STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

MAPLE LEAF OF LEE COUNTY HEALTH )

CARE, INC., a wholly owned )

subsidiary of HEALTH CARE AND ) RETIREMENT CORPORATION OF AMERICA, )

)

Petitioner, )

)

vs. ) CASE NO. 87-0693

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES and )

GENE LYNN d/b/a CAREAGE )

SOUTHWEST HEALTHCARE CENTER, )

)

Respondents. )

) HEALTH QUEST CORPORATION (LEE )

COUNTY), )

)

Petitioner, )

)

vs. ) CASE NO. 87-0694

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent. )

) FORUM GROUP, INC., Sponsor of ) Retirement Living of Lee County, )

)

Petitioner, )

)

vs. ) CASE NO. 87-0697

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES and ) CAREAGE INVESTMENT, INC., sponsor ) of CAREAGE SOUTHWEST HEALTHCARE ) CENTER, )

)

Respondents. )

) HILLHAVEN, INC., d/b/a HILLHAVEN ) HEALTH CARE CENTER-LEE COUNTY, )

)

Petitioner, )

)

vs. ) CASE NO. 87-0698

) STATE OF FLORIDA, DEPARTMENT OF ) HEALTH AND REHABILITATIVE SERVICES, ) SERVICES and CAREAGE SOUTHWEST ) HEALTHCARE, )

)

Respondents. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, Diane A. Grubbs, held a formal hearing in the above- styled matter on December 1-4, 7-11, and 14-16, 1987, in Tallahassee, Florida.

On October 26, 1988, due to the unavailability of Hearing Officer Grubbs, the above-styled matter was assigned to Hearing Officer William J. Kendrick.

Section 120.57(1)(b)11, Florida Statutes.

APPEARANCES

For Petitioner Alfred W. Clark, Esquire Maple Leaf of Lee Post Office Box 623

County Health Care Inc.: Tallahassee, Florida 32302

For Petitioner R. Terry Rigsby, Esquire Forum Group, Inc.: J. David Holder, Esquire

325 John Knox Road, Suite C-135 Tallahassee, Florida 32303

For Petitioner Steven W. Huss, Esquire

Health Quest 1017 Thomasville Road, Suite C

Corporation: Tallahassee, Florida 32303

For Petitioner C. Gary Williams, Esquire

Hillhaven, Inc. R. Stan Peeler, Esquire Post Office Box 391 Tallahassee, Florida 32302

Charles Loeser, Esquire

315 West Jefferson Boulevard South Bend, Indiana 46601-1586

For Respondent Robert Cohen, Esquire Gene E. Lynn d/b/a John Gilroy, Esquire Careage Southeast Post Office Box 10095

Healthcare Center: Tallahassee, Florida 32302

For Respondent Edgar Lee Elzie, Esquire Department of Health 215 South Monroe Street Rehabilitative Suite 804

Services: Tallahassee, Florida 32301

ISSUE

Whether the Department of Health and Rehabilitative Services should approve the application for certificate of need (CON) of any one or more of five applicants for community nursing home beds in Lee County for the July 1989 planning horizon.

PRELIMINARY STATEMENT

This cause was initiated by the filing of petitions for hearing challenging the proposed grant of a certificate of need (CON) to Gene Lynn d/b/a Careage Southwest Healthcare Center (Careage) and the proposed denial of petitioners' applications for certificates of need for nursing hone beds in District VIII, Lee County, Florida. Initially, ten petitions were consolidated; however, six of the petitions (Case nos. 87-0695, 87-0696, 87-0699, 87-0700, 87- 0701, and 87-0925) were voluntarily dismissed prior to hearing. Hillhaven, Inc. d/b/a Hillhaven Health Care Center-Lee County (Hillhaven) filed a partial notice of voluntary dismissal whereby Hillhaven dismissed the portion of its petition challenging the preliminary approval by the Department of Health and Rehabilitative Services (Department) of CON Application No. 4748 filed by Careage. Although the Department proposed to award Careage only 60 of the 120 beds sought by it, Careage did not file a petition challenging the denial of its application for 120 beds, but appeared as a respondent to defend the Department's decision to award it 60 beds.

At the hearing, petitioner Maple Leaf of Lee County Health Care, Inc., a wholly owned subsidiary of Health Care and Retirement Corporation of America (HCR), presented the testimony of Paul Sieben, an expert in architecture and construction cost estimation; Patrick Michael Dray, an expert in nursing home administration and operation; Brenda Kennedy; Bruce Schroeder, an expert in accounting and financial feasibility of nursing home projects; Milo Bishop, an expert in health planning; and Carolyn S. Lookabill, an expert in the development of programs for the care of Alzheimer's disease and related disorders. HCR Exhibits 1-14, 16-18, 20, and 22-24 were received into evidence.

Petitioner Forum Group, Inc. (Forum), presented the testimony of Rita McDonald, an expert in nursing home operation and staffing, and quality assurance associated with nursing home operation; Raymond G. Lewis, an expert in health care accounting as it relates to third party reimbursement; Donald I. Craig, Jr., an expert In health care planning and nursing home development; David Reynolds, an expert in architecture, design and construction Management of nursing homes and construction cost estimating including equipment costs for nursing homes; David Warner, an expert in health care planning, including need analysis and health care finance; and David Yantner, an expert in long-term care finance, including financial feasibility forecasting. Forum Exhibits 1-5 and 7-

11 were received into evidence.

Petitioner, Health Quest Corporation (Health Quest), presented the testimony of Paul E. Reilly, an expert in nursing home design, architecture, construction and equipment costs; Fran Neuse, an expert in gerontological nursing and nursing hole quality of care; and Kevin Krisher, an expert in nursing home planning and development. Health Quest Exhibits 1-16, 18-19, and 21-24 were received into evidence.

Petitioner Hillhaven, Inc. (Hillhaven), presented the testimony of Richard

1. Ebersole, an expert in nursing home development and operations; Linda

   McClanna, an expert in nursing home operations, including quality assurance and quality of care; Dan Leon, an expert in nursing home design, and construction and equipment costs; Stephen Martin, an expert in health care accounting and finance, and accounting feasibility and reimbursement; and, Julie Towne, an expert in health care planning and development of certificate of need applications. Hillhaven Exhibits 1A, 1, 3, and 5-13 were received into evidence.

   
   

   Respondent, Gene Lynn, d/b/a Careage Southwest Health Center (Careage), presented the testimony of Carmen Steiner, an expert In nursing home administration and operations, including staffing and quality assurance; Art Heitlauf, an expert in longterm finance; William T. Loder; Marlin Huisinga, an expert in nursing home design and architecture; Frank Cushing, an expert in nursing home construction and project development costs; and Deborah J. Krueger, an expert in health care planning and finance. Careage Exhibits 1-4 and 6-12 were received into evidence.

   
   

   Respondent, Department of Health and Rehabilitative Services (Department), presented the testimony of Elizabeth Dudek, an expert in health planning as related to certificate of need review; and Robert W. Sharpe, an expert in health planning. Department Exhibits 1-13 were received into evidence.

   
   

   Following the hearing, the parties entered into a posthearing stipulation which provides as follows:

   
   

   1. The parties are not in agreement as to whether the 1986 or 1987 statutes regarding certificates of need are applicable in this case. However, if the 1986 statutes are applicable, the parties agree that the following statutory criteria were either met by each of the respective applicants or that said criteria is inapplicable:

      Section 381.494(6)(c)4, 6, 7, 10, 11 and

      384.494(6)(d), Florida Statutes.

      
      

   2. The parties agree that the following portions of Section 381.494(6)(c)8 were met by each of the applicants or that said criteria are inapplicable:

      the effects the project will have on clinical needs of health professional training programs in the service district; the extent to which the services will be accessible to schools for health professions in the service district for training purposes if such services are available in a limited number of facilities; the availability of alternative uses of such resources for the provision of other health services; ...

      
      

   3. The parties further stipulate and agree that if the 1987 statute is applicable, the following statutory criteria were either

      met by each of the respective applicants or that said criteria are inapplicable:

      Section 381.705(1)(d),(f),(g),

      (k) and 381.705(2), Florida Statutes.

      
      

   4. The parties also agree that with regard to Section 381.705(1)(h), the following portion

of such section was either met by each of the respective applicants or that said criteria is inapplicable:

the effects the project will have on clinical needs of health professional training programs in the service district; the extent to which the services will be accessible to schools for health professions

in the service district for training purposes if such services are available in a limited number of facilities; the availability of alternative uses of such resources for the provision of other health services; ...

The transcript of hearing was filed February 10, 1988, and the parties were granted leave until March 8, 1988, to file proposed findings of fact. Under the circumstances, the parties waived the requirement that a recommended order be rendered within 30 days after the transcript is filed. Rule 221-6.31, Florida Administrative Code. The parties' proposed findings have been addressed in the appendix to this recommended order.

FINDINGS OF FACT

The Applicants

1. Applications for certificates of need (CON) for nursing homes are accepted by the Department of Health and Rehabilitative Services (Department) in batching cycles and are subject to competitive review. The Department comparatively reviewed and analyzed 13 individual applications for proposed nursing services for District VIII, Lee County, in the July, 1986 nursing home batching cycle. Five of those applications are at issue for purposes of this proceeding.

   
   

2. Pertinent to this proceeding, petitioner, Maple Leaf of Lee County Health Care, Inc., a wholly owned subsidiary of Health Care and Retirement Corporation of America (HCR filed an application for a 120-bed nursing home (CON 4746), petitioner Forum Group, Inc. (Forum), filed an application for a 60-bed nursing home (CON 4755), petitioner, Health Quest Corporation (Health Quest), filed an application for a 60-bed nursing home (CON 4747), petitioner, Hillhaven, Inc., d/b/a Hillhaven Health Care Center Lee County (Hillhaven) filed an application for a 120-bed nursing home (CON 4756), and respondent, Gene Lynn d/b/a Careage Southwest Healthcare Center (Careage) filed an application for a 120-bed nursing home (CON 4748). Each of these applications was timely filed.

   
   

   The Department's "preliminary" action

   
   

3. The Department is the state agency charged with implementing and regulating the CON program for medical facilities and services in Florida. Within the Department, the Office of Community Medical Facilities is responsible for the review of CON applications and provides a recommendation for approval or disapproval after its analysis is concluded. The Department assigned the

   subject District VIII applications for the July, 1986 hatching cycle to Medical Facilities Consultant Robert May for review. Mr. May was supervised in his work by Elizabeth Dudek, an experienced Medical Facilities Consultant Supervisor, who has reviewed or supervised the review of approximately 1200 CON applications.

   
   

4. Robert Nay and Elizabeth Dudek concurred in their evaluations of the applications and recommended that Hillhaven's application be approved for 60 beds in Lee County. This recommendation was forwarded to the Administrator of the Office of Community Medical Facilities, Robert E. Naryanski, who also occurred with the recommendation on or about December 20, 1986, and forwarded the recommendation to Marta Hardy, Deputy Assistant Secretary for Health Planning and Development, for final approval. An unusual set of circumstances evolved from that approximate point in time with respect to the applications at issue.

   
   

5. Sometime in late November 1986 Marta Hardy talked to Robert Sharpe, Administrator of the Office of Comprehensive Health Planning, concerning the applications in this batching cycle and stated that she intended to involve him in the review procedure. In late December, she asked Mr. Sharpe to review the applications for four of the counties in the cycle, including Lee County. Mr. Sharpe is in a separate and distinct part of the Department, which reports to the Deputy Assistant Secretary but does not, in the ordinary course of operations, review certificate of need applications. Mr. Sharpe's involvement with reviewing nursing home applications had never occurred before and has not occurred since. However, Mr. Sharpe has been involved on limited occasions with reviewing hospital CON applications in preparation for administrative hearings.

   
   

6. Careage had a CON application in each of the four districts that Mr. Sharpe was asked to review. Mr. Sharpe was not asked to review any other districts other than the four districts in which Careage had applications pending. In Mr. Sharpe's conversation with Ms. Hardy, Ms. Hardy specifically mentioned Careage while expressing her concern about the Department's ability to discriminate the best applicants on the basis of quality of care. Ms. Hardy mentioned no other applicant by name. Mr. Sharpe, in all circumstances, recommended Careage for approval.

   
   

7. Mr. Sharpe did not attempt to do a complete re-review the applications, and did not redo any part of the review that had been performed by the Office of Community Medical Facilities specifically the need calculations and comparing the applications to the statutory review criteria. Mr. Sharpe did not apply statutory review criteria in his review of the applications because it had been determined that all the applicants were minimally qualified and met the statutory review criteria. Mr. Sharpe felt that the responsibility of his office was simply to do a comparative review to determine the best applicant.

