14-005121 Hernando-Pasco Hospice, Inc. vs. Agency For Health Care Administration Status: Closed Recommended Order on Wednesday, March 11, 2015.

Summary: Published need for hospice SA 5A was in error. AHCA did not use current death data per need rule. Argument that APA requires rule promulgation to adopt each new data report before using new data is contrary to AHCA's rule and practice and is wrong.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

HERNANDO - PASCO HOSPICE, INC.,

Petitioner,

vs. Case No. 14 - 5121

AGENCY FOR HEALTH CARE

ADMINISTRATION,

Respondent,

and

COMPASSIONATE CARE HOSPICE OF

THE GULF COAST, INC., AND WEST

FLORIDA HEALTH, INC.,

Intervenors.

_______________________________/

RECOMMENDED ORDER

On January 20, 2015, a final administrative hearing was held

in this case in Tallahassee, Florida, before Elizabeth W.

McArthur , Administrative Law Judge, Divi s ion of Administrative

Hearings (DOAH).

APPEARANCES

For Petitioner: Seann Frazier, Esquire

Parker, Hudson, Rainer and Dobbs, LLP

215 South Monroe Street, Suite 750

Tallahassee, Florida 32301

For Respondent: Richard Joseph Saliba, Esquire

Agency for Health Care Administration

2727 Mahan Drive , Mail Stop 3

Tallahassee, Florida 3230 8

For Intervenor Compassionate Care Ho spice of the Gulf

Coast, Inc.:

Geoff rey D. Smith, Esquire

Corinne T. Porcher, Esquire

Smith & Associates

3301 Thomasville Road , Suite 201

Tallahassee, Flori da 32308

For Intervenor West Florida Health, Inc.:

Stephen K. Boone, Esquire

Boone, Boone, Boone, and Koda, P.A.

1001 Avenida Del Circo

Post Office Box 1596

Venice, Florida 34284

STATEMENT OF THE ISSUE

The issue in this fixed need pool challenge is whether

Respondent erred in determining that there is a numeric need for

one additional hospice program in service area 5A.

PRELIMINARY STATEMENT

On Oct ober 3, 2014, the Agency for Health Care

Administration (AHCA or Respondent) published the results of its

fixed need pool calculations for the next certificate of need

(CON) application batching cycle. The published fixed need pool

for hospice programs sh owed a numeric need for one new program in

service area 5A, Pasco County. Hernando - Pasco Hospice, Inc. (HPH

or Petitioner), timely notified AHCA of an error allegedly made

in the fixed need pool number for hospice service area 5A.

According to HPH, proper application of AHCAÓs rule setting forth

the numeric need methodology for hospice programs should have

resulted in a fixed need pool number of zero instead of one, to

indicate no need for any new programs in service area 5A.

Thereafter, HPH timely filed a petition for a disputed - fact

administrative hearing to contest AHCAÓs preliminary decision

that the published numeric need for service area 5A was not

erroneous and would not be corrected. AHCA forwarded the matter

to DOAH for the assignment of an a dmin istrative l aw j udge to

conduct the proceeding and issue a recommended order.

Compassionate Care Hospice of the Gulf Coast, Inc. (CCH),

and West Florida Health, Inc. (WFH) (collectively, Intervenors),

timely filed motions to intervene to support AHCAÓs fixe d need

pool determination, which were granted without objection.

Prior to the scheduled final hearing, AHCA and Intervenors

filed various motions to dismiss or relinquish jurisdiction,

which were denied. AHCA and Intervenors also sought official

recognit ion of an HPH motion to intervene in another fixed need

pool challenge involving a different service area. They claimed

HPHÓs allegations in the motion were inconsistent with HPHÓs

positions in this case. Official recognition was denied because

the issue s in the two cases were demonstrably different, and

HPHÓs statements in the motion to intervene, standing alone, were

not inconsistent with HPHÓs positions in this case.

The parties filed a joint pre - hearing stipulation. To the

extent relevant, the partie sÓ stipulations are adopted herein.

At the hearing, the parties offered Joint Exhibits 1 through

5, which were admitted. HPH presented the testimony of: Marisol

Fitch, the recently appointed supervisor of AHCAÓs CON unit; and

Jay Cushman, accepted as an expert in health planning with an

emphasis in hospice programs. HPHÓs Exhibits 1 through 8, 11

through 13, and 16 through 18 were admitted.

AHCA presented additional testimony of Marisol Fitch, and

AHCAÓs Exhibits A and B were admitted. CCH did not prese nt any

additional witnesses; CCHÓs Exhibits 1 , and 6 through 9 were

admitted. WFH did not present any witnesses or exhibits,

adopting the presentations by AHCA and CCH.

At the end of the hearing, the parties agreed to a ten - day

deadline after the filing o f the transcript in which to file

proposed recommended orders (PROs). The one - volume Transcript

was filed on January 26, 2015. PetitionerÓs unopposed motion for

an extension of the PRO deadline was granted. The parties timely

filed PROs by the extended deadline, which have been considered

in preparing this Recommended Order.

FINDING S OF FACT

A. The Parties

1. HPH is a licensed provider of hospice services in

service area 5A, Pasco County.

2. AHCA is the state agency responsible for administering

Flori daÓs CON program, by which AHCA determines whether there is

a community need for regulated health care facilities and

services as a prerequisite to licensure and operation.

3. Intervenors CCH and WFH alleged in their motions to

intervene that they are fil ing CON applications by which they

will be seeking to fill the allegedly erroneous numeric need for

one new hospice program in service area 5A. Their allegations

are accepted as true. They were not disputed; instead, the

parties stipulated to the legal c onclusion that follows from

those alleged facts: that all parties, including Intervenors,

have standing to participate in this proceeding.

B. Nu meric Need and Evolution of the Fixed Need Pool Proce dure

4. As part of its responsibilities under the CON l aws, AHCA

is required to establish, by rule, uniform need methodologies for

CON - regulated health facilities and services. Those need

methodologies must take into account Ð the demographic

characteristics of the population, the health status of the

populati on, service use patterns, standards and trends,

geographic accessibility, and market economics. Ñ £ 408.034(3),

Fla. Stat. (2014). 1/

5. Florida Administrative Code Rule 59C - 1.0355 codifies the

uniform need methodology that applies to hospice programs. Th e

numeric need methodology reflected in the current rule was

adopted in 1995, and has remained essentially the same since that

time. The rule defines 27 service areas, and AHCA uses the need

methodology in rule 59C - 1.0355(4)(a) to calculate numeric need

f or hospice programs for each of the 27 service areas.

6. AHCA accepts CON applications for new hospice programs

in batching cycles twice each year. Overall, the CON program has

four batching cycles annually; regulated facilities and services

are split up and assigned to alternating semi - annual batching

cycles. The timetable basis of the batching cycle was developed

by the Department of Health and Rehabilitative Services (HRS),

AHCAÓs predecessor, as a mechanism to allow for simultaneous

filing and compar ative review of competing CON applications. 2/

7. The Ðfixed need poolÑ procedure was developed to address

problems sorting out comparative review rights, which were

described in the landmark decision , Gulf Court Nursing Center v.

Department of Health and Rehabilitative Services , 483 So. 2d 700

(Fla. 1st DCA 1985) ( Gulf Court ). 3/ Gulf Court held that in order

to stay true to the right to comparative review in the context of

the CON laws, HRS had to require that CON applications filed in a

batching cycle ha d to address a specific need projection, which

would be the ÐfixedÑ need pool applicable to that batching cycle.

Id. at 706 - 707.

8. The first step towards creating a ÐfixedÑ need pool for

each batching cycle involved HRSÓs interpretation of its uniform

n eed methodology rules to require that the data plugged into the

calculation of numeric need had to be the data available at the

time the applications were filed and reviewed, rather than the

most recent data available at the time of an administrative

heari ng. In Meridian v. Department of Health and Rehabilitative

Services , 548 So. 2d 1169 (Fla. 1st DCA 1989), the court affirmed

an HRS decision on nursing home CON applications that turned on

HRSÓs interpretation of its bed need rule providing that Ðthe

thre e year projections of population shall be based upon the

official estimates and projections adopted by the Office of the

Governor.Ñ The court found Ðno error in HRSÓs decision that, for

purposes of determining the number of beds in the planning

horizon fi xed pool, [the rule] is properly construed to mean that

the population estimates adopted by the GovernorÓs office at the

time the initial applications were filed and reviewed must be

used, rather than the most recent estimates adopted by that

office at the time of the hearing[.]Ñ Id. T he court explained:

The logic of HRSÓ s position is unassailable.

It gives effect to the notion that, pursuant

to applicable principles of comparative

review, the number of beds in the fixed pool

. . . to which the applicant sÓ applications

were addressed (as shown by the formula)

would become set . . . for purposes of

comparative review, even though new data

coming to light in later months or years

might reflect a different bed need when

factored into the formula.

