STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FIRST AMERICAN CORPORATION, ) d/b/a SPRING HILL HEALTH )

FACILITY, )

)

Petitioner, )

)

vs. ) CASE NO. 84-2206

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, James E. Bradwell, held a public hearing in this case on October 2, 1984, in Tallahassee, Florida.

APPEARANCES

For Petitioner: F. Philip Blank, Esquire

241 East Virginia Street Tallahassee, Florida 32301

For Respondent: John F. Gilroy, Legal Intern

TURNER & MANNHEIMER

318 North Calhoun Street Tallahassee, Florida 32301

ISSUES PRESENTED

The issue presented for determination herein is whether or not F.A.C. Health Care, Inc., d/b/a Spring Hill Health Facility (Petitioner) is entitled to a Certificate of Need to establish a 60-bed nursing home to serve Hernando County.

INTRODUCTION AND BACKGROUND

On January 14, 1984, Petitioner applied to the Department of Health and Rehabilitative Services (herein sometimes referred to as Respondent or HRS), for a Certificate of Need to establish a 120-bed nursing home in Spring Hill to serve the Hernando County area. That application was subsequently amended on September 26, 1984, to establish a 60-bed nursing home. On April 30, 1984, HRS issued its State Agency Action Report initially denying Spring Hill's application for the Certificate of Need. Notice of that denial was published in the Florida Administrative Weekly. Petitioner timely filed a petition for a formal administrative hearing pursuant to Section 120.57(1), Florida Statutes.

The matter was referred to the Division of Administrative Hearings by HRS on June 20, 1984, with the request that a hearing officer be assigned. By notice of hearing dated June 28, 1984, the final hearing was scheduled for October 2, 1984.

At final hearing, in support of its position of entitlement to a Certificate of Need, Petitioner presented the testimony of James R. Fulmer, Vice President of First American Corporation, who was accepted as an expert in health planning, nursing home administration, need and financial feasibility, and Thomas J. Konrad, a health care facilities consultant who was accepted as an expert in planning, certificate of need review, and need assessment.

Petitioner's Exhibits 1 and 5 were marked for identification and Exhibits 2 through 4, 6 and Composite Exhibit 7 were received into evidence.

Respondent presented the testimony of its medical facilities consultant, Reid Jaffe. Respondent's Exhibits 1 through 4 were offered and received into evidence without objection.

Pursuant to a joint pre-hearing stipulation, the parties agreed that Petitioner, Spring Hill, has satisfied the statutory and rule criteria embodied in Sections 381.494(6)(c)3 through 8, 10. and 11., Florida Statutes; and Florida Administrative Code Rules 10-5.11(1), (2), (4), and (7) through (11).

1/ Statutory and rule criteria which remain to be determined herein are Sections 381.494(6)(c)1., 2., 9., 12., and 13., Florida Statutes; and Florida

Administrative Code Rules 10-5.11(3), (5), (6), (12)(a), and (12)(b), and (21).

The parties have submitted post-hearing proposed findings of fact pursuant to Section 120.57(1)(b)4, Florida Statutes. A ruling on each proposed finding of fact has been made either directly or indirectly in this recommended order except where such proposed findings of fact have been rejected as subordinate, cumulative, immaterial, or unnecessary.

FINDINGS OF FACT

1. Upon consideration of the oral and documentary evidence adduced at hearing, including the pre-hearing stipulation, the following relevant facts are found.

   
   

2. F.A.C. Health Care, Inc. is a wholly-owned subsidiary of First American Corporation. First American Corporation has owned, operated and developed approximately 75 long-term care and retirement facilities over the past 15 years. These operations are primarily located in the southeastern United States. At present, First American Corporation operates 20 facilities and has seven Certificates of Need in the developmental stages. (TR. 35, Fulmer)

   
   

3. On January 14, 1984, Petitioner filed an application with the Respondent for a Certificate of Need to construct and operate a community nursing home in the City of Spring Hill in Hernando County, at a total cost of

   $3,180,000. (Petitioner's Exhibit 1) The letter of denial accompanying the state agency action report dated April 30, 1984, noted the basis for denial as follows:

   
   

   Existing and approved bed capacity in Citrus/Hernando Counties is sufficient to satisfy projected need for 1986.

