The Issue At issue in this proceeding is whether petitioner's request to modify its certificate of need from a 60-bed child/adolescent psychiatric hospital to a 45- bed child/adolescent and 15-bed adult psychiatric facility should be approved.
Findings Of Fact Case status In February 1993, petitioner, Martin H.M.A., Inc., d/b/a SandyPines Hospital (SandyPines), filed an application with the respondent, Agency for Health Care Administration (AHCA), for a modification of its certificate of need (CON) from a 60-bed child/adolescent psychiatric hospital to a 45-bed child/adolescent and 15-bed adult psychiatric hospital. Upon review, AHCA concluded that SandyPines' request could not be accommodated under the modification provisions of Rule 59C-1.019, Florida Administrative Code, and required certificate of need review. Accordingly, AHCA proposed to deny SandyPines' request, and these formal proceedings to review, de novo, the agency's decision were commenced at SandyPines' request. The applicant SandyPines is the holder of certificate of need number 4004 which authorized it to construct a 60-bed child/adolescent psychiatric facility. That facility was constructed and is currently in operation in Tequesta, Martin County, Florida. SandyPines is now, and has been since it commenced operations in January 1990, licensed as a Class III Special Psychiatric Hospital with 60 psychiatric child/adolescent beds. It has never provided adult inpatient psychiatric services and, until approximately October 18, 1993, had never provided any adult outpatient psychiatric services. The adult outpatient psychiatric services currently provided by SandyPines are not subject to CON review. SandyPines's fiscal problems When SandyPines opened in January 1990, no managed care organizations existed in its local market; however, with each passing year managed care has become more prevalent such that currently 45-50 percent of SandyPines admissions are covered by some form of managed care. This has significantly adversely affected SandyPines' revenues such that it lost approximately $600,000 last fiscal year and, absent increased occupancy levels, its continued viability is, at best, questionable. Indeed, if SandyPines continues to operate as currently configured, it projects a loss for the fiscal year ending September 30, 1994, of $1,099,777. Occupancy levels are low, however, for District IX as a whole, due in large measure to the demands for managed care. For the six-month period ending June 1993, the average occupancy rate for child/adolescent psychiatric beds was 35 percent and for adult psychiatric beds 65 percent. To address its faltering business, SandyPines has, as heretofore noted, begun to provide adult psychiatric services on an outpatient basis; however, unless it can combine inpatient adult psychiatric services with the program it is doubtful that its adult program will prove successful. In this regard, SandyPines offered proof, which is credited, that patients and their physicians are looking for what has been termed "one-stop shopping." The patient does not want to go to one facility for outpatient care and another facility for inpatient care, and the referring physicians would rather send all of their patients to one facility that offers a full spectrum of services. Therefore, from a marketing perspective, the addition of adult inpatient psychiatric services at SandyPines would have a positive effect. Whether modification of SandyPines' CON to allow inpatient adult psychiatric services will increase the hospital's daily census and utilization sufficiently to assure its viability is, at best, fairly debatable. To analyze the impact of redesignating 15 child/adolescent beds to 15 adult psychiatric beds, SandyPines made an assumption of an average daily census of 10.5 patients on the 15-bed adult psychiatric unit. Based on such assumption, SandyPines calculated a net income from that unit, for the fiscal year ending September 30, 1994, assuming it opened April 1, 1994, of $589,664, and a net loss for the facility as a whole of $510,113, as opposed to a net loss of $1,099,777 without the adult unit. Based on the same assumptions, SandyPines calculated a net income for the fiscal year ending September 30, 1985, for the adult unit at $1,111,008, and a net income for the facility as a whole with an adult unit at $44,980. As heretofore noted, SandyPines' ability to achieve an average daily census of 10.5 patients is, at best, fairly debatable. To SandyPines' credit, it has an active advertising and marketing department comprised of six people and its director of marketing and business development. This marketing group is constantly striving to develop relationships with referral sources and to develop programs to meet market needs and demands. There was, however, no proof of record to demonstrate any existent commitments in the community or any objective data to support the conclusion that SandyPines could reasonably expect to attain an average daily census of 10.5 patients. Moreover, four of SandyPines' potential competitors for adult psychiatric patients exhibited more than a 78 percent occupancy rate for the first six months of 1993, which may be reflective of among other attributes, a strong existent referral pattern, and the overall District average was only 65 percent, which reflects significant unused capacity. On balance, the proof is not compelling that SandyPines could achieve the occupancy levels it projected. Whether SandyPines achieved its projected occupancy levels for adult services or some lesser level would not, however, significantly adversely impact existing providers. Moreover, the redesignation of beds and the necessary modification of the facility to meet required legal standards of separation of adult and child/adolescent units would require no more than $50,000-$80,000; a capital expenditure well below that which would require CON review. Is modification appropriate Pertinent to this case, Rule 59C-1.109, Florida Administrative Code, provides: A modification is defined as an alteration to an issued, valid certificate of need or to the condition or conditions on the face of a certificate of need for which a license has been issued, where such an alteration does not result in a project subject to review as specified in . . . subsection 408.036(1) . . ., Florida Statutes. Subsection 408.036(1), Florida Statutes, provides in pertinent part: . . . all health-care-related projects, as described in paragraphs (a)-(n), are subject to review and must file an application for a certificate of need with the department. The department is exclusively responsible for determining whether a health-care-related project is subject to review under [ss.408.031-408.045]. * * * (e) Any change in licensed bed capacity. * * * (h) The establishment of inpatient institutional health services by a health care facility, or a substantial change in such services . . . * * * (1) A change in the number of psychiatric . . . beds. Finally, pursuant to the Legislature mandate of Section 408.034(3), Florida Statutes, to "establish, by rule, uniform need methodologies for health services and health facilities," AHCA has promulgated Rule 59C-1.040, Florida Administrative Code, which establishes discrete methodologies for calculating the need for the establishment of inpatient adult psychiatric services and inpatient child/adolescent psychiatric services, and provides for the identification of the number of hospital inpatient psychiatric beds for adults and children/adolescents by facility. As heretofore noted, SandyPines' license designates it as a "Class III Special Psychiatric hospital with 60 Psychiatric Child/Adolescent beds," and the inventory established pursuant to Rule 59C- 1.040(11), Florida Administrative Code, has identified SandyPines' beds as child/adolescent. Resolution of the parties' dispute as to whether SandyPines' proposed conversion of beds from child/adolescent to adult is subject to CON review under Section 408.036(1)(e), (h) and (l), Florida Statutes, and therefore not susceptible to modification under Rule 59C-1.109(1), resolves itself to an interpretation of Section 408.306(1), Florida statutes, and the provisions of Chapter 59C-1, Florida Administrative Code. SandyPines contends that hospital inpatient psychiatric services, as used in Chapter 408, Florida Statutes, and Chapter 59C-1, Florida Administrative Code, is a generic term for the treatment of psychiatric disorders and that its proposal to treat adults, as opposed to children/adolescents, is not a change in health services. Accordingly, SandyPines concludes that the proposed conversion does not constitute "[a] change in licensed bed capacity," "the establishment of inpatient institutional health services by a health care facility, or a substantial change in such services," or " change in the number of psychiatric beds," such that CON review would be required under Section 408.306(e), (h) and (l), Florida Statutes. Contrasted with SandyPines' position, AHCA interprets the foregoing provisions of law, when read in para materia, and with particular reference to Rule 59C-1.040, Florida Administrative Code, as establishing two discrete types of inpatient psychiatric services, to wit: child/adolescent and adult. The separate CON review criteria established by Rule 59C-1.040, Florida Administrative Code, for child/adolescent and adult inpatient psychiatric services is consistent with AHCA's interpretation. Indeed, the rule, among other things, establishes separate bed need methodologies, fixed need pools, bed inventories, utilization thresholds, and minimum unit sizes for child/adolescent and adult services. Granting SandyPines' request would run counter to these CON review criteria by, among other things, altering the District IX inventory of child/adolescent and adult psychiatric beds, as well as awarding adult psychiatric beds when there is no need under the established methodology. Finally, consistent with the provisions of Section 395.003(4), Florida Statutes, the agency has issued SandyPines a license "which specifies the service categories and the number of hospital beds in each bed category [60 psychiatric child/adolescent beds] for which [the] license [was issued]." Granting SandyPines' request would constitute a change in its "licensed bed capacity." Considering the foregoing provisions of law, it is concluded that the interpretation advanced by SandyPines is strained, and the interpretation advanced by AHCA is reasonable. Accordingly, it is found that SandyPines' proposed conversion of 15 child/adolescent psychiatric beds to 15 adult psychiatric beds is subject to CON review because such conversion constitutes "[a] change in licensed bed capacity," "the establishment of inpatient institutional health services by a health care facility, or a substantial change in such services," or "a change in the number of psychiatric beds." Section 408.036(e), (h) and (l), Florida Statutes
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a final order be rendered denying SandyPines' request to modify its certificate of need from a 60-bed child/adolescent psychiatric hospital to a 45-bed child/adolescent and 15-bed adult psychiatric facility. DONE AND ORDERED in Tallahassee, Leon County, Florida, this 14th day of March 1994. WILLIAM J. KENDRICK Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 14th day of March 1994.
The Issue Whether Rules 65E-5.2301(1) and (3) and 65E-5.170, Florida Administrative Code, constitute an invalid exercise of delegated legislative authority.
Findings Of Fact All procedural requirements for promulgation of Rules 65E-5.2301(1) and (3) and 65E-5.170, Florida Administrative Code (the challenged Rules) were properly fulfilled. Lash has standing to litigate the validity of the challenged Rules. On September 20, 2001, Lash was admitted to the Crisis Screening and Stabilization Unit (Unit) located in Fort Lauderdale, Florida. The Unit is authorized to receive patients pursuant to that portion of Chapter 394.453 of the Florida Mental Health Act, more popularly known as the Baker Act. Following Lash’s admission to the Unit, a document entitled Certificate of Patient’s Incapacity to Consent and Notification of Health Care Surrogate/Proxy (Certificate) was executed by two physicians (Two Physicians). Pursuant to the Certificate, the Two Physicians declared Lash incompetent to consent to treatment and appointed a Third Party (Third Party) to make medical decisions on her behalf, including authorizing treatment objected to by Lash. In so doing, the parties are of the opinion that the Two Physicians were acting pursuant to the challenged Rules.
