STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FORT MYERS CARE CENTER, INC., )

)

Petitioner, )

and )

) AMERICANA HEALTHCARE CORPORATION,)

)

Petitioner, )

and )

)

HEALTH SERVICES, INC., ) CASE NO. 79-0143

)

Petitioner, )

)

vs. )

) STATE OF FLORIDA, DEPARTMENT OF ) HEALTH AND REHABILITATIVE )

SERVICES, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, X. N. Ayers, held a consolidated public hearing in the above styled case on 2 February, 20 February and 8 March 1979 at Fort Myers and Tallahassee, Florida.

APPEARANCES

For Petitioner: John F. Lowndes, Esquire Fort Myers Care Michael Ryan, Esquire Center, Inc.: Post Office Box 2809

Orlando, Florida 32802

For Petitioner: Kenneth F. Hoffman, Esquire Americana Health Post Office Box 1872

care Corporation: Tallahassee, Florida 32302

For Petitioner: Robert Bode, Esquire Health Services, Post Office Box 391

Inc.: Raleigh, North Carolina 27602

For Respondent: Eric J. Haugdahl, Esquire

Assistant General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32301

By Petitions dated December 15, 1978, January 12, 1979 and January 17, 1979, Fort Myers Care Center, Inc. (FMCC), Americana Healthcare Corporation (AHC), and Health Services, Inc. (HSI), Petitioners, protested the Department of Health and Rehabilitative Services' (HRS), denial of their respective applications for certificates of need to operate nursing homes in Fort Myers, Florida and requested fair hearings. Respondent's motion for consolidation of these cases for hearing was granted.

The parties waived the requirement that the hearing be held within 30 days of the petition for fair hearing and the hearings commenced on 8 February 1979. The hearing was thereafter continued on 20 February, 1979 and 8 March 1979.

At these proceedings 13 witnesses were called and 33 exhibits were offered into evidence. Exhibit 22 was withdrawn after objection was made to its admission. Objection to Section I of Exhibit 23 was sustained, objection to Exhibit 24 was sustained, and ruling on the admissibility of Exhibit 26 was reserved at the hearing. The objection to Exhibit 26 is hereby sustained.

At the beginning of the hearing, the parties stipulated that there are a total of 741 existing or approved long-term care nursing home beds in Lee County, Florida; that extenuating and mitigating circumstances in the form of waiting lists and high occupancy rates justify approval for additional beds in Lee County; and that there is a present need and a certificate of need should be issued to allow the construction of an additional 100 to 120 long-term care nursing home beds in Lee County. It was further agreed that the stipulation would not preclude any of the petitioners from proving a current need in Lee County for more than 120 long-term care nursing home beds.

During the course of the hearing, the U.S. Census figures for Lee County became available and the parties stipulated that if the Census director were called, he would testify that on September 25, 1978 the population of Lee County (less Cape Coral) was 161,011, and the population over 65 years old was 35,877; and on February 28, 1978 the population of Cape Coral was 23,830 and the population over 65 was 6,107.

Proposed Findings of Fact submitted by Petitioners Fort Myers Care Center and Americana Healthcare Corporation not included below were not supported by credible substantial evidence or were deemed unnecessary to the results reached. Specifically, many of the findings proposed by Americana Healthcare Corporation are supported only by misconstruing or misinterpreting the evidence presented or by giving unwarranted credence to the testimony of certain witnesses.

FINDINGS OF FACT

1. FMCC's application is to provide a 102-bed long-term care nursing facility in Fort Myers, Florida, while AHC's and HSI's applications are to provide 120-bed long-term nursing care facilities.

   
   

2. When each of these applications was presented to the south Central Florida Health Systems Council, Inc. (HSA), the application of FMCC was approved and forwarded to Respondent recommending approval and the other two applications were disapproved and so forwarded. The primary reason given by HSA for disapproving HSI's application was lack of firm financing and for disapproving AHC's application was cost of construction.