   
   

   There are 60 nursing home beds that have

   been approved but have not been constructed at the present time, which, when added to the existing nursing home bed supply in Citrus/Hernando Counties, will serve to satisfy a portion of the projected need

   for skilled nursing home beds in the

   sub-district through 1986. The proposed

   120 beds are in excess of the 37 beds needed to reduce the prospective base utilization rate to a reasonable level by 1986. (TR. 36, Fulmer; Petitioner's Exhibit 2)

   
   

4. On September 26, 1984, Petitioner amended its original application to reflect a reduction from 120 to 60 nursing home beds. Documents reflecting the corresponding reduction in project costs from 53,180,000 to 51,780,000 were submitted with the amended proposal. (Petitioner's Exhibit 3)

   
   

   FINANCIAL FEASIBILITY OF THE PROPOSED SPRING HILL FACILITY

   
   

5. The immediate and long-term financial feasibility of a project is one criteria considered during the Certificate of Need review process. Section 381.494(6)(c)9., Florida Statutes.

   
   

6. The total cost of the project of 51,780,000 appears reasonable and in line with similar projects. Funds for full 100 per cent financing of the project are available through industrial revenue bonds at 14 per cent interest over 30 years. In order to acquire an industrial revenue bond application, Petitioner would maintain a $150.000 debt service reserve fund. (Petitioner's Exhibit 3)

   
   

7. Other methods of financing available to finance the subject project include conventional financing, syndicated equity programs and insurance investment programs. (Testimony of Fulmer at TR. 39-40)

   
   

8. Due to the largely rural setting, projected utilization for the first year would be 81 per cent Medicaid, 5 per cent Medicare and 14 per cent private pay. Occupancy is projected to reach 97 per cent by the fifth full month of operation and would be supported in part by the increased utilization of nursing home beds as a direct result of the implementation of diagnostic related groupings.

   
   

9. Pro forma statements for the first and second years of operation show a net operating profit beginning in the ninth month and continuing through the second year. The equipment costs, staffing patterns and personnel budget also appear reasonable for this type of project.

   
   

   METHODS AND CONSTRUCTION COSTS

   
   

10. Another issue in this proceeding was whether Spring Hill satisfied the criteria in Section 381.494(6)(c)13., Florida Statutes, regarding the cost and methods of construction.

    
    

11. Spring Hill's proposed facility will provide 11,981 square feet devoted to patient care and 9,710 square feet for administrative and common service areas at a construction cost of $41.50 per square foot. (Petitioner's Exhibit 3) Proposed construction costs and methods of construction efficiently

    minimize square footage space requirements and related construction costs and will permit the most efficient operation of the facility at a low per diem cost. The construction cost appears reasonable and is also supportive of a primarily Medicaid based facility. Finally, Respondent offered no evidence to controvert the reasonableness of construction costs and methods proposed by Petitioner.

    
    

    IMPACT ON HEALTH CARE COSTS

    
    

12. Section 381.494(6)(c)12., Florida Statutes provides that as part of the Certificate of Need review, probable impact of the proposed project on the cost of providing health care services be considered.

    
    

13. Petitioner's expert, Fulmer, urges that there would either be no impact on the cost of care or due to the availability of additional Medicaid beds, costs would be reduced since the private pay demands of family and relatives having to pay for the care of an individual rather than participating in the Medicaid program would reduce the costs of health care to the community rather than increase the financial burden. In this regard, Petitioner offered no evidence to substantiate the claim that the demand for Medicaid beds exceeded the supply, or that Medicaid patients had been refused health services by the available Medicaid health care providers.

    
    

    AVAILABILITY AND ACCESSIBILITY OF EXISTING SERVICES

    
    

14. Hernando County lies within HRS District III which is composed of 16 counties in north-central Florida, stretching from the Gulf of Mexico north of Tampa to the Georgia border. (Petitioner's Exhibit 6) The District is further divided into sub-districts. Hernando County represents a separate sub-district.

