STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

HEALTH QUEST CORPORATION d/b/a ) REGENCY PLACE OF WEST PALM BEACH, )

)

Petitioner, )

)

vs. ) CASE NO. 83-1893

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent. )

)

RECOMMENDED ORDER

This case was heard on December 6, 1983, by R. L. Caleen, Jr., Hearing Officer with the Division of Administrative Hearings, in West Palm Beach, Florida. By agreement of the parties, the evidentiary record was extended to include the deposition of Theodore J. Foti, taken on January 18, 1984, and filed on February 27, 1984.

Both parties subsequently filed proposed findings of fact. Their proposed findings are adopted to the extent they are incorporated in this recommended order. Otherwise they are rejected as unsupported by the preponderance of evidence, as irrelevant, or as unnecessary to resolution of the issue presented.

APPEARANCES

For Petitioner: Charles M. Loeser, Esquire

315 West Jefferson Blvd. South Bend, Indiana 46601

For Respondent: Steven W. Huss, Esquire

Department of Health and Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32301

ISSUE

Whether petitioner's application for a certificate of need to construct a 120-bed nursing home in West Palm Beach, Florida, should be granted, or denied in accordance with DHRS' preliminary agency action.

BACKGROUND

Petitioner Health Quest Corporation d/b/a Regency Place of West Palm Beach ("Health Quest") applied to respondent Department of Health and Rehabilitative Services ("DHRS") for a certificate of need ("CON") to construct a 120-bed nursing home in West Palm Beach, Florida. West Palm Beach is located in Palm

Beach County, a designated subdistrict of DHRS District IX. On April 28, 1983, DHRS preliminarily denied the application, asserting that:

The proposed project is not consistent with Chapter 10-5.11(21), Florida Administrative Code, nursing home bed methodology.

A need does not exist to add nursing home beds to . . . Palm Beach County through 1986. There are 1680 approved but not constructed beds in the County. The bed need methodology produces an excess of 1534 nursing home beds in the County through 1986.

(R-3) 1/

Health Quest disputed the denial and timely requested a Section 120.57(1) hearing. On June 15, 1983, DHRS forwarded this case to the Division of Administrative Hearings for assignment of a hearing officer.

At hearing, and through the subsequently filed deposition, Health Quest presented the testimony of Barbara H. Jacobowitz and Theodore J. Foti. DHRS presented the testimony of Herbert E. Straughn. Health Quest's Exhibit Nos. 1 through 6 were received into evidence, as were DHRS' Exhibit Nos. 1 through 7.

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

FINDINGS OF FACT

1. The sole reason given for denying Health Quest's application for a CON is the alleged failure of the application to satisfy the nursing home bed need methodology contained in DHRS Rule 10-5.11(21), Florida Administrative Code. DHRS contends that application of this bed need methodology supports a conclusion that the proposed nursing home is not needed within the three-year planning horizon--1983 through 1986.

   
   

   I.

   
   

   Application of Rule 10-5.11(21): The Nursing Home Bed Need Methodology

   
   

2. Under the nursing home bed need methodology expressed by Rule 10- 5.11(21'), DHRS determines if there is a projected need for new or additional community nursing home beds three years into the future by using the following formula:

   
   

   De

   N = -------- x R x P - Eb

   Se

   
   

   where:

   
   

   N is area-specific allocation of community nursing home beds for the calendar year for which a projection is being made,

   De is the percentage of elderly living in poverty in the relevant departmental service district according to the latest available

   U.S. census.

   
   

   Se is the percentage of elderly living in poverty in the State according to the latest available U.S. census.

   
   

   R is the statewide bed need ratio (27 community nursing home beds per 1,000 population age 65 years and older),

   
   

   P is the population age 65 and older projected three years into the future residing in the relevant departmental district based on

   latest mid-range projections published by the Bureau of Economics and Business Research at the University of Florida, and

   
   

   Eb is the number of existing and approved community nursing home beds within the relevant departmental service district.

   
   

   The projected bed need derived from this formula is then measured against a "current utilization" threshold. Rule 10-5.11(21)(f). Thus, although bed need may be projected under the formula, an application will not normally be approved unless current nursing home occupancy rates meet minimum standards prescribed in the rule.

   
   

   Finally, if bed need is projected and the current utilization threshold is satisfied, additional beds may be added only to the point at which further bed need additions will cause "prospective utilization rates" for the subdistrict to drop below a base rate prescribed in the rule. Rule 10-5.11(21)(g), (h), Fla.

   Admin. Code.