   
   

8. Mr. Sharpe placed information in the applications into what has been termed a "matrix." The purpose of the matrix was to present the information in the applications in a format which would facilitate a comparative analysis based on a greater number of factors than had previously been considered. Traditionally, the predominant factors utilized by the Department in reviewing applications were construction costs, Medicaid participation percentages, proposed sites, and charges. The matrix developed by Mr. Sharpe included additional factors which he felt would better address the quality of care to be provided, such as the size of facility, the size of the patient rooms, the amenities available to the patients and their families, the type and level of staffing, availability of special programs, and operating costs. By including a greater number of factors in the matrix, more information was considered in

   selecting the best applicant. As a result, the factors that traditionally had been considered by the Department were given relatively less weight. There was no notice to the applicants of this change in practice. Further, although all the information considered by Mr. Sharpe was taken from the applications and generally required to be in the application, the applicants reported the information differently, making a direct "apples-to-apples" comparison difficult.

   
   

9. Mr. Sharpe's review of the applications spanned approximately five to eight days. Mr. Sharpe's staff in the information on the matrix from the applications, and, although Mr. Sharpe had personally reviewed all the applications, Mr. Sharpe did not personally check the information placed on matrix for accuracy. The Office of Community Medical Facilities' initial review covered a period of approximately six months. There was no evidence that the duties and responsibilities of the Office of Community Medical Facilities were not carried out in a thorough and appropriate manner. Ms. Dudek has more experience in reviewing CON applications than Mr. Sharpe, and she took into account, among other review criteria requirements, the type programs offered by the applicant and the quality of care the applicant had demonstrated and was capable of providing. Mr. Sharpe never talked to Ms. Dudek to find out the basis for her recommendation because he felt his responsibility was to do an independent review.

   
   

10. Robert Sharpe reported his findings with regard to Lee County to Marta Hardy who apparently accepted Mr. Sharpe's recommendation on or about January 7, 1987, approving Careage's application for 60 beds and denying all others.

    
    

11. On or about January 23, 1987, in the Florida Administrative Weekly, it was published that Careage was approved fob a 120-bed facility in Lee County. Actually HRS approved Careage for a 60-bed facility; the 120-bed figure in the Florida Administrative Weekly was erroneous.

    
    

12. As a result of a new administration and Bob Griffin succeeding Ms. Hardy as Deputy Secretary in the Office of Health Planning, and due to his concerns about the unique manner in which these applications were reviewed and a decision made, another review of the applications for Lee County was conducted. The Office of Community Medical Facilities, the office originally responsible for reviewing the applications, was asked to do this review. This third review was conducted during the summer of 1987 by Bob May while this case was pending before the Division of Administrative Hearings. In this third review, a matrix was also used, but not the identical matrix previously used by Mr. Sharpe. Indeed, the Office of Community Medical Facilities was instructed not to look at what Mr. Sharpe's office had done. The review resulted in a decision that HRS would maintain its position of supporting partial approval of the Careage application for 60 beds. By letter dated September 4, 1987, the parties were formally notified of the HRS decision and a Correction Notice was published in the Florida Administrative Weekly indicating that the notice published in January, 1987, stating that Careage had received a CON for 120 beds, should have shown a partial approval of 60 beds, and a denial of 60 beds.

    
    

13. HCR, Forum, Health Quest and Hillhaven timely contested initial approval of the Careage application and their own respective denials. Careage and HRS are the respondents. Hillhaven, prior to final hearing, dismissed its case contesting the Careage approval for 60 beds, and in this proceeding contends that Hillhaven should be awarded a certificate of need because there is

    a bed need in excess of 60 beds in Lee County. Careage did not timely contest the denial of the 120 beds requested in its original application. Health Care and Retirement Corporation of America

    
    

14. HCR, through its wholly owned subsidiary, Maple Leaf of Lee County Health Care, Inc., proposes to construct a 120-bed community nursing home in Lee County, Florida. At the time its application was submitted, HCR had not selected a site on the proposed facility, but at hearing proposed to locate it in the Ft. Myers area.

    
    

15. Currently, HCR owns and operates 92 nursing homes in 19 different states, including seven within the State of Florida. Its existing Florida facilities are Pasadena Manor Nursing Home (South Pasadena, Florida), Community Convalescent Center (Plant City Florida), Kensington Manor (Sarasota, Florida), Jacaranda Manor (St. Petersburg, Florida) Wakulla Manor (Crawfordville, Florida, Heartland of St. Petersburg (St. Petersburg, Florida, and Rosedale Manor (St. Petersburg, Florida). Each of these facilities received superior ratings on their latest licensure and certification survey with the exception of Heartland and Rosedale, which received a standard and conditional rating respectively. Significantly, the conditional rating assigned to the Rosedale facility occurred less than six months after that facility was acquired by HCR, and all deficiencies were corrected within 19 days of the survey.

    
    

16. HCR's current proposal for a 120-bed facility will be a one-story structure containing 40,000 gross square feet, including 2,000 square feet for an ancillary adult day care center. It will have 58 semi-private rooms with half-bath (toilet and sink) and four private rooms with full bath (toilet, sink and shower) located within four patient wings, two nursing stations, two dining rooms, central bathing facilities, beauty- barber shop, quite lounge, physical therapy room, occupational therapy room, multi-purpose rooms, outdoor patio areas and the other standard functional elements required to meet licensure standards. In all, the proposed facility meets or exceeds state requirements for the construction of nursing homes.

    
    

17. HCR proposes to dedicate one wing (14 semi-private and 1 private room) of its facility to the care of patients suffering from Alzheimer's Disease and related disorders. Alzheimer's Disease is a brain disorder that results in gradual memory loss and, as such loss progresses, a need for increased personal care. Historically, Alzheimer's patients have been mixed with other patients in nursing homes, often disrupting other patients and presenting problems of control for staff separate Alzheimer's care unit enables the nursing home to utilize special techniques to manage the patient without restraint or sedation, and provides the patient with a smaller, safer and specially designed area with specially trained staff to address the needs of such patients. However, absent fill-up, HCR does not propose to limit admission to its Alzheimer's unit solely to patients suffering from Alzheimer's disease and related disorders. HCR's Alzheimer's unit is reasonably designed, equipped and minimally staffed for its intended purpose.

    
    

18. HCR also proposes to provide, as needed, subacute care at its facility. Due to the impacts of the federal DRG (diagnostically related group) system which encourages hospitals to discharge patients earlier, there has been an increased demand for subacute services in nursing homes. Included within the subacute services HCR proposes to offer are ventilator care, IV therapy, pulmonary aids, tube feeding, hyperalimentation, and percentage and long term

    rehabilitation. HCR currently provides a wide variety of such subacute services at its existing facilities, and it may reasonably be expected to continue such practice at the proposed facility.

    
    

19. As an adjunct to the proposed nursing home, HCR proposes to operate an adult day care unit for 12 Alzheimer's Disease patients. Additionally, HCR will offer respite care within the nursing home when beds available. Adult care and respite care provide alternatives to institutional long-term care in nursing homes, aid in preventing premature rising home admissions, and promote cost containment.

    
    

20. As initially reviewed by the Department, HCR's activity would be a single story building containing 40,000 gross square feet, including the day care area, with an estimated total project cost of $3,894,000. As proposed, the total project cost equates to $32,450 per bed, and as designed provides 127 net square feet of living space for private rooms and 166 square feet for semi- private rooms. Construction equipment costs were as follows: Construction costs $2,200,000; costs per square foot $55.00; construct cost per bed 17,417; equipment costs $420,000; and equipment cost per bed $3,500. HCR's estimate of project costs is reasonable.

    
    

21. At hearing HCR updated its project costs to account for changes that arose during the delay between initial review and de novo hearing. As updated, the total project cost was $4,375,500, or $36,462 per bed. Construction equipment costs, as updated were as follows: construction costs $2,400,000; cost per square foot $60.00; construction cost per bed $19,000, equipment costs

    $420,000; and equipment cost per bed $3,500. HCR's updated estimate of cost is reasonable.

    
    

22. Staffing at the proposed 120-bed facility is designed to accommodate the needs of the skilled and intermediate care patients, as well as the special needs of the Alzheimer's and subacute patients. HCR will provide 24-hour registered nurse coverage for subacute patients and a higher staffing level in the Alzheimer's unit. The nursing home will provide 3.59 hours per patient in the Alzheimer's unit and 2.73 nursing hours overall, based on the assumption that 50 percent of the Alzheimer's patients will wanderers and that 50 percent of all patients will require skilled care. Precise staffing for subacute patients will be determined by the nature of the subacute services needed. HCR's staffing levels, as originally proposed and as updated, meet or exceed state standards.

    
    

23. The salary and benefit estimates provided by HCR in its original application reflect salary and benefit levels current at the time of application, and the salary and benefit projections provided by HCR at bearing reflect current (1987) salaries and benefits inflated to the date of opening. Both estimates are reasonable.

    
    

24. HCR's projection of utilization by class of pay as initially proposed was as follows: Private pay 51 percent, Medicaid 46 percent, and Medicare 3 percent. Due to its experience over the intervening 17 months since submittal of its application, HCR updated its assessment of utilization as follows: Private pay 50 percent, Medicaid 46 percent, and Medicare 4 percent. The current Lee County Medicaid experience level is 46 percent, and HCR provides an average 71 percent Medicaid occupancy in its Florida facilities. HCR's projections for payor mix are reasonable.

25. HCR's initial application contained estimates of expenses and revenues current as of the date of application (July 1986) but failed to include an inflation factor to accommodate anticipated increases in expenses and revenues. Initially, T. projected its per diem room charges to be $60 to $85. At hearing, HCR projected its per diem room charges in the year opening (1990) to be $90 for a private room, $75 for a semiprivate room, $76.00 for Medicare patients, and $72 for Medicaid patients. The private, semi-private and Medicare charges were determined by inflating current (1987) Lee County charges forward to the year of opening. The Medicaid charges were based on a calculation of the Medicaid reimbursement formula. These charges, when multiplied by patient days, are a reasonable estimate of the projected revenues of the facility.

    
    

26. HCR's estimate of expenses in its initial application was based on its current experience. Intervening events have lent new insight to its evaluation of expenses, as have intervening inflationary factors. While HCR's estimate of expenses and revenues was reasonable in its initial application, its current estimates comport with the reality of a 1990 opening and are reasonable.

    
    

27. HCR has the available resources, including management personnel and funds for capital and operating expenditures, for project accomplishment and operation, and will be able to recruit any other personnel necessary to staff its facility. Since HCR does not propose to initially limit admission to its Alzheimer's unit solely to patients suffering from Alzheimer's disease and related disorders, its pro formas are premised on reasonable assumptions, and it has demonstrated the financial feasibility project in both the short term and long term.

    
    

28. The proof demonstrates that HCR provides and Bill continue to provide quality care. HCR's corporate standards and guidelines regulate such areas as patient rights, staff development and orientation, physician and nurse services, pharmacy services and medication administration, social services, and infection control. HCR's manager of quality assurance, house professional services consultants, and quality assurance consultants regularly visit each HCR nursing home to implement the quality assurance standards and guidelines. Each HRC nursing home provides a staff development director who is responsible for the orientation of new employees, training new employees, and continuing training for all employees.

    
    

    Forum Group Inc.

    
    

29. Forum is a publicly held health services company which owns, develops and operates retirement living centers and nursing homes on a national basis. Currently Forum operates 22 Lang facilities and an additional 11 retirement living centers with attached nursing facilities, including one nursing facility in Florida. Its Florida facility holds a standard rating. Other facilities owned by Forum in Texas, Kentucky and Illinois do, however, hold superior ratings.

    
    

30. Pertinent to this case, Forum proposes to develop a retirement living center in Lee County that would consist of its proposed 60-bed skilled and intermediate care nursing home, an adult congregate living facility, and apartments or Independent living. Each of the three components which comprise Forum's retirement living center are physically connected and share some operational functions, such as a central kitchen, laundry, administrative area and heating plant. Such design provides for an efficient operation, as well as an economical distribution costs facility wide.

31. The nursing facility proposed by Forum will be a single story building of wood frame and brick veneer construction containing 27,000 gross square feet. It will include 20 semi- private rooms with half bath, 16 private rooms with half bath, 3 private rooms with full bath, and one isolation room with full bath. Also included are a beauty-barber shop, quite lounge, physical therapy room, occupational therapy room, and exam-treatment room. But for the length of the corridors in the patient wings, discussed infra, the proposed facility meets or exceeds state requirements for the construction of nursing homes.

    
    

32. Forum's proposal, as initially reviewed by the Department, would have a total project cost of $2,314,800. This equates to $38,580 per bed, and as designed provides 150 net square feet of living space for private rooms and 228 net square feet for semi-private rooms. Construction equipment costs were as follows: Construction costs $1,377,000; cost per square foot $51.00; construction cost per bed $22,950; equipment costs $200,000; and equipment costs per bed $3,333. Forum's estimate of project cost is reasonable.

