STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Petitioner, )

)

vs. ) CASE NO. 80-044

) WESTCHESTER GENERAL HOSPITAL, )

)

Respondent, )

) HEALTH SYSTEMS AGENCY OF SOUTH ) FLORIDA, INC., )

)

Intervenor. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, R. L. Caleen, Jr., held a formal hearing in this case on July 22, 24, and September 5, 1980, in Tallahassee, Florida.

APPEARANCES

For Petitioner: Donna H. Stinson, Esquire

General Counsel Department of Health and

Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32301

For Respondent: Paul W. Lambert, Esquire and

Stephen Marc Slepin, Esquire 1114 East Park Avenue Tallahassee, Florida 32301

For Intervenor: R. William Roland, Esquire

Post Office Drawer 229 Tallahassee, Florida 32302

ISSUE PRESENTED

Whether Westchester General Hospital's exemption for HRS Certificate of Need review should be forfeited or revoked because of failure to take actions required for preservation of its exemption.

CONCLUSIONS AND RECOMMENDATIONS

Westchester General Hospital failed to meet requirements for preserving its exemption, as specified by HRS Rule 10-5.05 and the accompanying non-rule

interpretation of Chapter 78-194, Section 3, Laws of Florida; but under the particular circumstances this case, forfeiture or revocation of Westchester General Hospital's exemption is barred by principles of equitable estoppel. HRS should allow the hospital six (6) months from entry of the final order in this case within which to take the actions required for preservation of its exemption.

BACKGROUND

In December, 1979, the Petitioner, State of Florida Department of Health and Rehabilitative Services ("HRS"), issued an administrative complaint charging that Respondent, Westchester General Hospital ("Westchester"), had forfeited its statutory "grandfather" exemption from Certificate of Need requirements by failing to comply with HRS Rules 10-5.05 and 10-5.02, Florida Administrative Code. Those rules required that, to preserve their exempt status, grandfathered projects (such as WESTCHESTER's) must be under physical and continuous construction (beyond site preparation) by July 1, 1979.

WESTCHESTER then challenged the validity of these rules in a separate Section 120.56 proceeding, DOAH Case No. 80-137R.; by order entered April 18, 1980, the DOAH hearing officer declared Rules 10-5.05 and 10.5.02 invalid.

WESTCHESTER appealed, and HRS cross-appealed the order to the First District Court of Appeal. WESTCHESTER's appeal was subsequently dismissed, and the HRS appeal remains in effect.

WESTCHESTER, although not expressly requesting a hearing, filed various responses to the HRS complaint; HRS thereafter forwarded this case to the Division of Administrative Hearings for assignment of a hearing officer to conduct a Section 120.57 hearing.

WESTCHESTER moved to dismiss the administrative complaint on the ground, inter alia, that HRS was attempting to petition itself for the issuance of an unsolicited declaratory statement. In response, HRS declined to characterize its complaint as either an attempt to formulate a declaratory statement, or revoke a license. After argument, WESTCHESTER's motion was denied; however, the parties were placed on notice that WESTCHESTER presently enjoyed an exemption from the Certificate of Need requirements, an exemption which HRS, by these proceedings, was seeking to revoke or declare forfeited. As a result, the provisions of Section 120.60(6), relative to licensee revocation, were held applicable.

The Health Systems Agency of South Florida, Inc., ("COUNCIL") filed a petition to intervene which, over WESTCHESTER's objection, was granted.

Upon motion, HRS subsequently amended its complaint by alleging two additional grounds for declaring forfeiture of WESTCHESTER's exemption: one, based on Chapter 78-194, Section 3, Laws of Florida, that WESTCHESTER failed to complete construction of its hospital project by July 1, 1979--and the other, based on an HRS policy interpretation of Chapter 78-194, supra, that WESTCHESTER failed to place its project under physical and continuous construction prior to July 1, 1979. WESTCHESTER's motion to dismiss these amendments was denied.

The HRS amended administrative complaint then came on to final hearing. At hearing, HRS called Autha W. Forehand, Donald E. Davis, Thomas Konrad,

and Albert R. Chamlis, as its witnesses and offered into evidence Petitioner's Exhibits 1/ 1 2, 3, 4, 5, 9, 10, 11, 12, 13, 14, 16, 17, 17A, 17B, 2/ 19,

20, 21, 23, 25, and 27, each of which was received. The COUNCIL offered no additional witnesses or evidence.

WESTCHESTER called Syliva Urlich as its only witness, and offered Respondent's Exhibits 1/ 1, 2, 4, 5, 6, 7, 8, 9, 11, 12, 13, 14, 17, 18, 19, 21, 24, and 25 into evidence, each of which was received.

The parties requested and were given the opportunity to submit proposed findings of fact within thirty (30) days after filing of the hearing transcript. The posthearing proposed findings were subsequently received by November 10, 1980.

FINDINGS OF FACT

Based upon the evidence presented, the following facts are determined:

I.

