The Issue The issue is whether a rule which requires that staff be directly employed by or under contract with a Medicaid home health agency, and that such agencies issue either W-2 or 1099 tax forms to individuals on their staffs, constitutes an invalid exercise of delegated legislative authority.
Findings Of Fact The Parties Petitioner Las Mercedes is a licensed home health agency. From July 1, 2004, through June 30, 2006 ("the audit period"), Las Mercedes was also an enrolled Medicaid provider of home health care services. Services were provided through so-called "staffing agreements" with twenty-two companies. Las Mercedes, together with the patient's physician, determined the scope, duration, and plan of care, and it controlled, coordinated, and evaluated the services provided. Las Mercedes established the policies and procedures for submitting progress and clinical notes, scheduling visits, periodic patient evaluation, and the payment for services. (See Stipulation of Facts filed October 6, 2009, in DOAH Case No. 08-5653MPI.) Respondent AHCA is the state agency responsible for administering the joint federal-state Medicaid Program in Florida. It is responsible for, among other things, reimbursing providers for services to Medicaid recipients. In an Amended Final Audit, AHCA determined that Las Mercedes was overpaid $878,843.93 in Medicaid funds between July 1, 2004, and June 30, 2006. The allegation was based on the undisputed fact that Las Mercedes did not issue W-2s or 1099 tax forms to the individuals who provided home health care, but instead issued 1099s to the twenty-two staffing companies. As a result, AHCA concluded that the staff was not employed by or under contract with Las Mercedes as required by Rule. The Rule Challenge The challenged Rule is a provision from the Florida Medicaid Home Health Services Coverage and Limitations Handbook, which is incorporated by reference by Florida Administrative Code Rule 59G-4.130. On page 1-8 of the Florida Medicaid Home Health Services Coverage and Limitations Handbook, July 2008 edition, the Rule is as follows: Home health services are provided by qualified health care professionals who are directly employed by or under contract with a home health agency that is enrolled in the Medicaid Home Health Services Program. Employed or contracted means that the home health agency provides a W-2 or 1099 tax form for the individual. The home health agency must ensure that all staff (employed or contracted) who provide home health services are qualified and licensed. By contrast, Subsection 400.462(9), in establishing licensure requirements for home health agencies has the following definition of a direct employee: "Direct employee" means an employee for whom one of the following entities pays withholding taxes: a home health agency; a management company that has a contract to manage the home health agency on a day-to-day basis; or an employee leasing company that has a contract with the home health agency to handle the payroll and payroll taxes for the home health agency. AHCA agrees that the Medicaid Rule excludes employee staffing agreements that are permitted by the licensure statute. Las Mercedes asserts that the Rule is an invalid exercise of AHCA's delegated legislative authority because: (1) it is ultra vires; (2) the definition of "employed by or under contract with" is in irreconcilable conflict with the definition of "direct employee" in Subsection 400.462(9), Florida Statutes; and (3) it is arbitrary and capricious and, therefore, unenforceable. Las Mercedes also claims that the Rule exceeds the authority granted to AHCA by federal law. It interprets the law as requiring that the licensure standard apply equally to the Medicaid and non-Medicaid providers. That view is based on the language in 42 U.S.C. § 1396(a)(33)(B), which is, in relevant part, as follows: [A state plan for medical assistance must provide] that, except as provided in section 1919(g) [42 USCS § 1396r(g)], the State or local agency utilized by the Secretary for the purpose specified in the first sentence of section 1864(a) [42 USCS § 1395aa(a)], or, if such agency is not the State agency which is responsible for licensing health institutions, the State agency responsible for such licensing, will perform for the State agency administering or supervising the administration of the plan approved under this title [42 USCS §§ 1396 et seq.] the function of determining whether institutions and agencies meet the requirements for participation in the program. The "agency utilized by the Secretary, as provided in 42 U.S.C. § 1395aa(a)" refers to the following: Use of State agencies to determine compliance by providers of services with conditions of participation. The Secretary shall make an agreement with any State which is able and willing to do so under which the services of the State health agency or other appropriate State agency (or the appropriate local agencies) will be utilized by him for the purpose of determining whether an institution therein is a hospital or skilled nursing facility, or whether an agency therein is a home health agency. (Emphasis added.) In Las Mercedes' view of the federal law, the qualifications for being licensed and being a Medicaid provider are expected to be the same. It appears that nothing prohibits that from being the case. Las Mercedes also asserts that the Rule conflicts with 42 C.F.R. § 447.204, which states: The agency's payments must be sufficient to enlist enough providers so that services under the plan are available to recipients at least to the extent that those services are available to the general population. In this record, however, Las Mercedes presented no evidence regarding payments or, as Las Mercedes implies, the extent to which Medicaid services may or may not be adequate without the use of the staffing arrangements permitted under Subsection 400.462(9), Florida Statutes. Las Mercedes also argues that the Rule is arbitrary and capricious. AHCA, it says, cannot articulate a valid reason why licensed home health personnel must receive a tax form directly from a Medicaid provider. Further, Las Mercedes asserts, the Rule is not logically related to the stated purposes of ensuring health, welfare, and safety, and avoiding waste, fraud, and abuse. The Agency's Explanation for the Rule AHCA is responsible for the licensure of home health agencies pursuant to Part III of Chapter 400, Florida Statutes, more specifically Sections 400.461 through 400.5185, known as the "Home Health Services Act." Florida Administrative Code Rules in Chapter 59A-8 implement the provisions of the Home Health Services Act by setting minimum standards for licensure. To be enrolled as a Medicaid provider, a home health agency must not only be licensed, but also must have entered into a Medicaid provider agreement, a voluntary contract between AHCA and the agency. See § 409.907, Fla. Stat. The provisions related to Medicaid are found in Sections 409.901 through 409.920, Florida Statutes. Florida Administrative Code Rule 59G-4.130, including the language that is challenged, cites as enabling statutes Sections 409.905, 409.908, and 409.9081, Florida Statutes, not the licensure provisions in Chapter 400. AHCA contends that challenged Rule is a logical, rational imposition of higher standards than the minimum standards for licensure on those home health agencies that are also Medicaid providers. Its purpose is to ensure health, safety, and welfare of Medicaid recipients, and to curb waste, fraud and abuse. To that end, AHCA maintains that the Rule allows it to exercise greater oversight over the Medicaid program. AHCA concedes that a violation of the challenged Rule would not in and of itself result in any action to deny or revoke a license, although exclusion from the Medicaid program would result in revocation or denial of a license.
The Issue Whether the applications for certificate of need numbers 8380, 8381, 8382 and 8383, filed by Petitioners RHA/Florida Operations, Inc., Care First, Inc., Home Health Integrated Health Services of Florida, Inc., ("IHS of Florida,") and Putnam Home Health Services, Inc., meet, on balance, the statutory and rule criteria required for approval?
Findings Of Fact Care First The Proposal Care First, the holder of a non-Medicare-certified home health agency license, was established in March of 1996. Owned by Mr. Freddie L. Franklin, Care First is the successor to another non-Medicare-certified home health agency also owned by Mr. Franklin: D. G. Anthony Home Health Agency ("D. G. Anthony"). Established in May of 1995, D. G. Anthony provided over 10,000 visits in its first 10 months of operation mostly in Leon and Wakulla Counties, pursuant to a contract with Calhoun-Liberty Hospital Association, Inc. Very few of the 10,000 patients were referred to D. G. Anthony by Calhoun-Liberty; they became D. G. Anthony's patients through community-based networks, including physicians, created through the efforts of Mr. Franklin and D. G. Anthony itself. D. G. Anthony was dissolved in 1996. Both its patient census and its staff of 45 were absorbed by Care First. D. G. Anthony's contract with Calhoun-Liberty was substantially assumed by Care First so that it provided service to Medicare patients as Calhoun-Liberty's subcontractor. From the point of view of the federal government, the Medicare patients served by Care First were Calhoun-Liberty's patients, even those who had not been referred to Care First by Calhoun Liberty and who had been referred from other community sources. Care First, therefore, was simply a sub- contractor providing the services on Calhoun-Liberty's behalf. The contract was terminated effective December 1, 1996. Calhoun-Liberty was free to terminate Care First with 30 days notice, a peril that motivated Mr. Franklin to seek the CON applied for in this proceeding. With the termination of the contract, Care First ceased serving Medicare patients, "because Mr. Franklin did not want to enter into another subcontractor arrangement because of all the issues and problems," (Tr. 934,) associated with such an arrangement. Mr. Franklin is involved with nursing homes as the administrator at Miracle Hill Nursing Home in Tallahassee. He is an owner of Wakulla Manor Nursing Home in Wakulla County, and he owns a 24 bed CLF, Greenlin Villa, also in Wakulla County. Miracle Hill has the highest Medicaid utilization of any nursing home in District 2. Both Miracle Hill and Wakulla Manor are superior rated facilities. On the strength of Mr. Franklin's extensive experience with community-based organizations and health care services, as well as Care First's succession to D. G. Anthony and other historical information and data. Care First decided to proceed with its application. In the application, Care First proposes to establish a home health agency that, at first, will serve primarily Franklin, Gadsden, Jefferson, Leon, Liberty and Wakulla Counties. It plans to expand into Madison and Taylor Counties in its second year of operation. Five of these eight counties have high levels of poverty; six of the eight are very rural, with the population spread widely throughout the county. Ninety-six percent of Care First's patients are over age Minority owned, approximately 65% of the patients are members of minorities. Many of the patients live in rural areas and are Medicaid recipients or are uninsured low income persons who do not qualify for Medicaid but cannot afford home health care. Since it will be serving the same patient base as a Medicare-certified agency, Care First has committed to the provision of 7% of its visits to Medicaid patients and 1% of its visits to patients requiring charity/uncompensated care. Care First projects 18,080 visits in its first year and 29,070 in its second year. Care First will promote efficiency through the use of a case management approach. Each patient will be assigned a case manager who will act as the patient advocate to provide care required and to identify and assist the patient with access to other "quality of life" enhancing services. Care First proposes an appropriate mix of services, including skilled nursing, physical therapy, speech and language therapy, occupational therapy, home health aide services and social services. Care First estimates its total project cost at $25,808. Of this amount, $2,000 is indicated as "start-up cost", with nothing allocated to salaries. Care First indicates no "capital projects" other than its proposal for the home health agency in District 2. Care First's proposal would be funded from a $60,000 bank line of credit. Projected Utilization Potential patients will be able to gain access to Care First through several avenues, including physician referral, hospital referral, nursing home discharge, assisted living referrals from community agencies and organizations such as Big Bend Hospice and through private referral. In addition, there are several natural linkages to the community for Care First. Wakulla Manor and Miracle nursing facilities offer Care First's services to discharged residents in need. Very often, residents and families choose Mr. Franklin's agency because they are familiar with him, staff or the quality of care provided. Residents of Greenlin Villa, owned by Mr. Franklin, frequently chose Care First when in need of home health agency services. Mr. Franklin's civic, church, and community involvement is impressive. He is president of the Florida Health Care Association, chairman of the board of the Tallahassee Urban League, superintendent of the Wakulla County Union Church Group, and serves on the advisory board for the Allied Health Department for Florida A&M University. In the past, he has served on the Board of Trustees of Tallahassee Community College. He was accepted as an expert in long-term care administration in this proceeding based in part on his service on the Governor's Long Term Care Commission. Miracle Hill has held a "Superior" licensure rating for the last ten consecutive years. It is the highest rating awarded by the AHCA licensure office and is intended to blazon the high quality of care provided by the facility. Although reported through Calhoun-Liberty, very few of D. Anthony's and Care First's past referrals have been generated through that affiliation. Rather, they have come through community contacts and getting the referrals from "talking with physicians," (Tr. 922), in Tallahassee and the surrounding areas, many of whom Mr. Franklin has gotten to know through his post as Administrator of Miracle Hill Nursing Home. By far, it is through physician referrals that Care First receives most of its patients. Care First's physician referral list includes 47 doctors who referred patients to D. G. Anthony since May, 1995. These doctors practice in urban areas and some have rural clinic offices which they staff on certain days of the week. Physicians are willing to refer patients to Care First because of the quality of care which has been provided by Care First, as well as the reputation of its owners. The Care First application included letters of support from eight physicians who have referred patients to Care First in the past and state that they will continue to support Care First with referrals in the future. Among the letters included are those from Dr. Earl Britt, a practitioner of internal medicine and cardiology in Tallahassee, and Dr. Joseph Webster, who practices internal medicine and gastroenterolgy in Tallahassee. Many of the patients of these two physicians are elderly. Dr. Britt's patients often have chronic hypertension or heart disease, are diabetic or suffer strokes. These two physicians provided over half the total number of patient referrals to D.B. Anthony and Care First. Dr. Britt and Dr. Webster established through testimony that Freddie Franklin and Care First have an excellent reputation for provision of quality of care and enjoy significant support among physicians within the service area. Moreover, Dr. Britt, although based in Tallahassee, stressed the importance of Care First's proven ability to provide home health services in the rural setting both from the standpoint of understanding the needs of the rural patient and from being able to travel over rural terrain in order to deliver services. (Tr. 1151, 1152, 1154). Approximately 11,500 visits were performed by D. G. Anthony staff from the period of May 1995, through April 1996, before they became the staff of Care First. Since the agency has established a presence in the district and has physician and other referral mechanisms in place, it is reasonable to project that Care First will continue to grow and will experience between 18,000 and 20,000 visits in its first year and 28,000 to 31,000 visits in year two as a Medicare-certified home health agency. These projections stem from the historical and very recent monthly growth of D. G. Anthony, as well as demand it is experiencing from Franklin and Jefferson Counties, two counties it does not serve regularly at present but plans to serve regularly in the future. The reasonableness of Care First's projections is bolstered by the conservative number of visits per patient the projections assume, 35, when typically Medicare-certified agencies average at least 35 visits and as many as 60 visits per patient. Care First's utilization projections are reasonable. It enjoys an excellent reputation for quality of care and ability to deliver services. Together with its predecessor, D. G. Anthony, it has a proven track record and has benefited from a referral network that remains in place. These factors, together with the conservative assumptions upon which its projected utilization is based demonstrate that its projected utilization is reasonable. Financial Feasibility of Care First The total project cost for the Care First agency is projected to be $25,808. The majority of the costs are reasonable for this type of health care project. The majority of the project development costs, the application fee and much of the cost of the consultant and legal fees, have already been paid by Care First. Care First's Schedule 2 was prepared in conformance with the requirements of the agency and accurately lists all anticipated capital projects of Care First. The necessary funding for the Care First project will come from Care First's existing $60,000 line of credit with Premier Bank, in Tallahassee. This method of funding the project is reasonable, appropriate, and adequate. Care First has demonstrated the short term financial feasibility of its project. Care First's schedule 6 presents the anticipated staffing requirements for its home health agency. The staffing projections are based upon the historical experience of D. G. Anthony and Care First, taking into consideration the projected start-up and utilization of the agency. The projected salaries are based upon current wages being paid to Care First employees, adjusted for future inflation. Care First's schedule 6 assumptions and projections are reasonable, and adequate for the provision of high quality care. The staffing proposed by Care First is sufficient to provide an RN or an LPN and an aide in each of the eight counties Care First proposes to serve in District 2. Care First's schedule 7 includes the payor mix assumptions and projected revenue for the first two years of operation. Medicare reimburses for home health agency services based upon the allowable cost for providing services, with certain caps. The Care First revenues by payor type were based upon the historical experience of D. G. Anthony and Care First, as well as the preparation of an actual Medicare cost report. The Care First payor mix assumptions and revenue assumptions are reasonable. Care First's projection of operating expenses in Schedule 8A is also based on the