Id. at 1 170 - 1171.

9. Over time, the interpretation approved in Meridian was

codified in the need methodology rules, by the addition of

language that set a specific cut - off time, at which point the

available data would be utilized. Taking the concept one step

fur ther, AHCA adopted a Ðfixed need poolÑ rule whereby before

each batching cycle, AHCA uses the data called for by its need

methodologies, runs the calculations, and publishes the resulting

Ðfixed need poolÑ numbers in what is now the Florida

Administrative Register . Fla. Admin. Code R. 59C - 1.008(2).

10. AHCAÓs fixed need pool rule allows a ten - day window

following publication for any person Ðwho identifies an error in

the fixed need pool numbersÑ to advise AHCA of the error. If

AHCA agrees, it will make the correction and re - publish the fixed

need pool number(s). If AHCA disagrees, the fixed need pool

publication may be challenged in a proceeding such as this one,

but only by a party that timely advised AHCA of an error.

C. HPHÓs fixed need pool challe nge

11. HPH timely advised AHCA of an alleged error in the

fixed need pool number published for service area 5A. HPH

contended that AHCA did not use the correct death data specified

in the rule methodology, and that had AHCA used the data required

by the rule methodology, AHCAÓs calculation would have resulted

in a fixed need pool of zero, meaning no numeric need for an

additional hospice program, in service area 5A. When AHCA

disagreed with HPHÓs contention, HPH timely filed its petition

for a disputed - fact administrative hearing.

12. The fixed need pool for hospice service area 5A, as

determined in this proceeding, will ultimately govern AHCAÓs

decisions on CON applications filed in the October 2014 batching

cycle. When there is a numeric need for an additional program, a

CON application seeking to fill that need is generally

approvable. However, in the absence of numeric need for an

additional program, a CON application will not be approved unless

the applicant can demonstrate Ðspecial circumstances. Ñ

D. Numeric Need Methodology for New Hospice Programs

13. AHCAÓs hospice need methodology is set forth in r ule

59C - 1.0355(4)(a). Though lengthy and complicated, the current

rule methodology is set forth in its entirety below:

Numeric need for an addi tional H ospice program

is demonstrated if the projected number of

unserved patients who would elect a H ospice

program is 350 or greater. The net need for a

new H ospice program in a service area is

calculated as follows:

(HPH) - (HP) ϔ 350

where:

(HP H) is the projected number of patients

electing a H ospice program in the service area

during the 12 month period beginning at the

planning horizon. (HPH) is the sum of (U65C ×

P1) (65C × P2) (U65NC × P3) (65NC × P4)

where:

U65C is the projected num ber of service area

resident cancer deaths under age 65, and P1 is

the projected proportion of U65C electing a

Ho spice program.

65C is the projected number of service area

resident cancer deaths age 65 and over, and P2

is the projected proportion of 65C e lecting a

H ospice program.

U65NC is the projected number of service area

resident deaths under age 65 from all causes

except cancer, and P3 is the projected pro -

portion of U65NC electing a H ospice program.

65NC is the projected number of service area

res ident deaths age 65 and over from all

causes except cancer, and P4 is the projected

proportion of 65NC electing a H ospice program.

The projections of U65C, 65C, U65NC, and 65NC

for a service area are calculated as follows:

U65C = (u65c/CT) x PT

65C = (65c/CT) x PT

U65NC = (u65nc/CT) x PT

65NC = (65nc/CT) x PT

where:

u65c, 65c, u65nc, and 65nc are the service

areaÓs current number of resident cancer

deaths under age 65, cancer dea ths age 65 and

over, deaths under age 65 from all causes

except cancer, and deaths age 65 and over from

all causes except cancer.

CT is the service areaÓs current total of

resident deaths, excluding deaths with age

unknown, and is the sum of u65c, 65c, u6 5nc,

and 65nc.

PT is the service areaÓs projected total of

resident deaths for the 12 - month period

beginning at the planning horizon.

ÐCurrentÑ deaths means the number of deaths

during the most recent calendar year for which

data are available from the D epartment of

Health , Office of Vital Statistics at least 3

months prior to publication of the F ixed N eed

P ool .

ÐProjectedÑ deaths means the number derived by

first calculating a 3 - year average resident

death rate, which is the sum of the service

area resi dent deaths for the three most recent

calendar years available from the Department

of Health , Office of Vital Statistics at least

3 months prior to publication of the F ixed

N eed P ool , divided by the sum of the July 1

estimates of the service area populatio n for

the same 3 years. The resulting average death

rate is then multiplied by the projected total

population for the service area at the mid -

point of the 12 - month period which begins with

the applicable planning horizon. Population

estimates for each ye ar will be the most

recent population estimates from the Office of

the Governor at least 3 months prior to

publication of the F ixed N eed P ool . The

following materials are incorporated by

reference within this rule; Department of

Health , Office of Vital St atistics Florida

Vital Statistics Annual Reports entitled

ÐDeathsÑ for 2012, 2011 and 2010, and Florida

Population Estimates and Projections by AHCA

District 2010 T o 2030, released September,

2013. These publications are available on the

Agency website at http://ahca.myflorida.com/

MCHQ/CON_FA/Publications/index.shtml and

http://www.flrules.org/Gateway/reference.asp ?

No=Ref - 03907 .

The projected values of P1, P2, P3, and P4 are

equal to current statewide proportions

calculated as follows:

P1 = (Hu65c/Tu65 c)

P2 = (H65c/T65c)

P3 = (Hu65nc/Tu65nc)

P4 = (H65nc/T65nc)

where:

Hu65c, H65c, Hu65nc, and H65nc are the current

12 - month statewide total admissions of H ospice

cancer patients under age 65, H ospice cancer

patients age 65 and over, H ospice patients

under age 65 admitted with all other

diagnoses, and H ospice patients age 65 and

over admitted with all other diagnoses. The

current totals are derived from reports

submitted under subsection (8) of this rule.

Tu65c, T65c, Tu65nc, and T65nc are the current

12 - m onth statewide total resident deaths for

the four categories used above.

(HP) is the number of patients admitted to

H ospice programs serving an area during the

most recent 12 - month period ending on June 30

or December 31. The number is derived from

repor ts submitted under subsection (8) of this

rule.

350 is the targeted minimum 12 - month total of

patients admitted to a H ospice program.

14. The hospice need methodology establishes the standard

that numeric need for a new hospice program exists when the

difference between projected hospice admissions and the current

admissions in a service area is equal to or greater than 350, but

when this difference is less than 350, no numeric need exists.

15. The methodology codifies AHCAÓs policy choices for how

to project hospice admissions and over what period of time. The

rule selects two years as the appropriate planning horizon, so

that the methodology projects the number of hospice admissions

expected in the service area for the twelve - month period

begi nning two years after applications are filed.

16. AHCAÓs policy judgments are reflected in the formulaÓs

details regarding what evidentiary data should be considered,

what values should be placed on the different categories of data,

and what relationship the separate categories of data should bear

to each other in calculating numeric need. The formula codifies

AHCAÓs judgments regarding how the following categories of data

should be used to project admissions: historic death data,

including numbers of d eaths, causes of death, and age at time of

death; population data, including current population numbers and

population projections for the planning horizon; and historic

admissions data, including numbers of hospice admissions,

diagnoses at admission, and age of admitted patients. The

formula also reflects AHCAÓs judgment regarding the significance

of comparative service area data and statewide data.

17. The data ingredients used in the methodology include

the stateÓs official death statistics issued by the Department of

Health Office of Vital Statistics in its Florida Vital Statistics

Annual Reports, which provide aggregate numbers of deaths and

breakdowns by cause of death and age categories; the stateÓs

official population estimates and projections iss ued by the

Office of the Governor; and admissions data from semi - annual

reports that licensed hospices are required to submit to AHCA.

18. Imbedded in the lengthy hospice need methodology rule

is language that defines the specific cut - off time at which the

data that is available will be used to calculate numeric need, as

has been provided in all of AHCAÓs uniform numeric need

methodology rules to codify the holding of Me ridian , supra .

Thus, where the methodology calls for use of ÐcurrentÑ deaths,

rule 59C - 1.0355(4)(a) has, at all times since the methodology was

adopted in 1995, provided as follows:

ÐCurrentÑ deaths means the number of deaths

during the most recent calendar year for

which data are available from the . . .

Office of Vital Statistics [4/] a t least 3

months prior to publication of the F ixed N eed

P ool.

