Category Archives: Administrative Law

HIPAA Enforcement and Compliance: What You Need to Know

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HIPAA 101

The Health Insurance and Accountability Act of 1996 (HIPAA) is a federal law that sets forth certain requirements to be followed by healthcare providers and related entities with respect to safeguarding a patient’s privacy and security.¹ HIPAA helps to ensure that all medical records, medical billing, and patient account information meet certain standards with regard to documentation, handling, and privacy. Most simply, it requires “covered entities” to protect the privacy of patient information, secure patient health information (physically and electronically), adhere to the “minimum necessary” standard for use and disclosure of patient health information, and specifies patients’ rights for access, use and disclosure of their health information.

Following the passage of HIPAA, the 2009 Health Information Technology for Economic and Clinical Health (HITECH) Act and the 2013 HHS HIPAA Final Omnibus Rule strengthened and updated the federal HIPAA privacy and security standards. Major revisions included: breach notification requirements, fine and penalty increases for privacy violations, mandating that business associates are directly liable for HIPAA compliance, patients’ right to request electronic copies of their health care records, and patients’ right to restrict disclosure to health plans for services self‐paid in full (“self‐pay restriction”).

HIPAA’s Privacy and Security Rule, along with the relatively recent revisions resulting from the 2009 HITECH Act and 2013 Final Omnibus Rule, are discussed briefly below. ²

HIPAA Privacy Rule

The HIPAA Privacy Rule, 45 CFR Parts 160-164, regulates the use and disclosure of Protected Health Information (“PHI”). Under HIPAA, a covered entity is not required to obtain consent or authorization to use or disclose PHI for treatment, payment, or health care operations.³ While the HIPAA Privacy Rule does not require an individual’s consent or authorization for the use or disclosure of PHI for treatment, payment, or health care operations, Florida Statutes imposes a more stringent standard for the use or disclosure of patient information, and requires a written authorization for disclosures other than for treatment purposes, except under certain enumerated circumstances.⁴
When the use or disclosure of PHI is not related to treatment, payment, or health care operations, HIPAA requires a written valid authorization, except under certain enumerated exceptions.⁵ In order for the authorization to be valid, certain requirements outlined in HIPAA must be met.⁶ The HIPAA Privacy Rule contains several key definitions, listed below:
Business Associate: A person, other than a member of the covered entity’s workforce, that, with respect to a covered entity, performs or assists in the performance of a function or activity involving the use or disclosure of individually identifiable health information.⁷

Covered Entity: A health plan, health care clearinghouse, or health care provider who transmits any health information in electronic form in connection with a transaction subject to the privacy rule.⁸

Protected Health Information (PHI): Individually identifiable health information that is transmitted by electronic media, maintained in electronic media, or transmitted or maintained in any other form or medium.⁹ PHI is information related to a patient’s past, present, or future physical and/or mental health condition. It includes, but is not limited to, the following information when it is maintained by a healthcare covered entity in order to conduct healthcare treatment, payment, or operations: name, address, birthdate, telephone number, email address, social security number, medical record number, account number, certificate/license number, and several other types of information collected and used by healthcare providers. PHI includes health information about individuals who have been deceased less than 50 years.

Minimum Necessary: When using or disclosing protected health information or when requesting protected health information from another covered entity or business associate, a covered entity or business associate must make reasonable efforts to limit protected health information to the minimum necessary to accomplish the intended purpose of the use, disclosure, or request. The minimum necessary requirement does not apply to disclosures to a health care provider for treatment.¹⁰

HIPAA Security Rule

The HIPAA’s Security Rule established a national set of security standards for protecting certain health information that is held or transferred in electronic form.¹¹ The Security Rule specifies a series of administrative, physical, and technical safeguards for covered entities to use to assure the confidentiality, integrity, and availability of electronic protected health information. While the Privacy Rule concerns those who can have access to PHI, the Security Rule’s focus is on ensuring that only those who are entitled to access electronic protected health information (ePHI) gain access to ePHI.

The HIPAA Security Rule applies to covered entities and business associates, as defined above. While the Privacy Rule protects the privacy of PHI, the Security Rule protects PHI that a covered entity creates, receives, maintains or transmits in electronic format. The Security Rule does not apply to PHI transmitted orally or in writing, only electronic PHI.¹²

The Security Rule requires covered entities and business associates to maintain reasonable and appropriate administrative, technical, and physical safeguards for protecting e-PHI. The Rule does not dictate which security measures a covered entity or business associate must use, but requires that they take into account: their size, complexity, and capabilities; their technical, hardware and software infrastructure; the costs of security measures; and the likelihood and possible impact of potential risks to e-PHI.¹³ Covered entities must adopt reasonable and appropriate policies and procedures to comply with the provisions of the Security Rule, and must periodically review and update its documentation.

Breach Notification Requirements

The HIPAA Security Rule requires covered entities to notify individuals, the Secretary of HHS under certain circumstances, and in some cases, the media, regarding breaches of unsecured protected health information.¹⁴ Once a covered entity discovers a breach of unsecured PHI, both Florida law and HIPAA require notification to the individual “without unreasonable delay.”

Under HIPAA’s Security Rule, the outside time limit for individual notification is 60 calendar days, while under the Florida Information Protection Act (FIPA), the outer time limit for notification is 30 days.¹⁵ As Florida’s law is more stringent, covered entities should be sure to comply with the shorter timeframe specified in Florida statutes. Additionally, business associates are required to notify covered entities of a breach of unsecured PHI.¹⁶
Enforcement Overview

The U.S. Department of Health and Human Services Office for Civil Rights (OCR) is responsible for enforcing HIPAA’s Privacy and Security Rules. OCR enforces the Privacy and Security Rules by investigating complaints and conducting compliance reviews to determine if covered entities are in compliance.

If OCR accepts a complaint for investigation, OCR will notify the person who filed the complaint and the covered entity named in it. Then the complainant and the covered entity will present information about the incident(s) described in the complaint. Covered entities are required by law to cooperate with complaint investigations.

If a complaint describes an action that could be a violation of the criminal provision of HIPAA (42 U.S.C. 1320d-6), OCR may refer the complaint to the Department of Justice for investigation.

OCR reviews the information, or evidence, that it gathers in each case. In some cases, it may determine that the covered entity did not violate the requirements of the Privacy or Security Rule. If the evidence indicates that the covered entity was not in compliance, OCR will attempt to resolve the case with the covered entity by obtaining: voluntary compliance; corrective action; and/or a resolution agreement.

If the covered entity does not take action to resolve the matter in a way that is satisfactory, OCR may decide to impose civil money penalties (CMPs) on the covered entity. If CMPs are imposed, the covered entity may request a hearing in which an HHS administrative law judge decides if the penalties are supported by the evidence in the case.¹⁷

Potential Fines

Failure to comply with HIPAA can result in civil and criminal penalties.

Civil Penalties¹⁸
The HITECH Act, enacted as part of the American Recovery and Reinvestment Act of 2009 (ARRA) that was signed into law on February 17, 2009, established a tiered civil penalty structure for HIPAA violations (see chart below).¹⁹ The Secretary of the Department of Health and Human Services (HHS) has discretion in determining the amount of the penalty based on the nature and extent of the violation and the nature and extent of the harm resulting from the violation.²⁰ If the covered entity or business associate does not act with willful neglect and corrects the violation within 30 days, the OCR may not impose any penalty. Timely correction is an affirmative defense.²¹

HIPAA Violation	Minimum Penalty	Maximum Penalty
Individual did not know (and by exercising reasonable diligence would not have known) that he/she violated HIPAA	$100 per violation, with an annual maximum of $25,000 for repeat violations	$50,000 per violation, with an annual maximum of $1.5 million per identical violation per year
HIPAA violation due to reasonable cause and not due to willful neglect	$1,000 per violation, with an annual maximum of $100,000 for repeat violations	$50,000 per violation, with an annual maximum of $1.5 million per identical violation per year
HIPAA violation due to willful neglect but violation is corrected within the 30 day required timeframe	$10,000 per violation, with an annual maximum of $250,000 for repeat violations	$50,000 per violation, with an annual maximum of $1.5 million per identical violation per year
HIPAA violation is due to willful neglect and is not corrected within the 30 day required timeframe	$50,000 per violation, with an annual maximum of $1.5 million	$50,000 per violation, with an annual maximum of $1.5 million per identical violation per year

Criminal Penalties²²
Covered entities and specified individuals, as explained below, whom “knowingly” obtain or disclose individually identifiable health information in violation of HIPAA may be fined up to $50,000, as well as face imprisonment up to one year. Offenses committed under false pretenses allow penalties to be increased to a $100,000 fine, with up to five years in prison. Offenses committed with the intent to sell, transfer, or use individually identifiable health information for commercial advantage, personal gain or malicious harm permit fines of $250,000, and imprisonment for up to ten years.²³

Covered Entity and Specified Individuals

The DOJ concluded that the criminal penalties for a violation of HIPAA are directly applicable to covered entities—including health plans, health care clearinghouses, health care providers who transmit claims in electronic form, and Medicare prescription drug card sponsors. Individuals such as directors, employees, or officers of the covered entity, where the covered entity is not an individual, may also be directly criminally liable under HIPAA in accordance with principles of “corporate criminal liability.” Where an individual of a covered entity is not directly liable under HIPAA, they can still be charged with conspiracy or aiding and abetting.²⁴

Recent HIPAA Violations

Anthem Health Insurance Breached Again

In February 2015, Anthem Health Insurance, the nation’s second largest health insurance company, reported what is likely the largest health care related breach of HIPAA data to date. The breach involved an estimated 80 million Anthem customers, and Anthem is potentially liable for up to $1.5 million for the breach under HHS rules.²⁵ The two largest health care breaches to date have been Tricare in 2011, which affected 4.9 million individuals, and Community Hospital Systems in 2014, which involved data from 4.8 million individuals.²⁶

According to an Anthem official statement, while there was no evidence that medical information was compromised, the attackers gained access to Anthem’s IT system and have obtained information from members such as names, medical IDs/SSN, mailing and email addresses.²⁷ For this to be considered a HIPAA breach, Protected Health Information (PHI) as defined by HIPAA and HITECH Security Rules would have to be involved. A person’s name, address and SSN (identifiers confirmed as part of the Anthem breach) are included within the types of data that comprise PHI, as articulated above.

This is not the first time that Anthem’s security was breached resulting in HIPAA violations. Anthem recently agreed to pay HHS $1.7 million to settle an investigation into a separate computer breach that occurred in 2010 and resulted in the disclosure of personal information of approximately 612,000 people.²⁸ (At the time of the breach, Anthem was known as WellPoint). The HHS found that in 2009 and 2010, WellPoint did not adequately implement policies and procedures to protect unsecured “electronic protected health information” covered by HIPAA, and as a result, names, dates of birth, addresses, Social Security numbers and health information of over 600,000 WellPoint customers was disclosed.²⁹ According to HHS, the personally identifiable information that HIPAA-covered health plans maintain on enrollees and members, including names and Social Security numbers, is protected under HIPAA, even if no specific diagnostic or treatment information is disclosed.³⁰
Other Recent HIPAA Enforcement Actions and Resolutions

The Office for Civil Rights, the HHS division responsible for enforcing HIPAA, has levied more than $25.1 million in fines against healthcare organizations responsible for violating the privacy and security rules.³¹ To date, HHS has resolved 21 cases that resulted from breach reports of electronic protected health information. A few of these are highlighted below. For a more comprehensive accounting, please see: http://www.hhs.gov/ocr/privacy/hipaa/enforcement/examples/index.html.