The Proposed Westchester Hospital Construction Project

1. At all times material hereto, WESTCHESTER has operated a 100-bed osteopathic hospital in Miami, Florida. In 1971, it decided to expand by constructing a 112-bed second floor addition. To be eligible for certain federal benefits, an HRS Certificate of Need was required for the expanded hospital project. Such certificates were normally issued by HRS upon the recommendation of the appropriate local health planning council, now known as health system agencies. (Testimony of Urlich, Forehand; R-9.)

   
   

2. Thus, on June 30, 1971, WESTCHESTER sought a favorable recommendation for the project from the Health Planning Council of South Florida, predecessor to Intervenor, Health Systems Agency of South Florida, Inc. (both hereafter referred to as "COUNCIL"). However, the COUNCIL preferred construction of the new 212-bed replacement hospital at a site across the street from WESTCHESTER's existing facility. WESTCHESTER ultimately acceded to the COUNCIL's wishes, and agreed to construct a new replacement hospital rather than simply expand its existing hospital. The COUNCIL's approval of the proposed WESTCHESTER replacement hospital followed on January 17, 1972. (Testimony of Urlich: R-1, R-2, R-9.)

   
   

3. On January 7, 1972, WESTCHESTER formally requested HRS to issue a Certificate of Need for the proposed 212-bed replacement hospital; on February 16, 1972, HRS notified the U.S. Department of Health, Education, and Welfare that "on the strength of the approval of the new 212-bed Westchester . . . Hospital by the . . . Council . . . this agency stands ready to issue a Certificate of Need for the facility if the project is found to be financially feasible." (Testimony of Urlich; P-4.)

   
   

4. By March 1978, due to increased construction costs, WESTCHESTER had decided to build a 125-bed replacement hospital, rather than the 212-bed replacement originally planned. (Testimony of Urlich, P 4.)

   
   

   II.

   
   

   The Florida "Health Facilities Planing Act", and Westchester's Grandfather Exemption

5. In 1972, the Florida Legislature enacted the comprehensive "Health Facilities Planning Act" ("Act", Sections 381.493 through 381.497, Florida Statutes. The Act, generally, required proposed new or replacement health care facilities such as hospitals and nursing homes, to first obtain from HRS a Certificate of Need (a statement evidencing community need for the proposed facility); however, the Act granted a "grandfather exemption" to Certificate of Need requirements for projects where land had been acquired and preliminary construction plans filed with HRS prior to July 1, 1973. Section 381.497, Florida Statutes (1973).

   
   

6. In this proceeding, HRS and the COUNCIL have conceded that WESTCHESTER qualified for the grandfather exemption conferred by Section 381.497. Between 1974 and 1978, HRS and the COUNCIL repeatedly stated, and represented to WESTCHESTER, that its proposed hospital project was grandfathered under the Act:

   
   

   "It appears that our project is grandfathered [under Certificate of Need Laws] because of the expenses you have incurred subsequent to your project being approved by the [Council]

   . . . ."--letter dated January 21, 1974, from Health and Rehabilitative Services to Westchester. (P-4. p. 14.)

   
   

   "This decision [not to reconsider its earlier approval of the Westchester project] is based on the fact that Westchester is grandfathered in under the Certificate of Need Law."--Letter dated January 24, 1974, from Council to Health and Rehabilitative Services, Bureau of Community Medical Facilities. (R-7).

   
   

   "In reviewing the files . . . I note that your project was 'grandfathered' due to the prior approval by the [Council] . . . and the amount of expenditures made in behalf

   of the project."--Letter dated September 17, 1974, from Health and Rehabilitative Services to Westchester. (P.8.)

   
   

   "We find that your [hospital replacement facility] . . . is not reviewable under the State Certificate of Need nor under Section 1122 of P.L. 92-603, since your project has been 'grandfathered' under such laws."--Letter dated March 1, 1977, from Health and Rehabili- tative Services to Westchester. (P.14.)

   
   

   However, the decision by HRS and the COUNCIL that WESTCHESTER was exempt form the Act's Certificate of Need requirements was not based upon an explicit finding that WESTCHESTER had satisfied the two grandfather exemption criteria of Section 381.497, Florida Statutes: acquisition of land and filing of preliminary construction plans with HRS by July 1, 1973. Rather, it was based upon their realization, under principles of estoppel, that they had made numerous representations to WESTCHESTER that its project was grandfathered-- representations which WESTCHESTER had subsequently relied and acted upon in good faith. (Testimony of Forehand, Chamlis; P-4.)

   III.

   
   

   1978 Legislative Repeal of Statutory Grandfather Exception: HRS Interpretation and Implementation

   
   

7. In 1978, the Florida Legislature enacted Chapter 78-194, Section 3, Laws of Florida, which repealed Section 381.497 (the Act's grandfather exemption), effective July 1, 1979. In connection with that repeal, the Legislature (1) directed HRS to provide notice to exempted health care facilities by July 15, 1978; (2) stated that if HRS had previously provided written notification to projects that they were exempt or grandfathered, such notice would be considered "as valid evidence of inapplicability of [the Act] .

   . . ." Section 1, supra; and (3) provided that any project so exempted could reduce the number of authorized beds without HRS or health system agency approval. Section 1, supra. (P-13.)