Findings Of Fact On October 15, 1985, Petitioner, Mercy Hospital, Inc. (Mercy), filed an application with Respondent, Department of Health and Rehabilitative Services (Department) for a certificate of need (CON) to convert 29 medical/surgical beds into 29 long-term substance abuse beds. On February 27, 1986, the Department denied Mercy's application, and Mercy timely petitioned for formal administrative review. Mercy is a 538-bed acute care hospital located in Miami, Dade County, Florida. Due to a declining patient census, Mercy is, however, operating only 360 of its 530 licensed beds. Mercy currently offers services in medicine, surgery, psychiatry, obstetrics, gynecology, emergency medical services and outpatient services. Need The predicate for the Department's denial of Mercy's application was a perceived lack of need for long-term substance abuse beds in District XI (Dade and Monroe Counties), and the impact such lack of need would exert on the other statutory and rule criteria. Resolution of the need issue is dispositive of Mercy's application. There currently exists no numeric need methodology for determining the need for long-term substance abuse beds. The Department has, however, adopted Rule 10-5.11(27)(h)1, Florida Administrative Code, which establishes the following occupancy standard: No additional or new hospital inpatient substance abuse beds shall normally be approved in a Department service district unless the average occupancy rate for all existing hospital based substance abuse impatient beds is at or exceeds 80 percent for the preceding 12 month period. District XI has 190 approved long-term hospital impatient substance abuse beds; however, only 30 of those beds are currently licensed. The licensed beds are located in Monroe County at Florida Keys Memorial Hospital (Florida Keys), and are operating well below the 80 percent occupancy standard established by rule. 1/ The remaining beds are to be located in Dade County where Intervenor, Management Advisory and Research Center, Inc., d/b/a Glenbeigh Hospital (Glenbeigh) holds a CON for a 100-bed unit and Mount Sinai Medical Center (Mount Sinai) holds a CON for a 60-bed unit. Glenbeigh's facility is currently under construction, and Mount Sinai is seeking licensure. While not licensed, Mount Sinai has operated its 60-bed unit under its acute care license, and for the first three quarters of 1985 reported occupancy rates of 49.7 percent, 62 percent, and 48.9 percent. While the beds approved for District XI do not demonstrate an 80 percent occupancy rate, only one unit, Florida Keys, is licensed and operational. That unit is located in Key West, serves the middle and lower keys, and is not accessible to Dade County residents. The remaining units are not licensed, and their occupancy figures are not representative of a functional substance abuse unit. Accordingly, a failure to demonstrate compliance with the 80 percent occupancy standard is not necessarily dispositive of the question of need. There currently exists, however, no recognized methodology to calculate need for long-term substance abuse services. Accordingly, to demonstrate a need in 1990 for such services, Mercy relied on a numeric need methodology devised by its health planning expert, Daniel Sullivan 2/ (Petitioner's exhibit 4). Sullivan's methodology was not, however, persuasive. The First Step in Sullivan's Methodology The first step in Sullivan's methodology was to derive an estimate of the number of substance abusers in District XI who would seek treatment in an inpatient setting. The figure he calculated (a,170) was derived-through a four- stage refinement process. Initially, Sullivan estimated the number of problem drinkers within the district for the horizon year by applying the Marden methodology. That methodology, routinely relied upon by health planners, identifies the number of problem drinkers in a given population by multiplying a probability factor to age and sex groupings. By applying the Marden methodology to the age and sex demographics of District XI, Sullivan calculated that an estimated 148,541 problem drinkers would reside within the district in 1998. Sullivan then strove to estimate the number of problem drinkers who would seek treatment in some formal setting (network treatment). To establish that estimate, Sullivan relied on a report prepared for the National Institute on Alcohol Abuse and Alcoholism (NIAAA) entitled "Current Practices in Alcoholism Treatment Needs Estimation: A State-of-the-Art Report". According to Sullivan, that report estimates the percentage of problem drinkers who will seek network treatment to be 20 percent. Therefore, he calculated that an estimated 29,788 problem drinkers in District XI would seek such treatment in 1990. Sullivan then strove to estimate the number of problem drinkers who would seek treatment in an inpatient setting. To establish that estimate, Sullivan relied on a survey conducted in 1982 by the NIAAA entitled National Drug and Alcoholism Treatment Utilization Survey". According to Sullivan, that survey indicated that approximately 78 percent of all problem drinkers who sought treatment did 50 on an outpatient basis. Therefore, using a factor of 22 percent, he calculated that an estimated 6,536 problem drinkers in District XI would seek such treatment in 1990. Sullivan's methodology, at stage two and three of his refinement process, was not persuasive. While Sullivan relied on the factors presented in the reports, there was no proof that health planning experts routinely relied on the reports. More importantly, there was no evidence of the type of survey conducted, the reliability of the percentage factors (i.e.: + 1 percent, 10 percent, 50 percent, etc.), or their statistical validity. In sum, Sullivan's conclusions are not credited. The final stage at step one of Sullivan's methodology, was to estimate the number of substance abusers (alcohol and drugs) who would seek treatment in an inpatient setting. To derive that estimate, Sullivan relied on a report prepared by the Department's Alcohol, Drug Abuse and Metal Health Office, contained in a draft of its 1987 state plan, which reported that 80 percent of substance abusers abuse alcohol and 20 percent abuse other drugs. Applying the assumption that 80 percent of substance abusers abuse alcohol, Sullivan estimated that 8,170 substance abusers in District XI would seek inpatient treatment in 1990. Sullivan's conclusion is again not persuasive. To credit Sullivan's methodology, one must assume that substance abusers (alcohol and drugs) seek treatments at the same rate as alcohol abusers. The record is devoid of such proof. Accordingly, for that reason and the reasons appearing in paragraph 12 supra, Sullivan's conclusions are not credited. The Second Step in Sullivan's Methodology. The second step in Sullivan's methodology was to estimate the number of hospital admissions, as opposed to other residential facility admissions, that would result from the need for substance abuse services. To quantify this number, Sullivan relied on one 1982 survey conducted by NIAAA. According to that survey, the distribution of inpatient substance abuse clients by treatment setting in 1982 was as follows: Facility Location Number Percent of Total Hospital 17,584 34.1 Quarterway House 1,410 2.7 Halfway Housed/ Recovery Home 14,648 28.4 Other Residential Facility 15,980 31.0 Correctional Facility 1,985 3.8 TOTAL 51,607 100.0 percent Therefore, using a factor of 34.1 percent, Sullivan estimated the number of substance abuse hospital admissions to be 2,784 for 1990. For the reasons set forth in paragraph 12 supra, Sullivan's conclusions are, again, not credited. The Third and Fourth Steps in Sullivan's Methodology. The third step in Sullivan's methodology was to estimate the number of substance abuse hospital admissions that would require long-term, as opposed to short-term, services. To derive this estimate, Sullivan calculated admissions to short-term beds by applying a 28-day length of stay and an 80 percent occupancy standard to the Department's short-term bed need methodology (.06 beds per 1,000 population) contained in Rule 10-5.11(27)(f)1, Florida Administrative Code. Sullivan then subtracted that number (1,182) from the estimated number of substance abuse hospital admissions for 1990 (2,784), and concluded that the estimated number of hospital admissions in 1990 that would result from the need for long-term substance abuse services would be 1,602. The final step in Sullivan's methodology was to calculate the need for long-term hospital substance abuse beds. To derive this estimate, Sullivan multiplied the estimated number of long-term substance abuse admissions (1,602) by an average length of stay of 37 days, and divided that total by an occupancy standard of 292 days (80 percent of 365 days). Under Sullivan's methodology, a gross need exists for 203 long-term substance abuse beds in District XI. To establish net need, Sullivan would reduce the 203 bed district need by the 160 beds approved for Dade County, but ignore the 30-bed unit at Florida Keys because of its geographic inaccessibility. By Sullivan's calculation, a net need exists for 43 beds in Dade County. Sullivan's analysis, at steps three and four of his methodology, is not credited. Throughout his methodology Sullivan utilized District XI population figures (Dade and Monroe Counties) to develop a bed need for Dade County. Although Monroe County accounts for only 4 percent of the district's population, the inclusion of that population inflated Dade County's bed need. More demonstrative of the lack of reliability in steps three and four of Sullivan's analysis are, however, the methodologies by which he chose to calculate short- term admissions and long-term substance abuse bed need. Sullivan calculated admissions to short-term beds by applying a 28-day length of stay and an 80 percent occupancy standard to the Department's short- term bed need methodology (.06 beds per 1,000 population) contained in Rule 10- 5.11(27)(f)1, Florida Administrative Code. 3/ By using a 28-day length of stay, the maximum average admission permitted for short-term beds, as opposed to the district's demonstrated average of 24-days, Sullivan inappropriately minimized the number of estimated short-term admissions and maximized the number of estimated long-term admissions. 4/ Sullivan sought to justify his use of a 28-day standard by reference to testimony he overheard in a separate proceeding. According to Sullivan, a Department representative testified that the 28-day standard was used in developing the Department's .06 short-term beds per 1,000 population rule. Sullivan's rationalization is not, however, persuasive. First, Sullivan's recitation of testimony he overheard in a separate proceeding was not competent proof of the truth of those matters in this case. Second, Sullivan offered no rational explanation of how a 28-day standard was used in developing the rule. Finally, the proof demonstrated that the average short-term length of stay in District XI is 24 days, not 28 days. The difference between a 24-day and 28-day average short-term length of stay is dramatic. Application of Sullivan's methodology to the population of Dade County, and utilizing a 24-day average, would demonstrate a need for 170 long-term beds, as opposed to Sullivan's calculated need of 203 beds. In addition to the average short-term length of stay factor, long-term bed need is also dependent on an average length of long-term admissions factor. Under Sullivan's approach, the higher the average, the higher the bed need. Accordingly, to derive a meaningful bed need requires that a reliable average length of stay be established. The data chosen by Sullivan to calculate such an average was not, however, reliable. Sullivan used a 37-day average length of stay to develop his long-term bed need. This average was developed from the CON applications of Mercy, Glenbeigh and Mount Sinai. In the applications, Mercy estimated an expected length of stay of 30-37 days, Glenbeigh 36-38 days, and Mount Sinai 28-49 days. Use of a simple average, of the expected lengths of stay contained in Mercy's, Glenbeigh's and Mount Sinai's applications, to develop an average long- term length of stay is not persuasive. The figures contained in the applications are "expected length of stay", a minimum/maximum figure. Mercy failed to demonstrate that a simple average of those figures was a reliable indicator of average length of stay. Indeed, Mercy presented evidence at hearing that its average length of stay would be 30-31 days; a figure that is clearly not a simple average of the 30-37 day expected length of stay contained in its application. Mercy's failure to demonstrate a meaningful average length of stay renders its calculated bed need unreliable. Sullivan's Methodology - An Overview Each step of Sullivan's methodology was inextricably linked to the other. Consequently, a failure of any step in his analysis would invalidate his ultimata conclusion. Notwithstanding this fundamental fact Mercy, with the exception of the Marden methodology, failed to present a reasonable evidentiary basis to demonstrate the reliability and validity of Sullivan's methodology or any of its parts. Since his methodology was not validated, or each of its inextricably linked parts validated, Sullivan's conclusions are not persuasive or credited. Other Considerations If Mercy receives a CON, it will enter into a management contract with Comprehensive Care Corporation (CompCare) to operate the substance abuse unit. The parties anticipate that Mercy will provide its existing physical plant, custodial services, support services, dietary services, complimentary medical services, medical records and pharmacy services, and that CompCare will provide the treatment team, quality assurance, public information, promotion and operational management. Under its proposed agreement with CompCare, Mercy would pay CompCare on a per patient day basis. This fee was not, however, disclosed at hearing nor were the other expenses for patient care established. 5/ Consequently, Mercy failed to establish that its proposal was financially feasible on either a short or long term basis. Mercy also proposes to provide bilingual staff, and dedicate a portion of its patient days to indigent and Medicaid patients. There was no competent proof to establish, however, that such needs were not met, or would not be met, by the existing facilities.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the application of Mercy for a certificate of need to convert 29 medical/surgical beds to 29 long-term substance abuse beds be DENIED. DONE AND ORDERED this 4th day of February, 1987, in Tallahassee, Florida. WILLIAM J. KENDRICK 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 4th day of February, 1987.
Findings Of Fact In 1993, the US Health Care Financing Administration gave Respondent approval to design and implement a pilot program for the delivery of mental health services in part of Florida. The pilot program is limited to Medicaid Area 6, which consists of Hardee, Highlands, Hillsborough, Manatee, and Polk counties. The purpose of the pilot program is to change the way in which the State of Florida pays for mental health services under the Medicaid program. At present, the State makes "fee-for- service" payments based on predetermined fees for defined services. RFP, 1.1 KK. Under the new method, the State will make "capitation" payments consisting of a monthly fee paid in advance to the contractor for each enrolled Medicaid recipient, regardless whether the enrollee receives the services during the payment period. RFP, 1.1.H. On November 23, 1994, Respondent issued Request for Proposals 9501 (RFP). The purpose of RFP 9501 is to procure a contract with a "single, comprehensive mental health care provider on a prepaid, capitated basis, to provide mental health benefits to Medicaid recipients who are residents of Medicaid Area 6 . . .." RFP, 1.4. The second paragraph of RFP 1.4 identifies four goals of the procurement: that the procurement proceed in a timely manner, (2) that the . . . RFP . . . encourages free and open competition, (3) that the procurement effort and resulting new contract operations be completed in a timely manner without disruption of service to Medicaid clients, and (4) that the procure- ment result in a single contractor for Area 6 with sufficient resources to provide services to all AFDC related and SSI Without Medicare Medicaid eligibles in Area 6. Section 2.2 requires that the contractor provide "[i]npatient hospital care for psychiatric conditions," "[o]utpatient hospital care for psychiatric conditions," "[p]sychiatric physician services," "[c]ommunity mental health care," "Mental Health Targeted Case Management," and "Mental Health Intensive Case Management." Section 2.3 defines the six categories of services identified in the preceding paragraph. Referring to "Community mental health care" as "Community Mental Health Services," Section 2.3 states: Community Mental Health Services Community Mental Health Services are rehabil- itative services which are psychiatric in nature, rendered or recommended by a psychia- trist; or medical in nature, rendered or recommended by a psychiatrist or other physician. Such services must be provided in accordance with the policy and service provision specified in the Community Mental Health Services Provider Handbook. The term "Community Mental Health Services" is not intended to suggest that the following services must be provided by state funded "Community Mental Health Centers" or to preclude state funded "Community Mental Health Centers" from providing these services: There are eight categories of mental health care services provided under community mental health: Treatment planning and review; Evaluation and testing services; Counseling, therapy and treatment services provided by a psychiatrist or physician; Counseling, therapy and treatment services provided by a direct service mental health care provider; Rehabilitative services; Children's mental health services; Specialized therapeutic foster care, Level 1 and 2; and Day treatment programs. Community mental health services for children in specialized therapeutic foster care and resi- dential treatment will be provided by HRS District 6 Alcohol, Drug Abuse and Mental Health Program Office to the same degree as in the past. Services are limited to those covered services provided by or under the recommendation of a psychiatrist or physician and related to a plan of care provided or authorized by a psychiatrist or physician, as appropriate, based on the patient's diagnosis. Targeted Case Management The contractor shall adhere to the requirements of the Medicaid Case Management Services Provider Handbook, but will not be required to seek certifications from the HRS Districts' Alcohol, Drug Abuse and Mental Health Program Office in regard to clients, agency designation, or mental health care case manager qualifications. Case manager training materials will be made available through the agency for reproduction by the contractor. Intensive Case Management This is a new mandatory service which is intended to provide intensive, team case management to highly recidivistic persons who have severe and persistent mental illness. Section 2.5 requires that the contractor "adhere to the following minimum staffing, availability, and access standards": The contractor shall provide access to medically necessary mental health care (with the exceptions noted in section 2.4 B.) The contractor shall make available and accessible facilities, service locations, and service sites and personnel sufficient to provide the covered services (specifically, non-hospital outpatient, emergency and assessment services) throughout the geographic area, within thirty minutes typical travel time by public or private transportation of all enrolled recipients. (The typical travel time standard does not apply to waiting time for public transportation--it applies only to actual time in transit.) The contractor must allow enrollees to choose one of the capitated services, as provided in Section 5.1 F.1., when the plan offers