    
    

15. Petitioner's facility is proposed to be located in the City of Spring Hill, located in the fastest growing area of Hernando County. (Petitioner's Exhibits 1 and 2) The latest bulletin (No. 69) from the University of Florida, Bureau of Economic and Business Research, shows a 90 per cent projected growth between 1980 and 1990. Much of the population in the Spring Hill area falls in the 65 and older age bracket. County age group projections released by HRS on September 24, 1984, reveal that the elderly population of 65 and over in Hernando County in 1985 is projected as 17,616, or approximately 27 per cent of total population. By 1990, those projections will grow to 24,887 or approximately 29 per cent of total population. (Respondent's Exhibit 2)

    
    

16. The growth trend in Hernando County is an extension of the rapid coastline development occurring in the New Port Richey- Clearwater areas and the counties to the south of Hernando. Previously, the only major development in Hernando County was centered in Brooksville, the middle of the county. Consequently, the existing community nursing home services in Hernando County are concentrated in the Brooksville area.

    
    

17. Although Petitioner, through its expert (Konrad) testified that there is a mal-distribution of existing beds and community nursing home services which renders them neither available nor accessible to the rapidly growing elderly population in the southwestern Hernando County corridor and that high occupancy rates in existing community nursing homes in the area and the existence of waiting lists corroborates the lack of availability and accessibility of community nursing home services in the area, the evidence introduced herein failed to establish either the existence of waiting lists or that the existing community nursing homes in the area were overcrowded.

    SHELTERED VERSUS COMMUNITY NURSING HOME BEDS

    
    

18. Petitioner contends that certain nursing home beds associated with the adult congregate living facility at Evergreen Woods in the Spring Hill area are not actually available and accessible to the general public but instead are functioning as sheltered nursing home beds. Respondent, on the other hand, considers the 60 nursing home beds associated with Evergreen Woods to be available and accessible to the general public. A review of the entire record compiled herein failed to substantiate Petitioner's claim that those beds at Evergreen Woods are unavailable and/or inaccessible to the general public.

    
    

    DETERMINATION OF NEED, SECTION 381.494(6)(c)1., FLORIDA STATUTES.

    
    

19. In determining need for nursing home beds, a Certificate of Need project is reviewed on a 3-year planning horizon. In this case, predicted need for nursing home beds in District III and the sub-district of Hernando County is calculated through 1987.

    
    

20. Hernando County is a single county sub-district located within in HRS planning District III in north central Florida. HRS has determined the overall nursing home bed need for District III as well as sub-district allocations by applying the uniform nursing home bed need methodology for community nursing home services contained in Florida Administrative Code Rule 10- 5.11(21). (Petitioner's Exhibit 5)

    
    

21. Respondent provided a step-by-step application of the community nursing home bed need rule and introduced their exhibits supporting the calculation period (Testimony of expert medical facilities consultant, R. Jaffe and Respondent's Exhibits 1 and 2). Briefly stated, application of the pertinent rules reveals an extrapolated need for 31 beds which are available for CON approval based on data available to Respondent on June 29, 1984 and that 36 beds are available based on later data released on September 24, 1984. (TR. 91, Conrad; TR. 130, Jaffe and Petitioner's Exhibit 6)

    
    

22. The census report applicable herein reflects that there were 360 licensed beds in the Hernando sub-districts and no approved beds for a total of

    360 beds. 2/

    
    

23. Application of the nursing home bed need methodology is not the sole factor used in determining whether a CON application should be granted. Other factors, such as access, high occupancy rates, chronically underserved population and high Medicaid utilization are definite factors in approval of additional beds in cases where the rule shows either no need or only slight need.

    
    

24. Respondent has, on several occasions, granted 60-bed applications where accessibility issues justified the grant of a minimum-sized facility in spite of the lesser numerical need indicated under the rules. 3/

    
    

25. Petitioner referred to instances wherein Respondent had granted approval for CON's in other districts where there were unusual circumstances such as accessibility issues as referred to herein above. A review of those cases reveals that a departure from the usual bed-need methodology is warranted in cases of extremely high occupancy rates (95 per cent or higher) or the facilities with lower occupancy rates, e.g. 85.7 per cent for homes in Sarasota County, which were located in inaccessible distances away from the population concentration.

26. Petitioner has not demonstrated sufficient basis herein to warrant a departure from the usual bed need rule methodology.

    
    

27. The instances wherein a departure from the usual bed need rule methodology has occurred are distinguishable, inasmuch as in the instant case, there are three existing facilities presently in Hernando County offering 360 nursing home beds. Current occupancy rate has been shown to be reasonable and is standing at or below average for District III.