$150,000 HIPAA Settlement Involving Anchorage Community Mental Health Services (ACMHS) (December 2014): Under the settlement agreement, ACMHS will pay $150,000 and adopt a corrective action plan to correct deficiencies in its HIPAA compliance program. OCR opened its investigation after receiving notification from ACMHS regarding a breach of unsecured electronic protected health information (ePHI) affecting 2,743 individuals due to malware compromising the security of its information technology resources. OCR’s investigation revealed that ACMHS had adopted sample Security Rule policies and procedures in 2005, but these were not followed. Moreover, the security incident was the direct result of ACMHS failing to identify and address basic risks, such as not regularly updating their IT resources with available patches and running outdated, unsupported software. http://www.hhs.gov/ocr/privacy/hipaa/enforcement/examples/acmhs/acmhsbulletin.pdf.

$800,000 HIPAA Settlement Involving Parkview Health System, Inc. (June 23, 2014): Under the settlement, Parkview agreed to pay $800,000 and adopt a corrective action plan to address deficiencies in its HIPAA compliance program. OCR opened an investigation after receiving a complaint from a retiring physician alleging that Parkview had violated the HIPAA Privacy Rule. Parkview employees left 71 cardboard boxes of medical records unattended and accessible to unauthorized persons on the driveway of the physician’s home. In addition to the $800,000 resolution amount, the settlement includes a corrective action plan requiring Parkview to revise their policies and procedures, train staff, and provide an implementation report to OCR. http://www.hhs.gov/news/press/2014pres/06/20140623a.html.

$4.8 million HIPAA Settlement Involving New York Presbyterian Hospital and Columbia University (May 2014): Two health care organizations settled charges that they potentially violated the Health Insurance Portability and Accountability Act of 1996 (HIPAA) Privacy and Security Rules by failing to secure thousands of patients’ electronic protected health information (ePHI) held on their network. The monetary payments of $4,800,000 include the largest HIPAA settlement to date. OCR initiated its investigation of New York and Presbyterian Hospital (NYP) and Columbia University (CU) following their submission of a joint breach report, dated September 27, 2010, regarding the disclosure of the ePHI of 6,800 individuals, including patient status, vital signs, medications, and laboratory results. In addition to the impermissible disclosure of ePHI on the internet, OCR’s investigation found that neither NYP nor CU made efforts prior to the breach to assure that the server was secure and that it contained appropriate software protections. http://www.hhs.gov/news/press/2014pres/05/20140507b.html.

$1.7 Million HIPAA Settlement Involving Concentra Health Services (April 2014): OCR opened a compliance review of Concentra Health Services (Concentra) upon receiving a breach report that an unencrypted laptop was stolen from one of its facilities, the Springfield Missouri Physical Therapy Center. OCR’s investigation revealed that Concentra had previously recognized in multiple risk analyses that a lack of encryption on its laptops, desktop computers, medical equipment, tablets and other devices containing ePHI was a critical risk. While steps were taken to begin encryption, Concentra’s efforts were incomplete and inconsistent over time leaving patient PHI vulnerable throughout the organization. OCR’s investigation further found Concentra had insufficient security management processes in place to safeguard patient information. Concentra has agreed to pay OCR $1,725,220 to settle potential violations and to adopt a corrective action plan.
http://www.hhs.gov/ocr/privacy/hipaa/enforcement/examples/stolenlaptops-agreements.html.

What To Do If You Become Aware of a HIPAA Breach?

Covered entities must provide a process for individuals to make complaints and document all such complaints.³² Additionally, covered entities may not take any retaliatory actions against anyone making a complaint.

If a breach of unsecured protected health information poses a risk of significant financial, reputational or other harm to the patient, business associates must promptly report the breach to covered entities, and covered entities must notify the patient without unreasonable delay, and no later than within 60 days under HIPAA³³, or 30 days under FIPA. If the breach involves fewer than 500 persons, the covered entity must notify HHS by filing an electronic report no later than 60 days after the end of the calendar year.³⁴ If the breach involves 500 or more persons, the covered entity must file the electronic report when it notifies the patient.³⁵ The written notice to the patient must satisfy regulatory requirements.³⁶ Documenting proper actions will help you defend against HIPAA claims. Covered entities and business associates are required to maintain documentation required by HIPAA for six years.³⁷

Understanding the HIPAA Complaint Process and Compliance Reviews

It is important that covered entities have a working knowledge of the complaint, investigation, and enforcement process in order to ensure HIPAA compliance.³⁸

The Complaint

Any person who believes that a covered entity or business associate is not complying with HIPAA has the right to file a complaint with HHS.³⁹ The complaint must name the provider who allegedly violated HIPAA and describe the acts or omissions that are believed to have violated HIPAA. The statute of limitations time period for filing complaints is 180 days after the date when the complainant knew or should have known that the act or omission occurred, but this time limit can be waived for good cause.⁴⁰

Investigating Complaints

If HHS accepts a complaint for investigation, it will notify the person who filed the complaint and the covered entity named in it. Then the complainant and the covered entity will have the opportunity to present information about the incident described in the complaint. HHS has the authority to subpoena witnesses and documents as part of its investigation. The investigation may include a review of the covered entity’s policies, procedures, or practices.⁴¹

Once HHS has completed its investigation, one of three things may occur. The first thing that may occur is that HHS may close the case in favor of the covered entity because it determines that the covered entity did not violate HIPAA. HHS will inform the covered entity and the complainant of its determination.⁴²

Assuming HHS finds that a covered entity has violated HIPAA, HHS will attempt to resolve the matter informally, which could include such things as demonstrated compliance, a completed corrective action plan, or other resolution agreement.⁴³

If the complaint is not resolved by informal means, the HHS will inform the covered entity and will allow the covered entity to submit written evidence of any mitigating factors or affirmative defenses.⁴⁴ Mitigating factors are things such as the nature of the violation; the circumstances surrounding the violation; the degree of culpability of the covered entity; a history of compliance; and, the financial condition of the covered entity. Affirmative defenses would include circumstances that made it unreasonable for the covered entity, despite exercising ordinary care and prudence, to comply with HIPPA.⁴⁵ After considering any mitigating factors and/or affirmative defenses, if HHS finds that a civil money penalty should be imposed, it will inform the covered entity or business associate of such finding in a notice of proposed determination.⁴⁶

Compliance Reviews

In addition, HHS may conduct compliance reviews to determine whether a covered entity or business associate is complying with HIPAA.⁴⁷ HHS may initiate these reviews when it becomes aware of possible violations of HIPAA by a covered entity.

How to Protect Yourself and Avoid Penalties

Cyber attacks on health care organizations increased 100 percent between 2009 and 2013, and about 40 percent of health care organizations reported facing criminal cyberattacks in 2013.⁴⁸ The FBI released a warning to the health care sector in April 2014, advising health care providers that their cybersecurity systems lagged behind protections in the retail and financial sectors, leaving them vulnerable to attacks by hackers.⁴⁹

Healthcare organizations should perform a HIPAA risk assessment to look at where patient information is stored and accessed, and how the organization protects that information. Such an assessment will examine the risks of a breach and provide recommendations on how to minimize risks. Every health care organization should protect its sensitive data by doing the following:

Perform a security risk analysis yearly to discover security vulnerabilities
Keep hardware and software updated with current security patches
Determine whether the use of encryption technology is reasonable and appropriate, and if so, deploy encryption technology
Perform routine audits of access to information

Additionally, it is important that every organization engage in a full compliance review of policies, forms, and procedures on an annual basis with health care regulatory counsel to ensure HIPAA compliance. All “covered entities” and “business associates” were required to update their HIPAA policies, procedures, forms, and Notices of Privacy Practices by September 23, 2013. All covered entities must have documented policies and procedures regarding HIPAA compliance. Additionally, HIPAA compliance requires staff privacy and security training on a regular basis.

As discussed above, HIPAA compliance is mandatory and fines for breach are hefty. HIPAA regulatory counsel can help to ensure HIPAA compliance by reviewing, revising, and updating internal HIPAA policies and procedures, and tailoring such policies and procedures to the specific health care entity.

At a minimum, to avoid HIPAA penalties, health care providers and business associates should:

Designate HIPAA Privacy and Security Officers. Covered entities must designate privacy and security officers responsible for ensuring HIPAA compliance. These individuals, among other things, will be responsible for the development and implementation of policies and procedures and for receiving HIPAA complaints. The designations must be documented in writing.⁵⁰

Provide Appropriate Training to Employees and Agents. Covered entities and business associates must train their employees to comply with HIPAA policies and procedures, and all trainings should be documented in order to avoid/minimize HIPAA penalties.⁵¹

Ensure Compliance with Authorization, Use, and Disclosure Rules. As discussed above, covered entities and business associates may not use, access, or disclose protected health information without the patient’s valid, HIPAA-compliant authorization unless the use or disclosure fits within an exception.⁵² Authorization is not required under HIPAA to carry out treatment, payment, or health care operations, however Florida Statutes requires a more stringent standard in some circumstances, and a covered entity would be required to adhere to both.

Know Patients’ Rights. Covered entities and business associates must understand and adhere to HIPAA’s patients’ rights.⁵³

Maintain HIPAA Compliant Written Policies and Forms. Covered entities and business associates must develop and maintain written policies that implement the privacy and security rule requirements, including those dealing with confidentiality and patients’ rights.⁵⁴

Execute Compliant Business Associate Agreements. HIPAA requires covered entities to execute “business associate agreements” with their business associates before disclosing protected health information to the business associate. To avoid liability for the business associate’s actions, covered entities must ensure that their agreements specify that the business associate is an independent contractor and not an agent of the covered entity.

Implement Appropriate Safeguards for PHI and ePHI. A covered entity must have in place appropriate administrative, technical, and physical safeguards to protect the privacy of PHI.⁵⁵ The security rule contains detailed regulations concerning safeguards that must be implemented to protect electronic health information.⁵⁶

Respond Immediately to Any Breach. HIPAA requires covered entities and business associates to investigate any privacy complaints, mitigate any breach, and impose appropriate sanctions against any agent who violates HIPAA.⁵⁷ A covered entity or business associate can avoid HIPAA penalties altogether if it does not act with willful neglect and corrects the violation within 30 days.

Geoffrey D. Smith is a shareholder in the law firm of Smith & Associates, and has practiced in the area of health care law for over 20 years.

