vs. ) CASE NO. 86-0047
Respondent. )
A final hearing was held in this case in Tallahassee, Florida on December 8, 1986 before Donald D. Conn, a duly designated Hearing Officer of the Division of Administrative Hearings, to determine whether Florida Health Facilities Corp. (of Lee County), d/b/a Pines Village Care Center, "Petitioner", is entitled to a certificate of need to be issued by the Department of Health and Rehabilitative Services, "Respondent", for the licensure of 42 nursing home beds which would complement 78 existing licensed beds. The parties were represented as follows:
Petitioner: W. David Watkins, Esquire
Respondent: John F. Gilroy, Esquire
At the hearing, Petitioner called Michael L. Schwartz, who was accepted as an expert in health care planning and administration, including nursing home administration, and Jerry Voyna, who was accepted as an expert in nursing home accounting. Respondent called Joyce Farr, a medical facilities consultant who was accepted as an expert in health planning as it relates to certificate of need regulation. Petitioner introduced eleven exhibits, and Respondent introduced two exhibits. Official recognition was taken of the Recommended Order previously issued in Case Number 86-0051. A transcript of the hearing was filed on January 23, 1987, and the parties requested and received authorization for an extension of time until February 12, 1987 to file proposed findings of fact and recommended orders. The Appendix to this Recommended Order contains specific rulings on timely filed proposed findings of fact.
On or before July 15, 1985 Petitioner timely filed an application for a certificate of need (CON No. 4179) to add 42 beds to an existing nursing home in Lee County, Florida. Petitioner's application was denied by Respondent, subject to the right to a hearing, by letter dated December 6, 1985 for the sole stated reason that:
Application of Chapter 10-5.11(21), Florida Administrative Code, to
Lee County shows no need for additional beds in the County through 1988.
The letter further states that the "basis of the above decision" is contained in the State Agency Action Report.
Petitioner timely sought a Section 120.57(1), Florida Statutes, hearing concerning Respondent's notice of its intention to deny this application.
The parties filed a Pre-Hearing Stipulation on December 3, 1986 which states that the only statutory criteria at issue in this proceeding are those contained in Sections 381.494(6)(c)1, 2 and 12, as well as the criterion at Section 381.494(6)(c)9, Florida Statutes, insofar as it relates to the need for the proposed additional nursing home beds. Further, the parties stipulated that the only rule criteria at issue are found at Rules 10-5.11(1), (3) and (6), as well as the criterion at Rule 10-5.11(5), Florida Administrative Code, insofar as the long-term financial feasibility of the project is related to the need for the services being proposed.
It is readily apparent that the parties have stipulated to issues in this proceeding which may be beyond the scope of the sole reason for denial of this CON application set forth in Respondent's letter of December 6, 1985. The parties' stipulation has been accepted, however, and will therefore define the issues to be determined in this case.
Petitioner has an existing 78 bed nursing home in the vicinity of Ft. Myers, Florida. This is located in Respondent's District 8, Subdistrict Lee- County. Previously, Petitioner received approval to construct 120 beds at this facility but was only licensed to use 78 beds. In fact, Petitioner has already constructed, equipped and furnished the additional 42 beds, and now seeks approval to use these beds. No additional capital expenditures would be necessary to place these beds in service.
The methodology for calculating need for community nursing home beds is set forth in Rule 10-5.l1(21)(b)1-9, Florida Administrative Code. As more particularly set forth in Findings of Fact 7 through 23, this methodology can be summarized as follows:
Determine the planning horizon to which an application is directed.
Determine the district's age adjusted number of beds in the horizon year by applying the current bed rates for population age groups 65-74 and 75 + to the district's horizon year population.
Determine the gross allocation of beds to the applicable subdistrict by multiplying the
district's age adjusted number of beds by the ratio of licensed beds in the subdistrict to
licensed beds in the district, and also by the ratio of the average occupancy rate in the subdistrict to
.90.
For purposes of this calculation in this case, licensed beds are determined as of June 1, 1985 and occupancy rates are those that existed
from October, 1984 to March, 1985.
Determine the net allocation of beds to the applicable subdistrict by subtracting the total number of licensed beds in the subdistrict
at the time of hearing plus 90 percent of approved beds in the subdistrict at the time of hearing from the subdistrict gross allocation.
