A. GONZALEZ HOSPITAL, )
vs. ) CASE NO. 79-1362
DEPARTMENT OF HEALTH AND ) REHABILITATIVE SERVICES,. )
Respondent. )
This matter came on for hearing in Tampa, Florida, before the Division of Administrative Hearings, by its duly designated Hearing Officer, Robert T. Benton, II, on August 8, 1979.
Kenneth G. Oertel, Esquire
For Respondent: Amelia M. Park, Esquire
By letter dated May 22, 1979, Art Forehand, an administrator in respondent's Office of Community Medical Facilities, advised petitioner of respondent's determination that petitioner's "proposal to replace or renovate [petitioner's hospital] facility is subject to [certificate of need] review." Joint exhibit 1. The letter to petitioner's counsel stated:
Had your client, upon being advised of the physical plant deficiencies on February 5, 1976 and on October 25, 1976, commenced construction by July 1, 1977 to replace or renovate the facility; such a construction project would not have been subject to certificate of need review. For whatever reasons, construction was not commenced prior to July 1, 1977. Therefore, repeal of the exemption from review statutory pro- visions (381.496) on July 1, 1977 auto-
matically subjected the project to certificate of need review.
[W]e cannot substantiate your client's allegation that they were prohibited by Department of Health and Rehabilitative Services from correcting the facility deficiencies at the time noted or prior to July 1, 1977. Joint exhibit No. 1.
In the letter, respondent characterized its determination as "a final agency decision," but, upon petitioner's request for "a full hearing pursuant to Section 120.57," the matter was referred to the Division of Administrative Hearings.
Since 1904, a group of citizens in Tampa has paid weekly or monthly fees entitling each member to medical care as needed at little or no additional expense. Medical facilities for the group have been housed in a hospital building in Ybor City. In 1939, A. A. Gonzalez, a physician, gained control of these physical facilities. The A. A. Gonzalez Hospital Corporation acquired a
34 bed hospital. A. A. Gonzalez was president of the corporation until his death in 1953, when his widow, Lucia Gonzalez Nuniz, became president and treasurer of the corporation, positions she still holds. Aurelia Gonzalez- Risler, daughter of A. A. Gonzalez, now chairs the corporation's board of directors and is an executive vice-president of the corporation. There were some 6,000 members of this mutual aid medical society in 1976, but membership has fallen off considerably since then.
Respondent has at least two subdivisions with whom hospitals in Florida sometimes come into contact. There is the Office of Licensure and Certification and there is the separate and distinct Office of Community Medical Facilities. The Office of Licensure and Certification employs architects and others who review plans for health care facilities in an effort to insure that they will comply with standards designed to protect the public health and safety. Among other things, these standards cover hospital laboratories, pharmacies, radiology departments, fire control, sanitation, and general physical plant requirements. See Chapters 395 and 400, Florida Statutes, and Chapter 10D-28, Florida Administrative Code. In furtherance of its objectives, the Office of Licensure and Certification also conducts periodic hospital inspections.
Respondent's Office of Community Medical Facilities, on the other hand, administers the certificate of need program, an elaborate regulatory scheme intended to reduce health care costs by preventing unnecessary capital outlays by health care providers. Under this program, health care facilities or health maintenance organizations apply for certificates of need as a legal prerequisite to constructing new facilities, making certain capital expenditures, or taking certain other steps. See Sections 381.493 through 391.497, Florida Statutes, and Chapter 101, Florida Administrative Code. Preparation of an application for a certificate of need is a substantial undertaking.
Before a proposed hospital is built, both a license from respondent's Office of Licensure and Certification and a certificate of need from respondent's Office of Community Medical Facilities are ordinarily required. At all pertinent times, the Office of Licensure and Certification had an official policy of referring inquiries about certificates of need to the Office of Community Medical Facilities. In addition, there was an unwritten agreement between the two offices that the Office of Licensure and Certification would issue no license until the license applicant had obtained either a certificate
or need or a letter from the Office of Community Medical Facilities stating that no certificate of need would be required.
Respondent's Office of Licensure and Certification conducted inspections of petitioner's facilities on February 5, 1976, on March 22, 23 and 24, 1976, on October 7, 1976, and again on October 24, 1976. As a result of these inspections, numerous deficiencies were pointed out to the petitioner. Some of these were readily correctable, but others, including the installation of new plumbing and widening the corridors, would have required substantial outlays.
