STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

AMBULATORY & ADMITTING )

SURGICAL CENTER, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 84-2633

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent. )

)

RECOMMENDED ORDER

This case was heard on March 27, 1985 in Miami, Florida, by R. L. Caleen, Jr., Hearing Officer with the Division of Administrative Hearings. The parties were represented by counsel.

APPEARANCES

For Petitioner: Arthur Spiegel, Esquire

1050 Spring Garden Road Miami, Florida 33136

For Respondent: Richard A. Patterson, Esquire

1323 Winewood Blvd. Bldg. One, Suite 407

Tallahassee, Florida 32301 ISSUE

Whether Petitioner's Certificate of Need (CON) should be declared null and void for failure to satisfy conditions for its continuing validity.

BACKGROUND

By letter dated June 7, 1984, Respondent, Department of Health and Rehabilitative Services (DHRS), notified Ambulatory & Admitting Surgical Center, Inc. (Petitioner), that CON No. 1956 was "null and void" for failure to commence construction by August 18, 1983, when a six-month extension, granted earlier, expired. On July 6, 1984, Petitioner timely contested DHRS' decision and requested a Section 120.57(1) hearing. DHRS granted the request and forwarded this case to the Division of Administrative Hearings for assignment of a hearing officer.

Hearing was set for December 11, 1984, then--on Petitioner's unopposed motion--continued and reset for March 27, 1985.

At final hearing, Petitioner presented the testimony of Vincent Pino and offered Petitioner's Exhibit Nos. 1 through 4 into evidence. DHRS presented the testimony of Wayne McDaniel and offered Respondent's Exhibits Nos. 1 through 10 into evidence. 1/

The transcript of hearing was filed on April 22, 1985. The deadline for filing proposed findings of fact was May 20, 1985. DHRS timely filed its proposed findings; Petitioner's proposed findings, filed on July 15, 1985, were untimely (56 days late). DHRS subsequently moved to strike on grounds of untimeliness. The motion is denied. DHRS has not alleged or shown prejudice from Petitioner's late filing. Striking a parties' proposed findings is a severe sanction which, under these circumstances, is not warranted.

The parties' proposed findings have been considered in preparing this Recommended Order. A ruling on each proposed finding has been made either directly or indirectly, except where such findings have been rejected as subordinate, cumulative, immaterial, unnecessary, or unsupported by the evidence.

Based on the evidence adduced at hearing, the following facts are determined:

FINDINGS OF FACT

1. On October 30, 1981, Petitioner applied for a CON to establish an ambulatory surgical center in an existing building it owned at 5975 Southwest Eighth Street, Miami, Florida. Petitioner had operated a free-standing ambulatory surgical center at that location since January, 1979. It sought a CON (a prerequisite to obtaining a license from DHRS) in order to serve Medicare and Medicaid patients. (R-1, R-2)

   
   

2. On February 19, 1982, after receiving additional information and holding a public hearing on the application, DHRS issued CON No. 1956, authorizing the requested ambulatory surgical center, at a cost of $278,000. The first page of the CON designated February 18, 1983, as the "Termination Date." (R-9)

   
   

3. The second page of the CON provided Petitioner with actual notice of the statute and rule governing expiration and extension of CONs:

   
   

   A Certificate of Need shall terminate 1 year after the date of issuance unless the appli- cant has commenced construction, if the project provides for construction, or in- curred an enforceable capital expenditure commitment for projects not involving con- struction, or unless the certificate of need validity period is extended by the Department for an additional period of up to 6 months, upon showing good cause by the applicant for the extension. The Department shall monitor the progress of the holder of the certificate of need in meeting the timetable for project development specified in the application and may revoke the certificate of need after consideration of recommendations of the health systems agency, if the holder of the

   
   

   (R-9)

   certificate of need is not meeting such timetable and is not making a good faith effort to meet it.

   
   

   1. Rule 10-5.13(2)[sic] Florida Adminis- trative Code, states:

      An applicant desiring a 6 months validity extension to a certificate of need shall submit such request to the Department, in writing; not later than 15 days prior to the certificate termination date providing docu- mentation of good cause upon which such request is based. Good cause by the appli- cant in support of a request [sic) for a validity time period extension is documenta- tion that each of the following has been satisfied:

      1. If applicable a site has been firmly secured.

      2. Project financing has been firmly se- cured.

      3. For projects involving construction, final construction plans for the proposed project have been submitted for review by the Office of Licensure and Certification of the Department unless the applicant can document that the submission of such final construc- tion plans for review was precluded by cir- cumstances beyond his control.

      4. For projects not involving construction, the applicant has been - precluded from incur- ring an enforceable capital expenditure commitment by factors beyond his control.