19. Similarly, the rule defines ÐprojectedÑ deaths as used

in the methodology, and identifies the population data to be used

in connection with projecting deaths. The current language, which

has remained materially unchanged since 1995, provides:

ÐProjectedÑ deaths means the number derived

by first calculating a 3 - year average

resident death rate, which is the sum of the

service area resident deaths for the three

most recent calendar years av ailable from the

. . . Office of Vital Statistics at least 3

months prior to publication of the F ixed N eed

P ool , divided by the sum of the July 1

estimates of the service area population for

the same 3 years. The resulting average

death rate is then multi plied by the

projected total population for the service

area at the mid - point of the 12 - month period

which begins with the applicable planning

horizon. Population estimates for each year

will be the most recent population estimates

from the Office of the Governor at least 3

months prior to publication of the F ixed N eed

P ool .

20. The hospice need methodology uses a comparable cut - off

for hospice admissions data, which is the third data ingredient

used to calculate numeric need. The methodology defines c urrent

hospice admissions (HP) as Ð the number of patients admitted to

H ospice programs serving an area during the most recent 12 - month

period e nding on June 30 or December 31 [as] derived from reports

submitted under subsection (8)[.]Ñ While not expressed as a cut -

off counting backwards from the fixed need pool publication, the

same objective is achieved by the data submission deadlines,

which serve to define the most recent 12 - month period for which

data reports are available. Paragraph (8) of the hospic e rule

requires semi - annual reports by hospice providers, with reports

covering January through June each year due by July 20; and

reports covering July through December due by January 20. Thus,

for the October 3, 2014, published fixed need pool, the most

recent twelve - month period for which AHCA had admissions data

reports was July 1, 2013, through June 30, 2014. The data

reports through June 30, 2014, were due by July 20, 2014, two and

one - half months before the fixed need pool publication.

21. The ru le methodology itself sets the standards for

numeric need for hospice programs. The methodology ingredients

are evidentiary facts -- actual death data and population numbers

from two different executive state offices, and actual admissions

data from hospice providers. The facts used to calculate need

are not themselves standards, specifications, or pol icies; they

have no independent significance or effect. Their significance

comes only from the methodology, which prescribes how the facts

are to be used to calculate need.

22. The hospice rule remained the same from 1995, when the

current methodology was adopted, until 2009. In 2009, AHCA

amended the hospice need rule in reaction to the initiation of

two types of challenges -- one, a fixed need pool challen ge;

another, an unadopted rule challenge pursuant to section

120.56(4), Florida Statutes, neither of which were shown to

culminate in a final order on the merits. The 2009 amendment

added the following two sentences after the definitions of

ÐcurrentÑ deat hs, ÐprojectedÑ deaths, and population estimates:

The following materials are incorporated by

reference within this rule; Department of

Health Office of Vital Statistics Florida

Vital Statistics Annual Report 2007, Deaths,

and the Office of the Governor Fl orida

Population Estimates and Projections by AHCA

District 20 0 0 T o 20 2 0, released September,

20 08 . These publications are available on the

Agency website at h ttp://ahca.myflorida.com/

MCHQ/CON_FA/index.shtml.

Since 2009, this provision has been amended three times to change

the dates of the referenced materials. At no time has the

referenced materials included the hospice admission reports used

as the third data ingredient to calculate need.

E. AHCAÓs calculation of numeric need for service area 5A

23 . At issue in this fixed need pool challenge is whether

AHCA failed to follow its rule methodology, by failing to use the

correct data for ÐcurrentÑ deaths specified in the rule. By

extension, this dispute also implicates the correctness of data

used for ÐprojectedÑ deaths, which adds current deaths to the two

prior yearsÓ deaths to calculate a three - year average death rate.

24. For ÐcurrentÑ deaths, AHCA utilized death data from the

2012 Florida Vital Statistics Annual Report. For ÐprojectedÑ

deaths , AHCA utilized death data from the Florida Vital

Statistics Annual Reports for 2010, 2011, and 2012.

25. Death data for calendar year 2013 were available from

the Department of Health Office of Vital Statistics by no later

than May 29, 2014, when the 201 3 Florida Vital Statistics Annual

Report was published and made available on the Department of

HealthÓs website. Thus, 2013 was the most recent calendar year

for which death data were Ðavailable fromÑ the Department of

Health Office of Vital Statistics at least three months -- indeed,

over four months -- before the fixed need pool publication on

October 3, 2014.

26. AHCAÓs rule defines ÐcurrentÑ deaths as used in the

numeric need methodology in clear terms, by specifying the data

source and the cut - off time. The purpose of the three - month cut -

off time specified in the rule is to allow AHCA sufficient time

to obtain the data, plug the data into the numeric need

methodology, run the calculations, and publish the results. AHCA

had more than sufficient time to d o so in this case. AHCA should

have applied its rule as written, by using the 2013 death data.

27. Had AHCA used the current death data defined by its

rule to calculate numeric need, the result for service area 5A

would have been zero numeric need. Thus , the failure to use

current death statistics, in the manner designed by the

methodology, in relation to current hospice admissions data and

population numbers, materially changed not only the resulting

need number, but also, the methodology itself. Inste ad of

considering 2013 death data in relation to hospice admissions for

July 2013 through June 2014, AHCA used older death statistics,

while still using the hospice admissions data for July 2013

through June 2014. The calculation does not reflect the valu es

and relationship of the different data types called for by AHCAÓs

policy, as set forth in the rule methodology. The fixed need

pool number of one new hospice program needed was an error.

F. AHCAÓs proffered interpretation of its hospice rule

28. AHC A and Intervenors do not effectively refute the fact

that death data for calendar year 2013 were Ðavailable fromÑ the

Department of Health Office of Vital Statistics more than three

months before the publication of the fixed need pool, which is

the languag e of the rule. Instead, they argue that the data were

not Ðavailable toÑ AHCA to use to calculate the fixed need pool,

because they contend that AHCA is required pursuant to section

120.54(1)(i)1 . , Florida Statutes, part of the Administrative

Procedure Ac t (APA), to first incorporate the 2013 V ital

S tatistics Annual R eport in its rule before AHCA can use the

facts in that report to calculate numeric need.

29. AHCA articulated its interpretation of its rule as

follows in the Joint PRO filed by AHCA and Int ervenors:

The Agency interprets Rule 59C - 1.0355(4)(a),

F.A.C., to require use of the death reports

specifically incorporated into the rule in

determining the meaning of ÐcurrentÑ deaths

used in the hospice fixed need pool

methodology. To the extent there is any

conflict between the ruleÓs requirement that

the Agency use the most current death data

available and the specific incorporation of

the 2012 death report, the Agency, based on

the statutory mandates of section

120.54(1)(i)1, F.S., interprets the rul e to

require the data expressly incorporated until

there is a formal modification by properly

enacted rule. The Agency reconciles the

ruleÓs definition of ÐcurrentÑ deaths, or the

number of deaths during the most recent

calendar year for which data are av ailable

from the Department of Health, Office of Vital

Statistics, at least three months prior to

publication of the Fixed Need Pool, with the

fact that the death data available to the

Agency is the death data specifically

incorporated by reference. (Jt. PRO at

11 - 12).

30. AHCAÓs proffered interpretation is contrary to the

clear words that it chose to use in its rule. It is neither

interpretation nor reconciliation to change the words Ðavailable

fromÑ the Office of Vital Statistics to Ðavailable toÑ A HCA. It

is neither reconciliation nor interpretation to ignore the ruleÓs

requirement to use the most current death data available from the

Office of Vital Statistics.

31. AHCA does not contend that it added the incorporating

reference based on a belief that historic death data issued by

the Office of Vital Statistics meets the APAÓs definition of a

rule. Instead, AHCA explained that it added the references to

specific data reports to identify the data used to calculate the

fixed need pool and make it a vailable to those interested in

obtaining that data. Now, having added references to specific

data reports in its rule, AHCA contends that it does not matter

whether the data reports meet the definition of a rule; AHCAÓs

position is that it must update th e rule references before the

current data can be used.

32. The position of AHCA and Intervenors assumes that the

hospice rule requires that the referenced vital statistics

reports must be used in lieu of the defined ÐcurrentÑ death data.

However, the ho spice rule simply does not say what AHCA and

Intervenors argue it says. The language chosen by AHCA in 2009

and left unchanged since then simply identifies specific data

reports, without stating how or when those reports may or must be

used. No operative ÐactionÑ words accompany the data report

references. Instead, the references are informational: here are

some reports and here is a way to obtain them.

33. If in 2009, AHCA had rewritten its hospice rule to say

that for purposes of the methodology, Ðc urrentÑ deaths means

death data in the most recent Vital Statistics Annual Report that

has been promulgated by AHCA as a rule and incorporated in this

rule by reference, then the position of AHCA and Intervenors

would be well - taken, even if it would make n o sense to promulgate

death statistics -- historic, evidentiary facts -- as rules. But

AHCA clearly did not choose such a path.