The first step in calculating need pursuant to Respondent's methodology set forth in Rule l0-5.11(21)(b)1-9, Florida Administrative Code, is to establish a planning horizon. Subparagraph (b) of the rule states:
the Department will determine
if there is a projected need for new or additional beds three years into the future according to the methodology specified under subparagraphs 1 through 10. (Emphasis supplied.)
The Respondent interprets this to mean that the planning horizon is established by counting three years into the future from the filing deadline, established by rule, for a particular application. This is a reasonable interpretation and is consistent with the plain meaning of the rule. Thus, in this case the planning horizon to which Petitioner's application is addressed is July 15, 1988.
The next step in applying the need methodology is to determine what is meant by "current population" as that term is used in Rule 10-5.11(21)(b)2. The Respondent interprets this to mean the population current on the application filing deadline which in this case was July 15, 1985. This is also a reasonable construction of the rule, and is therefore accepted. However, the Respondent further contends that the "current population" estimates to be used in applying the rule methodology are those that were available from the Office of the Governor when this application was submitted, and that more recent updates of those estimates should not be considered. Since all population estimates and projections are only approximations, rather than actual counts, it is more reasonable to use updated revisions of "current population" which may be available at the time of hearing. These are still estimates of the population current as of the date an application is filed (in this case July, 1985), but they can reasonably be expected to be more accurate than the prior estimate. In the same manner, estimates of the planning horizon year population (July, 1988) available at the time of hearing should also be used rather than July, 1985 estimates of that population.
Respondent's interpretation which is hereby rejected and which would require the use of population estimates available when the application was submitted, excluding all revisions and updates, is not set forth by rule. Additionally, Respondent offered only the testimony of its consultant, Joyce Farr, to explicate this "incipient policy" but she was neither involved in, nor
part of, the decision making process which lead to this announced policy. Further, the position advocated by Farr is at variance with Respondent's prior application and interpretation of its rule, and is contrary to the interpretation used when Petitioner submitted this application. At the time of hearing, Farr did not know of any Final Order of Respondent, nor was any policy memoranda introduced, which set forth and adopted the interpretation she espoused as Respondent's policy. The only explanation offered for her interpretation was that she had been told by her supervisor that Respondent would take this position in all cases as a result of the Recommended Order in Case Number 86-0051, dated October 10, 1986, but not yet acted upon by Respondent at the time of hearing. No other evidence was presented by Respondent in support of Farr's interpretation, or to otherwise explicate this non-rule policy.
Before applying the need methodology rule, a determination must also be made as to how "occupancy rates" will be measured, as used in Rule 10- 5.11(21)(b)4. As recently as May 8, 1986, Respondent's Administrator of Community Medical Facilities concurred in an interpretive memo prepared by Reid Jaffe, consultant supervisor, which indicated that at the time of hearing the latest available six months occupancy rates would be used. Yet, at hearing Joyce Farr again announced a change of policy to freeze everything, including occupancy rates, to the time of the original application. Under this interpretation, "occupancy rate" in this case would be based on the six months' data for October, 1984 through March, 1985. Petitioners urge the use of "occupancy rate" data from April, 1986 to September, 1986, the latest six months' occupancy data available at the time of hearing.
The interpretation announced by Farr at hearing is reasonable, and although in apparent conflict with the interpretive memo dated May 8, 1986, it is consistent with the plain meaning of Rule 10-5.11(21)(b)4 which requires the review of applications submitted for the July batching cycle (in this case July, 1985) to "be based upon occupancy rate data for the months of October through March preceding that cycle" (October, 1984 through March, 1985). Petitioner's position regarding the data to be used in determining "occupancy rate" is therefore rejected as contrary to, and inconsistent with, the plain meaning of the applicable rule.
Next, the number of "licensed beds" in District 8 for purposes of subparagraphs (b)2 and 4 of the need methodology calculation must be determined. The district licensed bed figure is explained by Rule 10-5.11(21)(b)7 as follows:
Review of applications submitted for the July batching cycle should be based upon the number of licenses (sic) beds (LB and LBD) as of
June 1 preceding that cycle; applications for the January batching cycle shall be based upon the
number of licensed beds (LB and- LBD) as of December 1 preceding that cycle.
Petitioner urges that licensed beds be based on June, 1986 data and Respondent urges data from June 1, 1985. Petitioner's position is again contrary to the plain meaning of the rule, and is therefore rejected. For purposes of subparagraphs (b)2 and 4, LB and LBD are determined as of June 1, 1985.