    
    

33. Forum provided a single-line drawing indicating the general arrangement of spaces for its proposed facility. As proposed, the facility would consist of two patient wings, and a central nurse's station. The corridor lengths in the patient wings exceed state standards by 40 feet. They could, however, be modified to conform to State standards without significantly affecting the cost of construction. The project would have energy conservation features such as heavy duty roof and side insulation, double-glazed windows, and high efficiency heating and air conditioning equipment.

    
    

34. The forum facility will offer skilled and intermediate care, and subacute care, including IV therapy, ventilator care, hyperalimentation, pulmonary aids, and short and long term rehabilitation. Forum would contract out for physical therapy, speech therapy, pharmacy consultation and a registered dietician. If needed, Forum would offer respite care when beds are available.

    
    

35. The proposed staffing levels and salaries proposed by Forum in its application are reasonable and meet or exceed state standards. Forum has a staff training program, with pre-service and in-service training, and utilizes a prescreening procedure to assure it hires competent staff. Twenty-four hour coverage by registered nurses will be provided, and a staffing ratio of 2.9 will be maintained. The staffing level at the proposed facility is consistent with that experienced at Forum's existing Florida Facility. Forum provides, and will continue to provide, quality care.

    
    

36. Forum's application projected its utilization by class of pay as follows: private pay 58.47 percent, Medicaid 37.16 percent, and Medicare 4.37 percent. Currently, Forum experiences a 48 percent Medicaid occupancy rate system-wide, although it only has 2 of 35 beds dedicated to Medicaid care in its present Florida facility.

    
    

37. Forum estimated its revenues based on patient charges ranging from

    $50.64 per day for Medicaid/semi-private room to $75.00 per day for SNF/private pay/private room. Based on such revenues, its pro forma, utilizing a conservative 86.25 percent occupancy rate at the end of the second year of operation, demonstrated the short term and long term financial feasibility of the project as initially reviewed by the Department notwithstanding the fact that it had underestimated its Medicaid and Medicare reimbursement rates.

    
    

38. At hearing, Forum sought to demonstrate that its project was currently feasible by offering proof that intervening events had not significantly

    impacted the financial feasibility of its project. To this end, Forum offered proof that the contingencies and inflation factors it had built into the construction of its initial proposal would substantially offset any increased costs or expenses of construction. Additionally, Forum sought to update its proposal at hearing by offering testimony that included an increase in the administrator's salary from $27,000 to $39,000, a decrease in interest in year one to $187,803, an increase in interest in year two to $250,790, and an increase in revenues based on patient charges ranging from $69.19 per day for Medicaid/semi private room to $90.00 per day for SNF/private pay/private room.

    
    

39. Some of the applicants objected to Forum's proof directed at the current financial feasibility of its project because it had not previously provided them with a written update of its application as ordered by the Hearing Officer. The applicants' objection was well founded. Further, the proof was not persuasive that any contingencies and inflation factors it had built into its initial proposal would substantially offset any increased costs or expenses of construction, nor that salaries, benefits and other expenses that would be currently experienced were appropriately considered in addressing the present financial feasibility of Forum's project.

    
    

40. While Forum has the available resources, including management personnel and funds for initial capital and operating expenditures, for project accomplishments and operation, and will be able to recruit any other personnel necessary to staff its facility, it has failed to demonstrate that its proposal, as updated, is financially feasible in the long term. Health Quest Corporation

    
    

41. Health Quest is a privately held corporation which owns, develops and operates health care facilities and retirement centers on a national basis. Health Quest has been in business for approximately 20 years, and currently operates 11 long-term care facilities and three retirement centers in Indiana, Illinois, and Florida. Its existing Florida facilities are located in Jacksonville, Boca Raton, and Sarasota. It also has facilities under construction in Winter Park and Sunrise, Florida. Health Quest also held a number of other certificates of need to construct nursing facilities in Florida. Recently, however, it decided to transfer or sell 3-4 of those certificates because its initial decision to develop nine new projects simultaneously would have, in its opinion, strained its management staff and commitment to high quality standards. HCR is, however, currently proceeding with several projects in Florida, and anticipates that the proposed Lee County facility will be brought on line thereafter.

    
    

42. Pertinent to this case, Health Quest proposes to develop a retirement center in Lee County that would consist of a 60-bed skilled and intermediate care nursing home, and 124 assisted living studio apartments (an ACLF). 4/ The two components which comprise Health Quest's retirement center are physically connected and share some operational functions such as a common kitchen, laundry, therapy areas, maintenance areas, and administrative areas. Such design provides for an efficient operation, as well as an economical distribution of costs facility wide.

    
    

43. In addition to providing an economical distribution of costs, the two components of the retirement center are mutually supportive. The nursing care unit supports the ACLF by making sure that health care services are available to the assisted living people. The ACLF supports the nursing unit as a source of referral and as an alternative to nursing home placement.

44. The nursing facility proposed by Health Quest will be a single story building of masonry and concrete construction. It will include 6 private rooms and 27 semi-private rooms with half-bath attached, central nurse's station, central bathing facilities, beauty-barber shop, quite lounge, central dining area, physical and occupational therapy room and outdoor patio The center, itself, will provide patios, walkways and other outdoor features to render the facility pleasant and attractive, and will provide multi-purpose areas to be used for religious services and other activities, an ice cream parlor and gift shop. As proposed, the nursing home meets or exceeds state standards.

    
    

45. As initially reviewed by the Department, Health Quest's proposed facility contained 25,269 gross square feet, with an estimated total project cost of $2,244,505. As proposed, the total project cost equates to $37,408 per bed, and as designed provides 240 net square feet of living space for both private and semi-private rooms. Construction equipment costs were as follows: Construction costs $1,470,333; cost per square foot $58.19; construction cost per bed $24,506; equipment costs $298,200; and equipment cost per bed $4,970. While the majority of Health Quest's costs are reasonable, its equipment costs are not. These costs are substantially the same as those projected in its original application for a 120-bed facility, which at an equipment cost of

    $300,000 derived an equipment cost per bed of $2,500. Why the same cost should prevail at this 60-bed facility was not explained by Health Quest, and its equipment cost per bed of $4,970 was not shown to be reasonable.

    
    

46. As with most applicants, Health Quest updated its project costs at hearing to account for the changes which were occasioned by the delay between initial review and de novo hearing. As updated, the estimated project cost is

    $2,290.331, $38,172 per bed. Construction equipment costs were as follows: Construction costs $1,507,043; cost per square foot $59.64; construction cost per bed $25,117; equipment costs $302,700; and equipment costs per bed $5,045. Again, while the majority of Health Quest's costs are reasonable its equipment costs are, for the reasons heretofore expressed, not shown to be reasonable.

    
    

47. The Health Quest facility will offer skilled and intermediate nursing care, and subacute care, including IV therapy, chemotherapy, TPN therapy and tracheostomy care. Also to be offered are respite care as beds are available and, within the complex, adult day care. Health Quest will maintain a nursing staffing ratio of approximately 3.25 hours per patient day for skilled care and

    2.5 for intermediate care.

    
    

48. As originally reviewed by the Department, Health Quest's staffing levels and expenses were reasonable. At hearing, Health Quest increased its staffing levels to account for an increased demand in labor intensive care, and increased its staffing expenses to account for the intervening changes in the market place. As updated, Health Quest's staffing levels and expenses are reasonable.

    
    

49. Health Quest's projection of utilization by class of pay in the application reviewed by the Department was as follows: private pay 51.6 percent, Medicaid 45 percent, and Medicare 3.4 percent. Health Quest's utilization projection, as updated at hearing, was as follows: private pay 50.9 percent, Medicaid 45 percent, and Medicare 4.1 percent. TAB Health Quest currently serves 30 percent Medicaid patients at its Jacksonville facility, 10 percent Medicaid patients at its Boca Raton facility, and no Medicaid patients at its Sarasota facility. It has, however, committed to serve 40 percent and 48 percent Medicaid patients at its Sunrise and Winter Park facilities, respectively. Health Quest's projections of payor are reasonable.

50. Initially, Health Quest projected its per diem room charges to range from $52 for skilled and intermediate care Medicare patients to $57.25 for skilled care-private and Medicare patients. It did not, however, draw any distinction between private and semi-private rooms. At hearing, Health Quest projected its per diem room charges as follows: $90 for SNF/single/private pay;

    $73 for SNF/double/private pay; $73 for SNF/double/Medicare; $68 for SF/double Medicaid; $68 for ICF/single/private pay; $70.75 for ICF/double/private pay; and

    $68 for ICF/double/Medicaid. Health Quest's fill-up and occupancy projections, as well as its projections of revenue and expenses, are reasonable. They were reasonable when initially reviewed by the Department, and as updated.

    
    

51. During the course of these proceedings, a serious question was raised as to whether Health Quest had demonstrated that it had the available resources, including management personnel and funds for capital and operating expenditures, for project accomplishment and operation, or that it was committed to the subject project. Within the past three years, Health Quest has sold three of its approved CONS and is considering the sale a fourth due to its inability to handle that number of projects, and the adverse impact it would have on its ability to deliver quality care. Notwithstanding its inability to proceed with approved projects, Health Quest proceeded to hearing in October 1987 and December 1987 for nursing home CONs in Hillsborough County and Lee County (the subject application), and also had nine such applications pending in the January 1987 batching cycle and eight such applications in the October 1987 batching cycle. Health Quest's actions are not logical, nor supportive of the conclusion that it is committed to this project or that it possesses available resources for project accomplishment. Under the circumstances, Health Quest has failed to demonstrate that it has the available resources, including management personnel and funds for capital and operating expenditures, for project accomplishment and operation.

    
    

52. Health Quest's facilities in Jacksonville and Boca Raton currently hold superior ratings from the Department. A superior rating includes consideration of staffing ratios, staff training, the physical environment, physical and restorative therapies, social services, and other professional services. Those facilities are monitored, as would the subject facility, by Health Quest for quality care through a system of quarterly peer review, and provide extensive staff education programs that include orientation training for new staff and on-going education for regular staff. Health Quest has demonstrated that it has provided quality care. However, in light of the strain its current activities have placed on its resources, it is found that Health Quest has failed to demonstrate that it could provide quality care at the proposed facility were its application approved. Hillhaven, Inc.

    
    

53. Hillhaven is a wholly owned subsidiary of the Hillhaven Corporation, which is a subsidiary of National Medical Enterprises. The Hillhaven Corporation has been business for almost 30 years, and is currently responsible for the operation of approximately 437 nursing homes and retirement centers nationally, including 15 nursing homes which it owns or operates in the State of Florida.

    
    

54. Hillhaven proposes to develop a new 120-bed skilled and intermediate care community nursing home in Fort Myers, Lee County, consisting of 38,323 square feet. It will include 14 private rooms and 53 semi-private rooms, a full bath attached to each room (shower, toilet and sink), central tub rooms, beauty- barber shop, quite lounge, chapel, physical therapy room, occupational therapy

    room, and outdoor patio areas. In all, Hillhaven's proposed facility meets or exceeds state requirements for the construction of nursing homes.

    
    

55. As initially reviewed by the Department, Health Quest's proposed facility would be a single-story building containing 38,323 gross square feet, with an estimated total project cost of $3,544,444. As proposed, the total project cost equates to $29,537 per bed, and as designed provides 217 net square feet of living space for both private and semi-private rooms. Construction equipment costs were as follows; construction costs $2,146,000; cost per square foot $56.00; construction cost per bed $17,884; equipment costs $442,005; and equipment cost per bed $3,683.38. Hillhaven's project costs are reasonable.

    
    

56. As with the other applicants, Hillhaven update its project costs at hearing to account for the changes which were occasioned by the delay between initial review and de novo hearing, certain oversights in its initial submission, and its decision to proceed with type 4 construction as opposed to type 5 construction as originally proposed. As updated, the estimated project cost is $4,089,639, or $34,155.33 per bed. Construction equipment costs, as updated, were as follows: construction costs $2,446,088; cost per square foot

    $63.82; construction cost per bed $20,384; equipment costs $521,200; and equipment costs per bed $4,343.33. By far, the biggest factor in the increased construction costs was Hillhaven's decision to proceed with type 4 construction as opposed to type 5 construction. Either type of construction would, however, meet or exceed state standards, and Hillhaven's estimates of construction and equipment costs are reasonable.

    
    

57. The Hillhaven facility will offer skilled and intermediate care, occupational therapy, speech therapy, physical therapy, recreational services, restorative nursing services, and social services. Hillhaven does not discriminate on admission, and would admit Alzheimer's and subacute patients as presented. Were sufficient demand experienced, Hillhaven has the ability to provide and would develop a full Alzheimer's unit, and provide day care and respite care. Currently, Hillhaven operates 36 Alzheimer's units at its facilities nation wide, but has experienced no demand for such a special unit or other special care at its existent Lee County facility.

