88-004043F A Professional Nurse, Inc. vs. Department Of Health And Rehabilitative Services Status: Closed DOAH Final Order on Monday, January 9, 1989.

Summary: Denial of home health Certifiacte Of Need unjustified because agency had no rules for evaluating application, essentially requiring hearing. Fees granted.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

A PROFESSIONAL NURSE, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 88-4043F

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent. )

______________________________)

FINAL ORDER

This matter was heard by William R. Dorsey, Jr., the Hearing Officer

designated by the Division of Administrative Hearings, on November 16, 1988, in

Tallahassee, Florida.

APPEARANCES

For Petitioner: Donna H. Stinson, Esquire

MOYLE, FLANIGAN, KATZ

FITZGERALD & SHEEHAN, P.A.

The Perkins House, Suite 100

118 North Gadsden Street

Tallahassee, Florida 32301

For Respondent: John Rodriguez, Esquire

Department of Health and

Rehabilitative Services

Fort Knox Executive Center

2727 Mahan Drive

Suite 309

Tallahassee, Florida 32308

Proposed final orders have been submitted by both parties. Rulings on the

proposed findings of fact are made in the appendix to this final order.

STATEMENT OF THE ISSUE

The issue is whether A Professional Nurse, Inc., is entitled to an award of

attorney's fees and costs under the Equal Access to Justice Act, Section 57.111,

Florida Statutes, for fees and costs incurred in a prior formal proceeding in

which A Professional Nurse, Inc., sought a certificate of need to become a

Medicare certified home health agency and prevailed.

FINDINGS OF FACT

The Stipulated Facts

Prior to the final hearing, the parties stipulated to the following:

1. This is an action for attorney's fees pursuant to Section 57.111,

Florida Statutes.

2. The fees sought by A Professional Nurse arise from pursuing its right

to a formal hearing under Section 120.57(1), Florida Statutes, in Case No. 87-

0451, A Professional Nurse Inc. v. Department of Health and Rehabilitative

Services.

3. In that prior proceeding, the Department had notified A Professional

Nurse by letter dated November 17, 1986, that its application for a certificate

of need as a home health agency was denied. The letter also advised A

Professional Nurse of its right to request a Section 120.57(1) hearing.

4. A Professional Nurse prevailed in the proceedings in Case No. 87-0451,

and a final order was entered by the Department of Health and Rehabilitative

Services granting A Professional Nurse Certificate of Need No. 4636 as a home

health agency.

5. A Professional Nurse qualifies as a "small business party" under

Section 57.111, Florida Statutes. The $14,144 in attorney's fees requested by A

Professional Nurse in this proceeding is a reasonable fee.

6. The issue to be determined is whether the Department's decision to deny

the certificate of need application was "substantially justified" as defined in

Section 57.111(3)(e) Florida Statutes.

The Acts Found Based Upon the Hearing

The following findings are made based upon the evidence presented at the

hearing in this case:

7. A Professional Nurse provides home-based skilled nursing care, nurses

aide care, homemakers' services, and related professional and institutional

staffing services. In June of 1986 it filed an application for a certificate of

need as a Medicare certified home health agency to serve HRS District IX. A

decision was due on that application in October 1986.

8. On September 16, 1986, an employee of the Department requested an

extension of time for the Department's decision until January 1987 because the

Department had no rule methodology for determining need for home health

agencies, but hoped to have one by January 1987. A Professional Nurse agreed to

a three-week extension but did not agree to defer a decision until January 1987.

9. On November 17, 1986, the Department notified A Professional Nurse that

its application had been reviewed pursuant to Section 381.493 through 499,

Florida Statutes, and Chapter 10-6, Florida Administrative Code. The State

Agency Action Report issued by the Department that day proposed to deny the

application.

10. At the time the application was reviewed in November 1986, the

Department had no numeric need methodology promulgated by rule for determining

the need for additional Medicaid certified home health agencies. At no tide

during the application process was A Professional Nurse told how the Department

would determine the need for additional home health agencies, given the absence

of any need methodology properly adopted in rule form.