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¹ See Pub.L. No. 104-191, 110 Stat.1936 (1996) (codified at 42 U.S.C. § 1320d-d8), commonly referred to as the Health Insurance Portability and Accountability Act of 1996 (HIPAA).
² For additional information on HIPAA Privacy and Security Rules, see http://www.hhs.gov/ocr/privacy/hipaa/understanding/summary/index.html and http://www.hhs.gov/ocr/privacy/hipaa/understanding/srsummary.html
³ 45 C.F.R. §164.502.
⁴ § 456.057(7)(a), Florida Statutes. While beyond the scope of this article, it is imperative that covered entities familiarize themselves and comply with the more stringent Florida statutes governing patient privacy and security, and the recently enacted Florida Information Protection Act of 2014 (FIPA), which took effect July 1, 2014.
⁵ 45 C.F.R. §164.508.
⁶ 45 C.F.R. §§164.508, .512.
⁷ 45 C.F.R. §160.103.
⁸ 45 C.F.R. §160.103.
⁹ 45 C.F.R. §160.103.
¹⁰ 45 C.F.R. §164.502(b).
¹¹ http://www.hhs.gov/ocr/privacy/hipaa/understanding/srsummary.html.
¹² http://www.hhs.gov/ocr/privacy/hipaa/understanding/srsummary.html.
¹³ 45 C.F.R. §164.306(b)(2).
¹⁴ 45 C.F.R. §§164.404, 164.406, 164.408.
¹⁵ Florida Information Protection Act (FIPA); Fla. Stat. §501.171.
¹⁶ 45 C.F.R. §§164.410.
¹⁷ http://www.hhs.gov/ocr/privacy/hipaa/enforcement/process/howocrenforces.html.
¹⁸ 45 C.F.R. §160.404.
¹⁹ See http://www.ama-assn.org/ama/pub/physician-resources/solutions-managing-your-practice/coding-billing-insurance/hipaahealth-insurance-portability-accountability-act/hipaa-violations-enforcement.page.
²⁰ Id.
²¹ 45 C.F.R. §160.410.
²² 42. U.S.C. §1320d-6.
²³ Id.
²⁴ See http://www.ama-assn.org/ama/pub/physician-resources/solutions-managing-your-practice/coding-billing-insurance/hipaahealth-insurance-portability-accountability-act/hipaa-violations-enforcement.page.
²⁵ http://www.usatoday.com/story/tech/2015/02/05/anthem-health-care-computer-security-breach-fine-17-million/22931345/.
²⁶ http://www.usatoday.com/story/tech/2015/02/05/anthem-health-care-computer-security-breach-fine-17-million/22931345/.
²⁷ Id.
²⁸ http://www.usatoday.com/story/tech/2015/02/05/anthem-health-care-computer-security-breach-fine-17-million/22931345/
²⁹ Id.
³⁰ http://www.hhs.gov/ocr/privacy/hipaa/enforcement/examples/wellpoint-agreement.html
³¹ http://www.hhs.gov/ocr/privacy/hipaa/enforcement/examples/wellpoint-agreement.html
³² 45 C.F.R. §164.530.
³³ 45 C.F.R. §164.404.
³⁴ 45 C.F.R. §164.408(c).
³⁵ 45 C.F.R. §164.408(b).
³⁶ 45 C.F.R. §164.404.
³⁷ 45 C.F.R. §164.530(j).
³⁸ http://www.hhs.gov/ocr/privacy/hipaa/enforcement/process/howocrenforces.html
³⁹ 45 C.F.R. §160.306(a).
⁴⁰ 45 C.F.R. §160.306(b)(3).
⁴¹ 45 C.F.R. §160.306.
⁴² 45 C.F.R. §160.312(b)
⁴³ 45 C.F.R. §160.312(a).
⁴⁴ 45 C.F.R. §160.312(a).
⁴⁵ 45 C.F.R. §160.410.
⁴⁶ 45 C.F.R. §160.312.
⁴⁷ 45 C.F.R. §160.308.
⁴⁸ http://www.washingtonpost.com/blogs/the-switch/wp/2015/02/05/why-hackers-are-targeting-the-medical-sector/?hpid=z1.
⁴⁹ Id.
⁵⁰ 45 C.F.R. §164.530(a).
⁵¹ 45 C.F.R. §164.530(b).
⁵² 45 C.F.R. §164.502.
⁵³ 45 C.F.R. §§164.524, .526, .528.
⁵⁴ 45 C.F.R. §164.316.
⁵⁵ 45 C.F.R. §164.530(c).
⁵⁶ 45 C.F.R. §164.308.
⁵⁷ 45 C.F.R. §164.530.

Smith & Associates Lobby for ALF Changes

Watch Smith & Associates’ attorneys Geoff Smith and Susan Smith lobby the Florida Legislature for changes in the Nursing Home CON laws here. (Smith & Associates start at the 1:39 mark).

Currently, the CON rules, as they are applied to Nursing Homes, allow for one nursing home to obtain and hold a monopoly in a district. This leads to fewer options for nursing home patients. Smith & Associates is lobbying the Florida Legislature to change this law to protect nursing home patients.

Update on Return of Nursing Home CON in Florida

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AHCA will be releasing its State Agency Action Reports (“SAARs”) on February 20, 2015, announcing the preliminary decisions for approvals and denials of the 104 CON Applications filed in the first batching cycle since the Legislature lifted the moratorium on new nursing homes in Florida. But what happens next? What do you do if you don’t agree with AHCA’s preliminary decisions? Who has standing to challenge the decision if your CON has been preliminarily approved? This article will provide a basic overview of Fla. Stat. §120.569 and §120.57 (2014), including the timing of challenges, the basic laws regarding standing to bring a challenge, and an overview of the administrative process should you wish to file a challenge or find yourself defending against a challenge.

NOTIFICATION OF DECISIONS

AHCA notifies CON Applicants of its preliminary decisions by releasing SAARs for each subdistrict where there was one or more CON Applications filed. The SAARs contain an assessment of each Applicant’s proposal, and a determination ultimately of which applicant or applicants best meets the statutory and rule review criteria. There is no fixed weight applied to any criteria, and the analysis by AHCA involves a weighing and balancing of all the review criteria.

There are four ways to access SAARs. First, there is a link from AHCA’s home page where all of the SAARs will be posted on February 20, 2015: http://www.fdhc.state.fl.us/MCHQ/CON_FA/Batching/applications.shtml. Sometimes, it can be later in the afternoon before the SAARs are actually posted. Second, any person or company can sign up to be added to AHCA’s email notification list for all CON batching cycle public notices, which includes the notification of the preliminary decisions on CON Applications. Third, AHCA directly contacts CON Applicants via the information provided in the initial CON Applications. Finally, within a few days of the decisions being announced, AHCA will publish formal Notices of Decisions in the Florida Administrative Register (“FAR”).

DECISIONS AFFECTING SUBSTANTIAL INTERESTS

Anytime AHCA makes a decision affecting substantial interests, AHCA must provide a “point of entry” for challenging the decision in an administrative trial. The “point of entry” explains when, where, and how the affected person or entity can challenge AHCA’s preliminary decision. Pursuant to Rule 59C-1.012 within 21 days after publication of the Notice of Intent in the FAR, a CON Applicant can request an administrative hearing to challenge the decision. The failure to timely file a proper request for administrative hearing challenging the denial of a CON Application shall result in the denial becoming final.

If a valid request for an administrative hearing is timely filed by a denied competing CON Applicant, a granted CON Applicant in the same sub-district shall have 10 days from the Notice of Litigation being published in the FAR to file a Petition challenging any or all other co-batched CON Applications.

Nursing home CON Applicants can only challenge other Applications that were comparatively reviewed for the same services in the same sub-district. Existing providers in the same district that will be substantially affected by the approval of a competing proposed facility or program can initiate or intervene in a challenge pursuant to Fla. Stat. §408.039(5)(c) (2014). Thus, existing providers are given a wider geographic area to be allowed to challenge a CON than competing CON Applicants.

An existing provider that intervenes within 21 days of the publication of the Notice of Decisions has full party status; however, an intervenor that does not intervene within 21 days is only granted status that is contingent upon the standing of the other parties to the litigation. This comes into play where there is a problem with the original parties’ standing, where the original parties decide to dismiss their challenge, or where the original parties resolved certain substantive issues in the case, through stipulations or otherwise, before the intervenor came into the case. It is often said that unless an existing provider files a Petition with 21 days of the FAR Notice of Decisions, the intervenor takes the case as they find it and is at the mercy of the original parties when it comes to maintaining standing.

FILING A PETITION

Petitions are filed at AHCA. Sometimes, inexperienced attorneys inadvertently file at the Division of Administrative Hearings (“DOAH”), which could raise jurisdictional issues if there is inadequate time to correct the error prior to the 21 day deadline.

Petitions must comply with the uniform rules of procedure under §120.54 (5)(b), including at least the following:

Identify the Petitioner;
State when and how the Petitioner learned of the decision;
Explain how the Petitioner’s substantial Interest are affected by the proposed action;
A statement of all material disputed facts;
A statement of the ultimate facts that warrant the reversal of the decision;
A statement of the rules or statutes that require a reversal or modification of the decision; and
A statement of the relief sought.

FORMAL ADMINISTRATIVE HEARINGS

If timely Petitions are filed meeting all of the required substantive criteria, AHCA refers the cases to DOAH for assignment of an Administrative Law Judge (“ALJ”) to review the decisions being challenged. This hearing is considered a “de novo” proceeding, which means that the ALJ should not be influenced by AHCA’s preliminary decision set forth in the SAAR—and the SAAR is “not clothed with a presumption of correctness.” That said, statistically, AHCA preliminary decisions are more frequently upheld than overturned by the ALJs. Perhaps that is because AHCA becomes a party in the proceeding and typically presents expert witnesses to support its rationale for why it’s preliminary determination was correct. That said, there are a significant number of cases where AHCA’s preliminary decision to approve or deny a CON has been decided differently by the ALJ and AHCA has issued a Final Order upholding the ALJ’s determination.

An administrative hearing is similar to a civil court trial, with slightly relaxed rules of evidence. Parties conduct written discovery, and pre-trial depositions of witnesses. The parties then present their case through expert testimony, lay witness testimony, and submission of documentary evidence. There is an opening statement, direct examination and cross-examination of witnesses by attorneys, and legal arguments over admissibility of evidence.

One of the most common arguments in CON cases concerns whether the evidence being presented amounts to an “impermissible amendment” of a CON Application. By Rule and established case law, a CON Applicant cannot amend its Application to include new concepts or theories for approval that were not set forth in the CON Application. However, an Applicant may introduce new evidence, new or updated data, and testimony that elaborates and explains concepts or theories that were included in the CON Application.

By statute, a party requesting a hearing has a right to demand that the hearing be commenced within 60 days of assignment to an ALJ. As a practical matter, most hearings are not done on this expedited schedule. It is not unusual for the hearing process to take 4-6 months or longer. Hearings typically last about 2-3 days for each party involved. In multi-party proceedings a final hearing may last 3-4 weeks. Virtually all CON final hearings are held in Tallahassee.

Upon conclusion of a formal hearing, the parties are required to submit a Proposed Recommended Order (“PRO”) for the ALJ’s review and consideration. This is typically filed 30 days or so after the final hearing. The PRO includes proposed Findings of Fact as well as proposed Conclusions of Law. By Rule a PRO is supposed to be no longer than 40 pages, but is not unusual for an ALJ to expand the number of pages to 60 or 80 pages depending on the number of parties involved. The ALJ reviews all PROs submitted by the parties and then issues a decision in a Recommended Order.