historical experience of D. G. Anthony and Care First, as modified for the mix of services to be offered and the projected staffing requirements. The use of historical data to project future expenses adds credibility to the projections. Care First's projected expenses for the project are reasonable. The Care First application presents a reasonable projection of the revenues and expenses likely to be experienced by the project. Care First has reasonably projected a profit of $8,315 for the first two year of operation. Care First's proposal is financially feasible in the long term. As the result of its community contacts, Care First has been offered the use of donated office space in Franklin, Jefferson, Wakulla, and Gadsden counties. The use of donated office space will decrease the cost of establishing a physical presence and providing services in those counties since Care First will not have a lease cost for a business office and a place to keep supplies. Quality of Care Through the experience of D. G. Anthony, Care First has identified the particular needs of the community it served. This experience has been carried over into Care First's provision of services. In the 9 months of Care First's existence at the time of hearing, it provided quality of care. Its predecessor, D. G. Anthony, also provided quality of care. While Care First's experience is relatively limited, there is no reason to expect, based on the experience of both Care First and its predecessor D. G. Anthony, that quality of care will not continue should its application be granted. IHS of Florida The Application IHS of Florida is a wholly-owned subsidiary of Integrated Health Services, Inc. ("IHS") formed for the specific purpose of filing CON applications. IHS operates other home health agencies under other subsidiary names. Pernille Ostberg is a senior vice president of the Eastern Home Care Division of Symphony Home Care Services, Integrated Health Services. In that capacity she oversees nearly 195 operations in six states, including Florida. Her operations include home health agencies, durable and medical equipment distributions, and infusion therapy offered by pharmacists. Under Ms. Ostberg's guidance, IHS has grown to its current roster of 195 agencies in only three years, from a beginning of only five agencies. IHS first acquired Central Park Lodges, primarily a nursing home company which also owned five home health agencies. Once these agencies became Medicare certified, IHS made a corporate decision to acquire additional Medicare certified home health agencies. Beginning approximately three years ago, IHS undertook a series of acquisitions which included Central Health Services, Care Team, ProCare/ProMed, and Partners Home Health. More recently, IHS has acquired the Signature Home Health and Century Home Health Companies. And, immediately prior to the final hearing in this matter, IHS acquired First American Home Health Care, making IHS the fourth largest provider of home health services in America. Of all the home health agencies overseen by IHS, 95% are Medicare certified, and 62-63 are located in Florida. IHS now has a presence in all districts except District 1 and 2. IHS personnel also have extensive experience in starting up new home health agencies. IHS personnel have opened over 40 locations across the United States. IHS employees have extensive experience bringing new home health agencies through successful surveys by the Joint Commission on the Accreditation of Hospital Organizations ("JCAHO") recommendations. Of 18 branches personally taken through initial survey by IHS's Pernille Ostberg, none were recommended to change their operations and none were cited for a deficiency. IHS has recently opened, licensed, and certified new home health agencies in AHCA Service District 5, 6, and 10. They have also received licensure in District 7, 8, and 11. Based on the extensive expensive of IHS personnel, a start up home health agency typically experiences 8,000 - 15,000 visits per first year. Opening a new program requires two months for licensure. It will require a registered nurse for three months to make certain all manuals are in place and that quality personnel are recruited. After achieving licensure, one must wait for a certification survey, which may take as long as six months. The three IHS home health agencies that became certified recently have experienced 200 visits in the first month, a good sign of growth. IHS' umbrella organization for home health organizations is Symphony. Most of their home health companies retained their original names. Other IHS home health companies include ProCare, Central Health Services, Partners Home Health, Nurse Registry, and First American. IHS of Florida has applied for applications in other districts. This applicant filed applications in District 7, 8 and 10 and each were approved. IHS of Florida's CON application number 8382 was prepared by Patti Greenberg with the significant input of IHS and IHS of Florida's operational experts. Ms. Greenberg has prepared 75-100 CON applications, 20-25 of which sought approval for Medicare Certified Home Health Agencies. Each of these prior applications had been approved or otherwise reached settlement before litigation. The Proposed Project Once the needs analysis was complete, IHS examined geographic issues within the 14 county district. IHS examined where the populations required home health agencies and what niche of the market IHS could expect to achieve. Projected visits were determined by examining month by month, how this agency would grow. This projected utilization was subdivided among sub-visit types. Existing IHS home health agencies visit mix (skilled nursing as opposed to home health aide or therapy visits) was used to estimate skill type of the projected total volume. The projected utilization was also subdivided by payor class. This payor class projection was derived specifically for District 2, its poverty levels and its managed care penetration. In the aggregate, IHS projects 7,650 visits in year one and 17,100 visits in year two. This projection is reasonable and achievable. Witnesses for the Agency agreed that IHS of Florida's projected number of visits was "definitely attainable". Past and Proposed Service to Medicaid Patients and for Medically Indigent The payor class analysis allowed IHS to conclude it should condition its approval of its application under the performance of 5% Medicaid and 1% charity care. The balance of the population served by an IHS Medicare Certified Home Health agency would be covered by Medicare. The condition is important as it is a requirement which, if not achieved, will subject IHS of Florida to fines and penalties by the agency. Improved Accessibility The applicant will improve the efficacy, appropriateness, accessibility, effectiveness and efficiency of home health services in District 2 if approved. IHS of Florida will provide good quality of care, should its application be granted. Quality of Care Through competitive forces, the applicant's approval will also improve the quality of care offered by home health agencies in District 2. The approval of IHS of Florida's application will also comply with the need evidenced by the extent of utilization of like and existing services in District 2. Economies from Joint Operations Certain economies derived from the operation of joint projects are achieved by IHS of Florida's proposal. IHS has a home office and corporate umbrella which oversees all of its operations for home health services. This master office offers economies of sale by sharing resources across a wide array of home health agencies in Florida and other states. Thus, the incremental expense for corporate overhead is reduced as compared to a free-standing home health agency. Additionally, this national oversight provides better economies to provide the most recent policies and procedures, billing systems, and other systems of business operation. Financial Feasibility IHS of Florida has the resources to accomplish the proposed project. As demonstrated on schedule 1, and schedule 3 of IHS exhibit 1, the budget for the project is only $144,000. This budget includes all appropriate equipment for both the initial and satellite offices. Budgeted amounts include all required lease expenses, equipment costs and even start-up costs such as salaries for the recruitment of training and staff prior to opening. In total, $52,000 of pre-opening expenses are projected, which is reasonable. IHS of Florida filed applications for other home health agency start-ups in three different districts. The applicant had more than $180,000 in cash on hand and an additional $226,000 assured from a commitment letter from IHS which was also contained in the application. A letter of commitment from Mark Levine, a director and executive vice president of IHS, indicated IHS will provide $250,000 in capital for this specific project. Additionally, IHS will provide up to $1 million in working capital loan to assure no cash flow problems ever arise. A similar letter of commitment appears in each of the CON applications which IHS of Florida has filed. IHS has committed to fund each of the CON applications applied for by IHS of Florida. Each of these letters of commitment for the various CON applications sought by this applicant are on file with the AHCA. In total, the applicant projects $600,000 in capital commitments assured. IHS' balance sheet, reveals access to $60 million in cash and cash equivalent. The record clearly demonstrates an ability of IHS to fund all capital contributions required by the applicant. The current assets of IHS approximate $240 million. In addition to having cash in the bank, IHS is a growing concern and is, in fact, a Fortune 500 company that is publicly traded on the New York Stock Exchange. IHS generates revenues which exceed its annual expenses. In the last year, IHS derived $30 million more than it experienced in expenses. The application is financially feasible in the short- term. IHS' application is also feasible in the long-term. IHS of Florida's utilization projections are reasonable. Budgeted staffing and salaries are reasonable. The cost limit calculation and reimbursement calculation by payor source, which is provided in great detail in Schedule 5 of IHS of Florida's application, is reasonable. Projected expenses associated with this project were reasonably calculated based on the actual experience of other IHS Home Health operations. The reasonableness of these costs are also demonstrated when compared with the cost per visit by existing agencies in District 2. In fact, IHS of Florida predicted it would be a lower cost provider than the expected cost of existing agencies at the time IHS of Florida's operations would begin. IHS of Florida's proposal will have a healthy, competitive effect on the cost of providing services by other providers. Putnam The Proposal Putnam proposes to establish a Medicare-certified home health agency with its primary office located in Bay County. Bay County was selected as the primary office based upon the locations of existing and approved agencies in District 2, the aggregate utilization of each, and the number of individuals aged 65 and over distributed among the existing District 2 counties and agencies. Mr. Alan Anderson is Putnam's sole stockholder, Director, and President. Under the ownership and administration of Alan Anderson, Putnam has provided Medicare-certified home health services in AHCA District 3 continuously since 1986. Mr. Anderson is also the sole owner, director, and president of Anderson Home Health, Inc., a Medicare-certified home health agency serving AHCA District 4 since 1992. Anderson Home Health's CON was obtained by Putnam through the same process undertaken by the prospective applicants in this proceeding. Putnam's District 3 agency has successfully served District 3 residents since 1986 at first through its Palatka office, then growing to its current size of four offices. In District 4, Anderson Home Health, Inc. has also experienced successful operations having grown from its principal office in Duval County to a total of four offices. Putnam's District 3 home health agency began with the original office located in Palatka, followed by offices opened in Gainesville, Ocala and Crystal River. Anderson Home Health, Inc.'s District 4 operation began with the original office located in Jacksonville; the second office was opened in Daytona Beach, followed by the opening of the third office in Orange Park; and the fourth office was opened in Macclenny. Putnam's District 3 agency is JCAHO accredited "with commendation." As part of CON application No. 8383, Putnam has agreed to certain conditions upon award. First, the proposed project will locate its primary office in Bay County. Putnam also conditions its approval with the provision that 0.25% of its admissions will be persons infected with the HIV virus. Four percent of its patients will be Medicaid or indigent patients. Finally, Putnam has conditioned its approval upon the provision of various special programs such as high tech home health services, a volunteer program, and the establishment of a rural health care clinic. History or Commitment to Provide Services to Medicaid and Indigent Patients For Medicare reimbursement purposes, Putnam proposes to maintain a Medicare-only agency and private sister agency which provides services to non-Medicare patients. The private sister agency will provide service to the Medicaid and indigent patients. The costs of providing services to these non-paying or partial paying patients will be absorbed by the agency as a contribution to the community. The establishment of a private sister agency to handle the non-Medicare patients is common in the home health industry. As a condition in the application, Putnam will accept up to 3.0% Medicaid patients. Although it stated in its application that it would accept between .5%-1.0% indigent patients, its conditioning of the application on 4.0% Medicaid and indigent patients would necessitate that it accept at least 1.0% indigent (if not more, should the Medicaid patients fall below 3%) in order to meet the 4.0% Medicaid and indigent care condition. The percentages proposed by Putnam are consistent with the statewide average (approximately 95% Medicare) and the District average (approximately 92.1% Medicare). Bay County's average of Medicare patients is approximately 96.4% Medicare. To meet the 4.0% Medicaid and indigent condition, Putnam's average of Medicare patients might have to be less than the Bay County average but not by much. Certainly, meeting the condition is achievable. The agency's position is that Putnam's Medicaid/indigent commitment is not a ground for denial of the application. Quality of Care Putnam has continuously owned and operated a licensed Medicare-certified home health agency in District 3 since 1986 and has been JCAHO accredited with commendation status since 1994. In an effort to continuously provide quality care, Putnam has developed a comprehensive set of policies and procedures to guide its staff, its physicians, volunteers, patients, as well as patients families. No evidence was presented to suggest that Putnam does not have a history or ability to provide quality care. Availability of Resources, Including Health Manpower, Management Personnel and Funds for Capital and Operating Expenditures Putnam has provided Medicare-certified home health service to the residents of District 3 for ten years. Putnam will be able to share its existing personnel and operations expertise with the proposed District 2 agency. Administrative, Managerial, and Operational Personnel Putnam intends to utilize existing administrative personnel in the start up and overall operation of the proposed agency. These management personnel include the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Data Processing Director, Director of Volunteers, Personnel Director. These experienced personnel will be available to provide valuable management support to the proposed agency. The proposed agency will be operated by an administrator who will report directly to Putnam's CEO, Alan Anderson. The agency's administrator will be actively involved in budget preparation, physician relations, community education, and preparation for regulatory agency surveys. The proposed agency will rely upon the demonstrated experience of key personnel in its initiation. Ms. Nora Rowsey, experienced in the start-up phases of home health agencies, will personally supervise and implement the start up phase of the proposed District 2 agency. Putnam intends to hire individuals to work within the proposed agency who already have experience in the provision of the necessary services. Current employees of Putnam's as well as contract personnel of the District 3 agency have indicated a willingness to provide services in Bay County once the application is approve. Funding and Capital Resources Putnam projects the total costs of initiating the proposed agency to be approximately $70,000. Putnam has simultaneously applied for two other Medicare-certified home health agencies, in Districts 6 and 7. Each of these projects area also projected to cost approximately $70,000. Putnam, therefore, has projected costs associated with all three projects of approximately $210,000. Additionally, there is a $10,000 contingency cost related to the District 3 offices bringing the total expenditure for all capital projects of $220,000. Putnam's application includes two letters from First Union National Bank of Florida which substantiate that there are funds on hand to finance all of Putnam's capital expenditures, including the District 2 proposed agency. As of April 18, 1996, Putnam's bank account had a twelve month average balance of $245,949.02. As of April 18, 1996 the accounts of both Putnam and Anderson Home Care Inc., had a combined twelve month average balance of $676,656.93. The evidence established that these funds exist and are available for all proposed capital projects. In the two years prior to hearing, Putnam showed sound management, significant growth, and a strong financial position. It continues to do so. In an interoffice memorandum dated May 28, 1996, from Roger L. Bell to Richard Kelly, Health Services and Facilities Consultant, Putnams' financial position was described as follows: The current ratio of .62 indicates the current assets are not adequate to cover short term liabilities. The long term debt to equity and equity to assets ratios are very weak. This, along with the negative equity make a weak financial position. The profit margin at .1% is also very weak, and raises some concern with the applicant's ability to cover operating expenses . Putnam Ex. No. 4. This criticism was answered by Putnam. The agency may not have considered certain factors applicable to a predominantly Medicare-reimbursed home health agency. Putnam's current liabilities are payable in a longer term than the receivables are collectible. Furthermore, with provision of 98% Medicare services, which is solely cost reimbursed, there remains only two percent of the operation left to make a profit. A .1% profit from the small amount of insurance and private pay patients indicated financial health. Putnam, moreover, is a viable operation because of its historical success, its knowledge of the industry, its expansion to six locations, its growth in staff, and its growth in patient visits. Putnam has the resources available to provide the necessary administrative, managerial, and operational manpower needed by the proposed home health agency. AHCA's financial criticisms are unfounded; Putnam has on hand the capital necessary for the accomplishment of the proposed project. Putnam has the experience and know-how