another service, not reimbursed under the contract, as a downward substitution. The maximum amount of time between an enrollee's request for mental health services and the first point of service shall be as follows: For emergency mental health services as defined in section 1.1 BB., service shall be immediate. For persons initially perceived to need emergency mental health services, but upon assess- ment do not meet the criteria for emergency care, they are deemed to require crisis support and services must be provided within twenty-three hours. For routine outpatient intake, assessment shall be offered within seven calendar days. Follow-up service shall be offered within fourteen calendar days after assessment. Minimum staffing standards shall be as follows, and failure to adhere to these staffing standards, or the staffing standards indicated in the winning proposal, whichever are greater, may result in termination of the contract (if the contractor's "staff" person does not fill one of the "key staff" positions listed on page 81, the staff persons may be a subcontractor.): * * * The contractor's outpatient staff shall include at least one FTE direct service mental health care provider per 1,500 prepaid members. The Agency expects the contractor's staffing pattern for direct service providers to reflect the ethnic and racial composition of the community. The contractor's array of direct service mental health care providers for adults and children must include providers that are licensed or eligible for licensure, and demonstrate two years of clinical experience in the following specialty areas: Adoption, Separation and loss, Victims and perpetrators of sexual abuse, Victims and perpetrators of physical abuse, Court ordered evaluations, and Expert witness testimony. Mental health care case managers shall not be counted as direct service mental health care providers. The contractor shall provide Spanish speaking and Spanish literate direct service providers at each service location at which there are Spanish speaking enrollees. The contractor shall provide staff approp- riately trained and experienced to provide psychological testing. The contractor shall provide staff approp- riately trained and experienced to provide rehabilitation and support services to persons with severe and persistent mental illness. For all persons meeting the criteria for case management as specified in the Medicaid Case Management Provider Handbook, the contractor shall adhere to the staffing ratio of at least 1 FTE mental health care case manager per 20 children, and at least 1 FTE mental health care case manager per 40 adults. Direct service mental health care providers shall not be counted as mental health care case managers. * * * Section 2.10 provides, in part: The contractor shall be responsible for the coordination and management of mental health care and continuity of care for all enrolled Medicaid recipients through the following minimum functions: A. Minimizing disruption to the enrollee as a result of any change in service providers or mental health care case manager occurring as a result of the awarding of this contract. An offeror may not propose rates exceeding Medicaid's upper payment limit, which "is that amount which would have been paid, on an aggregate basis, by Medicaid under fee-for-service for the same services to a demographically similar population of recipients." 4.11. Section 1.1 TTT defines "Upper Payment Limit" similarly: "The maximum amount Medicaid will pay on a capitated basis for any group of services, based upon fee-for- service Medicaid expenditures for those same services." Section 4.11 sets the range of payment rates at 92-98 percent of the upper payment limit. Each offeror is required to propose a specific payment percentage within the range. Section 4.17 allows offerors to propose a risk corridor of up to 16 percentage points plus and minus the proposed range. The corridor must be equal above and below the capitation rate. The RFP illustrates the risk corridor by applying an 8 point corridor to a 95 percent capitation rate. In this case, the contractor absorbs any plan costs up to 4 percent over the actual payments made to the plan by Respondent or retains any excess plan payments up to 4 percent over the actual costs. Beyond the corridor, the contractor and Respondent share equally in the costs or savings, subject to Respondent's upper payment limit. In no event, however, shall the contractor be entitled to payment from Respondent for "start- up" or "phase-down" costs. Section 4.18 addresses subcontractors: The contractor is fully responsible for all work performed under the contract resulting from the RFP. The contractor may, with the consent of the agency, enter into written subcontract(s) for performance of certain of its functions under the contract. The contractor must have subcontracts with all administrative and service providers who are not salaried employees of the plan prior to the commencement of services under this contract. The contractor shall abide by the requirements of Section 1128A(b) of the Social Security Act prohibiting HMOs and other such providers from making payments directly or indirectly to a physician or other provider as an inducement to reduce or limit services provided to Medicaid enrollees. The contractor must submit signed subcontracts, for a complete provider network in order to obtain agency approval for operation in an area, within sixty days of the execution of this contract, for each proposed subcontracted service provider. Any additional subcontracts must be submitted to the agency twenty days prior to the subcontract effective date. Subcontracts must be approved in writing by the agency's Technical Project Manager prior to the effective date of any subcontract. No subcontract which the contractor enters into with respect to performance under the contract resulting from the RFP shall in any way relieve the contractor of any responsibility for performance of its duties. Amendments to subcontracts must be approved by the agency before taking effect. The contractor shall notify the agency in writing prior to termination of approved subcontracts. The contractor will agree to make payment to all subcontractors within 35 days of receipt of all invoices properly documented and submitted by the subcontractor to the plan. All subcontracts executed by the contractor under the resulting contract must meet the following requirements and be approved by the agency in advance of implementation. All subcontracts must adhere to the following requirements: Be in writing. Specify the functions of the subcontractor. Identify the population covered by the subcontract. Specify the amount, duration and scope of services to be provided by the subcontractor, including a requirement that the subcontractor continue to provide services through any post- insolvency period. Provide that the agency and DHHS may evaluate through inspection or other means the quality, appropriateness, and timeliness of services performed. Specify that the subcontractor has read and agreed to the subcontract and the service provision requirements under section 2 of RFP, for services to be provided under the subcontract, and to the contractor's admission and retention criteria for the services the subcontractor will provide as indicated in the subcontractor's response to section 5.1 F3.b,(5). Provide for inspections of any record pertinent to the contract by the agency and DHHS. Specify procedures and criteria for extension and renegotiation. Provide for prompt submission of information needed to make payment. Require an adequate record system be maintained for recording services, charges, dates and all other commonly accepted information elements for services rendered to recipients under the contract. Require that financial, administrative and medical records be maintained for a period of not less than five years from the close of the contract and retained further if the records are under review or audit until the review or audit is complete. Prior approval for the disposition of records must be requested and approved by the contractor if the subcontract is continuous. Require safeguarding of information about recipients according to 42 CFR, Part 431, Subpart F. Require an exculpatory clause, which survives the termination of the subcontract including breach of subcontract due to insolvency, that assures that recipients or the agency may not be held liable for any debts of the subcontractor. Provide for the monitoring of services rendered to recipients sponsored by the contractor. Specify the procedures, criteria and requirements for termination of the subcontract. Provide for the participation in any internal and external quality assurance, utilization review, peer review, and grievance procedures established by the contractor. Make full disclosure of the method and amount of compensation or other consideration to be received from the contractor. Provide for submission of all reports and clinical information required by the contractor. Make provisions for a waiver of terms of the subcontract, if appropriate. Contain no provision which provides incentive, monetary or otherwise, for the withholding of medically necessary care. Require adherence to the Medicaid policies expressed in applicable Medicaid provider handbooks. Require that the subcontractor secure and maintain during the life of the subcontract worker's compensation insurance for all of its employees connected with the work under this contract unless such employees are covered by the protection afforded by the provider. Such insurance shall comply with Florida's Workers' Compensation Law; and Contain a clause indemnifying, defending and holding the Agency and the plan members harmless from costs or expense, including court costs and reasonable attorney fees to the extent proximately caused by an negligent act or other wrongful conduct arising from the subcontract agreement. This clause must survive the termination of the subcontract, including breach due to insolvency. The contractor shall give the agency immediate notification in writing by certified mail of any action or suit filed and prompt notice of any claim made against the contractor by any subcontractor or vendor which in the opinion of the contractor may result in litigation related in any way to the contract with the agency. In the event of the filing of a petition in bankruptcy by or against a principal subcontractor or the insolvency of said subcontractor, the contractor shall immediately advise the agency. The contractor shall assure that all tasks related to the subcontract are performed in accordance with the terms of the contract. The contractor shall identify any aspect of service that may be further subcontracted by the subcon- tractor. Subcontractors shall not be considered agents of the agency. For evaluation purposes, the RFP divides proposals into two parts: technical and rate, including any rate corridor. The six categories under the technical part, with point values in parentheses, are: Management Summary (0 points), Organization and Corporate Capabilities (100 points), Proposed Staffing Pattern and Licensure of Staff and Facilities (250 points), Operational Functions (400 points), Mental Health Care Service Delivery (400 points), and Transition Workplan (100 points). RFP, 6.1. Section 5.1.C describes the 100-point Organization and Corporate Capabilities as follows: The proposer shall provide in this tab a descrip- tion of its organizational and corporate capabi- lities. The purpose of this section is to provide the agency with a basis for determining the contractor's, and its subcontractors', financial and technical capability for undertaking a project of this size. For the purpose of this tab, the term proposer shall refer to both the contractor and its major subcontractors. It does not refer to the plan's "parent company" unless specifically indicated. Section 5.1 D states the elements of the 250-point Proposed Staffing Pattern and Licensure of Staff and Facilities. Section 5.1 D.3 requires the offeror to disclose "actual and proposed" FTE professionals, including psychiatrists, case managers, psychologists, nurses, and social workers. Section 5.1D.4 requires the offeror to explain how the plan will allocate staff to meet various demands, such as for adoption, sexual and physical abuse counseling, and psychological testing of children. Section 5.1 D.5 requires the proposal to: Describe how the plan will ensure that it has the staff resources appropriately trained and experienced to provide rehabilitative and support services to low income adults with severe and persistent mental illness and, under separate heading, to children with severe and persistent mental illness. Denote the number and percent of total FTEs which will be filled by persons with this type of experience and who will be providing these types of services. Explain the contractor's rationale for the staffing levels indicated and provide a brief, one or two line, description of the training and exper- ience of such persons who will provide these services under the plan. Section 5.1.E describes the elements of the 400-point Operational Functions, in part, as follows: Within this tab, the proposer shall explicitly address its operational capacity to serve Medicaid recipients, and its previous history serving the Medicaid and other low income populations. Separately, the proposer shall address the member services the plan will offer, grievance procedures, quality assurance procedures, the contractor's proposed reporting systems, and the contractor's proposed handling of subcontracts. Service Area of Proposed Plan 42 CFR 434.36 Describe, for each county, how the proposer will meet throughout the lifetime of the contract the 30 minute typical travel time requirement specified in section 2.5 A.1. Describe, for each county, how the proposer will meet throughout the lifetime of the contract the 30 minute typical travel time requirement for child psychiatrists specified in Section 2.5 B.2. Describe, for each county, how the proposer will meet throughout the lifetime of the contract the 30 minute typical travel time requirement for adult psychiatrists specified in Section 2.5 B.1. * * * Section 5.1.F describes the 400-point Mental Health Care Service Delivery category. Section 5.1 F states, in relevant part: This section shall include a detailed discussion of the proposer's approach to providing mental health care. The proposer must be able to document a demonstrated ability to provide a comprehensive range of appropriate services for both children and adults who experience impairments ranging from mild to severe and persistent mental illness. Plans must provide services up to the limits specified by the RFP. They are encouraged to exceed these limits. However, in no instance may any service's limitations be more restrictive than those specified in the Florida Medicaid fee- for-service program. The plan cannot require payments from recipients for any mandatory services provided under this contract. Summary of Services * * * The following is a summary list of the services which may be provided . . . * * * Optional Services Crisis Stabilization Unit * * * z. Other Services (List) * * * Care Coordination 42 CFR 434.52; 10C-7.0524(16), F.A.C. Attach the plan's written protocol describing the plan's care coordination system, which should include the plan's approach to care coordination, utilization review, and assuring continuity of care, such as, verifying medical necessity, service planning, channeling to appropriate levels of treatment, and develop- ment of treatment alternatives when effective, less intensive services are unavailable. The protocol should also address the following questions: * * * 3. Indicate how the contractor will establish services in such a way as to minimize disruption of services, particularly to high risk populations currently served by the department, for children and, separately, for adults. * * * Section 6.3 describes the criteria for evaluating proposals. For Proposed Staffing Pattern and Licensure of Staff and Facilities, the evaluation criteria include, at 6.3 B.3.c: The ability of the proposer to ensure it has, and will continue to have, the resources necessary to provide mental health rehabilitation and support to children who are in the care and custody of the state or who have special needs, such as children who have been adopted or have been physically or sexually abused. About a year ago, Respondent issued RFP 9405, which also sought to procure mental health services on a capitated basis for Medicaid Area 6. Respondent received four proposals, which contained numerous deficiencies. Respondent later withdrew RFP 9405 for revisions to encourage more competition. Concerns over competition involve the role of Community Mental Health Centers (CMHC) in the procurement. CMHCs are publicly funded, not-for-profit entities that traditionally have provided five types of services: emergency, outpatient, day/night, inpatient, and prevention education. CMHCs now also operate crisis stabilization units and supply case management services, as well as specialized children's services, services for aged persons with severe and persistent mental illness, and services for persons with alcohol or drug dependencies. The RFP calls for a wide range of mental health care services, only part of which are community mental health services or other services presently provided by CMHCs. However, CMHCs constitute the only available network of existing providers of community mental health services to Medicaid clients in Medicaid Area 6. Medicaid payments account for about 30 percent of the revenue of Area 6 CMHCs. In late 1992, six CMHCs in Area 6 formed Florida Behavioral Health, Inc. in response to competition from one or more other provider networks, such as Charter. The competitive network of six CMHCs consisted of Manatee Glens Corp., Mental Health Care, Inc., Northside Mental Health Hospital, Peace River Center for Personal Development, Inc., Winter Haven Hospital, and Mental Health Services. Although the six CMHCs are not all of the CMHCs in Area 6, they provide nearly all of the community mental health services to Medicaid clients in Area 6. By early 1993, Florida Behavioral Health, Inc. formed Florida Health Partnership with Options Mental Health, Inc., which is a managed-care provider owned by First Hospital Corporation--a behavioral health management company. With the assistance of Florida Health Partnership, Options Mental Health, Inc. submitted a proposal in response to RFP 9405. An oral or written agreement between Florida Behavioral Health, Inc. and Options Mental Health, Inc. prohibited the six CMHCs from assisting any entity but Options Mental Health, Inc. in responding to RFP 9405. This agreement continues to prohibit the six CMHCs from assisting any entity but Options Mental Health, Inc. in responding to the RFP. The six CMHCs have shared with Options Mental Health, Inc. cost and utilization information. The importance of the unpublished cost information is unclear, and Petitioner has not yet made a public records request to obtain this information. The same is true of unpublished utilization information, which includes information on waiting lists for community mental health services. Any delay in providing community mental health services would have a bearing on the projected demand and thus the cost of a capitated plan. After withdrawing RFP 9405, Respondent revisited the requirement that offerors propose an existing network of providers. In an effort to encourage competition, Respondent deleted a requirement in RFP 9405 that proposals contain existing provider networks. Respondent substituted a requirement that proposals describe provider networks generally, without necessarily including names of subcontractors. Petitioner did not prove any fraudulent, illegal, arbitrary, or dishonest act by Respondent. The main thrust of Petitioner's case is that the effect of the RFP is illegal or arbitrary. Petitioner asserts that the RFP requires a sole source provider or, at minimum, precludes free and open competition. Petitioner argues that the