STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

GULF SOUTH MEDICAL ENTERPRISES ) and FIRST ASSEMBLY OF GOD, ) d/b/a OASIS HEALTHCARE, )

SEMINOLE COUNTY, )

)

Petitioner, )

)

vs. ) CASE NO. 86-0638

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent. )

)

RECOMMENDED ORDER

Final hearing in this action was held on November 17, 1987, in Tallahassee, Florida, before Mary Clark, Hearing Officer of the Division of Administrative Hearings.

Prior to hearing, the Petitioners in Cases No. 86-0355 and 86-0638, R. H. Little and Associates, Inc., and Gulf South Medical Enterprises, respectively, filed Notices of Voluntary Dismissal. The hearing, therefore, proceeded with a single Petitioner, Health Quest Corporation, in Case No. 86-0136.

The parties were represented as follows:

For Petitioner: Steven W. Huss, Esquire

1017 Thomasville Road, Suite C Tallahassee, Florida 32303

For Respondent: Robert L. Powell, Esquire

Department of Health and Rehabilitative Services

1323 Winewood Boulevard

Tallahassee, Florida 32301 PRELIMINARY STATEMENT

This proceeding arose from the determination by the Department of Health and Rehabilitative Services ("HRS") that there was no need for additional nursing home beds in Seminole County, District VII, for the July 1985 batching cycle. By letter dated December 17, 1985, HRS informed Health Quest Corporation (Health Quest) that its application for Certificate of Need for a 120-bed nursing home was denied.

Several continuances were granted to accommodate the unopposed requests of the parties. The several other applicants in this batching cycle withdrew, leaving a single application and limited issues.

At the hearing, Health Quest presented two witnesses: Kevin Krisher was qualified without objection as an expert in health care and nursing home development and planning; Robert Weller, Ph.D., was qualified without objection as an expert in demography. Twenty-eight exhibits were offered and received into evidence.

HRS presented the testimony of a single witness, Reid Jaffe, who was qualified without objection as an expert in health planning and in Florida certificate of need review. A single exhibit, HRS' calculation of need, was received into evidence.

After the hearing, and preparation of a transcript, both parties submitted proposed recommended orders. Rulings on each proposed finding of fact are found in the attached Appendix.

ISSUE

The general issue is whether Health Quest is entitled to a Certificate of Need for nursing home beds in Seminole County for the July 1985 batching cycle.

The more limited issues on which this case focused are whether July 1985, or July 1987, is the appropriate release date for population data; whether the base period for "current population" is January 1985, or July 1985; and whether the applicant could, at the final hearing, scale down its request for beds to a number substantially less than the 120 beds requested in its July 1985 application.

FINDINGS OF FACT

1. Health Quest Corporation maintains its home office in South Bend, Indiana. As described by its Vice-President for Planning, the company is a moderately-sized, long-term care and assisted living company.

2. Health Quest has been in existence since 1969, under its President and CEO, Larry Garratoni. The Company has approximately twelve facilities, including three Florida facilities: a 120-bed freestanding nursing home, a 107- bed nursing home with 80 attached assisted living units, and a facility in Sarasota with 300 retirement units.

   
   

3. In July 1985, Health Quest filed its application for a new 120-bed nursing home in Seminole County, HRS District VII.

   
   

   After an exchange of correspondence and information relating to omissions to the application, the application was deemed complete effective September 30, 1985, and the application was denied on December 17, 1985.

   
   

4. At the final hearing, Health Quest presented two exhibits with updated information to support its original 120-bed application, and updated information to support a scaled-down 60-bed Certificate of Need. These two exhibits, Petitioner's Exhibits 10 and 11, were admitted over HRS objection that they constituted amendments to the completed application, prohibited by HRS Rule 10- 5.008(3), Florida Administrative Code.

   
   

   Health Quest argued that the updates were intended to present a more current description of the cost structure and operating structure that Health Quest would be using, and to support partial approval of the original application. The relevance of these documents is addressed in my conclusions of law, below.

   
   

5. The basis for HRS' denial of the Health Quest original application is, "... insufficient need for an additional 120 bed nursing home in the subdistrict." (Petitioner's No. 7)

   
   

6. A determination of need in this case depends largely upon the proper application of the methodology described in HRS Rule 10-5.011(1)(k), Florida Administrative Code, which provides, in pertinent part:

   
   

   1. Community Nursing Home Beds. A community nursing home bed is a nursing home bed not located within a life care facility certified under Chapter 651, Florida Statutes.

      1. Departmental Goal. The Department will consider applications for community nursing home beds in context with applicable statutory and rule criteria. The Department will not normally approve applications for new or additional community nursing home beds in any departmental service district if approval of an application would cause the number of community nursing home beds in that departmental service district to exceed the number of community nursing home beds calculated by the methodology described in sub-

         paragraphs (k)2., 3., and 4., of this rule.