   
   

8. HRS interpreted Chapter 78-194, supra, as requiring health care facilities previously exempted by Section 381.497, to be under physical and continuous construction (pursuant to final construction plans approved by HRS) by July 1, 1979, in order to "preserve" their exemption from Certificate of Need review. During July 1978, pursuant to the legislative directive, HRS notified those on its list of exempt facilities as to the passage of Chapter 78-194, supra, and the requirement of physical and continuous construction by July 1, 1979. However, WESTCHESTER was not notified at that time because it was not on HRS' list of exempted facilities that had met the two exemption criteria of Section 381.497. It was not until October 28, 1978 (when HRS finally determined that WESTCHESTER should be treated as an exempted facility) that WESTCHESTER was notified in writing by HRS as to the requirements of Chapter 78-194, supra. Since HRS had promulgated no rules interpreting or implementing Chapter 78-194, supra, the content of its notice to WESTCHESTER is significant. In its October 28, 1978, notice to WESTCHESTER, HRS stated:

   
   

   "The purposes of this letter is [sic] to state the position of this agency with respect to the grandfathered status of your project, to advise you of the contents of SB 764 [Chapter 78-194] and to advise that the grandfather clause (Section 381.497 of the statutes) is repealed effective 1 July 1979. With the repeal of the grandfather clause on 1 July 1979, your construction project [whether for a 105-bed replacement facility or expansion

   of your current facility to 212 beds] must be under physical and continuous construction, pursuant to final construction plans approved by the Office of Licensure and Certification, by 1 July 1979 to preserve the exemption from review status of the project." (P-4)

   
   

   (Testimony of Forehand; P-4, P-23.)

   
   

9. Effective June 5, 1979, HRS adopted rules for the purpose of implementing the Legislature's 1978 repeal of the Act's grandfather clause. Those rules incorporated HRS' interpretation of Chapter 78-194 previously announced in its notices to exempt facilities, i.e., such facilities were required to be placed under "physical and continuous construction, pursuant to final construction plans approved by the department, prior to 1 July 1979."

   Rule 10-5.05, Florida Administrative Code. However, the term "construction," infra, was specifically defined by Rule 10-5.02(21):

   
   

   "'Construction' means the commencement of and continuous activities beyond site preparation normally associated with erecting, altering or modifying a health care facility pursuant to construction plans and specifications approved by the department under the provisions of Rules 10D-28, 10D-29 or 10D-33, Florida Administrative Code." Id.

   
   

   WESTCHESTER subsequently challenged the validity of these rules pursuant to Section 120.56, Florida Statutes. By final order entered April 18,1980, a Division of Administrative Hearings hearing officer declared rules 10-5.05 and 10-5.02(21) invalid exercises of delegated legislative authority because of inadequate economic impact statements prepared in connection with their adoption. WESTCHESTER appealed the final order to the First District Court of Appeal, and HRS timely cross-appealed. Although WESTCHESTER's appeal was subsequently dismissed, the HRS cross-appeal was preserved and remains pending before the appellate court. (Testimony of Forehand; P-17, P-17A, P-17B.)

   
   

10. By defining "construction" as used in Section 10-5.05 to mean commencement of and continuous activities "beyond site preparation," HRS promulgated a definition different from, and more restrictive than the one generally utilized in the architectural and construction industry. As used by professionals in that industry, "construction" may commence prior to site preparation indicators of commencement of construction include the execution of a construction contract with the general contractor, the obtaining of a building or foundation permit, the ordering of building materials, or the signing of contracts with subcontractors. Any of these events may occur before clearing and preparing the site--the first on-site indicator of construction. (Testimony of Forehand, P-17, P-17A, R-27, R-28.)

    
    

11. HRS' interpretation that Chapter 78-194, supra, required grandfathered projects to be placed under physical and continuous construction beyond site preparation prior to July 1, 1979, was not conveyed to grandfathered projects through its July 1978 form notice, or individual notice to WESTCHESTER dated October 28, 1978. The grandfathered facilities received constructive notice of the "beyond site preparation" requirement by the promulgation of Rule 10- 5.02(21). Thus, between its effective date, June 5, 1979, and the July 1, 1979, deadline for the commencement of construction "beyond site preparation," the grandfathered projects, including WESTCHESTER, were allowed 25 days to fulfill the new HRS requirement for preservation of their exemptions. (Testimony of Forehand, Chamlis; P-4, R-23.)

    
    

12. The factual basis underlying the HRS interpretation of Chapter 78-194, supra (embraced by its 1978 implementing rules infra), is that its ability to conduct effective health care planning under the Act was frustrated by the continued existence of exempt health care facilities lacking a definite time for completion, or even commencement, of construction. Such exempt facilities, represented substantial future bed-capacity; in areas where they were planned, HRS could not accurately determine when, if, and to what extent additional health care facilities were needed. HRS reasonably interpreted Chapter 78-194, supra, as a legislative directive that exempt facilities must "build, or not build"; by adding a rule definition requiring construction beyond site preparation, HRS was attempting to ensure that construction efforts were bona

    fide and substantial, and not merely token actions taken to preserve exempt status. (Testimony of Forehand, Chamlis.)

