South Carolina              
Administrative Law Court
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SC Administrative Law Court Decisions

CAPTION:
Tuomey Healthcare System vs. DHEC and Advantage Health Systems, Inc. d./b/a CarePro Home Health - Sumter

AGENCY:
South Carolina Department of Health and Environmental Control

PARTIES:
Petitioner:
Tuomey Healthcare System

Respondents:
South Carolina Department of Health and Environmental Control and Advantage Health Systems, Inc. d./b/a CarePro Home Health - Sumter
 
DOCKET NUMBER:
02-ALJ-07-0083-CC

APPEARANCES:
n/a
 

ORDERS:

FINAL ORDER AND DECISION

I. Introduction

On July 2, 2001, CarePro Home Health‑Sumter (CarePro) requested a Certificate of Need (CON) from the South Carolina Department of Health and Environmental Control (DHEC) seeking to enable CarePro to provide home health services in Sumter County. Upon receiving additional information from CarePro, DHEC conducted a review which resulted in DHEC granting the CON to CarePro on February 22, 2002.

Tuomey Healthcare Systems (Tuomey) disagreed with DHEC’s decision. Accordingly, on March 1, 2002, Tuomey invoked the contested case hearing authority of the Administrative Law Judge Division (ALJD) for CON disputes. See S.C. Code Ann. §§ 44‑7‑210(D)(2), 1‑23‑310(2), and 1‑23‑600(B) (Supp. 2001). After a hearing on October 17 and 18, 2002, post-trial briefs were filed on December 12, 2002. After an examination of the evidence presented in light of the arguments made, the CON must be granted.

II. Analysis

The issue is straightforward. Does CarePro meet the requirements for obtaining a CON to provide home health services in Sumter County? If yes, the CON is proper; if no, a denial is required.

A. Positions of Parties


By reliance upon seven factors, DHEC approved CarePro’s application. Tuomey argues that six of the factors do not warrant granting the permit. The following lists the criteria relied upon by DHEC and briefly summarizes Tuomey’s objections:

Reg 61-15 DHEC Criteria Tuomey’s Challenge

(1) 802.1

Compliance with the State Health Plan (Need)

 

Need is not met since “CarePro failed to present any evidence of independent quantifiable data regarding need for home health services in Sumter County.” (Tuomey’s Br. p. 4). Further, Standards 3 and 7 of State Health Plan are not met.

(2) 802.4a,4b

Acceptability

 

Acceptability is not present since the project lacks adequate Community and Physician Support.

(3) 802.23a

802.20a

Effects on Other Facilities

Effects on Staff Resources

 

The project will have a negative impact on the current and projected occupancy rates or use rates of existing facilities and services as well as strain existing staff resources.

(4) 802.9

802.15

Net Income

Financial Feasibility

 

Net Income and Financial Feasibility are lacking since CarePro has made “unsubstantiated assumptions” regarding patient demand and revenues and expenses.

(5) 802.3b,3f,3g

802.31a,31d

Distribution (Accessibility)

Medically Underserved Groups

 

Distribution (Accessibility) is not met since the evidence shows that the large number of referrals of patients to CarePro will produce a significant adverse impact on Tuomey and

No Medically Underserved Groups will be met since no medically underserved groups exist in the county.

(6) 80213a,13d

Record of the Applicant

 

NOT CHALLENGED BY TUOMEY

(7) 802.6a

Projected Revenues

 

Projected Revenues are inaccurate since they failed to include a federally imposed 15% cut in patient benefits.

B. Applicable Law To Be Applied to Established Facts


The standard of proof in a CON contested case hearing is preponderance of the evidence with the burden of proof on the party bringing the controversy. S.C. Code Ann. § 44‑7‑11 through 44‑7‑340 (Supp. 2001); S.C. Code Ann. Regs. 61‑15, § 403(1) (Supp. 2001); National Health Corp. v. S.C. Dep ‘t. Of Health and Environmental Control, 298 S.C.373, 380 S.E.2d 841 (1989). Thus, in the instant case, Tuomey has the burden of establishing by a preponderance of the evidence that CarePro does not meet the requirements for a CON to provide home health services in Sumter County.

1. General CON Requirements

The State Certification of Need and Health Facility Licensure Act (Act) establishes the compliance requirements for obtaining a CON. See S.C. Code Ann. § 44‑7‑110 et seq. (Supp. 2001). To assure compliance, DHEC exercises "control and administration of the granting of [CONs.]."

