96-005873CON First American Home Care Of Florida Inc./Belle Glade And First American Home Care Of Florida, Inc. vs. Agency For Health Care Administration Status: Closed Recommended Order on Monday, March 24, 1997.

Summary: Certificate of Need (CON) void on one-year termination date. Agency for Health Care Administration's failure to survey for medicare based on CON-holder's failure to submit Health Care Facility Application (HFCA) forms required prior to survey.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FIRST AMERICAN HOME CARE OF )

FLORIDA, INC., PANAMA CITY, )

)

Petitioner, )

)

vs. ) CASE N O . 96-5873

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Respondent. )

_______________________________)

RECOMMENDED ORDER

This case was heard by Eleanor M. Hunter, Administrative Law

Judge, Division of Administrative Hearings, on February 3, 1997,

in Tallahassee, Florida.

APPEARANCES

For Petitioner, Rebekah N. Murphy, Esquire

First American Nelson, Mullins, Riley and

Home Care of Scarborough, L.L.P.

Florida, Inc., 400 Colony Square, Suite 200

Panama City: 1201 Peachtree Street, Northeast

Atlanta, Georgia 30361

For Respondent, Richard M. Ellis, Esquire

Agency For Agency For Health Care Administration

Health Care 2727 Mahan Drive, Building 3

Administration: Tallahassee, Florida 32308

STATEMENT OF THE ISSUES

Whether Certificate of Need Number 7618 issued to First

American Home Care of Florida, Inc., Panama City is void.

PRELIMINARY STATEMENT

On August 19, 1996, the Agency For Health Care

Administration ("AHCA") notified First American Home Care of

Florida, Inc./Panama City (First American/Panama City) that

certificate of need ("CON") number 7618 was void because First

American/Panama City failed to become Medicare certified within

one year of issuance, as required by law. First American/Panama

City timely filed a petition challenging AHCA’s determination

that the CON was void, and the matter was referred to the

Division of Administrative Hearings.

At the final hearing, First American/Panama City presented

the testimony of Judie Rowland, R.N. and Helen Jess. First

American/Panama City’s exhibits 1-12 were received in evidence.

AHCA presented the testimony of Helen Jess and Elfie Stamm.

AHCA’s exhibits 1-2 were received in evidence. The transcript

was filed February 24, 1997. AHCA’s proposed recommended order

was received on March 7, 1997, followed by First American/Panama

City’s on March 10, 1997.

FINDINGS OF FACTS

1. In March 1995, First American Home Care of Florida,

Inc., Panama City ("First American/Panama City") filed an

application with the Agency For Health Care Administration

("AHCA") for a certificate of need ("CON") to establish and

operate a home health agency in Panama City, in AHCA District 2.

2. AHCA is the state agency authorized to issue, deny or

revoke CONs for health care facilities and services in Florida.

3. First American/Panama City is a Florida corporation and,

until October 16, 1996, was a wholly owned subsidiary of First

American Health Care of Georgia, Inc. ("First American"), whose

controlling shareholders were Robert J. and Margie B. Mills.

4. First American/Panama City’s CON application was

approved by AHCA and CON 7618 was issued in August 1995.

Subsection 408.040(2)(a), Florida Statutes and Rule 59C-

1.018(2)(6), Florida Administrative Code , provide that a CON

terminates one (1) year from the date of issuance if appropriate

licensure and certification has not been received. The CON

termination date for First American/Panama City was July 31,

1996.

5. In October 1995, First American/Panama City executed

contracts to lease a building and to perform the necessary

renovations to operate a home health agency in Panama City.

6. After First American/Panama City applied for a license

in January 1996, AHCA surveyed its operations on March 27, 1996,

and issued its license effective April 1, 1996.

7. After obtaining the state license from AHCA, First

American/Panama City began admitting patients. On April 23,

1996, after having admitted enough patients to cover the

disciplines for which it wished to be surveyed, First

American/Panama City requested a Medicare certification survey.

The request was submitted to the office of the AHCA surveyor, Ken

Arnold, at the suggestion of an employee of AHCA’s licensure

office, Helen Jess. When Ms. Jess and Judie Rowland, First

American/Panama City’s representative, talked on April 23, 1996,

Ms. Jess also told Ms. Rowland that certain required HCFA forms

were missing from the licensure files. Having not had the

Medicare survey by May 29, 1996, Ms. Rowland called and again

wrote to Mr. Arnold. When she called, Mr. Arnold’s secretary

said the file was not complete with the appropriate HCFA forms,

which were required before a survey was authorized.