34. No evidence was presented to document the 2009

rulemaking process, such as the rulemaking record or

correspondence that AHCA may have submitted to the Joint

Administrative Procedures Committee to explain how it reconciled

the ÐcurrentÑ deaths definition with the incorporation of an

older Vital Statistics Annual Report. While CHC asked Ms. Fitch

whether the subject of the seemin g conflict between the two

provisions was discussed in the public hearing, Ms. Fitch

candidly responded that she did not know; she has only been at

AHCA since 2011. No testimony was offered by any witness with

knowledge. The reasonable inference, especia lly in the absence

of any contradictory evidence, is that AHCA purposefully chose to

leave intact the ruleÓs requirement to use ÐcurrentÑ death data,

as that term has been defined since 1995, and to simply add a

passive reference to specific data reports a s one way to inform

those interested in identifying the data reports used for the

fixed need pool calculations.

35. AHCAÓs prior practice between 2009 and 2014 with regard

to the Vital Statistics Annual Reports adds credence to the view

that AHCA simply i ntended to offer the data reports as part of

its rule for informational purposes. Evidence of the rule

amendment history offered at hearing established that in 2009,

AHCA promulgated a rule amendment that incorporated by reference

the 2007 Vital Statistic s Annual Report. In 2010, AHCA

promulgated a rule amendment that changed the reference from the

2007 report to the 2008 Vital Statistics Annual Report. In 2012,

AHCA promulgated a rule amendment that changed the reference from

the 2008 report to the 2010 Vital Statistics Annual Report. In

the most recent rule amendment adopted in April 2014, at the

suggestion of a public hearing participant AHCA left the

reference to the 2010 report, and added references to the 2011

and 2012 Vital Statistics Annual Repor ts. The language of these

references remained passive, in the same style used since 2009.

36. AHCAÓs prior practice demonstrates that before this

case, AHCA never interpreted its rule to require use of only the

specific vital statistics reports that we re incorporated by

reference . T he hospice rule methodology requires AHCA to use

historic death data for three consecutive calendar years to

calculate ÐprojectedÑ deaths. Thus, twice each year in

calculating the fixed need pools, AHCA used at least two Vi tal

Statistics Annual Reports that were not incorporated by reference

in its rule. And to this day, AHCA has never incorporated by

reference the Vital Statistics Annual Report for 2009, yet the

death data in that report was used to calculate need for hosp ice

programs for three consecutive years.

37. AHCAÓs prior practice of intermittently undergoing rule

promulgation to update the references to specific Vital

Statistics Annual Reports and only including some of the reports

actually used to calculate numer ic need, is consistent with the

view that the past reports have been adopted by reference for

informational purposes only.

38. No explanation was offered as to why AHCA promulgated

references to only two of the three types of data reports used in

the hosp ice need methodology calculations. The failure to adopt

references to specific admissions reports would be inconsistent

with the asserted position that the APA requires AHCA to

promulgate as rules the data reports it uses to calculate need.

But the failu re to incorporate the hospice admissions reports as

rules would square with the notion that the purpose of the

passive references to the vital statistics and populatio n reports

is informational only. AHCA uses other means to make the hospice

admissions re ports available to interested persons .

39. Interpreting the hospice ruleÓs reference s to specific

data reports as being for informational purposes only gives

effect to all of the rule language chosen by AHCA -- not only to

the part of the rule that identifi es specific reports (but does

not mandate their use), but also, to the unchanged parts of the

rule defining ÐcurrentÑ deaths and ÐprojectedÑ deaths as used in

the methodology. No other interpretation of these provisions was

suggested to give effect to all parts of AHCAÓs adopted rule.

G. HPHÓs unadopted rule argument

40. AHCAÓs position asserted in this proceeding gives rise

to a problematic unadopted rule issue raised by HPH.

41. AHCA contends that it is obligated under the APAÓs

rulemaking statute to incorporate by reference the specific data

reports it uses to calculate numeric need. AHCA contends that it

must undergo rule promulgation to add references to each annual

iteration of the official vital statistics report and the

official population repor t before the data in those reports can

be used. Leaving aside for now the fact that AHCAÓs rule does

not mandate use of the referenced reports and excludes references

to the third type of data report used for the need calculation,

AHCAÓs position creates a tremendous rulemaking burden. Issuance

of the death data and population data reports is not

synchronized; indeed, over the years, either or both annual

reports have not come out when expected.

42. The facts in this case illustrate that point. When the

2013 death data became available, HPH made AHCA aware of that

fact. Yet AHCA did not immediately begin rule promulgation in

May 2014, when it could have done so.

43. In October 2014, AHCAÓs response to HPHÓs error notice

with regard to the service area 5A fixed need pool was twofold:

first, AHCA disagreed that it should have used the 2013 death

data available from the Office of Vital Statistics, because AHCA

claimed it was required under the APA to amend its rule first

before using the current death dat a; but second, AHCA had decided

not to proceed with rulemaking right away, because it wanted to

await the new population report from the Office of the Governor

so that it could update both reports in one promulgation process.

44. At hearing, AHCA explaine d that it was not pronouncing

a ÐpolicyÑ that it would always await the population report

before beginning rule promulgation. Once again, AHCAÓs prior

practice is illuminating, because AHCA has undertaken rule

promulgation approximately every other year, to update the

references to the two annual data reports in tandem.

45. AHCA characterized the decision to delay promulgation

as a Ðcase - by - caseÑ decision based on a variety of factors. The

facts identified were that the population report was not yet

avai lable, and that AHCA had just finished its last promulgation

go - round in April 2014.

46. The very fact that AHCA has determined that it may

choose to undergo rulemaking or to delay rulemaking, and that it

will make its decision on the basis of administrat ive convenience

factors, is either an agency statement of general applicability,

prescribing the agencyÓs rulemaking practice or procedure in ways

that are different from what any statute or rule provides, or it

is AHCAÓs confirmation that updating the dat a report references

in its rule is inconsequential.

47. AHCAÓs position that it must undergo rulemaking before

using the most recent facts to calculate its fixed need pools is

one that creates the urgency to undergo and complete rulemaking.

AHCAÓs admini strative convenience would not be a reason to not

expeditiously promulgate rules, if indeed AHCA were correct that

rulemaking is required. The APA would dictate that AHCA proceed

as soon as practicable and feasible. If AHCA maintains that it

must promulg ate facts as rules and updated facts as amended

rules, then AHCAÓs position dictates that AHCA necessarily must

be in endless rulemaking for that purpose.

48. Anticipating this, AHCA asserted that its delay was

justifiable because AHCA did not think it wa s Ðpracticable or

feasibleÑ to complete the rulemaking process by the October 3 ,

2014, fixed need pool publication date. However, whether AHCA

could have completed the process would not be the question asked

by the APA if rulemaking was required; the issu e would be why it

was not practicable or feasible for AHCA to initiate rulemaking.

Moreover, AHCAÓs reasoning in this regard was not persuasive;

while AHCAÓs prior rulemaking timelines sometimes were longer

than four months , those timelines included a n in ternal routing

and review process, which would not be necessary if the sole

rulemaking activity were to update a reference to a data report.

49. The picture got worse by the time of hearing: as of

January 20, 2015, AHCA was still waiting for the new pop ulation

report from the Office of the Governor, and AHCA still had not

begun rulemaking. AHCAÓs unadopted statement that it can choose

not to proceed expeditiously to rule promulgation, while at the

same time asserting that rule promulgation is required, would

doom at least two batching cycles to stale 2012 death data; the

next fixed need pool publication date is just around the corner.

50. It appears that AHCA has not thought through

sufficiently the ramifications of its position. As HPHÓs expert

reason ably explained, important health planning objectives are

served by considering the most current data possible. AHCAÓs

uniform need methodology rules require AHCA to use the most

current data possible to calculate numeric need, compromised only

by the dict ates of Gulf Court , as recognized in Meridian . Gulf

Court and Meridian acknowledge that it is necessary to make some

sacrifice in the health planning objectives served by using the

most current data possible, in order to achieve a process tha t

ensures fai rness to applicants entitled to comparative review.

This balance has been achieved by cutting off the opportunity to

use the most recent data as evidence in administrative hearings,

and mov ing up the time for collecting the facts used to calculate

need. It is one thing to carry out the fixed need pool process

by providing a cut - off point for collecting the data used to

calculate need; it is another matter entirely to suggest that the

fixed need pool process somehow transforms evidentiary facts into

statem ents of policy that have to be promulgated as rules. But

if that is AHCAÓs position, AHCA cannot choose for reasons of

administrative convenience to not move forward immediately to

promulgate the new facts as rules.