3. Trained personnel to man the proposed facilities are in short supply in Lee County. Applicants' plans to import personnel, if necessary, from other parts of the country were supported by no evidence to indicate such personnel would be amenable to move to Lee County.

   
   

4. All applications were disapproved by Respondent and each applicant requested a hearing which resulted in this consolidated hearing.

   
   

5. At present there are 741 existing or approved long-term care nursing home beds in Lee County, Florida. A 120-bed facility at Cape Coral became operative in February, 1979 and a 60-bed addition to Beacon-Donegan Manor nursing home has also been approved.

   
   

6. Prior to the opening of the newest 120-bed facility at Cape Coral, the occupancy rate for the other long-term care nursing homes was greater than 90 percent. Due to its recent opening, no evidence was presented as to the occupancy rate in Lee County following the opening of the Cape Coral facility.

   
   

7. The population of Lee County in 1978 was 184,841 with 41,984 more than

   65 years old, which is less than 23 percent of the population. This is in line with the population forecasts by the University of Florida and validates the estimated 1980 population figures which were used by all parties in submitting their applications.

   
   

8. In 1978 Respondent proposed a State Health Plan which included a determination that the long-term care nursing home bed needs were 27 per 1,000 population greater than 65 years old. This determination was unacceptable to the Department of Health, Education and Welfare (HEW) whose decision is binding on Respondent. In refusing to accept this standard, HEW reaffirmed the requirement that the formula contained in the Hill-Burton Act be utilized in determining certificates of need.

   
   

9. Following the Hill-Burton formula results in no additional long-term care nursing home beds needed in Lee County. Modification of the results produced by use of the Hill-Burton formula when extenuating and mitigating circumstances exist is authorized by the Florida Medical Facilities Plan. Accordingly, when use of Hill-Burton formula produces results contrary to obvious facts, such as a showing of no need for additional facilities when occupancy rates are high and long waiting lists for admission exists, these extenuating circumstances are considered and a finding of need is made.

   
   

10. The parties stipulated that extenuating circumstances, notably the greater than 90 percent occupancy rate in nursing homes in 1977 and most of 1978 and the existing waiting lists created need for 100 to 120 additional beds.

    
    

11. No evidence was presented establishing a need for more than 100-120 additional long-term care nursing home beds in Lee County. In fact, no evidence was presented showing the current occupancy rate, current waiting lists, or any other information not previously submitted to the Health Systems Agency was here presented other than the latest Census Report, which merely confirmed the accuracy of the forecasts.

    
    

12. Even if the 27 beds per 1,000 population greater than 65 which was proposed by the South Central Florida Health Systems Agency were used to establish the number of beds needed, their limitation, that no more than 50 percent be added in the two-year planning period, would preclude approving more than one additional nursing home at this time.

13. Absent evidence showing a need for more than one additional nursing home, the only issue remaining is which of the applicants is best qualified to provide the best service at the lowest cost for the stipulated need.

    
    

14. HSI submitted proposed construction costs and patient charges in line with those submitted by FMCC. However, although their application states, and the Health Systems Agency apparently accepted, their allegation that an option to lease had been obtained on the property on which the proposed facility was to be erected, testimony at the hearing disclosed that only an oral agreement to lease the property had been obtained by HSI. An oral agreement affecting a long-term lease of real property comes within the Statute of Frauds and is unenforceable. This fact alone renders all cost estimates submitted by HSI suspect. Further, the financing proposed by HSI to construct the facility shows less than $200,000 equity capital available and a requirement to borrow

    $1,300,000. One ground noted by the Health Systems Agency for disapproving this application was the inadequacy of their financing. No evidence presented at this hearing contradicted this Health System Agency's finding.

    
    

15. AHC operates some 50 nursing homes in 14 states with two nursing homes in the Orlando area. A certificate of need has been obtained for a third nursing home in Jacksonville.

    
    

16. Florida Living Care, Inc., the parent corporation of FMCC, manages some 44 nursing homes and owns 25. It has certificates of need for 6 nursing homes in Florida, one of which is completed and in operation, while 3 are under construction.