    
    

    IV.

    
    

    Westchester's Actions in Constructing Hospital Project

    
    

13. Between 1972 and 1977, on the basis of the COUNCIL's and HRS' approvals (Paragraphs 2-3, infra) and representations (Paragraph 6, infra) WESTCHESTER acquired land, incurred expenses, entered contracts, and made commitments in connection with constructing the replacement hospital. In January 1974 HRS seemingly accepted the assertion that WESTCHESTER had expanded, or entered, financial commitments of approximately $1,340,000 for construction of the new hospital. WESTCHESTER retained surveyors, engineers, and lawyers to obtain necessary zoning changes, building permits, and plat approvals, and, through 1979, paid them in excess of $83,000. In November 1979, HRS was informed by WESTCHESTER's certified public accountant that WESTCHESTER had, to date, incurred expenditures of $2,810,000 in connection with preparing for and constructing the new hospital. In this proceeding, neither HRS nor the COUNCIL have disputed WESTCHESTER's assertion that it has expended substantial monies for the purpose of constructing the replacement hospital. (Testimony of Urlich, P-4, P-9.)

    
    

14. During 1979, WESTCHESTER experienced extensive difficulties and delays in obtaining the Dade County building permit and plat approvals required to construct the replacement hospital. The building permit was applied for in April 1979, and a "foundation only" building permit was issued by the Dade County Building Department on July 2, 1979. The effectiveness of the permit, however, was contingent upon final approval and recordation of the project plat. WESTCHESTER spent in excess of $2,900 in expenses to obtain this building permit. It was, however, the obtaining of county platting approval which proved most difficult and exclusive. After WESTCHESTER discovered the monuments placed earlier on the project site had been destroyed, the entire project had to be resurveyed and the monuments reset prior to obtaining plat approval. The process of plat approval required formal action by the Dade County Commission and, prior to reaching the Commission, a project of this complexity and magnitude required independent review and approval by a myriad of local governmental agencies. During the review process, various problems arose involving drainage, ingress and egress, a canal crossing, and a street closing. WESTCHESTER paid water hookup fees of $5,000 and entered numerous agreements with various county departments. A primary cause of the delay in obtaining platting approval is attributable to the failure of the Dade County Building Department and WESTCHESTER to communicate frequently concerning the problems that were arising and what steps were necessary to overcome them. As an example, 11 specific deficiencies in WESTCHESTER's platting application were identified by the building department on December 9, 1979; however, WESTCHESTER was not notified of these deficiencies until February 1980. (Testimony of Urlich; P-20, P-21.)

    
    

15. Because of WESTCHESTER's failure to obtain final plat approval from the county, construction of the hospital foundation could not begin and the building permit expired in February 1990. It is reasonable to expect that, with diligent effort, the platting deficiencies could have been overcome within a three-month period. However, the filing of the HRS' administrative complaint in December 1979 placed the WESTCHESTER construction project in jeopardy, causing WESTCHESTER to temporarily halt its efforts to obtain local government approvals and proceed with construction. Under the circumstances, WESTCHESTER's cessation

    of activity in December was reasonable, and HRS does not assert otherwise. (Testimony of Urlich; P-20, P-21.)

    
    

16. In April 1979, WESTCHESTER submitted final construction plans for its hospital to HRS for State review and approval; a $5,000 construction plan review fee was paid. On June 25, 1979, the supervising HRS architect, approved commencement of foundation work for the 125-bed replacement hospital, but withheld final approval of the remainder of the facility pending further review. The architect advised WESTCHESTER that subsequent review might require changes within the hospital building, thereby affecting its foundation. The architect cautioned: "Therefore, the risk of starting foundation work at this time must be assumed by [WESTCHESTER] . . . " (R-22.) It was not until September 18, 1979, that the HRS architect gave final approval to WESTCHESTER's construction plans. Expert testimony established that it would have been unreasonable, under such circumstances, for WESTCHESTER to proceed with construction of the foundation prior to final HRS approval of the plans. WESTCHESTER could not have begun construction of the foundation, in any event, because it had not yet obtained final plat approval from the Dade County Commission. (Testimony of Urlich; P-20, R-21, R-22.)

    
    

17. On or about June 29, 1979, WESTCHESTER began preparing the hospital construction site. It erected a sign identifying the site as the location for a new hospital. Heavy earth-moving equipment was observed clearing and leveling the terrain. By August 31, 1979, WESTCHESTER had installed a construction trailer at the site and clearing and leveling had been completed. However, by the end of September 1979 no further construction activity at the site had taken place. The foundation had not been staked-out, excavated, or poured; neither were any construction materials present. As of December 1979 when HRS failed its administrative complaint in this case, WESTCHESTER's construction activity at the site had not progressed beyond site preparation. (Testimony of Urlich;

    P-2, P-25.)