51. When AHCAÓs representative was ask ed whether it was

important to use the most current data possible when calculating

numeric need under the hospice methodology, her response was that

Ðwe donÓt go with importance. We go with whatÓs incorporated.Ñ

(Tr. 31). However, the hospice need metho dology serves as AHCAÓs

expression of the importance of using ÐcurrentÑ death data,

tempered only by the need for a cut - off point t hat gives AH C A

enough time to collect the data, calculate need, and publish the

fixed need pool.

52. AHCA carries out its im portant health planning policies

to use current data as the ingredients to calculate numeric need

pursuant to its other uniform need methodologies . For example,

the neonatal intensive care bed need rule methodology uses birth

statistics like the hospice r ule uses death statistics that are

available from the Office of Vital Statistics as of a specified

cut - off time before the fixed need pool publication . See Fla.

Admin. Code R. 59C - 1.042(3). And that rule, as well as AHCAÓs

other uniform need methodology rules, use population estimates

issued by the Office of the Governor as of a specified cut - off

time before the fixed need pool publication. Id. ; see also Fla.

Admin. Code R. 59C - 1.036(3)(c) (nursing facility bed need rule);

59C - 1.039(5)(c) (comprehensive medical rehabilitation inpatient

bed need rule). None of AHCAÓs other need rules incorporate any

data reports by reference. AHCAÓs representative testified that

because the other rules do not incorporate data reports by

reference, AHCA uses the most curr ent data available as of the

cut - off time specified in each rule to calculate numeric need for

the fixed need pool publication.

53. AHCAÓs representative acknowledged that there is

no thing in the CON laws requiring AHCA to promulgate death

statistics or p opulation data as rules, or to incorporate data

reports by reference. Thus, AHCAÓs proffered interpretation of

its hospice need rule (see Finding of Fact ¶ 29) is borne solely

of AHCAÓs understanding of what the APA requires.

54. AHCAÓs representative testified that AHCA is

considering overhauling all of its need rules and adopting

another rule that will serve only as the repository to

incorporate by reference all data reports (presumably including

admissions reports) used in all need methodologies. Bu t AHCA has

not taken any formal steps in this direction yet. Interestingly,

AHCAÓs representative acknowledged that a ÐruleÑ cataloging and

incorporating by reference the data reports used in AHCAÓs need

methodologies would not have any policy implication s.

CONCLUSIONS OF LAW

55 . T he Division of Administrative Hearings has

jurisdiction over the parties to and subject matter of this

proceeding . §§ 120.569 and 120.57(1), Fl a. Stat.

56. AHCAÓs preliminary fixed need pool determination for

hospice service area 5A, timely challenged by HPH, is the proposed

agency action at issue in this proceeding.

57. As an existing hospice provider in service area 5A, HPH

is a candidate for party status to oppose a CON application to

establish a new hospice program in se rvice area 5A. See

£ 408.039(5)(c), Fla. Stat. HPHÓs substantial interests are

adversely affected by AHCAÓs fixed need pool publication showing a

numeric need for one new hospice program in service area 5A. As

the parties stipulated, HPH has standing.

58. Intervenors are potential applicants seeking to

establish a new hospice program in service area 5A. The prospect

for approval of one of the applications would be greatly enhanced

if HPHÓs challenge to the fixed need pool does not succeed. As

the pa rties stipulated, Intervenors have standing.

59. HPH has the burden of proving by a preponderance of the

evidence that AHCA made an error in the published fixed need pool

of one new hospice program needed in service area 5A for the

second batching cycle of 2014. See generally B alino v . DepÓt of

Health & Rehab. Servs. , 348 So. 2d 349 , 350 (Fla. 1st DCA 19 77 );

§ 120.57(1)(j), Fla. Stat.

60. The premise of HPHÓs challenge to the fixed need pool

number is that AHCAÓs need calculation failed to apply the te rms

of the hospice numeric need methodology rule, because AHCA did

not use 2013 death data where the methodology calls for ÐcurrentÑ

deaths. According to the clear dictate of the rule, the term

ÐcurrentÑ deaths as used in the methodology Ðmeans the number of

deaths during the most recent calendar year for which data are

available from the Department of Health , Office of Vital

Statistics at least 3 months prior to publication of the F ixed

N eed P ool. Ñ Fla. Admin. Code R. 59C - 1.0355(4)(a).

61. HPH proved th at 2013 is the most recent calendar year

for which death data were Ðavailable from the Department of

Health , Office of Vital Statistics at least 3 months prior to

publication of the F ixed N eed P ool.Ñ Death data for calendar

year 2013 were available from t hat Office by May 29, 2014, more

than four months prior to the fixed need pool publication.

62. As a threshold matter, AHCA and Intervenors argue that

either HPHÓs challenge is not cognizable in a fixed need pool

challenge, or that there are no disputed i ssues of material fact

and that DOAH should have relinquished jurisdiction to AHCA to

resolve pure legal issues.

63. A fixed need pool challenge may properly be predicated

on an argument that AHCA did not properly apply its need

methodology rule in calcul ating numeric need. See, e.g. , Hospice

of Lake & Sumter , Inc. v. Ag . for Health Care Admin . and Hope

Hospice and Commun ity Serv s . v. Ag . for Health Care Admin . ,

Consolidated Case Nos. 08 - 6215 and 08 - 6218 (DOAH Order

Relinquishing Jurisdiction, Feb. 2, 200 9) ( Lake and Hope ) , at 9

(fixed need pool challenge is proper when based on an alleged

misapplication of the hospice need methodology or an alleged

failure to update population data from a previous batching

cycle); accord Big Bend Hospice v. Ag. for Health Care Admin. ,

Case No. 01 - 4415 (Fla. DOAH Nov. 7, 2002; AHCA April 8, 2003),

affÓd , 904 So. 2d 610 (Fla. 1st DCA 1995). HPHÓs challenge falls

within these parameters, and is proper.

64. The argument that DOAH should have relinquished

jurisdiction becaus e of a lack of disputed material facts was

advanced repeatedly before, during, and after hearing. AHCA and

Intervenors attempted to characterize HPHÓs challenge as one that

only raises legal issues that are, in effect, attacks on AHCAÓs

hospice need rule. However, AHCA disputed HPHÓs allegation that

2013 death data were available from the Office of Vital

Statistics. A s is evident from the Findings of Fact above, HPHÓs

challenge is directed not to the rule itself, but to the

convoluted interpretation prof fered by AHCA and Intervenors in an

attempt to reconcile seemingly conflicting parts of the rule.

See Finding of Fact ¶ 29.

65. As a general proposition, AHCAÓs interpretation of its

rule s is entitled to great weight and deference, particularly

where the interpretation is borne of the agencyÓs construction of

the statutes administered by the agency . See, e.g. , Lakeland

RegÓl Med. Ctr. v. Ag. for Health Care Admin. , 917 So. 2d 1024,

1029 (Fla. 1st DCA 2006).

66. To the extent AHCAÓs proffered interpreta tion is not

evident from the language of its rule or discoverable precedents,

AHCAÓs interpretation is subject to proof by expert testimony,

documentary opinions, or other evidence appropriate to the nature

of the issue involved, and AHCA must expose and e lucidate the

reasons for its actions with competent, substantial evidence on

record. See, e.g . , Courts v. Ag. for Health Care Admin. , 965 So.

2d 154, 157 (Fla. 1st DCA 2007); Brookwood - Walton Cnty. Conv .

Ctr. v. Ag. for Health Care Admin. , 845 So. 2d 223, 229 (Fla. 1st

DCA 2003). Thus, the reasonableness of AHCAÓs proffered

interpretation of its hospice rule (see Finding of Fact ¶ 29),

not evident from the rule language or precedent , is a factual

matter for determination. Further, to the extent AHCAÓs

pr offered interpretation is inconsistent with its prior practice,

the reasonableness of AHCAÓs explanation for the inconsistencies

is also a factual matter for determination based on the evidence .

§ 120.68(7)(e) 3 . , Fla. Stat.

67. The general deference affo rded to an agencyÓs

interpretation of its rules is not without limit , even when the

interpretation is based on statutes over which the agency has

substantive jurisdiction . Thus, whe n an agencyÓs interpretation

of its rule is contrary to the words used in the rule, the agency

properly is held to the Ðrule as written, and not as [the agency]

has seen fit to modify it.Ñ Boca Raton Art ificial Kidney Ctr. v.

DepÓt of Health & Rehab. Servs. , 493 So. 2d 1055, 1057 (Fla. 1st

DCA 1986) (where a CON need rule adopt ed a planning horizon of

one year from when the CON application was completed, HRS could

not change the rule by re - interpreting it to mean one year from

the final hearing); Vantage Healthcare Corp. v. Ag. for Health

Care Admin. , 687 So. 2d 306 (Fla. 1st DC A 1997) (AHCA is required

to follow its rules; agency action that conflicts with the

agencyÓs own rules is erroneous).