EXCEPTIONS AND THE FINAL ORDER

Once the ALJ issues a Recommended Order, the case is remanded back to AHCA for issuance of a Final Order. Parties may file exceptions to the Recommended Order to explain why the ALJ’s decision is in error. In issuing a Final Order, AHCA may not reject an ALJ’s findings of fact, unless the Agency reviews the entire record, and finds that there is no “competent, substantial evidence” to support a specific finding. It is not the role of AHCA to reweigh the evidence, or judge the credibility of witnesses, or to substitute its balancing of the evidence for that of the ALJ. As to Conclusions of Law, AHCA cannot disturb a conclusion unless it is on a legal matter that is within AHCA’s expertise and jurisdiction (e.g., its governing statute and rules) and AHCA must state with particularity its reasons for rejecting or modifying the conclusion of the ALJ, and must make a finding that its substituted or modified conclusion of law is as or more reasonable than the ALJ’s conclusion.

The issuance of a Final Order by AHCA is the end of the formal hearing process, and unless a judicial appeal is taken, the CONs will be issued or denied as set forth in the Final Order.

FURTHER APPEALS

A party may appeal the Final Order to a District Court of Appeal. This appeal is limited only to a review of the record by a three judge panel based upon legal arguments submitted by the parties’ attorneys in legal briefs.

CONCLUSION

February 20, 2015, will be a historic date for nursing homes in Florida. No doubt there will be numerous preliminary approvals and numerous disappointed CON Applicants. The CON process also includes protections for those with existing operations that could be adversely impacted by a CON being issued to another facility. Thus, whether you are seeking approval for new a nursing home or are simply seeking to protect your existing operation, it’s important to stay engaged in the process and know your rights.

A nursing home wishing to compete in this batching cycle needs to begin preparing now. If you need help competing in this upcoming batching cycle, contact the experienced counsel at Smith & Associates.

Geoffrey D. Smith is a shareholder in the law firm of Smith & Associates, and has practiced in the area of health care law and CON regulation for over 20 years.

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Nursing Home CON Update

The State Agency Action Reports (SAARs) for the latest CON batching cycle are scheduled to be released on 2/20/15. After that date, applicants that wish to challenge the Agency’s findings have only 21 days to file a Petition for Formal Administrative Hearing. These dates are very important and failure to meet the deadlines may forfeit your rights. To see a full explanation of the CON Batching Cycle, read “Nursing Home CON Batching Cycle Rapidly Approaching”. If you need help or have questions about the upcoming deadlines, please contact us here at Smith & Associates. Our attorneys are dedicated professionals with decades of experience in health care and CON law.

The Waiting is Over – Nursing Home Need Projections Show Need in 31 Subdistricts

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The waiting is over. The official AHCA Fixed Need Pool projections have been released. Positive bed need is shown in 31 nursing home subdistricts. This includes the following subdistricts with a projected Need in excess of 200 beds: Subdistrict 3-2 (Alachua, Bradford, Dixie, Gilchrist, Lafeyette, Levy and Union counties); Subdistrict 3-7 (Lake and Sumter counties); Subdistrict 6-5 (Polk County); Subdistrict 7-2 (Orange County). There are an additional 10 subdistricts with projected Need in excess of 100 beds. Below is a complete listing of all subdistricts with the projected Need:

Community Nursing Home Bed Need

District 1
Subdistrict 1	160
Subdistrict 2	0
Subdistrict 3	0
District 2
Subdistrict 1	56
Subdistrict 2	63
Subdistrict 3	14
Subdistrict 4	86
Subdistrict 5	19
District 3
Subdistrict 1	99
Subdistrict 2	227
Subdistrict 3	43
Subdistrict 4	140
Subdistrict 5	65
Subdistrict 6	66
Subdistrict 7	205
District 4
Subdistrict 1	111
Subdistrict 2	170
Subdistrict 3	167
Subdistrict 4	0
District 5
Subdistrict 1	67
Subdistrict 2	89
District 6
Subdistrict 1	110
Subdistrict 2	0
Subdistrict 3	0
Subdistrict 4	25
Subdistrict 5	203
District 7
Subdistrict 1	131
Subdistrict 2	218
Subdistrict 3	130
Subdistrict 4	122
District 8
Subdistrict 1	23
Subdistrict 2	37
Subdistrict 3	0
Subdistrict 4	0
Subdistrict 5	40
Subdistrict 6	0
District 9
Subdistrict 1	18
Subdistrict 2	37
Subdistrict 3	6
Subdistrict 4	0
Subdistrict 5	0
District 11
Subdistrict 1	168
Subdistrict 2	0

Geoffrey D. Smith is a shareholder in the law firm of Smith & Associates, and has practiced in the area of health care law and CON regulation for over 20 years.

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PREPARING FOR THE RETURN OF NURSING HOME CON PROCEEDINGS

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It’s now old news that the Florida Legislature has lifted the 13-year moratorium on the Certificate of Need program for new nursing homes in Florida. In addition to allowing new skilled nursing facility development projects to be authorized by CON, the legislation includes a variety of provisions that create new CON exemptions and expedited reviews for certain bed additions and facility replacement projects, as well as relaxing some of the standards for assessing need for new skilled nursing facilities and beds. For a full review of the specific provisions adopted in the CON law, see my newsletter article posted on-line at www.smithlawtlh.com. Below I address what skilled nursing facility owners and operators, and potential applicants, should be doing to prepare for the return of nursing home CON proceedings in Florida.

The Batching Cycle Deadlines

Under existing Rules, AHCA has a schedule that governs the procedures and a detailed time-line for applying for a Certificate of Need. Applications for new skilled nursing facilities and bed additions may be submitted two times per year in the “batching cycle” for “other beds and programs.” A “batching cycle” review is required for any party that wishes to obtain a CON for a new facility or bed addition that is not authorized under an exemption or expedited review. The key dates for the next available batching cycle are as follows:

Event	Deadline
Fixed Need Pool Projections	10/03/14
10 days to File Notice of Errors in a Fixed Need Pool	10/13/14
21 Days to File Formal Challenge to Fixed Need Pool	10/24/14
Letter of Intent Filing Deadline	10/20/14
16-day Grace Period Letter of Intent Filing Deadline	11/05/14
CON Initial Application Filing Deadline	11/19/14
Request Public Hearing	14 Days After Publication Of Application Filing in Florida Administrative Register
CON Application Omissions Response Deadline	12/24/14
State Agency Action Reports (SAARs) Issued	2/20/15
Deadline to File Petition for Formal Administrative Hearing to Challenge a SAAR	21 Days After Publication of the SAAR Results in the Florida Administrative Register

Based on the schedule for the next batching cycle, any party wishing to submit a CON Application should immediately begin the process of putting together a “CON Application Team” consisting of at least the following members:

Key management for owner/operators;
Experienced CON counsel;
Experienced health planner;
Experienced financial planner; and
A health care architect.

FIXED NEED POOL PUBLICATION AND CHALLENGES

The process for CON Applications will commence with the publication of fixed need pools on October 3, 2014. The fixed need pool is a projection of the number of new skilled nursing facility beds that will be needed in each nursing home sub-district for a planning horizon that is three years in the future. The Need formula included in AHCA’s existing Rule (which should be adjusted by the changes required in the recent legislation lifting the moratorium) takes into account a variety of factors including: a) current and future population in two age groups (65-74 and 75 and older); b) the most recent bed rates for skilled nursing facilities in the District; c) occupancy rates in the district; d) a target occupancy rate; and e) allocation of beds among sub-districts. The “Net Need” number will be published in the Florida Administrative Register providing any interested parties with notice of AHCA’s projections of the number of needed beds that will be applied to review of any CON Applications submitted in the batching cycle. Unless a party successfully challenges a Fixed Need Pool publication, then the Need is “fixed” and will be applied to all applications in the batch.

The CON statute and applicable rules allow for a party to file a challenge to the publication of a Fixed Need Pool to correct any errors identified in the calculation. A party wishing to challenge a Fixed Need Pool must notify AHCA in writing within 10 days of publication of the Fixed Need Pool detailing any errors in the calculation. If AHCA agrees that an error was made, then it will file and publish a Notice of Corrected Fixed Need Pool. If AHCA disagrees that any error was made, a party may file a Petition for Formal Administrative Hearing within 21 days of the original Fixed Need Pool publication, and the matter will be referred to an Administrative Law Judge at the Division of Administrative Hearings for a formal hearing on the evidence.

LETTERS OF INTENT AND GRACE PERIOD LETTERS OF INTENT

In the upcoming batching cycle, any party interested in filing a Certificate of Need application for skilled nursing facilities or bed additions (non-exempt) must file a Letter of Intent by the deadline of October 20, 2014. If any party files a Letter of Intent in a sub-district, a “grace period” is triggered which allows any other party to submit competing a Letter of Intent to file a competing CON Application in the same sub-district where an applicant has already filed a Letter of Intent. The grace period deadline is November 5, 2014.

THE INITIAL CON APPLICATION

The initial CON Application deadline in the upcoming batching cycle is November 19, 2014. It is not uncommon for parties and their CON team to meet with representatives of AHCA prior to filing the initial CON Application to discuss any potential concerns or issues, and simply to obtain some insight to any issues that AHCA staff may feel are particularly important to address in the CON Application.

Typically a party will file only what is called a “shell application” by the initial application deadline—that is simply signing a blank application form and noting that the remainder of any information will be submitted with the Omissions Response.

Upon receipt of the Initial CON Applications, AHCA notifies each party of any Omissions in the initial Application. These Omissions letters have become boilerplate over the years, and AHCA typically sends a form letter indicating that all responses to all sections of the Application form are required to be submitted by the Omissions deadline.

PUBLIC HEARINGS AND WRITTEN OPPOSITION STATEMENTS

A Public Hearing may be requested after initial CON Applications are filed. A public hearing is an opportunity for interested members of the public, or any party, to provide AHCA with comments in support of or in opposition to any Application. The date and time of the Public Hearing will be published by AHCA. The hearings are typically held in the local Health Council offices in the area where the proposed project will be located shortly after the Omissions deadline. A party may use the Public Records Law to obtain a copy of the CON Application prior to the public hearing.

In lieu of a Public Hearing, parties may submit written statements to AHCA. It is not unusual for AHCA to receive detailed opposition statements from existing providers in the same District in response to a CON Application. Opposition statements must be submitted prior to the Omissions deadline, unless a Public Hearing is requested and held in which case written opposition materials can also be submitted at a public hearing.

OMISSIONS RESPONSES AND REVIEW CRITERIA

The deadline in the next batching cycle to file the Omissions Response to a CON Application is December 24, 2014. The Omissions Response is typically the real meat of the Application, and will usually be a document of 150 pages or more of narrative responses addressing the various CON review criteria, along with required financial schedules, audited financial statements, a financial feasibility analysis, and architectural schematic drawings of the proposed facility or bed addition.

CON Review Criteria set forth in Section 408.035(1), Florida Statutes, include the following:

(a) The need for the health care facilities and health services being proposed.

(b) The availability, quality of care, accessibility, and extent of utilization of existing health care facilities and health services in the service district of the applicant.