    
    

18. WESTCHESTER's delays in obtaining the necessary government approvals and constructing the hospital in 1979 were caused by a combination of factors, one of which was WESTCHESTER's failure to doggedly and tenatiously attack each problem raised during the governmental reviews until it was satisfactorily resolved. However, given the magnitude and complexity of the construction project, the extensive governmental review and permitting processes involved, and unforeseeable problems such as the obliteration of previous survey monuments on the project site, it is concluded that WESTCHESTER made reasonably diligent efforts between November 1978 and December 1978 to obtain the required governmental approvals and proceed with construction. (Testimony of Urlich; P- 2, P-21, P-22, P-25, R-21, R-22.)

    
    

    V.

    
    

    Opportunity for Westchester to Show compliance with HRS Requirements

    
    

19. Between August and December 1979--prior to issuance of the HRS administrative complaint--HRS and WESTCHESTER exchanged correspondence concerning the requirements of HRS Rules 10-5.02(21) and 10-5.05(2), Florida Administrative Code, and the extent of WESTCHESTER's compliance. WESTCHESTER, through its authorized representatives and attorneys, was fully informed of the rule requirements and aware that HRS was considering taking action against it for failure to comply with those requirements. (Testimony of Forehand; P-3, P- 1, P-9, P-12.)

20. During November 1979 WESTCHESTER's attorney met with HRS representatives concerning the question of WESTCHESTER's compliance with the requirements of Rules 10-5.02(21) and 10-5.05(2)--i.e., physical and continuous construction, beyond site preparation, prior to July 1, 1979. The WESTCHESTER attorney asked for and was given the opportunity to investigate and present information to HRS for the purpose of showing compliance with HRS requirements. HRS agreed to take no action against WESTCHESTER until receipt of the attorney's response. Subsequently, WESTCHESTER's attorney presented information to HRS for the purpose of showing compliance with all lawful requirements for preservation of WESTCHESTER's grandfather exemption; it was only after receiving this information that HRS instituted the administrative action which is the subject of this proceeding. However, at no time did HRS show a copy of the proposed administrative complaint to WESTCHESTER representatives for the purpose of allowing them an opportunity to show that the allegations were unfounded. (Testimony of Forehand; P-3, P-8, P-9, P-12.)

    
    

    CONCLUSIONS OF LAW

    
    

21. The Division of Administrative Hearings has jurisdiction over the parties and subject matter of this proceeding. Section 120.57(1), Florida Statutes (1979). WESTCHESTER disputed the factual allegations contained in the HRS administrative complaint. Although not expressly requesting a Section 120.57(1) hearing, it presented motions, evidence, and argument in opposition to the agency complaint. A Section 120.57(1) proceeding is the appropriate forum for a party to challenge and scrutinize proposed agency action. See, United States Service Industries-Florida v. Florida Department of Health and Rehabilitation, 385 So.2d 1147 (Fla. 1st DCA 1980), McDonald v. Department of Banking and Finance, 346 So.2d 569 (Fla. 1st DCA 1977).

    
    

22. HRS Amended Administrative Complaint. By its amended complaint, HRS seeks entry of a final order declaring that WESTCHESTER's grandfather exemption from Certificate of Need review has been forfeited, thereby subjecting it to Certificate of Need requirements in order to build the proposed 125-bed replacement hospital. The amended complaint alleges that WESTCHESTER has violated, or failed to meet requirements for preservation of its exemption. These requirements are found in three disparate HRS interpretations of Chapter 78-194, Section 3, Laws of Florida: one, adopted by HRS rule, a second, contained in HRS non-rule policy, and a third, based on non-rule policy and purportedly inferred directly by the statutory language:

    
    

    1. Rule Interpretation of Chapter 78-194

       
       

23. First, HRS asserts that Rules 10-5.02(21) and 10-5.05(2) require that projects exempted by Section 381.497 (1973) be placed under physical and continuous construction (beyond site preparation) prior to July 1, 1979. Although these rules were declared invalid on April 18, 1980, by a DOAH hearing officer, HRS timely cross-appealed. By virtue of Rule 9.310(b)(2), Fla.R.App.P., the HRS appeal operates as an automatic stay of the DOAH order. Unless the stay is vacated, or the appeal completed, the HRS rules remain in full force and effect. In Department of Environmental Regulation v. Deltona, Case Nos. XX-335, XX-336,and YY-76, the First District Court of Appeal recently addressed the effect of such a stay:

    
    

    "There does appear to be some confusion however, as to the effect of this stay. The orders appealed hold that certain of DER's

    [Department of Environmental Regulation] rules and regulations are invalid. DER's

    appeal automatically stays the effect of those orders. The rules, therefore, continue to be valid until the appeal is completed "

    Order entered December 5, 1980, in Department of Environmental Regulation, supra.

    
    

24. It is concluded that HRS has established, by a preponderance of evidence, that WESTCHESTER failed to take actions specified by Rule 10-5.05 as necessary to preserve its exemption from Certificate of Need review, i.e., place its 125-bed replacement hospital under physical and continuous construction, beyond site preparation, prior to July 1, 1979. The sanction provided by Rule 10-5.05 for such failure is forfeiture of exemption from Certificate of Need requirements. However, under the circumstances of this case, the application of such a sanction to WESTCHESTER would violate rules of fair play and should be barred by principles of equitable estoppel.