   
   

4. After granting the CON, DHRS set up a routine monitoring schedule with specific dates (4, 8, and 12 months from issuance of the CON) by which Petitioner was to submit status reports on the proposed project. (R-10)

   
   

5. By letter dated June 4, 1982, DHRS asked Petitioner to complete and return the first monitoring report on the project. Petitioner completed and returned the report on June 28, 1982. (R-10)

   
   

6. On September 29, 1982, officials (including a medical facilities architect) from DHRS' Office of Licensure and Certification, Plans and Construction Section, located in Jacksonville, Florida inspected Petitioner's facility. By letter dated February 1, 1983, George E. Hapsis, the medical facilities architect informed Petitioner that "[the building was found to contain many deficiencies that in its present state would prevent licensing by the state." (R-10) He then identified 102 separate deficiencies and asked to be notified when they were corrected.

   
   

7. On February 18, 1983 (the expiration or termination date of CON No. 1956); HRS' Office of Community Medical Facilities (which processes CONs), received Petitioner's request for an extension of CON No. 1956. The reasons given were that Petitioner had recently received the results of the site inspection and needed additional time to comply with DHRS' recommendation. It

   also advised DHRS that "[i]n the very near future, you will receive new plans of all necessary construction and remodeling to fully meet requirements. "

   (R-10)

   
   

8. DHRS agreed to the request. By letter dated February 23, 1983, it grant a six-month extension of CON No. 1956, setting a new termination date of August 18, 1983, and warned Petitioner:

   
   

   Please be advised that the project must be under physical and continuous construction prior to the new termination date to have a valid and continuing Certificate of Need.

   (R-9)

   
   

9. On July 18, 1983 (17 months from issuance of the CON and one-month prior to expiration to the six-month extension), DHRS sent Petitioner a request for specific information. The request reminded Petitioner of the August 18, 1983 termination date; referenced the provisions of Chapter 381 (concerning expiration of CONs if construction not commenced within 12 months, and authorizing an extension of up to six months); and asked for information on whether construction, if any was involved, had commenced. "Commenced construction" was explained as initiation of continuous construction activity beyond site preparation, associated with erecting or renovating a health care facility. If no construction was involved, DHRS asked for documentation as to whether enforceable capital expenditure commitments had been made for the project.

   
   

10. By letter dated July 28, 1983, Petitioner replied to DHRS' request; stating that most of the 102 deficiencies were minor and "being worked on" and that, as to the other DHRS recommendations, "a few alterations and an addition are necessary, also we are working on it step by step." (R-10) Petitioner asserted that it was unable to submit the exact cost of the proposed work and that it deserved an extension of its CON.

    
    

11. On August 15, 1983, three days before the final termination date of CON No. 1956, DHRS received a letter from Petitioner, asking, once again, for an extension of its CON. It stated that it was "doing some work" on the inspection recommendations, buying equipment, and working with the City of Miami regarding zoning. (R-10)

    
    

12. On September 27, 1983, Nathaniel W. Ward, Jr., a medical facilities. consultant with DHRS, replied to Petitioner's letter:

    
    

    Please excuse our delay in answering your letter of August 12, 1983. It was placed in the file as a determination was made that you did not need an extension.

    
    

    If you have commenced [sic] construction at the end of the one-year period, then you will continue to have a valid Certificate of Need as long as you continue to construct to license the facility.

    
    

    (R-10) (Mr. Ward was apparently unaware of or overlooked, the fact that Petitioner had already been granted a six-month extension of its CON; under Section 381.494(8)(f), Florida Statutes, no further extension could have been

    granted. Further evidence of Mr. Ward's misapprehension was his statement that if construction had commenced at the end of the one-year, the CON would continue to be valid. If construction had indeed, commenced at the end of the one-year period, the original six-month extension would have been unnecessary.)

    
    

13. Subsequently, Petitioner submitted preliminary construction drawings to DHRS' Office of Licensure and Certification in Jacksonville, which reviews preliminary drawings, makes recommendations prior to submittal of final drawings, and licenses health care facilities. After review of the preliminary drawings, that office gave Petitioner extensive comments on the drawings and withheld approval.

    
    

14. As of May 2, 1984, Petitioner's preliminary drawings had not yet been approved by DHRS and no final construction drawings for the proposed facility had been received by the Office of Licensure and Certification.

    
    

15. On May 16, 1984, nine months after the final termination date of CON No. 1956 (including the six-month extension), Wayne McDaniel, CON Monitoring Supervisor for DHRS, and Keith Matherene, a medical facilities consultant, inspected the site of the proposed facility. During their two-hour site visit, Vincent Pino, owner of corporate Petitioner, admitted that he (Petitioner) had, as yet, made no modifications to the existing structure since he had decided to redesign the project and had submitted new plans to the Office of Licensure and Certification. There was no evidence of any physical modifications having been made to the existing structure. Before leaving, Mr. McDaniel told Mr. Pino he would be given several days to provide written information on any extenuating circumstances which might explain the delay in construction.

    
    

16. By letter dated June 7, 1984, after having received no response from Petitioner, DHRS declared CON No. 1956 null and void for noncompliance with Section 381.493(3)(g), Florida Statutes.