Petitioner contends that its 78 community nursing home beds previously authorized by CON 1616 were licensed on May 31, 1985, and should therefore be counted as "licensed beds." Respondent's witness testified that these beds were actually licensed on June 3, 1985, and therefore should not be considered "licensed beds" for purposes of applying subparagraphs (b)2 and 4 of the need methodology calculation in this case. Petitioner has the burden of proof, but has not offered competent substantial evidence to support its position. It has not established that these 78 beds should be considered "licensed beds" for purposes of subparagraphs (b)2 and 4 since it has not been established that they were actually licensed on or before June 1, 1985.
The provisions of Rule l0-5.1l(21)(b)1-4 and 7 can therefore be applied to calculate gross bed need for Lee County using July 15, 1988 as the applicable planning horizon, updated estimates of "current population" for July 15, 1985 and for the planning horizon which were introduced by Petitioner, the "occupancy rate" as determined by data from October, 1984 through March, 1985 which was introduced through exhibit by Respondent, and the number of "licensed beds" in District 8 and the Lee County subdistrict on June l, 1985, as also introduced through exhibit by Respondent.
The first step in the calculation of gross need for the horizon year is to derive BA, the current bed rate for the age group 65-74. This rate is defined by subparagraph (b)2 of Rule 10-5.11(21) as follows:
BA = LB / (POPC + (6 x POPD)
Where:
LB is the number of community nursing home beds in the relevant district.
POPC is the current population age 65-74.
POPD is the current population age 75 years and over.
The district licensed bed figure (LB) is then defined by subparagraph (b)7 as follows:
Review of applications submitted for the July batching cycle should
be based upon the number of licenses (sic) beds (LB and LBD) as of June 1 preceding that cycle; applications
- for the January batching cycle shall be based upon the number of licensed beds (LB and LBD) as of December 1 preceding that cycle.
Application of the methodology prescribed by subparagraph (b)2 to this case produces the following calculation:
BA = LB / (POPC + (6 x POPD)
BA = 4,005 / (131,642 + (6 x 79,661)
BA = 4,005 / (131,642 + 477,966)
BA = 4,005 / 609,608
BA = .0065698
The second step in the calculation of gross need for the horizon year is to derive "BB", the current bed rate for the population age group 75 and over. This methodology is defined by subparagraph (b)3, and calculated in this case as follows:
BB = 6 x BA
BB = 6 x .0065698
BB = .0394188
The third step in the calculation of gross need for the horizon year is to derive "A", the district's "age-adjusted number of community nursing home beds" at the horizon year. This methodology is defined by subparagraph (b)1 as follows:
A = (POPA x BA) + (POPB x BB)
Where:
POPA is the population age 65-74 years in the relevant departmental district projected
three years into the future.
POPB is the population age
75 years and older in the relevant departmental district projected three
years into the future . . .
Application of the methodology prescribed by subparagraph (b)1 to this case produces the following calculation:
A = (POPA x BA) + (POPB x BB)
A = (142,791 x .0065698 + (90,467 x .0394188)
A = 938.10831 + 3,566.1006
A = 4504
The final step in the calculation of gross need in the horizon year is to derive "SA", the "preliminary subdistrict allocation of community home beds" (gross bed need in this case). This calculation is defined by subparagraph (b)4 as follows:
SA = A x (LBD/LB) x (OR/.90)
Where:
LBD is the number of licensed community nursing home beds in the relevant subdistrict.
OR is the average occupancy rate for all licensed community nursing homes within the subdistrict of the relevant district.
Review of applications submitted for the
July batching cycle shall be based upon occupancy rate data for the months of October through March preceding that cycle . . . .
The subdistrict licensed bed figure (LBD) is defined, consistently with LB, by subparagraph (b)7, supra.
Application of the methodology prescribed by subparagraph (b)4 to this case produces a gross need in July 1988 of beds, as follows:
SA = A x (LBD/LB) x (OR/.90)
SA = 4504 x (808/4005) x (.9689/.90) SA = 4504 x .20174 x 1.0766
SA = 978.
The final step in the numeric need methodology is to derive net need from gross need. According to subparagraph (b)9, this need is derived as follows:
The net bed allocation for a subdistrict, which is the number of beds available for Certificate of Need approval, is determined by subtracting the total number of
licensed and 90 percent of the approved beds within the relevant depart-
mental subdistrict from the bed allocation determined under sub- paragraphs 1 through 9 (sic 8). . . (Emphasis added.)