    
    

25. The defense of equitable estoppel, as raised by WESTCHESTER, prevents HRS from declaring forfeiture of its grandfather exemption based on the alleged failure to comply with HRS rules. Estoppel means nothing more than application of the rules of fair play. Town of Largo v. Imperial Homes Corp. 309 So.2d 571 (Fla. 2d DCA (1975). It is available as a defense to a legitimate exercise of police power when a person, in good faith, relies upon some affirmative act of government and thereby changes his or her position or incurs such extensive obligations and expenses that it would be unjust to destroy the acquired right. City of Hollywood v. Hollywood Beach Hotel Co., 283 So.2d 867, 869 (Fla. 4th DCA 1973), rev. in part, 329 So.2d 10 (Fla. 1976).

    
    

26. WESTCHESTER reasonably relied upon, changed its position, and expended substantial monies based on HRS' written notification, dated October 28, 1978, that Chapter 78-194 required

    
    

    "physical and continuous construction pursuant to final construction plans approved by [HRS] . . . by July 1, 1979 to preserve the exemption from review status "

    (P-4.)

    
    

    WESTCHESTER had a right to rely on the agency's interpretation of it's organic statute. See, Anderson vs. Department of Revenue, 380 So.2d 1083, 1087 (Fla. 3rd DCA 1980). In the HRS notice, the term "construction" was used in its ordinary sense; it was not defined as meaning activities "beyond site preparation". Such new, and more restrictive definition -- which imposed a greater burden upon WESTCHESTER -- was not adopted by HRS until June 5, 1979. Rule 10-5.02(21), Florida Administrative Code. Such adoption allowed WESTCHESTER a mere 25 days to comply with the more stringent requirement -- construction beyond site preparation -- a time period patently unreasonable given the complexity and magnitude of the proposed construction project.

    WESTCHESTER cannot be deprived of a benefit (its exemption) for failure to perform actions which it was not given a reasonable opportunity to perform. See E.G., McCray vs. Department of Health and Rehabilitative Services, 384 So.2d 980 (Fla. 3rd DCA 1980).

    
    

27. Except for the requirement that construction be "pursuant to final construction plans" approved by the department, WESTCHESTER complied with the interpretation of Chapter 78-194 conveyed by HRS in its October 28, 1978,

    letter. The execution of building contracts, financial commitments, and expenditures of funds far in excess of $100.000 coupled with actual leveling and preparing the site, as done here, constitutes commencement of "construction" as the term is ordinarily used in the architectural and construction industries.

    
    

28. Moreover, with respect to the requirement that construction be "pursuant to final plans" approved by HRS, WESTCHESTER applied for HRS approval, and paid a $5,000 plan review fee in April of 1979; however, HRS did not give final approval until September, 1979. The HRS "foundation-work only" approval of June 25, 1979, did not supply a basis upon which WESTCHESTER could reasonably proceed since the approval warned of possible foundation changes required by future changes within the building. Thus, HRS shares responsibility for WESTCHESTER's inability to begin construction prior to July 1, 1979, pursuant to HRS-approved final plans; HRS cannot impose sanctions upon others for delays which it occasions.

    
    

29. It is concluded, therefore, that WESTCHESTER, to the extent allowed by HRS, reasonably complied with the HRS interpretation of Chapter 78-194 contained in the October 28, 1978, notification. WESTCHESTER's failure to construct pursuant to final plans approved by HRS was due, in part, to delay attributable to HRS. Rules 10-5.02(21) and 10-5.05(2), effective June 5, 1979, significantly modified the HRS October 1978 interpretation of Chapter 78-194--by defining "construction" as meaning beyond site preparations--without giving WESTCHESTER a reasonable opportunity to comply. In Town of Largo, supra, at 573, the Second District Court of Appeal declared that, under estoppel principles:

    
    

    "One party will not be permitted to invite another onto a welcome mat and then be permitted to snatch the mat away to the detriment of the party induced or permitted to stand thereon . . ." Id.

    
    

    By adopting rules in the eleventh hour, placing a new, and more restrictive, interpretation on Chapter 78-194, Section 3, supra, and providing insufficient time to comply therewith, HRS attempts to "snatch the mat" away to the detriment of WESTCHESTER. Such action is impermissible.

    
    

    1. Non-rule Interpretation of Chapter 78-194

       
       

30. Secondly, HRS (in Paragraph 5 of the complaint) asserts WESTCHESTER failed to comply with a non-rule interpretation of Chapter 78-194; the non-rule interpretation differs from Rules 10-5.02(21) and 10-5.05(2) only in that the requirement that construction be pursuant to HRS-approved final plans is omitted. HRS added this non-rule interpretation of Chapter 78-194 to buttress its complaint in the event the First District Court of Appeal ultimately invalidates Rules 10-5.02(21) and 10-5.05(20.

    
    

31. HRS supplied adequate record foundation for this non-rule interpretation of Chapter 78-194. See, Florida Cities Water v. Florida Public Service Commission, 384 So.2d 1280 (Fla. 1980). Such an interpretation is consistent with the language of the law, and has a sound policy and factual basis. However, no evidence was presented to show that this interpretation was ever announced or applied prior to the filing of the complaint in this case. The department's non-rule interpretation is not readily apparent from a reading of the statute; an exemption holder could not read the statute, and, from its language, reasonably infer an obligation to construct, beyond site preparation, prior to July 1, 1979.