to make the proposed project work in District 2's rural areas. Financial Feasibility Putnam has the resources to implement this project if approved. Putnam has the same capability that existed when three offices were opened during the period from April 1992 through February 1993, and the same resources when four offices were opened in 1995. In every instance, the new offices were started up with cash on hand from operation. Mr. Anderson, Putnam's President and sole shareholder and director, testified that he spends much time in the financial area of the operations. As of November 29, 1996, after deducting all accounts payable, Putnam has a cash balance of approximately $390,000. Anderson Home Health, Inc. had a balance of approximately $425,000. Mr. Anderson testified that the First Union letters in the application at pages 231 and 232 were correct and that Putnam is in even better shape now than when the letters were written. Putnam is financially feasible in the short term. AHCA contends Putnam's project is not financially feasible in the long term because the projected visits stay the same in the second year and because it does not project a profit in year two of operation. This fails to take into account Putnam's performance over the past ten years which, as the agency conceded at hearing, is an important consideration . Mr. Anderson purchased Putnam in 1986. At that time the agency had a single office in Palatka doing 4,000 visits. Following Mr. Anderson's purchase of the agency it had grown to over 55,000 visits and close to a hundred employees. After the success experienced by Mr. Anderson in Palatka, Putnam filed a CON application for District 4, with a proposed principle site in Jacksonville. The District 4 CON was approved by the agency--without any concerns for financial feasibility nor with any concerns for Putnam's cash flows. Without having any experience or referral sources in Jacksonville, Putnam began doing approximately 7,000 visits. The number of visits jumped to 45,000 in the second fiscal year, 123,000 in the third fiscal year, and as of September 30, 1996 the Jacksonville office performed 158,000 visits. Aside from the extraordinary growth experienced in the Palatka and Jacksonville offices, already discussed, Putnam has opened rural offices also doing very well. The Macclenny office in rural Baker County had over 15,000 visits in the first twelve months and is currently averaging over 1800 visits. The Crystal River office in rural Citrus County made over 12,000 visits in its first year and is currently doing approximately 1400 visits a month. Every new office opened by Putnam or Anderson Home Health since 1991 has been break even or better. Putnam has a proven track record for the successful and profitable operation of new Medicare-certified home health agencies. Putnam's project is financially feasible in the long term. Utilization Projections The application sets forth reasonable utilization projections. Based on Putnam's utilization in the past, there is no reason to believe the projections set forth in the application are or unreasonable or will not be achieved. Impact on Costs Putnam is a high tech provider of home health services and will provide some services not currently available or available only in a limited number of agencies. The impact of approval of Putnam's application on costs in the District will be minimal due to the reimbursement issues associated with Medicare which is cost based. RHA A Not-for-Profit Corporation in District II RHA is not-for-profit corporation whose purpose is to provide a continuum of care to the community. All profits are returned to its nursing homes or agencies as a way of continuing to build the programs. RHA owns two nursing homes in AHCA District II; Riverchase Care Center in Gadsden County and Brynwood Center in Jefferson County. If approved, RHA is proposing to locate its Medicare certified home health agency in existing space within the Riverchase and Brynwood nursing facilities. Both of these facilities are managed and operated by HealthPrime, Inc., a company which operates approximately 40 facilities in 13 states. While RHA is technically the owner and therefore applicant for this CON, HealthPrime would operate the proposed Medicare certified home health agency within the nursing homes. RHA's home health agency would have two offices. The office located in the Riverchase facility would serve Gadsden, Liberty, Franklin, Gulf, Wakulla, Jackson, Calhoun, Washington, Holmes and Bay Counties. The office located in the Brynwood facility would serve Leon, Jefferson, Madison and Taylor Counties. Financial Feasibility The only questions raised by AHCA concerning RHA's financial feasibility went to the ability of RHA to fund this project in conjunction with other CON projects listed on Schedule 2 of its CON application. The largest project on Schedule 2 of RHA's application was a CON application for a 20 bed addition to Riverchase Care Center. At hearing it was determined that since the filing of the instant home health CON application, the 20 bed application had been withdrawn, was no longer viable, and was not being pursued by RHA. Once AHCA's financial expert learned that the 20 bed addition to the Riverchase Care Center had been administratively withdrawn and that its costs should therefore no longer appear on Schedule 2, questions about the financial feasibility of the project were resolved. RHA's project was shown to be financially feasible in the short term based upon the financing commitment of HealthPrime. RHA proved that its assumptions and projections made in its financial analysis are reasonable. These assumptions were based on actual experience in the operation of similar skilled nursing facility based home health agencies, as well as prior experience of other home health agencies in their first two years of operation. RHA's proposed project shows a net income in years one and two and is financially feasible in both the short and long term. Availability and Access of Services To the extent that the number of people needing home health care will increase in the future, there is need for new providers of home health services to provide such availability and access. RHA's willingness to condition its application on service to AIDS, indigent and Medicaid patients can only improve the availability and access to services in the district. In addition, RHA's approval to provide nursing home based home health services is unique to the provision of home health services in District II. Efficiency RHA's proposal, which would place its home health agency within its nursing homes, is unique among the applicants in this proceeding. Such an arrangement provides not only an efficient continuum of care to the patients, it also provides efficiencies and cost savings in the sharing of resources. RHA's proposed project is cost effective because it utilizes existing space and equipment in its nursing homes. Skilled nursing home based Medicare certified home health agencies are specifically recognized by the Federal Medicare program in their cost reports. Home health reports are filed as a part of the nursing home cost report and there is an allocation of the nursing home's cost to the home health agency. This benefits both the provider and the Medicare program through cost savings. RHA's cost per visit to the Medicare program of $48 will be substantially less than the District II average of $66 per visit projected for the time RHA will be operational under the applied- for CON. RHA's proposed project will have no impact on its costs of providing other health care services. Appropriateness and Adequacy RHA proposes to provide the entire range of home health services throughout the district. Given the project need in the planning horizon, RHA's proposal is more than adequate to meet the demand for such services. Quality of Care An applicant's ability to provide quality care is another important factor in statutory and rule criteria. RHA and HealthPrime have shown, through operation of their nursing homes in Florida, all of which have superior ratings, that they have the ability to provide quality health care. In addition, HealthPrime, which will actually operate the home health agency, has experience operating four other nursing home based home health agencies. HealthPrime will utilize its quality assurance programs already in place in its other home health agencies and will seek JCAHO accreditation of this proposed agency. By combining a home health agency with its existing nursing homes, RHA will improve the case management of its patients by providing vertical integration of its services in a continuum of care. Such continuum of care provides a stability in personnel and providers that are working with the patient. Economies and Improvements from Joint or Shared Services As previously discussed, RHA's unique proposal to operate a nursing home based home health agency not only offers a continuum of care for the patient, it also provides fiscal economies to the agency as well as the Medicare program. Resource Availability Based on RHA's experience of hiring personnel for its existing nursing homes in the district, there will be no problem in hiring sufficient personnel for RHA's agency. Fostering Competition The addition of other Medicare certified home health agencies in a district consisting of 10 counties and only 23 providers will promote increased competition and more options for patients. Findings Applicable to All Four Applicants No Fixed Need Pool The agency has no rule methodology to determine the need for Medicare-certified home health agencies. The agency's most recent home health need methodology was invalidated in Principal Nursing vs. Agency for Health Care Administration, DOAH Case No. 93-5711RX, reversed in part, 650 So.2d 1113 (Fla. 1st DCA 1995). There is, therefore, no numeric need determination, or "fixed need pool", established by the agency applicable in this proceeding. District 2 AHCA District 2 is composed of 14 counties. The applicants propose to concentrate their service in various, different parts of the district. Local and State Health Plan Preferences District 2 Health Plan Services to Medicaid and Medically Indigent The first preference under the District 2 Health Plan provides a preference to applicants with a history of providing services to Medicaid or medically indigent patients or commitment to provide such services in the future. Mr. Franklin of Care First has such a history. He is an owner of Wakulla Manor, which had a Medicaid occupancy rate of 88.09% for the period of July-December, and the administrator of Miracle Hill Nursing Home which had a Medicaid occupancy rate of 95.74% for the same period. In the face of such a record, Care First’s commitment of 7% Medicaid and 1% uncompensated/charity patients might seem to pale. But it is a significant commitment, given the nature of the home health agency business, and one upon which Care First agrees its application should be conditioned. IHS conditioned its application on 5% Medicaid and 1% charity care. Putnam conditioned its application on an “Indigent and Medicaid participation equal[ling] 4.0%.” Putnam Ex. No. 1, pg. 51. Putnam, moreover, proposes a Medicare-only agency. Establishment of a private sister agency, a practice common in the home health care industry, will allow Putnam to provide service to the Medicaid and indigent patients separate from its Medicare-only agency. RHA has provided a high percentage of Medicaid/charity days at its Riverchase facility (92.10%) and at its Brynwood facility (90.24%). In addition, RHA is willing to condition its CON on the provision of a minimum of 1% of annual visits to indigent care and 5% to Medicaid. Service to Unserved Counties. Preference 2 states that “[p]reference should be given to any home health services CON applicant seeking to provide home health care services in any county within the District which is not presently served by a home health agency.” There are no counties within District 2 that are not presently served by a home health agency. Service Through a County Public Health Unit Preference 3 states that “[p]reference should be given to a home health services CON applicant seeking to develop home health care services to be provided through a county public health unit in the district in order to more adequately serve the elderly and medically indigent patients who are isolated or unable to travel to permanent health care sites." Of the four applicants, only IHS of Florida’s application is conditioned on working with public health units. IHS has experience working with public health units, working with them currently in Martin County, Manatee County and Broward County. Nonetheless, IHS of Florida will not be providing its services “through” a public health unit. Public Marketing Program Preference 4 states, “[p]reference should be given to a home health services applicant who has a history of providing, or will commit to provide, a public marketing program for services which included pamphlets, public service announcements, and various other community awareness activities. These commitments should be included on the granted CON as a condition of that CON.” Care First currently markets its services to the community and commits to a public marketing program in the future as a condition of its CON. IHS of Florida committed to performing at least one community awareness activity per calendar quarter as a condition of its application. It also indicated, moreover, that it would work to develop public service announcements and marketing programs with the help of public health units or any other appropriate vehicle. The latter indication, however, was not made a condition of the application. Putnam provides educational services to the community, its employees, patients and patients’ families, including the provision of pamphlets, and presenting audio and video tapes as appropriate to the patient and their families. Putnam, however, did not condition its application on a commitment to a public marketing program or commit to such a program in any other way in its application. RHA stated it would accept a condition on its CON to provide a public marketing program for services, including pamphlets, public service announcements and other community awareness activities. It did not reflect such a condition on the “Conditions” page of the application, but, given its statement that it would accept such a condition, there is nothing to prevent the agency from imposing such a condition should it grant RHA’s application. Access Requirements Preference 5 is, “[p]reference should be given to a home health services CON applicant who agrees, as a condition of the CON, to meet the following access requirements for each county in which services are provided: 1) 24 hour local telephone call (or toll-free) contact. 2) 24 hour call/response capability. 3) Maximum on one (1) hour response time following call. Care First currently meets the requirements of Preference 5 in the counties in which it now provides services, and has committed to continue to meet these requirements as a Medicare certified home health agency in all counties in which it will provide services. Care First has made as conditions of its CON, provision for 24-hour accessibility by answering service and installation of a toll-free access line and maintenance of a log of calls during the hours the agency is closed, including documenting of response time to each call. IHS of Florida conditioned grant of its CON on a 30 minute response time, and 24-hour phone availability on a toll-free hot line. Putnam presently provides the services in this preference in its District 3 Medicare certified home health agency and agrees to meet this preference within 90 days of initiating services. It did not, however, make a commitment to meet this preference on the “conditions,” page of its application. There is nothing to prevent the agency from making Putnam’s CON, if granted, conditional upon compliance with this preference. RHA has agreed to have its CON conditioned to meet the access requirements of Preference 5. 2. State Health Plan Service to Patients with AIDS The first preference under the State Health Plan is that “[p]reference shall be given to an applicant proposing to serve AIDS patients.” All four applicants are committed to serving AIDS patients. Full Range of Services. Preference 2 of the State Health Plan is “[p]reference shall be given to an applicant proposing to provide a full range of services, including high technology services, unless these services are sufficiently available and accessible in the same service area." There are currently 11 hospital-based Medicare certified home health agencies in District 2. Several of them provide the high tech services which are sometimes needed by discharged hospital patients. Very few referrals for high tech care have been received by D. G. Anthony or Care First since May, 1995, and there is no indication such services are not available in District 2. Care First has identified, however, an unmet need for the pediatric and pre-hospice home health agency services and has conditioned its application on the provision of those services to the community. IHS of Florida proposes, among other high tech services, infusion therapies, pain management therapies and chemotherapy. There is no evidence, however, that these therapies are not available in District 2. The same is true of Putnam as to the high tech therapies it proposes to provide. There is no evidence that they are not available in District 2. Although RHA indicated in its application that it intended to provide the entire range of services that a home health agency can provide, again, there is not evidence that they are not available in District 2. Disproportionate Share Provider History Preference 3 is “[p]reference shall be given to an applicant with a history of serving a disproportionate share of Medicaid and indigent patients in comparison with other providers within the same AHCA service district and proposing to serve such patients within its market area." Care First, having been formed in March, 1996, did not have a history of providing Medicaid and indigent patients. Care First has committed to 7% of its visits to Medicaid patients, well above the average of existing District 2 agencies of 2-3% Medicaid. Care First has committed to 1% of its visits to charity/uncompensated care. IHS of Florida has committed to 5% Medicaid and 1% charity care. Like Care First, IHS of Florida, as a newly formed corporation, does not have a history of serving a disproportionate share of Medicaid/indigent care patients. Putnam’s commitment is 3% to Medicaid and 1% to charity care. This commitment will be met through its sister home health agency and not the Medicare-certified home health agency for which the CON is sought. RHA has committed to set aside 5% total annual visits to Medicaid patients and 1% of annual visits to indigent care. It has a history of providing a disproportionate share of services to Medicaid patients at its two skilled nursing facilities in District 2, Riverchase Care Center in Quincy and Brynwood Center in Monticello. Underserved Counties Preference 4 is [p]reference shall be given to an applicant proposing to serve counties which are underserved by existing home health agencies. The rural areas of District 2 are traditionally underserved. Putnam will serve Bay County, an underserved county; the three other applicants will serve rural areas of more than one county in District 2. Consumer Survey Data Preference 5 is "[p]reference shall be given to an applicant who makes a commitment to provide the department with consumer survey data measuring patient satisfaction." Care First has committed to providing