      2. Need Methodology. In addition to other relevant statutory and rule criteria to be used in considering the allocation of new or additional community nursing home beds, the Department will determine if there is a projected need for new or additional beds 3 years in the future according to the methodology specified under Sub-subparagraphs

         1. through j. This methodology provides for adjustments to current community nursing home bed rates based upon expected changes in the proportion of district residents age 75+ and the current utilization of community nursing home beds in the subdistricts designated by local health councils. In districts with a high proportion of elderly residents living in poverty, the methodology specifies a minimum bed rate.

            1. A = (POPA x BA) + (POPB x BB) Where:

               
               

               A is the district's age- adjusted number of community nursing home beds for the review cycle for which a projection is being made.

               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.

               BA is the estimated current bed rate for the population age 65-74 years in the relevant district.

               BB is the estimated current bed rate for the population age

               75 years and over in the relevant district.

            2. BA = LB/(POPC + (6 x POPD) Where:

               
               

               LB is the number of licensed community nursing home beds in the relevant district.

               POPC is the current population age 65-74 years.

               POPD is the current population age

               75 years and over.

               
               

            3. BB 6 x BA

               
               

            4. SA A x (LBD/LB) x (OR/.90) Where:

         
         

         SA is the preliminary subdistrict allocation of community nursing home beds.

         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 appli- cations submitted for the July batching cycle shall be based upon occupancy rate data for the months of October through March pre- ceeding that cycle; appli- cations submitted for the January batching cycle

         shall be based upon occu- pancy rate data for the months of April through September proceeding the cycle. For the purposes

         of this rule, the occupancy data to be considered shall be that collected by the Department's Office of Health Planning and Development or a contractor

         assigned to collect the data.

         * * *

         
         

7. For purposes of applying the methodology, the parties have agreed to the following factors:

   
   

   1. Occupancy rate (OR) is .9366.

      
      

   2. Licensed beds in the subdistrict (LBD) is 725.

   3. The number of approved beds in the subdistrict is 179

      
      

   4. Licensed beds in the district (LB) is 4425.

      
      

   5. July 1988 is the planning horizon.

   
   

   (Petitioner's Exhibit No. 12, Respondent's Exhibit No. 1, Prehearing Stipulation filed 11/13/87).

   
   

8. While the parties have not agreed which figures are applicable, they have stipulated to the population figures for the following periods:

   
   

   (1)	January	1, 1988,	as	of July	1, 1985:
   	Pop A:	93,987
   	Pop B:	56,612
   (2)	July 1,	1985, as	of	July 1,	1985:
   	Pop C:	96,295
   	Pop D:	58,307
   (3)	July 1,	1988, as	of	July 1,	1985:
   	Pop A:	110,788
   	Pop B:	69,020
   (4)	January	1, 1985,	as	of August 1987:
   	Pop C:	96,741
   	Pop D:	57,545
   (5)	July 1,	1985, as	of	August 1987:
   	Pop C:	100, 276
   	Pop D:	60,133
   (6)	July 1,	1988, as	of	August 1987:
   	Pop A:	119, 915
   	Pop B:	75,704

   
   

   (Prehearing Stipulation filed 11/13/87)

   
   

9. The source of the population figures are the official estimates and projections adopted by the Office of the Governor. These are prepared by the Bureau of Economic and Business Research at the University of Florida and are released periodically. Because better data is available, the July 1987 releases of estimates and projections is more accurate than the July 1985 releases of estimates and projections. The rule does not specify which version must be used.

   
   

   HRS relied on the July 1985 releases that were available at the time the application was first received. HRS did not present evidence to support that policy in this proceeding. HRS does include updated data for other factors in the methodology, for example, occupancy rate and number of licensed beds.

   
   

   Health Quest advocates the use of the July 1987 releases that were available at the time of hearing and presented competent expert testimony from a demographer to support its position.

10. The parties also disagree on the base period for current population, ages 65-74 and 75+ (POPC and POPD).

    
    

    With the exception of the January 1987 batching cycle, HRS' Certificate of Need review staff have consistently applied a three year planning horizon; that is, the base period is considered the date of the batching cycle (here, July 1985). It appears that in its state agency action report, HRS originally used January 1985 as the current population base period. HRS' Office of Comprehensive Health Planning, a separate office within the agency, uses a base period six months prior to the application date in its published semiannual bed need reports.

    
    

    Health Quest advocates use of the earlier base period and argues that it is consistent with good health planning because the earlier period is the midpoint of the six-month occupancy period prescribed by the rule.