    
    

58. As originally reviewed by the Department, Hillhaven's staffing levels an expenses were reasonable. At hearing, Hillhaven increased its staffing levels to account for staff inadvertently omitted from its initial application, and increased its staffing expenses to account or intervening changes in the market place. As updated, Hillhaven's staffing level is 2.5, and its staffing levels and expenses are reasonable.

    
    

59. Hillhaven's projected utilization by class of pay as originally reviewed by the Department was as follows: private pay 30 percent, Medicaid 60 percent, and Medicare 10 percent. As updated at hearing, Hillhaven's utilization projection was as follows: private pay 44 percent, Medicaid 53 percent, and Medicare 3 percent. Currently, Hillhaven provides, on average, 53 percent Medicaid care at its facilities in Florida. Hillhaven's estimate of payor mix was reasonable and, in light of intervening changes in circumstance, was reasonable as updated.

    
    

60. Hillhaven's patient charges for its second year of operation as originally reviewed by the Department ranged from $58.60 to $62.00 per day. As updated, Hillhaven's patient charges ranged from $52.13 to $73.50 per day. Hillhaven's estimated charges were achievable when initially proposed and as updated, and are reasonable.

61. Hillhaven's fill-up and occupancy projections, as well as its projections of revenues and expenses, are reasonable. They were reasonable when initially reviewed by the Department, and comport, as updated, with the current experience in Lee County.

    
    

62. Hillhaven has the available resources, including management personnel and funds for capital and operating expenditures, for project accomplishment and operation, and will be able to recruit any other necessary personnel to staff its facility. Its pro forma estimates are premised on reasonable assumptions, and Hillhaven has demonstrated the short term and long term financial feasibility of its project.

    
    

63. Currently, Hillhaven owns or operates 15 facilities in the State of Florida. Of these 15 facilities, two have opened within the past year and are not eligible for ratings. Nine of the 13 eligible facilities are operating with superior licenses. Of the remaining four facilities, two have a standard license and two have a conditional license. The two facilities with conditional ratings have both resolved their deficiencies.

    
    

64. Hillhaven has provided and will continue to provide quality care. It ensures that quality care will be maintained within its facilities by drawing upon the professional resources four regional offices comprised of registered nurses, quality assurance monitors, regional dietitians, maintenance supervisors, employee relations specialists, and other administrative support personnel. Regional consultants visit company facilities monthly to plan, organize and monitor operations, and to conduct in-service training workshops. Overall, Hillhaven provides each facility with an in-depth quality assurance program.

    
    

    Gene Lynn d/b/a Careage Southwest Healthcare Center

    
    

65. Gene Lynn (Careage) is the president and 100 percent owner of Careage Corporation. Since 1962, Careage has developed approximately 150 nursing homes and retirement centers, as well as 100 medically related facilities, in 22 states and the Virgin Islands. Until December 1986 it did not, however, own or operate any facilities. Currently, Careage operates four nursing homes in the United States (one in the State of Washington, two in the State of California, and one in the State of Arizona) , but none in Florida. The home office of Careage is located in Bellevue, Washington.

    
    

66. Careage proposed to develop a new 120-bed skilled and intermediate care nursing home in Lee County with specialty units for subacute and Alzheimer's care, consisting of 45,500 square feet. It would include a patient care unit consisting of 2 isolation rooms and 7 private rooms with full bath and

    45 semiprivate rooms with half-bath, an Alzheimer's unit consisting of 1 private room with full bath and 10 semiprivate rooms with half bath, central dining area, beauty-barber shop, quiet lounge, chapel, physical therapy room, occupational therapy room, outdoor patio areas, and exam-treatment room. As proposed, the nursing home meets or exceeds state standards.

    
    

67. As initially reviewed by the Department, Careage's proposed facility was a single-story building containing 45,500 gross square feet, with an estimated total project cost of $4,150,000. As proposed, the total project cost equates to 34,583 per bed, and as designed provides 184-227 net square feet of living space for isolation/private rooms, and 227-273 net square feet of living space or semi-private rooms. Construction equipment costs were as follows:

    construction costs $2,583,125; cost per square foot $56.77; construction cost per bed $21,526; equipment costs $420,000; and equipment cost per bed $3,500. Careage's methods of construction, as well as its construction and equipment costs, are reasonable.

    
    

68. The Careage facility would offer skilled and intermediate care, occupational therapy, physical therapy, recreational services and social services. Additionally, the proposal includes a special 21-bed unit dedicated solely to the treatment of Alzheimer's disease patients, and a dedicated 10-bed unit for subacute care which will accommodate technology dependent children care. Among the subacute services to be offered are hyperalimentation, IV therapy, ventilators, heparin flush, and infusion pumps for administration of fluids. Careage will offer respite care as beds are available, and will offer day care in a separate facility.

    
    

69. Careage's projected utilization by class of pay as originally reviewed by the Department was as follows: private pay 49 percent, Medicaid 40 percent, Medicare 3 percent, subacute (private) 6 percent, and VA 2 percent.

    
    

70. Careage's patients charges for its facility were projected as follows: private and VA (room rate only) $63.86, Medicaid (all inclusive rate) $59.23, Medicaid (all inclusive rate) $108.15, and private (other) /subacute (room rate only) $128.75.

    
    

71. Careage's fill-up and occupancy projections as well as its projections of revenues and expenses, for its 120-bed facility were not shown to be reasonable. First, in light of the fact that there was no quantifiable demand for a dedicated Alzheimer's unit and subacute care unit, as discussed infra at paragraphs 126-129, no reliable calculation of fill-up and occupancy rates or revenues and expenses could be derived that was, as the Careage application is, dependent on such revenue stream. Second, the Careage pro forma was predicated on average rates experienced in Lee County. Since Careage proposes heavier nursing care than that currently experienced in Lee County, its estimates of patient charges are not credible.

    
    

72. At hearing, Careage updated its 120-bed application to account for inflationary factors that had affected the project since it was first reviewed, and to correct two staffing errors. These updates did not substantially change the project.

    
    

73. Careage has the available resources, including management personnel and funds for capital and operating expenditures, for project accomplishment and operation, and will be able to recruit any other necessary personnel to staff its facility. Its pro forma estimates were not, however, premised on reasonable assumptions, and Careage has failed to demonstrate the short term and long term financial feasibility of its 120-bed project.

    
    

74. Following the Department's initial review of the applications in this batching cycle, it proposed to award a certificate of need to Careage for a 60- bed facility, premised on its conclusion that there was insufficient numeric need to justify an award of beds exceeding that number, notwithstanding the fact that the application of Careage was for 120 beds and did not request or propose a 60-bed facility. Notably, all financial, staffing, construction, equipment and other projections described in the Careage application were based on a 120- bed facility, and no information was provided regarding a 60- bed facility.

    Also notable is the fact that the other applicants were not accorded equal consideration. Not surprisingly, the proposed award of a CON for 60-beds to

    Careage was timely challenged, but Careage did not protest the Department's denial of its application for 120 beds but appeared as a respondent to defend the Department's decision to award it 60 beds. At hearing, Careage offered proof of the reasonableness of its 120- bed proposal over the objection of the other applicants. /5

    
    

75. Careage contends that its proposed 60-bed facility is a scaled down version of its 120-bed proposal Careage proposes to offer the same services in its 60-bed facility as it proposed in its 120-bed facility, including the 21-bed Alzheimer's unit and 10-bed subacute care unit. Its proposed 60- bed facility is not, however, an identifiable portion of its initial project.

    
    

76. As proposed, the 60-bed facility would contain 26,900 gross square feet, and meet or exceed state standards. It would include a patient care unit consisting of 1 isolation room and 4 private rooms with full bath, 17 semi- private rooms with half-bath, an Alzheimer's unit consisting of 1 private room with full bath and 10 semi-private rooms with half-bath, together with the same amenities offered by the 120-bed facility, but on a reduced scale.

    
    

77. As proposed, the total project cost for the 60-bed facility is

    $2,475,000, which equates to $41,250 per bed. As designed, the facility would provide the same net square footage of living space for private and semi-private rooms as the 120-bed facility. Construction equipment costs would be as follows: construction costs $1,431,750; cost per square foot $53.22; construction cost per bed $23,863; equipment costs $210,000; and equipment cost per bed $3,500. Careage's methods of construction, as well as its construction and equipments costs, are reasonable.

    
    

78. Careage's projected utilization by class of pay in its 60-bed facility was as follows: private pay 47 percent, Medicaid 40 percent, Medicare 5 percent, subacute (private) 6 percent, and VA 2 percent.

    
    

79. Careage's patient charges for its 60-bed facility were projected as follows: private and VA (room rate only) $66.00, Medicaid (all Inclusive rate)

    $63.50, Medicare (all inclusive rate) $120.00, private (other)/subacute (room rate only) $130.00.

    
    

80. Careage's fill-up and occupancy projections, its projections of revenue and expenses, and its pro forma estimates for its 60-bed facility suffer the same deficiencies as those for its proposed 120-bed facility. Under the circumstances, Careage has failed to demonstrate the short term and long term financial feasibility of its 60-bed facility.

    
    

81. While Careage has only owned and operated nursing homes for a short time, the proof demonstrates that it has and will continue to provide quality care for its residents. The Alzheimer's unit and subacute care units are reasonably designed, equipped and staffed for their intended functions. Staffing ratios in the subacute unit will be 6.0, and in the other areas of the facility 3.0.

    
    

82. Careage currently utilizes a quality assurance program at each facility which includes a utilization review committee, safety committee, infection control committee, and pharmaceutical committee. Each facility also has a resident advisory council, community advisory council, and employee advisory council. Presently, Careage is developing a company level quality assurance program, and has initiated announced and unannounced site visits by a

    quality assurance expert to evaluate resident care, operations, maintenance and physical environment. The Department of Health and Rehabilitative Services

    
    

83. The opinions expressed by the witnesses offered by the Department were premised on information available to them while these applications underwent "preliminary" review. The information available to them at that time, and represented by the State Agency Action Report (SAAR), was incomplete and inaccurate in many respects, including the services to be provided by some of the applicants and the approved bed inventory and occupancy rates utilized in the need methodology. These witnesses were not made privy to, and expressed no opinions, regarding the relative merits of the applications in light of the facts developed at hearing.

    
    

84. Throughout the hearing, counsel for the Department objected to evidence from any applicant regarding "updates" (changes) to their applications as they were deemed complete by the Department prior to its initial review. It was the position of the Department's counsel, but otherwise unexplicated, that the only appropriate evidence of changed conditions after the date the application was deemed complete were those changes which relate to or result from extrinsic circumstances beyond the control of the applicant, such as inflation and other current circumstances external to the application.

    
    

85. The majority of the "updated" material offered by the applicants at hearing did result from the effects of inflation, the passage of time between the application preparation and the dates of final hearing, changes in the market place regarding nursing salaries, changes in the Medicaid and Medicare reimbursement system and typographical errors in the application. Some changes in design were offered as a result of the applicant's experience with other construction projects and in order to comply with licensing regulations. There were also some changes which resulted from better information having been secured through more current market surveys. None of the applicants attempted to change their planning horizon, the number of beds proposed, the proposed location of the facility or the services to be offered except Careage.

    
    

86. The Department has established by rule the methodology whereby the need for community nursing home beds in a service district shall be determined. Rule 10-5.011(1)(k)(2), Florida Administrative Code; formerly, Rule 10- 5.11(21)(b) Florida Administrative Code.

    
    

87. The first step in calculating need pursuant to the rule methodology is to establish a "planning horizon." Subparagraph 2 of the rule provides:

    
    

    Need Methodology... The Department will determine if there is a projected need for new or additional beds 3 years into the future according to the methodology specified under subparagraphs a. through i.

    
    

88. The Department interprets subparagraph 2, and the applicants concur, as establishing a "planning horizon" in certificate of need proceedings calculated from the filing deadline for applications established by Department rule. This interpretation is consistent with the numeric methodology prescribed by subparagraph 2, and with the decision in Gulf Court Nursing Center v. Department of Health and Rehabilitative Services, 483 So.2d 700 (Fla. 1st DCA 1986). Applying the Department's interpretation to the facts of this case establishes a "planning horizon" of July 1989.

89. Pertinent to this case, subparagraphs 2a-d provide the methodology for calculating gross bed need for the district/subdistrict in the horizon year. In this case, the applicable district is District 8, and the applicable subdistrict is Lee County.

    
    

90. The first step in the calculation of gross need for the horizon year is to derive "BA", the estimated bed rate for the population age group 65-74 in the district. This rate is defined by subparagraph 2b as follows:

    
    

    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.