In order to apply subparagraph (b)9 and thereby determine "net" need, it is necessary to decide on what date the licensed bed inventory should be calculated. Respondent asserts that "licensed beds" for purposes of subparagraph (b)9 is the same as LB and LBD used in subparagraph (b)2 and 4, as defined in (b)7. The rule, however, is silent as to how licensed bed inventory should be calculated for purposes of subparagraph (b)8. Respondent did not explicate the reasons for its interpretation. Respondent's position that subparagraph (b)7 defines licensed bed inventory for subparagraph (b)9 ignores not only the clear link between (b)7 and the gross need methodology, but also the plain language and purpose of subparagraph (b)9 which is to derive a realistic estimate of net (or actual) need in the horizon year. Since all licensed and approved beds from previous batching cycles will serve at least a
portion of the horizon population, it is only reasonable to include these beds when calculating net need. It would be unreasonable not to count any beds licensed or approved after June 1, 1985 in the calculation of net need. In fact, subparagraph (b)9 itself addresses "the total number" of licensed and approved beds, not just beds that existed on June 1 1985.
Petitioner's 78 beds should therefore be counted as "licensed" for purposes of applying the net need methodology calculation in subparagraph (b)9 of Rule 10-5.11(21), and the 143 beds reserved pursuant to the decision in-Gulf Court Nursing Center v. Department of Health and Rehabilitative Services, 483 So.2d 700 (Fla. 1st DCA 1985) should be counted as "approved beds".
Net need is then calculated under subparagraph (b)8 as follows: Subdistrict allocation for Lee County = 978
Less Licensed beds = 996
Less 90 percent of 143 approved beds = 129 Surplus in Lee County = 148
Therefore, according to Respondent's need methodology as established in Rule 10-5.11(21)(b) there is a surplus of beds in Lee County for the planning horizon to which Petitioner's application is directed. Petitioner has not established that there is a need for the beds sought in CON 4179 under review in this case.
The source in the record of the data used in the above calculations is as follows:
LB, LBD, OR - Respondent's Exhibits 1,2
POPC, POPD, POPA, POPS - Petitioner's Exhibit 4
It has not been established that persons using existing and like services are in need of nursing home care but are unable to access services currently available. The need for services which have been denied has not been documented by attending physicians' plans of care or orders, or assessments by either Respondent or attending physicians, as required by Rule 10-5.11(21)(b)10.
Petitioner has not established that a geographic or economic accessibility problem exists in Lee County which would warrant approval of this application notwithstanding the lack of need under the methodology of Rule 10- 5.11(21)(b).
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties and subject matter in this case. Section 120.57(1), Florida Statutes.
Petitioner bears the burden of establishing its entitlement to the CON it seeks. By virtue of the parties' stipulation, Petitioner must show specifically whether the criteria contained in Sections 381.494(6)(c)1,2,9 and 12, Florida Statutes, and Rules 10-5.11(1)(3)(5) and (6), Florida Administrative Code, have been met. See Finding of Fact 3. Florida Department of Transportation v. J.W.C. Co, Inc., 396 So.2d 778 (Fla. 1st DCA 1981).
The initial issue is whether Petitioner has established that a need exists for the additional community nursing home beds that it seeks to add to its facility in Lee County. Rule 10- 5.11(21), Florida Administrative Code, sets forth Respondent's methodology for calculating need. In determining nursing home bed need, Respondent is required to follow the provisions of Rule 10-5.11(21). Page v. Capital Medical Center, Inc., 371 So.2d 1087 (Fla. 1st DCA 1979).
An agency's interpretation of its own rules must be given great weight and deference, and should be followed unless clearly erroneous or contrary to the plain meaning of the rule itself. Natelson v. Department of Insurance, 454 So.2d 31 (Fla. 1st DCA 1984); School Board of Pinellas County v. Department of Administration, Division of Retirement, 492 So.2d 767 (Fla. 1st -DCA 1986). As set forth in the above Findings of Fact, Respondent's interpretation and application of Rule 10-5.11(21) -- is reasonable and consistent with the plain meaning of said rule as to the determination of the planning horizon, LB, LBD and OR. Therefore, Respondent's position regarding these elements used in its need calculation methodology has been accepted. However, Respondent's position regarding POPC, POPD, POPA and POPS is contrary to the plain meaning of its own rule, in some respects represents a change of agency policy that has not been explicated, and has therefore been rejected as erroneous. See Conclusions of Law 2-12, Manor Care of Hillsborough County v. Department of Health and Rehabilitative Services, DOAH Case No. 86-0051 (Recommended Order entered October 10, 1986).