    
    

28. Additionally, Respondent introduced a "Stipulation of Settlement" dated September 28, 1984 which was entered into by and between Evergreen Woods Health Care Center and Respondent. The substance of that stipulation reveals that during October of 1983, Evergreen Woods Health Care Center (EWHCC) as Petitioner, filed an application with Respondent for a Certificate of Need to add 60 beds to its existing 60-bed nursing home located in Spring Hill, Hernando County, Florida. The application sought 45 community beds and 15 sheltered beds. As a means of amicably resolving that proceeding and based on available need data based on applicable quarterly census reports and application of the need criteria, EWHCC, as Petitioner in that proceeding, amended its Certificate of Need application filed October, 1983, to add a total of 60 beds to its existing facility; 31 beds to be designated as community beds and 29 to be designated as sheltered beds. A review of the public records reveal that the Certificate of Need has been issued (amended CON No. 2959 issued early October, 1984) pursuant to that stipulation of settlement. 4/

    
    

    CONCLUSIONS OF LAW

    
    

29. The Division of Administrative Hearings has jurisdiction over the subject matter and the parties to this proceeding. Section 120.57(1), Florida Statutes.

    
    

30. The parties were duly noticed pursuant to the notice provisions of Chapter 120, Florida Statutes.

    
    

31. The authority of the Respondent, Department of Health and Rehabilitative Services is derived from Chapter 381, Florida Statutes and Rule Chapters 10-5, Florida Administrative Code.

    
    

32. The parties stipulated that all statutory criteria have been met by the applicant except those criteria codified in Sub- sections 381.494(6)(c)1., 2., 9., 12., and 13, Florida Statutes.

    
    

33. Competent and substantial evidence was offered herein to establish that by using the September 24, 1984 applicable census data, 36 beds were available for sub-district approval in Hernando County. Likewise, as of June 29, 1984, there were 31 beds available for sub-district approval in Hernando County.

    
    

34. The Stipulation of Settlement entered into by and between Respondent and Evergreen Woods Health Care Center (DOAH Case No. 84-1630, CON No. 2959) depleted all available beds which were available for CON approval pursuant to the criteria set forth in Rule 10-5.11(21, Florida Administrative Code.

35. Based on the foregoing Findings of Fact and Conclusions of Law, petitioner failed to establish any basis for a departure of the rule criteria set forth in the uniform nursing home bed need rule embodied in Florida Administrative Code Rule 10- 5.11(21).

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that:

The application of First American Corporation d/b/a Spring Hill Health Facility for establishment of a 60-bed nursing home facility in Hernando County, Florida, be DENIED.

RECOMMENDED this 14th day of February, 1985, in Tallahassee, Florida.

JAMES E. BRADWELL

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 14th day of February, 1985.

ENDNOTES

1/ Consequently, no recommended findings of fact or conclusions of law will be made as to these criteria.

2/ The 360 licensed beds are composed of 180 beds located at Brooksville Nursing Manor, 120 beds located at Eastbrook Health Care Center and 60 beds located at the Evergreen Woods facility in Spring Hill.

3/ From a health planning perspective, the smallest financially feasible size one could build a nursing home is in 60-bed increments. (Testimony of Jaffe and Konrad)

4/ At the outset of the hearing herein, the parties argued the admissibility of that stipulation of settlement. Based on the undersigned's considered deliberation of the arguments of the parties including the fact that the Petitioner (EWHCC) was an earlier batched applicant, the Petitioner's claim of inadmissibility due to, inter atia, lack of notice and other claimed abridgements of due process and other procedural violations, the stipulation of settlement is a factor which cannot be ignored and therefore must be considered in view of the Respondent's charge to review applications in the context of stated criteria embodied in Section 381.494(6)(c), Florida Statutes, requiring consideration of such things as availability, efficiency, accessibility, extent of utilization and the adequacy of like and existing services in the applicant's health service area.

COPIES FURNISHED:

F. Philip Blank, Esquire

241 East Virginia Street Tallahassee, Florida 32301

John F. Gilroy Legal Intern

TURNER & MANNHEIMER

315 North Calhoun Street Tallahassee, Florida 32301

David Pingree, Secretary Department of Health and Rehabilitative Services

1323 Winewood Boulevard

Tallahassee, Florida 32301

Docket for Case No: 84-002206

Orders for Case No: 84-002206