    
    

91. The parties concur that the district licensed bed figure (LB), as well as the subdistrict licensed bed figure (LBD) is calculated based on the number of community nursing home beds as of June 1, 1986. The Department's Semi-Annual Nursing Home Census Report and Bed Need Allocation prepared for the July 1986 review cycle (July 1989 planning horizon) listed 4,193 licensed community nursing home beds in District 8 and 996 in Lee County. However, that count taken on May 1, 1986, did not include 120 new beds which were licensed in Charlotte County on May 8, 1986. The count also excluded 287 beds at four other facilities in the district, including 60 beds at Calusa Harbor in Lee County, because they were listed as sheltered beds according to Department records at that time. After passage of Section 651.118(8), Florida Statutes, the Department surveyed the facilities and found that the beds at these four facilities were operated as community beds rather than sheltered beds. Under the circumstances, the proof demonstrates that as of June 1, 1986, there were 4,600 licensed community nursing home beds in district 8 (LB) and 1,056 in Lee County (LBD).

    
    

92. The formula mandated by the rule methodology or calculating BA requires that the "current population" for the two age groups be utilized. The rule does not, however, prescribe the date on which the "current population" is to be derived.

    
    

93. Some of the applicants contend that the current population" for POPC and POPD should correspond to the period for which the average occupancy rate (OR) is calculated or the July batching cycle, OR based upon the occupancy rates of licensed facilities for the months of October through March preceding that cycle. Under this theory, January 1, 1986, as the midpoint of that period, is the appropriate date to calculate "current population" to derive PCPC and POPD.

    
    

94. The Department contends that "current population" for POPC and POPD should be calculated as of July 1986, the filing deadline for applications in this review cycle. The Department's position is, however, contrary to its past and current practice.

95. The need reports issued by the Department between December 1984 and December 1986, routinely used a three and one- half year spread between the base population period and the horizon date for "current population." In the January 1987 batching cycle, which cycle immediately followed the cycle at issue in this case, the Department utilized a three and one-half spread between the base population period and the horizon date for "current population" when it awarded beds in that cycle. The Department offered no explanation of why, in this case, it proposed to deviate from its past and current practice. Under the circumstances, January 1, 1986, is the appropriate date on which the "current population" is to be calculated when deriving POPC and POPD.

    
    

96. The parties are also in disagreement as to whether population estimates developed after the application deadline can used to establish the current population. Rule 10- 5.011(k)2h, Florida Administrative Code, mandates that population projections shall be based upon the official estimates and projections adopted by the Executive Office of the Governor, but does not limit such proof to any particular estimate.

    
    

97. The Department advocates the use of population estimates existent at the application deadline. Accordingly, it would apply the official estimates and projections adopted by the Executive Office of the Governor as of July 1, 1986. Other parties would apply the more recent estimates adopted by the Office of the Governor as of July 1, 1987.

    
    

98. In this case, the use of either estimate would have no significant effect on the result reached under the rule methodology; however, since all population estimates and projections are only approximations rather than actual counts, it would be more reasonable from a health planning perspective to use the latest estimates of the 1987 population than the estimates available at the time of application. In this case, this means using July 1, 1987, estimates of January 1986 populations. These estimates are still "current" as of January 1986, since It is still the January 1986 population that is to be measured, and more reliable from a health planning perspective than the prior projection. In the same manner, July 1, 1987, estimates of horizon year 1989 populations (PCPA and POP), infra, would also be used rather than July 1, 1986, estimates of that population. Accordingly, Forum's calculation POPC (128,871), POPD (77,194), POPA (149,645), and POPB (95,748) is appropriate. (Forum Exhibit 10, Appendix A)

    
    

99. Application of the methodology prescribed by subparagraph 26 to the facts of this case produces the following calculation:

    
    

    BA 4,600/(128,871 + (6 x 77,194) BA 4,600/(128,871 + 463,164)

    BA 4,600/592,035 BA .0077698

    
    

100. The second step in the calculation of gross need for the horizon year is to derive "BB", the estimated bed rate for the population age group 75 and over in the district. This methodology is defined by subparagraph 2c, and calculated in this case as follows:

     
     

     BB 6 x BA

     BB 6 x .0077698

     BB .0466188

101. 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 homes beds" at the horizon year. This methodology is defined by subparagraph 2a as follows:

     
     

     A (POPA x BA) + (POPB x BB)

     Where:

     
     

     POPA is the population age 65-74 years in the relevant department district projected three years into the future.

     
     

     POPR is the population age 75 years and older in the relevant departmental district projected three years into the future.

     
     

102. Application of the methodology prescribed by subparagraph 2a to the facts of this case produces the following calculation:

     
     

     A (149,645 x .0077698) + (95,748 x .0466188)

     A 1,162.7117 + 4,422.4086

     A 5,585.12

     
     

103. The final step in the calculation of gross need in the horizon year is to derive "SA", the preliminary subdistrict allocation of community nursing home beds;" gross need in the case. 7/ This calculation is defined by subparagraphs 2d 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 6 month occupancy rate for all licensed community nursing homes within the subdistrict of the relevant district. Occupancy rates established prior to the first batching cycle shall be based upon nursing home patient days for the months of July 1 through December 31; occupancy rates established prior to the second batching cycle shall be based upon nursing home patient days for the months of January 1 through

     June 30.

     
     

104. The batching cycle in which these applications were filed, however, occurred before the Department amended its rule to include the fixed need pool concept contemplated by subparagraph 2d. Accordingly, the parties concur that the six month period on which the average occupancy rate is calculated is not as set forth in subparagraph 2d of the current rule, but, rather, defined by former rule 1C--5. 11(21)(b)4 as follows:

     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 data for the months of October through March preceding that cycle...

     
     

105. In calculating the occupancy rate (OR) for the licensed community nursing homes in the subdistrict (Lee County) the Department derived a figure of

     91.91. The Department arrived at this figure based on the first day of the month patient census of each facility considered to have community beds (LBD=1,056), which included the 60 beds at Shell Point Nursing Pavilion; assumed that such census was maintained throughout the entire month; and then divided such patient days by the actual number of beds available. The Department's methodology is an accepted health planning technique, and comports with its previous practice.

     
     

106. Some of the parties disagree with the technique utilized by the Department to calculate OR, and advocate the use of actual patient day occupancy to derive OR. This technique differs from the "first of the month" technique by utilizing the actual number of patient days experienced by the facility, as opposed to assuming a constant census based on first of the month data. This alternative methodology is, likewise, an accepted health planning technique, and if proper assumptions are utilized will yield a more meaningful result than the Department's methodology.

     
     

107. In this case, the proponents of the "actual patient day occupancy" methodology, erroneously assumed that 160 beds at Shell Point Nursing Pavilion were community nursing homes beds, as opposed to 60 beds; and, based on an erroneous LBD of 1,156, derived a subdistrict occupancy rate of 92.97. Under such circumstances, these proponents calculations are not reliable, and the subdistrict occupancy rate derived by the Department is accepted.

     
     

108. Applying the facts of this case to the methodology prescribed by subparagraph 2d produces the following gross need calculation for the subdistrict:

     
     

     5A 5,585.12 x (1,056/4,600) x (.9191/.9) SA 5,585.12 x .2295652 x 1.0212222

     SA 1309.36

     
     

109. The final step in the numeric need methodology is to derive net need from gross need. According to subparagraph 2i, this need is calculated 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 department subdistrict from the bed allocation determined under subparagraphs 2.a. through

     f. unless the subdistrict's average occupancy rate for the most recent six months is less than 80 percent, in which case the net bed

     allocation is zero. The number of approved and licensed nursing home beds for the second batching cycle in 1987 shall be based on the number of approved and licensed beds as of August 1, 1987, in subsequent nursing home batching cycles, the number of licensed and approved beds to be used in establishing net need for a particular batching cycle shall be determined as of the agency's initial

     decision for the immediately preceding nursing home batching cycle.

     
     

110. While the rule requires that net need be calculated by subtracting "the total number of licensed and 90 percent of the approved beds" In the subdistrict from the cross need previously calculated, it is silent as to the date that inventory should be calculated when, as here, the batching cycle at issue predates its enactment. In the face of this dilemma, the parties rely on the provisions of former rule 10-5.11(21)(b) , Florida Administrative Code, which was existent when their applications were filed to resolve their dispute. Under the circumstances, reference to former rule 10-5.11(21)(b), is appropriate.

     
     

111. Former rule 10-5.11(21)(b)9 provides:

     
     

     The net bed allocation for a subdistrict, which is the number of beds

     available, is determined by subtracting the total number of licensed and 90 percent of the approved beds within the relevant

     departmental subdistrict from the bed allocation determined under subaragraphs 1 through 9 (sic 8).... (Emphasis added)

     
     

112. While the former rule requires that net need be calculated by subtracting "the total number of licensed and 90 percent of the approved beds" in the subdistrict from the gross need calculated under subparagraphs (b)1-8, it is silent as to the date that inventory should be calculated. The Department asserts that the number of licensed beds should be calculated as of June 1, 1986 (the date established by subparagraph (b)7 of the former rule as the data base for calculating LB and LBD, and the number of approved beds as of December 18, 1986 (the date the Department's supervisory consultant signed the state agency action report). The other parties would likewise calculate licensed beds as of June 1, 1986, but would also calculate approved beds as of that date.

     
     

113. The Department offered no reasonable evidentiary basis for its interpretation of the date at which the total number of licensed and approved beds are to be calculated under subparagraph (b)9 of the former rule. As discussed below, the dates used by the Department and the other parties for purposes of calculating net need were facially unreasonable.

     
     

114. The Inventory of licensed and approved beds under subparagraph (b)9 of the former rule, as well as subparagraph 2i of the current rule, are inextricably linked. As approved beds are licensed, the approved bed inventory decreases and the licensed bed inventory increases. The Department's interpretation of the dates at which licensed and approved beds are to be counted is neither logical nor rational, since it could result in some beds not being counted as either licensed or approved. For example, if beds were

     approved and not yet licensed on June 1, 1986, but licensed before the consultant supervisor signed the SAAR (state agency action report), they would not be counted in either inventory. On the other hand, the other parties' approach would ignore all beds licensed or approved from previous batching cycles after June 1, 1986 which beds were intended to serve at least a portion of the future population.

     
     

115. The fundamental flaw in the parties' approach to establishing an inventory date under subparagraph (b)9, was the assumption that subparagraph (b)7 of the former rule defined licensed bed inventory for purposes of subparagraph (b)9. The Department's rule must be construed in its entirety, and all parts of the rule must be construed so as to work harmoniously with its other parts. So construed, the only logical conclusion to be drawn, as hereinafter demonstrated, is that subparagraph (b)7 defines LB and LBD ("current" licensed beds) for the cross need calculation under the methodology defined by subparagraphs (b)1-4, and does not presume to define licensed beds for the net need calculation under subparagraph (b)9.

     
     

116. Subparagraphs (b)1-4 and 7 of the numeric need methodology prescribed by the former rule is designed to yield a gross bed need for the horizon year. The keys to this methodology are the calculation of a current bed rate (BA) and current occupancy rate (OR) for the current using population, and the projection of those rates on the population to be served in the horizon year.

     
     

117. A meaningful calculation of the current bed rate cannot, however, be derived without a current inventory of licensed beds (LB and LBD). Accordingly, the relationship between subparagraph (b)7, which defines the data base (June 1, 1986 in this case) for defining LB and LBD (the "current" licensed bed inventory) to the gross bed need calculation is apparent.

     
     

118. The parties' suggestion that subparagraph (b)7 defines licensed bed inventory under subparagraph (b)9 not only ignores the inextricable link between subparagraph (b)7 and the gross bed need methodology, but also the language and purpose of subparagraph (b)9. The purpose of that subparagraph is to derive a realistic estimate of actual (net) bed need in the horizon year. Since all licensed and approved beds from previous batching cycles were intended to serve at least a portion of the horizon population, it would be illogical to ignore any of those beds when calculating net need. Accordingly, it would be unreasonable in this case not to count any beds that were licensed or approved from previous batching cycles between June 1, 1986, and the date a decision is rendered on these applications. Indeed, subparagraph (b)9 speaks to "the total number" of licensed and approved beds, not beds existent on June 1, 1986. In sum, subparagraph (b)7 cannot be read to define licensed bed inventory under subparagraph (b)9, and the parties' suggestion that it can is rejected as contrary to the clear language of the rule methodology. See: Boca Raton Artificial Kidney Center, Inc. v. Department of Health and Rehabilitative Services, 493 So.2d 1055 (Fla. 1st DCA 1986).

     
     

119. Since the purpose of subparagraph (b)9 is to calculate a realistic estimate of the net bed need for the horizon year, it is appropriate to use the most current inventory of licensed and approved beds at the point a decision is rendered on an application. This assures to the greatest extent possible that the horizon population will not be over or undeserved.