    
    

17. Petitioner's failure to commence construction was due at least in part, to its unsuccessful efforts to obtain additional parking space for the proposed facility. Additional parking space was a zoning requirement which had to be met before a building permit could be issued. Petitioner signed contracts with two nearby landowners in an attempt to gain the necessary parking space, but the landowners failed to perform. After receiving DHRS' June 7, 1984 notice, Petitioner suspended its efforts to obtain additional parking.

    
    

    CONCLUSIONS OF LAW

    
    

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

    
    

19. Section 381.494(8)(f)1., Florida Statutes, provides for the expiration and extension of CONs:

    
    

    A Certificate of Need shall terminate 1 year after the date of issuance unless the appli- cant has commenced construction, if the pro- ject provides for construction, or has in- curred an enforceable capital expenditure commitment for a project, or unless otherwise specified in subparagraph 2., not involving construction or unless the certificate-of-

    need validity period is extended by the department for an additional period of up to

    6 months upon showing of good cause, as defined by rule, by the applicant for the extension. The department shall monitor the progress of the holder of the certificate of need in meeting the timetable for project development specified in the application and may revoke the certificate of need, if the holder of the certificate is not meeting such timetable and is not making a good faith effort, as defined by rule, to meet it.

    
    

    "Commence construction" is defined by Section 381.493(3)(d), as:

    
    

    . . . initiation of and continuous activities beyond site preparation associated with erecting or modifying a health care facility, including procurement of a building permit applying the use of department-approved construction documents, proof of an executed owner/contractor agreement or an irrevocable or binding forced account, and actual under- taking of foundation forming with steel installation and concrete placing.

    
    

    DHRS Rule 10-5.13(1), Florida Administrative Code, specifies that the total time extension allowed for a CON shall not exceed six months and declares that "the certificate shall become null and void at the conclusion of the extended validity time period unless the project is under construction if construction is involved or an enforceable capital expenditure commitment is incurred if construction is not involved."

    
    

20. In the instant case, the evidence establishes that construction on essential renovations for Petitioner's proposed ambulatory surgical center was not commenced before (or even after) the expiration of the six-month extension of its CON. (Since construction was involved and necessary for licensing of this facility the existence or non-existence of a capital expenditure commitment is immaterial.) Although three years had elapsed from issuance of its CON, Petitioner had not, despite repeated assurances to DHRS, obtained a building permit, received DHRS approval for final construction drawings, or commenced actual construction of essential renovations to the existing facility.

    
    

21. Petitioner explains that it had difficulty obtaining additional parking space so that zoning requirements could be met and a building permit issued. but even if it is assumed that Petitioner was making continuous and good faith efforts to commence construction within the time required, such efforts do not satisfy the explicit requirement of statute and rule that meaningful construction be commenced before expiration of a six- month extension. Nor do such efforts allow Petitioner to avoid the necessary result of its failure to meet the conditions required for continued validity of its CON. It is concluded, therefore, that CON No. 1956 expired on, and has been null and void since, August 18, 1983.

    
    

22. Petitioner asserts that DHRS is estopped to cancel the CON because of Mr. Ward's letter of September 27, 1983. The essential elements of estoppel, however, have not been proven. In Florida, equitable estoppel has four

elements: (1) a representation by the party estopped to the party claiming the estoppel as to some material fact; (2) which representation is contrary to that later asserted by the estopped party; (3) a reliance upon the representation by the party claiming the estoppel; and (4) a change in the position of the party claiming the estoppel to his detriment, caused by the representation and his reliance thereon. Travelers Indemnity Co. v. Swanson, 662 F.2d 1098 (5th Cir. 1981). Here, it has not been shown that Mr. Ward made a material representation, contrary to one asserted later by DHRS; or that Petitioner relied on or changed its position based on any representation made by Mr. Ward. Mr. Ward's representation that Petitioner did not need an extension was immaterial since a second extension could not have been granted, in any event. Further, since the letter was written after the six-month extension had lapsed, Petitioner could not have delayed construction in reliance upon it.

Furthermore, the letter's statement that petitioner's CON would continue to be valid was conditioned on construction having commenced at the end of the (initial) one-year period. It was Petitioner's failure to satisfy this condition which led to its request for a six-month extension. Finally, no detrimental reliance on any statement in Mr. Ward's letter has been shown.

RECOMMENDATION

Based on the foregoing, it is RECOMMENDED:

That DHRS enter a final order declaring CON No. 1956 null and void for failure to satisfy statutory and rule criteria for its continuing validity.

DONE and ORDERED this 22nd day of August, 1985, 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 22nd day of August, 1985.

ENDNOTE

1/ Petitioner's exhibits will be referred to as P-_, Respondent's as R-_.

COPIES FURNISHED:

Richard A. Patterson, Esquire 1323 Winewood Blvd.

Bldg. One, Suite 407 Tallahassee, Florida 32301

Arthur Spiegel, Esquire 1050 Spring Garden Road Miami, Florida 33136

Docket for Case No: 84-002633

Orders for Case No: 84-002633