RFP illegally and arbitrarily favors offerors of CMHCs, in partnership with CMHCs, or with subcontracts with CMHCs. Through testimony and argument, Petitioner asserts that various provisions of the RFP either exacerbate or fail to ameliorate the advantages enjoyed by CMHCs, especially due to RFP requirements of implementation of the new provider network in 60 days and with minimal disruption to Medicaid clients. RFP 1.4(2) encourages open and free competition. RFP 2.3 D disclaims any intent that only CMHCs may supply community mental health services. Petitioner's chief witness, Dr. Ronald Mihalick, testified that RFP 2.3 D favors CMHCs because state regulations have designated them the sole provider of community mental health services and government grants have funded their capital expenditures. Neither Dr. Mihalick, Petitioner's other witness, nor Petitioner's counsel has suggested a practical means by which to eliminate this advantage of CMHCs, which cannot, by executive or legislative fiat, be stripped of their buildings, equipment, or experienced staffs, nor of the advantages that may accrue to them by virtue of such assets. It would be counterproductive to eliminate CMHCs from direct or indirect participation in the subject procurement. Nor is Respondent required, if it were legally able, to assign to CMHCs the status of universal providers in order to eliminate illegality or arbitrariness from the RFP. The RFP seeks a broad range of mental health services, of which a substantial part are community mental health services. RFP 2.3 D represents a simple description of community mental health services and expressly negates the inference that only CMHCs may provide such services. RFP 2.3 E and F describes two of the five categories of mental health services: targeted case management and intensive case management, respectively. Intensive case management is a new service, and nothing suggests that Area 6 CMHCs have any direct experience that would give them an advantage in providing this new service, Targeted case management is an existing service provided by CMHCs. There is some doubt whether the RFP provides detailed cost information, including information about targeted case management. However, Petitioner has never made a public records request for such information from any of the CMHCs or Respondent. In any event, Petitioner has hardly presented sufficient evidence regarding targeted case management that the inclusion of such a service in the RFP is arbitrary or illegal. RFP 2.5 prescribes standards for minimum staffing, availability, and access. The minimum staffing standards do not require that existing service providers supply the specified services. For instance, "direct service mental health care providers" must be "licensed or eligible for licensure," as provided in RFP 2.5 B.3.a. Petitioner's objection is that the RFP expresses staffing standards in accordance with Medicaid guidelines, under which the CMHCs are already operating. This objection is puzzling because the procurement is for Medicaid services. In any event, the presence of such a provision does not render the RFP illegal or arbitrary for the reasons already stated. RFP 2.5 B.4 requires staffing ratios of one fulltime equivalency (FTE) per 20 mental health care case managers for children and one FTE per 40 mental health care case managers for adults. Again, though, the RFP does not require that such case managers must be currently employed by a CMHC or even currently providing such services. Petitioner legitimately objects to specifications expressed in terms of FTEs when applied to non-administrative services. The use of FTEs applies to fulltime employees, not to individual therapists who may see Medicaid clients on an occasional basis. The requirement that non-administrative services be expressed in FTEs unduly emphasizes process over product or outcome and is inconsistent with the spirit of the RFP. However, the use of FTEs in RFP 2.5 B.4 does not rise to the level of arbitrariness or illegality. As Respondent's chief witness, Marilyn Reeves, testified, an offeror may convert individual therapists to FTEs, even though the contractor may bear the risk of a faulty conversion formula. RFP 2.10 requires that the contractor implement the new capitated plan with minimal disruption to Medicaid clients, whose mental conditions may worsen from such disruption. Petitioner does not challenge this sensible provision. Petitioner instead argues that other pro-CMHC provisions preclude the implementation of a new plan with minimal disruption. Petitioner has failed to prove that the pro-CMHC provisions, except for 4.18 as discussed below, necessitate more than minimal disruption during the transition. RFP 4.17 provides that Respondent shall not pay the contractor's start-up or phase-down costs. Petitioner's objection is that government grants have paid for the capital expenditures of the CMHCs. For the reasons discussed in connection with RFP 2.3 D, Petitioner has failed to prove how this provision is arbitrary or illegal. RFP 5.1 D assigns 250 points for the proposed staffing pattern and requires the offeror to disclose "actual and proposed" FTE professionals, such as psychiatrists, case managers, and social workers. An offeror that has already identified its personnel may be able to provide a more detailed description and earn more points than another offeror that has yet to find its subcontractors. Likewise, RFP 5.1 D.5 requires a discussion of FTEs, although an offeror with as yet unidentified subcontractors probably can satisfy this section with a more generic discussion and not lose points. In any event, to the extent that the specification in terms of FTEs favors CMHCs, such a provision is not so onerous or unnecessary as to be arbitrary or illegal, as discussed in connection with 2.5 B.4. RFP 5.1 E assigns 400 points for operational functions and requires the offeror to "explicitly address its operational capacity to serve Medicaid recipients, and its previous history serving the Medicaid and other low income populations." Unlike RFP 5.1 C, which requires a proposal to address the contractor and its "major subcontractors," 5.1 E does not mention subcontractors, so this provision favors CMHCs even less than the other provisions of 5 and 6. Perhaps for this reason, neither Petitioner's witnesses nor Petitioner's proposed recommended order addressed RFP 5.1 E. RFP 5.1 F requires an offeror to provide a "detailed discussion," in which it shall "document a demonstrated ability to provide a comprehensive range of appropriate services . . .." An offeror with as yet unidentified subcontractors will likely be unable to supply nearly as much detail as an offeror with subcontractors already in place, but this provision would, if challenged, not be deemed arbitrary or illegal. However, Petitioner challenges only RFP 5.1 F.1 (Optional Services) and 5.1 F.4.a.3. Section 5.1 F.4.a.3 reiterates the requirement that the new capitated plan be implemented so as to "minimize disruption of services." As noted above, Petitioner of course does not object to this requirement, but uses it to show how other provisions are arbitrary or illegal. Petitioner objects to the portion of 5.1 F.1 identifying crisis stabilization units as an Optional Service. Although only CMHCs are licensed to operate crisis stabilization units, the same services are available from other sources, although often not as economically. Moreover, the crisis stabilization unit is only an Optional Service, which Respondent mentioned only for illustrative purposes. The last-cited option, "Other Services (List)," encourages offerors to devise creative options that may not involve such traditional providers as crisis stabilization units. RFP 6.3 B.3.c requires the offeror to ensure that "it has, and will continue to have, the resources necessary to provide mental health rehabilitation and support . . .." Satisfaction of the criteria of 6.3 B, like 5.1 C, D, and F, is easier for CMHCs and harder for contractors with as yet unidentified subcontractors. However, the advantage conferred upon CMHCs is not so great as to render 6.3 B arbitrary or illegal. To varying degrees, RFP 5.1 D.5, E.1, and F.1 (Optional Services) and 6.3 B.3.c prefer CMHCs or offerors affiliated with CMHCs. These provisions potentially conflict with the RFP provisions encouraging free and open competition and prohibiting more than minimal disruptions in service. The potential conflicts are partially attenuated by the ability of an offeror, prior to submitting a proposal, to identify subcontractors that may provide similar services to non-Medicaid clients or provide similar services to Medicaid clients in other areas of Florida or other states. RFP 5.1 D.5, E.1, and F.1 (Optional Services) and 6.3B impose qualitative standards upon the contractor and any subcontractors, whose employees have direct contact with the Medicaid clients. Non-CMHC offerors may nonetheless be able to identify, at the proposal stage, their subcontractors so as to earn the maximum points in these categories. For instance, offerors may find non-CMHC subcontractors providing community mental health services to non- Medicaid clients or to Medicaid clients elsewhere in Florida or the United States. With greater difficulty, non-CMHC offerors with as yet unidentified subcontractors may be able to project, at the proposal stage, features of their subcontractors. They may not be able to score as well as CMHCs and other offerors with already identified networks of community mental health service providers. However, to the extent that non-CMHCs are disadvantaged by these provisions, Petitioner has not shown that the inclusion of these provisions is arbitrary or illegal. These provisions ensure the delivery of quality mental health services. As likely as not, Petitioner has included these provisions after careful consideration of the benefits of further competitiveness and the costs of further limitations upon the participation of CMHCs. The final provision challenged by Petitioner is RFP 4.18, which acknowledges that the contractor may not itself provide the mental health services, but may contract with subcontractors for the provision of these services. Requiring that the contractor have subcontracts prior to the commencement of services under the new capitated plan, Section 4.18 adds that the contractor must submit for Respondent's written approval: signed subcontracts, for a complete provider network in order to obtain agency approval for operation in an area, within sixty days of the execution of this contract, for each proposed subcontracted service provider. Petitioner's challenge to RFP 2.3 D, E, and F; 2.5 A and B.3 and 4; and 4.17 fails because these provisions confer upon CMHCs an insignificant advantage, an advantage upon that could not be removed without eliminating CMHCs from the procurement, or an advantage while specifying an important substantive requirement. Petitioner's challenge to RFP 5.1 D.5, 5.1 E.1, 5.1F.1, and 6.3 B.3.c fails because these provisions, even if conferring significant advantages upon CMHCs, impose important qualitative requirements upon the delivery of mental health services to Medicaid clients. However, RFP 4.18 is different from these other provisions. It does not involve the actual delivery of mental health services to Medicaid clients. Section 4.18 dictates only how long after signing the contract with Respondent the contractor has to implement the new capitation contract. The advantage conferred by 4.18 upon CMHCs is neither trivial nor necessary. The federal waiver runs two years from the actual start-up date of the new capitation plan. Obviously, an inordinate delay in implementation might suggest that the contractor is unable to do the job, but nothing in the record suggests that 60 days marks the beginning of an inordinate delay. Respondent understandably wants to get the pilot project started quickly, presumably in anticipation of important cost savings. But these considerations do not rise to the importance of other provisions involving the actual delivery of mental health services to Medicaid clients. Non-CMHCs, especially offerors with as yet unidentified subcontractors, face a considerable task in plan implementation. For this procurement, only one offeror will have the assistance of the CMHCs, which gives that offeror a clear advantage in at least the community mental health and targeted case management categories. There is no good reason to increase this advantage by imposing an unrealistically short implementation timeframe on contractors. On the other hand, there are two reasons why the 60-day implementation timeframe is arbitrary and illegal: it conflicts with RFP provisions encouraging open competition and it conflicts with RFP provisions prohibiting more than a minimal disruption to clients. The new capitation plan represents a marked departure from past practice. The successful contractor is assuming considerable financial risks when it sets its fees and risk corridor, if any. This risk is spread over a wide geographic area containing some of Florida's most densely populated areas. Anticipated cost savings to the State may result in narrowed profit margins before the contractor can safely realize savings from reductions in the cost of mental health services provided to Medicaid clients. The success of the capitation plan is jeopardized if the contractor underestimates the revenue needed for the successful operation of the plan. The offeror without subcontractors at the time of submitting a proposal needs time to enlist the cooperation of CMHCs or other subcontractors. A witness of Respondent described a possible scenario in which CMHCs declined to cooperate with the contractor and were forced to terminate employees. Although these employees would be available to the contractor, they would not likely be available in a 60-day timeframe. A multitude of tasks confront the non-CMHC contractor, especially if the contractor does not have a subcontractor network in place when submitting the proposal. Not surprisingly, Respondent's witnesses did not offer a spirited defense of the 60-day implementation timeframe, as is partly illustrated by the following testimony of Respondent's chief witness: Q: Is there a reason that the language on Page 61 says "must have signed subcontract within 60 days?" A: No. What it is trying to get at there is that if you are going to start being operational within 60 days, you got to know that you got to get those subcontracts approved by us prior to being able to do that. Respondent's witness readily testified that the deadline would not be enforced, if the enforcement jeopardized the welfare of the Medicaid clients. Of course, given the vulnerability of the clients, Respondent would not require the implementation of an unfinished plan at the end of the contractual implementation timeframe, regardless of the duration of the implementation timeframe. But a rational deadline for implementation would not so readily invite discussions of waivers and extensions. The presence of an impractical deadline misleads offerors. Some offerors may obtain an unfair advantage by structuring their proposals without regard to the implementation timeframe, secure in the knowledge that it will not be enforced. Other offerors may limit Optional Services or avoid more creative delivery or administrative programs in order to ensure that their plans can be implemented within the arbitrarily short implementation timeframe. To eliminate arbitrary and illegal conflicts with other RFP provisions encouraging open competition and prohibiting more than minimal disruptions in service, the implementation timeframe of 60 days must be extended to at least 120 days.
Recommendation Based on the foregoing, it is hereby RECOMMENDED that the Agency for Health Care Administration enter a final order amending RFP 4.18 by inserting "120" days for "60" days in the second paragraph and making any necessary conforming changes elsewhere in the RFP, and, after making these changes, proceed with the subject procurement. ENTERED on January 31, 1995, in Tallahassee, Florida. ROBERT E. MEALE Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings on January 31, 1995. APPENDIX Rulings on Petitioner's Proposed Findings 1-4: (except that "poisonous" in paragraph 2 is rejected as melodramatic and unsupported by the appropriate weight of the evidence): adopted or adopted in substance. 5: rejected as unsupported by the appropriate weight of the evidence, except for 4.18. 6-7: adopted or adopted in substance, except that Petitioner did not challenge 5.1 E at the hearing or in the proposed recommended order. 8: rejected as irrelevant. 9-13: adopted or adopted in substance. 14: rejected as unsupported by the appropriate weight of the evidence. Petitioner did not prove that the actual information shared by the CMHCs was crucial--only that certain information could theoretically be crucial. 15: adopted or adopted in substance, although other CMHCs operate in Area 6, but do not possess much share of the community mental health services market. 16-17: rejected as irrelevant. 18: adopted or adopted in substance, except for the last sentence, which is rejected as unsupported by the appropriate weight of the evidence (except for 4.18). 19-20: adopted or adopted in substance. 21: rejected as repetitious. 22: adopted. 23-25: adopted or adopted in substance, except for last sentence of paragraph 25, which is rejected as unsupported by the appropriate weight of the evidence. 26-27: adopted or adopted in substance. 28: rejected as unsupported by the appropriate weight of the evidence. 29-33: adopted or adopted in substance, except for last sentence of paragraph 33, which is rejected as unsupported by the appropriate weight of the evidence. 34: adopted or adopted in substance. 35-36: rejected as unsupported by the appropriate weight of the evidence. 37-38: adopted or adopted in substance, although this was hypothetical testimony of one of Respondent's witness, not a formal statement of Respondent's "position." 39 (first sentence): rejected as unsupported by the appropriate weight of the evidence. 39 (second sentence): adopted. 40-44 (second sentence): adopted or adopted in substance. 44 (third sentence): rejected as recitation of evidence. 45: adopted. 46-47: adopted or adopted in substance. 48: rejected as unsupported by the appropriate weight of the evidence. 49: rejected as irrelevant and, except for 4.18, unsupported by the appropriate weight of the evidence. Rulings on Respondent's Proposed Findings 1-5: adopted or adopted in substance. 6: adopted or adopted in substance, except for 4.18. 7: adopted or adopted in substance. 8: adopted or adopted in substance, at least to the extent that Petitioner failed to prove the contrary. 9 (except last sentence): adopted or adopted in substance. 9 (last sentence): rejected as speculative. 10-16: adopted or adopted in substance, although the extent of Petitioner's ability to respond satisfactorily is questionable, as is the rationale for the use of FTEs for non-administrative positions. Additionally, all proposed findings that RFP provisions do not place non-CMHCs at a disadvantage, when such proposed findings conflict with findings in the recommended order, are rejected as unsupported by the appropriate weight of the evidence. COPIES FURNISHED: Douglas M. Cook, Director Agency for Health Care Administration 2727 Mahan Drive Tallahassee, FL 32308 Harold D. Lewis, General Counsel Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, FL 32303 Sam Power, Agency Clerk Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, FL 32303 Seann M. Frazier Mark A. Emanuele Panza Maurer P.A. 3081 East Commercial Blvd. Suite 200 Ft. Lauderdale, FL 33308 Paul J. Martin William H. Roberts Assistant Attorneys General Office of the Attorney General PL-01, The Capitol Tallahassee, FL 32399-1050
The Issue The issue for determination is whether Respondent was reimbursed by the Medicaid program for non-covered behavioral health services and was, therefore, overpaid by the Medicaid program in the amount of $17,506.76, as set forth in Petitioner's agency action letter dated March 31, 2011.
