Florida's Third District Court of Appeal has held that Florida's Agency for Health Care Administration (AHCA) properly exercised its discretion in denying a home health agency Change of Ownership application (CHOW) on the grounds that the new 100% shareholder previously worked for another home health agency that had been terminated by Medicare in 2006. This unprecedented decision could have broad implications for healthcare companies and investors, as well as lawyers representing them.
The case involved Roberto Marrero's purchase of 100% of the stock of Trust Care Health Services, a home health agency in Virginia Gardens, Florida. As the transaction involved a transfer of 100% of Trust Care's outstanding stock, the company was required to file a CHOW application to inform AHCA of the change and to obtain a new license. AHCA denied the application on the grounds that Mr. Marrero previously served as administrator of All Med Network Corp., a home health agency terminated by Medicare in 2006, and because AHCA determined the CHOW application did not correctly disclose certain information concerning Mr. Marrero's prior role. Mr. Marrero appealed AHCA's decision and argued that although Medicare terminated his former employer, he never was sanctioned personally by Medicare or AHCA. The court's two-judge majority – relying in part on AHCA's regulatory role in safeguarding public health – held that AHCA did not abuse its discretion in denying the CHOW application and license. The dissenting judge opined that although in theory it might be good public policy for AHCA to deny CHOW licenses in these circumstances, AHCA's interpretation of the applicable Florida statute was clearly erroneous in his view. It is unclear at this time whether the appellant will try to seek further review by the Florida Supreme Court.
The Florida law at issue in the case is a general healthcare facility licensing statute that is not limited to home health agencies. Consequently, healthcare companies, investors, and their counsel must use caution when analyzing (1) who can be owners or have a controlling interest in a licensed healthcare facility in Florida, and (2) what information is required to be disclosed when completing an AHCA licensure application.