatever argument these may be as to economies of scale and start-up costs for a new home health agency, the undisputed evidence is that an existing, fully-staffed, fully- equipped home health agency has all of its necessary patient referral sources in place and functioning. Thus, the economies of scale argument relating to start-up costs of new home health agencies is not applicable to existing agencies. Nevertheless, to accomplish the goals of translating gross number of visits projected as needed in the appropriate planning horizon to gross number of Medicare agencies needed, HRS proposed in the methodology of its former proposed rule to use a denominator of 9,000 visits, inflated by the so-called additive factor in two ways, i.e., (1) by incorporating an additive factor of total Medicare visits in the district, divided by 9,000, and (2) by then multiplying this ratio by the so-called "C" factor, which consists of three different arbitrary values, 3% of 9,000 (270), 2 1/2% of 9,000 (225), and 2% of 9,000 (180), depending on the filing year of the application being reviewed. This entire value was then added to 9,000 visits. The effect of including "MV" divided by 9,000 in the additive factor was to yield a final value for this factor, with or without the "C" multiplier, which varied in size from one HRS Local Health Planning District to any other. This occurred because "MV" would differ from district to district, driven as it was by district population in the given planning horizon. For the same reason, this ratio within the additive factor would also vary from year to year. Absolutely no rationale or purpose has been offered for thus varying the "target agency size" from district to district and year to year. This result of including MV/9,000 in the additive factor is, therefore, totally arbitrary in its own right. As previously noted, the "additive factor" contained its own internal additive factor; a multiplier referred to as "C". The arbitrary values which were substituted for "C" are set forth above. In its first value, "C" caused the methodology of the proposed rule to yield a statewide average district net need under the formula as proposed of only two (2) new agencies, the closest whole value possible to the existing number of Medicare home health agencies as of the date of the proposed rule's publication. The only evidence tending to explain the derivation of "C" is testimony that HRS files contained several computer "runs," each with a different value and showing different net need results, and that the value chosen by HRS for the first two years (270) yielded the overall statewide average district net need which closest approximated the status quo. No evidence was introduced to show how either the values attributed to "C" or the existence of "C" itself were empirically justified or served a valid health planning purpose. Proposed Rule 10-5.11(14) provided for annual updating of the projected population data to be used therein, but froze as "standards" the 1982 Medicare Florida home health agency utilization rates which appeared in factors "A," "B," and "C". More recent use rates, i.e., 1983 values for each of these use rates, are, and have been, readily available. This data, published by HCFA, is released at least annually, and is readily available to anyone requesting it, with a minimum of effort. It is unreasonable not to update these utilization rates to the most recent available data. In addition, there are several specific health planning reasons why refusal to consider the readily available updated 1983 use rates would be unreasonable in this case. First, since at least 1978, when such records became available, HCFA data has shown a steady and consistent trend of increases in all three of these utilization rates, both in Florida and in the nation as a whole. There are several reasons explaining this trend: there have been ever-increasing pressures in the health care delivery system to "deinstitutionalize" patient services, with an emphasis on outpatient and home health services a major part of the reason for this emphasis is budgetary restraints home health services are far less expensive than comparable inpatient services; there has been an increase in the need for home health services for younger populations for things such as post-surgical care; there have been innovative technological developments in home health care, including the so-called hi-tech services which in the recent past, if available at all, were only available in inpatient settings; there has been a demonstrated increased awareness of home health services and their advantages, both in the physician community and among the public at large; and there have also been significant changes and expansions in Medicare reimbursement of home health services which have encouraged increased utilization. The 1982 Medicare utilization reporting period pre- dated the October, 1983, implementation of the Medicare prospective payment system for hospitals, which has been identified as a specific cause of increased home utilization. Furthermore, most of the previously discussed innovative hi-tech home health services were not in use in home health in 1982, and that reporting year's data ignores their effect on home health utilization. The proposed rule, in paragraph (e), provided that home health agencies shall be restricted to providing services within a single departmental district. The proposed rule further provided that any multi-district or cross-over agency should be included in the inventory of the home health agencies in the district into which it crosses over. As reflected in Findings Of Fact 19 and 20 above, multi-district or cross-over agencies should logically be taken into account in determining the adequacy of existing home health agencies to serve the needs of a particular district. Multi-district or cross-over agencies are licensed to operate in some of District VIII and must be presumed to be operating in parts of the district absent a showing that they are not. In this case, the evidence was that