11. At the time the application was filed, the Department was using a

numeric need formula. The formula was not found in any rule, it was a

modification of a proposed numeric need rule which had been declared to be

invalid. Home Health Services and Staffing v. Department of Health and

Rehabilitative Services, Case 85-1377R (DOAH March 12, 1986). The modifications

were made by the Department to correct deficiencies the hearing officer had

identified, which among other things, were that the proposed rule was too

restrictive, stifled competition, and therefore was invalid. This modified need

formula had been used by the Department in evaluating CON applications submitted

in the batching cycle immediately preceding the batch in which A Professional

Nurse's application was filed. That methodology had not been published as a

proposed rule or adopted as a rule.

12. After A Professional Nurse's application was filed, but before any

preliminary decision was made on it, the Department ceased using its

unpromulgated numeric need methodology. Why the Department abandoned the non-

rule numeric need methodology cannot be determined from the record in this

proceeding. The unpromulgated numeric need methodology the Department had been

using showed a need for additional health agencies in District IX, and would

have led the Department to grant A Professional Nurse's application.

13. In reviewing A Professional Nurse's application, the Department

utilized the thirteen statutory criteria found in Section 381.494(6)(c), Florida

Statutes (1985). The pivotal criteria, the assessment of need for an additional

home health agency, is listed in the statute, but no method for evaluating need

is prescribed. After abandoning its unpromulgated numeric need methodology, the

Department's position was that an applicant had to demonstrate "unmet need" by

showing that individuals were being denied home health care they were seeking in

order for an applicant to obtain a certificate of need as a new home health

agency.

14. When the Department reviewed A Professional Nurse's application it did

not know, and could not determine, how many home health agencies were needed in

District IX. The Department's new policy on need imposed a nearly impossible

burden on applicants to demonstrate need without identifying for applicants the

appropriate means to show that people-seeking services were not being served,

and that additional home health care agencies were needed in a district.

15. In an effort to deal with the problem of implementing the general

statutory requirement that the Department assess the need for additional home

health agencies when reviewing CON applications, A Professional Nurse presented

a methodology to the Department as a "addendum" to its certificate of need

application during the public hearing which was conducted on the application.

The methodology A Professional Nurse presented was a variation on the

invalidated rule. The proposed methodology demonstrated a need for additional

home health agencies in HRS District IX.

16. The administrator of the Department's certificate of need office, Mr.

Maryanski, took the position at the time the methodology was proposed by A

Professional Nurse, that even if an applicant presented a need methodology to

the Department, it would be "more appropriate" for a hearing officer to

determine the validity of a proposed methodology than for the Department to

accept an applicant's proposed need methodology formula when reviewing the

application. This position, in effect, requires all applicants to request

Section 120.57(1) administrative hearings, and bear the expense of such

hearings, if they hoped to obtain a certificate of need. The alternative was

for applicants for CONs for home health agencies to grant the Department

repeated extensions of time in which to evaluate their applications until a new

methodology was chosen by the Department and promulgated as a rule.

17. The District Court of Appeal, First District, issued an opinion on

July 22, 1986, in the case of Upjohn Healthcare Services, Inc. v. Department of

Health and Rehabilitative Services, 496 So.2d 147 (Fla. 1st DCA 1986) published

at 11 Florida Law Weekly 1592, holding that the Department had a statutory duty

to have a methodology for review of home health agency certificate of need

applications. At the time of the review of the application by a A Professional

Nurse in November 1986, no such methodology yet existed, and consequently, none

could be applied by the Department.

CONCLUSIONS OF LAW

18. The Division of Administrative Hearings has jurisdiction over this

matter. Sections 57.111 and 120.57(1), Florida Statutes (1987).

19. A small business party which prevails in a proceeding under Chapter

120, Florida Statutes, is entitled to an award of attorney's fees under Section

57.111(4)(a) unless the actions of the state agency which caused the small

business party to participate in the formal proceeding were substantially

justified, or unless special circumstances exist which would make on award of

fees unjust.