8. Ms. Rowland spoke with Ms. Jess who responded in

writing, on June 4, 1996, with the missing HCFA forms enclosed,

which included HCFA-2572 - Statement of Financial Solvency and

HCFA 1513 - Disclosure of Ownership and Control Interest

Statement. In the June 4 th letter Ms. Jess expressed doubts that

First American/Panama City could complete those two forms,

stating in pertinent part:

We are advised that there is a pending

bankruptcy proceeding in the U.S. Bankruptcy

Court for the Southern District of Georgia,

entitled In Re: First American Healthcare of

Georgia, Inc. and its Wholly-Owned

Subsidiaries . We are advised further that

First American Home Care of Florida, Inc. is

a wholly-owned subsidiary of First American

Healthcare of Georgia, Inc. Accordingly, it

does not appear that you are able to declare

item 2 on the enclosed Statement of Financial

Solvency and, thus, that you are currently

ineligible for Medicare certification. The

enclosed forms are therefore provided to you

only as a courtesy at this time. The

provision of these forms should in no event

be construed as a preliminary determination

that our Agency intends to issue a Medicare-

certified home health agency license to First

American Home Care of Florida, Inc., Panama

City.

We are further advised that sentencing is

expected this month in the criminal matter

entitled United States v. Robert Mills,

Margie Mills, and ABC Home Health Care, Inc. ,

which is pending in U.S. District Court, S.D.

Ga. If a judgment of conviction is entered

in the criminal matter, First American Home

Care of Florida, Inc. could be permissively

excluded from the Medicare program. It would

therefore appear that eligibility of First

American Home Care of Florida, Inc. cannot be

determined pending the outcome of the

criminal proceeding, as well as the

bankruptcy proceeding.

9. When she received Ms. Jess’ correspondence of June 4,

1996, and the HCFA forms, Ms. Rowland forwarded the forms to the

offices of the First American corporate headquarters in

Brunswick, Georgia. HCFA Form 2572 - Statement of Financial

Solvency, was returned to Ms. Jess on August 22, 1996. The

remaining forms were returned to Ms. Jess on September 3, 1996.

10. First American/Panam a City took the position, in the

letter accompanying the financial solvency form, that AHCA’s

letter of June 4 th was legally incorrect in concluding that the

bankruptcy proceeding could affect solvency. As a Chapter 11

bankruptcy proceeding, the disposition of the case is the grant

of an "order of relief." The letter also " . . . note[s] that 11

U.S.C. section 525(a) prevents a governmental unit from refusing

to renew a license, permit, franchise . . . because of the filing

of its bankruptcy."

11. In th e letter of September 3, 1996, First

American/Panama City noted that it had received a letter dated

August 29, 1996, from the principal regional counsel for the

Department of Health and Human Services indicating that HCFA

would certify Panama City after AHCA surveyed and assured HCFA

that the home health agency meets federal, state and local laws.

HCFA form 1513 - related to ownership and control was filed

giving " . . . information regarding steps that are being taken

to bring the Parent Holding Company into compliance. . . .", a

reference to a plan for merger with another home health agency,

as part of the settlement in the bankruptcy proceedings.

Approved on September 12, 1996, the merger was completed on

October 16, 1996.

12. In the interim, however, on August 19, 1996, AHCA

notified First American/Panama City that its CON was void

effective on the one year termination date, July 31, 1996,

because of its failure to become Medicare certified.

13. First American/Panama City contends that the actions o f

AHCA precluded its compliance with the deadline and that it is,

therefore, entitled to an extension of time.

14. First American/Panama City cites AHCA’s delay from the

first notice of availability for survey, on April 23, 1996, to

the second notice, on May 29, 1996, as one reason for its failure

to receive timely Medicare certification.

15. First American/Panama City also claims that the

position taken in the June 4, 1996 letter written by Ms. Jess, on

behalf of AHCA, indicates that AHCA would not conduct the survey

because of the pending legal proceedings. That decision by AHCA,

according to First American/Panama City, would not have been

affected by the timely filing of the HCFA forms.

16. First American/Panama City claims entitlement to an

extension of time based on the good faith efforts of Ms. Rowland

in actively trying to get AHCA to conduct the Medicare survey.

Ms. Rowland, however, concedes that Ms. Jess, beginning with the

April 23 rd telephone call, pointed out " . . .it looked like

there were some [papers] missing." Ms. Rowland testified that

"Helen did say on that date [April 23, 1996] that she did not see

the disclosure of ownership and charges of financial solvency,

part of the papers for certification." (Transcript, pages 16-

17.)

17. Ms. Rowland informed the corporate headquarters

regulatory affairs staff of the conversation, and forwarded the

forms to them. The forms were, in fact, completed, but not

returned to AHCA until after AHCA’s notice that the CON was void.

18. First Amer ican/Panama City also argues that AHCA’s

legal conclusions, as implied in the letter of June 4, 1996, were

in error. The letters of August 22, 1996 and September 3, 1996,

were legally correct interpretations of the bankruptcy

proceedings and the Medicare fraud prosecution, according to

First American/Panama City. Assuming, arguendo , that First

American/Panama City not AHCA is correct, the regulatory affairs

staff failed to submit the forms and to make that argument until

after the termination date of the CON. AHCA received no request

for an extension of the validity period for CON 7618 as provided

in Rule 59C-1.018(3).

CONCLUSIONS OF LAW

19. The Division of Administrative Hearings has

jurisdiction over the parties to and subject matter of this

proceeding, pursuant to subsection 120.57(1), Florida Statutes .