68. Where, as here, an agency has adopted clear rule

language that has been interpreted and applied by the agency in

accordance with the clear words in the rule, the agency may not

simply change its interpretation of the rule language. Instead,

the words must be applied as written and as interpreted unless

and until the words in the rule are changed. Id. ; Cleveland

Clinic Fla. Hosp. v. A g. for Health Care Admin. , 679 So. 2d 1237 ,

1242 (Fla. 1st DCA 1996).

69. AHCAÓs hospice need rule defines ÐcurrentÑ deaths in

language that is clear and that has remained unchanged since

first codified in 1995. The plain language of the current deaths

d efinition in the hospice rule requires AHCA to use the 2013

death data to calculate numeric need. Lake and Hope , supra , at

9 ; Big Bend Hospice , supra .

70. AHCA and Intervenors contend that AHCAÓs use of old

(2012) death data was consistent with the hospi ce ruleÓs

definition of ÐcurrentÑ deaths, because 2013 death data were not

Ðavailable toÑ AHCA to use. But that is not what the rule says.

AHCAÓs rule requires the use of the 2013 death data because the

2013 data were available from the Office of Vital S tatistics

before the specified cut - off. The language chosen by AHCA for

its rule is Ðavailable fromÑ the Office of Vital Statistics, not

Ðavailable toÑ AHCA. AHCAÓs interpretation requires a re - writing

of the rule that is not permissible.

71. AHCA and I ntervenors argue that the 2009 amendment to

the hospice rule to add references to specific data reports

requires AHCA to promulgate rule amendments incorporating each

new data report before the data can be used to calculate numeric

need. This argument fai ls on multiple levels.

72. First, the rule, as amended in 2009 and three times

thereafter to its current form, simply does not say that AHCA

must use the referenced data reports to calculate numeric need.

Instead, the rule continues to provide that where the methodology

calls for ÐcurrentÑ deaths, that means the death statistics for

the most recent calendar year for which data are available from

the Office of Vital Statistics at least three months prior to the

fixed need pool publication.

73. In this reg ard, it does not matter whether AHCA and

Intervenors offer a reasonable or correct interpretation of the

APAÓs requirements for incorporation by reference. If the APA

requires that an agency adopt a rule providing ÐX,Ñ but the

agencyÓs rule provides ÐCÑ i nstead, the agency cannot through

interpretation simply construe ÐCÑ to mean ÐX.Ñ Thus, even if

the APA required AHCA to rewrite its rule to say that ÐcurrentÑ

deaths means death statistics in the most recent vital statistics

report that is incorporated b y reference in this rule, AHCA would

have to actually rewrite the rule to say that. The rule does not

say that now, and cannot be made to say that through

Ðinterpretation . Ñ

74. The argument by AHCA and Intervenors also fails with

regard to its essential predicate that the APA requires AHCA to

incorporate by reference as part of its hospice need rule

historic death data disseminated pursuant to statutory mandate by

the Office of Vital Statistics. The APA does not require

agencies to promulgate facts as ru les. The APA does not require

agencies to promulgate historic data as rules. Instead, the rule

promulgation requirement is framed in the following manner in

section 120.54(1)(a), Florida Statutes: Ð Each agency statement

defined as a rule by s. 120.52 sh all be adopted by the rulemaking

procedure provided by this section as soon as feasible and

practicable. Ñ

75. Section 120.52(16) defines ÐruleÑ to mean

e ach agency statement of general

applicability that implements, interprets, or

prescribes law or policy or describes the

procedure or practice requirements of an

agency and includes any form which imposes

any requirement or solicits any information

not specifically required by statute or by an

existing rule. The term also includes the

amendment or repeal o f a rule.

76. Incorporation by reference is a mechanism by which

material that meets the definition of a rule can be promulgated

as a rule by reference, so as to not have to set forth the

material itself within the text of the rule. Thus, the

Ð rule makin g proceduresÑ referred to in section 120.54(1)(a), by

which agency statements must be adopted as rules, include section

120.54(1)(i)1. , which provides: Ð A rule may incorporate material

by reference but only as the material exists on the date the rule

is a dopted. For purposes of the rule, changes in the material

are not effective unless the rule is amended to incorporate the

changes. Ñ 5/ This statutory language is not new, nor was it new

when the hospice rule was amended in 2009; at that point it had

been on the books, without change, for well over a decade.

77. The limitation on incorporating material by reference

as the material exists when the rule is adopted is consistent

with the notion that when standards outside of a law or rule are

incorporated b y reference, it is as if the legislative or

administrative body were adopting those standards as its law or

rule. When the incorporated standards are later changed outside

of the legislative or rulemaking process , those changed standards

are not the ones that the legislative or administrative body

adopted. If the legislative or administrative body wants to

adopt the changed standards as part of its law or rule , it must

specifically incorporate the changed standards through the formal

promulgation process . Otherwise, the legislative or

administrative body would be unco nstitutionally or unlawfully

adopt ing standards as a law or rule without going through the

required procedures .

78. It was difficult to find any administrative or

appellate cases involving a nything remotely like the issue

presented here. Virtually all of the cases that consider

material incorporated by reference as a rule involve

incorporative references of substantive standards,

specifications, or policies that are required to be used as th e

governing standards by the incorporating law or rule.

79. For example, AHCA and Intervenors cite to the recent

Final Order in Peek v. State Board of Education , Case No. 12 -

1111RP (Fla. DOAH Aug. 22, 2012), in which Judge John G. Van

Laningham invalidate d a proposed rule establishing procedures and

standards governing submission and review for approval of each

school districtÓs evaluation systems for instructional personnel

and school administrators. Judge Van LaninghamÓs thorough

analysis determined tha t the proposed rule failed to comply with

the APAÓs requirements for incorporative references. The

proposed rule required submission of the evaluation systems on a

checklist form that was incorporated by reference , and t he

proposed rule specified that the submissions would be judged for

compliance with the elements in the checklist. The checklist had

Ðconsiderable prescriptive contentÑ with Ðdozens of mandatory

elements.Ñ In five instances, the checklist mandated that

submissions meet standards or requir ements that were set forth in

external documents. As such, the checklist that would be

incorporated by reference in the proposed rule did not itself set

forth all of the requirements, but rather, referred to another

level of external material that imposed additional standards.

80. In Peek , Judge Van Laningham discussed the

incorporation by reference method of rulemaking, quoting with

approval the following excerpt from an article written by now -

Administrative Law Judge F. Scott Boyd, Looking Glass Law:

Le gislation by Reference in the States, 68 La. L. Rev. 1201 , 1210

(2008)("Legislation By Reference") :

A reference is incorporative if its effect is

to adopt the standards, requirements, or

prohibitions of the referenced material as

its own standards, require ments, or

prohibition. An incorporative reference

occurs whenever legislation references

material outside of itself and indicates

expressly or by implication that this

material should be treated as if it were

fully set forth at that point in the

legislati on. The requirements of the

referenced material are then said to be

Ð incorporated into Ñ or Ð adopted into Ñ the

legislation that adopted them, without the

necessity of printing the text verbatim.

81. In contrast to an Ðincorporative referenceÑ that

impos es standards, requirements, or prohibitions in material that

is adopted as if fully se t forth , Judge BoydÓs Legislation By

Reference described a different kind of reference to external

material in legislation (defined broadly for purposes of his

article to include administrative rules) :

A legislative reference is termed

ÐinformationalÑ if its only effect is to alert

the reader to the existence of additional

information or other material that might be of

interest. An informational reference

therefore neithe r affects the material to

which it refers nor is in any way affected by

it. [ ] In one sense, then, informational

references have no real legal effect at all.

Id. at 1205 (footnote omitted).

82. The description of Ðinformational referencesÑ i n

Legislat i on By Reference i s fitting here ; the description of

Ðincorporative referencesÑ does not fit . Death data in official

Vital Statistics Annual Reports do not constitute standards,

requirements, or prohibitions. The data reports are not

referenced because t hey have ÐlegalÑ e ffect in the sense of

establishing standards , requirements, or prohibitions . One need

only imagine a hospice need methodology rule containing actual

death statistics for past calendar years for 27 different service

areas -- the number of d eaths in total, the causes of death, and

the age categories -- to realize the absurdity of the suggestion

that death statistics are the sort of material that the APA

requires to be adopted as rules . Instead, the annual reports

with death statistics contain historic, evidentiary data.

Indeed, AHCAÓs explanation for referencing the rep orts in the

rule in 2009 fits the purpose of an informational reference : to

alert the reader to material that might be of interest.