such data to the agency. IHS of Florida will maintain a data base of results of patient satisfaction surveys and make them available to the agency, just as it already does. Putnam will make available to the agency the results of surveys similar to surveys measuring patient satisfaction Putnam has already developed. Putnam has conditioned its application on providing these surveys to the agencies as well as surveys measuring physician satisfaction. RHA has cited on its “Conditions” page, “. . . (it) will provide the Agency for Health Care Administration with consumer survey data.” Quality Assurance Program and Accreditation The State Health Plan’s Sixth Preference is “[p]reference shall be given to an applicant proposing a comprehensive quality-assurance program and proposing to be accredited by either the National League for Nursing or the Joint Commission on Accreditation of Healthcare Organizations." Care First included in its application a copy of its Quality Assurance Program which has been in use since May, 1995. The program meets the state and federal licensure and certification requirement and the stringent requirements of JCAHO. Moreover, Care First has conditioned its application upon JCAHO accreditation. IHS of Florida submitted documentation regarding its Quality Assurance Program through initiatives such as Total Quality Management and Continuous Quality Improvement. It will seek accreditation from JCAHO within one year of receiving its CON. Putnam, an existing home health agency in District 3 since 1986, has over the years developed and refined a comprehensive quality assurance program which is above the industry standard. The District 3 agency, using its quality assurance program, has attained its JCAHO accreditation “with commendation,” a distinction received by less than 4% of all applicants. Putnam will seek accreditation from JCAHO for its District 2 operation within one year of receiving its CON. RHA is willing to condition its CON on the provision of a comprehensive quality assurance program and accreditation by the JCAHO. Need 1. Numeric Need Since there is no published fixed need pool applicable to this proceeding, the parties, other than the agency, developed their own methodologies for determining numeric need. Each of the methodologies employed by the parties was reasonable. After taking note of the statistics for actual patient visit growth in District 2 from 1991 to 1994, Michael Schwartz began with a conservative number of 60,000 new patient visits per year, a number half of the growth for the lowest growth year of that time period. Multiplying that number times the three horizon years of 1994-97 equals 180,000 new patient visits from 1994 which yields a need for 5.2 agencies. The reasonableness of numeric need in excess of four is supported by other factors. After the filing of the four applications at issue in this proceeding, there are two fewer Medicare-certified home health agencies with certificates of need in District 2. At the same time, home health care visits have been on the increase not only in the district as discussed, above, but in the state as well. Statewide, home health care visits grew from 18 million to 22 million between 1991 and 1994. The utilization of home health care agencies is increasing because of population growth and an increase in the number of visits per patient. The amount of time spent by patients in the hospital is decreasing. The decrease translates into increased need by patients for visits from home health agencies. The need for home health is going to continue to increase because it is a cost-effective alternative to nursing home placement and hospital care. From 1991 to 1994, the number of home health visits more than doubled: from 369,396 to 869,893. This trend continued in 1995. The recent significant growth in the utilization of home health agencies in District 2 is expected to continue. The growth is attributable not only to a population increase in the district but to increase in the use rate for home health agency services as well. The growth in use rates can be explained, in part, by the increase in the senior population (65 and older) and the pressure exerted by managed care for earlier hospital discharges and home health agency services as a viable alternative in some cases to inpatient treatment. The senior population in District 2 is reasonably expected to grow approximately 8% in the five years after 1996, with 15% growth expected reasonably in the 75 to 84 year old population and even higher growth, 25%, in the population over 84 years old. 2. Other Indications of Need Local physicians have experienced difficulty arranging for the existing home health agencies to provide services to patients located in remote areas of District 2. Specialized groups, such as AIDS patients, would, in all likelihood, benefit from additional home health agencies in District 2. Furthermore, a study conducted by IHS of Florida showed that the district has an unusually high rate of diabetes and in four counties has a diabetes death rate 100% greater than the statewide average. Well Springs home health agency is one of the two Medicare-certified home health agencies to cease providing Medicare-certified home health services after the four applicants in this proceeding filed the applications at issue here. Well Springs was licensed in all 14 counties of District 2 and had physical locations in Franklin, Gadsden, Bay, Leon, Liberty, Taylor and Madison Counties. It had a significant share of the District 2 Medicare certified home health agency market with 13.1% of the 1994 visits, the second highest in the District. With Well Springs discontinuing Medicare-certified home health agency services, a void was left for such services in District 2, particularly in those counties in which Well Springs had a physical presence.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED: That the Agency for Health Care Administration enter its final order granting CON Nos. 8380, 8381, 8382 and 8384 to RHA/Florida Operations, Inc., Care First, Inc., Home Health Integrated Health Services of Florida, Inc., and Putnam Home Health Services, Inc., respectively. DONE AND ENTERED this 9th day of June, 1997, in Tallahassee, Florida. DAVID M. MALONEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 9th day of June, 1997. COPIES FURNISHED: Sam Power, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Suite 3431 Fort Knox Building III Tallahassee, Florida 32308-5408 Jerome W. Hoffman, General Counsel Agency for Health Care Administration 2727 Mahan Drive, Suite 3431 Fort Knox Building III Tallahassee, Florida 32308-5403 Richard Ellis, Esquire Agency for Health Care Administration 2727 Mahan Drive, Suite 3431 Fort Knox Building III Tallahassee, Florida 32308-5408 W. David Watkins, Esquire Watkins, Tomasello & Caleen, P.A. 1315 East Lafayette Street, Suite B Tallahassee, Florida 32301 Mark Emanuel, Esquire Panza, Maurer, Maynard & Neel NationsBank Building, Third Floor 3600 North Federal Highway Fort Lauderdale, Florida 33308 Paul Amundsen, Esquire Amundsen & Moore 502 East Park Avenue Tallahassee, Florida 32301 Theodore E. Mack, Esquire Cobb Cole & Bell 131 North Gadsden Street Tallahassee, Florida 32301
Findings Of Fact On September 13, 1984, Santa Fe Healthcare Systems, Inc. (Santa Fe), d/b/a Alachua General Hospital, applied for a certificate of need (CON) to establish a Medicare-certified home health agency in Alachua, Levy and Bradford Counties. This application was identified by HRS as CON Action No. 3452. On March 29, 1985, Upjohn Healthcare Services, Inc. (UHCS), timely petitioned for a formal administrative hearing to challenge the granting of any portion of the CON application of Santa Fe to establish home health agencies in Alachua, Levy and Bradford Counties. Petitioner, Personnel Pool of North Central Florida, Inc. (Personnel Pool), was initially a party to this proceeding. Personnel Pool applied for a CON to establish a Medicare certified home health agency to serve Lake, Alachua, Citrus, Levy, Marion, and Sumter Counties in District III. Personnel Pool's application was identified by HRS as CON Action No. 3450, and was reviewed in the same batching cycle as Santa Fe's application. That proceeding was designated DOAH Case No. 85-1455 and consolidated with these cases. On October 23, 1985, however, Personnel Pool filed a Notice of Voluntary Dismissal by which it voluntarily dismissed its petition in DOAH Case No. 85- 1455. APPLICATION Santa Fe Healthcare Systems is a parent corporation with three divisions. The first division, called Genesis Hospital System, operates four affiliated hospitals: Leach General Hospital (AGH), Bradford Hospital (BH), Williston Memorial Hospital (WMH), and Calhoun Hospital (CH). The second division, Santa Fe Management Services, provides a variety of services, including financial, design and construction, risk management, and other related services to affiliates. The third division is called Wellness, Inc., operating a variety of properties including a personnel registry, urgent care centers, physicians' office buildings, and Shared Services, Inc., a for profit corporation, which comprises a pharmacy, a collection service bureau, a delicatessen, a laundry, a microfilming service, and several other support services. Santa Fe proposes to receive Medicare certification for its existing operational hospital-based home health delivery system, which is not now certified to receive Medicare reimbursements. This home health delivery system has one office which is located on campus at AGH in Gainesville. Santa Fe proposes to provide all types of home health services on a 24- hour a day, 7 days a week basis. If the home health agency obtains Medicare certification, it will become a department of AGH for Medicare cost reporting purposes. Santa Fe intends to staff its home health agency with dedicated employees of its affiliated hospitals and, as necessary, by part-time employees of the hospitals who are under- utilized as hospital staff, under principles of "variable staffing." Santa Fe proposes to serve the following mix of patients by payor class: 80%-Medicare 6%-Medicaid; 6% -Indigent and Bad Debt and 8%-Private Pay. Santa Fe proposes to serve patients regardless of their ability to pay for home health services. Santa Fe intends to subsidize the provision of home health services to indigent patients through the reimbursements it receives from providing home health services to Medicare patients, and through a transfer of funds from its affiliated hospitals to Santa Fe's home health agency. See paragraphs 17 through 21 below. At the present time, Santa Fe is providing home health care to patients eligible for Medicare reimbursement free of charge without seeking reimbursement from Medicare. There was no evidence of the losses incurred by Santa Fe in this endeavor. Santa Fe does not anticipate that it will be able to bill or get later reimbursement for the care provided to these Medicare eligible patients, even if it becomes Medicare certified. MEDICARE/MEDICAID REIMBURSABLE HOME HEALTH Medicare is a federally-funded health program for the elderly and for certain disabled persons only. In order for a provider of Medicare home health services to be reimbursed, the provider must serve Medicare eligibles who: (a) are referred by order of a physician (b) are home bound (c) require skilled care (skilled nursing, physical therapy, occupational therapy, and speech therapy) and (d) require skilled services only on a part- time, intermittent basis. Medicare does not reimburse for custodial care (such as provided by a nursing home or adult congregate living facility) or for acute care services (such as services to the acutely ill usually provided by a hospital). Medicare provides reimbursement only for skilled nursing, physical therapy, speech therapy, home health aide, and medical social services. Medicare presently reimburses home health agencies, whether hospital-based or free-standing, on a cost reimbursement basis, subject to an aggregate cost reimbursement limitation or cap. As long as the Medicare home health agency does not exceed the cap it gets paid all of its costs for allowable expenditures. If it exceeds the cap, then it only gets paid at the cap. A cap is figured for each service (skilled nursing, home health aide, physical therapy, speech therapy, occupational therapy, and medical social services). Previously, all of the costs incurred for providing these services were added together and compared against an aggregate reimbursement limit or cap. If aggregated costs were below the aggregate cap, the provider was paid its costs, and was only penalized for the amount by which it exceeded the aggregate cap. However, starting with fiscal years beginning after July 1, 1985, the Medicare program has eliminated the aggregate cap and will apply only the cap for each type of home health services. If a provider's cost exceeds the cap for each service the provider will only receive the cap for such service. The Medicare program recognizes that the cost of providing home health services through a hospital-based home health agency generally is higher because overhead of the hospital is allocated to the home health agency. (In fact, AGH's allocation of overhead to Santa Fe's home health delivery system will he less than the allocation of overhead from UHCS' national and regional offices to its home health agencies in Alachua, Bradford, and Levy Counties.) Medicare thus could reimburse Santa Fe's home health agency at a ten percent increment above the cost caps established for non-hospital home health providers. In contrast to Medicare, the Medicaid program provides reimbursement to providers only for skilled nursing services and home health aide services to patients who meet strict income and asset limitations. No reimbursement is provided for physical therapy, medical supplies or ancillary costs of providing reimbursable services. Instead of the cap system applicable to Medicare reimbursement, only a fixed fee determined in advance is provided for Medicaid services. Accordingly, a provider can expend costs in excess of reimbursement to serve Medicaid eligible patients. Recent changes in the Medicare reimbursement for hospital care have resulted in a prospective payment system. This system is commonly referred to as the diagnostic related grouping system (DRG). Under that system a hospital is not reimbursed for its costs. Rather the hospital receives for in- patients a predetermined reimbursement covering all costs related to providing patient care for the diagnosis of the patient, based on the historical costs for serving such a patient in the geographic area where the hospital is located. If the length of stay of the patient is such that the cost of providing care exceeds the Medicare reimbursement provided under the applicable DRG system, the hospital experiences a loss for its service to that patient. If the patient's stay is shorter than the average duration for that DRG, however, the hospital's costs usually are less than the Medicare reimbursement for the patient, and the hospital experiences a windfall gain. DRG reimbursements are fixed amounts regardless of length of stay. COST CONSIDERATIONS Santa Fe's home health delivery system operates as a cost and revenue center within the Santa Fe system separate from the centers mentioned in paragraph 3 above. If certified under the Medicare program, it will be a separate revenue center for Medicare reimbursements. In its amended application, Santa Fe projects a loss in its first twelve months of operation amounting to $20,267. Santa Fe projects a loss of $30,409 for the second twelve months of operation. However, these losses will be more than offset by savings to the affiliated hospitals from discharging its Medicaid and indigent patients from the hospitals at an earlier date because home health services can be provided at a lower cost. In any event, with more than $7 million of earnings from its combined operations for the year ending September 30, 1985, Santa Fe can easily cover any reasonable losses that the proposed home health agency might incur during the first two years of operation. In addition, Santa Fe will shift a portion of its administration, supervisory, dietary, maintenance, and housekeeping costs from AGH to the new home health agency. These items are commonly identified overhead expenses. Santa Fe will shift some of the existing costs of AGH's administrator and assistant administrator's salary and fringe benefits to the home health agency. Santa Fe will also shift some of the costs of salaries for supervisory health care personnel to the home health agency to the extent that these supervisors provide guidance to the staff of the home health agency. AGH will hire additional staff to handle home health billing. This cost will also be borne by the home health agency. Approximately 95% of the overhead of AGH which Santa Fe intends to shift to its Medicare home health agency does not represent new or additional costs. Rather, that portion will represent costs which Santa Fe is presently incurring in the operation of AGH. In the first twelve months of operation AGH will allocate approximately $150,000 of its existing overhead to the home health agency. In the second twelve months of operation AGH will allocate $175,000 of its existing overhead to the Santa Fe home health agency. Santa Fe's hospitals will have to subsidize the Santa Fe home health agency between $75,000 and $90,000 for provision of services to indigents and for additional costs associated with treating Medicaid patients. Santa Fe will ask Medicare to reimburse the overhead allocated from AGH to the Santa Fe home health agency up to the cap. See paragraph 12 above. Because of the reimbursement of the portion of the overhead allocation from the affiliated hospitals to the proposed home health agency, approval of any portion of Santa Fe's proposal probably will increase the cost to Medicare for Medicare reimbursable home health services in Alachua, Bradford and Levy Counties. NEED CONSIDERATIONS UHCS is the only existing provider of home health services licensed by HRS to provide Medicare home health services in Alachua, Bradford and Levy Counties within HRS District III. UHCS is also licensed to provide home health services in Dixie, Gilchrist, Marion, Lafayette, Putnam, Union and Suwannee Counties in District III. UHCS operates a parent agency office located in Alachua County (Gainesville), with licensed subunit offices in Bradford (Starke), Levy (Chiefland), and Putnam (Palatka) Counties. UHCS operates a separate licensed and Medicare certified parent home health agency in Marion County. UHCS operates a private-sector home health business without a CON, which is separate from its licensed home health agencies and subunits. UHCS provides skilled nursing, physical therapy, speech therapy, occupational therapy, home health aide and medical social services to patients in their homes. UHCS also provides intermittent skilled care to private pay patients through its licensed home health agency; and provides homemaker, live-in companions, and one-time RN visits through a separate private sector business. UHCS provides services twenty-four hours a day, seven days a week. Its offices are open from 7:30 a.m. to 6:00 p.m. It provides an answering service whenever the office is closed. The administrator, director of professional services, and supervisors are always on call. UHCS provides quality assurance programs to exceed the Medicare, Medicaid and licensure standards for home health care. These programs include: quarterly utilization review of medical records corporate quarterly quality assurance: ongoing client record audit supervisory visits employee evaluations; and