(c) The ability of the applicant to provide quality of care and the applicant’s record of providing quality of care.

(d) The availability of resources, including health personnel, management personnel, and funds for capital and operating expenditures, for project accomplishment and operation.

(e) The extent to which the proposed services will enhance access to health care for residents of the service district.

(f) The immediate and long-term financial feasibility of the proposal.

(g) The extent to which the proposal will foster competition that promotes quality and cost-effectiveness.

(h) The costs and methods of the proposed construction, including the costs and methods of energy provision and the availability of alternative, less costly, or more effective methods of construction.

(i) The applicant’s past and proposed provision of health care services to Medicaid patients and the medically indigent.

(j) The applicant’s designation as a Gold Seal Program nursing facility pursuant to s. 400.235, when the applicant is requesting additional nursing home beds at that facility.

There are a number of required schedules that pertain to the CON Application financial analysis, including the following:
     Schedule 1: Estimated Project Costs
     Schedule 2: Capital Projects List
     Schedule 3: Source of Funds Documentation
     Schedule 4: Historic Utilization
     Schedule 5: Projected Utilization
     Schedule 6: Staffing and Salaries
     Schedule 7: Projected Revenues
     Schedule 8: Projected Expenses and Net Income
     Schedule 9: Architectural Criteria
     Schedule 10: Project Completion Forecast
     Schedule 11: Fines, Levies and Overpayments.

Additionally, the CON Application includes a required Form setting forth Conditions Predicated on Award of CON. This form allows an Applicant to accept specific Conditions on the CON which may include “enticements” or “sweeteners” offered by an Applicant to make its CON Application more appealing than other applicants. Common conditions include a specific site location; implementation of a specific program or service that may be lacking in the community; enhanced staff or staff qualifications; and a specific minimum percentage of charity, indigent or unfunded patients to be served. Virtually anything may be offered as a Condition, and in some instances CON Conditions may make the difference between approval and denial of an application.

The Nursing Facility CON Rule (59C-1.036(3), Florida Administrative Code) also includes the following Review Criteria pertaining to an Applicant’s Quality of Care:

(e) Quality of Care. In assessing the applicant’s ability to provide quality of care pursuant to Section 408.035(1)(c), F.S., the agency shall evaluate the following facts and circumstances:

1. Whether the applicant has had a Chapter 400, F.S., nursing facility license denied, revoked, or suspended within the 36 months prior to the application.

2. Whether the applicant has had a nursing facility placed into receivership at any time during the period of ownership, management, or leasing of a nursing facility in the 36 months prior to the current application.

3. The extent to which the conditions identified within subparagraphs 1. and 2. threatened or resulted in direct, significant harm to the health, safety or welfare of the nursing facility residents.

4. The extent to which the conditions identified within subparagraph 3. were corrected within the time frames allowed by the appropriate state agency in each respective state and in a manner satisfactory to the agency.

(f) Harmful Conditions. The agency shall question the ability of the applicant to provide quality of care within any nursing facility when the conditions identified in subparagraphs (e)1. and (e)2. resulted in direct, significant harm to the health, safety or welfare of a nursing facility resident, and were not corrected within the time frames allowed by the appropriate state agency in each respective state and in a manner satisfactory to the agency.

There are also additional Review Criteria set forth in Rule 59C-1.030, Florida Administrative Code, which address specific needs of various underserved population groups, and how the applicant proposes to enhance access to services for such groups.

Finally, Applicants typically will include an “adverse impact” analysis to demonstrate that approval of the CON Application will not imperil or jeopardize the continued operation of other existing skilled nursing facilities.

COMPARATIVE REVIEW AND THE STATE AGENCY ACTION REPORT

Once all CON Omissions Responses are filed, AHCA then conducts a comparative review of CON Applications that are submitted for beds or facilities located in the same sub-district. The review includes an assessment of each Applicant’s proposal, and a determination ultimately of which applicant or applicants best meet the statutory and rule review criteria. There is no fixed weight applied to any criteria, and the analysis by AHCA involves a weighing and balancing of all the review criteria.

AHCA’s initial decision for all CON Applications submitted in each sub-district is announced in a State Agency Action Report (SAAR). The SAAR sets forth the comparative review of the CON Applications, and the key points that resulted in AHCA’s recommendation to approve or deny an Application. Because so many applications are similar, it is often difficult for AHCA to articulate the precise reasons why one applicant may have been selected for approval over other applicants.

In a bygone era of CON review, decisions to outright deny or disqualify a CON Applicant from consideration were often made based upon perceived technical defects in an Application. Today, such disqualification of a defective CON Application is less common. Decisions typically address AHCA’s perception of the relative merits of each applicant’s proposal; although technical defects can still hurt the overall review of the merits of an application.

FORMAL ADMINISTRATIVE HEARINGS

After issuance of a SAAR, any co-batched applicant, as well as any existing provider of skilled nursing facility services in the same health planning District, may file a Petition for Formal Administrative Hearing to challenge AHCA’s initial decision. Thus, a co-batched applicant can request a formal hearing to demonstrate through evidence that its application is superior to other applicants that were approved, or conversely that other applicants had defects or problems with the application that should have resulted in denial. Similarly, an existing provider in the same District may challenge the approval of an applicant for a new facility based upon a demonstration that its existing facility will suffer an adverse impact, and that a preliminarily approved application does not on balance meet the CON review criteria set forth in statute and rule.

If Petitions are filed, the cases are referred to the Division of Administrative Hearings (DOAH) for assignment of an Administrative Law Judge to review the decisions being challenged. This hearing is considered a “de novo” proceeding, which means that the ALJ should not be influenced by AHCA’s preliminary decision set forth in the SAAR—and the SAAR is “not clothed with a presumption of correctness.”

An administrative hearing is similar to a civil court trial, with slightly relaxed rules of evidence. Parties conduct written discovery, and conduct pre-trial depositions of witnesses. The parties then present their case through expert testimony, lay witness testimony, and submission of documentary evidence. There is an opening statement, direct examination and cross examination of witnesses by attorneys, and legal arguments over admissibility of evidence. One of the most common arguments in CON cases concerns whether the evidence being presented amounts to an “impermissible amendment” of a CON Application. By Rule and established case law, a CON Applicant cannot amend its application to include new concepts or theories for approval that were not set forth in the CON Application. However, an Applicant may introduce new evidence, new or updated data, and testimony that elaborates and explains concepts or theories that were included in the CON Application. These issues are often hotly debated during the course of a CON hearing.

By statute, a party requesting a hearing has a right to demand that the hearing be commenced within 60 days of assignment of an ALJ at DOAH. Most hearings are not done on this expedited schedule, however, and it is not unusual for the hearing process to take 4-6 months or longer. Hearings typically last about 2-3 days for each party involved. In multi-party proceedings involving several applicants, existing providers, and AHCA, a final hearing may last 3-4 weeks. All final hearings are held at DOAH headquarters in Tallahassee.

Upon conclusion of a formal hearing, the parties are required to submit a Proposed Recommended Order (PRO) for the ALJ’s review and consideration. This is typically filed 30 days or so after the final hearing. The PRO includes proposed Findings of Fact as well as proposed Conclusions of Law. By Rule a PRO is supposed to be no longer than 40 pages; but is not unusual for an ALJ to expand the number of pages to 60 or 80 pages depending on the number of parties involved. The ALJ reviews all PROs submitted by the parties and then issues a decision in a Recommended Order.

EXCEPTIONS AND THE FINAL ORDER

Once the ALJ issues a Recommended Order, the case is remanded back to AHCA for issuance of a Final Order. Parties may file “Exceptions” to the Recommended Order to explain why the ALJ’s decision is in error. In issuing a Final Order, AHCA may not reject an ALJ’s findings of fact, unless the Agency reviews the entire record, and finds that there is no “competent, substantial evidence” to support a specific finding. It is not the role of AHCA to reweigh the evidence, or judge the credibility of witnesses, or to substitute its balancing of the evidence for that of the ALJ. As to Conclusions of Law, AHCA cannot disturb a conclusion unless it is on a legal matter that is within AHCA’s expertise and jurisdiction (e.g., its governing statute and rules) and AHCA must state with particularity its reasons for rejecting or modifying the conclusion of the ALJ, and must make a finding that its substituted or modified conclusion of law is as or more reasonable than the ALJ’s conclusion.

The issuance of a Final Order by AHCA is the end of the formal hearing process, and unless a judicial appeal is taken, the CONs will be issued or denied as set forth in the Final Order.

FURTHER APPEALS

A party may appeal the Final Order to a District Court of Appeal. This appeal is limited only to a review of the record by a three judge panel based upon legal arguments submitted by the parties’ attorneys in legal briefs.

CONCLUSION

Anyone who operates or wishes to operate a Skilled Nursing Facility in Florida should pay careful attention to the CON process that will begin in October of this year. There will be ample opportunities for parties that are seeking to expand skilled nursing operations in Florida. The CON process also includes protections for those with existing operations that could be adversely impacted by a CON being issued to another facility. Thus, whether you are seeking approval for new nursing home development or are simply seeking to protect your existing operation, the return of nursing home CON in Florida is likely to be of interest.

Geoffrey D. Smith is a shareholder in the law firm of Smith & Associates, and has practiced in the area of health care law and CON regulation for over 20 years.

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Assisted Living in Florida, How is it Changing?

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An Assisted Living Facility (ALF) is a residential establishment that is designed to provide personal care services to one or more persons in the least restrictive and most home-like environment. Personal services that are provided to residents of an ALF are services such as physical assistance with, or supervision of, the activities of daily living and the self-administration of medication. ALFs can range in size from one resident to several hundred and may offer a wide variety of personal and nursing services designed specifically to meet an individual’s personal needs. The services available in these facilities are intended to help residents remain as independent as possible and for some to “age in place” when their health care needs increase.

Standard Licensed ALFs

A standard ALF must be licensed by the Agency for Health Care Administration (AHCA). The official definition of an assisted living facility is any building or buildings, section or distinct part of a building, private home, boarding home, home for the aged, or other residential facility, whether operated for profit or not, which undertakes through its ownership or management to provide housing, meals, and one or more personal services for a period exceeding 24 hours to one or more adults who are not relatives of the owner or administrator. Specialty licensed facilities are available for individuals with increased health care needs. There are three types of specialty licenses: Extended Congregate Care License, Limited Nursing Services License and Limited Mental Health License.

Regardless of the facility’s license status, residents living in ALFs cannot have conditions that require 24-hour nursing supervision. The only exception to this is for an existing resident who qualifies for and receives hospice services from a licensed hospice while continuing to reside in an ALF.

Specialty License: Extended Congregate Care

An Extended Congregate Care (ECC) license is issued to an assisted living facility that provides services beyond those authorized for a standard ALF, meaning that they may provide additional nursing services and total assistance with personal care services. New facilities may apply for an ECC license at the time of initial application. Existing facilities qualifying to provide extended congregate care services must have maintained a standard license and may not have been subject to administrative sanctions during the previous two years, or since initial licensure if the facility has been licensed for less than two years. Mandatory services that must be provided include, but are not limited to total help with the activities of daily living, more frequent nursing assessments and assistance with administered and self-administered medications.