     
     

120. In those circumstances where the SAAR becomes final agency action, the Department's approach of calculating inventory on the date the supervisory consultant signs the SAAR, assuming that inventory includes licensed and

     approved beds on that date, might be reasonable. However, where, as here, the SAAR constitutes only preliminary agency action, and a de novo review of the application is undertaken, there is no rational basis for subsuming that inventory. The rule methodology considered, the only rational conclusion is that net need be derived on the date of de novo review, and that it be calculated reducing the gross need calculation by the inventory of licensed and approved beds from previous batching cycles existent on that date.

     
     

121. As of the date of administrative hearing there were 1,056 licensed beds and 120 approved beds in the subdistrict. Applying the methodology prescribed by subparagraph 2i to the facts of this case calculates a net need of

     145 community nursing home beds for the July 1989 planning horizon.

     
     

     Special Circumstances.

     
     

122. The Department will not normally approve an application for new or additional nursing home beds in any service district in excess of the number calculated by the aforesaid methodology. Rule 10-5.011(1)(k), Florida Administrative Code. Succinctly, the need for nursing home services, whether they be general or special, is a product of the rule methodology, and not relevant to a calculation of need absent a demonstration of special circumstances.

     
     

123. The Department has adopted by rule the methodology to be utilized in demonstrating special circumstances that would warrant a consideration of factors other than the numeric need methodology in deciding the need for nursing home services. That rule, 10-5.011(1)(k)2; Florida Administrative Code, provides:

     
     

     In the event that the net bed allocation is zero the applicant may demonstrate that

     circumstances exist to justify the approval of additional beds under the other relevant criteria specifically contained at Section 10-5.011. Specifically, the applicant may show that persons using existing and like

     services are in need of nursing home care but will be unable to access nursing home services currently licensed or approved within the subdistrict. Under the provision, the applicant must demonstrate that those persons with a documented need for nursing home services have been denied access to currently licensed but unoccupied beds or that the number of persons with a documented need exceeds the number of licensed unoccupied and currently approved nursing home beds. Existing and like services shall include the following as defined in statute or rule, adult congregate living facilities, adult foster homes, homes for special

     505 home health services, adult day

     health care, adult day care, community care for the elderly, and home care for the elderly. Patients' need for nursing home care must be documented by the attending physicians' plans of care or orders,

     assessments performed by staff of the Department of Health and Rehabilitative Services, or equivalent assessments performed by attending physicians indicating need for nursing home care.

     
     

124. In the instant case, some of the applicants have proposed special services, including an Alzheimer's unit, subacute care unit, and beds for technology dependent children. They offered, however, no proof that any person with a documented need for such services had been denied access to available beds that the number of persons with a documented need exceeded the number of available beds. Succinctly, there is no credible proof that the need for nursing home services in Lee County exceeds that calculated pursuant to the numeric need methodology.

     
     

125. While there are no special circumstances existent in this case that would justify an award of beds in excess of that calculated by the rule methodology, that does not mean that consideration of the Alzheimer's, subacute and technology dependent children services offered by some of the applicants is not relevant to the comparative review of the subject applications. Rather, it means that the need for such services will presumptively be met within the need calculated by the rule methodology. How the applicants propose to address that need is, however, a matter for consideration in a comparative review of their applications.

     
     

126. Each of the applicants propose to provide subacute care, with Careage proposing a special 10-bed subacute care unit which would accommodate technology dependent children. HCR and Careage propose special Alzheimer's care units; a 15-bed unit by HCR and a 21-bed unit by Careage. Hillhaven will admit Alzheimer's disease patients as presented, and will develop a dedicated Alzheimer's unit if demand should subsequently develop.

     
     

127. The prevalence of Alzheimer's disease and the increased demand for subacute services brought about by DRGs, demonstrates that there will be a demand for such services within existing and proposed facilities. There was, however, no persuasive proof of any demand for technology dependent services in Lee County.

     
     

128. While there is a demand for Alzheimer's disease care, and the preferred mode of care is in a separate unit specifically designed, staffed, and equipped to deal with this degenerative disease, there was no persuasive proof that the demand is such as to warrant the creation of a separate unit such as proposed by HCR and Careage. 10/ Absent such quantifiable demand, the application of Hillhaven more realistically addresses the need for Alzheimer's disease patients than does that of the other applicants.

     
     

129. With regard to subacute care services, the proof likewise fails to quantify the demand for such services. Under such circumstances, Careage's proposed 10-bed subacute care unit is not objectively warranted, and does not serve to better its proposal to provide such services over the proposals of the other applicants. Consistency with district plan and state plan

     
     

130. The District 8 health plan contains the following pertinent standards and criteria: Community nursing home services should be available to the residents of each county, 4 within District Eight.

     
     

     At a minimum, community nursing home

     facilities should make available, in addition to minimum statutory regulation, in the facility or under contractual arrangements, the following services:

     
     

     a.	pharmacy	h. occupational therapy
     b.	laboratory	i. physical therapy
     c.	x-ray	j. speech therapy
     c.	dental care	k. mental health counseling
     e.	visual care	l. social services
     f.	hearing care	m. medial services
     g.	diet therapy

     
     

     New and existing community nursing bed developments should dedicate 33-1/3 percent of their beds to use for Medicaid patients.

     
     

     Community nursing home (skilled and intermediate care) facilities in each county should maintain an occupancy rate of at least

     90 percent.

     
     

     No new community nursing home facility should be constructed having less than 60 beds...

     
     

     Each nursing facility should have a patient transfer agreement with one or more hospitals within an hour's travel time, or the nearest hospital within the same county.

     
     

     All community nursing homes and applicants for community nursing homes should document their history of participation in Medicaid and Medicare programs. ...

131. The State Health Plan contains the following pertinent goals: GOAL 1: TO DEVELOP AN ADEQUATE SUPPLY OF

     LONG TERM CARE SERVICES THROUGHOUT FLORIDA.

     
     

     GOAL 2: TO ENSURE THAT APPROPRIATE LONG TERM, CARE SERVICES ARE ACCESSIBLE TO ALL RESIDENTS OF FLORIDA.

     
     

132. Each of the applicants demonstrated that their proposal would conform, at least minimally, with the foregoing provisions of the state and local health plans. Of particular significance to Lee County is, however, an applicant's commitment to Medicaid service.

     
     

133. The District 8 Council has reported that hospitals in Lee County are having difficulty placing Medicaid patients in nursing homes due to the unavailability of Medicaid beds. The current Medicaid experience is 46 percent. Therefore, the local council has directed that new and existing community nursing home developments should dedicate at least 33-1/3 percent of their beds for Medicaid patients. While all applicants propose to meet this standard, Hillhaven's proposal to dedicate 53 percent of its beds to Medicaid care is substantially greater than the commitment of the other applicants, and is

     consistent with its current experience in meeting a community's need for nursing home care.

     
     

     Availability, appropriateness, and extent of utilization of existing health care services

     
     

134. Section 381.705(1)(b), Florida Statutes, requires Consideration of the availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of like and existing health care services in the service district. When the subject applications were filed, there were 1,056 licensed beds in Lee County with an occupancy rate of 91.91 percent. The nursing home bed supply in Lee County is obviously strained, and there exist no reasonable alternatives to the addition of new beds to the subdistrict.

     
     

135. To coordinate with existing health facilities, each applicant proposes to establish appropriate transfer agreements and affiliations with local physicians, hospitals, and other health care providers.

     
     

136. While some of the applicants have proposed an Alzheimer's unit and subacute care unit, the proof failed to demonstrate any quantitative need for such units in the subdistrict. Some applicants also proposed to provide day care in conjunction with their nursing home. Currently, there exists adequate day care in Lee County at little or no expense to the patient, and there was no persuasive proof of a need for additional day care services. Economies derived from joint health care resources

     
     

137. HCR and Hillhaven each proposed 120-bed facilities which would provide for a more efficient and economical operation than a 60-bed facility. The 60-bed facilities proposed by Forum and Health Quest are, however, part of a larger complex which likewise lends itself to an efficient and economical operation.

     
     

138. HCR, Hillhaven, Forum and Health Quest are major operators of nursing home facilities, and are thereby able to negotiate and obtain bulk prices for food, medical and nursing supplies. These savings are ultimately passed on to the residents. Additionally, by drawing upon a broad spectrum of expertise existent within their corporate networks, these applicants are best able to maintain and improve the services they offer.

     
     

     The criteria on balance

     
     

139. In evaluating the applications at issue in this proceeding, none of the criteria established by Section 381.705, Florida Statutes, or Rule 10- 5.011(k), Florida Administrative Code, have been overlooked. As between the competing applicants, consideration of those criteria demonstrates that Hillhaven is the superior applicant whether it is evaluated on its application as initially reviewed by the Department or as updated at hearing. Among other things, the Hillhaven facility is spacious with large and well appointed patient rooms, its project costs are most reasonable (whether type 5 or type 4 construction), its programmatic proposal and staffing levels are most reasonable in light of existing demand, its provision for Medicaid services is the highest, and its patient charges are the lowest.

     
     

     CONCLUSIONS OF LAW

     
     

140. The Division of Administrative Hearings has jurisdiction over the parties to, and the subject matter of these proceedings.

141. At issue in this proceeding is whether the applications of HCR, Forum, Health Quest, Hillhaven, and Careage to construct a new nursing home in Lee County should be approved. As the applicants, the proponents have the burden of demonstrating their entitlement to a certificate of need. Boca Raton Artificial Kidney Center, Inc. v. Department of Health and Rehabilitative Services, 475 So.2d 260 (Fla. 1st DCA 1985), and Florida Department of Transportation v. J.W.C. Company, 396 So.2d 788 (Fla. 1st DCA 1981).

     
     

142. Pertinent to this proceeding, Section 381.705, Florida Statutes (1987), and Rule 10-5.011(k), Florida Administrative Code, establish the criteria which must be considered in evaluating applications for a certificate of need. Balsam v. Department of Health and Rehabilitative Services, 486 So.2d 1341 (Fla. 1st DCA 1986), and Department of Health and Rehabilitative Services

     v. Johnson and Johnson Home Health Care, Inc., 447 So.2d 361 (Fla. 1st DCA 1984). The weight to be accorded each criteria and the consequent balancing will vary, however, depending on the facts and circumstances of each case. Collier Medical Center, Inc. v. Department of Health and Rehabilitative Services, 462 So.2d 83 (Fla. 1st DCA 1985). See also: Graham v. Estuary Properties, Inc., 399 So.2d 1374 (Fla. 1981).

     
     

143. Under the facts and circumstances of this case, Hillhaven has demonstrated that its proposal to build a 120-bed nursing home in Lee County is superior to that of the other applicants, and that it is entitled to a certificate of need. Hillhaven's application as initially reviewed by the Department and as updated at hearing was superior to those of the other applicants.

     
     

144. Regarding the updates, it is concluded that the updates to the applications offered in this proceeding should be considered in evaluating the merits of each application. The applications were filed in July 1986 and the final hearing held in December 1987. The "updates" offered and received into evidence at the hearing resulted in large measure from the effects of inflation, the passage of time, changes in the market place regarding the availability and salaries of nursing and other personnel, business decisions based upon a longer period of experience, and better knowledge of the area based upon more recent surveys. As stated in the findings of fact, none of the applicants changed the size of their proposed facilities with respect to the number of beds requested, the proposed location of their facilities, the services proposed or the planning horizon upon which their proposals were based, and none of the changes or updates offered at hearing constituted substantial amendments to the original applications deemed complete by the Department, except those offered by Careage.

     
     

145. As noted in the findings of fact, Careage did not timely protest the Department's decision to deny its application for a 120-bed facility, but appeared herein as a respondent to defend the Department's decision to award it a CON for 60 beds. The predicate for the Department's decision was ostensibly action 381.709(4)(b), Florida Statutes (1987), formerly Section 381.494(8)(c), Florida Statutes, which authorizes the Department to issue a CON for a proposed project in its entirety or for an identifiable portion of the project. The proposed award of a 60- bed CON to Careage was not, however, as noted in the findings of fact, for an identifiable portion of its proposed 120-bed project. Accordingly, while Careage's request for a 120-bed or 60-bed CON must fail because it is inferior to the proposal of Hillhaven, it must also fail because Careage failed to timely protest the denial of its 120-bed application and because its 60-bed proposal is not an identifiable portion of its initial application.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a final order be entered granting Hillhaven's application

for a certificate of need to construct a new 20-bed community nursing home in Lee County, and denying the applications of HCR, Forum, Health Quest and Careage.

DONE AND ENTERED in Tallahassee, Leon County, Florida, this 22nd day of November, 1988.

WILLIAM J. KENDRICK

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 22nd day of November, 1987.

ENDNOTES

1/ Although Hillhaven, like Careage, had applied for 120 beds, the Department had decided that there was sufficient need only for a 60-bed facility, not a 120-bed facility.