consultations from UHCS' advisory council. UHCS has a field staff of seven registered nurses at its Gainesville office to provide skilled nursing visits in the homes of patients who reside in Alachua County. The staff presently contains two fewer RN's than it contained twelve months prior to the final hearing. As of September 1, 1985, UHCS also had eliminated one occupational therapist from its direct patient care staff. UHCS has not replaced the two RN's or occupational therapist because UHCS has experienced a decline in the number of visits and patients served during the twelve month period preceding the final hearing. Without increasing its present RN field staff and direct-patient care staff, UHCS could increase its delivery of home health services in Alachua County by between twenty and twenty-five percent. By adding one additional clinical supervisor UHCS could increase its delivery of home health services in Alachua by an additional fifty percent, over and above the twenty to twenty-five percent excess capacity mentioned above. UHCS actively seeks to find patients in need of the types of home health services which it delivers. UHCS utilizes patient coordinators, all of whom are RN's, to make its services known in Alachua, Bradford and Levy Counties. The coordinators visit each of the hospitals in these counties to distribute Medicare home health guidelines and to ascertain whether there will be discharges from these hospitals who will need home health services. UHCS receives referrals from hospitals, physicians and other health care providers. Approximately thirty-five percent of its referrals from Alachua County come from hospitals. Alachua General Hospital provides nineteen percent of those referrals. The number of referrals to UHCS for home health services for patients residing in Alachua County has decreased during the past twelve months prior to the final hearing. The quality of home health services delivered by UHCS in Alachua, Bradford and Levy Counties was not questioned in this proceeding. In terms of quality of care, Santa Fe and AGH readily refer patients who are eligible for Medicaid and Medicare home health services to UHCS. UHCS has the same access to information about patients referred to it by AGH as Santa Fe's home health delivery system, to the extent that AGH permits UHCS access. UHCS takes advantage of the access provided by AGH in preparing patients referred to it for home care. At all times relevant to this proceeding, no patients residing in Alachua, Bradford and Levy Counties who were qualified to receive Medicare or Medicaid reimbursable home health services have been unable to receive services from UHCS. AGH's social services department (which performs discharge planning functions for the hospital) has had no problem placing patients in need of Medicare and Medicaid reimbursable home health services. Santa Fe hospitals having been able to obtain these services from UHCS for all patients residing in Alachua, Bradford and Levy Counties. Santa Fe does not propose to meet any need for Medicare and Medicaid reimbursable home health services which is not already being met by UHCS in Alachua, Bradford or Levy Counties. Santa Fe only proposes to serve patients of physicians that are members of the medical staff of its hospitals (AGH, BH and WMH). Since April 5, 1985, HRS has employed a uniform methodology contained in proposed Rule 10-5.11(14), Florida Administrative Code, for determining the need for additional home health agencies in Florida. Although that rule has been challenged in another proceeding, HRS has adopted the need methodology as a matter of department policy. HRS now utilizes that need methodology as its policy without exception in reviewing all applications for certificates of need to establish home health agencies in Florida. The methodology in the HRS proposed rule projects a need for sixteen home health agencies in HRS District III for the relevant planning horizon (1987). Because of dated factors in the methodology, the need projected under the methodology is incorrect and actually should be 17. Although HRS listed in its State Agency Action Report only sixteen licensed home health agencies and one CON approved home health agency for District III, the following agencies are also licensed to provide Medicare home health services in District III: (a) UHCS is licensed to operate a subunit in Palatka, Putnam County, District III (b) UHCS is licensed to operate a subunit in Starke, Bradford County, District III; and (c) Central Florida Home Health Services, Inc. Volusia/Seminole/Lake is licensed to provide home health services in Lake County, District III. The Leon County subunit was added in early 1984 the Putnam County subunit in November 1984 and the Bradford County subunit in March 1985. The evidence was not clear whether these three subunits apparently underwent certificate of need review. UHCS opened at least the most recent of these three subunits in a conscious effort to keep out competition. The subunits added a clinical supervisor and a clerical person to staff the new subunit offices the same nurses and home health aides previously based in Levy, Bradford and Putnam Counties continued to work there but out of the subunit offices. Under present uniform policy of HRS, each of these offices sensibly is counted against the gross need for additional Medicare licensed home health agencies in District III in order to determine if there is a net need or surplus. As defined in Rule lOD-68.02(19), Florida Administrative Code, a subunit of a home health agency is a semi-autonomous agency. It is incapable of sharing administration, supervision and services on a daily basis with the parent home health agency. Rule lOD-68.04(2), Florida Administrative Code, requires that subunits be separately licensed whenever the subunits "are operated outside of the county of the parent agency or operate as autonomous subdivisions." Since 1977 HRS has required that subunits of home health agencies must receive a CON before they can be separately licensed. Rule 10-5.04(7), Florida Administrative Code, provides that a CON must be obtained, not only for the establishment of a new home health agency, but also for the establishment of a new subunit of an agency. It was not proved that any of the subunits in District III are not meeting the need in the counties where they are located to the contrary, the evidence suggests that the subunits are meeting the existing need with excess capacity to spare. Accordingly, the inventory of licensed and CON approved Medicare home health agencies in HRS District III exceeds the need projected for licensed home health agencies in that district for 1987, the relevant planning horizon, by four agencies. Although the HRS' uniform need policy and the need methodology employed by the Local Health Council for District III project approximately the same number of persons in need of home health services, these methodologies differ as to how they would allocate agencies to meet the projected need. The HRS' home health methodology does not permit a subdistrict determination of need, while the District III methodology defines each county within District III as a subdistrict for home health services, and then assesses a need for one agency for each multiple of 800 persons in need, up to a maximum of four agencies. In comparison with the HRS methodology, the District III methodology allows more Medicare home health agencies to serve the same number of patients identified as needing Medicare home health services. The District III methodology would assess the need for an additional agency in Alachua County but no need for additional agencies in Bradford or Levy County. The HRS methodology assumes that agencies will it compete across county lines and that a methodology like the District III methodology can and will result in "false competition." The rationality of this aspect of the HRS methodology as a general rule was not persuasively established in this case. As a general rule, it would seem more rational to foster some type of competition at some level of activity in order to help depress Medicare costs (especially under the new reimbursement system described in paragraphs 15 and 16 above) and improve quality of services rather than allow certain providers to gain a monopolistic-type hold on parts or all of the service area. Such an approach seems even more appealing in light of the evidence in this case that UHCS recently placed at least one subunit in the service district in a conscious effort to keep out competition. But Santa Fe did not prove on the facts of this case that it is time to place a new agency in Alachua to compete with UHCS despite the HRS methodology and the facts in evidence that UHCS can more than adequately meet the need for home health services in Alachua County within the relevant planning horizon. ACCESS CONSIDERATIONS Through UHCS' parent agency and subunit offices the residents of Alachua, Bradford, and Levy Counties have geographic access to all Medicare and Medicaid reimbursable home health agencies. The Local Health Council for District III determined that, in those cases where the area for proposed service is one where residents do not have access to home health care due to financial barriers, the council would recommend approval of an additional home health agency if its need methodology shows no need for an additional Medicare agency. The Local Health Council for District III also recommended that county government assume responsibility for paying for home health services for indigent clients. In addition, the council recommended that volunteer organizations provide funding for home health services to medically indigent patients. The council established that home health agencies should provide an amount of uncompensated charitable home health care equivalent to at least one percent of the preceding fiscal years' gross revenue for any given home health agency. UHCS does not accept patients who cannot pay all of their bills for home health services either in cash, by Medicare or by a combination of cash and Medicaid (or, presumably, Medicare if applicable.) Therefore, no Medicare certified home health agency serves the medically indigent in Alachua, Levy or Bradford County.
Recommendation Based on the foregoing Findings Of Fact and Conclusions of Law, it is recommended that the Department of Health and Rehabilitative Services enter a final order denying in its entirety the application of Petitioner in Case No. 85-1501, Santa Fe Healthcare Systems, Inc., for a certificate of need for a home health agency to serve Alachua, Levy and Bradford Counties, CON Action No. 3452. RECOMMENDED this 23rd day of January, 1986, in Tallahassee, Florida. J. Lawrence Johnston Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 23rd day of January, 1986. APPENDIX Rulings on UHCS' Proposed Findings of Fact. Accepted in part rejected in part as unnecessary. See Finding 1. Accepted. See Finding 1. Rejected as conclusion of law. Accepted in part; rejected in part as unnecessary. See Finding 2. 5 and 6. Rejected as unnecessary. Accepted. See Finding 3. Accepted, except the existing home health delivery system is not a home health agency as defined by statute. See Conclusions of Law. See Finding 4. Covered by Finding 5. Covered by Finding 6. Covered by Finding 6. 12-38. Covered by Findings 7-33, respectively. 39. Rejected as contrary to the greater weight of the evidence. 40-42. Covered by Findings 34-36. 43-46. Rejected in part as cumulative and in part as subordinate. 47-51. Covered by Findings 37-41. Covered by Finding 42. Covered by Finding 43. Rejected as contrary to the greater weight of the evidence. 55-56. Covered by Finding 44 and 45. 57. Rejected in part as immaterial (HRS can condition the CON by its Final Order in this case), in part as being legally incorrect (HRS can enjoin violations of representations upon which a CON is granted) and in part as unnecessary and cumulative (that Santa Fe is now operating a hospital based home health delivery system). 58-59. Rejected as immaterial and unnecessary. HRS determinations to date are preliminary and subject to change based on the evidence. 60-62. Rejected in part as cumulative and in part as conclusions of law. Petitioner's Proposed Findings of Fact. (Petitioner's proposed findings of fact are unnumbered. For purposes of these rulings, they have been assigned consecutive numbers for each paragraph). The first sentence is rejected as unsupported by the evidence; the balance is covered by Finding 3. Covered by Findings 4 and 6. Covered by Finding 17. Covered by Finding 17. Covered by Findings 24 and 46. Covered by Findings 4 and 6 (partly cumulative). Rejected as cumulative. Covered by Findings 3738. Covered by Finding 39. (Rejected in part as contrary to the greater weight of the evidence.) Rejected as cumulative. Covered by Finding 44. HRS' Proposed Findings of Fact. There were none. COPIES FURNISHED: William C. Andrews, Esquire, Scruggs & Carmichael P. O. Drawer C One Southeast First Avenue Gainesville, Florida 32601 Robert P. Daniti, Esquire Carson & Linn, P.A. 253 East Virginia Street Tallahassee, Florida 32301 Harden King, Esquire Assistant General Counsel Department of Health and. Rehabilitative Services 1317 Winewood Boulevard Tallahassee, Florida 32301 David Pingree, Secretary Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32301
The Issue The issue is the consideration of the validity of proposed Rule 10-5.11(14), Florida Administrative Code.
The Issue Whether or not the Petitioner is entitled to be issued a Certificate of Need to establish a home health agency to serve Putnam County, Florida.
Findings Of Fact Based upon my observation of the witnesses and their demeanor while testifying, the documentary evidence received, post-hearing memoranda and the entire record compiled herein, the following relevant facts are found. Family Center Home Health Care, Inc. (Petitioner), filed an application seeking to establish a home health agency to serve Putnam County, Florida. Ms. Felice M. Knotts, R.N., M.S.N., is the person who completed the application for the issuance of a Certificate of Need on behalf of Petitioner. Ms. Knotts has been a registered nurse since approximately 1966, and is a Doctoral candidate for a degree in Health Services Administration. The application was referred to the North Central Florida Health Planning Council, Inc., pursuant to Sections 381.493-.499, Florida Statutes, for review and comments. The Health Systems Agency (HSA) staff, its project review committee and its Board of Directors each recommended denial to the Department of Health and Rehabilitative Services of a Certificate of Need with the Board recommending denial by a vote of 23 to 0. Need for the proposed project is to be measured against standards found in the Local Health System's plan and Chapter 10-5, Florida Administrative Code, pursuant to Section 381.494, Florida Statutes (1979). By letter dated October 27, 1981, Petitioner was advised by the Respondent that her proposal to establish a home health agency in Putnam County had been reviewed by the North Central Florida Health Planning Council, Inc., and was denied on the basis that the proposed project was inconsistent with the HSA's health system plan and Chapter 10-5.11 (14), Florida Administrative Code. In addition, the two (2) current home health agencies operating in Putnam County, even if combined, do not reach the average daily census maximum of three hundred (300) which is required for the establishment of another home health agency. As stated, currently there are two (2) home health agencies licensed to serve Putnam County, Upjohn Health Services and Central Florida Home Health Services. During 1980, Upjohn served six (6) patients and Central Florida Home Health Services served one hundred sixty-two (162) patients. Upjohn found demand insufficient in Putnam County to establish a sub-unit. At the time that Petitioner's application was reviewed by the Department of Health and Rehabilitative Services, Upjohn had a case load of five (5) patients while Central Florida had a case load of ninety-five (95). During the hearing herein, representatives of each agency indicated that it had sufficient capacity to meet future demands. Standard 1-1 in the Health System's plan requires that the need for new home health agencies be based on home health use rates, projected population and a minimum volume of 1,200 patients per year per agency. Based on current regional use rates of six (6) patients per 1,000 population and the projected population in 1985 of some 56,800 people in Putnam County, 341 Putnam County residents would need home health care during 1985. By use of this standard, the need could exist for less than one-third (1/3) of a single home health agency. Petitioner sought to introduce into evidence a chart which would purportedly show the need as required pursuant to Chapter 10-5, Florida Administrative Code. The chart was based on Ms. Knotts' contact with numerous physicians who practice in the subject area and purportedly recorded their responses in a document designated as Petitioner's Composite Exhibit No. 3. Based on the fact that none of the physicians who purportedly relayed information to Petitioner was present to testify during the course of this hearing, information contained in petitioner's survey is hearsay. As such, that information is not, standing alone, reliable or sufficient to support a basis for which a finding of fact can be made. Chapter 120.58(1)(a), Florida Statutes. Rule 10-5.11(14)(b), Florida Administrative Code, provides that a Certificate of Need for a proposed new home health agency shall not be issued until the daily census of each of the existing home health agencies or sub-units providing services within the health service area of the proposed new home health agency has reached an average of three hundred (300) patients for the immediate preceeding calendar quarter. That rule also allows for need to be shown for a proposed new home health agency by demonstrating mitigating and extenuating circumstances as follows: That the population of a proposed service area is being denied access to home health care services because existing agencies are unable to provide service for all persons in need of home health care or that approval of the new home health agency would foster cost contain ment for all providers in the health service area. Based on the above, it is concluded that the two (2) currently licensed home health agencies in Putnam County have not obtained the average daily census of three hundred (300) patients. Likewise, there was no substantial competent evidence that the population of Putnam County is being denied home health services or that creation of Petitioner's home health agency would foster cost containment for all providers in the health service area. In this regard, officials from the existing two (2) currently licensed home health agencies testified to the extensive under-utilization of existing services which would likely have the effect of increasing charges because of the duplication of under-utilized services which cannot be demonstrated to be cost-effective. Based thereon, I shall recommend that the Petitioner's application to create a home health care agency be denied.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED: That the Respondent, State of Florida, Department of Health and Rehabilitative Services, enter a final order denying Petitioner's application for the issuance of a Certificate of Need to establish a home health agency to serve Putnam County, Florida. RECOMMENDED this 20th day of August, 1982, in Tallahassee, Florida. JAMES E. BRADWELL, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 20th day of August, 1982.