Additionally, the parties have failed to recognize the clear distinction between "gross" need, as calculated with reference to subparagraphs (b)2, 4 and 7, and "net" need, as calculated with reference to subparagraph (b)9 of Rule 10- 5.11(21). Boca Raton Artificial Kidney Center, Inc. v. Department of Health and Rehabilitative Services, 493 So.2d 1055 (Fla. 1st DCA 1986). Since subparagraph (b)9 appears reasonably intended to calculate a realistic estimate of "net" (or actual) need for the horizon year, the most up-to-date information should be used for purposes of subparagraph (b)9 in order to insure
that the horizon population will not be over or under served. Where, as here, a de novo review of a CON application is undertaken, there is no rational reason for ignoring or failing to consider the licensed and approved bed inventory that exists at the time of hearing. McDonald v. Department of Banking and Finance,
346 So.2d 569 (Fla. 1st DCA 1977); Boca Raton Artificial Kidney Center v. Department of Health and Rehabilitative Services, 475 So.2d 260 (Fla. 1st DCA 1985).
The calculation performed in the above Findings of Fact 6-23 utilizing Rule 10-5.11(21)(b), Florida Administrative Code, does not identify a need for community nursing home beds in Lee County for the planning horizon here at issue. To the contrary, a surplus of beds will exist. Therefore, Petitioner has not met its burden of proof regarding the central issue in this case, as identified by stipulation of the parties.
Notwithstanding a lack of need, subparagraph (b)10 provides a mechanism whereby an applicant may show special circumstances which might support an application. However, Petitioner has failed to show, by competent substantial evidence, any basis for the application of this provision in this case.
Petitioner asserts that despite its failure to establish need or special circumstances, its application should be approved because it will lead to "cost containment" since there would be no additional capital expenditures
associated with the additional 42 beds it has already constructed and now seeks only to license. In effect, Petitioner argues that need, special circumstances and other criteria here at issue should be ignored, and the decision based solely on the issue of "cost containment". This argument ignores the clear legislative purpose behind CON review which is to provide for a balanced consideration of all relevant criteria. North Ridge General Hospital, Inc. v. Department of Health and Rehabilitative Services, 478 So.2d 1138 (Fla. 1st DCA 1985); Department of Health and Rehabilitative Services v. Johnson and Johnson Home Health Care, Inc., 447 So.2d 361 (Fla. 1st DCA 1984). Where the parties have identified "need" as the central issue against which other criteria must be measured, approval should not be given when, as here, need has not been established.
Based upon the foregoing, it is recommended that Respondent issue a Final Order denying Petitioner's application for CON 4179.
DONE AND ENTERED this 2nd day of March, 1987 in Tallahassee, Florida.
DONALD D. CONN
Filed with the Clerk of the Division of Administrative Hearings this 2nd day of March, 1987.
APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-0047
4. Rejected in Findings of Fact 12, 13.
9-11 Rejected in Findings of Fact 6-23.
12-19 Rejected in Findings of Fact 26, 27 and otherwise not based on competent substantial evidence.
20 Rejected in Findings of Fact 10, 11.
21-22 Rejected as irrelevant, unnecessary and not based on competent substantial evidence.
25-32 Rejected as irrelevant and unnecessary.
33-36 Rejected as simply a summation of testimony and statement of position rather than a finding of fact; otherwise cumulative and unnecessary.
37-38 Rejected as not based on competent substantial evidence.
39-44 Rejected as irrelevant and unnecessary.
45-47 Rejected in Findings of Fact 12, 13 and otherwise irrelevant and not based on competent substantial evidence.
W. David Watkins, Esquire Post Office Box 6507 Tallahassee, Fl 32314-6507
John F. Gilroy, Esquire Richard Patterson, Esquire Department of Health and
Rehabilitative Services 1323 Winewood Blvd.
Gregory L. Coler Secretary
1323 Winewood Blvd.
Rehabilitative Services 1323 Winewood Blvd.