/2 The matrix utilized in this third review was the matrix that had been used by the Office of Community Medical Facilities in the review of applications in the January, 1987 batch. Although it was not the same matrix used by Mr.

Sharpe, some of the components were the same.

3/ The proof offered by Forum regarding financial feasibility is further tainted by the fact that its witnesses violated the sequestration rule. Mr. Kanter, notwithstanding the fact that the rule had been invoked, spoke with Mr. Lewis after had testified regarding the current Medicare and private pay rates.

4/ Health Quest originally applied for a 120-bed nursing home. This application was timely amended in November 1986 to include only 60 beds. Accordingly, Health Quest's application is for a 60-bed facility.

5/ At hearing, Careage also sought to justify the award to of a scaled down version of its 120-bed nursing home for 90 beds. Its proof with respect to the 90-bed facility was, however, sorely lacking and it failed to demonstrate its financial feasibility through proof of persuasive predicates, or the reasonableness of its construction, equipment or staffing. Notably, Careage's original application had not proposed a 90-bed facility, and had provided no financial, staffing, construction, equipment or other projections relevant to such a proposal.

6/ The batching cycle in which these applications were filed occurred prior to the Department's adoption of its fixed need proof rule. Rule 10-5. 011(k)2g, Florida Administrative Code. Accordingly, pertinent to this case are the provisions of former rule 10-5.11(21)(b)7, which defined the licensed bed figure (LB) as follows:

Review of applications submitted for the July batching cycle shall be based upon the number of licenses (sic) beds (LB and LRD) 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.

In all other pertinent respects, except as discussed in paragraph 110, infra, the current and former rule methodologies are substantially alike.

7/ SA is denoted as preliminary since an additional adjustment (poverty adjustment) is possible under subparagraphs 2e and f. Where, as here, that adjustment is not appropriate, SA is the gross bed need for the horizon year.

8/ In the same vein, subparagraph (b)7 speaks to licensed bed inventory as of June 1, a limited number, and does not address total inventory or even mention approved beds.

9/ The Department contended that there were 150 approved beds, as of the date the supervisory consultant signed the SAAR, by virtue of the Gulf Court litigation. In that case, the Department's approval of Beverly Enterprises' application for CON #1991 (60 beds) and CON 1992 (90 beds), from a previous batching cycle, was under protest. The parties to that action resolved their dispute, and on October 21, 1987, the Department entered a final order approving Beverly Enterprises' application for CON 1992 for 120 beds and the relinquishment of CON. Accordingly, at de novo hearing, there were not 150 approved beds designed to serve a portion of the horizon population, but only

120 beds.

10/ To support a demand for such services, the applicants relied upon a statistical calculation of the incidence of Alzheimer's disease. Such raw statistical data was not, however, validated or otherwise demonstrated to be a reliable indicator of the need for nursing home beds for Alzheimer's disease patients. Also relied upon by the applicants was a survey of existing nursing homes and hospital's. Such survey was, however, cursor and biased, and its results were premised on incomplete responses and a lack of meaningful data concerning the frequency or extent of any demand for specialized services.

Notably, of the institutions surveyed one had a separate Alzheimer's unit of 64 beds and a subacute care unit of 48 beds and reported no waiting list. There was no demand reported for technology dependent children services.

APPENDIX TO RECOMMENDED ORDER

HCR's proposed findings of fact are addressed as follows: 1-11. Addressed in paragraphs 86-121.

12-30. Addressed in paragraphs 122-129, 17-19, 57, and 68.

31-32. Addressed in paragraphs 14-19.

1. Not necessary to result reached.

2. Addressed in paragraph 85.

3. Addressed in paragraph 18.

36-37. Addressed in paragraph 17.

38-39. Addressed in paragraph 19.

1. Addressed in paragraph 24.

2. Addressed in paragraph 2.

3. Addressed in paragraphs 130-133.

43-46. Addressed in paragraphs 15 and 28.

47-48. Addressed in paragraph 27

49. Addressed in paragraph 24.

50-55. Addressed in paragraphs 25-27.

56-57. Addressed in paragraph 22.

58-59. Addressed in paragraphs 23 and 27.

60-68. Addressed in paragraphs 16, 20 and 21.

69-70. Addressed in paragraph 137.

71-88. Addressed in paragraphs 3-13, and 53-64.

89-103. Addressed in paragraphs 65-82.

Forum's proposed findings of facts are addressed as follows: 1-2. Addressed in paragraphs 1-2.

3-14. Addressed in paragraphs 3-13.

15-32. Addressed in paragraphs 86-121.

33-35. Addressed in paragraph 29 and 30.

36. Not necessary to result reached. 37-38 & 45. Addressed in paragraphs 130

39, 41 & 44. Addressed in paragraph 36.

40. Addressed in paragraph 37.

43-43. Addressed in paragraph 32.

46-50. Addressed in paragraph 35.

51. Addressed in paragraph 34.

52-53. Addressed in paragraphs 29 and 35.

54-55. Addressed in paragraphs 30 and 137.

56-90. Addressed in paragraphs 29-40.

91-95. Addressed in paragraphs 14-28.

96-120. Addressed in paragraphs 41-52.

121-136. Addressed in paragraphs 53-64.

137-147. Addressed in paragraphs 65-82 and 127.

Heath Quest's proposed findings of fact are addressed as follows: 1-14. Addressed in paragraphs 1-13, 42, 74, and 122-129.

15-70. Addressed in paragraphs 41-52, 130-133, and 137-138.

71-118. Addressed in paragraphs 29-40.

119-131. To the extent necessary, addressed in paragraphs 29-52.

Hillhaven's proposed findings of fact are addressed as follows: 1-19. Addressed in paragraphs 1-13, 15, 29,

41, 53 and 65.

20. Addressed in paragraphs 84 and 85. 21-25. Addressed in paragraphs 14-28. 26-32. Addressed in paragraphs 29-40. 33-39. Addressed in paragraphs 41-52.

40-47. Addressed in paragraphs 53-64 and 139.

48-69. Addressed in paragraphs 86-121.

70-74. Addressed in paragraphs 130-133.

75-80. Addressed in paragraphs 122-129, and 134-136.

81. Not a finding of fact.

82-88. Addressed in paragraphs 15, 17, 22, 27, and 28.

89-93. Addressed in paragraphs 29, 33 and 35.

94-97. Addressed in paragraphs 41, 51 and 52.

98-107. Addressed in paragraphs 63 and 64.

A half-bath as used throughout this recommended order has been defined as a facility which includes a sink and toilet but no bathing (tub or shower) amenities. The proof offered by Health Quest that its "half bath" included a half-size bath tub was not credible.

165-176. Addressed in paragraphs 20, 21, and 54-56.

177-182. Addressed in paragraphs 24, 25, 36-38, 49, 50, 59 and 60. Careage's proposed findings of fact are addressed as follows:

1. Addressed in paragraph 6.

2-9. Addressed in paragraphs 3-13, 65 and 74.

10-22. To the extent necessary, addressed in paragraphs 17- 19, 66, 68 and 76.

23-24. Addressed in paragraphs 69 and 78.

25-29. Addressed in paragraphs 81 ad 82.

1. Addressed in paragraphs 67 and 77.

2. Not necessary to result reached.

3. Addressed in paragraph 73.

4. Addressed in paragraphs 67 and 77.

34-38. Addressed in paragraphs 66, 67, 74-77.

39-41. Addressed in paragraphs 69, 71, 78 and 80.

42. Addressed in paragraph 81.

43-44. Addressed in paragraphs 71 and 80.

45-46. Addressed in paragraphs 122-129.

1. Addressed in paragraphs 130-133.

2. Addressed in paragraphs 86-121.

49-51. Addressed in paragraphs 15, 17, 22, 28, and 81.

1. Addressed in paragraphs 14, 15, 28, 65, and 81.

2. Addressed in paragraph 25.

54-55. Addressed in paragraphs 32, and 37-40.

56. Addressed in paragraphs 31 and

57-58. Addressed in paragraphs 42, 47 48, and 50.

1. Addressed in paragraph 44.

   
   

   The Department's proposed findings of fact addressed as follows:

   1-2. Addressed in paragraphs 1 and 2.

   3-13. Addressed in paragraphs 86-121.

   14-15. Addressed in paragraphs 122-129.

   1. Addressed in paragraph 132.

   2. Addressed in paragraph 139.

   3. Addressed in paragraph 10.

19-61. Addressed in paragraphs 21, 38, 46, 56, 74, 75, and 83-85.

COPIES FURNISHED:

Alfred W. Clark, Esquire Post Office Box 623 Tallahassee, Florida 32302

R. Terry Rigsby, Esquire

J. David Holder, Esquire

325 John Knox Road Suite C-135

Tallahassee, Florida 32303

Steven W. Huss, Esquire 1017 Thomasville Road Suite C

Tallahassee, Florida 32303

C. Gary Williams, Esquire

R. Stan Peeler, Esquire Post Office Box 391 Tallahassee, Florida 32302

Charles Loeser, Esquire

315 West Jefferson Boulevard South Bend, Indiana 46601-1586

Robert Cohen, Esquire John Gilroy, Esquire Post Office Box 10095

Tallahassee, Florida 32392

Edgar Lee Elzie, Esquire

215 South Monroe Street Suite 804

Tallahassee, Florida 32301

Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32399-0700

Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407

Tallahassee, Florida 32399-0700

John Miller, Esquire Acting General Counsel Department of Health and Rehabilitative Services Fort Knox Executive Center 2727 Mahan Drive, Suite 309

Tallahassee, Florida 32308

=================================================================

AGENCY FINAL ORDER

=================================================================

STATE OF FLORIDA

DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES

MAPLE LEAF OF LEE COUNTY HEALTH

CARE, INC., a wholly owned subsidiary of HEALTH CARE AND RETIREMENT CORPORATION OF AMERICA,

Petitioner,

CASE NO.: 87-0693

vs. CON NO.: 4746

DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES and GENE LYNN d/b/a CAREAGE SOUTHWEST HEALTHCARE CENTER,

Respondents.

/ HEALTH QUEST CORPORATION (Lee HRS

County),

Petitioner,

CASE NO.: 87-0694

vs. CON NO.: 4747

DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES,

Respondent.

/ FORUM GROUP, INC., Sponsor of Retirement Living of Lee County,

Petitioner,

Respondents.

/ HILLHAVEN, INC., d/b/a HILLHAVEN HEALTH CARE CENTER-LEE COUNTY,

Petitioner,

CASE NO.: 87-0698

vs. CON NO.: 4756

DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES and CAREAGE SOUTHWEST HEALTHCARE CENTER,

Respondents.

/

FINAL ORDER

This cause came on before me for the purpose of issuing a final agency order. The Hearing Officer assigned by the Division of Administrative Hearings (DOAH) in the above-styled case submitted a Recommended Order to the Department of Health and Rehabilitative services (HRS). A copy of that Recommended Order is attached hereto.

RULING ON EXCEPTIONS FILED BY DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES (HRS)

1. HRS excepts to that sentence in finding of fact 74 which states that "Also notable is the fact that the other applicants were not accorded equal consideration." No ruling is made on this exception; however, I note that the finding in paragraph 74 is inconsistent with the finding in paragraph 4 concerning Hillhaven's application.

   
   

2. HRS excepts to that sentence in finding of fact 75 which states that "Its proposed 60 bed facility is not; however, an identifiable portion of its initial project." Under HRS' policy in effect at the time, a 60 bed facility was considered to necessarily be an identifiable portion of a 120 bed facility. See Meridian, Inc. vs. HRS, 9 FALR 5095. The exception is granted.

   
   

3. HRS excepts to finding of fact 83 insofar as it found that the State Agency Action Report (SAAR) was inaccurate with respect to the approved bed inventory utilized in the need methodology. The 150 approved bed figure used in the need calculation in the SAAR is the correct figure based on HRS' policy of counting approved beds as of the date of the supervisor's signature on the SAAR. See Florida Health Facilities, Corp. vs. HRS, 9 FALR 2708, Per Curiam affirmed

   520 So2d 588 (Fla. 1st DCA), Broward Healthcare, Ltd. vs. HRS., 9 FALR 1973, affirmed 520 So2d 587 (Fla. 1st DCA). The exception is granted.

   
   

4. HRS excepts to the-last sentence of finding of fact 94 which states "The department's position is; however, contrary to its past and current procedure." See manor Care of Hillsborough County vs. HRS, 9 FAIR 1102. The exception is granted.

   
   

5. HRS excepts to the last sentence of finding of fact 95 which states "Under the circumstances, January 1, 1986, is the appropriate date on which the current population is to be calculated when deriving POPC and POPD." See Manor Care, Sura. The appropriate date is July 1, 1986, otherwise a three and one half year rather than a three year planning horizon results. The exception is granted.