20. It is stipulated that A Professional Nurse is a small business party,

that it prevailed in the underlying certificate of need application hearing, and

ultimately was granted a certificate of need by final order issued by the

Department. The underlying adjudicatory proceeding was initiated by the

Department, when it issued its State Agency Action Report denying the CON to a A

Professional Nurse.

21. The nub of the controversy is whether the Department's actions were

"substantially justified." That term is defined in Section 57.111(3)(e) as

follows:

A proceeding is "substantially

justified" if it had a reasonable basis

in law and fact at the time it was

initiated by a state agency.

22. The Department lacked a reasonable basis in law to deny the

application A Professional Nurse had submitted. The decision of the court of

appeals in Upjohn Healthcare Services, Inc. v. Department of Health and

Rehabilitative Services, 11 Florida Law Weekly 1592, 496 So.2d 147 (Fla. 1st DCA

1986), held that Section 381.494(8)(b), Florida Statutes, required the

Department to promulgate by rule a numeric methodology to assess need when

reviewing home health agency certificate of need applications. The Department

still had no rule when it denied A Professional Nurse's application. This

default on the part of the Department virtually required the Department to deny

all home health agency certificate of need applications, and leave it to the

applicant to demonstrate some appropriate need methodology in Section 120.57(1)

administrative hearings. This is precisely the position adopted by the

administrator of the certificate of need office. A Professional Nurse had a

legal entitlement, under the Upjohn decision, to have its application considered

and evaluated against a properly adopted numeric formula for gauging the

statutory element of need. Additionally, under Section 120.54(12), Florida

Statutes, the agency was required to engage in rulemaking. Development of ad

hoc incipient policy is insufficient under this 1984 amendment to the

Administrative Procedure Act. See also A Professional Nurse, Inc. v. Department

of Health and Rehabilitative Services, 519 So.2d 1061, 1065 (Fla. 1st DCA 1988).

The absence of a need methodology made this impossible, and rendered the

agency's denial unreasonable as a matter of law.

23. Additionally, the Department lacked a reasonable basis in fact to deny

the CON, because the Department's position that the applicant should be required

to show that individuals were not being served by existing home health agencies

was unreasonable. The unreasonableness of the Department's position is

discussed in the recommended order in Case 87-0451 at findings of fact 12-15.

The Department adopted these findings in its final order.

24. The actions of the Department in denying A Professional Nurse's

application for Certificate of Need 4636 lacked a reasonable basis in law and in

fact, and consequently ware not substantially justified under Section

57.111(3)(e), Florida Statues.

25. Hearing Officer Dean reached a substantially similar conclusion in the

final order entered in Homecare Associates of Northwest Florida, Inc. v.

Department of Health and Rehabilitative Services, Case 88-4763F, entered on

December 21, 1988. That decision awarded fees and costs against the Department

for denial of a CON to a home health agency applicant in circumstances similar

to those presented here. Hearing Officer Kiesling also has awarded fees to a

home health agency CON applicant in similar circumstances. Home Health Care of

Bay County, Florida v. Department of Health and Rehabilitative Services, Case

88-1353F (entered June 29, 1988).

26. No special circumstances were proven by HRS which would make an award

of attorney's fees in this case unjust.

ORDER

It is ORDERED that the Department of Health and Rehabilitative Services pay

to A Professional Nurse, Inc., $14,144.00 as reimbursement for attorney's fees

and costs pursuant to Section 57.111, Florida Statutes.

DONE AND ORDERED in Tallahassee, Leon County, Florida, this 9th day of

January, 1989.

_________________________________

WILLIAM R. DORSEY, JR.

Hearing Officer

Division of Administrative Hearings

The Oakland Building

2900 Apalachee Parkway

Tallahassee, FL 32399-1550

[phone]

Filed with the Clerk of the

Division of Administrative Hearings

this 9th day of January, 1989.

ENDNOTE

1/ The prehearing stipulation gives this date as November 17, 1987, which is

clearly incorrect.