    
    

    The rule does not explicitly state that current population is determined as of the batching cycle, but the context strongly supports that interpretation, as discussed in the conclusions of law.

    
    

11. Health Quest submitted four iterations of the methodology, including one utilizing the July 1985 base population, a July 1987 release date, and the other values stipulated by the parties. (Petitioner's Exhibit 12). This is adopted as follows, with a resulting bed need of 53.58:

NET BED ALLOCATION: SEMINOLE COUNTY, 7/88 PLANNING HORIZON

(Using 7/85 base population and the 7/87 population set) 1. BA = LB + 4425

POPC + (6 X POPD) 100,276 + (6 x 60,133)

= 4,425 = 9.597 Per 1000

461,074

2. BB = 6 x BA = 6 x 9.597 = 57.582 Per 1000

3. A = (POPA x BA) + (POPB x BB) = (119,915 x 9.597/K)

+ (75,704 x 57.582/K) =

1,150.82 + 4,359.19 = 5,510.01

4. SA = A x LBD X OR = 5,510.01 x 725

LB .90 4,425

x 0.9366 x 939.48

.90

5. Net Bed Allocation SA - (LBD + (AB x .90) = 939.48 - [725 + (179 x .90)]

= 939.48 - 886.10 53.38

1. The Local Health Council of East Central Florida (District VII,) has adopted a standard that the minimum size of new nursing homes should be 120 beds

   in all counties, except Osceola, where the minimum size should be 60 beds. (Petitioner's Exhibit 26).

   
   

   Health Quest's expert conceded that a 120-bed home is more efficient to operate. (Transcript, p. 77)

   
   

2. It is a generally accepted standard that nursing home units should be organized in groups of 60 beds. Health Quest's expert urged that if a need for

   54 beds is found, the approved number should be rounded up to 60 beds.

   
   

3. With the exception of need and the above-mentioned policy of the District Health Council, Health Quest's proposed facility (both 120-bed and 60- bed version) meets the applicable criteria for Certificate of Need approval, including quality of care and financial feasibility. In advance of hearing, the parties stipulated that most non-need related criteria were met. (Prehearing stipulations filed 11/13/87 and 11/16/87). In addition, .Health Quest presented perfunctory, unrebutted testimony with regard to the facility's compliance with statutory and rule criteria.

   
   

4. Approval of either a 60-bed or 120-bed new nursing home in Seminole County would result in a surplus of beds for the July 1988 planning horizon. Health Quest did not present evidence of special circumstances to justify approval of additional beds, as provided in Rule 10-5.011(1)(k)2.j., Florida Administrative Code.

   
   

   CONCLUSIONS OF LAW

   
   

5. The Division of Administrative Hearings has jurisdiction over the parties and subject matter in this proceeding pursuant to Sections 120.57(1) and 381.494, Florida Statutes.

   
   

6. The dispositive issue in this case is whether a proper application of the need methodology in Rule 10-5.011(1)(k), Florida Administrative Code, would result in a need for additional nursing home beds in Seminole County, as requested by Health Quest.

   
   

7. It is not necessary to determine whether Health Quest's application could be updated at hearing to support a 60-bed certificate, as the result of the determination of need is less than 60 beds. The Department is, however, authorized to grant a Certificate of Need for identifiable portions of a project. Subsection 381.709(4)(b), Florida Statutes (1987). Competent testimony established that 60 beds is an identifiable portion of a project. See Finding of Fact No. 13.

   
   

8. HRS' use of outdated population data in the rule methodology is rejected as an irrational and non-explicated policy. McDonald v. Department of Banking and Finance, 346 So.2d 569 (Fla. 1st DCA 1979).

   
   

9. In interpreting rules, words should be given their plain and ordinary meaning. Boca Raton Artificial Kidney Center, Inc. v. Dept. of Health and Rehabilitative Services, 493 So.2d 1055, 1057 (Fla. 1st DCA 1986). Health Quest's use of January 1985 as a "current population" base is rejected as contrary to the plain meeting of the rule. While "current" is not defined, nothing in the context of the rule suggests that "current" means a point in time six months prior to the batching cycle. The three year horizon is not specifically defined either, but both parties readily accept that period to be three years from the batching cycle. Since the factors, POPA and POPB, are

   defined as population projected three years in the future, and POPC and POPD are current population, the adoption of January 1985 base would result in a 3 1/2 year planning horizon.

   
   

10. Approval of either the 60-bed application or the 120-bed application would result in a surplus of beds in Seminole County in the 1988 planning horizon. The need methodology, properly applied, results in a net bed need of

    54 beds.