    
    

17. AHC proposes to finance 87 percent of the cost of the 120-bed project, or $2,160,000, in a 40-year loan at 8.5 percent interest.

    
    

18. FMCC proposes to finance 80 percent of the cost of a 102-bed project, or $1,000,000, in a 25-year loan at 9.5 percent interest.

    
    

19. Although no testimony regarding the current status of mortgage money was presented, it is recognized that interest rates are at historically high levels and that FMCC is more likely to get financing on the terms it proposed than is AHC on the terms the latter proposed.

    
    

20. HSI proposed costs and charges result in average costs of $30.16 per patient per day. FMCC proposed costs and charges result in average costs of

    $30.96 per patient per day. AHC proposed costs and charges result in average costs of $34.40 per patient per day.

    
    

21. No significant difference exists in the services proposed by each of the applicants.

    
    

22. Savings from combined purchasing can result when numerous facilities are operated. Both AHC and FMCC are in a better position in this regard than is HSI. Additional savings in group food purchasing can result when facilities are within 200 miles of each other. The facilities FMCC's parent corporation is opening in Sebring and Port Charlotte are close enough to Fort Myers to allow group food purchasing for these facilities.

    
    

23. AHC's construction costs are approximately 50 percent higher per bed than are the costs submitted by FMCC and HSI. This factor must result in higher charges to amortize these higher construction costs.

    CONCLUSIONS OF LAW

    
    

24. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter of these proceedings.

    
    

25. No credible evidence was presented to show that more than 120 additional long-term care nursing home beds are needed in Lee County by 1980.

    
    

26. Issuance of certificates of need is governed by the provisions of Section 381.494, Florida Statutes, which provides in pertinent part:

    
    

    (5)(c) The following shall be thoroughly con- sidered by health systems agencies in certificate of need determinations for health-care facilities and services and health maintenance organizations:

    l. The need for health-care facilities and services being proposed in relation to the applicable health systems plan, annual imple- mentation plan, and state medical facilities plan adopted pursuant to Titles XV and XVI of the Public Health Service Act.

    
    

27. The Health Systems Plan adopted by South Central Florida Health Systems Agency provided 30 long-term nursing beds per 1,000 population over age

    65 with a limitation on adding more than 50 percent of the need in one year. This formula is inconsistent with the Hill-Burton formula, but even under this formula, in view of the recently approved beds at Cape Coral and Beacon-Donegan, the need for more than one additional nursing home could not be met.

    
    

28. Under the Hill-Burton formula for computing the bed needs in Lee County, no new long-term care nursing home beds are needed. The parties stipulated that 100 to 120 additional beds are needed. No evidence was presented to show special or extraordinary circumstances exist to justify the addition of more than 100 to 120 nursing home beds in Lee County.

    
    

29. The evidence submitted supports the recommendation of the Health Systems Agency that the application of FMCC for a certificate of need be approved, and the applications of AHC and HSI be disapproved.

    
    

30. From the foregoing it is concluded that the addition of not more than

120 long-term care nursing home beds will be needed in Lee County by 1980 and that Fort Myers Care Center is the applicant best qualified to provide such a facility. It is therefore

RECOMMENDED that the application of Fort Myers Care Center to construct and operate a 102-bed long-term care nursing home facility in Fort Myers be granted, and the applications of Americana Healthcare Corporation, and Health Services, Inc., be disapproved.

Entered this 13th day of April, 1979.

K. N. AYERS Hearing Officer

Division of Administrative Hearings

COPIES FURNISHED:

John F. Lowndes, Esquire and

Michael Ryan, Esquire Post Office Box 2809 Orlando, Florida 32802

Kenneth F. Hoffman, Esquire Post Office Box 1872 Tallahassee, Florida 32302

Robert Bode, Esquire Post Office Box 391

Raleigh, North Carolina 27602

Eric J. Haugdahl, Esquire Assistant General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32301

Room 101, Collins Building

MAIL: Room 530, Carlton Building Tallahassee, Florida 32301

Docket for Case No: 78-002505

Orders for Case No: 78-002505