one of the three multi-district or cross-over agencies Visiting Nurses Association of Hardee County is not operating in District VIII, but there was no similar evidence as to the other two multi- district or cross-over agencies. Those two should be counted in District VIII's inventory of home health agencies. HRS did not prove by the evidence in this case that proposed Rule 10-5.11(14), if proposed as non-rule policy, is reasonable. (ii.) Quantification of Need. As mentioned, the utilization method of quantifying need for Medicare-certified home health agencies is a reasonable approach. As also mentioned, it is most reasonable and accurate to use the most recent available utilization data for 1983 in quantifying need for Medicare-certified home health agencies. According to the 1983 data: (1) 5.78% of elderly Medicare enrollees receive home health services; (2) 0.058% of the population under 65 receive Medicare home health services and (3) recipients average 33.3 home health visits each. The next element of quantifying need is determining the planning horizon on which the need is to be projected. The evidence in this case was persuasive that it is reasonable to project need two years into the future from the date of the final hearing. The date of the final hearing itself would roughly coincide with a planning horizon two years from the date the applications were deemed complete. This would leave no lead time for start-up. While the evidence was that start-up time is relatively minimal in home health, it cannot be assumed that start-up would begin at or near the time of the final hearing. The Recommended Order has just now been entered, and an additional period of time can be expected to elapse before final agency action. Finally, placing the planning horizon two years from the date of the final hearing is consistent with past agency policy before the decision in Gulf Court Nursing Center v. Department of Health and Rehabilitative Services, 10 FLW 1983 (Fla. 1st DCA, August 20, 1985); clarified on rehearing, 11 FLW 437 (February 14, 1986). Using the 1983 utilization data, the gross number of visits projected for 1988 can be obtained by multiplying the projected district population of persons 65 years of age or older times the 5.78% utilization rate and adding that number to the product of the projected district population of persons aged O to times 0.058%, the percentage of persons 0 to 64 estimated to be using Medicare home health services. Using this method, the total number of visits projected in District VIII for 1988 is 449,483. Having determined the estimated number of total visits, this number must then be translated into number of home health agencies by dividing the total by a number of visits per home health agency. Because of economies of scale, this number must be at least in the range between 6,000 and 10,000 visits per agency. The evidence is that, beyond the minimum size for a home health agency, there is no causal and predictable relationship between number of visits per agency and the cost; efficiency of a home health agency. Some of the evidence has suggested that total number of visits in a district should therefore be divided by the minimum agency size. But this would change the analysis from the analysis of the need for an additional home health agency to an analysis whether the market could bear an additional home health agency. Whether certificate of need regulation in the area of home health makes sense on the evidence of this case, the rationality of the law in effect must be presumed. Under the law in effect, the analysis must measure the need for an additional home health agency, not the ability of the market to absorb an additional home health agency. See Conclusion Of Law 3 below. Throughout the state, the number of Medicare visits per home health agency varies broadly from the minimum size agency to almost 80,000 visits per year. In District VIII, Redi-care operated in 1984 at 34,641 visits, while another agency in the district operated at only approximately a tenth of those visits. The District VIII average in 1984 was 19,206 per year. Since there are no apparent economies of scale above six to ten thousand visits per year, there is no general optimum size for a home health agency. The volume at which a home health agency can efficiently operate is instead a function of demographics. The size of a home health agency will vary in relationship to the size and composition of the population within reach of the agency and the number of other agencies actively competing for the same market. For this reason, the most appropriate available number to use as the visits per agency per year for planning purposes is the number of visits per year agencies are now making. The only evidence of this nature in the record is the average size of home health agencies in District VIII in 198419,206 visits per year or, approximately, 19,000 visits per year. 449,483 visits divided by 19,000 visits per year results in 23.7 or, rounding, 24 Medicare-certified home health agencies needed in District VIII. As previously discussed, there are for planning purposes 22 licensed and approved Medicare-certified home health agencies in District VIII, resulting in a net need in District VIII in 1988 for 24 minus 22, or 2 Medicare-certified home health agencies. However, the evidence in this case is that Medicare- certified home health agencies are limited by federal regulations and practical considerations to a range of approximately 50 miles and by HRS to the counties of their licensure. (HRS proposed Rule 10-5.11(14), Florida Administrative Code, would have expanded licensees' authority to operate throughout the district, but it has been held invalid and is not in effect.) Therefore, it is not rational for planning purposes to end a home health need analysis at the district level. If, for example, the two agencies needed in District VIII are needed in the southern part of the district, it would serve no health planning purpose to authorize two additional agencies in the northern part