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 The issue is whether A Professional Nurse, Inc., is entitled to an award of attorney's fees and costs under the Equal Access to Justice Act, Section 57.111, Florida Statutes, for fees and costs incurred in a prior formal proceeding in which A Professional Nurse, Inc., sought a certificate of need to become a Medicare certified home health agency and prevailed.
Findings Of Fact The Stipulated Facts Prior to the final hearing, the parties stipulated to the following: This is an action for attorney's fees pursuant to Section 57.111, Florida Statutes. The fees sought by A Professional Nurse arise from pursuing its right to a formal hearing under Section 120.57(1), Florida Statutes, in Case No. 87- 0451, A Professional Nurse Inc. v. Department of Health and Rehabilitative Services. In that prior proceeding, the Department had notified A Professional Nurse by letter dated November 17, 1986, that its application for a certificate of need as a home health agency was denied. The letter also advised A Professional Nurse of its right to request a Section 120.57(1) hearing. A Professional Nurse prevailed in the proceedings in Case No. 87-0451, and a final order was entered by the Department of Health and Rehabilitative Services granting A Professional Nurse Certificate of Need No. 4636 as a home health agency. A Professional Nurse qualifies as a "small business party" under Section 57.111, Florida Statutes. The $14,144 in attorney's fees requested by A Professional Nurse in this proceeding is a reasonable fee. The issue to be determined is whether the Department's decision to deny the certificate of need application was "substantially justified" as defined in Section 57.111(3)(e) Florida Statutes. The Acts Found Based Upon the Hearing The following findings are made based upon the evidence presented at the hearing in this case: A Professional Nurse provides home-based skilled nursing care, nurses aide care, homemakers' services, and related professional and institutional staffing services. In June of 1986 it filed an application for a certificate of need as a Medicare certified home health agency to serve HRS District IX. A decision was due on that application in October 1986. On September 16, 1986, an employee of the Department requested an extension of time for the Department's decision until January 1987 because the Department had no rule methodology for determining need for home health agencies, but hoped to have one by January 1987. A Professional Nurse agreed to a three-week extension but did not agree to defer a decision until January 1987. On November 17, 1986, the Department notified A Professional Nurse that its application had been reviewed pursuant to Section 381.493 through 499, Florida Statutes, and Chapter 10-6, Florida Administrative Code. The State Agency Action Report issued by the Department that day proposed to deny the application. At the time the application was reviewed in November 1986, the Department had no numeric need methodology promulgated by rule for determining the need for additional Medicaid certified home health agencies. At no tide during the application process was A Professional Nurse told how the Department would determine the need for additional home health agencies, given the absence of any need methodology properly adopted in rule form. At the time the application was filed, the Department was using a numeric need formula. The formula was not found in any rule, it was a modification of a proposed numeric need rule which had been declared to be invalid. Home Health Services and Staffing v. Department of Health and Rehabilitative Services, Case 85-1377R (DOAH March 12, 1986). The modifications were made by the Department to correct deficiencies the hearing officer had identified, which among other things, were that the proposed rule was too restrictive, stifled competition, and therefore was invalid. This modified need formula had been used by the Department in evaluating CON applications submitted in the batching cycle immediately preceding the batch in which A Professional Nurse's application was filed. That methodology had not been published as a proposed rule or adopted as a rule. After A Professional Nurse's application was filed, but before any preliminary decision was made on it, the Department ceased using its unpromulgated numeric need methodology. Why the Department abandoned the non- rule numeric need methodology cannot be determined from the record in this proceeding. The unpromulgated numeric need methodology the Department had been using showed a need for additional health agencies in District IX, and would have led the Department to grant A Professional Nurse's application. In reviewing A Professional Nurse's application, the Department utilized the thirteen statutory criteria found in Section 381.494(6)(c), Florida Statutes (1985). The pivotal criteria, the assessment of need for an additional home health agency, is listed in the statute, but no method for evaluating need is prescribed. After abandoning its unpromulgated numeric need methodology, the Department's position was that an applicant had to demonstrate "unmet need" by showing that individuals were being denied home health care they were seeking in order for an applicant to obtain a certificate of need as a new home health agency. When the Department reviewed A Professional Nurse's application it did not know, and could not determine, how many home health agencies were needed in District IX. The Department's new policy on need imposed a nearly impossible burden on applicants to demonstrate need without identifying for applicants the appropriate means to show that people-seeking services were not being served, and that additional home health care agencies were needed in a district. In an effort to deal with the problem of implementing the general statutory requirement that the Department assess the need for additional home health agencies when reviewing CON applications, A Professional Nurse presented a methodology to the Department as a "addendum" to its certificate of need application during the public hearing which was conducted on the application. The methodology A Professional Nurse presented was a variation on the invalidated rule. The proposed methodology demonstrated a need for additional home health agencies in HRS District IX. The administrator of the Department's certificate of need office, Mr. Maryanski, took the position at the time the methodology was proposed by A Professional Nurse, that even if an applicant presented a need methodology to the Department, it would be "more appropriate" for a hearing officer to determine the validity of a proposed methodology than for the Department to accept an applicant's proposed need methodology formula when reviewing the application. This position, in effect, requires all applicants to request Section 120.57(1) administrative hearings, and bear the expense of such hearings, if they hoped to obtain a certificate of need. The alternative was for applicants for CONs for home health agencies to grant the Department repeated extensions of time in which to evaluate their applications until a new methodology was chosen by the Department and promulgated as a rule. The District Court of Appeal, First District, issued an opinion on July 22, 1986, in the case of Upjohn Healthcare Services, Inc. v. Department of Health and Rehabilitative Services, 496 So.2d 147 (Fla. 1st DCA 1986) published at 11 Florida Law Weekly 1592, holding that the Department had a statutory duty to have a methodology for review of home health agency certificate of need applications. At the time of the review of the application by a A Professional Nurse in November 1986, no such methodology yet existed, and consequently, none could be applied by the Department.
The Issue Pursuant to the Stipulation, the factual issues to be determined are: Whether DHRS' initial agency action in denying CON #4912 to Home Care was substantially justified; Whether special circumstances existed which would make an award of fees and costs unjust. Whether this action was initiated by a state agency within the meaning of Section 57.111(3)(b)3, Florida Statutes. The ultimate issue for determination is whether Petitioner is entitled to attorney's fees and costs under Section 57.111, Florida Statutes, the Florida Equal Access to Justice Act (FEAJA), for fees and costs incurred in DOAH Case No. 87-2150.
Findings Of Fact Pursuant to a Stipulation entered into by the parties, filed on November 10, 1988, the parties have admitted and/or stipulated that: DHRS' initial agency action was to deny CON #4911 to Home Care for the establishment of a Medicare home health agency to serve patients in Walton and Okaloosa Counties, Florida. After preliminarily denying Home Care's CON application, DHRS was required by statute or rule to provide Home Care with a clear point of entry to a formal administrative hearing pursuant to Section 120.57, Florida Statutes. Home Care's Petition for Attorney's Fees was timely filed after Respondent, DHRS, filed a Final Order in this case on July 26, 1988, sustaining Home Care's position that it should be awarded CON #4911. Home Care is a "small business party" within the meaning of Section 57.111(3)(d)1.b., Florida Statutes. Home Care is a "prevailing party" within the meaning of section 57.111(3)(c)1., Florida Statutes. Home Care incurred reasonable attorneys' fees and costs in Case No. 87- 2150, at least in the amount of $15,000. The following findings are based upon the record presented: Home Care filed its timely petition in this fee case after Respondent, Department of Health and Rehabilitative Services ("DHRS") entered a final Order on July 26, 1988, in Case No. 87-2150 granting Home Care a certificate of need ("CON") to operate a home health agency. DHRS' Final Order was a reversal of its original position on Home Care's application which was initially denied by DHRS. A formal administrative hearing was held before the undersigned on the issue of whether Home Care was entitled to a CON. The pleadings, transcripts, and exhibits in that proceeding, Case No. 87-2150, have been duly considered in regard to whether DHRS' actions were substantially justified in initially denying Home Care's application. The parties have stipulated that those documents shall constitute part of the record in this proceeding. The following findings are based upon the record in Case 87-2150 and the findings made in the Recommended Order entered in that case and adopted by the agency's final order. DHRS is the state agency responsible for administering the State Health Planning Act pursuant to Sections 381.701 through 381.715, Florida Statutes. (a) At the time DHRS denied this application, it did not have any published rule or policy on the methodology for determining need. Its original rule was successfully challenged and in 1984 DHRS attempted to promulgate a new rule. This proposed rule was invalidated in 1985 because it was based upon a use rate methodology and contained arbitrary criteria. Subsequently, DHRS published an interim policy which it used to assess home health care CON applications. The interim policy was applied to the first batch of applications in 1986 and used a rate population methodology which projected the number of Medicare enrollees using home health care services. The projected number of users was multiplied by the average number of visits per medicare home health care user. See Paragraph 15 of Recommended Order, Case No. 88-4763F. This interim policy was defended by DHRS in the First DCA in December 1986. In the summer of 1986, representatives of the Florida Association of Home Heath Agencies complained to the governor's office about the interim policy. After meetings between the staff of DHRS and the Governor's office, the Department abandoned the interim policy. No change occurred in the medical or financial factors which would warrant a change in policy. Additional applications had to be approved by Ms. Hardy's superiors. Home Care filed a Letter of Intent on October 8, 1986, and a CON application for a Medicare-certified home health agency in Okaloosa and Walton Counties on December 15, 1986. This was application CON Action No. 4911. DHRS published its notice of denial of CON Action No. 4911 in a letter to counsel for Home Care dated April 30, 1987. No specifics were given regarding the grounds for denial. Applicants at that time had been asked to give DHRS an unlimited extension of time within which to render a decision on their applications. Those who refused had their applications denied and were required, similar to Home Care, to demonstrate an unmet need based upon the broad statutory criteria found in Chapter 381, Florida Statutes. DHRS characterizes the procedure above as a free form action utilizing the statutory criteria found in Section 381.705, Florida Statutes. DHRS argued in Case No. 87-2150 that its incipient policy looks at the actual need by applying the 13 statutory criteria and bases its conclusion upon information collected from local home health service providers and the local health council. The denial of Home Care's application by DHRS does not state how DHRS applied the statutes to Home Care's application in order that Home Care or others could ascertain a developing standard. DHRS admitted that it did not have any rule upon which to adjudicate the application and DHRS did not present any credible evidence in support of its denial in Case No. 87-2150. DHRS did not adduce evidence supporting its denial because it was DHRS' policy to place the burden of proving both the facts and the methodology on the applicant. The deposition of Joseph Mitchell was introduced and made a part of this record. Mitchell's testimony is clear that, although there is a possibility Home Care could recoup some portion of the costs of litigation in medicare reimbursement as a cost of organizing and establishing the business, it is not certain that Home Care would be compensated because there is a cap on all reimbursable costs above which Medicare will not reimburse a provider and such legal expenses might not be allowed. See Deposition of Mitchell, page 76-78. Intervenors Choctaw Valley Home Health Agency and Northwest Florida Home Health Agency submitted a proposed order in this action seeking a dismissal of Home Care's petition for attorneys' fee and costs as to any relief from the Intervenors.
The Issue The issue for determination is whether Petitioner must reimburse Respondent for payments totaling $29,701.19 that Petitioner admittedly received from the Medicaid Program between May 1, 1996, and March 31, 1998, in compensation for the provision of home health services. Respondent contends that Petitioner is not entitled to retain the payments in question, primarily on the allegations that the compensated services were not medically necessary, were improperly documented, or both.