83. AHCA and Intervenors offer several admi nistrative

orders providing that material incorporated by reference was

binding as a rule. Each of these administrative orders involve s

a true incorporative reference as described by Judge Boyd in

Legislation By Reference . In each of the cited proceeding s, the

material incorporated by reference and deemed binding as a rule

set forth standards or requirements. None of them involve

informational references to factual data. Moreover, the

incorporative reference in the rule made clear that the issue at

hand would be addressed by reference to requirements in the

incorporated material. Thus, for example, in Parkinson v. Reily

Enterprises, LLC and Department of Environmental Protection , Case

No. 06 - 2842 (Fla. DOAH Feb. 12, 2007), the Department of

Environmenta l Protection (DEP) adopted a rule that provided for

delegation of authority under a particular permitting program to

water management districts Ðas set forth inÑ DEPÓs interagency

operating agreements with the water management districts, which

were incorpo rated by reference in DEPÓs rule. Accordingly, DEP

was bound by the terms of an operating agreement with a water

management district, incorporated by reference in the rule, which

set forth the details of DEPÓs delegation of authority.

Similarly, in Outloo k Media v. Department of Transportation , Case

No. 09 - 3444 (Fla. DOAH Aug. 11, 2010), a statute required that

applications for outdoor advertising permits must be made on a

form prescribed by the Department of Transportation (DOT). DOT

promulgated a rule r equiring submittal of applications on a form

that was incorporated by reference. The form set forth

requirements that must be met by the applicant. In that context,

an applicantÓs failure to comply with a requirement imposed by

the application form was d eemed a failure to comply with DOTÓs

rule. Finally, in McCarty v. D epartment of Corrections , Case No.

90 - 5311BID (Fla. DOAH Jan. 3, 1991), the DepartmentÓs rule

required that bid proposals be submitted on a form setting forth

bid specifications, which was incorporated by reference in the

rule. When a bidder failed to comply with specifications in the

form, the bid was deemed non - responsive, because the Department

was bound by the specifications incorporated by reference.

84. The only case found in which the APAÓs requirements for

incorporation by reference were squarely addressed in the context

of references in rules to data was Lane v. Department of

Environmental Protection , Case Nos. 01 - 1332RP et al. (Fla. DOAH

May 13, 2002), affÓd , per curiam , Case No . 1D02 - 2043 (Fla. 1st

DCA, May 20, 2003). In Lane , Judge Stuart M. Lerner issued a

468 - page Final Order comprehensively addressing eight

consolidated challenges to DEPÓs proposed rules that described

how DEP would exercise its authority to identify and li st s urface

waters in the state that are impaired for purposes of the state's

total maximum daily load . At pages 388 to 392, Judge Lerner

addressed a challenge to a proposed provision that federal STORET

data Ðwill be the Òprimary source of data used for d etermining

water quality criteria exceedances [.] Ó Ñ Petitioners contended

that the reference to STORET data violated the APAÓs requirements

for incorporating material by reference . Judge Lerner disagreed:

To the extent Joint Petitioners allege . . .

that the proposed rule chapterÓs reference to

STORET is in violation of the requirement of

[section 120.54(1)(i) 1. ], that Ð[a] rule may

incorporate material by reference . . . only

as the material exists on the date the rule

is adopted,Ñ the argument is unpersu asive.

Through its reference to STORET, the

Department is not incorporating in the

proposed rule chapter any standard - setting

ÐmaterialÑ as that term is used in [section

120.54(1)(i) 1. ]. The Department is simply

explaining where the data it will consider in

determining Ðwater quality criteria

exceedancesÑ will come from. Even though

some of the data may not now exist, there is

nothing in [section 120.54(1)(i) 1. ]

prohibiting the Department from giving such

an explanation in the proposed rule chapter.

Id. at 389. Judge Lerner proceeded to summarize decisional law

explaining when legislation is incorporating substantive

standards in referenced materials, so as to require that the

materials be in existence at the time of the legislation and to

require that changes to the incorporated materials not be given

legal effect witho ut a corresponding amendment to the law

incorporating the materials by reference. In contrast, when

legislation references data instead of substantive standards,

the same restrictions do not apply.

85. One of the key cases relied on by Judge Lerner is

Eastern Air Lines, Inc. v. Department of Revenue , 455 So. 2d 311

(Fla. 1984). Judge Lerner quoted the following passage in

Eastern Air Lines , which is equally instructive here:

In Welch t his Court looked to the rule of law

announced in Freimuth v. State , 272 So. 2d 473

(Fla. 1972). There, the Court said that the

legislature may adopt provisions of federal

statutes and administrative rules made by a

federal administrative body that are in

existence and in effect at the time the

legislature acts, but it would be an

unconstitutional delegation of legislative

power for the legislature to adopt in advance

any federal act or the ruling of any federal

administrative body that Congress or an

admin istrative body might see fit to adopt in

the future. 272 So. 2d at 476. Accordingly,

this Court held the statute unconstitutional

for attempting to incorporate by reference

future legislative and/or administrative

actions of jurisdictions outside Florida . Id.

We believe that Eastern's reliance on the

aforementioned language is misplaced. The

statute under attack merely provides that an

adjustment be made to the fuel price which is

based on the percentage change in the average

monthly gasoline price c omponent of the

Consumer Price Index. Here, the legislature

is merely setting forth the manner in which

the department is to determine the appropriate

total motor fuel and special fuel retail

price. The department is directed with

precision how to make s uch a determination.

We think the language of Welch a nd Freimuth

should be interpreted to apply to statutes

which incorporate federal statutes or

administrative rules which substantively

change the law, and not to a statute which

incorporates a federal in dex to provide aid in

making a ministerial determination.

Furthermore, we do not agree with Eastern's

contention that the statute is also

constitutionally infirm because the Department

of Revenue will utilize a consumer price index

which is to be determin ed after the effective

date of the act. In Gindl we upheld a

statutory provision which required a

computation based on the most recent

publication of the Florida Price Level Index

prepared by the Department of Administration.

The statute was to take effe ct July 1, 1976.

The Department of Education intended to base

the distribution on a survey which would be

started in October or November of 1976 and

completed during the early part of 1977. In

other words, the effect of the statute was to

reach forward a nd allow distribution to be

calculated on the most recent publication of

the Florida Price Level Index, an index which

was not in existence when the law became

effective. We agree with the circuit court's

determination that the method of a ppropriation

in chapter 83 - 3 is equivalent to the method

approved in Gindl .

Id. at 315 - 316.

86. The analyses in Lane and Eastern Air Lines apply here.

They confirm that AHCA is not required to undergo rule

promulgation every time new data reports are issued by the

Off ice of Vital Statistics in order to apply that data to the

standard - setting need methodology. The death data in those

reports are facts, and are not themselves standards having the

force and effect of law. As such , the references in the hospice

need rule must be considered informational references . As Judge

Lerner determined, such references are not prohibited by the

APA, but they are not subject to the stricter requirements for

incorporative references of standard - setting material .

87. AHCA acknowledg es that nothing in the CON laws would

require rule promulgation to adopt vital statistics reports as

rules. AHCAÓs interpretation of the APA, over which AHCA has no

substantive jurisdiction, is not entitled to deference and is

unpersuasive. The CON laws require AHCA t o promulgate uniform

need methodology rules, and AHCA has done so. The provisions of

the hospice need methodology rule would be distorted and

undermined by AHCAÓs interpretation of the APA to preclude use

of the most recent available death s tatistics to calculate

numeric need, and to instead require AHCA to engage in endless

meaningless rulemaking to change the date references of data

reports before the facts in those reports can be used.

88. AHCA and Intervenors identify a single adminis trative

order, Balsam v. Department of Health and Rehabilitative

Services , Case No. 84 - 0173RX (Fla. DOAH March 29, 1984), which

they characterize as ÐprecedentÑ requiring AHCA to incorporate

data by reference before the data can be used in fixed need

calcu lations. The Balsam order, predating Gulf Court , Meridian ,

and fixed need pools, is inapposite. Balsam did not address

historic data like the death statistics at issue here. Instead,

Balsam expressed a limited concern directed to HRS adopting the

results of a UniversityÓs methodology for projecting population

without promulgating the methodology or the results as rule s .

HRS acknowledged the legitimacy of the concern by arguing that

its rules should be interpreted to say that HRS would first

consider Ðthe methodologies and techniques used by [the

UniversityÓs Bureau of Economic and Business Research] to m ake

its projections.Ñ But the rules did not say that.

89. After Balsam , AHCAÓs uniform need methodology rules

were changed to provide for use of the of ficial population

estimates issued by the Office of the Governor. AHCAÓs use of

those population reports is not an issue presented here for

determination, but presumably AHCAÓs change to an official

government source for population data was made with Bals am in

mind. Regardless, the limited concern expressed in Balsam has

no application to AHCAÓs use of death data.

90. Chapter 382, Florida Statutes, mandates the

establishment of the Department of Health Office of Vital

Statistics, which is required to de velop a vital statistics

system of registration, collection, and preservation of vital

records, including records of deaths and births, and to tabulate

and disseminate annual reports of those vital statistics.