of the district. There are two ways of analyzing home health need on a sub-district basis: First, using the utilization method, and secondly, allocating district-wide need by percentage of the elderly population in each sub-district. Under the utilization method, Lee County is projected to require 147,686 Medicare home health visits in 1988. Dividing the total visits by the district average-sized agency (their being no evidence of the average size per agency on a county basis), Lee County would need 7.8 or, rounding, 8 Medicare- certified home health agencies. Since Lee County only has five existing or approved Medicare-certified home health agencies at this time, it has a net need of three agencies. On the other hand, using the same analysis, the Charlotte, Collier and DeSoto Counties have no need projected for 1988. For Charlotte County: 64,735 visits divided by 19,000 per agency per year equals 3.4 or, roughly, three Medicare-certified agencies needed in 1988. Charlotte County now has four Medicare- certified home health agencies with home offices in Charlotte County, and three others are licensed to operate in Charlotte County. Collier County is projected to have 57,909 visits divided by 19,000 visits per agency per year equals a need for three agencies projected for 1988. Collier now has three agencies based in Collier County and three others licensed to operate there. In DeSoto County, only 7,659 visits are projected for 1988. This is less than the average-sized agency in District VIII, but it is assumed that there is a need for one home health agency in DeSoto County in 1988. There is one based in DeSoto County now, and another is authorized to operate there. Multiplying the total district-wide need of 22 Medicare-certified home health agencies projected for 1988 by the pertinent county's percentage of the elderly population of District VIII results in the following allocation: Lee County 32.785% x 22 = 7.2 Collier County 12.77% x 22 = 2.8 Charlotte County 14.54% x 22 = 3.2 DeSoto County 1.67% x 22 = .4 As a result of this sub-district analysis, it becomes apparent that there is a need for at least two additional Medicare-certified home health agencies in Lee County, but there is no quantifiable need elsewhere in District VIII projected for 1988. (iii.) Other Need Considerations. Since 1978, utilization of home health services in Florida has consistently increased in all categories for which utilization rates are kept the number of persons over the age of using home health services, the number and percent of disabled persons under the age of 65 using home health services, and the average number of visits provided per patient per spell of illness. In recent years, there also have been significant innovations and reimbursement changes in health care, both in home health and elsewhere in the health care industry, which have significantly increased the utilization of home health services. In October, 1983, hospitals came under the new Medicare prospective payment system whereby they no longer are reimbursed for services to Medicare patients on a reported cost basis, but rather are reimbursed on a fixed-fee-for-service basis, known as Diagnostic Related Groupings, or "DRGs". Hospitals are now reimbursed a fixed amount for each defined DRG service or procedure, regardless of the costs incurred by the hospitals in delivering that service. The effect of this new reimbursement methodology has been to encourage hospitals to find ways to deliver services at lower costs, and thus maximize reimbursement. One obvious way to accomplish this is to shorten the length of the patient's stay in the hospital. Another is to defer several services, previously performed in an inpatient setting, to home health providers for provision in the patient's home, or on an outpatient basis with subsequent follow-up care in the patient's home. In either event, the experience of the industry has been that since the implementation of DRGs, many patients are being discharged by hospitals sooner, in a sicker or more acute condition, and in greater need of home health services. At the same time, the industry has experienced the recent development of several so-called hi-tech home health services more advanced treatment and care procedures now being widely provided in the home, which a very short time ago were only provided in inpatient settings. These services include such procedures as chemotherapy, hyper-alimentation, and various other forms of indirect tube feeding. In addition, the industry has seen the development of new modernized equipment which has enabled many of these and other advanced procedures to be provided more inexpensively in the home. Complicating matters further, Florida's nursing homes have, for some time now, been operating at very full levels. Often the physician is left with only two choices - very expensive hospitalization or home health care. Some of these other need considerations already have been taken into account in the quantification of need just analyzed. The analysis does not, however, take into account continued increases in utilization after 1983 which, while not exactly speculative, are not certain and are not quantifiable. DeSoto Memorial's proposal for a hospital-based home health agency affords some advantages in enabling DeSoto Memorial to utilize currently under-utilized hospital facilities and services. It also increases the likelihood that patients will benefit from better continuity of care. However, the evidence did not prove or disprove the extent of continuity of care which can now be achieved without the DeSoto Memorial proposal as a result of efforts to coordinate care of patients among the hospital, the existing home health agencies and the physicians. In other words, while continuity of care using existing home health providers may take more effort, there is no evidence that it cannot be provided. Criterion Section 381.494(6)(c)3. (The ability of the applicant to provide quality of care.) The parties have stipulated to the ability of both Medical Personnel