Findings Of Fact Lorraine A. Mitchell, Ph.D., LCSW, has certifications, among others, in trauma, substance abuse, and sex therapy. She treats Medicaid patients who, as described by her, other practitioners might turn-away. Dr. Mitchell became an authorized Medicaid provider of community behavioral mental health services to Medicaid recipients. As a community behavioral mental health services provider, Dr. Mitchell was issued individual Medicaid provider number 768303100 and was a Type 07 provider. At all times material hereto, Dr. Mitchell had a valid Medicaid Provider Agreement with AHCA (Agreement). The Community Behavioral Health Services Coverage and Limitations Handbook, effective October 2004, hereinafter Handbook, provides in Chapter 1 that community behavioral health services include "mental health and substance abuse services provided to individuals with mental health, substance abuse and mental health and substance abuse co-occurring disorders for the maximum reduction of the recipient's disability and restoration to the best possible functional level." The Handbook further provides, among other things, (a) that Type 07 providers are the Comprehensive Behavioral Health Assessment Provider and Specialized Therapeutic Foster Care Provider; (b) that a treating licensed practitioner of the healing arts (LPHA) must enroll as Provider Type 07 and must be affiliated with a group provider in order to be enrolled as an individual Provider Type 07; and (c) that a LPHA includes a clinical social worker, mental health counselor, marriage and family therapist, or psychologist. The Handbook was incorporated by reference into Florida Administrative Code Rule 59G-4.050, Community Behavioral Health Services. Dr. Mitchell was advised by AHCA that she was required to be affiliated with a group practice. For a period of time, Dr. Mitchell was affiliated with the Trauma Resolution Center, hereinafter TRC. The evidence demonstrates that some Medicaid payments for services rendered were paid to TRC and, in turn, TRC paid Dr. Mitchell; and that some Medicaid payments were paid directly to Dr. Mitchell. Sometime after her affiliation with TRC, Dr. Mitchell formed Mitchell and Associates. As Mitchell and Associates, the same services were provided and the same Medicaid provider number and provider type were used by Dr. Mitchell. As a result, Dr. Mitchell billed under the name of Mitchell and Associates, but continued to use her individual Medicaid provider number (768303100) and provider type (Provide Type 07). AHCA audited certain of Mitchell and Associates' Medicaid claims for the community behavioral mental health services rendered. AHCA's audit focused only on services for which billing by Mitchell and Associates, as a Provider Type 07, was not permitted. A Provider Type 07 was only authorized to bill for Comprehensive Behavioral Health Assessment services (code H0031 HA) and Specialized Therapeutic Foster Care services (codes S5145, S5145 HE, and S5145 HK). AHCA determined from the audit that, for services in 2009 and 2010, Mitchell and Associates billed for non-covered services for a Type 07 provider (services beginning on February 4, 2009, and ending on August 10, 2010, for codes H2019 HR and H2019 HO) in an amount exceeding $17,506.76. No dispute exists that, during 2009 and 2010, Mitchell and Associates received payment for services to Medicaid recipients, including for the services that are being disputed. Further, no dispute exists as to whether the services were provided or as to the medical necessity of the services provided. The evidence demonstrates that, for the audit of services rendered by Mitchell and Associates during 2009 and 2010, Mitchell and Associates billed for non-covered behavioral health services (services beginning on February 4, 2009, and ending on August 10, 2010, for codes H2019 HR and H2019 HO), and received payment for same in an amount exceeding $17,506.76. Further, the evidence demonstrates that Mitchell and Associates was overpaid by the Medicaid program in an amount exceeding $17,506.76 for the non-covered behavioral health services. AHCA seeks only the overpayment amount of $17,506.76. No dispute exists as to the accuracy of the formula used to calculate the total overpayment. At all times material hereto, Dr. Mitchell attended training sessions presented by persons, who processed Medicaid billings, in order to better understand the billing aspect as Medicaid providers. Further, Dr. Mitchell was in contact with AHCA's staff, who assisted Medicaid providers, in order to obtain a better understanding of the Medicaid provider process for Type 07 providers. The evidence demonstrates that Dr. Mitchell believed that she was billing correctly and was billing for covered behavioral health services. AHCA considers the billing by Mitchell and Associates to be a mistake, not fraud. The evidence demonstrates that the billing by Mitchell and Associates was not fraud, but was a mistake. On September 27, 2010, Mitchell and Associates was issued a group Medicaid number. Dr. Mitchell began billing under the group Medicaid provider number for services rendered.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration enter a final order: Finding that Lorraine A. Mitchell and Associates, P.A., received overpayments from the Medicaid program for non-covered behavioral health services in 2009 and 2010 (for services beginning on February 4, 2009, and ending on August 10, 2010, for codes H2019 HR and H2019 HO) in the amount of $17,506.76; and Requiring Lorraine A. Mitchell and Associates, P.A., to repay the overpayment of $17,506.76, plus interest at ten percent interest from March 31, 2011, in accordance with an agreed upon repayment schedule. S DONE AND ENTERED this 17th day of August, 2011, in Tallahassee, Leon County, Florida. ERROL H. POWELL Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 17th day of August, 2011.
The Issue Whether the Department should issue certificate of need number 4502 to construct and operate a fifty-bed long-term psychiatric hospital in Leon County, Florida, to HCAC?
Findings Of Fact HCAC is a corporation formed by Anthony Estevez for the purpose of developing and operating a long-term psychiatric facility in Leon County, Florida. The facility was to be known as HCAC psychiatric Hospital of Leon County. Mr. Estevez owns 100 percent of the stock of HCAC. The Department is the state agency in Florida authorized to issue certificates of need for long-term psychiatric facilities. TMRMC is a general acute care hospital located in Tallahassee, Leon County, Florida. TMRMC operates a free- standing short-term psychiatric facility in a two-story, approximately 45,000 square foot, structure located within a block and a half from the main hospital. TMRMC's psychiatric facility is licensed for sixty beds. At present, forty-five of its beds are actually open, with fifteen beds in each of three units. One unit is available for adult patients (including geriatric patients), one is available for adolescent patients and one is available for an open adult unit. The other fifteen beds are available but are not staffed because of a lack of patients. Apalachee is a private, non-profit corporation. Apalachee provides comprehensive community mental health services to Franklin, Gadsden, Jefferson, Leon, Liberty, Madison, Taylor and Wakulla Counties. Apalachee was established consistent with State and federal guidelines to provide a variety of mental health Services. On March 17, 1986, a Letter of Intent was filed with the Department notifying the Department of Mr. Estevez's intent to apply for a certificate of need in the March 16, 1986, batching cycle. This Letter of Intent was filed within the time requirements of Florida law. On April 15, 1986 Estevez filed an application for a certificate of need for a comprehensive, free-standing, ninety-bed long-term psychiatric facility to be located in Leon County, Florida. Leon County is located in the Department's District 2. District 2 is made up of Bay, Calhoun, Franklin, Gadsden, Gulf, Jackson, Jefferson, Holmes, Leon, Liberty, Madison, Taylor, Wakulla and Washington Counties. Franklin, Gadsden, Jefferson, Leon, Liberty, Madison, Taylor and Wakulla Counties make up Subdistrict 2B. The other Counties make up Subdistrict 2A. HCAC's application was filed with the Department and the District 2 local health council. In a letter dated May 15, 1987, the Department requested additional information from HCAC. The information requested by the Department was provided by HCAC on or about June 19, 1986 and June 23, 1986. On September 23, 1986, the Department issued a State Agency Action Report partially approving HCAC's certificate of need application. HCAC was notified of the Department's decision and was issued certificate of need #4502 by letter dated September 30, 1986. HCAC had sought approval to construct a ninety-bed facility providing specialty long-term psychiatric services for the chronically mentally disturbed; patients with a ninety-day average length of stay. The facility was to provide care to adolescents, adults and geriatrics. Certificate of need #4502 authorized HCAC to construct a fifty-bed long-term adult, geriatric and adolescent psychiatric hospital in Leon County. The Department approved the facility because of its perception that there is no long-term psychiatric facility serving the geographic area proposed by HCAC to be served. By letter dated November 13, 1987, the Department issued an amended certificate of need #4502 to HCAC restricting the services to be provided to adult and geriatric long-term psychiatric services. HCAC intends on using thirty-six beds for adults and fourteen beds for geriatric patients. HCAC did not contest the Department's reduction in the size of the approved facility or the limitation of the scope of services to adult and geriatric patients. At the formal hearing HCAC presented evidence to Support the approved fifty-bed facility Serving only adults and geriatrics. HCAC has not contested the Department's decision to only partially approve HCAC's application. Supporting documentation took into account the smaller size of the approved facility. No substantial change in the scope or emphasis of the facility was made by HCAC other than the elimination of adolescent Services. HCAC has projected an average occupancy rate of 80 percent for the third year of operation. Because of the failure to prove that there is a need for an additional fifty long-term psychiatric beds for District 2, HCAC has failed to prove that this projection is reasonable. As of the date of the Department's initial decision and at the time of the formal hearing of these cases Rivendell Family Care Center (hereinafter referred to as "Rivendell") an eighty-bed long-term-psychiatric free-standing hospital located in Panama City, Bay County, Florida, had been open for approximately six weeks. Rivendell's occupancy rate at the time of the formal hearing was approximately twenty-four percent. Long-term psychiatric services mean hospital based inpatient services averaging a length of stay of ninety days. Long-term psychiatric services may be provided pursuant to the Department's rules in hospitals holding a general license or in a free-standing facility holding a specialty hospital license. Generally, the chronically mentally ill constitute an under-served group. In order to provide a complete continuum of care for the mentally ill, in-patient hospital treatment, including twenty-four hour medical care and nursing services and intensive resocialization or teaching of resocialization skills, should be provided. The Department has not established a standard method of quantifying need for long-term psychiatric beds in Florida. The Department's approval of the additional long- term psychiatric beds and facility at issue in this proceeding and the Department's and HCAC's position during the formal hearing that there is a need for HCAC's facility was based generally upon their conclusion that there is a "lack of such a facility to serve the geographic area." During the formal hearing, the Department further justified the need for the facility as follows: Basically it was felt that given the geographic distance or distances between this area, the eastern portion of District II, and the closest facilities, meaning licensed hospitals or facilities authorized by a Certificate of Need to offer long-term adult psychiatric services in a Chapter 395 licensed hospital, that there probably should be one here of a minimal size because we were not firm in, or in surety of the number of patients who might need the service in this area. But we thought that there should be at least a minimally sized long-term psychiatric hospital in this area to serve this area. HCAC and the Department failed to prove that there is a need for an additional fifty long-term psychiatric beds in District 2. At best, HCAC and the Department have relied upon speculation and assumptions to support approval of the proposed facility. In order to prove need, the characteristics of the population to be served by a proposed health service should be considered. A determination that there is a need for a health service should be based upon demographic data, including the population in the service area, referral sources and existing services. HCAC and the Department did not present such evidence sufficient enough to Support the additional fifty beds at issue in this proceeding. HCAC did not use any need methodology to quantify the gross need for long-term psychiatric beds in District 2. Nor did HCAC or the Department present sufficient proof concerning existing services, the population to be served, the income or insurance coverage of the Service area population or actual service area referral patterns. In its application. HCAC premised its proposal, in part, on the assumption that "the Leon County area is an undeserved area with residents being referred to facilities long distances away." HCAC exhibit 2. The evidence does not support this assumption. HCAC also premised its proposal upon its conclusion that it would receive patient referrals from existing institutions. The evidence failed to support this conclusion. HCAC also premised its proposal upon the fact that long-term psychiatric services have been designated as a licensure category by the Department. This does not, however, create a presumption that there is a need for such services in a particular area. Based upon the evidence presented at the formal hearing concerning one methodology for quantifying the need for long-term psychiatric beds, there may already be a surplus of long-term psychiatric beds in District 2. Such a surplus of beds may exist whether State hospital beds and ARTS and GRTS program beds are considered. The methodology is based upon national length of stay data for 1980 which was obtained from the National Institute of Mental Health. The methodology did not take into account more current data or Florida specific data. Therefore, use of the methodology did not prove the exact number of long- term psychiatric beds needed for District 2. Although the weight of the evidence concerning the use of the methodology failed to support a finding as to the exact number of long-term psychiatric beds needed in District 2, its use was sufficient to support a finding that there may be a surplus of beds already in existence. The methodology further supports the conclusion that HCAC and the Department have failed to meet their burden of proving that there is a need for the proposed facility. The weight of the evidence failed to prove whether long-term inpatient psychiatric services, other than those provided at State hospitals, are "within a maximum travel time of 2 hours under average travel conditions for at least 90 percent of the service area's [District 2] population." The closest long-term inpatient psychiatric facility [other than a State hospital], Rivendell, is located in Panama City, Bay County, Florida. This facility is located in Subdistrict 2A. There is no facility located in Subdistrict 2B. Rivendell is located on the western edge of Subdistrict 2B, however. The weight of the evidence failed to prove that this facility is not within a maximum travel time of 2 hours under average travel conditions for at least 90 percent of District 2's population. On page seven of the State Agency Action Report approving Rivendell, the Department indicated that "[t]he proposed location insures that 90 percent of the District I and District II population will have access within two hours travel time." This determination was made prior to the