On December 20, 1976, Oscar Gonzalez, then petitioner's administrator, Mrs. Nuniz, Mr. Gilbert Flores, an architect retained by petitioner, and employees of respondent, Messrs. Owen, Schilling, Stankaitis, Insley, Burton and Honeywell, met in Jacksonville. Petitioner's counsel, J.J. Craparo, initiated arrangements for this meeting but did not attend. "At this meeting, many possibilities were discussed, including extensive renovation and replacement facilities," Respondent's exhibit No. 1, and including the requirement that a hospital building comply with the more stringent code standards applicable to new buildings if more than half the value of the building is expended on renovation, in a twelve month period. As a practical matter, petitioner's building could not be altered to comply with the code standards applicable to new buildings. During the meeting on December 20, 1976, Mr. Flores made a telephone call to determine whether land adjacent to the existing building would be available.
Everybody at the meeting was under the impression that a project on the scale necessary to correct the deficiencies at A.A. Gonzalez Clinic and Hospital would require a certificate of need. Mr. Burton said as much. Every employee of respondent in attendance worked for the Office of Licensure and Certification. None was familiar with every exemption from the requirement that certificates of need be obtained. Petitioner's representatives relied on respondent's employees for their information. At this meeting, Louis Norman Schilling strongly urged that petitioner build a replacement facility rather than attempt renovation, a recommendation be repeated in a meeting on January 3, 1977, with Oscar Gonzalez, Gilbert Flores and Alberto Gonzalez del Barrio. At the time, Mr. Schilling worked for respondent. He is now an architect in private practice whom petitioner has retained in its efforts to build a replacement facility.
At the meeting on January 3, 1977, Mr. Schilling advised petitioner's representatives that they would have to have a certificate of need or a "waiver letter" before proceeding with construction. After considering various alternatives, including the possibility of building a new hospital with 50 beds, petitioner decided to build a 34 bed replacement facility adjoining the existing building, which could then be used for doctors' offices and out patient services.
As early as the summer of 1976, Mr. Schilling, at the behest of his supervisor, Mr. Rosenvold, told petitioner's representatives to contact the Florida Gulf Health Systems Agency (HSA) about applying for a certificate of need. The HSA is a non profit federally funded organization that makes recommendations on certificate of need applications to respondent's Office of Community Medical Facilities. In January of 1977, Oscar J. Gonzalez and other persons connected with petitioner met with Gary Silvers, the HSA's director of project review. They told Mr. Silvers that they needed to act to meet the objections of the Office of Licensure and Certification. Among the
possibilities discussed was a new facility with expended services. Mr. Silvers did not advise petitioner's representatives that an exemption from the certificate of need review process was available to them. Instead, he recommended that they obtain technical assistance in preparing an application and suggested that they contact Michael J. Maffe, a consultant. Acting on this suggestion, petitioner entered into negotiations with Mr. Maffe which resulted in an agreement between petitioner and Health Research & Planning Associates, Inc., of which Mr. Maffe was president. Under the terms of this agreement, which was entered into in April of 1977, petitioner paid the consultant seventy- five hundred dollars ($7,500.00). Mr. Silvers received a letter from petitioner dated March 9, 1979, petitioner's exhibit No. 4, which he accepted as a letter of intent to file an application. The HSA forwarded this letter to respondent's Office of Community Medical Facilities, which received it on March 24, 1977.
Some of the money used to finance the initial phases of the project came from Ybor Community Hospital and Health Care Center, Inc. (YCHHCC) a separate corporation whose board of directors overlaps petitioner's. Several physicians contributed to capital to YCHHCC, including Dr. Muniz ($18,000.00), Dr. Angel Alonso ($10,000.00 individually), Dr. Jorge Capote ($6,000.00), Dr. Victor A. Mallea ($2,000.00 individually), Drs. Mallea, Montoya and Alonso ($7,500.00 jointly), and Dr. Michael Martinez-Corpas ($2,000.00). Some
$25,000.00 was expended on architects' fees, consultants' fees and the like before July 1, 1977, alone, in efforts to obtain certificate of need.
As a result of petitioner's facility's deterioration, membership in the health care plan has fallen off, and people who have remained members frequently choose to be hospitalized elsewhere or are sent elsewhere by their physicians. Before July 1, 1977, petitioner received dues of between $30,000.00 and $35,000.00 monthly. By the time of the hearing, receipts had fallen off to about $15,435.00 monthly.