   
   

3. Under this bed need forum1a, projected need for nursing home beds in 1986 is calculated as follows:

   
   

   N	=	De ------ Se
   N	=	9.28 -----	=	.73
   		12.70
   .73	x	27 ----	=	19.7 beds/1000 65 +
   		1000

   
   

   District IX Subdistrict (Palm Beach Co.) 19.7 x 264,326 = 5,207 19.7 x 198,747 = 3,915

   Thus the formula shows a projected need for 5,207 nursing beds in 1986 in District IX; and a projected need for 3,915 beds in 1986 in the subdistrict of Palm Beach County. (Testimony of Straughn, R-4, R-5, R-6)

   
   

4. The inventory of licensed and approved beds for District IX is 5,487 beds, and for Palm Beach County, is 4,086. Subtracting the projected inventory from the projected need indicates a "no need" of 280 beds. A similar calculation for Palm Beach County indicates a "no need" of 171 beds. (Testimony of Straughn, R-4, R-5, R-6)

   
   

5. Under Rule 10-5.11(21)(e) , this is identified as a "c4" need relationship--where neither district nor subdistrict show a need for additional bed capacity. The prescribed current utilization threshold and the prospective bed rate of utilization for "c4" need relationship is 95 percent and 85 percent, respectively. See, 10-5.11(21)(f), (h).

   
   

6. These utilization thresholds are not satisfied in the instant case. The current utilization of beds in Palm Beach County is 92.7, which falls short of the required 95 percent threshold. Consequently under the rule, no beds may be added until the 95 percent threshold is met. Even if this current threshold of 95 percent were met, there would still be 1,192 excess beds in Palm Beach County through 1986. 2/

   
   

7. Hence, use of the bed need methodology contained in Rule 10-5.11(21) indicates that the proposed nursing home beds are not needed through 1986. In the absence of unique and peculiar circumstances, and unless other rule or statutory criteria justify issuance, the application must be denied.

   
   

   II.

   Failure to Show Unique or Peculiar Circumstances, or Other Overriding Criteria

   
   

8. Health Quest, having failed to satisfy the numerical bed need standards imposed by DHRS rule, has also failed to show unique and peculiar circumstances which would otherwise justify granting its application. The bed need rule takes into account factors raised by Health Quest, such as the relative wealth and poverty of an affected population. While it is expected that new Medicare regulations may increase the need for nursing home services, increases attributable to Medicare changes remain speculative and uncertain. In any case, changes in need for nursing home services due to Medicare changes will not be unique to District IX or Palm Beach County.

   
   

9. Health Quest has also failed to show that it is entitled to a CON based on any other rule or statutory criteria. Its reliance on the provisions of the State Health Plan is misplaced since that plan is largely obsolete.

   
   

   CONCLUSIONS OF LAW

   
   

10. The Division of Administrative Hearings has jurisdiction over the parties and subject matter of this proceeding. Section 120.57(1), Fla. Stat. (1983).

    
    

11. DHRS is authorized to grant or deny applications for CONs' in accordance with the criteria of Section 381.494(6)(c) Florida Statutes (1983), and DHRS rules. Rule 10-5.11(21) was adopted in an apparent effort to make the "need" criteria of the statute more specific and their implementation, more predictable. This rule has been administratively challenged as an invalid

    exercise of delegated legislative authority. The challenge was denied by a hearing officer of the Division of Administrative Hearings on February 3, 1984. See, DOAH Case No. 83-2260R.

    
    

12. In licensing proceedings such as this, the applicant has the burden of demonstrating entitlement to the requested CON. See, Department of Transportation v. J.W.C. Co., Inc., 396 So.2d 778 (Fla. 1st DCA 1981). Here, Health Quest has failed to sustain its burden. The thrust of its case is that Rule 10-5.11(21) is unreasonable and arbitrary. This amounts to an impermissible collateral attack on a rule in a Section 120.57 adjudicatory proceeding. When an agency casts a permissible policy choice in rule form, that choice must be given effect. Rulemaking, insofar as it goes, "displaces proof and debate of policy in Section 120.57 proceedings McDonald v. Department of Banking and Finance, 346 So.2d 569, 583 (Fla. 1st DCA 1977). Once cast in a rule, an agency's policy choice becomes "well-nigh conclusive." Bowling v. Department of Insurance, 394 So.2d 165, 174 (Fla. 1st DCA 1981). The rule may not be discarded or repealed except by Section 120.54 rulemaking proceedings.

    
    

13. Rule 10-5.11(21), is not, however, necessarily dispositive. Other statutory or rule criteria may justify issuance of a CON, despite failure to satisfy the numerical bed need requirements of the rule. Moreover, circumstances which are truly unique and peculiar to an application may justify exceptional agency action. But Health Quest has failed to demonstrate that exceptional circumstances or other criteria of rule or statute entitle it to requested CON. Accordingly, the application must be denied.

RECOMMENDATION

Based on the foregoing, it is RECOMMENDED:

That Health Quest's application for a certificate of need to construct a nursing home in West Palm Beach, Florida, be denied.

DONE and ENTERED this 7th day of June, 1984, in Tallahassee, Florida.

R. L. CALEEN. JR. Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301

(904)488-9675

Filed with the Clerk of the Division of Administrative Hearings this 7th day of June, 1984.

COPIES FURNISHED:

Charles M. Loeser, Esquire

315 W. Jefferson Blvd. South Bend, Indiana 46601

Steven W. Huss, Esquire Department of Health and Rehabilitative Services 1323 Winewood Blvd.

Tallahassee, Florida 32301

David Pingree, Secretary Department of Health and Rehabilitative Services 1323 Winewood Blvd.

Tallahassee, Florida 32301

Docket for Case No: 83-001893

Orders for Case No: 83-001893