20. First American/Panama City has the burden of proving by

a preponderance of the evidence that its CON should have been

extended by AHCA. Department of Banking and Finance, etc. v.

Osborne Stern and Company , 670 So.2d 933 (Fla. 1996).

21. Subsection 408.040(2)(c), Florida Statutes , provides

that:

[t]he certificate-of-need validity period for

a project shall be extended by the

department, to the extent that the applicant

demonstrates to the satisfaction of the

department that good faith commencement of

the project is being delayed by litigation or

by government action or inaction with respect

to regulations or permitting precluding

commencement of the project. [Emphasis

added.]

Relying on the statute, First American/Panama City asserts that

AHCA inappropriately and impermissibly refused to conduct the

Medicare survey, which was the sole reason that it was unable to

complete the project before the CON termination date, not any

lack of good faith on the part of First American/Panama City.

22. AHCA has implemented subsection 408.040(2)(c) in Rule

59C-1.018(3), Florida Administrative Code , which provides that:

(a) A one-time extension of the certificate

of need termination date, not to exceed 6

months, shall be granted if the holder has

demonstrated good cause for an extension in

accordance with the provisions described

below. The holder of a certificate of need

who desires a 6-month extension shall submit

a request for an extension to the agency, in

writing, not later than 15 calendar days

prior to the end of the 1-year termination

date, or 2-year termination date for

multifacility projects. The request shall

include a revised timetable for the project.

Failure to timely file is a waiver of the

right to request an extension . The

submission of a request does not extend the

validity period of a writing, of the

disposition of the request on or before the

termination date.

23. First American/Panama City relies on the decision in

Health Quest Corporation IV v. Department of Health and

Rehabilitative Services , 593 So.2d 533 (Fla. 1 st DCA 1992). In

Health Quest , as in this case, the CON had a one year validity

date. Due to litigation over a sewer connection, changes in the

county permitting process, and the absence from work (on the last

two days before the CON became void) of a county department head,

the District Court held that the CON termination date was

extended. The opinion notes that the rule on extensions based on

litigation and good faith efforts was adopted by the agency

subsequent to the final hearing. Because the rule had not been

adopted at the time Health Quest’s CON was declared void, the

procedure for requesting an extension adopted in the rule

distinguishes this case from the Health Quest decision. After

learning from the letter of June 4, 1996, that AHCA did not

believe it could file the HCFA forms required prior to survey,

First American/Panama City had until 15 days prior to the July

31 st termination date to request an extension of the CON

termination date.

24. Alternatively, First American/Panama City’s regulatory

staff could have done in a timely manner what it later did on

August 22, 1996 and September 3, 1996, file the HCFA forms

explaining its legal opinion of the Chapter 11 proceedings, and

its prospective ownership. First American/Panama City would

have, thereby, given AHCA the opportunity to evaluate the

adequacy and completeness of the HCFA forms, and to decide

whether or not to conduct the Medicare survey.

25. The theory which First American/Panama City pursues in

this case in akin to equitable estoppel, which requires a three-

part showing: (1) a representation as to a material fact that is

contrary to a later-asserted position; (2) reliance on that

representation; and (3) a change in position detrimental to the

party claiming estoppel, caused by the representation and

reliance thereon. Department of Revenue v. Anderson , 403 So.2d

397, 400 (Fla. 1981). There is no evidence that AHCA made a

representation as to a material fact contrary to a later-asserted

position. By contrast, Ms. Jess’ June 4, 1996 letter objectively

indicates doubt on the part of AHCA regarding First

American/Panama City’s ability to become Medicare-certified, and

cautions that providing of federal forms therewith "should in no

event be construed as a preliminary determination" that AHCA

intended to issue a certified license. While estoppel does not

require the performance of a futile act, the salient fact for

estoppel analysis is that the necessary forms were provided by

AHCA and not timely returned to AHCA. First American/Panama City

had at least six weeks in which to complete and return the forms

before CON 7618 terminated on July 31, 1996.

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 CON 7618 is void.

DONE AND ENTERED in Tallahassee, Leon County, Florida, this

24th day of March, 1997.

___________________________________

ELEANOR M. HUNTER

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone] SUNCOM 278-9675

Fax Filing [phone]

Filed with the Clerk of the

Division of Administrative Hearings

this 24th day of March, 1997.

COPIES FURNISHED:

Richard M. Ellis, Esquire

Agency For Health Care Administration

Office of the General Counsel

2727 Mahan Drive

Tallahassee, Florida 32308

Rebekah N. Murphy, Esquire

Nelson, Mullins, Riley and

Scarborough, L.L.P.

400 Colony Square, Suite 200

1201 Peachtreet Street, Northeast

Atlanta, Georgia 30361

Sam Power, Agency Clerk

Agency For Health Care Administration

2727 Mahan Drive

Fort Knox Building 3, Suite 3431

Tallahassee, Florida 32308

Jerome W. Hoffman, General Counsel

Agency For Health Care Administration

2727 Mahan Drive

Tallahassee, Florida 32308

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 final order in this case.