initial approval by the Department of HCAC's proposed facility. If the Florida State Hospital at Chattahoochee (hereinafter referred to as "Chattahoochee"), which is located in District 2, is taken into account, long-term psychiatric services are available within a maximum travel time of 2 hours under average travel conditions for a least 90 percent of District 2's population. Chattahoochee provides long-term inpatient psychiatric hospital care to indigent and private pay patients. The quality of cafe at Chattahoochee is good and a full range of therapeutic modalities typically available at other psychiatric hospitals are available. HCAC and the Department have suggested that there is need for the additional fifty beds at is sue in these cases because of their conclusion that 90 percent of the population of District 2 is not within two hours under average travel conditions of long-term psychiatric services. The failure to prove this conclusion further detracts from their position as to the need for the proposed facility. HCAC exhibit 8 is a copy of the goals, objectives and recommended actions contained in the 1985-87 Florida State Health Plan relating to mental health facilities. The evidence in this proceeding failed to support a finding that HCAC's proposed facility will enhance these goals, objectives and recommended actions. Goal 1 of the 1985-87 Florida State Health Plan is to "[e]nsure the availability of mental health and substance abuse services to all Florida residents in a least restrictive setting." Objectives 1.1, 1.2 and 1.4, and the actions recommended to achieve these objectives are not applicable to HCAC's proposed facility. Objective 1.3 provides that additional long-term inpatient psychiatric beds should not be approved in any district which has "an average annual occupancy of at least 80 percent for all existing and approved long-term inpatient psychiatric beds." Goal 2 of the 1985-87 Florida State Health Plan is to "[p]romote the development of a continuum of high quality, cost effective private sector mental health and substance abuse treatment and preventive services." The objectives and recommended actions to achieve this goal are not applicable to HCAC's proposed facility. Goal 3 of the 1985-87 Florida State Health Plan is to "[d]evelope a complete range of essential public mental health services in each HRS district." The objectives and recommended actions to achieve this goal are not applicable to HCAC's proposed facility. The Florida State Plan for Alcohol, Drug Abuse and Mental Health Services does not specifically deal with private long-term psychiatric services. Instead, it relates specifically to treatment in the state mental health treatment facilities. The applicable district mental health plan does not specifically address long-term psychiatric services. The plan does, however, recommend that new facilities should indicate a commitment to serving the medically indigent. HCAC has agreed to provide 5.6 percent of its patient days for indigent care. HCAC's commitment to provide 5.6 percent of its patient days for indigent care is consistent with this objective. Mental Health District Boards have been abolished. The District 2 Alcohol, Drug Abuse and Mental Health Planning Council, however, has published the Alcohol, Drug Abuse, and Mental Health 1986-89 Provisional District Plan. It is acknowledged in this Plan that deinstitutionalization and the provision of the least restrictive means of treatment should be promoted. The use of long- term psychiatric inpatient beds does not promote this philosophy. If a patient is not admitted as part of the 5.6 percent indigent commitment of HCAC and cannot pay the $10,500.00 per month admission charges, HCAC will not admit the patient. Additionally, if a patient is admitted and runs out of funds to pay the daily charges and is not part of the 5.6 percent indigent commitment, the patient will be transferred to another facility. HCAC's facility will be accessible to all residents who can pay for their services or who are part of the 5.6 percent indigent commitment of HCAC. The provision of 5.6 percent indigent care is adequate. HCAC will provide non- discriminatory health care services, to those indigent patients who are covered by HCAC's 5.6 percent commitment. The Counties which make up Subdistrict 2B, other than Leon County, are below the average national and State poverty levels. In most of the Counties, twenty percent of the population have incomes below the poverty level. HCAC has not managed any type of psychiatric hospital and currently has no employees. The proposed facility is to be managed by Flowers Management Corporation (hereinafter referred to as "Flowers"). Flowers is a psychiatric management company that has been in operation since 1984. Mr. Estevez owns fifty-one percent of the stock of Flowers and is the Chairman of the Board. Flowers is operating five Psychiatric/substance abuse facilities: three hospital based and two free-standing pychiatric/chemical dependency facilities. The staff and faculty of Flowers has a strong background in the management of psychiatric facilities. Flowers has no experience in the management of a long-term psychiatric facility. Mr. Nelson Elliot Rodney, Flowers' Regional Vice President, will be ultimately responsible for the management of the proposed facility. The administrator of the facility will report to Mr. Rodney. Mr. Rodney will seek to implement the goals outlined in HCAC's certificate of need application for the proposed facility. Mr. Rodney has not designed a psychiatric hospital. Nor has Mr. Rodney worked at or administered a long- term psychiatric hospital. The overall treatment plan as presented in HCAC's certificate of need application and as presented at the formal hearing lends itself to the development of a good program for long-term psychiatric care. HCAC has associated itself with experts in long-term psychiatric care in order to develop a detailed plan specifically addressing the treatment needs of long-term psychiatric patients. HCAC has the ability to, and will, provide good quality patient care. Apalachee provides certain programs in Subdistrict 2B which provide alternatives to long-term psychiatric hospitalization: the Geriatric Residential Treatment System (hereinafter referred to as "GRTS") and the Adult Residential Treatment System (hereinafter referred to as "ARTS"). Apalachee's GRTS program, which serves Individuals fifty-five years of age and older, contains a residential component with a total capacity of Seventy geriatric beds. A wide variety of services are provided as part of the GRTS program, including day treatment and case management components. When Apalachee's ARTS program is fully implemented there will be a total of one hundred sixty-three beds available for the care on long-term mentally ill adults and geriatrics within Subdistrict 2B. The ARTS program serves adults who are eighteen to fifty-four years of age. Apalachee's GRTS and ARTS programs do not provide the identical services provided in a free-standing long-term psychiatric hospital. The programs do provide some identical or similar services, and, to that extent, the programs complement the continuum of psychiatric care available. To the extent that they provide the same type of services, Apalachee's GRTS and ARTS programs serve as alternatives to HCAC's proposed facility. There is a national shortage of registered nurses. This shortage is particularly acute with regard to psychiatric nurses. TMRMC has a current shortage of three registered psychiatric nurses, three part-time psychiatric registered nurses, seven flex positions for psychiatric nurses, one full- time nurse technician position and one mental health worker. TMRMC has had difficulty, despite adequate efforts to recruit, recruiting for its psychiatric facility since it opened. It has never been fully staffed with psychiatric nurses. There is also a shortage of occupational therapists. TMRMC has had an occupational therapist vacancy for seven months. Mr. Rodney will be responsible for the recruitment of the necessary personnel for the proposed facility. Mr. Rodney indicated that he would utilize recruitment methods similar to those used by TMRMC. Mr. Rodney will also use his experience and contacts in the Dade County, Florida area. HCAC's salary package is reasonable and HCAC will provide adequate in- service training programs. Although HCAC will have difficulty in attracting qualified staff, just as TMRMC has had, it will be able to obtain adequate staff for the proposed facility. HCAC may do so, however, at the expense of existing health care providers. Apalachee provides the following programs in District 2: Wateroak--A sixteen-bed long-term psychiatric hospital for the treatment of children and adolescents. It is a licensed Specialty hospital; In November of 1987, Apalachee began construction of an acute care facility, which will provide inpatient short- term psychiatric services; Case Management Services--Case management services, which include supportive counseling, medication therapy, assistance with transportation and home visitation, are provided to the chronically mentally ill on an outpatient basis. The Services are to be provided where the patients reside; Hilltop--A sixteen-bed residential treatment center. Hilltop is a group home living facility for adults eighteen to fifty-four years of age; Chemical Dependency Program--Individual, group and family counseling and educational services on an outpatient basis for Individuals with suspected substance abuse problems; Emergency Services--Year-round, twenty-four hour a day telephone or face-to-face evaluations to persons with an acute disturbance or who are in need of evaluation for determination of the proper level of care; PATH--Positive Alternative to Hospitalization Program, a crises stabilization unit developed as an alternative to short-term psychiatric care; PPC--Primary Care Center, a nonhospital medical detoxification unit providing short-term detoxification care to alcohol abusers; Gerontological Programs--Made up of the GRTS program and an outpatient component. Through the outpatient component, Apalachee uses its outpatient clinics in each County in its service area to provide linkage for therapy and medication and supportive counseling to geriatrics; ARTS Program; and Designated Public Receiving Facility--Apalachee is the designated public receiving facility for Subdistrict 2B. It screens and evaluates every person admitted to Chattahoochee. Apalachee's adult mental health programs which are available to indigent patients, directly impact both long and short-term hospital utilization, lowering such utilization. For example, before establishing the services provided to suspected substance abusers, many patients were placed in long-term psychiatric hospitals. Referrals to TMRMC of patients under the Baker Act have been reduced from an average of fifteen to eighteen patients per day to an average of one-half to one person per day. There has also been a decrease in admissions to Chattahoochee since Apalachee established the GRTS and ARTS programs. At the time of the formal hearing of these cases TMRMC had a census of only twenty-eight adult patients in its short-term psychiatric facility. TMRMC's census has been low for the past two years. TMRMC's short-term psychiatric facility is operating at a loss. Any further loss of patients would have a serious impact on the facility. From October 1, 1986 to July 31, 1987, TMRMC lost $127,337.00 on its short-term psychiatric facility. For the twelve-month period from October 1, 1986 to October 1, 1987, it is reasonably estimated that TMRMC will lose $139,722.00. TMRMC would like to open the fifteen-bed unit (which is presently closed) of its short-term psychiatric facility. It must increase its census before it can do so. It has been attempting to increase its census by sending out mail-outs and newsletters, sponsoring educational programs advertising, inviting health care professionals to the facility and initiating clinical affiliations with university programs. Rivendell is an eighty-bed long-term psychiatric facility. Forty of its eighty beds are licensed for adults and geriatric patients. The other forty beds are licensed for children and adolescent patients. Rivendell's census at the time of the formal hearing of these cases was six to eight patients. Chattahoochee has a total of 823 long-term psychiatric beds for adults and geriatrics. There are no like and existing long-term psychiatric beds for adults and geriatrics located in Subdistrict 2B. The only like and existing long-term psychiatric beds for adults and geriatrics available to residents of District 2 are located in Subdistrict 2A at Rivendell. The proposed HCAC facility will result in increased competition in District 2. This increase in competition will have an adverse impact on suppliers of inpatient psychiatric services. Admissions to the proposed facility will likely include patients who would be more appropriately hospitalized in a short-term facility. Although HCAC has no plans to admit short-term patients and will attempt to prevent such admissions, mental health professionals cannot accurately predict the length of a patient's stay upon admission. The determination will often require an in- hospital evaluation of the patient. Therefore, patients more appropriately treated in a short-term facility such as TMRMC will end up spending some tide in HCAC's proposed facility. TMRMC will lose patient days if the HCAC facility is constructed. This will adversely affects TMRMC's occupancy rate, which is already low, and cause further losses in revenue. Given the surplus of long-term psychiatric beds in District 2 and the low occupancy of short-term beds in Subdistrict 2B, it will difficult for HCAC to continue in existence without admitting short-term psychiatric patients. The operation of the proposed HCAC facility will also adversely affect the availability of nurses to staff Apalachee's acute care facility and other Apalachee operations and TMRMC's ability to staff its short-term psychiatric facility. Even the loss of one more full-time registered nurse at TMRMC could cause critical staffing problems. Because of the lack of need for fifty additional long-term psychiatric beds in District 2, HCAC's proposed facility would also have an adverse affect on Rivendell. The proposed facility will provide internships, field placements and semester rotations for psychiatrists, psychologists, social workers, nurses and counselors. The facility will work closely with community agencies and community personnel in developing, operating and providing resources for training for community groups, patient groups and personnel. In- service training will be open to selected professionals in the community. HCAC's proposed facility will have a positive effect on the clinical needs of health professional training programs and schools for health professions in District 2. The-total estimated cost of the proposed project approved by the Department is $4,108,000.00. HCAC plans on financing 100 percent of the cost of the project with a mortgage loan at 13 percent interest. Mr. Estevez has had experience in obtaining financing for health care and other commercial projects. In 1987 alone, Mr. Estevez was personally involved in over $20,000,000.00 of financing. Short-term financial feasibility means the ability to successfully fund a project to ensure that the project will succeed in the short-term. To achieve short-term financial feasibility, there must be sufficient funds to cover any losses incurred during the initial operating period and to cover any short fall in working capital necessary to fund the project. NCNB, a financial institution with which Mr. Estevez has had, and continues to have, a long and profitable association, has indicated interest in financing the proposed project. A financing letter to this effect has been provided. Although the letter does not specifically refer to the proposed project, the weight of the evidence supports a finding that NCNB would be willing to finance the project. In light of Mr. Estevez's experience in obtaining commercial financing and his relationship with NCNB, it is reasonable to conclude that 100 percent financing of the project can be obtained at 13 percent interest. The proposed project will have a negative cash balance at the end of its first and second year of operation. Given Mr. Estevez's commitment to the project, sufficient funds for capital and operating expenses will be available to cover these negative cash balances. Although Mr. Estevez