Specialty License: Limited Nursing Services

A Limited Nursing Services (LNS) License is issued to an ALF that provides nursing services that are beyond what a standard ALF is licensed to provide. Residents living in an ALF with a LNS license must meet the same residency criteria for a standard licensed ALF; however, they may also receive a limited number of nursing services. Existing facilities qualifying to provide limited nursing services shall have maintained a standard license and may not have been subject to administrative sanctions that affect the health, safety, and welfare of residents for the previous two years or since initial licensure of the facility has been licensed for less thantwo years. The nursing services available in a limited nursing services facility are more extensive than what is provided in a standard ALF and are provided pursuant to the resident’s service plan.

Specialty License: Limited Mental Health

A Limited Mental Health (LMH) License is issued to a standard ALF that serves three or more mental health residents. A mental health resident is an individual who receives social security disability income or supplemental security income due to a mental disorder as determined by the Social Security Administration and receives optional state supplementation. To obtain a limited mental health license, a facility must hold a standard license as an assisted living facility, must not have any current uncorrected deficiencies or violations, and must ensure that, within six months after receiving a limited mental health license, the facility administrator and the staff of the facility who are in direct contact with mental health residents must complete specified training.

ALF Staff Training

Administrators and Managers: Administrators and other ALF staff must meet minimum training and education requirements that are established by the Department of Elder Affairs, that are comprised of “core” training, in-service training and continuing education that is required throughout their tenure. Every facility shall be under the supervision of an administrator who is responsible for the operation and maintenance of the facility including the management of all staff and the provision of adequate care to all residents. Administrators who supervise more than one facility shall appoint in writing a separate “manager” for each facility.

Staff: Staff with direct care responsibilities are required to have in-service training that covers a variety of topics, including infection control training, elopement training, training on “do not resuscitate” orders and may have to complete training on special topics such as self-administration of medication, Alzheimer’s disease and related disorders, and HIV/AIDS training. Staff in “direct contact” means direct care staff and staff whose duties take them into resident living areas and require them to interact with residents (this does not include maintenance, food service, or administrative staff). There are additional specific requirements for ECC staff and LMH staff, such as continuing education on ECC and LMH specific topics.

Resident Rights

Each resident living in an ALF has special rights that are delineated in Florida Statutes. An example of some of these rights are that no resident of a facility shall be deprived of any civil or legal rights, benefits, or privileges guaranteed by law, the Constitution of the State of Florida, or the Constitution of the United States as a resident of a facility; every resident shall have the right to live in a safe and decent living environment, free from abuse and neglect; be treated with consideration, respect and with due recognition of personal dignity, individuality, and the need for privacy. Each patient is given a copy of their rights upon entering the ALF.

Protection of Resident Rights

The Long-Term Care Ombudsman Program is comprised of 17 local councils across Florida, all offering free, localized advocacy services. The Ombudsman program is housed in the Department of Elder Affairs (DOEA) and is headed by the State Long-Term Care Ombudsman, Leigh Davis, who is appointed by the DOEA secretary. An ombudsman is a specially-trained and certified volunteer who has been given authority under federal and state law to identify, investigate and resolve complaints made by, or on behalf of, long-term care facility residents. Ombudsmen respond to resident complaints and concerns ranging from issues with medication and care administration to matters of dignity and respect. It is the ombudsman’s role to protect the legal rights of residents and assure that they receive appropriate treatment and quality care. Anyone can report a concern, including residents, relatives, friends, facility staff, legal representatives and other concerned citizens. Complaints may be related to the facility, its employees, or any agency or person who threatens or violates the rights, health, safety or welfare of a resident. Complaints filed with the Long-Term Care Ombudsman Program are kept completely confidential, unless permission is given by the resident or complainant to disclose related information.

Changing Law

Over the past two legislative sessions, lawmakers have been trying to strengthen the regulation of ALFs. This legislative push was prompted by the Miami Herald’s investigative series “Neglected to Death” published in April 2011. This series reported numerous instances where the investigative journalists alleged that AHCA failed in its duty to protect the residents of Florida’s ALFs. The investigative series reported on a series of incidents that occurred in licensed ALFs that resulted in death or serious injury to a resident. The journalists created the impression that these incidents were caused by lax enforcement efforts by AHCA. The article stated that AHCA repeatedly caught facilities breaking the law; however, AHCA failed to act on the violations, or in some cases only partially punished the violators agreeing to reduced fines and suspensions rather than full fines and revocation of licenses. As reported in the article, the ombudsman program was reporting more and more occurrences of abuse and neglect in Florida ALFs, however according to the articles, AHCA failed to investigate a large portion of the cases.

Prompted by the Miami Herald investigative reports, in July 2011, Governor Rick Scott directed AHCA to examine the regulation and oversight of ALFs. AHCA’s response was to increase its enforcement efforts, and Administrative Complaints with severe sanctions for ALF operators found not to be in compliance with licensure standards. AHCA also created a workgroup with the objective to make recommendations that would improve the monitoring of safety in ALFs. The workgroup had two phases and produced a final report to the Governor and Legislature on November 26, 2012. In June 2012, the DOEA, in consultation with AHCA, the Department of Children and Families (DCF) and the Department of Health (DOH), began rulemaking meetings to address the problems with ALF regulation.

In the 2013 legislative session, an “ALF reform bill” was proposed but failed to pass. In the most recent 2014 legislative session Senate Bill 248, with a proposed effective date of July 1, 2014, was proposed to strengthen the regulation of ALFs and make other regulatory changes to improve their quality. Among other goals, the bill would have clarified issues regarding mental health residents in an ALF relating to necessary services and would require facilities with one or more, rather than three or more state supported mental health residents to obtain a Limited Mental Health License. The bill proposed changes to resident rights regarding the protection against retaliatory action for presenting grievances. The proposed bill also authorized additional staff duties in the assistance with self administration of medication and required additional training for staff. However, the bulk of the bill was directed at the regulation of ALFs by AHCA through increased fines for violations, double fines for repeated violations, fines against a facility that does not show good cause for terminating the residency of an individual, specifying the circumstances under which AHCA must impose an immediate moratorium on a facility, and even authorizing AHCA to revoke the license of a facility that has or had a 25 percent or greater financial ownership interest in a second facility which closed due to financial inability to operate or was the subject of other specified administrative actions.

The proposed bill was estimated to generate approximately $1.1 million of additional net revenues for AHCA per year based on the revised fine amounts. Of course, one aspect of the increased administrative penalties and fines that would be handed out by AHCA is that there will be an increased number of legal cases brought on by the harsher penalties and fines. In the face of opposition from many in the ALF industry, the bill failed to pass.

What does this mean for providers?

Although Senate Bill 248 did not pass during this legislative session, the fact remains that lawmakers will most likely continue in their pursuit of stricter regulation of ALFs. In fact, AHCA has already launched a regulatory “crackdown” on ALFs. If an ALF is cited for deficiencies during a survey, investigation or monitoring visit, AHCA may file an Administrative Complaint and seek to impose sanctions. Civil penalty sanctions available to AHCA depend on the class of violation. There are four classes: Class I violation penalties are between $5,000 and $10,000 for each violation; for each Class II violation between $1,000 and $5,000; for each Class III violation between $500 and $1,000; and for each Class IV violation between $100 and $200 for each violation if the problem is not corrected. During fiscal years 2011-2013 AHCA entered 115 final orders for Class I violations, 749 final orders for Class II violations, 507 final orders for uncorrected Class III violations, and 18 final orders for uncorrected Class IV violations.

In addition to financial penalties, AHCA may also sanction an ALF by imposing an emergency moratorium or suspension on patient admissions, denial of a license, temporary license suspension and permanent revocation of the ALF license. For the period between July 1, 2012 and June 30, 2013, the current count for AHCA actions against ALFs is 43 cases involving suspension, revocation, moratorium on admissions or denial of licenses. Below are examples of AHCA’s crackdown and all providers should be aware that they are susceptible to increased scrutiny by AHCA.

Premier Adult Care:

Owned two houses, one in Titusville operating as a five-bed adult family care home and one in Merritt Island operating as a two-bed ALF seeking to operate under the exemption that “Any person who provides housing, meals, and one or more personal services on a 24-hour basis in the person’s own home to not more than two adults who do not receive optional state supplementation. The person who provides the housing, meals, and personal services must own or rent the home and reside therein.”
The Merritt Island home was under a lease agreement between the owner and the caregiver who provided services to the two residents of the Merritt Island home that was operating as an ALF under the “exception.”
AHCA filed an administrative complaint against the ALF stating that it was operated and maintained without a license, which the Agency determined directly threatened the physical or emotional health, safety, or security of the residents; and also that it failed to maintain its operation in accordance with the minimum requirements of law, failing to provide care and services at mandated minimum standards, and intentionally operated an unlicensed ALF. AHCA sought fines in the amount of $7,000.
The case did not involve any allegation of abuse, neglect, or mistreatment in any manner whatsoever of any resident of either the Merritt Island or Titusville homes. The sole issue was whether the Merritt Island home was required to obtain a license, or was instead exempt from licensure.
Although the Administrative Law Judge recommended only a temporary suspension and payment of a fine, AHCA over-ruled the recommendation and the ALF’s license was permanently revoked.

Pompano Retirement Village

Owner and vice president of the ALF Pompano Retirement Village was a controlling interest as defined by Florida Statute.
3/5/12 A criminal information filed charging the Owner with unlawful receipt of kickbacks in a federal health care program, considered to be a disqualifying offense.
4/5/12 Owner of the ALF was arrested.
April 2012 Plea was entered.
6/15/12 Judgment entered against Owner.
7/12/12 Documents filed with Florida Division of Corporations evidencing the resignation of Owner as vice president of the ALF.
10/19/12 AHCA filed an Amended Administrative Complaint charging the ALF with not timely removing Owner from his position with the ALF, constituting an act upon which a license may be denied and furthermore that it failed to abide by the background screening standards of the Florida Statutes.
The ALF’s license was therefore revoked.

Personal Care:

Two facilities and each location had 14 beds.
The ALF was threatened with an Emergency Suspension Order after a diabetic resident had to be transported to the hospital with a stage 3 decubitus ulcer on her foot.
AHCA filed at least five Administrative Complaints against these two facilities collectively over a period of two years, alleging any combination of the following: failure to keep medication records updated, provide proper assistance with medication, failure to document changes in medications, failure to have background checks on employees, failure to provide safe and decent living environments (medications not in lock box), and similar deficiencies.
AHCA sought license revocation and administrative fines.
AHCA settled for a voluntary relinquishment of both ALF licenses within one year and no fines.

The Paradise ALF:

Administrative complaint seeking a $1,000 fine was filed after AHCA conducted a survey and alleged that two staff members were lacking in background screening clearance.
Administrative complaint seeking a $5,000 fine and revocation of license filed after a complaint survey wherein it was alleged that among other things, the ALF failed to protect the residents from unsafe conditions and deficient practices that exist in the facility.
AHCA issued an Immediate Moratorium on Admissions and Emergency Suspension of License Order after the complaint survey.
The ALF failed to timely respond to the Administrative Complaint and Election of Rights, thus waiving its right to a hearing to contest the allegations and sanctions sought in the Administrative Complaint.
The ALF’s license was therefore revoked.