Findings Of Fact The evidence presented at final hearing established the facts that follow. The Agency is responsible for administering the Florida Medicaid Program. As one of its duties, the Agency must recover "overpayments . . . as appropriate," the term "overpayment" being statutorily defined to mean "any amount that is not authorized to be paid by the Medicaid program whether paid as a result of inaccurate or improper cost reporting, improper claiming, unacceptable practices, fraud, abuse, or mistake." See Section 409.913(1)(d), Florida Statutes. This case arises out of the Agency's attempt to recover alleged overpayments from Monef, a Florida-licensed home health agency. As an enrolled Medicaid provider, Monef is authorized, under a Medicaid Provider Agreement with the Agency, to provide home health services to Medicaid recipients. Under the Medicaid Provider Agreement, Monef assented to comply with “all local, state and federal laws, rules, regulations, licensure laws, Medicaid bulletins, manuals, handbooks and Statements of Policy as they may be amended from time to time.” The home health services at issue consisted of skilled nursing care rendered either by a registered nurse (“RN”) or a licensed practical nurse (“LPN”), as the needs of the recipient required, together with personal care provided by a home health aide. The "audit period" that is the subject of the Agency's recoupment effort is May 1, 1996 to March 31, 1998. During this audit period, the Medicaid Program reimbursed Monef for all of the skilled nursing and home health aide services that are the subject of this dispute. Largely (though not entirely) on the allegation that the home health services in question were not medically necessary, the Agency contends that Monef collected overpayments totaling $29,701.19 in compensation for services rendered to nine separate patients. The following table summarizes the Agency's allegations. PATIENT NAME GROUND(S) FOR DENIAL ALLEGED OVERPAYMENT Louisiana S. No medical necessity $8,498.17 Robert M. No medical necessity $3,615.54 Mario P. No medical necessity $2,403.33 Angel S. No medical necessity $2,089.12 Ana G. No medical necessity $2,015.94 Joann N. No medical necessity $1,705.12 C. Watson No medical necessity $1,268.76 Yvette F. Service refused $122.16 Rosa P. Multiple $7,983.05 Medical Necessity The proof was in conflict concerning the medical necessity of the challenged home health services that Monef provided to the foregoing patients. There were three categories of expert opinion evidence on this issue, described below. The attending physicians' opinions. To be Medicaid compensable, home health services must be provided pursuant to a written treatment plan that is prepared individually for each recipient and approved by his or her attending physician. The treatment plan——called a "plan of care" or "plan of treatment"—— must be reviewed and updated periodically (about every two months) and also as the patient's condition changes. A required component of all plans of care is the attending physician's certification that the services specified in the plan are medically necessary.1 The fact that a treating doctor, by prescribing, recommending, or approving a medical service, has attested to its medical necessity is not sufficient, in itself, to support a finding that the resulting care was medically necessary. See Rule 59G-1.010(166)(c), Florida Administrative Code. Nevertheless, the attending physician's opinion regarding medical necessity is relevant evidence, even if it is not inherently dispositive. In this case, all of the services that the Agency contends were not medically necessary had been determined to be medically necessary by the respective patients' treating physicians. The peer-review organizations' opinions. During the audit period, the Medicaid Program would not reimburse a home health agency for any home visits in excess of 60 visits per recipient per fiscal year unless the provider had obtained authorization to provide such care, in advance, from the Agency or its designee. Such "prior authorization" was required to be based on medical necessity. At times during the audit period the Agency was under contract with a company called Keystone Peer Review Organization ("KePRO"), which acted as the Agency's designee in regard to pre-approving services above the 60-visit limit. At other times this function was performed by Florida Medical Quality Assurance, Inc. ("FMQAI"). In a couple of instances, the Agency itself gave Monef prior authorization to perform services that it now contends were not medically necessary. By statute, a peer-review organization's written findings are admissible in an administrative proceeding as evidence of medical necessity or lack thereof. See Section 409.913(5), Florida Statutes. Monef had obtained prior authorization based on medical necessity for most of the services that the Agency has challenged as medically unnecessary. The opinions of the Agency's designees, KePRO and FMQAI, are relevant evidence of medical necessity. Dr. Sullenburger's opinion. Dr. John Sullenburger is the Agency's Medicaid physician. He would have testified at the final hearing as an expert witness for the Agency, but the parties stipulated that Dr. Sullenburger's ultimate opinion, based on the medical records, was that each of the claims that the Agency alleges was not medically necessary was, in fact, unnecessary. By entering into this stipulation, Monef effectively waived its right to cross-examine Dr. Sullenburger and thereby expose the particular facts upon which his opinion was based. For its part, the Agency relinquished the opportunity to have the doctor explain the reasons why he had concluded that the patients' attending physicians——and also, in many instances, the Agency's designated peer-review organizations——had erred in making their respective determinations that the subject services were medically necessary. As a result of the parties' stipulation concerning Dr. Sullenburger's testimony, the factfinder was left with a naked expert opinion that merely instructed him to decide the ultimate factual issue of medical necessity in the Agency's favor. In making findings regarding medical necessity, the factfinder settled on the following rules of thumb. Greatest weight was accorded the opinions of KePRO and FMQAI. These were deemed to have the highest probative value because the peer- review organizations' determinations of medical necessity were made before the services in question were provided, and neither of the Agency's designees had any discernable motive to stretch the truth one way or the other. Certainly, the peer-review organizations more closely resemble a disinterested, neutral decision-maker than either the patient’s treating physician or the Agency's expert witness (whose opinions were formed after the services had been rendered and the claims paid); indeed, if anything, KePRO and FMQAI might be expected to tilt in the Agency's direction (although there was no evidence of such bias in this case).2 The hearsay opinions of the treating physicians, on the one hand, and Dr. Sullenburger, on the other, were considered to be about equally persuasive——and none was particularly compelling.3 It should be stated that the attending physicians' certifications of medical necessity, each of which lacked analysis that might have connected the facts concerning a patient's medical condition with the need for services, were as conclusory as Dr. Sullenburger's ultimate opinion. Consequently, in those instances where a peer-review organization gave Monef a mandatory prior authorization to render services that the attending physician had certified as being medically necessary, it has been found that, more likely than not, the services in question were medically necessary. In contrast, a closer question arose in those instances where there was no evidence of prior authorization when such was required. The expert opinions——the attending physician's on one side, Dr. Sullenburger's on the other—— essentially canceled each other out. While ordinarily in an evidential tie the party without the burden of proof (here, Monef) would get the nod, in this case the Agency had the slightest edge, on the strength of Rule 59G-1.010(166)(c), Florida Administrative Code. Under this Rule, an attending physician's approval of a service is not, "in itself," sufficient to support a finding of medical necessity.4 Because of the Rule, Monef needed to introduce some additional, persuasive evidence (e.g. the attending doctor's testimony regarding the need for the service) to overcome Dr. Sullenburger's opinion.5 Louisiana S. At the time that the services in question were provided, from May 7, 1997, until December 20, 1997, this patient, an obese woman in her late 60s, was being treated for diabetes, hypertension, and coronary artery disease. She was not able to self-administer the insulin shots that were needed to prevent complications from diabetes. For the period from May 5, 1997, through June 30, 1997, KePRO gave prior authorization to 53 skilled nursing visits and 23 home health aide visits.6 Monef was reimbursed for 42 skilled nursing visits and 23 home health aide visits conducted in this period. From July 1, 1997, until September 1, 1997, Monef provided a total of 66 combined skilled nursing and home health aide visits to Louisiana S. The Medicaid Program paid for 60 of them. Because these were the first 60 visits of the fiscal year, which began on July 1, 1997, prior authorization was neither needed nor obtained. During the period between September 1, 1997, and November 1, 1997, Monef made 96 skilled nursing visits, out of 124 that KePRO had pre-approved, and 20 of 27 authorized home health aide visits. KePRO gave prior authorization for 124 skilled nursing and 27 home health aide visits for the period from November 1, 1997 to January 1, 1998, of which 54 and 18, respectively, were made. Based on the levels of service that KePRO had approved before July 1, 1997, and then after September 1, 1997, it is reasonable to infer, and so found, that the first 60 combined visits to this patient in fiscal year 1997-98 would have been pre-approved had Monef been required to obtain prior authorization. The home health care services that Monef provided to Louisiana S. between May 9, 1997, and December 30, 1997, for which the Medicaid Program paid $8,498.17, were medically necessary. Robert M. Robert M., a man in his mid-40s who received home health care from Monef from November 26, 1997, through March 27, 1998, suffered from arteriosclerosis, hypertension, acute bronchitis, and schizophrenia. His residence was an assisted living facility ("ALF").7 FMQAI gave prior authorization for 61 skilled nursing and 61 home health aide visits to occur between November 26, 1997, and January 26, 1998. Monef provided 55 nursing and 59 home health aide visits during this period. Monef requested prior approval for 25 skilled nursing and 63 home health aide visits for the period from January 26, 1998, and March 26, 1998. Although prior authorization was needed for these services, which exceeded the limit for fiscal year 1997-98, there is no evidence in the record that FMQAI granted Monef's request for approval. FMQAI authorized 23 skilled nursing visits and 30 home health aide visits for the period from March 26, 1998, to May 28, 1998. However, Monef provided just one skilled nursing visit during this time, on March 27, 1998. The home health care services that Monef provided to Robert M. between November 26, 1997, and January 26, 1998, and on March 27, 1998, were medically necessary. Lack of medical necessity was established, however, for the services provided between January 26, 1998, and March 26, 1998. The Medicaid Program paid the following claims, totaling $1,442.49, for this period: One RN visit, $34.04; 21 LPN visits, $549.99; and 51 home health aide visits (35 at $17.46 apiece and 16 at $15.46 each), $858.46. Mario P. From November 25, 1997, through March 28, 1998, Mario P., a septuagenarian who was being treated for acute gastritis, an enlarged prostate, and mental illness, received home health visits at the ALF where he lived, the services provided by Monef. FMQAI approved 43 skilled nursing and 61 home health aide visits for the period from November 26, 1997, through January 26, 1998; 11 skilled nursing and 62 home health aide visits for January 26, 1998, until March 26, 1998; and 25 skilled nursing visits for March 1, 1998, through May 1, 1998 (overlapping the immediately preceding period by about three- and-a-half weeks). The actual number of skilled nursing and home health aide visits for which the Medicaid Program reimbursed Monef was within the pre-approved service levels for each period. The home health care services that Monef provided to Mario P. between November 26, 1997, and March 28, 1998, for which the Medicaid Program paid $2,403.33, were medically necessary. Angel S. Angel S. was a man in his middle 50s who had been diagnosed with gastroduodenitis (an inflammation of the stomach and duodenum) and mental illness. Monef obtained prior authorization from KePRO to provide Angel S. with 34 skilled nursing and 62 home health aide visits between November 25, 1997, and January 25, 1998. During this time, the Medicaid Program reimbursed Monef for 32 skilled nursing and 44 home health aide visits. FMQAI pre-approved 26 skilled nursing and 27 home health aid visits for January 25, 1998, through March 25, 1998. Monef was reimbursed for 20 and 21 such visits, respectively. The home health care services that Monef provided to Angel S. between November 25, 1997, and March 25, 1998, for which the Medicaid Program paid $2,089.12, were medically necessary. Ana G. When she was a client of Monef, Ana G., a woman in her 60s, was suffering from acute gastritis and major depression. She lived in an ALF. FMQAI pre-approved 50 skilled nursing visits and 40 home health aide visits for the period from November 25, 1997, through January 25, 1998. In that time, Monef rendered 28 skilled nursing visits and 42 home health aide visits for which it received compensation from the Medicaid Program. For the period from January 25, 1998, through March 25, 1998, FMQAI gave prior authorization for 9 skilled nursing and no home health aide visits. During this time, Monef provided 15 skilled nursing visits and 15 home health aide visits for which Medicaid paid. The services that Monef rendered to patient A. Garcia between November 25, 1997, and March 23, 1998, were medically necessary except for 17 home health aide visits (at $17.46 apiece) and 6 skilled nursing visits (at $24.19 each), making a total of $441.96 in overpayments. Joann N. In her late 30s at the time of the services in question, Joann N.'s principal diagnosis was major depression. She also suffered from hypertension and a type of diabetes. Because Joann N.'s primary diagnosis was a mental illness, the home health services provided to her may not have been Medicaid-compensable due to an exclusion that bars coverage for mental health and psychiatric services.8 The Agency, however, did not disallow Monef's claims on this basis, relying instead exclusively on the allegation that the services were not medically necessary. None of the skilled nursing and home health aide visits that Monef provide Joann N. between February 16, 1997, and September 1, 1997, was pre-approved. There is evidence that Monef sought KePRO's prior authorization of 26 skilled nursing and ten or 12 home health aide visits for the period from April 16, 1997, to June 16, 1997, but no proof was adduced showing that approval was granted. Based on the number of combined visits that Monef provided both before and after July 1, 1997 (the start of fiscal year 1997-98), it does not appear that prior authorization was required. There are no grounds in the record, however, from which to infer that prior authorization(s) would have been given if needed. Accordingly, lack of medical necessity was established for all of the home health services that Monef provided Joann N, for which the Medicaid Program paid a total of $1,705.12. C. Watson C. Watson was a teenager with cerebral palsy and quadriplegia who received care in her home between May 12, 1997, and March 31, 1998. The Agency alleges that all of the skilled nursing services that Monef provide C. Watson were medically unnecessary but acknowledges that the home health aide visits were appropriate and covered. The Agency itself pre-approved the home health care visits that Monef had requested for the period from May 12, 1997, through June 30, 1997, namely, 24 skilled nursing and 40 home health aide visits. The Medicaid Program reimbursed Monef for 12 skilled nursing and 38 home health aide visits made during this period. The Agency gave prior authorization for home health care to be provided between July 1, 1997, and September 1, 1997. FMQAI also pre-approved the following services for the same period: five skilled nursing visits and 43 home health aide visits. Monef was reimbursed for 17 skilled nursing visits made during this time. For the periods of September 1, 1997 to November 1, 1997; November 1, 1997 until January 1, 1998; and January 1, 1998 through March 1, 1998, KePRO pre-approved levels of skilled nursing services (nine, four, and nine visits, respectively) that were not exceeded by Medicaid-paid claims for these services rendered by Monef during the subject timeframes. FMQAI gave prior authorization for four skilled nursing visits to occur between March 1, 1998 and May 1, 1998, but Monef did not submit any claims for such services rendered during this period. Lack of medical necessity was established for 12 skilled nursing visits made during the period from July 1, 1997 through September 1, 1997. The Medicaid Program paid a total of $319.13 for these visits (One RN visit at $31.04 and 11 LPN visits at $26.19), and this sum constitutes an overpayment subject to recoupment. The rest of the skilled nursing visits that Monef furnished to C. Watson were medically necessary. Yvette F. Yvette F. was a patient in her 30s suffering from complications relating to HIV infection. On Christmas Day, 1997, Yvette F. refused most of the skilled nursing services that had been scheduled, to spend time with her family. The Agency has sought to recoup the $122.16 that the Medicaid Program paid for an RN's visit to Yvette F.'s home on December 25, 1997. This sum reflects four hours of service. The medical records in evidence establish that the patient's refusal of treatment occurred after the RN had arrived at her residence, and that, despite the patient's refusal of service, the RN did perform an assessment on Yvette F. that day. The Agency failed to establish that, under these circumstances, Monef is entitled to no reimbursement. Yet, common sense instructs that the covered claim should not encompass four hours of services when clearly that much time was not spent on this particular visit. Unfortunately, nothing in the record, including the parties' legal arguments, provides guidance for resolving this particular problem. In the absence both of controlling authority and evidence of the actual time spent, the factfinder has determined that the claim should be equitably apportioned to do rough justice, with Monef being compensated for one hour of service and the balance returned to the Medicaid Program. On this basis, then, lack of medical necessity has been shown for three hours of skilled nursing services, making an overpayment of $91.62. Rosa P. Rosa P. was a woman in her late 30s with multiple health problems, including uncontrolled diabetes, recurring infections, renal failure, respiratory insufficiency, and mental illness. Monef