did not provide a separate audited financial statement, the weight of the evidence proved that Mr. Estevez has the ability to provide the necessary capital. In the short-term, HCAC's proposal is financially feasible. HCAC has projected that it will operate at an average length of stay of ninety days. It will charge an all-inclusive $350.00 per day for its long- term psychiatric services, including all ancillary services. Initially, HCAC projected the following payor mix: Medicaid of 30 percent; Medicare of 20 percent; and insurance and private pay of 50 percent. HCAC was informed by the Department that Medicaid reimbursement was not available for psychiatric services in private free-standing psychiatric hospitals. Consequently, HCAC modified its payor mix by eliminating Medicaid from its payor mix. At the formal hearing of this case, HCAC projected the following payor mix: Medicare of 3.3 percent; indigent of 5.6 percent; and insurance and private pay of 91.1 percent. Medicare reimburses for psychiatric care in a limited fashion. That is why HCAC reduced its projected Medicare reimbursement to 3.3 percent of its total revenue. Medicare patients generally use the majority of their lifetime reserve Medicare reimbursable days for other types of care, including short-term psychiatric care and acute care. Persons in need of long-term psychiatric care generally have a poor work history because of their illness interferes with their ability to obtain and maintain employment. Patients have few economic resources of their own. A patients family structure is often disorganized as a result of the patient's episodes of illness. These episodes strain the family relationship. Persons in need of long-term psychiatric care are often unable to pay for needed services and their family members are either unable or unwilling to support the person. There is no facility in Florida with a payor mix of 91 percent insurance and private pay. HCAC's projection of 91.1 percent insurance and private pay is not a reasonable projection. This finding of fact is based upon the high poverty levels within Subdistrict 2B, the lack of need for additional long-term psychiatric beds and the failure to prove that insurance benefits for long-term care are available in District 2. The State of Florida, Employees Group Health Self-Insurance Plan does not provide coverage for specialty hospitals, such as HCAC's proposed facility. The State of Florida provides 42 percent of the employment in Leon County. Insurance provided by other employers in the area limits coverage for inpatient psychiatric care to thirty to thirty-one days. These benefits are often exhausted before long- term care becomes necessary. In order to achieve a 91.1 percent insurance and private pay payor mix, 80 percent to 100 percent will have to be private pay patients. Such a high percentage of private pay patients is not reasonable. The effective buying income in Leon County in 1986 was approximately $22,600.00. In District 2 it was $18,700.00. Madison County and Jefferson County are among the counties heading Florida's poverty rate. Taylor County is the ninth poorest county in the State. HCAC has projected a 95 percent occupancy rate for its proposed facility within six months of its opening. HCAC has failed to prove that this occupancy rate can be achieved. In light of the high poverty rate in the area, the lack of need for long-term psychiatric services and the inability of patients to pay for such services, this projected occupancy rate is not reasonable. In light of HCAC's failure to prove that there is a need for the proposed facility or that its payor mix is reasonable, HCAC has failed to demonstrate that its occupancy projection is achievable. HCAC has projected that 7.3 percent of its gross revenue will be deducted as revenue deductions. Included in this amount are contractual allowances, charity care and bad debts. Medicare reimburses hospitals for total costs rather than revenue or charges. HCAC, therefore, gas projected approximately $6,000.00 for the first year and $24,000.00 for second year as contractual allowances. HCAC's projection of deductions from revenue are not reasonable. Bad debt of 1.6 percent is unreasonable compared to the experience at other long- term psychiatric facilities in Florida. The $350.00 all-inclusive charge is not reasonable. This charge will not be sufficient to cover the proposed facility's costs. HCAC's projected costs for "Supplies and other" and for taxes are reasonable. HCAC has failed to prove that its proposed facility is financially feasible in the long-term. The projected and approved cost of construction is $3,965,456.00. HCAC has indicated that the facility will consist of two, one-story buildings connected by a hallway. The facility will have approximately 40,563 gross square footage. The actual site for the project has not been selected or purchased. The floor plan calls for twenty-five, semi-private rooms for patients. The patient-care building will contain four independent and secure living/program areas connecting to a central core which will contain an atrium open to the outdoors. There will be approximately 811 gross square feet per bed, which is adequate. The proposed design is reasonable. The projected completion forecast of HCAC is reasonable. The projected costs of completing the building are reasonable. The building will be built by Project Advisers Corporation (hereinafter referred to as "PAC"). PAC is a health care, commercial and residential construction company. Mr. Estevez owns 100 percent of PAC. Since 1978, PAC has been involved in the construction of St. John's Rehab Center and Nursing Home, South Dade Nursing Home, Hialeah Convalescent Center, South Dade Rehab Hospital and two psychiatric/chemical dependency hospitals for Glenbeigh Hospital. Generally, there are no differences in the construction requirements between short-term and long-term psychiatric facilities.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED the Department enter a Final Order denying the application of HCAC for a certificate of need to construct and operated a fifty-bed long-term psychiatric facility in Leon County, Florida. DONE and ENTERED this 3rd day of May, 1988, in Tallahassee, Florida. LARRY J. SARTIN Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 3rd day of May, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-4373 and 864374 The parties have submitted proposed findings of fact it has been noted below which proposed findings of fact have been generally accepted and the paragraph number(s) in the Recommend Order where they have been accepted, if any. Those proposed findings of fact which have been rejected and the reason for their rejection have also been noted. HCAC's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 5-6. The third through fourth sentence are hereby accepted. 1 and 6. 3 1 and 39. 4 6 and 9 5 7. 6 8-10, 34 and 97. 7 11. 8 11, 14 and 76. The last Sentence is not supported by the weight of the evidence 6. The last sentence is not supported by the weight of the evidence. 10 10 and 69. 11 Hereby accepted. 12 39-40. 13 These proposed findings of fact are cumulative, subordinate and unnecessary. They deal with the weight to be given to other evidence. 14 42. 15-19 Although these proposed findings of fact- are generally true, they are cumulative, subordinate and unnecessary. The first sentence is not supported by the weight of the-evidence. The rest of the proposed findings of fact are hereby accepted. Although the proposed finding of fact contained in the first sentence is generally true, it is cumulative, subordinate and unnecessary. The rest of the proposed findings of fact deal with the weight to be given to other evidence. These proposed findings of fact are not supported by the weight of the evidence. 23-26 Although these proposed findings of fact are generally true, they are cumulative, subordinate and unnecessary. 27 Although this proposed finding of fact is generally true, the weight of the evidence failed to prove that HCAC will be able to achieve its plans. 28-33 Although these proposed findings of fact are generally true, they are cumulative, subordinate and unnecessary. 34 43. 35 51. The last sentence is not supported by the weight of the evidence. 36 52. 37 53. 38 69-70. 39 72. 40 73. 41 74. 42 67. 43 68. 44 34 and 37. 45 104. 46. The first sentence is law. The last sentence is accepted in 105. 47 97 and 99-100. 48 101. 49 103. 50 102. 51 Hereby accepted. 52-53 These proposed findings of fact deal with the weight to be given other evidence. 54 78. 55 79-80. 56 79. 57-58 Not supported by the weight of the evidence. 76. The last sentence is not supported by the weight of the evidence. Not supported by the weight of the evidence. Although generally correct, these proposed findings of fact do not support HCAC's projected utilization. Irrelevant. Not supported by the weight of the evidence. Irrelevant. 65 92. 66 93. 67 94. The last two sentences are not supported by the weight of the evidence. 68 95. Not supported by the weight of the evidence. HCAC's proposed facility and TMRMC are not comparable. 71-75 Not supported by the weight of the evidence. 54 and 59. The last sentence is not supported by the weight of the evidence. The first two sentences are hereby accepted. The last sentence is not supported by the weight of the evidence. Irrelevant. 79-83 Not supported by the weight of the evidence. 84-85 Statement of law. Hereby accepted. 6 and 25. The last sentence is not supported by the weight of the evidence. 88-90 Although these proposed findings of fact are generally true, they are cumulative, subordinate and unnecessary. 91-92 Not supported by the weight of the evidence. 93 Although these proposed findings of fact are generally true, they are cumulative, subordinate and unnecessary. The last two sentences are conclusions of law. 94-95 Not supported by the weight of the evidence. Irrelevant. The first sentence is a conclusion of law. The second sentence is hereby accepted. The last sentence is irrelevant. 13. The last two sentences are conclusions of law. Irrelevant. 100-102 Hereby accepted. Not supported by the weight of the evidence. Hereby accepted. 44. The last sentence is irrelevant. 47. The last sentence is not supported by the weight of the evidence. 16. The last sentence is not supported by the weight of the evidence. 108 15. Not supported by the weight of the evidence. Irrelevant. See 23. The last sentence is not supported by the weight of the evidence. Conclusions of law. Not supported by the weight of the evidence. 114 34. 115 29. The last sentence is not supported by the weight of the evidence. 115a 30. The last sentence is not supported by the weight of the evidence. 115b-e 30. The next to the last sentence of e is not supported by the weight of the evidence. 115f Not supported by the weight of the evidence. 116-117 Not supported by the weight of the evidence. 118 Hereby accepted. 119-120 35. 121 Irrelevant. 122 33. 123-124 Irrelevant. 125-129 Not supported by the weight of the evidence. 130 3. 131 Hereby accepted. 132 64. The last sentence is not supported by the weight of the evidence. 133 See 49 and 65. 134 54. The last two sentences are not supported by the weight of the evidence. The Department's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 Hereby accepted. 2-3 8-9. 4 Not supported by the weight of the evidence. 5 13 and 25. Not supported by the weight of the evidence. Conclusion of law. 8 31. 9 Not supported by the weight of the evidence. 10-12 Irrelevant. 13 Not supported by the weight of the evidence. 14-16 Conclusions of law. TMRMC's Proposed Findings of Fact 1 1, 6 and 9-11. 2 See 6 and 9. 3 6-10. 4 76. 5 77-78. 6 79. 7 79-80. 8 Hereby accepted. 9 81. 10 82-83. 11 34 and 36. 12 36. 13 6. 14-15 39. 16 41-42. 17 2. 18 3. 19 4 and 6. 20-21 54. 22 Not Supported by the weight of the evidence. 23 54. 24 46 and 54. 25-26 54-55. 27-29 54. 30 54-55. 31 44-45, 47 and 54. 32 Hereby accepted. 33 54-55. 34 55. 35 Irrelevant. 36 56. 37 58. 38 49. 39 48. 40 50. 41-44 Although these proposed findings of fact are generally true, they are cumulative, subordinate and unnecessary. 45-46 65. 47-48 57. 49 58. 50 63-64. 51 Not supported by the weight of the evidence. 52 63-64. 53 63-64. 55 Hereby accepted. Not supported by the weight of the evidence. 56 65. 57 Not supported by the weight of the evidence. 58 25 and 59. 59 Not supported by the weight of the evidence. 60-62 Although these proposed findings of fact are generally true, they are cumulative, subordinate and unnecessary. 63 25 and 59. 64-68 Although these proposed findings of fact are generally true, they are cumulative, subordinate and unnecessary. 69 Not supported by the weight of the evidence. 70-71 27. Although these proposed findings of fact are generally true, they are cumulative, subordinate and unnecessary. Not supported by the weight of the evidence. 74 18 and 96. Irrelevant. Although these proposed findings of fact are generally true, they are cumulative, subordinate and unnecessary. 77-81 Although generally true, these proposed findings of fact are not relevant to this de novo proceeding. 82 Hereby accepted. 83 84. 84 Hereby accepted. 85-86 Irrelevant. 87 See 69 and 72. 88 94. 89 Hereby accepted. 90 74. 91 94. The last three sentences are not supported by the weight of the evidence. 92-93 Not supported by the weight of the evidence. 94-96 Although these proposed findings of fact are generally true, they are cumulative, subordinate and unnecessary. 97 19. 98-99 18. Hereby accepted. Irrelevant. Hereby accepted. 103 19. 104 Although these proposed findings of fact are generally true, they are cumulative, subordinate and unnecessary. 105 20. 106 21. 107 Hereby accepted. 108-110 See 23. 111 Not supported by the weight of the evidence. 112 85. 113 86. 114 88. 115 89. 116-118 Although these proposed findings of fact are generally true, they are cumulative, subordinate and unnecessary. 119 91. 120 90. 121 96. 122-126 Not supported by the weight of the evidence. 127 Hereby accepted. 128-129 Irrelevant. 130 22. 131 97-98. 132 99. 133-139 Not Supported by the weight of the evidence. 140 95. 141 Not supported by the weight of the evidence. 142 97. 143-146 Not supported by the weight of the evidence. Apalachee's Proposed Findings of Fact 1 6 and 8-9 2 4. 3(a)-(i)(1) 54. 3(i)(2) 44-45. 3(j) 44 and 54. 3(k) 54. 4 3. 5 1. 6 104. 7 39 and 41. 8 27 and 60. 9 25 and 59. 10(a) Not supported by the weight of the evidence. 10(b) 27. 10(c) 26. 10(d) Not supported by the weight of the evidence. 11 13. 12(a) 81. 12(b) 82-83. 13 6 76 and 87. The second, third, fifth- eighth sentences, the Second Paragraph and the last Paragraph are not Supported by the weight of the evidence. 71 and 74. Other than the first two Sentences of the first Paragraph and the first two sentences of the third Paragraph, these Proposed findings of fact are not Supported by the weight of the evidence. 16(a) 90. The Second Paragraph is not Supported by the weight of the evidence. 16(b) 88. 16(c) 94. 16(d) 76 and 95. Other than the first three sentences of the first Paragraph and the last Paragraph, these Proposed findings of fact are not Supported by the weight of the evidence. 17 48-49 and 65. The Sixth and eighth Sentences and the last Paragraph are not Supported by the weight of the evidence. 44-47 and 54. The last Sentence of the first Paragraph and the last four Sentences of the last Paragraph are irrelevant. 19 62. 19(a) 3, 23, 56-57 and 64. The Second and third Paragraph are Cumulative and unnecessary. 19(b) 63. The Second Paragraph is Cumulative and unnecessary. 19(c) Cumulative and unnecessary, 19(d) 25, 59, 62 and 66. 19(e) 65. 20 Not Supported by the Weight of the evidence or Cumulative and unnecessary, 21 39 and 41. The last Paragraph is not Supported by the weight of the evidence. COPIES FURNISHED: Jean Laramore, Esquire Anthony Cleveland, Esquire Post Office Box 11068 Tallahassee, Florida 32302 Ronald W. Brooks, Esquire 863 East Park Avenue Tallahassee, Florida 32301 Theodore E. Mack, Esquire John Rodriguez, Esquire Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 Darrell White, Esquire Gerald B. Sternstein, Esquire Post Office Box 2174 Tallahassee, Florida 32301 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 =================================================================
The Issue Whether the Agency for Health Care Administration's (the Agency's or AHCA's) decision to award the contract contemplated in RFP No. 0610, Area 9, is contrary to the Agency's governing statutes, the Agency's rules or policies, or the proposal specifications.