Provider Rights

If an ALF receives an Administrative Complaint from AHCA, it is notified of the right to request an administrative hearing. If the ALF elects to seek an administrative hearing, there are two options, an informal administrative hearing or a formal administrative hearing. The ALF must request the hearing within 21 days of the day the Administrative Complaint was received. At an informal hearing, the ALF may submit testimony and written evidence to AHCA to show that the proposed agency action contained in the Administrative Complaint is too severe or that the fine should be reduced. If a formal hearing is requested, the ALF will have the opportunity to present its case in front of an administrative law judge appointed by the Division of Administrative Hearings, not just to plead their case with AHCA. The attorney for the ALF will be able to present testimony and witnesses, can cross-examine witnesses presented by AHCA, can conduct formal discovery to obtain information that AHCA possesses and will have the opportunity to submit proposed findings of fact and conclusions of law for consideration by the administrative law judge. The attorney has the opportunity to fight for the ALF’s rights to operate and that decision will be made by an administrative law judge, not AHCA.

Conclusion

All ALFs will need to increase their vigilance in complying with licensure standards, training standards and resident care. The purpose of increased standards is to protect the residents of ALFs. Unfortunately, sometimes the side effect of stricter fines and heavier penalties is unfair policing of providers which results in higher agency revenue. If you have recently had a survey with poor results and an Administrative Complaint is imminent, call us today. Don’t wait.

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Early Effects of the New CON Laws

We posted before about how the lifting of the moratorium CON Regulations for Nursing Homes would alter the nursing home regulation landscape. Now that the law has been passed and the moratorium actually lifted, the effects are beginning to be felt. Recently, AHCA posted its list of applicants for the “1st Other Beds & Programs Batching Cycle of 2014.” The list can be found here.

What is readily apparent is that the existing providers are getting in early to raise the bar before competitors have a chance to enter the market now that the CON moratorium has been lifted. If you are a nursing home provider and you need help navigating these new laws, we can help. Contact us here for a free consultation.

Nursing Home Certificate Of Need Returning In Florida: Ready, Set, Go!

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After a moratorium that has lasted 13 years, Florida is preparing to reactivate its Certificate of Need (CON) program for new community nursing homes or skilled nursing facilities. Originally enacted in 2001 as a response to concern over an ever-growing state Medicaid budget, Section 408.0435, Florida Statutes, prohibited the Agency for Health Care Administration (AHCA) from issuing any CON for a new nursing home. Under the original legislative bill imposing this moratorium, it was to last only five years. However, it was extended by the Legislature for five more years in 2006 and then extended again in 2011. Now, under a pair of bills winding through the House and Senate, the Florida Legislature appears poised to repeal the moratorium and allow for new nursing home CONs to again be issued in the State. Those in the nursing home or skilled nursing industry who have seen their development plans thwarted over the past decade can prepare now to take advantage of the re-opening of the CON program.

Under committee substitutes for House Bill 287 (now CS/HB 287) and Senate Bill (now CS/SB 268) the moratorium enacted in Section 408.0435, Florida Statutes, would be repealed effective July 1, 2014, and the CON program for nursing homes would be reactivated with some new twists allowing for additional or expanded exemptions and “expedited review” for certain projects, including:

Exemptions: No CON Approval Needed

The existing CON exemption for replacement of a nursing home on the same site, or within 3 miles of the same site, would be expanded to allow for replacements within 5 miles of the existing site; and limits this exemption to only those replacements in the same nursing home “sub-district” under AHCA rules.

Creates a new exemption for facilities to add either 30 beds or 25% bed addition (whichever is less) to a facility that is being replaced.

Continues the existing “high occupancy” CON exemption to add 10 beds or 10% of the facility’s existing number of beds, but lowers the threshold to qualify from 96% annual occupancy to 94% annual occupancy.

Authorizes a new exemption for facilities with a common ownership interest to combine beds or transfer beds between facilities in the same district if there is no increase in the total number of beds in the district and the site to which beds are transferred is within 30 miles from the original location.

Expedited Reviews: Fast-Track Approval

Expands existing law allowing for expedited review to replace a nursing home within the same district under certain conditions, and now allows for replacement anywhere within a 30-mile radius, even outside of the existing District.

Allows for expedited review of replacement facilities that will be located outside of 30 miles from the existing site provided that the replacement location is within the same sub-district or an adjoining sub-district. However, if the move will be to an adjoining sub-district, the existing nursing homes in the adjoining sub-district must have had at least 85% occupancy in the last six month.

Amends existing provisions for allowing for expedited review of relocation of beds to a facility in the same district, by allowing beds to be relocated to another facility or a new facility in the same district or in an adjoining district, so long as there is no increase in the overall number of beds in the state.

Standing to Challenge Exemptions and Expedited Review Applications

There are clear benefits to a CON exemption or expedited review application, chief among which is the ability to apply at any time without having to wait for the twice-per-year competitive review batching cycles and publication of a “fixed need pool” by AHCA. Instead, an applicant for an exemption or expedited review can apply at any time, and the review and approval process is much shorter.

But does approval under an exemption or an expedited review process protect an applicant from potential legal challenges by existing providers in the same geographic area? It is often erroneously believed by applicants for an exemption or an expedited project that AHCA’s decision to approve the project cannot be challenged. However, Section 408.039(5)(c), Florida Statutes, specifically allows that existing providers in the same service district can challenge a proposed AHCA CON approval of a project whether that preliminary approval is the result of a batched comparative review or under an expedited review process. While it is uncommon, there is legal standing for existing providers to challenge the issuance of an expedited CON approval through the normal process under the Florida Administrative Procedure Act (Chapter 120, Florida Statutes) which includes the right to seek a full formal administrative hearing to resolve any factual disputes before an independent Administrative Law Judge assigned by the Division of Administrative Hearings (DOAH). Similarly, the granting of a CON exemption can be challenged and subject to a formal administrative hearing if there are factual disputes as to whether or not an applicant actually meets the legislative criteria for the CON exemption. University Community Hospital v. Department of Health and Rehabilitative Services, 555 So. 2d 922 (Fla. 1st DCA 1990).

Comparative Review Process

In addition to the changes to CON exemptions and CON expedited review applications described above, the lifting of the moratorium on CON approvals for new nursing homes will revive the existing process for comparative review of competing CON Applications for new facilities or bed additions to existing facilities that are not exempt or subject to expedited review. This process includes the following procedural steps with the changes being proposed in the pending House and Senate Bills noted:

Publication of a Fixed Need Pool: Under the established CON process, AHCA will publish a “fixed need pool” for nursing home beds in the Florida Administrative Register two times per year under the formula set forth in Rule 59C-1.036, Florida Administrative Code. The current rule formula projects the need for new nursing home beds in a future three year planning horizon, taking into account: the projected population in the District for population ages 65 to 74 and ages 74 and above; the use rates for usage of nursing homes by these age groups in the District; and the current bed inventory and occupancy. Any party may challenge the accuracy of AHCA’s published fixed need pool by filing a notice of any errors within 10 days of the publication, and filing a Petition for Formal Administrative Hearing to challenge any uncorrected errors within 21 days of the published Fixed Need Pool.

Filing of Letters of Intent: Once the need is established, any person or entity that wishes to apply for a new nursing home, or addition of beds, must first submit a “Letter of Intent” identifying the number of beds being sought and the location by District, sub-district and county. The filing of a Letter of Intent triggers a “grace period” during which any other parties may submit a competing Letter of Intent for a project that will be located in the same District. A party is free to apply for any number of beds that are within AHCA’s published projection of fixed need. A party may also apply for beds under “special circumstances” or “not normal circumstances” for a new facility or bed addition regardless of the number of beds projected in the published fixed need pool.

The CON Application and Omissions Response: Once AHCA receives all initial and grace period Letters of Intent, the CON Applications are submitted by the applicants setting forth in detail the basis of the application and presenting data and analysis to demonstrate compliance with the statutory and Rule review criteria. See Section 408.035, Florida Statutes, and Rule 59C-1.030 and 59C-1.036, Florida Administrative Code. The Application is typically submitted in two filings: an initial or “Shell” application that includes the required forms, and an Omissions response with detailed information and analysis. Typically, an application will include a Need Analysis, Utilization Forecast, Financial Pro Formas, a short-term and long-term financial feasibility analysis, and an architectural narrative and detailed schematic drawings for the proposed project.

If the application is alleging “not normal circumstances,” the applicant must demonstrate need by showing that existing facilities are unavailable or inaccessible, the quality of care in the service area is suffering from overutilization, or by providing other information to illustrate that the situation is not “normal” in the service area. Humana, Inc. v. Department of Health and Rehabilitative Services, 469 So. 2d 889 (Fla. 1st DCA 1985); Department of Health and Rehabilitative Services v. Johnson & Johnson Home Health Care, Inc., 447 So. 2d 361, 363 (Fla. 1st DCA 1984); Balsam v. Department of Health and Rehabilitative Services, 486 So. 2d 1341 (Fla. 1st DCA 1986). It has been held that there is no limitation to circumstances that may be shown to constitute a “not normal” situation warranting approval of an application in the absence of published need, but it is common for applicants to discuss “barriers to access” including geographic, financial, cultural or programmatic barriers.

AHCA Review of Competing Proposals in the Same District: Once all applications and responses are submitted, AHCA is required to conduct a comparative review of applications for new facilities or beds located in the same District. In conducting its review, AHCA approves the application or applications it finds best meet the projected need and the statutory and rule review criteria.

The proposed legislation to lift the moratorium on nursing home CON approval includes some important changes to AHCA’s review of applications under existing statutes and rules, including the following:

Aggregating Need in Sub-Districts: Allows an Applicant to aggregate the need in contiguous sub-districts for purposes of demonstrating need for a new facility or new beds. The current statute and rule require the applicant to only consider need in the sub-district where the facility will be located. If using an aggregated “need” from two or more sub-districts under the new bill requirements, the facility must be located in the sub-district where the highest annual occupancy of two sub-districts are aggregated. If more than two sub-districts are aggregated to support an argument for need, then the facility must be located so as to provide reasonable geographic access to residents of all the sub-districts. Interestingly, the bills provide that need will continue to be shown under the Rule formula in contiguous sub-districts where the facility is not built, even though the facility is being located to address the projected need in that sub-district.

Lower Occupancy Target in Rule: Requires that AHCA lower the desired occupancy rate that the agency uses in its rule for determining need from 94% to 92% occupancy in the sub-district.

Positive Treatment for De-licensing Beds in Areas with No Need: The bills require that AHCA establish a positive CON application factor for an applicant in a sub-district where need has been published, if the applicant agrees to voluntarily relinquish licensed nursing home beds in one or more sub-districts where no need is projected. The applicant must show that it operates, controls, or otherwise has an agreement with the owner to ensure that such relinquishment of beds will occur if the new application is approved.