32. The evidence establishes that WESTCHESTER failed to take actions specified by this non-rule interpretation as necessary to preserve its exemption. However, the same estoppel principles which bar application of the HRS rule interpretation of Chapter 78-194 effectively bar application of the similar non-rule interpretation. WESTCHESTER had a right to reasonably rely on the less restrictive interpretation contained in the October 28, 1978 HRS notification. No evidence was presented to show that the more restrictive HRS non-rule interpretation was announced, or conveyed, or known to WESTCHESTER prior to July 1, 1979. HRS is thus estopped from retroactively imposing a requirement--construction beyond site preparation prior to July 1, 1979--with which WESTCHESTER had no opportunity to comply.

    
    

33. The HRS action against WESTCHESTER may be analogized to revocation of a license. Section 1 of Chapter 78-194, supra, provides, in pertinent part:

    
    

    "If a health-care facility project has been previously notified in writing by the depart- ment that it is exempt or grandfathered under the provisions of the . . . Act, such notice shall be considered as valid evidence of inapplicability of S.s. 381.493-381.495 . . . and exemption from the Act." Id.

    
    

    A "license" is defined by the Administrative Procedure Act to include a form of authorization required by law, Section 120.52(7), Florida Statutes. In this case, WESTCHESTER received previous notices from HRS that it was exempt; under Chapter 78-194, Section 1, such notices constitute evidence of inapplicability of the Act, i.e., such notices affirmatively authorized WESTCHESTER to construct its planned replacement hospital without obtaining a certificate of need. Thus, when HRS alleges that WESTCHESTER's failure to perform certain acts justifies forfeiture of its exemption, it is reasonable to apply basic license revocation principles and procedures. One such principle is that a licensee has the "right to know in advance from a reading of the language [in rule or statue] what conduct is proscribed." Lester v. Department of Professional and Occupational Regulations, 348 So.2d 923, 925 (Fla. 1st DCA 1977).

    
    

34. Here, the non-rule interpretation justifying forfeiture (or revocation) of WESTCHESTER's exemption had no independent or separate existence from the October 28, 1978 notification and the HRS rules. Its silent proscription, (or, conversely, affirmative requirement for preservation of exempt status) was unknown to WESTCHESTER; under such circumstances, failure to comply with such a criterion cannot provide a basis for license revocation or forfeiture.

    
    

    1. Alternative Interpretation of Chapter 78-194

    
    

35. Alternatively, HRS alleges that Chapter 78-194, Section 3, supra, requires that WESTCHESTER's proposed replacement hospital be "completely constructed and licensed by July 1, 1979, in order to preserve its grandfather exemption. (Paragraph 6, amended administrative complaint.) However, this interpretation, never before asserted by HRS, is contrary to and directly contradicts its previous rule and non-rule interpretations of Chapter 78-194. No advance notice of this interpretation was ever given to WESTCHESTER or other exempted facilities. HRS offered no factual or policy evidence to support it. Neither is this interpretation compelled, or necessarily inferred by the plain wording of Chapter 78-194. As a result, this interpretation cannot provide a

    lawful basis for forfeiture of WESTCHESTER's exemption. See, Lester, supra; McDonald v. Department of Banking and Finance, supra, DeDakis v. Florida Real Estate Commission, 388 So.2d 22, 23 (Fla. 1st DCA 1980); Section 120.68 (12)(b), Florida Statutes.

    
    

36. Compliance with Section 120.60(6). WESTCHESTER raised, as an affirmative defense, that HRS failed to comply with the procedural requirement of Section 120.60(6), Florida Statutes (1979), prior to filing its administrative complaint. Section 120.60(6), supra, requires that agencies give reasonable notice to licensees of facts or conduct warranting administrative action, and provide them an opportunity to show compliance with all lawful requirements for retention of the license. This informal procedure must be followed prior to the filing of an administrative complaint seeking revocation of a license. See, Sheppard v. Board of Dentistry, 385 So.2d 143 (Fla. 1st DCA 1980); Chavers v. Florida Real Estate Commission, 384 So.2d 963 (Fla. 1st DCA 1980).

    
    

37. Based on the facts of this case, WESTCHESTER through its agents, received actual notice of its alleged conduct warranting HRS administrative action, and was provided an opportunity to show compliance with all lawful requirements prior to formal HRS action. It is concluded, therefore, that HRS complied with Section 120.60(6), supra.

    
    

38. Constitutionality of Chapter 78-194. WESTCHESTER also contends, by way of defense, that its grandfather exemption conferred by Section 381.497, Florida Statutes, and subsequent HRS notifications is a "Vested right" which the legislature cannot constitutionally extinguish by enactment of Chapter 78-194, supra.