Findings Of Fact On April 3, 2006, AHCA issued solicitation number AHCA RFP 0610, titled Prepaid Mental Health Plan, AHCA Areas 8 and 9. The RFP sought a Prepaid Mental Health Plan vendor for certain Medicaid recipients in the Agency's Area 9, defined as Indian River, Martin, Okeechobee, Palm Beach and St. Lucie Counties.1/ Lakeview did not challenge the RFP specifications. Lakeview, Magellan and Mental Health Network submitted responses to the RFP. The Agency rejected the response filed by Mental Health Network because it failed to meet a mandatory requirement of the RFP. The Agency accepted Lakeview and Magellan's proposals as responsive to the RFP. The Agency employed three evaluators to review parts of the bids submitted. Those reviewers were Erica Carpenter, George Woodley and Jill Sorenson.2/ After calculation of the average ranking of the scores, Magellan was ranked as the highest scored bidder and Lakeview was ranked second. Terms of the RFP The RFP is made up of an initial two-page transmittal letter and 30 attachments. Relevant to this inquiry are terms contained in the transmittal letter and Attachments A, C, D and E. Attachment A specifies the following with regard to submitting a proposal: 9. Respondent's Representation and Authorization. In submitting a response, each respondent understands, represents and acknowledges the following (if the respondent cannot so certify to any of the following, the respondent shall submit with its response a written explanation of why it cannot do so) * * * The product offered by the respondent will conform to the specifications without exception. The respondent has read and understands the Contract terms and conditions and the submission is made in conformance with those terms and submissions. If an award is made to the respondent, the respondent agrees that it intends to be legally bound to the Contract that is formed with the State. The respondent has made a diligent inquiry of its employees and agents responsible for preparing, approving, or submitting the response, and has been advised by each of them that he or she has not participated in any communication, consultation, discussion, agreement, collusion, act or other conduct inconsistent with any of the statements and representations made in the response. The respondent shall indemnify, defend and hold harmless the Buyer and its employees against any cost, damage or expense which may be incurred or may be caused by any error in the respondent's preparation of its bid. All information provided by, and representations made by, the respondent are material and important and will be relied upon by the Buyer in awarding the contract. Any misstatement shall be treated as fraudulent concealment from the Buyer of the true facts relating to submission of the bid. A misrepresentation shall be punishable under law, including but not limited to, Chapter 817 of the Florida Statutes. This provision is understood to indicate that the Agency will take all representations at face value, a conclusion that is consistent with the provisions in the following paragraph: 10. Performance qualifications. The Buyer reserves the right to investigate or inspect at any time whether the product, qualifications, or facilities offered by respondent meet the Contract requirements. Respondent shall at all times during the Contract term remain responsive and responsible. . . . If the Buyer determines that the conditions of the solicitation documents are not complied with, or that the product proposed to be furnished does not meet the specified requirements, or that the qualifications, financial standing, or facilities are not satisfactory, or that performance is untimely, the Buyer may reject the response or terminate the Contract. . . . This paragraph shall not mean or imply that it is obligatory upon the Buyer to make an investigation either before or after the award of the Contract, but should the Buyer elect to do so, respondent is not relieved from fulfilling all Contract requirements. Attachment C of the RFP contains the special conditions relevant to this procurement, including the timeline for the solicitation, a description of mandatory requirements, provision for vendor questions and a vendor's conference, and required certifications to be included with any proposals. In terms of mandatory requirements, Section C.7 of Attachment C states: C.7 Mandatory Requirements. The State has established certain requirements with respect to responses submitted to competitive solicitations. The use of "shall", "must", or "will" (except to indicate futurity) in this solicitation, indicates a requirement or condition from which a material deviation may not be waived by the State. A deviation is material if, in the State's sole discretion, the deficient response is not in substantial accord with the solicitation requirements, provides an advantage to one respondent over another, or has a potentially significant effect on the quality of the response or cost to the state. Material deviations cannot be waived. The words "should" or "may" in this solicitation indicate desirable attributes or conditions but are permissive in nature. Deviation from, or omission of, such desirable features will not in itself cause rejection of a response. Sections C.13 and C.14 of Attachment C address several certifications which must be included with any response to the solicitation. At the end of each of these sections, is a statement in bolded and capital letters stating, "FAILURE TO SUBMIT ATTACHMENT [G , REQUIRED CERTIFICATIONS, SIGNED BY AN AUTHORIZED OFFICIAL, or ATTACHMENT J, GENERAL VENDOR ELIGIBILITY REQUIREMENTS, respectively] SHALL RESULT IN THE REJECTION OF A PROSPECTIVE RESPONSE. Similarly, Section C.15 states that an original technical response must be accompanied by a proposal guarantee payable to the State of Florida in the amount of $5,000 and made in the form of a bond, cashier's check, treasurer's check, bank draft or certified check. As with Sections C.13 and C.14, Section C.15 ends with a statement in bolded and capital letters, stating, "FAILURE TO INCLUDE THE PROPOSAL GUARANTEE WITH THE SUBMISSION OF THE ORIGINAL RESPONSE WILL RESULT IN THE REJECTION OF A PROSPECTIVE VENDOR'S RESPONSE." Subcontracts for the project are discussed in Section C.20 of Attachment C. This section provides in pertinent part: The vendor shall be responsible for the administration and management of all aspects of the contract and the Prepaid Mental Health Plan resulting from the RFP. This includes all aspects of network management, subcontracts, employees, agents and anyone acting for or on behalf of the vendor. The vendor may, with the consent of the Agency, enter into written subcontract(s) for performance of certain of its functions under the contract. The vendor must have subcontracts with all administrative and service providers who are not salaried employees of the plan prior to the commencement of services under this contract. . . . The vendor must submit signed subcontracts, for a complete provider network in order obtain Agency approval for operation in an area, within sixty (60) days of the execution of this contract, for each proposed subcontracted provider. (Emphasis supplied.) Section C.38 provides the general instructions for response preparation and submission. It specifies that the response shall include a transmittal letter; proof of appropriate licensure or application for same; an accreditation certification; the proposal guarantee; a cross-reference table between the proposal and the RFP scope of service requirements; and the actual technical response. With respect to the technical response, the RFP requires that it be prepared in the order specified, with sections tabbed for ease of identification and evaluation. The RFP further states that "[s]pecific questions to be answered within these sections can be found in Attachment E." Attachment D describes the scope of services sought through the solicitation. It provides a general background for issuing the RFP, describes its purpose, and the type of services that a successful vendor must provide. Included within this Attachment are many of the definitions pertaining to the services sought, and the Attachment outlines both mandatory and optional services to be provided by a successful vendor to enhance the plan's covered services for enrollees. The scope of services provides guidance concerning what must be included for each section of the technical response. Nothing in the RFP required a respondent to submit letters of intent with potential subcontractors as part of its submission in response to the RFP. Attachment E is entitled "Evaluation Criteria." The relevant portions of Attachment E provide the following: Review of Mandatory Criteria. Responses to this solicitation will be evaluated against the mandatory criteria found in Part I, Technical Response Mandatory Criteria. Responses failing to comply with all mandatory criteria will not be considered for further evaluation. Evaluation of Responses. Each response determined to be in compliance with all mandatory criteria will be evaluated based on the criteria and points scale delineated in Part II, Evaluation Criteria. Each response will be individually scored by at least three evaluators having expertise and knowledge of the services required by this solicitation. However, the Agency reserves the right to have specific sections of the responses evaluated by less than three individuals. Responses will be evaluated on a per area basis. 1. Evaluation points awarded will be based on the following point structure: Points The component was not addressed. The component contained significant deficiencies. The component is below average. The component is average. The component is above average. The component is excellent. * * * Ranking of responses. Each evaluator will calculate a total score for each response. The Chairman will use the total point scores to rank the responses by evaluator (response with the highest number = 1. second highest = 2, etc.). The Chairman will then calculate an average rank for each response for all the evaluators. The average rankings for each response shall be used to determine a recommendation for contract award for each area. . . . (Emphasis supplied.) Page 3 of 12 in Attachment E contains Part I, TECHNICAL RESPONSE MANDATORY CRITERIA, referenced in Section E.1, above. It states: This evaluation sheet will be used by the Agency for Health Care Administration to designate responses as qualified or not qualified. If the answer to any of the questions in the table below falls into the "No" column, the response will be designated as "not qualified" and will not be considered for further evaluation. QUESTIONS YES NO 1 Did the response include the signed Attachment G, Required Certifications Form required in Section C.13? 2 Did the response include the completed Attachment J, General Vendor Eligibility Requirements Form as required in Section C.14? 3 Did the response include a transmittal letter, signed by an individual having the authority to bind the vendor, as outlined in Section C.38? 4 Did the response include a copy of the vendor's certificate of authority issued by OIR; or documentation proving application for the certificate as required in Section C.38? 5 Did the response include Attachment DD, Prepaid Mental Health Plan Attestation of Accreditation Status Form Required in Section C.38? 6 Did the response include a proposal guarantee in the original Technical Proposal in the amount of $5,000 as specified in Sections C.15 and C.38? Pages 4 through 12 of Attachment E identified the evaluation criteria used to score responses meeting the mandatory criteria identified in Part I. The general category "Organization and Corporate Capabilities" could receive a total of 80 points. Within that category, points would be awarded under the subcategories labeled legal entity; network; organizational structure; mental health care experience; community coordination and partnerships; management information system; administrative reporting; financial statements; legal actions; financial risk and insolvency protection; surplus fund requirement; and contractor's and subcontractor's facilities and network management. The general category "Operational Functions" could receive a total of 90 points. The subcategories identified for scoring include the service area of proposed plan; outreach requirements; mental health care provider assignment procedures; enrollee services; grievance procedures; quality improvement requirements; care coordination; clinical records requirements; out-of-plan services; cost sharing policies; after hours access; and the proposed subcontractor/provider network. The RFP anticipates that the winning proposer would contract with Community Mental Health Centers (CMHCs) to provide a portion of the services to be provided under the contract awarded pursuant to the RFP. Three CMHSs are located in Area 9: Oakwood Center of the Palm Beaches, New Horizons of the Treasure Coast and South County Mental Health Center. Oakwood Centers of the Palm Beaches and New Horizons of the Treasure Coast both operate multiple locations throughout Area 9. South County Mental Health Center operates from a single office in Delray Beach, Palm Beach County. Both Lakewood's and Magellan's proposals anticipated contracting with all three CMHCs. Neither had binding agreements with any of the CMHCs. Review of the Proposals AHCA found that both Magellan's and Lakeview's proposals met the requirements outlined in Part I, Technical Response Mandatory Criteria. As previously stated, the proposal submitted by Mental Health Network was rejected for not meeting this criteria. The Agency's decision that Lakeview's and Magellan's proposals were responsive to the RFP and would be evaluated is consistent with the terms of the RFP as specified in Attachment E. Both Magellan's and Lakeview's proposals contained information for each of the technical sections of the RFP dealing with provision of a network of providers. Once the submissions were provided to the Evaluators for scoring, no evaluator gave a "0" for any section of either proposal. In other words, the Evaluators were satisfied that each submission provided information for each section identified as mandatory under the scoring criteria. Instructions for scoring proposals that met the requirements of the Technical Response Mandatory Criteria were provided by Barbara Vaughan of the Agency's procurement office, and by Deborah McNamara, who was in part responsible for preparing the RFP. Those instructions directed the Evaluators to use the evaluation criteria contained in the RFP. The instructions specified that each evaluator was to review the proposals separately and under no circumstance were they to discuss their evaluations with anyone other than the Chairman or the Procurement office. The evidence reflects that the Evaluators followed these instructions. There are four sections of the RFP that could be said to address the assembling and coordination of a network providers: Section 3.B (Network); Section 3.E (Community Coordination and Partnerships); Section 3.L (Contractor's and Subcontractor's Facilities and Network Management); and Section 5.M (Subcontracts/Provider Network). With regard to provision of a network under Organization and Corporate Capabilities (Section 3.B of the Detailed Evaluation Criteria Components), the Evaluators were instructed to consider Sections D.19 through D.23 of the RFP, titled Overview of Prepaid Mental Health Plan; General Service Requirements; Medicaid Service Requirements; Additional Service Requirements and Minimum Access and Staffing Standards. The written instructions also directed the Evaluators to consider the following questions with respect to the proposed network: Are traditional community providers represented? Are rural areas sufficiently covered? Is there evidence that sufficient providers are available to cover the full range of required services? Are there innovations or does the vendor propose to expand the current provider community in a positive way? Has the vendor identified and responded to any gaps in the current system of care? Magellan's proposal devoted 24 pages to explaining its proposed network. It affirmed that a contract for inclusion in the network would be offered to all of the providers in Section 409.912(4)(b)(7), Florida Statutes. Magellan advised that it sent proposed letters of intent to all CMHCs in Area 9. It disclosed that two of the CMHCs (Oakwood Center of Palm Beaches and New Horizons of the Treasure Coast) had informed Magellan that they were "owners/partners" with a competitor for the RFP, but that it fully expected both entities to participate in the network should Magellan be awarded the contract. It also noted that it had an existing contractual relationship for commercial patients with one of the CMHCs. Magellan's response regarding this component was responsive to the RFP. Erica Carpenter gave both Lakeview and Magellan a score of 3 for this component. George Woodley gave both vendors a score of 4. Jill Sorenson gave Lakeview a score of 3 and Magellan a score of 2. Under Community Coordination and Partnerships (Section 3.E), the Evaluators were given the following written instructions: Consider: RFP, D. 22 Are there existing collaborative agreements with community partners? If not, what are the plans to develop collaborative agreements? Will the vendor facilitate development of a community system of care? Are there any innovative approaches in the vendor's plans for community involvement? With respect to Community Coordination and Partnerships, Magellan submitted a seven-page description of its relationships with community stakeholders, such as United Way; coordination of the partnership between Magellan and its providers; use of a database of community resources and other aspects of its proposed community coordination. Magellan's proposal for this component was responsive to the RFP. Erica Carpenter awarded both Lakeview and Magellan 3 points for Community Coordination and Partnerships. George Woodley awarded 4 points to each. Jan Sorenson awarded 4 points to Lakeview and 3 points to Magellan. Under Section 3.L (Contractor's and Subcontractor's Facilities and Network Management), the written instructions stated: The adequacy, accessibility and quality of the proposed plan facilities as indicated in the vendor's facility standards plan. Consider: * RFP, D.23, B., 5. * Is there evidence that the facilities are accessible to the disabled? For this category, Magellan made assurances that its subcontractors would meet the seven standards required by AHCA. Magellan provided its facility standards plan as well as its physical security facility assessment protocol for monitoring providers and subcontractors for compliance with these requirements. Magellan also described its credentialing process for providers, its custom of organizational site reviews and its plan for disaster preparedness. Magellan's proposal for this component was responsive to the RFP. Erica Carpenter awarded both Lakeview and Magellan 3 points for Contractor's and Subcontractor's Facilities and Network Management. George Woodley awarded 4 points each and Jan Sorenson awarded 3 points each. Finally, under Section 5. M. (Subcontracts/Provider Network), the written instructions provided: The quality, adequacy, acceptability and responsiveness of the vendor's protocol, policies and procedures for network management, including the types of providers selected, the selection process, and risk determination. Consider: RFP, C.20 What are the minimum criteria providers meet to be included in the network? How do the minimum criteria ensure providers are qualified to work with Severely and Persistently Mentally Ill and Seriously Emotionally Disturbed enrollees? For this category, Magellan provided certification of network provider eligibility, and samples of Magellan contracts for facility, group and individual providers. The proposal states in pertinent part: Partnership. The Magellan of Florida plan for network management is founded on our primary partnership with consumers, the Agency for Health Care Administration, (AHCA), and preferred providers Children's Home Society and Family Preservation Services of Florida, as well as a range of broader collaborative relationships with providers throughout Area 9. Our network will encompass all willing current Medicaid providers, ranging from major community provider agencies such as Oakwood Center of the Palm Beaches, New Horizons of the Treasure Coast, Healthy Solutions Resource Center, Suncoast Mental Health Center, South County Mental Health and Center for Child Development; to leading hospitals such as Fair Oaks Pavilion of Delray Medical Center, St. Mary's Medical Center, and Savannas Hospital; to specialty providers like Hibiscus Children's Center and Mutilingual Psychotherapy Centers. We will help them to continuously improve the quality of their efforts and to comply with State and Federal Medicaid requirements. (Emphasis supplied.) Magellan also provided a reference table that identified requirements under AHCA's contract and where those requirements are met in Magellan's contract and/or addendum. Again, Magellan's proposal with respect to this component was responsive to the RFP. Erica Carpenter awarded both Lakeview and Magellan 3 points for Subcontracts/Provider Network. George Woodley awarded 4 points each, and Jan Sorenson awarded 4 points to Lakeview and 3 points to Magellan. If only these four areas were to be considered, Lakeview's scores were higher than Magellan's for these components of the RFP. These, however, reflect only a portion of the elements to be considered in determining the winner of the contract award. Ultimately, Magellan's proposal received a higher overall score than Lakeview's when all components of the proposals were considered.
Recommendation Upon consideration of the foregoing findings of fact and conclusions of law, it is RECOMMENDED: That a final order be entered dismissing Petitioner's Formal Written Protest. DONE AND ENTERED this 6th day of December, 2006, in Tallahassee, Leon County, Florida. S LISA SHEARER NELSON 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 6th day of December, 2006.