    
    

11. For good reason, Health Quest urges that this need be "rounded-up" to an approval of 60 beds. The economy and efficiency of 60-bed unit increments is well established in the record.

    
    

12. However, there are other practical considerations which outweigh this argument, beyond the fact that a bed surplus would result. An approval of less than 120 beds in Seminole County would be contrary to the district plan of the local health council. Health Quest presented neither competent evidence nor persuasive argument to overcome that conflict. Consistency with the local health plan is a significant consideration in Certificate of Need review under both the 1987 and prior version of the statute. See Section 381.494(8)(d), Florida Statutes (1985) and Section 381.709(4)(b), Florida Statutes (1987).

    
    

13. Further, to the extent that denial of a Certificate of Need in this case would result in a need for 54 beds in 1988, it is wholly unrealistic to anticipate that the need will be met this year by this applicant. The fast- track schedule prescribed in the 1987 revisions to the Certificate of Need review process (See Section 381.709, Florida Statutes), should help eliminate the consumption of the three year planning horizon by various delays, however justified.

    
    

14. Health Quest has failed to meet its burden of proving entitlement to the Certificate of Need it is seeking. Boca Raton Article Kidney Center, Inc.

1. Fla. Dept. of HRS, 475 So.2d 260, 262 (Fla. 1st DCA 1985).

   
   

   RECOMMENDATION

   
   

   Based upon the foregoing, it is hereby RECOMMENDED:

   1. that Health Quest's application for Certification of Need for nursing home beds in Seminole County be denied.

      
      

   2. that the applications by R. H. Little and Gulf South be dismissed, in accordance with those parties' earlier notices of voluntary dismissal.

DONE and RECOMMENDED this 15th day of March, 1988, in Tallahassee, Florida.

MARY CLARK

Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 15th day of March, 1988.

APPENDIX TO RECOMMENDED ORDER, CASE NOS. 86-0136, 86-0355, 86-0638

The following constitute my specific rulings on the findings of fact proposed by the parties.

Petitioner's Proposed Findings of Fact

1. Addressed in Preliminary Statement.

2. Addressed in paragraph's 1 and 2.

3. Adopted in paragraph 2.

4-5. Rejected as unnecessary.

6-12. Adopted in substance in paragraph 3. 13-14. Rejected as unnecessary

15-16. Adopted in paragraph 4.

17-72. Rejected as unnecessary, except as summarized in paragraph 14.

1. Rejected as unnecessary

2. Adopted in paragraph 7 and 8. 75-76. Adopted in paragraph 10. 78-80. Adopted in paragraph 7.

81-82. Rejected as unnecessary.

1. Rejected as contrary to the weight of evidence and contrary to the rule.

2. Adopted in paragraph 11, except for the conclusion relating to "rounding-up."

3. Rejected as unnecessary.

86-93. Adopted in substance in paragraph 9.

94. Rejected as argument.

95-96. Rejected as unnecessary.

1. Rejected as cumulative and unnecessary.

2. Rejected as irrelevant.

3. Rejected as contrary to the rule.

4. Rejected as irrelevant. Further, while HRS has used the 3-1/2 year horizon in a single batching cycle, that horizon in CON review has not been accepted by HRS.

5. Rejected as irrelevant.

6. Adopted in paragraph 10.

7. Rejected as contrary to the rule. However, the sentence regarding need calculation in the SAAR is adopted in paragraph 10.

8. Rejected as cumulative and irrelevant.

105-170. Rejected as unnecessary. That Health Quest meets the criteria except those related to need is adopted in summary, in paragraph 14.

Respondent's Proposed Findings of Fact

1. Adopted in paragraph 3.

2. Adopted in paragraph 5.

3. Adopted in paragraph 6.

4. Rejected as contrary to the evidence and contrary to the rule.

5. Rejected as contrary to the evidence.

6. Rejected as irrelevant, except as addressed in paragraph 4.

7. Adopted in paragraph 7.

8. Adopted in paragraph 10.

9. Rejected as irrelevant.

10. Adopted in paragraph 15.

COPIES FURNISHED:

Robert Powell, Esquire Department of Health and

Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32399-0700

Steven W. Huss, Esquire 1017 Thomasville Road

Tallahassee, Florida 32303

Gregory L. Coler Secretary

Department of Health and Rehabilitative Services

1323 Winewood Boulevard

Tallahassee, Florida 32399-0700

John Miller General Counsel

Department of Health and Rehabilitative Services

1323 Winewood Boulevard

Tallahassee, Florida 32399-0700

Sam Power, Clerk Department of Health and

Rehabilitative Services 1323 Winewood Boulevard Building One, Suite 407

Tallahassee, Florida 32399-0700

Docket for Case No: 86-000136

Orders for Case No: 86-000136