   
   

6. HRS excepts to the last sentence of finding of fact 98 which states that "Accordingly, Forum's calculation of POPC (128,871), POPD (77,194), POPA (149,645), and POPB (95,748) is appropriate." The correct calculation is based on the latest data available at the time of initial free-form review, which is the data released by the Governor's Office on July 1, 1986, which is: POPC (131,642), POPD (79,661), POPA (148,229), POPB (96,142). See Manor Care, Sura. The exception is granted.

   
   

7. HRS excepts to finding of fact 99, in that it utilizes incorrect figures for POPC an POPD, and hence the calculation of BA is incorrect. See Manor Care, Sura. using the proper POPC and POPD figures, BA 0.0075458327. The exception is granted.

   
   

8. HRS excepts to finding of fact 100 in that it uses a figure for BA calculated using incorrect figures for POPC and POPD, and hence the calculation of BB is incorrect. See Manor Care, Sura. Using the proper POPC, POPD, and BA, BB 0.0452749964. The exception is granted.

   
   

9. HRS excepts to finding of fact 102 in that it utilizes incorrect figures for POPA, BA, POPB, and BB, and hence the calculation of A is incorrect. See Manor Care, Sura. Using the correct figure for POPA, BA, POPB, and BB, A = 5471. The exception is granted.

   
   

10. HRS excepts to finding of fact 108 in that it utilizes an incorrect figure for A, and hence the calculation of SA is incorrect. See Manor Care, Supra. Using the correct figure for A, SA = 1283. The exception is granted.

    
    

11. HRS excepts to finding of fact 113 insofar as it finds the dates used by the department for purposes of calculating need to be facially unreasonable. See Manor Care, Supra; Florida Health Facilities Cor., Sura; Broward Healthcare, Sura. The date set forth in the rule for counting licensed beds and the date the supervisor signs the SAAR are reasonable dates for calculating need under the rule ethodology. The exception is granted.

    
    

12. HRS excepts to finding of fact 114 insofar as it finds that the department's interpretation of dates at which licensed and approved beds are to be counted is neither logical nor reasonable, and insofar as it concludes that under the department's interpretation beds approved and not yet licensed on June 1, 1986, but licensed before the consultant supervisor signed the SAAR, would not be counted in either inventory. As HRS applies this policy, it does not result in beds being not counted in either inventory. Under the facts discussed, HRS would continue to count the beds as approved beds for purpose of

    the numeric need calculation. See cases cited in the ruling on exception number

    11 above. The exception is granted.

    
    

13. HRS excepts to finding of fact 115. Subparagraph (b)7 defines LB and LBD for both the gross need calculation in subparagraph (b) 1 - 4 and for net need calculation under subparagraph, (b)9. See Broward Healthcare, Sura. The exception is granted.

    
    

14. HRS excepts to finding of facts 116, 117, 118, 119, 120, and 121, to the extent that those findings conclude that it is appropriate to use the most current inventory of licensed and approved beds at the time a decision is rendered on the application and that consequently the correct number of licensed beds is 1,056 and the correct number of approved beds is 120, with a resultant net need of 145 beds.

    
    

    The correct number of licensed beds to use in the numeric need calculation is 1,056, but because that is the number of licensed beds in the inventory on June 1, 1986, the date established by the rule, and the correct number of approved beds is 150, the number of beds approved on the date of the supervisor's signature on the SAAR. Use of these numbers results in a numeric need of 92 beds. 1/ 2/ See case cited in exception 11 above. The exception is granted.

    
    

15. HRS excepts to conclusion of law 4 insofar as it concludes that Hillhaven is entitled to a certificate of need in Lee County. Because Hillhaven's application is for 120 beds and there is only a need for 92 beds in the district, the application is not consistent with all statutory and rule criteria. Under Rule 10-5.011(k), the department will not normally approve applications for beds when such approval would cause the number of beds in the district to exceed the need calculated by the rule methodology. The exception is granted.

    
    

16. HRS excepts to conclusion of law 5 insofar as it might be construed to deem admissible updates which do not result from extrinsic circumstances beyond the control of the applicant or which do not consist of evidence which explains or corroborates assertions made in the application and does not change the nature or scope of the proposal. The exception is granted.

    
    

17. HRS excepts to conclusion of law 6 insofar as it concludes that the 60 bed proposed award to Careage did not constitute an identifiable portion of the

120 bed application. See exception 2 above. The exception is granted.

RULING ON EXCEPTIONS FILED BY MAPLE LEAF OF LEE COUNTY (HCR)

1. HCR excepts either in whole or in part to factual findings of the Hearing Officer in paragraphs 12, 16, 27, 55, 56, 57, 58, 59, 60, 61, 62, 124, 125, 126, 128, 129, 132, 133, 136, 139. The findings are supported by competent, substantial evidence; therefore, the exceptions are denied. Gruman vs. State, 379 So2d 1313 (Fla. 2nd DCA 1980), Heifetz vs. Department of Business Regulation, 475 So2d 1277 at 1281 (Fla. 1st DCA 1985)

HCR also submitted 84 proposed findings of fact subsequent to the entry of the Recommended Order. In a formal administrative proceeding under Section 120.57(1), the appropriate tribunal to consider proposed findings of fact is the Division of Administrative Hearings. HCR requests that in the agency review of

the Recommended Order, its proposed findings of fact be considered. There is no authority for HCR's request; therefore, it is denied.

HCR also filed a Motion for a review of the complete record. A review of the complete record is required when the agency rejects findings of fact as not founded on competent, substantial evidence or where the facts were found in a proceeding which did not comply with the essential requirements of law, Section 120.57(1)(b)10, Florida Statutes. In the present case, the only findings rejected by the department are either conclusions of law or mixed conclusions of law and fact arising from the Hearing Officer's incorrect interpretation of the numeric need rule found in Section 10-5.011(1)(k), Florida Administrative Code. Under these circumstances a review of the complete record is not required; therefore, HCR's Motion is denied. See Baptist Hospital vs. HRS, 500 So2d 620 (Fla. 1st DCA 1986).

RULING ON EXCEPTIONS FILED BY CAREAGE

Careage excepts either in-whole or in part to factual findings of the Hearing Officer in paragraphs 6, 7, 8, 9, 71, 73, 75, 80, 126, 128, 129, and

133. The findings are supported by competent, substantial evidence; therefore, the exceptions are denied.

In paragraphs 4, 5, and 9 of its exceptions, Careage excepts to the Hearing Officer's conclusions regarding the updating of CON applications in 120.57 proceedings See the ruling on the departments exception number 16.

In paragraph 8, Careage excepts to the Hearing Officer's conclusion that its proposed 60 bed facility was not an identifiable portion of its 120 bed proposal. The exception is granted. See the ruling on the department's exception number two (2)

RULING ON EXCEPTIONS FILED BY HILLHAVEN

Hillhaven excepts to the Hearing Officer's interpretation of the numeric need rule, Section 10-5.011(1)(k) Florida Administrative Code. See the rulings on the department's exceptions for the departments interpretation of the rule.

RULING ON EXCEPTIONS FILED BY FORUM

Forum excepts either in whole or in part to the Hearing Officer's findings of fact in paragraphs 39, 40, 56, 60, and 62. The finding are supported by competent, substantial evidence; therefore, the exceptions are denied.

FINDINGS OF FACT

The Department hereby adopts and incorporates by reference the findings of fact set forth in the Recommended Order except where inconsistent with the rulings on the exceptions and conclusions of law stated elsewhere in this Final Order.

CONCLUSIONS OF LAW

The Department hereby adopts and incorporates by reference the conclusions of law set forth in the Recommended Order except where inconsistent with the ruling on the exceptions and conclusions of law stated elsewhere in this Order.

Hillhaven's, HCR's, and Careage's 120 bed proposals fail to meet statutory and rule criteria in that they propose 120 bed facilities when there is a numeric need for only 92 beds, (See finding of fact 122 and Rule 10-5.011(1)(k)

, F. A. C., cited therein), and none of these applicants justified additional beds under special circumstances (See finding of fact 124); therefore, these proposals should be rejected.

Careage proposed a 90 bed facility, which is within the 92 bed need, but failed to demonstrate financial feasibility, reasonableness of construction, equipment or staffing for such a facility (See finding of fact 74); therefore, this proposal should be rejected on the basis of a balanced weighing of all applicable criteria.

Three applicants, Careage, Health Quest, and Forum, presented proposals at hearing for 60 bed nursing homes, which are within the numeric need for the District. Of these three, Careage failed to show that its fill up and occupancy projections, its projection of revenue and expenses, and its pro forma estimates where reasonable, and therefore failed to demonstrate financial feasibility (See finding of fact 80). Health Quest failed to demonstrate that its equipment costs, either as reviewed by HRS or updated at hearing, were reasonable (Findings of fact 45, 46) and failed to demonstrate that it had available resources, including management personnel and funds for capital and operating expenditures, for project accomplishment and operation (Finding of fact 51).

Health Quest also failed to demonstrate that it could provide quality care at the proposed facility (Finding of fact 52). Forum failed to prove that its proposal was financially feasible in the long term. (Findings of fact 38, 39, 40.) Because of the shortcomings in the Careage, Health Quest, and Forum 60 bed proposals, I conclude that on the basis of a balanced weighing of the applicable criteria that these proposals should be rejected. I concur with the recommendation of the department's counsel expressed in his exceptions that all proposals considered in this proceeding should be rejected. Based upon the foregoing, it is

ADJUDGED, that the certificate of need applications by Maple Leaf of Lee County, Inc. (CON Number 4746); Health Quest Corporation, (CON Number 4747); Careage, Gene Lynn (CON Number 4748); Forum Group, Inc. (CON Number 4755), and Hillhaven, Inc., (CON Number 4756) are DENIED.

DONE and ORDERED this 19th day of January, 1989, in Tallahassee, Florida.

Gregory L Coler Secretary

Department of Health and Rehabilitative Services

by Deputy Secretary for Programs

ENDNOTES

1/ Section 120.57(1)(b)10, Florida Statutes, authorizes an agency to "... reject or modify the conclusions of law and interpretation of administrative rules in the Recommended Order..."

2/ It is not necessary to remand this cause to the Division of Administrative Hearings because this calculation of numeric need is based on the department's interpretation of Section 10- 5.011(1)(k), Florida Administrative Code, and competent substantial evidence in the record. HBA Corporation vs. HRS, 482 So2d

461 at 465 (Fla. 1st DCA 1986), Humana vs. HRS, 492 So2d 388 (Fla. 4th DCA 1986), Baptist Hospital vs. HRS, 500 So2d 620 (Fla. 1st DCA 1986).

Copies furnished to:

Diane A. Grubbs Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32399-1550

Alfred W. Clark, Esquire 1725 Mahan Drive, Suite 300 Post Office Box 623 Tallahassee, Florida 32308

R. Terry Rigsby, Esquire

J. David Holder, Esquire RIGS BY & HOLDER

1408 North Piedmont Way Suite 200

Tallahassee, Florida 32312

Steven W. Huss, Esquire Attorney at Law

1017 Thomasville Road Suite C

Tallahassee, Florida 32303

Charles M. Loeser, Esquire Assistant General Counsel

315 W. Jefferson Boulevard South Bend, Indiana 46601

C. Gary Williams, Esquire

R. Stan Peeler, Esquire AUSLEY, McMULLEN, McGEHEE, CAROTHERS & PROCTOR

227 South Calhoun Street Post Office Box 391 Tallahassee, Florida 32302

Robert S. Cohen, Esquire John F. Gilroy, Esquire HABEN & CULPEPPER, P. A.

Post Office Box 10095 Tallahassee, Florida 32302

Lee Elzie, Esquire Guyte McCord, Esquire

MACFARLANE, FERGUSON, ALLISON & KELLY

215 South Monroe Street Tallahassee, Florida 32302

INFORMATION COPIES:

Theodore Maok, Esquire Assistant General Counsel

Department of Health and Rehabilitative Services 2727 Mahan Drive

Fort Knox Executive Center Tallahassee, Florida 32308

FALR

Post Office Box 385 Gainesville, Florida 32602

Janie Block (PDDR)

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a copy of the foregoing was sent to the above-named people by U.S. Mail this 23rd day of January, 1989.

R. S. Power, Agency Clerk Assistant General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407

Tallahassee, Florida 32399-0700 904/488-2381

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this final order is entitled to judicial review which shall be instituted by filing one copy of a Notice of Appeal with the agency clerk of HRS, and a second copy, along with filing fee as prescribed by law, with the District Court of Appeal in the Appellate District where the agency maintains its headquarters or where a party resides. Review proceedings shall be conducted in accordance with the Florida Appellate Rules.

The Notice of Appeal must be filed within 30 days of rendition of the order to be reviewed.

Docket for Case No: 87-000693

Orders for Case No: 87-000693