Control and administration is obtained by requiring all CON projects to be examined in light of promulgated Project Review Criteria. See S.C. Code Ann.§ 44‑7‑190 and S.C. Code Regs. 61‑15, Chapter 8. Further, the State Health Plan (SHP) must be used "in the administration of the [CON] Program provided for in [Article 3 of Chapter 7 of Title 44]."

Thus, S.C. Code Regs. 61‑15 and the SHP provide the foundation upon which granting or denying a CON application depends. See S.C. Code Ann. § 44‑7‑210 (Supp. 2001) ( CON may not be issued unless an application complies with the SHP, Project Review Criteria, and other regulations). Even more to the point, given that S.C. Code Regs. 61‑15 at § 802.1 holds that an application will not be approved unless "it is in compliance with the [SHP]," S.C. Code Regs. 61‑15 forms the all‑encompassing umbrella for judging whether a CON is proper.

2. Project Review Criteria

While S.C. Code Regs. 61‑15, § 801 et seq. establishes numerous review criteria, an applicant need not be examined under all of them. S.C. Code Regs. 61‑15, § 801.3. Rather, DHEC is charged with setting the specific criteria for review of a CON request. See S.C. Code Regs. 61‑15, §§ 801.2 and 304. Thus, CarePro must satisfy the criteria imposed by DHEC.[1]

3. Criteria Satisfied

The parties stipulated to several facts relevant to the dispute.

(1) The CarePro CON application was filed and reviewed under the 2001 State Health Plan (SHP), the applicable plan at the time of the filing of the application;


(2) The 2001 SHP states that the authorized number of home health agencies for a county with a population of 75,000‑125,000 is five (5);

(3) The 2001 SHP states that the 1999 population of Sumter County was 110,500;

(4) The 2001 SHP states that the number of individuals served by home health agencies in Sumter County is 15.93 persons per thousand population and the South Carolina state average is 21.53 persons per thousand population;

(5) The 2001 SHP authorizes a new home health agency to be approved for Sumter County;

(6) No other home health CON applications were filed for Sumter County;

(7) In the 2001 SHP, Tuomey Regional Home Health, Tri‑County Home Health Care; Wateree Home Health Services (DHEC), and CareSouth Home Care Professionals are the four (4) home health agencies that are listed as licensed to provide home health services in Sumter County; and

(8) CareSouth Home Care Professionals served only three (3) Sumter County residents in 1999.

With these facts as the beginning background, additional facts drawn from the testimony and evidence presented at the hearing when applied to the applicable law demonstrates the CON must be granted.

a. Need Demands of the State Health Plan 802.1

The demand of 802.1 is that the applicant comply with the State Health Plan. Tuomey argues that the State Health Plan is not satisfied since “CarePro failed to present any evidence of independent quantifiable data regarding need for home health services in Sumter County.” (Tuomey’s Br. p. 4). In addition, Tuomey argues that Standards 3 and 7 of State Health Plan are not met. I cannot agree with Tuomey’s position.

The facts of this case show independent quantifiable data establishing a need for home health services in Sumter County. For example, population data from the National Disability Statistics published by the United States Department of Education in 1996 establishes that 16% of the United States population age 65 or older and 2.5% of the population age 18 to 64 could benefit from home health services. Accordingly, based on census data from 1990 to 2000, Sumter County has an April 1, 2000 population of 104,646, of which 11,759 are age 65 or older and 63,454 are 18 to 64. Therefore, 3,468 Sumter County residents (11,759 @ .16 plus 63,454 @ .025) could benefit from home health services. Since the total number of clients served in Sumter County during 1999 was 1,760 (see 2001 SHP), the number of residents of Sumter County that could benefit from home health services but that are not receiving them is 1,708.


Here, the evidence from DHEC materials establishes quantifiable data showing a need for additional home health services. The 1999 and 2001 State Health Plans demonstrate that Sumter County’s home health utilization has been below the state average for four consecutive years. These lower utilization rates have been occurring despite the fact that Sumter County patients have hospitalization rates comparable to the state average, that Sumter County has chronic diseases and conditions such as diabetes, hypertension, stroke, and cancer that are equal to or higher than the state average, and that a higher percentage of minority population exists in Sumter County than compared to the state average. Thus, the evidence establishes that a significant number of residents of Sumter County are in need of additional home health services.

CarePro will meet a considerable portion of the unmet need in Sumter County. First, in general terms, the testimony proves that a significant number of minority residents of Sumter County are undetected by the existing health care providers. CarePro is a minority owned agency that will access many of these undetected individuals through a network of community activities in minority communities, churches, and referrals from others who have benefited from CarePro’s home health agency in Richland County.