rendered home health care to Rosa P. from November 22, 1996, until February 1, 1998, for which the Medicaid Program paid $24,543.27 on 1,012 separate claims. The Agency seeks to recoup a little more than one- third of the amount previously paid to Monef for this patient's home health care, alleging a number of grounds to disallow a number of claims. The following table summarizes the Agency's contentions regarding the challenged claims. ("Doc." is an abbreviation for "documentation." "PC" is an acronym for plan of care. The alphanumeric claim identifiers in the left-hand column were assigned by the Administrative Law Judge for ease of reference.) CLAIM ID DATE(S) SERVICE(S) GROUND(S) FOR DENIAL ALLEGED OVERPAYMENT RP-1 11-22-96 Nursing No doc. $29.04 RP-2 12-9-96, 12- 10-96, 12- 14-96 Aide No doc./POT not followed (x3) $52.38 RP-3 12-25-96 to 1-5-97 Aide No PC rendered (x11) $192.06 RP-4 1-6-97, 1-7- 97, 1-9-97, 1-10-97, 1- 11-97, 1-12- 97 Aide POT not followed (x6) $104.76 RP-5 1-22-97 to 3-22-97 All POT not signed by MD or RN $4,009.37 RP-6 3-24-97 to 5-2-97 Aide No PC rendered (x40) $698.40 RP-7 5-2-97 Nursing No doc. $29.04 RP-8 5-3-97 to 7- 4-97 Aide No PC rendered (x62) $1,032.52 RP-9 7-21-97 to 7-26-97 Aide POT not followed (x6) $87.309 RP-10 8-4-97 to 8- 10-97 Aide PC not rendered (x7) $122.22 RP-11 10-29-97 Nursing Documented only 1 of 2 billed visits $31.04 RP-12 11-3-97 Aide No doc. $17.46 RP-13 11-4-97 Aide No doc. $17.46 RP-14 11-14-97 Aide No doc. $17.46 RP-15 11-15-97 Aide No doc. $17.46 RP-16 11-16-97 Aide No doc. $17.46 RP-17 11-22-97 to 11-26-97 Aide No doc. (x10) (2 billed visits per day) $52.3810 RP-18 12-1-97 Aide No doc. $17.46 RP-19 12-2-97 Aide No doc. $17.4611 RP-20 12-3-97 Aide No doc. $17.46 RP-21 12-28-97 to 2-28-98 Nursing POT not signed by MD or RN $1,724.37 The total of these alleged overpayments, without adjustment for the several minor arithmetic or typographical errors in the Agency’s papers, see endnotes 9 - 11, is $7,983.05. Each claim or claim set will be addressed in turn below. RP-1. The medical records contain a "Time Record Nursing Progress Note" dated November 22, 1997, that documents a skilled nursing visit to the patient on that day. Therefore, the Agency failed to prove its allegation of overpayment regarding RP-1. RP-2. Included in the patient's records is a "Weekly Activity Report and Time Slip" for the week beginning Monday, December 9, 1996, that was filled out by the home health aide who cared for Rosa P. during that seven-day period. To keep track of tasks performed, the form instructed the aide to check boxes in a table that cross-referenced particular duties (e.g. oral hygiene, change linens, turn & position), which are described in the left-hand column, with the days of the week, which are listed, Monday through Sunday, in the top row. For the days in question (December 9, 10, and 14, 1996), the aide checked boxes showing that, among other things, she had given the patient a shower and assisted her in a wheelchair, both of which are Medicaid-covered services. See Paragraphs 133, 137, infra. Handwritten notes inscribed on the Agency's work papers next to each of the three dates at issue state: "only p/c [personal care] [is a] shower —— not following POT [plan of treatment]." The first of these points is incorrect: assistance with a wheelchair, like showering a patient, is a covered home health aide service. The plan of care that covered the subject dates disproves the second assertion. The written treatment plan explains that the home health aide will "provide personal care, asst [assist] [with] ADL's [activities of daily living] including bath, skin/foot care." The aide was following this course of action on December 9, 10, and 14, 1996. The Agency did not prove an overpayment in connection with RP-2. RP-3. The Agency seeks to recoup payments of $17.46 apiece for 11 home health aide visits made between December 25, 1996 and January 5, 1997, on the ground that the aide did not perform any covered personal services. Although a dozen such visits were made during this particular period, the Agency's work papers reveal that the claim for services rendered on December 29, 1996, was approved. The aide's time sheets for the relevant period substantiate the Agency's allegation, with one exception. The aide's entry on December 26, 1996, is identical to that of December 29, 1996, the latter which the Agency correctly deemed sufficient to make Medicaid financially responsible. On both days, the aide helped the patient with a tub bath and shampoo, which are covered personal services. For the other ten days, review of the aide's time sheets reveals that many services were rendered in the category of "light housekeeping" and "meal preparation." These fall within the exclusion for "housekeeping, homemaker, and chore services, including shopping" and hence are not covered services. Handbook, at p. 2-6; see also Rule 59G-4.130(8)(a)2., Florida Administrative Code (1996).12 (Curiously, the Agency did not specifically rely upon this exclusion.) In its Proposed Recommended Order, Monef points out that the aide made a written notation each day concerning the patient's voiding of bowel and bladder. Because the non- exclusive list of covered home health aide services included "toileting and elimination," see Rule 59G-4.130(5)(b)3.b., Florida Administrative Code (1996), it is possible that the aide was providing a compensable service during the period in question. The trouble is, it cannot be determined from the evidence whether the aide actually assisted the patient——or whether the aide merely wrote down on the time sheet what had been observed regarding the patient's use of the bathroom facilities. Although the question is close, it is determined that simply observing and commenting daily about the patient's elimination of bodily wastes is not enough, without more, to constitute a Medicaid-compensable home health aide service.13 Being unable on the present record to find that the aide did more than watch and write, it is determined that covered services in the area of "toileting and elimination" were not persuasively shown to have occurred. Consequently, lack of medical necessity has been established as to 10 home health aide visits. The total overpayment on RP-3 is $174.60. RP-4. For the week from Monday, January 6 through Sunday, January 12, 1997, the Agency alleges that six home health aide visits are not covered because the aide failed to follow the plan of treatment. Notations on the Agency's work papers suggest another basis: "only shower - incomplete," meaning, presumably, that the only covered personal care provided was assistance in the shower. See discussion regarding RP-2, supra. The aide's time sheet for the relevant period contradicts the Agency's contention. First, bathing assistance was not the only covered personal care rendered on the days in question. The aide also helped the patient with her wheelchair, which is a service covered under the rubric of "transfer and ambulation." Rule 59G-4.130(5)(b)3.e., Florida Administrative Code (1996). Second, the aide's entry for January 8, 1997——for which claim the Agency is not seeking to recover——is substantially the same as those for the challenged days. The only material difference is that on January 8 the aide checked the box indicating that she had shampooed the patient's hair. Nothing in the Rule or the Handbook, however, provides that a shower with shampoo is covered but a shower without shampoo is excluded from coverage, and the Agency failed to prove a factual basis, or advance a logical one, for drawing such distinction. Consequently, the Agency did not establish an overpayment with regard to RP-4. RP-5. The medical records in evidence contain a "Home Health Certification and Plan of Care" for Rosa P. that was signed and dated, on January 22, 1997, by the RN and by the patient's attending physician, Dr. John Prior. This plan of care covers the period from January 22, 1997 through March 22, 1997. The Agency did not present any evidence that either the doctor's or the nurse's signature appearing on this form are inauthentic or that either or both failed to sign on January 22, 1997, as recorded. Therefore, the Agency's allegation that the plan of treatment for the period in question is invalid was not proved. RP-6. This claim set encompasses five full weeks plus five days of home health aide service, or 40 visits in all. The Agency alleges that no covered personal care was provided during these visits. The time sheets demonstrate that the aide provided a covered service, namely assistance in the shower, on all days between March 24, 1997 and April 6, 1997, and also on the five days from April 28 through May 2, 1997. The Agency therefore failed to prove its allegation as to these 19 visits. The Agency made its case, however, in connection with the remaining 21 visits from April 7 to April 27, 1997, inclusive. The time sheets for these dates do not adequately document the provision of a covered service.14 Accordingly, lack of medical necessity was established for 21 home health aide visits at $17.46 each, making a total overpayment on RP-6 of $366.66. RP-7. The Agency has sought to recover payment of $29.04 for an RN visit to the patient on May 2, 1997, alleging lack of documentation. The medical records show that on this particular date, an LPN treated the patient from 8:00 a.m. to 8:45 a.m. Later that same day, at 5:00 p.m., an RN arrived to provide care, which she did, afterwards leaving the patient’s residence at 5:45 p.m. These two visits are documented in separate "Time Record Nursing Progress Note" forms. The Agency did not establish that the nursing notes are inauthentic or incredible.15 Thus, the allegation regarding RP-7 was not proved. RP-8. The Agency contends that 62 home health aide visits between May 3, 1997, and July 4, 1997, were not compensable because no covered personal care was provided. The aide's time sheets establish that a covered personal care (assistance in the shower) was given on May 3 through May 17, inclusive (15 visits at $17.46 apiece), and also on June 20 through 22, 1997 (three visits at $17.46 each). Shower assistance was also provided on May 26 through June 1, 1997 (seven visits at $15.46 each). Skin care, a covered service, was provided on June 7, 1997 (one visit, $15.46). And ambulation assistance, a covered personal care service, was rendered on seven visits from June 9, 1997, through June 15, 1997, at $15.46 per visit. For the remaining 29 visits, however, the aide's time sheets fail adequately to document the provision of a covered service. Ten of these visits were billed at $15.46, the others at $17.46 apiece. Thus, with respect to RP-8, the Agency established an overpayment of $486.34. RP-9. This claim set involves six home health aide visits on the dates of July 21 through July 26, 1997, inclusive, during which, the Agency alleges, the plan of treatment was not obeyed. (The Agency did not seek to recoup the payment made for aide services rendered on Sunday, July 27, 1997, even though that date’s visit is included within the same time sheet as the Monday through Saturday visits, and the services rendered on July 27 were identical to those performed earlier in the week.) According to the pertinent time sheet, covered personal care services (bathing and assistance with ambulation) were provided in connection with the challenged claims. Further, the plan of treatment in effect at that time stated that the aide would "assist with personal care, ambulation, prepare meals, grocery shop, wash clothes, [and] straighten bedside unit." The time sheet establishes that the aide complied with these instructions. Accordingly, the Agency failed to prove its allegation regarding RP-9. RP-10. The Agency alleges that none of the home health aide visits from August 4 through August 10, 1997, entailed covered personal care services. The aide's time sheet for that week, however, documents that bathing care, specifically showering, was provided. Because showering the patient is clearly a covered item, the Agency failed to carry its burden of proof in respect of RP-10. The patient's medical records contain two "Time Record Nursing Progress Note" forms dated October 29, 1997, which document separate RN visits on that date, one lasting from 4:30 p.m. to 5:15 p.m., the other from 6:00 p.m. until 7:40 p.m. The Agency therefore did not establish, by a preponderance of evidence, its allegation that Monef had provided documentary support for only of one of two nursing visits on October 29, 1997. RP-12, -13, -14, -15, and -16. The Agency alleges that these five home health aide visits, occurring over a two- week period from November 3, 1997 to November 16, 1997, are not adequately documented. The visits of Monday, November 3, and Tuesday, November 4, 1997, which the Agency challenges, are reported on the same time sheet as those of November 5 through 9, 1997, which the Agency accepts. The duties performed on each of these days, both challenged and unchallenged, were identical, except that on November 4 and 8 the aide shampooed the patient. Numerous covered personal care services were rendered each day during the week, including bathing, oral hygiene, skin care, and assistance with ambulation. The duty descriptions on the aide's time sheet for the week beginning Monday, November 10, 1997——a week that included three challenged visits (November 14 through 16)——are substantially similar to one another (though the Agency accepted claims for November 10 through 13) and nearly identical to those given for the preceding week. Once again, covered personal care services rendered consistently throughout the week of November 10 to 16, 1997, included bathing, oral hygiene, skin care, and ambulation assistance. The evidence, therefore, does not support the Agency's allegation that the services in question were not adequately documented. RP-17. The Agency alleges that home health aide visits made from November 22 through November 26, 1997, were not documented. The medical records demonstrate that one such visit per day was provided, for a total of five. The records show further, however, that Monef was reimbursed for two visits for each of the days in question, receiving double the amount to which it was entitled based on the documented number of visits. The Agency, therefore, has proved an overpayment of $87.30 (five visits at $17.46 apiece). RP-18, -19, and -20. The Agency contends that there is insufficient documentation for home health visits on December 1 through 3, 1997. But the aide's time sheet for the week beginning Monday, December 1, 1997, adequately establishes that such visits actually occurred——and that covered personal care services (bathing, oral hygiene, skin care, and ambulation assistance) were provided during each of them. However, as with RP-17, the records show that Monef was reimbursed for two visits for each of the days in question, receiving double the amount to which it was entitled based on the documented number of visits. The Agency, therefore, has proved an overpayment of $50.38 (two visits at $17.45 apiece and one billed at $15.46) with regard to RP-18, RP-19, and RP-20. RP-21. The Agency seeks to recover payments for all nursing services rendered from December 28, 1997 through February 28, 1998, on the ground that the plan of treatment for the subject period was not signed and dated by the attending physician, as required. In fact, the pertinent treatment plan was signed by a Dr. Roxana Lopez, and by the RN. Neither signature, however, was dated. Thus, the Agency is correct in its assertion that the plan of treatment is deficient. But, the record also contains a letter from KePRO dated December 29, 1997, which grants prior authorization for 124 skilled nursing and 61 home health aide visits for the period from December 28, 1997 through February 28, 1998. According to this letter, Monef's request for pre-approval was made on December 22, 1997. One of the items that must be submitted to the peer- review organization with a request for prior authorization is the written plan of treatment. Thus, it is reasonable to infer, and so found, that KePRO had in its possession the deficient plan of treatment and, in granting prior authorization, overlooked the fact that the doctor had not dated her signature. Monef did not urge that KePRO's pre-approval of the services in question effected a waiver of the Agency's right to disallow the ensuing claims based on what is, in these circumstances, clearly a technicality,16 or that the Agency should be estopped from raising this particular objection, although little imagination is required to perceive the potential merit in either argument. It is not necessary to reach waiver or estoppel issues, however, for KePRO's approval letter establishes persuasively that the doctor and the nurse signed the plan of treatment before December 29, 1997——and hence at or before the start of care and services thereunder. Plainly, in other words, the attending physician timely approved the plan of treatment, even though she failed to date her signature. Under the particular facts of this case, therefore, where the treatment plan is in substantial compliance with the requirements, and neither the Medicaid Program nor the patient suffered any conceivable prejudice as a result of a demonstrably harmless (on these facts) and unintentional deficiency, it is determined that the Agency has failed to prove a sufficient basis to recoup payments totaling $1,724.37 for pre-approved, medically necessary services that were actually provided to an eligible patient. The following table summarizes the foregoing findings relating to claims for services to Rosa P. CLAIM ID DATE(S) SERVICE(S) GROUND(S) FOR DENIAL ACTUAL OVERPAYMENT RP-1 11-22-96 Nursing No doc. $0 RP-2 12-9-96, 12- 10-96, 12- 14-96 Aide No doc./POT not followed (x3) $0 RP-3 12-25-96 to 1-5-97 Aide No PC rendered (x11) $174.60 RP-4 1-6-97, 1-7- 97, 1-9-97, 1-10-97, 1- 11-97, 1-12- 97 Aide POT not followed (x6) $0 RP-5 1-22-97 to 3-22-97 All POT not signed by MD or RN $0 RP-6 3-24-97 to 5-2-97 Aide No PC rendered (x40) $366.66 RP-7 5-2-97 Nursing No doc. $0 RP-8 5-3-97 to 7- 4-97 Aide No PC rendered (x62) $486.34 RP-9 7-21-97 to 7-26-97 Aide POT not followed (x6) $0 RP-10 8-4-97 to 8- 10-97 Aide PC not rendered (x7) $0 RP-11 10-29-97 Nursing Documented only 1 of 2 billed visits $0 RP-12 11-3-97 Aide No doc. $0 RP-13 11-4-97 Aide No doc. $0 RP-14 11-14-97 Aide No doc. $0 RP-15 11-15-97 Aide No doc. $0 RP-16 11-16-97 Aide No doc. $0 RP-17 11-22-97 to 11-26-97 Aide No doc. (x10) (2 billed visits per day) $87.30 RP-18 12-1-97 Aide No doc. $17.46 RP-19 12-2-97 Aide No doc. $15.46 RP-20 12-3-97 Aide No doc. $17.46 RP-21 12-28-97 to 2-28-98 Nursing POT not signed by MD or RN $0 The Agency, in sum, proved overpayments totaling $1,165.28 in relation to Rosa P. The Bottom Line The Agency established that Monef received overpayments in connection with six patients. The following table summarizes these overpayments. PATIENT NAME GROUND(S) FOR DENIAL OVERPAYMENT Robert M. No medical necessity $1,442.49 Ana G. No medical necessity $441.96 Joann N. No medical necessity $1,705.12 C. Watson No medical necessity $319.13 Yvette F. Service refused $91.62 Rosa P. Multiple $1,165.28 Accordingly, the Agency is entitled to recover from Monef the principal sum of $5,165.60.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency enter a final order requiring Monef to repay the Agency the principal amount of $5,165.60. DONE AND ENTERED this 14th day of November, 2001, in Tallahassee, Leon County, Florida. JOHN G. VAN LANINGHAM Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 14th day of November, 2001.