    
    

39. Jurisdiction to pass on the constitutionality of a statute belongs exclusively to the judiciary; such questions are not subject to administrative determination under the Administrative Procedure Act, Chapter 102, Florida Statutes. See, Department of Revenue v. Young American Builders, 330 So.2d 864 (Fla. 1st DCA 1976); Legg and Co. v. Department of Transportation, 383 So.2d 962 (Fla. 45th DCA 1980).

    
    

40. Additional Time Allowed for Westchester Compliance. Although HRS is estopped to declare forfeiture (or revoke WESTCHESTER's grandfather exemption for failure to comply with its rules (and accompanying non-rule policy) prior to July 1, 1979, such estoppel is limited by the facts which give it rise. HRS is not, and should not be permanently foreclosed from applying the rules in question (and accompanying non-rule policy) to WESTCHESTER. Chapter 78-194, Section 3, supra, requires uniform agency interpretation and application. Both the rules, which are presumptively valid, and the non-rule policy, which is reasonable interpretation of the statute, represent the agency's attempt to reasonably implement the statute. WESTCHESTER is entitled to fair and equitable application of the statute by HRS, nothing less and nothing more.

    
    

41. In order to renew its construction activity, WESTCHESTER must (1) reapply for and obtain a new building permit, and (2) obtain final plat approval and recordation by Dade County. The evidence supports a conclusion that these steps, if diligently pursued, can be completed in three months. Allowing an additional three months for handling of unforeseen and new problems that may have arisen during the intervening period, it is reasonable to conclude that WESTCHESTER should be able to comply with HRS Rules 10-5.05 and 10-5.02(21) and accompanying non-rule policy, i.e., commence physical and continuous construction, beyond site preparation, within six months from final HRS action

    in this case. Delays which are not the fault of WESTCHESTER, or are beyond its control, would justify reasonable extension by HRS.

    
    

42. Failure by WESTCHESTER to comply with Rules 10-5.05 and 10-5.02(21) and accompanying non-rule policy within the time allowed by HRS should result in forfeiture and revocation of its grandfather exemption and imposition of Certificate of Need requirements upon the proposed replacement hospital.

    
    

43. Motion to Strike. On November 7, 1980, HRS moved to strike a "Notice of Filing" submitted by WESTCHESTER on November 4, 1980. Attached to the Notice of Filing is a copy of a portion of a deposition of David Pingree taken on September 3, 1980. At close of hearing in this case, no provision was made for submittal of such posthearing evidence. Accordingly, the HRS motion to strike is granted.

    
    

44. Proposed Findings of Fact. The parties submitted extensive proposed findings of fact and conclusions of law. To the extent they are incorporated herein, they are adopted; otherwise they are rejected as unsupported by the evidence, irrelevant to the issues presented, or contrary to law.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED:

That Petitioner, HRS, enter a final order:

1. Finding that WESTCHESTER failed to meet requirements for preserving its exemption, as specified by HRS Rule 10-5.05 and the accompanying non-rule interpretation of Chapter 78-194, Section 3, Laws of Florida; but

   
   

2. Concluding that, under the particular circumstances of this case, forfeiture or revocation of WESTCHESTER's exemption for such failure is barred by principles of equitable estoppel; and

   
   

3. Allowing WESTCHESTER six (6) months from entry of the order within which to take actions necessary to meet the above requirements for preservation of its exemption.

DONE AND ENTERED this 9th day of January 1981 in Tallahassee, Florida.

R. L. CALEEN, JR. Hearing Officer

Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 9th day of January 1981.

ENDNOTES

1/ Petitioner's and Respondent's Exhibits will be referred to as "P " and "R ", respectively.

2/ A copy of the Order of the First District Court of Appeal, reinstating the HRS cross-appeal in Case Nos. TT-222 and VV-189, was submitted, as agreed, as a posthearing exhibit, and has been marked "P-17B."

COPIES FURNISHED:

Donna H. Stinson, Esquire 1323 Winewood Boulevard

Tallahassee, Florida 32301

Paul W. Lambert, Esquire and

Stephen Marc Slepin, Esquire 1114 East Park Avenue Tallahassee, Florida 32301

R. William Roland, Esquire Post Office Drawer 229 Tallahassee, Florida 32302

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DISTRICT COURT ORDER

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DISTRICT COURT OF APPEAL, FIRST DISTRICT

Tallahassee, Florida 32301

Telephone No. (904) 488-6152

DATE: September 8, 1982 CASE NO. AD-72

WESTCHESTER GENERAL HOSPITAL, VS. DEPARTMENT OF HRS

Appellant/Petitioner Appellee/Respondent

MEMORANDUM TO COUNSEL OR PARTIES LISTED BELOW

The following action was teken in the above-styled case on the above date:

Appellant's motion for attorney's fees is granted, and case is remanded to Agency for award of reasonable fee.

By Order of the Court RAYMOND E. RHODES, CLERK

I HEREBY CERTIFY that a true and correct copy of the above was mailed this date to the following:

Paul W. Lambert, Esq., and Stephen Marc Slepin, Esq., Tallahassee, Florida Donna H. Stinson, Esq., Tallahassee, Florida

KAREN ROBERT

Deputy Clerk

Docket for Case No: 80-000044

Orders for Case No: 80-000044