Second, in more particular terms, CarePro’s past experience demonstrates that it will be able to reach many minority Sumter County residents who currently have not availed themselves of needed home health services. Indeed, since 75% of CarePro’s current Richland County patients are minorities, CarePro anticipates the same experience for its Sumter County services. In reaching these Sumter residents, CarePro will focus on Sumter County patients that are being treated by physicians in Columbia. In fact, in 1999, a total of 2,177 Sumter County residents were discharged as patients from Richland County hospitals.

Accordingly, CarePro has established independent quantifiable data demonstrating that a need exists for additional home health services in Sumter County

i. Standard 3 of SHP

Standard 3 of the SHP requires “documentation from physicians and discharge planners in the proposed service area substantiating the need and support for an additional home health agency.” Here, that requirement is satisfied.

CarePro received the following support letters and referral estimates from Richland County physicians who indicated they would refer patients to CarePro’s Sumter operation:

Gerald A. Wilson, MD 6 to 10 per month

Dennis A. Wilson, MD 4 to 5 per month

Everett L. Dargan, MD 4 to 5 per month

Albert Humphrey, MD 5 per month

Putrina Dunlap‑Deas, MD 10 per month

Barr D. Oliver, MD 10 per month

In addition, CarePro received the following support letters and referral estimates from Sumter County physicians who indicated they would refer patients to CarePro’s Sumter operation:

J. Julian Abbott, MD 1 per month

Joseph C. Williams, MD 2 to 3 per month

Brenda C. Williams, MD 2 to 3 per month


M. Francisco Gonzalez, MD 1 to 5 per month

Melvyn V. Mahon, MD 4 to 5 per month

The letters acknowledge that the physicians understand they are providing support for CarePro to expand home health operations into Sumter.

ii. Standard 7 of SHP

Standard 7 of the SHP requires that the “applicant must document that they can serve at least 50 patients annually in each county for which they are licensed within two years of initiation of services.” The physician letters identified above demonstrate CarePro will have a patient base of at least 50 patients by the end of the second year of operation. Further, that patient base will be serviced by CarePro staff. For example, some of CarePro’s current staff live in Sumter County and Lower Richland County and have expressed an interest in working in Sumter County. In addition, CarePro will utilize its existing administrative staff to oversee operations in Sumter County.

In addition, CarePro’s success in Richland County is persuasive evidence of its ability to be successful in Sumter County. For example, CarePro has been providing home health services to Richland County since 1997 and in 1999 served 222 patients.

b. Acceptability 802.4a,4b

The argument presented is that acceptability is not present since the project lacks adequate Community and Physician Support.

The CarePro application contained letters of support from physicians in Sumter County as well as from physicians in Richland County who will be referring Sumter County residents to CarePro. Additionally, governmental officials and community organizations provided letters of support for the application with no letters in opposition received from community leaders.

At least seven Sumter County physicians expressed their views that no new home health agency should be allowed to operate in Sumter County. However, those physicians did not specifically address their comments to CarePro itself. Further, while CarePro did not include any support letters from hospital discharge planners, DHEC’s experience establishes that the lack of such letters is not unusual. Therefore, the project does not lack adequate community and physician support.

c. Effects on Other Facilities and Effects on Staff Resources 802.23a, 802.20a

The view of Tuomey is that the project will have a negative impact on the current and projected occupancy rates or use rates of existing facilities and services as well as place a strain on existing staff resources. I disagree.


Even though physicians have plans to refer a significant number of patients to CarePro during its first year, size of staff limitations and management decisions will restrict CarePro’s patient census to approximately 75 patients in its first year of operation in Sumter County, a number representing 4.2% of the Sumter County home health patients. Such a percentage does not present a meaningful adverse impact to existing providers of home health services. Certainly, nothing in the past history of home health services in Sumter County demonstrates that the addition of a new home health agency will cause existing providers to close. For example, when Tuomey began providing home health services, Tri-County, a then existing provider, did not cease its services. Based on all the evidence, the project will not have a significant negative impact on existing providers of home health services. Further, no persuasive evidence demonstrates how CarePro’s services will place a strain on existing staff resources. Rather, CarePro has current employees in Sumter County who have indicated a desire to work in Sumter County. Thus, the evidence does not establish that employees from existing providers will be lost to CarePro.

d. Net Income and Financial Feasibility 802.9 and 802.15

Tuomey argues that a basis for denying the CON is that the net income and financial feasibility are lacking since CarePro has made “unsubstantiated assumptions” regarding patient demand and revenues and expenses. Again, I cannot agree.