Pool and DeSoto Memorial to provide quality care. Both applicants have the ability to provide socalled "hi-tech" home health services such as chemotherapy and indirect tube feeding. As previously mentioned, the DeSoto Memorial proposal will facilitate continuity of care. Criterion Section 381.494(6)(c)8. (The availability of resources, including health manpower, management of personnel, and funds for capital and operating expenditures, for project accomplishment and operation; the effects the project will have on clinical needs of health professional training programs in the service district the extent to which the services will be accessible to schools for health professions in the service district for training purposes if such services are available in a limited number of facilities the availability of alternative uses of such resources for the provision of other health services and the extent to which the proposed services will be accessible to all residents of the service district.) Both Medical Personnel Pool and DeSoto Memorial have available the resources, including health manpower, management personnel, and funds for capital and operating expenditures necessary to accomplish and operate the project. There was no evidence of the effects of either project on clinical needs of health professional training programs. There was no evidence that the services proposed by either Medical Personnel Pool or DeSoto Memorial will be available to schools for health professions in the service district for training purposes, or that such services are available in a limited number of facilities. As proposed home health agencies, both the Medical Personnel Pool and the DeSoto Memorial applications will use resources largely only to extent necessary. Capital investment is relatively minimal, and nurses and other personnel providing home health services to patients can be hired on an hourly basis as needed. To the extent not needed, those resources would be available for the provision of other health services that might be needed. The DeSoto Memorial proposal for a hospital-based home health agency would be particularly capable of using such resources for alternative uses. The Medicare-certified home health services proposed by both Medical Personnel Pool and DeSoto Memorial will be accessible to all residents of the service district within approximately 50 miles of the proposed agencies. As previously mentioned, there is a geographic limit to the economic delivery of home health services from any one agency. However, except for Lee County, all residents of District VIII will have access to Medicare-certified home health services without either of the proposals. There is a demonstrated lack of access to Medicaid reimbursable home health services and to home health services for the indigent. However, those services are not the subject of this proceeding. See Conclusions Of Law 1. Criterion Section 381.494(6)(c)9. (The immediate and long- term financial feasibility of the proposal.) The parties have stipulated to the immediate and long- term financial feasibility of both the Medical Personnel Pool and the DeSoto Memorial proposal. Criterion Section 381.494(6)(c)12. (The probable impact of the proposed project on the costs of providing health services proposed by the applicant, upon consideration of factors including, but not limited to, the effects of competition on the supply of health services being proposed and the improvements or innovations in the financing and delivery of health services, which foster competition and service to promote quality assurance and cost-effectiveness.) As previously mentioned, additional competition in Medicare-certified home health services probably would tend to improve the quality of the services provided, give providers incentive to meet the needs and desires of the patients in the service area and foster innovations in the home health area. As to price competition, there was no evidence that competition in Medicare-certified home health services will have any positive effect on the cost of home health services in the service district. Actually, the evidence was that additional home health agencies would be likely to increase slightly the charges for home health services. These increases would be subject to the Medicare cap which most agencies' charges already are approaching. I. Balanced Consideration of the Criteria. Balancing all the criteria that have been considered as applicable in light of the parties' stipulations, it is found that there is need and sufficient justification to grant the Medical Personnel Pool application, but only as to Lee County. There is no need for or sufficient justification to authorize Medical Personnel Pool to operate in Charlotte or Collier Counties or to grant the DeSoto Memorial application. (If need for Medicare-certified home health agencies could be based upon the needs of Medicaid and indigent patients, the evidence would support the need for both proposals as applied for.)
Recommendation Based on the foregoing Findings Of Fact and Conclusions of Law, it is recommended that Respondent, Department of Health and Rehabilitative Services, enter a final order: (a) granting the application of Petitioner, Personnel Pool of Southwest Florida, Inc., for a certificate of need for Medicare home health services but only for Lee County and only on the conditions (1) that Personnel Pool provide 2% of its total visits to Medicaid patients and one hour of uncompensated visits to indigent patients for every 20 hours of visits to Medicare patients for which it is reimbursed and (2) that it will operate all of its home health services out of the same corporate entity out of which it operates Medicare-certified home health services: (b) denying the Personnel Pool application as to Collier and Charlotte counties; and (c) denying the application of Petitioner, DeSoto Memorial Hospital. RECOMMENDED this 7th day of May, 1986 in Tallahassee, Florida. J. LAWRENCE JOHNSTON Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 7th day of May, 1986.