At the hearing, the parties stipulated that, until July 1, 1977, petitioner could lawfully have renovated or replaced the facility without a certificate of need, but would have required a certificate of need as a legal prerequisite to an expansion. Petitioner only learned this after July 1, 1977. Respondent first acknowledged that this was the case on May 22, 1979.
But for being misled about the necessity for a certificate of need, petitioner would have begun construction of a replacement facility before July 1, 1977.
The foregoing findings of fact should be read in conjunction with the statement required by Stuckey's of Eastman, Georgia v. Department of Transportation, 340 So.2d 119 (Fla. 1st DCA 1976), which is attached as an appendix to the recommended order.
CONCLUSIONS OF LAW
Before its repeal, Section 381.496, Florida Statutes (1975), entitled "Exemption for emergency repairs and replacement," provided that
. . . in the event the facility is required by a governmental authority to make certain repairs or replacements or provide for re- construction . . . such facility may proceed to repair its buildings and equipment, or to make the required alterations, repair, or
reconstruction without the necessity of com- plying with ss. 381.493 - 381.497, and such work is exempt from the provisions of
ss. 381.493 - 381.497 [requiring certificate of need review].
To the same effect, former Rule 10I-2.03(d), Florida Administrative Code, exempted "projects for repairs, replacement, [or] reconstruction . . . of a hospital . . . when such action is required by governmental authority to satisfy safety or fire requirements."
Section 4, Chapter 77-400, Laws of Florida (1977), repealed Section 381.496, Florida Statutes (1975), effective July 1, 1977. Section 6 of the same act created Section 381.498, Florida Statutes (1977), which provided:
In the event of the destruction of any part of a health-care facility or health maintenance organization as a result of fire, civil dis- turbance, or storm or any other act of God, the department shall automatically grant a certificate of need to the extent of, but not to exceed, replacement of the previously existing facility.
The following year the Legislature enacted Chapter 78-194, Laws of Florida (1978), thereby amending Section 381.498, to read:
In the event of the destruction of any part of a health-care facility or health maintenance organization as a result of fire, civil dis- turbance, or storm or any other act of God, the Department of Health and Rehabilitative Services shall expedite a certificate of need determination to the extent that the application includes replacement of the pre- viously existing facilities. The department shall adopt rules providing procedures for expeditious consideration of certificate of need applications.
In narrowing the scope of, then eliminating altogether, the exemption embodied in Section 381.496, Florida Statutes (1975), the Legislature did not explicitly address transitional situations such as where construction had begun before the exemption was removed.
It falls to respondent, therefore, to adopt policies to implement these statutory changes. Adoption of such policies might take the form of rule promulgation. While respondent has amended Rule 10-5.05, Florida Administrative Code, to reflect the statutory changes since Section 381.496, Florida Statutes (1975), was in force, no provision has been made for projects in process at the time of the changes.
Although a rule covering every conceivable transitional situation might be the ideal, "the Florida APA . . . also recognizes the inevitability and desirability of refining incipient agency policy through adjudication of individual cases." McDonald v. Department of Banking and Finance, 346 So.2d 569 (Fla. 1st DCA 1977). In the present case, tentative "incipient agency policy"
was articulated in Mr. Forehand's letter of May 22, 1979, in which it was stated that the exemption embodied in Section 381.496, Florida Statutes (1975), was available if construction began before July 1, 1977; but was unavailable, if construction began after July 1, 1977, "[f]or whatever reasons."
Making the now repealed exemption available to a facility falling within its purview at the time construction began is clearly in keeping with the overall statutory scheme. Respondent proved no facts, however, in support of its contention that this policy should not also extend to a facility falling within the purview of the exemption on which construction would have begun before July 1, 1977, but for misinformation supplied by petitioner. Nor has respondent offered any legal justification for so capricious a distinctive, especially in light of the express legislative intent "to invest [a subdivision of respondent] with the roles of provider of information, consultant, stimulator and adviser to all health-care institutions . . . ." Section 381.493(2), Florida Statutes (1978 Supp.).
Given the general statutory scheme and the specific prohibition against licensure of a facility for which no certificate of need has issued, see Section 381.495, Florida Statutes (1977), an appropriate means of implementing a policy recognizing exemptions repealed in mid-project is the ministerial issuance of a certificate of need to the exempt facility.