Medicare will provide as much as 80% of CarePro’s revenue with that revenue based on Medicare reimbursing CarePro under a payment plan based on a 60 day episode of care. Under the plan, an assessment places the patient within one of 80 different reimbursement categories with the more severely ill patients being reimbursed at a higher rate. Thus, with one exception, regardless of the number of visits or actual costs to the home health agency, CarePro will receive a predetermined Medicare rate for each 60 day episode. The exception is that for patients receiving less than five home health visits during the 60 day period, Medicare will reimburse the home health agency on a per visit rate instead of the 60 day episodic rate.

While CarePro’s initial projected budget failed to consider the 60 day episodic rate, subsequent corrected budgets estimated 75 patients for the first year, 80 patients the second, and 90 the third. The budgets assumed an average rate of two 60 day episodes per patient with an average number of visits per episode of 25. Further, the budgets assumed an average rate for patients receiving less than five home health visits during a 60 day period to be 2%. CarePro’s assumptions of 2% and 2 episodes per patient are reasonable since they are based on historical data from CarePro’s Richland County services. Further, patients who have more severe health problems require more home health visits, and patients with more severe health problems remain in home health for a longer period of time. Thus, these budgets provide a reasonably based projection of a loss in year one of $10,715 rising to a profit of $2,533 in year three.

e. Distribution & Medically Underserved Groups 802.3b,3f,3g,31a,31d


Regs. 802.3b explains that the proposed service should be located so that it may serve medically underserved areas (or an underserved population segment) and should not unnecessarily duplicate existing services in the proposed service area. Likewise, 802.3f, 3g, and 31 all seek to assure that the potential service provider will provide services to the needy and do so without regard to ability to pay.

Tuomey argues that CarePro will create an unnecessary duplication of existing services and that no medically underserved groups will be served by CarePro since no medically underserved groups exist in the county. The evidence here does not support Tuomey’s position.

The population of Sumter County is approximately 50% black, a percentage higher than the statewide percentage. The significance of that statistic is that, when considered as a group population, black residents of South Carolina have a higher incidence of diabetes, hypertension, strokes, and cancer than non-blacks. However, despite the higher incidence of these conditions, the rate of home health utilization in Sumter County has been consistently among the lowest in the state.

Given the medical status of residents of Sumter County, CarePro will not create an unnecessary duplication of services since CarePro seeks to primarily reach the previously unserved and underserved black population of Sumter County. CarePro’s record in Richland County demonstrates an ability to accomplish such a task since 75% of its patients in Richland County are minorities. Further, DHEC’s Office of Minority Health reported that patients of a specific racial or ethnic background often express a preference for healthcare providers having similar racial or ethnic backgrounds. When such preferences are met, a higher utilization of services results. In addition, CarePro’s business model identifies minority social, civic and religious organizations whose members do not typically see physicians and who do not fully utilize the available healthcare system. Accordingly, CarePro will reach an underserved population and by doing so will not create any unnecessary duplication of services.

f. Projected Revenues 802.6a

Under Regs. 802.6a, documentation of CarePro’s proposed charges are in order. Tuomey’s final argument is that CarePro’s proposed charges give rise to erroneous projected revenues since CarePro failed to include a federally imposed 15% cut in patient benefits.

Eighty percent of CarePro’s home health patients will be Medicare patients. Given that fact, CarePro’s application was called into question since it did not adjust its revenue projections for a proposed 15% reduction in reimbursement scheduled to occur for the 2002 federal fiscal year. However, Congress authorized a year delay of the 15% reduction and some doubt existed that the budget cuts would remain at 15% or that the reduction would be implemented at all. Further, CarePro did submit a final third set of financials based upon proper revenue projections. Accordingly, CarePro’s proposed charges and projected revenues are reasonably based.

III. Order


After an examination of the evidence presented in light of the arguments made, CarePro Home Health‑Sumter’s requested Certificate of Need to provide home health services in Sumter County is GRANTED.

AND IT IS SO ORDERED.

_________________________________

RAY N. STEVENS

Administrative Law Judge

Dated: March 17, 2003

Columbia, South Carolina



[1]Such an approach complies with the duty that the contested case address only those issues "presented or considered during the staff review and decision process." S.C. Code Ann. § 44‑7‑210(E) (Supp. 2001). Moreover, Tuomey has not challenged DHEC’s choice of factors either below or at the ALJD level.


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