APPENDIX

The following are city rulings on the proposed findings of fact submitted

by the parties pursuant to Section 120.59(2), Florida Statutes (1985).

Rulings on Petitioner's Proposed Findings:

1. Covered in finding of fact 8.

2. Covered in finding of fact 9.

3. Covered in findings of fact 10 and 11.

4. Covered in finding of fact 12.

5. Covered in finding of fact 13.

6. Covered in findings of fact 3 and 5.

7. Covered in finding of fact 9.

8. Covered in finding of fact 14.

9. To the extent necessary covered in conclusions of law.

10. Covered in finding of fact 15.

11. Covered in finding of fact 9.

12. Covered in finding of fact 16.

13. Covered in finding of fact 16.

14. Covered in finding of fact 17.

15. Covered in finding of fact 18.

Rulings of Respondent's Proposed Findings:

1-7. Covered by the prehearing stipulation.

8. Adopted in paragraph 8.

9. Adopted in paragraph 10.

10. Covered in finding of fact 11.

11. Covered in finding of fact 10.

12. Rejected because there was a need for additional home health care

agencies in District IX, as found in the recommended order in the underlying CON

case. That recommended order was adopted by HRS and the certificate of need was

granted to A Professional Nurse.

13. Rejected because this matter is not at issue.

14. Rejected as unnecessary. This proceeding is not one where HRS may

relitigate the merits of the certificate of need application.

15. Rejected for the reasons stated immediately above.

16. Rejected for the reasons given for rejecting proposed finding of fact

14.

17. Rejected for the reasons given for rejecting proposed finding of fact

14.

18. Rejected for the reasons given for rejecting proposed finding of fact

14. See also recommended order in the underlying CON action.

19. Rejected. HRS was required, by the decision of the court of appeals

in Upjohn Health Care Services to have a numeric need methodology. In an attempt

to assist the agency with the situation presented by the agency's failure to

adopt a rule, the applicant presented the proposed methodology at the public

hearing, after the application had been deemed complete. HRS did not have the

right to reject that methodology out of hand when it had no methodology of its

own. If HRS had had a duly promulgated methodology, and the application had

failed to contain facts necessary to apply the methodology, HRS would be

correct, and information filed after the application had been deemed complete

could have been disregarded by the Department.

COPIES FURNISHED:

Donna H. Stinson, Esquire

MOYLE, FLANIGAN, KATZ

FITZGERALD & SHEEHAN, P.A.

The Perkins House, Suite 100

118 North Gadsden Street

Tallahassee, Florida 32301

John Rodriguez, Esquire

Department of Health and

Rehabilitative Services

Fort Knox Executive Center

2727 Mahan Drive

Suite 309

Tallahassee, Florida 32308

Sam Power, Clerk

Department of Health and

Rehabilitative Services

1323 Winewood Boulevard

Building One, Room 407

Tallahassee, Florida 32399-0700

Gregory L. Coler, Secretary

Department of Health and

Rehabilitative Services

1323 Winewood Boulevard

Building One, Room 407

Tallahassee, Florida 32399-0700

John Miller, Esquire

General Counsel

Department of Health and

Rehabilitative Services

Fort Knox Executive Center

2727 Mahan Drive

Suite 309

Tallahassee, Florida 32308

NOTICE OF RIGHT TO JUDICIAL REVIEW

A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO JUDICIAL

REVIEW PURSUANT TO SECTION 120.68, FLORIDA STATUTES. REVIEW PROCEEDINGS ARE

GOVERNED BY THE FLORIDA RULES OF APPELLATE PROCEDURE. SUCH PROCEEDINGS ARE

COMMENCED BY FILING ONE COPY OF A NOTICE OF APPEAL-WITH THE AGENCY CLERK OF THE

DIVISION OF ADMINISTRATIVE HEARINGS AND A SECOND COPY, ACCOMPANIED BY FILING

FEES PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL, FIRST DISTRICT, OR

WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE PARTY

RESIDES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE

ORDER TO BE REVIEWED.