Challenges to State Agency Action Reports: AHCA’s decision is announced in a State Agency Action Report (SAAR). Any competing applicant in the same District, as well as existing providers in the same District, have legal standing to initiate or intervene in a formal administrative proceeding to challenge the Agency’s preliminary decision that is announced in the SAAR. Thus, an applicant who believes it has a superior CON application, or who otherwise believes that AHCA improperly denied its application has the right to a formal hearing before an Administrative Law Judge (ALJ) at DOAH to present evidence to support its application, or to demonstrate that another applicant should not be approved or has an inferior application, or to demonstrate that more than one applicant should have been approved under the circumstances that exist. Similarly, existing providers have the right to initiate or intervene in formal proceedings to demonstrate that a new applicant or applicants should not be approved under the statutory or rule review criteria. The review by the ALJ is “de novo,” meaning that the agency’s SAAR is not entitled to any presumption of correctness; but, rather, the ALJ reviews the evidence anew to make a determination.

Parties in an administrative hearing have the right to present witnesses, documentary evidence, and to submit Proposed Recommended Orders that include Findings of Fact and Conclusions of Law. An ALJ reviews the evidence, and the Proposed Recommended Orders and then issues a “Recommended Order.”

A party may file “Exceptions” to the Recommended Order within 15 days after the ALJ’s issuance of the order. AHCA then reviews all Exceptions to the Recommended Order and issues a Final Order. However, AHCA, as a state agency, is limited by the Administrative Procedure Act in its authority to overturn the findings by an ALJ. Factual issues susceptible of ordinary methods of proof that are not infused with policy considerations are the prerogative of the ALJ as the finder of fact.” Heifetz v. Dep’t of Bus. Regulation, Div. of Alcoholic Beverages & Tobacco, 475 So. 2d 1277, 1281 (Fla. 1st DCA 1985) (citing McDonald v. Dep’t of Banking & Fin., 346 So. 2d 569 (Fla. 1st DCA 1977)). This includes consideration of the evidence presented, resolution of conflicts in the evidence, judging credibility of the witnesses, drawing permissible inferences from the evidence, and reaching “ultimate finding[s] of fact based on competent, substantial evidence.” Id. (citing State Beverage Dep’t v. Ernal, Inc., 115 So. 2d 566 (Fla. 3d DCA 1959)). An “agency may not reject the [ALJ’s] findings unless there is no competent, substantial evidence from which the finding could reasonably be inferred. The agency is not authorized to weigh the evidence presented, judge credibility of witnesses, or otherwise interpret the evidence to fit its desired ultimate conclusion.” Id. (emphasis added) “If there is competent[,] substantial evidence in the record to support the ALJ’s findings of fact, the agency may not reject them, modify them, substitute its findings, or make new findings.” Rogers v. Dep’t of Health, 920 So. 2d 27, 30 (Fla. 1st DCA 2005). Only in the narrow area where a Conclusion of Law or recommendation is within the substantive jurisdiction of the agency under its governing statutes and rules, may the agency overturn such conclusions and recommendations. Even in these narrow circumstances, the agency, in rejecting or modifying a conclusion of law by the ALJ, must state with particularity its reasons for rejecting or modifying the conclusion, and must make an affirmative finding that its conclusion is as, or more reasonable than, the ALJ’s conclusion that is being rejected.

A party may appeal the issuance of a Final Order to the District Court of Appeal where the project would be located, or to the First District Court of Appeal in Tallahassee.

Limitation on New Nursing Home CONs

Although the lifting of the moratorium on CONs for nursing homes will present some new opportunities, there are limitations. First and foremost, the bills currently under consideration would each place a statewide cap on the number of new nursing home beds that could be approved from July 1, 2014 to July 1, 2019. Under both the House and Senate Bills the cap would be 3,750 beds statewide. Once the cap is reached, both bills provide that no further CONs may be granted by AHCA.

Based upon a preliminary analysis conducted by National Healthcare Associates (NHA), a national consulting firm with headquarters in Coral Gables, it is likely that positive fixed need for additional nursing home beds will occur under the rule need formula, including the new statutory changes. Bed need using currently available data, would be shown for the following sub-districts:

Sub-district	Counties	Net Need
1-1	Escambia, Santa Rosa	185
1-2	Okaloosa	14
2-1	Gadsden, Holmes, Jackson, Washington	71
2-2	Bay	82
2-3	Calhoun, Franklin, Gulf, Liberty, Wakulla	33
2-4	Leon	106
2-5	Jefferson, Madison, Taylor	23
3-1	Columbia, Hamilton, Suwannee	121
3-2	Alachua, Bradford, Dixie, Gilchrist, Lafayette, Levy, Union	275
3-3	Putnam	57
3-4	Marion	167
3-5	Citrus	100
3-6	Hernando	82
3-7	Lake, Sumter	159
4-1	Nassau, Duval	144
4-2	Baker, Clay, Duval	214
4-3	St. Johns, Duval	178
4-4	Flagler, Volusia	160
5-1	Pasco	62
5-2	Pinellas	82
6-1	Hillsborough	219
6-2	Manatee	1
6-4	Highlands	30
6-5	Polk	244
7-1	Brevard	133
7-2	Orange	353
7-3	Osceola	151
7-4	Seminole	129
8-1	Charlotte	10
8-2	Collier	32
8-5	Lee	279
9-1	Indian River	12
9-2	Martin	2
9-3	Okeechobee	25
11-1	Miami-Dade	269

Under the new Bill changes, an applicant could have the option of aggregating the need in multiple contiguous sub-districts to demonstrate sufficient need for a new facility. Importantly, the current need rule contains a “default to zero” provision based on occupancy rate in a sub-district – i.e., if the sub-district average occupancy is less than 85% for the most recent six month any calculated need defaults to zero. There is presently no proposed legislative change to this required average occupancy. According to NHA the average occupancy in the following sub-districts was below the required 85% based upon the most recent six month reporting period (July 1, 2013 through December 31, 2013), and therefore there would be no need for any additional beds under the “default to zero” provisions of the Rule:

1-3 (Walton)
6-2 (Manatee)
6-3 (Hardee)
8-1 (Charlotte)
8-3 (DeSoto)
8-4 (Glades and Hendry)
8-6 (Sarasota)
9-4 (Palm Beach)
9-5 (St. Lucie)
10 (Broward)
11-2 (Monroe)

Thus for large portions of the State, it is expected that there will be published numeric need and applicants will have the ability to compete for the published bed need.

Looking at factors other than published need, according to NHA, there are barriers that exist in some parts of the State. These barriers must be identified and analyzed by an applicant to determine whether there is sound health planning justification for approval of a new facility, or of additional beds, even where there is zero published need. Every area or sub-district must be analyzed based upon the unique facts and circumstances applicable to that area.

Conclusion

The lifting of the 13-year moratorium will bring dramatic changes to the CON landscape for nursing homes in Florida. It will undoubtedly present new opportunities for nursing home and skilled nursing facility providers that have been unable to proceed with business expansion plans over the past 13 years. For existing providers who are operating efficiently at high occupancy, the lifting of the moratorium may present challenges by prospective CON applicants and market entrants taking advantage of the new and expanded exemption and expedited review process.

Although the legislative session is not yet over, and it is possible that the bills to lift the moratorium will not pass, current progress of the bills indicates likely passage. All nursing home and skilled nursing operators and prospective applicants should take note and should be ready to respond to this dramatic change.

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Geoffrey D. Smith is a shareholder in the law firm of Smith & Associates, and has practiced in the area of health care law and CON regulation for over 20 years.

Mounting a Successful Challenge to an Emergency License Suspension Order

Before an Emergency Suspension Order can be issued to suspend a medical license, the Department of Health must provide specific facts and reasons to support a finding of immediate danger to the public health, safety and welfare. The First District Court of Appeal recently released an opinion in which the Department failed this minimum requirement. In a unanimous decision, the court struck down an emergency order suspending the medical license of Alan Mendelsohn, a prominent ophthalmologist in Broward County.

The applicable standard of review for any Emergency Suspension Order (which allows suspension of a license without a prior hearing on the merits) is whether, “on its face, the order sufficiently states particularized facts showing an immediate danger to the public welfare.” Robin Hood Group, Inc. v. Florida Office of Insurance Regulation, 885 So. 2d 393, 396 (Fla. 4th DCA 2004). See also, Broyles v. Department of Health, 776 So. 2d 340 (Fla. 1st DCA 2001).

Instead of citing any facts which warranted the emergency license suspension, the Department of Health relied solely on a state statute and prior court opinion that permitted such emergency suspension orders where the licensee has committed a misdemeanor or felony under one of several federal statutes relating to Medicaid fraud. Previously, Dr. Mendelsohn, who was also a registered lobbyist, had entered a plea of nolo contendere in federal court to a charge of conspiracy to commit fraud upon the United States in violation of 18 U.S.C. 371 for allegedly using campaign funds for private use.

The statute relied upon by the Department – 456.074(1), Florida Statutes – specifically lists certain federal violations, including 18 U.S.C. 371, ending with the modifying term “relating to the Medicaid program.” Dr. Mendelsohn argued that the statute requires all of the listed violations be related to the Medicaid program in order for the Department to be excused from stating specific facts showing harm to the public. The Department argued that the modifier applied only to the offenses immediately preceding the modifier. The First DCA disagreed and, citing basic rules of grammatical construction and indicators of legislative intent, ruled the modifier applied to all of the listed violations. Since no facts were provided on the face of the emergency order to support a finding of immediate danger to public health, the order was stricken.

Historically, Florida courts have kept agencies from abusing the imposition of emergency moratoriums where immediacy of public harm is lacking or where the moratorium is not “narrowly tailored” to address the threat of harm. See e.g., St. Michael’s Academy, Inc. v. Department of Children and Families, 965 So. 2d 169 (Fla. 3rd DCA 2007) (allegations of isolated incidences were insufficient for emergency order suspending license because danger was not immediate and future harm was speculative); Henson v. Department of Health, 922 So. 2d 376 (Fla. 1st DCA 2006) (department’s emergency order suspending doctor’s license to practice osteopathic medicine because of narcotics violations quashed as broader than necessary to protect the public); Cunningham v. AHCA, 677 So. 2d 61 (Fla. 1st DCA 1996) (emergency suspension of psychiatrist’s license for over-prescribing narcotics to three patients was overly broad); Duabe v. Department of Health, 897 So. 2d 493, 495 (Fla. 1st DCA 2005) (emergency order to suspend petitioner’s license before administrative complaint was issued was unnecessary where petitioner stopped using an unapproved product on patients and destroyed his remaining supply before the emergency order was issued). Moreover, a demonstration of immediate serious harm to the public, and the consequent necessity for the emergency order, must be more than a general, conclusory prediction of harm. Bio-Med Plus, Inc. v. Department of Health, 915 So.2d 669 (Fla. 1st DCA 2005).

In Dr. Mendelsohn’s case, the Department currently has an administrative complaint pending with the Florida Board of Medicine to suspend or revoke Dr. Mendelsohn’s license. Unlike the Emergency Suspension Order, this course of action provides for a hearing on the merits before the license can be suspended. Even if an appellate court upholds an emergency suspension order, the licensee is entitled to an administrative hearing on the merits.

If you have any questions about Department of Health Emergency Suspension Orders and your rights to contest them, please feel free to speak with an attorney at Smith & Associates.