91. Death statistics are historic facts. The annual

reports issued by the Office of Vital Statistics pursuant to its

statutory duty would be admissible evidence to prove the truth of

the death statistics compiled therein, under the hearsay

exceptions provided in section 90.803(8), Florida Statutes

( public records and reports), and section 90.803(9) (records of

vital statistics). By reason of Gulf Court and Meridian , the

time for considering this admissible evidence is set before the

fixed need pool publication so AHCA can plug the evidence into

its methodology to calculate need.

9 2 . AHCA and Intervenors argue that, even if AHCA was not

required to incorporate the death statistics annual reports by

reference through the rule promulgation process, AHCA in fact did

so, and having done so, is thereby p recluded from using updated

death statistics annual reports until the rule is amended to

incorporate the new report by reference as part of the rule.

9 3 . Coming full circle, AHCA and Intervenors couch their

argument in terms of AHCA being bound by its ru le, which they

contend requires AHCA to use the death statistics in the reports

incorporated by reference. However, the hospice rule says no such

thing. The only part of the rule that specifies the death data to

be used in the numeric need methodology is the language defining

ÐcurrentÑ deaths and ÐprojectedÑ deaths.

9 4 . Applying the plain language of the hospice need rule,

without reading words into the rule and without deleting existing

language, requires AHCA to use 2013 death data to calculate

numer ic need. The ÐcurrentÑ death s definition, as the operative

provision that specifies which data is to be used, controls. The

passive language incorporating by reference older vital

statistics annual reports does not direct the use of the

referenced report s in calculating new fixed need pools. Instead,

the passive reference language is a helpful provision identif ying

some of the data reports that have been used and provides links

for how the data reports can be obtained . While the APA does not

require AHC A to promulgate death statistics reports as rules, it

does not prohibit AHCA from identifying data reports and

providing convenient access for informational purposes.

9 5 . Since AHCAÓs existing rule does not state that the

reference d data reports must be used to calculate numeric need,

it follows that AHCA is not required to update the informational

references through rule promulgation before AHCA is permitted

(and required) to follow the o perative language in its rule

directing the use of death data f or the most current year for

which data are available from the Office of Vital Statistics.

96. AHCAÓs convoluted interpretation , quoted in Finding of

Fact ¶ 29, cannot be accepted. It is contrary to the rule as

written. It rewrites or eliminates the Ðc urrentÑ deaths

provision and adds ÐactionÑ words to the passive references to

specific data reports . Instead of interpreting its rule in a way

that rewrites the words codified in the rule, AHCA must ha rmoniz e

(without changing) all of the rule language. Giving full effect

to the operational part that defines ÐcurrentÑ deaths, while

properly treating the passive references as informational only ,

harmonizes all of the rule language without changing any of it.

It also avoids the quandary from AHCAÓs interpr etation that AHCA

would have violated the APAÓs rulemaking requirements by choosing

not to procee d expeditiously to rulemaking.

9 7 . AHCAÓs explanation of what it believes the APA

requires, to justify its proffered interpretation of the hospice

rule , c a nnot be squared with AHCAÓs prior practice in which AHCA

has never limited itself to using only those data reports

incorporated by reference in the hospice rule . AHCAÓs

explanation cannot be squared with AHCAÓs current practice of

undergoing rule promulga tion to reference only some of the data

reports used by the hospice need methodology , while excluding the

hospice admissions data reports . And AHCAÓs explanation cannot

be squared with AHCAÓs practice in connection with other CON need

methodology rules, w here AHCA does not take the position that it

cannot use data to calculate numeric need until the data reports

are promulgated and incorporated by reference as rules . AHCA did

not reasonably explain these inconsistencies.

98 . HPH met its burden of provi ng that AHCA failed to apply

its hospice need methodology rule as written. AHCAÓs rule

requires use of the 2013 death data where the methodology calls

for ÐcurrentÑ deaths. Instead, AHCA erroneously used 2012 death

data for ÐcurrentÑ deaths. The resulti ng numeric need

determination of one new hospice program needed was erroneous.

The corrected fixed need pool number for hospice service area 5A ,

using the death data required by AHCAÓs rule, is zero.

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 determining that the published

fixed need pool number of one for hospice service 5A was

erroneous, and that the correct fixed need pool number for

hospice service 5A is zero.

DONE AND ENTERED this 1 1 th day of March , 2015 , in

Tallahassee, Leon County, Florida.

S

ELIZABETH W. MCARTHUR

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

12 30 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 1 1 th day of March , 2015 .

ENDNOTE S

1/ References to Florida Statute s are to the 2014 codification,

unless otherwise provided.

2/ The batching cycle mechanism was developed in response to

Biomedical Applications of Clearwater v. Department of Health and

Rehabilitative Services , 370 So. 2d 19 (Fla. 2d DCA 1979)

( Biomedica l ). In Biomedical , the court applied the Ashbacker

doctrine, established in Ashbacker Radio Corp. v. Federal

Communications Commission , 326 U.S. 327, 66 S. Ct. 148, 90 L.Ed.

108 (1945), to the CON program, holding that CON applicants have

an inherent righ t to comparative review with other mutually

exclusive CON applications. In explaining mutual exclusivity in

the CON context, the Biomedical court described the Ðfixed need

poolÑ concept: ÐWe are not the first to observe that where need

is determined in a ccordance with a quantitative standard; that

is, by number of units, a fixed pool of needed investments is

thereby created. Opposing applicants necessarily become

competitors for that fixed pool.Ñ Id. at 23. The court

suggested that a Ðself - starting mec hanism within HRSÑ was needed

and invited HRS Ðto devise means of achieving comparative

consideration[.]Ñ Id. at 25. The result was the batching cycle

mechanism.

3/ Prior to fixed need pools, HRS calculated numeric need under

the applicable rule method ology at the time of its initial review

of CON applications, plugging into the calculations data

available at that time. But if HRSÓs initial decisions were

challenged, as they often were, numeric need would be

recalculated in subsequent administrative he arings based on new

data admitted as evidence . Hearings were frequently delayed at

the request of parties hoping for new favorable data , which could

be used as evidence. The problem tackled by Gulf Court was how

to sort out comparative review rights whe n numeric need is the

product of new data issued a fter HRS Ós initial decisions , when

several batching cycles might be pending at DOAH , with later

batch es sometimes going to hearing before earlier batch es .

4/ The 1995 version of the hospice rule identified the Office of

Vital Statistics as being within HRS, as it was at the time.

Following a reorganization, the Office of Vital Statistics was

reassigned to the Department of Health, and the reference in the

rule was later changed to reflect that reassignment . Otherwise,

the language has not been changed from 1995 to its present form.

5/ AHCA and Intervenors also refer to F lorida Administrative Code

Rule 1 - 1.013, adopted by the Department of State to address

requirements for incorporation by reference, purs uant to the

rulemaking authority in section 120.54(1)(i)6. As AHCA and

Intervenors acknowledge, the Department of StateÓs rule permits

agencies to incorporate material by reference Ðprovided it meets

the definition of ÒruleÓ provided in section 120.52(16) . . . and

is generally available to affected persons.Ñ (Jt. PRO at 24 ).

Despite this recognition, AHCA and Intervenors fail to explain

how historic death data meets the definition of a rule.

COPIES FURNISHED:

Seann M. Frazier, Esquire

Parker, Hudson , Rainer and Dobbs, LLP

215 South Monroe Street , Suite 750

Tallahassee, Florida 32301

(eServed)

Richard Joseph Saliba, Esquire

Agency for Health Care Administration

2727 Mahan Drive , Mail Stop 3

Tallahassee, Florida 3230 8

(eServed)

Geoffrey D. Smith, E squire

Smith and Associates

3301 Thomasville Road , Suite 201

Tallahassee, Florida 32308

(eServed)

Corinne T. Porcher, Esquire

Smith and Associates

3301 Thomasville Road , Suite 201

Tallahassee, Florida 32308

(eServed)

Stephen K. Boone, Esquire

Boone, Bo one, Boone, and Koda, P.A.

1001 Avenida Del Circo

Post Office Box 1596

Venice, Florida 34284

(eServed)

Elizabeth Dudek, Secretary

Agency for Health Care Administration

2727 Mahan Drive , Mail Stop 1

Tallahassee, Florida 32308

(eServed)

Stewart Williams , General Counsel

Agency for Health Care Administration

2727 Mahan Drive , Mail Stop 3

Tallahassee, Florida 32308

(eServed)

Richard J. Shoop, Agency Clerk

Agency for Health Care Administration

2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

(e Served)

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of this Recommended Order. Any exceptions

to this Recommended Order should be filed with the agency that

will issue the Fi nal Order in this case.